Gold World News Flash |
- Market Commentary From Monty Guild
- Jim?s Mailbox
- The Market Ticker - Fed Loses (Again), Expected To Appeal
- Both Crude and Gold Slip as Risk Aversion Takes up Before Selling Pressure
- Are Gold & SP500 Topping Out Here?
- Hyperinflation is a Fiscal, not Monetary Phenomenon
- Carts and Horses
- 1% of 1%
- Inflation Follows the Stimulus Boom
- David Skarica: Economic "Water Torture" Coming to U.S.
- Fed Loses (Again), Expected To Appeal
- Forecasts for the Mighty U.S. Retail Investor
- In The News Today
- Two Must Read Articles on Gold
- Technically Precious with Merv - August 20, 2010
- Gold Testing Channel Support
- Upcoming Conferences
- Smart Investment - Candian Junior Gold and Silver stocks
- Got Gold Report - COT Flash August 22
- LGMR: Gold Enters Strongest Period, Eurozone Debt Crisis Returns
- Policy Solutions, Part One of Four
- The Market Ticker - Fed Loses (Again), Expected To Appeal
- Economic "Water Torture" Coming to U.S.
- Trading Gold, Using Kitco Traffic As a Guide
- Gold Enters "Strongest Period" as Eurozone Debt Crisis Returns, US Fed "Playing with Fire"
- Gold Enters "Strongest Period" as Eurozone Debt Crisis Returns, US Fed "Playing with Fire"
- US Said Preparing New Laws To Seize Americans Retirement Accounts
- Marc Faber And Peter Schiff Take On The Bond Bulls; The Rosenberg-Faber Gentlemen's Bet
- The Dawes Premonition
- Gold Seeker Closing Report: Gold and Silver End Mixed and Near Unchanged
- SP 500 September Futures; Gold Daily and Weekly Charts: Silver Weekly Chart
- Over lunch with the FT, more ignorant snickering about gold
- Bancor: The Name Of The Global Currency That A Shocking IMF Report Is Proposing
- Garrison Hill Capital Management: “Unstressful Assumptions”
- What’s Your Home Worth? Ask FHFA
- Douglas' study of London gold fix's price suppression is posted in Spanish
- Douglas' study of London gold fix's price suppression is posted in Spanish
- Financial Retraction Ahead?
- Why Gold Is Not In a Bull Market
- Ambrose Evans-Pritchard: America no longer needs Chinese money, for now
| Market Commentary From Monty Guild Posted: 23 Aug 2010 06:30 PM PDT View the original post at jsmineset.com... August 23, 2010 08:14 PM Dear CIGAs, HOW "CONSERVATIVE" IS YOUR MUNICIPAL BOND PORTFOLIO? The municipal bond market has performed well in recent years. A long period of declining U.S. interest rates and growing fears of rising tax rates have helped them outperform other investments. In our opinion, there are many under-disclosed risks and problems in municipal bonds of which investors who own them should be made aware. Muni bonds are a nearly $3 trillion market, and are often sold as conservative assets. The following opinion piece from today's Wall Street Journal by Steve Malanga discusses how some states have been less than forthcoming about their fiscal health. Due to years of fiscal manipulations, many states, counties, municipalities, school districts, and public utilities are going to have trouble refinancing their debt in the coming years. It is not just the Wall Street banks and large public companies ...
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| Posted: 23 Aug 2010 06:30 PM PDT View the original post at jsmineset.com... August 23, 2010 01:48 PM 15 Signs The U.S. Housing Market Is Headed For Complete And Total Collapse CIGA Eric Words like total collapse and dying tends to be associated with the "selling of fear". This label, in turn, can lead to instant discredit or laughable denial. Unfortunately, the cyclical low in housing is not due for years (decades). One-dimensional thinking, such as the price of my home is no longer falling in U.S. dollars so things are getting better, only ensures that most will be caught flat-footed by the complex nature of a multidimensional world. In constant currency terms, gold, the value of home prices in America continues to slide into the minor cyclical low. As the article suggests the signs are there, but few are ready to acknowledge it until the majority of the damage has been done. Simply follow the money, listen to the markets, and ignore the rest. U.S. Median Home Price (MHP) to Gold: S&P Homebuilders (H...
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| The Market Ticker - Fed Loses (Again), Expected To Appeal Posted: 23 Aug 2010 06:30 PM PDT Market Ticker - Karl Denninger View original article August 23, 2010 11:35 AM...
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| Both Crude and Gold Slip as Risk Aversion Takes up Before Selling Pressure Posted: 23 Aug 2010 06:30 PM PDT courtesy of DailyFX.com August 23, 2010 05:00 PM Fundamental activity is back on track at the start of the new trading week; but the commodity market is stilling wanting for momentum. What will catalyze oil in a drive below $70 and force gold to finally reverse its month-long bull trend? North American Commodity Update Commodities - Energy Crude Confirms a Channel Break with a Seven-Week Load after Disappointing European Activity Data Crude Oil (LS Nymex) - $73.10 // -$0.72 // -0.98% If there were any doubt that crude was losing its speculative support; that bullish line of reasoning is diminishing at a rapid pace with Monday’s confirmed close below support demarked as the floor in its three-month rising trend channel. The precious commodity is now testing lows not explored in seven weeks; and the tally now has the market falling 11 out of the past 13 active trading sessions. That is a clear trend. However, a missing and critical component of this drive is mome...
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| Are Gold & SP500 Topping Out Here? Posted: 23 Aug 2010 06:30 PM PDT Prices continue to churn as traders and investors try to figure if they want their hard earned dollar in cash or investments. The market is very jittery simply because no one wants to get caught on the wrong side of the market if it makes another 30-40% move, which is why we are seeing money rotate in and out each with very little commitment and follow through. Until a major trend looks to be in place most investors will not me holding many positions over night or through the weekend. Here are a couple charts on what I think is most likely to happen in gold and the sp500. GLD – Gold ETF Daily Chart Last week we saw gold move higher by 1% but I cannot help but think a sharp sell off is only days away from being triggered. Either we get a another pop into resistance which would eventually trigger a wave of sellers and cause a sharp drop or the price of gold will drift lower to eventually break a key support level and trigger stop orders. Once the stops start to get...
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| Hyperinflation is a Fiscal, not Monetary Phenomenon Posted: 23 Aug 2010 06:30 PM PDT Months ago we wrote about the true causes of hyperinflation. We proceed to expand upon our views as we disagree with the views put forth by John Mauldin, Mike Shedlock and now Jim Rickards who all focus on velocity and/or bank lending as important causes of hyperinflation. The reality is that hyperinflation is first and foremost set in motion and driven by a deteriorating fiscal situation. In fact, significant economic weakness and deflation is a precursor to hyperinflation. Too many analysts believe that there has to be some economic demand or some consumption to stimulate inflation or hyperinflation. Printing money to try and stimulate your economy or excessive credit growth is what leads to inflation. Printing money because you are broke and can’t service your debts is what leads to hyperinflation. Recently Jim Rickards wrote about how a change in velocity can trigger hyperinflation or severe inflation. At Mises.org, Henry Hazlitt educates us on velocity: For...
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| Posted: 23 Aug 2010 06:30 PM PDT [FONT=Arial,Helvetica,sans-serif][COLOR=#000000][FONT=Arial]Peter Schiff, president of Euro Pacific Capital and author of the new best-selling economic fable, How an Economy Grows and Why It Crashes.[/COLOR][/FONT] In a CNBC debate last week, former Labor Secretary Robert Reich presented a set of contradictory beliefs that unfortunately reflect the conventional wisdom of modern economists. In a discussion with Wall Street Journal columnist Stephen Moore, Reich correctly and comprehensively listed the reasons why American consumers could spend so lavishly before the crash of 2008 and why they can no longer keep up the pace. But instead of making the logical conclusion that former levels of spending were unsustainable and that spending should now reflect current conditions, he advocated that government take on additional debt so that tapped out consumers can spend like they used to. To achieve this, Reich called for lowering taxes on working Americans and raising ta...
