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• traveling with metals
• Europe Has Its PIGS, America Its CAIN and Un(Abel) – Both Will Be Good For Gold
• U.S. Stock Market Forecast: Tech, Energy, Commodities and Gold Are Top Plays for 2011
• Precious Metals Propaganda Games
• Howard Marks on Gold
• Are the Fed’s Swap Lines Deliberately Meant to Keep the Dollar Weak?
• Gold Rises as UK Finances Deteriorate and IMF Gold Sales Finish
• Correction – IAU Holds Some Gold in London
• Relationship Between Stocks and Metals: Will Silver Decline?
• A Show Stopper
• Ted Butler's latest on the CFTC
• IAU Adds 8.7 Tonnes New Gold – Insiders Buying Vulture Bargains
• Resource guru Holmes shares his favorite metals picks
• Americans are rushing to "poor man's gold"
• Out of control Congress has burdened us with most new laws in 50 years
• Copper explodes to new all-time highs
• Wall Street catfight: Columnist attacks Meredith Whitney's muni bond call
• Serious Problems Ahead for the British Pound
• IMF Completes 403.3 Tonne Gold Sales Program
• De Beers and Anglo hunt offshore gold
• Trading Comments, 22 December 2010 (posted 09h30 CET):
• ECB : no change in Gold assets last week
• Letter to CFTC Commissioner Chilton on trends in Bullion Bank Gold and Silver short positions
• Debt at Every Turn: New Governors Attack the Debt Crisis
• Coal’s Winter of Content
• Municipal Bond Market Crash 2011: Are Dozens Of State And Local Governments About To Default On Their Debts?
• Gold Rises as UK Finances Deteriorate
• Ground Floor Projects at Caza Gold
• Down Argentine Way
• Problems continue at the silver comex/JPmorgan finds allies to hide the silver shorts
• Silver Outperforms Gold – Profit! Silver Underperform Gold – Profit Again!
• Money Creation Home Invasion
• Gold & Dow Liquidity Flows For 2011
• Temporary Zeros
• Changes on the General Stock Market – Will Silver Decline?
• Why Gold is About To Power Higher to Complete a Big Rally
• Gold Seeker Closing Report: Gold and Silver End Slightly Higher
• Doug Kass: Gold Will Plunge 25 Percent in 2011
• Obama Tax Cuts Will Push Investors Further to Gold
• The Holiday Grind Is Here For 10 Days Only – Are You Ready?
• Is Gold Buying in India Slowing Down?

traveling with metals Posted: 22 Dec 2010 06:07 AM PST Know this has been discussed quite a bit...sorry for another dupe thread... but considering the :reddy:holes at the TSA, I want to be careful. I am going to be moving about $500 face of 90% quarters, traveling domestically by air. Wife and I will be traveling together. Obviously, this does not go in checked luggage. I am thinking to split it half and half in between our 2 carry-on bags. Does that sound reasonable? Any problems?

Europe Has Its PIGS, America Its CAIN and Un(Abel) – Both Will Be Good For Gold Posted: 22 Dec 2010 05:40 AM PST In Europe, they were able to come up with a clever moniker, PIGS, to succinctly represent [and name the countries in dire financial straights - Portugal, Iceland, Ireland, Greece and Spain] the most boorish animals on the farm, and [I have taken it upon myself to call the U.S. state budget crises] the story of CAIN (California, Arizona, Alaska, Illinois, New York and New Jersey), the seven most rotten pillars of our union, and (Un)Abel, the country as a whole, which is (Un)Abel, i.e. unable, to do anything about the impending crises. Given the current political climate and implicit anti-bailout mandate of the new Congress, the Federal government might be powerless to do anything but accept painful state defaults. Before we know it, we could all be ancestors of evil... 2011 could be the year that CAIN starts to face some serious trouble, and may need some serious help to avoid killing his brother (Un)Abel! Words: 1529

U.S. Stock Market Forecast: Tech, Energy, Commodities and Gold Are Top Plays for 2011 Posted: 22 Dec 2010 05:03 AM PST Shah Gilani submits: The outlook for the U.S. stock market in the New Year figures to be an exasperating mixture of promise and peril. Positive momentum is building going into 2011, but so are dangerous bubbles. The high-tech, energy, materials and commodities sectors will be hot in the New Year. And the U.S. stock market will get an added boost from the fact that U.S. Treasuries, municipal bonds (munis) and euro-based investments will not. Complete Story »

Precious Metals Propaganda Games Posted: 22 Dec 2010 04:18 AM PST It's never a waste of time to read the views of Canadian gold icon, John Embry, and a recent article he wrote is no exception. Much of his thoughts on how and why the precious metals markets are so strong are based upon "fundamentals" with which we're already familiar. There are no longer any surprises here. In this instance, I was more interested in what Embry had to say about the other side of the gold market: the anti-gold cabal of bankers who have sought to suppress this market ever since they duped Western leaders (and most notably the U.S.) into dumping the gold standard, which allowed them to print infinite amounts of their worthless paper. In this respect, I will beg to differ with Mr. Embry, somewhat. He observed that the U.S. propaganda machine had (finally) cut back on its plethora of "gold bubble" articles, and he had now been reading that the "reason" why the precious metals market won't keep going higher is because these markets are (supposedly) "overbought". In fact, the propagandists haven't stopped one form of gold-bashing in favor of another. Rather, what has been exposed is one of the innate weaknesses in propaganda: once a saturation level of propaganda has already been reached, additional attempts at brainwashing will have a steadily diminishing impact – eventually numbing readers/listeners to the point where the propaganda is simply tuned-out. This is especially true with respect to the precious metals market, where during this ten year bull market, investors have been exposed to ten, relentless years of anti-gold propaganda every bit of which was proven false. In a scenario such as this, the brainwashing of the propagandists is especially susceptible to over-use, since even the most dim-witted sheep will begin to notice when someone has been consistently wrong about a subject for ten years. This is why we see sentiment in the general public toward precious metals slowly improving: the lies and "warnings" about the precious metals market are increasingly less able to deter the general public. Thus, when Embry talks about the propagandists "stopping" the gold-bubble nonsense, and "starting" the overbought-babble, what is really taking place is merely the alternation between one avenue of propaganda and another – so that the sheep don't become totally immune to all of the propaganda, permanently. The other aspect of Embry's article which I found particularly thought-provoking was his observations about how the propaganda-machine is desperate for some "respectable voices" to utter their propaganda – as this tends to counter the repetition-effect I described previously. Here, at the top of the list is  sleazy George "Bubbles" Soros, who is seen to repeatedly use his mouth to utter the words "gold bubble" (over and over and over), while he's busily buying gold with both hands. Apparently even billionaires are not above the old "bash and buy". Embry chose to focus upon the propaganda uttered by Warren Buffet, and his lieutenant, Charles Munger. I won't bother detailing their rhetoric, after Embry has already done so. Suffice it to say that the reason of both for their "I hate gold" attitudes is the tired, old line about gold having no intrinsic value. You can't eat it, you can't pour it into the tank of your car and drive around – so it has no value. John Embry refers to this as "sophistry of the worst sort", and I fully echo that remark. Intelligent precious metals investors have known for years what is seemingly beyond the grasp of Buffett and Munger: that gold (and silver) is the best "money" ever devised by our species. Here we can expand on the empty "logic" of Buffett and Munger. Without "money", a convenient medium of exchange for commerce, we are left with no alternative except "barter". Does any rational adult actually think that our modern economy could survive a week without a legitimate currency to use in all of our transactions?

Howard Marks on Gold Posted: 22 Dec 2010 03:57 AM PST Market Folly submits: Howard Marks of Oaktree Capital has been on a writing spree as of late. Yesterday we posted Howard Marks' thoughts on the credit cycle. Today, we turn our attention to his memo, "All That Glitters" which focuses on everyone's favorite precious metal: gold. Reasons to Own Gold Complete Story »

Are the Fed’s Swap Lines Deliberately Meant to Keep the Dollar Weak? Posted: 22 Dec 2010 01:47 AM PST Central banks provided two pieces of market supportive news in the past 48 hours. China announced its intent to buy Portuguese bonds, and the Federal Reserve extended its "swap lines" deep into 2011. China Ready to Buy Up to $6.6B in Portugal Debt (Reuters) Fed Extends USD Swaps With Major Central Banks (Reuters) Via Reuters, the swap lines, at first set to expire next month, will now run til August 1st. The lines were first opened to the ECB and SNB — the European and Swiss central banks respectively — and were later expanded to multiple additional central banks, including those of Sweden, Mexico and Brazil. The August extension applies to the Fed's counterparts in Europe, Japan, Canada, England and Switzerland. So why is the Fed doing this? Straight from the horse's mouth (official Fed statement): "[The swap lines] are designed to improve liquidity conditions in global money markets and to minimize the risk that strains abroad could spread to U.S. markets." That's the official justification. A between the lines reading is slightly more self serving: The Fed wants to keep the dollar weak — or otherwise keep it from rising too much. Above we have a monthly chart of the US dollar index. As you can see, from 2002 onward the $USD had been declining — a trend perceived as good for everyone. As Americans gorged on "stuff," the vendor finance arrangements put in place by China and Middle East oil exporters allowed the party to continue unabated. Long term interest rates were kept low via the recycling of $USD back into treasury bonds, in turn keeping mortgage rates low and perpetuating the housing bubble. Meanwhile many emerging markets enjoyed rapid growth — courtesy of a binging U.S. consumer — as the leverage and credit boom radiated outward. But then, as things fell apart in 2008, the $USD saw a dramatic surge. A wave of panic swept the globe as the supernova debt boom collapsed. Trillions of dollars in credit flows evaporated, and American investors effectively "short" dollars (via overseas investments and 'carry trade" type arrangements) had to cover with a vengeance. As the chart shows, the $USD saw another upward surge in early 2010, first on China fears, and then eurozone sovereign debt fears as the Greek situation ignited. (This is when the Economist's Acropolis Now cover was published — a keepsake to be sure.) So, as you can guess, one of the many fears keeping Ben Bernanke awake at night is the possibility of a surging $USD. Not only is the dollar a "risk-off" fulcrum, balanced against "risk on" for all other paper asset classes, a rising buck is also a political headache for the Obama White House and other American interests seeking a U.S. export revival. So, back to those swap lines. Why and how would they be an attempt to keep the dollar down? Well, first consider what a swap line actually is. From the Federal Reserve website: In general, these swaps involve two transactions. When a foreign central bank draws on its swap line with the Federal Reserve, the foreign central bank sells a specified amount of its currency to the Federal Reserve in exchange for dollars at the prevailing market exchange rate. The Federal Reserve holds the foreign currency in an account at the foreign central bank. The dollars that the Federal Reserve provides are deposited in an account that the foreign central bank maintains at the Federal Reserve Bank of New York. At the same time, the Federal Reserve and the foreign central bank enter into a binding agreement for a second transaction that obligates the foreign central bank to buy back its currency on a specified future date at the same exchange rate. The second transaction unwinds the first. At the conclusion of the second transaction, the foreign central bank pays interest, at a market-based rate, to the Federal Reserve. Dollar liquidity swaps have maturities ranging from overnight to three months. In layman's terms, we can think of a swap line as a standing guarantee of  U.S. dollar liquidity. If you (as a central banker) ever need greenbacks in a pinch, you know you'll be able to procure them instantly, no matter how "tight" the open market may be. This standing guarantee reduces the odds of another violent $USD spike of the type we saw in late 2008. In a way, one can think of it as "short squeeze insurance." The many players around the world who are "short" U.S. dollars — by way of lending arrangements denominated in dollars and so on — have spiking dollar risk implicit in their positioning. What the Fed has essentially said to these players is, "It's okay for you to keep borrowing in dollars, because in the event of a new liquidity crisis we will create accessible dollars for you (via the channel of your local CB)." Consider, too, the conditions under which all these central banks would be pushed to draw on their $USD swap lines at the same time. By definition, these would be crisis conditions in which availability of $USD was scarce relative to near-term surging demand. In such conditions, the Federal Reserve would have to create more dollars to meet existing outsized demand (as crisis-driven preferences for holding $USD, or covering short $USD obligations, would create a shortage). So the liquidity promise is also a sort of printing-press promise: In the event of another crisis, the Fed will be on its toes and ready to "print" however much fresh $USD the world needs. The really neat trick is, simply in making this promise, the Federal Reserve can achieve its aim of keeping the $USD down. This effect is produced even without the Fed doing anything. How? Simple: The Fed has promised $USD liquidity will be there "if needed." This promise can be "taken to the bank" — literally. Commercial institutions can thus rest easier with short-dollar liabilities. To wit, whether one is a bank, a commercial operator, or a speculator, it's very tempting to borrow in $USD these days — to leverage the greenback via some form of debt arrangement and participate in the "carry trade." But this move could also be considered risky, due to the possibility of carry trade reversal and crisis-driven supply / demand crunch… and so, with the extension of the Fed swap lines, Uncle Ben has stepped up and said "Hey, no problem, carry trade away — we'll be there in a tight spot (via printing press) to provide liquidity for you." And so the dollar stays suppressed, and everyone stays happy (apart from those pesky "non-core" inflation watchers, and anyone else feeling a cost of living crunch)…

Gold Rises as UK Finances Deteriorate and IMF Gold Sales Finish Posted: 22 Dec 2010 01:17 AM PST gold.ie

Correction – IAU Holds Some Gold in London Posted: 22 Dec 2010 01:08 AM PST In the previous blog and Vulture post we were erred regarding the metal holdings for IAU, which we had thought were ALL in the COMEX warehouses. Not so according to IAU's bar list published by the trust. Click here for the bar list or copy and paste the following in your browser: http://us.ishares.com/content/stream.jsp?url=/content/en_us/repository/resource/gold_bar_list.pdf&imeType=application/pdf We apologize for the misunderstanding on that, however we remain curious as to why the reporting on the IAU metal holdings at the COMEX are "delayed." See the COMEX inventory report at this link: http://www.cmegroup.com/trading/energy/nymex-daily-reports.html

Relationship Between Stocks and Metals: Will Silver Decline? Posted: 22 Dec 2010 01:00 AM PST

A Show Stopper Posted: 22 Dec 2010 12:25 AM PST For all those who watched the historic CFTC meeting December 16th on position limits, no, your eyes didn't deceive you – the meeting ended strangely and abruptly. No vote was taken on the staff's proposal and you should be scratching your head at what actually transpired. As strange as the sudden adjournment to the most important meeting in CFTC history might be, there was a wealth of knowledge and confirmation to be drawn from it. This meeting was perhaps the most significant and positive development towards ending the long-term silver manipulation that I have witnessed in my 25 year involvement. Silver investors should come away from this meeting with a strong conviction of how things will turn out.

