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Thursday, February 24, 2011

Gold World News Flash

Gold World News Flash

The End of the US Dollar?

Posted: 24 Feb 2011 03:00 AM PST

The turmoil across North Africa and the Middle East is threatening not only to overthrow aging dictatorships, autocracies and monarchies, but also to upset the geopolitical balance between the countries of that region and the Western powers that has existed since at least the 1950s. For the West, the issue has always been the security of oil. For the US there is a second issue, and that is the security of Israel. Now both are under threat.


GoldSeek.com Radio Gold Nugget: James Turk & Chris Waltzek

Posted: 23 Feb 2011 07:02 PM PST

China Steps up Silver Purchases

Posted: 23 Feb 2011 06:04 PM PST

Carefully hidden in the depths of a recent Forbes blog was perhaps one of the most important stories for all of 2011, at least for silver. Robert Lenzner wrote that "China's Industrial and Commercial Bank (ICBC) reports purchases of physical gold and gold-related investments are growing at record setting rates."


Maybe That Really *Was* the Top…

Posted: 23 Feb 2011 06:01 PM PST

Someone noted in the Rick's Picks forum the other day that it is unseemly for me to act so gleeful about the prospect of a market collapse. In fact, few things that I can imagine would be healthier for the economy. Otherwise, as long as we keep telling ourselves that things can't really be that bad with the Dow Industrials trading above 12000, we will be unable to do what needs to be done to put the economy back on track.


Key Takeaways From Cambridge House Silver Summit

Posted: 23 Feb 2011 05:32 PM PST

Jason Hamlin submits:

Cambridge House puts on some of the best commodity-focused investment conferences in the industry and this year was no different. The February show in Phoenix, Arizona included presentations from industry heavyweights such as Ted Butler, Bill Murphy, Jay Taylor, Mickey Pulp, John Kaiser and others. Over 40 booths were filled with up-and-coming junior resource miners, including one of my favorite silver plays, Aurcana Corporation (CVE: AUN or AUNFF). Aurcana stock advanced as much as 19% today, the first trading session following the conference. Aurcana just began construction on their Shafter mine in Texas, which is estimated to be one of the top ten largest silver mines in the world. In addition the company is already producing one million ounces from its La Negra mine in Mexico and is projecting a jump to 5 million ounces per year once Shafter comes online.

I gave a 30-minute presentation to a packed room


Complete Story »


Gold Seeker Closing Report: Gold and Silver Gain Almost 1% and 2% More

Posted: 23 Feb 2011 04:00 PM PST

Gold fell a few dollars in Asia before it rebounded and saw slight gains in London, but it then accelerated even higher in the last four hours of trade in New York and ended near its late session high of $1416.40 with a gain of 0.94%. Silver climbed to as high as $33.768 and ended with a gain of 1.86% at a new 30-year closing high.


THERE GOES THE FIRST SECTOR

Posted: 23 Feb 2011 02:47 PM PST

Bear markets begin when something fundamental breaks. Usually the sector initially affected will roll over before the general market and tends to be a warning sign of what lies ahead.

The last bear market was triggered when the credit bubble created by Greenspan's foolish monetary policy burst. It was exacerbated by Bernanke's foolish attempt to debase the currency and reflate the bubble. All he succeeded in doing was to inflate oil to $147, which put the finishing touches on an already crumbling economy.

The market gave us a warning when the financials began to diverge from the rest of the market. Considering that the banks were one of the leading sectors during the `02-`07 bull the fact that they couldn't follow the rest of the market to new highs after the February `07 correction was a big red flag that the bull was on it's last legs.


I've been saying for more than a year now that the unintended consequences of QE would be to spike inflation, which in turn would poison the global economy. I knew all along that Ben was never going to create any jobs by printing money and of course he hasn't.

So if inflation is going to sink the economy and kill the stock market we should see warning signs from the sectors most affected by rising inflationary pressures, just like the banks warned us in `07 that the fundamentals were broken.

Sure enough I think we are starting to see those warning signs. 

Emerging markets have been the hit hard by food inflation. We are now seeing food riots in many third world countries. Emerging markets just like financials during the last bull were one of the leading sectors. EEM is now starting to diverge from the rest of the global stock markets. It's now on the verge of breaking back below the November cycle low.


The other sector that is extremely sensitive to inflation are the transports. When energy costs spike shipping companies profit margins are squeezed. The last two days have seen the Dow Transports fold under the pressure of surging oil prices. Keep in mind oil is only on the 17th day of it's intermediate cycle. That cycle lasts on average 50-70 days. I think we are going to see $5.00 gasoline by the time the dollar collapses into it's three year cycle low later this spring.


If the market can recover from the recent correction and make new highs I don't expect the transports will be able to follow. That will set up a Dow Theory non-conformation and most bear markets begin with a Dow theory non-confirmation.

China is already in a bear market. I think most emerging markets have probably topped and I doubt the rest of the global markets have more than 2 or 3 months left before the next leg down in the secular bear market begins.


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GPIF Worried About Japan's Public Debt?

Posted: 23 Feb 2011 02:02 PM PST


Via Pension Pulse.

Chikafumi Hodo and Hiroyasu Hoshi of Reuters report, Japan's giant pension fund warns on nation's debt:

Japan's $1.4 trillion Government Pension Investment Fund (GPIF), the world's largest pension fund, warned the country needs to resolve its debt problems, although, for now, it is sticking to its basic investment strategy.

 

GPIF Chairman Takahiro Mitani said in an interview with Reuters that Japan's bulging public debt -- the largest among developed countries at double the size of its $5 trillion economy -- would reach a crucial point in five to 10 years if the problem is not resolved.

 

The GPIF, whose asset size is larger than both the Canadian and Indian economies, is a major force in the Japanese government bonds (JGB) market, where it parks two-thirds of its assets.

 

The GPIF plans to diversify its portfolio, however, by investing in emerging markets, where its hopes to start channeling funds in the financial year that starts in April.

 

"We are not thinking of changing our basic portfolio as a result of ratings changes by credit rating companies," Mitani said on Wednesday.

 

Moody's Investors Service changed the outlook on Japan's Aa2 sovereign rating to negative from stable on Tuesday, warning that government policies may be insufficient to rein in the country's huge public debt.

 

That warning followed Standard & Poor's downgrade of its rating on JGBs last month, its first such cut in nine years.

 

WATCHING FUND FLOWS

 

Bond markets showed a muted reaction to Moody's action on the view that high domestic savings will provide ample funding for the government for now.

 

"I don't think investors are making investment decisions based on credit rating companies' actions. Rather, they are watching overall fund flows into JGBs to make their decisions," Mitani said.

 

Still, it is important for the Japanese government to resolve its fiscal problems, Mitani said, adding that he shared the credit rating firms' views that the country cannot leave the debt situation as it is. He did not elaborate.

 

The GPIF, which invests the reserves of national and corporate pension plans, held total assets of 117.6 trillion yen as of September.

 

Its performance in the six-month period to September was a negative 1.5 percent, compared with a positive 7.91 percent for the whole financial year that ended last March.

 

The fund's performance up until September lagged other major overseas counterparts, such as California Public Employees' Retirement System (Calpers) which posted a positive return of 3 percent, while the Canada Pension Plan Investment Board produced a bigger return of plus 5.2 percent.

 

Besides Japanese government bonds, the fund also has exposure to domestic shares, foreign bonds and foreign equities.

 

MANAGER SELECTION

 

Mitani said the GPIF was in no hurry to move into emerging equity markets, which have recently lost steam.

 

A tender to pick fund managers for GPIF's emerging market equities investments closed in December and it has completed its first round of screening, he said.

 

He expected the entire selection process could take about one year as the fund received a large volume of applications.

 

The fund decided to take on exposure to emerging markets as they are growing rapidly and offered great potential for future growth, he added.

 

"We don't have to rush in now as emerging market (equities prices) are in a corrective phase," he said.

 

"We want to take more time and we want to be more selective in choosing managers."

 

Mitani said the fund's investments in emerging markets would be gradual and the initial amount would be small.

 

The GPIF will use the MSCI main emerging market stock index .MSCIEF as its benchmark.

 

As of September, about more than 9 percent of the GPIF's total assets were in foreign equities.

Maybe Mr. Mitani is looking for a serious correction in emerging markets (EM) before plowing billions of dollars in emerging markets. I don't know but I can introduce GPIF to a very experienced emerging markets manager I know here in Montreal who will be glad to consult them for a fraction of the cost they're going to be paying these EM managers they're currently reviewing.

Back to the topic in the article. Kip McDaniel of aiCIO reports, Japan's GPIF Calls on Gov't to Rein in Mounting Public Debt:

Chairman Takahiro Mitani of Japan's $1.4 trillion Government Pension Investment Fund (GPIF), the world’s largest and thus first on aiGlobal 500 listing of the world's largest asset owners, has called on the government to help rescue the nation from its growing debt before it reaches a critical point.

 

"We are not thinking of changing our basic portfolio as a result of ratings changes by credit rating companies," Mitani told Reuters, noting that the fund aims to diversify its portfolio by increasingly investing in emerging markets. In the six month period to September, the performance of GPIF, which has an asset size larger than both the Canadian and Indian economies, was negative 1.5%, compared with a positive 7.91% for the entire financial year that ended last March.

 

The statements by Mitani over Japan's burgeoning public debt, amounting to double the size of its $5 trillion economy, follows the decision by Moody's Investors Service to change the outlook on Japan's Aa2 sovereign rating to negative from stable. It also comes about a month after Standard & Poor’s downgraded the government’s sovereign debt rating, with both Moody's and the S&P asserting long-term fiscal unsustainability of the country's debt.

 

Late last year, the fund came under fire from an Organization for Economic Co-operation and Development (OECD) report. The report, focusing on both governance and investment strategy issues at the GPIF, followed a set of 2006 reforms at the fund. “While much improved,” the report states, referring to previous reforms, “the new governance structure still falls short of international best practices and in some aspects does not meet some of the basic criteria contained in OECD recommendations.”

 

Among the report’s complaints relating to governance, the GPIF still is not required to put its investment policy in writing, and there remains uncertainty surrounding the issue of whether the fund’s Board sets – or simply recommends – the investment policy. Also concerning to the OECD was the fact that the responsibilities of Chairman of the Board, Chief Executive Officer, and Chief Investment Officer all coalesce in one man – currently Takahiro Mitani. “The lack of a clear separation between operational and oversight roles within the fund is a major problem that goes against OECD recommendations,” the report stated before recommending that the roles be distinct. Furthermore, the report asserted, a more robust staff should be hired.

I'm a stickler for pension governance and believe in transparency, so I don't understand why GPIF's investment policy isn't made public. But when you're the biggest fund in the world, you don't want to start telegraphing your moves in advance. In fact, you can argue that GPIF is too big and needs to be cut into several large funds (Mr. Mitani rejects such proposals). A senior pension fund manager told me that ABP, the large Dutch pension fund, is struggling with economies of scale due to its size. It's not easy for these mega-funds to deliver returns once they cross a certain asset threshold (I've seen this with hedge funds).

As for Mr. Mitani's influence, I believe that it's crucial to segregate senior functions. The President & CEO of a pension fund doesn't have time to be the Chief Investment Officer. I've seen it firsthand and think it's too much responsibility for one person to handle. You want your CIO to be dedicated full-time to investments. Presidents & CEOs have to handle the board and stakeholders on top of heading the fund, leaving them little time to follow markets closely and make tactical investment decisions.

