Gold World News Flash |
- Bumpy Road Ahead - Go for Blue Chips and Gold
- The Year of Living Quantitatively
- Class action against Morgan, HSBC specifies silver manipulation mechanism
- Gold Seeker Closing Report: Gold and Silver End Mixed In Quiet Trade
- Timberline Resources Our Top Pick for 2011
- Stewart Thompson: Central banks use gold to control markets
- Porter Stansberry: Bumpy Road Ahead; Go for Blue Chips and Gold
- Outlook 2011: China Says No More Cars, Down Goes the Auto Industry
- Strong foreign banks splurged on, profited from Fed's emergency credit
- Strong foreign banks splurged on, profited from Fed's emergency credit
- Greed And Fear's Chris Wood On The Timing Of The Euro Endgame
- The 'Gold Covered Call Writing' Managed Futures Program
- Daily Market Recap: 12.27.2010
- MONDAY Market Excerpts
- Richard Russell - We Will Have an Upside Explosion in Gold
- Gold Daily and Silver Weekly Charts
- GATA's lawsuit for Fed's gold documents slogs on
- GATA's lawsuit for Fed's gold documents slogs on
- COT Gold, Silver and US Dollar Index Report - December 27, 2010
- The Why of White Metals: Silver, Platinum and Palladium in 2010
- No signs of a gold bubble despite record advances in 2010
- Mandarin Monday – China Tightens, Snow Chills Markets
- Jim's Mailbox
- Reader Threatens To Sue Fed After Losses Incurred By Going Long Inverse Leveraged ETFs
- If You Haven't Bought Silver Yet, Read This
- The China Syndrome: A Building Bubble This Way Bloweth
- Is China The Big Silver Short?
- +74% later, Wall St. Journal notices silver only to try to talk it down
- Demanding the Mark Back: Opposition to the Euro Grows in Germany
- The Past: Abandoned Principles and Misguided Policies
- Deficit Hawk Coburn Should Save His Breath
- Government Spending, GDP and Nonsense In Between Them
- The Impossibility of a Gold Bubble
- Real Estate Spin Continues by Mainstream Media
- China Raises Interest Rates to Combat Inflation
- Rick Rule Very Bullish On Silver For 2011
- Bailed-out banks slip toward failure
- Indian gold appetite remains strong
- A Chinese New Year in Currency Wars
- Either America Or China Will Crash In 2011
- The Case For Gold Today
- Gold up Rs 20 on global cues, silver falls on reduced offtake
- The Case For Buying Gold Today
- Gold prices shrug off rate hikes
- No Signs of a Gold and Silver Bubble Despite Record Advances in 2010
- The Morning Gold Report
- If You Haven't Bought Silver Yet, Read This
- Gold and the Economy : Don’t be fooled
- Dallas Fed's Texas Manufacturing Index Misses Expectations Of 17, Comes At 12.8, Inventories Surge
- Dollar Pays Bill for US Military
| Bumpy Road Ahead - Go for Blue Chips and Gold Posted: 27 Dec 2010 06:03 PM PST Steady tailwinds benefited the stock market for most of 2010, but Stansberry & Associates Investment Research Founder Porter Stansberry is bracing himself and his clients for a bumpy ride for equities in the new year, as well as unprecedented instability in muni bonds and Treasuries. In this exclusive interview with The Gold Report, Porter, who's been predicting the dire consequences of unbridled borrowing and continued quantitative easing for some time, recommends utmost caution and conservatism for investors in 2011.
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| The Year of Living Quantitatively Posted: 27 Dec 2010 06:02 PM PST There are increasingly those who predict hyperinflation, which is popularly defined as rapidly-rising prices that soon reach un-payable levels, and which is always caused by the true definition of inflation, which is (according to the Mogambo Big Book Of Economic Stuff (MBBOES), "A gigantic growth in the money supply, which is caused by banks deliberately acting like greedy, lying, filthy pigs who deserve to be thrown in jail."
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| Class action against Morgan, HSBC specifies silver manipulation mechanism Posted: 27 Dec 2010 05:31 PM PST 1:30a Tuesday, December 28, 2010 Dear Friend of GATA and Gold (and Silver): A Chicago law firm yesterday announced another class-action lawsuit against J.P. Morgan Chase & Co. and HSBC Holdings PLC complaining of silver market manipulation. Interestingly, the lawsuit cites GATA's silver market manipulation whistleblower Andrew Maguire and U.S. Commodity Futures Trading Commission member Bart Chilton, and specifies mechanisms by which Morgan and HSBC could manipulate the silver market through the use of silver exchange-traded funds. The lawsuit complains: "Before the Class Period began, JPMorgan had become the custodian and an authorized participant of the largest known concentration of silver bars, the iShares Silver ETF, which holds in excess of 340 million troy ounces of silver, a sum that equals an estimated 1/3 of the total present global supply of silver bullion. As a result, it had actual knowledge of the precise whereabouts of much of the world's known silver bar supply. ... Dispatch continues below ... ADVERTISEMENT 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 "In approximately March 2008, JP Morgan acquired Bear Stearns, which held a very large short position in silver. With more of the total short position in silver concentrated in the hands of JP Morgan, it had a further motive to suppress prices. "Upon information and belief, JP Morgan works together with HSBC, the other dominant player in the silver and precious metals markets. In July 2009, HSBC became the custodian of the SIVR ETF, which meant that it had physical access to and knowledge of the silver held by that trust. Notably, it named JP Morgan as one of the sub-custodians of the SIVR ETF. "As a result of their participation in the silver ETFs, JP Morgan and HSBC had a direct opportunity to confer and discuss with each other the prices of silver held by each of them. "In addition, Defendants had a strong incentive to suppress downward the price of silver as measured by the NYSE-Arca and CME/COMEX instruments. For example, Defendants could pledge their silver to the ETFs in exchange for ETF shares, sell their shares to other market participants, drive down the prices of silver through trades on NYSE-Arca and CME/COMEX, buy back their ETF shares from investors at lower prices, and return their (now lower-priced) silver ETF shares in exchange for the silver bars initially pledged against those shares, the real value of which remained the same, and only notionally appears lower because of Defendants' suppression. "With respect to Defendants' conduct on the CME/COMEX platforms, JPMorgan and HSBC's scheme has been corroborated by Andrew Maguire, a 40-year precious metals trading veteran. Mr. Maguire reported his findings to the Commodity Futures Trading Commission (CFTC), which commenced an investigation in 2008. "On October 26, 2010, CFTC Commissioner Bart Chilton stated that there had been 'violations of the Commodity Exchange Act in the silver market' and 'fraudulent efforts to persuade and deviously control' silver prices, and that these efforts 'should be prosecuted.'" The full complaint of the lawsuit has been posted at GATA's Internet site here: http://www.gata.org/files/SilverManipulationLawsuit-NIllinois-12-07-2010... The law firm's press release is appended. CHRIS POWELL, Secretary/Treasurer * * * Cafferty Faucher LLP Files Class Action Lawsuit Law Firm Press Release http://www.businesswire.com/news/home/20101227005224/en/Cafferty-Faucher... CHICAGO -- Cafferty Faucher LLP (www.caffertyfaucher.com) filed a lawsuit on behalf of a class that includes purchasers and sellers of the iShares Silver Trust (NYSE-Arca SLV) and the ETF Securities Ltd. Silver Trust (NYSE-Arca SIVR) during the period March 1, 2008, through the present. The lawsuit alleges that JPMorgan, the custodian of silver backing SLV securities and the sub-custodian of silver backing SIVR securities, and HSBC, the custodian of silver backing the SIVR securities, manipulated and suppressed the price of silver bar financial products, including SLV and SIVR, in violation of Section 9 of the Securities Exchange Act. If you purchased or sold the iShares Silver Trust ETF or the ETF Securities Silver Trust securities during the period March 1, 2008, through the present, you may move the Court to serve as lead plaintiff within 60 days. The lawsuit, Case No. 1:10-cv-07768, was filed in the Northern District of Illinois on December 7, 2010 and is assigned to the Honorable Charles R. Norgle Sr. The case is also brought on behalf of investors who purchased or sold CME Group Inc.'s Comex silver futures or options contracts, which are traded electronically through the Chicago-based Globex platform and through Comex. On behalf of these investors, the lawsuit alleges violations of the anti-manipulation provisions of the Commodity Exchange Act. In addition to the claims under the anti-manipulation provisions of the Securities Exchange Act and the Commodity Exchange Act, the lawsuit also alleges that defendants violated federal antitrust law. Cafferty Faucher LLP, with offices in Chicago, Philadelphia, and Ann Arbor, Michigan, is a national litigation firm that represents investors, businesses, and consumers who have been injured by illegal marketplace practices. Firm contact information is available at the above website. The firm has recovered tens of billions of dollars for its clients in cases targeting illegal acts and practices in a variety of industries including securities, commodities, insurance, pharmaceuticals, banking services, medical, high-tech, food and beverage, construction materials, and many others. Combined, the firm's attorneys have hundreds of years of experience working to recover losses on behalf of clients. Contacts for Cafferty Faucher LLP: Anthony Fata (Chicago), 312-782-4880, or Bryan Clobes (Philadelphia), 215-864-2800. Join GATA here: Yukon Mining Investment e-Conference http://theyukonroom.com/yukon-eblast-static.html Vancouver Resource Investment Conference http://cambridgehouse3.com/conference-details/vancouver-resource-investment-conference-2011/15 Cheviot Asset Management Sound Money Conference Phoenix Investment Conference and Silver Summit Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: http://www.gata.org/node/16 ADVERTISEMENT Prophecy Drills 71.17 Metres of 0.52% NiEq 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
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| Gold Seeker Closing Report: Gold and Silver End Mixed In Quiet Trade Posted: 27 Dec 2010 04:00 PM PST Gold fell $10 to $1371.20 in early Asian trade before it rebounded to see a $5.18 gain at $1386.38 and next fell back to $1377.69 by a little after noon EST, but it then rallied back higher in the last hour of trade and ended with a gain of 0.08%. Silver fell to $28.74 and climbed to $29.31 before it dropped back to $29.03 by a little after 8AM EST, but it also rallied back higher in New York and ended with a loss of just 0.34%.
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| Timberline Resources Our Top Pick for 2011 Posted: 27 Dec 2010 03:04 PM PST Steven Halpern's The StockAdvisors.com Top Pick Challenge for 2011 is up and posted on AOL at the following link: http://www.bloggingstocks.com/2010/12/27/top-picks-2011-favorite-stocks-from-60-advisors/ Our Top Pick for 2011 is our Vulture Bargain #4, Timberline Resources....
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| Stewart Thompson: Central banks use gold to control markets Posted: 27 Dec 2010 02:00 PM PST 10:54p ET Tuesday, December 21, 2010 Dear Friend of GATA and Gold: In commentary published today at GoldSeek, Stewart Thompson of the Graceland Updates letter emphasizes again that central banks buy and sell gold not to "make money" but rather to control the value of their currencies, moving their currencies up and down as politics seems to require -- that is, to rig currency markets. This point was made four years ago by the British economist Peter Millar in his excellent study, ""The Relevance and Importance of Gold in the World Monetary System," which you can find at GATA's Internet site here: Of course the same point has been made quite often lately by market analyst James G. Rickards of Omnis Inc., who has suggested that the Federal Reserve peg the dollar to a higher gold price through "open market" purchases and sales of gold, rather than through the traditional surrpetitious maneuvering of intermediaries: Thompson writes today: "With quantitative easing effectively dead now as a tool to handle any further worsening of the crisis, the central banks will look to accelerate their gold buy programs to revalue gold higher, and keep it higher. The point of revaluation is to devalue the debt that is owed by the government to its citizen creditors. "There is no possible way on this earth that I am going to stand before you four days before Christmas as gold revaluation gets under way and top-call myself or you out of your gold items. "The central bank buy programs are not about accumulating gold as an asset, as you accumulate it as an asset, an investment. They use gold as a control mechanism, and it takes very little gold to control the entire paper money system. "The central banks have no interest in buying gold cheaply or selling it 'high.' During gold revaluation (now) they want to pay higher and higher prices for gold, to ease their ability to pay their creditors in paper money." Compare the thoughtfulness of Thompson, Millar, and Rickards with the cavalier remarks of supposed analysts like Jon Nadler of Kitco, who insists that central banks have absolutely no interest in the price of gold, and Jeff Christian of CPM Group, who says he has consulted for most central banks and has found that they hardly ever think about gold at all even as they claim to sit on huge gold reserves. Of course the Fed somehow thinks about gold enough to refuse to give GATA access to its records about gold and particularly the records of the Fed's gold swap agreements with foreign banks: Thompson's commentary is headlined "Gold and Dow: Liquidity Flows For 2011" and you can find it at GoldSeek here:
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| Porter Stansberry: Bumpy Road Ahead; Go for Blue Chips and Gold Posted: 27 Dec 2010 01:32 PM PST Source: Karen Roche of The Gold Report 12/27/2010 Steady tailwinds benefited the stock market for most of 2010, but Stansberry & Associates Investment Research Founder Porter Stansberry is bracing himself and his clients for a bumpy ride for equities in the new year, as well as unprecedented instability in muni bonds and Treasuries. In this exclusive interview with The Gold Report, Porter, who's been predicting the dire consequences of unbridled borrowing and continued quantitative easing for some time, recommends utmost caution and conservatism for investors in 2011. The Gold Report: Much has happened since our last discussion in September. The election, with the Republicans taking the House and the super majority in the Senate. QE2 (quantitative easing) not only discussed but actually released. The U.S. assisting in the financing in Europe. The benefactors of the 2008 bailout money finally published. And then the hottest topic in Washington for a while, extending the B...
