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Friday, December 24, 2010

Gold World News Flash

Gold World News Flash

Crude Oil Hits New 27-Month Highs, Gold Holds Steady in Muted Trade

Posted: 23 Dec 2010 06:54 PM PST

courtesy of DailyFX.com December 23, 2010 08:51 PM Crude ended the week at the highest levels in two years, with WTI over $91 and Brent now trading just under $95. Gold fluctuated, but didn’t move significantly on the week. Commodities – Energy Crude Oil Hits New 27-Month Highs Crude Oil (WTI) - $91.51 // $1.03 // 1.14% Commentary: Crude oil rose for a fifth straight session on Thursday, adding $1.03, or 1.14%, to settle at $91.51 ahead of the three-day holiday weekend. Prices are now at a 27-month high and are back in price discovery mode after consolidating between $87 and $90 for almost three weeks. The theme underlying these price advances in all risk assets, not just crude, is general economic optimism. U.S. data is becoming more constructive, the European sovereign debt situation seems to be under control, and emerging markets continue to grow robustly. With regard to crude oil specifically, inventories have begun to draw down rapidly as demand surges ahe...


Executive Summary: How to Protect Your Portfolio from the Economic Insanity

Posted: 23 Dec 2010 05:04 PM PST

Bullion Management Services


Gold Seeker Weekly Wrap-Up: Gold and Silver End Slightly Higher on the Week

Posted: 23 Dec 2010 04:00 PM PST

Gold saw slight gains in Asia before it fell back off in London and early New York trade to see a $14.56 loss at as low as $1371.94 by about 10AM EST, but it then bounced back higher in the last few hours of trade and ended with a loss of just 0.38%. Silver fell to as low as $28.933 before it also rallied back higher and ended with a gain of 0.07%.


Shanghai Stocks Drop Following Failed 3 Month Bill Auction

Posted: 23 Dec 2010 03:31 PM PST


As the rest of the world celebrates Christmas, blissfully pretending all is good, and the Fed can manipulate markets to infinity without at least one of the numerous violated laws of physics being reasserted in the process, things in China are once again reminding those who care that just as liquidity giveth, so does liquidity taketh away. We pointed out a week ago that the 7 day Repo rate in China recently hit a post-Lehman high, as banks are increasingly concerned that following 3 RRR hikes, the PBOC has no choice but to resort to some tightening measure that actually works. As a result excess liquidity has suddenly become rares than hen's teeth. Today we get a first hand lesson of why this was material: Dow Jones reports that the Chinese MoF has failed to attract sufficient interest in its 3 Month 20 billion CNY auction. The result: SHCOMP is now down 1.2%. Bottom line: as the world is sleeping, China just had a failed bond auction. If news mattered, this would be a very disturbing event. Luckily for Ben, it doesn't. For the time being. It will soon. Then Montier's mean reversion meme may just strike with great deferred vengeance and furious accrued anger.

From Dow Jones:

China shares extend their falls following news the Ministry of Finance fails to attract enough bids to sell all of its planned CNY20 billion 3-month bills in an auction. The Shanghai Composite Index is now down 1.2% at 2819.72 and analysts peg support at 2800. The MOF's unsuccessful bill auction is fresh evidence of tight liquidity conditions in the market, due to China's three RRR hikes since November and rising cash demand near the year-end. "Institutions are inclined to expedite pocketing in some profit," says China Post Securities, adding "the situation will increase the likelihood of a bearish market in the short term." Banks continue to fall on various news reports that China is likely to use new measures, such as special RRR hikes, to rein in credit expansion next year.

Incidentally, the last time China had a failed bond auction was in mid April, just as the stock market hit its then 2010 highs, only to be followed by a drop to the year's lows.

h/t London Dude Trader

Outlook 2011: Crude Oil & Gasoline, Escalator Up and Elevator Down

Posted: 23 Dec 2010 01:46 PM PST


By Dian L. Chu, EconForecast

Just in time for Christmas, On Wednesday, Dec. 22, U.S. gasoline prices hit an average $3 a gallon for the first time in more than two years, according to AAA's Daily Fuel Gauge Report. Meanwhile, U.S. stocks and oil also climbed to the highest levels since 2008.

Crude = 71% of Gasoline Price

Crude oil is the biggest component, and accounts for about 71% of the price of gasoline as of Nov. 2010, based on EIA estimate (Fig. 1).  Roughly, for every one dollar increase in the per barrel (42 gallons) price of oil, gasoline prices rise 2.5 cents per gallon. So, a ten-dollar rise in crude price per barrel would add about 25 cents at the pump, not accounting other components.

Crude Prices Defy Ample Supplies

This new gasoline high came just as crude oil also reached a two-year high as traders bid it up after U.S. Energy Dept. reported a week-on-week inventory draw, while unusually cold weather in the United States and Europe has also helped.

Oil futures for February delivery rose to $90.48 a barrel, the highest since Oct. 3, 2008. Prices have climbed 14% this year, and up about 26% since late August. And by the way crude oil prices are climbing; you’d think there’s a supply shortage. Totally not so:

  • The week-on-week crude inventory draw was largely due to refiners’ year-end strategy to minimize potential taxes on year-end inventory. 
  • Despite a weekly draw, crude oil, along with products inventories (except distillate), all saw a year-over-year increase (Fig. 2). Crude inventory level is still above the average range (Fig. 2), while gasoline inventory is also close to the high end of the average range. 
  • If there’s strong demand elsewhere around the globe, as many have suggested, there should not be such a build in the domestic inventory.
  • The global physical oil market also tells a similar story. WSJ reported that the International Energy Agency (IEA) estimates OPEC spare capacity is around 6.4% of global demand, nearly double the level of late 2007. Data from Oil Market Intelligence also indicate the world oil inventories stood at 20 days worth of demand, up from 14 days in November 2007.


Gasoline Prices Defy Historical Pattern

Moreover, gasoline also saw some unusual movement. Gasoline prices in the U.S. generally follow a seasonal pattern – prices typically rise during summer driving season and drop after Labor Day. However, the EIA reported that there’s a reversal of pattern this year - the national average price has risen by 30 cents per gallon since Labor Day (Fig. 3), the largest increase over that period since 1990.


Blinded by Santa

Meanwhile, many analysts, including the EIA, attributed the run-up in crude prices and the reversal of historical pattern in gasoline prices to strengthening global product demand and firming economic growth in the U.S.

However, people seem to have been blinded by Santa as to the obvious:

  • An above $3 a gallon gasoline price during the third week of December was last seen in 2007-- one year prior to the financial crisis.
  • The last time, any time during the year, the national average for regular unleaded was above $3 was in 2008, when crude reached an all-time high of $147 a barrel!

Bear in mind, the unemployment rate was 4.6% and 5.8% in 2007 and 2008 respectively when gasoline was above $3 a gallon, and there was actually a global supply crunch due to robust (pre-crisis) global growth.

What’s Wrong with This Picture?

In contrast, here we are in 2010, barely out of the Great Recession, the jobless rate is hovering around 10%--twice the levels in 2007/08--while the housing sector remains under intensive care with existing home sales down 27.9% year-over-year in Nov.

So, it begs the question-- what’s wrong with this picture? How could crude oil and gasoline be at this price level given ample supplies, and a lack luster macroeconomic condition?

QE Liquidity Euphoria

As discussed before, one thing the U.S. Fed’s QE has accomplished is building up concerns about the possible inflation. Expectation of inflation, improving global growth, and increasing risk appetite because of the U.S. Federal Reserve's QE pumping up the economy, have driven investors to plow money into the commodities and stocks at a record pace.

This massive QE liquidity is also a major factor in the current strong correlation between WTI crude and S&P 500--another reversal of historical pattern. So, it is no coincidence that the S&P 500 index also hit its highest level since the collapse of Lehman Brothers.

The broader equity and commodity markets, including crude oil, are artificially supported by the U.S. Federal Reserve, and largely detached from the market demand and supply factors, where traders/speculators will run the show at least through 2011.

More Downside Possibilities

Most agencies forecast the world oil demand to outstrip supply in the long run; however, during next year, there could be a lot more downside possibilities than upside surprises. Some of crude oil’s downside possibilities in 2011 could come from one or a combination of the following (but not limited to):

  • China & India Slowing Growth & Oil Demand - Beijing just slapped a 4% hike on domestic gasoline and diesel prices effective Dec. 22. India is also expected to decide whether to increase state-set fuel prices amid crude oil at near two-year highs. This and other tightening measures to fight inflation would crimp growth as well as oil demand in both countries, the major growth engine of the world.
  • High oil prices could trigger a global recessionary cycle - Bank of America Merrill Lynch estimates that a $15 rise in the price of oil could shave about half a percentage point from U.S. economic growth in 2011, enough to wipe out the Fed's QE2 effect.  
  • A deepening European debt crisis
  • Escalating geopolitical tensions in N. Korea, the Middle East, etc.
  • U.S. sovereign debt and/or municipal debt crisis

And don’t count on a U.S. recovery to be the upside surprise factor either. The EIA Short-term Energy Outlook published on Dec. 7 projects gasoline consumption in the U.S. to increases by 0.4% and 0.8% in 2010 and 2011 respectively.

$110-$115/bbl by April?

Technically speaking, crude could see some profit taking in January with major support at around $89 levels.  Look out below if it breaks resistance of $87.  On the upside, the next two key resistance levels should be at $95/b, and $100/b respectively (See Chart)

Nevertheless, if the stars are aligned, that is, global economy really picking up stream with two consecutive months of good U.S. jobs numbers, inflation concerns and QE could form a perfect storm for crude to hit $110 to $115 a barrel late March or April next year, after a few retirements, and if it breaks above $100.  At that level, gasoline at the pump could hit $3.70-$3.80 a gallon range.

Escalator Up, Elevator Down

Right now, speculative longs are dominating the crude market with hedge-funds and other large speculators long positions outnumbered short positions by 205,890 contracts in the week to Dec. 14, according to the Commodity Futures Trading Commission (CFTC).

Whenever you have an over-bullish market like this, it sets up for increasing risk and huge swings, particularly for crude oil, as it is one of the most widely traded and speculated asset classes in the world. Liquidity could only drive prices up to a point as there is no real strong demand to support the lofty $100+ crude price levels, but plenty of land mines to spook an exit en masse.

So, expect volatility to be the major theme in the New Year with crude oil taking the escalator up, but the elevator down, and a couple of $12- to- $15 moves in both directions along the way. 

Remember, the market is designed to fool most of the people most of the time.  ~ Jesse Livermoore
Dian L. Chu, Dec. 23, 2010,


Silver shortage feeds on itself, Rick Rule tells King World News

Posted: 23 Dec 2010 01:33 PM PST

9:25p ET Thursday, December 23, 2010

Dear Friend of GATA and Gold (and Silver):

Interviewed today by King World News, Rick Rule of Global Resource Investments Ltd. in Carlsbad, California, remarks that shortages of silver are causing more shortages as investment demand piles in, including silver exchange-traded funds and the new Sprott Physical Silver Trust. Since most silver is produced as a byproduct from mining for other metals rather than from mining for silver directly, Rule says, supply is not keeping up. Rule's interview is headlined "Physical Supply Shortages in Silver to Continue" and you can find it at the King World News blog here:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2010/12/23_R...

Or try this abbreviated link:

http://tinyurl.com/2dtc3bh

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


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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


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Sona Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit,
Extending the Mineralization of the Southwest Vein on the Property

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

An Irrevocable Right to Benefits?

Posted: 23 Dec 2010 01:13 PM PST


Via Pension Pulse.

Lisa Fleisher of the WSJ reports, New Jersey Pension Gap Grows:

New Jersey's pension gap grew to $53.9 billion in the last fiscal year, up from $45.8 billion, thanks to market losses and a lack of state funding, according to figures released Thursday by the state.

 

The looming pension burden, largely ignored by the state for the past decade, has ballooned into a nearly unmanageable problem that will push state and local finances into a corner in coming years, dropping large bills in the laps of already strained taxpayers.

 

Gov. Chris Christie's administration said the gap, which reflected the state's investment positions as of June 30, highlighted the need for proposed cuts to current public workers' pensions.

 

The new calculations mean the state has 62% of the money it needs to pay retirement benefits promised to roughly 720,000 state and local workers over the next decade, down from 66% a year earlier. But the state is using an annual 8.25% rate of return, which critics say masks the problem by being overly optimistic

 

"As all states, they're getting it wrong," said Eileen Norcross, a George Mason University researcher who has studied New Jersey's budget and pensions. Using a 3.5% rate of return, she had estimated the previous liability at $173 billion.

 

For most of the past decade, New Jersey politicians from both parties have skipped required payments to the pension fund while giving increases in benefits to workers. Faced with a tight budget, Mr. Christie skipped a $3.1 billion payment this year, which experts said all but guaranteed a higher gap next year.

 

Mr. Christie, a Republican, wants to reverse a 9% pension bump workers received in 2001 under a Republican administration. A spokesman for Senate President Stephen Sweeney said he would work on changes that would "ensure workers who have been promised a pension get one," adding the governor needed to fund the pensions.

 

Unions argue their members have an irrevocable right to benefits they have earned, and the governor has said he will meet the unions in court. Public workers pay into their pensions at various rates—8.5% of salary for police officers and firefighters; 5.5% for teachers, state and municipal workers; and 3% for most judges.

 

"Once again, the Christie administration wants to make middle-class retirees pay the price for the disastrous consequences of reckless speculation and financial malfeasance on Wall Street, and for the legislature's continuing failure to fund the pension," said Bob Master, political director for the New York-area Communications Workers of America.

 

Mr. Christie in March signed a slew of pension and benefits changes pushed by Democrats but said they didn't go far enough. In September, Mr. Christie unveiled further proposals targeting current workers, including raising the retirement age to 65, requiring all workers to contribute 8.5% of their salaries to pensions, and eliminating cost-of-living increases.

 

In a statement, state Treasurer Andrew Sidamon-Eristoff said Thursday, "Unchecked, the cost of this impossible burden will fall not just on the taxpayers of today, but on future generations of New Jerseyans."

