Gold World News Flash |
- The Golden Chalice and Gold’s Greatest Correction Since 1980
- The LBMA joins the gold squeeze cover-up
- Yes, You Can Time the Market – Here’s How!
- SP-500, GLD and GDX - Sentiment Trumps Everything
- Guest Post: SP-500, GLD and GDX - Sentiment Trumps Everything
- Gold Holds The Line
- What Wisdom Suggests Doing
- Got Gold Report - COT Flash July 25
- A New Taxpayer Rip-Off: Mortgage Backed Securities From the FDIC
- The Death of Paper Money
- Some Thoughts on Deflation
- With Silver Soaring, Beware of Who You Buy From
- Bubble Baths and Stress Tests
- How To Be Positioned for SP500, Gold and Oil
- 103 U.S. Banks Have Collapsed So Far In 2010 – Do You Know If Your Bank Will Survive?
- Kennedy half dollars
- A Supernova in Silver is Fast Approaching!
- Were The Stress Tests For Real? Volume Says Otherwise
- Yes, You Can Time the Market - Here's How!
- A Bearish Predisposition?
- Cheeky's Futures Charts - July 25
- The State the Welfare State is In
- The Golden Chalice and Gold's Greatest Correction Since 1980
- Jim's Mailbox
- LBMA Closes Off Public Access To Key Bullion Bank Trading Data
- Ambrose Evans-Pritchard: Reflections on the death of paper money
- German Banks Hiding Stress Test Data Further Undemine Geithner's European Scammery Tour
- India warned of stagflation risk as price of food soars
- Adrian Douglas: The LBMA joins the gold squeeze cover-up
- How Goldman's Counterparty Valuation Adjustment (CVA) Desk Saved The Firm From An AIG Blow Up (And Opens Up A Whole New Can Of Wormy Questions)
- Onshore Rush by Offshore Moratorium
- August 2010 Inflation
- Is Oil Spill Cover for Massive Foreclosure?
- The Week Ahead for the USD and US Markets
- S&P 500: The Optimist's Argument (Part I of II)
- HEAD AND SHOULDERS TOP OR BOTTOM II
- Alternatives to the U.S. Dollar
- Junior Gold Miners Versus The Big Producers
- Silver Rises for Week, US Bullion Coins Near 2.3M for Month
| The Golden Chalice and Gold’s Greatest Correction Since 1980 Posted: 25 Jul 2010 06:13 PM PDT Gold has been on a tear since the low in 1999 at $252.50 ($GOLD) per ounce, thrashing virtually every other asset class for over a decade as it soared to its $1265 high in June 2010. A solid case can certainly be made that as long as the dollar is being destroyed by loose fiscal and monetary policy that gold has a one-way ticket to higher prices. However, no market runs to the sky.
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| The LBMA joins the gold squeeze cover-up Posted: 25 Jul 2010 06:09 PM PDT The London Bullion Market Association has just taken the highly unusual step of blocking access to statistics relating to the trading activities of its member bullion banks. This information has been available to the public since 1997 but as of this week it is available only to LBMA members.
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| Yes, You Can Time the Market – Here’s How! Posted: 25 Jul 2010 06:05 PM PDT The trend is your friend and this article reviews the 7 most popular trend indicators to help you make an extensive and in-depth assessment of whether you should be buying or selling stocks, bonds, ETFs, gold or silver for your portfolio. If ever there was a "cut and save" investment advisory this article is it.
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| SP-500, GLD and GDX - Sentiment Trumps Everything Posted: 25 Jul 2010 06:03 PM PDT Markets rise when the preponderance of participants are buyers, and fall when the preponderance of participants are sellers. One of the key ways to anticipate the pendulum swings of participant behavior, and therefore price behavior, is to evaluate sentiment. Sentiment, more than fundamentals or technical analysis, trumps everything.
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| Guest Post: SP-500, GLD and GDX - Sentiment Trumps Everything Posted: 25 Jul 2010 05:42 PM PDT
SP-500, GLD and GDX - Sentiment Trumps Everything, Submited By John Townsend, The TSI Trader Markets rise when the preponderance of participants are buyers, and fall when the preponderance of participants are sellers. One of the key ways to anticipate the pendulum swings of participant behavior, and therefore price behavior, is to evaluate sentiment. Sentiment, more than fundamentals or technical analysis, trumps everything. When too many players are on the same side of a trade they eventually find themselves in a crowded position where most everyone around them has the same motivation – to reverse their position when the tide changes. Little by little, as participants slip out the back door by changing the bias of their position, the pendulum of price swings more sharply against the remaining herd in the crowded trade. Inevitably, something akin to panic sets into the herd as they begin to aggressively reverse their position for financial survival. The primary ingredient that causes price to catapult, up or down, is sentiment oscillation and capitalization from one sentiment extreme to the other. An astute market technician, investor or trader will look for those flash points where conditions are ripe for a market reversal. It sounds easy to do, but remember that when the analysis is very convincing, the preponderance of market participants will disagree. It seems that to be effective at market timing one needs to listen not to what others are saying, but to what the sentiment data represents as truth. With these thoughts as a foreword, let’s see what the current sentiment situation is for the SP-500. The following chart is from Market-Harmonics and assimilates 4 years of bull/bear percentage data from Investor’s Intelligence. To this chart I have measured and notated in blue the percent change in bearish advisors per the Investor’s Intelligence data, for each downswing of the SP-500. My notation in green is the percentage change in bearish advisors for the related upswing of the SP-500. The price of the SP-500 is notated in black at each swing peak and trough. One of the most striking observations I have made of this data is that it appears the maximum pendulum swing in the bearish direction is a 20% change. This occurred in Q1, 2008. More frequently this percentage change has topped out at 19%, followed by 16%, 11% and smaller percentage changes. The obvious conclusion I come to is that our current bearish % change situation, at a 19% reading, is about at the maximum. History seems to show that investor’s emotions, like a physical rubber band, can only be stretched so far into pessimism (19-20%) - the bearish direction - before they snap back in the opposite bullish direction. The pendulum swing in the bullish direction is about to begin at this very time.
I would expect that the stock market could not possibly peak until the % of bears decrease by a minimum of 8%, and more statistically likely 10-15%. With a current reading of 36%, I am suggesting that we should not even consider a peak in the stock market until the bear percentage reading drops from where it is now at 36% to 28%, and more likely to around 26-21%. What this means for now is that 1100 is not the top in the SP-500. Far from it. The bears have not even begun to turn into bulls. Price will go much higher from here and it will take weeks, if not a couple of months, minimum, to reach a shift where the % of bears are themselves finally out of whack on the teeter-totter. Gold, while not covered by Investor’s Intelligence to my knowledge, would appear to be in a similar setup as the stock market. For this I turn to data published this past week at Schaeffer’s Investment Research and look at the 2 year history of the GLD put/call option ratio. What we can observe is that when the bearish trade gets excessively crowded, when a preponderance of participants are convinced that gold will fall, that is not the top in gold. Rather, it is the bottom. I have circled with green the price of gold for each occasion of a put/call ratio spike.
If I were presently short gold and looked at this chart it would send shivers down my spine. No kidding. Nothing like finding out you are in a crowded trade that once it starts to go bad, you KNOW it will go very bad.
If you are interested in reading more about the techniques of using the True Strength Index (TSI) indicator, want to be exposed to discussion and analysis of various mining stocks, as well as the US Dollar and stock markets, or just want to participate in a blog where your thoughts are heard and responded to, I invite you to join me at my website which is: The TSI Trader. Or jot me an email, tsiTrader at gmail.com I wish you a profitable week! John Townsend
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| Posted: 25 Jul 2010 04:23 PM PDT www.preciousmetalstockreview.com July 24, 2010 Ben Bernanke spoke this past week and was quite frank during the first day of testimony. The markets plunged as a result of his talk of the economy being “unusually uncertain”. I’m sure his unusually candid remarks sparked an evening of calls by some of the highest members on high finance in the US who pleaded with him to expunge his previous days honesty. It worked and sent markets higher into Friday where they look to have traced out a mildly bullish pattern for at least the short term. But then again the perpetually wrong Tim Geithner was on the tube saying there is no double dip recession. Technically he’s right since we’re in a large depression that has only run perhaps 40% of it’s course. That 40% number is my attempt at being generous this week. But only being 35% through the earnings season so far there is still much news to consider. ...
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| Posted: 25 Jul 2010 04:22 PM PDT (Very Few are Wise Today!) Silver Stock Report by Jason Hommel, July 24, 2010 James 1:5 If any of you lacks wisdom, he should ask God, who gives generously to all without finding fault, and it will be given to him. Proverbs 16:16 How much better to get wisdom than gold, to choose understanding rather than silver! (This does not mean silver is "bad", it means silver is very good. To say something else, like understanding, is very very good, it must be better than something very good, like silver.) And I fully agree with Proverbs 16:16. It is much more important to understand why you need silver, than just owning silver. Some silver owners are selling silver, because they have no understanding of why they need silver. Some others sell silver trying to anticipate short term tops, when we are far from a top. Therefore, having understanding is much more import...