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| Posted: 23 Aug 2010 06:30 PM PDT (The Silver Market is tiny, tiny, [SIZE=-1] [SIZE=-1]tiny [/SIZE] [/SIZE]!) Silver Stock Report by Jason Hommel, August 23rd, 2010 Please bear with me while I repeat myself about how tiny the silver market is. Let's start with the facts. World annual silver mining adds about 600 million ounces of new silver, that includes all silver as byproduct supply from copper, gold, lead, zinc and other mines. Recycling contributes about 150 million oz. That's total supply. That is balanced on the demand side by industrial demand, jewelry demand, photography demand, and investor demand. Industrial demand is about 45%, jewelry is about 25%, photography is down to about 15%, and investors demand about 15%. Investor demand is about 100 million oz. per year, which, at $18/oz., is about $1.8 billion dollars. You can verify those stats at http://www.silverinstitut...
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| Inflation Follows the Stimulus Boom Posted: 23 Aug 2010 06:30 PM PDT Peter Schiff of Euro Pacific Capital notes that the Federal Reserve, and the idiots like Paul Krugman who genuflect at the altar of Keynes, is not done with destroying the economy, but that "Bernanke and his supporters have said that their stimulus will be withdrawn as soon as the recovery takes hold in earnest." Hahaha! I laugh because this makes me think of my dad saying, in answer to my constant whining, "Shut up! I'll buy you a motorcycle when your Uncle Raymond pays me back the money I loaned him,' which finally got to be a family joke because Uncle Ray never came across with a dime because he was a penniless mooch all his life! Hahaha! Mr. Schiff is apparently not interested in my family-joke anecdotes or the fact that I had to finally buy my own stupid motorcycle, which was too small and crappy because I didn't have much money because I did not like to work, which is another whole issue. Instead, Mr. Schiff says, "This misses the point that any 'growth' created by stimulus...
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| David Skarica: Economic "Water Torture" Coming to U.S. Posted: 23 Aug 2010 06:30 PM PDT Source: Brian Sylvester of The Gold Report 08/23/2010 Addicted to Profits Newsletter Writer David Skarica has an addiction that might just benefit you. David is addicted to making himself and his subscribers money. In this exclusive interview with The Gold Report, David predicts that the U.S. economy will decline very slowly, describing the process as "Chinese water torture." David says any precipitous market drop will be pre-empted by further quantitative easing. And this, he says, will be bullish for gold. He also names some companies that might help folks suffering David's sweet affliction. The Gold Report: You said in a recent Addicted to Profits newsletter that your indicators "are not really screaming 'bear.'" What are your indicators, and what has led you to believe that? David Skarica: Part of it is sentiment, and part of it is the monetary outlook. And part of it is the cycle of the stock market. On the sentiment side, I watch a few indicators: Investors Inte...
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| Fed Loses (Again), Expected To Appeal Posted: 23 Aug 2010 06:30 PM PDT Market Ticker - Karl Denninger View original article August 23, 2010 11:35 AM Gee, you mean that really is a government function and the FOIA really does apply? [INDENT] Aug. 23 (Bloomberg) -- A U.S. appeals court refused to reconsider a ruling that requires the Federal Reserve Board to disclose documents identifying financial firms that might have failed without the largest U.S. government bailout. [/INDENT] Of course you have to expect they'll go to the SCOTUS for a final attempt, and ask for a stay, which (assuming they appeal) they will almost-certainly get. But the options for the thieves guild, er, Clearing House Association (the organization that represents large commercial banks like BOA, Citi, etc) are running short. Beyond the Supreme Court there's only contempt and compliance left. [INDENT] The Fed argued in the case, which was brought by Bloomberg LP, the parent of Bloomberg News, that disclosure of the documents threatens to stigmatize borrowers and cau...
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| Forecasts for the Mighty U.S. Retail Investor Posted: 23 Aug 2010 06:30 PM PDT The 5 min. Forecast August 23, 2010 10:32 AM by Addison Wiggin & Ian Mathias [LIST] [*] Floodgates about to open… India hints at opening market to retail investors [*] Bond bubble expands: Investors rush out of stock mutual funds at record rate… and pile into Treasuries [*] SEC catches New Jersey cheating investors… fines state $0 [*] An unlikely summertime bull market: The sudden resurgence of M&A [/LIST] Ease of access is a staple of market booms. It’s hard to imagine American stocks, for example, surviving these days without support from retail, institutional and international investors alike. In the same way, much of China’s incredible market boom is thanks to Hong Kong, whose exchange opens the gate to millions of investors who want a piece of the world’s hottest market. Now it looks like ease of access is coming to India. “India is planning to open the country's equity markets to foreign retail investors,&rdq...
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| Posted: 23 Aug 2010 06:30 PM PDT View the original post at jsmineset.com... August 23, 2010 07:03 AM Jim Sinclair’s Commentary Eventually yes, but for now MOPE is directed at the weak euro states to divert this occurrence. Hussman: Bernanke’s Quantitative Easing Is About To Trigger A Collapse In The US Dollar Joe Weisenthal | Aug. 22, 2010, 5:29 PM In his latest weekly letter, John Hussman warns of an imminent and disorderly collapse of the US dollar, courtesy of Ben Bernanke’s move towards more quantitative easing. The whole thing is worth reading, but here’s the key part of it: From the standpoint of the two parity conditions, the very long-term implication of quantitative easing is a gradual devaluation of the U.S. dollar (an increase in the dollar price $/FC of foreign currency). If this increased inflation risk was reflected in interest rates (so that real interest rates were held constant), the U.S. dollar would simply move along that gradually sloped PPP line, and likewis...
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| Two Must Read Articles on Gold Posted: 23 Aug 2010 06:30 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 19, 2010 06:59 AM [LIST] [*]The imminent failure of the London gold pool [*]The best gold interview of 2010 [/LIST] [url]http://www.grandich.com/[/url] grandich.com...
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| Technically Precious with Merv - August 20, 2010 Posted: 23 Aug 2010 06:29 PM PDT Since its bottom in late July gold has been on an almost steady advance, day after day. However, this advance has traced an upward sloping wedge pattern on the charts and this pattern usually suggests a break to the down side ahead. That could come any day now. GOLD LONG TERM As mentioned a couple of weeks back the new long term P&F chart continues to show gold still trapped inside that up trending channel shown some time back. The action over the past few weeks has provided us with a long term support above the $1155 level but should the price come down to the $1155 price level we would have a bearish break. From the P&F chart standpoint that is the price level to watch. In the mean time the action continues in the up trending channel. As for our normal indicators, changes happen very slowly. Gold remains above its positive long term moving average line and the momentum indicator remains in its positive zone above a positive trigger line. The volume indicator...
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| Posted: 23 Aug 2010 06:29 PM PDT courtesy of DailyFX.com August 23, 2010 06:35 AM 240 Minute Bars Prepared by Jamie Saettele Gold is making its way lower in an impulsive fashion. The first 5 wave decline ended following a terminal thrust from a triangle. The rally is in 2 equal legs, common for corrections, and may be complete. A drop below the corrective channel would inspire confidence in the downside....
