| Gold and Silver vs. all fiat currencies in 2010 Posted: 04 Jan 2011 02:35 PM PST Race to Debase - 2010 Q4 by James Anderson (Sales), Gold & Silver Staff Welcome back to the Worldwide Fiat Currency Race to Debase! Take a moment to examine how gold and silver crushed their paper currency competition in 2010. In US dollar terms gold was up 29.6% on the year. Beginning the year at $1097, gold showed a steady pace reaching $1421 to close out the year. Silver absolutely dominated the field with a flurrying finish rounding out an 83% gain for the year. Amazing! Silver lapped four fiat currencies of the more than 75 we tracked in 2010. The white metal also threatened to lap seventeen other paper notes with above a 90% appreciation against such names as the euro, the Denmark kroner, and the Vietnamese dong... to name a few. The Venezuelan bolivar was the ultimate loser against the price of gold and silver with much of this due to the country's double currency devaluation within a year's time! It seems dollars are hard to find in Venezuela and they are currently fetching upwards of 8 bolivar per dollar in the black market (almost twice the official rate of 4.3 bolivars per dollar). So what happens when the dollar begins to have its upcoming currency crisis? If the reserve currency of the world suffers devaulations, what then is the world's monetary flight to safety? That's right, 5000 years running, gold and silver have been mankind's ultimate money and safe haven. 2010 was no exception to this rule: | Base Currency vs. One Gold Ounce | 1-Jan-10 | 1-Jan-11 | % Gold Gain in 2010 | | Afghanistan Afghanis | 53,343 | 61,158 | 14.7% | | Albania Leke | 104,997 | 148,940 | 41.9% | | Algeria Dinars | 78,965 | 104,548 | 32.4% | | Argentina Pesos | 4,171 | 5,642 | 35.3% | | Australia Dollars | 1,223 | 1,389 | 13.6% | | Bahamas Dollars | 1,097 | 1,421 | 29.6% | | Bahrain Dinars | 414 | 536 | 29.5% | | Bangladesh Taka | 75,662 | 100,212 | 32.4% | | Barbados Dollars | 2,195 | 2,843 | 29.5% | | Bermuda Dollars | 1,097 | 1,421 | 29.6% | | Brazil Reais | 1,914 | 2,359 | 23.2% | | Bulgaria Leva | 1,497 | 2,081 | 39.0% | | CFA BEAC Francs | 502,190 | 696,322 | 38.7% | | Canada Dollars | 1,154 | 1,418 | 22.9% | | Chile Pesos | 556,850 | 664,883 | 19.4% | | China Yuan Renminbi | 7,493 | 9,369 | 25.0% | | Colombia Pesos | 2,244,898 | 2,722,077 | 21.3% | | Comptoirs Français Francs | 91,358 | 126,675 | 38.7% | | | | | | Base Currency vs. One Gold Ounce | 1-Jan-10 | 1-Jan-11 | | Costa Rica Colones | 618,358 | 715,132 | 15.7% | | Croatia Kuna | 5,594 | 7,844 | 40.2% | | Czech Republic Koruny | 20,134 | 26,558 | 31.9% | | Denmark Kroner | 5,701 | 7,913 | 38.8% | | Dominican Republic Pesos | 39,642 | 52,878 | 33.4% | | East Caribbean Dollars | 2,853 | 3,838 | 34.5% | | Egypt Pounds | 6,018 | 8,252 | 37.1% | | Estonia Krooni | 11,979 | 16,609 | 38.7% | | Euro | 766 | 1,062 | 38.6% | | Fiji Dollars | 2,116 | 2,632 | 24.4% | | Hong Kong Dollars | 8,509 | 11,049 | 29.8% | | Hungary Forint | 207,032 | 295,818 | 42.9% | | IMF Special Drawing Rights | 700 | 923 | 31.9% | | Iceland Kronur | 136,181 | 163,538 | 20.1% | | India Rupees | 51,147 | 63,539 | 24.2% | | Indonesia Rupiahs | 10,315,100 | 12,793,050 | 24.0% | | Iran Rials | 10,869,251 | 14,645,199 | 34.7% | | Iraq Dinars | 1,265,793 | 1,658,832 | 31.1% | | Israel New Shekels | 4,136 | 5,043 | 21.9% | | Jamaica Dollars | 98,024 | 120,397 | 22.8% | | | | | | Base Currency vs. One Gold Ounce | 1-Jan-10 | 1-Jan-11 | | Japan Yen | 102,084 | 115,351 | 13.0% | | Jordan Dinars | 779 | 1,006 | 29.2% | | Kenya Shillings | 83,234 | 114,427 | 37.5% | | Kuwait Dinars | 315 | 400 | 26.9% | | Lebanon Pounds | 1,650,963 | 2,132,175 | 29.1% | | Malaysia Ringgits | 3,758 | 4,384 | 16.7% | | Mauritius Rupees | 33,812 | 42,359 | 25.3% | | Mexico Pesos | 14,371 | 17,571 | 22.3% | | Morocco Dirhams | 8,666 | 11,842 | 36.6% | | New Zealand Dollars | 1,512 | 1,821 | 20.5% | | Norway Kroner | 6,332 | 8,273 | 30.6% | | Oman Rials | 423 | 547 | 29.4% | | Pakistan Rupees | 92,518 | 121,690 | 31.5% | | Peru Nuevos Soles | 3,168 | 3,987 | 25.9% | | Philippines Pesos | 50,741 | 62,032 | 22.3% | | Poland Zlotych | 3,128 | 4,209 | 34.6% | | Qatar Riyals | 3,997 | 5,175 | 29.5% | | Romania New Lei | 3,227 | 4,541 | 40.7% | | Russia Rubles | 33,265 | 43,322 | 30.2% | | | | | | Base Currency vs. One Gold Ounce | 1-Jan-10 | 1-Jan-11 | | Saudi Arabia Riyals | 4,116 | 5,330.58 | 29.5% | | Singapore Dollars | 1,542 | 1,826 | 18.4% | | South Africa Rand | 8,108 | 9,424 | 16.2% | | South Korea Won | 1,277,096 | 1,592,877 | 24.7% | | Sri Lanka Rupees | 125,504 | 157,696 | 25.6% | | Sudan Pounds | 2,452 | 3,551 | 44.8% | | Sweden Kronor | 7,848 | 9,554 | 21.7% | | Switzerland Francs | 1,137 | 1,328 | 16.8% | | Taiwan New Dollars | 35,063 | 41,421 | 18.1% | | Thailand Baht | 36,597 | 42,672 | 16.6% | | Trinidad and Tobago Dollars | 6,949 | 9,012 | 29.7% | | Tunisia Dinars | 1,453 | 1,992 | 37.1% | | Turkey Lira | 1,646 | 2,185 | 32.8% | | United Arab Emirates Dirhams | 4,030 | 5,221 | 29.6% | | United Kingdom Pounds | 679 | 911 | 34.1% | | United States Dollars | 1,097 | 1,421 | 29.6% | | Venezuela Bolivares Fuertes | 2,359 | 6,112 | 159.1% | | Vietnam Dong | 20,278,046 | 27,711,168 | 36.7% | | Zambia Kwacha | 5,092,801 | 6,794,531 | 33.4% |
| Base Currency vs. One Silver Ounce | 1-Jan-10 | 1-Jan-11 | % Silver Gain in 2010 | | Afghanistan Afghanis | 821.03 | 1,329.80 | 62.0% | | Albania Leke | 1,616.07 | 3,238.49 | 100.4% | | Algeria Dinars | 1,215.40 | 2,273.25 | 87.0% | | Argentina Pesos | 64.20 | 122.67 | 91.1% | | Australia Dollars | 18.82 | 30.21 | 60.5% | | Bahamas Dollars | 16.89 | 30.91 | 83.0% | | Bahrain Dinars | | | What Rising Interest Rates Mean Posted: 04 Jan 2011 02:21 PM PST --Ka-pow! --Just a day after speculating on the 2011 prospects for precious metals, we opened today's paper to find they had been punched firmly in the nose by profit-taking traders. Comex gold fell back 3.1% and under US$1,400 while silver slipped under $30 and fell by 5.1% in futures trading. --Here in Australia markets are lower on very thin volume. The miners are down, which is about what you'd expect with commodities taking it on the chin overnight. There is also the continued speculation about how big an affect the floods in Queensland will have on export earnings (and Queensland's own budget deficit). --The day-to-day changes in commodity prices aren't a really big deal. The "really big deal" is whether commodities are overbought, given what the world economy is actually doing to do in 2011. Gold, oil, copper, silver, wheat, rice and other commodities soared in December. But now traders are taking profits. So is this a good time to establish a position if you don't already have one? --Well, one key to this mystery is figuring out