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Saturday, August 13, 2011

Gold World News Flash

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Gold World News Flash

Russell - $2,000 Gold Shortly, Then $2,500, $5,000 & $10,000

Posted: 12 Aug 2011 04:58 PM PDT

With tremendous volatility in gold, silver and stocks, the Godfather of newsletter writers Richard Russell had this to say in his commentary this week, "I think what I'm most interested in now is whether and to what effect the fading market has on the US economy. I honestly don't think most people are taking this market decline seriously. After all, we "have the marvelous Fed" and the Fed has always come through in an emergency. Besides, probably 90% of living Americans have never seen or lived through what I call really "hard times."


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Stock Market Turns Bear, Gold Stocks Stand Tall

Posted: 12 Aug 2011 04:56 PM PDT

Morris Hubbartt Weekly Market Update Excerpt posted Aug 12, 2011 US Dollar Chart Dollar Commentary [LIST] [*]You were told by Congress and the Fed that if the government didn’t raise the debt ceiling, a disaster would ensue. Well, the debt ceiling was raised and the disaster continues. The situation now feels “out of control.” [/LIST] [LIST] [*]The debt downgrade was the fundamental driver that pushed gold above the technical channel and onto what I’ve labeled the “super highway” price channel. The Fed seems to have pulled out all the stops, and still business is almost at a standstill. Something is very wrong. [/LIST] [LIST] [*]The economy is weakening, unemployment remains over 9%, and the stimulus that did not help before is called for again. The Fed can lower rates to boost bond prices, but not enough to help businesses. [/LIST] [LIST] [*]Ben Bernanke told Congress in July that the Fed would intervene...


Gold: Not Just for Nutjobs

Posted: 12 Aug 2011 04:45 PM PDT

by Zoe Tustain BullionVault Friday, 12 August 2011 Squirreling away a gold reserve no longer seems nuts… THERE ARE some who seem to think only western speculators buy gold – either that or paranoid conspiracy theorists preparing for Armageddon. This couldn't be further from the truth. In fact, China and India alone account for more than half of the world's gold demand, while central banks – not exactly known for being gung ho – are increasingly using their reserves to buy gold. In fact, the world's central banks bought more gold in the first half of this year than they did in the whole of 2010, according to figures published by the World Gold Council. Away from the debt-laden economies of Europe and the US, both advanced and developing nations have added to their official gold bullion reserves: [LIST] [*]South Korea almost tripled its gold reserves by buying 25 tonnes of gold in the last two months. [*]The Bank of Thailand bought 30 tonnes of the metal over the same peri...


LGMR: Gold up 5% on Week, "Allocated Gold Preferred"

Posted: 12 Aug 2011 04:42 PM PDT

London Gold Market Report from Ben Traynor BullionVault Friday 12 August, 09:00 EDT Gold up 5% on Week, "Allocated Gold Preferred", Short Sell Ban "Worst Thing They Can Do Right Now" SPOT MARKET gold bullion prices fell nearly 1% in an hour Friday morning London time – hitting a low of $1746 an ounce – as stocks and commodities rallied after yesterday's decision by four European regulators to ban short selling. Dollar gold bullion Prices however remained 5% up on the week as we head towards the weekend. Silver bullion Prices meantime hit $38.70 per ounce around lunchtime – a 1% gain for the week. "The gold physical market seems to believe that gold will move still higher soon," reckons Walter de Wet, commodities strategist at Standard Bank. "This, combined with seasonal demand which should start picking up soon too, is providing good physical demand for gold and silver." "The gold market remains underpinned by the movement to physical gold," agrees a note from UBS. "We ...


Gold Seeker Weekly Wrap-Up: Gold and Silver Gain About 5% and 2% on the Week

Posted: 12 Aug 2011 04:00 PM PDT

Gold waffled near unchanged in Asia and London before it fell to as low as $1722.45 by about 10:45AM EST, but it then rallied back higher in late trade and ended with a loss of just 0.52%. Silver fell to $38.085 in London, but it then climbed to as high as $39.094 in New York and ended with a gain of 1.4%.


Silver Update 8/12/2011 Numismatics

Posted: 12 Aug 2011 03:52 PM PDT

Brother JohnF gives us an excellent update for today on silver and gold. In addition his subject in this report is Numismatics, which is the study or collection of currency, coins, tokens, etc. He talks about the best investments in world silver coins in the market today. If you are buying coins this is the [...]


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Hugo Salinas Price: Silver money again for the U.S. too

Posted: 12 Aug 2011 03:44 PM PDT

11:44p ET Friday, August 12, 2011

Dear Friend of GATA and Gold (and Silver):

The presentation made at GATA's Gold Rush 2011 conference in London by Hugo Salinas Price, president of the Mexican Civic Association for Silver, "Dorothy's Silver Shoes -- or the Re-monetization of the Silver Currency of the United States of America," has been posted at the association's Internet site, Plata.com, here:

http://www.plata.com.mx/Mplata/articulos/articlesFilt.asp?fiidarticulo=1...

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


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Prophecy Platinum Reports 10.97 Million Ounces Inferred
and 1.04 Million Ounces Indicated PGM+Gold in Yukon

An independent resource report on the Wellgreen project in the Yukon Territory in Canada has just confirmed that it as one of the largest platinum group metals projects in Canada and one of the few outside South Africa, Prophecy Platinum Corp. Chairman John Lee says.

The report, compliant with Canadian National Instrument 43-101, was written by geologist Todd McCracken of Wardrop Engineering Inc., a Tetra Tech company. It incorporated drill data from 701 diamond drill holes (182 surface and 519 underground) totaling more than 53,222 metres. Using a 0.4 percent nickel equivalent cutoff grade, the Wellgreen deposit now contains a total inferred resource of 289.2 million tonnes at an average grade of 0.53 g/t platinum, 0.42 g/t palladium, 0.23 g/t gold (1.18 g/t PGM and gold), 0.38 percent nickel, and 0.35 percent copper. Separately, the deposit also contains an indicated resource of 14.3 million tonnes at an average grade of 0.99 g/t platinum, 0.74 g/t palladium, 0.52 g/t gold (2.25 g/t PGM and gold), 0.69 percent nickel, and 0.69 percent copper.

Prophecy Platinum Corp. trades on the Toronto Venture Exchange under the symbol NKL, on the pink sheets in the United States as PNIKD, and in Frankfurt as P94P.

For the complete press release on the Wellgreen report, please visit:

http://prophecyplat.com/news_2011_july14_prophecy_platinum_new_resource_...


Join GATA here:

Toronto Resource Investment Conference
Thursday-Friday, September 15-16, 2011
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Thursday-Friday, October 20-21, 2011
Davenport Hotel, Spokane, Washington

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Wednesday-Saturday, October 26-29, 2011
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Golden Phoenix Q2 2011 Conference Call Posted at Company Internet Site

The second quarter 2011 conference call of Golden Phoenix Minerals Inc. (GPXM) has been posted at the company Internet site for immediate playback. The call includes updates on the start of gold production at the company's Mineral Ridge gold project in Nevada, the letter of intent to acquire the Santa Rosa gold mine in Panama, and the company's due-diligence efforts to secure a senior stock exchange listing.

The conference call is 18 minutes long and you download an mp3 of it here:

http://www.goldenphoenix.us/audio/GPXMCC071211.mp3

Or play back the call here:

http://goldenphoenix.us/conferencecalls/

Golden Phoenix is a U.S. mining company with international exposure to gold, silver, and strategic metals. The company's business model combines project generation and royalty mining that offers the potential for exploration upside, coupled with the backing of production and future royalty streams. View company videos here:

http://goldenphoenix.us/

Max Keiser & The Gold Standard: Best for All?

Posted: 12 Aug 2011 03:36 PM PDT

Garnering Gains in The New Abnormal: Gold, Silver, Equities, Commodities & Interest Rates

Posted: 12 Aug 2011 02:58 PM PDT

Deepcaster


Guest Post: Too Much Of A Good Thing Is Not A Good Thing

Posted: 12 Aug 2011 01:37 PM PDT

Submitted by David Galland of Casey Research

Too Much Of A Good Thing Is Not A Good Thing

I am beginning to feel a bit like one of the French unfortunates stumbling through the fog in the Ardennes, circa 1914. Except that, instead of Germans full of deadly intent coming at me in the gloomy forest, it is a flock of black swans.

As it was for the French in the Ardennes, the number of problems – then Germans, now black swans – is becoming overwhelming.

Consider just a little of what we as investors, and as individuals looking forward to retirement in accommodations more commodious than a shipping box, must contend with:

  • The Euro-Stone. Despite all the bailouts and bluster flying about Europe, the yields in the wounded "piiglets" of Greece, Portugal, etc. have failed to soften to more tolerable levels. Worse, yields in the fatter PIIGS of Spain and Italy are hardening. This is of no small import to the German and French banks, which together are owed something like US$2 trillion by the porkers. At this point, it is becoming clear that the eurozone's systematic flaws doom the euro to continue trending down until it ultimately takes its place in the pantheon of failed monies.

  • The Yen Has Lost Its Zen. This week the Japanese government again began intervening in currency markets because, remarkably, the yen has been pushed to highs against the dollar. This in a nation with a government debt-to-GDP ratio that is better than twice the also horrible ratio sported by these United States.

That ratio ensures that Japan's long struggles will continue, burdened as it also is with the aftermath of the deadly tsunamis and the ongoing drama at Fukushima. Adding to its woes are the commercial challenges it faces from aggressive neighbors, and maybe worst of all, the demographic glue trap it is stuck in, with fewer and fewer young to pick up the social costs of the old. Toss in the waterfall plunge in Japan's much-vaunted savings rate – formerly a big prop keeping Japanese interest rates down – and the picture for Japan is anything but tranquil.

  • China's Crucible. There are many reasons for being optimistic about the outlook for China, including a large and hard-working populace. But there is one overriding reason to expect a big bump in the path to China's emergence as the world's reigning economic powerhouse.

Simply, it's a capitalistic country with a communist problem.

Now, in the same way that some people believe in leprechauns or any of dozens of other magical beings, some people believe that an economy can be successfully commanded just as a captain commands the crew of a Chinese junk cruising along the coast. It's a fantasy.

While the comrades in charge have done quite well – largely by getting out of the way of natural human actions – they are fast reaching the limits of their ability to navigate the shoals. As I don't need to tell you, China is a massive country, with hundreds of millions of people capable of every manner of human strengths and frailties. But if they share one interest, it is in a job that allows them to keep their rice bowls full and a roof over their heads. Said jobs don't come from government dictate – at least not on a sustainable basis – but rather by the messy process of free-wheeling commerce… and the more free-wheeling, the better.

In the July edition of The Casey Report, guest contributor James Quinn discusses the very real challenges facing China, not the least of which is that in the latest reporting period, official Chinese inflation popped up to 6.4%. Even more concerning was a 14% rise in the price of food.