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| Posted: 23 Aug 2010 06:29 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 23, 2010 07:36 AM I continue to pray my Achilles holds up until October 27th operation date (the doctors wanted to operate a week ago but I have a full plate of work in both companies I must get through so we’re gambling I can hold on until the 27th) Providing I don’t rupture it, I plan on being at the following conferences and hope to see many of you there: [LIST] [*]Toronto Resource Investment Conference September 25th and 26th [*]St. John’s, Newfoundland Resource Investors Forum September 27th and 28th [*]Michael Campbell’s “Moneytalks” Vancouver Precious Metals Conference October 23, 2010 [/LIST]Several readers continue to request a New Jersey conference. I can try to host a luncheon in the area. Send me an email (peter@grandich.com) with your name and email address stating you would be interested...
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| Smart Investment - Candian Junior Gold and Silver stocks Posted: 23 Aug 2010 06:29 PM PDT www.smartinvestment.ca...
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| Got Gold Report - COT Flash August 22 Posted: 23 Aug 2010 06:29 PM PDT 20100822COTflashPub By Gene Arensberg Esse quam videri – To be rather than to seem Bottom line: With gold approaching past resistance this week’s COT report reveals COMEX commercial traders increasing their “opposition” to gold and to a lesser extent, silver. Silver’s non-confirmation of gold worrisome. Gold +1.7% and the gold LCNS +8%. Silver +1.2% and the silver LCNS +1.9%. Details just below. HOUSTON – Gold continued its strangely quiet march higher since we last reported here at Got Gold Report. Indeed this week it tested the USD $1,230s - a good thing since we reentered the gold trade with a full position July 27-29 with gold then $1,159. As it continued its stealthy rise, we have to note that the largest sellers of gold futures on the COMEX have stepped up their “opposition” as we detail below. We also have to note that silver, the second most popular precious metal, has failed to &#...
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| LGMR: Gold Enters Strongest Period, Eurozone Debt Crisis Returns Posted: 23 Aug 2010 06:29 PM PDT London Gold Market Report from Adrian Ash BullionVault 08:25 ET, Mon 23 August Gold Enters "Strongest Period" as Eurozone Debt Crisis Returns, US Fed "Playing with Fire" THE PRICE OF GOLD in wholesale dealing held flat Monday morning in London, easing down to $1226 an ounce as European stock markets rose but government bonds and traded commodities were also unchanged. "The Federal Reserve has begun to play with fire, the effects of which I doubt Bernanke fully appreciates," writes John Hussman of the eponymous $6.3bn asset management group in the US, extending his Strategic Total Return Fund's exposure to precious metals to 10%. Following the Fed's revival of quantitative easing at the start of this month, "We would prefer the opportunity to accumulate a larger exposure [to gold investment] on substantial price weakness," Hussman adds, noting that "Mining stocks have essentially gone nowhere since May." "The markets dip in May and come back after the summ...
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| Policy Solutions, Part One of Four Posted: 23 Aug 2010 06:26 PM PDT Some think of my book as just another rant against socialism, therefore a rejection of solutions that would involve extensive use of government. But sprinkled throughout the book are not-so-subtle hints of what actions to take and, equally important, which solutions could potentially prove harmful. What is being missed by nearly everyone in Washington D.C. and by those on Wall Street who were fattened by the bubbles and lobbied hard for a bailout is that the cause of our problem is moral hazard. Moral hazard is an artificiality, a false signal that contravenes the working of the marketplace, for it severs the age-old relationship between risk and return. Borrowers and lenders will become ebullient or fearful, and they will always do so in tandem, never in opposition. About the only thing that can constrain excessive behavior is to promote the development of contrary thinkers at both extremes of the cycle. We desperately need sound banks. There are none, despite what managements in this sector or stress testers will tell you. They all clustered at the edge of employing extraordinary leverage, both on and off their balance sheets, and they exposed themselves to nearly unquantifiable counterparty risk. They did so because government stepped in to insure deposits, and it preempted the role of safekeeping. The elastic nature of fiat currency intervention at the bottom of economic cycles transmitted a message that systemic risk did not exist any longer. Yet at exactly this moment, government became least able to provide a backstop to deposits and counterparty failure, because it had leveraged its own balance sheet, whose debts are those of the people (the upper-middle class to be specific -— since they are nearly exclusively called upon to fund government). Government also succumbed to moral hazard, for legislators felt they could propose and approve spending programs that would be enjoyed by a majority of citizens but be paid for by a smaller, separate group. Like the banker who shifted risk to government and retained the profit, an electoral majority clamored for more stuff: medical care, retirement income, education, lower mortgage payments and down payments, support for almost any social hardship imaginable, as long as somebody else was picking up the tab. It's like having a charge card whose bill goes to another person — not necessarily one such as a parent, who out of love would hold you accountable, but a faceless group in another tax bracket for whom you might even hold animosity for their success. Separating the giving from the getting creates moral hazard. It takes almost inhuman moral fortitude to refuse the largesse. It is not a coincidence that both the private and public sectors would fall prey to moral hazard at exactly the same moment. It happened because our culture changed over the last century. Our ancient tribal instinct of collectivism returned. We turned away from acknowledgement that an economic and social system operates in another dimension far more complex than that which man can control, and we tinkered with it at our own peril. Regards, Bill Baker, [Editor's note: This passage is reprinted from William W. Baker's book, Endless Money: The Moral Hazards of Socialism, with the permission of John Wiley & Sons, Inc (©2010). You can get your own copy of his book here.] Policy Solutions, Part One of Four originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."
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| The Market Ticker - Fed Loses (Again), Expected To Appeal Posted: 23 Aug 2010 06:05 PM PDT Market Ticker - Karl Denninger View original article August 23, 2010 11:35 AM...
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| Economic "Water Torture" Coming to U.S. Posted: 23 Aug 2010 06:05 PM PDT Addicted to Profits Newsletter Writer David Skarica has an addiction that might just benefit you. David is addicted to making himself and his subscribers money. In this exclusive interview with The Gold Report, David predicts that the U.S. economy will decline very slowly, describing the process as "Chinese water torture."
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| Trading Gold, Using Kitco Traffic As a Guide Posted: 23 Aug 2010 05:39 PM PDT
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| Posted: 23 Aug 2010 05:29 PM PDT
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| Gold Enters "Strongest Period" as Eurozone Debt Crisis Returns, US Fed "Playing with Fire" Posted: 23 Aug 2010 05:29 PM PDT
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| US Said Preparing New Laws To Seize Americans Retirement Accounts Posted: 23 Aug 2010 05:09 PM PDT First They Destroy Private Healthcare in America – Yes, the socialist Democrats won their first battle to destroy the private healthcare system in the US but the automatic IRA bill now in Congress is their next attack to also control, confiscate and destroy the private retirement system. Ultimately, nationalizing healthcare is designed to create a major new government revenue stream by replacing private health insurance with a nationalized, mandatory, government program and their goal is identical with your retirement plan. Washington will decide the annual forced healthcare premiums on all Americans with the middle and upper wage earners paying far higher premiums than the subsidized voting constituencies who will be the primary beneficiaries of the program. Their goal is to allow Washington to steal much of the annual health premiums (taxes) for current revenue needs and to bailout and subsidize with your premiums the health programs for the voting blocks of poor and underemployed, illegals, unions and the millions of city, county, state and federal government employees. Eventually there will be no private competition available except for the very wealthy and Washington will constantly increase premiums just as they raise taxes today. Next They Steal Your Private Retirement Benefits – Just as with the Obama Administration plans eventual nationalization of healthcare, the tremendous amount of funds in private retirement plans and IRA accounts are also being targeted to meet future revenue needs. Bills have just been introduced in both the House and Senate to create the new Auto IRA accounts which will at first be voluntary but later will become mandatory like Social Security and I expect the early 3% employee after tax contribution levels to eventually rise to 10 to 15% of compensation rising even more than Social Security has increased over the years. Read this August 17th article in Investment News at for more information. 
