Gold World News Flash |
- Weekend Report
- Tony Mariano: The Special Science of Rare Earths
- Meet someone who is 90% invested in gold and silver!
- Italy trapped in slow lane as political crisis deepens
- Hourly Action In Gold From Trader Dan
- Monthly Gold Charts From Trader Dan
- Calling All Gold Bulls
- Got Gold Report - COT Flash July 31
- How to conquer "volatile volatility"
- HeadFaked
- The Gov't Has Declared War on Savers. Here's How to Fight Back
- Why Bankers Didn't See Collapse... The Bombing of Iran
- Oh Canada
- Gold
- Jim?s Mailbox
- Gold Scents Weekend Report
- Debunking Deflation
- What Is Gold Really Worth?
- Why Gold Stocks are Certain to Go Higher
- My Friend, Mr. Bull
- London Metal Exchange Belly up??
- Is A Shift In Fed Policy Coming?
- Kinross Gold to Buy Red Back Mining for $7.1 Billion, a 17% Premium
- Asian Metals Market Update
- Mojitos For the Long Run
- UBS sees gold investors diversifying into reality
- Gold Seeker Closing Report: Gold and Silver Gain With Stocks and Oil
- Fed will go to war on deflation next week, leading economist predicts
- Alasdair Macleod: BIS swaps may be last gamble to suppress gold price
- Fed's inflation experiment may treat Americans as lab rats, Rickards tells King
- Fed's inflation experiment may treat Americans as lab rats, Rickards tells King
- The Gold Bull Market is Alive and Well
- Inflate Your Debts Away
- Fed Feeling States' Pension Pain?
- The Most Wrong Thing I’ve Ever Heard
- Jim's Mailbox
- In The News Today
- On the Mega ReFi Rumor
- The Silver Price is Clearly Today's Big Story
- Guest Post: Will John Paulson Be Wrong This Time?
| Posted: 02 Aug 2010 07:10 PM PDT Stocks: I expect, barring some kind a catastrophe, next week should be another good week for the market. The recent minor pullback has worked off the short term overbought conditions and in the process formed a small bull flag. As long as we continue to get these minor corrective moves it will serve to keep intermediate sentiment from getting too bullish too fast, and ultimately it is sentiment that will halt this rally, especially if this does turn out to be a bear market rally (which I'm by no means convinced it is yet). As of Friday, intermediate term sentiment was still depressed and at levels that often halt corrections much less start them. The market is only on the 4th week of this intermediate cycle. The cycle averages about 20 weeks so the next major intermediate trough won't be due until November. Often 2 or 3 small moves in a row on the McClellan oscillator precede a big move in the market. No change here. I continue to think we are in a failed and ...
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| Tony Mariano: The Special Science of Rare Earths Posted: 02 Aug 2010 07:10 PM PDT Source: Karen Roche and Sally Lowder of The Gold Report 08/02/2010 The ability to separate the science from the promotional claims is among the expertise that Geological Consultant Tony Mariano, PhD, brings to the rare earth elements (REE) table. Tony, who for decades has combined long hours in the lab with even longer field visits to evaluate mineralization in its natural environment, is among the rare ones who can help companies evaluate a deposit for grade, tonnage and the prospects for economic recovery. A sharp technician who manages to keep his head out of the clouds and his feet on the ground, Tony shares some of his secrets, and some of his opinions about the hottest prospective properties, in this exclusive interview with The Gold Report. The Gold Report: Jon Hykawy, technology analyst at Byron Capital Markets, recently told us that short supplies of heavy rare earths (HREEs) will be driving up their price and shifting the economies of mining projects in favor o...
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| Meet someone who is 90% invested in gold and silver! Posted: 02 Aug 2010 07:10 PM PDT Nations rise when, through inventions and technology they become economically prosperous. They grow as they enlarge their borders and increase in influence, through conquests or by trade. They fall, when the growing need to pay for promises made, and the cost of foreign wars, drains the treasury. (Charts in this report are courtesy Stockcharts.com unless indicated). Featured is the daily gold chart. The uptrend is well defined. The month-old correction appears to have run its course. The RSI is at 8 month old support and so is the MACD (green lines). The 50DMA is in positive alignment to the 200DMA (green oval), and the latter is rising at 1.5% per month! A breakout at the blue arrow will turn the short-term trend bullish again, in harmony with the long-term trend. We are not ‘gold bugs’, neither are we ‘silver bugs’. We are investors who have discovered that when governments and their bankers inflate the money supply,...
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| Italy trapped in slow lane as political crisis deepens Posted: 02 Aug 2010 07:10 PM PDT August 02, 2010 12:13 PM - July car sales have plummeted in Italy, compounding the country's woes as political crisis threatens months of wrangling and fresh concerns about the safety of Italian debt. Read the full article at the Telegraph......
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| Hourly Action In Gold From Trader Dan Posted: 02 Aug 2010 07:10 PM PDT View the original post at jsmineset.com... August 02, 2010 11:38 AM Dear CIGAs, Click chart to enlarge today's hourly action in Gold in PDF format with commentary from Trader Dan Norcini ...
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| Monthly Gold Charts From Trader Dan Posted: 02 Aug 2010 07:10 PM PDT View the original post at jsmineset.com... August 02, 2010 11:44 AM Dear CIGAs, Click any chart to enlarge this month's Gold charts in various currencies in PDF format with commentary from Trader Dan Norcini ...
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| Posted: 02 Aug 2010 07:10 PM PDT The following is automatically syndicated from Grandich's blog. You can view the original post here. Stay up to date on his model portfolio! August 02, 2010 09:00 AM Has “Tokyo Rose” broken clock forecasts got you down? Is “always wrong” Kaplan allowing you to lose sight of things? Does Gartman’s “flip flops” make your head spin? Enough is enough! These folks and much of the media that follow these erroneous “Pied Pipers” has made the small camp of true gold bulls start to question their very sanity. I’m here to tell you that we’re at best only halfway through the “mother of all gold bull markets.” Now you can sit around and whine during yet another correction in this bull market but not me. Every time their crap is publicized and it allows readers to be demoralized, I will just remember Sergent Stryker Lets get back in the war! [url]http://www.grandich.com/[/url] grandich.com...
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| Got Gold Report - COT Flash July 31 Posted: 02 Aug 2010 07:10 PM PDT By Gene Arensberg Esse quam videri – To be rather than to seem Bottom line: COT report shows large commercial traders piling on new net short positions modestly for gold, still reducing LCNS for silver. Open interest for gold plunges late week. Gold -2.6% and the gold LCNS +5.5%. Silver -0.2% and the silver LCNS -2.5%. Details just below. DEEP SOUTH USA – Writing on the fly this week, so this report may seem briefer than normal. Then again this is an important week as we are once again long gold. We had been waiting since May, patiently like good Vultures, for gold and silver to make it into our expected support zones. Gold finally fell enough to enter our expected zone, which any of our regular readers will know has been the upper $1,150s for quite some time. Thus, we are long gold with a full position with an average entry of $1,159 equivalent. We are simultaneously pleased and disappointed that silver was unable to make...