Scrambling to keep employment high while also keeping inflation low, the Chinese government is throwing all sorts of ingredients into the mix – building ghost cities, raising interest rates, stockpiling commodities, clamping down on dissent, hacking everyone – but in the end, the irrefutable laws of economics must prevail. And so the Chinese government will have to atone for the massive inflation it unleashed in 2008, and for the equally disruptive misallocations of capital that are the hallmark of command economies.

While the blowup in China will wreak havoc in world markets, including many commodities, a bright side for gold investors is that the country's rising inflation should help keep the wind in the sails of monetary metal. It's no coincidence that the World Gold Council's latest data show investment demand for gold in China more than doubling in the first quarter of this year.

  • Uncle Scam. Then there is the United States. Casey Research readers of any duration know the fundamental setup… The political avarice that dominates both parties… The fear and greed of John Q. Public and his steady demands that the government do more… The scam being run by the Treasury and the Fed to provide the funny money to keep the government running… The cynical attempts by certain politicians to stoke a class war… The cellars full of toxic paper at the nation's financial institutions… The outright corruption and deceit of the various government agencies as they twist and torture the data to fool the people into supporting them in their scams.

But there's a growing problem: An increasing number of people and institutions are coming to understand just how intractable the problems are. This has resulted in a steady move into tangible assets – gold, especially – that are not the obligation of any government. And it's not just individuals and money managers moving into gold, but central banks as well. That is an absolute sea change from the situation even a few years ago.

Meanwhile, with the Treasury unable to borrow since May, a backlog in government financing needs has built up. Which begs the question: With the Fed standing aside (for the moment), where is the government going to find all the buyers for the many billions of dollars worth of Treasuries it needs to flog in order to keep the scam going?

If I were a conspiracy theorist, I might look at the sell-off in equities this week, triggered as it was by nothing specific, and see a gloved hand operating behind the curtain. After all, nothing like a good old-fashioned stampede out of equities to send billions chasing after "safe" Treasuries… which has been exactly the case this week.

Regardless, with the crossroads for hard choices now behind us, the global economy finds itself at the top of a long hill… with no brakes.

From here on, it will increasingly be every nation for itself – meaning a return to competitive currency devaluations and, in time, exchange and even trade controls.

And we will see a return of the Fed to the markets. On that topic, I will once again trot out a chart from an article by Bud Conrad that ran in The Casey Report a couple of years back.

I do so because it shows what I think is a very strong corollary between what occurred in Japan after its financial bubble burst and what is now going on here in the U.S. (and elsewhere). As you can see, as a direct result of the Japanese central bank engaging in quantitative easing, the Japanese stock market bounced back strongly. But then, when the quantitative easing stopped, the market quickly gave back all its gains.

(Click on image to enlarge)

If I had the time and the resources to whip up a chart overlaying the quantitative easing here in the U.S. of late versus the equity markets, I would. But I don't, and so will delve into that fount of all information – the Internet – and grab a chart constructed by someone else (in this case, Doug Oest, managing partner of Marquette Associates – thanks, Doug!)

As one can readily see, the Japanese experience is indeed a corollary to what's happened here, with QE pushing the stock market higher. Conversely, until the Fed comes back in, equities could be in for a rough ride. Likewise, when the Fed returns with the next round of QE, stocks could put in a very nice rally.

(Click on image to enlarge)

Some conclusions:

  1. The Fed will have to roll out another round of quantitative easing. And it will likely have to once again provide swap lines to the European central banks as it did in 2008 – though this time around, a belligerent Congress is watching the Fed's every move, so it may not be able to move as quickly as it would have otherwise. In the end, however, given there is less than nothing being done on the front of fiscal policy, it will fall to the Fed to once again ride to the rescue. But it will do so on a lame horse.
  1. A delay by the Fed to act could help the Treasury, at least temporarily. Per above, the U.S. government has to move a boatload of paper by the end of this year. If it wants to avoid the dire consequences of having to pay out higher yields in order to attract sufficient buying, it will have to find a lot of demand in a hurry. Should the Fed sit on its hands a bit longer, especially in the face of the escalating euro crisis, the resulting turmoil in global equity markets could provide the necessary demand to clean up the backlog and keep the U.S. government operating.?(In July's Casey Report, Bud Conrad dissects the situation and comes to some startling conclusions… and an emerging profit opportunity.)
  1. The return of the Fed may signal the beginning of the end. In the face of broad weakness in the global economy and in most commodities, the fact that gold has held up so well is a clear indication that there has been an intrinsic change in the gold market. Barbarous relic no more, it has clearly been returned to its longstanding role as sound money – unique and increasingly valued when compared to the fiat competition.

This role will only become more crucial as the world's desperate nation-states fire their currency cannons in the war to remain viable. The Fed's return to Treasury markets will be, in the rear-view mirror of future history, seen to be a seminal event – the beginning of the end of the current fiat monetary system.

Simply put, too much of a good thing is too much of a good thing. And make no mistake, the decades of operating under a fiat monetary system have been a very good thing for the political classes and their pandering cronies.

Those good times are coming to an end.

Silver Gold Calculator Available at iTunes!

Posted: 12 Aug 2011 01:01 PM PDT

Announcing the Silver Gold Calculator from Solari and The Moneychanger now available at the iTunes store!

It's been a while in coming, but it's available now. Solari and The Moneychanger's Silver and Gold Calculator can be installed on your mobile device, iPhone, iPod, iPad or [...]


Jump in Gold Price –What Did It Really Say?

Posted: 12 Aug 2011 01:00 PM PDT

In the last weeks we have seen the gold price jump from the price we alerted our subscribers of $1,555, to reach just over $1,800. Contrary to the view of many analysts, we do not see this as a frothy overrun from which it will pull back. On the contrary, this rise in the gold price has said so much more than simply, trading peak.


The Gold Price is Climbing Against Every Fiat Currency and Becoming the Premier Alternative Money

Posted: 12 Aug 2011 12:10 PM PDT

Gold Price Close Today : 1,740.20
Gold Price Close 5-Aug : 1,648.80
Change : 91.40 or 5.5%

Silver Price Close Today : 3910.1
Silver Price Close 5-Aug : 3819.7
Change : 90.40 or 2.4%

Gold Silver Ratio Today : 44.505
Gold Silver Ratio 5-Aug : 43.166
Change : 1.34 or 3.1%

Silver Gold Ratio : 0.02247
Silver Gold Ratio 5-Aug : 0.02317
Change : -0.00070 or -3.0%

Dow in Gold Dollars : $ 133.86
Dow in Gold Dollars 5-Aug : $ 143.65
Change : $ (9.79) or -6.8%

Dow in Gold Ounces : 6.476
Dow in Gold Ounces 5-Aug : 6.949
Change : -0.47 or -6.8%

Dow in Silver Ounces : 288.20
Dow in Silver Ounces 5-Aug : 299.97
Change : -11.77 or -3.9%

Dow Industrial : 11,269.02
Dow Industrial 5-Aug : 11,457.93
Change : -188.91 or -1.6%

S&P 500 : 1,178.81
S&P 500 5-Aug : 1,201.16
Change : -22.35 or -1.9%

US Dollar Index : 74.579
US Dollar Index 5-Aug : 74.489
Change : 0.090 or 0.1%

Platinum Price Close Today : 1,796.00
Platinum Price Close 5-Aug : 1,719.00
Change : 77.00 or 4.5%

Palladium Price Close Today : 743.55
Palladium Price Close 5-Aug : 740.10
Change : 3.45 or 0.5%


Big surprise this week was the SILVER PRICE, refusing to drop below 3700c. The GOLD PRICE gained -- choke! -- 5.5%. Stocks did worse than 1.6% implies, dollar stayed flat, and platinum shot up 4.5% and left palladium in the dust.

Yesterday I recounted to y'all that the gold 20 franc coins, favorite of gold-hungry French investors, were carrying huge premiums in Europe ($28 - $35 versus $5 at wholesale here). Last night on the way home I heard a report on National Proletarian Radio that French authorities were warning those casting doubt on the solvency of French banks that they'd better not. French bank stock indices were hit hard this week. Clearly the French, who in my 64-year old memory have undergone at least one currency reform and loads of inflation, are running on the banks and swapping euros for gold. To what degree, I haven't a clue, but a few days ago something else occurred that brought to mind the French proverb, "Nothing is confirmed until officially denied." A couple of rating agencies made showy announcements that French government debt was STILL rated AAA. Right, but who asked you? Unless there's a problem, this resembles an astronomer announcing that the sky is still blue.

Y'all need to face the likelihood that the GOLD PRICE made at least an interim top this week. We will know by the progressive depth of the reaction how far it will carry. If GOLD doesn't break $1,720 (low today at $1,723.95) then it will piddle sideways a few days and take off again, rushing over $1,800.00

On 10 August the GOLD PRICE made a new all time high close at $1,781.30. In the aftermarket that day it traded above $1,810. If it breaks $1,720 it might fall to $1,675. A close above $1,781.30 contradicts all that and tells you gold is making yet another leg up.

Today the GOLD PRICE ranged from $1,766.46 to $1,723.95 and closed Comex $8.60 lower at $1,740.20. Gold added nearly $100 this week.

The NATURE of gold's situation has changed. In its first wave up from 2001 - 2008, it moved glacially, adding only a tiny bit at a time, struggling to attract investors. It peaked in March 2008, then gave up 30% by November. Then it began the next leg up, and this one moves with much greater speed, violence, and volatility.

The NATURE of the economic situation has changed, calling into question all the old economic verities like "US debt is the lowest risk investment." Sovereign debt around the world is being scrutinized, and investors don't like what they see. The old Keynesian paradigm -- government managing the economy and borrowing and spending its way into prosperity -- is crumbling like the Berlin Wall and that other brand of socialism. Oh, it hasn't fallen off the throne yet, but it's being pushed. The Tea Party, the endemic and insuppressible financial and fiscal crises, the rotten banking structure, debt downgrades, bailouts, all of these are the fevers, chills, and icy sweats of a dying system. Its death is hastening, hastening. Pray that liberty succeeds it, and not a worse tyranny.

In any event, all these forces are pushing gold higher and higher, and in the next three to 10 years you will see prices at levels you would never have dared dream of, let alone mention, in 2001. Shuck out of stocks and dollar denominated investments (CDs, savings accounts, annuities, bonds) and put the proceeds into silver and gold. There's still time.

Yet take not MY word for this argument.  Look at the July break out with a breakaway gap at E1,090 and run to E1,276 yesterday.


Turn not yet away, gentle readers. Throw up Gold in Yen, and mark and inwardly digest the breakout 1 August above Y127,500, and follow the climb to Y139,580 yesterday.


My point? Gold is climbing against every fiat currency. Gold is becoming the premier alternative money. Slowly, slowly the public is repudiating those central bank currencies in favor of gold. This, too will speed up.

