Gold World News Flash |
- International Forecaster October 2011 (#5) - Gold, Silver, Economy + More
- Transcript of Chris Waltzek’s Interview With Peter Grandich
- Silver Dollar Values Prices Will Be Skyrocketing, Now Should I Invest in Silver Instead Of Gold?
- Greg Weldon: ECB Forced to Print, Gold’s Lowest Target $3,000
- Finews Interviews James Turk
- The Economic Crisis in Europe; Unpayable Debts. Impending Financial Insolvency
- Don't Forget About the Dollar
- Saudi central bank says it's not interested in distressed assets or gold
- Weldon - ECB Forced to Print, Gold’s Lowest Target $3,000
- The Biggest Market Headfake Ever: Is A Wholesale French Bank Liquidity Run The Sole Reason For The Euro, And S&P, Surge?
- Gold mines in the spotlight
- Signature Trends
- THE MOST IMPORTANT DECISION BERNANKE WILL EVER MAKE
- On the Edge with Jeff Berwick
- Mining giant sparks Europe's new gold rush
- Gold vs. Gold Mining: The Wrong Question, Part II
- Gold Signals The End
- When Money Dies, Some Will Prosper
- Gold Opportunities Under the Mattress and in the Ground
- Any Greek Restructuring Should Be Designed To Trigger A Credit Event
- US Dollar Gann Angle Trend Study
- This Past Week in Gold
- Guest Post: Breaking Points: Recognizing The Signs Of Painful Cultural Shift
- The Best of the Week
- Gold Traders Most Bullish Since July After Plunge
- Real Estate can be a Recession breaker
- Gold Stocks Vastly Outperform Gold On The Week – Will The Trend Continue?
- The Shovel and Hole Maneuver For Hiding Gold, Guns and Other Assets
| International Forecaster October 2011 (#5) - Gold, Silver, Economy + More Posted: 16 Oct 2011 05:32 AM PDT The big question is will Greece succumb to insolvency in November? Our answer is probably not. It should take 3 to 6 months but it is coming no matter how much money and credit is thrown at the problem. The markets on the short-term basis believe it is a coin toss. If the funds are not forthcoming you could see a 60-80 percent haircut on bond losses. If it is 3 to 6 months it will probably be 100%. Many in Europe believe the Merkel-Sarkozy team has a plan that will work, but as yet we do not know what that plan is. In spite of that the euro this past week rallied from $1.32 to $1.38 as the US dollar fell lower.
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| Transcript of Chris Waltzek’s Interview With Peter Grandich Posted: 16 Oct 2011 05:19 AM PDT Today's featured guest has been a market commentator for 30 years. Peter Grandich correctly forecasted not only the '87 market crash, but also the dot.com bust. Peter Grandich is a strong supporter of the gold and silver market and is editor of The Grandich Newsletter. Welcome, Peter.
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| Silver Dollar Values Prices Will Be Skyrocketing, Now Should I Invest in Silver Instead Of Gold? Posted: 15 Oct 2011 02:07 PM PDT from PRLog.org: My own curiosity in gold goes back to the 1970′s when I bought my first gold coins. Over the many years I have had the opportunity to assess the efficiency of gold and silver side by side. I watched gold climb from about $100/oz to $850/oz from 1973 to 1980. That is an 850% increase. I watched silver in the precise exact same time frame climb from about $4.50/oz to $50/oz. That is more than a 1000% increase. So even in the decade of the 70s silver was outperforming gold. Go to http://silver-dollar-values.com for more lucrative silver and gold tips. It is broadly thought that many intrigued parties every right here and overseas manipulate the metals markets. That indicates they fluctuate broadly. Silver tends to fluctuate collectively with gold nevertheless the swings in each directions are higher. In the finish of the twenty year bear marketplace in precious metals which ended in about 2000 gold had fallen from $850/oz to a reduced of about $252/oz but silver had fallen all of the way back once more from $50/oz to its level in the beginning of the 1970s at just a little below $5/oz so its percentage drop was higher than that of gold.
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| Greg Weldon: ECB Forced to Print, Gold’s Lowest Target $3,000 Posted: 15 Oct 2011 01:24 PM PDT from King World News:
With gold and silver finishing the week higher, King World News interviewed Greg Weldon, Head of Weldon Financial. Weldon has a global following of some of the wealthiest investors in the world including individuals, institutions and financial firms. When asked about his take on the ongoing crisis, Weldon stated, "The contagion is still raging and it's too soon to celebrate. This is the problem I have with thinking any of these solutions they are going to come up with are really solutions at all because 25 of the 27 nations (in Europe) are in violation of the rules on debt and deficits. So how are these nations going to bail each other out? They are all in the same boat." Greg Weldon continues: Read More @ KingWorldNews.com
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| Posted: 15 Oct 2011 01:21 PM PDT from GoldMoney.com:
No, it is not true. First of all, the price of just about every other asset also fell, so gold was no different in this regard. More importantly, gold is a tangible asset, so it does not have any counterparty risk. It is this attribute that makes gold the best safe haven. What makes gold so volatile lately? It is not only gold that is volatile. For example, the VIX Index, which is a measure of volatility of US stock markets, tripled over the past couple of months. Everything is volatile because the financial system is breaking apart. To explain this point, picture in your mind a spinning top. As it slows down, there are often some huge wobbles before it rights itself, and then eventually falls over. The volatility we are seeing now is those wobbles. I expect another bank collapse like Lehman before the end of the year. That is when the top will fall over.
