Gold World News Flash |
- The Long and Short of What’s Happening With Silver These Days
- This Secret Factor Will Cause Gold to Go Parabolic – and We Are Not There – YET!
- Warning Signs Suggest U.S. Headed for a Complete Societal Collapse!
- Six Sound Reasons NOT to Buy Gold!
- Jim Rickards - Race Between Gold & New Paper Currency
- IMF Fails, Gold Shines as Currency Wars to Continue
- Currency wars are necessary if all else fails
- Daily Dispatch: The Folly of Competitive Currency Devaluations
- Jim?s Mailbox
- In The News Today
- Hourly Action In Gold From Trader Dan
- Crude Oil Benefits from Economic Outlook, Gold Supported by Weak Dollar
- Brent Cook: Tête-à-Tête with Paul van Eeden
- Fed Mandates Inflation
- Gold: Get It While You Can
- For week ending 08 October 2010
- LGMR: Euro-Gold Correlation Eyed Together with "Huge Spike" in Futures Trading
- Things
- A Disappointing NFPs Encourages Gold and is Ignored by Oil Traders
- Gold and silver set to dip as China calls the shots?
- Gold Edges Back as Dollar Bounces…
- Gold Seeker Closing Report: Gold and Silver Rise To New Highs
- 10/11/10 Midnight Report: Market takes a break, wants to get to know QE2 before going all the way
- It’s Official: I’m Out of Ideas.
- Fully Priced in Fraud
- 10 Reasons Why Ordinary Hard-Working Americans Are About To Really Start Feeling The Squeeze
- The Average American Has a Sub-Average Quality of Life... and a Sub-SUB View of Politicians
- A Detailed Look At Global Wealth Distribution
- Are U.S. Investors Driving The Gold Price?
- Where to Buy the Next Dip in Gold
| The Long and Short of What’s Happening With Silver These Days Posted: 11 Oct 2010 07:04 PM PDT Something has drastically changed in the silver market. The banks that once controlled the price of silver are now closing positions at a loss. The commercial shorts have begun to bleed money – and when blood spills sharks will circle. Hedge funds and traders that never even thought of silver before will begin to squeeze the shorts. If the big banks don't quickly regain control of the silver market they may lose it forever. Words: 733
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| This Secret Factor Will Cause Gold to Go Parabolic – and We Are Not There – YET! Posted: 11 Oct 2010 07:04 PM PDT One of gold's allures is its use as a hedge against negative economic outcomes: inflation, deflation, general economic collapse and even war [with] investors and speculators enter[ing] the market based on their guesstimate of how bad things might get. [An analysis of] how gold performs during inflation and deflation [suggests, however, that there has to be some another] market force - some secret force - that has driven gold prices by +370% over the last 10 years. Words: 734
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| Warning Signs Suggest U.S. Headed for a Complete Societal Collapse! Posted: 11 Oct 2010 07:04 PM PDT There are now countless warning signs all around us on a daily basis that the U.S. is headed for a complete societal collapse. Words: 573
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| Six Sound Reasons NOT to Buy Gold! Posted: 11 Oct 2010 07:04 PM PDT One investment is touted as the cure all for incompetent governmental economic mismanagement, heightened risks of war, threats of rampant inflation, and depreciating currency. That investment is making new highs every day. That investment is gold. Should you succumb? No, and here are six reasons why! Words: 1269
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| Jim Rickards - Race Between Gold & New Paper Currency Posted: 11 Oct 2010 06:51 PM PDT Central planners are using the currency crisis as an opportunity to move forward with a renewed push for a global currency. As I said yesterday, as the currency wars escalate, it is wise for individuals to have a presence outside of the system by owning gold. The entire King World News interview with Jim Rickards will be available later in the week.
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| IMF Fails, Gold Shines as Currency Wars to Continue Posted: 11 Oct 2010 06:47 PM PDT The IMF was unable to stem the tide of competitive currency devaluations over the weekend. As a result, governments and central banks around the world still have the green light to continue with their money printing orgy. Some of the citizens of these various regions and countries have recently been acting as their own central banks by purchasing gold as insurance against the currency wars. As fears escalate, the question now becomes, when will the people of this world once again have a stable system of currency? Here is a new piece exclusively for the King World News blog from Ben Davies, CEO of Hinde Capital which sums up the situation nicely: IMF At The Epicenter Of Currency Earthquake
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| Currency wars are necessary if all else fails Posted: 11 Oct 2010 06:01 PM PDT The overwhelming fact of the global currency system is that America needs a much weaker dollar to bring its economy back into kilter and avoid slow ruin, yet the rest of the world cannot easily handle the consequences of such a wrenching adjustment. There is not enough demand to go around.
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| Daily Dispatch: The Folly of Competitive Currency Devaluations Posted: 11 Oct 2010 05:48 PM PDT October 11, 2010 | www.CaseyResearch.com The Folly of Competitive Currency Devaluations Dear Reader, I have a number of items to discuss today, but none quite so important as the news of what didn’t happen at the just-concluded IMF annual meeting in Washington, and what’s not on the agenda for the upcoming G-20 meeting in South Korea. What didn’t happen, and what isn’t on the agenda at the confabs, is any sort of discussion of a broad new monetary arrangement that puts a stake of gold through the heart of the hopelessly broken fiat system that now holds sway. And the stake doesn’t have to be made of gold – just as long as it’s something tangible and firmly anchors political promises to fiscal realities. But that conversation hasn’t even begun. Instead, in the same way that the world’s money is backed by nothing, the world’s central bankers confuse policy with spee...
