Friday, December 31, 2010

Hyperinflation will drive gold to unthinkable heights
We now live in a world where governments print worthless pieces of paper to buy other worthless pieces of paper that combined with worthless derivatives, finance assets whose values are totally dependent on all these worthless debt instruments.  Thus most of these assets are also worth-less.

American Eagle Silver Uncirculated Coin

From the horse's mouth--the US Mint:

Production of United States Mint American Eagle Silver Uncirculated Coins continues to be temporarily suspended because of unprecedented demand for American Eagle Silver Bullion Coins.

Tuesday, December 28, 2010

Biz Break: iPhone relief in San Francisco; plus: a real estate 'double dip'?

Real Estate Spin Continues by Mainstream Media

China shrinks rare earths export quota

China will do what China wants to do.  Which means the end of cheap electronic imports are coming to an end.

Class action against Morgan, HSBC specifies silver manipulation mechanism
"Before the Class Period began, JPMorgan had become the custodian and an authorized participant of the largest known concentration of silver bars, the iShares Silver ETF, which holds in excess of 340 million troy ounces of silver, a sum that equals an estimated 1/3 of the total present global supply of silver bullion. As a result, it had actual knowledge of the precise whereabouts of much of the world's known silver bar supply.

"In approximately March 2008, JP Morgan acquired Bear Stearns, which held a very large short position in silver. With more of the total short position in silver concentrated in the hands of JP Morgan, it had a further motive to suppress prices.

"Upon information and belief, JP Morgan works together with HSBC, the other dominant player in the silver and precious metals markets. In July 2009, HSBC became the custodian of the SIVR ETF, which meant that it had physical access to and knowledge of the silver held by that trust. Notably, it named JP Morgan as one of the sub-custodians of the SIVR ETF.

"As a result of their participation in the silver ETFs, JP Morgan and HSBC had a direct opportunity to confer and discuss with each other the prices of silver held by each of them.

"In addition, Defendants had a strong incentive to suppress downward the price of silver as measured by the NYSE-Arca and CME/COMEX instruments. For example, Defendants could pledge their silver to the ETFs in exchange for ETF shares, sell their shares to other market participants, drive down the prices of silver through trades on NYSE-Arca and CME/COMEX, buy back their ETF shares from investors at lower prices, and return their (now lower-priced) silver ETF shares in exchange for the silver bars initially pledged against those shares, the real value of which remained the same, and only notionally appears lower because of Defendants' suppression.

U.S. gas price tops $3 a gallon, highest since Oct '08

What inflation?

Roubini: "It's Pretty Clear The Housing Market Has Already Double Dipped"

Guest Post: Former Shell Oil Chief Predicts $5 Gas by 2012

I’m predicting a worse outcome over the next two years, which takes us to 2012 with higher gasoline prices, uncertainty as to the future of hydrocarbons, more regulation on the hydrocarbon industry based upon who the administration is today…
And what I fear the most is that by 2012 prices are so high that we have a backlash from the electorate and we go into reverse and we go back to a hydrocarbon only type of a future, maybe with some nuclear, instead of moving on in the 21st century.

I’m predicting, based upon the moratorium in the Gulf of Mexico, up to a million barrels a day of US production gone because of the politics of freezing drilling in the Gulf.
The headline is the moratorium is lifted, the reality is you can’t get a permit… I’m expecting no new drilling for two more years at least.

If we stay on our current course, within a decade, within ten years, we’re into energy shortages in this country big time. Black outs, brown outs, gas lines, rationing - that’s my projection based upon the current inability to  make decisions.

When the American consumers are short, or when prices are so high - $5 a gallon for gasoline by 2012 - I believe that’s going to happen - that’s going to set a new tone, it’s going to be panic time on the part of the politicians, they’re going to suddenly get some kind of a sense we better do something.

MannKind Updates Status of New Drug Application for AFREZZA(R)

MannKind Corporation (Nasdaq: MNKD) today announced that it was informed on December 27, 2010 by the U.S. Food & Drug Administration (FDA) that the agency will not be able to complete the review of the New Drug Application (NDA) for AFREZZA(R) (insulin human [rDNA origin]) Inhalation Powder by the action date of December 29, 2010. The FDA stated that it will require approximately four additional weeks to complete its review of the NDA.
See disclaimers in the left side bar.

Disclosure:  no position in MNKD.

Monday, December 27, 2010


Gold historically rallies between September until March, at which point, it will correct on a seasonal basis.  Worldwide events like the Ramadan, Diwali, Christmas, and the Chinese Lunar New Year coincide with the rally period.  The enclosed article suggests the gold bubble could burst in May or June of 2011.

In my opinion, it doesn't take into account that precious metals are a store of value, and not just a commodity.  Readers should perform their own due diligence and decide for themselves what the potential outcomes are.

Gold miners to go global

Look for M & A activity within the precious metals mining sector to increase globally going forward.

John Embry: gold, silver could go ballistic by year-end

By year-end, I'm hoping Embry means 2011, and not 2010.

Howard Buffett Said "Human Freedom Rests On Gold Redeemable Money", Called For Return To Gold Standard

Howard Buffett, Warren's late dad, had an entirely different perspective on gold than his more famous son.  Hence, this was a must re-blog.

The hypocrisy of Berkshire's Charlie Munger

Friday, December 24, 2010

Crude Passes $91, As $100 Billion In US GDP Is Wiped Out In Minutes

I've read every $1 price increase in a barrel of oil causes a 0.3% reduction in trade.  With the US economy hovering around $14 trillion, GDP is reduced $84 billion with every $1 increase in a barrel of oil, which is in the ball park of $100 billion, as stated in this article.