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| Outlook 2011: China Says No More Cars, Down Goes the Auto Industry Posted: 27 Dec 2010 11:57 AM PST
By Dian L. Chu, EconForecast  Although China auto market is expected to slow down in the coming years (see Predicted Sales Chart) partly because the tax incentives that help drive the auto sales are set to expire on Dec. 31, 2010, the world’s top auto companies still have high hopes for China. 
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| Strong foreign banks splurged on, profited from Fed's emergency credit Posted: 27 Dec 2010 11:29 AM PST Non-US Banks Gain from Fed Crisis Fund By Robin Harding, Bernard Simon, and Christian Oliver http://www.ft.com/cms/s/0/69728262-11ec-11e0-92d0-00144feabdc0.html#axzz... Some of the world's strongest banks have profited from an emergency credit facility set up by the US Federal Reserve to shore up confidence in the global financial system, according to a Financial Times analysis of data released by the Fed. More than half of lending under the Fed's term auction facility -- the largest of its crisis programmes -- went to foreign banks. Details of the varied uses to which they put it may add to political criticism of the Fed. The Taf was set up in December 2007 to provide one-month loans to credit-worthy banks as markets dried up for lending longer than overnight. In August 2008 it began offering three-month loans as well. Rabobank of the Netherlands and Toronto-Dominion of Canada, two of the only banks in the world with triple-A credit ratings, used more than $20 billion in cumulative Taf loans. ... Dispatch continues below ... ADVERTISEMENT Prophecy Receives Permit To Mine at Ulaan Ovoo in Mongolia VANCOUVER, British Columbia -- Prophecy Resource Corp. (TSX-V:PCY, OTCQX: PRPCF, Frankfurt: 1P2) announces that on November 9, 2010, it received the final permit to commence mining operations at its Ulaan Ovoo coal project in Mongolia. Prophecy is one of few international mining companies to achieve such a milestone. The mine is production-ready, with a mine opening ceremony scheduled for November 20. Prophecy CEO John Lee said: "I thank the government of Mongolia for the expeditious way this permit was issued. The opening of Ulaan Ovoo is a testament to the industrious and skilled workforce in Mongolia. Prophecy directly and indirectly (through Leighton Asia) employs more than 65 competent Mongolian nationals and four expatriots. The company also reaffirms its commitment to deliver coal to the local Edernet and Darkhan power plants in Mongolia." The Ulaan Ovoo open pit mine is 10 kilometers from the Russian border and within 120km of the Nauski TransSiberian railway station, enabling transportation of coal to Russia and its eastern seaports. Thermal coal prices are trading at two-year highs at Russian seaports due to strong demand from Asian economies. For the complete press release, please visit: http://prophecyresource.com/news_2010_nov11.php Ed Clark, TD chief executive, said that using Taf was logical even though his bank never had a liquidity problem. "That wasn't how we made a lot of money. But you make a dollar here, you make a dollar there. What's the spread you make on a billion dollars?" he said. In the summer of 2008, TD was borrowing $1 billion from TAF at rates of between 2 and 2.5 per cent. For that borrowing it used the lowest quality -- and hence highest yielding -- collateral acceptable to the Fed. More than 80 per cent of its collateral had a triple-B credit rating at a time when such bonds yielded about 7 per cent. TD could therefore have made a notional gross spread of about $4 million a month during 2008. Mr Clark said the authorities were encouraging healthy banks to use schemes such as the Taf so as not to stigmatise their weaker counterparts. In January 2008, Ben Bernanke, the Fed chairman, said the Taf appeared to be succeeding because "there appears to have been little if any stigma." "You go through the whole crisis and there were lots of things we did that weren't necessarily economic but were the right thing to do for the system," said Mr Clark. "So I'm not embarrassed by this at all." Rabobank said it used the Taf only "in case the situation on the financial markets would further deteriorate" but it still had $5 billion in outstanding loans as late as January 2010. The Fed declined to comment, but has pointed out that all of its emergency credit was repaid in full with interest, and that its goal was to provide liquidity. Korean banks, including Hana Bank, Korea Development Bank, Industrial Bank of Korea, and Shinhan Bank, were also among the most enthusiastic posters of triple-B collateral to the Taf. One Korean bank official said: "It was the best option we had for raising foreign capital during the financial crisis." Join GATA here: Yukon Mining Investment e-Conference http://theyukonroom.com/yukon-eblast-static.html Vancouver Resource Investment Conference http://cambridgehouse3.com/conference-details/vancouver-resource-investment-conference-2011/15 Cheviot Asset Management Sound Money Conference Phoenix Investment Conference and Silver Summit Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: Help keep GATA going: GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: http://www.gata.org/node/16 ADVERTISEMENT Sona Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit, Company Press Release, October 27, 2010 VANCOUVER, British Columbia -- Sona Resources Corp. reports on five drillling holes in the third round of assay results from the recently completed drill program at its 100 percent-owned Elizabeth Gold Deposit Property in the Lillooet Mining District of southern British Columbia. Highlights from the diamond drilling include: -- Hole E10-66 intersected 17.4g gold/ton over 1.54 metres. -- Hole E10-67 intersected 96.4g gold/ton over 2.5 metres, including one assay interval of 383g of gold/ton over 0.5 metres. -- Hole E10-69 intersected 85.4g gold/ton over 4.03 metres, including one assay interval of 230g gold/ton over 1 metre. Four drill holes, E10-66 to E10-69, targeted the southwestern end of the Southwest Vein, and three of the holes have expanded the mineralized zone in that direction. The Southwest Vein gold mineralization has now been intersected over a strike length of 325 metres, with the deepest hole drilled less than 200 metres from surface. "The assay results from the Southwest Zone quartz vein continue to be extremely positive," says John P. Thompson, Sona's president and CEO. "We are expanding the Southwest Vein, and this high-grade gold mineralization remains wide open down dip and along strike to the southwest." For the company's full press release, please visit: http://sonaresources.com/_resources/news/SONA_NR19_2010.pdf
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| Strong foreign banks splurged on, profited from Fed's emergency credit Posted: 27 Dec 2010 11:29 AM PST Non-US Banks Gain from Fed Crisis Fund By Robin Harding, Bernard Simon, and Christian Oliver http://www.ft.com/cms/s/0/69728262-11ec-11e0-92d0-00144feabdc0.html#axzz... Some of the world's strongest banks have profited from an emergency credit facility set up by the US Federal Reserve to shore up confidence in the global financial system, according to a Financial Times analysis of data released by the Fed. More than half of lending under the Fed's term auction facility -- the largest of its crisis programmes -- went to foreign banks. Details of the varied uses to which they put it may add to political criticism of the Fed. The Taf was set up in December 2007 to provide one-month loans to credit-worthy banks as markets dried up for lending longer than overnight. In August 2008 it began offering three-month loans as well. Rabobank of the Netherlands and Toronto-Dominion of Canada, two of the only banks in the world with triple-A credit ratings, used more than $20 billion in cumulative Taf loans. ... Dispatch continues below ... ADVERTISEMENT Prophecy Receives Permit To Mine at Ulaan Ovoo in Mongolia VANCOUVER, British Columbia -- Prophecy Resource Corp. (TSX-V:PCY, OTCQX: PRPCF, Frankfurt: 1P2) announces that on November 9, 2010, it received the final permit to commence mining operations at its Ulaan Ovoo coal project in Mongolia. Prophecy is one of few international mining companies to achieve such a milestone. The mine is production-ready, with a mine opening ceremony scheduled for November 20. Prophecy CEO John Lee said: "I thank the government of Mongolia for the expeditious way this permit was issued. The opening of Ulaan Ovoo is a testament to the industrious and skilled workforce in Mongolia. Prophecy directly and indirectly (through Leighton Asia) employs more than 65 competent Mongolian nationals and four expatriots. The company also reaffirms its commitment to deliver coal to the local Edernet and Darkhan power plants in Mongolia." The Ulaan Ovoo open pit mine is 10 kilometers from the Russian border and within 120km of the Nauski TransSiberian railway station, enabling transportation of coal to Russia and its eastern seaports. Thermal coal prices are trading at two-year highs at Russian seaports due to strong demand from Asian economies. For the complete press release, please visit: http://prophecyresource.com/news_2010_nov11.php Ed Clark, TD chief executive, said that using Taf was logical even though his bank never had a liquidity problem. "That wasn't how we made a lot of money. But you make a dollar here, you make a dollar there. What's the spread you make on a billion dollars?" he said. In the summer of 2008, TD was borrowing $1 billion from TAF at rates of between 2 and 2.5 per cent. For that borrowing it used the lowest quality -- and hence highest yielding -- collateral acceptable to the Fed. More than 80 per cent of its collateral had a triple-B credit rating at a time when such bonds yielded about 7 per cent. TD could therefore have made a notional gross spread of about $4 million a month during 2008. Mr Clark said the authorities were encouraging healthy banks to use schemes such as the Taf so as not to stigmatise their weaker counterparts. In January 2008, Ben Bernanke, the Fed chairman, said the Taf appeared to be succeeding because "there appears to have been little if any stigma." "You go through the whole crisis and there were lots of things we did that weren't necessarily economic but were the right thing to do for the system," said Mr Clark. "So I'm not embarrassed by this at all." Rabobank said it used the Taf only "in case the situation on the financial markets would further deteriorate" but it still had $5 billion in outstanding loans as late as January 2010. The Fed declined to comment, but has pointed out that all of its emergency credit was repaid in full with interest, and that its goal was to provide liquidity. Korean banks, including Hana Bank, Korea Development Bank, Industrial Bank of Korea, and Shinhan Bank, were also among the most enthusiastic posters of triple-B collateral to the Taf. One Korean bank official said: "It was the best option we had for raising foreign capital during the financial crisis." Join GATA here: Yukon Mining Investment e-Conference http://theyukonroom.com/yukon-eblast-static.html Vancouver Resource Investment Conference http://cambridgehouse3.com/conference-details/vancouver-resource-investment-conference-2011/15 Cheviot Asset Management Sound Money Conference Phoenix Investment Conference and Silver Summit Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: Help keep GATA going: GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: http://www.gata.org/node/16 ADVERTISEMENT Sona Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit, Company Press Release, October 27, 2010 VANCOUVER, British Columbia -- Sona Resources Corp. reports on five drillling holes in the third round of assay results from the recently completed drill program at its 100 percent-owned Elizabeth Gold Deposit Property in the Lillooet Mining District of southern British Columbia. Highlights from the diamond drilling include: -- Hole E10-66 intersected 17.4g gold/ton over 1.54 metres. -- Hole E10-67 intersected 96.4g gold/ton over 2.5 metres, including one assay interval of 383g of gold/ton over 0.5 metres. -- Hole E10-69 intersected 85.4g gold/ton over 4.03 metres, including one assay interval of 230g gold/ton over 1 metre. Four drill holes, E10-66 to E10-69, targeted the southwestern end of the Southwest Vein, and three of the holes have expanded the mineralized zone in that direction. The Southwest Vein gold mineralization has now been intersected over a strike length of 325 metres, with the deepest hole drilled less than 200 metres from surface. "The assay results from the Southwest Zone quartz vein continue to be extremely positive," says John P. Thompson, Sona's president and CEO. "We are expanding the Southwest Vein, and this high-grade gold mineralization remains wide open down dip and along strike to the southwest." For the company's full press release, please visit: http://sonaresources.com/_resources/news/SONA_NR19_2010.pdf
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| Greed And Fear's Chris Wood On The Timing Of The Euro Endgame Posted: 27 Dec 2010 10:02 AM PST
From CLSA's Greed and Fear, by Chris Wood, December 23 edition. The S&P500 remains at post-Lehman highs and GREED & fear remains nervous about a correction. But GREED & fear will also have to admit that the short-term technical indicators long followed here are not sending warning signals. Rather the message is bullish which is one reason why GREED & fear is not reducing the beta of the long-only portfolios. It is also the case that the US continues to be cut relative slack because of the problems in Euroland. Here the ongoing noise from Brussels makes it clear that the final crescendo of this particular drama lies in the future. With Frau Merkel continuing to talk tough about the need for fiscal discipline, and rejecting euro bonds, it appears that there will have to be more market turmoil before the inevitable decisions are taken. GREED & fear says inevitable because it still seems likely that the end game will involve some form of German acceptance of collective fiscal responsibility and debt restructuring. This is partly because the German establishment is so committed to the euro and partly because of the practical fact that German banks have such big exposure to the debt of the European periphery countries. The past week have seen further signals that the above will be the end game. Thus, an article in the pinko paper by Peer Steinbru?ck and Frank-Walter Steinmeier, the former minister of finance and former foreign minister in the last SPD government, proposed debt haircuts as well as the limited introduction of European-wide bonds (see Financial Times: “Germany must lead fightback”, 15 December 2010). Second, the ECB announced on 16 December that it decided to almost double its subscribed capital base from €5.76bn to €10.76bn, with effect from 29 December. This suggests that there is an understanding, despite the official rhetoric, that there are losses that will need to be taken. Still it also seems clear that there needs to be more market panic for such decisions to be forced on the relevant authorities, most particularly Frau Merkel. All this suggests an opportunity for macro investors since it seems increasingly likely to GREED & fear that this drama is going to come to a head in the first half of 2011 and not in 2013 or later. Moreover the moment some form of credible debt restructuring is agreed, in the form of a European version of the Brady Plan, a bid should come in for the euro against the US dollar and indeed against the Swiss franc which has been the major beneficiary of the systemic surrounding the euro to the chagrin of the Swiss National Bank. But all this lies in the future. For the moment the issue for investors is what will be the catalyst to precipitate the next wave of market turmoil. Will it be Portugal, will it be Spanish banks’ property exposure or will it be a new Irish Government’s desire to walk away from the massively costly bank guarantees committed to by its predecessor? GREED & fear has no idea which will be the precise catalyst. Indeed it could be all of them. But more turmoil is coming which is why the best hedge for those owning Asian equities remains shorting European bank stocks Meanwhile, the