Gold World News Flash

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• Richard Russell - Gold is in the Process of Building a Bottom
• GoldSeek.com Radio Gold Nugget: Robert Kiyosaki & Chris Waltzek
• Germany promised U.S. in 1967 not to convert dollars to gold
• Will Gold, Silver and Oil Prices Soar on Social Unrest In The Middle East?
• Don't Retreat, Reload Your Gold
• Occam's Razor and the Gold Price
• Housing Armegeddon To Get Much Worse
• Gold Seeker Closing Report: Gold and Silver End Mixed
• Australian Dollar Holds Near Parity after RBA Rate Decision
• Canadian Pensions Surge Ahead
• Guest Post: The Road to Madness Is Paved With $100 Bills
• Gold Price Traded Down From Friday's High to Close at $1,333.80
• Spending Cuts - January 31, 2011
• Treasury Yields are Blinking Red
• Gold: Investment Demand In Flux
• MONDAY Market Excerpts
• The Continuing Argument Over Fiscal Policy
• The Meddling of Global “Thinkers”
• Monthly Gold Charts From Trader Dan
• Hourly Action In Gold From Trader Dan
• Gold and silver decline is over, Turk tells King World News
• Hugo Salinas Price: Monetizing silver in British pounds
• Policy makers at Davos see dollar losing reserve dominance
• Maybe there can be several reserve currencies, Rickards tells King World News
• Barrick CFO: Central Banks may shift more reserves into gold
• $2 Billion Up in Flames
• Social Unrest Rises With Food Prices
• Paolo Lostritto: Don't Retreat, Reload Your Gold
• Jim's Mailbox
• China’s Urban Underground Dwellers
• Stay Focused, Gold Investors
• Gold Daily and Silver Weekly Charts
• My Largest Personal Investment
• A Culture of Complacency
• Jump on the Gammon Wagon
• PopCon: The ‘Economic Recovery’ Lie
• Quest for the Best Gold Stock: Central GoldTrust
• More On Housing...
• James Turk - Gold & Silver Have Reached an Important Bottom
• Are Gold and Silver Still a Buy? Absolutely – & Here’s Why
• The Gold Roller Coaster
• The Economic Recovery Lie
• $50 Physical Silver by April 2011
• Crude Oil Spikes Like An Egyptian
• Gold investors should stay focused
• Donner Metals, Xstrata Zinc and the Bracemac-McLeod Mine
• Precious Metals Bull-Riding
• When All Roads Lead to Default
• UBS Cuts Its Gold Recommendation
• Precious Metals and the Dollar’s Next Big Move Part II

Richard Russell - Gold is in the Process of Building a Bottom Posted: 31 Jan 2011 08:00 PM PST With gold and silver off of the recent lows and the US Dollar staying below key support at 78.50, the Godfather of newsletter writers Richard Russell asked this important question, "Will the dollar continue its fall, and will the Dollar Index break below its March 2008 record low of 72.165?" This posting includes an audio/video/photo media file: Download Now

GoldSeek.com Radio Gold Nugget: Robert Kiyosaki & Chris Waltzek Posted: 31 Jan 2011 07:02 PM PST

Germany promised U.S. in 1967 not to convert dollars to gold Posted: 31 Jan 2011 06:30 PM PST

Will Gold, Silver and Oil Prices Soar on Social Unrest In The Middle East? Posted: 31 Jan 2011 06:07 PM PST

Don't Retreat, Reload Your Gold Posted: 31 Jan 2011 06:04 PM PST When it comes to the 2011 gold price correction, Wellington West Senior Analyst Paolo Lostritto says he's seen worse. He counsels investors to "use this opportunity," if they haven't already, to rebuild gold positions because he foresees upside by the second half of 2011. In this exclusive interview with The Gold Report, Paolo shares his insights.

Occam's Razor and the Gold Price Posted: 31 Jan 2011 04:33 PM PST Dear CIGAs, "One should not increase, beyond what is necessary, the number of entities required to explain anything" Occam's razor is a logical principle attributed to the mediaeval philosopher William of Occam (or Ockham). The principle states that one should not make more assumptions than the minimum needed. This principle is often called the principle of parsimony. It underlies all scientific modelling and theory building. It admonishes us to choose from a set of otherwise equivalent models of a given phenomenon the simplest one. In any given model, Occam's razor helps us to "shave off" those concepts, variables or constructs that are not really needed to explain the phenomenon. By doing that, developing the model will become much easier, and there is less chance of introducing inconsistencies, ambiguities and redundancies. http://pespmc1.vub.ac.be/occamraz.html Using William of Ockham's method for analysis of the gold price reaction, the following has occurred. 1. $1400 was an embarrassment to the thesis of "Inflation under control." 2. Gold bank hard price blocking drew a top formation but one that will NOT put a long term top on gold. 3. A crazy hedge fund kid got caught in an underfunded spread. 4. The crazy kid got it backwards either on the spread itself or by using is as a trading position. 5. The liquidation of the spread put more longs into the market than shorts covered. 6. The formation created by the $1400 block broke down as product of the spread trader's failures. 7. Algos tripped off the selling and now are trading gold from the bear side. Algos have no intellect; they are mathematic soul-less driven machines. Occam's Razor applied to #1 through #7 summates that the entire gold situation can be addressed as "Technical Damage Requires Technical Repair" before it is off to the races again.

Housing Armegeddon To Get Much Worse Posted: 31 Jan 2011 04:24 PM PST We are officially in the middle of the worst housing collapse in U.S. history - and unfortunately it is going to get even worse.  Already, U.S. housing prices have fallen further during this economic downturn (26 percent), then they did during the Great Depression (25.9 percent).  Approximately 11 percent of all homes in the United States are currently standing empty.  In fact, there are many new housing developments across the U.S. that resemble little more than ghost towns because foreclosures have wiped them out.  Mortgage delinquencies and foreclosures reached new highs in 2010, and it is being projected that banks and financial institutions will repossess at least a million more U.S. homes during 2011.  Meanwhile, unemployment is absolutely rampant and wage levels are going down at a time when mortgage lending standards have been significantly tightened.  That means that there are very few qualified buyers running around out there and that is going to continue to be the case for quite some time to come.  When you add all of those factors up, it leads to one inescapable conclusion.  The "housing Armageddon" that we have been experiencing since 2007 is going to get even worse in 2011. Right now there is a gigantic mountain of unsold homes in the United States.  It is estimated that banks and financial institutions will repossess at least a million more homes this year and this will make the supply of unsold properties even worse.  At the same time, millions of American families have been scared out of the market by this recent crisis and millions of others cannot qualify for a home loan any longer.  That means that the demand for unsold homes is at extremely low levels. So what happens when supply is really high and demand is really low? That's right - prices go down. More Here..

Gold Seeker Closing Report: Gold and Silver End Mixed Posted: 31 Jan 2011 04:00 PM PST Gold traded only slightly lower in Asia before it fell back off in London and saw a $17.80 loss at as low as $1323.00 by about 9:30AM EST, but it then rallied back higher for most of the rest of trade in New York and ended with a loss of just 0.52%. Silver fell $0.383 to as low as $27.517 at around 7AM EST before it also rallied back higher in New York and ended near its late session high of $28.425 with a gain of 0.93%.

Australian Dollar Holds Near Parity after RBA Rate Decision Posted: 31 Jan 2011 03:00 PM PST courtesy of DailyFX.com January 31, 2011 07:51 PM The Reserve Bank of Australia maintained its cash rate target at 4.75% for a third month, matching expectations. The Australian Dollar- which was rallying prior to the monetary policy decision- continued higher, holding just below parity versus the U.S. Dollar. The Reserve Bank of Australia maintained its cash rate target at 4.75% for a third month, matching expectations. The Australian Dollar- which was rallying prior to the monetary policy decision- continued higher, holding just below parity versus the U.S. Dollar. In its accompanying statement, the RBA sounded a surprisingly optimistic tone. Referring to the impact from the flooding in Queensland as having a “temporary adverse effect on economic activity and prices,” the central bank went on to say that it will “look through the estimated effects of these short-term events on activity and prices.” Overall, the RBA continues to have a very favorable...

Canadian Pensions Surge Ahead Posted: 31 Jan 2011 01:17 PM PST Via Pension Pulse. Ten days ago, CNW reported, RBC Dexia survey: Canadian Pensions Surge Ahead of Pre-Crisis Levels (HT: Bruce): Strength in Canadian equities have helped Canadian pension plans surge ahead of their pre-financial crisis levels of 2008, according to a survey just released by RBC Dexia Investor Services, which maintains the industry's most comprehensive universe of Canadian pension plans and money managers.   Within the $340 billion RBC Dexia universe, pension assets earned 4.3 per cent in the quarter ending December 2010, improving the full year performance to 10.4 per cent, making this a second consecutive year of double digit returns.   Despite the volatility in the global markets during the past ten years, Canadian pension plans have achieved an average annualized return of 5.4 per cent. "What the last decade has taught us is that diversification and disciplined investing is key over the long run," noted Fay Coroneos, Global Head of Risk & Investment Analytics for RBC Dexia.   Canadian equity markets flourished as nine out of ten TSX sectors experienced double digit annual gains. Even though Canadian Pension plans underperformed the index by 0.4, "it was encouraging to see strong returns not only in energy and materials but also in industrials and the consumer discretionary sectors" added Coroneos.   Foreign equities increased 6.3 per cent over one year. "Returns were muted by the soaring loonie, which gained significantly against the US dollar and was one of the best performers among major world currencies," reported Coroneos. The MSCI World index in local currency increased 10.0 per cent for the year, but was reduced to 5.9 per cent when translated into Canadian dollars.   For the year, domestic bond holdings within Canadian pension plans advanced 7.8 per cent, surpassing the DEX Universe index by 1.1 per cent. "Long-term bonds, with maturity of over ten years, continue to dominate short-term and mid-term bonds in 2010," said Coroneos.   "The growing focus on asset-liability matching has resulted in pension plans shifting into the longer end of the yield spectrum, increasing demand for long-term bonds. In light of this, we believe a governance structure which includes the use of a liability-based benchmark will be of great interest for pension plans in 2011." The growing focus on asset-liability matching has increased pensions' demand for long bonds. Meanwhile, Canadian pensions enjoyed the benefits of a strong Canadian stock market. I was surprised to read nine out of ten TSX sectors experienced double digit annual gains in 2010. That "beta boost" helped Canadian pensions surge ahead from pre-crisis levels. And On Monday the S&P/TSX composite index jumped 114.41 points to 13,551.99 led by energy as political unrest in Egypt raised worries about a disruption in oil supplies and pushed crude prices higher: Crude has surged almost eight per cent over the last two sessions on worries that the Suez Canal, a key route for oil tankers and cargo ships, may be closed and that the unrest could spread.   “The market doesn’t know quite what to make of it,” said John Stephenson, portfolio manager at First Asset Funds.   “I think energy and financials are moving higher (because) Canada is a safe haven and commodities is a store of value. If there’s some problem with oil, it may be good for Canadian producers, Canada’s stock index but it’s not good for the U.S. economy broadly.”   The energy sector rose 2.74 per cent as Cenovus Energy shares gained $1.24 to C$34.60 while Suncor Energy (TSX: SU) climbed $1.42 to $41.46.   Imperial Oil Ltd. (TSX: IMO) reported that its net income increased 50 per cent in the fourth quarter to $799 million, or 94 cents per share. That’s up from $534 million, or 64 cents per share, a year earlier on higher oil prices and improved operations and Imperial shares rose $1.95 to $44.65. There is increasing talk of Canada as a "safe haven". I'm not so convinced but global investors are buying up Canadian assets and the Canadian dollar. Just how much of this is speculative flow and how much of it based on fundamentals is very hard to ascertain, but there is no reason to believe the uptrend won't continue. In fact, I wouldn't be surprised to see the S&P/TSX make new highs in 2011. If it does, Canadian pensions will continue riding the beta wave higher.

Guest Post: The Road to Madness Is Paved With $100 Bills Posted: 31 Jan 2011 12:57 PM PST Submitted by Graham Summers of Phoenix Capital Research The Road to Madness is Paved with $100 Bills   …just as I am affected by the maniac, so I am affected by most modern thinkers. That unmistakable mood or note that I hear from Hanwell [an insane asylum], I hear also from half the chairs of science and seats of learning to-day; and most of the mad doctors are mad doctors in more senses than one. They all have exactly that combination we have noted: the combination of an expansive and exhaustive reason with a contracted common sense. They are universal only in the sense that they take one thin explanation and carry it very far. But a pattern can stretch for ever and still be a small pattern. They see a chess-board white on black, and if the universe is paved with it, it is still white on black. Like the lunatic, they cannot alter their standpoint; they cannot make a mental effort and suddenly see it black on white.                                         ~C.K. Chesterton Ben Bernanke is insane. I mean neither insane in a flippant sense, nor in the ordinary sense (as in plain nuts), but an even more insidious form of insanity, namely the insanity of one who cannot see the world as a place outside his own thoughts and beliefs. I am speaking of the insanity of one who believes that all things can be reduced to a simple issue or pattern, the insanity of which Chesterton spoke in his essay The Maniac. Indeed, all of Bernanke’s monetary policies and actions can be traced to his one core belief: that the US Federal Reserve didn’t do enough to stave off the Great Depression. Never mind that this belief is completely inaccurate (as the data clearly shows), it is the foundation of Bernanke’s entire academic and now monetary career. It is the lone road on his mental map of the world. It doesn’t matter that the road is leading us all to disaster, for Bernanke there is simply no other course of action to take. In his mind, the Fed failed to act in the ‘30s and so he MUST act regardless of facts, data, or consequence. Indeed, were any of us to point out to Bernanke that his claims regarding inflation (that it is contained), unemployment (that QE will help it), or economic growth (that we’re in a recovery) are all at complete odds with reality, his answer would be, “well, it would be much worse if I hadn’t acted.” This is the hallmark of an insane argument. It is logic without common sense, reason taken to the absolute limit, unable to consider anything outside the confines of its own understanding. Bernanke will drive us all to ruin, pushing ever harder on the gas pedal and repeating, “I must act, I must act, I must act” under his breath in order drown out the cries of, “stop, you’ll kill us” from the 308+ million of us sitting in the backseat. Indeed, the only ones whom Bernanke can hear are the Primary Dealer banks, all of whom slap him on the back and tell him he’s doing a great job. Bernanke is the nerd with a single skill the jocks currently find useful. And he’s mistaken their support for genuine admiration and camaraderie. He feels their hands slapping his back and doesn’t notice the “kick me” sign they’ve installed there. And herein lies the great irony of Ben Bernanke and his academic theories. The Primary Dealer banks, who pull the real strings at the Fed and who are only interested in making money (not theories), will use him and his misguided beliefs to serve themselves for as long as the benefits of said theories, namely hundreds of billions in free money, outweigh the risks (public outrage), just like all capitalists do when considering an investment. However, once Bernanke’s policies bring the US public to a true boil, the puppet masters will discard their Chairman and his misguided theories like an old, broken toy. They’ll make a human sacrifice of him, pinning the blame for the collapse of the US Dollar and the US’s descent into 3rd world status on his slouched academic shoulders right next to the “kick me” sign. For when the public wants blood, it will be Bernanke, not the banks or their bonuses, who will be sacrificed. It’s tragic, especially for the thousands of people who are now literally starving because of Bernanke’s monetary madness, that the nerd who wanted so desperately to fit in with the big shots will find himself and his theories discarded in the dustbin. At least he got a Time Magazine cover out of it. For the rest of history, his 15 minutes of fame will stare out at us from the archives of other discarded maniacs. Indeed, he’ll find himself in good company, surrounded by others who believed the world fit only into their own manias; men such as Hitler and Stalin. Good Investing! Graham Summers

