Gold World News Flash |
- Second Largest Bull Market Correction for Silver
- KWN Special - Martin Armstrong: Who Will Collapse First?
- Want to Make a ?Golden? Investment? Here are 50 Ways to Do So
- Physical Silver Shortages Growing, Premiums Rising
- David Morgan Interviewed, Gold & Silver Investment & Volatility
- Meltdown: The Men Who Crashed the World (Pt. 1)
- Negative interest rates from short to long will support metals, Michael Pento says
- Is the Noose Tightening Around Gold?
- Pat Heller: Silver shortages growing and premiums rising
- Don't Panic on Metal Tumble
- Unless the Gold Price Batters Through that $1,620 Ceiling and the Silver Price Through 3100c, Lower Prices Lay in Store
- Open Interest Falls to Lowest Levels in Years / Sets the Stage for Gold & Silver to Rocket Higher
- Gold and Silver Prices Plunge
- Guest Post: China’s Rare Earths Monopoly - Peril or Opportunity?
- Lower Lows in the Cat-Like Real Estate Market
- Gold Focus Remains to the Downside
- James Turk Talks to John Embry
- Michael Pento - Here is Why Gold & Silver Will Not Collapse
- A Look at the Long-Term Trends in Government Spending
- There are several reasons to be concerned about the possibility of some sort of peak or decline in silver production
- ATM SKIMMING VS FEDERAL RESERVE SKIMMING
- In The News Today
- Hedge Fund Action Doesn’t Change Fundamentals
- Physical Silver Shortage to Follow Paper Selloff
- Jim's Mailbox
- Tough Love
- Guest Post: The Politics Of Consistently Bad Legislation
- Market Snapshot: What A Day!
- Rare Earths: What Next?
- Shale Gas: Is It Really All That?
| Second Largest Bull Market Correction for Silver Posted: 29 Sep 2011 06:09 PM PDT Odds and ends from the Chart Book, silver and The Little Guys.
Continued… What are the odds this will end up being the largest correction for silver – even larger than the 2008 near 60% retrace panic lows? We Vultures believe that just about everything that governments and central banks will end up having to do over the next while will involve force feeding more liquidity into an already liquidity-bloated, over-leveraged monetary system - in order to keep deflation at bay. Nobody wants deflation, but for central banks deflation is the anti-Christ and must be avoided at all costs. When possible banking collapse push comes to monetary policy shove, we can count on the Fed, E.U. and even the China "put" of more quantitative easing – if necessary, just wait and see. Short term moves are anyone's guess at this point, but longer term the bull case for precious metals is rock solid. That's why most of the seasoned and really savvy analysts keep saying to buy the harsh dips. That's why quite a few central banks are on the bid for gold now too instead of selling. They see more money printing ahead too. On another note, if it has felt like this has been an especially harsh pullback/correction for the smaller, less liquid and more speculative miners and explorers, like the ones which populate the Canadian Venture Exchange Index or CDNX, … the companies we often refer to as "The Little Guys", … well, it has been, no matter how one measures it. Just below is the CDNX compared to the HUI, which tracks a basket of the larger gold and silver miners.
The current market for The Little Guys is almost as harsh as the 2008 collapse relative to the HUI, and the HUI was decimated then too. As bad as it got for the Big Miners, it was pure purgatory for their smaller cousins three years ago. When bargain hunting, think cheap, think very cheap, especially in a rush to liquidity cascade lower like the one trying to get it on right now. When we compare the CDNX to gold (below), we can see that there is a profound shortage of confidence in speculative stocks and there has been since 2008. This ratio has fallen below the lows of last year and is not all that far from its all time lows set in 2008.
Small mining companies ironically need a more confident market to keep pace with the underlying commodities. That is in part why mining shares did not strongly outperform gold and silver until after they peaked in 1980. The paradox was that as the metals rose and went parabolic in the late 1970s it was during a crisis of confidence with fears of hyperinflation. Metals soared, but mining equities suffered along with other stocks at the tail end of a protracted bear market. Mining companies are stocks and stocks underperform in times of crisis, but they often improve well before the return of confidence is apparent to most people.
We just don't get all that many true panic cascade opportunities to work with in a trading career – they are rare. And remember that we believe that it is only a question of time before the miners, big and small, begin to "answer" the metals just as they finally did in the early 1980s. So we sure do want to take advantage of as much of this rare event as we can … if it continues, that is. That's if the market doesn't start to discount a major change too soon before the best and cheapest part of the panic op arrives.
We aim to first identify that condition and then join them when they do, adjusting our super-bargain targets as we go along as best we can. When one follows and charts more than sixty different issues in the same sub-sector as we do, it's pretty clear when there is a major change of investor/trader sentiment and demand afoot.
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| KWN Special - Martin Armstrong: Who Will Collapse First? Posted: 29 Sep 2011 04:55 PM PDT  With continued turmoil in global markets, today King World News interviewed internationally followed Martin Armstrong, Founder and Former Head of Princeton Economics International, Ltd.. Armstrong's firm rose to be perhaps the largest multinational corporate advisor in the world and by the 1997 Asian Currency Crisis, Armstrong was invited by China and he flew to Beijing to advise the Central Bank. Many people don't realize that Congress went to Martin Armstrong for help as the fires were burning during the financial collapse of 2008.
This posting includes an audio/video/photo media file: Download Now |
| Want to Make a ?Golden? Investment? Here are 50 Ways to Do So Posted: 29 Sep 2011 04:30 PM PDT Beyond its role as a diversifying agent in a portfolio, perhaps the most enticing attribute that gold offers is the huge potential for price appreciation. Although prices were stuck in somewhat of a rut in the middle part of the last decade, financial turmoil, money printing, and widespread fears over inflation have pushed gold prices sharply higher in recent years to near all time highs… Given the continuation of easy money policies by the Fed and other central banks around the world, as well as the very real possibility of more turmoil in the financial space, it isn't surprising that many investors are looking to cash in on this modern day gold rush. For these investors looking to make a play on this elusive metal, we explore below*every nook and cranny of the investing world to offer 50 ways to play gold. Words: 2768 So says Jared Cummans ([url]www.CommodityHQ.com[/url])**in an article* which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has further ...
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| Physical Silver Shortages Growing, Premiums Rising Posted: 29 Sep 2011 04:02 PM PDT by Patrick A. Heller, CoinUpdate.com:
The last sentence of the column noted that delivery times on physical silver were backing up. In the two days since, there has been a significant slowdown in deliveries. Further, premiums are on the rise. The reason for these trends is that virtually everyone is a buyer of physical silver and not a seller at this week's lower prices. Not only are people buying, but they are buying right away rather than taking time to "think about it."
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| David Morgan Interviewed, Gold & Silver Investment & Volatility Posted: 29 Sep 2011 03:28 PM PDT |
| Meltdown: The Men Who Crashed the World (Pt. 1) Posted: 29 Sep 2011 03:14 PM PDT |
| Negative interest rates from short to long will support metals, Michael Pento says Posted: 29 Sep 2011 03:13 PM PDT 11:07p ET Thursday, September 29, 2011 Dear Friend of GATA and Gold (and Silver): Interviewed by King World News, fund manager Michael Pento argues that gold and silver will not fall much from here because the Federal Reserve has set about making real interest rates negative along the entire time horizon. Certainly such circumstances will tend to support precious metals prices, but as long as precious metals buyers accept mere certificates in place of their metal or take cash settlement of futures contracts, the gold and silver price suppression schemes can continue indefinitely because imaginary supply can be created indefinitely. An excerpt from Pento's interview is posted at the King World News blog here: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/9/29_Mi... CHRIS POWELL, Secretary/Treasurer ADVERTISEMENT Lewis E. Lehrman on How to Solve the U.S. Debt Problem Lewis E. Lehrman, chairman of the Lehrman Institute, sponsor of The Gold Standard Now project, advises that to reduce the $1 1/2 trillion U.S. deficit, the Republican Party must initiate an investment program. Working Americans are not saving, which enables the banks to lead the country into a cycle of debt, leverage, boom, panic, and bust. Lehrman says: Eliminating the budget deficit of a trillion and a half dollars cannot be done overnight. The proposal by U.S. Rep. Paul Ryan was very dramatic -- one Republican called it radical -- but it was not happily received. The solution, of course, is to design an American program for prosperity, because you can solve these entitlement problems with a growing economy. We need a tremendous program of investment, and investment comes from savings. When you pay savers, middle-income professionals, and working people 0 percent at the bank, you are not going to encourage them to save. Then we are left with a bank cycle of debt, leverage, boom, panic, and bust." To read more and to sign up for The Gold Standard Now's free, noncommercial, weekly report, "Prosperity through Gold," please visit: http://www.thegoldstandardnow.org/gata Join GATA here: The Silver Summit http://cambridgehouse.com/conference-details/the-silver-summit-2011/48 New Orleans Investment Conference http://www.neworleansconference.com/ Support GATA by purchasing gold and silver commemorative coins: https://www.amsterdamgold.eu/gata/index.asp?BiD=12 Or by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Be Part of a Chance to Discover Multi-Million-Ounce Gold and Silver Deposits in Canada Northaven Resources Corp. (TSX-V:NTV) is advancing five gold and silver projects in highly prospective and politically stable British Columbia, Canada. Check out the exploration program on our Allco gold/silver project : -- A large (13,000 hectare) property, covering more than 15 square kilometers of a regional mineralized trend just 3km from a recently announced 1.2-million-ounce gold and 15-million-ounce silver deposit. -- The property hosts historic high-grade silver workings and many mineral showings as well as former mines at the property's northern and southern boundaries. -- A deep-penetrating airborne geophysics survey has just been completed on the entire property and neighboring deposits and its results are eagerly awaited. To learn more about the Allco property or Northaven's other gold and silver projects, please visit: http://www.northavenresources.com Or call Northaven CEO Allen Leschert at 604-696-3600.
