Tanner Investments

2012-02-16T01:14:00.000-08:00

Rush To Buy Physical Gold And Silver Hasn’t Started Yet
By Patrick A. Heller – Liberty Coin Service
Commentary on Precious Metals Prepared for CoinWeek.com

Even though gold and silver prices are up significantly since the beginning of 2012, that doesn’t necessarily mean that this trend will continue. Buyers and sellers modify their decisions as prices change.

When you look at who is and who isn’t actively buying or selling gold and silver right now, that can give you significant clues as to where prices head in the near term.

Ever since the price of gold surpassed $1,000 for the first time in 2008, there has been significant liquidation and recycling of “scrap” gold such as jewelry and industrial products. In many instances, people who lost jobs or experienced other financial setbacks have sold assets to generate cash flow. Investment demand in the past three years has been so strong that prices continued to rise despite the increase in recycling supplies. From now into the future, however, the amount of scrap gold that could be liquidated will be smaller than it would have been because of all the gold already recycled.

The story is similar for silver. During the 1979-1980 precious metals boom, many companies acquired equipment to recycle metals. Even though prices later fell so low that it was no longer economical to acquire such equipment, it was still profitable to continue to use existing machines since the acquisition costs had already been paid. As a result, silver recycling continued at a steady pace even when prices were far lower during the past few decades.

Therefore, there is less silver available for recycling today and in the future than there would have been. Another factor to consider is that the use of silver in photography (including x-rays) has fallen sharply in the past decade or so. This is significant because a high percentage of silver used in photography is recycled. As the amount of silver used in photography has fallen, so has the amount of silver that could be recycled.

With higher prices, there would be a strong incentive for mining companies to expand production. However, it’s not quite that simple. From discovery of a mine site until full production used to take an average of about three years. With increasing environmental and other regulations, it now takes an average of about ten years to go into full scale operation.

Increasing regulations have also impacted the ability of existing mines to operate. In January, the government shut down operations at the Lucky Friday mine in Idaho, producer of about 0.5% of the world’s newly mined silver supply. Even though the mine had passed twice-a-year federal safety inspections, it was closed because of alleged problems with its state of the art mine shaft supports. The owner of the mine stated that it will take a full year to fix the alleged safety issues before the mine can resume operation.

Overall, silver mine output has been rising over the years even as global gold mine output mostly declined. Still, silver supply is just not increasing enough to match the rise in demand.

For decades, the central banks were net sellers of gold every year. That changed a couple of years ago to central banks now being net buyers of gold. The swing from being a net supplier to a net buyer has affected the supply/demand equation by about 40 million ounces a year. This is a huge impact when you consider that worldwide annual mine output may be only 70 million ounces.

Above ground inventories of physical gold and silver have dwindled over the past few decades, with supplies of both metals becoming tighter every year. Last year I received several reports of would-be buyers of multi-million dollar amounts of physical gold or silver who wanted to take immediate delivery but were unable to find sellers willing to accept their orders.

While the supply side of gold and silver is constrained, I think the largest impact on the prices of both will come from a surge in buying demand. Even though there has been an increase in demand for the two metals for industrial and investment purposes, the market has not yet experienced a sustained rush to buy physical gold and silver.

For instance, when gold and silver prices fell sharply in late 2008, there were significant delays in purchasing almost every form of bullion-priced physical gold and silver. At the most extreme, new orders for 1 ounce size silver rounds and ingots were taking three months for delivery after the buyers had paid for them. Today, in the US almost every bullion coin and bar is available for live or short term delivery. Premiums are close to as low as they have been over the past couple of years.

The recent weekly Commitment of Traders Report issued by the COMEX show that speculators have not jumped into the market. This means that the price increases have occurred without this source of demand.

China and India are the world’s two largest nations for consumption of gold and silver. What happens in those countries has a major impact on prices.

The Chinese government has been very aggressive at purchasing physical gold and silver for itself and also encouraging its citizens to accumulate precious metals. It is expanding the venues which would make it convenient for people to acquire gold and silver. There are regular stories of Chinese citizens who are unable to purchase physical precious metals because the stores are out of stock or have lines so long that it takes (literally) several hours to get service.

Demand in India is very sensitive to price. When prices fall, demand soars. When prices rise, demand tapers off until there is a sense that the market has established a base from which prices will resume climbing. Right now, buyers in India are mostly sitting on the sidelines since the price of gold broke above $1,700. So, prices rose in the second half of January without extra demand from this nation.

In Europe and the Middle East, there is strong demand for physical gold and, to a lesser extent, silver as safe havens from deteriorating currency values. Demand was especially strong in North America in March and April 2011, but is now lackluster.

Although there have been some investment funds taking positions in gold or silver, this activity has been on a minor scale.

Perhaps the most significant indicator that the rush to buy gold and silver has not started in earnest is the relatively minor importance that the two metals have in world finances. There were times in the first half of the 20th century where the value of gold and silver mining shares and all the circulating gold and silver coins made up more than 20% of global wealth. Today that proportion of worldwide wealth is about 0.5%.

By the way, perhaps a significant indicator of where prices are headed in the near future is a decision by Endeavor Silver to inventory part of its newly mined silver output rather than sell it at current prices. I have heard that other mining companies are discussing this option, where they might only sell enough metal to fund continuing operations. It is highly unusual for mines to choose to defer cash flow in anticipation of much higher prices in the coming months.

The real rush to buy gold and silver will not be underway until there is strong demand from China and India, elsewhere in the Far East, the Middle East, Europe, and across North America. You will also see central banks and investment funds purchasing greater quantities of physical gold and perhaps silver. When fabricators and wholesalers are unable to meet demand for physical metal, prices could skyrocket. We are a long way from this position today. But it is coming and will be here surprisingly soon

2012-02-15T02:50:00.000-08:00

Ben Davies - Fair Value on Gold Today is Over $4,000
In an exclusive interview with King World News, Ben Davies told KWN the fair value of gold today is over $4,000. Ben Davies, CEO of Hinde Capital, also said the public is now starting to enter the gold market. Here is what Davies had to say: “The theme I had last time we were talking, ‘This was to be the year of defaults.’ I spoke specifically about a (coming) risk asset rally. One thing that was very evident to me, at the end of last quarter, from my trip to Asia and in conversations I had with fund managers here in Europe and the UK, it was very evident a lot of people had moved to cash.”

“What we’ve experienced since I was last on the show, and something I thought was very much in the cards, was this risk asset rally. We’ve seen the physical metals, some of the industrial metals have done very well out of the chute this year, posting double digit returns. Obviously they had been quite suppressed into the end of last year.

More importantly stock markets have rallied, but it feels like a reluctant rally because people were in cash. They really haven’t participated in this, it’s classic discounting mechanism. We had gone to the edge and then the ECB came out and waived their magic wand and provided an inordinate amount of liquidity.

People have underestimated what a big impact this has had (on the markets). The ECB balance sheet has grown substantially. The banks, for now, can survive any kind of euro earthquake. Certainly for the next three years.

Of course, risk assets have runaway and with it gold and silver....

“I think for the moment, the market, post-FOMC, rates are on hold forever it would seem. According to Ben Bernanke he is trying to drive inflation in the system to reduce the burden of the debt.

In such a situation, gold popped higher in the short-term. The markets are now clearly overbought. Everything we look at in the short and even the medium-term is suggestive that we have to chop some wood here. The question on all of our minds is, how much is the market going to come back?

Perhaps we can suggest the market is not going to correct that much and work off the overbought (condition) in and around this $1,700 to $1,740 level and then move higher. If they (the Fed) do nothing more, the monetary base is very high now and gold and silver look extremely undervalued relative to that (monetary base).

The only question is will the deleveraging suck up some of that money? At the end of the day, if you balance off the deleveraging and the money that’s been pumped into the system, what we would be left with is gold and cash. That’s where we will be able to ascertain the true value, but I suspect it is somewhere north of $3,000 an ounce.

The high net worth and retail investor is really starting to accept that gold is here to stay. They are beginning to understand it should be part of your portfolio. So I’m really constructive over the course of this year.

I would not be surprised if 2012 is the year we really start to get that retail momentum into the (gold) market. So it’s not inconceivable the numbers I have posted in latter years, that we start getting back to what I consider fair value relative to the monetary base, which is, of course, over $4,000.”

This interview is one of Ben Davies most powerful ever. He covered gold and silver along with what fundamentals are driving key asset classes. The KWN audio interview with Ben Davies is available now and you can listen to it by CLICKING HERE.

2012-02-14T02:39:00.000-08:00

Celente - Gold, Silver, War, Systemic Collapse & Social Unrest
With growing fears about the stability of the financial system, a looming war and a stampede of wealthy investors into hard assets, today King World News interviewed Gerald Celente, Founder of Trends Research and the man many consider to be the top trends forecaster in the world. Celente had this to say about an increased number of investors that have been crowding into gold and other hard assets: “The smart people are (buying gold) and more and more people are waking up to it. So the people that are going to survive and thrive are going to be the ones that are prepared, the ones that are going to see history before it happens and get ready for it and there are very few.”

Gerald Celente continues:

“As we know, they (central planners) are going to do everything they can to drive the price of gold. It’s not in their best interest for people to bail out of their worthless paper or digital money and buy something like silver and gold that’s a real tangible asset or even diamonds. That’s why you are seeing the price going up on that (diamonds) as well.

When you pick up the news and you read the FBI warned this past Monday that people who believe that going off the gold standard has bankrupted America are now considered anti-government extremists, you know there is a lot of worry out there about more people buying gold and not believing in the US government.

They want to do everything they can to drive fear into people, so they do not buy into gold and keep buying into worthless paper dollars. It’s a trend that I warned about. I’ve been saying over and over again, ‘Watch out, for some kind of Economic Martial Law, where it may become impossible for you to buy or sell gold.’ And it looks as though the government is moving in that direction.

Listen to full audio interview HERE.

2012-02-13T02:31:00.000-08:00

Hathaway - People Are Right to be Scared & Gold is a Necessity
With gold and silver consolidating recent gains, today four decade veteran John Hathaway told King World News that many of his clients are scared because of what is happening in the economy and the global financial system. Hathaway is the prolific manager of the Tocqueville Gold Fund and he has achieved a 5-star rating from Morningstar. Here is what Hathaway had to say: “People are scared on a number of different fronts. It’s economic, the fact that the economy is basically going nowhere. The policies of the administration. We have no solution to the fiscal issues in sight. You know people are right to be scared. The direction of public policy in this country is dreadful.”

“If you look at Europe, that’s a farce. I’ve given up watching what’s going on in Greece. If they have an agreement, you can bet it will fall apart within a month of them signing it. Europe hasn’t been solved. So anybody with liquid assets in this world, given this macro climate where financial repression is the avowed policy of treasury departments and central banks around the world, you’ve got to think about gold. And gold is not a trade. You don’t do it to make money, you do it to protect capital.

The wind is totally at our back (and) there are so many green lights flashing for people to move money into gold. It’s a very powerful setup for gold to move higher. As a veteran of markets I think a bottom is in place for gold, (and setup) to make an attempt at new highs.....

“But that’s all short-term stuff. I mean think about what’s going on in this world. Like a python you are basically being strangled on all kinds of economic freedoms. Rights of private property and personal liberty are under attack everywhere.

The basis of a free society is sound money and when you see those freedoms under attack, it’s almost essential to have some optionality in terms of future purchasing power should these things get worse. Gold is the best answer. Gold is a necessity to get through these times.”

2012-02-12T14:59:00.000-08:00

Richard Russell - Massive Money Going Into Tangibles
King World News has been receiving reports of staggering amounts of money moving into tangibles. Today the Godfather of newsletter writers, Richard Russell, was discussing this very subject: “I just went through the latest Rapaport jewelry and diamond magazine, and I was frankly amazed at the record prices paid at auction. Obviously, big money is investing in valuable tangibles. The prices that some of these jewels have gone for are at simply mind-blowing heights.”

“I list just a few examples to show subscribers that big (huge) money is investing in almost priceless, rare tangibles. These stones are often handed down from generation to generation, and only appear when one generation puts a stone up for auction.

The Elizabeth Taylor diamond, sold at Christie's NYC, Dec., 2011, estimated sale price $2.3 million, it sold for $8.8 million.

A pear-shaped 100 carat white diamond, auctioned at Sotheby's May 1995, estimate $13 million, sold for $16.4 million.

Graff pink 24 carat pink diamond, sold a Sotheby's, estimated at $27 million, sold for $46.1 million, November 2010.

A blue 38 carat diamond auctioned at Christie's, estimate $15 million, sold Dec. 2008 for $34.3 million.

A Bulgari emerald brooch. Estimated at $500,000, sold Dec, 2011 at auction at Christie's, sale price $6.7 million.

A 24 carat pink diamond auctioned at Sotheby's -- estimate $27 million, sold Nov. 2010 for $46.15 million.

NOTE -- many of these rare jewels are one of a kind, and have never been put up for auction before.

The magazine lists over 30 of these fantastic jewels with almost all selling far above estimates.

The fact is that today there are thousands of millionaires around the world and hundreds of billionaires. These people have enormous buying power, and their greatest problem is protecting their fortunes and their purchasing power. Hoarding great jewels is one way to do it. For instance, compare a $60 million rare one-of-a-kind diamond that weighs less than an ounce with $60 million worth of gold. And the diamond is smaller than the smallest joint of your little finger!”

To subscribe to Richard Russell’s Dow Theory Letters CLICK HERE.

2012-02-10T01:43:00.000-08:00

Embry - Gold’s Rise Will Shock Market Participants This Year
With gold trading roughly $30 higher and silver breaking solidly above the $34 level, today King World News interviewed John Embry, Chief Investment Strategist of the $10 billion strong Sprott Asset Management, to get his take on where he sees gold and silver headed from here. Embry told KWN this will be, by far, the strongest year for gold during this entire bull market. Here is what Embry had to say about the situation: “The fact that sentiment is so poor with gold at these levels just indicates that people don’t realize what’s really unfolding. I think the price action to begin the year has been exemplary. It was interesting as gold was getting a head of steam going last week, out comes that bogus jobs report that led to the one day reversal in gold and silver.”

“Accompanying the phony jobs number were all sorts of wonderful headlines in the mainstream press about how the US economy was firm and there were signs of recovery and so on. The fact they said there were 243,000 jobs created is ridiculous. When you couple all of this with the fact that sentiment in gold and silver is so bad, this sort of quiet gain, I mean gold has risen the better part of $200 since the end of the year, that’s a lot in a short period of time.

I still believe this is all just a precursor to what will be the finest year we’ve ever had in this bull market. The best up year, so far, in this gold bull was 36% and I would be surprised if that number were not obliterated this year. This will continue to be a very strong year for the precious metals and it will leave many market participants shocked.”

Rest of story

2012-02-09T01:30:00.000-08:00

Bill Gross Explains Why "We Are Witnessing The Death Of Abundance" And Why Gold Is Becoming The Default "Store Of Value"
While sounding just a tad preachy in his February newsletter, Bill Gross' latest summary piece on the economy, on the Fed's forray into infinite ZIRP, into maturity transformation, and the lack thereof, on the Fed's massive blunder in treating the liquidity trap, but most importantly on what the transition from a levering to delevering global economy means, is a must read. First: on the fatal flaw in the Fed's plan: "when rational or irrational fear persuades an investor to be more concerned about the return of her money than on her money then liquidity can be trapped in a mattress, a bank account or a five basis point Treasury bill. But that commonsensical observation is well known to Fed policymakers, economic historians and certainly citizens on Main Street." And secondly, here is why the party is over: "Where does credit go when it dies? It goes back to where it came from. It delevers, it slows and inhibits economic growth, and it turns economic theory upside down, ultimately challenging the wisdom of policymakers. We’ll all be making this up as we go along for what may seem like an eternity. A 30-50 year virtuous cycle of credit expansion which has produced outsize paranormal returns for financial assets – bonds, stocks, real estate and commodities alike – is now delevering because of excessive “risk” and the “price” of money at the zero-bound. We are witnessing the death of abundance and the borning of austerity, for what may be a long, long time." Yet most troubling is that even Gross, a long-time member of the status quo, now sees what has been obvious only to fringe blogs for years: "Recent central bank behavior, including that of the U.S. Fed, provides assurances that short and intermediate yields will not change, and therefore bond prices are not likely threatened on the downside. Still, zero-bound money may kill as opposed to create credit. Developed economies where these low yields reside may suffer accordingly. It may as well, induce inflationary distortions that give a rise to commodities and gold as store of value alternatives when there is little value left in paper." Let that sink in for a second, and let it further sink in what happens when $1.3 trillion Pimco decides to open a gold fund. Physical preferably...

2012-02-08T03:06:00.000-08:00

States seek currencies made of silver and gold
NEW YORK (CNNMoney) -- A growing number of states are seeking shiny new currencies made of silver and gold.

Worried that the Federal Reserve and the U.S. dollar are on the brink of collapse, lawmakers from 13 states, including Minnesota, Tennessee, Iowa, South Carolina and Georgia, are seeking approval from their state governments to either issue their own alternative currency or explore it as an option. Just three years ago, only three states had similar proposals in place.

"In the event of hyperinflation, depression, or other economic calamity related to the breakdown of the Federal Reserve System ... the State's governmental finances and private economy will be thrown into chaos," said North Carolina Republican Representative Glen Bradley in a currency bill he introduced last year.

Unlike individual communities, which are allowed to create their own currency -- as long as it is easily distinguishable from U.S. dollars -- the Constitution bans states from printing their own paper money or issuing their own currency. But it allows the states to make "gold and silver Coin a Tender in Payment of Debts."

To the state legislators who are proposing state-issued currencies, that means gold and silver are fair game, said Edwin Vieira, an alternative currency proponent and attorney specializing in Constitutional law. And since gold has grown exponentially more valuable, while the U.S. dollar continues to lose ground, the notion has become increasingly appealing to state lawmakers, he said.

The state gold rush: Utah became the first state to introduce its own alternative currency when Governor Gary Herbert signed a bill into law last March that recognized gold and silver coins issued by the U.S. Mint as an acceptable form of payment. Under the law, the coins -- which include American Gold and Silver Eagles -- are treated the same as U.S. dollars for tax purposes, eliminating capital gains taxes.

Since the face value of some U.S.-minted gold and silver coins -- like the one-ounce, $50 American Gold Eagle coin -- is so much less than the metal value (one ounce of gold is now worth more than $1,700), the new law allows the coins to be exchanged at their market value, based on weight and fineness.

Local currencies: In the U.S., we don't trust

"A Utah citizen, for example, could contract with another to sell his car for 10 one-ounce gold coins (approximately $17,000), or an independent contractor could arrange to be compensated in gold coins," said Rich Danker, a project director at the American Principles Project, a conservative public policy group in Washington, D.C.

South Carolina Republican Representative Mike Pitts proposed a currency system that would allow people to use any kind of silver or gold coin -- whether it's a Philippine Peso or a South African Krugerrand -- based on weight and fineness. Pitts said in the bill, which currently has 12 co-sponsors, that the state is facing "an economic crisis of severe magnitude."

Republican representatives from Washington State followed suit in January, introducing a bill that would also allow any gold and silver coins to be considered legal tender based on metal values. Minnesota, Iowa, Georgia, Idaho and Indiana are also considering similar proposals.

Many of the bills would make it possible for residents to exchange the physical coins for goods and services, so you could use coins to buy anything from groceries to a car as long as the store chooses to accept them.

However, most people aren't going to walk around with such valuable coins in their pockets, said Vieira. Plus, calculating the value of the coins -- especially if they come from different parts of the globe and are of different sizes and shapes -- will get tricky.

It's more likely that the states will create electronic depositories and accounts for the coins to make transactions easier, when and if the initial bills are passed, he said.

Utah Gold & Silver Depository is already developing a system where customers could use debit cards linked to their gold holdings. When customers swipe their debit cards to make transactions, physical gold and silver coins would be transferred between accounts in privately-owned depositories (or vaults) based on the market value of the metals.

Before deciding on a specific form of currency, some states -- including Minnesota, Tennessee, Virginia and North Carolina -- are considering proposals that would first require a committee to review their alternative currency plan.

The future of U.S. currency: The states' proposals have been gaining steam among Tea Partyers and Republicans, many of whom also endorse a nationwide return to the gold standard, which would require the U.S. dollar to be backed by gold reserves.

Tea Party "father" Ron Paul is sponsoring the "Free Competition in Currency Act," which would allow states to introduce their own currencies, and rival Newt Gingrich is calling for a commission to look at how the country can get back to the gold standard.

But it will be the individual states that could really get the ball rolling, said Vieira. Even if several of the current proposals get killed, the introduction of so many bills at the state level is drawing national attention to the issue, he said.

Funny money: 11 local currencies

Of all the state proposals circulating right now, Republican-controlled states including South Carolina, Georgia, Idaho and Indiana have the best chance of passing their proposed bills this year, said American Principles Project's Danker. If just one or two states implement an alternative currency, it could have a Domino effect, he said.

"I think we could get a couple passed in this legislative session, and that would show this is mainstream, popular and it would be a justification for more of the risk-averse states for doing this," he said.

There are, of course, many people who think the recent push for alternative state currencies should be stopped in its tracks. David Parsley, a professor of economics and finance at Vanderbilt University, said he thinks state-issued currencies are a "terrible" idea.

"Having 50 Feds" could debase the U.S. dollar and even potentially lead the country into default, he said. "The single currency in the United States is working just fine," said Parsley. "I have no idea why anyone would want to destroy something so successful -- unless they actually wanted to destroy the country."

2012-02-07T01:21:00.000-08:00

Case-Shiller: Home Price Declines Accelerate
Standard and Poor’s reported that the November data for the Case-Shiller Home Price Index indicated further declines, the 20-city index falling 1.3 percent for the second straight month as property values declined in 19 of the 20 cities, also for the second month in a row. On a year-over-year basis, the 20-city index is now down 3.7 percent.

On a seasonally adjusted basis, home prices were down only 0.7 percent with three cities seeing gains and David M. Blitzer, Chairman of the Index Committee at S&P Indices, was not hopeful when he noted the following:

Despite continued low interest rates and better real GDP growth in the fourth quarter, home prices continue to fall … The trend is down and there are few, if any, signs in the numbers that a turning point is close at hand.

It looks like policy makers in Washington might want to accelerate plans for the next attempt at rescuing the housing market, that is, before prices fall too much further.

2012-02-06T18:03:00.000-08:00

2012-02-06T00:59:00.000-08:00

Good Inflation Video

Click HERE to watch on Youtube.

2012-02-03T01:37:00.000-08:00

Failed Fed Policies Prolong The Agony
By Ron Paul - Daily Paul
The Federal Reserve's interest rate price-setting board, the FOMC, met last week. They will continue to set the federal funds rate at well below 1%, and plan to keep it low until the end of 2014. That's a year and half longer than they planned when they met just last month. Chairman Bernanke says they are keeping interest rates so low for so long because the economic outlook warrants it.