As panic put jet fuel in gold's tanks, it pushed the SILVER PRICE down, all the way back to 3700c on Tuesday. Yet silver did not break and fall to its 200 dma (now 3404) but fought back and today gained 44.5c to 3910.1c. I must still accept lower prices as the most likely outcome, UNLESS silver closes above 4100c, then 4200c quickly.

Countering that view is silver's uptrend -- yes, Uptrend -- since the June 27 low at 3338c. Of course, after a week of parabolic upward GOLD action, I'd be foolish not to brace myself for a correction. But mercy! of all the gold and silver bulls in the world, I have been kicking against the goads. Silver and gold have consistently outperformed my expectations this year. Market's left me a little punchy, but determined to buy more and more silver and gold on every little dip.

The gold/silver ratio is one fact causing me to look for lower silver. The previous post-May correction high had been 44.584 on 28 June. On 9 August it hit 45.938, which whispers that the ratio will move higher still. Way things are going, that might not be due to silver falling, but to gold blasting away topside, powered by more panic.

I watch. I wait. I am glad that so many of y'all swapped out of silver into gold, because now that move looks very slick. Let's hope it pans out with a higher ratio.

BOTTOM LINE: Long term bull market in silver and gold needs me to defend it like two lionesses need my help with a wildebeest. We may be in for a greater or lesser correction, but the primary trend remains up in a bull market.

Here's what the Dow posted this week: Down 634.76, up 429.92, down 519.83, up 423.37, up 125.71 for a net loss of 175.59. Intraday low for the week was 10,604.70, which fulfilled my target of 10,900 from the head and shoulders and 10,700 from previous trading and lateral support. Wherefore we can guess that stocks will mount a sickly rally from here. They are far below their 200 dma (11,991.67), and could reach that or a little higher. Volatility this week was due certainly to panic in the market generated by US debt downgrade (insubstantial but damaging to psychology) and European sovereign debt crisis. No doubt volatility was supercharged also by the yankee government's Plunge Protection Team.

Be all that as it may, the Dow is doomed to move much, much lower, but not immediately. Close below 10,700 gainsays my cheery optimism and turns the Dow down into the nether regions. If you are one of those laggards who still owns stocks, better seize ANY rally like a seat on the last train out of Moscow in November 1917.

STOCKS -- they are the non-nutritious filler in the Box of Investment Breakfast Cereal.

The Dow in Gold Dollars' last low for the move that began in August 1999 came on 9 March 2009 at G$147.24 (7.123 oz). On 10 August the DiG$ made a new low for the 12 year move at G$124.40 (6.018 oz). Since August 1999 the Dow has lost 80% against gold, and will lose another 80%. Ditto silver.

US DOLLAR INDEX is range trading between 75 and 74.50. Panic spilling over from Europe is sending flight capital into the dollar, and the NGM of all the central banks, who work together like fire ants, are trying to keep the euro (destined for US$1.20) afloat and keep the Yen from rising to the sky. Expect further dollar rally. Break above 75.50 is the first tripwire of a rally, then a close over 76 and 76.75.

Euro, Frankenstein of currencies, rose 0.11% today to 1.4258. Downtrend remains unchallenged. Yen is knocking on all time highs.

Y'all enjoy your weekend.
  
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.

Be advised and warned: Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures.

Clusterfukushima

Posted: 12 Aug 2011 11:42 AM PDT

By Washington's Blog

There have been a cluster of earthquakes near Fukushima. Just yesterday, there was another 6.0 earthquake.

There have been a cluster of meltdowns at Fukushima. For example, Asahi reports today:

 

A second meltdown likely occurred in the No. 3 reactor at the Fukushima No. 1 nuclear power plant, a scenario that could hinder the current strategy to end the crisis, a scientist said.

 

In that meltdown, 10 days after the March 11 Great East Japan Earthquake, the fuel may have leaked to the surrounding containment vessel, according to a report by Fumiya Tanabe, a former senior researcher at what was then the government-affiliated Japan Atomic Energy Research Institute.

 

***

 

Under Tokyo Electric Power Co.'s road map to deal with its crippled nuclear plant, reducing temperatures at the bottom of the core pressure vessel is one objective for bringing the accident under control. But if the fuel burned through the pressure vessel surrounding the No. 3 reactor and dropped into the containment vessel, that plan would be affected.

 

***

 

Around 11 a.m. on March 14, the reactor building was hit by a large hydrogen explosion that was likely caused by a core meltdown, which led to fuel falling to the bottom of the pressure vessel.

 

***

 

Tanabe also estimates that the second meltdown led to the release of large amounts of radioactive materials, and that much of the fuel fell through the pressure vessel to the surrounding containment vessel.

 

***

 

Kunihisa Soda, a former commissioner at the Nuclear Safety Commission of Japan who is a specialist on severe accidents at nuclear plants, said the possibility of a second meltdown could not be ruled out.

Nuclear expert Arnie Gundersen notes that there are currently lethal radiation levels at Fukushima, that even higher measurements are to still come, and that the nuclear core has leaked out and is on floor like a pancake working its way down.

NHK notes that scientists have found radiation levels in Japan higher than any found in the contaminated zone in Chernobyl called Red Forest:

And nuclear regulators only thought about worst case scenarios involving a single nuclear plant. They totally ignored the fact that power loss to complexes of nuclear reactors - like the cluster of 6 reactors at Fukushima - could lead to multiple simultaneous meltdowns.

And then there's a cluster of cover ups.

As the New York Times reports:

 

"From the 12th to the 15th we were in a location with one of the highest levels of radiation," said Tamotsu Baba, the mayor of Namie, which is about five miles from the nuclear plant. He and thousands from Namie now live in temporary housing in another town, Nihonmatsu. "We are extremely worried about internal exposure to radiation."

 

The withholding of information, he said, was akin to "murder."

 

In interviews and public statements, some current and former government officials have admitted that Japanese authorities engaged in a pattern of withholding damaging information and denying facts of the nuclear disaster — in order, some of them said, to limit the size of costly and disruptive evacuations in land-scarce Japan and to avoid public questioning of the politically powerful nuclear industry. As the nuclear plant continues to release radiation, some of which has slipped into the nation's food supply, public anger is growing at what many here see as an official campaign to play down the scope of the accident and the potential health risks.

 

Seiki Soramoto, a lawmaker and former nuclear engineer to whom Prime Minister Naoto Kan turned for advice during the crisis, blamed the government for withholding forecasts from the computer system, known as the System for Prediction of Environmental Emergency Dose Information, or Speedi.

 

"In the end, it was the prime minister's office that hid the Speedi data," he said. "Because they didn't have the knowledge to know what the data meant, and thus they did not know what to say to the public, they thought only of their own safety, and decided it was easier just not to announce it."

 

***

 

Meltdowns at three of Fukushima Daiichi's six reactors went officially unacknowledged for months. In one of the most damning admissions, nuclear regulators said in early June that inspectors had found tellurium 132, which experts call telltale evidence of reactor meltdowns, a day after the tsunami — but did not tell the public for nearly three months. For months after the disaster, the government flip-flopped on the level of radiation permissible on school grounds, causing continuing confusion and anguish about the safety of schoolchildren here in Fukushima.

 

***

 

The timing of many admissions ... suggested to critics that Japan's nuclear establishment was coming clean only because it could no longer hide the scope of the accident.

The mayor of Namie also said the government's justifications for withholding information are nonsensical.

And in related news:

It's a clusterfukushima.

Investors shaken after roller-coaster ride

Posted: 12 Aug 2011 09:38 AM PDT

August 12 (Financial Times) — The cliche "rollercoaster ride" is often overused in financial markets. But this week has been the real thing: the biggest one-day fall and rise in stocks since the 2008 Lehman Brothers' collapse, record low yields for benchmark US Treasuries and huge swings in the value of the Swiss franc.

"At some point you laugh at it a bit," says Christopher Blum of JP Morgan Asset Management. "It is exhausting. The market in the very short term can be so volatile: you could even call it irrational."

So, where exactly are the financial markets at the end of such a turbulent week? In some ways, not so very far away from where they started.

[source]

PG View: The DJIA ended the week down 175 points from last Friday's close.

Sinners and Saints

Posted: 12 Aug 2011 09:32 AM PDT

Author: 
David Galland
Synopsis: 

David's musings about sinners and saints, and how those who are neither can suffer in party-happy Argentine towns as well as in warped democracies. Also in this edition: Will Facebook be destroyed?

Dear Reader,

Click onto any news website, turn on any cable news show, or read just about any blog these days and you'll find all manner of coverage and opinion on the recent action in global markets.

Which brings to mind the words of Peter Lynch who, for 13 years, managed the world's largest equity fund. Despite the cumbersome size of his fund, Lynch still beat the S&P Index in 11 out of 13 years, generating an annual average return of 29% along the way. In other words, he's a guy who knows something about managing money. And on that topic, he once said, "If you spend more than 13 minutes analyzing economic and market forecasts, you've wasted 10 minutes."

As I am recovering from long days buried up to my neck in the research and editing involved with putting out the latest (48-page…ugh) edition of The Casey Report, released yesterday, I'm not in much of a mood to waste the proverbial 10 minutes today. 

Yet, because what's going on in the financial markets is directly relevant to the financial health of you, dear reader, I will share a couple of quick but, I think, useful observations.


The Upshot of the Fed's Recent Moves

As readers of any duration are aware, once it became clear that the Fed was going to step away from the $600 billion binge of Treasury buying popularly referred to as QE2, I became convinced that we would see:

  • The stock market take a hit, just as was the case in Japan after they ended their first experiment in quantitative easing.
  • Treasury yields hold steady, and maybe fall, as the sea of money sloshing about planet Earth rewarded the U.S. government for pausing in its monetary madness.
  • Leading to a stronger dollar and, because of the inverse correlation…
  • Weakness in the commodity sector, including gold. While we strongly advocated holding on to bullion and buying more on dips, we also suggested dear readers consider taking profits on any resource stock positions that had risen sharply.

Well, here we are in August, just a few weeks into the post-QE period, and what have we seen?

(Click on image to enlarge)

  • The stock market has taken a hit. While so far only an "average" correction, there are signs that the correction is far from over.  
  • Treasury yields fell to new record lows, making the bubble in Treasury bonds even more acute. More on that momentarily.
  • As shown in the chart here of the Dollar Index, the dollar did strengthen, arresting its long slide. After moving up from its May lows, it has mostly traded sideways.
  • The commodity sector, shown here in the chart of the CRB Index, has fallen fairly sharply.

(Click on image to enlarge)

  • The one disconnect is that gold has gone parabolic, shown here in the chart of the GLD index.

(Click on image to enlarge)

So I think the basic premise that the Fed's stepping back from quantitative easing would signal a shift, albeit of relatively short duration, in the long descent of the dollar has largely proved out.

Wasting a few more minutes of our collective time, I will toss out an opinion as to where things might be headed next.

As bad as the dollar is, it remains the leper with the most fingers, as one wit put it.

