Gold World News Flash

---

• International Forecaster July 2010 (#1) - Gold, Silver, Economy + More
• Bear Market Race Week 142: Will Hyper-Inflation Benefit Stock Valuations?
• Rick Rule on Bail-Outs, Business-Cycles and 10 More Years of a Golden Bull
• Sending Your IRA Gold on an Overseas Vacation
• July 4th Market Musings - Half-Year Checkup
• Fed Watch List: One Year Later
• Is Aggregate Debt Excessive?
• In the Name of Debt
• The ‘flations
• A Debate With Rory Roberts
• Financial Sense Newshour - Gold Roundtable - 7-3-2010 - Listen to the audio
• On Why America's 234th Birthday May Not Have Many More To Follow
• Europe Weekly Summary
• The Death Cross: Another Sign That We Are On The Verge Of A Recession?
• Jim's Mailbox
• Precious Metals Market Report
• How the iPod Became Irrelevant to Apple's Growth
• LONG EVEN FOR A BEAR
• Euro Rallies As Economic Data Piles Up Against a Strong Recovery
• How the Banksters Serve the Gold-Buyers
• Silver Pummeled as U.S. Weekly Prices Dive 7.4%
• Bullion Prices & Business Weekend Recap – July 3, 2010
• Metals smash down was just another paper affair, Butler tells King World News
• What’s Happening With Gold?
• June's Hottest ETFs
• Ford, Tesla, Solyndra: Good Economic News or Bunk?
• "Inflation Seen As Nation's Salvation" Redux; How Keynes Grew To Hate 'Keynesianism' And Love The Monetary Bomb
• Conservative Growth Investing: Compelling Style for Challenging Times
• Myths of Austerity?
• Massive Drain Of COMEX Silver Inventories Continues
• DOW below 1,000?
• Texas AG Candidate Sues Goldman et al For Causing "Recession, Unemployment" And Everything Else That's Bad
• H.R. 5618 - Extending Unemployment Benefits– A Bad Bill
• Stocks May Surprise by Year-End
• 5 Defensive Utility Dividend Stocks
• Sentiment Indicator Points To A Sharp Rally Coming In Gold

International Forecaster July 2010 (#1) - Gold, Silver, Economy + More Posted: 05 Jul 2010 02:22 AM PDT Ten days ago we reported the most recent data on gold reserve holdings as presented by the World Gold Council, where we pointed out that Russia had purchased 27.6 tons of gold in the most recent reporting period, bringing its total to 668.6 tons. It appears Russia is only getting started. According to the latest IMF data, in the period between April and May, Russia added another 22.5 tons, bringing its May total to a fresh record of 703.1 tons. Russia "has added gold every month since at least February." At the same time, The International Monetary Fund's gold holdings fell by 15.25 metric tons (490,286 ounces). "Reserves of gold at the IMF were 2,951.58 tons at the end of May compared with 2,966.83 tons at the end of April, data on the IMF's website show." Good thing the world's bailout cop is doing all it can to keep gold prices low by transacting in the open market instead of in pre-negotiated transaction, This "is an indication that they will continue to sell the remaining 137.5 tons on-market as opposed to via off-market transactions with other central banks," said Daniel Major, an analyst at Royal Bank of Scotland Group Plc in London. "Indeed the decline in gold sales from European central banks and purchases from India, Russia and China in recent years demonstrates gold's growing popularity with central banks." Well, all Central Banks except those that are printer happy of course, and are now loaded to the gills with toxic debt that will continue to impair their currencies until the bitter Keynesian end.

Bear Market Race Week 142: Will Hyper-Inflation Benefit Stock Valuations? Posted: 04 Jul 2010 05:44 PM PDT The 1929 & 2007 Bear Market Race to The Bottom Week 142 of 149 Days of Extreme NYSE Breadth Keep Coming! Will Hyper-Inflation Benefit Stock Valuations? NYSE Market Cap & the US National Debt Mark J. Lundeen [EMAIL="mlundeen2@Comcast.net"]mlundeen2@Comcast.net[/EMAIL] 02 July 2010 Color Key to text below Boiler Plate in Blue Grey New Weekly Commentary in Black Below is my BEV chart for the Bear Race. We are now in Wk 142, that’s not far from Wk 149. Why is Wk 149 significant? The Great Depression Bear lasted 149 weeks. Only 8 weeks to go before this Bear Market lasted longer than the Great Bear did. Up to about early May, it’s accurate saying that most people thought the Bear Market ended with the March 2009 Bottom. I never thought that. Why didn’t I? There was just too much Official Level Cover-Up, involving Trillions of Dollars. Our “Policy Makers” believed it was possible to cheat Mr Bear of his dinn...

Rick Rule on Bail-Outs, Business-Cycles and 10 More Years of a Golden Bull Posted: 04 Jul 2010 05:44 PM PDT Sunday, July 04, 2010 – with Scott Smith Rick Rule The Daily Bell is pleased to present an exclusive interview with Rick Rule (left). Introduction: Rick Rule began his career in the securities business in 1974, and has been principally involved in natural resource security investments ever since. He is a leading investor specializing in mining, energy, water, forest products and agriculture. A popular public speaker, Mr. Rule is a featured presenter at investment conferences and resource investment forums throughout the world. His firm provides unique insight into the workings of the natural resource marketplace. Global Resource Investments provides investment advice and brokerage service to individuals, corporations, and institutions worldwide. Rick Rule has originated and/or participated in several hundred transactions over the past 30 years, including both debt and equity in private, pre-public and public companies. These private placement activi...

Sending Your IRA Gold on an Overseas Vacation Posted: 04 Jul 2010 05:44 PM PDT Sending Your IRA Gold on an Overseas Vacation By the Editors of BIG GOLD In a recent article we considered the pros and cons of putting gold bullion into a self-directed IRA and detailed how to do it. But the arrangements we covered were entirely domestic. What about having your IRA hold gold offshore? It can be done, but before you go to the trouble, ask why. Your IRA would still be subject to U.S. law, and your IRA custodian would still be in the U.S., regardless of where the assets are. One possible reason is protection from future creditors, especially of the lawsuit variety. If your IRA exceeds a million dollars, or if you live in the wrong state, or if you inherited the IRA, it may be available to anyone who successfully sues you. There are some rather complex arrangements that can move IRA assets (gold or anything else) offshore and make them far more difficult for a creditor to reach. But if that's your motive, we'd think twice about the loss of control t...

July 4th Market Musings - Half-Year Checkup Posted: 04 Jul 2010 05:44 PM PDT Market Ticker - Karl Denninger View original article July 04, 2010 11:39 AM With all the screaming going on this weekend by various market prognosticators - and the truly pitiful performance Friday late, I thought I'd try to put forward some balance on this Independence Day. First, Gold.  Momentum is unfavorable and the close under the 50MA not positive at all.  Short-term regaining and holding the 50MA, and preventing it from turning downward, is critical.  Should that fail first-level support is around the 1160 level and second-level around 1075 - the latter, however, is under the 200MA and isn't very likely to hold if we get there. This isn't the sort of pattern you want to see if you're bullish on Gold.  I've talked about it for months now - the original triple-ascending slope is a relatively-common and dangerous parabolic blow-off sort of move.  Gold then fell through the second trendline and wallowed along the lowest-slope one for over a month,...

Fed Watch List: One Year Later Posted: 04 Jul 2010 05:26 PM PDT Annaly Salvos submits: Friday marked the one-year anniversary of the launch of Annaly Salvos, and we thought we would take advantage of this milestone to revisit the graph at the heart of our very first post. It is a snapshot of the factors we believe the Fed watches to determine the fundamental health of the economy: the Capacity Utilization rate (CapU) in white, core CPI in red, the unemployment rate in yellow and the Fed Funds rate in green. We observed that when there is a lot of slack in the economy—high unemployment and low factory usage—and inflation is quiescent, the Fed will typically start to lower rates. If the economy is performing well, generating tight resource utilization and more inflationary pressures, the Fed will typically start to tighten. A close look at the graph will also show that as the business cycle waxes and wanes, the Fed is asymmetrical in its response. It is much quicker to lower rates at the first sign of weakness than it is to tighten when the going is good. Where are we now versus a year ago? From the Fed’s decision-making perspective, we think it is unchanged to worse. Capacity utilization at 74.1% has bounced off its recent lows, but it is still no better than the cyclical low of the 2000 recession. The unemployment rate is exactly where it was a year ago, though this is primarily due to a mass exodus from the labor force (the number of workers no longer in the labor force has increased by more than 3 million since last year). And the core inflation rate looks like it will soon be called the core deflation rate. So while the Federal Reserve may talk about economic growth being constrained due to “developments abroad” (as it did in the last FOMC statement), ultimately we think Bernanke & Co. may be more inclined to follow their Econ 101 graph of domestic activity and act accordingly. We’ll check in again next year. Complete Story »

Is Aggregate Debt Excessive? Posted: 04 Jul 2010 05:00 PM PDT

In the Name of Debt Posted: 04 Jul 2010 04:39 PM PDT A front-page photo in Tuesday's Financial Times shows lightning striking near the Parthenon. Zeus must be reading the paper. Greece is supposed to cut its public spending by an amount equal to 10% of its GDP. Even so, its public debt is expected to rise to nearly 150% of GDP by 2016 - or three times the level of Argentina when it defaulted in 2001. It should be obvious that the Greeks owe too much. But so does almost everyone. Every kind of debt is so heroic it poses an affront to nature and a challenge to the gods. Much of it is unpayable. Private debt. Public debt. Short term. Long term. US. England. Europe. All kinds of debt in all kinds of places. In America's private sector, for example, debt exploded 6 times faster than GDP since 1950. And today, the whole world staggers under debt, with more than $3.50 of debt for every dollar of GDP. Today's global economic problem is breathtakingly obvious: too much debt. The solution is obvious too; debt that cannot be repaid must be destroyed - by defaults, foreclosures, bankruptcies, write-downs, and restructurings. Nouriel Roubini, writing in The Financial Times this week, is on the right track. Greece cannot bear the weight of all its debt, he says. Since it will default sooner or later, better to restructure the debt now...reducing it to a level the Greeks can actually pay. Fair enough. Creditors would take their losses in an orderly way. When the debtor cannot pay, the creditor should take the loss. But practically the entire burden of modern economics over the last 3 years has been a scammy effort to shift the losses to someone else. To bring the readers fully into the picture, the great debt build-up began with Reagan in the White House and Thatcher at #10. Reagan added to deficits. Thatcher cut them. On the west side of the Atlantic, economists called on Reagan to stop spending. On the east side, 346 economists implored Maggie Thatcher to spend more. Reagan's young budget director, David Stockman, resigned in protest when the Republicans wouldn't bring deficits under control. Meanwhile, Maggie Thatcher was told that her austerity policies would "deepen the depression, erode the industrial base and threaten social stability." She should do a U-turn immediately, said the august economists. "This lady's not for turning," she replied. It didn't seem to matter what anyone thought or did. Markets do what they want. Back then, interest rates were coming down. The US 10-year Treasury yield fell from 15% in 1980 down to under 3% today. In that tender, delightful world, debt was no problem for anyone. Even if you wanted to default, the banks wouldn't let you. They offered to refinance your debt at a lower rate. Both Britain and America grew; their debts grew too. Private sector debt peaked out in 2007. Households and corporations have been de-leveraging ever since. But as the private sector taketh away, the public sector giveth more debt. And again, markets are doing what they want. Interest rates are already at the lowest levels in a generation. This time, economies cannot cut rates and grow their way out of debt. Instead, someone will have to pay. Who? The world's economists have no better idea what is happening in the 21st century than they had in the 20th. They neither saw the crisis coming, nor knew what to do when it arrived. Their panicky 'rescue' attempts wasted $10 trillion. They claimed they had put the world on the road to 'recovery' and claimed victory over the credit cycle. They might just as well have claimed to have conquered sin or exterminated cockroaches. Neither governments nor their economic advisors can make bad debt disappear. They know that as well as we do. All their sweating and grunting has another purpose - to decide who gets stuck holding the bag. Taxpayers, for example. That is the general drift of the Germano-Anglo- Canadian proposal. 'Austerity,' as they call it, means higher taxes, fewer services, and bailouts of the financial sector. The big banks won't pay for their mistakes. The public will. Martin Wolf and Paul Krugman are wrong about many things, but they're probably right about the side effects of this bitter medicine; it will probably deepen and prolong the slump. It will cause a 'third depression,' says Krugman. On the other hand, Krugman, Wolf and the other neo-Keynesians have a bad proposal of their own. "...governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending," writes Krugman. If too little spending were the real problem, it would invite the most agreeable fix since sex therapy. Every government would lend a hand. Alas, the real problem is the opposite. It is the consequence of too much spending - debt. More government spending means more debt. Who will pay it? Taxpayers? Consumers? Savers? Investors? Lenders? The young? The old? Nobody knows for sure. But everybody is surely going to find out. Bill Bonner for The Daily Reckoning Australia Similar Posts: Government Debt What's the Best Way to Get Through a Debt Crisis? There Are More Millionaires in China Than France US Economy Still in a Deflationary Contraction Keynesians Believe Governments Have to Manage Economy in Macro-Economic Way