Ted Butler's latest on the CFTC Posted: 21 Dec 2010 11:58 PM PST Ted Butler Commentary December 21, 2010 A Show Stopper For all those who watched the historic CFTC meeting December 16th on position limits, no, your eyes didn't deceive you – the meeting ended strangely and abruptly. No vote was taken on the staff's proposal and you should be scratching your head at what actually transpired. As strange as the sudden adjournment to the most important meeting in CFTC history might be, there was a wealth of knowledge and confirmation to be drawn from it. This meeting was perhaps the most significant and positive development towards ending the long-term silver manipulation that I have witnessed in my 25 year involvement. Silver investors should come away from this meeting with a strong conviction of how things will turn out. I know there are deep differences between the five commissioners on the matter of position limits, even though such limits are now mandated by law. I know that the CME Group (COMEX and NYMEX) is pulling out all stops to prevent, delay and water down any position limits that may be enacted. But I also know that there is one glaring truth that accounts for the dissention and turmoil revealed at the meeting. This is all about silver and its manipulation. If it weren't for silver, this meeting and the issue of position limits would be a non-event. There is no current concentration problem in any other commodity. Because of the fact that silver has been manipulated in price and position limits would terminate that manipulation, the CME and JPMorgan want to derail any move towards these limits. Keep this fact in mind, as it is the central issue. When it comes to market regulation and silver the CME Group does not do the right thing. They are only interested in their bottom line and the devil with everyone else. However, the CME is designated as a self-regulatory organization by law, which means they have special responsibilities as a front line defense against market wrongdoing. This is an issue in which the public has spoken loud and clear and it is downright un-American to solicit public opinion and then to ignore that opinion. My sense is that the CFTC is trying to be as accommodative to the CME exchange as possible, in order to ease the way into new position limits, as required by law. Instead, the CME turned increasingly hostile to any change in position limits. My advice to the CFTC is to stop trying to reason with the CME and take the proper measures to end the silver crime in progress. Commissioner Bart Chilton, much to his credit, made a number of recent statements that gave me great encouragement. He has confirmed that a single entity controlled 35% to 40% of the short side of COMEX silver earlier this year. (He didn't identify JPMorgan as the entity, because he is precluded by law from doing so.) Chilton also indicated that he thought a 1500 contract limit for silver to be reasonable. But it was something that Chilton said in a speech two days before the meeting that rocked me. In essence, Chilton proposed that any time a trader hits the proposed position limit and is holding a hedge exemption from position limits the agency would closely review the details of the underlying swaps that allowed the exemption. Importantly, Chairman Gensler ratified Chilton's approach at the hearing and directed the staff to initiate this approach immediately. The chairman's exact words were, "Make it so." Why was I rocked? Because I thought the agency was already doing this. Then it dawned on me that verifying whether the OTC swaps position that allowed JPMorgan to hold the obscenely concentrated COMEX short position was handled by the CME as part of their role as a SRO (self-regulatory organization). The CFTC never got to examine the details of what swaps justified JPMorgan's concentrated silver short position, just the CME. In an instant, I knew how the silver scam was allowed to continue this long. The exchange decided what OTC swaps were legitimate, not the CFTC. But with Chilton's Position Points approach, it would now be the agency doing the verification. Talk about a game changer. I have to speculate on what I think the CFTC will find when they examine JPMorgan's swap book. Mine is not a new speculation, but one I had written about before in many article, starting more than 7 years ago. When the CFTC opens JPMorgan's swap book, I believe they will find it littered with Chinese names. Here's an article from a year ago that also contains links to earlier articles on this theme http://news.silverseek.com/TedButler/1252075929.php JPMorgan must have some reason to justify the big concentrated COMEX silver short position. If they claim that they are long silver OTC swap positions as an offset to their COMEX short position, it becomes critical that the CFTC inquire who is holding the short side of the OTC silver swaps. My belief is that it will be Chinese interests on the short side of the swap. Such a finding will lead the CFTC to conclude that it is really China holding the concentrated silver short position and they are using JPMorgan and the CME Group as their dupes to carry out the silver manipulation. This wouldn't absolve JPMorgan or the CME for enabling China to manipulate silver, but actually make it worse. A foreign super power and clear rival to US national interests being aided and abetted in the serious market crime of manipulation in the price of a vital world commodity by leading US financial firms is almost too outrageous to contemplate. Yet that is exactly what I think has occurred. I did not pick interests in China out of the thin air. As the largest producer of silver in the world (mining plus refining), it would sound plausible for them to be short (but never to the extent it has reached on their surrogate COMEX position held by JPM). More importantly, rogue traders from China have had a regular habit of betting on the short side of world commodities that their country consumes with a ravenous appetite, although that would not appear to make sense. Two examples that come to mind are disastrous bets on the short side of oil and copper five or six years ago. It made no sense for Chinese traders to have bet the short side big in oil or copper. Yet it happened. Just because it makes no sense for someone from China to have bet big on the short side of silver doesn't mean it couldn't happen. Let's face it – someone is and has been short on silver, all the way up from the single digits. It will go down as the single dumbest trade in history when all is said and done, taking the title away from Barrick Gold and Anglo Ashanti for their dumb short gold trades. If my premise is correct, not only has the CME looked the other way when examining the offsetting OTC swaps of JPMorgan, it means that they also looked the other way when Bear Stearns held the big concentrated COMEX silver short position and AIG Trading before them. In other words, the CME got into a long term habit of looking the other way. It also explains why they are so opposed to any legitimate reform of the concentrated silver short position. What makes manipulation the most serious market crime possible is because it distorts the law of supply and demand and misallocates capital resources. Were it not for the long-term silver manipulation and the distortion of the price, we would not be on the verge of a physical shortage. This article was released to subscribers on December 17. For subscription information please go to www.butlerresearch.com http://www.investmentrarities.com/te...12-21-10.shtml

IAU Adds 8.7 Tonnes New Gold – Insiders Buying Vulture Bargains Posted: 21 Dec 2010 11:31 PM PST We note that metal holdings for SPDR Gold Shares (GLD) rose by about 9 tonnes last week, to 1,298.94 tonnes, but metal holdings have been more or less moving sideways in GLD since June.

Resource guru Holmes shares his favorite metals picks Posted: 21 Dec 2010 11:27 PM PST From Frank Holmes of U.S. Global Investors: I recently sat down with my friend Bob Lenzner, who hosts his own show "StreetTalk" on the Forbes Video Network. I always enjoy my conversations with Bob because he asks such intelligent questions and is passionate about our key areas like China, commodities, and gold. We sat down for a lengthy discussion during which I shared my top picks for several precious metals. I first discussed what I like to call the "Love Trade" for gold. While many think of fear as a key driver of gold prices, I like to focus on the growing number of people around the world buying gold out of love. We've seen exploding demand for gold and gold jewelry in... Read full article (with video)... More on commodities: How you'll know when the gold market tops Move over silver: Another precious metal is breaking out Marc Faber: The three commodity investments you must buy now

Americans are rushing to "poor man's gold" Posted: 21 Dec 2010 11:26 PM PST From Kitco News: Demand for silver coins is extremely strong, according to figures released by the U.S. Mint. November silver sales figures showed sales at 4.260 million ounces sold; December silver coin sales have already hit 1.747 million ounces. Cumulative silver sales totals for the year-end of 2010 were calculated at 34.637 million ounces for silver coins. By comparison, gold coin sales for the same time period lagged behind, yearly totals for gold coin sales accounted for 1.212 million ounces sold. Barclays Capital described U.S. Mint silver coin sales as "exceptionally strong" for December; gold coin sales were... Read full article... More on silver: Forget silver bullion... buy these instead An incredible BULLISH development for silver Resource guru Sprott: Silver will be this decade's gold

