Gold World News Flash |
- Gold Rage – A Complete Guide to Fear, Loathing and ‘Hysterical Antagonism’ of Gold
- Are Precious Metals and Indexes Going Parabolic?
- Adam Michael: Exciting International Oil and Gas Opportunities
- The Mysterious Stagnation of M2 Money Supply
- Daily Dispatch: The End of the Gold Bull Market
- Two Vital Data Points, A Niche Market to Watch, Gold “Panic Buying” and More!
- Jim?s Mailbox
- In The News Today
- Hourly Action In Gold From Trader Dan
- The Easy Money Has Been Made Already
- Another Day... Another Record High Close for Gold
- It’s All Better Now
- Fiat Central Banks Down for the Count?.. Conservative Sham in Britain?
- LGMR: Gold Hits New Euro & GBP Highs as "Trend Following" Compounds Inflation & Defau
- The World According to Gold
- Dow Jones Versus Gold: The Fight For Real Value
- Trading Ideas for the Second Collapse and Reflation/Inflation Period
- Credit Suisse: Next Stop, S&P 1,270
- Doug Casey on The Return of the Crisis Creature
- Liquidity, Solvency and the Difference Between U.S. and Greece
- Insights From An Ex-Wall Street CEO
- Banks: It's All Political Now
- Greek Wildfire Engulfs the Euro in Flames, buoys Gold
- European Central Bank Now Playing a Very Weak Hand
- The Financial 'Bezzle' of the Western World Is Slowly Lifting
- "Junk" Silver
- Trading Week Outlook: May 16 - 21, 2010
- The Next Bubble?
- 5 Facts You Should Know About The Financial System
- Has Gold Become The Worlds New Reserve Currency?
- Gold Seeker Closing Report: Gold and Silver Fall About 1%
- Portugal's upcoming private debt problem
- Buy Japan
- Europe, Greece and a French Blonde
- The Problem of Knowledge
- As Of Today The Government Will Spend Borrowed Money
- Jay Taylor interviews Ron Paul on auditing the Fed
- Silver and Gold Price Rally is Intact, Merely Taking a Rest, Offering Y'all Bargain Prices
- Gold has bugs gasping, gloating -- but still bullish
- China Roundtable with Robert Horrocks and Vitaliy Katsenelson
- Volcker on the “Disintegration” of the Euro
- Gold ETFs try to lure Indians away from metal and into paper
- Hyperinflation or Hyperdeflation
- Futures charts; May 14th
| Gold Rage – A Complete Guide to Fear, Loathing and ‘Hysterical Antagonism’ of Gold Posted: 13 May 2010 07:28 PM PDT Stacy Summary: I've recently been noticing quite a bit of the gold rage Jesse refers to in this blog entry. The Alan Greenspan essay is definitely worth reading (or re-reading) and suggests 'intent' to his crimes against the markets, economy and the currency.
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| Are Precious Metals and Indexes Going Parabolic? Posted: 13 May 2010 07:07 PM PDT It’s been an exciting couple weeks in the market with gold now making new all time highs as money floods into this shiny safe haven. It has everyone all worked up wanting to take part or they are riding the rally up already. But the big question is when should some money be taken off the table to lock in gains and lower your overall risk during these crazy times? Below are a few charts showing you how I see things at this time. GLD – Gold Exchange Traded Fund The price of GLD and gold appear to be going parabolic (straight up). The tough part about this type of price action is that large moves can happen in a very short period of time. But on the flip side, when the price reverses we tend to see prices fall just as fast if not faster. Trading this type of price action carries a very high level of risk. Those chasing it up buying at these overbought market conditions is a double edge knife. SLV – Silver Exchange Traded Fund Silver is t...
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| Adam Michael: Exciting International Oil and Gas Opportunities Posted: 13 May 2010 07:07 PM PDT Source: Interviewed by Gordon Holmes, Publisher, The Energy Report 05/13/2010 Oil and gas analyst Adam Michael is excited—in some cases very excited—about a lot of things in his sector, including Turkish gas and Latin American oil plays. He even gets excited about long-term oil price fundamentals. Just don't ask him about the domestic oil and gas market. It's just so yesterday's cycle. The Energy Report: Adam, please give us a macro view of the energy market. Adam Michael: On a macro level, it's important to look at inventory levels, but more importantly I think it's just fundamental economics. What do the global industrial production numbers look like? Are we building business inventories? We had a huge drawdown in business inventories during the last recession and those inventories need to be replenished to feed the global expansion. As we build inventories and increase industrial production, demand for energy increases. It's really that simple. TER...
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| The Mysterious Stagnation of M2 Money Supply Posted: 13 May 2010 07:07 PM PDT I always make sure that I have taken all my pills before I look at the end-of-month money supply figures, which turned out to be a good idea, because M2 growth has been, as they say, quite anemic for the past several months. I think it's bad news, which seems paradoxical because I am always screaming my head off about how inflation in the money supply is a bad thing, because inflation in the money supply causes inflation in prices, which is The Thing To Be Feared (TTTBF) because that is going to destroy us, and yet here I am whining in Real Mogambo Terror (RMT) because the money supply is NOT increasing, thus apparently proving, as my wife says, that I "cannot be pleased." Perhaps you realize that this must be bad news because you, too, are dizzy from the unexpectedness of it all, as you would think the money supply would be going To The Freaking Moon (TTFM), what with Fed Credit still increasing at almost $20 billion a month, the national debt taking a monstrous leap of $184 billion...
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| Daily Dispatch: The End of the Gold Bull Market Posted: 13 May 2010 07:07 PM PDT May 13, 2010 | www.CaseyResearch.com The End of the Gold Bull Market Dear Reader, In communicating with a financial advisor friend of mine this morning, the topic of cash and gold stocks came up. Which got me thinking about a few things I’d like to share with you. To change things up a bit, I’ll interview… myself. Q. With gold and gold stocks on a tear, does Casey Research still recommend holding 1/3rd of a portfolio in cash? A. The answer depends, of course, on what country you are currently sitting in. Were I sitting in the eurozone, I would have already moved much of my safe harbor cash into the “resource” currencies such as Canada and Norway… i.e. countries that are rich in the natural resources that the world needs and will always need. If my derrière was resting in a seat planted on U.S. soil, as it is, and I didn’t plan on doing any significant overseas spending, then I would f...
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| Two Vital Data Points, A Niche Market to Watch, Gold “Panic Buying” and More! Posted: 13 May 2010 07:07 PM PDT The 5 min. Forecast May 13, 2010 11:38 AM by Addison Wiggin & Ian Mathias [LIST] [*] Two big numbers, and the connection few people see [*] Why Treasury’s April deficit figures are a big fat lie [*] “Panic buying” of gold in Europe, and the golden ATM in Arabia [*] The niche segment of the metals market that could be on the verge of a breakout [/LIST] Two big numbers made news yesterday as we approached the market close. No one, to our knowledge, made a connection between the two. But to us, the connection is screamingly obvious. And frankly, your financial future hinges on that connection. Here’s the first number: $82.7 billion. That’s the deficit the U.S. Treasury posted last month. That’s awful for April, which usually records a positive number, thanks to tax receipts flooding in around the 15th. Last year recorded a loss too. But that was only $21 billion. So this year, the bleeding is nearly four times as bad. For the recor...
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| Posted: 13 May 2010 07:07 PM PDT View the original post at jsmineset.com... May 13, 2010 08:35 AM Dear Jim, A sign of things to come, perhaps? David D Abu Dhabi hotel installs gold vending machine Thu May 13, 8:00 am ET ABU DHABI (AFP) – There’s no mistaking what’s in this vending machine. The well-heeled in the Gulf can now grab "gold to go" from a hotel lobby in the United Arab Emirates, when the need for a quick ingot strikes. On Thursday, a day after its inauguration, the shiny machine attracted spectators of many different nationalities who gathered to watch whenever an enthusiast was struck with the urge to splurge on a bar of the precious metal. Abu Dhabi’s Emirates Palace Hotel became the first place outside Germany to install "gold to go, the world’s first gold vending machine," said a statement from Ex Oriente Lux AG, the German company behind the vending machine. "In addition to one-gram, five-gram and 10-gram bars of gold, the machine also dispenses gold coins," it adde...