Gold Price Traded Down From Friday's High to Close at $1,333.80 Posted: 31 Jan 2011 12:40 PM PST Gold Price Close Today : 1333.80 Change : (6.90) or -0.5% Silver Price Close Today : 28.174 Change : 0.240 cents or 0.9% Gold Silver Ratio Today : 47.34 Change : -0.654 or -1.4% Silver Gold Ratio Today : 0.02112 Change : 0.000288 or 1.4% Platinum Price Close Today : 1788.80 Change : -3.60 or -0.2% Palladium Price Close Today : 813.65 Change : 1.15 or 0.1% S&P 500 : 1,286.12 Change : 9.78 or 0.8% Dow In GOLD$ : $184.31 Change : $ 2.02 or 1.1% Dow in GOLD oz : 8.916 Change : 0.098 or 1.1% Dow in SILVER oz : 422.09 Change : 2.39 or 0.6% Dow Industrial : 11,891.93 Change : 68.23 or 0.6% US Dollar Index : 77.74 Change : -0.504 or -0.6% Over the weekend the GOLD PRICE traded down from Friday's $1,345+ high. While Europe had it, gold eroded from 1338 to $1,325. New York Open took it up over $1,330, but just as quickly it slammed back down to $1,323. A long rise followed from 9:30 to 1:00 p.m. EST to $1,337, but gold fell again to $1,333.80, down $6.90, when Comex closed at 1:30. Balance of the day was sideways. Bottom line here is that Gold reacted today against Friday's rise, no surprise, and has since Wednesday formed a clear upside-down head and shoulders, which usually leads to higher prices. Gold would smash the meaning out of that formation if it closes below $1,325, and signal lower prices to come. Let us watch, though, and see whether Gold can clear $1,360. The SILVER PRICE let go of nothing today and grabbed another 24c to close Comex at 2817.4c, clearly punching through 2800c resistance. Low today was 2752c, which was roughly the high on Wednesday and Thursday. Thus silver appears to have escaped gravity. Today's highs fell at 2844c. On a longer term chart silver touched its 20 day moving average today (2820c), but, but, but the 20 dma closed BENEATH the 50 DMA (2867) four days ago, and that is NOT a bullish sign. Just as SILVER and GOLD closed confused today, so am I. Over my shoulder I am looking for a surprise rally that might take metals up to new highs and the GOLD/SILVER RATIO to a new low. On the other hand, the charts before my eyes are mumbling and whispering about lower prices -- and the time elapsed since that 3 January high seems so short. Well, I reckon if it was easy politicians and bankers would be doing it. Markets never pass up a chance to humble and bewilder. Look at silver and gold today. Gold, which in the face of the Egyptian "crisis" should have risen, fell instead. Silver, which ought to have followed or been weaker than gold, rose. That famous safe-haven the US dollar fell, too -- hard. A reader wrote asking me why I didn't mention the upheaval in Egypt as a cause of gold's rise on Friday. Mainly because I don't put much stock in so-called "safe haven" moves. If they run counter to the prevailing trend, they have no lasting effect. If they run with the trend, they only drive it a bit further. Either way, as soon as the crisis passes, the effect passes. Usually it's just noise to filter out. Speaking of Egypt, do any of you mushrooms besides me entertain a tee-tiny doubt about the "spontaneity" of the uprising in Egypt? Does anybody with even a tenth of a brain left believe that a big, mean government that has held power 29 years by jailing and otherwise silencing its opponents can be overthrown by a bunch of hollering nerds on Twitter or Tweeter or Tweety-Bird or whatever it's called? Now think about that. Yes, yes, the Spirit Of Democracy rises up against the Tyrant, arm in arm in solidarity with the Easter Bunny and Tweety Bird. Hmmmm. Friends, I am just a natural born durn fool from Tennessee, but even I suspect a set-up, more so when Bernard O'Bama and Handsome Hillary mumble about democracy, which looks so much like throwing Mubarak out of the rowboat that I can't tell the difference. Just to show that even a blind hog finds an acorn now and then, the execrable Franklin Roosevelt said, "Nothing happens by accident in politics. If it happened, somebody made it happen." All that the US dollar index accomplished was to reach up and touch its 20 DMA at 78.22, then fall back. Today the dollar lost 50.4 basis points (0.65%) to end the day at 77.735, but during the day made a low at 77.55, slightly lower than Friday's 77.61. The dollar index has now carved out for itself a new shelf of support at 77.60. Fall off that, and it will revisit 76. My bias still hints that the dollar will turn and rise, but my chief grounds for that is the dollar's long fall accompanied by madly optimistic silver and gold markets. The pendulum swings, so count on it, be it sooner or later. On a five-day chart today's "advance" in the Dow, 68.23 points, looks like no advance at all. The gate looks firmly closed on the Dow at 11,900. Last two day's trading have dragged the Dow down to its 20 DMA (11,802.37) which might stop the fall, or might merely ring the first warning bell. I'll take that second. Dow closed at 11,891.93 and the S&P gained 9.78 to close at 1,286.12 I know the January rule for stocks, "As goes January so goes the year." If stocks gain from 31 December to 31 January, they supposedly will gain for the year. Well, ride that horse if you want 'til he falls dead beneath you, but I want no ride at all on stocks, thanks very much. Sorrow, woe, and grief lie that way. (Dec. 2010 Dow closed 11,573.42; today, 11,891.93.) On this day in 1609 the Amsterdam Exchange Bank was founded. It accepted deposits of foreign coin and silver and gold bullion, and issued the depositors credits. By generally sound management as and exchange and warehouse, it managed to stay in business until the city took it over in 1790. Sooner or later, I reckon, all banks go bad. Argentum et aurum comparenda sunt -- -- Gold and silver must be bought. - Franklin Sanders, The Moneychanger The-MoneyChanger.com Phone: (888) 218-9226 or (931) 766-6066 © 2010, The Moneychanger. May not be republished in any form, including electronically, without our express permission. To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate in a bubble, primary trend way down. Whenever I write "Stay out of stocks" readers inevitably ask, "Do you mean precious metals mining stocks, too?" No, I don't.

Spending Cuts - January 31, 2011 Posted: 31 Jan 2011 11:11 AM PST Spending Cuts - Casey's Daily Dispatch [LIST] [*]Sign Up Now! [*]| [*]RSS Feed [*]| [*]Print this [*]| [*]Visit the Archives [*]| [*]Email to a Friend [*]| [*]Back to All Publications [/LIST] January 31, 2011 | [url]www.CaseyResearch.com[/url] Dear Reader, Most cautionary tales of gold hearken back to January 1980, its last major peak. Though there are important lessons to draw from this period, I don't think that's the best guidance in today's market. For one thing, the 1980 speculators were in some ways wrong. The same things that concerned investors then concern gold investors today: in...

Treasury Yields are Blinking Red Posted: 31 Jan 2011 10:50 AM PST Here's an excellent article by Mike Whitney discussing what Treasury yields are telling us about Ben Bernanke's intentions. - Ilene  Treasury Yields are Blinking Red Courtesy of MIKE WHITNEY, writing at CounterPunch Treasury yields are "blinking red", but the Fed keeps acting like nothing's wrong. What's the deal? Let's explain: Fed chairman Ben Bernanke's bond purchasing program (QE2) has sent the yield on the 30-year Treasury skyrocketing. At the same time, the the 2-year Treasury is stuck at a lowly 0.61. That means, the "yield curve" between the two bonds has grown steeper, which normally happens at the beginning of a recovery because investors are moving out of "risk free" bonds to riskier assets like stocks. Typically, the yield on the long-term bond will start to go down on its own because investors expect the Fed to raise short-term rates to curb potential inflation. But that's not happening this time. Why? And why should we care? The reason we should care is because the yield curve is signaling one of two things; inflation or default. What it is not signaling is a robust recovery. Remember, the Fed's main job is "price stability" which means keeping a lid on inflation. When the yield on long-term bonds spikes, then it's up to Bernanke to show the market he'll do what's necessary to fight inflation, that is, raise rates. It's a question of credibility. But Bernanke isn't interested in credibility. In fact, he's not only said that he will keep rates low for an "extended period of time" but also pledged to continue his $600 QE2 program until there's a "significant improvement in labor market." He was joined in his commitment by all of the active members of the FOMC. Now, granted, QE2 has boosted stock prices, but the extra liquidity has also inflated commodities prices (making it harder on consumers) and wreaked havoc in emerging markets forcing trading partners to control capital flows or raise rates to tamp down inflation. But QE2's greatest shortcoming is that is really doesn't create jobs as advertised. It's just more supply side, "trickle down" monetary theory designed to goose the market while workers languish in unemployment lines. Here's how the Wall Street journal's Kelly Evans summed it up: "...the limits of monetary policy are becoming clearer. History suggests any further easing probably would do too much for the stock market and asset prices, and too little for jobs. The only real fix is to lower the cost of U.S. workers relative to foreign rivals and machines, or else raise their bang for the buck. The latter, while clearly preferable, requires education and training that won't turn things around overnight." ("The Fed's Magic Show Appears to Be Over", Wall Street Journal) In other words, the Fed is planning to give every working man and woman in the US a big pay-cut so they can go nose-to-nose with foreign labor. You can see how this blends seamlessly with Obama's State of the Union Speech where he focused on "competition" as his central theme. More importantly, Obama reiterated his pledge to double exports in the next 5 years. The only way that can be achieved is by destroying the dollar. Here's a clip from an op-ed by Judy Shelton that explains what's going on: "Beware of President Obama's call for a doubling of U.S. exports over the next five years as a way to reduce the unemployment rate. The obvious quick route to export success for any nation is to depreciate its currency. Dollar depreciation is already being pushed by the Obama administration as the key solution for resolving our massive trade deficit with China..... ...The government will continue to run a large budget deficit, which must be financed by issuing more government debt. The debt is monetized when the Federal Reserve purchases it from the public. The effect is to increase the money supply. Inflationary monetary policy goes hand-in-hand with a falling dollar in foreign-exchange markets." ("The Wrong Way to Double Exports", Judy Shelton, Wall Street Journal) So, while working people and pensioners see their savings sliced in half to accommodate the globalist dream of an evenly-depressed world labor market; the investor class will get regular injections of Fed liquidity via QE2 to keep stocks "bubbly" and profits high. But large-scale monetary manipulation does involve some serious risks, as Deborah Blumberg points out in her WSJ article "Is Steep Yield Curve Signaling Pain to Come?". Here's an excerpt: "Some bond experts believe yields in the Treasurys market are signaling the U.S. could one day be stripped of its triple-A status as it confronts a bloated budget deficit with no clear plans to reduce debt. A peculiar distortion in the benchmark U.S. government-bond yield curve, which is the gap between two-year and 10-year yields, is pointing to worries that the U.S. could see its top-notch credit rating downgraded within several years, according to some experts.... ... "We've never seen these moves when we've had better economic data, and with Fed [rate] hikes on the way," she said. The yield curve is flashing "concerns about an unsustainable fiscal deficit and an eventual potential ratings downgrade," said Priya Misra, head of U.S. rates strategy at Bank of America Merrill Lynch.... In the past, steep yield curves have been associated with sovereign-debt-ratings downgrades. Japan was stripped of its triple-A status by Moody's in 1998 and Standard & Poor's in 2001....The consequences of a U.S. credit-ratings downgrade could devastate the economy, pushing up borrowing costs and threatening the dollar." ("Is Steep Yield Curve Signaling Pain to Come?", Deborah Lynn Blumberg, Wall Street Journal) The United States will not default because it pays its debts in its own currency, (and the Treasury can always just print more money) but the prospect of a ratings downgrade is quite real. That means it would cost considerably more to finance the debt. Also, long-term interest rates will rise sharply. That will crimp consumer spending, slow economic activity, and deal a death blow to the struggling housing market. Bernanke's playing a dangerous game. If he's not careful, he could trigger a run on the dollar.

Gold: Investment Demand In Flux Posted: 31 Jan 2011 10:32 AM PST Hard Assets Investor submits: By Julian Murdoch As gold prices skyrocketed last year, so too did investment demand, according to the World Gold Council's recent Gold Investment Digest. Although gold has since pulled back from its record $1,400/oz level, gold prices were still substantially higher in 2010 than the previous year. Last year, the average price of gold rose 25.9 percent year-over-year to $1,224.52, up from $972.35 in 2009. Much of that was driven by investment in ETFs and physical gold, as U.S. unemployment and lingering fears of further economic difficulties in Europe continued to support gold as a safe haven. ETFs: Surprises In GLD, India (Click to enlarge) ETF holdings monitored by the World Gold Council continued to grow in 2010, though not as quickly as we saw in 2009 — 361 tonnes vs. 617 tonnes. Still, by year-end, ETFs held a whopping 2,167.4 tonnes of metal. GLD saw the year's largest gains, with 147.1 tonnes added to the fund during 2010 to reach a total of 1,280.7 tonnes. But it's interesting to note that since the report's publication, GLD's holdings have dropped by more than 55 tonnes — its lowest levels since last May. This is a case where optimism can hurt. As Ong Yi Ling, investment analyst with Phillip Futures in Singapore, noted to TradeArabia, "The ETF is decreasing due to the optimism in the US economy. If we see concerns on unemployment coming back to haunt us, then perhaps we could see the ETF holding start to increase again." Another Complete Story »

MONDAY Market Excerpts Posted: 31 Jan 2011 10:24 AM PST Gold futures end month down 6.1% The COMEX April gold futures contract closed down $7.20 Monday at $1334.50, trading between $1323.60 and $1347.20 January 31, p.m. excerpts: (from Reuters) Gold notched its first monthly decline in six months as positive U.S. economic data coupled with fading worries about the euro zone debt crisis put a damper on the metal's rally. On the physical market though, premiums for gold bars were at their strongest since at least 2004 on tight supply and short-covering before the festive season in India and China, as well as physical buying driven by the deadly protests in Egypt…more (from TheStreet) Already reports indicate that banks in Egypt are running out of cash, which strengthens gold's case as a form of money during times of crisis. A million man march is scheduled for Tuesday and if Egypt shuts down the Suez canal, investors could flee to gold. Gold popped 1.7% Friday on a variety of factors, the strongest being the protests in Egypt that turned violent. Although steps were taken over the weekend to force President Mubarak out of office in a more peaceful way, the unrest is far from over…more (from Marketwatch) Safe-haven buying diminished Monday as concerns about Egypt's unrest eased. "Some of that flight to quality subsided," said Adam Klopfenstein, senior market analyst with Lind-Waldock. "A lot of the buying was done on Friday," and as the situation didn't spread to other Arab countries and the regime remained in place, some decided to take profits, Klopfenstein added. U.S. equities opened higher Monday, also siphoning some support for metals, as investors tempered worries about Egypt with solid earnings…more (from Dow Jones) Stronger than expected U.S. economic data Monday further undercut investors' desire for gold. U.S. consumers increased their spending by 0.7% in December, slightly more than economists had expected, and Americans' incomes rose by 0.4% for a second month in a row. Separately, the Institute for Supply Management reported its Chicago Business Barometer–a survey of regional purchasing managers–climbed to its highest reading since July 1988 and marked the 16th straight month of economic expansion…more (from Bloomberg) Gold futures for April delivery dropped 0.5% to settle at $1,334.50 an ounce on the Comex. The metal slumped 6.1% in January. Dennis Gartman, economist and editor of the Gartman Letter advised clients to buy gold today after the metal bounced off the 150-day moving average, the fourth time that's happened in the past year. The price fell to $1,309.10 on Jan. 28, near the key technical indicator, before rebounding. "It is time to return to gold now that it has corrected," Gartman said in his newsletter…more see full news, 24-hr newswire…

