Thursday, March 31, 2011

Minneapolis Fed's Kocherlakota: "Fed Funds Rate May Need To Rise 75 bps By End Of 2011"

http://www.zerohedge.com/article/minneapolis-feds-kocherlakota-rate-may-need-rise-75-bps-end-2011

Lear Capital: Pay Attention and Gold May Pay You Back

http://www.zerohedge.com/article/lear-capital-pay-attention-and-gold-may-pay-you-back

Libya-Owned Bank Drew at Least $5 Billion From Fed

http://www.bloomberg.com/news/2011-03-31/libya-owned-arab-banking-corp-drew-at-least-5-billion-from-fed-in-crisis.html

That's nice to know that the Fed bailed out a Libyan bank--repeatedly--to the tune of $5 billion.

Predictions of Ben Bernanke being tried for treason don't seem so outrageous after all.  Congratulations to Fed Chairman Bernanke and President Obama for winning Time's Man of the Year award.  So did Adolf Hitler and Joseph Stalin, who had the ignominious achievement of winning it twice.

About that Nobel Peace Prize...

“Each time that I see Mr. Bernanke, and each time Mr. Tim Geithner opens his mouth, I feel like buying more gold and silver.”

http://www.commodityzen.com/2011/03/gold/each-time-that-i-see-mr-bernanke-and-each-time-mr-tim-geithner-opens-his-mouth-i-feel-like-buying-more-gold-and-silver/

Gross Echoes Buffett Saying Treasuries Have ‘Little Value’ on Debt, Dollar

It's about time Bill Gross is coming to his senses: bond prices are about to collapse, and simultaneously, yields will rise.  It's not arbitrary that the world's biggest bond investor is avoiding US Treasury bonds. 

http://www.bloomberg.com/news/2011-03-31/gross-echoes-buffett-saying-treasuries-have-little-value-on-debt-dollar.html
Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said Treasuries “have little value” because of the growing U.S. debt burden.

The U.S. has unrecorded debt of $75 trillion, or close to 500 percent of gross domestic product, counting what it owes on its bonds plus obligations for Social Security, Medicare and Medicaid, Gross wrote in his monthly investment outlook. The U.S. will experience inflation, currency devaluation and low-to- negative interest rates after accounting for consumer-price gains if it doesn’t reform its entitlement programs, he said.

Bolivia Protesters Halt Operations at San Cristobal Silver Mine

No big deal:  it's not like silver prices have been soaring or anything.  Gulp.

http://www.bloomberg.com/news/2011-03-30/bolivia-protesters-halt-operations-at-san-cristobal-silver-mine.html
Sumitomo Corp.’s silver, zinc and lead mine in Bolivia has been halted since last week by a strike, the mining ministry said.

Workers at the San Cristobal mine are demanding better health care, a government official, who can’t be named because of ministry policy, said today by telephone.

Sumitomo’s San Cristobal, in southwestern Bolivia’s mineral-rich region of Potosi, is the world’s third-largest silver mine and the sixth-biggest zinc mine.

The Anti-Thesis of the New World Order

http://www.larsschall.com/2011/03/29/the-anti-thesis-of-the-new-world-order-%E2%80%93-die-anti-these-der-neuen-weltordnung/
Conclusions: The price rise of silver in Q4/2010 would have been much steeper had J.P. Morgue and HSBC not “shellacked” the market with an additional, cumulative 4 billion in price-suppressive, paper short sales. Had these agents of the U.S. Federal Reserve not undertaken this market manipulation – the price of silver would have soared much higher, making the already weak U.S. Dollar look even more unattractive as a prudent vehicle for countries seeking diversification/safety of their reserve positions.

The CFTC is “owned” by the banks they are supposed to regulate. Instead of ensuring the sanctity of our capital markets, enforcing meaningful position limits, they aid-and-abet the banks in their price rigging [undoubtedly in the name of fiat preservation / National Security].

What is really occurring in precious metals-ville is that DEMAND for physical metal is now increasingly trumping the fraudulent, unlimited supply of paper metal [futures]. This is why “BEAT-DOWNS” in price – like the buck and half swoon depicted below [circled] on March 11, 2011 – no longer cause MASSIVE, LASTING breakdowns. A couple of years ago an engineered sell-off like the one depicted below would have decimated the silver market for months.

The real reason for the growing resilience in the metals markets is this: despite shills claiming that physical supply is no problem – institutional investors and national mints are having increasing difficulty sourcing physical metal.

In the past – smack downs in the price made investors wary and blunted demand. Today, investors are better informed and realize that smack downs in price when physical supplies are tight – are not only counter-intuitive, they’re a sign of desperation – and this brings buyers of physical metal “out of the woodwork”. - Rob Kirby

Treasury Places $35 Billion in 5 Year Notes; US Now $64 Billion Away ($35 Billion Tomorrow) From Debt Ceiling Breach

http://www.zerohedge.com/article/treasury-places-35-billion-5-year-notes-us-now-64-billion-away-debt-ceiling-breach

I guess it's now (un)official:  time to shut down the federal gummint.

Fed Monetization Ending, Believes "World Credit War" Is About To Escalate

There flees another buyer of US Treasuries.

http://www.zerohedge.com/article/chinas-dagong-sees-no-threat-fed-monetization-ending-believes-world-credit-war-about-escalat

Hoenig Says Lower And Middle Classes Pay "Dear Price" For Fed Mistakes, Accuses Fed Of Commodity Price Inflation

Good timing on Fed governor Hoenig's part:  he speaks the truth as he is about to retire.


http://www.zerohedge.com/article/hoenig-says-lower-and-middle-classes-pay-dear-price-fed-mistakes-accuses-fed-commodity-price
"While some of the increase may reflect global supply and demand conditions, at least some of the increase is driven by highly accommodative monetary policies in the United States and other economies."

For those terrified by the ravages of deflation: "I tracked the average growth of money and the price levels in the United States from the 19th century to the present (Chart 3). It should surprise no one that there is a striking parallel between the long-run growth of money and the growth in the price-level index. From the end of World War II alone, the price index has increased by a factor of ten. With such a track record, it is hard to accept that deflation should be the world’s dominant concern."


"Central bankers must look to the long run. If current policy remains in place, we almost certainly will stimulate the growth of asset values and inflation. This may temporarily increase GDP and employment, but in the long run, we risk instability, damaging inflation and lost jobs, which is a dear price for middle and lower income citizens to pay."

World needs $100 trillion more credit, says World Economic Forum

http://www.telegraph.co.uk/finance/financetopics/davos/8267768/World-needs-100-trillion-more-credit-says-World-Economic-Forum.html

The world's expected economic growth will have to be supported by an extra $100 trillion (£63 trillion) in credit over the next decade, according to the World Economic Forum.

And people wonder why I'm long precious metals.

Wednesday, March 30, 2011

Wal-Mart CEO Bill Simon expects inflation

If there's one retail company on earth that understands inflation, Wal-Mart is it.  Thanks to Dick for finding this article.

http://www.usatoday.com/money/industries/retail/2011-03-30-wal-mart-ceo-expects-inflation_N.htm
The world's largest retailer is working with suppliers to minimize the effect of cost increases and believes its low-cost business model will position it better than its competitors.