Specifically, as discussed last week, due to systemic flaws, the euro is increasingly looking doomed, which suggests we'll continue to see money flow out of the euro and into the dollar.

In this regard, it's worth noting that for better than a decade, central banks and institutions have been re-jiggering their foreign currency reserves to make room for the euro. Consequently, about 27% of the record $5.3 trillion held in foreign currency reserves by central banks is now in euros. That is $1.4 trillion, some percentage of which may soon be looking for a new address as things in the eurozone progress from bad to worse.

Thus, for a time at least, the Treasury is likely to be able to attract euro-refugees into the dollar, and maybe even be able to keep borrowing at today's near record-low rates. How low? This week, the yield on the 10-year Treasury fell to 2.04%, the lowest ever. 

But there's a rub.

As our own Bud Conrad explains in detail in the current edition of The Casey Report, the Treasury market is now the largest bubble on the planet. How big a bubble can be understood by comparing the record-low rates just mentioned against the record size of the U.S. debt and its record deficits.

This is the part where it gets exciting – at least if you are paying attention.

Once the pin hits the bubble – and that pin is the inevitable price inflation that pushes today's negative real yields even deeper into the red – not only will the world's central bank be scrambling for a new home, but so will a tsunami of money coming out of bonds, the world's largest financial market by a wide margin.

As to where that money may go, you can rest assured it won't be the yen – which is in almost as much trouble as the euro or the renminbi – at least not as long as the communists are still in control. 

Which leaves gold, the all-time indisputable champion of money.

Already we have seen a big swing in central bank reserves of gold, with the bankers collectively switching from being net sellers of millions of ounces of gold annually as recently as 2008, to being net buyers. They'll be buying more.

The Near Term

Since we're engaging in speculation about the future, I would add that in the near term, I expect the frenzy in gold to abate and prices to consolidate for some time. Any time a market moves as far and fast as gold has of late, it almost certainly has to take a pause. 

It's worth remembering that just a month ago, on June 12, the price of gold was "just" $1,550. So even a fall of $200 per ounce (gasp!) would mean absolutely nothing in the overall scheme of things. That is not to say you should try to trade any pullback – there are too many black swans circling overhead – just don't worry if gold does correct.

Turning to the junior gold stocks we tend to favor, you can see that they indeed moved down as the Fed moved to the exit on its quantitative easing, and somewhat lagged the recent run-up of bullion. I don't see that as a particularly bad thing.

(Click on image to enlarge)

Specifically, there are a lot of very solid gold explorers and producers that offer intrinsic value that is well above their current market caps. If during a consolidation phase, we can buy more ahead of the true mania that is to come, count me in.

As to what's next, while no one can say with anything close to certainty, there is little question that all eyes will be on Bernanke and the Fed when they next convene in Jackson Hole at the end of this month.

If they fail to step back up to the plate with more Treasury purchases – and an energetic buying spree at that – then the equities markets will remain under pressure. The dollar would likely break up out of its current plateau, keeping pressure on commodities.

While gold might remain somewhat quiet, with all the uncertainty – and flows coming into the yellow metal from the eurozone and elsewhere, including China, where inflation is beginning to run hot – gold could just as well go up as down. So, per above, no need to even think about selling your gold now.

If, on the other hand, the Fed does announce QE3, then the dollar will break down and commodities up – probably sharply so. Along with the stock market, and especially gold stocks.

While interest rates might initially fall, I don't think they'd stay down for long as fears over the safe return of principal are overrun by fears over the losses to be suffered by the eroding dollar.

So, what's an investor to do? I'm reminded of the classic scene from Dirty Harry. You know, the one that includes the immortal words "Do you feel lucky, punk?"

Simply, you have to decide how much are you willing to risk on a bet that the Fed will or will not announce QE3, perhaps even as soon as its Jackson Hole meeting?

Personally, over the last couple of days, I have been buying select resource shares and an inverse interest rate fund – not in the hopes of a quick profit, but because I am confident in the medium- to longer-term outlook and willing to invest accordingly. But I never have (and hopefully never will) so much money in any one investment, or category of investment, to cause me to lose sleep at night if things go seriously against a position.

In the current context, I had been marshalling cash ahead of the Fed's policy shift away from quantitative easing, and am now deploying some of that cash – though still cautiously.

This personal rule of thumb, of not investing to the point of discomfort and well away from the reef of disaster, has rarely been more important than now, given that we are in a transition period that will be marked by excessive volatility and uncertainty. And against the backdrop where the only fundamental that counts is what the schizophrenic, sociopathic U.S. government decides to do when it rolls out of bed on any given day.

Who knows, maybe it will decide to sell all the gold in Ft. Knox to pay down its debt? (Provided there is any gold, that is.) Could happen.

Simply, the world we will live in and the markets we invest in are inexorably linked to the desperate straits the world's governments have gotten themselves into.

Absent the sort of painful reform we all know is needed but which almost no politician will champion out of fear of losing their job, we are headed for a sovereign debt smash-up that will ultimately blow apart the current monetary system.

I may be wrong, but I don't think this smash-up will take overly long to arrive.

Two related inputs that arrived in my email box yesterday.

The first was from our own Terry Coxon.

"During the week ended Aug 1, M1 grew by 5%. Weekly numbers often throw off crazy results, but I've never before seen anything this crazy."

While I haven't had time to get to the bottom of Terry's numbers, if he's right, then the government has decided to forgo anything resembling monetary restraint. We'll try to report more on this next week.

Then there's this from Bud Conrad, yesterday.

Today's 30-year auction came in very badly:

Bond auction stopped at 3.75% (111-3 on the CT30). Was trading bid side 3.65% at 1pm – and WI trading lower, 3.80%.

              – Bid/cover was 2.08; prior 2.8
              – Indirects 19.5%
              – Directs 12.2

The 10-year was trading at record lows of 2.1% as we went to press. This 30-year auction saw the rate jump off record lows by 10 basis points, which is very rare. The poor bid to cover and relatively low Indirects are consistent with the weak result.

So we have a jump in the monetary base and a stumbling Treasury auction ahead of the government needing to move a huge amount of Treasuries to make up for the period when it stopped borrowing – coming as it will on top of its normal/abnormal levels of borrowing.  

Paradoxically, as Nikolai Chernyshevsky succinctly put it, "the worse the better" – at least for gold investors.

Specifically, if I had to bet, I'd say that the Fed will announce QE3 by the end of the year, and perhaps as soon as the upcoming Jackson Hole meeting. At which point the race to the bottom for the euro and the dollar will turn into a sprint, as will the move in gold towards yet another record high.

For now, I would continue holding a high 33% portfolio allocation to gold, 33% in cash diversified a number of strong currencies, and 33% "other" – mostly in resource and deep-value investments.

The period between now and the end of the year is going to be very volatile. I would be especially wary of leverage, and if you have to lean in any one direction, lean in the direction of being cautious.

And, if you are able you make it, take time right away to register for our next summit titled When Money Dies, October 1-3 in Phoenix, Arizona.

On that topic, I am very pleased to announce that because of the importance of this event, for the first time ever, Casey Research is teaming up with another organization – the Sprott Group of Companies – as co-hosts for one of our summits.

You can learn more and sign up today by following this link. By signing up before August 19, you can still take advantage of our early-bird pricing and save $200.  

The alliance with Sprott for this summit is only one of a number of changes we'll be implementing to make the event even more special. But I have to warn you, this one will sell out especially quickly, so if you want to sign up, you'll need to do so right away.

(As I was wrapping up this edition, I just heard from Lew Rockwell that he'll be driving half way across the country to participate. And the program just gets better…)

See you there!


Sinners and Saints

How the Argentines, among other Latin cultures, arrived at the custom of dining late and partying later – much later – is a mystery to me.

After all, in antiquity, illumination was a luxury, and so the amateur anthropologist would assume that traditions would have evolved over the centuries whereby evening meals and such would have been eaten early and be of short duration, so as to conserve candles and other fuels used for lighting.

Furthermore, one might logically conclude that, in the tougher days of yore, people would have to rise early and toil long just to stay even with the steady demands of life – which again argues for the whole early-to-bed thing.

Yet, in the Argentine, custom makes it abnormal for dinner to begin before 9:00 p.m., or for revelers to show up at the door before midnight (and in Buenos Aires, even that would be considered unfashionably early). As for the socially acceptable time to head to the exits, that would be somewhere around 3:00 a.m. for the old and infirm, and 5:30 a.m. for carefree youth.

I was reminded of these customs regularly during our recent trip, tucked, as we were, into a house just off the quaint plaza of Cafayate in the far northwest of Argentina. Though we certainly enjoyed the convenience of a town house during the day and pacific evening hours, I can't say the same about the times when the appointed party hours rolled around, as they almost always did on Thursday, Friday, and Saturday nights.

On one Saturday I can still recall, the fiesta began several hours after I had gone to bed, flaring up at the traditional hour and gaining steam from there. Having learned my lesson several times over, I had prepared for the auditory assault by cramming thick wads of wax sold for the purpose into my ear canals, dampening the noise to little more than a throbbing beat. This was, I can assure you without hesitation, a big improvement from going au naturel, because not only are Argentine fiestas late and long, but they are energetically loud. In addition to the blaring music, heavy on the bass beats, there is also a fondness for disc jockeys whose particular skill seems to rest in being able to encourage the partiers to dance, dance, dance using ear-wrinkling exhortations normally reserved for announcing that a futbol goal has been earned.

Despite my ear armor, the noise of the night's festivities woke me on several occasions, allowing me to mark the approximate end of the festivities as being 5:43 a.m., after which I slipped into a deep sleep…

… but slept no later than 7:30 a.m. when the town's church bells started up, ringing the populace awake with somber intonations of piety.

Lying there, the thought came to me that the early hour and the method the church uses to announce its presence – a very loud bell – is not accidental. No, I came to believe as I tossed and turned, pulling a pillow over my head in support of the earplugs, that the church bells are deployed like a modern police department's sound weapons to remind the sinners that there are consequences to their late-night excesses.

And so it is that sinners and saints alike are made to suffer the excesses of each, and those of us who are neither are made victims of both.

This is, of course, entirely analogous to being a citizen of a degraded democracy. On the one side, we have the military industrial complex with its fondness for (very profitable) displays of very loud fireworks in other people's backyards, and on the other we have the perfect-worlders with their feel-good programs, most of which are as counterproductive as trying to bomb the world into peace.

Here in the U.S., the "average" guy is showing signs of growing irritable at being disadvantaged by sinners and saints alike, with the Tea Party being the most vocal of the dissenting groups.

But even some of those in the mainstream media appear to be reaching a breaking point, witnessed by the video of one Dylan Ratigan ranting on MSNBC. What's notable about Mr. Ratigan's rant, however, is not how close he appears to come to slipping into a nervous breakdown, but rather that the "solutions" he espouses all involve yet more government. At one point he seems to come close to calling for Obama to take on dictatorial powers, but then settles for spouting off on the need for the government to go even further into debt with an infrastructure fund, blah, blah, blah.