The ‘flations Posted: 04 Jul 2010 04:32 PM PDT "Data raise fears over faltering economy," says this morning's Financial Times. What a surprise! What happened to the recovery? The Dow fell another 41 points. Gold got hammered for a $39 loss. Why would gold go down so much? Because people are finally realizing that deflation is the real risk, not inflation. Gold could continue to slip and slide for a long time now... It's hard to say. It can rise in a deflation. But it depends on how volatile and uncertain the markets appear. In a stable, Japanese-style slump, gold could go down and stay down for many years. But you know our thoughts on the subject. We'll see all kinds of 'flation' before this crisis is over. Deflation. Inflation. Stagflation. Hyperinflation. You name it! The latest news tells us that jobs are down. Treasury bonds are trading at their highest point in 14 months. A 10-year Treasury note yields just 2.93%. As dear readers know, the feds can't really make bad debt go away. All they can do is move it around. The parties to the transaction - creditors and debtors - usually decide among themselves who bears the losses. Typically, if the debtor can't pay, the creditor loses his money. But when the feds step in almost anything can happen. But nothing good. The general government plan is to collectivize losses - either by moving them onto the taxpayers or by moving them onto the general public. When the government borrows money to fund its bailouts and boondoggles, for example, it is taking losses away from the people who deserve them and sticking them on the taxpayer. If they can manage to boil up a little consumer price inflation that is even better. Then losses seem to disappear into the air...like noxious fumes. The entire public breathes them in and gets a little lightheaded. It doesn't know what to think or who to blame. (More below...) In the present case, some economists favor sticking taxpayers with the losses. Others are squarely against it, preferring to force the losses on the general public by means of inflation. The trouble is, these cockamamie plans tend to have unanticipated consequences. The Japanese feds really pulled a fast one, in this regard. They borrowed from their own people in order to fund a 20-year bailout/boondoggle program. The idea was to provide "counter-cyclical stimulus." Naturally, the stimulus never seemed to stimulate anything but more stimulus. The program went on for two decades...and, as far as we know, the Japanese economy is still limping along. The effect economists did not anticipate was that the economy did not take off. Instead, there followed two decades of on-again, off-again slump. Which is why it would have been better to let the creditor and debtors work out their problems on their on...let them take their losses back in 1990...and be done with it! Another unanticipated result has not yet been fully realized. The government took savings from Japanese households and spent it. Now, a whole generation of Japanese old people looks to government bonds as the source of its retirement wealth. Trouble is, there is no wealth there. The feds took credits and turned them into debits. They took the surplus wealth of an entire generation and squandered it. Now, instead of looking to stored-up wealth for their retirements, the Japanese have to hope that the next generation will be kind enough - and able - to keep up with the debts laid upon them. Trouble is, the next generation has too much debt to carry. Government bonds outstanding equal nearly 200% of GDP. At zero interest rate, it's not too hard to keep up with the interest payments. But even the Prime Minister is beginning to wonder how those debts will ever be repaid. And interest rates will not stay low forever. Imagine that inflation rose...and that investors got nervous. Imagine that the carrying cost of that debt rose in Japan as it did in the '70s in the US. At 10% interest, the cost would be one fifth of GDP - or about as much as the entire government budget. Obviously, the system will fall apart first...leaving Japanese retirees with a lot less money than they thought they had. ******************** Here's a thought. The G20 meeting ended with a call to reduce deficits. The Obama team, on the other hand, warned that cutting deficits might undermine a very fragile recovery. There seems to be no understanding of what is really going on. We are in a spell of debt de-leveraging in the private sector. There is no way to make the problem disappear. The only real question is who will bear the losses. We've seen what happened in Japan. That's the alternative that most economists are urging (only they claim that this time the stimulus will work...if we keep at it). But what if governments really take the path signaled by the G20? What if they cut spending? What then? Well, then you'd have de-leveraging in the private sector. And de- leveraging in the public sector. At the same time. There would probably be hell to pay for a while. But it would at least cure the real problem rather than just disguising the losses and collectivizing the costs. But don't worry, dear reader. There is almost no chance that governments will follow through on their promises to de-leverage. Instead, they will reduce the rate at which they are adding debt. The private sector will continue to de-leverage. Government 'austerity' measures will be blamed. And then? Well...who knows? But that's probably when the printing presses get turned on...and gold enters the third and final stage of its bull market. Stay tuned. Regards, Bill Bonner for The Daily Reckoning Australia Similar Posts: Government Debt AIG to Receive $85 Billion Loan from Fed If the US Economy is Really Following Japan Things Will Get a Lot Worse The Fallacy of the Fallacy of Composition Japan and its Economy Did Not Have Secret to Everlasting Success

A Debate With Rory Roberts Posted: 04 Jul 2010 04:29 PM PDT Well it didn't have any conviction, but Friday's 46 point loss on the Dow was the 7th consecutive losing session and brought America's share idol to a 9-month low. The Dow is trading below the "psychologically important" 10,000 level. And investors in the US are resigned to the fact that the labour market's problems may be far worse than they expected and take a lot longer to recover. Not to be Danny Downer, but we reckon that the Western World is just waking up to the fact that globalisation has wrought structural changes to labour markets. Many skilled manufacturing jobs (and unskilled too) have migrated to markets with lower labour costs (and easier labour laws...and no labour unions). Those high-paying jobs probably aren't coming back. And to the extent they've been replaced at all, they've been replaced by lower-wage salaries in the service economy. The Australian market was virtually unchanged Friday, although the Sydney Futures are down this morning. Incidentally, we're working from Sydney for most of this week. We've come up to prepare for our debate tonight with Macquarie Bank interest rate specialist Rory Roberts. Tickets to the event - dinner, drinks, debate - are limited but may still be available. Send emails to thoughtbroker@gmail.com And speaking of Macquarie Group, how different it is to be a financial institution in Sydney than a miner in Melbourne or Perth. This article in today's Age revealed an October 7th, 2008 dinner between Macquarie executives and then-financial services minister Senator Nick Sherry at Macquarie's Martin Place redoubt here in Sydney. Five days later a federally backed deposit guarantee was in place along with a valuable wholesale funding guarantee that made it possible for Macquarie and other Aussie banks to "rent" the government's triple AAA credit rating. According to the article, "Under the wholesale funding guarantee, Macquarie was able to use the taxpayers' AAA-rated backing to access money on credit markets at a cheaper rate than it otherwise could before lending it at a higher rate to make a profit on the spread. The bank paid $200million to use the rating. Its corporate and asset finance division tripled its profit last year, in part by using the cheap funding to buy loan books at a discount. The risk to the taxpayer AAA rating remains until all the loans are repaid in full." Nice work if you can get it, huh? What was that about socialising losses and privatising profits again? The article points out that shortly after the collapse of Lehman Brothers in New York, ASIC banned short-selling on Australian financial firms. That stopped the bleeding. Our point? Well of course a responsible government would do what it thought necessary to prevent a collapse in a major financial firm. That's the way things work these days. But aren't we constantly assured that no such crisis is possible with Australia's well-regulated and well-capitalised banks? Yes we are! Of course it's possible extraordinary actions are only required in extraordinary situations. But it's also possible that the events in October of 2008 were the beginning of a giant transfer of risk in the Australian financial system from the private sector to the public sector. It's this same transfer of risk that's put so much pressure on sovereign credit ratings in Europe. In fact, one of the current proposals in front of APRA is for a Financial Claims Scheme which makes permanent the guarantee on all Australian bank deposits. It's a government guarantee. So as far as we can figure, the government, in principle, is putting itself on the hook to guarantee all Australian bank deposits should an Aussie bank, in some unlikely circumstance, go under. Not possible? It is possible. Unlikely? Maybe. But if you accept the premise that the last thirty years have seen fiat money credit bubbles leak their way into all sorts of markets, and one by one that those markets have topped out and fallen as the supply of cheap money fell away...and if you look at the huge levels in household debt growth in Australia (primarily mortgage debt) and see just how exposed the banking sector is to a) wholesale borrowing costs from overseas and b) residential housing... well then? You get Aussie banks chock full of assets bought with borrowed money. Safe as houses? Hmm. More on that tomorrow. Dan Denning for The Daily Reckoning Australia Similar Posts: Feds Get the Wrong Man Were the Government's Stress Tests a Bogus Exercise in Deception? RBA Rate Cut Does Little to Unlock Credit Market Australia to Borrow as Much as $300 billion Aussie Banks Addicted to Foreign Borrowing

Financial Sense Newshour - Gold Roundtable - 7-3-2010 - Listen to the audio Posted: 04 Jul 2010 02:48 PM PDT Especially newer people to the gold market should listen to the interview. http://feeds.feedburner.com/fsn Amazing even Christian did not piss me off....well almost until the very end.