Still, inflation is "going to be serious," Wal-Mart U.S. CEO Bill Simon said during a meeting with USA TODAY's editorial board. "We're seeing cost increases starting to come through at a pretty rapid rate."

Sunday, March 27, 2011

QE ending?

I know some readers are long the precious metals, so I thought I would chime in with my admittedly subjective take on future Fed actions.

If QE 2.0 is not extended beyond June 30, after Fed announcements in April, look for all asset classes to decline, including possibly gold and silver (and mining companies).  However, I view a correction (dip) in the mining sector as a buying opportunity, because when the economic indicators tank as a result of the ending of QE, the Fed and monetary authorities will figure out the economy is too fragile to stand on its own, and will need further injections of liquidity to continue its "recovery."

It may take them several months of states and municipalities going bankrupt to figure out they can't stop the printing press, and will need to bail out these entities as well as sectors like commercial real estate.  Then, they will stealthily implement new rounds of stimulus, which will enable a resumption of the bull market in precious metals.

Long-term buy and holders need not do anything right now, and perhaps even buy the dip if and when it happens.

Traders may want to take some profits off the table, and wait for the buying opportunity to re-deploy the cash.  Aggressive traders may consider shorting the commodities complex, but that's not something I would personally consider, because front-running and fighting the Fed could be hazardous to your health if you mistime it.

Of course, I could be wrong:  if QE gets extended, the bull market in precious metals could continue onward and upward without pause.  Which means even if I do sell out of some positions, I won't sell everything.  Instead, I will possibly take only partial profits, and wait for the dip to occur--if it ever does.

Jim Rickards and Chris Whalen have submitted fantastic interviews and reviews on the topic of the potential cessation/continuation of QE, and how the Fed can use its enormous balance sheet to shape the bond yield curve, shifting it to shorter term securities without drastically expanding their balance sheet.  In other words, the Fed can surreptitiously continue rounds of QE in an attempt to stimulate the economy without drastically expanding their already bloated balance sheet.

See disclaimers in the side bar.

Disclosure:  long precious metals equities.

Ratigan: "We Spent Four Times More On Clinton's Blowjob Than We Did Investigating The Financial Crisis"

Thanks to Brian for finding this video.


http://www.youtube.com/watch?v=shoPWQcgDHs

Saturday, March 26, 2011

Federal Reserve Officials talking the Dollar up - Gold down on cue

http://traderdannorcini.blogspot.com/2011/03/federal-reserve-officials-talking.html

Temporary Unlimited Coverage for Noninterest-bearing Transaction Accounts

All is well.

http://www.fdic.gov/deposit/deposits/insured/temporary.html

In Prison for Taking a Liar Loan

http://www.nytimes.com/2011/03/26/business/26nocera.html?_r=1&emc=eta1

At least mortgage brokers and Wall Street executives don't go to jail for mortgage fraud.

Inflation and equities

http://www.financeandeconomics.org/Articles%20archive/2011.03.25%20Inflation_and_equities.htm

Look who's calling Utah and gold 'eccentric'

http://www.gata.org/node/9742

Yeah, like the British have their $hit together.

China sees strong commodities, weak dollar in 2011

http://www.reuters.com/article/2011/03/25/us-china-economy-overview-idUSTRE72O1MP20110325

J.P. Morgan Chase, HSBC May Have Gained Billions from Influencing Silver Prices

The word is slowly leaking out.  Greenstein's post isn't very comprehensive, but at least it addresses the crimes-in-progress.

http://blogs.forbes.com/traceygreenstein/2011/03/25/j-p-morgan-chase-and-hsbc-may-have-gained-billions-from-influencing-the-price-of-silver-2/

JPMorgan Holding 30,844 Ounces of Silver for Clients

http://www.bloomberg.com/news/2011-03-24/jpmorgan-holding-30-844-ounces-of-silver-for-clients-comex-says.html

Let's see:  JPMorgan is the target of several lawsuits for price manipulation of silver.  They are the custodian for the SLV silver ETF, and now a custodian for COMEX physical silver inventory.  Recorded inventory levels are dubious as there are allegedly multiple claims against each ounce of silver.  Yet, the CME fast-tracked JPMorgan's application to be a custodian for COMEX silver.  Allegations from silver analysts are neither the COMEX or SLV has the physical inventory of silver in their vaults that they claim to have.

Sure sounds like the fox guarding the hen house.

The COMEX Goes "Extend and Pretend" on JPMorgan's Paper Silver Short

http://truthingold.blogspot.com/2011/03/comex-goes-extend-and-pretend-on-jp.html

Doug Casey: "Absolutely convinced the euro is going to fall apart"

If the dollar is an “IOU nothing,” the euro is a “who owes you nothing.” When it collapses, a lot of people are going to suffer a big wealth haircut. Bernie Madoff swindled thousands of people out of billions. The euro will swindle millions of people out of trillions.

…The average urban peasant in Europe thinks his government is somehow watching out for him. I suppose that’s true, at least the way a dairyman watches his cows, or a swineherd watches his pigs. But the euro really is backed by nothing. Though, at the moment, you could say it’s backed by Mercedes cars and Gucci bags… anything you can trade euros for. But that’s for a limited time. I’m absolutely convinced the euro is going to fall apart...
- Doug Casey

'Kinetic military action' is still hell

http://www.nypost.com/p/news/opinion/editorials/kinetic_military_action_is_still_m5xY8QTxTK35Y5VympnGbK

Um, what does "no-fly zone" mean, and what exactly is "kinetic military action"?

The German Hyperinflation, 1923

Since PBS is government-subsidized, I feel safe in linking this article.

http://www.pbs.org/wgbh/commandingheights/shared/minitext/ess_germanhyperinflation.html

For those more curious, Google Weimar Republic.  Or Rudolf Havenstein.  Yes, I know--I am repeating myself.

Thoughts On The Liberty Dollar Debacle

http://www.alt-market.com/articles/71-thoughts-on-the-liberty-dollar-debacle
However, it wasn’t the conviction itself that struck me, so much as the language of the prosecutor, U.S. Attorney Anne Tompkins, in her post trial statement. Let me reprint my favorite parts for you here:


“Attempts to undermine the legitimate currency of this country are simply a unique form of domestic terrorism,”


“While these forms of anti-government activities do not involve violence, they are every bit as insidious and represent a clear and present danger to the economic stability of this country,”

“We are determined to meet these threats through infiltration, disruption and dismantling of organizations which seek to challenge the legitimacy of our democratic form of government.”
I could add a few names to that list:  Blackhawk Ben and Turbo Tax Timmy.
My feeling (and this is only an intuitive notion) is that Tompkins had little to do with the writing of those statements, or had much “coaching” from the Department of Homeland Security, which has been expanding its absurd definition of terrorism to include almost anyone who does not agree with the philosophies of establishment elites and corporate global banks. Even returning military veterans of Iraq and Afghanistan have been listed as possible domestic terrorist threats. Why not proponents of gold and silver?


