Gold World News Flash |
- “GATA considers its lawsuit a success for having established in open court that the Fed has many secrets about gold.”
- Gold Mining Acquisitions to Continue in 2011 & 2012
- Jim?s Mailbox
- Fed can keep most gold secrets but must yield one, judge rules
- The Goldsmiths, Part CLXXIX
- Two Huge No-No’s for Gold Investors
- It's All Good for Gold
- Better than Gold? … Jim Rogers Thinks So.
- Crude Falls on Profit Taking, Gold Rebounds on Bargain Buying
- The US Dollar: Dead On Its Feet, Dead Cat Bounce, or Dying to Rally?
- Grandich Interviewed in Market Oracle
- Gold Seeker Closing Report: Gold and Silver Gain Almost 2%
- Ben Davies: Pensions need gold, the currency of hard assets
- Senate votes to repeal 1099 provision
- Banks Overcharging Pension Plans?
- Jim's Mailbox
- AXA Rosenberg's Attempt To Conceal Its Quant Glitch Costs $242 Million
- Why Food Prices Must Go Up
- Bernanke Either Is Smoking Some Strong Weed Or Is A Malicious Liar
- Chinese Silver Buying Just Beginning
- The Truth About Gold
- Should Investors Continue to Buy Gold?
- Guest Post: Can’t See the Forest For The Trees
- Don't get mugged. Buy Silver.
- Fed Excess Reserve Cumulative Deficiency Hits Record
- The Real Reason for Rising Commodity Pricesw
- Ben Bangs Bonds Out of Range
- Guest Post: Smoot Hawley Redux
- Egypt And The Muslim Brotherhood: A Stratfor Special Report
- Keiser Report: Silver Stick for JP Vampire (E118)
- Ben Davies: “Pensions are an accident waiting to happen.”
- THURSDAY Market Excerpts
- On the African gold trail with GoldStone Resources
- Is Egypt A Preview of 2015 America?
- In The News Today
- Housing Armageddon: 12 Facts Which Show That We Are In The Midst Of The Worst Housing Collapse In U.S. History
- Fronteer Bought Out By Newmont, Readers Up Over 120%
- Fuzzy Logic: Those Who Fail to Learn From History...
- Gold Unchanged
- Modern Monetary Theory and Why We Have a Debt Based System
- Gold Thoughts
- It's Official: ICE Sets Cotton Position Limit
- Gold Daily Silver Weekly Charts - Panic Hits the Money Printers As Benny Signals QE -> infinitum
- “At Great Risk”
- “At Great Risk”
- No Sale Thursday - Will the Dollar Save Retail or Doom Us All?
- Gold: Quickly climbing the wall of worry
- Inflation’s First Phase
- Hourly Action In Gold From Trader Dan
- Options Offer Clues to Gold's Direction
| Posted: 03 Feb 2011 08:03 PM PST
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| Gold Mining Acquisitions to Continue in 2011 & 2012 Posted: 03 Feb 2011 08:00 PM PST  King World News is taking a look at gold mining takeovers after Newmont announced its $2.3 billion takeover of Fronteer Gold. Legendary trader Jim Sinclair commented today, "The majors must buy qualified juniors. They have never been successful explorers. Reserves of the majors hold have hit a plateau or are on the decline."
This posting includes an audio/video/photo media file: Download Now | |||||||||||
| Posted: 03 Feb 2011 07:00 PM PST View the original post at jsmineset.com... February 03, 2011 07:24 PM Greetings Jim, We have been monitoring the gold market closely for the past several weeks in anticipation of the development of a meaningful low, and today’s sharp move higher was a bullish signal that suggests the anticipated low may be in the process of forming right now. Gold closed well above resistance at the upper boundary of the downtrend from early January on the daily chart, confirming the start of a new reaction. From a temporal perspective, we are 5 trading days into the cycle following the Short-Term Cycle Low (STCL) on January 27, and today’s move up to a new short-term high is a bullish sign that indicates the current cycle may be right translated. If the developing reaction continues to strengthen and consolidates the gains of the past 5 sessions at current levels or higher, the bullish translation will be confirmed. However, the most important potential development relates to ...
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| Fed can keep most gold secrets but must yield one, judge rules Posted: 03 Feb 2011 06:08 PM PST The Federal Reserve can keep secret most of the gold documents at issue in GATA's freedom-of-information lawsuit against it, a federal judge ruled today. But the judge, Ellen Segal Huvelle of U.S. District Court for the District of Columbia, ordered the Fed to disclose to GATA a potentially crucial document by February 18.
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| Posted: 03 Feb 2011 06:03 PM PST As discussed in prior Goldsmiths, the Rothschild Cabal money changers are the very people who have created oscillating, up and down, financial markets. While this can be argued as plausible in stocks, because of the great diversity in businesses and the periodic changing circumstances, it makes no sense to me at all for items that should have some stability based on fundamentals—like with currencies and most commodities (to certainly include gold and silver).
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| Two Huge No-No’s for Gold Investors Posted: 03 Feb 2011 06:01 PM PST The recent Resource Investment Conference in Vancouver may well have set a new attendance record for that venue. So many company booths filled the display area that they overflowed onto the confines of the massive Vancouver Convention Centre West. I was asked to speak in place of Kitco's Jon Nadler, who was unavoidably absent from the conference. My topic was entitled The Precious Metal's BIG Money Train is Leaving the Station…Are You Ready?
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| Posted: 03 Feb 2011 05:03 PM PST Robert Kientz submits: Gold began the New Year tumble and the bears came out in force to discuss the end of the gold rush. Gold was back up again Thursday, offering us the perfect chance to discuss why fundamentals are still strong. Gold's Pullback Quite a few reasons have been cited for Gold's recent pullback. The first was a change in COMEX margin requirements that showered cold water on traders opening new long positions due to higher cash requirements. Secondly, the Federal Reserve announced an accounting change, saving it from potential bankruptcy. If the Federal Reserve cannot technically go bankrupt, then a major reason for holding gold and silver, the currency crisis, loses some steam in the eyes of some investors. I don't think the accounting gimmick will ultimately eliminate the currency crisis trade, but it buys the Fed some time with the public before they lose confidence in the central bank. A quote from Reuters:
And, Complete Story »
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| Better than Gold? … Jim Rogers Thinks So. Posted: 03 Feb 2011 04:46 PM PST
The following is an excerpt from our FREE Inflationary Holocaust Survival Guide.
Do you know Jim Rogers?
The legendary investor first went to work on Wall Street with $600 in his pocket in the late ‘60s. In 1970, he and George Soros founded the Quantum fund: one of the greatest investment funds in history.
Between 1970 and 1980, the Quantum fund returned 3,365%, outperforming the S&P 500’s performance of 47% by an enormous margin. On an annual basis, Rogers and Soros produced average returns of 38%. Rogers then “retired” with millions in his bank account at the ripe age of 37.
Since then, he’s taken two trips around the world, the first on a motorcycle, the second in a custom-made Mercedes. Still managing his own money, Rogers has used his “on the ground” knowledge of foreign markets to make numerous major calls. He went long stocks in 1982 when everyone was still bearish. Stocks more than tripled in the five years following this. He also went short before the market crash in 1987.
However, his most famous call was the commodities bull market that began in 1999. At that time, everyone thought he’d lost his mind. Commodities had done nothing in 15 years. The Dow Jones Commodities Index hadn’t been revised since the 1960s. and Reuters’ hadn’t revised its commodity index since the 1930s.
With no decent options available, Rogers decided to launch his own commodities index. He did so August 1, 1998. He then took off on his second world trip as chronicled in Adventure Capitalist. Since that time, the Rogers International Commodities Index has more than doubled. In contrast, the S&P 500 has fallen.
And Jim believes we’re just getting started.
Historically commodities have always done well during periods of high inflation. And Jim, like myself, believes the Feds’ moves are highly inflationary. In fact, I borrowed the term “Inflationary Holocaust” from one of Jim’s interviews with CNBC. Jim said, "We're setting the stage for when we come out of this of a massive inflation holocaust,"
Jim has publicly stated that he is looking to get all of his money out of the dollar in the coming months. He’s also continually buying more commodities. And one segment in particular interests him.
Agricultural commodities.
It’s not difficult to see why. You only make big money by buying investments that have been ignored for years. And few investment classes are as unpopular as agricultural commodities (when was the last time someone you knew opened a sugar plantation or soy bean farm?)
It’s not mere anecdotal evidence either. Inventories for corn, wheat, and soybean are all near 40-year lows. Other soft commodities like cotton, sugar and coffee are at historically low inventories too. So there’s very limited supply.
And it’s only going to go lower.
The credit crisis has made it a lot more difficult for farmers to get access to credit for fertilizer. And low commodity prices have made it no longer economical to grow certain crops (I personally know of a large farm that will not be planting any corn this year for the first time in 60 years).
Yet, while supplies are dwindling, demand is growing rapidly. From 1974-2005, the world’s population grew by more than 1.1 billion people. Initially, most of them¾ and the rest of the world for that matter¾ weren’t eating anything resembling a western diet. For example, in 1980 the average Chinese consumer lived off $1 a day.
However, as emerging markets’ economies began to expand, so did the diets of their citizens. In 1985 the average Chinese consumer ate 44 pounds of meat per year. Today, it’s more than doubled to 110 pounds.
Now, it takes 17 pounds of grain to generate one pound of beef. So grains demand is soaring... But land is limited. In 1989,worldwide arable land was 1.6 billion acres. It’s 1.6 billion acres today.
It’s the perfect set up for any investment: dwindling supplies and growing demand. The inflationary holocaust will only be adding gasoline to the fire, pushing agricultural commodities to record highs. As Jim Rogers puts it, “God knows how high the price of agriculture is going to go, so that's where I'm putting more of my money now than in other things… I think I'm going to make more money in agriculture than I make in precious metals.''
To continue with the rest of our Inflationary Holocaust Survival Guide, go to http://www.gainspainscapital.com and click on FREE REPORTS. All in all its 14 pages explain not only why inflation is here now, why the Fed is powerless to stop it, and three investments that absolutely EXPLODE as a result of this (including Jim Rogers personal favorite on playing agricultural commodities).
Good Investing!
Graham Summers
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| Crude Falls on Profit Taking, Gold Rebounds on Bargain Buying Posted: 03 Feb 2011 04:40 PM PST courtesy of DailyFX.com February 03, 2011 07:51 PM It was a quiet day for crude oil, but gold managed to rise as bargain hunters entered the fray. Commodities – Energy Crude Falls on Profit Taking Crude Oil (WTI) - $91.05 // $0.51 // 0.56% Commentary: Crude oil was fell on Thursday, with WTI shedding $0.32, or 0.35%, to settle at $90.54, while Brent fell $0.58, or 0.57%, to settle at $101.76. It was a day of profit taking as some traders lock in the gains from this week. Recall that Brent surpassed $100 for the first time in 27-months this week. In fact, prices have been above $100 every day this week. As we’ve been writing, the trend remains decisively higher, but a correction is overdue. Tomorrow’s U.S. nonfarm payrolls report provides a bit of event risk, but forecasts aren’t calling for any fireworks, with a 146K increase expected. Technical Outlook: Prices have put in a bearish Dark Cloud Cover candlestick formation below resistance at $92.58,...
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| The US Dollar: Dead On Its Feet, Dead Cat Bounce, or Dying to Rally? Posted: 03 Feb 2011 04:36 PM PST
Well, the US Dollar has staged a small bounce at $77 or so. The question now is whether this becomes anything substantial, or is merely a result of the Euro/USD pair becoming so stretched that a brief pullback had to happen.
We should know the deal within a few days. However, the greenback is now only 2% away from breaking its multi-year support line. If the Dollar turns down again now then the inflationary collapse will intensify rapidly.
I’m inclined to say that we may get a decent bounce here, possibly to 79 or so. The reason I say this is that while the US Dollar is so close to breaking CRITICAL support, the Euro (which comprises over 50% of the US Dollar index) remains well below its multi-year downward trendline:
Ultimately all of this is just question of which paper currency will collapse first. From a fundamental standpoint the Dollar is more sound than the Euro (the Dollar is backed by the US Government while the Euro is backed by… ???). However, the US Dollar also happens to be under the watch of a man who thinks nothing of killing a currency (and indirectly people via soaring food prices).
Indeed, only one currency continues to soar to new highs and is actually increasing purchasing power and that’s Gold. So if you own Dollars OR Euros, I strongly urge you to consider moving some of that paper into the Ultimate Currency.
After all, wouldn’t you like to own something that Ben Bernanke and Jean Claude Trichet didn’t control?
Good Investing!
Graham Summers
PS. If you’ve yet to take steps to prepare your portfolio for the coming inflationary disaster, our FREE Special Report, The Inflationary Holocaust explains not only why inflation is here now, why the Fed is powerless to stop it, and three investments that absolutely EXPLODE as a result of this.
All in all its 14 pages contain a literal treasure trove of information on how to take steps to prepare AND profit from what’s to come. And it’s all 100% FREE.
To pick up your copy today, got to http://www.gainspainscapital.com and click on FREE REPORTS.
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| Grandich Interviewed in Market Oracle Posted: 03 Feb 2011 04:02 PM PST The following is automatically syndicated from Grandich's blog. You can view the original post here. Stay up to date on his model portfolio! February 03, 2011 07:56 PM Major Pools of Capital and The Mother of All Gold Bull Markets Commodities / Gold and Silver 2011 Feb 03, 2011 – 04:00 AM [url]http://www.grandich.com/[/url] grandich.com...
