Gold World News Flash

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• The Gold Standard Theory and Myth (J.T. Salerno)
• Will Rising Yields End the Party?
• Please return to watching TV . . . Crash JP Morgan Buy Silver
• How to hedge against Silver mining management hedging themselves.
• 3 – 3 – 11: a day to force backwardation gap WIDER and force ALL CASH SETTLEMENT DEFAULT!!!!
• In The News Today
• “I thought I would show you what is engraved on my all my 100 oz. silver bars (22 of them).”
• Meet The Objects Tunisia's Ben Ali Did Not Have Time To Steal
• Sure It’s Legal… But Is It RIGHT?
• Is Gold Crash Proof This Time Around?
• Bernanke's REAL Legacy: Helping Goldman Sachs Fleece Us All
• Silver Bankers Sitting on Big Derivatives Losses
• Silver Bankers May Be Sitting on Big Derivatives Losses and the Fed May Be Funding Them
• Don't Let Wisconsin Divide Us ... Conservatives and Liberals AGREE About the Important Things
• Tired (And Broke) From All The "QE Is Just An Asset Swap" Rhetoric? Then Read This
• Silver Rises to 30-Year High and Slips Into Backwardation
• Graphic Video Of Army Shooting At Peaceful Bahrain Protestors
• Global Currency Coming . . . And Gold's a part of it
• World Bank's Zoellick Calls For Overhaul Of Monetary System, Says Yuan Should Get Prominent Role
• The Secret to Valuing Options
• Q4 Hedge Fund Hotel Update: Apple Is Now Held By A Record 195 Hedge Funds
• Now, Boxed Wine Instead of $60 Bottles
• Banks Responsible For Sudden European Liquidity Crunch Identified
• The Future of Silver Mining
• Weekly precious metals review at King World News
• 'Fisher' at G-10 gold meeting was likely NY Fed market rigger Peter Fisher
• Gold gobblers: countries with the highest gold demand
• Bernanke Says Two Speed Economic Recovery Requires Different Policies
• Gold and Silver Sell Targets
• The countries with the largest gold reserves
• Gold Producers Takeovers Talk
• GOLD RED ALERT: U.S. Government Plans Confiscation of Gold and Silver This Year
• Gold Prices & the Middle East Revolutions
• Richard Russell - Silver Hedging By Miners A Big Mistake
• Silver Investing "Never Stronger"
• Silver Investing "Never Stronger"
• Gold Bullion, Nickel Coins
• 'Fisher' at G-10 gold meeting was likely NY Fed's market rigger Peter Fisher
• Silver's Palladium Moment
• Gold Price Might Reach $1,600 and Silver 3950c, Is Gold Heading Up to the Next Resistance Level?
• Playing Jim Roger's Picks With ETFs

The Gold Standard Theory and Myth (J.T. Salerno) Posted: 19 Feb 2011 05:45 PM PST

Will Rising Yields End the Party? Posted: 19 Feb 2011 04:38 PM PST Via Pension Pulse. Ben Levisohn of the WSJ reports, Rising Yields Could End the Party: With corporate profits rising and economic data coming in better than expected lately, stocks are surging. But so are bond yields—and that could spoil the party. Bond yields and stock prices have been rising together. On Feb. 8, the Dow Jones Industrial Average touched 12233, its highest level since June 2008. The same day, the yield on the 10-year Treasury reached 3.72%, the highest since April 2010. Rates have risen for six consecutive months, the longest such streak since 2006.   Signs of a healthier economy are growing more numerous by the day. The Chicago Purchasing Managers Index, for instance, rose in January to its highest level since 1988. Corporate profits also have been better than expected; more than 70% of the companies in the Standard & Poor's 500-stock index that have reported fourth-quarter results so far have beaten earnings projections.   Yet rising bond yields can cause problems of their own. Higher yields raise borrowing costs for companies, homeowners and municipalities, especially overleveraged ones. Over time, those higher costs can be a drag on corporate profits and economic growth. Rising yields also make bonds relatively more attractive than stocks for income-oriented buy-and-hold investors.   The question for investors is when bond yields and stock prices might start to decouple. Since 1963, stocks and bonds have tended to move in opposite directions whenever the yield on the 10-year Treasury note has risen above 5%, according to data compiled by LPL Financial in Boston. When the 10-year yield is below 5%, stocks and yields tend to move in the same direction.   More recently, however, 4% yields have been a pivot point—and given the surge in yields recently, that is reason for caution. On April 5, for instance, the 10-year Treasury yield briefly rose above 4% as investors worried that the Federal Reserve would have to raise rates to tamp down inflation. During the next two months, the S&P 500 fell 12%, as U.S. economic data soured and the "flash crash" spooked investors.   "If we get to 4% and it's purely a market move, then we have a problem," says David Ader, head of government-bond strategy at CRT Capital Group LLC in Stamford, Conn.   If rates rise too quickly in coming months, that could undermine any budding recovery in housing and municipal finance, says David Bianco, chief U.S. equity strategist for Bank of America Merrill Lynch. That is because mortgage rates and municipal bond yields both track Treasurys to some extent, and an increase in borrowing costs could add further stress to these fragile areas of the economy. Mr. Bianco says a move to 4% or higher during the first half of 2010, or above 4.5% during the second half, could exacerbate problems.   "A rise above 4% characteristically doesn't trigger an economic slowdown or recession," adds James Stack, president of InvesTech Research in Whitefish, Mont. But "it will provide a headwind."   Equities could come under pressure, too, if the gap shrinks between the 10-year yield and the overall stock market's "earnings yield," a measure of a company's earnings per share as a percentage of its stock price that is calculated by taking the reciprocal of the market's price/earnings ratio. When the difference between the 10-year yield and the earnings yield drops below zero, it can signal a shift in the market, as it did in mid-2008, before the market plunged and Treasurys soared. Conversely, the ratio crossed zero into positive territory in 2004, and stocks rallied for three more years.   Right now, the market trades at about 17.2 times trailing 12 month earnings, according to Ned Davis Research in Venice, Fla. That translates to an earnings yield of 5.82%. With the 10-year yield at about 3.65% now, the difference is about 2.2 percentage points—much less than the August peak of 3.7 percentage points. And with bond yields expected to continue their rise and earnings yields to fall, it may be only a matter of a few months before the difference disappears, says Tim Hayes, chief investment strategist at Ned Davis.   Already, signs are emerging that bond yields and stocks are poised to go their separate ways. On Feb. 3, the one-year correlation between the two measurements fell to 0.43, down from nearly 0.6 in September. (A correlation of 1.0 means two indices move in lockstep; a correlation of minus-1.0 means they move in complete opposition.) That was the weakest correlation since the beginning of 2010.   Of course, this doesn't mean investors should run for the exits. Yields remain at levels that likely signal optimism about growth rather than fears of inflation. But rising yields do mean investors should exercise caution. If yields continue to rise, they should look to more defensive sectors, including energy and staples, Mr. Hayes says.   "The question is how much higher rates will the market tolerate," he says. "More often than not, rising rates ultimately become a problem for stocks." I like Tim Hayes and Ned Davis Research and pay attention to what their models are forewarning. Another independent research firm, BCA Research, has been warning government bond buyers to beware: "The recent breakout of the U.S. 10-year Treasury yield above 3.5% is an important technical signal, highlighting that the macro-backdrop is increasingly turning against the bond market," said BCA Research in a recent report.   "Our global cyclical bond indicators have been bearish for some time and valuation is poor in most of the major countries. The only missing ingredient for a fully-fledged bond bear market is the start of monetary tightening cycles in the U.S. or Europe. Recent comments from Chairman Bernanke, President Trichet and Governor King give us little reason to question our call that the Fed, ECB and BoE are on hold until early 2012. Nonetheless, there is room for the market to discount a faster pace of rate normalization even if central banks do not get started until early next year."   "We are not extremely bearish on government bonds in the near term because the absence of central bank rate hikes should limit the upside for yields in the coming months. Nonetheless, we expect yields to ultimately be significantly higher on a 6-24 month horizon." Will the bond market kill the party in equities? That depends on inflation expectations and the US jobs market. So far, the latter hasn't shown any signs of a sustained pickup but inflation pressures are building, especially in emerging markets. In fact, the ECB chief recently warned that rising food demand could drive inflation: European Central Bank head Jean-Claude Trichet said Wednesday that food prices could keep rising due to increasing demand from emerging countries and suggested a global effort to raise production in Africa. Changing consumption patterns in large emerging countries have fuelled food prices and “it is quite possible that this will continue for a while longer,” Trichet told the German weekly Die Zeit in an interview. “At the same time, there are huge expanses of land in Africa which could be used for agricultural purposes,” Trichet added. “We need to provide the right incentives for African farmers in this respect.” He called the situation “an important global issue which should be taken up by bodies such as the G20” group of developed and emerging economies. Higher prices would not force the ECB to raise interest rates but the bank would focus on avoiding “second-round effects” whereby high oil and food prices are transformed into generalised inflation. It would watch in particular for signs of “a wage-price spiral,” Trichet said. Countries where economic activity is pushing inflation to levels that have begun to ring alarms, as is the case in Germany, should adopt “more restrictive” policies “to avoid the economy overheating or speculation getting out of control,” Trichet said. He noted that “Germany has also succeeded remarkably well in regaining its competitiveness over the last 10 years (and was) ... now reaping the rewards of its patient efforts.” But the ECB president cautioned that German output had not yet returned to levels seen before the global financial and economic crises. Trichet downplayed notions that some Germans were becoming more sceptical of the 17-nation eurozone because they might have to provide substantial financial support for weaker members in the coming years. “Deep down, everybody is aware of the importance of our historic project,” he said. Even though global inflation is on the rise, the WSJ reports that traders of U.S. federal-funds futures seemed to have less faith that price pressures will force the Federal Reserve to begin lifting its key short-term rate by the end of this year:   The central bank's funds rate target has remained inside a lowest-ever range of 0% to 0.25% since December 2008, but the market had recently forecast a higher rate by year's end after some encouraging economic data and inflation worries. However, Federal Reserve Bank of Chicago President Charles Evans--a voting member of the rate-setting Federal Open Market Committee--said Thursday that unemployment is still too high and overall inflation to low for the Fed start raising rates.   Evans and other Fed officials this week signaled that the central bank will likely complete its current quantitative easing program as scheduled at the end of June. The program, also known as QE2, refers to the Fed's purchase of $600 billion in U.S. Treasurys to keep longer-term rates low and help speed up the economic recovery.   Evans explained that recent food and energy price increases account for only a small percentage of overall inflation.   Outside the U.S., inflation appears to be a bigger worry, which is primarily responsible for Friday's steepening of the yield curve.   A steeper curve means the market anticipates longer-term rates rising while shorter-term rates stay low.   European Central Bank Executive Board member Lorenzo Bini Smaghi warned that the ECB may have to raise rates if global inflation pressures build.   "It is a key challenge for monetary policy to avoid spillovers and maintain inflation expectations in check," said Bini Smaghi in an interview published Friday in the daily newsletter Bloomberg Brief.   Bini Smaghi's comments came on the same day that producer prices in Germany--Europe's largest economy--jumped 1.2% in January and 5.7% on an annual basis. The annual figure was the highest since October 2008.   Meanwhile, U.S. federal-funds and the bulk of the most-actively traded Eurodollar futures contracts priced in lower short-term rates on Friday, due in part to traders' desire for safe investments ahead of the long holiday weekend.   Safe-haven bids were tied to continuing turmoil in the Middle East, including citizen protests in several countries and escalating tensions between Iran and Israel.   At Friday's settlement, January 2012 fed-funds futures--measuring expectations for the Dec. 13 FOMC meeting--priced in a 54% chance for the committee to raise the funds rate to 0.5%. That's down from a 64% chance at Thursday's settlement, and a 94% chance at last Friday's settlement.   Longer-dated February 2012 fed-funds futures were no longer fully priced for the first rate hike to occur at the Fed meeting in late January of next year.   The February 2012 contract priced in a 94% chance for a 0.5% rate, down from being fully priced for the move on Thursday. A week ago, the same contract had also priced in a 40% chance for a further tightening to 0.75%.   A 0.75% funds rate is no longer factored into the February 2012 contract. Also, a large-volume options trade performed Friday signaled expectations for a continued rally in prices--equal to lower implied rates--for second year Eurodollar futures contracts.   Brokers reported a trading firm performed 30,000 to 40,000 spreads, simultaneously buying and selling call options, aiming for June 2012 Eurodollar futures price to reach 99.125 before the calls expire in June of this year.   At the 99.125 strike or underlying futures price, June 2012 Eurodollars would reflect expectations for the implied London interbank offered rate, or Libor, to fall to 0.875%.   Libor expectations are calculated by subtracting the Eurodollar futures price from 100.   At Friday's settlement, June 2012 Eurodollar futures were 3.5 basis points higher at 98.615, projecting Libor to reach 1.385%.   Eurodollar futures reflect market expectations for changes in the three-month Libor, which is the rate that banks charge each other for borrowing U.S. dollars.   The three-month dollar Libor is also viewed as a benchmark for lending to businesses and households, and it's frequently considered as a surrogate for U.S. fed-funds rate expectations. Elsewhere, inflation pressures are building and so are expectations of rate hikes. Unveiling the Bank of England’s quarterly inflation report on Wednesday, Mervyn King, the governor, bent over backwards to insist no decision had been made on whether, or when, the monetary policy committee should raise interest rates: Yet, aside from a few traders in the sterling currency markets, the consensus remains that a signal on rates has been given and the next move is likely to be as little as three months away. “The February inflation report contained two important messages,” said Simon Hayes, economist at Barclays Capital. “The first is that the MPC is leaning towards a rate rise over the next few months. The second is that the envisaged policy tightening is small and gradual and may yet be subject to delay, depending on the evolution of the data.”   Mr Hayes’s comments were echoed by many other long-term MPC observers. The process by which economists have come to this conclusion is highly technical. Malcolm Barr, economist at JPMorgan, says it requires enlarging the Bank’s trademark fan chart showing the likely path of inflation and applying a large ruler against it to measure changes.   The reason economists have been reduced to reading the runes is Mr King’s habitually circumspect presentation on the day of the inflation report. Observers must wait for the monthly publication of the MPC minutes to discover the numbers behind the Bank’s forecast.   On Wednesday he said only that the Bank’s inflation forecast was “based on the assumption that Bank rate follows a path implied by market rates...”   A look at the interest rate futures market shows that in 12 months rates are expected to be 1.358 per cent, implying three, quarter point rate hikes by then. By August, the markets expect rates to be more than 1 per cent, suggesting two increases will have taken place by then.   Mr King, however, went to great lengths to insist the MPC “does not endorse the market path for interest rates”. “We never do,” he said. What this tells me is that inflation pressures are building but it's too early to call for rate hikes in the US. In Europe and England, rate hikes are likely in the next few months, but expect a gradual approach if they start hiking rates. And what about the stock market? Will the bond market kill the party in stocks? Isn't that always the case? Yes, it typically is the case, but it's not as simple as people think. Even if central banks start hiking rates, there is so much liquidity in the global financial system that stocks will continue grinding higher and in some sectors, another bubble is already underway. In other words, rising yields will not end the party anytime soon but they will put pressure on stocks and force asset allocators to rethink their asset allocation. But for now, I wouldn't be too concerned about rising bond yields. And don't forget, despite what some smart economists are writing, deflation isn't dead. Fairfax Financial, one of the best funds in the world, is still positioned for deflation with 89% of its equity exposure hedged through total return swaps on the Russell 2000 and S&P 500. They took a hit last quarter but might eventually turn out to be right with this deflationary macro call. If deflation fears reappear, funds should be preparing by scooping up government bonds as yields rise. Deflation might turn out to be the surprising call of the next decade.