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| Posted: 13 May 2010 07:07 PM PDT View the original post at jsmineset.com... May 13, 2010 09:15 AM Jim Sinclair’s Commentary What OTC derivatives do not do to the investment bank, litigation will. Prosecutors Ask if 8 Banks Duped Rating Agencies By LOUISE STORY Published: May 12, 2010 The New York attorney general has started an investigation of eight banks to determine whether they provided misleading information to rating agencies in order to inflate the grades of certain mortgage securities, according to two people with knowledge of the investigation. The investigation parallels federal inquiries into the business practices of a broad range of financial companies in the years before the collapse of the housing market. Where those investigations have focused on interactions between the banks and their clients who bought mortgage securities, this one expands the scope of scrutiny to the interplay between banks and the agencies that rate their securities. The agencies themselves have been widely ...
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| Hourly Action In Gold From Trader Dan Posted: 13 May 2010 07:07 PM PDT View the original post at jsmineset.com... May 13, 2010 10:01 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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| The Easy Money Has Been Made Already Posted: 13 May 2010 07:07 PM PDT The following is automatically syndicated from Grandich's blog. You can view the original post here May 13, 2010 12:14 PM There’s two things you can count on from “Tokyo Rose”: [LIST] [*]Constantly wrong predictions [*]Cheap laughs [/LIST]Sorry, but I had to post this interview if for nothing more than his statement that the “easy money has been made already on gold.” That actually may end up true Tokyo but the other part not mentioned is you had no part in it. In fact, if one had listened to you, not only would they have not made easy money but would have not been a big buyer in the greatest run in the history of free trading gold. Now since I took up cyberspace to comment on the single best contrarian indicator in gold’s modern era, I think it’s only fair that I also mention these comments of his may sound familiar. I think you will find he said much the same at $1,100, $1,000 and below. I think by now we understand why he never has acce...
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| Another Day... Another Record High Close for Gold Posted: 13 May 2010 07:07 PM PDT Gold didn't do much in Far East trading during their Wednesday morning... with the low price of the day [around $1,228 spot] being set at 1:00 p.m. in Hong Kong's afternoon. and then didn't show much signs of life until after London opened for trading. Then the gold price tacked on about $12 to $1,242 spot before giving up eight dollars of that gain by 9:00 a.m. in New York. From that point, gold rallied to it's high of the day [$1,249.60 spot] around 2:30 p.m. in electronic trading, before getting sold off into the New York close at 5:15 p.m. Eastern. But, when the smoke cleared, it was another record high close for gold. Silver declined slowly in Far East trading.... and reached its nadir shortly before London opened for the day. From there, silver rose above $19.50... and stayed there for most of the day, with the high of the day [$19.74 spot] coming in New York trading at precisely 10:30 a.m. Eastern time. From that point, silver fell traded sideways until...
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| Posted: 13 May 2010 07:07 PM PDT By Neil Charnock goldoz.com.au Introduction Gold reached US$1248.20 which was a new record high in USD. Silver has also followed gold up, this rally looks like the real thing. I have to stand corrected here as I was off the mark a little in some recent statements. I forecast US$1180 as an interim top and it only reached $1170 before pulling back to the $1140 level. I had also thought we would have pulled back for longer and that this rally would be a false break out. So much for short term forecasting it is extremely difficult. This short term forecast turned out wrong thanks to one trillion more reasons potentially circulating in Europe. The European rescue package is not a done deal as there are all kinds of caveats to clear first. Markets have appeared unconvinced this will either happen or actually help at all in the longer term. Economic rules that control inflation are out the window and confidence in the Euro is hitting very low levels providing a p...
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| Fiat Central Banks Down for the Count?.. Conservative Sham in Britain? Posted: 13 May 2010 07:07 PM PDT Fiat Central Banks Down for the Count? Thursday, May 13, 2010 – by Staff Report Central banks are losing credibility ... Whether or not one believes that the €750bn European rescue plan will stabilise financial markets, its consequences for Europe's economies are surely negative. Indeed, while many cheered the initial rebound in equity markets, the reactions in currency markets on the first trading day after the announcement were a harbinger of these negative consequences: the initial gains of the euro were erased by the end of the trading session. Of course, the bail-out for holders of Greek government debt – and now possibly Spanish and Portuguese government debt – raises familiar problems of moral hazard that will increase risk-taking and encourage irresponsible government policy in the future. The loans and loan guarantees from other countries in Europe do not deal with the simple fact that the Greek government cannot service its de...
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| Posted: 13 May 2010 07:07 PM PDT London Gold Market Report from Adrian Ash BullionVault 09:55 ET, Thurs 13 May Gold Hits New Euro & GBP Highs as "Trend Following" Compounds Inflation & Default Fears THE PRICE OF GOLD in terms of Euros and Sterling rose to new record highs Thursday morning in London, trading $5 below yesterday's all-time Dollar high as commodities fell and government bond prices rose. A 2% surge in Asian stocks faded in European dealing. The Athens stock market retreated 1% by mid-afternoon. "Unless the government of a major economy actually defaults, or the Dollar collapses, we expect gold to drop back to $1000 by the end of 2010," reckons Julian Jessop, chief international economist at Capital Economics, writing in today's Financial Times. But "It's not just sovereign default that bond investors fear," argues Steven Barrow, chief currency strategist at Standard Bank. "Resurgent inflation is also a worry. There may be some very early signs that these concerns could be ...
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| Posted: 13 May 2010 07:07 PM PDT By James West MidasLetter.com Thursday, May 13, 2010 Whenever gold touches a new record price, goldbugs leap up and down and slap each other heartily on the back in a self-congratulatory ritual that is becoming as predictable as the 4 seasons. They are right, and they know it. For all the troughs in the chart since 2000, any tenacious golden insect who held on through trial and tribulation has only seen his fortune grow. Naysayers have gone silent, for the most part, but for that implacable breed who can still claim a flat earth when all the evidence is in supporting a round planet. Gold is speaking to us, in its gleaming, grinning, golden silence, from its distant historical perch in the affairs of commerce among humans. Its telling us what fools we are to believe in the fiat paper issued by governments. Its telling us that many G7 governments are either in cahoots with or the unwitting foils of the elite banking set who pilfer the pockets of citizens (while padding the ...
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| Dow Jones Versus Gold: The Fight For Real Value Posted: 13 May 2010 06:40 PM PDT Dear Friends, I thought it might be a good time for an examination of the Dow Jones Industrials over the last ten+ years in comparison to gold given the fact that the stock market has seemingly recovered all of its losses incurred since last week's 1000 point intraday plunge. While it may give the financial press something to cheer about, the sad truth that is lost on a good portion of the investing public is that the gains in the Dow are ephemeral at best; illusory is a more apt description. Over the last decade the Dow has made an all time high in 2007. Sounds good but upon closer examination we can see that when compared to gold, a store of value, that same year it had already lost half of its value in REAL terms since 1999. The current ratio is closer to 8.7, a loss of 60% or so within the last three years alone. The peak reached eleven years ago was nearly 45. That totals a staggering loss in REAL TERMS of 80% in eleven years.. Another way of saying this is that a rising gold price is basically the same thing as a loss of purchasing power in the currency in which gold is priced. Gold is not so much rising as the Dollar is losing value. For that matter, nearly all of the fiat world currencies are losing value against gold. What this means is that while investors may be cheering the fact that the Dow is going higher (or it was until last week), those gains are not compensating them for the debauchery of the native currency. In REAL TERMS, stock market gains over the last decade, when compared to gold, have been as enduring as the morning mist. This is why gold will never lose its allure. It truly is a store of value during times of economic and political uncertainty. Europe in particular is rediscovering this truth and it will be just a matter of time before the larger investing public here in the US does also. Click chart to enlarge in PDF format
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| Trading Ideas for the Second Collapse and Reflation/Inflation Period Posted: 13 May 2010 06:31 PM PDT Vega submits: Fundamentals are weak The "smart money" managers that I talk to (whom I can't name but are large HF managers), are bearish on any security that isn't super-senior (mortgages with large cushions, DIP loans, etc.) and on cyclical industries. Ordinary people can't buy these easily. Also, economic fundamentals are very weak in Europe, as the PIIGS' GDP will contract this year and next, unemployment will go to protest levels, and greater socialist policies (wealth transfers, taxes, regulations) will pick up. Complete Story »
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| Credit Suisse: Next Stop, S&P 1,270 Posted: 13 May 2010 06:22 PM PDT The Pragmatic Capitalist submits: Credit Suisse (CS) joins the group of banks that believe the recent downturn will be a good longer-term buying opportunity (see MS outlook here and GS outlook here). They believe the recent sovereign debt news is being overblown and attribute their bullish stance to 4 factors:
All of this shows that the ECB, EU, and IMF are serious about tackling these problems. It also shows that they can coordinate a plan and act quickly when needed. Finally, and most importantly, it shows that policymakers have learned the lessons of Lehman and cannot allow such a catastrophic failure to occur again (or so they assume). All of this leaves them very bullish on the markets into year-end. They believe the S&P could rally 10% from here: Complete Story »
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| Doug Casey on The Return of the Crisis Creature Posted: 13 May 2010 06:09 PM PDT Doug, on March 3, you and I spoke about how to profit from the coming collapse of the euro. Prior to that, we talked about a major market correction on the way this year. Just last week, we saw a major confidence crisis hit the eurozone and the Dow drop 1,000 points in one day's intra-day trading. It looks to me like the beginning of a sequel to the film we saw in 2008: Return of the Crisis Creature. How do you see the latest market developments?