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| Gold Seeker Closing Report: Gold and Silver Gain Almost 2% Posted: 03 Feb 2011 04:00 PM PST Gold fell $3.80 to $1327.20 in Asia before it rose to see a $6.55 gain at $1337.55 in early New York trade and then fell off rather markedly in midmorning trade to as low as $1325.10 by a little after 10AM EST, but it then spiked back higher midday and ended near its early afternoon high of $1355.64 with a gain of 1.58%. Silver fell to $28.175 at the open of trade in New York before it rose to see an almost 1% gain at $28.487 by about 9AM EST and then dropped to as low as $27.965, but it also surged back higher midday and ended near its early afternoon high of $28.852 with a gain of 1.73%. Both metals have continued even higher in after hours access trade at the time of writing.
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| Ben Davies: Pensions need gold, the currency of hard assets Posted: 03 Feb 2011 03:32 PM PST 11:08p ET Thursday, February 3, 2011 Dear Friend of GATA and Gold: Writing exclusively for King World News, Hinde Capital CEO and gold advocate Ben Davies details why gold has become indispensable to pension funds as government pension schemes collapse into insolvency. Davies' essay is headlined "Pensions Need Gold, the Currency of Hard Assets" and you can find it at the King World News blog here: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/2/3_Ben... Or try this abbreviated link: CHRIS POWELL, Secretary/Treasurer 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 Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: http://www.gata.org/node/16 ADVERTISEMENT Prophecy Resource Spins Off Platinum/Palladium Venture: 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
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| Senate votes to repeal 1099 provision Posted: 03 Feb 2011 02:59 PM PST By Laurie Kulikowski http://www.thestreet.com/story/10995960/1/senate-votes-to-repeal-1099-pr... Congress is one step closer to repealing the IRS 1099 reporting requirement that small-business owners were finding such a burdensome part of health care reform. The Senate voted 81-17 late Wednesday to pass an amendment to the FAA Air Transportation Modernization and Safety Improvement Act (S. 223) that would do away with the provision. The quick turnaround in the Senate comes on the heels of President Barack Obama's call for repeal during his State of the Union Address last week. As part of the health care reform act passed a year ago, beginning in 2012 business owners would have to use 1099 IRS tax forms for all transactions greater than $600 each year. Business owners and trade organizations claimed the rule would create too much red tape for a small firm. The House has yet to pass a version of the repeal. At least four proposals are working their way through the House of Representatives, two of which originally came from the Senate. ADVERTISEMENT Prophecy Resource Spins Off Platinum/Palladium Venture: 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 Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: http://www.gata.org/node/16 ADVERTISEMENT Sona Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit, 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
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| Banks Overcharging Pension Plans? Posted: 03 Feb 2011 02:28 PM PST
Carrick Mollenkamp, Lingling Wei and Gregory Zuckerman of the WSJ report, Suit Alleges Mellon Created Fake Trades, Overcharged: Bank of New York Mellon Corp. currency traders used a foreign-exchange system called "Charlie" to create fake trades and overcharge Virginia pension funds by at least $20 million, according to allegations in recently unsealed documents in a Virginia court. In a separate Reuters article, Martha Graybow and Tom Hals report, U.S. states ramp up foreign currency trade probes:
Finally, this little tidbit from Advisor One:
Currency trading is huge business for banks. HUGE! The amount of money they make trading currencies on behalf of clients is incredible. And it's a market that's not regulated so a lot of dubious things can take place, especially with unsuspecting clients who can be easily duped. I'm not going to comment on the allegations in these articles but if State Street or Bank of New York Mellon lose these cases, their reputation will take a hit. It's going to cost them a lot more than damages. You may be shocked to know that many pension funds do not pay attention to currencies. And yet on any given year, large currency swings can have a material impact on performance. Here is where I'm going to plug my former boss from PSP Investments, Pierre Malo. Before joining PSP, Pierre was head of currencies at the Caisse de dépôt et placement du Québec. He retired from PSP and is now consulting. You can visit his site, Pierre Malo Consulting Inc., and feel free to contact him with any questions you have on F/X matters and pension funds. He is one of the nicest people I ever met in finance and he knows currencies and how to deal with banks to make sure they're not screwing you (he is also an expert on governance). I have nothing against banks making money in F/X markets trading fairly, but if they're screwing customers to juice their profits, then they should be prosecuted. Period. The same goes for other activities in bond, equity and derivatives markets (banks are making a killing in CDS market). Pensions have a fiduciary duty to safeguard pension assets and make sure that banks are not shortchanging them in any way.
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| Posted: 03 Feb 2011 02:24 PM PST Greetings Jim, We have been monitoring the gold market closely for the past several weeks in anticipation of the development of a meaningful low, and today's sharp move higher was a bullish signal that suggests the anticipated low may be in the process of forming right now. Gold closed well above resistance at the upper boundary of the downtrend from early January on the daily chart, confirming the start of a new reaction.
From a temporal perspective, we are 5 trading days into the cycle following the Short-Term Cycle Low (STCL) on January 27, and today's move up to a new short-term high is a bullish sign that indicates the current cycle may be right translated. If the developing reaction continues to strengthen and consolidates the gains of the past 5 sessions at current levels or higher, the bullish translation will be confirmed.
However, the most important potential development relates to the intermediate-term cycle. We are now 27 weeks into the cycle following the Intermediate-Term Cycle Low (ITCL) on July 30, and 90% of all intermediate-term cycles are less than 23 weeks in duration, so the next low is well overdue.
A strong close tomorrow would create a bullish engulf pattern on the weekly chart, signaling that the latest ITCL very likely occurred last week and forecasting additional gains during the next 2 to 3 months. Best, CIGA Erik McCurdy
How Much is a Nickel Worth? More than Five Cents, Says Michael Lewis What's commonly known as Gresham's law, the debasement of currency causes the hoarding of good (old) relative to bad (new) money, is not a new human behavior. This tendency had been observed as far back as the 5th century BC. It's becoming clear that the public is beginning to relearn a very old monetary lesson. Source: tvsquad.com
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| AXA Rosenberg's Attempt To Conceal Its Quant Glitch Costs $242 Million Posted: 03 Feb 2011 01:54 PM PST
So much for quant trading being an innocent program that can never do any harm. After a year ago AXA Rosenberg disclosed that it had kept its clients in the dark about a massive error in the computer code of its "quantitative investment model", today the SEC fined the one time asset manager of over $70 billion with a record for its kind fine of $242 million. As a reminder the immediate effect of the error when first reported was the major underperformance of the fund compared to its peers: "A number of the funds managed wholly or partly by AXA Rosenberg performed poorly last year." Yet what supposedly did not alert the firm that anything was wrong was that the system was performing in line with other comparable models: ""It wasn't obvious if there were any problems or any impact from this error on our fund because it followed a similar trend to other quant managers," Vanguard spokeswoman Rebecca Katz told Reuters on Saturday." In other words, it is safe to assume that other AXA peers have or had been operating with comparable system flaws, yet due to the SEC's preoccupation with porn, had never been caught, and as a result investors in such funds may have well been fleeced of millions due to comparable uncaught computer glitches. So much for robotic efficiency, especially when coupled with a human's eagerness to engage in willful securities fraud... From today's SEC announcement charging AXA Rosenberg with Securities Fraud, and imposing a $242 million fine:
What happened with AXA will soon enough happen with all other HFT firms, that today are still all the rage, but following the next major market meltdown that not even all the talent of Sack Frost will be able to recover from, the ensuing scapegoating will immediately focus on blaming those most defenseless and most silicon endowed: the various collocation boxes that do nothing but "provide liquidity." And as a reminder, scalping and frontrunning HFT algos collect rebates in up markets... as well as down.
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| Posted: 03 Feb 2011 01:54 PM PST Since, being as melodramatic as I can be, all is lost, there is nothing that can be done, except for the government(s) to come up with plans for some new Big Screw Jobs (BSJs) with which to forestall the Big Ugly Inevitable (BUI). This is the take I get on a Bloomberg article that starts off with, "Speculation and price swings in agricultural markets may threaten food security, 48 farm ministers meeting in Berlin said a month after a United Nations gauge of global costs reached a record." There was, alas, nothing in the report about how The Courageous Mogambo (TCM) was there, and who cried out, in his outrage and his grief, "That's because you morons are all printing money and deficit-spending like it is some kind of freaking virtue or something! Milton Friedman said, and history has proved, that inflation is always and everywhere a monetary phenomenon, which, if you don't understand English, means you must have somebody who does savvy the lingo translate it into whatever indeciphera...
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| Bernanke Either Is Smoking Some Strong Weed Or Is A Malicious Liar Posted: 03 Feb 2011 01:13 PM PST "History repeats itself, first as tragedy, second as farce" - Karl Marx I don't think it's any coincidence that today's spike in gold coincided with Bernanke's smoke-blowing session in front of the National Press Club. What is really sad and pathetic is that most of the country that bothers to read/follow the news will wake up tomorrow morning to headlines which proclaim that Bernanke said the economy is improving. BUT, if you look at the real TRUTH behind the economic numbers released lately, you will see that the indices used to measure economic activity have been skewed to the upside primarily by price inflation at the "non-core" level, where "non-core" as defined by the Fed/Govt is "the cost of food and energy." Yes, 'tis indeed a massive farce. Let's use today's factory orders report as an example, which posted a .2% gain vs. an expected .4% decline. If you read thru the details of the report, which you can do HERE, you will find that the index gains were driven primarily by an increase in the output of non-durable goods and inventory build-up. If you read thru the data table, you'll find that "petroleum and coal products" were nearly 15% of the total value of the index and represented one of the largest % increase in value from Nov to Dec. Given that we know that the price of oil increased during November by almost 13%, it stands to reason that a large percentage of the gain in the factor order index was the price of oil (and coal). Furthermore, the price of steel has been climbing sharply, ergo the increase in the value of the durable goods component of the index. More here.. 
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| Chinese Silver Buying Just Beginning Posted: 03 Feb 2011 01:02 PM PST Just a few decades ago, China the Giant was barely a mortal. It produced most of what it consumed, and the corporate mega-producers installed during the darkest days of Asian freedom and democracy produced all the commodities the country might need within its own borders. One such commodity was the one we all love: silver. In fact, China produced so much that it couldn't use all of it, nor was it interested in holding onto the metal. The country was a net exporter until four years ago, when at the height of the most recent credit bubble, net imports materialized. Today, China consumes more silver than it ever has in history. It's not that China isn't still producing silver—it is, but it's consuming and hoarding more of it. Through 2010, net imports increased some 15%, while exports fell by nearly 60%. Such a fast swap from exporter to importer means additional strain on the silver markets. From 2009 to 2010, total net imports surged three hundred percent in ju...
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| Posted: 03 Feb 2011 12:49 PM PST www.theablespeculator.com [EMAIL="analyst@theablespeculator.com"]analyst@theablespeculator.com[/EMAIL] DAILY REPORT February 04, 2011 "The guiding principle (for American government) is that as long as the public is under control, everything is fine" --- Noam Chomsky Egypt seems to be coming apart at the seams and the unrest may be spreading to Jordan as the King fired members of his cabinet in order to stave off potential problems. Then comes Saudi Arabia and pent up resentment against that royal family. We already know that Tunisia and Syria are experiencing difficulties and it’s not far from where we are today to a Middle East engulfed in an uprising. Bin Laden and the Taliban have been planting seeds for ten years and thanks to a very short sighted American foreign policy, it looks like they’ll bare fruit sooner rather than later. Now the US is doing what it always does, calling for the removal of a man they supported for twenty years. J...