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| Posted: 11 Oct 2010 05:47 PM PDT View the original post at jsmineset.com... October 11, 2010 07:10 AM Eric, Another way to say it is Yuan trumps dollar. Regards, Jim Currency Rift With China Exposes Lost Clout of U.S. CIGA Eric The deterioration of investment and loss of production in the United States to emerging economies is more complex than a simple adjustment to floating or fixed currency exchange rates. There's an old saying that whoever controls the world's money controls the world. The hard part is maintaining control over the world's money. Unsound debt and fiscal management often leads to currency depreciation or debasement (reduction of precious metals content in coins). Currency depreciation, in turn, inevitably redefines what people will accept as the world's money. Generations of citizens accustomed to the illusion of prosperity despite gross mismanagement, like their fore fathers, will return to the safety of gold as the world's acceptable money. History is repeating. The only problem is th...
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| Posted: 11 Oct 2010 05:47 PM PDT View the original post at jsmineset.com... October 11, 2010 08:21 AM Jim Sinclair’s Commentary This article is correct on the demise of the dollar, to which I add the Rise of Gold. The demise of the dollar In a graphic illustration of the new world order, Arab states have launched secret moves with China, Russia and France to stop using the US currency for oil trading By Robert Fisk Tuesday, 6 October 2009 In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies. including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar. Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on ...
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| Hourly Action In Gold From Trader Dan Posted: 11 Oct 2010 05:47 PM PDT View the original post at jsmineset.com... October 11, 2010 10:00 AM Dear CIGAs, The push from the 77 level on the USDX looks suspicious to me as the Dollar was spanked rather rudely last evening after the end of the weekend summit which amounted to a gigantic waste of time. It is a given that no one is happy with what is taking place in the Forex markets. Brazil was active this morning buying up Dollars in an attempt to keep its Real from continuing to levitate higher while the Europeans continue to complain about their Euro bearing the brunt of the currency wars, especially considering the fact that so many of the member countries of the EU are nowhere near being out of the woods on their own sovereign debt woes. Price movements of the nature we are seeing in the currency markets, especially on the lack of market moving news, therefore are always to be viewed with a great deal of suspicion. It is a given that Central Banks around the globe are becoming more and more active in the...
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| Crude Oil Benefits from Economic Outlook, Gold Supported by Weak Dollar Posted: 11 Oct 2010 05:47 PM PDT courtesy of DailyFX.com October 10, 2010 10:51 PM The new week in commodities will feature a push-pull between upside momentum catalyzed by economic optimism and profit taking considerations as traders seek to lock in huge gains. Commodities – Energy Crude Oil Benefits from Economic Outlook Crude Oil (WTI) - $83.32 // $0.66 // 0.80% Commentary:Crude oil is kicking off the new week with more gains as optimism surrounding the global economy continues to permeate the financial markets. Now that U.S. petroleum inventories are showing some signs of falling from their extremely elevated levels, that is only adding more fuel to the fire for crude oil prices. This next week will likely be influenced primarily by the push-and-pull of upside momentum and profit taking considerations. While there are some economic releases of note, there is nothing that can really turn the tide. Bears need an unexpected shoe to drop if they want to see a significant decline in asset prices, crude ...
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| Brent Cook: Tête-à-Tête with Paul van Eeden Posted: 11 Oct 2010 05:47 PM PDT Source: Brent Cook and The Gold Report 10/11/2010 Renowned Exploration Analyst and Geologist Brent Cook produces the weekly Exploration Insights newsletter, covering geology and discoveries worldwide. In this interview, Brent catches up with former [I]EI Writer Paul van Eeden. A fresh addition to Miranda Gold Corp.'s board of directors, Paul offers characteristically frank insights into gold and precious metals and shares several choice companies with [/I]The Gold Report. In January of 2008 Paul van Eeden stood on the stage as the headline speaker at the Cambridge House Investment Conference and said "sell everything." He didn't say it just once but several times during his 25-minute standing room only speech. It was a very sobering and prescient talk that earned him no new fans at the time. Up until that speech, Paul had been writing a weekly investment newsletter in which he discussed macro-economic issues, money supply, and the gold price. I worked with Paul on that ...
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| Posted: 11 Oct 2010 05:47 PM PDT [COLOR=#333333][FONT=Times New Roman]By Peter Schiff Much of the content of the latest Fed statement, released on September 21, echoes the central bank's previous post-credit crunch pronouncements: there is still too much slack in the economy, interest rates are still going to be near-zero for an "extended period," and the Fed will continue to use payments from its Treasury purchases to buy yet more Treasuries. But this recent statement uses a new turn of phrase that should have Americans very upset. The Fed says that "measures of underlying inflation are currently at levels somewhat below those the Committee judges most consistent, over the longer run, with its mandate." Though the wording treads lightly, it should not be taken lightly. It may signal the final push toward dollar collapse. The Fed's dual mandate, since an amendment in 1977, has been to promote "price stability" and "maximum employment." While often discussed as if both goals are complementary facets of ...
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| Posted: 11 Oct 2010 05:47 PM PDT "Currency wars are necessary if all else fails: Ambrose Evans-Pritchard. India's rich throng to gold. Perth mint inundated as gold price soars. Bank of Russia speedsupgold purchases... and much, much more. " Last Week in Gold and Silver Well, it was another good week in the gold market once again... with another weekly high closing price. The RSI still shows hugely overbought...but we've been there before... and the price continues to move from "the lower left to the upper right", as Dennis Gartman is so fond of saying. The sell-off on Thursday reduced the overbought position somewhat, but it's still way up there. Here's the 3-year gold chart... and you can read whatever you wish into the current situation. Click here to enlarge. The silver price closed the week at another new 30-year high price. It's price, like gold's, is way into overbought territory as well. The 3-year chart tells all. Click here to enlarge. Here's the world's reserve curren...
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| For week ending 08 October 2010 Posted: 11 Oct 2010 05:47 PM PDT Technically Precious with Merv Is it the economy, is it world tensions, who cares, the precious metals just keep on going higher and higher. Where they will stop nobody knows. But they will stop sometimes. Tomorrow or next year, that’s the question? GOLD LONG TERM During a bull market the long term changes very seldom. Looking at all the indicators the positive ones just continue to be positive. No use wasting much time trying to analyze something that doesn’t change. The gold price remains above its positive moving average line, the long term momentum indicator remains in its positive zone above a positive trigger line and the volume indicator continues to move higher above its positive trigger line. All is still right with gold and the long term rating remains BULLISH. The long term point and figure chart continues on its upward path and remains bullish also. INTERMEDIATE TERM The price of gold has been in a blazing up trend for over two months ...
