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- Crise systémique globale – Premier semestre 2012 : Décimation des banques occidentales
- Gold Traders Most Bullish Since July After Plunge
- Gold, Gold, Gold… What About Silver?
- Solid Day for Gold and Silver/Dexia bailout dead in the water/Foreigners redeem massive treasuries
- Gold And Silver Metals Versus Gold Mining Stocks
- Gold "Building a Base above $1650", BRICS Ponder Giving More to IMF to Assist Europe
- Silver – An alternate Take
- Real Silver Highs
- The Shovel and Hole Maneuver For Hiding Gold, Guns and Other Assets
- The "Moscow gold", the reserves of the Bank of Spain sent to the Soviet Union
- Money, Gold, and the Great Depression
- Global Gold Production History
- By the Numbers for the Week Ending October 14
- When Money Dies, Some Will Prosper
- Listen You Lazy Bugger!
- Friday ETF Roundup: VXX Slides On Investor Optimism, UNG Soars On Weather Forecast
- Demand Media Has Abandoned Its Golden Goose
- NextEra Energy Is A Dividend Star On The Rise
- Whatever you do, don't forget about the dollar
- Porter Stansberry: Don't invest another dollar before reading this
- Free Trade Or Fair Trade? 20 Reasons Why All Americans Should Be Against The Insane Trade Policies Of The Globalists
- eBay emerges as new destination for physical gold, silver buyers
- Why Intel Can Be A Money Maker For Investors
- Gold Seeker Weekly Wrap-Up: Gold and Silver Gain About 3% on the Week
- Inflation onDemand & Along the ‘Continuum’
- Corvus Expands Resource at North Bullfrog (Nevada)
- Why We’re Ungovernable, Part 2: Battle Lines
- COT Silver Report - October 14, 2011
| Crise systémique globale – Premier semestre 2012 : Décimation des banques occidentales Posted: 15 Oct 2011 03:48 AM PDT - Communiqué public GEAB N°58 (15 octobre 2011) -  Comme anticipé par LEAP/E2020, le second semestre 2011 voit le monde continuer sa descente infernale dans la dislocation géopolitique globale caractérisée par la convergence des crises monétaire, financière, économique, sociale, politique et stratégique. Après une année 2010 et un début 2011 qui aura vu le mythe d'une reprise et d'une sortie de crise voler en éclat, c'est désormais l'incertitude qui domine les processus de décision des Etats comme des entreprises et des individus, générant inévitablement une inquiétude croissante pour les années à venir. Le contexte s'y prête particulièrement : explosions sociales, paralysie et/ou instabilité politique, retour de la récession mondiale, peur sur les banques, guerre monétaire, disparition de plus d'une dizaine de milliers de milliards USD d'actifs-fantômes en trois mois, chômage durable et en hausse généralisé, … C'est d'ailleurs cet environnement financièrement très insalubre qui va générer la « décimation (1) des banques occidentales » au cours du premier semestre 2012 : avec leur rentabilité en chute libre, leurs bilans en pleine déconfiture, avec la disparition de milliers de milliards USD d'actifs, avec des Etats poussant de manière croissante à la réglementation stricte de leurs activités (2), voire à leur mise sous tutelle publique et avec des opinions publiques de plus en plus hostiles, l'échafaud est désormais dressé et au moins 10% des banques occidentales (3) vont devoir y passer dans les prochains trimestres. Pourtant, dans cet environnement de plus en plus chaotique en apparence, des tendances se dégagent, des perspectives parfois positives apparaissent, … et surtout, l'incertitude est beaucoup moins forte qu'on pourrait le croire, pour peu qu'on analyse l'évolution du monde avec une grille de lecture du monde-d'après-la-crise plutôt qu'avec les critères du monde-d'avant-la-crise. Dans ce numéro 58 du GEAB, notre équipe présente également ses anticipations 2012-2016 des « risques-pays » pour 40 Etats, démontrant qu'on peut décrire les situations et identifier les tendances lourdes à travers le « brouillard de guerre » actuel (4). Dans un tel contexte, cet outil d'aide à la décision s'avère très utile pour l'investisseur individuel comme pour le décideur économique ou politique. Notre équipe présente également l'évolution du GEAB $ Index et ses recommandations (or-devises-immobilier), y compris bien entendu les moyens pour se protéger des conséquences de la prochaine « décimation des banques occidentales ». Pour ce communiqué public du GEAB N°58, notre équipe a choisi de présenter un extrait du chapitre sur la décimation des banques occidentales au premier semestre 2012. Premier semestre 2012 : Décimation des banques occidentales En fait, il va s'agir d'une triple décimation (5) qui culminera avec la disparition de 10% à 20% des banques occidentales au cours de l'année à venir : . une décimation de leurs effectifs . une décimation de leurs profits . et enfin, une décimation du nombre des banques. Elle s'accompagnera bien entendu d'une réduction drastique de leur rôle et de leur importance dans l'économie mondiale et affectera directement les établissements bancaires des autres régions du monde ainsi que les autres opérateurs financiers (assurances, fonds de pension, …).  Notre équipe pourrait aborder ce sujet comme les médias anglo-saxons, le président des Etats-Unis et ses ministres (7), les experts de Washington et de Wall Street, et plus généralement les grands médias (8) le font ces derniers temps à propos de tous les aspects de la crise systémique globale, c'est-à-dire en disant : « C'est la faute de la Grèce et de l'Euro ! ». Cela aurait évidemment comme vertu de réduire à quelques lignes cette partie du GEAB N°58 et de supprimer toute velléité d'analyse d'éventuelles causes aux Etats-Unis, au Royaume-Uni ou au Japon. Mais, sans surprise pour nos lecteurs, ce ne sera pas le choix retenu par LEAP/E2020 (9). Etant le seul think-tank à avoir anticipé la crise et prévu plutôt fidèlement ses différentes phases, nous n'allons pas en effet abandonner aujourd'hui un modèle d'anticipation qui fonctionne bien au profit de préjugés dépourvus de toute capacité prédictive (n'oublions pas que l'Euro se porte toujours bien (10) et que l'Euroland vient de réaliser son petit exploit d'enchaîner en six semaines les 17 votes parlementaires nécessaires pour renforcer son fonds de stabilisation financière (11)). Alors, plutôt que de répercuter de la propagande ou du « prêt-à-penser », restons fidèle à la méthode d'anticipation et collons à une réalité qu'il nous faut dévoiler pour pouvoir la comprendre (12). En l'occurrence, depuis des lustres, quand on pense « banques », on pense avant tout à la City de Londres et à Wall Street (13). Et pour cause, depuis plus de deux siècles pour Londres, et près d'un siècle pour New York, ces deux villes sont les deux cœurs du système financier international et les tanières par excellence des grands banquiers de la planète. Toute crise bancaire mondiale (comme tout phénomène bancaire d'envergure) prend donc sa source dans ces deux villes et y termine sa course aussi, puisque le système financier mondial moderne est un vaste processus d'incessants recyclages de la richesse (virtuelle ou réelle) développée par et pour ces deux villes (14). La décimation des banques occidentales qui débute et va se poursuivre dans les prochains trimestres, phénomène d'ampleur historique, ne peut donc se comprendre et se mesurer sans analyser avant tout le rôle