Wednesday, August 31, 2011

WSJournal, NYTimes commentaries urge: Murder gold
The commentary in The Wall Street Journal, written by David Malpass, a Treasury Department official during the Reagan administration, quotes former Federal Reserve Chairman Paul Volcker as having repeatedly declared gold to be "the enemy," something GATA Chairman Bill Murphy has cited about Volcker from time to time in his daily "Midas" column at Malpass writes that "sound monetary policy will produce lower gold prices," which are desirable because "piling trillions into foreign countries, gold, and idle Treasury bonds sucks capital away from growth. The Fed should put an end to it."

The commentary in The New York Times, written by the newspaper's "DealBook" columnist Steven M. Davidoff, proposes that the U.S. Commodity Futures Trading Commission force commodity exchanges to raise margin requirements for gold trading to quash "speculation" in the monetary metal, and even "to limit the gold acquired individually and by the ETFs. All of these measures would have to be coordinated and put into effect on a global basis."

Coordinated and put into effect on a global basis? As in a "conspiracy" of central bankers?

Emerging market central banks boost gold holdings in July

How exchange-traded fund GLD lets you pretend to own gold

Rick Rule - Expect More QE to Send Gold Prices Soaring
“Well the positive part is pretty obvious, it looks like in both Europe and North America the trend is towards more quantitive easing.  More purchase of bogus securities by the central banks through the issuance of phony paper.  What they call quantitive easing Eric, you and I would call counterfeiting.”

“They are printing more currency units and those currency units aren’t covered by the utility generating capability of the economies that use them.  In other words the value of the goods and services produced by the European and North American economies aren’t increasing, but the number of currency units, either dollars or euros that  they issue, are growing. 

In the case of gold, as dollars become worth less, the nominal value of gold increases.  While I don’t expect that this process will be a straight line process, meaning there will be plenty of volatility to scare the heck out of your readers, the trend nevertheless is towards more inflation, more counterfeiting and at least higher nominal gold prices. 

I suspect there will be higher real gold prices as well because I think that the fear buying that accommodates the phony and fraudulent issuance of currency will be accompanied by greed buying as speculators crowd into a gold market that is showing some momentum.  So I think the two primary investment motivators, greed and fear, will combine to take the gold price much higher....

“We are finally beginning to see the cash generating capabilities of these companies at higher gold prices.  Whereas last year industrywide free cash flows were in the $2 billion range, this year they should be in the $5 billion range. 

In addition to reassuring investors that free cash flow will allow the companies to engage in merger and acquisition activities, it will also allow the funding of greenfield and brownfield projects, which will further grow their production and consequently further grow their cash flow.

So I think in the next three to six months the gold shares will outperform gold as a consequence of merger and acquisition activities, by corporate performance itself and of course by this discovery cycle we’re talking about.  Finally Eric, some relief for your junior gold stock buyers.”

Belarus Runs Out of Meat as Russians Exploit Currency Plunge

You want to know what hyperinflation looks like?  Two words:  empty shelves.  Coming to a supermarket near you if the USDollar continues to be destroyed.

Fremont solar tech firm Solyndra to shut down, lay off 1,100 workers

Despite government subsidies of more than $500 million, and a big media push from Obama, Solyndra is filing for bankruptcy.  GM-lite.

Bill Murphy On Venezuela’s Gold (part 2)

Monday, August 29, 2011

The Idea That Gold Is In A Bubble Is Idiotic

Northwestern Mutual Makes First Gold Buy in 152 Years (Update2)

Note the date of the article at the bottom.  In other words, they've done pretty well for themselves.
By Andrew Frye

June 1 (Bloomberg) -- Northwestern Mutual Life Insurance Co., the third-largest U.S. life insurer by 2008 sales, has bought gold for the first time the company’s 152-year history to hedge against further asset declines.

“Gold just seems to make sense; it’s a store of value,” Chief Executive Officer Edward Zore said in an interview following his comments at a conference hosted by Standard & Poor’s in Brooklyn. “In the Depression, gold did very, very well.”

Northwestern Mutual has accumulated about $400 million in gold, and Zore said the price could double or even rise fivefold if the economy continues to weaken. Gold gained 10 percent last month, the most since November. The commodity has more than tripled since 2000, rising for eight straight years. Gold futures for August delivery slipped $4.80 to $975.50 at 4:03 p.m. in New York.

“The downside risk is limited, but the upside is large,” Zore said. “We have stocks in our portfolio that lost 95 percent.” Gold “is not going down to $90.”

Policyholder-owned Northwestern Mutual, based in Milwaukee, ranks third by 2008 life insurance premiums according to data from the National Association of Insurance Commissioners. The data excludes annuities.

To contact the reporter on this story: Andrew Frye in New York at
To contact the editor responsible for this story: Rick Green at Last Updated: June 1, 2009 16:34 EDT

Three terrible lies you need to know about gold

Steve Jobs inspired by Atlas Shrugged when he started Apple?

Real People Say "Screw You" To The Markets

Record prices spawn new wave of China gold bugs

I'm a little concerned about the proliferation of gold derivatives trading, as they are merely paper contracts, but I am enthused by the exploding demand for physical bullion.  The battle between perma-short bullion banks against the physical buyers will end badly for the former.  You can print paper into perpetuity, but you can't print an ounce of real gold.

Gold, politics, and Venezuela

As GATA has alleged for over a decade, the vaults of central banks and treasuries are devoid of unencumbered gold, if it even exists at all.  The emperor(s) have no clothes, and Venezuela may have started a mad dash for sovereign nations to repatriate their physical gold reserves.  Conspiracy theories aren't necessarily fictitious, folks.  We're all about to find out the hard way.
Chavez is not just recalling his country’s gold to protect its integrity, he is waging an idealist’s war against the capitalist system and the US in particular. This is why he has threatened to move gold and foreign reserves to the countries he says he trusts, principally Russia and China, and why he is proposing to nationalise Venezuela’s gold mines.

He has picked the capitalist system’s weakest point. He has been told by his central bank that the Fed, the BoE and the Bank for International Settlements hold gold for the whole central banking community in the main trading centres, and that much of this gold exists only as a ledger entry and is not backed by physical metal. Whether or not Venezuela’s gold is held in these fractionally-backed sight accounts, or in earmarked accounts where the gold is held separately, we do not actually know; but there is little doubt that this move is designed to encourage other central banks to demand that their gold is also repatriated.

