Monday, February 28, 2011

Silver as an asset class

There are approximately165,600 tons (5.324 billion ounces) of gold above ground.  Priced at $1400 per ounce, the existing gold above ground is worth $7.5 trillion.

The market capitalization of Microsoft is $225 billion.

The market capitalization of Apple is $325 billion.

The market capitalization of ExxonMobil is $425 billion.

Equities worldwide are roughly $50 trillion.
US debt and unfunded liabilities total over $100 trillion, despite much lower figures reported by the mainstream media.

The global derivatives market is well over $1 quadrillion.

There are roughly 900 millions ounces of silver above ground as of late 2010, of which 490 million ounces are in ETF vaults.  At today's price of $34 per ounce, all the existing silver in the world is worth $30.6 billion.

It won't take much to move the needle on silver.

CNBC On The Case For $130 Silver

JPMorgan Fighting 10,000 Lawsuits

Race To Undo The Cure

This is an expose on miscreants within the media, the FDA, the medical community, and hedge funds.

Marc Faber: "I Think We Are All Doomed"
"I think we are all doomed. I think what will happen is that we are in the midst of a kind of a crack-up boom that is not sustainable, that eventually the economy will deteriorate, that there will be more money-printing, and then you have inflation, and a poor economy, an extreme form of stagflation, and, eventually, in that situation, countries go to war, and, as a whole, derivatives, the market, and everything will collapse, and like a computer when it crashes, you will have to reboot it."

Saturday, February 26, 2011

Lewis Lehrman on a Modernized Gold Standard

Thanks to Kitty for finding this video.

Speak Up and Be Heard

Will AIG Implosion 2.0 Lead To QE 3.0?

Here we go again with AIG.
"American International Group Inc., the bailed-out insurer, said it faces increased risk of losses on its $46.6 billion municipal bond portfolio and that defaults could pressure the company’s liquidity."
The value of our investment portfolio is exposed to the creditworthiness of state and municipal governments. We hold a large portfolio of state and municipal bonds ($46.6 billion at December 31, 2010), primarily in Chartis, and, because of the budget deficits that most states and many municipalities are continuing to incur in the current economic environment, the risks associated with this portfolio have increased. Negative publicity surrounding certain states and municipal issues has negatively affected the value of our portfolio and reduced the liquidity in the state and municipal bond market. Defaults, or the prospect of imminent defaults, by the issuers of state and municipal bonds could cause our portfolio to decline in value and significantly reduce the portfolio’s liquidity, which could also adversely affect AIG Parent’s liquidity if AIG Parent then needed, or was required by its capital maintenance agreements, to provide additional capital support to the insurance subsidiaries holding the affected state and municipal bonds. As with our fixed income security portfolio generally, rising interest rates would also negatively affect the value of our portfolio of state and municipal bonds and could make those instruments more difficult to sell. A decline in the liquidity or market value of these instruments, which are carried at fair value for statutory purposes, could also result in a decline in the Chartis entities’ capital ratios and, in turn, require AIG Parent to provide additional capital to those entities.

Wednesday, February 23, 2011

Eric Sprott: "There Is No More Silver Left"

Israeli tanks strike Gaza after mortar attack

Crude oil is about to jump another $10 a barrel.

Geithner Says Not To Worry About Surging Oil Prices: "Central Banks Have A Lot Of Experience In Managing These Things"

No problem!  Famous last words.

And Wow: Fed's Hoenig Says United States Has "Deeply Undermined Free-Market Capitalism"

Too bad Hoenig is stepping down as Kansas City Fed governor soon.

The Fed mutiny has arrived:
And the last one:
Step. away. from. the. bathtub. Tom.
In other news, someone at the top finally tells the truth about this shitshow of a banana republic.

Speaking of the Denver Mint...

I encourage everyone to visit a US Mint.  The San Francisco mint is closed to the public, but the Denver mint offers guided tours to the public.  Reserving a space is recommended to ensure a slot.

As readers of this and other blogs now understand, central bankers, government monetary officials, academia, the financial industry, and the media are notorious anti-gold advocates.  High commodities prices, especially precious metals, thwart the advocacy of the USDollar as the global reserve currency.  Our whole financial system is USDollar-based, and has been since 1945 from Bretton-Woods.

But other sovereign nations are getting increasingly concerned by the profligate printing of the USDollar, so they are diversifying away from USDollar-denominated assets, selling US Treasuries, and buying gold, for instance.  They deservedly are concerned about a bloated, insolvent country issuing more debt.

But the US government and its cohorts must obfuscate these monetary shenanigans, and they also realize that rising prices in the precious metals sector are the canaries in the coal mine of financial distress.  That's why it's in government's best interests to talk gold and silver down, with complicity from economists, pundits and the media.