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| Liquidity, Solvency and the Difference Between U.S. and Greece Posted: 13 May 2010 06:04 PM PDT Edward Harrison submits: When bankruptcy comes, it does so normally as a result of a liquidity crisis. This is true for countries as much as it is for companies. It’s not as if someone in charge walks in one day and says "you are insolvent so you must default immediately." That is what happens in the case of banks seized by the regulator. In other cases of insolvency, creditors become spooked about longer-term insolvency. At first, they demand a higher return for their loans. Eventually, they pull in their horns altogether. Liquidity dries up and the company or country is unable to roll over its debt requirements. It literally runs out of money. Complete Story »
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| Insights From An Ex-Wall Street CEO Posted: 13 May 2010 05:48 PM PDT
Submitted by a reader. I am Ex CEO of mid sized Wall Street Firm. Known for equity research; reasonably good trading; acceptable Investment Banking. Now retired Executed 1st program trade that I am aware of. Manually handled blocks of stock vs options on the XMI for expiration October of 1983. Can read the tape as well as most. I cannot come up with any explanation for market activity for last 15 months other than treasury intervention. Probability of other explanation is nonexistent. But if that is the case…and I was Tim, how would I work it…starting in March 09. 4) Not on paper, but at the coffee house, I would discuss how I generally would support a steady underlying bid to keep sell-offs limited. To use quieter times to make the push (as ZH points out…rainy days and Mondays never get them down). Even if they ever got audited; they had a winning trade. And even better, they could make some losing trades and still be ahead of the game. After all, no side pockets needed. No outside investor. No redemption provision at all. So now we get cute…. We actually take the market up on light volume…especially since we have VIX low and complacency rampant. Now I can even sell some volume at an intraday loss. I am still way ahead of the game…. And I replenish my capital to keep the support up. It’s a inside Ponzi game and I am using my winnings to keep it going. I do not think this plan leaked, because if it did, they would have run in front of me in such a major way; but the tape stayed steady, steady. But they did appreciate how much help we were for C and friends and they kept their stocks in safe zones. The only leak was in a soft way to CNBC by telling them we had their back if they had ours. And I don’t think they realize the extent to which we appreciated the “benefits” of our friends. But now it is a drug. And we have drug money to keep it going. And we know how the process works. Se we get O to call Angela and say; this drug puts the wind at your back. You have the shorts just where we did – and with that start, you too will soon have a positive trading account that you can lever up. OPM leveraged up. We ended up selling when we should have been buying and we are now in the negative column (speculation on authors part). Stay the course. Trichet to the rescue. Only one mistake. Currency markets just a might bit bigger than equity markets. And one can support the equity markets all day long with enough money but if you take the carry support away…… And so I think the hangover effect will set in and Uncle Ben will say to Timmy….that was a terrific and successful experiment. But I don’t have more TARP money to double your equity bet. You can keep your bet on until I get forced to sell some mortgages….but enough of adding. Let Trichet carry some water for awhile Author again… so that’s how I explain light volume during the day, followed by sharp volume bursts down. Not the algo’s….but rather Timmy. And its like he gives them a dollar amount to raise…and then walks away. Who knows…it could have even been Timmy who set the Thursday action into motion, but for the first time he did it simultaneously with other large sellers worried about intl markets. We have met the enemy and he is us.
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| Posted: 13 May 2010 05:40 PM PDT David Goldman submits: Now that the state and the banks have merged in a corporatist alliance, all market news is political news. The market got clobbered yesterday on news that New York State would investigate banks for rigging credit ratings on mortgage-backed securities by providing bad information to the ratings agencies. In my experience, the banks and the ratings agencies had a common purposes, which was to make money. The ratings agencies would advise the banks on how to tweak the portfolios behind Collateralized Debt Obligations so as to squeeze out more incomes. It wasn’t simply a matter of the banks hiring ratings agency experts and gaming the models for their own benefit; the ratings agencies themselves were making most of their money from the CDO market, and volunteered their time and advice to help the banks issue more. These issues come up because the banks and governments are partners in the attempt to reflate the world economy through deficits comprising a double-digit proportion of GDP in most of the major economies. The banks finance the governments, with money that they borrow from the governments. That’s why many banks showed a profit during every single trading day of the first quarter: with a steep yield curve and nearly zero-cost funding, you have to go out of your way to lose money. Complete Story »
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| Greek Wildfire Engulfs the Euro in Flames, buoys Gold Posted: 13 May 2010 05:39 PM PDT
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| European Central Bank Now Playing a Very Weak Hand Posted: 13 May 2010 05:35 PM PDT Bruce Krasting submits: I have always watched the Swiss Franc. To me it is the “pure play” measuring system for how the Euro is fairing. The following long and short-term charts (click on each to enlarge) tell the story. We closed at the low yesterday. We’re just a few bips away from a new big figure on Euro/CHF.   The following is a chart (click to enlarge) derived from CIA information on External Debt. These are just the liabilities. There are assets on the other side of this ledger in many cases. I put a check next to the big Euro’s. $16 trillion between France, Germany, Netherlands, Italy and Spain. I exclude Ireland, Belgium and Luxemburg because these liabilities are tied to assets. Complete Story »
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| The Financial 'Bezzle' of the Western World Is Slowly Lifting Posted: 13 May 2010 05:34 PM PDT Vega submits: Protests in San Francisco Protests in the Western World Complete Story »
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| Posted: 13 May 2010 05:27 PM PDT Good basic info on "junk" silver coins - a great way to collect silver. http://www.2-clicks-coins.com/articl...ver-coins.html
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| Trading Week Outlook: May 16 - 21, 2010 Posted: 13 May 2010 05:27 PM PDT All Things Forex submits: Inflation and economic growth will be the main themes of the week ahead scheduled to bring a series of Consumer Price Index and Gross Domestic Product reports from major industrialized nations around the globe. Complete Story »
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| Posted: 13 May 2010 05:20 PM PDT Initial Claims (444k yesterday and upwardly-revised to 448k last week) continues to creep down, but seems very reticent to press below 440k or so. Considering the strong Employment data we digested less than one week ago, and the breathless analysis we saw of those figures, it qualifies as a disappointment the longer ‘Claims remain this high. As I pointed out last week, though, it is Payrolls that is the outlier: all other useful indicators of employment show improvement, but very slow improvement. The bond market was reasonably stable for a bond auction day, and ended near unchanged. TYM0 was +2/32nds, with the new 10y note at 3.55%. Stocks weakened, partly because the Wall Street witch hunt is gathering steam (oddly, Bernanke weighed in on the side of keeping banks together with their swaps trading units, which this author has advocated, but the main news yesterday concerned the widening probe into the influence Wall Street firms had on the ratings of mortgage bond deals). Another part of the equity weakness was, I think, because the euphoric bounce on the European bailout package was not followed up with any post-euphoric follow-through. Most opaquely, but perhaps most importantly, yesterday’s wobbling of stocks may also be partly due to the slowly-dawning realization that the bailout package is less than meets the eye. The ECB has reportedly already slackened purchases of government bonds after an initial show of strength, but both the shock and the awe seem to be fading pretty rapidly…and it hardly bears noting that another weekend is approaching. Stocks ended the day down 1.2%.. Complete Story »
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| 5 Facts You Should Know About The Financial System Posted: 13 May 2010 05:20 PM PDT Let's connect the dots on the ENTIRE financial system right now. Fact #1: Banks are Insolvent. The only reason they're still in business is because they are permitted to value their balance sheet at whatever price they choose. I could privately value my car at $500 TRILLION, but that doesn't mean I'll get that price for it when it comes time to sell. Ditto for the banks and their garbage saturated balance sheets. Fact #2: Countries are Insolvent Europe, a union of broke countries, recently announced it is bailing itself out. This is a bit like your bankrupt friend announcing he is gifting himself $1 million: it DOESN'T SOLVE ANYTHING. As I've stated time and again, you CANNOT solve a debt problem by issuing more debt. Fact #3: Wall Street is Crooked Anyone who even wants to debate this can look at Goldman Sachs' latest trading results: Goldie made money EVERY SINGLE DAY of last quarter. As if that wasn't statistically impossible enough, the firm pulled in $100 million+ on 35 out of 63 days. This simply cannot be done ethically. The only way your trading is that good is because you're cheating (front-running your clients or manipulating the market). Fact #4: The Central Bankers Cannot "SAVE" Anything The world's central bankers are clueless about fixing the debt problems (see Europe). If a private business employed the same tactics as Ben Bernanke and pals, it would be bankrupt. Leaving a paperweight on the "print" button is not a policy. Neither is buying garbage debt (something of NO value) at 100 cents on the dollar. Indeed, there's a word for someone willing to the latter action; it's "sucker." Fact #5: The Stock Market is Controlled by Computers The stock market has rallied courtesy of outright manipulation and fraud. Bailout Ben's money didn't go to Mom and Pop America, it went to Wall Street where they gunned the stock market higher on next to no volume using algorithmic computer programs to front-run their clients (see Goldman above). So markets today are not moving based on real investors, they are moving based on computers that trade back and forth in nanoseconds if not faster. These programs were created to reap a ¼ penny profit for each transaction the make (a policy the NYSE created to induce investors to continue trading and provide "liquidity"). However, as last Wednesday showed, when things start to get ugly all these "liquidity providers" seem to vanish in a hurry. More Here..