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| Marc Faber And Peter Schiff Take On The Bond Bulls; The Rosenberg-Faber Gentlemen's Bet Posted: 23 Aug 2010 04:30 PM PDT
The debate over whether bonds are in a bubble is very much the topic du jour, and while some deflationists like David Rosenberg believe that not only is there no bubble, but the 10 year will soon slide inside of its all time tights at under 2.1%, others believe the 30 years bull run in Treasuries is the dumbest thing since the dot com bubble, and that if anyone is hoping to make money, it should be on the countertrend. Two such Treasury bears are Marc Faber and Peter Schiff, both of whom were on CNBC tonight, and both were dissecting what in their view is the fallacy of the long-UST trade. As for the Faber-Schiff view, no surprise: Peter encapsulates it best: "the bond market is the mother of all bubbles right now, and when it bursts the losses will dwarf the combined losses of the stock market bubble and the real estate bubble. There is no way for the government to pay this money back." And echoing a topic Zero Hedge has been warning on extensively, namely the maturity of trillions in short-term debt that rolls every month, Schiff notes: "I am afraid is that when people realize we can't pay this money back, we aren't going to be able to roll over all this short-term debt. And so it's not just paying the interest, we are going to have to retire the principal." Peter Schiff is correct that inflating our way out of this debt bubble is a lose-lose proposition. Schiff also notes the stupidity of crowds, by highlighting that 10 years ago everyone was chasing risk, by piling into stock market funds, followed by everyone knows what. The outcome for bond investors is clear: "this decade is going to be the worst decade for bonds in US history. Bond holders are going to get wiped out. Either the government is going to default, or it is going to inflate, but either way the people holding the bonds, are holding the bag." Faber then joins in: "there isn't much upside in treasuries unless it is for the short term. When I look ten years ahead I don't want to have my money in USTs." His main concern is that due to high budget deficits, there is a good chance that these will go even higher, and as a result the interest payments on government debt will become unbearable. As for the foreign bid, Faber also points out their prior folly: "In 1999/2000 foreigners also wanted to buy the NASDAQ and what happened afterwards is a major collapse. I would not look at foreign buying as a very intelligent leading indicator." In other words Faber just called the Chinese, UK and Japanese permabid in UST moronic. Faber is also not a big fan of a 30 year bond market (since 1981). "I would rather buy an asset class that has been in a bear market." Faber would buy farm land, agricultural commodities, and that gold belongs in a portfolio. Probably the best argument of the debate is Schiff's observation that the government is not expanding the economy with the newly printed money: no money is being invested in productive capacity, it is not expanding the tax base, and as a result the economy is getting weaker. Faber, is laconic, in saying that the UST market bottomed out in 1981 when yields went over 15% on the 10 Y, and topped in December 2008, at 2.1%, which was "the peak of the bubble." Lastly, we learn that Faber and Rosenberg have a bet that bonds will not penetrate the tights seen in December 2008. We believe that even if they do, it is irrelevant. The short-term gyrations of the bond market are now merely all the investors winding and unwinding a plethora of wrong curve trades. The end result, as we have long pointed out, whether it be by way of hyperinflation or hyperdeflation is essentially the same. And the world would be a much more coherent place if the deflationists and inflationists realized that their arguments are two sides of the same coin. What is certain is that the Fed, in its central planning attempt to hold core inflation at 2-3% in perpetuity, will fail. How nobody understands this simple truth is beyond us. And going back to the Faber-Rosenberg bet: who wins if either of them is correct: in both cases nothing good, and frankly everything bad, awaits the US economy on very short notice.
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| Posted: 23 Aug 2010 04:21 PM PDT When a blind mathematician exits the market because an ominous technical omen indicates a crash ahead, what do you make of it? Last week the whole internet was abuzz with the phrase "The Hindenburg Omen." The "Omen" is actually a convergence of technical and momentum indicators which, when sighted, usually leads to a big market correction. Its creator Jim Miekka has used it to forecast major market tipping points. And this week, Miekka told the Wall Street Journal he had heeded the warning and was out of the market completely. Miekka is right that September is historically a lousy month for stocks. Just why this has been the case is disputable. Is it well-rested and tanned North Atlantic fund managers getting back behind the desk and putting their brain in a psychologically defensive mode as the autumn and the winter approach? Is it cyclical? Is it random? Is it aliens? Add to the Hindenburg Omen the "Dawes Premonition." Writing over in Money Morning today, Dawes (the editor of Slipstream Trader) concludes:
We are now at the point where the bear market rally is looking dead and buried and a resumption of the downtrend is about to occur. The long term trend has already turned down in May when the 35 day MA crossed with the 200 day MA. The rally of the past month saw an intermediate uptrend in place which is on the edge of failing with the 10 day MA about to cross with the 35 day MA to the downside. Therefore we are about to see all trends aligned, from the short term to the long term trend and they are all pointing down. The distribution of the past year is looking very tired and another retest of the c.4200 lows in the ASX 200 is going to crack. That will give immediate targets to c.3900. And below there it looks very scary indeed. If the market does crack under this 4,400 level then I wouldn't be surprised to see the market swan dive to 3,900 in a matter of weeks. What about days? Today's opening hasn't been so flash. And with the news on the political scene getting increasingly bizarre - a unity government with Tony Abbot as Prime Minister and Kevin Rudd as a front-bencher and Foreign Minister - investors might start to get a bit nervous about what the political class is up to. Our suspicion is that it is better to have the political class bickering like children with one another than cooperating toward some common goal. That common goal - defined by them and not you - will probably include spending more of your money, raising taxes, and improving the planet in some undefined and unproven but costly way. We'd rather have them at each other's throats than clutching for ours in tandem. At least Australia is not America, financially speaking. That economy appears to be circling the great historical drain. Economists told Bloomberg they expect existing home sales to have fallen by 12.9% from June. This shows that the recession in America never really ended. It just got papered over by asset inflation driven by Fed policy and government stimulus that lulled people into somnambulant complacency. Yet it's clear that ordering extra gravy on your fries will not make you thin. For example, the arguments implying that stimulus spending "saved" Australia from the recession persist and are taken as a gospel truth by most in the media. But even if they are technically true - in the sense that you define recession as two consecutive quarters of a contracting economy - what has really been engineered? A recession is the natural way of correcting bad investments made at the end of the business cycle or a credit boom. Those bad investments are failed businesses or mis-allocations of credit that didn't produce jobs, income, or a net economic benefit. Or sometimes people just don't' want to eat at Barnacle Bill's. Preferences change with time. And time changes with time. The market economy - a complex adaptive system - sorts the wheat from the chaff and generally delivers consumers more choice and lower prices. When credit excesses emerge, the recession wipes away the slate and puts the economy and the job market back on a sound economic footing where real growth based on real demand from real savings can begin again. Maybe Barnacle Bill's will make a comeback. Or the next big thing will be Mexican food. Or organic salads made from produce grown on sustainable farms. It will be something, but only if you allow recessions to do their work. Not that we're arguing in praise of recessions, although maybe we should. But preventing them is a wilful denial that any bad investments were made in the previous boom. It's like saying you don't need to burn calories to lose weight. You just need to eat more and let fitness come to naturally, while you gorge on Tim Tams on your couch and watch Master Chef. To deny the necessity of a correction to bad investments and misallocated capital is to deceive people into behaving as if everything were fine. Instead of saving and building up the household balance sheet, people take on more credit and spend. This, in fact, is what "avoiding the recession" accomplished in Australia. It encouraged Australians to believe the world is not as financially dangerous place as it actually is and to continue with behaviour (taking on mortgage debt) which makes them even more vulnerable to the next credit shock. That is not "saving" anyone. That's leading them straight into the waiting room of the next financial slaughterhouse. It would be nice if eating chocolate didn't make your ass big. But it does. Each financial decision has consequences to. A government stimulus program is an attempt to avoid the consequences and costs for financial behaviour by passing them on to someone else. It feels good doing it because you're avoiding pain and rewarding yourself by borrowing money someone else must repay. That might feel good, but it doesn't seem very ethical. But postponing an inevitable day of reckoning by deceiving people about the real state of things might be the sort of thing Big Brother or the Nanny State prefers to do. It's easier to spend what's not yours. And it makes people more complacent and dependent, when their financial lives are destroyed, on the government. But perhaps that was/is part of the plan, too. In any event, nothing much has changed overnight in on our beautiful blue planet with its brittle and complex financial system. Bond yields remain at historic lows in one of the great ironic developments of the last fifty years (as investors confuse government bonds with safe financial ground). A great deal of confusion about corporate earnings is now making the picture for equities very murky. And the Federal Reserve has quietly begun monetising U.S. debt. Our view is that mild deflation will simply be the prelude to a defacto debt default/devaluation in the U.S. This event will be massively inflationary and lead to much higher global interest rates, much lower asset prices, and a premium bid on tangible assets. Speaking of which, it's time for lunch. Brownies anyone? Until tomorrow! Dan Denning
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| Gold Seeker Closing Report: Gold and Silver End Mixed and Near Unchanged Posted: 23 Aug 2010 04:00 PM PDT Gold saw slight gains in Asia before it fell back off in London and midmorning New York trade to as low as $1221.60 by about 11AM EST, but it then rallied back higher into the close and ended with a loss of just 0.06%. Silver fell to as low as $17.875 by late morning in New York before it also rallied back higher in the last couple of hours of trade and ended with a gain of 0.11%.