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| Should Investors Continue to Buy Gold? Posted: 03 Feb 2011 12:28 PM PST Avery Goodman submits: Recently, UBS analyst, Larry Hatheway, issued a bearish forecast for the price of gold. He thinks that continuing economic recovery will cause lower demand, and that this will cause the price to drop. He is naive. Economic recovery, in the United States and the rest of the world, is being driven by the printing of money and the monetization of government debt. Complete Story »
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| Guest Post: Can’t See the Forest For The Trees Posted: 03 Feb 2011 12:17 PM PST
Submitted by Miss America Can’t See the Forest for the Trees Five years ago, when I showed up on the doorstep of Nouriel Roubini’s RGE Monitor, I was in the minority of macro economists who saw a financial tidal wave coming. For the rest of the world, including Wall Street’s financial analysts, Fed bankers, Politicians, or even Moses himself, none of them could see how the contagion from subprime loans could cascade into a systemic crisis. A crisis that would then expose larger problems that would eventually lead to a complete financial meltdown. Similar to the subprime loans and the subsequent credit crisis, we face a new tsunami of what on the surface appears to be of minor financial relevance, but what will be the final straw that breaks the camel’s back if not politically achieved. What it is is ownership and accountability, from a political standpoint, for ALL of the politically fueled economic decisions being made as well as their side effects. For investors, it would be a catastrophic misjudgment to not escalate these macro political views into the analysis of economic work. (This is starkly different then a political debate, but rather a true non-partisan skyview of policies and rhetoric and their overall effects on the psyche of the economy.) For a financial system that is running on the fumes of confidence, we need to properly analyze this new dynamic. Quite simply put… The cross pollination of politics and economics is not only the #1 factor in investing right now… IT’S THE ONLY FACTOR!!! We are not facing a credit crisis. (The printers solved that.) We are facing a confidence crisis. Papering over financial voids, changing accounting rules, socializing loses, removing moral hazards… these are the death throws of ponzi scheme that is allowed to continue through the TBTF virus of our worldwide interrelated financial systems. The current green shoots are nothing but weeds of: “well if we’re all screwed, then none of us are screwed.” When that’s the good news… what’s the bad? It doesn’t take a rocket scientist (or a high frequency trade algorithm) to see that stocks are now all trading within a standard correlation with one another. From an analytical standpoint… Fundamentals are dead. (yes, there can be momentary exceptions, which is what keeps the addicted gamblers coming back… but from a macro standpoint, nothing withstands the tsunami.) In Egypt right now, no one is looking at the P/E ratio of the Egyptian Company for Mobile Services S.A.E.! No one is looking at what the likelihood of the National Bank of Egypt paying a dividend! No. Instead what is driving that market is civil unrest. The results of events like these can be easy to see in hindsight. We can accurately dissect them afterwards… but the warnings are almost always unseen in forethought. I Guarantee you that no current investment models place the proper risk management weighting on this tsunami. What starts as a cultural awareness, eventually grows to an upheaval of entitlement and elitists. This is the ebb and flow as the meek try to once again inherit the earth. (or at least 50% of it from the top 1%) An Egyptian setting himself on fire was the spark that set Egypt on fire. To try and time our markets is the financial equivalent to dousing yourself with gasoline and hoping things turn out all right. Five years ago, I watched people’s eyes glaze over as I explained the financial Armageddon we faced. It was a fictional story that could never actually happen. Now, 2 years after the collapse, understated unemployment still grows, growth is muted or faked, …but most of all, faith is swaying. The next dominoes to fall. In Europe, Eastern European countries (EECs) that grew, and enabled EU nations to leverage their own growth through funding these EEC’s, will now see the rugs pulled out from under them. As the EU has to ring fence their selves to bail one another out, there is no longer spare change to debt finance these EEC countries. These same counties who are not part of the EURO then are forced into the reality of inflation as they have to print their unwanted currencies to pay off their EURO denominate debt. …and this speaks nothing of the actual size of the obligation due for the EURO zone countries that have no cross border contractual obligations to one another other then fear of contagion. Similar to the problems of Europe, the US at the muni level will see the states run similarly dry. As this trickles to local governments who largely depend on the trickle down, we see a cascading affect on the negative outlook for economic recovery. As these funds fizzle, they cause more cutbacks, more layoffs, more mortgage defaults, less tax revenues from houses and unemployed, and a greater dependence on federal aid, which once again circle back to the taxpayers and our future generations. For those EEC countries, they know violence. Their existence is born from revolution. Not much differentiates a social regime from a debt slave regime! For Americans, the fantasy of the past 99 weeks of paid unemployment, comes to a reality end. Those barely treading water, no longer receiving aid, and having less decent prospects for work will have to find a means to survive. While at the same time, cutbacks in police forces, education, and various other evolutionary services will be the enablers for those who have no other choice to find their means. A future without civil unrest seems a bit unrealistic. Mark my words, in the coming 2 years… not a single word a CEO says, nor a single dividend a company announces will have nearly the financial importance of what society grades the current politicians who are now in control of our economy. This new social science of pricing in the psychological effects of things like truth and accountability will paramount. And being pioneers in understanding the political effects of the market are what will keep you ahead of the game. In the meantime, if you feel you have to invest… Well then invest in real productive (not servicing) things that will affect the society you are part of. Invest in your health. Invest in your relationships, and invest in the future of our kids. Avoid the servicing sectors of the world. For example, Facebook, which was born in 2003/4 has no historically comparable measure. (forget the fact that it is born from stolen ideas, affiliated with napster/music theft… and we are just handing them all of our personal information?!?!?!) This king of information in the information age, whom collects advertising revenue, is service, servicing a service. The “pro’s” over at Goldman Sachs try buying a 1% share, thus valuing the company at $50,000,000,000.00… …Well of that $50billion, what portion of Facebook would an Egyptian want to own right now??? …especially when the internet is shut down? In god we trust? In the politicians we trust? (Who speak for our currencies, our countries and our economies?) Well, this new level of “faith economics” will have to stand up to scrutiny that leaves us potentially valuing a service somewhere in-between $0-$50billion. That’s a wide range of trust. That’s a wide range of faith! Now do you get the underestimated risk assessments associated with civil unrest and political economics??? Do you see the Tsunami of accountability? All the best, Miss America – Rich Hartmann
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| Posted: 03 Feb 2011 12:00 PM PST
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| Fed Excess Reserve Cumulative Deficiency Hits Record Posted: 03 Feb 2011 11:51 AM PST
Today, instead of the traditional, and sometimes boring, weekly balance sheet format (no surprises: another week, another record) we want to focus on one particular aspect of the Fed's balance sheet: namely the unprecedented differential between bank excess reserves and Fed asset purchases since the start of the latest round of quantitative easing (since the launch of QE Lite in August 2010). Since this cumulative number has now hit $170 billion, it can no longer be qualified as pocket change, even by the Chairman's standards. First, below is a weekly presentation of the change in the key merkatble assets since QE Lite. To the negative we have the paydown in MBS and Agencies, offset by Treasury purchases on the positive side.
As the black line demonstrates, marketable Fed assets have increased by just under $200 billion, with the $361 billion in Treasury purchases being offset by $168 billion in mortgage related paydowns. Yet while in theory the increase in assets should match the change in bank excess reserves, this is surprisingly not the case, not by a lonch shot. The next chart show the huge differential between the two:
The highlighted bar demonstrates just how large the different has become (as a reference, the Fed's most recent excess reserves were $1.08 trillion). On the other hand, with the SFP unwind, the offset should be a dollar for dollar increase in excess reserves. So if in the coming weeks if we do not see a surge in excess reserves that means that banks are actively using capital not to lend (see G.19) but to speculate in stocks, and as Zero Hedge predicted the money from the SFP program, all $195 may end up being used to purchase GM and other worthless stock. Also for purists, here is the most recent complete Fed balance sheet...
And also the relative holdings of the Fed compared to those of the other five biggest institutional holders. China is becoming an increasingly irrelevant player in the global game theory of international leverage.
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| The Real Reason for Rising Commodity Pricesw Posted: 03 Feb 2011 11:40 AM PST FGMR - Free Gold Money Report February 3, 2011 – An article today in The Wall Street Journal highlights the latest rise in the price of wheat. Blaming bad weather, it notes that the “global wheat market is caught between freezing winds and a sirocco.” The WSJ therefore warns that “investors should beware of whiplash as weather normalizes.” Given that wheat is “up 13% since the start of December”, it is good advice – if weather were to blame. The reality is that wheat is being driven higher by more than bad weather. The price of wheat has been climbing since June, a fact conveniently ignored in the WSJ article, perhaps because it doesn’t square with its premise that bad weather is causing higher wheat prices. Are we to believe that the market knew seven months ago that weather around the world today would be so bad that it would impact global wheat output? Or has wheat – which has risen $3.50 per bushel, ...
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| Posted: 03 Feb 2011 11:18 AM PST
The long end of the bond market has been stuck in a range for almost two months. I think it may have broken out of the range today. The closing price on the bond contract today was 118.99. The low set back on 12/14 was 119.05.  It didn’t take much for the contract to stumble to this foul smelling level. The last 50bp came thanks to Bernanke. At one PM the minutes of his speech came out. Essentially Ben commits himself to continuing QE. We take another step down in bond land. Maybe an important one. The day chart:  Knee jerk reactions and hourly market trends don’t mean much in the scheme of things. What consequence Ben had today will be lost in the noise a few days from now. That said, it's interesting to watch the market’s reaction. When Ben said, “We’re going to continue with the QE” bonds traded cheaper. Ben’s not going to quit. QE2 will run its full course. Long bond yields are going up as a result. It must kill Ben to see how the market now trades him and his policies. Ben is an academic, no market experience to speak of. Maybe he his clueless how the boys in the futures pits are pricing him these days. If so, he should ask his partner in QE crime, Brian Sack. He runs the NY Fed desk and does understand market sentiment. Brian would tell Ben the markets are fading him. And making money in the process. I lived through this once before when William Miller was running the Fed. The markets beat this poor guy to death. He couldn’t say a word with out stocks, bonds or the dollar falling out of bed. I was one of many who would just short things ahead of any of his scheduled comments. Ducks in a barrel. Miller came in March of 1978. He was out by August the following year. The markets crushed him. They did him in. 
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| Guest Post: Smoot Hawley Redux Posted: 03 Feb 2011 10:33 AM PST
Submitted by Jim Quinn Smoot Hawley Redux As the Greater Depression continues along a parallel pathway with the Great Depression of the 1930s, Congress is about to commit the same blunder it made in 1930. The rocket scientists in the House of Representatives in September passed the Currency Reform for Fair Trade Act, which aims to crack down on Chinese currency manipulation by targeting imports from China and other countries with currencies that are perceived to be undervalued. The vote was 348 to 79, with more than 100 Republicans voting in favor of the bill. It died in the Senate before the mid-term elections, but Representative Sander Levin, Representative Tim Ryan and Representative Tim Murphy are expected to reintroduce the bill when the House returns in February from a congressional district work break. Senators Shumer and Casey are also planning legislation to punish the Chinese for unfair trade practices. The head rocket scientist, Nancy Pelosi, declared: “For so many years, we have watched the China-U.S. trade deficit grow and grow and grow. Today, we are finally doing something about it by recognizing that China’s manipulation of the currency represents a subsidy for Chinese exports coming to the United States and elsewhere. We owe that to American workers.” This legislation is part of the Democrats’ “Make It in America” initiative that endeavors to increase domestic manufacturing and creating new American jobs. In classic congressional fashion, they are attempting to pass a bill that will make them look good in the eyes of their constituents, but will exacerbate already dangerous world trade imbalances. You can count on Congress to pander to unions, protectionists, and America Firsters with hollow legislation, when 40 years of bad decisions, bad policies, and bad choices placed us in this situation. When you have made legislative choices that will require the U.S. government to borrow another $6 trillion in the next four years and you already owe someone $868 billion, it is not a good idea to punch them in the nose. The U.S. is running an annual trade deficit exceeding $500 billion per year. It has not run an annual trade surplus since 1975. The trade deficit peaked at $769 billion in 2006, subtracting 5.7% from GDP. The enormous trade deficits are a result of government spending policies, Federal Reserve monetary policies, and corporate outsourcing that have gutted the industrial base of the U.S. These policies resulted in personal consumption expenditures surging from 62% of GDP in 1970, to 71% of GDP in 2009. The trade deficits are not the fault of the countries selling goods to American consumers. Trade subtracted 3.5% from growth in April through June, the most since 1947, as imports surged at the fastest pace since 1984.
The trade deficit with China reached a record level in August of $28 billion, as imports skyrocketed. The U.S. is on track to exceed the 2008 record trade deficit with China of $268 billion. The facts that you don’t hear from the protectionist crowd is that exports to China are on track to reach $84 billion in 2010, 20% higher than the previous peak in 2008. Exports to China have increased by 525% since 2000, while imports from China have increased by 340%. The storyline about China not allowing U.S. imports into their country is false. Putting tariffs or quotas on goods coming from China will not create jobs in America and will only deepen and lengthen the current depression, just as it did in the 1930s. Protectionism During the Great DepressionThe complete collapse of worldwide trade during the 1930s, with its root in trade protectionism, did not cause the Great Depression, but it certainly didn’t help. In 1929, exports totaled $5.9 billion and accounted for 5.7% of GDP. By 1933, exports had plunged to $2.0 billion and accounted for only 3.5% of GDP. Imports plummeted by an equal amount. Global trade declined by 60% as tariffs were imposed and retaliation created a downward spiral. The U.S. provoked the trade war with the passage of the Smoot-Hawley Tariff Act.
Senators Reed Smoot and Willis C. Hawley sponsored the bill, and it was signed into law on June 17, 1930, by Herbert Hoover. It raised U.S. tariffs on over 20,000 imported goods to the highest levels since 1828. The new tariff imposed an effective tax rate of 60% on more than 3,200 products and materials imported into the United States, quadrupling previous tariff rates. According to the U.S. Statistical Abstract, the overall effective tariff rate was 13.5% in 1929 and 19.8% by 1933. It seems politicians never change. During the 1928 presidential campaign, Herbert Hoover promised to help beleaguered farmers by increasing tariffs on agricultural products. After getting elected, Hoover asked Congress for an increase of tariff rates for agricultural goods and a decrease of rates for industrial goods. The Republican-dominated House and Senate did him one better and increased tariffs across the board. In May 1930, a petition was signed by 1,028 economists asking President Hoover to veto the legislation. Henry Ford begged him to veto the legislation. Hoover opposed the bill and called it “vicious, extortionate, and obnoxious” because he felt it would undercut his pledge to international cooperation. Then he proved that he was a standard-issue weak-kneed politician by signing the bill. Hoover’s initial instinct proved correct. The international community levied their own tariffs in retaliation after the bill became law. Canada, Britain, and other European countries immediately imposed their own tariffs. World trade came to a grinding halt. Germany, with its war reparations, was particularly vulnerable to this contraction. Ironically, the U.S. was the lender to the world during the 1920s. American lending propped up the entire world economy. Former allies paid war-debt installments to the U.S. chiefly with funds obtained from German reparations payments, and Germany was able to make those payments only because of large private loans from the U.S. and Britain. Similarly, U.S. investments abroad provided the dollars, which alone made it possible for foreign nations to buy U.S. exports. By killing world trade with the Smoot-Hawley tariffs, the U.S. shot itself in the foot and contributed to worsening the Depression in Germany. This inadvertently led to the rise of Hitler. Talk about unintended consequences. Decades of Bad ChoicesBlustering politicians like Nancy Pelosi and Chuck Schumer are attempting to ram through populist legislation in order to appear to be on the side of the American people. The Treasury secretary of the United States has declared China a currency manipulator. Chinese Premier Wen Jiabao responded in kind: “If we increase the Yuan by 20% to 40%, as some people are calling for, many of our factories will shut down and society will be in turmoil. If China saw social and economic turbulence, then it would be a disaster for the world.” They are playing a high-stakes game of chicken, and the ante is much higher than it was in 1930. Exports account for 12.5% of our GDP today, versus 5.7% prior to the Great Depression. The United States was a net exporter when the 1970s started. Our enormous trade deficits, which subtract from GDP, were not imposed on us by foreign countries. We are in this predicament because we made appalling choices.
