Wednesday, October 27, 2010

JPMorgan, HSBC Sued For Silver Market Manipulation

Finally. No one will ever accuse me of being a conspiracy theorist anymore. Whether JPMorgan and HSBC will be found guilty or not is immaterial. They will surely settle without admitting guilt, and pay a hefty fine to make it go away. But the blatant price suppression of silver (and gold) will finally end if justice is served.

The horse is out of the barn, and expect precious metals prices to rise again as shorts are forced to cover. And if longs insist on physical delivery, a short squeeze will trample shorts dumb enough to not cover.

Silver, bitchez!

See disclaimers in the side bar.

Disclosure: long precious metals mining shares.

The Wizard of Oz

Match the characters of the film "The Wizard of Oz" to the real characters.

The Wizard of Oz characters:

Dorothy (the innocent)

Toto (the even more innocent)

Wizard of Oz (the Grandmaster Flash)

Scarecrow (the brainless)

Tin Man (the heartless)

Cowardly Lion (the coward)

Wicked Witch of the West (self-explanatory)


The American citizen

Future generations of Americans

Ben Bernanke

Barack Obama

Lloyd Blankfein

Tim Geithner

Nancy Pelosi

Any particular order is purely coincidental.

Bill Gross calls the Fed a Ponzi scheme

This won't put Bill Gross's PIMCO on the White House Christmas list, especially since the world's largest bond fund manager has been profiting from front-running the Fed.

The "P" in "PIIGS" is about to collapse

Portugal is on the brink.

As BBC reports, "the minority government of Portugal has failed to gain opposition support for its proposed austerity budget. A failure to pass the budget could plunge the country back into the debt crisis it had seemingly escaped since the summer." And this: "Prime Minister Jose Socrates threatened to quit if the budget fails, while the finance minister ruled out more talks." In other words, the Portuguese government is about to fall,...

CFTC regulator alleges fraud in silver trading

China should boost gold reserves

Yet, the anti-gold crowd still believes gold is a barbaric relic and serves no purpose, since "you can't eat it."

Tuesday, October 26, 2010

Lorcaserin CRL interpretation

This is one MD's interpretation of Lorcaserin's Complete Response Letter from the FDA.

What do the CRL requirements for Lorcaserin mean in practice?

1. Non-clinical issues

a. “Detailed accounting of all microscopic pathology slides prepared from FEMALE rats that contributed to the mammary tumor incidence data in each update to the FDA and the final study report”

i. Requirement: account for all slides done on those tissue – exactly what it says – an accounting issue.

ii. In total, 65+65+75 = 205 FEMALE rats were given lorcaserin along with 65 untreated control FEMALE rats - see Table 6 in the section: “Genotoxicity and Carcinogenicity Assessment For Lorcaserin” (Mammary Tumors).

iii. This task should not take more than 4 months, leading to a revised report (if needed)

b. Independent pathologists/group of pathologists to re-adjudicate all mammary and lung (unclear why lung) tissues from all FEMALE rats (205)

i. I understand this to mean that since a discrepancy was found between the week-96 tumor incidences at all doses – the reason for the accounting check – these pathologists are to re-read the histological slides and give a final decision on what the true incidences are, so as to settle the discrepancy.

1. This procedure should not take more than 4 months

2. The response does not require a new study, according to advice we have received from a non-clinical safety assessment toxicologist.

ii. During the Arena Conference Call on October 25, 2010, the reason for the discrepancy was provided: The preliminary slides were reviewed on a periodic basis by one pathologist and sent to the FDA prior to the final submission. However, at the end of the study, three independent pathologists performed a peer review of the data and submitted their results, the ones that were included in the final NDA.

iii. The discrepancy between the assessments made by the different pathologists was mentioned by in the section: “Genotoxicity and Carcinogenicity Assessment For Lorcaserin” (5th paragraph; Mammary Tumors), where Dr. Alavi (FDA’s nonclinical pharmacology/toxicity presenter) makes the following statement:

“In subsequent updates and in the final study report, the incidence of adenocarcinoma in the MD and HD females was lower than that reported at week 96 (Table 7a). The incidence of adenocarcinoma increased in the controls and stayed consistent in the low dose group over the same period. The incidence of fibroadenoma increased in all dose groups from week 96 to the final study report, though the numbers notably varied in the mid- and high dose groups (Table 7b). It appears that some of the decrease in the number of adenocarcinoma after week 96 was accompanied by an increase in fibroadenoma, potentially a consequence of the sponsor/CRO reclassifying the observed tumor types.”

1. The question that begs an answer here is: Why did Dr. Alavi not know that the slides had been reviewed by a single pathologist during the study and then by three independent pathologists at the end of the study?

2. It is well known that inter-observer variation can occur in assessments of this nature. This should have been taken into account, rather than implying that the sponsor/CRO had acted improperly in respect of the discrepancy in the final numbers

c. Demonstrate that the apparent increase in aggressiveness of adenocarcinoma in rats administered lorcaserin is REASONABLY (not conclusively) irrelevant to human risk assessment.

i. Here they are asking: With regard to the re-adjudicated results, a statistical analysis must again be carried out on the incidence of fibroadenomas and adenocarcinomas

ii. This is not a new study, but a re-assessment of the existing one. Unless the accounting yields a new surprise, then a further study will not be necessary.

iii. The results will most likely be the same. If they are the same, then Arena needs to demonstrate that the adenocarcinomas seen at the very high and toxic Lorcaserin doses, and the statistically significant increases in fibroadenomas, do not portend a risk to humans. The following information is relevant here:

The incidence of malignant adenocarcinoma tumors identified in the 10 mg/kg/day female group was no different to the normally-occurring incidence of these tumors identified in the untreated control group. Furthermore, in the 30 mg/kg/day female group, a dose 24-fold greater than the anticipated human therapeutic dose, the incidence of malignant mammary tumors was no greater than the normally-occurring malignant mammary tumor incidence reported in the untreated control female rats. Only at 100 mg/kg/day was there a statistically significant increase in adenocarcinoma incidence, but this lorcaserin dose is 82-fold that intended for human use. (Note that if Arena decides to fall into the FDA ‘mechanism of action (MOA) involves prolactin’ “trap”, they will fail and spend an eternity attempting to find the answer. They should not attempt to open Pandora’s box. There are numerous drugs on the market today for which the MOA for pathology is not understood).

Although the fibroadenoma incidence in the rats was found to be statistically significant at all doses, and the practice of combining benign tumors with malignant tumors is commonly done when the cell types are the same, this does not pose a human risk for the following reasons:

1. Fibroadenoma and adenocarcinoma arise from cell types with different histogenesis. Adenocarcinomas are classified under the epithelial histotype, fibroadenomas under the epithelial-stromal histotype (Russo, Gusterson, et al. 1990 and Russo, Russo, et al. 1989).

2. Benign mammary fibroadenomas can only be transformed to malignant mammary carcinosarcoma and never to mammary adenocarcinoma (Russo, Gusterson, et al. 1990 and Russo, Russo, et al. 1989). These are distinctly different tumors.