Sad to say, those of us with a natural predilection for self-reliance and being left to our own peaceful pursuits are massively outnumbered. As the crisis worsens, we will see more, not fewer, calls for the government to do more and then more. And so, all that is left to us is to find a nice quiet spot away from sinners and saints alike and hope for the best but plan for the worst.


Friday Funnies

When I saw this cartoon, I thought of the Treasury (with the paper bag and the need to sell untold billions in new iss


Withdrawals From Stock Funds Biggest Since ’08

Posted: 12 Aug 2011 09:32 AM PDT

August 12 (Bloomberg) — Investors pulled the most money from global stock funds since 2008 in the past week as the Standard & Poor's downgrade of Treasuries and the deepening European debt crisis prompted a flight into cash and gold.

Funds that buy global equities suffered $3.5 billion in net withdrawals in the week ended Aug. 10, the most since the second week of October 2008, according to Cameron Brandt, director of research at Cambridge, Massachusetts-based EPFR Global. Investors removed $11.7 billion from funds that invest in U.S. equities, the most since May 2010 when investors pulled money following a one-day market crash that briefly erased $862 billion.

"This week had a feeling of capitulation as we saw investors running for cover," Brandt said in a telephone interview. "The last time we saw this kind of flight to safety" was in 2008, he said.

[source]

Indian gold demand soaring

Posted: 12 Aug 2011 09:30 AM PDT

India's gold price climbed to a new all-time high in the middle of the week. While the Indian rupee lost ground again and fell to a 10-week low, the nation's benchmark gold futures contract ...


When China Didn’t Show Up

Posted: 12 Aug 2011 09:26 AM PDT

Addison Wiggin – August 12, 2011

  • "Professional politicians" blow off the poor "ins and outs" of a Treasury auction… Why you shouldn't
  • The economic number that just turned in its most dismal performance since 1980
  • How gold stocks are looking as cheap as they did at the bottom in 2008… and a 3-Part "Market Volatility" Strategy for your consideration…
  • Echoes of 2008: Europe's short-selling ban sets up an intriguing opportunity…
  • Soccer moms patrolling for prostitutes… nickel-and-diming folks at customs… and how unemployment benefits create more jobs (ahem)…

Yesterday, an auction of 30-year Treasury bonds went south.

So poorly, in fact, did the auction go, yields jumped from 3.51% to 3.78% — the largest single day leap since "Tall Paul" Volcker was running the Fed in the early 1980s.

Back then, it was a matter of necessity: Volcker told us, off camera during the filming of I.O.U.S.A., that his status as an "inflation slayer" was a revisionist myth, more or less, and that higher interest rates back then were the only way to bring buyers into the tent and keep the government funded.

Yesterday's leap? That was not part of the plan. Certainly not, if you go by the Fed's FOMC press release from Tuesday. The Fed wants to keep their overnight rates at 0-0.25% until mid-2013.

We pause for a moment here at the beginning today's 5 with apologies to the president.

He politely asked during a White House press conference a month and a day ago if we, "the public" would please leave the "ins and outs of… a Treasury auction" to the "professional politicians."

He's right, we know. The "pros" have been doing such a bang-up job, who are we to worry?

Really.

This morning, however, we just couldn't help ourselves…

What got us spooked at yesterday's bond auction is, in a word, the Chinese didn't show up. We have speculated on more than one occasion what would happen if the Chinese failed to show. Well, now we know.

It gets a little worse. Insurance companies and pension funds sat this one out, too.

For the first time in the history of 30-year bond auctions, "direct bidders" bought more bonds than foreign bidders.

The "primary dealers" — the 20 megabanks that are required to submit bids in exchange for a host of special privileges with the Fed and U.S. Treasury — wound up buying 68% of yesterday's issue.

Why the sudden aversion to U.S. debt?

"Duration risk," a bond trader would answer.

"Unless you think there's going to be no inflation for an extremely long period," explains Credit Suisse strategist Ira Jersey, "then it's hard to make the case for why 30-year bond yields should go a lot lower."

As if to underscore the point, the People's Bank of China issued a quarterly report laying out its worldview today. The main take-away: The debt level in the United States and other Western nations is "worrisome."

At the same time, the Chinese allowed their currency to rise to a 17-year high against the dollar.

Since S&P's downgrade of U.S. debt last Friday, Chinese leaders have allowed the renminbi to rise the most in one week since they loosened its peg to the dollar in June 2010.

"The Chinese have stopped laughing at [Treasury Secretary] Geithner's so-called 'strong dollar policy,'" says Euro Pacific Capital's Michael Pento, "and are now allowing the renminbi to rise against the greenback" — up 6.8% since that loosening of the peg 14 months ago.

"If we continue down this road much longer, the only buyer of U.S. debt will be the Fed. That's the real downgrade to come. Not from the credit rating agencies, but from our foreign creditors.

"Once we have a failed Treasury auction, it will engender a vicious cycle. Debt service expense will soar, which causes out-of-control deficits. The Fed will be forced to purchase more of the debt and inflation rates become intractable, thus destroying GDP growth."

"Ordinary Chinese feel let down by the government," writes our friend Dee Woo from China. "Woody" is a high-school teacher and one of our most valuable on-the-ground contacts there.

"They heard the country is suffering billions in losses because of dollar depreciation and S&P downgrade," Woody says, confirming the accounts of Chinese "microbloggers" we passed along on Tuesday.

"Because of the severe income inequality, many Chinese are further pushed down the social spectrum. Too many can't afford a house, health care, pension, and education for their kids. They have contributed so much to Chinese boom only to see their hard-earned dollars to be loaned to the U.S."

Sounds as if that's starting to wind down now.

The Chinese are sending a warning. Alas, despite the president's request of a month ago, the "professional politicians" don't seem too worried. Or even to have noticed what happened.

The president hasn't canceled his August vacation to Martha's Vineyard. Meanwhile, 81 members of the House — nearly one in every five members — will be on a junket to Israel this month sponsored by the pro-Israel lobby AIPAC.

Heh. You can't make this stuff up.

However, as a member of "the public at large," you can take protective measures right now. We describe them in this presentation. Ignore it at your peril.

Too early to say as of this writing… but today might turn out to be the only day this week the Dow makes a move of less than 400 points. (Strange times… which we plan to address directly on your behalf with the three-part strategy you'll see below.)

The blue chips opened up nearly 150 points on the news that retail sales rose 0.5% between June and July.

Then most of that gain evaporated on the news that consumer confidence as measured by Reuters and the University of Michigan sank to nearly unprecedented lows.

At 54.9, the new consumer confidence number pulled off several extraordinary feats…

  • It's lower than any of the guesses among 69 economists surveyed by Bloomberg
  • It's lower than at any other time during the Great Correction
  • In fact, it's the lowest it's been since May 1980… when Americans' only respite from economic gloom was the release of the first Star Wars sequel.

European stock indexes ended the day up big. The Euro Stoxx 50 index, a blue chip benchmark, jumped over 4% — the first substantial move up in three weeks.

Authorities in France, Italy, Spain and Belgium are, apparently, choosing to kill the bearers of bad news, rather than address any financial problems they face. They've banned short selling of those nation's big financial shares for the next two weeks.

"This is a sign of desperation," says Strategic Short Report's Dan Amoss, "and it will only worsen the liquidity freeze in European stock markets.

"Plus, it will heighten suspicions that French banks are in big trouble with PIIGS debts… and perhaps were the parties writing credit default swaps on Greece and Portugal debt in the wake of the May 2010 bailout, and thus are like AIG pre-September 2008."

You don't have to imagine how this is going to turn out. Two days after AIG blew up in 2008, the SEC banned short selling of the financials. The sector, as represented by the XLF ETF, plunged nearly 40% in three weeks.

Hmmm… A look at the holdings of the iShares MSCI Europe Financials Sector Index Fund (EUFN) and a little work with a calculator… and we see that French-, Italian-, Spanish- and Belgian-traded firms make up nearly 30% of the total.
And there's nothing to stop you from shorting that. Just sayin'.

Gold is experiencing a delayed reaction to the increased margin requirements we mentioned yesterday. The spot price sank fast this morning, bottoming out for the moment a little below $1,730.

Still, that's a higher price than anytime before this week.

Gold "would have to get to $2,200 just to break the inflation-adjusted highs from 1980," our resource trader Alan Knuckman tells First Business. "There's still more upside. But you've got to be careful. We could see some $100 moves either way. Better to have a long-term investment horizon."

Alan's readers have applied simple strategies in gold this year to grab gains that far outpace the bullion price — 107% and 233%, to be precise. Right now, you can join them right here at a substantial break from the regular subscription fee.

Silver is the metal proving to be less volatile today, down slightly to $38.47.

Gold stocks are finally taking a breather after an impressive run-up this week. The GDX gold stock ETF, which moved up 7% the first four days this week, is off 1.5% as we write.

By any objective standard, gold stocks are looking cheap.

"Aggregate data for the world's 13 senior gold producers showed them worth just $0.73 for every $1 of the gold price," according to one report from MineFund Analytics issued last Friday. "The last time gold stocks were that cheap was November 2008, shortly after the all-time low of $0.66 set on Oct. 27, 2008.

"Although that suggests there is excellent value to be had by buying more equity in gold producers," the report goes on, "there is still reason for caution. The chart pattern for the deteriorating valuations is very similar to summer 2008, when it seemed impossible for prices to go any lower. However, they continued to do so."

[Urgent Editor's note: "The various editors at Agora present many gold stocks," writes a reader in a recent survey we sent to Reserve members. "Considering the current market conditions, which ones are the most attractive for the midterm, either low-risk good upside or medium-risk higher upside?"

"In this crazy stock market," writes another, "for the next six-12 months, what should my portfolio strategy be? Do I get out of stocks and short the market? Invest only in gold, long-term bonds and foreign currency? Or some other strategy?"

Another put things more succinctly: "Buy, sell or hold?"

To address this market head on, we're employing a 3-Part "Market Volatility" Strategy immediately:

  1. First, we're holding an exclusive "Reserve members-only" teleconference early next week — convening all our editors to ask them one simple question at this critical juncture: What to do now? Send additional questions you have, here
  2. Second, we're assembling a report detailing the top precious metals plays among all our editors.
  3. We're convening an "Emergency Summit" of our editors, assembling them in person, and inviting a select group of readers to join them. We're sending out the invitations next week. If you want to receive this invitation, all you need to do is drop us your email address. Here's where to go. Please indicate if you're a Reserve member when you write in.]

For a brief picture of what real life is like after a municipal bankruptcy, we turn to the soccer moms patrolling for prostitutes in Vallejo, Calif. The story was profiled on ABC's Nightline last night.

Vallejo went into bankruptcy court more than three years ago. The police force that once numbered 160 is down to 90. So ordinary parents are keeping an eye out for any soliciting.

