Gold World News Flash |
- Why I’m Singing “Waltzing Mathilda” in the Shower
- EU rescue costs start to threaten Germany itself
- Gold Seeker Weekly Wrap-Up: Gold and Silver End Mixed on the Week
- Gold "Hump" Shifting from Diwali to Xīn Nián
- Jon Hykawy Sees Downstream Value in Rare Earths
- In The News Today
- Weekly Market Update Excerpt Nov 26, 2010
- The Gold price isn’t about Gold!
- From Nomi Prins: China, Russia and the Dollar
- Surge Of Inexplicable After Hours Selling Takes Gold Volatility Index To All Time Low
- Gold Wave 2 Top in Place?
- The Dynamics Of A Currency War
- Can U.S. Afford Political Gridlock Already?
- Downstream Value in Rare Earth Metals Companies
- Russia may join euro eventually, put it ahead of dollar, Putin says
- Gold Buying Demand Hump Shifting from Diwali to Chinese Xīn Nián
- Rob McEwen - Gold Mania, Then a Re-Writing of the System
- FRIDAY Market Excerpts
- Gold, Silver Impacts By China’s Infrastructure Building for Long-term Economic Growth
- SILVER TO $714. Gold to $10,000. Get Some. Get Physical.
- My Silver Collection – 500 Ounces
- Gold 'Hump' Shifting from Diwali to Xin Nian
- RT: Putin Ditches Dollar; Keiser Predicts Germany New “Superpower”
- Gold Daily and Silver Weekly Charts
- Why the Government Hates Deflation
- What To Do When The FBI Raids Your Hedge Fund
- Thanksgiving Week Open Forum
- Time for Mortgage Lenders to Consider a Jubilee?
- QE2 & The Great Misdiagnosis
- Yeah, Thanks A Lot!
- Two years after the credit-crisis panic in the autumn of 2008
- People's Bank of China Researcher Calls on U.S. to Sell Gold
- Last Minute After Hours Dump Leaves Investors On Edge Ahead Of "Dual POMO Bail Out Monday"
- Police State USA: TSA Gestapo Empire
- Should You Buy Gold From the TV or the Radio?
- LGMR: Falling Silver & Strong Gold Signal "Chinese Slowdown"
- The Gold Price Isn't About Gold!
- Guest Post: With 'Synthetic Banking' Just Around the Corner Enjoy 'The Liechtensteiner' on 'Fed Monday'
- Myriad Responses to the Global Financial Crisis
- Memo to Ireland
- Gold "Hump" Shifting from Diwali to Xīn Nián
- The Gold Price Over Thanksgiving
- Economic Boom, Bust, and Gold
- “Next Generation” Vaccines
- Presenting The Irish Bailoutees: A Redux
- Holiday Squeeze on the Dollar, Gold & Stocks
- Buy Gold: It’s the Only Way to Combat Government Spending
- Proving Banker Fraud
- The Wrong Lesson from Ireland
| Why I’m Singing “Waltzing Mathilda” in the Shower Posted: 26 Nov 2010 05:10 PM PST
If you want to participate in the global carry trade in its purest form, take a look at the Australian dollar. The central bank has been the first and fastest to raise interest rates because of rocketing commodity prices and booming business with China.
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| EU rescue costs start to threaten Germany itself Posted: 26 Nov 2010 04:26 PM PST "Germany cannot keep paying for bail-outs without going bankrupt itself," said Professor Wilhelm Hankel, of Frankfurt University. "This is frightening people. You cannot find a bank safe deposit box in Germany because every single one has already been taken and stuffed with gold and silver.
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| Gold Seeker Weekly Wrap-Up: Gold and Silver End Mixed on the Week Posted: 26 Nov 2010 04:00 PM PST Gold fell over $20(from Wednesday's close) to as low as $1351.33 and silver dropped over a dollar to as low as $26.452 in early New York trade before both metals rallied back higher into the close, but gold still ended with a loss of 0.63% and silver closed with a loss of 3.05%.
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| Gold "Hump" Shifting from Diwali to Xīn Nián Posted: 26 Nov 2010 01:28 PM PST by Adrian Ash BullionVault Friday, 26 November 2010 China isn't the world's No.1 gold buyer just yet. But its impact is already showing in how global gold prices move... SURGING DEMAND from China, the world's second-largest gold buyer, is changing seasonal patterns in gold price trends for investors everywhere. How so? At this current pace, private Chinese demand may overtake India's by 2014 (if not sooner), giving the world's two most populous nations two ounces of gold in every five sold worldwide that year. But already, this further eastwards shift is showing in global gold prices. Coinciding with the post-harvest wedding and festival season, Indian demand typically peaks with Diwali (the Hindu "festival of lights") in early November. Chinese households, on the other hand, ramp up their gold buying around Chinese New Year (starting on Feb. 3rd in 2011) – and as the hump in global demand is moving from Diwali to Xīn Nián, so too is the annual peak in the ...
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| Jon Hykawy Sees Downstream Value in Rare Earths Posted: 26 Nov 2010 01:26 PM PST Source: Brian Sylvester of The Gold Report 11/26/2010 Byron Capital Markets Analyst Jon Hykawy sees the rare earth elements (REE) sector for what it is—something much different from mining copper or gold. He believes the keys to making money in rare earths involve metallurgy, deposit location, marketing and downstream integration. In this Gold Report exclusive, Jon makes his case for rare earth elements and the companies he believes have the best chance to deliver them at a profit. "Rare earth-equipped motors are the lightest, most efficient motors possible for powering these hybrid and electric cars in the future and that doesn't seem to be something that's going to change," says Jon Hykawy, who was part of a panel at the recent Forbes and Manhattan Resource Summit in West Palm Beach, Fla. Joining Hykawy on the panel were REE specialist Dr. Tony Mariano and Ford Motor Company's Ted Miller. Hykawy stressed that the weight-saving and heat-dissipating qualities o...
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| Posted: 26 Nov 2010 01:25 PM PST Jim Sinclair's Commentary There is so much happening now that any thought other than self protections is madness. The dollar is no safe haven. Gold will trade at and above $1650. Putin: Russia will join the euro one day Speaking at a conference in Germany the Russian prime minister, who is in the country for talks with Chancellor Angela Merkel, said he was convinced the euro would stabilise and strengthen despite the current sovereign debt crisis. He said: "Yes, there are problems. But the economic policy of the European Central Bank and of the governments of leading European economies … convinces me that the stability of the euro will be ensured." He added: "We know there are problems in Portugal, Greece, Ireland and the euro is wobbling a bit. On the whole it is a solid, good currency and it should take its place, its role as a reserve currency." Asked about Russia's role in the eurozone in the future, Mr Putin said: "Can it be supposed that one day Russia will be in some joint currency zone with Europe? Yes, quite possible." Speaking at the same event, Josef Ackermann, chief executive of Deutsche Bank, echoed Mr Putin and said he could imagine Russia joining a common European currency.
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| Weekly Market Update Excerpt Nov 26, 2010 Posted: 26 Nov 2010 01:22 PM PST Super Force Signals A Leading Market Timing Service We Take Every Trade Ourselves! Email: [EMAIL="trading@superforcesignals.com"]trading@superforcesignals.com[/EMAIL] [EMAIL="trading@superforce60.com"]trading@superforce60.com[/EMAIL] Gold and Precious Metals Gold Bullion. 6 Month Price Chart Super Force Gold Bullion Analysis: [LIST] [*]Gold has a Super Force Buy Signal as of Friday Nov. 12th on SGOL at $135.41 and $131.70 is also a buy. Sell at $141.73. [/LIST] [LIST] [*]Bullion equivalent buy price: $1354. Nov. 12 [/LIST] Bullion sell price: $1417. Bullion buy price: $1317. [LIST] [*]I see Gold going remarkably higher over the next several monthsand years. Any investor who is light on Gold (under 30% precious metal assets) should begin accumulating now, and buy much heavier if Gold goes lower. [/LIST] [LIST] [*]As I examine the precious metal sector, I see some key developments that stand to open further buying opportunities. [/LIST] [LIST...
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| The Gold price isn’t about Gold! Posted: 26 Nov 2010 01:00 PM PST Since 2000, the gold price has risen from $300 to $1,400 an ounce. There are several more important reasons than its being 'just a commodity.' The strongest driving force behind gold's rise in the last four years has been investment demand. As a commodity, it doesn't tarnish, it's a great conductor, and makes good looking jewelry. But these reasons are not the reasons why people invest in gold.
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| From Nomi Prins: China, Russia and the Dollar Posted: 26 Nov 2010 12:45 PM PST Share this:
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| Surge Of Inexplicable After Hours Selling Takes Gold Volatility Index To All Time Low Posted: 26 Nov 2010 12:07 PM PST
In addition to the rout in the ES, VIX and GC which we pointed out earlier, there were some additional fireworks behind the scenes in today's after hours session. The CBOE Gold Volatility Index, the ^GVZ plunged by the most in over a year, as the index hit an all time low of 15.92 without the underlying making much of a notable move. The most curious aspect of the trade was that the entire dump occured in the AH session. Many were left scratching their heads over what caused this monstrous unwind in long vol positions: was this the unwind of a massive long ES/short GC arb? We don't know, although if rumors that a major fund is planning to stand for delivery of Dec gold turn out to be true, then obviously someone got confirmation today. Keep a close eye out on the GVZ. Should this price level persist on Monday, then the front futures contract will likely surge.
A trader whom we managed to reach late in the day had this to say on this stunning move:
If the short covering in paper persists, perhaps the world won't even need the Krieger/Keiser physical PM campaign to destroy Blythe Masters. And a bonus observation of the gold curve is the Gold February contract, where in the last minute someone bought 2k contracts, which represents 200,000 ounces or about $272MM worth of gold. Not a bad purchase for the last trade on the slowest day of the year. As usual, we welcome our readers' perspectives on this largely unexpected move.
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| Posted: 26 Nov 2010 11:52 AM PST courtesy of DailyFX.com November 26, 2010 11:30 AM Daily Candles Prepared by Jamie Saettele A corrective advance from the low is nearing completion. Expectations are for a top (possible already in place at 1382.90) and reversal. Additional resistance would be 1388 (the 61.8% retracement of the decline from the peak)....
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| The Dynamics Of A Currency War Posted: 26 Nov 2010 11:40 AM PST View the original post at jsmineset.com... November 26, 2010 09:52 AM My Dear Friends, What you are witnessing is adults acting like children. A currency war solves absolutely nothing whatsoever. A currency war puts extreme strains on exports. A currency war never establishes a currency’s value versus its trading partners than can be maintained for any meaningful period of time. A currency war creates currency levels that have nothing to do with reality economically and are unsustainable. A currency war is endemic to QE in the entire Western world. A currency war is destructive to all. A currency war may cause gold to sell off like today in one currency, but it also causes gold to rise in others. A currency war in time elects gold as the only viable currency. A currency war is exactly what will give you levels of the gold price forecasted by Armstrong and Alf that are well above what we have looked at for over 8 years. A currency war is wha...
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| Can U.S. Afford Political Gridlock Already? Posted: 26 Nov 2010 10:57 AM PST With the near collapse of the financial system in 2008, the Bush Administration, with the Republican party in control of both houses of Congress, took aggressive, unprecedented action. The government was not grid-locked. Decisive action was possible and was taken.
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| Downstream Value in Rare Earth Metals Companies Posted: 26 Nov 2010 10:53 AM PST Byron Capital Markets Analyst Jon Hykawy sees the rare earth elements (REE) sector for what it is—something much different from mining copper or gold. He believes the keys to making money in rare earths involve metallurgy, deposit location, marketing and downstream integration. In this Gold Report exclusive, Jon makes his case for rare earth elements and the companies he believes have the best chance to deliver them at a profit.
