Gold World News Flash |
- Hourly Action In Gold From Trader Dan
- Jim?s Mailbox
- In The News Today
- Risk Trends Level Off but Crude Continues Lower as Growth Numbers Cool
- Crude Oil Falls for the Fifth Session, Gold Rally Continues
- Vindicating the Austrian School of Economics
- Debt Crisis Ignition
- Daily Dispatch: WWII Events
- Embry Still Burns Bright
- Gold To Fall In Fall For Once?
- Another Global Milestone Surpassed
- Gold Reaches Tests 61.8% Level
- Gold, Oil, SP500 & Dollar At Key Pivot Points
- All That Glitters...
- Smoke From The Copper and Gold Markets
- Gold and financial crisis
- America the Fallible... Men and Women Are the Same?
- LGMR: Gold Unwinds Last Month's Sell-Off as Race to Bottom in Forex Spreads to China
- 8 Charts That Will Make You Short Equities, Buy Bonds and Gold
- Three Risks Associated With Bond ETFs
- Currency Outlook: Focus on Australian, Canadian Dollar
- Print, Baby, Print!
- Inflation and Gold
- The Dodd-Frank Wall Street Reform and Consumer Protection Act: The Triumph of Crony Capitalism (Final, Part 4)
- Gold Buyers Push Through Concrete
- 10 Signs The U.S. is Becoming a Third World Country
- 18 Signs That America Is Rotting Right In Front Of Our Eyes
- CBRE August Cap Rate Survey
- Population and Destiny
- Gold Seeker Closing Report: Gold and Silver Gain Almost 1% and 2%
- A review of gold, silver market manipulation complaints to the CFTC
- Where Are Hedge Funds Placing Their Bets?
- In Advance Of Tomorrow's "Future Of Housing Finance" Kabuki Theater; Or Why The GSE Zombies Will Suck The US Middle Class Dry Forever, Amen
- 'Banging the close' is illegal in commodities, unless you bang it down
- 'Banging the close' is illegal in commodities, unless you bang it down
- Dissecting The Flashing Red Warning Light Of Record Stock Correlations
- Ebay: 90% dimes, $1.00 including shipping
- Protecting Your Cash
- Eton Park Joins Soros And Paulson In Making GLD Fund's Top Stock Holding
- Exporting Economic Growth
| Hourly Action In Gold From Trader Dan Posted: 16 Aug 2010 07:57 PM PDT View the original post at jsmineset.com... August 16, 2010 09:38 AM Dear CIGAs, News out of Japan overnight that its economy grew a mere 0.4% during the last quarter when economists and analysts were looking for a growth rate averaging 2.3% sent the yen sharply higher against the Dollar. Yes, you read that correctly. Apparently news out of the US concerning the lackluster Empire State factory index reading had investors rushing for the "safe haven" of the Yen not to mention setting off another buying orgy in the US bond market. The buying send the yield on the Ten year to an astonishing 2.6%! The bond bubble continues unabated. Part of the reason that the bonds keep moving higher and higher and interest rates lower and lower is that good quality paper for the fixed income market is getting harder and harder to come by. That is basically making investors choose Treasuries more by default rather than choice. Of course, the other reason is that the banks are reaping millions, if not...
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| Posted: 16 Aug 2010 07:57 PM PDT View the original post at jsmineset.com... August 16, 2010 12:08 PM Capital Flow Transition from Public to Private Sector CIGA Eric Any record, especially ‘Junk" bond issuance, during periods of aggressive currency devaluation is always dangerous. U.S. companies issued risky "junk" bonds at a record clip this week, taking advantage of keen investor appetite for returns amid declining interest rates and tepid stock markets. The borrowing binge comes as the Federal Reserve keeps interest rates near zero and yields on U.S. government debt are near record lows. Those low rates have spread across a variety of markets, making it cheaper for companies with low credit ratings to borrow from investors. I continue to watch is the performance of long-term high grade corporates relative government bonds (LTCBTRILTGBTRIR). This ratio represents one of the best money flows measures between the public and private sectors. Many stock market experts suggested that a rally could not mat...
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| Posted: 16 Aug 2010 07:57 PM PDT View the original post at jsmineset.com... August 16, 2010 12:28 PM Jim Sinclair's Commentary Maybe it never have dawned on the US Administrations that you should not treat your banker badly. The legislative just made a motion again to declare China a currency manipulator, unmindful that the economic future of the entire West depends on China increasing their US Treasury position. China Sold More Treasurys in June AUGUST 16, 2010, 2:05 P.M. ET By TOM BARKLEY And MEENA THIRUVENGADAM WASHINGTON—China was a net seller of U.S. Treasurys for a second straight month in June, while overall inflows into long-term U.S. assets continued, the Treasury Department said Monday. China’s holdings fell $24 billion to $843.7 billion, though it remained the largest foreign holder of Treasurys. That followed net sales of $32.5 billion in May. Recent bouts of selling by China have stoked concerns that the largest creditor nation to the U.S. may reduce its exposure, though the move h...
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| Risk Trends Level Off but Crude Continues Lower as Growth Numbers Cool Posted: 16 Aug 2010 07:57 PM PDT courtesy of DailyFX.com August 16, 2010 04:55 PM A cooling in Japanese growth and disappointing read from the New York-regional manufacturing report would encourage crude to maintain trend. However, the combination of tempered trend and an advance in gold better reflects underlying risk currents. North American Commodity Update Commodities - Energy A Clear Channel will Pit Fundamental Conviction against Technical Opportunity for Crude Traders Crude Oil (LS Nymex) - $75.24 // -$0.15 // -0.20% Putting in for its fifth consecutive daily decline, crude has matched the performance of its late-June / early-July bear swing and simultaneously confirmed the influence of a near three-month rising trend channel. While the bear trend that was extended into the start of this week has confirmed the most prolific bear trend in six weeks and tested lows not seen in five, the combination of fundamental and speculative influences may act to prevent a follow through on th...
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| Crude Oil Falls for the Fifth Session, Gold Rally Continues Posted: 16 Aug 2010 07:57 PM PDT courtesy of DailyFX.com August 16, 2010 11:51 PM Crude oil fell for a fifth session on Monday, but downside momentum is waning. Tuesday brings the release of U.S. economic figures that will either reestablish downside momentum or lead to a reversal. Gold continues to benefit from double dip fears. Commodities – Energy Crude Oil Falls for the Fifth Session Crude Oil (WTI) $75.34 // +$0.10// +0.13% Commentary: Monday was a day of pause for crude oil and equity markets, as risk assets generally fluctuated between small gains and small losses. Oil would register its fifth loss in as many sessions, but clearly downside momentum is waning now that prices are notably below last week’s highs. Prices are currently near the $75.50 level, which is close to the midpoint of crude oil’s 11-month range, with prices below that having turned out to be attractive buying opportunities. U.S. economic data set to be released on Tuesday will include figures on Hou...
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| Vindicating the Austrian School of Economics Posted: 16 Aug 2010 07:57 PM PDT Finally the Austrian school of economics, sometimes referred to as the Austrian Business Cycle Theory (SBCT), is getting some respect, as we learn from DailyBell.com, that quoted an editorial from Ron Smith at The Baltimore Sun saying “The few economists that warned that the credit explosion of recent years would hasten and deepen financial disaster were mainly from the so-called Austrian school and were derided by their Keynesian counterparts as kooks. Who looks kooky now?” As grateful as I am to Ron Smith for this public recognition that the Austrian school of economics is the only correct theory of economics, and his realization that the current bunch of lowlife trash that hew to the ridiculous neo-Keynesian econometric crapola should be rounded up and put in prison for impersonating persons with intelligence, and for causing so much trouble for everybody, and probably destroying the country, and perhaps the world, with their laughable stupidity and surprising gullibil...
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| Posted: 16 Aug 2010 07:57 PM PDT By Neil Charnock goldoz.com.au Introduction Isn’t that funny; everybody is getting risk adverse again - what a surprise. Before I highlight an excellent strategy for US and European investors I need to announce two general warnings about the near future. Markets are currently irrational and dangerous because they have factored in growth based on wrong assumptions. This has recently led to the wrong stance on risk in the global markets as well. We have been warning our Members about this and related issues for a few weeks in our newsletter – ahead of the recent high so they had the opportunity of selling into the strength. Earlier in the year I called for a buying season for the Australian gold stocks in May and June and it was a good call. Sixteen of our stronger gold producers made lows in that time frame and then went on to rally however like elsewhere else the rally has been lacklustre. The emerging gold stocks did better on average than...