The fallacies in their reasoning would be amusing if they weren't so dangerous. The Fed wants to keep the price of money at essentially zero – in other words "free" – to boost the economy. But the boost they are attempting won't get here for another three years. That's not a recovery. And we've already tried this tactic. That's how we got into this mess in the first place: with interest rates artificially low for a very long time. Free money doesn't stimulate growth, as Japan's two lost decades clearly show. Artificially low interest rates only serve to punish saving, distort market signals, and cause further malinvestment. They also do nothing to address the only real solution to our economic woes: liquidation of the bad debt that hangs around the neck of the world's economy, preventing recovery. Artificially low interest rates merely ensure that we remain a debt-financed consumer economy guaranteed to end up with a weaker economy and higher prices.

What baffles me even more is that two decades after the collapse of Soviet planning and decades more since the U.S. and economists purportedly rejected the idea of price setting, we find nothing wrong with the Fed setting the price of money. We all agree it is a bad idea to have a board saying the price of wheat should be $250 a ton today, or carpenters wages should be $25 an hour until the end of 2014. But we are perfectly comfortable with having a board set the price of one half of every transaction in our economy. And our markets are supposedly free.

The Fed policies of low interest rates, Operation Twist, and rounds of quantitative easing are all attempts to keep the economy alive artificially. But the 12 FOMC participants cannot manage the economy any better than the bureaucrats of the Soviet Union. The policies haven't worked. They won't work. Real economic recovery cannot come until we liquidate the bad debt, until we eradicate the poor decisions we made over the last decade, and start with a sound foundation. It is time we acknowledge the truth of the Fed's activities: they are merely using fancy words for price setting.

Treasury Secretary Andrew Mellon was correct in the 1920s when he said "liquidate everything." That's what we did in the severe depression of 1920-21, and we recovered so quickly it is never even talked about. We didn't take his advice after the 1929 crash, and ended up with the Great Depression. We are committing the same mistakes, destined to live in this Great Recession for a decade or more—it has already been four years, the Fed says it will be at least three more! It's time we start rethinking what the Fed's policies are really doing to our economy, because obviously, by their own admission, they haven't helped.

2012-02-02T01:17:00.000-08:00

Gold Is The Hottest Currency In The World
Forbes - Robert Lenzner, Forbes Staff
The price of gold is roaring back from its latest temporary correction, sending the bears into full withdrawal. If you sold your gold in December as it fell to $1525 an ounce, you’re probably feeling foolish at the incredible $210 rise to $1735– a 15% move in no time at all.

Gold, you see, is not a commodity like oil and copper and wheat. It is rather an alternative currency– one that finds buyers when paper currencies like the Euro are being hugely increased in supply by the ECB to forestall a sovereign cum bank crisis in Europe. There’s $650 billion in European bank and sovereign debt coming die before March 31, 2012 which can be sopped up by the $650 billion gift from ECB to the banks at the bargain rate of 1%. And more available from the European central bank– Europe’s very own Quantitative Easing program.

As the supply of gold cannot keep up with paper money(supply increases very little despite exploration), and it can be bought without loss of any real interest income, it seems clear t hat the gold bull market is alive and well. Central banks obviously are of the mind that gold’s rise will make up for t he decline in paper money and the lack of income on central bank liquid investments.

Then, too, the speculators already dumped 42% of their long positions between August and December, 2011 according to the High-Tech Strategist, a January 5, 2012 market letter by Fred Hickey that I strongly recommend. Hedge funds sold to meet redemptions. Hot money ran at warnings by technicians.

The truth is that the drop to $1525 in December triggered the renewed buying by the Chinese, who are the new incremental buyers in the world. The Chinese prefer to buy on weakness and not compete with the central banks of Russia, Korea, Thailand,Singapore and are buying to hold.

Zhang Jianhua, the research bureau director of the People’s Bank of China, was quoted in the POBC internal newspaper as insisting that “The Chinese government needs to further optimize China’s foreign exchange asset portfolioi and seek relatively low entry points to buy gold assets.”

Gold, apparently, is the Chinese priority for a “safe haven” when slow economic growth leads to widespread monetary easing and fears of ultimate inflation. Gold more than stocks or bonds or real estate, is obviously seen as the preferred way to store wealth. In that sense the Chinese are way ahead of the US and Europe.

After all its moves in 2011 gold was still up about 11%– more than stocks any place, and only beaten by 10 year US treasuries. Treasuries at 2% aren’t viewed as a reserve currency. Gold is the hottest currency in the world. Just ask the Chinese.

2012-02-01T01:40:00.000-08:00

Turk - Gold Ready to Smash Through $2,000, Exploding Higher
Today James Turk told King World News that gold is very close to beginning a move that will take the ‘Metal of King’ smashing through the $2,000 level. Turk was even more outspoken on where silver is headed and included a chart. Turk, who was interviewed out of Spain, had this to say about where gold and silver are headed in coming weeks: “The logical question here, Eric, is after the big week we had last week, will silver drop back to give buyers one more chance to buy the dip? A dip is logical given silver’s 6.5% gain last week. On the other hand, as we noted in the last blog we did, sometimes the dips can be very shallow.”

“The important point to keep in mind is while silver may look high compared to where it started the month, to me silver looks cheap compared to its upside potential over the next few months. So don’t wait for a big pullback to buy. If today is the day where you purchase silver each month, go ahead and make the buy. Don’t try to time the market.

This following weekly silver chart is really looking very powerful and as I have been saying, once silver hurdles above $35, I expect to see $68-$70 in 2-to-3 months.

Note how the downtrend line, the $35 resistance level and the current silver price are getting ready to meet. Silver's first attempt to hurdle $35 could happen within the next 2-to-3 weeks....

“There is, of course, no guarantee that silver will successfully hurdle $35 on its first attempt, but we need to get ready just in case it does. By ‘get ready,’ I mean we have to prepare ourselves mentally - to eliminate the emotion and watch what silver is telling us. This can be very hard to do, but it is essential. Otherwise you will miss the big moves, and it is riding these big moves to the fullest extent possible, from start to finish, where the big money is made.

Regarding gold, I don’t think people realize that gold could explode from current levels. I think the potential for explosion is there and what you are going to see is not only silver on the move, but you will also see gold smash through the $2,000 level.”

When asked what’s happening in Europe, Turk responded, “It looks like Greece is ready to blow up, Eric. The Greeks have rejected German-led calls for the EU to start managing Greek government finances. That would mean the complete loss of Greek sovereignty, so the Greek finance minister obviously rejected that dictate.

Consequently, it looks like Greece is not going to get its next bailout, meaning it will default. But there’s a lot of other bad news in Europe as well. Spain is in a depression with its youth unemployment rate now over 50%. France just raised the VAT (Value Added Tax) to 21%. Imagine, Eric, paying 21% to the government for everything you purchase.

This is why the underground economy is so large and growing in Europe because people need to survive. Across the channel, the UK is sliding into what looks like a deep recession.

To make things even worse, on the other side of the Atlantic, the Federal Reserve announced they are going to destroy savers by keeping interest rates below the inflation rate for another two years. It is really tragic, Eric, how governments are destroying capitalism, but as Ludwig von Mises warned us, governments will destroy free markets and economic activity long before they understand how they work.”

2012-01-31T11:00:00.000-08:00

Von Greyerz - Gold Market Positioned for Massive Upside Move
Today Egon von Greyerz told King World News that central bank balance sheets are expanding at a dangerous rate and this is a recipe for an explosion in gold and silver prices. Egon von Greyerz is founder and managing partner at Matterhorn Asset Management out of Switzerland. Here is what von Greyerz had to say about central bank activity and how it will impact gold and silver prices: “I’ve been looking at the explosion of the balance sheets of the central banks and it’s just astonishing to see how much money they are printing and how their balance sheets are expanding. We have the absolute perfect recipe for hyperinflation and thus a massive increase in the price of gold and silver.”

When asked about the action in gold and silver, von Greyerz responded, “The move in gold, so far, looks extremely good. I’m always pleased that we don’t have a straight move up, although I do think we will have faster moves higher in the not too distant future. This is strong action with small corrections.

We are at $1,730 today and I think within the next couple of months we will certainly be touching $1,900 and continuing higher from there. I don’t think $1,900 will be a stopping point for very long.

I really like the action of silver. Silver still hasn’t broken out like gold has, but as I said to you last time, I expect that to happen soon. It will break out around the $37 level. That’s going to happen very quickly because the gold/silver ratio is moving down nicely, but I think it will soon accelerate lower and silver will move a lot faster to the upside than gold.

So I can see $37 being taken out within the next 30 days and then we will just start flying from there. It won’t take long to get up to $50 again.”

2012-01-30T01:15:00.000-08:00

Gold Will Double In 5 Years
by Henry Blodget Daily Ticker
Gold is off its recent highs, but Frank Holmes of US Global Investors says the bull trend is very much intact.

Gold is actually a seasonal investment, says Holmes. In the first sixth months of the year, investors focus on the "fear" trade--the hope that gold will insulate investors from carnage in other assets (or the fear that investing in gold will clobber them).

In the second half of the year, however, investors begin to focus on the "love" trade--the season in which people around the world start thinking of giving the metal as gifts (in the shape of jewelry). The love trade, says Holmes, should drive gold higher by the end of the year.

And the long term?

Gold prices could double in five years, says Holmes. The supply of paper money is exploding, while the supply of gold itself is growing quite modestly. So when you project out those trends, the outlook for gold as investment is still promising.

And Holmes just one of those gold bulls who only like gold because of some religious devotion to it --or because it's going up?

No way, says Holmes! The fundamentals really do suggest that gold prices will pretty much only go up.

2012-01-27T01:22:00.000-08:00

In A Weak Moment..... I Voted
Shocked and amazed at how well anti-establishment Ron Paul has been doing this election season, I determined that I would vote in the SC Republican Primary last week as I felt I finally had a choice and was not being forced to vote for the lesser of two evils. But, as the election results rolled in, I was quickly brought back to the reality of how our system really works.

Seems I forgot that even if the people finally wise up and think for themselves rather than falling for all the media hype, the powers-that-be still have the final sayso in the outcome. Reading the following article reminded me of this truth that I zealously overlooked on my way to the polls last Saturday.

"The clues are clear but only to the alert observers. In year 2000, for the first time a gross inconsistency showed itself as an anomaly. The exit polls in Florida and Ohio did not match the election results at the local level. For a full generation, the correlation had been over 90%, as it should be, since people exiting a voting center reveal their votes with consistency. This is the left hand and the right hand coinciding genetically with the same human standing before the clipboard recording the exit poll. The lapdog subservient US press reported the anomaly as people changing their minds, or not admitting to the clipboard their actual voting preference. Numerous statistical studies showed the anomalies in colored form, to expose Florida and Ohio for its voting system fraud. Yet another blatant fraud has infected the American landscape. This is a far cry from legions of dead people rallying to vote for Kennedy in Chicago during the 1960 election, with the forces marshalled by Mayor Daley. History has repeated, as 1000 dead people voted in the South Carolina primary in one city alone. My guess is the dead people voted for Gingrich.

The season started in Iowa, where Ron Paul had a nice steady lead for the few weeks leading into the caucus. Then suddenly Santorum came out of nowhere to share the win with Romney. Paul finished a lowly third. The Santorum crowds were small except for his victory speech. Could it be that the outsourced vote count took 10% to 12% of the Paul vote and put it in the Santorum bin? Then in New Hampshire, where vote fraud is much more difficult due to hand counted ballots, a reality check came. Santorum finished way down the line. Move on to South Carolina, where again Ron Paul shared the lead position in the polls. But on the primary day, again Paul finished again a lowly third. We are told Gingrich won, and justified by having his home state so nearby. Yet Gingrich had to cancel a couple campaign stops due to lack of attendance. Ooops! Could it be that the outsourced vote count took 10% to 12% of the Paul vote and put it in the Gingrich bin?"

Source

2012-01-26T01:27:00.000-08:00

India to pay gold instead of dollars for Iranian oil. Oil and gold markets stunned
DEBKAfile Exclusive Report January 23, 2012, 5:57 PM (GMT+02:00)

India is the first buyer of Iranian oil to agree to pay for its purchases in gold instead of the US dollar, debkafile's intelligence and Iranian sources report exclusively. Those sources expect China to follow suit. India and China take about one million barrels per day, or 40 percent of Iran's total exports of 2.5 million bpd. Both are superpowers in terms of gold assets.

By trading in gold, New Delhi and Beijing enable Tehran to bypass the upcoming freeze on its central bank's assets and the oil embargo which the European Union's foreign ministers agreed to impose Monday, Jan. 23. The EU currently buys around 20 percent of Iran's oil exports.

The vast sums involved in these transactions are expected, furthermore, to boost the price of gold and depress the value of the dollar on world markets.

Iran's second largest customer after China, India purchases around $12 billion a year's worth of Iranian crude, or about 12 percent of its consumption. Delhi is to execute its transactions, according to our sources, through two state-owned banks: the Calcutta-based UCO Bank, whose board of directors is made up of Indian government and Reserve Bank of India representatives; and Halk Bankasi (Peoples Bank), Turkey's seventh largest bank which is owned by the government.

An Indian delegation visited Tehran last week to discuss payment options in view of the new sanctions. The two sides were reported to have agreed that payment for the oil purchased would be partly in yen and partly in rupees. The switch to gold was kept dark.

India thus joins China in opting out of the US-led European sanctions against Iran's international oil and financial business. Turkey announced publicly last week that it would not adhere to any sanctions against Iran's nuclear program unless they were imposed by the United Nations Security Council.

The EU decision of Monday banned the signing of new oil contracts with Iran at once, while phasing out existing transactions by July 1, 2012, when the European embargo, like the measure enforced by the United States, becomes total. The European foreign ministers also approved a freeze on the assets of the Central Bank of Iran which handles all the country's oil transactions.

However, the damage those sanctions cause the Iranian economy will be substantially cushioned by the oil deals to be channeled through Turkish and Indian state banks. China for its part has declared its opposition to sanctions against Iran.

debkafile's intelligence sources disclose that Tehran has set up alternative financial mechanisms with China and Russia for getting paid for its oil in currencies other than US dollars. Both Beijing and Moscow are keeping the workings of those mechanisms top secret.

2012-01-25T02:29:00.000-08:00

'The World Does Not Need to End'
A Gold Bull and His Prediction: $10,000 an Ounce
Wall Street Journal Online

There are gold bulls. And then there is Shayne McGuire.

The 44-year-old pension-fund manager from Texas, who spoke recently at a gold conference in Berlin, caused a stir among the roomful of gold aficionados. His provocation: A book that predicts the price of the precious metal could soar to $10,000 an ounce, more than seven times its current price.

Like those who once boldly predicted $1,000 Internet stocks and a 36000 Dow Jones Industrial Average, Mr. McGuire is a lone voice among mainstream investors suggesting such an outsize price jump in gold's price.

Mr. McGuire's view isn't idle prognostication. He runs a $330 million gold portfolio at the Teacher Retirement System of Texas. Mr. McGuire's forecast, which he made in the recently released book, "Hard Money," makes him a very far outlier. Most on Wall Street consider the prediction outlandish.

"If you missed" gold's recent run-up "you have to come up with some pretty sophisticated reasons to buy" now, says Andy Smith, metals analyst with Bache Commodities, a unit of Prudential Financial Inc.

Mr. McGuire was early to the gold trade. In 2007, he and a colleague persuaded the $100 billion Texas fund, the nation's eighth largest, to move into the metal. It was a novel strategy that made it one of the few large U.S. pension funds to have a fund solely devoted to gold.

At the time, gold was trading at around $650, less than half its current price.

In his 2007 pitch, Mr. McGuire argued that gold was "the most underowned major asset, widely seen as an eccentric, anachronistic leftover from the pre-information age that is best for 'end of world' types."

Not everyone at the Texas fund felt the same way. In one meeting, a pension executive sarcastically asked if anyone else in the room thought "the world was going to end?"

Indeed, most pension funds still steer clear of gold, investing just a fraction of 1% on average of their assets in the yellow metal, according to Alan Kosan, of Rogerscasey, an investment-consulting firm. Most pension funds consider gold too volatile and therefore too risky.

So far, however, Mr. McGuire is in the money. With gold prices surging this year, his fund is up about 25% since its inception a year ago. For its fiscal year ended in June, the Texas pension fund was up 15.6% overall. The gold fund has half its assets invested in a gold exchange-traded fund, SPDR Gold Trust, and the rest invested in gold stocks.

Gold's historic run-up was spurred by uncertainty about currencies, fears of inflation and continued monetary easing by the Federal Reserve. Like dot-com stocks in that bubble, which were difficult to value because many companies generated no earnings, gold is hard to value because it produces no earnings or revenue and costs money to store.

"It doesn't do anything but cost you charges and stare at you," billionaire investor Warren Buffett said in a recent interview.

There are other gold bulls, of course, including prominent hedge-fund manager John Paulson, who has predicted gold could go to $4,000 an ounce by as early as 2013.

For his part, Mr. McGuire says gold is no longer only for those who think financial Armageddon is near. He expects gold to soar amid rising inflation, among other things. "The world does not need to end for gold to go hyperbolic," he says.

In his book, Mr. McGuire reasons that $10,000 gold is possible if enough other pension funds and big investors jump-start buying and move as little as 1% of total global stocks and bonds holdings into the metal. Such a migration into gold would equal enough demand to push prices up tenfold from their current level, he calculates.

Of course, the same argument would be true for nearly every other investment class. Mr. McGuire has confidence in his argument, however, because he believes inflation will return, which typically pushes gold prices higher.

He said he expects a series of fiscal crises to hit around the world. And then there is China, where he says that gold is "widely regarded as a basic savings asset."

Gold prices also are rising because of the ascendancy of exchange-traded funds, which are funds that track an index but are be traded like a stock. The largest ETF, under the trading symbol GLD, now invests $50 billion, an amount that Mr. McGuire believes could grow far higher if investors shift a small percentage of their investment funds into gold. At its current level, the stock-market capitalization of all gold ETFs is about $80 billion, roughly that of McDonald's Corp.

"Now that the value of modern money is becoming highly questionable, more and more people are turning to gold. It's not the new thing; it's a return to normal," he says.

The son of a foreign correspondent for Newsweek, Mr. McGuire grew up in Mexico and spends leisure time playing chess and reading history books.

He is a fan of the financial history of the 1930s, and quotes from Franklin Delano Roosevelt's first inaugural speech in 1933 about the importance of not overspending. Before joining the Texas pension fund in 2001, he was an analyst at Deutsche Bank and ING Barings.

His gold prediction is by far the most aggressive call he has made in his career, he says, but he says he ignores his doubters. "It seems like an aggressive call," Mr. McGuire says, "but it's really a comment on what governments have been doing to the monetary system."

Of course, the risks of such a big prediction can affect one's entire career, much as it did former stock analyst Henry Blodget, whose bullish call on Amazon.com was lambasted after shares plunged in the dot-com bust. "There are enough nutty-sounding gold targets out there that this one probably won't shock anyone," Mr. Blodget wrote in an email. "But it's certainly a nice big headline-friendly number."

2012-01-24T04:45:00.000-08:00

Libya Was All About Gold
[Futuremoneytrends.com] James Rickards is Senior Managing Director at Tangent Capital Partners LLC, a merchant bank based in New York City, and is Senior Managing Director for Market Intelligence at Omnis, Inc, a technical, professional and scientific consulting firm located in McLean, VA.

During this interview with Mr. Rickards, he discusses the next global financial crisis and how the average person should take steps to protect themselves. Mr. Rickards, who also has been an adviser to the Defense Department and the intelligence community, gave us his outlook for Iran, Ron Paul, occupy Wall Street, the tea party, and how we could potentially be approaching total financial chaos.

If you cannot watch the above video, click HERE.

2012-01-23T01:31:00.000-08:00

Ben Davies - Funds Will Pile into Gold after Missing the Rally
With gold closing the week at the $1,665 level and silver at $32, today King World News interviewed Ben Davies, CEO of Hinde Capital, to get his take on where the gold & silver markets are headed. When asked what he is focused on right now, Davies remarked, “We’re looking at this year being a year of sovereign defaults. That’s where I’m focused and from that I have to try to derive what asset classes are going to do. I think of the monetary system, at the moment, as a coin. There are flip sides of the coin and one side is credit, deleveraging or deflation as I call it.”

“On the other side we’ve got monetary inflation, and those two are trying to counter-balance each other to try and keep the coin spinning, in the middle, keeping upright. It wavers one way, risk assets go off into credit deleveraging. It flips the other way, markets surge again.

To enlighten on that is to go back to what happened in December. I was very clear from my trip to Asia and the way I’ve perceived positioning in the market, that it was more likely we were going to have a post Christmas or certainly a December deleveraging.

For me, watching the actual physical gold market, although the gold/silver ratio pushed out a little bit, I really felt the selling was all about gold, and silver was just a side participant. Watching the market, it was one seller. I’m not going to name names, but I suspect it was a very large fund that’s had a very bad year. Everyone knows who it is (Paulson)....

“His gate was up for allowing redemptions and I suspect there were significant redemptions. So there was selling of the GLD, or certainly there was selling in other parts of the gold market, in order to unwind the collapse in his own fund.

So one seller in the market was pretty rigorous for the space of a week. It was very obvious based on the sentiment indices we look at, these were some of the best risk/reward sentiment levels that we’ve ever seen. Probably the best seen since the 2008 level, and actually I would say they were arguably better in silver.

If I would have been an investor I’d probably have taken more risk in silver, which is what we did. We bought some call spreads, in the market, to add to our long silver position. We got long, actually, on the very last day of the year when the market gave us our buy signals. The market, as of yet, hasn’t told us to be out and so we are still over-invested in the market.

In terms of calling for prices, I think we had a great call (last year). We called for a $400 or $500 rally in the market. We got it, almost to the $2,000 level that we asked for.

My only criticism of myself is I hung on to the belief that despite the central bank intervention in the market, I thought with all of the currency proliferation it would be enough to offset the deleveraging and spur gold to a nominal new high. That didn’t happen.

I would say that (with gold) coming in $1,570 at the start of the year, you would have to believe the market had more upside. But people aren’t really invested and the market is rising on this monetary asset growth. It’s really inflation that’s driving this, underpinning the market.

The danger here is that people (who especially run funds) feel they are missing this rally and they start to pile in. I would say I’m looking for the $1,700 - $1,720 level before I’d even think about reducing.”

In this interview Davies covered gold, silver, the mining shares and what fundamentals are driving assets in 2012. The KWN audio interview with Ben Davies will be available shortly and you can listen to it by CLICKING HERE.

2012-01-20T02:40:00.000-08:00

John Embry - Gold to Rapidly Triple in Price on This Move
[KingWorldNew-Blog] With gold holding on to gains above the $1,650 level, today King World News interviewed John Embry, Chief Investment Strategist of the $10 billion strong Sprott Asset Management, to get his take on where he sees gold headed from here. Embry informed KWN that gold was very close a major breakaway move to the upside. Here is what Embry had to say about the situation: “I’ve been of the mind for a considerable period of time that the gold price really wouldn’t accelerate to the upside until such time as the physical market finally overwhelmed the paper market. But I think we’re reaching the stage now where there is mounting buying of physical because people are starting to realize the paper price is fraudulent.”

“We’re very close now to that important moment where the physical market actually does overwhelm the paper market, and as this takes place you will see massive moves in the price of gold. I will finally be convinced the physical market has gained ascendancy when the gold price is going up 4% or 5% a day or $100. That’s going to happen.