Which dovetails back to why I recommend readers visit a US Mint if they can.  Upon first entering the welcoming room in the Denver mint to start the tour are two display cases to your left.  The first one chronicles the history of gold.  The next one chronicles silver.

Anybody see the irony in this?  Presidential administrations, central bankers, US Treasury officials, Ivy League economists, Wall Street financial titans, and the financial press have all minimized, dismissed, trivialized, and even mocked precious metals as an investment class, in their vested interest to maintain the status quo of the USDollar as a reserve currency.  They simultaneously proclaim gold is a "barbaric relic."  Gold bugs are lunatics, etc., as the groupthink goes.

Yet, as clear as day, the first thing that grabs you when you start the tour at the Denver mint, are the display cases on the history of gold and silver.  "Do as I do, not as I say..."

The  Establishment's mandate is protect the veneer of the USDollar as a credible medium of exchange and store of value.  While it is true that USDollars are a medium of exchange, since the US Federal Reserve Bank was created in 1913, the USDollar has been a terrible store of value.  It has lost 90 - 99% of its purchasing power since then, depending on which inflation calculations one uses (the official government CPI statistics are notoriously understated).  And that dollar debasing accelerated after 1971 when President Nixon took us off the gold standard, opening the door for central bankers worldwide to recklessly print currency.  Thanks to the ravages of inflation, does anybody still think the cost of healthcare and college tuition has declined over the years?

Former Fed Chairman Greenspan took us to unprecedented heights in debt, and current Fed Chairman Bernanke has subsequently expanded our nation's balance sheet exponentially.  They are trying to solve a huge debt problem by issuing astronomically more debt.  It's insane.  Former US Treasury Secretary Robert Rubin under President Clinton declared the US would pursue a strong dollar policy.  Please...

That's why the financial industry is expert at creating and hoarding Federal Reserve Notes (e.g. USDollars), and why CPA's are expert at keeping as much of them as they can.  But Federal Reserve Notes are just that:  notes, which is essentially debt.  After all, "this note is legal tender for all debts, public and private" and backed only by the "full faith and credit of the U.S. government"—the government's ability to levy taxes to pay its debts.

It has no intrinsic value, and is only worth as much as the confidence in the solvency of the issuing sovereign nation.  Due to America's overconsumption and the overexpansion of our debt levels, the world is losing confidence in the USDollar.

Yet, the government doesn't want too many Americans to own gold or silver.  Why?  Because that means you are outside the all-encompassing financial system.  You are no longer depending on them financially--no longer a counterparty.

I will leave the reader to connect the dots.  If this sounds esoteric, and in case I'm being too vague, I will provide one quote:

"Gold is money and nothing else." - JPMorgan, 1912

Note the name--and the date.  Neither are coincidental.

Contango in gold vs. backwardation in silver

I've written several blogs on why backwardation indicates physical spot shortage and is bullish for a commodity, so readers can do a search for "backwardation" to find the previous blogs.  Also, previous blogs may have described the contango in oil markets, and how speculators were taking delivery of barrels of crude oil, and storing them in supertankers in order to take advantage of higher prices on later delivery months.  That strategy only made sense if the contango was wide enough to justify the inventory costs (as well as opportunity cost).

But since a picture is worth a thousand words, here are a couple charts on the contango in gold and backwardation in silver.  A contango is normal because it's plausible that futures prices are higher than the spot price, as markets discount in the cost of owning inventory, namely storage, insurance, and security.

By contrast, backwardation indicates an immediate physical shortage, as sellers scramble to find inventory to deliver to buyers, and are forced to bid up prices once they do find supply.  My ad hoc surveys and visits to coin dealers and the US Mint in Denver confirms the tightness in the physical silver market.

Click on images to enlarge.  Credit goes to for the charts.

Counterfeit coins from China turning up in Wash. state

I witnessed some fake gold Chinese panda coins last year.  Even the numismatist who owned them was fooled.  As always, caveat emptor.

Rich farmers now buy silver bars, not jewellery

Nomura Predicts $220 Oil If Just Libya, Algeria Cut Output

Home prices may fall by up to 25 percent: economist
"My intuition rates the probability of another 15, 20, even 25 percent real home price decline as substantial. That's not a forecast but it's a substantial risk I think," Shiller told reporters on a conference call.

U.S. single-family home prices fell for the sixth month in a row in December, bringing them closer to the low seen in 2009, according to the S&P/Case Shiller composite index of 20 metropolitan areas.