There is little doubt that Mr. Mitani is one of Japan's most powerful men. If he's expressing concern over Japan's mounting public debt, it's because he's worried about what the future holds. There are legions of hedge fund managers salivating at the thought of making a fortune shorting JGBs. Most of them have been slaughtered over the years and will continue getting slaughtered betting against JGBs.

In November 2009, Richard Katz, editor of the Oriental Economist Alert, wrote an op-ed in the WSJ, Now Is Not the Time to Fret About Tokyo's Debts. I quote the following:

Deficit hawks assert that the Bank of Japan will soon lose its ability to keep rates low, arguing that the struggle between the government and private borrowers for limited funds will send interest rates skyward.

 

The evidence says the opposite: There is no crowding out. The government has not even borrowed enough to offset the decline in private borrowing. Corporate net debt peaked at 117% of GDP in 1990. By 2007, corporations seeking to shed nonperforming loans had reduced their debt to 70% of GDP. Household gross debt, meanwhile, fell to 70% of GDP in 2007 from 82% of GDP in 1999. As a result, the total combined private and government debt peaked in 2000 at 276% of GDP, and has since declined to 244% as of 2007, the latest data available.

 

Nor is there any lack of buyers for new government bonds, 95% of which are held by domestic investors. The banks need to buy this paper to offset the decline in their core lending business. From 1998 through 2009, outstanding bank deposits rose 17% but bank loans fell 13%. How could the banks pay interest to their depositors unless they bought bonds to earn interest?

 

The real danger from Japan's debt buildup is not a potential crisis in the government-bond market but corrosion in the real economy. The Bank of Japan will retain both the need and the ability to keep long-term rates very low for the foreseeable future. But this method of avoiding fiscal crisis causes enormous collateral damage.

 

By lowering the hurdle rate for investment, this action leads firms to pour capital into wasteful projects that temporarily boost demand but end up hurting long-term growth. Consider this decade's binge in new supermarkets, even though total supermarket sales have been flat for years. Then there are all the "zombie" firms kept in business by very low interest rates; 20% of bank loans charge less than 1% interest while 5% charge less than 0.5%.

 

Japan has been here before. In 1997, a similar debt scare led Prime Minster Ryutaro Hashimoto to raise consumption taxes, plunging the country into deep recession. In 2003, similar panicky storylines spooked the markets. It's easy to see why investors are having déj` vu; Tokyo today is headed toward a budget deficit that's 10% of GDP, and the ratio of outstanding government debt to GDP has hit a record high.

 

Japan is certainly a deficit addict. Ever since the mid-1970s, a structural shortfall in private domestic demand has compelled the government to sustain decade after decade of deficit spending to make up for that shortfall. Japan's new government says it wants to solve that problem by using government money to raise household disposable income. Yet, fearing today's deficits, policy makers are waffling on that program. Virtually every day various ministers come out with a new and conflicting message on fiscal policy.

 

Japan's top fiscal priority today should be to use large budget deficits—spent on the right things, such as child care allowances, free high school tuition, connecting suburban houses to sewage lines and consumer-oriented tax cuts—to ensure recovery. With many economists anticipating economic softness in the first half of 2010, perhaps even a quarter of negative growth, this is hardly the time for premature withdrawal. Once recovery is in place, that's the time to address the deficit and, more importantly, its underlying causes.

Even though that article was written over a year ago, it's worth keeping in mind that Japan's net debt profile isn't as bad as doomsayers portray it to be. More recently, Lindsay Whipp of the FT reports, Japan’s debt gives investors unlikely opening:

The distant chimes of alarm bells are going off about Japan again.

 

Just a month after Standard & Poor’s downgraded the government’s sovereign debt rating, Moody’s on Tuesday warned that it might follow suit, both agencies citing long-term fiscal unsustainability of its growing debt pile.

 

The political deadlock that could delay the passing of budget-related bills and progress on comprehensive tax reform to pay for rising welfare costs is certainly not helping confidence.

 

Tom Byrne, Moody’s senior vice-president, said that his view “takes into account intensifying political challenges facing the [Naoto] Kan government, which may heighten policy formulation and execution risks”.

 

Domestic investors, which make up 95 per cent of the Japanese government bond market, are watching developments closely.

 

While they do not envisage a worst-case scenario, whereby the government will be unable to issue a huge mountain of refinancing bonds, and they certainly do not expect a bond and currency crisis in the medium term, the opacity of the current political turmoil is creating confusion.

 

“Risk seems to be more skewed towards the downside on domestic investors’ confidence on the political will for fiscal austerity,” says Tomoya Masanao, a Tokyo-based portfolio manager for Pimco.

 

“This means I should remain cautious about the JGB market. But we are not in the camp that JGBs are going to blow up because of the fiscal situation.”

 

The long-term sustainability of Japan’s growing debt pile is a touchy subject that has oftendivided domestic and overseas investors. Mistiming a JGB bond and yen crisis or expectations for a spike in yields have caused numerous foreign investors pain. But that has not stopped some placing a small chunk of their assets on a bet that, as Tokyo’s fiscal stability deteriorates in the future, there are huge gains to be made.

 

And Kyle Bass of Hayman Capital Management, a well-known JGB bear, this month reminded his investors of a looming bond market crisis in Japan.

 

Investors are well versed in the numbers and they are not pretty. To name a couple, Japan’s gross debt is set to grow to more than twice the size of the economy this year. Its debt burden is estimated to reach Y997,700bn by the end of March 2012. In addition, new bond issuance is set to exceed tax revenues for the third year running in the fiscal year 2011.

 

But Tokyo can rely on the huge pool of domestic funds to buy up JGBs for now, particularly as there are few other options for investors in yen. Public and private institutions’ capacity for soaking up JGBs minimises the government’s funding costs.

 

Benchmark 10-year yields may have risen nearly 50 per cent since the beginning of October to 1.27 per cent, in line with gains in US Treasury yields, but they still remain the world’s lowest.

 

Nevertheless, there have been signs of movement out of JGBs from the public sector. Japan Post Bank’s outstanding JGB holdings dropped Y6,167bn to Y149,724bn between March and December, amid an increase of just over Y2,000bn in its holdings of dollar- and euro-denominated assets. There is a chance this is just an asset allocation adjustment but the buying fits with a call from Shizuka Kamei, a former minister in charge of the post office, to diversify funds.

Japan’s public pension funds were also net sellers of bonds for the first time in almost a decade last year amid deteriorating demographics, and that trend is only likely to continue. But for now, the bond market has shrugged its shoulders at the shift, partly because it remains incremental.

The most important investors last year were commercial banks, as corporate savings have made up for a slowdown in household savings rates. Signs of an improving economy have raised expectations for increased investment by companies using those savings, but one official at a Japanese megabank says that this is not happening.

“Even if Japanese companies’ profits have been good, it does not mean that the domestic economy is improving, because the growth is coming from external demand,” the official said. “I am not seeing a trend of yen-denominated corporate deposits being withdrawn or loan volume picking up,” he says.

Investors agree. Pimco’s Mr Masanao adds that corporate savings are not a temporary phenomenon because the slower growth and deteriorating demographics suggests that companies need to invest less.
“There may be some capital leakage overseas by large corporations, but it’s still a micro story more than a macro one,” he said.

This theme of falling investment is important when estimating the point at which Japan’s current account surplus could shift into deficit, a key moment for the JGB market, according to Société Générale.

Estimates for when that might happen vary widely, but SocGen says that it is possible that Japan could maintain its surplus for “decades to come”. It points out that despite the drop in the household savings rate the current account surplus appears to be on a rising trend over the past two decades, apart from the sharp drop during the financial crisis


Why Copper Cannot Be Money!

Posted: 23 Feb 2011 01:48 PM PST

(We are paying more for silver than ever; & Selling Platinum at 3% under spot!) Silver Stock Report by Jason Hommel, February 23rd, 2011 Copper is NOT money, and can never be money. I just bought a 15 kilo copper bullion bar. It was $360. With copper at $4.32/pound, the bar is 33 pounds, and thus has $142 worth of contained copper. The mark-up on the copper bar is 150% over spot! Copper 1 oz. rounds would contain about 29 cents worth of copper, but cost at least 70 cents just in manufacturing costs, for a markup of 240% over spot! So, why did I buy the 15 kilo copper bar? So I'd have a sample to show people, to show why copper is not money, of course! The physical example of the copper bar will utterly refute the nonsense of people who claim that anything can be money, and that it makes no difference whether money is silver, gold, or copper. I'll be able to tell them to "Go ahead, put the 15 kilo bar in your pocket," or I could say, "Go ahea...


Getting to Know Crisis Premiums

Posted: 23 Feb 2011 01:35 PM PST

There's a term gold and silver investors like to use to describe changes in premiums based solely on changes in the markets and demand for physical metals: the crisis premium. The crisis premium was most recently encountered at the turn of the new millennium when hundreds of thousands of people stashed record collections of gold and silver to protect against what was supposed to be the worst electronic catastrophe ever. Bank balances were supposed to go to zero, and computers were to become virtually worthless when the date rolled over to 01/01/00. Of course, that never happened, no one died, and the sun still rose the next morning. What we have on our hands now looks to be a crisis premium, but the crisis, interestingly, isn't showing in the premium. Instead, it is showing in the price of silver itself. International Revolution Because metals are driven by a number of different elements, fear being a large portion of this driving force, the silver markets a...


Hey, Hoenig, those oversize banks are rigging markets for your boss

Posted: 23 Feb 2011 01:11 PM PST

Fed's Hoenig Says U.S. Should Break Up Largest Financial Firms

By Joshua Zumbrun
Bloomberg News
Wednesday, February 23, 2011

http://www.bloomberg.com/news/2011-02-23/fed-s-hoenig-says-top-financial...

WASHINGTON -- Federal Reserve Bank of Kansas City President Thomas Hoenig said U.S. regulators should avert another crisis by breaking up large financial institutions that pose a threat "to our capitalistic system."

"I am convinced that the existence of too-big-to-fail financial institutions poses the greatest risk to the U.S. economy," Hoenig said today in a speech in Washington. "They must be broken up. We must not allow organizations operating under the safety net to pursue high-risk activities and we cannot let large organizations put our financial system at risk."

Hoenig, the lone dissenter from every Fed meeting in 2010, has argued that the most sweeping overhaul of U.S. financial regulation since the Great Depression won't prevent the largest banks from taking excessive risks and increasing market share. Regulators, including the Fed, are implementing the law.

... Dispatch continues below ...


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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


"In my view, it is even worse than before the crisis," Hoenig said at a luncheon for Women in Housing and Finance. "As well-intentioned as the Dodd-Frank Act may be, it will not improve outcomes," he said.

The Dodd-Frank Act, named after its chief sponsors, Massachusetts Rep. Barney Frank and former Connecticut Sen. Chris Dodd, both Democrats, created a resolution authority to unwind the largest financial institutions. It also adopted the Volcker rule, which aims at reducing the odds that banks will make risky investments and put their federally insured deposits at risk.

"Protected institutions must be limited in their risk activities because there is no end to their appetite for risk and no perceived end to the public purse that protects them," Hoenig said.

The Financial Stability Oversight Council, established under the legislation, is working to flesh out the Volcker rule.