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| Posted: 16 Aug 2010 07:57 PM PDT August 16, 2010 | www.CaseyResearch.com WWII Events Dear Reader, Vedran Vuk here filling in for Chris Wood. Today, the history buffs will get a treat. We’ll be taking a look at some significant WWII events and the resulting stock market reactions. Why is this important today? Stock markets always react to important events in one way or another. If the event was predicted, the impact on the actual event date will be minor. Market predictions adjust prices long before the event actually occurs. If the event is a surprise, the market will react sharply. This important insight has many applications today. For example, yes, there are still sovereign debt problems out there. But how well is the market prepared? Everyone recognizes the PIIGS problem. This could mean that the danger is partially factored into current prices. Further, double-dip debates are constant in the media. A sudden downturn wouldn’t catch ev...
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| Posted: 16 Aug 2010 07:57 PM PDT Source: Brian Sylvester and Karen Roche of The Gold Report 08/16/2010 Sprott Asset Management's Chief Investment Strategist John Embry loves to talk gold. And we love to listen. We thought you might, too, because he's always long on opinion and predictions. John envisages that the "extraordinarily painful" economic times ahead will ultimately lead to a new currency backed by, of course, gold. In the meantime, John suggests you "protect yourself" from downside risk by shifting 25% of your portfolio to precious metals. In this exclusive interview with The Gold Report, John even proffers some names to help you bulk up. The Gold Report: Thank you, John, for taking the time to talk with The Gold Report today. John Embry: It's always a pleasure to chat with you. TGR: I noted in a recent article in Investor's Digest that you were talking about the M3. You said, "M3 in the first quarter was falling at a rate last seen during The Great Depression." We recently interviewed John...
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| Gold To Fall In Fall For Once? Posted: 16 Aug 2010 07:57 PM PDT www.preciousmetalstockreview.com August 14, 2010 The Federal Reserves announcement this past week that they will monetize their debt sent markets reeling initially, but they seem to have somewhat stabilized, at least for now. This coming week will tell the tale, likely most of it to be told early Monday morning. It’s hard to gauge though with such low volume in summer, this summer in particular. Gold, however, is holding up very well, but I’m very nervous for once as we move closer to the post-labour day timeframe which usually is so good for Gold (details below). Metals review Gold only moved higher by 0.85% on the week but crossed a key technical level. By moving above, and staying above the 50 day moving average Gold will attract more buying even in these dog days of summer where volume is abysmal. Gold is also nearing a key horizontal level at $1,220 which also happens to be the right shoulder in a short t...
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| Another Global Milestone Surpassed Posted: 16 Aug 2010 07:57 PM PDT The 5 min. Forecast August 16, 2010 11:53 AM by Addison Wiggin & Ian Mathias [LIST] [*] Another major Chinese milestone… our thoughts on the world’s new No. 2 economy [*] Chris Mayer offers a new investment frontier: Columbia [*] Data disappoints: Fed, Homebuilders start off another week of lousy index reports [*] Failed bank scene goes from bad to worse: Media loses count while banks massage earnings [/LIST] Our coffee doesn’t taste any different this morning. The sun still appeared on the horizon in the East. But today the world is different. Bean counters who care about these things say China has become the world’s second largest economy, effective: immediately. If numbers from the Far East can be trusted, China produced $1.3 trillion of economic activity in the second quarter. Japan, the erstwhile #2 economy on the planet, produced a mere $1.2 trillion. Moreover, at the current trajectory, China’s economy will be larger than the Unit...
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| Gold Reaches Tests 61.8% Level Posted: 16 Aug 2010 07:57 PM PDT courtesy of DailyFX.com August 16, 2010 07:17 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. It seems as though the first 5 wave decline ended following a terminal thrust from a triangle. I do expect this rally from the low to prove corrective. Price has reached the 61.8% retracement – additional resistance would be the parallel channel....
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| Gold, Oil, SP500 & Dollar At Key Pivot Points Posted: 16 Aug 2010 07:56 PM PDT Sunday Aug 15 Last week was exciting as investments rocketed higher or tank… We saw Gold and the US Dollar pop while oil and equities dropped sharply with heavy volume. Just to recap, Wednesday the market went into free-fall mode sending traders and investors running for the door. This was obvious from looking at the large percent drop coupled with heavy selling. That day the NYSE showed panic selling with 37 shares sold for every 1 share purchased meaning pure panic. In my Wednesday night report “How to Take Advantage of Panic Selling for SP500 and Gold ” I explained how to read these extreme market conditions and what to expect the following sessions. Currently the price of gold, oil, spx are trading somewhat at the opposite extremes seen last week. Below are a few charts explaining the situations: GLD – Gold ETF Trading Signals This 60 minute chart shows gold getting hit hard on Wednesday morning. Investors and traders around the globe were c...
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| Posted: 16 Aug 2010 07:56 PM PDT Aden Article By Mary Anne & Pamela Aden August 13, 2010 Courtesy of www.adenforecast.com It was another action packed month. The volatility never seems to end, at least that’s the way it’s been for many months now… actually, for the past few years. The markets have essentially been reacting to the news of the day for what seems like ages. When the news is good, they rise. When it’s bad, or perceived to be bad, the markets get nervous, they become vulnerable and they decline. And investors simply don’t know what to do. They’re still edgy and uncertain. And as long as this continues, the entire outcome could go either way…. STAY WITH GOLD So what’s an investor to do? Stay in gold. Despite its recent volatility, it’s the one investment that benefits during times of uncertainty. As you’ve seen, it does well during good times and bad. That’s been true throughout history, and it still is. The...
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| Smoke From The Copper and Gold Markets Posted: 16 Aug 2010 07:56 PM PDT From the August 2010 HRA Journal David Coffin & Eric Coffin, HRA Advisories The dollar denominated copper price benefited from a Euro recovery beginning in mid July. Other base metals also gained from the falling Dollar. Traders had become more cautious about gold after its long uptick, but some greater comfort with the economy after Europe managed to push back from the brink also helped the brief move into base metals. However, internal fundamentals are also playing a role copper’s price move. Warehouse stocks of copper listed at the LME [London Metals Exchange] have continued to decline from February highs. This decline did slow somewhat when the red metal’s price gain bumped up against the $7500/tonne ($3.40/lb) level in late July. In Shanghai the July turnover of copper was off by 40% from a year ago and by 7% relative to June, but warehoused copper listings had declined there earlier in the month and have staid at that lower level. An e...
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| Posted: 16 Aug 2010 07:56 PM PDT At what point does a market crash translate to a lengthy bear market and/or an economic recession? This question was taken up by a celebrated historian of the early 20th century, one Otto C. Lightner. In 1922, Lightner chronicled nearly every major economic depression in the known history of the Western world in a 400-page volume entitled “The History of Business Depressions.” Lightner’s comprehensive chronicle of business depressions contains much that is applicable to today’s economic situation following the credit crisis. (It must be noted that before the Great Depression of the 1930s, the word “depression” was used without distinction to describe what could either be considered a mild recession or a major depression.) One interesting example of an ancient economic crisis was detailed by Lightner, who explained the Roman debt crisis of A.D. 33. This particular crisis had some amazing parallels to the credit crisis of recent...
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| America the Fallible... Men and Women Are the Same? Posted: 16 Aug 2010 07:56 PM PDT America the Fallible Monday, August 16, 2010 – by Staff Report Mort Zuckerman The End of American Optimism ... Our brief national encounter with optimism is now well and truly over. We have had the greatest fiscal and monetary stimulus in modern times. We have had a whole series of programs to pay people to buy cars, purchase homes, pay off their mortgages, weatherize their homes, and install solar paneling on their roofs. Yet the recovery remains feeble and the aftershocks of the post-bubble credit collapse are ongoing. We are at least 2.5 million jobs short of getting back to the unemployment rate of under 8% promised by the Obama administration. Concern grows that we are looking at a double-dip recession and hovering on the brink of a destructive deflation. Things are bad enough for Federal Reserve Chairman Ben Bernanke to have characterized the economic outlook late last month as "unusually uncertain." – Wall Street Journal/Mortimer Zuckerm...