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| LGMR: Euro-Gold Correlation Eyed Together with "Huge Spike" in Futures Trading Posted: 11 Oct 2010 05:47 PM PDT London Gold Market Report from Adrian Ash BullionVault 09:05 ET, Mon 11 Oct. Gold Edges Back as Dollar Bounces, Euro-Gold Correlation Eyed Together with "Huge Spike" in Futures Trading THE PRICE OF WHOLESALEgold bullion slipped 1% in London on Monday morning, falling to $1342 per ounce as the start of what traders expected to be a quiet New York session approached. Following heated discussion – but no resolution – of the "global currency war" at this weekend's annual meeting of the International Monetary Fund's members in Washington, the US Dollar rallied from yet another 15-year low to the Japanese Yen beneath ¥81.50, and also bounced from worse than $1.40 to the Euro. World stock markets were little changed, with both Tokyo and Toronto closed for national holidays.German and UK bonds slipped back, nudging interest rates higher. The US bond market stayed shut for Columbus Day."[That was] the 9th up week in the past 10 sessions," says bullion bank Scotia Mocatta...
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| Posted: 11 Oct 2010 05:47 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! October 11, 2010 07:46 AM [LIST] [*]What’s another trillion or two anyway? [*]War, what is it good for? [*]Say good-bye to silver manipulation? [*]Don’t Worry Be Happy crowd tells only half the story [*]Another brick on the wall [*]I quit cold turkey [*]Good interview [/LIST] [url]http://www.grandich.com/[/url] grandich.com...
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| A Disappointing NFPs Encourages Gold and is Ignored by Oil Traders Posted: 11 Oct 2010 05:47 PM PDT courtesy of DailyFX.com October 08, 2010 04:44 PM Fundamental event risk was high Friday; but the commodity market was still trading on the high volatility from the previous session. A reversal effort would take precedence to a meaningful reaction to the frequently market-moving US NFP release. North American Commodity Update Commodities - Energy Despite Stable Risk Trends and Disappointing Data, Crude Manages a Sharp Rebound Crude Oil (LS Nymex) - $82.66 // $0.99 // 1.21% The sharp tumble from oil Thursday was a corrective effort following a particularly aggressive upswing. However, volatility begets volatility; and the drive to end the week would put the market back in tune with the past two week’s primary drive. Hovering just around $83, US oil is holding just off of five-month highs awaiting a catalyst (speculative or fundamental) to determine whether the bull trend will remain intact or a remarkable reversal is in the cards. Looking ahead to n...
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| Gold and silver set to dip as China calls the shots? Posted: 11 Oct 2010 05:47 PM PDT
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| Gold Edges Back as Dollar Bounces… Posted: 11 Oct 2010 05:35 PM PDT
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| Gold Seeker Closing Report: Gold and Silver Rise To New Highs Posted: 11 Oct 2010 04:30 PM PDT Gold climbed to over $1350 in Asia before it fell to see a $3.38 loss at $1340.22 by a little after 8:30AM EST, but it then rallied back higher for most of the rest of trade in New York and ended near its late session high of $1354.07 with a gain of 0.7% at a new record closing high. Silver dropped to as low as $23.022 by late morning in New York before it bounced back higher in the last couple of hours of trade and ended with a gain of 0.65% at a new 30-year closing high.
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| 10/11/10 Midnight Report: Market takes a break, wants to get to know QE2 before going all the way Posted: 11 Oct 2010 04:20 PM PDT
It was a quiet day on the Street as the bond markets and federal offices were closed to celebrate one of the greatest threesomes of all time, and no, Money McBags isn't talking about the Three Stooges, the Dahm triplets or that scene in Meggann and Hanna love Manuel, he's talking about the voyage of the Nina, Pinta*, and Santa Maria as today was Columbus day so hopefully you all coughed in to a blanket and handed it to your neighbor in order to celebrate.
As for the market, investors came down from their weekend long party celebrating the destruction of 95k jobs (minus another 11kish due to the birth/death model) which has made QE2 a near certainty as 93% of economists now surveyed believe Benny B will get his asset buying on at the beginning of November (of course 90%+ of economists didn't see the global financial collapse coming but that is because they were all likely distracted by Art Laffer's oddly dyed hair as the aged and lilliputian witch doctor, which is actually the formal term for economist, tries to blend in to normal society to keep his pot of gold safe). The market has had a stunning run considering not much is getting better (other than rush hour traffic, prices at WalMart, and Minka Kelly) so it will be interesting to see if buying the rumor will persist until the next Fed meeting in November when the "sell the news" algorithm kicks in for all of the HFT's (and if you haven't watched the 60 Minutes piece on HFTs from last night, it was decent enough in an informative way yet lacked the anger, insight, and Leslie Stahl nip slip that Money McBags would have liked to have seen).
In macro news, not much happened today other than Foreclosure-gate keeps ramping up as apparently mortgages had less documentation than Meg Whitman's maid. With foreclosed upon houses driving homes sales as they are cheaper and usually contain less old lady smell than owner occupied houses, a slow down in processing foreclosures will severely impinge upon the government's desire to move housing inventory. This is because sellers still refuse to come down in price as they try to avoid taking losses on their mortgages which are more underwater than Mary Jo Kopechne. It will be interesting to see how all of this plays out, though more interesting to see how this plays out.
The only other interesting piece of macro news was that Janet Yellen (who was speaking for her first time as the Federal Reserve's vice chairperson after taking over for Donald Kohn thanks to her stunning victory in the swimsuit competition where she became the first vice chair candidate to rock a two piece since Frederick H. Schultz in 1979) said that the Fed's accomodative policy of keeping rates low could lead to excessive risk taking as companies can easily lever up now that money is cheaper and easier to access than Paris Hilton's vagina (though with a bit less cocaine on it, but just a bit less). So it will be up to the Fed to "take the punch bowl away" (her actual words) before the economy overflows it with turds.