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| Is the Noose Tightening Around Gold? Posted: 29 Sep 2011 03:08 PM PDT from WealthCycles:
Governments around the world are becoming increasingly insolvent. Not only have they borrowed vast amounts of currency, but the citizens of those countries are beginning to wake up to the government economic recklessness for the first time. The recent history of gold control:
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| Pat Heller: Silver shortages growing and premiums rising Posted: 29 Sep 2011 02:28 PM PDT 10:30p ET Thursday, September 29, 2011 Dear Friend of GATA and Gold (and Silver): Coin and bullion dealer Pat Heller reports at Coin Update tonight on the rising premiums and growing shortages for gold and particularly silver. Heller's report is headlined "Physical Silver Shortages Growing, Premiums Rising" and you can find it at Coin Update here: http://news.coinupdate.com/physical-silver-shortages-growing-premiums-ri... CHRIS POWELL, Secretary/Treasurer ADVERTISEMENT Drilling at Prophecy Platinum's Wellgreen Project in Yukon Company Press Release VANCOUVER, British Columbia, Canada -- Prophecy Platinum Corp. (TSX-V: NKL, OTC-QX: PNIKF, Frankfurt: P94P) has announced the drill results received from its 2011 drilling Wellgreen platinum group elements, nickel, and copper project in the Yukon Territory. Borehole WS11-188 encountered 457 meters of mineralization grading 0.47% nickel equivalent (including 0.72 grams per ton platinum, paladium, and gold) from surface to the footwall contact. Within this larger swath of mineralization, the hole encountered a high-grade section of 17.8 meters of 3.14 grams per ton platinum, palladium, and gold, 1.03% nickel, and 0.74% copper (1.77% nickel equivalent). The hole was drilled completely outside of current resource boundaries, between the East Zone resource and the West Zone resource that was reported in the company's press release no July 14, 2011. The high-grade intercept located between the two resources not only demonstrates that the East and West Zone resource form a single, geologically contiguous body but also indicates that the higher-grade material in the East Zone continues to the west and at depth at Wellgreen. For drill result tables and maps, please see the company's full press release here: http://www.prophecyplat.com/news_2011_sep26_prophecy_platinum_wellgreen_... Join GATA here: The Silver Summit http://cambridgehouse.com/conference-details/the-silver-summit-2011/48 New Orleans Investment Conference http://www.neworleansconference.com/ Support GATA by purchasing gold and silver commemorative coins: https://www.amsterdamgold.eu/gata/index.asp?BiD=12 Or by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Sona Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit, Company Press Release, October 27, 2010 VANCOUVER, British Columbia -- Sona Resources Corp. reports on five drillling holes in the third round of assay results from the recently completed drill program at its 100 percent-owned Elizabeth Gold Deposit Property in the Lillooet Mining District of southern British Columbia. Highlights from the diamond drilling include: -- Hole E10-66 intersected 17.4g gold/ton over 1.54 metres. -- Hole E10-67 intersected 96.4g gold/ton over 2.5 metres, including one assay interval of 383g of gold/ton over 0.5 metres. -- Hole E10-69 intersected 85.4g gold/ton over 4.03 metres, including one assay interval of 230g gold/ton over 1 metre. Four drill holes, E10-66 to E10-69, targeted the southwestern end of the Southwest Vein, and three of the holes have expanded the mineralized zone in that direction. The Southwest Vein gold mineralization has now been intersected over a strike length of 325 metres, with the deepest hole drilled less than 200 metres from surface. "The assay results from the Southwest Zone quartz vein continue to be extremely positive," says John P. Thompson, Sona's president and CEO. "We are expanding the Southwest Vein, and this high-grade gold mineralization remains wide open down dip and along strike to the southwest." For the company's full press release, please visit: http://sonaresources.com/_resources/news/SONA_NR19_2010.pdf
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| Posted: 29 Sep 2011 02:00 PM PDT By: John Browne Thursday, September 29, 2011 Fall officially began on September 21, but it’s not just leaves that are cascading downward. In the few market days of the new season, precious metals prices have seen significant drops, some 11% for gold and 31% for silver. In its lurch downward, gold plowed through support levels at $1,750, $1,700, and $1,645 an ounce. I'm sure many readers are concerned. After all, by the time gold put in its recent peak on August 22, it had logged a stunning 44% appreciation in calendar year 2011. And even after its recent tumble, the metal is still 22% higher than it was on January 27, the 2011 low. Therefore, some may conclude that gold has further to fall, and that the descent could be steep. Given this anxiety, it might be helpful to summarize some factors we see impacting prices. Emotions loom large in the financial world, and it is easy to l...
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| Posted: 29 Sep 2011 01:49 PM PDT Gold Price Close Today : 1615.50 Change : (0.60) or 0.0% Silver Price Close Today : 30.472 Change : 0.388 or 1.3% Gold Silver Ratio Today : 53.02 Change : -0.704 or -1.3% Silver Gold Ratio Today : 0.01886 Change : 0.000247 or 1.3% Platinum Price Close Today : 1528.00 Change : -3.00 or -0.2% Palladium Price Close Today : 623.00 Change : 0.00 or 0.0% S&P 500 : 1,160.40 Change : 9.34 or 0.8% Dow In GOLD$ : $142.73 Change : $ 1.90 or 1.3% Dow in GOLD oz : 6.904 Change : 0.092 or 1.3% Dow in SILVER oz : 366.04 Change : 0.04 or 0.0% Dow Industrial : 11,153.98 Change : 143.08 or 1.3% US Dollar Index : 77.93 Change : 0.078 or 0.1% Metals put in a mixed close day. The GOLD PRICE gained a microscopic 60 cents to close Comex at $1,615.50 while the SILVER PRICE gained 38.8c to close 3047.2c, but didn't break through 3100c resistance or even 3050c, although in the aftermarket it has climbed to 3072.5c. Ambivalence, ambivalence, all is ambivalence! The SILVER PRICE has established support at 2900c, but cannot climb through 3100c. The GOLD PRICE has some sort of floor at 1580, but cannot break through the $1,620 ceiling. All this has unfolded against a background of lower highs and lower lows, i.e., a downtrend. Thus we must conclude that unless the GOLD PRICE batters through that $1,620 ceiling and the SILVER PRICE through 3100c, lower prices lay in store. However I caution that gold and silver could still rally up to the bottom of that consolidation area, about $1,750, seem strong as a garlic milkshake, then step into an elevator shaft. Be patient, be patient. Buy some if you just can't stand the wait, but be patient. What doth one say about a market that rises to a high of 11,269, then gives up 40% of that 259 point gain to close at only 11,153.98, up 1.3%? One sayeth, "The Dow is tapped out." S&P500 rose a feebler 9.34 (0.81%) to close 1,160.40. All this, remember, was riding the crest of the euphoric wave pouring out of Euroland because the German Bundestag voted today to sell out Germany to the banks, i.e., back the Bucket for Sovereign Debt a.k.a. euro bailout fund hung with the cosmically impossible name of European Financial Stability Facility. Sounds like some place you'd get your oil changed when your Volvo engine's running too hot. Durned if the eurocrats aren't getting away with turning the crisis to their advantage and increasing their centralized tyranny! It is historically ironic that Germany now has all she fought for in two world wars, but without the bloodshed: the Fourth Reich. I went to school in Germany and am a great admirer of German culture and civilization, except for the Nazi aberration. Remember that the German Empire began to be built on the ruins of Rome with Charlemagne (768-814 a.d.) and was officially founded as the First Reich with the crowning of Otto I in 962. (Remember that the Franks like Charlemagne were really Germans who settled in France, so ultimately the French are really Germans, or the Germans are French, and I'm my own grandpa.) The First Reich lasted until Francis II abdicated in 1806. The Second Reich came with the founding of the Prussian empire upon the defeat of the French (those "other" Germans) in 1871 with Wilhelm I. That Reich ended in 1918 when Wilhelm II "the Incompetent" abdicated. Then the Nazis came along and, as they always so skillfully did, co-opted existing symbols while filling them with wholly new meaning. (Think of the Hakenkreuz or swastika used to replace the Christian cross.) Anyway, the Nazis proclaimed the Third Reich, and that ended with Hitler in 1945. Later skilful German statesmen worked to set up a European political order that would be peaceful and prosperous, but somewhere along the way that metastasized into the European bureaucracy. Bottom line is, today the Germans are the lynchpin, not to say the rulers, of the Eurozone. The ancient Reich has been revived. And in Asia, the Japanese have hegemony in the "Greater East Asia Co-Prosperity Sphere" they sought to establish by force 1905 - 1945. Ironically enough, most of the big German and Japanese corporations from those "bad" years are still around, Mitsubishi, e.g., making cars instead of Zero fighter planes, Krupp, Siemens, etc. Governments and dictatorships may come and go, but corporations are forever. The US won the war, while the corporations stole the peace. Whoa! Sorry, I got clean off point. Back to today's markets. US DOLLAR INDEX was 77.93 when I began writing this, up only 7.8 basis points, but now is trading over 78 at 78.028, up 0.23%. SOMEbody (read: Nice Government Men) keeps slapping the dollar down every time it pokes its uppity head above 78. That won't last forever, and the dollar will move higher. Poor, pitiful Euro rose a little today, 0.38%, to 1.3593, ready to begin its next plunge. Yen dropped 0.34% to 130.18c/Y100 (Y76.81/$1). Japanese NGM have still not chastised and tamed their wayward currency. 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. 