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| Russia may join euro eventually, put it ahead of dollar, Putin says Posted: 26 Nov 2010 10:44 AM PST By Louise Armisted http://www.telegraph.co.uk/finance/currency/8163347/Putin-Russia-will-jo... Vladimir Putin said it is "quite possible" that Russia will one day join the eurozone and create a currency that would eclipse the US dollar as the global reserve standard. Speaking at a conference in Germany the Russian prime minister, who is in the country for talks with Chancellor Angela Merkel, said he was convinced the euro would stabilise and strengthen despite the current sovereign debt crisis. He said: "Yes, there are problems. But the economic policy of the European Central Bank and of the governments of leading European economies ... convinces me that the stability of the euro will be ensured." He added: "We know there are problems in Portugal, Greece, Ireland and the euro is wobbling a bit. On the whole it is a solid, good currency and it should take its place, its role as a reserve currency." ... Dispatch continues below ... ADVERTISEMENT Prophecy Receives Permit To Mine at Ulaan Ovoo in Mongolia VANCOUVER, British Columbia -- Prophecy Resource Corp. (TSX-V:PCY, OTCQX: PRPCF, Frankfurt: 1P2) announces that on November 9, 2010, it received the final permit to commence mining operations at its Ulaan Ovoo coal project in Mongolia. Prophecy is one of few international mining companies to achieve such a milestone. The mine is production-ready, with a mine opening ceremony scheduled for November 20. Prophecy CEO John Lee said: "I thank the government of Mongolia for the expeditious way this permit was issued. The opening of Ulaan Ovoo is a testament to the industrious and skilled workforce in Mongolia. Prophecy directly and indirectly (through Leighton Asia) employs more than 65 competent Mongolian nationals and four expatriots. The company also reaffirms its commitment to deliver coal to the local Edernet and Darkhan power plants in Mongolia." The Ulaan Ovoo open pit mine is 10 kilometers from the Russian border and within 120km of the Nauski TransSiberian railway station, enabling transportation of coal to Russia and its eastern seaports. Thermal coal prices are trading at two-year highs at Russian seaports due to strong demand from Asian economies. For the complete press release, please visit: http://prophecyresource.com/news_2010_nov11.php Asked about Russia's role in the eurozone in the future, Mr Putin said: "Can it be supposed that one day Russia will be in some joint currency zone with Europe? Yes, quite possible." Speaking at the same event, Josef Ackermann, chief executive of Deutsche Bank, echoed Mr Putin and said he could imagine Russia joining a common European currency. Mr Putin said that for the past decade there has been a reliance on the dollar that needs to be rebalanced as it makes the world economy vulnerable. "We should move away from the excessive monopoly of the dollar as the only global reserve currency," he said. But the Russian prime minister was critical of European laws intended to improve transparency in energy supply and distribution. He claimed the "Third Energy Package," aimed at liberalising the market, will hinder investment and amounts to uncivilised "robbery." Moscow claims that the measures devalue the European assets of Gazprom, the state-controlled gas giant. Mr Putin said: "We often hear from our partners in Europe and North America: 'If you want to be members of a global family of civilised nations, you should behave in a civilised way.' What is this then? Have our colleagues forgotten the basic principles?" Meanwhile, Russia's finance minister, Alexei Kudrin, has said the country's banks may buy stakes in the UK's "large" financial companies. He claimed that VTB Group, Russia's second-biggest lender, is among the banks interested in acquisitions in the UK. During Vince Cable's trade mission to Moscow, the Business Secretary said he would "welcome" Russian investors. 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 Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit, Company Press Release, October 27, 2010 VANCOUVER, British Columbia -- Sona Resources Corp. reports on five drillling holes in the third round of assay results from the recently completed drill program at its 100 percent-owned Elizabeth Gold Deposit Property in the Lillooet Mining District of southern British Columbia. Highlights from the diamond drilling include: -- Hole E10-66 intersected 17.4g gold/ton over 1.54 metres. -- Hole E10-67 intersected 96.4g gold/ton over 2.5 metres, including one assay interval of 383g of gold/ton over 0.5 metres. -- Hole E10-69 intersected 85.4g gold/ton over 4.03 metres, including one assay interval of 230g gold/ton over 1 metre. Four drill holes, E10-66 to E10-69, targeted the southwestern end of the Southwest Vein, and three of the holes have expanded the mineralized zone in that direction. The Southwest Vein gold mineralization has now been intersected over a strike length of 325 metres, with the deepest hole drilled less than 200 metres from surface. "The assay results from the Southwest Zone quartz vein continue to be extremely positive," says John P. Thompson, Sona's president and CEO. "We are expanding the Southwest Vein, and this high-grade gold mineralization remains wide open down dip and along strike to the southwest." For the company's full press release, please visit: http://sonaresources.com/_resources/news/SONA_NR19_2010.pdf
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| Gold Buying Demand Hump Shifting from Diwali to Chinese Xīn Nián Posted: 26 Nov 2010 10:28 AM PST China isn't the world's No.1 gold buyer just yet. But its impact is already showing in how global gold prices move... SURGING DEMAND from China, the world's second-largest gold buyer, is changing seasonal patterns in gold price trends for investors everywhere.
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| Rob McEwen - Gold Mania, Then a Re-Writing of the System Posted: 26 Nov 2010 10:21 AM PST With gold and silver consolidating recent gains, King World News interviewed Rob McEwen, former Founder and CEO of Goldorp and current Chairman and CEO of US Gold. When asked about the possibility of hyperinflation occurring in the United States, Rob compared the US to Weimar Germany and stated, "In January of 1919 you could buy one ounce of gold that was selling for $20 an ounce for 170 reichsmarks. Four years later in November of 1923, to buy one ounce of gold you needed 87 trillion reichsmarks, now that's twelve zeros. And it doesn't matter how much money you had in the bank, it was worthless if you left it in German marks."
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| Posted: 26 Nov 2010 10:04 AM PST Dollar firms on Eurozone worries, weighs on gold price The COMEX February gold futures contract closed down $10.70 Friday at $1364.30, trading between $1352.00 and $1376.80 November 26, p.m. excerpts: see full news, 24-hr newswire…
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| Gold, Silver Impacts By China’s Infrastructure Building for Long-term Economic Growth Posted: 26 Nov 2010 10:01 AM PST In an earlier article we saw the might of China’s residential sector. An examination of the non-residential sector and infrastructure initiatives in China puts beyond doubt the support for metals from China alone. However, withdrawal of the effect of the stimulus combined with cautious investors expecting a correction in China’s real estate may result in an imminent correction before prices continue upward.
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| SILVER TO $714. Gold to $10,000. Get Some. Get Physical. Posted: 26 Nov 2010 10:00 AM PST Share this:
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| My Silver Collection – 500 Ounces Posted: 26 Nov 2010 09:58 AM PST Share this:
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| Gold 'Hump' Shifting from Diwali to Xin Nian Posted: 26 Nov 2010 09:57 AM PST China isn't the world's No.1 gold buyer just yet. But its impact is already showing in how global gold prices move...
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| RT: Putin Ditches Dollar; Keiser Predicts Germany New “Superpower” Posted: 26 Nov 2010 09:30 AM PST Share this:
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| Gold Daily and Silver Weekly Charts Posted: 26 Nov 2010 08:54 AM PST |
| Why the Government Hates Deflation Posted: 26 Nov 2010 08:16 AM PST Being the naturally cynical type of guy that you would expect from someone so angry, so depressed, so outraged, so paranoid and so "Howard Beale" ("I'm as mad as hell, and I'm not going to take this anymore!") as I am, people want to know "what is with" all of this "deflation" stuff that the Fed is worried about. Some of them write to me, some beginning, "Dear Mogambo" or, "Dear Moron." These are the ones I immediately delete without reading, as they did not have the proper opening salutation. On the other hand, if the email is properly addressed, I will immediately read it, such as this latest one here that correctly begins, "Dear Handsome And Wise Mogambo (HAWM), What is with all of this fear of deflation? It is being portrayed as a dread so fearful that the treacherous, foul Federal Reserve feels somehow justified in using monstrous monetary policy to target inflation in prices to be at least 2% per year, which is the most horrifically terrible thing that the treacherous, foul F...
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| What To Do When The FBI Raids Your Hedge Fund Posted: 26 Nov 2010 08:13 AM PST
From Bloomberg's Jonathan Weil What to Do When the FBI Raids Your Hedge Fund As if the global capital markets hadn’t suffered enough shocks lately -- artillery fire in Korea, meltdown in Ireland, Eva Longoria Parker’s divorce filing -- life just threw America’s hedge-fund masters a beanball. It appears the government wants to toss many of them in jail. This week the Federal Bureau of Investigation executed search warrants at three large hedge funds’ offices as part of a widening insider-trading investigation. Several other funds, including SAC Capital Advisors, got subpoenas for documents. What does this crisis mean for the industry? We already can guess the first question that must have leaped to the mind of every self-respecting wealth maximizer: “How can I use this information to make enough money to buy myself a jet?” The answer, of course, is that it pays to be on the inside. This raises an even more intriguing existential question. Is it possible for a hedge fund to profit off its own imminent collapse? A little role-playing exercise shows it’s not only possible -- it’s preordained. Imagine you are a skilled trader at a hedge fund with a few billion dollars under management. You learn that FBI agents have just arrived to raid your firm. Lesser beings might cower under the pressure. You, though, realize that you now possess the ultimate edge: The knowledge of what is happening to you at this very moment. You scan the latest news for headlines about your firm and, seeing none, set about on an action plan. One Question Soon the unsuspecting public will be told that financial stocks are plunging on the news that your firm is being raided. You have the benefit of knowing this in advance. The only remaining questions: Do you short Goldman Sachs? Do you short other large banks, too? More importantly, do you short them for your personal account, or for your fund’s? Sensing nothing but upside in the downside, you settle on all of the above. Next comes the due diligence. Brilliantly, you recall a speech in March by Robert Khuzami, the head of the Securities and Exchange Commission’s enforcement division. “The masterminds leave the fewest footprints, and they are often planning their defense at the same time they are committing the fraud,” he said. “To take a simple example, those who trade on insider information may well accumulate at the same time a stack of research reports on a company whose stock they just illegally purchased, and point to that file when law enforcement comes knocking.” As you consider whether to send Khuzami a thank-you note, you hit the print button. Piles of bearish research reports churn out, ready to be placed on your desk as if they had been there for weeks. You’re probably just being paranoid, though. For all you know, the trades you executed were legal. Make a Call Right about now, your attention starts to shift. There’s the question of whom to call first about the FBI raid. Personal lawyer? Spouse? Lover? No, you resolve instead to call your fund’s top so-called expert-network service. They helped get you in this mess. Surely they can get you out, right? Past experience tells you the experts’ information always falls into one of two categories: Worthless or way, way too good. You hope for the latter. Even if the network can’t lure away Khuzami from the SEC to represent you, maybe the experts could dig up some dirt on the pimply FBI agents downloading your firm’s e-mails? Suddenly it occurs to you that all your phones probably are tapped. Better hold off on making that call.
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| Posted: 26 Nov 2010 07:34 AM PST I have sensed some consternation about the Irish bailout and how it relates to the 10 year old USAGold archives written by Another and FOA. The theme goes something like this: A/FOA didn't foresee what is happening today, therefore the Freegold they did foresee is now in jeopardy... Malarkey!Europe is presently operating under the $IMFS (that's the dollar international monetary and financial
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| Time for Mortgage Lenders to Consider a Jubilee? Posted: 26 Nov 2010 06:48 AM PST By Rick Ackerman, Rick's Picks [Nearly three years of strenuous efforts by the Fed to lift home prices has not added even a dime's worth of inflation to the average dwelling. Perhaps it's time to try a new approach by bailing out beleaguered homeowners, more than 35 million of whom owe more on their mortgages than their properties are worth. In the essay below, our astute friend Doug B, a Colorado-based financial advisor and formidable outside-of-the-box thinker, asserts not only that debt forgiveness can help return the real estate market to health, but also that lenders are likely to support it when they ponder the alternative of empty houses falling rapidly into an unsaleable state of neglect. RA] With the latest round of discovery in the real estate market characterized by the foreclosure crisis, it is time to ponder the concept of Jubilee. Originally coined in Deuteronomy and Leviticus, Jubilee refers to forgiving of debt. Not being a student of the Bible, I shouldn't try to interpret the reasons why it became law in the days of the Old Testament; but being a student of the Housing Bubble, I think I can weigh in on what it means for price discovery as we embark on the "C" Wave of the real estate market collapse. One look at the Case-Shiller Housing Index and you can see that calls for a bottom here or even another 10% lower is wishful thinking under the theology of Bob Farrell's 10 Market Rules to Remember. Household Debt Ratio John Mauldin has written several thoughtful commentaries on how the carelessness in mortgage underwriting during the bubble will continue to create enormous friction in the foreclosure process, while revealing who the rightful owners are for much of the paper gone bad. Suffice it to say that the Financial Crisis still has some life in it from those perspectives. But I am more interested in how this will play out for the household. After all, I have been insistent that the Household Debt to Disposable Income Ratio has to revert to the mean with dramatic speed, much like oil prices did after that last bubble peaked. Back in the late 1930s, after the last secular credit collapse, the debt-to-income ratio bottomed below 30%. It spent the next 70 years climbing, finally in exponential fashion, to almost 140% before the housing/mortgage bubble burst in 2007. In order to get back even to high double digits, enormous amounts of debt will have to go away, because income growth cannot occur that fast even in the best of circumstances. And at the household level, mortgage debt is pretty much where it's at.