The ‘London Trader’ is right when he says there is a lagging effect from the physical purchases which is later reflected in the price. In the end, the Achilles heel of the paper manipulators is they have to be able to get enough physical gold to handle demand. So, I agree with the London Trader there is a delayed reaction.

I’ve had this discussion with a friend of mine, who was very active in the gold market of the 1970s, and he witnessed the London Gold Pool supplying as much gold as was necessary to keep the price suppressed. But at some point the entities working the London Gold Pool realized they only had a finite amount of gold. Even though they hate gold, they realized they couldn’t sell it all....

“I think we’re getting to that point once again, and that will be the inflection point that will kick off the physical explosion in the price. I’ve been surprised the suppression has gone on as long as it has. The gold has been coming out of the Western vaults through leasing, but I believe that has a very finite life now.

The minute this thing gets away and we start to have a real market and prices start to reflect real supply/demand, it will bring in a lot more demand at the same time supply is being diminished. This is why you’re going to have price moves of staggering dimensions.

What we are seeing, to date, is just the beginning because the market has been rigged the whole way up. But the fact is gold has risen from $250 to as high as $1,925 and that just reflects the power of the fundamentals. We haven’t seen the market break away from the rigging, which it will, and that’s when the huge moves will happen.

The technician I have the utmost respect for is Alf Fields. When I was at a conference in Australia, last November, Alf told me he believed gold had bottomed and would not break $1,500. He has now stated the bottom is in and his next major target is $4,500 on gold. That’s roughly a triple off the lows. That, alone, would kind of support the idea the physical market is going to gain ascendancy.

We will have $100+ up-days in gold. Right now it’s hard to believe, but we are going to see moves that will be staggering to market participants. You could see moves, to the upside, of hundreds of dollars in a day. When you say that, you almost lose people because they cannot conceive of that type of action yet.

If you contrast where we are versus the 70s, we are probably in the ’74 to ’76 time frame. So the big move in gold is still ahead of us. This time the moves will be greater because there is less physical gold available and conditions are infinitely worse. That’s where people get those numbers for gold like $10,000 and I could certainly see something like that happening.”

2012-01-20T01:22:00.000-08:00

Half of U.S. Households Received Government Benefits in 2010
from Yahoo Finance
A record-high 49% of the population lived in a household receiving some type of government benefit in the second quarter of 2010, according to Census data reported by The Wall Street Journal. Most of this group received so-called "means tested" benefits like food stamps, subsidized housing or Medicaid. Many are also benefiting from unemployment insurance spending, which has quadrupled since the downturn.

Is this statistic a watershed mark of our decline into socialism, a totally reasonable outcome from the Great Recession, or, somehow, both things at the same time?

Click here to read the rest of the story.

2012-01-19T04:22:00.000-08:00

Cash Is Trash

Robert Kiyosaki is author of Rich Dad, Poor Dad and is known world-wide as an investor, author, businessman and motivational speaker.

2012-01-18T01:39:00.000-08:00

What would it take to burst gold’s price?
igoldprice.net
No one ever said gold was an asset for the faint-hearted. Or indeed, for anyone who doesn’t enjoy an argument.

To some it is the only true form of money, a king over the water just waiting to be re-installed on its rightful throne once the impostors are cleared out of the way. To others, it remains, as the economist John Maynard Keynes described it, a “barbarous relic,” of no more relevance to the 21st century that the canal or the telegraph.

Still, even by its usual standards, it was more contested than ever as 2011 closed out. After running all the way up to $1,916 an ounce in the autumn it dropped all the way back to $1,550 as the year ended. So has the great gold bull market, which started in earnest all the way back in 2000, finally blown out?

Not quite. Gold will tip over into bubble territory one day. But it won’t move into a bear market until central bankers start hammering down on inflation as they did in the early 1980s. And that moment is still some way off.

True, it is not hard to make a bear case for gold.

Any asset that has been rising fast for more than a decade has to treated with suspicion. Back in July 1999, gold hit a 20-year low of $252.80 an ounce. The International Monetary Fund was a seller, and so were central banks in Australia and Britain. It looked as if time was finally being called on its role as the ultimate repository of value. As it turned out, that was the bottom of the market. Since then the price has climbed and climbed. Even give the correction before Christmas, gold is up six-fold in a little over a decade, while stocks and most other assets have gone nowhere.

That bull market has entered the popular consciousness. Ordinary people who hardly follow the markets, and have no idea what bond or currency markets are doing, now discuss gold in much the same way they used to discuss property prices. There are endless adverts offering great prices for unwanted jewelry. Gold funds pitched at ordinary investors are being launched all the time, and the bullion companies are building new vaults to store all the stuff. It even trends on Google.

If that isn’t a sell signal, it is hard to know what is. On top of that, some of the smartest players in the markets have jumped off the bandwagon. George Soros, the hedge-fund guru, has said he has sold most of his gold holdings. Like him or not, Soros is always worth listening to: he’s been right more often than most of us, and has the bank balance to prove it.

Against that, the bull case is not hard to make either. Inflation is still a threat. Central banks are still minting money. The dollar is in steady decline as the world’s reserve currency. Perhaps most importantly, the euro remains in crisis. Either the European Central Bank will print lots of money — which is good for gold — or else the currency will collapse chaotically — which would be good for gold as well. Little surprise then that the bulls are sticking to their forecast of the price soaring past $2,000 an ounce during the course of this year.

Who should you believe? One useful way of cutting through this argument is to ask this question. What it would actually take to drive the price of gold down?

We have one major example to look at. Between 1980 and 1982, the price of gold collapsed from more than $840 an ounce to less than $320.

Why did that happen? Well, because there was a sustained rise in interest rates. In the U.S. interest rates went from 11% in 1979 to 20% in 1980. In the U.K. rates went up to 16% in 1980. Even in that haven of low inflation and monetary stability, the old Bundesbank-controlled West Germany, rates went all the way up to 11.5%. Gold peaked at roughly the same time, but then went into a sustained decline.

The reason for that is not hard to understand. Rising interest rates do two things to gold.

First, they reduce inflation — and since gold is primarily a hedge against inflation, that reduces its value. Once the central banks have made it clear they are going to raise rates to whatever level is necessary to bring prices under control again, there is not much reason to protect yourself from inflation. You are better off moving into other assets — such as stocks, for example — that will flourish as the economy becomes more stable. Investors don’t catch on immediately, but they get the message soon enough.

Second, as interest rates rise, it becomes more expensive to own gold. The precious metal pays no interest. Indeed, you have to pay to store it. When interest rates are zero, as they are now, that doesn’t make much difference — cash doesn’t pay any significant interest either. But when interest rates rise, the cost of holding gold, in the sense of interest foregone, starts to rise. Back in 1980, you could get 20% on cash, so all that gold sitting in your portfolio looked expensive.

The point is a simple one. The gold price is not going to fall in any sustained way until interest rates start to rise significantly. Perhaps they don’t need to go back to 1980s levels because they are starting from a lower base. But interest rates of 10% would be necessary to create a bear market in gold.

Is there any sign of that? Not yet. If anything, central banks are going to make money even cheaper this year.

The precious metal will turn into a bubble one day — every asset eventually does. But it is a long way off that point now.

Author: Matthew Lynn is a financial journalist based in London. He is the author of “Bust: Greece, the Euro and the Sovereign Debt Crisis,” and he writes adventure thrillers under the name Matt Lynn.

2012-01-17T01:10:00.000-08:00

Point Of No Return
The following commentary and chart are from and article entitled 2012 - The Year Of Living Dangerously.

The world is awash in debt. Everyone is focused on the PIIGS with their debt to GDP ratios exceeding the Rogoff & Reinhart’s 90% point of no return. But, the supposedly fiscally responsible countries like Germany, France, U.K., and the U.S. have already breached the 90% level. Japan is off the charts, with debt exceeding 200% of GDP. These figures are just for the official government debt. If countries were required to report their debt like a corporation, their unfunded entitlement promises to future generations are four to six times more than their official government debt.

Any critical thinking person can look at the chart above and realize that creating more debt out of thin air to solve a debt problem is foolish, dangerous, and self serving to only bankers and politicians. The debt crisis took decades of terrible choices and bogus promises to produce. The world is now in the midst of a debt driven catastrophe. At best, the excessive levels of sovereign debt will slow economic growth to zero or below in 2012. At worst, interest rates will soar as counties attempt to rollover their debt and rolling defaults across Europe will plunge the continent into a depression. The largest banks in Europe are leveraged 40 to 1, therefore a 3% reduction in their capital will cause bankruptcy. Once you pass 90% debt to GDP, your fate is sealed.

2012-01-16T01:29:00.000-08:00

The US Economic Situation Simplified
(Or, why it is unwise to store your savings in paper money)
Source: Norman Willis, Nazarene Israel

Why the US credit rating was downgraded...
• U.S. Tax revenue: $2,170,000,000,000
• Fed budget: $3,820,000,000,000
• New debt: $ 1,650,000,000,000
• National debt: $14,271,000,000,000
• Recent budget cut: $ 38,500,000,000

Let's remove 8 zeros and pretend it's a household budget:
• Annual family income: $21,700
• Money the family spent: $38,200
• New debt on the credit card: $16,500
• Outstanding balance on the credit card: $142,710
• Total budget cuts: $385

2012-01-13T01:24:00.000-08:00

$10,000 Gold is Coming in 2012/13! Here’s Why
Source: munKNEE.com
I am increasingly confident that the consequences of fragile sovereign debt, precious metals market manipulation, insufficient physical supply, and the need for a safe haven investment refuge, will contribute to rampant price inflation and drive precious metals bullion and mining stock to a parabolic peak price of $10,000 sometime in 2012 or 2013 at the latest. You may think my views are crazy or perhaps that my imagination is way out of hand or, at best, that I don’t have access to the appropriate reality checks but the reality of the situation is that we are going to see $10,000 gold in the next year (or two)! Read on for what I believe to be very sound reasons for coming to such a conclusion. Words: 1102

So says Arnold Bock (www.FinancialArticleSummariesToday.com) in an updated version of an article written back in 2010 in which the passage of time has only strengthened his assertion. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Bock goes on to say:

Below is my assessment of the situation and rationale for my not so outlandish forecast/prediction:

THE CAUSES

1. History is No Guide
Gold has only been trading freely since President Nixon’s 1971 decision to deny gold to the French and others attempting to repatriate their paper dollars for the metal. As such, there has been a scant forty years of gold production and trading since it was detached from supporting paper money. This period has also been marked by substantially higher monetary and price inflation as well as currency devaluation.

2. Market Manipulation
The Commodity Futures Trading Commission (CFTC) held a major hearing in 2010 which blew the doors off bullion metals futures trading markets in terms of what was revealed publically. I predict this public hearing will be viewed in the period ahead as the precious metals price liberation event of the decade.

More recently, Eric Sprott has pointed out in an article entitled Sprott: Shocking Shenanigans in Paper vs. Physical Silver Market that the annual production of physical silver is traded in the futures markets in a space of one to three days. That means the virtually all the trading in the futures markets is about trading phantom paper supported by absolutely nothing. I ask, is this make sense? Is it a valid method of establishing the price of the real precious metals?

It is commonly known that JP Morgan Chase in the major player in commodities futures markets trading. Not only do they take massive naked short positions (betting that prices will fall), they do it with large substantial leverage. What isn’t as well known though is that Chase acts as the agent for the Federal Reserve Board and other central banks in ‘managing’ the precious metals markets on their behalf. Central banks want ‘orderly’ precious metals markets and prices and currencies which don’t gyrate wildly. Only then can they achieve stealth inflation through financial repression in their monetary policy which is so beneficial in servicing debt.

3. Insufficient Physical Inventories
While it is normal for traders to roll their expiring contracts over into new paper trades, most traders accept cash in settlement rather than the metal. At hearing of the CFTC in 2010 Jeff Christian inadvertently confirmed that there is little bullion in storage at the London Metals Exchange or New York’s COMEX to back the metals trading. (See a previous article I wrote entitled Where’s the Gold!?) justifying this fact by noting that less than one ounce of one hundred traded is paid out in physical metal. This revelation confirmed a much worse reality than even critics, such as the Gold Anti-Trust Action Committee (GATA), had expected. It seems too that the Asian and Mid East buyers and owners of bullion have been removing gold from their dealers’ vaults and are taking it “home” thus leaving much less than previously thought in the London, New York and Toronto vaults.

In addition to what looks like a production peak in the gold mining industry (production has fallen in 5 of the last 8 years), central banks have for the first time recently become net purchasers (having bought more gold last year– 425 tons – than at any time since 1964).

The single largest purchasers of metal these days, other than central banks, are the bullion ETF’s (Exchange Traded Funds) which ostensibly have their metal inventories in vaults. These relatively new investment vehicles, unfortunately, are not transparent in their business practices. Regular audits by reputable accounting firms and allocated and segregated bullion inventories stored in reputable vaults are opaque at best. This begs the question:“Do the large ETF bullion funds actually have the metal they purport to own, or is their inventory more the ‘paper gold’ variety in which bullion futures trading exchanges specialize?”

THE EFFECT
1. The revelation, outlined above, that there is insufficient physical inventory to meet new investment demand for ownership and delivery of physical bullion, is about to blow the price lid skyward.
2.As public awareness of sovereign debt mounts, it will drive home the reality of mounting government insolvency.
3.Confidence in paper currencies will wilt commensurately.
4.Investment demand for gold as real money as a safe haven investment will expand exponentially.
5.These events began in 2011, should accelerate in 2012 and extend further out toward 2015 before demand is satiated.
6.Dramatic price increases in gold and silver will at that point be encouraged by the unstated desire of central banks and politicians to devalue their currencies in order to assist them in meeting their debt and unfunded liabilities because rising precious metals prices effectively devalues associated paper money.
7.A new world ‘Reserve Currency’, composed of a trade weighted group of currencies and a gold component for credibility, will be introduced to replace a troubled US dollar. This new and higher value currency will be used to price and settle accounts in the instance of international trade. National and regional currencies will continue to be used for domestic purposes, but will be conveniently devalued by both appreciating precious metals bullion and the new world reserve currency.

After the 2008/2009 crash, governments bailed out their failing financial institutions and investment banks through a variety of innovative measures. The next time round most governments will not be in a position to do it yet again. Even more troubling, the IMF (International Monetary Fund) will not be capable of rescuing the increasing number of insolvent governments and their financial institutions.

CONCLUSION

The circumstances immediately ahead are largely unprecedented. History is therefore only marginally useful as our guide to the future price of precious metals. We are now in genuinely unchartered territory. As such, as I said in the oppening paragraph, I fully expect gold to gold parabolic in 2012/2013 topping out at $10,000.

2012-01-12T19:15:00.001-08:00

Why the Wealthy Own Gold
321Gold.com
By Mark Motive,Posted Jan 10, 2012

The global economy is in turmoil. Europe is on the verge of collapse, probably taking the US down with it. As the euro-crisis worsens, we march ever closer to outright monetization of European debt by the ECB and, covertly, by the Federal Reserve. The developed world is perilously close to a monetary deluge that could make the Weimar Republic's hyperinflation look like amateur hour.

Yet, I still talk to Wall Street analysts who clearly misunderstand gold's place in a portfolio. Meanwhile, many people who are part of the world's wealthy class are hoarding gold. What do they know that others don't?

If you ask the common man in the street about investing in gold, most will give you a strange look. After all, they believe investing is about stocks, bonds, and CDs.

If you ask someone with a bit more investing knowledge, they will tell you to buy gold during inflationary periods.

If you ask a relatively sophisticated investor, they will tell you to buy gold during deflationary and inflationary periods. Some may even say to buy gold during periods of uncertainty and instability, or when real interest rates are negative.

However, if you ask the world's wealthy class about gold they will give you a very different answer. At Plan B Economics, we've found that most of the world's wealthy class doesn't view gold as an investment at all! I would argue these folks have it right. Simply put, they consider gold to be a store of wealth and believe that anytime is a good time to own some gold.

With wealth storage (a.k.a. wealth preservation) as their goal, the rich are less fixated on daily fluctuations in gold prices. They aren't trying to earn short-term profits from gold ownership - they are trying to maintain their overall purchasing power. Since the wealthy have large asset bases, losses in purchasing power add up to big dollar figures, but the wealth preservation characteristics of gold are just as beneficial to the middle class.

Gold can protect real wealth because it tends to move in a different direction than other types of assets (i.e. gold is negatively correlated with other assets), making it an effective portfolio diversifier. When gold prices are falling, other forms of wealth are often rising in real terms. When gold is rising, other assets are usually falling in real terms. Gold has an offsetting effect when it is part of an overall asset base - but there are more important reasons the wealthy own gold.

As the world sinks into greater financial and political uncertainty, the wealthy want to protect their families from the unthinkable. Physical gold can store substantial wealth in a compact, universally-accepted form that can be hidden from the prying eyes of governments. So if/when collapse truly occurs, as it has consistently throughout history, the wealthy can escape with a big portion of their assets.

At this point, some of you reading this may be rolling your eyes, thinking such asset positioning is reserved for conspiracy theorists and survivalists, but history and current anecdotal evidence suggest this is how many wealthy people think. In fact, since I began writing on economics, I have encountered many wealthy people who have caches of food, precious metals, and weapons (but rarely admit it). They are acutely aware that if society broke down, they'd be the first scapegoats of the masses and any government rising to fill the power vacuum.

Ask the wealthy and middle class people who escaped Hitler's Germany (or many other similar authoritarian regimes throughout history) about gold. These people left behind houses, businesses, and paper assets to escape their home country. They even left behind savings and securities accounts, the withdrawal of which would have alerted authorities. (Moreover, German currency and securities were worthless in the eyes of non-German financial institutions.) They did, however, take as much gold as was physically possible. To these people, gold wasn't an investment, but a way to smuggle a lifestyle across borders in a suitcase.

I believe gold can provide the same utility to the wealthy and middle-class alike. Everyone should have a portion of their wealth stored in a fungible, highly-concentrated, portable form. The goal here is to prepare, not to predict. After-all, you buy homeowner's insurance but never expect your house to burn down.

So next time you consider gold as an investment, ask yourself why you are buying it. If you're worried about 20% up and down moves, then you are simply speculating on the price of gold. If you're looking for a portfolio diversifier, then you will be willing to accept gold's counter relationship to other asset classes. But if you are truly looking to protect from economic or political collapse, and need an enduring store of wealth, you may want to think like the wealthy class and hold physical gold in a hidden yet easily accessible location.

2012-01-12T01:59:00.000-08:00

Fractal Analysis Suggests Dow Could Drop to 6,000 in 2012 and Gold Take Off Like It In 1979
Excerpt: The Dow’s inflated value, relative to the value of gold, was brought about by this debt-based monetary system. It follows naturally that in the event of the debt-based monetary system collapsing (it will eventually); the Dow:gold ratio could go back to levels prior to the introduction of this system. This level could be anywhere between 0.2 and 1, in my opinion. Therefore, it is possible to have a gold price of $5000, with the Dow at 1000. I do not say that we will have these levels, but it is certainly possible. All I am saying is that we have to be prepared for extremes never before seen in our lifetime.

I have written before of how similar today’s conditions are to that of the Great Depression and, based on that analysis, today’s economic fundamentals certainly support the theory of a massive drop in the Dow, relative to gold and even the US dollar.

Read full article here.

2012-01-12T01:08:00.000-08:00

Still Clueless
I was reading the following comments from Peter Schiff's recent CNBC interview and just wondering just how high gold will go once the public finally "gets it." We've gone from $300/ounce to $1600/ounce and still nobody owns gold. How many zeros will we have to add to the end of the gold price once the public understands the seriousness of the situation?

**************************

In a recent interview on CNBC on December 30, Peter Schiff of Euro Pacific Capital said. "You need to own gold, and most people are still clueless about that."

"The fundamentals have never been better for gold and I think prices are going a lot higher," Schiff told CNBC in an interview looking back on gold’s 2011 performance and ahead into 2012.

"I still think it's headed higher. I'm not really sure when you talk about the turnaround, I don't think that the correction we've had in the last few months has turned the bull trend. I think we're still in a bull market. I think that trend is going to continue. The question is, is the correction over? I don't think there's much more left in the correction. ...

"The U.S. is a bigger disaster than Europe, but all the central banks -- the U.S., the [European Central Bank], the Bank of Japan, Bank of China -- everybody is printing too much money. Everybody has rates too low, and the world is looking for an alternative to currencies, not just the dollar or the euro, but the world. People are going back to real money and not enough people have made that switch. Most people are still clinging to the idea that there's a safe haven somewhere in currency. There is no safe haven in currencies. If you want to protect your wealth, if you want to store purchasing power, you can't do it in a currency. You need to own gold, and most people are still clueless about that.”

2012-01-11T01:54:00.000-08:00

Absurd Gold/Silver Price Ratio; Why $500/oz Silver Is Now A Certainty In The Future
by Jeff Nelson, ETF Daily News
Arithmetic is a harsh mistress. Irrespective of how badly the banking cabal wishes to suppress the prices of gold and silver, and irrespective of how much brute force they are able to apply to the market over the short term with their (illegal) manipulations; the inexorable pull of supply and demand will inevitably overwhelm any/all such operations.

This is not the whimsical theory of some ivory-tower economist, but a simple fact of markets which has been demonstrated to us all in totally unequivocal parameters. Thus back in the “bad, old days” of manipulation – when the banksters still had large hoards of bullion to dump onto the market and crush the price – the price of silver was pushed to a 600-year low (in real dollars). What did the extreme manipulation of the silver market in the 1990’s reap for the banksters? A 1,000% increase in the price of silver over the following decade.

CLICK ON CHART TO ENLARGE

The misunderstanding of most novice investors in this sector (and a source of tremendous frustration) is that these short-term episodes of manipulation somehow delay (or even prevent) gold and silver prices from reaching their “maximum” levels. In fact the precise opposite is the truth: each and every manipulation operation translates to even higher long-term prices for gold and silver. It’s all just simple arithmetic.

Perhaps the easiest way to illustrate these dynamics is through comparing the gold market and the silver market. While both of these markets have been subjected to extreme manipulation, it is clear that manipulation of the silver market has been much more severe. There are two related numbers which illustrate this point.

Knowledgeable investors know that the long-term price ratio of gold versus silver (i.e. over roughly 5,000 years) has averaged approximately 15:1. This closely coincides with the ratio of the natural occurrence of these two elements in the Earth’s crust (approximately 17:1). Not only did this price ratio remain relatively constant over several millennia, but the fact that the price ratio so closely mirrors the rate of occurrence of the two metals shows that (in relative terms) our species has demonstrated a roughly equal preference for the two metals throughout recorded history.

These facts establish beyond any possible contradiction that over the medium or long term the price of silver must remain at close to a 15:1 ratio versus the price of gold. There is only one factor which could alter this arithmetic: if our preference toward the two metals changed. Has any such change in preferences occurred? Yes. Silver has become much more popular.

This increased popularity comes in two distinct forms. Modern technology has established silver as the most valuable/versatile of all metals, with more new silver-based patents being created than for any other metal. Along with that there has been an even more stunning/dramatic surge in investor demand for silver – a consequence of silver being perennially and extremely undervalued.