"We must break up the largest banks, and could do so by expanding the Volcker rule and significantly narrowing the scope of institutions that are now more powerful and more of a threat to our capitalistic system than prior to the crisis," Hoenig said.

The Kansas City Fed chief cited research from the regional bank indicating that large banks enjoyed savings of 1.6 percentage points on debt with a two-year maturity and more than 3.6 percentage points for seven-year debt.

"In a competitive marketplace, where just a few basis points make a difference, these funding advantages are huge and represent a highly distorting influence within financial markets," he said.

In response to audience questions, Hoenig said the Fed's monetary policy "invites speculation" with its current pledge to keep interest rates low for an "extended period."

Hoenig cited the case of rising farmland values. The Chicago Federal Reserve reported last week that the price of such land rose 12 percent in the fourth quarter of 2010 from a year earlier. In congressional testimony last week, Hoenig said the Kansas City Fed has recorded farmland prices nearly 20 percent above year-earlier levels in Kansas and Nebraska.

The Fed's policy is "encouraging asset buildups," Hoenig said. "My point is that monetary policy isn't just about inflation." It's also "about asset values."

Fed presidents rotate voting on monetary policy and Hoenig, 64, will not vote this year. He joined the Kansas City Fed in 1973 as an economist in banking supervision after earning his doctorate at Iowa State University. Hoenig became president of the Kansas City Fed in 1991.

"The substantial incentives that large organizations have to take on more risk, with the government expected to pick up the losses should they incur, unfailingly lead to undue risks throughout the balance sheet," he said.

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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

In The News Today

Posted: 23 Feb 2011 01:10 PM PST

Dear Friends,

To my great surprise upon returning from the AGM my African daughter was waiting at home. Marlene is a very successful competitive rider in Africa and has been invited to ride in the Florida circuit. She is giving me a pre-birthday birthday so I am quite occupied tonight.

I can sum up the past days by saying that the changes in the Middle East are world changes which are not going back to pre-event normal. The change in the Middle East is going to accelerate the impact of peak energy production as a major economic force.

Gold is strong against a weak cyclical background which assures you that as the cycle changes an explosion in price will definitely occur.

$1650 is in the bag.

Respectfully,
Jim

Socialism Gone Apeshit: Obama Wants To Use Proceeds From $20 Billion Fraudclosure Settlement To Reduce Underwater Mortgages

Posted: 23 Feb 2011 12:51 PM PST


Ever wonder why the banks have been stowing away cash as if in anticipation of a torrential rainy day? Well, it just started pouring. According to the WSJ: "The Obama administration is trying to push through a settlement over mortgage-servicing breakdowns that could force America's largest banks to pay for reductions in loan principal worth billions of dollars…Terms of the administration's proposal include a commitment from mortgage servicers to reduce the loan balances of troubled borrowers who owe more than their homes are worth, people familiar with the matter said. The cost of those writedowns won't be borne by investors who purchased mortgage-backed securities, these people said…some state attorneys general and federal agencies are pushing for banks to pay more than $20 billion in civil fines or to fund a comparable amount of loan modifications for distressed borrowers…Regulators are looking at up to 14 servicers that could be a party to the settlement…Banks would also have to reduce second-lien mortgages when first mortgages are modified…Under the administration's proposed settlement, banks would have to bear the cost of all writedowns rather than passing them on to other investors. The settlement proposal focuses on pushing servicers who mishandled foreclosure procedures to eat losses, by writing down loans that they service on behalf of clients. Those clients include mortgage-finance giants Fannie Mae and Freddie Mac, as well as investors in loans that were securitized by Wall Street firms.” In other words, we have just reached the pinnacle of banana republic socialist insanity. In one fell swoop the teleprompter will not only grant reprieve to the banks for decades of fraudulent mortgage activity, but undercapitalize themselves and have them at risk for another liquidity run, which would of course mean another record multi-trillion taxpayer bailout. And the worst case: the 10 million or whatever underwater mortgages will get an average reduction of $2000 each. This is unfuckingbelieveable!

From the WSJ:

A settlement could help lift a cloud of uncertainty that has stalled the foreclosure process since last fall. Economists have warned that foreclosures need to proceed for the housing market to continue on a path to recovery. It's unclear how many borrowers would benefit from a deal. Servicers have thus far had difficulty managing the volume of troubled loans.

So far, most loan modifications have focused on shrinking monthly payments by lowering interest rates and extending loan terms. Banks, as well as mortgage giants Fannie Mae and Freddie Mac, have been shy to embrace principal reductions, in part due to concerns that many borrowers who can afford their loans will stop paying in the hope of being rewarded with a smaller loan. But some economists warn that rising numbers of underwater borrowers will drag on housing markets and the economy for years unless more is done to help them.

Several federal agencies have been scrutinizing the nation's largest banks over breakdowns in foreclosure procedures that erupted last fall. Last week, the Office of the Comptroller of the Currency said only a small number of borrowers had been improperly foreclosed upon. But the regulator raised concerns over inadequate staffing and weak controls over certain foreclosure processes.

A settlement must satisfy an unwieldy mix of authorities, including state attorneys general and regulators such as the newly formed Bureau of Consumer Financial Protection, who support heftier fines. They must also appease banking regulators, such as the OCC, that are concerned penalties could be too stiff.

"Nothing has been finalized among the states, and it's our understanding that the federal agencies we are in discussions with have not finalized their positions," said a spokesman for Iowa Attorney General Tom Miller, who is spearheading a 50-state investigation of mortgage-servicing practices.

On the utter economic futility of this idiotic action:

Bank executives say principal cuts don't necessarily improve payment patterns, and have told other parties involved in the talks that principal reductions could raise new complications. First, it will be difficult to determine who gets reductions and who doesn't. And even if banks agree to a $20 billion penalty, the number of mortgages that can be cured with that number is limited, one of these people said.

Any settlement could be one of the largest to hit the mortgage industry. In 2008, Bank of America settled claims worth more than $8.6 billion for loans allegedly involving predatory lending practices committed by Countrywide Finance Corp., which it acquired that year.

Of course the winner would be Obama's chances at getting reelected for a second term as teleprompter in chief. As for the outcome, now that the curve is flattening and the sad reality of the economic collapse is once again being appreciated, we will have a bank collapse that much sooner, leading to more trillions in taxpayer funded bail outs, so Wall Street can have another year of record bonuses, all the while the Chairsatan proceeds with QE 3, 4, 5, 6 and so forth. Which of course is the primary motive.

Protecting Yourself from Bernanke’s Money Printing

Posted: 23 Feb 2011 12:34 PM PST

As I was lying to my wife about where I had been when I was supposed to be home “over two hours ago,” it suddenly occurred to me that this is just an example of the lying crap that comes out of your mouth when called upon to cover up something bad about yourself. For me it was that I was casually driving along, innocently on my way home to happily meet my loving family, when I saw that Lulu’s Ooh La La Lounge had, I guess, gotten their license back, and was having a “Get Acquainted Sale,” the specifics being drinks 3-for-the-price-of-1 and no cover charge. Well, one thing led to another and then I was telling one of the pole-dancers named Amber that if she stuck her tongue in my ear, I would tell her how to survive the coming inflationary collapse being caused by the foul Federal Reserve creating So Freaking Much Money (SFMM). She made an ugly face and said, “Eww! Gross!” and then started struggling to break free from my loving embrace, sayi...


The Rydex Market Timers

Posted: 23 Feb 2011 12:23 PM PST


Two consecutive down days in the equity markets must seem like Armageddon for those whom forgot the markets can go both ways.  But let's be real.  Nothing has happened.  A 3% down draft in two days after a 30% moonshot in the SP500 over the past 6 months is nothing, and at best, this week's events serve to remind investors that markets MAY go in both up and down directions.  Risks have been rising for awhile, and it is just not because the bullish (sic: foolish) extremes in sentiment.  Rising and persistent trends in the CRB Index, gold, and yields on the 10 year Treasury are significant headwinds.  Crude oil had a high probability of trading higher.  Something had to give, and investor sentiment is just one part of the market puzzle.

Presented below is data from the Rydex family of mutual funds.  Rydex is useful as sentiment data because it assesses how investors are positioned (short v. long) and if they have conviction in those positions (leveraged v. non leveraged).  In addition, this is not opinion based sentiment data, but it is based upon real dollars and cents flowing into real funds.  Lastly, there is over 10 years of data covering 2 bull and 2 bear markets.

The attached daily report (Premium Content) is from 2.21.11, and is courtesy of TheTechnicalTake.com rydex report for 2.21.11


A Sound & Credible Currency

Posted: 23 Feb 2011 12:00 PM PST

by Adrian Ash BullionVault Wednesday, 23 February 2011 As a currency, the Euro doesn't have to do much to equal its peers... "SILVER HITS new all-time highs in Euro" proclaimed Zero Hedge on Monday. Regular readers of the blog site won't choke to know it was wrong, this time by only one third. Mistaking (and showing) a chart of month-end prices for a chart of daily silver prices, Zero Hedge's pseudonymous host, Tyler Durden, missed the true Euro-equivalent spike to €32.80 per ounce of 18 January 1980 – hit in what was then the Deutsche Mark the very same day that silver priced in Dollars also hit its all-time high to date...some 44% above this week's top. Still, the point is near-enough made. Because silver, like gold, isn't just about the Dollar, even though its latest surge coincides with the latest plunge in the US currency. Instead, silver has also caught a strong and growing bid over the last 5 years against the Dollar's upstart challenge...


It Is Time To Embrace the New Refrain ?Got Silver??

Posted: 23 Feb 2011 12:00 PM PST

*The Coming Silver Supernova Few investment opportunities arise in our lifetime like silver. The stage is set for a percentage gain of extraordinary magnitude! Forget the popular refrain of "Got Gold?" and make some additions to your portfolio to take advantage of the coming silver supernova! Words: 513 So*said**[B]Donald J. Poitras [/B]in*an article written for www.FinancialArticleSummariesToday.com*which Lorimer Wilson, editor of www.munKNEE.com, has reformatted*and edited* below for the sake of clarity and brevity to ensure a fast and easy read. (Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.)*Poitras*goes*on to say: These Facts About Silver Say It All a) Diminishing Supply: Increasing Demand [LIST] [*]600 million ounces are mined yearly yet industrial demand is over 900 million ounces per year, and new uses keep expanding. [*]Investment demand has exploded with the advent of a number of silver ETFs and the in...


Both the Gold Price and Silver Price Appeared To Have Completed a Low Degree Correction Yesterday, and Both Began Climbing Again

Posted: 23 Feb 2011 11:43 AM PST

Gold Price Close Today : 1413.40
Change : 12.90 or 0.9%

Silver Price Close Today : 33.298
Change : 0.436 cents or 1.3%

Gold Silver Ratio Today : 42.45
Change : -0.171 or -0.4%

Silver Gold Ratio Today : 0.02356
Change : 0.000094 or 0.4%

Platinum Price Close Today : 1783.40
Change : -3.60 or -0.2%

Palladium Price Close Today : 777.70
Change : -26.80 or -3.3%

S&P 500 : 1,307.40
Change : -8.04 or -0.6%

Dow In GOLD$ : $177.05
Change : $ (3.19) or -1.8%

Dow in GOLD oz : 8.565
Change : -0.154 or -1.8%

Dow in SILVER oz : 363.56
Change : -3.26 or -0.9%

Dow Industrial : 12,105.78
Change : -107.01 or -0.9%

US Dollar Index : 77.38
Change : -3.880 or -4.8%

The GOLD PRICE closed today at $1,413.40, rising another 12.90. Gold has gained $25.20 since its Friday close, and stands less than $10 below its all time high of $1,422.60 (3 January 2011).