Tuesday, February 22, 2011

Embry - Short Squeeze in Silver, Manipulators Getting Overrun
“There is a tremendous bid in the gold and silver markets at a time when the market is tight in these metals and there is a concentrated short position in both gold and silver.  The Middle-East crisis has come out of left field and this is creating additional bidding in the precious metals markets.  To be bearish gold and silver is to be bullish paper currencies and in view of QE and sovereign risks, that is a terrible bet.”

When asked about silver Embry remarked, “Eric Sprott and I have always contended that in silver if you get some serious physical buying in the absence of above ground inventories that are available for sale, that the paper manipulators would basically get overrun.  Right now we are in the process seeing that unfolding.

I definitely think a short squeeze is underway in silver.  The evidence will be if the price of silver moves sharply higher from here.  I think you will know if you have a real short squeeze if this thing starts piling on gains in the next week.

The price of silver has been held back for so long and this is not something that can be cured with existing mine production because mine production has been sticky.  People are coming after silver as a monetary asset because it’s so much cheaper than gold and this is creating an explosive situation.”

No links, just straight talk

Three years ago, when I started this blog, my macro thoughts and ideas on the economy and global finance were largely ignored and considered extreme (to the shiftless, my thoughts are still considered extreme).  Hence, my blog posts were long and esoteric to most.  As events have unfolded, and as my accompanying thoughts are no longer considered on the fringe, I have been able to cover more ground by merely providing links to articles--sometimes even from mainstream media outlets.

Having said that, most are still confused, so I will try to distill the main points to the best of my ability.

1) individuals, families, small businesses, local governments, states, the Federal government, and most developed countries still have huge debt problems which have not been addressed structurally, despite post-2008 "financial regulatory reforms".
2) emerging countries still enjoy rapid GDP growth, but clouds are lining up on the horizon for them too, as our interconnected global economy is USDollar-based, and the reserve currency is being debauched by a reckless Fed and corrupt politicians.
3) the deflation/inflation debate is over.  Inflation has won--and will win, perhaps morphing into something far worse than a deflationary contraction.  Hyperinflation can collapse sovereign nations overnight.
4) falling US home prices and stagnant wages do not indicate deflation.  Home prices are falling because real estate is largely purchased using credit.  The credit bubble has collapsed--therefore, assets normally purchased on credit (e.g. mortgages) will experience price declines due to lack of available credit.
5) on the other hand, consumable items are soaring in price due to the inflationary monetary policies of the Fed and US Treasury--they are printing currency out of thin air.
6) food and energy inflation is why the citizens are rioting in underdeveloped countries in the Middle East and Africa.  Sure, they are also protesting oppressive governments, but that alone is not why people take it to the streets.  They risk life and limb being in the line of fire because they cannot feed their families.
7) food accounts for approximately 10% of US household budgets.  In poor countries, 75% of their household budget may be allocated toward food.  When Americans see our food and energy bills rise 20%, we will complain to our neighbors.  When Egyptians see their food costs rise 20%, they are wiped out and starving.
8) the "it can't happen here syndrome" is a fallacy.  It has already happened here in the 1970's during the Iranian oil embargoes, when we had gas lines, and even/odd days rationing.  With rising energy prices, all sectors of our economy are adversely impacted, because our efficient supply-chain infrastructure relies on cheap oil.
9) lacking cheap energy sources, mild inflation can turn into high inflation overnight, irrespective of the Fed unwinding its easy monetary policies.  Unlike the early 80's, when former Fed Chairman Volcker derailed inflation by raising short-term interest rates to 21%, current Fed Chairman Bernanke will be unable to raise interest rates BECAUSE HE WOULD BANKRUPT THE UNITED STATES OVERNIGHT BY DOING SO.  Deficits and debt do matter, Mr. Chairman.
10) having said that, expect a stagnant economy (despite media cheerleading a recovery), high structural unemployment, rising inflation, more quantitative easing in attempts to stimulate the economy, and the continued deterioration of the USDollar.
11) speaking of inflation and unemployment, both measures are understated by official US government statistics, in order to soothe the naive and trusting masses.
12) the stagflation will be a precursor to the final collapse of the USDollar--probably when it is officially removed as the global reserve currency.  Hyperinflation will result, as will a drastic reduction in US consumer purchasing power--and a precipitous drop in our standard of living.

I will leave the reader to formulate their own investment thesis based on the aforementioned scenarios, but understand that central bankers and governments will do all they can to surreptitiously manipulate markets and obfuscate the fact that they are destroying their currencies, destabilizing sovereign economies, and impoverishing billions of the citizen-class.  They will feel the pressure to print more money to fill the gaping holes of insolvency, and they will justify it as stimulative and necessary bailouts.  They are correct short-term, but longer-term, they are ensuring the financial collapse of the world as we know it.