The take-away message is that quantitative easing (or printing money out of thin air) induces price inflation, which is counterproductive for economic stimulation.

Noteable quotes on (sound) money

Part 2-JP Morgan Silver Manipulation Explained

Hey, if it takes a cartoon for Americans to learn something, so be it.

Alabama Town’s Failed Pension Is a Warning

Bank Of America Registers And

Wednesday, December 22, 2010

Full 2 hour lecture of Jim Rickards on economics and national security

Jim Rickards - Economics & National Security - Trailer

Moody's May Cut US Rating on Tax Package

I recall Treasury Secretary Geithner declaring US Treasuries being downgraded from a AAA credit rating being "impossible."  Well, the unthinkable is now tangible, according to Moody's.

Jerry Brown: California Budget Is "Much Worse Than I Thought -- We've Been Living In Fantasy Land"

He said last night: "I'm going to try to get the budget agreements done within about 60 days. I don't think we have a lot of time to waste... It will be a very tough budget, but it will be transparent... We've been living in fantasy land. It is much worse than I thought. I'm shocked."

Hear that, last year's $20 billion budget cuts amounted to living in fantasy land.
Brown implied he would apply major cuts to the education system and other programs. He also refused to rule out new taxes. And it's got to add up to at least $29 billion in cuts.

$2tn debt crisis threatens to bring down 100 US cities

Fed extends USD swaps with major central banks

The same foreign finance ministers who criticized the Fed's quantitative easing 2.0 are now at the Fed's doorstep with hat in hand.  The most insolvent nation is backstopping other insolvent nations, in case of another financial and liquidity crisis.  In case?

Meredith Whitney defends her position on muni defaults

State Budgets: The Day of Reckoning

Another financial crisis is looming.

2011: The Year Public Pension Plans Get Whacked

Tuesday, December 21, 2010

Sunday, December 12, 2010

Market alarm as US fails to control biggest debt in history

This is EXACTLY what I have been warning about for a few years, and I may have been early on the forecast, but the debt bomb is coming home to roost among all developed countries.  Most retail investors put too much emphasis on equities, but the bond market is a better indicator of what is really occurring economically worldwide.  The fixed-income market is much bigger and participants are mostly institutional investors, the so-called smart money.

Paramount Gold Discovers High Grade Strike Extension of Main Palmarejo Mine Vein at San Miguel

Shares of PZG spiked over 40% last Friday on news of a high-grade strike extension in their Palmarejo mine.

See disclaimers in the side bar.

Disclosure:  long shares of PZG.

The Fed? Ron Paul’s Not a Fan.

Another nice find from Kitty:

Thursday, December 9, 2010

Let's get physical, physical...

He was quite confident that he wouldn’t have a problem getting his silver because he had been paying storage fees on it since buying it in the late 1990’s.  The Swiss bank is insisting that he take cash, but he is demanding his silver which is supposed to be sitting in the bank’s vault be delivered to him.

Make sure your gold and silver are stored outside of the banking system.

“It is important for people to keep their eye on the big picture and not be distracted by short-term volatility in the price of gold and silver.   The long-term trend for both precious metals is still pointing higher.”

What in the world is going on with some of these banks that are supposed to be storing their customers gold and silver?  Have they leased it out to another entity?  Have they sold their customers precious metals and left an IOU in the vault while continuing to charge custodial fees?

Jim Rogers: 'US government's inflation data is a sham'

Leading investor Jim Rogers has attacked the US government's inflation data as a "sham" that is causing the central bank to massively understate price pressures.

"I expect interest rates in the US to go much, much, much higher over the next few years," he said, adding that he is betting against US Treasuries.
The core personal consumption expenditure index, which strips out food and energy costs, is the Fed's preferred measure of inflation.

"Everybody in this room knows prices are going up for everything," Mr Rogers told the Reuters Summit.

The investor remains bullish on commodities given the debt crises facing many country across the world.

"If the world economy gets better, commodities are going to go up in price because there are shortages. If the world economy does not get better, you should own commodities, because [central banks] are going to print more money," he said. "Real assets are the way to protect yourself. 

Mr Rogers also predicted that the price of gold will rise eventually above $2,000 an ounce. The price of spot gold hit a record high of $1,430.95 an ounce before falling back to close on Tuesday at $1,409.35. 


Jim Rogers: 'Britain is totally insolvent'

'Greece is insolvent, Portugal has a liquidity problem, Spain has a liquidity problem, Belgium has been cooking the books for a long time, Italy has been cooking the books for a long time and the UK is totally insolvent.'
'Greece is insolvent, Portugal has a liquidity problem, Spain has a liquidity problem, Belgium has been cooking the books for a long time, Italy has been cooking the books for a long time and the UK is totally insolvent.'
'You need to let Ireland go bankrupt. They are bankrupt, why should innocent Germans, Poles or anybody pay for mistakes made by Irish politicians and banks.'
'It's dumbfounding and stupefying to me that you have a central bank in the United States that thinks that all it needs to do is print money,' he said. That has never worked, never worked anywhere in the world in the long-term or the medium-term.'

Economist Nouriel Roubini on Wednesday voiced concern over a compromise on extending tax cuts struck by US President Barack Obama and Republican leaders, saying the agreement could expose the US to bond vigilantes who will drive up bond yields.

Bond vigilantes – the term was coined by economist Ed Yardeni in the 1980s to describe major investors who demand higher yields to compensate for the perceived risks resulting from large deficits - could derail the country’s precarious recovery, some economists say.

 Chinese central bank adviser Li Daokui said on Wednesday the fiscal health of the United States was worse than Europe's, and that the dollar had so far been shielded from trouble because markets are still focused on debt-laden European countries.

