IMF expands crisis-prevention credit lines

http://www.bloomberg.com/news/2010-08-30/imf-expands-crisis-prevention-credit-lines-extends-duration-to-two-years.html

Its flexible credit line, reserved for countries that pre- qualify based on sound fundamentals, will be extended for up to two years and have no set limits.

Strauss-Kahn has sought to enhance the institution’s role as a buttress against financial crises, convincing member countries to pledge $500 billion in emergency funds in 2009. Today’s decision is part of a push before the Group of 20 summit in November to attract more countries to its contingency financing program.

Talks are ongoing with member countries to raise the IMF lending capacity to $1 trillion as part of G-20 discussions.

Guess which member country pledges the largest capital funding to the IMF? The US does, which also happens to be the most indebted country. In essence, the US taxpayer will bail out other sovereign countries at risk of default. Meanwhile, the US itself is in danger of defaulting on its own financial obligations.

The theater of the absurd has reached the hallowed halls of the IMF, the ECB, and the Fed. They are following the Zimbabwe version of Moore's Law in doubling their deficits every 18 months in lieu of increasing the number of transistors on a semiconductor chip.

Rare earth metals

I've been warning readers on the dangers of China cornering the market on rare earth metals. Expect supply chain disruptions and prices to rise on items the world wants, such as IPhone's, hybrid car batteries, and other high-tech gadgets. Inflation--what inflation?

http://www.telegraph.co.uk/finance/newsbysector/industry/mining/7970872/Backlash-over-China-curb-on-metal-exports.html

Ron Paul: Depression is coming

http://www.newsmax.com/InsideCover/ron-paulobamadepression-taxes/2010/08/30/id/368750

Rep. Ron Paul, R-Texas, says depression looms for the economy and that failure to extend the Bush tax cuts for everyone would hasten the process.

“It will be devastating if the (tax) breaks aren’t renewed,” the 2008 presidential candidate told Newsmax.TV.

Even without expiration of the tax cuts, the economy is headed for depression, he predicts. “That will just make it worse much faster.”

Paul is introducing a bill next year for the nation’s gold reserves to be audited.

“It’s common sense for the country to know what it owns,” he said. The last audit was in the 1970s, and a lot of central banks have sold or loaned gold since then.

“Hopefully someday there will be a gold currency, or they will return gold to the people because it was taken from them in the 1930s at a very low rate,” Paul said.

“We should know what we own. Why should anybody oppose us counting what’s in the bank, in case we make use of it, just because too many questions are raised about what central banks have done in the last 10 to 15 years?”

And that’s the main reason the Fed successfully opposed his proposal this year for an audit of the central bank, Paul says. “They didn’t want us —as a people or Congress — to know what deals they made with other central banks.”

Transparency is the main issue for the Fed, says Paul.

State default risk

Click on chart to enlarge.

http://www.bespokeinvest.com/thinkbig/2010/8/30/state-default-risk.html

Soros and gold re-revisited

http://gregnguyen.blogspot.com/2010/07/soros-and-gold-revisited.html

And today, here is a Bloomberg article on it.

http://www.bloomberg.com/news/2010-08-30/gold-rallying-to-1-500-for-analysts-as-soros-s-bubble-inflates.html

American capitalism gone with a whimper

http://english.pravda.ru/opinion/columnists/107459-0/

Prime Minister Putin, less then two months ago, warned Obama and UK's Blair, not to follow the path to Marxism, it only leads to disaster. Apparently, even though we suffered 70 years of this Western sponsored horror show, we know nothing, as foolish, drunken Russians, so let our "wise" Anglo-Saxon fools find out the folly of their own pride.

Again, the American public has taken this with barely a whimper...but a "freeman" whimper.

An elite depression

This is one of the best articles I've read on the economic and financial ramifications of an incumbent power elite.

http://www.thedailybell.com/1320/Is-it-an-Elite-Depression.html

The true value of gold

This is a balanced, longish article on gold, taking into account it's from a mainstream financial media source, the Financial Times, which traditionally has had a negative bias against alternative asset classes. It has been a slow death dance for all currencies for decades, and perhaps this signals the beginning of the end for paper numeraire.

http://www.ft.com/cms/s/2/e9378c6c-b0b8-11df-8c04-00144feabdc0.html

The author includes a quote by George Bernard Shaw at the end of the article:

“You have to choose between trusting the natural stability of gold and the natural stability of the honesty and intelligence of the members of the government. And with due respect for these gentlemen, I advise you… to vote for gold.”

National debt is biggest threat to national security

http://www.executivegov.com/2010/08/mullen-national-debt-is-a-security-threat/

The national debt is the single biggest threat to national security, according to Adm. Mike Mullen, chairman of the Joint Chiefs of Staff. Tax payers will be paying around $600 billion in interest on the national debt by 2012, the chairman told students and local leaders in Detroit.

“That’s one year’s worth of defense budget,” he said, adding that the Pentagon needs to cut back on spending.

Concentration of short positions at the COMEX

Click on chart to enlarge.

The concentration of short positions in COMEX gold and silver among a few bullion banks suggests price suppression and manipulation.

Green Cross receives approval for Peramivir in South Korea

http://www.businesswire.com/news/home/20100816005534/en/BioCryst%E2%80%99s-Partner-Green-Cross-Receives-Marketing-Manufacturing

Peramivir has now received regulatory approval in both Japan and South Korea. In the US, Peramivir is in phase III clinical trials

Uncle Scam

http://www.caseyresearch.com/editorial/3621?ppref=ZHB192ED0810E

US economic data alarming

http://www.bloomberg.com/news/2010-08-27/pimco-s-el-erian-says-alarming-data-signals-show-u-s-economy-faltering.html

U.S. economic data are “alarming,” signaling the recovery is losing momentum, Mohamed A. El-Erian, Pacific Investment Management Co.’s chief executive officer, wrote in an opinion piece in the Washington Post.

Unemployment is high, consumer credit is shrinking and small companies are having trouble obtaining bank lines of credit, wrote El-Erian, who is also co-chief investment officer at Pimco, which runs the world’s largest bond fund. Increased government spending and additional debt purchases from the Federal Reserve are unlikely to spur a rebound, he wrote.

Gee, ya think?

Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York, cut his estimate for growth this quarter to a 2 percent annual pace. As recently as two weeks ago, he projected 4.6 percent.

Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut, estimates a 2.3 percent rate of expansion, down from a June forecast of 4.1 percent.

These geniuses forecasted over 4% growth earlier? Their clients must be feeling warm and fuzzy on their stellar accuracy.

Fed prepared to act if economy worsens

In the "No $hit" category of Fed press conferences, Chairman Bernanke announced that the Fed was "prepared to act if the economy continued to weaken."

http://www.nytimes.com/2010/08/28/business/economy/28fed.html?_r=1

QE 2.0 is just around the corner. The problem is it won't end there.

Melanoma

I invested in shares of MELA last year on its promising MelaFind technology to detect melanomas with 98% accuracy, way above the expected 60 - 70% accuracy by expert dermatologists. I took profits in MELA despite my continued optimism for MelaFind's eventual approval. The commercialization roll out plan wasn't clear to me, and in fact, the PDUFA date was delayed until November 18, 2010. MELA shares may rise in anticipation of FDA approval.