Internationally, nothing really happened today other than a reservoir of toxic waste (also known as Bette Midler's one woman show) burst in Hungary killing 8 people and spilling almost as much hazardous sludge as the recent Gulf oil spill thus making both the country's financial system and now their topography, covered in shit. Otherwise it was pretty quiet as the currency wars continue on and European countries brace for future downgrades.
In the market, MSFT released their new phone so now they can lose to AAPL and GOOG in another vertical, the C bank analyst said he expects the sector to meet or beat guesses (and of course most bank stocks sold off on that ringing endorsement), and WYN shot up ~8% after they bet it all on red. Also, NYT jumped 9% because some analyst at UBS apparently piled on the BS by saying newspaper ad sales are increasing while apparently forgetting that the newspaper industry is within a decade of going the way of the dodo bird, the Edsel, and cost of living adjustments for social security checks. Finally, solar stocks were on fire thanks to revenue raises, ASTI getting full IEC certification meaning their panels can withstand prolonged exposure to the elements and thus can move in to the building market, and investors realizing solar companies main source of energy is entirely fucking free.
*Money McBags realizes that he linked to a woman with the last name Pinto and not Pinta, but the only person he could find with the name Pinta is a transexual porn star (true story) and as only a few of you likely work at the SEC, he decided not to link to that.
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| It’s Official: I’m Out of Ideas. Posted: 11 Oct 2010 03:47 PM PDT
September turned out to be the best trading month of my career. Not only did my longs go up and my shorts go down, there was panic buying of virtually every asset class I have been herding readers into. Only my short on the yen stood out there flaunting a middle fingered salute, threatening new highs as I write this, despite two healthy rounds on intervention by the Bank of Japan. In a profession where you are only as good as your last trade, the question arises of what to do now? How about precious metals? Last month, the sector rocketed, with gold (GLD) up 6%, silver (SLV), 16%, platinum (PPLT), 9%, and palladium (PALL), 16%. Individuals, institutions, and central banks alike fought with each other to acquire positions in this space. Hmmmm. I don’t think I’ll load the boat here. How about emerging markets? I hear that’s the place to be. A quick look at the charts show that Chile (ECH) jumped by 10%, Singapore (EWS), 10%, South Korea (EWY), 15%, South Africa (EWA) ,17%, Indonesia (IDX), 17%, and sausage eating, beer drinking Poland (EPOL), up an unbelievable 18%. It seens that the more abuse about a recommendation I made, the faster it went up. I’ve spent so much time writing about Asia that I now have to douse my food with soy sauce for it to taste right. Gulp. I don’t think I want to buy on top of these meteoric moves. The US government’s policies out to be knocking the legs out from under the dollar pretty soon. Maybe I should buy some foreign currencies? My top pick in the currency arena, the Australian dollar, leapt 10% in September, followed by a 4.3% move in the Canadian dollar. These are enormous moves over such a short period. Even the Chinese Yuan managed a lethargic 2.1% move. I have been singing Waltzing Mathilda in the shower so often that my neighbors are threatening legal action. How about looking in a nook so obscure that it is unlikely anyone has found it yet, like rare earths? But a quick typing in of the symbols in my charting software reveals that Molycorp (MCP) exploded up 76% in September, Avalon Rare Metals (AVARF) popped 46%, and Lynas Corp. (LYSCF) rose 65%. As much as I like the long term case for these metals, it would be nuts to establish new positions here. OK, maybe the problem is that I’m obsessing about financial markets, and should look at the food sector for some bargains. Everywhere I looked, the moves were just as impressive, with corn (CORN), wheat, and soybeans (35%), just posting record consecutive limit up moves. Coffee (JO), cotton (BAL) (46%), and sugar (SSG) (94%) posted equally impressive moves. I look at moves like these and my inner trader says “run, Forest, run!” When I was running my big hedge fund and delivered outsized returns like this, I went 100% into cash, embarked on a long vacation, and waited for my performance bonus to clear the bank. I took the QEII (the nautical kind) to England, loaded up on new Sea Island Silk shirts at Turnbull & Asser on London’s Jermyn Street, and mount my annual attempt to summit the Matterhorn, only to be turned back by weather at the Hörnli Hut. My investors loved it. I went on these extended sabbaticals because whenever I brought in stellar gains, mean reversion had the nasty habit of taking them away. Is QEII (the monetary kind) already priced in, but may not happen? You have to ask the same with a Republican win in November. Cash looks like the best investment of all right now. Better to lock in that performance, keep you powder dry, and live to fight another day. To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.