3. The rat model of tumorigensis closely mimics human breast tumor development.

4. Fibroadenomas rarely progress to adenocarcinoma in the rat.

5. Fatalities from benign fibroadenomas do not translate as a risk to humans.

6. Fibroadenomas rarely progress to adenocarcinoma in the human female and are relatively common (London, et al. 1992).

d. Provide ADDITIONAL DATA/INFORMATION regarding the distribution of lorcaserin to the CNS in animals and human subjects that would clarify or provide a better estimate of astrocytoma exposure margins.

i. Since brain partitioning – brain-to-plasma (BPD) ratio - was not determined in humans, the FDA is concerned that estimates of safety margins based on extrapolation from monkey brain-to-plasma ratios are not reliable. This assumption was made by Dr. Alavi as outlined below:

ii. The problem here is as follows:

1. The brain-to-plasma ratio for lorcaserin is not known in humans since it is a novel new drug that has not yet been studied in this way. But we do know:

a. The brain-to-plasma ratio for lorcaserin for mice is 25 times higher in the brain vs. plasma (of note, there were no brain tumors in mice including the high dose group).

b. The brain-to-plasma ratio for lorcaserin for rats is 29 times higher in the brain vs. plasma.

c. The brain-to-plasma ratio for lorcaserin for monkeys is 10 times higher in the brain vs. plasma.

2. Regarding the reliability of extrapolating monkey brain-to-plasma ratios to human subjects:

Dr. Alavi’s assumption is: "Brain partitioning in human subjects was not determined. Thus, estimating safety margins based on assumptions of partitioning in human subjects is not entirely reliable. Assuming that the monkey best models human partitioning, the estimated safety margin to a non-tumorigenic dose in rats may range from 11x to 17x, with tumors associated with brain exposures that are 40x to 59x higher than clinical exposure. More conservatively, safety margins based on plasma drug levels, which is known for rats and humans, yields a safety margin to the non-tumorigenic dose in rats of 5x, with brain tumors occurring at doses of lorcaserin 17-fold higher than the clinical dose” from the section in the FDA briefing document: from the section “Genotoxicity and Carcinogenicity Assessment For Lorcaserin” (Abstract).

iii. The solution: An extensive review on this very issue (Shen, Artru and Adkison 2004) contradicts Dr. Alavi's opinion that estimating safety margins based on assumptions of partitioning in human subjects is not entirely reliable. Referring to the monkey model, the authors state - “In the second part of our analysis, we examined the issue of whether CSF penetration studies in animals are predictive of human data. We obtained animal and human CSF data on 27 drugs, including 13 antiepileptics, 1 psychotropic drug, 5 anesthetics or analgesics, 5 antibiotics, 1 antiretroviral, and 2 anticancer drugs, and across six animal species, including rats, dogs, rabbits, cats, guinea pigs and monkeys. As can be seen in Fig. 9, there is a reasonably good correlation for the majority of drugs in this survey."

1. In the same article the authors conclude: "Despite the complexity of CSF physiology and pharmacokinetics, CSF penetration studies in animals remain a practical option for the assessment of CNS drug delivery in early preclinical drug development"

a. Monkey brain partition studies can, therefore, be used with reasonable assurance for estimating a drug's margin of safety in the human brain.

iv. The brain-to-plasma ratio for lorcaserin for rats is 29 times higher in the brain vs. plasma and the for monkeys it is 10 times higher in the brain vs. plasma

1. The interpretation:

a. This means that there is 29x more lorcaserin in the rat brain, so the dose given to rats at the LD, MD, and HD will be much higher in the CSF and therefore more toxic.

b. In practice, this means that at any given dose, the higher the brain exposure in rats, the higher will be the estimated brain exposure in humans - From the Tables 13 and 14 in the FDA briefing in the section: “Genotoxicity and Carcinogenicity Assessment For Lorcaserin (Brain Astrocytoma)”

i. Brain exposure in the rat at 30mg/kg (brain tumors present in the rat) = 405-591 mcgm/ml.

ii. Using the brain-to-plasma ration of 10x in the monkeys (multiple the brain exposure in rats by 10).

iii. Brain exposure in humans at the 30 mg/kg (brain tumors present in the rat) = 40x-59x multiple of the clinical dose (10mg bid (twice a day).

iv. Therefore, from the Table, we can see that the margin of safety is at 11x-17x multiple of the clinical dose, which would satisfy the concern brought up in the CRL.

v. The 17x dose is when the tumors first appeared (the 30 mg/kg dose). Hence the tumorigenic dose for humans, when discussing brain/plasma ratios, would then be 40-59x multiple of the clinic dose - far above the 25-fold limit dose in the FDA guidelines.

vi. So from the data on the male rats the risk of developing statistically nonsignificant astrocytomas in the human, assuming that this can be transferred to human risk, would only arise at 40-59 x multiple of the clinical dose. The margin of safety dose would be 17x multiple and perhaps anywhere up to 39x multiple, although the precise value would have to be determined at incremental increases in the dose of lorcaserin (which is not necessary).

vii. However because Dr. Alavi used plasma levels, he concluded that the nontumorigenic dose (level where there are no tumors) gave a margin of safety at only a 5x multiple of the clinical dose. Our analysis suggests that he erred in doing this.

v. Astrocytoma was only statistically significant in male rats in the high dose group, but none of these tumors was found in the female rats.

1. The solution:

a. Arena must supply all MBTD and brain-to-plasma ratio data to FDA in a simple, easy-to-read format.

b. Given adequate resources, this administrative task should not take long.

2. Clinical issues

a. Results on the BLOOM-DM trial. There is nothing more to say on this point.

3. Labeling requirement.

a. Schedule IV: This is not a significant issue. Schedule IV does not necessarily preclude long-term use, although FDA may add restrictions to that effect.

b. They did leave the door open for removal of this label.

c. Arena must discuss with FDA any nonclinical studies conducted to address abuse concerns regarding the long-term use of lorcaserin.

In conclusion, no new studies need to be done except perhaps brain partitioning studies on humans. However, this may not be necessary if the information provided above is correct. If such studies were performed, they would not be long-term experiments and could be completed in a relatively short period, and they may not even need to be carried out under GLP conditions. However, I sense Arena already has all the data required to address this particular concern. Every other aspect of the CRL involves a REVIEW of existing information, nothing else. If everything is submitted in a timely manner, the estimated timeframe for the completion of these reviews should be less than 6 months.


London, S.J., Connolly J.L., S.J. Schnitt, and G.A. Colditz. "A Prospective Study of Benign Breast Disease and the Risk of Breast Cancer." JAMA 267 (1992): 941-4.

Russo, Jose, Barry A. Gusterson, Adrianne E. Rogers, Irma H. Russo, Seft R. Wellings, and Matthew J. Van Zwietien. "Biology of Disease: Comparative Study of Human and Rat Mammary Tumorigenesis." Laboratory Investigation, 1990: 267.

Russo, Jose, Irma H. Russo, Matthew J. van Zwieten, Adrianne E. Rogers, and Barry A. Gusterson. "Integument and Mammary Glands of Laboratory Animals." In Classification of Neoplastic and Non-neoplastic Lesions of the Rat Mammary Gland, edited by T.C. Uones, U. Mohr and R.D. Hunt, 275-304. Berlin:Springer-Verlag, 1989.

