Gold World News Flash |
- Gold near 5-week high on inflation
- Bottleneck or Supply Deficit?
- Gold set for biggest weekly gain in 2011
- Silver Rises to 30-year High as Mints Start to Ration Coins
- SilverFuturist on the recent ‘Man throwing Silver into ocean' video; ‘We want to Crash JP Morgan so bad we'll throw away our Silver if that's what it takes.'
- Gold Seeker Closing Report: Gold Gains Almost 1% and Silver Surges Nearly 3% to a New 30-Year High
- Crash JP Morgan Buy Silver
- Silver Tales
- Silver porn (**)
- The Two Faces of Ben Bernanke
- Why I love Gold
- WTF!? Mike and Dave ARE STILL ROLLING AROUND VEGAS talking about Gold and Silver . . . What about taking in a show or hitting the all you eat buffet guys?
- Silver Blasts Higher, Constantine and Timberline News
- Life Savings Gone: Man Robbed Of 750K Of Silver
- The Gold Price Smashed it's $1,380 Resistance Closing at $1,384.70
- Egypt's Next Crisis: The Economy
- Calculating the Misery of Inflation
- Where Is Gold Headed?
- Guest Post: Bottleneck Or Supply Deficit?
- Gold futures mark highest close in five weeks
- On Humanity’s Instinctual Need for Democracy
- Feeling the Margin Squeeze
- How to Become a Millionaire by the Time You’re 40
- Bernanke says Fed has learned lessons from the recession
- Silver Wheaton's Future Is Bright
- Reykjavik, Athens, Dublin, Tunis, Cairo . . . Wisconsin. Global Insurrection Against Banker Occupation reaches USA
- Gold Daily and Silver Weekly Charts
- Healthy Correction for Gold Miners, Precious Metals in Secular Bull Market
- Gold and Silver Bullion Bottleneck or Supply Deficit?
- FT announces SLA is winning war against JP Morgan (reg. rec.)
- Barrick Gold's CEO Discusses Q4 2010 Results - Earnings Call Transcript
- Indias Gold Demand Beggars Belief
- Gold Market: Demand in Flux
- “Eric, normally we go into option expiration and both gold and silver will be under pressure. This is the first time we’re going into option expiry with silver in backwardation.”
- 8 Stocks to Pop for a Rising Gold Price 2011 Forecast
- “Germany is still on the hook for $8 bn. worth of bonds issued near the end of the Weimar Republic, and that their value has soared because it’s tied to the price of gold.”
- Gold's Bull Market
- SILVER BABY!
- Wisconsin Democrats Boycott Anti-Union Vote By Fleeing State
- Global Gold Demand Hit 10-Year High In 2010
- Emerging market central banks become large buyers of gold
- This short squeeze in silver could be 'the big one,' Turk tells King World News
- Silver Gains on Inflation Concerns and Tight Supply
- India's Gold Demand Beggars Belief
- LGMR: Gold Rises in Dollars, Physical Demand "Very Much" About Inflation
- Government Spending to Perpetuate Fiscal Insanity
- Gold Continues to Test Fibonacci Retracement
- Today’s Best Investment…Rhymes With Pickles
- Comment Letter On Our Crime Scene Of A Stock Market
- Gold Rises, Physical Demand Due to Inflation and Low Interest Rates, Not Middle East Crisis
| Gold near 5-week high on inflation Posted: 17 Feb 2011 06:09 PM PST By Lewa Pardomuan As anti-government protests rock the Middle East, the White House, U.S. Secretary of State Hillary Clinton and the Pentagon all urged Bahrain's leaders to pull back after police attacked demonstrators in the Gulf kingdom's worst violence in decades. … France's agriculture minister warned the United Nations that food riots like those of three years ago could break out around the world because of steep rises in food prices. In 2008, riots broke out in countries as far apart as Egypt, Cameroon and Haiti. … "As we see more prices in the grains move higher, we are convinced that people are saying: well OK, what's the store of value now? So they are moving to gold as a result of that," said Jonathan Barratt, managing director of Commodity Broking Services in Melbourne. … The International Monetary Fund will warn G20 finance ministers this weekend of growing risks to the world economy from surging food prices and public finances while also advocating a somewhat weaker dollar. [source]
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| Posted: 17 Feb 2011 06:09 PM PST There have been numerous reports of bullion shortages in many parts around the world, along with rising premiums. And the two explanations – we're running out of gold! and, it's just a manufacturing bottleneck – are at odds with one another. So, who's right?
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| Gold set for biggest weekly gain in 2011 Posted: 17 Feb 2011 05:36 PM PST By Kim Kyoungwha Immediate-delivery bullion was little changed at $1,385.38 an ounce at 1:32 p.m. in Singapore and has gained 2 percent this week, the biggest advance since the week ended Dec. 31. "Gold remains as attractive as ever," said Gavin Wendt, a Sydney-based resource analyst with MineLife Pty Ltd. "There's no compelling reason to sell gold, with growing political uncertainty in North Africa and potentially elsewhere, escalating food prices fanning inflation and the U.S. sitting on an ever-growing pile of debt." … Eleven of 15 traders, investors and analysts surveyed by Bloomberg, or 73 percent, said the metal will rise next week. [source]
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| Silver Rises to 30-year High as Mints Start to Ration Coins Posted: 17 Feb 2011 04:12 PM PST "We have sold everything we can produce in silver and have demand for at least twice that volume," said David Madge, head of bullion sales at the Royal Canadian Mint, which produces the silver Maple Leaf coin. Silver coin sales at the US Mint and the Austrian Mint also hit record levels in January. The surge of buying has both boosted silver prices and helped push the market into "backwardation" – an unusual condition in which forward prices are lower than prices for immediate delivery. While investors are buying, miners have been selling their future silver production to lock in gains, which has depressed long-dated futures prices. More Here.. 
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| Posted: 17 Feb 2011 04:06 PM PST
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| Gold Seeker Closing Report: Gold Gains Almost 1% and Silver Surges Nearly 3% to a New 30-Year High Posted: 17 Feb 2011 04:00 PM PST Gold saw slight gains in Asia and London, but it then accelerated even higher in New York and ended near its last minute high of $1384.68 with a gain of 0.68%. Silver waffled near unchanged in Asia and London before it stormed higher throughout most of trade in New York and ended near its last minute high of $31.578 with a gain of 2.97% at a new 30-year high. Both metals have risen to new highs in after hours access trade as well.
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| Posted: 17 Feb 2011 02:58 PM PST
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| Posted: 17 Feb 2011 02:14 PM PST
Nice move in silver today. We are now in uncharted waters. I think what happened long ago with “Bunky” Hunt was just noise. We are at the high. This was going to happen sooner or later, so no big surprise. I do wonder, “Why today?” 
Old Story
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| Posted: 17 Feb 2011 02:04 PM PST
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| Posted: 17 Feb 2011 01:27 PM PST By: Peter Schiff Thursday, February 10, 2011 Based on his recent public comments, Fed Chairman Bernanke seems determined to give the U.S. dollar the reputation of Egypt’s Hosni Mubarak: an unwanted relic of the past that everyone agrees must go, but stubbornly clings to a privileged position. The dollar is currently the world’s ruling currency, but, as with Mubarak, I believe that growing public discontent will spur regime change quicker than most pundits expect. Clearly, the most significant problem facing central bankers around the world is the recent eruption of inflation, which is sparking unrest in Asia and the Middle East. With respect to this issue, Bernanke is alternating his responses through two different personas. Sometimes he chooses to act like Baghdad Bob, the Iraqi Information Minister who, in the opening days of the 2003 invasion of Iraq, continue...
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| Posted: 17 Feb 2011 01:20 PM PST
Investors have dozens of reasons for loving Gold. Some love it because it’s a great inflation hedge. Others love it because it can’t be devalued. Others love it because it’s a storehouse of wealth.
Personally I like Gold for all of these reasons too. But my favorite reason for liking Gold is because it calls “BS” on this stupid stock market rally.
Indeed, while stocks have hit new highs for the rally begun March 2009, Gold has a way of showing the world that most of these gains are in fact illusory: the product of easy money and US Dollar devaluation.
Here’s stocks priced in US Dollars:
Here’s US stocks priced in Gold:
Not quite as impressive is it? In fact, based on this chart, stocks haven’t increased your purchasing power since April 2010… interestingly enough the time at which the Fed’s QE1 program ended.
In other words, Gold has proved, beyond a shadow of a doubt, that the Fed’s QE lite and QE 2 programs haven’t done ANYTHING for real household wealth. Stocks, when priced in a currency that can’t be devalued, have accomplished NOTHING since April 2010.
The picture is even worse when you look at stocks priced in Gold since the Tech Bubble:
Ouch.
That’s an 81% drop in value since 2000. So not only have stocks done NOTHING in nominal terms since the Tech bubble, but they’ve actually LOST 81% in purchasing power since the last decade.
How can you not like Gold? It’s the one stop refutation of everything Bernanke and the others central banking folks claim. It stops CNBC’s nonsense dead in its tracks. It calls BS on all the bulls.
AND it increases your real wealth.
Graham Summers
PS. If you’re getting worried about the future of the stock market and have yet to take steps to prepare for the Second Round of the Financial Crisis… I highly suggest you download my FREE Special Report specifying exactly how to prepare for what’s to come.
I call it The Financial Crisis “Round Two” Survival Kit. And its 17 pages contain a wealth of information about portfolio protection, which investments to own and how to take out Catastrophe Insurance on the stock market (this “insurance” paid out triple digit gains in the Autumn of 2008).