In a related peer-reviewed article, a surprising trend for melanoma was revealed.

http://www.onenewspage.com/news/Health/20100827/14464544/Health-and-melanoma-cancer-using-MelaFind.htm

According to the New England Journal of Medicine published Wednesday August 25th 2010, 68,000 are diagnosed with melanoma each year. While it was believed that whites with the fairest skin and blue eyes were most at risk the number are 4.5% of whites, 8% of Latinos, and 15% of African Americans. Now the good news is that an experimental tool named MelaFind is like the same outer space recognition tool that is used in outer space. Dermatologists claim that while they find melanomas two thirds of the time MelaFind finds melanomas 98% of the time, and compares it to other melanomas both...

See disclaimers in the side bar.

Disclosure: no position in MELA. A family member still has a position in MELA.

David Letterman on Obama's 6th vacation

Rosenberg: this is a depression

http://www.youtube.com/watch?v=cbATZcck0Vg&feature=player_embedded

Watch how his depressing message is cut off by the CNBC anchor at the end of the video.

New home sales in July

http://www.zerohedge.com/article/rosenberg-explains-why-not-one-new-home-priced-over-750000-sold-july

The high-end market, in particular, is under tremendous pressure. In fact, it is becoming non-existent. Guess how many homes prices above $750k managed to sell in July. Answer — zero, nada, rien; and for the second month in a row."

Central bankers believe in gold

In a stunning reversal from previous polls, central bankers and sovereign wealth fund managers believe gold will be the best performing asset for the rest of 2010.

http://www.bloomberg.com/news/2010-06-22/gold-to-be-best-performing-asset-for-the-rest-of-the-year-ubs-poll-finds.html

The ethics of gold

http://english.alrroya.com/node/54671

Police force cutbacks

http://www.usatoday.com/news/nation/2010-08-25-1Anresponsecops25_ST_N.htm

Budget cuts are forcing police around the country to stop responding to fraud, burglary and theft calls as officers focus limited resources on violent crime.

The true national debt

http://theburningplatform.com/blog/2010/08/24/the-true-national-debt/

Gold and Economic Freedom, by Alan Greenspan, 1966

This was his opinion before he was Fed Chairman, obviously.

http://www.constitution.org/mon/greenspan_gold.htm

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard.

The contents in a military survival pack

"One .45-caliber automatic, two boxes ammunition, four days' concentrated emergency rations, one drug issue containing antibiotics, morphine, vitamin pills, pep pills, sleeping pills, tranquilizing pills, one miniature Russian phrase book and Bible, one hundred dollars in rubles, one hundred dollars in gold, five packs of chewing gum, one issue prophylactics, three tubes lipstick, three pair of nylon stockings."

"Shoot, a fella could have a pretty good weekend in Vegas with all this stuff." Haha...

Commercial property owners choosing to default

Much like homeowners strategically defaulting on underwater properties, large commercial real estate owners are choosing to walk also.

http://www.sott.net/articles/show/214217-Commercial-Property-Owners-Choose-to-Default

US Treasury bond bubble?

http://www.zerohedge.com/article/marc-faber-and-peter-schiff-take-bond-bulls-rosenberg-faber-gentlemens-bet

As for the Faber-Schiff view, no surprise: Peter encapsulates it best: "the bond market is the mother of all bubbles right now, and when it bursts the losses will dwarf the combined losses of the stock market bubble and the real estate bubble. There is no way for the government to pay this money back."

Schiff notes: "I am afraid is that when people realize we can't pay this money back, we aren't going to be able to roll over all this short-term debt. And so it's not just paying the interest, we are going to have to retire the principal." Peter Schiff is correct that inflating our way out of this debt bubble is a lose-lose proposition. Schiff also notes the stupidity of crowds, by highlighting that 10 years ago everyone was chasing risk, by piling into stock market funds, followed by everyone knows what. The outcome for bond investors is clear: "this decade is going to be the worst decade for bonds in US history. Bond holders are going to get wiped out. Either the government is going to default, or it is going to inflate, but either way the people holding the bonds, are holding the bag."

Faber then joins in: "there isn't much upside in treasuries unless it is for the short term. When I look ten years ahead I don't want to have my money in USTs." His main concern is that due to high budget deficits, there is a good chance that these will go even higher, and as a result the interest payments on government debt will become unbearable. As for the foreign bid, Faber also points out their prior folly: "In 1999/2000 foreigners also wanted to buy the NASDAQ and what happened afterwards is a major collapse. I would not look at foreign buying as a very intelligent leading indicator." In other words Faber just called the Chinese, UK and Japanese permabid in UST moronic. Faber is also not a big fan of a 30 year bond market (since 1981). "I would rather buy an asset class that has been in a bear market." Faber would buy farm land, agricultural commodities, and that gold belongs in a portfolio.

Probably the best argument of the debate is Schiff's observation that the government is not expanding the economy with the newly printed money: no money is being invested in productive capacity, it is not expanding the tax base, and as a result the economy is getting weaker.

Faber, is laconic, in saying that the UST market bottomed out in 1981 when yields went over 15% on the 10 Y, and topped in December 2008, at 2.1%, which was "the peak of the bubble."

Gold and silver go vertical on anticipation of QE 2.0

Click on chart to enlarge.

http://www.zerohedge.com/article/gold-goes-vertical-goldman-reiterrates-harsh-qe-expectations

Existing home sales plunge

http://www.zerohedge.com/article/existing-home-sales-plunge-272-record-drop-expectations-134

Again, what recovery? We are almost 3 years into this recession/depression. Recessions, on average, last 18 months.

When money dies, by Adam Ferguson

http://university.unitedstatesliberty.org/654/textbooks/adam-fergusson-when-money-dies-nightmare-of-the-weimar-collapse/

Cumulative bank failures reported by FDIC

Click on chart to enlarge.

Some recovery, eh?

Greek yachts on fire-sales

http://www.zerohedge.com/article/market-yacht-head-athens-alimos-marina-blue-water-specials

California forces state agencies to accept IOU's

http://www.bloomberg.com/news/2010-08-23/california-measure-would-force-state-agencies-to-take-ious-for-payments.html

Enron accounting has bankrupted America

http://finance.yahoo.com/tech-ticker/%22enron-accounting%22-has-bankrupted-america-u.s.-deficit-really-202-trillion-kotlikoff-says-535354.html?tickers=udn,tlt,tbt,uup,TIP,%5Egspc,GLD&sec=topStories&pos=9&asset=&ccode=

“Forget the official debt,” he tells Aaron in this clip. The “real” deficit - including non-budgetary items like unfunded liabilities of Medicare, Medicaid, Social Security and the defense budget - is actually $202 trillion, the professor and author calculates; or 15 times the “official" numbers.

“Congress has engaged in Enron accounting,” says Kotlikoff, who recently penned an op-ed for Bloomberg entitled: The U.S. Is Bankrupt and We Don't Even Know It.