Shen, Danny D., Alan A. Artru, and Kimberly A. Adkison. "Principles and Applicability of CSF Sampling for the Assessment of CNS Drug Delivery and Pharmacodynamics." Advanced Drug Delivery Reviews, 2004: 1825-1857.

Daniel P. Lopez, M.D., F.A.C.O.G.

Diplomate American Board of Obstetrics and Gynecology

BORG Member

Paul Tudor Jones on China-US relationship

China accuses US of out of control printing

Marc Faber on QE2, equities, commodities, and bonds

CFTC raises alarm about silver market

Where are all my detractors now? I've been harping on illegal price suppression schemes by the large bullion banks for years, to an audience who generally dismissed me as a conspiracy theorist. This may cause the price of silver to soar even more now that the commercial shorts have to cover their shorts--and their tracks. I'm going to guess they'll get a slap on the wrist (i.e. a fine with no admission of guilt) since they're doing it on behalf of the Fed--even if the CFTC enforces its position limits.

Either way, manipulation only works--until it stops working. The horses have left the barn. Silver, bitchez!

Monday, October 25, 2010

Chinese bailing out Greece

On the surface, this article seems benign enough: China, flush with cash reserves, wants to bail out Greece--and by extension, the Euro zone, in order to maintain Europe's consumption of Chinese exports. They intend to do this with the purchase of soon-to-be-worthless Greek bonds, an IOU issued by a bankrupt government (sound familiar?). Fine.

But let's think a couple moves ahead, as the Chinese rarely make a move without surveying the landscape several years down the road. Like their developing world peers, the Chinese are getting increasingly nervous with their overweighted holdings in US Treasury bonds, as the Fed continues to feverishly devalue the USDollar. Selling US Treasuries with abandon would only undermine the value of Chinese holdings, increasing selling pressure and plummeting the value of said US bonds.

The solutions? Buy tangible assets supportive of their growing industrial base, including securing natural resources and resource companies in the energy and metals complex. Another solution? Buy the Euro. How? Through the Greek back door (no pun intended).

Of course, the Chinese will put on a varnished exterior, bailing out a valued customer, and buying assets from a trading partner--and all of that will be true, as they aim to increase market penetration in the Euro zone. But the ulterior motive is to find another resting place for their bulging reserves, as they slowly divest their US Treasury holdings.

Meanwhile, Congress and US Treasury Secretary Geithner cry "Wolf" and whine about Chinese currency manipulation. If the US really wanted the Chinese to stop devaluing the yuan, the Fed should stop devaluing the USDollar. But of course, that won't happen because the Fed needs to feed the Congressional beast.

And as the Chinese and other sovereign funds further divest of US Treasuries, interest rates will inevitably rise, as bond buyers demand higher yields to compensate for rising default risk. This will undermine any interest rate-suppression effects of further quantitative easing. Which means QE will fail--again.

And around and around we go, circling down the drain.

60 Minutes: Unemployment

Sunday, October 24, 2010

Save your nickels

At current price levels, their melt value is $0.06. If inflation gets worse, nickel and copper prices will rise further, and the melt value will rise accordingly. If deflation sets in, the nickel still has a face value of $0.05.

Keynesian policies are dooming the world economy

...and causing asset bubbles in emerging countries and commodity markets.

Shanty towns--in Sacramento, CA

Saturday, October 23, 2010

Depression within a depression

Again, the myths of FDR and his role in the Great Depression are dissected, coming up with different conclusions from what Keynesian economists want to admit.

Germany calls out Geithner's hypocrisy

The finance ministers of Brazil and now Germany are declaring what I've been ranting on for years: the Fed is the biggest manipulator of currencies in the world, despite accusing others of currency intervention.

At the G-20 meeting, per Bloomberg, German Economic Minister Rainer Bruederle said that the Fed's "push toward easier monetary policy is the “wrong way” to stimulate growth and may amount to a manipulation of the dollar. Excessive, permanent money creation in my opinion is an indirect manipulation of an exchange rate." The fact that China was smart enough to peg its currency to the most rapidly devaluing currency in the world is a different story altogether, and merely confirms that they are leap and bounds more sophisticated in their monetary policy than anyone gives them credit for. If Geithner wants to prevent a relative depreciation of the Yuan versus all other currencies in the world (especially the EUR, against which it continues to be in freefall), the answer is simple: stop bloody printing!

Lorcaserin and the FDA's Complete Response Letter

Here is a positive assessment of the CRL by Dr. Daniel Lopez:
Here are my initial thoughts in the middle of the night

I think it is positive on several points:

1. Nonclinical issues
- Accounting issue - easily resolved - to make up for the discrepancy between week 96 and final NDA incidence of fibroadenomas and adenocarcinomas
- "demonstrate that the apparent increase in aggressiveness of adenocarcinoma in rats administered lorcaserin is reasonably irrelevant to human risk assessment" - I think that this has already been proven - the key words - apparent and reasonably irrelevant - this can be taken from my letter directly and has been done - Arena just has to provide it.
- "provide additional data/information regarding the distribution of lorcaserin to the CNS in animals and human subjects that would clarify or provide a better estimate of astrocytoma exposure margins" should not be a problem

2. Clinical issues
NO NEW STUDIES - will accept BLOOM -DM results. Study already completed, results within a few weeks to 2 months. If the numbers are good then we have a Slam-dunk

Finally "The FDA also stated in the letter that in the event evidence cannot be provided to alleviate concern regarding clinical relevance of the tumor findings in rats, additional clinical studies may be required to obtain a more robust assessment of lorcaserin's benefit-risk profile" Again cancer expert Dr. Gary Williams will be pivotal here. What this sounds like to me is that they have conceded that their conclusions regarding the rat studies were unjustifed and erroneous. They sound like they just want an explanation of why the findings are not relevant to human risk. I believe we have shown that conclusively and they have all the information we have discussed and was sent to them by myself and others.
They have presented a CRL that is in effect a 6 month review or less, maybe 3 months - it will depend how long it will take the pathologists to go over all the slides

And finally a labelling requirement - Schedule IV

From the DEA website:

Schedule IV
• The drug or other substance has a low potential for abuse relative to the drugs or other substances in Schedule III.
• The drug or other substance has a currently accepted medical use in treatment in the United States.
• Abuse of the drug or other substance may lead to limited physical dependence or psychological dependence relative to the drugs or other substances in Schedule III.
• Examples of drugs included in schedule IV are Darvon®, Talwin®, Equanil®, Valium®, and Xanax®.

This is not a problem - it just requires the physician to have a DEA license with Schedule IV prescribing privileges - which almost all physicians have.

However they provided the following path to remove this label: The CRL provided the opportunity to complete preclinical studies that may lead to a different recommendation - again this refers back to the nonclinical issues.

Overall, in my opinion, a very soft and manageable CRL. It's late at night and I am just quickly jotting down a synopsis - after some rest hope to process this more - however I think the jist of it will be the same.


Friday, October 22, 2010

USDollar woes

CFTC biased, according to departing judge

In a notice recently released by the CFTC, Painter said Judge Bruce Levine, his longtime colleague, had a secret agreement with a former Republican chairwoman of the agency to stand in the way of investors filing complaints with the agency.

