Gold World News Flash |
- Brother Can You Spare a Trillion?
- The Gold-Fear Dynamic
- CRU's Helen O'Malley Speaks Manganese
- A Time for Gold
- Greece Economic Depression Resulting in INFLATION NOT DEFLATION Surge
- Got Gold Report – Stopped on Silver, Caution Flags Flying
- European Bailout Pushes Markets Higher
- Europe's Bazooka
- Europe’s Trillion Dollar Bailout, Short-Term Speculations, Rise of the Long-Term Unem
- Broad Market & Gold Projections
- Merv's Weekly Gold and Silver Commentary - May 07, 2010
- Fed Audit Under Fire
- Jim?s Mailbox
- Hourly Action In Gold From Trader Dan
- In The News Today
- Mark Thornton on Lincoln's Folly, the Civil War and the Impact of the Business Cycle
- Commodity & Index ETF Trading Strategy
- Gold Market Update - May 09, 2010
- Silver Market Update - May 09, 2010
- The ECB Learned Nothing From Us
- LGMR: Gold "Calms" as Stocks, Euro Leap on Brussels' €750bn "Shock & Awe"
- As I Warned Yesterday, It Appears the Market Is Calling the Europeans Bluff – It’s Now Put Up Or Get Put Down
- Why a Navy SEAL Could Help Fix Our Broken Financial System
- EU Copies the U.S. in Borrowing From the Future to Fix the Present
- Commercial Real Estate Still in Trouble
- Pairs Trade to Exploit NAV Premium in Physical Gold Fund vs. GLD
- Murray Pollitt: The hypocrisy of the Greek 'rescue'
- Murray Pollitt: The hypocrisy of the Greek 'rescue'
- Goldman, Goldman uber alles
- The Trillion Dollar Gamble?
- Fannie and Freddie: Can We Finally Admit the New Deal Failed?
- PotashCorp (NYSE:POT) — Reports Fivefold Volume Increase Over Last Year
- The gold standard: The case for another look
- The Fed Reopens Dollar Swap Lines to Avert Disaster on US Markets
- The Multi Trillion Dollar Band-Aid
- Morgan wants custody of everybody's gold in Singapore too
- Morgan wants custody of everybody's gold in Singapore too
- Finally, a REAL European Bailout!
- Large insider transactions; a sign all was not well at Moody’s
- The U.S. Debt-Trap
- Coin Monday: 1873, Open and Close
- The secret knowledge and the secret gold market
- Lew Rockwell asks Ron Paul: Is there any gold in Fort Knox?
- Metals market manipulation complaints gain credibility, Wealth Daily says
- Investors Willing To Pay 31% Premium To NAV For Sprott’s Physical Gold ETF In Strike Over Global Fiat Devaluation Insanity
- Paperbugs Don’t Understand How Far We Have to Go
- Federal Agents Investigating JP Morgan’s Silver Market Manipulation
- Prudence in Volatile Times
- Trending Toward Randomness
- Euphoria
| Brother Can You Spare a Trillion? Posted: 10 May 2010 07:47 PM PDT In what has now become the normal in expectations, European policy makers have announced a 750 BILLION EURO bailout policy late Sunday evening in defense of the Euro currency and a show of force between the USA FED, the European Central bank, the Bank of Japan, the Bank of Canada and the Bank of England. In a nutshell they will buy bonds and will intervene in markets and "do what they have to" in order to avoid a meltdown. This is akin to the USA bailout of 1 Trillion dollars. This will only buy time, but it is all that can be done right now. For the moment the term being touted this Monday morning is "putting a floor on risk assets”. This time they mean stocks and bonds and not commodities. In the same manner as the USA announcements, this move is being looked upon as "SHOCK AND AWE." What happened to cause such a turn in policy? While I am not certain, the plunge in liquidity of the world stock markets ...
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| Posted: 10 May 2010 07:47 PM PDT I am a guy who thinks he is a hero for being "out there", on the cutting edge, heroically standing at major intersections, yelling my head off to educate drivers who get caught at the stop light, by looking them right in the eye and telling them that "You are doomed, you moron! Doomed! Doomed by the loathsome Federal Reserve creating So Unbelievably Much (SUM) excess money, which not only devalues your pitiful little stash of money, but total outstanding debt increases, including the $1.5 trillion increase in the national debt in the last 12 months, thanks to the moronic Congress deficit-spending to try to achieve some bizarre Utopia via complete government regulatory takeover of everything in exchange for giving them gobs and gobs of newly-creation money, courtesy of the Federal Reserve, saving them from well-deserved bankruptcy, all of which means terrifying increases in prices that will destroy us all! Destroy us all, you moron!" If they meet my gaze or pretend that I am not there,...
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| CRU's Helen O'Malley Speaks Manganese Posted: 10 May 2010 07:47 PM PDT Source: Brian Sylvester and Karen Roche of The Gold Report 05/10/2010 "The price for manganese ore has recovered a lot more swiftly and strongly than we anticipated," explains Helen O'Malley, a bulk manganese specialist with London-based CRU, adding: "The price bottomed out last year to about $3.50 per dry metric ton unit (DMTU) and now it's up to about $8.00." In this exclusive interview with The Gold Report, O'Malley sheds some light on the seldom-discussed metal and its supply and demand fundamentals. She also explains how the market is really being driven by China and even lists several junior mining companies who are actively exploring manganese properties. The Gold Report: Helen, our readers may be unfamiliar with manganese and its applications. Could you please provide us with an overview of the metal and its main uses? Helen O'Malley: We estimate about 98% of manganese is consumed in carbon steel or stainless steel. So that accounts for the bulk of consump...
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| Posted: 10 May 2010 07:47 PM PDT [COLOR=#000000][FONT=Arial][COLOR=#000000]Peter Schiff, president of Euro Pacific Capital and author of Crash Proof 2.0: How to Profit from the Economic Collapse:[/COLOR][/COLOR][/FONT] Dear Investor, The frightening financial gyrations unleashed by the unrest in Greece, and compounded by the mysterious kinks of electronic stock markets, have quickly reintroduced naked fear into the hearts of investors. Not surprisingly, while these concerns throw into question the safety of just about every asset class, gold and silver are beckoning once again as a means to help protect purchasing power. We are now in the early stages of what I believe will be a global sovereign debt crisis. With Greece, Portugal and Spain, we are seeing the results in what might be considered the “subprime” nations struggling with overly burdensome debt payments. However, just like in the mortgage crisis, many “prime” nations, like the United States and Great Brit...
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| Greece Economic Depression Resulting in INFLATION NOT DEFLATION Surge Posted: 10 May 2010 07:47 PM PDT Greece, Europe's Achilles Heel continues to implode under its budget deficit and total debt burden sending a series of strengthening shock waves across Europe's credit and financial markets. Whilst many western economies bounce back from the Great Recession of 2008-2009, Greece's economic depression continues as the economy is set to contract by further 4% during 2010 which is much worse than the 2.5% contraction of 2009 and looks set continue contracting for several more years. Greek Unemployment is soaring to 12% this year up from 9.5% in 2009 and is set to continue higher to 13.5% in 2011. All of the austerity measures implemented to date are only going to narrow the Greek budget deficit to about 10% of GDP for the current year, and contrary to ECB and Greek government announcements Greece is NOT going to meet the 3% deficit target in 3 years time. Meanwhile missing from the whole too and fro is that the Greece debt mountain will continues to mushroom ever higher dema...
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| Got Gold Report – Stopped on Silver, Caution Flags Flying Posted: 10 May 2010 07:47 PM PDT By Gene ArensbergEsse quam videri – To be rather than to seem. Rig for heavy weather and hope we don’t get it. “Greece is just the coating in the pan to fry PIIGS.” – Don Coxe, BMO Capital Markets. ATLANTA – Positive money flow into gold and silver ETFs showed strongly this week as the very viability of one of the world’s major fiat currencies (the euro) comes into serious question. Indeed the very existence of the European Union now seems questionable where just two years ago its currency strangely seemed preferable to many. What a difference two years makes these days. Wealth flowed rapidly away from the euro and into U.S. dollars, gold and other havens. We believe the main reason Greece has not already been cut from the E.U. is simple. As long as Greece remains in, it takes the spotlight off the next PIIG in line. We wonder if the now blowing-out credit default swaps have already discounted the next Europea...
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| European Bailout Pushes Markets Higher Posted: 10 May 2010 07:47 PM PDT Gwen Robinson reports at ft.com that the EU (European Economic Union) has set up an emergency funding facility of up to €500bn to support loan guarantees and credit in Europe. The IMF (International Monetary Fund) has added an additional €220bn. This brings the total from these two sources to approximately $960 bn, significantly larger than the U.S. TARP package in the fall of 2008. To support this effort, a currency swaps window has been reopened by the U.S. Federal Reserve to improve liquidity for world currencies, especially the British pound, the Swiss franc and the euro. See article by Scott Lanman and Craig Torres (Bloomberg). This window had just recently been closed (Feb. 1) after more than a year of operation to smooth systemic risks for currency exchange rates as a result of the banking crisis. This time the window is being opened because of a sovereign debt crisis. But the reason for reopening the window is still to try to reduce the expos...
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| Posted: 10 May 2010 07:47 PM PDT Axel Merk, Portfolio Manager, Merk Mutual Funds May 10, 2010 [ame]http://www.youtube.com/watch?v=vY_DXkIWx_Q[/ame] French President Sarkozy wasn't kidding when he promised to shock the markets with a series of measures aimed at containing the sovereign debt crisis. Europe got the bazooka former U.S. Treasury Secretary Paulson always wanted. German chancellor Merkel and European Central Bank (ECB) President Trichet control the bazooka's safety. What are the implications for liquidity and solvency issues? The euro and U.S. dollar? The decisions were breathtaking – literally so, as wheelchair-bound German finance minister Schauble was rushed to hospital after almost suffocated due to an adverse reaction to new medication. Those thinking such an emergency would weaken Germany's hand were quickly proven wrong: Germany's interior minister de Maziere was an even more stubborn negotiator. As the package to support weaker eurozone countries grew, Germany dug in its heels, reques...
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| Europe’s Trillion Dollar Bailout, Short-Term Speculations, Rise of the Long-Term Unem Posted: 10 May 2010 07:47 PM PDT The 5 min. Forecast May 10, 2010 01:04 PM by Addison Wiggin & Ian Mathias [LIST] [*] Europe unveils mega bailout… Rob Parenteau, Dan Amoss share investment implications [*] Euro crisis offers convenient coverage for Fannie Mae bailout… another $8 billion down the drain [*] The restless bread line grows: Long-term unemployed hit record highs [*] Gold coin buyers flood U.S. Mint, on track for biggest month… ever? [/LIST] The Renaissance. The Age of Enlightenment. The Industrial Revolution. The Gilded Age. The Cold War. The Information Age. The Bailout Age? The printing press already has its own prominent place in history, so we’re not sure what else to call the first couple decades of the new millennium. But after this morning’s news, there’s little debate: time to fire it up! The European Union (EU) and International Monetary Fund (IMF) announced a plan that comes straight out o...
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| Broad Market & Gold Projections Posted: 10 May 2010 07:47 PM PDT We were in front of this latest downdraft and also correct in my bullish projections for Gold at the same time. Gold has hit 1210, the SPY has hit sub 113, which was the initial area for a minimum bottom. We have to put aside some of the computer related problems and look at around 110-111 as the recent bottoming areas on the SPY ETF. I’m looking again for the SPY to work it’s way down to 94-97 and probably over 4-5 months from mid April. My projections are for a bottom on or around September 15th, plus minus a few days. There are trading opportunities during this 5 month correction in this bull market, so it does not mean one has to be 100% in cash. However, mutual fund investors and index investors are best to be on the sidelines for the most part. Below is my projection for the SPY ETF on a go forward basis. Back in November of 2009 I actually projected 121 on the SPY when it was trading well below that figure for an initial market top. Theref...
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| Merv's Weekly Gold and Silver Commentary - May 07, 2010 Posted: 10 May 2010 07:47 PM PDT Technically Precious with Merv For week ending 07 May 2010 The saying “looks too good to be true” just seems to fit the latest gold activity. I like the action but something just doesn’t jive. Maybe it’s that (lack of) momentum (strength) behind the recent stock price action. Love it while it’s there but always be on guard. GOLD LONG TERM All we need is a quick reference to the point and figure action. It remains quite bullish and everything said last week still holds. Gold continues on its way towards my long term projection of $1600, with a couple of lower projections along the way. As for where we are with the normal indicators, well they are all positive. The price of gold remains above its positive sloping long term moving average line. The momentum indicator remains in its positive zone above its positive sloping trigger line. The volume indicator continues to make new all time highs and remains above its po...
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| Posted: 10 May 2010 07:47 PM PDT It doesn’t come as too much of a surprise that the measure to audit the Federal Reserve is coming under continuous fire from the central bank and its cronies. For the first time since the Federal Reserve was created nearly a century ago, they have hired an actual lobbyist to pound the pavement on Capitol Hill. This is a desperate effort to hang on to the privilege of secrecy and lack of accountability they have enjoyed for so long. Last week showed they are getting their money’s worth in the Senate. At the very last minute on the floor of the Senate, supposed compromise language was agreed to and substituted in the Sanders Amendment to the Financial Reform Bill. This language was acceptable to the administration, committee leadership, and to the Fed. The trouble is, while it is better than no audit at all, it guts the spirit of a truly meaningful audit of the most crucial transactions of the Fed. In fact, rather than still calling the Sa...
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| Posted: 10 May 2010 07:47 PM PDT View the original post at jsmineset.com... May 10, 2010 07:01 AM Jim, The Fed says that all the funds they committed to the EU Shock and Awe bailout was $30 billion, but you say $350 billion. How can that be? CIGA Arlen Dear Arlen, Until 1am last night shock and awe was slightly above $600 billion. We have to consider that the IMF-USA commitment was $100 billion which comes from the US Treasury compliments of the US Federal Reserve. Previous swaps were in the neighbourhood of $200 billion to $400 billion. We know the Fed never fibs,. but accounting can be very creative. We came close to an implosion of collateral and there the little stability was resident in the EU early this morning. Libor was about to explode upwards. A reasonable conclusion of total contributions thanks to the US Fed is $350 billion Regards, Jim...
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| Hourly Action In Gold From Trader Dan Posted: 10 May 2010 07:47 PM PDT View the original post at jsmineset.com... May 10, 2010 10:46 AM Dear CIGAs, Click chart to enlarge today's hourly action in Gold in PDF format with commentary from Trader Dan Norcini ...