What we see here is the not so subtle conditioning of average Americans towards categorizing certain innocuous behaviors as being related to possible criminal or terrorist motives. Owning guns is anti-social, and you are a naughty bad person for liking big boom boom stick. What’s that? A pocket Constitution!? Didn’t McVeigh or one of the 9/11 hijackers carry around something like that? You have a survival garden? Hmm, that sounds fishy. I better call the FDA and make sure everything you’re doing is on the up and up. You want to trade gold and silver? Privately?! That’s obviously “black market” barter, and you are the reason the economy is so unpleasant. I don’t get as many food stamps and free big brother goodies as I used to, and I blame you and your dastardly sense of self sufficiency! The IRS should have your head! And so it goes…

So, I promote private barter networking and precious metals to safeguard communities from impending inflationary crisis, and am therefore a “non-violent domestic terrorist which represents a clear and present danger to the economic stability of this country”? How does Tompkins or anyone else, with a straight face, declare alternative markets and sound money as a danger to economic stability, when the U.S. economy has already been annihilated by the derivatives bubble conjured by international banks and the private Federal Reserve? What about the constant fiat injections by our central bank which have created an atmosphere prime for dollar devaluation and hyperinflation? Why in the hell hasn’t the U.S. Attorneys Office or Anne Tompkins placed the terrorist label squarely on the doorstep of JP Morgan, Goldman Sachs, HSBC, or the Fed itself? I mean, if we are going to start equating the destabilization of the economy with white Al-Qaeda, then let’s be fair at least. Global banks have had far more to do with our financial downfall than gold or silver trade ever will.

Silver and gold options expiry and delivery

The cat's out of the bag.  Thanks to BORG members Eric and Robert for finding these articles.

http://seekingalpha.com/article/260168-gold-and-silver-options-expiry-march-28-2011-expect-volatility?source=article_sb_exclusives_2

http://seekingalpha.com/article/260205-slv-holdings-reach-record-high?source=qp_article

http://seekingalpha.com/article/259549-will-jpmorgan-now-make-and-take-delivery-of-its-own-silver-shorts

http://seekingalpha.com/article/260171-did-ubs-mislead-small-investors-about-stored-silver?source=yahoo

And finally, this oldie and goodie which I read last year:

http://www.marketoracle.co.uk/Article20677.html

Follow London's Biggest Demonstration In A Decade As 300,000 Protest Austerity And Public Sector Cuts

http://www.zerohedge.com/article/follow-londons-biggest-demonstration-decade-300000-protest-austerity-and-public-cuts

Friday, March 25, 2011

Part 5 - The Silver Saga Story Continues


http://www.youtube.com/watch?v=fzyXn8t0plM

Dylan Grice Explains Why He Likes Gold, And Why $7,500/Oz Makes A Gold Standard Possible

Ingenuity is not wisdom.

http://www.zerohedge.com/article/dylan-grice-explains-why-he-likes-gold-and-why-7500oz-makes-gold-standard-possible
Today, Grice puts the matter to rest with his latest Popular Delusions piece: "Why this commodity specific value investor likes gold." To wit: "In the hard sciences knowledge builds cumulatively. It propels the relentless growth in man’s ability to do more with less, which makes commodities such a lousy investment in the long term. Yet in the realm of social decision-making mankind is a fool, unable to learn the wisdom of posterity and doomed to repeat its mistakes: the first credit crunch occurred in the Rome of 33AD and the ancient Greeks lived with high inflation. Confidence in central bankers’ ability to learn from past inflation is as likely to be misplaced as it was in their ability to learn from past credit booms. Gold remains the cleanest insurance against such overconfidence." And confirming gold's very unique position in the investment pyramid, Grice's conclusion borders on the ontological: "Shorting mankind’s ingenuity isn’t a smart thing to do. But ingenuity isn’t wisdom. And shorting mankind’s ability to absorb wisdom … well, aren’t you silly if you don’t? With less of the technological risk you’re taking when you buy any other part of the commodities complex, gold is the oldest, purest and simplest way."

Thursday, March 24, 2011

US Finances Rank Near Worst in the World

Top 10 Keynesian Ways To Boost The US Economy

http://www.zerohedge.com/article/guest-post-top-10-keynesian-ways-boost-us-economy

In all seriousness, how can any economist interpret the tsunami disaster as economically positive without logically supporting the controlled demolition of the United States? How would the results not equate? This is the irrationality of Keynesian models. Regardless of debt levels, inflation levels, natural disasters, inventory gluts, etc. the answer to economic problems always culminates in further spending.
There can be positives and negatives to spending. During the Reagan years, the economy was not over leveraged, so spending created a net positive for growth. But when the economy is over leveraged (including governments) like it is today, and like it is in Japan, both destruction and spending can be catastrophic.  When inflation accelerates, further spending becomes the problem and not the solution.

Many economists would laugh off my attempt at sarcasm with the top ten listed above, but inwardly their economic theories serve to justify such irrational policies, only they couch their theories under academic names.  Debt spending can work for awhile….but it cannot work forever.

Bloomberg Consumer Comfort Index Plunges To Seven Month Low As Wealth Effect Trounced By Poverty Effect

http://www.zerohedge.com/article/bloomberg-consumer-comfort-index-plunges-seven-month-low-wealth-effect-trounced-poverty-effe

Nero's Fiddle And Obama's Golfclubs

http://www.zerohedge.com/article/guest-post-neros-fiddle-and-obamas-golfclubs

Pan American Silver Q4 rises; sees lower '11 production

Usually, when the price of a commodity soars, its producers plan on producing more of the commodity.  After all, what company wouldn't want to enjoy higher profits?  They only cut back production if the price of the commodity they produce plummets in price, as the production process becomes uneconomic--they can't sell the commodity profitably at lower prices.

Hence, it is puzzling that Pan American Silver announced that they are planning to reduce their production levels going forward--despite record profits from soaring silver prices.  Here's one explanation:  their reserves are dwindling--they are running out of silver in the ground.  Otherwise, they would plan on producing more silver, not less. 

http://mobile.reuters.com/article/idUSSGE71F02B20110216?feedType=RSS&irpc=43

The Golden Pyramid

This article is not just brilliant in its analysis of the gold market, but also in its timeliness.  It was published in August 1999.

http://www.usagold.com/hathawaypyramid.html

Why Central Banks of the West hate Gold

http://traderdannorcini.blogspot.com/2011/03/why-central-banks-of-west-hate-gold.html

Tuesday, March 22, 2011

Former Goldmanite And Head Of New York Fed Bill Dudley: "Let Them Eat iPad"

Since you can't eat gold, try eating an IPad 2.

http://www.zerohedge.com/article/former-goldmanite-and-head-new-york-fed-several-career-risk-free-restless-natives-let-them-e
Earlier today, Goldman New York Fed plant, and Jan Hatzius predecessor, Bill Dudley, emerged from his ivory tower to make a trek to Queens to deliver prepared remarks written by some intern, discussing the prospering state of the New York burrough (speech link). Unfortunately for the multi-millionaire, things quickly went from Unicorny and Rainbowy to horribly wrong. During the Q&A, one audience member asked: "When was the last time, sir, that you went grocery shopping?"

he "tried to explain how the Fed sees things: Yes, food prices may be rising, but at the same time, other prices are declining. The Fed looks at core inflation, which strips out volatile food and energy costs, to get a better sense of where inflation may actually be heading."

"I can't eat an iPad," another quipped.