Out of control Congress has burdened us with most new laws in 50 years Posted: 21 Dec 2010 11:24 PM PST From Bloomberg: However history judges the 535 men and women in the U.S. House of Representatives and Senate the past two years, one thing is certain: The 111th Congress made more law affecting more Americans since the "Great Society" legislation of the 1960s. For the first time since President Theodore Roosevelt began the quest for a national health-care system more than 100 years ago, the Democrat-led House and Senate took the biggest step toward achieving that goal by giving 32 million Americans access to insurance. Congress rewrote the rules for Wall Street in the most comprehensive way since the Great Depression. It spent more than $1.67 trillion to revive an economy on the verge of a depression, including tax cuts for most Americans, jobs for more than 3 million, construction of roads and bridges, and investment in alternative energy; ended an almost two-decade ban against openly gay men and women serving in the military, and is poised today to ratify a nuclear arms reduction treaty with Russia. For all of its ambitious achievement, the 111th Congress, which may adjourn this week, also witnessed a voter-backlash driven by a 9.6-percent unemployment rate that cost Democrats control of the House and diminished their Senate majority. "This is probably the most productive session of Congress since at least the '60s," said Alan Brinkley, a historian at New York's Columbia University. "It's all the more impressive given how polarized the Congress has been." As lawmakers wrap up the session, Wall Street firms such as Goldman Sachs Group Inc., JPMorgan Chase & Co., and Citigroup Inc. are positioned to complete their best two years in revenue, General Motors Co. has emerged from bankruptcy with more than $23 billion repaid to the U.S. Treasury, and American International Group Inc. was able to sell $2 billion of bonds in its first offering since the company's 2008 bailout. Market Performance The S&P 500 Index has gained 38.9 percent since Congress convened in January 2009, the biggest increase for a two-year congressional session since 1997-1998, according to data compiled by Bloomberg. The S&P 500 Index reached 1254.60 yesterday, the Dow Jones Industrial Average 11533.16. Stimulus money created and saved jobs across the country, helping strapped state governments retain their workforces, according to government analyses. President Barack Obama's Council of Economic Advisers said that in Ohio, for instance, the legislation created 122,000 jobs for teachers, police officers, and construction workers. "These policies carried the economy along during a period when the private sector was not engaged,' said Ethan Harris, head of developed-markets economic research in New York at BofA Merrill Lynch Global Research. Election Results The careers of many lawmakers didn't fare so well. Fiscally conservative Tea Party activists channeled their frustration with government spending and debt into political campaigns, most often to the benefit of Republicans challenging Democratic incumbents. In the Nov. 2 elections, Democrats lost 63 House seats, costing their party control of the chamber in next year's Congress. In the Senate, the Democratic majority was shaved by six seats; the party will have 53 votes in next year's session, Republicans 47. "What we did was work, and our reward was, 'Get out of here,'" said Representative Louise Slaughter, a New York Democrat and outgoing chairwoman of the House Rules Committee. While Slaughter won re-election, five of her New York colleagues were among Democrats defeated. Party-line votes on most of the major measures engendered ill will among Republicans and helped stall in the Senate initiatives requiring significant bipartisan support. Blocked legislation included limits on greenhouse-gas emissions that scientists blame for global warming, a bill the House passed in June 2009, a measure offering undocumented immigrants a path to citizenship and the administration's attempts to curb growing income inequality with tax increases for higher earners. Republican Agenda Those are unlikely to be tackled next year, when the House's Republican majority will turn its attention to dismantling the health-care law and cutting domestic government spending by $100 billion. Congress this year was also unable to approve a single one of the 12 annual appropriations bills that fund the government. "I think it was a disaster," said Senator Jeff Sessions, an Alabama Republican, of the congressional session. Senator Richard Durbin of Illinois, the chamber's No. 2 Democratic leader, saw it differently: "This whole two-year session has been dramatic in terms of its achievement and the changes that it's brought about." End of Era The policies embraced by the 111th Congress suggested the end of an era in Washington, as Democrats pushed to reverse three decades of deregulation that began under President Ronald Reagan, say economists. "We've been in a trend toward an attempt to deregulate the economy," said Harris. "You're turning back the clock to an earlier period." The scope of regulations approved since Obama took office has made business hesitant to expand and hire new workers, he said. "Business is overwhelmed," said Harris. Congress scored its first big accomplishment weeks after Obama's inauguration with passage in late February 2009 of a $814 billion stimulus bill. It has created or saved 3.3 million jobs, according to the Congressional Budget Office, while also steering more funds to road construction, broadband technologies, and renewable energy ventures. New Customers The health-care legislation approved last March provided insurers including WellPoint Inc. of Indianapolis and drug- makers such as Pfizer Inc. of New York millions of new customers by requiring that all Americans have health insurance. These industries, as well as medical device-makers, will also face billions of dollars in new fees, and hospitals face a host of new standards designed to help curb soaring costs. The health-care law is facing legal challenges, with the insurance provision a key dispute. An overhaul of the rules governing the financial services industry, approved in July, aims to prevent a repeat of an economic collapse that led to the failures of Lehman Brothers Holdings Inc. and Washington Mutual Inc. It included $4 billion in aid to help thousands of unemployed property owners avoid foreclosure, while the program has fallen short of its goals. Congress also passed laws to help ensure pay equity by enabling women to pursue lawsuits claiming they were underpaid, and to empower the federal Food and Drug Administration to regulate the tobacco industry, which includes restrictions on cigarette marketing. New Justices Additionally, lawmakers expanded state programs for health insurance for children, and they confirmed two Supreme Court justices, Sonia Sotomayor and Elena Kagan. Sotomayor became the first Latino to serve on the court, and the pair increased to three the number of women among the nine justices. Following the November elections in which voters handed Democrats what Obama termed a "shellacking," Congress in a lame-duck session made significant additions to its accomplishment list. Lawmakers approved an $858 billion measure that continues for two years Bush-era tax cuts for all income levels, extends aid for 13 months to the long-term unemployed, provides estate tax relief and cuts by two percentage points worker payroll taxes during 2011. Congress in its last days also voted to repeal the "don't ask, don't tell" ban on military service by openly gay men and women. Yesterday it cleared the biggest food-safety overhaul in more than 70 years, giving the FDA more enforcement power. And the expected Senate ratification today of the new Strategic Arms Reduction Treaty will give Obama a key foreign-policy victory. "What we've been able to do in the lame duck has been not just bipartisan by a fingernail, but bipartisan on a broad basis," said Senator Claire McCaskill, a Missouri Democrat. 'Cherry on Top' From a market perspective, Congress's biggest accomplishment was probably the tax cuts, with the estate tax breaks the "whipped cream, fudge, and cherry on top," said Ethan Siegal, president of the Washington Exchange. Investors responded to the health-care and financial- services measures largely negatively, with health care viewed as "big government gone nuts," he said. Democrats say it will take years before the public recognizes their achievements. Many of the measures that passed were designed to forestall a bleaker recession, an argument that's little comfort to many Americans as the nation's unemployment rate has remained at 9.5 percent or higher for more than a year. "It was hard to tell people that we accomplished anything important when their lives are so difficult," said Representative Henry Waxman, a California Democrat and outgoing chairman of the House Energy and Commerce committee. Changing Direction The Tea Party movement, which worked to elect lawmakers advocating a new era of fiscal authority, has already begun to shift the direction of Congress. Shortly after the election, Senate and House Republicans announced a voluntary ban on earmarks, the funding for pet projects added to bills by lawmakers. The incoming House Republican leadership has promised to turn the focus of the Appropriations Committee from funding government to identifying spending cuts. Many of those efforts will likely fail in the Democrat- controlled Senate. And the party split between the two chambers is likely to bring the record of congressional productivity to an abrupt end in January. "There's just nothing that's going to be accomplished," said Brinkley. "What really is disturbing is that this is a period in which there is a lot to be done." To contact the reporters on this story: Lisa Lerer in Washington at llerer@bloomberg.net; Laura Litvan in Washington at llitvan@bloomberg.net. To contact the editors responsible for this story: Mark Silva at msilva34@bloomberg.net. More government insanity: The next massive bailout will happen here This little-known mistake is pushing America toward collapse The U.S. gov't is dumping money into some of the craziest and most frivolous things imaginable

Copper explodes to new all-time highs Posted: 21 Dec 2010 11:20 PM PST From Bloomberg: Copper may rally to new records as China imports more of the metal in the first quarter and the launch of exchange-traded products locks up physical supplies, said an analyst at Beijing Antaike Information Development Co. "Copper is in an upward trend, so new records can be expected," Yang Changhua, a senior analyst at the metal researcher, said by phone from Beijing today. "The global supply shortage offers fundamental support, and money continues flowing in amid investment demand," said Yang, who has been doing copper research in China for 15 years. The metal reached a record $9,392 a metric ton yesterday on the London Metal Exchange as Chinese imports rebounded and an accident at the world's third-largest copper mine curbed supplies. The International Copper Study Group is expecting a 435,000-ton deficit in the refined metal next year. "The market is very sensitive to positive news right now, showing a typical bull market feature," Everbright Futures Co. said in a research report today. China, the world's largest consumer, shipped in 232,298 tons of refined copper last month, up 37 percent from a one-year low in October, customs data showed. Anglo American Plc and Xstrata Plc's Collahuasi venture in Chile declared force majeure after three workers died when a ship-loader at Patache port collapsed on Dec. 18. The three-month contract has gained 27 percent this year in London, and traded little changed at $9,360 a ton at 1:30 p.m. in Singapore. "Imports in the first quarter, especially in February and March, should be higher than the lows in the past couple of months," Yang said. "Although local prices are now lower than London, imports for financing purposes are rising." ETF Impact The London Stock Exchange launched the world's first exchange-traded products backed by copper, nickel, and tin on Dec. 10, as ETF Securities Ltd. sought to meet demand to invest in industrial metals. JPMorgan Chase & Co. and BlackRock Inc. said in October they planned to introduce copper ETFs next year. "Essentially, to launch an ETF product is to drive up the prices of the underlying physicals," Yang said. "It locks up, or 'consumes', a large amount of existing supplies." Actual consumption growth of copper by China will slow next year to around 8 percent from 11.5 percent this year. Cables and home-appliances, which have been supporting the demand, will continue to play a major role, said Yang. China's spending on a national power grid may account for 50 percent of the increase in its overall copper demand next year, Macquarie Group Ltd. said in a report on Dec. 7. Trade Financing As Beijing tightens liquidity in an attempt to ease the highest inflation in more than two years, borrowing costs are rising. To secure financing, trading firms apply for letters of credit for copper imports. The companies then get a window of about 90 days of almost free credit, and can pay back the funds after they sell the products. Traders can either sell the metal onto the local market if prices catch up with London, or ship it out to nearby LME warehouses if that is profitable, according to Yang. Stockpiles in London Metal Exchange warehouses may rise as traders in China re-route metal previously intended for imports, said Jeremy Goldwyn, who overseas business development in Asia for London-based Sucden Financial Ltd. on Dec. 16. This will probably continue into early February, according to Goldwyn, who has been in the metals business for more than 20 years. – Helen Sun. Editors: Richard Dobson, Ravil Shirodkar. To contact the Bloomberg News staff on this story: Helen Sun in Shanghai at hsun30@bloomberg.net. To contact the editor responsible for this story: Richard Dobson at Rdobson4@bloomberg.net. More on copper: Credit Suisse: $10,000 copper is coming Morgan Stanley: Copper will lead the base metals rally What gold and copper are saying about the stock market

Wall Street catfight: Columnist attacks Meredith Whitney's muni bond call Posted: 21 Dec 2010 11:18 PM PST From Bloomberg: There will be between 50 and 100 "significant" municipal bond defaults in 2011, totaling "hundreds of billions" of dollars. So said banking analyst and new municipal bond expert Meredith Whitney on the "60 Minutes" show on Sunday, in perhaps the boldest, most overreaching call of her career. Hundreds of billions of dollars? The one-year record, set in 2008, is $8.2 billion. You can see how an estimate of "hundreds of billions" would get people's attention. There are a lot of reasons to be doubtful about the health of the municipal market right now, as elucidated by "60 Minutes" correspondent Steve Kroft. Tax revenue is down, public pension and health-care liabilities are up, the federal government's bailout money to the states is running out, and the chances that those funds will be replenished are remote. And yet – hundreds of billions of dollars in default? The number is in the realm of the fabulous. If pressed, I would say that we might see between 100 and 200 municipal defaults next year, maybe totaling in the $5 billion or $10 billion range. Whitney doesn't believe the states will default. That leaves us with local governments and authorities as the ones failing to pay debt service on their bonds, which makes this an even bolder call. Most defaults in the modern era aren't governmental or what we might call municipal at all. The majority are corporate or nonprofit borrowings in the guise of some municipal conduit – nursing homes, housing developments, biofuel refineries – so they could qualify for tax-free financing. Whitney's Vision And those are the ones I think will still comprise the majority of defaults in 2011. This isn't the Whitney scenario. No, she envisions between 50 and 100 – or more – counties, cities, and towns making the choice to renege on their bonded debt. My question is: Why? Why would a governmental entity go out of its way to provoke or alienate its best source of finance? In the old days you might say that bondholders were a distant class of banks and plutocrats mainly centered in the Northeast. That's no longer true, and hasn't been since at least the passage of the Tax Reform Act of 1986, which made bonds less attractive for banks and insurance companies, among other things. Today, a city's bondholders might live in the municipality itself, and almost certainly reside within the state. Debt Service Why would a governmental entity choose to default on its bonds, especially if they make up a relatively small proportion of its costs? "Debt levels for U.S. local and state governments are relatively low, with annual debt service representing a relatively small part of budgets," Fitch Ratings said in a special report in November. Entitled "U.S. State and Local Government Bond Credit Quality: More Sparks Than Fire," the report said, "The tax-supported debt of an average state is equal to just three percent to four percent of personal income, and local debt roughly three percent to five percent of property value. Debt service is generally less than 10 percent of a state or local government's budget, and in many cases much less." The lead analyst on the report was Richard Raphael, who has been covering municipal finance for 31 years. He is not one of the analysts "who got everything wrong in the housing collapse," in the words of correspondent Kroft. In his report, Raphael said, "debt service is a relatively small part of most budgets, so not paying it does not do much to solve fiscal problems (particularly as compared to the costs of such an action)." Headline Grabber What irks me about this Whitney call is that it generalizes about a market that resists generalization, a market that is particular and specific to a remarkable degree. And it doesn't answer the question "Why?" It is instead an assertion aimed at getting attention. Whitney made headlines in 2007 when she predicted Citigroup would lower its dividend and that it was time to sell bank stocks. She made headlines in September when she said she produced a report on 15 states' financial condition, and said the federal government might be called upon to bail them out. Whitney only let clients see the report, so I don't know if her conclusions are supported. She said it was 600 pages long and had taken two years to produce. Perhaps Whitney should stick with bank stocks. (Joe Mysak is a Bloomberg News columnist. The opinions expressed are his own.) To contact the writer of this column: Joe Mysak in New York at jmysakjr@bloomberg.net. To contact the editor responsible for this column: James Greiff at jgreiff@bloomberg.net. More on muni bonds: The next financial crisis that will rock America Porter Stansberry: The next phase of the debt crisis is here Must watch 60 Minutes story: This looming financial crisis rivals the subprime debacle

Serious Problems Ahead for the British Pound Posted: 21 Dec 2010 08:48 PM PST Link:  Serious Problems Ahead for the British Pound Image:  GoldMoney founder, Free Gold Money Report editor, and GATA consultant James Turk writes that Britain may beat the United States to hyperinflation. Turk's commentary is headlined "Serious Problems Ahead for the British Pound".  It's a short read, with a terrific graph that's worth the trip all by itself... and the link is here.