The Continuing Argument Over Fiscal Policy Posted: 31 Jan 2011 10:05 AM PST I note that a Bloomberg.com article reported that Jean-Claude Trichet – whom I refer to as "socialist moron Keynesian euro-trash halfwit," but which everyone else refers to as European Central Bank President – is said to have said, while "speaking on behalf of the world's central bankers," that "the global economy has recovered better than expected, boosting inflation pressures in emerging markets." Hahaha! What Mr. Trichet literally said is that, "It's clear that it is extremely important that we all keep control of inflation expectations, and that calls for appropriate decisions," which is actually a relief, because I hate it when something is extremely important, yet not in control, like when my wife is so mad at me about something that is, apparently, extremely important, yet her anger is so uncontrolled in that she is stammering in rage "You…you…you…!" And if I try to help her by asking, "What in the hell are you stammering about, now?" oddly enough, she gets worse! And her eyes kind of bug out, too! I mean, I can't win here! You can see the kind of crap that I have to put up with all the time! And it doesn't get any better with this Trichet character, either, as he says that it is clear, and that it is extremely important, to "keep control of inflation expectations" which, in this case, is apparently achieved by saying lying, stupid things like how the economy has recovered "better than expected," which is only true if you expected the world to erupt in anarchist flames where everything gets destroyed in a hyperinflationary catastrophic bankruptcy that sweeps around the world while flying saucers invade the Earth and enslave us all, or Democrats invade the Earth and enslave us all, one's as bad as the other, probably. And so, explains Mr. Trichet, the "recovery," which is better than expected, is why price inflation is up!  Hahaha! And the lie of a recovering economy makes it suddenly OK that the poor, and everyone else, for that matter, slip a little closer to starvation because rising prices for food and energy consumes all their income? What kind of crazy, demonic government is that? The same kind as America has, that's what kind! Hahaha! And that – that! – is why I am a proud Tea Party member who wishes us the best, and who laments the fact that it is Far, Far Too Late (FFTL) to do anything, like a car going 90 miles an hour sailing off a cliff after careening crazily down a perilous and steep mountain road. As the car sails though the air, two guys inside are arguing, one saying, "More spending!" and the other saying, "Less taxes!" Now, there are those that do not understand that such examples of Real Mogambo Humor (RMH) are very, very subtle, and thus not suited to the masses, who do not see the glaring, obvious connection between comparative economic virtues of more spending or less taxes and the prospect of a speeding car going over a cliff and smashing onto the rocks below, everyone inside screaming in fear all the way down, until the sudden stop kills everyone in a horrible, gruesome death milliseconds before the car bursts into flames, destroying everything, including whatever the car landed upon, probably an endangered species of some kind, or somebody's mailbox, which aren't cheap. And when people gather around to see what happened, they will ask, "What happened?"  If they did, then I would tell them that two guys in the car went over a cliff because they were arguing about fiscal policy when they should have been, instead, in total agreement to complain about the Federal Reserve creating so freakishly much money!" If I did, I am sure that they would look at me with those same blank looks of incomprehension and befuddled stupefaction that are on the faces of the people in the security video that shows I am peacefully standing in line, waiting for a cashier, and I am exercising my First Amendment rights by passing the time saying to the cashiers as I waited, "Take your time, morons! The longer you wait to ring up my sale, the utility of my purchase is still new and undiminished, even as my money becomes more worthless, losing purchasing value with every tick of the clock – tick tock, tick tock, tick tock! –  because the foul Federal Reserve is creating $100 billion of new money Per Freaking Month (PFM)!" I expected, as I always expect, someone to say, "Well said! Well said, handsome, intelligent stranger to whom the bewildering world of economics seems but children's toys!" Well, they didn't. So you can see on the video where I tell them, "The Federal Reserve is creating money out of thin air so that the corrupt government can borrow the money and spend it, which increases the money supply, which distorts everything, leading to weird bubbles and busts, mostly busts, fads and flops, mostly flops, and inflation, inflation, inflation that is going to eat you alive!" This is when the security video shows the security guard coming over and asking me to leave, which I do, but not before saying, in my most melodramatic Mogambo eloquence and with a theatrical dismissive wave of my arm, "You have been warned, earthlings!" It's too bad that the video does not have a sound track, and thus there is no official record of my voice trailing off into the distance, saying, "So buy gold and silver, you morons! Gold and silver!" I hope I did some good! The Mogambo Guru for The Daily Reckoning The Continuing Argument Over Fiscal Policy 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."

The Meddling of Global “Thinkers” Posted: 31 Jan 2011 10:00 AM PST Now here's something interesting. Every year, Foreign Policy magazine produces a list of the Top 100 Global Thinkers in the World. We picked up the list…looking for our own name. But wait… The key is that these are "global" thinkers. They're not just thinkers, in other words, they are people who are thinking about how people on the other side of the planet should conduct their business. We were suspicious even before we looked at the list. "Foreign Policy"? We're against it. Why should we worry about things that don't concern us? "Well… You can't put your head in the sand," you might reply. "You have to be concerned, because things that happen overseas do affect you." Yes, that is true. They affect us. But so does the price of whiskey, the traffic on the Beltway, and the weather. None of them is worth thinking about. We can do nothing about them. And it would be indecent for us to try. Imagine if we took an interest in the whiskey distiller's business. What could we do? Try to force him to lower his prices? Try to show him how to operate more efficiently – as if we could know? Set up a buyers' cartel to negotiate for lower prices? At best, we'd be wasting our time. At worse, we might succeed! Then, whiskey producers would be responding not to market forces…but to meddlers' forces. What a mess that would be! Meddling with things close at hand is bad enough. Meddling with things far away is worse. Remember our Daily Reckoning dictum: ignorance increases by the square of the distance. The farther you get away the harder it is to tell what is going on. The details disappear. All you can make out are the rough outlines. Shadows…reflections…silhouettes… In the darkness, you step on every rake and fall into every hole. The next thing you know, you are calling for "reforms" in countries you've never even visited…setting the price of China's money…and invading Iraq. But let's look at who Foreign Policy magazine thinks are the 100 Top Global Thinkers. Uh oh. In the first and second place are Warren Buffett and Bill Gates. Hmmm… They're smart guys. But what makes them "thinkers"? What have they been thinking about? And what are their thoughts on the subject? FP says they are there, not for their contributions to the wealth of mankind, but for their philanthropic activities. Wait a minute. What's philanthropy got to do with thinking? Okay… We're stumped on that one… So, who's the number 3 thinker? Barack Obama! Hold on… This is getting silly. Have you ever heard Barack Obama come up with an original thought? Or any kind of thought worthy of the word? No. That's not his thing. He's a politician. Politicians are not thinkers. They may be doers…but they're not thinkers. Obama gives us plenty of empty expressions and hollow words – "change you can believe in"…"hope"… "winning the future" – but real thoughts? Original ideas? Nope. Generally, politicians are not thinkers. Occasionally, you get a politician who pretends to be a thinker – such as Princeton University chief Woodrow Wilson. But he almost invariably turns out to be a jackass and a fool. There must be exceptions – Marcus Aurelius and Thomas Jefferson come to mind. But they seem ill-suited to the political profession and probably should have eschewed public office in the first place. So let's keep moving. There must be someone on this list who is a real thinker. Let's look back at last year…let's see…who was FP's top thinker? Ben Bernanke! Well, that does it for us. What's the matter with these people? Can't they tell the different between tired hacks with worn-out, crackpot ideas…and real thinkers? The Foreign Policy editors should do some real thinking of their own. Then, maybe they'd mind their own business. Regards, Bill Bonner for The Daily Reckoning The Meddling of Global "Thinkers" 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."

Monthly Gold Charts From Trader Dan Posted: 31 Jan 2011 09:55 AM PST Dear CIGAs, Click either chart to enlarge this month's action in Gold in PDF format with commentary from Trader Dan Norcini

Hourly Action In Gold From Trader Dan Posted: 31 Jan 2011 09:49 AM PST Dear CIGAs, Gold was strong upon its opening overnight in Asian trading but could not hold onto its gains as longs used the rally to lighten up further and reduce their exposure. While that is not unexpected considering the technical posture of the market, it is also disappointing that with the CCI index making yet another all time high today as commodities across the board were soaring, the yellow metal simply went nowhere. It appears that the "growth trades" are now the new norm for the time being with gold being jettisoned in favor of equities. You'll note that this is the reason that gold is down in unison with the Dollar as I explained in last week's comments. The "risk trades" were still being implemented but gold was not a part of them, at least for today. There was also the usual, "buy the rumor, sell the fact" trade associated with Egypt in the sense that it did not fall apart completely over the weekend, although that is a matter of perspective. Traders were fearing a region-wide proliferation of the unrest on Friday and by today they were practically bored by it all. We'll have to see how the metal handles any potential retest of last week's lows. I would actually prefer to see it move lower and then bounce away as that would more clearly denote those lows at the end of the recent price retracement but rest assured that the perma bears are attempting a push down through those levels. Whether or not it holds will depend on the willingness of longs to stop liquidating. As has been the case with this market since its decade long bull market began – the key to any upward progress is the willingness of managed money and other speculative interest to buy into it. If the specs continue dropping off of the long side, the market will move lower. Granted, they are selling into strong hands but that is little consolation for those who might be long the futures market or the ETF. When the exchange released the Open Interest figures from Friday's sharp price recovery and there was a sizeable reduction, I knew we were in trouble. Still, the metal has not given back all of its gains from Friday and that still gives the bulls the opportunity to hold it here if they will simply stop running. Demand for the metal is incredibly strong on the physical side of things and if the specs would stop disgorging their longs, the market could base here. We do know however that the bullion banks are buying like crazy as price descends. With the managed money side of things down to long side levels last seen when gold was trading at $920, there is not sufficient fresh selling to break the market down below $1300. That requires a spec rout and liquidation selling. We will have to see if those left in the market on the long side have the financial wherewithal to stand pat. The Dollar chart looks beyond awful right now with failure to hold today's low setting the market up for a move down towards 77.20. Dollar bulls need to at the very least take out today's high to stick a short term bottom in near 77.80. Bonds have broken back down once again (no surprise) giving up all of Friday's Egyptian turmoil-based gains plus some. They continue to tread water with Fed buying under the market preventing a deeper sell off. Watch for them to immediately pop higher on the reopen of electronic trade early this evening. As mentioned earlier, the CCI went on to set another all time record high in today's session as Bernanke's "the only thing we really need to fear about inflation is the unreasonable fear of inflation", took yet another round house kick upside the head. Crude oil shot up to a fresh yearly high just shy of $93 as that market is attempting to forge a solid close above $92 on the charts. If it does, it is going to move towards $95. Brent crude, which is arguably a better representative of crude prices globally shot up to $101.67 and as I write this is trading above the $100 bbl mark. But I am not the least bit concerned about these rising food and energy prices because Ben Kenobi has told me that the Force is strong with him and he can sweep it all away by merely waving his hand. Gold is probably the Darth Vader of the Federal Reserve universe so this time I am rooting for the dark side. A rising commodity index that is firing on all three cylinders, base metals, energy and food, is not conducive to continued selling pressure on the precious metals side of the sector. I suspect that the Jedi at the Federal Reserve are tremendously disconcerted over getting zapped by some lightning coming out of gold. The HUI was caught between a rising equities market and falling gold prices today but managed to hang in there fairly well. Obviously, it would have been beneficial to the cause of the precious metals for the thing to have gained on the day but it is still holding above 500 at this point. We need to see it get a close above 517 ( a strong close) to turn things solidly around. I should point out that its reluctance to stay below 500 is resulting in the 10 day moving average beginning to flatten out although it is still moving lower. We will be keeping close tabs on this index. Click charts to enlarge in PDF format with commentary from Trader Dan Norcini

Gold and silver decline is over, Turk tells King World News Posted: 31 Jan 2011 09:44 AM PST 5:40p ET Monday, January 31, 2011 Dear Friend of GATA and Gold (and Silver): The recent decline in gold and silver prices is over as oil and other commodity prices continue to rise, GoldMoney founder and GATA consultant James Turk tells King World News. Excerpts from the interview can be found at the King World News blog here: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/1/31_Ja... Or try this abbreviated link: http://tinyurl.com/4ctpfc7 CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action committee Inc. ADVERTISEMENT Prophecy Resource Spins Off Platinum/Palladium Venture: World-Class PGM Deposit in Yukon Company Press Release, January 18, 2011 VANCOUVER, British Columbia -- Prophecy Resource Corp. (TSX-V:PCY)and Pacific Coast Nickel Corp. announce that they have agreed that PCNC will acquire Prophecy's Nickel PGM projects by issuing common shares to Prophecy. PCNC will acquire the Wellgreen PGM Ni-Cu and Lynn Lake nickel projects in the Yukon Territory and Manitoba respectively by issuing up to 550 million common shares of PCNC to Prophecy. PCNC has 55.7 million shares outstanding. Following the transaction: -- Prophecy will own approximately 90 percent of PCNC. -- PCNC will consolidate its share capital on a 10 old for one new basis. -- Prophecy will change its name to Prophecy Coal Corp. and PCNC will be renamed Prophecy Platinum Corp. -- Prophecy intends to distribute half of its PCNC shares to shareholders pro-rata in accordance with their holdings. Based on the closing price of the common shares of PCNC on January 17, $0.195 per share, the gross value of the transaction is $107,250,000. For the complete announcement, please visit: http://prophecyresource.com/news_2011_jan18.php Join GATA here: Phoenix Investment Conference and Silver Summit Renaissance Glendale Hotel and Spa Friday-Saturday, February 18-19, 2011 Glendale, Arizona http://cambridgehouse3.com/conference-details/phoenix-investment-confere... Support GATA by purchasing a colorful GATA T-shirt: http://gata.org/tshirts Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: http://www.goldrush21.com/ Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: http://www.gata.org To contribute to GATA, please visit: http://www.gata.org/node/16 ADVERTISEMENT Sona Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit, Extending the Mineralization of the Southwest Vein on the Property Company Press Release, October 27, 2010 VANCOUVER, British Columbia -- Sona Resources Corp. reports on five drillling holes in the third round of assay results from the recently completed drill program at its 100 percent-owned Elizabeth Gold Deposit Property in the Lillooet Mining District of southern British Columbia. Highlights from the diamond drilling include: -- Hole E10-66 intersected 17.4g gold/ton over 1.54 metres. -- Hole E10-67 intersected 96.4g gold/ton over 2.5 metres, including one assay interval of 383g of gold/ton over 0.5 metres. -- Hole E10-69 intersected 85.4g gold/ton over 4.03 metres, including one assay interval of 230g gold/ton over 1 metre. Four drill holes, E10-66 to E10-69, targeted the southwestern end of the Southwest Vein, and three of the holes have expanded the mineralized zone in that direction. The Southwest Vein gold mineralization has now been intersected over a strike length of 325 metres, with the deepest hole drilled less than 200 metres from surface. "The assay results from the Southwest Zone quartz vein continue to be extremely positive," says John P. Thompson, Sona's president and CEO. "We are expanding the Southwest Vein, and this high-grade gold mineralization remains wide open down dip and along strike to the southwest." For the company's full press release, please visit: http://sonaresources.com/_resources/news/SONA_NR19_2010.pdf