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| Posted: 10 May 2010 07:47 PM PDT View the original post at jsmineset.com... May 10, 2010 11:36 AM Dear CIGAs, The problem with "Pretend and Extend" is that each time the cost of Pretend goes up, the time period of extend goes down. The Euro must hold $1.29 or the Wolfpack wins the day. The Firm (1993 movie) announced today that it did not have a losing day in trading last month. The Wolfpack remains in control. Jim Sinclair’s Commentary So far today the Wolfpack still holds the high ground. At 1:12 p.m. the euro has lost its grip on the $1.29 level. Failing to maintain the level of $1.29 for the euro, the odds then favor the Shock and Awe being equal to Baghdad Shock and Awe which only began a multi-year war and huge losses of life. Jim Sinclair’s Commentary $30 billion again. Maybe so far today, but that is creative wording. Fed Restarts Currency Swaps as EU Debt Crisis Flares (Update2) By Scott Lanman and Craig Torres May 10 (Bloomberg) — The U.S. Federal Reserve wil...
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| Mark Thornton on Lincoln's Folly, the Civil War and the Impact of the Business Cycle Posted: 10 May 2010 07:47 PM PDT Sunday, May 09, 2010 – with Scott Smith Dr. Mark Thornton The Daily Bell is pleased to present an exclusive interview with Mark Thornton (left). Introduction: Mark Thornton is Senior Fellow at the Ludwig von Mises Institute. He serves as the Book Review Editor of the Quarterly Journal of Austrian Economics and as a member of the Editorial Board of the Journal of Libertarian Studies. He has served as the editor of the Austrian Economics Newsletter and as a member of the graduate faculties of Auburn University and Columbus State University. He has also taught economics at Auburn University at Montgomery and Trinity University in Texas. Mark served as Assistant Superintendent of Banking and economic advisor to Governor Fob James of Alabama (1997-1999) and he was awarded the University Research Award at Columbus State University in 2002. His publications include The Economics of Prohibition (1991), Tariffs, Blockades, and Inflation: The Economics of the Civi...
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| Commodity & Index ETF Trading Strategy Posted: 10 May 2010 07:47 PM PDT May 9, 2010 As we all know, last weeks stock market blip/mini crash was very emotional for those of you watching or trading it live. A lot of money changed hands last week and you either lost a bundle or made a bundle I did send out some charts and a video on Thursday night about the market crash/recovery if you have not seen it. It's called "Stock Market Micro Intraday Crash Shows Us Where The Safe Havens Are". Below are my ETF charts for the commodities and index I actively follow and trade. GLD – Gold Bullion ETF – Daily Chart GLD is a great ETF to trade as it generates 10-20 quality low risk setups each year for subscribers. The chart clearly shows the large rally in late 2009 and the correction as it formed patterns moving from a down trend – base – and back to an uptrend. $USD – US Dollar Index – Monthly Chart This weekly chart I think shows some serious potential for gold and silver prices. The US Dollar is now trading at a key resistance level ...
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| Gold Market Update - May 09, 2010 Posted: 10 May 2010 07:47 PM PDT Gold ended last week very close to new highs against the dollar, which was a remarkable achievement given that the dollar soared and that the stockmarket fell heavily. The NYSE tried to explain away the near 1000 point drop in the DJIA intraday on Thursday as being due to some sort of technical glitch, but the more plausible explanation for us is that it was occasioned by temporary blind panic, which should it recur would have rather unfortunate consequences, to put it mildly. The implications of this formidable strength in gold are immense, for what this means is that it has arrived at the point where it no longer matters much what the dollar and stockmarkets do - it's going up anyway. The reason for this is that we are now advancing rapidly into the endgame of the global [ame="http://en.wikipedia.org/wiki/Fiat_money"]fiat[/ame] experiment, which is concluding as it inevitably must with mess and mayhem. The abolition of the [ame="http://en.wikipedia.org/wiki/Gold_standa...
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| Silver Market Update - May 09, 2010 Posted: 10 May 2010 07:47 PM PDT You have to feel a little sorry for silver. It has been suffering from an identity crisis - it can't make up its mind whether it's an industrial metal or a Precious Metal. You could see this on Thursday when as gold surged and the stockmarket tanked, it hardly moved. It was like a bewildered child at a country crossroads not knowing whether to follow its big brother gold and take the high road, or to follow the man with the candy and take the low road. There is an old saying that [ame="http://en.wikipedia.org/wiki/Blood_is_thicker_than_water"]blood is thicker than water[/ame] , so after a sigh silver ran to catch up with its brother on Friday. It's nice to have a story with a happy ending, although actually what we are looking at here is a beginning, the beginning of the next stage of a journey to lofty heights. On its 3-year chart we can see that after its recovery last year from the panic lows of 2008, silver's advance slowed as it approached and ran into a wall o...
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| The ECB Learned Nothing From Us Posted: 10 May 2010 07:47 PM PDT Market Ticker - Karl Denninger View original article May 10, 2010 07:50 AM [INDENT] (EU) ECB's Weber: Bond buys will be narrowly focused, Government bond purchases have considerable risks to ECB's stability policy; will not undermine current monetary policy [/INDENT] No kidding. Did you figure this out before or after Bernanke bought $1 trillion+ of MBS and debt from Fannie and Freddie? Now he's stuck with it, he really doesn't want it, the credit quality is deteriorating at a fairly nasty rate (see Fannie and Freddie's recent quarterly reports) and yet he can't dump it either without destroying the market - especially given that he now owns about 20% of the float! So he has a mark-to-market loss now (which he can hide), he might wind up with a principal loss if he keeps it, and yet if he dumps it the long end will go bananas almost immediately. So Mr. Webber: What makes you think you won't also get stuck with a bunch of trash you can't reasonably do anything with, leavi...
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| LGMR: Gold "Calms" as Stocks, Euro Leap on Brussels' €750bn "Shock & Awe" Posted: 10 May 2010 07:47 PM PDT London Gold Market Report from Adrian Ash BullionVault 07:35 ET, Mon 10 May Gold "Calms" as Stocks, Euro Leap on Brussels' €750bn "Shock & Awe" THE PRICE OF GOLD fell hard from last week's record-high finish on Monday morning, losing 2% vs. the Dollar as commodities and global equities jumped on news of the European Union's new €750 billion "Stabilization Mechanism" plan. The Euro currency leapt 2.6% during Asian trade, rising back above $1.30 – a level first broken in late 2004 – for the first time in five sessions. Britain's Pound recovered almost half the last fortnight's drop vs. the Dollar, trading above $1.4950. The French stock market leapt more than 8% by lunchtime in Paris. Frankfurt's Dax and London's FTSE100 both rose almost 5%. Crude oil and base metals rose sharply. Silver was little changed. "The impetus for last week's move [in gold] has calmed for the moment," says metals-conglomerate Mitsui's London dealing team in a note. "Bigge...
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| Posted: 10 May 2010 07:01 PM PDT
Yesterday I commented on the folly of promising big money to throw at a myriad variety of highly indebted nation without a central authority to enforce the structural change needed to actually cure the problems that created the need for the monies in the first place. See The EU Has Set Up An Oppurtunistic Entry Point for Shorts Instead of Expressly Offering a Solution to the Pan-European Sovereign Debt Crisis! and What We Know About the Pan European Bailout Thus Far. The primary flaw, by far, that I perceive in this most grand of grand bailout schemes is that it is just that – a bailout, not a solution. Methinks the market is about to call the EU on their bluff pretty much along the same lines that I espoused above. For those subscribers who follow my belief that the ECB and EU leaders are making one of the largest policy blunders of modern times, this may be an opportunity to set up a short position that makes the Lehman Brothers’ debacle look like a day rally. All subscribers are welcome to download our latest •Euro Erases Gains as Optimism Cools; Stocks, Commodities Fall on China CPI May 11 (Bloomberg) — The euro lost all of yesterday’s gains on concern the almost $1 trillion lending plan to bail out indebted nations in Europe will fail to avert a slowdown in the region. Asian stocks, copper and U.S. index futures fell after China’s inflation rate accelerated to an 18-month high. The euro, after yesterday strengthening as much as 2.7 percent against the dollar, traded 0.3 percent weaker than last week’s closing level as of 1:45 p.m. in Tokyo. The MSCI Asia Pacific Index dropped 0.7 percent to 119.29 as declines in mining companies and Japan’s banks countered positive earnings news from corporations including Sony Corp. Standard & Poor’s 500 Index futures lost 0.6 percent, following the biggest jump in U.S. stocks since March 2009. “Markets realized quickly that this crisis won’t be cured by adding liquidity, no matter how big it is,” said Toshihiko Sakai, head of trading for currencies and financial products at Mitsubishi UFJ Trust & Banking Corp. in Tokyo. “The structural problems of the euro zone will persist. I’m not surprised at all the euro is losing strength again.” Greece may have its credit rating lowered to junk within the next month, Moody’s Investors Service said yesterday, citing the country’s “dismal” economic prospects. The European Central Bank’s decision to buy government bonds, a move designed to help reduce financing costs for countries including Greece, poses “significant stability risks,” council member Axel Weber said. •China Inflation Accelerates as Loans Surge, Property Prices Rise by Record – I led my Pan-European Debt Crisis series with a piece on China macro for it is quite possible that a China bubble burst may be the straw that breaks the European camels back. See Can China Control the “Side-Effects” of its Stimulus-Led Growth? Let’s Look at the Facts. May 11 (Bloomberg) — China’s inflation accelerated, bank lending exceeded estimates and property prices jumped by a record, increasing pressure on the government to raise interest rates and let the currency appreciate. Consumer prices rose 2.8 percent in April from a year earlier, the fastest pace in 18 months, and property prices jumped 12.8 percent, the statistics bureau said in statements today. New lending of 774 billion yuan ($113 billion), announced by the central bank, was more than any of 24 economists forecast. Asian stocks pared gains on concern that Chinese officials will move to cool the fastest-growing major economy, while yuan forwards rose. China’s top priority should be preventing excessive increases in asset prices and liquidity after Europe’s almost $1 trillion loan package reduced the risk of another global slump, central bank adviser Li Daokui said yesterday. “Price pressures have been building throughout the economy, strengthening the case for higher interest rates and a stronger yuan,” said Brian Jackson, a Hong Kong-based strategist at Royal Bank of Canada. “China is at risk of overheating, with spot fires breaking out in various parts of the economy.” … The MSCI Asia Pacific Index reversed a gain of as much as 0.7 percent after the China reports, to trade 0.5 percent lower at 119.55 as of 12:03 p.m. Hong Kong time. Non-deliverable yuan forwards rose 0.2 percent, indicating that the government will scrap a peg to the dollar and let the currency gain 2.4 percent in the next year. The increase in consumer prices compared with 2.4 percent in March and the 2.7 percent median estimate of 30 economists surveyed by Bloomberg News. Producer prices jumped 6.8 percent, also topping estimates, today’s release from the statistics bureau showed. The jump in property prices in 70 cities was the biggest since data began in 2005, defying a government crackdown on speculation that intensified last month. •Bank Swaps, Libor Spreads Show Doubts Over Europe Bailout: Credit Markets May 11 (Bloomberg) — Money markets and the cost of protecting bank bonds from losses show investors are concerned the almost $1 trillion rescue plan announced by European leaders may not be enough to contain the region’s sovereign debt crisis. The Markit iTraxx Financial Index of credit-default swaps on 20 European banks was last at 130.5 basis points compared to 100.25 basis points for the Markit iTraxx Europe Index of 125 investment-grade companies, a benchmark it traded an average 10 basis points below for three years, according to CMA DataVision. The three-month Libor-OIS spread, which widens as banks’ willingness to lend decreases, advanced to 19.17 basis points from 18.92 yesterday and 6 on March 15. The loan package for debt-laden nations including Greece is part of an attempt to stem a decline in the euro, which fell to a 14-month low last week, and stave off a sovereign default that would threaten recovery from the worst global recession since the 1930s. Banks’ potential losses stemming from the crisis are under scrutiny by investors concerned financial institutions are owed too much by Europe’s most-indebted countries. [#ff0000;">Look above for our latest take on this. Shorting into European bank strength is the Reggie Contrarian Trade of the Day!] “Sovereign risk hasn’t gone away in the slightest,” said Jim Reid, head of fundamental strategy in London for Deutsche Bank AG, Germany’s biggest bank. “What this package has done is massively reduced the tail risk in European markets without necessarily changing the medium- to long-term dynamics of financial markets.” Investor ‘Euphoria’ … Elsewhere in credit markets, the extra yield investors demand to own corporate debt instead of government securities fell 8 basis points to 169 basis points, or 1.69 percentage point, after soaring 28 basis points last week, according to Bank of America Merrill Lynch’s Global Broad Market Corporate Index. It peaked at 511 basis points on March 30, 2009, and dropped to as low as 142 on April 21. Average yields fell 0.5 basis point to 4 percent. The cost of protecting Asia-Pacific bonds from default rose today as investor “euphoria” at the European measures abated, according to Fumihito Gotoh, head of Japan credit research for UBS AG in Tokyo. The Markit iTraxx Asia index of credit-default swaps on 50 investment-grade borrowers outside Japan climbed 3 basis points to 108 as of 11:27 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show. It declined 28 basis points yesterday, according to CMA, after European Union finance chiefs agreed to offer as much as 750 billion euros ($956 billion), including International Monetary Fund backing, to countries facing deep budget deficits and flagging investor confidence. Europe Sovereigns… The European Central Bank also said it will buy government and private debt. Credit swaps on Greece tumbled 329.5 basis points to 586, the biggest decline since March 2005, according to CMA. The swaps are still up from 364 on April 12. Contracts on Portugal, which were 152 basis points four weeks ago, dropped 170 to 255. Spain, which declined 65.5 to 173 yesterday, is 48 basis points higher than April 12. Italy, which fell 68.5 to 157 yesterday, was 124 basis points two weeks ago. “Maybe Greece won’t default in the near term or even the medium term, but the debt hasn’t gone away,” said John Anderson, head of credit at Gartmore Investments in London. “Budget deficits still need to be cut for the debt to be paid down.” Credit swaps pay the buyer face value if a borrower fails to meet its obligations, and prices decline as perceptions of creditworthiness improve. A basis point equals $1,000 annually on a contract protecting $10 million of debt. Libor Rates… The three-month London interbank offered rate in dollars, the rate banks pay for loans, fell to 42.1 basis points from 42.8 on May 7. The rate climbed 8.2 basis points last week, the biggest increase since October 2008, a month after Lehman Brothers Holdings Inc.’s bankruptcy filing. The difference between it and the overnight indexed swap rate, the so-called Libor-OIS spread, climbed yesterday even after the rescue announcement. Predictions for the spread in the months ahead, based on contracts trading in the forwards market, or so-called FRA/OIS spreads, are for 26.5 basis points by June, down from 38 on May 7 and still almost twice the 14.5 basis points from two weeks ago, according to UBS AG data. “People will remain somewhat on edge,” said David Watts, a London-based strategist at CreditSights Inc. “There are still a lot of hurdles to overcome before we get settled back to where we were a month and a half to two months ago.” The European bailout may unravel if countries fail to meet austerity targets under terms of the loan package, Watts wrote with strategist Louise Purtle in a note to clients yesterday.. “You now have moral hazard at a sovereign level and investors should still be wary of the whole situation,” said Gartmore’s Anderson. “There are record deficits in just about every country in Western Europe and something ultimately needs to be done about them.” •Euro Recovery Proves Short-Lived on Interest Rates, ECB’s Bond-Buying Plan May 11 (Bloomberg) — Europe’s $1 trillion plan to rescue the region’s debt-laden governments may fail to reverse the euro’s worst start to a year since 2000 amid bets the central bank will keep interest rates at a record low for longer. The currency surged by as much as 2.7 percent against the dollar yesterday before paring that gain, and closing up 0.3 percent to $1.2787 in New York. It will probably decline toward $1.20, according to UBS AG and Barclays Plc, ranked by Euromoney Institutional Investor Plc as the world’s second- and third- largest currency traders. Schneider Foreign Exchange, the third- most-accurate forecaster of the euro against the dollar in the first quarter, also cut its prediction. Traders are betting the currency will resume its decline as Europe’s economic recovery trails behind that in the U.S., prompting the European Central Bank to keep its main refinancing rate at 1 percent this year while the Federal Reserve starts raising rates. The ECB’s decision to buy bonds may prompt investors to question its independence and demand “a higher risk or credibility premium,” Kenneth Broux, a senior market economist at Lloyds Banking Group Plc in London, wrote in a client note. “The cost of securing the future of the euro is proving to be extremely high, as can be seen by the size of the package, and there are a lot of long-term negative implications attached,” said Ian Stannard, a senior currency strategist at BNP Paribas in London. While the rescue package “may provide some very near-term support for the euro” it “doesn’t have an impact on the longer-term outlook,” he said. The euro fell 0.5 percent to $1.2722 as of 6:36 a.m. in London, from yesterday in New York, and dropped 1.1 percent to trade at 117.99 yen. Europe’s common currency is “endangered,” John Taylor, who helps oversee $7.5 billion as chairman of New York-based FX Concepts Inc., manager of the world’s largest currency hedge fund, said in a Bloomberg Television interview. “The problem has been found out. The king has no clothes.” The 16-nation euro slumped 11 percent since Jan. 1, its worst start since the year after its introduction, on concern the debt crisis in countries from Greece to Portugal will slow the region’s economic recovery and prompt the ECB to buy assets while the Fed is exiting its own emergency measures.