We chose to allow the Federal Reserve to inflate away 95% of the purchasing power of the USD since 1971. We chose to elect politicians that have driven the national debt from $371 billion in 1970 to $13.6 trillion today. We chose to support “free trade” legislation that allowed corporate CEOs to gut our industrial base and ship good-paying jobs to China, while filling the pockets of these executives with millions. We chose to spend rather than save and invest in our country. We chose to become a consumer debt-centered society, relishing in the cheap goods we could buy from China on credit. We chose low prices at Walmart over small-business owners and sustainable domestic production of goods. Decades of bad choices cannot be reversed through taxation, tariffs, and quotas.
The Chinese have pegged their currency to the USD since 1995. For a decade, the U.S. was just fine with the peg, as American consumers got cheap goods, American corporations reaped huge profits from outsourcing, and banks raked in billions by lending money to everyone. Now that we have entered the Greater Depression, the finger pointing and accusations have begun. Politicians and the people who elected them want someone to blame for their bad choices. The Chinese are the bogeyman that forced Americans to buy on credit. They forced American corporations to offshore millions of U.S. jobs. If the U.S. had a strong dollar policy, ran surpluses, and lived within its means, the Chinese peg would be meaningless. U.S. GDP has grown by 335% since 1985. Over this same time frame, exports to China have grown by 1,800%, and imports from China have grown by 7,700%. Do politicians actually believe that imposing 30% tariffs on all Chinese products will magically create new manufacturing jobs in America? The 42,400 factories that have closed since 2001 and the 5.4 million manufacturing jobs lost are not coming back. A 30% upward revaluation of the yuan or 30% tariffs on Chinese products would devastate an economy that is still 70% dependent upon consumer spending. Just as in 1930, protectionist measures would boomerang and smack America in the back of the head.
If the pandering politicians in Washington D.C. are myopic enough to ignore the lessons of the past and start a trade war with China and/or the rest of the world, the possible implications would be:
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| Egypt And The Muslim Brotherhood: A Stratfor Special Report Posted: 03 Feb 2011 10:12 AM PST
If indeed as Credit Suisse speculated gold's move was predicated by concerns that the Muslim Brotherhood may end the peace treaty with Israel, then the relationship between Egypt and the country's largest Islamist movement, the Muslim Brotherhood, deserves a special focus. Below we publish a special report by Stratfor focusing precisely on this relationship, and what the future may hold for either. Egypt and the Muslim Brotherhood: A Special Report With Egypt’s nearly 60-year-old order seemingly collapsing, many are asking whether the world’s single-largest Islamist movement, the Muslim Brotherhood (MB), is on the verge of benefiting from demands for democracy in Egypt, the most pivotal Arab state. Western fears to the contrary, the MB is probably incapable of dominating Egypt. At best, it can realistically hope to be the largest political force in a future government, one in which the military would have a huge say. The MB and the Egyptian StateThe fear of Islamism for years allowed the single-party state to prevent the emergence of a secular opposition. Many secular forces were aligned with the state to prevent an Islamist takeover. Those that did not remained marginalized by the authoritarian system. As a result, the MB over the years has evolved into the country’s single-largest organized socio-political opposition force. Even though there is no coherent secular group that can rival the MB’s organizational prowess, Egypt’s main Islamist movement hardly has a monopoly over public support. A great many Egyptians are either secular liberals or religious conservatives who do not subscribe to Islamist tenets. Certainly, the bulk of the people out on the streets in the recent unrest are not demanding that the secular autocracy be replaced with an Islamist democracy. Still, as Egypt’s biggest political movement, the MB has raised Western and Israeli fears of an Egypt going the way of Islamism, particularly if the military is not able to manage the transition. To understand the MB today — and thus to evaluate these international fears — we must first consider the group’s origins and evolution. Origins and Evolution of the MBFounded in the town of Ismailia in 1928 by a schoolteacher named Hassan al-Banna, the MB was the world’s first organized Islamist movement (though Islamism as an ideology had been in the making since the late 19th century). It was formed as a social movement to pursue the revival of Islam in the country and beyond at a time when secular left-leaning nationalism was rising in the Arab and Muslim world. It quickly moved beyond just charitable and educational activities to emerge as a political movement, however. Al-Banna’s views formed the core of the group’s ideology, which are an amalgamation of Islamic values and Western political thought, which rejected both traditional religious ideas as well as wholesale Westernization. The MB was the first organizational manifestation of the modernist trend within Muslim religio-political thought that embraced nationalism and moved beyond the idea of a caliphate. That said, the movement was also the first organized Islamic response to Western-led secular modernity. Its view of jihad in the sense of armed struggle was limited to freedom from foreign occupation (British occupation in the case of Egypt and the Israeli occupation of Palestinian land). But it had a more comprehensive understanding of jihad pertaining to intellectual awakening of the masses and political mobilization. It was also very ecumenical in terms of intra-Muslim issues. Each of these aspects allowed the movement to quickly gain strength; by the late 1940s, it reportedly had more than a million members. By the late 1930s, there was great internal pressure on the MB leadership to form a military wing to pursue an armed struggle against the British occupation. The leadership was fearful that such a move would damage the movement, which was pursuing a gradual approach to socio-political change by providing social services and the creation of professional syndicates among lawyers, doctors, engineers, academics, etc. The MB, however, reluctantly did allow for the formation of a covert militant entity, which soon began conducting militant attacks not authorized by al-Banna and the leadership. Until the late 1940s, the MB was a legal entity in the country, but the monarchy began to view it as a major threat to its power — especially given its emphasis on freedom from the British and opposition to all those allied with the occupation forces. The MB was at the forefront of organizing strikes and nationalist rallies. It also participated, though unsuccessfully, in the 1945 elections. While officially steering clear of any participation in World War II, the MB did align with Nazi Germany against the United Kingdom, which saw the movement become involved in militancy against the British. MB participation in the 1948 Arab-Israeli war further energized the militants. That same year, the covert militant entity within the movement assassinated a judge who had handed prison sentences to a MB member for attacking British troops. It was at this point that the monarchy moved to disband the movement and the first large-scale arrests of its leadership took place. The crackdown on the MB allowed the militant elements the freedom to pursue their agenda unencumbered by the movement’s hierarchy. The assassination of then-Prime Minister Nokrashy Pasha at the hands of an MB militant proved to be a turning point in the movement’s history. Al-Banna condemned the assassination and distanced the movement from the militants but he, too, was assassinated in 1949, allegedly by government agents. Al-Banna was replaced as general guide of the movement by a prominent judge, Hassan al-Hudaybi, who was not a member of the movement but held al-Banna in high regard. The appointment, which conflicted with the MB charter, created numerous internal problems and exacerbated the rift between the core movement and the militant faction. Meanwhile, the Egyptian government’s October 1951 decision to abrogate the 1936 Anglo-Egyptian treaty set off nationwide agitation against British rule. Armed clashes between British forces and Egyptians broke out. The MB’s militant faction took part while the core movement steered clear of the unrest. It was in the midst of this unrest that the 1952 coup led by Gamal Abdel Nasser against the monarchy took place. The MB supported the coup, thinking they would be rewarded with a political share of the government. The cordial relationship between the new Free Officers regime and the MB did not last long, however, largely because the military regime did not want to share power with the MB and, like the monarchy, saw the MB as a threat to its nascent state. Initially, the new regime abolished all political groups except the MB. The Nasser regime, in an attempt to manage the power of the MB, asked it to join the Liberation Rally — the first political vehicle created by the new state. Unsuccessful in its attempts to co-opt the MB, the Nasser regime began to exploit the internal differences within the movement, especially over the leadership of al-Hudaybi. The MB leader faced mounting criticism that he had converted the movement into an elite group that had reduced the movement to issuing statements and had taken advantage of the notion of obedience and loyalty to the leader to perpetuate his authoritarian hold. Al-Hudaybi, however, prevailed and the MB disbanded the covert militant entity and expelled its members from the movement. In 1954, the regime finally decided to outlaw the MB, accusing it of conspiring to topple the government and arresting many members and leaders, including al-Hudaybi. Meanwhile, the military regime ran into internal problems with Nasser locked in a power struggle with Gen. Muhammad Naguib, who was made the first president of the modern republic (1953-54). Nasser succeeded in getting the support of al-Hudaybi and the MB to deal with the internal rift in exchange for allowing the MB to operate legally and releasing its members. The government reneged on its promises to release prisoners and the complex relationship between Nasser and al-Hudaybi further destabilized the MB from within, allowing for the militant faction to regain influence. The MB demanded the end of martial law and a restoration of parliamentary democracy. Cairo in the meantime announced a new treaty with London over the Suez Canal, which was criticized by the al-Hudaybi-led leadership as tantamount to making Egypt subservient to the United Kingdom. This led to further police action against the movement and a campaign against its leadership in the official press. The Nasser government also tried to have al-Hudaybi removed as leader of the MB. Between the internal pressures and those from the regime, the movement had moved into a period of internal disarray. The covert militant faction that was no longer under the control of the leadership because of the earlier expulsions saw the treaty as treasonous and the MB as unable to confront the regime, so it sought to escalate matters. Some members allegedly were involved in the assassination attempt on Nasser in October 1954, which allowed the regime to engage in the biggest crackdown on the MB in its history. Thousands of members including al-Hudaybi were sentenced to harsh prison terms and tortured. It was during this period that another relative outsider in the movement, Sayyid Qutb, a literary figure and a civil servant, emerged as an influential ideologue of the group shortly after joining up. Qutb also experienced long periods of imprisonment and torture, which radicalized his views. He eventually called for the complete overthrow of the system. He wrote many treatises, but one in particular, Milestones, was extremely influential — not so much within the movement, as among a new generation of more radical Islamists. Qutb was executed in 1966 on charges of trying to topple the government, but his ideas inspired the founding of jihadism. Disenchanted with the MB ideology and its approach, a younger generation of extremely militant Islamists emerged. These elements, who would found the world’s first jihadist groups, saw the MB as having compromised on Islamic principles and accepted Western ideas. Further galvanizing this new breed of militant Islamists was the Arab defeat in the 1967 war with Israel and the MB’s formal renunciation of violence in 1970. Anwar Sadat’s rise to power after Nasser’s death in 1970 helped the MB gain some reprieve in that Sadat gradually eased the restrictions on the movement (but retained the ban on it) and tried to use it to contain left-wing forces. After almost two decades of dealing with state repression, the MB had been overshadowed by more militant groups such as Tandheem al-Jihad and Gamaa al-Islamiyah, which had risen to prominence in the 1980s and 1990s. Close ties with Saudi Arabia, which sought to contain Nasserism, also helped the organization maintain itself. While never legalized, the MB spent the years after Sadat’s rise trying to make use of the fact that the regime tolerated the movement to rebuild itself. Its historical legacy helped the MB maintain its status as the main Islamist movement, as well as its organizational structure and civil society presence. Furthermore, the regime of Sadat’s successor, Hosni Mubarak, was able to crush the jihadist groups by the late 1990s, and this also helped the MB regain its stature. The MB thus went through different phases during the monarchy and the modern republic when it tried to balance its largely political activities with limited experiments with militancy, and there were several periods during which the state tried to suppress the MB. (The first such period was in the late 1940s, the second phase in the mid-1950s when the Nasser regime began to dismantle the MB and the third took place in the mid-1960s during the Qutbist years.) MB beyond EgyptShortly after its rise in Egypt, the MB spread to other parts of the Arab world. The Syrian branch founded in the late 1930s to early 1940s grew much more radical than its parent, wholeheartedly adopting armed struggle — which sparked a major crackdown in 1982 by Syrian President Hafez al Assad’s regime that killed tens of thousands. In sharp contrast, the Muslim Brotherhood in Jordan in the early 1940s very early on established an accommodationist attitude with the Hashemite monarchy and became a legal entity and founded a political party. Until the Israeli capture of the West Bank and Gaza Strip in the 1967 war, the Palestinian and Jordanian branches constituted more or less a singular entity. The Gaza-based branch was affiliated with the Egyptian Muslim Brotherhood, which Israel used to weaken the Palestine Liberation Organization (PLO). Those elements went on to form Hamas in 1987, which has pursued its activities on a dual track — political pragmatism in intra-Palestinian affairs and armed struggle against Israel. Hamas also emerged in the West Bank though not on the same scale as in Gaza. Similarly, in the Arabian Peninsula states, Iraq and North Africa, there are legal opposition parties that do not call themselves MB but are ideological descendants of the MB. The parent MB, by contrast, was never legalized and has never formed a political party per se. While the Muslim Brotherhood in Egypt is the parent body and there is a lot of coordination among the various chapters in different countries, each branch is an independent entity, which has also allowed for a variety of groups to evolve differently in keeping with the circumstances in the various countries. Despite dabbling in militancy, Egypt’s MB always remained a pragmatic organization. Egypt’s true militant Islamists in fact represent a rejection of the MB’s pragmatism. Decades before al Qaeda came on the scene with its transnational jihadism, Egypt was struggling with as many as five different jihadist groups (born out of a rejection of the MB approach) fighting Cairo. Two of them became very prominent: Tandheem al-Jihad, which was behind Sadat’s assassination, and Gamaa al-Islamiyah, which led a violent insurgency in the 1990s responsible for the killings of foreign tourists. The jihadist movement within the country ultimately was contained, with both Tandheem al-Jihad and Gamaa al-Islamiyah renouncing violence though smaller elements from both groups joined up with al Qaeda-led transnational jihadist movement. Global perceptions of the MB and of political Islamists have not distinguished between pragmatist and militant Islamists, especially after the 9/11 attack and rising fears over Hamas and Hezbollah’s successes. Instead, the MB often has been lumped in with the most radical of the radicals in Western eyes. Very little attention has been paid to the majority of Islamists who are not jihadists and instead are political forces. In fact, even Hamas and Hezbollah are more political groups than simply militants. There is a growing lobby within the United States and Europe, among academics and members of think tanks, that has sought to draw the distinction between pragmatists and radicals. For more than a decade, this lobby has pushed for seeking out moderates in the MB and other Islamist forces in the Arab and Muslim world to better manage radicalism and the changes that will come from aging regimes crumbling. AssessmentBecause Egypt has never had free and fair elections, the MB’s popularity and its commitment to democracy both remain untested. In Egypt’s 2005 election, which was less rigged than any previous Egyptian vote, given the Bush administration’s push for greater democratization in the Middle East, MB members running as independents managed to increase their share of the legislature fivefold. It won 88 seats, making it the biggest opposition bloc in parliament. But the MB is internally divided. It faces a generational struggle, with an old guard trying to prevent its ideals from being diluted while a younger generation (the 35-55 age bracket) looks to Turkey’s Justice and Development Party (AKP) as a role model. The MB also lacks a monopoly over religious discourse in Egypt. A great many religious conservatives do not support the MB. Egypt also has a significant apolitical Salafist trend. Most of the very large class of theologians centered around Al-Azhar University has not come out in support of the MB or any other Islamist group. There are also Islamist forces both more pragmatic and more militant than the MB. For example, Hizb al-Wasat, which has not gotten a license to operate as an official opposition party, is a small offshoot of the MB that is much more pragmatic than the parent entity. What remains of Tandheem al-Jihad and Gamaa al-Islamiyah, which renounced violence and condemned al Qaeda, are examples of radical Islamist groups. And small jihadist cells inspired by or linked to al Qaeda also complicate this picture. Taken together, the MB remains an untested political force that faces infighting and competitors for the Islamist mantel and a large secular population. Given these challenges to the MB, confrontation with the West is by no means a given even if the MB emerged as a major force in a post-Mubarak order. The MB is also well aware of the opposition it faces within Egypt, the region and the West. The crumbling of the Mubarak regime and perhaps the order that damaged the MB for decades is a historic opportunity for the movement, which it does not wish to squander. Therefore it is going to handle this opportunity very carefully and avoid radical moves. The MB is also not designed to lead a revolution; rather, its internal setup is such that it will gradually seek a democratic order. The United States in recent years has had considerable experience in dealing with Islamist forces with Turkey, under the AKP, being the most prominent example. Likewise in Iraq, Washington has dealt with Islamists both Sunni (Iraqi Vice President Tariq al-Hashmi for many years was a prominent figure in the Iraqi chapter of the MB called the Iraqi Islamic Party) and Shiite (Prime Minister Nouri al-Maliki, Islamic Supreme Council of Iraq leader Abdel Aziz al-Hakim, Muqtada al-Sadr, etc.) as part of the effort to forge the post-Baathist republic. That said, the Muslim Brotherhood of Egypt is viewed as a very opaque organization, which increases U.S. and Israeli trepidations. Neither of these powers are willing to place their national security interests on the assumption that the Muslim Brotherhood would remain a benign force (as it appears to be) in the event that it came into power. Concerns also exist about potential fissures within the organization that may steer the movement into a radical direction, especially when it comes to foreign policy issues such as the alliance with the United States and the peace treaty with Israel. The possible looming collapse of the 60-year Egyptian order presents a historic opportunity for the MB to position itself. Even though the movement has remained pragmatic for much of its history and seeks to achieve its goals via constitutional and electoral means and has opted for peaceful civil obedience and working with the military as a way out of the current impasse, its commitment to democratic politics is something that remains to be seen. More important, it is expected to push for a foreign policy more independent from Washington and a tougher attitude toward Israel. At this stage, however, it is not clear if the MB will necessarily come to power. If it does, then it will likely be circumscribed by other political forces and the military. There are also structural hurdles in the path of the MB taking power. First, the ban on the movement would have to be lifted. Second, the Constitution would have to be amended to allow for religious parties to exist for the MB to participate as a movement. Alternatively, it could form a political party along the lines of its Jordanian counterpart. Being part of a future coalition government could allow the United States to manage its rise. Either way, the MB — an enormously patient organization — senses its time finally may have come.