de Wall Street et Londres dans cette débâcle financière. La Grèce et l'Euro y jouent indéniablement un rôle comme nous l'avons analysé dans des GEAB précédents, mais ce sont ceux de facteurs déclencheurs : la dette de la Grèce, ce sont les turpitudes bancaires d'hier qui explosent sur la place publique aujourd'hui ; l'Euro c'est l'aiguillon de l'avenir qui perce la baudruche financière actuelle. Ce sont les deux doigts qui pointent le problème ; mais ils ne sont pas le problème. C'est ce que sait le sage et ce qu'ignore l'idiot d'après le proverbe chinois (15). Pour anticiper l'avenir des banques occidentales, c'est en effet à Londres et Wall Street qu'il faut regarder, car c'est tout simplement là que le troupeau bancaire se rassemble et vient boire sa dose de Dollars chaque soir. Et l'état du système bancaire occidental peut se mesurer à travers l'évolution des effectifs des banques, de leur profitabilité et de leurs actionnaires. De ces trois facteurs on peut déduire assez directement leur aptitude à survivre ou disparaître. La décimation des effectifs des banques Commençons donc par les effectifs ! En la matière le tableau est bien sombre pour les employés du secteur bancaire (et même désormais pour les « stars du système bancaire ») : Wall Street et Londres annoncent sans interruption depuis la mi-2011 des licenciements massifs, relayés par les centres financiers secondaires comme la Suisse et les banques eurolandaises ou japonaises. Ce sont au total plusieurs centaines de milliers d'emplois bancaires qui ont disparu en deux vagues : 2008-2009 d'abord, puis depuis la fin du printemps de cette année. Et cette seconde vague monte en puissance au fur et à mesure des mois qui passent. Avec la récession globale désormais en cours, l'assèchement des flux de capitaux vers les USA et le Royaume-Uni consécutifs aux changements géopolitiques et économiques en cours (16), les immenses pertes financières de ces derniers mois, et les réglementations en tout genre qui progressivement « cassent » le modèle banco-financier ultra-profitable des années 2000, les dirigeants des grandes banques occidentales n'ont plus le choix : il leur faut à tout prix limiter leurs coûts au plus vite et dans des proportions importantes. La solution la plus simple (après celle consistant à surfacturer les clients) est donc de licencier des dizaines de milliers d'employés. Et c'est ce qui se passe. Mais loin d'être un processus maîtrisé, on constate que tous les six mois ou presque, les dirigeants des banques occidentales découvrent qu'ils avaient sous-estimé l'ampleur des problèmes et qu'ils sont donc obligés d'annoncer de nouveaux licenciements massifs. Avec le perfect storm politico-financier qui s'annonce aux Etats-Unis pour Novembre et Décembre prochains (17), LEAP/E2020 anticipe ainsi une nouvelle série d'annonces de ce type dès le début 2012. Les cost-killers du secteur bancaire ont de beaux trimestres devant eux quand on voit que Goldman Sachs, qui est également directement concerné par cette situation, en est réduit à limiter le nombre de plantes vertes dans ses bureaux par souci d'économies (18). Or, après les plantes vertes qu'on éradique, ce sont généralement les pink slips (19) qui fleurissent. La décimation du nombre des banques D'une certaine manière, le système bancaire occidental ressemble de plus en plus à la sidérurgie occidentale des années 1970. Ainsi les « maîtres des forges » s'étaient crus les maîtres du monde (contribuant d'ailleurs activement au déclenchement des guerres mondiales), tout comme nos « grands banquiers d'affaires » se sont pris pour Dieu (à l'instar du PDG de Goldman Sachs ou au moins pour les maîtres de la planète. Et l'industrie sidérurgique fut le « fer de lance», la « référence économique absolue », de la puissance pendant plusieurs décennies. On comptait la puissance en dizaines de millions de tonnes d'acier comme on a compté ces dernières décennies la puissance en milliards USD de bonus pour dirigeants et traders des banques d'affaires. Et puis, en deux décennies pour la sidérurgie, en deux/trois ans pour la banque (20), l'environnement a changé : concurrence accrue, profits qui s'effondrent, licenciements massifs, perte d'influence politique, fin des subventions massives et in fine nationalisations et/ou restructurations accouchant d'un secteur minuscule par rapport à ce qu'il était à son heure de gloire (21). D'une certaine manière donc, l'analogie vaut pour ce qui attend en 2012/2013 le secteur bancaire occidental.  A Wall Street, déjà Goldman Sachs, Morgan Stanley, JPMorgan avaient dû se transformer soudainement en « banques normales » pour être sauvées en 2008. A la City, l'état britannique a dû nationaliser toute une partie du système bancaire du pays et à ce jour le contribuable britannique continue à en supporter le coût puisque les cours des actions des banques se sont effondrés à nouveau en 2011 (22). C'est d'ailleurs l'une des caractéristiques du système bancaire occidental dans son ensemble : ces opérateurs financiers privés (ou cotés sur les marchés) ne valent pratiquement plus rien. Leur capitalisation boursière s'est envolée en fumée. Cela crée bien entendu une opportunité de nationalisation à faible coût pour le contribuable dès 2012 car c'est le choix qui va s'imposer aux Etats, aux Etats-Unis comme en Europe ou au Japon. Que ce soit par exemple Bank of America (23), CitiGroup ou Morgan Stanley (24) aux Etats-Unis, RBS (25) ou Lloyds au Royaume-Uni (26), la Société Générale en France, Deutsche Bank (27) en Allemagne ou UBS (28) en Suisse (29), certains très grands établissements, « too big to fail » (trop gros pour tomber) vont tomber. Ils seront accompagnés par toute une série de banques moyennes ou petites comme par exemple Max Bank qui vient de faire faillite au Danemark (30°. Face à cette « décimation » les moyens des Etats seront rapidement dépassés, surtout en cette période d'austérité, de faible rentrée fiscale et d'impopularité politique du sauvetage bancaire (31). Les dirigeants politiques vont donc devoir se concentrer sur la préservation des intérêts des épargnants (32) et des employés (deux aspects à fort potentiel électoral positif) au lieu de sauvegarder l'intérêt des dirigeants et des actionnaires des banques (deux aspects à fort potentiel électoral négatif et dont le précédent de 2008 a démontré l'inutilité économique (33)). Cette situation entraînera un nouvel effondrement des cours des valeurs financières (y compris les assurances jugées très « proches » du contexte bancaire) et accroîtra le désarroi des hedge funds, fonds de pension (34) et autres opérateurs traditionnellement très imbriqués avec le secteur bancaire occidental. Nul doute que cela ne fera que renforcer le contexte récessionniste général en limitant d'autant les prêts à l'économie (35).  