"On Judge Levine's first week on the job, nearly twenty years ago, he came into my office and stated that he had promised Wendy Gramm, then Chairwoman of the Commission, that we would never rule in a complainant's favor," Painter wrote. "A review of his rulings will confirm that he fulfilled his vow," Painter wrote.

Painter continued: "Judge Levine, in the cynical guise of enforcing the rules, forces pro se complainants to run a hostile procedural gauntlet until they lose hope, and either withdraw their complaint or settle for a pittance, regardless of the merits of the case."

Thursday, October 21, 2010

Foreclosure-gate may cause another banking meltdown

Must-hear interview with Jim Rickards on foreclosure-gate.

The Stand-up Economist

Chinese relations on Saturday Night Live

iDepression 2.0

A little reality about the job situation in this country is in order. The unemployment rate reported by the Bureau of Labor Statistics and parroted by the mainstream media is currently 9.6%. Once you stop counting people who have given up looking for jobs and “left the workforce”, discouraged workers, marginally attached workers and workers forced to work part-time, you magically get a 9.6% rate. Using the method of measuring unemployment used during the Great Depression and reproduced by, the real unemployment rate is a depression-like 22.5%. The peak unemployment rate during the Great Depression was 25%. There is no doubt that we are in the midst of 2nd Great Depression, but where are the bread lines and the lines of unemployed winding around the corner? No need. This is the electronic Great Depression – iDepression 2.0. Your 99 weeks of unemployment and food stamps are direct deposited into your bank account so that you don’t have to leave the comfort of your McMansion that you haven’t made a mortgage payment on in the last 14 months. There were no credit cards in 1933. Without a job or a house, you needed to move to where there might be a job. Hence the mass migration from the Midwest to California – ala The Grapes of Wrath. Today, a neighbor in a matching McMansion down the street, with the perfectly manicured lawn, could be unemployed for three years and no one would ever know. They could sustain themselves on unemployment payments, food stamps, and credit cards. Welcome to the iDepression 2.0.

Warren Buffett: forget gold, buy stocks

I respect Warren Buffett for his stock-picking acumen and value-driven analysis, but I have no idea where stocks are headed. As long as the developed world is running deficits, debasing their currencies, and keeping real interest rates negative, I will be accumulating tangible assets, specifically precious metals.

Frank Byrd on inflation

30 minutes of must-view video on inflation.

Frank Byrd talks Inflation: Past, Present and Possible Future from Frank Byrd on Vimeo.

Saturday, October 16, 2010


Confirmation bias, meet illusory correlation.

I know that most men—not only those considered clever, but even those who are very clever, and capable of understanding most difficult scientific, mathematical, or philosophic problems—can very seldom discern even the simplest and most obvious truth if it be such as to oblige them to admit the falsity of conclusions they have formed, perhaps with much difficulty—conclusions of which they are proud, which they have taught to others, and on which they have built their lives.
- Leo Tolstoy, "What is Art?"

Thursday, October 14, 2010

Mortgage Bankers Association strategic default

"Do as I say, not as I do." Got it?

Nobel Laureate says we need $10 trillion of QE

The Prince of Princeton is officially an idiot shill for Keynesian economics.

Jobless claims revisions

Click on graph to enlarge

Normally, when data is revised, it averages out to some points being revised up if the initial data is too low, and some points being revised down if the initial data is too high. Over time, there is a regression to the mean, which is a neutral value of zero.

But after looking at the chart above of initial and continuing jobless claims, we find that upward revisions occur 75 out of 76 weeks. The odds of this happening by coincidence are statistically impossible. Obviously, there is a persistent bias to publish data which understates the true unemployment picture.

The Bureau of Labor Statistics should rename themselves the Bureau of Lies and Statistics.

Gold is the final refuge against universal currency debasement

Interim projections for gold
The starting-point is to go back to when the bull market began for precious metals, at roughly the turn of the millenium. At that time, the small number of informed, precious metals commentators who occupied this niche were “estimating” that the price of gold could hit $1000/oz – with the more confident/bullish pundits suggesting that gold might even reach $2,000/oz.

Skip-ahead to today, and now any experienced precious metals commentator who estimates $2,000/oz as a “ceiling” for the price of gold is seen as being extremely conservative.

What happened between then and now? Were those earlier commentators simply not as aware or astute with respect to the potential of precious metals? Hardly. As a commentator who was not one of the first to become an advocate for precious metals, I have great admiration for the “first generation” of commentators who were here before myself.

Not only did they demonstrate superior insight in seeing what was happening before others, but they also demonstrated extraordinary courage and conviction in being ready to stand up and make their predictions for this sector – when it was literally the most-unloved asset-class among all Western investors.

What has changed since $2,000/oz was originally seen as a long-term maximum for the price of gold is that our currency-debauching bankers keep “moving the goal-posts”. Put another way, the bankers have accelerated the destruction of their cherished, paper currencies so rapidly that the earlier predictions were rendered obsolete.

In short, while the original “gold bugs” were seen as extremists and alarmists, in fact their only ‘sin’ was to underestimate the monetary depravity of bankers. Thus, we have established the proposition that rather than being shrill “Chicken Littles”, that precious metals commentators have been making sober, conservative appraisals of the economic harm caused by the extreme excesses of bankers – in the absence of a gold-standard.

This leads us to a second proposition: Given the reasonable, responsible efforts of precious metals commentators to apprise us of the relative appreciation of gold and silver versus banker-paper, the rate of change of such estimates provides a reasonable “proxy” for the speed at which the bankers are destroying these fiat-currencies. Most notably the U.S. dollar, the world’s “reserve currency”.

It is extremely useful to identify such a proxy, living in a world where our governments use heavily-contrived statistical fictions as a means of deceiving rather than informing us. Listen to clueless, media talking-heads yammer on about a “gold bubble”, listen to the same vacuous voices talk about “near-zero inflation”, and you can rest assured that you will live in a state of perpetual ignorance regarding the rate of destruction of our paper currencies (and the paper wealth they represent).

As useful as these commentators’ future estimates of gold and silver prices are, however, it recently occurred to me that such literature is very likely concealing a very large “blind spot” regarding the economic analysis conducted by precious metals commentators. Specifically, we run into nothing less than a logical disconnect when our analysis turns toward a subject with great relevance for the precious metals sector: hyperinflation.

Note that when such paper reaches zero, that this necessarily implies that the “price” of gold and silver in such a worthless currency is literally infinite . Even those people who didn’t excel in “math” will understand that there is a rather large gap between $10,000/oz and infinity.

This brings us (at last) to what is implied by any/every commentator who engages in price-forecasting with respect to silver and gold. Either such commentators are only making “medium-term” estimates for gold and silver prices, or that commentator is implicitly rejecting the possibility of hyperinflation – or the commentator simply doesn’t understand what hyperinflation really is.

In saying this, I’m not attempting to denigrate any other commentators. Indeed, being a “numbers guy” my entire life, I have always been highly cognizant of the increasing level of “mathematical illiteracy” in our societies. Part of this “illiteracy” is directly attributable to the enormous defects in our education systems. However, the other aspect of this lack of comprehension is that we are being exposed (for the first time) to mathematical concepts which are far more abstract or complex than anything which our ancestors ever needed/attempted to understand.