 

Average annual pensions for new retirees as of July 2009 were roughly $39,500 for state workers, $46,400 for teachers, $73,500 for police officers and firefighters, and $105,600 for judges.

So who is right, unions or the Christie administration? At this point, it doesn't matter. Yes, Wall Street's elite made off like bandits, squeezing the middle class once again. But Governor Christie, who spoke with 60 Minutes this past Sunday, is right when he says public sector workers and retirees will get little sympathy from private sector workers who saw their 401K plans implode in 2008. Moreover, with state budgets deep in the red, there is no money left to pay for public works projects, let alone generous public pension benefits. All stakeholders need to make concessions or risk deeper cuts down the road.

If I were the unions, I would use this as an opportunity to push for better governance at the large state public plans. And by better governance, I mean make sure that alignment of interests are there. As for state governments, they have little choice but to raise the retirement age, cut benefits, and partially or fully remove inflation protection on public sector pensions. They should also revise their rosy investment assumptions for state plans.

This may seem unfair and unreasonable to public sector workers, but to quote a strategist who I spoke with yesterday, "deleveraging sucks". You can't have pensions apartheid between the private and public sector. And there are no "irrevocable rights to benefits". Just look at the mess Greece and Ireland are in right now. When the money runs out, cuts are guaranteed.

That's one of the reasons why I was disappointed with the meetings at Kananaskis. A lot of people are looking at politicians with gold plated pensions asking themselves why couldn't they expand CPP and provide Canadians with a more secure retirement? I know, the critics will holler: "it's just another payroll tax". They're wrong and shortsighted and I'm embarrassed to say this is the best Canada could come up with -- another giveaway to banks and insurance companies. And who's going to end up bailing out PRPPs when they flop? Who else but Canadian taxpayers!

There was a time when Canada led the way in terms of health, education and social economic policy. Our leaders need to rethink expanding CPP. If you do it right, you'll bolster the private and public sector. But if you do it wrong, or introduce half-baked measures, you're better off not doing anything at all. I'm serious, I'd rather see no change than reforms that are doomed to fail.

Holiday Hours

Posted: 23 Dec 2010 11:43 AM PST

For those wondering about market hours this Christmas holiday:


The One Nicaraguan Development That’s Doing Well

Posted: 23 Dec 2010 11:00 AM PST

When we arrived in Nicaragua, a group of Dear Readers was already at the house. They were having a dinner party on the lawn. Tables had been set up…looking out over the ocean. By 6 PM it was dark. A full moon arose in the East. It had been windy earlier in the day, but now the wind had eased into a gentle breeze.

Joselito brought out his guitar.

"Besame. Besame mucho…"

"You must love it here," said a young woman. "This is about the most beautiful place in the world, isn't it?"

The next day, we took a tour of the development here in Nicaragua.

Housing is in a slump in the US. Developments in Latin America and the Caribbean have fallen on hard times too. Especially here in Nicaragua, where president Daniel Ortega has driven off foreign investment.

"I think he's becoming paranoid," reported our local contact. "He doesn't want to go anywhere. And when he goes out, he has a whole team of bodyguards. He's afraid someone is going to kill him."

But Ortega or no Ortega…real estate bust or no real estate bust…Rancho Santana is booming. There is a new pool at the clubhouse and a new clubhouse under construction. New condos. A huge new woodshop. New heavy equipment. A team of 250 workers…some of them working day and night.

What's going on?

"This is the only project in Nicaragua that is still doing well," explained a sales agent. "It's practically the only project in Latin America that is still solvent. Down the coast, several of them have gone bust. In one, the owner just left. The homeowners tried to call. But he just packed up and left the country, leaving them without roads or water.

"And that's not that uncommon. These guys sold lots during the boom years. Then, when the bust came they didn't have the money to complete the projects. Lot owners were left holding the bag.

"Developing is a tough business, even in the best of times. And developers are generally a stupid bunch. If not actually criminal. Either they are dreamers who keep investing in their own projects. Or they are schemers who take the money out. The dreamers go bust in hard times. The schemers high tail it out of the country.

"You need a serious developer. One who's been through a couple of complete cycles. One with enough money to survive. And one with enough integrity to do what he's promised. Unfortunately, there aren't many like that. Not down here.

"You can buy very cheap property here now. But you have to be careful."

Regards,

Bill Bonner
for The Daily Reckoning

The One Nicaraguan Development That's Doing Well 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."


Gold Market Update

Posted: 23 Dec 2010 10:53 AM PST

Little has changed since the last updates were posted on the 5th December, but what change there has been has increased immediate upside potential in both gold and silver substantially, as the minor reaction in gold and sideways action ... Read More...



Silver Market Update

Posted: 23 Dec 2010 10:51 AM PST

Many traders are starting to get edgy about silver because its steep uptrend has been in force for quite a while now, and when silver breaks down from an uptrend it has a nasty tendency to drop like a rock. This is understandable ... Read More...



Financial Collapse as Early as the End of the First Quarter, 2011... "If that happens, paper money is worth nothing anymore..."

Posted: 23 Dec 2010 10:48 AM PST

Just a quick break from the MMT series and from holiday visits, from Bloomberg:

Gijsbert Groenewegen, managing partner and founder of hedge fund Silver Arrow Capital Management was on Bloomberg yesterday and discussed what 2011 may hold.  He covers commodities, precious metals, equities, and the possible collapse of paper money which could occur as early as next year.

I agree with his view that gold could drop significantly as hedge funds are forced to sell their most liquid investments to cover equity losses.  But I think gold's subsequent bounce would be much stronger than the $1,500-$2,000 range Groenewegen gives, especially if sovereigns get involved and use gold once again to back their currencies.

Gold Market Update - Dec 23, 2010

Posted: 23 Dec 2010 10:32 AM PST

You can consider this Gold Market update to be gift wrapped. As I am unable to get presents to each and every reader this year for logistical reasons, these Gold and Silver Market updates are going to have to suffice, which is perfectly reasonable given how bullish they are. Little has changed since the last updates were posted on the 5th December, but what change there has been has increased immediate upside potential in both gold and silver substantially, as the minor reaction in gold and sideways action in silver of recent weeks has served to further unwind the earlier overbought condition. The interpretation of the pattern in gold presented in the last update, which was that it is marking out an upwardly skewed bullish "running correction" remains unchanged. All that has happened in the past few weeks is that it has reacted back across the upsloping channel to arrive at support near its rising 50-day moving average. As we can see on the 6-month chart this reaction h...


Silver Market Update - Dec 23, 2010

Posted: 23 Dec 2010 10:30 AM PST

Clive Maund You can consider this Silver Market update to be gift wrapped. As I am unable to get presents to each and every reader this year for logistical reasons, these Gold and Silver Market updates are going to have to suffice, which is perfectly reasonable given how bullish they are. Many traders are starting to get edgy about silver because its steep uptrend has been in force for quite a while now, and when silver breaks down from an uptrend it has a nasty tendency to drop like a rock. This is understandable, but according to our interpretation of the charts, rather than suddenly break down, silver is instead about break higher and embark on another upleg that will take it to new highs. On its 6-month chart we can see how the fine uptrend in silver remains in force, although it is clearly at an important juncture, as it must get moving shortly to avert the risk of a breakdown. While gold has reacted back somewhat in recent weeks, silver, which has outperformed go...


THURSDAY Market Excerpts

Posted: 23 Dec 2010 10:16 AM PST

Gold eases before Christmas holiday

The COMEX February gold futures contract closed down $6.90 Thursday at $1380.50, trading between $1372.60 and $1389.00

December 23, p.m. excerpts:
(from Reuters)
Christmas holidayGold pared early losses of nearly 1% by the end of New York's holiday-shortened week as the euro rebounded, with analysts saying a possible rise in inflation next year could send the metal higher. Thursday's correction notwithstanding, gold is still heading for its first weekly rise in three. Gold touched one-week lows early, hit by a rising dollar after a raft of U.S. economic data pointed to stronger fourth-quarter growth than the prior three months' tepid pace…more
(from AP)
The Commerce Department reported that consumer spending rose 0.4% in November from the month before. That was slightly below expectations of a 0.5% gain. In a separate report, the Labor Department said the number of people applying for unemployment benefits for the first time dropped by 3,000 last week to 420,000. That number is just low enough to indicate modest job growth…more
(from Dow Jones)
Credit ratings agency Fitch cut Portugal to A+ with a negative outlook, but gold saw little upside from the decision despite the report stoking investor concerns about Europe's sovereign-debt crisis. "The Portuguese have always been large holders of gold," and some investors worry the country could sell off a large amount of gold stock in a move that will disturb the market, said George Gero, vice president with RBC Capital Markets…more
(from Marketwatch)
Gold futures ended with a loss, resulting in a near-flat weekly performance, but managed to recover from session lows as rallying oil prices raised the metal's allure as an inflation hedge. "The dollar was kind of at the top of its range and pulled back, and crude oil was very strong," noted Charles Nedoss, senior market strategist at Olympus Futures. "If you're seeing an inflationary move in oil and food, that would be good for gold." Oil pushed above $91, the first time it's broken through that level since Oct. 3, 2008…more
(from Bloomberg)
Gold futures for February delivery fell 0.5% on the Comex. The metal is headed for a 10th straight annual gain, with the price climbing 26% this year, topping returns on U.S. stocks and bonds. "Investors have had a good year in gold and commodities, and they want to take some of that money home," commented Leonard Kaplan, president of Prospector Asset Management. Floor trading ended early today, and the market will be closed tomorrow for the Christmas holiday…more

see full news, 24-hr newswire…

After Nearly Two Years Of Searching, TrimTabs Still Can't Figure Out Who Is Buying Stocks

Posted: 23 Dec 2010 10:05 AM PST


A year after Charles Biderman's provocative post first appeared on Zero Hedge, in which he asked just who is doing all the buying of stocks as the money was obviously not coming from retail investors (and came up with one very notable suggestion), today Maria Bartiromo invited the TrimTabs head once again (conveniently in CNBC's lowest rated show, during Christmas Eve eve, at a time when perhaps 5 people would be watching) in an interview which disclosed that after more than a year of searching, Biderman still has no idea who actually buying. In response to Bartiromo's question if the retail investor, who left after the flash crash (thank you SEC), Biderman responds what every Zero Hedger has known for 33 weeks: "Retail investors are not coming back to the US. Those investors that are investing are buying global equities and are buying commodities. We are seeing lots money going into commodity ETF funds: gold, silver..." and the even more unpleasant summation: "individuals have been selling, companies are net selling, insider selling and new offerings are swamping any  buyback and any cash M&A activity since QE 2 was announced. Pension funds and hedge funds don't really have that much cash to invest. So what nobody's asking is what happens when QE 2 stops: if the only buyer is the Fed, and the Fed stops buying, I don't know what is going to happen...When I was on your show a year ago I was saying the same thing: we can't figure out who is doing the buying it has to be the government, and people said I was nuts. Now the government is admitting it is rigging the market." Cue Bartiromo jaw dropping.

As for the simple math of where the money is actually going:

"Money flows come out of income, take home pay of everybody plus money that came from real estate is down about $1 trillion a year. It peaked in the 3rd quarter of 2008, at $7 trillion, that's take home pay for everybody who pays taxes plus the money that came from real estate. It has now bottomed at $5.9 trillion. We are still down $1.1 trillion in money that people have to spend each year, that 16%. And some of the money that is leaving equity markets we think is going to pay bills."

Much more CNBC non-grata truthiness in the full clip, in which Biderman suggest what Zero Hedge readers realized over a month ago, that in June QE3 will likely have at least a partial municipal bond focus.

 

Jackie O (Silver Vigilante) visits NYC (****)

Posted: 23 Dec 2010 09:37 AM PST

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Rick Rule - Physical Supply Shortages in Silver to Continue

Posted: 23 Dec 2010 09:05 AM PST

King World News today interviewed one of the great minds in the resource world, Rick Rule. Rick alerted King World News readers in late October about shortages in silver. About one month later silver had advanced over $8 or roughly 35%. Rick is one of the most level-headed individuals in the business so we wanted to catch up with him for an update on his thoughts on what was happening with silver and where it is headed.


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Right on time…

Posted: 23 Dec 2010 09:03 AM PST

By Paul Ferguson Gold bounced off of trendline support this morning.  Trading in the gold shares looked particularly encouraging, with stocks opening at their lows and working their way higher.  Volume on the pullbacks the past few days has been significantly lighter than volume on the preceding moves up.  This is normal bull market action.  Many [...]


Head-Fake

Posted: 23 Dec 2010 08:53 AM PST


A friend sent me the following chart. The arrows, shading etc. are his. Note that he has a few questions. If you can answer the second question you could make some money.

 


The green shaded area was clearly a head-fake by the market. This was (in part) a reaction to the Greenspan comment that the economy had “hit an invisible wall”. Alan was right. Many indicators and a fair number of soothsayers (myself included) saw the signals and concluded that a double dip (or at least a significant slowdown) was in the cards. As far as the markets go that call was dead wrong. The view was that employment would continue to worsen. That of course was spot on. Wrong for the right reason. Yuck.

The yellow line covers the time that QE2 first became official. It took the Fed another two months to actually implement the policy after the September comments by Ben. But there was very little doubt on the outcome right from the get-go. Yes there were speeches and planted news stories that suggested there was some debate. That was all show pony, there was never any doubt about the outcome.

Stocks have loved it. Why not? The Greenspan Put worked great for a while. QE is even better. The Bernanke Put is ‘In the Money’. The thinking is you can’t lose. A very dangerous state of mind. The bond reaction was: buy on the rumor and sell (hard) on the news.

Looking at the chart since September you have to ask the question; “Is this real or is this another head-fake?” It’s hard to fight the lines that point up since September and not conclude that the market is telling you a sustainable recovery is being formed. I read a fair bit and can say that an awful lot of pundits are looking at this and concluding that the worst is behind us and that reasonably solid growth is on tap for 2011. The next read on the Leading Indicators will no doubt show an uptick, the principal reason being that the yield curve has steepened.