Pour simplifier la vision de cette évolution, on peut dire que le marché bancaire occidental réduisant considérablement son périmètre, le nombre d'acteurs sur ce marché est obligé de diminuer en proportion. Dans certains pays, en particulier ceux où les très grandes banques accaparent 70% ou plus du marché bancaire, cela va se traduire inévitablement par la disparition de l'un ou l'autre de ces très gros acteurs … quoiqu'en disent leurs dirigeants, les stress tests ou les agences de notation (36). Si l'on est actionnaire (37) ou client des banques qui risquent de s'effondrer au premier semestre 2012, il y a bien entendu des précautions à prendre. Nous en présentons plusieurs au sein des recommandations de ce GEAB N°58. Si l'on est dirigeant ou employé de ces établissements, les choses sont plus compliquées car il est désormais trop tard selon LEAP/E2020 pour éviter ces banqueroutes en série ; et le marché de l'emploi bancaire est saturé du fait des licenciements massifs. Cependant, voici un conseil de notre équipe si vous êtes employé de ces établissements : si on vous fait une offre de départ volontaire intéressante, saisissez-la car d'ici quelques mois, les départs ne seront plus volontaires et se feront dans des conditions peu favorables. ---------- Notes: (1) La décimation était un châtiment militaire romain consistant à punir de mort un légionnaire sur dix quand l'armée avait fait preuve de lâcheté au combat, de désobéissance ou de comportement inacceptable. Le système romain de décimation fonctionnait par tirage au sort. (2) Des réglementations qui amputent fortement les activités les plus lucratives des banques. Source : The Independent, 12/10/2011 (3) Notre équipe estime la proportion plutôt entre 10% et 20%. (4) Brouillard de guerre auquel les médias dominants contribuent d'ailleurs fortement au lieu d'essayer de clarifier la situation. (5) En prenant le sens de décimation au sens large, c'est-à-dire, une diminution brutale pouvant être largement supérieure aux 10% de l'époque romaine. (6) Pour LEAP/E2020, ce type de classement ne présage en rien des événements puisque le choc en cours est très largement supérieur en intensité et en durée aux hypothèses des stress tests. Et cela vaut également pour les banques américaines bien entendu. (7) Tout est bon désormais pour Barack Obama, en difficile position pour la future élection présidentielle du fait de son bilan économique catastrophique et de la déception profonde d'une grande partie de son électorat de 2007 du fait de ses multiples promesses non tenues. Il doit à tout prix essayer de rejeter sur n'importe qui ou n'importe quoi l'état désastreux de l'économie et de la société américaine. Alors pourquoi pas la Grèce et l'Euro ? Quand cela ne marchera plus (d'ici un ou deux mois), il faudra trouver autre chose mais la gestion à courte vue étant une spécialité de l'administration Obama, nul doute que le fidèle relais de Wall Street qu'est Timothy Geithner, son ministre des finances, trouvera une autre explication. En tout cas, cela ne sera pas la faute de Wall Street, avec lui on peut au moins être certain de cela. Sinon, l'administration Obama pourra toujours ressortir le « spectre iranien » pour tenter de détourner l'attention des problèmes internes aux Etats-Unis. C'est d'ailleurs ce qui semble être d'actualité avec l'histoire abracadabrante de la tentative d'assassinat de l'ambassadeur saoudien à Washington par les narcotrafiquants mexicains payés par des services iraniens. Même Hollywood hésiterait devant l'improbabilité d'un tel scénario ; mais pour sauver le soldat « Wall Street » et tenter une réélection, que ne ferait-on pas ? Sources : Huffington Post, 26/07/2011 ; NBC, 13/10/2011 (8) Ces grands médias (financiers ou généralistes) ont en effet un passé brillant en matière d'anticipation de la crise. Vous vous souvenez sûrement de leurs titres en 2006 vous mettant en garde contre la crise des subprimes, en 2007 vous annonçant l' « implosion » de Wall Street pour 2008, et bien entendu, début 2011, vous prévenant d'un grand retour de la crise dès l'été 2011 ! Non, vous ne vous en souvenez pas ? Pas de panique, votre mémoire est bonne … car jamais ils n'ont fait ces titres, jamais ils ne vous ont prévenu de ces événements majeurs et de leurs causes. Alors, si vous persistez à considérer que comme ils le répètent tous les jours, les problèmes actuels ont pour cause « la Grèce et l'Euro », c'est que vous croyez qu'ils sont subitement tous devenus honnêtes, intelligents et perspicaces… et vous devez donc aussi croire au Père Noël dans la même logique. C'est charmant, mais pas très efficace pour affronter le monde réel. (9) Notre équipe a depuis longtemps souligné les problèmes européens et a anticipé plutôt correctement l'évolution de la crise sur le « Vieux continent ». En revanche, nous essayons d'éviter d'être victime du syndrome de l'arbre européen cachant la forêt de problèmes majeurs américains et britanniques. (10) Petit rappel pédagogique : ceux qui ont parié pour un effondrement de l'Euro il y a un mois ont à nouveau perdu de l'argent. Au rythme de « crise de fin de l'Euro » tous les 4 mois environ, il ne va pas leur en rester beaucoup d'ici 2012. (11) Alors que les Etats-Unis par exemple n'ont toujours pas été capables de démontrer leur capacité à surmonter les oppositions entre Républicains et Démocrates concernant la maîtrise de leurs déficits. (12) A ce sujet, il est consternant de voir le G20 se préoccuper de l'Euro alors que la question centrale de l'avenir reste le Dollar. Visiblement, l'immense opération de manipulation médiatique lancée par Washington et Londres aura réussi à repousser pour un temps encore l'inévitable remise en cause du statut central de la devise US. Comme anticipé par notre équipe, il n'y a donc rien à attendre du G20 jusqu'à la fin 2012. Il va continuer à discourir, à prétendre agir et en fait à ignorer les questions clés, celles qui sont les plus difficiles à mettre sur la table. Les récentes annonces d'un accroissement des moyens du FMI font partie de ces discours vides qui ne seront pas suivi d'effets car les BRICS (les seuls à pouvoir accroître les fonds du FMI) ne mettront pas leurs moyens financiers dans une institution où ils continuent à être marginaux en termes d'influence. En attendant, ces annonces font croire qu'il existe toujours une volonté commune d'action au niveau international. Le réveil en sera d'autant plus douloureux dans les mois à venir. (13) Si vous pensez à la Grèce, c'est que vous êtes Grec ou bien que vous êtes dirigeant ou actionnaire d'une banque ayant trop prêté à ce pays au cours des dix dernières années. (14) Et d'une certaine manière aussi pour les deux Etats concernés. Mais c'est un aspect déjà plus discutable, et d'ailleurs largement discuté, de savoir si de telles places financières sont une bénédiction ou une malédiction pour les Etats et les peuples qui les accueillent. (15) Source : L'Internaute (16) Entre l'intégration accrue de l'Euroland qui prive la City de juteux marchés et le rapprochement économique, financier et monétaire des BRICS, court-circuitant Wall Street et la City, ce sont des parts croissantes du marché financier global qui échappent aux banques de Londres et New York. (17) Voir GEAB N°57 (18) Source : Telegraph, 19/08/2011 (19) Aux Etats-Unis, le « pink slip |
| Gold Traders Most Bullish Since July After Plunge Posted: 15 Oct 2011 01:10 AM PDT ¤ Yesterday in Gold and SilverI 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 Friday trading session at $32.16 spot...up 34 cents from Thursday. Like gold, silver volume was very light...around 27,000 contracts net.
Here's the 5-day dollar chart for entertainment purposes only. From midnight in New York on Sunday night until the yesterday afternoon close, the dollar declined about 180 basis points.