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| LGMR: Gold Unwinds Last Month's Sell-Off as Race to Bottom in Forex Spreads to China Posted: 16 Aug 2010 07:56 PM PDT London Gold Market Report from Adrian Ash BullionVault 08:35 ET, Mon 16 August Gold Unwinds Last Month's Sell-Off as "Race to Bottom" in Forex Spreads to China's Yuan THE PRICE OF GOLD rose to its best level since the start of July in early trading on Monday, rising above $1226 per ounce as world stock markets sagged but commodity prices ticked higher. Crude oil bounced from a 1-month low, and wheat futures rose again after dipping from this month's near-two year high – sparked by Russia banning exports amid its worst drought in five decades. Silver prices edged up to $18.30 an ounce, some 2.6% above last Thursday's two-week low. So-called "safe haven" government bonds also rose following weak Japanese GDP data, nudging the 30-year US Treasury yield down to a 16-month low of 3.80%. "The low [in gold] turned out to be at $1156 per oz," says a review of this summer's action so far from Canada-based bullion bank Scotia Mocatta, "which was just a few dollars...
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| 8 Charts That Will Make You Short Equities, Buy Bonds and Gold Posted: 16 Aug 2010 07:01 PM PDT Marvin Clark submits: Last week, the stock market awoke briefly to view the soft economic data named recovery and became startled. The market also heard the Fed admit that they are standing by to intervene once more if the pain becomes too great. As you know, stocks sold off, bond yields moved lower and the double dip recession moved closer to probable than to possible. Below are eight charts showing why this economy is flat on its back. When the Fed takes action to arrest the second dip, the price of gold will surely rise. Complete Story »
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| Three Risks Associated With Bond ETFs Posted: 16 Aug 2010 06:57 PM PDT Kevin Grewal submits: Exchange traded funds are known for their ability to provide diversification, low cost alternatives, asset allocation and exposure to hard-to-reach markets and sectors. From a portfolio management and asset class perspective, bond ETFs do such a thing; however, it is equally important to understand the inherent risks involved with these versatile investment tools. The first risk involved with bond ETFs is the risk of default. Bond ETFs hold actual bonds, which are promissory notes. So in essence, these promissory notes are only as good as the government, agency or corporation that issues it. Complete Story »
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| Currency Outlook: Focus on Australian, Canadian Dollar Posted: 16 Aug 2010 06:48 PM PDT Zhong Jin submits: Weak import data from China last week raised investors’ fear of fading demand from emerging markets on commodities. It is clear that the Chinese economy is slowing down and that demand for raw materials is dropping accordingly. Commodity currencies, such as the CAD and AUD, have dropped against the USD as investors continue to worry about the slowing Chinese economy. China’s yuan had its biggest weekly decline in 20 months as investors expected that China would protect its exporters from the slowdown. At the FOMC meeting on Tuesday, the Fed acknowledged the prospect of lower U.S. economic growth and prepared for another QE. The Federal Reserve also decided to keep the low interest rate unchanged. The FOMC admitted that the recovery has “slowed” but said that it still expected “a gradual return to higher levels of resource utilization in a context of price stability”. The Fed decided that it will purchase longer-term Treasury securities after the investment in MBS is paid back. This statement further turned off investors' risk appetite in light of slower economic growth and an insufficient response from Fed. Complete Story »
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| Posted: 16 Aug 2010 06:14 PM PDT Bernanke was correct back in 2002 when he pointed out that the Fed could always devalue the dollar by increasing its supply, but as far as we can tell that's the only important economics concept he has ever been correct about.
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| Posted: 16 Aug 2010 06:08 PM PDT It's difficult to take the pulse of the nation nowadays with all the events that have occurred on public stage these past couple of years. Fundamentally, we are becoming a nation of haves and have nots. Either we own a home, have a good paying job with superior benefits or we have no job and our home is preparing to go into foreclosure.
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| Posted: 16 Aug 2010 06:05 PM PDT
From The Daily Capitalist Until I began to examine the Dodd-Frank financial overhaul bill I had no idea that it would so significantly change the direction of the United States. It's scope is so vast and pervasive that it is difficult to grasp its totality. I wrote this article to try to explain this and why I believe it is so important for us to understand it. Because of its complexity it was not possible to do this briefly, so I wrote this major "white paper" and divided it into four parts to make it easier to digest. This is the final part of this four part series. Final, Part 4 Why Regulators Will Always Fail Why should new regulations work when the old ones failed?:
The problem with this kind of regulation is that new laws are always looking backward in an attempt to prevent the last bust from happening. While the origins and outcomes of boom-bust cycles behave similarly, as Rogoff and Reinhart point out in their research, the asset classes and mechanics of the boom are different. As the Fed pumps money into the economy, money follows different paths and inflates and distorts different asset classes each time. In the Dot.com boom-bust cycle money flowed into high-tech companies and the stock market. Before that cycle, money flowed into real estate, mainly multi-family housing. The current cycle pushed money into housing, and more importantly, new forms of debt based on housing that hadn't previously existed. It is obviously more complicated than this, but the point of this paper is that regulators will never keep up with the next asset class boom and bust because they will be looking backwards. Will they know the "next one" when they see it? I doubt it. What They Forgot I discussed in the Part 1 of this article that there is almost nothing in the Act that actually prevents the Fed from creating new boom-bust cycles or that inhibits the federal government’s policies favoring, and thus distorting, the housing market. Here are things that they should have tackled but didn’t. Fannie and Freddie The Act failed to deal with Fannie and Freddie. Recall my question at the beginning of this article about why lenders would make unsafe loans. There is no question that the primary movers in the housing boom and bust were Fannie Mae and Freddie Mac, government sponsored housing financing entities (GSEs). Fannie guaranteed one-half (53%, or about $5.5 trillion) of the U.S. housing market’s $10.7 trillion of mortgages; about 10% ($500 billion) of those were subprime (“toxic”) mortgages. Countrywide, the largest subprime lender, eventually taken over by BofA, sold 90% of its loans to Fannie, and Countrywide’s loans comprised 25% of Fannie’s purchases. Fannie and Freddie were nationalized in September, 2008 and the federal government assumed their liabilities without limits. As of Q1 2010, Fannie had lost double its profits made for the previous 35 years. They have already cost taxpayers about $85 billion. Estimates of bailout costs range as high as $1 trillion, assuming home values decline another 20% and foreclosure rates continue to climb. It is interesting that the Republicans tried to introduce provisions in the Act that would reform Fannie and Freddie. But Barney Frank blocked this reform:
There is no need for the government to be involved in the housing market. It is purely a political play. As Douglas Holtz-Eakin, former Bush II economic advisor and CBO director, said, “Republicans and Democrats love putting Americans in houses, and there’s no getting around that.” Even FDIC Chair Sheila Bair, said:
To be fair to the Administration, they and Mr. Frank have said that Fannie and Freddie need “dramatic reform” but they have no political will to get rid of them or let the market function properly. Meanwhile, the federal government loan guarantee machinery is still roaring along. The FHA has guaranteed about one-half of all new home loans since 2009. Its minimum down payment requirement is 3.5%. About 24% of loans it guaranteed in 2007 and 2008 are in default. Overall delinquencies are 8.3% of their $865.5 billion of loans, up 35% over June last year. The government continues unabated to favor and distort the housing market despite their role in causing the financial crisis. Federal Reserve Boom-Bust Generator The other question I asked at the beginning of this article is, why all of a sudden did we have a boom? No economist, other than Austrian theory economists, answers this question satisfactorily. Keynesians believe that our excesses are caused by our “animal spirits,” i.e., greed. Monetarists and other neo-Classical economists attribute it to the usual factors of an "excessive" money supply (Milton Friedman believed in a steady state monetary inflation of around 4% per year), greed, and perhaps legislative policies such as those favoring housing. The Austrians have placed the cause of booms and busts at the proper source, and that is the Federal Reserve, the only authority which has the power to “print” money. Nothing in the Act changes the Federal Reserve’s power over interest rates and money supply. The Fed’s dual mandates are still to maintain steady interest rates and maximize employment. The Fed’s role in the housing boom-bust is shown as follows. From 2000 to 2004 the Fed Funds rate went from about 6.5% to 1.0% and money supply shot up:
And so did the housing market:
When the Fed floods the economy with new money it doesn’t create wealth; if that were the key then we would all be rich. What it does by artificially reducing interest rates is to distort the entire entrepreneurial process and sends capital to places where it isn’t really needed. In this cycle it went into housing, drove prices up, created an unsupportable debt structure, and, as we are now finding, housing was massively over-produced. The result was the greatest expansion of debt in history. In Austrian economics terms this result is called “malinvestment.” To the Fed’s consternation, money supply is now declining as the above chart shows. The Fed desperately wants to cause inflation because they believe it will rescue the economy. They believe they can cause inflation by pumping money into the economy and expanding money supply. But they have a problem. As a result of malinvestment and the huge amount of debt built up to support it, money supply is now declining even though interest rates are effectively zero. A declining money supply is deflationary. They will eventually find a way to inflate which will lead to stagflation. (See, "Anti-Deflationists Win The Day At The Fed," and this and this.) Too Big To Fail and Moral Hazard The most important lesson of this financial crash is that large financial companies now know that they will be bailed out if the Fed and Congress believe it is necessary to “save the economy.” While the President says we’ll never bail out these companies again, the Act, as noted previously, actually does allow the government to bail out “industries.” The only reason the language in the Act was inserted to “prevent bailouts" was to attempt to placate the general public who believe that bailouts of TBTF companies was wrong. If the government really wished to prevent bailouts, they would have done so explicitly, but they didn’t. They believe bailouts are absolutely necessary to "save the economy." The expectation of bailouts is what economists call a “moral hazard.” That is, if you bail companies out it encourages risky behavior because of the knowledge that they will be bailed out. Capitalism, as many have pointed out, is a system of profit and loss. The loss part of that equation is essential to capitalism. Austrian economist Joseph Schumpeter called the failure of firms a process of “creative destruction.” Not only does failure wipe out the mistakes of a failed business, but more importantly it is a necessary signal to entrepreneurs, banks, and venture capitalist to not waste their valuable capital on similar ventures. If you remove the concept of loss from TBTF businesses, the signal are you sending is to encourage risk-taking with the taxpayers’ money. The system of bailouts isn’t new. The federal government has created an entire structure to prevent or cushion failure in those industries which it favors. Professor Russ Roberts in his paper, “Gambling With Other People’s Money: How Perverted Incentives Created the Financial Crisis,” details this process eloquently and in detail. From the fractional reserve banking system allowing banks to back their loans with only 10% of Tier 1 capital, to deposit insurance (now raised to $250,000), to Basel II capital rules, to CRA rules, to Fannie, Freddie, and the FHA, the entire system is skewed toward cushioning the risk-takers from the consequences of their actions. This has created a system of “crony capitalism,” a system which favors the government’s friends. I call it the Wall Street-Washington Financial Complex. In an article from the City Journal, Nicole Gelinas points to a book, 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown, by Simon Johnson, MIT entrepreneurship professor, and James Kwak, a former McKinsey consultant, of which she notes:
The Stifling Hand of the Financial Risk Czars In August, 2008 I wrote an article predicting the coming creation of a financial risk czar:
Because these crises are never quite the same, they won’t see the next one coming, but they will see a lot that aren’t.
***** To see previous parts of this article: Part 1; Part 2; Part 3. To download a PDF of the entire article, go here.
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| Gold Buyers Push Through Concrete Posted: 16 Aug 2010 06:01 PM PDT Gold forced a few green shoots through concrete yesterday, setting the stage for a shot this month at June's all-time highs near $1270. That would require a further rally of just 3.5 percent from current levels, based on yesterday's $1226.90 settlement price for the Comex December contract.
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| 10 Signs The U.S. is Becoming a Third World Country Posted: 16 Aug 2010 05:16 PM PDT (snippet) 1. Rising unemployment and poverty: Unemployment numbers, food stamps, and home foreclosures continue to reach new record highs.. 2. Economic dependence: The United States finished 2009 with a debt-to-GDP ratio of 85%, according to the International Monetary Fund (IMF). The current trend projects the United States to finish 2010 at 94% and 2011 at 98%. 3. Declining civil rights: Everyday freedoms are often a casualty of a society in collapse. 4. Increasing political corruption: When political corruption becomes the accepted norm, as opposed to the exception, then there's a good bet your country resembles the Third World. 5. Military patrolling the streets: The rise of a militarized police state is a hallmark of most Third World countries, particularly in times of rapid economic collapse. America's declaration of the War on Terror has created a constant threat to National Security that has allowed for the military to be deployed on American soil. 6. Failing infrastructure: As 46 of 50 states are on the verge of bankruptcy, cities are going dark, asphalt roads are returning to the stone age, and nationwide budget cuts are leaving students without teachers, supplies, or a full-time education. These are common features one will see as they travel through the poorest of Third World countries. More Here.. 
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| 18 Signs That America Is Rotting Right In Front Of Our Eyes Posted: 16 Aug 2010 04:28 PM PDT 
Once upon a time, the American people worked feverishly to construct beautiful, shining communities from coast to coast. But now we get to watch those communities literally crumble and decay in slow motion. Nothing lasts forever, but for those of us who truly love America it is an incredibly sad thing to witness what is now happening to the great nation that our forefathers built. The following are 18 signs that America is rotting right in front of our eyes.... 1 - Due to extreme budget cuts, school systems across the United States are requiring their students to bring more supplies with them than ever this year. In Moody, Alabama elementary school students are being told to bring paper towels, garbage bags and liquid soap with them to school. At Pauoa Elementary School in Honolulu, Hawaii all students are being required to show up with a four-pack of toilet paper. 2 - According to the American Association of School Administrators, 48 percent of all U.S. school districts are reporting budget cuts of 10 percent or less for the upcoming school year, and 30 percent of all U.S. school districts are reporting cuts of 11 to 25 percent. 3 - In Chicago, drastic budget cuts could result in an average class size of 37 students. 4 - The governor of Hawaii has completely shut down that state's schools on Fridays - moving teachers and students to a four day week. 5 - According to the Federal Highway Administration, approximately a third of America's major roadways are already in substandard condition. 6 - All over the United States, asphalt roads are being ground up and are being replaced with gravel because it is cheaper to maintain. The state of South Dakota has transformed over 100 miles of asphalt road into gravel over the past year, and 38 out of the 83 counties in the state of Michigan have now turned some of their asphalt roads into gravel roads. 7 - According to the U.S. Department of Transportation, more than 25 percent of America's nearly 600,000 bridges need significant repairs or are burdened with more traffic than they were designed to carry. 8 - In a desperate attempt to save money, the city of Colorado Springs turned off a third of its streetlights and put its police helicopters up for auction. 9 - The state of Arizona has eliminated funding for full-day kindergarten and has shut down a number of state parks. 10 - Over the past year, approximately 100 of New York's state parks and historic sites have had to cut services and reduce hours. 11 - In Georgia, the county of Clayton recently eliminated its entire public bus system in order to save 8 million dollars. 12 - Elsewhere in Georgia, 30,000 people recently turned out to pick up only 13,000 applications for government-subsidized housing. A near-riot ensued and 62 people were left injured. The amazing thing is that all of this commotion was just to get on a waiting list. There are no aid vouchers even available at this time. 13- In the city of Philadelphia, rolling fire station "brown outs" recently cost a 12 year old autistic boy named Frank Marasco his life. 14- Oakland, California Police Chief Anthony Batts says that due to severe budget cuts there are a number of crimes that his department will simply not be able to respond to any longer. The crimes that the Oakland police will no longer be responding to include grand theft, burglary, car wrecks, identity theft and vandalism. 15- The sheriff's department in Ashtabula County, Ohio has been slashed from 112 to 49 deputies, and there is now just one vehicle remaining to patrol all 720 square miles of the county. 16 - Of 315 municipalities the New Jersey State Policemen's union recently canvassed, more than half indicated that they were planning to lay off police officers. 17 - Not that the criminals are doing that much better. Things have gotten so bad in Camden, New Jersey that not even the drug dealers are spending their money anymore. 18 - Almost everyone knows someone who has been severely impacted by this economic downturn. A new Rasmussen Reports national telephone survey has found that 81 percent of American adults know someone who is out of work and looking for a job. So can't the states just step up and start spending more money and fix these things? Well, no. The truth is that the states are absolutely broke. Quite a few of the states are actually on the verge of default, and there is no getting around the fact that budget cuts that are much more severe are going to be required in the years ahead. So can't the U.S. government step in and bail out the states? Well, yes, but as we have detailed previously, the U.S. government is literally drowning in a sea of red ink. The U.S. government is already spending an amount of money equivalent to approximately 25.4 percent of GDP this year. How much more money can the U.S. government possibly spend? To get an idea of just how bad things are already, the IMF says that in order to fix the U.S. government budget deficit, taxes need to be doubled on every single U.S. citizen. Are you ready to pay double the taxes? No matter how you slice it, the U.S. is in a massive amount of financial trouble and the American people are starting to realize this fact. In fact, one new poll found that nearly two-thirds of Americans believe that the U.S. economy will get worse before it gets better. But unfortunately things are not going to get "better" - at least in the long-term. The decay and the rot that have already set in are only going to get worse. These problems did not appear overnight and they are not going to be solved overnight. Our leaders have been making very bad decisions for decades, and all of those bad decisions are starting to catch up with us. But perhaps you disagree. Feel free to tell us what you think in the comments section below....