IMF Completes 403.3 Tonne Gold Sales Program Posted: 21 Dec 2010 08:48 PM PST Vietnamese seek safety in gold as currency wobbles.  Writing on the Wall -- Hyperinflation Is Very Near: James Turk. Silver analyst Ted Butler has a must read essay. Serious Problems Ahead for the British Pound: James Turk... and much more. ¤ Yesterday in Gold and Silver With the holiday season almost upon us, price volatility has almost vanished... along with trading volume.  Gold had a bit of a spike that began a few minutes before the New York open in Tuesday's trading... but that bit of positive excitement vanished quickly, as an ever-vigilant not-for-profit seller showed up about an hour later and took back that gain, plus a few dollars more.  The gold price recovered a bit... and closed virtually unchanged from Monday. You could be forgiven if you thought that the silver chart looked like a carbon copy of the gold chart... complete with the price spike/take-down at the same times.  Silver had a price range of almost 60 cents during early morning trading in New York... with a high of $29.59 spot... and a low of $29.01 spot.  The metal finished up a few pennies on the day. These price spikes/take-downs were gold and silver specific... as you'd really have to stretch your imagination to see them in the platinum and palladium charts for Tuesday. The world's reserve currency traded within a 60 point range yesterday... with its low coming at 2:00 a.m.... and it's high about 1:45 p.m.  There was no relationship between the dollar and the gold price that I could see. Gold got smacked just before the equity markets opened yesterday... and both gold and silver hit their nadirs at 9:45 a.m... and that was the low for the gold equities as well.  But try as they might, they were not able to regain their opening highs... and the HUI finished down 0.22%.  As a group, the silver stocks fared much better than their golden brethren. The CME Delivery Report showed that 65 gold and 22 silver contracts were posted for delivery on Thursday. There was a minor withdrawal of 29,287 ounces from the GLD ETF yesterday... and no change reported at SLV. The U.S. Mint had a small sales report as well... adding 25,000 to their silver eagle totals... up to 1,772,000 for the month.  If the mint keeps up with their usual year-end tradition, they should have a really large addition to both gold and silver sales sometime next week. There was a fair amount of in/out activity at the Comex-approved depositories yesterday... and by the time they had parked the forklifts for the day, they had added 312,830 ounces of silver to their collective inventories.  The link to that action is here. Sponsor Advertisement SLAM Exploration Ltd., SXL on TSX-V, is drilling for gold on its wholly owned Reserve Creek gold project in Ontario. All 16 of SLAM's previous holes have hit gold mineralization including a 16.85 m core interval grading 16.45 g/t gold in hole RS1016. This included a bonanza intercept of 274 g/t over 0.5 m in hole RS1016. The previous hole, RS1015 hit similar mineralization ranging up to 107 g/t over 0.3 m within a 12.64 m interval grading 5.48g/t gold. SLAM has traced the Reserve Creek deposit by drilling over a strike length of 350 m and to a depth of 125 m. The deposit is open at depth and along strike. The Company expects to complete the current 2,000 metre drilling program on the Reserve Creek gold project before Christmas. With $4M in the bank, the company intends to expand this program and sustain drilling activity through much of 2011. The Company is also drilling at Silverjack where SLAM hit high grade silver-copper-lead-zinc mineralization early this year. Seventeen holes hit high grade silver and base metals with assays ranging up 19 oz/ton silver, 2.69% copper, 14.60% zinc and 12.8% lead. SLAM is poised for positive gold and silver results and expects to deliver a steady stream of positive news while precious metals continue their upward momentum. Please visit our profile on Casey's website to learn more about the company and request information. ¤ Critical Reads Subscribe Three-Year CRB Chart I'm going to start off the 'critical reads' section the same as I did yesterday... with a couple of graphs.  The first one is the "Three-Year CRB Chart" courtesy of Australian reader Wesley Legrand.  It's obvious that the CRB is still a long way away from its 2008 highs.  Once again, no words of explanation are necessary. Click here to enlarge. View full GSD edition 8 Metals From 2010 Also from 'the land down under' is this graph from Nick Laird over at sharelynx.com.  I've titled it "8 Metals From 2010".  This is another graph that doesn't need any embellishment. Click here to enlarge. View full GSD edition Commodity market concentration starts to worry even Wall Street Journal Today's first item is a GATA release of a Wall Street Journal story that was posted shortly after midnight.  The headline from The Wall Street Journal reads "Trader Holds $3 Billion of Copper in London"... and Chris Powell's headline reads "Commodity market concentration starts to worry even Wall Street Journal"... and the link to this very interesting story that's well worth your time, is here. View full GSD edition Serious Problems Ahead for the British Pound GoldMoney founder, Free Gold Money Report editor, and GATA consultant James Turk writes that Britain may beat the United States to hyperinflation. Turk's commentary is headlined "Serious Problems Ahead for the British Pound".  It's a short read, with a terrific graph that's worth the trip all by itself... and the link is here. View full GSD edition Writing on the Wall -- Hyperinflation Is Very Near James also has a short blog posted over at King World News.  That piece is headlined "Writing on the Wall -- Hyperinflation Is Very Near".  James tells Eric that hyperinflation is near as governments continuing monetizing their debt... and debt holders begin to doubt the value of their assets.  The link is here. View full GSD edition 'Hat Trick' for James Well, it's a 'Hat Trick' for James in this column.  Here's an audio interview with James that was done by Dr. Dave Janda of "Operation Freedom" over the last weekend.  James covers a tremendous amount of ground in this interview... and the link to the mp3 file is here. View full GSD edition Part 2 of the Interview With Jim Rickards And here's "Part 2 of the Interview With Jim Rickards".  Eric King sent me the link a few minutes after midnight.  I ran "Part 1" in this column yesterday, so here's the rest... and it will take about 10 minutes of your time.  The link is here. View full GSD edition De Beers and Anglo hunt offshore gold My last five stories are all gold or silver related.  The first is posted over at the South African website capetimes.co.za and is courtesy of reader 'David in California'.  The headline reads "De Beers and Anglo hunt offshore gold".  One has to wonder why De Beers is suddenly interested in gold exploration... and offshore gold exploration to boot.  The link to the story is here. View full GSD edition IMF completes 403.3 tonne gold sales program Here's a gold story that was sure a surprise to me when I saw it posted as a GATA release yesterday.  It was a Reuters piece headlined "IMF completes 403.3 tonne gold sales program".  I wonder who got the last 100 tonnes or so, because, as the story states... "the IMF has not yet provided details of sales in November or December."  I'll certainly be interested in who got the rest of the IMF gold tranche that they had for sale.  And they're certainly being quiet as church mice about all this, as normally they shout gold sales from the rooftops.  One has to wonder what's going on behind the scenes that we don't know about.  The link to this very short must read story is here. View full GSD edition Built back into monetary system, gold may stay up, Davies tells CNBC Europe Here's a GATA release headlined "Built back into monetary system, gold may stay up, Davies tells CNBC Europe".  The roughly 8-minute video interview is imbedded in the GATA release... and the link to that is here. View full GSD edition Vietnamese seek safety in gold as currency wobbles Here's another gold-related story that I found out about through a GATA release.  This is an AP offering that was filed early yesterday morning from Hanoi... and the he

De Beers and Anglo hunt offshore gold Posted: 21 Dec 2010 08:48 PM PST Link:  De Beers and Anglo hunt offshore gold Image:  My last five stories are all gold or silver related.  The first is posted over at the South African website capetimes.co.za and is courtesy of reader 'David in California'.  The headline reads "De Beers and Anglo hunt offshore gold".  One has to wonder why De Beers is suddenly interested in gold exploration... and offshore gold exploration to boot.  The link to the story is here.

Trading Comments, 22 December 2010 (posted 09h30 CET): Posted: 21 Dec 2010 06:30 PM PST There was another uneventful short-lived dip in gold and silver yesterday, but their prices did not drop as much as the day before. It is one sign that the downside potential is

ECB : no change in Gold assets last week Posted: 21 Dec 2010 05:52 PM PST

Letter to CFTC Commissioner Chilton on trends in Bullion Bank Gold and Silver short positions Posted: 21 Dec 2010 05:00 PM PST Market Force Analysis

Debt at Every Turn: New Governors Attack the Debt Crisis Posted: 21 Dec 2010 12:58 PM PST "The Day of Reckoning has come!" So said New Jersey's new governor-elect. New Jersey is hardly unique. Practically every government in the developed world faces the same problem. National. State. Local. Expenses grew during the boom years. We all know why. Politicians prefer to spend then to save. They buy votes with other people's money. That's why they like programs for poor people. They come cheap. But the votes they buy on credit are even cheaper. Give a job...a handout...free drugs...housing subsidies - and send the bill to the next generation. With declining interest rates and an expanding economy, governments could get away with it. Low interest rates made deficits easy to finance and reduced the cost of refinancing existing debt too. The trend was always unsustainable, even when things were going well. You can't spend more than you can afford forever. Everyone knew that a day of reckoning would come. And guess what...here it is. These new governors are no dopes. They have some room to maneuver. They can blame the problems on their predecessors. They can be heroes, solving them. In cutting spending now, they'll be doing what has to be done. The smart thing to do would be to exaggerate the problems. But in the present case, exaggeration is hardly necessary. The financial problems are so grave, they don't need to be puffed up. Newly-elected governor Jerry Brown in the Golden State is in the same position. Hardly had the votes been counted when Jerry began taking more careful inventory. Naturally, what he found surprised him... He was shocked...SHOCKED...by the seriousness of the fiscal challenge. He pledged to come into the state capital with a broom the size of the Inland Empire...sweeping away unnecessary expenses and cleaning up state finances. The story is the same in practically every Middlesex, village and farm community. States and municipalities spent more than they could afford. They ran up pension obligations. They borrowed for stadia and swimming pools. And now, like Ireland and Greece, they can't keep up with the payments. What are they to do? Default! Yes, but before they do that they need to make a show of trying to be responsible. They need to talk about budget cutting and financial integrity. They will try to cut wages, close libraries, and renegotiate contracts. Some will succeed. Many won't. All we know for sure is that it will be fun to watch. We also know that people who lent money to these governments will wish they hadn't. In the US, as in Europe, there are bound to be debt crises. Cities and states will come to the brink of insolvency. There will be bailout initiatives. Austerity drives. Showdowns with unions. New York City almost went broke in the '70s. The mayor asked the federal government for a bailout. "Drop dead," said President Jerry Ford...or at least that was what was reported in the New York tabloids. The feds said no. New York had to get its own house in order. Of course, it succeeded, thanks in part to a huge boom in the financial industry that began in 1982. Will there be another huge boom in the US? Maybe. But there's a bust to live through first. And in the crises ahead, municipal bonds are almost sure to go down. Beware. And more thoughts... Mr. Ben Bernanke. Mythbuster! "One myth that's out there," he told 60 Minutes, "is that what we're doing is printing money." Ha. Ha. Ha. Can you imagine anything so laughable? So ridiculous? So absurd? And to think that even we, at The Daily Reckoning, believed it. How could we be so credulous? Of course, the Fed is not printing up money. How could we have been so naïve? The days of printing up money are long gone. Now, the Fed doesn't do anything of the sort. Instead, it merely buys US government debt from banks. That's not printing money. Nope. Not at all. Not even close. But wait. How does it pay for the bills, notes and bonds it buys? Oh, well, it certainly doesn't print up money. Instead, it merely credits the banks with the money...electronically. No printing involved. The banks then have money that didn't exist before. The banks are supposed to lend it out. For every dollar they get from the Fed they can lend out 10. That's how it works. So, IF anyone wanted to borrow the money, and IF the Fed had bought, say, $1 trillion worth of US government debt, the banks COULD lend ten times that amount...thus increasing the supply of money in circulation by $10 trillion. Does that sound like printing money to you? Nah... Of course not. Does it sound like it might cause inflation? Well, yes... It would be rather surprising if it didn't. Consumer price inflation is now running at about 1% per year. Why so low? Because, so far, the banks aren't lending. The Fed adds money to the system. But it doesn't get passed along. Why not? Because we're in a Great Correction. The economy is saturated with debt. People are trying to dry out. And no matter how many times the Fed offers them a drink; they're still on the wagon. Of course, if the economy were to go on a binge again, the banks would lend, people would borrow, and all that money the Fed didn't print would suddenly come out of hiding. Consumer prices would go up. Hyperinflation could come quickly. Then what would Mr. Bernanke do? He says he would raise interest rates immediately, should the CPI hit 2%. Well, dear reader, do you believe him? We do. At least as much as we believe he's not printing money. Regards, Bill Bonner. for The Daily Reckoning Australia Similar Posts: USA Has Fives Times As Much Sovereign Debt As All the PIIGS Put Together The $5 Trillion Debt Tsunami The Sovereign Debt Disaster In Europe, Banks Borrow Money and Lend it Back to the Government A Loss is Not a Loss if You Turn Debt into Equity

Coal’s Winter of Content Posted: 21 Dec 2010 12:57 PM PST For all the talk of gold, the fact is that the coal mined each year is worth FOUR times all the gold produced each year. Not to mention that coal is Australia's biggest export earner as well. And as long as everyone believes the world is warming up then you won't hear too often how coal fired power stations produce more power than any other source. Yet despite the discussion around the renaissance in nuclear power, wind-farms, solar energy, and 'cleaner' sources of carbon such as gas, coal still produces more power than all of these combined. More to the point this is increasing. Coal produces 42% of the world's energy Source: Merrill Lynch Commodity Research I'll leave the global warming debate to our good pal, Kris Sayce, over at Money Morning. But right now, the Northern Hemisphere is already in the grips of an arctic winter. London airports are shut, roads are blocked, and it looks like Aunty Mildred won't be making it out for Christmas after all. Ah...shucks. Even though life is so much sweeter down here, ninety percent of the world's population still insists on living in the Northern hemisphere. It's going to take a lot of coal to keep them all snug this winter. Last winter was freezing, and this one is shaping up to be another shocker. What was that about global warming...? After climbing steadily all year, coal prices are really jumping sharply at the moment. This won't ease off until Spring-time comes round. Coal prices jumping as winter sets in around the Northern Hemisphere Source: Bloomberg These winter prices are a nice little kicker for anyone invested in coal stocks. But it is the long-term story that gets me fired up. And it is this long term story that is behind a quarter of the Diggers and Drillers tips being for coal companies.  Readers are now up 52% on average across these three stocks. Now you are probably expecting me to start banging on about China at this point. "Chinese demand is going to increase forever and forever, Blah, blah, blah, blah, blah...." But this time it's all about the other country with more than a billion people. India. India's situation is desperate. Its power-station's coal stores are already dangerously low, and they keep building more power-stations all the time. The country's coal imports need to triple to prevent a serious crisis. Its coal imports are big but are really just taking off NOW. Last year, it got through about 375 million tonnes of thermal coal. The chart below shows this demand is expected to jump by 75% to around 650 million tonnes a year. Indian coal consumption climbing rapidly Source: Citi Research The pace won't slow either. A few weeks ago India's Coal Minister said that the nation's annual coal imports will need to TRIPLE in the next twenty years. Commodity forecasts can be very wrong of course. It's happened before! But say you are building twenty brand-new, thousand-megawatt power-stations. You can be sure as hell you will need fifty million tonnes of coal a year for the next few decades. This predictability makes for much better forecasts. India knows it's going to go compete with China for this coal. This is why it's muscling in to the scrum to buy coal deposits now, before they all get snapped up by someone else. Just last week we saw Indian group, Lanco Infratec, snap up Griffen Coal. Right now it looks like another Indian party has joined the brawl over who gets to buy another coal company which is in fact the first coal company I tipped for Diggers and Drillers, back in March. The price is up 85% since then, but the fun has just started. With higher coal prices, and competition over good coal projects hotting up by the week, I added a third coal company to the mix just two week ago. It's already off to a flying start but has much further to go. Regards, Dr Alex Cowie, Editor of Diggers and Drillers. Similar Posts: General Motors: A Forerunner for What's to Come for the Broader Economy Global Warming Temperatures Falling for the Last 10 Years Uranium: A Carbon-friendly Substitute for Coal How to Sift Winning Resource Stocks from the Washouts A New 'Trade of the Decade'