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| Posted: 11 Oct 2010 03:45 PM PDT Here's the investment dilemma of the day: if financial markets have already priced in several trillion dollars worth of quantitative easing from around the world, where can markets realistically go from here? Stocks, bonds, commodities...all of them have raced higher in September, anticipating more free money from the Fed, the Bank of England, the Bank of Japan, and the European Central Bank. One interesting note from America is that bond fund assets of $2.6 trillion are now nearly equal to the assets of diversified equity funds assets of $3 trillion. This is worth having a look at because it tells you of a shift in attitudes toward risk (or perceived risk). And to put the shift to bond funds in perspective, Morgan Stanley says more money flowed into bond funds in the last 12 months ($412 billion) than flowed into equity funds in the 12 months leading to the 2000 dot.com tech bubble high ($340 billion). One obvious to today's opening question, then , is: higher! That is, if all the folks who've been pouring money into bonds funds (and emerging market funds, and precious metals exchange traded funds) decide that September was no fluke, then they could become stock buyers again. You'd have another nice little rally. This, by the way, is what Warren Buffett is yammering on about. Buffett told Fortune magazine's Most Powerful Women summit last week that, "It's quite clear that stocks are cheaper than bonds. I can't imagine anyone having bonds in their portfolio when they can have equities ... but people do because they lack the confidence." There are a lot of reasons people might lack confidence right now. But should they be buying bonds? Bonds are the mainstay of the deflationist camp. You buy them for fixed income when you expect disinflation or deflation. They are liquid and their value doesn't rise or fall with earnings variations. And by the way, you might even make a capital gain on bonds these days if your front running central banks. For example, the Fed has delivered a massive boost to U.S. bank earnings over the last two years by essentially subsidising their net interest margins. The banks can borrow from the Fed at near zero short-term rates and then lend long to Uncle Sam for 30-years at over 4%. Free money to change your life! With other central banks willing to dip into the bond and real estate markets with asset purchases to 'get things going,' bond investors might be thinking this is a low-risk way to front-run the early stages of Quantitative Easing part Two. It doesn't seem like a very safe trade, though. But then, nothing seems very safe today. This is frankly what keeps us awake at night, along with the neighbour's cat. We're a bit worried that the collateral securitising large debts in the Western world is a festering pile of crap. Unlike a wine, bad debt does not improve with age. Yet that's what everyone hoped would happen in 2008 when the severe capital impairments at banks in America and Europe were addressed with short-term shenanigans. Well, the short-term is over now. Welcome to the long-term. Incidentally, the odds of another massive banking/housing crisis in the United States seem to getting shorter. The latest catalyst if the "robo-signing" scenario where banks apparently initiated tens of thousands of foreclosure proceedings against homeowners without having proof that the bank owned the home. A full primer can be found here. This is a morbidly fascinating issue because it gets to the heart of what the housing crisis has done to America. It's turned into a third-world country where contract is not only not enforceable, it's optional. If you can't prove you own title to a property, you certainly can't foreclose on it. You can't sell it either. This is a big problem for banks. At the operational level, the cost of servicing such a large number of mortgages eats into earnings. If the bank is forced to go to court, the cost goes up. There is also the issue of the bank having securitised these loans and sold them. If the income from the mortgage dries up because the homeowner challenges the ownership of the loan, and the bank can't prove who owns the loan, then the purchasers of securitised mortgages can "put back" to banks the securities and get paid for them. This would force banks to repurchase securitised mortgages they'd offloaded onto entities like Fannie Mae and Freddie Mac. In other words, all that bad-loan risk would be repatriated right back home on the bank balance sheet. Banks have planned for this by adding a "reserve for loan repurchases" column to the balance sheet. The number, depending on the bank, is going to get a lot bigger. Of course all this must seem like a terribly American problem and not have much at all to do with Australia. But the nut of it is this: a massive Federal bailout of the entire American housing market is looking likely in the early part of next year as the Obama administration deals with a largely Republican Congress. Both parties will want to engineer some kind of TARP Two well before the presidential election in 2012. And this program must keep people in their homes instead of just bailing out banks. Not that we're a big fan of such programs. But if it's required, it's going to mean even more money printing than markets are figuring in with QEII. In fact, we would be surprised if this bank recapitalisation issue does not soon become the decisive factor in expectations for more QE. But what does it mean? It means the flight out of the dollar and into emerging markets and tangible assets will continue for longer go higher than you expect. While we're on the lookout for a market that's fully priced in a second round of QE, we think the deflationists have seriously underestimated the amount of new money that will come into existence and the affect that money will have on prices. Hint: they will not be going nominally lower. Dan Denning
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| 10 Reasons Why Ordinary Hard-Working Americans Are About To Really Start Feeling The Squeeze Posted: 11 Oct 2010 02:18 PM PDT 
The reality is that it is getting really hard to make it out there. Not only do most households have both parents working, but in many cases both parents are getting second or even third jobs. Things have gotten so bad that millions of Americans have felt forced to turn to the government for assistance just to survive. It can be really disheartening to come to the end of the month and realize that despite your best efforts you have less money than you did at the beginning of the month. But that is where millions upon millions of American families now find themselves. The economic despair in the air is almost palpable. Already hordes of Americans are truly and honestly hurting and things are only going to get worse. The following are ten reasons why ordinary hard-working Americans are about to really start feeling the squeeze.... #1 Gas prices are going up again. AAA says that the average price of a gallon of regular gasoline in the United States was $2.80 on Sunday. That is 32.6 cents higher than it was during the same time period in 2009. As oil and gas prices continue to go up, that is also going to have a significant impact on utility bills for American families this winter. #2 The price of food is poised to rise substantially. Bloomberg is reporting that the the cost of meat in the United States is going nowhere but up. But meat is not the only thing that you will soon be paying much more for at the supermarket. Wheat, corn, soybeans and almost every other major agricultural commodity is absolutely soaring this fall. As this continues, it is inevitable that ordinary Americans will see much higher food prices at their local grocery stores. On a previous article, a reader named Erica left a comment in which see detailed the stunning food inflation that she is seeing where she lives.... Food inflation is real, and it is here. Just yesterday I compared my receipt from a grocery run to prices I have from the same exact store from September 15, 2009. Bacon? Up 52% to $13.69 from $8.99 for 4 lbs. Butter? Up 73% to $9.99 from $5.79 for 4 lbs. Pure vanilla extract up 14% to $6.79 from $5.95. Chopped dried onions up a mere 2% but minced