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| Got Gold Report - COT Flash July 25 Posted: 25 Jul 2010 04:22 PM PDT By Gene Arensberg Esse quam videri – To be rather than to seem Bottom line: COT report shows large commercial traders reducing net short positions for gold at very strong pace. LCNS for gold falls over 73,000 contracts past 3 weeks. Ordinarily more bullish than bearish. Gold -1.7% and the gold LCNS -13.2%. Silver -2.9% and the silver LCNS -6.4%. Details just below. ATLANTA – We are still waiting patiently like good Vultures for gold and silver to make it into our expected support zones. The longer it takes the more confidence we seem to garner for those support zones. We are eager to redeploy our short-term gold and silver ammunition, but we sure haven’t missed all that much by not doing so since we were profitably stopped in May. Indeed, gold closed Friday, July 23 almost exactly where we were stopped May 20 and within about $25 above where we will feel compelled to reenter. The net result is that we remain on the sideli...
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| A New Taxpayer Rip-Off: Mortgage Backed Securities From the FDIC Posted: 25 Jul 2010 04:22 PM PDT You know about all the assets received by the FDIC when a bank goes into receivership? That's the stuff that the take-over bank won't accept as assets of value. Well, as of this week the FDIC has about $37 billion of such assets, according to Barry Ritholtz at The Big Picture. Ritholtz says that the FDIC is strapped for cash and has filed for a pilot program to package these as MBS (mortgage backed securities) and sell them as government guaranteed securities. He says the securities will sell for somewhere between 10 cents and 50 cents on the dollar, best guess. The result, if all $37 billion are so disposed, is that the FDIC will gain between $3.7 billion and about $18 billion in additional cash in reserve for future back failures. Isn't this a good thing? Wait just a minute. If these MBS are worth what is obtained for them, then the buyers will make a fair return on their investment. What's a fair return? How about 5% a year for seven to ten years? For a seven ...
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| Posted: 25 Jul 2010 04:22 PM PDT July 25, 2010 10:05 AM - As they prepare for holiday reading in Tuscany, City bankers are buying up rare copies of an obscure book on the mechanics of Weimar inflation published in 1974. Read the full article at the Telegraph......
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| Posted: 25 Jul 2010 04:22 PM PDT Some Thoughts on Deflation The Super-Trend Puzzle The Elements of Deflation Maine, New York, Turks and Caicos, and Europe 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. For equity investors, this is an important question because, historically, periods of deflation have not been kind to stock markets. Let's come at this week's letter from the side, and see if we can sneak up on some answers. Even on the road (and maybe especially on the road, as I get more free time on airplanes) I keep up with my rather large reading habit. This week, the theme in various publications was the lack of available credit for small businesse...
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| With Silver Soaring, Beware of Who You Buy From Posted: 25 Jul 2010 04:22 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. As prices tread higher, these scams will only continue to grow in their influence. Here's a simple guide to evaluate silver, and whether or not it is indeed real: Does it Look Right? Any coin shop owner or worker should be able to tell immediately whether or not your coin stacks up as a real silver coin. One of the best ways to see if it is in fact silver is to flick it with your fingernail. For larger, 1 ounce coins, the silver coin should set off a high pitched ringing nose. Now smack your fingernail against another coin, preferably one of nickel-clad. You'll find the noise is short, not as high-pitched, an...
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| Posted: 25 Jul 2010 04:19 PM PDT In the dog days of the North American summer, August is a month of lethargy and indolence. It pays to remember that while you're still in the grip of Australia's winter. In fact, it's one of the only explanations for how a stress test is not really a stress test. Because a real stress test would, you know, be stressful. And who wants that during the middle of a long, hot summer? In the big picture, our view didn't really change over the weekend. Money and capital are migrating from the West to the East. Emerging markets are better long-term investments than developed markets. And both are hostage the large amount of volatility that accompanies private sector deleveraging and public sector incompetence. But in the short-term, we're not quite sure what to make of the so-called stress tests on 91 European banks. The test results were released last Saturday morning in Australia and showed a remarkable amount of vigour in Europe's banking system. Just seven of the ninety one banks failed the test, with five in Spain and one each in Germany and Greece. And those banks require a paltry $5 billion in capital to be restored to full health. Imagine having chest pains and being referred by your doctor to a cardiologist for further tests. You go, expecting the worst. But you show up and the doctor asks you sit in a big Lazy boy recliner while he fetches you a buck of extra crispy fried chicken to be chased by a big chocolate milkshake and draws you a scented bubble bath. Instead of a treadmill, you get a cakewalk. Would you be confident of the test results? European regulators are either unimaginative, or the whole exercise was a public relations exercise designed to restore confidence in European banks without really revealing how stressed out bank balance sheets would be in a sovereign debt default. But whether a bank is adequately capitalised to withstand big losses isn't really a matter of confidence. It's just maths. And for the record, the tests measured losses on sovereign bonds, not an outright default by a European sovereign. In other words, the European maths weren't that stressful at all. The banks in question were subjected to a test in which European GDP contracted by 3% and stocks fell by 20%. That seems like a mild amount of stress. What's more, the tests assumed the banks would take losses on sovereign government bonds held by their trading desks. That sounds sensible, given the fact that widespread holdings of sovereign debt are thought to make up huge portions of European bank capital. You'd want to see how well capitalised the banks remained if they took losses on those sovereign bonds. But the stress tests excluded write downs on sovereign bonds held by the banks in their normal banking book, where most of the bonds are actually held. According to Morgan Stanley analyst Huw van Steenis in today's Australian Financial Review, European lenders hold 90% of their Greek bonds in their banking book and just 10% in their trading book. The tests assume lenders will receive full value at maturity of all the sovereign bonds held in the banking book. Isn't that a bit like saying that as long as you don't count all the debt that could go bad, European banks are well capitalised? Hmmn. In any event, a clean (albeit dubious) bill of health for Europe's banks ought to be good news for Australian banks who borrow in Europe. Yet another story in today's AFR confirms what we've suspected for awhile: bank interest rates in Australia are decoupling from the cash-rate set by the Reserve Bank of Australia. Instead, they are more and more being determined by the global cost of capital. Don't expect any of Big Four to push up rates before the election, lest they hand either party a big club to beat them over the head with. But according to Pimco's Robert Mead, "The average cost of funds is going up for banks," in Australia. "To the extent this continues, eventually it will need to be passed on to customers." "Problems in credit markets caused by the European debt crisis have pushed up the cost of funds that Australia's banks borrow on international financial markets and then lend out their customers," reports George Liondis. The Big Four are set to borrow as much as $170 next year in new and rolled over borrowings. They're competing for that money with corporations and governments. Sooner or later - later being after the election - you can expect the bank to put up rates over and above what the RBA has decided - even if the RBA lifts rates at its next meeting. This is good for anyone who lives on bank interest and less good for anyone paying a variable rate mortgage. Do you reckon this makes the banks a buy or a sell? Over the weekend we were thinking of what our friend Dan Ferris calls "world dominating" stocks. He was referring to a handful of businesses that regularly grow earnings, increase dividends, and own or dominate a niche in the market that makes them relatively unassailable. Examples would include Wal-Mart (NYSE:WMT), Intel (NASDAQ:INTC), and Microsoft (NASDAQ:MSFT). To be fair, these are the bluest of blue chips. You probably don't need a newsletter to tell you to buy these businesses. That said, in the chase for market-beating returns, most investors probably load up on risk and forget the unsexy but reliable companies that deliver growth without requiring leverage. And it can't hurt to invest in a business you actually understand. Why? About five years ago we used to regularly attend the regular meetings of a private group of accredited investors who entertained proposals from entrepreneurs seeking capital. The deals varied, from income deals to private equity to warrants. There was a crazy variety of opportunities. But you'd be amazed at how few of the entrepreneurs seeking capital could answer two basic questions: what do you do and how soon will I make money? Does Australia have world-dominating blue chip franchises with a track record of increasing earnings and dividends like clockwork? Or, does its large exposure to the commodity cycle introduce a lot of volatility to earnings? Hmm. That answer is probably self-evident. But for the rest of this week, we're going to explore the issue of long-term, big picture investment strategies and see how they apply to Australia. Feel free to send your thoughts to us at dr@dailyreckoning.com.au Dan Denning
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| How To Be Positioned for SP500, Gold and Oil Posted: 25 Jul 2010 03:12 PM PDT The market momentum and internals are looking strong for the equities market overall. With last weeks strong close we have seeing the percentage of stocks closing above their 50 and 200 day moving averages surge from 40% to 68% ... Read More...