The place where the nitric acid of truth will hit the mystery metal of this rally comes at gold's last high. SILVER has made new highs in this move, but gold has not. If it falters at $1,422 then this party is over and the cops have just pulled up outside. If gold sails through $1,422 then gold will run wilder than ever, with silver alongside. If gold clears $1,422 (needs to get to $1,451 to exceed old high by a safe 2%), the targets that move implies are so huge that I don't even want to mention them to y'all cause you'll think I'm crazy.

Both the GOLD PRICE and SILVER PRICE appeared to have completed a low degree correction yesterday, and both began climbing again today. Silver's high Comex close came today (another new high) at 3329.8c, up 43.6c from yesterday. Silver's running mad as a weasel with his tail on fire. Looking at the ancient charts -- brush the dust of that, will 'ya?-- there is a squiggle, and not much of a squiggle, of resistance/support at 3450c and at 3950c. Not much guidance there, but leave it at this: 3500c is in silver's sights.

Finally, let me get out my hose and sprinkle all y'all down with a little more ice-water. Gold, and especially silver are levitating, rising straight up. Don't get used to this, friends, cause it ain't normal. It's fun while it lasts, and I love the music, but when it ends it ends all of a sudden, faster than quicksilver falls thru a sifter. So keep you flincher flinched, just in case the music ends soon. Meanwhile, we just enjoy the dance.

By the way, I did mention, didn't I, that silver could rise to 4000c and the GOLD/SILVER RATIO could drop to 38? I can't remember a thing.

Sorry I missed y'all yesterday, but I was finishing up my monthly Moneychanger newsletter. Paid subscribers can pick it up now at www.the-moneychanger.com.

My bewilderment continues, a tug of war between the forces and signs for higher prices, and the forces of gravity.

Against the silver and gold rally continuing are the blows platinum and palladium have taken in the last few days. More, stocks have lost 300 points in two days. That has to make silver feel heavy. Also, there was that leap to new high territory on Monday, a holiday in the US. Was that leap genuine, or should be discount it because the mammoth US market was closed? Silver reached 3433c!

But these are all niggling quibbles compared to the silver and gold charts, which still point powerfully upward. But more of that anon. Let us first cast our gaze upon the scrofulous US dollar.

Today the dollar nixed by upside-down head and shoulders reversal pattern by dipping and closing below 77.50. Dollar lost 38.8 basis points today to close at 77.38. It has fallen below its 20 DMA (77.90) below the last low, MACD is pointing lower. Euro also is above its 20 DMA headed for its last high at 1.3841 (closed today at 1.3749). Next backstop for dollar is last low at 76.88.

STOCKS have been whipped hard with a barbed wire scourge. Dow has lost 285.47 points the last two days, 107.01 of it today to perch finally at 12,105.78. S&P500 has lost 35.61 points, and today lost 8.04 and finally stopped rolling downhill at 1,307.40.

I've been telling y'all that stocks were forming a bearish rising wedge. Under that wedge there is only -- air. Space. No trampolines or tarpaulins to break the fall. It appears that the Dow has plunged through that wedge's lower boundary line, which will accelerate the plunge. HOWEVER, the Dow might bounce off round number support -- indeed, appears to have done so today -- at 12,000. I believe that this is the definitive break in stocks.

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.

Safely Storing Your Gold - February 23, 2011

Posted: 23 Feb 2011 11:30 AM PST

Safely Storing Your Gold - Casey's Daily Dispatch [LIST] [*]Sign Up Now! [*]| [*]RSS Feed [*]| [*]Print this [*]| [*]Visit the Archives [*]| [*]Email to a Friend [*]| [*]Back to All Publications [/LIST] February 23, 2011 | [url]www.CaseyResearch.com[/url] Dear Reader, On Monday, I wrote an article expressing the view that derivatives and OTC markets weren't responsible for the 2008 crash. In my opinion, heavy regulation in this market will do nothing to prevent the next crisis. Rather, the same old culprit known as the business cycle was responsible for the present financial disaster. Since...


Three Decade Low for Gold Silver Ratio, Timberline Pops

Posted: 23 Feb 2011 10:06 AM PST

Gold and silver are firm this Wednesday afternoon and the gold/silver ratio (GSR) is also holding firm with a 42-handle (with a few probes to a 41 handle at times), meaning it takes about 42 ounces of silver to "buy" an ounce of gold sans the premiums. Considering that today is the date for February options on gold and silver futures to expire, that the metals held firm is saying something. ...


Protecting Yourself from Bernanke’s Money Printing

Posted: 23 Feb 2011 10:00 AM PST

As I was lying to my wife about where I had been when I was supposed to be home "over two hours ago," it suddenly occurred to me that this is just an example of the lying crap that comes out of your mouth when called upon to cover up something bad about yourself.

For me it was that I was casually driving along, innocently on my way home to happily meet my loving family, when I saw that Lulu's Ooh La La Lounge had, I guess, gotten their license back, and was having a "Get Acquainted Sale," the specifics being drinks 3-for-the-price-of-1 and no cover charge.

Well, one thing led to another and then I was telling one of the pole-dancers named Amber that if she stuck her tongue in my ear, I would tell her how to survive the coming inflationary collapse being caused by the foul Federal Reserve creating So Freaking Much Money (SFMM).

She made an ugly face and said, "Eww! Gross!" and then started struggling to break free from my loving embrace, saying, "Let me go, you stupid old man!" which alerted me that she needed, you know, more convincing.

So I said, "If you don't, then I won't tell you the Big Mogambo Secret To Wealth (BMSTW), then you will be so destroyed by the inflation in prices that you will be begging me – begging me! – to let you do that tongue thing, and more! Much more! Oh, so much, much more! I am laughing diabolically at your choice! Hahahaha!"

Well, the reason I got home after just two lousy hours is that I got discouraged when she said, "We all know all about your stupid Big Mogambo Secret To Wealth (BMSTW), which is to buy gold, silver and oil stocks when the Federal Reserve is creating so much money, because that means lots of inflation in prices, which will destroy the currency, the kind that you are supposed to be sticking in my G-string, but you don't, you cheap bastard!"

So you can see why I was trying to lie my way out of revealing the truth.

As for Ben Bernanke of the Federal Reserve, he is lying to cover up the sheer incompetence and Utter, Utter Failure (UUF) of the Federal Reserve in general since 1913, the UUF of his personal chairmanship of the Federal Reserve during the disaster of the last Five Freaking Years (FFY), and the UUF of the entire clot of neo-Keynesian econometric theoretical crapola that is still, unbelievably, all the rage amongst mainstream economists, the media and drooling morons, as entirely redundant as that is.

As a result of all of that disastrous Federal Reserve creation of money, food prices have been rising horrifically, at a reported 28% worldwide over the last six months, but Ben Bernanke is certain – absolutely certain! – that it is NOT related, in any way, to the enormous amounts of money that he has been creating for the last five years In A Freaking Row (IAFR).

In fact, Bernanke says that the inflation is "not a dollar effect, it's a growth effect."

My immediate, overwhelming outrage at such a preposterous, nonsensical idiocy is such that my brain kind of explodes, and I cannot actually form intelligible words, barely managing a kind of spluttering, raging incoherence.

My hands are clenched into fists, my neck muscles contracted into tight, stiff knots, and yet with a Mogambo Herculean Effort (MHE), I manage to contain my adrenaline-fueled need for vengeance against the Federal Reserve and their neo-Keynesian econometric theoretical stupidities, all of which have the effect of bizarrely recommending permanent inflations in the money supply, which causes inflation in prices, which is causing (at last count) 87 riots around the world.

And now that people are being killed, it makes you ask, "What price monetary growth?"

Easing one almost paralyzed-with-rage, ham-handed fist onto a button on the console, I will just switch you over to Dan Amoss, in his essay "The Food Crisis is a Dollar Crisis" here at The Daily Reckoning, who says, "At this week's hearing on Capitol Hill, Fed Chairman Ben Bernanke demonstrated a lack of understanding about what causes inflation. His comments reflected a belief that GDP growth causes inflation."

Through gritted teeth I say, "Bravo! Well said!"

He goes on, "When asked about the impact of QE2 on global food prices, Bernanke responded that the destabilizing spikes are due to weather and rapid growth in demand for grains in emerging markets. What a lame excuse! As an admirer of Milton Friedman, he must know that 'inflation is always and everywhere a monetary phenomenon.' Inflation isn't a 'weather phenomenon.'"

His point is that inflation in all prices can only happen as a result of creating more money, as "Without forever-growing money supplies, price spikes in one set of goods, like food, would be offset by price declines in more discretionary goods."

But that ain't the way it is these days, and like I said to Amber, the stupid Big Mogambo Secret To Wealth (BMSTW) is to buy gold, silver and oil when the Federal Reserve is creating so much money, because that means lots of inflation in prices, and 4,500 years of history says that when inflation in consumer prices goes up, so do gold, silver and energy, saving the proverbial butt of those lucky enough to own them!

Whee! This investing stuff is easy!

The Mogambo Guru
for The Daily Reckoning

Protecting Yourself from Bernanke's Money Printing originally appeared in the Daily Reckoning. The Daily Reckoning has published articles on the impact of quantitative easing, bakken oil, and hyperinflation.

QE2: The Road To A Gold Standard

Posted: 23 Feb 2011 09:57 AM PST

by Jim Willie CB February 22, 2011 home: Golden Jackass website subscribe: Hat Trick Letter Jim Willie CB, editor of the "HAT TRICK LETTER" Use the above link to subscribe to the paid research reports, which include coverage of critically important factors at work during the ongoing panicky attempt to sustain an unsustainable system burdened by numerous imbalances aggravated by global village forces. An historically unprecedented mess has been created by compromised central bankers and inept economic advisors, whose interference has irreversibly altered and damaged the world financial system, urgently pushed after the removed anchor of money to gold. Analysis features Gold, Crude Oil, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and US Federal Reserve monetary policy. What an incredible few weeks with global uprisings! It is not all too surprising that social eruptions over food prices come from the Arab...


US Dollar Tumbles, Gold $1,410, Silver $33.50, Oil Near $100

Posted: 23 Feb 2011 09:45 AM PST

Even with stocks struggling, the bull market in hard assets continues to roar. Oil assaulted the $100 level during intra-day trading, then pulled back below $98 before rallying to close near $99. The precious metals were strong despite options expiration as gold closed over $1,410 and silver closed above $33.50. The US dollar tumbled near the 77 level as an index.


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Here's a good question – is there gold in Fort Knox? (David Morgan & Mike are still driving around in Vegas!)

Posted: 23 Feb 2011 08:53 AM PST

Natural Resources Sector, Finding Value Amidst Volatility

Posted: 23 Feb 2011 08:41 AM PST

  Cranberry Capital Inc. President Paul van Eeden still favors the natural resources sector above all others because they are "absolutely central to our standard of living, our quality of life and the technological progress we've made." Despite the dangers, frothiness of equities and absence of fundamentals to support current valuations, he says, "there are always opportunities in the market. . .you just have to recognize them." Find out where Paul believes investors can find good value in the current market in this exclusive interview with The Gold Report.


