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Sunday, July 25, 2010

Gold World News Flash

Gold World News Flash

GoldSeek.com Radio: David Morgan, Robert Ian, The International Forecaster, and your host Chris Waltzek

Posted: 25 Jul 2010 04:00 PM PDT

1st Hour: Headline news & the Market Weatherman Report. Spotlight Stock Picks. Host Chris Waltzek & The International Forecaster discussion and listener's questions. 2nd Hour: Robert Ian, Conquerchange.com David Morgon, Silver-investor.com


CFTC's Chilton explains hope for freer, more transparent gold, silver markets

Posted: 25 Jul 2010 06:00 AM PDT

The member of the U.S. Commodity Futures Trading Commission who has been advocating imposing position limits on traders in the precious metals markets, Bart Chilton, has made a video explaining why he thinks the financial regulation law just enacted by Congress and President Obama promises great progress, particularly in making the commodity markets freer and more transparent.


Some Thoughts on Deflation

Posted: 25 Jul 2010 05:02 AM PDT

The debate over whether we are in for inflation or deflation was alive and well at the Agora Symposium in Vancouver this this week. It seems that not everyone is ready to join the deflation-first, then-inflation camp I am currently resident in. So in this week's letter we look at some of the causes of deflation, the elements of deflation, if you will, and see if they are in ascendancy.


International Forecaster July 2010 (#7) - Gold, Silver, Economy + More

Posted: 25 Jul 2010 04:00 AM PDT

The talk of recovery pervades insider thinking. The major media worldwide plays the same refrain. This is a desperate attempt to befuddle the public with misdirected propaganda to preserve confidence in a system that is in a state of collapse. As CNBC leads the charge, loss of faith in the system grows with each passing day.


Bring Out Your Dead

Posted: 25 Jul 2010 03:00 AM PDT

Last week, the price of gold again broke below its new base at $1,200, and the U.S. stock market was again under strong pressure, due to a confluence of fears, most of which point to a deflationary double-dip. The fears were fanned by disappointment in the just-released early quarterly results, by the latest CPI reports that show inflation continuing to moderate, and by yet another poll revealing faltering consumer confidence.


With Silver Soaring, Beware of Who You Buy From

Posted: 24 Jul 2010 09:00 PM PDT

With silver attracting headlines, cult-like following, and higher prices, silver investors should be on high alert for a scam being perpetrated on the internet. Newly minted fake coins are finding their way from Chinese counterfeiters to Ebay and then to investors who unknowingly purchase $20 rounds that are in reality only a few dollars worth of metals.


JPMorgan et al Reduce Their Gold Short Position Substantially

Posted: 24 Jul 2010 07:10 PM PDT

The tiny rally in gold that began at 3:00 p.m. Friday in Hong Kong [2:00 a.m. in New York] lasted for only a couple of hours, as once it broke through $1,200 spot... a not-for-profit seller was only too happy to sell it down to below that number... and by lunchtime in London, the rally had pretty much petered out. However, just before New York opened, gold caught another bid and was back over $1,200 in a jiffy... only to be hammered back below $1,200 spot the moment that the bullion banks in New York swung around to their trading desks at the Comex open. Then, once the London p.m. gold fix was in shortly before 10:00 a.m. Eastern time, the dealers pulled their bids... and that was basically that for the rest of the New York trading day. The high and low prices for gold on Friday were both set in New York... with the high posted at $1,203.90 spot... and the low at $1,183.90 spot. Silver's chart was a sort of mini-version of the gold chart... and, for ...


In The News Today

Posted: 24 Jul 2010 07:10 PM PDT

View the original post at jsmineset.com... July 24, 2010 01:40 PM Dear CIGAs, Where the FDIC has vended banks to the good ole boys with stated value guarantees on the junk paper, the bank is whole, not broke, if you think about it. The junk paper that killed the bank is as good as a US treasury bill as it has a government agency guarantee without any doubt. There is always cash and the junk paper now is excellent collateral. What gifts are being wrapped, tied with green ribbons, and given to the insiders? If karma exists these horrid beings are in for a terrible future.   Jim Sinclair’s Commentary We are now up to seven so far this weekend. Bank Closing Information – July 23, 2010 These links contain useful information for the customers and vendors of these closed banks. Home Valley Bank, Grants Pass, OR SouthwestUSA Bank, Las Vegas, NV Community Security Bank, New Prague, MN Thunder Bank, Sylvan Grove, KS Williamsburg First Natio...


How to Pull Cash Out of Your Silver Holdings Without Losing Ounces

Posted: 24 Jul 2010 07:10 PM PDT

With silver on a bull run, you might be tempted to take some cash out of your silver holdings. However, if you're like most silver investors, who have an array of different silver coins, rounds, and other metal pieces, you might just be able to cash in without reducing your total holdings. Silver Grab Bag You bought a bag of junk silver, it weighs the right amount, and all of it looks quite dated. The mesh bag is interesting, and it may even have some bank ink on it showing the silver's origins. However, other than the price, weight or type of coins, do you really know what you own? You will need to think like a collector to do this, but for people who have a variety of silver, this can be both fun and rewarding, and maybe it can help better connect you with other silver collectors or investors. All About Collecting Coin collectors are interested in picking up coins to complete their sets. A collection that spans dimes from 1900-2000 is worthless if i...


The Future of America

Posted: 24 Jul 2010 07:10 PM PDT

The following is automatically syndicated from Grandich's blog. You can view the original post here. Stay up to date on his model portfolio! July 24, 2010 05:19 AM China to switch away from U.S. Dollars? Inflation to come roaring back? Rollover Is there anything we can do about it? [url]http://www.grandich.com/[/url] grandich.com...


Trader Dan Comments On This Week?s CCI Action

Posted: 24 Jul 2010 07:10 PM PDT

View the original post at jsmineset.com... July 23, 2010 04:05 PM Dear Friends, I have already put up a chart of the CCI this week in which I noted that it was approaching the top of its trading range that has held for the entirety of this year. The reason I seem somewhat obsessed with this is the fact that this chart, in my opinion, is the clearest indicator of how the war between the deflationists and the inflationists is faring. Until we get a decisive breakout of this trading range in one direction or the other, the uncertainty that has gripped the markets for what now seems an eternity will continue with the subsequent wild price swings up one week and then down the next. My analysis of this chart suggests that until we get a clean break of the 500 level, it is hard for me to get too excited about the prospects for a shift in investor sentiment decidedly in the favor of inflation. When we do however, I suspect that prices will move rather quickly as the rush into tangibles wil...


Higher Taxes are Coming. Head for Your Bunkers.

Posted: 24 Jul 2010 07:00 PM PDT

In the calming environment of the Big Mogambo Big Is Better Bunker (BMBIBB), I can finally relax by sitting, armed to the teeth, amongst my puny trove of gold, silver and oil, idly trying to say, "Big Mogambo Big Is Better Bunker" five times quickly until my seething, vaguely homicidal rage at the Federal Reserve and the socialist/fascist/ communists in the White House and Congress that have destroyed us all.


The Goldsmiths—Part CLI

Posted: 24 Jul 2010 06:08 PM PDT

Gold and silver advocates and aficionados have had a strong supporter and promoter for years in North Idaho named Edgar J. Steele. Steele has been important to the pro precious metals people and markets because he was a prominent lawyer who had defended several legal cases which received wide press across America.


17 Reasons to be Bullish About the Markets

Posted: 24 Jul 2010 05:43 PM PDT

The Pragmatic Capitalist submits:

Regular readers know I tend to focus on the negative aspects of the markets as opposed to the positives – anyone could put on a smile and skip through oncoming traffic, but the truth is, the investment world can be a very dangerous place so skipping along as if there are no risks involved is beyond foolish. But ignoring the positives is equally foolish. In this world of heightened market risks and particularly clear uncertainty here are 17 reasons to consider the bullish case (via David Rosenberg at Gluskin Sheff):

  • Congress extending jobless benefits (yet again).
  • Polls showing the GoP can take the House and the Senate in November.
  • Some Democrats now want the tax hikes for 2011 to be delayed.
  • Cap and trade is dead.
  • Cameron’s popularity in the U.K. and market reaction there is setting an example for others regarding budgetary reform.
  • China’s success in curbing its property bubble without bursting it.
  • Growing confidence that the emerging markets, especially in Asia and Latin America, will be able to ‘decouple’ this time around. We heard this from more than just one CEO on our recent trip to NYC and Asian thumbprints were all over the positive news these past few weeks out of the likes of FedEx (FDX) and UPS.
  • Renewed stability in Eurozone debt and money markets – including successful bond auctions amongst the Club Med members.
  • Clarity with respect to European bank vulnerability.
  • Signs that consumer credit delinquency rates in the U.S. are rolling over.
  • Mortgage delinquencies down five quarters in a row in California to a three-year low.
  • The BP oil spill moving off the front pages.
  • The financial regulation bill behind us and Goldman (GS) deciding to settle –more uncertainty out of the way.
  • Widespread refutation of the ECRI as a leading indicator … even among the architects of the index! There is tremendous conviction now that a double-dip will be averted, even though 85% of the data releases in the past month have come in below expectations.
  • Earnings season living up to expectations, especially among some key large-caps in the tech/industrial space – Microsoft (MSFT), AT&T (T), Caterpillar (CAT), and 3M (MMM) are being viewed as game changers (especially 3M’s upped guidance). Even the airlines are reporting ripping results.
  • Bernanke indicating that he can and will become more aggressive at stimulating monetary policy if he feels the need and Friday urging the government to refrain from tightening fiscal policy (including tax hikes).
  • Practically every street economist took a knife to Q2 and Q3 GDP growth, which has left PM’s believing we are into some sort of capitulation period where all the bad news is now “out there”.

Source: Gluskin Sheff


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The Bondsman's "Fear of Death"?