The Rescue That Missed Main Street

Embry - Incredible Physical Gold Demand, Premiums Exploding

Richard Russell - Gold Will Break to New All-Time Highs

The 150-day moving average currently is at $1492.  In other words, a drop to that level today would still mean the decade-long bull market in gold is still intact.  Of course, the moving average will move higher going forward (since gold has had a strong upward move over the last 150 days), so support levels will rise over time.  The take away message is corrections are healthy for bull markets, allowing prices to consolidate in an orderly manner.  It also builds a base from which the next leg up can materialize.

Sunday, August 28, 2011

Are precious metals currently bubble assets?

Gold and silver are asset classes which have been in decade-long secular bull markets.  Currently, gold is approaching $1800 an ounce, approximately 6% below it's all-time high, while silver is approximately $42 an ounce, 20% below it's all-time high.  Here are my opinions on where they are headed.

Mining shares have underperformed the metals themselves for 3 years, but I expect that to change soon--it may already be happening.  In fact, I think the shares may start to slingshot up past gold and silver prices.  A few reasons:

1) operational leverage.  For example, when the cost of digging up gold for a miner is $500, and the price of gold is $900, its profit is $400/oz.  When the price of gold is $1800, holders of physical gold double their returns, as the price has doubled from $900 to $1800.

However, a mining company's profit soars from $400/oz. to $1300/oz. ($1800 - $500).  That's operational leverage.  Of course, when gold declines, the shares of the mining company would theoretically have a steeper decline.  Leverage works both ways.

2) The above calculation assumes input costs are similar (energy prices have actually decreased recently, labor costs are fairly constant in a soft job market, and water costs have stabilized), and therefore profits for the mining company should more than triple, which theoretically should indicate the share price of the company should also triple.  Therefore, as oil prices decline, more top line revenue (from a higher gold price) should flow directly to the bottom line, as input costs decline.  More revenue and reduced input costs are a nice combination for company profits, which should reflect in higher share prices.

3) Smart hedge funds have been playing the long side of gold and silver (as opposed to the bullion banks who are permanently short selling gold and silver).  The hedge funds have also hedged their long positions in the precious metals by shorting the mining companies.  That's why mining shares have underperformed relative to the metals.  But as with any suppression scheme, the gravy training never lasts forever (e.g. carry trade of foreign currencies like the yen, Swiss franc, Aussie dollars), so the really smart ones exit the trade before it reverses.

Also, as equities overall collapse, and the miners have recently shown resilience by maintaining and even rising against the overall market decline, other institutional investors will soon take notice and play the long side of the mining companies.  Institutional investors are always comparing their performance relative to their peers, quarter by quarter.  Many will notice the few who have outperformed due to their high allocation to precious metals.  They in turn will initiate or add their exposure to the precious metals sector.

This alone will cause mining shares to rise.  The rise will be even more explosive as quarterly earnings reports come in higher than consensus estimates.  In other words, the mining sector will surprise on the upside, which should drive even more institutional and retail investors to shift into the lightly-covered mining equities.  After all, every major bank follows the financials, technology, industrial, consumer, transport, energy sectors, etc., but very few are overweight precious metals coverage.  Gold has had a sustained, but orderly decade-long rally, but the banks still treat that sector as if it just experienced its worst performance, when it tanked between 1980 and 2001.  The financial pundits and mainstream media still treat gold like the black plague, since they all know gold is in a "bubble".

That is slowly changing, as hedge funds and banks in London are beefing up their precious metals analyst teams.  Unless precious metals completely collapse from these levels, initiating or adding to current mining exposure could be a good call heading into the fall and winter--historically a seasonally strong period for the precious metals sector.  The smart money is already in, the BIG money comes next.  The dumb money comes last.

Ask yourself this.  Where were all the bubble callers for Nasdaq stocks in 1999, or in real estate in 2005?  They were few to be found, as the consensus believed high-tech stocks could never plunge, or that US real estate could never decline.  To suggest otherwise made you unpopular and the target for ridicule.  There was a manic rush into internet stocks, and bidding wars on secondary homes in sunshine states.  THAT is a sign of a bubble--a frenzied mania of too many buyers. 

By contrast, the rise in gold and silver has been somewhat orderly, with light media coverage--despite gold climbing in price each and every year since 2001, setting new all-time highs along the way.  Imagine if the Dow Jones achieved that with regularity--there would be headlines splashed across every major media outlet.  The anti-gold media aim to maintain the banking status quo, with sponsorship from the government and central banking cartel.

Gold has not reached its mania stage--yet.  The fact that every analyst on CNBC, Bloomberg or the average Joe on the street thinks gold is in a bubble tells me it's nowhere near a top.  In other words, the "experts" and sheep will be wrong again.  They're just angry they missed this rally for the last 10 years, and are talking their book.

I've been pounding the table for almost 3 years about buying gold and silver, and frankly, I've been on the right side of the trade.  The Ivy League, Nobel Laureate Keynesian economists have been completely wrong.  I started my coin collection as a kid in the 1970's.  I bought gold jewelry as a tourist in Asia in 1998 and 2000--that's just the thing to do when visiting Asia--buying 24 K pure gold.  I could be labeled a gold bug, but that's not entirely accurate.  Between 1980 and 1999, gold was the worst-performing asset class.  Stocks, real estate, and even bonds were the assets to own.  But since 2000, precious metals have far outperformed, on a nominal basis, as well as inflation-adjusted.  Asset classes are cyclical in nature--there's a time to buy them, and there's a time to sell them.  I don't fall in love with any particular asset class.  But when there is financial distress, and when market participants distrust paper currencies, gold and silver will have their place as safe havens and alternative currencies.

Bubbles burst when everybody and his stockbroker brother-in-law owns a certain asset--everybody is "all in", so there are no more bullish buyers left.  This never ends well, as the bubble asset has become extremely "overbought"--there are no buyers left and only potential sellers.  In other words, you'll know a bubble is about to crash when your shoeshine boy gives you stock advice, or the bartender gives advice on internet stocks (true story, it happened to me in a bar in Portland in 1999), or all your friends tell you how to flip desert condos.  Those are signs you need to exit before everybody else does.

But when everybody says we're in a bubble, we are not in a bubble.  This rally in gold still has legs--lots of it.  You want evidence?

I had read last year that only 3% of Americans own gold.  Which means it's an under-appreciated asset--at least among Americans (it is not under-appreciated among Asians, middle eastern oil sheiks, the drug cartel, or Swiss bankers.  They are all accumulating).

But since we live in America, and due to my incessant curiosity, I decided to take my own ad hoc survey, which is continuing.  I have asked friends, family, colleagues, total strangers at airports, restaurants, hotels, etc.  Of the 217 people (and counting) I have asked, exactly 9 Americans own gold.  Most give me a blank stare, and have no idea why I would ask them that, much less what form the gold comes in, how or where to buy it, etc. (like many of you who have asked me).  Many can't even begin to ask me cogent questions, like "should I buy mining shares, bars, coins, where do I store it," etc.  When prompted, the average person thinks I'm odd, or at least off-center for even asking them about something that has no relevance in their lives.  As usual, and they will find out the hard way; their action or inaction may end up having THE most relevance in their lives.