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| How to conquer "volatile volatility" Posted: 02 Aug 2010 07:10 PM PDT The stock market since the May “flash crash” and early July cycle low has been a trading range affair characterized by alternations between high and low volatility levels, or what pundits have taken to calling “volatile volatility.” As Steven Sears in his Barron’s column of July 26 pointed out, “The back-and-forth action is just the latest reminder that volatile volatility is a central fact of the 2010 market.” After being spoiled by last year’s extremely low volatility market, participants are shell-shocked at the heightened levels of volatility in recent months. The cyclical context for this year’s volatility can be found in a Kress Cycle pattern characterized by crossing currents: on the one hand the 4-year cycle due to bottom in late September is an obstacle against a runaway type market like we saw in 2009; on the other hand the 6-year cycle is still in its ascending phase and is acting as a support against t...
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| Posted: 02 Aug 2010 07:10 PM PDT www.preciousmetalstockreview.com August 1, 2010 I need a vacation like I need my morning coffee. The never ending barrage of lies, fudged numbers and attacks on gold are wearing me down. Along with the long hours. This weeks letter will be shorter than normal, at least now at the outset that’s the plan! Alas, my time off doesn’t come until the end of the month. I recall the summer of 2007, being on a houseboat on a beautiful lake in BC, Canada for a week with no outside communication, only to come out to the beginning of the first large leg lower of this current crisis. It was blamed on the housing issues. It was no doubt a large part of the problem, but derivatives and simply too much debt being incurred by nations and individuals is the root of the problem and that is now very clear. I fear as I begin my trip late in August this year that the current move lower, will accelerate and become clear to the masses. This time ...
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| The Gov't Has Declared War on Savers. Here's How to Fight Back Posted: 02 Aug 2010 07:10 PM PDT By Tom Dyson Monday, August 2, 2010 The government has declared war on savers… It wants to stimulate the economy, boost business activity, and lower unemployment. When you save money, you don't support this agenda. Your money stays in the bank earning interest. To persuade you not to save, the Federal Reserve has set interest rates at zero percent. You get no reward for saving money. In addition, the Fed is inflating the money supply, which causes asset prices to rise… and erodes your purchasing power. It's also engineered a big bounce in the stock market. Thanks to this 65% rally, all the best stock-market income investments – like pipeline stocks and real-estate investment trusts – are now overvalued, dangerous, and offering record-low income yields. Most people have no idea how troubled the economy and the stock market are right now… and they don't understand how critical savings and income will be in the coming years. They'r...
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| Why Bankers Didn't See Collapse... The Bombing of Iran Posted: 02 Aug 2010 07:10 PM PDT Why Bankers Didn't See Collapse Monday, August 02, 2010 – by Staff Report How can we avoid the next financial crisis? Urgently listen to those who foresaw this one ... Three years on from the collapse of the sub-prime housing market in America, Gregory Zuckerman asks who can help us avoid the next financial crisis. ... After a strong recovery at the end of 2009, life has proved tougher in 2010 for the titans of Wall Street. ... A few savvy investors – most with little relative experience in real estate, derivatives or mortgage investing – anticipated a historic housing and financial collapse. Their remarkable success begs an obvious question: why did this unlikely group predict the crumbling of the housing market and the resulting pain felt around the globe, even as the experts were stunned by the developments? – UK Telegraph Dominant Social Theme: So many questions that must be earnestly answered. Free-Market Analysis: We have wr...
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| Posted: 02 Aug 2010 07:10 PM PDT The following is automatically syndicated from Grandich's blog. You can view the original post here. Stay up to date on his model portfolio! August 02, 2010 07:18 AM Other than my belief that Canada’s most western major city lacks a real hockey team, I find my neighbors to the north as the only paper currency I would invest in. From below 80 versus the U.S. Dollar, I’ve championed the Loonie as the one currency to own other than gold. I continue to believe the Loonie can go to a significant premium over the U.S. Dollar in the next 1-3 years. [url]http://www.grandich.com/[/url] grandich.com...
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| Posted: 02 Aug 2010 07:10 PM PDT courtesy of DailyFX.com August 02, 2010 06:35 AM 240 Minute Bars Prepared by Jamie Saettele Gold has topped. Please see the latest special report for details. Gold is making its way lower in an impulsive fashion. The short term count has changed slightly. It seems as though the first 5 wave decline ended following a terminal thrust from a triangle. Expectations are for strength towards 1208/1220 before gold rolls over and plunges in a larger 3rd wave. Jamie Saettele publishes Daily Technicals every weekday morning, COT analysis (published Monday evenings), technical analysis of currency crosseson Wednesday and Friday (Euro and Yen crosses), and intraday trading strategy as market action dictates at the DailyFX Forum. He is the author of Sentiment in the Forex Market. Follow his intraday market commentary and trades at DailyFX Forex Stream. Send requests to receive his reports via email to [EMAIL="jsaettele@dailyfx.com"]jsaettele@dailyfx.com[/EMAIL]....
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| Posted: 02 Aug 2010 07:10 PM PDT View the original post at jsmineset.com... August 01, 2010 06:37 PM Are the bond bulls about to get steamrolled? CIGA Eric As the deflation rhetoric intensifies and scares the hell out of the gold community, it's not hard to find a bond bull praising the virtues of fixed investments. Talk, however, is cheap. I prefer to follow the money. Money flows suggest that the bond bulls and all their bravado are standing in front of oncoming steamroller. Connected money, huge bulls in April, has turned statistically bearish into strength. US TBd (20 Years +) and the Commercial Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest: Retail money (also know as wrong way Charlie), huge bears in April, has turned statistically bullish into strength. US TBd (20 Years +) and the Commercial Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest Technically speaking, the up trend appears to have b...
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| Posted: 02 Aug 2010 06:23 PM PDT
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| Posted: 02 Aug 2010 06:13 PM PDT Given our grim outlook on inflation, we continue to favour hard assets and the fast-growing developing economies in Asia. If our assessment is correct, our preferred sectors (energy, precious metals and industrials) and our favourite stock markets (China, India and Vietnam) are likely to generate spectacular long-term returns.
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| Posted: 02 Aug 2010 06:11 PM PDT The reason we are very bullish on gold's prospects beyond the short-term isn't that we think gold is a screaming bargain based on the way things are today; we are bullish because we don't think that today's gold price comes close to fully discounting the adverse FUTURE effects of government and central bank policies.
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| Why Gold Stocks are Certain to Go Higher Posted: 02 Aug 2010 06:05 PM PDT So why is it highly probable that gold stocks will go higher? Let me digress for a moment. Making big money isn't all that difficult. It doesn't involve making numerous profitable trades or correct investment decisions. Simply put, one needs to find the long-term trends and ride them from their infancy to their apex. Currently, there are three long-term secular trends that still have a ways to go.