‘Temporary Rally’… The currency surged yesterday after governments pledged to make 440 billion euros ($562 billion) available as part of the package, with 60 billion euros more from the European Union’s budget and as much as 250 billion euros from the International Monetary Fund. It jumped 4.4 percent versus the yen in the two days through yesterday, the biggest advance since November 2008. The gains won’t be sustained, said Mansoor Mohi-uddin, Singapore-based global head of currency strategy at UBS, forecasting a “temporary rally” toward $1.35 before a drop. “The euro will definitely hit what we call its long-term fair value at $1.20 and it may easily overshoot that if difficulties in Europe persist,” he said. “The policy mix in Europe is becoming very unfavorable to the currency.” See the complete Sovereign Debt Crisis free and available to the public. Significantly more sovereign debt exposed bank research and sovereign state finance analysis is available to subscribers in the green sidebar of the afore-linked page.
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| Why a Navy SEAL Could Help Fix Our Broken Financial System Posted: 10 May 2010 06:33 PM PDT
Central Bankers always seem to do the wrong things at the wrong times in manners that hurt the citizens of their country in the maximum amount possible. Not only do they commit these mistakes, but they commit the same mistakes over and over and over again with the insane belief that executing the same mistake will produce a different outcome. So I suggest that the next person US President Obama appoints to the Board of Governors of the US Federal Reserve should be a US Navy SEAL. In fact, he should also appoint a SEAL to his Presidential Economic Advisory Board. At a minimum, by employing SEAL culture to this financial crisis, we would not have the current crop of buffoons execute the same mistake over and over again and have them sell us their mistakes as recovery that are in reality, cover ups for the next imminent collapse.
When I first started training in martial arts, I was very fortunate to have as my instructor an ex-Navy SEAL for the first four years of my martial arts life. Though those that have never trained in martial arts a single day in their life sometimes belittle such training due to their ignorance of the positive culture of such training, there is no doubt in my mind that the life lessons I learned from my training, if applied to our present global monetary crisis, would provide a clear path towards the development of a sustainable solution. SEALs abide by a certain warrior culture that make them very different from every other elite division of the military. Here are three rules that SEALs could teach Central Banks to abide by that would lead to the development of sustainable solutions instead of the quick fixes Central Banks design to fool the people:
RULE #1: Never make the same mistake twice. You are your best critic. When you make a mistake or do something wrong, take it onboard and take it seriously. Be hard on yourselves. Do what you have to in order to not make the same mistake twice.*
Central Banks continuously repeat the same mistake over and over again and seemingly are incapable of learning from their previous mistakes. Every time the bubbles and price distortions they create in stock markets and real estate markets crash, they have engineered the same response for decades – print more money out of thin air and re-inflate the bubbles again – though this response always ends in failure. Furthermore, Central Banks’ decisions to bail one another out to keep the fiat money system alive has never produced a positive result in the history of mankind, yet we find ourselves heading down this same path today. Greenspan himself admitted that the Fed Reserve’s actions to bail out the UK in the 1920s “nearly destroyed the economies of the world,” yet the Feds insist on repeating these same foolish actions today. If a Navy SEAL sat on the Board of Governors, without knowing a single thing about monetary policy or finance, he could still steer them to make wiser decisions. Employing the rule of never making the same mistake twice, a SEAL would have stopped Central Banks from reinflating bubbles decades ago.
Furthermore, given the penchant of Central Banks to repeatedly engage in the execution of the same mistake, determining the Euro’s fate more than 2 ½ years ago was fairly transparent. This is why, at the beginning of 2008, I stated in my book Confessions of a Wall Street Insider, “We can be assured that in 2008, the destruction of monetary value in both Europe and the United States will occur...when smart investors finally realize that no fiat currency is safe, I believe that investors (at least the savvy ones) will begin to dump the Euro and the Pound as well.” A couple of months after I made that comment, the Euro plummeted from about 1.58 USD to 1.25 USD. Today, we’re back at 1.27 USD. Despite (or perhaps better phrased as “As a result of”) a near trillion dollar bailout of the EU, the Euro remains doomed.
RULE #2: If some part of your platoon’s training is not working, perhaps it’s a matter of command and control or a gear problem or tactical maneuver; fix it now!*
Central Banks are notorious for lying to the public and covering up the truth for the purposes of selling false notions of hope and economic recovery and fooling the sheeple. Such tactics only delay an inevitable crash in financial markets, whether that crash arrives in the form of a melt up in markets denominated in worthless currencies or a deflation of asset values also accompanied by plummeting currency values. Central Banks never try to fix problems now but always choose to delay the inevitable for as long as possible as if delaying the implementation of a real solution and burying their heads in the sand will make the problem go away. A Navy SEAL would never allow such dishonest tactics as these types of tactics could cost the life of every member of his team. Instead, a Navy SEAL would undoubtedly hold all Governors’ feet to the fire. This is why we should desire the appointment of a Navy SEAL to the Board of Governors. *Source: The Finishing School, by Dick Couch
RULE #3: Take your responsibilities seriously and be accountable for your actions. Don’t cut corners and don’t take the easy way out. Always do things the right way even if the right way is the hard way.**
Again, if you listen to Central Bankers speak, one would conclude that they never heard of the concept of personal accountability and responsibility. Instead of taking blame for the devastating consequences of their mistakes, Central Bankers always blame outside parties for their mistakes, claim such consequences can never be predicted even though Austrian economists repeatedly and accurately predict the consequences of their actions, and lavish undeserved praise upon themselves. Remember Ben Bernanke’s “we saved the world” speech that he gave at Jackson Hole, Wyoming last August 21, 2009? Well Ben, it appears that your declaration was just a little premature. Of course Ben’s arrogant, self-serving comments back then were a product of not adhering to the above SEAL rule of fixing problems now. Central Banks always take stop-gap measures to the emergencies they create that only delay the emergence of a more severe emergency six to nine months later. If a Navy SEAL were on the Board of Governors, he would no doubt kick out any team member that deliberately endangered the lives of team members (all citizens of the Republic of America and the world), refused to accept responsibility for one’s actions, and refused to fix a problem right away when identified. Yes, that means, Helicopter Ben would have been long gone by now. **Source: The Warrior Elite, by Dick Couch
Central Bankers, it’s time you took a page out of the playbook of Navy SEALs.
About the author: JS Kim is the Chief Investment Strategist and Managing Director of SmartKnowledgeU, LLC, a fiercely independent wealth consultancy company that guides investors in the best ways to build wealth through the progression of this global financial crisis. His investment newsletter, Crisis Investment Opportunities, has significantly beat all major world indexes since its launch in 2007, outperforming the S&P 500 and FTSE 100 by more than 27% in 2007, both indexes by more than 40% in 2008 and both indexes by more than 51% from January 2009 to May 2010. Special thanks to my mentor, SEAL Alvin Dukes, and author Dick Couch for providing the foundation for this article.
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| EU Copies the U.S. in Borrowing From the Future to Fix the Present Posted: 10 May 2010 06:10 PM PDT Wall Street Cheat Sheet submits: When the Federal Reserve announced plans to print money to artificially add demand to the markets, the S&P 500 rallied ~75%. Now that the EU is running the same play, should we expect a similar outcome? While we shouldn’t expect another 75% rally, we should adjust our opinions to accept the raw fact that those who are selling Euros, Bonds, stocks, etc. are now standing in the pits with a buyer who in theory can print and borrow what it takes to maintain stability. So, rather than accepting a correction now, the EU has followed the US in the practice of borrowing from the future to bandaid the now. Complete Story »
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| Commercial Real Estate Still in Trouble Posted: 10 May 2010 06:07 PM PDT  Michael Panzner submits: Another day, another "solution." Yeah, right. What about tomorrow, when the next phase of this slow-motion meltdown unfolds? Or the day after that? Or next week? Or next month? Unfortunately for those who are trying to keep the sinking ship afloat, there isn't enough money available to meet the potentially unlimited demand for band-aids and bailouts. So, many long-festering problems, such as the unraveling of the commercial real estate market, will only worsen. In "Struggling Commercial Real Estate Helplessly Waits Around For The Slaughter Of 2010," Business Insider's The Money Game clues us in on the latest developments:
Complete Story »
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| Pairs Trade to Exploit NAV Premium in Physical Gold Fund vs. GLD Posted: 10 May 2010 05:52 PM PDT Dan Pritch submits: There’s an intriguing anomaly forming between two gold exchange traded products that should in concept track virtually simultaneously with the spot price of gold bullion save for minor fluctuations in NAV and management fee differences. While GLD is most familiar to many retail investors looking to mimic changes in the price of gold bullion, there are some who believe if there were actually a demand of delivery of the physical gold the holding company purports to have on hand, they couldn’t deliver. At a high level, that’s true of the entire US banking system. When banks are leveraged 30-1, if all depositors simultaneously demanded liquidation of their accounts, the entire system would become insolvent. That’s why the the FDIC was so vocal during the financial crisis in stressing that a) no investor had ever lost a dollar in an FDIC-insured account and b) they raised account limits temporarily given the new reality that many accounts well exceeded $100,000. Within the prospectus for GLD, there are also various risks highlighted that may cause discomfort for investors. I’m not drawing any parallels between FDIC insurance and GLD other than to highlight investor comfort level – there is not such government assurance related to GLD. Complete Story »
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| Murray Pollitt: The hypocrisy of the Greek 'rescue' Posted: 10 May 2010 05:48 PM PDT 1:45a ET Tuesday, May 11, 2010 Dear Friend of GATA and Gold: In his latest market letter, Murray Pollitt of Pollitt & Co. in Toronto writes that the "rescue" of Greece is actually a rescue of banks holding Greek bonds and the bond-rating agencies that declared those bonds to be any better than Argentinian bonds, which default and are written down every so often as a matter of course. Pollitt wonders how, when the time comes, the U.S. dollar will be "rescued." (Hmmm. ... maybe if there's any gold left by then. ...) Pollitt's commentary is titled simply "Hypocrisy" and he has allowed GATA to post it here: http://www.gata.org/files/PollittMarketLetter-05-04-2010.pdf CHRIS POWELL, Secretary/Treasurer ADVERTISEMENT Prophecy Resource Corp. Appoints Rob McEwen to Advisory Board Prophecy Resource Corp. (TSX.V: PCY, OTC: PCYRF) is pleased to announce the appointment of Rob McEwen to the company's Advisory Board. McEwen is a leading Canadian mining industry entrepreneur. He is the chairman and CEO of U.S. Gold Corp. and Minera Andes Inc. McEwen was the founder and former chairman and CEO of Goldcorp Inc., whose Red Lake Mine in northwestern Ontario, Canada, is considered to be the richest gold mine in the world. During his tenure at Goldcorp, McEwen transformed the company from a collection of small companies into a mining powerhouse, growing its market capitalization from $50 million to approximately $8 billion. For Prophecy Resource Corp.'s complete statement: http://www.prophecyresource.com/news_2010_mar11b.php > Support GATA by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: * * * Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Coming Friday-Sunday, June 11-13, at the Dallas-Fort Worth Airport Marriot: The conference will explore the dangers and opportunities in today's bullion markets and the need for investors to diversify bullion holdings outside of bullion banking and commodities markets. Speakers will include David Morgan of Silver-Investor.com, Gold Anti-Trust Action Committee Chairman Bill Murphy, and Duncan Cameron and Philip Judge of Anglo Far-East Bullion Co. The earliest conference attendees on Saturday will be able to schedule one-on-one interviews for personal consultation with Anglo-Far East's experts on Sunday. To learn more about and register for the Anglo Far-East Bullion conference, please visit: http://www.anglofareast.com/seminar-registration/
This posting includes an audio/video/photo media file: Download Now | ||||