Posted: 24 Jul 2010 01:59 PM PDT


Via Pension Pulse.

I spent the afternoon reading a fascinating paper by Shimshon Bichler and Jonathan Nitzan, Systemic Fear, Modern Finance and the Future of Capitalism (PDF file is available here). The introduction sets out the intent of their research:

The specific focus of the article is two historical ruptures of modern finance – the periods of 1929-1939 and 2000-2010. During both periods, capitalists abandoned the conventional forward-looking ritual of capitalization, resorting instead to the backward-looking posture of pre-modern finance. In our view, these rare episodes are of great importance for understanding the nature of capitalist confidence and the capitalists’ ability to rule – as well as the possibility that this system of rule will collapse. Our inquiry seeks, first, to characterize key features of these episodes; second, to speculate on their causes; and third, to assess, however speculatively, what they might imply for the future of capitalism.

While I recommend you carefully read the entire article, I want to focus on a few passages that are particularly interesting to financial market observers and pertinent to my post. First, let's begin with the takeoff:

The capitalist class is finally seeing light at the end of the tunnel. For many months now, its analysts, statisticians and public officials have been spotting “green shoots” everywhere they look. The snowballing global recession, they say, seems to have slowed down and perhaps even ended. Managers the world over are purchasing more inputs after a period of buying much less; the factories of Asian exporters are running at full steam; raw material prices have rebounded strongly; bank lending is reviving and home owners are starting to refinance their mortgages at lower rates; and in the United States, the world’s biggest producer-consumer, initial unemployment claims seem to have peaked, while consumers are beginning to loosen their purse strings. But the most important sign that the worst of the crisis is over comes from the equity market: stock prices are the ultimate barometer of capitalist health, and they have been soaring.

The market takeoff is evident in Figure 1 (above). The chart traces the U.S. dollar price of three key indices – all world equities, U.S. equities, and the equities of the U.S. FIRE sector (finance, insurance and real estate). All three indices show a sharp, synchronized rise. In slightly more than a year, from February 2009 to April 2010, the world index gained 67%, the U.S. index 62%, and the U.S. FIRE index – previously the most battered of the three – a whopping 93%.

Suddenly, the bulls are everywhere. The greatest returns are usually earned during the initial part of a rally, and no respectable fund manager likes being beaten by a rising average. With the economy apparently bottoming out and with the stock market having been in a major bear phase for nearly a decade, investors are no longer afraid of losing money; their fear now is not making enough of it. And so arises the specter of “panic buying,” a frenzied attempt to jump on the bandwagon before the really large gains are gone.

Of course, not everyone buys this rosy scenario. Many observers continue to feel that the recent stock market rally is no more than a dead-cat bounce. In the eyes of the pessimists, investors are knee-jerking to a false start. The economic recovery, they say, will be W-shaped, and the market will re-collapse before any real boom can begin. This recession, they warn, is nasty and likely to linger for years.

Bichler and Nitzan then discuss why this debate is fundamentally wrong:

Regardless of who is right, though, there is something fundamentally wrong with the debate itself. The current news may be good or bad, revealing or misleading – but, then, investors aren’t supposed to take their cue from the current news in the first place.

To trade assets on the basis of today’s statistics is to be backward looking. It is to be retrospective rather than predictive, to react rather than initiate, to trail rather than lead. It puts investors at the tail end of social dynamics.

Needless to say, such behavior is entirely improper. According to the sacred annals of modern finance, formalized a century ago by Irving Fisher (1907) and popularized during the Great Depression by Benjamin Graham and David Dodd (1934), asset prices are forward looking: “The value of a common stock,” dictate Graham and Dodd in their immortal doorstopper, “depends entirely upon what it will earn in the future” (p. 309).

The authors then explore why investors depart from this conventional forward-looking practice:

In our view, the reason is systemic fear. Systemic fear is a class of its own. It has little to do with the periodic down-swings that make capitalists cautious, and it has no connection to the dread and ap-prehension that regularly puncture their habitual greed. “Business as usual” is always uncertain, and with capitalism constantly in flux, investors are forever fearful about profit and wary about risk: they are concerned that earnings may not rise as quickly as they hope, or that they might fall; that volatility will increase; that interest rates will rise; and so on.

But these fears, no matter how intense, are self-contained. They pertain to the level and pattern of profit, not to its existence. They do not impinge on the normality of profit – i.e., on the belief that assets have a “natural” tendency to grow and that capitalists have the power and right to enforce and appropriate such expansion. And most crucially, they reflect the belief that expected profits, whether high or low,could always be priced to their present value. Regardless of the market’s ups and downs, the underlying assumption is that the capitalization process itself – the ritual that creorders modern capitalism and anchors its dominant ideology – will remain intact.

Occasionally, though, there arises a very different and far deeper type of fear: the terrifying thought that the entity of profit – and, worse still, the very institution of capitalization on which the entire capitalist megamachine stands – might cease to exist. This latter fear is associated with systemic crisis – that is, with periods during which the very future of capitalism is put into question. It is what Hegel meant when he spoke of the bondsman’s “fear of death”:
For this consciousness [of the capitalist bound to the steering wheel of a megamachine gone wild] was not in peril and fear for this element or that [such as falling profit or rising volatility], nor for this or that moment of time [like a sharp market correction or a declaration of war], it was afraid for its entire being; it felt the fear of death, the sovereign master [the ultimate wrath of the ruled]. It has been in that experience melted to its inmost soul, has trem-bled throughout its every fibre, and all that was fixed and steadfast has quaked within it [will capitalism survive?]. (Hegel 1807: 237)
The first time capitalists were gripped by such systemic terror was during the Great Depression of the 1930s. The second time is during the present crisis, a protracted turbulence that started in the early 2000s and is still ongoing.

Looking at the current crisis, Bichler and Nitzan write:

And then there are those, like financial commentator Gideon Rachman, for whom the problem is largely temporary. The economists, Rachman suggests, have actually made great strides in understanding how the economy works. But from time to time the delicate machine gets infected by a “new type of economic virus,” and we need to be a bit patient until the economists discover the cure (Rachman 2009).

By 2010, though, it seems that the virus continues to elude the pundits. The threat of default has spread from business enterprise to sovereign governments, with countries like Iceland, Dubai, Greece and who-knows-who-is-next flirting with bank-ruptcy. Participants at a special conference hosted by Soros’ Institute for New Economic Thinking at Kings College, including five Nobel-winning economists, expressed grave concern that “many investors now find it hard to judge the ‘real’ riskiness of sovereign debt.” Gillian Tett conveys the atmosphere of theoretical bewilderment and ideological anxiety:
Three years ago, it seemed inconceivable that a country such as Greece would be allowed to default, or exit the eurozone. But back then it seemed equally hard to imagine that Lehman Brothers might fail. Now that Lehman has gone, who knows what the worst-case scenario might be? Could the eurozone break up? Could Greece default? What might happen to other debt-laden nations, such as the US, if the worst case scenario occurred? The one thing that is clear is that the answers to those questions now depend as much on culture and politics as on macro-economics. . . . In this new world of sovereign risk, what really matters is a set of issues that cannot be plugged into a spreadsheet. The old compass no longer works. (Tett 2010)
The predicament is so serious that even the know-all the collective brain of the capitalist class – has become disoriented. According to Martin Wolf, chief economics commentator at the Financial Times, "the markets don't know what to fear: will it end up in deflation, default, inflation, financial shocks, or all of these?' "Markets are unpredictable, he informs his son, like children. . . ." And when the youngster asks: So what's going to happen next? the elder, who is usually able to answer questions that most people cannot even ask, replies: "If I knew that, I wouldn't be a mere economic journalist..." (Wolf 2010)

Finally, Bichler and Nitzan ask whether capitalism is heading for systemic collapse:

The decade-long breakdown of capitalization is no fluke. The fact that for ten years now capitalists have been pricing equities based on past profit betrays deep distress. Their fear now is not only that the level of capitalization may be bumping into a glass ceiling; it is also that the very ritual of capitalization – the universal crystal ball through which they have been seeing the future for nearly a century may be giving them awfully wrong signals. And when the future looks bleak, and the dominant ideology appears opaque if not misleading, there arises the specter of systemic fear.

Given the foregoing, the obvious question to ask is: does systemic fear signal the imminent collapse of capitalism?

They conclude with these thoughts:

In order to see that something is systemically wrong, we need to think not positively, but negatively. Specifically, we need to look for market patterns that are inher-ently inconsistent with forward-looking capitalization. The manifestation of such pat-terns would then prove, by negation, that the ritual is broken. The specific pattern emphasized in this paper is one in which stock prices, instead of looking into the deep future, nervously trace the ups and downs of current and past earnings. This backward-looking pattern goes against the very gist of forward-looking finance. And when it emerges – as it did during the crisis of the 1930s and again in 2000 – we can be fairly certain that capitalization has broken down and that the ruling class has lost its confidence in obedience.

A shrewd academic might have leveraged this apparent anomaly into a full-blown mechanized model, complete with a universal taxonomy of “fear-of-death” eras, a sliding scale of price-profit correlations alerting investors when to switch and reswitch between forward- and backward-looking postures, and an easy-to-follow list of “how to profit” from both. And judging by what is on sale in the analysis market, this model could end up having plenty of paying followers.

We prefer to forego this investment opportunity and instead keep our speculations tentative and free. Capitalism may survive this systemic crisis, as it survived that of the 1930s. As before, this survival may require a significant transformation – one that restructures the entire architecture of power, including its material technology and dominant ideology – and such transformation is certainly possible.

But there is also a very real possibility that the current crisis will prove too much for the capitalist class to handle. “The history of all hitherto existing society,” write Marx and Engels in the opening paragraphs of the Communist Manifesto, “is the history of class struggles.” And that struggle can end “either in a revolutionary reconstitution of so-ciety at large, or in the common ruin of the contending classes (Marx and Engels 1884: 57-58).