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| SP 500 September Futures; Gold Daily and Weekly Charts: Silver Weekly Chart Posted: 23 Aug 2010 03:01 PM PDT | ||||
| Over lunch with the FT, more ignorant snickering about gold Posted: 23 Aug 2010 02:54 PM PDT 11:15p ET Monday, August 23, 2010 Dear Friend of GATA and Gold: A "Lunch with the FT" interview with "When Money Dies" author Adam Fergusson, published Friday in the Financial Times and written by Jonathan Ford, was interesting enough but couldn't help concluding with the caricature used to smear anyone interested in gold -- the survivalist loony seeking to be vindicated by the collapse of civilization. Ford writes: "As we finish our main courses and order coffee, I mention that I have been talking to some of the gold bugs who venerate Fergusson's book. They do not share his horror of inflation. Rather, they long for a new Weimar, in which paper currencies collapse, leaving gold as the only trusted store of value. This is a world in which we are all forever descending into our cellars, with a shotgun and a mountain of tinned food for company." ... 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 Actually, many people with an interest in gold -- people with whom Ford plainly has not talked -- have a quite different vision of the future, one in which the currency, gold, commodity, stock, and bond markets trade freely without surreptitious government intervention, where labor is rewarded more than it is taxed or cheated by inflation, where government is open and transparent, and where journalism fearlessly holds to account both the government and the money power behind the government. Fifteen months ago in London GATA tried to explain this vision to an FT reporter in person, and again many times since in e-mail, starting with documentation of the Western central banking system's gold price suppression scheme, without evoking the slightest interest from the newspaper. A month ago that scheme exploded practically in the FT's smug face when a newsletter writer caught the Bank for International Settlements undertaking without any announcement the biggest gold swap in history, leaving the FT to quote anonymous sources insisting that it was no big deal, allowing the newspaper to drop the story quickly, apparently never to return to it. (See http://www.gata.org/node/8875.) But the gold price suppression scheme -- essentially a scheme by a very few powerful people to set, arbitrarily and secretly, the value of all labor, goods, and services in the world -- remains a big story, the biggest financial story of all time. GATA would be glad to discuss that story over "Lunch with the FT." We'll bring the sardines and hardtack from our stash in the cellar. Until then Fergusson might consider writing a sequel to his book about the Weimar hyperinflation. He could call this one "When Journalism Dies." The FT's account of its lunch with Fergusson is appended. CHRIS POWELL, Secretary/Treasurer * * * Lunch with the FT: Adam Fergusson By Jonathan Ford http://www.ft.com/cms/s/2/e13b361e-abe8-11df-bfa7-00144feabdc0.html As befits a man who has written an acclaimed book about money and prices, Adam Fergusson starts our encounter by eyeing the menu beadily and asking who will be paying the bill. "Milton Friedman said the most efficient way of spending money is to spend your own, and the least efficient way is to spend other people's," he says. "If you go out to lunch and have to pay your own bill, you have what you want and can afford. If someone else is paying, you may as well have the lobster." As I confirm that the FT will be paying, we scan the menu but, alas, there is no lobster. I am meeting Fergusson at Belvedere, a slightly gloomy restaurant in the middle of Holland Park, close to where he lives in west London. It is a sultry day and we initially consider sitting outside on the terrace, but the closely packed tables are already filling up and it is too noisy. So we settle down, virtually the only diners in the shadowy and rather formal interior. Fergusson, 78, a former journalist and politician, is enjoying an unexpected literary revival thanks to the republication last month of a book he wrote 35 years ago -- a history of the hyperinflation in 1920s Weimar Germany. "When Money Dies" tells the story of Germany's economic collapse after the First World War, which culminated in the mind-boggling inflation of late 1923 -- a dreadful time when visitors to Berlin saw people starving in the streets and the number of marks to the pound was at one point equivalent to the number of yards from the earth to the sun. Already a cult text among gold enthusiasts and inflation phobes (old copies of the original hardback were until recently trading at up to L1,800 each on the Internet), it received a further boost when it was revealed in a Sunday newspaper at the time of the relaunch that the book was admired by the US investor, Warren Buffett, and recommended by him to others. It seemed to confirm Fergusson as the sage to whom the Sage of Omaha himself turned. The claim guaranteed the book a lot of attention and Fergusson found himself being summoned to give his views about the economic situation on the BBC's Today programme and the television news. This did not abate even after Buffett told CNN that he had not actually read the book. "When Money Dies" continues to be well-reviewed and the sales pile on. Fergusson is embarrassed and amused by the Buffett story, which , it should be said, has never been repeated by him or his publisher to market the book. "My daughters call it Buffettgate, which I like very much," he says. The claim, he tells me, came from a Dutch hedge fund manager who attended the launch party, having purchased 200 copies, which he said he would give to every member of the Dutch parliament and some top-flight bankers. "He told me that it was a cult among high-powered financiers," says Fergusson, who remains mystified how the story found its way into the paper. "Buffett does now have the book and has thanked my publisher for sending it to him," he adds. "He may now have read it; we can only guess." The waiter takes our order. Fergusson has the gazpacho and calves liver ("pink but not too pink"), while I have eggs Benedict and then poached salmon. We agree to have, and choose, two glasses of St Veran. Fergusson is not an economist and "When Money Dies" is a social history rather than an economic tract. The younger son of an impecunious Scottish baronet, he became a journalist after reading history at Cambridge, working first for the Glasgow Herald and later for a now-defunct magazine with the distinctly unpromising title of the Statist. A competitor to the Economist, it was owned by the otherwise left-leaning publisher of the Daily Mirror, whose boss, Hugh Cudlipp, described it as the company's intellectual "fig leaf." Fergusson was the foreign editor until it closed in 1967, when he moved to The Times as a feature writer, specialising in economic affairs. Fergusson wrote "When Money Dies" in the early 1970s when the British economy was buckling in the wake of the first oil shock -- which killed growth and pushed prices up. "When I started researching it in 1973, inflation was about 10 percent, and when the book came out in 1975 it was nearly 25 per cent," he says. "Somebody said, 'We must go back and look at what happened in the 1920s when prices got out of control.'" It started life as a series of articles in The Times that drew on the Weimar story in order to warn Britain off the inflationary track. But, I interject, weren't the parallels rather thin? Even at its peak in 1975, British inflation hit an annual rate of only just over 24 percent. At the climax of the Weimar disaster, prices were doubling every two days. The quantum was different, Fergusson agrees. But, he says, all periods of high inflation -- however harsh -- involve the same moral slide. "The corrupting thing about inflation is the way the feelings and jealousies are exactly the same," he says. "You worry that some people are doing better than you are -- people who know what to do about rising prices while you don't." In the Weimar time, this was particularly extreme. High inflation wiped out debts, atomising the savings of the prudent and redistributing wealth to the