| AgAuPM.com Gold And Silver Trading System – Trade No.1 Posted: 22 Mar 2011 06:16 PM PDT Trade No.1 was made at my real money TradeFair financial spread betting account with Gold Apr 2011 Futures. Stop loss order was $16 away from opening position, which I’ll be moving once trade will be in profit. Check for updates in Comments section of this blog post to find what was the trade and screen [...]  
|
| Gold Karats & Diamond Carats; Ounces & Troy Ounces: What’s the Difference? Posted: 22 Mar 2011 06:05 PM PDT You have no doubt read countless articles on the price of gold costing "x dollars per ounce", own a gold ring or some other piece of gold jewellery and/or wear or have bought/plan to buy a diamond ring but do you really understand what exactly what you are buying? What's the difference between 1 troy ounce of gold and 1 (regular) ounce? What's the difference between 18 and 10 karat gold? What's the difference between a .75 and a 1.0 carat diamond? Let me explain. 
|
| Gold and Silver: Head and Shoulders Above the Market Posted: 22 Mar 2011 06:02 PM PDT I admit that I am pretty lazy, and I don't do a lot of technical analysis of markets and/or prices, but I do some charting of some things, and I naturally come across some of what others write about emerging chart patterns, and price-points, and channels, and bands, and stuff I don't understand even more than I don't understand any of this. 
|
| Goldman: Gold $1,480 in Next 3 Months Posted: 22 Mar 2011 06:00 PM PDT |
| Gold Seeker Closing Report: Gold Ends Slightly Higher While Silver Surges To A New 31-Year High Posted: 22 Mar 2011 04:00 PM PDT Gold climbed $5.84 to $1432.04 in Asia before it fell to see a $6.80 loss at $1419.40 by about 9AM EST, but it then rallied back higher into the close and ended with a gain of 0.07%. Silver dropped as much as 25 cents to $35.73 by about 9AM EST, but it then rose to a new session high of $36.46 by late morning in New York and ended with a gain of 0.92% at a new 31-year closing high. 
|
| GATA commemorative gold and silver coins available from AmsterdamGold Posted: 22 Mar 2011 03:44 PM PDT 11:40p ET Tuesday, March 22, 2011 Dear Friend of GATA and Gold (and Silver): Our longtime friends at AmsterdamGold have minted the official GATA commemorative gold and silver coins, gold in 1-ounce and 10-ounce denominations, silver in 32-ounce and 100-ounce denominations. The coins are absolutely beautiful and are engraved with the outline of Alain Despert's painting symbolizing GATA's challenge to surreptitious government intervention to suppress the price of the precious metals. The coins will be lasting proofs of their owners' support for GATA's work, and GATA will share in the proceeds to AmsterdamGold from their sales. An advertisement for the coins has been placed on the home page of GATA's Internet site, and you can learn more about the coins and purchase them at the AmsterdamGold Internet site here: https://www.amsterdamgold.eu/gata/index.asp?BiD=12 CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
ADVERTISEMENT Sona Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit, Extending the Mineralization of the Southwest Vein on the Property Company Press Release, October 27, 2010 VANCOUVER, British Columbia -- Sona Resources Corp. reports on five drillling holes in the third round of assay results from the recently completed drill program at its 100 percent-owned Elizabeth Gold Deposit Property in the Lillooet Mining District of southern British Columbia. Highlights from the diamond drilling include: -- Hole E10-66 intersected 17.4g gold/ton over 1.54 metres. -- Hole E10-67 intersected 96.4g gold/ton over 2.5 metres, including one assay interval of 383g of gold/ton over 0.5 metres. -- Hole E10-69 intersected 85.4g gold/ton over 4.03 metres, including one assay interval of 230g gold/ton over 1 metre. Four drill holes, E10-66 to E10-69, targeted the southwestern end of the Southwest Vein, and three of the holes have expanded the mineralized zone in that direction. The Southwest Vein gold mineralization has now been intersected over a strike length of 325 metres, with the deepest hole drilled less than 200 metres from surface. "The assay results from the Southwest Zone quartz vein continue to be extremely positive," says John P. Thompson, Sona's president and CEO. "We are expanding the Southwest Vein, and this high-grade gold mineralization remains wide open down dip and along strike to the southwest." For the company's full press release, please visit: http://sonaresources.com/_resources/news/SONA_NR19_2010.pdf
Join GATA here: An Evening with Bill Murphy and James Turk
Sponsored by Deutsche Edelmetall-Gesellschaft
Friday, April 29, 2011
Hofbrauhaus, Munich, Germany
Support GATA by purchasing gold and silver commemorative coins: https://www.amsterdamgold.eu/gata/index.asp?BiD=12 Or a colorful GATA T-shirt: http://gata.org/tshirts Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: http://www.goldrush21.com/ Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: http://www.gata.org To contribute to GATA, please visit: http://www.gata.org/node/16
ADVERTISEMENT The Gold Standard Now: It Can Work Today a dollar is worth 80 percent less than it was 40 years ago, and less than 5 percent of its value a hundred years ago. We deserve a dollar that is as good as gold, a dollar that will hold its value from year to year so we can be financially secure and our economy can generate more and better jobs. For most of America's history, our dollar was literally as good as gold. But on August 15, 1971, our politicians destroyed the link between gold and the dollar. They destroyed the foundations of our economic system. A new Internet site, TheGoldStandardNow.org, provides news and cutting-edge analysis about this most important issue and explains how the gold standard worked in the past and how it can work in the future. Visit us today: http://www.thegoldstandardnow.org/about/137-welcome-newsmax
|
| Gadhafi could transport the gold to Chad or Niger, where the gold could be swapped for currency transferred into a bank owned by the Libyan Foreign Bank — a branch of the central bank. Posted: 22 Mar 2011 03:32 PM PDT When Gadhafi falls, does Libya’s gold get leased at 1% per year? Share this:  
|
| How to Stop the Public Pension Brain Drain? Posted: 22 Mar 2011 03:17 PM PDT 
 Via Pension Pulse.
I had a great lunch today with someone from a US investment firm that manages roughly $8 billion. This person used to work for a well-known investment consulting firm and he's plugged with public and private pension plans down south.
We talked about everything: our backgrounds, my recent CCSVI procedure, my blog and how I can monetize it, future projects, the stock market, Japan, my views on hedge funds, private equity, real estate, investment consultants, and pension governance. One of the subjects we touched was how lousy the compensation system is at most US state plans. He was surprised to hear how senior pension officers at large Canadian public pension plans are so well compensated, with many senior officers making in excess of a million dollars when you include their long-term bonus (typically based on four-year rolling return over the benchmark).