Hugo Salinas Price: Monetizing silver in British pounds Posted: 31 Jan 2011 09:33 AM PST 5:30p Monday, January 31, 2011 Dear Friend of GATA and Gold (and Silver): The presentation of Hugo Salinas Price, president of the Mexican Civic Association for Silver, at last week's Cheviot Asset Management Sound Money Conference in London, described how silver might gradually be monetized in British pounds. You can find the presentation at the association's Internet site here: http://www.plata.com.mx/mplata/documentos/images/Hugo_Salinas_Price_Lond... CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc. ADVERTISEMENT Sona Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit, Extending the Mineralization of the Southwest Vein on the Property Company Press Release, October 27, 2010 VANCOUVER, British Columbia -- Sona Resources Corp. reports on five drillling holes in the third round of assay results from the recently completed drill program at its 100 percent-owned Elizabeth Gold Deposit Property in the Lillooet Mining District of southern British Columbia. Highlights from the diamond drilling include: -- Hole E10-66 intersected 17.4g gold/ton over 1.54 metres. -- Hole E10-67 intersected 96.4g gold/ton over 2.5 metres, including one assay interval of 383g of gold/ton over 0.5 metres. -- Hole E10-69 intersected 85.4g gold/ton over 4.03 metres, including one assay interval of 230g gold/ton over 1 metre. Four drill holes, E10-66 to E10-69, targeted the southwestern end of the Southwest Vein, and three of the holes have expanded the mineralized zone in that direction. The Southwest Vein gold mineralization has now been intersected over a strike length of 325 metres, with the deepest hole drilled less than 200 metres from surface. "The assay results from the Southwest Zone quartz vein continue to be extremely positive," says John P. Thompson, Sona's president and CEO. "We are expanding the Southwest Vein, and this high-grade gold mineralization remains wide open down dip and along strike to the southwest." For the company's full press release, please visit: http://sonaresources.com/_resources/news/SONA_NR19_2010.pdf Join GATA here: Phoenix Investment Conference and Silver Summit Renaissance Glendale Hotel and Spa Friday-Saturday, February 18-19, 2011 Glendale, Arizona http://cambridgehouse3.com/conference-details/phoenix-investment-confere... Support GATA by purchasing a colorful GATA T-shirt: http://gata.org/tshirts Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: http://www.goldrush21.com/ Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: http://www.gata.org To contribute to GATA, please visit: http://www.gata.org/node/16 ADVERTISEMENT Prophecy Resource Spins Off Platinum/Palladium Venture: World-Class PGM Deposit in Yukon Company Press Release, January 18, 2011 VANCOUVER, British Columbia -- Prophecy Resource Corp. (TSX-V:PCY)and Pacific Coast Nickel Corp. announce that they have agreed that PCNC will acquire Prophecy's Nickel PGM projects by issuing common shares to Prophecy. PCNC will acquire the Wellgreen PGM Ni-Cu and Lynn Lake nickel projects in the Yukon Territory and Manitoba respectively by issuing up to 550 million common shares of PCNC to Prophecy. PCNC has 55.7 million shares outstanding. Following the transaction: -- Prophecy will own approximately 90 percent of PCNC. -- PCNC will consolidate its share capital on a 10 old for one new basis. -- Prophecy will change its name to Prophecy Coal Corp. and PCNC will be renamed Prophecy Platinum Corp. -- Prophecy intends to distribute half of its PCNC shares to shareholders pro-rata in accordance with their holdings. Based on the closing price of the common shares of PCNC on January 17, $0.195 per share, the gross value of the transaction is $107,250,000. For the complete announcement, please visit: http://prophecyresource.com/news_2011_jan18.php

Policy makers at Davos see dollar losing reserve dominance Posted: 31 Jan 2011 09:25 AM PST By Paul Carrel Reuters Monday, January 31, 2011 http://www.reuters.com/article/2011/01/31/uk-davos-dollar-idUKTRE70U3X82... DAVOS, Switzerland -- The U.S. dollar's role as a reserve currency will diminish in the coming years as Asian economies like China grow and countries seek to diversify their monetary holdings, policymakers said on Friday. The U.S. Federal Reserve's policy of quantitative easing -- essentially printing money -- and a call by France to look at ways to wean the world off the dollar as the sole reserve money have put the U.S. currency in the spotlight. "I'm more optimistic about the euro gaining strength as a potential reserve currency," Bank of Israel Governor Stanley Fischer said during a panel discussion at the annual World Economic Forum here. ... Dispatch continues below ... ADVERTISEMENT Prophecy Resource Spins Off Platinum/Palladium Venture: World-Class PGM Deposit in Yukon Company Press Release, January 18, 2011 VANCOUVER, British Columbia -- Prophecy Resource Corp. (TSX-V:PCY)and Pacific Coast Nickel Corp. announce that they have agreed that PCNC will acquire Prophecy's Nickel PGM projects by issuing common shares to Prophecy. PCNC will acquire the Wellgreen PGM Ni-Cu and Lynn Lake nickel projects in the Yukon Territory and Manitoba respectively by issuing up to 550 million common shares of PCNC to Prophecy. PCNC has 55.7 million shares outstanding. Following the transaction: -- Prophecy will own approximately 90 percent of PCNC. -- PCNC will consolidate its share capital on a 10 old for one new basis. -- Prophecy will change its name to Prophecy Coal Corp. and PCNC will be renamed Prophecy Platinum Corp. -- Prophecy intends to distribute half of its PCNC shares to shareholders pro-rata in accordance with their holdings. Based on the closing price of the common shares of PCNC on January 17, $0.195 per share, the gross value of the transaction is $107,250,000. For the complete announcement, please visit: http://prophecyresource.com/news_2011_jan18.php "We ourselves are diversifying into currencies which we would never have put in the reserves before, including the Australian dollar and so forth," he added. "I think people will diversify their reserves." French President Nicolas Sarkozy is trying to rally the Group of 20 powers to the idea of a more varied monetary system after decades of the dollar being the world's reserve currency and a major unit of international trade settlement. The dollar debate comes at a time when many countries are tempted to let their currency drop to promote exports and growth after the worst downturn since World War Two, even if that can be at each others' expense. Bank of Canada Governor Mark Carney and Fischer anticipated that, in the long run, Asian monies would have a greater role as reserve currencies. "I agree with Stan (Fischer) that over time there will be more of a multi-polar system. Other currencies will play a central role in reserves," he said. "The (Chinese) renminbi, over time, should have a role as a reserve currency." Turkish Finance Minister Mehmet Simsek saw the United States' quantitative easing policy leading to a diversification of reserve holdings. "If the U.S. continues the way it is ... certainly countries will look for alternatives because you can't print so much money and expect no consequences," he said. "Ultimately the centre of gravity is shifting toward the East," Simsek added. "Certainly 10 years from now there could be a very different landscape." * * * Join GATA here: Phoenix Investment Conference and Silver Summit Renaissance Glendale Hotel and Spa Friday-Saturday, February 18-19, 2011 Glendale, Arizona http://cambridgehouse3.com/conference-details/phoenix-investment-confere... Support GATA by purchasing a colorful GATA T-shirt: http://gata.org/tshirts Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: http://www.goldrush21.com/ Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: http://www.gata.org To contribute to GATA, please visit: http://www.gata.org/node/16 ADVERTISEMENT Sona Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit, Extending the Mineralization of the Southwest Vein on the Property Company Press Release, October 27, 2010 VANCOUVER, British Columbia -- Sona Resources Corp. reports on five drillling holes in the third round of assay results from the recently completed drill program at its 100 percent-owned Elizabeth Gold Deposit Property in the Lillooet Mining District of southern British Columbia. Highlights from the diamond drilling include: -- Hole E10-66 intersected 17.4g gold/ton over 1.54 metres. -- Hole E10-67 intersected 96.4g gold/ton over 2.5 metres, including one assay interval of 383g of gold/ton over 0.5 metres. -- Hole E10-69 intersected 85.4g gold/ton over 4.03 metres, including one assay interval of 230g gold/ton over 1 metre. Four drill holes, E10-66 to E10-69, targeted the southwestern end of the Southwest Vein, and three of the holes have expanded the mineralized zone in that direction. The Southwest Vein gold mineralization has now been intersected over a strike length of 325 metres, with the deepest hole drilled less than 200 metres from surface. "The assay results from the Southwest Zone quartz vein continue to be extremely positive," says John P. Thompson, Sona's president and CEO. "We are expanding the Southwest Vein, and this high-grade gold mineralization remains wide open down dip and along strike to the southwest." For the company's full press release, please visit: http://sonaresources.com/_resources/news/SONA_NR19_2010.pdf

Maybe there can be several reserve currencies, Rickards tells King World News Posted: 31 Jan 2011 09:20 AM PST 5:17p ET Monday, January 31, 2011 Dear Friend of GATA and Gold: Interviewed by Eric King of King World News, market analyst Jim Rickards speculates on a new world financial system that uses several reserve currencies. Rickards also discusses China's need for more gold to become an economic superpower. The interview is 13 minutes long and you can listen to it at King World News here: http://kingworldnews.com/kingworldnews/Broadcast/Entries/2011/1/31_Jim_R... CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc. ADVERTISEMENT Sona Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit, Extending the Mineralization of the Southwest Vein on the Property Company Press Release, October 27, 2010 VANCOUVER, British Columbia -- Sona Resources Corp. reports on five drillling holes in the third round of assay results from the recently completed drill program at its 100 percent-owned Elizabeth Gold Deposit Property in the Lillooet Mining District of southern British Columbia. Highlights from the diamond drilling include: -- Hole E10-66 intersected 17.4g gold/ton over 1.54 metres. -- Hole E10-67 intersected 96.4g gold/ton over 2.5 metres, including one assay interval of 383g of gold/ton over 0.5 metres. -- Hole E10-69 intersected 85.4g gold/ton over 4.03 metres, including one assay interval of 230g gold/ton over 1 metre. Four drill holes, E10-66 to E10-69, targeted the southwestern end of the Southwest Vein, and three of the holes have expanded the mineralized zone in that direction. The Southwest Vein gold mineralization has now been intersected over a strike length of 325 metres, with the deepest hole drilled less than 200 metres from surface. "The assay results from the Southwest Zone quartz vein continue to be extremely positive," says John P. Thompson, Sona's president and CEO. "We are expanding the Southwest Vein, and this high-grade gold mineralization remains wide open down dip and along strike to the southwest." For the company's full press release, please visit: http://sonaresources.com/_resources/news/SONA_NR19_2010.pdf Join GATA here: Phoenix Investment Conference and Silver Summit Renaissance Glendale Hotel and Spa Friday-Saturday, February 18-19, 2011 Glendale, Arizona http://cambridgehouse3.com/conference-details/phoenix-investment-confere... Support GATA by purchasing a colorful GATA T-shirt: http://gata.org/tshirts Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: http://www.goldrush21.com/ Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: http://www.gata.org To contribute to GATA, please visit: http://www.gata.org/node/16 ADVERTISEMENT Prophecy Resource Spins Off Platinum/Palladium Venture: World-Class PGM Deposit in Yukon Company Press Release, January 18, 2011 VANCOUVER, British Columbia -- Prophecy Resource Corp. (TSX-V:PCY)and Pacific Coast Nickel Corp. announce that they have agreed that PCNC will acquire Prophecy's Nickel PGM projects by issuing common shares to Prophecy. PCNC will acquire the Wellgreen PGM Ni-Cu and Lynn Lake nickel projects in the Yukon Territory and Manitoba respectively by issuing up to 550 million common shares of PCNC to Prophecy. PCNC has 55.7 million shares outstanding. Following the transaction: -- Prophecy will own approximately 90 percent of PCNC. -- PCNC will consolidate its share capital on a 10 old for one new basis. -- Prophecy will change its name to Prophecy Coal Corp. and PCNC will be renamed Prophecy Platinum Corp. -- Prophecy intends to distribute half of its PCNC shares to shareholders pro-rata in accordance with their holdings. Based on the closing price of the common shares of PCNC on January 17, $0.195 per share, the gross value of the transaction is $107,250,000. For the complete announcement, please visit: http://prophecyresource.com/news_2011_jan18.php

Barrick CFO: Central Banks may shift more reserves into gold Posted: 31 Jan 2011 09:12 AM PST by Phred Dvorak January 31, 2011 (The Wall Street Journal) — The world's biggest gold producer expects central banks will likely shift more of their monetary reserves into gold this year, as they worry about soaring stockpiles of U.S. dollars. Jamie Sokalsky, chief financial officer of Canada's Barrick Gold Corp., said there has been a "sea change" in the past year, with central banks that had stocked up on U.S. dollars starting to buy more gold to diversify their holdings. Many forecasters say that trend will continue this year, since global currency reserves are approaching the $10 trillion mark — the bulk of it in U.S. dollars — even as a faltering economy and climbing debt load look set to depress the value of those dollars… Central banks are "concerned about how much they're holding in U.S. dollars," said Mr. Sokalsky. "There aren't that many alternatives." Barrick itself doesn't forecast how much gold central banks are likely to buy, he said. Barrick keeps close watch on currency values, particularly that of the U.S. dollar—because they affect both the price of the gold the company mines and the cost of digging the metal out of the ground. … a weakening greenback could [...] raise the cost of Barrick's operations in countries from Papua New Guinea to Argentina. Around a third of Barrick's costs are denominated in currencies other than the U.S. dollar. …… To fend off sudden increases in expense, Barrick watches movements in the Australian dollar closely and hedges aggressively. [source] RS View: Here's an encouraging thought for long-time conspiracists: you can't have it both ways. As the world's largest producer, either Barrick is in league with the central bankers of the world as a penultimate "insider", or else they are not. If they are not, then a lot of past rancor is merely so much noise on the wind, along with much that yet prevails. However, if they are, then here is yet another roadsign to count among the increasing number of official blessings being openly expressed upon the bright future of the gold market. [Regarding my own perspective on the matter, Barrick and her peers got themselves hip deep in the metal-hedging mire that pages upon pages have already detailed like so much water under the bridge. That ridiculous scene then had to run its sloppy collision course with permanent extinction, which it largely now already has, and now we all hear the same harpstrings as we float more or less together -- some pushing, some pulling, some shyly, some boldly -- into the future.]

$2 Billion Up in Flames Posted: 31 Jan 2011 09:00 AM PST The 5 min. Forecast January 31, 2011 11:53 AM by Addison Wiggin - January 31, 2011 [LIST] [*] Poor return on investment: How $2 billion a year is literally going up in flames [*] Byron King with a chart that helps answer a burning question about Egypt: Why now? [*] China seeks more gold, cuts another U.S. energy deal [*] Rotten economy forces a merger of “till death do us part” with “rest in peace” [*] “Our very lifestyle makes us less competitive”… Readers sound off on U.S. labor costs [/LIST] Here’s a helpful reminder as we begin the week: Out of every $100 Uncle Sam spends, 52 cents buys this: Every year, Washington sends $2 billion in aid to the regime of Hosni Mubarak; $1.3 billion of that is for his military. Egypt is the No. 2 recipient of foreign aid, after Israel. Right now, the return on investment doesn’t look very good. Rising food prices were the cataly...

Social Unrest Rises With Food Prices Posted: 31 Jan 2011 09:00 AM PST Here's a helpful reminder as we begin the week: Out of every $100 Uncle Sam spends, 52 cents buys this: Every year, Washington sends $2 billion in aid to the regime of Hosni Mubarak; $1.3 billion of that is for his military. Egypt is the No. 2 recipient of foreign aid, after Israel. Right now, the return on investment doesn't look very good. Rising food prices were the catalyst that set off long-simmering anger over repression and corruption. But what exactly set off the food prices? "I believe this depicts a major aspect of Egypt's problem," says Outstanding Investments editor Byron King of the graph below: "As of 2010, Egypt began consuming all the oil that it extracts. Egypt no longer exports oil. Interesting timing for social unrest, don't you think? "Here's what the numbers show. Egypt's net oil exports have been falling each year since the mid-1990s. So for the past 15 years or so, Egypt's government has been raising less and less income with which to offer food and fuel subsidies to the teeming masses in the country's expansive slums." Without those subsidies, huge numbers of people in Egypt – population 85 million – would not eat. As we mentioned last week, Egypt is the world's biggest wheat importer. "In the past few years," Byron continues, "Egypt has imported about 40% of its food overall and 60% of its wheat. Egypt buys the food on world markets, paying world prices. "In the past year or so, as net oil exports shifted down to zero, the food problem became even worse for Egypt. World wheat production is down, and global export markets are tightening." You know the story: drought in Russia, floods in Australia and so on. And at the very moment Egypt has less oil revenue, it's shelling out more for food. And the subsidies go only so far. "The bottom line is that energy is a problem for Egypt, compounded by revenue shortfalls, compounded by large and growing population, compounded by the need for food imports. "It's an explosive mix, and now the fuse has burnt down. I don't doubt that this all is why we're seeing riots in the streets." Addison Wiggin for The Daily Reckoning Social Unrest Rises With Food Prices 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."

Paolo Lostritto: Don't Retreat, Reload Your Gold Posted: 31 Jan 2011 08:45 AM PST Source: Brian Sylvester of The Gold Report 01/31/2011 When it comes to the 2011 gold price correction, Wellington West Senior Analyst Paolo Lostritto says he's seen worse. He counsels investors to "use this opportunity," if they haven't already, to rebuild gold positions because he foresees upside by the second half of 2011. Of the 19 companies he covers, only a handful will outperform the broader market in any given year. We know you want those names. And in this exclusive interview with The Gold Report, Paolo gives them to you. His colleague, Senior Research Analyst Steve Parsons, also shares his insights on a few of his favorites. The Gold Report: Reuters reported that for the fourth time in two months, China has boosted the reserve requirement ratio (RRR) for their largest banks in an effort to curb inflation. Thailand and South Korea have made similar moves in recent weeks, and the first RRR move in China was made after inflation reached above 5% in November. Do...