Please return to watching TV . . . Crash JP Morgan Buy Silver Posted: 19 Feb 2011 04:36 PM PST

How to hedge against Silver mining management hedging themselves. Posted: 19 Feb 2011 04:02 PM PST Richard Russell – Silver Hedging By Miners A Big Mistake Clearly, the miners are morons to start hedging again. This is one of the problems of owning mining shares: management. ETF's like GDX are a good way to net out management risk, IMO. Note: the reason these guys are hedging is because they let some [...]

3 – 3 – 11: a day to force backwardation gap WIDER and force ALL CASH SETTLEMENT DEFAULT!!!! Posted: 19 Feb 2011 03:38 PM PST MK: Forcing an all cash settlement default on CME will trigger a run on JP Morgan's stock, the Fed, and the U.S. dollar. Be prepared for this meltdown. Even if you do not support the SLA, protect yourself against a US collapse (hyperinflation) with some Silver (and Gold). A lot of people are going to [...]

In The News Today Posted: 19 Feb 2011 03:25 PM PST My Dear Friends, As you know, my Irish Mother gave me detailed instructions on signs and omens. I will claim some responsibility for the recent low in gold by wearing my Carhartt bib overalls backwards for half a day. You are welcome. Well, all day today, my money hand's palm is itching like crazy. Mom informed me that means a great deal of money is about to come. Come on now, charts only work because you believe they will. Regards, Jim   Jim Sinclair's Commentary Shame on the Western world media. Widespread collapse of the American protectorate in the Arab world Basically, we can consider that the events in Tunisia and Egypt have acted as a double trigger violently uprooting the entire Arab world (and the Middle East) of the world before the crisis, a world characterized by the omnipresence of a guardian power, the United States, managing the imbalances in this region with only two concerns: to control the price of oil and ensure Israel's security More… Jim Sinclair's Commentary Fubar beyond recognition. Here we go again: Egypt to Bahrain US pledges for democracy may not extend to Bahrain, even if Obama finally supported Egypt's rebellion. Mark LeVine Last Modified: 18 Feb 2011 13:04 GMT It took until Hosni Mubarak was safely in Sharm El Sheikh and newly free Egyptians were celebrating in Tahrir square, but president Obama finally came out firmly for democracy in Egypt, no qualifiers attached. Obama's words were eloquent indeed; for my money even more so than his 2009 speech in Cairo. As he explained, what the world had witnessed the previous 18 days was truly "history taking place. The people of Egypt have spoken. Their voices have been heard. And Egypt will never be the same… for Egyptians have made it clear that nothing less than genuine democracy will carry the day." The president went on to detail a set of expectations: protecting the rights of Egypt's citizens, lifting the emergency law, revising the constitution and other laws to make this change irreversible, and laying out a clear path to elections that are fair and free. Those expectations are entirely in line with the core demands of the organisers of the protests-turned-revolution. For that, Obama deserves credit, although at least some should be held in reserve until we see how much pressure his administration is willing to put on the military to ensure that it carries out a full transition to democracy. What's more, in changing themselves, Mr. Obama declared that "Egyptians have inspired us". They did so in good measure, he rightly explained, through understanding their full worth, as equal members of the larger human history and community. "Most people have discovered in the last few days that they are worth something, and this cannot be taken away from them anymore. Ever." More… Jim Sinclair's Commentary Spontaneous explosion of democracy? That is plain ignorant. Bahrain forces fire at protesters Troops open live fire around Pearl roundabout in Manama after nightfall, at least 66 wounded. Shots were fired by soldiers around Pearl roundabout in Manama, the Bahraini capital, a day after police forcibly cleared a protest encampment from the traffic circle. The circumstances of the shooting after nightfall on Friday were not clear. Officials at the main Salmaniya hospital said at least 66 people were injured, some with gunshot wounds to the head and chest. Some doctors and medics on emergency medical teams were in tears as they tended to the wounded. X-rays showed bullets still lodged inside victims. "This is a war," said Dr. Bassem Deif, an orthopedic surgeon examining people with bullet-shattered bones. Protesters described a chaotic scene of tear gas clouds, bullets coming from many directions and people slipping in pools of blood as they sought cover. More… Jim Sinclair's Commentary What derivatives do not do to international investment banks, litigation will. Allstate sues JPMorgan over mortgage debt losses Wed Feb 16, 2011 6:16pm EST By Jonathan Stempel NEW YORK, Feb 16 (Reuters) – Allstate Corp (ALL.N) sued JPMorgan Chase & Co (JPM.N) on Wednesday to recover losses after the bank allegedly misrepresented the risks on more than $757 million of mortgage securities the insurer bought. The lawsuit against the second-largest U.S. bank was filed just seven weeks after Allstate filed a similar lawsuit against Bank of America Corp (BAC.N), the largest bank, over losses on more than $700 million of mortgage securities. Jennifer Zuccarelli, a JPMorgan spokeswoman, declined to comment on the lawsuit, which was filed Wednesday in the New York State Supreme Court in Manhattan. Allstate, the largest publicly-traded U.S. home and auto insurer, is one of many to sue lenders for allegedly misleading them about mortgage securities. The Northbrook, Illinois-based company said it suffered "significant losses" after JPMorgan and its affiliates misled it into believing it was buying "highly-rated, safe securities" backed by high-quality loans. "In fact," Allstate said, "defendants knew the pool was a toxic mix of loans given to borrowers that could not afford the properties, and thus were highly likely to default." More…     Jim Sinclair's Commentary Marie McDonnell reports the "Sum of All Fears" for the OTC derivatives based on subprime and now prime mortgage garbage instruments. Goodnight Banks: Arizona SB1259 Foreclosures; Proof of Ownership Passes Senate Foreclosure Fraud | February 16, 2011 at 1:19 PM The Market Ticker – Goodnight Banks: Arizona Well what do we have here? A. For any beneficiary who is not the originating beneficiary on the deed of trust, the beneficiary shall record a summary document regarding the beneficiary's legal interest in the deed of trust that contains the following information in chronological order: The full name and address of record of every prior beneficiary on the deed of trust. The date, recordation number or other unique designation of the instrument, and a description of the instrument that conveyed the interest of each beneficiary. More… Jim Sinclair's Commentary This is NOT the outbreak of democracy. It is the groundwork for a victory for Iran. Iranian ships are being respected by Egypt in their passage via the Suez Canal. Saudi prince Talal warns of uprising threat February 18, 2011 9:45AM A SENIOR member of the Saudi royal family has warned that the oil-rich country could be harmed by the uprisings sweeping the Arab world unless it speeded up reforms. Prince Talal bin Abdul-Aziz Al Saud told BBC Arabic that "anything could happen" if King Abdullah Bin Abdul Aziz did not proceed with a program of political transformation. "King Abdullah … is the only person who can carry out these reforms," the prince told the broadcaster. "On his departure, may that be in many years to come, latent trouble will surface and I have warned of this on many occasions. We need to resolve the problems in his lifetime," the prince added. Talal added that if Saudi authorities "don't give more concern to the demands of the people, anything could happen in this country". Talal has long called for reform in Saudi Arabia and formed the liberal political group "Free Princes Movement" in 1958 in reaction to the hostility between former kings Saud and Faisal. Because of his involvement with the Free Princes Movement it is unlikely that Talal, a former ambassador to France, will ever become king. More…

“I thought I would show you what is engraved on my all my 100 oz. silver bars (22 of them).” Posted: 19 Feb 2011 02:32 PM PST Max In response to many of your articles and in particular "Silver inspires revolutions for hundreds of years!", I thought I would show you what is engraved on my all my 100 oz. silver bars (22 of them). Enjoy. SP Share this:

Meet The Objects Tunisia's Ben Ali Did Not Have Time To Steal Posted: 19 Feb 2011 12:50 PM PST Even as Ben Ali was fleeing his country, his presidential palace continued to be a hoard of all the items he had "borrowed" over the decades. As Al Arabiya reports, "Tunisia's ousted president stashed diamonds, gold and wads of cash in secret spots around his palace in the impoverished country's capital, according to video shown by state television on Saturday." The clip below shows the objects Ali was in too much of a hurry to pick up. Among these: wall safes full of cotton fiat, necklaces and other trinkets. Alas: not a single bar of silver or gold anywhere. It seems the dictator may have lacked in PR skills, but he sure knew what to pick when fleeing the country. The clip below (after the jump) shows parts of the spoils. From Al Arabiya: Tunisia's ousted president stashed diamonds, gold and wads of cash in secret spots around his palace in the impoverished country's capital, according to video shown by state television on Saturday. Popular uprisings in January toppled president Zine al-Abidine Ben Ali after 23 years of repressive rule, sending shockwaves through the rest of the Arab world and encouraging a similar revolution in Egypt. Ben Ali hid treasures behind curtains and in secret compartments behind the palace library, according to the video broadcast by First National TV, which showed millions of dollars and euros, diamond necklaces and gold recovered from the palace in Tunis' Sidi Bou Said district. The broadcast said the riches would be redistributed to Tunisians, who have complained of rampant corruption during Ben Ali's rule of the North African state. Tunisian GDP per capita is roughly $10 per day. France, Switzerland, Canada, and the European Union have said they have frozen the assets of the former president and his family. Tunisia's interim government, charged with setting elections, said it was seeking to recover money and property to help combat poverty. While we are waiting for the WGC to distribute an updated sovereign gold and/or tungsten holdings list, here are the countries that we expect to see a material decline in their gold stash sooner or later: Saudi Arabia: 322.9 tonnes Algeria: 173.6 tonnes Libya: 143.8 tonnes Kuwait: 79.0 tonnes Egypt: 75.6 tonnes Bangladesh: 13.5 tonnes Tunisia: 6.8 tonnes Bahrain: 4.7 tonnes Congo: 0.3 tonnes Kenya: 0.0 tonnes