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| Posted: 16 Aug 2010 04:06 PM PDT
The monthly CBRE August Cap Rate survey is out, and unlike recent months, the outlook for commercial real estate is turning more dour. CBRE's commentary: "As the US economy slows from its growth over the past six months, activity is expected to be more moderate for the remainder of the year. This is partly due to the fact that a few government stimulus programs are coming to an end, along with the fact that job growth remains slow. According to Economy.com the gross domestic product is expected to grow 2.7%, which is a reduction from the 3.0% that was originally projected for 2010. On the upside, corporate profits are steadily increasing and business capital spending is expected to continue to rise. Commercial investment activity and interest have increased in the first half of 2010, but the prevailing challenge continues to be a shortage of suitable product." None of this takes away from the fact that commercial real estate, which has long been the bubble within a bubble, continues to subsist purely on the premise of the (ever) greater fool theory, in that ML's research and underwriting desk will be able to find those to sell equity to in an attempt to delever almost a trillion in REIT debt maturing by 2012. Failing that, the firm will merely extend maturities and roll the debt when the time comes: as recent weeks have taught us, there is no shortage of lunatics chasing yield, believing that High Yield is fixed income, when it is really just a high beta equity play on distressed names. It most certainly would not be a CBRE report if there was not a section focusing on the rosiness of the second coming of the depression. And yes, we henceforth will dub anyone who uses the phrase "[blank] on the sidelines" an incorrigible idiot, as demonstated conclusively earlier this is a validation of the worst form of financial incompetence: not knowing that balance sheets have liabilities in addition to assets. Anyway, back to CBRE's CRE "pros":
The full report can be found here. h/t Robert
This posting includes an audio/video/photo media file: Download Now | ||||
| Posted: 16 Aug 2010 04:01 PM PDT So land banking is back then? That's one way of viewing the $1.2 billin bid by Canada's Agrium for wheat exporter AWB. Agrium is offering a 57% premium to AWB's share-price before the mooted merger with Grain Corp. Maybe the cashed-up Canadians are taking advantage of a beaten-down share (RSPT and litigation related). But it's obvious that arable land and food is compelling investment. The nice thing about food is that you can eat it. The same can't be said for government bonds or, to be fair, gold. This may explain the appetite of Canadian companies for Austrlian agricultural assets. Acccording to today's AFR, over $6 billion has been, "thrown at Australian agricultur acquisitions in the past year." Last year Canada's Viterra paid $1.6 billion for South Australian ABB Grain. While specific agricultural equities in Australia are difficult to value because of the variability of global commodity prices, the general trade is pretty simple as a concept: buy food. And you dont' get more tangible, as an asset class, than land. This is one reason why earlier this year we suggested buying companies sitting on large deposits of unused, unextrated commodities that might be key to a post-deflationary, post hyper-inflationary meltdown. Speaking of tangible assets, gold futures hit a six-week high overnight. They've since retreated. But it's a strange old world. The news that Japan's annualised GDP grew at just 0.4% was enough to give investors a major case of cold feet. They bought Treasuries. Some of them bought gold. It shouldn't surprise anyone that Japan is not growing like gangbusters. Demographically speaking, it's not a young country anymore. This is one reason why Japanese stocks have never fully recovered from the 1989 crash and another reason why Japan's public-debt-to-GDP ratio has been sustainably high. Japanese savers have been content to fund domestic government deficits because they prefer the safety of bonds to taking risks in the stock market. As you can see from the population pyramid of Japan (see charts below) it's relatively top-heavy. That means Japan has a large percentage of its population at or near retirement age. To the extent that "demographics is destiny' - demographic trends drive consumer spending and corporate earnings and/or indicate the coming strain on government financiers - Japan doesn't look like much of a growth stock. And now - why'll we're anticipating and preparing for the next great U.S. dollar crisis - we'll pause in our regular reckoning to look at a few of the population pyramids that struck our fancy. The question, posed by a long-suffering reader, is whether Australia faces a lot of long-term negatives because it shares the same demographic profile as Japan or the nation's of Western Europe. Before we answer that, let's look at the population pyramids we selected from here. As a reminder, they show you the distribution of the population in terms of age.      What have we learned? Japan and Italy have ageing populations. Through either low immigration or low birth rates, or a combination of both, ageing countries face some grim demographic math. Pension (private and public) pensions are likely to increase even as the tax base shrinks. Taxes go up on younger people. But government borrowing probably increases too, unless benefits get cut. If the borrowing is not from domestic savings (where it would then NOT go to private enterprise) it must be done on global markets at whatever the market price for money is. Iran is very young, but ruled by theocratic old men. Hmmn. The U.S. has a squarish figure. But the pyramid does not reveal that for most American workers, real wages have gone nowhere since 1974. The boomers might be able to retire by liquidating their share market and housing wealth. But who are they going to sell to? The government? Australia looks surprisingly curvy, which reveals something demographically unusual. Australia's GenX generation is actually larger than its Baby Boomer generation. Hmmn. The Boomer in both parties are promising the sky to themselves and Gen Y and the Millennials. Who's going to pay for it? The Xers that run small businesses and are in the prime of their wage earning years. Give them they yoke. There are future fields to plough! It will be interesting to see how the votes breakdown over the weekend. As an Xer, but not an Australian citizen, your editor remembers recessions and his first job (as a 12-year old bus boy in a restaurant owned by a friend's dad). We generally reject most stereotypes. But we do find most Xers to be suspicious of or at least not expect a lot of government. However, government may be expecting a lot of all of us! What can you take away from Australia's demographic chart? Given that there is no immediate funding crisis for social welfare, it's going to be pretty easy to convince Aussie investors to invest in government bonds as an alternative to shares. It might even be mandated that popular investment vehicles are required to own "safe" government bonds and thus, directly fund deficit spending for years to come. Dan Denning
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| Gold Seeker Closing Report: Gold and Silver Gain Almost 1% and 2% Posted: 16 Aug 2010 04:00 PM PDT Gold climbed as much as $12.50 to as high as $1227.10 by a little before 9AM EST before it fell back off a bit into the close, but it still ended with a gain of 0.77%. Silver rose over 2% to as high as $18.462 before it also dropped back off a bit, but it still ended with a gain of 1.77%.
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| A review of gold, silver market manipulation complaints to the CFTC Posted: 16 Aug 2010 03:11 PM PDT 11p ET Monday, August 16, 2010 Dear Friend of GATA and Gold (and Silver): Allan Flynn, an architect in Australia who follows the precious metals markets, has examined the nearly 3,000 public submissions made to the U.S. Commodity Futures Trading Commission this year about manipulation in the gold and silver futures markets. Flynn finds that complaints came from a UBS vice president and a banker in rural Iowa as well as from people who were sore that silver market analyst Ted Butler, the great crusader against silver market manipulation, wasn't invited to testify at the CFTC's March 25 hearing on the gold and silver markets and from people who were sore that the CFTC's Internet video and audio feed of GATA Chairman Bill Murphy's testimony was cut off, alone among all testimony. Flynn's commentary is headlined "Too Big To Foil -- Submissions to the CFTC Precious Metals Hearing, March 2010" and you can find it at his blog here: http://toobigtofoil.blogspot.com/2010/08/black-eyed-bankers.html 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: Toronto Resource Investment Conference The Silver Summit 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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| Where Are Hedge Funds Placing Their Bets? Posted: 16 Aug 2010 02:35 PM PDT
Quarterly filings were released on Monday and all eyes are on star hedge fund managers. The WSJ reports, Paulson Adds Goldman Sachs, Other Financial Stakes:
But not everyone is bullish on financials. Reuters reports Lampert fund trims stakes in financials:
In other activity, Bloomberg reports that billionaire Nelson Peltz disclosed that his hedge-fund group sold a $132 million stake in Kraft Foods Inc. that it bought earlier this year:
New Zealand's Stuff reports from Reuters, Hedge funds find oil bargains:
Earlier this month, FINalternatives reported that hedge funds opened the first half with modest gains, but some of the industry’s biggest players did substantially better:
Finally, FINalternatives also reported that Goldman added Millennium, Citadel High Frequency Trader:
You can learn more on "high frequency trading" and how it distorts market prices and volume by reading this article. Alpha is a tough business and the top hedge funds are always looking for an "edge" to compete with each other. I track hedge funds' quarterly filings very closely and pay particular attention to small and mid cap holdings. But I'm also cognizant that these big hedge funds can churn their portfolios many times in quarter, and if you're not careful, you can be left holding the bag.