what rising bond yields mean. U.S. Ten-year Treasury yields have risen since October. This is a key indicator of the expectations investors have about inflation. When bond yields rise, investors expect inflation. --But this still doesn't quite unravel the mystery. Rising bond yields that anticipate inflation could be interpreted bullishly. It's investors summing up the economy and seeing more growth ahead. They sell fixed income and rotate, in text book fashion, into equities. In this context, rising bond yields are nothing to worry about. They're actually a good sign! --But are they really? The U.S. government deficit has just eclipsed $14 trillion. Bloomberg reports that governments in Europe have to refinance over $1 trillion in debt 2011. When you keep those numbers in mind, then rising bond yields are the bond vigilantes way of saying, "inflation is coming and it's not because of a good economy...it's because of rising deficits and bad fiscal and monetary policy." --One vote in the inflation camp is Warren Buffet. Berkshire Hathaway has recently sold $1.5 billion worth of fixed rate debt in order to put to death $1.5 billion in variable rate debt. You'd only do that if you were worried that interest rates could rise quickly and ruinously. --Right now, though, everything seems to be trundling along quite nicely. You'd never get the impression that the financial system remains weak and one crisis away from another big liquidity/solvency shock. That remains a big threat in 2011 though. --The big threat to Australia from an external interest rate shock is that the country has trouble financing its chronic current account deficit. Commodity exports generate national income. But the country imports so many other consumer and manufactured goods (not to mention money for banks to lend into the housing boom) that the global cost of capital is a key issue for Australia's future prosperity. --One long-term solution to this capital dependency, according to Stephen Grenville via Business Spectator, is to turn the windfall profits of the miners (who obviously have no use for them) and turn it into a sovereign wealth fund (SWF). That SWF can be like a little government slush fund for those times when budget deficits rear their ugly head. --Of course, many countries are using SWFs as tools of national grand strategy. Today's Chanticleer article in the AFR reports that SWFs have over $4 trillion in combined assets globally. China' SWF, the China Investment Corporation, has over US$300 billion, some of which you'd reckon would find its way into Australian coal, iron ore, bauxite and other minerals. --But to be honest, Australia would have a trifling SWF if it chose to fund it via a tax on resource profits. After all, commodity price cycles are...well...cyclical. They go up. They go down. And that's not including the fluctuations in supply and demand that affect price and government royalty revenue, as Queensland's government is now finding out with disrupted coal royalties. --No...the irresistible asset pool in Australia is in retirement funds via the compulsory contributions you make as a worker. Global pension fund assets are $24 trillion, according to the AFR. In Australia, retirement assets are over $1 trillion. That's too much money for a government to ignore. --If you want to know how your retirement assets might be seized by the State to finance deficits or transfer payments, look no further than Eastern Europe and countries like Bulgaria, Hungary, and Poland. The Christian Science Monitor reports how European governments are turning to the last large pools of capital available that don't need to be borrowed when they can simply be seized. --Australia's government finances are certainly not so dire, yet. The terms of trade remain high as does the Reserve Bank of Australia's index of commodity prices. With the Aussie dollar above parity and the resource revenue rolling in, Australia's huge foreign debt doesn't seem like such a problem. And a retirement crisis driven by surging government liabilities and falling revenues seems remote, if not downright impossible. --But if you wanted to watch for one big trend elsewhere this year that might eventually show up here it's this: when nation states fight back against insolvency and resist debt restructuring or austerity, cutting public pension benefits and monopolising access to retirement assets is one-two combination you can expect to happen. --Where capital goes in that kind of environment - if in fact it's allowed to move anywhere at all - is a great question. We'll take it up again tomorrow. Until then... Dan Denning
for The Daily Reckoning Australia Similar Posts: | | Huge raid by the cartel..gold and silver fall on massive volume Posted: 04 Jan 2011 02:20 PM PST | | Getting Outta Dodge Posted: 04 Jan 2011 02:12 PM PST Were I without family ties, I might consider expatriating to one of the quiet, out-of-the-way towns in Central- or South America that I drove my VW bus through in 1977-1978. Spending a year and a half living life at a slower pace and speaking in a second language was world view- opening for this California born American. Through it all, I met many wonderful, amazingly generous people. Unfortunately, I also saw a lot of grinding poverty and misery. I finally lost count of how many times I stared into the barrel of a loaded submachine gun held by an edgy 19 year-old soldier at some border crossing or roadblock. My experience was life-changing, and made me appreciate the blessings of life in the United States - such as they were then. Thirty years later, I am not sure what I would feel coming home from such an adventure. I am saddened that governments at all levels have completely lost self-control. I am distressed that corporations now find it more profitable to pay off politicians for special subsidies and protections than to compete. I am depressed that Americans now walk away from commitments and belly up to the entitlement bar without any compunctions. We have spent the last forty years eating our seed corn and frittering away our wealth on trifles. I am having great difficulty facing my young adult children with the news that their lives will be harder than mine has been...that college might have been a waste of time and money...that funding my granddaughter's college savings fund may be an exercise in futility...that saving and deferred gratification were cruel jokes that a manipulated stock market, zero interest rates, and future inflation will render worthless. My family is here, so I'm resigned to remaining here to see whatever fate delivers. I feel strongly that we're close to the tipping point, after which collapse is inevitable. While a real, final dot.gov crash will make for very hard times, in the end it may be the only way to