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| Posted: 02 Aug 2010 05:56 PM PDT Dr. Duru submits: For many of us, investing over the last 10 years has been much more difficult and a lot less fun than it was in the 90s. In the 90s, it was easy to accept the religion of “buy and hold”, keep the faith that assets are pre-ordained to increase in value, and drown oneself in the doctrine of the “Great Moderation” and the banishment of the business cycle. So, I am always pleasantly tickled to stumble into a real live raging bull who still thinks of the world in terms of 10-15 year bullish investment theses. And stumble I did when a good colleague of mine at work greeted me with a huge grin after having discovered some of my postings on Seeking Alpha. It is cool to pretend I have some kind of celebrity status because I am crazy enough to expose my investing and trading opinions to a skeptical and critical public audience, but after we tangled with the fun and games (including some ribbing over my opinions on Intel (INTC) – more on that later), we got to the serious stuff. Complete Story »
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| London Metal Exchange Belly up?? Posted: 02 Aug 2010 05:52 PM PDT
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| Is A Shift In Fed Policy Coming? Posted: 02 Aug 2010 05:24 PM PDT
From The Daily Capitalist However I will assume Mr. Hilsenrath has pretty good connections as a Journal reporter so I will take his piece seriously. Here is the gist of the article:
The article notes the disagreements among the Fed presidents about inflation, deflation, and the direction of the economy. The inflation hawks, chief among them being Thomas Hoenig of the Kansas City Fed, would probably like to increase the Fed Funds rate soon. Charles Plosser (Philadelphia), James Bullard (St. Louis), and my favorite, Richard Fisher (Dallas) have been favorable to quantitative easing by allowing the Fed to continue to buy toxic debt ("quantitative easing"). None of these Fed presidents seem to understand the causes of deflation or inflation as being something that they create through money supply manipulations. But James Bullard has come up with another twist. Dr. Bullard released a paper last week about the dangers of deflation ("Seven Faces of 'The Peril'"). I should tell you that he rose from the research department to president of the St. Louis Fed, which makes him a bit of a policy wonk. Dr. Bullard says we can stop deflation by buying U.S. Treasurys (this form of "quantitative easing" is also called "monetizing debt"). He says ZIRP (zero interest rate policy) encourages deflation and violates the Taylor Rule (the Fed must keep short-term interest rates at a fixed bandwidth above or below "equilibrium" which is some theoretical balance between the rate of interest and inflation expectations). He says ZIRP loses its effectiveness, creates expectations of lower prices, and increases the likelihood of deflation. Bullard's solution is to monetize federal debt, but to only do it 'just right':
Let me translate this for you:
Bullard released this paper for a reason and that is to frame the debate about what they are all really concerned about: a sinking economy that will keep unemployment high. Continued high unemployment is not politically acceptable to Congress and the Administration, and the Fed will face tremendous pressure in the next several months as negative data continues to come in. Most Fed presidents fear unemployment more than they do deflation. I believe they will keep ZIRP for the foreseeable future and that they will also engage in more "quantitative easing." Monetizing debt has been a taboo among central bankers because it is a one-way ticket to high inflation. But, Dr. Bullard thinks that is what the Fed should do. That is why I believe we are eventually headed for stagflation.
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| Kinross Gold to Buy Red Back Mining for $7.1 Billion, a 17% Premium Posted: 02 Aug 2010 05:23 PM PDT
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| Posted: 02 Aug 2010 05:04 PM PDT All the key ingredients for commodities to rise are in place (1) A weaker US dollar (2) Around two percent rise in US and European stock markets (3) Lack of negative news. As long as this continues commodities will continue to rise. But I expect profit taking at the slightest of bad news. Trade in the momentum and buy on dips but use higher stop losses and watch to signs of intra day trend reversal.
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| Posted: 02 Aug 2010 04:13 PM PDT Here we are in the second half of the calendar year. And the last three years give you absolutely no clue about what to expect. Today's Daily Reckoning endeavours (to persevere) and to determine the future of corporate cash flows and the equity risk premium in emerging markets. But let's start closer to home with a brief history of the last three second halves of the calendar year. In the second half of 2007 - for the six months between June 1st and January 1st - the All Ordinaries finished essentially flat. In 2008, that six-month period in the second half captured some of the shock-horror of the GFC, with the All Ords down 38%. But the liquidity driven rebound of 2009 saw that same six-month period deliver a 25% gain on the index. So in this case, history teaches us nothing, except to expect volatility. Morgan Stanley analysts say that the range-bound Aussie market could deliver some volatile profits, if you're willing to load up on risk. In other words, it will pay to add risk now, according to the Morgan analysts. "We continue to think now is the time to add back risk to equity portfolios, given cheap valuations on 2011 earnings," writes equity analyst Toby Walker. "Having said that, we think range-bound and volatile markets could continue near term before a final quarter rally towards our year-end index target of 5207 [on S&P/ASX 200]." A lot depends on what you think 2011 earnings will be. And that depends on how much growth in the real economy - if it grows it all - comes from confident consumers and business and how much comes from government-generated stimulus (less and less). The bear case is that the growth will come from neither, making it "not-growth", or "contraction" as some of us call it. More out of curiosity than anything else, we ran a five-year chart of the All Ordinaries this morning to see what the gross return would have been for a buy-and-hold investor. The results are in the chart below, and they're not so flash. But then, it's been a pretty bad five years. If you start that same chart in 2009 and roll it forward through 2014, what do you reckon it will look like?  Using rolling five-year periods to determine the performance of equity markets is a favourite technique of people who tell you to buy and hold stocks for the long run. The embedded premise - which may or may not be borne out by the data - is that the longer you hold stocks, the less risky they are. Therefore, a buy-and-hold technique is the best strategy for dealing with unpredictable preiods of volatility. Set and forget! But that strategy will turn out to be a dud if any one of several scenarios turn out to be true. For one, there is the "weight of money" argument here in Australia. With retirement contributions being compulsory, there' an argument to be made that the share market will always push higher because it's fed by a captive stream of money that flows only one way and generally into one asset class. It will be interesting to see how fund managers behave in the coming years. For the most part, fund managers buy shares because it's what they get paid to do, the way bakers bake bread and chandlers make candles. True, buying stocks because it's what you're expected to is not terribly imaginative. But in a world of relative returns - where your performance is judged on matching the index - it's almost a self-fulfilling argument: buy the same stocks everyone else is buying and you'll at least match the market. Chandle away by day and drink mojitos by night. That works out well for the fund manager, but maybe not as well for the individual investor (especially if you don't like mojitos). But the individual investor does have an advantage over your average institutional fund manager: he can think freely and act independently. If he's a thinking man's investor we think he'll ask himself something like the following question: will stocks consistently deliver a rate of return over and above the so-called risk-free rate of return in government bonds in the next ten years? This question about the equity risk premium - what stocks are expected to return over long-term government bond yields - is an especially fascinating question right now. Right now, investors are absolutely in love with long-term government debt. This is one way of saying that they expect a much lower equity risk premium in the coming years. But what does that mean? Well, stocks can only pay dividends or grow earnings by growing their