"Is this what your life is going to be like if you continue to live here?" asks the reporter of one of the moms. "Yeah… we're just trying to protect each other and save our neighborhood."

One of the women being confronted by the soccer moms turned to prostitution after losing her job at a hospital. "Any job that pays well is a good job," she said.

"If you keep this up" she then warned the soccer moms on patrol, "someone's going to get hurt and I guarantee it won't be a prostitute."

Meanwhile, it looks as if the feds are picking up a few cues from local governments… and using petty offenses to help fill their bottomless coffers.

U.S. Customs has fined a family $300 for failing to declare an apple, tomato, and three cucumbers upon arrival from Israel at Newark Intl. They were healthful snacks for the flight, stashed in one of the kids' backpacks. Dad forgot all about it when he filled out the declaration form.

We know produce is getting expensive, but sheesh…

"For me it was like, you know, what you see on TV," said mom Suri Steinberger. "I thought I was going to get handcuffed, they have my kids. So I just started to cry."

Customs says it's an individual officer's discretion whether to "destroy" the offending agricultural goods or "fine the traveler."

With a yawning $1.65 trillion annual deficit, we have a feeling the latter is going to be the default option going forward.

"This administration and the Congress," writes a reader, conspiratorially, "will thank you for urging everyone to buy gold. I don't believe they were smart enough to plan it this way, but once the dollar is nearly worthless and it takes $5,000, $10,000, $100,000 (pick a number) to get one ounce of gold, the solution to salvaging what's left of their scheme is nearly certain: Gold in private hands will be confiscated.

"Not only will this save the country (at least temporarily) from complete bankruptcy, it will, in effect, greatly accelerate the transfer of wealth. Few poor people own gold, but the 'wealthy' do."

The 5: We haven't urged anyone to do anything. We're just reading the writing on the wall.

"I have a 1907 $10 gold piece," a colleague wrote over IM this morning, "that my grandparents kept hidden in an upright piano during the 1930s as an act of defiance against FDR…"

When or if the government "confiscates" gold… they won't get to spend the money to clean up their debts. Their goal would be to remove gold as a contender to the U.S. dollar.

If you disagree with the strategy, we've identified a few "offshore gold storage programs" in a special report that goes out to every new reader of Apogee Advisory. Thus, we urge you inquire here.

"As any old mule farmer knows," writes another with an obvious overassessment of the size of his audience, "to get a mule to do what you want it to do you first have to get its attention. Congress has had it far too easy for far too long and are just going through the motions of listening to the American people."

"Imagine if in 2012 a fairly large percentage of the voting population just simply refused to vote for any Republican or any Democrat, period. Instead they voted for the Libertarian, Constitution or Green Parties candidates. I'm not saying that the third-party candidates all would win. More than likely, they wouldn't."

"What it would do if a third-party candidate starting coming in a respectable third or even second would be to be to make the two major parties realize that they could no longer assume that they would be the only candidates the voting public would support, and they would have to clean up their act."

The 5: More likely they'll seek to tighten up the ballot access laws — a ridiculous number of "valid" petition signatures, for instance, which has already taken place in several states — to further limit the impact of third parties.

Sorry, we still don't see any answers coming from the inane rules that define the rules of politics.

"The riots in England," a reader writes, "could very well be a forecast of things in the U.S. With the unemployment rate for teens and those in their early 20s soaring, we are sitting on a time bomb waiting to explode. Meanwhile, Congress fiddles and the country burns…"

"Everything I read says that small businesses are the main sources of new jobs, but no one focuses on helping small businesses. The last government official I heard on TV said that they were working with banks to make more loans available to small businesses. Typical governmental attitude — solve your problems with more debt."

"I own a small business and I don't need more credit. I need less governmental red tape and help with Obamacare. If Obama has his way, I will be hit with higher taxes because my tax return shows more than $250,000 in income. The problem is that I don't get a $250,000 salary. I have a Sub S business on the accrual basis. That book income represents inventory I can't sell and accounts receivable I can't collect."

"In order to pay for Obamacare and higher taxes, I will have to cut expenses, and my biggest expense is salaries. I will have to let people go to pay for this."

"If someone in the government were smart, they would open a website where small business owners could send in their suggestions on how the government could help them and then they would actually take some of these suggestions."

The 5: You're looking at this all wrong. All those people you let go to pay for health insurance and higher taxes? The government gives them unemployment benefits… and that creates new jobs.

Or at least that's how White House Press Secretary Jay Carney explained it yesterday.

Seriously.

Asked to justify the president's push for extended benefits, Mr. Carney put it this way: "It is one of the most direct ways to infuse money directly into the economy because people who are unemployed and obviously aren't running a paycheck are going to spend the money that they get…

"And… that way, the money goes directly back into the economy, dollar for dollar virtually."

"Every place that money is spent has added business and that creates growth and income for businesses that lead them to decisions about jobs, more hiring. So there are few other ways that can directly put money into the economy than applying unemployment insurance."

The circuitous reasoning seems to go something like this: Pass new regulations and tax hikes that make it harder for already stressed small business owners to keep employees, let alone hire news ones; then when the unemployment numbers fail to turn around, ask Congress to borrow more money so they can extend unemployment benefits… because it's good for the economy and creates jobs.

Oy.

If we're missing some higher purpose to the administration's reasoning, we hope you'll do us the honor and correct our understanding. Until then…

Have a good weekend,

Addison Wiggin
Agora Financial's 5 Min. Forecast

P.S."With so much volatility," inquired another Reserve member who replied to our recent survey, "what criteria do you use to exit the market (cash or short or puts) and re-enter the market (long and calls)?"

A great question after a rough week like this… we expect to answer it next week when we kick off our 3-Part "Market Volatility" Strategy.

We're going assemble our editors on the phone for an exclusive "Reserve members-only" teleconference. If you're a Reserve member, you'll have the chance to listen in. As of this moment, it looks like we'll host the teleconference on Tuesday.

Likewise, we're assembling an exclusive special report detailing the top gold and precious metals plays being recommended by our editors right now.

And we're convening an "Emergency Summit" of our editors, assembling them in person and inviting a select group of readers to join them. We're sending out the invitations next week. If you want to receive this invitation, please leave your email address with us here. Please indicate if you're a Reserve member when you write in.

Mr. Market’s Next Attack

Posted: 12 Aug 2011 09:00 AM PDT

Whew!

What a week.  Traders must be reeling.  The rest of us are staggering.

And nobody knows anything.

Is this market going up or down?  We don't know.  But wherever it is going, it seems to be in a hurry to get there.

It collapsed on Monday, soared on Tuesday, collapsed again on Wednesday and soared again on Thursday.  The Netscape News report:

The Dow Jones industrial average soared 423 points. It had already fallen 634 points Monday, risen 429 Tuesday and fallen 519 Wednesday. Never before has the Dow had four 400-point swings in a row.

The pieces of news that sent Wall Street rocketing higher were not exactly blockbusters: Cisco Systems said its profit was better than expected, the job market got a little better, and France tried to raise confidence in its shaken banking system.

But this is a week in which any move by the market — higher or lower — seems to touch off an investor stampede. So it was on Thursday, when stocks shot higher at the opening bell and never turned around.

So, nobody knows why the stock market went up yesterday.  Of course, they don't know why it went down the day before either.

That's why a lot of old market hands get tired of wondering about it.  "Just show me the chart," they say.  They don't believe it's worth trying to figure out the why…they just look at the pattern.

But when we've looked at the charts we still don't know anything.  Maybe the seasoned pros can see things we don't.  To us, they're just as confusing as everything else.

Mr. Market is a cagey fellow, no doubt about it.  And if he has a story to tell, he keeps it to himself.  That said, he's only natural.  And there are certain natural laws that even he has to obey.

For example, he can't allow debt to build up forever.   There always comes a moment of awful recognition, when lenders realize they've been idiots…when they see that they won't get their money back.  Savvy speculators try to sell the debt short before lenders catch on.

Nor can asset prices run too far ahead of real values for too long.  Sooner or later comes a moment of reckoning, when asset values and asset prices converge.    Savvy speculators bet on convergence.  They buy when a stock is far below its real value…and sell when it is far above.

But Mr. Market is a fooler.  He doesn't make it easy.

All over the world stocks are down about 20% from their recent peaks and about 5% to 10% for the year.  But they're far from cheap.  Shiller's normalized earnings put the P/E on US stocks today at about 20.   Major bear market bottoms come with the P/E down at 6 to 8.   The typical bottom, according to Shiller, comes at about 13.

So, if this were a bear market (we don't know)…and if it were a typical bear market (we don't know that either)…it would bottom out at about 8,000 on the Dow (now, 11,143).

If this were a major bear market, we'd look for a bottom in the 4,000 to 6,000 range.

We don't know what game Mr. Market has in mind.  But we know he can play a cruel hand.  It's not that he has no sense of pity.  He just wants to teach a lesson that investors won't soon forget.  Here's what we think he's up to:

First, he will dally around a bit.  Let investors recover their breath and their nerve.  Then, he'll move prices back up….this would draw more money into the stock market.

When most of the seats in the theater are full look for a furry creature sneaking around with a can of gasoline in one hand and a pack of matches in the other.  He'll set fire to it.   Stocks will go down…stabilize…then go down again.  Then, Warren Buffett will announce that he is buying.  The Fed will announce another QE program…perhaps with a different twist.

What ho!  Stocks will soar…and then fall again.  Down, down, down…they'll drop to their level of March '09…and keep falling until they have finally found their bottom – maybe 3…maybe 5…maybe 10 years from now.

The bear in the stock market will send investors fleeing to the shelter of the bond market.  In a stagnant, Japan-like economy, even with trillion-dollar deficits, bond yields will stay low.  Investors will get 2% on 10 year T-notes.  "Better than losing money in the stock market," they'll say.

Households will put their savings into US Treasury debt – something they can count on.  Businesses will store their cash in US Treasury debt, after all…no point in investing in new plant and equipment.  Financial institutions, too, will seek out US Treasury bonds as the only place where they can still place money safely.  Ben Bernanke has pledged to keep the key lending rate near zero.   Bankers now know they will be given free money for the next two years.  All they have to do is take it…and lend it back to the US government!

And then, when the bond market is fat and happy…and the nation's savings have been transferred to the government and consumed by it, Mr. Market will creep up again – like a thief in the night – and give it a wallop.

Just in the last few weeks, stock market investors lost about $3 trillion of wealth – on paper.  How they will look back on these days with pleasant nostalgia!  Mr. Market's next attack on stocks will wipe out $10 trillion.   And when he whacks the bond market, he'll take out another $10 trillion.

And this time, it won't be just 'paper' wealth.  It will be real wealth…the savings built up over millions of lifetimes of hard work.

And more thoughts…

Have the riots reached New York or Boston yet?

As Dear Readers know, we have wondered what this Great Correction really intends to correct.  At a minimum, it seems destined to correct the 50+ year build-up of debt.  But maybe it will destroy modern social-welfare governments too.