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| 103 U.S. Banks Have Collapsed So Far In 2010 – Do You Know If Your Bank Will Survive? Posted: 25 Jul 2010 02:53 PM PDT 
When it comes to the health of the U.S. banking system, the statistical trends certainly do not look promising. At the end of 2008, there were 252 U.S. banks on the FDIC's problem list. At the end of 2009, there were 702 U.S. banks on the FDIC's problem list. About halfway through 2010, FDIC Chairman Sheila Bair said that 775 banks (approximately 10% of all U.S. banks) were on the problem list. Does anyone else notice a trend developing? It is time for everyone in the financial world to admit that the U.S. banking system is dying. Do you know if your bank if on the problem list? You might want to go check. Not that your money is going to suddenly disappear. Even if your local bank fails, the FDIC will guarantee your bank account, right? Yes, it will. But the FDIC is far from healthy at this point. The FDIC is backing approximately 8,000 U.S. banks that have a total of about $13 trillion in assets with a deposit insurance fund that is pretty close to empty. Well, actually "empty" is not quite the right word. It was recently reported that the FDIC's deposit insurance fund is sitting at negative 20.7 billion dollars. And the FDIC estimates that the seven bank failures on Friday will reduce the fund by another $431 million. Ouch. The truth is that the FDIC is rapidly turning into a gigantic financial black hole. The red ink just seems to be endless. The FDIC now estimates that their funds will experience a $60 billion reduction due to additional bank closings between now and 2014. And to be honest, that figure is way too optimistic. So who is going to bail the FDIC out? The same source that bails everyone out. The U.S. taxpayers. But isn't that bad? Yes, all of these bailouts are going to cause the U.S. national debt to continue to explode, but what else can we do? Are we just going to shut down the FDIC? That wouldn't go over too well with anyone. No, the truth is that this is the system that we have built. All the crap flows downhill and ultimately ends up in the laps of U.S. taxpayers. The bad news is that it looks like large numbers of banks are going to continue to fail. You see, right now the American people are simply not doing a very good job of paying their bills. During the first quarter of 2010, the total number of loans at U.S. banks that were at least three months past due increased for the 16th consecutive quarter. Just think about that for a moment. Would you consider 16 in a row to be a trend? In an economic system built on credit, it is absolutely imperative that most people pay their debts or the whole thing will come crashing down very quickly. And right now it is undeniable that things are unraveling at a staggering pace. So who is benefiting from all this? Well, there is one segment of the banking industry that is actually performing quite nicely in the midst of all of this chaos. Many of the largest banks in the U.S. have been reporting very large profits as they gobble up larger and larger shares of the U.S. banking market. In a previous article entitled "Are We About To Witness The Greatest Banking Consolidation In U.S. History?", we noted the rapidly growing power of America's megabanks.... Back in 2000, the "Big Four" U.S. banks - Citigroup, JPMorgan Chase, Bank of America and Wells Fargo - held approximately 22 percent of all deposits in FDIC-insured institutions. As of June 30th of last year that figure was up to 39 percent. The Founding Fathers of this country warned us of the danger of big banks getting too much power, but we have not listened to their warnings. Now we have monolithic global banks that are so immense in size that we seem almost powerless to control them. In fact, the six biggest banks in the United States (Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo) now possess assets equivalent to 60 percent of America's gross national product. The truth is that these sharks aren't shedding any tears when your local banks die off. Why? Because they know that many of the customers from the banks that have died will soon come their way. The reality is that all of the legislation and regulations implemented during the past 30 or 40 years have rigged the game massively in favor of the big global banks. So dozens upon dozens of smaller banks are going to continue to die and the megabanks are going to continue to eat up increasingly larger portions of market share. So if you still have money in a small local bank, enjoy it while you can. From now on, the small bank in America is an endangered species.
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| Posted: 25 Jul 2010 02:51 PM PDT Does anyone know if Kennedy Half Dollars 1966 have any appreciable silver content? I was given a few the other day and I doubt if they do, but would appreciate any input from the better minds on this. TIA
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| A Supernova in Silver is Fast Approaching! Posted: 25 Jul 2010 02:41 PM PDT The stage is set for a silver price percentage gain of extraordinary magnitude! Forget the popular refrain of "Got Gold?" and add a substantial quantity of silver to your portfolio to take advantage of the coming silver supernova! Read More...
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| Were The Stress Tests For Real? Volume Says Otherwise Posted: 25 Jul 2010 02:03 PM PDT As investors debate the validity of the stress test to gauge the financial health of European banks, the market has definitely signaled clues on the charts that we are nowhere out of the woods yet with the sovereign debt issue. Read More...
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| Yes, You Can Time the Market - Here's How! Posted: 25 Jul 2010 01:49 PM PDT The trend is your friend and this article reviews the 7 most popular trend indicators to help you make an extensive and in-depth assessment of whether you should be buying or selling stocks, bonds, ETFs, gold or silver for your portfolio. Read More...
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| Posted: 25 Jul 2010 01:19 PM PDT
From systemic risk of capitalism, we move on to more current events. I had lunch today with Greg Gregoriou, a professor of Finance at SUNY (Plattsburgh) Greg has published many books and articles, and his most recent article with Razvan Pascalau on the optimal number managers in funds of hedge funds has garnered much attention.
FINalternatives reports that three of New York City’s five public pension funds are mulling their first allocations to hedge funds. So why the fixation on hedge funds? Part of it is gaining access to top investment managers who deliver alpha no matter what market cycle we are in, part of it has to do with the focus on risk management and managing liquidity risk, and part of it is the whole fixation with alternatives (hedge funds, private equity, commodities and infrastructure).
But the bears keep on growling, reminding us that systemic, structural problems aren't going away anytime soon. Bob Chapman of the International Forecaster notes this in his latest comment, Talk of a Recovery Hides Collapse:
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| Cheeky's Futures Charts - July 25 Posted: 25 Jul 2010 12:17 PM PDT
Futures are off and kicking....
Indexes
Energy
Metals
Agricultural commodities
Bonds
Currencies
New Zealand
Australia
Japan
Korea
Hong Kong
Dubai
Shenzen Stock Exchange
Shanghai
India
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| The State the Welfare State is In Posted: 25 Jul 2010 12:16 PM PDT "You can take your loans and shove them," the Hungarian economic minister, György Matolcsy, did not say. But that's what he was thinking. Watch out. The Hungarians are trendsetters. They ran a budget deficit of 9% of GDP back in 2006. They got a $20 billion bailout in 2008 and have been living with austerity measures ever since. The current budget is only in deficit by 3.8% of GDP - barely a third of the US level. After a regime change in April, they've had enough. "We told the IMF/EU that further austerity was out of the question," said Matolcsy. Les Echos reported this week that 64% of French workers were retired by age 60. People working for favored state enterprises - such as the SNCF, which runs the train system...or for the "fonction publique," which keeps people from getting anywhere - may retire earlier. They get extra credit for years worked in hardship overseas destinations - such as Tahiti, for example. And a French politician can get a pension after only 6 years in government. In the old days it was a lucky man who retired before his beard grows white. Now, if he plays his cards right, he could begin collecting a pension before his beard starts to grow at all. This information comes in the context of a great debate, "a parliamentary battle." The French government has proposed a law raising the retirement age to 62. The socialists have proposed 150 amendments. Over at The Financial Times, meanwhile, the editors have devoted this week to their own great debate on the subject. "To tighten, or not to tighten - that is the question," writes Martin Wolf. The rumbles in Paris and London are just two of many mock skirmishes going on. Neither side wants to aim too carefully at the real problem; they fear they might hit themselves! You'll recall, the G20 - the USA dissenting - urged member states to cut public expenses. They pledged to cut public deficits in half by 2013 and to stabilize debt by 2016. But Hungary has already broken ranks. The big spenders insist that more spending is needed to protect the system. The cutters say more cuts are the thing that will preserve it. Neither has any doubt that the system is worth saving. That, precisely, is the target of today's back page artillery. Otto von Bismarck would hardly believe what a smashing success his innovation has become. Practically every advanced government picked it up in one form or other. The little guy liked it because he thought it gave him something for nothing. And the welfare state proved him right. The expenses of the first generations in the system were easily supported by the larger, richer generations that came after. Leaders liked it too, because it made the voters more dependent and controllable: the masses wouldn't revolt as long as their pension checks kept coming. Ernest Ackerman must have smiled broadly when he got the first US Social Security check for 17 cents in 1937. Since then, the checks got bigger and came earlier. More benefits were added - education, health care, parks, libraries, unemployment compensation... Ordinary people began to spend more time in universities than they did in bars. Health care services included evermore complicated and expensive procedures. Thousands were employed to regulate, control, protect and administer the public weal. Millions more were able to malinger and leech. One got a subsidy for his farm. Another was 'disabled' at work. And still another had his bank bailed out. The first problem is obvious; the costs got out of hand. The United States has one of the least extensive social welfare systems. (It makes up for it with military spending.) Yet, its basic figures are not much different from those of most European states. The US has a current deficit equal to about 12% of GDP and has debt approaching 100% of GDP. If you include state and local debt, as well as the under-funded liabilities of its pension and health care plans, the total rises to more than 500%. In other words, future generations will have to devote 5 years' worth of total US output in order to pay for benefits awarded by a previous generation of politicians. Over time, too, the 'benefits' tend to become more and more bogus. Providers and recipients connive in a kind of symbiotic zombie-ism. Perpetual students take pathetic and preposterous classes from permanent professors. Morbid patients, funded by the state, become the health care industry's best customers. And early retirees clog the highways with their camping cars, when they should be at work. Chiselers, grifters, stuffed-shirts and time-wasters - the welfare state attracts them like a rich old widow attracts gigolos. The masses are beginning to see this as a losing proposition; the swindle no longer works in their favor. New generations are often smaller. They may not be richer either. Staggered by debt and deadbeats, the next generation will have a hard enough time taking care of itself, let alone paying the accumulated expenses of the ones that came before. Today, a taxpayer pays a euro to his government. With all the waste and corruption, he's lucky if he gets 50 centimes' worth of real services. Officials try to disguise these facts by borrowing, hiding the 'social charges,' and printing money. But word gets around: the welfare state no longer pays. Bill Bonner
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| The Golden Chalice and Gold's Greatest Correction Since 1980 Posted: 25 Jul 2010 11:35 AM PDT The developed world is finally waking up to the reality of the potential for across the board deflation that brings the wholesale destruction of asset values. Read More...
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| Posted: 25 Jul 2010 11:15 AM PDT Dear CIGAs, Behind the cloak of all methods of MOPE a massive failure of US banks is being revealed very slowly. Wake up and read this please.