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| Keiser Report: Silver Stick for JP Vampire (E118) Posted: 03 Feb 2011 09:58 AM PST
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| Ben Davies: “Pensions are an accident waiting to happen.” Posted: 03 Feb 2011 09:56 AM PST When the world realizes that its pensions need gold as a core asset, the price will move dramatically higher. MK: I met up with Ben Davies in London last week at the Cheviot Hard Money conference. Ben is a pure macro machine that assimilates everything and knows all the odds. Share this:
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| Posted: 03 Feb 2011 09:51 AM PST Gold pops back above $1350 after Bernanke comments The COMEX April gold futures contract closed up $20.90 Thursday at $1353.00, trading between $1325.30 and $1356.60 February 3, p.m. excerpts: see full news, 24-hr newswire…
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| On the African gold trail with GoldStone Resources Posted: 03 Feb 2011 09:50 AM PST View the original article at Stockopedia February 03, 2011 07:08 AM Since Jurie Wessels took the reigns as chief executive of Goldstone Resources (LON:GRL) in May 2009, the company has snapped up a collection of prospective gold projects in west and central Africa that have given its investors a reason to get excited. Together with exploration director Dr Hendrik Schloemann, Wessels has built a shimmering prospector's portfolio that started in Ghana and now stretches west to Senegal and south to Gabon. The more advanced Homase project in Ghana has the potential to tempt GoldStone's strategic partner Unity Mining (ASX: UML) to consider putting it into production once it has reached critical mass and all the other projects could be a company-maker in their own right.GoldStone first listed on London's Alternative Investment Market in 2004 when it raised £5.6m to fund exploration work in Guyana. Mixed results and a string of inconclusive new projects followed before Wessels got the ...
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| Is Egypt A Preview of 2015 America? Posted: 03 Feb 2011 09:19 AM PST
Love them or hate them, only the most self-deluded can claim that the NIA, and its predictions, have been incorrect so far in this monetary 'printing' cycle. Sure they may have an agenda, and yes, Gen Ben may one day pull his money (if he is willing to see the S&P plunge to 666 and well below, so not really), which would kill all commodities, and certainly gold, in their tracks, but focusing solely on their message will have spared many massive real (not nominal) losses as surging commodity prices dwarf the modest pick up in stocks. Today's note from the NIA, while unpleasant, looks at the disastrous long-term consequences of the Chairman's monetary policy, and concludes rightfully so, that absent a diametric shift, which after today's press meeting may well require a revolution as the creature appears to be well on its way to QE3, 4 and so on, what is happening in Egypt is a preview of what will happen in the US in a few short year. Furthermore, the NIA's prediction that rice is up, up and away is in line with what Zero Hedge has been claiming since October (link). Also as a reminder, and as David Tepper just confirmed today, the realization that Rubber is the third and last R-bubble is starting to percolate...
Egypt: Preview of America in 2015, from the NIA h/t Robert
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| Posted: 03 Feb 2011 09:07 AM PST Jim Sinclair's Commentary The majors must buy qualified juniors. They have never been successful explorers. Reserves the majors hold have hit a plateau or are on the decline Have a look at this deal which is a blueprint for many to come. Compare this blueprint to your holdings. Newmont to buy Canada's Fronteer Gold for C$2.3 bl NEW YORK/TORONTO, Feb 3 (Reuters) – Newmont Mining Corp (NEM.N) has agreed to buy Fronteer Gold Inc (FRG.TO) for C$2.3 billion ($2.3 billion), extending its presence in the western United States as bullion prices hover near record highs. The cash and stock transaction – the latest in a string of deals targeting Canadian miners – will add 4.2 million ounces of gold resource to the portfolio of the world's second-largest gold producer. "This acquisition of Fronteer Gold is in line with some of the more recent acquisitions in the gold space, where major mining companies have been going after very high quality assets," said Adam Graf, a mining equity analyst for Dahlman Rose in New York. Fronteer shareholders will receive C$14 in cash and one common share in a new company, called Pilot Gold, in exchange for each common share of Fronteer Gold. The offer represents a 37 percent premium to Fronteer Gold's Wednesday close of C$10.25. Fronteer shares rose more than 40 percent to C$14.40 on Thursday afternoon.
Jim Sinclair's Commentary Don't buy the argument that since there is no Khomeni in Egypt that the uprising must result in a sustainable democracy. It is not a personality but the organized undercurrent that has put both Yemen and Egypt in harm's way. Maybe Saudi Arabia is pushing their ability to buy everyone. Have you looked at the level of Saudi debt lately? It is not too good. Financial TV is reporting with glee that Google has 75,000 job applications for 6000 jobs. That sounds impressive on first read, but if you think about it is very disturbing. Has it dawned on you that QE must continue because natural buyers of Treasury instruments have reduced their purchases and some have even sold?
Jim Sinclair's Commentary This type of event has never brought sustainable democracy anywhere. Remember the Shah? The Fighting Rages On in Tahrir Square As dawn broke on Thursday behind the frontlines in Cairo's Tahrir Square, the scene was one of disaster and casualty, as bloodied young men lay slumped on the ground after their 15-hour battle with pro-government loyalists, while others crafted new weapons, ready to distribute to the fresh infusion of young men who had arrived to join them. As I walked behind the barricades separating the anti-government protesters and President Hosni Mubarak's supporters, it was clear that the fighting was far from over. (Indeed, at this moment, at 2.38 p.m., bursts of heavy automatic gunfire can be heard below my hotel window, outside the Egyptian Museum on the edge of Tahrir Square.) About 10,000 people still occupied the square early on Thursday morning, and by 9 a.m. many more began pouring into the area through the sole chokepoint still open on the square's perimeter. The fighting that went on through Wednesday night and into Thursday — which began when thousands of Mubarak supporters converged on the huge crowd occupying Tahrir Square — involved creating makeshift armies overnight, as young men hurriedly organized themselves into battle shifts. Abdallah Khaled, 26, a screenwriter, said about 20,000 men in the square took turns fighting throughout the night, mindful that they could not afford to flag. "We got stones by breaking the ground, [using] rounds of people," he said. "Others took turns carrying the stones. When you became tired from fighting, you had to wait for someone to come relieve you before you could fall back." A fourth group kept watch for snipers, who they said were perched on the highway overpass overlooking the Egyptian Museum. Doctors in a makeshift trauma center set up in an alleyway on the south-eastern edge of Tahrir Square — about 300 yards from the frontline — told me on Thursday morning that five men had been killed by sniper fire at about 4.30 a.m.; residents in my hotel had been jolted out of bed at that hour by heavy gunfire. "I insist they were professional snipers, because the shooting was in the same place," says Mahmoud Abdelrahmen, 30, an ear, nose and throat surgeon at Cairo University, pointing to his left temple; he had tended to the injured throughout Wednesday night. "It was not by chance, it was by professional snipers," he said, adding that they were likely using pistols.
Jim Sinclair's Commentary The slowest guys in the world call for speed. This world is really nuts. Europe Leaders Call for faster transition in Egypt London, Feb.3 (ANI): European leaders have called on the Egyptian leadership to effect a faster transition of power to ensure stability in that country. British Prime Minister David Cameron on Wednesday issued a veiled warning to Egyptian President Hosni Mubarak to halt the involvement of Egyptian security forces in the turmoil. After meeting with Ban Ki Moon, the United Nations secretary general, Cameron told reporters outside 10 Downing Street. "We've been watching the events in Cairo with grave concern and completely condemn the violence that's taking place." "And, if it turns out that the regime in any way has been sponsoring and tolerating this violence, that would be completely and utterly unacceptable. These are despicable scenes that we are seeing, and they should not be repeated," he added. Britain and the United States have been closely coordinating their pronouncements on the Egyptian upheaval, with frequent telephone calls between Cameron and President Obama and between Britain's foreign secretary, William Hague, and Secretary of State Hillary Rodham Clinton.
Jim Sinclair's Commentary This is not what sustainable democracy is based on. Secret police blamed as peace protesters are gunned down in the siege of Cairo At least three anti-government protesters in Egypt were shot dead after gunfire rained down on Cairo's Tahrir Square in violent overnight clashes. Protest organiser Mustafa el-Naggar said he saw the bodies of three dead protesters being carried towards an ambulance. More than 1,500 people were injured in the latest violence, which came before dawn, as protesters remained in the street through the night following a day of clashes between supporters of President Hosni Mubarak and dissidents.