In 2011, the United States sold nearly 40 million Silver Eagle 1-oz coins while only selling approximately 1 million Gold Eagles – a near 40:1 ratio. This ratio is more than double the 5,000-year price ratio, and more than double the relative natural occurrence of silver. In other words, over the long-term this demand profile is totally unsustainable – and must result in (first) the total depletion of silver inventories, and (second) a rise in the price of silver sufficient to stifle silver demand sufficiently for balance to be restored.

However, the demand profile of silver is literally only half the story here – and the supply-side illustrates the futility of bankster manipulation in even more absolute terms. Given that silver is 17 times more plentiful in the Earth’s crust, we would expect the world’s mining industry to be producing about 17 times as much silver as gold each year. In fact actual production numbers are nowhere near this ratio.

To attempt to conceal the ridiculous imbalance between silver mining and gold mining, the banksters report silver mine production in (Imperial) ounces, while reporting gold production in (metric) tonnes. Fortunately anyone able to employ a calculator can overcome this clumsy attempt at deceit.

Converting all mine production to ounces, gold mine production was over 100 million ounces in 2010 while silver mine production was a mere 735 million ounces. Thus we have the miners producing only approximately 7 times as much silver as gold in 2010, while investors are exhibiting a 40:1 preference in buying silver versus gold. Meanwhile the gold/silver price ratio is an utterly insane 55:1 at the present time.

Keep in mind that the preference for silver over gold industrially is just as extreme. While industrial demand for gold has essentially remained flat over recent years, industrial demand for silver has risen by roughly 50% over the past 10 years – and by 18% in 2010 alone. This rabid industrial demand for silver (along with relatively little recycling) has resulted in global stockpiles of silver being decimated, with silver inventories plummeting by 90% between 1990 and 2005 alone.

Conversely, virtually every ounce of gold ever mined is still available today. As a result of decades of yet another gross imbalance in this market, there is less silver in the world today (relative to gold) than at any time in thousands of years. A precise ratio is impossible to construct, however estimates range from a (conservative) 6:1 level to the estimates of the more bullish commentators in the sector, who insist there is more (above-ground) gold in the world today than silver. This means that relative to supply, silver is currently under-priced by a factor of ten (if not more).

At the same time that silver is at its most popular point in history, there is less of it around (relatively) than at any time in history. Anyone with the slightest comprehension of markets understands what must happen: the price of silver must explode to a level which simultaneously dramatically depresses demand, while causing an explosion in silver mining activity. And note that the current parameters discussed here were after the 1,000% price increase over the past decade. Not only has the supply-deficit remained despite that 1,000% price increase, it’s gotten larger. Thus we might (conservatively) estimate that another 1,000% increase in the price of silver might just be enough to restore balance to the market.

What we have observed generally with respect to the gold and silver markets over the past few decades is nothing more than a long-term illustration of the principles of supply and demand, along with the absolute dictates of arithmetic. The extreme manipulation of the precious metals sector during the last decade of the last century has led to massive price increases in the prices of gold and silver in the first decade of this century – despite the banksters redoubling their efforts to suppress these markets.

Silver was suppressed even more extremely during those previous years, and so it nearly doubled the gains of the gold market over the past decade. This is nothing but a reiteration of one of the most obvious common-sense principles of human commerce: if you put something “on sale” you will increase buying and burn through inventories. If you price something at an extreme discount, you simply burn through inventories much, much faster.

The gold/silver price ratio has once again reached an absurd manipulation-extreme. This in turn is conclusive proof of the current, ruthless suppression of silver taking place in this market – as unequivocally demonstrated by the supply/demand parameters previously detailed. What does this mean over the longer term? That $500/oz silver is now a certainty in the future.

2012-01-10T03:35:00.000-08:00

Why Has Gold Been Down?
By Jeff Clark, Casey Research

In spite of some short-term fixes, there remains no real resolution to the sovereign debt issues in many European countries. We're certainly not spending less money in the US, and now we're bailing out Europe via currency swaps with the European Central Bank. Shouldn't gold be rising?

Yes, but nothing happens in a vacuum. There are some simple explanations as to why gold remains in a funk.

1.The MF Global bankruptcy, the seventh-largest in US history, forced a high degree of liquidation of commodities futures contracts, including gold. Many institutional investors had to sell whether they wanted to or not. This is similar to why big declines in the stock market can force funds and other large investors to sell some gold to raise cash for margin calls or meet redemption requests.

2.The dollar has been rising. Money fleeing the Eurozone has to go somewhere, and some of it is heading into US bonds, which means first converting the foreign currency into dollars.

3.It's tax-loss selling season, something that's also impacting gold stocks. Funds and individual investors are selling underwater positions for tax purposes. Funds also sell their big winners to lock in gains for the year and dress up quarterly reports.

These forces have all acted to depress the gold price.

Notice I didn't say that gold has suddenly become viewed as a poor safe haven. Nor that many of the world's major currencies are no longer being debased… nor that global sovereign debt issues are resolved… nor that interest rates are positive. No, the fundamental reasons for owning gold are still intact. So don't let the selling depress you.

Let's put gold's recent price action into perspective. It peaked on September 5 at $1,895 (London PM Fix) and has thus been in decline for about three months. Yet look at the bull market's biggest three-month correction in relationship to the ultimate trend.

Click here to read the rest of the article.

2012-01-09T12:48:00.000-08:00

Upside of Gold Only Limited By Politicians' Ability to Reign In Spending
More from Nick Barisheff's article entitled Why Rising Debt Will Lead to $10,000 Gold.

This chart clearly shows that US federal debt (purple) and the price of gold (gold) are now moving in lockstep. This correlation will likely continue for the foreseeable future. The red line represents the repeatedly violated government debt ceilings.

CLICK ON CHART TO ENLARGE

If you think politicians will reign in spending and quit printing money, then DON'T buy gold. I have some oceanfront property in Arizona that might suit you better!

2012-01-09T01:26:00.000-08:00

Why Rising Debt Will Lead to $10,000 Gold
Excerpts from a presentation by Nick Barisheff
at the 18th Annual Empire Club Outlook Luncheon,
January 5, 2012 Toronto, Canada

A recent Congressional Budget Office report predicted the US federal government’s publicly held debt would top an unsustainable 101 percent of GDP by 2021. Currently, the official US debt is an astronomical $15 trillion. Yet this is only the current debt. If the US overnment used the same accrual accounting principles that public companies must use, unfunded liabilities like Social Security and Medicare make the real debt more than $120 trillion. This represents over $1 million per axpayer. Obviously, this amount is impossible to repay.

As we remind our clients this is not a typical bull market. Gold is not rising in value, currencies are losing purchasing power against gold, and therefore gold can rise as high as currencies can fall. Since currencies are falling because of increasing debt, gold can rise as high as government debt can grow.

While central banks have been net purchasers of gold since 2009, the real game changers will be the pension funds and insurance funds, which at this point hold only 0.3 percent of their vast assets in gold and mining shares. Continuing losses and growing pension deficits will make it mandatory for them to eventually include gold— the one asset class that is negatively correlated to financial assets such as stocks and bonds. When this happens, there will be a massive shift from over $200-trillion of global financial assets to the less than $2 trillion of privately held bullion.

These events gave me the confidence to title my new book $10,000 Gold. The book connects the many trends that will be directly and indirectly responsible for both the rising debt and the rising gold price over the next five years. It will be published this year.

2012-01-06T01:52:00.000-08:00

$135 Billion Redeemed From US Equity Mutual Funds In 2011, 34 Of 35 Consecutive Weekly Outflows
from Zerohedge.com
At this point the weekly ICI fund flow update, showing the barrage of redemption requests no matter what the market does, is a moot point, but we will do it anyway: in the week ended December 21, when the market was doing its usual Santa rally antigravitational acrobatics and rising on the now denied hope that the European LTRO would be the Hail Mary pass of 2011, investors in domestic equity mutual funds pulled another $2.7 billion, leaving funds with even less dry powder, with even less ability to lever up, and with an even lower margin of error to any sharp pull backs in stocks. To date, and with just one week left in, investors have withdrawn a whopping $135 billion from equity mutual funds, which we are 100% certain is an all time record for any year in which the S&P closed even nominally positive for the year, proving that nobody believes this farce known as a market any longer. But we all know that... In further detail, investors withdrew funds for 34 of 35 consecutive weeks, have withdrawn $19 billion in the past month alone, and their flows show no indication of any sort of market correlation any longer, indicating that no matter how high the "powers that be" push stocks, retail no longer cares, and will not chase "performance" especially when said performance is 100% fraud and manipulation.

Click on chart to enlarge.

2012-01-06T01:37:00.000-08:00

Gold's Rise
The following chart shows just how slow and steady gold's 10+ year price rise has been.

Notice that the angle of ascent has not changed in over 10 years. Usually, when a market reaches a top, the angle of ascent will steepen. No such phenomenon here! Just slow and steady growth with plenty more to come as governments world-wide continue to debase their currencies.

2012-01-05T07:59:00.000-08:00

Hitler Precious Metals Cartel Parody

2012-01-05T01:17:00.000-08:00

2012 Outlook from Peter Grandich
Excerpted from The Grandich Letter
U.S. Stock Market – Perhaps the best thing I did in 2011 was not to short this market despite lots of suggestions to, and I ended up making my only trade from the long side. While something unforeseen can take it down hard, it continues to look like for the early part of 2012 that the least resistance is to the upside. I think the “Don’t Worry, Be Happy” crowd will make the argument that the market held up despite an onslaught of so-called bad news like the European debt crisis and, with the U.S. economy grudgingly improving, can push share prices higher.

The key question is, can the November presidential election create another “hope” win for either party and therefore postpone until after 2012 the inevitable horrific fiscal crisis that is coming here at home… no ifs, ands or buts? I don’t know the answer, but I do know it’s not a question of if it gets real bad here, but when.

U.S. Bonds – Personally, I think it’s insane to lend anyone (let alone broke Uncle Sam) money for 10 – 30 years for interest rates of 2-4%. You would have to believe in Santa Claus and the Tooth Fairy and think that Elvis and Jimmy Hoffa are alive on an island somewhere to believe inflation is/will be less than these interest rates over the next 10 -30 years. In the end, I think bonds end up the worst bet for the next 10 years.

U.S. Dollar – Its main competition, the Euro, is in horrific shape at the moment and giving some wind behind the dollar’s sail. The problem with that is the Europeans have at least come face to face with the debt problem. Americans by and large still have their heads buried in the sand and have made an already bad problem worse. I don’t know the date or time, but the ability to kick the can down the road is nearing an end. The price to be paid will be enormous and shall eventually kill the U.S. Dollar.

I continue to believe the Canadian Loonie (dollar) is the only currency to own. I love Canada (I’m working on the Canucks part).

Gold – Whatever lows we make in this current correction (worse case is the low $1400s, best case is low being put in very near term), I suspect it shall be well within the 1st quarter and by the time 2013 arrives, we shall be at new highs. The mother of all gold bull markets remains, IMHO.

2012-01-04T19:49:00.000-08:00

Richard Russell - We are Watching Market History in Gold
With mounting fears over the recent plunge in gold and silver and continued volatility in markets globally, the Godfather of newsletter writers, Richard Russell, had this to say in his latest commentary: “This year's close for gold marks the 11th year for higher year end gold closing. To my knowledge this is the longest bull market of any kind in history in which each year's close was above the previous year. This fabulous bull market will not end with a whisper and a fizzle. I continue to believe that the upside gold crescendo of this bull market lies ahead. We are watching market history.”

“I note the frustration and anger of the anti-gold crowd. To miss 12 years of rising prices is enough to make any investor furious with himself. I would guess that 99 percent of Americans have never participated in the gold bull market. Thus, sour grapes is the sentiment of the gold-haters. Happy to say my subscribers who listened to me in the early years of the gold bull market have enjoyed the riches bestowed upon them by the greatest bull market in history.

Below are the last day of the year quotes for gold.

2000 -- $273.60

2001 -- $279.00

2002 -- $348.20

2003 -- $416.10

2004 -- $438.40

2005 -- $518.90

2006 -- $638.00

2007 -- $838.00

2008 -- $889.00

2009 -- $1096.50

2010 -- $1421.40

2011 -- $1566.80

Gold pessimism grows. Market Vane's bullish consensus has plunged to a rare 56%, lowest percentage in recent years. Gold had been down six days in a row and is now heavily oversold. This may be the final much needed washout before the eventual blow-off.”

This bull market in gold has required tremendous patience as governments have constantly been active in a game of psychological warfare against the long-term gold holders. This latest correction has tested the nerves of even the staunchest bulls.

As Sinclair said in his last KWN interview: “But let me tell you that when this year is over, the only hands left holding physical gold and gold shares are the strongest hands on the planet. Every possible weak hand has been shaken out. Every person with emotions even latently capable of overwhelming their intellect, overwhelming their judgement, will have already overwhelmed it this week. After this week, the people who are left are people who will never give up their positions.”

To subscribe to Richard Russell’s Dow Theory Letters CLICK HERE.

2012-01-04T01:08:00.000-08:00

Government Gone Wild
The statistics in this little video really drive home the fact that we are way past the point of no return. It is only a matter of time before our economy collapses under the load of the massive government overhead. Gold continues to be the only safe haven in this coming storm as paper will surely become worthless eventually.

Click HERE to watch

2012-01-03T11:50:00.000-08:00

The Fundamental Case for Gold Remains Rock Solid
From the Casey Daily Dispatch, Jan. 2, 2012
Gold demand from investment and central banks grew tremendously last year. Further, the geography of gold buying was widespread, with big purchases coming from Europe during the initial bouts of their crisis and Japan after the Fukushima accident. Small investors and monetary authorities alike purchased gold due to economic, financial, monetary, and political concerns. Quite frankly, we see none of these factors changing anytime soon.

Further, many countries continue to debase their currencies at phenomenal rates (see Bud Conrad's related article below). While US Treasuries may be a good temporary parking spot for cash, don't kid yourself about what's behind it all: nothing. The dollar is a fiat currency, no more. A true safe haven is something that cannot be debased, devalued, or destroyed by any government. After accounting for inflation, your dollars are worth less every year.

The reasons for gold's bull market aren't going away anytime soon. Make sure you have enough exposure to make a material difference to your portfolio.

The Gold Price Will Continue To Be Volatile
The average annual gold price in 2011 was $1,571.50/ounce, which was 28% higher than the prior year's average. As we outlined in our last article about gold corrections, the average retreat in gold since 2001 (of those greater than 5%) is 12.5%. Declines of this degree are normal. They will happen again. Thus, expected price behavior leads us to get excited when gold and related stocks go on sale, not depressed about the dips.

If you buy gold during corrections, your gain by the end of the year will be higher than the annual advance.

2011-12-29T01:32:00.000-08:00

James Turk - What to Expect from Gold & Silver in 2012
With 2011 coming to a close and investors concerned about the recent plunge in both gold and silver, King World News interviewed James Turk out of Spain to get his take on what to look for in 2012. When asked what investors in gold and silver should expect in 2012, Turk stated, “Yeah, I think the big theme in 2012, Eric, is going to be the continuing problems here in Europe. Not only with the sovereign debts, but I think you are going to see increasing focus on the insolvency in the banks themselves. That’s going to be the big story in 2012.”

“The major drivers for the metals have been banking and financial problems worldwide. So, I see no reason to suspect that the metals are going to do anything except go higher next year. As we speak, gold is up 17% (for this year), so if we finish around here that will be the eleventh year gold has traded higher. The average annual rate of appreciation over those eleven years is just about 17% per annum.

But I’m actually looking for something much better than average next year, simply because people are increasingly understanding that Europe is spinning out of control. The US government’s own financial condition is (also) spinning out of control, Japan is spinning out of control, the UK is spinning out of control, there are no safe havens, except the precious metals.”

When asked about the recent smash in both gold and silver, Turk responded, “You know, Eric, we’ve seen so many of these takedowns over the past ten years and they are so contrived. They basically go to the various technical points that cause people to sell and you get all of the gurus on television saying the bull market (in gold) is over and we are starting a new bear market.

But you have to ask yourself, ‘What fundamentally has changed to make me want to sell my precious metals?’ If anything the fundamentals have become even better than they were at the beginning of the year, given the fact there are so many problems out there that haven’t been solved. Given the fact that when you own physical gold or physical silver you don’t have counterparty risk, that’s going to become an increasing issue in 2012 as well.

The last couple of weeks are no different than what we’ve seen many, many times before and to me, even if you look at it from a technical perspective, gold is still in an uptrend. (Also), that flag formation on silver is still forming very, very nicely. When we break out of that flag, I think you are going to see the price of silver double in (roughly) three months.

So, $70 silver by the end of March, is that realistic? Yes, I think so. Gold over $2,000 in 2012, probably in the first quarter, yeah. That’s very realistic as well because the things which have been driving the metals are still very much in place. So forget about a downdraft here and there, just see it as a buying opportunity.

View gold and silver as a form of savings and when is all said and done a few years from now, you are going to be very, very happy acquiring the precious metals at these prices.

I think the insights the ‘London Trader’ discussed with you are truly remarkable and I really recommend that everybody read that interview a couple of times to make sure all of the points he is making sink in...Yes there is tightness (in the physical market) and you see it in the interest rates.

There is nothing I can see out there that’s bearish for gold at the moment. In fact, the way I look at it is everything I see is very bullish and we are down to the level that you are starting to see that huge physical demand. That’s usually been a good sign you are at a major low and likely to go higher.”

2011-12-28T18:28:00.000-08:00

Pento - Here is Why Gold Price Will Stay Strong & Not Retreat
KING WORLD NEWS - With 2011 coming to a close, today Michael Pento, of Pento Portfolio Strategies, writes for King World News to explain why the gold price is remaining firm, near $1,600, and why it is not likely to retreat much further from current levels: “Standard and Poor’s has been greatly vilified for their call to lower the U.S. credit rating to AA+ from AAA. The evidence, naysayers point to, for their justification of excoriating S&P is the performance of Treasuries since the downgrade occurred. Indeed, U.S. debt yields have fallen and the dollar has increased in the four months after being stripped of AAA.”

Michael Pento continues:

“In fact, foreigners increased their holdings of Treasuries in Q3 by $17.2 billion and now own nearly 50% of our marketable debt. And 60% of their currency reserves are in U.S. dollars. So there are no signs of panic yet.

The prevailing wisdom of today now yields to the conclusion that getting your debt downgraded automatically renders a boost to your currency and bond prices. Therefore, why worry? Their comfort is ridiculously based upon the notion that the U.S. has a printing press and can create unlimited amounts of inflation. Therefore, interest rates will never rise and debt service won’t ever be a problem.

I think that’s also what the government of Hungary believed after WWII. They had a printing press also and it was used to pay debts accumulated during the war. But their daily rate of inflation hit a global record of over 200%. I wonder if the mortgage rates in Hungary were low back in 1946?

I, of course, strongly applaud S&P for attempting to shed a light on our pernicious debt problem. The U.S. government seems completely inept at taking even the smallest baby step towards lowering our annual shortfall in revenue over spending—let alone paying off the debt....

“Recent examples of the paralysis in Washington include; the debt ceiling debate, Simpson Bowles Committee and the payroll tax holiday extension. Time after time D.C. manages to decide to increase the debt without cutting spending.

Our debt now exceeds GDP, and the annual deficits pile on an additional $1.3 trillion each year to that accumulated debt. Our publicly traded debt has increased 100% in the last 5 years!!! What is even worse is that our debt as a percentage of revenue is exploding. Back in 1971, the national debt was 218% of revenue. Today it has skyrocketed to about 700% of revenue, and if you think that is bad you are correct.

But just wait until interest rates start to rise. The average yield on U.S. debt is near 1% today. It was 6.5% in the year 2000. But given our record level of debt and Fed-led money creation, yields on Treasuries could go much higher than at any other point in U.S. history. Just imagine the instability that will arise when yields start to soar on corporate, consumer and government debt.

That’s the reason why I believe if there is any criticism to be placed on Standard and Poor’s it should be that their rating of U.S. debt is still too high and that the downgrade came way too late. It is also the most important reason why the price of gold is still just 20% off its all-time high. And why it’s likely not to retreat much lower than where it is today.”

2011-12-23T01:27:00.000-08:00

Republicans and Democrats
Just a reminder to all my conservative friends not to be fooled by this latest crop of Republicans begging for your vote. (Ron Paul exempted!) They are wolves in sheep's clothing as history has proven over and over. Don't get me wrong. I am conservative and have never voted for a Democrat in my life. But, I refuse to vote for the lesser of two evils. In fact, I would argue that over the last 10 years, it is the Democratic party that has become the lesser of the two evils. (Obama and Hillary exempted!) I was reminded of that fact once again as I read the following from Doug Casey in his latest email update to his subscribers entitled "Getting Out of Dodge."

"The Johnson administration's so-called Great Society created vast new federal bureaucracies that promised Americans free food, shelter, medical care, education, and what-have-you. Americans became true wards of the state. But the real, final nail in the coffin for America was in 1971 - Nixon taking the US off the gold standard.

Nixon taking the US off the gold standard - open devaluation of the dollar, combined with wage and price controls for some months. And that was not long after the so-called Bank Secrecy Act, which abolished bank secrecy, and required the reporting of all foreign financial accounts. Nixon was, in many ways, even more of a disaster than Johnson. Republicans are usually worse than Democrats when it comes to freedom, partly because they like to couch their depredations in the rhetoric of defending the free market. While everyone understands that Democrats are socialists just under the surface, Republicans actually give capitalism a bad name. Baby Bush is a perfect, recent example."

2011-12-22T18:14:00.000-08:00

The Ron Paul Portfolio
The Wall Street Journal's personal-finance blog
Republican presidential candidate Rep. Ron Paul marches to his own drummer in politics – and in his investment portfolio, too.

Here at Total Return, we’ve looked at hundreds of the annual financial-disclosure forms in which the members of Congress reveal their assets and trades – and we’ve never seen a more unorthodox portfolio than Ron Paul’s. (In fact, The Wall Street Journal revealed problematic trading in Congress more than a year and a half before the “60 Minutes” episode that recently raised a ruckus over the same topic, but that’s another matter.)

According to data available through his 2010 “Form A” financial disclosure statement, filed last May, Rep. Paul’s portfolio is valued between $2.44 million and $5.46 million. (Congressional disclosures are given in ranges, not precise amounts.)

Most members of Congress, like many Americans, hold some real estate, a few bonds or bond mutual funds, some individual stocks and a bundle of stock funds. Give or take a few percentage points, a typical Congressional portfolio might have 10% in cash, 10% in bonds or bond funds, 20% in real estate, and 60% in stocks or stock funds.

But Ron Paul’s portfolio isn’t merely different. It’s shockingly different.

Yes, about 21% of Rep. Paul’s holdings are in real estate and roughly 14% in cash. But he owns no bonds or bond funds and has only 0.1% in stock funds. Furthermore, the stock funds that Rep. Paul does own are all “short,” or make bets against, U.S. stocks. One is a “double inverse” fund that, on a daily basis, goes up twice as much as its stock benchmark goes down.