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| The Economic Crisis in Europe; Unpayable Debts. Impending Financial Insolvency Posted: 15 Oct 2011 01:18 PM PDT by Bob Chapman, GlobalResearch.ca:
The big question is will Greece succumb to insolvency in November? Our answer is probably not. It should take 3 to 6 months but it is coming no matter how much money and credit is thrown at the problem. The markets on the short-term basis believe it is a coin toss. If the funds are not forthcoming you could see a 60-80 percent haircut on bond losses. If it is 3 to 6 months it will probably be 100%. Many in Europe believe the Merkel-Sarkozy team has a plan that will work, but as yet we do not know what that plan is. In spite of that the euro this past week rallied from $1.32 to $1.38 as the US dollar fell lower. Greece has been laboring under austerity imposed by the EU, IMF and the ECB and as a result their deficit for the first half of the year rose to $21.4 billion from $17.3 billion. Needless to say, tax revenues have fallen off a cliff and as a result the Troika has mandated further cuts in order to offset revenue loss. This is a never ending story, because when all is said and done the economy will be all but dismantled, that is what economy existed in the first place. As a result unemployment worsens and that provides more demonstrators in the streets. Those lower tax receipts mean more government layoffs. As a result of these and other problems Greek projections came up about 25% short of projections. These nebulous announcements by key players certainly did not justify major rallies in stock markets. Economic numbers in Greece are dreadful and in the UK, US and Europe they are only marginally better. It is obvious the world is slowing down.
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| Posted: 15 Oct 2011 12:50 PM PDT The strength of a month ago has given way to weakness over the past two weeks. But the price structure is still bullish, as price has only pulled back to test support levels at 76.65. This would represent a very good low risk entry ... Read More...
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| Saudi central bank says it's not interested in distressed assets or gold Posted: 15 Oct 2011 11:59 AM PDT Would they really announce any buying in advance and thereby drive up the price they'd have to pay? Or would they deny interest until they got their metal? See: * * * By Martin Dokoupil http://www.reuters.com/article/2011/10/15/us-saudi-cbanker-idUSTRE79E291... PARIS -- Saudi Arabia's central bank is not interested in buying distressed or speculative assets such as troubled European debt and gold and the OPEC member's banks are well positioned to withstand the euro zone crisis, its head said on Saturday. The world's No. 1 oil exporter like most of its Gulf Arab neighbors is a major holder of dollar assets as its riyal currency is pegged to the greenback and crude accounts for 85 percent of its budget revenue. Asked if the Saudi Arabian Monetary Agency had considered buying European sovereign bonds such as Italian ones, Governor Muhammad al-Jasser told Reuters: "We do not buy specific bonds at all. We have not done it." "We always have a much more integrated reserve investment strategy which looks at it in a continuous and dynamic way that values security, safety and liquidity and therefore we do not look opportunistically at distressed assets or special assets that come up one way or the other," Jasser said after a meeting of the Group of 20 countries in Paris. ... Dispatch continues below ... ADVERTISEMENT For Continuous Wealth Creation, the Hera Research Newsletter The life cycles of companies that produce natural resources allow investors to allocate assets among companies at different stages of development and to profit from transitions between stages. Based on natural resource company life cycles, the Hera Research Newsletter maximizes profits through deep, fundamental analysis at each stage of development and by moving gains back to earlier-stage companies in a continuous wealth-creation process. Hera Research covers a pipeline of high-quality natural resource companies at different stages of development. The companies span discovery and production of gold, silver, and platinum group metals, select base metals, oil and gas, green energy, agriculture, rare earth elements, uranium, and more. Discover the unique value of the Hera Research Newsletter by visiting: http://www.heraresearch.com/newsletter.html Or call Ron Hera at 360-339-8541x101. The central bank of Saudi Arabia, which is the only Middle Eastern member of the G20 group of developed and emerging economies, rarely comments on its reserve strategy. Gold, which has tumbled from a record high of above $1,920 an ounce, is another asset of little interest to the Saudi central bank due to its volatility, Jasser said. "We have gold in our reserves but we have not bought and we have not sold it in a very long time. It has become a very speculative asset and we do not get into any speculative assets," he said. Asked whether the central bank was going to stick to this strategy, Jasser said: "Yes". Boosted by robust oil prices of above $100 per barrel this year, the Saudi central bank's net foreign asset reserves have climbed steadily to a record high of 1.879 trillion riyals ($500 billion) in August. Gold reserves have been unchanged at 1.556 billion riyals since 2008, the central bank's data show. Jasser also said U.S. Treasuries continued to be "an important safe haven and major asset" in global financial markets. "62 percent of global reserves are still in U.S. assets. It is safe to say they are there to stay for a while," he said. A downgrade of the United States' top-notch "AAA" credit rating by Standard & Poor's in August shocked the global markets but had no adverse impact on its bonds. Jasser also said banks in the world's top Arab economy were well positioned to deal with any upcoming shocks as well as the European debt crisis. Capital adequacy for banks was north of 17 percent with most of it Tier 1 capital. "That's very robust. Second, our banks sources of funding are predominantly domestic from domestic deposits which is a reasonably stable source of funding," he said, standing in front of the G20 meeting venue at a sprawling complex of Ministry of Economy, Finance and Industry. "Most of the lending is domestic also so the exposure to the outside is very limited and therefore we are very confident that our banking system is well positioned to withstand any stress emanating from what's happening in Europe," he said. Robust lending growth to the private sector of more than 9 percent in the first 10 months of the year indicated strong demand, while inflation has stabilized in a tight range of 4.6-4.9 percent and should begin trending down, Jasser said. "Our economy is doing very well and is expected to continue next year. This year, I have forecast that we will have at least 5 percent growth and probably something close to that next year," he said. Analysts polled by Reuters in September expected the $447 billion Saudi economy to expand by 6.5 percent this year and 4.5 percent in 2012 helped by an estimated $130 billion boost in social spending, or nearly 30 percent of GDP. Jasser said interest rates settings were appropriate at the moment with no signs of inflation coming from monetary impetus. "I still think it is an appropriate setting now until we see inflation due to monetary impetus," he said. Asked whether that meant credit growth needed to be in double digits, Jasser said: "Something like that. And it also depends on credit whether it is going to productive activities and leading to growth one would not worry too much about it, if it is going to finance speculative activities one has to worry." The Saudi central bank has been keeping its repo rate at 2 percent since January 2009 and reverse repo rate at 0.25 percent since June 2009. It needs to hold its key rates near U.S. benchmarks to avoid excessive pressures on its dollar peg. 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 Golden Phoenix Signs Definitive Agreement to Acquire and Reopen Santa Rosa Gold Mine in Panama Company Press Release SPARKS, Nevada -- Golden Phoenix Minerals Inc. (OTC Bulletin Board: GPXM) has signed a definitive agreement to acquire a 60 percent interest, with an option to buy an additional 20 percent interest, in the Santa Rosa gold mine in Panama, now owned by Silver Global S.A., a Panamanian corporation. Santa Rosa produced more than 100,000 ounces of gold from 1996 to 1998 before being closed in part to low gold prices, which are now more than five times higher. Golden Phoenix intends to acquire its initial 60 percent interest in Santa Rosa by acquiring 60 percent of the share capital of a recently created company under the name Golden Phoenix Panama S.A., formed to hold and operate the mine. Tom Klein, CEO of Golden Phoenix says: "The agreement establishes a solid framework from which we can advance Mina Santa Rosa to production-ready status." For Golden Phoenix's complete statement, please visit: http://goldenphoenix.us/press-release/golden-phoenix-signs-definitive-ac...