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| Has Gold Become The Worlds New Reserve Currency? Posted: 13 May 2010 04:09 PM PDT http://www.marketoracle.co.uk/Article19455.html Michael Snyder Economic Collapse Pravda.ru Quote: For decades, the U.S. dollar has been the reserve currency of the world. This has given the United States an extraordinary amount of economic power, but as the U.S. economy has started to come apart over the past decade, other nations have increasingly sought to move away from the U.S. dollar and find other alternatives. For a long time it was thought that the Euro would become the next great reserve currency of the world. However, the recent Greek debt crisis, along with massive financial instability in nations such as Portugal, Spain and Italy, has caused investors to rapidly lose confidence in the Euro. In fact there are even some whispers that the Euro may not even survive the sovereign debt crisis as it sweeps across Europe. With both the U.S. dollar and the Euro looking shaky, investors have been searching somewhere safe to put their money. Increasingly, they have been turning to gold. So has gold now become a new reserve currency? Will all of this new demand drive the price of gold into unprecedented territory? Well, the truth is that as long as paper currencies around the world continue to show instability, gold will continue to be a preferred choice. Nations all over the world are looking for ways to diversify their very large foreign exchange reserves. For example, China now has approximately $2 trillion in foreign exchange reserves, and has been wanting to reduce its position in U.S. dollars for quite some time now. But where should they put their money? The Euro is coming apart like a 20 dollar suit. There is a very real fear that Greece is only the first domino to fall and that soon nations like Italy, Spain and Portugal will be begging the IMF for assistance as the sovereign debt crisis sweeps across Europe. Well, what about the British pound? The truth is that the pound is not very appealing right now because the U.K. is facing a massive government debt crisis as well. In fact, Bank of England governor Mervyn King recently warned that public anger over the "austerity measures" that soon must be implemented in the U.K. will be so intense that whatever party wins this election will be out of power for a generation. Well, how about the Japanese yen? Ironically, there has been a move towards the Japanese yen in recent days, but the truth is that the Japanese debt situation is one of the worst in the world. Japan's gross public debt has reached 201 percent of GDP and Japan's battle with deflation dragged into its 13th straight month in March. No, the yen is not safe at all. So does that bring us back to the U.S. dollar? No. There is a reason why nations all over the world have been wanting to get out of the U.S. dollar. The United States has piled up the biggest mountain of debt in the history of the world, and even official U.S. government reports admit that the U.S. government is on a financial path that is not even close to sustainable. The U.S. economy is caught in a death spiral, and that makes the U.S. dollar very unsafe. So, what is safe at this point? Well, gold is. The price of gold rose to $1,210 an ounce on Friday. The terms "flight to quality" and "safe haven" are increasingly being used for the precious metal as investors flee all of the major global paper currencies. Just consider some of the recent comments about gold by financial experts that have shown up in the news.... Stephen Platt, a commodity analyst at Archer Financial Services Inc. in Chicago: "The sovereign-debt panic is spreading and forcing a flight to quality into gold." Citigroup analyst David Thurtell: "Gold is now enjoying safe haven status, partly because bonds, particularly peripheral euro zone government and bank paper, is no longer a safe haven." Dennis Gartman, an economist and the editor of the Suffolk, Virginia-based Gartman Letter: "There is a clear flight into quality to the gold market as frightened capital seeks a haven of any sort while confusion reigns." So will this move towards gold continue? Sure. Although anyone who follows the gold market knows that big financial institutions regularly work to suppress the price of gold. In fact, one industry insider recently decided to be a whistleblower and came forward with "smoking gun" evidence of price manipulation in the precious metals markets, but the CFTC didn't do a thing about it. Fortunately, the overwhelming demand for gold is now pushing the price up despite efforts to suppress it. In addition, once it becomes apparent that most of the "gold" that is traded in the world is not backed by the actual metal itself, the price of gold will go even higher. For years, almost everyone has assumed that the London Bullion Market Association (LBMA), the world's largest gold market, had actual gold to back up the massive "gold deposits" at the major LBMA banks. But that is just not the case. People are now starting to realize that there is very little actual gold in the LBMA system. When most people think they are buying "gold", what they are actually buying are just pieces of paper that say they own gold. Egon von Greyerz of Matterhorn Asset Management in Switzerland recently elaborated on this point. He says that "a lot of people who have studied it closely are convinced that there is a major shortage in physical gold at LBMA. LBMA trades around 700 tons net of gold daily. That is 25% of world annual production and around $6 trillion annually. To back that amount of trading on a 100% reserve ratio basis, it would need several year's production of physical gold, which they definitively haven't got." So what is going to happen when investors start demanding physical delivery of the gold that they purchase? It is going to create a huge mess. Needless to say, if you are investing in gold make sure that you take physical delivery of the gold. As the paper currenices all over the globe continue to unravel (as all debt-based paper currencies always do), all precious metals, including gold, will be increasingly in demand. In fact, the idea of gold being a "reserve currency" is not anything new. Gold has been a "reserve currency" for thousands of years, and those who understand history know that it will always remain one.
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| Gold Seeker Closing Report: Gold and Silver Fall About 1% Posted: 13 May 2010 04:00 PM PDT Gold fell almost 1% in London before it climbed back higher in morning New York trade and saw a 13 cent gain at $1242.83 by about 11:30AM EST, but it then fell back off in the last couple of hours of trade and ended near its session low of $1227.35 with a loss of 1.1%. Silver rose almost 1% to as high as $19.806 before it also fell back off in late trade and ended with a loss of 1.02%.
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| Portugal's upcoming private debt problem Posted: 13 May 2010 03:50 PM PDT
Portuguese National Statistics Institute reported yesterday that the average debt-to-equity percentage of Portuguese companies has reached a staggering 140%. In the economy which is now perceived as the next problem within EMU, such high average percentage of enterprise debt will not only have a big impact on Portuguese economy, but also on EMU in general. One does not need to be reminded that Greece has succumbed to external help mechanisms in coping with its debt, which was only higher by 1000 bps than the debt held by Portuguese companies. Furthermore the markets view on corporate vs sovereign debt does not favor Portugal's optimistic long term view considering economic growth. Although Portuguese NSI reported that the GDP has increased by 1.7% in the last quarter one needs only to take a closer look into main contributors of said growth. Most of the growth was achieved by government spending, and private contribution continues to fall in the overall GDP. Credit Derivatives market reflected its positive attitude towards EMU, and Portuguese companies have, therefore, been the largest beneficiaries of CDS market tightening. Four out of five highest daily tighteners were Portuguese companies with Hellenic Telecom Org SA completing the circle. For more graphic representation consult with the table below.