Sure It’s Legal… But Is It RIGHT? Posted: 19 Feb 2011 11:11 AM PST I’d like to ask your indulgence today.   Typically we reserve these pages for in-depth analysis of the stock market and economy. But I’ve grown FED UP with the complete lack of coverage that one area of the current crisis has received.   Ever since the Financial system started imploding in July 2007, I’ve heard countless folks talk about liquidity, bull markets, bear markets, the dollar, bailouts, etc. But there’s one thing I’ve heard virtually NO ONE talk about. That is:   MORALITY or ETHICS.   Everyone’s analysis of this financial crisis is far too complicated. The simple facts are that it was created by complete and utter greed on the part of various regulators and financiers.   In simple terms, the banks (investment and otherwise) lobbied Congress, the SEC, and other regulators to let them engage in business practices that were neither sensible nor responsible (excess leverage, financial wizardry that turned junk subprime assets into “AAA” rated entities, and more). They did this under the pretence that these practices would be good for the market and US economy as a whole.   The reality is that these practices allowed the banks to make ENORMOUS profits: between 1970 and 2003, financial stocks’ earnings as a percentage of the S&P 500’s total earnings rose from less than 10% to 31%. Put another way, by 2003, financials accounted for nearly 1/3 of ALL profits made by publicly traded companies.   Now, THE largest expense for any financial company is SALARIES. So when banks and financial companies lobbied to have their leverage limits increased (or any number of other changes that were made in the ‘90s and ‘00s), they did it for one reason: to collect HUGE payouts.   These folks were driven by greed and nothing more. They didn’t want more people to own homes. They didn’t care if folks lost money buying the AAA rated garbage they pawned off on pension funds and the like. They didn’t care if their OWN balance sheets were cesspools of crap loans no one would ever pay back. Heck, they weren’t even looking after their shareholders (leverage of 50-to-1 makes it extremely likely you’ll end up wiping out ALL equity sooner rather than later).   No, they wanted one thing and one thing only: to make as much money as they possible could.   And boy did they.   In 2007, the average Goldman Sachs pay was $661,000. For Morgan Stanley it was $340,000. Again, these guys were after one thing: BIG PAYOUTS.   So now we fast forward to the financial crisis.   Ever since this Crisis began, the guys behind the bailouts and other “solutions” have used the law or legal precedent to justify their actions. Bernanke, for example, has cited all kinds of laws that give him the right to throw tax-payer money around, monetize debt, and all the other financial hocus pocus he’s engaged in. Same goes for Hank Paulson (who somehow managed to convince the government that he was an impartial figure despite making $500 million+ at Goldman Sachs).   But no one has EVER used the phrases “this was the right thing to do” or “this was a good, moral action.”   Perhaps I’m a naïve fool who belongs in a Disney movie or a Charles Dickens novel (where good and bad distinctions are always clear), but I don’t see the ethics or “moral right” of any of the stuff going on in our financial system today.   I don’t see how it’s “right” for the US central bank to destroy our currency so that Goldman Sachs can pay itself 2007 level bonuses again.   I don’t see how the same folks who created this mess (Hank Paulson, Bernanke, etc) should be allowed to try and fix it.   I don’t see how it’s “morally correct” to funnel tax-payer money to Wall Street BUT not to small businesses and the like (if we’re going to bail people out or help them, why not focus on the 17 million small businesses instead of the 10 biggest banks?)   I don’t see how it’s “ethical” to allow Goldman Sachs and other High Frequency Trading Program operators to “front-run” me and everyone else who participates in the financial markets (Goldman’s traders only lost money two days last quarter… that is statistically impossible unless you’re cheating).   Bottomline: I don’t see ANY actions that are truly aimed at helping MOST of us (the RIGHT thing to do). All I see are huge sums of money (my, yours, our children’s and our grandchildrens’) being thrown at guys who:   1)   Made a ton of money pursuing reckless business practices, screwed up, and should go broke or be fired 2)   Have shown ZERO responsibility for the actions they pursued that caused this Crisis 3)   Have yet to offer any real solutions (or changes to their business practices) to help SOLVE the Crisis   Basically, we have a very small minority of Americans who believe they deserve a FREE LUNCH. These folks are Wall Street and the banks (the alleged pillars of capitalism).   The irony here is that the basic tenant of capitalism (and MORALITY) is responsibility for one’s actions. If you pursue reckless business practices in the name of greed and those practices turn against you, you SHOULD GO BROKE. You don’t get to keep everything, keep calling the shots, AND get other peoples’ money as a reward for your mistakes.   Never-mind the legality of this issue… it’s simply NOT RIGHT. End of story.   Let’s put this whole issue into perspective. Imagine two salesmen working at the same firm: Bob and Frank. Bob lies to his clients, embezzles money, and generally engages in business practices that could damage his firm. Frank, on the other hand, never lies, doesn’t cheat his clients, and always watches out for the firm’s best interests.   Now, what sane business owner would give Franks’ salary and commissions to Bob?   NO ONE.   And yet, this is exactly the “solution” Ben Bernanke and others have been pursuing in dealing with this Crisis. They are giving OUR money to people who created a MESS. Again, forget about whether or not this is legal. It’s not right. Never has been. Never will be.   And I don’t think I’m totally misguided here.   The ENTIRE financial system runs on trust (credit and debt are issued based on your trust you will be paid back). If you want to fix the financial system, you need to restore trust.   Ben Bernanke is working overtime to make the banks trust each other again… but he’s sacrificing an even more important “trust” relationship to do this. That is the trust Americans have for Wall Street/ the banks/ regulators/ etc.   It may have gotten Ben Bernanke re-elected… but it’s going to destroy Americans’ retirement, incomes, and prosperity.   And that simply is not right.   Good Investing!   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.

Is Gold Crash Proof This Time Around? Posted: 19 Feb 2011 11:05 AM PST I’ve been receiving quite a few emails regarding the topic of Gold and how it will perform if another Crash hits. The following are my thoughts on this matter.   The first thing that needs to be said is that IF we have another systemic meltdown like that of Autumn 2008, Gold will likely go down along with everything else. There are simply too many big players (hedge funds, investment banks, etc) with heavy exposure to Gold who would be forced to liquidate their positions during a systemic collapse.   I know this is not what the Gold bugs want to hear, but during systemic Crises, just about every investment on the planet plunges while the US Dollar and Treasuries rally. Of course, this time around if another 2008-type event hits, it will undoubtedly involve or be focused on sovereign debt. So this raises the potential that Treasuries, particularly those on the long-end of the yield curve, could be hammered as well as all other assets outside the Dollar. This is worth keeping in mind for those who view Treasuries as a safe haven.   So if we go into a 2008-type event, Gold will fall. It will likely fall much less than other assets (stocks and industrial commodities), but it will still go down at least at first. This forecast is confirmed by the market action in 2008 as well as the market collapse from April 2010-July 2010. Both times Gold took a hit, but both times it came back quickly.   So if you’re heavily exposed to Gold, you’re going to need to think “big picture” or have a very strong stomach when the market Crashes.   Now, let’s take a look at the charts.   For starters, the number one metric you need to focus on in terms of determining Gold’s market action is the 34-week exponential moving average. Since the Gold bull market began in 2001, this has been THE support line for Gold. As you can see, Gold has only broken below this line ONCE in the last ten years and that was during the 2008 systemic collapse. So take a note of this line and always watch where Gold trades relative to it.   Indeed, a significant break below this line that DOESN’T occur during a system Crash would be a MAJOR warning that the Gold bull market is in trouble. Remember, the ONLY time we took this line out before was during the systemic collapse in 2008. So a break below it WITHOUT a Crisis would be VERY bearish.   And if Gold breaks below this line on its own (without a Crisis) and then fails to reclaim it… well, then it would be SERIOUS time to reevaluate the Gold bull market story.   Because of its significance as THE support line for the Gold bull market, the 34-week exponential moving average also serves as an excellent gauge for determining when Gold needs to take a breather or correct.   Indeed, anytime Gold has stretched too far away from this line to the upside, it has usually staged a pretty sharp reversal to re-test this line. I’ve circled the most significant episodes of this from the last seven years in red on the chart below. These are the BIG picture gauges and items to take note of: the points to remember in terms of determining where Gold is in its bull market and whether it’s an asset class you want to “buy and hold.”   Good Investing!   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.

Bernanke's REAL Legacy: Helping Goldman Sachs Fleece Us All Posted: 19 Feb 2011 09:48 AM PST I’ve watched with first amusement, then disgust, and ultimately outrage as various pundits proclaimed Bernanke’s efforts “saved the financial system” or helped the US “weather the storm.” Bernanke did NO such thing. You could train a chimpanzee to hit the “print money” button at the Fed every-time the Fed phone rings with a Wall Street number and get the same results. To date, Bernanke has spent or put the taxpayer on the hook for some $24 TRILLION in bailouts, lending windows, and off balance sheet arrangements.   #333333;">AND HE’S FIXED NOTHING. #333333;">Banks remain insolvent (if you marked their assets at market value, they’d all wipe out equity in a second), mortgages remain underwater, hundreds of thousands of Americans continue to lose their jobs every month, foreign investors grow increasingly distrustful of the dollar, and the financial system continues to have multiple black swans… all of which could bring about another CRASH. #333333;">Indeed, anyone looking to proclaim Bernanke as a savior should review the below video which shows that the guy DIDN’T HAVE A CLUE about the financial system/ economy from 2005-2007. Just click on the below image to watch (video should load in your Internet Browser). Prepare to see an Ivy-league educated guy who’s in charge of our monetary system NOT see the biggest housing bubble in US history OR the worst financial crisis since the ‘30s (an era on which he is an alleged expert).   #333333;"> #333333; text-decoration: none;">   #333333;">However, to focus on Bernanke’s incompetence is to overlook his culpability in destroying Americans’ wealth. In the last 12 months alone, the man has committed perjury (he lied under oath about no longer monetizing debt), embezzlement ($24 trillion gone to banks at least $9 trillion of which no one, not even the head of oversight at the Fed, kept track of), fraud (any proclamation of green shoots or recovery is fraud), corruption (forcing Bank of America to buy Merrill Lynch), and more. #333333;">It would, in fact, be no exaggeration to say that Ben Bernanke is a financial criminal on a scale that makes Bernie Madoff look like Mr. Rogers. Madoff ripped off $50 billion. Bernanke is currently destroying the middle class in the US, trashing our currency, worsening EVERY Americans’ quality of life, and erasing any hopes of retirement for millions of Boomers. #333333;">In simple terms, Bailout Ben, in a mere year and a half, has overseen the destruction of 30% of US household wealth (from a housing and stock bubble he FAILED to see coming while working under Greenspan). He has yet to do a single thing to protect the average American or the dollar, but instead has opted to funnel trillions of taxpayer dollars over to Wall Street so that Goldman Sachs and friends could claim they’re not insolvent and pay themselves RECORD bonuses. Folks, the US stock market is an enormous house of cards propped up by the biggest bubble-blower in history. Fundamentals have NOT improved, the economy continues to collapse (regardless of the GDP accounting gimmicks they use to claim we’re out of the recession), and stocks are at least 20-30% overvalued.   This mess will come unraveled. And it won’t be long… #333333;">Prepare Now!   #333333;">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.

Silver Bankers Sitting on Big Derivatives Losses Posted: 19 Feb 2011 09:25 AM PST Silver Bankers Sitting on Big Derivatives Losses My question is simple. What are bankers like J.P. Morgan and HSBC doing playing in such size in this market? What is the economic and productive benefit? Perhaps there is a good answer. The taxpaying public certainly deserves to know. The CFTC says they have looked into this, [...]