Municipal Bond Market Crash 2011: Are Dozens Of State And Local Governments About To Default On Their Debts? Posted: 21 Dec 2010 12:36 PM PST In the United States, it is not just the federal government that has a horrific debt problem.  Today, state and local governments across America are collectively deeper in debt than they ever have been before.  In fact, state and local government debt is now sitting at an all-time high of 22 percent of U.S. GDP.  Once upon a time, municipal bonds (used to fund such things as roads, sewer systems and government buildings) were viewed as incredibly safe investments.  They were considered to have virtually no risk.  But now all of that has changed.  Many analysts are now openly speaking of the possibility of a municipal bond market crash in 2011.  The truth is that dozens upon dozens of city and county governments are teetering on the brink of bankruptcy.  Even the debt of some of our biggest state governments, such as Illinois and California, is essentially considered to be "junk" at this point.  There are literally hundreds of governmental financial implosions happening in slow motion from coast to coast, and up to this point not a lot of people in the mainstream media have been talking about it. Fortunately, a recent report on 60 Minutes has brought these issues to light.  If you have not seen it yet, do yourself a favor and click on the video below and spend a few minutes watching it.  It is absolutely stunning. In the piece, one of the people that 60 Minutes interviewed was Meredith Whitney - one of the most respected financial analysts in the United States.  According to Whitney, the municipal bond crisis that we are facing is a massive threat to our financial system.... "It has tentacles as wide as anything I've seen. I think next to housing this is the single most important issue in the United States and certainly the largest threat to the U.S. economy." State and local governments across the United States are facing a complete and total financial nightmare.  The 60 Minutes report posted below does a pretty good job of describing the problem but it doesn't even pretend to come up with any solutions.... Unlike the federal government, state and local governments cannot just ask the Federal Reserve to print up endless amounts of cash.  If state and local governments want to spend more than they bring in, they must borrow it from investors. If the municipal bond market crashes, and investors around the world are no longer willing to hand over gigantic sacks of cash to state and local governments in the United States, then the game is over.  Either state and local governments will have to raise taxes or they will have to start spending within their means. Most Americans have no idea what this would mean.  For decade after decade, state and local governments throughout the nation have been living way, way, way above their means.  If the debt cycle gets cut off, it is going to mean that many local communities around the nation will start degenerating into rotting hellholes nearly overnight. We are already seeing this happen in places such as Detroit, Michigan and Camden, New Jersey but if the municipal bond market totally collapses we are quickly going to have dozens of Detroits and Camdens from coast to coast. Let's take a closer look at some of the state and local governments that are in some of the biggest trouble.... California California is facing a 19 billion dollar budget deficit next year, and incoming governor Jerry Brown is scrambling to find billions more to cut from the California state budget.  At this point, investors are becoming increasingly wary about loaning any more money to the state.  The following quote from Brown about the desperate condition of California state finances is not going to do much to inspire confidence in California's financial situation around the globe.... "We've been living in fantasy land. It is much worse than I thought. I'm shocked." Unfortunately, the economic situation in California continues to degenerate.  For example, 24.3 percent of the residents of El Centro, California are now unemployed.  In fact, the number of people unemployed in the state of California is approximately equivalent to the populations of Nevada, New Hampshire and Vermont combined. The housing market in the state is also a major drag on the economy there. For instance, the average home in Merced, California has declined in value by 63 percent over the past four years. The state of California is swamped with so much debt that there literally appears to be no way out. Arizona The state government of Arizona is so incredibly starved for cash that it actually sold off the state capitol building, the state supreme court building and the legislative chambers.  Now they are leasing those buildings back from the investors that they sold them to. Arizona also recently announced that it has decided to stop paying for many types of organ transplants for people enrolled in its Medicaid program. Illinois Illinois is widely regarded to be in the worst financial condition of all the U.S. states.  At this point, Illinois has approximately $5 billion in outstanding bills that have not been paid. According to 60 Minutes,  the state of Illinois is six months behind on bill payments.  60 Minutes correspondent Steve Croft asked Illinois state Comptroller Dan Hynes how many people and organizations are waiting to be paid by the state, and this is how Hynes responded.... "It's fair to say that there are tens of thousands if not hundreds of thousands of people waiting to be paid by the state." The University of Illinois alone is owed 400 million dollars.  There are approximately two thousand not-for-profit organizations that are collectively owed a billion dollars by the Illinois state government. New Jersey The New Jersey state budget has been slashed by 26 percent, a billion dollars have been cut from education and thousands of teachers have been laid off. But even with all of those cuts, New Jersey is still facing a $10 billion budget deficit next year, and the state has $46 billion in unfunded pension liabilities and $65 billion in unfunded health care liabilities that it is somehow going to have to address in the future. Detroit Detroit Mayor Dave Bing has come up with a new way to save money.  He wants to cut 20 percent of Detroit off from essential social services such as road repairs, police patrols, functioning street lights and garbage collection. Miami One Miami commissioner declared earlier this year that bankruptcy may be the city's only financial hope. Philadelphia, Baltimore and Sacramento Major cities such as Philadelphia, Baltimore and Sacramento have instituted "rolling brownouts" in which various city fire stations are shut down on a rotating basis. Camden The second most dangerous city in the United States - Camden, New Jersey - is about to lay off about half its police in a desperate attempt to save money. Oakland Oakland, California Police Chief Anthony Batts has announced that due to severe budget cuts there are a number of crimes that his department will simply not be able to respond to any longer.  The crimes that the Oakland police will no longer be responding to include grand theft, burglary, car wrecks, identity theft and vandalism. Nassau County, New York In New York, the country of Nassau (one of the wealthiest counties in the state) has a budget deficit that is approaching 350 million dollars. America used to be viewed as the land of great economic progress, but that is no longer the case.  Sadly, all over the United States there are signs that we are actually going backwards as a country. All over the nation, asphalt roads are actually being ground up and are being replaced with gravel because it is cheaper to maintain.  The state of South Dakota has transformed over 100 miles of asphalt road into gravel over the past year, and 38 out of the 83 counties in the state of Michigan have transformed at least some of their asphalt roads into gravel roads. Just think about that - we are actually going back to gravel roads. What's next? But this is what is going to happen all over America if dozens of state and local governments start defaulting and the municipal bond market crashes. In fact, don't look now, but there are signs that a "bloodbath" in the municipal bond market has already begun.  The months of November and December have been incredibly rocky for municipal bonds. The days when U.S. states and cities could borrow seemingly endless amounts of incredibly cheap money are officially over. So where are state and local governments going to get the money that they need? Well, they are going to come and try to get it from you of course.  Over the past two years, 36 of the 50 U.S. states have jacked up taxes or fees. Many local governments are trying to raise funds any way that they can.  For example, from now on if you are caught jaywalking in Los Angeles you will be slapped with a $191 fine. This kind of thing is happening all over America.  Police departments are being turned into revenue raising operations.  Police are so busy writing tickets that they barely have any time to investigate actual crimes anymore. But it simply is not going to be enough.  State and local governments across the U.S. are facing financial holes of legendary proportions. The 60 Minutes report above stated that the combined unfunded pension and health care liabilities of the 50 states is $1 trillion.  Unfortunately, that is an estimate that is probably way too conservative.  In fact, two prominent university professors have calculated that the combined unfunded pension liability for all 50 U.S. states is approximately 3.2 trillion dollars. So if the municipal bond market does crash will the federal government step in and bail everyone out? Well, this upcoming spring the $160 billion in federal "stimulus money" runs out.  At that point there will likely be a huge cry for even more "stimulus money" for state and local governments. Unfortunately, as I wrote about yesterday, the federal government is also flat broke and swimming in an ocean of endless red ink.  Congress could potentially step in and try to bail all the state and local governments out, but in the end it is the American people who are going to have to pay the bill. We are on the verge of a horrific economic collapse which is going to change life in this country as we know it forever.  All of this debt is absolutely going to swamp us.  Our politicians can keep trying to kick the can down the road for as long as they can, but eventually the financial nightmare that so many of us have been dreading is going to overtake us.

Gold Rises as UK Finances Deteriorate Posted: 21 Dec 2010 10:00 AM PST Gold and silver edged higher again in most currencies. Profit taking and book squaring prior to year end have led to lackluster range bound price action. Word that IMF gold sales to central banks are complete saw gold prices rise slightly.

Ground Floor Projects at Caza Gold Posted: 21 Dec 2010 10:00 AM PST Caza Gold Corp. is a new gold resource company focused on acquiring, exploring and developing gold mining properties in Mexico. Currently Caza holds two attractive gold exploration projects.

Down Argentine Way Posted: 21 Dec 2010 10:00 AM PST There are many ominous parallels between Argentina and the U.S. and the question often asked is can America avoid the economic consequences that Argentina suffered from a fascist government combined with government debt and currency collapse? I believe the answer is likely NO! "There are a lot of ways to ruin an economy. Argentina has experimented with most of them. It has devalued its currency, and revalued it. It has pegged it, and then knocked down the peg. It has regulated, controlled,

Problems continue at the silver comex/JPmorgan finds allies to hide the silver shorts Posted: 21 Dec 2010 09:44 AM PST