Is gold a commodity?

http://online.wsj.com/article/SB10001424052748703908704575433670771742884.html?mod=WSJ_hps_sections_personalfinance#printMode

Deep discounts aren't enough to lure shoppers

http://finance.yahoo.com/news/Some-stores-finding-deep-apf-2686642153.html?x=0&sec=topStories&pos=3&asset=&ccode

Dr. Keynes killed the patient

http://www.realclearmarkets.com/articles/2010/08/20/dr_keynes_killed_the_patient_98632.html

American consumers are trying their best to deleverage. In terms of the story, the patient is actually trying to lose weight. But the government is blocking deleveraging and trying to boost consumption. They are forcing food down the patient's throat. According to the Flow of Funds Report, households reduced debt at a 2.4% annualized rate ($330 billion) during Q1 of 2010. Meanwhile, the federal government was piling on debt at an 18.5% annual rate ($1.44 trillion). Since every dollar of government debt is a promise to tax the private sector in the future with interest, this public spending spree effectively negated the Herculean efforts of the private sector to return to a sustainable path.

That's where the arrogance of Washington is really apparent. Scores of millions of American consumers have made the decision that reducing their debt burden is in their best interests right now. But a few hundred individuals in government believe they know better than the collective wisdom of the entire free market. By leveraging up the public sector, they have used their power to confiscate our savings. In short, they are forbidding us from following the common sense path to fiscal health.

Iran loads first nuclear power plant

http://www.zerohedge.com/article/iran-loading-fuel-its-first-nuclear-power-plant-israel-warns-reactor-use-totally-unacceptabl


http://www.reuters.com/article/idUSLDE67K01D20100821

Former Fed governor Fred Mishkin on Iceland

Iceland's economy collapsed in 2008, as did its currency. Fred Mishkin is a former governor in the Federal Reserve Bank. He's also an Ivy Leaguer from Columbia University. In other words, he has impressive credentials as a respected economist in academia and within the government. Watch how he squirms in the video when pressed with tough questions.

America will soon find out we have been duped by our government leaders and economists, in my opinion, of course. "Faith in the central bank" is a contradiction of terms.

Quant funds are shrinking

Not only are retail investors retreating from the stock market, but so are the "smartest-guys-in-the-room" quant funds. It appears the smart money lost big in 2008.

http://www.nytimes.com/2010/08/20/business/20quant.html?_r=2&dbk

With fewer retail and institutional participants, any liquidity-induced market rallies will be short-lived and shallow, in my opinion.

California facing IOU's again

http://www.ft.com/cms/s/0/3e65bb32-abb9-11df-9f02-00144feabdc0.html

Mortgage aid program is a bust

http://www.google.com/hostednews/ap/article/ALeqM5gyoZ46fqVwnds84XZfpZHVMrkGCgD9HNA66G0

FDIC failed bank list

I've blogged this link before, but the most recent collapse of banks has a disproportionately high number from California. Florida and Nevada are also competing for the unenviable throne of banks under receivership.

http://www.fdic.gov/bank/individual/failed/banklist.html

The erosion of America's middle class

http://www.spiegel.de/international/world/0,1518,712496,00.html

thestreet.com is bearish on ARNA--again

Adam Feuerstein, thestreet.com's biotech analyst is once again bearish on shares of Arena Pharmaceuticals. He was also bearish on shares of DNDN and HGSI before they appreciated more than 10-fold from their lows. And he was bullish on VVUS before the advisory committee rejected anti-obesity drug Qnexa, tanking shares more than 60% the next day.

http://www.thestreet.com/story/10829837/arena-pharma-deja-vu-danger.html

In other words, his track record for predicting winners and losers is spotty at best.

Meanwhile, the editors of the New England Journal of Medicine and the Formulary journal, the most respected peer-reviewed medical journal and peer-reviewed drug management journal, respectively, were overwhelmingly positive of ARNA's Lorcaserin benefits for obese and morbidly overweight patients, balanced against a clean safety profile.

Mr. Feuerstein is a "Senior Columnist" specializing in biotech and works for thestreet.com, a public company being investigated by the SEC for accounting irregularities.

http://www.zerohedge.com/article/jim-cramers-thestreet-being-investigated-sec

thestreet.com is also a defendant in a lawsuit seeking $250 million in damages for business defamation, product disparagement, and injurious falsehood.

http://wallstreetpit.com/22485-generex-gnbt-launches-250mln-lawsuit-against-thestreet-com-tsmc

For what it's worth, Mr. Feuerstein has a bachelor's degree in political science from Emory University.

See disclaimers in the side bar.

Disclosure: long shares of ARNA.

Tipping points

http://www.zerohedge.com/article/guest-post-preserve-and-protect-mapping-tipping-points

The downfall of western civilization

* 0:45 The credit growth since the end of the Gold Standard, along with consumer debt, and the wealth we've created in the last 40 years is based on credit, not on "good times."
* 2:55 Government post financial crisis have patched things up for the banks with $20 trillion, but the same problems are there. And none of this has helped people, with surging unemployment rates.
* 5:00 Austerity measures will lead to deflationary collapse, and banks will collapse in this scenario because none of the loans will be repaid.
* 6:05 The long trends are now a structural decline of the west, which could last 20-100 years, and the east will rise. But China and India will suffer during this correction, with their domestic economies pulling them out of it faster.
* 7:10 Gold will play a major role in the future because it will be part of a future reserve currency.
* 8:23 Gold merely reflects the printing of money, 1 ounce of gold is supposed to buy a man's suit throughout history.

Gold vs. silver

Click on chart to enlarge.

Yes, I'm a self-admitted gold bug, but I'm actually more bullish on silver. Here's why, according to John Williams of shadowstats.com:

Gold and Silver Highs Adjusted for CPI-U/SGS Inflation. Despite the June 28th historic high gold price of $1,261.00 per troy ounce, gold and silver prices have yet to approach their historic high levels, adjusted for inflation. The London afternoon fix, per Kitco.com of January 21, 1980 would be $2,382 per troy ounce based on July 2010 CPI-U-adjusted dollars... and would be $7,727 per troy ounce in terms of SGS-Alternate-CPI-adjusted dollars [all series not seasonally adjusted].

In like manner, the all-time high price for silver in January 1980 of $49.45 per troy ounce [London afternoon fix, per silverinstitute.org] has not been hit since, including in terms of inflation-adjusted dollars. Based on July 2010 CPI-U inflation, the 1980 silver price peak would be $139 per troy ounce and would be $450 per troy ounce in terms of SGS-Alternate-CPI-adjusted dollars [again, all series not seasonally adjusted].

Note that his calculations for inflation are different than the official CPI data released by the US Bureau of Labor Statistics, which have been altered over the years and hence, grossly understate true inflation.

Also, silver has underperformed relative to gold, as it is an industrial metal used in many different applications, and with weakness in global economies, silver's price has been dampened. But it has appreciated since the market meltdown in 2008 because investors are starting to realize that silver is also a store of value, much like gold is. And because it is not hoarded like gold is, the pending shortage of physical silver will exacerbate the squeeze on silver prices.