break the fever that is killing the country. Perhaps then we can dust off the Constitution and rebuild. ----------- I enjoyed reading the "The Persistent Myth of American Economic Dominance" as I enjoy reading many of the articles here at The Daily Reckoning. Anyway, it was asked, in this article, for us to share our stories with you on "Getting out of Dodge." I went down to Chile in 2008 with the idea of just vacationing and learning Spanish. I found to my surprise that Chile is a great country and an economic power in its own way. It has low government debt, etc. Anyway, I found a job with a tech company making about 15% less than I was making in the US, but my money went so much further. I was able to buy a 2-bedroom 2-bath condo with all the amenities and 24/7 security for about $120,000 US dollars. There was also no income tax. Basically you just pay a 19% sales tax on everything. It was just so simple to live there. The government left you alone and expected you to work for what you got. They also have a privatized retirement plan where you pay 12.5% of your check to a company who manages your stock portfolio for you. Then you pay 7% for your private medical care comparable to US health care. It was nice to never have to fill out any tax forms and to keep roughly 80% of my paycheck every pay period. My wife and I came back to the US after a few years there to give my wife, who is Chilean, the experience of living in the US. I think what I learned from my experience in Chile is there are lots of other countries who understand much better the importance of freedom and keeping government intrusion to a minimum if you want a healthy economy. ----------- My wife and I recently expatriated. We are fortunate that although we were both born in the USA, due to accidents of birth, we hold passports of EU countries allowing us to live and work in the EU freely. Getting a foreign citizenship (and passport) is essential prior to expatriation; this is totally legal in the USA and you do not have to forfeit your US citizenship as a consequence. However, very few will be able to get a foreign passport so easily. The hard way is to live in a new host country for a long period of time and apply for citizenship. Some countries are rumored to sell passports, but this smacks of fraud and I'd be very suspicious of the utility of such a passport if push came to shove. A better way is if your parents or grandparents were foreign born, to check out whether this could entitle you to a grant of citizenship. Germany for one, grants automatic citizenship to children of German nationals born abroad (until recently this only applied to German fathers, not mothers); this is the best way possible since your foreign citizenship is not something you have to apply for - you already have it and perhaps are just not aware of it. Ireland grants citizenship to grandchildren of Irish nationals regardless of where born, but genealogical proof is required. Expect these rights and programs to become more limited or even to vanish over the coming years, so your readers should investigate the opportunities as soon as possible and avail themselves quickly; there is no downside to having a foreign passport 'at the ready', and it makes international travel much easier even if you do not expatriate. We thought long and hard about giving up our citizenships, but in the end we could fathom no logical reason for hanging on, other than blind inertia. As your article points out, the US government has made it very difficult on expatriates in many ways and it's hard to justify blind loyalty when your own country treats you like a criminal. The act of expatriation is disarmingly simple and quick, but best handled by an attorney in a foreign country who specialized in this. You have to be living overseas to do this, and you have to have a foreign passport otherwise you would become stateless, and as a result the embassy people won't let you renounce your US citizenship. ----------- If there were a poll on the issue I think eighty percent of Americans would want to stay put, while twenty percent would pack for an offshore destination. I don't think the issue is as clear-cut as staying in the US or leaving it. Staying or leaving is a shadow issue cut in half. Half the problem is that too many of those who would stay - regardless of how unlivable the US becomes - are confessing apathy and resignation to the rapacity of a government that considers itself too big to fail. The other half of the problem is that those who would choose to leave the US would be confessing to surrender of all hope for the US. The only ones who seem to know where they want America to go are the Progressives, the Socialists, the statists, and the one-world control freaks, who, if floated head to toe, would form a gooey bridge from Brussels through Ivy League campuses to the White House and Congress. The real issue is for Americans to realize that America has been hijacked by the most cynical and diabolical crowd ever assembled in Washington, DC. After that realization dawns, we must re-dream America. We must not settle for pretenders representing us in our nation's top offices. We must re-claim, renew, and reorient America. That's the issue. ----------- I would leave next week if I could liquidate my rental portfolio and personal residence that fast. I'm fed up! I think it will get much worse. If I don't leave soon, they may not let anyone out of the country at all. It's sad because I just found the perfect place to live in the US. ----------- I can only share a perspective of a small business owner. We are a manufacturing company with approximately 25 full time and 8 part time employees. We have been in business 26 years and my sons represent the third generation. I do not expect business to be easy and we don't mind working hard. But I don't understand this feeling that I get from the current administration that we are the enemy. I would repent if someone would tell me what I have done wrong. Hugh Smith Of Two Minds recently quipped that one would have to be insane or a masochist to hire an employee in America. I wonder how long we can remain insane enough to keep this up. ----------- A few years ago I lost my job of 31 years at a mid-size bank, and, to carry me over to retirement, I took a job as a store cashier. It was my trip to the real world. I live and work in Cleveland and the clientele flowing through our store daily is enough to give one pause. A large number of customers are on the food stamp card. Or, as I prefer to call it, the Junk Food Card. The big game is for two people to live together - one with some income and the other drawing unemployment or welfare (or even both drawing welfare). It is very common for food card purchases to consist entirely of pop, candy, ice