garlic (wet) was up 32%. #3 It looks like those receiving Social Security are not going to be seeing cost-of-living increases again. The Associated Press is reporting that the U.S. government is expected to announce some time this week that the tens of millions of Americans that receive Social Security will go through yet another year without an increase in their monthly benefit payments. You see, Social Security cost-of-living adjustments are tied to the official government inflation numbers, and according to the U.S. government there is basically very little inflation right now. Of course we all know that is a lie, but it is what it is. #4 The cost of health care continues to soar into the stratosphere. Americans already pay more for health care than anyone else in the world, and yet costs continue to spiral out of control. The cost of health care increased a staggering 9.6% for all U.S. households from 2007 to 2009. Now, health insurance companies from coast to coast are announcing that they must raise health insurance premiums substantially due to the new health care law that Barack Obama and the Democrats have pushed through. So in 2011 it looks like the average American family is going to have to carve out an even bigger chunk of the budget for health care. #5 American families could desperately use a recovery in the housing industry, but that is simply not going to happen. Foreclosure-Gate is getting worse by the day, and it threatens to bring the U.S. real estate industry to a complete and total standstill. If it is ultimately proven that the paperwork for millions of mortgages in the United States is seriously deficient, it could push hordes of mortgage lenders into bankruptcy and render mountains of mortgage-backed securities nearly worthless. Regardless, it is now going to be much more difficult to get a mortgage, much more difficult to buy a home and much more difficult to sell a home. We could very well be looking at the next stage of the housing crash. Ordinary Americans could end up losing trillions more in home equity. #6 More Americans than ever find themselves unable to pay their bills, and an increasing number of frustrated creditors are actually resorting to wage garnishment. Yes, you read the correctly. Creditors are starting to ruthlessly go after the weekly paychecks of debtors. The following is an excerpt from a recent New York Times article that discussed the rise of wage garnishment as a weapon against debtors.... After winning, creditors can secure a court order to seize part of the debtor's paycheck or the funds in a bank account, a procedure called garnishment. No national statistics are kept, but the pay seizures are rising fast in some areas — up 121 percent in the Phoenix area since 2005, and 55 percent in the Atlanta area since 2004. In Cleveland, garnishments jumped 30 percent between 2008 and 2009 alone. So if you are getting behind on your debt, you better watch out - your creditors may soon decide to garnish your wages. #7 Americans now owe more on student loans than they do on credit cards. As hard as that is to believe, that is actually true. Americans now owe more than $849 billion on student loans, which is a new all-time record. Student loan payments can be absolutely crippling to a household budget. This is especially true for young Americans that have just gotten out of school. Sadly, student loan debt is nearly impossible to get rid of. Once you are committed, it will follow you around for the rest of your life. #8 Even as expenses rise, incomes are down from coast to coast. Median household income in the U.S. declined from $51,726 in 2008 to $50,221 in 2009. There are very few areas that have not been affected. In fact, of the 52 largest metro areas in the United States, only the city of San Antonio did not see a decline in median household income during 2009. #9 If all of this was not bad enough, now there are rumblings that the U.S. Federal Reserve is actually thinking that we need more inflation. A number of top Federal Reserve officials have come out recently and have publicly supported the notion that the Fed needs to purposely create more inflation in order to stimulate the economy. Of course what they don't tell the American people is that inflation is a hidden tax on every single dollar in our wallets and in our bank accounts. More inflation would be really bad news for ordinary Americans, because they are already having a tough time getting their dollars to stretch far enough. #10 Apparently the U.S. government (and many state and local governments) think that this is a great time to stick it to the American people by hitting them with a slew of new taxes. There are so many tax increases scheduled to go into effect in 2011 that it is hard to keep track of them all. In fact, there are many (myself included) that are calling 2011 "the year of the tax increase". But the Americans that are going to get it the worst of all are those that are going to get hit with the Alternative Minimum Tax. One out of every six American households is going to be hit with a tax increase averaging $3,900 (thanks to the AMT) and most of them don't even know that it is coming. So did you think that 2010 was bad? Well, you haven't seen anything yet. 2010 was a Sunday picnic compared to what is coming. Get ready to get squeezed. Get ready for higher food prices, higher gas prices, higher health insurance premiums and higher taxes. Get ready to try to do a lot more with a lot less. Inflation is already here, but it is going to get a whole lot worse. Meanwhile, the U.S. government (along with state and local governments) is going to continue to have a voracious appetite for more revenue. Average Americans are going to be squeezed until they have nothing left to give. Then they are going to be squeezed just a little bit more. Are you ready?
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| The Average American Has a Sub-Average Quality of Life... and a Sub-SUB View of Politicians Posted: 11 Oct 2010 01:48 PM PDT
Let’s take a slice of the adult American population, say, 100 people, and put them in a room.
Of these 100, nearly three quarters (73) complain of financial stress. In fact, of the ones who are divorced, 80% cited financial difficulties as the reason they split from their spouse.
It’s not surprising to hear this, the official numbers tell us that roughly 9-10 of the 100 people we selected are unemployed. Of course, those are the “official” numbers. If you actually bother asking these 100 people to their faces if they’ve got work, you’d find 16-17 of them are unemployed, but the 6-7 extra to the official 10 listed as out of work are not counted by the Government because they’ve given up looking for employment.
According to the Government’s official data, these people no longer exist, but they’re standing there in our room, along with the rest of the folks who the Government DOES count. And they help explain how despite an official unemployment rate of 9.5%, roughly 13% of our average 100 (13 people) are currently using food stamps to buy food.
But even this number hides the real level of economic collapse in the US. All told 14 (14.3% to be exact) of our 100 average Americans are living at the poverty level. Only two countries in the OECD have higher poverty rates: Turkey and Mexico.
Of course, this is merely because we’re focusing on adults for this exercise; the poverty level for children under the age of 18 is an incredible 20%. Who would have ever thought that was possible in the US? I certainly didn’t.
Of the 67 or so people who own homes in our group of “average Americans,” 16 (roughly 24%) of them are “underwater,” meaning they owe the bank more money on their mortgage than their homes are actually worth. Another five out of this 67 have lost their homes to foreclosure since the Depression began in 2007.
Add to all of this the facts that Americans’ second most common source of wealth (stocks) haven’t returned anything in over a decade and that incomes today are 5% lower than they were in 1999 and you’ve got a pretty bleak picture for the US economy and Americans’ quality of life. Indeed, according to Credit Suisse, the US now ranks seventh in the world in terms of wealth… which the website Zero Hedge notes is behind Singapore, Sweden, AND France.