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| Posted: 16 Aug 2010 02:16 PM PDT
Tomorrow, a variety of luminaries, such as Bill Gross and Mark Zandi, will be panelists in a worthless and futile spectacle titled "Conference on the Future of Housing Finance" which has the aim of doing something or another to extend and pretend the ticking timebomb that are the bankrupt GSEs. It will most certainly succeed in that regard. What it will definitely fail at, is to provide some resolution to the $7 trillion mortgage "holding" problem, which incidentally was the first domino to fall in 2008, which just so happened nearly took down western-style capitalism with it (and morbidly, it should have: the result would have been a system infinitely better). Yet as we prepare for this hearing (and try to track down Mr. Gross' testimony to validate his previous statement that absent an implicit government guarantee he would buy MBS/Agency securities only with 30% down), here is another view, this one from none other than Edward Pinto, who himself was an executive vice president and chief credit officer at Fannie Mae in the late 1980s. As Pinto says, echoing the previous high dB statements by Rick Santelli, "We'll never get a rational mortgage system until the government's affordable housing mandates are ended." We couldn't agree more. From The Future of Housing Finance, by Edward Pinto, posted on the WSJ:
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| 'Banging the close' is illegal in commodities, unless you bang it down Posted: 16 Aug 2010 02:13 PM PDT 10:25p ET Monday, August 16, 2010 Dear Friend of GATA and Gold (and Silver): Back in April the U.S. Commodity Futures Trading Commission took action in a commodity market manipulation case that may illustrate what commodity market law enforcement is all about. As part of a settlement agreement, the commission fined Moore Capital Management L.P. of New York $25 million for attempting to manipulate the platinum and palladium futures markets in 2007 and 2008. The CFTC found that a former portfolio manager for Moore Capital engaged "in a practice known as 'banging the close.' Specifically, the former portfolio manager's orders were entered in a manner designed to exert upward pressure on the settlement prices of the platinum and palladium futures contracts." Many market observers and particularly gold and silver market observers may laugh at this CFTC enforcement action, insofar as "banging the close" often can be found in various markets in the United States and particularly in the gold and silver futures markets. It's also called "tape painting." ... 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 So how come the CFTC has not acted against "banging the close" in gold and silver futures, or against any manipulation in the gold and silver markets, though such manipulation is now brazen and though the CFTC purports to have been investigating the silver market for years? It's because "banging the close" and "tape painting" in the commodity markets, while illegal, are actionable politically only when the attempted price manipulation is upward. Manipulation that suppresses commodity prices is not actionable politically; rather, it is U.S. government policy, implemented through the great investment banks that are effectively government agents, a policy perhaps first discerned by the British economist Peter Warburton in his 2001 essay, "The Debasement of World Currency: It Is Inflation, But Not as We Know It" (http://www.gata.org/node/8303). Warburton wrote: "Last November I estimated the size of the gross stock of global debt instruments at $90 trillion for mid-2000. How much capital would it take to control the combined gold, oil, and commodity markets? Probably no more than $200 billion, using derivatives. Moreover, it is not necessary for the central banks to fight the battle themselves, although central bank gold sales and gold leasing have certainly contributed to the cause. Most of the world's large investment banks have overtraded their capital so flagrantly that if the central banks were to lose the fight on the first front, then their stock would be worthless. Because their fate is intertwined with that of the central banks, investment banks are willing participants in the battle against rising gold, oil, and commodity prices." But any legal action that acknowledges market manipulation is worth publicizing, since the markets are still full of "analysts" who scoff at suggestions of manipulation even when it's a matter of public record and fines of $25 million. The CFTC's announcement of its fine against and settlement with Moore Capital Management can be found here: http://www.cftc.gov/PressRoom/PressReleases/pr5815-10.html. The CFTC's full order against Moore Capital Management can be found here: http://www.cftc.gov/ucm/groups/public/@lrenforcementactions/documents/le... A class-action lawsuit against Moore Capital Management for anti-trust law violations in its manipulation of the platinum and palladium markets recently was brought in U.S. District Court for the Southern District of New York. You can find the complaint here: http://www.gata.org/files/MooreCapitalClassActionComplaint.pdf If you think you may have been injured by the platinum and palladium market manipulation cited by the lawsuit and would like more information about it, you can contact lawyers at the Berger and Montague law firm in Philadelphia, Merrill Davidoff at mdavidoff@bm.net or Michael Dell Angelo at mdellangelo@bm.net. GATA remains hopeful that similar lawsuits eventually will be brought against the investment banks that have been manipulating the gold and silver markets. In the meantime, GATA is pressing its own federal Freedom of Information Act lawsuit against the Federal Reserve, seeking access to the Fed's gold records, which the government seems to consider more sensitive than the blueprints for nuclear weapons, surreptitious manipulation of the gold and related markets being a weapon of even greater power for world domination. CHRIS POWELL, Secretary/Treasurer Join GATA here: Toronto Resource Investment Conference The Silver Summit 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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| 'Banging the close' is illegal in commodities, unless you bang it down Posted: 16 Aug 2010 02:13 PM PDT 10:25p ET Monday, August 16, 2010 Dear Friend of GATA and Gold (and Silver): Back in April the U.S. Commodity Futures Trading Commission took action in a commodity market manipulation case that may illustrate what commodity market law enforcement is all about. As part of a settlement agreement, the commission fined Moore Capital Management L.P. of New York $25 million for attempting to manipulate the platinum and palladium futures markets in 2007 and 2008. The CFTC found that a former portfolio manager for Moore Capital engaged "in a practice known as 'banging the close.' Specifically, the former portfolio manager's orders were entered in a manner designed to exert upward pressure on the settlement prices of the platinum and palladium futures contracts." Many market observers and particularly gold and silver market observers may laugh at this CFTC enforcement action, insofar as "banging the close" often can be found in various markets in the United States and particularly in the gold and silver futures markets. It's also called "tape painting." ... 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 So how come the CFTC has not acted against "banging the close" in gold and silver futures, or against any manipulation in the gold and silver markets, though such manipulation is now brazen and though the CFTC purports to have been investigating the silver market for years? It's because "banging the close" and "tape painting" in the commodity markets, while illegal, are actionable politically only when the attempted price manipulation is upward. Manipulation that suppresses commodity prices is not actionable politically; rather, it is U.S. government policy, implemented through the great investment banks that are effectively government agents, a policy perhaps first discerned by the British economist Peter Warburton in his 2001 essay, "The Debasement of World Currency: It Is Inflation, But Not as We Know It" (http://www.gata.org/node/8303). Warburton wrote: "Last November I estimated the size of the gross stock of global debt instruments at $90 trillion for mid-2000. How much capital would it take to control the combined gold, oil, and commodity markets? Probably no more than $200 billion, using derivatives. Moreover, it is not necessary for the central banks to fight the battle themselves, although central bank gold sales and gold leasing have certainly contributed to the cause. Most of the world's large investment banks have overtraded their capital so flagrantly that if the central banks were to lose the fight on the first front, then their stock would be worthless. Because their fate is intertwined with that of the central banks, investment banks are willing participants in the battle against rising gold, oil, and commodity prices." But any legal action that acknowledges market manipulation is worth publicizing, since the markets are still full of "analysts" who scoff at suggestions of manipulation even when it's a matter of public record and fines of $25 million. The CFTC's announcement of its fine against and settlement with Moore Capital Management can be found here: http://www.cftc.gov/PressRoom/PressReleases/pr5815-10.html. The CFTC's full order against Moore Capital Management can be found here: http://www.cftc.gov/ucm/groups/public/@lrenforcementactions/documents/le... A class-action lawsuit against Moore Capital Management for anti-trust law violations in its manipulation of the platinum and palladium markets recently was brought in U.S. District Court for the Southern District of New York. You can find the complaint here: http://www.gata.org/files/MooreCapitalClassActionComplaint.pdf If you think you may have been injured by the platinum and palladium market manipulation cited by the lawsuit and would like more information about it, you can contact lawyers at the Berger and Montague law firm in Philadelphia, Merrill Davidoff at mdavidoff@bm.net or Michael Dell Angelo at mdellangelo@bm.net. GATA remains hopeful that similar lawsuits eventually will be brought against the investment banks that have been manipulating the gold and silver markets. In the meantime, GATA is pressing its own federal Freedom of Information Act lawsuit against the Federal Reserve, seeking access to the Fed's gold records, which the government seems to consider more sensitive than the blueprints for nuclear weapons, surreptitious manipulation of the gold and related markets being a weapon of even greater power for world domination. CHRIS POWELL, Secretary/Treasurer Join GATA here: Toronto Resource Investment Conference The Silver Summit 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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| Dissecting The Flashing Red Warning Light Of Record Stock Correlations Posted: 16 Aug 2010 01:56 PM PDT