The model is simple enough: citizens give up a portion of their freedom and a portion of their money.  In return they get safety…protection…and something for nothing.  The typical voter believes he will get more than he paid for…he counts on his government to rob those richer than he is and transfer the loot to him.

The system works – for a while.  But as these governments mature they become more expensive, rigid, and zombified.  More and more people find ways to get something for nothing.  More and more join the underclass, because it is easier to live at someone else's expense, even if you can't live very well.  Pretty soon, there are zombies all over the place.

The Cameron government in the UK – like almost all social welfare governments – spends more than it can afford.  It realized it had to stop feeding the zombies so much.  It announced cut backs.  This week, the zombies counterattacked.

'They don't treat me right,' said one zombie quoted in the International Herald Tribune.  'They just give me enough money to eat and watch TV.'

When they are not eating at taxpayer expense…or watching TV at taxpayer expense…in an apartment paid for at taxpayer expense…wearing clothes furnished at taxpayer expense, they are likely communicating by cellphone or Blackberry or I-phone, also provided at taxpayer expense.  This week, the zombies got in touch with one another and decided to upgrade their lifestyles by breaking into shops and stealing things.  That too, was at taxpayer expense.  But it wasn't an expense authorized by the peoples' representatives in Parliament.  The zombies had declared war.

The British feds were outraged.  They had spent so much money on these people.  Why were they biting the hands that fed them?  Ah…you know the answer, Dear Reader.  Because the system had turned almost a whole generation of people into zombies.    Zombies are used to getting something for nothing.  If they get it from the feds …or take it directly, what is the difference?

And what else do they have to do?  Watching TV all day is boring.  For a brief time this week, zombies were on the march.

It probably won't be the last time.  The Zombie Wars have begun.

Regards,

Bill Bonner,
for The Daily Reckoning

Mr. Market's Next Attack originally appeared in the Daily Reckoning. The Daily Reckoning provides 400,000+ readers economic news, market analysis, and contrarian investment ideas. Follow the Daily Reckoning on Facebook.

Gold Daily and Silver Weekly Charts - Comex Bear Raid Continues

Posted: 12 Aug 2011 08:51 AM PDT


This posting includes an audio/video/photo media file: Download Now

Friday Afternoon Humor: "Welcome To The Final Stretch..."

Posted: 12 Aug 2011 08:35 AM PDT

From TheLFB

"Welcome to The Final Stretch, broadcasting live from beautiful Financial Park; home to the exuberant commentary. You join us now as we to go in today's financial Gymkhana……And They're Off!!!

  • With a few minutes to go the pace is quickening even though 80% of the world's financial markets are already closed.
  • Tension mounts as the field moves past Against The Clock.
  • We have trainers with us waiting to cast their opinions, some of who do not even have a horse in the race but who are more than willing to tell us how it should be run.
  • Still no comments on why and Mutual Fund Losses and Massive Redemptions were withdrawn.
  • Low Volume Ramps and Intra-day Drops were placed as favorites ahead of the session, which did not please the punters.
  • As we head into the close it has to be noted that NYMEX is no longer in the field, which eliminates Bullish Bullion and Weak Oil.
  • Initial Margin Call looks to have very few supporters in the stand, but may once again surprise a lot of people at the close.
  • Volatility Index is coming around the outside rail. Market Leader is at the rear.
  • Apple just put its nose in front, unimpeded by ECB jostling for position, and Increasing Vix making an unexplained move.
  • Ohhhhh, we have a faller; we will get a reporter straight over there.
  • It looks as though Breaking Headlines cut across Slow and Steady, and in the carnage that followed Retail Trader was left in the dust. 
  • Risk Exposure pushes to the front leaving Shut The Front Door and OMG trailing at the back.
  • Twitter is putting in a burst to get past Breaking Headlines who is still battling hard with Slow and Steady.
  • The ECB has dropped backwards as the weight of carrying The PIGGS looks overbearing.
  • Ohhhhh, but look at this, just as things were settling down a move by Tele-Prompter has sent the whole field backwards.
  • Eating Peas and Suck It Up did not react well to that move, and we may see a stewards inquiry into why that happened at this stage of proceedings.
  • Treasury Yields has collapsed and is staying down after Bond Values muscled past with little effort.
  • Credit Default Swaps has ignored the moves by S&P Ratings and kept a great pace, while all of the time aware that California Munis are on their tail.
  • Martha's Vineyard and The Nineteenth Hole look a long way off right now, but moves at the rear by Airforce One may be enough to get them through.
  • At the closing bell Initial Margin Call takes it from Credit Default Swaps, who got in by a nose over How Do I Explain This, which pushes out What's All The Noise to finish in 4th place. The Bernanke Put finishes last.

Coverage of the next race from Asia will include a battle between Currency Exchange, Liquid Assets, and 24-Hour Commodities. Details to follow......"

Friday Afternoon Humor: "Welcome To The Final Stretch..."

Posted: 12 Aug 2011 08:35 AM PDT


From TheLFB

"Welcome to The Final Stretch, broadcasting live from beautiful Financial Park; home to the exuberant commentary. You join us now as we to go in today's financial Gymkhana……And They're Off!!!

  • With a few minutes to go the pace is quickening even though 80% of the world's financial markets are already closed.
  • Tension mounts as the field moves past Against The Clock.
  • We have trainers with us waiting to cast their opinions, some of who do not even have a horse in the race but who are more than willing to tell us how it should be run.
  • Still no comments on why and Mutual Fund Losses and Massive Redemptions were withdrawn.
  • Low Volume Ramps and Intra-day Drops were placed as favorites ahead of the session, which did not please the punters.
  • As we head into the close it has to be noted that NYMEX is no longer in the field, which eliminates Bullish Bullion and Weak Oil.
  • Initial Margin Call looks to have very few supporters in the stand, but may once again surprise a lot of people at the close.
  • Volatility Index is coming around the outside rail. Market Leader is at the rear.
  • Apple just put its nose in front, unimpeded by ECB jostling for position, and Increasing Vix making an unexplained move.
  • Ohhhhh, we have a faller; we will get a reporter straight over there.
  • It looks as though Breaking Headlines cut across Slow and Steady, and in the carnage that followed Retail Trader was left in the dust. 
  • Risk Exposure pushes to the front leaving Shut The Front Door and OMG trailing at the back.
  • Twitter is putting in a burst to get past Breaking Headlines who is still battling hard with Slow and Steady.
  • The ECB has dropped backwards as the weight of carrying The PIGGS looks overbearing.
  • Ohhhhh, but look at this, just as things were settling down a move by Tele-Prompter has sent the whole field backwards.
  • Eating Peas and Suck It Up did not react well to that move, and we may see a stewards inquiry into why that happened at this stage of proceedings.
  • Treasury Yields has collapsed and is staying down after Bond Values muscled past with little effort.
  • Credit Default Swaps has ignored the moves by S&P Ratings and kept a great pace, while all of the time aware that California Munis are on their tail.
  • Martha's Vineyard and The Nineteenth Hole look a long way off right now, but moves at the rear by Airforce One may be enough to get them through.
  • At the closing bell Initial Margin Call takes it from Credit Default Swaps, who got in by a nose over How Do I Explain This, which pushes out What's All The Noise to finish in 4th place. The Bernanke Put finishes last.

Coverage of the next race from Asia will include a battle between Currency Exchange, Liquid Assets, and 24-Hour Commodities. Details to follow......"

Think Gold Is Not Manipulated? Think Again

Posted: 12 Aug 2011 08:19 AM PDT

Once the worth of gold and paper currency is wiped out by the conspiring of financiers, globalists, and other moneyed interests, there will be nowhere to turn for an object of value. Courtesy of Minyanville On Wednesday August 10 the Chicago Mercantile Exchange ("CME") came out with an announcement that it would be raising margin [...]


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Amazing Power

Posted: 12 Aug 2011 08:00 AM PDT

Imagine discovering that your dog can fly. As soon as you'd gotten over the surprise, you'd start wondering why you hadn't noticed years before. Then you'd start thinking about the money you could make with such a talented canine.

That's the experience I had with IRAs.

IRAs seemed so plain and ordinary. Good to have, comforting at times, but dull, like chicken noodle soup. Nothing special and nothing to get excited about. IRAs ran on AAA batteries and had about as much power… or so I thought.

Then what a surprise! I learned how an IRA can be a powerhouse for accumulating tax-free wealth. I don't mind admitting I'd been blind to the potential that was right in front of me for so long – I had so much company in not noticing. Even today 67 million Americans have an IRA, but not one in a thousand understands all the good things he can do with it or how powerful it can be for building and protecting wealth.

Here's a sample of what the rules allow you to do with your IRA (and that most investors haven't a clue is possible).

Gold. Buy gold coins for your IRA and store them privately at home. You can even hide the coins in a jar of canned peaches and keep them in your refrigerator if you think that's the safest way to handle them. It's all within the rules.

Rentals. Your IRA can own an apartment house and be a landlord. And you can be the rent-collector and pick up those checks every month – tax-deferred income for your IRA.

Bigger rentals. Want a bigger apartment house? If you decide the terms are right, your IRA can use mortgage financing for a rental property.

Operating business. Follow the rules carefully and you can run a motel, restaurant, bio-science lab, specialty store or any other business and let your IRA pick up most of the earnings. Running a business is demanding, but the work is a lot more enjoyable when a big chunk of the income is tax deferred – or even tax free.

Foreign real estate. Your IRA can buy an apartment in Buenos Aires or farmland in New Zealand. It'll be waiting for you if you ever need to go there.

Equipment leasing. Do you have experience selling or servicing heavy equipment, trucks, airplanes, medical equipment or anything else that users often want to lease? Your IRA can be the lessor while you put your knowledge to work helping your IRA earn the lease payments – income for your IRA to add to its growing pile of tax-deferred cash.

Private lending. Your IRA can earn high returns lending money on well-secured first and second mortgages. That's what the smart banks do, and they collect far more than the sad returns they pay to IRA investors who buy their CDs.

Rehabilitate property. You can buy and manage the rehabilitation of a run-down dwelling, apartment house or office building and let your IRA reap the financial benefit.

Seize bargains. You can show up at foreclosure sales (there are plenty of them these days) and buy property for your IRA at distress prices. You might do the same thing on your own, but you'll enjoy the profits more if they're protected from tax by your IRA.

And those are just examples. Whatever investment you'd like to make and whatever business opportunity you'd like to pursue, there is a proper way for your IRA to collect most of the benefit. That means more of your earnings are tax-deferred – and with a Roth IRA the earnings can be tax-free.

Unnoticed

Maybe you're wondering how a secret that big could be a secret at all. The answer is pretty simple.

As a matter of law, an IRA must have a custodian. It's the custodian that holds legal title to whatever is in your IRA. But the custodian doesn't have to accept any investment it doesn't like. It can just say "No."