Markets have, obviously, positively reponded to monetary and fiscal measures and that is reflected in the following credit derivative indexes which have all tightened today. The following table shows the general attitude towards EMU the best:
Also what is interesting is observing that T/W ration is above 90:1. Although EU GDP rose above analyst estimates and came at 0.2% the trend of such credit tightening is unsustainable on the long term. Per Diario del Noticias:
All this measures will have an impact on both public consumption, private debt service, availability of long term borrowing, debt servicing costs, debt insurance cost and overall growth. As mentioned before, private debt is unsustainable as it is, and this measures, while obviously ineffective even from a theoretical point of view, will only push the country further into austerity spiral and since EMU-EU countries move in a synchronized manner we can expect more development concerning EMU-EU zone in the future. It is not hard to see the direct implications of rising taxes combined with austerity measures. Portuguese companies will weaken in the following months and a larger percentage of cash flows will flow towards debt service and debt insurance service. Enterprise spending will evaporate due to increase in income taxation and unavailability of access to long term credit facilities. Contagion in the private credit derivatives markets will spill over to sovereign debt insurance and with increasing yields + large future bond redemptions, which total 3 trillion EUR for EMU countries in the next three years, ECB and members of the monetary union will need to take steps similar to those which were taken on Sunday when the 1 trillion back up plan was announced. My belief is that monetization of debt in the secondary market will need to increase if these scenarios play out; and to artificially strengthen the EUR, I am afraid, EMU will decide to either cut lose some of EMU members from the monetary union to strengthen up the join currency or enforce pegs with non EMU countries. With utilization of future swap facilities the move should translate into a stronger EUR in the short term, but long term perspective remain bleak and uncertain at best. It is unclear how will measures of austerity and taxation translate into a sustainable economic environment. Due to my long term bleak prospect regarding both the EUR and the USD I recommend hedging a prospect of a devalued currency with gold and other stores of wealth which have proved to have the highest growth over a longer period of time, above all other assets classes and currencies; which this chart demonstrates perfectly:
If you want to monitor the situation daily I recommend following key indicators such as LIBOR, EURIBOR, LIBOR/EURIBOR spread, Markit iTraxx Europe, Markit iTraxx Euro Senior Financials, as well as, private credit derivatives market and sovereign credit derivatives market. That should give you insight into future macroeconomic developments better than following daily equity charts.
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| Posted: 13 May 2010 03:40 PM PDT When we revealed our new Trade of the Decade in The Daily Reckoning earlier this year, the reaction we got from a lot of readers could be summed up in one word: "Huh?" Almost no one quarreled with the first part of our trade, "Sell US Treasurys." But almost no one agreed with the second half, "Buy Japanese stocks." From a contrarian standpoint, this negative reaction toward Japanese stocks warmed our hearts. Where has been the worst place to park your money for the last 20 years? What investment is so dull, so currently irrelevant, people don't even talk about it anymore? The answer: Japanese stocks. In the early '80s Japan Inc. was the marvel of the world. The Japanese had their technology, their management style, their strict adherence to national ethic and focused, organized capitalism. The stars seemed aligned for Japan. And they stayed that way for the decade. The Nikkei 225 Index rose from 6,500 to nearly 40,000. Ivy league MBA programs were teaching a whole new set of buzzwords in Japanese, like "kaizen," the concept of ongoing improvement. Americans even started to eat raw fish. Throughout the '80s, the Japanese bubble was inflated largely by credit, much like the US a few decades later. Stocks, bonds, real estate, art - even golf courses - became so desired that investors began borrowing money to have them. Soon enough, most Japanese had to borrow to afford a stake in Japan Inc. When these asset classes, by sheer force of nature, began to correct, losses were exacerbated by countless loans going bad. Leverage, as the US would also learn later, works in both directions. In the last days of 1989, the music stopped. The bubble went bust...and Japanese stocks tumbled into one of the most severe and enduring bear markets in modern finance.  The Nikkei fell as much as 80% from peak to trough and is still down more than 70% from its 1989 high! Sure, there were five sucker rallies along the way. They ranged from as little as 34% to as much as 136%. Each one lured spectators back into the water. And each one whisked most of them back out to sea. Eerily like the US today, Japan sought to cure this problem with easy money. Interest rates were slashed to zero to bring the economy and the stock market back to "the good ol' days." Japanese banks were pumped full of public funds to keep them afloat, but saddled with so much regulation they were labeled "zombies" of the industry, unable to thrive in any market condition. Because they were not forced to recognize and write off their bad debts, Japanese "zombie" banks have been reluctant to lend to anyone, especially to risky borrowers like new businesses. The same Japanese who were the smartest, most innovative culture in the 1980s were often perceived as incompetents in the 1990s - incapable of adapting to change and repairing their damaged economy. To make matters worse, Japan had the oldest population in the world, with one in five citizens over 65...not the best foot soldiers for the battle against recession. But today, you can buy Japan Inc. for almost the same price as when the whole mess first began - but that same price includes 30 years of innovation and (some) GDP growth. There are currently 200 companies on the Tokyo stock exchange selling for less than the cash held on their books, but hardly anyone is writing about it. "Nobody is interested in Japan," says Dr. Marc Faber. "All the funds have withdrawn money from Japan; they have given up on Japan." Corruption and crime is low. War seems unlikely. Incomes and employment have stabilized and the Japanese have returned to their thrifty, saving-oriented ways. Japan has a new government too, one that's promised to reduce spending and bureaucracy. Japanese government debt is very high, approaching 200% of Japan's GDP. The interest rate on this debt cannot go up from its very low levels, or it might suffocate the economy. So the alternative would feature some form of money-printing like "quantitative easing" - i.e. buying government bonds with newly printed yen. The Japanese government knows it is facing a tougher funding environment over the next decade. Many savers - the traditional buyers of Japanese government debt - will become spenders in retirement. That means these traditional buyers of government bonds will become sellers. Japan may need to attract international capital to keep refinancing its government debt. If its currency weakens over the next few years, by the middle of the decade, international investors will be more enticed to buy yen and yen-denominated government bonds. When the currency of a manufacturer's home country weakens, and it is selling products into markets with stronger currencies, the effect on profit margins can be dramatically positive. So world-class, export- oriented manufacturing companies based in Japan could lead Japanese stocks higher. Could things in Japan get worse yet? Maybe over the next couple of years... but they've been beaten down for so long, it's hard to imagine much worse. Many investors have given up hope, which has pushed valuations to low levels. We'd rather bet on Japanese stocks over the next decade than against them. All the same, we're not going to put our eggs in one basket. That's why we have two fund recommendations to take advantage of the world's most- hated asset class. First is the iShares MSCI Japan Index Fund (NYSE:EWJ). It mirrors the performance of the MSCI Japan Index, a very broad swath of Japan's largest companies. And it gives you a good shot at outperforming the benchmark Nikkei 225 Index. On both a one-year and a five-year basis, EWJ has beaten the Nikkei. But don't limit yourself to the blue chips. In almost every market turnaround, small-cap companies lead the way. So pick up the Fidelity Japan Smaller Companies Fund (FJSCX) as a supplement. This fund outperformed the MSCI Japan Index during the post-rebound in 2009. And it might do so again when Japan really starts to rebuild. Plus, you'll gain exposure to many companies in this fund that you won't find in EWJ. Remember, this is the Trade of the Decade. Not the Trade of the Week. Buying gold in early 2000 at $300 didn't look like a very smart move in the summer of 2001, when it was $260. Patience counts. Addison Wiggin