As we pointed out on Friday, implied correlation closed at an all time high. While this phenomenon is likely the most concerning indicator of a wholesale market meltdown (not to mention that market neutral funds continue on their rapid progression to oblivion: for reference check HFRXEMN and HSKAX), more so than even the Hindenburg Omen (which however does make for a cool soundbite) as there are no endogenous safe-haven sectors within stocks (the safe haven is simply known as bonds, and stunningly high yield also applies even though HY, especially B2/B and lower, and stocks probably differ in some way, but we still haven't quite figured out what), the threat level will only be obvious in retrospect. The very curious topic has incentivized some in the sellside realm to present their own cautionary tales about the trade off and the cost-benefit analysis of a record high cross asset correlation. One among these is BNY's Nicholas Colas, who points out that due to the subliminal perception of record low stock dispersion (or liminal if such people read sites like Zero Hedge), investors have decided to diversify on their own not within stocks, but outside of stocks, the result being record inflows into bond funds (and outflows out of equities). His summary is very concerning: "Investors, even if they have not learned it formally, understand that diversification means lower correlations. As long as stocks, bonds, precious metals, and other assets all move in lock step, retail investors will most likely favor less risky assets." This statement captures the problem better than most: stocks, and their liquid, synthetic, nouveau-CDO cousins, the ETFs, continue to trade higher on ever greater vapors, as the underlying asset base is increasingly devoid of cash. And when the margin call-based liquidations set in, and they will, stocks will collapse more violently, and with far greater amplitude than they did on May 6 (incidentally a date which is an anniversary of the real Hindenburg disaster). Only in retrospect will the current record correlation levels be perceived for the loud alarm bell they truly are. But, courtesy of our idiot regulators, this will certainly not occur sooner, or before it is too late. More from Colas on this striking phenomenon.
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| Ebay: 90% dimes, $1.00 including shipping Posted: 16 Aug 2010 01:50 PM PDT I've bought this deal before, it's legit. You may want to hurry. Only one but it's free money. http://cgi.ebay.com/ws/eBayISAPI.dll...m=190431352766
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| Posted: 16 Aug 2010 01:15 PM PDT An Interview with Doug Casey from Cafayate, Argentina Interviewer: Doug, we recently talked about getting assets out of your home country, especially the US, where to take them and what to do with them. In so doing, you touched on the inevitability of currency controls just ahead, especially for Americans. Can you tell us more about that? Doug: Yes, I'm quite serious about what I said about "the grim reality of impending currency controls." As the global economy continues to deteriorate, governments will have to appear to be "doing something." It's going to become very fashionable to institute some sort of foreign exchange control. Why might that be? Because obviously, people who are taking their money out of the country are unpatriotic... Besides, getting money abroad is obviously something that only rich people would do...and of course, it's time to eat the rich, as well. For those two reasons, there won't be much resistance to controls. And the state gets to appear to be "doing something." And when they do, more people - at least those with any sense - will get scared and really try to get their money out, which will exacerbate the run to the exits. The bottom line is that if you want to get your money out, the time to do it is now. Beat the last-minute rush. I don't know what form the exchange controls are going to take, but there are two general possibilities: regulation and taxation. The regulations might take the form of a rule prohibiting you from taking more than X-thousands of dollars abroad per year without special permission. No expensive vacations, no foreign asset purchases without state approval. As for the taxation, if you want to, say, buy foreign stocks or real estate, you might have to pay an "Interest Equalization Tax" or some such. So, you could do it, but it'd cost you a lot of money to do it. Something like either of these, or both, is definitely in the cards. Interviewer: But aren't foreign exchange controls something from the past? I mean, where do they exist today? Doug: Well, foreign exchange controls have been used since the days of the Roman Empire. A country debases its currency, raises taxes beyond a certain level, and makes regulations too onerous - and productive people naturally react by getting their capital, and then themselves, out of Dodge. But the government can't have that, so it puts on foreign exchange controls. They're almost inevitable at this point. Almost every country - except for the US, Canada, Switzerland, and a few others - had them until at least the '70s. I remember leaving Britain once in the '60s, and a border guy searched me to see if I had more than 50 pounds on me. In those days currency violations in the Soviet Bloc countries could get you the death penalty. Things liberalized around the world with Reagan and Thatcher, and then the collapse of the USSR. But you have to remember that that was in the context of the Long Boom. Now, during the Greater Depression, things will become much stricter again. Interviewer: Okay, so, we talked last week about Americans at least setting up a Canadian bank account and safe deposit box, and better yet going in person to Panama, Uruguay, Malaysia, or a similar place to do the same. And once there, you advised getting with a lawyer, either referred by someone you trust or found through an interview process, to set up a corporation that can handle your assets and investments for you. This all needs to be reported but it's wise to do it in advance of the higher costs or other limitations to come. Doug: Yes. While US persons must report foreign bank and brokerage accounts, safe deposit boxes are not - at least not yet - reportable. This leads me to the biggest and best "loophole" when it comes to potential foreign exchange controls, and that's foreign real estate. I'm of the opinion that, broadly speaking, real estate as an asset class is going to be a poor performer for a long time to come - but that won't be equally true across all countries. Real estate in countries that rely on mortgage debt to buy and sell will continue to be the worst hit. People don't understand that buying property with a mortgage is just the same as buying stocks on margin. It's caused speculative bubbles and malinvestment. Until the malinvestment in those countries is entirely liquidated, you don't want to invest in real estate in them. But a lot of countries, especially in the third world, have no mortgage debt whatsoever. Zero mortgage debt. You want a piece of property, you pay for it in cash. That keeps prices down and the market much more stable. And it makes for more interesting speculations, because if a mortgage market develops in the future, it could light a fire under prices. But, from the viewpoint of foreign exchange controls, the nice thing about real estate is that there is no way they can make you repatriate it. Other than owning a business abroad, real estate is the only sure way to legally keep your capital offshore. Interviewer: So, part of your thinking here isn't just speculative. You're talking about strategies for wealth preservation, not just in the face of foreign exchange controls, but more aggressive, predatory taxation and confiscation by the state - they can seize your assets, even real estate, in the US, but not abroad. Doug: Exactly. Argentina is excellent from that point of view; rights to real property are, if anything, better than those in the US In many ways, Argentina is culturally and demographically more like Europe than Europe. Uruguay is also excellent, although culturally it's like a backward province of Argentina. I'm not currently up-to-date on the Chilean real estate market, but Chile is definitely now the richest and most advanced South American country, and an excellent choice. Brazil is fine. Colombia is improving greatly. Ecuador has a goofy president, but parts of it are very nice, and it's about as cheap as Argentina. Eastern Bolivia is interesting, actually, despite Morales. Only Venezuela is out of the question in South America - but Chavez won't last forever. It's just a pity they have all that oil, which is always a corrupting influence. Interviewer: Well, then, what about Central America? I know you prefer South America for speculative purposes, but what if someone wants to park a lot of wealth by buying a couple miles of beautiful beachfront property in Costa Rica, or some place like that? Doug: I was a big fan of Costa Rica for many years... The first time I went down there was 35 years ago - but it's a different place now. Then, it was very cheap, and now it's very expensive. And it's totally overrun with gringos. So, Costa Rica is not of that much interest to me at this point; it's pleasant, but there's limited upside. I think