After our lunch, which he graciously treated me to, he sent me this timely article written by Dan Primack of CNN Fortune, How to stop the public pension brain drain: Some of America's largest public pension systems are in crisis. And, no, I'm not talking about the trillions of dollars in unfunded liabilities. Instead, this is about how new regulations are impeding management of those systems' most lucrative assets. Some of the rules are in response to bribery scandals in states like California, New York, and New Mexico. But they threaten to make unstable financial situations even shakier (ok, I guess this sort of is about those unfunded liabilities). Just last month, California's largest public pension lost two senior investors who had helped manage around $22 billion of private equity assets for California's largest public pension. Not because of below-market salaries, but because they felt handcuffed by the new rules. Others have executive recruiters on speed-dial. So I've come up with a list of four reforms that public pensions should institute immediately. Otherwise, their money soon will be managed by newly minted MBAs whose institutional knowledge begins yesterday. 1. Stop fretting about the middlemen The pension system crackdown came after a small number of placement agents—people who help private funds raise capital—were found to have traded political favors (or cash) to secure pension fund investments for their clients. The knee-jerk reaction in some states has been to either ban placement agents or to criminalize inadequate disclosure of their involvement. This strategy is akin to baseball focusing on steroid dealers instead of on steroid use by its own players. The placement agent scandals were enabled by pension systems turning a blind eye to how certain investments were made. Was a former pension board member acting as a placement agent and raising money for his former colleagues? Did those colleagues then put pressure on investment staff to approve the deal (or worse, overrule a staff recommendation against investing)? Bribery is a two-way street, so pension systems should eliminate all nonpublic interaction between board members and investment staff. They also should enter all prospective investments into a database—including placement agent details—and create a step-by-step chronology of how the investment was introduced and vetted. 2. Fix compensation The typical public-pension portfolio manager gets a salary, plus a bonus tied to the prior year's performance. But some long-term asset classes do not lend themselves to one-year performance reviews. Private equity investments, for example, typically produce something called a J-curve, in which performance is flat or slightly negative for the first several years and then quickly curves up. Consequently many portfolio managers are credited for or discredited by the work of predecessors (since today's returns can be the result of much older investments). Public pensions should defer bonuses to such managers until more accurate data is available. Not only will that encourage smarter investing, but it could help lock up talent. 3. Commonsense travel and gift rules We obviously don't want pension investment staff receiving $7,000-a-night hotel suites from outside firms seeking business (yes, that happened). But we do want them to be able to do their job. Institute and enforce a $50 gift limit for items (golf balls, tote bags, etc.), but provide significant, supervisor-approved leeway for business-related meetings, meals, and travel. For example, if portfolio managers are expected to work on laptops during 10-hour trips from Sacramento to London, it is counterproductive to make them sit in coach. 4. Let your people leave Some states have begun pushing to prevent pension staffers from leaving to take jobs with firms that have received pension investments. Unfortunately, that could become a major impediment when recruiting new talent, particularly at large systems invested with hundreds of outside firms. My solution: Prevent staffers from hiring on only at firms where they were responsible for the relationship. If it was someone else's deal—something we'll know from our database—then fly, fly away. And exempt junior folks who do not have the authority to make decisions. Otherwise, it looks a bit like indentured servitude. The best solution may be to spin out pension investment offices into quasi-private, independent organizations, kind of like what many top universities have done with their endowments. But that isn't politically feasible. My proposed reforms, on the other hand, can be adopted immediately without too much blowback. If public pensions wait much longer, they will only keep losing their best people. And even more money. This is a subject that I can go on and on about. In my "ideal governance" scenario, all pension fund managers get compensated on six year rolling return basis. Senior public pension officers get compensated properly, based primarily on the fund's overall results, and if they deliver results, they're entitled to a decent bonus that is competitive relative to the private sector. One caveat to this: if the Fund loses 10% or more on any given year, no bonus whatsoever even if they beat their benchmark. This may sound harsh but it's a politically wise decision. As for travel and gifts, I have no problem with pension officers traveling business class but the points one accumulates should be used for future business trips, not personal trips. If the public pension fund is paying your business class trip to Asia, Europe or wherever, then you should use the points you collect from these trips for business trips or pass them to other employees who also travel for the pension fund. As for wining and dining, most pension funds have strict rules when it comes to dinners and gifts, but very few actually enforce them. Unfortunately, the pension business is fraught with potential bribes, frauds and scams. When someone can sign multi-million dollar cheques over to some fund, some consultant, some IT vendor or whatever, then they can easily arrange to get kickbacks under the table. And good luck tracking this stuff. Nowadays, anyone can set up an offshore bank account and have money wired into an account. Nobody will ever know that a kickback took place unless this idiot goes off and starts living the high life and raising eyebrows. The one scam that really pisses me off is when a senior pension officer invests hundreds of millions to some private equity fund, hedge fund or real estate fund and then goes off to work for them soon after. Public pension funds should have an iron clad rule that employees are not allowed to go work for any fund they invested with for a minimum of five years. If they do, then the pension fund should have the right to pull their money out of that fund. This is one rule that needs to be enforced. Senior pension fund managers setting themselves up on easy street by abusing their power is simply not acceptable. As for investment consultants, I agreed with the gentleman I had lunch with today. Most of them offer no value added whatsoever. There are some excellent ones, but so many of them offer bogus advice, have conflicts of interest and act like gatekeepers to US public pension funds who practice cover-your-ass politics. The SEC, FSA, and Canadian regulatory authorities should take a long hard look at the investment consulting business and clamp down on some egregious abuses and questionable practices. Finally, there is nothing wrong with public pension funds seeding internal managers who want to start their own private equity, hedge fund or other fund. We talked about that today. In the US, there is more of an entrepreneurial culture. Endowment funds have done this and so have family offices like the Bass family. But here in Canada it's rare and in Quebec, it's almost unheard of. I don't understand it. I can gather ten experienced professionals I know in Montreal and Toronto to start a top-notch multi-strategy hedge fund that would rival the best out there but nobody is willing to seed any fund up here. It's truly pathetic, as if we don't want people to succeed. If I was a large global fund looking to seed top talent, I'd come to Montreal and set up an office. You'd be surprised at how many talented individuals there are in this city who can offer you true alpha, not just bogus leveraged beta.  
|
| Where You Hide It Posted: 22 Mar 2011 03:10 PM PDT |
| Gold Price Must Close Clean Through $1,435, Then Advance to $1,451 Posted: 22 Mar 2011 02:50 PM PDT Gold Price Close Today : 1427.50 Change : 1.30 or 0.1% Silver Price Close Today : 36.271 Change : 0.269 cents or 0.7% Gold Silver Ratio Today : 39.36 Change : -0.258 or -0.7% Silver Gold Ratio Today : 0.02541 Change : 0.000165 or 0.7% Platinum Price Close Today : 1740.30 Change : -6.60 or -0.4% Palladium Price Close Today : 737.90 Change : -9.50 or -1.3% S&P 500 : 1,293.77 Change : -4.61 or -0.4% Dow In GOLD$ : $174.04 Change : $ (0.40) or -0.2% Dow in GOLD oz : 8.419 Change : -0.019 or -0.2% Dow in SILVER oz : 331.36 Change : -0.52 or -0.2% Dow Industrial : 12,018.63 Change : -17.90 or -0.1% US Dollar Index : 75.45 Change : 0.044 or 0.1% As I expected, the GOLD PRICE didn't do very much today, merely moved sidewise. Sure, it gained $1.30 on Comex, and defended an attack all the way down to $1,419.90, but it snapped right back to close at $1,427.50. That does not qualify as a rousing, unequivocal breakout over $1,425, but considering where gold was coming from in a long rise, it saved face. Stakes are very high here. Either gold closes clean through $1,435, then advances to $1,451 (2% above the 3 January high), or it has formed a broadening top. That consists of a series of slightly higher or even highs, accompanied by slightly lower lows, so that the chart shows a megaphone opening to the right. Should that be what gold has in mind, then it has quite a correction in store. However, it would need to close below the last low, $1,308, to confirm that. So gold is stuck in between, and we can't say whether it will rise or fall unless it closes above $1,436 or below $1,420. If I had to guess, I'd say gold will rise, but I'm just a natural born fool, just guessing. The SILVER PRICE added another 26.9c today to close at an altogether new high of 3627.1c. That close also took the gold/silver ratio to a new low, 39.36, marginally. Silver above 3650c will run away like half-broke horses pulling a steel-wheeled wagon over gravel. Below 3540c silver will act like the water in your bathroom sink when you pull the plug. Right now, the momentum favours higher prices. Think and recall: primary uptrend. Bull market. Several more years for silver and gold to rise. Don't let go of that, no matter how markets bounce up and down. Here's another interesting but small fact: the wholesale buy side discount on US 90% coin rose today from 75c to 70c. A tiny sign, but may prove meaningful. Stocks aquitted themselves most raggedly today. Down as much as 36 points, the Dow in the end climbed the last of four hills to close down only 17.9 points at 12,018.63 (S&P500 lost 4.61 at 1,293.77). Yet again the Dow deals with the magical 12,000, so fraught with juju in the investment jungle. Appears that yesterday marked the limit of stocks' recovery from the 11,555.48 low of the last downleg. Strengthen that notioning, the Dow closed below its 50 DMA (12,029), and more, volume dried up yesterday, never a good sign for a rising market. Finally, it remains below the downtrend line from the February high. This could be worse -- we could tie anchors and ploughshares about its ankles -- but it's quite bad enough as is. Only hint it might rise lies in the MACD, where the Dow may be struggling to turn up. Imagine a lottery where not only do you have to pay for a ticket, you have to pay the winner as well. That's stocks. Stay away. Idea keeps fidgeting in my head that the Japanese earthquake shook stock markets world-wide and they may not recover soon. Nikkei closed today at 9608, down form a 10,891 February high by almost 12%. The Nice Government Men from many nations have put their heads together and seem to be jimmying the Yen market nicely. Eded down today 0.07% at 80.91 yen to the dollar (123.59 cents to 100 yen). They have beaten it back from the deadly 124 boundary. THE US DOLLAR INDEX added a scootsh today, 4.4 basis points to 75.445. Here we go again. The buck stands at its November low, and will either find footing in a double bottom or sink clean thru that mark in a race toward, first, 74.23 (Nov. 2009 low) or 70.70 (2008 low). It's ridiculous trying to forecast a currency exchange rate technically, because central banks manipulate all rates. The dollar has sunk from 120 in 2001 to 70.70 in 2008. Y'all think that happened by accident to a bank that can print or withdraw as many dollars as it pleases? It happened because somebody in the Bush (and now Obama) regime decided to let the dollar depreciate. What? You, there! Mushroom! You object to that policy? You whine that it will pauperize orphans and widows and pensioners? Quiet, mushroom! You can't make a central bank omelette without breaking eggs, and if you're not careful, we might just throw in some mushrooms, too. On this day in 1765 the English parliament passed the Stamp Act, the first direct tax on American colonists. It was NOT popular, and parliament repealed it a year later. Speaking of stamps, they tell a fairly accurate tale of inflation. When I was a boy, a first class stamp cost 4 c. On this day in 1981 stamps went from 15c to 18c. On this day in 2002 (I think this is National Raise Postage Rate day) the rate was raised from 34c to 37c. Today it costs 44c, and congress ain't about to repeal that. Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.- Franklin Sanders, The Moneychanger The-MoneyChanger.com© 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. 