Again, this is all 100% FREE. To pick up your copy today, got to http://www.gainspainscapital.com and click on FREE REPORTS.
PPS. We ALSO publish a FREE Special Report on Inflation detailing three investments that have all already SOARED as a result of the Fed’s monetary policy. You can access this Report at the link above.
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| Posted: 17 Feb 2011 12:46 PM PST
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| Silver Blasts Higher, Constantine and Timberline News Posted: 17 Feb 2011 11:47 AM PST Two of last year's Vulture Bargains issued interesting news today. We will get to that in a jiffy, but first a little crow is on the menu here at GGR. We like our Crow served chicken fried, with lots of salt and pepper, some dinner yeast rolls, sautéed peas & carrots mixed right in with southern rice and some good old brown gravy, thank you very much. Crow Tastes Good Sometimes Less than an hour after this morning's "nagging feeling" post went "live," you know, the post where we spent most of the time showing in the charts why the nagging feeling that had crept in was not showing in the charts, … you know, the post that said that if silver broke out today, our brand new hedges would be gone and gone quick; … the post that said that we had gotten "smaller" in some issues and that the Trading Gods would probably laughingly send them much higher now that we had not only done that, but then announced it publicly! … less than an hour after that post went live, kaboom! Silver didn't just print a feeble, "maybe-looking" just-barely kind of new high. No, sir and madam, silver blasted up and into what had to be a virtual boxcar full of trading and short seller trailing buy stops in the $31.30s and $31.40s.
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| Life Savings Gone: Man Robbed Of 750K Of Silver Posted: 17 Feb 2011 10:35 AM PST A Chilliwack man says he is traumatized after he was punched, stabbed and tied up by home-invading thieves who made off with his life savings in silver bars. The two thugs, wearing what he described as fake police uniforms, unloaded a vault and spirited away with $750,000 in silver the man had bought as an investment last year. The 52-year-old victim, still shaking after the robbery at his Imperial Street home on Feb. 9, now wonders who among his friends or acquaintances is behind the brazen midday theft. "Obviously some friend, or friend of a friend, or friend of a family member was told and they leaked it to the wrong people," he said. (snippet) "When I bought it in January a year ago some people said. 'You are crazy,'" he said. "It turns out that it really was one of the best investments I've ever made." The man, a former professional, wouldn't say how much he had paid for the bullion, though $750,000 in silver bullion was worth about $415,500 this time last year. A bank refused to store the silver, he said, because it was too big. 
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| The Gold Price Smashed it's $1,380 Resistance Closing at $1,384.70 Posted: 17 Feb 2011 10:13 AM PST Gold Price Close Today : 1384.70 Change : 10.00 or 0.7% Silver Price Close Today : 31.572 Change : 0.942 cents or 3.1% Gold Silver Ratio Today : 43.86 Change : -1.022 or -2.3% Silver Gold Ratio Today : 0.02280 Change : 0.000519 or 2.3% Platinum Price Close Today : 1846.30 Change : 17.00 or 0.9% Palladium Price Close Today : 845.00 Change : 4.85 or 0.6% S&P 500 : 1,340.40 Change : 4.08 or 0.3% Dow In GOLD$ : $183.88 Change : $ (0.88) or -0.5% Dow in GOLD oz : 8.895 Change : -0.043 or -0.5% Dow in SILVER oz : 390.13 Change : 0.80 or 0.2% Dow Industrial : 12,317.08 Change : 28.91 or 0.2% US Dollar Index : 77.98 Change : -0.244 or -0.3% The GOLD PRICE today rose $10 on Comex to close the day at $1,384.70, well past the $1,380 resistance. I'm through fighting it, which, I grasp, may mean that it has topped, but I can't fight it any longer. GOLD has topped its 20 and 50 day moving averages (50 @ $1,370.11), the Moving Average Convergence/Divergence indicator is positive, like a snowball rolling down the Alps, Relative strength indicator isn't overbought, and it has reached a new high for the move. Some profit taking tomorrow (Friday) may take it down a notch, but it is headed higher. I bought today. One reason I have to throw in my bearish gold towel is that silver today made a new high for the move from November 2008. Comex silver gained 94.2c to close at 3157.20. Ratio fell to 43.86. The SILVER PRICE momentum indicators are more overbought than gold's by far, but typically silver leads the way in the late stages of a rally, where we are now. Silver is tugging gold up. Learn thy lesson from my error. It's always dangerous to fade a bull market, because the major trend is up, which means more than half the time those who bet against it will lose. Once again I must re-learn the ancient wisdom, "The trend is your friend." I bought SILVER today, too. The new GOLD/SILVER RATIO low at 43.86 brings us to my first alternative target at 43.63, 2006's low. Below that lies 42 and 41, also possibilities. From this point gold might begin to gain on silver, which slows down the ratio's progress. To nail the final nail in Doubt's coffin, gold must close at a new high, above $1,422.60. Looking for upside targets leads to targets like $1,600 and 3900c, although I will still be looking over my shoulder to make sure I am not being suckered by a double top. The white thing flying by your head is my bearish towel, which I am throwing in on silver and gold. They're headed higher. The US DOLLAR INDEX fell today 24.4 basis points to 77.979 (down 0.31%). That's dead on the 20 day moving average, but the uptrend remains unbroken. The euro rose to 1,3607, closing above its 10 day moving average, but right on its downtrend line. That's a might-ee position: might go up, might go down. Dollar is sagging but has not broken down. One of the great mysteries in my life, at this point greater than the mystery of a man and a maid, is stocks. But I suppose their levitation testifies to the power of printing money. Go, Ben. Stocks are in a rising wedge. Rising wedges usually break down. The RSI is more overbought than Miami condos in 2007 -- moonstruck. If MACD goes any higher it will reach escape speed and leave the earth. Economic sense behind this? Nothing. Sawdust. Dow today reached a new high for the move at 12,317.08, up 28.91. S&P rose 4.08 to 1,340.40. Volume is declining, which is negative, but so is everything else, so why let THAT bother you? I don't care how much fun they're having at that party or how cheap the booze is, I'll just stay outside, thank you. Argentum et aurum comparenda sunt -- -- Gold and silver must be bought. - Franklin Sanders, The Moneychanger The-MoneyChanger.com Phone: (888) 218-9226 or (931) 766-6066 © 2011, The Moneychanger. May not be republished in any form, including electronically, without our express permission. To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate in a bubble, primary trend way down. Whenever I write "Stay out of stocks" readers inevitably ask, "Do you mean precious metals mining stocks, too?" No, I don't. 
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| Egypt's Next Crisis: The Economy Posted: 17 Feb 2011 10:11 AM PST Mubarak resigned, journalists packed their gear, and CNN went back to talking about obesity statistics - but Egypt's troubles are far from over. After weeks of protests (leading to strikes and, understandably, no tourists), the country's economy took an estimated 1.5 billion-dollar punch to the face. This appears to be the tip of the iceberg for Egypt's economical woes, however - as you'll read in the piece below from STRATFOR, a global intelligence company I've come to know and love. Mubarak's gone... as are his son's banking reforms. Resurrected is the military's practice of borrowing money from banks with no intention of paying it back - likely leading to a debt level of bailout proportions. The nation's not about to find the extra $16 billion a year it needs in its couch cushions. While everyone talks about democracy in Egypt, STRATFOR gives you the real scoop on what's going on behind the scenes - and what military rule means for Egypt, it...