So, how do we get there? I suggest that the only way to get there is through massive mortgage modification, whereby lenders are constantly marking their asset to market, which is 80% or 90% of the market value of the collateral. I am talking about offering the borrower a principle reduction to less than 100% of the appraised value and at an accompanying market rate (currently about 4%), just to deter the homeowner from sending in the keys. This is going to be big. We're talking trillions of dollars.
But why will the lenders do this? I believe that Mr. Market will leave them no better choice. Let's start with an example: an 80th percentile 55-year-old with $150,000 household income buys a $450,000, 4-bedroom house on a golf course in Tampa in 2006 with $75,000 down and a $375,000 6.5% mortgage. Now the place is worth maybe $250,000 and there are several places in the neighborhood where the lawn isn't being mowed. The homeowner still makes $150,000, but he can't refinance because he can't make the loan-to-value. Then he finds out that the average homeowner in foreclosure won't make a payment of any sort for eighteen months before he gets booted. And why does he have four bedrooms anyway? Nobody ever shows up except at Thanksgiving. They could stay at the Holiday Inn Express. Oh, and by the way, guess what happens to a house on a golf course in Tampa when the owner sends in the keys and shuts off the air conditioning. It turns into a rotten tomato in a matter of months. He feels a little bit like a chump. Homeowner 'Boxed In' I would argue that the lenders and mortgage servicers really want to avoid foreclosing at all costs…because of all the costs. They own more empty houses than they can sell by their freshness date, so why not kick the can down the road until the market improves? But the guy in the above example is boxed in. He reads about affordability being at all-time highs, but he is trapped at 6.5% on $375,000 in debt on a (hopefully) $250,000 pad! Did you know that the Mortgage Debt Relief Act of 2007 allows homeowners who stiff their lender to exclude the debt forgiveness from ordinary income for up to $2 million through 2012? Did you know that, before that, when you told your lender to shove it, the IRS issued you a 1099 (subject to ordinary income rates) for whatever the lender wrote off as a loss on the foreclosure or short sale? No more. At least until 2013. So perhaps "strategic defaults" will start driving the market at the margin. Maybe Wells Fargo won't care that you just stiffed Bank of America when you make a 0% down offer at $250,000 for the place across the street that they own. Bank of America has no recourse other than their collateral. Oh, and serve that with a 4%, 30-year fixed rate, if you please. My guess is that Bank of America intervenes by modifying so they don't end up with the rotten tomato. How is that for taking knife to the Debt to Disposable Income Ratio? I have thought of many reasons why lenders would not want to cooperate in this type of transaction, but sooner or later, Mother Nature shows up in the form of Mr. Market and makes a mess out of convention. It almost seems absurd to expect the process to be orderly when we just experienced the biggest, broadest credit driven bubble in human history. On the bright side though, whatever clears the market quickest is probably the cheapest solution for everyone involved. By marking the mortgages to the market, the lender gets a big piece of investment back and lives to fight another day. The homeowner, who lost all his money, can start putting one foot in front of the other again too. Price Discovery All this leads to the question of what such a process would mean for price discovery. On the positive side, it would keep a lot of supply (no pun intended) off the market and increase the disposable income for all those households who end up making lower mortgage payments. On the negative side, it does create a bit of a "Pandora's Box" problem, as this much of a write-down at the margin would do little to improve demand while reemphasizing the imperative to downsize. And most homeowners are hanging in there hoping for the same recovery that the lenders are anticipating. Much would depend on how distressed the process becomes and how severe the impairment to the banking system. There would be an enormous amount of pain and conflict between parties. One way or another, we have a long way to go in this new, deflationary paradigm. Principle reduction appears to be the most likely part of process. (If you'd like to have Rick's Picks commentary delivered free each day to your e-mail box, click here.) Rick's Picks is a trading newsletter for stock, gold, silver and mini-indexes. All trades are based on the proprietaryHidden Pivot technical analysis method.
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| QE2 & The Great Misdiagnosis Posted: 26 Nov 2010 06:37 AM PST By Jim Willie CB, Golden Jackass Subscribe: Hat Trick Letter The backdrop has turned dire on several front simultaneously. The great millstone around the USEconomy's neck continues to drag it down. CoreLogic reported 2.1 million units have created a swamp in Shadow inventory of the housing market. That equates to 23 months inventory, whereas normal is 7 months. They tallied the growing tumor of bank owned properties as a result of home foreclosures, also called the REOs (real estate owned). Look for no housing market recovery for at least another two years. Starting in summer 2007, the Jackass forecast each year has been for another two years of housing market declines, all correct. Ireland might be squarely in the news, but the big enchalada is Spain. The Irish banks have presented a grand headache for the European banks, with a $150 billion exposure. Ironically, Ireland has done more to reduce its budget spending effectively than any EU member nation, yet is left to twist in the soft rain. They cut their government budget by 20%. The USGovt budget grows every year without remedy or remorse. Few seem to remember that Irish fund managers lost the German civil service pension funds a couple years ago, a source of hidden tension and great resentment. Spain will rock Europe and the Euro currency in the springtime. The gold price consolidation will center on the Spaindebt crisis hitting fever pitch, with the Euro hit. Then again, perhaps a mammoth new wave of European gold demand will neutralize any USDollar stability. On Tuesday this week, the Euro fell by 200 basis points, but the gold price was stable like a rock. That is notable strength. But the bigger story of strength is with silver. The round robin of destruction to major currencies that makes the Competing Currency War, the race to the bottom in rotated currency debasement, it will lift gold & silver in a round robin of strong demand. MISDIAGNOSIS: INSOLVENCY NOT ILLIQUIDITY The US bankers often go home to mommy and order a giant slosh of monetary inflation whenever in deep intractable trouble, like after the previous mistake in QE1 when ordering a giant slosh of monetary inflation. The USFed, led by the academic professor with no business experience, has ordered a fresh supply of gasoline from a lit fire hose, but he does so on a collapsing building. Bernanke has very erroneously diagnosed lack of liquidity within the system to be the underlying problem. He has prescribed a huge swath of 'free money' to be sent into the bond market as a solution. He has prescribed that cheap money continue to be delivered to the USEconomy. Bernanke has failed to notice the insolvency in banks, and has failed to notice that 0% has yet to prompt any revival in lending among banks. Bernanke is fighting INSOLVENCY with LIQUIDITY for a second time after learning nothing the first time. The USTreasury 10-year yield has risen from a grand bond market dare, not at all from evidence of growth. Bond players dare the USFed to create another $1 trillion in new money. In no way does another lift in retail spending constitute a recovery. Household insolvency rises every month from worsening home loan balances. The USFed wants households to spend more on borrowed funds, yet they have depleted home equity and vanished income security. No, US bankers are confused with their wrecked financial engineering aftermath and the broad banking system insolvency that they refuse to acknowledge or discuss. Ever since the April 2009 decision by the USCongress to bless the falsified accounting practices by the Financial Accounting Standards Board, the big US banks have masked their ruined balance sheets, sold stock for their dead entities, and pretended to act as banks. Instead they are mere carry trade shells taking advantage of the USTreasury yield differentials, and storing the cash profits in the USFed, where it earns interest. Finance minister Wolfgang Schauble from Germany was hostile in public remarks toward the desperate monetary decisions. At the recent G-20 Meeting, Schauble called USFed Chairman clueless openly (his word), describing his policies as reckless (his word). He ridiculed the USGovt approach to urge China and Germany to reduce their trade surpluses. Take surpluses as signs of success and competent industrial and policy management, where the US is void. He gives his nation credit for a strong competitive industry. He cites a direct contradiction. Schauble said, "The American growth model, on the other hand, is in a deep crisis. The United States lived on borrowed money for too long, inflating its financial sector unnecessarily, and neglecting its small and mid-sized industrial companies. There is no lack of liquidity in the USEconomy, which is why I do not recognize the economic argument behind this measure." Exactly on both counts!!! The USFed is fighting insolvency with liquidity rather than debt restructure for a second time, after learning nothing the first time. The US economists have lost their way so badly, that they no longer comprehend the concept of legitimate income. The US counselors push for putting more cash in consumer hands, regardless of where it comes from. Call it heresy, or call it incompetence, or call it blindness from the Keynesian bright lights that burn bright in the inflation laboratory. New money does not cure an insolvent banking system or insolvent households. No sterilization of QE2 is in the plan, to serve as protection for the USEconomy. Not in QE2!! My forecast is for the hollowing out of the USEconomy from a massive cost drain with puny export benefit, compounded by continued income erosion. Price inflation will be labeled as growth, even income growth, the chronic sins. The borrowing costs have been near 0% for 18 months with no economic response, making Bernanke's points again vacant, myopic, and deficient. He is fighting an endemic insolvency problem with amplified monetary inflation. A voice with hint of wisdom came from former New York Fed President E Gerald Corrigan Corrigan. He said, "Even in the face of substantial margins of under-utilization of human and capital resources, efforts to achieve an upward nudge in today's very low inflation rate make me somewhat uncomfortable." His experience came under ex-USFed Chairman Volcker during the late 1970 decade, who raised interest rates to 20% to combat inflation, pushing the economy into the 1981-82 recession. That was the final chapter of anti-bubble USFed chieftain linneage. Since the Greenspan Era, it has been full speed ahead with inflation engineering, asset bubble creation, erudite apologists, permitted bond fraud, careful collusion, and reckless management. They have systemic failure to show for it. The claim by Bernanke and a supporting chorus of economists that QE2 will bolster USEconomic competitiveness is fallacious, and patently backwards as usual. It will push the US further into a wasteland, a vestibule to the Third World. The higher cost structure uniformly imposed will render great damage in a profit squeeze for businesses and discretionary spending squeeze for households. New money does not cure an insolvent banking system or insolvent households. It presents a new problem of significiant price inflation. They want it, so they can call it growth!! Producing high value products efficiently and cost effectively makes the nation competitive. Imposing a fair tax structure that is stable, reasonable, and with proper incentives makes it competitive. Having an active legal prosecution staff to combat bond fraud and defense appropriation fraud makes it competitive. Having a strong education system makes it competitive. A weaker currency raises the cost structure, increases import costs, and assists the export trade if a nation has one. The United States has shipped a large segment of it away in the last 10 years to China, after having shipped a larger segment away in the 1980 decade to the Pacific Rim. Not only did the US promote its financial sector, but it denigrated the industrial sector as dirty. By removing a significant portion of the nation's capacity to generate legitimate added value income, the USEconomy was left vulnerable to debt overload and insolvency. The US Ship of State was hoisted on its own petard. For those ignorant of naval terminology, that means the US killed itself in a great display of cannon backfire in recoil. The QE2 initiative will be disastrous from many angles, certain to push the nation into an Inflationary Depression, from the current chronic Deep Recession. MARGIN HIKE AS FINAL LIMP WEAPON Increases to the silver margin requirement in futures contracts should be viewed as the final act of desperation. It is a device to control price within the paper silver arena. However, in a grand backfire, a higher margin produces a lower price for the physical buyers, who eagerly step up to place and fill orders. The margin maintenance hike on November 9th was six times greater for silver than for gold. The Big Four US banks are caught in an historically unprecedented short squeeze, bleeding $billions. Tuesday November 9th saw a powerful gold & silver price downdraft. The COMEX raised the silver margin requirement in a bland attempt to slow a raging bull market amidst a broken global monetary system. One week later they raised the margin again for both monetary metals. The price downdraft continued. But some calmer winds in Europe enabled precious metals prices to recover. Silver has snapped back much more than gold. The Chicago Mercantile Exchange raised the margin requirements for silver on November 9th. It was highly motivated. They wanted to prevent a blowout upside move in silver past $30 before Christmas, and to relieve some of the pain to the Big Four US banks. Unlike gold & silver, no margin hikes were doled out for soybeans, corn, sugar, or cotton despite their concurrent price gains. The message is clear, that desperation has set in relative to precious metals, as conditions are breaking down badly. The CME sent out a memo raising the margin maintenance requirements for silver futures by up to 29%, from $5000 to $6500 per contract. Initial positions have a slightly higher margin. It is their right, being the market maker. Let not their fast disappearing silver inventory deter their path. Less than two weeks later, the CME raised the silver margin maintenance requirement another 11.5% to $7250 in a sign of desperation. They also raised the gold margin, but only by 6% from $4251 to $4500 in a symbolic gesture. The CME motive is less about risk mitigation concerns and more driven by the desire to restrain the bull market movement. The investment world will regroup long before Christmas, like in the next week or two. Just when the European woes focused on Ireland, and a rescue aid package seemed in the offing, the silver price jumped upward by $2.00 on a single day, November 18th, a strong telegraph across the paper-physical silver table.The Powerz cannot halt the silver juggernaut, which will see $30/oz by January. If a double hike in the silver margin is the best they have, then they are truly whistling in the grave yard. The demand for gold is global, diverse, and motivated by the gradual disintegration of the monetary system. Sovereign bonds that support the major currencies are in deep trouble the world over. The consensus actions toward Quantitative Easing, also known as hyper monetary inflation, have boosted demand for gold & silver monumentally in a natural offset. Dozens of nations and billions of people around the world are slowly awakening to the grand deception of money itself and the crumbly foundation that make up fiat currencies. They are losing money in supposedly safe government bonds, a trend without precedent. Most of Southern European nations will declare debt default within two years. Foreign central banks are attempting to diversify their oversized US$-based reserves without causing a run on the USDollar. Gold is gradually being seen as part of the solution, at least in private wealth preservation. Gold is the new reserve safe haven asset, since it is true money.