More Tales of Revolution and Government Waste

Posted: 23 Feb 2011 08:41 AM PST

Tunisia…Egypt…Libya…a half dozen others on the brink…

While restless masses across the Middle East and North Africa region are struggling to realize democracy in their own lands, many here in the USA are just now waking up to some of the not-so-pleasant effects of it. The expression of discontent is more or less the same in each country. The results? Well, we'll have to wait and see…

In the beginning, democracy seems a virtuous and decent enough solution to autocratic tyranny. And it is…so long as the process is populated with virtuous and decent people. During the seeds of revolution, dictators are quickly overthrown and the people usually obtain a "voice" through the ballot box.

Everyone feels part of the progress, part of the plan. Love, hope and jasmine. All that good stuff.

But democracy has the regrettable tendency to remain in the hands of the virtuous and the decent for precious little time. As Winston Churchill once suggested, democracy is "the worst form of government…except for all the others that have been tried." It wins by default, in other words.

Over time, once the fanfare of revolution begins to fatigue, the democratic political system matures toward a kind of tyranny of the majority. By the time people get around to voting other people's property into their own hands, the game is more or less over. And while oppressive regimes like those of Ben Ali, Hosni Mubarak and now Muammar Gaddafi present easy targets for freedom-seeking individuals, it's much easier to topple a dictator than to topple "of the people, by the people," no matter how big a mess the people are making of their own condition.

Opined our Reckoner-in-Chief, Bill Bonner, on the topic last week in his essay "On Humanity's Instinctual Need for Democracy":

"Is it possible that democracy is just the flavor of the month…an evolutionary development, like all the forms of government that came before it? Is it possible that it succeeded in the 20th century because it was much better adapted to leeching out the wealth and complicity of the average man? It gave him a stake in the system – like getting some prisoners to guard each other, or bribing taxpayers to rat out their neighbors to the IRS? Isn't it possible that by giving the masses a 'voice,' the elites who really control government are better able to take his money…and, if necessary, his life?

"Soldiers will do their duty to a dictator, if the price is right," continued Bill. "They will do their duty to the government they helped elect for less. And they will more willingly submit to government's taxes, too, if they feel they are its masters, rather than the slaves. The real difference may only be an illusion, but it is an effective one. In practice, the individual may have less ability to influence the large pool of voting numbskulls than he does to influence a single knuckleheaded autocrat. But heck, we're all democrats now."

…for better or worse, we would dare to add.

And this brings us to the current situation here in America today. The individual states, having voted for themselves unsustainable welfare systems and exorbitantly expensive public services, are broke. From the essay "Budget Deficits, Pension Plans and the Seeds of Rebellion" in The Daily Reckoning Weekend Edition:

"States from coast to coast are facing budget shortfalls of a magnitude heretofore unseen, unfathomable, even. More than 40 states are in the red for a combined budget shortfall of $125 billion for fiscal year 2012. California is the worst, with a $25.4 billion hole to fill, more than seven times Wisconsin's gap. Illinois comes in next with a $15 billion shortfall, followed by Texas with $13.4 billion, New Jersey at $10.5 billion and New York at $9 billion."

Voters have only themselves to blame. But here at The Daily Reckoning, we like to look on the bright side of life. We celebrate the collapse of governmental incompetence at any and all levels, whether in this country or abroad. And with each passing day, and with each meddlesome, cumbersome, costly bill that is passed, we draw one step closer to that denouement.

In fact, so impressed are we with state government incompetence that we've decided to honor it in this year's Daily Reckoning Financial Darwin Awards. Simply put, we asked readers to send in tales and anecdotes of government waste from their own states. Which state is most determinedly enacting bone-headed policies and business-quashing edicts, thereby ensuring their own eventual demise?

We'll announce the "winning" state in this coming Weekend Edition, so there's still time to submit your own boots-on-ground observations. For now, here are a couple of examples of what you're up against…

Fellow Reckoner, Fred, had this to say from the heart of the Mid West revolt…

I was a Wisconsin Department of Transportation field construction engineer for 35 years. One spring in the '80s I was starting a major road reconstruction project and doing survey out in the field with my staff. A massive county paint truck showed up to paint the traffic lane lines. I went over and told the foreman we would be ripping out the pavement and it would be a waste of money. He agreed but had to get the OK from his office. He called in but they told him it was too much work to cancel the work order. So, you guessed it, the road was striped. The very next day, we began removing two miles of pavement – but we did have a nice line to follow.

Along the same lines – a lesson in bureaucratic logic. In construction, all the materials going into a project must be documented as to source, material, manufacture, etc. However, some small, insignificant items did not require a formal report. So for these items we had a "Documentation Without Report" form – i.e., a report for things not requiring a report.

And this, from a Fellow Reckoner in California, a state leading the charge to bankruptcy with a $25.4 billion budget shortfall…

Perhaps this job announcement for the California Corrections Department [could be considered for your Financial Darwin Award Series]:

Recreation Therapist, Correctional Facility:

Starting Salary: $5,679/month

Description: A new job listing this month in San Diego, CA provides this $70,000 a year position description: A recreation therapist, correctional facility, encourages…individual and group activities such as indoor and outdoor games and sports, dance, parties, dramatics, and special interest clubs; Supervises entertainment and movies and assists in planning programs for special occasions.

I wonder if we are also paying for party favors and birthday hats.

Got something better? Send us your tales of government waste to right here.

Joel Bowman
for The Daily Reckoning

More Tales of Revolution and Government Waste originally appeared in the Daily Reckoning. The Daily Reckoning has published articles on the impact of quantitative easing, bakken oil, and hyperinflation.

The Federal Reserve Is Causing Turmoil Abroad

Posted: 23 Feb 2011 08:40 AM PST

Few protesters in the Middle East connect rising food prices to U.S. monetary policy. But central bankers do.

In accounts of the political unrest sweeping through the Middle East, one factor, inflation, deserves more attention. Nothing can be more demoralizing to people at the low end of the income scale—where great masses in that region reside—than increases in the cost of basic necessities like food and fuel. It brings them out into the streets to protest government policies, especially in places where mass protests are the only means available to shake the existing power structure.

Consider, for example, that much of world trade, particularly in basic commodities like food grains and oil, is denominated in U.S. dollars. When the Fed floods the world with dollars, the dollar price of commodities goes up, and this affects market prices generally, particularly in poor countries that are heavily import-dependent.

[source]

PG View: Indeed, it already seems long forgotten that anti-government protests that erupted in Tunisia and Algeria were initially about food price inflation.

Gold Daily and Silver Weekly Charts - Blythe Might As Well Be Walkin' On the Sun

Posted: 23 Feb 2011 08:40 AM PST


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QE2, The Road To A Gold Standard

Posted: 23 Feb 2011 08:30 AM PST

What an incredible few weeks with global uprisings! It is not all too surprising that social eruptions over food prices come from the Arab world, since they spend up to 75% to 80% of income on food for basic needs. What proof that the global economy is not a closed system! The QE and QE2 initiatives have spread like a powerful virus, leading to global commodity prices heading upward and quickly. Even cotton is up 170% in price. The USFed has suffered even more credibility blows, calling the global food price inflation unrelated to its QE2 policy. It is obviously connected. What we have is the Western Big Banks protected from fraud prosecution, redeemed for their broken toxic balance sheets at government expense, leading to a global price tag in the form of foodstuffs and commodities.


Silver a Sound and Credible Currency

Posted: 23 Feb 2011 08:23 AM PST

As a currency, the Euro doesn't have to do much to equal its peers... "SILVER HITS new all-time highs in Euro" proclaimed Zero Hedge on Monday.


Gold rises to 7-week high on Mideast concerns

Posted: 23 Feb 2011 08:21 AM PST

Gold for February delivery, the most active contract, advanced $12.90, or 0.9%, to $1,414 an ounce on the Comex division of the New York Mercantile Exchange. That was gold's best settlement since Jan. 3.

"You tell me when things are going to stabilize in the Middle East and I will tell you when risk aversion is off," said Bart Melek, head of commodities strategy at TD Securities in Toronto. "People are buying gold as a way to hedge against geopolitical risk."

[source]

PG View: Mideast concerns and the resulting higher oil prices have also weighed on stocks as investors worry that rising energy prices will further sap an already weak economic recovery. The situation is also stoking inflation fears as energy is a major input price for many food products and consumer goods.

Torch the Pipelines?

Posted: 23 Feb 2011 08:01 AM PST

by Addison Wiggin - February 23, 2011

  • Oil production already down 25% in Libya… and how it could quickly reach zero
  • Just in: Prestigious brokerage matches Byron King’s bold oil prediction
  • Grains pull back… Alan Knuckman on where they go from here
  • Why the National Association of Realtors has even less credibility today than yesterday
  • Mozilo skates… Why the Countrywide chief’s fate is only the beginning

Yikes… Oil is up again this morning. West Texas Intermediate has blasted up to $96.78. (Barely a week ago, it was $85.) Brent is up to $109.02.

According to Reuters, Libyan oil production is already down to three-quarters of normal. And that could soon plunge to zero… if it’s true that a desperate Col. Gaddafi is looking to torch the pipelines leading from his country’s oil fields to Mediterranean ports.

“Gaddafi has ordered security services to start sabotaging oil facilities,” a source close to the regime tells Time intelligence columnist (and former CIA case officer) Robert Baer. “The sabotage, according to the insider, is meant to serve as a message to Libya's rebellious tribes: It's either me or chaos.”

“Seriously,” muses our own Byron King, “I wonder if any of Gaddafi’s goons will pull the trigger. Maybe... Saddam Hussein and Desert Storm sort of speaks for itself.”

Just in case you need a reminder of what happened 20 years ago this month…



As Iraqi forces retreated from Kuwait in 1991, Saddam Hussein ordered his troops to set fire to some 700 oil wells. Nine months passed before the last fire was put out.

Baer says if Gaddafi can’t get the tribes back in line, he’ll turn Libya into a Somalia… with oil. To start that process, he just released some Islamic militant prisoners to stir things up.

It may be just a bluff. Then again, Gaddafi’s own interior minister just joined the opposition. Desperate men do desperate things. We’ll be watching.


“Oil prices could go up substantially even from these levels," says Vancouver favorite Marc Faber. “I don't think that oil is expensive compared to other commodities or compared to other goods prices in the world.”

And if that doesn’t make sense to you, we’ll share this chart with you one more time:



"Further gains would, obviously, depend on some political problems,” Faber continues -- for instance, “some interruptions in oil supplies.”


“Things are (finally) starting to come unglued in the Middle East,” says Byron King, writing today from his old stomping grounds in the Texas oil patch. “Are you surprised? Much of this discord -- great and small -- has been festering for a long time.

“And also, for a long time, a lot of forces have been working for the pots NOT to boil over. We’ve seen a lot of big power accommodation toward crummy governments, run by thieves and despots, if not zealots and ideologues, if not just plain mentally ill sociopaths.

“Even the much-vaunted ‘resource nationalism’ of recent years is, at root, ‘resource larceny’ by the top dogs. Look at Libya, with 7 million people and $50 billion in nationalized oil money per year. That translates to something over $7,000 per person, yet the place is impoverished. Where did all the money go?

“At any rate, you need to understand that the post-World War II era -- which was, in many respects, so favorable to the U.S. -- is just plain falling apart before our eyes. It worked until it stopped working. Now? I think it’s broken pretty bad.”