Straight Talk with John Rubino: The Damage Is Already Done

http://www.chrismartenson.com/blog/straight-talk-john-rubino-damage-already-done/54475

Gaddafi sitting on 143 tonnes of gold in Libya

http://www.smh.com.au/world/gaddafi-sitting-on-143-tonnes-of-gold-in-libya-report-20110322-1c4cj.html
Libyan leader Muammer Gaddafi is reportedly sitting on a 143.8-tonne $6.4-billion pot of gold - enough to pay mercenaries to fight for him for years.


The gold bullion - held by the Libyan central bank and controlled by Colonel Gaddafi - is among the 25 largest reserves in the world, the Financial Times reported, citing the International Monetary Fund.

They provide the 68-year-old Libyan strongman a lifeline after billions of assets held offshore were frozen by the United States and the 27 member states of the European Union.

March Madness: Democrats vs. Dictators

Thanks to Kitty for finding this one.

http://www.foreignpolicy.com/articles/2011/03/17/march_madness_democrats_vs_dictators

Click on image to enlarge.

URGENT: Radiation 1,600 times normal level 20 km from Fukushima plant: IAEA

http://english.kyodonews.jp/news/2011/03/80057.html
Radiation 1,600 times higher than normal levels has been detected in an area about 20 kilometers from the crippled Fukushima Daiichi nuclear power plant, International Atomic Energy Agency officials said Monday.

Data collected by an IAEA team show that radiation levels of 161 microsievert per hour have been detected in the town of Namie, Fukushima Prefecture, the officials said.

The government has set an exclusion zone covering areas within a 20-km radius of the plant and has urged people within 20 to 30 km to stay indoors.
Staying indoors?  How about "get the hell out of there"?

Land of the Setting Sun

Folks, read this commentary carefully.  I have been forecasting Japan's demise for several years now.  This latest disaster only ensures and perhaps even accelerates this process.  Observers may also want to find parallels between Japan's predicament and our woes here in the US:  an aging demograph and an exploding debt problem.

http://www.theburningplatform.com/?p=13311
The short-term impact of this disaster will push Japan into recession. The rebuilding efforts over the coming years will create a positive GDP figure, but will not do anything to benefit Japan over the long haul. The billions designated to rebuild will be money not invested in a more beneficial manner. The linear thinkers conclude that over the long-term Japan will be OK. These people are ignoring the double D’s – Debt and Demographics. When Japan entered its two decades of recession and experienced the Kobe earthquake in 1995, its government debt stood at 52% of GDP. Today it stands at 225% of GDP. Twenty one years ago, the Japanese population was still relatively young, with only 12% of the population over 65 years old. The population of Japan peaked in 2004 and now is in relentless decline.

With the amount of debt hanging over the Japanese empire, it might be a good strategy to commit hari-kari. The non-thinking pundits on CNBC contend that since Japan hasn’t had any detrimental effects from running their debt to 225% of GDP, running it to 300% won’t be a problem. Reinhart and Rogoff studies concluded that once a country breaches the 90% level, growth slows and a debt crisis is likely to ensue. Japan has been stuck in a 20 year recession, as they chose Keynesian shovel ready projects, quantitative easing, currency manipulation, and covering up the true financial condition of its banks over accepting the consequences of a debt bubble. Remind you of anyone? The result is their real GDP is lower today than it was in 1995. The Paul Krugmans of the world would contend that they just didn’t spend enough.


The only reason Japan has not collapsed is due to its homogeneous population willing to buy virtually all of the debt issued by its government for the last twenty years and its prodigious ability to produce high quality products that the rest of the world wants. Japan has maintained a consistent trade surplus, and its government debt has been held mainly by its own people, with 95% of Japanese government bonds in the possession of Japanese, meaning the country was able to finance itself without depending upon fickle foreign investors who might prefer a return greater than 1%. This ain’t 1990. The savings rate of the Japanese population had already declined from 14% in 1990 to 2% by 2008.

“The Government Pension Investment Fund, which oversees 117.6 trillion yen ($1.4 trillion), in September forecast that it would sell 4 trillion yen in assets in the business year ending March 31 to fund payouts. Sales by the fund, which helps oversee public pension funds for Japan’s 37 million retirees, come as the first of Japan’s baby boomers is set to turn 65 in 2012, making them eligible for pension payments. Japan choices are to default on its debt, print money to fund interest on the debt, raise taxes effectively robbing savers of their money, or undertake huge spending cuts. The dilemma stems from years of Keynesian and Monetarist stupidity.”

The Bank of Japan is doing what they do best - printing money. Quantitative easing is an art form perfected by all Central Banks across the globe. Every disaster over the last twenty years, whether man made (wars, internet collapse, housing collapse, debt meltdown) or caused by nature, are met with the exact same solution – PRINT MONEY.

This method works until it doesn’t work. Japan’s central bank cannot reverse the demographics. From this point forward the population of Japan will be net sellers of government debt. Japanese insurance companies will be on the hook for $33 billion in claims. They will need to sell government bonds in order to make those payments. The World Bank has estimated the cost of rebuilding to be $235 billion. The government will need to borrow this money. At least 30% of its energy needs are off-line. It already imports 95% of its oil and coal. They will need to increase energy imports to make up for the nuclear energy shortage. Its positive trade balance was already in decline.  The clueless CNBC pundits can drone on about how this natural disaster will be good for the Japanese economy because of the substantial rebuilding program, but they are dead wrong. Japan is trapped, with no way out. They will need to issue hundreds of billions in new debt, which cannot be bought by its citizens, pension funds, or insurance companies. How many foreign investors will buy a 10 Year Japanese government bond paying 1%, knowing that Japan wants to weaken its currency? NONE. The only choices are to raise interest rates to attract buyers or print more money. With an already suffocating level of debt, they can’t allow interest rates to rise. They would choke on the interest.

The Bank of Japan will follow the same script as Ben Bernanke. They will print new Yen and buy the newly issued debt. What an original idea. Japan is caught in a debt stranglehold and demographic nightmare. Their currency will ultimately collapse like a nuclear reactor after a tsunami. When Japan defaults on their debt, the pain will be intense, as they will be throwing their own aged population under the bus. America, on the other hand, will throw the whole world under the bus when we default.
The Japanese own $886 billion of US Treasuries and have bought $256 billion of our debt since October 2008. Timmy Geithner will need to issue $1.5 trillion of new bonds per year. Japan will no longer be a buyer. They will be a seller. This will put upward pressure on U.S. interest rates. Japan’s reconstruction needs will put pressure on commodity and energy prices. Production and supply problems for Japanese parts and goods are already creating problems for GM and other car companies in the U.S. Lack of supply leads to higher prices. The great earthquake/tsunami/nuclear meltdown of 2011 will result in more quantitative easing in Japan and the U.S. This will result in even more inflation than we are experiencing today. Once the inflation genie is out of the bottle, the race to the bottom will accelerate. Gold will decide who wins the race. It has been a neck and neck race since 2001. I’m not sure it is a race anyone wants to win. But the destination is certain.  

Fed Will Release Bank Loan Data as Top Court Rejects Appeal

What is the Fed and the Obama Administration hiding?

http://www.bloomberg.com/news/2011-03-21/fed-must-release-bank-loan-data-as-high-court-rejects-appeal.html

Perhaps the fact that foreign banks, hedge funds, and individuals may have also been bailed out is even more discomforting to the powers-that-be.