“Hyperinflation” is just such a concept. Not only do we need to carefully define this concept before we can possibly understand it, but we need to construct a definition where “understanding” is within the grasp of the average person. Here we run into a second “disconnect”. Economists and other scholars looking at related issues have indeed constructed several definitions for hyperinflation.

In the conclusion to this commentary, I will argue that such definitions are not accessible to the average person, and thus are not helpful in educating the general public about this very important concept.

75 gold bugs price targets

Their predictions appear extreme, but then again, they've been on the right side of the trade for the last 10 years.

The crowning failure of old governments

This is a good treatise on why QE 2.0 won't work.

Trichet warns of "beggar thy neighbor" policies

He knows competitive currency devaluation wars lead to trade wars, protectionism and plummeting global trade. This was the exact scenario which triggered the Great Depression.

Former car czar Steven Rattner settles

In another sign of corruption, cronyism and rigged capitalism, Steven Rattner "settles" with the SEC, pays a fine, and exercises his "Get out of jail" card.

Wednesday, October 13, 2010

Krugman vs. Ferguson

Princeton's Krugman has a Nobel Laureate. Harvard's Ferguson is an economic historian. Guess who wins this debate on fiscal stimulus?

Tim Geithner says there is no risk of a currency war

Too bad every other finance minister disagrees.

U.S. Treasury Secretary Timothy Geithner said on Tuesday he sees "no risk" of a global currency war and wants to maximize incentives for China to allow its yuan to rise in value.

He told the Charlie Rose Show in an interview that China would work against its basic development objectives if it kept its currency undervalued.

"I'm very confident over time that this is going to happen," he said of Chinese currency appreciation. "We just want to make sure it's happening at a gradual but still significant rate."

If there's one thing US government officials should learn, it is this: China will do what's best for China.

IMF: rethinking macroeconomic policy

Better late than never--at least they are honest about their mistakes.

Research Department
Rethinking Macroeconomic Policy
Prepared by Olivier Blanchard, Giovanni Dell’Ariccia, and Paolo Mauro
Authorized for Distribution by Olivier Blanchard
February 12, 2010
Disclaimer: The views expressed herein are those of the authors and should not be
attributed to the IMF, its Executive Board, or its management.

The great moderation lulled macroeconomists and policymakers alike in the belief that we knew how to conduct macroeconomic policy. The crisis clearly forces us to question that assessment. In this paper, we review the main elements of the pre-crisis consensus, we identify where we were wrong and what tenets of the pre-crisis framework still hold, and take a tentative first pass at the contours of a new macroeconomic policy framework.

Foreclosure crisis with Jim Rickards and Chris Whalen

Last gasp of the fiat money regime

Anytime Jim Rickards takes time out to pen an article or appear on an interview, I sit up and take notice. Folks, this guy knows his stuff and he has the resume to back it up. This is a MUST-READ op-ed.

'Gold is the best asset class to be in'

I generally agree with this article, with the exception of the last sentence, although as usual, the mainstream investment analysts have the price targets all wrong. They will be proven to be conservative--again, in my humble opinion.

Regarding the last sentence in the article, there are absolutely counterparty risks with owning gold and silver ETF's, specifically GLD and SLV. Read the documents before investing.
The trouble with chasing performance is that you often join the party too late. Yet gold continues to defy the odds and if the great and the good of the investment world are to be believed, the gold price has further to go.

Last week, the analyst rated the most accurate forecaster of the gold price said the precious metal would keep rising.

"You can't mine gold," say nervous investors who fear that the massive printing of money by central banks under the guise of quantitative easing can only lead to runaway inflation. Sceptics of gold as an investment point to the costs of owning it and the fact that it produces no income.

Finding an analyst who is bearish on gold is a tough task; most appear to believe that gold is a worthy asset, not least because of the continued economic uncertainty. But four years ago The Sunday Telegraph found one. Nick Goodwin, a much quoted South African mining analyst, warned people against jumping on the bandwagon when the price stood at $600 an ounce.

He said: "I have been following gold for 30 years and gold is a bitch. Why weren't people buying gold when it was $250 but want to buy it at $600? Gold has had a hell of run and it needs to take a breather." Mr Goodwin was proved mightily wrong and today the rationale for investing on gold stands firm.

Mr Hitzfeld said further increases in the price were "preprogrammed". He said factors exerting upward pressure were renewed fears among investors sparked by recent loosening of monetary policy by the US Federal Reserve and reforms in the Chinese market that gave investors there greater access to the metal.

"The Chinese government has encouraged consumers to invest in gold, and with great success. Chinese demand will now increasingly be felt on the global markets," Mr Hitzfeld said.

Although China is now the world's largest gold producer, this production would be insufficient to meet domestic demand, so China would increasingly import gold, draining supply from the rest of the world and putting upward pressure on the price.

The Chinese government's gold reserves have also risen sharply and there is scope for further increases, as they account for just 1.7pc of foreign exchange reserves, Mr Hitzfeld said.

Analysts from ANZ, the Australia and New Zealand banking group, agreed. Describing gold as "the best asset class to be in", the analysts, Mark Pervan, Natalie Robertson and Andrew McManus, said: "Gold has been the strongest performing and least volatile major commodity and financial asset class in the past 10 years – we expect this trend to continue.

"We see more upside for gold prices as the key drivers of a safe-haven and currency-hedge demand are joined by the emergence of strong demand from China and India.

The issue for investors who have yet to invest in gold is whether it is too late. Mr Soros may be a gold bull at the moment, but he still has his reservations. He said in January: "When interest rates are low we have conditions for asset bubbles to develop, and they are developing at the moment. The ultimate asset bubble is gold."

I left out analyst price targets by design, as they are meaningless. I also left out the vehicles on how to own gold--I highly recommend reading the whole article. The article doesn't mention gold- and silver-related assets like mining shares.

And this is the last sentence I disagree with. Under normal market conditions, ETF's are good for tracking physical spot prices. But when markets aren't properly functioning in an orderly manner (which is one of the primary reasons for possessing physical bullion in the first place), the paper contracts of futures markets and ETF's could decouple from the spot price if there is a run on physical inventory. In other words, there are multiple claims on the same ounce of gold as they are not 100% backed by inventory.

Alternatively, follow Mr Soros and invest via an ETF – "physically backed" ones that own actual gold should be the safest.

See disclaimers in the side bar.

Disclosure: long gold and silver, long gold and silver mining shares.

Fed warming up the printing presses?

Tuesday, October 12, 2010

Yale Ph.D., And Former Fed Member Tells Obama To Pull A "Gordon Brown" And Sell All Of America's Gold

Disclosure: long gold and silver. In other words, I am not listening to financial "experts" and economists like Edwin Truman.

President Obama Falls Victim to Chase Robo-Signer

It’s not the foreclosure affidavits only. Hello? It’s the whole kit-n-caboodle. it’s the fabricated assignments of mortgage, fake allonges, robo-stamped endorsements in blank, and satisfactions of mortgage, ignoring SEC and IRS regulations, disregard for the steps required by the REMIC rules. It’s all the top national banks and their servicing arms. The whole of it is a sham. Don’t believe the propaganda that insists otherwise.