cream, etc. Then out comes the big wad of cash for the beer and cigarettes. With most of these people it seems very likely that they have no inclination to work at all, and gaming the system is how they wish to live. Then there are the folks drawing disability. Most of them look quite healthy enough to be working - maybe not at a job they had been doing previously, but still capable of gainful employment. Many of our other customers are older people on fixed incomes. People who are working steady jobs are in the minority. The problem here is obviously that the failure to maintain entitlement programs - which truly cannot continue to be funded given today's local, state, and federal government deficits - will almost certainly result in anarchy. The thought of where Cleveland will be in a few years is absolutely frightening. Making things worse, the intelligencia has all fled the city, leaving opportunists to run the government. Every week the news reports are highlighting another local politician that is under investigation for fraud in office. I don't think I'll be moving to a foreign country, but I'll definitely be selling my house in Cleveland and moving to some small town somewhere that has all the amenities I require - with more favorable demographics. And I can understand that moving to a foreign country could be an even better alternative in the long run. So, basically, I'm all for "getting out of Dodge"! ----------- I left the mortgage industry in 2003 and started a stone masonry business. My clientele are wealthy and still spending money. They are moving further out into the countryside and a few are building hardened shelters under their homes as well as installing generators with over capacity propane storage, chickens, gardens, trout ponds, orchards, and enough land to isolate and hide the operation from passersby. A one to one and a half hour ride to town is not out of the norm. They are not all retirees. My employees, friends and family are involved part time (full time, 2nd shift) in food production. We pasture raise broiler hens, beef, pigs, and vegetables. Canning and dehydrating is back in vogue. We are preparing for the worst hoping for the best, raising children, and trying our best to stay in God's grace. Regards, You, The Daily Reckoning Readership,
for The Daily Reckoning Australia Editor's Note: Eric J. Fry, Agora Financial's Editorial Director, has been a specialist in international equities for nearly two decades. He was a professional portfolio manager for more than 10 years, specializing in international investment strategies and short-selling. Joel Bowman is managing editor of The Daily Reckoning. After completing his degree in media communications and journalism in his home country of Australia, Joel moved to Baltimore to join the Agora Financial team. His keen interest in travel and macroeconomics first took him to New York where he regularly reported from Wall Street, and he now writes from and lives all over the world. Similar Posts: | | Contrarian Investing and Predictions-Plus for 2011 Posted: 04 Jan 2011 02:03 PM PST New Year's Resolutions & Predictions-Plus! We're at the beginning of the 2nd decade of the 3rd millennium. What will happen this year? We don't know. Most likely 2011 will be a lot like 2010. That's the way it usually works. Big trends are hard to see. One year seems to wander around much like the one before it and the one after. Only much later can you see where they were going. If 2011 is like 2010 you can stop worrying. Almost everything went up in 2010 - except for real estate. Stocks went up. Even US bonds went up. What went up most was our favorite investment - gold. It closed the year at a record high, giving us a gain of nearly 30%. So far this year, the trends continue. On the first trading day the Dow rose 93 points. Gold went up $15. But wait. Should you bet on stocks and gold? Will gold do as well in 2011? Will stocks go up another year? Do you seriously think we have answers to those questions? You can't know what will happen. Predictions are worthless. So what we give you are Predictions-Plus. What's a prediction-plus? It's better than a prediction; it's the thing that probably won't happen but that you should expect anyway. It's the thing you should believe even if it isn't true. Hey, look, that's the way all the important things in life work. No kidding. You meet a pretty woman. Maybe you could get to be friends. Maybe you could take her on a weekend tryst...like a state governor would. It could be a lot of fun. Most likely, your wife would never know. But you're better off believing she would find out tomorrow! Or, suppose you sent in a fraudulent IRS return in order to get a big refund. You'd probably get away with it; that's a prediction. But here's a prediction-plus: you'll get audited before the end of the week! Likewise, there are predictions-plus in the financial area. What's most likely in 2011? A repeat of 2010. That's what you usually get. But that's not the best thing to believe or the best way to bet. Everyone is betting on higher stock prices, higher gold prices...and higher just about everything. The money is to be made in the Predictions-Plus - betting on the contrary. Here's our old friend Marc Faber with one of them. Bloomberg: Marc Faber, who advised investors to buy US stocks in March 2009 as the Standard & Poor's 500 Index began a rally of as much as 86 percent, said US Treasuries are a "suicidal" investment. Government bonds are likely to decline, said Faber, who publishes the Gloom, Boom and Doom Report. After bottoming in December 2008, the 10- year Treasury yield rose as high as 3.9859 percent in April on government measures to stimulate the economy. Concern about a second recession in three years sent yields lower through October. "This is a suicidal investment," Faber said in a telephone interview from St. Moritz, Switzerland. "Over time, interest rates on US Treasuries will go up. Investors will gradually understand that the Federal Reserve wants to have negative real interest rates. The worst investment is in US long-term bonds." Treasury 10-year note yields will rise to 5 percent from yesterday's level of 3.349 percent, Faber said, without specifying a time frame. As bonds fall over the next decade, he said investors should buy precious metals, real estate or equities. US debt has returned 5.7 percent in 2010, more than erasing last year's 3.7 percent loss, according to a Bank of America Merrill Lynch index. "If you print money, the currency goes down and the S&P 500 goes up," he said. "By the end of 2011, people will look at 2012 and think 2012 could be a very bad year because the policies applied are not sustainable and create a lot of instability. Investors may look at 2012 and 2013 with horror."