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| Posted: 29 Sep 2011 01:07 PM PDT by Harvey Organ: Good evening Ladies and Gentlemen: The price of gold fell slightly by 80 cents to $1615.60. The price of silver rose by 38 cents to $30.47. I told you yesterday that all options that have been exercised receives a futures contract and they are thus standing for delivery. The bankers for the past year have been whacking the precious metals during the last few days of the month trying to discourage the new options holders from taking delivery of metal. This again is doomed to fail. Let us head over to the comex and assess trading. Read More @ HarveyOrgan.Blogspot.com
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| Posted: 29 Sep 2011 01:04 PM PDT |
| Guest Post: China’s Rare Earths Monopoly - Peril or Opportunity? Posted: 29 Sep 2011 11:30 AM PDT Submitted By John C.K. Daly of OilPrice.com China's Rare Earths Monopoly - Peril or Opportunity? The prosperity of China's "authoritarian capitalism" is increasingly rewriting the ground-rules worldwide on the capitalist principles that have dominated the West's economy for nearly two centuries. Nowhere is this shadow war more between the two systems more pronounced than in the global arena of production of rare earths elements (RREs), where China currently holds a de facto monopoly, raising concerns from Washington through London to Tokyo about what China might do with its hand across the throat of high-end western technology. In the capitalist West, as so convincingly dissected by Karl Marx, such a commanding position is a supreme and unique opportunity to squeeze the markets to maximize profits. Except China apparently has a different agenda, poking yet another hole in Marx's ironclad dictums about capitalism and monopolies, further refined by Lenin's screeds after his Bolsheviks inadvertently acceded to power in 1917 in the debacle of Russia's disastrous involvement in World War One. Far from squeezing its degenerate capitalist customers for maximum profit (and it's relevant here to call Lenin's dictum that if you want to hang a capitalist, he'll sell you the rope to do it), Beijing has apparently adopted a "soft landing" approach on rare earths production, gradually constricting supplies whilst inveigling Western (and particularly Japanese) high tech companies to relocate production lines to China to ensure continued access to the essential commodities. REEs are found in everyday products, from laptops to iPods to flat screen televisions and hybrid cars, which use more than 20 pounds of REEs per car. Other RRE uses include phosphors in television displays, PDAs, lasers, green engine technology, fiber optics, magnets, catalytic converters, fluorescent lamps, rechargeable batteries, magnetic refrigeration, wind turbines, and, of most interest to the Pentagon, strategic military weaponry, including cruise missiles. Technology transfer is the essential overlooked component in China's economic rise, and Beijing played Western greed on the subject like a Stradivarius, promising future access to China's massive market in return, an opium dream that rarely occurred for most companies. You want unimpeded access to Chinese RREs? Fine – relocate a portion on your production lines here, or… Which brings us back to today's topic. Rare earths and investment – where to go? China is riding a profitable wave, which depending on what figures you read, produces 95-97 percent of current global supply, and unprocessed raw earth earths ores are currently going for more than $100,000 a ton, or $50 a pound, which some of the exotica fetching far more (niobium prices has increase an astounding 1,000 percent over the last year). Rare earth elements like dysprosium, terbium and europium come mainly from southern China. According to a United States Energy Department report, dysprosium, crucial for clean energy products rose to $132 a pound in 2010 from $6.50 a pound in 2003. The soaring prices however have also invigorated many countries and producers to begin looking in their own back yards, for both new deposits and former mining sites that were shuttered when production cost made them uneconomic before prices went through the ceiling. However, a number of unknown factors play into developing alternative sources to current Chinese RRE production. These include first prospecting possible sites, secondly, their purity and third, initial production costs, where modest Chinese labor costs are a clear factor. The 17 RRE elements on the Periodic Table are actually not rare, with the two least abundant of the group 200 times more abundant than gold. They are, however, hard to find in large enough concentrations to support costs of extraction, and are frequently found in conjunction with radioactive thorium, leading to significant waste problems. At hearings last week before U.S. House of Representatives Committee on Foreign Affairs Subcommittee on Asia and the Pacific, Molycorp, Inc. President and Chief Executive Officer Mark A. Smith stated that his company was positioned to fulfill American rare earth needs, currently estimated at 15,000-18,000 tons per year, by the end of 2012 if it can ramp up production at its Mountain Pass, California facility. Which brings us back to foreign producers. A year ago Molycorp announced that it was reopening its former RRE mine in Mountain Pass, Calif., which years ago used to be the world's main mine for rare earth elements, filing with the SEC for an initial public offering to help raise the nearly $500 million needed to reopen and expand the mine. Low prices caused by Chinese competition caused the Mountain Pass mine to be shuttered in 2002. Mountain Pass was discovered in 1949 by uranium prospectors who noticed radioactivity and its output dominated rare earth element production through the 1980s; Mountain Pass Europium made the world's first color televisions possible. Molycorp plans to increase its capacity to mine and refine neodymium for rare earth magnets, which are extremely lightweight and are used in many high-tech applications and intends to resume production of lower-value rare earth elements like cerium, used in industrial processes like polishing glass and water filtration. In one of those historic economic ironies, China was able to increase its RRE production in the 1980s by initially hiring American advisers who formerly worked at Mountain Pass. So where do investors look to cash in on the RRE boom? First, do your homework. Exhibit A is Moylcorp, which would seem to be in unassailable position as regards U.S. production, but which nevertheless on 20 September after JPMorgan Chase & Co. lowered its rating of the company, citing declines in rare-earth prices, causing its stock to plummet 22 percent in New York Stock Exchange composite trading, despite being the best-performing U.S. IPO in 2010 after beginning trading in July, more than tripling after rare-earth prices soared as China cut export quotas. Is there money to be made in RREs? Undoubtedly – but the homework for the canny investor needs to extend beyond spreadsheets to geopolitics, mining lore, chemistry and Wall Street puffery. That said, it seems likely that whatever U.S.-based company can cover the Pentagon's RRE requirements is likely to see more than a minor boost in its bottom line. Gentlemen, place your bets – but do your homework first.
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| Lower Lows in the Cat-Like Real Estate Market Posted: 29 Sep 2011 11:05 AM PDT Bill Bonner View the original article. September 29, 2011 11:07 AM Cash is still king. Cash is king because non-cash is a commoner and a loser…it's losing its value. An article in yesterday's Financial Times, for example, tells that: "US inflation expectations at lowest point in year." In other words, forget inflation. Forget price increases. It's cash…cash…cash. Cash on the barrel…cash in hand…cash and carry. You got cash? You da king! People expect cash to be more valuable. And if we're right…it will be more valuable. Stocks, for example, fell yesterday. The Dow dropped 179 points. And gold. It lost $34. Another article in yesterday's financial press told us that "it's a great real estate market…if you're rich." Why? Because the rich have cash. They're the kings, queens and jokers too. And now they can use cash to buy other assets at a discount. They get more for their money. When inflation subsides so do prices. And nowhere have th...
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| Gold Focus Remains to the Downside Posted: 29 Sep 2011 11:05 AM PDT courtesy of DailyFX.com September 29, 2011 07:24 AM 300 Minute Bars Prepared by Jamie Saettele, CMT “Gold plunged last week and reversed just shy of its 200 day average, which hasn’t been reached in over 2 years! An impulse is unfolding from the high so expectations are for this rally to reverse near the current level and for gold to drop in a 5th wave to a new low.” Look lower. Trend Strength (M,W,D) – 3, 0, (2) Latest Video Weekly Forecast 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...
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| James Turk Talks to John Embry Posted: 29 Sep 2011 10:50 AM PDT James Turk: I'm James Turk. I'm a director of the GoldMoney Foundation and it's my real pleasure to be here today in Jersey Channel Islands with my friend, John Embry, Chief Investment Strategist of Sprott Asset Management. John, it's a pleasure to see you here, and I really appreciate you taking the time out to meet with us. John Embry: Well, it's wonderful to see you again, James. I'm looking forward to our conversation. James: Yeah, it's been a while since we've had a chance to talk about markets, but let's get right into it. Silver, that's the topic of conversation at the moment. What are your thoughts on what's been going on here? John: Well, I think the rise to sort of nearly $50 recent peak, believe it or not, was justified. It's funny when you read the mainstream press, everybody's talking about bubbles and how big the correction is going to be, and they don't seem to understand the fundamentals. Yeah, I think the fundamentals for silver are impeccable. The fact we're going through a tough correction here is not surprising. This is a paper-driven, Comex-sponsored correction and it's to be expected. I mean, if you've been involved in the silver markets as long as we have at Sprott, we're used to these things. They're not fun, but they're just another buying opportunity. James: Yeah, one of the things that I've been trying to make clear is that there's a difference between the physical market and the paper market. And sometimes the paper market can drive prices, to a certain extent, because there's so much paper out there relative to the amount of physical. And it can drive it to the upside to a certain extent and to the downside to a certain extent. Is that what you see happening now, the paper market driving it because of people bailing out of leverage positions? John: Yeah, I would go so far as to say the paper market probably drives the price most of the time. When the physical market takes over is when the physical shortage of significant dimensions takes place. And what's going on right now is very clearly there's massive short positions in the paper market. These positions are being protected, and in the short run, they have a lot of power. They can move the market a long way – as we've seen – and we've seen a 20 per cent plus correction from the highs of what? A week ago? James: Yeah. John: But this is not atypical and I don't think people should be deeply concerned about it. They should actually be thankful if they don't own silver, because they're getting another opportunity to buy some. James: Yeah, one of the things I've been recommending is to continue in the accumulation, you know, month-in, month-out. Whenever your budget allows, just continue buying regardless of the price, because in the long run, the trend is much higher. And by accumulating in that kind of a cost-averaging program, a few years from now you're going to look back and be very happy. Would you agree with that? John: I think that's a very brilliant strategy; I've actually done that myself in gold and silver for years. Whenever I have free cash flow, I put it in. I don't worry about the price because I believe the trend is established and it has been for over 10 years. And it's certainly – what people can't grasp, all these talks about bubbles, is we're in the early stages of a massive move in the precious metals. And what we've seen to date is actually quite restrained and orderly. It will become disorderly on the upside. James: Yeah. One of the things that I've been focusing on since January, and actually a little bit before, was the interest rates on the precious metals and whether they're going to go into backwardation. In fact, silver did go into backwardation in January. And if you look at the spot price, relative to the December 2015 price on silver, we've been in backwardation ever since then. Have you ever seen anything like that before? John: No, I haven't. And I think what it is indicative of is what we were mentioning briefly before, and this is the physical shortage. I mean, there's a massive amount of paper silver out there, but because