Having said that, it's the older crowd that is the most clueless, as we've been brainwashed for so long that gold is a barbaric relic, and that the only way to build wealth and prosperity is through accumulating USDollars.  Fair enough, it's worked very well for many, but then one has to explain why the USDollar has lost 90% of its value in the last 40 years.  Much of that wealth is and will be proven to be illusory when real rates of inflation are factored in (as opposed to fictitious CPI data).

It's been the younger generation that is finally opening up to the concept that the USDollar is being destroyed, and that to maintain purchasing power, one needs to hold tangible assets.  Problem is, most young people have no savings to speak of, so even if they are open to buying gold and silver as protection against devaluation, most don't own any, either.  That's why I don't ask if they think gold and silver are good hedges against currency devaluation.  I specifically ask people if they OWN any.  That usually thins the herd out considerably.

Conclusion?  Gold and silver's advances still have a long way to go.  When there is a mad dash by the masses lining up around the block of the local coin dealer, then I would rethink my investment thesis.  And those in line will be looking to BUY gold and silver, not selling it.  In a mania, buyers usually buy out of fear or greed.  With gold, buyers will be driven by BOTH fear and greed.  That's why it will be the mother of all manias, in my opinion.

Unfortunately for the average person, that's when the bubble will burst, because by then, prices will be much higher than they are today.  And that's the best-case scenario--that the bubble in gold will burst! I WANT gold prices to decline, because that would mean trust in our global financial system has returned, that trade imbalances are mitigated, and fiscal deficits are vanquished.  The gold bubble will burst if/when all developed countries in Asia, Europe and the US will get their fiscal house in order, when stocks and real estate return to levels where they make economic sense...when the concept of sound money returns, and austerity, savings, and investment are rewarded--not punished by artificially low yields.  This also means letting zombie banks and reckless countries collapse.  Bad loans must be written down, with both borrowers and creditors taking a hit instead of being bailed out.  Of course, this will never happen because politicians have to answer to their entitled constituents, who demand something for nothing.  Which means the bailout mentality will continue until it can't continue anymore.  Bailouts entail ginning up the printing press, which is by definition, inflationary--despite denials by the Keynesians who only point to their sacred, but utterly fictitious CPI data.  And of course bad debtors will default anyway, only later and under much worse conditions.

Where does this lead us?  If that's the best-case scenario, what's my worst-case scenario?  The answer is gold and silver will be SPENT in barter, not sold for a profit.  Because in that financial Armageddon scenario, the USDollar would have collapsed and we'd be in an apocalyptic hyperinflation, at which point, you'd be suicidal to exchange your gold and silver for USDollars (or more correctly, Federal Reserve Notes--read the wording).  Why would you trade in a tangible asset for worthless paper?
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

“The few who understand the system will either be so interested in its profits or be so dependent upon its favors that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests.” - The Rothschild brothers of London writing to associates in New York, 1863.
“Let me issue and control a nation’s money and I care not who writes the laws.” - Mayer Amschel Rothschild (1744-1812), founder of the House of Rothschild.

Saturday, August 27, 2011

Western Speculators Sell Gold; Asia and West Buy Bullion - Coin and Bar Supply Increasingly Tight

The title says all you need to know.  The bullion banks are losing control in their price suppression schemes, because the physical buyers are all too happy to buy at lower prices.

Bill Murphy On The Gold Crash

The Pan Asia Gold Exchange and Hugo Chavez, a curious meeting of minds?

If you can understand this article, you will understand why the prices of physical gold and silver will be much higher going forward.  The author explains the difference between paper claims on unallocated gold and silver, in contrast to physical, deliverable bullion.  When the inevitable shortage on physical inventory materializes, the prices for physical bullion will soar and decouple from the contractual, paper prices.  Many who thought they owned gold and silver will be left holding the proverbial bag.

It's a shell game the bullion banks and central banks are playing--and the suckers are the citizens.

40 Lipsticked Virgins: Gadhafi's Best Bet for Survival

Ron Paul Warns of Riots; Robert Reich Calls for Marches

2010 Congressman Ron Paul's financial statements

He's been buying precious metals mining shares for years.  His gold bug portfolio has done pretty well. /understatement

It May Be 2008 All Over Again, But There Is One Key Difference
A Race In Opposite Directions:

How scary is it? The best illustration comes from the $US Gold price. The “price” of longer-term US Treasury debt has risen by 14.75 percent since the beginning of July. Over the same period, the $US price of Gold has risen from $US 1482 to its August 19 spot future close of $US 1852. That’s a rise of $US 370 or 25 percent. Yet US Treasury debt and Gold are polar opposites in any sane evaluation of the financial system. Treasury debt is the foundation of the global monetary system. Gold is the pariah of the global monetary system and has been locked out of it in any official form for four decades.

With all the comparisons to the events of 2008 which have been appearing in the mainstream financial media, this comparison has been all but totally overlooked. Cast your mind back to the carnage of late 2008. During that period, almost everything was sold off. While it is true that Gold did not fall nearly as far as did most of its fellow “commodities”, it is nonetheless a fact that in the two months between mid September and mid November 2008, Gold fell from about $US 920 to $US 700. That’s about 24 percent.

There were two financial assets which boomed in late 2008. One was Treasury debt, the other was the US Dollar. While Gold and everything else was falling out of bed, the trade-weighted US Dollar index - the USDX - soared 21 percent from 73 to 88.2 between early August and late November 2008.

Compare that to what is happening now. Treasuries are soaring but the US Dollar is, at best, flat. And Gold in terms of EVERY major paper currency has gone ballistic. This time, things do look different.

Jim Rogers supports Ron Paul
"In this election if Ron Paul gets anywhere near the nomination I would certainly support him. He is the only one that I've seen in American politics that seems to have a clue about what's going on."

Friday, August 26, 2011

Gold Rush!

The Broken Window Fallacy
The Federal Reserve Bank of San Francisco's own economists forecast a bear market in stocks for at least another decade, bottoming out in 2021.
The model-generated path for real stock prices implied by demographic trends is quite bearish. Real stock prices follow a downward trend until 2021, cumulatively declining about 13% relative to 2010. The subsequent recovery is quite slow. Indeed, real stock prices are not expected to return to their 2010 level until 2027. On the brighter side, as the M/O ratio rebounds in 2025, we should expect a strong stock price recovery. By 2030, our calculations suggest that the real value of equities will be about 20% higher than in 2010.
 What's next?  Will the progressives now label the Fed itself financial terrorists?