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| Calculating the Misery of Inflation Posted: 17 Feb 2011 10:00 AM PST I was, unfortunately, sober enough to realize that I needed to get a lot drunker if I was going to withstand the horror of reading of even more economic fallout of the Federal Reserve's disastrous decisions to create So Freaking Much Money (SFMM). In particular, Michael Pento, in an essay in the Euro Pacific's Weekly Digest newsletter, writes, "For the year 2010, the trade gap surged 43%, which was the biggest jump in a decade, as our government's efforts to reignite consumer borrowing and spending led to a record number of imported consumer goods." I wince and moan, devastated by the very concept of a trade gap jumping by almost half in One Freaking Year (OFY), a situation where we bought more from foreigners than we sold to foreigners, thus many of the Fed's trillions of new dollars flowed out of the US and into the world economy where it would produce its inflationary havoc, QED. Mr. Pento is also one of the few to notice that "the Misery Index hit a 26 year high for 2010. The index – which is simply the addition of the unemployment and inflation rate – reached 11.29." And how bad is this? Well, he says, "You have to go all the way back to 1984 to eclipse such a level of pain. Only back then, inflation was calculated without the 'benefit' of the manipulations of the Boskin Commission. Therefore, the Misery Index should be, in reality, much higher than 11.29 and is probably closer to the pain we felt under Jimmy Carter." Well, as a guy who thinks that inflation in important prices (food, energy, etc.) is running at least 7%, and as a guy who has seen John Williams at shadowstats.com showing pretty convincingly that unemployment is really running at over 22%, this means that the Misery Index at 29 has NEVER been this high! As bad as this is, this is, actually, the good news! The bad news is that the Misery Index will continue higher and higher because the Federal Reserve continues creating more and more money, and today's record-setting Misery Index of 29 will one day be considered "the good old days" when the news is filled with catastrophic inflation, widespread bankruptcies and economic collapse. At that dismal future time, your growing sense of horror will only momentarily be diverted by an amusing sidebar, perhaps a story titled "Mogambo Him Go, Say Fed No Mo'", a human-interest saga of how a guy calling himself The Mogambo is calling for his army of Junior Mogambo Rangers (JMRs) across the country to lean out of their windows and say, "I'm as mad as hell with the inflations and horrors of the Federal Reserve and I am not going to take it anymore!" in their demand that the Federal Reserve be dissolved and the country put back on a gold standard as literally required in the Constitution of the United States so that this monetary and fiscal madness would stop, and with a gold standard, never again would we have to face such appalling, catastrophic consequences of absurd levels of monstrous, monetary irresponsibility and sheer stupidity. Of course, the Main Stream Media will latch, like vicious, mindless, blood-sucking lamprey eels, onto the fact that my "popular uprising" is just a glaring rip-off of Peter Finch's famous scene in the movie Network, and which proves how I have no talent or creativity of any kind, which in turn shows how stupid I am, despite how I got very, very lucky when I bought all that gold and silver before the full impact of the inflationary horror unleashed by the Federal Reserve creating all that excess money started hitting everyone, but they won't mention that, by then, I am So Freaking Rich (SFR) that the only I reason I don't buy the whole Main Stream Media and fire them all is that I am too rich, too lazy, and/or too drunk, and/or too distracted, and/or too whacked-out to do it, or to even give a crap one way or the other. Mr. Pento is apparently unimpressed with my Fearless Mogambo Forecast (FMF) of what the future holds, or that whole swaths of the economy will tremble at my whim, but agrees that "America's citizenry are experiencing rising food and commodity prices, rising interest rates, falling home prices and stagnate wages and job growth." I was going to say that Mr. Pento, again, does not mention how buying gold, silver and oil is a perfect thing to do when the Federal Reserve is creating So Freaking Much Money (SFMM) that it guarantees ruinous inflation in prices so that most everyone will be bankrupt and eating weeds and bugs to stay alive because they can't afford food. Then I realized he actually DID say the same thing when he said, "But so far Mr. Bernanke has only managed to bail out his buddies on Wall Street and in Washington. Maybe he just doesn't realize that he is in the process of wiping out the middle class by destroying the value of our currency and rendering those without financial means, helpless to guard themselves against inflation." I smiled with satisfaction that when he went on to disparage Bernanke's legendary acing of the SAT by saying, "Too bad questions regarding the benefits of a sound currency weren't on his SAT exam." And again I smiled that Mr. Bernanke's dismal, utter failure and ridiculous incompetence shines a revealing light on Princeton, where he was, unbelievably, the head of the economics department. And a third time I smile because the entire historical record of the last 4,500 years is the same story, over and over, of idiot governments spending themselves into bankruptcy, and how gold and silver prove to be The Best Investment Ever (TBIE). And a fourth time I smile because one cannot help but smile when saying, "Whee! This investing stuff is easy!" The Mogambo Guru Calculating the Misery of Inflation originally appeared in the Daily Reckoning. The Daily Reckoning has published articles on the impact of quantitative easing, bakken oil, and hyperinflation.
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| Posted: 17 Feb 2011 09:38 AM PST Hard Assets Investor submits: By Brad Zigler For some investors, the headline question is a forgone conclusion. For others, gold's price destination isn't so certain. Answering the question in Complete Story »
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| Guest Post: Bottleneck Or Supply Deficit? Posted: 17 Feb 2011 09:15 AM PST
By Jeff Clark of Casey Research Bottleneck or Supply Deficit? There have been numerous reports of bullion shortages in many parts around the world, along with rising premiums. And the two explanations – we’re running out of gold! and, it’s just a manufacturing bottleneck – are at odds with one another. So, who’s right?
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| Gold futures mark highest close in five weeks Posted: 17 Feb 2011 09:05 AM PST By Wallace Witkowski and Claudia Assis Gold for April delivery closed up $10, or 0.7%, at $1.385.10 an ounce on the Comex division of the New York Mercantile Exchange. Reports of unrest in Bahrain, Yemen and other Arab countries have unsettled markets. … John Person, president of NationalFutures.com, said an uptick in the U.S. consumer price index also benefitted gold Thursday. Government data Thursday showed that core consumer prices rose 0.2%. The core rate is within the Federal Reserve's guidelines, but most people who trade pay more at the grocery store and the gas station, so "its hard to tell them inflation is non existent," Person said. "Therefore gold is bid every time we get news of upticks in costs or government spending, both here, Europe and in China." [source]
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| On Humanity’s Instinctual Need for Democracy Posted: 17 Feb 2011 09:00 AM PST The world took a big step forward – on the road to perfection – last week. At least, that's what you'd think if you watched TV or read the paper. To hear the press tell it, when a mob upsets a dictator, it is because they "yearn for freedom." They can hardly wait to get into the voting booth so they can pull the lever for truth and justice. Martin Wolf, writing in The Financial Times, and recently listed by Foreign Policy magazine as one of the world's 100 best thinkers, says the move in Egypt was a step in the right direction. How does he know it is the right direction? Because that's the way the rest of the world is going! He provides figures showing that there are many more democracies today than there were in 1945. The reasons he gives for this shift? Economics. Education. Richer, better educated people are less inclined to leave all the power in the hands of an autocrat, he thinks. But there's another reason. "The most powerful reason for believing in democracy's future, however, is that it responds to something deep with in us." Yes, dear reader…it is in our genes. Our inner democrat just needed about 2,000 years after the birth of Christ to express himself. And now he's mouthing off everywhere. Or… Is it possible that democracy is just the flavor of the month…an evolutionary development, like all the forms of government that came before it? Is it possible that it succeeded in the 20th century because it was much better adapted to leeching out the wealth and complicity of the average man? It gave him a stake in the system – like getting some prisoners to guard each other, or bribing taxpayers to rat out their neighbors to the IRS? Isn't it possible that by giving the masses a "voice," the elites who really control government are better able to take his money…and, if necessary, his life? Soldiers will do their duty to a dictator, if the price is right. They will do their duty to the government they helped elect for less. And they will more willingly submit to government's taxes, too, if they feel they are its masters, rather than the slaves. The real difference may only be an illusion, but it is an effective one. In practice, the individual may have less ability to influence the large pool of voting numbskulls than he does to influence a single knuckleheaded autocrat. But heck, we're all democrats now. Regards, Bill Bonner On Humanity's Instinctual Need for Democracy originally appeared in the Daily Reckoning. The Daily Reckoning has published articles on the impact of quantitative easing, bakken oil, and hyperinflation.
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| Posted: 17 Feb 2011 08:51 AM PST by Addison Wiggin - February 17, 2011
 The Dow and the S&P have begun the day down about a quarter percent each. Judging by the reaction to the day’s key data point, the market may be finally sniffing out a story we’ve been onto since last fall. Let’s dive in… That most-massaged measurement of the cost of living -- the consumer price index -- rose 0.4% last month, according to the Bureau of Labor Statistics.Over the last four months, CPI has risen 1.1%. On an annualized basis, that’s 3.3%. You can be forgiven for thinking your own cost of living is rising at a somewhat faster pace since last October. But it’s no surprise when the statisticians “adjust” their numbers like so…
 For an alternative (and more realistic view), we turn to the academics at MIT, and their Billion Prices Project. They track the daily price fluctuations of 5 million items sold by 300 online retailers in 70 countries.Its latest data for the United States show a shocking divergence from CPI, starting in early 2010 and skyrocketing so far in 2011.   Back in fantasyland, “measures of underlying inflation remained subdued and longer-run inflation expectations were stable,” according to the minutes from the Federal Reserve’s Jan. 25-26 meeting, released yesterday -- “further increases in commodity prices” notwithstanding.How can the Fed say such a thing? Because it relies on an even more massaged measure of the cost of living called “core CPI” -- which strips out the costs of food and energy, supposedly because they’re “volatile.” The core rate clocked in at 0.2% last month. Over the last four months, it’s up 0.4%.  Despite all the statistical games, the some of the numbers within CPI reveal a genuine rise in the cost of living. Check out some of these year-over-year increases:
[Ed. Note: Figures like these make Chris Mayer’s most recent presentation more timely than ever. For some simple ideas about inflation-proofing your portfolio, look here.]  “I’m surprised at how complacent the stock market remains in the face of obvious pressure building on the CPI,” says Strategic Short Report editor Dan Amoss. “If the Fed doesn’t react to a rising CPI by tightening policy, Treasury yields will keep soaring and inflationary psychology will take root among most producers.”On the other hand, “if the Fed does react by ending QE and raising short-term rates, it doesn’t require much imagination to guess what would happen to a stock market that’s running entirely on fuel from the Fed. “Either of these potential scenarios is bad for stocks.”  “The only scenario that argues for further rallies in stocks,” Dan continues, “is if -- miraculously -- even with unprecedented money printing and deficits worldwide, the CPI doesn’t continue rising.“A rising CPI will give more ammunition to the growing chorus of Fed critics in Congress. At a hearing last week, when questioned about the building pressure on consumer prices, Fed chief Ben Bernanke answered that it would be easy to stop this trend by reversing his policies. But you know he’s terrified at the prospect of tightening. “He’s an academic with his head in the sand.”  “The price of everything seems to have skyrocketed,” writes Mark Thornton of the Mises Institute. Only housing, the dollar and inflation-adjusted income are negative. World food and commodity prices are up 28% over the last six months.“Higher food prices set off the revolutions in Tunisia and Egypt and the mass protests in countries like Algeria, Jordan, Yemen, Bahrain and Iran. People in these countries buy more unprocessed foods and spend a much higher percentage of their income on food, so they have been severely impoverished by Bernanke’s QE2.”  Now… Let’s take CPI at face value for just a moment… and compare it to the producer price index released yesterday.CPI is up 1.1% over the last four months. But wholesale prices as measured by PPI rose 3.0% during the same period. Returning to the Fed minutes from last month: “Some business contacts indicated that they were going to try to pass a portion of these higher costs through to their customers but were uncertain about whether that would be possible given current market conditions.” In other words, consumers are still strapped… and businesses find themselves trapped in the “margin squeeze” we’ve been warning about for… well, the last four months.  This margin squeeze has already shown up during earnings season. Procter & Gamble… Ford Motor… Kraft Foods… they’re among dozens of companies whose profit and revenue beat the Street’s expectations during the fourth quarter… but whose profit margins shrank compared to the third quarter.There will be more where this comes from: This week, FedEx slashed its earnings forecast for the current quarter by 22%, thanks in large part to fuel prices.  None of this bodes well for a stock market that just yesterday finally reached the milestone of doubling from its lows of March 2009 (at least as measured by the S&P 500). The Fed has done a bang-up job of driving up stocks with quantitative easing… but it can’t be sustained forever.“The fact remains,” says Dan Amoss, “that there is no direct ‘transmission mechanism’ from the Fed’s balance sheet to the stock market. Speculators have to have a very specific, benign perspective on Fed policy in order for Fed policy to impact stocks. “Today’s misplaced faith in the omniscience of the Fed will soon fade, and when it does, the market will return to intrinsic value very rapidly. Using the most robust, back-tested historical valuation models, the best estimates of fair value for the S&P 500 that I’ve seen are somewhere in the range of 800-1,000 – 25-40% below current levels.” Tomorrow, Dan issues his newest recommendation that can position you to profit from falling stock prices in general… and margin squeeze in particular. It’s a counterintuitive strategy… but one that proved immensely profitable as the market swooned in 2008. While the S&P plunged 42% that year… Dan’s plays delivered an average gain of 99%. Learn all about Dan’s strategy here.  In another sign that the “recovery” is about to be strangled by margin squeeze, the Conference Board’s leading economic index eked out a mere 0.1% increase in January, the smallest, by far, since last August.The index’s three financial components pushed the index up -- especially stock prices and the spread between the federal funds rate and 10-year Treasuries. But the index’s seven economic components dragged the index down -- especially the average workweek in manufacturing, first-time unemployment claims and building permits.  Gold is taking the CPI figures in stride, the spot price up another $5, to $1,381. Silver is yet again knocking on the door of $31. At $30.93, we’ll see if the white metal can stick its foot in the door before it gets slammed shut.The dollar index is hanging in there just below 78.  Oil prices are steady, with Brent Crude pulling back a few pennies, to $103.57, despite the latest revolution in the Middle East coming to a head. The rulers of Bahrain just banned all protests and sent in the military to break up the main protest camp. Officially, three people are dead and 231 hurt.We’ve had a wary eye on Bahrain for months. “It’s home,” we wrote on Sept. 1, “to a seething cauldron of Sunni-versus-Shia conflict -- the ultimate dividing line in Islam, going back to the seventh century. The rulers are Sunni. The majority of the population is Shia. You can see how this might be a problem.” The plot thickens when you consider as recently as 1970, Shia Iran claimed Bahrain as its own territory. Iranian politicians sometimes refer to Bahrain as Iran’s “14th province.” Readers with good memories might recall how just after Saddam Hussein invaded Kuwait in 1990, he justified it by calling Kuwait Iraq’s “19th province.” If this raises an eyebrow, you should probably examine the “New War” scenario for $220-a-barrel oil. It comes courtesy of Byron King’s Outstanding Investments -- just named the top-performing newsletter over the last 10 years by the prestigious Hulbert Financial Digest.  Is this a case of media deception? As the slogan says, “You decide.”Ron Paul followers are incensed by this Fox News segment a few days ago, after Paul won the straw poll at the confab of the Conservative Political Action Conference. An interview featuring Paul is set up with video of CPAC’s pollster announcing the result -- to a chorus of boos from Mitt Romney supporters. Except the video was from last year’s announcement, when Paul also won. This year, the reception was less hostile. “Truly low and smarmy” reads an email from a friend who passed this along. On blogs and message boards, the reaction is even more scathing. “We made a mistake with some of the video we aired,” says a Fox News statement, “and plan on issuing a correction… explaining exactly what happened.” “Fox has ‘plausible deniability’ here,” says The 5’s Dave Gonigam, who toiled in TV newsrooms for 20 years. “I don’t know how digital video files are labeled and archived in their system, so it’s conceivable some poorly paid numnuts pulled up a file labeled ‘CPAC straw poll announcement’ and didn’t bother to confirm it was, in fact, from this year. “Hell, if they can put Egypt in Iraq on a map of the Middle East, they can do just about anything out of stupidity, rather than malice.”  “I am puzzled by the 15%-plus difference between Brent Crude and WTI,” a reader writes, “and why there’s no arbitrage play to be had here. I know Brent and WTI are different grades, but surely the difference in refining costs between the two aren’t as high as 15%, or are they? No doubt there are other things at work here -- perhaps you can clear this up in a forthcoming issue of The 5?”The 5: In theory, Brent should be lower priced than WTI because it’s more viscous and has more sulfur… so it’s more difficult for refineries to process. But a funny thing has developed in recent weeks: In short, there’s a whole lot of crude from the Canadian tar sands that’s backing up into the terminal at Cushing, Okla. -- where WTI is priced. And there are only so many pipelines leading out of Cushing to Midwestern refineries. That situation is pretty much irrelevant to the rest of the world. Brent is rapidly becoming the new world benchmark. The spread is crazier than ever today -- more than $18 a barrel. As we write, WTI is at $85.11, while Brent is $103.58.  “I would like to strongly recommend a new movie with Ben Affleck -- The Company Men. It is the most significant, poignant and timely movie that i have seen in a couple years. I’m amazed that is has had so little advance hype.“Sorry, I really know why it hasn’t, because all the lessons the movie teaches about today’s economy and how we got there are still in place. I’m 72 years old, retired truck driver (Teamster’s union) and I genuinely fear for the future of this country. The movie is superbly cast and played. “The real villain is our humanity. However, the real lesson i got is that capitalism, which has made us the envy of the world, has begun to cannibalize our strong middle class and may well be our undoing unless we can figure out how to get it under control.” The 5: Thanks for the recommendation. While we’re at it, our friend David Tice from the Prudent Bear mutual funds advises us that Soul Surfer is due for release April 8. He financed it and serves as executive producer. “This is the inspirational story,” David says, “of Bethany Hamilton, the Hawaiian girl who lost her arm to a shark attack and who’s come back to become a professional surfer. The movie stars AnnaSophia Robb, Dennis Quaid, Helen Hunt, Carrie Underwood, Lorraine Nicholson and Craig T. Nelson. “It’s been getting very good scores in test screenings and will leave you feeling great and inspired.” Cheers, Addison Wiggin The 5 Min. Forecast P.S.:At the poetry festival in Granada, Nicaragua, yesterday, we noticed this poster:
They’re trying to pass our favorite South American dictat... er, presidente as a member of the global literati. Heh. We don’t know how seriously to take it, however, given our level of comprehension in the native tongue here, or the fact that John Grisham’s latest effort is also featured on the poster.
We’re told poets from all over the world come to read their poetry at this event. We caught the tail end of one reading from a woman whose accent sounded like she might be of Hispanic origin but living in California. She praised the crowd in English for having the courage to “display their happiness” and the strength to “chase out the scorpions.” We can’t help but feeling each time we come to Nicaragua that we’re witnessing a rare moment in history. The country still feels to this outsider like its healing from a civil war that ended nearly two decades ago. There are folks who work with us down here at the ranch who think of the war as the struggle of their parents’ generation. But the complexities of the global market also seem at bay for the time being. The food is fresh, untainted and local. The locals are genuine, generous and happy. From where I sit in the “clubhouse” I can see a panga -- a local fishing dinghy -- pulling up the catch of the day. It will likely be served up fresh on a table here tonight. Our contractor in Baltimore is an energetic 30-something from Oaxaca, Mexico. He owns land along the San Juan River not too far south from here. “I love Nicaragua,” he told me at a reception we were co-hosting this past summer. “The people are untainted. And they still believe they can make their world a better place.” On our last Chill Weekend in December, a Reserve member tried to convince me at dinner one night that we were doing God’s work in the area. We employ some 300 local workers. We’ve sponsored a clinic that delivered some 25 newborns last year. Ground just broke for a technical school in the field opposite the clinic. So yes. Good things. But God’s work? We’re not so sure. What else do we bring? If you’re a Reserve member and you’d like to observe the scene here in Nicaragua with us in June, you can find the details here.