I am going to stick my neck out and say it is a head-fake. It is not clear sailing in front of us. Some things that I think “fight” the conclusion that stocks, bonds and pundits are drawing:



-Sustaining the Bush tax cuts is not a stimulus. No one’s check is going to be bigger as a result. This is more of an absence of a negative versus a positive.

-The $115b, 2% reduction in Social Security taxes is a stimulus. But not much of one. It comes to $15 a week for the average worker. Helpful, but I don’t see it changing things too much. The reduced deductions are largely offset by the elimination of the Make Work Pay program. Net net no big deal.

-The dollar is too strong to think that our economy is going to grow much. 2011 will bring us higher trade and current account deficits. 

-2011 will be a year of non-stop muni “crisis” talk. What this really means is that the states, counties, cities, towns and villages will all be cutting expenses. They have to. They (for the most part) have to balance their budgets. Big cut backs in muni spending will drag on GDP.

-BABs is dead. This is going to make a difference in how big ticket projects are financed. Large construction projects of hospitals, schools, roads and the like are going to have to be scaled back.

-Energy prices are rising. In 2011 we will see this in both electricity and gas. That $15 a week savings from SS is going right out the window and into a gas tank.

-The cost of food and insurance is about at least 10% YoY. Don’t look at those CPI numbers. Look at your bills. Real disposable income is going down, not up.

-We will spend most of 2011 with unemployment NORTH of 10%. Give me a break, how can we expect much growth with that as a backdrop? Sure the checks are still going out. But this is the third year that we have been at post depression highs on UE. We also know that the UE numbers are bogus. The number of people who are out of the system altogether or are working part time just keeps getting bigger.

-ARRA, the 09 stimulus, is essentially finished. Another absence of a positive.

-We will have ZIRP. A plus. But how much of one? Loan demand is not responding to ZIRP. Most large companies are sitting on bundles of cash. ZIRP actually hurts them.

-Mortgage rates are not getting cheaper. Long-term bonds for corporates have backed up a bunch. 

-We have six months of QE2 left. The last month will see only small amounts bought by the Fed. Therefore in approximately 75 days we will be sliding downhill on this program. I’m not sure what it means or what will be the outcome. I know it will add to a sense of instability as something very significant will be passing into uncertainty. Put differently, we have 53 trading days left to half-life. Not much time at all.

-Don’t’ count on the EU lifting US GDP in 11. Not going to happen. China is a question mark. I say that they cool in the coming year by more than the current thinking.

-Wild Card. There are always surprises. Rarely are they good.

What are the odds that we see a head-fake? A surprise outcome where numbers and events force a significant rethink of the now prevailing 3+ % growth in 2011 story? I would say those odds are not too high. Does 30% probability for a hard landing sound right? It’s very hard to handicap. One thing about this; if we do see the head-fake it is going to put a big dent in markets that are now trading very rich.

If the first few weeks in January give us another run up in equities and yet cheaper bonds it might be worth buying some out of the money puts/calls. The money spent may be a throwaway. But if in fact what we are seeing is a big misread on the economy and a distortion by QE2 then we are going to see the bottom levels on the chart again. Something like that happens and there are big multiples on the money spent on the bet.

Gold Daily and Silver Weekly Charts

Posted: 23 Dec 2010 08:52 AM PST


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Left Behind

Posted: 23 Dec 2010 08:35 AM PST

by Addison Wiggin - December 23, 2010

  • Left behind: While U.S. sputters, world economy doubles 2000-2010
  • Back to the future: Stunning chart shows China, India reassuming roles they held a millennium ago
  • Treasury’s ugly truth: 2010 deficit only 61% higher than you were told on CNN
  • An end to the flu? Patrick Cox on one of the “wealth quakes” set to arrive in 2011
  • Parental discretion advised: WikiLeaks stirs CIA, Bank of America into profanity and vulgarity
  • Because we don’t always know what gets our readers’ dander up... An onslaught of mail about silent killer Priuses!

Here’s an interesting thought for you to chew on during your Christmas dinner. The world economy, following the global recession and financial crisis, is almost twice the size of a decade ago.

In 2000, world GDP was $32 trillion. “Next year, based on conservative growth assumptions” by the British megabank Standard Chartered, “it could rise to $64.7 trillion.”

“There was a significant contraction as a result of the crisis and global recession,” the bank admits, “but now the world is back to its pre-recession peak.”


Given all the handwringing over unemployment and outsourcing in the U.S., the figure seems improbable. But the stat belies the fact that most of the growth in the economy over the past decade has come from economies outside the U.S. or Europe.

Here in the Empire of Debt, GDP has been sluggish not just since the Panic of 2008, but for the last decade.


If the global trend continues for the next 20 years, then global growth in the 21st century will ring in at a clip superior to the historic period we call the Great Dollar Standard Era -- from the breakdown of Bretton Woods in 1971 through the palliative Y2K freakout:



Indeed, if the trend continues, the next era will see global growth that exceeds any period in the last 200 years except for the post-World War II era.

Hard to believe, isn’t it?

[Ed. Note: We were treated to these charts and facts by Chris Mayer who addressed Reserve members on our third Chill Weekend at Rancho Santana on Monday. And you thought it was all fun in the sun. Ha!

Our next Reserve-Only Chill Weekend is on Feb. 15-19, 2011... but I’m told it’s already sold out. If you’re interested in joining us down at the Ranch, we’re taking reservations for Reserve members (who want to invest in the project) for the weekend June 7-11. Contact our surfer-in-residence Marc Brown for details, right here.]


What’s perhaps even more interesting, Mr. Mayer suggested, the global output in the West may have peaked in 2000.



And if you narrow it down to just manufacturing, the peak came in 1953. “Services industries grew enough to offset such losses. That trend, though, ended in 2000.”

For hundreds of years, going back to the Renaissance, China and India ranked among the most productive economies on the planet.

Ironically, many of the contacts we’ve developed over the past decade have been investing in the so-called emerging markets. They’ve been taking advantage of this growth firsthand and doing quite well with their money in places like Colombia, Brazil, Vietnam, Indonesia, South Africa and spaces in between.

Such a strong trend is it we’re considering adapting and rebranding our new Apogee Beta product to cover fund managers and their strongest investment themes ex-U.S., ex-Europe. So far, we’ve got a tag line... “Capital Goes Where It’s Treated Best”... but we’re in search of a good name for the product. Got any ideas? Send ‘em to Dave: 5minforecast@agorafinancial.com

[Breaking News: In a remarkable episode of synchronicity, we see this headline from the U.K. Daily Mail -- “Fresh Humiliation for Eurozone as China Says It Will Bail out Debt-Ridden Nations.” Seems the Foreign Ministry just identified Europe as an important sector for China’s $2.7 trillion overseas investment fund. Previously, China offered to buy some of Greece’s and Portugal’s debt, but now it appears the commitment is going to be stepped up a notch or three. Stay tuned.]


As if to prove the above thesis, the U.S. Treasury just came clean on how much of a deficit it ran during fiscal 2010. It’s only 61% higher than the “official” figure.

The annual Financial Report of the United States Government came into being under Paul O’Neill, who you might remember from I.O.U.S.A. He was the Treasury secretary thrown overboard by Dick Cheney for having the temerity to believe deficits do matter.

The report applies generally accepted accounting principles to Uncle Sam’s books -- you know, the ones you have to apply in the private sector on pain of severe penalties.

That means Treasury took into account things like…

  • Hefty increases in costs accrued for veterans’ compensation

  • Government and military employee benefits

  • Anticipated losses at Fannie Mae and Freddie Mac.
Factor those in and the deficit came in at $2.08 trillion… just a wee bit over the figure splashed all over the media a few weeks ago, $1.29 trillion.

But it’s even more fugly than that.

“Broader GAAP-based federal deficits, including the Social Security and Medicare unfunded liabilities, have been in the $4-5 trillion range in 2008 and 2009,” says ShadowStats.com’s John Williams. ”And 2010’s deficit again likely was near $5.3 trillion, remaining both uncontainable and unsustainable.”

By this yardstick, you could eliminate all government spending except Social Security and Medicare and there’d still be a deficit.


If there’s going to be a showdown over raising the national debt ceiling next year, you can now mark it on the calendar -- March 4, 2011. My birthday. Go figure.

In their rush to get home to see their wives and mistresses for the holidays, Congress passed yet another “continuing resolution” this week to prevent a government shutdown.

With these resolutions, members don’t have to actually draft a budget -- you know, one of the few pesky activities they’re mandated to do by the Constitution? They can put the whole spending program on autopilot.

The new resolution should keep the lights on through March 4. By happy coincidence, this should be right around the time the national debt hits the current ceiling of $14.3 trillion.

Grab the popcorn. We’ll see if the Tea Partiers have any gumption then.


Markets across the globe are going into hibernation as the holidays approach and traders hit the road (or eggnog) early.

The Dow is up a fraction. The S&P is down a fraction. Gold has drifted down to $1,376, but that’s no cause for concern.


“It’s time to pull back the curtain on my first prediction for 2011,” says Breakthrough Technology Alert editor Patrick Cox, hopefully ignoring the fiscal picture of the nation. Instead, he’s been following a team of scientists who’ve developed “a technology that could stop viral disease -- much like the H1N1 ‘swine flu’ outbreak.”

Better yet, “Any virus, from warts and herpes to Ebola and AIDS, could be targeted” using this same research. “The science behind this company is so revolutionary it could destroy the vaccine industry as we know it. When I first read through the company’s materials, including its verified lab results, my jaw dropped.”

In short, the company is using nanotechnology -- picking apart molecules and even atoms -- to knock out viruses. And it’s on the verge of a significant announcement. “My sources tell me that this company will soon release shocking news about their work -- independent tests on how well one of their platforms works.”

We’ve been around Patrick long enough by now to know he’s not just blowing smoke. When he said to buy the tiny company Medarex, it was $4.74 a share. Seven months later, you could have been 235% richer when Bristol-Myers Squibb bought it out for about $16.

This year, Patrick has closed gains of 86% and 290%. Open positions have gains as high as 1,129%. So in 2011, you can put a tiny amount of money into Patrick’s five best ideas -- “wealth quakes” he calls them… and just forget about it.

In time, it could be a mountain of money. As is common in the tech market, the earliest investors make the biggest money. Give yourself an early present and check out all five of Patrick’s “wealth quake” predictions for 2011… right here.


Our final two items today run afoul of The Presbyterian Standard we like to follow here in The 5. That’s the effort to avoid any words we wouldn’t write to our mothers. Still, they’re too funny for us to ignore:

First, we’re learning how Bank of America is gearing up for a round of WikiLeaks revelations. WikiLeaks founder Julian Assange has confirmed he’s sitting on a stash of BoA documents. The bank is bracing for the onslaught by… registering naughty domain names.

On Dec. 17, BoA registered more than 300 web addresses, most of them along the lines of BrianMoynihanSucks.com, to prevent them from falling into the hands of people who don’t like the bank. Brian Moynihan is the CEO who replaced the tarnished Ken Lewis.

For the record, we have no idea if he sucks or not.

Second, the CIA is forming a task force to deal with the fallout from the diplomatic cables released by WikiLeaks. It’s been given the simple name of WikiLeaks Task Force, or WTF.

That’s right, WTF. If you’re familiar with the texting set’s vernacular, you’ll know why we wouldn’t want to write such things to our mothers, especially this time of year.




“Your commentary on the quiet electric cars is wholly misguided, and you cite irrelevant ‘data’ in a most feeble argument,” a reader grouses. “Over the last 10-15 years, the population of electric vehicles, only some of which are quiet enough to pose a hazard, has been minuscule -- even smaller! Statistics such as those exhibited in your citation change very slowly over time; they start to change long after a trend has started.

“Fact is electric cars are so quiet as to be dangerous when mixed thoroughly with pedestrians, especially in parking lots and driveways. To ignore the safety hazards of denying vulnerable humans an often-used and effective warning sensor such as hearing is patently absurd.

“Do you really want to stave off common sense for 30 years so you can have statistical evidence that common sense was necessary? Think of the thousands of dead (mostly children), maimed and permanently disabled people such ‘proof’ would require!

“‘Tis rare that our ham-handed U.S. government does the right thing. Let us celebrate passage of the bill requiring noisemaking in the Senate and enjoy our enginetones in a safer environment!”

The 5: You’re right, it was a feeble argument... but please Lord, tell us you’re kidding. You are kidding, right?

Usually these sorts of bills come with the name of some victim attached to it, to personalize it. If a blind person named Chloe had been killed by a hybrid car, it would be “Chloe’s Law.” But it’s not. It’s the “Pedestrian Safety Enhancement Act.” They didn’t even bother trying to squeeze a catchy acronym out of it.


“Isn’t the ‘noisemaking apparatus’ required by law,” asks another on or near our wavelength, “also known as a...wait for it... HORN?!”

“Maybe the ‘green’ car makers should comply with the decree to make their cars noisier,” suggests a third, “by having it play over and over again the following recording: ‘Don’t blame us, it’s the jackasses in Congress that are making us do this.’”


“Why not make manufacturers equip electric cars with spoked wheels. Then add a clothespin and a playing card and voila!”

The 5: Indeed, unfortunately, the playing card and clothespin lobbies don’t have as much clout in Washington as they used to.


“I’d like a drivetone, please,” writes a fourth, who then adds an angle we like to see. “What colors do they come in? Seriously, if Agora knows of a company making drivetones, I would be interested in the ticker. Figuring most cars will go the way of the electric and be quiet movers. It’s a problem, but a good problem.”

The 5: Sounds like a good job for the Penny Sleuths... we’ll put ‘em on the case.

(They’ve had a terrific year, by the way. Right now, their average open position is up 43%. If you haven’t checked out Penny Stock Fortunes, it’s one of the few genuine bargains across the entire financial publishing industry. Give it a look.)