of the mounting physical shortage, people are having to pay up for the physical and that's creating this distortion in the paper market where you've got backwardation. I think it's an extremely bullish signal going forward. James: It's also an indication that the arbs, the arbitrageurs, don't have the silver to actually borrow to sell spot and buy back in the future. John: Absolutely. And that just is another manifestation of the physical shortage. James: Which is also, obviously, another bullish indication about the silver market as well. John: Absolutely. James: Let's move from silver onto gold. You know, over the past year the ratio has dropped. The gold/silver ratio, the number of ounces of silver to buy an ounce of gold has dropped from about 65 or so, to as low as around 31, 32. We've bounced back up a little bit, we're still in the 30s. What's your thoughts here? Is the ratio going to continue to fall? John: Yeah, that's our belief at Sprott. I mean, my partner, Eric Sprott, is particularly strong in this point. He thinks that we will go back to the historical lows, which have been like 10 to 15 times. I mean, the fact we've gone as quickly as we have from in the 60s to into the 30s, one shouldn't be surprised at a correction. I mean, nothing goes in a straight line. And in this field, as you know, the corrections tend to be violent, and we're in the midst of a violent correction. But no, that doesn't affect the longer-term direction which I think probably is towards the historic lows. I think gold is going up a lot, silver is going up more, and its manifestation of it is a greater physical shortage of silver in the world than there is gold. James: From here going forward over the next couple of months, will silver climb more rapidly than gold in your view, or is it hard to say? John: I would say yes, once the correction is over. Oe thing I've learned from hard experience is you don't call bottoms in these short-term corrections, they can go far further than you think, rationally. But once that's behind us, yeah, I would think silver would reestablish its preeminence in terms of upside potential. James: I guess the extent of the correction is sort of a reflection of the amount of leverage that we see is on the way up? John: I guess it is. You know, the fact is I always marvel at these people who get cleaned out on Comex, because you can see these things coming. There was the confidence index which had silver up 96 per cent confidence – or however they measure this. And I mean, traditionally, that's been a very big red flag. If your long paper silver when this confidence stays at 95-96 per cent for weeks, you are probably going to get hurt, and that's exactly what we see. James: If you're trading paper. John: If you're trading paper. If you're trading silver that's paid for, physical silver, you just go, hey, that's just part of the game and, boy, we're getting an opportunity to buy silver at a great price again physically here very shortly. James: Yeah, that ratio that you're referring to is back in the 70s, which has recently been a good indication that we're at or very close to a bottom. John: Boy! It fell quickly. I mean, it went from 96 to, I think it was I saw it yesterday at 77 or something. I mean, I didn't see it fall quite that quickly. I think it was, what? Two days it took to go from 20 per cent? James: Yeah, that's right. I've never seen it fall that quickly either, not with regard to silver. I've seen it occasionally with regard to I think the Swiss franc years ago, but I don't recall it ever falling that rapidly with regard to silver. John: But you know, what's been amazing to me is that no one – I shouldn't say no one. Very few people foresaw the upside potential in silver and what's already been achieved. And consequently, as this thing has unfolded, the mainstream press has been absolutely, to a man, negative. I mean, your psychological backdrop to this for much higher prices is terrific, because the sentiment is not — in sort of a mainstream sense, is extremely negative. And people will all be sort of taking credit for this correction, but the fact is they never called the upside either, so I take it all with a grain of salt. James: Yeah, it's curious that people are calling this thing a bubble, when in fact the US government debt is continuing to grow without any kind of limits, spending continues to go, the Dollar Index, the dollar against major currencies is pretty much weak and in major downtrends. And to me it seems like the bubble is the dollar or US government debt, not gold or silver. John: It's unquestionably that. Now I think perhaps the hardest thing for the average person to understand, because I don't think their minds think in this channel because they don't deal with this on a daily basis, it's not the price of gold and silver that's changing, it's the value of the paper currencies that they're being valued in. James: Yeah. John: I mean, gold and silver have been constants for centuries, and they come and go – paper currencies come and go – and as you know, every single experiment, fiat paper currency, I guess, has ended disastrously. And by all evidence, what's going on with this, we're going to have a similar occurrence this time. James: Well, what I'd like to do is I'd like to use examples so people stop thinking in terms of dollars and start thinking in terms of gold and silver. And one of my favorite stories is that when I was growing up in the 1950s in the States, my parents could drive in to the local gas station and fill up the family car with two silver dollars. And today, you can still do that with the two silver dollars at the face. Not at the face value, but at the silver content at the market value. And it just goes to show you, you know, the consistency of gold's purchasing power and silver's purchasing power. And in fact, the problem is really that we calculate in terms of dollars and we lose sight of what is really happening to the purchasing power of the dollar. John: Well, that's one of the few advantages of being old, you remember what things used to cost. I used to always complain and my mother would say how cheap things were during the Depression. Well, I mean, I'm sort of falling into the same trap now. I remember how cheap things were in the 1950s. And I mean, I guess it's all currency-based. James: Yeah. Yeah, it truly is. You know, you're talking about fiat currencies and all fiat currencies have eventually failed, so let's sort of step back from the markets a little bit and take some big picture look at the international financial scene. How do you see things playing out here? Do you feel that the dollar is – its days are numbered? John: Well, I do. For the simple reason that I sort of look at things mathematically. And when I look at the US budget deficit, for example, you reach the stage now where expenditures are twice as much as revenues. They're taking in less than 50 per cent of what they're spending. Any time you've seen that in history, that means you've gone past the point of no return. So I find these debates about how much spending cuts they're going to have or tax rises to sort of deal with this budget deficit problem to be kind of vacuous, because I think they've really reached a stage where they can do nothing but monetize the debt because they can't correct it. If they were to do the kind of austerity program necessary to bring the lines closer together, they would crater the economy, which would end up causing the deficit to widen again anyways. So yeah, I really think that the dollar is in the death throes. I mean that's a big statement because it's been the reserve currency certainly for most of this century, but most certainly since the Second World War. This is a major change going on. James: But isn't the economy going to collapse anyway if they continue on this road of spending and more debt? John: I couldn't agree more. I think the problem is that whether you want to take sort of a form of hyperinflation first before you clean the system out or whether the politicians have the courage to sort of do what is necessary now in an austerity thing, you have to have an opinion. My opinion is they do not have the courage to do that. And as a result, we will have some form of hyperinflation before we reach that state. James: In other words, it's only the crisis that will cause the politicians to do the right thing? John: Yes. James: And hopefully, they will do the right thing and not the wrong thing when the crisis occurs? John: Well, I mean, at that point, there's really only one thing you can do. You have to change the whole currency situation. I mean, even in Zimbabwe, they got away from – they quit printing trillions and trillions of dollars of their own currency and they went to using foreign currency as an alternative and they seemed to have addressed the problem. I mean, when you've got the reserve currency of the world undergoing a similar type experience. This is going to be a unique experience because I guess we've never really had a situation like that. Most hyperinflations have taken place in secondary currencies. One of the great stories, and obviously it was the post-World War I Germany experience, and if you've read about that, it was truly horrifying. I sincerely hope we don't have to go through anything like that. James: How can we avoid that though, given the road that we're on? I mean, the head of the Reichsbank, Dr. Havenstein, basically says the same thing that Mr. Bernanke does, that he has to keep printing because the economy has to keep going with more money. John: I was afraid you were going to say that. I wish I could give some optimistic response. But I'm afraid I am in the camp that thinks that we're headed for some form of hyperinflation, and that's why I've been so pro-gold and silver for a long time. Because this isn't something that snuck up on us. You can see it building. It started a long time ago. And it's just like everything else, it starts slowly and then it starts to pick up speed. And as you mentioned, Mr. Bernanke's actions and statements, to me, are beyond belief for a guy who's obviously got a high IQ. I don't know where he's coming from. James: Yeah. Do you think he really believes what he's saying or he's saying it to try to keep the system going and doesn't want to be the captain of the ship when it sinks? John: I believe the latter, I think he's a very intelligent guy, and a very intelligent guy can see what's happening. James: So in some respect, it's like the politicians who don't want the ship to go down during their watch. They're trying to just keep it together until the next guy has to worry about the problem. John: I think that's almost the case through the whole US Government. Some of Tim Geithner's comments as Secretary of the Treasury are staggeringly ignorant – unless you realise it's all being done for confidence than it is stating any form of reality. James: The propaganda effect… John: Absolutely. James:…when Bernanke talks about controlling inflationary expectations thinking that that's going to stop inflation, even while he's building up the money supply by creating new currency by buying US Government debt on the other side of the equation. John: Oh, it's amazing. I mean the fact that inflationary expectations are stable. Well, I'm not sure. Yes, if you had to buy an iPad every day, I guess they are stable. But on the other hand, if you're buying food and energy, it's becoming apparent to the average citizen that things are getting pretty tight. I mean, their budgets are getting really stretched, so it's starting now. James: Even more so in the third world, where food and energy are a higher percentage of one's income. John: And they're being more honest about it. I mean, the third world is admitting that they have an inflation problem. And the one place on earth that seems to deny it totally is North America, and particularly the United States, and this allows them to continue with zero-based interest rates, which are sort of part of the problem, when you could have but in part of the solution. James: Yeah. What about the banks? How do you see them, the problems unfolding, and how the banks are going to respond here? Are you of the view that the banks are solvent and safe or are there still more issues with regard to the banking system? John: Well, I think there's enormous issues for two reasons. Number one, I mean, when they went back to mark-to-fantasy rather than mark-to-market, you have a massive group of misvalued assets on the banks' balance sheets. So given the leverage they've got, you would probably say most of them that if they really marked their assets to what they could sell them today, they would be insolvent. But then there's the issue that doesn't get talked about maybe as much as it should, and that is the massive amount of derivatives that are throughout the entire system. And they revalued, or Bank of International Settlements changed how they valued them in the sense that they sort of reduced the number or notional value. It'd be over a quadrillion now. Now, when you've got all of this through the banking system and the financial system, and they've never recognised the losing side of a lot of these trades, there's a massive problem. And that