President Obama is a victim of the robosigning phenomenon that has taken the financial industry by storm…

So you see, this whole Foreclosure-Gate crisis has nothing to do with the “deadbeat” borrowers, it never has.

It has to do with the complete lack of the respect of the law by the banking industry.

They got away with it up until now and are trying their damnedest to paper over their crimes.

It is time to say no more…

They tricked all of us, even you Mr. President, and completely disregarded the basic laws of this country to make a buck.

I have been beating this drum, along with a few others, for years now and it is time to come to an end.

Mr President, now that you have had the fraud perpetrated on you personally, what are you going to do about it?

The system is broken and the foreclosures need to be stopped NOW.

It is actually worse than you can imagine…

Were Obama's own mortgage documents signed by a 'robo-signer'?

To display the level of corruption built into the financial system, President Obama's own mortgage loan documents were probably fraudulent.

A consumer advocacy Web site has obtained some mortgage paperwork for President Obama and first lady Michelle Obama's home in Chicago.

The documents, which show that the couple's mortgage of $210,000 was fully paid on May 10, 2005, are signed by a Chase Home Finance vice president Marshe Craine.

The interesting thing about the documents is that Craine's signature on court documents related to other people's homes looks radically different from the version on the Obamas' paperwork. In other, unrelated cases, attorneys for homeowners have accused loan processing companies of allowing employees to forge other people's signatures.

Craine has also signed documents on behalf of Mortgage Electronic Registration Systems Inc. -- the Reston, Va.,-based company that was set up by the financial industry to help track securitized mortgages and that is being targeted in foreclosure lawsuits around the country.

A Chase spokesman declined to comment.

Sunday, October 10, 2010

Currency war threatens

Differences that threaten the outbreak of a currency war persisted after a weekend meeting of global finance ministers, who left without resolving what to do.

Various nations are seeking to devalue their currencies as a way to increase exports and jobs during hard economic times. The concern is that such efforts could trigger a repeat of the trade wars that contributed to the Great Depression of the 1930s as country after country raises protectionist barriers to imported goods.

"Currency disputes can easily become trade disputes," cautioned Canadian Finance Minister Jim Flaherty.

Corn futures limit up

Corn futures in Chicago surged to the highest level in two years after the U.S. Department of Agriculture last week cut its supply forecasts. Soybeans and wheat also advanced.

Corn futures for December delivery rose the 45-cent daily limit, or 8.5 percent, to $5.7325 a bushel on the Chicago Board of Trade. That’s the highest level since September 2008.

Yet, official government statistics on the consumer price index declare inflation is approximately 1%.

One person's opinion on the Fed

I haven't verified all the facts, though I agree with many of "Atomizer's" assertions on the Fed.

Most informed people are aware that Woodrow Wilson signed the Federal Reserves Act in 1913. In signing this act, this traitor transferred the power of Congress to print money to a private group of international bankers. Since then, instead of printing its own money, the US borrows money for its operations from the Fed at high interest rate. This is what caused the huge deficit which in turn caused the bankruptcy on the United States of America in 1933. The following is a speech by Rep. James Traficant, Jr (Ohio) addressing the House on March 17. 1993.

"Mr. Speaker, we are here now in chapter 11... Members of Congress are official trustees presiding over the greatest reorganization of any Bankrupt entity in world history, the U.S. Government. We are setting forth, hopefully, a blueprint for our future. There are some that say it is a coroner’s report that will lead to our demise.

"It is an established fact that the United States Federal Government has been dissolved by the Emergency Banking Act, March 9, 1933, 48 Stat. 1, Public Law 89-719; Declared by President Roosevelt, being bankrupt and insolvent. H. J. R. 192, 73rd. Congress in session June 5, 1933 - Joint Resolution To Suspend The Gold Standard and Abrogate The Gold Clause dissolved the Sovereign Authority of the United States and the official capacities of all United States Government Offices, Officers and Departments and is further evidence that the United States Federal Government exists today in name only."

(It is actually a corporation called THE UNITED STATES OF AMERICA, INC. filed in the District of Columbia.)

"The receivers of the United States Bankruptcy are the International Bankers, via the United Nations, the World Bank and the International Monetary Fund. All United States Offices, Officials, and Departments are now operating within a de facto status in name only under Emergency War Powers. With the Constitutional Republican form of Government now dissolved, the receivers of the Bankruptcy have adopted a new form of government for the United States. This new form of government is known as a Democracy, being an established Socialist/Communist order under a new governor for America. This act was instituted and established by transferring and/or placing the Office of the Secretary of Treasury to that of the Governor of the International Monetary Fund. Public Law 94-564, page 8, Section H. R. 13955 reads in part: “The U.S. Secretary of Treasury receives no compensation for representing the United States.”

In case you don't know, The Federal Reserve System is a sovereign power structure separate and distinct from the Federal United States government. The Federal Reserve is a maritime lender, and/or maritime insurance underwriter to the federal United States operating exclusively under Admiralty/Maritime law. The lender underwriter bears the risks, and the Maritime law compelling specific performance in paying the interest, or premiums are the same.

As to personal property and mortgage, here is why people don't actually really own their houses: Prior to 1913, most Americans owned clear, allodial title to property, free and clear of any liens or mortgages until the Federal Reserve Act (1913) “hypothecated” all property within the federal United States to the Board of Governors of the Federal Reserve, - in which the Trustees (stockholders) held legal title, the U.S. citizen (tenant, franchisee) was registered as a “beneficiary” of the trust via his/her birth certificate. In 1933, the federal United States hypothecated all of the present and future properties, assets and labor of their “subjects”, the 14th. Amendment U.S. citizens, to the Federal Reserve System.

"The real truth of the matter is, as you and I know, that a financial element in the large centers has owned the government of the U.S. since the days of Andrew Jackson." Franklin D. Roosevelt, U.S. President, in a letter written Nov. 21, 1933 to Colonel E. Mandell House.

Colonel House was a paid organizer and planner for the Bankers...directly under Rothchild payroll to accomplish very specific tasks in the US for the cabal.

The Internal Revenue Service is not an agency of the United States government either. It is true that not only can it NOT be found in Title 31, but it is nowhere to be found in the entirety of Title 5 U.S.C.

Congress THOUGHT it created it but it didn't. Just look at the 1100 manual and it tells you so. Congress only created the Commissioner's Office. He then hired the private collection agency people (IRS) and used them as the tax collectors.

In fact, you won't find any IRS employee listed as an Employee of the United States Government with a United States Employee Identification number that has been hired by any District Director in the country. Now I suggest you look at 27 Code of Federal Regulations Section 250.11 and therein you will find the definition of "Revenue agent." That definition reads "Any duly authorized Commonwealth Internal Revenue Agent of the Department of the Treasury of Puerto Rico."

Ronald Reagan, through the Grace Commission, demonstrated that little or no money of tax paid goes to the government.