Cheers,
Addison Wiggin
The 5 Min. Forecast

P.S.: We wrote Empire of Debt in 2005. But with China and other emerging markets soaking up more and more of the world’s capital, its themes are more relevant than ever.

You can get the updated 2009 edition at a 60% discount at Laissez-Faire Books. Plus, you can get any other title at 60% off… and on top of that you get a FREE copy of the Henry Hazlitt classic Economics in One Lesson.

Just enter coupon code THE5ED when you check out. This offer expires Dec. 31 – a week from tomorrow. So check out the online LFB catalog right away.

P.P.S.: The stock market is closed tomorrow. As The 5 will be. At least one of your editors will be driving the family to New Hampshire for Christmas Eve and Day. But never fear, even though many traders will sit out the week between Christmas and New Year’s, we won’t. We’re back on Tuesday the 28th, when we begin looking ahead to 2011 in earnest.

Until then, we hope you and yours have a Merry Christmas!


Ho…Ho…Huh? How much?!

Posted: 23 Dec 2010 08:23 AM PST

by Jodie Curtis
December 23, 2010 (FoxNews) — Perhaps your "true love" would prefer a nice gift card instead of two turtle doves or a few pipers piping.

The price of the whimsical gifts in the classic, "Twelve Days of Christmas" surged 9.2 percent this year, according to the 2010 PNC Christmas Price Index. This marks the largest percentage increase since 2003.

Pull out your wallets, and maybe a loan application, because the annual survey compiled by PNC Wealth Management, estimates the cost of the gifts to top $23,439 in 2010. That's a $1,974 increase from last year's Christmas Price Index.

The costs of only a few gifts remained unaltered by the current economic conditions. The price of a pear tree, four calling birds, and six geese-a-laying remained unchanged from last year. Given this is first time in three years the federal minimum wage hasn't been raised, the eight-maids-a-milking hourly rate remains unchanged at $7.25 an hour.

James Dunigan, managing executive of investments for PNC Wealth Management weighed in on the increase saying, "This year's jump in the PNC CPI can be attributed to rising gold commodity prices, represented by the Five Gold Rings which went up by 30 percent, in addition to higher costs for wages and benefits impacting some entertainers."

PNC Wealth Management also tabulates the "True Cost of Christmas" which determines the costs of the gifts repeated throughout the verses. You would have to shell out $96,824 for the 364 gifts. Never underestimate how much she might prefer just a nice cashmere scarf. Birds and lords-a-leaping tend to require quite a bit of upkeep. The five golden rings, well, those can probably stay on the list.

[source]

For comparison, see how our friend, Ed Stein, waxed philosophic last year for the Twelve Days of Christmas…

Global Economic Growth Doubles in 10 Years

Posted: 23 Dec 2010 08:16 AM PST

Here's an interesting thought for you to chew on during your Christmas dinner. The world economy, following the global recession and financial crisis, is almost twice the size of a decade ago.

In 2000, world GDP was $32 trillion. "Next year, based on conservative growth assumptions" by the British megabank Standard Chartered, "it could rise to $64.7 trillion."

"There was a significant contraction as a result of the crisis and global recession," the bank admits, "but now the world is back to its pre-recession peak."

Given all the handwringing over unemployment and outsourcing in the US, the figure seems improbable. But the stat belies the fact that most of the growth in the economy over the past decade has come from economies outside the US or Europe.

Here in the Empire of Debt, GDP has been sluggish not just since the Panic of 2008, but for the last decade.

If the global trend continues for the next 20 years, then global growth in the 21st century will ring in at a clip superior to the historic period we call the Great Dollar Standard Era – from the breakdown of Bretton Woods in 1971 through the palliative Y2K freakout:

World GDP Through 2030

Indeed, if the trend continues, the next era will see global growth that exceeds any period in the last 200 years except for the post-World War II era.

Hard to believe, isn't it?

What's perhaps even more interesting, according to Chris Mayer, editor of Mayer's Special Situations, the global output in the West may have peaked in 2000.

Make-up of World GDP Through the Centuries

And if you narrow it down to just manufacturing, the peak came in 1953.  "Services industries grew enough to offset such losses," Chris says. "That trend, though, ended in 2000."

For hundreds of years, going back to the Renaissance, China and India ranked among the most productive economies on the planet.

Ironically, many of the contacts we've developed over the past decade have been investing in the so-called emerging markets. They've been taking advantage of this growth firsthand and doing quite well with their money in places like Colombia, Brazil, Vietnam, Indonesia, South Africa and spaces in between.

[Breaking News: In a remarkable episode of synchronicity, we see this headline from the UK Daily Mail – "Fresh Humiliation for Eurozone as China Says It Will Bail out Debt-Ridden Nations." Seems the Foreign Ministry just identified Europe as an important sector for China's $2.7 trillion overseas investment fund. Previously, China offered to buy some of Greece's and Portugal's debt, but now it appears the commitment is going to be stepped up a notch or three. Stay tuned.]

Addison Wiggin
for The Daily Reckoning

Global Economic Growth Doubles in 10 Years 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."


Watching Grass Grow... and Paint Dry

Posted: 23 Dec 2010 07:23 AM PST

"GLD ETF declines 302,000 ounces. Interviewed on CNBC, CFTC's Chilton defends position limits. 33rd week in a row for outflows from U.S. domestic equity mutual funds. The Christmas Truce... and much more. " Yesterday in Gold and Silver Wednesday's trading activity in gold was like watching paint dry... no price action on light volume. The chart says it all. The gold price made it above $1,390 spot a couple of times... and that was all the excitement there was. Silver's price action was like watching grass grow. Volume was light as well. From the Far East open at 6:00 p.m. on Tuesday evening... right up until precisely 5:00 a.m. Eastern time yesterday morning... the world's reserve currency fell 40 basis points. Then at that precise moment, the dollar began to rally, gaining about 45 basis points by around 1:30 p.m. Eastern time. Coincidentally, gold and silver's high ticks of the day were at precisely 5:00 a.m. Eastern time as well... and the pr...


The Derivatives Market Monstrosity

Posted: 23 Dec 2010 06:40 AM PST

I assume that you, as an intelligent person who understands that the treacherous, greedy, vampire banks creating so much excess money means We're Freaking Doomed (WFD), are Up To Your Freaking Ears (UTYFE) in gold, silver and oil, and you have had it UTYFE with your family always complaining about how you spend all the family's income on gold, silver and oil instead of luxuries, family vacations, adequate food, clothing, medical care, dental care, blah blah blah, the list goes on and on. But what you really, really want to know is: How did we get into this mess? In that case, I present the Buttonwood column of The Economist magazine. Some guy who read an economics book a long time ago, but hasn't learned a thing nice, laughably wrote, "It is an economic truism that savings must equal investment." Hahaha! See? I told you it was laughable, as I handily proved by laughing! Hahaha! You'd think that the editors of The Economist would have heard me laughing about it and ask, "What ...


John Taylor Says To Play The Coming End Of The Global Reliquification By Shorting Australia

Posted: 23 Dec 2010 06:38 AM PST


In his weekly headline letter John Taylor analyzes where he and Jim Chanos have overlapping views, and where both of them erred (hint: everyone underestimated the willingness of Bernanke to sacrifice monetary prudence in order to reflate anything and everything, although with oil now the latest and greatest excess liquidity target, the experiment may soon be ending). Yet the time of the global reliquification may be coming to an end: "If the Republicans play rough and California craters, fiscal tightening will be the rule, US rates will be higher than Bernanke wants, the dollar will be strong, and foreign markets will be hurt. The odds favor an outcome like this, and the Fed is not free to ride to the rescue again. With Ron Paul riding hard over Bernanke, the Feds wild ways will be corralled. With fewer excess dollars, the growth game, and the markets that follow it, are over." So is shorting stocks the best bet? Yes. But an even better one is going short the Aussies: "The Aussie was over USD 1.0000 today and we think it is a great sell here."

MARKET INSIGHT REPORT
Aussie Luck Could Be Running Out

John Taylor, Chief Investment Officer

Jim Chanos seems to have lost his high profile perch as a China basher in the popular press, but he is still confident that China will be slowing and property values will drop sharply. Another analyst with an outside the box view about Australia and its coming problems has also gone quiet lately – me – as the last letter we wrote on this was dated March 11, titled The Lucky Country. Our conclusions were that “leverage is a dangerous thing and ‘excess leverage is always a disaster in the waiting” and finally that “luck will run out this year.” We’re waiting. Both Chanos and FX Concepts made the same error: we had not appreciated how far Ben Bernanke would go to flood the market with dollars. The Fed’s attempt to float the weak US economy on a pool of excess dollars resulted in a banner year for China, Australia, commodities, emerging markets, and a host of other things. Isn’t this still going on? What has changed? We think the answer is almost everything.

Considering that the Fed recently announced a new qualitative easing program that will put $75 billion into the global system each month until June, it might seem a stretch to say that things are changing, but they are both in the US and in Australia, plus the rest of the world including China. Front and center in the US is the 112th Congress which begins on January 3, which we expect to be one of the most tight-fisted in history. Just last night the 111th Congress in one of its last acts passed a bill to keep Washington running for another 10 weeks – only hours before it would have run out of money. What is impressive is that this bill freezes all budgets at current levels, does not fund the new healthcare bill or the financial regulation bill, and puts all future spending decisions off to the new Congress. The Buy American Bonds (BAB) program seems to have been left for dead, which could pitch California and other near-bankrupt states into a dark hole within a few months. There just won’t be any spending coming from Washington or the states. Most analysts are expecting better US growth from the personal tax compromise, Obama’s cutting of Social Security deductions, and extension of unemployment insurance. Even if this does not create growth – which it might not – it means that the  government must borrow more and there will be fewer dollars for the rest of the world. If the Republicans play rough and California craters, fiscal tightening will be the rule, US rates will be higher than Bernanke wants, the dollar will be strong, and foreign markets will be hurt. The odds favor an outcome like this, and the Fed is not free to ride to the rescue again. With Ron Paul riding hard over Bernanke, the Feds wild ways will be corralled. With fewer excess dollars, the growth game, and the markets that follow it,
are over.

Interestingly the Shanghai Composite Index and the Australian dollar are showing a six month correlation of 89%. Sydney looks like Shanghai south, but the Chinese authorities are slowing their economy – and Chanos says this will turn into a sharp slide. In Australia the party seems as exciting as ever and everyone is still dancing (see Chuck Prince). Housing prices – the highest in the world – are still climbing. In the capital cities prices are up over 50% since 2004 and the average house is valued at nearly 8 times the average income. With borrowing rates now averaging over 7¾%, this means about 60 percent of pre-tax earnings would have to go toward the mortgage of a new house. No wonder the delinquency rate is up to 2.8% in Western Australia and climbing throughout the country – even while the party is going on. With about 75 basis points priced into the forward curve this year, the situation will get tighter for the average Joe. Commodity prices made a new two year high today and the government just told us that mining taxes are still in good shape. I hope so, but we don’t bet on hope. The Aussie was over USD 1.0000 today and we think it is a great sell here.

Bloomberg Counters Gold’s Run With Absurd ‘Hit-Piece'

Posted: 23 Dec 2010 06:32 AM PST

By Jordan Roy-Byrne, The Daily Gold

Monday morning I was greeted via my inbox with a Bloomberg report on Gold (NYSE:GLD). Bloomberg has a series called "The Dark Side of Gold." Its important to note this isn't the first time the news organization has attempted a hit-piece on Gold. I wrote about this exactly one year agoand identified the cases and examples of Bloomberg's gold bashing.

The crux of the biased series (one that even makes CNBC blush) is how Gold ETF's are responsible for Gold's rise and contributing to a bubble. It is insinuated that because the ETF's are easily tradeable, a torrent of sell orders would cause Gold could to fall sharply, ala 1980.

Gold's rise actually has very little to do with the GLD ETF. It really is a non-factor when you consider any of the following reasons: Threat of sovereign debt defaults, debt monetization in Europe, Japan and US, 0%-1% interest rates, commodity bull market, and falling gold production. The GLD ETF is an effect of the bull market, not a cause. The same is true with mutual funds during the bull market in the 1980s and 1990s.

In the two minute preview video, Bloomberg's Carol Masser makes two ridiculous claims in a span of about four seconds. She claims that prior to the Gold ETF, only "conspiracy theorists" were buying Gold and that it cost a "fortune" because of holding costs and commissions. This is nothing other than failed hyperbole, seeking to demonize Gold and gold bulls. I'm not an expert on the exact ongoings of the physical market but I'm sure that it at that time it didn't "cost a fortune" to buy Gold. Meanwhile, any conspiracy theorists have clearly made a lot of money.

Oh, I forgot to note at the very start of the video, the woman claims that even "college coeds" are buying Gold. Really Bloomberg? Where is the evidence of that? Google that and I bet you are more likely to find softcore pornography than any hard-hitting evidence on such a ridiculous assertion.

Speaking of "hard-hitting," Bloomberg interviewed Mark Williams of Boston University, who on camera made the case that Gold is in a bubble by providing zero evidence. A googling of the professor reveals he was perfect for this series, as he is a notorious hard-money hater. In November he wrote an editorial about how the gold-standard should be relegated to the dustbin of history. The only thing that will be relegated to the dusbin of history is our fiat currency system. It's happened before and will happen again.

Finally, they trut out the Soros quote of Gold being "the ultimate bubble." There needs to be some clarification of this point. Soros is increasing his Gold position, which is already his largest position. In reality, he's not saying it is the ultimate bubble. Soros believes Gold will become the ultimate bubble and that is why Gold is his largest position.

In reality making Gold the focus misses and obfuscates the real issues at hand. This is about the future of our monetary system and fiat currency. I can understand that Gold could fall $300 at anytime and the perception of it lacking utility but explain to us how the fiat system will survive? No fiat currency has ever survived the "dustbin of history."

Fiat currencies have value based on the ability of government to meet its obligations. As we and others have picked up on, the USA's interest expense is now over $400 Billion and currently 17% of tax revenue. This is with interest rates at historical lows and a national debt of $14 Trillion. That doesn't include agency debt of $3 Trillion and an estimated $2.8 Trillion from the states.