Some Of Your Taxpayer Assets Will Be Sold Off To 'Vulture Funds,' In Case You Were Interested
In the process, these investors will instantaneously become the largest improved real estate owners and landlords in the world. The U.S. taxpayer will get pennies on the dollar for these homes and then be allowed to rent them back at market rates.

How Low Can Gold Go on a Correction?

If you're a "Buy the dip" kind of person, have some dry power available in case gold drops further.
As the chart above shows the price of gold has breached the sell line at $1,830 so we can expect to see a correction with downside price targets for support as follows:
  1. $1,750 for support from the dotted pink line.
  2. $1,650 for support from the warning line.
  3. $1,500 for support from the lead-in trend line.

Why Software Is Eating The World

Rothschild quotes

In case some of you haven't read these quotes before (which begs the question: do you even have a pulse?):
“The few who understand the system will either be so interested in its profits or be so dependent upon its favors that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests.” - The Rothschild brothers of London writing to associates in New York, 1863.
“Let me issue and control a nation’s money and I care not who writes the laws.” - Mayer Amschel Rothschild (1744-1812), founder of the House of Rothschild.

Roubini Says Rogers’s $2,000 Gold ‘Utter Nonsense’

Here's a quote from November 4, 2009 about the price of gold from Nouriel Roubini, NYU professor of Economics.  He's a respected expert who has an unshakeable faith in Keynesian economics.
Nouriel Roubini, the economist who predicted the global economic crisis, said a forecast by investor Jim Rogers that gold will double to at least $2,000 an ounce is “utter nonsense.”

There is no inflation or “near-depression” to drive gold prices that high, Roubini said today at the Inside Commodities Conference in New York. If a severe depression came to pass, with investors buying canned goods and hiding out in log cabins, “maybe you want some gold in that scenario,” Roubini said.

“Maybe it will reach $1,100 or so but $1,500 or $2,000 is nonsense,” Roubini said. Gold rose to a record $1,098.50 today in New York on speculation that central banks and investors will purchase the metal to hedge against a declining dollar.
What's that expression?  Those than can, do.  Those that can't, teach.  Hey Nouriel, stick to teaching your voodoo economics.

Marc Faber: don’t store your gold in the United States

Wednesday, August 24, 2011

Too many depositors, not enough borrowers

When the black line (loans) catches up to the blue line (deposits), the economy will recover, the huge monetary base transforms into money supply, the multiplier effect kicks in, and we'll have (high) inflation.

Hunt Brothers Framed By CFTC to Suppress GOLD!

This is a reprint of an oldie but goodie.

The effect of margin hikes

The question of whether hikes on margin requirements cause prices to tank can be debated ad nauseum.  Truth is, it's a half-truth.  It reduces the risk profile of the CME, but it also induces panic selling by levered longs.  And because the perma shorts in the precious metals markets are better capitalized, they don't have to close out positions as vociferously.

But a picture is worth a thousand words.  You decide.

Not so coincidentally, it was the hiking of margin requirements by the CFTC which eventually led to the bankruptcy of the Hunter brothers, in their attempt to "corner" the silver market.  That and the CFTC cap on silver ownership.  This forced the liquidation of the Hunts.  The government changed the rules of the game midstream.

Steve Jobs Resigns As CEO Of Apple

Good luck shareholders.  In fact, good luck NASDAQ.

Whistleblower: SEC improperly destroyed thousands of documents

And There's Your Perfectly Leaked Explanation: CME Hikes Gold Margins, Again, This Time By 27%

Gee, what a surprise.  The CME hiked margin requirements on gold futures exchange contracts again, further knocking down prices, and flushing out weak, leveraged longs.  I'm not prescient.  The status quo is just predictable.

US government asset seizures on the rise

Biggest Gold Drop Since December 2008 Sends Metal To... Week Ago Levels

Tuesday, August 23, 2011

Precious Metal Margin Warfare Jumps The Pacific, As Shanghai Hikes Gold Margins For Second Time In A Month, Prepares To Crush Silver

And sure enough, the big dip in gold ensues as a result of the margin hikes.  However deep the dip is, it will be temporary, as the debt problems in the Euro zone and in the US won't resolve themselves overnight.

Keynesian Solutions - After Total Failure -Try, Try Again

Gold Tops $1,910 for First Time

I told you folks the futures exchanges would hike margin requirements for gold contracts to "control volatility and mitigate risks", which is half-true.  The other half is they have to protect the perma-short bullion banks from imploding, as prices on precious metals soar.  Only I thought the COMEX (or CME) would act first.  It looks like their counterparts in Shanghai beat the boys in New York to it.  Or maybe they're the same players on the other side of the pond.
The Shanghai Gold Exchange will increase the trade margin requirement for its gold forward contracts for the second time in a month following recent rapid increases in gold prices. Margin requirements will be raised to 12 percent from 11 percent from settlement on Aug. 25, to prevent risks, keep the market stable and protect investors’ interests, the bourse said in a statement posted on the website today.

CME Group Inc., the world’s futures market, hiked the initial and maintenance margins on its gold contracts by 22 percent from the close of business Aug. 11. It last boosted gold margins on Jan. 20 and decreased them on June 20, according to data on its website.

Monday, August 22, 2011

Chavez move could drive gold through the roof - and put confiscation on the cards again
The theory that governments and bullion banks may not have the gold they claim to hold will be put severely to the test as Venezuela seeks to call in its overseas gold holdings.

The Devil Is In The Details
"Nobody lawyers up like this unless they are in deep shit"

Gaddafi gold-for-oil, dollar-doom plans behind Libya 'mission'? 

Thanks to Larry for finding this article and video.

The Lindau Nobel Laureate Meetings

Nineteen Nobel Laureates will be gathering in Lindau, Germany to discuss the world's economic problems.  My guess?  The world's brightest economists will collectively fail in solving our global economic and financial problems because they're all Keynesian economists.   Most glaringly, they don't understand the hazards of compounding debt.

How can I be so bold as to veer away from these intellectually superior economists?  Because they were all blind-sided by the subprime mortage crisis, the resultant financial meltdown, and their blind faith in papering over economic problems with printing more currency.  My proof?

Gold priced in USDollars since 2008 (the Greater Depression), 1971 (the closing of the gold window by President Nixon), and 1913 (the creation of the Federal Reserve Bank).  You pick your time period.