Where does our tax money go? When you send money to the IRS it first goes to a Federal Reserve Bank. From there it goes into the International Bank for Reconstruction and Development into what they call a Quad Zero account with a drawback fund from which the IRS refunds are distributed. (Title 22 section 286 United States Code) (31 CFR chapter 11, section 214.7)

What is left is then transferred to the International Monetary Fund (United Nations Monetary and Financial Conference, July 22, 1944) this money is then loaned out to other countries around the world including the United States. They must then pay back these loans (with interest) to the Central Bankers, not the United States of America.

Most Americans have no idea of these facts

Here's your link to begin your research.

Code of Federal Regulations (CFR): Main Page

Saturday, October 9, 2010

ARNA investors fight back

Triffin's dilemma, reserve currencies, and gold

Nearly 50 years ago, Yale University economist Robert Triffin identified the inevitable future deterioration of the dollar in his book, Gold and the Dollar Crisis: The Future of Convertibility (1960). Essentially, Triffin argued, under the Bretton Woods system in which the U.S. dollar was the world’s principal reserve currency (instead of gold, for example), the United States had to incur large trade deficits in order to provide the rest of the world with the liquidity required for functioning of the global trading system.

Unfortunately, Triffin wrote, U.S. trade deficits eventually would undermine the foreign exchange value of the dollar because foreign accounts would hold an increasing quantity of dollars. Restating Triffin's argument in contemporary terms, as the proportion of dollar claims held abroad versus U.S. gross domestic product (GDP) increases, the foreign exchange value of the dollar must decline if dollar interest rates do not increase at about the same rate as the foreign dollar claims.

Issuing the reserve currency gives domestic policy makers an advantage by making it easier to finance either domestic budget deficits or foreign trade deficits because there always is a ready bidders' market for any financing instruments from that issuer. Issuing the reserve currency enables the domestic population to consume more goods and services from whatever source than otherwise would be feasible. And issuing the reserve currency gives foreign policy officials of that nation the upper hand in determining multilateral approaches to either diplomacy or military action.

This last reason probably is why U.S. policy makers clung to the original Bretton Woods format for about 10 years beyond the point at which it still was viable, with the whole apparatus finally collapsing in August 1971.

Let us reconsider the effect of reserve currency issuance on domestic and foreign trade for a moment. Unless the issuing authorities can discover a way to allow their currency to depreciate more or less in proportion to the growing foreign trade deficits—by reducing interest rates or otherwise stimulating domestic inflation, for example—then a sustainable equilibrium becomes impossible.

Either the currency remains overvalued (good for the reserve currency status) and the trade deficits continue to increase, or the currency maintains fair external value (implicitly, a proportional devaluation, which is bad for the reserve currency status) and the trade deficits either stabilize or shrink. This latter proposition is what Professor Triffin was writing about in 1960, and it has been called Triffin's dilemma ever since.

Lewis Lehrman and John Mueller revived the discussion of Triffin's dilemma, without calling it that, in an article that appeared on December 15, 2008, in National Review Online. They suggested that the proper international reserve currency should be gold.

Food stamp nation with inflation

It's incredibly cruel and in poor taste to see pundits, analysts, and experts hail the Dow Jones Industrial Average cross the 11,000 threshold. And it's disheartening to witness the Bureau of Labor Statistics under-count unemployment and understate inflation at 1% for the Consumer Price Index, when a quick trip to the grocery store and gas station reveals much higher inflation. They're all lies perpetuated by the government, hiding behind flawed, official calculations to calm the growing social unrest. Meanwhile, the underclass and disappearing middle class have seen their purchasing power evaporate.

Are government economists and central bankers even looking to solve our economic problems? Or are they merely interested in covering up their treasonous actions? Debates of recovery vs. double dip recession seem pointless when the reality is that we are in the midst of a Greater Depression, with at least a decade of lower growth and higher inflation staring us in the face.

Friday, October 8, 2010

Standard of living for Americans is dropping

11 trends destroying the US economy

Bank of America halts foreclosures in 50 states

I guess that means the whole country since there's only 50 states in the US. I wonder if the mortgage on the White House is upside down.

A mushrooming crisis over potential flaws in foreclosure documents is threatening to throw the real estate industry into chaos, as Bank of America on Friday became the first bank to stop taking back tens of thousands of foreclosed homes in all 50 states.

The move, along with another decision on foreclosures by PNC Financial Services Inc., adds to growing concerns that mortgage lenders have been evicting homeowners using flawed court papers.

The foreclosure crisis--explained by Jon Stewart

It's a sad statement when the best source of news comes from the The Daily Show on Comedy Central.

Foreclosure Crisis
The Daily Show With Jon StewartMon - Thurs 11p / 10c
Daily Show Full EpisodesPolitical HumorRally to Restore Sanity

Thursday, October 7, 2010

Charlie Munger on communism, botox, and goldbug jerks

As fellow billionaire Warren Buffett's sidekick, when Charlie Munger speaks, people listen.

On investing in gold: I don't have the slightest interest in gold. I like understanding what works and what doesn't in human systems. To me that's not optional; that's a moral obligation. If you're capable of understanding the world, you have a moral obligation to become rational. And I don't see how you become rational hoarding gold. Even if it works, you're a jerk.

I guess I'm a jerk, then.

In closing, here is a quote from Warren Buffett's dad, Howard Buffett.

But when you recall that one of the first moves by Lenin, Mussolini and Hitler was to outlaw individual ownership of gold, you begin to sense that there may be some connection between money, redeemable in gold, and the rare prize known as human liberty.

- Howard Buffett (Warren Buffett’s father and former U.S. Congressman)

I guess Mr. Munger thinks his partner's late dad was also a jerk.

Ludwig von Mises quote

I've reference this quote before, but I just wanted to remind a few folks for emphasis, given recent world currency events.

There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved.

– Ludwig von Mises

China,the gold standard, and currency dumping

Click on photo to enlarge.
How times have changed, in the photo above the advent of the Communist control in the late 1940s saw Chinese citizens flock to grab gold. These very same people were summarily executed in the days that followed. Now China wants its people to purchase gold and silver. It makes it easier to move to a gold standard if everyone owns the gold!

Experience shows that neither a state nor a bank ever has had the unrestricted power of issuing paper money without abusing that power; in all states, therefore, the issue of paper money ought to be under some check and control; and none seems so proper for that purpose as subjecting the issuers of paper money to the obligation of paying their notes either in gold coin or bullion.

Wednesday, October 6, 2010

Zimbabwe bull market

Click on chart to enlarge.

The bull market in the Zimbabwe stock market was the biggest of its kind--in nominal terms. In real terms (adjusted for inflation), due to hyperinflation and the collapse of its currency, investors eventually lost everything.

Kyle Bass on hyperinflation

Kyle Bass was one of the few hedge fund managers who had the foresight to profit from the subprime mortgage bubble before it collapsed, so it may be prudent to hear him out on what he believes is coming next.
"The number one performing stock market in the last ten years has been Zimbabwe - in nominal terms" - that is the most memorable soundbite of Kyle Bass' presentation to David Faber at the Bearfoot Summit, because unfortunately, in real terms investors have lost all their money.

In fact, Bass says to shun stocks by and large, as in real terms (note not nominal), stocks will underperform a hyperinflationary system. This confirms what we have been observing for the past months ever since the latest FOMC regime, when gold has benefited far more from "money deluge" expectations that risk assets. In other words, those who are betting on a rising tide emanating from the inkjets' liquidity spigot, will do far better to buy gold than stocks.