Dear CIGAs, Friday evening, July 23, 2010, the FDIC announced seven more bank failures, bringing the totals to 103 so far this year and 270 since 2007. The seven banks closed this week had collective assets of $2.16 billion and deposits of $2.02 billion. Their closings cost the FDIC an estimated $431 million, about 21% of deposits. So far this year, bank closings have cost the FDIC an estimated $18.55 billion. Five of the seven closings were accomplished with the FDIC entering into loss-share agreements with the acquiring banks. That means, in effect, that the FDIC makes a guarantee to the acquiring bank that assets it has taken over from the failed bank will not decrease in value beyond a pre-agreed limit. In connection with those five closings this week, the FDIC entered into loss share agreements covering an additional $1.25 billion in assets. So far in this crisis, the FDIC has entered into loss share agreements covering about $180 billion. How Loss Share Agreements Figure Into Bank Failures: Loss share agreements save the FDIC money at the time of the closing, because the FDIC does not have to pay the acquiring bank as much money up front to honor the failed bank's deposits. However, a loss share agreement is by nature a bet. The FDIC is betting that over the next ten years, the failed bank's assets will turn out to be worth more than any party was willing to bid for the assets at the time each bank was closed. Future asset values are calculated net of selling expenses, meaning that things like foreclosure costs, property taxes, utilities and maintenance fees paid by the acquiring bank in disposing of the assets is deducted from their eventual sales price. This is why it is important to keep track of the total value of assets the FDIC has guaranteed under loss share agreements throughout this financial crisis. It is similar to keeping track of the total dollar value of mortgages guaranteed by Fannie Mae or Freddie Mac. The two major distinctions are that the FDIC's assets under loss share are, by definition, distressed assets and their value has already been significantly discounted. The FDIC's future exposure lies in the possibility that these assets may turn out to be worth even less than the discounted value agreed to at the time of each bank failure. This is a distinct possibility; otherwise the acquiring bank would not insist on the loss share agreement. In the event the assets turn out to be worth less than the amount agreed to by the parties up front, the FDIC's losses could grow dramatically beyond its original projections. Remember, the assets in question are illiquid and difficult to value, and their future value depends in large part on how this financial crisis plays out. You can bet the FDIC's loss projections assume the current downturn is over and we will be experiencing income growth, less foreclosure activity and recoveries in the residential and commercial real estate markets going forward. The parties that have acquired these assets under loss share agreements can afford to be indifferent as to what happens going forward. They are protected either way. This is yet another avenue of quantitative easing. The US Treasury, by way of the FDIC, is guaranteeing a value for the Country's most distressed bank assets much higher than anyone is actually willing to pay for them. In the process, it is helping disguise how "worth-less or worth-little" (Jim's words) these assets have become. More Evidence of FASB-Blessed Overvaluations: Each bank failure announcement allows us a peek into how extensively bank management have been exaggerating the value of their least liquid assets since the FASB's roll-back last year of fair value accounting requirements. Four of the worst examples of asset overvaluation exposed by this week's closings were as follows: SouthwestUSA Bank, Las Vegas, Nevada, had stated assets of $214 million and deposits of $186.7 million. The FDIC estimated its closing cost $74.1 million (40% of deposits). Based on that estimate, the bank's assets were really only worth $112.6 million, and had been overvalued by 90%. SouthwestUSA Bank's situation was so bad, the acquiring bank was only willing to take over $137.3 million (stated value) of its assets, with its losses on $111.3 million of those assets limited by a loss share agreement with the FDIC. The FDIC had to take the remaining $76.7 million (stated value) of assets onto its own books for later disposition. Under these circumstances, the FDIC's loss estimate could only be called a "guesstimate," because its eventual losses are made uncertain both by the loss share agreement and the difficulty gauging how much it will be able to realize on the sale of the assets it was forced to take over. Crescent Bank and Trust Company, Jasper, Georgia, had stated assets of $1.01 billion and deposits of $965.7 million. The FDIC estimated its closing cost $242.4 million. Based on that estimate, the bank's assets were really only worth $723.3 million, and had been overvalued by 40%. Thunder Bank of Sylvan Grove, Kansas, had stated assets of $32.6 million and deposits of $28.5 million. The FDIC estimated its closing cost $4.5 million. Based on that estimate, the bank's assets were really only worth $24 million, and had been overvalued by 36%. Community Security Bank of New Prague, Minnesota, had stated assets of $108 million and deposits of $99.7 million. The FDIC estimated its closing cost $18.6 million. Based on that estimate, the bank's assets were really only worth $81.1 million, and had been overvalued by 33%. Respectfully yours,
Follow the Money Within The Gold Market America's total debt is expected to exceed $14 trillion next year. Each American's share of that debt totals just short of $50,000. If Fedzilla was honest and put all the figures on the table, we are in debt over $100 trillion due to the unfunded financial obligations for Social Security, Medicare and Medicaid. As Jim suggests, an excellent economic observation from Ted (The Sledge) Nuggent. Actually, if all the "debt cards" were laid on the table the real burden would be far greater than anyone would be willing to recognize at least from a public perspective. Unfortunately, any sentence that starts enormous debt burden of the US and western world and ends with buy gold is still a first class ticket to the lunatic fringe. Nobody wants to be associated with the lunatic fringe. Thus, it's deer in headlights for most investors during the dips. Connected money is still covering their short positions into weakness. This is not subjective opinion but rather fact. This is reflected by WA reading above 80%. In other words, the change in composition of contracts is significant (not to be ignored). While the gold market will be "pressed" as long as possible, it will change direction when time is up. One simple rule: FOLLOW THE MONEY! Gold London P.M Fixed and the Commercial Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest:
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| LBMA Closes Off Public Access To Key Bullion Bank Trading Data Posted: 25 Jul 2010 10:49 AM PDT
Is something (abnormally) fishy in the state of precious metals manipulation? GATA's Adrian Douglas (recently famous for facilitating the emergence of whistleblower Andrew Maguire) seems to think so, after his observation that the LBMA has decided to block "access to statistics relating to the trading activities of its member bullion banks. This information has been available to the public since 1997 but as of this week it is available only to LBMA members." His conclusion: "There is a cover-up of back-door injections of liquidity of physical gold, and the LBMA now is trying to conceal trading information. I interpret the LBMA's move to secrecy as a sign that the opportunity to get real metal is closing fast." Read on for his argument... From GATA's Adrian Douglas The LBMA joins the gold squeeze cover-up, via GATA The London Bullion Market Association has just taken the highly unusual step of blocking access to statistics relating to the trading activities of its member bullion banks. This information has been available to the public since 1997 but as of this week it is available only to LBMA members. (See http://www.lbma.org.uk.) I have recently written a series of exposes of the LBMA (see References 1-4 below) using the association's own data to show that the LBMA's bullion banks are operating on a "fractional reserve" basis. My analysis indicates that the bullion banks are holding only 1 real ounce for about every 45 ounces of gold that they have sold, a reserve ratio of just 2.3 percent At the March 25 public hearing of the U.S. Commodity Futures Trading Commission on precious metals futures markets I cited the LBMA's own statistics to label the "unallocated gold" accounts of the bullion banks as a Ponzi scheme. (See Reference 3 below.) There were bullion bank representatives at the hearing but no one expressed an objection. That hearing was videotaped and posted at the CFTC's Internet site but the bullion banks have not made any public statement rebutting what I said. In fact at that hearing Jeffrey Christian, CEO of the CPM Group, acknowledged that what is widely called the "physical market" is in reality a largely "paper market" trading gold and silver as if they are financial assets and not physical metals. Christian stated that 100 ounces of paper gold are traded for every 1 ounce of physical gold. When the LBMA first made its trading statistics available in January 1997, observers and analysts were shocked. (See Reference 5 below.) No one could reconcile the statistics with other market data, nor comprehend how the bullion banks could be trading on a net basis more than 240,000 tonnes of gold annually while the global mine output was only 2,400 tonnes. Over the years the furor over these statistics had subsided until the end of 2009, when I commenced writing about my studies, showing that the statistics can be reconciled with other market data if the bullion banks are operating a fractional-reserve bullion banking operation with a recklessly low reserve ratio. I have also shown how the price of gold is suppressed because 45 ounces of demand are being diluted to result in purchase of only 1 ounce of real metal. If instead all 45 ounces were to be sourced and purchased, the gold price would be multiples of the current price. Typically when people are exposed in a scandal their first reaction is a cover-up. The most notorious examples of this are the Nixon administration, when it doctored the Watergate tapes, and Arthur Anderson, which shredded millions of pages of documents relating to audits of Enron Corp. The LBMA has now commenced a cover-up with respect to the gold trading activities of its member bullion banks, withdrawing statistics from the public domain. This appears not to be the only cover-up going on in the gold market. For years the International Monetary Fund has made great fanfare of its mere contemplation of selling some of its gold, and actual sales by the IMF have been widely publicized. Since February the IMF has been surreptitiously selling large tonnages of gold each month, but these sales now are to be found only by digging through the IMF's financial statements, and even there the recipients of the gold are not disclosed. (See Reference 6 below.) One has to wonder why the IMF now is trying to fly under the radar with its gold sales. Similarly it was recently discovered that the Bank for International Settlements didn't feel it necessary to announce its involvement in the largest gold swap in history, 346 tonnes. (See Reference 7 below.) The BIS swaps instead were discovered only because a market analyst dug through the footnotes of the bank's financial statements. These developments have all the hallmarks of cover-ups. In June the LBMA trading statistics showed that in May 2010 the average net daily trading in gold by LBMA member banks jumped a massive 50 percent from the month before to 24 million ounces each day from 16 million ounces each day. That translates to $7.5 trillion annually. If an operation is running on a razor-thin fractional reserve basis, such step changes are often fatal. It appears that a run on the bullion banks has commenced. There is a cover-up of back-door injections of liquidity of physical gold, and the LBMA now is trying to conceal trading information. There has been much debate about how investors, politicians, and regulators didn't see the 2008 financial crisis coming, and lack of transparency was cited as a key reason. Clearly those who have been manipulating the gold market are trying to skulk deeper into darkness. They have a lot to hide. Investors could have been blindsided by the events of 2008, but anyone who misses the writing on the wall about what's going on in the bullion markets is just foolish. The bullion banks have sold far more metal than they can deliver, and more and more customers are asking them to deliver. This has led to back-door bailouts and cover-ups. Anyone who has "unallocated" bullion should be very concerned. The LBMA itself describes owners of "unallocated bullion" accounts as "unsecured creditors." That means that the account holder has no collateral or title to any bullion. Bullion bank unallocated account agreements require the bank only to settle in cash for non-performance. That means when the physical squeeze that is evolving takes gold and silver prices to multiples of the current price, holders of unallocated metal accounts will not get any bullion, nor will they be compensated at the prevailing market price. I interpret the LBMA's move to secrecy as a sign that the opportunity to get real metal is closing fast. ---- References: 1. Adrian Douglas: Proof of Gold Price suppression -- Gold and the U.S. Dollar: 2. Adrian Douglas: Price Suppression Follows Inevitably from Fractional-Reserve Gold Banking: 3. Adrian Douglas: It's Admitted to the CFTC: London Gold Market Is a Ponzi Scheme: 4. Adrian Douglas: Jeff Christian's CPM Group Explains How to Make Paper Gold: 5. The Grand LBMA Expose: A Collective-Mind Analysis: http://www.gold-eagle.com/gold_digest/baron907.html 6. Adrian Douglas: IMF Can't Explain Gold Sales Now Without Revealing Squeeze: 7. Adrian Douglas: Mysterious BIS Gold Swaps Are Likely a Bullion Bank Bailout:
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| Ambrose Evans-Pritchard: Reflections on the death of paper money Posted: 25 Jul 2010 10:40 AM PDT By Ambrose Evans-Pritchard http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/790943... As they prepare for holiday reading in Tuscany, City bankers are buying up rare copies of an obscure book on the mechanics of Weimar inflation published in 1974. Ebay is offering a well-thumbed volume of "Dying of Money: Lessons of the Great German and American Inflations" at a starting bid of $699 (shipping free ... thanks a lot). The crucial passage comes in Chapter 17 entitled "Velocity." Each big inflation -- whether the early 1920s in Germany, or the Korean and Vietnam wars in the US -- starts with a passive expansion of the quantity money. This sits inert for a surprisingly long time. Asset prices may go up, but latent price inflation is disguised. The effect is much like lighter fuel on a camp fire before the match is struck. People's willingness to hold money can change suddenly for a "psychological and spontaneous reason," causing a spike in the velocity of money. It can occur at lightning speed, over a few weeks. The shift invariably catches economists by surprise. They wait too long to drain the excess money. ... Dispatch continues below ... ADVERTISEMENT Prophecy to Become Coal Producer This Year Prophecy Resource Corp. (TSX.V: PCY) announced on May 11 that it has entered into a mine services agreement with Leighton Asia Ltd. to begin coal production this year. Production will begin with a 250,000-tonne starter pit as planned in August, with production advancing to 2 million tonnes per year in 2011. Prophecy is fully funded to production and its management team includes John Morganti, Arnold Armstrong, and Rob McEwen. For Prophecy's complete press release about its production plans, please visit: http://www.prophecyresource.com/news_2010_may11.php "Velocity took an almost right-angle turn upward in the summer of 1922," said Mr O. Parsson. Reichsbank officials were baffled. They could not fathom why the German people had started to behave differently almost two years after the bank had already boosted the money supply. He contends that public patience snapped abruptly once people lost trust and began to "smell a government rat." Some might smile at the Bank of England "surprise" at the recent the jump in Brtiish inflation. Across the Atlantic, Fed critics say the rise in the US monetary base from $871 billion to $2,024 billion in just two years is an incendiary pyre that will ignite as soon as US money velocity returns to normal. Morgan Stanley expects bond carnage as this catches up with the Fed, predicting that yields on US Treasuries will rocket to 5.5 percent. This has not happened so far. Ten-year yields have fallen below 3 percent, and M2 velocity has remained at historic lows of 1.72. As a signed-up member of the deflation camp, I think the Bank and the Fed are right to keep their nerve and delay the withdrawal of stimulus -- though that case is easier to make in the US where core inflation has dropped to the lowest since the mid-1960s. But fact that O Parsson's book is suddenly in demand in elite banking circles is itself a sign of the sort of behavioral change that can become self-fulfilling. As it happens, another book from the 1970s entitled "When Money Dies: the Nightmare of The Weimar Hyper-Inflation" has just been reprinted. Written by former Tory European Parliament Member Adam Fergusson -- endorsed by Warren Buffett as a must-read -- it is a vivid account drawn from the diaries of those who lived through the turmoil in Germany, Austria, and Hungary as the empires were broken up. Near civil war between town and country was a pervasive feature of this break-down in social order. Large mobs of half-starved and vindictive townsmen descended on villages to seize food from farmers accused of hoarding. The diary of one young woman described the scene at her cousin's farm. "In the cart I saw three slaughtered pigs. The cowshed was drenched in blood. One cow had been slaughtered where it stood and the meat torn from its bones. The monsters had slit the udder of the finest milch cow, so that she had to be put out of her misery immediately. In the granary, a rag soaked with petrol was still smouldering to show what these beasts had intended," she wrote. Grand pianos became a currency or sorts as pauperized members of the civil service elites traded the symbols of their old status for a sack of potatoes and a side of bacon. There is a harrowing moment when each middle-class families first starts to undertand that its gilt-edged securities and War Loan will never recover. Irreversible ruin lies ahead. Elderly couples gassed themselves in their apartments. Foreigners with dollars, pounds, Swiss francs, or Czech crowns lived in opulence. They were hated. "Times made us cynical. Everybody saw an enemy in everybody else," said Erna von Pustau, daughter of a Hamburg fish merchant. Great numbers of people failed to see it coming. "My relations and friends were stupid. They didn't understand what inflation meant. Our solicitors were no better. My mother's bank manager gave her appalling advice," said one well-connected woman. "You used to see the appearance of their flats gradually changing. One remembered where there used to be a picture or a carpet, or a secretaire. Eventually their rooms would be almost empty. Some of them begged -- not in the streets -- but by making casual visits. One knew too well what they had come for." Corruption became rampant. People were stripped of their coat and shoes at knife-point on the street. The winners were those who -- by luck or design -- had borrowed heavily from banks to buy hard assets, or industrial conglomerates that had issued debentures. There was a great transfer of wealth from saver to debtor, though the Reichstag later passed a law linking old contracts to the gold price. Creditors clawed back something. A conspiracy theory took root that the inflation was a Jewish plot to ruin Germany. The currency became known as "Judefetzen" ("Jew confetti"), hinting at the chain of events that wouild lead to Kristallnacht a decade later. While the Weimar tale is a timeless study of social disintegration, it cannot shed much light on events today. The final trigger for the 1923 collapse was the French occupation of the Ruhr, which ripped a great chunk out of German industry and set off mass resistance. Lloyd George suspected that the French were trying to precipitate the disintegration of Germany by sponsoring a break-away Rhineland state (as indeed they were). For a brief moment rebels set up a separatist government in Dusseldorf. With poetic justice, the crisis recoiled against Paris and destroyed the franc. The Carthaginian peace of Versailles had by then poisoned everything. It was a patriotic duty not to pay taxes that would be sequestered for reparation payments to the enemy. Influenced by the Bolsheviks, Germany had become a Communist cauldron. Spartakists tried to take Berlin. Worker "soviets" proliferated. Dockers and shipworkers occupied police stations and set up barricades in Hamburg. Communist Red Centuries fought deadly street battles with right-wing militia. Nostalgics plotted the restauration of Bavaria's Wittelsbach monarchy and the old currency, the gold-backed thaler. The Bremen Senate issued its own notes tied to gold. Others issued currencies linked to the price of rye. This is not a picture of America, Britain, or Europe in 2010. But we should be careful of embracing the opposite and overly-reassuring assumption that this is a mild replay of Japan's Lost Decade, that is to say a slow and largely benign slide into deflation as debt deleveraging exerts its discipline. Japan was the world's biggest external creditor when the Nikkei bubble burst 20 years ago. It had a private savings rate of 15 percent of GDP. The Japanese people have gradually cut this rate to 2 percent, cushioning the effects of the long slump. The Anglo-Saxons have no such cushion. There is a clear temptation for the West to extricate itself from the errors of the Greenspan asset bubble, the Brown credit bubble, and the EMU sovereign bubble by stealth default through inflation. But that is a danger for later years. First we have the deflation shock of lives. Then -- and only then -- will central banks go to far and risk losing control over their printing experiment as velocity takes off. One problem at a time, please. Join GATA here: New Orleans Investment Conference * * * Support GATA by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: * * * Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Sona Resources Expects Positive Cash Flow from Blackdome, On May 18, 2010, Sona Resources Corp. (TSXV: SYS, Frankfurt: QS7) announced the release of a preliminary economic assessment for gold production at its flagship Blackdome and Elizabeth properties in British Columbia. Sona Executive Chairman Nick Ferris says: "We view this as a baseline scenario for gold production. The project is highly sensitive to the price of gold. A conservative valuation of gold at $1,093 per ounce would result in a pre-tax cash flow of $54 million. The assessment indicates that underground mining at the two sites would recover 183,600 ounces of gold and 62,500 ounces of silver. Permitting and infrastructure are already in place for processing ore at the Blackdome mill, with a 200-tonne per day throughput over an eight-year mine life. Our near-term goal is to continue aggressive exploration at Elizabeth and develop a million-plus-ounce gold resource, commencing production in 2013." For complete information on Sona Resources Corp. please visit: www.SonaResources.com A Canadian gold opportunity ready for growth
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| German Banks Hiding Stress Test Data Further Undemine Geithner's European Scammery Tour Posted: 25 Jul 2010 10:34 AM PDT
Hot on the heels of our earlier disclosure that the Landesbank stress test passage is either a joke or a scam, comes the knowledge that 6 out of the 14 tested German banks, including Landesbanks, have decide against posting their stress test details, specifically withholding the breakdown of their sovereign debt holdings. "Every other European bank, bar Greece’s ATEbank, which failed the test, complied with the disclosure requirement. Analysts said the German banks’ non-compliance would fuel suspicion they had something to hide, and risked further undermining faith in the whole stress test exercise, already criticised for its benign scenarios." Um "further undermine"? Has it not been made abundantly clear that the entire stress test soap opera was merely a pretext for Liberty 33 and Johnny 5 to ramp the market for the last hour of trading on Friday? Are people still confused that whenever Tim Geithner "plans" something, be it for the US, for his own tax estate, or for another continent, scammery, corruption and opacity are pretty much a necessary and sufficient condition for any "swiss watch" plan's execution. More from the FT:
Yeah, whatever. Only when the EC and whoever the other brain dead zombies of endless corruption in the failed European experiment are, disclose the haircuts on the trillions in shadow debt, and what forms of government backstops are being taken to prevent another shadow banking system run, this time originating out of Europe and not Hawaiian Tropic in Times Square, will anyone even pretend to listen to the zombiecrats and their artificially jiggered tests meant to give a golden star to anyone who so desires.