The remainder of Rep. Paul’s portfolio – fully 64% of his assets – is entirely in gold and silver mining stocks. He owns no Apple, no ExxonMobil, no Procter & Gamble, no General Electric, no Johnson & Johnson, not even a diversified mutual fund that holds a broad basket of stocks. Rep. Paul doesn’t own stock in any major companies at all except big precious-metals stocks like Barrick Gold, Goldcorp and Newmont Mining.

Rep. Paul also owns 23 other miners – many of them smaller, Canadian-based “juniors” whose stocks are highly risky. Ten of these stocks have total market valuations of less than $500 million, a common definition of a “microcap” stock. Mr. Paul has between $100,010 and $326,000 (roughly 5% of his assets) invested in these tiny, extremely volatile stocks.

Rep. Paul appears to be a strict buy-and-hold investor who rarely trades; he has held many of his mining stocks since at least 2002. But, as gold and silver prices have fallen sharply since September, precious-metals equities have also taken a pounding, with many dropping 20% or more. That exposes the risk in making a big bet on one narrow sector.

At our request, William Bernstein, an investment manager at Efficient Portfolio Advisors in Eastford, Conn., reviewed Rep. Paul’s portfolio as set out in the annual disclosure statement. Mr. Bernstein says he has never seen such an extreme bet on economic catastrophe. ”This portfolio is a half-step away from a cellar-full of canned goods and nine-millimeter rounds,” he says.

There are many possible doomsday scenarios for the U.S. economy and financial markets, explains Mr. Bernstein, and Rep. Paul’s portfolio protects against only one of them: unexpected inflation accompanied by a collapse in the value of the dollar. If deflation (to name one other possibility) occurs instead, “this portfolio is at great risk” because of its lack of bonds and high exposure to gold.

Running an investment portfolio that protects against only one bad outcome is like living in California and buying homeowner’s insurance that protects only against earthquakes, says Mr. Bernstein. You also want protection against fire and wind and theft and the full range of risks that houses are prone to. Likewise, he adds, investors should hold a broad mix of assets that will hold up under a variety of good and bad scenarios.

A spokeswoman for Rep. Paul didn’t respond to requests for comment. But you can say this for Ron Paul: In investing, as in politics, he has the courage of his convictions.

2011-12-22T01:22:00.000-08:00

Why Debt MUST Increase!
You may have seen the following comparison that has been making its way around the internet.

It demonstrates something that is so simple and basic, yet completely overlooked.

Each president must increase the debt or the whole house of cards falls, because we live in a debt-based monetary system. In other words, we create money by creating debt. Of necessity, for interest to be paid on the debt, more money must be created, which means more debt must be issued. It is the nature of the beast.

So, regardless of who the next president is, you can look for HIS face to replace Obama's on the above comparison, for any president who does not increase the debt will be the president remembered for collapsing the monetary system. And since that's not gonna happen, look for debt to continue to grow and precious metals to continue to rise in response to the devaluation of the monetary base.

2011-12-22T01:05:00.000-08:00

London Trader - We are Witnessing a Historic Bottom in Gold
KING WORLD NEWS - With many investors worried the price of gold could head lower, today King World News interviewed the “London Trader” to get his take on the gold market. The source stated, “The Chinese have continued to take delivery of both physical gold and silver directly from the ETF’s GLD and SLV. They are also going directly to producers. Entities are bypassing the COMEX altogether and going straight to gold mining companies. Every single month producers have a certain amount of gold and silver they sell. Normally they sell it to the bullion banks and the bullion banks, of course, leverage this gold and sell up to 100 times that in paper markets to control prices.”

The London Trader continues:

“They (bullion banks) hold that little bit of physical gold and claim they are backed up on their position to the CFTC. I have all my large buyers now going to producers and saying to them, ‘Look, don’t sell it to the bullion banks, we’ll buy it from you.’ So we are buying directly from the producers and this includes some sovereign entities which are doing the same thing.

We’re struggling to get the physical out of these guys (producers) because they have so many people banging on their door, saying, ‘Sell it to us direct.’ What these buyers are doing is essentially taking gold out of the system, which means the bullion banks can’t leverage that gold anymore.

So this is a huge, dynamic shift that wasn’t there before. Now we are working on one other thing. We’re beginning to offer them forward contracts. If you are a sovereign entity, what you are saying to these producers, especially on new projects, is, ‘Why don’t you sell the gold to me in 12 months? Here’s the cash, just provide it to me 12 months from now.’

These buyers are now cutting off future gold supply from the bullion banks....

“This is a huge, tectonic shift in price dynamics going forward because it is taking price discovery away from the bullion banks. These large Chinese buyers and sovereign entities which are doing this are going to have a massive impact on the market.

Interestingly, so many people are bearish on gold right now and looking for a collapse in the price of gold. They don’t understand what is happening in the physical market. The bullish fundamentals I just described to you have enormous implications.

We are making a historic bottom right now. The paper gold, or virtual gold market, has diverged so far from the physical market that it’s no longer a credible marketplace. That’s the key thing that came out of a very important meeting I was in yesterday where we had some serious players. The people I was meeting with are all on the buy side and have been since the lows last week.

There are massive physical orders, sitting, waiting for any more discounts, and yet everyone else seems to be short. So you have huge fuel for a rally here.

You have to keep in mind this recent plunge was orchestrated with borrowed gold and that borrowed gold is now gone. That’s why gold can’t go much lower. Any dips in price will be aggressively purchased. As I said earlier, right now we are witnessing a historic bottom.”

(The London Trader previously told KWN on October 21st that China had purchased a massive amount of physical gold at the lows of the October 20th session. That marked the dead low for the price of gold in October and gold rallied roughly 10% in the following 8 trading sessions.)

2011-12-21T01:02:00.000-08:00

Are You Tempted to Sell, or Eager to Buy?
by Jeff Clark, Casey Research
It wasn't a fun week for gold. By the close on Friday, the metal was down 6.7% (based on London PM fix prices), the biggest weekly decline since September. It got downright irritating when the mainstream media seemingly rejoiced at gold's decline. Economist Nouriel Roubini poked fun at gold bugs in a Tweet. Über investor Dennis Gartman said he sold his holdings. CNBC ran an article proclaiming gold was no longer a safe-haven asset (talk about an overreaction).

While the worry may have been real, let's focus on facts. Have the reasons for gold's bull market changed in any material way such that we should consider exiting? Instead of me providing an answer, ask yourself some basic questions: Is the current support for the US dollar an honest indication of its health? Are the sovereign debt problems in Europe solved? How will the US repay its $15 trillion debt load without some level of currency dilution? Is there likely to be more money printing in the future, or less? Are real interest rates positive yet? Has gold really lost its safe haven status as a result of one bad week?

So why did gold, silver, and related stocks fall so hard?

The reasons outlined in this month's BIG GOLD are still in play (the MF Global fallout, a rising dollar, year-end tax-loss selling, and the need for cash and liquidity to meet margin calls or redemption requests). Last Wednesday's 3.5% fall took on a life of its own, selling begetting selling, fear adding to fear (especially the case with gold stocks). None of these reasons, however, have anything to do with the fundamental factors that ultimately drive this market. Once those issues shift, then we'll talk about exiting.

So, should we buy now? Is the bottom in?

Let's take a fresh look at gold's corrections and compare them to the recent one. I've updated the following chart to include the recent selloff.

[How do I calculate the data? I look for the periods in every annual gold chart that represent a distinct fall greater than 5%, then measure the highs and lows.]

(CLICK ON IMAGE TO ENLARGE)

Our recent drop equals 12.5%. This isn't to suggest that the correction is over, but it does show that we've already matched the average decline, which is also 12.5%. This comes on the heels of the 15.6% fall in September. You'll notice something else: We've now had three major corrections (greater than 5%) in one year, the first time that's happened in this bull market.

The worst-case scenario would be a drop that matched the biggest on record, 27.7%. From $1,795 – the recent interim peak price – that would take us to $1,295. That wouldn't be fun, but a fall to that level would not by any stretch signal the end of the bull market, nor a fall into unprofitability for our producers. And it would represent a true blood-in-the-streets buying opportunity. After all, that's exactly what happened in 2006 and again in 2008, and in both instances gold eventually powered much higher. The bears were wrong then, and they'll be wrong again this time, even if that extreme scenario were to come to pass.

These data should actually give you some comfort. We've been here before. We've seen worse before. And yet, in every instance, gold and silver eventually climbed higher. So, unless you really believe that Obama and Merkel have brought happy days back to the world economy, precious metals will resume their ascent, and probably sooner rather than later. And when they do, you may well never be able to buy at these prices again. Those who were too scared to buy at $560 in 2006 and $700 in 2008 missed out on what were some of the greatest buying opportunities of this bull market.

2011-12-20T01:05:00.000-08:00

New Foreclosure Wave is Coming
CNBC - Despite a seasonal slowdown in overall foreclosure activity, and a process still bogged down and backed up by the "robo-signing" processing scandal, the U.S real estate market is about to be hit by another surge of bank repossessions, according to a new report from the online foreclosure sale site RealtyTrac. As banks resubmit millions of documents and courts begin hearing cases again, the backlog of over four million delinquent loans will start surging through the pipeline again.

Click HERE to read rest of article....

2011-12-19T01:06:00.000-08:00

A Million Reasons Why I Love Gold
by Peter Grandich, The Grandich Letter
December 14, 2011

Gold $1,565 Silver $28.50

In almost three decades in and around Wall Street, I’ve never seen such widespread distaste and outright hatred of an investment that for almost a decade has greatly outperformed just about every other investment vehicle: gold. I will discuss why I believe this is the case in a moment, but I want to first respond to what I can only describe as one of the “Three Stooges of Gold Forecasting’s” latest forecasts that has once again caused near hysteria among gold players and the media that follows it.

Dennis Gartman, a true master of self-promotion but who’s actual track record (if anyone in the media actually delved into it I believe they would see for themselves) better suits him for the lead role in “The Boy Who Cried Wolf,” has once again grabbed headlines with yet another the-gold-bull-market-is-over assertion.

Mr. Gartman is one of three people who many in the media continue to quote despite a nearly decade-long poor overall track record on gold. He, Jeff Christian and Jon Nadler have demonstrated to me (and I suspect many others) that a broken clock’s percentage of telling the correct time in any given day is about the same as their actual accurate forecasts for gold in the last decade.

Yours truly has called this the “mother” of all gold bull markets and, by making the following offer to the Three Stooges of gold forecasting, I would like to offer up a million reasons why:

I will wager any one of them (or a combination of all three) one million dollars U.S. that gold will hit $2000 before it hits $1,000 on the COMEX. I have arranged for the law firm of Lomurro, Davison, Eastman & Munoz of Freehold, New Jersey to hold the funds in trust. For once, let one or all of the most arrogant and often wrong gold forecasters truly put their money where their mouth is when it comes to gold forecasting. This offer shall be good until midnight, December 31, 2011 (I will donate my winnings to charities).

With regard to gold and the fact that I was supposed to be on vacation until January 3rd, I will be short and sweet: the great “Bull Run” won’t end until the price of gold has at least a “2” in the front ($2,000+).

In a nutshell, gold basically traded between $300 and $500 from the time in began free trading in the early 70s. It did briefly overall hit the mid $800s in early 80s. Up until the new millennium began, gold was greatly hindered by three factors, all of which are no longer negatives:
•Large-scale Central Bank selling;
•Gold producers cutting their noses to spite their faces by selling large quantities of production forward (hedging);
•No vehicle that could provide institutional type investors the ability to acquire/control large quantities of gold easily and provide liquidity. (The choices were purchasing physical bullion with costs and storage concerns and/or mining shares that proved more than once not to be exactly like owning gold).

These three former great negatives became major positives when:
•The Washington Accord was reached and Central Bank sales first became managed and then eventually turned into net buying;
•Producers like the old American Barrick (now Barrick Gold), who were more commodity traders than miners and used sophisticated hedging strategies to net much higher prices for gold than simply selling their production, were scorned for selling forward and it became evil to do so among investors;
•The creation of Exchange-Traded Funds (ETFs) allowed institutions to make gold part of their portfolios in an easy and liquidity-driven way and ended up tipping the scales heavily in favor of demand over supply.

The Three Stooges and the overwhelming negative gold pundits who think like them (Are all over the airwaves today) could only not ever grasp this changed landscape, but they could never also accept that despite widespread proof that all types of markets worldwide have been manipulated, that somehow manipulation didn’t occur in the gold market. Their favorite response was/is, “if gold is/was manipulated, how then did the market rise so much?” trying to suggest it should be much lower if people truly were trying to hold it down. These “pied pipers” of the hate gold crowd would want you to believe that the widespread corruption that has become evident in financial markets worldwide somehow doesn’t take place in gold and silver.

And that brings me to the final piece of the puzzle that has made up the gold game since it first started trading freely in the 1970s: gold is, and shall always be, hated by the overwhelming majority of people who work in the financial services industry and the media that follows it. You’re never ever, ever, ever, ever, ever, ever, ever going to find universal overall support for gold because to do so would equate to undermining what drives the financial services industry worldwide – the buying and selling of financial assets. Just like you will never hear a Ford dealer tell you to buy a Chevy or an Atheist tell you to love Jesus, an industry that makes its living selling stocks and bonds isn’t going to tell you to load up on something that usually benefits from their misfortunes. And neither shall the media in general who lives off those selling stocks and bonds.

So stop looking for the “crowd” to be gold lovers. In fact, when they come remotely close to that (like they did in September), it’s always a sign that a top of some type is near.

Instead, recognize the fundamental changes I spoke of that make up the gold market, throw in the fact that the world has gone mad with the printing of paper money and an epic crisis in the Middle East is coming in 2012, and use this correction in gold to add to or finally take ownership in the last great buying opportunity before the Three Stooges and their legion once again get bloodied and gored by the mother of all gold bull markets.

Because it’s that time of year when market moves can be exaggerated due to lack of liquidity, and the fact that the haters are having one of their “rare” opportunities to pound their chests (look at all the negative gold comments in the last 48 hours. Even Hulbert noted bullish sentiment near zero), it would come as no surprise to see the September lows of $1531 gold and $26 silver tested and/or broken briefly. One of the true best timers and good friend Mark Leibovit pointed out to me that cycle lows are not due for another month or so. Knowing this and the technical damage that has been done, there’s no need to rush and mortgage the house to buy gold. An accumulation program with time and price targets over the next several weeks should IMHO lead to a very nice capital gains Christmas present this time next year.

Finally, when the bears are once again proven wrong and we go over $2,000, the media shall finally ask them why they got it wrong yet again versus asking those of us who had it right for a decade why is it temporarily down….. NOT!

2011-12-19T01:01:00.000-08:00

Richard Russell - Gold Trading Above $1,500 is Bullish Action
With the recent plunge in gold and silver and continued stock market volatility, the Godfather of newsletter writers, Richard Russell, had this to say in his latest commentary regarding gold and stocks, “Do you remember the vicious bear market of 2007-2009? And do you remember how our brave and brainy Fed rushed in with trillions of computer-created dollars to halt the damage? I said halt but I didn't say end the bear market. A tremendous rally followed the 2009 low, and this rally took the Dow back to, and above, the 12,000 level.”

Richard Russell continues:

“This current bear market rally is comparable to the tragic fooler bear rally that followed the 1929 crash. But in extent, this bear market rally (I'm talking about the one that followed the 2009 low) was even greater than the 1929-1930 rally. And just as 1929-1930 fooled many investors, who re-entered the market thinking that they would recoup their 1929 losses, this giant 2009-2011 rally sucked in thousands of hopefuls back into the stock market again.

The great bear market rally is now about over, following a very long period of deceptive distribution. I am warning all my subscribers again that we are back in the grip of a vicious and ruthless bear. The bear has been held back for almost two years, due to the so-called quantitative easing of an anxious and ignorant Fed. There's no bear angrier than a frustrated bear. As a result, I believe we're going to see a brutal stock market that will shock the Fed and the bulls and the public -- and all who insist on remaining in this bear market.

I think we'll see selling of gold to cover losses (particular losses by the short sellers), but ultimately gold will be the last man standing. But most important -- GET OUT OF STOCKS.

I've been watching the Bloomberg TV channel all day. I 've heard nothing but gold is falling and is in a bear market plus a never-ending list of stocks to BUY! Nobody's talking about selling or the possibility that we're in a bear market.

I write about markets; this site is just not a substitute newspaper. Watch to see whether any newspaper or advisory comes out and declares that we are back in a major bear market. This bear market will leave its mark on everything: housing, commodities, banks, employment, consumers, retail sales, and nations around the world. It will go down in history. Sell your stocks. Get as liquid as you can. The ultimate liquidity is Constitutional money -- gold and silver.

I might be early, but I'm giving you the big picture -- the one that counts in the end.

I noted lots of cheering regarding the huge Black Friday retail "bargain" sales and then more cheering after the record Monday sales. I didn't think the huge sales were bullish. I took them as the public spending it's head off again -- instead of saving and acting out of austerity. The massive public spending is simply going to leave consumers with less money to spend in the future (and less savings). The more impressive action would have been the public acting conservatively.

The fading euro causes the dollar to strengthen, and in turn a strong dollar puts pressure on gold (gold that is measured in dollars). Gold holding above 1500 is bullish action.

Remember, the KEY number for the Dow is 10,000. Below 10,000, the bear really takes over. This early part of the resumption of the bear market will start very slowly and gingerly, and then later it will accelerate. Rallies will be frequent and disappointing.”

To subscribe to Richard Russell’s Dow Theory Letters CLICK HERE.

2011-12-16T01:31:00.000-08:00

What' Driving the Markets Lower?
With gold temporarily topping out a couple months ago at $1900 an ounce, and currently trading at $1570, many are probably concerned that the gold bull market is over. Nothing could be further from the truth.

The first explanation for the current downturn in prices is offered up by silver analyst Ted Butler:

"...the next logical downside trigger point in gold for selling by the technical funds and traders was the 200 day moving average ($1610). This particular moving average had not been broken in gold for almost three years, back to when gold was under $900. The longer a moving average remains unbroken, the more significance it holds to technical traders. This level has now been broken as well, encouraging those holding gold on technical or price movement grounds to sell. This selling begets other selling as fear of further losses resonates through the market as prices plunge. The price declines step up demands for more margin, prompting further long liquidation."

The translation of the above is this: This short term liquidation in gold is beginning to feed on itself. Since the gold market is moved in the short term by traders making purchases with borrowed money, and not long term investors, each time the market dips a bit lower, they are forced to sell more and more of their gold to cover their losses. So the cycle begins to feed on itself, because the more that is sold, the more the price is forced down, until all the hot money is forced out of the market. Once that happens, prices rebound. This happens every so often, but long term it is a non-issue.

In addition to the above, we are also in the midst of a dollar short-squeeze. In short, a dollar short-squeeze is where major global financial players have borrowed massive amounts of dollars and now they are being forced to buy back those dollars. To do so, they are being forced to liquidate asset, gold of course being one of those things being heavily liquidated at present to raise dollars. Again, this is a short-term issue and has no bearing on the long-term direction of the gold bull market.

Now, moving on, you might be asking, "so what started this little sell off to begin with?"

Well, the fact that we are in a once-in-a-lifetime gold bull market does not mean the market will not have its normal ups and downs along the way. No market ever goes straight up. In fact, in the last ten years that has seen gold up over 500%, there have been six corrections along the way of 15% or more. And after those six corrections, within three months the price of gold rebounded on average around 11%. (The following charts are from Casey Research's article entitled "Pullbacks in Perspective.")

That being said, you must also realize that sometimes these ups and downs are exacerbated by the anti-gold crowd that loves to beat the price down when one of these normal corrections come around.

Why? I'll let Peter Grandich of The Grandich Letter answer that one for you.

"And that brings me to the final piece of the puzzle that has made up the gold game since it first started trading freely in the 1970s: gold is, and shall always be, hated by the overwhelming majority of people who work in the financial services industry and the media that follows it. You’re never ever, ever, ever, ever, ever, ever, ever going to find universal overall support for gold because to do so would equate to undermining what drives the financial services industry worldwide – the buying and selling of financial assets. Just like you will never hear a Ford dealer tell you to buy a Chevy or an Atheist tell you to love Jesus, an industry that makes its living selling stocks and bonds isn’t going to tell you to load up on something that usually benefits from their misfortunes. And neither shall the media in general who lives off those selling stocks and bonds."

So, here's the bottom line gang. NONE of the financial difficulties that started the gold bull market 12 years ago are any better. In fact, they are worse. MUCH worse! Therefore, owning gold today makes more sense than it ever has before. The world's financial problems are much worse than they were even a year ago. So don't let this little bump in the road cloud your long term grasp of the fact that gold is your only lifeline in this sea of worthless paper money.

Keep the faith. You'll be glad you did.

2011-12-16T01:20:00.000-08:00

Smackdown!

Have a great Friday and enjoy this clip.

2011-12-15T01:21:00.000-08:00

Silver Sale: 75% Off!
Here's an excerpt from the most recent Delaire Report reminding us of just how undervalued precious metals really are.

There is no question the price of silver today at $32/oz. is cheap based on historical measures. Sure the nominal price of silver almost hit the 1980 highs of $50 back in April of this year. But when we’re comparing data from 30 years ago, we need to adjust for inflation to make sure we compare apples to apples. If we use the inflation-adjusted price of Silver from 1980 up and until now and if we use the Consumer Price Index (CPI)the price for silver adjusted for inflation should be around $140 an ounce and $114 if using the Producer Price Index (PPI).

Now when we compare Silver with more popular metrics like stocks, it is also relatively inexpensive. In 1980, the Dow to Silver ratio got as low as 18:1. In other words, one share of the Dow Jones Industrial Average bought you 18 ounces of Silver. Today, one share of the Dow buys as much 365 ounces. (Silver $33 & DJIA 12045).

If you compare it to a much broader index like the S&P 500, we see similar results. In 1980, one share of the S&P500 bought as little as 2.3 ounces of Silver. Today one share of the S&P500 buys us 33 ounces of Silver (SP 1246). Although these may seem like big numbers on the surface, silver has been outperforming stocks for 11 years. This is nothing new. For prudent investors, the trend in place for the last decade has been: Precious metals over equities and bonds.

Right now there is a lot of negative sentiment regarding silver, mainly due to the lack-lustre performance of the white metal over the last few months. But one good indicator for me is reports from major financial institutions. Usually they are so off the mark it is incredible. For example, recently HSBC raised its silver price targets in light of a “slight upward bias” it now sees for gold’s sister precious metal.

HSBC increased its 2012 silver estimate to $34.00 from $32.00 per ounce, and its 2013 target to $32.00 from $30.00 per ounce. The firm also introduced a 2014 silver estimate of $28.00 and reiterated its five-year forecast of $25.00 per ounce.

AS I have had mentioned in the past, we are all entitled to our own opinions but when you consider that the price of silver can jump more than 6% in one session, I find these price projections to be ridiculous. Silver is an extremely volatile metal and with the current financial crisis around the world prudent investors are looking to accumulate physical precious metals, in particular gold and silver. And, as I don’t see any solution any time soon, I maintain that investor demand for silver in 2012 will exceed investment demand of 2011, and this alone will push prices back above $40 an ounce.