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| Europe, Greece and a French Blonde Posted: 13 May 2010 03:32 PM PDT A very short message today.... We're hosting our first Family Office Partner's Reunion... The family office is just a different way of holding and organizing wealth. In fact, it's a different way of thinking about money. Instead of making money to enjoy yourself, you enjoy the idea that the rest of the family will be able to enjoy it. And if you do it right, maybe several generations will enjoy it. Do you have to be rich? Well, it helps. But the answer is no. It's just a different way of looking at it... You have to have some money that you don't intend to spend yourself, of course. Then, you draw the family into the project of increasing it...managing it...and using it. The amount probably matters less than the idea itself. Even with $10,000, you could go to your children and say: "Here...this will be the cornerstone of the family wealth. Let's manage it together. Maybe by the time your children are your age, it will be a much more important legacy." Then again, maybe they'll just buy a sports car. Can you still buy a sports car for $10,000? We bought our first real automobile for $78. It was a '37 Plymouth. Beautiful car. All original. And it ran well...for a while. We were only 16. We didn't have a driver's license yet, but we were getting ready. Then, the first real, roadworthy automobile we bought - at 17 years old - was a '61 MGA. Remember those? A little British sports car. A two- seater. What fun we had with that! We would play hooky from school, for example, and drive down to Chesapeake Beach. Or, we drove into Washington, DC, where we claimed to be over the legal drinking age and nobody asked any questions anyway. Or, sometimes we just drove around with the top down. Back in those days there was very little traffic on the roads of Southern Maryland. You could drive where you wanted. Then, you could stop by the side of the road and explore the woods...or drive to some empty beach along the Chesapeake... What a great time it was to be young, white, and pretend to be over 21! Maybe it was a great time to be young and black, too. We don't know. One of our friends at the time was a black girl named Ruby. Segregation had ended just a few years before. Blacks and whites did not mix socially. But we'd put the top down on the car and drive around together. There wasn't anywhere to go, really. And nothing much to do. But on a nice day, it was a delight just to be out and about in the little red sports car. People would stare and shake their heads... A white boy with a black girl? It just didn't seem right! Whatever happened to Ruby? We don't know... Maybe she'll read this and we'll hear from her. Why are we reminiscing? Well, that little sports car only cost us $200. Too bad we didn't put it in a barn somewhere and hold onto it. Today, it would be worth thousands. You can't buy an MGA for $200 dollars today, partly because they are collectors' items and partly because the dollar ain't what it used to be. Why ain't the dollar what it used to be? Don't ask silly questions. You know perfectly well. Because it's just paper. And in The Wall Street Journal yesterday was the harbinger of something big. A guest editorial suggested that the US return to the gold standard! The stock market went up 148 points yesterday. Gold went up even more - $22. Stocks have gone nowhere in the last 11 years. Gold is at an all- time high. And now gold goes up on 'good' news and on 'bad' news. Inflation? Gold goes up. Deflation? Gold goes up. When stocks go up...gold goes up more. When stocks go down, gold goes up anyway. Why? The gold market is anticipating a blow-up in the world's monetary system. We see it coming too. We've already seen what happens when a small country runs up too much debt. Investors get worried. Interest rates rise. The country can no longer borrow to cover its deficits...or to pay its past loans. Disaster. But the Greek situation is not very different from the situation in dozens of other countries - including Portugal, Spain, Italy, Britain and the USA. America is unique...and just the same. It is already so deep in debt that even if you taxed 100% of Americans' income, the resulting take wouldn't be enough to cover the deficit (people would earn less). And if you cut the Pentagon budget by 100%...you'd still have a deficit too. It would take a remarkable act of political courage and discipline to put the US back on the path towards sound public finances. Do you see that happening? We don't. Instead, what we see are more deficits - from here to kingdom come. Already, the US national debt (to say nothing about the unfunded liabilities and future debts already in the pipeline) is approaching 100% of GDP. (Greece is at 120% of GDP...soon to be 150%). At 100% of GDP, the economy must grow at least at the same rate as the interest charge on the debt - or the debt will get larger and larger. In other words, if you paid 5% on the debt...and the rate of GDP growth were 5%...then, if you devoted all the additional growth to paying the interest on the debt, you'd stay in the same place! The last measure of growth in the US was 3.2%...probably declining. (We'll set aside the important question as to whether this growth is real or fiction.) But long-term borrowing costs for the feds are headed to 5%. And as investors lose confidence in America's ability to pay...or its willingness (or ability) to keep the dollar from falling in value...the carrying cost on debt grows. It is probably too late already. We are probably past the point of no return, as economists Rogoff and Reinhart insist. In our view, the US could still save itself IF it could make an extraordinary commitment to budget cutting. But we won't hold our breath. Instead, we'll buy more gold. And more thoughts... In a bar in Paris... A woman, blond hair, well-shaped, came in. Tanned and confident. She took a chair at the bar and ordered a coffee. It was 9AM. Your editor was sitting at a table writing his Daily Reckoning. Men in blue coveralls stood at the bar drinking their morning coffee. A couple of businessmen sat at a nearby table. When the woman entered the bar, everyone noticed. Not that there is any shortage of beautiful women in Paris. But no one wants to miss an opportunity to look at one. The woman enjoyed the attention. There was a slight smile on her face as she sipped her coffee and read a newspaper. A man in blue jeans, about 45, with graying hair and a George Clooney look about him, entered the bar. He stood near the woman and ordered a coffee. At first, he did not seem to notice her. He looked calm. At ease. Then, when he noticed the woman drinking coffee beside him, his left foot rose so that the toes tapped the floor. He glanced at her...then glanced away...then shifted his posture once...twice...still tapping his toe on the floor. He looked at himself in the mirror behind the bar. He brushed his hair... He looked like he was searching for a cigarette... Then, he took out a Blackberry and began checking messages...glancing at the woman from time to time...tapping his toe...shifting around...looking in the mirror... He cleared his throat. He leaned toward the woman... He reached for a lump of sugar in the bowl in front of her... "Pardon..." he said. She looked up. She smiled. She went back to reading her paper. His smile slumped. He drank his coffee and left the bar. Regards, Bill Bonner
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| Posted: 13 May 2010 03:20 PM PDT If the expansion of the Federal Reserve's balance sheet due to its swaps agreements with Europe is a trip-wire for inflation, consider it trippy. Bloomberg reports that, "The Federal Reserve's balance sheet rose to $US2.34 trillion, the first increase in a month, as the central bank reopened liquidity swaps with foreign central banks. Assets increased by $US9.93 billion, or 0.4 per cent, in the week ended yesterday, the central bank said today in a statement. The balance sheet reached a record level of $US2.343 trillion April 14." The increase in liquidity swaps was US$9.21 billion in the last week. That's presumably the money headed "over there" to Europe to reinforce the ECB's efforts to prevent a wider "contagion" in European credit markets. The bigger the Fed's balance sheet gets the more support you'll probably see in the gold price. Speaking of which, JP Morgan analyst Michael Jansen told clients in a note that, "The gold price is being driven by...the rising concern of the 'exit strategy' for central banks given that the ECB is the latest agency to join the (quantitative easing) bandwagon...Indeed, the perceived breach of the ECB's independence...adds to the view that in the long-term monetary and fiscal authorities will be forced to choose between anaemic economic conditions or monetary-driven inflation." "Monetary-driven inflation" is, along with good old fashioned fear, behind this week's move in gold and precious metals. It is easier for governments to lean on central banks to print money than it is to make politically unpopular (and socially destabilising spending cuts). Bond markets will try to hold European governments honest by punishing those that don't commit to genuine spending cuts and deficit reduction. But this not just an accounting debate or a fiscal policy debate. Europe's post-war social contract is being forcibly rewritten by economic circumstances. Markets enjoyed a massive "short squeeze" rally with the announcement of the bailout. But how markets behave now is anyone's guess. Our guess is that austerity measures in Greece, Spain, Portugal, and probably Italy will prove so unpopular that governments who agree to them may find it hard to hold onto power. And then? Debt default remains a real possibility, and one not currently priced into equities, if you ask us. But don't take our word for it. Yesterday the Australian Mint said it sold more gold coins in the first two weeks of April than in the entire first quarter of the year. Nearly all the buying was coming from Europe. The mint told Reuters that it sold 243,500 ounces of gold coins and bars in the first two weeks of April compared to 205,000 in the first quarter. Meanwhile, what about China? We concede that all of our information comes second hand, and not from any correspondents on the ground (although some of our colleagues are headed that way next week). In the meantime, there are signs that property prices are already falling in Beijing and some analysts are joining in the prediction of a major credit bubble that's due for a popping. Beijing commercial property prices may have fallen by nearly 31% in the last month, if we're reading this article correctly. "The average transaction price of commercial residential properties in Beijing for the week ended May 9 fell 1,790 yuan per square meter or 9.6 percent week-on-week to 16,898 yuan per square meter, reports The Beijing News, citing statistics released by Beijing Real Estate Information Network. Compared with the week ended April 11, the average transaction price of commercial residential properties in Beijing plunged 31.43 percent or 7,744 yuan per square meter." That's just one source and one market. But if it's correct, that is...well...that is what it is, isn't it? But according to Hong Kong-based hedge fund analyst David Roche, it gets a lot worse. "We've got the beginnings of a credit-bubble collapse in China," Roche told Marketwatch.com. Roche goes on