Daily Show: Mandvi - Odyssey Dawn - Unconstitutional War

http://www.thedailyshow.com/watch/mon-march-21-2011/odyssey-dawn---unconstitutional-war

Government double-speak

"No-fly zone" = flying over and bombing your country.

"Department of Defense" = Department of War.

All is well though, as "collateral damage" will be minimal.

"Collateral damage" = death and injury to innocent civilians.

"We need to destroy the village to save it."  That one is self-explanatory.

Monday, March 21, 2011

Angry Taco Bell customer fires at officers

http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2011/03/21/state/n081343D84.DTL&tsp=1

What's the Buzz? A Coarse Description of Information Propagation

Look at the y-axis of Figure 1(a).

http://engineering.ucsb.edu/insights2011/files/pdf/abstracts/Moehlis%20%28Busch%29_Insights2011.pdf

Rising Food Prices May Be Here to Stay

I wonder how Blackhawk Ben would respond to this survey from the IMF--and the fact that millions will starve as a result of food inflation.

http://www.imf.org/external/pubs/ft/survey/so/2011/NEW031711A.htm

The Great Credit Contraction

http://www.creditcontraction.com/images/affiliate/Great-Credit-Contraction-Liquidity-Pyramid-Large.jpg
Click on image to enlarge.

QE is the End of America as We Know It

http://paperempire.net/2011/03/20/qe-is-the-end-of-america-as-we-know-it/

U.S DEPARTMENT OF HOMELAND SECURITY HAS TOLD BANKS - IN WRITING - IT MAY INSPECT SAFE DEPOSIT BOXES WITHOUT WARRANT AND SIEZE ANY GOLD, SILVER, GUNS OR OTHER VALUABLES IT FINDS INSIDE THOSE BOXES!

http://oregonrepublic.posterous.com/us-department-of-homeland-security-has-told-b

I do know banks can deny customer access to safety deposit boxes.  I am not sure of the implications of the Patriot Act, but I wouldn't be surprised if this is true.  Readers should perform their own due diligence, as will I.

Money market accounts and withdrawal requests

Many of my friends and family didn't believe me when I said financial institutions, under law, could delay customer withdrawal requests up to seven business days.  In other words, what you and I think are immediately liquid accounts are anything but.  Still don't believe me?  Here's your proof:

http://www.cftc.gov/tm/finseginterp_9.htm
The Division's position is based upon the fact that the Committee has imposed a reservation of notice requirement for the MMDA, such that banks and savings and loan institutions must reserve the right to require seven days prior notice of withdrawals or transfers from any MMDA [money market deposit account].
The Committee determined to impose the reservation of notice requirement even though the Committee recognized that banks and savings and loan institutions would exercise their rights under such a requirement infrequently. The Division is concerned that such a right is likely to be exercised when there is a significant market disruption. In such circumstances, the inability of an FCM to obtain immediate access to the funds in an MMDA could magnify the impact of any market disruption and cause additional repercussions.

Mizuho's ATM crash may last to Tuesday or longer

Be prepared for this:  what happens if  you can't withdraw cash from an ATM--and can't receive direct payments from your job?  What other forms of money will you use?


http://www.marketwatch.com/story/mizuhos-atm-crash-may-last-to-tuesday-or-longer-2011-03-20

China Imports 245 Tonnes Of Silver In February And Qatar SWF “Interested” In Buying Silver

http://www.zerohedge.com/article/china-imports-245-tonnes-silver-february-and-qatar-swf-%E2%80%9Cinterested%E2%80%9D-buying-silver

Department of Justice logic on domestic terrorism

http://www.sovereignman.com/expat/bernanke-terrorist
“Attempts to undermine the legitimate currency of this country are simply a unique form of domestic terrorism.  While these forms of anti-government activities do not involve violence, they are every bit as insidious and represent a clear and present danger to the economic stability of this country.”
 Was the Department of Justice referring to Bernard von NotHaus--or Fed Chairman Ben Bernanke?

Sunday, March 20, 2011

Secret Iran Gold Holdings Leaked: Tehran Holds Same Amount Of Gold As United Kingdom, And Is Buying More

http://www.zerohedge.com/article/secret-iran-gold-holdings-leaked-tehran-holds-same-amount-gold-united-kingdom-and-buying-mor

Wars devalue sovereign currencies because of inflation (from printing more currency).  What better way to hedge against said inflation than to buy gold?

Saturday, March 19, 2011

Pento - US to Default on Debt, Dollar Headed Much Lower

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/3/19_Pento_-_US_to_Default_on_Debt%2C_Dollar_Headed_Much_Lower.html

Nigel Farage: Van Rompuy must apologise over Gaddafi meeting


http://www.youtube.com/watch?feature=player_embedded&v=XHBMLil4JbI

Understanding the radioactivity at Fukushima

This is the best presentation on the dangers of the Fukushima nuclear  plant disaster I have seen.  The presentation comes from Physics professor Ben Monreal of UCSB, which happens to be my alma mater.  Bone up on your periodic tables.

http://online.kitp.ucsb.edu/online/plecture/bmonreal11/pdf/BMonreal11_PublicLecture_KITP.pdf
Conclusions
• The worst general-public effects of Chernobyl were
stress/fear; HUGE education/communication failure
• You have the information: count the millisieverts and
decide how to respond
• My feeling: the worst-case radiation hazards from
Fukushima are mitigatable and local
• (early evacuation + controls on 131I in food)
• My feeling: the global radiation hazard is nil.
• The best way to reduce worldwide low-level radiation
releases is ... stop burning coal
Save your energy for those affected by the tsunami and
“50 plant workers” at Fukushima
Ben Monreal, UCSB Physics 3/11

Libya: jet crashes in Benghazi


http://www.youtube.com/watch?v=1J6waCdPe-Y

Silver manipulation claims spark discord at US watchdog

http://www.citywire.co.uk/money/silver-manipulation-claims-spark-discord-at-us-watchdog/a479805?ref=citywire-money-investments-list
New claims that the silver price is being manipulated have prompted a senior US regulator to criticise the agency regulating commodity markets –the very agency that he oversees.
I recommend reading the comments also.

We Have Forgotten What True Money Is

http://www.cnbc.com/id/42027149

Friday, March 18, 2011

Very low radiation detected on US west coast-sources

http://www.reuters.com/article/2011/03/18/japan-quake-ctbto-radiation-idUSLDE72H1M220110318
Very low concentrations of radioactive particles believed to have come from Japan's Fukushima nuclear power plant have been detected on the U.S. west coast, diplomatic sources said on Friday.
The level of radiation was far too low to cause any harm to humans, they said.
I'd prefer to receive expert opinions on radiation levels from a toxicologist than a diplomat.

QE3 May Be ‘Unavoidable Fact of Life’

http://www.cnbc.com/id/42128767
Just raise the sensitivity thresholds on the radiation detectors.  "All is well."

http://www.chicagobreakingnews.com/news/local/chibrknews-tokyo-flight-triggers-ohare-radiation-detectors-20110317,0,4216493.story
Mayor Richard Daley acknowledged today passengers on a flight from Tokyo had set off radiation detectors at O’Hare International Airport, but he offered no details and said federal officials will be handling the situation.