If our 100 “average Americans” may have a sub-average quality of life, but they have a sub-SUB-average view of Politicians.
At no point in the last year have more than half (50) of our group of average Americans approved of President Barack Obama. Indeed, only 29 of them approve of the job our current President is performing.
However, these poor views of our President pale in comparison to the loathing our average 100 display towards Congress: only 16 of them think Congress is doing a good or excellent job.
In contrast, over half (56) of them DIS-approve of the job Congress is doing. More than three quarters of them (76) believe most members of Congress are more interested in their own careers than in helping Americans.
And yet, despite all of this, US politicians and the powers that be continue to proclaim that the US is on the road to recovery, that our economy is strengthening, and that they’ve got everything under control.
Even more astounding, the US stock market continues to rally in the face of economic data that is simply horrific. In fact, stocks actually rally BECAUSE of bad economic data since traders believe it guarantees the Fed will throw even more money at the problem in the form of QE 2 (never mind that QE 1 was a total failure).
How will this end? Somewhere between really bad and horrible. Stocks can disconnect from reality for a while, but not permanently (see 2008). And when the two meet up again this time around it’s going to make 2008 look like a picnic.
Why?
Because the Federal Reserve has already thrown the kitchen sink at the problem. So when the markets come unhinged again the world will realize the truth of the Financial Crisis: that the Fed cannot and will not save the day. All it’s done is trash the Dollar while propping up insolvent banks.
Good Investing!
Graham Summers
PS. If you’re worried about the future of the stock market and have yet to take steps to prepare for the Second Round of the Financial Crisis… I highly suggest you download my FREE Special Report specifying exactly how to prepare for what’s to come.
I call it The Financial Crisis “Round Two” Survival Kit. And its 17 pages contain a wealth of information about portfolio protection, which investments to own and how to take out Catastrophe Insurance on the stock market (this “insurance” paid out triple digit gains in the Autumn of 2008).
Again, this is all 100% FREE. To pick up your copy today, got to http://www.gainspainscapital.com and click on FREE REPORTS.
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| A Detailed Look At Global Wealth Distribution Posted: 11 Oct 2010 01:12 PM PDT
By now it should be common knowledge to everyone that in American society, the top wealthiest 1 percentile controls all the political power, holds half the wealth, and pays what is claimed to be the bulk of the taxes (despite mile wide tax loopholes and Swiss bank accounts). The rest of the population is merely filler, programmed to buy every latest self-cannibalizing iteration of the iPad/Pod while never again paying their mortgage and brainwashed to watch 2 hours of prime time TV commercials to keep it distracted from the fact that the last time America was a democracy was around the time the Wright brothers were arguing the pros and cons of frequent flier programs. So far so good. But what about the rest of the world? How is wealth stratified in a global perspective? Where do the "rich" live? What kind of wealth is controlled by various countries? Where are the Ultra High Net Worth people? For answers to all these questions, and much more, confirming that just like in America, the wealthiest 0.5% control over 35% of world wealth, Credit Suisse has compiled and released its latest "Global Wealth Report." The findings are summarized here. The first figure shows world wealth by region. The US, with its wealth of about $50 trillion, accounts for 25% of total world wealth, which at last check was about $200 trillion. And yes, Europe as a region has a slightly greater wealth portion (32%) than does America (31%).
When it comes to geographic distribution, it is to be expected that North America will have the greatest proportion of people in the ultra wealthy category. Indeed, the chart below confirms this.
Drilling down into asset composition in various countries, it becomes obvious why the Fed is so focused on keeping the stock market high. With America being the wealthiest country in the world, and the bulk of US wealth held in financial assets, offset by a material amount of debt, which confirms that a deflationary spiral would be the end for the "wealth effect" so desired by Ben Bernanke. More from CS: "Consider first the relative importance of financial versus non-financial assets, and the size of debt. Expressed as a percentage of gross household assets, the pattern clearly differs markedly between poorer and richer countries and regions. In developing countries (see Figure 1), for example India and Indonesia, it is common for 80% or more of total assets to be held in the form of non-financial assets, largely housing and farms. A high proportion of real property is also evident in transition countries in Europe, reflecting in part the wholesale privatization of housing in the 1990s. As countries develop and grow, the importance of non-financial assets tends to decline, so that the share in China, for instance, is now close to half. In the richest countries, financial assets typically account for more than half of household wealth. There are interesting exceptions to this general pattern. Recent robust house price rises have propelled the share of non-financial assets above 60% in France and some other major European countries. South Africa, on the other hand, is an outlier in the developing world, with exceptionally high holdings of financial assets: the figure of 80% exceeds the share found in both the United States and Japan." In other words, the more "developed" the world becomes, the greater the amount of wealth tied into the perpetuation of the Ponzi lies. Small wonder why so few in charge are willing to actually do anything that changes the status quo.
Next, it is time to drill down in the specific composition of the financial assets. Figure 2 provides more detail, showing the breakdown of financial assets into three categories: currency and deposits, equities (all shares and other equities held directly by households), and other financial assets for selected countries. To add further detail, in most countries the reserves of life insurance companies and pension funds form the largest component of “other financial assets.” The composition of financial assets differs considerably across countries, especially with regard to the importance of shares and other equities. One interesting trend we note is that equities are not always a large component of household financial wealth, even in countries with very active financial markets. In the United Kingdom and Japan, for example, equities account for just 13% and 9% of total financial assets respectively. In contrast, they make up 37% and 43% of financial assets in Sweden and the USA, respectively. Broadly speaking, the relative importance of currency and deposits falls as that of bonds and equities increases. On the other hand, the portfolio share of “other financial assets” does not vary a lot, staying in the range of about 40%–45%. However, when we come to the UK, Japan and Colombia, which have the lowest portfolio share of equities, the pattern breaks down. The UK has a moderate currency and deposits share, but the largest “other financial assets” share, reflecting large life insurance and pension reserves. Colombia also has more in the form of “other financial assets” than is typical. Japan, on the other hand, which has a strong tradition of saving in deposit form, has a very large currency and deposits share and only a 35% share of “other financial assets.”