business. And a company can only grow its business if people are spending money. A lower equity risk premium means investors expect lower earnings growth. And it should follow that lower corporate earnings growth in the aggregate should mean lower GDP growth. All of this, by the way, is an inherently deflationary argument. Asset prices fall as the equity risk premium collapses. The balance sheet recession in which households and businesses pay off debt, increasing saving, and reduce spending, becomes the balance sheet depression and stocks fall further. This is the scenario in which investors begin to choose a fixed income strategy - a regular payment from a creditor - over equities. Mind you, we still find it mind-bogglingly stupid that investors would loan money to the United States government over a long-period of time and expect to beat inflation. To be fair, maybe that's not what's going on. As a trade, if you believe the austerity measures by the public sector will combine with the deleveraging of the private sector and households, then yes, bond prices could go higher as stocks go nowhere. This, however, is a play for capital gains from bonds and not a true income strategy. None of that answers the question of whether the equity risk premium will rise or fall in the coming years. We reckon it will fall, but not because sovereign bonds are truly "risk-free." They've never been riskier. Investors crowding into them now are setting their saving up to be consumed when the Feds unleash inflation. But we'll save that argument for later this week. For now, we had hoped to go back and cite a study we've previously analysed that looked at corporate cash flows in the post World War Two era. It showed, if we recall correctly, that corporate cash flows were anomalously high in that period, mostly as a result of the Baby Boomers, instalment credit, and the gradual establishment of the dollar standard. It showed that cash-flows were set to mean revert, meaning a lower equity risk premium for the next generation of investors. In other words, several generations of corporations and roughly fifty years of corporate earnings benefitted enormously from the population boom of the post-War period. That boom itself led to a consumption boom, driven both by demographics - a large percentage of the population with growing incomes and access to credit - which led to even higher earnings. But in the Western world, at least in America, real average income growth hasn't improved much since 1974. Households have increasingly borrowed against home equity and stocks to finance consumption. And even all that seems to have hit the proverbial wall in the last few years. Mean reversion alone would argue for lower aggregate corporate profits. Mean reversion plus demographics (ageing populations) plus credit depression conspire to predict lower earnings too. We'll wind up, though, with two qualifiers. You are not required to buy the stock market. But you can choose to buy certain stocks. And even in an economy with ageing workers and mean-reverting corporate cash flows, some businesses (like healthcare and probably energy) will see earnings growth. Equity investors may be willing to pay an even higher risk premium for those earnings outperformers in future years. But all along we have been referring, in a general, to equity risk premiums in Anglo countries that benefitted from the same post-War trends of a booming population, pent up demand for durable and consumer goods, access to credit, and assets up on which further consumption could be financed. What about China and India for Australia? That is, can and should you as an Australian investor allocate a larger portion of your equity portfolio to shares in emerging markets? Those markets are driven by some of the same forces - rising levels of consumption and access to credit - that drove corporate-cash flows so high for so long in Western markets. Is there a responsible way to capture some of those rising cash flows as an equity investor - if indeed they exist? We'll take up the subject of alpha and beta and asset allocation tomorrow. Until then... Dan Denning
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| UBS sees gold investors diversifying into reality Posted: 02 Aug 2010 04:00 PM PDT 11:57p ET Monday, August 2, 2010 Dear Friend of GATA and Gold: MineWeb's Dorothy Kosich last week described a report by UBS Investment Research that discovers a new trend among gold investors: actual gold. Kosich writes: "In their analysis, UBS noted, 'A new trend in 2010 is the movement toward fully allocated physical gold. In H2 and 2011, we expect this type of gold exposure will deepen as new and existing investors diversify a portion of their gold reserves to purely allocated form. Quite simply, such customers are limiting their weight of paper gold exposure. In essence, this is diversification within diversification.'" What a polite way for UBS to acknowledge that most gold investment hasn't been gold at all and that gold is really just another form of "gold" for people who would like to diversify, people who would like to have both some real assets out of which they can't be cheated and some imaginary assets out of which they can. Well, all GATA can do is pass the word along. We can make the world's largest investment banks any less stupid or venal. Kosich's report is headlined "Time to Accumulate Metals and Mining Stocks -- UBS" and you can find it at MineWeb here: http://www.mineweb.co.za/mineweb/view/mineweb/en/page67?oid=108588&sn=De... CHRIS POWELL, Secretary/Treasurer 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 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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| Gold Seeker Closing Report: Gold and Silver Gain With Stocks and Oil Posted: 02 Aug 2010 04:00 PM PDT Gold fell as much as $7.30 to $1174.20 in London before it jumped up to $1190.35 in early New York trade and then fell back to see a slight loss at $1179.13 by around noon EST, but it ultimately bounced back higher in the last hour of trade and ended with a gain of 0.04%. Silver fell to $18.055 and rose to $18.54 before it fell back off in the last few hours of trade, but it still ended with a gain of 2.29%.
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| Fed will go to war on deflation next week, leading economist predicts Posted: 02 Aug 2010 03:24 PM PDT By James Quinn http://www.telegraph.co.uk/finance/economics/7923054/Federal-Reserve-to-... The Federal Reserve is set to kick-start a new phase of monetary easing, a leading Wall Street economist claims. Paul Sheard, Nomura's chief global economist, argues that the current conditions are ripe for the American central bank to take affirmative action to put the US recovery back on track. In the first call of its kind from a Wall Street economist, Mr Sheard says that given subdued growth and concern about inflation, the Federal Open Markets Committee will act when it meets a week today. His comments follow those of James Bullard, president of the St Louis Fed, who last week said the central bank needs to equip itself with a plan for further quantitative easing should it be required, and after the latest US growth figures showed the American economy deteriorated somewhat in the second quarter. ... 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 The Fed is thought unlikely to make any change to its base Federal funds interest at the meeting, which has been held at a range of 0-0.25 percent since December 2008. "We now believe that current conditions have moved policymakers into action and that the FOMC will adopt a more accommodative stance at its 10 August meeting," Mr Sheard wrote in a research note. "We expect the Fed to at least stop the passive contraction of its balance sheet." Such a step is one of three possible options the Fed has in its arsenal, as outlined by Ben Bernanke, chairman of the Federal Reserve, before the US Congress last month. The other two are restarting the asset purchase programme that ended in March, and changing the language in the FOMC's statements to make it clear deflation will not be tolerated. However Mr Sheard argues that stopping the Fed's balance sheet from contracting further seems a sensible move. "To the extent that the size of the Fed's balance sheet matters, this, in effect, amounts to a gradual tightening of monetary policy. Further shrinkage of its asset holdings now seems inappropriate in light of downside risks to growth," he continued. Concerns about the health of the US economy shone through in the fate of the dollar yesterday, with the dollar index -- which values it against a basket of currencies – hitting a three-month low on fears that US recovery is stalling. The index touched 81.354, as sterling hit a six-month high against the greenback, touching $1.5820. A string of recent disappointing US data was to blame, along with fears over the latest US unemployment figures, to be published on Friday. The dollar failed to be revived by news that construction spending rose 0.1 percent in June, thanks mainly to a 1.5 percent increase in public spending on infrastructure projects. Meanwhile the Institute of Supply Management index edged down slightly, slipping to 55.5 in July from 56.2 at the end of June, on a scale whereby anything above 50 suggests that the manufacturing economy is expanding. "Forward momentum is slowing in the manufacturing sector, but there are no signals in this report that a sharp growth slowdown is in the cards," said Brian Bethune, chief US financial economist at IHS Global Insight. 