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| India warned of stagflation risk as price of food soars Posted: 25 Jul 2010 10:28 AM PDT By Ambrose Evans-Pritchard http://www.telegraph.co.uk/finance/globalbusiness/7909557/India-warned-o... As David Cameron leads a giant delegation of British businessman to India, the tiger economy is facing the worst overheating crisis in a decade and may have to jam on the brakes. A panel of Indian government advisers has called for immediate interest rate rises to prevent double-digit inflation spinning out of control. "Further tightening is required. Inflation is more than twice the comfort zone," the Economic Advisory Council said. The central bank has been slow to act as India's inflation rises to 11 percent, the highest in the G20 group of countries. The benchmark interest rate is heavily negative in real terms at just 5.5 percent. ... Dispatch continues below ... ADVERTISEMENT Sona Resources Expects Positive Cash Flow from Blackdome, On May 18, 2010, Sona Resources Corp. (TSXV: SYS, Frankfurt: QS7) announced the release of a preliminary economic assessment for gold production at its flagship Blackdome and Elizabeth properties in British Columbia. Sona Executive Chairman Nick Ferris says: "We view this as a baseline scenario for gold production. The project is highly sensitive to the price of gold. A conservative valuation of gold at $1,093 per ounce would result in a pre-tax cash flow of $54 million. The assessment indicates that underground mining at the two sites would recover 183,600 ounces of gold and 62,500 ounces of silver. Permitting and infrastructure are already in place for processing ore at the Blackdome mill, with a 200-tonne per day throughput over an eight-year mine life. Our near-term goal is to continue aggressive exploration at Elizabeth and develop a million-plus-ounce gold resource, commencing production in 2013." For complete information on Sona Resources Corp. please visit: www.SonaResources.com A Canadian gold opportunity ready for growth Food prices have been soaring despite the release of grain stocks. This has led to led to harsh criticism from the Bharatiya Janata nationalists and the Communists. "The incumbent elite in Delhi may be sitting on a dormant volcano if popular protests over rising food and fuel prices erupt," said commentator Paranjoy Guha Thakurta. Mr Cameron, accompanied by the chief executives of some of Britain's biggest companies, is attempting to forge new economic ties with a leader of the emerging BRIC states. India has been growing at 8pc to 9pc a year over much of the past decade, benefiting from free-market reforms after shaking off the socialist shackles of the old Hindu Model from the Nehru era. Growth has been slower than in China but still enough to power an industrial revolution. However, the country is already running into infrastructure limits. Premier Manmohan Singh is drawing up plans for roads, ports, railways, and airports, with a spending spree on new power plants. Lack of electricity has become an acute problem, with daily power cuts. Maya Bhandari from Lombard Street Research said New Delhi had been far behind the curve in tackling price pressures. The central and regional budgets are heavily in deficit and this is being "monetised" by central bank policy. The inflation rate for primary articles has reached 16 percent. "This is not far from British inflation just before the bitter stagflation years of the later 1970s," she said. Join GATA here: New Orleans Investment Conference * * * Support GATA by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: * * * Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Prophecy to Become Coal Producer This Year Prophecy Resource Corp. (TSX.V: PCY) announced on May 11 that it has entered into a mine services agreement with Leighton Asia Ltd. to begin coal production this year. Production will begin with a 250,000-tonne starter pit as planned in August, with production advancing to 2 million tonnes per year in 2011. Prophecy is fully funded to production and its management team includes John Morganti, Arnold Armstrong, and Rob McEwen. For Prophecy's complete press release about its production plans, please visit: http://www.prophecyresource.com/news_2010_may11.php
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| Adrian Douglas: The LBMA joins the gold squeeze cover-up Posted: 25 Jul 2010 09:31 AM PDT By Adrian Douglas The London Bullion Market Association has just taken the highly unusual step of blocking access to statistics relating to the trading activities of its member bullion banks. This information has been available to the public since 1997 but as of this week it is available only to LBMA members. (See http://www.lbma.org.uk.) I have recently written a series of exposes of the LBMA (see References 1-4 below) using the association's own data to show that the LBMA's bullion banks are operating on a "fractional reserve" basis. My analysis indicates that the bullion banks are holding only 1 real ounce for about every 45 ounces of gold that they have sold, a reserve ratio of just 2.3 percent At the March 25 public hearing of the U.S. Commodity Futures Trading Commission on precious metals futures markets I cited the LBMA's own statistics to label the "unallocated gold" accounts of the bullion banks as a Ponzi scheme. (See Reference 3 below.) There were bullion bank representatives at the hearing but no one expressed an objection. That hearing was videotaped and posted at the CFTC's Internet site but the bullion banks have not made any public statement rebutting what I said. In fact at that hearing Jeffrey Christian, CEO of the CPM Group, acknowledged that what is widely called the "physical market" is in reality a largely "paper market" trading gold and silver as if they are financial assets and not physical metals. Christian stated that 100 ounces of paper gold are traded for every 1 ounce of physical gold. ... Dispatch continues below ... ADVERTISEMENT Prophecy to Become Coal Producer This Year Prophecy Resource Corp. (TSX.V: PCY) announced on May 11 that it has entered into a mine services agreement with Leighton Asia Ltd. to begin coal production this year. Production will begin with a 250,000-tonne starter pit as planned in August, with production advancing to 2 million tonnes per year in 2011. Prophecy is fully funded to production and its management team includes John Morganti, Arnold Armstrong, and Rob McEwen. For Prophecy's complete press release about its production plans, please visit: http://www.prophecyresource.com/news_2010_may11.php When the LBMA first made its trading statistics available in January 1997, observers and analysts were shocked. (See Reference 5 below.) No one could reconcile the statistics with other market data, nor comprehend how the bullion banks could be trading on a net basis more than 240,000 tonnes of gold annually while the global mine output was only 2,400 tonnes. Over the years the furor over these statistics had subsided until the end of 2009, when I commenced writing about my studies, showing that the statistics can be reconciled with other market data if the bullion banks are operating a fractional-reserve bullion banking operation with a recklessly low reserve ratio. I have also shown how the price of gold is suppressed because 45 ounces of demand are being diluted to result in purchase of only 1 ounce of real metal. If instead all 45 ounces were to be sourced and purchased, the gold price would be multiples of the current price. Typically when people are exposed in a scandal their first reaction is a cover-up. The most notorious examples of this are the Nixon administration, when it doctored the Watergate tapes, and Arthur Anderson, which shredded millions of pages of documents relating to audits of Enron Corp. The LBMA has now commenced a cover-up with respect to the gold trading activities of its member bullion banks, withdrawing statistics from the public domain. This appears not to be the only cover-up going on in the gold market. For years the International Monetary Fund has made great fanfare of its mere contemplation of selling some of its gold, and actual sales by the IMF have been widely publicized. Since February the IMF has been surreptitiously selling large tonnages of gold each month, but these sales now are to be found only by digging through the IMF's financial statements, and even there the recipients of the gold are not disclosed. (See Reference 6 below.) One has to wonder why the IMF now is trying to fly under the radar with its gold sales. Similarly it was recently discovered that the Bank for International Settlements didn't feel it necessary to announce its involvement in the largest gold swap in history, 346 tonnes. (See Reference 7 below.) The BIS swaps instead were discovered only because a market analyst dug through the footnotes of the bank's financial statements. These developments have all the hallmarks of cover-ups. In June the LBMA trading statistics showed that in May 2010 the average net daily trading in gold by LBMA member banks jumped a massive 50 percent from the month before to 24 million ounces each day from 16 million ounces each day. That translates to $7.5 trillion annually. If an operation is running on a razor-thin fractional reserve basis, such step changes are often fatal. It appears that a run on the bullion banks has commenced. There is a cover-up of back-door injections of liquidity of physical gold, and the LBMA now is trying to conceal trading information. There has been much debate about how investors, politicians, and regulators didn't see the 2008 financial crisis coming, and lack of transparency was cited as a key reason. Clearly those who have been manipulating the gold market are trying to skulk deeper into darkness. They have a lot to hide. Investors could have been blindsided by the events of 2008, but anyone who misses the writing on the wall about what's going on in the bullion markets