Silver Bankers May Be Sitting on Big Derivatives Losses and the Fed May Be Funding Them Posted: 19 Feb 2011 09:15 AM PST

Don't Let Wisconsin Divide Us ... Conservatives and Liberals AGREE About the Important Things Posted: 19 Feb 2011 07:58 AM PST → Washington’s Blog Don't let Wisconsin divide us. Conservatives and liberals actually agree about the most important things. In fact, most Americans - conservatives and liberals - are fed up with both of the mainstream republican and democratic parties, because it has become obvious that both parties serve Wall Street and the military-industrial complex at the expense of most Americans. In reality, all Americans - conservatives and liberals: Want to break up the unholy alliance between big government and big banks Want to break up the giant banks (and see this) Agree that the Wall Street criminals who committed fraud should be thrown in jail Agree that the Federal Reserve should be audited Are against corporate socialism Are against rampant inequality Want to stand up to the ruling class And are against unnecessary imperial wars The powers-that-be try to divide us and demonize the "other side" so that we won't realize how much we all agree on. See this, this, this, this, this, this, this and this. Don't let them. Debunking Myths Before we can honestly look at what's going on in Wisconsin, we need to dispel some commonly-accepted myths. People who think that debts and deficits don't matter are wrong. As two top American economists - Carmen Reinhart and Kenneth Rogoff - demonstrated in December 2009 : The relationship between government debt and real GDP growth is weak for debt/GDP ratios below a threshold of 90 percent of GDP. Above 90 percent, median growth rates fall by one percent, and average growth falls considerably more. We find that the threshold for public debt is similar in advanced and emerging economies... As I wrote in January 2010: Al Martin - former contributor to the Presidential Council of Economic Advisors and retired naval intelligence officer - observed in an April 2005 newsletter that the ratio of total U.S. debt to gross domestic product (GDP) rose from 78 percent in 2000 to 308 percent in April 2005. The International Monetary Fund considers a nation-state with a total debt-to-GDP ratio of 200 percent or more to be a "de-constructed Third World nation-state." Martin explained: What "de-constructed" actually means is that a political regime in that country, or series of political regimes, have, through a long period of fraud, abuse, graft, corruption and mismanagement, effectively collapsed the economy of that country. Forbes noted in December: Add the unfunded portion of entitlement programs and we're at 840% of GDP. Boston University economics professor and former Senior Economist for the President’s Council of Economic Advisers Laurence Kotlikoff says that the real federal debt is $202 trillion dollars, and that the U.S. is bankrupt. And see this, this, this, this and this. So we have to reduce our debt. And yet the government has been spending like a drunken sailor ... while slashing taxes. Not Liberal or Conservative ... But Redistribution of Wealth Up to the Ultra-Rich As I noted last December: Ronald Reagan gave big tax cuts to the wealthy.   So it is dramatic that Reagan's director of Office of Management and Budget - David   Stockman - calls the Bush tax cuts "the biggest fiscal mistake in history".   Specifically, Stockman told Dylan Ratigan that Bush's advisers forecast a $5 trillion surplus over 10 years. But "two unfunded wars and a Fed engineered housing bubble later", we're in a $ 5 trillion cumulative deficit. So Bush made a $10 trillion mistake.   Stockman said extending the Bush tax cuts won't stimulate the economy, the fact that the tax cut extensions will expire on the eve of the 2012 elections will panic politicians and force them to renew them yet again, and that "we're destroying the economy on Uncle Sam's credit card.   Indeed, Moody's and other rating services are threatening to downgrade America's credit rating due to the extension of the tax cuts for the wealthy:   The rating agency said in a report Monday that last week's agreement between the White House and congressional Republicans should bolster economic growth in the next two years – but at the expense of the nation's already perilous budget position down the road.   The agreement to extend the Bush tax cuts for two years and trim workers' payroll tax contributions for one could raise the U.S. debt-to-GDP ratio at 2012 to 72-73% from around 62% now, Moody's said. It said that without the tax package, that number might have been around 68% in 2012. [These numbers are low, as discussed above.]   ***   "Unless there are offsetting measures, the package will be credit negative for the US and increase the likelihood of a negative outlook on the US government's Aaa rating during the next two years," Moody's said.   The comment comes as the bond market seems to have reached very much the same conclusion. The yield on the 10-year Treasury has soared to 3.32% from around 2.4% two months ago, as investors bet on a stronger recovery and rising inflation. At the same time, our leaders are spending like they just won the lottery. As I wrote last March:   Why aren't our government "leaders" talking about slashing the military-industrial complex, which is ruining our economy with unnecessary imperial adventures?   And why aren't any of our leaders talking about stopping the permanent bailouts for the financial giants who got us into this mess? And see this.   And why aren't they taking away the power to create credit from the private banking giants - which is costing our economy trillions of dollars (and is leading to a decrease in loans to the little guy) - and give it back to the states? If we did these things, we wouldn't have to raise taxes or cut core services. And see this short video from England. The same thing is playing out on the state level. For example, if the Wisconsin governor was proposing cutting pensions because everyone needed to share in the sacrifice, that would be understandable. But as the Washington Post's Ezra Klein points out: The Badger State was actually in pretty good shape. It was supposed to end this budget cycle with about $120 million in the bank. Instead, it's facing a deficit. Why? I'll let the state's official fiscal scorekeeper explain (pdf): More than half of the lower estimate ($117.2 million) is due to the impact of Special Session Senate Bill 2 (health savings accounts), Assembly Bill 3 (tax deductions/credits for relocated businesses), and Assembly Bill 7 (tax exclusion for new employees).   In English: The governor called a special session of the legislature and signed two business tax breaks and a conservative health-care policy experiment that lowers overall tax revenues (among other things). The new legislation was not offset, and it helped turn a surplus into a deficit [see update at end of post]. As Brian Beutler writes, "public workers are being asked to pick up the tab for this agenda."   ***   Update ... The $130 million deficit now projected for 2011 isn't the fault of the tax breaks passed during Walker's special session, though his special session created about $120 million in deficit spending between 2011 and 2013 -- and perhaps more than that, if his policies are extended. That is to say, the deficit spending he created in his special session is about equal to the deficit Wisconsin faces this year, but it's not technically correct to say that Walker created 2011's deficit. Rather, he added $120 million to the 2011-2013 deficits, and perhaps more in the years after that. And according to Madison's Capitol Times: To the extent that there is an imbalance -- Walker claims there is a $137 million deficit -- it is not because of a drop in revenues or increases in the cost of state employee contracts, benefits or pensions. It is because Walker and his allies pushed through $140 million in new spending for special-interest groups in January. If the Legislature were simply to rescind Walker’s new spending schemes -- or delay their implementation until they are offset by fresh revenues -- the “crisis” would not exist.   The Fiscal Bureau memo -- which readers can access at http://legis.wisconsin.gov/lfb/Misc/2011_01_31Vos&Darling.pdf -- makes it clear that Walker did not inherit a budget that required a repair bill.   The facts are not debatable.   Because of the painful choices made by the previous Legislature, Wisconsin is in better shape fiscally than most states.   *** [Walker] has proposed a $137 million budget “repair” bill that he intends to use as a vehicle to ...   Pay for schemes that redirect state tax dollars to wealthy individuals and corporate interests that have been sources of campaign funding for Walker’s fellow Republicans and special-interest campaigns on their behalf. As Madison’s Democratic state Rep. Brett Hulsey notes, the governor and legislators aligned with him have over the past month given away special-interest favors to every lobby group that came asking, creating zero jobs in the process “but increasing the deficit by more than $100 million.”   Actually, Hulsey’s being conservative in his estimate of how much money Walker and his allies have misappropriated for political purposes.   ***   “Since his inauguration in early January, Walker has approved $140 million in new special-interest spending that includes:   “• $25 million for an economic development fund for job creation that still has $73 million due to a lack of job creation. Walker is creating a $25 million hole which will not create or retain jobs.   “• $48 million for private health savings accounts, which primarily benefit the wealthy. A study from the federal Governmental Accountability Office showed the average adjusted gross income of HSA participants was $139,000 and nearly half of HSA participants reported withdrawing nothing from their HSA, evidence that it is serving as a tax shelter for wealthy participants.   “• $67 million for a tax shift plan, so ill-conceived that at best the benefit provided to ‘job creators’ would be less than a dollar a day per new job, and may be as little as 30 cents a day.”   State Rep. Mark Pocan, D-Madison, sums up this scheming accurately when he says: “In one fell swoop, Gov. Walker is trying to institute a sweeping radical and dangerous notion that will return Wisconsin to the days when land barons and railroad tycoons controlled the political elites in Madison.”   Economist Menzie Chen argues that Wisconsin public workers make less than their private counterparts, even when pensions are included. And Pulitzer prize winning journalist David Cay Johnston says that Wisconsin's governor is really trying to bust unions as a first step in driving down everyone's wages ... both in the public and the private sector.  (Whether or not they are right is beyond the scope of this discussion). But whether or not you think union workers are whiners and labor unions harmful, the fact is that the governor of Wisconsin is trying to do exactly what the federal government is trying to do: throw money at their ultra-rich friends, and pay for it by shafting the little guy. It almost appears as if the federal and state governments are using "shock doctrine" tactics as an excuse for imposing "austerity measures" which benefit the wealthy at the expense of the little guy just like failed third world countries. Indeed, Governor Walker is a true conservative to the same extent that President Obama is a true liberal ... not very much. Again, if everyone - giant banks and corporations as well as workers - were being asked to share in the sacrifice, that would be completely different. But federal and state policies are making the rich richer and everyone else poorer. And if you still think that this is a conservative versus liberal issue, listen to what tried-and-proven conservatives (re-read Stockman's statements above) are saying. For example, Paul Craig Roberts, whose conservative credentials are impeccable - former Assistant Secretary of the Treasury under President Reagan, one of the people who most widely promoted "trickle down" economics, former editor of the Wall Street Journal, listed by Who's Who in America as one of the 1,000 most influential political thinkers in the world, and PhD economist - writes: Obama’s new budget is a continuation of Wall Street’s class war against the poor and middle class. Wall Street wasn’t through with us when the banksters sold their fraudulent derivatives into our pension funds, wrecked Americans’ job prospects and retirement plans, secured a $700 billion bailout at taxpayers’ expense while foreclosing on the homes of millions of Americans, and loaded up the Federal Reserve’s balance sheet with several trillion dollars of junk financial paper in exchange for newly created money to shore up the banks’ balance sheets. The effect of the Federal Reserve’s “quantitative easing” on inflation, interest rates, and the dollar’s foreign exchange value are yet to hit. When they do, Americans will get a lesson in poverty. <

Tired (And Broke) From All The "QE Is Just An Asset Swap" Rhetoric? Then Read This Posted: 19 Feb 2011 07:34 AM PST If you, like us, are tired of all the textbook pundits claiming over and over again that QE is nothing but an asset swap (odd how asset swaps get food prices to hit all time highs, not to mention M2, and to reverse what has formerly been a trillion dollar annualized drop in shadow banking - must be that latest outbreak of disinflation...), we urge you to read the following essay from Sean Corrigan. The Diapason Securities strategist as usual manages to cut through the academic drivel and hit at the core of the issue. The conclusion: "money does not have to be borrowed into existence, it can be spent into existence by the state for so long as that money's recipients show a willingness to accept it as a medium of exchange - and that is exactly what we have at work here...the government spends money it does not have into existence and disburses it through its welfare/patronage network; the associated debt is then taken up by a monetary institution (not least, the Fed itself, whether by its earlier process of debt substitution on private sector balance sheets when it was buying MBS, or in its current, direct uptake of Treasuries at the NYFRB) and the non-bank sector ends up with increased holdings of new MONEY as a result... The Fed has successfully placed a great deal of new money in the hands of those same banks' customers and this is patently exerting its expected influence on the prices of a whole range of non-money goods and assets, in a typically differentiated, Cantillon-effect fashion. How anyone can deny this is truly a mystery!" Indeed. From Sean Corrigan's February 18 Material Evidence Last week, we appended a graph which we felt showed that the Fed was clearly complicit in producing the current rise in commodity prices - a contention which we foolishly thought was unexceptional. One criticism which quickly emerged was that the graph did not show such a link; another was that this did not apply to commodity prices (obviously responding, therefore, to their 'fundamentals') since the Fed was 'only' creating excess bank reserves before locking them safely away from where they could influence the price of anything much at all. In order to address these two cavils, we unapologetically reproduce a more detailed version of the same graph, together with some extra supporting evidence of the crime and the following address to the jury. As we maintain that this graph shows, not only has AMS been driven by the Fed, but the excess money has clearly had an impact on commodity prices - whether via simplistic quantity theory means (more paper per resource unit) or by boosting speculative expectations (with not a little cheerleading from Blackhawk Ben) and hence bringing about the near record long positioning evident in many contracts. (Let us not either forget the impact of all the similar programmes enacted everywhere else in the world) Next, we must counter the casuistic Bernanke defence that all he has undertaken is an 'asset swap' and not a monetization and then deal with the widespread misperception that the build up of excess bank reserves has somehow 'sterilised' the associated money creation. In the first place, we simply need to say that the 'swap' being made — whether, as now, through regular POMOs or via the initial alphabet soup of lending programmes — is irrefutably one of non-money for money, presumably the very definition of 'monetization', whatever semantic games the Fed and its partisans wish to play. Furthermore, look at the other figures which show the influence the Federal budget is having on the supply of money at a time when, yes, much private borrowing has been curtailed and, so, when it has not been the primary means for money creation, as it is in more normal circumstances. What all too many commentators overlook — each either eager to beat the deflationary drum and so justify even more interventionism, or else to deny that their own favoured asset class is in another bubble — is that, as Leland Yeager long ago wrote, money does not have to be borrowed into existence, it can be spent into existence by the state for so long as that money's recipients show a willingness to accept it as a medium of exchange - and that is exactly what we have at work here. So, the government spends money it does not have into existence and disburses it through its welfare/patronage network; the associated debt is then taken up by a monetary institution (not least, the Fed itself, whether by its earlier process of debt substitution on private sector balance sheets when it was buying MBS, or in its current, direct uptake of Treasuries at the NYFRB) and the non-bank sector ends up with increased holdings of new MONEY as a result. The fact that the banks - for whom most of this money represents a liability — now largely offset it on the asset side of their balance sheets by placing it with the Fed (in the form of excess reserves), rather than re-lending it to others, does NOT somehow cancel out the creation of this money, it simply suppresses the commercial banking sector's possibilities for further multiplying it via the traditional operation of the fractional reserve mechanism. So, granted, the banks are not taking the first injection of newly created money and generating 10 times, 15 times - or whatever - more money from it, in addition. But the Fed has nonetheless successfully placed a great deal of new money in the hands of those same banks' customers and this is patently exerting its expected influence on the prices of a whole range of non-money goods and assets, in a typically differentiated, Cantillon-effect fashion. How anyone can deny this is truly a mystery!