The gold stocks gapped up about a percent at the open...and then traded sideways until shortly before lunch in New York. Then a buyer of some substance showed up...and by shortly after 2:00 p.m. Eastern time, the HUI was up about three percent. From there, the stocks traded sideways, but did manage to close on their high tick of the day, with the HUI up 3.08%...and 5.8% on the week.
The larger cap silver stocks did OK for themselves yesterday, so Nick Laird's Silver Sentiment Index was up 2.43%. For the most part, the price action in the juniors was a little more subdued.
(Click on image to enlarge) The CME's Daily Delivery Report showed that 97 gold...and 15 silver contracts, were posted for delivery on Tuesday. The link to that action is here. There were no reported changes in either GLD or SLV yesterday. The U.S. Mint had another sales report. They sold 2,000 ounces of gold eagles, another 1,000 one-ounce 24K gold buffaloes...and 50,000 silver eagles. For the first two weeks of October, gold eagles sales totaled 29,500...one-ounce 24K gold buffaloes are at 9,500...and silver eagles sales total 1,930,000 month-to-date. On Thursday, the Comex-approved depositories reported receiving 659,309 ounces of silver...and shipped 306,274 out the door. As expected, there weren't a lot of changes in yesterday's Commitment of Traders Report...and I'm just going to touch on the high points. In silver, the Commercial traders increased their net short position by 1,905 contracts...but I'd bet serious money that virtually every contract increase was Ted Butler's raptors selling their long positions and taking profits. In gold, the Commercial traders increased their net short position by 3,727 contracts. Some of that was raptor selling...and some of it was fresh shorting. There's nothing in these numbers that suggests that we aren't still completely sold out to the downside...and the next major price move will be up. Here's a chart that reader and contributor Scott Pluschau sent me yesterday...and here's his commentary to go with it. "As I said on Thursday, here's the up-dated [for Friday] chart on gold futures. Supply still met with demand at the rising trend line. One side is going to over run the other sooner or later...and after yesterday's price action, their bangin' on the door.
I'd guess we'll find out pretty quickly which way the price is going to break. The bullion banks are quite capable of painting any chart pattern they wish in gold and silver...and how this particular pattern resolves itself will be mostly up to them. The Perth Mint - Annual Report. Dr. Dave Janda interviews Ken Ivory...the Utah legislator that authored the legal coinage act in that state. U.S. Mint sales still going strong. ¤ Critical ReadsSubscribeMore Americans than Chinese can't put food on the tableThe number of Americans who lack access to basic necessities like food and health care is now higher than it was at the peak of the Great Recession, a survey released Thursday found. And, in a finding that could worsen fears of U.S. decline, the share of Americans struggling to put food on the table is now three times as large as the share of the Chinese population in the same position. This story was posted over at news.yahoo.com yesterday...and I thank reader David Ball for sending it along. The link is here.  My Advice to the Occupy Wall Street Protesters...hit bankers where it hurts: Matt TaibbiI've been down to "Occupy Wall Street" twice now, and I love it. The protests building at Liberty Square and spreading over Lower Manhattan are a great thing, the logical answer to the Tea Party and a long-overdue middle finger to the financial elite. The protesters picked the right target and, through their refusal to disband after just one day, the right tactic, showing the public at large that the movement against Wall Street has stamina, resolve and growing popular appeal. But...there's a but. And for me this is a deeply personal thing, because this issue of how to combat Wall Street corruption has consumed my life for years now, and it's hard for me not to see where Occupy Wall Street could be better and more dangerous. I'm guessing, for instance, that the banks were secretly thrilled in the early going of the protests, sure they'd won round one of the messaging war. Why? Because after a decade of unparalleled thievery and corruption, with tens of millions entering the ranks of the hungry thanks to artificially inflated commodity prices, and millions more displaced from their homes by corruption in the mortgage markets, the headline from the first week of protests against the financial-services sector was an old cop macing a quartet of college girls. This Matt Taibbi piece was posted over at Rolling Stone magazine on Wednesday...and I thank Alaska reader Richard Vollertsen for sending it along. The link is here.  Art Cashin Offers A Huge Lesson On Weimar HyperinflationIn his daily note, UBS floor guy Art Cashin delivers a monster history lesson on Weimar hyperinflation, and the roots of today's huge crisis. This businessinsider.com story was posted on Thursday...and is well worth your time. I thank Roy Stephens for sharing it with us...and the link is here.  This bizarre plot goes against all that is known of Iran's intelligence service: Patrick CockburnThe claim that Iran employed a used-car salesman with a conviction for cheque fraud to hire Mexican gangsters to assassinate the Saudi ambassador in Washington goes against all that is known of Iran's highly sophisticated intelligence service. The confident announcement of this bizarre plot by the US Attorney General Eric Holder sounds alarmingly similar to Secretary of State Colin Powell's notorious claim before the UN in 2003 that the US possessed irrefutable evidence Saddam Hussein was developing weapons of mass destruction. It also sound equally as silly as the U.S. governments explanation of the events surrounding 9/11...but don't get me started on that. This op-ed piece posted at the independent.co.uk website on Thursday is well worth reading...and I thank reader Brad Robertson for sharing it with us. The link is here.  Former Iran assassin says alleged plot 'makes no sense'In Tehran, an unexpected source is expressing doubt about the assassination plot laid out by US officials, alleging that Iran was behind plans to kill the top Saudi Arabian diplomat in Washington and blow up embassies. Dawud Salahuddin, an American fugitive who in 1980 was the last – and only – US citizen known to have killed on behalf of Iran's revolutionary regime, on US soil, says the plot borders on the unbelievable. "For all the noise that comes out of this country, the Iranians know full well they are no military match for the Americans; they know that better than they know their names," says Salahuddin, who spoke to the Monitor by telephone from his home west of Tehran. "So the notion that [the Iranians] are going to bring that down on them, that just makes no sense at all." This story, filed from Istanbul in Turkey, appeared in The Christian Science Monitor early yesterday...and was subsequently posted over at news.yahoo.com. I thank Swiss reader B.G. for bringing it to my attention...and the link is here.  EU May Impose Limits on Commodity Swaps, High-Frequency TradingThe European Union may impose position limits for commodities derivatives and curbs on high- frequency trading as part of plans to overhaul the region's financial-market rules. The European Commission, the 27-nation EU's executive arm, is seeking limits on the number of commodity derivative contracts "any given market members or participants can enter into over a specified period of time, or alternative arrangements" with the same impact, according to copies of proposals set for release on Oct. 20 that were obtained by Bloomberg News. French President Nicolas Sarkozy has demanded steps to curb commodity derivatives speculation, which he blames for driving up world food prices. He has made the issue a priority of France's presidency this year of the Group of 20 nations. This Bloomberg story from yesterday was sent to me by West Virginia reader Elliot Simon...and the link is here.  EU Said to Consider 50% Greek Write-downEuropean officials are considering write-downs of as much as 50 percent on Greek bonds, a backstop for banks and continued central bank bond purchases as key planks in a revamped strategy to combat the debt crisis, people familiar with the discussions said. The Greek bond losses may be accompanied by a pledge to rule out debt restructurings in other countries that received bailouts, such as Portugal, to persuade investors that Europe has mastered the crisis, said the people, who declined to be identified because the negotiations will run for another week. I thank Elliot Simon once again...this time for this Bloomberg story from yesterday...and the link is here. |
| Gold, Gold, Gold… What About Silver? Posted: 15 Oct 2011 01:00 AM PDT SunshineProfits |
| Solid Day for Gold and Silver/Dexia bailout dead in the water/Foreigners redeem massive treasuries Posted: 14 Oct 2011 11:34 PM PDT |
| Gold And Silver Metals Versus Gold Mining Stocks Posted: 14 Oct 2011 09:56 PM PDT "Back in the day before precious metals ETFs, gold mining stocks were considered a convenient surrogate for exposure to precious metals. The XAU (Gold & Silver Mining Index) is composed of large-cap members of this group. First let's compare a long-term chart of the XAU with one of gold. Note that the XAU and gold ran pretty close together from 1984 until about 2000. Then from the lows of 2000 gold rallied about +1400% versus only +125% for the XAU. (The Price Relative line has been trending down since 1996). An interesting point is that both indexes had major corrections in 2008 — about -70% for the XAU and -25% for gold." –Carl Swenlin DecisionPoint We say shares versus metals have been under pressure as broader stocks have, too.