US bond prices and the dollar would fall when the European situation stabilizes, Daokui said.
Here is my previous breakdown of long-expiry US Treasury bonds:

This is what I did in an attempt to hedge against rising bond yields (and interest rates):

Note the usual disclaimers in the left side bar and disclosures in the linked blog entries.

US state governments' debts soar

GCC urged to boost gold reserves

I've blogged about central banks and citizens of China, Russia, India, and other emerging countries accumulating gold for their reserves.  Europeans have also been stuffing German and Swiss safety deposit boxes and vaults with gold in the wake of sovereign debt crises in Greece, Ireland, Portugal, and Spain (and spreading into the core Euro countries).  The Gulf countries are joining the gold bandwagon, as their petrodollars sink in value with each round of monetary easing by the Fed.  The title of the article is self-explanatory.

GCC states should boost their foreign reserve holdings of gold to help shield their billions of dollars of assets from turbulence in global currency markets, say economists at the Dubai International Financial Centre Authority (DIFCA).

Diversifying more of their reserves from US dollars to the yellow metal would help to offer central banks in the region higher investment returns, said Dr Nasser Saidi, the chief economist of DIFCA, and Dr Fabio Scacciavillani, the director of macroeconomics and statistics at the authority.

"When you have a great deal of economic uncertainty, going into paper assets, whatever they may be - stocks, bonds, other types of equity - is not attractive," said Dr Saidi. "That makes gold more attractive."

Declines in the dollar during recent months have dented the value of GCC oil revenues, which are predominantly weighted in the greenback.

Longer term, gold could play a more important role in the global monetary system as the shift from developed world to emerging markets intensified, the two DIFCA economists said in a report published yesterday.

The dollar's position as the leading reserve currency was likely to diminish as US dominance of the world economy dwindled.

Gold could help to fill the void in the monetary system in the absence of the euro or the yuan proving viable alternative reserve currencies, they said.

Recent turmoil in currency markets has hastened moves by other emerging markets including India, China and Russia to add to their gold reserves. Gold accounts for about 25 per cent of the total reserves of the European Central Bank.

"The value of paper money is being debased by injections of quantitative easing in Europe, Japan and the US," said Dr Scacciavillani. "Gold is a means of exchange not dependent on any political decisions and has a role as a hedge against inflation and economic risk."

 Longer term, the commodity's importance would not diminish the need for the GCC to develop more monetary independence by pressing ahead with a single currency project, he said.

Global bond rout deepens on US fiscal worries

Agreement in Washington on a fresh fiscal package has set off dramatic rise in yields of US Treasuries and bonds across the world, threatening to short-circuit any benefits of stimulus. The bond rout raises concerns that the US authorities may be losing control over events.

Fed Critics Go Mainstream

Tuesday, December 7, 2010

J.P. Morgan Getting Squeezed In Silver Market? (SLV, JPM)

Mainstream media outlets are finally starting to report the alleged manipulation of silver prices.

How Much Gold and Silver Will the Treasury Secretary Determine is Sufficient to Meet Public Demand?

The bill H.R. 6162 Coin Modernization, Oversight, and Continuity Act of 2010 primarily establishes rules for the Secretary of the Treasury to provide biennial reports to specified committees on the costs related to circulating coins, and make recommendations for new metallic materials or procedures.

So what is the difference between "quantities sufficient to meet public demand" and "quantities that the Secretary determines are sufficient to meet public demand"?

In practice, we shall see if this represents a different standard, but at this point the change in wording makes me uncomfortable.  I want the supply of gold and silver bullion coins to be determined by demand in the marketplace, not determined by unspecified criteria established by the Secretary of the Treasury.

As the bill has already been passed in the House and Senate, and only requires the President's signature to become law, it seems too late to do anything other than brace for the possible repercussions.

Jim Rickards audio interview

Must-hear interview with Jim Rickards:

Fiscal Spending Jobs Multipliers: Evidence from the 2009 American Recovery and Reinvestment Act

Federal Reserve Bank of San Francisco Working Paper:

The estimated jobs multiplier for total nonfarm employment is large and statistically significant for ARRA spending (as measured by announced funds) through March
2010, but falls considerably and is statistically insignificant beyond March. The implied number of jobs created or saved by the spending is about 2.0 million as of March, but drops to near zero as of August.

Lastly, I find that spending on infrastructure and other general purposes had a large positive impact, while aid to state government to support Medicaid may have actually reduced state and local government employment.

Monday, December 6, 2010

Justice Department To Announce Historic Wall Street Crackdown, Expose Over 300 Criminal Defendants

Why Eric Sprott sees silver as the next big investing windfall

Artist's Impression Of JPM's CEO Hearing That Silver Is Trading Over $500

Knowledgeable gold and silver bugs will catch every inside joke, but even precious metals neophytes will appreciate this parody.   Google Jamie Dimon, Blythe Masters, Ben Bernanke, Tim Geithner, Ted Butler, and Max Keiser to understand the characters.  I'm assuming viewers know who the mustachioed psychopath is.

Bernanke Is 100% Sure

Ben Bernanke's Facebook page

A parody from zero hedge on Fed Chairman Ben Bernanke:

Click on image to enlarge--you won't regret it.

Watch As David Einhorn Makes A Mockery Of Fed "Expert Network" Larry Meyer

Government can’t print money properly

Thanks to Kitty for finding this article.

More than 1 billion unusable bills have been printed. Some of the bills creased during production, creating a blank space on the paper, one official told CNBC. Because correctly printed bills are mixed in with the flawed ones, even the ones printed to the correct design specs can't be used until they 're sorted. It would take an estimated 20 to 30 years to weed out the defective bills by hand, but a mechanized system is expected to get the job done in about a year.