|
| Fukushima Smoking Gun Emerges: Founding Engineer Says Reactor 4 Has Always Been A "Time Bomb", Exposes Criminal Cover Up Posted: 22 Mar 2011 02:21 PM PDT 
It was only a matter of time before someone grew a conscience, and disclosed to the world that in addition to the massive cover up currently going on with respect to the true extent of the Fukushima catastrophe, the actual plant itself, in borrowing from the BP playbook, was built in a hurried way, using cost and labor-cutting shortcuts, and the end result was a true "time bomb." Bloomberg has just released a report that if and when confirmed should lead to the prompt engagement of harakiri by the Hitachi executives responsible for this unprecedented act of treason against Japan's citizens. Quote Bloomberg: "One of the reactors in the crippled Fukushima nuclear plant may have been relying on flawed steel to hold the radiation in its core, according to an engineer who helped build its containment vessel four decades ago. Mitsuhiko Tanaka says he helped conceal a manufacturing defect in the $250 million steel vessel installed at the Fukushima Dai-Ichi No. 4 reactor while working for a unit of Hitachi Ltd. in 1974. The reactor, which Tanaka has called a “time bomb,” was shut for maintenance when the March 11 earthquake triggered a 7-meter (23-foot) tsunami that disabled cooling systems at the plant, leading to explosions and radiation leaks....“Who knows what would have happened if that reactor had been running?” Tanaka, who turned his back on the nuclear industry after the Chernobyl disaster, said in an interview last week. “I have no idea if it could withstand an earthquake like this. It’s got a faulty reactor inside.” What follows is the harrowing tale of a criminal cover up at the only reactor that luckily was empty when the catastrophe occurred. We can only imagine what comparable horror stories will emerge in the next several days as other whistleblowers emerge and disclose that Reactors 1 through 3 (which unfortunately do have radioactive fuel in their reactors) passed the same "rigorous" quality control process that makes them the same time bombs just waiting or the signal to go off (and probably already have... but since the truth is the last thing the public will uncover one can only speculate). More on this sad story of criminal corruption and incompetence from the bottom all the way to the top, from Bloomberg: Tanaka’s allegations, which he says he brought to the attention of Japan’s Trade Ministry in 1988 and chronicled in a book two years later called “Why Nuclear Power is Dangerous,” have resurfaced after Japan’s worst nuclear accident on record. The No. 4 reactor was hit by explosions and a fire that spread from adjacent units as the crisis deepened.
Hitachi spokesman Yuichi Izumisawa said the company met with Tanaka in 1988 to discuss the work he did to fix a dent in the vessel and concluded there was no safety problem. “We have not revised our view since then,” Izumisawa said.
Kenta Takahashi, an official at the Trade Ministry’s Nuclear and Industrial Safety Agency, said he couldn’t confirm whether the agency’s predecessor, the Agency for Natural Resources and Energy, had conducted an investigation into Tanaka’s claims. Naoki Tsunoda, a spokesman at Tokyo Electric Power Co., which owns the plant, said he couldn’t immediately comment.
Tanaka, who said he led the team that built the steel vessel, was at his apartment on Tokyo’s outskirts when Japan’s biggest earthquake on record struck off the coast on March 11, shaking buildings in the nation’s capital.
“I grabbed my wife and we just hugged,” he said. “I thought this is it: we’re dead.”
For Tanaka, the nightmare intensified the next day when a series of explosions were triggered next to the reactor that he helped build. Since then, the risks of radioactive leaks increased as workers have struggled to bring the plant under control.
Here is why one should not trust anything coming out of the authorities out of TEPCO and out of all other pundits who now rely on what is certifiably faulty information: Tanaka says the reactor pressure vessel inside Fukushima’s unit No. 4 was damaged at a Babcock-Hitachi foundry in Kure City, in Hiroshima prefecture, during the last step of a manufacturing process that took 2 1/2 years and cost tens of millions of dollars. If the mistake had been discovered, the company might have been bankrupted, he said.
Inside a blast furnace the size of a small airplane hanger the reactor pressure vessel was being treated one last time to remove welding stress. The cylinder, 20 meters tall and 6 meters in diameter, was heated to more than 600 degrees Celsius (1,112 degrees Fahrenheit), a temperature that softens metal.
Braces that were supposed to have been placed inside during the blasting were either forgotten or fell over when the cylinder was wheeled into the furnace. After the vessel cooled, workers found that its walls had warped, Tanaka said.
The vessel had sagged so that its height and width differed by more than 34 millimeters, meaning it should have been scrapped, according to nuclear regulations. Rather than sacrifice years of work and risk the company’s survival, Tanaka’s boss asked him to reshape the vessel so that no-one would know it had ever been damaged. Tanaka had been working as an engineer for the company’s nuclear reactor division and was known for his programming skills.
Saving Hitachi billions by putting millions at risk: “I saved the company billions of yen,” said Tanaka, who says he was paid a 3 million yen bonus and presented with a certificate acknowledging his “extraordinary” effort. “At the time, I felt like a hero,” he said.
Over the course of a month, Tanaka said he made a dozen nighttime trips to an International Business Machines Corp. office 20 kilometers away in Hiroshima where he used a super- computer to devise a repair.
Covering up the lies with a sheet, and bribing with golf and hot springs: Meanwhile, workers covered the damaged vessel with a sheet, Tanaka said. When Tokyo Electric sent a representative to check on their progress, Hitachi distracted him by wining and dining him, according to Tanaka. Rather than inspecting the part, they spent the day playing golf and soaking in a hot spring, he said.
The guy wouldn’t have known what he was looking at anyway,” Tanaka said. “The people at the utility have no idea how the parts are made.”
After a month of computer modeling, Tanaka came up with a way to use pumpjacks to pop out the sunken wall. While it would look like nothing had ever happened, no-one knew what the effect of the repair would have on the integrity of the vessel. Thirty- six years later, that reactor pressure vessel is the key defense protecting the core of Fukushima’s No. 4 reactor.
“These procedures, as they’re described, are far from ideal, especially for a component as critical as this,” Robert Ritchie, Professor of Materials Science & Engineering at the University of California of Berkeley, said in a phone interview. “Depending on the extent of vessel’s deformation, it could possibly lead to local cracking in some its welds.”
"The father of the Japanese Chernobyl": After the meltdown at Chernobyl in 1986, Tanaka was asked to narrate a Russian movie documenting the disaster. A team of Soviet filmmakers had taken 30 hours of footage inside the plant, getting very close to the ruptured core. The movie’s director died of radiation poisoning about a year after the filming. While watching the footage, Tanaka had a breakdown.
“All of a sudden I was sobbing and I started to think about what I’d done,” Tanaka said. “I was thinking, ‘I could be the father of a Japanese Chernobyl.’”
Two years later Tanaka says he went to the Trade Ministry to report the cover-up he’d been involved in more than a decade earlier. The government refused to investigate and Hitachi denied his accusations, he said.
Everybody lies. “They said, if Hitachi says they didn’t do it, then there’s no problem,” Tanaka said. “Companies don’t always tell the truth.”
So... is there still someone who believes anything coming out of Fukushima? And anyone who thinks that spraying water on overheating reactors from hopelessly irradiated firetrucks will actually do anything at all?  
|
| FMX Connect Debunks The Reverse Psychology In Goldman's "Buy Gold" Recommendation Posted: 22 Mar 2011 01:46 PM PDT 
Late last week, Zero Hedge pointed out that Goldman Sachs had come out with yet another flip flop piece on gold, having recommended that clients should go long, then short, then long again, pretty much depending on which way the wind blows. We have long been skeptical of Goldman calls on anything, let alone gold, as the firm, just like JPMorgan is very much fundamentally conflicted any time it has a bullish "recommendation" on any precious metal due to the very intimate influence gold and other commodities have on Fed presidents' perception of inflation (and the last thing one would want is for Bernanke's deflation scare tactics to be doubted by more than just Dallas Fed's Fisher, who despite lofty rhetoric has yet to back his words with even one abstaining vote). That said, our skepticism about Goldman's sudden shift in bias has been validated by FMX Connect, which has conducted a forensic analysis of just what Goldman is seeking to achieve with its most recent recommendation. We continue to be far more bullish on any price appreciation prospects for gold, when Goldman (not to mention that other clown on TV), are bearish on gold, than the inverse. From FMX Connect: Gold Prices to Hit $1,480: Goldman Advises to buy a Deferred Expiration We read an interesting sales pitch on the Street.com Friday. Here is an excerpt:
“The investment bank said in a research report Thursday that it expects gold to rally "towards our 3-month price target of $1,480" an ounce. Goldman is recommending investors get long on gold by buying the December 2011 futures contract currently trading at $1,426.10 an ounce.”
To restate:
“Buy Gold. Buy it in a less liquid, wider bid/ask market contract than April GC or GLD and buy it through and/or from us. Buy a contract whose liquidity will also most likely not be there when you need it most whether you are profitable or losing money.”
Forget the bank’s opinion. We ourselves are bullish. But it is commonly agreed among paranoid yet savvy traders that if Goldman is recommending you to buy, it is because they are already long and are maybe looking for an exit strategy for themselves or a client they favor.