risk to the above view remains that Frau Merkel remains hard line to the end and that German public opinion revolts against taking on any of the periphery’s debts. Clearly, this is possible. But it seems unlikely to GREED & fear given that all the empirical evidence thus far is that when push comes to shove, the Germans capitulate to the political mantra of maintaining the euro. What about the Chinese inflation story? GREED & fear will not repeat the relatively sanguine view already articulated here. But what is worth re-iterating here is that mainland policymakers are not concerned. The past week has seen more evidence of this. Thus, the Chinese government announced on Tuesday another increase in gasoline and diesel prices. As noted by CLSA China macro strategist Andy Rothman, this is not a signal that the PRC is particularly worried about inflation. Second, the chairman of the China Banking Regulatory Commission (CBRC), Liu Mingkang, made a speech at a financial forum in Beijing last Friday stating specifically that inflation was not a problem because of China’s continuing excess capacity. Thus, Liu said that there remains overcapacity for most industrial goods in China and that it is difficult for upstream inflation to be transmitted downstream. Clearly, the PRC policymakers could always be wrong. But in GREED & fear’s view the empirical evidence of the past ten years and more suggests they deserve to be given the benefit of the doubt. Still it is also the case that markets are likely to spend the first quarter of 2011 continuing to worry about inflation in China. This is because the mainland authorities are themselves now expecting inflation to peak at about 6% in the second quarter, primarily because of weather related seasonal pattern. Thus, January and February traditionally show strong month-on-month inflation pressures. Still the longer investors want to look into 2011, the less likely they are to be worrying about inflation in China or the rest of Asia and the more likely they are again to be worrying about renewed deflationary pressures in the West. As for developed market equities, the best place to be remains in those companies whose revenue streams are geared to the emerging markets. This is certainly how GREED & fear’s Japan long-only portfolio is positioned. On that point, the Nikkei published last week an interesting survey of 420 nonfinancial companies that found that 36% of Japanese listed companies’ earning last fiscal year (ended 31 March) came from emerging markets, up from just 9% a decade earlier. The same story applies in the US and European stock markets. But the only domestic story GREED & fear really likes in the West remains Germany and even there the final drama of Euroland’s crisis has the potential to hit resurgent consumer confidence, at least for a while. There have been interesting developments in the Korean peninsula in recent days. GREED & fear refers to South Korea’s so-called “live-fire drill” on Monday on Yeonpyeong Island and North Korea’s subsequent statement that the exercise was not worth reacting to. This suggests the North is hoping for a resumption of the six-party pantomime, or some variation of it, after the recent flurry of diplomatic activity. Thus, China’s leading diplomat, State Bingguo, has visited Pyongyang and Seoul in recent weeks while an unofficial US envoy, Governor Bill Richardson of New Mexico, also visited Pyongyang last week. Still if Washington and Seoul decline to be pressured into more talks, the risk to GREED & fear remains of further escalation from the North. For the failure of the South to do anything to stop the death of four South Koreans on South Korean soil, as a result of the violent attack in November, has led to a long overdue wake-up call in terms of South Korean public opinion. The support for the so-called “sunshine policy” has now all but evaporated. Instead there has been rising popular demand, in response to the South’s evident lack of military preparation for the North’s November attack, that Seoul makes it clear to Pyongyang that the next time such an incident occurs there will be a more aggressive retaliation. Hence this week’s military drills. This is why investors should understand that the risk of military escalation in the Korean peninsula has increased since the government of President Lee Myung-bak has now made it clear to the North Korean regime, via communications with the North’s main ally, namely China, that it has changed the rules of engagement. The message is that if the North launches another attack the response will be to retaliate by launching an attack on pre-targeted strategic assets such as missile sites in the North. The question then becomes the risk of escalation if the North responds in turn to such an attack. In this respect the ability of China, or the lack of it, will become a critical variable given the fact that Beijing was clearly not pleased with the North’s November provocation which put it in a difficult position diplomatically. Still so long as China is willing to shore up the North, and it is estimated to supply about three quarters of North Korea’s food and oil, it is not clear to GREED & fear if Beijing really has any control over the North’s behaviour. For the Kim Jong il regime presumably calculates that China will continue to prop it up because the alternative is a collapse of the Pyongyang regime which would likely mean a united Korean peninsula coming under the control of a pro-American alliance. Meanwhile the North Korean interest in launching the November attack was clearly to gain America’s attention. The ultimate goal is US acceptance of the North’s nuclear weapons programme. Hence the not coincidentally close timing in November of the shelling of the island and the decision to show the world the uranium enrichment facility. As for the investment implications, North Korea remains an impossible issue for markets to discount. It either does not matter at all or it is the only issue that counts.
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| The 'Gold Covered Call Writing' Managed Futures Program Posted: 27 Dec 2010 10:00 AM PST As a managed futures specialist it is my job to scour the universe of managers, called commodity trading advisors or CTAs, and help my clients allocate to these specialists. What I want to tell you about today is a managed futures program ... Read More...
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| Daily Market Recap: 12.27.2010 Posted: 27 Dec 2010 09:41 AM PST
The S+P traded in a 7 point range, closing small up on the day. Financials did the best, up almost 1%, on the back of the news that AIG received $4.3bn in bank credit lines. Not surprisingly, today was the lightest day of the year in terms of volumes.
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| Posted: 27 Dec 2010 09:36 AM PST Gold edges higher despite rate hikes The COMEX February gold futures contract closed up $2.40 Monday at $1382.90, trading between $1372.70 and $1387.00 December 27, p.m. excerpts: see full news, 24-hr newswire…
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| Richard Russell - We Will Have an Upside Explosion in Gold Posted: 27 Dec 2010 09:30 AM PST  With gold still consolidating gains, the Godfather of newsletter writers Richard Russell in his latest commentary stated, "I have posted (above) the year-end price of gold starting with the year 2000, the first up-year of one of the greatest and least appreciated bull markets in history. Take in this series, you may never see its like again."
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| Gold Daily and Silver Weekly Charts Posted: 27 Dec 2010 08:21 AM PST | ||||
| GATA's lawsuit for Fed's gold documents slogs on Posted: 27 Dec 2010 08:07 AM PST GATA's lawsuit against the Federal Reserve in U.S. District Court for the District of Columbia slogs on amid the Fed's desperate obstructionism. Last week, through its lawyers, William J. Olson and Jon S. Miles of the Vienna, Virginia, firm of William J. Olson P.C. (http://www.lawandfreedom.com/), GATA filed a long brief replying to the Fed's objection to a couple of GATA's requests. We have asked the court to review privately the gold-related documents the Fed doesn't want to disclose and to permit GATA to pose a limited number of questions to the Fed.
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| GATA's lawsuit for Fed's gold documents slogs on Posted: 27 Dec 2010 07:36 AM PST 3:37p ET Monday, December 27, 2010 Dear Friend of GATA and Gold: GATA's lawsuit against the Federal Reserve in U.S. District Court for the District of Columbia slogs on amid the Fed's desperate obstructionism. Last week, through its lawyers, William J. Olson and Jon S. Miles of the Vienna, Virginia, firm of William J. Olson P.C. (http://www.lawandfreedom.com/), GATA filed a long brief replying to the Fed's objection to a couple of GATA's requests. We have asked the court to review privately the gold-related documents the Fed doesn't want to disclose and to permit GATA to pose a limited number of questions to the Fed. Our lawyers' mastery of freedom-of-information law and precedent is amazing even as their reply brief may make any layman's eyes glaze over after reading just a few of its 25 pages. The brief has been posted at GATA's Internet site so our supporters and gold's friends can see just how much effort is going into the lawsuit: http://www.gata.org/files/GATAReplyVsFed-12-22-2010.pdf If you're inclined to help us carry on the struggle, please visit: CHRIS POWELL, Secretary/Treasurer 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 http://theyukonroom.com/yukon-eblast-static.html Vancouver Resource Investment Conference http://cambridgehouse3.com/conference-details/vancouver-resource-investment-conference-2011/15 Cheviot Asset Management Sound Money Conference Phoenix Investment Conference and Silver Summit Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Prophecy Drills 71.17 Metres of 0.52 percent NiEq 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
This posting includes an audio/video/photo media file: Download Now | ||||
| COT Gold, Silver and US Dollar Index Report - December 27, 2010 Posted: 27 Dec 2010 07:33 AM PST COT Gold, Silver and US Dollar Index Report - December 27, 2010
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| The Why of White Metals: Silver, Platinum and Palladium in 2010 Posted: 27 Dec 2010 07:32 AM PST Hard Assets Investor submits: By Julian Murdoch Precious metals have had a heck of a year, even the non-gold metals. Especially those, in fact: As of December 23rd, silverprices had risen 73% for the year and platinumup 17%; palladium, the surprise winner, had increased a shocking 84%. Complete Story »
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| No signs of a gold bubble despite record advances in 2010 Posted: 27 Dec 2010 07:11 AM PST December 27, 2010 (SeekingAlpha) — … So far it's been the amazing, runaway investment of the past decade. If you'd put your money into gold at the lows of about 10 years ago, you'd have made approximately a 400% return. That's left pretty much everything else — stocks, China, housing — in the dust (and we don't mean gold dust). We would be willing to bet that if you asked for a show of hands of how many people own gold in an audience of 100 seasoned investors, probably less than 10 might raise their hands. If you asked the same question in a room of average, random people, probably one or two hands at the most might go up. Gold is clearly not in the bubble stage yet. …Niall Ferguson in his book The Ascent of Money distills the formation of bubbles into five stages:
– 1) Some change in economic circumstances creates new and profitable opportunities. Following this analysis, gold is probably only in stage one, where changes in economic circumstances create profitable opportunities to buy the yellow metal. We are still far from euphoria. … We think that the bubble is not in gold, but rather in what is driving the price of gold: Fiat money creation. [source]
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| Mandarin Monday – China Tightens, Snow Chills Markets Posted: 27 Dec 2010 06:41 AM PST
Here’s the latest Stock World Weekly (archives here) We hope all of you had a great holiday weekend! –Ilene Mandarin Monday – China Tightens, Snow Chills MarketsIt's going to be another light trading week. Europe is off 1.25% this morning (8am) as the Shanghai fell 2% and the Hang Seng dropped 0.3% on news that China was raising rates 0.25% for the second time in 2 months - weeks ahead of what most considered a fairly aggressive tightening schedule. Chinese Premier Wen Jiabao voiced confidence Sunday that his government can contain rising prices. Speaking to listeners during a visit to state radio headquarters, Mr. Wen acknowledged that recent price increases have "made life more difficult" for middle and lower-income Chinese. But, pointing to measures the leadership has taken in recent months, he said: "As it looks now, we are completely able to control the overall level of prices." The remarks, in a session where Mr. Wen was asked repeatedly about prices, reflect the issue's political sensitivity for Beijing. Our futures would certainly be taking a much bigger hit if the dollar wasn't down half a point since Friday, inflating the prices of stocks and commodities and giving us the illusion of stability in what can easily become a rough morning. Of course we felt that last week's zero-volume move higher was fake, Fake, FAKE but, when the acting is that good, there's nothing else you can do but sit back and enjoy the ride. One long we did take on Thursday was a long on the VIX as we expect volatility to perk up in January. We took a short position on FCX at 2pm ($119) as a proxy for shorting gold and copper and we have an obvious exit point if they hit $120.
Let's not kid ourselves folks, oil is up $20 a barrel since September and that gives Ahmadinejad $84M PER DAY extra cash which he can use to help defeat the Great Satan. They are pumping the same oil as they were before - simply for a lot more money thanks (as usual) to Goldman Sachs, JP Morgan and the other patriotic speculators who are willing to bankrupt the people of their own countries in order to scrape a few extra dollars of commissions and profits off their energy trading. At $90 and 4.2M barrels a day, Iran gets 138Bn American Dollars a year to spend however they think is best and, if they thing that money is best spent buying roadside bombs for their militant friends in Iraq - well that's just good old fashioned Capitalism at work, right?
Wen, is the question everyone needs to be asking as China's last round of rate tightening, also spurred on by ridiculous rises in energy prices that the government was determined to put a lid on, was a trigger that collapsed the global economy in 2008. As you can see from the chart on the right, the last series of rate hikes took them from 6% to 7.5% in just over a year but, from their perspective, were not aggressive enough as oil soared to $140 a barrel in 2008 because Bush was giving away stimulus money as fast as China could remove it from the system. Obama and the Bernanke have already teamed up for a $2Tn money drop in 2011 and that $20 that oil has risen since The Bernanke announce QE2 in September is $20 per barrel that China has to subsidize for their people, who pay a fixed rate. So take the $30Bn bonus that we're shipping over to Iran and multiply that by about 4 and that's what it costs the Chinese government to cover that extra $20 per barrel. Believe me, they DO NOT want to see $100, let alone $140 again, no matter how much CNBC, GS et al salivate over the possibility... Somehow, the MSM seems to think American Consumers have an extra $400M a day to spend on oil and that, of course, is just 20M barrels times $20 extra or "just" $146Bn a year that will be spent on oil instead of ITunes. Of course, then you have refining mark-ups (great for our VLO, who are up 20% since Sept) and ancillary inflation in food, heat, electricity etc and you can easily double that to $300Bn. Figure each $10 rise in oil costs US Consumers $150Bn more to consume the same food and fuel that they did before and then contemplate that the bottom 90% of wage-earners in this country are making 5% LESS than they did in 2005 AND that 10% of them have no jobs at all.