I believe is the underlying reason, the real underlying reason, for the quantitative easing to the extent. I don't see it ending. I don't see how it can end unless they're prepared to take a financial debacle. James: Yeah, you know, it's funny that you say that they've never taken the losing side. About eight years or so ago, a good friend of mine, we were chatting – he's a derivative expert – and I was talking about, "Somebody's on the winning side of the trade and somebody's on the losing side of the trade when you do derivatives." And he said to me, "No, you don't understand derivatives at all. Both sides are on winning sides of that trade because of the way they account for it." John: That's correct, and I think sort of where this skirt got pulled back a bit was when Lehman failed and then there was a sort of a counter-party that was going to be forced to sort of reveal… James: What the accounting losses really were. John: What they were. And then that was quickly papered over and they've sort of pushed on. But the fact is… James: But they haven't solved the problem. John: Oh, no, no. If anything, they've intensified the problem, because there's more derivatives being created every day. I mean, we're not shrinking the pile of derivatives, they're growing. I mean, we changed the way we accounted for them, so they said there were less, but there aren't less. James: Yeah, so it's not only the sovereign debt problem that's a sword pointed at the banks and their balance sheets, but the derivatives as well. And the derivatives isn't even getting the attention that the sovereign debt problem is getting. John: Well, the sovereign debt problem is the problem that's sort of the flavor of the day. I mean, it is an extension of the banking problem to begin with. Basically the private sector couldn't carry the debt load, so they had to shove it more onto the countries. And this has created this sovereign risk problem, which is endemic, it's everywhere. I find, when people talk about, "Well, the euro is better than the dollar." Well, I say, "Yeah? But is it?" I mean, the dollar's big problem is there are too many of them. They're creating so many of them and they're throwing them out into the world. And the people that are holding them are becoming, as you know, extraordinarily uncomfortable. I mean, the Chinese are becoming very vocal on the subject and they actually are taking action. They're not buying any more treasuries and that forces Mr. Bernanke to monetise more of them. Because where are the buyers coming from? Some of them are coming I guess from the banking system and what have you, but it's all a large daisy chain. James: We should be taking a message from the Chinese? Do what they're doing? Actually spend those dollars and put them into resources, like their failed bid on Equinox and things of that nature? John: Absolutely. Eric Sprott and I have been adamant on that point, that this is not the time to be holding paper assets. It's got to be real. James: Yeah. Let's talk a little bit about the mining stocks, which a lot of people have been very disappointed because they've been under-performing the metal for so long now and people now are starting to question, "Are the mining stocks ever going to catch up?" What are your thoughts here? John: Well, I think there's three factors. One is controversial and I can't prove it, it's just a thought I have. I think there has been some sort of active suppression of the mining stocks. You can do it so much with algorithm, computer-based trading. And so I think there has been, to some extent, an organised suppression of these stocks to keep peoples' interest away from the sector. And then you have the hedge funds who are always trying to make money every way they can. And sort of they're taking advantage of – they've got all sorts of sprints, trades on, goals, long goals, short shares, whatever. And it's worked because I had a great chat with a friend of mine – and he's one of the better gold analysts – in Toronto last weekend, and he said he'd just been on a tour of North America going to every financial center, talking to a lot of significant money managers. And the interest in gold stocks and silver stocks was negligible, like I mean basically they didn't want to hear about the subject. And I think it's two-fold. One is the fact that the stocks have acted terribly, relative to the metals. And the other is this thought that's been put out there that metals are in a bubble. So why would you own the stocks if metal is under-performed, just before the metals get killed? So you put all this together and you can rationalise why this is all happened. But all it's created, I think, is a spectacular opportunity in these stocks and when the dam breaks, I think you're going to see five- and ten-baggers all over the place. James: Yeah. I guess one of the things you can add to the negative sentiment is the fact that for most of the early part of the 2000s, the price of input costs, energy and labor, was rising faster than the gold price. So the margins on a lot of the money, the companies have been squeezed and they were showing poor operating results for a period of. But now that's changed. The cash flow on some the majors is starting to look very, very attractive, and the PEs are coming down to really, I think, pretty low levels based on historical basis. Would you agree with that? John: Totally agree. I was a huge proponent back in those days of what you just said. I think a lot of people fail to realise how tough the business was. The first rise in the gold and silver prices was eclipsed by the rise in their input prices. So it was a very hard business. Now laterally it hasn't been as bad. As you correctly point out, the numbers have been getting better. They're still not great. You'd think that with the prices of gold and silver having risen this much, these guys would be rolling in money. That isn't the case yet. They're just starting to really get reasonable returns in equity, and now in investment. So that really isn't a reason that can be put forth for stocks. That should have been the reason stocks underperformed before. Now, you're starting to see the fruits of higher prices. So, I don't see that as having been a major factor in the recent under performance in the stocks. I think it was the other things I mentioned. James: Yeah. From a technical point, the XAU's been in this range of 200, up to about 230 or so. Just moving sideways. Is that a bullish view in you mind? Or is that, again, reason for concern? John: Well, I guess it's depending where you're coming from. Basically if you're bear, you could say you're building a top. If you're a bull based on the fundamentals, which I am, I think it's one of these extended bases. And generally, those things propel stocks to much, much
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| Michael Pento - Here is Why Gold & Silver Will Not Collapse Posted: 29 Sep 2011 09:55 AM PDT  With worries surrounding the recent decline in the metals, today King World News interviewed Michael Pento, of Pento Portfolio Strategies. Pento had some strong thoughts on why gold & silver would prevail, "The main reason why gold is in this secular bull market for the last roughly twelve years is because interest rates in real terms have been falling. This is what happened recently with "Operation Twist," where the Fed went out and endangered its entire balance sheet, by going out along the yield curve and extending its duration."
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| A Look at the Long-Term Trends in Government Spending Posted: 29 Sep 2011 09:51 AM PDT Stocks are up a tad as of this writing. They were up quite a bit more than a tad earlier today but, as happened in yesterday's session, confidence waned around lunch, sending them lower in the afternoon. All in, the major US indexes are off by about 3% and change for the month…and down a little over 4% on the year. Gold, too, is having a tough time of it of late. An ounce of the precious metal "languishes" just above $1,616 per ounce after having traded up over $1,900 just a month ago. What gives? If you believe the papers, markets fall because of "uncertainty surrounding the Eurozone debt crisis…" or "an unexpected rise in jobless claims…" or "some other unexpected economic phenomenon that threw experts for a loop." Conversely, if we are to believe the mainstream media, markets rally due to "renewed confidence in the Eurozone…" or "a hunky dory jobs report…" or "because something finally fell in line with what a panel of experts had predicted." None of this is true, of course. At least not on purpose. Call it reactive reporting…sometimes known as "deductive fallacies"…other times known as "meeting a deadline." Get a journalist under the pump and he'll say just about anything to ensure he's out of the office by cocktail hour. Anything, that is, except "I don't know." People don't want to read "I-don't-knows." They want answers…even if they are incorrect, poorly thought out and bear the martini-stained scars from a long lunch meeting. But sometimes it's worth admitting a little ignorance, a little doubt and uncertainty. At the very least, it lends a bit more credibility to the times you do know something (or at least when you think/suspect that you do). We suspect (there's that word again) that, when it comes to stock market prognostications, the shorter the time frame of events, the less likely we are of having any real knowledge about anything. That may be true for many things…but it's especially true of the markets. Ask us what's happening today. We'll tell you we have no clue. Tomorrow? Nope. Still out of luck. How about a year from now, or longer? Ahh…now we're getting somewhere. That's because larger trends take time to work themselves through the pipes. Take gold, for example. In the very near term — like tomorrow — anything could happen. Volatility over the past few weeks has certainly testified to that. $60 up one day. An $80 drop the next. Generally, however, the recent trend has been down. People are heading into the "safety" of cash and bonds. But that, in itself, is still a reasonably short-term trend. Gold may yet go down to $1,400 per ounce. Or $1,200. Maybe lower. But stretch that trend out a bit further and see what you get. Gold is down about 15% over the past month…but it's up more than 500% during the past decade. Smooth the trend line out a bit. Take out the bumps. What does it tell you? Cash and bonds might be a "safe" place to be right now…but where will they be in another five years? Or in ten? Government issued money — be it in cash or bonds — represents a promise to pay. Nothing more. The key, it must be noted, is not only the ability to pay, but, more importantly, the perceived ability to pay. It's a confidence game, in other words. Is the US government going to cut spending during the next five to ten years? We doubt it. There might be talk about it along the way (impacting shorter term trends) but, long-term, the fix is in. A report carried in today's Washington Times, making the point for us, notes how budget cuts would "hollow out [the] military." An addiction to the military is part and parcel of being an Empire. It doesn't go away until it shoots itself in the face. Even Nobel Peace Prize-winning presidents are seen to expand the size and scope of the warfare state. Why? Because they have no choice. Too many vested interests. Too many greasy handshakes. Too many kickbacks and too many entrenched lobbyists. But what about the other component of Empire, the welfare state? Here too we see no choice but for the beast to grow. In fact, it must grow. That's the long-term trend of a welfare state. And it's a trend protected by democracy itself. Once the majority become net recipients, as is the case in the US, they vote themselves ever-fatter slices of other people's pies. The welfare state grows and grows until it ends up feasting on its own tail. Today, some 46 million Americans eat at the government's table thanks to food stamp programs. Another 60 million or so cash Social Security checks…with 10,000 more baby boomers set to retire every day for the next decade. The warfare/welfare state gorges on itself from one end…and shoots at itself from the other. Eventually, even the perceived ability to keep this charade going collapses. And with it goes the paper dollar promises used to pay for it all. Joel Bowman A Look at the Long-Term Trends in Government Spending originally appeared in the Daily Reckoning. The Daily Reckoning provides over 400,000 readers economic news, market analysis, and contrarian investment ideas.
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| Posted: 29 Sep 2011 09:49 AM PDT Peak Silver?
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| ATM SKIMMING VS FEDERAL RESERVE SKIMMING Posted: 29 Sep 2011 09:17 AM PDT This 1:58 second ATM Skimming clip has me perplexed. http://www.youtube.com/watch?v=m3qK46L2b_c&feature=youtu.be $300,000.00 stolen from Pennsylvania — Big fucking deal! In 2009 the wealth in the United States was $54,200,000,000,000.00. I was sickened reading the FY2005 FOMC Minutes. "Absent a dollar depreciation that's now probably on the order of 8, 9, or 10 percent, the deficit is going to steadily [...]