No doubt, sometimes you make money getting long when GS says “Buy”. And that is because GS has uncovered a soft spot and the market will overshoot even their inventory overhang being liquidated. Or because their own client told them to buy. Or perhaps you were an early entrant in their “find the bigger fool” race. But sometimes you don’t make money.
Here is what we want to focus on: The recommendation of buying a deferred expiration future when so many more logical choices are available. Warning: lots of derivative talk ahead. We were on a caffeinated roll when we wrote this and didn’t make the time to translate to normal English.
Why the recommendation is Bad or at least not optimal for most people.
The real poker-tell here for us is how the bank is recommending you to get long.
“…get long on gold by buying the December 2011 futures contract…”
Right off the bat the math is wrong. Using the warped logic that recommends buying deferred expiration futures: A three month target of $1480 translates to an August future at the latest. Why would you tell someone to pay more carry cost than necessary? But let’s look at the implications of any deferred future recommendation as a market taker (i.e. lifting offer/ hitting bid client)
Let us now count the ways that this December purchase is both ridiculous, negligent, and possibly the most obvious tell on earth as to what their position actually is.
1. December futures are less continuously liquid than their front month counterpart, currently the April contract. Which means the implicit fee from the bid/ask spread will be bigger on entry into the long position. Is this added premium worth it? NO. Gold is Gold, and the difference in price between April futures and December futures is the opportunity cost of money. Gold today is gold tomorrow plus the cost of how much interest it would be to borrow money to buy the contract. Note we said continuously liquid. There are times when December will be almost as liquid as April (with a wider bid/ask no doubt), but the real hidden hazard is continuity. Translation: “When you NEED to get out, because of the gold market washing out, the stock market washing out, you kids college tuition due, war, peace, pestilence, or whatever…..that exit liquidity will be AWOL relative to the front month’s liquidity.
2. If there ever were a short squeeze event like in Silver and spreads went backwardated, guess which contract would benefit? April. So as unlikely as it is to happen, buying December takes the whole homerun from physical delivery issues right off the table. You are actually short optionality on a short squeeze. Guess who is long it? Speaking of Silver: how is it that GS didn’t tell their clients Silver would go backwardated? It was the trade of the year and much easier to see than if the market itself would go up or down. Do you think they missed it? We doubt that. We also doubt they would let you in on it until the trade was exhausted. We know of two hedge funds that didn’t miss it, and they told no one anything on their bet. We found out after the fact. When JPM crushed silver spreads and carried out a prominent futures local out on a $10MM stretcher, were their clients in on that one as well? We wonder if GS was caught on the other side of that disaster. Probably not. They probably benefitted. But by all means buy gold because they think it’s going up. Enjoy the crumbs from a TBTF bank’s best trades. It will also come with one of those neat oval stickers you can put on your Land Rover
3. Try getting out when you have to, upon exit especially in a market washout scenario, Murphy’s law applies. The marketmaker of last resort will be Goldman. And guess what he has on his book as your position being, LONG and WRONG. The exit vig will kill you much more than those low-low commissions promised by your benevolent banker.
A Graphic Interlude: What Determines a future contract’s value
These charts are on different scales and not perfect renditions. But you see the point. The difference (for now) in gold future expirations is a function of interest rates, be it treasuries, LIBOR or some other correlated instrument that measures opportunity cost of carry. Futures are just synthetic forwards and vice versa. There is no benefit to buying less liquid instrument unless you are the marketmaker and can make more money in bid/offer fees than you lose in cost of carry arbitrage. There is a reason these curves are similar. Any variation is arbitrage, though not without risks. A future contract in Gold’s value is a mathematical equation.
Spot price x days to expiration divided by 365 x the risk free rate of money for that time period + some storage cost factor= the future price.
There are 2 scenarios that will change that math. When a shortage of physical gold reflects a need to roll futures to spot (unlikely but we can pray!) or when aliens land that eat Dec gold and crap April gold (Moonshot contango)
Also, buying a December future contract does not limit your downside risk NOW as many people think. “It’s Gold in December, not now right?” There is another word for that. It is called a DECEMBER CALL OPTION.
Why the Banks may be legitimately recommending this tactic and why that recommendation assumes you are too stupid to understand the risks of getting long another way: “You may be holding it for a long time and we are trying to save you the rollover cost execution.”
a. Math is math. Rolling over your long every expiration will cost approximately as much money as the complete contango from April to December right now. Add in the “We know you’re a buyer so we’re gonna back off and raise our Dec. ask price because you are a captive client” and you will most likely get crushed. They can’t fade you in April. They have more competitors there.
b. Even if a. is wrong and they are not fading you, and the monthly rollover carry is a tick or 2 more than just buying and holding the December future, we’d rather pay that liquidity premium any day instead of being kept on hold while our broker, banker, AND counterparty susses out our position before making a market in a back month future. Even if you execute the Dec contract for yourself on a screen, who do you think is bidding up the December contract with no fear of anyone selling it to them? They borrow at 0.00% interest. Their staying power is bigger than you and your 18% visa card. And they know you are coming to buy. Its Bayesian probability and asymmetric risk for them. You are toast. Their whole commodity model has de-evolved into a Martingale trade, And Double Zero is the Fed going under.
c. If it were more efficient to buy December futures than to buy April and roll them over, there would be no back month independent marketmakers or arbitrageurs, because there wouldn’t be sufficient edge to support their trading. But yet there are plenty of back month futures marketmakers willing to make a market in something you know infinitely less about than they do. Back month marketmaking is not a public service. Meanwhile, there are hardly any spot month independent marketmakers anymore, because the market is just too tight to make a living unless you are arbing another venue. Natural flow as a result of transparency and technology makes the market now. December, not so much.
Why they may be recommending this tactic with less than your best interests at heart:
1. They could already be long December contracts given to them from producers who hedged production last year. The Bank’s own hedges could be in April and they seek exit liquidity on their December long leg while they unwind their shorter dated leg, which is infinitely more liquid for them.
2. They are long April and are perfectly happy putting on the April/ Dec spread at higher than interest rate differentials. Specifically, 8 month rates will be less than what you pay buying December at a price while April is trading at a lower price. Example: they sell Dec, buy April and collect a cost of carry spread of say, .25% and then trade a bond spread that charges them .15%. Tadaaa, inefficient markets make them money.
3. Because their market share in commodities has shrunk since ETF’s have trumped their own GSCI for retail flow, and they have to make up some “special” reason to buy a December contract in Gold.
4. Maybe they are helping to create exit liquidity for a client they give a shit about, someone like Paulson? Free Abacus with every Dec future?
5. Some other reason our paranoid minds haven’t thought of.
In the one size fits all category, they should be telling you to buy an ETF. No rollover risk, less entry and exit vig and no cost of carry. But they can’t control that transaction can they? Unless of course they expect a paper versus physical delivery issue. In which case you should be long April, not December.
Even if their idea is legitimate and we’re wrong. They should at least describe the risks of buying a deferred expiration contract and not in some fluff piece by shill Jim Cramer’s site.
The irony of a good marketmaker is that his success attracts competitors and his service is then no longer needed. As these banks make less money on tighter bid/ask spreads they seek legislative protection of their franchises, less transparency, restrictions on competition and such. Call it white-collar welfare. Failing that, they seek more and more arcane ways of convincing you to put on a position which could be executed much less expensively. They seek to migrate your positions into the desert of liquidity. Where transparent light rarely shines. This way the bodies are harder to find if it blows up. They are in a war with exchanges as well. Exchange products are trumping bank intellectual capital and salesmanship. And so the banks are trying and succeeding in buying pieces of them now. There is a new wall going up, and it is being constructed by the government around the Exchanges. The banks want to be on the right side of that wall. Even while they rail against the exchange clearing monopolies, they want in. But we digress.
We are Bullish on Gold
Here is what we are telling you at the most basic level: if you are bullish, and haven’t fallen asleep yet reading this; buy the front month contract and use some reliable methodology to generate a stop loss. Be it technical analysis, bank roll management, voodoo, interest rates or whatever. Just have a level to get out if you are wrong.
If you insist on buying a December futures contract, the screen market will be 2 to 3x as wide as the April, and we’re sure higher than the cost of carry. Whatever gets you through the night we guess. Vaya con dios.
If you wish to express your position in options, consider a tight December call spread or a ratio if you are not afraid of margin calls. But learn what we are saying here first. Google it or email us. We’ll respond.
If you want to get fancy, do what the pros do, a covered write. Buy April Gold. Then ask yourself at what price do you want to get out? Goldman says $1480.00. If you agree, sell a December 2011 $1500 call and create a dividend for yourself if the market doesn’t get there. If it does, laugh to the bank. Just make sure you have the capital to handle a margin call, even as you are making profits. Keep your powder dry and don’t put too much in any one idea.
 
|
| Guest Post: Expanding The Polity Posted: 22 Mar 2011 01:19 PM PDT 
Submitted by Daniel Cloud Expanding the Polity
American foreign policy theory divides into two main schools. Both have been useful in the past, but neither fits the world we have to deal with now.