Combined, the quarantined bills add up to $110 billion -- more than 10 percent of the entire U.S. cash supply, which now stands at around $930 billion.

The flawed bills, which cost around $120 million to print, will have to [be] burned.

Sunday, December 5, 2010

JP Morgan revealed as mystery trader that bought £1bn-worth of copper on LME

Is JPMorgan cornering the market in copper?

Former OMB Director Debunks The Economic Recovery Myth

Ben Bernanke on 60 Minutes: Doesn't rule out QE3

Federal Reserve Chairman Ben Bernanke this Sunday will make his second appearance on 60 Minutes, defending the central bank's controversial $600 billion bond buying program.
And he doesn't rule out the possibility that more could be on the way.

"He explains why the Fed announced its intention to buy $600 billion in Treasury securities, defending against charges the move will lead to inflation and not ruling out the purchase of more," CBS said Friday.

The Fed's latest move would mark the central bank's second round of quantitative easing since the financial crisis in the fall of 2008. Nicknamed QE2, it is meant to stimulate the economy by keeping interest rates low and encouraging consumers to spend more and businesses to create jobs.

The plan has drawn a major backlash from both conservatives and global leaders. Critics argue the policy of low interest rates will artificially devalue the dollar, and feed long-term inflation and asset bubbles.

Saturday, December 4, 2010

A conversation with Art Cashin

Art Cashin recaps "breaking the buck" of money market funds, and how we were all frozen out, post-Lehman collapse.

There were reports today that they were considering would they need martial law if banks failed and people took to the streets. So they were as terrified as everybody else. I think they never realized what Lehman would do, not only with the money market funds, but when the money market funds looked like they were freezing up and everybody got terrified, they stopped dealing in commercial paper.

Money markets are the major source of liquidity in commercial paper. Not to bore the viewers, but commercial paper is a very liquid, short-term borrowing thing that IBM uses, that Proctor and Gamble uses. I mean, we're not talking about financials here. We're talking about transferring from Wall Street to Main Street. These people are used to borrowing for two or three weeks. And suddenly, they were frozen out. There were no assets. And that, I think, is what terrified both Bernanke and Paulson. And they had to guarantee to try to re-liquefy.

Art Cashin on the coming hyperinflation

Let’s take a different tack. To understand the incomprehensible scope of the German inflation maybe it’s best to start with something basic….like a loaf of bread. (To keep things simple we’ll substitute dollars and cents in place of marks and pfennigs. You’ll get the picture.) In the middle of 1914, just before the war, a one pound loaf of bread cost 13 cents. Two years later it was 19 cents. Two years more and it sold for 22 cents. By 1919 it was 26 cents. Now the fun begins.

In 1920, a loaf of bread soared to $1.20, and then in 1921 it hit $1.35. By the middle of 1922 it was $3.50. At the start of 1923 it rocketed to $700 a loaf. Five months later a loaf went for $1200. By September it was $2 million. A month later it was $670 million (wide spread rioting broke out). The next month it hit $3 billion. By mid month it was $100 billion. Then it all collapsed.

Things did not go badly instantly. Yes, the deficit soared but much of it was borne by foreign and domestic bond buyers. As had been noted by scholars…..“The foreign and domestic public willingly purchased new debt issues when it believed that the government could run future surpluses to offset contemporaneous deficits.” In layman’s English that means foreign bond buyers said – “Hey this is a great nation and this is probably just a speed bump in the economy.” (Can you imagine such a thing happening again?)
When things began to disintegrate, no one dared to take away the punchbowl. They feared shutting off the monetary heroin would lead to riots, civil war, and, worst of all communism. So, realizing that what they were doing was destructive, they kept doing it out of fear that stopping would be even more destructive.
Currencies, Culture And Chaos – If it is difficult to grasp the enormity of the numbers in this tale of hyper-inflation, it is far more difficult to grasp how it destroyed a culture, a nation and, almost, the world.

People’s savings were suddenly worthless. Pensions were meaningless. If you had a 400 mark monthly pension, you went from comfortable to penniless in a matter of months. People demanded to be paid daily so they would not have their wages devalued by a few days passing. Ultimately, they demanded their pay twice daily just to cover changes in trolley fare. People heated their homes by burning money instead of coal. (It was more plentiful and cheaper to get.)

The middle class was destroyed. It was an age of renters, not of home ownership, so thousands became homeless.

All hope and belief in systems, governmental or otherwise, collapsed. With its culture and its economy disintegrating, Germany saw a guy named Hitler begin a ten year effort to come to power by trading on the chaos and street rioting. And then came World War II.

JP Morgan Silver Manipulation Explained

I've been preaching this conspiracy theory for two years and now they're making a cartoon out of it.  I guess this makes the theory more legitimate than the fact that criminal and civil charges have been launched against JPMorgan for the manipulation of silver prices.  Life imitates art.

Friday, December 3, 2010

Bernanke Tells Nation This Sunday: More QE Coming

Equities and gold spiked in the last hour of trading.  Rumors leaked out that Bernanke's taping with CBS' 60 Minutes would air this Sunday.   Nah, Wall Street doesn't trade on rumors and leaks, do they?

HK gold market hit by sophisticated scam

Here is another article on fake gold showing up in Hong Kong.

As occurrences of fake gold become increasingly exposed, the market will slowly come to the realization that there is less gold above ground than what "official" estimates are.  Actual physical shortages will only be intensified.  I'll leave it up to the reader to decipher what the consequences are.