Fecks, Lies and Video Tape [or the Cabal Channel]

Mohamed El-Erian Says We Can Not Assume The Dollar Will Retain Its Reserve Currency Status

Even the co-head of PIMCO, the world's largest bond fund, is issuing a warning for the USDollar losing its global reserve currency status.  'Bout time...
"It is a warning shot to America that we cannot simply assume flight to quality, flight to safety. That people are starting to worry about the fiscal situation in the U.S., worrying about the level of debt and what they're hearing about states and municipalities. I would take this as a warning shot that we cannot assume that we will maintain the standing of the reserve currency as we have in the past." - Mohamed El-Erian, PIMCO CIO

Monday, February 21, 2011

Federal, state and local debt hits post-WWII levels

America is broke

Former LA Mayor: 90% of cities and states to go bankrupt

Oil Goes Berserk In Electronic Trading As WTI Passes $98

Considering markets in the US were closed due to President's Day, a lot of fireworks sure occurred in overseas markets.  Kaboom!

What is a commercial signal failure?

Silver Crosses $34

I recall many experts last year declaring silver was a bubble bursting when it crossed $15.

Here was my untampered, recorded prediction last year (in case there is any doubt among new readers of this blog--long-time readers know I've been pounding the table on precious metals generally, and silver specifically):

In hindsight, what appeared to be a very aggressive forecast at the time turned out extremely conservative.

See disclaimers in the side bar.

Disclosure:  long physical silver and mining equities.

As BP Prepares To Evacuate Staff From A Burning Libya, Commodities Are Exploding

Sunday, February 20, 2011

Wake up, Americans. Your economic dream is a nightmare

I wouldn't say nobody sees this coming.  Some of us have been warning about this impending financial crisis for years.

Saturday, February 19, 2011

A Frightening Satellite Tour Of America's Foreclosure Wasteland

As Speculative Bullish Bets Surge, Is Rice The Next Silver (And Manipulated In Kind?)

Meet The Objects Tunisia's Ben Ali Did Not Have Time To Steal

Short Squeeeeeeze in silver

Click on image to enlarge.

This is what the shorts look like when they are being squeezed.

If The CME Hiked Gold And Silver Margins By 50% And Nobody Cared, Did A Tree Fall In The Precious Metal Price Suppression Scheme?

Exchanges raising margin requirements usually tank the markets in question.  No such luck for the silver and gold shorts.

Now that JPM is out of the picture, the last recourse of gold and silver price suppression is exchange margin hikes. Or was. The CME has announced, that as of close today, it will hike various gold and silver (and other metal) contract initial and maintenance margins by 50%.... And nobody cared. This means the CBs are well on their way to losing the imposed gold standard wars.

Silver rises to 30-year high as mints start to ration coins

Silver jumped to a 30-year high amid record levels of investor buying that has drained mints of silver coins.

The price of the precious metal hit $31.37 a troy ounce on Thursday, up 16 per cent since mid-January and the highest since March 1980. The world’s leading mints have reported record sales of silver coins in January and some, including the Royal Canadian Mint and Austrian Mint, have had to ration sales.
“We have sold everything we can produce in silver and have demand for at least twice that volume,” said David Madge, head of bullion sales at the Royal Canadian Mint, which produces the silver Maple Leaf coin. Silver coin sales at the US Mint and the Austrian Mint also hit record levels in January.

The surge of buying has both boosted silver prices and helped push the market into “backwardation” – an unusual condition in which forward prices are lower than prices for immediate delivery.

Friday, February 18, 2011

MIT "Billion Price Project" Confirms US Prices Surging (In Case There Was Any Confusion)

Protests for Week of 02/18/2011,-39.902344&spn=127.694932,270.527344&z=3

A letter to Ben Bernanke

Prepare To Give Up All Private Data For Any Gold Purchase Over $100

By the way, Executive Order 6102 referenced in the article was FDR's creation to confiscate all private citizens' gold in 1933...all except your gold wedding band.

The time to shut down the blog is coming.  Instead, I will blog about Justin Bieber.

Obama Administration calls for 5% royalty on gross proceeds of mines

Great--now the Obama Administration is going after one of the last profitable industries left by levying a 5% tax on the gross proceeds (which is more painful than a tax on net profits) of mining companies.  Why don't they just tax all companies 100%, kill all job-creating enterprises, and just call it a day?

Guess what, geniuses?  This will only drive miners out of the US--or out of business.  Guess what that does to the price of the natural resource?  Folks, this country's productive capacity is toast.  Sell your SUV and learn how to ride a bike again.