Morgan Stanley raises gold and silver price targets

As a contrarian, this concerns me, and I expect a temporary pullback in light of the recent surge in prices. But mid- and long-term, Morgan Stanley hits the nail on the head prognosticating the bullish case for precious metals.

From Morgan Stanley's Peter Richardson, who has just become one of the bigger gold/silver/platinum/palladium/platinum/rhodium bulls.

* Identified and implied investment demand has increasingly become the main driver of demand in the gold market. Since 2002, investment demand as a percentage of total demand has increased from 14% to 41.4% in 2009. We expect these percentages to rise further, to 46.9% in 2010 and 48.9% in 2011. In Q2 2010 alone, investors bought 274t of gold via exchange traded funds (ETFs).
* This development is predominantly a measure of fear regarding the purchasing power of the world’s major fiat currencies, especially the US dollar and the Japanese yen. In our view, investors have become increasingly concerned about the risk of a protracted period of deflation and low growth in the developed world. This has raised demand for investments that retain real purchasing power in a period of falling prices and weak demand.
* However, judging by the flood of money into inflation-adjusted government bonds as well as gold, investors are also worried about future inflation. This paradoxical fear of current deflation and future inflation has its roots in the anticipated policy response to the current US, Japanese and European growth environment. Most notably, gold investors are concerned about renewed quantitative easing (QE) and an anticipated expansion in liquidity and currency devaluation that is also viewed as potentially inflationary, fuelling the demand for real assets that preserve purchasing power.
* Gold has been a particular beneficiary of this safe-haven demand since the US FOMC alluded to the possibility of renewed QE in the minutes of its September 2010 meeting. However, this allusion also coincided with resurgent fears over the European sovereign debt crisis following news of higher bank bailout costs in Ireland, rating downgrades in Spain, and concerns regarding capital adequacy of European banks following the publication of Basel III guidelines.
* In addition, despite these resurgent fears over European sovereign debt and the health of some European banks, European central bank net sales of gold actually fell in the first year of the third Central Bank Agreement on Gold, to only 6.2t. Given purchases by non-European central banks, the official sector is likely to be a net buyer of gold in 2010, and net selling will probably be smaller than previously anticipated.
* As a result, we have raised our 2011 gold price forecast in our base case by 14.3%, to an average US$1,315/oz, and in our bull case, which anticipates a more aggressive level of dollar weakness and a protracted period of negative real interest rates, we have raised our price forecast to US$1,512/oz from US$1,380/oz.

21st century gold standard

Financial hurricane to collapse the system

This is a concise explanation of the pending mortgage fraud crisis--and resultant collapse of the financial system.,_Sinclair_-_Financial_Hurricane_To_Collapse_the_System.html

“That collateralized debt obligation is now effectively worthless because the collateral behind the debt can no longer be collected. The banks cannot go and get it.

Let’s say you have 10 mortgages at $1 million a piece, the sum total of those mortgages are $10 million. So, the banks took the 10 mortgages and bundled them together into a collateralized debt obligation or CDO with a face value of $10 million.

They then sold that new entity that they created to an investment group of some sort, a pension fund, hedge fund, etc. promising them a yield of let’s say 7%. The sales pitch would emphasize the fact that this CDO was backed by real collateral. In the event of loan defaults by the borrowers, the banks would tell the buyer of the CDO that the collateral behind the loan could be sold to recapture any potential losses on the part of the purchaser.

Everything seemed to work fine until the defaults began and the foreclosure process kicked into high gear. The foreclosure process has exposed fatal flaws in the system and the flaw is that the banks cannot prove clear ownership of the mortgage.

Consequently, they are then barred from foreclosing on the property. Because they can no longer foreclose on the properties, the CDO is now effectively worthless.

The hedge funds and the pension funds cannot now sell these CDO’s on the open market, so how are they going to recover their original investment? Perhaps you may say that won’t be a problem because these instruments were insured. The problem is now the credit default swap or the insurance policy that was purchased to protect against default assumes that the insurer has the financial wherewithal or resources to make good on the claim.

If there were only a small number of these problem CDO’s this would not be an issue. But as the number of the foreclosures continue to skyrocket, and more and more banks are prohibited from seizing the collateral behind the property, the sheer magnitude of the number of claims presented to the insurer will overwhelm their balance sheet.

In effect what you have is an insurance company which doesn’t have enough money to pay off the claims. Compounding the problem is the fact that the CDO’s and credit default swaps related to these claims form a mass network of interdependence. This then ripples through the entire system and creates a domino effect which can cause the failure of entities creating the next financial crisis.

Ultimately the Federal Reserve will be asked to step in and buy up the now worthless CDO’s and put those on its balance sheet. In order to do this the Federal Reserve will have to engage in massive quantitative easing, taking onto its balance sheet the worthless CDO’s in exchange for newly issued treasuries.

IMF warns against currency war

After Brazil's Finance Minister declared a foreign currency war was underway, US Treasury Secretary Tim Geithner immediately denied the existence of a trade war of competitive currency devaluation.

It appears the IMF and G20 disagree with Geithner. Gee, leading US government officials are in denial on our faltering economy and the USDollar--what a surprise.

Tuesday, October 5, 2010

Company insiders selling

Take it for what it's worth.

Citigroup, Ally sued for racketeering

Readers should understand that under RICO laws, assets of the accused can be seized. RICO laws were enacted to prosecute organized crime syndicates.

The implication is that the mortgage-back securities and associated derivatives are worthless, as home borrowers default en masse, with no recourse. There is no collateral backing the mortgages, the collateralized debt obligations, or the credit default derivative swaps. No one knows who owns the mortgages, and hence, investors of the synthetic derivatives own worthless paper. Banks, insurers, pension funds, institutional and sovereign funds are included as investors of these toxic assets.

Yet, markets still ignore these machinations. Once reality hits, we'll see a re-run of the banking crisis of 2008, only bailouts won't be on the menu. Or will they?

Citigroup Inc. and Ally Financial Inc. units were sued by homeowners in Kentucky for allegedly conspiring with Mortgage Electronic Registration Systems Inc. to falsely foreclose on loans.

The lawsuit, filed as a civil-racketeering class action on behalf of all Kentucky homeowners facing foreclosure, also names as a defendant Reston, Virginia-based MERS, the company that handles mortgage transfers among member banks. The suit claims that through MERS the banks are foreclosing on homes even when they don’t hold titles to the properties.

The homeowners claim the defendants filed or caused to be filed mortgages with forged signatures, filed foreclosure actions months before they acquired any legal interest in the properties and falsely claimed to own notes executed with mortgages.

The Kentucky suit claims MERS and the banks violated the Racketeer Influenced and Corrupt Organizations Act, a law originally passed to pursue organized crime.

“RICO comes in because the fraud didn’t just happen piecemeal,” Heather Boone McKeever, a Lexington, Kentucky-based lawyer for the homeowners, said in a phone interview today. “This is organized crime by people in suits, but it is still organized crime. They created a very thorough plan.”

The suit, which includes claims of fraud, also names as defendants other banks, real-estate law firms and document- processing companies.