While the near-term picture for silver remains uncertain the long-term drivers of silver's up trend is still in place. Enormous and growing Asian economies like China and India are getting richer... and they have deep cultural affinities for precious metals. Plus, the Western world has lived way beyond its means for a long time... the debts and liabilities it has taken on can only be paid back with devalued, debased money. This is bullish for "real money" assets like gold and silver.

With sentiment so negative toward silver (and just beginning to turn back up), it's a great time to take a position in this long-term bull market.

2011-12-14T01:51:00.000-08:00

Warning, They're Coming For Your Savings
I've written often in the past that governments always eventually steal from their citizens when faced with insurmountable budget shortfalls. I was reminded of this fact again when I read the following about Portugal's latest budget moves:

Portugal raids pension funds to meet deficit targets
The Delaire Report, Dec. 6, 2011
Portugal has raided €5.6bn (£4.8bn) of pension fund assets in a controversial scramble to meet its deficit targets. “The cabinet agreed to transfer the assets from four of Portugal’s biggest banks to the state balance sheet. The assets will be used to bridge a gap needed to meet the fiscal deficit target of 5.9% of GDP set by the terms of the country’s €78bn bail-out from around 10% in 2010. "This measure is more than sufficient to meet the budget deficit goal in 2011," said Helder Rosalino, secretary of state for central administration, on Friday. Portugal said it had informed the EU and IMF and assured them it would be a “one-off”. However the 2010 budget was met by shifting three pension plans from Portugal Telecom on to the public social security system. The liabilities don’t count, yet. There have been no complaints from Eurostat but Raoul Ruperal from Open Europe said: “This can’t be seen as a future revenue stream in any way.” A “one-off,” who are they kidding? This is only the beginning. The fact is you cannot trust the government to look after your interests. You must take control and act in your own interest. You need to protect your hard earned money before it is too late. Increased taxes as well as newly invented taxes are coming. More controls are on the way so governments can stick their grubby hands in your till.

Owning gold and silver are necessary steps you need to take in order to protect your wealth.

For you skeptics that think it can't happen here, it already has. Back in the early 70's Congress grabbed the Railroad Retirement Fund and merged it with Social Security. I remember my dad, a life-long railroad employee, was furious.

Theft is nothing new for governments, so don't be surprised when they come for yours! At present, the total income tax revenues collected by the US are not enough to even pay the interest on the debt.

Where will out government go for money? That's right, YOUR privately held accounts.

Your 401(k), your IRA and your pension plan is at risk of being seized. Act now while you still can. Move your wealth to privately held assets that Uncle Sam can't confiscate.

It's not a question of "if" this will happen. The only question is "when." Don't wait too late.

2011-12-13T01:08:00.000-08:00

Golden Returns
The following chart shows the net rate of return gold has delivered for the last 10 years after subtracting inflation. No other asset class even comes close, and at present, gold has still not been discovered by the average retail investor. When that finally happens, these numbers will be unimaginable.

CLICK ON CHARTS TO ENLARGE

Now, here's how bank CDs have fared over the same time period.

The only guarantee that investors can count on these days is that by putting their wealth in the bank, they are GUARANTEED to lose money!

2011-12-12T01:30:00.000-08:00

We Travel A Familiar Path
The following excerpt is from a They Thought They Were Free: The Germans, 1933-45 written in 1955 by Milton Mayer, a reporter who studied the lives and attitudes of ordinary Germans leading up to and through the Hitler regime. If this doesn't get you attention about the somber future we face, nothing will.

"What no one seemed to notice," said a colleague of mine, a philologist, "was the ever widening gap, after 1933, between the government and the people. Just think how very wide this gap was to begin with, here in Germany. And it became always wider. You know, it doesn’t make people close to their government to be told that this is a people’s government, a true democracy, or to be enrolled in civilian defense, or even to vote. All this has little, really nothing, to do with knowing one is governing.

"What happened here was the gradual habituation of the people, little by little, to being governed by surprise; to receiving decisions deliberated in secret; to believing that the situation was so complicated that the government had to act on information which the people could not understand, or so dangerous that, even if the people could not understand it, it could not be released because of national security. And their sense of identification with Hitler, their trust in him, made it easier to widen this gap and reassured those who would otherwise have worried about it.

"This separation of government from people, this widening of the gap, took place so gradually and so insensibly, each step disguised (perhaps not even intentionally) as a temporary emergency measure or associated with true patriotic allegiance or with real social purposes. And all the crises and reforms (real reforms, too) so occupied the people that they did not see the slow motion underneath, of the whole process of government growing remoter and remoter.

"You will understand me when I say that my Middle High German was my life. It was all I cared about. I was a scholar, a specialist. Then, suddenly, I was plunged into all the new activity, as the university was drawn into the new situation; meetings, conferences, interviews, ceremonies, and, above all, papers to be filled out, reports, bibliographies, lists, questionnaires. And on top of that were the demands in the community, the things in which one had to, was ‘expected to’ participate that had not been there or had not been important before. It was all rigmarole, of course, but it consumed all one’s energies, coming on top of the work one really wanted to do. You can see how easy it was, then, not to think about fundamental things. One had no time."

"Those," I said, "are the words of my friend the baker. ‘One had no time to think. There was so much going on.’"

"Your friend the baker was right," said my colleague. "The dictatorship, and the whole process of its coming into being, was above all diverting. It provided an excuse not to think for people who did not want to think anyway. I do not speak of your ‘little men,’ your baker and so on; I speak of my colleagues and myself, learned men, mind you. Most of us did not want to think about fundamental things and never had. There was no need to. Nazism gave us some dreadful, fundamental things to think about—we were decent people—and kept us so busy with continuous changes and ‘crises’ and so fascinated, yes, fascinated, by the machinations of the ‘national enemies,’ without and within, that we had no time to think about these dreadful things that were growing, little by little, all around us. Unconsciously, I suppose, we were grateful. Who wants to think?

"To live in this process is absolutely not to be able to notice it—please try to believe me—unless one has a much greater degree of political awareness, acuity, than most of us had ever had occasion to develop. Each step was so small, so inconsequential, so well explained or, on occasion, ‘regretted,’ that, unless one were detached from the whole process from the beginning, unless one understood what the whole thing was in principle, what all these ‘little measures’ that no ‘patriotic German’ could resent must some day lead to, one no more saw it developing from day to day than a farmer in his field sees the corn growing. One day it is over his head.

"How is this to be avoided, among ordinary men, even highly educated ordinary men? Frankly, I do not know. I do not see, even now. Many, many times since it all happened I have pondered that pair of great maxims, Principiis obsta and Finem respice—‘Resist the beginnings’ and ‘Consider the end.’ But one must foresee the end in order to resist, or even see, the beginnings. One must foresee the end clearly and certainly and how is this to be done, by ordinary men or even by extraordinary men? Things might have. And everyone counts on that might.

"Your ‘little men,’ your Nazi friends, were not against National Socialism in principle. Men like me, who were, are the greater offenders, not because we knew better (that would be too much to say) but because we sensed better. Pastor Niemöller spoke for the thousands and thousands of men like me when he spoke (too modestly of himself) and said that, when the Nazis attacked the Communists, he was a little uneasy, but, after all, he was not a Communist, and so he did nothing; and then they attacked the Socialists, and he was a little uneasier, but, still, he was not a Socialist, and he did nothing; and then the schools, the press, the Jews, and so on, and he was always uneasier, but still he did nothing. And then they attacked the Church, and he was a Churchman, and he did something—but then it was too late."

Continue reading the rest of the excerpt HERE.

"They thought they were free, the Germans, 1933 - 1945. But then it was too late." Milton Mayer

Friends, it's already too later here as well. All you can do is protect yourself with gold. It's private, portable and still available..... at least for now.

2011-12-11T18:01:00.001-08:00

None are more hopelessly enslaved than those who falsely believe they are free. - Johann Wolfgang Goethe [1749-1832]

2011-12-09T01:41:00.000-08:00

Lies, Damned Lies, and (Unemployment) Statistics
Mainstream media and Wall Street are salivating over the Bureau of Labor Statistics’ latest job growth numbers, which suggest that unemployment is on its fastest decline since the recession began in 2008.

There are three kinds of lies, wrote Mark Twain in 1906, “lies, damned lies, and statistics.” Take a page from his book and consider that the latest unemployment report is nothing more than an attempt by the custodians of our government, who are increasingly coming under fire from the populace, to hide the fact that their grand plans for centralizing social, financial and economic control are failing miserably.

The Head Lies could have just as easily read “315,000 give up searching for jobs and officially leave the workforce,” but that doesn’t play into the narrative, and we need to maintain appearances. How else are we supposed to keep the Dow Jones cranking amid a collapsing global economy?

This is a warning to our readers that trusting the Bureau of Labor Statistics could be dangerous to your financial health and personal well being.

Click HERE to read the rest of the article.

2011-12-08T15:18:00.000-08:00

Canada's Gold Problem, It Has None
Eric Sprott with Sprott Asset Management discusses how Canada sold all of its gold and how that decision will impact the country. This is a MUST WATCH 5 minute video.

The direct link to the video is HERE.

The gold buying spree is still in its beginning stages. This is a trend that will continue for years, driving gold to previously unimagined higher prices..... if you can buy it at all!

2011-12-08T15:09:00.000-08:00

Faber Touts G-O-L-D
Legendary investor continues his support of gold. You may remember Faber as one of the few who correctly predicted the 1987 stock market crash. This 8 minute video is pretty technical stuff, and most of you won't really want to sit through the whole thing, but you can watch the video below if you are having trouble sleeping. Of interest is the following exchange with the host:

On whether he'd rather own euros or dollars, Faber responds:

"I have a very special stock tip for you. The symbol is g-o-l-d. That is what I prefer to hold. Both the euro and the dollar are long-term undesirable currencies, especially given zero interest rates in the U.S. Equities to some extent become like cash because they become a store of value compared to cash at a zero interest-rates. Paintings become a store of value, stamps become a store of value."

The direct link to the video is HERE.

2011-12-08T14:22:00.000-08:00

Jim Rogers on CNBC

Click HERE to watch on Youtube.

2011-12-07T01:16:00.000-08:00

It's Time to Think in Terms of Gold

By Jeff Clark, BIG GOLD

A young woman – let's call her Andrea – inherited some money from her father in late 1997. She was only nineteen at the time. Not knowing the first thing about investing, she kept the money in stocks and bonds as her father had, wanting to hold on to it until she really needed it. She played it "safe."

She got married last year and so began to withdraw the money. She was pleased to see a chart from the broker that showed her portfolio was up about 20%. While admittedly not a great return over 12 years, her account had nevertheless survived both the 2000 tech crash and the 2008 market meltdown. She knew not all investors could not say the same thing.

Andrea began spending the money, thankful that she'd saved the money to start a family. But a cruel reality slowly began to set in: the money didn't seem to be going very far. She couldn't quite put her finger on why, but it all clicked when she saw the lofty price of a new SUV she wanted. She remembered her Dad's favorite vehicle back in the day – a Ford Ranger pickup – and recalled him boasting that he paid only $8,500 for it in 1992. A comparable vehicle today costs more than twice as much.

It hit her like a slap in the face. While the number of dollars in her portfolio was greater than what she inherited, they bought less stuff. It was such a revelation that she actually uttered the words out loud…

"My investments didn’t keep up with inflation… I LOST money!"

Gold Is the Benchmark

Whether they realize it or not, the same thing is happening to most people's investments. Over time, real returns are diluted because of inflation. The only reliable way to measure the value of investments is in terms of a financial intermediary that cannot be inflated: gold. That way, investors can tell how they're doing in real terms.

This has practical ramifications for all of us. Someday, we (or our heirs) are going to spend some of the wealth we are accumulating. How much we can actually buy with our gains will directly depend on how hard inflation has hit whatever our investments are denominated in. A 15% gain in dollars is only 9% in real terms if USD inflation was 6% during that time frame. A money-market return of 1% is a losing investment if denominated in something inflating at 3%. In Andrea's case, by keeping all her funds in dollars, her 20% gain turned into a 16% loss in purchasing power.

In other words, since most people don't adjust for inflation, their investments are not doing as well as they think.

In contrast, if Andrea had kept part of her inheritance in gold, that portion would have grown 332% (from December 1998 to June 2010, when she got married). More importantly, she would have lost no purchasing power during that time. In fact, after inflation and taxes, Andrea could've bought 50% more in goods and services than in 1998, if purchased using liquidated gold. She could buy two small pickup trucks today with the same number of gold coins it took her father to purchase the Ford Ranger in 1992. (This all while gold went nowhere for those first three years and lost a third of its value in the fall of 2008.)

With gold as her savings vehicle, she could have completely sidestepped the erosion in the dollar.

How have you done?

Re-Indexing in Gold – "This Changes Everything"

To demonstrate the effect of currency dilution, we've developed a tool for re-indexing popular indices from dollars to gold. Doing so provides a more accurate picture of the dilution of investments made in dollars (and would work just as well in euros or other currencies). We use gold in grams so the indices won't be priced in decimals.

Here's how the DOW has fared since 2000 when measured in both dollars and gold:

CLICK CHART TO ENLARGE

We also decided to look at some foreign markets. Are they doing better than the US?

The stock market for Hong Kong, one of the largest exchanges in Asia, shows an increase of 6% in dollars. However, it’s lost 82.3% when priced in gold.

The stock market for Hong Kong, one of the largest exchanges in Asia, shows an increase of 6% in dollars. However, it’s lost 82.3% when priced in gold.

The primary stock market for UK companies is down 22.4% since 2000 calculated in dollars, but has fallen 87.1% in gold grams.

Conclusions

Obviously, measuring portfolios in dollars exaggerates performance in real terms. This isn't to say that one shouldn't invest in stocks. It means that one must: a) be cognizant of how results compare to gold or other real assets that one might buy with whatever currency one is dealing with; b) adjust brokerage statements to allow for currency dilution; and c) not rely on stocks in general to outpace inflation.

In fact, it isn't just investments that are eroding. Our entire world is being devalued, even as one reads this article – from groceries and gas to cars and college. Someday we'll want to spend the gains we're making; how will we avoid the long-term erosion of the currencies we invest in?

The answer is simple: save in gold. The dollars you keep in a money-market account will steadily lose value year after year. In fact, monies deposited into a simple savings account in 2000 have lost an incredible 25% of their purchasing power since then. Conversely, if those savings were denominated in gold, the wealth would have not only been preserved but increased. We believe this trend will continue – and accelerate. It will become increasingly important to your financial future that you cash in earnings from time to time and save them in precious metals – not in dollars, euros, yen, yuan, or even Swiss francs.

Don't make the mistake Andrea did. Save in gold. That new car or retirement home or world travel you want to spend money on someday will be a lot easier to afford if your savings are denominated in the one asset that can't be debased, devalued or destroyed.

2011-12-06T01:02:00.000-08:00

Unfixable
The following 1 hour video presentation is one of the best I have seen in a while. EVERYONE needs to watch it, and then watch it again. To watch it on Chris' page, click here.

2011-12-05T01:30:00.000-08:00

Gold Bull Alive and Well
Sean Boyd is CEO of $8 billion Agnico Eagle. When asked where he sees the gold bull market at this point, Boyd stated, “I believe we are in the middle of the bull run. Here we are and some people are saying gold is a bubble, but we’ve been maintaining over the last couple of years that we don’t see a lot of new people in terms of investment conferences, particularly among non-gold people.

So that means we are still early in the game and gold still has a lot further to run on the upside. When you have assets under management, which have allocations of gold at less than 1%, that means there is still much more room for gold in portfolios and we are still not there yet.

If you look at India and China, combined they took down about 52% of the annual mine supply last year. That’s a fair chunk and that’s up from where it was several years ago. That trend is likely to grow.

When you layer on top of that, eventually, more and more investors are feeling they need to diversify and get exposure to metal, that’s when gold will just take off. That will be the last phase of the bull market and it may still be two or three years away depending on how quickly this all unfolds.

That could take the price of gold into numbers that we can’t even imagine at the moment. We always talk about silver, and silver will go along with gold. Silver did have a big run and got ahead of itself, but silver, traditionally, will follow gold higher and the upside on silver will be greater in percentage terms than it is on gold.”

2011-12-02T04:23:00.000-08:00

Gold's Rise.... Inevitable
Here's a few paragraphs from the most recent Delaire Report.

When investors turn to cash in an attempt to minimise losses in their portfolios, and as strange as it may seem, they still turn to the perceived safety of government bonds and cash. In the short-term cash is a safe-haven asset, but in the longer term, the value will be eroded by inflation and currency debasement. And, when it comes to government bonds, I maintain that there is nothing safe about these debt instruments especially when the governments issuing these bonds are essentially bankrupt. But in addition, the current yields are so low that they barely cover for inflation, or they are so high that they indicate an inherent weakness which suggests that the risk of investing may also be too high. While investors flee the euro and turn to the US dollar, it is not going to be long before their attention turns from the Eurozone back to the USA. But, in addition to these two major global currencies, the Yen, and Sterling are not much better alternatives. In other words the fiat currencies of the world are crumbling and as individuals around the world recognise what is going on and lose confidence in these paper currencies, they will turn to holding real tangible assets, in particular gold and silver.

The fundamentals driving the price of gold have not changed and the main driving force still remains the problems going on in the global monetary system. The size of global debt is simply too large in relationship to the size of the various economies. The only way out at the moment is to print more money. This will debase the value of some currencies, causing other currencies to become overvalued. This is in turn will create havoc in the global currency system, and send prices of most commodities much higher.

As the fate of the European monetary union slides closer to the edge of a massive precipice, investors holding European sovereign debt are going to lose confidence and bail out of their bonds. As they seek safe haven investments, their first choice will no doubt be the US dollar as well as the Swiss franc, but there will be those who understand the value of owning gold as well and they will include it in their portfolios.

While the price of gold continues to consolidate, I believe that this is merely the calm before the storm. I am certain prices are headed much higher, and gold is nowhere close to being in a bubble.

2011-12-02T01:59:00.000-08:00

Gold/Silver Relationship
Here's a few paragraphs from silver analyst Ted Butler's mid-week commentary.

"The recent underperformance of silver relative to gold and other commodities presents an added reason to consider silver as undervalued. While many investors view relative price weakness as a reason to avoid purchase, that reaction is incorrect for a market already manipulated to the downside, like silver. In fact, an objective analysis of the relative price moves this year in gold and silver should bring that out. Silver and gold have more in common than any other commodity, making them an ideal relative comparison. As I write this, gold is up $325 (23%) year to date, while silver is up $2 (6.5%). (Admittedly, silver has generally outperformed gold on different time spans). Since there are 3 billion ounces of gold bullion in the world (out of 5 billion oz total), the value of those bullion ounces have increased this year by almost $1 trillion, to over $5.2 trillion. The total value of the world’s one billion ounces of silver bullion has increas ed by $2 billion to $33 billion. In other words, the increase alone in the value of the world’s gold bullion this year is 30 times greater than the total value of all the world’s silver bullion. Please think about that for a moment."

"My point is that there is not much difference in the investment merits of gold and silver to warrant such a mismatch in the value of each. Both are precious metals valued by world investors in times of economic stress and loss of confidence. That the dollar value of gold is almost 175 times greater than the dollar value of silver is absurd. Let me be clear in what I am saying. I am not saying that gold is valued at absurd levels; I am saying that silver is being valued at absurdly low levels relative to gold. It is absurd that a ten dollar change in the gold price is equal to the total value of all the world’s silver bullion. The true absurdity is that this mismatch in relative values is not yet recognized by the world’s investors, even the big and sharp hedge fund operators. As and when it is recognized, those investors will rush to buy silver. In a very real sense, the higher gold prices climb, the better it is for silver. A higher gold price is the silver investor’s best friend."

2011-12-02T01:08:00.000-08:00

Ron Paul's Statement on the Fed's Continued Euro Bailout
"The Fed's latest actions in cooperating with foreign central banks to
undertake liquidity swaps of dollars for foreign currencies is another reason
why Congress needs enhanced power to oversee and audit the Fed. Under current
law Congress cannot examine these types of agreements. Those who would argue
that auditing the Fed or these agreements with central banks harms the Fed's
independence should reevaluate the Fed's supposed independence when the Fed
bails out Europe so soon after President Obama promised US assistance in
resolving the Euro crisis.

Rather than calming markets, these arrangements should indicate just how
frightened governments around the world are about the European financial
crisis. Central banks are grasping at straws, hoping that flooding the world
with money created out of thin air will somehow resolve a crisis caused by
uncontrolled government spending and irresponsible debt issuance. Congress
should not permit this type of open-ended commitment on the part of the Fed, a
commitment which could easily run into the trillions of dollars. These dollar
swaps are purely inflationary and will harm American consumers as much as any
form of quantitative easing.

The Fed is behaving much as it did during the 2008 financial crisis, only
this time instead of bailing out politically well-connected too-big-to-fail
firms it is bailing out profligate government spending. Citizens the world over
deserve better than this. They deserve sound money that cannot be manipulated
and created out of thin air by central planners who promise printed prosperity.
Fiat money caused this European crisis and the financial crisis before it. More
fiat money is not the cure. The global fiat currency system has proven itself a
failure, we need real monetary reform. We need sound money."

2011-12-01T05:33:00.000-08:00

Guess Who's Bailing Out Europe? You Are!
Below is a short excerpt from an article over at Rick Ackerman's site entitled Watch T-Bonds, Not the Criminally Insane Dow. Pay close attention to the last few lines. I know the average person on the streets doesn't understand credit swaps any more than I do, but here's the bottom line. No one will loan Europe any more money, so the Fed is stepping in and loaning them YOUR money. Again, all courtesy of the banksters who now control the world courtesy of YOUR money. If you have been reading this blog for any time at all and you still own financial assets (bank accounts, stocks, bonds, mutual funds, etc.), then you deserve what you are about to get because your refusal to educate yourself and opt out of the system is part of the problem! The only way to stop this game is to refuse to play it by storing your wealth in gold and/or silver that they can't create out of thin air.

"If DaBoyz can squeeze a 500-point Dow rally out of yesterday’s administered easing of dollar “swap” rates, just imagine what they can do with a little Santa seasonality and a dollop of year-end window-dressing. Let’s be straight about a couple of things. First, no one expects the latest easing of global credit lines to resolve Europe’s debt crisis. And second, the 800 points the Dow has tacked on this week represent little more than trading machines masturbating each other amidst a short-covering panic. Some observers merely yawned, noting that the swap arrangements that make it easy and cheap – and now even easier and cheaper, if such a thing were imaginable — for foreign banks to borrow dollars have been in place since 2007. However, others saw the announcement by the central banks as nothing less than a bold step by the Federal Reserve to begin monetizing the debt of Spain, Italy, Greece, France et al.

It’s a moot point whether the U.S. has begun bailing out Euro-deadbeats, however, since the U.S. is a deadbeat itself, albeit one in sole possession of the world’s reserve currency and therefore of the ability to gin up unlimited quantities of the stuff at will. Meanwhile, there’s little point in pretending that the U.S. is somehow not immersed in the bubbling cauldron of toxic global finance. U.S. banks had stopped lending to their European counterparts, and that’s why the Fed stepped in to pretend it has the situation under control. This may work for another week or so, if that long, but it’ll be interesting to see whether reducing swap rates to near-zero will help suppress sovereign borrowing rates that recently topped the 7% “red zone” for Italy. Would you lend the Italian government hundreds of billions of dollars at 7%? That’s what we thought. But if you live in Europe or the U.S., you’ll be doing it anyway – and for a lot less than 7% –courtesy of the bankers."