Monthly gold has been tracking an excellent long term 45 degree up rally since 2001.
Gold has been a foundational currency for thousands of years. Paper money is all fiat currency; merely a facsimile of the real McCoy, gold. When President Nixon took the USA off the gold standard in 1971, this was the death knell for our USA dollar and golden credit standing behind it. (Pun intended) With no ties to something solid and real, central bankers could print anything with wild abandon including dollars, bonds, bills, and notes. Because of the magnitude of their efforts, they could go even further, giving phantom leveraged credit to just about anybody including themselves with absolutely no controls or offsets. So, what has happened in the 40 years since 1971; we have destroyed the monetary foundation of America and other nations throughout the world. The dollar is the reserve currency for the world once being 85% of all reserves but that has fallen into the 70% range. "I think we can say that in the past there has been a passing similarity in price movement between the two indexes, but it has been a similarity in direction, not magnitude. Why the difference in performance? Gold is a commodity, and gold stocks are stocks in companies that mine gold." –Carl Swenlin GDX is channeled trading sideways for now. The juniors, (chart two) GDXJ, had an exit relapse.
We currently have two hurdles to overcome before precious metals shares can rise with very solid gains. (1) The broader stock markets must be given support and rally. (2) Gold must rally back-up to at least $1750 or higher. Silver was badly wounded in the $49 to $32.50 stomp. Its next move is to $38.85 resistance, perhaps the high for the year, which holds back silver stocks, somewhat. Both metals and their shares will regain solid footing and rally over years. Gold, Silver and their shares all move in staggered steps and stairs. They are never precisely in lock-step unison. Rising markets in all of these sectors should rally over weeks ahead.
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| Gold "Building a Base above $1650", BRICS Ponder Giving More to IMF to Assist Europe Posted: 14 Oct 2011 09:01 PM PDT |
| Posted: 14 Oct 2011 07:28 PM PDT |
| Posted: 14 Oct 2011 05:00 PM PDT |
| The Shovel and Hole Maneuver For Hiding Gold, Guns and Other Assets Posted: 14 Oct 2011 05:00 PM PDT |
| The "Moscow gold", the reserves of the Bank of Spain sent to the Soviet Union Posted: 14 Oct 2011 04:54 PM PDT wikipedia |
| Money, Gold, and the Great Depression Posted: 14 Oct 2011 04:30 PM PDT Federal Reserve |
| Global Gold Production History Posted: 14 Oct 2011 04:30 PM PDT Goldsheet Links |
| By the Numbers for the Week Ending October 14 Posted: 14 Oct 2011 02:31 PM PDT Just below is this week's closing table, followed by the CFTC disaggregated commitments of traders (DCOT) recap table for the week ending October 14, 2011.
Continued… Brief comments: Both gold and silver advanced for the week in USD terms, but gold declined in euro terms on a sharply stronger single currency. Note that even after a 201-basis point drop for the DXY Tues/Tues (to 77.58) ICE commercial traders kept the downward pressure on the greenback index by adding another 3,662 contracts net short the DXY. 53,000 + contracts net short is a very large stand and represents 76% of the open interest. The "ICE coms" were rewarded with another 96-ticks lower by Friday's close to 76.62 – a major reversal for the USD. Minor negative money flow for the largest gold and silver ETFs, barely worth mentioning. Relief bounces evident for mining shares, large and small, up from strongly oversold levels. Follow through required now to be convincing. Higher weekly highs and lows for both gold and silver, a positive sign, but the contraction in the hi-lo spreads suggests growing opposition. Note the much higher weekly low for silver which suggests urgency on the part of buyers. Ted Spread high enough to be worrisome, suggesting that banks are becoming more leery of their banking brethren. When this indicator falls it will be one of the signals that danger is abating. In the DCOT table below a net short position shows as a negative figure in red. A net long position shows in black. In the Change column, a negative number indicates either an increase to an existing net short position or a reduction of a net long position. A black figure in the Change column indicates an increase to an existing long position or a reduction of an existing net short position. The way to think of it is that black figures in the Change column are traders getting "longer" and red figures are traders getting less long or shorter. All of the trader's positions are calculated net of spreading contracts as of the Tuesday disaggregated COT report. (DCOT Table for data as of October 11. Source CFTC for COT data, Cash Market for gold and silver.) |
| When Money Dies, Some Will Prosper Posted: 14 Oct 2011 11:18 AM PDT "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: |
| Posted: 14 Oct 2011 10:15 AM PDT First up, Slipstream Trader has posted his latest S&P 500 analysis over at his YouTube Channel. The latest video came out Friday. You can find it here. Murray's written synopsis is that:
Basically the market is in no man's land and we need to see more price action to decide on direction. Huge overhead resistance still in place between 1230-1260 in the S+P 500. Any failure from that zone will give some great sell signals. If the market can't reach that level and falls over from here then I have to wait until we see a close below 1255-1270 before getting more bearish. There are some conflicting signals and we have the Europe rescue package coming up which could cause some buying leading into it. You can watch the latest Slipstream update here. Meanwhile, in other news.. Australian rap news crew Juice Media has uploaded its latest creation onto YouTube. Quite frankly, the members of the crew are geniuses. If you don't feel like bobbing your head to the tune, here are some of the opening lyrics:
'As you know, the world is urgently trying to make sense of our "global economy" and its arcane trends. Gloom Boom and Doom editor Marc Faber also reckons he knows what's happening. And he has a solution for the Americans too:
'I tell you what the US needs. The US needs a Lee Kwan Yew [former PM of Singapore] who stands in front of the US and tells them: Listen you lazy bugger! Now you have to tighten your belts! You have to save more! You have to work more for lower salaries! And only through that will we get out of the current dilemma that essentially prevents the economy from growing.' That's right. Only by reducing debt can the problem of too much debt be reduced. People need to save. 'But that will crash the economy' scream the Keynesians. Even Keynesians can't force people to spend though, so they look to the government to fill the gap. But government borrowing is just a balance sheet swap. The poor and overleveraged swap their own questionable balance sheet for the government's - the taxpayers'. That allows them to borrow far more than they otherwise could. The proceeds are then distributed around the system. The poor get welfare to keep them poor. The big companies get bailouts to keep them big. The rich get paid interest on the bonds. And the politicians get to keep their jobs. But what about the Steve Jobses of the world who are still in their garages? What about the Mark Zuckerbergs who are still at university? They are the job creators. And they get nothing. They are prevented, more and more each day, by the barriers erected to their success. You might notice that most of the big corporate successes in the last few decades have come about in the IT industry. Apple, Google, Facebook. How many of their employees are unionised? Is the industry subject to a special tax? Does it pay royalties? Have badly run IT companies received bailouts? (The NBN doesn't count.) The one part of the world's industry that is least inhibited is the one part keeping it going. But productive initiatives can only support so much dead weight. With less and less proper capitalism, there will be less and less prosperity. So is there any chance of a political resolution? Well, Europe seems a basket case. And the US presidential race is shaping up with so much irony its gobsmacking. Three of the big campaign issues are Obamacare, the Federal Reserve, and improper use of political power. The Republican nomination is between an implementer of universal healthcare, a former chairman of a Federal Reserve board and a former democrat who believes in executive orders for mass vaccination! But unless libertarian Ron Paul wins, it won't matter who does. The economic problems are bigger than any president, prime minister or central banker. That doesn't mean they won't have a go at 'solving' them. CLSA's investment guru Russel Napier explains how they will proceed:
'What's going on now is nothing to do with the business cycle. It's much, much bigger than that. We're getting a change in the structure of the way the world works. It's very simple. In a market system prices are determined by supply and demand. But that isn't always true... sometimes the government doesn't like the prices. And the government comes in and determines prices. That's a structural change that goes on for 20-30 years. That's what we're living through this last couple of years... That's coming to the entire developed world. People say it's deflation, devaluation, default. No it's not. Its nationalisation.' The nationalisations have already begun in Europe, with the Belgian bank Dexia. Well, this is the second round after the many nationalisations in 2008. But how will governments fund nationalisations? They will be willing to monetise debt to make up what their taxpayers aren't willing to pay. That creates inflation, if they are successful. That leaves our own Reserve Bank of the Land of Oz in a difficult situation. The Wizard of Oz, RBA Governor Glenn Stevens will face the choice of watching the Aussie dollar go stratospheric in value relative to trading partners' currencies, or join in the fun of printing money to manipulate currencies. The Swiss and Singaporeans faced this issue recently and gave in to temptation. They intervened in foreign exchange markets to devalue their currency. If the Swiss and Singaporeans can't set an example, what are the chances of Aussies doing it? Reader Mail Last week, we asked this question: After 20 years without a recession, how will Australians react when one finally comes along? Will they set themselves alight, protest, loot, stage a revolution? Here are a select few of the excellent responses we got: 'I think most Aussies will go to the pub and bitch about the rising price of beer when a recession occurs. I would also hope some form of demonstration against stupid taxes (and lies regarding them), against ridiculous management payouts, and Government intervention into Sound Money of individuals. But we'll all likely just go to the pub.' 'I believe that many Australians have their head in their sand and do not want to believe that the world is in an increasingly dangerous place from a financial perspective. There is almost a "titanic like" refusal to acknowledge that there is a real possibility of hard times around the corner. This is encouraged of course by the "China cargo cult" where we hear Wayne Swan saying weekly how well we are doing. I suspect many Australians would really struggle in a recession and would be very shocked if their access to expensive clothing, cars, housing and regular overseas holidays was cut back.' 'If the government decides the Zombies in society get a smaller pay check each we can expect them to revolt and riot as has been experienced in Euro countries. Somehow these Zombies who eat the flesh off the system us taxpayers provide deem themselves as positive contributors to society.' 'Given the frustration at all levels of society with the rotten performance of most politicians - with magnificent exceptions - I would say new parties will emerge with genuine dedication to country and people. Inevitably, with the current economic regime dictating the political agenda, they won't achieve much.' 'At least 51% of them will vote for continuing welfare hand-outs/employment in the public sector and give the Socialist/Fabians/Marxists/Trotskyists another 4 years. Case closed.' 'If Australia is affected by a recession - Australians will react as our Nation always has in time of trouble and that is to band together and help each other. Of course, there are always bad apples in the bunch, but, they shall be squashed like bugs.' 'I have suggested that Australians, particularly those Australians reared in the country, will be like a 'suspension fence'. Most fences are rigid, but suspension fences (an Australian invention) give like elastic on impact. So, we the Australian people have a lot of 'give' in us and are seen by others as apathetic. But, after a suspension fence gives on impact (it doesn't break) it rebounds, throwing off the beast that has hit it with force. I expect that the country people, true to the roots of their forebears, will respond strongly when least expected.' 'As has been the case for decades on a variety of issues; Aussies will scream but mostly WHINGE long and loud. When challenged, it will be a case of "why didn't someone tell us about it? Then , when the warnings they got are shown to their faces,., it's a case of "Well,we didn't think you meant it so bad and you were only trying to make a point"' 'I believe riots and protests are inevitable, when people finally awaken to how royally screwed theyve been by corrupt leaders...bankers who are not elected..... reserve bank officials who also work for major corporations.... superannuation that is going down the gurgler' 'In short, I think we will experience all the bad things that the USA is currently experiencing but, since our house prices and wage rates are the highest in the world, the ramifications of a recession will be far, far worse.' Until next week, Nickolai Hubble.