What we are seeing this holiday season is consumers RE-leveraging for the holidays. Now, I'm a little early with this, you won't hear about it until the data comes in later in the month - just like I told you about the Muni Debt months before it became a popular theme so let's just consider this something we'll need to watch out for in 2011. As you can see from the chart on the left, we are in a contraction on CMI (Consumer Metrics Institute's) data, which takes into account broad consumer spending trends and clearly indicates we are in no way out of the woods yet. As Housing Time Bomb points out: "The CMI goes on to explain how the majority of our growth in 2010 was as a result of massive government stimulus combined with improved exports thanks to a falling currency." Or, as I said last week - we have fooled almost all of the people some of the time in 2010 - whether that will last into 2011 or not is the question we must ponder for the new year. Meanwhile, baby it is cold outside in the Northeast and that, of course is bad news for retailers, who want consumers to come out and cash in those gift cards. It also stops air travel and keeps people at home and not driving - all bad for oil prices but we're not expecting them to fail $90 as long as we keep getting short-shipped over 10M barrels a week from our good friends at OPEC - a trick they've been using all of December to create artificial draws in US crude supplied. Last week, 8.7Mb of oil were imported per day and at least that was some improvement over the prior week's 7.7Mbd of imports, quite a bit below our 5-year average of 10Mbd. This effectively shorts our inventories by 10-15Mb PER WEEK so it doesn't matter whether you try to conserve oil or not, they will just short-ship us and call the draw-down in energy "consumption" because that is the totally BS way they measure it. As I said, we are short oil and short the markets at the moment as we still aren't quite seeing how they can keep all these balls in the air - no matter what, it's going to be an interesting New Year - but let's try to get through the week first! Be careful out there!
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| Posted: 27 Dec 2010 06:38 AM PST Hi Jim and Dan, I hope you both had a great Christmas. I keep mentioning to my readers that we may be in the early stages of a significant drought in the plains area. The first impact will be the winter wheat crop, followed by beans and corn if the pattern continues into the spring. Cost-push inflation is going to be horrible as is. Imagine the impact of crop failure too. Yikes! Have a great week! Hi Craig, Thanks for the map. I have also been following that situation very closely. Not only are we dealing with some potential here in the US for dryness issues, but Argentina is running very hot and dry right now as corn enters its critical pollination phase. Soybeans also are at a stage where they too are affected in terms of both size and pod filling. It looks like the grain and bean situation has the potential to put more pressure to the upside on food prices. As you say, a combination of monetary issues and fundamentals could get ugly very quickly. Happy New Year,
Jim, China is a heavy investor in Brazil, mostly in strategic sectors like oil or land. Lately they have bought stakes in Brazilian electricity distribution businesses for close to $1 billion. Why would China do this except for diversifying from its dollar holdings? Best regards, China Spends Close to US$ 1 Billion Buying Power Plants in Brazil Electric power in Brazil Beijing-based State Grid Corp. of China completed the purchase of seven electricity distribution businesses in Brazil for US$ 989 million, announced the Chinese government this past week. Beijing-based State Grid will run electricity transmission services in the southeast of Brazil and supply power to Brazilian capital BrasÃlia, São Paulo and Rio de Janeiro, according to a statement at the website of the Chinese government's state-owned Assets Supervision and Administration Commission. China's biggest electricity network operator agreed in May to buy controlling stakes in seven power transmission units in Brazil from Elecnor SA, Abengoa SA, Isolux Ingenieria SA and Cobra Instalações e Serviços SA. Latin America's biggest economy is attracting local and overseas investors to develop its energy infrastructure to meet power demand as its GDP expands more than 7%. State Grid has obtained a 30-year right to transmit power to the southeastern region of Brazil, the statement said. The electricity distribution businesses will generate annual profit of about US$ 110 million, according to the statement.
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| Reader Threatens To Sue Fed After Losses Incurred By Going Long Inverse Leveraged ETFs Posted: 27 Dec 2010 06:22 AM PST
Remember when double and even triple inverse leveraged ETFs were all the rage? That all occurred in the brief period of time before it became clear that Bernanke would first take down the global financial system before he let Citi get back to $1/share again. Apparently one reader recalls it all too well: "In 2008 at the bottom of the market I sold positions I owned in physical gold and banks stocks such as Bank of America (BAC), Citigroup (C) and also non financial companies such as Ford (F). I used these proceeds to purchased inverse ETF’s such as NYSE: FAZ (Direxion Financial 3x Short) and NYSE:SRS (Proshares Real Estate 2x Short). Since making these purchases, these ETF’s have suffered significant drops in value as reflected in their price. In fact NYSE: FAZ has plummeted from $1100 per share to $11 per share and SRS has reduced in price from $1000 per share to $19.50 per share. It is now apparent that the Fed spent trillions of dollars to raise the price of bank stocks and to inversely suppress the price of these inverse ETFs." Yet is this nothing but a case of fippers' remorse? Is there legal precedent for an actual claim? Was the Fed in breach of duty "by allowing investors to make investments into funds such as FAZ and SRS and other inverse ETF’s, while the Fed was performing transactions that the Fed knew or should have known would severely harm the investors in these publicly traded fund." Will Bernanke cave and make whole everyone who dared to put money into the market, even if it meant betting on a broad market decline? After all the whole purposes of the latest propaganda campaign is to get people to put money in the market with no fear of loss whatsoever: whether one is bullish or bearish (and as the lack of participation shows, most are certainly still bearish). Which is where it gets interesting: "Therefore, I appeal to your office to make due and just compensation in treble damages amounting to $__ million dollars for a full and good faith settlement of this matter. If this is agreeable, I am prepared to enter into a confidential good faith settlement." In our ridiculous bizarro world, in which nothing makes sense following each recurring Fed intervention, perhaps the Fed making whole those who lose money regardless of their bias, is just what is needed to break the 33 weeks of outflows... Full letter submitted by Bill Pitts: December 7, 2010 On or about March of 2009, the Federal Reserve Bank (The “Fed”) commenced in actions that involved making loans to banks, financial institutions, wholly owned Fed companies (i.e. Maiden Lane), lenders and publicly traded companies. Additionally evidence suggest that the Fed through these firms and at the direction of the Fed made direct purchases of equities in publicly traded companies for the purpose of raising stock prices. These transactions were undisclosed to the public and investors. Neither the Fed nor the recipient companies disclosed these material transactions to the investing public. Ostensibly, this assistance from the Fed was conducted with the objective of increasing the stock value of many troubled companies and banks. Additionally, under the plan by the Fed and U.S. Treasury, these banks and financial institutions used the Fed supplied funds to purchase each other’s stock. This was conducted to allow each bank to raise each other’s stock values to improve the assets values on one another’s balance sheets. These actions were supported encouraged, known about and assisted through actions of the Fed and the United States Treasury. While these actions may have been helpful to those firms to abate the systemic problems within the market, assisted in working to make recipient banks more solvent and may have prevented additional bank failure, these actions resulted in severe detrimental damage to many individual investors. As you are keenly aware, most every market transaction has two sides to a trade. As a stock or asset class increases in value, some investors realize gain while simultaneously others who concluded that the stocks would NOT improve in price and made investments accordingly known as taking a “short” position would loose money. The inverse of this scenario is also true. As I understand it, between the Fed and the SEC you all are charged with ensuring fairness, honesty and integrity in our markets and monetary system. It is also my understanding that the Fed professes to never intervene in the markets unless it is to prevent crisis. In 2008 at the bottom of the market I sold positions I owned in physical gold and banks stocks such as Bank of America (BAC), Citigroup (C) and also non financial companies such as Ford (F). I used these proceeds to purchased inverse ETF’s such as NYSE: FAZ (Direxion Financial 3x Short) and NYSE:SRS (Proshares Real Estate 2x Short). Should your office desire to discuss this, I can be reached at my office at XXX-XXX-XXXX or my mobile at XXX-XXX-XXXX "Secret bailouts do not merely benefit recipients; they also deceive investors into mistaking fantasy for fact. Such deceptions often punish honest investors, like the honest investors who sold short the shares of insolvent financial institutions early in 2009.Based on all available public disclosures, the story remained fairly grim into the spring of 2009. Accordingly, the short interest – i.e., number of shares sold short – on Goldman Sachs common stock hit a record 16.3 million shares on May... 15, 2009 – about 3.3% of the public float. But over the ensuing six months, Goldman’s stock soared more than 30% – producing roughly $500 million in losses for those investors who had sold short its stock. Not surprisingly, the total short interest during that timeframe plummeted to less than 6 million shares, as short-sellers closed out their losing positions." http://www.economicpolicyjournal.com/2010/12/totally-busted-truth-about-goldmans.html http://www.washingtonpost.com/wp-dyn/content/article/2010/12/01/AR2010120106870.html http://www.youtube.com/watch?v=rTPa1hGtpJs http://money.cnn.com/2010/12/01/news/economy/fed_reserve_data_release/index.htm?hpt=T1 http://www.zerohedge.com/article/meet-35-foreign-banks-got-bailed-out-fed-and-just-cpff-banks http://www.bloomberg.com/news/2010-12-02/federal-reserve-may-be-central-bank-of-the-world-after-ubs-barclays-aid.html http://www.bloomberg.com/apps/news?pid=20601087&sid=aymTlczlMmpA&os=1 http://www.csmonitor.com/Money/Robert-Reich-s-Blog/2010/0401/Fed-in-hot-water-over-secret-bailouts http://networkedblogs.com/21Xqv http://www.huffingtonpost.com/2010/12/01/fed-opens-books-revealing_n_790529.html http://www.youtube.com/watch?v=E10bHAI7U68&feature=player_embedded http://www.thefoxnation.com/business/2010/04/22/goldman-ceo-visited-wh-4-times-during-sec-investigation http://www.mcclatchydc.com/2010/04/21/92637/goldmans-connections-to-white.html http://www.youtube.com/watch?v=ssl5yb7FewA http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a.G6KFfaDdSc http://www.youtube.com/watch?v=HaG9d_4zij8 http://www.youtube.com/watch?v=n0NYBTkE1yQ&feature=player_embedded http://www.cnbc.com/id/34126826 http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/6646923/Bank-of-England-tells-of-secret-62bn-loan-to-save-RBS-and-HBOS.html http://www.guardian.co.uk/business/2009/dec/03/bank-england-secret-loan-hbos http://www.youtube.com/watch?v=2EQDrVKYWmc Bailouts could cost U.S. $23 trillion http://www.politico.com/news/stories/0709/25164.html http://abcnews.go.com/Business/Politics/story?id=814 http://blog.newsweek.com/blogs/wealthofnations/archive/2009/09/22/tracking-the-19-trillion-bailout-funds.aspx http://www.youtube.com/watch?v=oxuqmPyKqcs&feature=player_embedded http://www.zerohedge.com/article/how-lehman-feds-complicity-created-another-illegal-precedent-abusing-primary-dealer-credit-f http://www.youtube.com/watch?v=Q48eSoTNByQ&feature=related http://www.washingtonsblog.com/2010/04/geithner-looting-country-for-trillions.html http://www.zerohedge.com/article/why-fed-actively-managing-25-billion-maiden-lane-mbs-portfolio-when-its-24-trillion-soma-hol http://www.themarketguardian.com/2010/04/did-the-fed-just-surreptitiously-bail-out-europe/ http://www.dailymail.co.uk/news/article-1339220/Goldman-Sachs-pay-111million-bonuses-despite-taking-billions-bailout-money.html#ixzz18NTzHyqF http://www.mcclatchydc.com/2010/04/21/92637/goldmans-connections-to-white.html http://www.ynetnews.com/articles/0,7340,L-3320118,00.html http://articles.cnn.com/2010-04-20/politics/obama.goldman.donations_1_obama-campaign-presidential-campaign-federal-election-commission-figures?_s=PM%3APOLITICS http://news.antiwar.com/2010/09/16/following-fierce-debate-israel-decides-to-buy-f-35-warplanes/ h/t Will
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| If You Haven't Bought Silver Yet, Read This Posted: 27 Dec 2010 06:18 AM PST By Chris Weber, editor, The Weber Global Opportunities Report Monday, December 27, 2010 The last time I was able to identify a period when a precious metals correction was about over happened two years ago… At that time, gold hit a low of $693 and silver $9.63. Since then, gold has risen about 100%, but silver has soared 206%. This is an extraordinary occurrence in just two years. Back in October, I thought both metals, and especially silver, were due for a rest, and perhaps a correction. Silver reached $24.75 on October 14. I expected a back-off to begin. Silver briefly touched as low as $23. That is a 7% fall. In the universe of silver, this is nothing. And then the rise resumed. In December, silver reached a new high of $30.50. This all feels unprecedented to me. Gold has not been giving people an advantageous entry point for a long time now. But silver is supposed to crash at certain times… It can almost be relied upon to do this. Not this time. A...