Beware of fake gold scam 

I have been been bullish on gold as a hedge against currency debasement--long before most retail investors.  As the price of gold rises, expect more fake gold scams, with retail jewelry being the largest target.  The guest interviewee is wrong on fake gold bars though--there have been cases of tungsten-filled fake gold bars being exposed at some smelters, which I blogged about last year.  Click here for the blog entry and watch the video.

As an investor, your best bet to owning physical bullion is to buy sovereign gold and silver coins, such as the American Eagle series or the Canadian Maple Leaf.  These coins from their respective national mints should be the most difficult to counterfeit, are recognized as having monetary value worldwide, and therefore highly liquid.

See the disclaimers in the side bar.

Disclosure:  long physical gold and silver coins.

Chris Whalen: Fed let the real economy go to hell

Jim Rickards believes Chris Whalen to be the most astute banking analyst he's met.  This snippet further validates that label.

China Should Consider Increasing Gold Reserves to Boost Trade in the Yuan

China Is `Scared' of U.S. Monetary Policy, Rogoff, Rickards Say

Thursday, December 2, 2010

The lifecycle of bureaucracy

Volcker Says Dollar's Role in Danger as U.S. Influence Declines Globally

The precious metals power higher

I am often asked when it will be time to sell the gold and silver we are now accumulating as our savings to get us though the crisis as it continues to unfold in the years ahead.  I always respond that the end of this bull market will not be like the one that ended in January 1980.  When gold and silver eventually become overvalued at some future date, you won’t “sell” your metals; you will “spend” them. 

In other words, I expect that because national currencies are being so badly mismanaged, many will collapse – including the dollar, which was the conclusion of The Collapse of the Dollar that I wrote with John Rubino in 2004.  As a consequence of the dollar and many other national currencies collapsing, so little confidence thereafter will be placed in any government’s management of a currency that few if any national currencies will exist.  This watershed event will mark the end of the world’s reckless experiment foolishly started in 1971with fiat currencies backed by nothing. With the inevitable failure of national currencies, gold and silver will be the currency of choice.

Gold Imports by China Soar Almost Fivefold as Inflation Spurs Investment

China’s gold imports jumped almost fivefold in the first 10 months from the entire amount shipped in last year as concern about rising inflation increased its appeal as a store of value, said the Shanghai Gold Exchange. 

Imports gained to 209 metric tons compared with 45 tons for all of 2009, Shen Xiangrong, chairman of the bourse, told a conference in Shanghai today. China, the world’s largest producer and second-biggest user, doesn’t regularly publish gold-trade figures and rarely comments on its reserves. 

Gold imports this year by India have already exceeded 2009 levels as consumers boost jewelry purchases, the World Gold Council said Nov. 17. Imports totaled 624 tons by the end of the third quarter, compared with 559 tons in all of 2009, according to the council.

Bundesbank joins Fed in demanding secrecy for gold swaps

Fed Names Recipients of $3.3 Trillion in Crisis Aid

The American public won't like the fact that hundreds of billions went to bail out foreign institutions and companies.  But then again, the American public won't care until it's too late.

The Federal Reserve, under orders from Congress, today named the counterparties of about 21,000 transactions from $3.3 trillion in aid provided to stem the worst financial panic since the Great Depression. 

Bank of America Corp. and Wells Fargo & Co. were among the biggest borrowers from one program, the Term Auction Facility, with as much as $45 billion apiece. Some aid went to U.S. units of foreign institutions, including Switzerland’s UBS AG, France’s Societe Generale and Germany’s Dresdner Bank AG.

Tuesday, November 30, 2010

China approves gold fund of funds

China’s securities regulators have given the go ahead for a mutual fund to invest in foreign exchange-traded gold funds, potentially tapping interest among mainland China investors who face negative real interest rates on their bank deposits and want to hedge against inflation.

The state-run China Daily said Tuesday that the new gold fund was the first of it its kind to be available to mainland investors. 

More funds could be on the way soon, as several other fund providers have pending applications for similar products, seeking to tap rising interest among mainland Chinese investors for precious metals, the report said.

An I.M.F. Announcement On The Completion of Gold Sales Due Soon

Banks Resisting Fannie, Freddie Demands to Buy Back Mortgages

It's Goliath vs. Goliath, and it won't end well.  In one corner is Freddie Mac and Fannie Mae.  In the other corner are banks, big and small, refusing to take back bad loan portfolios.

Fannie Mae and Freddie Mac are facing growing resistance as they attempt to push failed home loans off their books and onto the balance sheets of banks including Bank of America Corp. and JPMorgan Chase & Co.
The two government-owned mortgage companies are enforcing contracts that require lenders to buy back loans that didn’t meet underwriting standards. At the end of September, the companies reported, banks hadn’t responded to $13 billion in buyback requests. A third of those were at least four months old and Freddie Mac has begun to assess penalties for the delays.

The gold standard never dies

Contagion strikes Italy as Ireland bail-out fails to calm markets

In case you've been in a deep slumber for a year, you'd know that Greece and Ireland have defaulted on their sovereign debt and received bailouts from the European Central Bank and International Monetary Fund, the world's central bank.  You'd also know that the bond vigilantes have Portugal and Spain in their crosshairs.

What's less known is Italy and Belgium are also teetering on the brink of a sovereign debt crisis of their own.  For forward thinkers, look at France and Germany itself.  The ECB and IMF are running out of life boats.

Monday, November 29, 2010

Europe's debt domino effect

WikiLeaks Will Unveil Major Bank Scandal

I wonder if the bookies are taking odds on which major bank will be unveiled by WikiLeaks in the next major financial scandal.