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| How to Become a Millionaire by the Time You’re 40 Posted: 17 Feb 2011 08:49 AM PST It sounds like a pretty good goal… just make sure you sock away a million dollars by the time you're 40 years old. So, how do you do it? Matt Krantz at USA Today has crafted the most practical strategy he could think of to accomplish the deed. First, he assumes you're 23, with a salary of about $40,000, and he ignores inflation, just to greatly simplify the math. Then, after taxes and expenses, he figures saving up about ten percent per year is realistic, as is a two percent raise each year. He also assumes you manage a ten percent average annual return including dividends. Where's that leave you? By 40, you'll have racked up about $227,000 in savings. Not at all shabby, but far shy of a million dollars. At that rate, you'd have to keep saving until 54 to reach your goal. Instead, he suggests a more effective plan: "What, then, is required to hit $1 million by 40? The first thing investors try to do is chase after highflying investments that will be their ticket to riches. But this approach brings the potential for disaster. To be a millionaire by 40, you'd have to get an average annual rate of return of 24% over the next 18 years. I can't stress how difficult that's going to be. A return of 24% is nearly three times the long-term average return of the Standard & Poor's 500. Getting that return would require a huge increase in risk, risk that could wipe out your dreams after just one bear market. "So if chasing returns isn't the answer, what is? How about if you saved more? Clearly, if you squirrel away more money, and successfully invest at 10% returns, you can make your goal. But I hope you like eating 25-cents-a-pack ramen noodles. You'd have to save nearly 45% of your gross income to be a millionaire by 40. We all know some frugal people, but saving nearly half your gross income is probably not realistic. "What if you could put your career on the fast track? Instead of boosting your income 2% a year, you get a better-paying job, do some moonlighting and boost your income. Well, you'd better get cracking. You'll need your income to rise 21% a year over the next 18 years to make this happen. You'd need to boost your annual income from $40,000 to more than a $1 million by the time you're 40 for this to all work out." It sounds a bit frustrating at first, but Krantz points out that if you manage to put away 20 percent of your salary, earn a four percent raise each year, and lock in ten percent average annual returns, your portfolio will hit $518,000 by your 40th birthday. Even more encouraging… he points out that if you can keep it up for just another few years, you'll be a millionaire by 46. Not too bad. You can read all the details behind the strategy in his USA Today post on how it's possible to put away $1 million by the time you're 40. Best, Rocky Vega, How to Become a Millionaire by the Time You're 40 originally appeared in the Daily Reckoning. The Daily Reckoning has published articles on the impact of quantitative easing, bakken oil, and hyperinflation.
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| Bernanke says Fed has learned lessons from the recession Posted: 17 Feb 2011 08:31 AM PST by Edward Wyatt [source] RS View: To be sure, not only was the Fed was too trusting of the commercial/investment banking sector, but so, too, were their customers (i.e., the public at large.) We would all do better to maintain a much more significant portion of our savings outside the confines of the banking sector — such as possible through the avenue of tangible assets. Ownership of gold, for example.
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| Silver Wheaton's Future Is Bright Posted: 17 Feb 2011 08:25 AM PST Michael Filloon submits: Silver Wheaton (SLW) is quickly becoming one of the best names in silver. It has an interesting business style, as it's a silver streaming company. SLW will pay upfront for the right to silver mined at a location, and depending on how much the payment is, it Complete Story »
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| Posted: 17 Feb 2011 08:19 AM PST MK: We called it on our TAM shows on Resonance FM London every Saturday night – starting five years ago. We saw it coming then, and we've been documenting it for you for five years since. The GIABO is only just now getting started. Look for currency collapses and Silver (and Gold) to skyrocket. Share [...]
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| Gold Daily and Silver Weekly Charts Posted: 17 Feb 2011 08:17 AM PST | |||||
| Healthy Correction for Gold Miners, Precious Metals in Secular Bull Market Posted: 17 Feb 2011 08:13 AM PST One of the most difficult decisions an investor must make is to determine if a turning point is of short-term or long-term consequence. The markets give subtle clues to students of the market of impeding danger and times of caution. A stock's reaction to news may tell us the authentic underlying strength. In November and December, gold, silver and mining stocks sold off on China raising rates and now in February they shrug off the news. Is that telling us the correction may be over? A break above the 50-day moving average will bring back the previous gold run. Often times in a secular uptrend news items are planted, causing short-term shakeouts, which often in retrospect are great buying opportunities. I have learned over time it is important to look at a long-term weekly chart and review the trend. If the trend is a normal healthy linear trend then most times a correction becomes a major buying opportunity.
Gold miners have put in a short-term bottom under $53. A cross above the 10-week or 50-day moving average on volume could forewarn of a break into new highs. After touching support and reaching oversold levels, traders entered the secular bull trend. Mining executives and fund managers believe gold and silver are in a long-term bull market. Many of these precious metal majors are sitting on huge amounts of cash and may become the new income stocks as they increase dividends to shareholders in 2011. The large miners are undervalued relative to other sectors and may have a strong 2011 as their profit margins increase. I expect new highs for the large producers and for them to outperform.
Gold has bounced at my previous buy signal under $130 and has reached a short-term overbought condition after reaching multi-year oversold levels. The first bounce after a significant correction may push stochastics into extremes and should be given less importance. I believed gold at under $130 or $1325 spot was an ideal buy as it reached long-term support and oversold levels. We must remember that gold is in a secular uptrend and these trends must be given strong weight when making decisions. I believe gold will reach new highs as central banks will be reluctant to raise interest rates in light of high unemployment and mounting debt fears. I expect further debt issues to resurface globally and for investors to seek out real money — gold and silver. Look for gold to hold the 50-day moving average, pushing a lot of bears who were expecting a steeper correction back into gold, causing it to reach new highs. Using a simple set of trend channels one can assess the risk at key market turning points. For four months, while investors were chasing gold at resistance, I was writing about key sectors and stocks that doubled, especially in uranium and molybdenum. Many investors left precious metals for riskier assets in energy, rare earths and base metals. Now gold and precious metal mining stocks seem to have found support and are making a leg higher despite fears of rising rates in both the US and China to combat rising prices of basic goods and commodities. Investors are realizing that interest rates won't deter this economy on steroids. President Obama does not appear to be cutting spending as our deficits soar into record territory and we may be setting ourselves up for QE3 if yields continue rising. Look at this video from January 29th where I predicted precious metal prices would reverse and turn higher. Sign up for my free 30 day trial to my daily technical reports by
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| Gold and Silver Bullion Bottleneck or Supply Deficit? Posted: 17 Feb 2011 08:04 AM PST Jeff Clark, BIG GOLD writes: There have been numerous reports of bullion shortages in many parts around the world, along with rising premiums. And the two explanations - we're running out of gold! and, it's just a manufacturing bottleneck - are at odds with one another. So, who's right?
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| FT announces SLA is winning war against JP Morgan (reg. rec.) Posted: 17 Feb 2011 07:52 AM PST FT: Silver rises to 30-year high as mints start to ration coins MK: The Silver Liberation Army (SLA) has drained all the available supply of coins. This is causing backwardation in the futures market. The Comex is on the verge of collapse. We are winning this war against JP Morgan!!!!! Share this:
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| Barrick Gold's CEO Discusses Q4 2010 Results - Earnings Call Transcript Posted: 17 Feb 2011 07:50 AM PST Barrick Gold (ABX) Q4 2010 Earnings Call February 17, 2011 9:30 am ET Executives Deni Nicoski - Vice President of Investor Relations Jamie Sokalsky - Chief Financial Officer and Executive Vice President Peter Kinver - Chief Operating Officer and Executive Vice President Robert Krcmarov - Senior Vice President of Global Exploration Aaron Regent - Chief Executive Officer, President, Director and Member of Environmental, Health & Safety Committee Analysts John Bridges - JP Morgan Chase & Co Kerry Smith - Haywood Securities Inc. George Topping - Stifel, Nicolaus & Co., Inc. Patrick Chidley - Barnard Jacob Mellet Greg Barnes - TD Newcrest Capital Inc. Presentation Operator Ladies and gentlemen, thank you for standing by, and welcome to Barrick Gold Year End 2010 Results Conference Call. [Operator Instructions] And now, I have the pleasure to turn the call over to Mr. Deni Nicoski, Vice President, Investor Relations. Please go ahead, sir. Deni Complete Story »
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| Indias Gold Demand Beggars Belief Posted: 17 Feb 2011 07:49 AM PST
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| Posted: 17 Feb 2011 07:47 AM PST Hard Assets Investor submits: B y Ju lian Murdoch Earlier today, the World Gold Council released its quarterly Gold Demand Trends report, the go-to source for industry data on consumption patterns for the yellow metal. And the numbers confirm what many market watchers have suspected for months: 2010 was a year of superlatives. In 2010, total worldwide gold demand surged to 3812.2 tonnes — a 10-year high and a nine percent rise compared with 2009 levels. That increase may sound slight, until you consider the dollar value difference: With the average London PM fix in 2010 a record $1224.50/oz (2009 averaged "only" $972.30/oz), the total worth of gold market demand soared to $150 billion. That's 38 percent over 2009. The report breaks out the demand segment-by-segment, offering several reasons for 2010's record demand levels: Tonne by tonne, total gold demand for 2010 notched only slightly higher than 2008 levels. But dollar for dollar, the value Complete Story »
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| Posted: 17 Feb 2011 07:46 AM PST
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| 8 Stocks to Pop for a Rising Gold Price 2011 Forecast Posted: 17 Feb 2011 07:38 AM PST Kurtis Hemmerling submits: The average gold price forecast for 2011 is $1,457. This figure represents the average price prediction of a large group of high profile analysts posted by the London Bullion Market Association. The average high range they see is around $1,633 giving the price some upside potential. Over the past 10 years the Complete Story »
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| Posted: 17 Feb 2011 07:35 AM PST
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| Posted: 17 Feb 2011 07:23 AM PST February 14, 2011 By Mary Anne & Pamela Aden Courtesy of www.adenforecast.com If we had to pinpoint a time during the last 10 years when the gold price broke out into a full on bull market, it was in 2005 when the $500 level was clearly broken. That was a key level at the time and this break out coincided with the launching of gold's ETF, GLD. It was also clearly a break away from the dollar as gold began jumping up in all currencies. This is when the bull market started heating up and gold never looked back until it surpassed the 1980 record high in 2008. The financial crisis pushed the gold price down in the sharpest correction in the bull market, yet gold closed 2008 up on the year, which was only bettered by bonds at the time. Most impressive, it didn't take gold but a few months to reach a new high once again. Most important and the reason why we are going over the bull market is because the gold price has been on a tear with not even a 14% decline sinc...