2011-12-01T01:05:00.000-08:00

Notary who blew whistle on foreclosure fraud found dead
LAS VEGAS (KSNV MyNews3) -- The notary who signed tens of thousands of false documents in a massive robo-signing scandal case was found dead in her home on Monday.

The notary, 43-year-old Tracy Lawrence, was supposed to be in court at 8:30 Monday morning for her sentencing hearing. When her attorney did not hear from her for more than an hour, Sr. Deputy Attorney General Robert Giunta asked for a bench warrant to be issued for Lawrence. The judge denied the request.

Police were sent to Lawrence's house to check on her after her lawyer expressed concern for her client's well-being. They found her body inside her home.

Metro Homicide Detectives are working currently the case. It is unclear if her death was due to natural causes, or if it was a suicide.

Detectives said this afternoon that they have ruled out homicide as a cause of death.

Last Monday, Lawrence pled guilty to only one criminal charge of notary fraud.

Lawrence came forward earlier this month and admitted that she had notarized around 25,000 fraudulent documents as part of a foreclosure fraud scheme.

Title officers Gary Trafford and Geraldine Sheppard of California are allegedly behind the fraud that involved forging signatures on tens of thousands of notices of default between 2005 and 2008. The two were indicted on more than 600 charges in a 439-page indictment filed on November 16.

The Nevada Attorney General is negotiating the terms of surrender for the pair. Both are expected to surrender sometime in December.

2011-11-30T03:15:00.000-08:00

The Four Harbingers Of The Apocalypse
by Bill Buckler, The Privateer

There are four indicators today which show as clearly as anything can be shown the state of our global debt-based monetary and financial system. Any one of them alone should be all the evidence one needs that the system is unsustainable. Put them together and much more than the canary is singing.

First, the most popular (measured by its nominal “value”) investment vehicle today is a combination of a bet that sovereign debt will go bankrupt and an “insurance policy” that if/when it does, the holders of the debt paper will be made whole. These are called “credit default swaps” or CDSs, conceived in the early 1990s and unleashed on the investment world shortly thereafter. The total of CDSs outstanding doubled every year from 2003 to 2007. This growth paused in 2008 - early 2009 and then exploded again with the onset of “quantitative easing”.

The second indicator is the mere fact that it is now universally accepted in the investment world that the only “safe” government debt is one issued by a government whose central bank has demonstrated its willingness to print money.

The third indicator is the fact that the “sovereign debt crisis” hype is focussed exclusively on Europe in a desperate attempt to prevent the discovery that everybody is in the same boat.

And the fourth and last is Gold. On the paper markets, the price of Gold can and is being manipulated. Beyond Gold’s price appreciation is the ever increasing global demand for physical Gold and the fact that central banks throughout Europe and Asia are ADDING to their supply.

The worse the situation gets, the more dangerous becomes a “promise to pay” which relies on nothing except a central bank’s ability and willingness to PRINT. In these circumstances, the last paper asset standing will be the “money” - the actual CASH money - itself. Everywhere today, cash is king. But that old saying comes from an era when there were still limits on how much of it governments could create. Those limits have long since been removed. For REAL markets - you need REAL money.

2011-11-30T01:02:00.000-08:00

Investor's Digest of Canada
Here's a quote from the Investor's Digest of Canada by John Embry, Chief Investment Strategist of Sprott Asset Management in Toronto.

"I've always believed that the real move in gold and silver wouldn't occur until price discovery moved from the fraudulent paper market to the physical market.

And now there's abundant evidence that we're on the cusp of just such a development.

When that happens, I can assure you that many of the current non-believers in gold and silver will increasingly put their savings in these precious metals.

The impact of this shift will result in price moves in both metals that are now virtually unimaginable to most observers.

In fact, the numerous top-callers, along with those who view gold and silver as nothing more than bubbles, may be shocked when they discover that the price rises we've seen to date are merely a prelude to the price rise that's in store for us in the future."

2011-11-29T01:04:00.000-08:00

Richard Russell: Crumbling Debt to Crush Everything in its Path
With plunging stock markets and continued turmoil globally, the Godfather of newsletter writers, Richard Russell, is warning his subscribers in his latest commentary, “Stock market is just beginning to hint of the hard times that I see ahead. The almost insane world of debt is rolling close to the cliff and I see increasingly hard times ahead. Crumbling debt will act like a cement roller, crushing everything in its path. The occasional rebound or bounces on the lows will be sudden and short lived.”

“As of now, both the Dow and the S&P are down for the year. I call this Stage One. Stage Two will occur if the Dow sinks into the 10,000 (level). Stage Two Point Five will occur if the Dow starts trading below 10,000. I think if the Dow trades under 10,000, consumer sentiment will change from hope to fear and anxiety.

The big, smart money is choosing diversity. Their problem, diversify into what? The answer may be to diversify into something that is life sustaining...Sustaining may be a matter of food, water, and shelter.

I know much of the above sounds outrageous, but in 1980 the Dow at 10,000 sounded outrageous. We're moving into a world that today's generations will be dealing with matters that they've never had to deal with before.

Continue to accumulate gold and 10 ounce silver bars. I'm sorry for young people now, their biggest move has been to move back in to their parents homes, back into the nest is the fated move today. As far as the economy is concerned, the phrase is ‘Don't be a pest, go back into the nest.’

This is what occurred during the 1930s, and it's in full bloom today. My best advice if your kid moved back in with you, make them pay some rent. They must realize that there is no free lunch, and there are no free living quarters. Next week I will go into detail as to why a giant storm is brewing.”

To subscribe to Richard Russell’s Dow Theory Letters CLICK HERE.

2011-11-28T07:59:00.000-08:00

Help Is On The Way

Looks like we are about to turn the corner on this economic downturn. They've got it all figured out. I think this plan will work!

2011-11-28T02:44:00.000-08:00

Billionaire Eric Sprott Asking Silver Producers to Save in Silver
In what could be a critical turning point for the silver market, billionaire Eric Sprott, Chairman of Sprott Asset Management, informed King World News that he is writing a letter to silver producers requesting that they store their money in silver, rather than in cash at banks. Sprott brought up the letter when asked where he sees gold and silver headed, “It’s hard to define it, who knows? I mean if you had a printing scenario you have no idea where the price of gold goes because you have no idea how much they are going to print. If you had a total bust and people feared the banking system and started buying gold, I have no idea what they would take the price of gold to because, of course, by that time all of the currencies would almost be worthless as well.”

Eric Sprott continues:

“All you know is that there’s only a couple of things that you have to have your money in to be safe. For example, I’m writing a letter basically suggesting to the silver producers, you know you guys have all of this money in banks, why do you have it in banks?

Put it into silver, it’s a way better asset than having a bank deposit that pays zero interest rate and you take all of the risk of the bank on. You know if enough people accept that thinking, I mean, at the margin, you bring all of those buyers in (to silver), who knows where the price is going to go? But it won’t bear any relationship to where it is today.”

2011-11-25T01:53:00.000-08:00

Is Politics Our Only Hope?
Here's an excerpt from an interview with Keith Neumeyer, CEO of First Majestic Silver Corp. I encourage you to read the full interview here, but I had to share the following quote. I agree with his analysis, but if our only hope of averting a world crontrolled by the banksters is for politicians to all of a sudden do the right thing, then we're doomed already. Politicians are not paid to "do the right thing." Politicians are paid to represent the interests of those who put up the money to get them elected, and that AIN'T us!

"I’m an optimist. I believe one day that governments will rewrite the rules and force the regulators to protect investors. That’s where we were back in the ‘70s and that’s where I think we have to be again to correct the problems that have arisen over the past 40 years. Silver is being revalued. It’s going to affect a lot of people along the way and it will change the financial system. Ultimately, we’re going to have a new financial system and, hopefully, we’ll go back to natural markets, completely driven by supply and demand. It may take another 20 years but I think it will happen."

"If I’m wrong, the banks will run the world, even more so than they do today, 10 or 20 years from now. God forbid that we ever get there because that’s a one currency, one government world that would absolutely be a disaster for the human race. There would be no freedoms at all to move or to invest. It would be like having shackles on our ankles. There is a movement to go in that direction, unfortunately. There are a number of very wealthy people that want to see that. I hope that we can find the politicians to prevent that type of world from coming to pass."

2011-11-24T01:11:00.000-08:00

Chart of the Day

Today's chart provides some long-term perspective in regards to the gold market. As today's chart illustrates, the massive bull market in gold that began in early 2001 is alive and well. In fact, as today's chart illustrates, the pace of the gold bull market has only increased over time. Since peaking in early September 2011, however, gold has retreated. Each pullback has brought gold back down to support (green line) of its accelerated uptrend. Over the past two weeks, gold has declined once again and has crossed below the $1700 per ounce level and is once again testing support.

2011-11-24T00:19:00.000-08:00

Beware the REAL Terrorists
Silver analyst Ted Butler had a fairly big report to subscribers on Saturday...and here are two and a half free paragraphs...

"It [has occurred] to me that it is financial terrorism that best describes the behavior of the manipulators in the silver market. When a world commodity, like silver, declines 30% in a matter of days [twice this year], or when it declines 7% in a day [Thursday] for no good economic reason, it is natural to wonder why that occurred. When the only plausible explanation is that the sell-offs occurred as a deliberate attempt to scare innocent holders out of the market through fear and intimidation [of further loss], is that not financial terrorism?"

"As I’ve indicated previously, the key to these sudden and sharp silver sell-offs is in the sequence of events. In every single instance, it is never a case of investors suddenly deciding to sell and that collective selling action which precipitates the price decline. Rather, it is always the case of the price first being suddenly rigged lower [at the quietest of trading times] and investors then reacting to those lower prices and selling after the price has come down. Also, in every single instance, those who initiated the suddenly lower prices [the COMEX commercials], then reap the whirlwind of their financial terrorism by buying all the positions they were able to intimidate into being sold. Scare folks into selling so that the financial terrorists can then buy from those that had been terrorized."

"This is a crooked, rotten racket that has been going on for decades in silver. The only difference is that it is not al Qaeda or some militant terrorist group at work, but a consortium of leading banks and firms financially terrorizing that segment of the public that has chosen to invest in silver. Instead of being organized by bin Laden, the silver terrorists are organized and protected by the CME Group."

2011-11-23T06:20:00.000-08:00

Russell Says.....
Richard Russell has been in the investment advisory business for over 63 years. He is known as "the Godfather of newsletter writers," and is universally respected.

So what does a guy with this much knowledge of history have to say about the current state of affairs? Will America come back like we have countless times in the past?

"My advice: We are moving closer and closer to what I call "survival period" -- the period where the magic of compounding turns into what will be the poison of compounding. This isn't a time for timing. This is a time for action. Reduce your exposure to bonds and all items that provide fixed interest rates. Similarly, reduce your exposure to stocks except the gold miners. Look to expand your positions in inflation-protected assets, especially gold."

"Those who are holding stocks in the hopes of the usual rebound are going to be terribly disappointed in the years ahead. This bear market is going to be unlike anything we've ever seen before. In the end my survival vehicle will be gold. I say again, timing is hopeless. Gold will have purchasing power and true wealth as almost everything else is destroyed by this unprecedented bear market. The US Government is now so loaded with ever-growing debt that it has become a mathematical freak. We return to different times, when rising interest rates will eat up the US government. With $55 trillion in assorted debts, the US is in no shape to deal with rising interest rates. We are in a state of reverse compounding, leading to inevitable bankruptcy on a massive scale."

2011-11-23T00:19:00.000-08:00

John Embry - Get Ready for Extreme Money Creation Globally
from King World News
With gold trading down $50 and silver $1.50 lower, today King World News interviewed John Embry, Chief Investment Strategist of the $10 billion strong Sprott Asset Management to get his take on where he sees gold, silver, the US dollar and the mining shares headed. When asked about the smash in gold and silver, Embry responded, “Well I’m not terribly surprised. I mean they’ve got the perfect backdrop against which to drop gold and silver prices. They just lob it into the whole idea that they are risk assets and the whole risk on trade is being taken off because of all of the problems in the background.”

“The simple fact is we’ve got an option expiry on gold tomorrow and until that’s over we won’t have a true picture because they’ve got a vested interest in driving the prices down and they’ve got the environment in which to do it. This has been my mantra (buy the dips) for as long as the bull market has been on.

Do not buy strength in gold and silver because you always are subjected to these paper smashes which create fabulous buying opportunities. If you’ve had that discipline (to buy the dips) for the last ten years, you have accumulated fantastic positions in both gold and silver at (extremely) good prices.”

When asked about the significant volatility on the mining shares, Embry replied, “Well that’s typical. Basically with the stock market down the better part of 3%, this is the perfect environment to abuse the gold and silver shares, which as you correctly point out, in many cases, are relatively illiquid....

“The prices that are being created here are insignificant in the long-run. If anybody is on margin they’ve got a problem and if not and you are smart, you buy more.”

When asked about silver specifically, Embry stated, “The fundamentals are fantastic. It’s a very small market relative to all the other markets and there is a massive paper short who has been manipulating the market violently for years, and we all know who that is.

I mean we shouldn’t be surprised that in these difficult times these guys are throwing everything at it but the kitchen sink. It’s just creating an unbelievable opportunity and when silver is trading at 5 and 10 times these levels in a few years, this will just be a bad memory.”

When asked about Ben Davies comments regarding crash signals and money printing, Embry remarked, “Well I would open my comments by saying Ben Davies is one of the smartest guys I’ve ever met and I’m honored to agree with him.

I think there is no question that when push comes to shove here, and it’s getting real close, the only alternative to a massive deflationary collapse is extreme money creation at all levels and virtually throughout the world.”

2011-11-22T12:50:00.000-08:00

Aaron Russo on The Federal Reserve
Here's a short 10 minute video clip that I hope you will copy and forward to everyone you know. In it is revealed the REAL problem that America faces, and the conclusion that partisan politics is NOT the answer.

Of course, my answer is even much simpler than Mr. Russo's. If Americans would store their wealth in gold, instead of paper, then the bankers would be out of business tomorrow.

I can't control you, and I can't control the politicians. I can only control me, and I choose to no longer give the bankers power over me by investing my wealth in their paper money.

If enough people quit playing, then it's game over.

2011-11-18T07:20:00.000-08:00

For Your Week-end Reading Pleasure
Here's some short excerpts from several articles that I encourage you to click on and read the full article.

It’s All About Gold Now
In a new book called “Currency Wars,” Wall Street insider Jim Rickards examines how countries try to get out of financial trouble by devaluing their currencies. Rickards says, “Today, as yesterday, countries are attempting to devalue their way out of trouble. Following the strategy of beggar-thy- neighbor, the U.S., Europe, China and Japan all want to weaken their currencies. The flaw in the tactic should be clear. “Not everyone could cheapen at once,” Rickards writes. “The circle still could not be squared.” (Click here to read a book review by Bloomberg.) Rickards predicts the U.S. dollar’s future is not bright, and if there were a “catastrophic collapse of investor confidence,” the dollar’s buying power could suffer suddenly and dramatically in a global sell off.

Gold would be the big beneficiary if the dollar declined, and Rickards’ top price for gold per ounce is–wait for it–$44,552! That price is the absolute highest possibility. Rickards and others predict that in the next few years, America will go back on some sort of gold standard. Meaning, the dollar will be backed by gold, but Rickards has stated on many occasions that there probably will not be a100% gold backed U.S. dollar. Instead, Rickards contends it will be more in the neighborhood of 40%. If that is the case, then gold would be $17,821 per ounce using Rickards numbers. It appears gold prices are going much higher.

US Federal Prosecutions For Financial Fraud In the Obama Administration Fall to 20 Year Lows

The declines in US Federal prosecutions for financial fraud that began under G.W. Bush have followed that down trend that in the first three years of the Obama Administration. That might make more sense if Obama had not been elected as a reform president in response to one of the greatest financial frauds in American history.

In the first three years of the Obama Administration, federal prosecutions have been running at new highs. Over half of the prosecutions involve illegal immigration. Another 17% are drug related.

Illegal immigrants and drug dealers have the reputation for being notoriously cheap in providing campaign contributions.

Prosecutions for financial fraud however have dropped to the lowest levels in over 20 years.

Gold and the Dot-Coms: Comparing the Bubbles
MarketWatch.com
Investor enthusiasm is particularly keen on the yellow metal, around $1,800 an ounce. How does gold's rise compare to the rise of the Nasdaq Composite Index during the 1990s? Mark Hulbert does the charting, and comes away with compelling findings. Laura Mandaro reports.

2011-11-18T01:37:00.000-08:00

Agnico Eagle CEO - Gold Could Rise to Unimaginable Levels
KingWorldNews.com
With gold around the $1,780 level and silver trading near $35, today King World News interviewed Sean Boyd, CEO of $8 billion Agnico Eagle. When asked what he sees going forward with the price of gold, Boyd responded, “It’s still a very strong market. There was forced selling not too long ago by certain holders and that tended to spook the market. But we have been consistently sticking with the investment thesis that governments have too many obligations that they simply can’t meet and as a result we are going to see ongoing and continued debasement of paper money.”

Sean Boyd continues:

“The flip side of that is people are looking for hard assets and gold, being one of the primary hard assets, is a major beneficiary. So we don’t see any reason to believe this upward trend in gold won’t continue. I think it will continue and we will see $2,000 shortly.

So we’ve seen some volatility, I think that’s natural, but the general trend is more uncertainty, more debasement of paper currencies and gold is going to be one of the primary beneficiaries of that.”

When asked if he ever thought, years ago, the world financial situation would have deteriorated the way it has, Boyd replied, “No and we still had, like most people, confidence that the authorities, the government officials and central bankers would have been able to figure it out. And it’s clear they haven’t been able to figure it out.

They’ve tried things that have traditionally worked, so those are things they expected to work. But maybe it’s a function of the liabilities and obligations and promises they’ve made are so large now that the old ways of dealing with them just doesn’t work anymore and that’s the scary part. No one knows where this will end, that’s what is scary and this is getting people increasingly worried....

“There’s very little political will to come up with solutions. That is simply feeding the uncertainty and that uncertainty is causing people to look at ways to protect their wealth. So people that have money or are managing money are looking at ways to protect it. Obviously one of the ways individuals feel comfortable protecting their wealth is through owning gold.

When asked where he sees the gold bull market at this point, Boyd stated, “I believe we are in the middle of the bull run. Here we are and some people are saying gold is a bubble, but we’ve been maintaining over the last couple of years that we don’t see a lot of new people in terms of investment conferences, particularly among non-gold people.

So that means we are still early in the game and gold still has a lot further to run on the upside. When you have assets under management, which have allocations of gold at less than 1%, that means there is still much more room for gold in portfolios and we are still not there yet.

If you look at India and China, combined they took down about 52% of the annual mine supply last year. That’s a fair chunk and that’s up from where it was several years ago. That trend is likely to grow.

When you layer on top of that, eventually, more and more investors are feeling they need to diversify and get exposure to metal, that’s when gold will just take off. That will be the last phase of the bull market and it may still be two or three years away depending on how quickly this all unfolds.

That could take the price of gold into numbers that we can’t even imagine at the moment. We always talk about silver, and silver will go along with gold. Silver did have a big run and got ahead of itself, but silver, traditionally, will follow gold higher and the upside on silver will be greater in percentage terms than it is on gold.”

2011-11-17T11:08:00.000-08:00

World Bank President: Gold is Still a Good Investment
from the Economic Policy Journal
I spent some time Tuesday afternoon at the Wall Street Journal CEO Council, which was being held at the Four Seasons in Washington D.C. The usual suspects were there, everyone from Rupert Murdoch to Dick Cheney to Tim Geithner.

The most fascinating conversation I had was by far with Robert Zoellick, president of the World Bank. If you recall, a year ago he wrote an op-ed in the Financial Times stating that the Group of 20 leading economies should consider adopting a global reserve currency based on gold as part of structural reforms to the world’s foreign-exchange platform. He wrote that the increasing use of gold as a monetary asset was an “elephant in the room” that was being ignored by policymakers in the debate over how to correct global trade and fiscal imbalances.

No doubt under bankster pressure, he backed away from his gold stance two days later. He said that critics had misunderstood his proposal as a call for a return to the gold standard.

On the sidelines of Tuesday's WSJ event, I probed him on the topic. It's clear that Zoellick is a big fan of gold. I have asked many high profile officials and investment people about gold, they usually yawn. Zoellick seemed pleased with the topic. I asked him for his current view on gold, he smiled, stopped himself and said, "No, I better not."

But then he added, "Anybody who listened to me last year is showing a nice profit." Gold is up about $300 an ounce since he wrote the Op-Ed. I asked him if those who listened to him last year should sell?

He looked at me, thought for a minute then said, "The uncertainty is still making gold a good investment."

Folks, I think we have a gold bug at the World Bank.

2011-11-17T01:24:00.000-08:00

When You Wake Up Tomorrow
Just a quick heads up. I want to make sure all of you realize that when you wake up tomorrow that any "account" you have can be debited for whatever amount the powers-that-be choose, and there's not a thing you can do about it.

You see, that's the problem with "accounts." Your wealth is being held by someone else, and chances are pretty good that they are crooks. And even if they aren't crooks, they are controlled by the US Government which is the biggest crook of all. Which puts your assets at risk.

Think it can't happen? Ha! It's already happening! Check out the following video from Gerald Celente where he discusses how his account was "debited" for over six-figures due to the failure of an institution that he was not even invested in.

Any bank account, IRA, 401k, mutual fund, annuity or brokerage account that you own is just one computer keystroke away from becoming someone elses. If you don't hold it in your hand, you don't own it. It's as simple as that!

2011-11-16T06:09:00.000-08:00

No Wonder Gold Is Rising
Here's a short excerpt from an article entitled "What's Driving Gold."

"Fear of Eurozone debt contagion is not the only factor driving the markets. There is also a major event looming for the US economy, namely the showdown of the Super Committee. With the deadline to craft the $1.5 Trillion debt reduction deal now nine days away, there seems to be little progress by the select lawmakers. In fact, the talks broke down when Democrats walked out this last week after ignoring the latest Republican proposal. The US budget battle is likely to reach center stage once again over the next ten days. An impasse will roil the markets once more.

The credit agencies may act before the Super Committee does. Many analysts believe a further downgrade of US sovereign debt is probable. Rather than taking the lead at this critical juncture, the president is taking a trip to Hawaii and Asia. It is becoming more apparent that the Administration would rather there is no deal; another example of the “do nothing opposition”. There was a time in this country when our leaders put needs of the country before politics. Those were the days…

So fasten your seat belt. We’re in for a bumpy ride. The stock market will remain highly volatile with daily triple digit swings. The bond market offers no escape. Treasury prices are bid up as funds flow out of Europe and equities into “safe” US notes, despite negative real interest rates for the instruments, and bid down when investors flood back into higher yielding stocks. Each trade represents a loss of capital (as well as a tax event).

It’s no wonder that prudent investors are once again turning to gold as the true safe-haven trade."