The situation is going to get worse. The states will likely need support in 2011 and perhaps a bailout by 2013. The continuation of the Bush tax cuts adds another $700 Billion to the deficit over the next two years. The most important variable of all, interest rates is now moving in the wrong direction.

Two years from now, the US government would be dealing with over $17 Trillion in debt and at the least, a 50% rise in interest payments. Even if interest rates hold around 4%, you are still looking at an interest expense equivalent to 25% of tax revenue. And that accounts for growth in tax revenue.

This speaks to why the Fed is monetizing the debt under the guise of economic stimulus and quantitative easing. They have to, and they are just getting started. In the coming months and years, the Fed will have to monetize more as the debt burden grows larger. Moreover, the Fed will periodically have to buy bonds to try and keep rates down. As rates rise, so does the debt burden. The perception is that rising rates is bearish for Gold. While this can be true in the very short run, it is quite the opposite in the larger picture if you have a huge debt burden.

We are in a new era. This isn't the 1980s and 1990s. The typical stockbroker, financial planner and mainstream publication doesn't get it. They've barely figured out this is a bull market for hard assets. Those who assume Gold is a bubble couldn't be more clueless about the state of affairs. They should do themselves a favor and study monetary history. Governments going broke, the restructuring of debts and monetary systems is nothing new.

Certainly Gold is volatile and inherently risky. It can and will have small and large setbacks along the way. However, the greatest risk is being unprepared for the inflation tsunami that lies ahead. This is why we developed a service focusing on the best profit opportunities along the way. If you are looking for professional guidance in riding the Gold bull and leveraging your returns, then we invite you to a free 14-day trial to our premium service.

Money & Markets Charts ~ 12.23.10

Posted: 23 Dec 2010 06:19 AM PST

View this week's chart comparisons of gold against fiat currencies, oil and the Dow. Stay tuned for our next Money & Markets segment of The Solari Report Thursday, January 6, 2011. Click here to view all charts as a pdf file. See previous Money & Markets Charts blog posts here. Currency charts are from StockCharts.com. Gold vs Oil Gold vs [...]


Thoughtful Thursday – The True Meaning of Christmas

Posted: 23 Dec 2010 06:12 AM PST


Thoughtful Thursday – The True Meaning of Christmas

By Phil at Phil's Stock World

Why it’s almost Christmas Eve, Mr. Scrooge!  

The Global markets are closing for the weekend and we're bound to have a very slow day - if you are waiting for a Santa Clause rally on today’s trading, you are very likely to be disappointed. Today is a day for relaxation and reflection.  Remember, the words of Jacob Marley, who said:

Business! Mankind was my business. The common welfare was my business; charity, mercy, forbearance, and benevolence were all my business. The dealings of my trade were but a drop of water in the comprehensive ocean of my business!

Marley was a man who worked and worked until the day he died and regretted it every day after.  If you don’t believe in an afterlife and you don’t believe in leaving behind the World a better place than you found it, at least find some time for yourself so people don’t call you "a squeezing, wrenching, grasping, scraping, clutching, covetous old sinner" after you're gone.  

I was inspired this morning by a post on Barry's site titled "Give and You Will Receive" listing 13 good ways we can all give every day.  'Tis the season of giving and goodwill to all man and all that and my children just completed their annual ritual of wrapping up all the toys they are done with to give to children who need them more than they do.  It's a little thing, but if you want your kids to learn the benefits of charity, actually parting with things they like or liked and physically giving them to kids who clearly appreciate it is much more gratifying than writing a check to some anonymous organization.  The same goes for volunteering some time (and money!) at a local shelter and helping some people come in from the cold for a nice, warm meal - it makes you appreciate your family dinner a LOT more! 

Anyway, end of commercial. Let's just see who's being naughty and who's being nice this morning. We have quite a bit of data today with November Durable Goods at 8:30 (which have been tailing off) along with Personal Income and Spending.  2010 has NOT been an exciting year so far with monthly gains of about 0.4% but, on the bright side, there were only small negative months but this report only covers November and will not give us a very good picture of the holiday season and is, in fact, likely to be front-loaded by the very early Hanukkah this year. We also get Initial Jobless Claims and we'll see how many Scrooges laid off their respective Cratchits the week before Christmas.

Checking with the Ghost of Christmas Past, we see that last year there were 556,517 jobs lost in the week ending December 26th but don't worry it's a humbug as the DOL "seasonally adjusted" the number down to a more palatable 454,000 but that was nothing compared to what they did the next week (1/2) as (and I kid you not) 1,151,891 of our fellow Americans were "adjusted" off the continuing claims data - never to return.  As old Ebenezer liked to say: "They had better do it, and decrease the surplus population." Unfortunately, unlike in Scrooge's relatively charitable times, there are no more Union Workhouses - were the poor were sent to be given work (albeit terrible work).  There is no more Treadmill, there is no more Poor Law until a person in the US has fallen far enough from their employment to qualify for Welfare.  

The lot of our phantom, 1,151,891 forgotten workers of 2009 is no better and maybe worse once the unemployment runs out than that of their 19th Century counterparts. Looking back at 2008 shows us that the current Administration has nothing on the previous one as 12/27/08's 717,000 unemployed magically transformed into 514,000 but that was nothing compared to 1/10/08, when 956,791 pink slips were counted at just 547,000 jobs lost!  

Another neat Government trick is to scale back the total number of citizens seeking employment, this skews all the numbers far lower.  In Dec 2008 there were 134M employable Americans but by Dec 2009 it had dropped to 132M but then the fun began and, as of Nov. 20th, it was down to 126M. Bye-bye 6% of the US labor force, Scrooge would be so pleased...  If you want to play a fun holiday game, go explain to an unemployed person that they're not really unemployed - they're just "seasonally adjusted" - expect the conversation to go a bit like this.  

Moving on to ghosts of Christmas Present, we have University of Michigan Sentiment for December and that will let us know how merry our surplus population is feeling this month. The non-stop media blitz has been working well and present sentiment is up about 10%, from 78.3 in August to 85.7 in December (preliminary) but the Outlook has been lagging at 66.8 in December's preliminary estimate vs 62.9 in August:

Of some interest to the homeless this morning will be New Home Sales at 10 am.  New home sales now are lower (290,00) than they were in 2009 and lower than they were in 2008 and lower than they were in any friggin' year on the chart that goes back to 1994.  Of course "lower" is a funny word because it doesn't really convey that the AVERAGE of the past 16 years is 900,000 and we peaked at 1.4 MILLION new homes in 2004 so to say 290,000 is lower may be a bit of an understatement but watch how excited the CNBC girl will get if we have 300,000 instead of 290,000.  300,000 homes divided by 50 states (6,000) divided by 52 weeks is 115 homes per week being built in the average state.  That means if you see a home being built in your travels today, you should make a wish - because it's a rarer sighting than a shooting star!  

Our final helpings of holiday data come at 10:30, when we get Natural Gas Inventories along with Leading Economic Indicators and those guys were VERY bullish back on Nov 26th with a report that kicked off the rally from 11,000 as ECRI pronounced "that the much-feared double-dip recession is not going to happen."   Not to be a Grinch but this is my big problem with chart people - they don't care HOW you break the levels - as long as you break them.  When this much effort is being made to stimulate the economy, I tend to adjust my chart expectations to account for the expected effect of the bailout/stimulus/POMO rather than get all impressed by jumping over a very low bar that was set under very different economic conditions.  

Even in their "bullish" outlook, ECRI said: 

Today, the car that is the U.S. economy is crawling uphill, slowing as its engine sputters. With politicians fighting about whether to use a screwdriver or a spanner to fix the motor, the Fed is convinced we’ll end up using neither. Determined not to let the car start rolling back disastrously downhill, yet unaware that the road is about to level off, the Fed is strapping an untested rocket onto the car in hopes of blasting it over the top.

The Fed, looking out the rear-view mirror to steer the car, won’t know when we’re approaching a bend in the road, though we’re now high up in the mountains, with a dangerous abyss below.

So forgive me for not getting all gung-ho bullish last month - I should have stopped when I read the headline or, as I mentioned Tuesday, just let Uncle Rupert report so that I could "decide" properly. We expected poor goods numbers based on the early earnings reports as well as the Beige Book and we expected disappointing spending as people simply have no money and our Holiday Shopping Survey has painted, so far, a less than robust picture - despite all the media hype to the contrary. HOV just told us they can't sell any homes so we don't expect much there and those unemployment numbers are a joke so we went bearish yesterday in Member Chat with some aggressive shorts.  

We had to adjust the NFLX trade idea from the Morning Post because they opened too high and that worked like a charm as NFLX took a nice dive off the opening spike.  We were similarly rewarded with PCLN put plays as well as an aggressive short call (Jan $430s sold at $9.60 finished the day at $7.50 - up 22%) and we even went after AMZN for good measure.  We're not purposely shorting everything Cramer says to buy but, if I missed anything - please let us know!  We re-established oil shorts as there is just no way demand matches this price ($90.50) despite what an endless parade of "expert" analysts are telling you on television.  So, pretty bearish into the long weekend but we did like C, XLF, HOV and TBT (to hold $38) to the long side.  Not really a mixed bag as our time-frame is for the shorter-term sell-off but, long-term, we like the financials.  

Old Scrooge may be distressed to see the US Dollar holding 81 this morning as a lot of or bearish premise was based on my assumption that the EU traders would not have the jingle balls to stay long the Euro into the long weekend - that will have to wait until 11:30 to resolve itself.  Gold isn't waiting, though - they are in day 2 of decline from Tuesday's $1,393 and well off the 7th's $1,430 at $1,375 (down 3.8%) with $1,354 being the 5% rule down from $1,425 and the next stop (10%) way down at $1,282, which is what we expect from gold in January.  

Oil we expect to fare no better and the Ghost of Christmas Future (you didn't think I was forgetting my theme for the day, did you) shows shade of $81 even as the shadows move across the line at $90. Chris Kringle Kimble has an excellent chart that shows the channel we're watching on crude and this is another one of those cases where I push my line up higher than the chart guy to account for the ridiculous amount of cheerleading for $100 oil we're getting from CNBC and other criminal enterprises aimed at bleeding the American Consumer dry and transferring the wealth of our nations overseas - even into the hands of terrorist organizations, while our own government leaders silently drive to the banks to cash their Christmas bonuses from the Energy and Financials lobbyists - who contribute over half of all the money taken in by politicians during the year.  Ho-ho-ho, that joke is on us!  

Here's Chris Kimble's Nasdaq chart and the futures topped out at 2,239 on the button last night but have pulled back to 2,230 since, just 15 minutes before the open:

One final ghastly visitation and then we can wake up as if it's all been a bad dream - Jessie's chart of the Russell and it's own Ghost of Christmas Past (but already forgotten by the investing public it would seem):

Are those who have forgotten the past condemned to repeat it or has the market, like Scrooge, truly turned over a new leaf and will forevermore keep the bullish Christmas Spirit alive in its heart - heading ever higher, never again to come down. Ah, there's a Christmas fable we'd all like to believe in!

Wishing all the best to you and your family this holiday season, 

- Phil

CHRiSTMaS SHoPPiNG RioT iN HoNG KoNG

Posted: 23 Dec 2010 06:00 AM PST


To give you an idea of what Chinese prosperity looks like in Hong Kong, I went out and captured the shopping riot that is currently taking place on the Kowloon side of the city in the upscale Canton Road area and the younger Mongkok shopping area.

As you can see, there are waiting lines at all of the exclusive designer label shops. Most of the people waiting on these lines are Mainland Chinese.

In all my years of living in New York and Europe, I never saw anything like this. Mainland Chinese are not particularly religious, so this is literally a feast of conspicuous consumption.

It is all being financed by iGoods, Androids, flat screen TVs, everything sold at Walmart and Target and whatever else it is that Americans are buying this Christmas (excluding guns, ammo and silver).

The pictures tell ten thousand words...

Scuse me I got gifts to buy... (JimiHendrix)

 

 

The music is the theme from the movie "Merry Christmas Mr. Lawrence" which featured David Bowie 

A little ‘Christmas Cheer' from Ed Stein and all your friends at USAGOLD…

Posted: 23 Dec 2010 05:57 AM PST


Christmas cheer

… as featured in our latest newsletter, USAGOLD News, Commentary and Analysis.

newsletter

Clients & Friends,

How is the Federal Reserve's policy of Quantitative Easing affecting our economy and fueling the continued rise of gold?
Read the December issue of USAGOLD News, Commentary and Analysis and find out.

Take advantage of our FREE Introductory Information Packet, and while you're there, consider signing up to ensure that you don't miss out on a single issue!

Happy holidays everyone and best wishes for a prosperous 2011. From all of us at USAGOLD, Centennial Precious Metals, Inc.

Good cheer to all. . . .

Lawrence Williams: China's discreet gold-buying, dollar-dumping strategy

Posted: 23 Dec 2010 05:54 AM PST

1:55p ET Thursday, December 23, 2010

Dear Friend of GATA and Gold:

MineWeb's Lawrence Williams today reflects on China's largely surreptitious accumulation of gold, its deceptive accounting of its gold reserves, and its careful unloading of dollar assets. Williams' commentary is headlined "China Central Bank Absorbing Substantial Amounts of Gold without Disrupting Market" and you can find it at MineWeb here:

http://www.mineweb.com/mineweb/view/mineweb/en/page31?oid=117410&sn=Deta...

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


ADVERTISEMENT

Opportunity in the gold coin market

Swiss America Trading Corp. alerts GATA supporters to an opportunistic area of the gold coin market. While the gold bullion market has been quite volatile lately and as of November 29 gold has risen only $7 per ounce over the last month, the MS64 $20 gold St. Gaudens coin has risen about 10 percent in the same time. The ratio between the price of these coins and the price of gold is rising. If you'd like to learn more about the ratio and $20 gold coins, Swiss America can e-mail you a three-year study of it as well as other information.