So far, the capitalists’ loss of confidence in obedience hasn’t elicited significance opposition – but that can change quickly. However, if the opposition fails to establish an effective and hopefully progressive alternative – an alternative that so far seems absent – it is not impossible for the reverberations of the clash, amplified by the high complexity of capitalism, to culminate in systemic collapse and collective ruin.

Tomorrow, I will go over some leading indicators that are being misread and show you why I'm more optimistic that the economic recovery will continue. As for the stock market, it is in the best interest of the financial oligarchy to reflate risk assets, and inflate our way out this mounting debt problem. Debt deflation will ultimately lead to systemic collapse and "collective ruin".

Gold Bullion, Sales Exploding

Posted: 24 Jul 2010 01:02 PM PDT

According to a recent article over on MarketWatch, the purchase of bullion gold coins is absolutely exploding. Even businesses that do little to no advertising, but supply the glittery commodity are doing very well. For example the article highlights one such business – called MTB – that is located in a dark Manhattan basement, that only features a yellow pages listing that is busier than ever:

Every day, people find their way to the Manhattan store with one thing in mind: getting their hands on gold bullion coins, as soon as possible and as much as possible, before the financial Armageddon they fear renders the dollars in their pockets worthless.

With the economy at a plateau at best – and another potentially feared free fall ahead, it's no wonder investors are seeking gold as a safe harbor. But, is it the best option?

Questionable Sales Tactics

The gold coin brokering business has come under scrutiny lately with major dealers like GoldLine receiving negative press and ongoing investigations. But, this is potentially good, this world is fraught with fraudulent dealers and those that fraud their customers in an attempt to earn a quick buck by incorrectly steering you into coins or packages that are more profitable for them. Yet, another potential example of companies taking advantage of consumers.

School Stocks Soar, Remain Unattractive; Any Exceptions?

Posted: 24 Jul 2010 09:36 AM PDT

Kevin Kennedy submits:
Beleaguered school stocks got some relief Friday after new regulations proposed by the U.S. Dept. of Education weren’t as tough as expected. It's not really enough to make them attractive yet, but it's a start.
Publicly-traded stocks in the U.S.-based education and training services industry jumped an average of more than 3.8% Friday. The group, attacked by short sellers and battered by tales of bad student loans and mixed results in training students for the work force, had suffered losses of more than 10% year-to-date that included a 22% drubbing in the past three months. The government released a preliminary version of the regulations in January, and uncertainty has hung over the group ever since.
The proposed rules aren’t a panacea for the industry, analysts say, and could still hurt schools with high debt-to-income ratios as a result of school loans, according to a report by Melissa Korn and Caitlin Nish for The Wall Street Journal. Schools also face greater scrutiny to ensure that their programs are actually preparing students for real jobs.
Leading the way higher Friday was DeVry (NYSE: DV), up 15.1% to 15.29. Other top gainers in the group included Nobel Learning Communities (Nasdaq: NLCI), up 9.0%; Strayer Education (Nasdaq: STRA), up 7.9% to 236.49; Education Management (Nasdaq: EDMC), up 7.5% to 16.31; Capella Education (Nasdaq: CPLA), +7.3% to 89.69; Grand Canyon Education (Nasdaq: LOPE), +6.6% to 23.12; Bridgepoint Education (NYSE: BPI), up 6.4% to 18.32; and Apollo Group (Nasdaq: APOL), which advanced 6.4% to 49.27.
The stocks of three companies that the rules are expected to impact more negatively struggled in Friday’s trading. ITT Educational Services (NYSE: ESI) edged ahead 0.3% to 85.44, while Corinthian Colleges (Nasdaq: COCO) slipped 0.5% to 10.20 and Universal Technical Institute (NYSE: UTI) gave back 0.7% and closed at 21.79.
The final regulations are expected to be adopted in November following a public comment period and take effect next year. Any penalties would not kick in until the 2010-13 school year.
The proposal would create three levels of schools and would likely impact about 5% of all schools serving about 8% of the roughly 1.8 million students enrolled in for-profit schools, reported John Lauerman for Bloomberg. Schools with high student debt-to-income ratios whose students are not repaying government loans fast enough would be restricted to growth limits and be forced to warn students in promotional materials.
The for-profit school industry received $26.5 billion in federal aid last year, a dramatic increase from $4.6 billion in 2000.
Despite today’s gains, none of the stocks in the group is close to being a market leader, and it will take a significant show of strength in the next several months to make the stocks attractive as new buys. Most of the stocks are closer to their 52-week lows than highs.
If I had to take a stab at one education stock that might emerge, it would be Minneapolis-based Capella Education. Today’s move brought it back to within 9% of its April 29 all-time high of 98.01. It’s a little pricy with a market cap of $1.5 billion and trading at 3.9 times sales, but its PE is reasonable at 31.
Capella operates Capella University, an online school with 42 graduate and undergraduate degree programs and more than 37,000 students. The company reported first-quarter earnings growth of 82% and revenue gains of 32% in April. The company is scheduled to report again next Tuesday, with analysts expecting second-quarter earnings to rise 41% to 79 cents per share and revenues to increase 29% to more than $103 million.
Disclosure: No positions

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3 Undervalued Foreign High Dividend Stocks

Posted: 24 Jul 2010 09:32 AM PDT

Double Dividend Stocks submits:

If you're looking for undervalued foreign dividend stocks with good growth prospects, our latest screen might interest you. We screened for attractive valuation metrics, such as, low Price/Free Cash Flow and PEG ratios, and high future EPS. We also screened for attractive ROE, ROI, ROA ratios, dividend stocks with a dividend yield above 5%, and low debt. This screen returned 2 Asian dividend paying stocks and 1 Latin American Telecom dividend stock, all of which are now in our High Dividend Stocks by Sector tables:

&iddot; City Telecom HK (CTEL): Provides integrated telecommunications services in Hong Kong via its own self-built fiber network. CTEL has a subsidiary, Hong Kong Broadband Network Limited (HKBN), that’s the fastest growing broadband service provider in Hong Kong. HKBN offers a diversified portfolio of innovative products that service over 1,027,000 subscriptions for broadband, local telephony and IP-TV services. CTEL also has branch offices in Canada and Guangzhou. (Source: CTEL website)


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Commodities Week: Oil and Copper Focus on Upside Risks, Gold Unchanged Despite Investor Liquidation

Posted: 24 Jul 2010 09:10 AM PDT

Sumit Roy submits:
Energy
After a pause in the prior week, crude oil resumed rallying this week, gaining 3.9% in the period. While encouraging corporate earnings announcements and a better-than-expected existing home sales figure were supportive of prices, the primary catalyst for crude’s advance is not what has happened, but rather what has not happened. The 26.3% decline in oil prices during May was due in large part to fear. As those worst-case economic fears have so far failed to materialize, the commodity has snapped back to more normalized levels.

In the bigger picture, crude oil has been largely rangebound, fluctuating between the upper-$60’s and the lower-$80’s since September of 2009. The latest economic scare was enough for crude oil to test the bottom of the range, but obviously not enough to cause any sort of breakdown. At $79, Friday’s close puts crude oil prices above the 50% retracement level of the May correction, or $75.70, indicating that risks are tilted modestly to the upside. The most obvious of those upside risks is the fate of Gulf of Mexico production, but there are also upside risks with regard to demand from emerging markets. Unavoidable is that fact that going forward, higher OPEC production will be necessary to close the gap between ‘free market supply’ (non-OPEC) and demand growth (the vast majority of which is from emerging markets).

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Franklin Sanders on the Coming Avalanche of 1099 Forms

Posted: 24 Jul 2010 09:07 AM PDT

Thursday, 22 July a.d. 2010 I have now lost count of all the emails, hysterical & otherwise, I have received about the "new tax on silver & gold" that was slipped into the Obamacare bill. WHOA. Stop. It is nothing of the kind, and in truth is MUCH worse than a mere tax on silver [...]


Leading Economic Indicators Offer More Warning Signs

Posted: 24 Jul 2010 09:01 AM PDT

mkaminisMarkos Kaminis (Wall St. Greek) submits:

The Conference Board's Leading Economic Indicators Index slipped 0.2% in June, offering yet another critical sign that the economy faces real risk of double-dip recession. The 0.2% drop compared against a revised 0.5% increase in May's measure. Economists were on target with their estimations, and so the news did not shake the market on Thursday. Rather, more positive testimony from Chairman Bernanke helped restore shares that were drained on Wednesday's commentary from the same.

Two out of the last three months produced declines in the LEI, and the positive drivers of the index continue to leave us less than enthused. They remain interest rate spreads, which are mostly due to prospective efforts of the Fed in its low-rate policy, and due to the dearth of demand for financial securities and borrowing instruments, especially in housing where mortgage rates are at historic lows.


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10 Charts, 10 Stories of the 'Real' Gold Price

Posted: 24 Jul 2010 08:09 AM PDT

Gold in Mind submits:

The charts never lie. But – half a truth is ever the blackest of lies.

We have all seen them before. The charts with gold at constant (inflation-adjusted) prices. They usually support various stories: why gold is an inflation hedge, why gold is not an inflation hedge (in the 80s and 90s); why gold is a bubble and why gold is not a bubble.


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US Equities Outperformed On Sad Day For Integrity

Posted: 24 Jul 2010 07:11 AM PDT


From Nic Lenoir of ICAP

The S&P looks like it has validated an inverted H&S pattern. While H&S pattern bearish patterns triggered on poor economic news and high volume are usually head fakes and a deadly bear trap, inverted bullish H&S with no participation on no news tend to see quite a bit of follow through.

More broadly we have pointed out that we would need a bit of confirmation from the Bovespa to fully confirm that the markets are breaking out, currently as seen on the daily chart we are right on the resistance still. Similarly AUDUSD closed right on the 200-dma.