an excellent place to be in Central America is Belize. Although culturally and ethnically, it's not really part of Central America; it's part of the Caribbean. Interviewer: And they speak English there. Doug: They do indeed, though things are changing. The Guatemalan government has always regarded British Honduras, which is what Belize used to be called, as part of Guatemala. There have actually been confrontations between Britain and Guatemala over this. But that's in the past; now there's a different problem. Guatemalans are rolling over the border in much the same way that Mexicans are in Texas, New Mexico, Arizona, and California. So, the character of Belize is changing, but for the foreseeable future, it's still going to be Belize, and I rather like it. Aside from Panama, Belize would be my first choice in Central America. The problem with Central America, however, is that it's a bunch of small countries that have historically been very unstable...The most culturally advanced country in Central America, not counting Mexico, of course, since it's in North America, is Guatemala. But Guatemala has had huge troubles with violence, which has only recently come to an end... I hate going through checkpoints at night, manned by jumpy, uneducated, heavily armed teenagers. Nicaragua is the low-cost alternative. Panama is probably the best choice. It's very international, very urban (in Panama City), and it's very sophisticated, infrastructure-wise. If I didn't like Argentina and Uruguay so much, I would put Panama at the top of my shopping list. To be continued... The Casey Research Team,
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| Eton Park Joins Soros And Paulson In Making GLD Fund's Top Stock Holding Posted: 16 Aug 2010 12:24 PM PDT
Eton Park, the hedge fund founded and ran by Goldman's youngest partner, Eric Mindich, has just joined Paulson and Soros in making GLD his largest common stock position at $800 million (in addition to owning calls and puts on GLD for another $1.1 billion in gross notional). The fund also owns puts for almost $900 million gross in the MSCI Emerging Markets index, but without having any detail on the strike and duration, this position could be equivalent to a net notional of anything (not to mention possible arbs with non-disclosable CDS and other OTC products). Either way, as Eton Park had no GLD common holdings at March 31, it is now clear where a substantial buying interest in the ETF came from in Q2. Elsewhere, Soros posted an update on his own holdings, which dropped by over 40%, from $8.8 billion to $5.1 billion, signifying the Hungarian manager may be getting more bearish on the economy. Further confirming his departure from stocks, aside from his top GLD position at 5.2 million shares, Soros' other key top 10 positions were convertible bond positions in Linear (3.125% 2027), Lawson (2.5% 2012), Flextronics (1% 2010), RF Micro (0.75% 2012), Epicor (2.375% 2027), RF Micro (1% 2014), Diodes (2.25% 2026), Cadence (1.375% 2011), Blackboard (1.5% 2027), JDS (1% 2026), and Ceradyne (2035), in order of size. The problem is that now that most funds have blown their easy money on accumulating GLD stakes, any incremental purchases in GLD will likely not be as easy on the margin. And with some of the biggest hedge funds in the world having made GLD their top position, and the likelihood that at least some of them have made wrong bets in their other holdings, a potential drop in the market, which could incite a flash round of margin calls, will likely see liquidations in GLD which is now liquidity of first resort for many of the top 10 worldwide hedge funds. This indeed foots with Goldman's recent upgrade on gold (PT of $1,300), which we took very skeptically. Our concern was subsequently validated by Robbin Griffiths in the following King World News interview:
We see gold going much higher in the long run. That's strategy. The tactics, however, may not be quite as simplistic as there are far too many variables suddenly involved to make a smooth prediction on how one gets from point A to point B. To quote Art Cashin: stay nimble.
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| Posted: 16 Aug 2010 12:23 PM PDT Nothing much happened on Wall Street Friday. Gold...stocks...held more or less where they were. So, we take up another week...wondering...waiting...trying to puzzle out what is going on. Just like every other week! Economists are finally beginning to ask questions. How come the economy isn't doing better? Why aren't consumers spending? Why aren't businesses hiring? They thought they were dealing with a typical recession - just one that was worse than most. But now, they're scratching their heads. It sure doesn't act like a typical recession. Maybe this isn't a cyclical problem at all, they're beginning to say to themselves. Maybe it's structural. Maybe something will have to change. But what? How? When? Whatever is going on, it ain't a 'recovery.' It ain't a depression either - at least, not yet. So far, our Great Correction hypothesis seems as good as an explanation as any. Here's the latest from Bloomberg: Consumer spending, which makes up 70 percent of the economy, is being held back by an unemployment rate close to a 26-year high. An Aug. 12 Labor Department report showing more Americans than estimated filed applications for unemployment benefits last week pointed to further weakness in the job market. The US trade deficit widened by $7.9 billion in June, the most since record-keeping began in 1992, to $49.9 billion, a report from the Commerce Department showed. Exports posted the biggest decline since April 2009. Investors should prepare for "major structural changes" as the global economy shifts to slower growth, Mohamed A. El- Erian, chief executive officer at Pacific Investment Management Co. said yesterday in a radio interview on "Bloomberg Surveillance" with Tom Keene. Consumers are spending less - no surprise there. That's just what you'd expect in a correction. The bad news is the trade deficit. It tells us that the little consumers are spending is not going to US producers. It's going overseas. Which means, the US continues to ruin itself so that others may have prosperity, and have it more abundantly. Jobs will be created in foreign countries - not in the US. Profits will be earned by foreign firms - or US firms doing business overseas. Capital/skills/expertise/technology - all the ingredients necessary for success in the modern economy - will continue to accumulate outside the US. Yes, dear reader, the Great Correction continues. It will surely correct the credit bubble...the housing bubble...and the stock market bubble. It may correct far more than that - including the dollar...the US bond market...America's bubble of power...and outsized living standards in the US. And back to our thoughts... From Germany comes news of a remarkable resurgence. The strong growth figures will also bolster the conviction here that German workers and companies in recent years made the short-term sacrifices necessary for long-term success that Germany's European partners did not. And it will reinforce the widespread conviction among policy makers that they handled the financial crisis and the painful recession that followed it far better than the United States, which, they never hesitate to remind, brought the world into this crisis. A vast expansion of a program paying to keep workers employed, rather than dealing with them once they lost their jobs, was the most direct step taken in the heat of the crisis. But the roots of Germany's export-driven success reach back to the painful restructuring under the previous government of Chancellor Gerhard Schröder. By paring unemployment benefits, easing rules for hiring and firing, and management and labor's working together to keep a lid on wages, Germany ensured that it could again export its way to growth with competitive, nimble companies producing the cars and machine tools the world's economies - emerging and developed alike - demanded. Germans steered clear of the debt-fueled consumption boom that many believe contributed to the financial crisis. During the recession, Chancellor Angela Merkel resisted the palliative of government spending that the United States and some European partners felt was crucial to restoring growth. As the latest numbers show, Germany is outproducing its neighbors by wider and wider margins, raising fears of a two-speed Europe that could render the common regional currency unstable. France's economy grew at just a small fraction of Germany's, 0.6 percent in the second quarter. Spain's economy grew an anemic 0.2 percent, while Greece's shrank 1.5 percent. How do you like those Germans? They ignore Tim Geithner, Martin Wolf, Paul Krugman and all the other neo-Keynesian meddlers and know-it-alls. Instead, they stick to the basics. They encourage work and productivity. And now, wouldn't you know it? The Teuton ants are taking market share from their grasshopper competitors. You remember how Wolf, et al, told the Germans not to work so hard? Angela Merkel was urged to raise wages in Germany...and boost spending. Germans were said to be producing too much, working too hard, and goofing off too little. "You should be more like us," said the Anglo-Saxons. Fortunately Merkel had the good sense to ignore them. Does that mean, the crisis is over for the Germans? Have they found a way make the welfare state work? Maybe. There's no doubt that they are on a better road than the US, France and Britain. But there are bound to be some potholes. *** Jules and his father performed a musical duet last night. One of the guests - an Englishman - surprised us. He got out a harmonica and joined in. It turned out, he had been a musician in his youth. "You do country...I do blues," he explained. But the two styles came together in a couple of bluesy country numbers, including "Girl from the North Country" and "Folsom Prison Blues." As they performed the old tunes, the young people got up and headed off to the pond. They started a fire on the bank and sat around roasting marshmallows. But it was not exactly a night with the Boy Scouts...or Kumbaya... More to come... Bill Bonner
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