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| Weldon - ECB Forced to Print, Gold’s Lowest Target $3,000 Posted: 15 Oct 2011 09:33 AM PDT  With gold and silver finishing the week higher, King World News interviewed Greg Weldon, Head of Weldon Financial. Weldon has a global following of some of the wealthiest investors in the world including individuals, institutions and financial firms. When asked about his take on the ongoing crisis, Weldon stated, "The contagion is still raging and it's too soon to celebrate. This is the problem I have with thinking any of these solutions they are going to come up with are really solutions at all because 25 of the 27 nations (in Europe) are in violation of the rules on debt and deficits. So how are these nations going to bail each other out? They are all in the same boat."
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| Posted: 15 Oct 2011 09:19 AM PDT Over the past two weeks, there is one simple thing that has been bugging skeptical macro observers: namely the paradox of i) just how ugly the European funding and liquidity situations have gotten, on the one hand, confirmed by the blow out in French bond yields (the French-Bund 10 year spread just hit an all time record yesterday) as well as continuing deterioration in credit spreads across core European nations, yet, on the other, ii) the euro, especially in that critical pair the EURUSD, has seen one of its most explosive rises in recent history, which as Zero Hedge pointed out yesterday, has totally decorrelated with the French-Bund spread, to which it had been firmly 'pegged' previously. As a result of ii), equity markets have surged due to legacy correlation arbs, which see Euro strength, and hence dollar weakness, as an empirical signal of equity "cheapness", which in turn leads all algos to treat a rise in the EURUSD as a buying signal. So how is it that even with the interbank liquidity situation in Europe frozen and getting worse, further keeping in mind that European banks are now expected to (or have already commenced - see yesterday's move in PrimeX) engage in widespread asset liquidations, that broad market risk is perceived as cheap? Simple. As the following note by Deutsche Bank's Alan Ruskin explains, the sole reason for the EUR (and hence S&P and global 100% correlated equity risk) surge in the past 9 days is not driven by any latent "optimism" that Europe will fix itself, but simply due to the previously discussed wholesale asset liquidations (as none other than the FT already noted), which on the margin are explicitly EUR positive due to FX repatriation, courtesy of the post-sale conversion of USDs to EURs. Which means that the ever so gullible equity market has just experienced one of the biggest headfakes in history, and has misinterpreted a pervasive European, though mostly French, scramble to procure liquidity at any cost by dumping various USD-denominated assets, as a risk on signal! In other words, an internal bank run has somehow been interpreted to be stock positive... And there is your explanation for not only the paradoxical surge in the EURUSD and S&P, but why the correlation between the EURUSD and the Bund-France spread has completely broken down. Expect all of this to promptly, and very violently, correct once the market understand what an idiot it has been in the past two weeks. From Deutsche Bank:
Even Deutsche Bank is scratching its head to explain the dichotomy between the funding market and general risk. They do, however, provide the only real explanation, as opposed to the widely trumpeted by market cheerleaders ridiculous explanation that this is merely the latest "hope" rally. Ridiculous, because if that was the case, one would see a thawing of interbank liquidity and defaults spreads. As Zero Hedge readers know, 100% the opposite has happened.
And so on. Naturally, the Eurocrats will be delighted to associate the run up in risk assets and the European currency as a confirmation that the market is interpreting further lies, innuendo, and confusion as a risk on indicator, and is encouraging their behavior, when nothing is further from the truth. However, the biggest beneficiary of the recent move is none other than the insolvent French banking system, whose very own liquidity run has caused asset values to soar, on an epic misinterpretation of underlying market signals, and thus sell even more into market strength, when in fact the market should be selling alongside France... As for unwind catalysts for this most insidious market move, we are confident that the inability of the G20 to come up with any resolution over the weekend in Paris, nor the Eurozone Summit in one week to actually present any relevant details vis-a-vis the continent's bailout, or the EFSF's expansion into some multi-trillion Bailoutstein monster, will not be met too happily by a market which has just realized it has been thoroughly fooled by the cash-crunched French banking system.
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| Posted: 15 Oct 2011 08:04 AM PDT Efforts to extract the yellow metal continue to grab the headlines. Here are a few of the sites currently getting attention. 