Swiss America also can provide a limited number of free copies of "Crashing the Dollar," a book written by Swiss America's president, Craig Smith.

For information about the ratio between the $20 gold pieces and the gold price and for a free copy of "Crashing The Dollar," please call Swiss America's Tim Murphy at 1-800-289-2646 X1041 or Fred Goldstein at X1033. Or e-mail them at trmurphy@swissamerica.com and figoldstein@swissamerica.com.

Join GATA here:

Yukon Mining Investment e-Conference
Wednesday-Thursday, January 19-20, 2011

http://theyukonroom.com/yukon-eblast-static.html

Vancouver Resource Investment Conference
Vancouver Convention Centre West
Vancouver, British Columbia, Canada
Sunday-Monday, January 23-24, 2011

http://cambridgehouse3.com/conference-details/vancouver-resource-investment-conference-2011/15

Cheviot Asset Management Sound Money Conference
Guildhall, London
Thursday, January 27, 2011

http://www.cheviot.co.uk/news/video/2010/12/the-cheviot-sound-money-conf...

Phoenix Investment Conference and Silver Summit
Renaissance Glendale Hotel and Spa
Glendale, Arizona
Friday-Saturday, February 18-19, 2011

http://cambridgehouse3.com/conference-details/phoenix-investment-confere...

Support GATA by purchasing a colorful GATA T-shirt:

http://gata.org/tshirts

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:

http://www.goldrush21.com/

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:

http://www.gata.org

To contribute to GATA, please visit:

http://www.gata.org/node/16


ADVERTISEMENT

Prophecy Drills 71.17 Metres of 0.52 percent NiEq
(0.310 percent Nickel 0.466 g/t PGMs +Au and 0.223 percent copper)
from surface at Wellgreen Project in the Yukon

Prophecy Resource Corp. (TSX-V: PCY) reports that it has received additional assays results from its 100-percent-owned Wellgreen PGM Ni-Cu property in the Yukon, Canada. Diamond drill holes WS10-179 to WS10-182 were drilled during the summer of 2010 by Northern Platinum (which merged with Prophecy on September 23, 2010). WS10-183 was drilled by Prophecy in October 2010. Highlights from the newly received assays include 71.17 metres from surface of 0.52 percent NiEq (0.310 percent nickel, 0.466 g/t PGMs + Au, and 0.233 percent copper) and ended in mineralization. For more drill highlights, please visit:

http://prophecyresource.com/news_2010_nov29.php

Lawrence Williams: China's discreet gold-buying, dollar-dumping strategy

Posted: 23 Dec 2010 05:54 AM PST

1:55p ET Thursday, December 23, 2010

Dear Friend of GATA and Gold:

MineWeb's Lawrence Williams today reflects on China's largely surreptitious accumulation of gold, its deceptive accounting of its gold reserves, and its careful unloading of dollar assets. Williams' commentary is headlined "China Central Bank Absorbing Substantial Amounts of Gold without Disrupting Market" and you can find it at MineWeb here:

http://www.mineweb.com/mineweb/view/mineweb/en/page31?oid=117410&sn=Deta...

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


ADVERTISEMENT

Opportunity in the gold coin market

Swiss America Trading Corp. alerts GATA supporters to an opportunistic area of the gold coin market. While the gold bullion market has been quite volatile lately and as of November 29 gold has risen only $7 per ounce over the last month, the MS64 $20 gold St. Gaudens coin has risen about 10 percent in the same time. The ratio between the price of these coins and the price of gold is rising. If you'd like to learn more about the ratio and $20 gold coins, Swiss America can e-mail you a three-year study of it as well as other information.

Swiss America also can provide a limited number of free copies of "Crashing the Dollar," a book written by Swiss America's president, Craig Smith.

For information about the ratio between the $20 gold pieces and the gold price and for a free copy of "Crashing The Dollar," please call Swiss America's Tim Murphy at 1-800-289-2646 X1041 or Fred Goldstein at X1033. Or e-mail them at trmurphy@swissamerica.com and figoldstein@swissamerica.com.

Join GATA here:

Yukon Mining Investment e-Conference
Wednesday-Thursday, January 19-20, 2011

http://theyukonroom.com/yukon-eblast-static.html

Vancouver Resource Investment Conference
Vancouver Convention Centre West
Vancouver, British Columbia, Canada
Sunday-Monday, January 23-24, 2011

http://cambridgehouse3.com/conference-details/vancouver-resource-investment-conference-2011/15

Cheviot Asset Management Sound Money Conference
Guildhall, London
Thursday, January 27, 2011

http://www.cheviot.co.uk/news/video/2010/12/the-cheviot-sound-money-conf...

Phoenix Investment Conference and Silver Summit
Renaissance Glendale Hotel and Spa
Glendale, Arizona
Friday-Saturday, February 18-19, 2011

http://cambridgehouse3.com/conference-details/phoenix-investment-confere...

Support GATA by purchasing a colorful GATA T-shirt:

http://gata.org/tshirts

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:

http://www.goldrush21.com/

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:

http://www.gata.org

To contribute to GATA, please visit:

http://www.gata.org/node/16


ADVERTISEMENT

Prophecy Drills 71.17 Metres of 0.52 percent NiEq
(0.310 percent Nickel 0.466 g/t PGMs +Au and 0.223 percent copper)
from surface at Wellgreen Project in the Yukon

Prophecy Resource Corp. (TSX-V: PCY) reports that it has received additional assays results from its 100-percent-owned Wellgreen PGM Ni-Cu property in the Yukon, Canada. Diamond drill holes WS10-179 to WS10-182 were drilled during the summer of 2010 by Northern Platinum (which merged with Prophecy on September 23, 2010). WS10-183 was drilled by Prophecy in October 2010. Highlights from the newly received assays include 71.17 metres from surface of 0.52 percent NiEq (0.310 percent nickel, 0.466 g/t PGMs + Au, and 0.233 percent copper) and ended in mineralization. For more drill highlights, please visit:

http://prophecyresource.com/news_2010_nov29.php

Precious Metals Propaganda Games

Posted: 23 Dec 2010 05:51 AM PST

By Jeff Nielson, Bullion Bulls Canada

It's never a waste of time to read the views of Canadian gold icon, John Embry, and a recent article he wrote is no exception. Much of his thoughts on how and why the precious metals markets are so strong are based upon "fundamentals" with which we're already familiar. There are no longer any surprises here.

In this instance, I was more interested in what Embry had to say about the other side of the gold market: the anti-gold cabal of bankers who have sought to suppress this market ever since they duped Western leaders (and most notably the U.S.) into dumping the gold standard, which allowed them to print infinite amounts of their worthless paper.

In this respect, I will beg to differ with Mr. Embry, somewhat. He observed that the U.S. propaganda machine had (finally) cut back on its plethora of "gold bubble" articles, and he had now been reading that the "reason" why the precious metals market won't keep going higher is because these markets are (supposedly) "overbought".

In fact, the propagandists haven't stopped one form of gold-bashing in favor of another. Rather, what has been exposed is one of the innate weaknesses in propaganda: once a saturation level of propaganda has already been reached, additional attempts at brainwashing will have a steadily diminishing impact – eventually numbing readers/listeners to the point where the propaganda is simply tuned-out.

This is especially true with respect to the precious metals market, where during this ten year bull market, investors have been exposed to ten, relentless years of anti-gold propaganda every bit of which was proven false. In a scenario such as this, the brainwashing of the propagandists is especially susceptible to over-use, since even the most dim-witted sheep will begin to notice when someone has been consistently wrong about a subject for ten years.

This is why we see sentiment in the general public toward precious metals slowly improving: the lies and "warnings" about the precious metals market are increasingly less able to deter the general public. Thus, when Embry talks about the propagandists "stopping" the gold-bubble nonsense, and "starting" the overbought-babble, what is really taking place is merely the alternation between one avenue of propaganda and another – so that the sheep don't become totally immune to all of the propaganda, permanently.

The other aspect of Embry's article which I found particularly thought-provoking was his observations about how the propaganda-machine is desperate for some "respectable voices" to utter their propaganda – as this tends to counter the repetition-effect I described previously.

Here, at the top of the list is  sleazy George "Bubbles" Soros, who is seen to repeatedly use his mouth to utter the words "gold bubble" (over and over and over), while he's busily buying gold with both hands. Apparently even billionaires are not above the old "bash and buy".

Embry chose to focus upon the propaganda uttered by Warren Buffet, and his lieutenant, Charles Munger. I won't bother detailing their rhetoric, after Embry has already done so. Suffice it to say that the reason of both for their "I hate gold" attitudes is the tired, old line about gold having no intrinsic value. You can't eat it, you can't pour it into the tank of your car and drive around – so it has no value.

John Embry refers to this as "sophistry of the worst sort", and I fully echo that remark. Intelligent precious metals investors have known for years what is seemingly beyond the grasp of Buffett and Munger: that gold (and silver) is the best "money" ever devised by our species. Here we can expand on the empty "logic" of Buffett and Munger.

Without "money", a convenient medium of exchange for commerce, we are left with no alternative except "barter". Does any rational adult actually think that our modern economy could survive a week without a legitimate currency to use in all of our transactions?

More articles from Bullion Bulls Canada….

How to Double the Debt in 5 Years

Posted: 23 Dec 2010 05:50 AM PST

By The Mogambo Guru

As a paranoid and angry lunatic, I am always nervous and on the suspicious lookout for subtle signs of danger that I know are all around me because the foul Federal Reserve has created, and is still creating, So Freaking Much Money (SFFM), which means that the terror of ruinous inflation in prices is a dead-bang, take-it-to-the-bank, guaranteed certainty.

And there is no telling what people will do when faced with both the ruinous deflation of the value of their assets and the unbelievable, catastrophic inflation in the prices of food and energy that seems so sadly certain, which is a nice phrase if I do say so myself, conveying, as it does, a sense of resigned melancholy instead of my more usual hyperbole of anger, hatred, betrayal, outrage and thirst for revenge against the treacherous Federal Reserve for creating so much excess money and against the corrupt Congress for allowing it!

Unfortunately, this is not about how I have the lyrical soul of a poet, but about how these people are the same average idiotic Americans who have, for more than half of the last century, been electing and reelecting Congresses that have enacted huge, growing, cancerous budgets that deficit-spent a gigantic $14 trillion in new national debt – a sum equaling GDP!

And these same disastrous weenies have borrowed and deficit-spent more than half of that $14 trillion national debt in just the last 10 years! And now they are on track to double the debt again in the next 5 years! Gaaah!! We're freaking doomed!

Doug Noland in his PrudentBear.com commentary does not mention this kind of mental and fiscal insanity directly, much less leading to the Hysterical Mogambo Conclusion (HMC) that we should be frantically buying gold, silver and oil in a frenzied, single-minded panic.

Instead, with the calm and dispassionate objectivity of the classic reporter, he notes that the latest Federal Reserve Z.1 "flow of funds" report shows that "This year will mark the second consecutive year where federal borrowings will have actually expanded more than the growth of total Non-financial borrowings. Nothing similar to this has happened in the post-WWII period."

Yow! This is the kind of "danger signal" that I am talking about!

The actual figures are that in just the last 9 quarters, which a little over 2 years, "total federal liabilities" exploded by a whopping $4.013 trillion, which increased the national debt by 60% in those aforementioned Two Freaking Years (TFY)! TFY!

Even more astoundingly, "After doubling mortgage Credit in less than 7 years, our system is now on track to double federal debt in about four years." Gaaahhhh! I thought it was 5 years! I scream anew in outrage and fear! Gaaahhh!

Suddenly, I am screaming in fear, but at the same time I am watching, as if in an out-of-body experience, little specks of spittle fly out of my mouth as I am screaming, and I am thinking to myself, "That's the problem with linear thinking! If I pursued a career of fame and fortune as The World's Fattest Man (TWFM) and weighed in at 1,500 pounds, can I actually double my weight in 4 years to 3,000 pounds? And then 4 years later double my weight again to 6,000 pounds? And then again to weigh 12,000 pounds?"

The answer is, obviously, "Not without a lot of tasty grub! Hahahaha!"

Fortunately, speaking of tasty grub calms me down enough so that I can read that the report also showed that combined local, state, and federal expenditures were up, and still totals about half of our $14 trillion GDP, even though the federal government borrowed and spent a whopping $1.8 trillion in the last 12 months, which may explain how Total Compensation increased 3.0% in the last year, rising to $8.03 trillion, which seems paradoxical since unemployment, at an "official" 9.8% and (according to John Williams at shadowstats.com) is unofficially 22%, is a Big, Big Problem (BBP).

Even more surprising was that Household Assets increased $1.2 trillion to $68.8 trillion, while Household Liabilities were $13.9 trillion and did not increase much because, I assume, people did not spend a lot of borrowed money in the last quarter.

The report handily subtracts liabilities from assets and concludes that that Household Net Worth increased $1.19 trillion during the third quarter, rising to a surprising $54.9 trillion, which is almost 4 times Liabilities, thus everything should be peachy keen and couldn't be better except for, you know, that pesky unemployment thing.

If you believe that, then you will not be interested in the Mogambo Big Plan (MBP) to buy gold, silver and oil as protection against the roaring, catastrophic inflation caused by the Federal Reserve creating so much money, and the federal government borrowing it and spending it.

And to tell you the truth, I don't know whether or not I believe any of it, and I only follow the Mogambo Big Plan (MBP) because it is fool-proof and so easy that I giggle with childish delight, "Whee! This investing stuff is easy!"

The Mogambo Guru
for The Daily Reckoning

How to Double the Debt in 5 Years 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."


US Mint Sales: ATB Silver Bullion Coins Near Sell Out

Posted: 23 Dec 2010 05:50 AM PST

Sales figures from the US Mint show that Authorized Purchasers have ordered nearly all of the available America the Beautiful Silver Bullion Coins.
The AP's took 67,000 more of the 2010 America the Beautiful 5 Ounce Silver Bullion Coins, which leaves 23,000 out of the 165,000 coins that the Mint said that they would [...]