Silver Outperforms Gold – Profit! Silver Underperform Gold – Profit Again! Posted: 21 Dec 2010 09:10 AM PST Mike Stall Sunshine Profits Contributing Author www.SunshineProfits.com The full version of our analysis (with comments particularly valuable for Precious Metals Traders) is available to our Subscribers. In our earlier essay, we saw how the silver-gold pair is ideal to bet on for mean reversion. We also saw how to make use of the mean reverting properties of any ratio. Continuing on that topic, we will investigate whether mean reversion holds true for the gold-silver ratio in particular. We will examine variables one should watch over when looking at regime changes (points where the mean is set to new values). We will also explore a simplistic trading strategy on the ratio based on some core parameters that determine entry and exit points. It must be noted that this essay is a simplistic approach to pair study. Real life strategies could be more complex. Also, mean reversion is not a winning proposition all the time. With proper stop losses, however, it will be observed that it works out well on the winning side over a number of trades. Where pair trading scores over normal trading is that positions are hedged and market exposure is lesser than single positions. Also, when one realigns portfolios (i.e. using pair trading signals to work in the long term), the question of losses is obsolete – the attempt is to increase returns of the precious metals portfolio and it has been observed that acting on information from the ratio will increase returns significantly (as compared to not acting on it at all). Does the Gold-Silver Ratio Really Revert to Its Mean? A long-term gold-silver ratio chart shows a wide range of 45 to 85. So do gold and silver really revert to their mean? Here the investor has to be aware of the notion of a moving average measure of the mean and use it rather than a fixed one. A Moving average serves the purpose of an average while taking recent history into account. That is, while a 10 year simple average may not be relevant today, a moving average lays emphasis on current market conditions and provides a more tradable average number. Also, the investor must be aware of the phenomenon of regime changes. Regime changes arise from fundamental changes in the components of the ratio (we will see various regimes in a separate study in our next article). However, a visual inspection of the ratio over the past ten years shows visible signs of a sinusoidal move. A long term moving average trendline emphasizes how the ratio oscillates between peaks and troughs. The ratio, when broken down into smaller subsets of time, also shows the same character of mean reversion. This is somewhat analogous to fractal theory – a fractal is a "fragmented geometric shape that can be divided into parts, each of which is an approximate copy of the whole (self similarity)". When we break the 10-year chart into smaller domains of a year (or even smaller intervals), we still observe mean reversion. We have provided a sample chart for the year 2006. The property of mean reversion is observed over any time domain – traders have to define their own frequency of trade and analyze the ratio accordingly. Please take a look below to see how the mean reversion worked in a smaller time frame in 2006. Clearly, two abovefeatured charts are very similar (fractal nature of the markets) and and the gold:silver ratio moves above and below its averages in both cases. Can the situation change, so that betting on the ratio will not play out exactly as expected? Yes, however there is a way to deal with that. Detecting Regime Changes Detecting regime changes is critical to pair traders or even long term investors taking cues from the ratio. Regime changes are critical because it helps to reset any existing model (in terms of trading signals). Because the pair is analyzed on the basis of averages, it is imperative to know if any changes in fundamentals alter the average numbers. One of the most important indicators highlighting a possible regime change is a relative high correlation combined with a wide divergence between a long-term and short-term moving average. A wide divergence shows that there has been a recent tendency of the ratio to move wide apart from the earlier averages. However, a high correlation implies that despite the changing ratio numbers, the relationship between gold and silver is still intact. This means that the current change in ratio numbers is likely to stay intact – a weakening relation evident from lower correlation could imply a likely reversion of the ratio. Our graph uses a 6-month moving average as a long-term measure while a 10-day average is used as a short-term measure. This is not a thumb rule – indicators are chosen keeping the investment horizon in mind (and extensive backtesting for the quant-advanced Investors). We observe at least three points on the graph where the criteria of high correlation and high divergence are met. It is also perhaps interesting to note how the ratio falls into a new 'steady state' following such a regime change. Regime changes are not only graphically or quantitatively detected. One should be on the lookout for fundamental reasons why the ratio should change. For example – setting a silver standard where silver would be used as money, while gold would not be used. In this hypothetical case the demand for silver would soar while the demand for gold would stay at the same level, and thus the gold:silver ratio would decline and most likely not reverse soon after that, as the factor that caused the ratio would not be purely emotional – it would be fundamental and sustainable. Vital Parameters in the Pair Trade Game Because a pair trade is based on the property of mean reversion, the most important parameter in a pair analysis is the average itself. A moving average is most commonly used because it retains more recent information than historic. Exponentially moving average (less popular than the simple moving average) measures can also be setup wherein old historic values continue to impact today's average (with emphasis on older data decaying exponentially), while new data is also weighed in. The time period of the moving average taken will depend on the investment horizon or trading frequency aimed at. For long term investors a 1 year moving average (or an exponential one with more weight on historical data) would be used, while a short-term trader would possibly look at a 10-day average (or an exponential one with significantly more weight on recent data). The other important parameter of interest in pair trading is the entry and exit signals. Generally, these points are where the moving average measure intersects the actual ratio (or a short term moving average that closely follows the actual ratio). Some traders enter when the actual ratio is a certain degree above the mean (i.e. wide divergence), and exit at the mean when it reverts. Some other traders favor entry at the mean and exit when it is diverged sufficiently from the mean again. This is subject to well-tested strategies and there is no single rule that wins. Correlation has to be the third parameter we look at because the entire philosophy of mean reversion is based on the expectation that the pair reverts to means due to the high correlation between the two legs. We have said earlier that when the ratio changes away from the mean drastically without a drop in correlation, it signifies a strength in the new move (hence a new regime). Similarly, a low correlation when the ratio diverges well away from the mean is favorable for mean reversion. Therefore, divergence away from the mean is not the only indicator investors should be looking at, correlation is also to be monitored. We add one more parameter of interest in pair trading – volatility. A higher volatility when the ratio moves away from the average is indicative of an unsteady movement and therefore a signal for the ratio to mean revert and vice versa. Generally, with a good choice of moving average/divergence/correlation, volatility is already accounted for. That is, a wide and sudden fluctuation alone leads to a good divergence (a gradual one will be reflected in the long-term moving average as well) – something that will inevitably lead to higher volatility. A weakening correlation is indicative of volatile moves in the prices of gold and silver. However, it is still a good practice to follow volatility moves of the ratio as well to consider entry and exit points for trades. Like most trades entered while due to a defined trading system, we must also have good choices of stop losses (in case of unexpected moves) and gain realizations (exit) to have a robust pair trading system. We tested a random strategy (in terms of entry exit points) keeping in mind the discussed parameters. Our strategy looked for any crossing of rolling correlation with the ratio (i.e. any point wherein the moving average crosses the ratio triggers a trade signal). Namely, there were 2 cases: 1. The ratio is above the moving average. It then crosses the moving average and moves below it. We enter at this point (based on the expectation that the momentum will continue before it mean reverts again) expecting the ratio to go down further. Therefore, we short gold and long silver. 2. The ratio is below the moving average. It then crosses the moving average and moves above it. We enter at this point (based on the expectation that the momentum will continue before it mean reverts again) expecting the ratio to go up further. Therefore, we long gold and short silver. In short, if the ratio crosses its moving average to the upside (moving above it) then we buy gold and short silver. Because we wanted to have a lower frequency trading horizon, we took a 1-year moving average measure. We also checked for volatility (1–year standard deviation of the ratio should be over 3) and correlation (one year moving correlation is less than 0.85). Profits for the trades would be taken at 25% while the stop loss is 10%. We observed that out of the 15 trades, 10 trades ended in profits (i.e. a 10*25=250% profit overall compared to 5*10=50% losses). The average holding period was 390 calendar days, and the true average return of each trade was about 12% if the whole capital was re-invested each time. By "true return" we mean that one would have increased his/her capital approximately 5.5 times, which is the same outcome if one would increase his/her capital by 12% 15 times in a row (taking compounding into account). Given that losses could be minimized and profits enhanced when using more sophisticated measures of volatility, correlation and moving averages (and also stop loss, profit realization), it is almost established that our stand on pair trading works (at least it did in the past ten years of historical data). As emphasized in our earlier essay, Investors with a long-term fundamental take on the precious metals market should not be primarily interested in pair trades. However, they may still take signals from the ratio and adjust exposure to gold and silver according to expectations and maximize portfolio returns. We strongly suggest Investors and Traders to set aside only a small portion of their capital for speculative positions – including pair trade. The biggest emphasis would be on building a long-term precious metals portfolio. However, please note that Investors can treat the entry and exit signals as indicators to realign their portfolio and improve returns even in the long run. Stay tuned to know the current state of the ratio and a fundamental dissection of the state of affairs (and also historical) in our next essay. We will explore the historical fundamental changes that have dictated the gold:silver ratio in our next article. Based on current fundamentals, we will see how the current state of the ratio signals a possible landmark change in gold-silver dynamics in the coming years and how we can act on the changing regime. Join our free mailing list today and get 7 days of free access to our Premium Service (Premium Updates + unique Charts and Tools). Ensure you do not miss the next essay of the trilogy (this being a follow up of the first essay on gold:silver ratio) where we examine the ratio from a fundamental viewpoint. Thank you for reading. Mike Stall Sunshine Profits Contributing Author www.SunshineProfits.com * * * * * Interested in increasing your profits in the PM sector? Want to know which stocks to buy? Would you like to improve your risk/reward ratio? Sunshine Profits provides professional support for Precious Metals Investors and Traders. Apart from weekly Premium Updates and quick Market Alerts, members of the Sunshine Profits' Premium Service gain access to Charts, Tools and Key Principles sections. Click the following link to find out how these benefits might facilitate your gains. Naturally, you may browse the sample version and easily sign-up for a free weekly trial to see if you like our accuracy – we insist that you check our previous updates for details. All essays, research and information found above represent analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments. By reading Mr. Radomski's or his associates' essays or reports you fully agree that they will not be held responsible or liable for any decisions you may make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Radomski, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Money Creation Home Invasion Posted: 21 Dec 2010 09:00 AM PST Apparently, late last night, from out of the spooky darkness, there was a sound that woke up my wife, and so she woke me up, wanting me to get up and go see what it was, which I figured would probably end up with me confronting some desperate, drug-crazed burglar who will pull out a knife and stab me over and over. So I said, "Wait! I have a better plan! I'll just load up some of these guns with these new, armor-piercing bullets and shoot right through the walls – Blam! Blam! Blam! – thus easily and conveniently 'taking out' the intruders from the warm comfort of our own bed!" Her hasty veto of my plan made me suspicious. "Aha!" I gloated. "You just want me to get killed! Is that it? You want me dead?" My vague suspicions of her treachery were starkly confirmed when she snapped back to me, "Why do you always ask that? At least, with you dead, I wouldn't have to listen to you always being crazy about the Federal Reserve creating so much excess money that the economy will be destroyed by inflation!" With a growing heat went on, "And I won't have to listen to your constant whining about how the Fed is financially and economically killing us with inflation in prices by creating too much money and credit, either!" Before I could gather my wits to respond, she continued, "And I won't have to sit through any more of your constant hysterics that the Fed is willing to destroy us with inflation so that the loathsome Obama administration can deficit-spend us into more un-payable debt, farther and farther, and faster and faster, deeper and deeper into some allegorical cold, dark, dangerous, uncharted depths of crushing oceans of federal debt that already approaches 100% of GDP in terms of cash flow, and which terrifyingly exceeds 5,000% of GDP in terms of accrued liabilities!" Then, her voice rising to a crescendo, she leaned towards me and yelled right in my face, "And you snore, too, making it all worse!" Then she lay back on her pillow with a smug grin on her face, finishing with, "So that would be nice for a change!" Sheepishly, I had to admit that she had a valid point, as someone snoring in your ear all night, every night, is probably the only thing scarier than the ruinous, catastrophic, hellish inflation in consumer prices that will result from the Fed creating so terrifyingly much money, sometimes referred to as "so horribly unbelievably much money," or "so insanely, catastrophically much money," depending on my mood. And this does not even consider the economic nightmare beyond the nightmare of inflation, which is that the new money will be used to buy trillions of dollars' worth of government debt so that the incompetent, over-taxing, over-regulating, suffocating monstrosity that has become the federal government, along with a poisonous, nasty, incestuous spider-web of local and state governments and regulators, can spend it, literally trying to fatten up their tragic citizen victims before the government predators sink their fangs into the businesses and the people, gradually sucking out the life juices – sluuuuuurrrrp! – of the people and the economy so that government spending is now fully half of GDP, and yet borrowing more money to finance spending more money to create more parasites addicted to more government spending, each with their own sets of fangs and perpetually ravenous hungers. Gaahhhhh! We're freaking doomed, and this nightmarish spider thing is really creeping me out, too! Looking for a way to distill all this economics down to something pithy and brief, and that does not involve spiders, so as to make my wife more easily understand the situation, I finally settled on "Shut up!" by way of explanation as to why the inflation in consumer prices that Ben Bernanke and his Federal Reserve are unleashing will destroy us and everything we love, including truth, justice and the American way, and there is nothing that anybody can do about it, including Superman, the government, her loud mouth, me, or some stupid burglar. Undeterred, she persisted that I get up and personally root out any burglars, along with any other intruders, murderers, rapists, kidnappers, escaped mental patients, FBI agents, ghosts, vampires, the undead, space monsters or their pods hiding in our house. When I protested, she taunted me, "What a wuss! Look at the bravery of Ron Paul taking over the chairmanship of the Monetary Policy Subcommittee that oversees the Federal Reserve! He knows that he is a marked man due to his long-professed desire to audit the corrupt Federal Reserve and the despicable banking system, especially since doing so would surely expose decades of slimy governmental corruptions, coercions, extortions, back-stabbing treacheries, poisonous treasons and lies, not to mention outright thefts, frauds and murders!" She smiled condescendingly as she said, "And yet you are such a Big Mogambo Baby (BMB) that you are too scared to even go see if there is one teeny, tiny burglar? Ron Paul would laugh at you, Big Mogambo Baby (BMB)! Hahaha! Big Mogambo Baby! Baby, baby, baby! Hahaha!" Of course, I failed to see either the humor or the connection between, on the one hand, the bravery of Ron Paul, heroically proposing to expose a century's worth of heinous criminalities of earthshaking, confidence-shattering consequence by the Federal Reserve, and, on the other hand, my cowardice, especially since the whole point would have been perfectly moot if I had been allowed to install a carefully-placed series of Claymore mines in the living room as per my original Super Mogambo Plan of Defense (SMPOD), instead of having it all being overruled at the last second by her "typical female" crap about how "a house is not an explosive death trap for intruders," which is something that I certainly had never heard before, and she got all huffy when I politely asked, "And just where in the hell is THAT written? In the Book of Stupid?" Well, we were soon yelling back and forth about who is really the stupid one around here, and any burglar was, by then, long gone. However, Ben Bernanke remains, and the tragedy of our national fate remains because the history of the last 4,500 years of governments and people over-borrowing remains, and the historically-consistent tragic fate of countries abusing a fiat currency remains, and the only thing remaining to do is to accumulate as much gold and silver as you can with your remaining money. And the best part is that buying gold and silver is so obvious, and so easy, that you laugh in merriment, "Whee! This investing stuff is easy!" The Mogambo Guru for The Daily Reckoning Money Creation Home Invasion originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."