Signs of a third world country

http://www.activistpost.com/2010/08/10-signs-us-is-becoming-third-world.html

John Embry on what else--gold and silver

http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=109856&sn=Detail

For profit educators cratering

http://www.marketwatch.com/story/for-profit-education-stocks-plunge-2010-08-16

I called this last year:

http://gregnguyen.blogspot.com/2009/03/educators-cratering.html

http://gregnguyen.blogspot.com/2009/04/short-squeeze-vs-selling-panic.html

Without a revolution, Americans are history

http://www.zerohedge.com/article/founder-reaganomics-says-without-revolution-americans-are-history

China favors Euro over USDollar

Be careful who you accuse of currency manipulation. They may stop buying your bonds.

http://www.emirates247.com/markets/gold/tons-of-gold-imports-turn-to-dust-on-arrival-2010-08-15-1.279082

China, whose $2.45 trillion in foreign-exchange reserves are the world’s largest, is turning bullish on Europe and Japan at the expense of the U.S.

Congress, Geithner, Bernanke and Obama have been incessantly accusing the Chinese of manipulating their own currency lower in order to maintain a competitive advantage in exports. What our government officials don't understand is that the Chinese are merely pegging the yuan to the dollar, so any manipulation the Chinese is doing is a direct result of the US Treasury and Fed manipulating the dollar.

Also, our leaders should be mindful that you shouldn't rattle the cage of your biggest creditor. As threatened, the Chinese are net sellers of US Treasury bonds, as they seek diversification away from the USDollar and dollar-denominated assets. They are buying gold and other foreign currencies to reduce their exposure to a debased reserve currency, the USDollar.

Threats of retaliation by raising tariffs in a trade war is exactly the wrong recipe for stimulating the economy. Perhaps our government economists should study the Great Depression to see how well nationalistic trade wars worked out.

Counterfeit gold bars

As the price of gold rises, counterfeits are starting to become more frequent.

http://www.emirates247.com/markets/gold/tons-of-gold-imports-turn-to-dust-on-arrival-2010-08-15-1.279082

Jim Sinclair's economic formula in 2006

The only thing he has been wrong about (so far) is his prediction for rising long-term interest rates. But there is still time for that.

http://jsmineset.com/jims-formula/

Debt to GDP ratio

Click on chart to enlarge.

This chart that should be a wake-up call for all Americans, but unfortunately, it will mostly fall on blind eyes and deaf ears.

I've blogged about this often, and this blog re-affirms my contention points.

http://theeconomiccollapseblog.com/archives/one-economic-chart-that-you-should-permanently-burn-into-your-memory

As you can see from the chart below, the total of all debt (government, business and consumer) is now somewhere in the neighborhood of 360 percent of GDP. Never before has the United States faced a debt bubble of this magnitude....

Us doom-and-gloomers have to stick together.

Game of chicken between fiscal and monetary authorities

http://www.zerohedge.com/article/willem-buiters-game-theoretical-explanation-interaction-between-central-banks-and-treasuries

To sovereign debt holders, the game is more like "musical chairs."

Tax revolution

http://www.bloomberg.com/news/2010-08-16/it-takes-a-tea-party-to-start-a-tax-revolution-caroline-baum.html

China is dumping US Treasuries and equities

The fear that foreign holders of US Treasury bonds are diversifying away from US Dollar-denominated assets is materializing. China, the largest holder of US Treasuries, is doing exactly that, while investing in natural resource companies and assets.

In order to prevent bond auctions from failing, mysterious buyers from England are stepping up to the plate to fill in the gap. Which is surprising since the UK may possibly be in worse fiscal shape than the US.

http://www.zerohedge.com/article/tic-data-confirms-china-bond-sell-continues-foreigners-dump-corporate-bonds-and-stocks

Gold market manipulation unraveling

https://marketforceanalysis.com/articles/latest_article_310710%20.html

But unallocated gold is not gold at all. It is not gold that has been deposited that is loaned to someone else. It is gold that has been deposited that is loaned simultaneously to many other people. I have estimated that for each ounce in the vault the bullion banks have loaned or sold 45 ounces. So this appears to confirm my thesis that the BIS has been credited 346 tonnes of ledger entry gold in the BIS unallocated gold accounts held with the bullion banks. This makes the BIS an “unsecured creditor” of the bullion banks as defined by the London Bullion Market Association (LBMA) in their description of “unallocated account” holders.

The FT story suggests at least 10 bullion banks needed physical gold bullion desperately. This looks like a rerun of the 1960’s London Gold Pool fiasco where central banks dishoarded gold to meet massive investor demand in a futile attempt to maintain a gold price of $35/oz.

I have spelled out in recent articles that there is a run on the bullion banks that has commenced and is gaining momentum. Investors and institutions are waking up to the fact that “unallocated gold” is not gold at all but just an unsecured promise for gold. They are now starting to demand delivery and as there is only one ounce backing each 45 ounces that are claimed the situation is turning into what will be a short squeeze of epic proportions.

So investors have bought a record amount of “physical gold” which is actually paper gold which they have never seen and only about 2.3% of what has been sold actually exists. The bullion banks are “awash” with liabilities for the record amount of gold they are supposed to be holding. Investors are now distrusting the bullion banks and are asking for delivery so is it too surprising that the record amount of “physical gold” sales has led to a record gold swap being transacted to give the bullion banks liquidity?

The IMF has been surreptitiously selling gold at a clip of around 15 tonnes per month every month since February without any official announcements and without disclosing the recipients. This is another sign that the bullion banks are in serious trouble.

When 45 ounces of gold are sold but only one real ounce is sourced the result is a massive suppression of the gold price. But the converse is also true; when 45 ounces of gold are demanded for only one that is in the vault the price explosion is beyond imagination.

What is becoming unraveled is not the mystery of the BIS gold swaps as claimed by the FT but the gold price manipulation scheme itself.

JPMorgan adds to position despite downgrade

On August 2, 2010, JPMorgan Chase analyst Kory Casimov downgraded Arena Pharmaceuticals to "Neutral" from "Overweight", reaffirming a $6 price target. Shares declined as a result of the downgrade.

ttp://finance.yahoo.com/news/Arena-shares-fall-on-JPMorgan-apf-3217542724.html?x=0&.v=1

This downgrade occurred two weeks after JPMorgan had upgraded Arena on July 16, 2010, after competitor Vivus's anti-obesity drug Qnexa was rejected by an advisory committee.

Why the sudden flip flop from upgrade to downgrade, after positive news? Shares of ARNA had soared from below $3 to a peak of $8 a month later, after several positive developments. So perhaps ARNA was trading at frothy levels. But with pivotal events of Lorcaserin's own advisory committee review on September 16, 2010 and a PDUFA date of October 22, 2010, shares of ARNA could rise even more on positive outcomes.

But a closer look at ownership holdings triggers more questions than answers on JPMorgan's motivation for the upgrade and subsequent downgrade.

Records show that as of August 12, 2010, JPMorgan had a new long position for ARNA shares:

2010-08-12 2010-06-30 13F-HR J P Morgan Chase And Co -2.35% Institution 43,082 New Holding 43,082

Which brings up the question: Why would JPMorgan downgrade ARNA--only to build a new long position in ARNA shares? Could their downgrade allow their clients to cover their short positions at a lower price? Or perhaps could they enable long clients to buy in at a lower price--after missing the big run up? A cynic would deduce the downgrade simultaneously provided an escape hatch for trapped shorts, and a lower entry point for long clients who missed the boat.