Important changes have come to the precious metals market. Silver has taken a leadership role. It has broken out in Europe to new highs. Its snapback was impressive after the weak-kneed COMEX hike in margin requirements. Silver is no longer only seen as just an industrial metal, a commodity, but rather as a safe haven alternative, a monetary brother to gold. The European Union bond fracture has wrought great damage to the structural foundation of the global monetary system. It is exposed as having a debt backbone, a paper spine fashioned of weakness, vulnerable to central bank abuse. Money is fleeing the EU Govt bonds, and fleeing even to some extent the USTreasurys. Horrible publicity has befallen the Big Four US banks with class action lawsuits at a time when Asian buyers have targeted the silver market.The Asians of unidentified origin (probably China) have descended with waves of layered orders, exploiting the discount offered from the paper impact after the margin hikes by COMEX officials. Recall that the US & China are locked in a trade war. The louder the USGovt accuses China of currency manipulation, the more they bid up Gold & Silver on the quiet. The strongest months of the year for Gold & Silver are December and January. The margin hike seemed designed to interrupt momentum. It only delayed the next powerful upward thrusts in price.
TITANIC BATTLE OVER PHYSICAL METAL The nature of the Gold & Silver markets is two-headed. The price discovery aspect is driven by the paper futures contracts. Intended as devices to aid in pricing, to protect from drawn out periods under which business is conducted with commitments made, the paper futures arena turned into a monster two decades ago. The paper tail has led the metal dog, a backwards condition. Some important developments have taken place in recent weeks and months. Secure allocated account holders at both the COMEX and LBMA have forced the situation, demanding physical delivery of futures contracts. They openly cite their distrust, as suspicion is aroused of improper lease of allocated accounts. Huge delivery demands have come from Chinese and Arab investors. The remarkable new wrinkle is that silver paper price ambushes have led to strong silver physical purchases. Stories abound of an Asian assault on the silver market underway. Interviews granted by those with direct information have appeared on reliable websites. The skirmishes result in backfires to the paper market mavens, as they offer repeated discounts to the Asian physical buyers, who grab at the discounts with layered orders, as reported. Therefore, the actions by the paper mavens works to accelerate their own destruction. Investors should hope for occasional ambushes, so that the physical side can reload and obtain more physical metal at lower prices. Also, with occasional bouts of consolidation, the price advances are more stable. A very bizarre pathogenesis of the silver paper market is evident, hidden from view. The London contact source has shared details to the inner workings of the Asian silver market assault on New York and London with an update. The Asian buyers have been squeezing the shorts in the silver market, causing great pain as the silver price has risen 50% since late summer. After the drop in price from a brief touch of $29 down to the low $25′s, the physical market has responded with strong demand. Keep in mind that the paper silver market is the opposite, a key point. The bizarre anomalous paper market results in more selling when the price drops, the opposite to normal. The ambush catches the leveraged players off guard, forcing paper position sales in sudden liquidations. So a collision is in progress. The paper arena cannot produce enough silver after the raids push down the paper price in order to relieve their tenuous short condition. By pushing down the paper price, they must bring to the table the discounted silver at the lower price, in physical deliveries. The paper market is playing directly into the hands of the physical participants who want to drain the exchanges of their bullion metal. The credibility of the London source was enhanced by the quick jump above $26 as he predicted earlier in interviews. He described lines being crossed between the paper and physical orders, stops, covers, and delivery demands. Details are provided in the November Hat Trick Letter. Great intrepid work by King World News for developing the valuable source. A staggering rise in physical demand is noted from Chinese & Indian buyers. Physical demand growth more than offsets the miner de-hedging, a process almost wound down fully. Investment demand globally is skyrocketing. According to the World Gold Council, global demand for gold bars climbed by over 30% between 2Q2009 and the second quarter this year. De-regulation in China might permit much broader gold ownership. That would unleash huge demand and pressure the Anglo bankers. Chinese demand has been strong for years, soon to reach a higher gear. With domestic mine output not expected to grow much next year, China will tap the global market, pushing up the gold price. New rules in China have already enabled tremendous increases in private gold demand, whose volume surpasses and overwhelms European central bank sales. The Chinese gold demand in 2010 will be a mammoth consensus estimated 500 tonnes. It will rise by as much as 20% in the year 2011, enough to surpass India as the top consumer in the next three years. Demand is forecasted to rise to around 600 tonnes in 2011, according to a Reuters survey of five analysts. Recent Chinese Govt restrictions imposed on property investment and speculation in other markets have resulted in more money going into gold and jewelry, which seems a calculated policy by the crafty government officials in Beijing. Gold will not burn their citizens in a bubble bust. Jewelry demand has risen by an average of 7% annually in steady fashion. Investment demand for gold in China has surged by 60% in 2009 to 150 tonnes. On an annualized basis, China is on course to import 118 tonnes of gold through Hong Kong. Domestic gold mine output is expected to be flat inside China for 2011, the first time in years. Couple strong demand and flat output, and big net import of gold bullion will result. The Peoples Bank of China announced in August a relaxation of gold rules, a prelude to broader reform of financial markets pertaining to bonds and currencies. Banks would be permitted to export and import more gold in a program to drive the development of their market in the precious metal. Regard this as a direct assault on the COMEX in New York and LBMA in London, since huge physical gold demand will ramp up to a staggering high level. The PBOC wants to draw gold tonnage into their country without disrupting market equilibrium unduly, as it diversifies more of its burgeoning $2.6 trillion in FOREX reserves. STATE VERSUS FEDERAL BATTLE A great battle is being waged, but not presented in the light preferred by the Jackass. Witness the Tenth Amendment battle by the states versus the USGovt on the federal front. The battle has myriad microcosms in the mortgage court decisions made against the big Wall Street banks. So far the decisions favor the people, but the USCongress is busy preparing an unconstitutional bill to permit interstate contracts and possibly to whitewash any mortgage contract fraud. Bank lobby funds flow briskly to the craftsmen of the legislation. If challenged, such a bill might not withstand a constitutional battle. Sheeple justice versus mega-banks could reveal a quintessential states rights battle versus the federal govt controlled by the banking syndicate. Local judges are taking action against obvious criminal and predatory behavior by the big US banks. Some Florida homeowners were foreclosed by the big banks when no home loan was active in force. The Robo-Signers have captured much attention in document forgery. People who challenge are often winning their homes free & clear. Fraudulent attempts to foreclose and seize homes are being interrupted by those who challenge, and demand to prove property title. Legal precedents are set. Banks are worried. Regard the battle as an extension of the Tenth Amendment challenge, with proxy brigades doing battle. The big US banks represent the federal authority when a certain lens is applied. The struggle in my view reveals a bigger macrocosm, where the states are pitted against the federal government. The proxy warriors for the states are local courts, where mortgage jurisdiction lies. The proxy warriors for the USGovt are the big Wall Street banks, whose syndicate has taken control of the national government bodies in their financial ministries. The states are fighting and winning the battle on home property challenges. Recall that in separate movements, 20 states have invoked the Tenth Amendment in a struggle to wrest back control from the New York and WashingtonDC syndicate. Their turf struggle has been over taxation, waged war, national security directives, border immigration, even threats of pandemic. Witness numerous local battles, erupting conflicts that serve as substitutes for state revolt against the encroaching federal apparataus. The legal structure favors the states. Watch the movements in reaction in counter-attack. What comes next might be Fascist Business Model corrupt extensions. The November Hat Trick Letter includes a review of some legal cases and their implications, which seem to be centered in metropolitan New York City. Some confusion might come from different decisions in different jurisdictions that lack consistency across the 50 states. That lack of uniformity might work to the advantage of upholding state rights, since the nation has always favored individuality of the states, a strength from diversity. Either way, a gigantic hairball is building within the system pipelines at a time when the majority of states are ruptured with huge budget shortfalls and pension shortfalls. They point a finger to the Wall Street corner where the housing & mortgage bust rendered damage. They point a finger to the USGovt colossus where the bloat exists, the deficits have expanded, and the control is centered. By the way, notice how Bank of America quietly is approaching the funeral parlor. Word from my sources tell of Wall Street buying heavily the Credit Default Swap contracts for Irish and Portuguese Govt debt, in order to lift the bond yields enough to create a
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| Posted: 26 Nov 2010 06:30 AM PST This week, Americans sit down in their sturdy chairs to enjoy a national feast. Businesses are shut down. Congress is adjourned. For one day at least, citizens can enjoy their peace. In every hamlet, urban ghetto and rank suburb they gather, sacrificing turkeys to their deities, whoever they might be. Before they tuck in, they bow their heads and give thanks. But for what? There have always been two parts to the Thanksgiving holiday – one sincere and personal, the other national, fraudulent and delusional. One of the first Thanksgivings took place in 1623. The colony at Plymouth Rock had barely survived. The supply ships from England had not brought enough food. Harvests were poor. People died of hunger, cold, disease and malnutrition. Like all central planners, Governor William Bradford blamed it on the weather. Then, when communal farming was abandoned, what luck, the weather improved: "The Lord sent them such seasonable showers, with interchange of fair warm weather as, through His blessing, caused a fruitful and liberal harvest…for which they blessed God. And the effect of their particular [private] planting was well seen, for all had…pretty well…so as any general want or famine had not been amongst them since to this day." Thanksgiving wasn't made a national holiday until 1863. Then, it celebrated not the success of the American experiment, but the end of it. Imagine a battle today in which 500,000 American soldiers died – almost as many as died in WWI and WWII combined. As a percentage of population that was the death toll at Gettysburg. That was what Lincoln chose to follow with a day of thanksgiving. Thanksgiving for what? "…peace has been preserved with all nations, order has been maintained, the laws have been respected and obeyed, and harmony