Federal deficit on track for a record this fiscal year

Last year, the Obama Administration and the CBO projected the budget deficit to decline.  Instead, it increased to a record amount (which I predicted).  They again are forecasting lower deficits going forward.  Anybody want to take that bet?

Why our government leaders and central bankers have any credibility left is one of life's greatest mysteries.

Allstate sues JPMorgan over mortgage debt losses

We'll see who has more juice:  the plaintiff insurers or the investment bank defendants.  Or at least who has better lawyers.

Special report: China flexed its muscles using U.S. Treasuries

Thanks to Kitty for finding this article on China and their hesitancy on long-dated US Treasury bonds.

Thursday, February 17, 2011


Wisconsin Gov Puts National Guard On Alert After Implementing Emergency Budget Measures

Is this Greece?  Ireland? Egypt?  No, it is Madison, Wisconsin.  Expect to see  more of this domestically as "austerity" measures are implemented in an attempt to resolve budget deficits.

Tips to Protect Yourself From a Worthless Dollar: Porter Stansberry;_ylt=AuzGKaXFQwEevO6RtEr7kRZk7ot4;_ylu=X3oDMTE3NHVzdG5pBHBvcwMxOQRzZWMDYXJ0aWNsZUxpc3QEc2xrA3RpcHN0b3Byb3RlYw--?tickers=gld,xlf,skf,^dji,^gspc,slv

"The End of America”: Porter Stansberry Sees the Future ... And It's Grim;_ylt=AsvyEUcN1VlLwBBv231UsONk7ot4;_ylu=X3oDMTE3NnY0cGY0BHBvcwM2MQRzZWMDYXJ0aWNsZUxpc3QEc2xrA3RoZWVuZG9mYW1lcg--?tickers=^DJI,^GSPC,GDX,MOO,GLD,UUP,DBA

Matt Taibbi's Latest: " Why Isn't Wall Street In Jail?"

Dr. Anthony Atala on growing organs

What Is Wrong With The U.S. Economy?

Gold bugs about to get squashed

This is more anti-gold advice from mainstream media, the same ones who have been wrong for 10 years running.

Wednesday, February 16, 2011

Tuesday, February 15, 2011

Per Declassified Testimony, Bernanke Blames Blogosphere For Itemizing Disastrous Consequences Of His Actions, Says Goldman Is A Utility

Paul Farrell: "Fed Dictator Bernanke Needs To Be Toppled"

Obama's Budget is a Fantastic Comedy

World Bank President Zoellick Says Surging Food Prices Have Pushed 44 Million People Into Extreme Poverty

Part 2: Economy Flight 666 - Our One-Way Ticket to Zimbabwe

Silver is Approaching Stage Two of its Bull Market

Thanks to Dick for finding this article on the stages of the gold and silver.

Tuesday, February 8, 2011

The Interesting History of Income Tax," by William J. Federer

Thanks to Brian Stone for finding this:

By William J. Federer
© 2011

Editor's note: The following quotes are published in the book, "The Interesting History of Income Tax," by William J. Federer (Amerisearch, Inc., P.O. Box 20163, St. Louis, MO 63123, 1-888-USA-WORD)

"It is a paradoxical truth that tax rates are too high and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now ... Cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus."
– John F. Kennedy, Nov. 20, 1962, president's news conference

"Lower rates of taxation will stimulate economic activity and so raise the levels of personal and corporate income as to yield within a few years an increased – not a reduced – flow of revenues to the federal government."
– John F. Kennedy, Jan. 17, 1963, annual budget message to the Congress, fiscal year 1964
"In today's economy, fiscal prudence and responsibility call for tax reduction even if it temporarily enlarges the federal deficit – why reducing taxes is the best way open to us to increase revenues."
– John F. Kennedy, Jan. 21, 1963, annual message to the Congress: "The Economic Report Of The President"

"It is no contradiction – the most important single thing we can do to stimulate investment in today's economy is to raise consumption by major reduction of individual income tax rates."
– John F. Kennedy, Jan. 21, 1963, annual message to the Congress: "The Economic Report Of The President"

"Our tax system still siphons out of the private economy too large a share of personal and business purchasing power and reduces the incentive for risk, investment and effort – thereby aborting our recoveries and stifling our national growth rate."
– John F. Kennedy, Jan. 24, 1963, message to Congress on tax reduction and reform, House Doc. 43, 88th Congress, 1st Session.