Best-case, it's a conflict of interest to issue a downgrade and then build a long position. Worst-case, this could be blatant manipulation of a stock.

And Wall Street wonders why retail investors are retreating from markets. Perhaps they're tired of being fleeced by investment firms more interested in their own proprietary trading desk than their fiduciary duties to their retail clients.

Fannie and Freddie bond upheaval

This must-read article requires a free online subscription to Financial Times.

http://www.ft.com/cms/s/0/3e726a68-a640-11df-8767-00144feabdc0.html

GLD - the new CDO in disguise

View the presentation by Hinde Capital.

http://www.hindecapital.com/docs/hil_reports/Hinde%20Capital%20-%20Precious%20Metals%20ETF%20Alchemy%20Aug%2012%202010.pdf

Listen to the audio interview.

http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/8/12_Ben_Davies_files/Ben%20Davies%208%3A12%3A2010.mp3

Inflation vs. deflation

The battle between equities giant Warren Buffett of Berkshire Hathaway and PIMCO's Bill Gross, the biggest bond fund manager, will be decided on whether inflation or deflation win out going forward. Buffett has increased his position in short-duration Treasuries, betting that inflation will cause longer-dated Treasury bond yields to rise. Gross is betting that long-term T-bond yields will continue to decline, as global economic growth declines, causing deflation.

http://www.zerohedge.com/article/buffett-vs-gross-or-inflation-vs-deflation-who-right

My guess is that both will be right. Long-expiry T-bond yields will continue to decline short-term in a low-growth environment, and demand for credit will be muted. However, as economic conditions continue their descent, central banks worldwide will inject liquidity in an attempt to stimulate their economies. The opposite effect will occur, as paper currencies are further debased, diminishing the standard of living for billions. Monetary stimuli will inevitably increase the prospects of inflation, especially if the velocity of money accelerates. The bond vigilantes will sense weakness in various foreign currencies, pushing up sovereign debt yields.

With the global economy intractably connected, sovereign debt crises will leapfrog from country to country, eventually reaching the shores of US, while the reserve status of the US Dollar will come into question.

The best gold interview of 2010

Enclosed is insight from a primary dealer of precious metals.

http://www.caseyresearch.com/displayCdd.php?id=509

Golf musings

I'm watching the PGA championships on TV right now, and a couple thoughts come to mind.

1) Tiger Woods' swing is in trouble. He's over-swinging, and dipping his head and body on the downswing, trying to add distance, which causes him to hit it fat. It's an amateur move usually caused by physical restrictions of weekend hackers with bad postures, but in Tiger's case, it's an insecurity embedded in his head. When you're not striking the ball well and with distance, the natural response is to try to swing harder. But all that causes is off-center contact, which contributes to loss of distance. And what you have then is a downhill spiral of swing mechanics, and an upward spiral of golf scores. This causes angry golf and potentially an expensive round of broken golf clubs.

That's why golf is such a brutal and unforgiving sport. Golfers in slumps receive advice from every corner, and pretty soon the swing becomes mechanical as the brain is stuffed full of bad swing thoughts. Sometimes the only way out of a slump is to push "delete" and stop thinking. A clear mind is the best antidote for a muddy swing. Don't swing harder; swing smoother.

Far be it for me to give golfing advice to the world's best ever player, but videos of his current swing expose his swing flaws.

2) As that may be, Tiger needs to go back to dating escorts and porn stars. He needs to do something, because as bad as his swing is, his putting is looking mortal. He used to be automatic up to 12 feet--he's now missing 2-footers, normally gimme's for even hackers. Obviously, he's showing his nerves and he needs to release that tension. Some people just aren't meant to be married--or monogamous. And the golf industry would do well to help him come to this realization. Because as a rehabilitating addict (notice he never mentions the phrase "sex addict"), his golf game is in the toilet.

Why should the PGA intervene? Because TV viewership is down 70% now that Tiger is no longer contending for championships. Even players normally jealous of his attention will plead with him to go back to his old ways. Because with his ascent in the golfing world and crossover appeal to the mainstream, their paychecks also got much bigger due to more generous corporate sponsorships. If his poor play keeps up, advertising rates will plummet to pre-Tiger levels, especially in light of a weakened economy.

3) Speaking of the PGA, they run commercials during TV breaks emphasizing the PGA's considerable charity work. They've tried to downplay the elitist nature of golf, choosing to focus on how it's a sport for the every day man, woman, and child. But the voice-over in one of the commercials belongs to Michael Douglas, the famous actor who is an avid golfer. Surely, he's among the elite, right? Yes and no.

Due to his reputation as a Hollywood playboy in real life and in his movie roles, Mr. Douglas was denied a country club membership in the three country clubs near his residence in Montecito, adjacent to Santa Barbara, California. He was an ultra-successful actor, wealthy, famous, with pedigree (Kirk Douglas was his father), white, and an entertainment industry icon with an international following. Yet, his reputation as a womanizer, whether feigned or real, derailed his otherwise ideal profile for these stuffy country clubs. The golfing Establishment rejected him. So what did he do? He built his own country club.

How ironic is it that he is now a spokesman for the PGA, the governing body of golf in the US, and the sport's ultimate promoter. I'm sure some old fogeys in conservative Montecito are rolling over in their golf carts.

4) Another commercial during coverage of the PGA golf tournament depicts the safety of a Mercedes-Benz vehicle. Granted, the choice of sponsor certainly fits the right demographic for a golf viewing audience. But the message was disturbing. Catering to the affluent's obsession with (perceived) dangers and safety issues, the commercial implies the luxury vehicle can help drivers veer away from imminent danger in case the driver literally falls asleep at the wheel. In fact, it goes beyond implication--it downright shows testimonials of drivers who did fall asleep but were somehow miraculously saved from death and destruction. It's a miracle, I tell you--a self-driving vehicle where the driver can fall asleep, or gab on the cell phone, whichever is more urgent at the time. Those damn distractions...

One of my idiosyncrasies is connecting seemingly irrelevant observations into a financial context. It annoys many people, unless my audience is of like-mind. So if you are not like me, stop reading now.

For the rest of you obsessed with finances and conspiracy theories, keep reading.

1) Tying this all together, in a barely coherent fashion, I've been a critic of the Fed and their Keynesian approach to managing economies. They believe they can control markets and economies by tampering with fiscal and monetary controls. They've effectively created recurring asset bubbles, unable to dampen the accompanying busts. The more they deploy credit expansion policies, the higher the debt levels, and the more destructive the deficits become to economic growth. The Fed and US Treasury push on a string, with the only beneficiaries being insolvent banks recapitalizing their balance sheet. Of course, Main Street doesn't benefit, because the aforementioned banks are hoarding their reserves, making a guaranteed return from the excess reserves, while the private citizens cannot receive loans. No credit means no capital and human investments, which means no hiring--not a quantum leap of faith.

Having said that, the only feasible path politicians have now is to continue handing out welfare to industries, home borrowers, the unemployed, bankrupt states, counties and municipalities. Never mind that the Federal government itself is insolvent. They'll just print money money and issue more debt. After all, our friendly allies in Russia, China, and the middle east oil cartel sovereigns will continue to fund our over-consumptive habits, right?