to assert that the Chinese banking sector will face huge loan losses on bad loans made to local governments. And what does that mean for you? Roche links a credit contraction in China with infrastructure spending, which he reckons accounted for 90% of China's economic growth last year. So while housing is a clear bubble, Roche says the contraction of bank lending will remove infrastructure investment as one of the key pillars of Chinese growth. He says that's negative for industrial commodities like iron ore and copper. As if the news wasn't bad enough for Aussie mining companies... Of course no one knows for sure what will happen next. The fact that so many people are talking about a China bubble is itself a disturbing sign. Normally you don't get that during a bubble, although claiming there is not a bubble in China because people are talking about it a fairly superficial way of dismissing the argument. But inquiring minds often disagree on the same set of objective facts. That's what makes a market. Our colleague Dr. Alex Cowie has the full time resource beat here in St. Kilda. Alex is recommending precious metals producers as part of his general strategy, with a particular focus on the inflationary policies of central banks. However the key debate the rest of this year is how to value the miners. And you have two massive elements of uncertainty now. One is the Rudd Resource Tax. The other is China's growth. The only upside to all of this is that a great deal of uncertainty can distort valuations, which occasionally gives you a chance to buy something really cheap at a time when everyone else is petrified. "You know," a friend said to us the other night over a drink, "sometimes you come off like a know-it-all smart arse. It's one thing for you to tell the Chinese they're doing it all wrong and predict a crash. But you're bagging out our Prime Minister and you're not even in an Australian. To be honest it's kind of aggravating and offensive." "Good," we replied. "How can you say that? Aren't you worried you're going to upset your readers? They won't become customers if they're angry with you." "That's true. But you probably mis-understand what our business is. I don't want a customer who's easily offended by ideas. It's my job to provoke thought. And you do that by presenting ideas, challenging conventional wisdom, and just thinking harder about things." Warming up to our task, and perhaps inspired by a sip of Maker's Mark, we continued, "When I see someone say something idiotic – or, if you prefer – something I think is totally wrong, I feel compelled to point it out. You have to challenge that stuff when you see it, or else people start to believe it. And once they start to believe it without really thinking about it, the game is up. You become a servile, passive, brain-dead whip dogged to be kicked around and cuffed about the ears by the Welfare State. You'll be lucky to get a bone." The discussion came up because of this quote by the Prime Minister earlier in the week on the radio. He said:
You have to give the Prime Minister credit. He says what he believes. But what he believes is all wrong. And we wish he'd stop using the phrase "the business of government." It's an insult to businesspeople. Government is not a business. It does not take risks with its own capital to create value and jobs. The Prime Minister is not an entrepreneur. He is, however, by his own admission, a manager. And in that respect, his hubris and his error are revealed. It is not "conservative economic management" for the government to massively intervene in the private sector. It is Socialism. You might agree with it or believe in the moral rightness of that intervention, mind you. But let's at least call things by their right names. It's one of the surrealities of the modern world that things are often given names that are in direct opposition to what they actually are. Examples include the Democratic People's Republic of Korea, which is neither Democratic nor a Republic, and Britain's Liberal Democratic Party, which is neither Liberal nor Democratic either. We would add to the list Kevin Rudd as a "conservative economic manager" of the economy. In any case, the Prime Minister's error (shared by many members of the opposition who fail to rebuke him), is that he does not understand the inherent impossibility of managing a complex system like the economy. The second order error is probably just a disagreement about the government's role in the economy. But you can't have the second error without the first. And the first one is a fundamental question about the limits of human knowledge. No human being, economist, and philosopher made this point more clearly than Friedrich Hayek. One of Hayek's great achievements – picked up today we think by Nassim Taleb – is forming a clearer picture about the quality of knowledge and what we can say that we really know. What does that mean? Hayek simply pointed out that in a complex system like an economy, no single person can have enough information or even know what information is required to correctly allocate and direct the use of society's resources. To believe otherwise is to have an exalted sense of your own abilities as a micro-manager. Hmmn. Hayek's critique of central planning – what he called the fatal conceit of socialism – was, and remains, the most sensible criticism of centralised economic authority. It can't work because human action is too complex and unpredictable and ultimately unknowable in a strict cognitive sense. You cannot plan and organise for what you do not know and cannot understand. Market prices, on the other hand, are the sum total of human action. Those prices contain information and help maintain the relationship between supply and demand. That is the essential triumph of a free market: it allows people to be free and choose their own path and, at the same time, manages the most efficient allocation of resources. It does this based on what people want as expressed through their own choices, not what government tells them they should or should not want. It produces this kind of peaceful and prosperous order – most of the time – without being organised by a smart man in an expensive suit serving on the public payroll. But the basic idea simple. Individuals and firms know better how to plan their own future than the government. If you believe otherwise, you believe the government has the right and the obligation to make plans on behalf of people who are not fit to govern themselves. Proper names for that include: Nanny State, coercion, tyranny and more! The Prime Minister is a planner and a world improver. That is the "business" he is in. And perhaps his motives are building a better world. But the way to do that is to sweep your own doorstep and tend your own garden, we'd submit. His belief about the proper role of government in the management in the economy is based on an overweening pride in the knowledge and skill of government ministers and career bureaucrats. How else can you explain a piece of tax law like the Resource Rent Tax which effectively makes the government a silent partner in the profit and the losses of the resource industry without the consent of shareholders? Only a man who believed government had the right and the ability to insinuate itself into private business relationships would so pridefully propose a scheme like that. That's not to say that the government doesn't have a role in civilised society. It most certainly does. Its role is to guarantee and enforce clear rules that establish and protect the ownership of private property and enforce contract, as well as punish people who take what is not theirs. The Law – transparent, providing equal justice, and impartially administered – is as important an institution to civilised society as the free market, which itself is could be described as a mechanism for communicating prices. By those standards – which are, of course debatable – this government has done the exact opposite of conservative economic management. It has changed the rules in mid-stream, proposed to enforce them retroactively, and demanded equity in private enterprise without paying for it like the rest of us. To be fair, that is "business" of a kind. Monkey business perhaps. Or "business" in the same way organising payments through the threat of violence is a "business." Or less threateningly, it's just meddlesome troublesome "business" that gets in the way of real people doing real business. As the economist and thinker Henry George wrote, "It is not the business of government to make men virtuous or religious, or to preserve the fool from the consequences of his own folly. Government should be repressive no further than is necessary to secure liberty by protecting the equal rights of each from aggression on the part of others, and the moment governmental prohibitions extend beyond this line they are in danger of defeating the very ends they are intended to serve." The world is complicated enough. Europe's sovereign debt crisis will eventually migrate its way to America and the super cycle in fiat money will end in either a debt deflation or massive inflation or both. Real wealth will be destroyed. Meanwhile, China faces a property and credit bubble of its own. These are big enough worries for Australia without having to worry that its own government is unwittingly sabotaging the country's success. Sound economic management would have been to leave well enough alone. But that is not what the government has done. And it's going to reap the whirlwind, both in the markets and, perhaps, at the polls. Dan Denning
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| As Of Today The Government Will Spend Borrowed Money Posted: 13 May 2010 03:14 PM PDT Starting today, the government has run out of revenue and is now relying entirely on borrowed money for the rest of the fiscal year. According to Congressional Budget Office (CBO) projections, American tax dollars only cover 61% of our nation's expenditures for this fiscal year, which began last August. So as of midday today, the government will have spent all anticipated tax revenue and will begin to spend borrowed money. We simply cannot afford the federal government's pattern of reckless spending. Congress must start making the difficult decisions necessary to reign in Washington's spending habits, and I will continue to support legislation to make this happen. 