On one side are realists, who believe that nations try to ‘balance’, try to make sure that no one of their potential rivals becomes powerful enough to dominate them. Wars, in realist theories, occur when the relative capabilities of nations change, and serve to ratify such changes. In such a dangerous world, national security is a concern that trumps everything else, and weakness only encourages aggression.
The problem with this model, at the moment, is the utter and complete lack of any sort of balance between the military capabilities of the United States and the capabilities of its potential adversaries. It’s possible to imagine future contingencies in which the concept of a balance of power would once again become relevant, but right now we might be better served by a theory that involves some sort of snowball effect.
On the other side are Wilsonians, who are impressed by the historical evidence that democracies don’t fight democracies. They essentially agree with Immanuel Kant, who argued, in Perpetual Peace, that a world of liberal states would be a world free of war. Kant, however, went one step further, suggesting that such a world would eventually become a sort of global federation, as the long habit of peaceful collaboration caused mutual trust to harden into mutual obligation. Once this occurred, of course, the Wilsonian foreign policy model would no longer apply, because international war would cease to be the issue – the security problem would then revolve around the potential for civil wars within the federation.
That’s a theory that seems to involve a snowball, or ‘bandwagoning’ effect. Does it fit our world? Has this happened yet? Are our various current wars international conflicts, or civil conflicts within a global polity, or something else? Political realities are often papered over with polite fictions. How could we tell?
It’s worth pausing for a moment to think about how a confederation like that might actually coalesce. If some plausible mechanism bears a close resemblance to the pattern of recent history, we’ll have more reason for trying to look at world politics through this Kantian lens.
We shouldn’t make the mistake of thinking in terms of an American empire. (Americans, especially, should resist the temptations of this simplistic image, because actually acting as if we thought we had a genuine empire would destroy the whole system we’ve already spent so much good blood to build.) The confederation sometimes presents that appearance, but appearances can be deceiving, and the voters out in Iowa are actually no more in charge of the whole thing than anyone else is.
The United States does now seem to effectively claim a monopoly on the legitimate use of force in interstate relations, a role it began to take on after the Second World War, and assumed more decisively after the collapse of the Soviet Union with the first Gulf War. It occupies the role of guarantor of international borders as a result of its historic role as leader of the Western alliance against the Soviet threat, and because it can, and because the costs of not doing so are unthinkable.
What advantages does it actually derive from this rather costly and difficult role? What makes its enormous military expenditures politically possible? Maintaining a powerful military force is a drag on the American economy in the short run, but probably beneficial in the long run, because of the technological prowess it creates. As George Soros suggests, the safety provided by being the world’s preeminent military power also goes along with the advantages associated with issuing the world’s reserve currency. These basically amount to being able to print money when you’d like to, rather than when you’re forced to. When America needs low interest rates, it can lower them, and when it needs high ones, it can raise them.
Everyone else has to first worry about what the Americans are doing. If they raise rates when American rates are low, their currency will appreciate against the world’s reserve currency. If they lower their rates when American rates are high, their currency will depreciate against the reserve currency. Stable exchange rates are better if you want to take advantage of the global marketplace that lies at the heart of the whole arrangement. So, over the last few decades, monetary policies and business cycles around the world have tended to get synchronized with the monetary policy and the business cycle of the manager of the reserve currency. Amplitude still varies from country to country, but the relative phases have increasingly tended towards coherence. One global business cycle produces, in the world’s democracies, one global pattern of voter behavior. As electoral cycles become synchronized as well, conservative or liberal waves can sweep through the whole system.
While the security created by American military preeminence makes the Fed the de facto world central bank (run entirely by Americans, at least in theory for avowedly American purposes) it is global civil society that has the real power in this system, and American military action is restrained by world public opinion, not in a position to restrain it. In the short term, an American president can ignore the preferences of non-Americans, but over the long run, the costs to his political party will be high, because what outsiders think of us powerfully influences the way we see ourselves. Most of the time, it’s easier to just do what’s expected of you.
(The ever-increasing volume of complaints about American policies by the rest of the world doesn’t actually reflect increasing American disregard for world opinion, instead it reflects a stronger and stronger expectation by the rest of the Polity that we will consider their preferences before making decisions. The constant criticism just tells you that criticism gets listened to…)
The federated democratic states are each still legally sovereign, and of course will remain so, all through the process of coalescence into a single polity, just as a feudal lord can retain notional autonomy even as his domain is subsumed into a centralized state. (This makes the UN seem rather like Versailles…)
Within each liberal state, the people are sovereign, exercising their sovereignty, through their elected officials, to preserve their own rights. A trans-national civil society with synchronized business and electoral cycles erodes the imaginary boundaries between these sovereign peoples, with business deals and marriages and cable news services and medical journals and all manner of human social entanglements creating a densely interconnected web with relatively few degrees of separation between physically and socially distant individuals. More and more, world public opinion becomes just that, world public opinion. Where there is one public, there is one sovereign, a ‘people’ not in the sense of sharing some exclusive story about ethnic or national identity, but in some other, modern sense that perhaps has something to do with the fact that we all have access to the same Internet and the same airplanes. You know, us.
Where there is only one sovereign, there is one de facto polity, which wears its associated ‘sovereign’ nation-states as the antiquated federal apparatus through which it exercises power. It’s a disorganized, decentralized state, with no written constitution, and a confusing tangle of institutions and customs, rather like the United Provinces in the 17th century, or perhaps the Holy Roman Empire. Not a very well-institutionalized polity, really a bit of a mess, but workable and, on the whole, fairly democratic.
It’s tempting to call this system ‘the global failed state’, but this would suggest a process of deterioration rather than one of coalescence. Perhaps ‘the nascent global state’ is better. But let’s give it a name from science fiction instead, let’s just call it the Polity. It increasingly seems that such an entity exists, whether we like it or not. Not an American empire, but a confederation of liberal states in which certain American institutions (the Fed, the military, the imperial presidency) play a special role, one that often conflicts with their formal constitutional obligations to American voters.
The real world is more complicated than Kant’s theory, though. A new polity doesn’t spring into existence in a second, it slowly crystallizes. The process is deceptive, because political order is a critical-mass phenomenon. Many social institutions have a hard time existing in the absence of other social institutions. Starting from Hobbesian anarchy, civil peace is reached by a process of bandwagoning, of people choosing to back the winning side once they see that others have chosen it. Both the evolution of civil society and the establishment of the rule of law are processes that tend to accelerate towards the end, often in concert. For a long time, it seems like nothing is happening, and then suddenly it’s all going very quickly.
Not everyone joins up for the same reason. Kant’s voluntary federation of liberal states, in the real world, becomes a heterogeneous agglomeration of states of various stripes. In states that already were liberal to start with, no real decision to join was ever made, it just happened, as the result of a large number of obvious-seeming choices about apparently unrelated things. States that now become liberal join the Polity almost automatically. But there are also some illiberal regimes that have made themselves parts of the coalescing polity to some limited degree. Egypt, until recently, was one such place.
Places like that, places where one party or one person or one ethnic minority or other exclusive group has a permanent monopoly on power, can be in the global polity to some limited degree, but they’re not really of it. I’ll call those countries foederati.
Becoming a foederatus is a strategic choice by the rulers of an illiberal regime. The intent is seldom to actually be subsumed by the Polity, though that is what tends to happen in the end. Instead, faced with the multi-pronged challenge of the confederation of democracies and its associated civil society, the cohesive minorities that govern these places try to cope with that challenge by allying themselves with the challenger, to preserve their own regime by attaching it to an antithetical one.
This is basically impossible in the long run, because in gaining the good things an alliance with the Polity has to offer, people in places like Egypt also acquire the skills and attitudes needed to assert their natural rights. As we’ve recently seen, military cooperation with the Polity leads to greater military competence and an enhanced sense of professional pride among officers, which tends to evince itself in a reluctance to fire on civilian demonstrators. Modern communications bring modern kinds of social complexity. Economic development and better education are deeply subversive of repressive regimes. Most of all, the rule of law, so essential to integration with the world economy, brings with it values and attitudes that are not at all consistent with the maintenance of an illiberal government.
The Polity, no matter what its constituent states want, just can’t stop itself from subverting illiberal regimes, simply by so visibly being what it is, an attainable utopia. When the crisis finally comes, it has no choice but to try to restrain its ally from using excessive force, but only egregiously excessive force can preserve a repressive regime when its citizens rise up against it. Because the Polity is otherwise a good, loyal, and safe ally, it will probably be influential when it does this, so attempts to change a foederatus into a full member of the Polity by means of people power can often succeed.
The only alternative to foederatus status, for an illiberal regime in the modern world, is the status of outsider or pariah state. States like Burma and North Korea are not part of the Polity, and are somewhat immune from its revolutionary influence. Libya under Qaddafi was such a place, and Iran is an outsider as well. In that sort of place, excessive force will be used against protesting citizens, and it is harder for people power to succeed. War by the Polity is likely to be required for the regime to change.
Since the Polity is understandably reluctant to undertake such wars – there is little for it to gain, and much for it to lose – this is a policy choice that is usually relatively stable in the short term. The price of this immediate stability is being denied the many benefits association with the Polity brings, from freedom from famine to foreign direct investment. The pariah state has to freeze its society in some particular awkward shape to keep it from morphing into a variant of the Polity’s, but this static society is confronted by a constantly changing and developing challenge from the outside world. In the end, some new technology or idea will overturn it, and the outsider will join the Polity anyway, late, and with little leverage.