Jim's Mailbox Posted: 31 Jan 2011 08:41 AM PST Kick The Can Down The Economic Road CIGA Eric Earning (sigh – as this heavily massaged and adjusted number is not what it seems) and spending more and save less philosophy has transitioned from economic choice to necessity for Americans. America's reliance on personal consumption, more commonly known as "spending", kicks the can down the road. The belief that economic problems are defined by weakness real estate is misguided. Real estate continues to be only a minor contributor to gross domestic product (GDP). It's contribution to GDP was only 6% at height of the real estate bubble. Residential Fixed Investment (RFI) As A %GDP and Residential Fixed Investment (RFI) As A %GDP Average from 1947: Real estate's importance since 2000, a point often missed by the headlines, resided in its ability to support and enhance leveraged consumption. Many Americans considered their homes as piggy banks for extra consumption prior to the collapse in 2006. The reliance on consumption to support GDP, however, did not fade with the decline of the real estate market. In fact, yesterday's personal consumption expenditures as a percentage of GDP nearly eclipsed the all-time highs achieved in 2009 (see chart below). In other words, spend more and save less, or the driving forced behind ongoing consumption bubble and economic imbalances within U.S., is live and well. Personal Consumption Expenditures (PCE) As A %GDP and Personal Consumption Expenditures As A %GDP Average from 1947 How's the consumption bubble maintained as real estate fades? The public sector through a combination of infinite quantitative easing (currency devaluation) and stimulus has replaced real estate as the boot that kicks the can down the economic road. The public sector spending which represented 17% of GDP in 2000 has surpassed 20% in 2010. Federal spending at 8.3% of GDP has jumped 43% during this period. Government Consumption Expenditures and Gross Investment (GCEI) As A %GDP Average from 1947: Federal Consumption Expenditures and Gross Investment (FED) As A %GDP Average from 1947: Investment and savings are the foundation of any sustainable economic recovery or economy. Investment in the US continues to flounder at levels not seen since the Great Depression. Unadjusted savings, heavily influenced by statistical assumptions and adjustments, thus, making historical comparisons meaningless, have turned but remain challenged despite the economic collapse. Gross Domestic Private Investment (GDPI) As A %GDP and Gross Domestic Private Investment (GDPI) As A %GDP Average from 1947 America is known for spending more and save less. The trends clearly reveal that is changed despite the rhetoric. Kick the can down the road until it's someone else's problem. Savings (SAV) As A %GDP Average from 1947: Headline: Americans earn and spend more, save less As incomes slowly creep back up, Americans are spending more freely and saving less. Personal income rose 0.4% in December, following a 0.4% increase in November, according to data released Monday by the Commerce Department. Spending by individuals ticked up 0.7%, compared to a revised 0.3% spike the prior month. Both measures beat expectations. Income was expected to increase by 0.5% in the month, according to a consensus estimate of economists from Briefing.com. The economists expected spending by individuals to rise 0.6% in December. Source: finance.yahoo.com More…

China’s Urban Underground Dwellers Posted: 31 Jan 2011 08:40 AM PST In a city of about 20 million, it's no surprise Beijing has more than its fair share of housing challenges. However, a solution that's become common for many average wage earners is not one you would probably guess they'd consider first… living underground in a 30-square mile network of air defense basements. The bunkers were originally built as shelter to protect citizens in the event of foreign air raids, and the Telegraph estimates that "as many as a million people live in small, windowless rooms that rent for £30 to £50 a month." For the time being, despite China's rising wealth, the homes are some of the only affordable housing options available to Beijing's migrant laborers. According to the Telegraph: "In a Beijing suburb, beneath one of the thousands of faceless residential tower blocks that have carpeted the city's peripheries in a decade-long building frenzy, one of Beijing's 'bomb shelter hoteliers', as they are known, agrees to show us his wares. Passing under a green sign proclaiming 'Air Defence Basement', Mr Zhao leads us down two flights of stairs to the network of corridors and rooms that were designed to offer sanctuary in the event of war or disaster. "'We have two sizes of room,' he says, stepping past heaps of clutter belonging to residents, most of whom work in the nearby cloth wholesale market. 'The small ones [6ft by 9ft] are 300 yuan [£30] the big ones [15ft by 6ft] are 500 yuan.' "Beijing is estimated to have 30 square miles of tunnels and basements, some constructed after the Sino-Soviet split of 1969, when Mao's China feared a Soviet missile strike, and many more constructed since to act as more modern emergency refuges. [...] 'Some 80pc of our tenants are girls working in the wholesale market and the rest are peddlers selling vegetables or running sidewalk snack booths,' he adds. 'There are dozens of similar air defence basement projects in residential communities. In this area, they say 100,000 live underground.'" Time will tell whether or not there is a bubble in China real estate. On the one hand, there are fewer mortgages in China than in the US, and therefore less of that type of home ownership speculation. On the other hand, the article points out that a very basic small apartment, about 860 square feet, now costs over 2,000,000 yuan, while the typical monthly salary is about 4,000 yuan. This means, "the average person would take 50 years to buy such an apartment, assuming they saved every penny they earned." You can read more details, and arrive at your own conclusion, by visiting the Telegraph's coverage of the underground world that hints at China's coming crisis. Best, Rocky Vega, The Daily Reckoning China's Urban Underground Dwellers 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."

Stay Focused, Gold Investors Posted: 31 Jan 2011 08:08 AM PST Frank Holmes submits: Last week was an eventful week at home and abroad with several events directly showing up in the performance of global markets and the price of gold. On Friday, Egypt’s mayhem in the streets caused uncertainty in the markets, but sent gold shooting up over $21 to close at $1,336.75. On Wednesday, a continuation of the Federal Reserve’s easy monetary policy pushed gold up double-digits. Earlier in the week, a small hedge fund that had overleveraged itself to gold futures blew out its position, causing the biggest ever one-day reduction in futures contracts for the Comex. This small hedge fund trader fell victim to one of the oldest flaws in capital markets — arrogance with excessive leverage. This is the same infallible, overleveraged attitude that took down Fannie Mae (FNMA.OB), Lehman Brothers, Long-Term Capital Management, Enron and a number of Main Street American Home Buyers who leverage themselves 100-to-1. By overleveraging his small $10 million fund, he was able to control the equivalent of South Africa’s annual gold production, according to the Wall Street Journal. That’s one small fund controlling an amount of gold equal to the world’s third-largest producer? Leverage of this magnitude is impossible to manage, no matter how intelligent the investor. However, danger and crisis can equal opportunity for long-term investors. All these events have created a lot of short-term noise but not derailed the long-term story. Life is about managing expectations and that’s why we educate investors to anticipate before they participate (View our Anticipate Before Complete Story »

Gold Daily and Silver Weekly Charts Posted: 31 Jan 2011 08:07 AM PST This posting includes an audio/video/photo media file: Download Now

My Largest Personal Investment Posted: 31 Jan 2011 07:38 AM PST I'm going to share with you something that I have put a good deal of my own money into. In fact, I have more money invested here than in anything else – about 40% of my personal investment account at the moment. Last year, I made 38.2% in these low-risk special situations – easily whipping the market's 13% return. It was some of the easiest money I've made in my investing career. I'll tell you how you can do the same thing. I'd like to call these special situations one of the market's best-kept secrets. Though many people still don't understand the basic mechanics, or even know these opportunities exist at all, the truth is that these aren't really secrets. Investing great Peter Lynch wrote two chapters about them in his bestselling book Beating the Street. (This is one of the best books about investing out there, by the way, along with One Up on Wall Street. My well-thumbed hardcovers have made me a lot of money over the years.) Lynch called the idea a "can't-miss proposition (almost)." And Seth Klarman, another famous and skilled investor, has a chapter about them in his book Margin of Safety. Even the measured Klarman, a master of understatement, calls this special situation "a compelling investment opportunity." Heck, even Barron's recently called these a "once-in-a-lifetime investment opportunity." And that may be literally true, as the biggest opportunity in these ideas may disappear forever by the summer of this year. (More on why below…) I've been an enthusiast of these things for years. I first wrote about them in 2005 in my Capital & Crisis newsletter. You would think such opportunities would close with all this coverage. Yet nearly every year, new deals crop up and the opportunities persist. I have a few hunches why more people still don't buy these. Part of it is that they seem boring. Part of it is the payoff doesn't often come right away. I earned 38% over the course of a full year. Sometimes it might take a little longer. Ideally, you should look at these as three-year holds. And part of it is simply that people have prejudices that prevent them from buying. So what am I talking about? I'm going to tell you, but I want you to keep reading even if, initially, the idea has no appeal to you. It's important you understand the full story before you pass judgment. I'm talking about thrift conversions. A thrift, or a savings and loan, is a bank. But it is a special kind of bank. It is a bank owned by its depositors. When a thrift goes public, it's called a thrift conversion because the thrift is converting from a company owned by depositors to one owned by public shareholders. This process is what creates the investment opportunity. Let me give you a simplified example. Say we have a thrift worth $100. For simplicity's sake, let's just say that all of its assets are in cash and it has no liabilities. The thrift decides to convert to a public thrift. So it sells 10 shares at $10 each. Now it has $200 in cash and there are 10 shares outstanding. But look at it from the investor's point of view. He put $10 in, but he owns a stock backed by $20 of cash – $200 divided by 10 shares outstanding. Put another way, he owns a bank at 50% of book value, or net worth, per share. In the real world, the values are not usually as extreme, but the idea is very much reality. As Klarman writes: "The preexisting net worth of the institution joins the investors' own funds, resulting immediately in a net worth per share greater than the investor's own contribution… In a very real sense, investors in a thrift conversion are buying their own money and getting the preexisting capital in the thrift for free." Peter Lynch called it the "hidden-cash-in-the-drawer rebate." Imagine buying a house and then discovering that the former owners have cashed your check for the down payment and left the money in an envelope in a kitchen drawer, along with a note that reads: "Keep this, it belonged to you in the first place." You've got the house and it hasn't cost you a thing… This is the sort of pleasant surprise that awaits investors who buy shares in any S&L that goes public for the first time. It's pretty simple. You get a bank at a big discount to book value – a book value that includes a whole bunch of fresh cash. Most bank stocks over time gravitate toward book value, at least. What often happens to these thrifts is that they get bought out at premiums to book value. According to SNL, a research organization, about 59% of the 488 thrifts that have converted since 1982 have been bought out at a premium to book value. In recent years, the pattern is even stronger. Since 1995, 64% have been acquired. The multiples paid are pretty good right now. In the last quarter of 2010, there were four pending acquisitions. The average multiple was 111% of book value. There was an additional transaction that closed in that quarter at a value of 148% of book value. So now you can see the opportunity. If you pay even 80% of book value for a cash-rich thrift and it trades to just book value, you've got a 25% gain and you've taken very little risk. Of course, you can do much better. But there are a few points you need to understand… First, new thrifts have to follow some rules. One is that they can't sell for three years. This is why I said you should look at these investments as three-year holds. Ideally, you want to give the thrift time to ripen and give yourself a shot at maximum gains. (Lynch tells the story of Morris County Savings Bank. It went public at $10.75 per share and sold three years later for $65.) Of course, you don't have to wait three years. I made my 38% in one year and I could sell if I wanted, but I'm content to let the investment story play out. My thrift still trades for less than book value. And more good things can happen after that first year – and this gets us to our second point. New thrifts can't buy back stock for at least one year. This is another important date in the life of a thrift – its one-year anniversary. After that, the thrift could use its ample cash to buy back stock at a discount to book value, thereby enriching the remaining shareholders even further. So after one year, if the thrift trades for less than book value, a stock buyback is likely the best use of cash. And many thrifts do implement buybacks. In the last quarter of 2010 alone, five different thrifts announced buybacks of 5-10% of their shares. The third point is why buy these now. The reason is there are many new deals to choose from. After only a handful of conversions in 2009, things started to pick up in 2010. Last year, there were 23 deals completed and they raised $2.2 billion in capital. This year looks like another rich one for thrifts. There are 17 deals in the pipeline already. The flurry of activity is due to uncertainty over the new financial overhaul bill, which would take effect this summer. It could mean the end of this long-running investment gold mine: the thrift conversion process. So many thrifts will try to convert before the summer. Finally, one last point before we look at specific opportunities: There are no free lunches. Even here. That is to say you have to be careful which thrifts you buy. Some thrifts come with problems and risks you probably don't want to take. Remember the 1980s? Charles Keating in handcuffs? The S&L crisis? Lots of thrifts got in trouble doing all kinds of stupid things. Greedy guys always manage to ruin a good thing. You can easily avoid the problems with a little attention upfront to some key details. Peter Lynch goes through some of his favorites in his book, and I've relied on his guidance when investing in these things over the years. There is a certain kind of thrift we want to own to increase our odds of success. Lynch calls them the "Jimmy Stewarts." Surely, you've seen the classic It's a Wonderful Life, in which Jimmy Stewart plays the part of a humble banker at an old savings and loan. Lynch wants to find the Jimmy Stewarts. The no-frills, low-cost neighborhood thrifts that make old-fashioned mortgage loans. They don't have splashy advertising. They don't pay to have their names on stadiums. Their branches don't look like Greek temples. So the first thing we want to pay attention to is the loan portfolio. We want low-risk loans, like simple old-fashioned mortgages. We don't want a lot of construction loans or anything that smacks of high finance. We also want to look at nonperforming loans (stuff that's gone bad) as a percent of assets. Ideally, we want low numbers, like 2%. Second, we want to look at financial strength. We want lots of equity. This is usually not hard to find with recently converted thrifts because they just went public and have lots of cash. It's pretty common to find ones with equity to assets of 13% or 17%, or even 20%. For perspective, the nation's biggest banks – the JP Morgans and Citis – have ratios of 5% or 6%. (And that's surely overstated, given all the off-balance sheet stuff. More likely, they have ratios of 1% or 2%.) This is why they are always getting in trouble. They operate with huge leverage. Thrifts are financially strong. We also want to look at book value. Ideally, we want to buy for less than book value for all the reasons I went through above. As Lynch advises, "Pick five S&Ls that fit the Jimmy Stewart profile, invest an equal amount in each of them and await the favorable returns. One S&L would do better than expected, three OK and one worse and the overall result would be superior to having invested in an overpriced Coca-Cola or a Merck." This is the plan I am implementing for the subscribers of Mayer's Special Situations. I don't expect this opportunity to be around forever, but it is around for the moment. Regards, Chris Mayer for The Daily Reckoning My Largest Personal Investment 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."