"A tax cut means higher family income and higher business profits and a balanced federal budget. Every taxpayer and his family will have more money left over after taxes for a new car, a new home, new conveniences, education and investment. Every businessman can keep a higher percentage of his profits in his cash register or put it to work expanding or improving his business, and as the national income grows, the federal government will ultimately end up with more revenues."
– John F. Kennedy, Sept. 18, 1963, radio and television address to the nation on tax-reduction bill

"I have asked the secretary of the treasury to report by April 1 on whether present tax laws may be stimulating in undue amounts the flow of American capital to the industrial countries abroad through special preferential treatment."
– John F. Kennedy, Feb. 6, 1961, message to Congress on gold and the balalnce of payments deficit

"In those countries where income taxes are lower than in the United States, the ability to defer the payment of U.S. tax by retaining income in the subsidiary companies provides a tax advantage for companies operating through overseas subsidiaries that is not available to companies operating solely in the United States. Many American investors properly made use of this deferral in the conduct of their foreign investment."
– John F. Kennedy, April 20, 1961, message to Congress on taxation

"Our present tax system ... exerts too heavy a drag on growth ... It reduces the financial incentives for personal effort, investment, and risk-taking ... The present tax load ... distorts economic judgments and channels an undue amount of energy into efforts to avoid tax liabilities."
– John F. Kennedy, Nov. 20, 1962, press conference

"The present tax codes ... inhibit the mobility and formation of capital, add complexities and inequities which undermine the morale of the taxpayer, and make tax avoidance rather than market factors a prime consideration in too many economic decisions."
– John F. Kennedy, Jan. 23, 1963, special message to Congress on tax reduction and reform

"In short, it is a paradoxical truth that ... the soundest way to raise the revenues in the long run is to cut the rates now. The experience of a number of European countries and Japan have borne this out. This country's own experience with tax reduction in 1954 has borne this out. And the reason is that only full employment can balance the budget, and tax reduction can pave the way to that employment. The purpose of cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus."
– John F. Kennedy, Nov. 20, 1962, news conference

"The largest single barrier to full employment of our manpower and resources and to a higher rate of economic growth is the unrealistically heavy drag of federal income taxes on private purchasing power, initiative and incentive."
– John F. Kennedy, Jan. 24, 1963, special message to Congress on tax reduction and reform

"Expansion and modernization of the nation's productive plant is essential to accelerate economic growth and to improve the international competitive position of American industry ... An early stimulus to business investment will promote recovery and increase employment."
– John F. Kennedy, Feb. 2, 1961, message on economic recovery

"We must start now to provide additional stimulus to the modernization of American industrial plants ... I shall propose to the Congress a new tax incentive for businesses to expand their normal investment in plant and equipment."
– John F. Kennedy, Feb. 13, 1961, National Industrial Conference Board

"A bill will be presented to the Congress for action next year. It will include an across-the-board, top-to-bottom cut in both corporate and personal income taxes. It will include long-needed tax reform that logic and equity demand ... The billions of dollars this bill will place in the hands of the consumer and our businessmen will have both immediate and permanent benefits to our economy. Every dollar released from taxation that is spent or invested will help create a new job and a new salary. And these new jobs and new salaries can create other jobs and other salaries and more customers and more growth for an expanding American economy."
– John F. Kennedy, Aug. 13, 1962, radio and television report on the state of the national economy

"This administration pledged itself last summer to an across-the-board, top-to-bottom cut in personal and corporate income taxes ... Next year's tax bill should reduce personal as well as corporate income taxes, for those in the lower brackets, who are certain to spend their additional take-home pay, and for those in the middle and upper brackets, who can thereby be encouraged to undertake additional efforts and enabled to invest more capital ... I am confident that the enactment of the right bill next year will in due course increase our gross national product by several times the amount of taxes actually cut."
– John F. Kennedy, Nov. 20, 1962, news conference

How inflation is turning breakfast into a luxury item

I told you folks I wasn't a conspiracy theorist.  By the way, this article is from Fortune/CNN, not a fringe blogger.

Egypt's unrest may have roots in food prices, U.S. Fed policy

This is another article submission by Kitty, and a theme I was pounding the table on last year.  Citizens don't take to the streets in response to an oppressive government.  They take to the streets because they are starving.

U.N. Food Agency Issues Warning on China Drought

Thanks to Kitty for finding this article.

Monday, February 7, 2011

Bank of England attempting inflation 'confidence trick', says former MPC member Kate Barker
Ms Barker, who served nine years on the Bank's Monetary Policy Committee (MPC), said rising prices may have already damaged the Bank's credibility and threaten a "more profound" loss of faith among the public.

A loss of credibility is dangerous as people begin to assume inflation will remain over target and so put up wages and prices accordingly, resulting in a self-perpetuating spiral of rising prices.

"If you believe inflation is going to come back to 2pc, you are going to behave as if that's going to happen when you're setting wages and setting prices," said Ms Barker.