| Murray Pollitt: The hypocrisy of the Greek 'rescue' Posted: 10 May 2010 05:48 PM PDT 1:45a ET Tuesday, May 11, 2010 Dear Friend of GATA and Gold: In his latest market letter, Murray Pollitt of Pollitt & Co. in Toronto writes that the "rescue" of Greece is actually a rescue of banks holding Greek bonds and the bond-rating agencies that declared those bonds to be any better than Argentinian bonds, which default and are written down every so often as a matter of course. Pollitt wonders how, when the time comes, the U.S. dollar will be "rescued." (Hmmm. ... maybe if there's any gold left by then. ...) Pollitt's commentary is titled simply "Hypocrisy" and he has allowed GATA to post it here: http://www.gata.org/files/PollittMarketLetter-05-04-2010.pdf CHRIS POWELL, Secretary/Treasurer ADVERTISEMENT Prophecy Resource Corp. Appoints Rob McEwen to Advisory Board Prophecy Resource Corp. (TSX.V: PCY, OTC: PCYRF) is pleased to announce the appointment of Rob McEwen to the company's Advisory Board. McEwen is a leading Canadian mining industry entrepreneur. He is the chairman and CEO of U.S. Gold Corp. and Minera Andes Inc. McEwen was the founder and former chairman and CEO of Goldcorp Inc., whose Red Lake Mine in northwestern Ontario, Canada, is considered to be the richest gold mine in the world. During his tenure at Goldcorp, McEwen transformed the company from a collection of small companies into a mining powerhouse, growing its market capitalization from $50 million to approximately $8 billion. For Prophecy Resource Corp.'s complete statement: http://www.prophecyresource.com/news_2010_mar11b.php > Support GATA by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: * * * Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Coming Friday-Sunday, June 11-13, at the Dallas-Fort Worth Airport Marriot: The conference will explore the dangers and opportunities in today's bullion markets and the need for investors to diversify bullion holdings outside of bullion banking and commodities markets. Speakers will include David Morgan of Silver-Investor.com, Gold Anti-Trust Action Committee Chairman Bill Murphy, and Duncan Cameron and Philip Judge of Anglo Far-East Bullion Co. The earliest conference attendees on Saturday will be able to schedule one-on-one interviews for personal consultation with Anglo-Far East's experts on Sunday. To learn more about and register for the Anglo Far-East Bullion conference, please visit: http://www.anglofareast.com/seminar-registration/
This posting includes an audio/video/photo media file: Download Now | ||||
| Posted: 10 May 2010 05:28 PM PDT Jim Rickards: "Goldman Can Create Shorts Faster Than Europe Can Print Money" By Tyler Durden http://www.zerohedge.com/article/jim-rickards-goldman-can-create-shorts-... Jim Rickards, who recently has gotten massive media exposure on everything from the J.P. Morgan silver manipulation scandal to the Greek default, was back on CNBC earlier [today] with one of the most fascinating insights we have yet heard from anyone, which demonstrates beyond a doubt why any attempt by Europe to print its way out of its current default is doomed: "Look at what [George] Soros did to the Bank of England in 1992. He went after them. They had a finite amount of dollars. He was selling sterling and taking the dollars, and they were buying the sterling and selling the dollars to defend the peg. All he had to do was sell more than they had and he wins. But he needed real money to do that. Today you can break a country. You don't need money. You just need synthetic euroshorts or CDS [credit-default swaps]. "A trillion-dollar bailout? Goldman can create 10 trillion of euroshorts. It just dominates whatever governments can do. So basically Goldman can create shorts faster than Europe can print money." Just wait until Europe finally realizes that the CDS "speculators" had all the cards in the poker game all along. And we hope Europe listens to the man. Being Long-Term Capital Management's former general counsel, he knows all about failed bailouts. * * * To watch video of the CNBC program with Rickards: http://www.zerohedge.com/article/jim-rickards-goldman-can-create-shorts-... ADVERTISEMENT Silver Phoenix Resources Inc. [CNSX: SP] has announced a non-brokered private placement offering to raise up to $2 million by issuance of up to 4 million flow-through units at a price of $0.50 per unit. Non-flow-through common shares are being offered on the same terms to interested subscribers. Private Placement Offering for Silver Phoenix Resources Inc. Each flow-through unit consists of one common share in the capital of the corporation (a "flow-through share") and half of one non-flow-through common share purchase warrant (a "warrant"). Each whole warrant shall entitle the holder to acquire one non-flow-through common share in the capital of the corporation (a "warrant share") until 5 p.m. Vancouver time on the date 24 months following the closing date (as defined herein) at a price of $0.70. The proceeds raised from the offering will be used for general exploration and to drill the 100-percent-owned River Jordan Property. This historic property hosts the King Fissure [aka River Jordan] lead, zinc, and silver deposit. Following a comprehensive field program in 1991, a structural re-interpretation of the complex folds hosting the King fissure deposit resulted in a major increase in potential mineralization to 20 million tonnes of 7.5 percent lead, 7.5 percent zinc, and 100 g/t silver [Laird and Clark, 1991]. The estimated tonnage of the light rare earth and niobium-bearing extrusive carbonatite unit is on the order of 33,750,000 tonnes, with no ore grade currently established. This historical estimate predates National Instrument 43-101 legislation. Interested parties can contact: William J. Murray, President and CEO For more information about the River Jordan Property, please visit: http://public.iwork.com/document/?a=p1047687515&d=River_Jordan_Property.... Support GATA by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: * * * Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Anglo Far-East Bullion Co., the Original Private Bullion Custodian For two decades Anglo Far-East Bullion co. has been providing select international clientele the highest degree of privacy, security, and access to buy, hold, and sell allocated gold and silver bars. -- Allocated gold and silver bars: AFE will not only provide you with the individual bar numbers of the bullion bars you own, but you can also rest safely in the knowledge that each bar is sight-verified by a top Swiss auditor and annually checked off against AFE accounts to ensure that your metal is locked away safely. -- Guaranteed market access and liquidity: AFE buys and sells directly with LBMA-certified metal refineries only. In bypassing the commodities market exchanges such as the Comex and bullion banks, AFE provides clients a means of access to the global physical precious metals markets that may not be available to others should systemic issues in the bullion markets arise. -- Stand for delivery: If at any time you wish to take delivery of your metal, AFE will arrange to have bars shipped to you anywhere in the world. -- Zero tolerance for leverage: AFE refuses to deal with "paper gold." We believe our clients want the metal itself so they may avoid the risks of the paper markets. AFE will not introduce such risk to its clients. -- Metal vaulted outside the banking system: None of AFE's clients have to worry that their metal is exposed to encumbrances bearing on bullion banks and commodities markets. None of AFE's vaulting partners or other strategic providers are controlled or majority-owned by banks. This is by design, not by accident. -- Access to the LBMA system of refineries, vaults, and security providers. This allows AFE clients to maintain London Good Delivery status of their metal, ensuring ease of sale or transfer, while being insulated from the "paper gold" market. -- Total privacy: AFE accounts are managed as numbered accounts in the Swiss private banking tradition. At no time does identifying information such as name and address appear on any account statement or other account documents. -- Geo-political diversification: In the words of the wise King Solomon, "Place a portion of seven and eight throughout the land, for you know not where evil may arise." Many of AFE's clients choose AFE specifically because their metal is safely vaulted outside the jurisdiction they reside in. -- Iron-clad governance: By contract with AFE's vaulting provider, no access may be made to the vaults without the attendance of an agent of the vault as well as an agent of the third-party signatory trustee, in this case top Swiss auditor Grant Thornton. All metal going into and -- more importantly -- coming out of the vaults requires the approval of a third-party signatory trustee as well as a detailed, sight-verified report of each bar and serial number by the auditor. For more information and a personal consultation with one of our private account liaisons, please contact us: Anglo Far-East Bullion Co.
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| Posted: 10 May 2010 05:27 PM PDT
So will Europe's version of "shock and awe" be enough to tame markets? Well think about this way. Let's say you are a big global macro hedge fund that was actively shorting sovereign debt of Southern European nations. Will you continue knowing that the ECB can squash you like a bug at any time? Highly unlikely. What's more likely is that you will move on to your next target, which might be the UK.
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| Fannie and Freddie: Can We Finally Admit the New Deal Failed? Posted: 10 May 2010 05:23 PM PDT
From The Daily Capitalist The Federal National Mortgage Association, fondly known as Fannie Mae, lost another $11.5 billion in the first quarter, its twelfth quarterly loss in a row, and is asking the taxpayers for another $8.4 billion to bail it out. According to the Wall Street Journal article, the company has lost $148 billion or about double the profits it has made in the last 35 years. This cute couple, Fannie Mae and Freddie Mac (the Federal Home Loan Mortgage Corporation), have cost taxpayers about $145 billion from the collapse of the housing bubble. As you know the government has agreed to backstop these companies by guaranteeing their losses. What were quasi-governmental entities are now clearly labeled as government enterprises which is what they always were. Fannie, Freddie, and the Federal Housing Administration, which isn't given a cute nickname, guaranteed 96.4% of all mortgages made in America in Q1 2010. Fannie and Freddie have about $5.5 trillion in mortgage assets.
But, as the Bloomberg article on this story points out, foreclosures have increased:
Please see my earlier article today on "Mortgage Problems Remain High" which shows the latest foreclosure related data. It remains high and is growing. The government's attempts to "stabilize" the housing market have failed and taxpayers will be stuck with the bill. Both companies are in "conservatorship" with the new Federal Housing Finance Agency (FHFA) which essentially means "nationalization." Is it not clear that these government programs have been a colossal failure. Understand that the operative word in the failure of these government sponsored agencies is the "Federal" part of their names. Fannie, Freddie, and the FHA were all formed in 1938 as a part of Roosevelt's New Deal programs to stabilize the housing market by creating liquidity in the mortgage financing system. Recall that in 1937 the economy had collapsed again, and FDR's Brain Trusters were casting about for a new programs to replace the ones that failed or were struck down as being unconstitutional. Many of these Brain Trusters were inspired by Stalin and especially Mussolini. In the 1920s and 1930s these dictators were considered by some as forward looking and worthy of emulation. Progress, it was thought, resulted from active federal intervention into almost every phase of American life. A bunch of smart young "experts" trained at our finest eastern universities would come up with "new" "progressive" solutions for outdated capitalism. FDR clearly sought to expand the power of the central government. As he said in 1934:
Sound familiar? It didn't work then and it's not working now. In fact the exact opposite of their policy goals have occurred. There is so much misinformation about the Great Depression and the New Deal that it requires several books to straighten it out. The bottom line is that Hoover and Roosevelt turned a garden variety market crash into the worst economic depression of modern times. The very policies they implemented actually caused the depression and delayed recovery for 20 years. You will recall that the DJIA didn't recover to pre-1929 levels until 1954. The market crash of 1920 was deeper (initially), resulted in a recession that had higher initial unemployment, yet it recovered in 18 months because the government (the unfairly ridiculed Harding Administration) did essentially nothing. I will further assert that one of the major causes of our economic crisis was due to the financial guarantees that Fannie and Freddie gave to the housing market. These guarantees allowed huge amounts of fiat money created by the Fed to be funneled into the housing market. Without these guarantees, the housing market would not have had the boom that it did. Regardless of the fact that these mortgages were packaged up into vehicles that were improperly evaluated for risk, no one in their right minds would have lent money to a borrower with a credit score of 500, less than a 5% down payment, and liar loan documents. Yet they did thanks to Freddie and Fannie. The government is doing everything they can to reflate the housing market and start the boom-bust cycle all over again. Now is the time to allow the free market in housing to function without the boom-bust causing interference of the government. Both Fannie, Freddie and the FHA should be abolished and let the market find the correct mortgage lending standards. Let the market take the risk of lending, not the taxpayer. For reasons related to a lack of understanding of economics, these relics of the New Deal still persist because of the belief of many in government that they actually serve a valid economic function. It seems that the market can provide us with enough cars, computers, and hamburgers at reasonable prices through competition without government intervention, so it can with housing. The consequences of continued interference in the housing market will only continue the vicious boom-bust housing cycles that have so harmed our citizens.