Overnight: Pro-government demonstrators, bottom, clashed with anti-government demonstrators as a palm tree burns from a firebomb in Tahrir Square, Cairo
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| Posted: 03 Feb 2011 09:03 AM PST
Michael argues that housing prices are not done going down, and neither is the value of the dollar. - Ilene Housing Armageddon: 12 Facts Which Show That We Are In The Midst Of The Worst Housing Collapse In U.S. HistoryCourtesy of Michael Snyder of Economic Collapse
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. Hopefully housing prices don't have too much farther to go down. Ben Bernanke and the boys over at the Federal Reserve are doing their best to flood the system with new dollars in order to prop up asset values, but you just can't create qualified home buyers out of thin air. Many analysts are projecting that U.S. housing prices will decline another ten or twenty percent before they hit bottom. In fact, quite a few economists believe that the total price decline from the peak of the market in 2006 will end up being somewhere in the neighborhood of 40 percent. But whether prices go down any further or not, the truth is that the housing crash that we have already witnessed is absolutely unprecedented. The following are 12 facts which show that we are in the midst of the worst housing collapse in U.S. history.... #1 Approximately 11 percent of all homes in the United States are currently standing empty. #2 The rate of home ownership in the United States has dropped like a rock. At this point it has fallen all the way back to 1998 levels. #3 According to the S&P/Case-Shiller index, U.S. home prices fell 1.3 percent in October and another 1 percent in November. In fact, November represented the fourth monthly decline in a row for U.S. housing prices. Many economists are now openly using the term "double-dip" to describe what is happening to the housing market. #4 The number of homes that were actually repossessed reached the 1 million mark for the first time ever during 2010. #5 According to RealtyTrac, a total of 3 million homes were repossessed by mortgage lenders between January 2007 and August 2010. This represents a huge amount of additional inventory that somehow must be sold. #6 72 percent of the major metropolitan areas in the United States had more foreclosures in 2010 than they did in 2009. #7 According to the Mortgage Bankers Association, at least 8 million Americans are at least one month behind on their mortgage payments. #8 It is estimated that there are about 5 million homeowners in the United States that are at least two months behind on their mortgages, and it is being projected that over a million American families will be booted out of their homes this year alone. #9 Deutsche Bank is projecting that 48 percent of all U.S. mortgages could have negative equity by the end of 2011. #10 Some formerly great industrial cities are rapidly turning into ghost towns. For example, in Dayton, Ohio today 18.9 percent of all houses are now standing empty. 21.5 percent of all houses in New Orleans, Louisiana are standing vacant. #11 According to Zillow, U.S. home prices have already fallen furtherduring this economic downturn (26 percent) than they did during the Great Depression (25.9 percent). #12 There are very few signs that the employment situation in the United States is going to improve any time soon. 4.2 million Americans have been unemployed for one year or longer at this point. While there has been some nominal improvement in the government unemployment numbers recently, other organizations are reporting that things are getting even worse. According to Gallup, the unemployment rate actually rose to 9.6% at the end of December. This was a significant increase from 9.3% in mid-December and 8.8% at the end of November. But even many Americans that do have jobs are finding out that it has become very, very hard to qualify for a home loan. In an attempt to avoid the mistakes of the past, banks and financial institutions have become very stingy with home loans. While it was certainly wise for them to make some changes, the truth is that perhaps the pendulum has swung too far at this point. The U.S. housing industry will never fully recover if they can't get their customers approved for mortgages. Congress is talking about passing even more laws that will make it even more difficult to get home loans. Even though they give speeches about how they want to help the U.S. housing industry, the truth is that Republicans and Democrats are both backing proposals that would make home mortgages much more expensive and much more difficult to obtain as a Bloomberg article recently explained....
While all that may sound reasonable, the truth is that the U.S. middle class has become so cash poor that the vast majority of them cannot afford homes without the kind of mortgages that were available in the past. Not that we should go back and repeat the mistakes of the past 20 years. It is just that nobody should expect the U.S. housing market to "bounce back" in an environment that has fundamentally changed. The housing market is not like other financial markets. It is difficult to artificially pump it up with funny money. If the U.S. housing market is going to rebound, it is going to take lots of average American families getting qualified for loans and going out and buying houses. But they can't do this if they do not have good jobs. Today, only 47 percent of working-age Americans have a full-time job at this point. Without a jobs recovery there never will be a housing recovery. In fact, there are all kinds of warning signs that seem to indicate that the U.S. economy could get even worse in 2011. Many economists are now openly using the word "stagflation" for the first time since the 1970s. Back in the 70s we had both high unemployment and high inflation at the same time. Well, we have already had very high unemployment, and thanks to the relentless money printing of the Federal Reserve, it looks like we are going to have high inflation as well. Middle class American families are going to be spending even more of their resources just trying to survive, and this is going to make it more difficult for them to purchase homes. In fact, in recent years average Americans have been getting significantly poorer. Over the past two years, U.S. consumers have withdrawn $311 billion more from savings and investment accounts than they have put into them. That is very troubling news. Now the price of food is soaring and the price of oil is about to cross $100 a barrel again. So what is going to happen if we have another major financial crisis and we witness another huge spike in the unemployment rate? The Federal Reserve is trying to smooth all of our problems over with a flood of paper money, but it isn't going to work. Yes, increasing the money supply will produce some false highs on the stock market and some false economic growth statistics for a while, but the tremendous damage that will be done to the economy is just not worth it. In any event, let us all hope that we see some really great real estate deals over the next couple of years, because in the times ahead land will be something very good to own. In fact, down the road it will be much better to own land than to have your money sitting in the bank where it will continuously decline in value. Use your paper money wisely. It will never have more value than it does today. So what do all of you think? Is the "housing Armageddon" almost over, or do housing prices still need to decline a bit more? Feel free to leave a comment with your opinion below....
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| Fronteer Bought Out By Newmont, Readers Up Over 120% Posted: 03 Feb 2011 09:00 AM PST Even though January of 2011 brought a lot of profit taking to mining stocks and precious metals, the leadership of Newmont (NEM) has used this pullback to purchase one of my long term favorite recommendations Fronteer Gold (FRG) for a 37% premium. I believed Fronteer was a great candidate for a takeout and mentioned it on thestreet.com over a month ago. Click here for the video. My premium readers have gained 120% since my 8-4-10 buy signal. If link doesn't work copy and paste this address into your browser. www.thestreet.com/video/10938487/gold-stocks-to-buy-as-ma-heats-up.html You are invited to partake of a free 30 day trial of my premium service at http://goldstocktrades.com/premium-service-trial where you can get daily reports on the next mining takeover.
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| Fuzzy Logic: Those Who Fail to Learn From History... Posted: 03 Feb 2011 08:51 AM PST
I firmly believe the influx of people (many "quants" but others as well) in Finance over the past decade who posess little-to-no knowledge of Financial history contributed to the bubble and the resulting collapse. Unfortunately, many of these people who know not the many, many lessons of financial history are lured into finance by the promise of money and all that comes with it. More unfortunately, despite the many and various lessons of which we've been recently reminded during/after this most recent crash, many of these people are still among us. Today, I read an article about China Media Express Holdings, and how its going to be the biggest short squeeze the author has ever seen/of 2011. My 1st reaction was that whoever this author was (I'd never heard of him), he must not have been around for very long. Remember Volkswagen (to use but one recent example)? Apparently the short thesis is that the company is a fraud. I do not know this company well, so I can't speak to that point, however, I CAN and will now, for your viewing pleasure, proceed to destroy the author's rationale for why the firm ISN'T a fraud. He says:
Big deal. Remember AIG Financial Products? Bang-up job they did! Surely all the problems started after Greenberg left (debatable). Regardless, numbers can be fudged, easily. More on this later. Additionally, 4 months is not a sufficiently-long track record for this point to be used to support a long thesis in my opinion.
What the hell is a Global Hunter? Is that a video game? Again, 3 months is not a very long time at all...
Deloitte was also Bear Stearns' auditor...
If you get your investment advice from Forbes you should just give me all your money now and save yourself the trouble.
Its not even on the top 10. What the hell is this guy talking about? It wasn't on the top 10 last year, either! Is there another Zack's I don't know about?
Yea, "top marks" for EPS growth, but IBD doesn't even rate CCME as the top stock in its group! High EPS growth alone does not a solid long-thesis make.
I'm more inclined to consider this an orange (if not red) flag, rather than a green one. Sure, it's good for a CFO to have a solid grasp of accounting, but posession of such knowledge can be used for trickery, as well. Again, more on this later
And the point is what, exactly? No firm that was eventually proven a fraud paid a dividend? Challenge.
Have all of these companies confirmed these contracts not only exist, but exist as CCME has represented?
Ask Sam Antar, co-mastermind behind the Crazy Eddie fraud(s). Just because you can't see fraud doesn't mean it isn't there.
What % of his portfolio does his CCME holdings represent? How long has he held it for? What's his investment thesis? Is it a momentum play or a fundamental one? In order for this last point to hold any credibility as a reason to be long the stock, each of these questions needs to be addressed. Oh, and one last thing: The firm that last year called Rino International a fraud has just initiated coverage on CCME, referring to this firm as a fraud, as well. Their rationale seems to be a bit stronger than Bradford's:
Only time will tell how this shakes-out but today, it looks like that call for a massive short-squeeze was not only premature, but extremely naive. CCME is already down 33% on the news today. I don't like engaging in ad-hominem attacks but the author, Glen Bradford's investing experience/background (provided in his bio), in consists of a bachelors in engineering combined with an MBA (one of those 3+2 programs), which he completed less than a year ago. It also looks like he's been trading his own account for 2 or 3 years (maybe more?) quite successfully. I don't know Glen, but from reading this article and a few of his others, he strikes me as one of the people I mentioned earlier. A guy with brains and drive who thinks he can "make it" in Finance, yet possesses little-to-no knowledge of the many lessons learned by investors past. If you don't know the stories of LTCM, Enron, Tyco, Worldcom, Adelphia, Global Crossing, the S&L Crisis, how portfolio insurance contributed to the 1987 crash, or countless other lessons going back centuries, then you have no business investing your or anyone else's money. Actually, wait. Go ahead and try to be an investor, just don't be surprised when your ignorance comes around to bite you in the ass.
The Analyst - Stone Street Advisors
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| Posted: 03 Feb 2011 08:31 AM PST courtesy of DailyFX.com February 03, 2011 07:57 AM 240 Minute Bars Prepared by Jamie Saettele Gold has held a multiyear support line. However, the decline from 1425.40 is in 5 waves, indicating that the larger trend is most likely down. Price has nearly reached initial resistance from the former 4th wave at 1348.50. Just above there is the 38.2% retracement at 1353.28. This area is reinforced by former support....
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| Modern Monetary Theory and Why We Have a Debt Based System Posted: 03 Feb 2011 08:18 AM PST I have decided to write once more a series of posts involving Modern Monetary Theory (MMT), or as I like to describe it: how the US monetary system actually works. For those that are not familiar with this, I have written an intro titled: Modern Monetary Theory , or How the US Monetary System Really Works. My post yesterday contained a link from the Fiscal Sustainability Teach-In which was held last April, 2010. That link had Economist Bill Mitchell's presentation on "What is Fiscal Sustainability." That presentation was also followed by a question and answer session by some prominent economists. It is not necessarily difficult material to understand. What hinders most people in understanding MMT is the amount of disinformation, perpetuated by the media and politicians, that is out there. We have all been conditioned to misunderstand how a modern monetary system works. And so, I will occasionally write about my views on MMT, as described by Bill Mitchell in his presentation. There will be several topics to be covered, and I hope this series sheds some light on what dangers, both economic and political, our current monetary system inherently contains. No monetary system is perfect, none have shown to have a perpetual lifespan, and a monetary system is only as good as the government that controls it. And so, we need to be mindful that there is also a distinction between theory and actual practice. That said, I want to tackle the biggest issue we face first: Why do we have a debt based system? And what I mean by that is why does the US need to conduct Treasury sales. Why doesn't the US government just "print," electronically or physically, the money we use? After all, the US government is not operationally constrained. It creates money whenever it spends. In his presentation, Bill Mitchell makes this point about sovereign deficits, debts, and ratios to GDP: And what really needs to be exposed in this discussion are that all those constraints are voluntary. And in a fiat monetary system, the national government doesn't have to issue any debt at all. And so fiscal sustainability can't be caught – a pure concept of it – can't be caught up and tied in with any of these voluntary constraints.In theory, what Bill Mitchell is saying sounds like great stuff. After all, isn't the interest on the national debt growing out of control? And to a large degree, much of the interest that the Federal Reserve receives through US Treasury purchases is returned to the Treasury anyway! But does that mean we are in the clear? And now that the Federal Reserve is the largest holder of US debt, should we feel secure knowing that most of the interest on that debt will be returned to the US Treasury? Not necessarily. A mistake economists make is to overlook noneconomic factors that have a tremendous economic consequences. All too often economists and other analysts view their topics in a sterile environment, unaffected by other exogenous factors. But there is one factor that cannot be ignored regarding the US Government's use of a Treasury market: Geopolitics. Bill Mitchell is correct when he says that the world's monetary system changed in 1971: And when you think about it, the whole discussion of fiscal sustainability in the mainstream media and in our governments, in our parliaments, are all applying the logic – and what's taught students in our universities out of textbooks – are all applying the logic that related moralists to a monetary system that ended in 1971.That's very true. Never before in the history if the world has the entire global economy functioned on purely fiat currency - currency that is nonconvertible. Yet we find ourselves constantly discussing economic topics in a gold standard era. But we also need to understand what were the geopolitical consequences of the change that occurred in 1971, with the end of the gold standard of Bretton Woods under the Nixon Administration. Up to that date, governments worldwide that accumulated surpluses through trade had three options: They held onto the currency, or they converted that currency into gold, a pure asset, or sovereign debt denominated in that currency which paid a return: interest. And so, the US in 1971 unilaterally told the world it would no longer exchange dollars for a fixed price in gold. And the result was that foreign held surplus dollars would be recycled into US Debts. Under the gold standard of Bretton Woods, the US's trading partners had an advantage. Whenever they felt the US overstepped its bounds in money creation, they could easily exchange their dollars for gold. As the gold was quickly being depleted, the US was forced to shut the gold window. This represented a geopolitical advantage to the US in the medium term. By strengthening the US Treasury market worldwide - as it became the only choice left for trade surpluses due to the new irredeemable dollar, the US could much more easily export its inflation. Don't get me wrong, the US was able to do this under the prior gold standard, but there was a built in "opt out" clause, so to speak. As a trading partner of the US, you could choose to exchange your US surplus dollars for gold instead of buying US debt. Those that did got gold for $35 an ounce. Not bad! But can the US really wipe out the US sovereign debt market and just issue currency as Bill Mitchell suggests nations are capable of doing? Yes, but the geopolitical repercussions would be severe. With the current debt based system, not only can the US export and control its inflation, but through debt issuance, it can also affect trade relationships. The US can buy whatever it wants without really selling as many things of value in return! But it's not just the US. The US-China trade relationship can be described as a vendor financing scheme as much as the Germany-Greece relationship is. As I have said before in other posts, fiat money allows trade imbalances to grow to dangerously high levels. The re-balancing of such distorted trade relationships are more likely to end in disaster than in a smooth re-balancing transition. But for the US, having the world's reserve currency requires that you run a trade deficit. After all, as the world economy grows, more US dollars need to be printed. If the US only exported, the amount of dollars worldwide would shrink as the US accumulates a dollar surplus. It's the same logic that describes a government's debt is always equal to it's private sector's savings. The US, as global superpowers are want to do, wants to maintain its superpower status. It's debt based monetary system allows it to consume much more than many other countries. The sustainability of such a system is another topic. I don't think it is sustainable. But the bottom line is that the US needs a debt based system. The economics of such a system reinforces the geopolitical goals of a superpower. That system, however, is being tested right now as the Federal Reserve becomes the largest owner of US debt. To ask the US to issue money without having a Treasury Market is to ask the US to step down from its role as a world power. Good luck with that. And if it did, the US would have to start increasing its exports real quick, because that FIRE Economy of big banks, big law firms, hedge funds, and real estate professionals and others would come crashing down. But that's another topic, for another day. (Just a quick note. There are other reasons for a Treasury market, re-capitalizing banks in a way that confuses the average person, targeting rates, etc... but I just wanted to focus on the geopolitical consequences in this post.) 