Recall my comments on the golf swing. The harder one swings, the LESS distance the ball flies. And the harder the Fed turns on the printing machine, the worse the economy becomes. Swing hard, and surely we'll all grow out of this mess. Hardly.

2) The next lesson here is know who you are, and know what you do well. If you're meant to be single, and singularly focused on playing golf, then stick with golf. Don't pretend to be someone you're not (in Tiger's case, a dedicated family man). Now that Tiger is going cold turkey on floozy gold diggers, he's finding he can't hit a golf ball straight. Tiger, do the PGA a favor, as well as your fellow golf pros. And the television networks. And the corporate sponsorships. And the whole golfing industry. They need the old Tiger back, because they are all hurting now. It's not just those at the top that are hurting. It's also the thousands of workers in the golf industry, from the local pro to the starter who makes sure you get out for a round on time. These guys are earning minimum wage--they won't be in the top tax bracket for a while. Golf doesn't have a Kobe, or LeBron, or even DWade. It only has you. And until you start pimp-busting--er, I mean pump-fisting again, they're going to miss that bonus check--the Tiger premium.

Please, for all of us weekend warriors...we need you too. Because it's hard for us to fantasize about hitting a golf ball like Duffy Waldorf.

3) The third message is be careful of social labels. Just because you are of certain skin color, pedigree, ethnic heritage, occupation, doesn't mean your social class status will be a benefit or a disadvantage in all venues. And just because the incumbent establishment has long-held traditions, doesn't make that establishment fair-minded or even right-minded. And just like Michael Douglas created his own country club, don't let others put you down. Sometimes, you can create your own reality.

4) Lastly, be careful of the creeping nanny-state mentality. The Mercedes vehicle commercial implies it is beneficial to have a car drive for you, and that you can depend on the car to prevent you from pending disaster. The reality is that while the car may have advanced safety features, it is still up to you navigate the car away from danger. You, your passengers, other drivers, pedestrians, and other people in the vicinity still require your responsible driving actions.

With respect to finances and retirement planning, do not depend on the government to take care of you. It is still your responsibility to plan your finances. Social Security, Medicare, Medicaid, other entitlement programs and pension funds are on track to insolvency, so don't believe government promises to take care of you in your golden years (the operative word being "golden"). The nanny-state may be alive and well, but don't rely on it being there when you expect it. Have a sound personal savings and investment plan in place, not just for income, but also as a hedge against inflation and a difficult investment environment.

Rick Santelli on government intervention

Rick Santelli goes thermonuclear on the Fed manipulating interest rates and its effect on the economy and housing industry.

Fooled by stimulus

This is another great commentary by Eric Sprott on the the failure of Keynesian economics and government stimulus programs.

http://www.sprott.com/Docs/MarketsataGlance/07_10%20Fooled%20by%20Stimulus.pdf

Pravda

In this op-ed, Murray Pollitt equates The Economist and Financial Times to Pravda, Joseph Stalin's propaganda machine.

http://www.gata.org/files/PollittMarketLetter-08-09-2010.pdf

Battle of the Wits

Figure out which one represents Goldman Sachs.



http://www.youtube.com/watch?v=TUee1WvtQZU

Goldman Sachs just put on a Strong Buy recommendation for gold. Short-term, buyer beware. Long-term, don't think short-term.

Section 8 waiting list

http://www.huffingtonpost.com/2010/08/11/thousands-wait-to-apply-f_n_678840.html

Visit msnbc.com for breaking news, world news, and news about the economy

http://www.myfoxdc.com/dpps/money/Hundreds-Hope-for-Federal-Housing-Assistance-20100811-am-sd_9118102

Economic collapse?

http://money.cnn.com/2010/08/11/news/economy/economic_collapse_GDP_unemployment.fortune/index.htm

Alexis De Tocqueville, author of Democracy in America, which was published that year, seemed to warn of this day when he wrote: "The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money."

US is bankrupt

http://www.bloomberg.com/video/62140030/

http://www.bloomberg.com/news/2010-08-11/u-s-is-bankrupt-and-we-don-t-even-know-commentary-by-laurence-kotlikoff.html

Fed reverses exit plans

http://www.bloomberg.com/news/2010-08-11/fed-reverses-exit-plans-sets-floor-of-2-trillion-for-securities-holdings.html

The Federal Reserve reversed plans to exit from aggressive monetary stimulus and decided to keep its bond holdings level to support an economic recovery it described as weaker than anticipated.

Central bankers meeting yesterday adopted a $2.05 trillion floor for their securities portfolio, pivoting toward a quantitative target for monetary policy.

Obama's economic team exhausted

http://thehill.com/homenews/administration/113141-white-house-economic-team-exhausted

Are we expected to feel sympathetic or honored by the hard work of the White House economic Dream Team? Here's a thought: reduce unemployment by providing incentives for businesses to grow and start hiring again. If it works, perhaps you won't have to work so hard in saving our economy. Because whatever it is you've done up until now isn't working.

Immelt scolded CNBC staff for being anti-Obama

I guess that explains Steve Liesman's pandering to US government fiscal and monetary policies. By the way, General Electric owned NBC, parent of CNBC.



http://www.youtube.com/watch?v=dq428cqNZbM&feature=player_embedded

Lorcaserin and diabetes mellitus

http://seekingalpha.com/instablog/523862-kllj-investments/86782-the-importance-of-arena-s-bloom-dm-study

Arena’s BLOOM-DM (Behavioral modification and Lorcaserin for Overweight and Obesity Management in Diabetes Mellitus) study for patients suffering from diabetes is now complete and the results are expected in late 2010. This study was a one-year, randomized, double-blind and placebo controlled Phase III trial on 604 patients with Diabetes Mellitus Type II who were overweight or obese and taking oral diabetes medications. These results will be filed as a Supplemental NDA (sNDA) after LORQESS (Lorcaserin) is approved. This study is of paramount importance for LORQESS to have an indication specific for the treatment or prevention of diabetes. Arena must clinically prove that taking LORQESS will improve HbA1c and Fasting Glucose to receive an indication for diabetes. If this proves to be the case, which was shown in BLOOM and BLOSSOM, then LORQESS could be covered by most Payers for the treatment of diabetes or the prevention of diabetes.

“Data from the 2007 National Diabetes Fact Sheet (the most recent year for which data is available)

Total: 23.6 million children and adults in the United States—7.8% of the population—have diabetes.

Diagnosed: 17.9 million people

Undiagnosed: 5.7 million people

Pre-diabetes: 57 million people

New Cases: 1.6 million new cases of diabetes are diagnosed in people aged 20 years and older each year.

Cost of Diabetes

$174 billion: Total costs of diagnosed diabetes in the United States in 2007

· $116 billion for direct medical costs

· $58 billion for indirect costs (disability, work loss, premature mortality)

See disclaimers in the side bar.

Disclosure: long ARNA shares.