has prevailed everywhere [EXCEPT IN THE THEATRE OF MILITARY CONFLICT]." Emphasis added…. [And we] "commend to his tender care all those who have become widows, orphans, mourners or sufferers in the lamentable civil strife in which we are unavoidably engaged." Lincoln should have proclaimed a day of mourning. The battle and the War Between the States were not glorious achievements. They were national disasters. The fondest hope of the founders – that people could decide for themselves what kind of government they would have – died on the battlefield. But the nation's course was set. America may be in the New World, but it has one of the oldest governments on the planet. France, Italy, Germany, India, China – all have newer, fresher governments, as much as 200 years younger. Newer economies bustle with more energy and money too. America appears near exhaustion by comparison. China and India eagerly court the future; America seems desperate to hold onto the past. Her armies are stretched over the globe, trying to prevent anything really new from coming about. At home, her politicians and economists try to prevent anything old from going away. At great cost, banks and businesses, as well as the old timers themselves, are propped up…supported…and sustained. Still, the typical American has much reason for gratitude. His house is bigger and gaudier than ever before. His car is a plush monster. He has more than enough to eat. He has gadgets and gizmos galore – including a machine that blows the autumn leaves off his asphalted driveway. And behind him is still the mightiest government the world has ever seen – ready to protect his vital interests in the Hindu Kush as well as Wall Street. Yet, all his blessings seem to come with fuses attached. If the winter is severe, he may not be able to heat his palace. If the price of gasoline rises, driving his land barge could ruin him. If he looks in the bathroom mirror, he might get depressed. Our own polling tells us that 1 in 10 households will give thanks for their government this week. They should reconsider. Didn't the federal government tempt them to buy a house by giving him tax breaks and subsidizing mortgage rates? Didn't it egg them on to spend money by reducing the value of the dollar by 97% over the last 97 years? Didn't the feds stymie every attempt to correct their over-consumption by cheapening credit and stimulating consumption even more? And isn't it the government that has run up a net national "finance gap" of more than $200 trillion…so that each newborn American faces a burden of $700,000 in debt even before his first diaper has been changed? And now, the government practically mocks him in an outrageous way. Ever since an amateur terrorist set his underwear on fire, the airport polizei are determined that a man should have his genitals checked before he boards an airplane. Thank god the would-be terrorist didn't tuck his explosives into a body cavity! It is fascinating from an ethnological point of view; the poor American has been led along, put upon and knocked around so much. Foreigners must look on in amazement, wondering how much abuse he'll take. And now, his head bent over…the "butterball" turkey waiting for him…the American must feel the weight of his blessings. He is broke. He may lose his job. His country is in decline, headed for bankruptcy and his leaders are incompetents and scoundrels. To make matters worse, his central bank is keen to commit a new act of sabotage – intentionally trying to undermine his savings…his labor…and his standard of living. Like Lincoln, he can say to himself…except for that…everything is okay… Regards, Bill Bonner Yeah, Thanks A Lot! 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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| Two years after the credit-crisis panic in the autumn of 2008 Posted: 26 Nov 2010 06:22 AM PST 09 March 09 – 19 November 10 Scorecard & Dow Jones Total Market Group's (DJTMG) 52 Wk Highs & Lows Mark J Lundeen [EMAIL="Mlundeen2@Comcast.net"]Mlundeen2@Comcast.net[/EMAIL] 24 November 2010 Two years after the credit-crisis panic in the autumn of 2008, and 21 months after the March 2009 stock market bottom, let's take a look at what's hot and what's not. Using: [LIST] [*]the Dow Jones Total Market Group: ( yellow and grey) [*]various major market indexes: (Red), [*]inflation indexes, the national debt & US Currency in Circulation: (Blue), [*]Metal prices: (Dark Green) [/LIST] I created the following table to give us a snapshot of the percentage gains of the market from two particular issues of Barron's: the bottom of the March 2009 stock market panic and now. But understand that while early March 2009 was a bottom for the stock market, gold and silver saw their bottoms in early November and late October, while copper in late Dec 2008. As the table...
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| People's Bank of China Researcher Calls on U.S. to Sell Gold Posted: 26 Nov 2010 06:15 AM PST "The European debt crisis goes viral. China and Russia drop the dollar in bi-lateral trade. Mark Hulbert very positive on gold stocks. John Embry and Rob McEwen speak out. A long interview with silver analyst Ted Butler... and much more. " Wednesday and Thursday in Gold and Silver Not a lot happened on either Wednesday or Thursday worth spending much time on. The gold price spent most of that 48-hour time period within a ten dollar price range... and at this rarified price, that's basically flat. The red line on the chart is Wednesday... and the green line is Thursday. Silver's action during the last couple of days is hardly worth mentioning, either. There was a bit of a sell-off at the London p.m. gold fix on Wednesday... but the price recovered quickly. Silver spent most of those two days within a 25 cent price band... less than a 1% range. Nothing much to see here, folks. The dollar didn't do much either... trading basically unchanged since...
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| Last Minute After Hours Dump Leaves Investors On Edge Ahead Of "Dual POMO Bail Out Monday" Posted: 26 Nov 2010 06:14 AM PST
Earlier we pointed out that today was trending to be one of the lowest volume days in history. A volume surge accompanying a panic dump into the close managed to pull the daily volume just barely higher than last Xmas eve (though still about 60% of last Black Friday). What is more relevant is that just after the market closed, the bottom fell out. ES closed at the lows of the day (contrary to amusing flashing and epilepsy-inducing CNBC "breaking news" propaganda stating just how much better compared to the day's low the S&P was trading at EOD) as the entire world woke up just after 1 pm realizing that Monday has that very deja vu-ish September 15, 2008 aftertaste. Not surprisingly, VIX exploded to the week's highs, well past the Korean war threats, and a 14% move in one day. And, yes, that old backstop gold, pulled a VIX. What is most relevant, is that something big is happening just behind the scenes: ZB volume explodes to 608K, while the CME Ultra Treasury volume of 349K surpasses the prior record of 237k. Monday may just be a very interesting day as faith in the bailout machinery no longer works, and the Fed's two POMOs will mark the point where Brian Sack officially jumps the shark. ES:
VIX:
and Gold:
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| Police State USA: TSA Gestapo Empire Posted: 26 Nov 2010 06:03 AM PST by Dr. Paul Craig Roberts It doesn't take a bureaucrat long to create an empire. John Pistole, the FBI agent who took over the Transportation Security Administration on July 1 told USA Today 16 days later that protecting trains and subways from terrorist attacks will be as high a priority for him as air travel. It is difficult to imagine New Yorkers being porno-screened and sexually groped on crowed subway platforms or showing up an hour or two in advance for clearance for a 15 minute subway ride, but once bureaucrats get the bit in their teeth they take absurdity to its logical conclusion. Buses will be next, although it is even more difficult to imagine open air bus stops turned into security zones with screeners and gropers inspecting passengers before they board. Will taxi passengers be next? In those Muslim lands whose citizens the US government has been slaughtering for years, favorite weapons for retaliating against the Americans are car and truck bombs. How long before Pistole announces that the TSA Gestapo is setting up roadblocks on city streets, highways and interstates to check cars for bombs? That 15 minute trip to the grocery store then becomes an all day affair. Indeed, it has already begun. Last September agents from Homeland Security, TSA, and the US Department of Transportation, assisted by the Douglas County Sheriff's Office, conducted a counter-terrorism operation on busy Interstate 20 just west of Atlanta, Georgia. Designated VIPER (Visible Inter-mobile Prevention and Response), the operation required all trucks to stop to be screened for bombs. Federal agents used dogs, screening devices, and a large drive-through bomb detection machine. Imagine what the delays did to delivery schedules and truckers' bottom lines. There are also news reports of federal trucks equipped with backscatter X-ray devices that secretly scan cars and pedestrians. More Here..With such expensive counter-terrorism activities, both in terms of the hard-pressed taxpayers' money and civil liberties, one would think that bombs were going off all over America. But, of course, they aren't. There has not been a successful terrorist act since 9/11, and thousands of independent experts doubt the government's explanation of that event. Entire Western Financial System Near Collapse? 
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| Should You Buy Gold From the TV or the Radio? Posted: 26 Nov 2010 06:01 AM PST By Dr. Steve Sjuggerud Friday, November 26, 2010 "I really felt like I was suckered," Zoanne Martz told ABC's Nightline… Ms. Martz bought gold coins from a TV ad. The price of gold doubled in the three years she owned them. When she recently lost her job, she wanted to cash them in… but to her shock, she found the coins were now worth less than she paid. Joe Kismartin bought gold coins from the same company… with a similar result. "When Joe Kismartin took his coins to a local coin ship a few months [after buying]," Nightline reported, "he was told his $5,000 worth of gold coins were worth only about $2,900." I would never buy my gold from the guys who advertise on TV or radio. The reasons are almost too numerous to list. But they come down to the typical sales practices of these outfits. Like car salesmen, gold salesmen have so many angles they can get you with if you don't know any better (and most people don't)… Let's say you call in t...
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| LGMR: Falling Silver & Strong Gold Signal "Chinese Slowdown" Posted: 26 Nov 2010 05:59 AM PST London Gold Market Report from Adrian Ash BullionVault 09:20 ET, Fri 26 Nov. Falling Silver & Strong Gold Signal "Chinese Slowdown" as Commodity Currencies Hit Together with Euro THE PRICE OF GOLD fell hard against the US Dollar in London on Friday, unwinding the last of this week's earlier 2.1% gain as global stock markets and industrial commodities fell across the board. The silver price dropped 3% from the start of Friday's "thin and quiet" trading in Asia, as one Hong Kong broker described it. Gold priced in Australian Dollars hit a fresh 4-month high, however, as the "commodity currency" fell hard on the forex market. Priced in Euros, physical gold bullion held onto this week's 3.3% jump, as Spanish government bonds bucked a rise in Greek and Irish debt, falling in price and pushing the 10-year yield to a Euro-record above comparable German Bunds. "There's no way back from the Euro," declared German central-bank chief Axel Weber this week. A break-up of the 16...
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| The Gold Price Isn't About Gold! Posted: 26 Nov 2010 05:46 AM PST Since 2000, the gold price has risen from $300 to $1,400 an ounce. There are several more important reasons than its being 'just a commodity.' The strongest driving force behind gold's rise in the last four years has been investment demand.