Sean Boyd: gold headed to $2000, silver to $60 to $75

Sure, Sean Boyd is admittedly talking his book, as he is the CEO of Agnico Eagle, a gold producer.  But he has been right for more than a decade, and Agnico has a $13 billion market capitalization.  You might want to sit up and take notice.

Putin ditches the dollar, backs the euro and Germany

Peter Schiff: Ireland should default

EU rescue costs start to threaten Germany itself

The escalating debt crisis on the eurozone periphery is starting to contaminate the creditworthiness of Germany and the core states of monetary union.
"Germany cannot keep paying for bail-outs without going bankrupt itself," said Professor Wilhelm Hankel, of Frankfurt University. "This is frightening people. You cannot find a bank safe deposit box in Germany because every single one has already been taken and stuffed with gold and silver. It is like an underground Switzerland within our borders. People have terrible memories of 1948 and 1923 when they lost their savings."
The refrain was picked up this week by German finance minister Wolfgang Schäuble. "We're not swimming in money, we're drowning in debts," he told the Bundestag.

Sunday, November 28, 2010

Fake "bogeyman" and artificial "security"

Lies across America

Putin: Russia will join the euro one day

State's secrets

Ireland bailout: fears mount that eurozone fund is too small

It's hypocritical for European finance ministers to  bash the Fed for applying quantitative easing several weeks ago, and then turn around and announce bailouts of Ireland, with Portugal and Spain waiting in the wings.  Printing money is printing money, and central banks from both sides of the Atlantic will do whatever it takes to save their respective economies from collapsing.

Asking China to Act Like the U.S.

Thanks to Kitty for finding this editorial on Sino-American foreign policy.

Friday, November 26, 2010

The Rules Of The "Multi-Trillion Shell Game" And What To Expect Next

"under the rules of this multi-trillion shell game, the sovereigns guarantee the ECB which funds the banks which buy the government debt which provides for everyone else's guarantees."

"...The latest move to contain excess liquidity and the forceful measures that the central government has taken to stabilize prices show the determination of Chinese policymakers to fight inflation. Though these moves may not be enough to tame inflation once and for all, they are a good start before more aggressive actions become necessary to battle inflation that is unlikely to end anytime soon, as debt-laden rich countries keep flooding the world economy with their newly printed money."
While the developed world continues to inflate with quantitative easing, the emerging world will apply quantitative tightening to ease inflationary pressures.  This may cause a temporary pause in rising prices of commodities, including precious metals.

With 'Synthetic Banking' Just Around the Corner Enjoy 'The Liechtensteiner' on 'Fed Monday'

The mad scientists are venturing back out into the deep end of the pool, having learned nothing from overleveraged derivatives gone wild.  As one commentator stated, "this will end very badly."

...there are no 'traders' at all, just 'synthetic traders' immersed in 'continuous risk management' with no 'exchange trading' or 'position management' costs or risks. Employing 'commercially prudent leverage' within 'continuous risk management',...
Where have we heard this before?  Whoever buys these structured financial vehicles has got to the dumbest nitwit of the 3rd order--or possesses a PhD in Economics from Princeton.

ECB's Weber Says Europe's Rescue Fund Could Be Increased If More Needed

As Jim Sinclair points out repeatedly, expect QE to infinity in the Euro zone and here in the States.

European Central Bank council member Axel Weber said governments can increase the size of the European Union-led bailout fund if necessary to restore confidence in the euro.
“Seven hundred and fifty billion should be enough to assure the markets,” Weber said at the German embassy in Paris late yesterday. “If not, it will have to be increased.”

Russia buys Canadian dollars, may add Australian dollar

Russia has reportedly added the Canadian dollar to the basket of currencies that comprise its international foreign-exchange reserves and indicated the Australian dollar will likely be the next addition.

Ulyukayev reportedly said Russia plans to increase the size of its Canadian dollar holdings in coming months as part of changes to its reserve holdings, also made up of the U.S. dollars, euros, British pounds, and Japanese yen. 

Ulyukayev also said the Russia central bank is still considering whether it should add the Australia dollar to its reserves’ holding, reaffirming statements earlier this year that it may add the commodity-backed currency as it diversifies away from the U.S. dollar.

Hungary Follows Argentina in Pension-Fund Ultimatum, `Nightmare' for Some

This is a real live example of what happens when underfunded pensions become nationalized.  This article also depicts other eastern EU countries' state pension funds are severely underfunded.

Hungary is giving its citizens an ultimatum: move your private-pension fund assets to the state or lose your state pension.

Thursday, November 25, 2010

The Euro game is up!

And apparently, so will the financial games of the rest of the developed world.

Wednesday, November 24, 2010

How hedge funds have profitted from QE

With the Fed and the Euro Central Bank applying QE, excess liquidity has to flow somewhere, and that somewhere is emerging countries with strong economies, sound currencies and trade surpluses.  This capital flow is causing price inflation, forcing countries like Brazil and China to impose price controls, which always ultimately fail.   But they have to do something to choke off the hot money.

Meanwhile, the savvy hedge fund managers (even the ones looking over their shoulders at the FBI) are buying emerging market equities and commodities, and plowing their profits into buying credit default swaps on European debt, profiting on sovereign debt crises in Greece, Ireland, Portugal, and Spain.  As the prospects for sovereign debt default increases, the CDS insuring said default appreciates in value.  In other words, these bond speculators are betting on these countries defaulting on their debt obligations.

These so-called bond vigilantes have no conscience:  when they smell blood, they drive up yields on these sovereign bonds, making it harder for these countries to service their debts, and practically ensuring a default.  Of course, the respective government officials will blame the speculators for driving their countries into the ground, but they conveniently ignore the fact that it was the government that recklessly spent money they didn't have, and hence, attracted the bond vultures in the first place.