A Culture of Complacency Posted: 31 Jan 2011 07:31 AM PST By Captain Hook, Treasure Chests That's what the stock market is right now more than anything else in terms of importance – it's a culture of complacency and corruption (from last week) that is perilously addicted to the Fed's liquidity. And I am certainly not the only one voicing concern in this regard, where you will find a recent interview with Mark Faber attached here on this subject addressing the root of this problem, which is of course the Fed's increasing inflationary policies. Within this interview, Faber discusses how Bernanke's misplaced policies targeted at lifting real estate prices is failing miserably, and that this inflation is making it's way into other essential commodities having price supportive demand / supply dynamics (think food, fuel, etc.), which is of course lifting prices in these areas just when an ongoing negative wealth effect in the sectors where people have most of their savings continues unabated. As Faber points out in no uncertain terms, and as usual, Fed policy is failing miserably (which is known to other Fed Presidents), and that this failure will have unexpected and profound consequences, not the least of which will undoubtedly include 'general price instability' eventually. (i.e. contrary to the Fed's primary mandate these days.) As you may know, Bernanke is not one to take failure sitting down however, and has now began to expand the Fed's daily monetization practices (and effectively its mandate) to include not just the bond markets, but stocks now as well. So it's no wonder speculators are becoming dangerously complacent these days, with the Bernanke put in the market every day propping up prices. One does need to wonder just what extent Banana Ben intends to take his monetization practices however, where as you may know, like a junkie, in doing so he has now set US markets on a 'crash course' in one way or another, where he either keeps increasing the dosage (potentially triggering shades of hyperinflation), or the stock market fails too, adding to the list of Fed failures. Unfortunately the junkies don't realize this, and continue to play in the markets assuming the Fed (Banana Ben) will keep feeding their worsening habits. This, is of course a recipe for disaster no matter what happens, where the deciding factor looks like it will be the bond market, with both foreign fringe (to the core) economies and the muni-bond market in the States continuing to unravel at alarming rates. Why is this observation important? Answer: Because short of what might produce shades of hyperinflation in undesirable sectors (again think food, fuel, etc.), Bernanke will be forced to either ramp up monetization practices further, or risk not just the muni-bond market imploding, but Treasuries as well; which again, as per our opening, will continue to play havoc in real estate, and likely stocks eventually too (think flash crash) when Murphy's Law decides to kick in. So, it's important to realize that because of Banana Ben's increasingly dangerous monetization experiment, which will also be written up in the text books to his dismay and shame, that both the broad bond and stock markets are 'accidents waiting to happen', with all the ingredients (sentiment, technical, contagion risk, etc.) for crashes now in place. That's right, we are just waiting for the trigger(s) to be pulled, and as long-time readers of these pages know (they know the importance of open interest put / call ratios [no other sentiment system predicted this rise in stocks]), that could be as early as this week (a January top) with options expiry removing put related support from the major US indexes. Yes, but isn't the monetization alone enough to lift stock prices independent of this? Answer: Unless Banana Ben is willing to buy up the whole market once the selling starts, in my estimation the answer to this question is no. That's why you don't start something like this in the first place. More recently (circa 1997) Hong Kong authorities tried this, and when the currency crisis hit in '97, stocks collapsed under adverse conditions. And while this scenario will likely not repeat here, still, something else will happen to trigger the selling (think options expiry), like Steve Jobs medical leave popping the Apple bubble, and then it's all over for the speculation game for some time once again. (i.e. think 2-years plus.) To cloud the waters however, we have had US price managers come down on precious metals quite hard since the beginning of the year, this while stocks have been squeezed higher making the manipulation obvious. Unintentionally then, US price managers have succeeded in creating a downside buffer for themselves in that precious metals are now short-term oversold on the dailies, and due for a bounce, which should act to support the broads as well because surface dwellers will take this as an inflation signal. So, as suggested above, this confusion could support general price levels in volatile fashion in coming months, where precious metals (the mania de jour?), like tech stocks in the year 2000, may not top for the present sequence until March. And while I don't for a minute think such a top in precious metals would be the ultimate full blown mania top, because public participation rates are still too low, at the same time some degree of exhaustion at that time (March) would provide an alignment within the larger inflation trade enabling all equity groups to decline in unison, just like they did on the upside via the dollar's ($) depreciation. Furthermore, as you will see below, while the dailies and weeklies might allow for a rally at this time, least we forget this does nothing for the monthlies, which at extremes, and poised to turn lower. And again, with stocks never this overbought previously in history, eventually (by March at the latest), this should be enough to roll over the entire inflation trade. Until then however, and as the British would say, the bureaucracy's price managers have made a 'right proper mess' out of maintaining synergy within the inflation trade, which is the whole idea in keeping the speculators both confused and taking stupid risks. This morning's trade profile is perfect example of what you can expect over in weeks to come with options / oversold related strength in precious metals being used to lift the entire equity complex after trapping a bunch of unsuspecting speculators in short positions yesterday off the Steve Jobs news. They can do this because don't forget the open interest put / call ratio profile (attached above) for precious metals in the ETF's and indexes is supportive of prices, so the price managers will use this to squeeze prices higher this week, which as postulated above, will be used to support the larger equity complex. (i.e. hence the turn around in stock futures overnight.) Of course some think that if the bureaucracy's price managers can stick handle gold down into ETF and index options expiry with open interest put / call ratios as high as they are, it's conceivable they might get their negative monthly close as well. Martin Armstrong discusses the various support levels in gold (and more) attached here. According to him, he thinks a negative monthly close below $1372 would pause gold on an intermediate basis, but me, I'm not so sure in this regard. As you know from the above, I'm still looking for one more rally into late winter / early spring before an intermediate degree correction sets in. And if I had to pick a target, Fibonacci resonance related resistance just above $1500 remains the possible goal, with Mother Nature exerting her inexorable draw to this level through time. (See Figure 1) Figure 1 You will remember from previous discussions on the subject that Fibonacci resonance related projections is a high confidence targeting methodology, which in gold's case, and as can be seen above, would involve the channel breakout holding support and then surging to the target. Along these lines it should be noted if this occurs, that it's a less frequently successful sequence except in very strong markets. And so from this we can conclude the move(s) in precious metals should remain bullish as long as this channel breakout in gold is maintained. If it fails, which is what I expect to happen as summer approaches, then a trip all the way back to the bottom is possible, putting gold back down into the $1100 area, and possibly lower. The count and sequencing shown below on the monthly plot from the Chart Room support this thinking, where we are in the throws of finishing up 1 of Primary (minimally) C right now with technical indicators now at the tops of their respective ranges. (See Figure 2) Figure 2 And if you think precious metals shares are not long-term overbought in some measures, just take a look at the MACD of the Amex Gold Bugs Index (HUI) monthly plot pictured below, where again, as you can see it's at the top of it's range and apparently turned lower. This is why monthly closes in the sector could prove important here in January, given because the establishment systematically suppresses precious metals, when viewed in the larger scheme of things, any downside moving forward should be viewed as mild. Moreover, with physical supplies of precious metals so low at present, which is a condition likely to get nothing but worse, this should always be in the back of your mind, that any weakness in gold and silver should prove temporal even if other asset categories begin to implode. (See Figure 3) Figure 3 At the same time however, one should also notice that while stochastics also appear to be rolling over, other indicators displayed show just how lack-luster this past rally in precious metals has been, and that when the stars become aligned once again, more gains should be expected. Further to this, just look at the weekly HUI / Gold Ratio plot below, where while prices could definitely fall further, RSI for example is already down in the low 40's and vexing support, suggestive that under the right conditions a bounce is in order. So, while prices could remain soft for a period of time while the larger equity complex corrects (whatever you call it), eventually the future for precious metals should appear bright on a sustained basis, not just because they get squeezed into options expiry again.  (See Figure 4) Figure 4 Unfortunately we cannot carry on past this point, as the remainder of this analysis is reserved for our subscribers. Of course if the above is the kind of analysis you are looking for this is easily remedied by visiting our web site to discover more about how our service can help you in not only this regard, but also in achieving your financial goals. Along these lines, you should know your subscription to Treasure Chests would include daily commentary from either the myself or Dave Petch. As you may know, I cover macro-conditions, sector timing, and value oriented stock selection, while Dave covers the HUI, XOI, USD, SPX, and TNX technically each week. Mr. Petch is a world class Elliott Wave Theory technician. In addition to this, you would have access to all archived commentaries, the Chart Room, exhibiting 100 annotated charts of the precious metals and stock markets, along with stock selection and sector outlook pages. Here, in addition to improving our advisory service, our aim is to also provide a resource center, one where you have access to well presented 'key' information concerning the markets we cover. And if you are interested in finding out more about how our advisory service would have kept you on the right side of the equity and precious metals markets these past years, please take some time to review a publicly available and extensive archive located here, where you will find our track record speaks for itself. Naturally if you have any questions, comments, or criticisms regarding the above, please feel free to drop us a line. We very much enjoy hearing from you on these matters. Good investing and best of the season all. Captain Hook The following is commentary that originally appeared at Treasure Chests for the benefit of subscribers on Tuesday, January 18th, 2011. Copyright © 2011 treasurechests.info Inc. All rights reserved. Treasure Chests is a market timing service specializing in value-based position trading in the precious metals and equity markets with an orientation geared to identifying intermediate-term swing trading opportunities. Specific opportunities are identified utilizing a combination of fundamental, technical, and inter-market analysis. This style of investing has proven very successful for wealthy and sophisticated investors, as it reduces risk and enhances returns when the methodology is applied effectively. Those interested in discovering more about how the strategies described above can enhance your wealth should visit our web site at Treasure Chests. Disclaimer: The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Comments within the text should not be construed as specific recommendations to buy or sell securities. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities. We are not registered brokers or advisors. Certain statements included herein may constitute "forward-looking statements" with the meaning of certain securities legislative measures. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the above mentioned companies, and / or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Do your own due diligence.

Jump on the Gammon Wagon Posted: 31 Jan 2011 07:29 AM PST Gammon Gold is well on its way to becoming one of the premier gold mining companies in Mexico, especially after Capital Gold (CGC) in 2010 signed a definitive agreement to be acquired by Gammon. Not only does this winning combination provide Gammon with immediate production in both gold and some silver but also augments Gammon’s long-term growth profile in addition to increasing 2p reserves rather sharply. Capital Gold Highlights The El Chanate mine alone will add an additional 50,000 ounces on top of the 70,000 it is currently producing by 2013 between 2 mines. 2P reserves will increase by approximately 1.5m ounces excluding the Orion Project. Other than growth produced via the El Chanate mine courtesy of the acquisition of Capital Gold (which added 130k in M&I GEO in the last 6 months), Gammon will also reap the benefits from Capital Gold’s Orion Project (total resources of 360k gold equivalent ounces). The Orion project's assessment will add approximately 50,000 – 60,000 ounces of GEO in 2013 (depending on spot silver). Though early in its life cycle it has demonstrated that it possesses high grade ore and contains over 11m ounces of M&I silver ( with an additional 550k of inferred resources) and 130k of M&I gold, for a total of 360k GEO in total resources. Due to the silver bi-products at both mines, the addition of capital gold will fit in perfectly with Gammon’s lost cost profile. The combination of these two mines provides great potential exploration upside as well Complete Story »

PopCon: The ‘Economic Recovery’ Lie Posted: 31 Jan 2011 07:21 AM PST By James West, MidasLetter.com It is only human to seek reasons for optimism, and to find comfort in self-delusion. "You're going to be just fine," is probably one of the most frequent lies told among family members when serious injury or illness occurs. We have to believe we're going to be "just fine", because the alternative is too painful, and painfully unacceptable. However, when the tendency towards delusion overshoots mere comfort and interferes with the potential effectiveness of a remedy, a brisk slap across the face is occasionally required to exorcise the delusion and let the healing begin. Such is the case with the global economy and its top leadership. The obsession among Ben Bernanke, Timmy Geithner, and Barack Obama in convincing Americans the storm is over and the rainbow is imminent are thoroughly preventing the corrective influence of unfettered markets from bestowing their therapeutic effect upon us. Only gold, not U.S. dollars, can fill the pot at the foot of the rainbow. They need a good smack across the face to get this through their stubborn little pointed heads. Japan just got a nice resounding smack across the face from Moody's. Downgrading the debt of the proud and massively self-conscious Japanese is more like a smack across the face after pulling their pants down in public. I've got that nation on suicide watch for the time being. In Egypt, Tunisia and Yemen, the citizens of those nations are administering a very energetic smack across the government face by rioting, and demanding an end to tyranny and injustice. The grass roots, unorganized and spontaneous nature of the social conflagration is testimony to its origin in the honestly aggrieved and tormented national soul. The smoke from those fires carries the scent of revolution, and threatens to ignite the entire region. England has just recorded a year of negative GDP growth, or more accurately, a year of GDP contraction. There is no 'perception management' program in place among the admirably pragmatic Brits. Things are not good, and they clearly have embraced the idea that happy phony touchy-feely is unacceptable. They're going to solve the problems by rolling up their sleeves and tackling the credit-spawned imbalances head on. But there's just one problem. These damn American elitist leaders and their obsessively inward facing narcissism is hindering the process. The non-stop and accelerating circle-jerk of Fed buying Treasuries so they can write checks and spew dollars into the economy has created the illusion of recovery, based on the selective presentation of certain data, that, taken on their own, might be indicative of economic resuscitation. But analyzed in the context of broader economic events and circumstances, they are merely numbers generated by numbers, and against the larger negative economic factors, are irrelevant. It's the global economy that's choking on U.S. dollar driven asphyxiation, and Moody's is threatening the requisite slap with a downgrade. This is the spread of the sovereign debt crisis from the European fringe to the globalized mainstream. It's a cancer that's spreading, even while these idiot pseudo-Americans harp on about recovery and growth and hijack Davos turning into an après-ski circle jerk glee club. I tell you I've never been prouder to be Canadian. When the real Americans catch the whiff from Egypt and start a little war dance of their own to end the tyranny and oppression of the elitists who have stolen democracy, liberty and justice from the populace, a smack across the face administered from within its own borders shall be imminent. That day is coming…you can just smell it. Among the irrefutable proof that the economic recovery is a complete and treasonous lie are the following facts: Unemployment continues to spread; Consumer prices are rising; Foreclosures are still mounting; Home prices are still dropping; The United States Government is broke. Here's how that lie is being morphed into the apparent economic recovery and becoming amplified and broadcast to the erstwhile anesthetized American public: 1. The U.S. Federal Reserve and the United States Treasury, effectively two departments within the administration of the national fiscal management branch of the government, fabricate, out of thin air, trillions of U.S. Dollars, and then give them to the nations biggest financial institutions. 2. These institutions then take these counterfeit dollars, and inject them into commodities markets by establishing hundreds of thousands of derivative contracts both long (betting the future prices rises) and short (betting the future price falls). The losses are rolled over into new contracts, and the wins cashed in and the contracts rolled up. With no position limits, no transparency, and no rules, the recycled losses build and build and build and now sit at some $600 trillion?? 3. The money fabricated from nothing becomes more money fabricated from nothing in the form of profits. The profits are reported as earnings (fabricated from nothing) generating positive numbers in the stock market (that mean nothing). All this in an effort to confuse you, the consumer, investor, and saver, into continuously working to generate real wages increasingly worth nothing thanks to this system, and abiding the law while they use your delusion to concentrate control of the world's assets into ever narrower and centralized control. Lets put it another way. Lets say, you work for me, and I pay you in popcorn, which you can use to trade for things like rice and corn and steak and cheerios and gas, because the popcorn has been accepted as a medium of trade, thanks to the stupendous marketing efforts of the central popcorn bank and the popcorn treasury, for over a century. Popcorn used to represent a certain amount of gold or silver or both but that system was just too dumb and didn't make sense and so now popcorn just represents popcorn. Its easy to pop, and everybody likes it. But suddenly, one day, I start paying you less popcorn, and at the same time, it takes more popcorn to buy the staples of life. Your family's economy crumbles, and suddenly your son can't go to soccer games (cause that takes popcorn and everybody knows, popcorn doesn't just grow on trees), and little Tina can't go to ballet, cause that takes more popcorn, and all the while, on TV and on the movies, everybody has all the popcorn in the world and they're all dressed well and healthy and beautiful, and in the news, the popcorn economy is improving. Popcorn, it would seem, is the be-all and end-all of life. But popcorn can't buy happiness, can it? Suddenly, the popcorn fed and popcorn treasury announce that hey!. We're just gonna pop more popcorn, cause that's what we need. So the popcorn goes into the economy from the popcorn bowls at the top of the food chain, and suddenly there's streets being paved, and new signs going up, and it starts to look and feel like things are gonna be okay, because the popcorn market, coincidentally is showing that certain sectors of the NYPE (New York Popcorn Exchange) are improving in earnings, and that's driving the NYPE higher. Popcorn is buying incrementally less, but there seems to be so much popcorn around…just that you can't really seem to get your hands on any. But they keep popping popcorn, but more and more of your friends are finding they're popcorn salaries aren't cutting the mustard and they're being turfed out onto the street. Popcorn popcorn everywhere. Golly. Why then, with all this popcorn around, are things going so sideways on the real world spreadsheet groaning under the increasing weight of the national debt? Why Japan, who has more popcorn out than anybody, just got officially reclassified as an economy that maybe shouldn't have so much popcorn invested into it. Maybe they can't repay their popcorn obligations to the popcorn generating countries that keep lending them more popcorn. You could say, they're choking on their own popcorn. This is the biggest Ponzi scheme of all time, the most popular con in history. Lets call it PopCon, so it has the slick marketing-oriented anagram that gives it a nice sound and imparts the mantle of respectability. Despite the popularity of the concept of 'too big to fail' among bankers and economists in the diseased economies, the simple truth is, nothing is too big to fail, and perpetual growth is impossible. Any future predicated on perpetual growth is bound to fail. The perpetual growth strategy guarantees that. Does anybody in Davos know this? And if they do, does anyone have the cojones to say it? And if they do, do they have the political capital to effect the changes that would defer this inevitability and reverse it? I don't see anyone. All I see are a bunch of theoretical economists and straw captains paying way, way, way too much for a ticket into the biggest nincompoop club in the world. Davos is just an international forum to strategize the next stage of PopCon. A Coordinated Assault on Gold and Silver The proof of a collusive and covert assault on the gold price is cobbled together strictly from circumstantial evidence. The massive build-up of short positions, and the cancellation of thousands of long contracts by the cartel of JP Morgan, HSBC and others is a signal to real bullion investors that such an attack is underway, and long investors dutifully proceed to the sideline while this perennial fraud-in-progress unfolds. The withering of CFTC resolve into vague policy action items for the future since Bart Chilton's comments expressing unequivocal conviction of market manipulation is proof of the influence of the banks over government policy. That this assault is mounted on such a coordinated basis is evident in the peculiar headlines and attention of CNBC, CNN, the Wall Street Journal and other elitist controlled mainstream financial media outlets proclaiming the abandonment by investors of gold as evidence by the "sharpest drop in the gold price in weeks." at the outset of 2011. That has hardly occasioned such a uniform response that unanimously confirms the end of the gold bull market in the past, considering the see-saw rise of gold from $300 an ounce to $1440 an ounce at the end of 2010. Another highly suspicious behaviour in the gold market is despite what should be highly highly gold positive events, i.e. the sudden breakdown of order in the middle east (normally sending investors flocking to gold), the downgrade of Japan's debt to AA- (a signal of spreading sovereign debt deterioration) and the U.S. record deficit combined with Treasury needing to go cap-in-hand to ask congress for clearance to borrow more money. AND Moody's threat to downgrade U.S. debt. These factors manifesting themselves together in 2006 would be enough to send gold soaring, but that reaction is completely absent. What gives? The lawsuits brought by GATA and the silver traders are proceeding, and the news outlets prefer to speculate on the demise of the gold market instead of focusing on growing fiduciary delinquency of the country's leadership. I'm sorry but does America not understand that it is now a fascist regime in the purest sense of the concept? What's happening in Egypt right now could easily erupt in the United States if they don't revise their self-image. Law and order is eroding in the United States and the grievances of the Egyptians closely mirror those of increasing numbers of Americans. The time for plastic surgery is over. Radical bypass surgery is needed to resuscitate the U.S. economy meaningfully. The authors of the concept of regime change are closer to falling victim to their own design then they clearly understand. With the publication of the Financial Crisis Inquiry Commission's report, unprecedented evidence pointing to preferential treatment of certain of the largest (too big too fail) institutions by government employees should theoretically catalyze a veritable armada of class action lawsuits. The American public has the ultimate opportunity to apply and keep up the pressure on the failed democracy and suspension of constitutional rights catalogued in this document. And since the commission has further pledged to publish boatloads of raw data and evidence, the U.S. is in a superb position to attack the anti-American banking and government criminal group in the courts, in the press, and spread the message through social media that the jig is up, and its time to demand in the most vociferous yet peaceful way, in the American tradition, an end to the current regime. New laws are required that decisively (not just optically) divorce banking from government. Banks should not be consulted in any way when drawing up legislation designed to isolate an admittedly predatory and opportunistic industry from stealing the homes and jobs of ordinary American citizens. Egypt may be a world away, but its grievances are shared, on a growing basis, by increasing numbers of Americans, and the collapse of the U.S. economy under an insupportable debt load is at hand. Abandoning dollars for gold and silver (for Americans) or more stable currencies (Canada, New Zealand, Australia, Norway, Switzerland) as an interim measure is the only defense the average American with any assets or savings left has. MidasLetter Premium Edition identifies 5 stocks on the first Sunday of each month from the TSX Venture Exchange that are expected to double within 12 to 18 months, 9 out of 10 times, or your money back. Subscribe now for $49 per month, or $499 for one year, at http://www.midasletter.com/subscribe.php. 30 day instant refund period from your first subscription day if not 100% satisfied.