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| The China Syndrome: A Building Bubble This Way Bloweth Posted: 27 Dec 2010 06:17 AM PST By James West MidasLetter.com December 27, 2010 The investment world has become obsessed with phenomena that cause catastrophic loss – so much so that a new language has evolved, subjugating old words to new meanings. Melt-downs, for example. Collapse. Bubbles. Bubble, in fact, is now the word that classifies any asset class believed to be overpriced as a result of investment hysteria. Right now, we have the gold bubble, the silver bubble, more generally, the commodities bubble. The real estate bubble, now burst, precipitated the world financial crisis of 2008, which, according to most financial press, is now over. Strange, that, since unemployment remains rampant, home prices are still at rock bottom, and earnings for any corporation who didn't get stimulus cash to superficially improve their balance sheet optics, are non-existent. But, as usual, the mainstream financial press misses the point. Gold and silver are not bubbles. Their demand as monetary metals grows in di...
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| Is China The Big Silver Short? Posted: 27 Dec 2010 06:15 AM PST It is well known that the Chinese have been accumulating gold for at least a decade, and presumably silver as well, gold primarily for its monetary value, and silver for both its monetary and industrial value. In April of 2009, the Chinese Central Bank announced that it had secretly acquired 454 tons of gold bullion over the previous six years, supposedly all from Chinese domestic production, increasing their total stock from 600 metric tons to 1054 metric tons, and making them the fifth largest holder of gold bullion in the world. Quoting Dow Jones Newswire, April 24, 2009: “The new figure leaves China as the fifth biggest holder of gold after the U.S, Germany, France and Italy. Including Switzerland's 1,040 tons, six countries and the IMF now have gold holdings of more than 1,000 tons.” I find these numbers most curious and suspicious. The reputed 454 tons that the Chinese central bank claims to have acquired between 2003 and mid 2009 is just enough to put t...
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| +74% later, Wall St. Journal notices silver only to try to talk it down Posted: 27 Dec 2010 06:10 AM PST Big advertiser J.P. Morgan Chase & Co. will be pleased. * * * Price of Silver Soaring Investor-Fueled 74% Gains Dwarf Gold; Race to Open Mines By Carolyn Cui and Robert Guy Matthews http://online.wsj.com/article/SB1000142405297020356800457604382039806794... BIG CREEK, Idaho -- An unexpected surge in investor demand is sending silver prices soaring—and speculators and mining companies are digging in. In the past four months, the metal has upended forecasts, rising 51% to a series of 30-year highs, before inflation. Silver closed Thursday at $29.31 a troy ounce, up from $16.822 at the beginning of 2010. Among the four major precious metals—the others being gold, platinum and palladium -- silver is up 74% this year, on track to be the second-best performing commodity after palladium, which is up 86%. Gold, by contrast, is up 26% and copper just under 28%. ... Dispatch continues below ... ADVERTISEMENT 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 Prices are rising despite oversupply and a lackluster recovery in industrial demand. Many analysts expected those factors would keep a lid on prices in 2010. What they didn't expect was an overwhelming flow of money into the market from investors eager to ride a commodities rally. "This is a story almost entirely about investment," says Stephen Briggs, senior metals strategist at BNP Paribas. The global silver appetite partly reflects world economic improvements. Investors from the U.S. to China turned to "hard" assets such as copper and other commodities in part as a hedge against inflation worries. Silver benefits from a dual role as industrial commodity and precious metal. Here in the mountain-ringed Silver Valley, historically one of the world's largest silver production regions, workers are busy punching through rocks to open passages in the Crescent Silver Mine, which closed more than a dozen years ago when prices of silver dipped to $5 to $6 an ounce. Even if prices retreat to $15 an ounce -- a level seen as recently as early this year -- some prospectors say they can break even, which means development will continue. "I think we are starting a new era in mining here," says Greg Stewart, president of United Mining Group, which has an 80% interest in the Crescent Silver Mine. Exchange-traded funds backed with silver have enabled investors to invest in a market that traditionally was harder to participate in. The largest silver ETF, the $10.2 billion iShares Silver Trust, has seen a $1.1 billion net inflow for the first 11 months of this year. In recent months, concerns about inflation, the European debt crisis and the U.S. Federal Reserve's recent moves to boost the economy have driven investors to hard assets, also benefitting silver prices. The craze has reached the coin market. In November, silver American Eagle coins sold by the U.S. Mint amounted to 4.26 million ounces, a monthly record in the agency's history. Silver's reliance on investors to prop up the price could cause it to tumble suddenly. "When investor support for the metal fades, the downside is going to be pretty substantial," says Credit Suisse analyst Tom Kendall. He forecasts an average price of $30.10 per troy ounce next year as "a lot of factors that have led people to buy silver would still be there in 2011." But he cautions, "The number is only going to be achievable as long as fresh money keeps moving in." Silver's all-time high was set in January 1980 at $48.70 an ounce, or $129.32 when adjusted for inflation. This year investors are expected to pile a record $4.5 billion into the silver market, accounting for 24% of the world's total demand, says GFMS Ltd., a metals consulting firm in London. That's the highest level, in dollar terms, in decades. Silver's relatively small market size—$19 billion compared with $170 billion for gold—has also played a role in amplifying the impact of investors, according to GFMS. The strength in silver prices has prompted a flurry of development around the globe and pushed anticipated production in 2010 to 733.2 million ounces, up 3.3% from 2009 levels, and up 14% since 2006. Silver has some inherent appeal due to its industrial use in electronics, silverware and coins. And reserves are limited. According to the U.S. Geological Survey, there are fewer years of U.S. silver production left in the ground than any other precious metal including gold. The recent price increase has been fueled by other factors in addition to investor interest. For instance, China recently abolished an exports tax rebate on metals. That has resulted in a 59% decline in silver exports. China is a major silver producer and was a big exporter until 14 months ago. Strong demand there, coupled with the elimination of the tax break to protect domestic natural resources, have led Chinese producers to slash exports. Concerns are lingering over excess supply. The market is set to see a surplus of 64.4 million ounces in 2010, says Barclays Capital, which could curb prices. This year's surplus will be 16% smaller than 2009's but much higher than previous years. Overall, silver production has been rising steadily in the past five years, with most of the growth coming from mines in Mexico, Latin America, and Australia. Gold Corp., a Vancouver-based mining company, expects to more than triple output at its mine in Mexico, Penasquito, which is expected to produce 10 million ounces of silver in 2011, up from about 3 million ounces in 2009, according to GFMS. Another new mine, Coeur d'Alene Mines Corp.'s Palmarejo silver and gold mine in Mexico, is also ramping up to produce 9 million ounces annually. And BHP Billiton, which owns one of the largest silver mines in the world, Cannington, is looking to increase production and extend the life of the mine, located in Australia. So-called junior miners like United Mining Group, which has an interest in the Crescent Silver Mine, are much smaller than mining giants like BHP and Rio Tinto. They often lack the capital or expertise to run a mine, which requires costly equipment and infrastructure. Instead, their geologists often scout projects and then sell an interest in them to larger companies. United Mining Group is issuing shares on the Toronto Stock Exchange to raise up to $8 million to develop the Crescent Silver Mine, which is more than 90 years old. Located in Idaho's Silver Valley—an area peppered with colorfully named mines like Lucky Friday, Sunshine and Bunker Hill—it is expected to begin production in early 2012, with output just over 1 million ounces. "The whole industry is like feast or famine," says Mr. Stewart of United Mining. Join GATA here: Yukon Mining Investment e-Conference http://theyukonroom.com/yukon-eblast-static.html Vancouver Resource Investment Conference http://cambridgehouse3.com/conference-details/vancouver-resource-investment-conference-2011/15 Cheviot Asset Management Sound Money Conference Phoenix Investment Conference and Silver Summit Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: http://www.gata.org/node/16 ADVERTISEMENT Prophecy Drills 71.17 Metres of 0.52% NiEq 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
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| Demanding the Mark Back: Opposition to the Euro Grows in Germany Posted: 27 Dec 2010 05:59 AM PST Surveys show that many Germans are worried about the future of the euro, but the country's political parties are not taking their fears seriously. The number of grassroots initiatives against the common currency is increasing, and political observers say a Tea Party-style anti-euro movement could do well. As a playwright, Rolf Hochhuth knows how to use timing to achieve the greatest possible impact. In the 1960s, he criticized the pope for remaining silent about the Holocaust. When everyone in the world was talking about globalization, he took to the theater stage and unmasked consulting companies like McKinsey as exploitation machines. Now Hochhuth is campaigning against the euro — and his stage is Germany's Constitutional Court. "Why should we help rescue the Greeks from their sham bankruptcy?" he asks. "Ever since Odysseus, the world has known that the Greeks are the biggest rascals of all time. How is it even possible — unless it was premeditated — for this highly popular tourist destination to go bankrupt?" [source] PG View: A clear majority of Germans believe they would be better off today if they had kept the mark, rather than have adopted the euro. A staggering 82% of Germans are worried about the stability of the euro. I wonder what the implications would be globally if 82% of Americans woke up to realize that the dollar — the world's reserve currency — isn't in any better shape.
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| The Past: Abandoned Principles and Misguided Policies Posted: 27 Dec 2010 05:58 AM PST When I was born in 1960, the political leaders of the United States believed very strongly that it was their duty to balance the government's budget and to ensure that the country's money was sound, in other words backed by gold. They believed these things just as their fathers, grandfathers and great-grandfathers before them had; and they feared that if the nation failed to abide by these core principles of economic orthodoxy there would be disastrous consequences. They were right. By the time I turned 12 in 1972 those principles had been abandoned. Spending by President Johnson on social welfare programs at home and the Vietnam War abroad produced large budget deficit in the late 1960s. President Nixon broke the link between dollars and gold in 1971. The worldwide economic crisis that erupted in 2008 originated four decades ago when Johnson and Nixon opened Pandora's Box and freed all the evils associated with paper-money denominated credit. Large budget deficits over-stimulated the US economy and pulled in imports. The nation's large trade surplus began to shrink and then swung into deficit. After Nixon destroyed the Bretton Woods system in 1971, credit, freed from the limitations imposed by gold reserve requirements, exploded. Between 1969 and 2008 debt to GDP in the United States rose from 170% to 370%. Surging credit financed American consumption; and businesses around the world responded by expanding industrial capacity. Increasing credit also drove US asset prices higher; and rising net worth encouraged still more consumption and industrial expansion. These trends, combined with technological advances in communications and transportation, ushered in the age of globalization. The world's industrial infrastructure changed beyond recognition and global capacity to produce manufactured goods and commodities rose many fold. An export-driven industrial revolution remade Asia in the course of only one generation; while over the same time the United States exchanged its industrial economy for one based on services. Surging commodity prices revitalized Russia and Brazil, and gave the traditional oil exporting nations staggering wealth and global influence. However, as the US trade deficit flooded the rest of the world with dollars, those dollars destabilized the global economy. When they entered the banking system of other nations, they produced unnaturally rapid deposit and loan growth that fuelled economic overheating and culminated in economic bubbles — as in Japan and the Asia Crisis countries. When the dollars were converted into other currencies, those currencies appreciated and the exports of those nations became less competitive. Central banks around the world reacted to that threat by creating their own money and using it to buy the dollars entering their economies in order to hold down the value of their currencies. As the US trade deficit grew larger (it peaked at $2 million A MINUTE in 2006) the currency intervention undertaken by central banks in the trade surplus countries expanded to a mind boggling scale and itself began to further destabilize the global economy. Between 2000 and 2010, foreign exchange reserves held by the world's central banks grew from $2 trillion to nearly $9 trillion, meaning that central banks created the equivalent of $7 trillion in ten years in order to depress the value of their currencies and protect their export sectors. Never before has so much money been created in such a short space of time. As central banks accumulated trillions of dollars, they reinvested them into US dollar-denominated assets in order to earn a return. The reinvestment of those dollars into US assets not only financed the US trade deficit, it also blew the United States into an economic bubble as it funded an extraordinary misallocation of capital into stocks, bonds and property. This fiasco was exacerbated by ill-advised US trade policies designed to promote trade with ultra-low wage nations with no concern for the balance of trade. As trade with low wage countries expanded, the United States manufacturing sector moved offshore and wage rates stagnated. America prosperity came to depend on inflating asset prices. US economic policy became hostage to the wealth effect produced by asset price bubbles. When the NASDAQ bubble popped in 2000, the Fed slashed interest rates until it created an even larger property bubble. The policy objective of the United States leaders during the last 15 years has been to manage economic growth through bubble creation. Alas, bubbles are easier to create than to sustain. Financial deregulation rounded out this series of disastrous policy mistakes by removing the controls imposed on the banking industry in the aftermath of the Great Depression. Thus liberated, the industry rapaciously pumped the economy full of toxic credit, using newly created financial instruments with unprecedented potential to damage the economy. This terrible series of policy mistakes produced the greatest economic boom in history. Unfortunately, that boom was not built on sustainable foundation. It was built on debt. In 2008 that debt could not be repaid and the global economy was plunged into the most severe crisis since the 1930s. With American consumers cut off from additional credit, global industrial capacity now greatly exceeded global income and purchasing power. Governments around the world are responding with unorthodox intervention on a scale unprecedented in peacetime. Trillions of dollars of government debt is being incurred and spent stimulating the economy. Trillions of dollars more are being created from thin air by central banks to prop up asset prices and to prevent the collapse of the global financial system. The implosion of the private sector credit bubble has left the global economy in critical condition and on government life support. The outlook for self-sustaining recovery is not good. This calamity is the consequence of the United States abandoning the core principles of economic orthodoxy: balanced budgets and sound money. Regards, Richard Duncan P.S. For more perspective from Richard Duncan you can visit his blog on economics in the age of paper money at www.richardduncaneconomics.com. The Past: Abandoned Principles and Misguided Policies originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."