fortunate or simply unscrupulous. "Germany's capital," Fergusson writes, "had been redistributed in the most cruel way, no longer spread reasonably evenly among millions but largely in coagulated blobs among the new plutocracy." Fergusson's experiences during British inflation were less harsh, but suggest that he would not have made a Weimar plutocrat. Comfortably off, if not rich, through marriage to the descendant of a South African randlord, he bought Krugerrands and some pictures on the advice of his broker -- with mixed success. "We brought two very nice paintings, one of which turned out to be a fake," he says ruefully. The fake, attributed to the French impressionist, Stanislas Lepine, was exposed only 20 years later when Fergusson sought to sell it. "I was offered a derisory sum so decided to keep it, hoping that one day it might be declared a Lepine again." Overall, the experience of scurrying around to purchase real assets that would hold their value was one that he found "ridiculous." But why does he think the book has struck a chord now? After all, in the wake of the credit crunch, deflation is supposed to be a bigger threat to Britain or the US than a re-run of Weimar. "Inflation may not happen, but things are very uncertain," says Fergusson. "I read the other day that [Bank of England Governor] Mervyn King said that there will be high inflation for another two years. "The use of unusual monetary measures during the crisis, such as quantitative easing (just another way of saying money-printing), has made the outlook hazy. The price of gold -- generally a proxy for concern about inflation -- has risen to its highest levels in real terms since the late 1970s. It is hard to tell what effect these measures may have when the economy grows again. "We all keep worrying about deflation but it can turn so fast." The Weimar story certainly has relevant lessons. Fergusson shows how the wrong path, once taken, is hard to retreat from. The German government chose to print money after the war to finance huge fiscal deficits because it feared that if it raised taxes and sold bonds, the economy would buckle under the strain, leading to mass unemployment and social unrest that could undermine the young German republic. While it had an independent central bank (supposedly a defence against monetary madness), this proved a feeble defence. The bank's president, Rudolf Havenstein, whom Fergusson thinks was unhinged, believed that if the government asked for more banknotes, his role was to be a compliant printer. At one point in 1923 he even boasted to the Reichstag that his presses were so efficient that he could increase the total circulation of marks in issue at that time by two-thirds in a single day. As the descent into hyperinflation accelerated, the idea of withdrawal became too painful to contemplate. Lord D'Abernon, the British ambassador in Berlin, wrote in a dispatch to London: "Inflation is like a drug in more ways than one. It is fatal in the end, but it gets its votaries over many difficult moments." Germany was not killed, but it had a near-death experience. By late 1923 confidence had collapsed and the entire stock of Reichsmarks in circulation, while denominated in trillions, was worth just over L30 million. In 1914 the figure had been L300 million. The government could no longer issue sufficient notes -- even with Havenstein's lightning presses -- to finance itself. Society started to break up. Farmers refused to sell their produce in return for what they called "Jew confetti" -- an ominous portent. Hungry townspeople went on raids into the countryside, slaughtering livestock, which they carried off. More prosperous regions contemplated secession. Fergusson shows how central to the social contract is trust in the soundness of money. Without it, the web of transactions upon which we all depend breaks down also. The result is total moral collapse. This perhaps explains why Fergusson turns out to be a fiscal hawk. He thoroughly approves of the new coalition government's decision to cut the deficit faster than its Labour predecessor wanted to. "This is absolutely the time we have to be cutting the fat," he says. "We have to crack down on the quangos and the unnecessary spending." Does he think that David Cameron is made of sufficiently stern stuff to sort out Britain's problems? Fergusson, who knew the new prime minister in his younger days (his elder son was a friend of Cameron's at Eton and Oxford), is diplomatic. "Too early to say, but I think he has started extremely well." Fergusson is a member of that rarest of species -- the pro-European Scottish Conservative. After leaving journalism in the late 1970s, he moved into politics, heading the successful 1979 campaign against Scottish devolution and then becoming a European MP in the same year. He is still sceptical about devolution, which finally occurred in 1999, believing that the failure to answer the "West Lothian question" -- the right of Scots MPs to vote on purely English legislation -- makes the constitutional settlement fundamentally unstable. A crisis was staved off in May only, he believes, by the Tories' decision to go into coalition with the Liberal Democrats: "Had David Cameron tried to take power with just one Scottish MP, the Scots would have exploded." The coalition has also helped on Europe, shaving off some of the Tories' rougher edges. After losing his European seat in 1984, Fergusson was an adviser to the Foreign Office on European affairs in the 1980s and still regrets the way Margaret Thatcher turned the Conservatives against the EU. "I admired enormously what she did in Britain, sorting out the economy and standing up over the Falklands," he says. "But her obsession with the idea that Europe was robbing Britain of its identity was very sad." Fergusson remains a pro-European, although the Greek crisis has, he believes, shown the limits of solidarity. "I have sympathy for those Germans who are furious at having to bail out the Greeks and other countries that have been less prudent." The lessons of 1923 are, he thinks, ingrained in German memory. "When Money Dies" is not the only Fergusson book being republished. "The Sack of Bath," a 1973 tome about the destruction of Bath's 18th-century architecture, is also being re-issued. "So much easier than writing new books," says Fergusson. "I leave that to my son." (His son, James Fergusson, also a journalist and writer, has a book on the Taliban coming out this week.) As we finish our main courses and order coffee, I mention that I have been talking to some of the gold bugs who venerate Fergusson's book. They do not share his horror of inflation. Rather, they long for a new Weimar, in which paper currencies collapse, leaving gold as the only trusted store of value. This is a world in which we are all forever descending into our cellars, with a shotgun and a mountain of tinned food for company. Fergusson winces: "If these are my friends, what need have I of enemies?" ----- Jonathan Ford is the FT's chief leader writer. 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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| Bancor: The Name Of The Global Currency That A Shocking IMF Report Is Proposing Posted: 23 Aug 2010 02:45 PM PDT 