We once again point out the global liquidity index which isgetting close to making new highs, and given the huge correlation between liquidity and equity markets over the last year, stocks are in fact under-priced in that respect, no matter all the reasons I see out there for a bear move. Governments and central banks have done their job well at propping up a piece of crap.



The European stress test today was a very very sad buffoonery to witness. Firstly the worst case scenario is a 3% GDP contraction and a 20% equity market sell-off. Let's be frank if GDP contracted in Europe by 3% stocks would fall a bit more than 20%. More importantly, as 20% correction would leave the market clear by 33% above the lows of 2009. You would think the worst case scenario would be at least to revisit these lows. So basically the worst case scenario is not really credible as a "worst" case. Secondly the test focused strictly on the mark-to-market holdings of sovereign bonds. That is like sizing up an iceberg using only the tip. Spanish banks for example are ridden with housing inventories that are most likely marked at the 2006/2007 highs, and all that is happily excluded from the test, as well as accrual accounting books. The fact that they had to resort to truncating the scope so much given a relatively mild worst case assumption tells you how much head scratching must have gone on to make this look half way decent. It even felt like they invented some random unknown banks that failed just to make it legit. Solid work I must say, and on a summer Friday with no volume and syndicated desks using algos to push up the tape, the reception by the market looks quite grand on paper. The fact sadly is that no one cared today and there is not one reasonably informed investor out there who doesn't see this for what it is: a sad joke. Unfortunately when everybody gives up on the market and it melts up for no reason, I think we are really worst off than if we took the pain we deserve now and deal with the real state of affairs. This expensive extension of a broken system will only make it worse in the end.

For now it looks though that markets are intent on more celebration and more rallying ni the near future.

Good luck trading,

Nic


The Sagging Sector Component Making Gold More Volatile

Posted: 24 Jul 2010 06:56 AM PDT

Denis Ouellet submits:

It has been a while since I took a good look at gold’s “fundamentals”, i.e. real world supply and demand. The Economist ran a good article on gold on July 8 which triggered more research. I am even more prudent with gold than before.

Demand for gold essentially comes from two different sources: jewellery and investment. Jewellery demand has declined spectacularly in the last decade, most likely in reaction to the rising price of gold. Pretty typical and rational behavior given gold’s five-fold price jump. Indians and Chinese consumers have, so far, kept buying gold while consumers elsewhere have cut their appetite by more than half. In a May 10, 2010 write-up on the India gold market, the World Gold Council saw more of the same:


Complete Story »


Goldman, Blackrock In Cross Hairs Again As Senator Grassley Digs Up Old Corpses

Posted: 24 Jul 2010 06:53 AM PDT


Just as Goldman's hope that the BP gusher's taking front page priority, especially in the aftermath of the rather amusing settlement between the firm and the SEC, was finally appearing to bear fruit as for the first time in over a year there was nothing relevant on the news front regarding the 200 West company, here comes Senator Chuck Grassley lobbing a grenade full of provocative and very much unanswered questions directed at the GAO, at Elizabeth Warren, and at Neil Barofsky that demand clear and prompt answers. We are also quite content that Blackrock and AIG once again manage to get themselves dirty.

Grassley submits questions for committee record about taxpayer dollars for AIG, Goldman Sachs counterparties

Question for the Record

Hearing before the Senate Finance Committee

July 21, 2010

Questions for Richard Hillman – Government Accountability Office

1. What does Treasury need to do to successfully exit from TARP?

2. Will Treasury reach its goal for HAMP of helping 3 to 4 million borrowers? If not, how many borrowers do you think will get help from the program?

3. To what extent were CPP investment decisions influenced by political considerations or other external factors?

4. Does the increasing number of firms missing their CPP dividend payments indicate that more CPP firms are at risk of failure? And does the number of missed dividend payments show that Treasury made mistakes investing in these institutions?

5. Will the government’s equity stakes in Chrysler and GM be worth enough for the government to make back its entire investment?  How long might it take for the government to recoup this money? 

6. GM has announced that it plans to launch an initial public offering (IPO) by the end of this year.  Is an IPO the only, or the best, alternative for recovering the taxpayer investment in GM, is an IPO on this timetable feasible, how will an IPO impact the government’s equity stakes in GM, and what role is Treasury playing in the IPO?

7. What work are you currently doing on Treasury’s aid to the auto industry?

8. GAO recommended last year that Treasury ensure it has adequate staffing to manage its investments in Chrysler and GM.  Where does Treasury stand on this?

9. What is the likelihood of AIG repaying the government?

10. How is Treasury helping small businesses?  Is Treasury meeting its goals for small businesses?

Questions for Elizabeth Warren, Congressional Oversight Panel

Several times in your Panel’s June report on the AIG bailout, you indicated that Goldman Sachs failed to provide information requested by the Panel.  In particular, you indicated that Goldman did not provide information sufficient to identify entities you called the “indirect beneficiaries” of the AIG bailout — financial institutions with whom Goldman had hedged the risk of its exposure to an AIG default.  You said, “And we want to know the identity of those parties partly just to know where American taxpayer dollars went, but partly to assess Goldman’s claim … that they had nothing at stake one way or the other in the AIG bailout.”

Following my suggestion to the Chairman that the Committee issue as subpoena if necessary, after the hearing, Goldman Sachs provided the Committee with the following spreadsheets and a briefing (see Attachments 1 and 2).  My understanding is that Attachment 1 lists companies that wrote credit default swap protection on AIG for Goldman, meaning that in the event of an AIG default in September 2008, these entities would have been responsible for paying Goldman the amount in the “Net” column.  Thus, these entities avoided losses in the amounts listed on Attachment 1 as a direct result of the taxpayers’ bailout of AIG in September 2008.

1. The fifth largest amount listed is about $175 million that Lehman Brothers would have owed Goldman Sachs on CDS protection.  However, given Lehman’s financial position at the time (September 15, 2008), isn’t it true that the real value of this hedge to Goldman would have been much less than $175 million?  Wouldn’t it have only been worth the approximate value of any collateral that Lehman had already posted to Goldman up to that date?

2. Similarly, is it possible that financial health of the other institutions on the list may have prevented them from being able to pay Goldman in the event of an AIG default? Does this undermine Goldman’s claim that it was “fully collateralized and hedged” with regard to the risk of an AIG default, and thus demonstrate that Goldman did, in fact, receive a direct benefit from the government’s assistance to AIG?

3. Will the Panel be seeking additional details about these transactions in order evaluate Goldman’s claim to have been indifferent to whether AIG went bankrupt?  If so, please describe the scope of your additional requests and inform the Committee if you do not receive complete cooperation.

As I understand Attachment 2, it lists a series of entities that directly benefited from government assistance through the Federal Reserve’s Maiden Lane III facility, in that they received cash provided to AIG, which it owed to Goldman and which, in turn, Goldman owed them.  The majority of these beneficiaries appear to be foreign entities.

4. Can you please explain how ensuring that these institutions were paid in full, rather than required to suffer the consequences of the risks that they took, benefited the U.S. taxpayer?

5. Will the Panel be seeking additional details about these transactions?  If so, please describe the scope of your additional requests and inform the Committee if you do not receive complete cooperation.

 

Questions for Neil Barofsky, Special Inspector General, TARP

 

Last year it was estimated that although the TARP program itself amounted to about $700 billion, the total government risk from other programs at the Freddie Mac, Fannie Mae, HUD, and the Federal Reserve amounted to about $3 trillion.  In the last year, this estimate has increased to $3.7 trillion.  So, we’ve added a whole new TARP program worth of risk in the last twelve months in the amount of $700 billion.

1. How likely is it that taxpayers could start suffering actual losses from this $3.7 trillion in risk?

2. What are the potential pitfalls that could cause these risks to start causing losses to taxpayers?

3. The last time you testified before the Committee, I asked you about a Wall Street investment firm named Blackrock.  I understand your office is auditing or investigated potential conflicts of interest involving this company and the Public-Private Investment Program, the $40 billion TARP program designed to buy toxic assets.  As I understand it, BlackRock has a deal to work on Maiden Lane for the Federal Reserve Bank of New York as a toxic asset analyst, while a separate BlackRock company has a deal with Treasury to participate in the Public-Private Investment Program to buy toxic assets.  What can you tell this Committee about the results of your investigation/review to date?

4. Your office has been investigating excessive executive severance payments to AIG executives that occurred earlier this year.  I have asked you to conduct this investigation because the Treasury Special Master for Executive Compensation has been unwilling to get to the bottom of what happened.  You also are investigating potential conflicts of interest within the Special Master’s office.  Could you please update the Committee on your progress?

Options Game Thrives on Plentiful Suckers

Posted: 24 Jul 2010 06:39 AM PDT

By Rick Ackerman, Rick's Picks

(Rich Cash, a wise and prolific contributor to the Rick's Picks forum, as well as a blogger of note, has written insightfully and with good humor on a subject near and dear to our heart – i.e., the put-and-call game. Fortunately, we retired our powder-blue market-maker smock and badge (#K30) just before the Feds started using RICO laws to prosecute white-collar criminals. We were a scurvy lot, for sure, and Rich has captured the flavor of the game in a way that explains what drew so many of us sleazeballs to the options trading floor. RA)

On Monday, some of the Fast Money Crowd were ready to jump off the bridge after INTC, JPM and GOOG flamed out on brilliant earnings. Tuesday, they were extolling weekly call options on AAPL with 70% volatility premiums. That's right — if a security that expires in a month is not a risky enough disappearing asset, now we can buy weekly options at a price almost guaranteed to absorb all price fluctuations and expire worthless.