“Of course the protection of the person coming off the plane is very important in regards to any radiation, especially within their families and anything else,” Daley said at a downtown news conference to discuss his trip to China this week.

City Aviation Commissioner Rosemarie Andolino would only say, “We are aware that occurred yesterday. We are working with Customs and Border Protection on this issue." She referred reporters to the Department of Homeland Security.

Oil rallies nearly 4 pct, focus back on Mideast

Spin, spin, spin and around we go....

http://af.reuters.com/article/energyOilNews/idAFL3E7EH0EX20110317
Data showing that inflation remained contained despite
rising prices also helped boost investor mood.
Huh?

UN Security Council Authorizes Libya No-Fly Zone: 10 For 5 Abstain 0 Against

We're going to war fellas.  The UN just OK'd the bombing of Labia, er...I mean Libya.

http://www.zerohedge.com/article/un-security-council-authorizes-libya-no-fly-zone-10-5-abstain-0-against
The vote by the UN Security Council to impose a no-fly zone on Libya and take "all necessary measures" to protect Libyan civilians from government-led attacks, has passed with a vote of 10 to 5. The vote "will also allow military intervention to enforce the ban, and calls to take "all necessary measures" to protect civilians and civilian populated areas under threat of attack." The UN Security Council Resolution was backed by 10 countries, enough to pass, while 5 other countries - including Russia, China and Germany - chose to abstain. None voted against.

There goes oil

http://www.zerohedge.com/article/there-goes-oil

Currency Meltdown Coming

http://usawatchdog.com/currency-meltdown/

Wednesday, March 16, 2011

Productivity during March Madness

P(t) = 1/t, t  > 0

P = Productivity
t = time

Warning:  as you're filling out your brackets, make sure your screen saver is handy in case your boss walks by your cubicle.

Housing Starts Plummet To Second Lowest Ever At 479K, Finished Consumer Food PPI Jumps By Highest Since 1974

http://www.zerohedge.com/article/housing-start-plummet-second-lowest-ever-479k-finished-consumer-food-ppi-jumps-highest-1974
Stagflation, bitchez!
That's a quote--not my words, so save the rotten tomatoes.

Japan hikes legal radiation dose for nuke workers

http://www.montereyherald.com/national/ci_17625188?nclick_check=1

So how much radiation is "safe"?  This would be laughable, if it wasn't tragic.

Executive Order 6814 - Requiring the Delivery of All Silver to the United States for Coinage

Apparently gold wasn't the only precious metal confiscated by Executive Order.  FDR also confiscated silver with Executive Order 6814 in 1934.

http://www.presidency.ucsb.edu/ws/index.php?pid=14741#axzz1Gm5VOpBU

Search Executive Order 6102 to see the blog entries for the confiscation of gold.  Or just click here.

Marc Faber On The Japanese Disaster, On A 20% Market Correction And On QE18

Tuesday, March 15, 2011

Adens, Schultz, batten down hatches

http://www.marketwatch.com/story/adens-schultz-batten-down-hatches-2011-03-14
“Five Big Trends For The Next Five Years” with even more powerful articulation:
(1) Inflation is headed up.
(2) Gold and silver are headed up.
The Adens think the gold and silver rise could be more dramatic that the 1970s. However, they write:
“Let’s say it is similar to the 1970s, then as we mentioned last month, gold could eventually rise to about $6,000 and silver to $150. We’re not saying these will be the ultimate upside targets, but they could be.”
(3) The US dollar is headed down.
(4) Interest rates are headed up.
(5) Bond prices will fall.
Here the Adens say:
“Even though the Fed says they’re going to keep interest rates low to help the economy, they simply won’t be able to. The Fed can control short-term interest rates, but not long-term rates. And with the U.S. needing more and more money to finance all of its expenses, the marketplace will demand higher rates in exchange for the growing risk. Under the current circumstances, interest rates are poised to rise much further in the years ahead.”

US backing for world currency stuns markets

http://www.telegraph.co.uk/finance/economics/5050407/US-backing-for-world-currency-stuns-markets.html

John Williams - The Great US Collapse Nears

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/3/15_John_Williams_-_The_Great_US_Collapse_Nears.html

Ayn Rand quote

"Whenever destroyers appear among men, they start by destroying money, for money is men’s protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it bounces, marked, ‘Account overdrawn.’
–Ayn Rand

Monday, March 14, 2011

March Madness

Sorry I haven't been blogging lately.  I seem to suffer from this strange seasonal flu every year, coinciding with the NCAA basketball playoffs.  ;-)

Get your brackets in.

Tuesday, March 8, 2011

James Turk - Forget $8,000, Gold Headed Much Higher

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/3/8_James_Turk_-_Forget_%248%2C000%2C_Gold_Headed_Much_Higher.html
People don’t understand how much wealth destruction has yet to occur as this financial bust that we are in works to its inevitable conclusion.  In effect, the Dow has to lose 90% vs gold.  This wealth destruction is going to devastate a great many investors, in fact most of them will never recover from this event.
    
As I said earlier Eric, my thinking has changed as we have been going through this cycle.  This time around is not going to be like the gold bull market of the 1970’s.  The dollar is going to lose its status as the world’s reserve currency.  This is fundamentally different than what occurred in the 1970’s.

I’m often asked by people when do I think they should sell their gold?  I tell them this time around it’s going to be easy because you are not going to sell your gold, you’re going to spend it.  In other words, gold will once again become currency.”

Ron Paul on financial crisis and asset bubbles

Skip the first minute.


http://www.youtube.com/watch?v=bhosVMQPrJc

Goldcorp profit jumps on higher prices, production

http://www.reuters.com/article/2011/02/24/goldcorp-idUSN2429040320110224
Goldcorp (G.TO) reported better than expected quarterly earnings on Thursday, as profits surged due to higher gold and silver prices and increased bullion production, sending its shares up more than 2 percent in after-hours trade.

Vancouver-based Goldcorp, the world's second largest gold miner by market capitalization, also raised its full year dividend payout by 11 percent to 40 cents a share and outlined plans to develop two major gold projects in Canada.
See disclaimers in the side bar.

Disclosure:  no position in Goldcorp.

Living Standards Doomed To Fall In U.S.

When the world's largest bond investor says get out of US Treasury bonds, one may want to take heed of his advice.

http://edegrootinsights.blogspot.com/2011/03/gold-market-saying-living-standards.html

Silver Shocker

http://news.silverseek.com/SilverSeek/1299509764.php

Bob Quartermain: The Constraints on Silver Supply


http://www.youtube.com/watch?v=0oVlQU-h5r4&feature=player_embedded

United States Mint Seeks Public Comment on Factors to be Considered in Research and Evaluation of Potential New Metallic Coinage Materials

I guess the US Mint is out of silver.  Contact them and let them know what materials you desire for your coins.

http://www.usmint.gov/pressroom/?action=press_release&id=1219
United States Mint Seeks Public Comment on Factors to be Considered in Research and Evaluation of Potential New Metallic Coinage Materials

WASHINGTON - The United States Mint today announced that it is requesting public comment from all interested persons on factors to be considered in conducting research for alternative metallic coinage materials for the production of all circulating coins.