So where in the world did the name "Bancor" come from? Well, it turns out that "Bancor" is the name of a hypothetical world currency unit once suggested by John Maynard Keynes. Keynes was a world famous British economist who headed the World Banking Commission that created the IMF during the Breton Woods negotiations. The Wikipedia entry for "Bancor" puts it this way.... The bancor was a World Currency Unit of clearing that was proposed by John Maynard Keynes, as leader of the British delegation and chairman of the World Bank commission, in the negotiations that established the Bretton Woods system, but has not been implemented. The IMF report referenced above proposed naming the coming world currency unit the "Bancor" in honor of Keynes. So what about Special Drawing Rights (SDRs)? Over the past couple of years, SDRs have been touted as the coming global currency. Well, the report does envision making SDRs "the principal reserve asset" as we move towards a global currency unit.... "As a complement to a multi-polar system, or even—more ambitiously—its logical end point, a greater role could be considered for the SDR." However, the report also acknowledges that SDRs do have some serious limitations. Since the value of SDRs are closely tied to national currencies, anything affecting those currencies will affect SDRs as well. Right now, SDRs are made up of a basket of currencies. The following is a breakdown of the components of an SDR.... *U.S. Dollar (44 percent) *Euro (34 percent) *Yen (11 percent) *Pound (11 percent) The IMF report recognizes that moving to SDRs is only a partial move away from the U.S. dollar as the world reserve currency and urges the adoption of a currency unit that would be truly international. The truth is that SDRs are clumsy and cumbersome. For now, SDRs must still be reconverted back into a national currency before they can be used, and that really limits their usefulness according to the report.... "A limitation of the SDR as discussed previously is that it is not a currency. Both the SDR and SDR-denominated instruments need to be converted eventually to a national currency for most payments or interventions in foreign exchange markets, which adds to cumbersome use in transactions. And though an SDR-based system would move away from a dominant national currency, the SDR's value remains heavily linked to the conditions and performance of the major component countries." So what is the answer? Well, the IMF report believes that the adoption of a true global currency administered by a global central bank is the answer. The authors of the report believe that it would be ideal if the "Bancor" would immediately be used as currency by many nations throughout the world, but they also acknowledge that a more "realistic" approach would be for the "Bancor" to circulate alongside national currencies at first.... "One option is for bancor to be adopted by fiat as a common currency (like the euro was), an approach that would result immediately in widespread use and eliminate exchange rate volatility among adopters (comparable, for instance, to Cooper 1984, 2006 and the Economist, 1988). A somewhat less ambitious (and more realistic) option would be for bancor to circulate alongside national currencies, though it would need to be adopted by fiat by at least some (not necessarily systemic) countries in order for an exchange market to develop." So who would print and administer the "Bancor"? Well, a global central bank of course. It would be something like the Federal Reserve, only completely outside the control of any particular national government.... "A global currency, bancor, issued by a global central bank (see Supplement 1, section V) would be designed as a stable store of value that is not tied exclusively to the conditions of any particular economy. As trade and finance continue to grow rapidly and global integration increases, the importance of this broader perspective is expected to continue growing." In fact, at one point the IMF report specifically compares the proposed global central bank to the Federal Reserve.... "The global central bank could serve as a lender of last resort, providing needed systemic liquidity in the event of adverse shocks and more automatically than at present. Such liquidity was provided in the most recent crisis mainly by the U.S. Federal Reserve, which however may not always provide such liquidity." So is that what we really need? A world currency administered by an international central bank modeled after the Federal Reserve? Not at all. As I have written about previously, the Federal Reserve has devalued the U.S. dollar by over 95 percent since it was created and the U.S. government has accumulated the largest debt in the history of the world under this system. So now we want to impose such a system on the entire globe? The truth is that a global currency (whether it be called the "Bancor" or given a different name entirely) would be a major blow to national sovereignty and would represent a major move towards global government. Considering how disastrous the Federal Reserve system and other central banking systems around the world have been, why would anyone suggest that we go to a global central banking system modeled after the Federal Reserve? Let us hope that the "Bancor" never sees the light of day. However, the truth is that there are some very powerful interests that are absolutely determined to create a global currency and a global central bank for the global economy that we now live in. It would be a major mistake to think that it can't happen.
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| Garrison Hill Capital Management: “Unstressful Assumptions” Posted: 23 Aug 2010 02:34 PM PDT
Garrison Hill Capital Management issued its latest report on the macro economic environment. The firm looks at the ridiculousness of the European stress tests, summarizing as to why the CEBS report is absolutely meaningless:
The firm later goes on to discuss its market outlook and positions: “We went into the month of July with a long Canadian dollar position / short Australian dollar position and skewed to being long risk assets marginally. We have subsequently closed the long Canadian dollar leg of that position and are now outright short Australian dollars. The Fund is short the Spanish and US equity markets at this point with a view that the indicies may give back some of the gains made in July, against being long approximately five fundamental names outside the gold sector. We also believe gold futures are now posed to rally towards $1300 and a portion of the Fund is now dedicated towards owning the ‘physical’ commodity as well as having fundamental positions in gold equities.” Garrison Hill Multi-Strategy LP I Newsletter - Aug 2010
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| What’s Your Home Worth? Ask FHFA Posted: 23 Aug 2010 01:24 PM PDT
The Federal Housing Finance Agency (“FHFA”) publishes its own monthly home price index. I think it is inferior to the Case-Shiller index in terms of measuring what is actually going on month over month. However, the FHFA gets its data from their own pool of mortgages. Given that FHFA represents more than 50% of all mortgages (Fannie+Freddie+FHLB=$5.9 Trillion) they have a unique database. The good news is that they have packaged this up on their website so that anyone can check out trends on both a city by city or a state by state basis. Amassing this database has/will cost the taxpayers at least $400 billion (about $3000 each) so I would encourage you all to get your money’s worth. Link The following are some graphs of individual states. I plugged in the start period as 2006 and a $1mm price tag (the site lets you use any variables you like). The results are not surprising. “Sand” did very poorly. The upper mid-west is bleeding. Snow resorts seem to have been clobbered. Texas did pretty well. I could find only one bright spot in all the country that not only sustained value but also saw prices rise. This RE winner shone while most other parts of the country were tanking by 30+%. Guess where that is? The District of Columbia, of course. I believe that there is a direct correlation to the results in D.C. and the rest of the country. Washington is flourishing while the rest of the country withers. Not a surprise to me. I found the site useful. I was able to confirm that the disagreeable relative who said, “RE is stable here in San Diego”, was full of crap. Prices in that zip code were down YoY for the past four years. I was also able to disabuse a RE agent in Naples, Florida who told me, “Prices are down at most by 20% from the high, they are already starting to recover”. They are actually closer to 40% off that high water mark and they continue to fall.        Note: In my neck of the woods (N. of NYC) there was a lousy selling season (ends August 1). It was better than 2009. There is still a tremendous overhang of properties. Increasingly, bank owned REO is a factor. There are many “must sell” homes. A number of these have quietly dropped the asking price another 10%. There does not seem to be elasticity of demand. There are cheap mortgages and cheap houses and no demand. I have to believe that this is occurring in other parts of the country. The graphs from the FHFA are headed lower. Except the one for D.C. 