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| PotashCorp (NYSE:POT) — Reports Fivefold Volume Increase Over Last Year Posted: 10 May 2010 05:06 PM PDT PotashCorp (NYSE:POT), the Canadian integrated fertilizer and feed products company with operations in Saskatchewan and New Brunswick, recently reported its new numbers and they are promising. The update shows exactly what Chris Mayer, editor of Agora Financial's Capital & Crisis newsletter, had been expecting. Farmers are coming back into the market and buying potash once again. From Mayer's most recent reader update: "PotashCorp (NYSE:POT) volumes increased fivefold over a year ago and earnings for the quarter were the second highest in company history. All in all, this was the first quarter of upticks after nearly 18 months of decline. Potash inventories are now 21% below the five-year average, which bode well for more buying. There were many details in Potash's report, as usual. I particularly enjoy PotashCorp's conference calls because CEO Bill Doyle has such a command of the issues affecting agricultural markets. "He reiterated how fertilizer prices don't bounce around day to day based on commodity prices. Many investors in the fertilizer stocks have focused on the potential bumper U.S. corn crop this year and lackluster grain prices. But the fact remains that current crop prices are still well above average and the economics of fertilizer use are still attractive. "Doyle also reminded investors not to focus too much on the U.S. There is strong demand for fertilizer from other parts of the world, in particular Asia and South America. Brazil, for example, imported only 83,000 tons in the first quarter of last year. This year, it imported 1.13 million tons in the first quarter. Doyle said that was "typical" of what they are seeing ahead of the June-September demand period. "While volumes are returning, prices are still down 40% from where they were a year ago. But there are many catalysts that could send prices higher. There is this nugget from David Delany, president of sales for PotashCorp, which has been underreported: "'When you see China import corn — and I don't know how many of you have picked up on this, but there is a 115,000-ton corn order from China which just came out yesterday. And there are indications that there is going to be more behind this. We have been waiting for China to import corn for a number of years… If you will recall, China used to be a 15-million-ton corn exporter. So for China to go from being a corn exporter to a corn importer has spectacular consequences for the corn market, for the grain markets, and I'm not sure that that is totally appreciated.' "This is not a one-off event. China's farmers can no longer meet domestic demand for corn, which is mainly used as animal feed to support China's growing dairy, hog and poultry sectors. If we see China start to regularly import corn, which I think is probable, that could be a big catalyst in the grain markets and for fertilizer use. "Doyle also talked about the number of catalysts out there that could spark potash prices higher: "'We've got the El Nino problem in Malaysia and Indonesia. Palm oil prices are escalating. That could also be a catalyst. We have got record soybean imports into China, also a potential catalyst. The recognition in the marketplace of tightening supply demand fundamentals of potash that will drive the restocking of the supply chain, when that light goes on, also a potential catalyst. So when you hear that people say that there are no catalysts for the price of potash to improve or change, it just shows a fundamental lack of understanding of all the nuances that are in this marketplace.' "What about new supply? Doyle went through some of the projects out there, and it seems most won't move forward because of poor-quality ore bodies and high costs. We need to see a much higher potash price to make these projects work." At this point, Mayer is watching the potash market and thinking strategically about how these catalysts will play out for PotashCorp. He goes on to describe that, right now, the company's large net asset value supports its stock price. Mayer reports in far more detail in the most recent issue of Capital & Crisis which he just released last Friday. Visit the Agora Financial research page to learn more about the newsletter and to sign up if you want to stay updated with his insights. Also, Chris Mayer will be speaking live at the Agora Financial Investment Symposium in Vancouver. You can read about how to register for the July event here. Best, Rocky Vega, [Nothing in this post should be considered personalized investment advice. Agora Financial employees do not receive any type of compensation from companies covered. Investment decisions should be made in consultation with a financial advisor and only after reviewing relevant financial statements.] PotashCorp (NYSE:POT) — Reports Fivefold Volume Increase Over Last Year originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day." Check out our new special report Investing in Offshore Oil
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| The gold standard: The case for another look Posted: 10 May 2010 03:58 PM PDT By Sean Fieler and Jeffrey Bell http://online.wsj.com/article/SB2000142405270230369560457518169390653220... Washington's elites are quietly preparing a post-election fiscal compromise that will fund much of President Barack Obama's domestic spending agenda with huge tax increases. They aim to create a value-added tax and will argue that there is no alternative even though doing so will leave the United States resembling the stagnant, bureaucratic nations of Western Europe. But there is an alternative. The U.S. could return to a gold standard, a system that would not only prevent the government from running chronic budget deficits but would also curb attempts to manipulate the value of the dollar for political reasons. The value of a gold standard was proven in the 19th century. Following the English parliament's passage of the Coinage Act in 1816, which created a gold standard in England in collaboration with the semi-private Bank of England, gold gradually displaced copper and silver to become the world's sole final currency. In doing so, gold established ground rules for international trade and integrated the world's economy. Countries that adopted the international gold standard prospered. This remarkably successful monetary system only blew apart with the outbreak of World War I in 1914. ... Dispatch continues below ... ADVERTISEMENT Prophecy Resource Corp. Appoints Rob McEwen to Advisory Board Prophecy Resource Corp. (TSX.V: PCY, OTC: PCYRF) is pleased to announce the appointment of Rob McEwen to the company's Advisory Board. McEwen is a leading Canadian mining industry entrepreneur. He is the chairman and CEO of U.S. Gold Corp. and Minera Andes Inc. McEwen was the founder and former chairman and CEO of Goldcorp Inc., whose Red Lake Mine in northwestern Ontario, Canada, is considered to be the richest gold mine in the world. During his tenure at Goldcorp, McEwen transformed the company from a collection of small companies into a mining powerhouse, growing its market capitalization from $50 million to approximately $8 billion. For Prophecy Resource Corp.'s complete statement: http://www.prophecyresource.com/news_2010_mar11b.php The reason it came apart then -- and not at other times when countries abandoned the gold standard to finance wars with deficit spending -- was that World War I was the first conflict to affect every major economically advanced country in the world. The U.S. suspended dollar convertibility to gold to finance the Civil War in the 1860s, but because Britain and other major economies did not suspend convertibility of their currencies there was an existing standard for post-Civil War America to rejoin. This wasn't the case after World War I. This might not have mattered, and the major economic powers might have re-established a monetary system similar to what existed before the war if not for the central reason why political elites dislike the gold standard: It leaves them little room to run the economy and claim credit for its successes. If you ask political elites why they oppose returning to gold today, they are apt to laugh uproariously and imply that adopting a gold standard is the policy equivalent of reviving the horse-drawn carriage. But their deeper reason is that they prefer to retain power over the economy that they would not have under a gold standard. Since the crackup of the international gold standard, all subsequent international monetary regimes have elevated dominant paper currencies -- first the British pound, later the dollar -- as the final money of the world. This set up a critical imbalance of international demand for dominant paper currencies, even while gold remained formally in the system between 1922 and 1973. Following the Nixon administration's decision to end the last vestigial (and exclusively foreign) convertibility of the dollar to gold in 1973, the American dollar has been in demand all over the world both for purposes of international trade and foreign central-bank liquidity. But foreign central banks don't stack their greenbacks in vaults. They maintain monetary reserves mainly as interest-bearing U.S. government-backed debt securities -- in effect, as unsolicited loans to the U.S. government. So by expanding its monetary base, China is both increasing monetized dollars and increasing the borrowing capacity of the U.S. government. That increase in borrowing capacity creates liquidity that is unrelated to any need of Americans involved in economic transactions. It is little wonder then that in recent decades -- beginning most notably in the 1980s -- the U.S. has registered far bigger budget deficits, accompanied by far smaller economic strains, than has been the case for countries whose currencies lack the standing of final money. The government of Charles de Gaulle, president of France from 1958 to 1969 and a supporter of returning to the international gold standard, once assailed this American liquidity advantage as an "exorbitant privilege." But for the U.S., the dollar standard has proven to be less like a bed of roses than a whack-a-mole game. In the 1960s, the mole that popped up was a weak dollar, which triggered accelerated gold outflow from the U.S. to foreign governments. In the 1970s, the mole took the form of high inflation and stagnation. In the 1980s, high interest rates and big budget deficits that reared their heads. In the 1990s, regional or one-sector investment bubbles triggered emergency easing of interest rates by the Federal Reserve. Finally, reacting to deflation fears following the bursting of the dot-com stock-market bubble, the Greenspan Fed pushed the federal-funds rate down to 1% or less and kept it there for far too long. This brought forth the Mount Everest of bubbles, a boom in U.S. residential real estate derivatives that spread all over the world. When credit-worthy investors and firms can borrow money for virtually nothing and aggressively leverage their investments in a market that seems headed in only one direction, no force on earth -- not even an Obama-appointed regulator -- is going to stop them from making that bet. Now Ben Bernanke's Fed is repeating recent patterns of keeping interest rates too low for too long, creating new bubbles and risking a whack-a-mole encore: 1970s-style stagflation. Before that happens, we need to lead the world back to the monetary system that worked better than any other -- and, moreover, the one most appropriate for a global economy that is integrating about as rapidly as it was in 1900. The first step in cutting off the addictive flow of foreign central-bank capital to Washington is an American commitment to a dollar convertible to gold on a date certain. The second step is allowing the market, in the run-up to that date, to find and fix a dollar price of gold that would encourage other nations to replace dollar reserves with gold holdings as their new monetary base, whether or not they choose initially to join the new international gold standard. These steps alone would put an end to the U.S.'s ability to run painless budget deficits financed by foreign central banks. But we should also provide an insurance policy against the tendency of political elites to fool around with our money. Legislation restoring dollar-gold convertibility should be accompanied by passage of a constitutional amendment guaranteeing the American people a right to conduct their economic affairs in gold, regardless of the future status of gold as the official money of the United States. The unexpected rise of the tea party movement over the past year should be sobering for Washington's bipartisan elite. It's a sign that many American voters are prepared to consider ambitious, even radical proposals to preserve the system of limited government the Founders created and that gave the U.S. the greatest economy ever to exist. We believe what this country needs most urgently is a dollar worth its weight in gold. ----- Messrs. Fieler and Bell are, respectively, chairman and policy director of the American Principles Project, an advocacy group based in Washington. Support GATA by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: * * * Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Coming Friday-Sunday, June 11-13, at the Dallas-Fort Worth Airport Marriot: The conference will explore the dangers and opportunities in today's bullion markets and the need for investors to diversify bullion holdings outside of bullion banking and commodities markets. Speakers will include David Morgan of Silver-Investor.com, Gold Anti-Trust Action Committee Chairman Bill Murphy, and Duncan Cameron and Philip Judge of Anglo Far-East Bullion Co. The earliest conference attendees on Saturday will be able to schedule one-on-one interviews for personal consultation with Anglo-Far East's experts on Sunday. To learn more about and register for the Anglo Far-East Bullion conference, please visit: http://www.anglofareast.com/seminar-registration/
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| The Fed Reopens Dollar Swap Lines to Avert Disaster on US Markets Posted: 10 May 2010 03:55 PM PDT Kristjan Velbri submits: Following the €750 billion emergency fund announcements from Europe, the Federal Reserve announced that it was going to reopen the dollar swap lines for the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank. This measure is supposed to help alleviate short term liquidity needs of commercial banks, in effect providing liquidity to the whole financial system. This is something one would expect to be cheered, but for some reason, that is not the case. One needs to understand the the Federal Reserve is not trying to help Greece or any other Club Med with their sovereign debt issues, it is simply trying to avoid contagion, id est a fire-sale of US dollar based assets. The last time non-US banks faced a dollar shortage, it resulted in a massive sale of everything and anything denominated in US dollars, including gold, which is regarded as a safe haven by many (including me). Back in the heyday of the dollar shortage of 2008-2009, the overnight lending markets literally fell to pieces - the charts of LIBOR and TED spread are a living witness to that. The Fed did its best to pick it up and it did a great job at it. The dollar shortage is the only reason the cyclical bear market that began in 2007 fell way off its downtrend channel. Anyone who is familiar with the 2007-2009 downtrend knows what I'm referring to. This time around, the Federal Reserve is trying to prevent the spread of the crisis to US markets. Remember, the sovereign debt crisis, as it stands now, is still only a European problem. The US with its massive national debt has not entered the stage yet and the Fed is doing its best to prevent this European problem from spreading to US markets. Complete Story »
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| The Multi Trillion Dollar Band-Aid Posted: 10 May 2010 03:48 PM PDT Dear Friends, So many unprecedented events have occurred that even we are getting hardened to the economically absurd. The Western world was once again on the brink of a financial collapse last evening. If it wasn't, you can be assured that the Fed would not have ponied up swaps as large as they have. The reason I discuss this tonight is to drive home the realization that the Western world is financially crippled with band-aids now amounting in the trillions. I can only imagine what size offering of euros took it down from over $1.30 to the present $1.2887. You pledge almost $1 trillion to do all necessary to support the euro, and it fails to take the prize on the day of initiation. "Pretend" comes at an ever increasing price. This time it was $200 billion more than TARP. "Extend" becomes less and less effective. Be very careful as this last save has not yet occurred. Respectfully,
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| Morgan wants custody of everybody's gold in Singapore too Posted: 10 May 2010 03:29 PM PDT J.P. Morgan to Store Precious Metals in Singapore By Kevin Lim http://www.reuters.com/article/idUSSGE6490MF20100510 SINGAPORE -- J.P. Morgan said on Monday it will open its first Asian precious metals vault facility in Singapore during the third quarter of 2010 to facilitate trading in gold and other valuable commodities. The vaults will accommodate the trading of physically settled futures contracts on regional exchanges, exchange-traded funds, as well as physically settled financing transactions in which J.P. Morgan is involved, it said in a statement. The Singapore Exchange recently introduced gold contracts as part of a plan to boost trading in commodity derivatives. Spot gold prices touched a five-month high on Friday as investors piled into the precious metal on fears of sovereign default in the euro region. ADVERTISEMENT Prophecy Resource Corp. Appoints Rob McEwen to Advisory Board Prophecy Resource Corp. (TSX.V: PCY, OTC: PCYRF) is pleased to announce the appointment of Rob McEwen to the company's Advisory Board. McEwen is a leading Canadian mining industry entrepreneur. He is the chairman and CEO of U.S. Gold Corp. and Minera Andes Inc. McEwen was the founder and former chairman and CEO of Goldcorp Inc., whose Red Lake Mine in northwestern Ontario, Canada, is considered to be the richest gold mine in the world. During his tenure at Goldcorp, McEwen transformed the company from a collection of small companies into a mining powerhouse, growing its market capitalization from $50 million to approximately $8 billion. For Prophecy Resource Corp.'s complete statement: http://www.prophecyresource.com/news_2010_mar11b.php Support GATA by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: * * * Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Preliminary Feasibility Study Completed for Seabridge Gold's KSM Project Study Reports Reserves of 30.2 Million Oz. Gold, 7 Billion Lbs. Copper, Base Case Life of Mine Cash Operating Costs Estimated at $144/oz. Gold Produced Toronto -- Seabridge Gold Inc. has announced results from a National Instrument 43-101 compliant preliminary feasibility study of its 100-percent owned KSM project in northern British Columbia, Canada. The study was prepared by Wardrop, a Tetra Tech company, a major international engineering and consulting firm. Seabridge President and CEO Rudi Fronk says, "The study confirms that the KSM project now hosts the largest gold reserve in Canada and one of the largest in the world. KSM is projected to provide an extraordinary mine life of more than 35 years with estimated cash operating costs well below the current average of the major gold producers. Estimated capital costs are in line with those of comparable, large-scale, undeveloped gold-copper projects and KSM has the advantage of being located in a low-risk jurisdiction." For the complete Seabridge Gold statement: http://www.seabridgegold.net/readmore.php?newsid=283
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| Morgan wants custody of everybody's gold in Singapore too Posted: 10 May 2010 03:29 PM PDT J.P. Morgan to Store Precious Metals in Singapore By Kevin Lim http://www.reuters.com/article/idUSSGE6490MF20100510 SINGAPORE -- J.P. Morgan said on Monday it will open its first Asian precious metals vault facility in Singapore during the third quarter of 2010 to facilitate trading in gold and other valuable commodities. The vaults will accommodate the trading of physically settled futures contracts on regional exchanges, exchange-traded funds, as well as physically settled financing transactions in which J.P. Morgan is involved, it said in a statement. The Singapore Exchange recently introduced gold contracts as part of a plan to boost trading in commodity derivatives. Spot gold prices touched a five-month high on Friday as investors piled into the precious metal on fears of sovereign default in the euro region. ADVERTISEMENT Prophecy Resource Corp. Appoints Rob McEwen to Advisory Board Prophecy Resource Corp. (TSX.V: PCY, OTC: PCYRF) is pleased to announce the appointment of Rob McEwen to the company's Advisory Board. McEwen is a leading Canadian mining industry entrepreneur. He is the chairman and CEO of U.S. Gold Corp. and Minera Andes Inc. McEwen was the founder and former chairman and CEO of Goldcorp Inc., whose Red Lake Mine in northwestern Ontario, Canada, is considered to be the richest gold mine in the world. During his tenure at Goldcorp, McEwen transformed the company from a collection of small companies into a mining powerhouse, growing its market capitalization from $50 million to approximately $8 billion. For Prophecy Resource Corp.'s complete statement: http://www.prophecyresource.com/news_2010_mar11b.php Support GATA by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: * * * Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Preliminary Feasibility Study Completed for Seabridge Gold's KSM Project Study Reports Reserves of 30.2 Million Oz. Gold, 7 Billion Lbs. Copper, Base Case Life of Mine Cash Operating Costs Estimated at $144/oz. Gold Produced Toronto -- Seabridge Gold Inc. has announced results from a National Instrument 43-101 compliant preliminary feasibility study of its 100-percent owned KSM project in northern British Columbia, Canada. The study was prepared by Wardrop, a Tetra Tech company, a major international engineering and consulting firm. Seabridge President and CEO Rudi Fronk says, "The study confirms that the KSM project now hosts the largest gold reserve in Canada and one of the largest in the world. KSM is projected to provide an extraordinary mine life of more than 35 years with estimated cash operating costs well below the current average of the major gold producers. Estimated capital costs are in line with those of comparable, large-scale, undeveloped gold-copper projects and KSM has the advantage of being located in a low-risk jurisdiction." For the complete Seabridge Gold statement: http://www.seabridgegold.net/readmore.php?newsid=283
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| Finally, a REAL European Bailout! Posted: 10 May 2010 03:28 PM PDT By Rick Ackerman, Rick's Picks At last, the European Union has decided to do a USA-style bailout – one with a quintessentially American, trillion dollar price tag and a shining vision of success. "[The agreement] will ensure that any attempt to weaken the stability of the euro will fail," said European Commission President Jose Manuel Barroso. Yeah, but for how long? We wonder if Mr. Barroso noticed that the euro finished on a downswing yesterday (see chart below), even as the ink on this latest deal was drying. Still, we hate to rain on the EU's parade, and even if the Mother of All Eurobailouts failed to inspire a show of confidence in the euro, it nonetheless did pump up the world's stock exchanges with trillions of dollars' worth of dubious new valuations. European shares registered their biggest single-day gain in a year-and-a-half, and U.S. stocks were not far behind.