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| Posted: 17 Feb 2011 07:23 AM PST | |||||
| Wisconsin Democrats Boycott Anti-Union Vote By Fleeing State Posted: 17 Feb 2011 07:21 AM PST
The farce over the Wisconsin anti-union vote has just passed into the surreal. According to the AP, democrat lawmakers, who are firmly opposed to voting on the bill which is said to already have majority support, and who have been boycotting the vote by being absent from the state capitol, have now escalated and patriotically left the state. The reason is that while the vote can not take place without at least one Democrat being present, the police had been sent out earlier, with orders to sequester the democrats. The democrat response: run away. As the AP reports: "Senate Republicans can't vote on the bill unless at least one Democrat is present. Police could be dispatched to retrieve them, but it was unclear if they would have the authority to cross state lines." So to all who were expecting the latest iteration of members of the executive class to run away (with or without gold) to come from Africa or the Middle East, will be disappointed: it was in America's very own back yard. From the AP:
We don't get what the big deal is here: just call Von Bernankestein's hot line and get him to deliver $10 billion, or trillion, it's all the same these days. These are the Chairman's favorite kinds of inbound calls. After all, the dollar needs all the help it can get to get to zero way ahead of everyone else. It is everyone's patriotic duty to go bankrupt and to demand bail outs from our money printing syndicate. Lastly, not doing so is racist.
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| Global Gold Demand Hit 10-Year High In 2010 Posted: 17 Feb 2011 07:11 AM PST "China gold demand growing at "explosive" pace: ICBC. Gold Imports by India Reach Record on Jewelry Sales. Any hedging by silver miners won't diminish short squeeze: James Turk...and much, much more. " Yesterday in Gold and Silver Although Wednesday's activity looks impressive on the Kitco graph below...nothing much happened yesterday...at least not on the surface. Gold's low of the day [$1,367.40 spot] came at the London p.m. gold fix around 3:05 p.m. GMT...which is 10:05 a.m. Eastern. From that low, gold rallied a bit...and then really caught a bid shortly before 11:30 a.m. The vertical price spike was hammered flat about forty-five minutes later...and gold behaved itself for the rest of the New York trading day. The spike high was recorded at $1,383.30 spot. The price action is silver was, as always, more 'volatile'. After hovering around both sides of $30.80 for most of the Far East and London trading day, silver got sold down a couple of time...
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| Emerging market central banks become large buyers of gold Posted: 17 Feb 2011 07:01 AM PST by Rhona O'Connell
The Council also believes that further sales from "advanced economies" are unlikely to be significant in the near future because the official sector remains highly risk-averse. … The Council identifies significant changes in behaviours in both the economies of Western Europe and North America (who typically hold over 40% of their total external reserves in gold, largely as a legacy of the gold standard) and developing countries (who average 5% or below with Asia at just 4%). Emerging market economies with rapid economic expansion have been substantial gold buyers. The speedy increase in these countries' holdings of foreign exchange, notably the dollar, has eroded the proportion of reserves constituted by gold, and some of these nations are looking to restore the earlier balance. … the deputy head of the Central bank of the Russian Federation announced in January this year that the government plans to purchase at least 100 tonnes of gold each year in order to replenish its reserves. In 2010 gold comprised 5% of Russia's foreign exchange reserves; in 2000 it was as high as 25%. [source]
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| This short squeeze in silver could be 'the big one,' Turk tells King World News Posted: 17 Feb 2011 06:58 AM PST 12:50p MT Thursday, February 17, 2011 Dear Friend of GATA and Gold (and Silver): Interviewed today by King World News, GoldMoney founder and GATA consultant James Turk says all the indicators for silver are bullish and that the short squeeze now under way could be "the big one." Excerpts from the interview can be found at the King World News blog here: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/2/17_Ja... Or try this abbreviated link: CHRIS POWELL, Secretary/Treasurer 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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| Silver Gains on Inflation Concerns and Tight Supply Posted: 17 Feb 2011 06:43 AM PST The price of silver has been running strong this last week, closing over the $30 per ounce range four times. Lingering concerns over debt and instability are still weighing on investors minds, making safe haven assets like silver and gold more attractive. [source] PG View: Silver charges to new 30-year highs. The white metal is currently trading $31.64, up nearly $1 (+3.23%) on the day.
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| India's Gold Demand Beggars Belief Posted: 17 Feb 2011 06:41 AM PST by Adrian Ash BullionVault Thursday, 17 February 2011 Despite prices rising 338%, global gold demand in 2010 was like the decade-long bull run hadn't got started... WESTERN SAVERS hoping to defend their standard of living as global incomes converge take note. Ten, even five years ago, precious-metals analysts thought rising incomes in Asia would see gold substituted for financial services or consumer goods. But China's private demand has more than doubled as a proportion of gross household savings. Based on the World Gold Council's latest data – issued today in the market-development and research group's new Gold Demand Trends report – India's private consumption jumped in 2010 to a new all-time record of more than 963 tonnes. That's equal to 2.65% of GDP on the IMF estimate. On BullionVault's analysis, it equated to more than 11.5% of India's gross household savings. Yes, the data are subject to revision, of course. They can only ever be an estimate, too. ...
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| LGMR: Gold Rises in Dollars, Physical Demand "Very Much" About Inflation Posted: 17 Feb 2011 06:38 AM PST London Gold Market Report from Adrian Ash BullionVault Thurs 17 Feb., 13:00 EST Gold Rises in Dollars, Physical Demand "Very Much" About Inflation & Low Interest Rates, Not Middle Eastern Unrest THE PRICE OF GOLD continued rising for US investors on Thursday, finishing the day in London at a five-week high of $1383 per ounce as world stock markets held flat and the Dollar slipped on the currency market. Developed-world government bonds ticked higher, as did crude oil prices, as Libya became the latest Middle Eastern country to see protests against its government on Wednesday, joining Algeria, Iran, Jordan and Morocco, as well as Tunisia and Egypt, which have already seen their long-time regimes fall. "Support for metals will continue to come from tensions in the Middle East," reckons precious-metals analyst Tom Pawlicki at brokers MF Global in Chicago. State TV in Bahrain reported today that the military will "take every measure necessary to preserve secu...
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| Government Spending to Perpetuate Fiscal Insanity Posted: 17 Feb 2011 06:22 AM PST Bill Bonner View the original article. February 17, 2011 10:20 AM Gold up a buck. Dow up 61. Housing still going nowhere…NAHB index flat for 4 months in a row. Food imports inflating at a 30% annual rate over the last 3 months. Fuel going up at a 60% rate. The World Bank says food stocks at "dangerously low" levels… "Manufacturers squeezed," by rising metals prices, says a headline. Retails sales in January below expectations. What can we say? Mixed signals. Confusing outlook. The underlying economy is in a slump. But the feds are putting out more and more hot money to try to fix it. It's a Great Correction, in other words. So, let's step back one more time and take a look at the big picture…then we'll return to our day by day reckoning tomorrow. Steven Rattner, writing in The Financial Times, says we're headed for a "fiscal nightmare." He puts the unfunded obligations of Social Security and Medicare at $50 trillion. Which is a lot of money. Even in this day ...
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| Gold Continues to Test Fibonacci Retracement Posted: 17 Feb 2011 06:22 AM PST courtesy of DailyFX.com February 17, 2011 08:00 AM 240 Minute Bars Prepared by Jamie Saettele To review, “decline from 1425.40 is in 5 waves, indicating that the larger trend is most likely down. Price is closing in on the 61.8% at 1380.82 and a move above there would shift focus to the 1393.90-1400 region. This area is defined by the 1/13 high, 100% extension (when counting the advance as an a-b-c-x-a-b-c), and 78.6% retracement. A drop below 1344 is needed to suggest that a secondary top is in place....
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| Today’s Best Investment…Rhymes With Pickles Posted: 17 Feb 2011 06:20 AM PST A huge opportunity to hedge against both inflation and deflation is lying out there in the open. There are no transaction costs and right now there's even a built-in discount. But most people will never realize any of this. In 1933 President Franklin Delano Roosevelt signed Executive Order 6102, which made it illegal for US citizens to hold gold bullion.
Prior to that order, the $20 bill was essentially a warehouse receipt for a one-ounce gold coin. Prior to the Federal Reserve Act of 1914, the $20 bill actually told you this.