Fed Reserve Governor Bullard wants inflation

The Fed governor calls for more quantitative easing on a massive scale to combat deflation, and to induce inflation. I've expected this action all along, and it will occur soon at tomorrow's FOMC meeting, or next month's. Be careful what you wish for, James Bullard.



http://www.youtube.com/watch?v=cSV1U_pppBQ&feature=player_embedded

Freddie and Fannie need billions more in aid

Both Freddie Mac and Fannie Mae lost billions more last quarter and will need billions more in aid from the federal government. Gee--what a shock.

http://www.google.com/hostednews/ap/article/ALeqM5i61IvzXZ9v93-0lhav_WRztb1aIgD9HG0A0G1

Government-controlled mortgage buyer Freddie Mac is asking for $1.8 billion in additional federal aid after posting a larger loss in the second quarter.

Freddie Mac said Monday it lost $6 billion, or $1.85 per share, in the April-to-June period.

The government rescued McLean, Va.-based Freddie Mac and sibling company Fannie Mae from the brink of failure nearly two years ago. The new request means they have needed $148.2 billion to stay afloat, about $63.1 billion of which is being used by Freddie Mac.

Both Fannie Mae and Freddie Mac have both lost tens of billions of dollars during the past two years and both are asking the government to prop them up. Last week, Fannie Mae requested $1.5 billion after posting a loss of $3.13 billion, or 55 cents per share, in the second quarter.

"We recognize that high unemployment and other factors still pose very real challenges for the housing market," CEO Charles Haldeman said in a statement.

Ya think?

"With that in mind, we continue to focus on the quality of the new business we are adding to our book to be responsible stewards of taxpayer funds."

Ha-ha, that's a good one...

The golden decade

Thanks to Dick for bringing this article to my attention.

http://www.financialsense.com/contributors/peter-schiff/the-golden-decade

Further job losses may spur quantitative easing

This is what I have been predicting all along: another round of quantitative easing due to a non-existent economic recovery, despite incessant cheerleading by government economists to the contrary.

http://www.guardian.co.uk/business/2010/aug/06/us-jobs-fall-double-expected

The sharp drop in jobs, which follows news of slowing economic growth in the US, is likely to prompt discussions at the Federal Reserve over implementing more quantitative easing – a way of pumping money into the financial system. The central bank's Federal Open Market Committee (FOMC) meets on Tuesday and Fed chairman Ben Bernanke has already hinted to markets that its programme of asset purchases could be resumed.

"The big picture is unfortunately that the downtrend in US economic growth is once again obvious, and these figures will probably do little to deter the FOMC from ultimately implementing fresh stimulus in the near future," said Nick Beecroft at Saxo Bank.

"I'd expect them to reinstate a quantitative easing programme - buying either US Treasuries or mortgage-backed securities - either at next week's meeting, or more likely at the following meeting on 21 September."

Goldman Sachs is now in the same camp, predicting QE 2.0 will be announced in Tuesday's FOMC meeting. They also lowered their forecast for GDP growth for 2011 from 2.5% to 1.9%, and raised their estimate for the unemployment rate from 9.7% to 10%.

http://www.zerohedge.com/article/goldman-explains-imminent-launch-1-trillion-qe-2-muses-dreaded-double-d

Japan's lost decade, or two

http://www.youtube.com/watch?v=udT3dbbryEU&feature=player_embedded

Art Cashin: Fed is walking a tightrope

http://www.zerohedge.com/article/art-cashin-fed-walking-tightrope-hurricane-and-other-observations

While we are seeing the headline numbers are pretty bad, behind the headlines there are some equally disturbing numbers. The government, we are hearing, because of tight budgets, people are being asked to take 1, 2 or even 3 furloughs a week without pay. That's wage deflation, and that's gonna put a strain on things: consumers are going to hold back.

The layoff seem to be slowing because business was taking the other approach. If you want to stay working I am going to have to cut your salary and/or your benefits.

Small businesses account for 50% of our GDP, they account for 60% of new hiring. We are not seeing new hiring because small businesses are not buying into this. So the recovery has not hit main street yet. If you ask small businesses why aren't you borrowing, their answer is "send me a customer, don't send me credit."

We've had more and more signs of potential deflation and the Fed is terrified of that...They've got to come up with something inventive, something as they call it, 'new quantitative easing.' And yet that brings the concern if they do something that is dramatically different, will people say 'What do they know that we don't know? What is the big cause of this?' So the Fed is walking a tightrope in a hurricane and it's going to be tough."

The many faces of gold

The seasonal price of gold:


Click on chart to enlarge.

http://contraryinvestor.com/2010archives/mojune10.htm

I guess my profit-taking exit targets are $1900, $3300, $3900, and $4900.

See disclaimers in the side bar.

Disclosure: long gold, long gold mining companies.

Billions missing in Iraq reconstruction

http://www.bbc.co.uk/news/world-south-asia-10774002

The Special Inspector General for Iraq Reconstruction says the US Department of Defence is unable to account properly for 96% of the money.

Out of just over $9bn (£5.8bn), $8.7bn is unaccounted for, the inspector says.

My only question is: 96%?

Animal spirits on Wall Street

Shout out to Kitty for this blog Hall-of-Famer. Enjoy.

http://www.zerohedge.com/article/wall-street-animal-spirits-stampede-across-river

Arena Pharmaceuticals receives $60 million from Deerfield

Shares in ARNA will take a hit temporarily this morning from the dilution. But longer-term, this financing will be beneficial for the following reasons:

1) it reduces the debt load by $30 million
2) it delays one payment for 2 years
3) it adds $30 million of cash to ARNA's coffers
4) it strengthens Deerfield's equity position, which is bullish as Deerfield has insider knowledge into Lorcaserin's New Drug Application (NDA). Deerfield is all in.

http://www.prnewswire.com/news-releases/arena-pharmaceuticals-to-receive-60-million-from-deerfield-management-100100874.html

See disclaimers in the side bar.

Disclosure: long ARNA shares, short January put options.

Is Romer quitting too?

First White House Budget Director Peter Orszag quits, citing marriage as the reason (I guess only single people can work in Obama's administration). Now Christina Romer, chairwoman of Obama's Council of Economic Advisers, has decided to resign, according to a source familiar with her plans. Obama's Dream Team of economic advisers is unraveling as fast as the economy is. Perhaps there's a correlation in there somewhere.

http://www.zerohedge.com/article/and-then-there-were-two-rumor-romer-resigning-obama-economic-think-tank

Beware the dragon's gold teeth

http://www.mineweb.com/mineweb/view/mineweb/en/page72068?oid=109182&sn=Detail&pid=92730

Concentration of traders in the COMEX

Click on chart to enlarge.

I wasn't aware that investment banks were in the gold and silver mining business. If not, then why are they selling so many futures contracts? Do they even have any physical inventory? Farmers hedge their crops, selling forward contracts. Miners hedge against falling metals prices. Why are the eight largest bullion banks selling 160 and 120 days of worldwide production for silver and gold, respectively? Most contracts are settled with cash. What if buyers demanded physical delivery?

See disclaimers in the side bar.

Disclosure: long gold and silver, long precious metals mining shares, and thankful the bullion banks keep pushing prices down.

The contrarian market and liquidity glut

http://www.zerohedge.com/article/contrarian-market-and-liquidity-glut-dissected

“I can’t think of a reason to be bullish...so I guess that is the reason to be bullish.” That quote from a client at our June 30th credit roundtable dinner in our view best summarized investor sentiment at the beginning of July. It also highlighted a key technical reason to have been bullish in July as negative investor sentiment reached a peak at the beginning of the month."