The problem intensifies when the debt contagion spreads to Italy, France, and eventually Germany, the last stronghold in the Euro community.  The UK, Japan, and the US will not be far behind.

The day the dollar died

China, Russia quit dollar

I wonder why this wasn't reported by US media outlets.

St. Petersburg, Russia - China and Russia have decided to renounce the US dollar and resort to using their own currencies for bilateral trade, Premier Wen Jiabao and his Russian counterpart Vladimir Putin announced late on Tuesday.

Chinese experts said the move reflected closer relations between Beijing and Moscow and is not aimed at challenging the dollar, but to protect their domestic economies.
"About trade settlement, we have decided to use our own currencies," Putin said at a joint news conference with Wen in St. Petersburg. 

The two countries were accustomed to using other currencies, especially the dollar, for bilateral trade. Since the financial crisis, however, high-ranking officials on both sides began to explore other possibilities.
Sun Zhuangzhi, a senior researcher in Central Asian studies at the Chinese Academy of Social Sciences, said the new mode of trade settlement between China and Russia follows a global trend after the financial crisis exposed the faults of a dollar-dominated world financial system.

Pang Zhongying, who specializes in international politics at Renmin University of China, said the proposal is not challenging the dollar, but aimed at avoiding the risks the dollar represents.

Irish Rescue Accord Turns Investors' Focus to Spain, Portugal

Sovereign debt crises started in Iceland, Latvia, Hungary, Dubai, and reached the shores of Greece.  Ireland is the latest victim, with Portugal and Spain in the crosshairs of bond vigilantes.  For the forward-thinking, Italy and France will be next to catch the contagion.  Germany must be bewildered at the spreading collapse around them.  German taxpayers will force the break up of the Euro, in my opinion, because they are absorbing the brunt of the bailouts.  With IMF participating in bailouts, so are American taxpayers.

Even as EU leaders said Ireland’s bailout will stem contagion in the euro region, investors are turning their attention to Portugal, which hasn’t cut government spending and has barely grown for a decade. A rescue of Portugal may increase pressure on its high budget-deficit neighbor Spain, whose gross domestic product is almost twice the size of Portugal, Greece and Ireland combined.

After Portugal “the next question would be Spain and then Italy and then France and then the EU,” said Antonio Garcia Pascual, chief southern European economist at Barclays Capital in London. “Spain is a bit too big to be bailed out, the size of a rescue required would use up all the funds available and then you have Italy with contagion as well,” prompting “a situation where the euro itself is put into question,” he said.

QE in Europe

QE in Europe— the European sovereign debt situation
It is not surprising that Europe’s short embrace of austerity has been unsuccessful.  There is never a choice for austerity until all other alternatives have been exhausted.  History is replete with examples.  Why don’t some of these stock market commentators read some global economic history?  It is obvious now and has always been obvious that Europe will go for QE.  It does not matter what they say about austerity.  We have been advising investors to watch what they do.  They are bailing out Ireland; Portugal is right behind and will be followed by Spain, Italy, and even France in the future.  There is no solution that politicians will embrace other than QE [money printing] because a program of austerity means the end of their political careers.  They will put their careers above the national interest.
It is absurd to believe that the U.S. dollar will be a safe haven over the intermediate term
An even more absurd belief is the one that puts U.S. dollar and U.S. debt as a safe haven.  There is not any convincing economic evidence that the U.S. dollar is well managed, and there is no reason to believe that the dollar will rise in value.  In fact, it is the U.S. governments’ intention to devalue the dollar and to print money to avoid a deflation in the U.S.  Why do some global commentators see the dollar as a safe haven?  In our opinion, the only safe haven is precious metals, energy, food and other assets which will hedge against the inevitable inflation that the above policies create.

Tuesday, November 23, 2010

Is China Betting Against a U.S. Housing Recovery

It looks like the Chinese are backing off the US bond market buffet table, and investing in other assets.

FDA criminal investigations chief resigns

The head of the Food and Drug Administration's criminal investigation unit is stepping down, months after the latest round of criticism directed at his department by congressional investigators.

Earlier this year the Government Accountability Office said that the FDA must exercise more oversight over Vermillion's unit, which has operated largely independent of agency leadership, despite growing into a $41 million operation with 230 staffers over the last decade. In 2008, House and Senate Republicans questioned the priorities of the criminal investigations unit, specifically its focus on drug abuse cases instead of broader misconduct by large companies.

"I hope that with new leadership, this office will contribute more to the FDA's overall mission of protecting public safety," said Sen. Charles Grassley, R-Iowa, in a statement Tuesday evening. Grassley requested the GAO investigation of FDA's criminal investigation unit.

In September, Grassley brought to light additional complaints against Vermillion in a letter to the GAO.

Grassley said that an anonymous FDA whistleblower contacted his office complaining that the GAO's findings were "less than stellar" and did not include a number of questionable practices by Vermillion.
The whistleblower alleged that Vermillion directed that reports "be changed to sanitize them of derogatory information" about former colleagues from the Secret Service now working at the FDA.

Euro Weakens to Below $1.34 as Merkel Says Currency in `Serious' Situation

I like German Chancellor Angela Merkel.  She tells it like it is, no beating around the bush.

North Korea attacks South Korea

Uuuummmm, let's see, now the US has to park sitting-duck aircraft carriers next to Korea as well as in the Strait of Hormuz to protect oil shipping lanes in the Middle East (and against that great scourge of Iran).

Anybody see a problem with this?  We don't have the money to fight two wars in Iraq and Afghanistan (never mind Iran), and now the US will be stretched even thinner.  I'm referring to our military forces and the US taxpayer.