After Executive Order 6102, $20 notes weren't allowed to be exchanged for gold anymore. Americans couldn't legally own or trade gold as money and savings, only as jewelry or collectible coins. A year after making monetary gold ownership illegal, FDR revalued gold from $20.67 per ounce to $35 an ounce with the Gold Reserve Act. The Act also required all gold and gold certificates to be turned over to the Treasury. The dollar was debased. Instead of "containing" 1/20 an ounce of gold, each dollar now only contained (or represented) 1/34 an ounce. And of course you couldn't actually own the gold itself. In 1971 Nixon severed the last official ties between gold and the dollar. The dollar quickly sunk to its real value, which had been debased by years of money supply inflation. By 1975, Americans were allowed to own bullion gold again, but during the roughly 40 years bullion gold ownership had been illegal, the dollar had been drastically debased. At its former lowest point in the summer of 1980, the dollar was worth only 1/850 an ounce of gold. It regained some value for a while, but right now a dollar gets you less than 1/1300 an ounce of gold. That was the story with a piece of paper that was merely standing in for a monetary metal. But what happens in the case of circulating coins actually composed of monetary metals? Let's look at quarters, dimes, nickels and pennies…
Why are quarters and dimes no longer silver? Why is the penny no longer mostly copper? And why will the nickel likely follow suit fairly soon? Because the amount of silver and copper and nickel in each case came to exceed the face value of the coin. The debasement of the US currency over time has required the metal in the coins to be replaced with a cheaper substitute. The average American has no idea what inflation really is or why currency debasement is a problem at all. He figures one metal is as good as another in minting of the currency…that when the face value of a coin falls below the value of the metal in the coin, it's nothing more than a curiosity. Substitute a cheaper metal, they think. Problem solved. And indeed the problem is solved for the government, which mints the coins made of real money at a loss after the effects of bouts of the inflation started by monetization of government debt. For savers and the overall economy on the other hand…their problems are just beginning… But that is a story for another time. For now let's look at the opportunities to be had when the government makes metals available for a fraction of their market price via coins…And let's see if there are any opportunities left (Hint: there are!). If you had seen the writing on the wall in the early 1960s and started hoarding quarters and dimes while they still were almost wholly silver, you would have found that your dimes were worth a high of $3.57 each in 1980 and your quarters were worth $8.93 each. In fact, these 90% coins still trade just like regular silver bullion bars and rounds. They were taken out of circulation – "hoarded" – by those savvy to debasement (Gresham's Law tells us that good money will be hoarded when bad money floods the market). These coins were collected without any transaction costs. They were bagged up with different face value totals: $1,000 bags, $500 bags, $250 bags, $100 bags and $50 bags. Each of these bags traded for over 35 times their face value because of the silver in the coins. At least they did at silver's peak in 1980. Even during the ensuing 20-year slump in silver prices, the value of silver bullion coins never dipped below three times face value. And now, thanks to waves of money and credit expansion from the Federal Reserve, silver is pushing back toward its old highs. These bags of silver coins are trading at more than 20 times their face value. They may hit 30 times face value again…and beyond… Silver probably has another trick or two up its sleeve. But let's turn our attention to the humble nickel… Every single circulating nickel still has 3.75 grams worth of copper each…along with 1.25 grams of nickel. Copper is currently about $4.46/lb. Nickel is currently about $12.97/lb. So if you do the math, each nickel is worth about 7.3 cents. 120 nickels pieces is worth $6.00 at face value. Those 120 coins contain about a pound of copper and 1/3 pound of nickel. That's about $8.76. You can't cash in on this arbitrage directly (anti-smelting laws for pennies and nickels were introduced in late 2006). But the bullion market for cupronickel coins will develop, just as it did for silver US coins. This will happen once the government starts minting five-cent pieces made out of cheaper metals. To those who doubt this will happen, I refer you to the bags of silver coins trading as bullion for over 20 times their face value. You can easily order such a bag right now by going to any of a number of online bullion dealers. These bags of coins sell right alongside silver bars and rounds. Right now, the government is subsidizing your copper and nickel purchases…and cutting out the middleman. As much as we complain about government, we ought to stop and offer them a little thanks for this one. What's even more interesting is that hoarding nickels provides an imbedded hedge against deflation. That's because a nickel will always be worth a nickel, at least. So if the dollar strengthens and copper, silver, and gold all get cheaper in dollar terms, you can still spend your nickels just like any other money. Your purchasing power stays the same, maybe even increases. But if the dollar declines, then the value of the cupronickel in the currency will rise against the face value. Eventually – at two or three times face value – these five-cent pieces will trade as bullion just as 90% silver quarters and dimes did and still do. Again, there is currently no transaction cost to saving in nickels and no risk from plummeting metal prices. There is literally nothing (in case of deflation) to lose and everything (in case of inflation) to gain. Your only real problem is storage; a few thousand dollars of nickels takes up a lot of space…and it's heavy. But people had the same problem with silver when it was cheap. I doubt they're complaining now. Having "too much" cupronickel won't seem like much of a problem if inflation continues to drive the cupronickel in five-cent pieces far in excess of face value. The cupronickel is America's last piece of honest currency. Regards, Gary Gibson, Today's Best Investment…Rhymes With Pickles originally appeared in the Daily Reckoning. The Daily Reckoning has published articles on the impact of quantitative easing, bakken oil, and hyperinflation.
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| Comment Letter On Our Crime Scene Of A Stock Market Posted: 17 Feb 2011 05:54 AM PST
Still wondering why the US (and global) stock market is nothing more than a crime scene, and an imminent catastrophe waiting to happen, supervised and regulated by a bunch of "special" porn addicts? Then read the following comment letter and wonder no more. Subject: File No. S7-02-10 File No. 265–26 and Release 34-61358 File No. S7-02-10 On a cloudy autumn afternoon in 1870, the Chicago White Stockings, a team that would evolve into the present day hapless Chicago Cubs, played an exhibition baseball game against a hastily assembled gang of amateurs calling itself the Board of Trade Scalpers. It was a rout. In nine innings of play at Dexter Park, next door to Chicago's new stockyards, the White Stockings crushed the Scalpers by a score of 30 to 2, likely the only time scalpers on the Chicago futures exchanges were so convincingly restrained. 140 years later, almost to the day, U.S. Commodity Futures Trading Commission Chief Economist Andrei Kirilenko and several co-authors published a paper called "The Flash Crash: The Impact of High Frequency Trading on an Electronic Market," to date the definitive examination of high frequency market makers. What Kirilenko reported is deeply troubling for U.S. markets, implying structural instability, crashes and liquidity crises large and small, toxic quotes and price discovery in the public markets, and the uncertainty of any order's likely effect on prices. His breakthrough paper is a decisive empirical justification for reforming how high frequency market makers operate in today's markets. Scalpers Though he doesn't use the word, Kirilenko's study is the latest U.S. government agency report on scalpers. Perhaps the earliest was by the Federal Trade Commission (FTC) in a seven volume report on grain trading, published over six years beginning in 1920. Defining a "scalper" as a firm that "typically buys and sells in large quantities, expecting to hold the trade open only a very short time" and that "intends to be even as to quantities bought and sold at the close of the business day and is reluctant to carry a trade over night," the U.S. government's 1920 definition of scalping tracks what today's high frequency market maker firms say about themselves almost word for word. While market makers in the futures markets have long fit the government's definition of a scalper, in U.S. equities in the recent past old-fashioned market makers carried inventory and committed capital overnight -- even several nights -- to smooth buying and selling pressures. They were required to post competitive quotes and to trade sparingly in the exchange markets. No more. They don't exist. They were too expensive and corruptible, and a series of well-intentioned reforms squeezed or priced them out, unwittingly opening the door to scalpers from the futures markets. More than a few high frequency equities market maker firms today were founded by "locals" (scalpers) from the futures markets, particularly the Chicago futures markets. "Scalper" is not an endearment, so these firms gussy up by calling themselves "liquidity providers" or "market makers" or "principal traders" instead. The FTC observed the same in 1920, saying "There is a preference for designations that sound well. Nobody calls himself a pit scalper." Though "liquidity provider" and "market maker" are stripped of their former meaning in the equities markets, high frequency firms wear these designations as if they were a rented tux. In his autopsy of e-mini SP 500 futures trading around the May 6, 2010 Flash Crash, Kirilenko describes how these firms destabilize markets. There's a tipping point in volatile markets when, in an instant, high frequency market makers stampede to rebalance their inventories, even cascading positions from firm to firm, while prices collapse. Kirilenko calls this "hot potato" trading, but it's an interdealer panic, a market maker fratricide. His conclusions extend to any volatile episode, because, as he wrote, high frequency market makers "did not change their trading behavior during the Flash Crash." Just as there were few restraints on the fund group whose selling Kirilenko shows tipped the Flash Crash, there were few restraints on the high frequency market maker algorithms that bought from it. Markets crashed when high frequency market makers hit internal inventory limits and unloaded onto the next market maker, which then hit limits and unloaded onto the next one, and so on, driving the market down by almost $1 trillion dollars in a few minutes. Kirilenko studied e-mini trading in the futures market, but the CFTC and U.S. Securities and Exchange Commission staff report on the Flash Crash showed the same behavior at work in the equities markets, doubtless from many of the same firms. "Market Structure as a Joke" The scalper's destabilizing practices are that it can quote as it pleases and trade as aggressively as it pleases and still carry the regulatory imprimatur and privileges of a market maker. As recently as the late 1990s, little of this was true in the equities markets. As the cash equities market automated, moved to decimals, deregulated and fragmented in the last 10 years, scalpers moved in with a soon-to-dominate business model, one they learned in the futures pits -- aggressive and often frenetic trading, keeping little or no inventory. Instead of smoothing buy and sell pressures, as market makers in the equities markets were -- in theory -- once supposed to do, scalpers exacerbate or hide from volatility, as Kirilenko discovered in the Flash Crash. The same was true in 1920, when the FTC noted that in volatile markets scalpers "run with it, and they may accentuate an upward or downward movement that is already considerable," or even, fearing losses, that a scalper "closes out his trades when the market