On Why America's 234th Birthday May Not Have Many More To Follow Posted: 04 Jul 2010 02:27 PM PDT As overindebted Americans and bankrupt cities and municipalities spend millions to celebrate America's 234th birthday (and delighted by the fact that while the rest of the world is writing in austerity, we actually can still pretend we can afford such demonstrations of affluence) with brilliant if transitory firework displays, it behooves everyone to step away from the symbolic, and consider for a minute the circumstances surrounding this country's declaration of independence. Since at the basis of every action there is always a monetary incentive, for a critical perspective of the economic conditions that led not only to the violent separation of the US from England, but to the subsequent creation of the Federal Reserve, the abolition of the gold standard, and all culminating with the imminent "end of the road” for the financial system as we know it, we present the following essay from reader Matthew Hinde. I'm sure you know that the primary reason for the American War of Independence was to break from the English banking system of the time. The English Banks wanted the US government and corporations to borrow money from them in order to trade. This is really what the founding fathers of America fought against and won independence from. And so after the war had been won the US financial system was controlled, and all US Dollars were issued, by the US Government. The value of each Dollar was fixed (i.e. there was no inflation) and ALL the banks operated within the financial system. The most significant aspects were that the value of a dollar was FIXED and that the commercial banks were not empowered to create money. This is really what the English banks wanted to be in control of - the power to create money and lend it to the US entities at interest. After the establishment of the Federal Reserve in 1913, however, the bankers finally got their way in the US. They took control of the US financial system and Fractional Reserve Banking became a reality in the US. What this means is that the financial system was essentially privatized and the commercial banks started to create money “out of thin air” by taking in deposits and then using these deposits to empower them to make loans significantly in excess of those deposits. I'm sure you can see how, through this scheme, the banks had shifted themselves out of a situation where they had primarily been an intermediary between savers and borrowers in the economy, to a situation where they had the authority to create and lend money into the economy. Practically what this has meant to the American people is that as the banks have created additional units of currency, the value of their savings has been consistently undermined and devalued over time. One could argue that this has been compensated for by interest being paid on peoples’ savings, however the fact of the matter is that this rate has been manipulated down by the Federal Reserve over time, resulting in significant asset price inflation. In addition to this qualitative devaluation of money, as the capital and interest repayments of existing loans has been made, liquidity has been drained out of the economy thereby creating monetary shortages on "main street". So I’m sure you can see from this that the American people have been hit on two sides, firstly the value of their money has been consistently devalued, and secondly the quantity of money in the real economy has also decreased relative to existing debt levels. From a banking perspective the only real concern for them was the second issue highlighted above (i.e. the fact that the quantity of money in the real economy was decreasing relative to the existing debt levels). This had the effect of reducing the probability that their loans would be repaid. In dealing with this issue the US Government and the Federal Reserve de-linked money from gold in 1971 and since the early 1980s they have also consistently reduced interest rates. The intention behind these efforts was to ensure that firstly, there would be nothing to limit the growth in the money supply and secondly, to reduce the monetary withdrawals (via interest repayments) out of the system. These two steps have both prolonged the functioning of the system as it stands. The long-term fundamental issue of the financial system though is that it is a “closed” system that requires the economy (i.e. all economic entities) to assume greater levels of debt for it to keep functioning. At the end of day there is literally no way out without altering the nature of the system itself. It is my firm belief that we have come to the “end of the road” for the financial system, as we know it. The myriad of problems that it is creating are only going to get larger as time moves forward – until the US Government takes decisive action to correct the fundamental issues. To this end it needs to fix the value of each unit of currency by linking it to a basket of commodities (not only gold since the total quantity of gold is limited and so that would in turn limit the total quantity of money - this was the problem that resulted in the initial creation of the Federal Reserve), and it needs to eliminate the fact that money can only be created through debt. Under the current financial system, everybody ends up in debt and the banks get to continue reaping from that state. It really is a time for change and I firmly believe that the US will once again lead the world in a new direction, one that is equitable and fair for all economic participants.

Europe Weekly Summary Posted: 04 Jul 2010 01:41 PM PDT A recap and look at things to come from the ever optimistic Dane, Goldman's Erik Nielsen Happy Saturday, First of all, to my many colleagues at Goldman to whom I mistakenly sent an email yesterday soliciting suggestions for what to cover in today’ email: My apologies - I meant to send it to our own little team, but hit the wrong send-list.  That said, many thanks for the huge number of suggestions I got; I have been truly overwhelmed by the enthusiasm.  I’ll be covering a number of the issues you suggested, but many of them we’ll have to take bilaterally, unfortunately. So, fresh from having watched Germany outplay Argentina – and following the Netherlands’ triumph over Brazil yesterday - I cannot help think that the Euro-zone seems to outperform expectations in football pretty much as they do in terms of economic performance.  If Spain does its job tonight, the Euro-zone will be occupying three out of the four semi-finalists spots down in SA.  Who would have thought… Here’s how Europe looks from the shade of my chestnut tree here in Chiswick: In the battle between stress markets and the real economy, last week went to the markets – but all due to poor data from the rest of the world. Marginally good news on the banks; we are all looking forward to the stress tests in 4-5 weeks. Confirmed decent growth indicators out of the Euro-zone this past week – and great growth numbers out of Ireland and Spain! The IMF has been busy this past week in Europe, extending the credit line to Poland, disbursing to Romania and agreeing a loan to Ukraine. Finally, call someone! – roaming became a lot cheaper in Europe this past week, thanks to the EU. Looking ahead – first and foremost, happy Fourth of July tomorrow! We’ll get industrial production numbers for May throughout Europe this coming week; we think they’ll all look pretty good.  In the Euro-zone, Spain already reported, and we’ll get Germany, France and Italy this coming week. ECB meets on Thursday and the Watchers’ conference is on Friday.  Listen out for what they think of Eonia and Euribor – and the banks. The UK also prints IP and manufacturing production (should be okay), and the MPC meets (no change.) Switzerland prints inflation (no core deflation, we think) as well as unemployment (unchanged.) Sweden and Norway print manufacturing production and inflation this week – production up and inflation down in both; nice combination.  Hungary also prints manufacturing production; we expect another very strong number, led by exports. Poland is holding the second round of its presidential election tomorrow, Sunday.  Hugely important for the policy agenda. -1            In the increasingly epic battle between the financial markets stress and the recovery in the real economy, I guess I should give last week to the financial markets, although any points taken this past week by the troubled markets were taken outside Europe.  Equities were hammered, of course, but they were driven by the poor numbers out of the US and what was interpreted as poor Chinese numbers (but give me a break; Chinese demand remain strong, and the Chinese authorities are obviously not too worried either since they let the FX move stronger again yesterday.)  Meanwhile, European sovereign spreads did quite well this past week, and Spain sailed comfortably through their auction on Thursday (in spite of the latest warning from Moody’s – and so it should be!)  While the auction probably was bought overwhelmingly by Spanish banks, I have noted that Spain’s Deputy Finance Minister, Jose Manuel Campa Fernandez, has been doing the rounds among US investors this past week, and from what I hear from people having met with him, the show has been impressive. -2            On the data front, the possibly most exciting number out last week was the ECB’s report that Euro-zone banks had increased their lending to non-financial corporates for the first time in 16 months.  Yes, its only one number, as everyone was busy reminding me, and while it certainly may start declining again, every new trend does start with one number.  The increase is more than three months earlier than we had expected, so maybe there is hope for an earlier than expected contribution to growth from fixed investment.  We’ll see.   There were also other good news out last week raising some (moderate) hope with respect to the banks, including the orderly unwinding of the ECB’s first 12-months LTRO and its drain on excess liquidity.  And looking ahead, I have been impressed with the policymakers’ response to market concerns about the upcoming stress tests.  The tests have been expanded to up to 120 banks, including all the Spanish banks and several German Landesbanks and the definition of “stress” has become more realistic, as well.  Reportedly, some Landesbanks have pointed out that they have no legal obligation to publish confidential data, but to me this is not a major issue.  If we can get clarity on some 100-110 Euro-zone banks, including the Spanish banks (and please be realistic here on real estate related assets!) followed by proper re-capitalisation, then we are a good step closer to restoration of a critical mass of the interbank market.  (For an overview of where we stand right now on Spanish bank reforms, please see European Weekly Analyst from last Thursday.)  As far as I know, publication of the stress tests is planned for end of July, although I have seen press reports suggesting that it’ll be on July 23.  The FT reports that the tests will lead to capital raising of €30bn; €20bn of which from public sector banks – sounds low to me.  Personally, I don’t think this in itself will trigger the use of the EFSF; if it gets activated then my guess would be that it’ll be for Portugal to get their reform process accelerated into higher gear. -3            On macro data, we had the Euro-zone PMI confirmed at 55.6 (consistent with GDP growth of +0.7%qoq, non-annualised).  This means that we are still sitting a bit above the trend number, so we should expect further moderate declines in the months to come.  Maybe more importantly, we had generally good numbers out of the battered periphery: Ireland reported a much stronger than expected Q1 GDP (+2.7%qoq), officially ending their recession just a couple of quarters after the implementation of the greatest fiscal consolidation plan in recent history.  And Spanish industrial production also surprised on the upside, rising 5.1%yoy in May after having risen 2.9% in April.  Twelve out of Spain’s Comunidades Autónomas reported positive year-on-year growth in May.  Meanwhile, Spanish jobless claims also came in better than expect in June (83,834 vs 65,000 expected), bringing the total below the still dreadfully high 4 million for the first time since the onset of the crisis.  If you are puzzled how economies can grow in the midst of fiscal tightening, you need to read Ben Broadbent and Kevin Daly’s excellent Global Economics paper from two months ago.  Outside the Euro-zone, UK purchasing managers reported a sharp drop in exports, which the UK papers quickly interpreted as a sign of the weakness in Continental Europe.  I disagree.  All the smaller and more open economies on the outskirt of the Euro-zone, including Sweden, Poland and Switzerland are all doing great, even to an extent that Riksbank started its hiking cycle this past week.  The problem with UK exports is more likely related to a product composition that does not fit so well, as well as the recent sterling appreciation. -4            The IMF has had a busy week in Europe:  First, they approved a one-year successor arrangement for Poland under the Flexible Credit Line  facility, making about €24bn (1,000% of quota) available to the government, if needed (the Poles say they’ll treat the credit line as precautionary without any intention to use it;) they completed the fourth review of the Stand-by with Romania and disbursed €1.3bn; and they announced a “Staff Level Agreement” with Ukraine on a €18bn Stand-By Arrangement.  They are also in Portugal these days, but this is (still) just routine stuff.  When you see these three agreements, you do wonder why a number of people doubt that countries, like Portugal, Spain, or Ireland couldn’t qualify for IMF funding, if they were to need it (and yes, the IMF has still plenty of money)! -5            Finally, as a devoted European, I have to remind my fellow Europeans that your mobile roaming tariffs dropped significantly last Wednesday (July 1); courtesy of European Commission interventions.  Interesting how most newspapers (particularly in this country) seem to forget to mention these types of benefits of being member of the EU!    Looking at the week ahead: -6            First of all, happy Fourth of July to my many American friends.  This was one of my favourite holidays during my many years in the States – still missing it rather badly, even on a beautiful day in Chiswick like today! -7            In the Euro-zone, industrial production numbers for May will begin to roll in this coming week.  These are very important numbers for our GDP forecast (E-Map relevance score of 5), and in the present environment they seem to be even better indicators than the usually supreme PMIs.  As discussed above, Spain already reported yesterday, setting (hopefully) the tone with a block-buster +5.1%yoy (+3.3% corrected for calendar effects).  Germany follows on Thursday (we expect +0.1%mom) and France and Italy report on Friday (we expect +0.2% and +0.5%, respectively.)  If we are right on these forecasts, then our once exuberant looking +0.9%qoq (non-annualised) GDP forecast for Q2 looks pretty alright again.  (I hope the writers at Time Magazine – whose main story this week is: “Why Europe Can’t Get Off The Ground” - take a look at these numbers!) -8            The ECB meets on Thursday; there’ll be no change in policies or message, but it’ll be interesting to hear if Trichet will say anything about the exit strategy.  I rather suspect that they are not too sorry to see Euribor drift slightly higher.  We think it’ll get to about 1% by year-end, which should set the stage foer the first formal rate hike in 2011’Q2 – i.e. unless the rest of the world de-rails us! (been a while since you heard that one?)  He may also be encouraged to say something about the banks now the €442bn is out of the way.  On Friday, there is the annual “ECB and its Watchers” conference in Frankfurt; the highlight of the year for us ECB watchers.  Alas, I won’t be there this year because my wife – for unexplainable reasons – has booked me Friday night in New York for something she claims has greater social value than the ECB!  Fortunately, Dirk Schumacher will be there and report on anything interesting, so look out for emails from Dirk on Friday. -9            In the UK we’ll get three important releases this week: On Monday we’ll get the last of the three June PMIs (for services), which may also move slightly lower from May’s robust 55.4 level, but nothing to worry about.  On Thursday we’ll get industrial production and manufacturing production for May; they were both down 0.4%mom in April – would be good to see some hard number recovery by now.  Finally, the MPC meets on Thursday, but there’ll be no change in anything. -10          There are three key releases in Switzerland this coming week:  First, there is June CPI on Tuesday, where the key issue will be whether May’s sharp decline in core inflation continues (maybe even into negative territory); we don’t think so – we expect a small uptick in core from May’s +0.2%.  Second, unemployment is out on Thursday (we expect unchanged 4.0%), and finally, and indeed least important, May retail sales emerges Monday morning (we expect a small increase, but these are volatile numbers.) -11          In Sweden it’s time for CPI inflation for June (Thursday) and industrial production (Emap relevance 3) for May (Friday).  In line with the Riksbank's projections, we continue to expect a sequential easing in CPIF inflation to come through in Q2 and Q3, as the inflationary effect of SEK depreciation fades (or indeed reverses with SEK strengthening) and the size of the output gap continues to contain inflationary pressure.  On Friday we expect a third month of marked improvement in IP. -12          In Norway it’s the other way around: First manufacturing production (Emap relevance 4) for May on Wednesday and inflation on Friday.  We expect production to increase to +0.5%mom, after 0.2% in April.  Inflation should tick down on base effects for June: we expect CPI-ATE inflation (inflation ex energy and tax changes) to fall to 1.2%yoy from 1.5% in May. -13          Hungary also publishes industrial production this week.  We expect another strong number in line with the rest of the region, with the year-on-year growth reaching some 9% in May.  As was the case in the previous months, we expect most growth to occur in the exports-oriented sectors. -14          The second round of Poland's presidential elections takes place tomorrow, Sunday  July 4. The two candidates who attracted the most votes in the first round will face each other in an increasingly narrowing battle for the presidency: Bronislaw Komorowski, candidate for the governing Civic Platform (PO), and Jaroslaw Kaczynski, leader of the main opposition party, Law and Justice (PiS) and riding high on sympathy (and his new soft touch) from the death of his brother.  Komorowski, currently Speaker of the House and acting President, won the first round, and recent polls suggest he will win in the second round. But Kaczynski has been gaining in popularity and the final race may be very close.  Magda Polan has commented that a Komorowski's win would mean that initiatives pushed through parliament by the governing coalition would not be vetoed (as was the case during the cohabitation period with late president Lech Kaczynski) and would enable the government to pursue the more ambitious fiscal and structural reforms needed to ensure long-term fiscal sustainability.  If Kaczynski wins, this will be one of the most impressive comebacks in Polish politics since the beginning of the transition process, albeit achieved in extremely unusual circumstances and on a strong wave of sympathy vote.  Kaczynski’s victory would at best preserve the status quo, and further reduce the chances of implementing cuts to entitlements, necessary to reign in public debt.  Moreover, it could break a governing coalition (PO and PSL), leading to early elections.  According to the recent polls, PO still commands largest voter support and could form a coalition with just one other party. Support for PiS is fairly high but, most likely, it would have to form a difficult coalition of three parties, resulting in a weak government not willing to push for any structural reforms that could lift potential growth and improve the long-term fiscal position and reducing the prospects for EMU accession in the next five years. … and that’s the way Europe looks to me on this lovely afternoon.  Next weekend I’ll be in New York, so I am not sure you’ll hear from me for a couple of weeks unless something dramatic happens. I hope you all enjoy the summer as much as I do.