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| Posted: 29 Sep 2011 09:16 AM PDT Dear CIGAs, During reactions in gold, the degree of gold and gold share holders pessimism is EPIC and without cause. Why Gold? 1. Gold is a currency. 2. Gold is competitive to paper currency. 3. Gold is not a commodity 4. Gold is a barometer of fear. 5. Gold is a barometer of confidence Continue reading In The News Today
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| Hedge Fund Action Doesn’t Change Fundamentals Posted: 29 Sep 2011 09:15 AM PDT Last week, hedge funds sold off their bullion holdings in what was a monumental run to the exits. As the price of silver and gold trended higher against declines in other commodities, equities, and so-called risk assets, the price for bullion gave institutional investors the comfort they needed to boost cash. But how much has changed since hedge funds eased up on margin plays in commodities? Not all that much. In the past 12 months, central banks have become increasingly concerned about deflation, realizing that no matter how much cash is injected into the money supply, there are still plenty of people on Main Street unwilling to leverage up. Of course, any deflation is temporary; to assume that deflation is not temporary is to assume that borrowers will not, no matter how clean their balance sheets, go back to spending. Consumers have an appetite to spend, just not an appetite to borrow to finance this spending. In a world dominated by fractional reserve ban...
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| Physical Silver Shortage to Follow Paper Selloff Posted: 29 Sep 2011 09:14 AM PDT In less than one week, the price of silver gave up some 9 months of gains in a move from $40 per ounce to $28. The current price for silver, which is the lowest price in 9 months, is sure to create shortages for physical silver. The physical silver market is very much its own market, one which is dominated by small silver investors and coin collectors. Compared to Wall Street, where margins change in a matter of minutes, and global issues permeate throughout trading floors, the local coin dealer hasn't changed in decades, let alone the past few weeks. Coin dealers, who are almost always best described as a small business operation, are not often hedged to their exposure. Many who open coin shops realize that the trend is up, and hedging would, over the long haul, be detrimental to potential earnings. Capital appreciation, for many dealers, may have been as profitable in 2010 as selling metals to customers. Physical Shortages After a decline equal to the ...
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| Posted: 29 Sep 2011 09:09 AM PDT Gold Share Broke Out To New Highs CIGA Eric Any investor pessimistic about the gold stocks is not listening to the message of the market. What's that message? Gold leads and the gold stocks follow. The most recent yellow box (green lined) illustrates this leadership. When gold stocks follow in the coming weeks/months will Continue reading Jim's Mailbox
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| Posted: 29 Sep 2011 09:00 AM PDT From The September 2011 HRA Journal David Coffin and Eric Coffin The market refrain this month could be summed up with the phrase “just do something!” Growth continues to be slow and the spectre of debt default in Europe has cast a pall over the markets for the past three months. Unfortunately, the EU bureaucracy is not built for speed so the torture is likely to continue for a while yet. Notwithstanding all the drama and lack of action it looks like the EU will do what it takes to avoid default and, ironically, markets are cheering that the thought that China might lend them some money. What a difference a couple of decades make. Whatever the outcome, it will be combined with continued austerity so it’s not likely we’ll see pre-2008 growth rates any time soon. That will put a damper on industrial metal price gains though there will be room for gains on discovery when things stabilize. In the short term gold prices will depend on traders op...
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| Guest Post: The Politics Of Consistently Bad Legislation Posted: 29 Sep 2011 09:00 AM PDT Via Brian Rogers of Fator Securities - Notes From The Sales Desk "The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics." - Thomas Sowell
The EUR lives to fight another day The big news this morning, aside from the relatively strong economic data out of the US (of course, we'll have to wait for the downward revision on jobs to see the real number, which is an ongoing statistical aberration for the record books but anyway) is the news that the German parliament overwhelmingly passed the measure to support the EFSF. In reality, this wasn't really that newsworthy as passing this particular legislation had been expected since Germany originally agreed to the deal in principal earlier this summer. This was not the leveraged, CDO^2 like structure that failed NY Federal Reserve President cum Treasury Secretary Tim Geithner had been pitching recently in Europe. No, that idea has been dismissed out of hand and Mr. Geithner properly ridiculed for recommending that the already over-taxed European people be further Major Kong-style strapped to the ticking atom bomb that is the European banks' leveraged balance sheets. The vote today was widely expected, although the margin of victory at 523 for vs 85 against, probably was a bit of a surprise. Still, Germany is only the 9th of the 17 countries to vote and pass the deal so there could be more drama as the situation changes daily while the 8 additional countries prepare their own votes. It would be a surprise if the rest of the Euro nations don't support the EFSF but in this unstable economic environment, anything is possible.
But assuming the rest of Europe proper agrees to the deal, much more attention will be focused on Greece, and indeed the rest of the PIIGS, to determine the serious nature of their intentions to enact austerity programs. Already it appears that the ability for the Greeks to raise more in taxes is being questioned by none other than prominent Greek politicians. Greek Deputy Prime Minister Theodore Pangalos was reported in the AP as saying, "I believe that the tax limits of Greek society have been exhausted. I would say they have been exhausted for some time." So for those keeping score at home, the austerity measures in Greece, if ever implemented which is doubtful to say the least, will further shrink the Greek GDP at a time when debt is increasing at crushingly high rates while the ability for the government to increase revenues via raising taxes is effectively dead. And the Europeans are working overtime to keep Greece from defaulting. Uhh, yea. Good luck with that.
The Political/Big Money Love Affair I was speaking to a good friend of mine yesterday who works in medical sales. This guy isn't an econo-phile or Fed watcher, just a regular guy trying to keep his job and scrape together an honest living to support his wife and 2 daughters. We were talking about real estate and why we're in the mess we're in. In a previous life, I used to sell fixed income derivatives on mortgages and CDOs (forgive me Father, for I have sinned) so I had a particularly good seat ringside as the mortgage bubble was blowing and eventually burst.
As I explained the incestuous relationship between the banking and political elite and how this relationship led to the unwinding of almost all of the decent financial regulation passed during the Great Depression, my friend became a bit incensed and asked, "How can politicians consistently support these bankers, even today, when the result of everything they've asked for has been disastrous for the average American?" Good question, my friend, good question indeed.
In my opinion, it's ridiculously simple. You see, we live in the world of multi-million dollar election campaigns. According to followthemoney.org, the total amount of money raised in 2010 in all states for all candidates was $3.4bn. During the Presidential election in 2008, President Obama raised over $745mm while John McCain only raised $386mm. In other words, the Presidential election has become at least a $1.1bn industry. And that number doesn't include the major sums raised and spent by their competitors during the primaries.
The total for the 2007-2008 state and federal election cycle was $5.7bn. And who were some of the largest contributors to this total you might ask?
· #1, National Education Association (a union) - $56mm · #6, National Association of Real Estate - $28.5mm · #9, ActBlue (liberal policy Organization) - $23.1mm.
In general, the top 50 contributors consists of a lot of unions, Indian gaming, major corporations and industry specific special interests. Do you think those organizations are giving all this money because they enjoy participating in the democratic process? Hardly. They look at this money as an investment and they expect a return. If they think the Dems will win, they'll spend slightly more on the Dems but still contribute to the Repubs and vice versa.
Making Politicians Dance From the politician's side, the math couldn't be simpler. According to opensecrets.org, the winner of a seat in the House of Representatives will spend on average about $1.4mm while the winner of a seat in the Senate will spend about $9mm. In other words, it's all about the money. If you don't raise a large enough war chest, you're dead. If you don't accept the special interest/lobbyist money, the other guy will and he or she will win. Meanwhile, there are no term limits on either chamber so your incentive is to build your own mini-empire of power and influence by playing ball with the biggest money donors. Perfect this formula and you can become furniture in Congress and stay there for decades. Seeing as how most of the folks roaming the halls of our Congress are the kind of people who never met a mirror they didn't like, the thought of being a major power-broker in DC is too much to resist. Big name committees, non-stop TV appearances, book deals, VIP invites to all the big DC events, etc... The upside to taking lobbyist money is huge while the downside is you lose and return to obscurity.
So let's recap, there are very few limitations to the amount of money and favors that can be given to politicians by large corporations, unions, special interests and wealthy individuals. Because of the influence this money buys, these donors guarantee themselves a special place in the candidate's heart and mind. This is their hook, money. On the other side, you have a class of politicians more than happy to sell out for whomever offers the most money to ensure they can keep winning their office over and over and over again as we have no term limits on Congress. And because we don't cap the amount of money a person can spend on election campaign, it largely becomes a contest of whomever raises and spends the most wins. Not always, but typically. Thus, we have created a political class that only serves itself and its clients' narrow interests and rarely considers the greater good. And we wonder how the American dream got killed. You tell me the incentives inherent in any system, and I'll tell you how the humans in that system are going to behave.
A Modest Proposal Is it really that hard to understand why our politicians (and frankly those of many European nations) have consistently voted for legislation that gutted the economic value of our countries in favor of bankers? As Deep Throat told Woodward and Bernstein, "Follow the money." If we really want to reform our political and economic institutions, the recipe is simple:
1. Term limits. 1 term, 2 terms, 3 terms or something else, but limit the amount of time ANY person can roam the halls of Congress. 2. Campaign spending limits. The max you can raise to run for the House of Representatives should be equal to some easy to define number. Say 10x the average salary of all state workers. That would mean that someone running in my home state of NM could spend about $440k while a candidate from a higher income state like New Hampshire could spend around $650k. Allow the candidate to accept that money from any source he or she likes and in any size, but make them publish the details of where they got the money.
As long as we keep the current system in place, we should not expect a political culture dramatically different from what we have today. Perhaps the donors will change a bit over time and the issues du jour will mean sometimes the Dems win, sometimes the Repubs win, but the system from the perspective of a DC insider will stay the same. Lobbyists win, Americans writ large lose.