"Once you start to think this monetary policy isn't all that it's cracked up to be, and things need to be changed in some way, then things inevitably become more difficult."

She added: "It's like a confidence trick."

Bullion Banks Get Smaller in COMEX Silver Futures

JPMorgan takes gold collateral, inflation in focus

J.P. Morgan Chase said on Monday it would accept physical gold as collateral with its counterparties as a growing number of clients look to use bullion as a hedge against inflation.

Good luck on JPMorgan returning clients' bullion when the proverbial crap hits the fan.

Investors' $102 Billion Precious Metals Wager Shows Bull Market Is Intact

Thanks to my friend Raj for this find:

Gold This Decade

Gold Is The Money Of Kings, And Debt Is The Money Of Slaves.

Silver Breaks its Golden Shackles
The stunning revelation from the data analysis was that if on any day I knew what the price of gold was I would be able to calculate the silver price from the equation of the relationship! How is that possible in a free market? It simply is not possible and so the conclusion is that silver is not in a free market but is manipulated to move algorithmically with the price of gold.

Since September 2010 silver has broken its golden shackles. The algorithmic trading that kept the price of silver subdued for seven years has been completely annihilated.

On Friday silver closed in complete backwardation on the Comex. Spot silver closed at $29.075/oz while FEB 2011 closed at $29.064/oz and DEC 2015 closed at $29.026/oz. I believe this is the first time in history that this has happened. Silver traded in backwardation between the spot price and futures contract up to one year out during the blatantly manipulative precious metals bashing of January, but now the entire futures structure is in backwardation. This is a sure sign there are shortages of silver because it means that buyers will pay a premium for silver delivered sooner rather than later.

Signs of shortages have also been apparent from a shrinking silver inventory on the Comex in the face of rising prices. The registered inventory stands at a paltry 43 Mozs. In addition there is lots of anecdotal evidence that there are tight supplies everywhere. There are reports of refineries refusing to take new orders due to insufficient silver feedstock.

News out of China recently showed that China's net imports of silver quadrupled in 2010 to 3,500 tonnes (112 Million ozs). China has traditionally been a silver exporter. For example, in 2005 China made net exports of 3,000 tonnes of silver.

The US mint reported last week a record month in silver eagle sales in January of 6.4 million ozs.

This update of my previous work adds more fuel to the fire that the dynamics of the silver market have dramatically changed. Because silver has been suppressed for so long we do not know what its free market price should be, but we are going to find out soon and I strongly suspect it will be many multiples of the current price.

Saturday, February 5, 2011

F.D.A. Declines to Approve Diet Drug
“It seems like the F.D.A. is heeding the lessons from the past,” said Dr. Sanjay Kaul, a cardiologist at Cedars-Sinai Medical Center in Los Angeles, who applauded the agency’s rejection of Contrave.

“The F.D.A. is trying to send a message to the pharmaceutical industry that repackaging old drugs is not the way to go,” said Dr. Kaul, who was a member of the advisory committee minority that voted against Contrave in December. “You’ve got to come up with some new innovative ways of addressing this objective.”
If true, why did Dr. Kaul want to approve Qnexa, Vivus' obesity drug, which combines phentermine and topiramate, while rejecting Arena's Lorcaserin, which is an innovative single agent?  Phentermine has been linked to adverse cardiovascular side effects, while extensive valvulopathy clinical trials revealed no statistically significant increased risk with Lorcaserin?

Berlusconi MP Caught Picking Out Hookers On iPad During No Confidence Vote

Peak Theories On Whether Gold Is On The Mend

Fed denies policy is causing food rises
Asset purchases by the US Federal Reserve do not cause rising food prices in countries such as Egypt, the central bank’s chairman Ben Bernanke said on Thursday.

“I think it’s entirely unfair to attribute excess demand pressures in emerging markets to US monetary policy, because emerging markets have all the tools they need to address excess demand in those countries,” he said.

Mr Bernanke’s comments are a firm retort to critics who argue that by driving down US interest rates with quantitative easing the Fed is pushing capital flows into commodities and emerging markets.

Name That Lie: Recent Fedspeak Soundbites

Ben Loses the Long End (of the bond yield curve)

Jim Rogers Tells CNBC To Change Its Name To CommoditesNBC, Sees Oil At $150, Is Short Nasdaq ETFs, Expects More Governments To Collapse

Classic Jim Rogers interview on CNBC:

U.S. Treasury urged to consider 100-year bond

This would be the ultimate sucker bet.  Tie up your money for 100 years by lending it to a bankrupt government.  No thanks.
Top Wall Street firms are urging the U.S. Treasury to create new products for American investors and have suggested an ultra-long bond with a maturity of 100 years, according to minutes from an advisory committee meeting released on Wednesday.