Breaking News: Japan’s Nomura Securities just issued a forecast of $220 oil if exports from Libya and Algeria grind to a halt. Remarkably, that’s the same number Byron uses in his own “New War” scenario for the Middle East.


The grains are in sell-off mode this week. Wheat, which touched nearly $9 a bushel recently, has retreated to $7.85. Corn has pulled back below $7.

But the trends remain in place to drive prices still higher, says Resource Trader Alert editor Alan Knuckman. "The explanation for higher agricultural products has been two major factors,” he says.

“First, the global demand for commodity goods has risen from extreme lows with the financial crisis and continued growth and recovery around the world.

“The second issue has been the weather catastrophe and disruptions worldwide have prevented the rebuilding of stockpiles for seasonal good production.

“The bullish trends have been well established, and data, news or events can only make the situation more dire as we prepare for the crucial spring planting in America.

“The highs in 2008 for corn were above $8.00 per bushel,” Alan points out, so on a pullback below $7, “there is still more upside. Wheat in comparison is below the $9.00 50% recovery from the 2008 extreme highs to the 2009 lows and may have the most upside potential from here.”


Gold has firmed a bit, to $1,411, a seven-week high. Silver is perking up likewise, the spot price now $33.65.

It’s been a remarkable stretch for all natural resources -- metals, agriculture, energy. And we don’t think it’s over yet. That’s why we’ve just done something for the first time in four years: We’re opening access to the Resource Reserve.

The Resource Reserve offers “one-stop shopping” for all aspects of resource investing. Everything you can possibly do to profit from the scarcity of natural resources -- and the geopolitical tensions making matters worse -- is available to you in the Resource Reserve…

  • Outstanding Investments, Byron King’s flagship newsletter, just named by Hulbert Financial Digest as the best-performing investment advisory of the last 10 years. Its 21.7% annualized return crushes the nearest competitor by more than half.

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  • Resource Trader Alert, Alan Knuckman’s commodity options service that lets you collect big gains in a short time. In just the last three months, Alan’s readers have picked up 95% on soybean meal… 217% on wheat… and they’re holding out for maximum gains on a heating oil play already up 223%.
You pay a one-time fee for the Resource Reserve -- about as much as you’d pay for just one year if you subscribed to these services separately. And you also get free annual admission to the Agora Financial Investment Symposium.

For that reason, we’re limiting the number of Resource Reserve slots to just 200. You can learn about all the benefits and privileges that come with membership right here.


 Stocks are drifting down slightly as we write, adding onto yesterday’s losses. The S&P fell 2% in a day.


 Sales of existing homes rose 2.7% in January, according to the National Association of Realtors. That’s slightly more than the Street expected. The number has risen five out of the last six months.

For the record, this may be the last time we ever bother mentioning this figure. According to The Wall Street Journal, the NAR is looking into whether it overstated existing home sales as long ago as 2007.

This became a glaring problem recently: The NAR said 4.9 million previously owned homes changed hands during 2010… while the research firm CoreLogic counted just 3.3 million.

Turns out the NAR doesn’t use MLS listings as its reference point -- or county courthouse filings, like CoreLogic. Rather, over the last decade, it used a model keyed to the 2000 Census, making various assumptions about population growth since then.

In other words, the NAR conjures up imaginary home sales the same way the Bureau of Labor Statistics conjures up imaginary jobs.

Screw it… We’ll go with CoreLogic’s figures from here on.


Speaking of people who have no credibility after the housing bubble, the feds have decided whatever Angelo Mozilo did to hose homeowners and mortgage investors at Countrywide, it didn’t amount to criminal wrongdoing.

This was one of those announcements that come late on Friday afternoon to garner as little attention as possible. Officially, the feds had no comment.

So it was left to a law professor at Columbia to explain it to the Los Angeles Times: There were just too many culpable parties to pin the case entirely on Mozilo -- mortgage brokers, investment bankers, rating agencies, to say nothing of Fannie and Freddie.

“All share responsibility,” says professor John Coffee, “but none are culpable enough by themselves to compare with [Enron's] Ken Lay, Jeff Skilling or the WorldCom CEO.”

There, in a couple of sentences, is the reason the savings-and-loan scandal of the late ’80s and early ’90s netted more than 1,000 convictions of senior insiders… and the far worse scandal of Ponzi finance during the oh-oh decade has netted precisely zero.

We don’t expect this number to change: There are just too many players in Washington and on Wall Street who stand to lose. Everyone’s in on the scam… except you and me.


Behold, the world’s most livable city… for the fifth year in a row.



Vancouver once again is tops in the most livable cities ranking by the Intelligence Unit at The Economist, based on criteria including “stability, health care, culture and environment, education and infrastructure.”

Melbourne has supplanted Vienna at No. 2. Canadian and Australian cities dominate the top 10. The top U.S. entry is Pittsburgh at No. 29.

We’ve never lived in Vancouver… but it’s a lovely place for a conference in July. Which is why we convene there every year for the Agora Financial Investment Symposium.

We’ve just settled on a theme for this year’s event, one that we’ve been fleshing out in these pages: Fight or flight. Do we (and we’re speaking mostly of Americans) fight the trends of our age and refuse to give up our entrepreneurial spirit… or do we flee for more hospitable climes?

Come join us for a raucous four-day discussion in a world-class city. Early-bird pricing is still available if you call Barb Perriello at (800) 926-6575.


“Uh, you have a chart yesterday that shows the U.S. as the 13th largest oil exporter. Please explain.”

The 5: The CIA Factbook figures we cited include more than just crude… and the United States still exports a host of refined products: gasoline to Mexico, distillates for specialty fuels used by industry in Europe and natural gas liquids, for example.

Of course, the United States ceased being a net oil exporter decades ago… which is what made the oil shock of 1973 so, well, shocking.


“Gotta admit,” a reader writes after seeing yesterday’s issue, “this book -- Atlas Shrugged -- formulated my base of economic reasoning. Most college students, as well as the public, could learn more and gain a better understanding of the world as a whole from this book. I have read thousands of books, or at least novels, and by far, this is my favorite.

“I would, in my future, wish to emulate or be Ragnar Danneskjold!”

The 5: Twenty years ago, the Book of the Month Club and the Library of Congress asked some avid readers what books had most influenced their lives. Atlas came in second, behind the Bible.

Given its resurgence the last two years, we wouldn’t be surprised to see a similar result.


“I listened to Byron's excellent video presentation, but the subscribe option has not worked after five attempts. Let him know that he is missing subscribers!”

The 5: We’re sorry you ran into trouble. This link will take you direct to the order form.

Regards,
Addison Wiggin
The 5 Min. Forecast

P.S.: “I understand,” a reader wrote in yesterday, “you have some openings in the Resource Reserve. I would appreciate the details.”

The 5: Indeed, we do. We dealt with most of the pertinent details above, but here’s the executive summary…

  • Every issue, alert and special report from Outstanding Investments, Energy & Scarcity Investor and Resource Trader Alert…

  • Plus, free annual admission to our confab in Vancouver…

  • All for a one-time fee equal to what you’d pay for one year if you subscribed to each service separately.
“I am up over $35,000 alone on [Company X], writes a satisfied Energy & Scarcity Investor subscriber.

Adds a happy Resource Trader Alert reader: “On Jan. 29, 2010, [my account] was $44,461.01, and on Oct. 29, it is $76,801.88.”

Again, please review the entire rundown of benefits and privileges that come with Resource Reserve membership, right here.


Massive 5,663,804 Ounces of Silver Withdrawn From SLV

Posted: 23 Feb 2011 07:57 AM PST

"Rich Indian farmers now buy silver bars, not jewellery. Counterfeit coins from China turning up in Washington state. Interviews with Pierre Lassonde and John Embry...and much more. " Yesterday in Gold and Silver Tuesday's high gold price [around $1,411 spot] came about two hours after trading began in the Far East. From that high, gold slid to its low of the day, around $1,393 spot, which was close to the London a.m. gold fix at 10:30 a.m. GMT. Gold then rose back up to unchanged by 11:15 a.m. in New York before getting sold off about ten bucks. From there it traded sideways into the close of electronic trading at 5:15 p.m. Eastern time. Not much to see here. To say that the silver price was 'volatile' yesterday, would be an understatement. For the first half of the trading day, silver pretty much followed the same flight path as gold...with the high [around $34.40 spot] and low [around $32.40 spot] coming almost at the same time as gold's hig...


Paul van Eeden: Finding Value Amidst Volatility

Posted: 23 Feb 2011 07:25 AM PST

Source: Karen Roche of The Gold Report 02/23/2011 Cranberry Capital Inc. President Paul van Eeden still favors the natural resources sector above all others because they are "absolutely central to our standard of living, our quality of life and the technological progress we've made." Despite the dangers, frothiness of equities and absence of fundamentals to support current valuations, he says, "there are always opportunities in the market. . .you just have to recognize them." Find out where Paul believes investors can find good value in the current market in this exclusive interview with The Gold Report. The Gold Report: Paul, in January 2008, you saw the impending crash and told investors to sell everything. Three years later, what are your feelings about the economy? Paul van Eeden: A lot has changed in three years and the recession was not as deep or severe as I had expected. Many people have been adversely affected, no doubt, although it could've been much worse...


LGMR: Gold Finds Support at $1400 as Saudi King Spends $38bn to Avoid Revolution

Posted: 23 Feb 2011 07:23 AM PST

London Gold Market Report from Adrian Ash BullionVault Weds 23 Feb., 09:15 EST Gold Finds "Bargain Hunting" at $1400 as Saudi King Spends $38bn to Avoid Revolution THE WHOLESALE LONDON PRICE of physical gold held onto this week's early rise again on Wednesday, pushing back above $1400 per ounce as world stock markets fell and crude oil rose to new two-year highs as fresh anti-government protests hit the Gulf state of Bahrain. More gunfire was reported in the Libyan capital Tripoli, but eastern cities enjoyed "delirious celebrations" at the demise of Colonel Gaddafi's forty-year regime, according to the BBC. King Abdullah of Saudi Arabia – jointly the world's biggest oil producer alongside Russia, and immune so far to civil unrest – returned from 3 months of medical treatment abroad to announce a near US$38 billion package of housing projects, pay rises and unemployment insurance. "We have to appreciate that in the west, what is happening in Egypt and Nort...


CIA Agent Caught Red-Handed Aiding Pakistani Terrorism?

Posted: 23 Feb 2011 07:20 AM PST


CNN notes:

News that the American accused of killing two Pakistani men is a CIA contractor has intensified an already highly charged situation in Pakistan.

 

"Raymond Davis is a CIA Guy," read the headline in the Daily Times newspaper Tuesday.

 

***

 

Davis was jailed January 27 after fatally shooting two men who pulled up to him on a motorcycle in a bustling Lahore neighborhood.

 

***

 

The 36-year-old Davis is a former member of the U.S. Army special forces and had been employed by security firm XE Services, previously known as Blackwater.

 

Davis began working for the CIA nearly four years ago. He was assigned to Pakistan in late 2009. He was living with other security personnel at a safehouse in Lahore before the shooting incident.

 

On Monday, a U.S. government official also said that Davis was a CIA contractor providing security for CIA officers.