Low Interest Rates Forever What does the political rant above have to do with economics in general or Latam specifically? Everything. In case you haven't noticed lately, the market doesn't move on good or bad earnings or economic data, it moves on political rumors and innuendo about government's willingness to continue the TARP/cheap money/QE lifeline to the terribly over-leveraged banking sector. It's especially troubling when you consider the faith most members of Congress place in Ben Bernanke and the other Oracles of Delphi at the Fed. One area that's going to come home to roost very soon is the zero interest rate policy (ZIRP) that has been in place since late '08/early '09.
Simply stated, investors in any maturity of US Treasury bonds are currently receiving a negative real return. Now for the speculative money, this might not be too bad given the much more negative returns of the stock market recently but for traditional buyers of long-dated fixed income that have long-dated asset return hurdles to meet, this is a disaster. Pension funds, insurance companies and other players that must meet a certain growth hurdle rate, say 5-8%, are falling dramatically behind their actuarial goals. This means regular folks are again going to be given the shaft for the failings of our Fed's monetary policy.
The problem for the Fed and government, however, is that with the enormous size of our national debt at about $15tr (thanks again special interest crew), we can never again allow the bond market to function without the Fed prepared to buy bonds at the slightest sign of distress. Again, simple math. If the average rate the government pays on its debt rises to 5%, which is less than the long-term average of between 5.5% and 6%, then the interest rate expense we'll pay on an annual basis will be $750bn, an amount comparable to the entire Dept. of Defense budget. Remember, we bring in about $2.2tr in revenue via taxes. If we have to pay $750bn or about 34% of total revenues on nothing more than interest on the debt, we're toast.
The White House, the Fed, the Treasury and a few members of Congress are aware of this but most in DC remain blissfully ignorant of this fact. Bottom line is this: QE does not exist for the banks or the economy or any other excuse uttered by PhDs at the Fed, it's about keeping borrowing costs low for the US as we simply can never afford to have high rates again or our credit and thus economic system will collapse. Monetizing the debt – it's not your grandfather's Federal Reserve Bank!
Meet the New Boss, Same as the Old Boss Therefore, our conflicted, bought-and-paid for politicians will continue to support the Fed because it is literally the only institution on the planet capable of keeping interest rates low. Low interest rates are the only thing that allows the US Treasury to continue to issue hundreds of billions of new bonds each month that will only be paid back in devalued dollars to fund wasteful spending we can't really afford. Spending that flows to all of the large political donors in Washington's quid pro quo style. The "success" of keeping interest rates low keeps the same kind of political "Yes" men and women, folks who will gladly do what they are told for the right dollar amount (which conjures up a much more pejorative term to describe their actions but this is a family audience), returning to DC on a regular basis. Which of course keeps our country subjected to the politics of big money, a "for sale" political class and bad legislation.
Reform the election system and we have a chance of changing the thinking and thus institutions in DC that our ruining our lives. Keep the system as is and get ready for the Great Reset. In fact, even if we do change the system with the debt we have, it may already be too late to avoid the Great Reset but at least we'll have better personnel in DC to clean up the mess.
* Fator Securities LLC, Member FINRA/SIPC, is a U.S. entity and a member of the Fator group of companies in Brazil. The comments below are from Brian Rogers, who is employed by Fator Securities (Brian's opinions are his own and do not constitute the opinions of Fator Securities or the Fator group of companies).
Fator Securities LLC is not affiliated with Zero Hedge or any third party mentioned in this communication; nor is Fator Securities LLC responsible for content on third party websites referred to in this communication.
This material was not prepared by Fator Securities LLC. U.S. Persons seeking further information must contact Fator Securities LLC in New York at (646) 205-1160. This material shall not constitute an offer to sell or the solicitation of any offer to buy (may only be made at the time qualified participants are in receipt of the requisite documentation, e.g., confidential private offering memorandum describing the offering, related subscription agreement, etc.). Securities shall not be offered or sold in any jurisdiction in which such offer, solicitation or sale would be unlawful or until all applicable regulatory or legal requirements of such jurisdictions have been satisfied. This material is not intended for general public use or distribution and is intended for distribution only to appropriate investors. The opinions contained herein are based on personal judgments and estimates and are, therefore, subject to revision. Past performances are not indicative of future results.
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| Posted: 29 Sep 2011 08:42 AM PDT We have seen several days in recent weeks that beggar belief in terms of intraday range and velocity but today was very impressive indeed. After rallying over 2.6% from overnight lows, ES then dropped almost 3.2% before managing a 2.2% rally off intraday lows in the last hour to regain VWAP. A massive volume at the close (especially compared to the rest of the day) was also notable but once again we note the significant pickup in relative volume as we sold off versus the rally.
Credit followed a similar path but with significantly less intraday range though HY ended up modestly outperforming IG at the very end of the day. The pattern of index outperforming single-names remained all day as skews compressed (taking away from the overall positivity of the green close in credit) and we note some quite significant deterioration from open to close among many credits. Most notable was further exaggeration of the discussion we had at the European close with regard Financials bond net-buying versus CDS protection buying as we point out BAC widened 15bps from open-to-close, MS 12bps, C 12bps, GS 9bps, and JPM 3bps. This should be intriguing for those who see the 2.8% up day in XLF today.
We pointed out at the earlier close how equities were leading risk assets in general today when they pushed down and that was the case but remarkably, the broad risk-asset-based CONTEXT basket maintained sense of decorum while all about it abandoned ship and by the close ES had pulled all the way back up to 'fair-value'. TSYs had a relatively quiet day after the auction seemed well received as the belly continued its trend from earlier of underperforming relative to the short- and long-ends (as the 30Y was the only maturity to manage a gain, with its yield dropping 2bps on the day). The USD leaked higher for much fo the middle of the day until ES decided it was time to rip and DXY went from almost unch on the day to -0.3% - hardly a huge move. We do note that when ES started to really accelerate in the last hour that it was CAD and SEK that moved the most relative to the USD. Precious metals and oil/commodities also rallied as ES ripped (and USD dipped) - all of them gaining around 1% in the last hour in a wondrous Birinyi's ruler straight-line fashion. We do note that gold is leaking lower after-hours - though only mildly. All-in-all, a very 'special' day for many traders and we can only hope, for the sakes of people's margin accounts, that getting through the month-/ quarter-end will at least calm intraday craziness a little. However, we fear that the longer it takes to bite the bullet in Europe, the more volatile we get as Greece's deadlines loom and scenarios become fewer and more disparate.
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| Posted: 29 Sep 2011 08:40 AM PDT Addison Wiggin – September 29, 2011
As your friendly publisher, we're glad Byron King pulled the trigger on 178% gains in Molycorp when he did. But we're also keen to suggest there's more to the story… as we'll show in today's episode of The 5.
 Indeed, the most abundant rare earths, cerium and lanthanum, could plunge another 50% in price over the next year, according to an analysis by Hallgarten & Co. in New York. The reality is a bit more complex. Put simply, the easy money's been made in rare earths. Yes, China controls 97% of world production. Yes, China has clamped down on exports. But China can't stop the users of rare earths from looking for alternatives. "If you think you can keep raising the prices for those materials and still keep your customers, you're crazy," says Jack Lifton, one of the foremost experts on rare earths. "The principal customer for rare earth metals is a global automotive industry using rare earth permanent magnets. That industry will engineer this stuff out."
"What did the JP Morgan report say?" asks our own Byron King, who's been onto the rare earths story since early 2008. "Not as much as you might think, really. "The report noted that rare earth prices have fallen since July, which is hardly big news if you follow these things. The report also speculated that non-Chinese demand will fall in the near term, which is also hardly a state secret worthy of WikiLeaks." "The big revelation was that JP Morgan cut its price target for Molycorp shares from the previous $105 per share estimate down to $66. Still, to me at least, that wasn't 'news,' because I never really expected Molycorp shares to get much above the $60 range." Indeed, Byron recommended getting out of Molycorp at $52.52 on Jan. 12 of this year… good for a 178% gain in four months. This morning, the stock is below $34.
"Even if the Vancouver company has eight employees, and one of them was a chemistry major 25 years ago before he became a stockbroker, the mineralogy and geology stories are nice, but won't get you anywhere. Not anymore. Doesn't impress anybody." "Now, people want to hear about the metallurgy, at a graduate-level of chemistry, and not just arm waving. Investors want feasibility studies and engineering diagrams from serious laboratories." "That is, people want to know that there's real chemistry and real engineering going on. 'Show me the test tubes!'" And "show me the application," we might add.
By one unofficial count, there have been 53 drone strikes this year in Pakistan. Two years ago, 53 was the number of drone strikes carried out by the U.S. military worldwide. Last year, that total more than doubled to 118.
As legend has it, an oracle told Alexander the Great if he could untie the Gordian knot, he would rule all of Asia. Alexander cut the rope with his sword, and the rest was history. He got as far as modern-day Pakistan. "There his exhausted troops rebelled," recalls syndicated columnist William Pfaff today, "and his retreat from Asia began. The oracle should have known that the mastery of Asia ultimately belongs to Asians." But that won't stop the president from trying. The United States has now carried out drone strikes in six countries that we know of: Pakistan, Afghanistan, Iraq, Libya, Yemen and Somalia. Drone strikes were carried out against the Somali rebel group al-Shabaab only last weekend. As the U.S. military expands its "footprint" around the globe, to use Pentagon lingo, drones will be undoubtedly play an exponentially growing role.
Their use will only proliferate from here… and the technology will only evolve. Do what you will with the forecast.
Beryllium is six times as strong as steel, withstands extremely high temperatures and has a high resistance to rust. Alloyed with aluminum, beryllium achieves even greater feats… and one company that Byron has been following this year has pulled off just that. "It's a true breakthrough in military technology," he explains, "contributing hardness, strength, high electrical and thermal conductivity, and resistance to wear and fatigue to U.S. fighter jets and other vital weapon systems." Two days ago, this company signed a drilling deal to begin the process of extracting large quantities of beryllium from a site in the Western U.S. It's a real-world example of "vertical integration" — pulling the stuff out of the ground and then using it to create materials to sell to a host of industries. Among the applications Byron cites: "Nuclear, aerospace, defense, telecom, computing, electronics, medical, automotive, oil and gas and many more." Right now, the company's market cap is a minuscule $42 million. "It would take only a tiny chunk of the defense budget's $707 billion spending spree to well exceed this Canadian company's small $42 million market cap." Byron reveals the name and ticker symbol of this stock to new members of Energy & Scarcity Investor… still available through midnight tonight at a handsome discount. Check it out here.