While financial TV anchors fawn over these Nobel Laureate economists, I'll reserve my admiration for Austrian School economists who got it right all along--yet are still ignored by the mainstream media, government economists, and central bankers.  Advocate sound currencies backed by tangible assets, and you'll find yourself blacklisted by the status quo.

S&P Board Fires CEO For Telling The Truth, To Be Replaced With COO Of Citibank

You can't make this $hit up, and yes, it is $hit.

Schiff - When Silver Breaks $50 Shorts to Propel it to $75-$100

Gold Nears $1,900 - Venezuela Formally Requests Gold Holdings Held By BOE Ship By Sea
The dumb money continues to warn that gold and silver are bubbles.

Their simplistic bubble thesis is based almost exclusively on the nominal US dollar price and recent price movements and on the assumption that (to paraphrase) ‘gold has gone up in price a lot - therefore it is a bubble’.

There is a continuing failure to look at the important supply and demand fundamentals of the gold and silver markets which leads to unsound reasoning and irrational conclusions. There is also a failure to adjust for inflation.

There is little knowledge of the very small size of the physical bullion markets vis-à-vis the stock, bond, currency and other markets.

There is also very little knowledge of financial, economic and monetary history and a continuing ignorance regarding ‘investment 101’ which is diversification.

Being prudent and having an allocation of 10% to gold will protect no matter what economic and monetary scenario develops in the coming months. If one is not leveraged and is prudently diversified and owns gold bullion (coins and bars in the safest way possible), it does not matter if gold is a bubble or not as you own a range of other quality assets.

From a purely investment point of view - an allocation of 5% to 10% makes sense.

From a financial insurance or store of wealth point of view – having a higher proportion of your overall net worth makes sense.

Especially given the risks posed to the dollar, euro, pound and fiat currencies and to deposits “guaranteed” by insolvent states.

Not putting 10% of your wealth in gold is extraordinarily imprudent today and a recipe for further financial destruction.

Sunday, August 21, 2011

The Battle For Libya Is Almost Over... As Is The Battle For Its 144 Tons Of Gold

Max Keiser - "Brown's Bottom" - (Documentary)

This is an oldie but goodie with Max Keiser on precious metals, price manipulation, and custodial vaults.

Silver Market Update

Some technical analysis from Clive Maund on silver.

Bart Chliton Response to my Email

Bart Chilton appears to be the one CFTC regulator with integrity, but I'm starting to think he's there just to appease the "conspiracy theorists" on market manipulation by the bullion banks.  In other words, he's a false flag--someone the public can complain to, while the shiftless CFTC does nothing to regulate market manipulators.  In fact, I firmly believe the CFTC and CME are all in on it, helping out their big brothers on Wall Street continue to rig markets to soak up short-term profits.

Not easy for bullion banks to put golden Humpty Dumpty back together again

This is exactly the tone of a letter I sent earlier today to friends and family.  This is only the beginning of the scramble for physical gold.

Friday, August 19, 2011

Ron Paul’s Exchange with Santorum Says It All

DE GAULLE predicted the US monetary crisis in 1965

Now you know why Charles de Gaulle sent warships to New York to take delivery on gold bars they purchased with USDollars, still redeemable for gold at the time.  The US Treasury was literally running out of gold because the French and Italian government purchases were depleting the Treasury's gold reserves.  This forced the hand of President Nixon to close the gold window on August 15, 1971.

John Embry - Silver About to Roar Through $50 All-Time High
There were some brilliant studies that were revealed at the GATA Conference.  One study showed that had you just taken the trade during the Comex hours over the past number of years, I forget if the chart was five years or ten years, but gold has been up dramatically, and Comex action alone, by itself would have netted out an actual decline in the gold price of $500 an ounce based on price changes just during the Comex hours.

That’s just statistically aberrant, it couldn’t happen unless there was manipulation.  It shows the extent of the manipulation.  Eventually the cartel will run out (of gold) and when they do look out because the price is going way, way higher than anybody imagines....

When asked about silver specifically Embry remarked, “Silver is absolutely explosive.  The bullion bank with the large short position has thrown everything but the kitchen sink at the thing on the downside.  You had those five margin hikes a couple of months ago as an example and that was all an attempt to hold back something that I don’t think can be held back.  All it did was sort of buy two or three more months and now silver is building up power to roar through the $50 all-time high.

Once silver does that (breaks $50), who knows where it’s going to go?  All I know is that gold is going a lot higher and the gold/silver ratio is going down and that means silver is going a lot further than gold.  So I mean pick your prices, they are going to be dramatically higher for both of them.”

Eric Sprott - The Price of Silver Should be $110 to $120 Today

The Jaws of debt

"You're gonna need a bigger boat."

Perfect Storm Sees Gold & Silver Surge – Chavez Gold Action Leads To Backwardation, Short Squeeze And ‘Havoc’ Concerns

Long-time readers of this blog know the concepts of backwardation, contango, a short squeeze, physical delivery vs. cash settlement, paper futures contracts vs. physical bullion, and the ramifications of a default at the COMEX (and at the LBMA).  For those late to the game, listen up.

And don't listen to the foolish Dennis Gartman, despite his huge following from CNBC.  He's been trying to trade in and out of this decade-long gold bull market for the last few years, frequently calling a wrong-headed "top".  His followers would have made more money if they just bought gold and sat on their holdings.

Biden seeks to reassure China on U.S. debt
U.S. Vice President Joe Biden on Friday said China had "nothing to worry about" concerning the safety of its vast holdings of Treasury debt, while China's Premier Wen Jiabao gave a ringing endorsement of the resilience of the debt-ridden U.S. economy. 
Given the track record of government leaders and central bankers, and their attempts to soothe markets, it's time to worry.

Federal Reserve Prediction Error Rate: 33% In Under 3 Months... Or 133%+ Annualized
So... from 3% to 2% in 11 weeks - a 33% change in forecast in under 3 months, or well over 133% annualized... And these are the clueless astrologists that not only determine our monetary policy, but tells savers to buy a lot of vaseline for the next 2 years as that's the only thing they will need in an environment in which the interest rate on their savings is zero until "mid-2013"

Is A Thunderous Flock Of Black Swans Imminent, Or The "Price Stability" Redux
...physics can not be circumvented with a printer, and a crash deferred today, is double the crash that can not be deferred tomorrow.

Thursday, August 18, 2011

U.S. Consumer Prices Rise More Than Forecast

What a shocker:  consumer prices are rising, despite a stagnant economy. /sarcasm

2008 REPLAY: Europe Moves To Ban Short Selling As Crisis Spreads
In 2008, several countries banned short-selling in an ultimately impotent attempt to control the crisis, but not everyone thinks a blanket ban works however. Analysts argue that it hasn't worked in the past, because it singles out a group that may not have been that active during the trades, and because it won't prevent panicked investors from selling their shares.