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| Douglas' study of London gold fix's price suppression is posted in Spanish Posted: 23 Aug 2010 01:23 PM PDT 9:20p ET Monday, August 23, 2010 Dear Friend of GATA and Gold: Thanks again to our friend Rafael Villegas, GATA board member Adrian Douglas' study, "Gold Market Isn't 'Fixed,' It's Rigged," sent to you on August 14 (http://www.gata.org/node/8918), which demonstrates how the daily London gold price fixing long has been a mechanism of price suppression, has been translated into Spanish and posted at GATA's Internet site here: http://www.gata.org/files/DouglasGoldMarketIsntFixedItsRigged-Spanish.do... 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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| Douglas' study of London gold fix's price suppression is posted in Spanish Posted: 23 Aug 2010 01:23 PM PDT 9:20p ET Monday, August 23, 2010 Dear Friend of GATA and Gold: Thanks again to our friend Rafael Villegas, GATA board member Adrian Douglas' study, "Gold Market Isn't 'Fixed,' It's Rigged," sent to you on August 14 (http://www.gata.org/node/8918), which demonstrates how the daily London gold price fixing long has been a mechanism of price suppression, has been translated into Spanish and posted at GATA's Internet site here: http://www.gata.org/files/DouglasGoldMarketIsntFixedItsRigged-Spanish.do... 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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| Posted: 23 Aug 2010 01:21 PM PDT
James Mackintosh of the FT reports, Wolf’s frustration bodes ill for investment flock (HT: Pierre):
It's not just Mr. Druckenmiller. Paolo Pellegrini, the hedge fund manager who was instrumental in John Paulson shorting the subprime mortgage market, reportedly is returning money to outside investors:
And on Monday, Warren Buffett's semi-secret stock picker Lou Simpson announced that he is retiring at the end of the year after a long career at the helm of Geico's investment portfolio. Meanwhile, Prem Watsa, the "Oracle of the North" who runs Fairfax Financial, is preparing for what he perceives to be the next big risk:
Before you liquidate your portfolio, keep in mind that as an insurance company, Fairfax is playing by a different set of rules than most investors because they have to manage their assets and liabilities more carefully than most fund managers. Moreover, equity and related investments still represent more than 20% of the portfolio, while cash and Treasuries make up a more modest sum. Prior to the financial crisis, Fairfax held more than half its portfolio in Treasuries and cash, and it was much less willing to take on equity risk. Now, its portfolio is only a quarter Treasuries and cash. And while the company has been cutting its exposure in equities, it has maintained its large position in two companies: Johnson & Johnson (NYSE: JNJ), and Kraft (NYSE: KFT). They also do a large percentage of their business abroad. Still, one wonders why are well known managers retiring and others reducing their risk? Economic uncertainty remains the single biggest factor weighing on all investors which is why Raghuram Rajan, the IMF's former chief economist says the Federal Reserve should consider raising rates, even as almost 10 percent of the U.S. workforce remains unemployed:
I doubt Mr. Rajan and Mr. White will persuade the Fed to raise rates anytime soon. As I've repeatedly stated, the Fed's policy is geared towards big banks, allowing them to borrow at zero to purchase higher-yielding Treasuries (locking in the spread) and to trade risk assets all around the world. Basically, it's reflate and inflate your way out of this mess, which is why we have a wolf market that's scaring small investors out of stocks into bonds. Will economic uncertainty persist and are bonds really in a bubble? If you listen to David Rosenberg, Chief Economist & Strategist at Gluskin Sheff, financial retraction is ahead (watch interview below). Moreover, there is no shortage of US Depression data. Nonetheless, there are some positive signs worth mentioning too. In his latest weekly comment, Yanick Desnoyers, Assistant Chief Economist at the National Bank of Canada wrote the following comment:
Indeed, US productivity fell unexpectedly in the second quarter for the first time since late 2008, suggesting that productivity is reaching its limits. And with temporary employment picking up and leading full-time employment, a turnaround in the US labour market might be materializing (click on chart above). If job growth doesn't pick up, expect the Fed to step in and do whatever it takes, including outright purchases of stocks, to reflate and inflate out of this mess. And if these policies fail, more people will be forced on a diet of macaroni & cheese. Come to think of it, maybe Kraft is an excellent investment for these uncertain times.
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| Why Gold Is Not In a Bull Market Posted: 23 Aug 2010 01:00 PM PDT What is a 'Bull' market? It is a market in an upward price phase of a market with the expectation that it will be followed by a 'Bear' or downward phase of a market. This mindset is common to all markets. Sayings like, "everything the at goes up must come down" is pretty standard and taken as part of life itself, but few examine it to see if it is really true.
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| Ambrose Evans-Pritchard: America no longer needs Chinese money, for now Posted: 23 Aug 2010 12:49 PM PDT By Ambrose Evans-Pritchard http://www.telegraph.co.uk/finance/comment/7958823/America-no-longer-nee... As the Sino-American showdown in the South China and Yellow seas escalates into the gravest superpower clash since the Cold War, the United States cannot wisely rely on China to help fund its budget deficit for any longer. The cacophony of voices in Beijing questioning or mocking the credit-worthiness of the US is now deafening, from premier Wen Jiabao on down. The results are in any case manifest: US Treasury data show that China has cut its holdings of Treasury debt by roughly $100 billion (L65 billion) over the past year to $844 billion. ZeroHedge reports that net purchases by the big three of China, Japan, and the UK (Mid-East petro-dollars) have been sliding for two years. In August they bought the least amount of US debt this year. ... 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 China is finding other ways to recycle its trade surplus and hold down its currency, buying record amounts of Japanese, Korean, Thai, and no doubt Latin American bonds. "Diversification should be the basic principle," said Yu Yongding, an ex-adviser to the Chinese central bank. Beijing is buying gold on the dips, or doing so quietly through purchases of scrap ores, or by deals with miners such as Coeur d'Alene in Alaska. It is building strategic reserves of oil and coal, and probably industrial metals. State entities are buying up natural gas reserves in Africa and Central Asia, or oil sands in Canada, or timber in Guyana. Where this expansion runs into political barriers, they are funding projects -- such as a $10 billion loan to Petrobras for the deep-water oil off Brazil. Where all else fails, they are buying equities. All of this recyles China's reserve surplus away from US debt. So it is a good thing that US citizens have stepped into the breach, investing a record $185 billion into bonds funds this year (ICI data). JP Morgan describes this as "extraordinary prejudice," evidence of irrational fear. Or perhaps JP Morgan has an extraordinary prejudice against bonds, arguably the shrewdest asset in a world where fiscal stimulus is being withdrawn before the rest of the economy has reached "escape velocity." The inventory cycle is ebbing, manufacturing has tipped over, the workforce is still shrinking, and the economy is sliding into a deflationary rut. Above all, bond appetite reflects what David Rosenberg at Gluskin Sheff calls the new frugality. Americans are saving again. Surplus nations are in for a nasty shock if they hope to feed off US demand as if nothing had changed. Yet bond yields have fallen to nose-bleed levels. Ten-year rates are at an all-time low of 2.27 in Germany, and back to 0.92 percent in Japan's deflation laboratory. They have slid to 2.6 percent in the US. When yields plumbed these depths over the winter of 2008-2009, latecomers burned their fingers badly. Ten-year Treasury yields doubled in five months as the effects of zero Fed rates, quantitative easing, and $2 trillion of fiscal stimulus worldwide halted the downward spiral. This time yields may stay low for longer. Fiscal and interest rate ammo has been exhausted, though not quantitative easing. I have little doubt that central banks can lift the West out of debt deflation if needed with genuine QE -- not Ben Bernanke's Black Box "creditism" or Japan's fringe dabbling. Whether they have the nerve or the ideological willingness to do so is another matter. Does that mean bond yields must keep falling to unimaginable lows, as they have in Japan for twenty years? Perhaps, but Japan is sui generis (captive bond market, vast foreign assets, demographic atrophy), and the world has moved on. As Moody's said this week, the Great Recession has made sovereign debt suspect. "The burden of proof now falls on governments." Events have "fast-forwarded history," ripping away the 20-year cushion we counted on before the "adverse debt dynamics" of our aging crisis hits home. Two epochal forces are colliding in the global bond market: core deflation is gathering force but the West is losing sovereign credibility just as fast. Arch-bear Albert Edwards at Societe Generale advises clients to prepare for a violent policy swing from one extreme to the other. First we deflate into the abyss: Then we inflate hard rates to get out again. At some point the "euthanasia of the rentier" will wear off. Misjudge the sequence at your peril. 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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