Chalk up the meager gains to relief that Germany's parliament approved an expansion of the eurozone bailout package. Heh. There's also cheer in the pits over the weekly numbers on unemployment claims. At 391,000, they're down substantially from the previous week's 428,000. Not that either number is an indicator of a robust economy, but there you have it.
For now, "Sellers have retained their advantage and we are looking at the likelihood of lower prices to come."
"Even though we are regulated by the Financial Services Commission in the island of Jersey, where we operate," says founder James Turk, "the Dutch regulator was requiring that we also be regulated by them. So for now, closing accounts for people resident in Holland was the only practical solution." The problem revolves around the arcane issue of whether GoldMoney's offshore storage of gold constitutes an "investment object" under Dutch law. Ordinarily, we'd chalk that up to bureaucratic idiocy… but then we recalled our story from last winter about the Dutch pension fund forced by central bankers to divest three-quarters of its gold holdings because gold was considered "too risky." And a couple of weeks ago, the head of the Dutch Socialist Party sent a letter to the nation's treasury secretary, asking, among other things, where the central bank keeps its gold, and whether any of it's been loaned out. Hmnn…
Perhaps the 60-year low on mortgage rates is not low enough? A 30-year fixed goes for 4.01%, according to your pals at Freddie Mac. And at 3.28%, a 15-year fixed is also at a record low. We're not going too far out on a limb to say that even if rates go lower, buyers won't be flooding the market and propping up home prices. Not unless the aforementioned first-time unemployment claims fall into the low 300,000 range. The last time that happened? November 2007… just before the "official" recession began.
Combined with the first-quarter's 0.4%, that works out to a 0.85% pace for the first half of 2011. The "expert consensus" of 80 economists polled by Bloomberg is counting on 2% growth for the second half. We're not.
No matter how many times Kauffman points that out, the research is a little, well, dry. No more… Kauffman debuted its "sketchbook" this morning. It's an animated whiteboard drawings narrated by CEO Carl Schramm and it's worth a look:  Among the points it makes creatively: Of the 3 million new jobs that are created in a typical year, nearly every one is at a firm that's been in existence five years or less. Maybe the drawings will actually make sense to the children at the playhouse on Capitol Hill. Perhaps a bit of it will end up in our entrepreneurship documentary RISK! The latest rough cut of which will be seen by a select group of Reserve members visiting us in Baltimore two weeks from tonight. Stay tuned…
"Welcome to 'SkyNet' in the Terminator sequels. The government already possesses the power to rain fire down from the sky. Who needs the mythical dragons?" The 5: Is it a stretch to suggest you invest in the raw materials these warmongers are consuming at an accelerating rate? The very thought of it sent fits around the table at our editorial meeting this morning. Let us know what you think here: 5minforecast@agorafinancial.com
"Our government seems determined to alienate just about everybody on the planet." The 5: Even readers of The 5.
"The bigger issue I see is when Taiwan reverts to China (and it will) and all those U.S.-sourced weapons and systems will be given and come willingly into the hands of the Chinese military. Not that that in itself is good or bad — I make no judgment on that — but I can imaging the hand-wringing in the Pentagon and CIA and they realize 'we did it again'!" The 5: Don't forget that Pakistan is moving closer to its old ally China these days as it drifts away from the United States… while the United States cements an alliance with China's archenemy India. More about that tomorrow…
"In a quick paragraph for the ignorant, how do derivatives work? In layman's terms, are these derivatives essentially a bet on top of bet on top of a bet by a few rich people and too-big-to-fail banks just looking to make a fast buck?" "And when it blows, Main Street (mom and the kids) picks up the pieces of Wall Street (the drunk and gambling husband/dad who loses everything)? Do the Republicans and/or Democrats believe that this is capitalism? Why is this stuff legal?" The 5: You know more about derivatives than you give yourself credit for. Cheers, Addison Wiggin P.S. Last chance: The half-price membership offer for Byron King's premium advisory Energy & Scarcity Investor expires tonight at midnight. If you're so inclined, take advantage here.
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| Shale Gas: Is It Really All That? Posted: 29 Sep 2011 08:31 AM PDT Synopsis: Updated estimates of the Marcellus Shale Basin's quantity of recoverable natural gas coupled with a regulatory environment that favors oil exploration strongly suggest that the Mania Phase of shale gas exploration is over. Dear Reader, Yesterday Amazon released the Kindle Fire, a new competitor for Apple and a possible competitor for Netflix as well. (Amazon has streamed movies for a while now, but the Kindle Fire could really bolster this business). Personally, I'm already a fan of the Kindle Fire at the price of $199. I like the iPad, but I just wouldn't use it enough to justify its price. Regardless of your opinion on the iPad versus the Fire, it's always exciting to have new products on the market. While Jeff Bezos revealed the Kindle Fire and paved a new path for Amazon, I attended another CEO presentation by the head of a major natural gas company. He was speaking about the future of the industry and laid out all the different directions natural gas could go. For example, if the government builds an LNG fleet infrastructure, the demand would jump. Then, he discussed the controversies over fracking and the different players against it in D.C. From there, he talked about the possibility of moving away from wind projects to natural gas. Next, he discussed the government opening more onshore and offshore sites. As Doug Casey notes, speculation can be seen as taking advantage of government-created distortions, and this CEO's speech clearly lined up a number of possible distortions ahead. However, the speech was a bit disheartening. The presentation could be summed up in three words: "government, government," and "government." In my opinion, the fact that the future of the industry is in the hands of the government is a frightening prospect. Of course, newer drilling technology was mentioned, but only as an aside to the multiple competing priorities in Congress. Furthermore, the CEO mentioned talking with political figures and the head of the Sierra Club. To tell you the truth, I couldn't see where his job as CEO started and his role as a K Street lobbyist ended. Thankfully, in the long run the oil and gas industry will overcome most political barriers if for no other reason than the macroeconomic fundamentals of the future will demand more energy to supply an ever-growing and wealthier world population. Nonetheless, it will be a brutal political battle every step of the way. In my opinion, this endless bickering in Washington is slowing down the economic work that needs to be done in the rest of America. Instead of the current status quo, could you imagine a world where all CEOs could focus on their companies rather than politics – like Bezos does at Amazon? Personally, that's my ideal for the future. Call me a dreamer or old-fashioned, but I believe that CEOs should focus on running their firms and creating better products, not lobbying Congress for survival or special advantages. The government needs to take its hands off industry, and similarly private companies need to stop pilfering the public's pockets. American needs to get back to business, rather than worrying about the next regulation down the pipeline. At least, that's happening in some industries such as technology, if not the economy as a whole. With natural gas in mind, the Casey Research energy team will discuss some problems with the industry. It seems that everything in this industry is hotly debated, from fracking to the actual gas below ground. Being on the right end of this debate could be a real opportunity, as plenty of intelligent minds are taking different sides of the argument.
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In 
As most of our WealthCycles.com readers know, governments don't like gold. You could make an even broader statement and say that governments don't like anything that competes with their control. Throughout the centuries, gold has been the ultimate rebel against governments.
"Rare earth prices," Bloomberg reports this morning, "are set to extend their decline from records this year." They're officially declaring one boom we've been following with some enthusiasm of late… busted.
It's tempting to draw a similar conclusion to Bloomberg when you examine the recent performance of REMX, the rare earth ETF:
The recent rough patch for rare earth stocks was also fueled by a J.P. Morgan report on industry darling Molycorp, which we cited briefly a week ago Wednesday. In light of events today, it's worth a closer look.
"Savvy investors are finished," Byron writes by email this morning, "listening to stories about how some Canadian junior named XYZ Co., with four employees in Vancouver, has an ore body on the far side of nowhere."
Twice this week, U.S. forces have launched attacks in Pakistan using drones:
It may be that drones are what Barack Obama believes will help him cut the Gordian knot of South Asia.
One pauses to wonder: Why does an "anti-war" president condones the use of drones in otherwise undeclared war zones? Perhaps it's because of their "unique capabilities": Drones are politically sanitary. Dehumanizing, sure. But for better or worse, they allow covert operations to be conducted from long distances without putting U.S. troops in harm's way — the only political cover a president needs.
Drones couldn't operate were it not for a lightweight-but-super-strong metal that Byron King has taken of late to calling "the fourth element."
Stock traders again lost their senses today. But a 134-point rally, thus far, on the Dow doesn't really make up for the 175 lost yesterday in a late-day mini-panic, does it?
"The negative character of the behavior of market price is acting like a dark cloud over the market," wrote 
After another trip below $1,600 overnight, an ounce of gold fetches $1,613 this morning. Silver tumbled below $30 overnight, but has since recovered to $30.48.
Our friends at GoldMoney have reluctantly decided to close the accounts of all their Dutch customers.
Even fewer Americans are signing contracts to buy homes than was previously thought. The National Association of Realtors (NAR) index of pending home sales fell 1.2% between July and August.
The Commerce Department is out with its final guess at second-quarter GDP — an annualized 1.3%.
On occasion, we've pointed to research at the Kauffman Foundation that shows how startup businesses are responsible for nearly all new jobs in the United States.
"It's not the poor Arabs the Pentagon's watching" with drone aircraft, a reader warns, commenting on this curious trend we've identified linking drones, military aircraft and the rare earth investing space, "it's all of us too!"
"One wonders at U.S. priorities and diplomacy," writes another reader, reflecting on the use of drones. "We supply Turkey with drones to use against Kurdish rebels and voila! we lose our only strong ally in Iraq — the Kurds."
"Why are you worried about a few thousand heat seeking missiles?" writes a reader after yesterday's issue. "I agree that if they fall in the wrong hands (and they will) that will be a problem (which, as you say, will mean bigger budgets for spooks)."
"What boggles the mind," writes a reader about derivatives, "is that those numbers aren't billions, they're trillions! America's GDP is only $14 trillion a year.
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