These factors include, but are not limited to, the effect of new metallic coinage materials on the current suppliers of coinage materials; the acceptability of new metallic coinage materials, including physical, chemical, metallurgical and technical characteristics; metallic material, fabrication, minting, and distribution costs; metallic material availability and sources of raw metals; coinability; durability; sorting, handling, packaging and vending machines; appearance; risks to the environment and public safety; resistance to counterfeiting; commercial and public acceptance; and any other factors considered to be appropriate and in the public interest.

The United States Mint is not soliciting suggestions or recommendations on specific metallic coinage materials, and any such suggestions or recommendations will not be considered at this time.  The United States Mint seeks public comment only on the factors to be considered in the research and evaluation of potential new metallic coinage materials.

The recently enacted Coin Modernization, Oversight, and Continuity Act of 2010 (Public Law 111-302) gives the United States Mint research and development authority to conduct studies for alternative metallic coinage materials.  Additionally, the new law requires the United States Mint to consider certain factors in the conduct of research, development, and solicitation of input or work in conjunction with Federal and nonfederal entities, including factors that the public believes the United States Mint should consider to be appropriate and in the public interest.

Comments must be submitted on or before April 4, 2011.  Interested parties may submit written comments by any of the following methods:
E-mail: coinmaterials@usmint.treas.gov
Fax: (202) 756-6500
Mail: New Coin Materials Comments
Mail Stop:  Manufacturing 6 North
United States Mint
801 Ninth Street, N.W.
Washington D.C.  20220
Hand Delivery/Courier:  Same as mail address.
For further information, contact:  Jean Gentry, Deputy Chief Counsel, United States Mint at (202) 354-7359 (not a toll-free call).

Contact:
Press inquiries:  Mike White (202) 354-7222
Customer Service information:  (800) USA MINT (872-6468)

Coinflation

Save your nickels.  They're worth almost 7 cents, based on today's metal value.  That's a 40% return.

http://www.coinflation.com/

Description Denomination Metal Value Metal % of Denomination
Lincoln Copper Cent Price1909-1982 Cent (95% copper) *
$0.01
$0.0284205
284.20%
Jefferson Nickel Price1946-2011 Nickel
$0.05
$0.0697883
139.57%
Lincoln Zinc Cent Value1982-2011 Cent (97.5% zinc) *
$0.01
$0.0063804
63.80%
Roosevelt Dime Value1965-2011 Dime
$0.10
$0.0249049
24.90%
Washington Quarter Value1965-2011 Quarter
$0.25
$0.0622646
24.90%
Kennedy Half Dollar Value1971-2011 Half Dollar
$0.50
$0.1245305
24.90%
Ike Dollar Value1971-1978 Eisenhower Dollar
$1.00
$0.2490624
24.90%
Susan B. Anthony Dollar Value1979-1981, 1999 SBA Dollar
$1.00
$0.0889498
8.89%
Sacajawea Dollar Value2000-2011 Sacagawea Dollar
$1.00
$0.0747294
7.47%
Presidential Dollar Value2007-2011 Presidential Dollar
$1.00
$0.0747294
7.47%

Rain or Shine, Oil Prices Headed Higher: Faber

http://www.cnbc.com/id/41961949

The Driver for Gold You’re Not Watching

The Driver for Gold You’re Not Watching
Jeff Clark, BIG GOLD
You already know the basic reasons for owning gold – currency protection, inflation hedge, store of value, calamity insurance – many of which are becoming clich├ęs even in mainstream articles. Throw in the supply and demand imbalance, and you’ve got the basic arguments for why one should hold gold for the foreseeable future.
All of these factors remain very bullish, in spite of gold’s 450% rise over the past 10 years. No, it’s not too late to buy, especially if you don’t own a meaningful amount; and yes, I’m convinced the price is headed much higher, regardless of the corrections we’ll inevitably see. Each of the aforementioned catalysts will force gold’s price higher and higher in the years ahead, especially the currency issues.
But there’s another driver of the price that escapes many gold watchers and certainly the mainstream media. And I’m convinced that once this sleeping giant wakes, it could ignite the gold market like nothing we’ve ever seen.
The fund management industry handles the bulk of the world’s wealth. These institutions include insurance companies, hedge funds, mutual funds, sovereign wealth funds, etc. But the elephant in the room is pension funds. These are institutions that provide retirement income, both public and private.
Global pension assets are estimated to be – drum roll, please – $31.1 trillion. No, that is not a misprint. It is more than twice the size of last year’s GDP in the U.S. ($14.7 trillion).
We know a few hedge fund managers have invested in gold, like John Paulson, David Einhorn, Jean-Marie Eveillard. There are close to twenty mutual funds devoted to gold and precious metals. Lots of gold and silver bugs have been buying.
So, what about pension funds?
  
According to estimates by Shayne McGuire in his new book, Hard Money; Taking Gold to a Higher Investment Level, the typical pension fund holds about 0.15% of its assets in gold. He estimates another 0.15% is devoted to gold mining stocks, giving us a total of 0.30% – that is, less than one third of one percent of assets committed to the gold sector.
Shayne is head of global research at the Teacher Retirement System of Texas. He bases his estimate on the fact that commodities represent about 3% of the total assets in the average pension fund. And of that 3%, about 5% is devoted to gold. It is, by any account, a negligible portion of a fund’s asset allocation.
Now here’s the fun part. Let’s say fund managers as a group realize that bonds, equities, and real estate have become poor or risky investments and so decide to increase their allocation to the gold market. If they doubled their exposure to gold and gold stocks – which would still represent only 0.6% of their total assets – it would amount to $93.3 billion in new purchases.
How much is that? The assets of GLD total $55.2 billion, so this amount of money is 1.7 times bigger than the largest gold ETF. SLV, the largest silver ETF, has net assets of $9.3 billion, a mere one-tenth of that extra allocation.
The market cap of the entire sector of gold stocks (producers only) is about $234 billion. The gold industry would see a 40% increase in new money to the sector. Its market cap would double if pension institutions allocated just 1.2% of their assets to it.
But what if currency issues spiral out of control? What if bonds wither and die? What if real estate takes ten years to recover? What if inflation becomes a rabid dog like it has every other time in history when governments have diluted their currency to this degree? If these funds allocate just 5% of their assets to gold – which would amount to $1.5 trillion – it would overwhelm the system and rocket prices skyward. 
And let’s not forget that this is only one class of institution. Insurance companies have about $18.7 trillion in assets. Hedge funds manage approximately $1.7 trillion. Sovereign wealth funds control $3.8 trillion. Then there are mutual funds, ETFs, private equity funds, and private wealth funds. Throw in millions of retail investors like you and me and Joe Sixpack and Jiao Sixpack, and we’re looking in the rear view mirror at $100 trillion.
I don’t know if pension funds will devote that much money to this sector or not. What I do know is that sovereign debt risks are far from over, the U.S. dollar and other currencies will lose considerably more value against gold, interest rates will most certainly rise in the years ahead, and inflation is just getting started. These forces are in place and building, and if there’s a paradigm shift in how these managers view gold, look out!
I thought of titling this piece, “Why $5,000 Gold May Be Too Low.” Because once fund managers enter the gold market in mass, this tiny sector will light on fire with blazing speed. 
My advice is to not just hope you can jump in once these drivers hit the gas, but to claim your seat during the relative calm of this month's level prices.