Silver Rises to 30-Year High and Slips Into Backwardation Posted: 19 Feb 2011 07:32 AM PST "G-10 minutes from 1997 show central bankers conspiring about gold. Probably Black Swan Event Equals Gold Explosion: Rick Rule. Why isn't Wall Steet in Jail?...and much, much more. " Yesterday in Gold and Silver Gold did virtually nothing on Friday. The New York low [$1,380.90 spot] came shortly after Comex trading began...and the high of the day [$1,393.20 spot] occurred during the lunch hour. Then it sold off a few dollars into the close. Nothing to see here. The silver price was almost as quiet as a church mouse all through Far East and London trading...and right up until the London p.m. gold fix at 3:00 p.m. GMT...or 10:00 a.m. Eastern. Then, away it went to the upside. In the space of three hours, silver was up a bit more than a dollar, before getting sold off into the close of Comex trading at 1:30 p.m. in New York. When electronic trading began, silver continued to inch higher right up until the close at 5:15 p.m. Eastern time. Silver's ...

Graphic Video Of Army Shooting At Peaceful Bahrain Protestors Posted: 19 Feb 2011 06:27 AM PST As more videos such as this make the mainstream, we are concerned that not only are the days of the current Bahrain King and crown prince numbered (which also implies the future of the US Navy's 5th fleet is uncertain), but that Saudi Arabia, which has supposedly volunteered to get involved in restoring "peace" to its small neighbor, is getting ever more nervous. We continue to be amazed at how effectively the Bernanke Put is working to mask the true level of geopolitical instability. If and when the crowd realizes that Bernanke, who has proven his efficiency at printing dollar signs on pieces of cotton, may be slightly less adept at doing the same with barrels of oil, the outcome will be amusing. Warning: very graphic. For those wondering about the composition of the 5th Fleet, we recreate it below courtesy of Wikipedia: Task Force 50, Battle Force (~1 x Forward Deployed Carrier Strike Group) Task Force 51, Amphibious Force (~1 x Expeditionary Strike Group) Task Force 52, mining/demining force Task Force 53, Logistics Force[4]/Sealift Logistics Command Central, Military Sealift Command (MSC replenishment ships plus USN MH-53E Sea Stallion helicopters and C-130 Hercules, C-9 Skytrain II and/or C-40 Clipper aircraft) Task Force 54, (dual-hatted as Task Force 74) Submarine Force Task Force 55, Operation Iraqi Freedom: Constellation Carrier Strike Force; June 2003: mine clearing force, including elements from the U.S. Navy Marine Mammal Program Task Force 56, Navy Expeditionary Combat Command force.[5] CTG 56.1 Explosive Ordnance Disposal / Expeditionary Diving and Salvage[6] CTG 56.2 Naval Construction Forces CTG 56.3 Expeditionary Logistics Support; Provides logistics support for USN/USA/USMC, cargo movement and customs throughout AOR CTG 56.4 Riverine; Provides riverineprotection of waterways from illegal smuggling of weapons, drugs and people CTG 56.5 Maritime Expeditionary Security; Provides anti-Terrorism/Force Protection of land/port/littoral waterway operations for USN and Coalition assets, as well as point defense of strategic platforms and MSC vessels CTG 56.6 Expeditionary Combat Readiness; Provides administrative “Sailor support” for all Individual Augmentees, and administers the Navy Individual Augmentee Combat Training Course and Warrior Transition Program Task Force 57, (dual-hatted as Task Force 72) Patrol and Reconnaissance Force (P-3 and EP-3 Maritime Patrol and Reconnaissance Aircraft) Task Group 57.1 Task Group 57.2 - in October 2006, consisted of VP-8, VP-9, VP-16, and VP-46.[7] Task Force 58, Maritime Surveillance Force (Northern Persian Gulf) Task Force 59, Expeditionary Force/Contingency Force (when required, eg. July–August 2006 Lebanon evacuation operation, in conjunction with Joint Task Force Lebanon) In February 2007 it was conducting Maritime Security Operations[8] and as of Nov. 2, 2007, it was running a crisis management exercise. The key issue now that the public has no trust left at all in the crown prince is that nobody is willing to engage in any form of constructive dialogue, meaning that the only option for King Hamad bin Isa al-Khalifa and his crown prince is to start fuelling the G-6. Also, it may be time for Jim O'Neill to add Bahrain to the N-11: the country's general labor union just announced an indefinite strike starting today. Full update on the latest events from Bahrain, courtesy of Al Arabiya: Anti-government protesters in Bahrain swarmed back into a symbolic square on Saturday, putting riot police to flight in a striking victory for their cause and confidently setting up camp for a protracted stay. Crowds had approached Pearl Square in Manama from different directions, creating a standoff with riot police who had moved in earlier to replace troops withdrawn on royal orders. Suddenly police raced to their buses, which drove away mounting kerbs in their haste to escape. The emboldened protesters, cheering and waving national flags, ran to the centre of the traffic circle, reoccupying it even before all the police had left. The crowd waved fleeing policemen through. "We don't fear death anymore, let the army come and kill us to show the world what kind of savages they are," said Umm Mohammed, a teacher wearing a black abaya cloak. Troops in tanks and armoured vehicles took over the traffic circle on Thursday after riot police attacked protesters who had camped out there, killing four people and wounding 231. Bahrain's crown prince announced that all troops had been ordered off the streets and that police would maintain order. "That's a very positive step," Jasim Hussain, a member of the main Shiite Wefaq bloc that quit parliament on Thursday, told Reuters. "They're trying to ease the tensions. I don't know whether it will be sufficient." "We hope to hear a clear message from the government that it will stop killing people who are protesting peacefully." Mattar said the king must accept the "concept" of constitutional monarchy, as well as withdrawing the military. "Then we can go for a temporary government of new faces that would not include the current interior or defence ministers." He reiterated an opposition demand for the king to fire his uncle, Sheikh Khalifa bin Salman al-Khalifa, crown prince, and prime minister since Bahrain gained its independence in 1971. "We are not going to enter a dialogue as Shi'ites," Mattar said. "They try to put the issue in this frame. The dialogue should be with all people who were protesting. Some are liberal, non-Islamic. Some are Sunni and some Shi'ite." Bahrain's general labor union called an indefinite strike on Saturday in protest against "violent acts" by police and demanding the right to demonstrate peacefully. Bahrain's main Shiite opposition group said on Saturday that the government must resign and the army pull off the streets of the capital before it will take up an offer of dialogue from the crown prince. "To consider dialogue, the government must resign and the army should withdraw from the streets" of Manama, said Abdul Jalil Khalil Ibrahim, parliamentary leader of the Islamic National Accord Association (Al-Wefaq), the largest Shiite opposition bloc. Bahrain's general labor union called an indefinite strike on Saturday in protest against "violent acts" by police and demanding the right to demonstrate peacefully. Bahrain's main Shiite opposition group said on Saturday that the government must resign and the army pull off the streets of the capital before it will take up an offer of dialogue from the crown prince. "To consider dialogue, the government must resign and the army should withdraw from the streets" of Manama, said Abdul Jalil Khalil Ibrahim, parliamentary leader of the Islamic National Accord Association (Al-Wefaq), the largest Shiite opposition bloc. "What we're seeing now is not the language of dialogue but the language of force," he said. On Friday King Hamad bin Isa al-Khalifa said he had granted the crown prince all powers to fulfil the hopes and aspirations of all gracious citizens from all sections" in the national dialogue. Bahrain's crown prince appealed on television for calm. "Today is the time to sit down and hold a dialogue, not to fight," he said on Friday. The monarch's offer of dialogue "is not serious," said the INAA's top MP, urging the authorities to take "serious and sincere measures that meet the requirements of the current situation". "The situation is complicated and I fear it has run out of control," warned Ibrahim, whose group -- which holds 18 of the 40 seats in parliament -- has pulled out in protest.

Global Currency Coming . . . And Gold's a part of it Posted: 19 Feb 2011 06:13 AM PST World Bank's Zoellick Calls For Overhaul Of Monetary System, Says Yuan Should Get Prominent Role MK: The new world currency will be backed in part by Gold . . . If the new world currency is backed by even 10% Gold that's an easy $3,000 for Gold. The experiment of 1971, a world of free [...]

World Bank's Zoellick Calls For Overhaul Of Monetary System, Says Yuan Should Get Prominent Role Posted: 19 Feb 2011 05:54 AM PST World Bank's Robert Zoellick, who has recently been on a truth-telling roll, suggesting a return to the gold standard, and also highlighting that surging food prices have suddenly pushed 44 million to extreme hunger around the world raising the likelihood for many more revolutions, penned an oped in yesterday's FT, sharing his vision for a "monetary regime for a multipolar world" in which, not surprisingly he warned that the current monetary system is perilous, and that China's Yuan should be added to the SDR, as well as other currencies "over time." This is yet another dig at the dollar's status as a reserve currency, yet without China taking proactive steps to indicate its interest at becoming the new de facto world currency, the status quo may be stuck with the greenback. Essentially, China is waiting until the right moment emerges, a time when it has stockpiled enough resources, when it can, unilaterally, or in collaboration with Russia and potentially a post-EUR Europe, make an announcement that the Yuan is the new reserve currency, backed by a basket of commodities. This is precisely the step-change that Zoellick is trying to avoid: "A framework to manage a monetary system in transition may be less headline-grabbing than sudden regime change, but it is a lot more realistic. Modernising the management of international monetary affairs could prove an important contribution to future growth. The time of powerful kings is long gone. But today’s leaders still have the chance to stamp their mark on the monetary framework of tomorrow." Unfortunately, the possibility of a gradual transition in which the US willingly cedes ever increasingly more of its reserve status is unthinkable: after all the bulk of the Fed's disastrous policy is dictated that no matter what the Chair does, the world has no choice but to continue using dollars. Which will work until it doesn't (and with total US debt at almost 100% of GDP, the "doesn't" part is approaching. Some more thoughts from Reuters on Zoellick's op-ed: Zoellick said countries participating in the SDR should review monetary and currency issues in an SDR forum. "This group should offer China the incentive to join the forum and eventually the SDR after it takes steps to internationalise the renminbi and moves towards an open capital account." Zoellick said over time other major internationalised currencies could be added to the SDR basket. "Leading powers are not going to accept the SDR as a new global reserve currency, nor the IMF as a global central bank," Zoellick said. He added, however, that the IMF would act as a referee, "able to blow the whistle on the appropriateness of external policies but not to impose penalties" in order to support a healthy global economy. And naturally Zoellick once again invokes the status of gold as the ultimate monetary arbiter: Within this new framework, the IMF should be a referee, able to blow the whistle on the appropriateness of external policies but not to impose penalties. The IMF should be directed to sharpen the multilateral review of “capital account” policies, as part of the G20’s new mutual assessment process (MAP). This review should compare national policies with international information indicators, including commodity prices such as gold. The IMF’s involvement, with its 187 shareholders, offers the G20 the incentive of greater legitimacy and the support of an institution with financial resources. All these suggestions are great. Too bad that just like with the SEC's trivial inversion of cause and effect in the flash crash and its precipitating factor, High Frequency Trading (circuit breakers do nothing to handle the reasons for a market crash: they merely moderate the symptoms), so all of Zoellick and Strauss-Khan's warnings that it is time to move to an SDR regime will not be heeded until it is too late.  Full Op-Ed link.