This bailout is a far cry from the paltry $60 billion credit line provided to Greece just a couple of weeks ago. We'd noted at the time that trying to do these rescue packages on-the-cheap would only invite doubt and derision. Probably the last thing those humorless stiffs in Brussels want is derision, and so no one should have been surprised to see them throw caution to the wind by ponying up a proper sum for a pan-European rescue. Greece will now be less likely to get kicked, punched and insulted when it heads for the discount window, and Spain, Portugal Italy and Ireland won't have to worry so much that all of the rescue money will gone by the time Greece is done with it. Soup to Nuts It's hard to say how long the good feelings will last, though, since we know from America's experience that even a trillion dollars doesn't go very far when the problem is perceived as bottomless. The cost of the U.S. bailout was estimated as high as $14 trillion, soup-to-nuts, and what did it get us besides a relatively modest blip in the Great Recession and a Fed balance sheet that remains a ticking time bomb . Would the bankruptcy of the PIIGs be an even bigger event than the collapse of the U.S. banking system? We think the question is moot, since either would trigger the other. Meanwhile, we're none too eager to short stocks at the moment, since, with the EU and Germany finally throwing in the towel on funny money, stimulus is headed toward a civilizational high. A trillion dollars in newly minted mind-money can only lower the threshold of what our best and brightest financiers perceive as "safety."
(If you'd like to have Rick's Picks commentary delivered free each day to your e-mail box, click here.) Related posts:
More articles from Rick Ackerman….
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| Large insider transactions; a sign all was not well at Moody’s Posted: 10 May 2010 03:28 PM PDT By Sol Palha, Tactical Investor Moody's finally fesses up to the fact that they received a Well's notice from the SEC; this time around things could be different as Moody's might officially be put out of business. It could actually lose the right to be a rating agency, which in our opinion would be a magnificent move. Moody's Corp has disclosed that its credit rating unit could face enforcement action from the US Securities and Exchange Commission for allegedly misleading regulators in a 2007 application to remain a nationally recognized rating agency. Moody's said in a filing late on Friday that the SEC is mulling starting an administrative case and "cease-and-desist" proceedings, and that a so-called "Wells Notice" was received from the SEC on March 18. Regulators send Wells Notices to firms or people to alert them of the likelihood that the government will file an enforcement action against them. Companies or people being investigated have the right to argue why they should not be charged by filing a "Wells submission." According to Moody's filing, the SEC claims the Moody's description of its procedures for determining credit ratings was "false and misleading" because of Moody's own finding that a policy had been violated internally. In the filing, Moody's said it disagrees with the SEC and said it had sent a response explaining why its application was accurate and why it believes enforcement is uncalled for. Full Story Off course Moody's is going to disagree with the SEC's finding; those that make a living by sucking blood from others try to deny it until the very end. This same punishment should be levied against all the rating agencies that failed to do their job; rating agencies that mislead should be banned forever so that the message is clear, do your job or die. Of more importance though, is the fact that insiders appeared to have acted on this information in a manner that would enable them to get the best price before this knowledge became public. Consider the following info Moody's CEO Dumped 100,000 shares of stock the day the Well's notice arrived. The well notice arrived on 18th of March; this once again clearly illustrates how corporate America is all about making money at the expense of its shareholders. However, sales by Buffets Company make CEO Raymond McDaniel sales seem very small; they unloaded a boat load of shares, the largest block was sold on the exact day that MCO received the notice. The timing of these transactions and the size leave one wondering if Berkshire Hathaway might have been privy to some inside info; take a look at the transactions. We are not stating that Buffet's company did anything wrong, but the timing of these transactions does make one wonder. 18th of March 678,962 shares at 29.98 a share 19th of March 136,943 shares at 29.81 a share 23 march 148,054 shares at 30.22 a share 24th march 54,574 shares at 30.37 a share 26th march 3,000 shares at 30.56 a share
Disclosure; we have no position in the stated investments More articles from the Tactical Investor….
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| Posted: 10 May 2010 03:27 PM PDT By Jeff Nielson, Bullion Bulls Canada In many previous commentaries, I have stressed that the issues (and crises) sitting right before our eyes are so large, and so obvious that you don't need a "background in economics" to understand what is occurring – merely an understanding of basic arithmetic…and there lies the problem. The vast majority of adults in our society have no understanding of arithmetic, or numbers in general – the product of decades of dependence upon the lowly calculator.
I don't have the space to go into this issue in detail. For those interested in this aspect of human devolution, I will refer readers to a previous commentary. The bottom-line is that we are now a society of mathematical 'illiterates': people who are incapable of evaluating any calculations or "statistics" with which they are presented, because they have stunted any intuitive grasp of numbers which they once possessed.
Nowhere is this issue clearer than with respect to the subject of interest on debt. The easiest way to illustrate we are a society of arithmetic ignoramuses is to point to credit-card balances. Simply put: anyone who pays interest on unpaid credit-card balances has absolutely no understanding of arithmetic. There can be no "justification" for incurring interest on credit-card balances.
Everyone knows that credit card interest rates are set to usurious levels, several percent higher than any other kind of debt. Every penny of credit card interest paid by consumers is no different than flushing money down the toilet.
We would all react in shock and ridicule if we saw someone flushing money down the toilet. However, why isn't anyone laughing at the American consumer: who carries $1 trillion of credit-card debt, and thus "flushes" somewhere around $200 billion of their own money – every year? Since I know that most people are not able to put such a number into perspective (for the reasons previously mentioned) let me help them out. During 2009, only about $250 billion of the Obama "stimulus package" was actually deployed in 2009. This means that 80% of that "stimulus" did nothing more than replace the credit-card dollars which Americans flushed down the toilet (i.e. paid to bankers) last year.
When the most-massive U.S. "stimulus package" ever enacted in the U.S. does little more than pay people's credit-card interest (for one year), it should be obvious to everyone that this is a serious problem. It's not. Paying-down that $1 trillion credit-card balance should be the #1 economic priority of Americans – as they obviously cannot afford to continue to flush $200 billion down the toilet every year. More articles from Bullion Bulls Canada….
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| Coin Monday: 1873, Open and Close Posted: 10 May 2010 03:27 PM PDT Heritage Auction Galleries It's not uncommon to have guests in the cataloging department, important customers or potential customers who visit our humble wing as part of a grand tour of Heritage world headquarters. Last week was one such occasion, and I had the opportunity to show off a coin I was cataloging. "Do you like gold?" I asked.
They did. "Ever seen a three dollar gold coin before?"
They hadn't. I passed one to them. The usual ooh-ing and ahh-ing ensued. Then one gentleman turned it over.
"When was this made? 1878?" He asked. The question struck me as odd. I didn't remember which three dollar gold coin I'd handed to the tour, but none of the threes on my desk had been dated 1878.
"Hmm, did you check the label?" He turned the coin over. "Oh, it's 1873." Then I understood why he'd been confused. He passed the coin back to me with a comment about needing to get his eyes checked. I reassured him that his eyes weren't the problem, and he was far from the first to make the same mistake. At the start of 1873, the U.S. Mint used a four-digit date punch, or logotype, that had the two ends of the 3 in 1873 nearly touching the center. The 3 looked like an 8 at first glance, and it didn't take long for this to come to the attention of the then-Chief Coiner of the Mint. A new logotype, this time with the ends of the "3″ well apart, went into service and was used for most of the year. Two dimes in the upcoming June Long Beach U.S. Coin Auction show the difference between the two logotypes: the last digit goes from ambiguous on the Closed "3″ coin to obvious on the Open "3″ piece. Now there's a funny wrinkle to that 1873 three dollar coin I showed to the tour. According to official Mint records, it shouldn't exist. There are no records of three dollar gold coins being struck for circulation in 1873. So what gives? There are multiple possibilities, none conclusively proven. The coins could have been struck in 1874 but from dies dated 1873. For example, when demand for $3 gold coins spiked in 1874, Mint workers may have just used the dies that were on-hand, which has historical precedent.
Or the Mint records could simply be in error, a theory used to explain any number of other rarities.
Parts of both could be correct, or both could be completely off-the-mark. Regardless, the 1873 $3 is a coin to keep an eye on.
Happy bidding!
To leave a comment, click on the title of this post.
-John Dale Beety 
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| The secret knowledge and the secret gold market Posted: 10 May 2010 03:26 PM PDT 11p ET Monday, May 10, 2010 Dear Friend of GATA and Gold: We at GATA have sometimes called gold's enduring role in the international monetary system "the secret knowledge of the financial universe." This view is shared by the anonymous but most alert and well-informed blogger FOFOA — for Friend of Friend of Another, a reference to the famous "Another" and "Friend of Another" postings at the old USAGold Forum of Centennial Precious Metals in Denver, many of which can be found here: http://www.usagold.com/goldtrail/archives/another1.html In his most recent essay, addressed last night to the European heads of state who were busily conjuring up a trillion of something or other to rescue themselves and their banks with, FOFOA remarked that the gold secret is known to only about a hundred people. This is not actually true, for the secret is known to hundreds and maybe thousands of the 6,000 people on the GATA Dispatch list and to thousands more on the membership list of GATA Chairman Bill Murphy's LeMetropoleCafe.com, as well as to many of the old readers of the USAGold Forum. But FOFOA's remark was metaphorically true, even as he would bring still more people in on the secret, as GATA would. That secret is that there are two gold markets — a visible market to mislead the other markets with, a largely paper market for which Kitco's Jon Nadler and CPM Group's Jeff Christian, among others, are the small publicity, and an invisible market, a market among the central banks, where gold is much different — real — and, because it is real, valued immensely more than it is in the visible and largely paper market. FOFOA expects that governments will escape their impending bankruptcies by vastly revaluing their remaining gold reserves. He cites GATA and some of the things GATA has brought to your attention over the years, like the intriguing comments about gold made by former Federal Reserve Governor Lyle Gramley on Business News Network in Canada in December 2008: FOFOA also quotes GATA favorites Eric Sprott and Jim Rickards. He plainly has been following GATA's work closely. FOFOA's premise is similar to that of the British economist R. Peter W. Millar, founder of Valu-Trac Investment Research, whose May 2006 study, "The Relevance and Importance of Gold in the World Monetary System," predicted an upward revaluation of gold by between 700 and 2,000 percent to avert worldwide debt deflation: When Millar wrote that study gold in the visible market was trading at about $650 per ounce. Millar thus envisioned the necessity of a gold price of between $4,550 and $13,000. FOFOA puts gold's current secret market price at around $6,000. On CNBC the other day, Rickards said he expected gold to reach $5,000 once the manipulation of the paper market was defeated. (See http://www.gata.org/node/8605.) FOFOA observes: "The effect of the contract gold market on the ordinary price of gold has been to keep it at manageable levels for 30 years now. But physical gold and contracts for gold are different things entirely. New contracts can be produced much faster than new physical gold can be mined. But when demand shifts from contracts to physical (which is happening), this puts great strain on the market that tries to price them as equals. And what must ultimately happen when this strain breaks the parity between physical gold and contract gold is that the membrane separating the Bank for International Settlements' physical gold price from the ordinary market will break. "When this happens, all your debt problems will be reset to manageable and sustainable levels again. In fact, the entire monetary and financial order will be reset. This is going to happen. And the central bankers can make it happen whenever they want, when they finally feel the heat of the fire on their own butts." Turning up the heat is GATA's work. FOFOA's commentary suggests that we're having some effect. If you're inclined to help with the heat, please consider contributing to GATA: Meanwhile, FOFOA's commentary is headlined "Open Letter to EMU Heads of State" and you can find it here: http://fofoa.blogspot.com/2010/05/open-letter-to-emu-heads-of-state.html CHRIS POWELL, Secretary/Treasurer ADVERTISEMENT Prophecy Resource Corp. Appoints Rob McEwen to Advisory Board Prophecy Resource Corp. (TSX.V: PCY, OTC: PCYRF) is pleased to announce the appointment of Rob McEwen to the company's Advisory Board. McEwen is a leading Canadian mining industry entrepreneur. He is the chairman and CEO of U.S. Gold Corp. and Minera Andes Inc. McEwen was the founder and former chairman and CEO of Goldcorp Inc., whose Red Lake Mine in northwestern Ontario, Canada, is considered to be the richest gold mine in the world. During his tenure at Goldcorp, McEwen transformed the company from a collection of small companies into a mining powerhouse, growing its market capitalization from $50 million to approximately $8 billion. For Prophecy Resource Corp.'s complete statement: http://www.prophecyresource.com/news_2010_mar11b.php > Support GATA by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: * * * Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Coming Friday-Sunday, June 11-13, at the Dallas-Fort Worth Airport Marriot: The conference will explore the dangers and opportunities in today's bullion markets and the need for investors to diversify bullion holdings outside of bullion banking and commodities markets. Speakers will include David Morgan of Silver-Investor.com, Gold Anti-Trust Action Committee Chairman Bill Murphy, and Duncan Cameron and Philip Judge of Anglo Far-East Bullion Co. The earliest conference attendees on Saturday will be able to schedule one-on-one interviews for personal consultation with Anglo-Far East's experts on Sunday. To learn more about and register for the Anglo Far-East Bullion conference, please visit: http://www.anglofareast.com/seminar-registration/