Options have a long and checkered history that dates from the seven years Isaac worked to marry Rebekah, only to wake up in the marriage bed with her older sister Leah, and work another seven years for the woman he loved. In the early 1900s, Jesse Livermore frequented options parlors known as bucket shops. For a small amount of money down, you had the brief right to buy or sell a security at a fixed price. If it went higher in that short amount of time, you made money. If not, you were out of luck. The bucket shops were so good at pricing option premiums they usually bucketed the orders rather than enter them.

Ye Olde Bucket Shoppe: doing business the old-fashioned way

Livermore was one of the few that did well enough in the bucket shops that he was banned. In the Roaring Twenties, Over-the-counter option writers sold puts and calls to anyone on anything that moved in the markets. Since most of the options expired worthless, they just pocketed the money. When put buyers came around to collect after 1929, most writers were long gone. A variation of this mindset may account for what and why Banks did with OTC derivatives, off-balance sheets, and out-of-the-country subsidiaries up until the 2008 crash and taxpayer bailout.

It took a bridge player named Bill Sullivan to formalize option rules to create the Chicago Board of Options Exchange in 1973. They used a normalized gaseous diffusion equation adopted by Fisher Black and Merton Scholes to price option premiums rationally. Bill created not only standardized, transparent, market-price cleared contracts, but a private third-party AAA credit guarantor in case either side defaulted. This model falls apart during Black Swan market distributions with long tails over long times, something the man who called derivatives "weapons of mass financial destruction" cited to shareholders to rationalize writing a lot of long-term options without collateral. Now, after his firm's credit rating was reduced, FinReg may require him to post margin, a giant margin call that may also impact earnings, since he had the integrity to mark his naked option shorts to market.

Taking It Public

Too bad Banks, Congress and Regulators did not enforce the CBOE derivative lesson before defaulting and leaning on taxpayers. The CBOE waited 37 years to go public, just before Summer 2010, and traded from 34.18 to 26.10, the fate of many hot IPOs and options. Of interest, options may have value as a leading market sentiment indicator.

The International Securities Exchange, now the leading option exchange, developed the 20 minute daily ISEE Sentiment Indicator index that excludes market maker and firm transactions to focus exclusively on the ratio of opening Call to opening Put customer transactions. ISEE has a pretty good history of calling market turns, including the March 2009 bottom and April 2010 top. The last few days, the ISEE set annual records with up to 224 Calls bought for every 100 puts bought, suggesting market sentiment is pretty complacent, if not ebullient. We may see in the short fullness of time if the complaint of the man who claimed he could make love to 100 women in a night was valid — that he had practiced too much that afternoon. We observe AAPL at 252 had a Point & Figure downside target of 216. We leave it to former P-Coast market maker, Blue Fin fund manager and financial journalist Rick Ackerman to make profitable picks and sense of all this…

(If you'd like to have Rick's Picks commentary delivered free each day to your e-mail box, click here.)

Rick's Picks is a trading newsletter for stock, gold, silver and mini-indexes. All trades are based on the proprietary Hidden Pivot technical analysis method.

© Rick Ackerman and www.rickackerman.com, 2010.

When Will the AA Batteries Run Out?

Posted: 24 Jul 2010 06:24 AM PDT

The Daily Reckoning

Dagong International Credit Rating, a new Chinese credit rating agency, purports to adhere to "fundamental principles of truthfulness, timeliness, and consistency." It warns that "over-reliance on financing income and debt roll-over will ultimately lead to a strong reaction of bond market, thus when the borrowing costs and difficulties increase, the credit risks will burst dramatically."

Although it rates the United States AA and says "the advantages of a comprehensive institutional system will help them gain the rooms for adjusting finance and debt," it culls out 18 countries for which it assigns ratings lower than those assigned by Moody's, S&P, and Fitch (and the United States is among them).

Thirteen of these are developed nations that have become, in Dagong's words: "the biggest source of systemic risk.. (and a) double dip for the world economy… Once the fiscal risk in this sort of countries get out of control, they will have to face even more financing difficulty.

Up to then the interest rate attached to the debt instruments will be running up rapidly, and the default risk in these countries will grow even larger; the fiscal fragility may badly threaten the successful recovery of their economic and financial conditions, and may even plague these countries in a relatively long run."

These are interesting observations, because they indeed are truthful and timely as well as the product of consistently applied financial statistical analysis that provides Dagong a superior way to compare sovereign credit risk among nations.

But they are also devoid of understanding of the systemic monetary flaws that led to the creation of excessive debt in recent decades, which are articulated in my book, Endless Money (John Wiley & Sons 2010), and the writings of other Austrian economists.

This may explain why China may have not sold much U.S. debt, and why it may feel that it can safely invest in other nations' credit rather than avoid systemic credit risk generally through allocating more than a trivial share of its currency reserves to gold.

Laced through the analysis is recognition that some countries may apply Keynsian solutions because their sovereign and private credit capacity is ample, and their outlook for economic growth may be more intrinsically secure.

In this way, China's policy actions are rationalized by its policy makers (as well as by western pundits). So in addition to having consumed the monetary Kool-Aid of the west, China has embraced the fiscal orthodoxy as well. This point of view echoes Bernanke's and Greenspan's view that the global debt crisis was fostered by a "savings glut" in China.

Murray Rothbard warns of businessmen clustering together in error. It would be a shame if the Chinese, despite this trenchant analysis of how the world's credit markets could unravel once again, steadfastly cast their lot with the Bernankes and Krugmans in the economics community.

As for the United States, we have already crossed the Rubicon, hopelessly defending a fiat based reserve currency and admonishing all others in the G-20 to spend recklessly and prop up impaired credit instruments at any cost.

The Chinese may be rating the U.S. "AA" for now, but if the process of instability of which Dagong hints takes over, we should expect the juice in this AA battery to run out, unable to be recharged by "a comprehensive institutional system (that) will help them gain the rooms for adjusting finance and debt."

Regards,

Bill Baker,
for The Daily Reckoning

[Editor's note: William Baker is the author of "Endless Money: The Moral Hazards of Socialism. You can get your own copy of his book here. You can also follow his commentaries on The Conservative Economist.]

When Will the AA Batteries Run Out? 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….

Junior Gold Miners Versus The Big Producers

Posted: 24 Jul 2010 06:24 AM PDT

By Jeff Nielson, Bullion Bulls Canada

As we see the in-flux of "born again" gold-bugs among mainstream market commentators, there has also been a commensurate increase in articles about the gold miners. Many "experts" who only a couple of years ago were shunning gold as a "barbarous relic" now feel qualified to "recommend" individual gold miners to their readers.

To the credit of a few of these individuals, they have done their "homework", and offer credible analysis and insight on the companies they cover. However, the majority of such pundits haven't learned the various quirks of this sector which make it different from all other commodity-producers. They engage in simplistic balance-sheet analysis which leaves investors dangerously uninformed about factors which have tremendous significance in the current and future performance of these companies.

In particular, we have numerous analysts touting the large gold-producers to their readers and clients, despite the consistent failure by most of these companies to deliver good "returns" to shareholders. Meanwhile, the smaller producers – the "junior miners" – have provided investors with many spectacular success-stories, with the best clearly still to come.

The leading "voice" when it comes to warning investors of the potential pit-falls of the larger mining companies is Jim Sinclair. He has told investors on countless occasions that many of these companies were carrying dangerous/destructive "gold derivatives" on their balance sheets – courtesy of the big-banks.

These derivatives were either incorporated into their operations as merely "hedges" against the gold-price or were a necessary condition in order to obtain financing for large, capital projects – such as the construction of a new mine. We've seen the results of these "deals with the devil" show up on the bottom-line of these mining giants: the complete inability to "leverage" the price of gold – either in terms of their own profitably or in returns to shareholders.

 

Company

closing price

3 years ago

% change

52-week high

52-week low

 

( in USD's)

 

 

 

 

Goldcorp Inc

$40.16

$27.19

48%

$47.41

$32.84

Barrick Gold Corp

$41.73

$33.51

28%

$48.02

$32.17

Newmont Mining Corp

$58.17

$41.88

39%

$63.38

$38.53

Agnico Eagle Mines Ltd

$56.21

$44.01

28%

$74.00

$49.64

Yamana Gold Inc

$9.36

$12.38

-24%*

$14.37

$8.42

 

The table above shows five of the "brand names" among the small group of "senior" gold producers (all listed on the New York Stock Exchange). Their stock performance over the past three years has been nothing short of dismal. While the price of gold has increased from $700/oz to $1200/oz over that period of time (roughly a 70% increase), these chronic under-achievers have (on average) only produced half that rate of return for shareholders – rather than "leveraging" the gold price, as all commodity-producers (should) do naturally.

Critics will argue that it's misleading (and unfair) to include Yamana Gold (NYSE: AUY) in this three-year comparison, as they had completed a major take-over in 2007 – which led to a massive dilution of the share structure. Certainly, I could have come up with a better-performing choice than Yamana Gold. However, I wanted to include it in this analysis, as it illustrates two of the major problems facing the large gold-producers: the difficulty in trying to generate production growth and the need for these "gold miners" to add more and more base metals mining to their operations.

More articles from Bullion Bulls Canada….

US Coin Composition Debate Returns with High Penny and Nickel Costs

Posted: 24 Jul 2010 06:23 AM PDT

Stack of U.S. coinsThe recent hearing on "The State of U.S. Coins and Currency" by the House Subcommittee on Domestic Monetary Policy and Technology yielded another interesting sub-topic aside from the increased chance for 2010 Silver Eagle proofs previously mentioned on CoinNews.