Quest for the Best Gold Stock: Central GoldTrust Posted: 31 Jan 2011 07:19 AM PST Michael Bryant submits: As I noted in my previous article that the technicals and fundamentals say that SPDR Gold Shares (GLD) is a good buy, I will take this one step further and look for the best gold stock. Below is a screen of gold stocks from Friday, January 29. (Click to enlarge) P/S = Price/Sales P/B = Price/Book P/C = Price/Cash P/FCF = Price/Free Cash Flow EPS next Y = EPS growth next year EPS past 5Y = EPS growth last 5 years Insider Trans = Insider Transactions Sales Q/Q = Sales growth quarter over quarter ROA = Return on assets ROE = Return on equity Curr R = Current Ratio, which “measures whether or not a firm has enough resources to pay its debts over the next 12 months.” A ratio of 1.25 means that “for every dollar the company owes it has $1.25 available in current assets.” Quick R = Quick Ratio Gross M = Gross Margin Oper M = Operating Margin Profit M = Profit Margin Purple boxed numbers are the top five best statistics in each category. Current and quick ratios about two were used. Seven companies had five or more purple boxes. # Purple Boxes Company Operations 10 Central GoldTrust (GTU) Trust 8 Newmont Mining (NEM) Many Countries 7 Compania de Minas Buenaventura SA (BVN) Peru 7 Cardero Resource Corp. (CDY) Mexico, Peru, Argentina, US 6 DRDGOLD Ltd. (DROOY) South Africa 5 Golden Star Resources, Ltd. (GSS) Ghana, Brazil, West Africa 5 Royal Gold, Inc. (RGLD) Many Complete Story »

More On Housing... Posted: 31 Jan 2011 07:08 AM PST "Home values are falling at an accelerating rate in many cities across the U.S" As I parse through the Q4 GDP number released on Friday, the more I understand just how bogus it is.  A large part of the input data is based on "estimates" and "assumptions."  I would bet we'll see some downard revisions going forward. But one of the biggest components of the economy, especially over the last 10 years, has been homebuilding, home selling and any activity related to those two activities.  As readers know, I expect 2011 to be a bad year for home prices.  I think a lot of people will be in for a very rude surprise in this regard. So I wanted to highlight this online Wall Street Journal article from today.  Here is the LINK.  This article reaffirms a previous post of mine this month that foreclosures, inventory and lack of credit-worthy buyers will force housing prices much lower for the foreseeable future: Market conditions could get worse in the months ahead. Millions of homeowners are in some stage of foreclosure or are seriously delinquent on their mortgages, and millions more owe more than their homes are worth. Real-estate agents are bracing for an uptick in distressed properties hitting the market, including foreclosures being sold by banks and homes sold by owners via a short sale, in which banks agree to a sale for less than the amount owed. The dynamic described in that quote is going to accelerate this year, as people continue to lose jobs, unemployment benefits expire and banks are forced to convert serious delinquencies into foreclosures. How can the Government prevent this?  By using Fannie Mae and Freddie Mac to monetize the delinquency and foreclosure problem.  This could happen but it is more likely that those two GSE's will be used to monetize the debt after the properties are transfered to the banks.  This of course will entail QE3, 4, etc. and, of course, much higher gold/silver prices. The other issue which is harder to prove is the "shadow" seller.  The seller who wants to sell but decides to wait "for the market to come back" or can't sell for a price that takes out the mortgage on the house.  But this article reaffirms my point:  Some sellers have opted to pull their homes from the market rather than lower their prices, either because they believe values will improve or because cutting the price would mean selling for less than the amount owed to the bank. Anectdotally around the Denver area, I am starting to see more "for sale" signs pop up again (some of it early seasonal), more "price reduced" signs and a lot more "for rent" signs.  The latter being people who want to sell but can't or want "to wait for the market to come back." The housing problem is causing a lot of pain in this country.  Unfortunately, I believe we are entering into an "acceleration" phase, as a larger percentage of homes decline in value to a level below the outstanding debt on the property.  I heard an ad from a large Denver mortgage broker last week advertising a 105% of value Fannie Mae refinancing product designed to allow homeowners to consolidate a 1st and 2nd mortgage into one. This is just one more indication of the Government "kicking the can down the road," as it means that the policy-makers are willling to use Taxpayer money to try and fix a problem that can only be fixed by the laws of supply and demand. .

James Turk - Gold & Silver Have Reached an Important Bottom Posted: 31 Jan 2011 07:01 AM PST With volatility continuing in gold and silver, today King World News interviewed James Turk out of Spain. When asked about the action in precious metals Turk responded, "Through Friday's close on the LBMA, silver remained in backwardation, even by the numbers reported on the LBMA's site. The strong bounce on Friday after the option expiration combined with the backwardation is clear evidence that silver doesn't want to stay down here in this area and is ready to move higher." This posting includes an audio/video/photo media file: Download Now

Are Gold and Silver Still a Buy? Absolutely – & Here’s Why Posted: 31 Jan 2011 06:58 AM PST [B]Prospect Of Future Rampant Inflation Will Cause Gold and Silver Prices To Go Even Higher![/B] After the impressive run in precious metals last year that saw gold rise 29.6% and silver rise 83%, the question on many investors’ minds is whether there is still any run left in these commodities. [Read on for a clear understanding of what we can expect for gold and silver - and why.] So says Ananthan Thangavel (Lakshmi Capital | Absolute Return Wealth Management Firm, RIA/CTA) in an article* which Lorimer Wilson, editor of www.munKNEE.com, has reformatted and edited [...] below for the sake of clarity and brevity to ensure a fast and easy read. (Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.) Thangavel goes on to say: [As the chart below shows] since the beginning of 2011, gold and silver have badly underperformed equities, which is a surprising trend given the high correlation between all 3 since August. ...

The Gold Roller Coaster Posted: 31 Jan 2011 06:01 AM PST Hard Assets Investor submits: By Brad Zigler The crisis in Egypt really stirred up the gold market Friday. And why shouldn't it? After all, there was a weekend — and a likelihood of increasing violence — ahead. On Monday morning, though, with the world markets open, the fear seemed to dissipate. There's a lot of fear premium embedded in gold's price. Over the past three months, we've come to see the degree of volatility in that component. Now, there's opinion aplenty explaining the weakness leading into Friday's price spike. The truth is laid out in the numbers. The weekly Commitment of Traders reports have been signaling a downtrend in speculative interest in gold for months. There's a lot of talk about the power of commercial traders — banks in particular — in the gold market, but for the past three years, there's been a back-and-forth struggle between commercials and money managers for market dominance. It's been fairly common, in fact, for the net long position of these funds to outsize commercials' net short stake. The degree of the funds' commitment to the long side, though, has been waning since the run-up to last fall's election. The ratio of long-to-total positions held by fund managers, once as high as 99.6 percent, fell to 84.0 percent last week. Money Managers' Net Long Gold Concentration To put this number in perspective, consider this: The funds' five-year average long concentration has been 88.6 percent. Last week's number were subpar. Of course, money managers aren't the only traders who Complete Story »

The Economic Recovery Lie Posted: 31 Jan 2011 05:38 AM PST By James West MidasLetter.com Monday, January 31, 2011 It is only human to seek reasons for optimism, and to find comfort in self-delusion. "You're going to be just fine," is probably one of the most frequent lies told among family members when serious injury or illness occurs. We have to believe we're going to be "just fine", because the alternative is too painful, and painfully unacceptable. However, when the tendency towards delusion overshoots mere comfort and interferes with the potential effectiveness of a remedy, a brisk slap across the face is occasionally required to exorcise the delusion and let the healing begin. Such is the case with the global economy and its top leadership. The obsession among Ben Bernanke, Timmy Geithner, and Barack Obama in convincing Americans the storm is over and the rainbow is imminent are thoroughly preventing the corrective influence of unfettered markets from bestowing their therapeutic effect upon us. Only gold, not U.S. dollars, ...

$50 Physical Silver by April 2011 Posted: 31 Jan 2011 05:36 AM PST In reading the title, your initial response may be one of doubt, yet hopefully curious enough to hear me out.  If I am wrong, I will have no problem in admitting so when the time comes, and that is all I am going to say about that. First, let us take a quick recap on how far silver has come. From 1970-2002, Silver has been an approximately an overall flat investment (on an annual nominal basis).  The one major exception was the great silver spike that had silver surge touch 50$ at one point.  You can read about it here. If you bought silver in 2002, you would be up approximately 600% with current spot price of silver at $28.01.  In doing some simple calculations, that is an equivalent return on investment of ~25% per year, annually compounded. Silver has been forming a short term exponential price function since 1996 with its only big "hiccup" in 2008.  It is important to know that in 2008, the price of silver (& Gold) dropped due to futures and options of silver (&gold) selling off, not physical silver. There is a lot of long exhausting research that has been done on this matter, and I will leave you to this link as a starter for this topic. Since the lows of ~10.50 in late 2008, silver has gained approximately 275% from lows in 2 years for an annual return of approximately 66% annually compounding returns (idealistic timing). Now focusing more on the short term, let us check the previous 5 months in silver.  Starting from August at $18 to our current $28 dollar level, silver has gained an impressive 55%  strongly suggesting an upward direction in only the last  5 months (from a once completely dormant metal for so many years).  It is quite a sight to behold, and one must ask the question will it continue?  And what will future prices look like?  And how soon? More Here.. This posting includes an audio/video/photo media file: Download Now