All of this has interesting implications for the question of what will eventually happen to the two most important foederati, China and Saudi Arabia. Both regimes have lost the ability to censor effectively, to keep information from their citizens. It’s not clear that either system is stable under these circumstances. (If there is no genuine political need to keep their citizens in the dark, why would they ever have devoted so much energy to it?) Both have recently shown signs of worrying about the possibility of political disturbances. China’s expenditures on internal security are enormous. Last week’s announcement of a freeze in its nuclear power program seems to reflect considerable anxiety about domestic public opinion. The recent downward revision of projected GDP growth rates – from ten percent per annum down to seven percent, a very sharp self-downgrade – is indicative of a decision to shift to prioritizing political stability over economic development, because what worries the Party most (we can see why from the Egyptian case) is the political effect of inflation.
We’re used to the diplomatic assumption that these two can do what they want, in terms of repressing their own populations, because their power will make the sovereign states of the Polity reluctant to antagonize them. This is still true, but it really doesn’t matter any more. Civil society is in charge in the Polity, not the states. Diplomats can’t commit world civil society to accepting state terror, or the repeated, highly visible violation of basic human rights. No matter what they promise, it won’t, it can’t. So the Saudi and Chinese regimes can easily earn its enmity.
In the full glare of modern communication technology, egregious acts of excessive violence against unarmed civilians in the context of a people-power event will eventually evoke a very hostile response from world civil society. In both of these cases the illiberal regimes involved have tried to walk a very fine line, fully availing themselves of the advantages of association with the Polity while attempting to sterilize all of its subversive effects. The decision to revert to full pariah status would be a politically difficult one, extremely costly in economic terms. But that is what the maintenance of their present repressive regimes in the face of some future Jasmine Revolution in their own countries would require, because the repeated use of excessive force on unarmed Saudi or Chinese civilians would make those regimes pariahs in the end, whether the Polity’s diplomats and politicians wanted it to or not.
Will the Chinese, or the Saudis, really prefer that dead-end path to the perils of genuine political reform? The problem with reform is that it’s risky, that nothing is more likely to produce a revolution than reforms that are timid, or poorly executed, or ill-conceived, or that simply started too late. It should be clear now, though, that the risk is not one that can be permanently avoided, and if you have to do it, it’s better to begin before events force your hand. Certainly the risks associated with political reform are preferable to the risks associated with pariah-hood, and in the long run the reformer’s country will be the more influential within the Polity once it joins.
The calculation isn’t all that hard to make, given the now-obvious risks of delay. It’s just too late, in either case, for the elite to back out; the only way out of the trap they’ve put themselves in is by going forward, and breaking through to full Polity membership. So expect to see one or both of these two countries voluntarily lead a new wave of genuine political reform among the foederati sometime fairly soon. Joining the Polity as a full member may not be a concept that appeals to their aging elites, but it’s much, much better than the alternative, than abandoning development as a policy goal, than international isolation and an eventual civil war. Even by Saudi or Chinese standards, Turkey and South Korea aren’t really such awful places, not when you compare them to Iran and North Korea; and there’s just so little reason to do things the hard way, when you’re obviously eventually going to end up joining the Polity one way or the other, unless some clever dictator quickly figures out a way to somehow dis-invent the Internet...
Daniel Cloud
(Readers who enjoyed this post might also enjoy The Lily, available here)  
|
| Richard Field: Regulators as Source and Perpetuator of Financial Instability Posted: 22 Mar 2011 11:19 AM PDT 
Below is a comment from my friend Richard Field of TYI, LLC, "a consulting and technology firm focused on the Future of Finance." Richard is an expert on structured finance and understand the market at the sub-atomic, loan level. He correctly points out that regulators are the problem, not the solution. Chris Q: Is it fair to say that financial regulators are both a source and perpetuator of financial instability?
Yes.
Financial regulators have a unique position. They are the only financial market participant who can see the current asset and liability level data at any financial institution.
Please reread the preceding sentence as it is the key to understanding why financial regulators are both a source of and perpetuator of financial instability.
No other financial market participant can see current asset and liability level data at a financial institution or in a structured finance security. All other financial market participants receive periodic consolidated financial statements. The only exception is management which can see the current asset and liability level data for the financial institution they run and the structured finance securities they service.
Why is the regulators' monopoly on current asset and liability level data important?
#222222; font-family: Arial,Tahoma,Helvetica,FreeSans,sans-serif; line-height: 18px;">Our financial markets are based on the idea of combining the notion of disclosure with caveat emptor [buyer beware]. As the #213abb;">FDR Framework puts its,
- #222222; font-family: Arial,Tahoma,Helvetica,FreeSans,sans-serif; line-height: 18px;">Governments are responsible for disclosure. They must ensure that market participants have access to all the useful, relevant information in an appropriate, timely manner;
- #222222; font-family: Arial,Tahoma,Helvetica,FreeSans,sans-serif; line-height: 18px;">Market participants are responsible for doing their homework [trust, but verify] using the disclosed information.
#222222; font-family: Arial,Tahoma,Helvetica,FreeSans,sans-serif;">With its monopoly on information, regulators interfere with the functioning of the financial markets when it comes to financial institutions. The monopoly prevents market participants from being able to do their homework.
#222222; font-family: Arial,Tahoma,Helvetica,FreeSans,sans-serif;">
#222222; font-family: Arial,Tahoma,Helvetica,FreeSans,sans-serif;">How does this monopoly make regulators a perpetuator of financial instability?
#222222; font-family: Arial,Tahoma,Helvetica,FreeSans,sans-serif;">
#222222; font-family: Arial,Tahoma,Helvetica,FreeSans,sans-serif;">As discussed in the post, #213abb;">Bank Capital and Bank Runs, banks are unstable because depositors and investors have no way of knowing if a bank is solvent or not. If doubt about a bank's solvency is raised, the best course of action for the depositor and investor is to withdraw their funds as quickly as possible - this is referred to as a run on the bank.
To limit bank runs, the US government adopted deposit insurance. This eliminated the solvency issue for retail customers [the depositors], but not for wholesale customers [investors, other financial institutions].
#222222; font-family: Arial,Tahoma,Helvetica,FreeSans,sans-serif;">
#222222; font-family: Arial,Tahoma,Helvetica,FreeSans,sans-serif;">The Financial Crisis Inquiry Commission documented how wholesale customers withdrew their funds because they could not determine if a bank was solvent or not. The reason wholesale customers could not determine if a bank was solvent is the financial regulators' monopoly on current asset and liability level data prevented them from having the data needed to do this analysis.
#222222; font-family: Arial,Tahoma,Helvetica,FreeSans,sans-serif;">
#222222; font-family: Arial,Tahoma,Helvetica,FreeSans,sans-serif;">The monopoly effectively perpetuates financial instability.
#222222; font-family: Arial,Tahoma,Helvetica,FreeSans,sans-serif;">
#222222; font-family: Arial,Tahoma,Helvetica,FreeSans,sans-serif;">How does this monopoly make regulators a source of financial instability?
#222222; font-family: Arial,Tahoma,Helvetica,FreeSans,sans-serif;">
#222222; font-family: Arial,Tahoma,Helvetica,FreeSans,sans-serif;">It prevents market participants from doing their homework and properly pricing the risk of financial institutions and structured finance products. As a result, market participants must rely on the financial regulators to do the analytical work for them and be right in their analysis. If the financial regulators are wrong, the market is over-invested in risky assets.
#222222; font-family: Arial,Tahoma,Helvetica,FreeSans,sans-serif;">
#222222; font-family: Arial,Tahoma,Helvetica,FreeSans,sans-serif;">
#222222; font-family: Arial,Tahoma,Helvetica,FreeSans,sans-serif;">There is a long history of financial regulators not being right in their analysis and spotting problems before they threaten to become systemic issues. We had the U.S. Savings & Loan Crisis, the Less Developed Country Debt debacle, Long Term Capital Management meltdown, and of course the sub-prime wipeout. #222222; font-family: Arial,Tahoma,Helvetica,FreeSans,sans-serif;">
#222222; font-family: Arial,Tahoma,Helvetica,FreeSans,sans-serif;">Please note, these episodes of financial instability occurred when the monetary authority and supervisory authority were combined (the Fed) or when they were separate (the BoE and FSA). #222222; font-family: Arial,Tahoma,Helvetica,FreeSans,sans-serif;">
#222222; font-family: Arial,Tahoma,Helvetica,FreeSans,sans-serif;">What is the solution to prevent the financial regulators from being a source and perpetuator of financial instability? #222222; font-family: Arial,Tahoma,Helvetica,FreeSans,sans-serif;">
#222222; font-family: Arial,Tahoma,Helvetica,FreeSans,sans-serif;">The simple solution proposed under the FDR Framework is to provide all market participants with the current asset and liability level data so they can do their homework. [please see the following #213abb;">article for a discussion on how this could be effectively and efficiently done using the shadow banking system as an example.] #222222; font-family: Arial,Tahoma,Helvetica,FreeSans,sans-serif;">
#222222; font-family: Arial,Tahoma,Helvetica,FreeSans,sans-serif;">The goal is to get a stable banking system without the economic distortions caused by the regulators' information monopoly. Markets, and the global banking system is a market, function best when ALL market participants, including regulators, have access to the same useful, relevant information in an appropriate, timely manner.