In fact, this topic proved to be a bit more contentious than the eagles as it invoked a miniature power struggle between the executive branch of the United States and Congress. At the heart of the matter is the makeup of American circulating coinage — its composition…. Read the rest of US Coin Composition Debate Returns with High Penny and Nickel Costs (855 words)

© 2010 CoinNews Media Group LLC

Metals now strongly bullish, Ted Butler tells King World News

Posted: 24 Jul 2010 06:23 AM PDT

12 noon ET, Saturday, July 24, 2010

Dear Friend of GATA and Gold (and Silver):

Silver market analyst Ted Butler tells Eric King of King World News that the big commercial shorts have massively closed positions on the New York Commodity Exchange and he sees gold's bullish prospects as 85 percent and silver's nearly 100 percent. Butler adds that he's encouraged about persuading the U.S. Commodity Futures Trading Commission to adopt effective position limits in precious metals futures trading now that new law requires the commission to set limits. Butler compliments CFTC Commissioner Bart Chilton for his work on the issue and his responsiveness to the public. You can listen to the interview at King World News here:

http://kingworldnews.com/kingworldnews/Broadcast_Gold+/Entries/2010/7/24…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

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

CFTC’s Chilton explains hope for freer, more transparent gold, silver markets

Posted: 24 Jul 2010 06:23 AM PDT

11:38p ET Friday, July 24, 2010

Dear Friend of GATA and Gold (and Silver):

The member of the U.S. Commodity Futures Trading Commission who has been advocating imposing position limits on traders in the precious metals markets, Bart Chilton, has made a video explaining why he thinks the financial regulation law just enacted by Congress and President Obama promises great progress, particularly in making the commodity markets freer and more transparent. The law, Chilton explains, requires the CFTC to establish position limits and authorizes the commission to prosecute "disruptive trading practices." Chilton says he is especially pleased with that, because the commission's market manipulation standards have failed almost completely for many years.

Chilton has been amazingly conscientious on the precious metals manipulation issue and has been amazingly responsive to gold and silver investors who have complained to the CFTC about market manipulation. He'll need their support as the CFTC writes the position limits regulations required by the new law. The big commercial shorts are sure to be heard as the commission continues to take public comment, so gold and silver investors can't let up yet.

You can watch Chilton's presentation at YouTube here:

http://www.youtube.com/watch?v=K1_q88rlUkw&feature=player_embedded

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

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

Mining Stock Talk interviews Peter Grandich on gold and silver

Posted: 24 Jul 2010 06:23 AM PDT

11p ET Friday, July 24, 2010

Dear Friend of GATA and Gold (and Silver):

Mining sector analyst Peter Grandich was interviewed for an hour this week by Mining Stock Talk. The interview covered not just the prospects for gold and silver but the always-negative gold and silver analysts who monopolize publicity given to the sector by mainstream financial news organizations; Grandich's belief in gold and silver market manipulation and his support for GATA; and some of his mining stock recommendations. You can listen to the interview at Mining Stock Talk here:

http://miningstocktalk.com/mining-stock-talk-interviews-peter-grandich/

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

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

Gold: Another High in Q2, With More to Come

Posted: 24 Jul 2010 06:23 AM PDT

Daniel Zurbrügg submits:

Our fundamental view on gold hasn’t changed in the last couple of weeks; we continue to be positive and expect further price increases in 2010 and 2011. The last quarter brought yet another new high with gold reaching USD 1,264. The gold price has fallen back to USD 1,200 recently because of negative sentiment caused by the news about the annual report of the Bank of International Settlement (BIS) that revealed that an amount of 346 tons of gold have been swapped for liquidity from the BIS.

This is a very significant trade and there is a lot of speculation about possible counterparties for such a trade. The most likely candidates seem to be troubled countries such as Italy, Spain or Portugal, but no additional information was disclosed.

Read more »

Gold Miner ETFs: A Better Option Than Spot Gold?

Posted: 24 Jul 2010 06:22 AM PDT

Tom Lydon submits:

For investors who don’t want to deal with the tax implications of futures-backed gold ETFs or those that hold the physical metal, gold miner funds may be an appealing option.

Almost 70 respected economists, academics, gold analysts and market commentators are of the opinion that gold is going to go to at least $2,500 per ounce before the top is reached, says ETF Daily News on iStock Analyst. Whether that’s true or not, gold miners still have a strong case.

Read more »

Rocky Mountain Chocolate Factory Update

Posted: 24 Jul 2010 05:52 AM PDT

ValueHuntr submits:
Rocky Mountain Chocolate Factory (RMCF), one of the stocks still part of the ValueHuntr Portfolio and also one of our favorite investments, recently held an earnings call where management updated shareholders on the company’s future plans and strategy. Some of the updates, along with an updated valuation, are posted below.

Revenues and Earnings

Complete Story »


Guest Post: The Strategic Ramifications Of A US-Led Withdrawal from Afghanistan

Posted: 24 Jul 2010 05:41 AM PDT


Submitted by Yossef Bodansky of www.oilprice.com

The Strategic Ramifications of a US-Led Withdrawal from Afghanistan

The United States and the NATO allies are preparing to disengage and soon withdraw from Afghanistan and even the most vocal advocates of the "long-term commitment" do not anticipate more than five years of active US and NATO involvement.  All the local key players — in Kabul, Islamabad, and countless tribal and localized foci of power — are cognizant and are already maneuvering and posturing to deal with the new reality.

Irrespective of the political solution and/or compromise which will emerge in Kabul, the US is leaving behind a huge powder keg of global and regional significance with a short fuse burning profusely: namely, the impact of Afghanistan’s growing, expanding and thriving heroin economy.

The issue at hand is not just the significant impact which the easily available and relatively cheap heroin has on the addiction rates in Russia, Europe, Central Asia, Iran, Pakistan, and Afghanistan, and the consequent public health, social stability and mortality-rate issues.

In global terms, the key threat is the impact that the vast sums of drug money has on the long-term regional stability of vast tracks of Eurasia: namely, the funding of a myriad of “causes” ranging from jihadist terrorism and subversion to violent and destabilizing secessionism and separatism. 

Russia is most concerned with these developments because most of them occur on Russia’s own doorstep and soft underbelly.  Moreover, Russia has always been cognizant of the potential dangers emanating from chaos at the Heart of Asia and the Greater Black Sea Basin. As a result, the Kremlin embarked on a major initiative to secure long-term international commitment to resolving Afghanistan’s endemic narcotics problem, which means consolidating a stable form of governance and thus eliminating the consequences of the region-wide narco-funded terrorism and destabilization.

On June 9-10, 2010, the Kremlin convened in Moscow an international forum entitled Afghan Drug Production: A Challenge to the International Community as the launch of the international drive to resolve Afghanistan’s long-term challenges where Russian Pres. Dmitry Medvedev delivered the opening speech.

“We consider drug addiction the most serious threat to the development of our country and the health of our people,” he said. Medvedev urged the international community to curtail the global spread of drug crimes which fuel terrorism. This would be possible, Medvedev argued, if the international community did not politicize the fight against drugs, narco-criminality, and narco-terrorism.

“The fight against the drug threat should be removed from any kind of politicization,” Medvedev stressed. He warned that any “political games” on such crucial issues are inadmissible for they “undermine our joint international efforts and weaken our anti-drugs coalition.”

Viktor Ivanov, the Director of Russia’s Federal Service for the Control of Narcotics, articulated the Kremlin’s case why the Afghan drug production is an international rather than a local or regional threat. “The time has come to qualify the status of Afghan drug production as a threat to world peace and security,” Ivanov said.

“This is a key postulate of the action plan that was proposed by Russia to the international community and voiced at NATO headquarters, the European Parliament and Beijing.” The Kremlin considers global drug trafficking to be far more destructive than terrorism alone because drug money is the primary facilitator of numerous threats including terrorism.

The long-term resolution of the crisis in Afghanistan is a precondition, Ivanov explained, because “it was drug production that had given rise to rife political and economic instability in Afghanistan…It is Afghan drug traffic that fuels terrorists in the North Caucasus; we need to work together to fight it.” Ivanov stressed the Kremlin’s conviction that Afghan drug trafficking “is a global problem” because it “feeds transnational crime and terrorism all over the world” and thus merits international solution.

Heroin production in Afghanistan has vastly expanded since the US-led forces entered in the Autumn of 2001.  Initially, poppy cultivation centered in the southern and, to a lesser extent, north-eastern provinces - all focus of US and NATO military activities.  Presently, poppy cultivation and drug-related activities have spread throughout most of Afghanistan. For example, a large number of heroin-processing labs — presently estimated at about 200 — were built as well.

However, ISAF [the International Security Assistance Force, in Afghanistan] prefers to largely ignore the growing narcotics problems for fear of alienating the farmer population that might resent losing its livelihood.  However, the US main concern has always been alienating the Kabul-centric political élite, the very same élite which is, at the very core of, and key to, the US-led effort to establish a centralized government in Kabul and a functioning state in Afghanistan. With drug money fueling the political machine which is crucial to the US nation-building efforts, the US has no interest in undermining Afghanistan’s narco-economy.

In the Moscow forum, US senior officials acknowledged the US reluctance to commit to the eradication of Afghanistan’s poppy cultivation and narco-economy.  Patrick Ward, the Acting Deputy Director for Supply Reduction at the White House Office of National Drug Control Policy, warned that intense anti-narcotics operations “will further undermine the rule of law and reinforce the nexus between drugs and terrorism”. He stated that US and ISAF forces must not find themselves in a position where they were perceived as the instrument of eradicating “the only source of income of people who live in the second poorest country of the world”.

The US Ambassador to Russia, John Beyrle, reiterated that the US would not take Russia’s advice about eradicating Afghanistan’s opium harvests anytime soon for fear of engendering popular alienation. UNODC Director Antonio Maria Costa agreed that “there is no rôle for NATO forces in eradication at the farm level” because this will push the population into the arms of the Taliban. However, he urged the US and NATO to embark on a comprehensive program to solve Afghanistan’s drugs menace at the national-political level; alluding to the centrality of narco-funds in Afghanistan’s politics and power élite. 