The U.S. at first falsely claimed that Davis was a diplomat with the State Department and should therefore be granted diplomatic immunity:

Despite the revelation of Davis' true line of work, U.S. officials on Monday renewed their argument that he has diplomatic immunity and must be released.

 

***

 

Before Monday, U.S. officials had described Davis only as an employee who was attached to the U.S. Embassy in Islamabad and who was working at the U.S. Consulate in Lahore at the time of the shootings.

But the deeper story is that Davis allegedly actively aided and abetted terrorism. As CNN notes:

Some newspapers cited unnamed sources to link Davis with "terrorist activity" and the Pakistani Taliban.

 

"CIA agent Davis had ties with local militants," read the headline in The Express Tribune.

 

The Tribune quoted an unnamed "senior police official" as saying Davis was suspected in masterminding terrorist activity.

 

"His close ties with the TTP (The Pakistani Taliban) were revealed during the investigations," the paper quoted the police official as saying. "Davis was instrumental in recruiting young people from Punjab for the Taliban to fuel the insurgency."

Indeed, one of South Asia 's largest news agencies (ANI) reports that - according to Russia's Foreign Intelligence Service - Davis was giving nuclear and biowarfare materials to Al-Qaeda:

Double murder-accused US official Raymond Davis has been found in possession of top-secret CIA documents, which point to him or the feared American Task Force 373 (TF373) operating in the region, providing Al-Qaeda terrorists with "nuclear fissile material" and "biological agents," according to a report.

 

Russia's Foreign Intelligence Service (SVR) is warning that the situation on the sub-continent has turned "grave" as it appears that open warfare is about to break out between Pakistan and the United States, The European Union Times reports.

 

The SVR warned in its report that the apprehension of 36-year-old Davis, who shot dead two Pakistani men in Lahore last month, had fuelled this crisis.

 

According to the report, the combat skills exhibited by Davis, along with documentation taken from him after his arrest, prove that he is a member of US' TF373 black operations unit currently operating in the Afghan War Theatre and Pakistan's tribal areas, the paper said.

 

While the US insists that Davis is one of their diplomats, and the two men he killed were robbers, Pakistan says that the duo were ISI agents sent to follow him after it was discovered that he had been making contact with al Qaeda, after his cell phone was tracked to the Waziristan tribal area bordering Afghanistan, the paper said.

The most ominous point in this SVR report is "Pakistan's ISI stating that top-secret CIA documents found in Davis's possession point to his, and/or TF373, providing to al Qaeda terrorists "nuclear fissile material" and "biological agents", which they claim are to be used against the United States itself in order to ignite an all-out war in order to re-establish the West's hegemony over a Global economy that is warned is just months away from collapse," the paper added.

See this, this, this and this for background.

Note: I cannot corroborate at this point that the allegations are accurate, since ANI does not link to any source materials.

When Will the Mainstream Media Be Ready To Call The NAR The Sham That It Really Is?

Posted: 23 Feb 2011 07:17 AM PST


The Wall Street Journal reports: US housing data may have understated extend of collapse. I can do naught but laugh. Are they serious? Don’t they even bother to read BoomBustBlog? The WSJ story goes on to read…

The housing crash may have been more severe than initial estimates have shown.

The National Association of Realtors, which produces a widely watched monthly estimate of sales of previously owned homes, is examining the possibility that it over-counted U.S. home sales dating back as far as 2007.

… The group reported that there were 4.9 million sales of previously owned homes in 2010, down 5.7% from 5.2 million in 2009. But CoreLogic, a real-estate analytics firm based in Santa Ana, Calif., counted just 3.3 million homes sales last year, a drop of 10.8% from 3.7 million in 2009. CoreLogic says NAR could have overstated home sales by as much as 20%.

While revisions wouldn’t affect reported home-price numbers, they could show that the housing market faces a bigger overhang in inventory, given the weaker demand.

In December, NAR said that it would take 8.1 months to sell some 3.6 million homes listed for sale at the current pace, but the number of months it would take could be even higher if sales are revised down. Any revisions wouldn’t have an impact on homeowners, but it could have consequences for the real-estate industry. Downward revisions would show that “this horrific downturn in the housing market has been even more pronounced than what people thought, and people already thought it was pretty bad,” said Thomas Lawler, an independent housing economist.

NAR said the data, which are used by economists, investors and the real-estate industry to gauge the health of the housing market, could be revised downward this summer. Lawrence Yun, chief economist at NAR, wasn’t specific about whether and by how much the revisions could reduce reported sales, and he raised the possibility that the CoreLogic estimates have understated the number of home sales. “This is a very important issue, and we are looking at it carefully right now,” Mr. Yun said.

I’m willing to go on record saying that the NAR’s economic tallies and their forecasts are simply jokes. Their “so-called” economists are shills and paid for marketing figures, nothing more. I have clearly stated this in the past. In absolute fairness to the MSM, I have been getting more airtime to espouse my decidedly contrarian views - including multiple spots on Bloomberg and CNBC. I will be a guest on CNBC's Fast Money tomorrow (Thursday the 24th) for a full hour. It should be quite fun for I do plan to spread a lot of the anti-NAR disinformation-bust juice around! Tune in to join the fun.

Alas, back to the matter at hand. Let’s reminisce via excerpts from Pay Attention to the National Association of Realtors and Their Chief Marketing Agent At Your Own Risk! and More Optimistic Fluff And Spin on Pessimistic Macro Numbers – This Type Of Reporting Simply Drives The More Intelligent, Valuable Eyeballs To Alternative Media, Ex. Blogs Wednesday, December 22nd, 2010

What is actually entertaining is to here quotes from NAR chief economists in the mainstream media (MSM). At what point do these guys lose credibility? The mere quoting of some  such as the NAR’s Yun, or to a greater extent, his predecessor, is enough to permanently lose some valuable (as in more intelligent, higher paid) eyeballs to alternative media. To wit, as excerpted from Pay Attention to the National Association of Realtors and Their Chief Marketing Agent At Your Own Risk!:

On the topic of the National Association of Realtors, and their marketing gurus chief economists, I assert that BoomBustBlog’s regular constituency is much too bright to fall for the pumping of real estate by the economist of a national realtor association. For those that may be a little more trusting, or a little less mathematically inclined, I will walk through previous proclamations that have come from the NAR and their chief marketing strategists economists…

July 2008 Yun stated “I think we are very near to the end of the housing downturn,” Yun said (AP News).

Lawrence Yun, chief economist for the Realtors, said that the housing rescue bill should play a major role in helping the housing market to rebound. He said an especially significant feature is a tax break worth up to $7,500 for first-time home buyers who purchase between April 9 of this year and July 1, 2009. Yun estimated that up to 3 million first-time home buyers could qualify for that tax break, providing a significant boost to sales at a critical time. “I think we are very near to the end of the housing downturn,” Yun said.

As a point of reference..


Of course, I can go on…

In 2007 Lawrence Yun state there would be no recession in 2008, according to USA Today. Of course, in that year I took the opposite side of that trade and said very bad things were coming. As it turned out I was a tad bit optimistic: Correction, and further thoughts on the topic, How Far Will US Home Prices Drop?, and Is this the Breaking of the Bear? (Yeah, the Bear Stearns and Lehman Brother’s collapse were an easy calls if you read the balance sheets and were realistic about leverage and the real estate situation). This  was also about the time I got into it with GGP’s CFO for calling out their insolvency. He called me names, and then they filed for bankruptcy. Of course, they had an investment grade and buy ratings from the ratings agencies and the sell side: BoomBustBlog.com’s answer to GGP’s latest press release and Another GGP update coming… (among over 700 pages of analysis, review the January 2008 archives or search for “GGP” for more research).

In my post “On the Latest Housing Numbers” of  Tuesday, November 24th, 2009, I quipped.

Lawrence Yun, NAR’s chief economist volunteered,

“We have seen some bulk purchases by investors, but we are not picking up that data through the Multiple Listing Service or through our release data, but we do know that there is some bulk purchases by investors who plan on releasing those properties within a year’s time, when they see a better market condition.”

I don’t believe “better” market conditions are coming any time soon. We are just coming off of the best market conditions anyone will see in their lifetime. Those market conditions were predicated upon unsustainable conditions, hence they came crashing down. They are crashing down, not crashed – as in past tense. I believe we have some ways to go. That is why I am not buying real estate, and I believe that those that are jumping in now are jumping in prematurely.

Personally, I don’t consider Mr. Yun to be a credible source, either. He may be smart and capable, but the extreme bias of his employer (the ultimate real property perma-bull) and the incredibly biased reports of his predecessor color his opinions by default. He is not nearly as bad as David Lereah (who was literally sensationalist-style perma-bullish) was, but he is still not objective. See  The Reggie Middleton Real Estate IQ Test – Who believes the NAR?

This is an excerpt from that post on Tuesday, 08 January 2008

From CNBC.com: Home Sales Seen Holding Steady In Coming Months

Pending sales of existing U.S. homes inched lower in November and should hold steady over the next few months, a real estate trade group said. (I ask, “Why should they do that? Credit is tighter, recession evidence is stronger. Supply is greater, and demand is lower. Hmmm, let me consult the book written by that ex-NAR guru for the answer.” )

The National Association of Realtors Pending Home Sales Index, based on contracts signed in November, dropped 2.6% in November, to 87.6 from an upwardly revised 89.9 in October.

Economists polled by Reuters ahead of the report were expecting pending home sales to decline by 0.5 percent from October’s originally reported 87.2.

The November number was down 20% from a year earlier.

The pending homes sales data suggests that the volume of sales will hold steady for a while before turning upwards before the end of the year, said NAR chief economist Lawrence Yun.

With all due respect to Mr. Yun, Mr. Lereah and the NAR, anyone swift enough to complete the registration form for this blog should know, by now, to discount this association’s data and opinions. They do not do the industry justice with this nonsense. Realtors should actually be the first in the protest line. It is their credibility that is being called into question, for this is THEIR trade group. Credibility is the key!

case_shille__change_april_09.png

Notice how accurate that NAR prediction was for 2008!

There’s much, much more to throw onto the fire…

My take: I believe that my blog’s readers are considerably above average in financial acumen and common sense. The NAR is simply not an entity to be taken too seriously, due to the obvious conflict of interest exemplified by their ex-economist, [[David Lereah]], who published some of the most absurd BS I have ever seen come from a nationally reknown organization. Examples of his work from Wikipedia: Are You Missing the Real Estate Boom?: Why Home Values and Other Real Estate Investments Will Climb Through The End of The Decade, And How to Profit From Them was published in February 2005 at just about the tippy top of the bubble (that takes some talent). One year later in February 2006, as the market is already on it’s way down, Lereah retitled his book Why the Real Estate Boom Will Not Bust and How You Can Profit from It. Lereah’s previous book The Rules for Growing Rich: Making Money in the New Information Economy touting investment in technology company equities was published in June 2000 at the onset of the collapse of the dot-com bubble.  This extreme cheerleading has died down substantially, but the overly optimistic spin is still evident with their new economist, Lawrence Yun.

I actually believe the Case Shiller graph above to be misleadingly optimistic due to my doubts about seasonality filtering and the exclusion of investor related properties (flips, see A reminder concerning popular housing indices) which are dominating the lower end of the market.

So on that note, I will present a graph that captures national economic house sales activity superimposed against the Case Shiller index,  but before I do that let’s laugh at the NAR’s ex-chief marketing strategist economist…

Publications from Wikipedia

Lereah’s book The Rules for Growing Rich: Making Money in the New Information Economy[5] touting investment in technology company equities was published in June 2000 at the onset of the collapse of the dot-com bubble.