The Secret to Valuing Options Posted: 19 Feb 2011 05:45 AM PST Unlike stock investing, options have to take into account time and volatility. That's why valuing options premiums can seem difficult. Fortunately, it isn't as hard as you might think… The premium of a stock option depends partly on its relation to the underlying stock. This is signified by the option's strike price as related to the market price of the stock at the time of the option purchase. If the strike price of the option is equal to the current market price, the option is considered at the money. A call with a strike price above the market price or a put with a strike price below the market value is considered out of the money. It is out of the money because it would be worthless if it expired today For example, if you buy a Widget Co. $40 call, but the price is $37, it is out of the money. If you buy a ComTech $115 put when the stock is at $117, it is also out of the money, because you would not exercise either option. After all, why would you want to pay $40 for a stock when you could get it for $37? Conversely, why would you sell a stock for $115 when people were willing to pay $117 for it? You buy an out-of-the-money option because you believe that given the volatility of the shares and the time you are guaranteed until expiration, the shares will move above $40—and be in the money. That's when the call's strike price is below the current market price or the put's strike price is above the market price. The option now has intrinsic value—a calculable worth. Obviously, in-the-money-options usually have a higher premium than out-of-the- money options. But out-of-the-money options move far more rapidly in favor of the buyer, percentage-wise, than do in-the money options when the underlying price moves your way. They also deteriorate more slowly than in the-money options if the underlying stock moves adversely, depending on the time until expiration. If option prices were based on their intrinsic value alone, there would no reason to buy options other than for insurance or hedging purposes. An option's premium would be fixed. But beyond an option's intrinsic value is its extrinsic value, the worth of the premium represented by time and volatility. Remember, options are wasting assets. They have a fixed term of life and die a little every day until they reach their expiration date. Unlike stock investors, option investors may not have time to recoup losses in a sudden turnaround. That risk can be reflected in the premium. For example, say it is January and you're looking to buy more Widget Co. options. Currently the stock is at $72, and you think it will go up to at least $85, but you're not sure when. Well, you could buy a March $85 call, or a December $85 call. Both are calls on the same stock at the same strike price, but the premiums could still be miles apart. Why? An option has no intrinsic value unless it is in the money. For the Widget Co. $85 call option to be in the money, it must go up $13.Would you rather have three months (March) for the stock to go up $13 or 11 months (December)? Most people would pick 11 months and would buy the December $85 call, but it depends on when you expect the price to move and how much you are willing to pay for the extra time. Options are speculative investments, and their value is as much a slave to supply and demand as just about anything you can buy and sell. Also, the more risk someone is willing to accept, the more they're going to want to get paid for it. With more investors clamoring for the same option—and with writers having to accept greater risk—anything can happen in 11 months; less is likely to happen in three so you can expect the premium on the longer-dated option to be higher. Remember, the longer the time until expiration, the more time the option has to meet your profit target. That's less risk for you… and that means a higher premium. When figuring out your profit target, keep in mind the break-even price. That's the price the underlying investment must reach for you to recoup your premium. You calculate the distance to the break-even price based on the price of the underlying instrument's shares, not the price you paid for the option. For example, you buy a Widget Co. March $85 call option for $5 a share (a premium of $500). In order to recoup your premium, the stock would have to go up $5 (above $85 a share), so the break-even price is $90 per share. Since you have the right to buy 100 shares of Widget Co. at $85 per share, a price of $90 would gain you $5 per share, or $500 ($5 times 100 shares). This equals the $500 premium you paid to buy the option. Any further increase in the stock price is profit, $100 for every dollar rise in the stock. For a put, do the opposite. Divide the premium by 100 and subtract it from the strike price. Once you figure out the break-even point, it's time to decide if the risks outweigh the potential rewards. Sincerely, Steve Sarnoff, Editor, Options Hotline The Secret to Valuing Options originally appeared in the Daily Reckoning. The Daily Reckoning has published articles on the impact of quantitative easing, bakken oil, and hyperinflation.

Q4 Hedge Fund Hotel Update: Apple Is Now Held By A Record 195 Hedge Funds Posted: 19 Feb 2011 05:19 AM PST The one company that will, without a shadow of a doubt, blow up the entire market should it finally reverse its trend of near exponential growth in recent months, and which has recently started indicating some (very) modest pricing weakness, is now held by more hedge funds than ever before. According to the just released Hedge Fund tracker from Goldman Sachs, Apple is now owned by 195 hedge funds, compared to 190 in Q3 as previously reported, and 181 before that. The world's biggest hedge fund hotel is filled to the brim. These fast money, marginal price determining buyers (and, yes, sellers) now hold 4% of the $332 billion equity cap. And with a solid 12% YTD return in the name, not to mention a negligible 1% short interest of market cap, the time to move on to greener pastures may be approaching. For now, all funds are docile and very well behaved participants in the game theory "don't sell" prisoner's dilemma. Yet with every dollar upside we are getting closer the first imminent defection. And a stock which can crash 10% on the merest hint of the passage of its founder, a stock which in turn accounts for 20% of the Nasdaq, and thus is a driver the ES and the global stock market, means that the continued meltup of the global stock market continues to rest on the shoulders of a sick man. That our regulators allow this is criminal and beyond reproach. But that's ok: it's all because of their prohibitively low budget. After all, how many bangbus subscriptions can $1 billion annual budget really buy? Stocks held by the largest number of very fast money hedge funds. We will bring all the important findings from Goldman's latest hedge fund update report shortly.

Now, Boxed Wine Instead of $60 Bottles Posted: 19 Feb 2011 05:00 AM PST More stunning data and anecdotal accounts of the miserable retirement prospects for baby boomers can be found in this WSJ story by E.S. Browning in which a 71-year old former AOL executive assistant now has to drink boxed wine instead of  $60 bottles. Retiring Boomers Find 401(k) Plans Fall Short The 401(k) generation is beginning to retire, and it isn't a pretty sight. The retirement savings plans that many baby boomers thought would see them through old age are falling short in many cases. The median household headed by a person aged 60 to 62 with a 401(k) account has less than one-quarter of what is needed to maintain its standard of living in retirement, according to data compiled by the Federal Reserve and analyzed by the Center for Retirement Research at Boston College for The Wall Street Journal. Even counting Social Security and any pensions or other savings, most 401(k) participants appear to have insufficient savings. Data from other sources also show big gaps between savings and what people need, and the financial crisis has made things worse. This analysis uses estimates of 401(k) balances from the end of 2010 and of salaries from 2009. It assumes people need 85% of their working income after they retire in order to maintain their standard of living, a common yardstick. Facing shortfalls, many people are postponing retirement, moving to cheaper housing, buying less-expensive food, cutting back on travel, taking bigger risks with their investments and making other sacrifices they never imagined. This is well worth reading in its entirety and, if you're like me, you won't know whether to laugh or cry, especially the part where 401k plans are characterized as a "gold mine for money-management firms". It's still unbelievable how, just a few years ago, people actually thought they didn't have to save for retirement because their house was doing it for them. Oh yeah, and then the stock market crashed and many aspiring retirees sold all their stocks. The idea that you can save five or ten percent of your income while working, using the rest to ratchet up your standard of living, and then maintain that standard of living in retirement just might be another good example of how conventional wisdom is oftentimes wrong.

Banks Responsible For Sudden European Liquidity Crunch Identified Posted: 19 Feb 2011 04:31 AM PST There goes another "fat finger" red herring. On Thursday and Friday, when we noted that borrowing under the ECB's Marginal Lending Facility has spiked from roughly €1 billion to €16 billion for two days in a row, we mocked the MSM explanation that this was merely the result of a fat finger, or at worst a faulty recalendarization of a term-MRO borrowing activity for an overnight one (at the exponentially higher rate of 1.75%). As expected, and as we predicted, this was indeed a case of bank gone wrong. Or two. The FT reports that "Anglo Irish Bank and the Irish Nationwide Building Society, Ireland’s two most troubled lenders, were behind a spike in overnight borrowings this week from the European Central Bank, according to people familiar with the transactions." And while we now know who the guilty parties are, the explanation once again leave much to be desired. It is no surprise that all European banks are exclusively reliant on the ECB for funding, which as previously indicated confirms that the Euribor market is a relic of the past since nobody approaches other banks for capital - everyone goes straight to uncle Jean Claude... And in doing so pledges any and all collateral, even if it means running an outright ponzi scheme. "Both banks have become heavily reliant on the ECB’s liquidity funding over the past 2 years, as they have been unable to roll over maturing bond debt and have seen an outflow of deposits." Yet instead of acknowledging that this action is merely a liquidity crunch, the FT's explanation is that the surge in borrowing has to do with the ability to unwind collateral on a moment's notice as a function of the banks' restructuring, instead of having it locked up for a week under the MRO. We are not sure if this "explanation" is just as, or more, laughable than the fat finger one. From the FT: A senior figure familiar with the transaction said it was “to facilitate” the sale of deposits by Anglo Irish and Irish Nationwide under the restructuring plan. Under the ECB’s normal refinancing operations, the collateral is locked up for a week. Tapping the ECB’s overnight or “marginal lending” facility, although more expensive “gives the banks the freedom to have the assets at their disposal immediately if there is a quick sale,” he said. Earlier this month, Anglo Irish said its borrowings from the ECB and from the Irish Central Bank – under the emergency liquidity assistance programme which applies slightly less onerous collateral eligibility rules – doubled to €45bn in 2010. However the assets used as collateral by both institutions to be able to borrow from the ECB are now being hived off as part of the lenders’ restructuring. The main collateral pledged with the ECB to borrow is the government backed bonds issued as consideration for the impaired property loans that are being bought by the National Asset Management Agency, the government’s bad bank loan agency. What is amusing is that while the logic works in theory, in practice it doesn't. Yesterday we said that "As European collateral has no quality thresholds, and as the ECB will accept anything, it makes no sense for any bank to pay incremental interest just to transfer borrowing to an overnight facility with a punitive rate - simple as that." The proposed explanation by the FT's "sources" is the only logical one under these parameters. Yet the trade off of a surge in interest in exchange for collateral flexibility makes little to no sense. First of all, NAMA is not supposed to start auctioning off deposits and other assets of the two failed banks for at least several more weeks, which does not justify paying the much higher overnight rate just to have the facility of not having a holding term locked in. Secondly, it is very naive to assume that the ECB would not release collateral even under a term facility at the moment's notice if the underlying bank requested it. After all, the ECB is more concerned with bank contagion (i.e., the truth coming out) than anything. Yet the good news is that now this deterioration is fully priced in and the levitation ramp may continue. And not just through Tuesday as Citi's Jurgen Michels expected. It may well go on for weeks until the supposed liquidation of collateral is consummated. What will be enjoyable to watch is just how much more MLF lending surges by in the same period, and how many other banks claim the same straw man excuse. Traders say the two lenders are expected to continue to rely on overnight borrowing for a couple of weeks as final plans are made to sell the Nama bonds as part of the wind down plan. Our prediction is to keep an eye out on the parallel shift between various term ECB tender operations. If indeed there is a scramble in broader Europe for freeing up collateral on a moment's notice, which reading between the lines of the FT's article implies, more and more banks will shift their holdings from LTRO facilities (28, 91 and 98 day) , to 7 Day MROs and finally to the overnight 1.75% Marginal Lending Facility. All of a sudden the European treasury curve for many continental institutions may get a whole lot flatter...

The Future of Silver Mining Posted: 19 Feb 2011 03:51 AM PST In my previous piece to this, I focused upon the definition of a "silver mine", in order to expose the biggest myth about silver: that having most of the world's silver produced as a "byproduct" of other mining is a normal state of affairs. What I demonstrated conclusively (through simple arithmetic) is that the only reason that most of the world's silver production doesn't come mostly from "primary" silver mines is purely a function of the price of silver (i.e the extremely low price). More specifically, I pointed out how it was the relentless manipulation of the price of silver – which was kept far below its "fair market value" – that resulted in the "silver mine" becoming an "endangered species". In this commentary, I intend to build upon that analysis, by explaining the implications of that analysis with respect to the creation of new silver mines. To start this process, it is first helpful to examine the gold mining industry, given the many and obvious parallels between the two metals. With respect to the gold market, knowledgeable investors are well aware that this metal has also been subjected to decades of price manipulation. While the manipulation of the gold price can be seen as "extreme" relative to the pricing of other metals, the manipulation of silver was "extreme" in relation to the price of gold. To understand this market-manipulation better, it's instructive to look at the history surrounding the "bottom" of the gold market. In this respect, there is no better place to start than with the observations made at that time by our good friends at GATA – the Gold Anti-Trust Action committee. On May 25, 1999; Bill Murphy had this to say, in a piece titled "Bottom in, bull market begins": Gold continues to make 20-year lows led by the unending barrage of selling in the physical market by Goldman Sachs…Goldman Sachs has been relentless in its selling since right before the Bank of England's announcement and has not let up since…We told you two weeks ago that the word was out in London that Goldman Sachs has a 1,000-tonne short position on its books… The "spot" price of gold on that date was $270/ounce, while the price of silver was just over $5/oz. The "announcement" which Bill Murphy alludes to is the infamous decision by future Prime Minister Gordon Brown to dump more than half of the UK's gold reserves onto the market at the absolute bottom (to bail-out Goldman Sachs?), costing his country billions of pounds. At this price, the world's gold-mining industry was decimated. Well over 90% of the world's gold mines were forced to shut-down, as only the world's absolute "richest" deposits could even be mined on a break-even basis at that price. Indeed, this reality alone is conclusive proof of that manipulation. What is important to note, however, is that at no time has the world's gold production ever been produced primarily as a "byproduct". In other words, that industry was never destroyed to the same degree as silver mining. In fact, Bill Murphy was slightly premature. The price of gold would actually decline to as low as $253/oz (approximately 6% below his call of a "bottom"), before rocketing upward more than 500% in the nearly 12 years since. My guess is that those investors who bought at $270/oz have forgiven Bill for being a little "early". The absolute "bottom" of the silver market occurred much sooner, back in 1992, with the price briefly going as low as $3.65/oz, and it averaged an amazing $3.95 throughout that year. Why is this "amazing"? Because that price represented a 600-year "low" for the silver market.