Most custodians are attached to a bank, stockbroker, mutual fund complex or insurance company. Not surprisingly, those captive custodians are ready to let your IRA buy whatever the bank, stockbroker, mutual fund complex or insurance company is selling – and nothing else. That's what keeps the handcuffs on most IRA investors and why most financial institutions like to tell just part of the IRA story. (The rest of the story is in this Report.)

Better Than "Self-Directed"

A sizeable minority of investors have slipped out of the ordinary-IRA handcuffs and moved to a so-called self-directed IRA. They've placed their IRA with a custodian that doesn't sell investments and that will consider accepting any investment.

That's better than what most IRA investors have, but not nearly as good what you could have.

The key word is consider. With a self-directed IRA, the investor must get the custodian's approval at each step of every transaction. That means extra work and trouble for the investor. It means delay, which means the risk of missing an opportunity. It also means uncertainty, since the custodian can always say "No, we don't do that." And when the custodian of a self-directed IRA finally does sign off on an investment, the starting bell rings for heavy fees that will keep draining the IRA's value.

The arrangement just isn't as self-directed as it looks. It would be more accurate to call it a May-I-Please IRA. Or a May-I-Please-Pay-More-Fees IRA.

That's why I created a report called How to Rescue Your Retirement from Three Dangerous Threats. In it, I reveal a little known IRS loophole that can help you triple the returns in your IRA.

No your dog can't fly. But your IRA can learn to.

Good luck out there.

Regards,
Terry Coxon,
for The Daily Reckoning

Amazing Power originally appeared in the Daily Reckoning. The Daily Reckoning provides 400,000+ readers economic news, market analysis, and contrarian investment ideas. Follow the Daily Reckoning on Facebook.

COT Gold, Silver and US Dollar Index Report - August 12, 2011

Posted: 12 Aug 2011 07:32 AM PDT

COT Gold, Silver and US Dollar Index Report - August 12, 2011


Don’t Forget America’s Failed States

Posted: 12 Aug 2011 07:25 AM PDT

London is burning. Greece is in receivership. Nobody wants Italian bonds. France's AAA rating is at risk. The headlines do seem to be a bit Euro-centric lately. But that's temporary. Before long the spotlight will swing back to America's failed states, beginning, as always, with California. Consider:

Signs point to California facing new budget gap
(Reuters) – California's summer vacation from its state budget woes didn't last long.

California's latest monthly revenue report shows revenue weaker than expected even before the stock market, a key source of revenue for the state, began sliding in response to Standard & Poor's downgrade of U.S. debt, anxiety about Europe's finances and the risk of the U.S. economy slipping back into recession.

For officials in California's capital, underwhelming July revenue and Wall Street's hard times suggest they will have to draw up plans for cutting more spending early next year.

Beyond Sacramento, if revenue swoons in coming months, it will assure renewed headlines of how the government of the most populous U.S. state is facing yet another budget shortfall.

Californians, and the state's bond investors, should brace themselves for that in light of how a choppy stock market can hurt the state's revenue, said Neil Hokanson of Hokanson Associates, a family wealth manager in Solana Beach, California.

California is like a household where one spouse is a sales person, Hokanson said, noting: "It has good years and it has bad years."

This year was supposed to be a not-so-bad year for California, with revenue improving after a few years of declines sparked by the housing crash, recession and plunge in stock prices following the Lehman Brothers bankruptcy.

Governor Jerry Brown and state lawmakers closed a roughly $10 billion deficit in June with a plan that balanced California's books with spending cuts, deferred payments, some fees and, most important, the assumption that an additional $4 billion in revenue would flow into state coffers.

The money would be generated by the state's gradual economic recovery and wealthy taxpayers who pay the bulk of personal income taxes, the state's most important revenue source, as their capital gains increase with the stock market extending its climb from its March 2009 low.

That plan may soon need to be revised.

Even before volatility struck the stock market this month, California's revenue was not meeting expectations: July revenue was $538.8 million, or 10.3 percent below its projected level in the state's recently enacted budget, the state controller said on Tuesday.

New California wildfire fee may drain agency's firefighting budget
(Mercury News) – A California law that imposes an annual wildfire fee on rural residents may have an unintended consequence — sapping the state fire agency of money it needs to fight wildland blazes, officials said Wednesday.

Concerns about the $150-a-year fee, which is contained in the state budget Gov. Jerry Brown signed earlier this summer, were raised Wednesday by the California Board of Forestry and Fire Protection.

Democrats in the Legislature passed the fee and said it eventually would raise $200 million a year. That would allow the state to transfer an equal amount of money from the California Department of Forestry and Fire Protection to the general fund budget.

Under the law, proceeds from the fee must go to local fire-prevention efforts through local fire districts, fire councils or the California Conservation Corps — not the state fire department.

George Gentry, chief operating officer of the Board of Forestry, told The Associated Press that will leave the department with a hole in its firefighting budget this year.

Court halts dismantling of CA redevelopment agencies
(San Francisco Chronicle) – The state Supreme Court put the brakes Thursday on a plan to dismantle redevelopment agencies in California, posing yet another challenge to California's ability to keep its budget balanced.

The court said it would decide by mid-January whether the state's plan to eliminate the economic development program is legal, and allowed redevelopment agencies to continue to exist while the case is pending. But it also barred the agencies from starting any new projects, issuing bonds or purchasing or transferring any property until the suit is resolved.

If the case is successful, it will punch a $1.7 billion hole in the state's budget for the current fiscal year and cause a $400 million annual shortfall in future years.

The decision comes just two days after state Controller John Chiang said that taxes and other revenue fell short of projections in July – though other state officials said those numbers are likely to change – and as doubts about the nation's economic stability continue to roil stock markets.

Stock market turmoil a bad omen for California budget
(Reuters) – The stock market's recent slump is reviving bad memories for California's government and raising concerns about revenue estimates for its budget, a perennial concern in the U.S. municipal debt market.

The concern in the state capital of Sacramento is the slump hints at the potential for a stock market meltdown like the one in 2008. That sent California's finances into disarray.

Heavy market losses could force California to trigger spending cuts to politically popular programs and revive calls for tax increases, both sure to spark rows in the legislature that cause many investors to stay clear of the state's debt.

Governor Jerry Brown and lawmakers in June notched a budget plan that closed a multibillion dollar deficit and balanced the state's books in part with a rosy revenue outlook.

Critics said the forecast was too optimistic given the state's weak economy and the potential for reversals in financial markets. When they swoon, California's revenue shrinks because it relies heavily on wealthy taxpayers and their capital gains to provide a large chunk of the personal income tax receipts.

And finally this from Douglas French of the Mises Institute:

Los Angeles, America's Harbinger
In a piece for the Wall Street Journal, Joel Kotkin tells of the demise of Los Angeles. No, you won't see Snake Plissken or Rick Deckard racing through the City of Angels just yet. But the city's political machine is doing all it can "to leave behind a dense, government-dominated, bankrupt, dysfunctional, Athens by the Pacific," explains Kotkin.

…The unemployment rate for Los Angeles County was officially 12.4 percent in June, after peaking a year ago at 13.4 percent. However, the worst is likely not over. As Kotkin explains, the Panama Canal is planning to widen and there are plenty of ports on the eastern seaboard looking for business. Also, the Golden State's renewable-energy mandates are estimated to increase energy costs by 20–25 percent. Californians already pay 53 percent more than the national average.

And the taxman is especially brutal in California, with a top rate of 10.3 percent, which kicks in at a $1 million in earnings. Sure, not many are pulling down that much, but the second highest rate, 9.3 percent, applies to those making $46,766 and above. The state's minimum wage is $8 an hour, 75 cents above the federal rate. And restaurant employers may not use tips earned as credit toward this obligation as is the case in many states. California employers are required to pay "exempt" employees double the state minimum, putting these employees in the 6 percent tax bracket.

What once was believed to be a city of destiny (paradise on earth) is being destroyed by government looting; and now its saviors, the state of California and the federal government, have been looted as well.

Some thoughts:
After spending a recent week in Los Angeles, I now understand the concepts of Peak Oil and road rage: Tens of thousands of cars, most containing only one person, going 75 miles an hour for a really long time to get anywhere. Besides being stressful, this system is fragile. It will grind to a halt on the day gas hits $6 a gallon.

California tends to lead the way for other US states, which in the past was mostly good. But now the Golden State is about to become a Third World country, complete with deteriorating public services and a permanent, volatile underclass. Those "London burning" pictures will be replicated in LA before too long.

The sad truth is that it's simply impossible to run a major US state with the current public sector pay/benefits structure. The process of scaling back pensions and salaries will hurt a lot of cops, teachers and social workers who don't deserve pain. But there's no mathematical alternative to a dramatic lowering of state/local operating costs.

This is the inevitable result of three decades of lies told to public sector unions and taxpayers. The people making the promises (lifetime pension/health care for 50-year-old retirees, for instance) either knew they were lying or were really, really stupid. Either way, they're the villains in this story.

The muni bond market has held up amazingly well considering that many of them are loans to bankrupt states in a soon-to-be bankrupt country. But in the coming year Meredith Whitney's prediction of "hundreds of billions of dollars of muni defaults" might come true, again with California leading the way.


Gold Decline Viewed as Corrective

Posted: 12 Aug 2011 07:20 AM PDT

courtesy of DailyFX.com August 12, 2011 07:08 AM 300 Minute Bars Prepared by Jamie Saettele, CMT “Analyzing structure from the July low suggests that a series of 4th and 5th waves should unfold. In other words, gold is headed higher but with corrections along the way. Near term support is 1740 and 1720. The next upside objective is not until 1926.50.” Trend Strength (M,W,D) – 3, 2, 3 Latest Video COT Jamie Saettele publishes Daily Technicals every weekday morning, COT analysis (published Monday), technical analysis of currency crosseson Wednesday and Friday (Euro and Yen crosses), and intraday trading strategy as market action dictates at the DailyFX Forex Stream. A graduate of Bucknell University, he holds the Chartered Market Technician (CMT) designation from the Market Technician Association. He is the author of Sentiment in the Forex Market. Send requests to receive his reports via email to [EMAIL="jsaettele@dailyfx.com"]jsaettele@dailyfx.com[/E...


Macro Commentary: The Cost of Fiat Money and Gold [Is a Swap from Gold to Land and Real Estate Brewing?]

Posted: 12 Aug 2011 07:18 AM PDT

Submitted by Brian Rogers of Fator Securities

Markets are trading sharply lower this morning after yesterday's late afternoon rally on the change in language in the Fed statement that will keep short interest rates essentially at zero until 2013.  As I have stated before, I believe they will ultimately be forced to keep rates low [...]


Paperbugs Won't Get It Until It's Too Late

Posted: 12 Aug 2011 07:13 AM PDT

A brutal cyclical common equity bear market within this secular bear market for common stocks has already begun. Meanwhile, the parabolic phase in the uncommon Gold secular bull market has just begun with the latest thrust higher. Read More...



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