Lereah has produced four titles on real estate investing. His most recent book, “All Real Estate is Local” was published by Doubleday in 2007. His 2005 book Are You Missing the Real Estate Boom?: Why Home Values and Other Real Estate Investments Will Climb Through The End of The Decade—And How to Profit From Them[6] was rereleased in February 2006 as Why the Real Estate Boom Will Not Bust—And How You Can Profit from It.[7] Before departing the NAR, Lereah wrote All Real Estate Is Local: What You Need to Know to Profit in Real Estate — in a Buyer’s and a Seller’s Market in 2007.[8]


NAR chief economist David Lereah’s book[6] in February 2005.

Lereah’s book[7] in February 2006 months before the real estate boom bust.

Lereah’s book on investing in information technology appeared in June 2000 as the dot-com bubble collapsed.[5]

Now, let’s put this all together to see what we get (reference each date above to the chart below. Unfortunately, I did not chart the dot.com bubble crash, which Mr. Lereah so accurately timed to the contrarian side :-) (literally, almost to the month), so we will have to leave that one out…

 

Subscribers have access to all of the data and analysis used to create these charts, in addition to a more granular application, by state in the SCAP template and by region in housing price and charge off templates – see

Click here to subscribe

And now for the myriad, and may I add, requisite, “I told you so’s”. Subscribers can feel free to click the various download links to review the relevant models, reports and analysis:

Eric Sprott: "There Is No More Silver Left"

Posted: 23 Feb 2011 07:05 AM PST


Eric Sprott made an appearance at Casey Research Gold and Resource Summit where in addition to providing a succinct summary of all his monthly letters from the past year, whose forecasts are all gradually panning out, he spoke about the prospects for gold, and particularly silver. We will leave it to readers to parse through the brief must watch clip, but here is the punchling for those wondering why increasingly more distributors are reporting indefinite lack of physical silver inventory: "There's $22 billion of silver available in the world, of which the ETFs already own half, and between you guys and us we probably own the other half... Which means there's nothing left."

h/t John


Finding Value Amidst Volatility

Posted: 23 Feb 2011 07:00 AM PST

Cranberry Capital Inc. President Paul van Eeden still favors the natural resources sector above all others because they are "absolutely central to our standard of living, our quality of life and the technological progress we've made." Despite the dangers, frothiness of equities and absence of fundamentals to support current valuations, he says, "there are always opportunities in the market. . .you just have to recognize them." Find out where Paul believes investors can find good value in the current market in this exclusive interview with The Gold Report.


Max Keiser: On Worldwide Revolts

Posted: 23 Feb 2011 06:48 AM PST

A Sound and Credible Currency

Posted: 23 Feb 2011 06:34 AM PST

Regular readers of the blog site won't choke to know it was wrong, this time by only one third. Mistaking (and showing) a chart of month-end prices for a chart of daily silver prices, Zero Hedge's pseudonymous host, Tyler Durden, missed ... Read More...



Gaddafi Threatens to Torch Libya’s Oil

Posted: 23 Feb 2011 06:08 AM PST

Yikes… Oil is up again this morning. West Texas Intermediate has blasted up to $96.78. (Barely a week ago, it was $85.) Brent is up to $109.02.

According to Reuters, Libyan oil production is already down to three-quarters of normal. And that could soon plunge to zero… If it's true that a desperate Col. Gaddafi is looking to torch the pipelines leading from his country's oil fields to Mediterranean ports.

"Gaddafi has ordered security services to start sabotaging oil facilities," a source close to the regime tells Time intelligence columnist (and former CIA case officer) Robert Baer. "The sabotage, according to the insider, is meant to serve as a message to Libya's rebellious tribes: It's either me or chaos."

"Seriously," muses our own Byron King, "I wonder if any of Gaddafi's goons will pull the trigger. Maybe… Saddam Hussein and Desert Storm sort of speaks for itself."

Just in case you need a reminder of what happened 20 years ago this month…

Jets Fly Over Kuwait
Scorched earth: US jets fly over the Kuwaiti oil wells torched by Saddam Hussein, 1991

As Iraqi forces retreated from Kuwait in 1991, Saddam Hussein ordered his troops to set fire to some 700 oil wells. Nine months passed before the last fire was put out.

Baer says if Gaddafi can't get the tribes back in line, he'll turn Libya into a Somalia…with oil. To start that process, he just released some Islamic militant prisoners to stir things up.

It may be just a bluff. Then again, Gaddafi's own interior minister just joined the opposition. Desperate men do desperate things. We'll be watching.

"Oil prices could go up substantially even from these levels," says Vancouver favorite Marc Faber. "I don't think that oil is expensive compared to other commodities or compared to other goods prices in the world."

And if that doesn't make sense to you, we'll share this chart with you one more time:

Commodity Prices 2008 vs. Today

"Further gains would, obviously, depend on some political problems," Faber continues – for instance, "some interruptions in oil supplies."

"Things are (finally) starting to come unglued in the Middle East," says Byron King, writing today from his old stomping grounds in the Texas oil patch. "Are you surprised? Much of this discord – great and small – has been festering for a long time.

"And also, for a long time, a lot of forces have been working for the pots NOT to boil over. We've seen a lot of big power accommodation toward crummy governments, run by thieves and despots, if not zealots and ideologues, if not just plain mentally ill sociopaths.

"Even the much-vaunted 'resource nationalism' of recent years is, at root, 'resource larceny' by the top dogs. Look at Libya, with 7 million people and $50 billion in nationalized oil money per year. That translates to something over $7,000 per person, yet the place is impoverished. Where did all the money go?

"At any rate, you need to understand that the post-World War II era – which was, in many respects, so favorable to the US – is just plain falling apart before our eyes. It worked until it stopped working. Now? I think it's broken pretty bad."

Addison Wiggin
for The Daily Reckoning

Gaddafi Threatens to Torch Libya's Oil originally appeared in the Daily Reckoning. The Daily Reckoning has published articles on the impact of quantitative easing, bakken oil, and hyperinflation.

Wow - This Is Timely:

Posted: 23 Feb 2011 06:00 AM PST


Here's the link to the website:  Atlas Shrugged

The trailer shows promise, but I'm sure Hollywood will screw up the true message of the book.

"Whenever destroyers appear among men, they start by destroying money (think:  the Fed/U.S. Treasury), for money is men's protection and the base of a moral existence.  Destroyers seize gold and leave to its owners a counterfeit pile of paper (think:  FDR 1933).  This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values.  Gold was an objective value, an equivalent of wealth produced.  Paper is a mortgage on wealth that does not exist...Paper is a check drawn by legal looters upon an account which is not theirs:  upon the virtue of the victims."



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Why Investing in Precious Metals is STILL the Way to Go

Posted: 23 Feb 2011 05:53 AM PST

Why I Put Almost All My Eggs Into Precious Metals “I have put almost all of my eggs in one basket – precious metals, energy and agriculture*-*with the bulk being in precious metals. These are diversified only in that they span bullion, geography and the range of very large to the very early stage junior exploration companies. A third of my investments are either in individual stocks (or their long-term warrants should they*have any) of which many of the companies are *juniors and the other two thirds are in mutual funds which invest in a range of larger-cap precious metals stocks.”* Let me tell you why*I thought it was a good idea at the time and still think it is.*Words: 1122 So*said Arnold Bock (www.FinancialArticleSummariesToday.com)*inan article back in 2005*which he has revisited and which*Lorimer Wilson, editor of www.munKNEE.com,* has edited [...]*for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be inclu...


A Sound & Credible Currency

Posted: 23 Feb 2011 05:38 AM PST

"SILVER HITS new all-time highs in Euro" proclaimed Zero Hedge on Monday. Regular readers of the blog site won't choke to know it was wrong, this time by only one third. Mistaking (and showing) a chart of month-end prices for a chart of daily silver prices, Zero Hedge's pseudonymous host, Tyler Durden, missed the true Euro-equivalent spike to €32.80 per ounce of 18 January 1980 – hit in what was then the Deutsche Mark the very same day that silver priced in Dollars also hit its all-time high to date...some 44% above this week's top.


Gold Cheap Versus Oil Signals Bullion to Rally

Posted: 23 Feb 2011 05:21 AM PST

Feb. 23 (Bloomberg) — Gold, trading near a record high, will outperform oil as surging inflation underscores the metal's role as an investment hedge, according to Credit Suisse Group AG.

The CHART OF THE DAY shows prices of gold for immediate delivery and New York-traded crude since 2008. The lower panel tracks the ratio of gold to oil, which shows an ounce of bullion buys about 15 barrels of the fuel now, compared with 26 barrels two years ago.

"We see potential for gold to outperform oil over the coming months," Stefan Graber, Zurich-based analyst with Credit Suisse, said in an e-mailed interview yesterday. "We think an ounce of gold could potentially buy a few additional barrels of oil. This assessment is based on our positive view on gold versus a neutral view on the oil market."

[source]

Gold Short Position Could Pay Off With This Scenario

Posted: 23 Feb 2011 04:50 AM PST

In this 4 minute video I explain exactly what I mean by a "short gold position." It does not mean I am bearish on gold, however the scenario I point out in this video could make money by being short gold and long another important market. The video points out what the scenario is, and which market you should be long in, against a short gold position. This is an interesting twist and a video you shouldn't miss.


Gold $2,300, Silver $150 and Looming Stock Market Crash

Posted: 23 Feb 2011 04:17 AM PST

Notes from the Cambridge House Silver Summit - Cambridge House puts on some of the best commodity-focused investment conferences in the industry and this year was no different. The February show in Phoenix, Arizona included presentations from industry heavyweights such as Ted Butler, Bill Murphy, Jay Taylor, Mickey Pulp, John Kaiser and others. Over 40 booths were filled with up-and-coming junior resource miners, including one of my favorite silver plays, Aurcana Corporation (CVE: AUN or AUNFF). Aurcana stock advanced as much as 19% today, the first trading session following the conference. Aurcana just began construction on their Shafter mine in Texas, which is estimated to be one of the top ten largest silver mines in the world. In addition the company is already producing one million ounces from its La Negra mine in Mexico and is projecting a jump to 5 million ounces per year once Shafter comes online.


Newmont Mining: Earnings Preview

Posted: 23 Feb 2011 03:44 AM PST

Zacks.com submits:

Newmont Mining Corp. (NEM) is slated to release its fourth-quarter 2010 results on Thursday, February 24 before the market opens. The current Zacks Consensus Estimate for the fourth quarter is $1.14 per share, representing an annualized growth of 0.13%.

With respect to earnings surprise, over the trailing four quarters, Newmont has outperformed the Zacks Consensus Estimate in three out of the four quarters. The average earnings surprise was a positive 13.84%, signifying that the company has outdone the Zacks Consensus Estimate by the same magnitude over the last four quarters.

Strong Preliminary 2010 Results

On January 20, 2011, Newmont reported its preliminary fourth quarter and 2010 production results. For the year 2010, gold production rose slightly to 5.4 million ounces over the previous year while copper production jumped 45% year over year to 327 million pounds. It sold 5.3 million ounces of gold at an average realized price of $1,222


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Silver Bunny is IN THE HOUSE!

Posted: 23 Feb 2011 03:42 AM PST
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