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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| Alasdair Macleod: BIS swaps may be last gamble to suppress gold price Posted: 02 Aug 2010 03:12 PM PDT 11:10p ET Thursday, August 2, 2010 Dear Friend of GATA and Gold: Economist and former banker Alasdair Macleod today published some insightful speculation about the cover story put out by the Bank for International Settlements through the Financial Times about the bank's recent surreptitious gold swaps. Macleod figures that an honest explanation by the BIS and its accomplices at the European Central Bank might go like this: "The committee is aware of a general increase in the bullion liabilities of banks in the Euro area and is working with the ECB and relevant European central banks to ease market shortages." Macleod writes: "The reason we will never get the truth this plainly is that any such admission would be rocket fuel to the gold price, bring on the bankruptcy of the bullion banks and the concomitant collapse of all paper currencies." For the European central bankers to put so much more gold into the market "when China, Russia, India, and other nations are aggressively accumulating it and the ability of the bullion banks to return swapped or leased gold to its actual owners is one hell of a gamble," Macleod concludes. "We have probably just witnessed the last throw of the dice in the European central banks' attempts to suppress the gold price." Macleod's analysis is headlined "The Gold Market and the BIS" and you can find it at his Internet site, Finance and Economics, here: http://www.financeandeconomics.org/Articles%20archive/2010.08.02%20GoldB... CHRIS POWELL, Secretary/Treasurer 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 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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| Fed's inflation experiment may treat Americans as lab rats, Rickards tells King Posted: 02 Aug 2010 02:49 PM PDT 10:45p ET Monday, August 2, 2010 Dear Friend of GATA and Gold: Interviewed over the weekend by Eric King of King World News, market analyst Jim Rickards of Omnis Inc. analyzed the desire of certain elements in the Federal Reserve to gin up inflation by "treating citizens of the United States as laboratory rats in a great monetary experiment" that, he suspects, could quickly tip the country into Weimar-style hyperinflation. You can listen to the interview at the King World News Internet site here: http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/8/2_Ji... CHRIS POWELL, Secretary/Treasurer 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 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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| Fed's inflation experiment may treat Americans as lab rats, Rickards tells King Posted: 02 Aug 2010 02:49 PM PDT 10:45p ET Monday, August 2, 2010 Dear Friend of GATA and Gold: Interviewed over the weekend by Eric King of King World News, market analyst Jim Rickards of Omnis Inc. analyzed the desire of certain elements in the Federal Reserve to gin up inflation by "treating citizens of the United States as laboratory rats in a great monetary experiment" that, he suspects, could quickly tip the country into Weimar-style hyperinflation. You can listen to the interview at the King World News Internet site here: http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/8/2_Ji... CHRIS POWELL, Secretary/Treasurer 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 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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| The Gold Bull Market is Alive and Well Posted: 02 Aug 2010 02:08 PM PDT
Since hitting a high of just over US$1,260 in June, the gold price has declined, recently trading around US$1,160. While the correction has occurred in stages over the past few weeks, the biggest impact was felt during US trading on 27 July, where the gold price fell US$25. This rather hefty fall had the Ill-informed gold bears salivating, calling an end to the decade long bull market and apparently, the 'gold bubble'. If last month's high represented the gold market peak, it's the most unassuming bubble I've ever seen. No hysteria, no scrambling for gold coins, gold stocks well of their highs…is this how bull market's end? I don't think so. Gold is simply experiencing a correction. None of the fundamentals that have driven gold's price higher over the years have changed. In fact they are getting stronger. To understand gold and why it is likely to continue to rise, you must first understand that gold is money. It has been for thousands of years and will be for thousands more. Despite the best efforts of governments and central bankers to discredit gold (a practice that has become more prevalent since paper money has come into use) gold's place in the international monetary system is as strong as ever. Let's look at a few (relatively) recent examples of gold v government. 1. The term 'greenbacks' first made an appearance in the American Civil War. Treasury Secretary Salmon P. Chase (Tim Geithner's equivalent) printed up a whole bunch of them to finance the war effort. Not surprisingly, they immediately fell in value against gold. Demonstrating the hubris of officialdom, Chase thought gold was the problem (rather than his trying to finance a war with paper) so he tried to outlaw the gold market. This caused havoc. He soon recanted and had to live with a depreciated currency. 2. In the depths of the Great Depression, the US dollar was tied to gold at $20.67 an ounce. Influenced by Keynes, US President Roosevelt thought the precious metal was holding the economy back. So he confiscated the public's gold and soon after revalued it to US$35 an ounce. It was an attempt to create inflation amidst the falling price environment of the Depression. The policy has some success…paid for by the public who exchanged their real money for (soon to be depreciated) US dollars. 3. Following WWII, the Bretton Woods system of international finance came into existence. The US dollar was tied to gold at US$35 an ounce, with the other major currencies tied to the US dollar. This worked ok for a while but rising US deficits (to finance the Vietnam War) put upward pressure on the gold price, as US creditors swapped their excess dollars for gold. A group of central banks tried to maintain the US dollar gold price at $35 an ounce through what was known as the London Gold Pool, but it broke down in 1968 when the French bailed out. (De Gaulle wasn't a fan of the US' spending habits). From there, an artificial, two-tier market was established to control the price of gold and mask the debasement and mismanagement of paper money. Needless to say it didn't work. US President Nixon abandoned gold in 1971 and throughout the decade, gold went from US$35 to $850 an ounce. Since 1971 gold has played no 'official' role in the global economy, and total debt in most developed economies has exploded. In the absence of gold, there has been no balancing or stabilising influence in the international economy. This is why debt was allowed to get to the extraordinary high levels that eventually caused the credit crisis. Unfortunately, that debt is still with us, and governments around the world are creating more of it to try and 'fix' the problem. This is the wrong course of action but if history is any guide, it will be pursued until the even the village idiot - whoever that is - notices. In other words, the monetary mismanagement that the rising gold price has been signalling for years will likely continue for a few more yet. Betting that the gold bull market is over is akin to betting on the wisdom of governments. I've happily taken the other side of that bet and following the recent sell-off, have just advised my subscribers to buy up a number of attractively priced gold companies. Investors with a little patience should do very well. Greg Canavan
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| Posted: 02 Aug 2010 02:00 PM PDT The Daily Reckoning has moved to its Summer Schedule. Which is to say, your editor is working only half days. The rest of the time, he is painting shutters and fixing tractors. We arrived on Friday at the family place here in the Poitou-Charente region of France. A wedding drew us hastily hither on Friday. But now we have settled into our familiar August pattern. Three out of six children have already arrived. One other will come in a week or so. Friends and other family members will trickle in for the next few days. Since we're on our holiday schedule, we'll make these Daily Reckonings short and to the point. The stock market in the US was flat on Friday. Gold rose $13. China edged out Japan to become the world's second largest economy. Bonds rose. And the dollar fell. The Bloomberg report:
At this stage in the typical post-war recovery, the economy should be steaming along with GDP growth of about 6%. The latest reading, alas, came in at only 2.4% for the second quarter. Growth has been cut in half from the end of last year. The recovery - if there ever was one - is now faltering. Of course, you, Dear Reader, know that there never was anything resembling a real recovery. You can recover from a fall. You can recover from a broken heart. You can recover from a head cold. You cannot recover from death. You can only become a zombie. The US economy merely became more zombified, after the crisis of '07-'09. Houses are underwater. People are living on food stamps and unemployment compensation. The feds control major industries. Banks are kept alive with tax money. And GDP 'growth' was pushed up by boondoggles, bamboozles and bailouts. But now, even the zombies are beginning to shuffle. They need more flesh...more blood... In this regard, Federal Reserve Governor Bullard has let the cat out of the bag. He says the best remedy at this stage would be further doses of quantitative easing. He's right - at least within the strange context of central banker thinking. If your goal is to get the zombies moving...you need to give them some juice. And when you've already cut your rates to zero (the current rate is actually 0.25%), and you've run a deficit of $1.5 trillion, what else can you do? You've got to print money, right? There are some very smart people who believe inflation rates are going up - soon. They're urging investors to dump the dollar and US bonds. Their logic is very clean and very solid: The US government owes more than it can pay. When a debt cannot be paid by the borrower, someone else must pay. Typically, it's the lender who pays when the borrower defaults. But the US government doesn't have to default. It has another alternative, the aforementioned quantitative easing - monetary inflation, in other words. Instead of defaulting on its debts directly, the federal government can inflate them away. We have no real argument with this line of thinking. We have a hunch, however, that it won't work out that way. It's too obvious. Instead, we see the zombies staggering on for years... Hey... Here's someone who likes at least one side of our Trade of the Decade - long Japanese small cap stocks, short Japanese government bonds. Leslie P. Norton reporting from Barron's:
Regards, Bill Bonner
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| Fed Feeling States' Pension Pain? Posted: 02 Aug 2010 01:52 PM PDT
MarketWatch reports, Pension Funding Relief Could Provide Between $19 Billion and $63 Billion Reduction in Required Contributions Over Five Years:
More information on the analysis can be found at: http://www.towerswatson.com/fundingrelief. These measures are just going to buy some time for US corporate DB plans, many of which are de-risking while public plans are taking on more risk to deal with their shotfalls. But have no fear, the Fed Chairman Bernanke feels states' pension pain:
Let me repeat what I've often stated, the Fed's policy is geared towards banks, keeping rates low so they can borrow cheap and invest in risk assets all around the world. The Fed is hoping that reflation will translate into mild economic inflation, thus avoiding any prolonged deflationary episode which will hit banks' and pensions' balance sheets. The reflation trade is alive & kicking, which is why smart money continues to buy the dips in equity markets. The doomsayers keep warning us that another disaster far worse than 2008 is on its way, but they've been wrong. Something tells me that this is just another cyclical recovery but with one important caveat. I was talking with a sharp senior portfolio manager this morning who told me investors remain "far too focused on the US economy when in reality, it's the Emerging Markets that are leading global growth this time around." According to him, this is a "new post-war phenomena" that is propelling the global economy ahead. His comment made me think that perhaps I should revisit Galton's fallacy and the myth of decoupling. If structural decoupling is taking place, then it will have profound implications for the way investors are currently pricing risk.
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| The Most Wrong Thing I’ve Ever Heard Posted: 02 Aug 2010 01:49 PM PDT
I’ve written about our esteemed former Fed Chairman enough times for people to know my views of the man. However, the Maestro recently let loose a statement on MSNBC that absolutely MUST be read by anyone who wants to understand the general philosophy at the Federal Reserve as well as why the US economy is so screwed up.
Greenspan said:
"if the stock market continues higher it will do more to stimulate the economy than any other measure we have discussed here." (on MSNBC’s Meet the Press).
The above statement is simply extraordinary given its source. This statement confirms what we have all suspected deep down all along: that Greenspan and the Ben Bernanke (the latter was Greenspan’s protégé) believe that the US economy’s focus is financial speculation.
In 1970, the financial industry only accounted for 10% of S&P 500 earnings. By 2003, this percentage had swelled to 31%. Put another way, by the turn of the century the financial industry accounted for nearly $1 out of every $3 in corporate profits.
Greenspan and the Fed instituted policies that helped facilitate this. They:
§ Left interest rates below the rate of inflation, punishing savers and forcing them to speculate in riskier assets § Told Congress to push back regulation allowing Wall Street to leverage up § Urged the regulators to ignore derivatives and other financial products that they themselves knew were dangerous and out of control § Thrown TRILLIONS of dollars at Wall Street § Didn’t give a hoot about incomes falling or the deterioration of other economic metrics that impacted ordinary citizens everyday lives
Greenspan’s admission also tells us why his successor, Ben Bernanke has chosen to combat the Financial Crisis by implementing policies that largely benefit Wall Street (the speculators) and punish Main Street (ordinary citizens). After all, if your primary focus is making sure that the markets stay up, who are you REALLY helping, the retiree with the 401(k) or the hedge fund trader who speculates aggressively using leverage?
Folks, this is the REAL “New Economy” Greenspan touted in the ‘90s: financial speculation. Greenspan and pals never really believed that technology would increase worker productivity. How could they? None of their policies actually benefitted technology firms or induced entrepreneurialism.
Instead, Greenspan and the Fed were trying to paper over the fact that the US had outsourced its manufacturing base and incomes were falling along with Americans’ standard of living. They fostering a credit bubble and maintaining loose monetary policies so that Americans would use credit and financial speculation to maintain the illusion that they were getting richer.
This is why the Fed ignored the bubbles in Tech stocks and the housing market. It’s also why the Fed continues to address the structural issues in the US economy (incomes, consumer debt, etc) and instead are trying to blow yet another bubble in the financial markets.
There are different types of “wrongness.” There is the wrongness of simply having no clue what one is talking about (for example, if someone asked Greenspan about bubbles and he started talking about taking a bath) and then there is the wrongness of being intelligent, having a clue about what one is talking about, but simply focusing on the WRONG goal/ strategy.
Greenspan, in the above quote, has established in clear terms that the US Federal Reserve is in the latter group. These folks can form clever theories and write erudite academic papers, but they are focusing entirely on the WRONG goal. People do not pay their bills from their stock picks, they do so from their incomes.
On top of this, financial speculation is an extremely unfair practice in terms of the parties involved. Even with discount brokerage rates, you’re starting own LOSING money the second you establish a position courtesy of the brokerage fees and commissions. Combine this with the fact most people don’t even make money in the market (the buy and hold crowd can attest to this in the last ten years) and it’s clear financial speculation benefits those on Wall Street a whole lot more than those on Main Street.
And yet, this is exactly the financial system Greenspan and Bernanke want. And I have no doubt this New “Wrong” will turn out just as poorly as the “New Economy.
Good Investing!