“Every time we have had a short selling ban, the sector it is supposed to protect has collapsed,” one hedge funder told the FT, adding that the measure seemed designed to stop hedge funds make money rather than stopping a collapse.

20 Cents for Gas Shows the Power of Silver - 2 August 2011
Go to any bank right now and hand them $100 and ask for nickels. The teller will gleefully give you back about $135 in metal (as of this writing). We suggest you do this as regularly as you can.

No, you can't take advantage of that now by turning around and selling these cupronickel pieces ("nickels" are actually only 25% nickel and 75% copper) for an immediate 35% gain. Not yet. But that time is coming. It could take years, but we doubt it will be that long this time around. The pace of debasement is accelerating over time.

Could Gold Soon Go Ballistic?
Gold and commodities work in the exact opposite manner to stocks. They bottom gradually and make spike tops, whereas stocks tend to make spike lows and usually top out gradually. The reason for this difference in behavior is that the same emotion that drives rising commodity prices also drives falling stock prices: fear.

In stocks we often observe that when the market is very oversold but fails to bounce in spite of that condition, a crash or a mini-crash can happen – as was in fact recently demonstrated. The opposite can happen in gold and commodities -  an overbought condition can lead to an upside blow-off.

We note that the gold market has been overbought for quite some time, but so far has refused to correct. Of course a short term correction remains the higher probability bet, however, one must be alive to the possibility that the recent persistent overbought state could also be the precursor to a blow-off move.
Recall for instance what happened with silver late last year and early this year  – from the point where it exhibited a strong and persistent overbought condition for the first time, it proceeded to almost double in price following a very brief, but hefty shake-out. Again, we are not predicting that the same will happen with gold here and now. We can not know that, and it is the lower probability outcome as mentioned above, but the fact that gold has remained persistently overbought for over three weeks now is a hint that something unexpected could happen.

LTCM Founder Says Leverage, Portfolio Theory Doomed Firm

Wednesday, August 17, 2011

As Chavez Pulls Venezuela's Gold From JP Morgan, Is The Great Scramble For Physical Starting?

This story of Venezuela taking delivery of their physical gold bullion is gaining traction.  This could the beginning of the repatriation of sovereign gold reserves from central banks worldwide, as nervous governments no longer trust their custodians in London and New York.  Is there any unencumbered gold left?  Heck, does gold even exist inside the custodial vaults?

A record 45.8 million American using food stamps

This has been blogged here many times.  The Chicago Tribune and CNN are catching up to the concept of the 21st century electronic equivalent of Great Depression-style bread lines.  We just don't have photos of the bread lines.,0,6178100.story

Should Gold Prices be Higher?

It is interesting that after a 10-year hiatus from CNBC, GATA's Bill Murphy returns in London, and not the US.  Notice how the former Bank of England official attempts to respond to Murphy's "conspiracy theories" by shifting his eyes down to the lower left.  When someone is remembering details, their eyes move to the right. When someone is making something up, their eyes move to the left.  Either that, or Jens' teleprompter is in that exact one spot.

Venezuela May Move Reserves From U.S. to ‘Allied’ Countries, Says Lawmaker

Tuesday, August 16, 2011

New High: 93% Say They're Paying More for Groceries Than A Year Ago

In the No $hit category, Americans are paying more for groceries than they did last year.  But, but, but, I thought Bernanke said inflation was "transitory"?  Readers of this blog and others have for years figured out official BLS CPI data have been understated.  But hey, we're all just stupid zombie consumers with maxed out credit cards, right?
Americans nationwide continue to lose faith in the Federal Reserve Board to keep inflation under control, with the number who say they are paying more for groceries now at an all-time high. 

Paul Krugman Wants Manufactured Threat From OuterSpace to Revive Economy

Left-wing, Keynesian, Nobel Laureate economist Paul Krugman is a war-monger.  Go figure.

The Daily Show - Indecision 2012 - Corn Polled Edition - Ron Paul & the Top Tier

Peter Schiff - Relentless Rise in Gold to Continue

Inflation is not "transitory"

According to Jim Quinn of the The Burning Platform blog:

The reality since Ben Bernanke announced his QE2 policy in August 2010 is:
  • Unleaded gas prices are up 45%.
  • Heating oil prices are up 46%.
  • Corn prices are up 71%.
  • Soybean prices are up 26%.
  • Rice prices are up 13%.
  • Pork prices are up 31%.
  • Beef prices are up 25%.
  • Coffee prices are up 38%.
  • Sugar prices are up 48%.
  • Cotton prices are up 13%.
  • Gold prices are up 42%.
  • Silver prices are up 115%.
  • Copper prices are up 23%.
Yet, official statistics from the BLS state inflation is running at 2 - 3%.  They must be applying fictional math in the District of Corruption.

Google's patent play: $12.5B for Motorola Mobility

They may not admit it, but Android operating system smartphone manufacturers HTC, Samsung, et. al aren't too keen with this acquisition by Google.

And Apple, the iPhone's manufacturer, won't comment.  They may not fear Google's deeper penetration into this space, but they aren't exactly doing cartwheels either.

Obama (Dis)Approval Rating Update: All Time Record Low

The good news is the approval rating for Congress is even lower.


Monday, August 15, 2011

Today Is The 40th Anniversary Of Nixon Ending Gold Standard And Creating Modern Fiat Monetary System

President Nixon closed the gold window 40 years from today, August 15, 1971, right before one of the most inflationary decades in US history.  Note in the archived video this action was intended to "halt inflation."  Laugh out loud.  Lies, lies, and more lies from Tricky Dicky...

Treasury International Capital Data For June

Foreigners were dumping US Treasury bonds in record numbers last June (coinciding with the ending of QE 2.0, by the way).  Not only were they not buying UST's, but they were also selling their existing inventory.  Anybody want to guess what other safe haven they were buying in lieu of said Treasuries?

Breaking The Silver Manipulation Barrier

There are a few minor mistakes in this blog post, but the tone of the silver manipulation in London and at the COMEX is accurate.  It's a good read for those unaccustomed to rigged markets.

Starbucks’ Schultz Urges Fellow CEOs to Boycott Campaign Giving
Chief Executive Officer Howard Schultz urged other CEOs to stop donating to U.S. political campaigns to encourage leaders to solve the nation’s growing budget deficit.

“I am asking that all of us forego political contributions until the Congress and the President return to Washington and deliver a fiscally disciplined long-term debt and deficit plan to the American people,” Schultz wrote in an e-mail sent to business leaders that was obtained by Bloomberg News.