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| Deficit Hawk Coburn Should Save His Breath Posted: 27 Dec 2010 05:46 AM PST By Rick Ackerman, Rick's Picks Interviewed by Fox's Chris Wallace on Sunday, Senator Tom Coburn (R-Oklahoma) made quite a splash in the news, warning that America could suffer "Apocalyptic pain" within the next few years if it doesn't get debt under control. Coburn's heart seems to be in the right place, since he is one of the most vocal members of Congress in railing against bailouts that have pushed public debt into the cosmos. But we wonder whether he isn't a few steps behind the real world in worrying that our standard of living will plunge if America's budget deficit is allowed grow. For in fact, the standard of living has been plunging for several years, to the extent that the middle class can no longer afford health care; that even households with two professional incomes must hock the ranch to put their kids through college; and that Baby Boomers' retirement plans are either being pushed back by five or ten years or postponed indefinitely. Moreover, for the broad middle class, the situation is likely to grow even worse in the years ahead as strapped cities and towns are forced to raise taxes to cover fixed expenses – especially pension and health care benefits for public employees — that are difficult or impossible to shrink. Add in the fact that real estate valuations from coast to coast are due to be reassessed downward for at least the next few years, and you begin to see why the deflation that holds the economy in a death grip cannot be loosened no matter what countermeasures are employed.
Sen. Coburn says that the U.S. has just three or four years to get its fiscal house in order before it faces the kind of austerity measures that have recently been imposed on Greece and Ireland. Unfortunately, austerity is not going to save those countries, nor will it save any of the others, including Spain, Portugal, Italy, where it eventually will be tried. Bear in mind that the purpose of austerity is not to bring budgets under control, but to buy time before the rest of Europe collapses in a crisis of confidence that seems all but inevitable. By putting the squeeze on the likes of Greece and Spain, the EU is providing cover for loan facilities that will keep the game going for yet a while longer. The U.S. is in somewhat better shape, but only superficially. Whereas Europe is committed to "saving" the euro because it is the only thing sustaining the dream of a transnational Europe, America has no such ideal or goal at stake when it acts aggressively, as it has, to trash the dollar. A Sea of Deflation Much as we respect Sen. Coburn, we'd advise him to save his breath when it comes to preaching austerity. The problem is that, no matter how drastically we cut spending or raise taxes, it won't begin to cover future obligations that will continue to grow like topsy. We are alluding mainly to future outlays that get lumped together euphemistically as "unfunded liabilities" – in large part, Social Security, Medicare and public pensions. The sums involved have been estimated at $125 to $150 trillion – vastly more than could ever be recouped through political-driven remedies. Looking at an even bigger picture, we see that those unfunded liabilities exist within a highly leveraged, quadrillion-dollar financial edifice that itself is collapsing. Under the circumstances, we might as well enjoy a final, inflationary blowout before deflation fully asserts its irresistible force. We suggested in an earlier commentary that the government consider a one-year moratorium on income taxes. This "gift" would amount to about $2.5 trillion – just a drop in the bucket compared to the sea of deflation that has come to engulf the world's assets. (If you'd like to have Rick's Picks commentary delivered free each day to your e-mail box, click here.) Rick's Picks is a trading newsletter for stock, gold, silver and mini-indexes. All trades are based on the proprietaryHidden Pivot technical analysis method.
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| Government Spending, GDP and Nonsense In Between Them Posted: 27 Dec 2010 05:30 AM PST No market news. Every market in Christendom was closed for the 25th. Still, the crackpot theorists and muddled meddlers never seem to take a holiday. Robert Shiller should have been embarrassed to write the following words. The New York Times should have been embarrassed to print them. But today's economic intelligentsia knows neither shame nor common sense. You be the judge: It has long been known that Keynesian economic stimulus does not require deficit spending. Under certain idealized assumptions, a concept known as the "balanced-budget multiplier theorem" states that national income is raised, dollar for dollar, with any increase in government expenditure on goods and services that is matched by a tax increase. The reasoning is very simple: On average, people's pretax incomes rise because of the business directly generated by the new government expenditures. If the income increase is equal to the tax increase, people have the same disposable income before and after. So there is no reason for people, taken as a group, to change their economic behavior. But the national income has increased by the amount of government expenditure, and job opportunities have increased in proportion. Economists embraced this multiplier because it seemed to offer a solution to a looming problem: a possible repeat of the Great Depression after wartime stimulus was withdrawn, and when new rounds of deficit spending might be impossible because of the federal government's huge, war-induced debt. It turns out that this worry was unfounded. The Depression did not return after the war. But in the early 1940s, economists justifiably saw the possibility as their biggest concern. Their discussions have been mostly forgotten because they didn't have much relevance for public policy – until now, that is, when we again have a huge federal debt and a vulnerable economy. Okay. The feds spend more money and increase taxes to pay for the spending. This has a multiplier of "one" – or so they say – meaning, you get one times the benefit. Why do we bother to challenge it? The idea is delusional claptrap. No need to shout it down. It whispers "nonsense" to anyone who will listen. All we have to do is imagine what really happens: A small, isolated town is in a slump. The mayor has read enough Keynes, Samuelson and Shiller to be dangerous. He increases both spending and taxes. He hires 20 people and raises taxes to pay their salaries. The 20 go to work, say, cutting the grass or painting the town hall. Now, they have income…which they spread among the town's bars, brothels and banks. Presto! GDP goes up! But where does the money come from? It comes from the taxpayers. On the one hand, the taxpayers have more – because the mayor is spending money. On the other, they have less, because taxes are higher. Since – in theory – they are only paying as much more in taxes as they receive in extra income, the lawn cutting and painting seems to be "free" extra GDP. Wait a minute. If this were so, why not hire everyone in town and triple or quadruple taxes? Why not? Because it doesn't work. It would only work – and only in theory – if the extra work undertaken by the government were equal in value to the work undertaken by the private sector. Otherwise, each person diverted out of the private economy merely becomes a zombie worker – producing something that may or may not be worthwhile. What about just hiring the jobless people? That would increase income, right? And then you wouldn't be taking anything away from the private economy, right? Wrong. You still have to take away money. And if you raise taxes by the amount of money you put into the system, you are taking the money away from the private economy. The public sector grows, compared to the private sector. The gross amount of extra taxes may be no higher than the gross amount of extra spending, but the private sector surrenders more of its income in order to pay for the spending by the government. Adding more zombies only makes it appear as though income has increased – as in a wartime, full employment economy. In fact, keep multiplying wealth according to the "balanced budget multiplier theorem" and you will soon have none left. Bill Bonner Government Spending, GDP and Nonsense In Between Them originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."
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| The Impossibility of a Gold Bubble Posted: 27 Dec 2010 05:29 AM PST In an ocean of propaganda, there are few forms of disinformation as annoying as the endless "gold bubble" babble. Typically, precious metals commentators will refute such nonsense by pointing out that compared to other commodity prices today, and compared to the gold price itself in 1980 that gold is still unequivocally "cheap" – and certainly does not represent an asset bubble in any respect. Despite the quintupling of the price of gold off of its absolute bottom, gold is arguably just as "cheap" today as it was when the price was below $300/oz. The reason is simple: the fiat paper currencies in which the price of gold must be expressed have been debauched/diluted by Western central banks (and the governments they represent) just as fast as the price of gold has been able to rise. Indeed, more worrisome is the fact that all Western governments look vulnerable to debt-default in their futures, with that fate all but inevitable for several European governments and (of course) the United States. Even worse than that, however, is that all of the actions of these governments make it abundantly clear that they are prepared to embrace hyperinflation (and a de facto default through driving their currencies to zero) rather than formally defaulting – and imposing the "hit" on bond-holders which is the only path to solvency for several of these nations. As the probability of default-through-hyperinflation moves from being likely to near-certain, this directly implies a corollary in the precious metals market: that it is impossible for gold to become an asset bubble. There is nothing either radical or surprising in such a conclusion. In fact, I have already implied this in a previous two-part series on precious metals and hyperinflation. It is a matter of simple arithmetic that as currencies go to zero, the price of hard assets go (literally) to infinity – with gold and silver being at the top of the list of "hard assets". This is the same thing as saying that gold (and silver) won't be "fairly valued" until the price reaches "infinity". And since (by definition) any finite number we are capable of expressing is less than infinity, it is mathematically impossible for the price of gold to ever reach a level where gold would represent an asset bubble. The only development which could negate this trend is if Western governments, and especially the U.S. (whose dollar is still the world's "reserve currency") were able to put an end to their spiraling debts and spiraling money-printing. In terms of the economic fundamentals of these nations, I have already been crystal-clear in previous commentaries as to the only policies which can restore these economies to a solvent basis (even after a debt-default): a four-day work week to put an end to massive, structural unemployment; and a taxation overhaul which disgorges the $10's of trillions in idle wealth being hoarded by 21st century Western misers. Without moving to a four-day work week, no Western economy can possibly have enough taxpayers to support even a minimal level of government. Again, this is just simple arithmetic. With more old people to support (by a vast margin) than at any time in our societies' histories, we can't expect to pay out the vast entitlements that pampered baby-boomers expect with far fewer taxpayers than at any time in history. Similarly, our economies are certainly doomed to implode if the despicable "hollowing-out" of our wealth (from income taxation) is not reversed. It is a matter of unequivocal arithmetic that all income taxation systems suck all the wealth out of the pockets of the poor and middle-class, and deposit that wealth into the hoards of the ultra-rich misers. It is also one of the most fundamental principles of economics that economic health is a direct function of the "velocity of money" in our economies. In other words, in any/every capitalist economy, our credit-based "growth" is only sustainable if money is vigorously spent and re-spent as it moves from one hand to the next. | ||||
| Real Estate Spin Continues by Mainstream Media Posted: 27 Dec 2010 05:27 AM PST Courtesy of Greg Hunter's USAWatchdog.com Dear CIGAs, The mainstream media was at it again last week–putting a positive spin on the awful real estate market. The USA Today headline on top of the "Money" section last Thursday read "Optimism for home sales adds up." The story said, "The trend is starting to move in the right direction," says Diane Swonk, chief economist at financial services firm Mesirow Financial. A string of new housing data is building optimism. Existing home sales in November rose 5.6% from October to a seasonally adjusted annual rate of 4.68 million, the National Association of Realtors reported Wednesday. Demand has steadily improved since bottoming in July following the end of the buyers' tax credit." (Click here for the complete USA Today story.) The headline and the beginning of the story would lead you to believe everything is turning around and the worst of the housing meltdown is behind us. The article failed to include the true context of that whopping 5.6% rise in sales. Here's how Marketwatch.com reported the exact same story, "Sales of existing homes rose 5.6% to a seasonally-adjusted annualized rate of 4.68 million, the National Association of Realtors said Wednesday . . . Even so, sales were still 27.9% below prior-year levels and below the 5.26 million in June when a homebuyer tax credit existed." (Click here to read the complete Marketwatch.com story.) Yes, the spin from USA Today left out the fact home sales were still nearly 28% below last year's levels. This is despite the homebuyer tax credit program that doled out up to $8,000 for buying a home. USA Today buried the real headline and that was this little morsel, "Home prices, down almost 30% from their 2006 peak, will fall 5% to 7% more before potentially rebounding later in the year, says Patrick Newport, IHS Global Insight economist. Banks will repossess 1 million U.S. homes next year, on top of 1 million this year, says market researcher RealtyTrac." How are back to back years with millions of "home repossessions" and declining prices of another "5% to 7%" not the lead in a story? What does "Optimism for home sales adds up," mean? Optimism adds up to another million foreclosures and another price decline? This is just another attempt to put lipstick on a pig of a housing market.