Interviewed on CNBC, CFTC's Chilton defends position limits

Posted: 23 Dec 2010 05:50 AM PST

9:38p ET Wednesday, December 22, 2010

Dear Friend of GATA and Gold (and Silver):

Interviewed for five minutes on CNBC's "Fast Money" program today, CFTC Commissioner Bart Chilton derided the assertion of a commodity exchange operator that large market shares don't interfere with free markets. Chilton insisted that position limits are necessary to prevent market manipulation, even as he acknowledged that preventing manipulation is likely to require the cooperation of exchange regulators in many countries. You can watch the interview at the CNBC archive here:

http://www.cnbc.com/id/15840232/?video=1706782569&lay=1

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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:

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http://www.gata.org/node/16

GoldMoney Foundation assists new edition of Vieira's ‘Pieces of Eight'

Posted: 23 Dec 2010 05:49 AM PST

4:18p ET Wednesday, December 22, 2010

Dear Friend of GATA and Gold:

With financial support from the GoldMoney Foundation, the magisterial work of lawyer, scholar, and historian Edwin Vieira, "Pieces of Eight: The Monetary Powers and Disabilities of the United States Constitution," is being reprinted and offered for sale, with delivery expected to begin in the middle of January. Details and ordering information were posted today at the Internet site of James Turk's Free Gold Money Report here:

https://www.fgmr.com/reprinting-of-pieces-of-eight.html

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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:

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To contribute to GATA, please visit:

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If only Bloomberg believed in a transparent gold market too

Posted: 23 Dec 2010 05:49 AM PST

Bloomberg Sues ECB to Force Disclosure of Greece Swaps

By Elisa Martinuzzi and Alan Katz
Bloomberg News
Wednesday, December 22, 2010

http://www.bloomberg.com/news/2010-12-22/bloomberg-sues-ecb-to-force-dis…

Bloomberg News filed a lawsuit against the European Central Bank, seeking the disclosure of documents showing how Greece used derivatives to hide its fiscal deficit and helped trigger the region's sovereign debt crisis.

The lawsuit asks the European Union's General Court in Luxembourg to overturn a decision by the ECB not to disclose two internal documents drafted for the central bank's six-member executive board in Frankfurt this year. The notes show how Greece used swaps to hide its borrowings, according to a March 3 cover page attached to the papers obtained by Bloomberg News.

ECB President Jean-Claude Trichet withheld the documents after the EU and International Monetary Fund led a 110 billion euro bailout ($144 billion) for Greece. The dossier should be disclosed to stop governments from employing the derivatives in a similar way again and to show how EU authorities acted on information they had on the swaps, according to the suit, filed by Bloomberg Finance LP, the parent of Bloomberg News.

The EU is dependent "on member states taking an open and transparent approach in relation to their levels of debt," Bloomberg said in its suit. "If Greece has failed to take such an approach in the past, there is a compelling public interest in relevant information being disclosed."

An ECB spokeswoman declined to comment on the lawsuit, which is based on the EU's freedom-of-information rules.

The ECB case follows a 2008 lawsuit by Bloomberg LP seeking disclosure of the U.S. Federal Reserve's records on emergency lending under the U.S. Freedom of Information Act. A group of banks is appealing to the Supreme Court over lower-court decisions ordering the Fed to identify loan recipients.

"Bloomberg is committed to transparent markets all over the world," said Matthew Winkler, editor-in-chief of Bloomberg News. "Decisions made behind closed doors helped contribute to the global economic havoc of the last few years. Money flees secrecy and unanswered questions undermine the financial system and give some participants an unfair advantage. Confidence in markets grows with information," he said. "Bloomberg wants the ECB, as well as the Federal Reserve and other financial institutions around the world, to end this damaging opacity."

The Greek government didn't originally disclose the swaps, designed to help it comply with the deficit and debt rules it agreed to meet when it joined the euro in 2001. Eurostat, the EU's statistics agency, said last month the swaps added 5.3 billion euros to the country's debt, without giving details. Repeated revisions of Greece's national accounts, beginning last year, spurred a surge in borrowing costs that pushed the country to the brink of default and triggered a region-wide debt crisis.

The ECB must consider demands for access to public documents under a March 2004 EU directive. Individuals and companies can then appeal to the European Ombudsman, which reports to the European Parliament, and the European Court of Justice.

"The information contained in the two documents would undermine the public confidence as regards the effective conduct of economic policy," Trichet wrote in an Oct. 21 letter, turning down Bloomberg's request for the documents. Disclosure "bears, in the current very vulnerable market environment, the substantial and acute risk of adding to volatility and instability."

ECB officials first spotted "a swap operation in unusual terms" in April 2009, seven months before the Greek crisis erupted, according to the March 3 cover note.

"It is wholly unclear what (if anything) the ECB did at that time to investigate further," Bloomberg's suit says.

"Disclosure would help prevent these situations repeating themselves," said Michael Spence, winner of the Nobel Prize for Economics in 2001 for his research on asymmetric information in markets. "It's a tough call. Not everything can be disclosed, but markets need to know."

Greece entered into a "large" number of private, off- market swaps from 2001 through 2007, Luxembourg-based Eurostat said in a report on Nov. 15. The agreements, which led to higher debt, were analyzed "in detail," Eurostat said. A follow-up report on Greek data including swaps is due in weeks, a spokesman said at the time.

"We entered the European Union with great effort," George Petalotis, a Greek government spokesman, told reporters in Athens today. "We don't tolerate anyone doubting that. Whoever possesses different evidence can bring it out."

* * *

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:

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To contribute to GATA, please visit:

http://www.gata.org/node/16

Will the Gold ETF Rally Soon Be History?

Posted: 23 Dec 2010 05:49 AM PST

Tom Lydon submits:

Gold ETFs were pushed to new heights this year as a global currency war and a flood of newly printed money pushed investors to the relative safety of the gold bullion. Will the good times end when the clock strikes midnight on Dec. 31?

Bill O’Neill, a principal at Logic Advisors, stated that “all the factors that have driven gold higher — the uncertainties, commodities as an asset class, gold as the ultimate currency — I don’t see that changing significantly,” reports Claudia Assis for Yahoo! Finance.

Read more »

Smaller Explorers vs. Major Miners

Posted: 23 Dec 2010 05:49 AM PST

Jeb Handwerger submits:

There is a growing scarcity of available precious metal mines in the world. The old majors such as Barrick (ABX), Goldcorp (GG), and Newmont Mining (NEM) are facing diminishing reserves in their existing mines. They are mature miners and their pockets are bulging with cheap dollars. Moreover, these majors are competing with the Chinese, Russians, Japanese, and Koreans who have all shown an interest in expanding their precious metals assets and diverting assets away from paper currencies into real assets. All of them know it is cheaper to buy growth rather than to find it; they're like the Red Queen in Alice in Wonderland who must take two steps forward just to stay in the same place.

Sitting on cash and not converting it into resource growth can be deadly for a large company in this ebullient precious metals market. Many ponder why precious metal prices are rising, yet many majors are sitting on their laurels afraid to make the plunge to acquire projects. This has led many institutional investors and mutual funds to flock to the smaller explorers who are delivering the consistent results to the market that characterize growth. Many of the developers have underperformed, and this certainly has been an explorer's market. I don't have to work hard to prove this point.

Read more »

Economic Outlook: 5 Things that Could Happen in 2011

Posted: 23 Dec 2010 05:39 AM PST

Nothing comes from nothing. But what comes from something?

Did you see what happened? The Fed's holdings topped $2 trillion for the first time ever. It took 95 years to get the Fed's holdings to $600 billion. In the space of 3 years, it has added $1.4 trillion more. That's something.

Extraordinary, no? Amazing, n'est-ce pas? Incredible, huh?

And yet, the feds expect this explosion of Fed assets to produce an ordinary firecracker of a recovery. They expect – or hope – that this fantastic increase in the base money supply of the US banking system will result in a rather run-of-the-mill rebound in the US economy.

The inflation rate (CPI) is only 1%…they think it will go to 2%. Long bond yields are expected to go up a little too – but not too much. Investor experts are predicting a 10% increase in stock prices in 2011. Almost every economist is talking about a "gradually strengthening recovery." Unemployment is supposed to go down a little. House prices are expected to stabilize…and even rise.

In other words, an out-of-control monster of monetary inflation is expected to sire a pipsqueak of a recovery.

We've talked in the past about how nothing comes from nothing…and how you can't produce real wealth with ersatz money. But what about this? Here we have the Fed doing something really big. Three times as big as anything they did in all the years since 1913.

And yet, economists expect nothing much to happen.

How likely is that? The feds don't know what they are doing. They are juggling nuclear bombs…and testing runaway viruses on an unsuspecting population.

What might happen?

Here are some guesses:

1) It will create more speculative bubbles. We wouldn't be at all surprised to see oil go to $100 and above, for example. The Fed's money is, so far, not making it into the real economy. But it is available to speculators. And speculators are betting that they can make more money in commodities than in US T-bills. So, keep an eye open. Most likely, you'll see some bubbles in 2011.

2) Emerging market stocks could soar. Imagine that you're 'trading' for Goldman Sachs. You can borrow dollars for nothing. What do you do with them? Invest them in the world's fastest growing economies! If you're lucky, you'll get 10%…maybe 20% return – on someone else's money. And if you're unlucky? Who cares? It's not your money. And you won't go broke. The Fed will give you more money.

3) Gold to $1,500. Why not? The IMF just completed selling. China, India and other emerging economies are adding to their stash. Speculators are getting in on the biggest and most reliable bull market in the financial world. Heck, even individual investors are catching on.

Passing through the airport in Miami last week, we noticed a gold vending machine! We had heard they were around. But this was the first time we saw one. How surprising would it be if more and more ordinary people started imitating the rich, who've been buying gold for years? Suppose people realize that their central bank is now working against them…and that they have to maintain their own real money reserves? We could easily see gold over $1,500 in 2011.

4) US bond yields rise; the bond market begins to break down. It looked like it was beginning a week or two ago. Bonds were going down just as Ben Bernanke was trying to push them up. Sooner or later, it's bound to happen. Investors must eventually realize that buying US debt is a dangerous proposition; the Fed is actively trying to reduce its value. And if there is one thing the Fed ought to be able to do it's to undermine the value of US debt. After all, the feds control the currency it's calibrated in.

5) In contrast to this bubbly and bodacious outlook is a not-insignificant risk that the whole shebang will blow up. US stocks could crash. Bubbles can explode. Unemployment, housing, sales, consumer price inflation – all could get worse. Then what? Then, the US dollar and US debt will go up!

Well, which is it, you're probably wondering. Inflation or deflation? Boom or bust?

Our answer? Yes!

It's all coming. If not in 2011, then…later.

Bill Bonner
for The Daily Reckoning

Economic Outlook: 5 Things that Could Happen in 2011 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."


Vulture Bargain Roundup for December

Posted: 23 Dec 2010 05:03 AM PST

As we close the end of 2010, Barclays sees gold at $1,460 to $1,480 in 2011; the IMF is done selling its 403 tonnes of gold; coffee and cotton are very strong; sugar at new 29-year highs; the U.S. Federal Reserve is now the largest single holder of U.S. debt at more than $1 trillion (but Ben S. Bernanke says they aren't printing money); the Baltic Dry index is weaker; but the VXO volatility index is near its lows for the year; copper at or near record highs, with one trader holding 80% to 90% of the LME supplies, but shares in Shanghai are flagging; Iran, Nigeria and the PIIGS are rattling newswires and global nerves, but the Ted Spread canary is singing at just 17 bps; crude oil is flirting with a technical breakout above $90, but NatGas is still sucking wind near U.S. $4.00 (likely for not much longer); bitter cold in Europe and Asia – the next arctic blast is staging in Canada's Yukon – soon to be flying south; skepticism about gold and silver is rampant (and contrary bullish); uranium slightly stronger on supply concerns; economists upping targets for U.S. growth based on, uh, tax breaks?; gargantuan U.S. debt a giant concrete cloud hanging over everyone, everywhere; sovereign debt, credit card debt, student debt, mortgage rates rising, a bond exodus and now we have the EPA to the "rescue," cracking down on gold mining autoclaves and roasters over mercury emissions … Let's stop there, shall we? Friends and fellow Vultures, what we have here for Christmas is a WOLRD CLASS WALL OF WORRY with every fiat currency vying to devalue.


A Guest's Contrarian Take On Dennis Kucinich's Recent Attempt To "End The Fed"

Posted: 23 Dec 2010 04:58 AM PST


Submitted by Arkady Kamenetsky of Right Condition

Dennis Kucinich finally shows the world why the Left is also against the Federal Reserve, gains support of Tea Party activist?

I have always mused and wondered out loud about the peculiar alliance between the likes of Ron Paul - a small government sound money advocate and people like Alan Grayson and Bernie Sanders who are admitted socialists.  What is it about these two completely polarizing political viewpoints that brought them together to fight the Fed?  In fact, I was utterly shocked that some libertarians mourned the defeat of Alan Grayson this past November citing his defeat as a loss in the battle against the Federal Reserve.

At the time my speculation was rather simple.  Socialists resent the Federal Reserve just as much as we do, however for entirely different reasons.  We resent the Fed for several basic reasons.  The Federal Reserve is a monopoly and controls the supply of money.  It centrally plans interest rates and has a flawed mandate to create full employment which is an illogical desire - because employment should always be liquid.  Finally the Federal Reserve has a mandate of steady inflation which erodes the value of the money we hold and crushes savings bringing about a 95% decrease in the value of the dollar since the Federal Reserve's inception.  Leftists like Grayson, Sanders and Kucinich hate the Fed because it is a private bank and usurps the power of Congress.  I concede that this is indeed a problem as the Federal Reserve actually controls more of the US budget than Congress and does so through unelected officials!   Yet the solution to our fiscal woes is to return to sound money and to break down the monopoly, something the Left will surely balk at.  Indeed, here comes a proposal from Rep. Dennis Kucinich that finally confirms my speculation.