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| Jay Taylor interviews Ron Paul on auditing the Fed Posted: 13 May 2010 03:04 PM PDT 11p ET Thursday, May 13, 2010 Dear Friend of GATA and Gold: Newsletter editor Jay Taylor interviewed U.S. Rep. Ron Paul, R-Texas, for 25 minutes on Tuesday, discussing at length Paul's campaign to audit the Federal Reserve. You can listen to the interview at Taylor's Internet site here: http://www.miningstocks.com/radio/radio_archives/taylor20100511-3.mp3 CHRIS POWELL, Secretary/Treasurer 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.... Join GATA here: World Resource Investment Conference * * * 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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| Silver and Gold Price Rally is Intact, Merely Taking a Rest, Offering Y'all Bargain Prices Posted: 13 May 2010 02:25 PM PDT Gold Price Close Today : 1228.80Change: 13.90 or -1.1%Silver Price Close Today : 19.476 Change 16.4 cents or -0.8%Platinum Price Close Today: 1735.40Change: -5.60 or -0.3% Palladium Price Close... This is a summary only. Visit GOLDPRICE.ORG for the full article, gold price charts in ounces grams and kilos in 23 national currencies, and more!
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| Gold has bugs gasping, gloating -- but still bullish Posted: 13 May 2010 02:09 PM PDT http://www.marketwatch.com/story/gol...ing-2010-05-13 Quote: Gold has bugs gasping, gloating -- but still bullish In the latest issue of the Aden Forecast, which came in Tuesday night, Mary Anne and Pamela Aden summarized their long-standing fundamental and inflationist arguments for gold. But they added in chart-speak: "Now that gold has broken into record high ground, above $1,218 on a close, it could jump up to $1,300 or higher, to possibly the top of the channel during the current rise. Gold's leading indicator has jumped up, and it has room to rise further. This tells us that gold is headed higher. The long-term indicator backs this up. ... It's signaling that the rise we call 'C' is still ongoing on a bigger-picture basis. That is, the rise since November 2008 is still underway, in spite of its already 73% gain from $705 to $1,220 today." This is a change, because when gold slumped in late winter, the Adens thought the "C wave" was over. But even then they predicted that the yellow metal would rebound. ( See Feb. 15 column.) Dow Theory Letters' Richard Russell, a friend of the Adens, doesn't even bother with these details. He says flatly: "Do not trade your gold or gold shares. The third phase for gold lies ahead. The central banks do not want to see a new high in the price of gold, and they will do anything they can to keep the price of gold down. But the primary trend of gold is more powerful than all the world's central banks taken together." "There is nothing more powerful than an idea whose time has come. The idea -- gold is the only money that's safe from the world's clueless governments, and their obsession to escape a recession or a depression." This is a change for Russell, too -- he used to deride the claim that gold's price has been long manipulated. Bill Murphy and his fellow radical gold bugs at his Lemetropolecafe Web site are the leading proponents of the manipulation thesis, which they blame on what they call the "Gold Cartel." ( See April 26 column.) Murphy was in full cry last night (and his cry is pretty loud): "After all these years, what fun to watch gold and silver trade like real markets. For a change, there is true ebb and flow ... and a refreshing change from Gold Cartel-inflicted patterns." "There is growing talk, which is also quite normal, about the gold ebullience ... too much froth. What these people who talk this way aren't dealing with is that the price of gold ought to be $2,300+ and would be without the price-suppression scheme. These prices are terrific but are nothing compared to what is coming down the pike." Murphy added in his conspiratorial way: "I am not at liberty in any way to go into further detail, but I can say there are growing developments behind the scenes which are going to send the prices of gold and silver sharply higher ... and they relate directly to what [the radical gold bugs have] been saying for 11+ years!!!" He may sound conspiratorial -- but gold is a lot higher than when I first wrote about Murphy on MarketWatch, nearly 10 years ago. I sense somewhat less concern that the gold shares, widely regarded as a leading indicator of gold's price, have been relatively sluggish. ( See May 10 column.) But let the record show that Murphy's Lemetropolecafe does supply one (short-term) cautionary note: India has just stopped importing gold -- not an unusual response to the metal's move, but sometimes a sign that it's due for a breather.
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| China Roundtable with Robert Horrocks and Vitaliy Katsenelson Posted: 13 May 2010 01:45 PM PDT
China Roundtable with Robert Horrocks and Vitaliy Katsenelson Vitaliy N. Katsenelson, CFA, is a portfolio manager/director of research at Investment Management Associates in Denver, Colo. He is the author of “Active Value Investing: Making Money in Range-Bound Markets” (Wiley 2007). To receive Vitaliy’s future articles my email, click here. P.S. Here is a link to my China presentation
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| Volcker on the “Disintegration” of the Euro Posted: 13 May 2010 12:32 PM PDT Bloomberg reports that "Tall Paul" Volcker is a bit down on the prospects for the euro after the events of the last six months (a period of turmoil that seems like it's been going on a lot longer than that) and the more recent $1 trillion bailout package announced on Sunday.
The euro hit a new low for the year earlier today against the dollar at just above $1.25, the lowest level in about 14 months. Sometimes it's hard to believe that it touched the $1.60 mark in 2008, that is, just before all four wheels fell off the global economic wagon. Of course, gold priced in euros continues to make new highs, yesterday threatening the €1,000 an ounce level before moving lower today to close at €984.
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| Gold ETFs try to lure Indians away from metal and into paper Posted: 13 May 2010 12:27 PM PDT SEs to open shop for Gold ETFs on Akshaya Tritiya From The Hindu, Chennai (Madras), India http://www.thehindubusinessline.com/2010/05/14/stories/2010051453561001.... MUMBAI -- Stock exchanges are all geared up to snatch a few glitter from jewellers this Akshaya Tritiya. Both Bombay Stock Exchange and National Stock Exchange will keep the markets open from 9 a.m. to 3.30 p.m. on Sunday for a special trading session in the seven gold exchange-traded funds traded on the exchanges' equity trading platform. Akshaya Tritiya is considered an auspicious occasion to buy gold. "Market participants may note that except for the seven gold ETFs, none of the other securities shall be available for trading on that day," NSE said in a press release on Thursday. Online commodity exchanges such as MCX, NCDEX, NMCE, and ICEX, which also trade in gold, are yet to decide on keeping their exchanges open on Sunday. Though gold ETFs do not attract big trading volumes on a normal day, a few brokers expect Akshaya Tritiya to change the trend and keep their terminals open for investors. Mr. Motilal Oswal, chairman and managing director of Motilal Oswal Financial Services, said, "We will keep our head office open and some of the retail branches will also operate to depending on client needs." Mr. Rakesh Goyal, senior vice president of Bonanza Portfolio, said that all their branches will be open and most of dealers, branch managers, and relationship managers have been asked to come. Gold sales this Akshaya Tritiya may be more in value terms, but in volume it may fall shorter than last year as prices have touched new highs in the last few days. Mr. C.J. George, managing director at Geojit BNP Financial Services, said, "Our branches will not be open this Sunday as gold ETFs do not attract many investors. However, our Internet trading facility and toll-free numbers will be available for those who want to trade." Mr. Prashanth Bhansali, managing director of Mehta Equities, said their offices and branches will be closed, as people prefer to buy gold by giving cash and not cheques. Moreover, most consumers feel more comfortable buying gold in the physical form than on paper. 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/ Join GATA here: World Resource Investment Conference * * * 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 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
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| Hyperinflation or Hyperdeflation Posted: 13 May 2010 12:00 PM PDT James Turk's article Hyperinflation Looms dated April 20, 2010, is based on Quantity Theory of Money (QTM). It draws an analogy between Weimar Germany of 1923 and the United States of 2010. Both precepts are invalid. As far as the QTM is concerned, it suffices to point to the very fact, admitted by Turk, that it is possible to have a shortage of money simultaneously with the overworking of the printing presses. Hyperinflation is not the same as the ultimate inflation of the money supply.
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| Posted: 13 May 2010 11:42 AM PDT
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OT: I wish to present to you a book written from an interdisciplinary perspective by one of the most renown philosopher today, Slavoj Žižek. The book analyzes events of 2007 and 2008 by utilizing aspects of Lacanian phsychology, Hegelian philosophy, Marxist theory and tidbits from pop-culture which all serve as an argumentative anchor. The book is great fun to read if you wish to go beyond quantitative, political and economic analysis of the events that unraveled in 2007 and 2008.
Slavoj Zizek, First as Tragedy, Then as Farce
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European leaders pledged a rescue package of almost $1 trillion this week to counter a mounting debt crisis and restore confidence in the currency. Former U.S. Treasury Secretary John Snow said this week the euro may need a common fiscal policy to survive, a comment echoed by Norman Lamont, who was U.K. finance minister when Britain opted out from the euro in 1992.
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