The Death Cross: Another Sign That We Are On The Verge Of A Recession? Posted: 04 Jul 2010 12:50 PM PDT The Standard & Poor's 500 50-day moving average stands poised to cross beneath the 200-day moving average.  To those in the financial industry, this is known as a "death cross", and it is a very powerful indicator that we could be entering a bearish period.  So is this yet another sign that we are on the verge of a recession?  Well, anyone who has spent much time trying to interpret financial charts will tell you how inexact that science can be.  Financial markets can be wildly unpredictable, and there is always a tremendous amount of manipulation going on behind the scenes.  However, when you add this impending death cross with all of the other signs that we could be entering a recession, there certainly seems to be reason for alarm.  The truth is that financial markets across the globe are full of fear and panic right now.  In fact, as noted in another article, the dominant force in world financial markets in 2010 is fear.  When fear rules, markets become very volatile and they can fall very quickly.  Anyone who has spent much time trying to squeeze profits out of world financial markets knows that they tend to fall much faster than they ever rise.  So are we now approaching one of those times of panic when financial markets across the world fall at breathtaking speed? Well, the truth is that nobody knows.  Anyone who says that they can predict these things with 100 percent certainty is either a liar or they are unbelievably rich.  But certainly the mood in the financial markets is grim.  If a death cross does happen on the S&P it is going to make things even more tense.         For those not familiar with investing terminology, Investopedia defines a "death cross" this way.... A crossover resulting from a security's long-term moving average breaking above its short-term moving average or support level. In this case, the death cross would be happening on the S&P 500, which is a weighted index of the prices of 500 large-cap common stocks actively traded in the United States.  The S&P 500 is one of the most commonly used benchmarks for the overall U.S. stock market. So how soon could we see a death cross on the S&P 500? Well, some analysts believe that it could happen almost at any time.... "Because the market has moved down so violently, it's brought about the likelihood of the Death Cross occurring much more rapidly," Abigail Doolittle, the founder of Peak Theories Research, was recently quoted by CNBC as saying.  "It now appears it could be only a day or two off if downward momentum continues." But hopefully most of you that are reading this are not even in the stock market at this point anyway. The truth is that the "rally" that we have witnessed in the financial markets has been nothing more than a "sucker's rally". The fundamentals of the marketplace have not changed. The U.S. housing market continues to teeter on the brink of disaster. The sovereign debt crisis is worse now than it ever has been. In fact, just about every economic indicator you could name is pointing to difficult times ahead. So there was really no fundamental reason why we should have even seen such a rally. But even with the recent rally, the stock market still has not been producing good returns. So often you hear people giving advice that goes something like this.... "If you are going to get into the stock market just keep your money in there and ride out the hard times because in the long run things always go up". But do they? The truth is that some people have done well, but overall inflation-adjusted returns from stocks over the past ten years have been pretty close to zero. So if the stock market is a game that you want to play, you had better really know what you are doing (or hire someone else who does), because it can be a very cruel game for amateurs. What does seem certain is that with so much tension in world financial markets right now, we are likely to continue to see an extreme amount of volatility in the marketplace.  In such an environment, even the slightest piece of good news or bad news can set off incredibly wild swings. It is a very exciting time for those of us who follow the financial news, but for those seeking to actually squeeze some  profits out of the marketplace, times such as these are not easy.

Jim's Mailbox Posted: 04 Jul 2010 12:03 PM PDT Hubris mixed with ignorance? CIGA Eric The dollar as all fiat currency is NO storehouse of the value of your life work. Over 40 US states are headed just this way. –Jim Jim, The headlines reveal all the hallmark signs of Keynesian addiction. While in many cases the abusers know their actions are detrimental, they simply cannot stop. Maybe it's nothing more than hubris mixed with ignorance of an economic theory that has morphed well beyond the intentions of its creator. As you said, over 40 US states are headed this way. Like an addict, they have to hit rock bottom, enforced by the discipline of the market, before the epiphany that "real" or inflation adjusted standard of livings need to be lowered. Eric Illinois Stops Paying Its Bills, but Can't Stop Digging Hole He picks the papers off his desk and points to a figure in red: $5.01 billion. "This is what the state owes right now to schools, rehabilitation centers, child care, the state university — and it's getting worse every single day," he says in his downtown office. 7.9 million jobs lost, many forever "We've entered a era where the United States will see more frequent recessions than anyone is used to," Achuthan said. One of the big problems is that many of workers who have lost jobs were in industries that are not likely to recover their former strength. More…

Precious Metals Market Report Posted: 04 Jul 2010 10:41 AM PDT By Catherine Austin Fitts This week Franklin Sanders of The Moneychanger will be joining us from Top of the World Farm as usual.  Special guest James Turk, founder of GoldMoney, will be joining us from New Hampshire, where he is spending summer months away from his home in Europe. I will be joining from London where [...]

How the iPod Became Irrelevant to Apple's Growth Posted: 04 Jul 2010 07:21 AM PDT Andy Zaky submits: A few years ago, I wrote an article detailing the iPod’s diminishing importance to Apple’s (AAPL) revenue growth. As Macintosh sales starting picking up steam, and the iPhone assumed the helm of Apple’s future growth prospects, the iPod started a slow descent down from its throne as Apple’s key main revenue driver. In January 2006, when Apple hit all time highs of $86.40, I remember how investors and financial analysts feared Apple’s best years were behind it. This fear, while apparently unfounded in retrospect, stemmed from the perceived belief that the iPod was near market saturation, and that Apple wouldn’t be able to innovate further. And though the market was in the midst of a raging bull market, investors saw Apple’s share price drop from $86.40 to $50.00 by that July. Complete Story »

LONG EVEN FOR A BEAR Posted: 04 Jul 2010 07:17 AM PDT By Toby Connor, Gold Scents The current decline has now lasted longer than even the longest leg down in the last bear market. The longer this goes the closer we get to a significant rally. As you can see this decline is now 7 days older than any decline during the last bear market. I'll say again that bears hoping the head & shoulders pattern will drop straight down to 850 are probably going to get caught in an explosive intermediate degree rally. It just doesn't make sense to continue pressing the short side at this point. It's safer to wait for a rally and then sell into it when it looks like it has topped. We've already had two intra-day reversals. There is a good chance this correction (bull market) or leg down (bear market) has reached exhaustion. At the very least one should tighten up stops so they don't lose whatever gains they might have. Although any little piece of good news or "surprise" Fed announcement pre-market could send the market rocketing right through stops trapping shorts in a losing position. That is the risk one takes playing the short side. The powers that be are going to do everything they can to halt the bear and hurt the shorts. I think we can count on at least one more round of QE if not more. Bans on short selling are surely coming again and I wouldn't put it past the government to massage the economic data even more than they already do to paint a better than reality picture. Before this is all over I even expect Ben to start dropping dollars from his helicopter although they will call it rebate checks again. Whatever it takes, Bernanke is not going to allow deflation. He already halted the most severe deflationary spiral since the depression in less than a year and aborted a left translated 4 year cycle with his printing press. That has never been done before. I don't know about you, but I have no desire to go up against that kind of firepower. And if that isn't enough to convince you the NY times had a feature article by Chicken Little, the sky is falling, end of the world himself Bob Precther. If sentiment has gotten so bad that the NY Times is giving interviews to Bob Prechter is must be time to back up the truck on the long side. (no thanks I'll just stick with my miners) Toby Connor GoldScents A financial blog primarily focused on the analysis of the secular gold bull market. If you would like to be added to the email list that receives notice of new posts to GoldScents, or have questions, email Toby.