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| Posted: 03 Feb 2011 08:16 AM PST Above wisdom came from the opening article in Bloomberg Businessweek titled, "Back to the Economic Future." Not in many decades has a mainstream American business publication reminded readers that some innovative thinking has occurred ... Read More...
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| It's Official: ICE Sets Cotton Position Limit Posted: 03 Feb 2011 08:05 AM PST
Earlier today we noted that the ICE was considering establishing size limits in [insert surging commodity here], in this particular case cotton. This has just been formalized as per the press release below, and explains why cotton is among the worst performing softs today. If gold continues refusing to play along with the script, look for the CME to do something comparable with gold and silver (for the third time) shortly. But never, and we repeat never, expect the Globex to do something crazy like hiking margin requirement on ES.... Ever. Market Regulation Advisory Cotton No. 2® Notice Period Exemptions Effective with the March 2011 Cotton No. 2® futures contract, ICE Futures U.S.®, Inc. (“Exchange”) will require Cotton market participants who expect to carry positions in excess of 300 contracts into the notice period to file an exemption request form with the Market Surveillance Department. To be eligible for a notice period exemption under Exchange Rule 6.26 (Hedge Exemption), applicants must request a specific long or short position sufficient to cover the applicant’s bona fide hedging requirements for the contract month’s delivery month and the next succeeding calendar month. Information must be provided to demonstrate that the requested position limit is economically appropriate to the reduction of risks arising from the potential change in the value of the assets owned by the applicant such as inventories and fixed price physical purchases or liabilities owed such as fixed price physical sales. An exemption request must be approved by the Exchange in order for a market participant to carry a Cotton No. 2® futures position in excess of the 300 contract spot month speculative position limit into the Notice Period. Pursuant to Rule 6.26, exemption requests must be received by the Exchange no later than five (5) business days prior to the first notice day of the contract month. Thus, exemption requests for the March 2011 notice period should be submitted by February 14, 2011. Any exemptions granted will be for a specified contract month only and should not be viewed as relief from the responsibilities all traders have to transact their business in a manner consistent with an orderly market.
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| Gold Daily Silver Weekly Charts - Panic Hits the Money Printers As Benny Signals QE -> infinitum Posted: 03 Feb 2011 08:01 AM PST | |||||||||||
| Posted: 03 Feb 2011 07:50 AM PST The 5 min. Forecast February 03, 2011 12:35 PM by Addison Wiggin [LIST] [*] They’re finally waking up... U.S. at “great risk” from rare earth squeeze, think tank warns [*] How opportunity still abounds for rare earth investors... if you know where to look [*] “Enormous” orders propel China past India as world’s biggest gold consumer [*] As Egypt seethes, Marc Faber calls the next likely location for a revolution [*] “It’s not about environmental protection at all”... Eye-opening letter explains how regulation really works [/LIST] “China’s dominance in the rare earths market will have profound implications for U.S. national security in the next couple of years” warns a new report from the American Security Project. “As it is, some analysts already believe it is too late to avoid a global shortage of rare earth metals, placing the U.S. in great risk. The U.S. needs to take steps to remedy this...
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| Posted: 03 Feb 2011 07:35 AM PST
 “China’s dominance in the rare earths market will have profound implications for U.S. national security in the next couple of years” warns a new report from the American Security Project.“As it is, some analysts already believe it is too late to avoid a global shortage of rare earth metals, placing the U.S. in great risk. The U.S. needs to take steps to remedy this situation.”  The significance isn’t what’s being said so much as who’s saying it.The American Security Project is a lesser-known think tank in Washington, but it has some heavy hitters on its board -- like Richard Armitage, who was Colin Powell’s No. 2 at the State Department; former Sen. Chuck Hagel (R-Neb.); and retired Adm. William Fallon, the first Navy officer to run U.S. Central Command. “Although the Pentagon claims that the U.S. only uses 5% of the world’s supply of rare earth metals for defense purposes,” the report says, “the fact is that the U.S. is completely reliant on China for the production of some of its most powerful weapons.” The math behind the warning: China accounts for 97% of current world production. That leaves only 3% coming from everywhere else. If the Pentagon uses 5% of current production… well, you see the problem.  Of course, our Byron King has been all over this story for nearly three years now. No one wanted to hear about these rare earth elements when Byron first started talking about them at our editorial meetings.No one. “Booooring!” was the often-heard low whistle from the peanut gallery while he spoke. How times have changed. If you need a refresher on recent developments, we sum them up in just one minute and 35 seconds in this Speed Brief.
 The AmSec report concludes with several recommendations for the U.S. government…
The report is referring to the mine owned by Molycorp, one of several operators of non-Chinese rare earth mines that sold off hard earlier this month, after an epic run-up late last year. Molycorp is in the same boat as all the other familiar names in the sector. They won’t be in production for another 12-24 months, at least. The race to become the first producing rare earth operator outside China is exactly why Byron has become so intrigued by one “dark horse” company that may get there first, against all odds. “To say I’m floored by this stock idea is a significant understatement,” Byron commented last week at our editorial meeting. This time around, people were listening. [Ed. Note: Because Byron was onto the rare earth game so early, he’s been able to deliver substantial rare earth gains to readers of his premium service Energy & Scarcity Investor… gains of 109% and 178% that took only two-four months to play out… and longer-term positions currently up 52% and 76%. “I invested $41,030 in nine stocks,” one reader wrote us at the end of 2010, “and they are now at $65,095, for a $24,071 gain, or 58%, since Oct. 13.” “[ESI] is without question my best advisory service,” writes another. “I have made more money with Byron than anyone else.” Byron’s presentation about the dark-horse rare earth stock that could shock everyone will be taken down from our servers tonight at midnight. If you’re interested in learning more about this company, including its ticker and growth prospects, please follow this link.]  Gold is pulling back a bit, the spot price retreating as we write to $1,329. Judging by recent events, that means the Chinese will continue to back up the truck.The Chinese are already on pace to surpass the Indians as the world’s biggest gold consumers. Traders estimate Chinese gold imports in the run-up to Chinese New Year (that’s today) are double those of a year ago. “The demand is unbelievable,” one senior banker tells the Financial Times. “The size of the orders is enormous” over the last month. During that time, gold retreated from record highs of $1,425.  Silver is moving closer to the $28 level, the spot price back to $28.13. Elsewhere in the commodity complex, copper prices have hit a record $10,000 per metric ton -- or $4.51 a pound.Cotton prices moved “lock-limit up” -- the maximum allowed by the exchange -- yesterday. They’re up 25% since mid-January, to $1.76 a pound, levels last seen during the Civil War in 1863. Seriously. Corn and soybeans hit 30-month highs this week, thanks to a port strike in Argentina that’s disrupting shipments. Food demand is so great around the world, we’ve noticed, any minor disruption along the supply chain... et voila, limit up!  As if on cue, for the second straight month, the United Nations’ index of world food prices hit a record high. In December, the figure surpassed the highs of mid-2008, and in January, it tacked on another 3.4%.After seven straight monthly rises, “These high prices are likely to persist in the months to come,” says Abdolreza Abbassian, an economist with the U.N.’s Food and Agriculture Organization. That’ll do nothing to take the heat off Arab autocrats like Mubarak in Egypt. But the crisis could hit elsewhere.  “I am worried that what has happened in Egypt will happen in Pakistan,” Vancouver favorite Marc Faber tells Bloomberg. “You may not have a problem in Saudi Arabia and in the Emirates, in Kuwait and Qatar, because there the governments can heavily subsidize food if they want to.”Not so in nuclear-armed Pakistan, where floods submerged one-fifth of the country six months ago. Recent nutrition surveys by the U.N. recently uncovered an “acute malnutrition” rate of over 20% among children in Sindh, one of Pakistan’s four main provinces.  Stocks are down this morning for no obvious reason. At one point, the Dow retreated below 12,000, but has since recovered.“I believe the Dow (but not all stocks) is being seen as a hedge against the dollar,” says newsletter veteran Richard Russell, “and as a safe haven for those who perceive that the dollar is steadily losing purchasing power.” A chart of the Dow and the dollar index since mid-January bears that out…   Chalk up a small victory for the good guys in the War on Small Business: The Senate voted yesterday to repeal the infamous “1099 provision” of the health care reform law.That’s the one requiring businesses to issue an IRS form 1099 to everyone from whom it buys more than $600 in goods and services every year. More than $600 in office supplies from Staples? You comb through the receipts and send a 1099. We won’t count this as a full victory until the House follows suit and the president signs the repeal -- which he’s promised to do.  With three days to go before the Super Bowl, we offer this abject lesson in market intervention, in this case by a municipal government.Taxi drivers in Dallas are on strike this week, but you wouldn’t know it if you’re trying to make your way from the airport to the stadium in Arlington. The city recently implemented a new rule, allowing cabs powered by compressed natural gas (CNG) to automatically go to the front of the taxi line at Love Field. It was pushed as a “green initiative” and a means of meeting federal air-quality standards… which, given your political persuasion, might make sense, except for one thing: Hybrid-powered taxis aren’t allowed the same privilege.
Turns out, it costs $14,000 to convert an existing gasoline-powered cab to CNG, a fee most cabbies say they can’t afford. Meanwhile, the handful of CNG cabs snag all the fares because they can always cut in to the front of the line. The whole thing is a sop to the Texas natural gas industry, say picketing members of the Association of Taxicab Operators USA. “We’re not going to stop [our protest] unless we have something in writing,” says its chairman. Or go bankrupt, we might add. The ATO USA represents about 700 of the 1,840 cab permits issued by the city. What a mess.  “Here is a real, true-life example of how government regulation really works,” writes a reader whose letter we’ve edited to protect his identity.“I work as a courier for a steel maker that disperses chemicals into a nearby river as a result of producing its specialty steel products. Every week, I pick up an ice chest filled with water (collected from where the company makes its dispersals), which is analyzed and the results sent to EPA. “The EPA then ‘disapproves’ of the results and fines the company several hundred thousand dollars each year. I asked why the company didn’t just spend the money to clean up its dispersions so it wouldn’t get fined. Answer? ‘Because it would take millions of dollars to do that.’ “Then I asked, ‘Then why doesn’t the EPA fine the company so much (several millions of dollars?) so that it pays the company to institute those expensive procedures to truly clean up their dispersions?’ “Answer? ‘Because the EPA doesn’t REALLY want the company to clean up what it flushes into the river; they just want the money for their budget, and they know that if they push the company too hard, then it will actually ‘clean up their act’ and there will be no more ‘fine money’ flowing to the EPA. “It’s not about environmental protection at all. It’s about the money! “I have total disrespect for the EPA, and all I can say to them is ‘Eat s**t!’ Environmental Protection Agency, my ass! They are corrupt beyond imagination.” The 5: And we’ve been wondering why it’s so expensive to do business in the U.S.  “In Tuesday’s 5, Byron pointed out that in Egypt, there is no middle class,” writes a reader with a curious take away. “Then, in the same issue, we start talking about paying Americans 2-3 bucks an hour. Can you spell ‘civil unrest’?“Americans demand higher wages because in our own minds, we’re all middle class. Every wage earner in this country from $24,000-300,000/year considers himself/herself to be middle class. “If the 2% of the folks in this country who own 40-50% of all assets in the country decide they want to pay only slave wages for a day’s work, it will only be a matter of time before you have uprisings in the streets of every major city in America akin to what we’re seeing in Egypt. “We’re better than that. Government regulations, while often a pain in the backside, do protect us from the egregious neglect that the owners of capital in this country would afflict us with if that oversight were not there. All we have to do is look to our friends in the banking and financial industries to see what happens when the government allows capitalism to operate completely unfettered.” The 5: The old “unfettered capitalism” argument, is it? Try “government-sponsored crony capitalism” and the revolving door between Goldman and the Treasury and then we can talk.  “You’re wrong!” writes a reader who takes issue with our item about the Fed surpassing China as the largest holder of U.S. Treasuries.“The largest holder of gov’t bonds is the Social Security Trust Fund. Don’t you guys believe in trusts?” The 5: As our friend David Walker, the former comptroller general, quipped in Vancouver last year, the Social Security Trust Fund is a misnomer because it can’t be trusted... and it isn’t funded. The Treasuries in the Social Security Trust Fund are “special-issue securities.” The only party that can buy them is… the U.S. Treasury. If the U.S. Treasury bought them, it would then have to turn around and issue an equal amount of conventional Treasury paper, flooding the market and driving up interest rates. This is why the “trust fund” exists merely as a piece of paper with a very large number on it, stashed in the bottom drawer of a file cabinet at the Bureau of the Public Debt in Parkersburg, W.Va.  “You have to admit,” writes another on the same subject, “it is pretty cool to be able to lend yourself money you don’t have and then spend it! How can I get in on that? I only hope the government doesn’t have to send someone ‘round to break its own thumbs when it can’t pay up.”The 5: Yeah, OK, we’ll admit that. Cheers, Addison Wiggin The 5 Min. Forecast P.S.: “Very simple,” writes a reader’s whose words we hesitate to publish for fear of inciting revolt among our editors. But here goes: “In the entire universe of Agora publications, Byron is by far the wisest, most spot-on writer. He is No. 1. “He comes across as very focused and does his homework (a lot of it) and his recommendations have delivered the goods in 95% of the time.” Of course, Byron gets a lot of these. “Byron has been a favorite of mine for a few years now,” another writes. “He combines the intellect of a Ivy league geologist, lawyer and military man with the down-to-earth style and wisdom that makes you feel like you are getting advice from a very smart version of your dad -- or a very good friend. “His advice has sure held the pain off in 2010. “My retirement account has increased very nicely with [names withheld to protect the paying]. I have held [ditto] for years, and I am up 511%. I am up 27% on [again], 23% on [and again] and 11% on [same].” “I trust Byron more than other stock researchers,” writes a third, “as he screams BUY, BUY, BUY only when he means it. He hasn’t been wrong on any of his big recommendations as long as I can remember.” “I am exited to report that my portfolio is up 200% as I type this letter,” writes a fourth. “Wow! Thank You, Byron.” Indeed, thank you, Byron. We publish all these comments by way of giving you one final reminder: We’re removing Byron King’s latest rare earths presentation from our servers tonight at midnight. If you want to learn about the one company set to beat the “usual suspects” into production and deliver a potential nine-bagger… please review it here, now.