Graham Summers
Ps. To join me for daily updates on the markets as well as more scathing reviews of the "powers that be," go to http://www.gainspainscapital.com/
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| Posted: 02 Aug 2010 01:47 PM PDT Gold to Silver Ratio (GSR) Pronounced weakness in the gold to silver ratio (GSR) has painted a red stick. While the ratio remains above June 2009 swing low, today's technical suggest that another wave of currency debasement lurks just around the corner. The bull from the lower magnet will intensify once the June 2009 swing low is breached. Those supporting the prevailing deflation rhetoric would be wise to listen to the message conveyed by the GSR. Gold to Silver Ratio (GSR):
When Money Dies: The Nightmare of the Weimar Hyper-Inflation Eric, This is a book with a lot of buzz- not readily available at a reasonable price I found it at Amazon in the UK Feel free to let your friends know. There's been a lot of talk and print about it and I bought it to see what hyper-inflation looks like. Jack Jack, Since the birth of man's awareness of the future, money never dies. It only changes in form. I have studied hyperinflation from ancient to modern times. It embodies the smell of fear and the felling of helpless for those unprepared for a currency transition. It is the manifestation of private and public panic – the panic to protect yourself, but neither knowing what to do nor able to do so in a timely manner. Hyperinflation is a crash in confidence of not only those that manage the currency but also the public leadership that surrounds it. Hyperinflation as an event tends to create both a confidence and power vacuum in which new leadership, either benign or sinister, tends to exploit. Sincerely,
Dear Jim, For those of us who tend to get nervous when listening to the predictions of economists on F-TV, I think referring to this news article makes a great deal of sense. Greenspan "thinks" the economy is having a modest recovery, but right now there is a "pause" in that recovery, so it feels like a "quasi-recession". Doesn't this fall quite contrary to economics lesson 101? Greenspan also clearly states in the video that "you cannot have inflation if a financial system is not working". It appears he has forgotten about some very important historical precedents including of course Weimar Germany. Greenspan also appears to drop a hint that government economists use the equity markets as a tool to maintain confidence. Forget about pro-business politics aimed at stimulating Main Street, its all about Wall Street. But we already know all of this……thanks Jim! CIGA Marc Greenspan: Slow economic recovery 'in a pause' WASHINGTON — Former Federal Reserve Chairman Alan Greenspan says he thinks the economy is having a modest recovery, but right now there's a "pause" in that recovery, so it feels like a "quasi-recession." Greenspan says long-term unemployment is pulling the economy apart even though large banks are doing much better and large companies are in excellent shape. Greenspan predicts that unemployment will remain where it is, hovering around 9.5 percent, for the rest of the year. Cheering the comeback of the stock market, Greenspan tells NBC's "Meet the Press" that a rising stock market will do more to stimulate the economy than any of the remedies now being discussed.
Jim Sinclair's Commentary CIGA Richard B is the "go to man" on the real events taking place every Friday. This is a subject you must understand if you wish to know what is really taking place inside the financials. Please take the time review this as Richard has taken many hours to keep you informed of fact, not fancy. It is apparent that many commentators make up much of what they report on. Here we deal in sourced fact. Summary of Week's Bank Failures Dear CIGAs, On Friday evening, July 23, 2010, the FDIC announced five more bank failures, bringing the totals to 108 so far this year and 275 since 2007. The five banks closed this week had collective assets of about $1.9 billion and deposits of about $1.8 billion. Their closings cost the FDIC an estimated $335 million, about 19% of deposits. So far this year, bank closings have cost the FDIC an estimated $18.88 billion. All five closings involved the FDIC entering into loss-share agreements with the acquiring banks. As a result, the total value of assets under FDIC loss-share agreements increased by $920 million, to about $180.82 billion. FASB-Blessed Asset Overvaluations Each of the FDIC's press releases describing bank failures provides a glimpse into the extent to which bank management may have been exaggerating the value of the bank's assets. Ever since the beginning of 2009, when the Financial Accounting Standards Board rolled back fair value requirements, bank management has had a dangerous amount of leeway to employ cartoon-like "mark-to-model" values for banks' hardest-to-value assets. For example, Bayside Savings Bank of Port Saint Joe, Florida, had stated assets of $66.1 million and deposits of $52.4 million. The FDIC estimated its closing cost $16.2 million. Based on that estimate, the bank's assets were really only worth $36.2 million, and had been overvalued by 83%. NorthWest Bank and Trust of Acworth, Georgia, had stated assets of $167.7 million and deposits of $159.4 million. The FDIC estimated its closing cost $39.8 million. Based on that estimate, the bank's assets were really only worth $119.6 million, and had been overvalued by 40%. Coastal Community Bank of Panama City, Florida, had stated assets of $372.9 million and deposits of $363.2 million. The FDIC estimated its closing cost $94.5 million. Based on that estimate, the bank's assets were really only worth $268.7 million, and had been overvalued by 39%. Truth Getting Stretched in FDIC Reports Two other bank failures announced this week are forcing me to raise a red flag regarding the degree to which Manipulation of Perspective Economics is starting to skew the information contained in FDIC press releases. What bothered me about these announcements was the combination of the FDIC projecting relatively small losses, yet describing resolution structures that made it clear the FDIC could barely give away the failed banks' assets. In both cases, the acquiring banks only took over about half of the failed banks' assets, and even then, required the FDIC to guarantee most of their value with loss sharing agreements. The FDIC ended up having to retain the rest of the assets, a total of about $550 million (stated value) between the two. You really have to wonder what the value is of assets the FDIC cannot get another bank to take over even with a guarantee against 80% of unexpected losses. Having to retain that many assets is the last thing the FDIC needs right now. As Greg Hunter pointed out in his article last week, the FDIC is already sitting on some $35 billion in assets from previous bank failures that it has yet to sell. The harder officials work to disguise the plain truth of what is going on, the more I worry about how serious the problems really are. Respectfully yours,
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| Posted: 02 Aug 2010 01:39 PM PDT Jim Sinclair's Commentary It may be a small announcement but it might well be the "death knell" in terms of acceptance of gold as the base for exchange traded metals funds that are paper derivative tricks and not bullion holders. It is small and unnoticed, but wow, it is powerful. It could have an effect on gold mining shares that is totally dynamic in a positive sense. SEC Urges Mutual Funds to Clarify Use of Derivatives The Securities and Exchange Commission wants mutual funds, exchange-traded funds and other registered investment companies to improve how they disclose their use of derivative contracts in their registration statements, shareholder reports and financial statements. The recommendation comes in the wake of the SEC's broader review of the use of derivatives by fund companies outlined in a March 25, 2010 statement. In a July 30th letter to the Investment Company Institute, the Washington, D.C. trade group for the mutual fund and investment funds industry, the regulator was critical of what it called generic disclosure which is either "highly abbreviated" or "lengthy, often technical." The ICI's members represent $11.42 billion in assets.
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| Posted: 02 Aug 2010 01:12 PM PDT
Last week there was a widespread rumor that Washington was thinking about a massive ReFi of home mortgages. I thought it was ridiculous. There may be more to it then I first considered. 
PIMCO and Blackrock (the major managers of government assets etc) would never “allow” it.
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| The Silver Price is Clearly Today's Big Story Posted: 02 Aug 2010 11:38 AM PDT Gold Price Close Today : 1183.40Change : 1.70 or 0.1%Silver Price Close Today : 18.403Change : 41.6 cents or 2.3%Platinum Price Close Today : 1601.40Change : 27.70 or 1.8%Palladium Price... This is a summary only. Visit GOLDPRICE.ORG for the full article, gold price charts in ounces grams and kilos in 23 national currencies, and more!