World Bank chief: Global economy in 'new danger zone'

Mystery and intrigue in the gold market

Another must-read on the gold suppression schemes of central banks, bullion banks and sovereign governments.  And a primer on why buyers should buy physical bullion and not paper futures contracts.

Rickards: US Will Revalue Gold to $7,000

This is a must-read on President Nixon closing the gold window on August 15, 1971, 40 years ago to this day.

The Media Admits To Ignoring Ron Paul


Saturday, August 13, 2011

Wednesday, August 10, 2011

Fed’s Sheets Quits as Bernanke’s Chief International Adviser

Just as all of Obama's economic advisors have resigned (the last one standing, Treasury Secretary TurboTax Timmy Geithner is barely hanging on), Fed Chairman Blackhawk Ben Bernanke's advisers are abandoning ship also.

What's that expression about rats abandoning ship?  Does anybody feel warm and fuzzy still? 

Fed’s Sheets Quits as Bernanke’s Chief International Adviser 

Bernanke Abandoned! Three’s a Trend After International Economic Adviser Sheets Ends 18-Year Run With Fed

Key Bernanke adviser resigns from Fed board

Fed’s Warsh Quits; Bernanke Adviser Questioned QE2



CME Hikes Gold Margins By 22% And Gold Drops by....0.4%, Resumes Climb

The commodities exchanges are doing everything in their power to knock down the price of gold, including raising margin requirements, which was successful in torpedoing silver prices back in early May.  They do this to protect the large exchange constituents who are naked shorting the precious metals in the futures exchange.  Of course, artificial suppression by changing the rules of the game only have temporary effect when there is heavy demand, and those effects are having a shorter and shorter half-life, as physical buyers bid up prices as they drop.  In the past, leveraged longs would liquidate in a panic sell.  Today, physical buyers are more than happy to load up when the price drops, as they can buy at lower, more attractive prices.  These buyers include big institutional buyers in Asia and Europe, and lately, sovereign wealth funds and central banks themselves.  The big bullion banks naked shorting the PM's are coughing up blood, because they can't shove around the small speculator longs anymore.  The counterparties have just as much capital as the commercial shorts, and aren't flinching when bear raids are manufactured.

Of course, the CME will reason they must hike margins as prices soar "to reduce volatility and risk", and that is true to some extent as prices rise, but the unwritten reason is they are coming to the aid of the large bullion banks who are getting crushed by their naked short positions.  These shorts will also claim they are net long in other markets to justify their outsized short positions, but that's just a veil to hide behind their surreptitious suppression schemes.  There isn't enough physical gold or silver--or even paper contracts to offset their huge short positions.

And due to the 100:1 leveraged nature of the paper schemes over physical inventory, every bar that gets taken out of the markets by longs demanding physical delivery, means 99 other derivative claims must be accounted for--or "covered."  There just isn't enough physical inventory to account for all the paper trading that occurs on a daily basis.  A default must surely occur at some point, as the world runs out of silver and gold.  We all know how that end game will play out.

Silver price update from Eric Sprott and James Turk

Ron Paul "This Is Probably A Bigger Problem Than The World Has EVER Faced Before!"

Think gold is high? Wait till dollar bonds are dumped, Davies says
"A paper currency system ultimately ends in insolvency," said Ben Davies, the chief executive of Hinde Capital in an interview with on Tuesday. "We have arrived at this point in the West. So why own worthless paper?"

Davies believes that the Federal Reserve got it wrong by attempting to pump cash into the system to avoid a liquidity crisis, as, he argues, they were not facing a liquidity crisis but a solvency crisis.

"Policymakers can't grasp the reality that allowing bondholders to default now, although horrendous for economies and employment," is a better option than defaulting later, said Davies.

"Individuals and private institutions are fleeing all fiat currencies into an asset that has no liabilities. This flight from insolvency is an exponential event," he said. "Gold is an inverse function of currency."

Fiat currencies are those a government has declared to be legal tender, without any intrinsic value or backing by reserves.

"Asset markets lost their funding when (the second round of quantitative easing) ended," said Davies. "Deleveraging has only just begun, but for now I am sure markets will bounce as QE3 arrives globally."

"If you think gold is high, wait until all and sundry exit dollar bonds," he said.

Tuesday, August 9, 2011

Stephen Leeb - Silver to Hit $200 Within 24 Months

The price of a Big Mac is now $17.19 in Zurich
I can think of a lot of words to describe the performance of the US dollar. Farce. Joke. Lunacy. Embarrassment. Disgusting. But it’s more clearly summed up like this: the price of a Big Mac is in Zurich is now so high (at $17.19) that a minimum wage employee in Minneapolis, Minnesota, would have to work for nearly 4-hours in order to afford it.

This is what stability looks like to Ben Bernanke.

S&P Cuts AAA Ratings on Thousands of Municipal Bonds After U.S. Downgrade

Redrawing The Exter Pyramid: Paul Mylchreest's Latest Observations On The Flow Of Funds And More

Revisiting and revising Exter's Pyramid.

London on Fire, So is Gold, Millions are Terrified

Global Grand Policy Failure: Liquidity Traps and Financial Black Holes

This is an honest assessment of why our economy can't get out of 2nd gear.

It’s time to be very concerned about what’s going on behind the scenes

Monday, August 8, 2011

Jim Sinclair interviewed by James Turk

The Silver Bears Are Back For Part 7

Rick Santelli: If Not For Tea Party, U.S. Would Be Rated BBB

Thanks to Dick for finding this snippet from the always entertaining, but honest Rick Santelli.,,and the idiot government mouthpiece Steve Liesman.

London riots

London Riots Spread to Other British Cities

Meanwhile, they are rioting in London.  Coming to a city near you.


Brace for Impact

Wall St. takes a dive on first day after downgrade

As usual, lost in the headlines of the stock market crash is gold surging to a new all-time high again.

The Farce Is (Again) Complete: Former Obama Budget Chief Orszag Says Official Economic Projections "Too Optimistic"
And so the comedy circle is complete yet again after none other than former White House budget chief Peter Orszag throws cold water in the face of the White House, the Treasury and everyone else who has so far been so stupid to continue to deflect blame for America's horrendous fiscal situation purely on S&P and its "colossal $2 trillion mistake." Because if the guy who up until a year ago personally came up with the White House's voodoo numbers is telling you they are full of shit (the numbers, not the White House), perhaps it does put the administration's claim that it is all S&P excel spreadsheet skills that are at fault, in a slightly different light.

Bill Gross Tells The Truth: "S&P Finally Got It Right. They Are Enforcing Some Discipline. My Hat Is Off To Them"

Sunday, August 7, 2011

QBAMCO's Take On The US Downgrade

S&P Explains Why The "$2 Trillion Error" Is Irrelevant

Shoot the messenger.