As has been said previously on this blog, by providing this data to the other market participants, the global regulators get to piggyback off of their analysis. For example, they can compare their analysis to JP Morgan's. If the results differ, it would be informative for the regulators to understand why. http://www.tyillc.com/ #222222; font-family: Arial,Tahoma,Helvetica,FreeSans,sans-serif;">
 
|
| 4 Hour Gold Chart - Update 5:00 PM CDT Posted: 22 Mar 2011 11:01 AM PDT [url]http://www.traderdannorcini.blogspot.com/[/url] [url]http://www.fortwealth.com/[/url] Gold is currently is in a consolidation phase with a higher bias. The broad range that is containing it is $1435 on the topside and $1390 on the bottom. It has moved from the bottom of the range to the top and is now at a point where it either needs to clear $1435 and press on towards $1445 or it will set back towards $1420. While it has pushed through what I consider to be an important technical resistance level, namely $1430, it cannot seem to hold its gain above this level for any length of time. This suggests that the bulls are hesitating to take on the selling cap at $1430 thrown in place by the bullion banks. If you note, both the Percent R and the Stochastic Indicator, trading range indicators, are now either at their sell zones or are moving down and away from that zone. Bulls need to quickly push this market higher or they run the risk that some of their more fickle comrades will liqui... 
|
| The Gold Bull Is Speaking - Are You Listening? Posted: 22 Mar 2011 10:54 AM PDT Stewart Thomson email: [EMAIL="stewart@gracelandupdates.com"]stewart@gracelandupdates.com[/EMAIL] email: [EMAIL="stewart@gracelandjuniors.com"]stewart@gracelandjuniors.com[/EMAIL] Mar 22, 2011 1. You've taken care of buying gold market put options for insurance, if you are nervous about a correction. Now let's get back to your gold party. 2. There is no top in gold, and silver is not "overvalued". Most investors are either bored or demoralized, having watched gold do little since October. Gold stocks have fared worse. 3. I don't see it that way. I think most investors are looking out the back window instead of the front. That action is going to prove extremely costly to them. 4. I see you facing a new and extremely exciting range, which is gold $1400-$1700. You can watch the golden ship sail away, or face the range. Get on your gold trading horse and ride! 5. As of yesterday, I... 
|
| Speculation Fraught with Difficulty Posted: 22 Mar 2011 10:53 AM PDT |
| Perils of holding cash – gold and silver seen as far superior Posted: 22 Mar 2011 10:40 AM PDT by David Levenstein
Tuesday, 22 Mar 2011 (Mineweb) — The events of the last few weeks have really been an eye-opener. They remind me of a saying I once heard, "the only certain thing in this life is the constant uncertainty." As I have mentioned countless times, we live in rather turbulent times, and thus it is prudent to take the right precautions to protect your assets correctly. No one could have predicted the earthquake that hit Japan recently, nor the nuclear crises that followed. But, they are indicative of the unpredictable global catastrophes that seem to be occurring more frequently than in past years. Coping with these natural disasters is one thing, but coping with man-made disasters is another. Right now we are at the verge of what has the potential to become one of the biggest man-made financial disasters of all time. While we hope that it won't happen the smart thing to do is to take certain precautions. The disaster that I am referring to is the collapse of the global monetary system as we currently know it. [...] … The point of me relating this story is to remind you, that at any time, any government can do whatever they like with their currency. If you are one of those people who have stashed cash away under your mattress, you may want to re-think the practice. It would be a terrible shame, if you wanted to use the money you had put aside and found that it was worthless. But, more importantly, while it is always good to have some cash available for unexpected emergencies, there are alternatives to storing cash. [source] 
|
| Gold Fields says hedging not “best for business” Posted: 22 Mar 2011 10:23 AM PDT By Amanda Cooper
March 22, 2011 LONDON (Reuters) — Selling gold output forward will not guarantee greater profitability for a mining company, but this does not mean the now-unfashionable practice of hedging won't make a comeback, says South Africa's Gold Fields. 
… Nick Holland, chief executive officer of Gold Fields, the world's fourth-largest listed gold miner, told Reuters on Tuesday that bets on the future price of gold could be profitable but were too risky a way to conduct business in the longer term. "Our experience is that over the longer run, it's been shown that you cannot predict that you can beat spot (prices) and you might get it right for two or three years, and then you'll give it all away in one year," he told the Reuters Global Mining and Steel Summit. Hedging — using the futures market to offset the risk of price changes in the physical metal — was rife a decade ago…. [and] the gold price was struggling below $300… "I'm not a believer that hedging will beat spot in the long run. But that's not to say that people won't do it anyway," Holland said. "At some point in time, prices will get up to a level, and company executives will be seduced into hedging some of their forward production, and I think over time they're going to find it's going to be quite difficult to manage those positions, because … you're at the mercy of the markets, and I don't think that's the best way to run your business." [source] 
|
| Apple Inc. Vs. Physical Silver Posted: 22 Mar 2011 10:12 AM PDT |
| Gold futures inch up in volatile trading Posted: 22 Mar 2011 10:05 AM PDT By Myra P. Saefong and Claudia Assis
March 22, 2011 (MarketWatch) — Gold futures edged up Tuesday, extending a winning streak to five sessions after spending most of the trading day wavering between small gains and losses. Gold has risen nearly $35 an ounce over its five-session win streak. "I think we'll trade sideways for a bit while the market digests the recent positive moves in metals and equities," said Brien Lundin, editor of Gold Newsletter. Over the long term, however, he said he expects "renewed strength in the metals as it becomes evident that the [Federal Reserve] is likely to continue its accommodating monetary policies." Gold for April delivery gained $1.20, or 0.1%, to settle at $1,427.60 an ounce on the Comex division of the New York Mercantile Exchange. The metal traded between a high of $1,432.30 and a low of $1,419.50. … In economic news, U.S. housing prices fell a seasonally adjusted 0.3% in January, the Federal Housing Finance Agency reported. Data for December were also revised down to a 1.0% drop from an originally reported decline of 0.3%. Gold may find some support as weaker housing data "point toward continuing economic malaise and a greater likelihood that the Fed will continue its easy-money policies," said Lundin. "The oil-price shock adds further support to the thesis. [source] 
|
| Gadhafi and The Hidden Pot of Gold in Libya Posted: 22 Mar 2011 10:01 AM PDT 
By Dian L. Chu, EconMatters
Speaking through a telephone call to state television, Libyan leader Moammar Gadhafi delivered quite a defiant tirade on Sunday, March 20 vowing a 'long war to victory' and pledged retaliation against the international military action descended upon Libya. Many military experts have suggested that the number of troops loyal to Gadhafi could be fewer than 10,000, and argued that Gadhafi will not last long at all.
Moreover, US and European governments have imposed sanctions and frozen Libyan assets worth billions of dollars, including the central bank, sovereign wealth fund and state oil company cutting off funding for further support activities....unless Gadhafi has a hidden pot of gold or two somewhere
As it has turned out, the 'long war' threat from Gadhafi may not be as emply as some might think. Financial Times on March 21 cited data from the International Monetary Fund (IMF) that the Libya holds 143.8 tonnes of gold (see table), but some say the actual amount could be several tonnes higher.
Instead of vaults in London, York or Switzerland, Libyan bullion is in the country held by its central bank, which is under Gaddafi’s control. However, Financial Times noted some believe that the gold reserves may have been moved from the central bank in the capital, Tripoli, to another location such as the southern city of Sebha, close to the borders with Chad and Niger.
According to FT.com. international banks or trading houses are unlikely to transact anything with Libya at this moment, let along gold, but there still could be other interested counterparties for a swap of arms, or cash. So, Gadhafi could conceivably transport the gold to Chad or Niger, where the gold could be swapped.
Libya's gold reserves, ranked No. 23 in the world, ahead of Saudi Arabia, as of December 2009 (see table above), are worth around $6.5 billion at current prices, enough to finance Gadhafi's defense against opposition and international forces for quite a while, to say the least. Furthermore, Gadhafi may have some other assets stashed in 'untraceable' places.
Gold prices has been rising and hit a record of $1445.70 on March 7 primarily driven by safe haven demand in the midst of continuing chaos in the Middle East, the crisis in Japan, weak dollar and rising inflation. If Gadhafi somehow finds his way to cash in on this pot of gold and make good on his 'long war' threat, it would only further gold and oil’s upward cause. And by the way, Goldman Sachs just put in a fresh gold price target of $1,480 within three months.