2011-11-16T05:51:00.000-08:00

What's Up With Silver?
Here's a short paragraph from silver analyst Ted Butler:

"Leaving aside the fact that silver is more manipulated than gold for a moment, there are some ready explanations for why silver has been somewhat of a relative drag recently. For one thing, since the September price smash, silver has not been able to penetrate to the upside its important moving averages (50 and 200 day), while gold has been able to climb or remain over all its important moving averages. I’m not a technician or chartist, but many market participants are heavily influenced by such indicators. That makes it important to be aware of what these technical traders are up to. The fact that silver is below the moving averages while gold is above keeps these technical traders from buying silver and encourages them to buy gold. I think this explains, more than anything, the recent relative punk price performance in silver compared to gold. But the nature of this technical moving average approach portends changes ahead."

2011-11-14T01:41:00.000-08:00

Why Wall Street Can't Handle the Truth
Longtime bank analyst Mike Mayo tells the inside story of why it's so hard to yell 'sell' in a crowded room—and lays out how Wall Street needs to change to avoid the next financial collapse.
Wall Street Journal - Over the past 12 years, longtime banking analyst Mike Mayo has issued numerous calls to sell bank stocks, a rarity in a system where nearly all stocks are rated buy or hold. His negative ratings have frequently gotten him in trouble with banks, clients and his own bosses, who didn't want to alienate those companies. In this excerpt from his new book, "Exile on Wall Street," Mr. Mayo gives an inside view of the fights, the scolding and the threatening phone calls he received as a result of yelling "sell"—and offers a proposal to fix the banking sector.

Taking a negative position doesn't win you many friends in the banking sector. I've worked as a bank analyst for the past 20 years, where my job is to study publicly traded financial firms and decide which ones would make the best investments. This research goes out to institutional investors: mutual fund companies, university endowments, public-employee retirement funds, hedge funds, and other organizations with large amounts of money. But for about the past decade, especially the past five years or so, most big banks haven't been good investments. In fact, they've been terrible investments, down 50%, 60%, 70% or more.

Analysts are supposed to be a check on the financial system—people who can wade through a company's financials and tell investors what's really going on. There are about 5,000 so-called sell-side analysts, about 5% of whom track the financial sector, serving as watchdogs over U.S. companies with combined market value of more than $15 trillion.

Unfortunately, some are little more than cheerleaders—afraid of rocking the boat at their firms, afraid of alienating the companies they cover and drawing the wrath of their superiors. The proportion of sell ratings on Wall Street remains under 5%, even today, despite the fact that any first-year MBA student can tell you that 95% of the stocks cannot be winners.

Over the years, I have pointed out certain problems in the banking sector—things like excessive risk, outsized compensation for bankers, more aggressive lending—and as a result been yelled at, conspicuously ignored, threatened with legal action and mocked by banking executives, all with the intent of persuading me to soften my stance.

Looking inside the world of finance—with its pressures to conform and stay quiet—may offer some insight into why so many others have fudged. And it may offer some answers as to how crisis after crisis has hit the economy over the past decade, taking the markets by surprise, despite what should have been plentiful warning signs.

***

It started in 1999, when I was managing director (the equivalent of partner) at Credit Suisse First Boston. At the time, what gave me the biggest concern was a sense that stocks within the banking sector were likely to turn downward.

Five years after the interstate banking law of 1994, which allowed banks to operate across state lines, the easy gains from consolidation were over. When banks couldn't maintain their growth momentum through mergers and cost cuts, they took the next logical step—they made more consumer loans. Logic dictated that this meant the quality of those loans would probably decrease, and, in turn, create a greater risk that some of them would result in losses. At the same time, executive pay was soaring, aided by stock options, which can encourage executives to take on greater risk.

For my 1,000-page report on the entire banking industry, with detailed reports of 47 banks, I wasn't just going to go negative on a few main stocks but the entire sector. This was completely the opposite of what most analysts were saying, not just about banks but about all sectors.

In decades past, the ratio of buy ratings to sell ratings had not been this lopsided, and in theory it should be roughly 50-50. That seems right, doesn't it? Some stocks go up, some go down, because of the overall market direction or competitive threats or issues specific to each company. In the late 1990s, though, the ratio was 100 buys or more for every sell. Merrill Lynch had buy ratings on 940 stocks and sell ratings on just 7. Salomon Smith Barney: 856 buy ratings, 4 sells. Morgan Stanley Dean Witter: 670 buys and exactly 0 sells.

Analysts almost never said to sell specific companies, because that would alienate those firms, which then might move business for bond offerings, equity deals, acquisitions, buybacks or other activity away from the analyst's brokerage firm. Say the word "sell" enough times, and you win a long, awkward elevator ride out of the building with your soon-to-be-former boss. And here I was, ready to go negative on the entire banking sector.

At the company's morning meeting between analysts and the sales staff, I gave a short presentation on the report. "In no uncertain terms," I said, "sell bank stocks. I'm downgrading the group. Sell Bank One, sell Chase Manhattan…." The message went out over the "hoot," or microphone, to more than 50 salespeople around the world. They would relay my thoughts to more than 300 money managers at some of the largest institutional investment firms in the business.

Afterward, I went back to my desk. Safe so far, I thought, and picked up the phone to call some of the biggest banks that had been downgraded, to give them a heads-up, along with some of the firm's institutional-investing clients. Not long after that, I was summoned back to the hoot for a special presentation to the sales force, something that had never happened before. They wanted me to clarify my thinking. Why not just leave the ratings at hold?

I laid out my case again: declining loan quality, excess executive compensation and headwinds for the industry after five years of major growth driven by mergers.

The counterattack started almost immediately. One portfolio manager said, "What's he trying to prove? Don't you know you only put a sell on a dog?" Another yelled, "I can't believe Mayo's doing this. He must be self-destructing!" One trader at a firm that owned a portfolio full of bank shares—which immediately began falling—printed out my photo and stuck it to her bulletin board with the word "WANTED" scribbled over it. I'd poked a stick into a hornets' nest.

That morning, I got a call from a client who runs a major endowment. "Check out the TV," he said. On CNBC, the commentators had picked up on the news and were now mocking me. Joe Kernen joked: "Who's Mike Mayo, and do we know whether he was turned down for a car loan?" I even got an ominous, anonymous voice mail from someone with a strong drawl cautioning, "Be careful with what you say."

Of course, the banks that I had downgraded were even more furious, and they let me know it. Routine meetings with management are a standard part of my work, yet when I requested these meetings after my call, several banks said no. Worse, a couple of big institutions in the Midwest and Southeast threatened to cut all ties with Credit Suisse—no more investment banking deals, no more fees.

Within a few months, the market began to experience problems. The Standard & Poor's bank index peaked in July 1999 and fell more than 20% by the end of the year. Regional banks, in particular, had their worst performance compared to the overall market in half a century.

***

I was still negative on the sector in 2001, when I moved over to Prudential, and I initiated my coverage with nine sell ratings. This was a tough stance to take at the time because bank stocks were on the rise. Soon enough, I would run into more of the usual problems.

After one meeting in New Jersey, one of the more senior portfolio managers offered to "advise" me about my views on the banking industry. The old-timer pulled me into a semidarkened room, just the two of us.

"I've been doing this a while," he said, "and you've gotta know when to change your view. You can't be so negative." He probably meant it as kindly advice from someone who had been around the block, but it came across more like a disciplinarian father scolding his son. His argument seemed to be that as long as the stock prices were going up, the banks' management and operating strategies didn't matter.

Other companies limited my access to senior executives. An analyst without access to executives—and the one-on-one insights that investors often pay for—can be perceived to be at a disadvantage compared to his or her peers. Goldman Sachs was fairly up front about it, a rarity in the industry. I had recently initiated coverage on the firm, so I had few established relationships I could leverage. When I told one point of contact at the company that I'd like to have more meetings with management, he told me that the firm wasn't singling me out—they treated everyone that way. When I pushed a little harder for a meeting, I received a message that we needed to "have a conversation."

Feeling like a student being reprimanded by a teacher, I was told that the most efficient use of management's time was for the executives to generate money for the firm instead of talking to the 20 or so analysts covering the company. An analyst like me would simply have to be patient. While I could live with this—to a degree—the gatekeeper added one more point: A consideration in granting analysts meetings with management of Goldman Sachs was the analyst's standing, influence and knowledge. "In other words," the gatekeeper added, "we evaluate you." (A spokesman for Goldman Sachs declined to comment for this article.)

***

As the financial crisis started rumbling in 2007, I was working at Deutsche Bank and went on CNBC in November to air my concerns. I said the total cost of the crisis could approach $400 billion, a number that was much higher than anyone else's estimate to that point—though one that still turned out to be too low.

I came up with this figure by combining losses not only from banks but from everywhere else in the financial system, as well, including mortgages and related securities. The project had been difficult and tedious, and members of my team had stayed at the office until midnight each night for weeks to dig up data.

The $400 billion number was an imperfect estimate, even with all that work, but at least I could be more vocal about my stance and help investors pull their money while the stock market—and the shares of most Wall Street banks—had yet to reflect these issues.

I also said that the banking industry had to come clean about the extent of its exposure to problem mortgages and other assets. After eight years of warning about an impending storm, I was now shouting from the mountaintop, saying that it was time to take cover.

Some of the attention my calls generated was not so positive, even within my own firm. My supervisors at Deutsche Bank told me that I should avoid making those kinds of strong, negative comments about the banking sector in the press.

Not long after that, I was summoned to a meeting on an upper floor of the building with a senior manager at Deutsche Bank. He said that the firm did not like to be seen as publicly negative on the U.S. banking sector at a time when it held certain short positions.

In the end, Deutsche Bank made $1.5 billion on one of its proprietary trades during the crisis by betting against mortgage-backed securities. The firm ended up losing about $4.5 billion overall, far less than most big banks, in part because of its aggressive short positions on the U.S. housing market.

But all I understood at the time was that I was in a cone of silence. The bank wouldn't interfere with my analysis of the sector or my research reports, but there was now a gag rule when it came to any more media spots. I could no longer talk to the broader financial community or to investors at large, only to institutional investors who were clients, and as a result, banks could more easily downplay their problems.

A spokesman for Deutsche Bank says, "We fully support our analysts' ability to publish independent research for the benefit of our clients."

2011-11-14T01:33:00.000-08:00

Stealing Pension Funds
Here's a great video from The Daily Show.

The Daily Show
Get More: Daily Show Full Episodes,Political Humor & Satire Blog,The Daily Show on Facebook

2011-11-11T07:07:00.000-08:00

Etrade Baby Goes Broke
Better watch this one before YouTube takes is down. It's hilarious, but be forewarned, the language is a little rough.

2011-11-11T04:42:00.000-08:00

Why Gold?
Here's a little snippet from an article yesterday over at Bloomberg:

The cost of a Thanksgiving dinner in the U.S. will jump 13 percent this year, the biggest gain in two decades, as prices rose for everything from turkey to green peas to milk, the American Farm Bureau Federation said.

A meal for 10 people on the holiday, which falls on Nov. 24 this year, will rise to $49.20 from $43.47 last year, the biggest increase since 1990, based on foods traditionally served including stuffing and pumpkin pie, the farm group said today in a release. Turkey was the most expensive and had the biggest gain, with a 16-pound bird up 22 percent at $21.57.

As every shopper knows, and this story illustrates, the commodities sector is experiencing inflation at run-away levels. But what we really need to find out is "why." Are food and other commodity prices rising because of a supply shortage? Or, are they rising simply because the value of the currency is falling? The answer to these two questions are critical when it comes to proper analysis of the current inflationary trends and a proper investment response to it.

Well, we don't have to read much further in the article before we get our answer:

At a time when global food prices tracked by the United Nations fell 9.1 percent from a record in February, U.S. consumers are paying record prices, including hams, ground beef, bread, flour and cheese.

So, the answer to our first question is that there is not necessarily a shortage of supply driving up food prices here in the US. In fact, food prices have been on the decline worldwide due to recent over-supply. Therefore, we are left by default with our answer to question number two: Food prices IN THE US are rising because the currency (the DOLLAR) that American's pay for their food is falling in value.

Now, armed with this information we can make some informed decisions about investing. Since these rising commodities prices are monetarily based, one should invest in commodities to preserve one's purchasing power. Of course, as everyone knows, gold is the ultimate commodity as it is the antithesis to devaluing paper money. When paper money falls in value, gold increases proportionately, as do other relatively fixed-supply commodities such as food/oil/materials, etc. Said another way, when governments create an oversupply of their currency by excess monetary creation, everything that is priced in that currency will cost more IN TERMS OF THAT CURRENCY ONLY. That is the key point to understand. As stated above, food prices are rising at present only in the dollar currency but not in other currencies. Therefore, this inflation we are seeing is monetarily based, not supply based, which is very bullish for the dollar-price of gold.

Simply knowing that prices are rising is not enough to base investment decisions on. One must know WHY prices are rising, and then, armed with this information, position one's investment portfolio appropriately. In an environment of monetarily-induced inflation, like we are presently experiencing in the US, hard assets such as gold and silver offer the investor the best chance of preserving their wealth from further devaluation.

2011-11-11T04:07:00.000-08:00

Chart of the Day - European Debt

All the European austerity and bailout plans have not managed to stem the European debt crisis. In fact, the severity of the crisis has only increased over time with Italy, the world's eighth largest and the euro zone's third largest economy, now becoming the latest European nation to likely require a bailout.

Today's chart helps illustrate the risk of European debt by plotting out the 10-year government bond spread (versus the German Bund) for all the PIIGS (i.e. Portugal, Italy, Ireland, Greece, and Spain) from 2007 to the present.

For example, the Greek 10-year government bond yield (light blue line) is currently a whopping 32.5 percentage points greater than that of the relatively stable German Bund. That is a far cry from where it was back in the summer of 2009. However, even more important is the status of Italy (dark blue line). Italy has €1.9 trillion ($2.6 trillion) of debt outstanding. This level of debt is greater than that of all the other PIIGS combined. Due to the severity of the situation, the European Central Bank may ultimately be forced to print a significant amount of euros – something they are very much ideologically opposed to doing.

2011-11-10T07:33:00.000-08:00

Buying up the world's gold - China's long term motive
LONDON - Gold imports into China via Hong Kong are continuing to boom with the total for the quarter to September exceeding the total amount for the whole of 2010. Ever since China loosened its restrictions on precious metals purchases, and indeed started selling the idea of gold and silver investment to the general populace via its state-owned banks (see: China pushes silver and gold investment to the masses), the Asian superpower has rapidly begun to challenge India as the world's largest consumer of gold. Given that it is largely believed that the Chinese state is taking in all its own mined gold (it is currently the world's largest gold producer) into its reserves without declaring the increase, the combined offtake within China of market purchases by the general population plus the amount being taken into its state coffers will soon be getting perhaps close to one third of total world gold output and rising ever faster.

China has always taken the long view and plans for eventualities years in advance. Nothing on the global front is unplanned. This has been seen with the ever increasing number of critical metals and minerals for which China has a virtual monopoly of the global market - rare earths is the most obvious example, but there are a number of other metals where China now provides around 90% of global supplies. Imposition of export quotas ostensibly to protect its own industries then follows, forcing prices up to unprecedented levels, and also forcing companies which require these metals as key parts of specific manufacturing processes to move their plants to China as that is the only way they can guarantee supplies, thus benefiting the Chinese economy as well as helping build employment in the world's most populous country.

Indeed, of the top 20 metals and minerals identified as being at significant supply risk compiled by the British Geological Survey in a recent report production of no less than 11 of them is dominated by China.

So what is China's plan with gold? There almost certainly is one. It can't be a case of tying up global supplies like it has with those critical metals because it doesn't, and can't, control enough of global supply to do that. The logical conclusion is that China is building its total reserves within the country in terms of both its government holdings and as an investment for individuals as it is convinced that the only way for the gold price to go is upwards, and perhaps the only way for the US Dollar and Euro to go is downwards - and ultimately, several years hence, it will move towards making the renminbi either the world's global reserve currency, or a significant part of it and reap the kind of benefits the USA has been able to since the dollar became the de facto global reserve currency.

China is a nation of gold believers, but is prepared to build its reserves gradually over a period of years to towards the purported 8,000 tons plus held by the U.S. Federal Reserve. It has a way to go yet and although it could do so more quickly by utilising its huge $3 trillion surplus to buy gold on the open market it would rather do so surreptitiously and gradually so as not to unduly accelerate the price of gold. This will thus allow its own citizens buying gold as an investment and inflation hedge to benefit and, importantly, allow it to filter down more as the Chinese middle class continues to build.

It has also set up the Pan Asian Gold Exchange (PAGE) which many feel is destined to be much more than that which its name suggests. Not only will it enable buyers to bypass the bullion banks and the LBMA, but it will also provide a path for the international investor to buy renminbi. As the financialsense.com website pointed out ahead of PAGE's opening "PAGE also provides a new way for international investors to own Chinese currency - the Renminbi (RMB). Here's how: The buyers will purchase gold contracts denominated in RMB. They can then hedge out the gold in the dollar-based gold markets. As a result, they effectively own RMB.

"We see here yet another example of multiple Beijing initiatives opening the RMB to world investors. Over time, these innovations will enhance the value of the RMB and create a deeper, more liquid foreign exchange presence for the Chinese currency. PAGE is another internationalization step forward for the RMB in the direction of world reserve currency status.

"The advantages of being the world reserve currency, as well as the responsibilities involved, have not been lost in the Chinese government."

As we said earlier in this article - China has always taken the long view and plans for eventualities years in advance. - The renminbi as the global world currency is probably many years away yet, but the day is getting closer and we would surmise that building its gold reserves is a key part of the long term Chinese plan to exert renminbi hegemony and replace that of the once-mighty dollar. And its people who are relentlessly hoovering up gold as it is sold off by the West will be double beneficiaries of this long term planning.

2011-11-10T06:30:00.000-08:00

Good Video On The Gold Market

Here's a great roundtable discusssion aired on CNBC - Africa on gold and silver between two gold and silver bulls and one non-believer. There's some good info available but the thing that really caught my eye was the inability of the so-called financial "expert" on this panel, co-host Simon Brown, to see the forest for the trees. Seems the only objection the host can come up with against owning gold is that it doesn't pay a dividend. I guess it makes more sense to own stocks that have fallen in value for the last 10 years but pay a 3-5% dividend than buy gold that is doubling in value every 3-5 years?

Seems that asking the "experts" to believe in gold is like asking folks to believe in God; it's just not cool, even though common sense tells you it's the only obvious thing to do. Again, like asking someone to believe in God, the objections against owning gold are actually quite amusing if you actually take a minute to analyze what is being said.

2011-11-09T10:03:00.000-08:00

Stay Ahead Of The Curve
This is a snippet of yesterday's commentary from the Casey Daily Dispatch.

It's fascinating that so many investors realize that gold matters, while many others try to knock it down. According to the naysayers, it's just a barbaric metal sought out by crazy gold bugs. Though this view has become less common, it's still present. And every time gold retreats, the media come out with article after article proclaiming the end of gold. With the price tipping over the $1,800 mark, the critics have been proven wrong again.

Just think about how important gold has become to the market. When I open up the Bloomberg website, I'm greeted by the prices of only a few indices and commodities: the DOW; S&P 500; Nasdaq; oil; the 10-year US Treasury note; and gold. The same is true of Morningstar, which lists the prices of gold, oil, and natural gas on the front page. Surely gold isn't on the front page because investors are concerned about the future price of gold jewelry. In many ways, gold has become a barometer of economic conditions.

Everyone now realizes that gold is important. The people still bashing it to the extreme are frankly in denial. No matter one's opinion on gold's investment-worthiness, gold has become a factor that market participants must follow closely. The market's perspective on the precious metal has come a long way, and we likely still have further to go. In the meantime, we'll continue to stay ahead of the curve.

2011-11-09T09:38:00.000-08:00

Thomas Jefferson Warned The Nation To Beware The Power Of The Banks
(Forbes) - Before there was John Kenneth Galbraith or Joe Stiglitz or Nouriel Roubini, or Simon Johnson or Niall Ferguson or Occupy Wall Street– there was one of the Founding Fathers, Thomas Jefferson giving an advance warning of 2008 some 200 years ago. An awesome foreboding it was, too.

“I believe that banking institutions are more dangerous to our liberties than standing armies,” Jefferson wrote. ” If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around(these banks) will deprive the people of all property until their children wake up homeless on the continent their fathers conquered.”

“ The issuing power of currency shall be taken from the banks and restored to the people, to whom it properly belongs.”

We should all meditate on that amazing prediction of things to come that are not necessarily beneficial to the 99%– but only to the 1%.

2011-11-08T13:52:00.000-08:00

The Law of Unintended Consequences and the Broad Brush of Regulation
Here is an interesting email I ran across talking about the effects of the Dodd-Frank Legislation and the damage it is already having on legitimate businesses. Looks like our politicians are making a bad situation even worse.....

FYI, we are getting the effects of Dodd-Frank in the shorts already (literally and figuratively).

As you know, we trade in the shipping world and use derivatives to hedge some of our physical forward ship and cargo positions because there isn't any other way do so. Our business requires us to take physical positions of ships and cargos for up to two or three years ahead, and it is very difficult if not impossible to back those up with counterbalancing physical positions, wherefore an active derivatives market sprang up about 25 years ago.

We clear the derivatives trade through one of the largest Scandinavian banks, with which we have dealt for a number of years quite successfully.

Just this week we were told that this bank can no longer trade with us on shipping derivatives because of Dodd-Frank; indeed, it cannot trade any longer with any entity controlled or beneficially owned by American interests. Furthermore, we have first and secondhand evidence that many of the largest international banks in Euroland and elsewhere around the world are refusing to open (legal, not secret) accounts for American citizens or companies controlled by same because of the raft of documentation and legal quagmire they are now required to comply with.

Yes, and indeed they are closing existing accounts with such entities to avoid having to deal with the US Godvernment!

This cannot be good for our recovery, our economy, or our international relationships, and is going to get much worse. The halls of Congress are littered with economic charlatans indeed! A little follow-up to our discussion: seems that there are two immediate problems faced by the foreign banks vis-à-vis "Doodie-Frankenstein": The 2,500-odd pages of regs are written so vaguely that the foreign banks cannot determine their liability nor their position as to whether they are coming under US regulation per D-F or not, and must await decisions and clarification on many aspects thereof; and the Volcker Rule with its 300 pages of footnotes - if it applies to the foreign banks, actually precludes them from trading as principals in any derivative transactions with American- or US-based entities. Thus the foreign banks for the moment choose to avoid making any deals with any such entities in order to prevent themselves from beco ming liable if all the legal wrangles end up making them so.

Furthermore, we are aware first- and secondhand that many are even refusing to open simple bank accounts for Americans for fear of falling afoul of D-F and exposing themselves to US regulation. As for our clients, they are for the moment shut out of hedging opportunities on the paper side, but will have to find either far less satisfactory or liquid physical hedges, or remain exposed on their existing and prospective physical positions... not a comfortable place to be in these volatile times.

This really is a huge problem. Not a minor annoyance at all. Likely to extend to trade financing and anything to do with banking, and will make USA more of a pariah than ever.

2011-11-07T01:48:00.000-08:00

The Debt That Overwhelmes All Others

2011-11-07T01:03:00.000-08:00