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| Posted: 26 Nov 2010 05:42 AM PST
Submitted by Vega Strategies With 'Synthetic Banking' Just Around the Corner Enjoy 'The Liechtensteiner' on 'Fed Monday' Swiss bankers know that the sharpest pencils in the business are wielded by the quaint and humble Liechtensteiners who run the choicest billions of the trillions of global HNW money out of their storybook village of Vaduz nestled splendidly amidst the Alps. And, lest anyone confuse such a pristine setting with a lack of 'street smarts', know that these expert practitioners in the 'financial arts' hovering there watch the Fed with the keen eye of the 'raven', studying every nuance and analyzing every utterance of the 'jujumen' of the FOMC. Around Lindenplatz, the 'ravens' hold two 'truths' to be self-evident, that the Fed's 'quantitative easing' program represents a 'stimulus' for a most pernicious kind of 'stock market manipulation' the likes of which has never been seen before, and, that the Democratic Party's 'Dodd-Frank financial reform' represents a 'stimulus' for a most sociopathic strain of 'money manager capitalism' the likes of which will never be seen again. Everyone knows that the Alps are the ancestral home of 'financial derivatives' and 'structured finance', that the Swiss have a taste for 'fine risk' as well as 'fine chocolate'. So it is not surprising to find a Liechtensteiner in California who has crafted the 'next big thing' in 'structured finance', coming soon to Wall Street, and it will 'donk' the 'frodd' right out of Dodd and Frank. It's called 'synthetic banking', and it's 'buy-side' in emphasis, it goes where the 'CDO', having been originated by the 'prehistoric financial engineers' at Drexel Burnham Lambert during the bygone era of 'the random walk hypothesis', born out of 'sell-side' passion, could never go, to that heretofore hypothetical state of 'continuous risk management', far more suitable to the hyperspeed era of 'the neurotic markets hypothesis', bypassing the 'superciliousness' of this 'lawyers and accountants relief act' that Frank and Dodd have wrought out of 'whole cloth'. Though 'replicable and scalable' in any of many ways like the 'CDO' before it, according to this California Liechtensteiner, the basic structure of a 'synthetic bank' compresses into the very short-term the form and function of a 'bank' without the 'organizational risk' that weighs so hard on the Fed's 'primary dealers'. For example, a 'synthetic bank' raises $100 million in 'synthetic tier one capital securities' and sells another $900 million in 'synthetic perpetual subordinated capital securities'. This 'synthetic bank capital' is then invested on an '80/20' basis in cash Treasuries and gold bullion, transforming the 'synthetic bank capital securities' into 'gold-backed securities' along the same logic that classifies 'CHF' as a 'gold-backed currency'. That $1 billion yields cash flow at a 100-200 basis points annual rate, but also serves as the 'margin collateral' to back a large desk for 'synthetic lending' into 'beyond investment grade' credits and a smaller desk for 'synthetic trading' of 'equity derivatives' that are 'beyond economics'. Writing $15 billion in 'CDS' on the largest and most well-managed highly-creditworthy multinational corporations generates the 'synthetic loan' portfolio, its thin premiums expanded through 'commercially prudent leverage' to generate more than sufficient cash flow to pay the holders of the 'synthetic perpetual subordinated capital securities' an 'excess excess fixed income return'. And with the 'management fees' covered by sound cash Treasuries management and smart 'gold bullion banking', the 'synthetic bank' deploys its 'synthetic traders' with a '$5 billion wallet'. 'Synthetic trading' zeroes in on 'equity derivatives relationships' where 'economics can be hedged away', situations involving the 'fundamental elements of tomorrow' and their 'higher order statistical moments' that securitize themselves into 'higher order derivatives', all of these, in such 'industries' as food, energy, medicine, semiconductors, communications, transportation, government, yes, government, and even the weapons of war, are absolutely and necessarily important irrespective of 'economic cycles'. 'Synthetic trading' is an 'engineered process', research-intensive, value-driven, and fundamentally-oriented, a prudently-undertaken transactional process with all necessary and appropriate incentives and disincentives firmly in place, along the lines of the 'post-2008' Goldman Sachs that just reported 'winning' on 64 out of 66 trading days in 10Q3. It is 'managed' in strictest harmony with the 'financial objectives' of the 'synthetic bank', there are no 'rogue traders', there is no 'noise trading' or 'lay off the losses' gambling posing as 'trading', there are no 'traders' at all, just 'synthetic traders' immersed in 'continuous risk management' with no 'exchange trading' or 'position management' costs or risks. Employing 'commercially prudent leverage' within 'continuous risk management', even a very modest 'metaphysically certain' 3% return on 'synthetic trading' generates a 100% return to the holders of the 'synthetic tier one capital securities'. Whereas massive 'CDO' volume generated 'ultimately unquantifiable' financial risk that produced 'panic' in 2008, large-scale 'synthetic banking' activity will continuously improve 'systemic risk management' within a far tighter feedback loop beyond the fantastical capacity of any 'macroprudential regulator' conjured up by Dodd-Frank, the 'CDS market' and 'equity derivatives market' that Congress portrays as the 'bogeyman' are actually 'ultra real-time rating agencies' stripped of 'organizational risk'. As a parade example of 'synthetic trading' consider 'The Liechtensteiner'. On Monday, the Fed, on its last legs as a credible institution, seeming more and more the 'mad dismal scientist', will 'double down' with two rounds of 'open market operations', a 'small bang' in the morning followed by a 'big bang' in the afternoon. Around Lindenplatz in Vaduz circa 2010's, where 'things are things', the 'ravens' easily reckon what market strategy is in conformity with the 'underlying strategy-of-strategies' at this market moment in time. The Fed moves the market, so they 'caw caw caw caw' about 'higher order statistical moments' and their 'higher order derivatives'. They 'caw caw caw caw' about an equilateral triangle of VIX and GVZ and EVZ, and how point KCJ makes 'the tetrahedron'. And they calculate 'the tetrahedral trade' from every possible 'financial angle' to 'maximin' the 'trade' and the 'risk'. Knowing the Fed, on 'GM Trades Again Day' last Thursday, any 'birdbrain' could have known to 'buy triangle JCJ GVZ EVZ and sell point VIX' and 'make a mint'. But this 'Fed Monday', the only trading day for the California Liechtensteiner's 'synthetic bank' of three-day tenor, it is left to 'Poe's raven' to make the 'caw caw caw caw' call to 'sell triangle VIX KCJ GVZ and buy point EVZ'. Now go find that 'where next' prime broker probably Swiss that knows his 'higher order statistical moments' to book 'The Liechtensteiner' and watch 'the tetrahedron' generate more money than a 'gaggle' of Goldman Sachs traders 'thrashing about' in the 'really risky world' of Dodd-Frank. 'The Tetrahedron' Trade 'The Liechtensteiner' 'Fed Monday' November 29, 2010 1015 AM 'Open Market Operations' 115PM Short 'Triangle' VKG and Long 'Point' E Vo VIX open Vc VIX close Ko KCJ open Kc KCJ close Go GVZ open Gc GVZ close Eo EVZ open Ec EVZ close VIX net Vn=Vo^2-Vc^2 KCJ net Kn=Ko*Vo^2/Ko-Kc*Vo^2/Ko GVZ net Gn=Go^2*Vo^2/Go^2-Gc^2*Vo^2/Go^2 EVZ net En=Ec^2*Vo^2/Go^2*3-Eo^2*Vo^2/Eo^2*3 'The Tetrahedron' Net Tn=Vn+Kn+Gn+En
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| Myriad Responses to the Global Financial Crisis Posted: 26 Nov 2010 05:34 AM PST Yes, dear reader…we are on the job. Reckoning away… And we are spoiled for choice this morning…so much to reckon with. First, let's begin with the US stock market. Up…down…up again. The Dow rose 150 points, Wednesday. Gold fell $4. What does that tell us? Nothing… Meanwhile, in Europe, poor Ireland is suffering. On Wednesday, it agreed to further spending cuts…and to higher taxes too. Talk about austerity…! These guys will do practically anything to protect their bankers. Bloomberg: Ireland's government said it will cut spending by about 20 percent and raise taxes over the next four years as talks on a bailout of the country near conclusion. Welfare cuts of 2.8 billion euros ($3.8 billion) and income tax increases of 1.9 billion euros are among the steps planned to narrow the budget deficit to 3 percent of gross domestic product by the end of 2014. The shortfall will be 12 percent of GDP this year, or 32 percent including a banking rescue. So far, the Irish people go along…like beasts of burden. Dumbly. Humbly. Fumbly. Whose side is the government on, they must wonder. We watch in amazement…we want to see how far they'll go. Of course, they're not the only ones who seem willing to put up with anything. In the US, the central bank has pledged to reduce the value of Americans' savings…to cut their real incomes…and make everything they buy more expensive. Hey, whose side are they on? A judge in England just handed down a jail sentence to four counterfeiters in Leeds. He said the clink was appropriate because the counterfeiters might have "undermined confidence in the system" and "caused a lot of people to lose money." If you get jail time for that, Ben Bernanke better watch out! Meanwhile, millions of Thanksgiving travelers got to try out the TSA's new "Grope and Fondle" system of terrorism fighting. Yes, the video proof is all over the airwaves…photos of the TSA patting down toddlers and grabbing crotches… How much of this will Americans take? We wonder about that too. Elsewhere, many people have decided they have had enough. Unfortunately, the ones who have had enough were the ones already getting too much – that's right, the zombies. Here's the story from Associated Press: Anger and fear about Europe's seemingly unstoppable debt crisis coursed through the continent Wednesday. Striking workers shut down much of Portugal, Ireland proposed its deepest budget cuts in history and seething Italian and British students clashed with police over education cuts. In Lisbon, strikers all but closed the airport, stranding passengers who couldn't get in or out of the country. "People have to fight for their rights," Moreira, 51, told The Associated Press. "People have to fight against what is happening." Government policies have "sent people into poverty and misery," said union leader Manuel Carvalho da Silva, noting that Portuguese civil servants will see wage cuts averaging 5 percent next year. Italian students occupied university buildings and piazzas to denounce education cuts being debated by Parliament, clashing briefly with police in Rome and blocking five main bridges over the River Arno in Pisa. In Britain, students decried government plans to triple tuition fees. "Education is not a rich kid's game," said Tash Holway, a 19-year-old student in London. "If this keeps up, the entire industry will change. It won't be about talent, but only about who can pay." Tempers even flared at the European Parliament in Strasbourg, France, where British legislator Godfrey Bloom was expelled from a debate on Ireland's financial meltdown after he called a German legislator an "undemocratic fascist." So you see, dear reader, there was too much for us to reckon with. We couldn't help ourselves… Bill Bonner Myriad Responses to the Global Financial Crisis 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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| Posted: 26 Nov 2010 05:32 AM PST
Again, is it down to save the nation or save the banks while it looks like the answer is the save as it ever was? - IleneMemo to Ireland"Tell the EU and IMF to Shove It!" By MIKE WHITNEY, originally published at CounterPunch Imagine that Yasser Arafat had succeeded in ending Israeli occupation and establishing a Palestinian state in the West Bank and Gaza. Now imagine that 10 or 15 years later, new Palestinian president, Mahmoud Abbas, agreed to hand over control of his country's budget to the IMF so his people's future would be controlled by outsiders. Do you think Palestinians would praise Abbas as a patriot or denounce him as a traitor? Irish Prime Minister Brian Cowen is Mahmoud Abbas. He's caved in to the demands of foreign capital and transferred control over the nation's budget to the EU and the IMF. Here's an excerpt from a November 24, article in Reuters:
This is a black day for Ireland. The Irish people will now face a decade or more of grinding poverty and depression thanks to their venal leaders. As soon as the ink dries on the IMF loans, the second occupation of Ireland will begin, only this time there won't be armored cars and Paramilitaries in fatigues, but nerdy-looking bureaucrats trained in the art of spreading misery. In fact, the loans haven't even been signed yet, and already IMF officials are urging the government to cut jobless benefits and the minimum wage. They're literally champing at the bit. They just can't wait to get their hands on the budget and start slashing away. And don't believe the hype about European unity or saving Ireland. My ass. This is about bailing out the banks. The bondholders get a free ride while workers get kicked to the curb. Here's a clip from the Financial Times that spells it out in black and white:
See? Another bank bailout. Ireland is being asked to cut to social services, slash wages, renegotiate contracts, and dismantle the welfare state so that undercapitalized banks in France and Germany can get their pound of flesh. But, why? They're the ones who bought the bonds. No one put a gun to their head. They knew they could lose money if Irish banks went south. That's the risk they took. "You pays your money, and you takes your chances." Right? That's how capitalism works. Not any more, it doesn't. Not while Cowen's in charge, at least. The Irish PM has decided to bail them out; make all the bondholders "whole again." But who made Cowen God? Who gave Cowen the right to hand over his country to the IMF? No one. Cowen is a rogue agent kowtowing to international capital. After he finishes his work in Ireland, he'll probably join globalist Tony Blair on the French Riviera for a little hobnobbing with the tuxedo crowd. It's revealing to watch the way Cowen works, as though the interests of foreign bankers mean more to him than those of his own people. For example, the Green Party withdrew from the government last night calling for new elections, but even though the government is in a shambles, the slippery Taoiseach wants to stay in power long enough to push through a new 4-year budget that will leave Irish workers on the brink of destitution. Who is Cowen working for anyway? This is from the Irish Times:
The prospective belt-tightening measures will include the firing of 28,000 public employees, a boost in property taxes, a 10 percent cut in welfare benefits, and higher taxes on low-wage workers. Cowen believes that taxing low income families is preferable to making billionaire bondholders eat their losses. The whole thing stinks to high-heaven. Is there a way out for Ireland? Economist Mark Weisbrot thinks so. Here's what he thinks should happen:
It's all de rigeur for the IMF. It wouldn't be an IMF program unless someone was starving. That's the benchmark for success. Ireland doesn't need structural adjustment programs that shrink GDP, dismantle popular social programs and strip wealth from workers when low interest funding and fiscal stimulus can bring the economy back to life. This is politics not economics. The EU and IMF are using the crisis to push through their own agenda. Their real goal is to crush the unions, shred the social safety net, and roll back the gains of the Progressive Era. The Irish people are left with no choice but to resist. Presently the Cowen government is collapsing. Bravo. Now it's off to the barricades to see if the damage can be undone. Ireland needs to withdraw from the EU and start fresh. It'll be a bumpy road at first, but there's no other way. Economist Dean Baker sums it up like this in an article in The Guardian. Here's what he said:
The Irish people didn't struggle through centuries of famine and foreign occupation so they could be debt-peons in the EU's corporate Uberstate. Like Sinn Fein president Gerry Adams said, "We don't need anyone coming in to run the place for us. We can run it ourselves." Right. Tell the EU plutocrats to take their Utopian Bankstate and shove it.