Greenspan Says Stocks Will Decline Following S&P U.S. Rating Cut

Is it coincidence that former Fed Chairman Alan Greenspan has been brutally honest since leaving his post in 2006?

Apmex Is On Hiatus Until Asia Open, Or Why You Better Already Have All Your Physical By Now...
As of yesterday, anyone wishing to pad their holdings of precious metals in response to what is about to be a perfect storm in risk, using one of the biggest vendors of gold and silver has to wait until Asia open, as the firm's checkout counter has just decided to enter suspended animation until 8pm today. "*Attention – Due to the uncertainty in the global precious metals markets, we will not be able to accept any additional orders until the global markets re-open in Asia. We expect to be accepting orders around 6:15 pm EST. Sunday August 7th, 2011, following the market open." Implication: the opening print in gold will not be the closing print from Friday. That much we can guarantee you.

America “Makes The Cut” – So What Happens Next?

This is the best post I've read  so far on the US Treasury debt downgrade.

Saturday, August 6, 2011

It Just Went From Bad To Far, Far Worse As Germany Says Italy Is Too Big For EFSF To Save, Refuses To Carry Euro Bailout Burden

Now that Germany and the Euro Central Bank are balking on further Euro bailouts, so does China.  "No, please, after you...really, you first--I insist..."

I've always thought the Euro was doomed, for many reasons.  But the writing is on the wall now.  While Germany hesitated initially in bailing out Greece and the "peripheral" countries, they eventually succumbed after preconditions of austerity were negotiated.  They're definitely saying "No!" to bailing out Italy and Spain, which have far bigger economies than Greece or Ireland.

Markets should be interesting on Monday to say the least.

The Official Calls For Change Roll In: "Fire Geithner"

Another prediction materializing:  calls for Geithner's head.  Blackhawk Ben Bernanke's seat is getting warm, too.

Gloating China Says "Has Every Right To Demand US Address Its Debt Problem", Asks For New Global Reserve Currency

Global Stock Sell-Off!!!

Chris Powell: Who will put the gold questions to central banks?

This is a long, but must-read op-ed.

Gold Could Hit $2,000 Despite Slip: Analysts


USSAAA - S&P Reconsiders Downgrade After White House Challenge

Friday, August 5, 2011

Joint Statement By The Fed, The FDIC, NCUA And OCC

Time to gin up the spin machine.

In other words, "All is well--nothing to see here."

Wednesday, August 3, 2011

Jim Rickards podcast interview

Another must-hear audio from Jim Rickards.

Gold Bull Accelerating After Debt Ceiling Theatrics

Ben Davies - Look For Another Short Squeeze in Silver

Doug Casey - Inflation to Start Running 20% - 40% Per Year

Is Gold a Bubble? 14 Charts, the Facts and the Data Suggest Not

China loses trust in US economic stewardship

Deficit Will Grow While Economy Shrinks

Paulson, BlackRock Hire London Mining Analysts as Funds Step Up Coverage 

The headlines declare there is a hiring scramble for mining industry analysts.  Reading between the lines, many more mining companies will now get analyst coverage, which can only be bullish for certain mining shares whose prices have been manipulated lower by the anti-gold crowd, or have suffered due to a dearth of coverage.

Mergers and acquisitions of junior and mid-level mining companies will undoubtedly increase as major gold producers look to replenish their reserves.  Remember:  a mining site is an always-depleting asset.  Just as investment banks and hedge funds are scrambling for analysts in a "hot" sector, mining companies need to add to their reserves; they're both acquiring assets.  Often, that means acquiring mid- and junior-level mining companies in lieu of exploring and developing their own properties.  Exploration is a high-risk enterprise, and junior explorers are more cost-efficient, without the bloated overhead of major gold producers.

Recall that it takes at least ten years to develop and bring on-line production of minerals--even if an exploration is lucky enough to yield said minerals.  By contrast, it takes a microsecond for Ben Bernanke to create trillions of paper dollars out of thin air (or the digital equivalent entries of 1's and 0's).  That's been our investment thesis for buying tangible assets in the first place:  scarce assets will inevitably rise in price--non-scarce assets will decline.  That's what the top callers don't get:  as long as central banks continue to bailout bankrupt governments and banks with reckless printing of currency, precious metals aren't in any bubble.

Central bankers worldwide are flooding markets with paper currencies in an attempt to artificially prop up sagging economies.  Quantitative easing (or debt monetization, for those allergic to cryptic central banker-speak) has failed to stimulate economies, but it has succeeded in debasing currencies and driving up costs, while reducing the standard of living globally.  But failure won't stop these Keynesian idiot-savants.  Bernanke and his central banking cohorts will continue to austistically bang on the printing press in an attempt to paper over fiscal insolvency.

With the prices of gold and silver continuing to rally, M & A activity will continue to elevate share prices of valuable properties.

See disclaimers in the side bar.

Tuesday, August 2, 2011

The Real Banking Crisis

Gold soars, equities tank

My long precious metals / short equities play has worked beautifully.  The question is what will happen going forward, debt ceiling debates notwithstanding.  I have no idea what stocks will do, because if the USDollar plummets, and equity markets could meltup in nominal terms, investors could still lose in real terms, due to currency devaluation.  A sharp decline in equities could also give reason for the Fed to re-deploy QE.  Further easing could cause equities to rebound as a result.

Short-term, bond prices are rallying in a flight to quality.  Long-term, I view this as a huge mistake, as interest rates can't stay at these depressed (manipulated) levels forever--and US Treasuries are no longer "riskless" safe havens.   Of course, Japan has defied this logic for 21 years and counting, so one can never tell.  As Keynes once said:  ""Markets can remain irrational far longer than you or I can remain solvent."

Precious metals remain in a decade-long secular bull market, for reasons I've blogged about ad nauseum.  The bottom line is that a debt ceiling hike changes nothing with our structurally broken economy.  We still have a compounding debt problem, and raising the debt limit exacerbates the problem, even if it delays the end game.  The G-8 countries are overly indebted (with Germany the lone exception, however their banks have exposure to bankrupt sovereigns), and the competitive currency devaluation continues.  There will be no winners in this race to the bottom.

Be right, and sit tight.  I ignore claims of precious metals being in a bubble.  I let the weak hands exit for a "profit" and I buy the dips when precious metals correct.

See disclaimers in the side bar.

Disclosure:  long precious metals, and mining shares.  Opened a long position in TBT today, a double-short on 20+ Year US Treasury bonds.  Long DXD, a double-short on the Dow Jones Industrials Average.