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| Posted: 15 Oct 2011 07:51 AM PDT The weekly trends in gold, silver and the XAU are all in a negative posture but with an improved tone. Please see my general two month outlook for these areas here. Secondly, I would like to emphasize that price improvements in the longer time frames always start first in the daily time frame. To that end, the very powerful Signature Trend Series is now complete and includes three indicators in daily time frames with current updates. Extensive descriptions are included. They are as follows: [LIST] [*]Although not a signature trend indicator, the Pendulum SRA Cycle Indicator is very highly ranked and regarded. This indicator is indeed the "pendulum" in Market Pendulum. [*]The DSX Formula relates Sir Isaac Newton's laws of motion to investments in a unique way. [*]The TDL Weekly Indicator emphasizes a train on longer term trend and track. [*]The SPDX includes a speedometer, GPS device and direction finder, all in one easy readout. [/LIST] All indicat...
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| THE MOST IMPORTANT DECISION BERNANKE WILL EVER MAKE Posted: 15 Oct 2011 06:58 AM PDT As many of you know who have read my work in the past, the dollar put in a major three year cycle low back in May. It has been my expectation all along that the rally out of that major bottom would coincide with another deflationary period and the next leg down in the stock secular bear market. So far this has been the case as stocks topped in May at the same time the dollar bottomed.  After a 15 week consolidation the dollar has initiated its first powerful thrust up out of that major bottom. As you can see in the chart below the rally out of a three year cycle low generally lasts at least a year and turns the 200 day moving average back up.  I've also noted that once the rally out of a three year cycle low rises above the 200 day moving average, it shouldn't dip back below that level, at least not for the next year to year and a half. Sometime in the next few days the dollar will put in a daily cycle low and bounce. My expectation is that it will either bounce off of the 200 day moving average or bottom slightly above that level. It's what comes next after that bounce that is absolutely critical. Bernanke is now about to make the most important decision of his life. The correct decision is to allow the dollar to appreciate, which in turn would continue to drive the stock market down into its next four year cycle low in the fall of 2012, and would facilitate a much-needed recession to cleanse at least some of the massive debt that has been accumulated in the last two years. That is the correct decision. It is also a very hard decision because it will lead to severe short-term pain and undoubtedly another depression on the same scale as 1932. However if Bernanke chooses to kick the can down the road again and continues his failed policy of monetary debasement then the dollar is at great risk of forming an extreme left translated three year cycle. For those of you that are new to cycles analysis, a left translated cycle is generally associated with a bear market. Left translated means that the cycle tops in the front half of its cycle timing band. In this case any top that forms prior to 18 months would signal a left translated three year cycle. Furthermore the more extreme translated a cycle is the more severe the decline tends to be, simply because the cycle has a lot more time to move lower. If Bernanke decides to avoid short-term pain and kicks the can down the road again with further currency debasement, then the dollar is at great risk of having already put in the top of this three year cycle. The unintended consequences of a three year cycle that tops in only four months are, to put it mildly, horrendous. That would indicate that the dollar is going to head generally lower for the next three years culminating in a hyper-inflationary event at the next three year cycle low in 2014.  The next couple of weeks and months are going to be of grave importance. The dollar needs to find support at the 200 day moving average and resume moving strongly higher. That would of course put pressure on the stock market and probably terminate the current bear market rally somewhere around the 200 day moving average (roughly SPX 1270ish) before the next leg down begins. If however the bounce out of the now due daily cycle low is weak and the dollar rolls over quickly and moves back below the 200 day moving average then all bets are off. Stocks could even rally back to marginal new highs. However that would also guarantee that the CRB has put in its three year cycle low and we are now at the very beginning of an inflationary Holocaust.  If Bernanke makes the wrong decision then gold is on the verge of moving into the bubble phase of the secular bull market. That being said gold should still experience one more move down in the next couple of weeks as the dollar rallies out of its impending daily cycle low. After that, everything hinges on Bernanke's decision whether or not to continue his failed monetary policies.       
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| Posted: 15 Oct 2011 06:39 AM PDT We interview Jeff Berwick of Dollar Vigilante.
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| Mining giant sparks Europe's new gold rush Posted: 15 Oct 2011 06:13 AM PDT The river runs red in Rosia Montana. The rouge-coloured run-off of zinc, iron, arsenic and other sulphides from nearly 2,000 years of gold mining make the waterway in Romania's Transylvanian mountains live up to the area's name, which means red mountain in Romanian. 
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| Gold vs. Gold Mining: The Wrong Question, Part II Posted: 15 Oct 2011 05:09 AM PDT You don't need to own Gold Mining stocks to hope they might start beating plain bullion soon...
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| Posted: 15 Oct 2011 04:24 AM PDT by Hubert Moolman:
Currently we use fiat currency, like the dollar, for economic measurement. However, this creates a huge distortion due to the fiat currency being highly unstable. Can you imagine what would be the effect on our planet if we did not use the normal cycles that the sun and moon provides us with? Our ability to produce food for example, could be severely disrupted, leading to famine or possible extinction of mankind. Read More @ HubertMoolman.Wordpress.com
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| When Money Dies, Some Will Prosper Posted: 15 Oct 2011 03:35 AM PDT from WealthCycles:
"When the currency system as we know it dies, some people will become very wealthy," begins a special report from the Casey Research/Sprott Inc. Summit, When Money Dies. It's an attention-getting lede sentence, and a sentiment that will sound quite familiar to readers of WealthCycles.com and the writings of Michael Maloney, who was a presenter at the Casey Research Summit held earlier this month in Phoenix. The report transcribes a roundtable discussion between Rick Rule, founder and chairman of brokerage firm Global Resource Investments, and two Casey Research editors, Louis James and Marin Katusa. Asked by the moderator "who killed money," Rule replies:
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| Gold Opportunities Under the Mattress and in the Ground Posted: 15 Oct 2011 03:35 AM PDT According to Edward Karr, CEO of RAMPartners, the band is tuning up and the guests are just starting to arrive. Instead of selling before the party really gets going, he advises keeping a "decent percentage" of cash to take advantage of opportunities to buy both physical gold and junior mining stocks. His real bottom-line advice in this exclusive Gold Report interview? Tap into what makes you happy in life.