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| Guest Post: Will John Paulson Be Wrong This Time? Posted: 02 Aug 2010 11:36 AM PDT
Submitted by The Burning Platform John Paulson Will Be Wrong This Time We have arrived at critical juncture in the ongoing financial crisis. Have the government actions of the last year successfully spurred the animal spirits of Americans, resulting in a self-sustaining recovery? The Obama administration and most of the mainstream media would answer yes. GDP has been positive for the last four quarters. Consumer spending has increased in five consecutive months. Corporate profits have been relatively strong. The country has stopped losing jobs. The missing piece has been a housing recovery. No need to worry. Famous or infamous (depending on your point of view) $15 billion man John Paulson has assured the world that house prices will rise 8% to 10% in 2011. His basis for this forecast is that California prices have rebounded 8% to 10% in the last year, and this recovery will spread to the rest of the nation. Maybe Paulson has teamed up with his buddies at Goldman Sachs to develop a product that guarantees a housing recovery. I tend to not believe anything that comes out of the mouth of anyone associated with Wall Street, but let’s assess the facts and see if they point to an impressive housing recovery in 2011. The man who has been right on housing for the last ten years has been Yale Professor Robert Shiller. His analysis of U.S. housing prices from 1890 until present, which he first published in 2005, unequivocally proved that we were in the midst of the greatest housing bubble in history. At the same time, David Lereah, the chief economist (shill) for the National Association of Realtors, was pronouncing it was the best time to buy. He published his masterpiece of market tops, Are You Missing the Real Estate Boom? at the 2005 housing peak. He called a bottom in January 2007, and the NAR has continued to tell Americans it is the best time to buy for the last five years as prices have dropped 36% nationally.
Dr. Shiller continues to be the voice of reason when it comes to the housing market. He is doubtful that the recent “recovery” will continue:
Whom do you believe? The paid mouthpiece for the National Association of Realtors, the Wall Street shill, or an impartial economics professor who has done rigorous analysis using 120 years of housing data? Government Manipulation and Failure The Obama administration has taken unprecedented actions using taxpayer money to keep housing from reaching its natural equilibrium level. The Keynesians who inhabit the White House decided that a first-time home buyer credit of $8,000 would boost home sales and have a multiplier effect by spurring home furnishing sales. It is obvious these people have not spent much time in the real world. No one decides to purchase a home because of a tax credit. They may accelerate a home purchase in order to take advantage of free money, but an incremental purchase will not be generated. The tax credit was set to expire in November 2009, and the bean counters at CBO projected it would cost taxpayers $8 billion. The NAR estimated that 1.9 million first-time home buyers took advantage of the government handout, resulting in 350,000 additional sales over that time frame. Therefore, the total cost to the taxpayer was $15 billion, and each additional home sale cost you $43,000. Dean Baker of the Center for Economic and Policy Research called the credit “a questionable redistributive policy” from renters to home buyers, but said that he used it himself when he bought a house. He wrote on his blog: “Thank you very much, suckers!” Congress deemed a 100% over-budget program that dispensed $8,000 to people for doing something they were going to do anyway such a raging success, they extended it and expanded it to all home sales. The new and improved program extended the $8,000 credit for first-time home buyers and added a $6,500 credit for any home purchase. It was restricted to “poor” folks who made less than $225,000. The credits run out on April 30, 2010. The mainstream media was positively ecstatic over the home sales “surge” in March. They will be astonished again next month as these handouts have pushed forward demand from later in the year. Economists have estimated phase two of this program will cost taxpayers $100,000 for each additional home sold. The following chart unmistakably shows a surge in home sales from the government giveaways and then a plunge immediately thereafter.
The Home Affordable Modification Program (HAMP) makes the home tax credit program look like an astonishing success. The Obamanistas took $75 billion of taxpayer funds and have been distributing it to millions of reckless homeowners in order to keep them in homes they can’t afford. The administration sold this plan as keeping 4 million people in their homes. A veteran in the mortgage industry recently noted that a HAMP application he reviewed showed that these poor people needed a reduction in their $1,880 mortgage payment while incurring the following expenses in the prior month:
The conception behind this plan was that these homeowners were just down on their luck and needed a little help. The facts have proven otherwise. Despite threats and tremendous pressure from the administration on the banks, the program has been a miserable failure. After one year, only 228,000 permanent loan modifications have been completed. Modifications made by banks in 2008 have re-defaulted at a rate of 60%. If this program results in 500,000 modifications, the cost to taxpayers per modification will be $150,000.
The truth is that millions of irrationally exuberant people bought houses they couldn’t afford, using “creative” mortgage products, and then borrowed against the inflated value of these houses so they could live the good life. They rolled craps and now need to accept the consequences. These worthless government programs have cost taxpayers $100 billion and just postponed the ultimate bottom for housing. Law of Supply and Demand The Federal Reserve also did their part in the last year. They printed enough dollars to load their balance sheet with $1.25 trillion of mortgage-backed securities of highly questionable value. These purchases, which artificially reduced mortgage rates by at least 0.5%, concluded on March 31, 2010. Mortgage rates have already risen 0.25% in three weeks.
Considering the pile of tax dollars thrown at the housing market in the last year by our leaders, you would think new home sales would be above the level sold in 1963. New home sales in 1963 reached 600,000 when the U.S. population was 189 million. Today, new home sales are trending at 400,000 and the population is 310 million. At the peak in 2005, the total of existing and new home sales reached 9.2 million, with inventory for sale of 2.8 million homes. Total home sales are now trending at 5.4 million, a 40% decrease, while inventory for sale is 3.7 million, a 30% increase. According to the Census Bureau, the real median price of homes in the U.S. peaked at $261,000 in the first quarter of 2006. The median price bottomed at $168,000 in the first quarter of 2009, a 36% drop. After throwing $100 billion at the problem and artificially depressing mortgage rates, the government has achieved an increase in prices to $173,000, a 3% surge. Based on this data, the market appears to have stabilized. An eight-month supply of inventory with prices up slightly sounds like a fledgling recovery. Nothing could be farther from the truth. Foreclose This House Believers in the fledgling recovery are ignoring some key facts. There are already 11 million homeowners underwater on their mortgages. As of March, banks had an inventory of about 1.1 million foreclosed homes, up 20% from a year earlier. Another 4.8 million mortgage holders were at least 60 days behind on their payments or in the foreclosure process. This “shadow inventory” was up 30% from a year earlier. At the current rate of sales, it would take banks nine years to clear this inventory. They are likely to increase the rate of sales as inventory continues to pile up. This will compel prices to go lower. Prices would fall even if a tsunami of Option ARM and Alt-A resets weren’t hurtling down the track – but they are. Beginning in June, a surge in resets will begin and not subside until late 2012. These liar loans were riddled with fraud, and the vast majority of these mortgagees will default after the reset. A surge in foreclosures is just over the horizon.
Reversion to the mean cannot be circumvented. It can be delayed, but it will not be denied. The combination of expiring tax credits, the failure of HAMP, the conclusion of the Fed buying dodgy MBS, the growing shadow inventory of foreclosures, Option ARM and Alt-A resets, and rising interest rates will result in a further fall in home prices of at least 20% in the next two years. Mr. John Paulson will be wrong this time. Maybe we could even arrange a bet. If I’m right, I get to take my clan to one of his 19 mansions for a weekend of fun among the ruling elite. If he is right, he gets to spend a weekend at my underwater condo in Wildwood among the real people.
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