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| Gold "Hump" Shifting from Diwali to Xīn Nián Posted: 26 Nov 2010 05:29 AM PST SURGING DEMAND from China, the world's second-largest gold buyer, is changing seasonal patterns in gold price trends for investors everywhere. How so? At this current pace, private Chinese demand may overtake India's by 2014 (if not sooner), giving the world's two most populous nations two ounces of gold in every five sold worldwide that year. But already, this further eastwards shift is showing in global gold prices.
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| The Gold Price Over Thanksgiving Posted: 26 Nov 2010 05:24 AM PST  Tim Iacono submits: Well, so much for the theory that the gold price tends to go up over the Thanksgiving holiday, when traders in the US are away from their desks and the rest of the world is more likely to do more buying of the metal than selling.
Complete Story »
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| Posted: 26 Nov 2010 05:07 AM PST In his interview with the CNBC on November 9, 2010, a highly regarded Wall Street economist, Nouriel Roubini, the cofounder and chairman of Roubini Global Economics, said that a gold standard is unlikely to stabilize the financial system. On the contrary, holds Roubini, such a standard can only make things much worse.
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| Posted: 26 Nov 2010 05:00 AM PST In the early 1990s, DNA vaccines for the treatment and prevention of diseases first emerged. Excitement about this technology was matched only by unrealistic expectations regarding the timeline to market. Interest was driven, however, by the real potential of the technology. For the first time, "unvaccinatable" targets like HIV and hepatitis C were in the bull's-eye. Traditional vaccine technology, using live or inactivated viruses, simply did not provide a viable way to provoke a protective immune response against these diseases. Moreover, DNA vaccines could be used against diseases other than their historical target: viruses. Early on, it dawned on researchers that this new generation of vaccines could be used to train the immune system to attack cancers and a wide range of other malignancies that act like foreign invaders inside the body. Conventional vaccines work by causing the body's immune system to recognize unique antigenic proteins that are part of the virus, triggering an immune response against the invader. The elegance of DNA vaccines is that, rather than introducing into the body an actual virus, only the antigen is introduced. Scientists realized that they could turn cells in the body into protein-manufacturing plants. By isolating the DNA responsible for producing ONLY the foreign antigenic protein associated with a specific virus, they could get around various issues associated with live or weakened viruses. Big Pharma companies like Merck, Wyeth and GlaxoSmithKline, as well as national labs and academic research facilities poured billions into a "first wave" attempt at producing commercially viable DNA vaccines. Problems delivering the DNA vaccines in a way that provoked a sufficient immune response soon dampened their enthusiasm. Two basic problems prevented the development of truly effective DNA vaccines. The first was an immature understanding of genetics. In those days, researchers were only beginning to learn how to optimize the DNA sequences to produce antigens with maximum impact. Additionally, there was the familiar "delivery" problem. Cells didn't absorb enough of the DNA plasmids to become effective antigen factories. Since the amount of antigens produced by the body was therefore low, the immune response was insufficient to form the basis of viable drugs. As a result, early DNA vaccine trials in humans were disappointing. The flow of research dollars slowed. Behind the scenes, however, determined scientists in dedicated startups never lost confidence in the core science. As importantly, alliances were formed and diverse discoveries merged. In recent years, their work has finally begun to bear fruit. I have been aware of this fact for some time. Until now, however, I hadn't identified a company that fits in the Breakthrough Technology Alert portfolio. But thanks to a series of mergers, a single company holds all the talent and IP needed to deliver on the breakthrough potential of DNA vaccine technology. In fact, the company appears to have solved the problems faced by early DNA vaccine researchers. "Next Generation" Vaccines 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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| Presenting The Irish Bailoutees: A Redux Posted: 26 Nov 2010 03:59 AM PST
Since once again we may have been a little too far ahead of the curve in demonstrating just who the biggest beneficiaries of the Irish taxpayer funded bailout are, we would like to repost an analysis from over a month ago presenting the key bondholders in Anglo Irish bank, who incidentally happen to be the cross-holders across most of the Irish capital structure, and which banks will likely be next in line for the bailout wagon. Not surprisingly, there are some names here (especially one) which Zero Hedge readers are all too familiar with. Are Irish Taxpayers About To Bail Out Goldman? Is Peter Sutherland Stealing From His Own People To Give To The Vampire Squid? (Zero Hedge, October 17, 2010) It is deja vu all over again. To little media fanfare the dire financial situation in Ireland is nothing less than a repeat of the Lehman collapse in those dark days of September 2008. With the recent nationalization of half of the country's six big banks, and the blanket guarantee over the rest of them, the Irish government has effectively made sure that bondholders in all banks, even those which such as long insolvent Anglo Irish bank will be made whole by the long-suffering Irish taxpayers. And despite rumors of haircuts for at least sub debtholders, actual facts validating this possibility remain unseen. Which begs the question why is everyone in the world so terrified of taking mark to market losses on even a few billion in debt? Simple: as all of the world's banks, but Europe more so than anyone else, are now caught in the biggest circle jerk ever imaginable, with one entity's liabilities making up another's assets, which in turn are someone else's liabilities, and so forth in a MC Escher (or is that HR Giger?)-esque flow chart of the surreal (as can be seen here), even one dollar of write downs can spiral and affect tens if not hundreds of billions of downstream assets (and thus liabilities). Which explains why the ECB and everyone else in Europe is so intent on preventing a failed auction in Ireland (we previously disclosed that virtually every September auction of Irish bonds was purchased by the ECB, either directly and indirectly): should the banks that are on the hook actually validate their impairment, Europe is one step away from activating its own $1 trillion TARP package. Yet what is amusing is that inbetween the cracks of exclusively European-bank based senior and subordinated bondholders in such bankrupt banks as Anglo-Irish, a familiar name emerges: Goldman Sachs. Yes, nested quietly inbetween the €4,034,756,880 in face value of Anglo Irish bondholders is the name that managed to pull the strings (via its puppet Hank Paulson) and get bailed out when AIG threatened to make Goldman management and investors insolvent. Is Goldman, via its UK-based Goldman Sachs Asset Management Intl. subsidiary, currently petitioning Brian Lenihan to be the only US-based bank to receive a direct bailout on its Anglo bond position? Or is it, as always behind the scenes, negotiating on behalf of 80 other European banks, among which Lombard Odier, Rothschild, and Deutsche, and achieve what it always succeeds in: escaping scott free, and stuffing taxpayers with the bill? We are confident Irish taxpayers, and drivers of cement trucks, would be fascinated in getting the correct answer. Guido Fawkes, who managed to obtain the Anglo Irish bondholder list, shares the following commentary:
Spot on question. And as the highlighted area in the chart below demonstrates, we would like to add Goldman Sachs to the list of bailoutees. Surely, few firms in the world deserve to be redeemed as much as god's little helpers.
Little else that can be added here... except for this amusing anecdote of another Goldman Sachs International Chairman, one Peter Sutherland, former Ireland attorney general and EU commissioner who just so happens was a chairman of British Petroleum (remember those guys?) previously. To wit from the Irish Times:
Surely, this great son of Ireland, who obviously has Lenihan in his back pocket, is in active negotiation on behalf of his current employer, Goldman Sachs. Yet something tells us Mr. Sutherland will be the last person to share light on Goldman's twilight relationship vis-a-vis the Irish government.
Lack of revisionism is not too surprising coming from a person whose personal, and future, fortune, is based on the past generosity of American, and now Irish taxpayers. Because his wealth is certainly not due to his skill at anything related to his actual career:
Perhaps instead of driving trucks full of cement into Parliament, Irish taxpayers can be a little more proactive, and ask one of their most respected "leaders" just on whose behalf he is working on in this latest bailout, which could easily be Ireland's last. h/t Niall
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| Holiday Squeeze on the Dollar, Gold & Stocks Posted: 26 Nov 2010 03:59 AM PST By Chris Vermeulen, TheGoldAndOilGuy The past week and a half has been as choppy as it gets for the stocks market. Thankfully the herd mentality (fear & greed) stays the same. Understanding what others think and feel when involved in the market is one of the keys to making money consistently from the market. The crazy looking chart below I will admit is a little tough on the eyes, and I should have used red and green for holiday colors but green just was not going to work today so bear with me . Market Internal Indicators – 10 minute, 7 day chart It shows and explains how I get a read on the overbought/sold conditions in the market. There are several other criteria needed to pull this trade off but it is these charts which tell me to start getting ready to take partial profits, buy or take short positions. The top section shows the NYSE volume ratio line. When the green line spikes is means there are more sellers than buyers by a large amount and I call this fear. On the other hand when he red line spikes it shows everyone is chasing the price higher because they can't stand the thought of missing another rally. I call this greed or panic buying. You buy into fear, sell/short into greed. Important point to note though… We are getting another sell/short signal here (Wednesday) but knowing Friday will be light volume and knowing that light volume means higher prices, I think we should get a better opportunity to short this new down trend next week at possibly a higher level. The market may have a short squeeze in the next 2-3 days. Just so you know, a short squeeze is when the market breaks to the upside on light volume forcing the short positions to cover. This creates a pop in price, only for it to drop quickly after. But, if we get a pop with solid volume behind it, then we could just see the up trend start again and we would then look to play the long side. Only time will tell…
Rising Dollar & Gold – I Don't Get It? Generally when the dollar raises gold drops, but they are both moving up in sync, and really I don't see the problem with this as it has happened many times in the past. Currently I am neutral on gold and silver because of this situation though. I feel something is about to happen in a week or so that will change things in a big way.