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| Friday ETF Roundup: VXX Slides On Investor Optimism, UNG Soars On Weather Forecast Posted: 14 Oct 2011 10:12 AM PDT By ETF Database: U.S. markets closed a very solid week on a high note as quality earnings helped to boost stocks in Friday trading. The Dow finished the day higher by about 1.5% while the broader indexes added ever more impressive gains as the S&P 500 rose by 1.7% and the Nasdaq gained 1.8% for the session. For winning sectors, energy and tech were the big gainers while pockets of the services and financial sector also outerperformed on the day. In terms of laggards, no one sector really stood out but consumer goods and some big healthcare names certainly finished below the market averages. Commodity markets also saw inflows in the session as gold added about 0.8% and oil surged $3.05/bbl. to finish just under the $87.30 mark in Friday trading. Beyond the headline commodities, copper added about 3.8% while ag products also saw continued gains as hogs rose 2.2% and softs added Complete Story » |
| Demand Media Has Abandoned Its Golden Goose Posted: 14 Oct 2011 09:16 AM PDT By Tim Chen: I believe Demand Media has essentially given up on content farming, the company's core business. Complete Story » |
| NextEra Energy Is A Dividend Star On The Rise Posted: 14 Oct 2011 09:15 AM PDT By Rising Dividend Investing: Normally we are suspicious when old-line companies take on new names. We have too many bad memories of the collapse of many of the new-name crowd during the Tech bubble. In rare cases, we believe changes in a company's name makes good business and strategic sense. Complete Story » |
| Whatever you do, don't forget about the dollar Posted: 14 Oct 2011 09:06 AM PDT From Zero Hedge: |
| Porter Stansberry: Don't invest another dollar before reading this Posted: 14 Oct 2011 09:01 AM PDT From Porter Stansberry in the S&A Digest: I'm starting… just starting… to become a bit more bullish. After months and months and months of warning people that the stock market wasn't safe… that Europe was bound to "blow up"… and that a serious currency crisis was looming… I am now beginning to see the first signs of value in the world's equity markets. Don't get me wrong… I'm not giving you the "all clear" signal. I'm simply saying it's time to start building your "I'm gonna buy" list. And to help you do this, in this week's Friday Digest, I'm going to do my best to help you learn the single most valuable concept in all of equity investing… Warren Buffett calls this concept economic goodwill. He used this idea to break away from the Graham and Dodd-style investing he used at the beginning of his career. Making the switch allowed him to go from being a great investor to being the richest self-made man in the world. While I don't expect that will happen for any of us, I can guarantee your results will vastly improve and you'll make investment decisions with far greater confidence. But… as always… I will issue a warning. And not my usual, "There's no such thing as teaching, only learning" disclaimer… This concept is very, very difficult – even for professional investors – to fully understand. I don't expect most of you will read this once and say, "I've got it!" But I truly believe that if I expose you to these ideas a few times each year… and if you keep reading and thinking… one day, the light will come on. And from that point, you'll be a much better investor. Before we get to the hard stuff… let me explain why I'm now starting to look for stocks to buy again for the first time since March 2010. Here's what I wrote then… If I'm right about the extent of the problems the world's sovereign debtors face, the world will experience a vastly slowing economy. Even though I expect the U.S. dollar to fall in value relative to hard commodities – like gold and oil – I think it will be difficult for the U.S. equity market to sustain its current high price. Stocks are trading at big multiples to earnings. High-quality names and low-quality names are just too expensive right now to be bought safely… Stocks have gone nowhere but up for nearly a year. Isn't that a sign I must be wrong about all of these financial problems? Not at all. The huge run-up in equities we've seen over the last year is merely proof our central bank is still powerful. The stock market rebound that's lifted shares in the United States started the same week the Federal Reserve began its $2 trillion program of "quantitative easing" – which simply means printing up money and buying debts with it. The Fed's [first round of quantitative easing] is scheduled to end this month. That's when we'll have our first real test of the true appetite for risk. I bet we see a big correction in the stock market at exactly the same time… If I'm right about my predictions, over the next five years, the price of silver is going to soar. And you should see a return to a more classic gold-to-silver ratio of around 1:16. With gold around $1,100 today, that would give you a silver price target of nearly $70. Today, silver is around $17. As you know, we were basically right on the mark about all those things. Stocks did fall in mid-2010, which prompted the Federal Reserve to launch its second round of quantitative easing (QE2). That caused stocks to become even more inflated. But they didn't come close to keeping pace with silver, which got as high as $50. QE2 saw stock markets around the world become wildly overvalued. By March 2011, the world's stock markets were as frothy as they had ever been – as overvalued in my eye as they were in the fall of 2007. I say so because I keep a list (my blacklist) of the number of companies whose shares are worth more than $10 billion and trade at more than 10 times annual sales. While some circumstances could justify such rich stock prices (like asset-holding companies with little annual sales)… on the whole, stock prices trading at this level can't be sustained. In the fall of 2007 – the last big peak in equity prices – 14 companies around the world qualified for my blacklist. By March 2011, there were 13. How could so many large companies trade at such wildly inflated prices in the face of our dire economic problems? The only explanation was manipulation of the money supply– a factor I knew wouldn't last. That's the main reason I've been so bearish for so long. Expensive equities and a looming debt/currency crisis is a lethal combination. But the key indicators I follow are beginning to look more attractive. For example, only five companies populate the blacklist now. And my favorite timing indicator, the spread between high-yield and Treasury bonds, has suddenly and strikingly widened. The chart below shows you this interest-rate spread (in grey), expressed as the number of basis points between the yield on a high-yield debt index and 10-year Treasurys. Translated in plain English, just divide by 100 and you'll see the interest rate differential. Today, it's approaching 7%.  As you can see, the so-called "risk-spread" widens when people demand higher returns from assets they view as risky relative to U.S. Treasurys. When that happens (represented by the grey line rising), stocks (the black line) fall. I believe this risk spread is going to continue to widen and stocks will continue to fall. But I don't expect it to widen by as much as it did in 2008. Why not? Because I don't believe the authorities will allow another major bank to actually fail, like they did with Lehman Brothers. Therefore… we're approaching a top in the risk spread, which means we're approaching a bottom in stocks. The word approaching doesn't mean anything definitive, I realize… It's just a reminder that things look more attractive from the long side today than they did six months ago. And as a result, it's time for us to begin thinking seriously about what kind of stocks we should buy for the long haul over the next several weeks or months. Some of the analysts around here… namely Dan Ferris… completely pooh-pooh the idea that these indicators do any good at all. Dan says trying to time the markets is a fool's errand. I respectfully disagree. I think the market clearly cycles between being broadly overvalued and broadly undervalued. I don't think it's all that difficult to judge. And I think knowing whether or not it's generally a good time to buy stocks or a bad time is important. I hope you'll consider why these indicators work and put them to good use. So… when you go to cash in some of your bonds or spend some of your cash on stocks, what kind of stocks should you buy? Should you buy an index fund? Should you buy gold stocks? Should you buy tech stocks? Should you buy emerging markets? High beta? Low beta? Dividend payers? Companies that buy back shares? I propose that you should focus on companies with large amounts of what Buffett calls economic goodwill… and what I call capital efficiency. They are the same exact concepts, as you'll see. Certain companies produce extremely high rates of return on the capital they hold. An example is Coca-Cola. Coke owns around $15 billion in property, plant, and equipment. It has $8 billion in long-term investments and more than $21 billion in cash and working capital. Altogether, that's about $45 billion in capital. Against these assets, it can borrow roughly $42 billion – that's long-term debt, receivables, etc. This is capital it doesn't have to keep in the business because it has such a strong business and reputation, it can borrow at cheap rates. That's been true, by the way, irrespective of the nominal level of interest rates. Coke's real (that is, after tax and after inflation) cost of borrowing is extremely low. On a net basis, Coke runs its entire operation on only $3 billion in capital. And on this $3 billion in net capital… it produces annual cash flows in excess of $9.5 billion. That's a return of 216% on net tangible capital. These kinds of returns shouldn't be possible in a rational, free market. Fortunately, people are not rational. They frequently pay absurdly high retail prices for products and services they love. Buffett explained how Coke can earn this high of a return on its capital in his 1983 annual