The Treasury's debt advisory panel, which includes executives from JPMorgan Chase (JPM.N) and Goldman Sachs (GS.N), recommended at a meeting on Tuesday that the government develop products for three different investor classes: banks, pension funds and insurers, and retail investors.

The new offerings would be a way to pump up domestic demand for the government's securities. Although around half of U.S. debt is held by domestic investors, heavy reliance on foreign creditors such as China, with just under $900 billion in U.S. Treasuries, is causing some concern in Washington.
Ya think?  Since foreign buyers are stepping away from the US Treasury bond market, now the big banks want to jam retail investors with worthless IOU's.  The hubris among the financial elite is remarkable.

China to raise gold, silver reserves in 2011

Governments stockpile food staples,dwp_uuid=a955630e-3603-11dc-ad42-0000779fd2ac.html#axzz1CqlD65y8

Governments across the developing world are stockpiling food staples in an attempt to contain panic buying, inflation and social unrest.But the hoarding is driving agricultural commodity prices even higher. The cost of wheat, the world’s most important staple, reached a fresh two-and-a-half-year high on Thursday, after countries from Algeria to Saudi Arabia announced extraordinary purchases.

Chinese Gold Demand Stuns London & Hong Kong Traders

Evidence QE 2.0 is not working

The Fed instituted QE 2.0, a plan to purchase $600 billion of US Treasury securities, in order to suppress interest rates and stimulate an economic recovery.  The bond market isn't behaving, as the vigilantes are coming to the realization that Bernanke's injection of liquidity is purely inflationary, which will dampen growth, as the USDollar is debased.  Hence, yields are rising, exacerbating our humongous debt problems.  His war on deflation will eventually create hyperinflation, in my opinion.
Click on image to enlarge.

See disclaimers in the side bar.

Disclosure:  no position in US Treasury bonds.

Thursday, February 3, 2011

Newmont Expands Nevada Growth Potential With Acquisition of Fronteer Gold

 Newmont Mining acquired Fronteer Gold at a 40% premium today.

See disclaimers in the side bar.

Disclosure:  exited shares of FRG today at $14.36 for a 600+% profit.

Wednesday, February 2, 2011

A Tale Of Outright Fraud From An Ex-Member Of Citi's Corporate Derivatives Team

Scotia Mocatta Sells Out Of All Silver Bars

Marc Faber Calls Bernanke A Liar, Thinks US Inflation Is Running Up To 8%, Believes Pakistan Will Fall Next

Fed passes China in Treasury holdings
The Federal Reserve has surpassed China as the leading holder of US Treasury securities even though it has yet to reach the halfway mark in its latest round of quantitative easing, according to official figures.

Based on weekly data released on Thursday, the New York Fed’s holdings of Treasuries in its System Open Market Account, known as Soma, total $1,108bn, made up of bills, notes, bonds and Treasury Inflation Protected Securities, or Tips.
According to the most recent US Treasury data on foreign holders of US government paper, China holds $896bn and Japan owns $877bn.

“By June [the Fed] will have accumulated some $1,600bn of Treasury securities, likely to be in the vicinity of China and Japan’s combined holdings,” said Richard Gilhooly, a strategist at TD Securities. “The New York Fed surpassed China in the past month as the largest holder of US Treasury securities,” he noted.

Japan downgrade: The beginning of the end?

Two years ago I was pounding the table about Japan circling the drain, and was labeled a doomsdayer.   Today, CNN and Fortune Magazine are reporting it.  That's about as mainstream as one can get.

One subtle clarification of the otherwise well-written article is in order.  The author mentions that owners of Japan government bonds (JGB) are the following:
Money manager Vitaliy Katsenelson and Devin Stewart, a senior director at the Japan Society in New York and a Carnegie Council Senior Fellow, agree with Bass. The way they see it, Japan has never meaningfully flirted with a loan default because it has always been able to borrow money from its own life insurance companies, pension funds, and banks.
While it is true that financial institutions are buyers of JGB, they are merely custodians.  The real owners are Japanese citizens who have had said JGB jammed down their throats by a corrupt government, enticing them to take on outsized risks by lending to a bankrupt nation in exchange for minuscule returns of 1% (or less, in some cases).

As noted in the article, the end game will not be pretty, as other developed countries will also encounter this demographic and fiscal problem--including the UK and the US.

CBO: Social Security to Run $45 Billion Deficit in 2011

Eric Sprott - Expect $50 Silver, Gold Possibly $2,150 by Spring

All 100 Ounce Silver Bars Will be Gone in a Matter of Days

Jim Rickards - BoE Governor is Right, We Are in a Depression