“I want to say one word to you. Just one word.” Not “plastics” but “liquidity”. Our longer term positive outlook on credit relies significantly on the technical condition of excess liquidity in financial markets. While eventually economic and credit fundamentals will need to catch up to those technicals to justify a continuation of spread compression (and credit market overweights), for now our year end outlook maintains that positive liquidity trends will lead to compression in spreads recouping much if not all of the European sovereign crisis induced spread widening.

In other words ignore fundamentals, ignore technicals, ignore everything you know about asset allocation and selection, and put your financial well being in the hands of the same people (the Fed) who have time after time proven the be the biggest wealth destructors of the US middle class year after year (unless of course one is a member of the privileged kleptocracy, in which case there is nothing to worry about).

Initial claims for unemployment insurance rises

http://www.dol.gov/opa/media/press/eta/ui/eta20101073.htm

I'm sure our government leaders will come up with another positive spin on the numbers.

Severe drought in Russia

http://earthobservatory.nasa.gov/NaturalHazards/view.php?id=44743

Higher food prices coming to a supermarket near you.

How to brainwash a nation

http://www.youtube.com/watch?v=zeMZGGQ0ERk

..the 4 steps used to transform the thinking and behavior of an entire population, over generations.

1) Demoralization
2) Destabilization
3) Crisis
4) Normalization

Senate approves aid to Medicaid and public employees

http://money.cnn.com/2010/08/04/news/economy/Senate_state_aid_medicaid_teachers/index.htm?hpt=T2

Secret banking cabal

To conspiracy theorists, the existence of a secret banking cabal is not news. What is shocking is the fact that a mainstream financial media outlet like Bloomberg would write about it. What is this world coming to? Will CNBC next expose the price suppression of precious metals in London and at the COMEX?

http://www.bloomberg.com/news/2010-01-28/secret-banking-cabal-emerges-from-aig-shadows-david-reilly.html

The idea of secret banking cabals that control the country and global economy are a given among conspiracy theorists who stockpile ammo, bottled water and peanut butter. After this week’s congressional hearing into the bailout of American International Group Inc., you have to wonder if those folks are crazy after all.

Wednesday’s hearing described a secretive group deploying billions of dollars to favored banks, operating with little oversight by the public or elected officials.

We’re talking about the Federal Reserve Bank of New York, whose role as the most influential part of the federal-reserve system -- apart from the matter of AIG’s bailout -- deserves further congressional scrutiny.

Cup and handle

Click on chart to enlarge.

Gold is forming a potentially bullish cup and handle continuation pattern. It theoretically marks a consolidation period before a breakout to the upside. It is just one of many indicators chartists utilize in technical analysis.

See disclaimers in the side bar.

Disclosure: long physical gold and silver.

Gold takeovers

Mergers and acquisitions activity is perking up among gold mining companies, as gold prices remain at elevated levels.

http://www.bloomberg.com/news/2010-08-03/gold-takeovers-reach-record-as-bullion-climbs-boosting-bmo-hsbc-merrill.html

SP downgrades Moody's

http://blogs.telegraph.co.uk/finance/tracycorrigan/100006756/why-sp-is-worried-about-moodys-and-vice-versa/

In an ironic twist, S & P is downgrading Moody's, which signals the beginning of a mutual cannibalization frenzy among the 3 credit ratings agencies (Fitch being the other). They all enabled and perpetuated the financial Ponzi schemes by assigning AAA credit ratings on worthless, toxic mortgage-backed securities, but the government did nothing to disembowel them. They also missed on the financial collapse and insolvency of major banks. It's ironic because while the government didn't kill them off, they will do it to each other.

Total market cap of gold equities

http://goldstocksdaily.com/2010/07/19/total-market-cap-of-all-gold-companies-262-1-billion/

It only takes a few big funds and central bankers from emerging countries (Russia, China, India, Brazil) to move the gold needle quickly and violently. Why? Because all the gold mining companies in the world are worth less than ExxonMobil.

The market capitalization for all gold mining companies globally is $262 billion. Exxon alone is worth $274 billion. The aggregate S & P 500 market cap is $10 trillion. When pension funds, mutual funds, banks, hedge funds, and investors rush into gold and gold equities, there will be trillions of dollars chasing companies worth $262 billion. It doesn't take a wild imagination to expect the prices of gold and gold equities to soar as a result.

University of Texas Investment fund buys gold

http://www.chron.com/disp/story.mpl/business/7108909.html

Fearing unstable international financial markets and the possibility of high inflation, Texas' higher education investment managers have bought more than $500 million in gold.

The gold purchases represent only 3 percent of the University of Texas Investment Management Co.'s $22.3 billion in investment funds, but it indicates how deeply the fund managers are concerned about the global financial future.

Wheat prices soaring

Yes, but our government tells us deflation is our biggest fear, in order to rationalize printing trillions of more dollars.

http://www.ft.com/cms/s/0/51913ed6-9e60-11df-a5a4-00144feab49a.html

Treasuries lack safety, liquidity for China

When your largest creditor wants to turn off the spigot, and your citizens back home are losing their jobs, their homes, and net worth, it's "uh-oh" time.

http://www.businessweek.com/news/2010-08-03/treasuries-lack-safety-liquidity-for-china-yu-says.html

The Chinese are diversifying away from USDollar-denominated assets, and looking at Special Drawing Rights as an alternative reserve currency. They're also accumulating gold.

Gold dinar, silver dirham

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

ARNA Q2 earnings report

http://finance.yahoo.com/news/Arena-Pharmaceuticals-prnews-3737388002.html?x=0&.v=1

Arena Pharmaceuticals, Inc. (Nasdaq:ARNA - News) today reported financial results for the second quarter ended June 30, 2010, and recent developments, including the successful Pre-Approval Inspection, or PAI, of the company's Swiss drug product manufacturing facility by the US Food and Drug Administration, or FDA.

"We have recently achieved a number of important milestones, including the establishment of an agreement with Eisai for the commercialization of lorcaserin in the US, the successful completion of the FDA's pre-approval inspection of our Swiss manufacturing facility and the publication of our BLOOM trial results in the New England Journal of Medicine," stated Jack Lief, Arena's President and Chief Executive Officer. "We are continuing to execute on our plans for lorcaserin as we prepare for the September FDA advisory committee meeting and potential regulatory approval."

See disclaimers in the side bar.

Disclosure: long ARNA sharews.

China opens up domestic gold market

http://www.thedailycrux.com/content/5410/China/eml

China will let more banks import and export gold and open trading further to foreign companies as near-record prices and falling stock markets spur demand in the world's second-largest buyer of the metal. Gold prices gained.

Gold demand in China, the world's largest producer, gained in the first half as government measures to cool the property market and falling equities spurred investment, the Shanghai Gold Exchange said July 7. Spot gold gained to a record in June as investors sought to protect their wealth amid concerns about the global economic recovery.

Ben Davies on gold

One of the best interviews on gold on CNBC, of all networks. Bravo.

http://www.cnbc.com/id/15840232?play=1&video=1552984313