Gold & Dow Liquidity Flows For 2011 Posted: 21 Dec 2010 08:51 AM PST Graceland Updates 4am-7am www.gracelandupdates.com www.gracelandjuniors.com Email: stewart@gracelandupdates.com stewart@gracelandjuniors.com Dec 21, 2010 What's in your stocking?  It's four days to Christmas!  Is it a selection of beautifully wrapped gold bars and gold stocks, or is it a toy US dollar photocopier wrapped in a pig's tail? Yesterday was another massive day for your Gold Juniors "Golden Popcorn" cash register machine.  Many juniors metals stocks soared yesterday, while others drifted. Here's a look at the gold stocks big picture. GDX Chart?  No, it's GDX OFF THE CHART ! It's time to get real.  Stop letting amateurs scare of you out of your positions.  The Gold Stock rocket has been launched and it is just like when bullion launched over 1045.  Nobody believed and most missed the whole ride to 1225.  You're not missing the gold stock ride.  Put your gold stock core positions in a vice and put a lock on the vice and throw the key in the garbage.  Thanks.  With Gold Stock, this time the ride goes off the chart while your investor competitors may hit the breadline.  Are You Prepared? I have to label Friday morning (Dec 17) as some sort of selling climax, despite gold being barely down from the recent highs. The level of emotional negativity that occurred Friday morning was identical to that which occurs at significant selling climaxes, and actual capitulation selling in the market was occurring in significant size. Many stayed quiet about their selling, pretending to themselves (and others) that they were simply taking a break for Christmas.  Marking your capitulation to model doesn't change the reality of a booked loss. Most gold analysts and investors have been caught in a vicious emotional trap in the gold markets (one that is turning from emotionally red to financially red) as they top call themselves out of gold, at a period in time that has the highest probability since the start of the bull market of seeing gold stock go vertical in a true parabolic rise. Investors were destroyed in 1979 by top calling themselves out of the gold market based on a huge rise in the US dollar that commenced.  The more the dollar soared, the more they sold and shorted gold.  Total losers. The dollar soared more, and gold stock went parabolic.  My tiny suggestion to you: don't use them as your market heroes.  This time, the "booked loss" for the top callers might be a place on the breadline, not just an obliterated (for life) trading account.  I see investors doing the exact same thing again right now, that they did in 1979. Here's a look at the Dow.  Notice the RSI from 1995 on this key Twenty Year Dow Monthly Chart. The top callers missed all the upside ride, as their coveted RSI went "massively overbought".  They failed to study Dow liquidity flows, and they are failing even worse now in the same way with GOLD liquidity flows.  Gold here and now is about central bank liquidity flows, not some 10 second RSI chart that fell out of a top caller's crackerjack box. The top callers failed to call the real top in the Dow in 1999, and failed again at the 2007 Lehman Top, when Morgan Stanley lit a cigar in the spring of 2007 and said, "Triple Sell Signal".  The banksters then marked a snack pack of Lehman OTC derivatives to market, and Elmer Fudd Public Investor learned a whole new meaning of the term, "Wieny Roast". Almost none of Morgan's own clients have ever listened to Morgan Stanley's epic signals that have an unparalleled record of accuracy in the Dow.  Since 1999, Elmer Fudd Public Investor has been reduced to a pathetic growth with safety puppet, afraid to buy even one share of the Dow.  The Dow is in a massive consolidation, indicating some sort of quasi-hyperinflation is near at hand.  Here's a look at the monster consolidation in play: Dow Monster Consolidation Chart. Forget the Dow.  It's far too late for most in the gold community to break the decades-old obsession with shorting the Dow, an obsession which is best compared to a drug addiction.  So, let's do what is practically necessary to make you money.  Focus on what that Dow consolidation means for Gold Stock.  Your gold stock.  The bare minimum upside target of the Dow's ten year consolidation is: Dow 21,000. That's the bare minimum target based on price consolidation, not time consolidation.  Even if QE succeeded to end the crisis (it's totally failed to do anything but prolong it), the amount of time in the "7000 to 14,000 point Dow box" makes Dow 30,000 the more likely bare minimum upside target. What is the ultimate target for GDX?  To understand the upside, what you need to understand is what the institutional money managers don't understand, which is that the failure of QE opens the door to gold revaluation.  The failure of gold revaluation opens the door to all-out money printing as the stated prime policy of the Fed. Institutional money managers don't want to hear about gold revaluation, because it means the currency and bond markets are in massive trouble.  It means they have to take all their clients' money and put it in the stock market to avoid watching it get hyper-inflated to nothing.  So they want to believe that QE is working.  The banksters are telling them that it is working, but drop occasional hints that there could be minor negative surprises ahead.  If you call mass breadlines a minor negative surprise, I guess you could term the banksters' statements as truthful. QE is not working.  Real estate is still going down, unemployment is still rising, debt is rising, and now rates are starting to rise.  Banks are restricting loan qualifications, not easing them.  That's not economic recovery fuel.  The icing on the QE failure cake is the QE limit numbers that institutions are setting.  They feel QE above these limits could start a hyperinflationary spiral. The problem is that the limits prevent the Govt from devaluing the dollar to the extent needed to effectively default on their debt obligations. With QE effectively dead now as tool to handle any further worsening of the crisis, the central banks will now look to accelerate their gold buy programs to revalue gold higher, and keep it higher.  The point of revaluation is to devalue the amount of debt that is owed by the govt to its citizen creditors. There is no possible way on this earth that I am going to stand before you 4 days before Christmas as gold revaluation gets underway, and top call myself or you, out of your gold items. The central bank buy programs are not about accumulating gold as an asset, like 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.  What if the monthly chart RSI on gold went overbought for the next five years on Gold, like it did the Dow?  What if you sold all your gold now and the central banks re-valued it to $2000 over the Christmas holidays?  Would that be a party?  Maybe you better put that overbought RSI chart back in the cracker jack box that it fell out of and enjoy your Golden Christmas, which is being brought to you by Central Bank Gold Liquidity Flows! Special Offer For Website Readers:  Send me an Email to freereports4@gracelandupdates.com and I'll rush you my free Golden New Year Report!  I'll show you how to use the RSI indicator in bull and bear markets professionally!  Have a great Christmas and thanks to all of you for your business! Thanks st Stewart Thomson Graceland Updates www.gracelandupdates.com Email: stewart@gracelandupdates.com Stewart Thomson / 1276 Lakeview Drive / Oakville, Ontario L6H 2M8 Canada Risks, Disclaimers, Legal Stewart Thomson is no longer an investment advisor. The information provided by Stewart and Graceland Updates is for general information purposes only. Before taking any action on any investment, it is imperative that you consult with multiple properly licensed, experienced and qualifed investment advisors and get numerous opinions before taking any action. Your minimum risk on any investment in the world is: 100% loss of all your money. You may be taking or preparing to take leveraged positions in investments and not know it, exposing yourself to unlimited risks. This is highly concerning if you are an investor in any derivatives products. There is an approx $700 trillion OTC Derivatives Iceberg with a tiny portion written off officially. The bottom line:    Are You Prepared?

Temporary Zeros Posted: 21 Dec 2010 08:43 AM PST Mercenary Links Roundup for Tuesday, Dec 21st (below the jump). 12-21 Tuesday Wall Street Pay Will Be Unequal as Some Receiving No Bonus – NYT As Hiring Falters, More Workers Become Temporary – NYT Demand for Recruiters Picking Up – WSJ.com Women's Pay to Recover Faster Than Men's, BofA Says – Bloomberg In California, Homeowners at Risk Struggle to Find Lawyers – NYT Census shows slowing US growth, brings GOP gains – Yahoo! Finance Screening Air Cargo Is a Struggle in a Far-Flung Industry – NYT China extends help to tackle euro crisis Fed extends program to ease Europe debt crisis – Yahoo! Finance Fed extends USD swaps with major central banks | Reuters Berlin's Lack of Vision: Europe Turns against Germany EU Fails to Grasp Nettle of a Continent in Crisis Citigroup warns of fresh wave of bank failures in Europe A Warning to Portugal as Spain Sells Bonds – NYTimes.com Greece Faces `Heightened' Probability of Debt Rating Downgrade, Fitch Says UK borrowing hits new record as Government spending jumps – Telegraph Abandoned Horses Are Sign of Ireland's Hard Times – NYTimes.com Cuomo Sues Ernst & Young – WSJ.com Ernst & Young: Too big to fail – Fortune Finance West Coast Drenching and Feet of Snow – weather.com Scientists Cite "Atmospheric River" for Near Continuous Rain At Heathrow, Criticism Piles Up as Snow Snarls Continue – WSJ.com Snow Extends European Air Travel Delays as Holiday Nears – Bloomberg Assange Confirms that Bank of America Is the Target of Bank Leak Deutsche Bank Settles Tax Shelter Case for $553 Million – NYTimes.com Bankers around world brace for drop in bonuses: Reuters poll | Reuters Earnings, M&A keep Wall St rally alive | Reuters CFTC names flash crash expert as chief economist | Reuters Bert Dohlmen On Gold And Precious Metals Manipulation | zero hedge Oil Industry Challenge on Biofuels Rejected by Court – Bloomberg Nuclear Pact Clears Senate Hurdle – WSJ.com China's State Grid to Buy Brazilian Power Firms – WSJ.com Bank of Japan Maintains Low Rates – NYTimes.com Cerberus Said to Recoup 90% of Chrysler Investment After Sale Amazon Said to Exceed Kindle Sales Estimates by 60 Percent Odds Skew Against Investors in Bets on Strangers' Lives – WSJ.com The Doctor's Dog Will See You Now – WSJ.com Internet start-ups: Another bubble? | The Economist E-Mail Use Falls as Young Chat and Text – NYTimes.com Tony Bates, Skype's Chief, Eyes New Markets – NYTimes.com Swiss franc gains on Portugal's woes Investors buy into haven of the dollar Loonie may be in 'death grip,' Carney should act: CIBC What I Learned from My Father, the Grifter | Men's Journal Bones at El Sidrón Give Glimpse Into Life of Neanderthals – NYT Hawkins deputies wrangle monkeys at meth lab raid ~

Changes on the General Stock Market – Will Silver Decline? Posted: 21 Dec 2010 08:37 AM PST   This essay is based on the Premium Update posted on December 21st, 2010 The past week has failed to provide clear signals in most markets worldwide. Perhaps the uncertainty of the financial stability of several European countries further compounded by normal holiday and year-end influences have thus far made December a difficult month to read. As we have stated in our previous essay, even though the trend for the USD Index appears to be up, the impact that currencies have on gold, silver and mining stocks is quite unclear. However, this is only the only interesting thing as far as influences on the precious metals market are concerned. A major change could be in the cards regarding the relationship between stocks and precious metals. The situation is therefore complicated by stock market uncertainty as well as the changing relationship they have had with precious metals. While uncertainty looms large over the state of the precious metals market, we analyze a few key indicators to comprehend fundamentals. Namely, gold and the general stock market appear to have a strong positive relationship in the short-term or 30-day column. However, the 10-day column clearly shows a reversal of this relationship from positive to negative. This can also be seen for the relationship between HUI and silver with stocks as well. If you didn't read our previous essays, and the above numbers appear perplexing, here's a short introduction – the greater the number (and more upward and green arrow accompanies it) the more positive influence a given market is likely to have on precious metals. The smaller the number (and more downward and red arrow accompanies it), the more negative influence a given market is likely to have on precious metals. Simply put, there are no sure bets at this time as to how precious metals prices will move in relation to general stock market trends. Much of the lack of clarity across the precious metals sector is related to risk/reward ratios. Sunshine Profits does not favor high risk moves regardless of the profit potential. We believe that speculative capital should be placed in the market when the risk/reward ratio is favorable. The uncertainty of today is clearly visible when comparing the 10-day column with the 30-day column in this week's matrix. It seems that an exact turnaround has taken place in how stocks relate to precious metals. This is quite unusual and increases the risk portion of the normal risk/reward ratio at least for the near-term. So, at this point it might be best to turn directly to the chart of gold (charts courtesy of http://stockcharts.com). The long-term GLD ETF chart provides a closer look at the current position of gold's price with respect to resistance and support levels. It can also be seen that when gold's price declined several weeks ago, it was very quick and was ultimately stopped by the 50-day moving average and its rising support line. History repeats itself to a considerable extent, so if we had a similar alignment of both support levels and price reached them after a sharp decline, with high probability of being correct we could state that the decline is over. However, at this time the 50-day moving average is below the rising support line, and even though broken though the latter it stopped at the former level (50-day MA). Moreover, the decline has not been rapid. Consequently, it is possible at this time that further declines may be seen. Meanwhile, the big hero of the recent rally – silver – appears to have gotten ahead of itself. Of course, a correction in silver's price is healthy for the long-term strength of subsequent rallies. Furthermore, it provides investors an opportunity to add to long positions at lower price levels, long-term Investors should be on a constant lookout for such buying opportunities. On the long-term above chart, some mixed signals are apparent. Silver has indeed held above the rising support level, the red line in our chart, and it remains within the rising trend channel. The latter is illustrated by the two parallel black lines in this week's chart. Conversely, note that silver has not been trading above the November intra-day high in recent days. It is perhaps likely that a decline below previous local bottoms could be seen in the near-term. Should that take place, the 50-day moving average will likely once again provide support. In the short-term chart this week, we see mixed signals one more time. Current price levels are slightly below previous intra-day highs (which is bearish for silver) and slightly above the rising support line (which is bullish). Gold, silver and mining stocks normally tend to move in similar fashions, frequently reaching local tops and local bottoms together. It is important to watch gold and the other precious metals markets when investing in silver as they frequently impact silver's price directly. Summing up, the long-term outlook for the white metal is bullish although the short-term appears unclear and very much mixed at this time – with a slight bearish bias. As the saying goes "when in doubt, stay out". Any speculative positions in silver should be opened only by the most risk-tolerant Traders. To make sure that you are notified once the new features are implemented, and get immediate access to my free thoughts on the market, including information not available publicly, I urge you to sign up for my free e-mail list. Sign up today and you'll also get free, 7-day access to the Premium Sections on my website, including valuable tools and charts dedicated to serious PM Investors and Speculators. It's free and you may unsubscribe at any time. Thank you for reading. Have a great and profitable week! P. Radomski Editor www.SunshineProfits.com * * * * * Interested in increasing your profits in the PM sector? Want to know which stocks to buy? Would you like to improve your risk/reward ratio? Sunshine Profits provides professional support for precious metals Investors and Traders. Apart from weekly Premium Updates and quick Market Alerts, members of the Sunshine Profits' Premium Service gain access to Charts, Tools and Key Principles sections. Click the following link to find out how many benefits this means to you. Naturally, you may browse the sample version and easily sing-up for a free weekly trial to see if the Premium Service meets your expectations. All essays, research and information found above represent analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments. By reading Mr. Radomski's essays or reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Radomski, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Why Gold is About To Power Higher to Complete a Big Rally Posted: 21 Dec 2010 08:07 AM PST Why Gold is About To Power Higher to Complete a Big Rally David Banister- www.MarketTrendForecast.com The gold bull has been moving in very reliable Elliott Wave and Fibonacci patterns for many years now, but once in awhile  the waters get a little murky for sure.  Recently we have seen a fair amount of volatility near year end as position squaring and year end machinations take hold.  With that said, it does appear that Gold should be poised to power higher near term, and I'm looking for a completion to a 5 wave rally that began from about $1,040 per ounce in February of this year. Over the past several weeks, I see a clear Fibonacci trading day relationship on Gold's swings from pivot highs to pivot lows. 8 days of correction, 13 days of rally, 8 days of correction is the recent pattern over the past 5 weeks or so. Below is a chart outlining these crowd behavioral based patterns that I rely on for both my trading service and market forecasting services.  You can see the clear relationships, confirmed by the stochastics indicators at the tops and bottoms as well: Based on the recent patterns, I believe we completed a minor wave 3 from the February bottom at $1424 a little over 5 weeks ago, and had a shallow period of 8 days to complete a wave 4 to $1,330.  Now, we are in the final 5th wave up pattern to complete an entire 5 wave move from February of 2010.  In the near term then, I'm expecting a pretty strong rally from this recent $1365 area to at least $1,480 per ounce, and eventually a good shot at completing the structure at $1525 ranges.  Short term, we should begin a wave 3 up here, followed by a 4th wave correction, and then a final and terminal 5th wave.  Below is a multi- month weekly chart view of where I see us heading and where we've been. Recently, I completed a brief E-book on Behavioral Based investing and trading, and it is free for new subscribers to TMTF or ATP services. If you'd like to stay updated on a more frequent basis, you can subscriber or otherwise sign up for weekly reports at www.MarketTrendForecast.com