Weekly precious metals review at King World News Posted: 19 Feb 2011 03:35 AM PST 9:33a MT Saturday, February 19, 2011 Dear Friend of GATA and Gold (and Silver): The weekly precious metals review at King World News finds Bill Haynes of CMI Gold and Silver reporting that retail participants were selling silver throughout the week until the price spike Friday. Haynes wonders how some analysts can say silver is plentiful when the futures market is in backwardation and the Sprott physical silver trust and others can't get metal promptly. And JSMineSet.com's Dan Norcini (also writing now at http://traderdannorcini.blogspot.com) notes that silver is back above its moving averages and says he doesn't see much imminent price resistance. The interviews together are about 22 minutes long and you can listen to them at King World News here: http://kingworldnews.com/kingworldnews/Broadcast/Entries/2011/2/19_KWN_W... CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc. ADVERTISEMENT Prophecy Resource Spins Off Platinum/Palladium Venture: World-Class PGM Deposit in Yukon Company Press Release, January 18, 2011 VANCOUVER, British Columbia -- Prophecy Resource Corp. (TSX-V:PCY)and Pacific Coast Nickel Corp. announce that they have agreed that PCNC will acquire Prophecy's Nickel PGM projects by issuing common shares to Prophecy. PCNC will acquire the Wellgreen PGM Ni-Cu and Lynn Lake nickel projects in the Yukon Territory and Manitoba respectively by issuing up to 550 million common shares of PCNC to Prophecy. PCNC has 55.7 million shares outstanding. Following the transaction: -- Prophecy will own approximately 90 percent of PCNC. -- PCNC will consolidate its share capital on a 10 old for one new basis. -- Prophecy will change its name to Prophecy Coal Corp. and PCNC will be renamed Prophecy Platinum Corp. -- Prophecy intends to distribute half of its PCNC shares to shareholders pro-rata in accordance with their holdings. Based on the closing price of the common shares of PCNC on January 17, $0.195 per share, the gross value of the transaction is $107,250,000. For the complete announcement, please visit: http://prophecyresource.com/news_2011_jan18.php Join GATA here: Phoenix Investment Conference and Silver Summit Renaissance Glendale Hotel and Spa Saturday, February 19, 2011 Glendale, Arizona http://cambridgehouse3.com/conference-details/phoenix-investment-confere... Support GATA by purchasing a colorful GATA T-shirt: http://gata.org/tshirts Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: http://www.goldrush21.com/ Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: http://www.gata.org To contribute to GATA, please visit: http://www.gata.org/node/16 ADVERTISEMENT Sona Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit, Extending the Mineralization of the Southwest Vein on the Property Company Press Release, October 27, 2010 VANCOUVER, British Columbia -- Sona Resources Corp. reports on five drillling holes in the third round of assay results from the recently completed drill program at its 100 percent-owned Elizabeth Gold Deposit Property in the Lillooet Mining District of southern British Columbia. Highlights from the diamond drilling include: -- Hole E10-66 intersected 17.4g gold/ton over 1.54 metres. -- Hole E10-67 intersected 96.4g gold/ton over 2.5 metres, including one assay interval of 383g of gold/ton over 0.5 metres. -- Hole E10-69 intersected 85.4g gold/ton over 4.03 metres, including one assay interval of 230g gold/ton over 1 metre. Four drill holes, E10-66 to E10-69, targeted the southwestern end of the Southwest Vein, and three of the holes have expanded the mineralized zone in that direction. The Southwest Vein gold mineralization has now been intersected over a strike length of 325 metres, with the deepest hole drilled less than 200 metres from surface. "The assay results from the Southwest Zone quartz vein continue to be extremely positive," says John P. Thompson, Sona's president and CEO. "We are expanding the Southwest Vein, and this high-grade gold mineralization remains wide open down dip and along strike to the southwest." For the company's full press release, please visit: http://sonaresources.com/_resources/news/SONA_NR19_2010.pdf

&#039;Fisher&#039; at G-10 gold meeting was likely NY Fed market rigger Peter Fisher Posted: 19 Feb 2011 02:39 AM PST 2a MT Saturday, February 19, 2011 Dear Friend of GATA and Gold: A well-informed friend notes that the "Fisher" quoted in the minutes of the April 1997 meeting of the G-10 Gold and Foreign Exchange Committee, dispatched to you yesterday, was almost certainly Peter R. Fisher, then head of open market operations and foreign exchange trading for the Federal Reserve Bank of New York, not Richard W. Fisher, lately president of the Federal Reserve Bank of Dallas, as first suspected. This makes wonderful sense, since the office Peter Fisher held at the New York Fed in 1997 was essentially the Fed's primary market-rigging office, and Peter Fisher's work was inadvertently brought under suspicion the following year in an admiring but later notorious profile published by The Wall Street Journal, which reported that he "swaps intelligence and rumors with traders and dealers from his office in the Fed's 10th-floor executive suite that overlooks the trading floor he runs." Of course there was then and is now no more important market for the Fed to rig than the gold market, and when the G-10 Committee on Gold and Foreign Exchange met in April 1997 to discuss "coordination" of Western central bank policy on gold, Peter Fisher would have been a vital participant. The Fisher identification has been corrected in yesterday's dispatch in the GATA archive here: http://www.gata.org/node/9623 And here: http://www.gata.org/node/9624 CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc. ADVERTISEMENT Prophecy Resource Spins Off Platinum/Palladium Venture: World-Class PGM Deposit in Yukon Company Press Release, January 18, 2011 VANCOUVER, British Columbia -- Prophecy Resource Corp. (TSX-V:PCY)and Pacific Coast Nickel Corp. announce that they have agreed that PCNC will acquire Prophecy's Nickel PGM projects by issuing common shares to Prophecy. PCNC will acquire the Wellgreen PGM Ni-Cu and Lynn Lake nickel projects in the Yukon Territory and Manitoba respectively by issuing up to 550 million common shares of PCNC to Prophecy. PCNC has 55.7 million shares outstanding. Following the transaction: -- Prophecy will own approximately 90 percent of PCNC. -- PCNC will consolidate its share capital on a 10 old for one new basis. -- Prophecy will change its name to Prophecy Coal Corp. and PCNC will be renamed Prophecy Platinum Corp. -- Prophecy intends to distribute half of its PCNC shares to shareholders pro-rata in accordance with their holdings. Based on the closing price of the common shares of PCNC on January 17, $0.195 per share, the gross value of the transaction is $107,250,000. For the complete announcement, please visit: http://prophecyresource.com/news_2011_jan18.php Join GATA here: Phoenix Investment Conference and Silver Summit Renaissance Glendale Hotel and Spa Friday-Saturday, February 18-19, 2011 Glendale, Arizona http://cambridgehouse3.com/conference-details/phoenix-investment-confere... Support GATA by purchasing a colorful GATA T-shirt: http://gata.org/tshirts Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: http://www.goldrush21.com/ Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: http://www.gata.org To contribute to GATA, please visit: http://www.gata.org/node/16 ADVERTISEMENT Sona Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit, Extending the Mineralization of the Southwest Vein on the Property Company Press Release, October 27, 2010 VANCOUVER, British Columbia -- Sona Resources Corp. reports on five drillling holes in the third round of assay results from the recently completed drill program at its 100 percent-owned Elizabeth Gold Deposit Property in the Lillooet Mining District of southern British Columbia. Highlights from the diamond drilling include: -- Hole E10-66 intersected 17.4g gold/ton over 1.54 metres. -- Hole E10-67 intersected 96.4g gold/ton over 2.5 metres, including one assay interval of 383g of gold/ton over 0.5 metres. -- Hole E10-69 intersected 85.4g gold/ton over 4.03 metres, including one assay interval of 230g gold/ton over 1 metre. Four drill holes, E10-66 to E10-69, targeted the southwestern end of the Southwest Vein, and three of the holes have expanded the mineralized zone in that direction. The Southwest Vein gold mineralization has now been intersected over a strike length of 325 metres, with the deepest hole drilled less than 200 metres from surface. "The assay results from the Southwest Zone quartz vein continue to be extremely positive," says John P. Thompson, Sona's president and CEO. "We are expanding the Southwest Vein, and this high-grade gold mineralization remains wide open down dip and along strike to the southwest." For the company's full press release, please visit: http://sonaresources.com/_resources/news/SONA_NR19_2010.pdf

Gold gobblers: countries with the highest gold demand Posted: 19 Feb 2011 12:20 AM PST Latest World Gold Council statistics shows a continued voracious gold appetite from Asia and the Middle East.

Bernanke Says Two Speed Economic Recovery Requires Different Policies Posted: 18 Feb 2011 10:43 PM PST Chairman Bernanke's speech was drawn from his paper examining the nature of international capital flows prior to the global financial meltdown.  The analysis is long on detail and useful for policymakers and research.  More importantly, Bernanke indicated that the two speed global economy calls for different policies.

Gold and Silver Sell Targets Posted: 18 Feb 2011 10:33 PM PST Below is a picture of a dog. In order to simplify this discussion in such a way those even Silver momentum traders might understand it, we have placed a circle around the approximate location of the dog's brain and a rectangle around the tail. At this point, we should all be together.

The countries with the largest gold reserves Posted: 18 Feb 2011 10:30 PM PST With gold prices remaining stubbornly high, here are the countries holding the cards when it comes to gold reserves. This posting includes an audio/video/photo media file: Download Now

Gold Producers Takeovers Talk Posted: 18 Feb 2011 10:13 PM PST Michael Fowler is a senior mining analyst with Loewen, Ondaatje, McCutcheon in Toronto and he was more than willing to speculate on potential takeovers in this exclusive interview with The Gold Report. "All of these gold producers are going to be active in the mergers and acquisitions (M&A) market. They are going to acquire because there's a huge amount of cash on their balance sheets," he says. Michael also talks about some undervalued names in his coverage universe, including one junior he thinks could climb 210% before year-end.

GOLD RED ALERT: U.S. Government Plans Confiscation of Gold and Silver This Year Posted: 18 Feb 2011 09:52 PM PST Sherrie writes: I received an email with the words "RED ALERT".  I received this from someone heavily involved and an expert in the metals and mining.  I highly respect both men involved, as they know and always telling the truth about what is happening in the world of metals.