Read full bill at Kucinich's website, which he cleverly and so predictably in true liberal fashion dubs "the National Emergency Employment Defense Act of 2010".

To create a full employment economy as a matter of national economic defense; to provide for public investment in capital infrastructure; to provide for reducing the cost of public investment; to retire public debt; to stabilize the Social Security retirement system; to restore the authority of Congress to create and regulate money, modernize and provide stability for the monetary system of the United States, retire public debt and reduce the cost of public investment, and for other public purposes.


There you have it folks.  Dennis wants the power of the Federal Reserve in Congress.  His ambitions are actually quite disturbing because he is also pursuing the flawed concept of full employment, but now he has added even grander ambitions - the one thing that the horrible Federal Reserve prevented Congress from doing - creating money for the purpose of spending it.   Granted with QE2 in full swing it becomes difficult to make that argument, because buying US debt so that the US Government can continue functioning is essentially the same thing, but at least our total debt grows and Americans are still aware of the cost.  With Kucinich's bill this aspect disappears as money will appear whenever Congress wishes it to be so and the value imbued in this money will come through Congress alone - a Chartalist dream come true.

The bill also offers an end to fractional reserve lending, a key inflationary engine where banks lend to other banks at a fraction thereby creating mountains of credit on top of a very small amount of money.  On page 40 of the bill, money in deposit institutions must :  be held for the exclusive use of the account holder; and may not be used by a depository institution to fund loans or investments.

Yeah, that can work when the exclusive lending power now falls to Congress!  Ironically, there are two ways to stop fractional reserve lending.  One is to use sound money and prohibit paper from being pyramided on top of the sound money much like it was done in the 1800s in America (and for 20 years under the Federal Reserve) and the other way is for Government to take over lending.   Indeed on page 11, the bill explicitly calls for:

To enable the Federal Government to invest  or lend new money into circulation as authorized by Congress and to provide means for public investment  in capital infrastructure.

So not only will the Government take over lending as a whole, but they will do so for what they dub to be 'good investment' or infrastructure!  A central planner's dream come true.

This bill also has the support of blogger Karl Denninger a Tea Party activist from Florida, who in my opinion seriously undermines his credibility by not only defending the bill out of principle, but also on a Constitutional basis! 

But it would be a monstrous improvement over what we have now, and I will remind Mush that in point of fact we had Colonial Script some rather long time ago, and further, there is nothing in The Constitution that prohibits the Federal Government from issuing and fixing the value of fiat currency.  In fact, such is explicitly contemplated and expected by The Constitution. 

Bigger nonsense cannot be found.  Now unless Dennis Kucinich proposes a return to the gold standard, the entire bill fails along Constitutional grounds and in fact, this is the very reason the Federal Reserve exists!!  The Fed has the power to create fiat money BECAUSE it is a private institution, Congress could never do it and if they could - there would have been no Fed in the first place.   There are two clauses in the Constitution that completely disprove Karl's notions.  There is also the history of the Continental which saw America's first paper currency go up in smoke due to inflation. 

Keep in mind, anything not specifically enumerated in the Constitution is not allowed. 

Article 1 Section 8 contains the following:

[The Congress shall] To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;

As you can plainly see, Congress has the power to create coins or regulate other coins and ensure standards in weight.  Nothing about paper here.  In fact, they go on and in Article Section 10 state:

No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.


Which explicitly bans paper money on a State level or what they call Bills of Credit and in fact go on and actually demand that payment of taxes be performed in coin. In fact one could aptly call today's dollars Bills of Credit. So by not enumerating the power to create paper money for the Federal Government, while explicitly banning paper money on a State level the Constitution packs a 1-2 punch that flat out destroys paper money and insists on money as something that has tangible value. Does that make me a gold bug? Not at all, use whatever you want for money, just make sure it has value because as long as money has value then no institution (Fed, Congress) can make it out of thin air.

Yet Karl insists that this bill is exactly what the country needs because it promises to be neither inflationary or deflationary. His faith comes from page 26 of the Bill:

GOVERNING PRINCIPLE OF MONETARY POLICY. The Monetary Authority shall pursue a monetary policy based on the governing principle that the supply of money in circulation should not become inflationary nor deflationary in and of itself, but will be sufficient to allow goods and services to move freely in trade in a balanced manner.
The Monetary Authority shall maintain long run growth of the monetary and credit aggregates commensurate with the economy’s long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate longterm interest rates.

 Oh ok, so because Congress promises to make sure that the supply of money and prices remains stable then instability will not happen? If they promised us unicorns that crapped skittles within a bill does everyone go out and buy a stable? In fact, Karl dubs this bill 'Delete the Fed' yet the bill creates a new office called The Monetary Authority which will have a chairman and appointed members (10 of them) chosen by the president that will meet on a regular basis and determine the correct supply of money. Whiskey-tango-foxtrot, we already have that and it's called the Board of Governors. Instead of getting rid of the Fed though, Kucinich is going to move the entire reserve system into the executive branch. What a joke.

Essentially this bill takes the Federal Reserve, renames it, makes it part of Congress and moves a private monopoly into a public monopoly. So instead of having the spending habits of Congress show up on the national debt, everything will now quietly happen through the power of Congressional members who can order money creation any time they feel like making an additional investment or building a Bridge to Nowhere.

As one last step before the final takeover, Kucinich plans to eliminate our debt. Sounds lovely does it not? Page 19 describes the process:

Before the effective date, the Secretary shall commence to retire all outstanding instruments of indebtedness of the United States by payment in full of the amount legally due the bearer in United States Money, as such amounts become due.

Elsewhere in the bill, Kucinich introduces a new money, called the United States Money although I suggest we just call it a Zimbabwe Dollar because that is it's destiny and we can save on printing costs. This United States Money will invariably have a conversion rate to the current US Dollar. In order for us to retire about 14 Trillion dollars of private and public debt, imagine for a second just how many new USM notes must be created? What will be the value of these USM notes? What happens to the dollar's reserve status that we enjoy now? Let me answer that for you: a metric ton, value will be non-existent and the one remaining reason why America is protected from hyper-inflation will be wiped out.

Mike Shedlock has also written a summary about this bill and called out Karl Dennginer's support which has now the potential to escalate into a blog war. This prompted Karl to call Mish 'mush' and make wild statements about the Constitution.  Karl also believes that if Ron and Rand Paul are for real than they will support this bill otherwise they are empty suits and fakes.  I will tell you this right now, Ron and Rand will never ever support this bill because it is a hideous and disgusting piece of legislation.

Yes this will will destroy the top banking elite and their easy money access through inflation, but this is no different than what North Korea did to it's currency - a gigantic devaluation of the dollar along with massive takeover by Congress over the last remainings parts of our economy. 

This is central planning on steroids and yet a Tea Party activist and well known blogger supports it. I am speechless.


Bargain Shopping in Peru, Chile and Brazil

Posted: 23 Dec 2010 04:36 AM PST

Global Strategist Jacek Dzierwa has just returned from another research trip to Latin America where he visited Peru, Chile and Brazil. Travel is important for our tacit knowledge because many of the world's best opportunities aren't discovered behind a Bloomberg terminal or an earnings report. We venture to visit as many companies as possible before investing in them.

This was Jacek's first trip to Peru and the country "surprised to the upside." Another beneficiary of higher commodity prices, Peru has seen a massive improvement in its standard of living in recent years.

The poverty level has declined from a staggering 55 percent in 2001 to 35 percent this year and is expected to fall to 25 percent by 2015. However, there is still much progress to be made. Roughly 71 percent of Peru's population works in an informal economy, which means they pay no taxes, have no bank accounts and have no access to credit. The size of this informal economy is second only to Bolivia (80 percent) in Latin America.

Peru's progress is on display in Lima, the country's capital and largest city. The bustling metropolitan city is home to South America's main Pacific port (Port of Callao) and several thousand factories and manufacturing plants. Recent growth has pushed the greater Lima's population over 9 million people.

One annoying side effect of this progress is heavy traffic. According to some estimates, the number of vehicles in Peru today is five times greater than it was a decade ago. That means that there are now 10 cars vying for space on the same roadways where there used to be two. Numerous Asian manufacturers from Korea and China have been big beneficiaries of this growth in demand for cars.

But there is relief on the way. The Peruvian government recently announced a $24 billion infrastructure overhaul over the next three years that should help the country meet its rapidly growing demand. One beneficiary of this infrastructure spending is likely to be Grana y Montero, a Peru-based construction and engineering company that Jacek uncovered during the trip. The firm is highly profitable with its EBITDA (earnings before interest, taxes, depreciation and amortization) margin in the last three years ranging from 16-20 percent. This is way above average for construction projects where EBITDA margins of 6-8 percent are considered good.

Just like in the U.S., it is the busy season for retail shopping in Latin America. Much of Peru's retail market is dominated by Chilean-owned companies such as Cencosud, which purchased the popular Wong (pictured) chain of stores back in 2008. The Wong family started the company, which is a supermarket grocery story, in their garage and developed it into a great retail business. Many Chinese emigrated from Macau as laborers in the 19th Century and today Peru boasts a 1 million Chinese population (total country population of 28 million) that has been active in its entrepreneurial efforts such as the Wong family.

In Santiago, Jacek met with Chilean-based large retailers Falabella and Cencosud. Both companies operate at higher profit margins than their U.S. counterparts, which partly explain their current hefty valuations. Cencosud aims to have checkout lines no more than three deep–one outlet Jacek visited had 67 cash registers open and each was busy.

Over in Brazil, Jacek made his third trip to the country in the past 12 months. Unfortunately, Jacek's experience at São Paulo's Guarulhos Airport was similar to the one we detailed a year ago—On the Ground in Brazil.

The unconfirmed word on the street is that FIFA has warned Brazil that they need to get their act together and improve the country's infrastructure before the 2014 World Cup or the games will be moved somewhere else. Just a rumor at this point, but it may be the motivation Brazil needs to get going.

Brazil's equity market has been a major underperformer this year. One reason is the large number of equity offerings coming out of the country, with the largest being the recent $25 billion offering from state-oil company Petrobras.

Brazil also faces an overvalued currency, which puts exporters at a disadvantage. Jacek snapped this photo as an example of how the overvalued Brazilian real affects retailers. Even after a 60 percent discount, this off-brand shirt costs the equivalent of $43, more than what one would pay in the U.S. for some name brands.

On the other hand, Brazilian retailers that sell a wide variety of imported goods can benefit from a stronger currency. In particular, we're optimistic about Lojas Renner (pictured).

Renner, which is similar to a Macy's in the U.S., has developed a cutting-edge "Enchantment" policy that asks each customer to take a satisfaction survey before they leave the store. Customers do so by pressing a simple button labeled unsatisfied, satisfied or enchanted. If a customer chooses unsatisfied, an associate immediately engages them to correct their experience.

In 2009, 16.6 million of the 17.2 million customers surveyed selected either satisfied or enchanted. We think this unique customer feedback loop gives the company a competitive advantage over other retailers.

Another thing to keep an eye on is the proposed integration of the Chile, Peru and Colombia stock exchanges to create a joint equities platform. Known as Mila, the joint exchange is currently in a beta testing phase. If approved, Mila could be the capital creation platform Latin America needs to take the next step in development.

We understand that the integration still requires some issues to be resolved before investors can reap the benefits of a larger trading platform. The companies which stand to benefit the most from a higher profile are those that currently fly under the radar of most investors, particularly those in Peru and Colombia.

Regards,

Frank Holmes,
for The Daily Reckoning

P.S. For more updates on global investing from me and the U.S. Global Investors team, visit my investment blog, Frank Talk.

Bargain Shopping in Peru, Chile and Brazil 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."


Gold prices slip to session lows after U.S. data

Posted: 23 Dec 2010 04:28 AM PST

December 23, 2010 (IBTimes) — Gold extended losses to a session low at $1,374.70 an ounce on Thursday as the dollar held onto gains versus the euro after U.S. durable goods, jobless claims and personal consumption data.

Spot gold was bid at $1,377.60 an ounce at 1343 GMT …

The euro won some reprieve on Thursday after plumbing a record low versus the Swiss franc overnight, but the currency's outlook was shaky at best and more losses into 2011 are seen likely as the euro zone debt crisis looked set to drag on.

Five major Greek banks were put on notice on Wednesday that their credit ratings could be cut to junk, Fitch Ratings said, a day after it put the country's sovereign ratings on the same watch.

Bullion was riding on fears the debt crisis in Europe would spread, with tensions in the Korean peninsula offering additional support. North Korea on Thursday criticised major land and sea military exercises planned by the South, but stopped short of threatening a retaliatory strike as tension remained high on the peninsula.

In a show of military might, South Korea held a major land drill in the Pocheon region, between Seoul and the heavily armed demilitarised zone (DMZ) separating the two Koreas. It also continued naval live-fire exercises 100 km (60 miles) south of the maritime border with North Korea.

The physical market saw some bargain hunting "… but other than that, it's very quiet. Most consumers are off," said a dealer in Singapore.

[source]

MISH: FOFOA Fallacy #3: Gold and only gold will fill the monetary store of value role. Not gold and silver. Not precious metals. Just gold.

Posted: 23 Dec 2010 04:25 AM PST

Gold is Money, What About Silver? Can Gold be Debt? Share this:


How Gold Can Protect Your Portfolio From the Economic Insanity

Posted: 23 Dec 2010 04:00 AM PST

Investors should be gravely concerned about the future of their portfolios, according to a newly released report from Bullion Management Group Inc (BMG). The reason? Because today’s fiscal and monetary policies have set the stage for a wrenching period of currency devaluation, portfolio destruction and potentially devastating inflation.


Profit, Protection Despite Cartel Intervention -- Update

Posted: 23 Dec 2010 04:00 AM PST

Bailouts and Stimuli have afforded The Cartel a whole panoply of additional tools for Market Intervention which they did not possess three years ago. These tools make tracking "The Interventionals" ever more challenging. In sum, this report provides even more evidence of continuing Risk of Systemic Collapse, and of the beginning of the attempted implementation of The Cartel's Nefarious "End Game."


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