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| China Raises Interest Rates to Combat Inflation Posted: 27 Dec 2010 04:50 AM PST Chris did a great job last week, keeping me up to date on what was going on… I thought he described it quite well, with the trading desks cut down to junior traders, and no one wanting to go far out on the limb with positions this close to end-of-the-year position squaring… I truly suspect that will be the case but only magnified to even slower movements and smaller volumes… But that doesn't mean I won't have anything to talk about! The Eurozone periphery country debt crisis still hangs over the euro (EUR) like the Sword of Damocles, which also means that the other non-euro countries of Europe, get some of the hangover from the Eurozone… Countries like Norway, Sweden, Denmark, and even Switzerland, aren't allowed to freely trade on their own fundamentals during times like this… But, in the end, these countries and their currencies will outperform the euro, because fundamentals eventually win out… The precious metals of gold and silver suffered the same fate as the euro last week, with any attempts to recover, being wiped out with the next day's trading… I think the rising yields (I'll talk about this in a minute) in Treasuries are dealing gold and silver a speed bump that they've not had to deal with in the past four years…. Rising yields… But, I think they'll get through it, when traders see that the rising yields are in reaction to rising inflation… Chris left me a note about the commodity currencies being the destination of the money this past week, and a quick look at the currency screens tells me that the Aussie dollar (AUD) is back to parity, the Canadian dollar/loonie (CAD) is heading toward parity again, The Brazilian real (BRL) is sub-1.70 again, so… The commodity currencies are trying to shake off the "holiday slowdown" and kick some sand in the US dollar's face! Here's the rest of what Chris left me… The sovereign debt crisis has been keeping a lid on the euro, and worries about the fiscal condition of the US have been keeping investors away from the dollar. This leaves the Asian currencies, commodity currencies, and emerging markets as the only places that seem to be attractive to investors. I failed to write much about the yen (JPY) last week, but read a couple of articles on Japan this weekend that gave me a few pieces of data to share. The Japanese government decreased their growth forecasts, predicting a 1.5% rise in GDP for 2011 compared to an expected 3.1% growth rate in 2010. The 11% rise in the Japanese yen versus the US dollar is being blamed for the expected slowdown. Japan continues to be an export driven economy, and the higher yen is definitely hurting sales of Japanese automobiles and electronics. The BOJ (Bank of Japan) continues to use QE (quantitative easing) to try and stimulate their economy. And while Western governments have limited their buying to bonds, Japan has expanded their QE program to purchases of real-estate investment trusts and exchange-traded funds in order to bolster stock prices. With bond yields starting to creep up, we will probably see the BOJ become even more aggressive with bond purchases in order to try and force yields lower. I still can't figure out why the Japanese yen has attracted so many investors. The fundamentals certainly don't support a strong currency, and growth prospects continue to be bleak. I know many investors were forced to buy the Japanese yen when they reversed their carry trades, and maybe that is what drove the yen higher. With yield differentials beginning to widen again, we could see another round of carry trades which would be bad news for the Japanese yen. I thank Chris for not only today's note, but for taking the conn on The Pfennig last week, while I was gone… So… Let's see, what else can we talk about today? Oh! China raised their interest rates 25 basis points (0.25%) last night, which we were expecting for a couple of weeks now… I like the fact that the Chinese didn't knee-jerk a rate hike two weeks ago, and I think the currency traders, at least the ones that are still around this week, like that too… Like I said above, the Aussie dollar is back to parity with the US dollar, and that wouldn't have happened if China had knee-jerked a rate hike two weeks ago… The Chinese believe that they are ahead of their rising inflation… I say… "Hey, if they say so"! The 10-year US Treasury continued to rise last week and is now at 3.45%… Remember that on just November 10th, this bond's yield was 2.63%… (Remember that when a bond's yield rises, the bond's price falls and vice versa when the bond's yield falls)… This move is a full 6-point fall in the price of the bond… If you owned $100,000 par of this bond, your loss right now would be $6,752! … Remember, a couple of weeks ago, when I said that I wasn't sure if this was actually beginning of the end of the Treasury bubble, because we had seen a couple of head-fakes before? Well… I'm becoming more convinced that this is the real deal with every passing day… Even the threat of the Cartel/ Bernank coming in and buying bonds in their effort to keep rates low, isn't holding the selling back… This could get quite ugly, folks… Quite ugly… And while the US Treasuries take it to the chin and mid-section, the price of oil is back above $90 (at $91) and looking as if traders might be targeting $100 oil once again… You know… Food and energy is taken out of the CPI, and people like me put them back in when reporting CPI, because whether the government takes it out and tries to show you that inflation doesn't exist… But, you and I know that it's not just food and energy that's hitting our wealth with inflation right now… I've given you all kinds of examples in recent months… But here's one that hit me the other day… Now, I have a monthly prescription that I've gotten for years…and with the same insurance! Well, three years ago, it was $20 per month, last year it went to $40 per month, and last week when I picked it up it was $60! Now, same prescription, same insurance paying a piece of the bill, and the rise in the price was tremendous! OK… Enough of that! Inflation scares the bejeebers out of me, and I know it's all around me right now… But not according to Big Ben Bernanke! He's still chasing the deflation ghost… I used to have a guy send me emails almost daily, beating me up for just about anything I said, but especially about inflation, as he read the Big Ben Bernanke book on dealing with deflation, and truly believed that deflation was the "thing that would kill us all!" I haven't heard from the guy in quite some time now… Yes, house prices are still deflationary… But that's just one asset. Speaking of rising inflation… I told you a couple of weeks ago that Brazil's inflation was rising and the central bank was dragging its feet with reaction to that rising inflation… Well, Brazilian economists, now join me in pointing to rising inflation in Brazil, which is going to hit 5.9% for 2010, even with a boat-load of rate hikes earlier this year… So, with no further follow up on the rate hikes, I don't see how Brazil is going to deal with inflation in 2011… Come on, Brazilian Central Bank… Get off your duffs! Well… I guess the data cupboard this week will gives us a couple of reports, but there's really not a whole lot in there. Tomorrow, the S&P/CaseShiller Home Price Index for October will print, along with consumer confidence… The "experts" believe that consumer confidence is going to rise this month… I would say that's probably true, but my belief is based on a different kind of consumer confidence… I believe that consumers are "consumed with unemployment" and "consumed with debt" and… I could go on, but you get the point… These consumer confidence surveys must be given to the same Pollyanna, everything-is-seashells-and-balloons people every month! Then there was this… I will be on the radio this Sunday on: on WAAM Talk 1600 a weekly radio show, with Doctor Dave Janda, airing Sunday from 3-5 PM… Doctor Dave Janda has really taken to hosting this radio show each week, and has attracted quite a few "name" guests… I'm just filler… but that's fine with me. I always enjoy talking to Doctor Dave, for he truly understands what the government is doing to our kids' (and grandkids') futures… So… If you're not living in the Ann Arbor area, you can get the streaming broadcast here… And I bet you can guess what I'll be talking about! To recap… The currencies and precious metals are pretty much stuck in a range with only the commodity currencies gaining in traction versus the dollar, in holiday/year-end slow market trading. US Treasury yields are really rising along with the price of oil… (Does anyone think inflation is coming? I do, I do!) And China raised their interest rates by 25 basis points last night, believing they are ahead of their inflation… China Raises Interest Rates to Combat Inflation originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day." More articles from The Daily Reckoning….
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| Rick Rule Very Bullish On Silver For 2011 Posted: 27 Dec 2010 04:48 AM PST The perennial star of the Agora Financial Forum held each year in Vancouver, veteran stock broker Rick Rule came out strongly in defense of silver as a top pick for 2011 in an interview on King World News. Asked whether silver shortages would continue he said: 'I suspect it's true. One of the things that happens at least in the near-term, shortages and the price rises that they cause ironically exacerbate shortages. Meaning that more people are attracted to speculations in silver as the price goes up. The price of course has gone up because of that attraction.
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| Bailed-out banks slip toward failure Posted: 27 Dec 2010 04:41 AM PST Number of Shaky Lenders Rises to 98 as Bad Loans Pile Up; Smaller Institutions Hit Hardest By Michael Rapoport http://online.wsj.com/article/SB1000142405297020356800457604401421979111... Nearly 100 U.S. banks that got bailout funds from the federal government show signs they are in jeopardy of failing. The total, based on an analysis of third-quarter financial results by The Wall Street Journal, is up from 86 in the second quarter, reflecting eroding capital levels, a pileup of bad loans and warnings from regulators. The 98 banks in shaky condition got more than $4.2 billion in infusions from the Treasury Department under the Troubled Asset Relief Program. When TARP was created in the heat of the financial crisis, government officials said it would help only healthy banks. The depth of today's problems for some of the institutions, however, suggests that a number of them were in parlous shape from the beginning. ... Dispatch continues below ... ADVERTISEMENT Prophecy Receives Permit To Mine at Ulaan Ovoo in Mongolia VANCOUVER, British Columbia -- Prophecy Resource Corp. (TSX-V:PCY, OTCQX: PRPCF, Frankfurt: 1P2) announces that on November 9, 2010, it received the final permit to commence mining operations at its Ulaan Ovoo coal project in Mongolia. Prophecy is one of few international mining companies to achieve such a milestone. The mine is production-ready, with a mine opening ceremony scheduled for November 20. Prophecy CEO John Lee said: "I thank the government of Mongolia for the expeditious way this permit was issued. The opening of Ulaan Ovoo is a testament to the industrious and skilled workforce in Mongolia. Prophecy directly and indirectly (through Leighton Asia) employs more than 65 competent Mongolian nationals and four expatriots. The company also reaffirms its commitment to deliver coal to the local Edernet and Darkhan power plants in Mongolia." The Ulaan Ovoo open pit mine is 10 kilometers from the Russian border and within 120km of the Nauski TransSiberian railway station, enabling transportation of coal to Russia and its eastern seaports. Thermal coal prices are trading at two-year highs at Russian seaports due to strong demand from Asian economies. For the complete press release, please visit: http://prophecyresource.com/news_2010_nov11.php Seven TARP recipients have already failed, resulting in more than $2.7 billion in lost TARP funds. Most of the troubled TARP recipients are small, plagued by wayward lending programs from which they might not recover. The median size of the 98 banks was $439 million in assets as of Sept. 30. The median TARP infusion for each was $10 million, federal filings show. "We certainly understand and recognize that some of the smaller institutions are experiencing stress," said David Miller, chief investment officer at the Treasury Department's Office of Financial Stability, which runs TARP. He noted that Congress mandated that banks of all sizes be eligible for TARP, adding that the government's TARP investment as a whole is performing well. Chris Cole, senior regulatory counsel at the Independent Community Bankers of America, a trade group, said small banks are "turning around slowly." Smaller TARP recipients are in worse shape than larger banks because the larger ones got help in addition to TARP, Mr. Cole said. Bank of America Corp. and Citigroup Inc. tapped the Federal Reserve's emergency-liquidity programs frequently during the crisis. The troubled banks identified by the Journal all have either a Tier 1 capital ratio under the "well-capitalized" 6% level; both a total risk-based capital ratio of under the "well-capitalized" 10% threshold and nonperforming loans of over 10% of their portfolio; or a regulatory order requiring the bank to monitor or boost its capital. A Federal Deposit Insurance Corp. spokesman declined to comment on the Journal's analysis, which also calculated that 814 of the nation's 7,760 banks and savings institutions are troubled according to these standards, up from 729 at the end of the second quarter. The FDIC's official list of problem banks, which uses different criteria from the Journal's analysis, includes 860 financial institutions. The banks aren't publicly identified. In October, the Government Accountability Office said 78 banks on the FDIC's troubled-bank list as of June 30 were TARP recipients, up from 47 at the end of 2009. Dozens of TARP banks were "marginal institutions" that were financially weaker than other recipients and should have gotten more scrutiny before receiving taxpayer-funded infusions, the GAO said. In a response to the GAO report, the Treasury Department said it would consider the GAO's recommendations to improve its funding process if it ever has a program similar to TARP again. In comparison, the first eight banks and securities firms receiving TARP got a total of $125 billion. All have repaid the funds Arthur Wilmarth, a George Washington University law professor and expert on banking regulation, said a lot of smaller TARP recipients are burdened with risky commercial-real-estate loans tied up in troubled strip malls and the like, and that makes it hard for them to raise new capital. "A lot of them are in kind of a frozen position," he said. One example of a TARP recipient in deep trouble: closely held Legacy Bank of Milwaukee. The bank had $205 million in assets as of Sept. 30 and got $5.5 million in TARP funds in January 2009. But more than half of Legacy's loans were in commercial real estate, and its nonperforming loans have escalated to 23% of its portfolio. It has posted eight straight quarterly losses, for a total loss of $11.6 million. Last month, the Federal Reserve declared Legacy "significantly undercapitalized," giving the bank until mid-January to either sell itself or raise more capital. José Mantilla, Legacy's president and chief executive, said the bank lends to an underserved, lower-income customer base. During the recession, those customers "have suffered, and they have fallen behind," Mr. Mantilla said. Legacy is working to raise capital, and "we still feel optimistic" about the bank's chances, he said. CommunityOne Bank of Asheboro, N.C., got $51.5 million in TARP funds in February 2009 through parent FNB United Corp. The company has suffered nine straight quarterly losses, sapping its capital. In July, the Office of the Comptroller of the Currency said the bank had engaged in "unsafe or unsound banking practices." R. Larry Campbell, the bank's interim president and chief executive, said CommunityOne is "fully engaged" in efforts to boost its capital. Join GATA here: Yukon Mining Investment e-Conference http://theyukonroom.com/yukon-eblast-static.html Vancouver Resource Investment Conference http://cambridgehouse3.com/conference-details/vancouver-resource-investment-conference-2011/15 Cheviot Asset Management Sound Money Conference Phoenix Investment Conference and Silver Summit Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: Help keep GATA going: GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: http://www.gata.org/node/16 ADVERTISEMENT Sona Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit, Company Press Release, October 27, 2010 VANCOUVER, British Columbia -- Sona Resources Corp. reports on five drillling holes in the third round of assay results from the recently completed drill program at its 100 percent-owned Elizabeth Gold Deposit Property in the Lillooet Mining District of southern British Columbia. Highlights from the diamond drilling include: -- Hole E10-66 intersected 17.4g gold/ton over 1.54 metres. -- Hole E10-67 intersected 96.4g gold/ton over 2.5 metres, including one assay interval of 383g of gold/ton over 0.5 metres. -- Hole E10-69 intersected 85.4g gold/ton over 4.03 metres, including one assay interval of 230g gold/ton over 1 metre. Four drill holes, E10-66 to E10-69, targeted the southwestern end of the Southwest Vein, and three of the holes have expanded the mineralized zone in that direction. The Southwest Vein gold mineralization has now been intersected over a strike length of 325 metres, with the deepest hole drilled less than 200 metres from surface. "The assay results from the Southwest Zone quartz vein continue to be extremely positive," says John P. Thompson, Sona's president and CEO. "We are expanding the Southwest Vein, and this high-grade gold mineralization remains wide open down dip and along strike to the southwest." For the company's full press release, please visit: http://sonaresources.com/_resources/news/SONA_NR19_2010.pdf
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| Indian gold appetite remains strong Posted: 27 Dec 2010 04:38 AM PST Buyers in India are waiting for bigger dips in the price of gold, as the year comes to a close. Since the year 2000, prices have not posted a negative annual return, paving the way for a better season ahead.