is just foolish. The bullion banks have sold far more metal than they can deliver, and more and more customers are asking them to deliver. This has led to back-door bailouts and cover-ups. Anyone who has "unallocated" bullion should be very concerned. The LBMA itself describes owners of "unallocated bullion" accounts as "unsecured creditors." That means that the account holder has no collateral or title to any bullion. Bullion bank unallocated account agreements require the bank only to settle in cash for non-performance. That means when the physical squeeze that is evolving takes gold and silver prices to multiples of the current price, holders of unallocated metal accounts will not get any bullion, nor will they be compensated at the prevailing market price. I interpret the LBMA's move to secrecy as a sign that the opportunity to get real metal is closing fast. ---- References: 1. Adrian Douglas: Proof of Gold Price suppression -- Gold and the U.S. Dollar: 2. Adrian Douglas: Price Suppression Follows Inevitably from Fractional-Reserve Gold Banking: 3. Adrian Douglas: It's Admitted to the CFTC: London Gold Market Is a Ponzi Scheme: 4. Adrian Douglas: Jeff Christian's CPM Group Explains How to Make Paper Gold: 5. The Grand LBMA Expose: A Collective-Mind Analysis: http://www.gold-eagle.com/gold_digest/baron907.html 6. Adrian Douglas: IMF Can't Explain Gold Sales Now Without Revealing Squeeze: 7. Adrian Douglas: Mysterious BIS Gold Swaps Are Likely a Bullion Bank Bailout: ----- Adrian Douglas publishes the Market Force Analysis letter (http://www.MarketForceAnalysis.com) and is a member of GATA's Board of Directors. Join GATA here: New Orleans Investment Conference * * * Support GATA by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: * * * Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Sona Resources Expects Positive Cash Flow from Blackdome, On May 18, 2010, Sona Resources Corp. (TSXV: SYS, Frankfurt: QS7) announced the release of a preliminary economic assessment for gold production at its flagship Blackdome and Elizabeth properties in British Columbia. Sona Executive Chairman Nick Ferris says: "We view this as a baseline scenario for gold production. The project is highly sensitive to the price of gold. A conservative valuation of gold at $1,093 per ounce would result in a pre-tax cash flow of $54 million. The assessment indicates that underground mining at the two sites would recover 183,600 ounces of gold and 62,500 ounces of silver. Permitting and infrastructure are already in place for processing ore at the Blackdome mill, with a 200-tonne per day throughput over an eight-year mine life. Our near-term goal is to continue aggressive exploration at Elizabeth and develop a million-plus-ounce gold resource, commencing production in 2013." For complete information on Sona Resources Corp. please visit: www.SonaResources.com A Canadian gold opportunity ready for growth
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| Posted: 25 Jul 2010 09:23 AM PDT
In today's NYT, Gretchen Morgenson does a good summary of how Goldman was demonstratively net short AIG (or net long its CDS, depending how you look at it) via nearly 100 counterparties to the tune of just over $1.7 billion in net notional, after Chuck Grassley released several previously classified documents disclosing Goldman's CDS position as of September 15, 2008, the day of Lehman's bankruptcy. As Gretchen summarizes: "According to the document, Goldman held a total of $1.7 billion in insurance on A.I.G. from almost 90 institutions. Its exposure to A.I.G. at that time was $2.6 billion. Goldman bought most of the insurance from large foreign and domestic banks, including Credit Suisse ($310 million), Morgan Stanley ($243 million) and JPMorgan Chase ($216 million). Goldman also bought $223 million in insurance on A.I.G. from a variety of funds overseen by Pimco, the money management firm." While the topic of how the world's biggest asset management firm in the face of Pimco (and specifically its massive Total Return Fund) could have a net short CDS position (i.e., unlimited downside exposure), and how this is supposed to demonstrate prudent capital management, is ripe for evisceration, we will leave it for another day, as there is something more notable in the Grassley disclosure that has to be discussed. While Gretchen is correct that the external position of Goldman's exposure vis-a-vis AIG is indeed a total of $1.7 billion in long CDS, if one were to actually present the gross number, the truth would be starker: as the Grassley document reveals, the firm's gross exposure for its IG flow and structured finance desks goes from a positive $1.7 billion net exposure, to a ($2.9) billion net exposure, a massive $4.8 billion swing! What is it that in one fell swoop moved the firm from having a huge long bet on AIG, to a major short CDS position, one that nearly entirely covered the firm's $2.6 billion in legacy risk exposure? Enter Goldman's Counterparty Valuation Adjustment desk. The Counterparty Valuation Adjustment desk at most "commercial banks" has operated in the shadows long enough. Perhaps this latest disclosure by Grassley will finally push it into the light. But just what is a CVA? Conveniently, the Bank of England just released its quarterly bulletin, in which it dedicates 9 pages to just this topic (granted in the context of sovereign defaults swaps, but the principles are identical). To wit:
The plot thickens: the table below demonstrates the external (net of CVA netting), and internal (gross up) exposure to AIG by Goldman Sachs. As is glaringly obvious, the two actual trading groups within Goldman, the IG Flow and Structure Credit, experience a miraculous transformation when moving from internal to external exposure, as noted above. In fact, this transformation is so big that had it not been for the extremely beneficial impact from the CVA internal-to-external adjustment, the firm would have in fact been short not only residual CDO exposure, but would have found itself net short AIG CDS as well, further increasing the motivation to tear up contracts, in the least, as is what ended up happening post Maiden Lane III, and to push outright for the prevention of an AIG bankruptcy (which also happened). It also puts into doubt the veracity of all those statements by Messrs Viniar and Blankfein that Goldman was "hedged" to an AIG collapse, and in fact did not need the government bail out.
Another observation: Goldman's flow operations once again demonstrate that they in no way take a hedged position against order flow, yet merely execute alongside (or just ahead of) the whales. It is, however the prop desk, or in the CVA case, the prop's prop trading desk, that ends up bailing out the firm (time after time). Indeed, in this particular case, the prop side of Goldman's operations is responsible for not only all the revenue associated with any selling of AIG CDS, but with initiating the positions in the first place, and furthermore, eliminating any and all massive losses that would have been borne out of the firm's flow traders, had nature runs it course. In other words Goldman's claim that prop accounts for just 10% of revenues is patently false, or true only in the case where the balance of the firm consistently generate negative revenues, with the delta a plug coming out of David Copperfield's hat. So just what is the basis of the CVA intervention: did the trading desk merely buy massive amounts of AIG CDS with the same counterparties (with CVA listed on the trade ticket instead of IGF or Structured Credit as the executor) and netting all at the end of the day, or, in yet another fractal bifurcation, merely buy protection of the secondary counterparties (to AIG as primary), thereby offsetting secondary risk. Or, as the BOE suggests, did the CVA merely double count hedged risk exposure: "Another way to mitigate counterparty risk is for parties to a derivative trade to exchange collateral when there are changes in the MTM value of the derivative contract." In other words, while Goldman was collecting excess collateral via aggressive EOD variation margin collection, did the CVA also book this as an actual trading offset? If so, the firm has been lying about its net exposure to AIG via CDS all along. To get to the bottom of this, Senator Grassley needs to immediately get not only the cost basis and trade dates of every single trade ticket that comprises the alleged $1.7 billion in net exposure, but also explicit details on the activity of Goldman's CVA desk as pertain to AIG risk mitigation, and how precisely that shadowy group within Goldman decides which counterparty requires such massive risk margin contrary to exposure produced by the firm's flow traders. After all, flow was and always is actively aware of unbalance risk well pre-CVA (which is really just a glorified middle office) intervention. Why is it that the flow desk was so comfortable with a huge bullish exposure on AIG, while the CVA had a mandate to be so very bearish? Since Goldman has indicated it is willing to cooperate with regulators and politicians, we are confident this minor additional data hunting expedition will be in no way unfeasible to 200 West risk mavens. And while at it, the Senator should also request the actual P&L per trade, and the actual unwind or novation date per ticket. In the case of novations, as we have speculated previously, if Goldman was merely offloading its short-risk exposure to an unwitting market maker or hedge fund, while AIG's CDS were trading tens of points upfront, even as the firm knew full well the FRBNY would not let it fail, this would constitute trading on material insider information, as we have demonstrated previously. If indeed Goldman was selling its AIG CDS at the very top of the market, that would open up an entirely whole new regulatory can of worms, one that we are confident all the pent up class action lawsuits and David Cuomo would be more than interested to tap into.