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| Lew Rockwell asks Ron Paul: Is there any gold in Fort Knox? Posted: 10 May 2010 03:26 PM PDT 4:55p ET Monday, May 10, 2010 Dear Friend of GATA and Gold: Lew Rockwell, founder and chairman of the Ludwig von Mises Institute and a former chief of staff for U.S. Rep. Ron Paul, R-Texas, interviewed Paul on Friday for Rockwell's Internet site. Rockwell says Paul "talks about the progress of his Audit the Fed bill, and why the Fed, the Treasury, and the banksters fear it. He also discusses the crisis in Europe and especially Greece, and the Fed's sinister and secret role. We know why the Fed wants its secrets kept safe from the American people, about what banks and other institutions it bails out by printing new money. But why do they so fiercely resist a physical audit of the gold at Fort Knox and in the vaults of the New York Fed? What are they hiding? Did far more U.S. gold flow overseas under LBJ and Nixon than is admitted? Has some or all of the remaining gold been sold, though it is still physically in the U.S.? Ron Paul, and all of us, want some answers." The interview is titled "Is There Any Gold in Fort Knox?" It's 14 minutes long and you can listen to it here: http://www.lewrockwell.com/lewrockwell-show/2010/05/09/149-is-there-any-… CHRIS POWELL, Secretary/Treasurer ADVERTISEMENT Private Placement Offering for Silver Phoenix Resources Inc. Each flow-through unit consists of one common share in the capital of the corporation (a "flow-through share") and half of one non-flow-through common share purchase warrant (a "warrant"). Each whole warrant shall entitle the holder to acquire one non-flow-through common share in the capital of the corporation (a "warrant share") until 5 p.m. Vancouver time on the date 24 months following the closing date (as defined herein) at a price of $0.70. The proceeds raised from the offering will be used for general exploration and to drill the 100-percent-owned River Jordan Property. This historic property hosts the King Fissure [aka River Jordan] lead, zinc, and silver deposit. Following a comprehensive field program in 1991, a structural re-interpretation of the complex folds hosting the King fissure deposit resulted in a major increase in potential mineralization to 20 million tonnes of 7.5 percent lead, 7.5 percent zinc, and 100 g/t silver [Laird and Clark, 1991]. The estimated tonnage of the light rare earth and niobium-bearing extrusive carbonatite unit is on the order of 33,750,000 tonnes, with no ore grade currently established. This historical estimate predates National Instrument 43-101 legislation. Interested parties can contact: William J. Murray, President and CEO For more information about the River Jordan Property, please visit: http://public.iwork.com/document/?a=p1047687515&d=River_Jordan_Property…. Support GATA by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: * * * Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Anglo Far-East Bullion Co., the Original Private Bullion Custodian For two decades Anglo Far-East Bullion co. has been providing select international clientele the highest degree of privacy, security, and access to buy, hold, and sell allocated gold and silver bars. – Allocated gold and silver bars: AFE will not only provide you with the individual bar numbers of the bullion bars you own, but you can also rest safely in the knowledge that each bar is sight-verified by a top Swiss auditor and annually checked off against AFE accounts to ensure that your metal is locked away safely. – Guaranteed market access and liquidity: AFE buys and sells directly with LBMA-certified metal refineries only. In bypassing the commodities market exchanges such as the Comex and bullion banks, AFE provides clients a means of access to the global physical precious metals markets that may not be available to others should systemic issues in the bullion markets arise. – Stand for delivery: If at any time you wish to take delivery of your metal, AFE will arrange to have bars shipped to you anywhere in the world. – Zero tolerance for leverage: AFE refuses to deal with "paper gold." We believe our clients want the metal itself so they may avoid the risks of the paper markets. AFE will not introduce such risk to its clients. – Metal vaulted outside the banking system: None of AFE's clients have to worry that their metal is exposed to encumbrances bearing on bullion banks and commodities markets. None of AFE's vaulting partners or other strategic providers are controlled or majority-owned by banks. This is by design, not by accident. – Access to the LBMA system of refineries, vaults, and security providers. This allows AFE clients to maintain London Good Delivery status of their metal, ensuring ease of sale or transfer, while being insulated from the "paper gold" market. – Total privacy: AFE accounts are managed as numbered accounts in the Swiss private banking tradition. At no time does identifying information such as name and address appear on any account statement or other account documents. – Geo-political diversification: In the words of the wise King Solomon, "Place a portion of seven and eight throughout the land, for you know not where evil may arise." Many of AFE's clients choose AFE specifically because their metal is safely vaulted outside the jurisdiction they reside in. – Iron-clad governance: By contract with AFE's vaulting provider, no access may be made to the vaults without the attendance of an agent of the vault as well as an agent of the third-party signatory trustee, in this case top Swiss auditor Grant Thornton. All metal going into and — more importantly — coming out of the vaults requires the approval of a third-party signatory trustee as well as a detailed, sight-verified report of each bar and serial number by the auditor. For more information and a personal consultation with one of our private account liaisons, please contact us: Anglo Far-East Bullion Co.
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| Metals market manipulation complaints gain credibility, Wealth Daily says Posted: 10 May 2010 03:26 PM PDT 4:47p ET Monday, May 10, 2010 Dear Friend of GATA and Gold (and Silver): Adam Sharp of the Wealth Daily letter in Phoenix writes today that complaints of precious metals market manipulation by big banks, complaints such as those GATA has made for the last decade, are gaining credibility. Sharp's commentary is headlined "JP Morgan's Alleged Manipulation of the Silver Market: A Modern Day Metals Conspiracy Theory" and you can find it at the Wealth Daily Internet site here: http://www.wealthdaily.com/articles/jp-morgans-manipulation-of-the-silve… CHRIS POWELL, Secretary/Treasurer ADVERTISEMENT Coming Friday-Sunday, June 11-13, at the Dallas-Fort Worth Airport Marriot: The conference will explore the dangers and opportunities in today's bullion markets and the need for investors to diversify bullion holdings outside of bullion banking and commodities markets. Speakers will include David Morgan of Silver-Investor.com, Gold Anti-Trust Action Committee Chairman Bill Murphy, and Duncan Cameron and Philip Judge of Anglo Far-East Bullion Co. The earliest conference attendees on Saturday will be able to schedule one-on-one interviews for personal consultation with Anglo-Far East's experts on Sunday. To learn more about and register for the Anglo Far-East Bullion conference, please visit: http://www.anglofareast.com/seminar-registration/ Support GATA by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: * * * Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT The Silver Saver Program A unique silver savings program has been developed by trusted friends of Silver-Investor.com founder David Morgan, perhaps the world's best-known silver market commentator. In the Silver Saver Program you buy silver in select increments and at competitive prices. You enter the market through dollar cost averaging. The program is easy to start and is automatic but also easily modified if you wish. Your silver can be delivered to your door. If the program no longer meets your needs, you can stop at any time. "This program," Morgan says, "not only receives my full endorsement but also adheres to the tenets I set forth in 'The 10 Rules of Silver Investing' — dollar cost averaging and putting real silver into your savings plan. "As an introductory promotion, if you decide participate in the Silver Saver Program, I will send you a free copy of 'Silver in the Next Decade,' one of the most important Morgan Reports I have written. And you will have the opportunity to read the Morgan Report free for 30 days. "Now more than ever it is important to accumulate physical silver and to stay informed on major economic developments. My reports cover money, metals, and mining, but I have always stressed the need to have physical metal. The Silver Saver Program will help you achieve a solid position in silver." For more information, please visit www.Silver123.net. If you would like to talk to someone about the Silver Saver Program, telephone our team at 785-727-2277.
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| Posted: 10 May 2010 02:42 PM PDT Over the past month, gold has quietly become the only true flight to safety. Forget the dollar: the dollar is "safe" just as long as Bernanke does not decide to pull a Sunday night comparable to what the ECB did last night and strangle the greenback with one press release: frankly it is just not worth the imminent currency debasement risk, especially with the inversion in the EURUSD as the trading day has proceeded. But don't take our word for it: even with today's last bail out which is supposed to scare all shorts into covering, and unload all risk-free trades, Gold is still at $1,200. And for a far more material indication of what the market thinks of not just gold, but of representations of gold holdings by ETF's with "imaginary" unaudited stashes all over the world, take a look at the Sprott PHYS physical gold ETF, and specifically the premium over its NAV. Today it hit an all time record of 31%. The NAV differential has steadily crept higher since the launch of PHYS. Investors are willing to pay 30% more than the real value of holdings just for the knowledge that the gold backing their "assets" actually exists.
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| Paperbugs Don’t Understand How Far We Have to Go Posted: 10 May 2010 02:38 PM PDT The value of common stocks relative to Gold is about to accelerate in the opposite direction the Larry Kudlow and Jimmy Jack Cramer crowd are expecting. The concept of relative wealth is an important one for Gold bulls to comprehend and embrace, as it allows them to calculate gains in something besides unstable paper debt-backed fiat currency, which is a worthless measure of value. In other words, it negates the need to worry about the inflation-deflation debate. The best example of this mental calculation of value is the Dow to Gold ratio. The average American, if they still have a job and any savings left, puts their excess money in stocks, real estate and/or government bonds. This is the absolute wrong thing to do, but the average American paperbug has been indoctrinated beyond what seems possible. Like members of the Jim Jones cult, most Americans are paperbugs and all-too-ready to drink the apparatchik Flavor Aid being served in public schools, on the nightly news and by mainstream financial publications that employ ignorant commentators like Ben Stein who preach "stocks for the long haul and everything will always be OK or better than OK". The bottom line is a simple but powerful concept: Gold will continue to increase in value relative to general stocks, real estate and government bonds, as it has over the past decade. This isn't rocket science, it is simply the swinging pendulum of financial history. Trust me when I tell you that you don't want to "buy and hold" Gold forever as an investor with a finite lifespan (unless you're going to die in the next 10 years…). Since a good picture is worth more than 1000 words to me, here are some charts expressing the Gold versus stocks comparison. First up, as a continuation of one of my previous posts regarding the all-important head and shoulders pattern in the Dow to Gold ratio, here is the breakdown using a weekly linear chart of the last 3.5 years that only shows weekly closing prices to negate the noise created by so-called "fat finger trade" days on Wall Street:
And here's a more "foresty" secular view of the Dow to Gold ratio since 1980:
I would also like to show the ratio of Gold to stocks in a different way, since we've all been conditioned since we were old enough to care to look at markets bullishly. Here is the Gold to Dow ratio
Just another "trees, meet the forest" perspective on where we are and where we're headed to keep both you and I from focusing too much on short-term noise. WAKE UP, PAPERBUGS! IT'S NOT TOO LATE! Oh, forget it. I don't know why I bother…
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| Federal Agents Investigating JP Morgan’s Silver Market Manipulation Posted: 10 May 2010 02:36 PM PDT In case readers missed this, Sunday's New York Post – the only major newspaper to report this, despite ALL major media outlets having been made aware of this – reported a wide-ranging investigation into JP Morgan's silver market corruption. The Antitrust Divsion of the Justice Dept is looking into criminal behavior and the CFTC is investigating civil charges. The investigation is all-encompassing, including JP Morgan's trading activity both on the NY Comex and the London Bullion Market Association.  (click on image to enlarge – source: GATA) The article pretty much explains the details. As we all know, there is a major disconnect between the extreme paper and derivatives short in silver amassed by JP Morgan vs. the amount of silver available to deliver should the buyers of JPM's fraudulent paper decide to ask for actual delivery of the metal, and especially if they decide to ask for private delivery out of JPM's custodial warehouses. For the record, and to highlight the degree of cover-up here, I know that the Financial Times was invited to participate in the fact-gathering and reporting of this investigation, but pulled out at the last minute. Recall that former British PM Tony Blair is now a highly paid "advior" to JPM – no doubt he pulled strings to scare off the FT. My hat's off to the NY Post for doing its job in reporting the Truth.