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| Any Greek Restructuring Should Be Designed To Trigger A Credit Event Posted: 15 Oct 2011 03:34 AM PDT From Peter Tchir of TF Market Advisors Any Greek Restructuring Should Be Designed To Trigger A Credit Event As talk about an actual restructuring of Greek debt increases, the EU continues to think avoiding a CDS Credit Event is a good thing. More and more stories and leaks indicate that a real restructuring of Greek debt is on the table, with write-offs of as much as 50%. Whether it will be real, permanent reductions in principle this time, or some other form of principle protected rollover with a subjective NPV calculation like the 21% haircut, remains to be seen. In any case, the EU continues to head down the path of bending over backwards to avoid trigger a CDS Credit Event. They are wrong to be avoiding a Credit Event on the Hellenic Republic. If they are really pushing for a true restructuring where banks and insurance companies are for all intents and purposes forced to accept a big haircut, they should want to trigger a CDS Credit Event. They are allegedly avoiding a credit event because it "could unleash a cascade of losses" according to a bloomberg article. That just makes no sense. It also seems that pride plays a role as the EU doesn't want to be impacted by the stigma of a default – a 50% write-off is even, but they don't want to be called defaulters. That is plain silly. They also seem to want to punish speculators, and this is where they really have it wrong, not only are few hedge funds short Greece via CDS at this time, the problems this creates for bank risk management desks is big and will have long term negative consequences for sovereign debt demand. Bank Credit Risk Management Back to the Dark Ages JP Morgan is one of the few institutions that have come through the financial crisis with an enhanced reputation. Their skill for If buying CDS is unlikely to provide the relief it should, the only way to reduce economic exposure is to sell assets. JPM would likely be ahead of the curve and sell their CDS while it still had value, and sell bonds/loans at the same time. Other banks and investors will eventually realize that they cannot rely on "net" exposures, when the regulators corrupt the product. Investors will start to focus on gross exposures because they will doubt the ability of banks to ever monetize their hedges. All the big banks, still likely to be risk averse, even after some multi trillion euro EFSF announcement, will want to maintain low economic exposure to European sovereign debt. If they don't believe their hedges will protect them because they would once again be forced to write down assets and not collect on their hedge, the only prudent risk management decision is to reduce assets. By eliminating a tool for banks to hedge their exposure by blatantly working around it, the EU will reduce future demand for bonds. Not what they are trying to accomplish. The whole point of the EFSF and other programs is to stimulate demand for bonds, and they will have achieved the opposite as big banks will have to reduce bond holdings since they will realize they cannot rely on their hedges. At the other extreme, some weak banks, the ones who likely wrote CDS rather than buying bonds because of the leverage, will want to write even more CDS. Why would they ever want to buy bonds when the EU just taught them that selling CDS is "free money." The weaker the institution, the more appealing that trade will be. So in the future, the unregulated, difficult to track CDS risk, will all be the hands of the weakest institutions – again, a result that does nothing good in the long run. The Facts Do Not Show a Risk of "Cascading Losses" From a CDS Credit Event on Greece According to DTCC, the net Hellenic Republic exposure in the entire system is €2.7 billion. Yes, the open longs (or open shorts) are a total of €2.7 billion. That is trivial compared to the €330 billion or so of Greek bonds outstanding. It isn't even 1% of the exposure the system has via the bond market. With a 50% haircut, bond investors will lose about €165 billion, and in the CDS market, a total of €1.3 billion would find its way from the net sellers of protection to the net buyers of protection. If the regulators and EU are sure the system can handle the bond write-offs, the write-offs for CDS are a rounding error, at best. What about the "transfer mechanism"? Isn't there some way the chain of payments could break down? There gross notional for Hellenic Republic CDS is €54 billion. These represent a combination of things, but primarily dealer to dealer trades where one dealer has an ultimate seller, and the other dealer has an ultimate buyer, and the trades run through them since they either don't fact that client or weren't the "axe" at the time the client was putting on the trade. There are also curve trades. Curve trades will collapse down. The street will run "trioptima" or some equivalent to net the risks down. Banks are well prepared for the settlement of CDS. The settlement of Lehman went smoothly in spite of concern at the time. There is no reason to expect it not to go smoothly this time. Once again, JPM's quarterly Earnings Presentation has some useful insights. They have $8.2 billion of Trading Exposure to Europe, which is "predominantly client-driven derivatives exposure of $14.2 billion, offset by collateral of $6.7 billion (95%+ held in cash)." I'm willing to assume that JPM is doing a good job on their counterparty risk management. Other big banks are going to be very similar. But let's look at a worst case. Assume one bank ("Dumb Bank") has written the entire €2.7 billion of net outstanding Greek CDS. That bank then owes €1.3 billion. If the bank doesn't have the money to pay, they would not pay the money to whoever they sold the protection to. They would have sold it to one of the "Dealer" banks, one of the 20-30 biggest banks that make markets in CDS as part of their core fixed income platforms. If they had trades on with several bank, then each of those banks would take a loss. It would not change their obligation to pay on their contracts? Does anyone really believe that one of the big banks couldn't afford that €1.3 billion loss? It would be painful, but they would absorb it, and the rest of the payments would flow through the system. They would honor obligation to whoever they sold CDS to, in spite of not receiving the money. That is how the system works. The extreme example where one bank provided that much counterparty exposure to one institution that couldn't pay would is unrealistic, but at least from the CDS chain of events, the losses would end at the big bank(s) that made that decision. No Contagion. The Dealer Bank would then proceed against Dumb Bank to collect its claim. Dumb Bank would enter into bankruptcy in some form or another. Bondholders would have a loss, and Dumb Bank's other counterparties would all have to scramble to replace risk. So this does have the potential to create contagion, but is the market really so stupid that no one would have noticed how bad Dumb Bank's finances were? The debt wouldn't be trading anywhere close to par if the bank had such big exposures and was in that much trouble. The loss to any single bank from triggering CDS is not likely to be enough to force them into bankruptcy. Unless a bank has been able to hide massive exposures from the market neither the share price nor the debt of these banks should be significantly affected by monetizing a mark to market loss already priced in, and in many cases, already collateralized. The system is just not that fragile, and the possible payments from triggering CDS are negligible relative to the losses that will be experienced from the bond market write-downs. If