Euro Rallies As Economic Data Piles Up Against a Strong Recovery Posted: 04 Jul 2010 07:16 AM PDT The Daily Reckoning The fireworks went off early yesterday in the currencies, folks… And they have not died down or had water thrown on them in the overnight and morning sessions… WOW! You should have seen the currency screens lighting up yesterday… First it was the rise in Initial Jobless Claims, and then the hits just kept coming for the dollar, and economy. ISM Manufacturing Index slid further than forecast, which means manufacturing is slowing down. And Construction Spending was down in May… I told you for the past week that the economic data was beginning to pile up against a strong recovery and for a double dip, and yesterday was no different! I was told by one of my chartist friends that the euro (EUR) would find resistance at 1.24 and 1.2450… The resistance must have been of the ilk of that country that I won't name so I don't tick people off, because… The euro flew right past those two figures without much hesitation… Here's the skinny… The economic data keeps piling up against the economy, which drives people to buy Treasuries, which pushes the price of Treasuries up, and the yields down… And down… And down… There's now a problem, folks… Yields are too low to be attractive, so the dollar got sent to the woodshed. The euro was the Big Dog once again, rising 2% on the day, and the other European currencies like Norway (NOK), Sweden (SEK) and Switzerland (CHF), all followed… The commodity currencies had a tough row to hoe all day, as the markets looked at them and said, "if the US isn't going to be the growth engine, there will be no global growth, and those currencies depending on global growth will slump"… Now… I still believe that commodities are in a bull market, and that commodities will rally strongly again, once the sovereign debt thing is in our rear view mirrors, and traders and investors begin to focus on fundamentals once again… And it's at that time, when these commodity currencies will come back… Gold fell alongside the dollar yesterday… And fell hard! In fact, gold fell below $1,200 (albeit briefly) overnight… But, investors, traders, etc. saw what I had told Jen, our metals trader, the other day… If gold falls below $1,200, I want to buy more… I didn't get the opportunity, because it happened overnight, and once it was below $1,200, the buying began, and gold is up $13 this morning… But, the wipeout it suffered yesterday was something to behold… And if you panicked, then that was the classic example of attempting to catch a falling knife! The euro is back above 1.25 this morning… The last time it breathed the air above 1.25 was the third week of May, and then it was sliding down the slippery slope… So… Is this the "real thing"? Hmmm… I don't think so, but I could be wrong. I'm told that most of the euro's rise yesterday came from short covering… (When someone has to cover their short position they have to buy the asset, thus if you have a lot of short covering, the buys drive up the price.) Then there was also a rumor that the Swiss National Bank (SNB) had come into the markets to sell francs and buy euros. The franc/euro spread had reached another all-time record level yesterday morning, and even though the SNB said that they no longer needed to stem currency appreciation, they can't have the franc so out of whack with the euro, so they allegedly did something about it. But… In the end, do euro holders care what drives their currency higher? Well, maybe, but have some fun with it… The commodity currencies got a bit of a lift overnight, when it was announced that the new Australian Prime Minister, Gillard, had reached an agreement on a total revision of the mining tax… Here's what I know… The Australian government announced a reworked version of its planned new mining tax, featuring major concessions to the mining industry including a reduction in the headline rate of the tax to 30% from 40%. Iron ore and coal, are the only commodities that will get taxed, and that's good news for commodities, and it eases industry fears about the potential impact on base metals projects. I read the report from Australia, and it sounds OK… Now, get my first reaction here… No tax is a good tax… However, this resolution is much better than the first proposal, which would have carpet-bombed all commodities with a tax, thus reducing the output… One note… The proposal still has to be passed by both houses of Parliament… Let's hope that the fat doesn't get added to their bills like they do the ones in this country! OK… I have to rail on the Fed for a minute here, so if you're not in the mood for taking the Fed to the woodshed, then go ahead and skip down a paragraph or two… I read this story on the Bloomie this morning, and immediately went over to the wall and screamed so loud, my voice is kind of froggy now! UGH! Here is a snippet… "Federal Reserve Chairman Ben S. Bernanke and then-New York Fed President Timothy Geithner told senators on April 3, 2008 that the tens of billions of dollars in 'assets' the government agreed to purchases in the rescue of Bear Stearns Cos. were 'investment grade.' They didn't share everything the Fed knew about the money. "The so-called assets included collateralized debt obligations (CDO's) and mortgage backed bonds with names like HG-COLL Ltd. 2007-1A that were so distressed, more than $40 million already had been reduced to less than investment grade by the time the central bankers testified. The government also became the owner of $16 billion of credit-default swaps, and taxpayers wound up guaranteeing high-yield, high-risk junk bonds." You can read the entire story here… But be prepared to put away the sharp objects, folks… OK… So… Either these two lied to Congress, or… Maybe they didn't know the difference between "investment grade" and "non-investment grade" assets!!! Which would probably make the most sense… But neither one should be acceptable to the American people… Speaking of making sense… I saw a video of someone that didn't make ANY sense! This was a video of the Speaker of the House telling people that unemployment benefits create jobs… I think that maybe I had better go back to school, and learn that kind of economics… I'm currently reading a book by Judge Andrew Napolitano called Lies The Government Told You… This is a historical look at all the lies, not just a book on current lies… Once you read this, then you'll have a different opinion on things, and then you'll begin to say… "Hey, that Chuck was bang on with that thought, or that thought." OK, maybe I'm stretching it a bit there! HA! Last year, in Vancouver, I gave a presentation at the Agora Financial Investment Symposium, and told the crowd there that their portion of the national debt was $37,000… Well, one year later… The number has grown to $42,000.. And that's for every citizen… If we only count the taxpayers, the number skyrockets to $118,000… Nice, eh? In our monthly letter to customers called A Review & Focus I do a section called "an inconvenient debt"… It gets a little dark and spooky from time to time going through all this debt that we have. (You can get your copy of this "award winning" monthly newsletter by becoming a customer of EverBank World Markets… (OK, I made up the award winning thing, but it sounded good, eh?)) Well… I almost made it through the Pfennig today without talking about the Jobs Jamboree… But, I've got space to fill, so I might as well go down this road and talk about what will drive the markets this morning… (I'm sure you're saying, "You think, Chuck? Yes, we would like to know about what will drive the markets this morning!") So, yes, the Jobs Jamboree is this morning. The experts believe that when you take out the government census workers, the US lost jobs last month… WHAT? Yes, that's true… So, I guess the Speaker of the House might want to revisit with those economists that she said advised her, because we've been paying out unemployment checks by the truckload for a couple of years now, and we're still not creating jobs! But since we're still dealing with an overall bias to risk aversion, a negative surprise on the jobs data would most likely benefit the dollar… I know, I know, that's a strange and twisted way of thinking, but it's true! In the old days, (now it sounds like I'm talking to my kids, who immediately head for the doors when I say, when I was a kid…) a negative number of jobs created would have sent the dollar to the woodshed, but not these days… These days, we have to deal with the risk aversion jugheads! To recap… The euro had its best performance day in months yesterday, moving from 1.22 and change to above 1.25. Bad economic prints in the US got things started, and the short covering and SNB intervention took it from there. Today is a Jobs Jamboree Friday, and gold, which had briefly dropped below $1,200 is up $13 this morning. Chuck Butler for The Daily Reckoning Euro Rallies As Economic Data Piles Up Against a Strong Recovery 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." More articles from The Daily Reckoning….

How the Banksters Serve the Gold-Buyers Posted: 04 Jul 2010 07:16 AM PDT By Jeff Nielson, Bullion Bulls Canada There has been a familiar refrain among gold-bulls for the past few years, "if only the big-buyers would demand "delivery" of most of their gold, this would destroy the anti-gold cabal once and for all." Consequently, a question which I (and other precious metals commentators) have often been asked is "why don't those big-buyers demand delivery?" Naturally, this is a question which I have also frequently asked myself, rhetorically. The answer finally sunk-in, but only after I was able to put aside my own perspective on the gold market, and think like a big-buyer. On stock bulletin-boards (which I have been known to frequent), when the price of gold is knocked down by the cabal, and the shares in the gold miners take a consequent hit, "longs" are often heard saying that "this is just another good buying opportunity." It is a retort which rapidly loses its potency after you have heard it a few times, but what are you going to do? On down-days in the market, it's either whine or show a little bit of (false?) bravado. However, there are a group of players in the precious metals market who truly do look at all pull-backs in the price of bullion as "buying opportunities" – the big-buyers. For purposes of definition, the buyers to whom I'm referring are central banks, funds, and the small number of wealthy individual investors who have the buying-power to make purchases on a similar scale. With average retail investors, we could buy our own lifetime's supply of bullion with a single purchase, and never cause even a ripple in the bullion market. However, the big-buyers face two related problems in attempting to fill their own "quotas" for bullion. To use an extreme example, China's government almost certainly wants to obtain several, thousand tons of gold, since (as I have written previously) I'm firmly convinced that China's government is making plans for a return to a "gold standard". Not only would it be impossible for China's government to ever buy that quantity of gold in one "gulp", but merely making the attempt would launch gold into a vertical price-explosion which would dwarf any movements we have seen during gold's quintupling in price. Keep in mind that the 200 tons of gold purchased by the government of India last year (as part of the ridiculously-hyped IMF sale of 400 tons of gold) represented the biggest single purchase of gold during this entire bull-market for gold. And in the early years of this bull-market, European central banks were foolishly dumping 500 tons per year of their own, precious reserves. In contrast, during the first nine months of the latest central bank "sales agreement", these same central banks have sold less than two tons – and virtually all of that was required for the minting of coins. As a result, the big-buyers literally need dozens of "buying opportunities", and in the case of the government of China, hundreds of buying opportunities. Enter the anti-gold cabal. The same arrogant bankers who smugly once believed that they could control the gold market "forever" with the (once) vast hoards of bullion which they held are now beginning to comprehend the truth. All they have really accomplished is to allow the big-buyers the opportunity to buy all these banksters' gold at a tiny fraction of its true value. More articles from Bullion Bulls Canada….

Silver Pummeled as U.S. Weekly Prices Dive 7.4% Posted: 04 Jul 2010 07:15 AM PDT U.S. silver prices tumbled 7.4% on the week, falling the most since the 8.4% drop during the week ending February 5, 2010. Much of the metal's decline — 91.8 cents worth — occurred on Thursday as a volley of reports added to worries of an economic slowdown in the U.S. and China, triggering a large [...]

Bullion Prices & Business Weekend Recap – July 3, 2010 Posted: 04 Jul 2010 07:15 AM PDT U.S. gold rose modestly Friday after double-dip recession worries pulled prices down in the previous session to a five-week low for the biggest one-day loss since February 4. Gold gained $1 before the holiday weekend, but registered its worst week in six and its second straight weekly decline. Global economic concerns also pummeled other metals, oil and stocks. Crude fell for five consecutive days and ended at a three-week low following a week in which prices had soared toward a two-month high. U.S. and European stocks all registered weekly losses, with major indexes plunging between 3.90 percent and 5.92 percent. (…) Read the rest of Bullion Prices & Business Weekend Recap – July 3, 2010 (1,439 words) © CoinNews.net for Coin News, 2010. | Permalink | No comment | Want more on these topics? Browse the archive of posts filed under Bullion Articles and Precious Metal Reports, Business News.