Gold Seeker Closing Report: Gold and Silver End Slightly Higher Posted: 21 Dec 2010 07:18 AM PST Gold gained as much as $6.48 to $1391.98 at the open of trade in New York before it fell to see a $4.60 loss at $1380.90 by a little before 10AM EST, but it then rallied back higher for most of the rest of trade and ended near its earlier high with a gain of 0.16%. Silver jumped over 1% to as high as $29.563 before it fell back to as low as $29.005 in midmorning New York trade, but it also rallied back higher for most of the rest of trade and ended near its earlier high with a gain of 0.24%.

Doug Kass: Gold Will Plunge 25 Percent in 2011 Posted: 21 Dec 2010 06:58 AM PST :36_1_25: Doug Kass: Gold Will Plunge 25 Percent in 2011 Tuesday, 21 Dec 2010 08:24 AM Article Font Size By Julie Crawshaw Seabreeze Partners' Doug Kass says gold will be highly volatile in 2011, plunging 25 percent. "I think that gold is going to be one of the worst asset classes of the new year," Kass told CNBC. "It's going to display an unprecedented volatility in 2011." "I think gold plummets more than $250 an ounce in a four-week period sometime in 2011, routinely moves $75 to $100 a day and briefly trades under $1,050 an ounce, ending the year at roughly between $1,100 and $1,200 an ounce." Kass says his view "starts with the observation that gold is a lot like religion." "No one can prove that God exists or that God doesn't exist," says Kass. "It's simple. Either you believe in God or you don't." "Well, that's exactly the way I think it is with gold." Gold bugs, Kass observes believe that gold is in finite supply and is more valuable during inflationary and uncertain times, and gold has been a store of value for thousands of years. However, gold is now viewed as a commodity for all seasons. "Gold has limited industrial value, throws off no income or cash flow and you can't analyze it with very much precision." "It's subject to wide price swings." Kass says he's also concerned that the SPDR Gold Trust (GLD), the largest gold holder in the world, is heavily concentrated in the hands of hedge-fund managers like (John) Paulson. "That's a very slippery slope," says Kass. Bloomberg Business Week reports that gold prices rose on concerns about Europe's debt, with gold for February delivery gaining $6.90 to settle at $1,386.10 an ounce. Read more: Doug Kass: Gold Will Plunge 25 Percent in 2011

Obama Tax Cuts Will Push Investors Further to Gold Posted: 21 Dec 2010 06:44 AM PST   Rosanne Lim Sunshine Profits Contributing Author www.SunshineProfits.com Obama Tax Cuts Will Push Investors Further to Gold The full version of our analysis (with comments particularly valuable for Precious Metals Traders) is available to our Subscribers. Starting January, American workers will start to see changes in their paychecks as the Social Security tax break that was signed into law last Friday takes effect. Workers normally allocate 6.2% of their wages to Social Security on the first $106,800. This will be reduced to 4.2%. The Social Security tax cut is just one part of the package that was passed. Additional measures include extending benefits for the long-term unemployed and passing a lower tax rate for inheritance above $10 million (from the proposed 45% to 35%). The inability of Obama's administration to collect higher taxes will pose a long-term challenge to the American economy. The government seems incapable of understanding that printing more money while reducing tax collection is a recipe to default. This mistake will have repercussions in a lot of ways, possibly even precipitating another meltdown that is worse than 2008 crisis. Unilateral financial "incentives" to the American public can turn into disincentives on the longer term. The future generation will be encumbered by a debt burden that is growing exponentially every year. Although mainstream news reports rosy statistics, this means nothing. In-depth research will reveal that on the state, county, and municipal level, the US is edging towards bankruptcy. Even some of the wealthiest jurisdictions in the nation are facing fiscal problems. Forget about journalistic oxymoron that is thought of up payroll employees. Who has ever heard of a "jobless recovery?" California itself is battling against insolvency while the Federal Reserve was forced to buy Treasury Bills to enable the government to stay operational. It is still early to say but the United States might be edging towards a third world status with all the recent decisions that government has taken. Of course the above is an exaggeration – the US will not likely become a third world country anytime soon, but it might lose its economic superpower status. The more money is printed, the more commodities become an attractive alternative. This makes both the job market and the real estate industry weak since gold and silver are rising relative to the US dollar. Obama has been criticized by the Republicans and some people in his own party. The problems go back a long way. Larry Summers, Obama's National Economic Council director, mainly acted as a Wall Street henchman and enshrined unregulated derivatives in the financial industry. The government is now forced to make concessions that only amount to status quo in many cases. The American president is facing a lot of challenges in passing key provisions in healthcare and in foreign policy in the Middle East. The recent tax cuts for the wealthy are designed to preserve some of his initiatives. But with the tax base of the government being eroded, there is no doubt that commodities like gold and silver will have strong years ahead as people turn to the ultimate money. Gold Prices Likely to Increase The fall of the dollar, increasing debt crises, and the deterioration of the G7 nations are all part of a one faulty system. This will force even more investors to turn to gold and silver as their hedge against uncertainty. In a previous article, we projected that gold will reach $1,600 relatively soon. But with the recent tax cuts, it is highly likely that it will move above the $1,700 in 2011 while silver will likely move well above the $35 level. Ben Bernanke has said that the $600 billion QE2 package might be expanded if necessary. That, in itself, is enough to push otherwise bearish investors to gold. In this regard, let's take a look at the long-term gold chart (courtesy of http://stockcharts.com). The gold chart this week still remains pretty much unchanged from last week. There are some consolidations below the upper border of the rising trend channel. Unless this particular resistance level is surpassed, the rally will not move to the eventual target of $1,600. At this time, it is likely for the upper border to stall any rally temporarily. The possibility that gold will decline by 5-6% still exists. Expectations in the Commodity Market It is generally expected that commodity market will continue its rally as the dollar weakens further. Investment funds, pension funds, and long-term investors are expected to pour more money into this asset class. Future gains might not be as sharp as the past. If they steeply rise in value, consumers might not be able to take it (given the "joblessness" of the recovery that we've mentioned earlier in this essay), which will later lead to lower demand. Now, let's look at oil prices. For the rest of 2010, oil could stay in the $70-$90 range as OPEC leaders don't see any need to change it. Leading oil suppliers agree that it is a fair price (in our view, the only way to have a fair price is to have a free market with near-perfect competition that determines what the price is – whatever it will be, it will be fair). China is a key driver of future demand but the government intends to curb inflation and thus, consumer demand. The weaker US dollar can send prices to the higher end of the range temporarily. But lack of demand at a higher price will again drive prices down. Meanwhile, gold's "crazy little brother" might outdo it this time. Both silver and gold are expected to reach new highs for the first half of next year because Western economies will face slow growth. Investors will turn to these metals to preserve their wealth at first and then simply because they saw these markets move up fast (final part of an upswing is almost entirely emotional). In addition, investment demand from exchange traded funds and central bank purchases will continue to support prices. Silver might outperform gold on a percentage basis during the final part of this rally. Although commodities will continue to act as a proxy for the weaker US dollar, it is important to note that commodities should be supported by actual usage. Uninterrupted price run-ups will have consequences. 10 to 15 percent corrections will likely become commonplace. If you are interested in knowing more on the market signals we analyze, we encourage you to subscribe to our Premium Updates to read the latest trading suggestions. We also have a free mailing list – if you sing up today, you'll get 7 days of full access to our website absolutely free. In other words, there's no risk, and you can unsubscribe anytime. Thank you for reading. Rosanne Lim Sunshine Profits Contributing Author www.SunshineProfits.com * * * * * Interested in increasing your profits in the PM sector? Want to know which stocks to buy? Would you like to improve your risk/reward ratio? Sunshine Profits provides professional support for Precious Metals Investors and Traders. Apart from weekly Premium Updates and quick Market Alerts, members of the Sunshine Profits' Premium Service gain access to Charts, Tools and Key Principles sections. Click the following link to find out how these benefits might facilitate your gains. Naturally, you may browse the sample version and easily sign-up for a free weekly trial to see if you like our accuracy – we insist that you check our previous updates for details. All essays, research and information found above represent analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments. By reading Mr. Radomski's or his associates' essays or reports you fully agree that they will not be held responsible or liable for any decisions you may make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Radomski, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

The Holiday Grind Is Here For 10 Days Only – Are You Ready? Posted: 21 Dec 2010 06:35 AM PST It's that time again when volume dries up and prices rise into the new year. A lot of individuals are scrambling to prepare for the holidays, even though we had a year to prepare. The big money has already done most of their year end shuffling and will be taking it easy until January. The market is overbought and sentiment readings are at extreme levels which in the past have been the start of large sell offs and even bear markets. While I am keeping a close eye for a top, there is not much we can do but stay long stocks and commodities until the market tips its hand and distribution selling is in control. The U.S. federal government is the only wild card going into year end that should be on traders' radars. They have been doing a great job boosting prices in the equities and commodities market, but can they continue to hold things up when the big money and the proverbial herd start unloading positions in 2011? SP500 Holiday Grind – Daily Chart This chart shows the slow and steady grind higher that we have seen in the S&P 500. I expect this to continue into 2011 The market in my opinion is on the verge of some serious selling so long positions should be small going forward. US Dollar On Pause For A Couple of Weeks This 4 hour candle stick chart of the dollar shows price testing resistance (a previous high). I am expecting to see the U.S. Dollar trade sideways or possibly move closer to the previous high as we enter the new year. A sideways dollar will allow the equity and commodity markets to rise. Weekend Conclusion: In short, I think we could see an intraday pullback early this week and then a grind higher. The pullback would shake out some weak positions before the holiday march higher takes place. I typically don't trade much going into the holiday season and new year. I may put on a small long position if I like what I see forming on the charts, but that would likely be about it. Light volume can be very dangerous to trade because sharp price spikes up or down can occur in a blink of an eye catching traders off guard. If you would like to learn more about trading while getting trade alerts for ETFs join my newsletter at:  http://www.TheGoldAndOilGuy.com Chris Vermeulen

Is Gold Buying in India Slowing Down? Posted: 21 Dec 2010 05:45 AM PST Iacono Research

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