The Great Correction could make bonds a good buy again in 2011. But it's a bad bet. So here's a prediction-plus: the bond market will crack in 2011. How about stocks? Well, we'll have to talk about them tomorrow. And more thoughts... Would you like to correct your mistakes? Fix your errors? Make yourself a better person? Have more success? Find love, happiness and money in 2011? You need a resolution! Fortunately, most people's lives are easy to improve. They don't have to do anything. They just have to stop doing things that are stupid. Let's talk a little about fat people. What's the solution to fatness? Easy peasy. Nothing. Just don't eat so much. Don't fix a big meal. Don't go out to a restaurant. Don't have a second helping. Just don't do it. We guarantee it will work. The same could be said of most people's financial problems. The average lumpenproletarian can't easily increase his income. He has a job. He earns a limited amount of money. Or he has a fixed retirement income. Unless he is young enough to still have career choices in front of him, his income is already effectively set. His choices have already been made. So if he wants to improve his financial circumstances, all he can do is to work on the expense side of the ledger, not the income side. And while the income side is helped by "commission" - that is, by doing things...the expense side is helped by "omission" - that is, by not doing things. Want the secret to financial success? Make sure the expense number is lower than the income number. How complicated is that? Yesterday, we were in the Miami airport reading in the newspaper about people who are facing severe financial stress. In some cases, they have lost jobs and income. In other cases, they have not saved enough for retirement. Still others simply have let their spending get away from them. What's the solution? The most obvious solution for all is: stop doing it. Don't spend. See something you want? Don't buy it. See something you need? Think again; you probably don't really need it. As we reported yesterday, 10,000 people will turn 65 every day for the next 19 years. Most of these baby boomer retirees are financially unprepared. They don't have enough money saved to live the way they expect to live. But that's just the beginning of the story. If we're right about the Great Correction, standards of living in the US are falling. Jobs will be scarce. Incomes - in real terms - will go down. This leaves almost everyone with a tight budget. What to do about it? Nothing! Cut spending by not doing anything! But what about those poor people in the newspaper? They have to pay for housing. Food. Gasoline. Insurance. Health care. All the usual stuff. After they pay the basics, they don't have anything left. In fact, an article in The New York Times two weeks ago showed how a couple with even $250,000 of income still had almost no free cash. How can you cut discretionary spending if you don't have any discretionary spending to cut? What if you're already down to the essentials? This is where it gets interesting. At a certain point, you have to stop doing nothing and begin to do something radical. We were just down in Nicaragua. On the beach, we met a Dear Reader. "That guy really has it figured out," said Elizabeth. "He has a beautiful house right on the beach. No heating bills. Property taxes are almost nothing around here. And you can't spend much money; there's nothing to buy. But it's a very high quality of life. If you don't miss shopping malls and movie theatres." Of course, you don't have to move to Nicaragua to live cheaply. Many places in America are even cheaper. Small towns in Texas. Arkansas. Tennessee. You can get a enough land to plant a garden. And heat your house with wood. Throw away your credit cards. Heck, it could be fun. [Joel's Note: Wanna take a look at the real estate opportunities down in Nicaragua? Our next available Rancho Santana "Chill Out" Weekend is scheduled for June 7-11. There are only 4 spots left here, though, so you'll have to be quick. As always with deals like this, exclusivity is key. So right now, invitations are limited to Reserve members only. Fortunately, due to the mistake we mentioned above, you still have a few more hours to join. Chill Out weekends are just one of the many benefits to Reserve membership. Check out the rest here...but only 'til 5pm today.] *** A Dear Reader sends a report on the effectiveness of the new see- through-clothing screening techniques at airports: Year-to-date statistics on Airport screening from the Department of Homeland Security: | Terrorist Plots Discovered | 0 | | Transvestites | 133 | | Hernias | 1,485 | | Hemorrhoids | 3,172 | | Enlarged Prostates | 8,249 | | Breast Implants | 59,350 | | Natural Blonds | 3 | Regards, Bill Bonner,
for The Daily Reckoning Australia Similar Posts: | | 01-04-11 smackdown poll Posted: 04 Jan 2011 11:37 AM PST The boards opinion and poll on today's smackdown. | | Bitchin’ Camaro Posted: 04 Jan 2011 11:19 AM PST 
Mercenary Links Roundup for Tuesday, Jan 4th (below the jump). 01-04 Tuesday - Chevy Camaro Outsells Ford Mustang, Ending 23-Year Reign
- Electric Cars Get Charged for Battle – BusinessWeek
- Minivans Avoid That Name in Search of a Sporty Image
- GM Continues To Stuff Dealers With Its Cars | zero hedge
- States Seek Laws to Curb Power of Unions – NYTimes.com
- Bankers Point to the Rules as the Problem – NYTimes.com
- BofA Freddie Mac Putbacks Resolved for 1¢ on $ | The Big Picture
- Bank of America to Buy Back Bad Loans from Fannie, Freddie – WSJ.com
- Bank of America: 439 Fewer Ways to Hate the Bank – Deal Journal – WSJ
- Indian Police File Case Against Citi CEO Pandit, Others – WSJ.com
- Obama was for the debt ceiling before he was against it
- Sweden Shows Central Bankers How to Fight Next Asset Bubble
- Fed Debated Rise in Bond Yields – WSJ.com
- Algorithms Take Control of Wall Street | Magazine
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- ~
  | | CFTC's Chilton: Reluctant To Support Position Limit Proposal So Far Posted: 04 Jan 2011 10:17 AM PST | | Silver & Gold Slip ‘Below July 2009 Trendline’ as Dollar Rises Posted: 04 Jan 2011 10:00 AM PST Silver and gold prices both unwound the last of late December's gains in early London trade on Wednesday on what several analysts called "profit taking" as world stock markets also fell.  | | A PM Wish for 2011: Stop the Darn Transactions! Posted: 04 Jan 2011 10:00 AM PST The case for equity leverage to gold is diminishing and will continue to do so until mining company executives and their bankers stop the addiction to deal-making.  | | Wheels in Motion Posted: 04 Jan 2011 10:00 AM PST The midweek session in New York opened and then continued with further spot price losses being recorded in the precious metals complex. Gold bullion dropped some $18 to near $1,363 per ounce and broke a pivotal support on the technical charts.  | | How Long Can the Markets Rally? Posted: 04 Jan 2011 10:00 AM PST Investors who purchased stocks, gold or silver, and bonds anytime in 2009 were handsomely rewarded in 2010 if they held their positions. How long will these assets continue to perform well?  | | Gold Climbed 29.8% in 2010 to End a Stellar Decade Posted: 04 Jan 2011 10:00 AM PST Gold continues to excel as one of this past decade's best performing asset classes and continues to garner the attention it rightfully deserves.  | | Municipal Debt Threatens US Economy Posted: 04 Jan 2011 08:05 AM PST The full version of our analysis (with comments particularly valuable for Precious Metals Traders) is available to our Subscribers. The debt crisis that has taken down banks and even countries threatens more than 100 American municipalities this year. According to Meredith Whitney who works as a US research analyst, local and state debts are the biggest concerns to the US economy today. It is large enough to derail economic recovery. She said that, "There's not a doubt on my mind that you will see a spate of municipal bond defaults. You can see fifty to a hundred sizable defaults – more. This will amount to hundreds of billions of dollars' worth of defaults". American states and cities have a total debt load of around $2 trillion. New Jersey government Chris Christie summarized it clearly, "We spent too much on everything. We spent money we didn't have. We borrowed money just crazily. The credit card's maxed out, and it's over. We now have to get to the business of climbing out of the hole. We've been digging it for a decade or more. We've got to climb now, and a climb is harder." Cities from Madrid to Detroit are struggling to pay off even just basic services such as street cleaning. Ms. Whitney's comments are likely to put focus on municipal bonds. She is ranked as one of the most influential women in American business. While working for Oppenheimer, a New York investment bank, she predicted that Citibank will cut its dividends. Although she suffered from a lot of criticisms then, her analysis proved to be correct as the bank was forced to seek government bail-out. Ms. Whitney has since started her own consulting firm. Deficit Already Affecting Public Spending American states have spent almost $500 billion more than tax revenues. In addition, they face another $1 trillion hole in pension funds. Already, Detroit is cutting road repairs, cleaning services, police, and lighting expenditures which affects 20% of the population. The city has suffered from nearly two decades of decline due to US auto outsourcing. It no longer generates enough wealth to provide services to its 900,000 inhabitants. Meanwhile, Illinois is suffering from similar ills after spending twice as much as it generated in tax. It is already six months behind on creditor payments. It owes $400 million to the University of Illinois alone and has 21% chances of defaulting on its debts. According to CMA Datavision which is a derivatives information company, this percentage is more than any other state. Other states such as California and Arizona are also taking steps to solve their debt problems. California has raised university tuition fees by 32% while Arizona sold its Supreme Court and state capitol buildings before leasing them back. Florida is another state that may be hit by a default; this state is the center of a real estate boom that went best recently. Philip Brown, the managing director of Citigroup in London said that, "It's all part of the same parcel: public sector indebtedness needs to be cut, it needs a lot of austerity and it hit the central government first, and now is hitting local bodies." Unlike banks and other financial institutions "cities are their own". According to Andres Rodriguez-Pose, a professor of economic geography at the London School of Economics, "cities will have to pay for their debts, and in some cases they will have to carry out dramatic cuts, such as Detroit's." If there is a city that best symbolizes distressed local finances, it is Vallejo in California. Vallejo is a former US navy town located near San Francisco. It has entered into Chapter Nine bankruptcy protection in 2008 and the effects are still resonating up to this day. The city is trying to negotiate with the unions, which has refused to accept a plan to cut salary two years ago. Vallejo has a population of around 120,000 but it carries $195 million in unfunded pension obligations. The town does not have enough local industry to sustain its finances; property tax collection dropped dramatically upon the collapse of the real estate market. Vallejo is given a C rating by Standard & Poor, the lowest level. US cities are more susceptible to defaults than their European counterparts because it relies mainly on municipal bonds while European towns depend on government bailouts and bank loans. Gold Expectations for 2011 Now, let's take a look at long-term gold chart (courtesy of http://stockcharts.com) to see how bullion fared this week: For some time, gold has tried to break the upper border of the rising trend channel. Gold prices have been wavering from $1,340 to $1,423 since October 5 with a general upward slope. It has often just fallen by a fraction below the rising trend line. There are signs that a break-out could be seen soon. We take into account that gold is quite bullish at the onset of a new year. The $1,600 target still seems realistic for the early part of 2011. 2010 ended on a high note for precious metals. Gold ended the year at $1,421 an ounce while silver is at $30.91 an ounce. Overall, gold prices rose by 30% in 2010 while silver leaped 80%. Prognostications abound in 2011. These forecasts consider the outlook for currencies, inflation, and interest rates in the world's largest economies. We'll examine some of the trends that may influence gold prices: Gold prices tend to rise in times of projected or actual inflation due to the bullion's status as a "safe haven" asset. Investors who are seeking an asset that reacts favorably to currency devaluation and inflation typically move some of their wealth into gold. Right now, the Fed is more concerned about deflation rather than inflation. As such, they show little reluctance to flood the US economy with dollars. Meanwhile, countries such as India and China want stronger economic growth. The result of this is higher inflation. China's prices are now 5.1% higher compared to a year ago while India projects an inflation of 5.5% by March 2011. But the correlation between high inflation and high gold prices isn't set in stone. Although more inflation will initially favor high gold prices, the countervailing policy of keeping interest rates to control inflation sometimes makes interest-bearing instruments more attractive. As of now, however, rates are not high enough to have an impact on gold prices. Historically, the first two months of the year are good for gold. Buyers seek back the gold positions they shed going into the New Year. The continuing inflationary concerns can further support prices in 2011. The Reserve Bank of India said that inflation is not slowing down as quickly as desired. In the US, there are reports that companies are experiencing higher costs for staffing and/or materials, but these costs are not yet being felt by the customers. According to Frank Holmes, the CEO of US Global Investors, "The two pillars of gold are, in any country's currency, are negative real interest rate and deficit spending." Mr. Holmes believes that low interest rates won't go away anytime soon as this would be "catastrophic" to the financial system. 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 sign up today, you'll get 7 days of full access (+unique Charts and Interactive Investment Tools) 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. 