But the problem of Afghanistan’s drugs cannot be ignored by the West because the primary strategic long-term impact of Afghanistan’s drugs is the use of the drug money along the distribution routes from Afghanistan-Pakistan through the energy-rich Central Asia to the western Balkans, mainly Kosovo.

The intimate relationships and close cooperation between the drug trade, international terrorism and separatism are not new phenomena.

In the early-1990s, the Sunni jihadist leadership assumed leadership over a thriving joint action. Specific fatwas from Islamist luminaries authorize these highly irregular, seemingly un-Islamic activities because they also contribute to the destruction of Western society and civilization. The Sunni Islamist fatwas are based on and derived from earlier rulings of the higher Shiite courts issued in connection with operations of HizbAllah and Iranian intelligence. The logic of these activities was elucidated in the mid-1980s in the HizbAllah’s original fatwa on the distribution of drugs: “We are making these drugs for Satan: America and the Jews. If we cannot kill them with guns so we will kill them with drugs.” 

The main reason, however, for the Sunni jihadist embracing of the drug-trade was practicality. In the early-1990s, the fledgling jihadist leadership concluded that an intricate system of funding activities in the West was needed. By then, Gulbaddin Hekmatyar was getting ready to ship drugs from Afghanistan to the West and was willing to divert profits from this drug trade to support the fledgling terrorist networks in return for the arrangement of a viable system of money laundering.

An up-and-coming young activist — Osama bin Laden — used his knowledge of the Western financial system and his family’s connections with the European banking system in order to organize the new financial system for jihad. At that time, the net worth of the Islamist network was estimated at $600-million in the West alone.

Another founding father of the narco-jihadist alliance was Shamil Basayev. Between April and June 1994, Basayev led a high-level Chechen delegation on a visit to an ISI-sponsored terrorist training infrastructure in both Pakistan and Afghanistan in order to arrange for advanced training and expert help, funding for the Chechen Jihad, and acquisition of weapons.

In Afghanistan, the Chechens visited the ISI’s training facilities in the Khowst area, then run under the banner of Gulbaddin Hekmatyar’s Hizb-i-Islami. In Pakistan, the Chechens had a series of high level meetings with the Pakistani leaders who for a period became the patrons of the Chechen Jihad, arranging for the establishment of a comprehensive training and arming program for the Chechens in Pakistan and Afghanistan.

As a primary source of funds for their jihad, the Chechens were offered a major rôle in the expanding push of heroin from Afghanistan-Pakistan into Europe. The Chechen jihad would be handsomely rewarded for facilitating forward distribution facilities at the gates of Europe. Toward this end, Basayev met with individuals identified as “former ISI senior officials”, who provided contacts for the drugs and weapons smuggling operations.

Moreover, in early 1994, senior Pakistani officials were reported to have intervened with the Taliban leadership to ensure the uninterrupted flow of heroin from the Helmand valley via Qandahar and Jalalabad. Under the new arrangements, the heroin would now be shipped northwards to an airfield near Chitral, Pakistan, from where the drugs, as well as a growing number of Chechens and Arab-Afghan volunteers, were flown to Chechnya. As the volume of heroin increased, truck convoys were dispatched across Central Asia.

By the late-1990s, as the sums of money available from the drug trade increased, bin Laden and the “Russian Mafiya” (in both Russia and several former-Soviet states) established a complex sophisticated money-laundering operation described by an insider as “an extended and octopus-like network that uses political names in Asia and Africa in return for commissions.” The funds were used to finance the Taliban movement and a host of jihadist terrorist operations worldwide. Bin Laden made a commission on these transactions and used this resource to fund his favorite jihadist networks and spectacular terrorism.

By now, the annual income of the Taliban from the drug trade was estimated at $8-billion.  Bin Laden was administering and managing these funds — laundering them through his Mafiya connection — in return for a commission of between 10 and 15 percent, which provided an annual income of about a billion dollars for the jihad.

All of this was rattled around the turn of the century. First, the Taliban leadership offered to stop the poppy growing as part of its desperate effort to gain legitimacy and support from the West. Although the Taliban eradicated virtually all poppy cultivation in southern Afghanistan, they permitted the jihadists to continue selling heroin from cached stockpiles.

By the time US forces entered Afghanistan in the Autumn of 2001, there was virtually no poppy cultivation. However, the US and NATO demonstrated benign neglect of the country-wide poverty and chaos. Meanwhile, Islamist leaders realized that the best way to ensure grassroots presence and even support would be through the provision of easy cash to the impoverished population.

The jihadist leadership used its supporter networks in the Persian Gulf States in order to clandestinely purchase virtually all the arable land in southern Afghanistan. Islamist emissaries now offered the population economic security in the form of loans and seeds for poppy cultivation on behalf of the mysterious landlords, and secure payment from buyers who would pick-up the harvest directly from the farmers, thus alleviating the dangers of traveling to the market. As well, tribal and local leaders were handsomely rewarded for their cooperation and endorsement of these arrangements.

By the time Washington committed to the establishment of a centralized government in Kabul, the entire power-political system was dependent on narco-funding for its existence and system of patronage. The US realized that it would be impossible to sustain the semblance of pro-Western system of governance in Kabul and the countryside without looking the other way on the rapidly growing and increasingly addictive narco-funding of Afghanistan’s upper-most leadership.

Indeed, the poppy cultivation area in Afghanistan rose from 8,000 hectares in 2001 to 74,000 in 2002, peaking at 193,000 in 2007 but going down to 123,000 hectares in 2009. Although the loss is mainly the result of blight attacking the crops rather than eradication by police, the Taliban are effectively capitalizing on the plight of the affected farmers by claiming the farmers were victims of ISAF poisonous spraying and offering financial help in return for the farmers’ support of the Taliban. 

Presently, some 80 percent of the total amount of Afghanistan’s opium is grown in Kandahar, Helmand, and Uruzgan provinces, where the presence and activities of US and ISAF forces is most intense. There are strong indications that farmers throughout Afghanistan are already preparing for a record-breaking opium poppy planting season beginning in mid-September 2010 in hopes of a bumper crop next year.

Slightly more than half the Afghan heroin is smuggled via the northern route: Central Asia, Russia and the GBSB (Greater Black Sea Basin). Secondary is the southern route which carries slightly over a third of the heroin via Iran, Turkey and the Middle East to the GBSB.

Presently, the overall annual income from the Afghan heroin traveling along the northern route alone is more than $17-billion, out of which, the jihadist movement and its localized (separatist/secessionist) allies are making about $15-billion. There is no reliable estimate of the total income of the southern route, but the best guesstimates put it at more than $10-billion, most of which also goes to funding jihadist and secessionist causes (including the Afghan and Pakistani Taliban).

The annual cost of doing business in Afghanistan is below $100-million. The organized-crime networks running the labs and patronage system have a gross income of a couple of billion dollars, a small portion of which is spent on the Kabul power structure. This disparity raises the question of the cost-effectiveness of tolerating the narco-funded leadership in Kabul.

The narco-profits are thus the financial engine of key elements of the current government in Kabul and its regional cronies, as aptly demonstrated in the most recent Aftghan presidential elections. They will not permit their financial life-line to simply go away in the name of democracy or good governance.  And having committed to Pres. Hamid Karzai and his patronage system as the key to the future of a modern state in Afghanistan, the US Barack Obama Administration cannot afford to see the administration in Kabul collapsing, no matter who they are or what they do.

Furthermore, the Afghan narcotics system is the key to the funding and sustenance of numerous regional and global dynamics which will not give up easily. The drug smuggling networks across Central Asia and into Russia and Europe are an integral part of a comprehensive narco-terrorist dynamics/system.  Drug-trade funds jihadist terrorism and subversion from Tajikistan to Chechnya to Bosnia-Herzegovina.

Moreover, the various separatist and secessionist movements — that is, minorities feeling pressure of regional dynamics while having sense of alienation and victimization/victimhood — are easy prey to the lure of easily available large sums of money from the drugs and smuggling trade. 

Most dangerous are the minuscule states and state-like entities. Since these states and entities are too small and under-developed to be able to sustain themselves economically and socially in a proper and legal way, their local leaderships tend to look the other way as narco-funded organized crime establishes footholds in their midst. The drug-trade and/or money laundering bring money in and thus financially sustain the mini-enclaves and the chimera of self-determination attained.

Consequently, the various separatist and secessionist “causes” from Central Asia to the Caucasus (not just Chechnya and the rest of the North Caucasus) and to the Balkans have become safe-havens for the drug-trade.  These include, for example, the financial and money-laundering centers in Stepanakert and Tiraspol, as well as Kosovo being the primary forward distribution point of Afghan-origin drugs into Western Europe.

And once they gained control over lucrative choke-points, these localized leaders, their cronies and their “causes”, will not give up without fierce fight irrespective of their declared ideologies. The on-going fierce struggle for the control over the Fergana Valley by an alliance of jihadists and drug smugglers is indicative of this trend.

The latest round of fighting which started in early June 2010 already resulted in the death of more than 2,000 civilians and the dislocation of a few hundreds of thousands, mainly Uzbeks. The struggle for the Fergana Valley started in March 2005 when Kurmanbek Bakiyev, at the head of a coalition sponsored by organized crime, exploited the US-sponsored “Tulip Revolution” in order to seize power in Bishkek so that the southern coalition could ensure state patronage to their undertaking.

The combination of subversion of Kyrgyzstan’s internal power dynamics and horrendous corruption could not be sustained for long. Indeed, it took five years for a coalition of traditional and radical power holders to overthrow Bakiyev. However, soon after Bakiyev was forced out of Bishkek in mid-April 2010, he and his allies started exacerbating the south in order to ensure their control over the Fergana Valley and the lucrative local drug-trade routes.

Hence, the ensuing riots and Kyrgyz-Uzbek fighting were neither spontaneous nor unanticipated.