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| Posted: 10 May 2010 02:31 PM PDT Prudence can seem very imprudent in a runaway bull market. In fact, it can seem downright stupid. Jean-Marie Eveillard's career provides a delightful insight into this irony - both the downside of exercising prudence when share prices are soaring; and the satisfaction of exercising prudence long enough to prove its value. Eveillard knows this reality firsthand. "A good value manager accepts that there will be periods of short-term pain," Eveillard once said. "It is one reason that there are so few good value managers. It's not just psychological. You may lose clients, or even your job." During Eveillard's first decade at the helm of the First Eagle Global Fund (originally called the Sogen International Fund), it easily outdistanced every applicable benchmark. From the fund's inception in November 1986 through March 31, 1997, First Eagle Global Fund delivered a total return of 236%, compared to only 133% for the MSCI World Index. This dazzling performance elevated Eveillard to celebrity status - so much so that he became a little nervous about the stock market...and increasingly cautions. He was also concerned that so many flimsy tech stocks were soaring for no good reason, and that compelling values were becoming almost impossible to find. Eveillard responded to these conditions by raising the cash level in his fund and also raising his exposure to gold. As a result of Eveillard's caution, his fund lagged far behind every relevant benchmark during the next three years. Between March of 1997 and March of 2000, First Eagle posted a total return of only 28% - or barely one third the 75% total return of the MSCI World Index. Eveillard's numbers seemed even more pathetic alongside a tripling of the NASDAQ Composite Index during the same timeframe! Eveillard was unflappable. He refused to embrace the tech stock mania that was powering financial markets around the globe to new highs. Instead, he simply maintained the value-based investment process that he had always pursued. In his self-defense, Eveillard simply stated, "I would rather lose half of our shareholders than half of our shareholders' money." And that's exactly what happened. As Eveillard later confirmed, "We did lose half our shareholders; we did not lose half our shareholders' money." For three long years, it looked like Eveillard's illustrious career might end in disgrace. His fund nearly closed down. But as it turned out, Eveillard's prudence was, in fact, prudent. In the ten years from March 31, 2000 to March 31, 2010, the S&P 500 Index and the MSCI EAFE Index both produced a negative total return. Over the identical timeframe, the First Eagle Global Fund more than tripled! Seth Klarman, another outstanding investor who has been prone to producing mediocre short-term results, shares Eveillard's outlook. In Klarman's 2004 client letter, he wrote: "By holding expensive securities with low prospective returns, people choose to risk actual loss. We prefer the risk of lost opportunity to that of lost capital. With our efforts focused on minimizing permanent impairment of capital, we also do not promise to make you the most amount of money in any short period of time. You have seen that in our results." Klarman expanded upon this theme in his book, "Margin of Safety," when he observed, "Like dogs chasing their own tails, most institutional investors have become locked into a short-term, relative performance derby. Who is to blame for this short-term investment focus? Is it the fault of managers who believe clients want good short-term performance regardless of the level of risk or the impossibility of the task? Or is it the fault of clients who, in fact, do switch money managers with some frequency? There is ample blame for both to share. "There are no winners in the short-term performance derby," Klarman continued. "Attempting to outperform the market in the short-run is futile since near-term stock and bond price fluctuations are random and because an extraordinary amount of energy and talent is already being applied to that objective. The effort only distracts the money manager from finding and acting on sound long-term opportunities. As a result, clients experience mediocre performance. Only brokers benefit from this high level of short-term think." By eschewing the conventional pursuit of superior short-term returns, Klarman has amassed an enviable record of superior long-term returns. From its inception in 1983 through Dec. 31,2009, his Baupost Limited Partnership Class A fund has earned an average annual return of 16.5%, net of fees, compared to 10.1% for the S&P 500. During the "lost decade" of 1998 to 2008, Baupost's fund crushed the S&P, returning 15.9% for the period vs. a loss of 1.4% for the S&P. Prudence sometimes seems imprudent. But it never is. Eric J. Fry
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| Posted: 10 May 2010 02:25 PM PDT The Dow lost another 139 points on Friday. Now the stock market is in a downtrend. Is it THE downtrend? Or just another random move, of no particular importance? Hard to say. We began questioning our faith last week. Why do we think there's a bear market in stocks? Why do we think stocks will go below 5,000 on the Dow? For a minute, we couldn't remember. We weren't questioning our reasoning; we were asking much deeper questions. Of course, we don't want to buy stocks - they're expensive. And the economy is worse than people think. But what we were wondering about is the idea that stocks move in long trends that take them from epic highs to epic lows. Of course, it is obviously true. Stocks go up and down. They're bound to hit extreme highs and extreme lows from time to time. Then, when you look at the pattern, it's going to look like the stock market knew where it was headed. That is, the motion of the stock market could be purely random, just like the finance professors say. Even so, it would still move from a very high point to a very low point. So what's the difference between random movements and the patterns that the random movements make? To put it another way, what is it about reality that makes it possible for it to appear completely random and completely organized at the same time? Or, what if God made it appear that he didn't exist? What if everything happened in an apparently random way, but according to a plan that was too subtle for us to understand? Whoa...this is, like, getting heavy...and deep. We're already in over our heads. So, let's back up. Let's say you knew that the stock market is theoretically random. But let's say you also knew that this random motion had been headed down for the last 10 years...and that stocks were still not even half as cheap as they were the last two times random motion took it to an epic low? What would you say? Well, "watch out!" That's what we'd say. Our position is that the market is almost random - but not quite. It is so random that almost everything it does can be explained by randomness. It is so random that it is almost impossible to beat with any 'intelligent' system. It is so random that it will drive a thinking man mad if he spends too much time thinking about it. And yet, for all its randomness, it looks to us as though there is a pattern. 29 - 66 - 99 Those numbers were the years in which the Dow hit major highs during the 20th century. Note that they are separated by periods of 33 to 37 years - roughly the period of a human generation. Bonds do more or less the same thing. From a low in '49, bond yields rose until '81 - 32 years. Then, they began an epic decline, which continued until 2008 - 27 years. (This trend may not be over). The big trends tend to last about as long as a generation. Why? Because one generation learns; the next forgets. After the Crash and Great Depression there was no way investors were going to bid up stocks to '29 levels. The old timers had to retire...and a new generation of investors had to take over. Of course, this is just a hypothesis. All we know is that when we look back at the stock and bond markets, we see long trends, punctuated by extreme highs and extreme lows. So, when an extreme high is reached, an investor is well advised to sell. The next extreme will be an extreme low. It can take 10 or 15 years to arrive. But it is a miserable time to be in the stock market. On the other hand, after an extreme low, an investor has little fear and a lot to gain. All he has to do is buy, sit tight...and hope he lives long enough to take advantage of it. Where are we now? It looks to us as though we are 10 years into a bear market. The extreme was reached in '99 - when tech stocks were trading at extraordinary prices. In the years following, the Dow actually went considerably higher. But adjusted for inflation, the Dow never actually set a new record. The period 2000-2007 was a bit like the period following the '66 top. High levels of inflation made it hard to see what was happening. The Dow rose to the '66 level two years later...and never registered deep losses. But year after year, inflation cut the real value of the index...wiping out about 75% of investors' money over the next 15 years. Even before inflation is taken into account, stock market investors made nothing during the last 10 years - not in the US. They ended the decade about where they started it. But this leaves the trend incomplete. Stocks have still not gotten down to super-cheap levels. Look back. The last extreme was on the upside. That means the next one should be on the downside. And it must be extreme - say, Dow below 5,000. Otherwise, the long-cycle prophecy won't be realized. For every extreme high there is an extreme low. Otherwise, nature would be out of balance and Heaven would be unfulfilled. So, until we finally reach an epic low...an epic low still lies ahead. And until that time, the souls of dead value investors and grumpy perma-bears are doomed to walk the earth... They can never relax. They can never sit down and have a beer. They will never be satisfied. Only when the Dow finally sells for 5-8 times earnings will they get to say 'I told you so.' Then, they can take up their eternal rest. It is coming, dear reader; it is coming... And more thoughts... We knew it! Yes, we could tell by the cut of the chin...and by the eyes. You know, that dim look of someone who thinks he knows what he is talking about but who really has no idea. We've been saying for a long time that Ben Bernanke is a Neanderthal. Now, at last, we have proof. Is this not the ancestor of Ben Bernanke? (Below...) And now that we know more about Ben Bernanke's lineage, it is tempting to draw other conclusions as well. Yes, dear reader, why did Neanderthals go extinct? Was it because of climate changes? Competition from other humans? Or, did one of Ben Bernanke's ancestors doom the whole race with his inept Neanderthal central banking? Yes, we now have the genome deciphered. Now we're ready for the rest of the story!  Wired Magazine: After years of anticipation, the Neanderthal genome has been sequenced. It's not quite complete, but there's enough for scientists to start comparing it with our own. According to these first comparisons, humans and Neanderthals are practically identical at the protein level. Whatever our differences, they're not in the composition of our building blocks. However, even if the Neanderthal genome won't show scientists what makes humans so special, there's a consolation prize for the rest of us. Most people can likely trace some of their DNA to Neanderthals. "The Neanderthals are not totally extinct. In some of us they live on a little bit," said Max Planck Institute evolutionary geneticist Svante P¨¨bo. It took four years for P¨¨bo's team to assemble a working sequence from DNA in the bones of three 38,000-year-old Neanderthal women, found in Croatia's Vindija Cave. The sequence, published May 6 in Science, covers about 60 percent of the entire genome. Though much remains unfinished, researchers were able to compare the Neanderthal genome to the human at 14,000 protein-coding gene segments that differ between humans and chimpanzees. Researchers link these proteins to changes in humans' cognitive development, physiology and metabolism. At all but 88 of those hot spots, Neanderthals were no different than us. The differences are so slight that the researchers suspect them to be functionally irrelevant. If more genomes could be compared, there might be no differences at all.  Changes in the biology of humans and our close caveman ancestors may be a result not of simple genetic changes, but of evolution in how humans use our genes, turning them on and off at different times and places. That type of evolution won't be easy to study by looking at a few ancient fossils. "There are a lot of aspects of differences between species that can't be solely obtained from DNA sequence," said University of Michigan genetic anthropologist Noah Rosenberg, who wasn't involved in the study. "But at the same time, the DNA sequence is a good place to start." Such studies will occupy scientists for years to come. In the meantime, the researchers produced a more immediately stirring result. They compared the Neanderthal genome to genomes of five people from China, France, Papua New Guinea, southern Africa and western Africa. Among non-Africans, between one and four percent of all DNA came from Neanderthals. On a functional level, the DNA was no different from our own, but bore telltale molecular marks of Neanderthal heritage. Many studies have posited a Neanderthal-human inbreeding. In 1999, researchers discovered a 25,000-year-old girl with mixed features. Population geneticists have found historical patterns of genetic influx so sudden that breeding with Neanderthals seems the most plausible explanation. But studies like those have not proved conclusive. For people of African descent disappointed that they lack Neanderthal ancestry, P¨¨bo gave solace. "It's totally possible that inside Africa, there was a contribution from other archaic humans that we don't know about," he said. "We shouldn't take these results as saying that only people outside Africa have caveman biology." [Images: 1. Neanderthal sculpture by John Gurche./ Photographed by Chip Clark, Smithsonian. 2) Neanderthal bone fragments./Max Planck Institute.] Regards, Bill Bonner
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| Posted: 10 May 2010 02:12 PM PDT --Yesterday was the day the world's capital markets turned into a giant fiat money casino. Consider yourself warned. You can trade your way to profits this in this market on the tide of easy money being printed now by the Federal Reserve and the European Central Bank. But the financial markets are now setting up for the mother of all collapses. --Up until yesterday, we've seen the end of the super cycle in fiat money as a process that could take years to unfold. The piecemeal nationalisation of certain industries...the assumption of private sector liabilities on the public sector balance sheet...the abrogation of contract in the form of defaulted mortgages that are not foreclosed on...and higher-and-higher public debt-to-GDP ratios were all signs that the government everywhere was sucking the life out of the economy to preserve the status quo, and turning dozens of firms and institutions into zombies with no real productive economic future. --But yesterday is a day that sent a bit of a chill down your editor's spine. And it's not because the €750 billion bailout package by the ECB caused a frisson here in St. Kilda. Granted, it did wonders everywhere else. The S&P 500 was up 4.4% in New York. Local stocks rallied. And most impressively, the spread between 10-year Greek debt and equivalent German bunds shrunk by a massive 570 basis points. --And if you're a speculator - and especially a high-yield bond hunter - why not get on the gravy train? If the ECB is going to print money to buy public and private sector debts to "ensure depth and liquidity" in certain markets, it's not a trend you want to fight. If the central banks are going to splurge on assets to support debt markets, bond yields will fall and asset prices will rise. For now. --But we reckon it is not for long. This really is Act V of the fiscal welfare state, in which monetary policy becomes the shameless handmaiden of fiscal policy in order to sustain an unsustainable kind of riskless society with massive benefits for everyone paid for by a few. That is an unaffordable illusion, the shattering of which leads to lower standards of living - a fact many in Europe find politically unacceptable (even if the fiscal facts speak for themselves). --To delay the day of reckoning, the ECB is offering European banks nearly unlimited amounts of cash for three and six month borrowing periods. You can imagine those banks - proud owners of heaps of sovereign debt from Greece, Spain, Italy, Ireland, and Portugal - are happy to sell that stuff to the ECB and borrow some short-term cash to lever up into an equity rebound. More privatised profits and socialised losses that favour the financial industry. --And why wouldn't you play that game if you were playing with other people's money? We'll get to WHOSE money in just a moment. --The immediate question you might have is, "Will this work?" It depends on what you mean by "work". By throwing wads of cash at stressed banks, the ECB alleviates the immediate threat in the market that bond yields spike and a liquidity crisis sets in. But enabling debt-laded countries to take on more debt hardly seems like a long term solution to the problem of living above your national means. --"You cannot make any nation that is unable to service its accumulated debts more creditworthy by extending more credit!" said Jeremy Batstone-Carr, analyst at Charles Stanley in today's Wall Street Journal. "If the EU lends Greece money, the loan will increase that country's public sector debt. The interest on the additional loan, whatever it eventually proves to be, will increase the public sector deficit. Total debt-servicing costs will rise, raising the burden on public sector cash flows. At some point in the future, the loan will have to be paid back." --EU policy makers hope that by extending more credit now to sovereign governments, bond investors will just, you know, back off! It's amazing to read how officials blame derivatives and a "wolf pack" of speculators for the crisis. As if it was the speculators who ran up huge debt-to-GDP ratios. As if the solution was to ban credit default swaps and remove the one market pricing mechanism which alerts investors to rising sovereign credit risk. --Incidentally, this is a minor trading point...but worth thinking about...who is on the other side of all the credit default swaps underwritten on European debt? Remember it was AIG that collected premia by writing default insurance against sub-prime mortgage backed securities and collateraised debt obligations. Goldman, among others, bought that insurance. --If you were a handy speculator right now, you'd find out who sold default insurance on Greek and Spanish debt. And then you might consider shorting the daylights out of them. --Of course maybe the ECB really has solved the problem by throwing a wall of fake money at it. But we reckon yesterday's action gives you fair warning about what's ahead and a bit of time to do something about it. A massive monetisation of debt and an increase in public sector liabilities has now been set in motion. The euro itself will soon, again, become a target of speculators once the next major tranche of sovereign debt must be rolled over and there's no one but the ECB there to buy it. --How long can Europe pay its bills and creditors with money that doesn't exist? --But the buried item in yesterday's news reveals that the U.S. dollar might be on the hook too. The Fed re-opened its swap lines with major banks around the world. This means the Fed will be expanding its balance sheet again...and sending a flood of dollars out into the world to shore up banks that need them. The Fed had closed the swap line with the ECB in February, when everything was just fine. --To the barricades, dollar standard! But this really could be a kind of lass stand for the dollar as the world's reserve currency. Unbeknownst to the American taxpayer, the Bernanke Fed has now thrown the dollar once more into the breach of a liquidity and solvency crisis. It may not survive. --That's what you should watch for, then: the expansion of the Fed's balance sheet. It will be hard to keep your eyes on that target with so many green numbers on so many shares and indices. The ECB has invited the entire financial world to speculate on the house. The ECB's monetisation - with the Fed's cash - is going to lead to a quick reflation of some markets; that's for sure. --The biggest inflation, though, could come in precious metals. In fact, as a hedge against the central bank monetisation strategy, precious metals are about the only sensible speculation in a market which has essentially been reduced to total speculation by the distortion of values from the flood of money. --Things that can't be printed by a central bank and aren't anybody else's obligation to pay might be the best investments for the rest of this year. And beyond? --The Welfare State has met its great funding crisis with a fraud. And the fraud is going to cost a lot of people a lot of money. If you're in markets now, be aware that markets no longer bear any relation to underlying risk or reality. It's never been more dangerous. And given the last few years, that's saying something. More tomorrow on when the U.S. debt shock may hit. Dan Denning
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