the EU believes the financial system can handle writing down the €330 billion of bonds (and I believe it can), then it is highly unlikely that the additional losses on €2.7 billion of CDS will be the straw that breaks the camel's back. It is just not plausible as the number is small, and the counterparty risk management is actually pretty good, and this would require gross negligence in virtually each and every bank to trigger the contagion risk the EU seems to fear. Pride and Punishment An actual restructuring where financial institutions permanently write-off 50% of the principle owed is a default by any other name. Pretending it isn't a default so you can say you have never defaulted is just bizarre. The loss can be called anything you want, but the end result is the same. Worrying about the semantics of having had a CDS Credit Event is just absurd. You can say that you "are slightly above ideal weight" but people will still no you are fat. And who is getting punished? Reading between the lines, the EU seems to be licking their chops at punishing all the hedge fund speculators who are short Greece via CDS. Well, guess what? They are NOT short Greek CDS anymore. The hedge funds are now generally flat or even long Greece via CDS. All you need to do is think about it for a moment. Greece trades at 62 points up front. So on a $10 million trade, you pay or receive $6.2 million. If you felt governments weren't going to manipulate the situation, where would you think the CDS would trade after a Credit Event? What is the recovery rate then? I think assuming anything lower than 20% is extremely aggressive. So you are risking 62 to make 18? That would require a high degree of certainty, or an even lower recovery assumption. It would also require you not to have read a newspaper or turned on the TV for the past month. The G-20, the IMF, the EU, the ECB, are all lined up to try and prevent a default, and even more importantly, continue to state that they want to avoid triggering a CDS Credit Event. You are making a bet against their ability to circumvent the rules. From a risk/reward standpoint, I would not be short Greek CDS. If anything I would have sold Greece CDS here (especially with talk of a 50% settlement). I would much rather be short French or Belgium CDS. They have a lot more opportunity to widen, with a limited ability to tighten. But if hedge funds aren't short Greek CDS, who is? Bank hedging desks! The banks are net short. The banks do not want to take off their shorts because they don't want to report larger net exposures. They aren't taking profits on these because optically they cannot report to shareholders increased exposure to Greece. They have done the same analysis as hedge funds and would like to cut their shorts, but this isn't about making money for the banks anymore, this is about presenting low exposure numbers. The smart, hedged banks, will be the ones punished. The EU wants to punish the hedge funds, but all they will do is punish banks that have been most prudent. And who is rewarded? Good old dumb bank. Wrote some CDS because they could get more leverage, and here they are being rewarded by the EU. The efforts to punish are likely to punish the wrong people and further reward the weakest institutions. At one time hedge funds were short Greece via CDS, but at one time I was young and athletic – things change over time. The EU should get over their anger and think responsibly. That is the only way to truly start correcting the core of the problems. Lashing out by manipulating markets and rules will do more harm than good.
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| US Dollar Gann Angle Trend Study Posted: 15 Oct 2011 03:31 AM PDT You can use the Gann Angle 1x1 to check your trends, when price fails to break it, a change in trend can be expected. More so those that where disappointed may cause a substantial move as they abandon positions aggressively. Read More...
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| Posted: 15 Oct 2011 03:29 AM PDT Summary: Long term - on major buy signal. Short term - on mixed signals. We have new buy signals and set ups this week and we are allocating modestly with tight stops. Read More...
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| Guest Post: Breaking Points: Recognizing The Signs Of Painful Cultural Shift Posted: 15 Oct 2011 02:35 AM PDT
Submitted by Brandon Smith from Alt- Market Breaking Points: Recognizing The Signs Of Painful Cultural Shift
Through the ages, nations and cultures of spectacular proportion and prominence have risen to prosperity, and fallen to chaos, on very particular and fundamental principles. In some cases, these great and terrible declines have taken centuries to culminate (as was the story of the Roman Empire), and only a few years in others (the Soviet Union comes to mind). In every example of societal destabilization, however, there were many signs of danger long before the final plunge; some unique to each particular culture, and some common to all. One of the most enduring and frightening similarities between crumbling nations is an overwhelming belief amongst the people that they have somehow "advanced" beyond the need for concern. Each self-destructing society presumed itself invincible. Each country thought itself the pinnacle of human potential, only to discover yet again that in abandoning or subverting the principles of freedom, and the bedrock pillars of conscience, reason, and wisdom, they had become merely another footnote in a long marathon of footnotes. Ultimately, the vast and sordid history of collapse could be summarized simply as a series of breaking points; moments at which opposing ideals and forces hyperextend the prevailing mechanics of a system, changing it entirely. Some of these events have produced surprising strides of understanding and political progress, as prevailed after the American Revolution. Others led to dark and mindless collectivist nightmares that fog men's eyes and hearts, as that which occurred after the Bolshevik Revolution in Russia. The difference is one of focus. Imperialist (elitist) ideologies were deemed unacceptable in both revolutions, but the tides of each conflict leaned towards entirely separate values. Individual liberty in the West, and collective safety and sacrifice in the East. In America, the uprising was led by common men and the target was clear. In Russia, the uprising was led by elitists posing as common men, and the target was obscured. In America, much of the public assumed roles as arbiters and political engineers. In communist Russia, much of the public was oblivious to such responsibility, and only subject to engineering. Two revolutions in the name of ending tyranny with two entirely different initial outcomes… I bring up these opposing paradigms not to spark another endless debate over the merits of communism versus capitalism, but to highlight a growing potential for a new brand of revolution in modern day America, now cutting through the surface, which may very well culminate in one of the two finales described above. More perhaps than any other time memorable, centralist and statist visions are today clashing with individualist and Constitutionalist pleadings for sanity. The air grows heavy and ripe for ignition. More even than any economic indicator, social indicators point in the direction of conflict and widespread malfunction. The question of "if" in terms of citizen dissent and the inevitable lashing response of government is no longer asked. Now, the question of "when" has risen to the surface. To predict the exact timing of a breaking point is impossible, but there are signals to watch for; social and political attitudes to monitor and examine. After analyzing the shifts of multiple nations and cultures over