Related Reading - Crude Oil and Gasoline Could Spike from Gadhafi's 'Long War' in Libya
EconMatters, March 22, 2011 | Facebook Page | Post Alert | Kindle  
|
| Silver update - 4:30 PM CDT Posted: 22 Mar 2011 09:52 AM PDT [url]http://www.traderdannorcini.blogspot.com/[/url] [url]http://www.fortwealth.com/[/url] Silver kept to its recent pattern of moving higher after the close of pit session trading adding another 10 -15 cents in the after hours trading but was unable to breach $36.50, the last line of defense being erected by the shorts to prevent a surge above $37. Volume to the upside has been pretty good but not strong enough to dislodge the shorts from behind this castle. Upside momentum is waning on this time frame chart as it is reflecting the inability of the bulls to breach $36.50. The Percent R, which is an indicator that is useful to gauge oversold and overbought zones for markets which are range trading or consolidating, which is what silver is currently doing, is now at the sell zone. That puts the burden upon the bulls to press through the sell side barrier and kick the market into a trending phase higher or some of the weaker longs will decide to book some profits and wait for another ... 
|
| Hourly Action In Gold From Trader Dan Posted: 22 Mar 2011 09:51 AM PDT Dear CIGAs, Click chart to enlarge in PDF format with commentary from Trader Dan Norcini For further market analysis and commentary, please see Trader Dan's website at www.traderdan.net 
|
| Rob Kirby describes his journey of discovery of gold market manipulation Posted: 22 Mar 2011 09:50 AM PDT 5:50p ET Tuesday, March 22, 2011 Dear Friend of GATA and Gold: German journalist Lars Schall has interviewed GATA consultant Rob Kirby of Kirby Analytics in Toronto about his journey of discovery of gold market manipulation and other market manipulation by central banks. The interview is headlined "Central Banking Is a Blight on Humanity" and you can find it at Schall's Internet site here: http://www.larsschall.com/2011/03/22/central-banking-is-a-blight-on-huma... CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
ADVERTISEMENT The Gold Standard Now: It Can Work Today a dollar is worth 80 percent less than it was 40 years ago, and less than 5 percent of its value a hundred years ago. We deserve a dollar that is as good as gold, a dollar that will hold its value from year to year so we can be financially secure and our economy can generate more and better jobs. For most of America's history, our dollar was literally as good as gold. But on August 15, 1971, our politicians destroyed the link between gold and the dollar. They destroyed the foundations of our economic system. A new Internet site, TheGoldStandardNow.org, provides news and cutting-edge analysis about this most important issue and explains how the gold standard worked in the past and how it can work in the future. Visit us today: http://www.thegoldstandardnow.org/about/137-welcome-newsmax
Join GATA here: An Evening with Bill Murphy and James Turk
Sponsored by Deutsche Edelmetall-Gesellschaft
Friday, April 29, 2011
Hofbrauhaus, Munich, Germany
http://www.goldmoney.com/munich-2011-april-29.html
Support GATA by purchasing a colorful GATA T-shirt: http://gata.org/tshirts Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: http://www.goldrush21.com/ Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: http://www.gata.org To contribute to GATA, please visit: http://www.gata.org/node/16
ADVERTISEMENT Prophecy Resource Spins Off Platinum/Palladium Venture:
World-Class PGM Deposit in Yukon Company Press Release, January 18, 2011 VANCOUVER, British Columbia -- Prophecy Resource Corp. (TSX-V:PCY)and Pacific Coast Nickel Corp. announce that they have agreed that PCNC will acquire Prophecy's Nickel PGM projects by issuing common shares to Prophecy. PCNC will acquire the Wellgreen PGM Ni-Cu and Lynn Lake nickel projects in the Yukon Territory and Manitoba respectively by issuing up to 550 million common shares of PCNC to Prophecy. PCNC has 55.7 million shares outstanding. Following the transaction: -- Prophecy will own approximately 90 percent of PCNC. -- PCNC will consolidate its share capital on a 10 old for one new basis. -- Prophecy will change its name to Prophecy Coal Corp. and PCNC will be renamed Prophecy Platinum Corp. -- Prophecy intends to distribute half of its PCNC shares to shareholders pro-rata in accordance with their holdings. Based on the closing price of the common shares of PCNC on January 17, $0.195 per share, the gross value of the transaction is $107,250,000. For the complete announcement, please visit: http://prophecyresource.com/news_2011_jan18.php
|
| Graham Summers’ Free Weekly Market Forecast (Death of the Dollar Back On Track Edition) Posted: 22 Mar 2011 09:50 AM PDT Graham Summers' Free Weekly Market Forecast (Death of the Dollar Back On Track Edition) The Euro just eeked out a new high, invalidating the Head and Shoulders pattern and setting the stage for additional upside gains to 145 or even 150 if things really take off. It's extraordinary given that the European Union continues to collapse (Portugal is next up on the block). 
This rally in the Euro has coincided with further weakness in the US Dollar, which has now taken out its 2010 low, leaving the 2009 low and 2008 lows as the final lines of support before we enter uncharted territory. 
The weekly US Dollar chart is even uglier, revealing that we've not only broken multi-year support but have rallied to retest this level and failed to reclaim it: a classic pattern that typically precedes sharper sell offs. 
Elsewhere in the markets, Gold is a hair away from hitting a new all time high priced in US Dollars. The bearish rising wedge remains in play. We bounced hard off the lower trendline setting the stage for a potential rally to the upper trendline: near $1500. 
Indeed, the great inflation hedge explosion continues fueled by an exodus from US Dollars into commodities of all kinds. Subscribers of Private Wealth Advisory are profiting beautifully from this courtesy of the incredible inflation hedges outlined in Parts 1 and 2 of my Inflationary Storm special report. As I write this, these five investments are up 6%, 6%, 7%, 25%, and a whopping 60%... in less than three months. As I've stated several times already, the Inflationary Storm Pt 1 is completely sold out and no longer available to the public. However, these aren't the only INCREDIBLE inflation hedges I've got up my sleeve. Indeed, I'm just putting the finishing touches on Part 2 of the Inflationary Storm. In it, I'm detailing three inflation hedges that are even LESS well known than the three first detailed in the Inflationary Storm Pt 1. Indeed, these three investments are all INSANELY undervalued, trading at prices that mean BIG GAINS are coming soon from investors catching on OR buyouts. Let me give you an example.
One of these investments is based on the single BEST inflation hedge of the last 50+ years. That's right, this investment has outperformed Gold, Silver, Real Estate, Stocks, and even Bonds since the 1950s. And one of my inflation hedges owns a TON of it. In fact, it's one of the largest owners of this investment on its CONTINENT. And that's just one of the three investments I'm detailing in Part 2 of the Inflationary Storm. I'm making only 250 copies of this report available to the public. That's IT. After 250 reservations are made, I'm closing the doors on this report and won't be mentioning it again. As I write this, the orders are already pouring in. It's not surprising given the success of my first two INCREDIBLE inflation hedges (they're already up 25%, and 60%). So if you're looking to get your hands on a copy of the Inflationary Storm Pt 2, you better move now, because I fully expect all 250 copies will be gone before the report goes out. To reserve a copy, all you have to do is take out a "trial" subscription to my paid newsletter, Private Wealth Advisory. Do this, and you'll receive a copy of the Inflationary Storm Pt 2 as soon as it's complete, as well as FOUR (4) additional Special Reports. To take out a "trial" subscription Private Wealth Advisory and reserve a copy of the Inflationary Storm Pt 2… Click Here Now!!! Good Investing! Graham Summers 
|
| Jim's Mailbox Posted: 22 Mar 2011 09:46 AM PDT Mr Sinclair, Gaddafi must read JSMineset also. It looks like he is his own central bank and does not seem to be worried that his assets are frozen as he has choices. Thanks for everything,
CIGA Bruno from Downunder Gaddafi sitting on 143 tonnes of gold in Libya: report
Glenda Kwek
March 22, 2011 – 11:24AM Libyan leader Muammer Gaddafi is reportedly sitting on a 143.8-tonne $6.4-billion pot of gold – enough to pay mercenaries to fight for him for years. The gold bullion – held by the Libyan central bank and controlled by Colonel Gaddafi – is among the 25 largest reserves in the world, the Financial Times reported, citing the International Monetary Fund. They provide the 68-year-old Libyan strongman a lifeline after billions of assets held offshore were frozen by the United States and the 27 member states of the European Union. The gold reserves are believed to have been moved from the central bank in the capital, Tripoli, to another city such as Sebha in the south, which is near Libya's African neighbours Chad and Niger, after fighting broke out, the Times reported. While bankers told the Times that international banks or trading houses were unlikely to buy any gold believed to be from Libya, Colonel Gaddafi may find buyers in Chad or Niger. More… 
|
| Money on Trial Posted: 22 Mar 2011 09:40 AM PDT 1998, one man created the "Liberty Dollar" backed by precious metals to, as he said, give Americans the freedom of choice. Read how the government put a drastic stop to his experiment… Also in this edition: Bernanke's language and what it tells you… and the melt value of U.S. coins.read more... 
|
| Think Like a Thief Posted: 22 Mar 2011 09:16 AM PDT |
| Gold: Now Thats a Track Record Posted: 22 Mar 2011 09:10 AM PDT Mises.org 
|
No comments:
Post a Comment