 | | Gold Seeker Closing Report: Gold and Silver Fall About 3% and 5% Posted: 04 Jan 2011 07:12 AM PST Gold fell throughout most of world trade and ended near its late session low of $1374.80 with a loss of 3.09%. Silver accelerated overnight losses in New York and ended near its early afternoon low of $29.33 with a loss of 4.89%. | | Price Inflation to Pay the Debt Posted: 04 Jan 2011 07:00 AM PST The lights of the Mogambo Security System (MSS) glowed dimly in the gloom of the bunker as I cowered in the darkness, and there were no sounds except the thumping, thumping, thumping of my terrified heart at The World Outside (TWO), a place I consider to be a vicious, hostile environment containing not only enemies of every sort, both real and imagined, but family members who want to know if I am coming out for dinner, or to tell me that someone is on the phone for me, or that somebody is going to greedily eat the last of my treasured Double-Stuf Oreos, somehow trying to get me outside and into their clutches so that they can take all my money and ask me to sign various forms and documents. And when I innocently and politely ask, "What is this paper that you want me to sign?" they hastily snatch it back out of my hand and rudely say, "Never mind, then!" So I sighed in relief, sitting there in the darkness, armed to the teeth and scared out of my mind, that I got through one more day without the world erupting in flames as the prices of consumer goods soar and there is mass rioting everywhere because of the foul treachery of the Federal Reserve creating trillions and trillions of dollars, thus inflating the money supply, which causes inflation in prices, and for the horrifying purpose of buying new government debt so that the Obama administration can deficit-spend almost $2 trillion in the next year, a debt for which comes to an other-worldly $20,000 a year for each of the nation's 100 million private-sector workers! Each! With interest due, too! As you may have guessed, my trigger finger spasmed in terror at the monetary and fiscal insanity, but the Uzi I was clutching with a death-grip did not fire, as I had cleverly remembered to put the safety "on" so that I would not have a sudden explosion of accidental gunfire like, you know, those other unfortunate incidents that nobody likes to talk about, except my idiot neighbors, who perpetually taunt me and call me "gun nut," and "homicidal maniac," and "creepy weirdo old man who ought to be locked up" ever since. Naturally, I object to the label "gun nut" because I am NOT a "gun nut," although I firmly believe that adult citizens should be allowed and encouraged to carry as much awesome lethal firepower as they are able to lift off of the ground and somehow holster under their bulging, ludicrously-oversized overcoats. And as for "homicidal maniac" I would say, "No. Not yet, at least. Thought about it, though." That leaves the charge of "creepy weirdo old man who ought to be locked up," to which I explain, in my own defense, "So? Screw you!" I say, "screw you" because most of them are middle class workers, and middle-class workers are only the middlemen in this gigantic wealth-transfer, as their incomes will tend to keep up with prices. The people who will ultimately "pay" the debt are those whose incomes do not keep up with the roaring inflation that is inevitable from such stupendous money creation. In short, the whole thing is paid for by inflation in prices, measured by the poverty and misery of the unemployed, the unemployable, and anyone living on a fixed income, like somebody stupid enough to buy an annuity or a long-bond. And trust me when I say not to waste your time trying to explain to these miserable poor people that while they got poorer, the rich get richer, which makes the government "do something" by increasing aid to these poor people, which means that the government must sell more debt, which means that the Federal Reserve must create more money with which to buy the new debt, which is borrowed by rich guys to buy the government debt, which makes the money supply go up, which makes prices go up, which makes the misery of the poor worse, and in the end the rich get all their money back plus interest, making them richer while the poor got poorer. This, in actual practice, I am sorry to say, is the monumental idiocy of the modern Democratic Party, for which I now have absolutely no respect whatsoever, and have as little for the loathsome Republican Party, too. In fact, the only things you can trust are gold and silver, which have always prospered in the last 4,500 years whenever a government pursued such fiscal and/or monetary insanity, which makes it all so easy that you gotta say, "Whee! This investing stuff is easy!" The Mogambo Guru
for The Daily Reckoning Price Inflation to Pay the Debt 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."   | | Gas & Oil Charge Ahead While Gold Wavers Posted: 04 Jan 2011 05:57 AM PST Jan 4, 2011
The former head of Shell Oil warns that oil could almost double in price, in a year. I brought oil to most of you as a screaming buy not only into the exact 2008 lows, but about 6 months ago in the $60-70 area.
I argued that the staleness and boredom of the sideways oil price action should not be taken for granted; oil should be accumulated.