thousands of years of human record, a pattern does, indeed, emerge. Similar developments in our times should not be taken lightly… 1) The Rise Of Moral Relativism Inherent conscience is a vital artery to a healthy society. When that artery is cut, entire structures and peoples die. There is no way around this, as history has shown. Cynics, often utilizing a highly limited understanding of the processes of mass psychology and individual psychology, tend to confuse the word "conscience" with the concept of taboo. Taboos are man-made morals, and are commonly applied as a method of social control by oligarchs and collectives, just as many laws are created to appease sometimes dubious bureaucracies. Conscience is NOT man-made, but an inborn process that human beings draw from unconsciously, and which true honor, compassion, and sincerity are derived. Conscience is an intuitive product, not intellectual. Moral relativism, by comparison, is a kind of emotional inhibitor which allows people to mechanize their thinking, and rationalize any activity no matter how despicable, as long as that activity is rooted in a "logical" framework. Logic, however, is limited… Interestingly, there are some forms of theoretical mathematics which allow false conclusions to be presented as fact, and this same methodology of fuzzy logic is consistently used by moral relativists to achieve the "appearance" of reason. At bottom, intellectual prowess accomplishes little without the disciplines of experience, emotion, and insight. Cultures which widely abandon the guidelines of conscience always find themselves subject to collapse, whether economic or political. Without the ability to feel empathy for the victims of one's actions, any disaster becomes possible. 2) The Displacement Of Cultural Subsections A society that maintains healthy appearances by purposely displacing and marginalizing certain belief systems or political stances is by its very nature self-destructive. For progress to be made, inclusion of ideas is paramount. Ideas must be allowed to stand on their own merit and not be victimized by the biases of an elite minority, or in some instances, an ignorant majority. Strong and meaningful ideas must be given space to thrive while bad ideas must be allowed to fall to the wayside. This happens when open discussion is given fair play. Suppression of discussion, whether by force or by stealth, leads to an inability of the people to form a true identity. Forced consensus ends not in stability, but in madness. 3) Distraction Over Substance Distracted people are uncaring people. A nation distracted by its own immediate desires over the concerns of the future is completely incapable of acting in its own best interest. Distraction comes in many forms, from vapid entertainment, to disinformation, to war and economic uncertainty. While most people are more than able to produce their own distractions, often governments will lend a helping hand in order to dissuade the masses from participation in the decision making processes. This includes the dilution of educational options and/or the co-option of the educational system altogether. You will find that in nearly every collapse of modern times, the citizenry found themselves surprised and shell shocked despite numerous and easily identifiable warnings. You will also find that the stunned populace was usually obsessed with any existing method to avoid involvement in the workings of the system in which they lived. They were caught off guard because, in the end, they were more comfortable not knowing the details. Comfort at the price of vigilance ends in devastation. 4) When Law Becomes Tyranny Law, at least as far as the fundamentals are concerned, is designed to protect citizens as well as authorities from undue actions and accusations. At its best, law shields us from our own follies, which may include the allowed ascension of poor leadership. At its worst, law is no longer used as a tool for protecting the public from error and malice, and is instead used as a tool for enslavement. When a culture elevates and worships law over the contents of their own consciences, the abuse of law for the sake of control is imminent. Law does not trump heart, yet many past societies have been convinced to follow immoral laws all while mistaking their actions for "civic duty". When law becomes infallible, fallible government becomes god, and no nation will ever be able to sustain such a delusion of grandeur for very long without reaping catastrophe. 5) Force Over Reason Force is used only in two instances within a domestic political environment; when a controlling entity seeks to acquire or maintain power after fear and disinformation have failed, and when a rebellious public seeks to undo the wrongs done and reason has gone ignored. A nation run by dishonest men is already a supreme candidate for extreme collapse, but when despots turn to violent policies to silence dissent, you can be sure that conflict is soon to follow. The level of this tension will be readily visible in the militant presence of the government in public buildings, on the roads, and even in the neighborhoods of the citizenry. A standing army upon the soil of a country, regardless of supposed rationale, is a recipe for a breakdown that goes far beyond the more manageable effects of financial distress and into the realm of lasting and vicious war. 6) False Paradigms And Mistaken Enemies A country near bedlam is usually filled with people seeking not just answers, but someone, anyone, to blame. This need for "justice" can be very misguided, and results in the projections of our own terrors onto innocent bystanders. Collapse is very often preceded by a swelling wave of attacks, usually directed at groups contrary to the majority belief. Political parties become factions. Ideals become battle cries. Fervor for retribution takes over. All the while, the true culprits (who are normally not a part of either side) sit back, relax, and turn the public in on itself. A frantic nation is an easily manipulated nation. Divided and fragile, such systems degrade while the source of the problem remains hidden. 7) Desperation And Loss Of Will A culture on the verge of sliding into full spectrum disintegration is generally not very chipper, however, when this despair results in the handing over of personal liberty for the sake of so called "security", an avalanche of regret and wild compensation in the form of moral relativism results. No matter what the state of a nation and its people, the will to move forward and to act for the betterment of the future can and does change everything. The blackest days of dread and ill omen are no match for man's ability to endure when he holds the truth dear. No obstacle is insurmountable. No enemy unbeatable. But, when that will is lost, so too is everything else. The concentration and frequency of the above elements can easily reveal the point at which a country is in respect to collapse. America now has many of these diseases at one stage or another, and in certain ways, has surpassed historic examples to form a never-before-seen dynamic for global turmoil. Currently, citizens are turning in greater and greater numbers to activism and protest, but the focus has moved away from the elites (central bankers and globalists) who deserve the largest portion of the public's ire. We have allowed deflections to go unchecked for too long, and the unwillingness of arbitrarily delineated sides (false Left and false Right) to reconcile at least until the larger threat is removed is setting our culture in motion into the depths of a nightmare we are not ready to handle. Such loss has happened before, and, through courage, understanding, and tenacity, it has also been undone before. The choice is ours. It always has been.