Gold Prices &amp; the Middle East Revolutions Posted: 18 Feb 2011 09:12 PM PST Middle East unrest and popular revolution has yet to affect the Gold Price... read more

Richard Russell - Silver Hedging By Miners A Big Mistake Posted: 18 Feb 2011 09:10 PM PST With silver closing at multi-decade highs and gold approaching $1,400, the Godfather of newsletter writers Richard Russell in his latest commentary stated, "The Dollar remains weak. As a store of value, the dollar has failed. This is the dreaded secret that the Wall Street Journal will not even mention. Instead, they prefer to bad-mouth gold. Throughout 5,000 years of history, gold has served as an effective store of value. No fiat currency has survived as long as 100 years." This posting includes an audio/video/photo media file: Download Now

Silver Investing &quot;Never Stronger&quot; Posted: 18 Feb 2011 09:10 PM PST Can Silver Investing keep pushing the white metal's price higher...? read more

Silver Investing "Never Stronger" Posted: 18 Feb 2011 09:10 PM PST Can Silver Investing keep pushing the white metal's price higher...? read more

Gold Bullion, Nickel Coins Posted: 18 Feb 2011 09:06 PM PST US government confiscated Gold Bullion in 1933. Are nickel coins next...? read more

&#039;Fisher&#039; at G-10 gold meeting was likely NY Fed&#039;s market rigger Peter Fisher Posted: 18 Feb 2011 08:05 PM PST 2a MT Saturday, February 19, 2011 Dear Friend of GATA and Gold: A well-informed friend notes that the "Fisher" quoted in the minutes of the April 1997 meeting of the G-10 Gold and Foreign Exchange Committee, dispatched to you yesterday, was almost certainly Peter R. Fisher, then head of open market operations and foreign exchange trading for the Federal Reserve Bank of New York, not Richard W. Fisher, lately president of the Federal Reserve Bank of Dallas, as first suspected. This makes wonderful sense, since the office Peter Fisher held at the New York Fed in 1997 was essentially the Fed's primary market-rigging office, and Peter Fisher's work was inadvertently brought under suspicion the following year in an admiring but later notorious profile published by The Wall Street Journal, which reported that he "swaps intelligence and rumors with traders and dealers from his office in the Fed's 10th-floor executive suite that overlooks the trading floor he runs." Of course there was then and is now no more important market for the Fed to rig than the gold market, and when the G-10 Committee on Gold and Foreign Exchange met in April 1997 to discuss "coordination" of Western central bank policy on gold, Peter Fisher would have been a vital participant. The Fisher identification has been corrected in yesterday's dispatch in the GATA archive here: http://www.gata.org/node/9623 And here: http://www.gata.org/node/9624 CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc. ADVERTISEMENT Prophecy Resource Spins Off Platinum/Palladium Venture: World-Class PGM Deposit in Yukon Company Press Release, January 18, 2011 VANCOUVER, British Columbia -- Prophecy Resource Corp. (TSX-V:PCY)and Pacific Coast Nickel Corp. announce that they have agreed that PCNC will acquire Prophecy's Nickel PGM projects by issuing common shares to Prophecy. PCNC will acquire the Wellgreen PGM Ni-Cu and Lynn Lake nickel projects in the Yukon Territory and Manitoba respectively by issuing up to 550 million common shares of PCNC to Prophecy. PCNC has 55.7 million shares outstanding. Following the transaction: -- Prophecy will own approximately 90 percent of PCNC. -- PCNC will consolidate its share capital on a 10 old for one new basis. -- Prophecy will change its name to Prophecy Coal Corp. and PCNC will be renamed Prophecy Platinum Corp. -- Prophecy intends to distribute half of its PCNC shares to shareholders pro-rata in accordance with their holdings. Based on the closing price of the common shares of PCNC on January 17, $0.195 per share, the gross value of the transaction is $107,250,000. For the complete announcement, please visit: http://prophecyresource.com/news_2011_jan18.php Join GATA here: Phoenix Investment Conference and Silver Summit Renaissance Glendale Hotel and Spa Friday-Saturday, February 18-19, 2011 Glendale, Arizona http://cambridgehouse3.com/conference-details/phoenix-investment-confere... Support GATA by purchasing a colorful GATA T-shirt: http://gata.org/tshirts Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: http://www.goldrush21.com/ Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: http://www.gata.org To contribute to GATA, please visit: http://www.gata.org/node/16 ADVERTISEMENT Sona Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit, Extending the Mineralization of the Southwest Vein on the Property Company Press Release, October 27, 2010 VANCOUVER, British Columbia -- Sona Resources Corp. reports on five drillling holes in the third round of assay results from the recently completed drill program at its 100 percent-owned Elizabeth Gold Deposit Property in the Lillooet Mining District of southern British Columbia. Highlights from the diamond drilling include: -- Hole E10-66 intersected 17.4g gold/ton over 1.54 metres. -- Hole E10-67 intersected 96.4g gold/ton over 2.5 metres, including one assay interval of 383g of gold/ton over 0.5 metres. -- Hole E10-69 intersected 85.4g gold/ton over 4.03 metres, including one assay interval of 230g gold/ton over 1 metre. Four drill holes, E10-66 to E10-69, targeted the southwestern end of the Southwest Vein, and three of the holes have expanded the mineralized zone in that direction. The Southwest Vein gold mineralization has now been intersected over a strike length of 325 metres, with the deepest hole drilled less than 200 metres from surface. "The assay results from the Southwest Zone quartz vein continue to be extremely positive," says John P. Thompson, Sona's president and CEO. "We are expanding the Southwest Vein, and this high-grade gold mineralization remains wide open down dip and along strike to the southwest." For the company's full press release, please visit: http://sonaresources.com/_resources/news/SONA_NR19_2010.pdf

Silver&#039;s Palladium Moment Posted: 18 Feb 2011 11:34 AM PST With silver hitting new highs, it may be hard to characterize the white metal as undervalued. Yet it bears repeating that silver can move higher for other reasons besides investment demand. This article reviews the industrial side of the equation...

Gold Price Might Reach $1,600 and Silver 3950c, Is Gold Heading Up to the Next Resistance Level? Posted: 18 Feb 2011 10:19 AM PST Gold Price Close Today : 1,388.20 Gold Price Close 11-Feb : 1,359.90 Change : 28.30 or 2.1% Silver Price Close Today : 3229.8 Silver Price Close 11-Feb : 2999.2 Change : 230.60 or 7.7% Gold Silver Ratio Today : 42.98 Gold Silver Ratio 11-Feb : 45.34 Change : -2.36 or -5.2% Silver Gold Ratio : 0.02327 Silver Gold Ratio 11-Feb : 0.02205 Change : 0.00121 or 5.5% Dow in Gold Dollars : $ 184.52 Dow in Gold Dollars 11-Feb : $ 186.57 Change : $ (2.05) or -1.1% Dow in Gold Ounces : 8.926 Dow in Gold Ounces 11-Feb : 9.025 Change : -0.10 or -1.1% Dow in Silver Ounces : 383.65 Dow in Silver Ounces 11-Feb : 409.22 Change : -25.56 or -6.2% Dow Industrial : 12,391.25 Dow Industrial 11-Feb : 12,273.26 Change : 117.99 or 1.0% S&P 500 : 1,343.01 S&P 500 11-Feb : 1,329.15 Change : 13.86 or 1.0% US Dollar Index : 77.642 US Dollar Index 11-Feb : 78.417 Change : -0.78 or -1.0% Platinum Price Close Today : 1,835.30 Platinum Price Close 11-Feb : 1,805.90 Change : 29.40 or 1.6% Palladium Price Close Today : 850.50 Palladium Price Close 11-Feb : 811.55 Change : 38.95 or 4.8% Mercy, what a week! The GOLD PRICE rose 2.1% -- yes -- the SILVER PRICE rose 7.7%, GOLD/SILVER RATIO fell 5.2%. Even stocks joined the party, but the US dollar couldn't be roused from its depression. Stick a little note up on your mirror to remind yourself that stocks and the SILVER PRICE trend together. When the stock market breaks, silver won't be long behind. (Whoa! No fiery emails, please, silver lovers, I am only talking about silver's performance relative to gold. When investors are risk-hungry, they buy stocks and silver. When they are risk-fearful, they sell stocks and silver and buy gold. I don't make the facts, I just report them.) This week the GOLD PRICE added a hefty $28.30. Last week, you may remember (and I do, and will remind y'all, because it turned out to be correct -- if it hadn't it would have gone down the memory hole faster than a weasel in a hurry) I said that if gold could pierce the top of its consolidation range, $1,368, it would sprint for $1,380. Yesterday it closed $1,384.70, and today on Comex gained another $3.50 to close at $1,388.20, treading the threshold of the next resistance level. Gold's lagging against silver, and the established pattern of spike lows for the GOLD/SILVER RATIO, have been keeping me bearish on both silver and gold. I have abandoned that reluctance because gold is now plainly confirming silver's rise, silver has risen to a new all time high above 3 January's high, the ratio has hit new lows, and silver's new high was already yesterday nearly 2% above 3 January, and today 3.9% above. All these argue stubbornly for a breakout and rally to higher prices. Look out! Don't stand in the way of that steam roller! The utter, final, and ultimate end of all doubt comes when gold, too, reaches a new all-time high above $1,422.60 (3 January's close). What are we looking at? 3500c and $1,475 at least. Higher? Possible. Silver might reach 3950c and gold $1,600. But let's see how it unfolds. I have been pondering this, thinking until my hair smoked. What in the world are we seeing? Look at the silver and gold rally from last summer, virtually straight skyward without a jiggle. Recall that markets move up in five waves, one long and very slow one up when only the realizers have caught on and are buying, a very sharp correction (2008) where the bull market tries to shake off as many riders as possible. After that first wave up and first corrective wave down begins the third wave up. That is never the mildest and sometimes the wildest, stretching and reaching farther even that the most unashamed bulls (like me) could imagine. In the third wave the establishment investors are catching on. Then comes another sharp correction, wave 4 down, shaking out more riders. Last comes wave 5 up, which usually travels straight up in an asymptotic or hyperbolic rise as the public climbs aboard. That's your clue time draweth nigh to climb off the bull. That third wave up cranked up in Fall 2008, and last summer began to stretch its legs. Trying to be wise these last weeks, trying to discipline myself to the historical stats, I became foolish and refused to believe my eyes. Clearly, silver and gold are not ready for any significant breather, nor has the gold/silver ratio made its low. It's all right, we just swapped gold for silver a little early. That correction will come, eventually, and we will swap back. But the lesson to learn here is this is a bull market, and you never, ever, fight the trend. Silver and gold's performance will run yet amoker, if "amok" is capable of comparison. Yet in the midst of life there is death, and when the bullets are whizzing around your head, you better keep it down. Ever present possibility remains that silver and gold will top suddenly and correct sharply. That, too, belongs to an enthusiastic market. From internal indicators the GOLD PRICE has more room to rise than silver. Weekly momentum indicators have just now turned up. They also have plenty of room to riot on the daily chart. The SILVER PRICE, on the other hand, has nearly reached escape velocity. Relative Strength Indicator is at the top of the range, but as we say in the fall, can become a lot more overbought before it drops. Weekly indicators are high, but what does silver care about that? Folks, you must buy the breakouts, as you must buy the corrections. Sometimes you get slapped, but a bull market is a rising tide, and she will eventually raise even the boats carrying your mistakes. Buy silver and gold. Driving all this is the Fed's generosity, pouring out money on all and sundry alike, like some perverse mockery of Cornucopia. Look at the little drop in the Dow in Gold Dollars, down to G$184.52 (8.926 oz). For weeks the DiG$ has hovered there, unable to make any progress. Sooner or later one of Reality's RPGs will bring it down, but the point to observe here is that the DiG$ remains flat because gold and stocks are rising at about the same rate. Clearly, stocks are acting as a "hard asset play", which, as bricks and mortar, they are. Unhappily, that's where the comparison dies, because they are also economic beings, not monetary, and they dwell within the economy. No amount of money printing will revive a sinking economy, Keynes, Bernanke, and Bernard O'Bama notwithstanding. Mark also that the new money driveth not all things with the same goad. Silver and palladium, for example, are running faster than the others, no doubt because they are such small markets. New money has a proportionately larger impact when it hits them. Ponder the Dow in Silver ounces. It fell a massive 25.5 oz this week, 6.2%, but reached no new low. The latest low struck on 3 January, when silver made its last price high, at about 375 oz. Miss not, however, that silver has been pounding the stuffing out of stocks, far more ardently than gold has. Still, the oddity always catches our eye: WHY? Odd, odd that the Gold/Silver ratio reached new lows without silver at a new high. Odd again that the Dow in Silver is higher today, with silver 120c higher than on 3 January, that it was then. I think the mystery is revealed in the Fed's pumping, because that new money runs first to Wall Street. Why not speculate? It's free money. Woe, woe, woe, down de dollar go, and not so very slow! US dollar index lost 35.3 basis points (0.45%) to end at 77.642, a new low for the move. Low came at 77.50. Now the dollar must either throw its grenade or fall on it. Since mid-January the dollar has traced out an upside down head and shoulders sort of pattern. A close below 77.50 violates that pattern and puts skids underneath the dollar. Yesterday's close took it below the 20 day moving average, first tripwire of a trend change. What will happen I don't know, but it will happen because the Fed wants it to, you can rest assured. Dollar weakness plainly is driving stocks right now, and stocks are the Fed's Potemkin indicator for the economy. "If stocks are rising, the economy must be recovering!" Right, and if you set a corpse upright in a coffin, he must need an armchair. STOCKS made new highs this week, indeed, today, too, but some indices rose while some fell. The Dow peaked its head above 12,380, rising 73.11 to 12,391.25. S&P rose far less, by 2.58 to 1,343.01. 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.

Playing Jim Roger's Picks With ETFs Posted: 18 Feb 2011 08:57 AM PST Tom Lydon submits: Are you an exchange traded fund (ETF) investor worried about how our country's loose monetary policy could affect the economy? Then you may want to listen to the advice of investment guru Jim Rogers. Sitting down with Judge Andrew Napolitano on Investment Postcards, venture capitalist Jim Rogers discusses his take on how to profit in times of reckless monetary policies. Rogers remarked that "[Federal Reserve Chairman Ben] Bernanke, he does not understand finance, economics and currencies; all he understands is printing money and now that we have given him the printing presses, he has run those printing presses as fast as he can." [Silver Complete Story »

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