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| No Sale Thursday - Will the Dollar Save Retail or Doom Us All? Posted: 03 Feb 2011 07:31 AM PST
No Sale Thursday - Will the Dollar Save Retail or Doom Us All?Courtesy of Phil of Phil's Stock World
The once mighty US dollar flops around in the mid-70s like a fish out of water, gasping for it's last breath. Like the Emilio, the goldfish (see link), it would be very easy for the powers that be to stomp the life out of it in its weakened condition but, if someone would be so kind as to pick it up and put it back into a bowl of water (or Global Liquidity, as the case may be), it might fully recover as soon as it catches its breath. As noted by Gold and Oil Guy, Chris Vermeulen - "Most economists are discussing the possibility of a major decline in the value of the U.S. Dollar going forward as inflationary monetary policy begins to strangle growth. While that view point may prove right over the long haul, in the short run most traders are not likely expecting the U.S. Dollar to rally." Chris also has some lovely charts indicating that the Gold sector may be presaging a rapid decline in the price of gold and another that points out that the Russell and the Transports are clearly rolling over - something that was discussed in last night's Phistockworld Wrap-Up Show: Indeed Bill Gross's comments are well worth a read and let's not forget Mr. Ron Paul, who we discussed yesterday morning, who added yesterday: "It is important to understand the Fed’s role in creating today’s unemployment crisis, while also highlighting that high unemployment and low economic growth can persist even in the face of tremendous monetary inflation." Wow, that was the topic of Monday's special post - how timely we are getting! Robert Reich added to our conversation last night, saying:
It's year 4 of our housing downturn and home prices are still dropping. This is not at all surprising to those of us who are not in denial because we realize that homes are expensive, generally costing much more money than the average person can find under the sofa cushions. That means they have to save up if they want to buy one - even if you can demonstrate that it would save them money in the long-run (see "Interest Scams and How to Avoid Them - Mortgage Madness" for a reality check on that).
That's without moving and furniture and painting and all those other little expenses that those of us who can afford them consider annoying, whereas, for the bottom 90% - they are insurmountable obstacles. The bottom 90% used to borrow deposit money from parents and other family members - now those people have no spare money either. If anything, the banks have tightened their lending requirements and the MSM has blamed the victims of the sub-prime scam for not being smarter than Mortgage Professionals and Bankers and seeing through the contracts they were advised to accept (by people they paid professional fees to). That has taken the option of giving the working poor the ability to purchases housing with little or no deposits off the table - EVEN if the mortgage and taxes are cheaper than their current rents. Why? Why would we do such a thing? Because the Banksters are not done stealing the homes yet. There's a reason that cash is required at foreclosure auctions and that there is no way a poor person could get a bank to give them a blank check to go house shopping with: The game is designed to block them out. Only rich people with money can buy cheap houses, silly. What do you think this is, Russia? China? We're Capitalists here - and that means NO POOR PEOPLE ALLOWED, right?
Unfortunately, we need those poor people to BUYBUYBUY the crap we sell them. Again, the problem the investing class has understanding this is that we are too far removed from the poor. And by poor, I don't mean your maid or the guy who rakes your leaves, I mean the 50% of the working people in this country who earn less than the median $26,500 a year. Jim Cramer says they will be buying houses, Jim Cramer says they will be subscribing to NetFlix and shopping on Amazon.com with their high-speed web browsers, perhaps on their new 3-D TVs... They will eat out at Chipolte and, of course, they will BUYBUYBUY food and gasoline no matter how expensive it gets.
Perhaps that will make us slow to join the party but I'd rather be late than wrong because late means we can catch up, while wrong means we're down considerably and writing books with sad little titles like "Getting Back to Even." I don't mean to pick on Cramer but it's amazing how many people I meet begin their questions with "Cramer says.." so he sort of embodies the mentality that led us to disaster in the last cycle and, as indicated in this chart from last year - here we are again, right at the top of the overheating commodity cycle that is driving inflation rapidly higher. I guess we can ignore it. But not today.
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| Gold: Quickly climbing the wall of worry Posted: 03 Feb 2011 07:16 AM PST by Mark Hulbert … In just a couple of hours, bullion rose $30 a ounce — in one fell swoop erasing nearly a third of its correction since New Year's. … Explosive rallies such as this are a hallmark of what often can happen when there is excessive pessimism, according to contrarian analysis. As evidence of that pessimism, consider the average recommended gold exposure among a subset of the shortest-term gold timers tracked by the Hulbert Financial Digest. This average recently dipped below zero, which meant that the average gold timer was allocating some of his gold portfolio to shorting gold. … if they remain stubbornly on the sidelines, if not outright bearish, then odds improve that gold will quickly rally into new all-time high territory. [source]
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| Posted: 03 Feb 2011 07:00 AM PST The year 2011 is the year when inflation will play the role of wrecking ball. It seems to threaten everything from emerging markets to the pretty earnings narrative of the market as a whole. I use the term "inflation" here as the man on the street does. It is when prices for most everything go up. It is not the best definition, because it obscures the reason why prices for most everything go up in the first place. The reason is that governments everywhere can't help but print lots of money. But let us not wander off course. It is what it is. Instead, let's think about the big emerging markets for a moment. They have been so important to the investment story of the last decade, for sure. Yet rising food and energy prices pose a big risk to them. In India, food prices are at their highest levels in more than a year, rising 18%. The dabbawalla, when he is done delivering lunchboxes, trots off to the market and finds that the price of onions has doubled in only a few months. Even the basics, like potatoes, have become expensive to the average Indian. One 54-year-old cloth trader in Mumbai complained: "It seems everything is going up in price, from vegetable and meat to diesel and household cooking gas. We are always worried as to what is next." Food prices are again becoming a serious issue, as they did in 2008 when the last food crisis brought riots in 30 countries all over the world. The UN tracks an index of 55 food commodities. It rose for the sixth straight month and is, in fact, above the previous high in June 2008. In China, the typical Chinese also faces rising prices for nearly everything. The official inflation rate recently hit a 28-month high. But it's the surging price of coal that may prove to be China's Achilles' heel, at least in the short term. Coal is what powers the great boom in China. And coal is at two-year highs. The basics like food and energy are like brakes on these economies. I think it would be surprising if, say, China could continue to grow 8% a year in a world of $100 oil – at least initially. (Solutions are found, in time.) Of course, the US and the more mature economies are not immune to rising food and energy prices, either. The thing is it is early in this story yet. Inflation will likely get much worse, if history is any guide. Everyone seems to know the US inflationary story of the 1970s. The official inflation rate hit nearly 14% by 1980. In other countries, it was worse. In the UK, inflation topped out at 27%; in Japan, 30%. It was not that long ago. Who is to say how bad things can get today? We will see, and we will watch things closely. In the stock market, inflation poses its own challenge to earnings. Thus far, out of the March 2009 bottom, earnings have exceeded expectations. The market has danced accordingly. But rising prices for commodities mean that many companies will face cost pressures. Whether they are able to pass on those increases to consumers and maintain their profit margins (and sales) is the challenge. Plus, those expectations have shifted. The market has risen to date on the back of a skeptical and pessimistic earnings view. As all bull markets do, it has successfully climbed that wall of worry. Yet cheerful forecasts make for a market vulnerable to near-term disappointment. The consensus forecast is $96 in earnings for the S&P 500, which would top its record mark in 2006. For the upcoming quarter, the consensus calls for a 29% increase in earnings from a year ago. We won't have to wait long to see some early indications if this is likely or not, as earnings start to roll in this week. Regardless, I'm convinced inflation is going to become the story in the markets this year. There are a number of investment consequences of the above, which we'll work out as we go along. However, since it is still early in the inflation curve, I think commodity businesses ought to do OK for the simple reason that what they sell adjusts nearly instantly to the effects of inflation. Oil companies, coal miners and farmers don't apologize for the prices of their goods. A barrel of oil is a barrel of oil, and you either pay the price or you don't get it. It's not a bag of Doritos, for which you can switch to a knockoff brand if they raise the price on you. But not all commodities will be on such footing. Take US lumber prices. I found this next chart very curious:
As David Wilson of Bloomberg points out, "Lumber has bounced back to prices seen during last decade's boom in US housing even though the homebuilding industry, one of the biggest sources of demand, is still in a bust." How so? Chinese demand. But the increase is from a temporary surge. China is trying to reduce its dependence on Russia, which is China's largest supplier. Perhaps it is a long-term shift. Or perhaps the Russians will sweeten the deal to get back their market share. If so, then the earnings of Plum Creek, Rayonier, Weyerhaeuser and other US log producers may enjoy only a brief day in the sun. In the commodity realm, I prefer longer-lasting advantages. Oil, for example, has held up well, and we know how difficult and expensive it is to find new sources of supply. The price of gold may be the most durable price of any commodity. Especially as the inflation thesis plays out. I'd stick with the smaller miners, because I think inflation will make it more attractive for big gold producers to buy smaller ones than to create such production from scratch. Despite this big-picture guesswork, I think it will be important to be choosy. First, the recent market rally has lifted all boats, even the leaky ones. But over the long haul, the leaky ships will still sink. It will pay to be in the right names. Second, you always have to consider the consequences of being wrong. You'll fare better in such cases with a quality name, well financed, led by talented people and acquired at a cheap price. Such investments will likely make you money over time, even if you get the big picture wrong. This is what smart investing is all about. Regards, Chris Mayer Inflation's First Phase originally appeared in the Daily Reckoning. Recent articles featured in The Daily Reckoning include the impact of quantitative easing and US debt.
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| Hourly Action In Gold From Trader Dan Posted: 03 Feb 2011 07:00 AM PST View the original post at jsmineset.com... February 03, 2011 11:06 AM Dear CIGAs, Apparently the catalyst for the strong move higher in gold today was a speech given by Chairman Bernanke in front of the National Press Club this morning. Basically he repeated what we have been saying for what seems like an eternity now – in spite of all the QE and gazillions in liquidity created by those programs, job growth remains anemic: "It will be several years before the unemployment rate has returned to a more normal level," Traders rightly interpreted that to mean QE is still on for the immediate future. Here is an excerpt from Bloomberg on the story detailing Bernanke's comments. Click here to read the entire story… [INDENT]Little Alarm Fed policy makers are showing little alarm over the rise in food and energy prices. The central bank's Jan. 26 statement acknowledged rising commodity prices while saying that longer- term inflation expectations were stable and "underlying inflati...
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| Options Offer Clues to Gold's Direction Posted: 03 Feb 2011 06:59 AM PST Hard Assets Investor submits: Gold's weak response to the Egyptian crisis has puzzled many investors. You'd think the market would reflect growing fear, sending gold prices higher. But despite Wednesday's escalation in violence, bullion prices slumped $8 an ounce. The price decline bespeaks an overreaction on Friday, when gold jumped $14/oz. Such is volatility. But gold market volatility has actually diminished recently. Or, rather, expected volatility - as measured by the options market - has shrunk. The CBOE Gold Volatility Index is derived from the implied volatility in SPDR Gold Shares Trust (GLD) option premiums. And if you've tracked it over the past couple of months, you probably have noticed that readings have moved into an ever-tightening range: CBOE Gold Volatility Index Vs. London A.M. Fix
Investors with experience in chart reading may recognize the pattern that's developed - the "wedge" is predictive of a breakout move. But the question now is whether that breakout will occur against a background of higher or lower gold prices. Gold's recent track record and a little probability the Complete Story »
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Bullish investors were winning gold's tug of war in a volatile session as the metal surged after Federal Reserve Chairman Ben Bernanke indicated that the economic recovery still requires the Fed's help. Some analysts were predicting the Fed could raise rates sooner than expected in light of strong economic data, but Bernanke killed that idea. The U.S. dollar index was rising 0.8% to $77.75, while the euro was shedding 1.2% to $1.36 versus the dollar…
It is down but not yet out. 
This is the part the top 1%, even the top 10% don't get and why they think that housing will recover if the Fed just keeps giving money to banks. That is total crap! People (the ones who buy the homes) need to save up (
Does that make sense to you or, is it just remotely possible, that 50% of the people in the United States of America can't possibly afford to live in Bullish Projection America and that the growth that is priced into the markets is, perhaps, overly optimistic? Our friend, Whitney Tilson, 
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