The toppling of the Bakiyev administration — which was based on the support of the southern clans and their allies and partners among the organized crime and jihadist circles — heralded a struggle for power and control over the lucrative drug-smuggling routes via the Fergana Valley.

Indeed, local jihadists rallied to the cause starting late April as a coalition of jihadists and pro-Bakiyev groups began distributing pamphlets and CDs throughout southern Kyrgyzstan urging the establishment of a separate South Kyrgyzstan Democratic Republic under the ousted Bakiyev.

The incitement stressed the discrimination and disenfranchisement of the Kyrgyz southern clans by an alleged coalition of the Kyrgyz northern clans and the local Uzbek population.  It did not take long for hatred and violence to erupt, destroying Bishkek’s control over the area. The jihadists and drug runners already benefit from the de facto dismemberment of Kyrgyzstan for the separate entity in the south encompassing the Fergana Valley already significantly expedite their operations. 

A similar trend is emerging in the Armenian enclave of Nagorno-Karabakh within Azerbaijan.  For as long as the economic situation was tenuous and there was near complete dependence on the largess of the West delivered via Yerevan (the capital of Armenia), Stepanakert (the capital of the Nagorno-Karabakh region) was ready for a political compromise which was going even beyond the hard-line position of Yerevan in the Minsk Group’s negotiations with Baku.

However, as the economic situation in Nagorno-Karabakh began improving mainly due to the trickle-down effect of transmitted and laundered narco-funds, the position of the Stepanakert authorities regarding the future of the enclave has hardened. 

In mid-June 2010, Stepanakert objected to a renewed mediation effort by the Kremlin. Stepanakert is apprehensive that a negotiated solution could be reached as Pres. Medvedev convinced Azerbaijan Pres. Ilham Aliyev and Armenian Pres. Serzh Sarkisian to meet in Saint Petersburg for the first time in more than four months and without the pressure of the Minsk Group’s mediators. Consequently, the Kremlin reported that the two presidents narrowed their differences on some of the lingering thorny issues.

In response, the Stepanakert Armenian leadership announced that the meeting between Aliyev and Sarkisian “will not help find a resolution” for the Nagorno-Karabakh Conflict.  Moreover, Stepanakert renewed its demand for a full state status in a new tripartite format — of Armenia, Nagorno-Karabakh, and Azerbaijan — along with the Minsk Group mediators (Russia, France and the United States). 

Concurrently, Stepanakert’s renewed political push is given a sense of urgency by exacerbating the security situation along the ceasefire line of contact.  Starting mid-June 2010, there has been a growing tension and escalation of fighting along the line of contact.  Karabakhi-Armenian troops intensified provocations and exchanges of fire with the Azerbaijani military facing them.

The first major incident took place on June 16, 2010 when Karabakhi-Armenian troops ambushed an Azerbaijani patrol and an Azerbaijani soldier was killed in the fighting.  This and a few smaller incidents led to growing tension and intensified military activities along the entire cease-fire line.

The number of clashes, ambushes, cross-border raids and brief exchanges of fire grew. On the night of June 18/19, 2010, Azerbaijani military noted preparations by Karabakhi-Armenian forces in north-eastern Nagorno-Karabakh where an Azerbaijani raiding party attacked the Karabakhi-Armenian positions, killing four soldiers and wounding four others before returning into Azerbaijani-controlled territory.  Baku confirmed that one Azerbaijani soldier was killed and h


The Health Care Bill Change in 1099 Reporting Requirements Does NOT Target Gold and Silver

Posted: 24 Jul 2010 04:42 AM PDT

Doubling Down on Housing?

Posted: 24 Jul 2010 04:11 AM PDT

While I sometimes lament the troubles we're having in getting our short sale offer moving toward a signed sales agreement, it's easy to lose sight of the fact that the housing market is dramatically different than it was just a few years ago for long-time homeowners who may have been non-participants in the housing bubble back around 2005 or 2006.

This WSJ story provides more reasons why being long-time renters isn't all that bad…

Record-low mortgage rates and a new slump in home prices are presenting unusual opportunities in the housing market these days—even for so-called underwater borrowers.

Some intrepid homeowners are intentionally taking a loss on their current house—and writing a big check to retire their old mortgage—in order to buy twice the home for not much more money. Others, eschewing conventional personal-finance advice, are even opting for "cash-in" refinancings, paying thousands of dollars out of pocket to settle old loans—and then taking out new mortgages with lower payments, shorter durations or both.

Katie Everett, a real-estate broker in Denver, says none of her clients kicked in cash when selling their homes last year. This year, "about half are willing to bring money to closing, anywhere from $5,000 to $45,000," she says.

Are these people crazy to be tying up even more of their cash in their homes, in effect doubling down on what has been a losing bet thus far?

Uh… yes?

No, apparently the correct answer is no – they're not crazy. At least according to economists.

Yet economists say trading up to new homes or refinancing existing ones can be smart—even if it means plunking down more cash to get out of old mortgages. People living in less-desirable neighborhoods might be able to find better homes in tonier ones that offer better appreciation potential. And with mortgage rates so low, such buyers can keep their monthly payments manageable, even though the new homes are more expensive.

"If you are trading up, what better time than when interest rates are at record lows and the cost of the trade-up is much less than it used to be?" says Christopher J. Mayer, a Columbia Business School economist.

Oh puhlease. Chris Mayer? Housing bubble denier extraordinaire?

Why do these people who gave such bad advice about five years ago still get called on by reporters to give even more advice? Search on "Mayer" here or here to see what Chris was thinking back in 2005 and 2006 – something about "Superstar Cities" where prices have fallen up to 40 percent since that wisdom was offered up.

Now here's something that seems to make sense in our new de-leveraged world…

In the past, financial planners typically recommended that homeowners devote as little cash to real estate as possible, and to invest it in the financial markets instead. But with stocks essentially where they were 11 years ago and market volatility seemingly on the rise, people are rethinking that wisdom. Devoting extra cash to repay a mortgage early is among the safest ways to produce an investment return."At this point," says Jay Brinkmann, chief economist of the Mortgage Bankers Association in Washington, "if they don't have anything else that is bringing a tremendous return, then they are buying themselves an annuity by paying their house off sooner than they needed to."

During the fourth quarter of 2009, 33% of refinancings were of the cash-in variety, the highest percentage since Freddie Mac began tracking the characteristics of refinance transactions in 1985. Figures for the second quarter are due next week.

"Historically high percentages of borrowers are paying down their principal when they refinance their mortgages," says Brad German, a Freddie Mac spokesman.

Man, that's gonna kill an economy like ours that is largely based on asset prices forever rising faster than debt.

I guess people are starting to catch on – aspiring to live a debt free and more stress free life.

There's a bit more in this report including a few examples of growing families trading up to a bigger house that seem to make good sense – just be sure to sell the old one before you commit to the new one!

OMB's Latest Projections Estimate 250K Jobs Created Each Month Through End Of 2015

Posted: 24 Jul 2010 02:30 AM PDT


Yesterday the OMB released its Mid-Season Review of the US Budget. In keeping with the encroaching Beijingization of all data releases, the administration now sees yet another decline in the 2010 budget deficit, this time a reduction of $84 billion compared to the February forecast. According to the budget office, despite a $33 billion projected drop in revenues, outlays will see an even greater haircut courtesy of "lower unemployment and government program" spending. Yet even so, the 2010 budget deficit is expected to hit $1.47 trillion and $1.42 trillion in 2011. Of course, all these numbers are flawed and irrelevant: the confirmation - the OMB's assumption about jobs projections. To wit: "With continued healthy growth in 2011 and beyond, the unemployment rate is projected to fall, but it is not projected to fall below 6.0 percent until 2015." One problem with this "assumption": for this projection to actually happen, it means the US government needs to start creating 245 thousand jobs every month beginning in July through the end of 2005 (and we give the OMB the benefit of the doubt: if their assumption means 6% by the beginning of 2015, it implies a ridiculous job creation rate of 300,000 per month for 54 months straight). Alas, in attempting to present the rosiest picture possible, the budget office is now completely ignoring such useless things as logic and merely discrediting itself with increasingly more ridiculous "analyses."

Readers will recall that a few days ago we presented the summary findings of a CEPR paper which demonstrated that 2007 peak employment levels will not be met until 2021, even after assuming a job creation rate of 166,000 a month for eleven straight years. The reason for this is that all the very smart economists consistently miss the most glaringly obvious thing: demographics, or specifically population growth. As the CEPR indicated, "Based on CBO projections, we assume a monthly growth in the labor force of just over 90,000 workers per month from January 2008 forward." In other words, just the natural growth of America will have added 8.6 million vacancies to the labor force from December 2007 through the end of 2015. And since the economy is already in the hole to the tune of 7.5 million jobs from the 2007 peak (see chart below), the OMB is effectively stating that it can bridge the shortfall of 16 million jobs in the next 5 years. Why, sure they can - if they can somehow create 245k jobs each month for the next 66 months. Alas, as the data demonstrates, the only time during the tenure of the Obama administration where there was a positive NFP number, is when the census fudge factor added hundreds of thousand of (potentially double-counted) positions, which have now been unwound. And obviously each month that does not create a net positive add to the economy, means more and more jobs have to be back-end loaded. In a few months, the economy will need to be adding 300k amonth to get to the OMB projection, then 400k... then 500k... Soon after that even China will have to tip its hat to the US propaganda machine.

Full chart summarizing the latest set of Goebbels-worthy data coming from the administration below:

Alas, this utter lack of logical thinking is precisely what occurred in the European stress tests: we will have quite a few more things to say shortly about Germany's Street Test Urban Achievers, the Landesbanks shortly, and how using a little comparable logic and data mining also quite easily refutes yesterday's "stupendous news."

Dollars Never-Ending Plunge and Its Golden Consequences

Posted: 24 Jul 2010 02:00 AM PDT
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