goes against him, and this practice can but tend to accentuate the swing." Registering as equities market makers, given valuable and unique regulatory preferences and access, cozying up with exchanges desperate for business, and then let loose on the stock markets, the scalper's business model makes the stock markets structurally unstable. Scalpers make the futures markets unstable too -- the FTC observed that scalpers "themselves often create the volatility with which they are most concerned" -- but their effect is especially pronounced in the equities markets. Unlike the futures markets, prices in the stock market aren't disciplined by prices in the spot market -- it is the spot market. And unlike the futures pit markets, the public equities markets for the most part trade in fixed price/time order, with no choice over counterparties and no way to avoid scalpers who might turn to compete for the very liquidity they just extended. The stock and futures markets differ in other ways too, if only because of the public confidence required of them. Whether the public invests in stocks has much to do with its confidence in the stability and integrity of the stock market. Whether the public buys orange juice has little to do with its confidence in the stability and integrity of the orange juice futures market. As important as the futures markets are, they aren't forums for long-term, even generational capital commitments, and the public doesn't directly invest its nest-eggs or retirement savings in them. Companies don't rely on them to raise capital for new plants, equipment and jobs. After just the last few years of their relative dominance, these firms have had extraordinary effects on the public equities markets. Institutional volume is fleeing, while retail volume is skimmed off and shrinks. Apart from liquid stocks, spreads have increased. Ominously, exchanges are being co-opted, their traditional purpose recast as technology providers, as simple hosts to a migrant group of high frequency firms, and exchange markets, liquidity formation and price discovery are fragmenting and uncoupling. He might have had something else in mind, but we can take it as an elegy to all of this when one senior stock exchange official was quoted in the Financial Times as saying, "Most of the world views our market structure as a joke." Inventory Microcycles A recent study found that high frequency firms post the best price at least 50% of the time in the equities markets. The study's author and high frequency firms pounced on this as strong evidence high frequency firms contribute to price discovery, more so than any other kind of firm. The analysis and conclusion are superficial. A bid or offer has at least four dimensions. Beyond price and size, any resting bid or offer has a lifetime, and the inventory cycle or position resulting from any executed bid or offer has a lifetime. Even if it's at the best price, a bid or offer lasting a fraction of a second hasn't contributed to price discovery, and market makers use the latest technology to post and cancel thousands of bids and offers per second, even in the same stock. An executed bid or offer where the position is unwound quickly and aggressively isn't price discovery either. Kirilenko found high frequency market maker inventory or position half-lives of less than two minutes in the futures market. Some equities high frequency market makers claim as little as 11 seconds in their stocks. Market maker inventory cycles of a few seconds or minutes, enforced by aggressive trading as time or prices go against the firm, actively destabilize prices, especially so in already volatile markets. Of a quote's four dimensions, only one has materially improved in the last 10 years. Because of decimalization, automation and deregulation, quoted spreads have improved for liquid stocks in stable markets. But quote duration is down, time-in-inventory is down, and for many stocks quote size is flat or down. This is all because, to manage costs, high frequency market maker inventory cycles are engineered down to seconds, and these firms keep their capital commitments low. High frequency firms will tell you they're like any other business except that capital is their inventory, and like any other business they make money by turning over their inventory, so they churn it as fast as they can. Frenetic trading isn't a byproduct of their strategies -- it is the strategy. The effect of all of this is that investors looking at a quote today can't predict what the quote means. They can't tell whether the quote will be there when they submit an order against it, and they can't tell when their own buying or selling will trigger a market maker's risk threshold. If they do trigger a threshold, the market maker cartwheels from liquidity supplier to liquidity demander to compete with an investor's own liquidity needs. As it cartwheels, it can shock prices. And when events align so market makers turn as a flock, as they did in the Flash Crash, they can collapse the market. This isn't price discovery. It's just short-term inventory management for unsupervised and risk averse scalpers. Toxic Quotes Scalping dominates today because it's cheap, and because it's cheap scalpers can post tighter spreads. It's cheap because the scalper's liquidity is toxic. Its quotes are priced aggressively, showing tight spreads, but only for small quantities with very short lifetimes, with aggressive inventory management behind them to limit the firm's exposure. Firms fine-tune their risk models to make their inventory cycles as short as possible while preserving profits, lowering risk and costs. And since current national market regulations focus mainly on only one of a quote's four dimensions -- price -- if you're the best price, by rule everyone must do business with you, and you gain market share. Exchange-regulated firms with longer term inventory models couldn't compete against the scalper's lower costs and tighter spreads, so over the last 10 years exchanges deregulated and became hosts for the scalpers, even cloning themselves to make new hosts. Deregulated, toxic quotes flourished and crowded out more stable quotes. U.S. exchanges today are interchangeable because scalpers determine market structure through their increasingly toxic quotes. Rather than a diverse ecosystem of market centers, with systemic resilience in that diversity, our deregulated markets are inbreds relying on the same high frequency market maker firms trading the same toxic scalper models. As has been said, an insight from the Flash Crash is that "volume is not liquidity." A further insight is that, batted about by scalper inventory microcycles, published quotes don't represent genuine liquidity either. A best bid today isn't a bid to own shares at a price, or even a traditional dealer or market maker's attempt to provide liquidity. As much as 50% of the time it's just a firm trying to scalp a few basis points as quickly as possible. When that scalper's bid is executed, it then becomes an unexploded competitive liquidity demand, with the timer set, as Kirilenko found, at about two minutes, or even less. These destabilizing trade practices are a fundamental structural instability behind the Flash Crash. Reforms At the November 5, 2010 meeting of the Joint CFTC-SEC Joint Advisory Committee on Emerging Regulatory Issues, former SEC Chairman David Ruder wondered whether to increase costs for high frequency market makers. He didn't suggest taxing them, as with a transaction tax. He asked whether they should face affirmative quoting obligations, "whether there should be some requirements that they provide liquidity." But along with affirmative quoting obligations, they should also face negative obligations, once common regulations limiting their ability to exacerbate price movements. Without negative obligations, affirmative quoting obligations make quotes still more toxic -- firms required to provide liquidity will trade even more aggressively to manage inventory. Negative obligations will prevent scalper fratricides, and stop high frequency market maker firms from unloading inventory onto the firms behind them. Without that kind of "hot potato" trading, the volume sensitive algorithm that tipped into the Flash Crash would not have descended into a lethal feedback loop as it traded against cart wheeling toxic quotes. The simplest negative obligations will extend market maker inventory cycles, preventing these firms from flipping into a liquidity crisis, as they did in the Flash Crash. In the equities markets, inventory microcycles are another reason to restore the public's priority at a price. The public's orders used to trade first at a price because professionals had time, place and information advantages over the public, but that regulation was eliminated as the exchanges deregulated. Professionals still have these advantages over the public, and today they are for sale to as many professionals as can afford them. Apart from questions of access and fairness, a frequently overlooked structural advantage of public priority is that the public's inventory cycle is longer than that of market makers. Restoring the public's priority in price queues both limits the reach of unexploded liquidity demands and recognizes the public's many disadvantages to professional scalpers. The equity market reforms and deregulation of the last 10 to 15 years happened for good reasons -- monopoly profits were flowing to intermediaries and exchanges, intermediaries were taking advantage of their customers, innovation was being strangled by entrenched interests -- and it was time for reform. As many of us hoped, new participants, technology and business models sprang up. Nobody wants to undo that progress. By analyzing trade and position data from the futures market, Kirilenko's breakthrough was to show how a dominant class of these business models can be disruptive, and how these models can be destabilizing enough to create systemic risk as an inherent consequence of their design. On a gross basis, these models can be checked by circuit breakers or price limits, and this is one reason price limits are standard in the futures markets. In the equities markets, these models must be checked even before they trigger circuit breakers or price limits because the equities markets are profoundly different from the futures markets. The simplest way to check these models is to put reasonable restraints and obligations on them. A basic function of any market is to produce a quote. The scalper's toxic quotes, thousands of them a second, are a hoax on our equities markets. No one planned it. It happened as an unanticipated consequence of well-meaning reforms to a flawed system. There is no competitive solution to this problem within current regulations so long as quote price is a routing table's first regulatory imperative. Competition simply forces exchanges to publish more and faster toxic quotes, as market power continues to shift from the exchanges to the scalpers. Finally, some have pointed out that regulation didn't work in the market break of 1987, when old-fashioned specialists and market makers shirked their responsibilities and hid from the market, and regulation won't work today. Regulation didn't stop them from shirking their responsibilities, but regulation didn't excuse them either, and regulation didn't encourage them to automate a deadlier game than hide-and-seek -- intermediaries didn't exacerbate the 1987 market break by playing market maker "hot potato," a feat unique to the Flash Crash. And the logic of "regulation didn't prevent 1987, so regulation won't work" is a civic novelty. Should we apply that logic to drunk driving, or to any other misbehavior? Of course not. Please regulate them. Sincerely, R. T. Leuchtkafer
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| Gold Rises, Physical Demand Due to Inflation and Low Interest Rates, Not Middle East Crisis Posted: 17 Feb 2011 05:46 AM PST THE PRICE OF GOLD continued rising for US investors on Thursday, finishing the day in London at a five-week high of $1383 per ounce as world stock markets held flat and the Dollar slipped on the currency market. Developed-world government bonds ticked higher, as did crude oil prices, as Libya became the latest Middle Eastern country to see protests against its government on Wednesday, joining Algeria, Iran, Jordan and Morocco, as well as Tunisia and Egypt, which have already seen their long-time regimes fall.
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