Metals smash down was just another paper affair, Butler tells King World News Posted: 04 Jul 2010 07:15 AM PDT 10:50a ET Saturday, July 3, 2010 Dear Friend of GATA and Gold (and Silver): In his weekly interview with Eric King of King World News, silver market analyst Ted Butler remarks that last week's smash down in the precious metals was another typical manipulation by the big commercial traders, a paper affair on the Comex without any real metal selling. The big commercials, Butler adds, began buying again on Friday. Butler says he has lost patience with the U.S. Commodity Futures Trading Commission, calls the silver market a criminal operation, identifies its perpetrators, as he has done before, and notes that none of them have ever challenged his accusation. The interview is about 10 minutes long and you can find it at the King World News Internet site here: http://www.kingworldnews.com/kingworldnews/Broadcast_Gold+/Entries/2010/… CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc. Join GATA here: New Orleans Investment Conference Wednesday-Saturday, October 27-30, 2010 Hilton New Orleans Riverside Hotel http://www.neworleansconference.com/index.html * * * 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: http://www.gata.org To contribute to GATA, please visit: http://www.gata.org/node/16

What’s Happening With Gold? Posted: 04 Jul 2010 07:15 AM PDT Market Blog submits: By Simon Avery The price of gold is showing some strength Friday after a wild selloff the day before. Read more »

June's Hottest ETFs Posted: 04 Jul 2010 06:11 AM PDT Scott's Investments submits: Below are the 20 hottest ETFs at the close on June 30th, based on the 6 month performance. These are not 'buy' recommendations or aggregate portfolios for investment. My favorite way to use this list is as a) to get a sense for the intermediate trends and b) as potential short-term trading opportunities (long or short), although I tend not to use leveraged funds. If you are comfortable using your own technical analysis that is the preferred way. Trend lines and support/resistance levels are some of the simplest and most powerful tools for analyzing price charts. An investor could also use proprietary trading signals combined with risk management techiniques such as those I profiled in-depth here.This month's list is heavy on Treasures on levered short ETFs. Data includes leveraged ETFs and the data source is FINVIZ.com. For real time tracking of this list see the right hand side of my blog. Ticker Company Free Trend Analysis Half Year Year 200 Day SMA [[AGA]] PowerShares DB Agriculture Dble Shrt ETN Here 53.55% 28.69% 25.88% [[TMF]] Direxion Daily 30 Yr Trs Bull 3X Shares Here 46.72% 11.76% 26.06% [[BHH]] B2B Internet HOLDRs Here 42.86% 81.82% 29.88% [[BOM]] PowerShares DB Base Metals Dble Shrt ETN Here 37.49% -45.29% 15.91% [[DRR]] Market Vectors Double Short Euro ETN Here 34.72% 27.00% 24.04% [[EUO]] UltraShort Euro ProShares Here 34.25% 26.12% 24.04% [[VXZ]] iPath S&P 500 VIX Mid-Term Futures ETN Here 31.27% 13.71% 26.16% [[DPK]] Direxion Daily Dev Mkts Bear 3X Shrs Here 28.89% -40.19% 19.47% [[GRN]] iPath Global Carbon ETN Here 27.78% 19.54% 12.11% [[TYD]] Direxion Daily 10 Yr Trs Bull 3X Shares Here 27.41% 19.65% 17.73% [[DGP]] PowerShares DB Gold Double Long ETN Here 26.77% 70.45% 19.69% [[UGL]] Ultra Gold ProShares Here 24.56% 67.76% 18.54% [[BXDD]] Barclays Short D Lvgd Inv S&P 500 TR ETN Here 24.54% 25.19% [[ZROZ]] PIMCO 25+ Yr Zero Cpn U.S. Trsy Idx ETF Here 23.61% 17.47% [[EDV]] Vanguard Extended Dur Trs Idx ETF Here 23.13% 12.62% 15.26% [[EPV]] UltraShort MSCI Europe ProShares Here 22.75% -31.51% 14.92% [[IIH]] Internet Infrastructure HOLDRs Here 22.39% 56.16% 14.05% [[EFU]] UltraShort MSCI EAFE ProShares Here 22.01% -26.48% 15.62% [[ERY]] Direxion Daily Energy Bear 3X Shares Here 21.83% -39.39% 19.33% [[ADZ]] PowerShares DB Agriculture Short ETN Here 21.08% 14.04% 12.82% Disclosure: No positions Complete Story »

Ford, Tesla, Solyndra: Good Economic News or Bunk? Posted: 04 Jul 2010 05:59 AM PDT Bruce Krasting submits: Some are touting Ford’s (F) improved financial position. They actually paid down some debt and threw some crumbs to Preferred shareholders. Some are looking to the IPO of Tesla (TSLA) as an indication that the capital markets are open and doing what they are supposed to do. Raising equity for new companies. Complete Story »

"Inflation Seen As Nation's Salvation" Redux; How Keynes Grew To Hate 'Keynesianism' And Love The Monetary Bomb Posted: 04 Jul 2010 05:56 AM PDT There are few things as entertaining as watching US propaganda movies from the 1930s. Case in point, this documentary from the depths of the great recession (1933), when America was struggling with a deflationary wave nearly as bad as the one today, and when the only salvation was the spinning of Keynesian politics to the point where even Keynes himself had to send a letter to FDR to warn him that how the US was was interpreting his fledgling economic religion (it hadn't quite made cult status yet), was wrong. Of course, nobody cared then, and nobody will care now: after all there are cans to be kicked, mid-term elections to prepare for, and votes to be bought with ridiculous unemployment benefit extensions upon extensions. And while even back then Keynes disagreed with FDR's wholesale economic approach which compounded failure upon failure, only to be saved by the "fluke" that was WWII, one wonders just how quickly he is spinning in his grave today, when, as Rick Santelli pointed out, we no longer have deflation, but deleveraging to the tunes of tens of trillions of dollars, and no longer a cyclical recession, but a structural shift in the way credit is apportioned, and disappearing, in the economy. We expect to soon see a comparable shift in the Fed's and the ECB's subliminal cartoon messages, which just like the recent 180 from Barton Biggs, will soon begin highlighting all those "previously undiscovered silver linings" in the great satan of inflation. Hilarious video below: And as PopModal points out, before America listens to the Krugmanites threaten mass extinction events in case America does not continue to spend, spend, SPEND, read the following observations based on an open letter from Keynes to Roosevelt: "Now there are indications that two technical fallacies may have affected the policy of your administration. The first relates to the part played in recovery by rising prices. Rising prices are to be welcomed because they are usually a symptom of rising output and employment. When more purchasing power is spent, one expects rising output at rising prices. Since there cannot be rising output without rising prices, it is essential to ensure that the recovery shall not be held back by the insufficiency of the supply of money to support the increased monetary turn-over. But there is much less to be said in favour of rising prices, if they are brought about at the expense of rising output. Some debtors may be helped, but the national recovery as a whole will be retarded. Thus rising prices caused by deliberately increasing prime costs or by restricting output have a vastly inferior value to rising prices which are the natural result of an increase in the nation's purchasing power." "I do not mean to impugn the social justice and social expediency of the redistribution of incomes aimed at by N.I.R.A. and by the various schemes for agricultural restriction. The latter, in particular, I should strongly support in principle. But too much emphasis on the remedial value of a higher price-level as an object in itself may lead to serious misapprehension as to the part which prices can play in the technique of recovery. The stimulation of output by increasing aggregate purchasing power is the right way to get prices up; and not the other way round." Of course, when the nation has no purchasing power, the government steps in to both restrict output and to borrow from future consumption to be the purchasing power of last resort. As for Bernanke's insane monetary printing experiment, Keynes had a thing or two to say about that as well: "The other set of fallacies, of which I fear the influence, arises out of a crude economic doctrine commonly known as the Quantity Theory of Money. Rising output and rising incomes will suffer a set-back sooner or later if the quantity of money is rigidly fixed. Some people seem to infer from this that output and income can be raised by increasing the quantity of money. But this is like trying to get fat by buying a larger belt. In the United States to-day your belt is plenty big enough for your belly. It is a most misleading thing to stress the quantity of money, which is only a limiting factor, rather than the volume of expenditure, which is the operative factor." So before all those who are dead set on spending America to oblivion and printing trillions and quadrillions more, perhaps they should realize that even Keynes not only did not endorse such irresponsible behaviour, but in fact criticized the US president way back in the day for taking the message of Keynesianism and turning it over on its head. Full letter from JM Keynes in the December 31, 1933 NYT issue. Keynes NYT Dec 31, 1933 h/t Ian

Conservative Growth Investing: Compelling Style for Challenging Times Posted: 04 Jul 2010 05:54 AM PDT Alan Brochstein, CFA submits: In mid-2008, after having launched my first model portfolio, the Top 20, I received a lot of feedback from the Seeking Alpha community that I needed to focus on dividend-paying companies and a strategy more appropriate for retirees or those nearing retirement. I listened and launched the Conservative Growth/Balanced Model Portfolio on July 21st, sharing a series of articles over the next several days that described the construction of the initial portfolio as well as the philosophy that then and still now guides the management of the model. The last article, Completing the Conservative Growth Portfolio, has backwards links to the entire series if you are interested. The model invests in stocks and bonds with the dual goals of long-term appreciation and capital preservation and is designed to typically deliver 1% current income above stocks. Performance is measured against a combination of 60% stocks (S&P 500) and 40% bonds (Barclays Aggregate Bond Index). Stocks must represent a minimum of 45% of the portfolio and can be as large as 75%, while bonds can range between 10% and 55%. Cash can range from 0% to 45%. Complete Story »