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| A Chinese New Year in Currency Wars Posted: 27 Dec 2010 04:26 AM PST Stacy Summary: China and the US are on the currency war battlefield. They’ll both lose in the end, but which of them will lose first? And how many do they take down with them? Is China behind the big silver short? Wen says China home price curbs not well handled Andy Xie: Either the US [...]
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| Either America Or China Will Crash In 2011 Posted: 27 Dec 2010 04:13 AM PST 
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| Posted: 27 Dec 2010 03:54 AM PST The establishment argument against gold comes down to the statement that it is a collectable that earns no yield. Art, rare coins, stamps and gold and silver bullion do not earn a yield. Stocks, bonds and real estate earn yields, so the prudent investor should focus on these assets rather than gold or precious metals. First, let us examine a hole in this argument. Let us look at bonds and other fixed income investments. The best instrument here is T-bills because they are virtually risk-free (not counting the risk from the depreciation of the currency). A study of the yield on T-bills going back to 1933 (which is the beginning of the modern monetary system) shows that the yield paid on T-bills bought at almost any time over the past 75 years has been completely eaten up by the depreciation of the currency.
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| Gold up Rs 20 on global cues, silver falls on reduced offtake Posted: 27 Dec 2010 03:28 AM PST Dec 27 (Times of India) NEW DELHI — Gold rose by Rs 20 to Rs 20,720 per 10 grams in the national capital on Monday on fresh buying by retailers amid firm Asian trends, while silver fell by Rs 50 to Rs 44,850 per kg on reduced industrial offtake. Market analysts said trading sentiment for gold turned bullish, as retail customers increased their holdings for the ongoing marriage season. They said a firming trend in Asian regions, which normally sets prices on the domestic front, further influenced the trading sentiment. [source] also… Indian gold appetite remains strong Analysts maintained that gold would get pounded and the dollar rebound as a consequence. But, on Monday, India's gold demand was moderate…. Traders said firmer trends in the global markets and the underlying appetite for the yellow metal continued to remain strong. … Indian consumers interest for the precious metal has grown by 10 times since the past year, Praful Sonawala, gold and diamond jewellery exporter said. "Take a look at China. Its gold imports have already soared to a record 209 tonnes this year, putting it on track to overtake India as the world's largest consumer," he said. China, already the largest bullion miner, imported more than 209 tonnes of gold during the first 10 months of the year, a five-fold increase from an estimated 45 tonnes last year. This clearly indicates that Beijing has overtaken India as the world's largest consumer of gold. China is also seen to be expanding its gold buying options for domestic buyers. The country's regulatory authority has reportedly given its domestic mutual funds a nod to invest in gold ETFs (electronic traded funds) outside China. The Industrial and Commercial Bank of China has also launched a gold accumulation plan for investors in mainland China. The daily payment scheme is very meagre, paving the way for small investors to invest in gold. According to a report in a Chinese daily, when the People's Bank of China announced the interest rate hike, Xia Bin, an advisor of the People's Bank of China said that China should hold more gold reserves to diversify its forex reserve. [source]
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| The Case For Buying Gold Today Posted: 27 Dec 2010 03:18 AM PST The establishment argument against gold comes down to the statement that it is a collectable that earns no yield. Art, rare coins, stamps and gold and silver bullion do not earn a yield. Stocks, bonds and real estate earn yields, so the prudent investor should focus on these assets rather than gold or precious metals.
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| Gold prices shrug off rate hikes Posted: 27 Dec 2010 03:13 AM PST by Alix Steel Gold for February delivery was adding $1.90 to $1,381.290 an ounce at the Comex division of the New York Mercantile Exchange. The gold price Monday has traded as high as $1,383.60 and as low as $1,373.50. … The greatly talked about and feared event of a rate hike in China happened with little fanfare to gold prices. The People's Bank of China raised the one-year lending rate by 25 basis points to 5.81% on Christmas, the second time in more than two months, to fight inflation. China had raised the amount banks must keep in their reserves six times this year in order to take money out of circulation but November's inflation reading was still 5.1% vs. a year ago. The much more aggressive step of raising key interest rates had been long feared by gold investors. Higher interest rates make it more appealing to keep money in the bank and a higher lending rate makes it less appealing to borrow. Both might hurt consumer demand for gold, despite the fact that China had been actively trying to promote it. … When inflation is high and rates are low negative real interest rates ensue, which is typically a green light for gold prices. Gold becomes attractive when rates are negative because paper money is literally worth less and gold becomes a safer place to preserve wealth. … China wasn't the only country to raise rates this weekend. Russia hiked the overnight deposit rate by 25 basis points to 2.75%, the first time in two years and economists expect that Brazil, another booming emerging market economy, will raise its interest rate in January. … Reaction to China was muted Monday by a blizzard on the East Coast of the U.S. and technical trading. Those traders still in the market will be looking to rebalance their portfolio headed into the new year possibly dumping gold for profits, buying back positions on a pullback or adding gold to show they own it. [source]
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| No Signs of a Gold and Silver Bubble Despite Record Advances in 2010 Posted: 27 Dec 2010 03:12 AM PST History has been peppered with financial bubbles and we’ll get to that, but first, is gold in a bubble? So far it's been the amazing, runaway investment of the past decade. If you'd put your money into gold at the lows about 10 years ago, you'd have made approximately 400% return. That's left pretty much everything else—stocks, China, housing—in the dust, and we don’t mean gold dust.
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| Posted: 27 Dec 2010 03:12 AM PST Rates Rise Amid Ever More Debt Supply On Christmas day, the People's Bank of China hiked their benchmark lending rate by 25bp to 5.81%, the second hike in two-months, as it steps up efforts to quell inflation. As China looks to cool its recovery, countries such as the United States — which have yet to find firm footing for their own nascent recoveries — are understandably concerned about the PBoC's latest move and that is reflected in today's lower bond and stock prices. Part of the logic of the Fed's QE2 program is that money creation used to buy Treasuries and suppress interest rates, devalues the dollar and makes our goods more attractive overseas…in places like China, which has a rapidly growing middle-class. However, when the PBoC acts to curtail Chinese demand with tighter monetary policy, the US is faced with conceding defeat, or increasing QE2 operations in an effort to undermine the PBoC's tightening measures. I'm inclined to think the Fed is not prepared to admit QE2 is a bust just yet; so let the games begin! In speaking about the European debt crisis, China's Commerce Minister Chen said there are no quick fixes, but added, Europe's debt problems cannot be solved by selling more government bonds and setting up a near-$1-trillion rescue fund as the money has to be rapaid at steep interest rates. Minister's Chen's comments could just as easily be applied to the US. It's a simple concept really: You can't extract yourself from a debt crisis by going deeper into debt. Bonds are under pressure in thin holiday trading in Europe, with the yield on benchmark German 10-year bunds near 7-month highs. US yields are higher as well, with the market turning its attention to this week's $99 bln in Treasury supply amid liquidity concerns stemming from holiday market conditions exacerbated by the East Coast blizzard. Ah, but with the Fed buying billions of dollars worth of Treasuries every day, they never truly have to worry about a complete absence of demand. NY Fed traders don't take 'snow-days' when there are POMOs to be done. As the blizzard of paper — both currency and bonds — continues into year-end, those markets become increasingly suspect. How can anyone be expected to make rational investment decisions when governments are issuing paper (bonds) at such an alarming rate and then buying that paper with more paper (currency) it also conjures out of thin air? Sure, you can piggyback that central bank buying and go along for the ride, but when this crazy scheme comes crashing down, your left with nothing more than paper and promises — or perhaps more accurately a bunch of '1s' and '0s' stored on a server somewhere. That ain't the same as having some real wealth — some gold and/or silver — in your possession.
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| If You Haven't Bought Silver Yet, Read This Posted: 27 Dec 2010 03:05 AM PST Chris Weber writes: The last time I was able to identify a period when a precious metals correction was about over happened two years ago... At that time, gold hit a low of $693 and silver $9.63. Since then, gold has risen about 100%, but silver has soared 206%. This is an extraordinary occurrence in just two years.
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| Gold and the Economy : Don’t be fooled Posted: 27 Dec 2010 02:55 AM PST Nichols on Gold
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| Dallas Fed's Texas Manufacturing Index Misses Expectations Of 17, Comes At 12.8, Inventories Surge Posted: 27 Dec 2010 02:41 AM PST
Another diffusion index miss, another snooze in stocks, another surge in inventories, another plunge in new orders, and another harbinger of margin collapse: that's how one can describe today's only relevant economic datapoint. The Dallas Fed's December Texas Manufacturing Index came at 12.8, a big miss from expectations of 17, and a drop from the November print of 13.1. And as always, the really nasty news was behind the headlines: finished goods inventories surged by 11.1 to -1.1 (and a whopping 19.5% in the six month forward index), while materials inventories rose by 3.9%. On the margin collapse side prices paid for raw materials jumped by 9%, wages and benefits increased by 4.4%, while new order volume and growth rate bit plunged by 7.5% and 6.8% respectively. We expect the futures to go green imminently on this piece of economic data which no computer gives a rat's ass about. Index detail:
From the report: Texas factory activity increased in December, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, was positive for the fourth consecutive month. Other indicators of current activity also remained positive, signaling continued growth in manufacturing. The shipments index held steady at a reading of 8, and the capacity utilization index rose from 10 to 15, with 29 percent of manufacturers reporting an increase. The new orders index declined in December but stayed in positive territory, with more than three-fourths of firms noting increased or unchanged order volumes. Measures of general business conditions remained positive in December. The general business activity index came in at 13, with nearly a quarter of respondents noting improved activity. The company outlook index edged down to 15, although the share of manufacturers who said their outlook improved rose to its highest level since May. Labor market indicators improved notably this month. The employment index rose from 6 in November to 15 in December, reaching its highest level since early 2007. Twenty-four percent of firms reported hiring new workers, compared with 9 percent reporting layoffs. Hours worked increased again this month, and the wages and benefits index rose from 5 to 10. Prices climbed again in December. Input costs remained on an upward trend, with the raw materials price index rising from 35 to 44. Forty-six percent of manufacturers saw an increase in prices paid for raw materials, compared with only 2 percent who saw a decrease. Finished goods prices rose for the second month in a row, although the great majority of respondents continued to note no change. More than half of respondents anticipate further increases in raw materials prices over the next six months, while 37 percent expect higher finished goods prices. Manufacturers’ six-month outlook continued to improve. The future indexes for production and shipments edged up further; more than half of respondents expect increases in these measures in coming months. The future new orders index rose to its highest level in four years, with all firms anticipating either increased or stable order volumes. The future general business activity index advanced from 26 to 37, and the future company outlook index rose to 38, with 94 percent of firms anticipating similar or improved conditions six months from now. The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity. Data were collected Dec. 14–21, and 96 Texas manufacturers responded to the survey. Firms are asked whether output, employment, orders, prices and other indicators increased, decreased or remained unchanged over the previous month. Survey responses are used to calculate an index for each indicator. Each index is calculated by subtracting the percentage of respondents reporting a decrease from the percentage reporting an increase. When the share of firms reporting an increase exceeds the share reporting a decrease, the index will be greater than zero, suggesting the indicator has increased over the prior month. If the share of firms reporting a decrease exceeds the share reporting an increase, the index will be below zero, suggesting the indicator has decreased over the prior month. An index will be zero when the number of firms reporting an increase is equal to the number of firms reporting a decrease.
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| Dollar Pays Bill for US Military Posted: 27 Dec 2010 02:37 AM PST By Michael Hudson Continue at the Real News Network . . . Solari Report Blog Commentaries The Slow Burn (9 April 08) The Military Holds the Dollar Up (30 July 08)
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On Saturday, the Chinese government announced that the benchmark one-year lending rate will climb 25 basis points while the one-year deposit rate will go up the same amount. In many instances, that would send gold prices lower, but not on Monday. Traders seemed eager to snap up gold even near its high for the year. The demand might have come from another recent announcement from the Chinese government: that average consumers could buy up and accumulate gold bullion in special accounts…
On the other side of the tape, I put up ![[CHIRATES]](http://si.wsj.net/public/resources/images/WO-AD828_CHIRAT_NS_20101226181803.jpg)
The entire GDP of Iran is $331Bn so almost half of that is oil money. If you ever wonder why Iraqi people are pissed off - their GDP is $65Bn and they pump 2.4M barrels a day, which at $90 times 365 days equals $78.8Bn so SOMEONE is getting ripped off in Iraq, don't you think? Even Nigeria gets a better deal than Iraq does with a GDP of $173Bn and 2.2Mbd of oil pumped out daily. We're still short oil - there is no shortage, just hype and speculation that will run its course. The question is, when? 
That's why, in my very humble opinion, anyone who tells you that oil will be over $100 AND the economy will recover - is on crack! The Fed cannot create money fast enough and the Treasury cannot print money fast enough to wallpaper over rising food and fuel costs (which are, of course, not part of the "core" CPI) and give us a consumer-based recovery at the same time. 
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