An interesting detour looks at gender distribution for asset holders in the US and the UK. As the chart below shows, in the UK women appear to hold more risky assets than men.
Looking at the history of global wealth per adult, net worth peaked just before the first ponzi/credit/housing bubble popped, confirming that a major portion of the then-record $50K/adult net wealth was imaginary. Yet it may have far more to drop: as CS says, "despite the financial crisis, the past decade has in fact been a relatively benign period for household wealth accumulation. Global net worth per adult rose 43% from USD 30,700 in the year 2000 to USD 43,800 by mid-2010. Since the number of adults increased from 3.6 billion to 4.4 billion over this period, aggregate household wealth rose by 72%. One important factor here was the depreciation of the dollar against most major currencies, which accounts for part of the rise in dollar-denominated values, but average net worth still increased by 24% when exchange rates are held constant." The next question is how much latent dollar devaluation has been accrued to this point and how much more is due to only gradually emerge.
The next chart is rather self-explanatory. The richest nations, with wealth in 2010 above USD 100,000 per adult, are found in North America, Western Europe, and among the rich Asian-Pacific and Middle East countries. They are topped by Switzerland, Norway, Australia, Singapore and France, each of which records wealth per adult above USD 250,000. Average wealth in other major economies such as the USA, Japan, the United Kingdom and Canada also exceeds USD 200,000.
And some more detail on the various wealth regions:
Next is a pie chart of with a detailed break down of wealth distribution by region.
Credit Suisse provides a look at geographic wealth distribution by decile: To be among the wealthiest half of the world, an adult needs only USD 4,000 in assets, once debts have been subtracted. However, each adult requires more than USD 72,000 to belong to the top 10% of global wealth holders and more than USD 588,000 to be a member of the top 1%. The bottom half of the global population together possess less than 2% of global wealth, although wealth is growing fast for some members of this segment. In sharp contrast, the richest 10% own 83% of the world’s wealth, with the top 1% alone accounting for 43% of global assets. Figure 4 shows how the regions of the world are represented amongst the wealth deciles. Unsurprisingly for example, North America and Europe together make up the lion’s share of the top wealth decile (10%). China has relatively few representatives at the very top and bottom of the global wealth distribution, but dominates the middle section, supplying more than a third of those in deciles 4–8. The sizeable presence of China in the middle section reflects not only its population size and moderate average wealth level, but also relatively low wealth inequality. China’s position in the global picture has shifted upwards in the past decade as a consequence of a strong record of growth, rising asset values and the appreciation of the renminbi relative to the US dollar. China already has more people in the top 10% of global wealth holders than any country except for the USA, Japan and Germany, and is poised to overtake both Germany and Japan in the near future.
Next is the chart that everyone has seen as it pertains to America, but few have seen in terms of the entire world. Per CS, Figure 1 shows “The global wealth pyramid” in striking detail. It is made up of a solid base of low wealth holders with upper tiers occupied by fewer and fewer people. We estimate that 3 billion individuals – more than two thirds of the global adult population – have wealth below USD 10,000. A further billion adults (24% of the world population) are placed in the USD 10,000–100,000 range, leaving 358 million adults (8% of the world population) with assets above USD 100,000. Figures for mid-2010 indicate that 24.2 million adults are above the threshold for dollar millionaires. While they make up less than 1% of the global adult population, they own more than a third of global household wealth. More specifically, individuals with wealth above USD 50 million are estimated to number 81,000 worldwide.
Some more details on the various tiers of the pyramid:
And next, is a detailed look at the very top of the pyramid: those individuals which have over 1 million in net worth.
The take home message is that the wealthiest people in the world have the bulk of their wealth entrenched in the current system and any dramatic overhaul or reset of the status quo will be met by the stiff resistance of those who can summon fleet of jets, private armies, and even Fed chairmen on a whim. Whether anyone will have the wherewithal to confront the broken system under such conditions remains to be seen. And for those seeing more granular detail by country, below are the profiles of the 15 or so wealhtiest countries.
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| Are U.S. Investors Driving The Gold Price? Posted: 11 Oct 2010 01:00 PM PDT In the U.S. gold markets investors can buy the shares of gold mining companies, get options to buy these shares, buy the Indices that track these shares, buy gold coins, gold bullion, buy the shares of gold Exchange Traded Funds, buy gold futures through COMEX and more still. Indeed the variety of different types of investment channels and their markets leads you to believe that the U.S. must be the heart of the world of gold. In terms of volumes of money that surely must be the case. This would be true if they all affected the gold price directly. Do they?
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| Where to Buy the Next Dip in Gold Posted: 11 Oct 2010 11:29 AM PDT The gold bugs who read this letter will not be surprised to hear that the Van Eck International Investor's Gold Fund (INIVX) has been the top performing US mutual fund for the past five years, with an annual 27% return. The firm focuses on buying miners with good management and decent growth prospects. These are often found listed on the Sarbanes-Oxley free Toronto Stock Exchange. Its three top picks now are Agnico Eagle (AEM), Kinross Gold Corp. (KGC), and Rangold Resources (GOLD). The gold industry is in a supply/demand sweet spot now, as supplies have been ex-growth for a decade in the face of a rising tide of demand. Peak gold is upon us, and unexploited deposits are getting farther and fewer between. There will be no more of history's "gold rushes" as seen in California, South Africa, Australia, and Alaska, as the world has been scoured to death for new deposits. This is happening while failed economic policies around the world create ever larger numbers of buyers. Gold may be overbought for the short term, but the world is waiting to buy it on any $100 dip, where emerging market central banks will be jostling with private institutions and individuals to top up existing positions, and "newbies" fight to open new ones. Van Eck's conservative one year target is $1,700/ounce. They think the bull market has a good five years to run, and won't end until we see an inflationary spike, taking prices to who knows where. Courtesy: Mad Hedge Fund Trader 
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