Mid-Week Gold, Dollar & Stock Trading Conclusion: Recently members had a great short play locking in 2.2% gain on one of our positions this week as we shorted the market using the SDS inverse SP500 ETF. We also continue to hold two other positions with a 22 and 24% gain thus far and I think going into year end things are really going to heat up. Get My Free Trading Guide Book and My Free Trading Ideas Here: http://www.thegoldandoilguy.com/trade-money-emotions.php
Chris Vermeulen
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| Buy Gold: It’s the Only Way to Combat Government Spending Posted: 26 Nov 2010 03:46 AM PST I tried to tell my boss that my unexplained absence was because I was so Completely Freaked Out (CFO) that I didn't know what to do all weekend except hide like a little crybaby coward in the Big, Beautiful Mogambo Bunker (BBMB) waiting for the inevitable collapse of the entire world order because of the massive over-creation of money by the foul Federal Reserve, where I whimpered and cried in fear because We're Freaking Doomed (WFD) and there is nothing – repeat, nothing! – that can be done. Naturally, I lost track of time, and so my absence is completely understandable and not my fault, but is, instead, the fault of the foul, filthy Federal Reserve creating so much money, for so long, that the US economy has been turned into a bloated, cancerous, twisted, bloated, government-centric grotesquerie that has almost destroyed us. I didn't tell her that through the mist of my bitter tears, though, I still managed to get a good laugh from the quixotic earnestness of Erskine Bowles and Alan Simpson, chairmen of some idiotic National Commission on Fiscal Responsibility and Reform trying to craft a plan to reduce government spending in an effort to reduce the national debt. Of course, before you can reduce the debt, you have to stop it from getting bigger, which is a Long, Long Way From Here (LLWFH) as even former Senator Alan Simpson says, "for every buck we spend we're borrowing 39 cents." At first I laughed with my usual merriment at such foolishness, although somewhat childishly hopeful and enthusiastic about the new commission while managing to overlook the fact that it is just another outrage of central planning to redistribute incomes that is doomed to failure. Suddenly, I also saw it as a ray of hope! Quickly, I proposed to my boss that instead of her just firing me like she wants to – and like I deserve – I organize a Company Commission on Responsibility and Reform to address my poor job performance, my incompetence and staggering net losses due to my apparent natural stupidity. She rudely vetoed my terrific plan, just like she always vetoes my Terrific Mogambo Plans (TMP) ever since that time long ago, in one of our first power-struggles after she came waltzing into the job opening that should have been mine to fill, when I casually asked her if she was buying gold, silver and oil as a defense against the horrifying inflation in prices that will result from the Federal Reserve creating so much new money. She acted surprised at the question, but admitted, smiling to be nice, "No." Boy, you should have seen that pleasant smile disappear from her stupid face as I was instantly on the attack, telling her that that meant she was stupid, as anybody with any brains at all knows that they should be buying gold, silver and oil with frantic abandon in response to the foul Federal Reserve acting so treacherously! Ergo, I went on, I didn't think that it was appropriate that I take orders from somebody more stupid than I, and if she wanted me to listen to any of her "boss" crap, she had better get some gold, silver and oil soon so that she would demonstrate enough smarts that I would value her opinion enough to even listen to it. I am not going to dwell on her reply or the brouhaha about how "cleaning the executive washroom" mysteriously appeared on my Job Description, but I will note for the record that her reaction is partly responsible for my now being totally AGAINST the National Commission on Fiscal Responsibility and Reform, as I always figured I would be. So, I go back to mirthlessly laugh – Hahaha! – at their arrogance, their conceit and their up-to-now total ignorance of the decades-long growing problems, caused by the Federal Reserve creating the money that made the problems financially possible, that underscore their glaring incompetence. As for the economy, a dollar not spent by the government is a dollar not received by somebody, which reduces national income dollar-for-dollar, which is Highly, Highly Significant (HHS) now that state, local and government spending constitutes slightly more than half – half! – of all spending in the Whole Freaking Country (WFC), meaning that government spending IS the freaking economy! Government spending is the economy!! And this is Just The Beginning (JTB) of the misery, because this horrific fact is made worse by that whole ordinary Multiplier Effect of the velocity of money, compounding the economic misery of each of those missing dollars as it no longer bounces hand to hand through the economy with everyone making a little profit and governments taking a little bite at each exchange, nibbling, nibbling, nibbling at it until it disappears totally. And let's not forget that every dollar is now the basis of a whole universe of derivatives, leveraging each of those dollars 10-to-1, 20-to-1, sometimes 40-to-1 – and more! – meaning that the total impact is some huge, unfathomable, terrifying multiple of this!!! And now these weenies think that they are going to reduce the debt? Hahaha! If Simpson, Bowles and the rest of National Commission on Fiscal Responsibility and Reform weenies had a clue about economics, they would note the use of the rare triple exclamation point at the end of the previous paragraph and correctly deduce that the only intelligent thing to do is to buy gold, silver and oil, which is not only the only the smart thing to do, but the easy thing, too! Whee! This investing stuff is easy! The Mogambo Guru Buy Gold: It's the Only Way to Combat Government Spending 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." More articles from The Daily Reckoning….
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| Posted: 26 Nov 2010 03:43 AM PST By Jeff Nielson, Bullion Bulls Canada Whenever the subject of white-collar crime comes up (irrespective of what particular offense is referred to), we are subjected to the same media drivel – from the pseudo-experts they dredge-up for their propaganda: "it's very hard to prove white collar crime". This is simply a myth. To explain this, I need to explain to people what "proof" is, since it is a concept that very few people understand. Generally speaking, "absolute proof" is something which is usually only found in mathematics and some science. Once we venture into the real world, absolute proof is very difficult to come by. This reality is of tremendous importance in our legal systems, since it forces us to make an explicit choice: we can seek absolute proof in our criminal and civil trials (in which case many people who break the rules of our society will certainly go unpunished) or we can accept some lesser standard for "justice" – which guarantees that a significant number of innocent people will be unjustly punished. Our societies have chosen the latter path, or at least that is what we have been told. In fact, what we see more vividly each day is that we have "two-tier" justice systems, where the wealthy and privileged are only punished on the rare occasions when we can obtain absolute certainty – while "the little people" are subjected to the lesser standard of justice, where the innocent are unjustly punished, simply to increase the number of guilty who are caught. Let me be clear that I am not criticizing the "official" standard of justice of near-certainty (in criminal trials). It is a sad reality that we must lower the burden of proof, or make it much too easy to perpetrate crimes. The outrage here is obviously that we live in societies which are quite content to punish the poor-but-innocent, and equally willing to allow vast numbers of the wealthy-and-guilty to go unpunished for their crimes. The fiction which the wealthy hide behind in our perverted "justice systems" is that the crimes they tend to be charged with are "hard to prove" – because we can't prove the intent of these white-collar criminals. To those with no understanding of our legal systems (i.e. the media), this sounds like a reasonable proposition: how can we "know" what these banksters were really thinking? This nonsense is immediately exposed for the propaganda that it is when we take a broader look at our criminal justice system. To begin with, nearly every crime requires proving the "intent" of the accused, know by the Latin term "mens rea" ("guilty mind"). When is the last time that you heard prosecutors whining about their inability to "prove intent" when it comes to punishing "the little people" for crimes (i.e. non-white-collar offenses)? This double-standard becomes glaringly obvious the moment we look at examples of wealthy people charged with non-white-collar crimes. Here, there is general public awareness – since we have all seen how our "justice" systems consistently allow the wealthy/privileged to walk away with nothing but a "slap on the wrist" (or an acquittal) in circumstances where a "little person" would be 100% certain of being convicted and harshly punished. Even here, we must listen to the propaganda of the wealthy. Supposedly, the "reason" why the wealthy walk away under circumstances where the rest of us would be punished is because "they can afford good lawyers". This is more fiction. The reality is that it is very rare for a "good lawyer" to dream-up some brilliant/novel argument, which results in a good result for their clients. The reality is that all that a "good lawyer" generally does for a client is two things: they present the same argument as "bad lawyers", but present that argument in a slightly more effective manner; and (more importantly) they sway judges merely with their reputations. We know this latter premise must be true, because the enormous gulf in the verdicts assessed against the wealthy and "the little people" (where the same weight of evidence exists) cannot be explained by the minor differences in the actual quality of their legal representation. Both of these factors feed into the inherent prejudice of our judiciary: that the wealthy (i.e. the peers of our judges) are worthy of more "mercy", and above all "the benefit of the doubt". More articles from Bullion Bulls Canada….
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| Posted: 26 Nov 2010 03:42 AM PST Bullion Vault The circumstances are well known. Ireland saw a long boom before the financial crisis. That boom was accompanied by a large rise in house prices and a boom in building construction. After the financial crisis and ensuing world-wide recession, many Irish banks were bailed out by the government or nationalized. The Irish government practiced austerity policies, increasing taxes and reducing expenditure. But, as the cost of the bailouts increased, so did the budget deficit. Many commentators are now claiming that Ireland's membership of the Euro was the underlying problem (for example, Peter Oborne at The Telegraph). In this argument many sound economic ideas have been mixed with careless ones. One argument is that if Ireland had not been part of the Eurozone it would have been able to devalue it's currency. It's true that if Ireland still had the Punt then this would be possible, but it's not as significant as many people believe. In today's world, with floating fiat currencies controlled by central banks, there is no clear concept of "devaluation" any more. The economic prospects of the region encompassed by each currency and the policies of the central banks are taken into account by the exchange rate market, and the exchange rate fluctuates minute by minute. This means there are two different arguments. The first, which focuses on the private sector, is that when a country enters recession the value of it's currency falls allowing a growth in exports. This is a dubious argument, but whatever its merits it could not have seriously improved the financial situation of the Irish banks or the Irish government. The second argument is that in a crisis the state's central bank may create money and use it to pay debts and finance bailouts. A modern state can easily create new money without having additional assets. If Ireland had kept the Punt, its own fiat currency, then the government could have bailed out the banks using newly created money. But, that would simply be a hidden tax. Inflation would ensue then holders of money and money-substitutes would see the real value of those assets fall. Holders of assets denominated in money such as loans and bonds would see those fall in value in real terms too. The tax would be paid by the people through this loss of purchasing power. Any permanent increase in the stock of money must lead to inflation, though there may be a time lag until it becomes noticeable. A temporary increase could only be achieved by withdrawing money from circulation afterwards, and that could only be done with taxation. That governments can create money to get themselves out of sticky situations is beneficial to governments, but not to the people they're supposed to serve. Critics of the Euro also claim that the Eurozone currency area could not have worked. According to this view the ECB must run monetary policy to suit the core Eurozone countries. But interest rates that are a good fit for Germany and France will cause problems in other Eurozone countries. There is some truth in this. In the years before the crisis, the ECB ran low interest rates to stimulate the northern European economies, particularly Germany and France which were struggling with rigid labor markets. A side-effect of that policy was the building booms in Southern Europe and Ireland which weren't sustainable. Though there is some truth in this view, it's still confused, too. The idea that labor market problems can be successfully compensated for by reducing interest rates is from Keynesian economics. The idea that central banks reducing interest rates to excessively low levels causes unsustainable booms is from Austrian economics. These views can't be mixed because they come from conflicting theoretical starting points. It isn't possible that Keynesian economists are right in France and Germany but Austrian economists are right in Ireland and Portugal. In my view, the ECB's low interest rates may have been an attempt to stimulate the Northern European economies, but that policy wouldn't have worked under any circumstances. The ECB's policy came at a cost to Ireland and the Southern European countries when the property bubbles burst, but that cost doesn't reflect any benefit to the Northern European countries. It's true that a Central Bank faces greater problems if the currency area that it regulates spans many countries with different conditions. But, as we have seen, Central Banks can't avoid recessions and crises even if they only regulate the currency of a single sovereign nation. Many countries have found themselves facing the consequences of the bad decisions made by Central Banks. Ireland isn't unique in that respect. What makes Ireland unique is the extraordinary lengths that the government have taken to support banks and property developers. In September of 2008 the Irish government guaranteed for two years all bank accounts with Irish banks and almost all loans to those banks. This September, when that guarantee was due to expire, it was extended for another three months. The government decided that rather than risk paying out on that guarantee they would bail out banks as and when they needed it. They nationalized the worst-affected bank – Anglo Irish Bank in 2008. So far, through several bailouts Anglo-Irish Bank has cost the Irish government €22.9 billion and the other banks have cost €10.1 billion, though the extent of losses hasn't been fully recognized and will probably be much greater. It is these debts that have caused Ireland's budget deficit to rise much more than those of other countries. There have been many rumors about corruption in the Fianna Fail and in Anglo-Irish bank. The actions of the former board of Anglo-Irish bank are under investigation by financial regulators and the police, the former CEO has been declared bankrupt. There are close links between the ruling Fianna Fail party and many property developers, that was the subject of jokes long before the crisis. The previous Taoiseach Bertie Ahern was investigated for receiving bribes from property developers. I think there's probably some truth in these allegations of corruption. But the politicians that form the government had many ways they could abuse their power for personal gain. A politician has many ways he can make a little on the side without bankrupting his country. It's ideas rather than corruption that have created such a great crisis for Ireland. The government thought that the resources the state could lay claim to were inexhaustible. They believed that if the state guaranteed bank accounts that this guarantee alone would satisfy the markets. Indeed, Finance minister Brian Lenihan once called the guarantee the "cheapest bailout in the world so far." But the government forgot that the power of the state isn't magical. A government can transfer the liabilities of banks onto the taxpayers, but they can't abolish them. Back in 2008, the government were worried that the failure of a bank would harm Ireland's reputation, but in the long run their cure was worse than the illness.
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The European Central Bank and a majority of Eurozone nations are urging Portugal to follow Ireland's example by formally applying for a bailout from the European rescue fund, Financial Times Deutschland reported today. Without disclosing sources, the paper said that by putting pressure on Portugal to seek aid, the ECB aims to prevent a collapse of Spain as it would automatically ease the pressure on the latter, whose banks have high involvement in Portugal…
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