Almost nobody listened. I gave up trying to convince you because I couldn't think of a novel way to get the point across. Now price has skyrocketed to over $90. A move above the $147 highs (I think we take out $200 in this bull) could be catastrophic for the real net worth of the average citizen, despite the non-stop propaganda from the banksters and the govt (gman).
According to these twin scumbags, raising the prices of your basic living expenses is great news for you, especially for widows and orphans. "Never mind that we just hit your purchasing power again. You are richer! Your 'investments' at the gas station, grocery, and pharmacy just went up in price again. Congratulations!" -Gman and the banksters, Jan 4, 2011?
So, have you missed the oil play? Here are 3 charts that should answer that question. Click here now to view the recent Oil Range Chart. You don't have to be exact when drawing HSR (horizontal support & resistance) lines, and in fact I would argue that being inexact will help you profit, because price rarely moves exactly as forecast or as "ordered" by technical analysis.
You can see that price has moved roughly between the red supply and blue demand lines. The black pyramid denotes a block of risk capital that is allocated in a pyramid formation in that range, buying more as price drops towards the blue line and feathered out as price rises towards the red line. You can see that price gyrated many times within the range. The trading strategy was highly profitable and part of the buys were core positions.
Here's a look at the New Range Oil Chart. Notice the much bigger size of the range, which extends all the way to the all-time highs around $147. It is absolutely critical to understand that just because price has broken out upside to a new range, you have no guarantee that price will stay there. An upside breakout "commands" you to play the new zone, but not to move all trading capital to the new zone. Price could go back into the old zone, and often does, if only temporarily.
Given that the new range is huge, you have not missed out on anything except the smaller range we just exited. You should also understand that as price goes higher, the distance away from the price of zero increases, so by definition your paper money risk also increases.
Don't end up like billions of public investors, who wait until price goes so high that they start to believe a drastic fall in price is "impossible", and a "new era of endless free money" has arrived, and surge in to buy. Their waiting for price to rise higher before buying increases their risk drastically.
Here's a 3rd look at the Oil Chart. Think back to 1999 when oil was $10 and supposedly headed to $5 because of a glut "destined to stay" for decades. Price could take out $147 on the upside and start a huge rise towards $200, $300, or higher. You need to coldly prepare now, for such an event.
Determine the amount of risk capital you are prepared to bring to such a scenario now, rather than committing "from the hip" after the fact.
Those 3 charts suddenly make all the "glut forever" natural gas bears look stupid. Will they look as stupid as the oil bears from 1999 (99% of the population) look today?
I don't know the answer to that question, but I'm fairly confident that I've succeeded this morning in giving you a taste for the unbelievable upside that really exists in natgas because only a moron seriously believes oil is going to $147, $200, or $300 as the paper currencies implode, while natgas languishes anywhere near current prices.
The reward to risk ratios for natural gas vastly exceed those for oil, and they are great for oil. Natgas is much closer to zero in price, so risk is much lower. As oil surges, natgas will be sought after as a replacement for oil.
The natgas daily chart is shown here. Notice the mass numbers of buy signals on the oscillators beneath the price chart. The chart is exhibiting an up-sloping head and shoulders bottom pattern, which can portend an explosive up-move in price. Subscribers who bought natgas are going to make untold riches if you leave your core positions alone and make them sacred. Those positions were bought around the lows, which I have dubbed, "the great discomfort zone".
Click here for the NatGas weekly chart. It is even more bullish than the very bullish daily chart! There is a down wedge on the weekly chart, and it just broke out upside! I've circled the breakout with a blue circle. Now, hone in on that daily chart again. What you have is a h&s bottom on the daily chart launching price up from a bull down wedge pattern on the weekly chart. The bottom line is: a natural gas super-move could be at hand. Are you prepared, what's your bottom line?
I asked the world's greatest juniors stock trader, GoldLion, to compile a "Seven Sisters" list of NatGas juniors, and he did. Those stocks look ultra-bullish, and I suggest you consider ruling them, as he is, with my pyramid generator, which buys weakness in a pyramid formation of risk capital allocation. My suggestion to you: throw the bears' NatGas glut nonsense in the same garbage can that now houses a mountain of failed oil glut analysis on $5 oil from 1999. Thanks!
What of the ultimate investment, Sir Gold Bullion? Here's an early morning look at the One Month Gold Chart.
I detailed the move over $1410 as opening the door to the 1410-1430 range play. Notice the gold-coloured pyramid's base is below the 1410 support zone. Always place your lowest buys in a buy campaign below the point you know is rational. Make your charts answer to you, not you to your chart.
Today's move down to $1407 has filled those buys in the 1430-1410 zone, and brought the bigger 1310-1370 range back into play. Note the gold pyramid shown in this 2nd look at the gold price. That's in play now. Feather your risk capital into price, starting now, allocating ever-more capital into price down to approx $1360 or $1350, if it happens.
You can't know how far price will descend towards the $1370 area. All you can do is be prepared to act.
The GDX chart seems to be hinting at further weakness. Here it is: GDX Volume Chart. The good news was that volume continued to drift off as price has lost upside momentum and drifted sideways for the past 2 months.
The bad news is that the burst of volume that just occurred was on a down day. I wouldn't read too much into one day's technical action. The holiday trading can distort volume patterns, but an argument can also be made by pure technicians that you should look only at volume itself, and whether low volume is caused by holiday trading or not, it is must be looked at from a purely technical perspective.
I don't see any weakness, if it happens, as bad news. I see it as monster good news. For you. You might get a chance to allocate more risk capital into gold stock. You get richer by owning more shares of gold stock, not just by increasing the dollars per share pricing! Special Offer For Website Readers: Send me an Email to freereports4@gracelandupdates.com and I'll rush you my Seven Sisters Natural Gas Report! At times like this, where gold "threatens" to correct, while NatGas threatens to astroblast higher, the action in NatGas can provide a phenomenal mental boost as you deal with the emotional issues that you face in the price weakness zone on gold as you go into accumulation mode! Thanks! 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? 
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