Myths of Austerity? Posted: 04 Jul 2010 05:30 AM PDT Via Pension Pulse. I want to follow-up on an article Paul Krugman published a few days ago in the NYT, Myths of Austerity: When I was young and naïve, I believed that important people took positions based on careful consideration of the options. Now I know better. Much of what Serious People believe rests on prejudices, not analysis. And these prejudices are subject to fads and fashions.   Which brings me to the subject of today’s column. For the last few months, I and others have watched, with amazement and horror, the emergence of a consensus in policy circles in favor of immediate fiscal austerity. That is, somehow it has become conventional wisdom that now is the time to slash spending, despite the fact that the world’s major economies remain deeply depressed.   This conventional wisdom isn’t based on either evidence or careful analysis. Instead, it rests on what we might charitably call sheer speculation, and less charitably call figments of the policy elite’s imagination — specifically, on belief in what I’ve come to think of as the invisible bond vigilante and the confidence fairy.   Bond vigilantes are investors who pull the plug on governments they perceive as unable or unwilling to pay their debts. Now there’s no question that countries can suffer crises of confidence (see Greece, debt of). But what the advocates of austerity claim is that (a) the bond vigilantes are about to attack America, and (b) spending anything more on stimulus will set them off.   What reason do we have to believe that any of this is true? Yes, America has long-run budget problems, but what we do on stimulus over the next couple of years has almost no bearing on our ability to deal with these long-run problems. As Douglas Elmendorf, the director of the Congressional Budget Office, recently put it, “There is no intrinsic contradiction between providing additional fiscal stimulus today, while the unemployment rate is high and many factories and offices are underused, and imposing fiscal restraint several years from now, when output and employment will probably be close to their potential.”   Nonetheless, every few months we’re told that the bond vigilantes have arrived, and we must impose austerity now now now to appease them. Three months ago, a slight uptick in long-term interest rates was greeted with near hysteria: “Debt Fears Send Rates Up,” was the headline at The Wall Street Journal, although there was no actual evidence of such fears, and Alan Greenspan pronounced the rise a “canary in the mine.”   Since then, long-term rates have plunged again. Far from fleeing U.S. government debt, investors evidently see it as their safest bet in a stumbling economy. Yet the advocates of austerity still assure us that bond vigilantes will attack any day now if we don’t slash spending immediately.   But don’t worry: spending cuts may hurt, but the confidence fairy will take away the pain. “The idea that austerity measures could trigger stagnation is incorrect,” declared Jean-Claude Trichet, the president of the European Central Bank, in a recent interview. Why? Because “confidence-inspiring policies will foster and not hamper economic recovery.”   What’s the evidence for the belief that fiscal contraction is actually expansionary, because it improves confidence? (By the way, this is precisely the doctrine expounded by Herbert Hoover in 1932.) Well, there have been historical cases of spending cuts and tax increases followed by economic growth. But as far as I can tell, every one of those examples proves, on closer examination, to be a case in which the negative effects of austerity were offset by other factors, factors not likely to be relevant today. For example, Ireland’s era of austerity-with-growth in the 1980s depended on a drastic move from trade deficit to trade surplus, which isn’t a strategy everyone can pursue at the same time.   And current examples of austerity are anything but encouraging. Ireland has been a good soldier in this crisis, grimly implementing savage spending cuts. Its reward has been a Depression-level slump — and financial markets continue to treat it as a serious default risk. Other good soldiers, like Latvia and Estonia, have done even worse — and all three nations have, believe it or not, had worse slumps in output and employment than Iceland, which was forced by the sheer scale of its financial crisis to adopt less orthodox policies.   So the next time you hear serious-sounding people explaining the need for fiscal austerity, try to parse their argument. Almost surely, you’ll discover that what sounds like hardheaded realism actually rests on a foundation of fantasy, on the belief that invisible vigilantes will punish us if we’re bad and the confidence fairy will reward us if we’re good. And real-world policy — policy that will blight the lives of millions of working families — is being built on that foundation. Mr. Krugman has been busy lately, appearing on Charlie Rose, and on Sunday he took part in the roundtable discussion on ABC's This Week, discussing the jobless recovery and why he was correct that more stimulus was needed in the first package. Krugman also appeared on CNN's Fareed Zakaria stating that more needs to be done to shore up the economy in the form of spending on public works and other programs. On the flip side, Mr. Zakaria interviewed Harvard economic historian Niall Ferguson who thinks we need to stop spending and "radically simplify the tax code" to shore up business confidence. I embedded the video with both interviews below and will go over a few key points. First, as I have stated before, implementing austerity measures at a time when private sector recovery is still fragile is very dangerous and will ultimately threaten the global recovery. Second, Krugman is right that austerity will work against governments trying to shore up their fiscal position. Why? Because if austerity slows the recovery, or worse still, kills it, then governments will see their tax revenues shrink dramatically. Imposing austerity measures during a fragile recovery is akin to engaging in fiscal suicide. Third, Krugman is right about Ireland, Latvia and Estonia. They all implemented savage cuts, unemployment went up, as did the cost of insuring their debt, and government revenues dwindled. It has been nothing short of a monumental disaster. Fourth, "invisible bond vigilantes" do not pose a serious threat for the US or even Japanese bond market. Bond vigilantes can easily pick on Greece, Portugal and maybe even Spain, but that game has run its course too. The Europeans finally woke up and sent out a strong signal to speculators in the form of a trillion dollar gamble. Importantly, the big, bad bond vigilantes are simply no match for the Federal Reserve and they know it. Bernanke can squash them like a bug if they get too smug and start speculating on US sovereign debt. Fifth, as I wrote in my last comment, the bond market is more worried about a 1930s echo right now, which is driving yields lower. If they were more worried of massive fiscal crisis leading to a run on the US dollar, then yields would be skyrocketing up, not down. Sixth, I do not agree with all of Krugman's proposals. Spending on public works is not a long-term solution to bolstering the labor market. You need to a much more radical approach which will target new emerging industries. I was happy to see president Obama announce that the government is handing out nearly $2 billion for new solar plants, but this is a drop in the bucket, basically peanuts. Seventh, I think Mr. Ferguson is right that we need to simplify the tax code, but I prefer a consumption tax which does not penalize low income families over any flat income tax. Mr. Ferguson was coy stating that "Keynesian policies were an abysmal failure in the past". It wasn't Keynesian policies that led to the 1970s stagflation episode, but supply shocks and funding the Vietnam war through expansionary monetary policy. Finally, one thing Krugman said on ABC's This Week really struck me. He said he doesn't like the term 'double-dip' because even of the US economy grows at 1% but unemployment rises to 10.5%, it won't technically be another recession, but that doesn't mean much to those who are currently struggling to find work. We are at a crossroad. Millions of unemployed people are losing hope, waiting for policymakers to come up with a program targeting job growth. Instead, all they are seeing is political feuding that doesn't address the central core issue - jobs. It's as if politicians have run out of ideas and go with whatever the latest poll tells them is the flavor of the day. The lack of leadership from politicians and business leaders during these unnerving times is truly disheartening. Let me end by wishing all my US readers a Happy Fourth of July. As bad as it gets, never lose hope in America.

Massive Drain Of COMEX Silver Inventories Continues Posted: 04 Jul 2010 05:05 AM PDT http://news.coinupdate.com/massive-d...ontinues-0344/ By Patrick A. Heller on July 1st, 2010 Categories: Featured Articles, Gold and Silver Commentary, Precious Metals On June 16th, the COMEX reported total silver inventories of 119.5 million ounces. Ten trading days later, on June 30, total inventories had fallen to 113.56 million ounces, a 5.94 million ounce (4.97%) decline. There have been significant declines on nine of the last ten trading days, but this story has received almost no coverage by the mainstream media. One reader of my June 25th column where I broke this story commented that this pattern was consistent with activity a year ago. It is true that inventory levels do fluctuate. For instance, the COMEX gold inventories are much higher now than they were a year ago. However, some information I have learned in the past five days further demonstrates that the current run on COMEX silver inventories is not just something that happens occasionally in a stable exchange. In particular, a high percentage of the withdrawn silver has apparently been from two specific depositories, not just all of the COMEX depositories in general. Those who have studied the details closely state that the banks losing the bulk of silver have been Scotia Bank and HSBC. Scotia Bank has been rumored for many months to have very little physical precious metals in its vaults to cover customer deposits. This can be done, in theory, if the bank owns derivatives to cover their short physical position, but these derivatives are only as good as the other party's abilities to deliver on demand in event of a possible Scotia default. There is not really any hard and fast information to prove that the derivatives are worth the paper they are printed on. In fact, since the total amount of extant silver derivatives exceed many years of silver mining production, let alone the much smaller amount of available above ground inventories, there is a huge reason to be fearful that the paper silver market could be heading for a crash in the near future. On one day in June, there were 630,000 ounces of silver withdrawn from other COMEX depositories on the same day that 610,000 ounces were deposited at Scotia Bank. This seems more than coincidental. It looks suspiciously like an emergency transfer from another depository to help Scotia Bank avoid default on making delivery that day. If this drain of COMEX silver inventories continues, it could literally be the spark that brings down the entire global financial system, Any indication that owners of "paper" silver may not be able to convert their paper into the physical product will only increase the demand to do just that. As I said five days ago, this run won't be confined to the silver market for long. Owners of paper gold will see what is happening and almost certainly step up converting their paper into physical metal. By the way, the COMEX recently reported that physical delivery of maturing gold contracts thus far in 2010 is running 39% higher than for the same period of 2009. The parties facing the largest potential losses are naked sellers of gold and silver commodity contracts, where there is no physical inventories to fulfill their liabilities. The entities with such huge positions are major banks. As gold and silver (and probably platinum, palladium as well as many other metals) prices rise because of the supply squeeze, it could easily happen that many major banks and central banks could go bankrupt. It scares me to think of the worldwide upheaval that could result from this growing run on COMEX silver inventories. I am even more terrified that, not only could it happen, it could bring on a severe financial crisis within a matter of weeks. Those who will be least harmed by these developments are those who get out of paper silver and gold and into physical metals as soon as possible. Patrick A. Heller owns Liberty Coin Service in Lansing, Michigan and writes "Liberty's Outlook," a monthly newsletter covering rare coins and precious metals. Past issues can be found online at http://www.libertycoinservice.com/ Pat Heller is also the gold market commentator for Numismatic News. Past columns online at http://numismaster.com/ under "News & Articles". His periodic radio interviews can be heard on WILS 1320 AM in Lansing, www.talkLansing.net, and on www.yourcontrarian.com. ---------------------------------------- Read carefully, same names, usuall suspects,however this is the first I have heard of taking delivery causing a total systemic crash.I thought the entire value of all contracts (paper and physical) still a small amount of money.

DOW below 1,000? Posted: 04 Jul 2010 04:28 AM PDT A proponent of the Elliott Wave theory for market forecasting sees trouble ahead: a slide worse than the Great Depression or the Panic of 1873. The Dow, which now stands at 9,686.48, is likely to fall well below 1,000 over perhaps five or six years as a grand market cycle comes to an end, he said. That unraveling, combined with a depression and deflation, will make anyone holding cash "extremely grateful for their prudence." A Market Forecast That Says 'Take Cover' By JEFF SOMMER Published: July 2, 2010 WITH the stock market lurching again, plenty of investors are nervous, and some are downright bearish. Then there's Robert Prechter, the market forecaster and social theorist, who is in another league entirely. Tami Chappell for The New York Times If Robert Prechter is right, one market analyst said, "we've basically got to go to the mountains with a gun and some soup cans."Mr. Prechter is convinced that we have entered a market decline of staggering proportions — perhaps the biggest of the last 300 years. NYT Subscribers Only