The solution?  Print more dollars.  Only this time, no one will protest, because well, we're so patriotic.

All markets crashed today:  especially stocks, Euro bonds, commodities, energy.  All except for gold and silver, despite a surging USDollar as investors rushed into "safe" havens.

Happy Thanksgiving everybody.

The biggest holder of US debt is now Ben Bernanke

...the Fed's official holdings of US Treasury securities now amount to $891.3 billion, which is higher than the second largest holder of US debt: China, which as of September 30 held $884 billion, and Japan, with $864 billion.

Finance 101:  when interest rates rise, bond prices decline.

Monday, November 22, 2010

Friday, November 19, 2010

Currency war brews

It's also Rickards vs. Roubini. Understand that while Roubini correctly called the financial crisis, so did Rickards. But Roubini also said gold was in bubble territory at $1100/oz, or thereabouts. Here's proof that he dismissed gold's prospects last year:

He may be considered a great economist by many, but that's also why the field of economics is called the "dismal science." The best ones are often wrong.

And the best ones can't even figure out the basic economic laws of supply and demand. Trillions of dollars are created with one computer keystroke by Blackhawk Ben Bernanke. Yet, it takes years of sweat, man, machine, and luck to produce an ounce of gold and silver. Paper currencies may be created out of thin air instantaneously, but precious metals are found and mined at an excruciatingly slow pace.

I'm glad Roubini isn't managing my money.

What could trip gold up?

Thursday, November 18, 2010

American t-shirt entrepreneurship at its best

China considers increase in gold reserve holdings

BOB RUBIN: "US In Terribly Dangerous Territory," Bond Market May Be Headed For "Implosion"

How ironic is it that former Treasury Secretary Rubin is issuing warnings of bond market implosions when he was one of the most instrumental in creating the bond market bubble in the first place, with his encouragement of levering up the economy via derivatives.

JPMorgan: Dollar to become world's weakest currency

This infers precious metals will be the strongest currency.

Official inflation statistics are understated in China

Mark-to-Make-Believe Perfumes Rotten Loans

Wednesday, November 17, 2010

CME raises precious metals margins requirements--again

In another desperate attempt to knock down the futures prices of gold and silver, the CME raised the margin requirements on gold and silver futures contracts.

I hope they raise the margin requirements to 100%, so there will be no leverage allowed. Although that would bankrupt the GLD and SLV ETF's, which are not 100% backed by physical inventory.

The more they play the price suppression game, the tighter the noose around their own necks. Buy physical.

De-facto unemployment rate

Hilarious parody of Fed Chairman Bernanke

Does QE really stimulate economic activity?

The effects of rising cotton prices

Wednesday, November 10, 2010

Paul Krugman gives up

Asian buyers have silver shorts checkmated

As described previously, it's a battle between the paper short sellers and the physical buyers. Eventually, physical bullion inventory dissipates, and the shorts will get trampled.

Pentagon can't explain apparent mystery plume off California coast

"Why the government is so badly organized that they can't get somebody out there to explain it and make this story go away ... I think that's the real story," Pike added. "I mean, it's insane that with all the money we are spending, all these technically competent people, that they can't get somebody out there to explain what is incredibly obvious."

When has the Pentagon not been able to explain flight-based objects? Perhaps it was that Daylight Savings Time thing.

Tuesday, November 9, 2010

CME Group Announces Money and Margin Requirement Increases

This is a good read on the dangers of trading in markets.

Three's company: silver margin change,_Silver_Margin_Change.html

This is a pointed reminder to the readers and listeners of King World News and something we have discussed before. Most markets consist of two parties, the buyer and the seller. But in futures markets there's a third party in every trade which is the exchange and more specifically the rule making bodies and margin setting panels on each exchange. They act not in the best interests of buyers or sellers but in the best interests of the exchange itself and its statutory duty to maintain orderly markets.

Invariably the parties disadvantaged by these moves complain that the exchange is "changing the rules in the middle of the game". That's a naive and pointless perspective. The fact is that the ability to change the rule is itself a rule. The exchange is not changing the rules, they are just utilizing an alternate set of rules that are already in place. Traders should stop complaining and read the rule book. It's all there.

What is more intriguing is what motivates the exchange officials to use these rules? Is it truly a disorderly market (the usual reason) or is it part of a larger coordinated effort involving Federal regulators and policymakers to do whatever it takes to push up prices of risky assets such as housing, stocks and junk bonds and push down prices of safe-harbor assets such as gold and silver?

The point is, when buyers and sellers transact in futures markets, they're never alone. Exchange monitors are always looking over your shoulder. Never ignore the power of the exchanges and regulators and always remember they will use this power when it suits them, not you.

Increase in margin requirements cause silver prices to tank

Of course, only margin requirements for non-member speculators were raised, while member firms' margin requirements were not. Gee, while some members are accused of rigging the game, the CME decides to punish the non-members. How's that for justice?

Competitive devaluation: friends bickering

Even our "friendliest" trading partners get it. Our not-so-friendly partners have understood it for years. Time for US leaders to get it.

"Don't Panic" - Blythe Masters, JPMorgan head of commodities

"Don't Panic. No one's going to get screwed." declared Blythe Masters, JPMorgan Chase's head of commodities.

Given JPMorgan is allegedly the biggest short in the LMBA and COMEX silver markets--while silver prices are soaring, she has every reason to panic. Oh, and add in the mounting lawsuits against JPMorgan for manipulation of silver prices, and Blythe herself may be out of a job soon. Perhaps she can hang on until the end of the year to ensure collection of her million-dollar bonuses.