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| Posted: 15 Oct 2011 02:21 AM PDT Synopsis: Welcome to the weekend edition of Casey Daily Dispatch, a compilation of our favorite stories from the week for the time-stressed readers. Dear Reader, Welcome to the weekend edition of Casey Daily Dispatch, a compilation of our favorite stories from the week for the time-stressed readers. Of course, if you want to read all of the Daily Dispatches from the week, you may do so in the archives at CaseyResearch.com.
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| Gold Traders Most Bullish Since July After Plunge Posted: 15 Oct 2011 02:16 AM PDT ¤ Yesterday in Gold and Silver I wouldn't read much into Friday's trading. Yes, it appeared that...once again...every rally got sold off in London and New York, but volume was also very light, around 92,000 contracts net...so it's not hard to push the market around when volume is this tiny. However, gold did close up $13.20 on the day at $1,679.80 spot, so we shan't complain too loudly. The silver price chart is more interesting. We had that little price dip on virtually zero volume just before 9:00 a.m. Hong Kong time...followed by a rally into the London open that began around 1:30 p.m. Hong Kong time. There was a slight dip into the London silver fix at noon local time, and the subsequent rally got hit about ten minutes after Comex trading began in New York. Then, about 10:10 a.m. Eastern time, a seller showed up and sold the silver price down to below the Thursday closing price. But after that seller disappeared, the price recovered somewhat, closing the Fri...
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| Real Estate can be a Recession breaker Posted: 14 Oct 2011 09:11 PM PDT  Most economists believe that the recession is caused by insufficient demand in economy. Some of the major countries like the United States and United Kingdom are facing these problems, which are the main areas where people from different countries of the world live for high-paying jobs. Taking into account that it was in real estate, which started the ball rolling towards a financial disaster in the first place; it is quite ironic that it is in real estate that investors really have the opportunity to benefit from the economic downturn. Thousands of families have lost their homes. Extreme precautions are taken to the government and financial institutions to stop the epidemic, but are they enough? You may already be experiencing a domino effect in your own business. This is not surprising that many business owners and managers have reported that companies have slowed down. Is there an area that will not be affected, if you are unemployed and business is worse than last year? With the current economic crisis many people are probably wondering if this recession will end, what caused this to happen and will it occur again. The credit crisis and the Depression of 2007 played a negative role in the U.S. housing market. The housing market is still in the process of recovery from the recession. The U.S. financial crisis has caused a disruptive effect on the housing market. One might think that the recession would slowdown price appreciation, even in high-end real estate markets such as Aspen and Snowmass. Due to economic problems, many owners are faced with rising costs of living and tax burdens even as income levels continue to fall. Real estate is one of the assets whose value is declining in the face of an infinite flood of foreclosures and bankruptcies, and when the recession is over it is REALTY whose value is guaranteed to go up. Everyone has been affected by the recession in real estate. Even if you do not lose your home, you have been affected by the chain reaction that began with the downturn in real estate. It is crucial for business owners and leaders to take concrete steps in these moments. Look at the positive side, the economic slowdown provided some interesting perspectives. United States face economic challenges, and could affect other states. Despite the U.S. markets that are not declared a state of recession, it is always wise to be wary. The government's offer to extend the $ 8,000 credit for first home buyers tax in mid-2010 and to expand the program to include the $ 6500 credit for non-time buyers will attract more domestic customers on the market. Whether you're a small business owner with real estate, or an owner of a mortgage in trouble, it is crucial to take stock of your existing debt burden. Take a closer look at your own expense to see where you might be able to save on living expenses. I will invite you to put at least some long-term thinking. If we are to survive the U.S. recession, we must make prudent investments. Rather than going to several stocks or shares, it is better to be safe away with investments in real estate. It's old news that the economic power continues to grow in oil-exporting countries that we send our dollars to. What could be the new news is that the long-awaited global production peak occurred in 2011 and 2012, well ahead of most forecasts. Recession proof business is increasingly likely to survive a severe recession, and if they are smart and do your research, not only can they survive but can actually thrive in recession and economic collapse that we are seeing in the U.S. Reports say that people are mentally depressed due to the recession; we must ensure that all is well and all we have to do is wait a while until there's growth the economy. More Here... 
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| Gold Stocks Vastly Outperform Gold On The Week – Will The Trend Continue? Posted: 14 Oct 2011 08:08 PM PDT For the week ending October 14, gold continued to rally, gaining $26 on the week to $1,678.00 as measured by the closing London PM Fix Price. Gold stocks, by comparison, dramatically outperformed the gain in bullion by almost fourfold. In order to get a broad based assessment of relative performance, gold was compared to the [...]
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| The Shovel and Hole Maneuver For Hiding Gold, Guns and Other Assets Posted: 14 Oct 2011 06:00 PM PDT Shtfplan
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James, after gold has fallen 15 per cent in three days, many people say, gold as lost its safe haven status. True?
Gold remains our best means of economic measurement. It is not a perfect or 100% consistent measure of wealth, but it is our best. Due to its monetary properties, gold can be used to measure wealth across generations. Just like we have the sun and moon to discern the times and seasons, I believe, we have gold to discern changes in wealth. It is interesting that the sun is often compared to gold, and the moon to silver. Just like a day in the Middle Ages is comparable to a day in this century, an ounce of gold in the Middle Ages is comparable to one today.
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