Texas AG Candidate Sues Goldman et al For Causing "Recession, Unemployment" And Everything Else That's Bad Posted: 04 Jul 2010 04:19 AM PDT Yesterday, NY's pension fund sued BP for having the temerity to see its shares drop. Today, the Democratic candidate for Texas  AG has filed a Legal Complaint and Legal Brief against Goldman Sachs et literally al for "causing financial crisis and physical harms; recession; unemployment; home and wealth loss; forced cutbacks in a wide variety of critical areas, including medical care, social services, and environmental protection" and pretty much everything that is bad in the world. Tomorrow, one million Americans file a class action lawsuit against E-Trade for experiencing a downday. In an action that is undoubtedly predicated by the plunging cash coffers and the drop in Texas pension funds, coupled with Wall Street's less than stellar popularity rating, the Democrat candidate for Texas Attorney General, Barbara Ann Radnofsky, has decided to put the two together, and to get her campaign off to a rock solid start, by suing Goldman Sachs Group, Morgan Stanley, UBS, Merrill Lynch/BOA, Citigroup, Credit Agricole, Credit Suisse, Deutsche Bank ("the Banks"), Moody’s, Standard and Poor’s, Fitch (“the Ratings Agencies”), AIG Insurance Company (AIG) and other John Doe defendants. The basis of the lawsuit apparently comes from this: "the U.S. Supreme Court recognizes the State's right to sue to protect its physical and economic well being and that of its citizens and the State's possession of Quasi Sovereign Interests in physical wellbeing and economic prosperity. The doctrine permits damages from such underlying theories as common law fraud and RICO, and survived Motions to Dismiss in the State tobacco litigation." In other words the vampire squid has become nothing more than a pack of cigarretes: Goldman Lights (recessed filter) anyone? Soon, we will be adding cancer to the list of evils unleashed upon the world at the breaking of the seventh seal. Not sure what to make of this - you see we have no legal Ph.D., but blaming someone for all the troubles in one state based on years of imprudent and reckless decisionmaking, coupled with legislative and regulatory capture, sure sounds like the July 4th thing to do. Some Ph.D.'s who however are smarter than us, and as a result can opine (in this case affirmatively), are the following: "Having reviewed the Complaint, and bringing their expertise to explain this action as viable, reasonable, plausible are:* Former Texas Attorney General and Gov. Mark White.* Dean Erwin Chemerinsky, UC Irvine Law School. * Prof. Charles Silver, UT Law School. * Forensic CPA and Senior Business Evaluation Analyst Jeannie McClure and other experts with whom she works (liability, causation, damages, economic modeling).* A variety of prominent lawyers, including Steve Malouf, Larry Joe Doherty, Tommy Fibich, and Mark Mueller." The full complaint is below: 1. Plaintiff State of Texas ("the State") sues Goldman Sachs Group, Morgan Stanley, UBS, Merrill Lynch/BOA, Citigroup, Credit Agricole, Credit Suisse, Deutsche Bank ("the Banks"), Moody’s, Standard and Poor’s, Fitch (“the Ratings Agencies”), AIG Insurance Company (AIG) and other John Doe defendants for causing financial crisis and physical harms; recession; unemployment; home and wealth loss; forced cutbacks in a wide variety of critical areas, including medical care, social services, and environmental protection. Damages to the State include but are not limited to reduction in the value of state investments and the increased costs to governmental units, including increased insurance costs to Texas governmental units seeking to issue bonds whose reputation has been unfairly impaired. Defendants caused budget shortfall of at least $18 billion to the State of Texas. The environment, health and wellbeing of the State and its citizenry are directly harmed. The first manifestations to children and other vulnerable citizens include hunger, disease and medical complication. 2. The U.S. Supreme Court recognizes the State's right to sue to protect its physical and economic well being and that of its citizens and the State's possession of Quasi Sovereign Interests in physical wellbeing and economic prosperity. 3. AIG negligently ran and ruined its own and other businesses and the economy by failing to act as a reasonable and prudent insurance company, costing over $180 billion for bailout. AIG foolishly insured many hundreds of billions of dollars of loan agreements: bets as to whether borrowers would default. In insuring these credit default swaps, AIG knew or should have known that massive defaults would occur and AIG would be left holding the bag. AIG’s misconduct included intentional and fraudulent acts and omissions. AIG engaged in fraudulent misrepresentations aware of the significant risks, but claiming credit default swaps were selling insurance for “a catastrophe that would never happen.” 4. The Banks negligently ran and ruined their own and other affected businesses and the economy. Wall Street Banks created financial products such as Collateralized Debt Obligations, derived from bonds, which they marketed and sold as legitimate investments, using credit default swapping to allow investors to also bet on failure/default. The Wall Street Banks, negligently and intentionally, allowed the ratings received on their own products to falsely portray the investments as better than in truth the investments were. Had investors or ratings companies been properly informed, they'd have known the products were designed to fail, intentionally favoring bettors-on-default. The Banks’ misconduct included intentional and fraudulent acts and omissions. 5. The rating system fostered by all defendants added to the deception including failure to disclose and eliminate banks’ control over ratings and payments. The ratings agencies also acted negligently, fraudulently and with gross negligence in their conduct. Each defendant’s private worries were not expressed publicly. In the September 2008 Financial Crisis, Ratings Companies downgraded hundreds of billions worth of Collateralized Debt Obligations, massive dollar amounts of which remained AAA rated up to that point. Significant amounts were not only degraded, but had filed default. Defendants acted, individually and together, in concert, conspiracy and enterprises. One now discovered email reflected the attitude: “Let’s all hope we are all wealthy and retired by the time this house of cards fails.” 6. Defendants’ gross negligence, and intentional torts, including omissions and acts and their toxic product offerings and sales were fraudulent as well as negligent. 7. The Defendants continue in their negligent, grossly negligent and intentional practices described, allowing their greed and egos to dominate their continued, poor decision making. The State's protection of its Quasi Sovereign Interest serves the public's interest in making Wall Street accountable for its actions, past, present and future, and seeks all injunctive relief to which it is entitled, as well as damages, to compensate for harm caused and prevent further damage. Wall Street continues its wrongful activities involving financial products. Texas sues to remedy and prevent further physical and economic injury to its citizenry, the state generally, and its economy and budget. The State is entitled to seek relief. The matters complained of affect her citizens at large. The environment and economy of Texas and the physical, economic and general welfare of its citizens have seriously suffered as a result of the toxic products and activities described. Texas sues for its damages caused by Wall Street's fee-churning, insider-favoring, betting-on-losers default misadventures. 8. The Texas Attorney General, on behalf of the people and State of Texas brings this suit under Texas law and the well recognized doctrine of Quasi Sovereign Interest for the following damages: A. Money damages to the State of Texas for at least $18 Billion; B. Requirement that Defendants disgorge their economic benefits, including claw back of any and all bonuses paid since the beginning of the harmful practices outlined; C. The State's attorneys fees, costs, and expenses; D. Punitive damages for the outrageous ruinous conduct described. Without the massive damages such as those suffered by Plaintiff, the wrongdoers would never have been caught. No self regulation, governmental regulation, or outside force exposed the wrongdoing. The massive harm (including self destruction) provided no halt to bad business practices. Without punitive damages, the harmful practices will continue into the future, exposing the State and its citizens to further damage. E. Such other and further relief as to which the State may show itself justly entitled. And if you just can't get enough, here is the legal brief of the litigation which is fully supported by the Texas Democratic party.

H.R. 5618 - Extending Unemployment Benefits– A Bad Bill Posted: 04 Jul 2010 03:38 AM PDT The House passed H.R. 5618 on Friday along party lines. This bill would extend unemployment benefits to November 2010. To see if your congressperson voted for this bad legislation see this list. I have two major objections to the bill. First is that this is not “pay go” and second this is all about politics and an election. The House bill was structured as an “emergency” spending bill. This designation allows for it to be exempt from the pay go rules. I am one of those who think that the biggest emergency the country faces is the size of the budget deficit. This bill would add $34 billion to our debt load. Here is how the CBO scored it. If the Senate passes this bill it would extend benefits to the end of November. Gee, that is a convenient time. Just a few weeks past the critical bi-elections. This bill has little to do with structural unemployment. It is about buying votes and trying to sustain political control of Congress. Those that support/vote for it will say that they are doing so to help the unemployed. Actually it is just more bad legislation. This is about politics, not economics. The Senate has gone on a ten-day holiday and will pick up the proposed legislation when they return. The vote will be on party lines. As of this weekend that means the White House has 57 of the 60 votes needed to pass. Olympia Snowe (R. Ma.) has indicated she will support it. Therefore they are two votes shy. If this deal clears the Senate and becomes law it would mean that two Republican Senators had their arms twisted, that or they had their political palms greased with some form of side deal. Washington at its worst. Does it matter that we are adding another $34b to our debt load when the debt is already $14 trillion? Not really. This only increases our debt by a ¼%. It is equivalent to about 20 days of interest. We are in so deep at this point that $34b is a very small number. How is that possible? I think the outcome of this legislation is important in a number of respects. It will influence markets and the economy. -If passed, it will be a weight on the dollar. Outside of the US every country is singing fiscal conservatism. We stand out in the opposite camp. Passage of this bill will be reflected in the capitol markets. -If enacted it will have some short-term beneficial impacts. It will keep consumption going for a bit longer. More I-phones will be bought, the number of defaults will be a bit less, there will be some monthly data released that will hide some of the weakness. -The President’s fiscal commission will release its results on December 1st. The day after the extension of benefits will expire and three weeks after the election. There is no way this temporary extension will be extended at that point. Either we hit a wall then or we hit a wall now. The President and the legislative side of D.C. will not be able to avoid the recommendations of the fiscal commission. -If this bill is not passed it will accelerate the slowdown that now seems to be coming at a frightening speed. Consider these two graphs of the number of people who will be impacted. By the end of July the number grows to 3.2mm. These are big numbers. This will show up on Wal-Mart’s sales. It will show up everywhere. Consumption will drop. Landlords will not get paid. Confidence will drop. Markets will drop. Federal and State revenues will drop. Deficits will rise. Debt will rise. These things will happen sooner versus later. H.R. 5618 just buys a few months.

Stocks May Surprise by Year-End Posted: 04 Jul 2010 03:02 AM PDT Chris Ciovacco submits: Commodities, Emerging Markets, and Commodity Currencies May Participate: Economic news has been weak lately. Financial markets have performed poorly for over two months. Dow Theory "sell signals" have been issued. You may have heard a "death cross" is on the way. It is nearly impossible to find a bull among the growing sloth of bears. We are concerned about both the fundamentals and the technicals. However, in the context of history the current situation is not all that unusual. Since risk assets, such as global stocks, commodities, and commodity-dependent currencies have very high correlations in today’s liquidity-driven markets, the comments made below relative to stocks also generally apply to copper, silver, oil, emerging market stocks, the Australian dollar, Canadian dollar, risk, etc. Complete Story »

5 Defensive Utility Dividend Stocks Posted: 04 Jul 2010 02:41 AM PDT Double Dividend Stocks submits: With the S&P down 12% and the Dow off nearly 10% in the 2nd quarter, you might well be thinking about defensive stocks. Comparing the various Industry Sectors over the 2nd quarter, the Utility sector has held up the best, dropping approx. 5.2%, vs. Basic Materials’ 17.2% loss. We screened the Utility section of our High Dividend Stocks by Sector tables for dividend paying stocks with above-average ROE, ROI, ROA figures, and below-average Debt/Equity and P/E’s. Complete Story »

Sentiment Indicator Points To A Sharp Rally Coming In Gold Posted: 04 Jul 2010 02:37 AM PDT By one historically accurate contrary sentiment metric, the gold market is poised to stage a surprising move higher soon.  From the Hulbert Gold Sentiment Newsletter Index:  over the three decades I've been tracking investment newsletters, the gold market has -- on average -- adhered to the contrarian pattern. That is, bullion has turned in far higher returns in the wake of low HGNSI levels than in the days and weeks following high readings. Here's a link the full article:  Sentiment Pointing To Higher Gold Prices If memory serves me correctly, I believe the HGNSI bottomed around the 18 level in October 2008 vs its current 23.5 reading.  Both sentiment readings point to extreme pessimism/bearishness, which typically forecasts a big move higher coming. Back then gold disconnected from its correlation with the stock market and began a move from $700 to its current $1211 level, or 73%.   The fundamentals supporting the price of gold have only strengthened considerably since Oct 2008, including a global movement of gold investors seeking to take actual physical delivery. One other point, the import premiums for India and Viet Nam on Friday snapped back sharply to unusually high levels, indicating that the $40 price drop stimulated widespread, aggressive buying in those two countries, the 2nd and 5th largest gold buying nations. The market is telling us one thing for sure:  Americans may be clueless with regard to gold, but the rest of the world has become used to $1200 gold and will welcome any downside price manipulation by U.S. banks with widespread arms.

You are subscribed to email updates from Gold World News Flash To stop receiving these emails, you may unsubscribe now.	Email delivery powered by Google
Google Inc., 20 West Kinzie, Chicago IL USA 60610