To QE, or not to QE

    You saw the possibility early that they might stop QE 2. They are floating balloons of policy change, and Geithner's sales pitch to the banks suggests that they are trying. But I just don't think they will get away with it, for all the consequences you articulated: rising rates would hurt stocks, the economy would tank, and the weak economy would get weaker. It might help the dollar, but the dollar has not collapsed at a level requiring the Fed to protect it.
    Let's see if the discussion by the Fed affects the markets as badly as the QE 2 discussion affected markets positively before the actual purchases. The 10-year Treasury bond dropped to 2.4% or so in August on just talk, and is a full % above that on the actual big purchases. If the talk scares the market (rates rise and stocks fall), I bet they extend QE 2 or diminish it slowly. They must be looking at the calendar for election year and will want to turn on the fire hose of new money printing at least 6 months or maybe a year before the election.
    I wrote about all this over a year ago, explaining that the federal government deficit is too big to be absorbed by anybody but the Fed, and that they would do what came to be QE 2. The deficit hasn't changed, so my prediction is that even if the Fed stops buying Treasuries for a few months, the bad reaction of markets will force them right back to the money printing press.
    Absent that, the obligations to pay interest on the debt at higher and higher rates will make the deficit so bad that the dollar really crashes. There is no way for the Fed to stay out of the business of bailing out the federal deficits for more than a quarter, in my opinion, and I'm still not expecting they can really pull that off. - Bud Conrad
While I agree the Fed is cornered and has no choice but to continue quantitative easing ad infinitum, talk and action of temporarily ending QE policies could tank equities--including the commodities reflation play.  Because a stock market crash will weaken an already fragile economy, I believe the Fed will have to reinstitute QE at some later point in time, which would enable another rally in equities, especially resource companies--and including precious metals mining shares.

The Fed has to do everything in their power to contain rising interest rates, because if rates rise appreciably, the United States of America would be bankrupt overnight due to our humongous debt levels.  QE extends and pretends the illusion of solvency--at least until the next Administration is voted in--whenever that is.

In summary, don't be surprised if the Fed announces the end of QE 2.0 in June, causing markets worldwide to collapse in reaction.  However, seeing that experiment fail, the Fed will have to reverse course again and reinstitute "stimulative policies", flooding equities and the bond markets with massive liquidity.  Wash, rinse, repeat...

The alternative scenario is if the Fed continues QE uninterrupted beyond June, as the doves within the Fed override the hawks again.  Either way, QE is baked into the cake, interrupted or otherwise.   Long-term, this remains bullish for precious metals, even if there are clouds on the horizon short-term.

What are the investment thesis ramifications?  Taking partial profits on outsized gains may be prudent--with an eye towards re-entering the precious metals complex at lower prices.  Aggressive traders may even short the market, but be forewarned that shorts have been torched for two years trying to time the market, anticipating a drop despite accommodative Fed monetary policies.  The Bernanke Put has been in play for 2 years now.  Don't fight the Fed is a truism, especially in this age of surreptitious market manipulation.

Having said that, if the Fed follows through with tightening, it makes sense to follow their lead and ease up on the accelerator pedal.  Ultimately, it will merely be jawboning, and they will have no other choice but to resume QE.  This will catalyze the next nominal rally in equities, and a surge in commodities.

See disclaimers in the side bar.

President Andrew Jackson quote

I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the Bank. You tell me that if I take the deposits from the Bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I have determined to rout you out and, by the Eternal, (bringing his fist down on the table) I will rout you out.  -  President Andrew Jackson addressing the US central bank in 1834.
Some things never change.

Monday, March 7, 2011

Obama Says NATO Considering Military Options Against Libya

http://www.zerohedge.com/article/obama-says-nato-considering-military-options-against-libya

I noticed numerous fighter jets running day-long exercises along the California coast on Saturday.  I also noticed Camp Roberts along the 101 highway was teeming with activity.  The base has been dormant for decades previously.

Physical Silver (PSLV) Premium To NAV Surges To Record High

http://www.zerohedge.com/article/physical-silver-pslv-premium-nav-surges-record-high

For what it's worth, Blythe Masters is the doyenne of JPMorgan's commodities trading desk.  The huge perma-short position in silver futures must feel like a noose around the neck.

Charles Biderman On How The Fed Continues To Rig The Market And Why There Will Be A QE 3...And 4

Paramount Gold Announces More Positive Results from Nevada Project: New Resource Estimate in Progess

Thanks to Dick for providing updates on PZG's new resource estimate.

http://ih.advfn.com/p.php?pid=nmona&article=46760896&symbol=PZG

These positive results on the Sleeper Mine provided a nice 7% boost in the price per share today, as we speculated it would last month.

http://finance.yahoo.com/q?s=pzg&ql=1

Look for further drill results from their San Miguel project.

See disclaimers in the side bar.

Disclosure:  long PZG shares.

Broke Town, U.S.A.

Thanks to Kitty for this submission.

http://www.nytimes.com/2011/03/06/magazine/06Muni-t.html?ref=magazine

US Dollar Very Long Term Chart: Emperor et Ses Amis du Vins

http://jessescrossroadscafe.blogspot.com/2011/03/us-dollar-very-long-term-chart.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+JessesCafeAmericain+%28Jesse%27s+Caf%C3%A9+Am%C3%A9ricain%29
This is what the Federal Reserve desires: to repair its economy and unpayable debts by expanding its monetary base while exporting much of the negative effects of such monetary inflation to the rest of the world, keeping things relatively stable to maintain confidence in their paper. And this is why the central banks attempt to control the price of less manageable currencies such as gold and silver. Silver is the most problematic because its supplies are difficult for the banks, as they have none of their own, and the world has largely depleted its discretionary strategic stockpiles of this metal. Long term price suppression breeds underinvestment and the inevitable shortages of real goods.

Rather than rallies through economic vitality and recovery, the dollar rallies have been marked by relative declines primarily in the euro on their sovereign debt problems. It is almost like a couple of drunks leaning on each other for support, except that the US is picking the Eurozone's pockets while they do it.

Oil, Gold Rise And Silver Surges To Record On MENA Contagion And Greenspan’s “Faulty” Fiat Currency Concerns

http://www.zerohedge.com/article/oil-gold-rise-and-silver-surges-record-mena-contagion-and-greenspan%E2%80%99s-%E2%80%9Cfaulty%E2%80%9D-fiat-currency

GREENSPAN ON CURRENCY:
"When you have two faulty currencies, and the euro and dollar are both faulty, but probably almost equally faulty, so that the exchange rate between the dollar and Euro is not really moving all that much."



GREENSPAN ON GOLD:
"What the price of gold is saying, is that there elements within the marketplace that feel very uncomfortable with respect to what is going on generally, and its not an accident that you're finding that central banks are going in to buy gold and one of the reasons is gold is historically one of the rare media of exchange that doesn't require any collateral or backing, counter signatures, gold is universally acceptable as a means of payment."

GREENSPAN ON THE GOLD STANDARD:
"I'm not saying we can or should go back on the gold standard, that would be extremely difficult, and it would require such cast changes that this society has made no indication that it wants to do that, but I do think to get a sense of the stability of the system, watching the price of gold is not too bad."