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| Onshore Rush by Offshore Moratorium Posted: 25 Jul 2010 08:59 AM PDT
By Dian L. Chu, Economic Forecasts & Opinions The de facto reinstated drilling ban in the U.S. Gulf of Mexico resulted from the BP oil spill is widely expected to last beyond the announced six months. Investors fled the energy sector, while producers are jumping onshore attempting to make up for the potential reserves and production shortfall due to the moratorium. Onshore Rush by Offshore Moratorium Dian L. Chu, July 25, 2010
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| Posted: 25 Jul 2010 08:32 AM PDT First, a quick welcome to our new site\interface. I've moved the site from its previous home on one of the nations largest gold brokers to this new site. Despite the name I hope to expand the writings to encompass more silver, platinum and other precious metal articles. In creating this new site and placing the featured video on the homepage I'm reminded by our friend Peter Schiff that gold could possibly hit $5000+ in the next few years. The video is a bit dated but very appropriate. Schiffs prediction of gold breaking $1200/ounce is here and there's no sign of stopping. With the economy still wobbly, everyone fearful, and real debates on national debt finally shedding light on what might happen to the dollar people are jumping in gold to save themselves. Unfortunately though there may be too much gold in the spot light. Its unclear whether it's a weakening dollar that has propped up gold or simply increased demand due to fear.
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| Is Oil Spill Cover for Massive Foreclosure? Posted: 25 Jul 2010 08:07 AM PDT See the Gulf of Mexico oil spill not as an engineered environmental disaster but rather a savvy political move that diverts attention from foreclosure action by foreign financiers. The lands have been offered by successive elected governments as collateral for the enormous cumulative debt of today. The Federal Reserve has issued unlimited debt instruments as fiat and electronic currency to government only through consent of its foreign owners. Ten foreign financial institutions are the corporate owners of the world's biggest alchemy machine, the Federal Reserve system. Government is an agent of Plutocracy to transfer wealth from serfs to aristocrats. And the military serves to protect the economic interests of Plutocracy. Until recently the US has been Plutocracy's chief global policeman to enforce foreclosure and inflict punishments. Busily policing and bullying other nations, US citizens have yet to understand the time has come to foreclose upon the lands of the New World of Amaracu (America).. More Here.. 
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| The Week Ahead for the USD and US Markets Posted: 25 Jul 2010 06:30 AM PDT
The USD started the past week strongly, making good headway against most of its counterparts. However it dropped sharply on Thursday, from 83.3 to 82.6 according to US Dollar Index. The depreciation was mainly caused by Bernanke’s comments and a slew of European data showing signs of a recovery. The stock market ended the week strong S&P 500 and Dow Jones Indexes rose 3.2% and 3.5% respectively. The star of the week was the NASDAQ Composite making a steep incline up 4.2%. The increases are attributable to better better-than-expected second quarter earnings reports and better than expected European data. In comparison with the several bullish data releases reported in Euro Zone, recent US releases haven’t been quite as bullish for the USD and this trend is expected to continue next week. The week ahead will prove to be busy, especially on Friday. The GDP, Consumer Confidence and other important indicators will be released. Any each of them can have a significant impact on the US stock and currency markets. Monday, 26 July Today the New Home Sales is going to release following last week’s Existing Home Sales data. The New Home Sales peaked= at 504K in April. However, the figure for May decreased dramatically to only 300K, whose forecast was 446K. Now the expectation for June is adjusted to a lower level at 317K. Taking last week’s Existing Home Sales data (0.19M more than forecast) into account, the New Home Sales is likely to rise. Tuesday, 27 July At 10:00 am, the Conference Board Inc. will report its Consumer Confidence for July. This is an important report and a leading indicator of consumer spending (a major driver for overall economic activity). The forecast for this month has already been modified downwards to 51.5. Wednesday, 28 July The Census Bureau will release the Core Durable Goods Orders at 8:30 am. This release measures the total value of new purchase orders placed with manufacturers for durable goods. Expectations are for the release to come in at 0.6% Thursday, 29 July Jobless Claims is released by the Department of Labor on Thursday. The impact of this indicator fluctuates from week to week, with recent stress test results and other good data from the Euro zone traders will be paying attention and looking for some kind of confirmation from the jobs market. Friday, 30 July At 8:30 am GDP figures for the 2nd quarter will be released, GDP measures annualized change in the inflation-adjusted value of all goods and services produced by the economy and offers a broad measure of economic health. This is the earliest release for the 2nd quarter and thus tends to have the most impact on the markets. GDP growth for the 1st quarter’s third estimate was 2.7% in an annual basis, after being revised down from the previous estimate 3.0% and the initial estimate of 3.2%, which means an increase in imports and decrease in exports. Investors will judge the markets based on these data. At the same time, GDP price index, which can measure the level of inflation, grew annualized 1.1% from the previous estimate. At 9.55 am Consumer Sentiment for July 2010 will be announced, Consumer sentiment reflects the consumer attitudes to the economy. It is directly related to the consumer spending power. The consumer sentiment index released in the mid-July plunged, down to 66.5 Key words for the week: New Home Sales, Consumer Confidence, Durable Goods Orders, Petroleum Status Report, Jobless Claims, GDP, Employment Cost Index, Consumer Sentiment
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| S&P 500: The Optimist's Argument (Part I of II) Posted: 25 Jul 2010 06:13 AM PDT Chuck Carnevale submits: The American Dream I believe we live in the greatest country in the world. Furthermore, I believe our country has the long-term track record to back up those beliefs. Therefore, I am very frustrated by the perma-pessimists, doom and gloomers and naysayers who are quick to write our country and its future prosperity off. Complete Story »
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| HEAD AND SHOULDERS TOP OR BOTTOM II Posted: 25 Jul 2010 06:08 AM PDT By Toby Connor, Gold Scents Calls for a market crash were flying left and right. I'll let you in on a secret, we always hear that the market is going to crash at intermediate cycle bottoms. The reality is we've had three real market crashes in the last 100 years. The odds of a fourth following right on the heels of the third are pretty darn slim. The first and the third crash were caused by credit bubble implosions and the second was caused by severe overvaluation in the fifth year of a secular bull market. These fifth year corrections are fairly common in long term bull markets as it seems like it takes about five years for sentiment to swing to the extreme bullish side. Then the fifth year correction serves to wipe out that bullish sentiment so the secular fundamentals can continue to drive the bull higher.   Not withstanding the very low odds of a market crash, I knew that we were way too late in the intermediate cycle, and sentiment was way too bearish for there to be much chance of the head and shoulders top succeeding (actually head and shoulders patterns only succeed and reach their target about 27% of the time). Not to mention everyone saw it which gave it even less odds of actually playing out like everyone was expecting. At that point it became much more likely that the market wasn't forming a head and shoulders top, it was in fact probably going to form a head and shoulders bottom with the half cycle low forming the right shoulder. No one else at the time was calling for any such outcome, as a matter of fact I took an amazing amount of abuse for my temerity to even consider such a ridiculous idea. As of yesterday the Dow has now completed the inverse head and shoulders pattern by breaking the neckline just like I thought it would. Now will it reach it's target (11,200)? The odds say no. But it's anybodies guess at this point.
 What we do know is that virtually all indexes have rallied out of the half cycle low to new highs thus breaking the pattern of lower lows and lower highs. Higher highs and higher lows is the definition of an uptrend. This was why I'm not ready to call a bear market yet. I was confident this rally was coming and we need to see were it goes before we can say with any confidence that we are back in the secular bear trend. We now have two clear lines in the sand. If the market breaks out to new highs then the perma-bear/deflationists were too early and the cyclical bull still has some kick left. If the market (both Dow and transports) break below the July 1st low then yes the bear is back.  As long as the market holds between those two lines we will remain in no-mans land. Right now the market is in rally mode just like I warned would happen. We just have to wait and see whether it turns out to be a bear market rally or another leg up in the cyclical bull market. I for one, have no intentions of trying to guess which it is until one of those lines gets broken.        Toby Connor A financial blog primarily focused on the analysis of the secular gold bull market. If you would like to be added to the email list that receives notice of new posts to GoldScents, or have questions, email Toby.
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| Alternatives to the U.S. Dollar Posted: 25 Jul 2010 06:05 AM PDT Here's an interesting story at Fortune about the various alternatives to the U.S. dollar as the world's reserve currency. Not surprisingly, IMF SDRs come out on top with gold second.
After that, there are a few odd-ball currencies, none of which I'd heard of before. It's funny how, for gold, the writer starts out with the gold bar vending machine recently installed in an Abu Dhabi hotel, as if the whole idea is just some sort of novelty when, in fact, wealthy individuals around the world are putting more and more of their wealth into the metal.
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| Junior Gold Miners Versus The Big Producers Posted: 25 Jul 2010 06:04 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.
The table above shows five of the "brand names" among the small group of "senior" gold producers. 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 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….
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| Silver Rises for Week, US Bullion Coins Near 2.3M for Month Posted: 25 Jul 2010 06:03 AM PDT U.S. silver slipped 1.9 cents on Friday, but three straight prior day gains lifted the metal higher for the week after prices had tumbled 57.4 cents last Friday and then another 24.5 cents on Monday.
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