Crude Oil Spikes Like An Egyptian Posted: 31 Jan 2011 05:33 AM PST By Dian L. Chu, EconForecast Images of mass Egyptian protesters clashing with police in Cairo broadcasted around the world shook global financial markets on Friday, Jan. 28.  Dow and S&P 500 both dropped more than 1%, while some asset classes such as gold, silver, U.S. Treasuries were hot commodities from safe haven demand. NYMEX West Texas Intermediate (WTI) also spiked more than 4%, closing at $89.34, while ICE Brent crude for March delivery surged 2.1% to $99.42 a barrel, and touched $99.74 intraday, a new post-2008 high.   Egypt - Home of Two Oil Transport Chokepoints If you are wondering the significance of Egypt related to the curde oil market. Here is a quick overview. Egypt, with oil production of about 685,000 barrels of oil a day, is ranked in the top 30 among the world's oil producers, based on U.S. government data. The country is not a significant oil exporter as its production is mostly used for domestic consumption. Graphic Source: U.S. EIA However, since Egypt is home to the two world oil transit chokepoints--Suez Canal and Sumed Pipeline--the surge in crude oil prices was partly on worries of potential supply transport disruptions. Suez Canal Shutdown = Higher Oil Price Suez Canal is a key water transportation lane between Europe, Middle East and Asia. An estimated 1.8 million barrels per day (b/d) of crude oil and refined petroleum products flowed through the Suez Canal, according to the U.S. EIA. The 200-mile long Sumed pipeline is an alternative to the Suez Canal for transporting oil with a capacity of around of 2.5 million barrels per day. In the event that the canal is closed, thousands of ships and oil tankers would have to go around Africa, adding about 6,000 kilometers (3,729 miles) to their journey, slashing the availability, while adding to the cost of crude oil. Increasing Middle East Tensions Furthermore, since crude oil typically is very sensitive to geopolitics, markets are also nervous because the unrest in Egypt has raised tensions in the Middle East- the world’s major oil-producing region. As riots first started in Tunisia, spreading to Yemen, and now Egypt, anger over rising prices and high unemployment has also prompted political protests erupting throughout the Arab world in Morocco, Algeria and Saudi Arabia. Crude & Equities Diverge Crude oil and equities were mostly trending in tandem since the 2008 financial crisis on the prospect of global economic recovery. And geopolitical events typically tend to spur a broad market risk-off trade, i.e. selling off equities and commodities like crude, going into bonds and dollar. However, since the situation in Egypt is very specific to the supply risk of crude oil, this time around, it is risk-off for stocks, but risk-on for crude, resulting in a divergence. (Fig. 1) WTI-Brent Spread at Record High The North African turmoil also strengthened North Sea Brent Crude and widened its premium over WTI to a record $12.49 before ending the day at $10.08 (Fig. 2). Historically, WTI, a lighter and sweeter crude, has enjoyed a roughly $2 premium to the North Sean Brent. This reversal and widening of the WTI-Brent price differential could be most attributed to seasonal and fundamental factors such outages at North Sea, cold weather in Europe, but more importantly is the “Cushing Syndrome.” “Cushing Syndrome” Distorts WTI Cushing, Oklahoma is a major crude oil trading hub and price settlement point for the NYMEX WTI. However, Cushing has a capacity and logistic problem, and the resulted land-lock tends to further exaggerate the already weaker U.S. demand, thus distorting against the WTI price. NYMEX WTI is also gradually losing its influence as global crude oil demand growth is shifting to Asia and away from the U.S. Inventory at Cushing gained 2.3% in the week ended Jan. 21 to the highest since August, while the overall inventory in the U.S. also rose to 340.6 million barrels, 4.25% higher than a year ago, and above the 5-year average, according to the data from the U.S. EIA. And the glut could get worse as TransCanada Corp.’s Keystone pipeline starts to pump as much as 156,000 barrels of Canadian crude to Cushing in February. Lack of Transparency Boosts Brent To be fair, with all the problems WTI seems to have (mostly associated with Cushing), Brent also has one unfair advantage over WTI which has helped boosting its price. That is, unlike the detail crude and product inventory report issued by the U.S. EIA weekly for the WTI crude, Brent does not have such (or any) reporting structure. So, for all the criticism about WTI and that Brent is a better benchmark reflecting global demand, Brent could actually have been more easily manipulated to its current near $100 levels, due to its lack of transparency, and the considerably lower volumes on ICE (25% of NYMEX WTI, according to the CME Group as quoted by FT Alphaville.) Higher Price = Better Benchmark? I personally think most market players probably just pick whichever has the higher price point as being “the better gauge.” So, when the spread flips back to its historical pattern, either by the U.S. working off the excess at Cushing, or by some change of the WTI pricing structure, we could see headlines touting WTI as the better benchmark. Fast & Furious WTI Short Squeeze Meanwhile, the record differential has attracted some new spread traders piling into Brent, while shorting the WTI. Bloomberg reported that open interest for Brent futures rose to a record 968,565 on Jan. 21, based on data from ICE Futures Europe. This not only further distorts the Brent and WTI differential, but also means a fast and furious short squeeze on the NYMEX WTI, with any unexpected events such as the Egyptian unrest. This is why you see WTI move 4% vs. the 2% of Brent on the same news. Europe Is Not $12 Stronger Moreover, the fact that the U.S. has more than sufficient crude inventory, a steady global product demand outlook (Fig.3), and plenty of OPEC spare capacity also suggests the world oil is currently well supplied, and there’s little reason Brent’s fundamentals should continue to be that much stronger than the WTI. As such, I believe the current wide spread, while partly supported by regional and seasonal market fundamental factors, is not sustainable. Be A Brent Bear & WTI Bull And with this new crisis in Egypt, shorts will likely come off on the WTI as nobody will be shorting crude anywhere, not even the WTI, regardless of the Cushing build. So, from what I've discussed here, I’d be more bearish on Brent and more bullish on WTI. From that perspective, sometime in the next week or so, I expect WTI to break above $90 a barrel and could make a run at $93 as protests escalate, and Brent could break above $100. Meanwhile, the WTI-Brent spread will likely narrow to around $8 next week, and have the potential to move below $6 over the next few weeks, if chaos continues. Crack Spread To Narrow Further  In the U.S., with both gasoline and distillate stocks continue to build staying above the average range, and declining gasoline demand (Fig. 4), the independent refiners like Murphy Oil, Frontier Oil, Tesoro, will likely bear the brunt of this unexpected spike of crude prices further pressuring the crack spread. Source: U.S. EIA Several U.S. refiners - Tesoro, Western Refining, and Alon USA each has short float of greater than 10%, while Valero short float stood at greater than 20%. Tanker Stocks Get An Egyptian Pop Similar to Brent, shares of tanker lines like Frontline, Teekay Tankers, General Maritime, Overseas Shipholding, and Nordic American Tanker, also got a pop due to speculation that that tankers would be in high demand if the turmoil in Egypt causes the Suez Canal to close.   So far, the Canal has been operating normally since the riots started, and there’s no indication of a possible shutdown. Nevertheless, since it takes some time for portfolio managers to reallocate funds, and as long as the North African situation remains unresolved, there could be some more upside before the sector’s fundamentals set in again. Among the tankers, Frontline, the world’s largest oil tanker operator, would be the best of the bunch from a risk/reward standpoint. I’d stay away from General Maritime for the time being mainly due to its high leverage and its struggle with debt in recent months. Start of a Political Shift in the Arab World So far, the protests in Egypt seem to have no clear leader or organization, but could be ongoing for a while.  For now, they have not spread into the major OPEC countries such as Saudi Arabia in a significant way; however, longer term, this movement could signal a change of political structures of possibly all Arab World in the years to come. Priceless - Geopolitical Premium Meanwhile, Bloomberg reported that oil options volatility increased to 30.1%, up 9% in one day as the underlying futures surged the most since Sep. 2009. So, depending on the development in Egypt and the Middle East, volatility will likely rule crude oil in the near term as there has not been a geopolitical event such as this for a long time, and the “geopolitical premium” rises and falls based purely on markets’ “fear perception.” Related Reading - Saudis Ditch NYMEX WTI - A Global Paradigm Shift Dian L. Chu, Jan. 30, 2011 | Read Me on Kindle | Facebook Page | New Article Alert | Google Profile

Gold investors should stay focused Posted: 31 Jan 2011 05:28 AM PST by Frank Holmes 01/31/11 (The Street) — Last week was an eventful week at home and abroad with several events directly showing up in the performance of global markets and the price of gold. … Earlier in the week, a small hedge fund that had overleveraged itself to gold futures blew out its position, causing the biggest ever one-day reduction in futures contracts for the Comex. This small hedge fund trader fell victim to one of the oldest flaws in capital markets — arrogance with excessive leverage. This is the same infallible, overleveraged attitude that took down Fannie Mae, Lehman Brothers, Long-Term Capital Management, Enron and a number of Main Street American Home Buyers who leverage themselves 100-to-1. By overleveraging his small $10 million fund, he was able to control the equivalent of South Africa's annual gold production, according to the Wall Street Journal. That's one small fund controlling an amount of gold equal to the world's third-largest producer? Leverage of this magnitude is impossible to manage, no matter how intelligent the investor. However, danger and crisis can equal opportunity for long-term investors. All these events have created a lot of short-term noise but not derailed the long-term story. … Long-term gold investors must remember that we have been here before. … Governments in the developed world, not just the U.S., have a long-term spending problem. Will they address their fiscal deficit spending on social welfare by making serious cuts or will they try to reflate their economies, devalue their currencies to stimulate exports or raise taxes to an extent they choke economic activity? Whichever way, it should be a positive for gold. Bottom line, it is prudent to have some exposure to gold in a diversified portfolio. [source]

Donner Metals, Xstrata Zinc and the Bracemac-McLeod Mine Posted: 31 Jan 2011 05:21 AM PST DON on AOTH Richard (Rick) Mills Ahead of the Herd As a general rule, the most successful man in life is the man who has the best information I recently talked with David Patterson, David is the CEO of Donner Metals TSX.V – DON. Donner Metals is a Canadian based junior resource company currently building a zinc, copper, silver and gold mine with Xstrata Zinc (LSE - XTA) in Québec, Canada. In this discussion with aheadoftheherd.com David talks about working with Xstrata and Donner Metals plans for the future. A presentation on Xstrata’s website from the London Metal’s Week shows their outlook for zinc demand and plans for the new mine in Québec. At full production beginning in Q1 2013, the Bracemac-McLeod mine will produce 80,000 tonnes of zinc and 10,000 tonnes of copper annually. One page, shown below, of Xstrata’s presentation highlights Bracemac-McLeod’s mine plan. AOTH: Donner Metals has a market cap of $30 million. Yet Donner is ...

Precious Metals Bull-Riding Posted: 31 Jan 2011 05:16 AM PST For obvious reasons, there is no metaphor more applicable to investing in the precious metals sector than riding a bull. With gold and silver prices having risen relentlessly for a decade, the stature and stamina of this "bull" are beyond question. Equally, remaining atop this "bull" has been an activity to challenge the perseverance and staying-power of the most dedicated rider. Helping us to improve our prowess as bull-riders have been two groups of "trainers". However to state that these two groups have opposite intentions is clearly an understatement. On the one side are long-established websites like Jim Sinclair's site, GATA, and LeMetropole Café. These fine sites have performed several valuable functions. They provided novice bull-riders with guidance on the precious metals sector. Of equal importance, they have continuously shone a spotlight on the manipulative activities of the bullion-banks. In other words, they have taught us about the tactics and motives of the "bull" we have sought to ride. Lastly, they have supported those whose "grip" was weakening to help them stay atop the bull, while encouraging those who have been "thrown" to get back on the beast. The value of this last service cannot be overstated. My own "moment of weakness" occurred in the summer of 2007, after a very long stretch of sideways trading in the sector. From an intellectual standpoint, I never lost my conviction about where gold and silver must be headed over the longer-term. The "arithmetic" of the fiat money-printing of the bankers leads to only one possible outcome. However, emotionally I had begun to question whether the bankers could still exert such control over this market that the "long term" would be a test of endurance which would exhaust the patience of most investors. It was the unwavering conviction of the principals of these sites who helped me conquer those doubts. A major "break-out" took place in the fall of 2007, and my own doubts have never returned. In subsequently founding Bullion Bulls Canada, we have endeavoured to follow in the fine tradition established by these sites: keeping those already in the sector well-informed, educating those new to the sector, and reassuring both "veteran" and "novice" alike – when the inevitable banker-generated "volatility" tests their faith. Our site (and others) swell the ranks of the "old guard" who came before us, just in time to meet the rising tide of precious metals investors flowing into the sector. At the same time, we cannot overlook the contribution of the other group of "trainers", without whom we could have never become the fearless, veteran "bull riders" that we are today: the bullion bankers. As with learning any other skill, there is only so much expertise we can acquire through being "taught" and "told" what to do. At some early point in skill-development we need to be able to put into practice what we have learned, as part of the trial-and-error method of learning which epitomizes our species. In this respect the bullion-bankers have been invaluable: they have supplied the "training bull" which all novices to this sector have been forced to ride, in order to earn their own status as bull-riders.

When All Roads Lead to Default Posted: 31 Jan 2011 05:10 AM PST Friday may have been a key turnaround day. Stocks fell 166 points on the Dow. Gold leaped $22. What's up? Hard to say… We'll have to see what happens this week. A falling gold price means people think things are under control…that they believe the present system works…and that it will deliver growth without excessive inflation. When people lose confidence in the system, on the other hand, the gold price goes up. By the end of last week, people must have been losing confidence. Egypt seemed on the brink of a major blow-up, possibly destabilizing the entire mid-east. And from Japan came more disturbing news: "S&P Downgrades Japanese Debt," said the headline. Standard and Poor's said Japan had no plausible plan for keeping itself from bankruptcy. The country has the highest debt to GDP ratio in the world. And it just keeps adding debt. Is that a problem? Lenders – mostly the Japanese themselves – don't seem to think so. They lend money to the Japanese for 10 years and ask only 1.24% interest. Can you imagine? If the yen lost only 2% per year – which is the TARGET in most advanced economies – the real interest rate would be negative. Meaning, the lender would lose money every year. And how will the Japanese repay the money? Lenders are putting up money to a borrower who, as the S&P puts it, has 'no plausible plan' for paying it back. And asking only 1.24% interest. What are they thinking? Are they thinking at all? Saving rates in Japan are falling. People are getting older. More people are retiring than entering the workforce. How can this movie possibly have a happy ending? Meanwhile, here's another headline. This one probably didn't rattle investors. But it should have shown them where we're headed: Spain to Raise Retirement Age to 67 MADRID – Spain's government and main labor unions agreed on Thursday to raise the retirement age as part of an overhaul of the country's pensions system, averting threatened organized protests and responding to investors who have been demanding that Spain clean up its public finances. After a year of negotiations, the draft deal ensures that Spain's normal retirement age will rise to 67 from 65. As part of a compromise, however, the government agreed that workers could retire at 65 if they had contributed to the state pensions system for at least 38.5 years. The agreement is also intended to cut the cost of future pension payments by basing the calculation for such payments on a worker's last 25 years of earnings, rather than the 15 years under current law. Pension reform has been a political hot potato in several European countries, including France, which was hit last autumn by a nationwide strike and protest movement before the government won support in Parliament for its plan to raise the minimum retirement age to 62 from 60. Similarly, Greece was the scene of serious unrest after its government also agreed last June to radical changes to its retirement program – including cuts in benefits and curbs on early retirement – as part of changes promised by Athens in return for a €110 billion, or $150 billion, bailout. Like many other Western countries, Spain is facing mounting difficulties in supporting the cost of an aging population, at a time when its economy is showing little signs of recovering from the worldwide financial crisis. Last year was the first in which Spain's pension system did not manage to run a surplus. What is this? It's a default. Spain is defaulting on promises made to its working classes. We'll see a similar default in all the advanced, social welfare economies. America included. They all made promises they can't keep. Now, they have to default…in many different ways. Some will cut back fast on promises in order to protect their credit. Others will let themselves be pushed to the wall – like Argentina in '01. They will not willingly cut back…they will be forced to do so. Then, when they run out of money, they will be unable to keep their promises. In desperation, they will seize assets and cause all sorts of mischief – just like the Argentines did. Still others…like a ruined man reaching for a loaded pistol…will turn to the printing press. It doesn't matter how many bailouts you give them. It doesn't matter how far down the road you "kick the can." All will default. The only questions are how and when… Bill Bonner for The Daily Reckoning When All Roads Lead to Default 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."

UBS Cuts Its Gold Recommendation Posted: 31 Jan 2011 04:58 AM PST Market Blog submits: By David Berman UBS economist Larry Hatheway is cutting his recommendation on precious metals from “overweight” to “neutral,” thanks to receding economic risks and a recovering global economy. “The recovery in the advanced economies is showing more signs of strength and sustainability,” he said in a note. “Inflation fears are overdone, in our view, in emerging and developed economies alike. And worries that Fed easing (‘QE2’) would lead to a dollar collapse and ‘currency wars’ have proven unfounded (as we always thought they would be).” In other words, he’s not overly keen on gold right now because the financial demand for precious metals is declining. At the same time, bond yields and stock prices are climbing higher with an improving economic backdrop, which raises the opportunity cost of holding gold. “Gold is unlikely to out-perform if cyclical risk premiums fall,” Mr. Hatheway said. “As a result, we believe it is correct to pare back overweight positions to neutral.” As for a hedge against the U.S. dollar, he noted that its negative relationship to the dollar (rising when the dollar falls) hasn’t actually been playing out since 2009. While the trade-weighted dollar index has been mostly flat since 2009, gold prices have risen, most likely because of sovereign risk emanating from the euro zone. “To be sure, we’re not yet ready to consign European sovereign risk to the history books,” he said. “But other ‘fear factors’ hitherto supporting gold prices are receding. Expectations regarding the durability of the US economic recovery Complete Story »

Precious Metals and the Dollar’s Next Big Move Part II Posted: 31 Jan 2011 04:51 AM PST We have seen some exciting moves in the market and with the market sentiment so bullish it should make for a sharp selloff in the coming weeks. Meaning everyone is overly bullish and owns a lot of stocks and commodities; therefore the market should top and leave them holding the bag while the smart money runs for the door. The market will not bottom until all of these individuals holding the bag finally cannot take the pain of losing any more money and once we see them panic and sell them all at once only then will we be looking to go long again. The past couple weeks I have been bombarded with emails asking if gold and silver have bottomed and if they should be buying more on these pullbacks. Those of you reading my work for the past few months know that my analysis clearly has shown how both gold and silver have been topping out. There have been strong distribution selling and price patterns on the charts are also clearly signaling a top was near. A couple weeks ago ...

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