letter, which I urge everyone to read. He used See's Candy as his example, because he had not yet bought Coke. In explaining See's ability to consistently earn a high return on its assets (25% annually, without any leverage), Buffett wrote… … It was a combination of intangible assets, particularly a pervasive favorable reputation with consumers based upon countless pleasant experiences they have had with both product and personnel. Such a reputation creates a consumer franchise that allows the value of the product to the purchaser, rather than its production cost, to be the major determinant of selling price. That's the whole magic. When you have a company that's able to maintain its prices and profit margins because of the value placed on the product by the purchaser rather than its production cost, you will have a business that can produce excess returns – returns that aren't explainable by rational economics. And those, my friend, are exactly the kind of companies you want to own. Now… if it were that simple, we'd all be rich. Buying these kinds of stocks is actually extremely difficult. Other investors also know which companies are producing excess returns. The capitalized value of those future excess returns – the value of a company's economic goodwill – ends up in the share price. Coke, for example, currently trades at more than four times its book value. Adjusting for the capitalized value of its economic goodwill that's currently in its share price (dividing 216% by four) still leaves you with an incredibly attractive annualized return of 54% on net tangible capital… But will these rates of return last? The critical question for investors is: Will Coke continue to increase the value of its brands and its products, so that in the future, the capitalized value of its economic goodwill will grow even larger? This kind of investing is the surest way to get rich in stocks over the long term. Let me show you why… Buffett says these companies have large amounts of economic goodwill – which he defines as the ability to maintain unusually high returns on net tangible capital. I describe these companies as incredibly capital efficient. We are talking about the same qualities. But... I think beyond a company's ability to make high returns, the more important fact is what happens to companies like this over time. They are able to return capital to investors at rapidly compounding rates because they simply do not require much tangible capital. Think about companies that don't require large, ongoing investments to grow production or maintain product quality. Then you will find the kind of stocks Buffett and I are looking for… Think about it this way: Does Coke have to invest billions of dollars in new technology every year to maintain the quality of its beverages? Does Harley Davidson spend billions of dollars on R&D to innovate new and better motorcycles? Nope. Folks don't want a "new" Harley. They want the rattle and the sound of a classic Harley. What about Hershey's? Do you think Hershey spends a fortune every year coming up with new brands and new kinds of chocolate bars? Nope. Companies with these special qualities are able to return more and more capital to shareholders every year, year after year, because it simply doesn't cost them much to grow. Let me show you what I mean by making a tough comparison. Apple is, perhaps, the greatest tech-products company of all time. People, including me, love its products and will pay more for them. Apple holds roughly $48 billion in net tangible capital and earns annual cash flows of more than $18.5 billion. That's a 38.5% return on net tangible capital, which is very, very good – especially considering the fierce global competition Apple faces. But I doubt Apple will ever be capital efficient. Why do Buffett and so many other long-term, successful investors refuse to buy technology stocks, even ones like Apple, that would seem to possess tremendous amounts of economic goodwill? Apple is not capital efficient. The company bears a huge burden in the form of the market's demand for cutting-edge products on a never-ending basis. Last year, Apple spent more than $7 billion paying the world's top computer scientists to design its products. And even these numbers underestimate the costs. The number of shares outstanding at Apple has increased by 42.3% since 2000. Why, you might wonder, would a company as profitable and cash-rich as Apple issue so much stock? Because doing so hides the true cost of production. The increase in share count reveals the long-term effects of granting millions of employee stock options. Likewise, Apple holds gigantic cash reserves ($41 billion) to ensure its continuity. People buying tech products need to have assurances that the company supporting the products will be around for several years. That's capital that can't be returned to shareholders. And that's why Apple has never paid a cash dividend or been a net buyer of its own shares. The company, which had a gross profit of $25 billion in 2010, returned none of this capital to its shareholders. The return to investors, if it ever occurs, remains uncertain. On the other hand, Coke earned $22 billion in 2010 gross profit (before all operating expenses). It returned more than $5.2 billion to its shareholders (23.4%). On $2.4 billion in gross profit, Hershey returned capital totaling $350 million to investors in 2010 (almost 15%). These companies are able to return a large percentage of the gross sales to their investors because they are extraordinarily capital efficient. And here's the best part. Hershey's cash and share-buyback payout to its investors last year was three times more than it was in 2000. Coke's cash and share-buyback payout to its investors last year was also three times more than it was in 2000. These companies don't require much in the way of additional capital as they grow. So they're able to return to their owners a higher and higher percentage of what they make as they get bigger. It's this compounding effect that really explains Buffett's colossal wealth. He didn't merely buy stocks at good prices. He bought great businesses that were tremendously capital efficient. He held them long enough to enjoy the advantages of their compounding returns. These companies also will benefit tremendously from inflation. They will be able to raise their prices while not suffering as much from the rising prices of capital goods, which they spend little on. I hope, with at least part of your savings, you'll begin to do the same. The time to make long-term purchases like these is coming. Finally… if you found today's Digest especially difficult to wade through… you are not alone. This is the most advanced class of investing. It's not easy… But if offers vast rewards. And which advisory should you read to start building your "hot list" of capitally efficient companies with huge economic goodwill? Even though we disagree on the timing issue, I recommend Dan Ferris' Extreme Value. He has a portfolio of companies with rock-solid balance sheets that pay healthy, consistently growing dividends and trade at laughably cheap valuations. His World Dominators are exactly the types of businesses you want to own as we emerge from this mess. Crux Note: To learn more about Extreme Value, click here… More from Porter Stansberry: Three terrible lies you need to know about gold Porter Stansberry's crisis update: This is what will happen next Porter Stansberry: The buying opportunity of a lifetime is approaching |
| Posted: 14 Oct 2011 08:51 AM PDT 
Congress has just passed new free trade agreements with South Korea, Colombia and Panama. The Obama administration has also made "the NAFTA of the Pacific" a very high priority. Obama says that all of these new trade pacts will create more U.S. jobs. Well, either Barack Obama is completely ignorant when it comes to economics or else he is lying. When we merge our economy with the economies of nations where wages are much lower, it is inevitable that large numbers of jobs are going to leave the high wage areas (where we live) and go to areas where wages are much lower. It also certainly does not help that we have the highest corporate tax rate in the world, that we burden our businesses with mountains of ridiculous regulations, and that we allow our "trade partners" to give their businesses a huge advantage by openly subsidizing them. The way that the system is set up now, nearly all U.S. businesses are at a massive, massive disadvantage. In general, the only businesses that can compete effectively in this environment are the giant corporations that can offshore huge portions of their operations. If you are a conservative, then there is no way that you should support our current trade policies. If you are a liberal, then there is no way that you should support our current trade policies. However, if you are a "George W. Bush Republican" or a "Clinton/Obama Democrat" that believes in globalism and the establishment of a one world economy as part of a "New World Order", then it would make sense why you would want to see America deindustrialized and brought down to the level of the rest of the world. But if you are a true conservative or a true liberal, then the following are reasons why you should be horrified by our current trade policies.... #1 Other Nations Openly Manipulate Their Currencies In Order To Gain A Significant Competitive Advantage For example, China keeps its currency set at a super low level relative to the U.S. dollar. By doing this, their products are far cheaper than U.S. products, and U.S. businesses cannot compete with them. This has resulted in the death of large numbers of U.S. businesses and the loss of millions of U.S. jobs. So just how bad is this problem? Well, a recent CNN article stated the following....
The other day the U.S. Senate passed a bill that would impose tariffs on currency manipulators, and China has already retaliated, even though the bill has not become law yet and even though it almost certainly won't. China plays hardball. They love the advantage that they are getting right now and they do not plan on losing it. #2 Millions Of Good Paying Jobs Have Been Shipped Overseas And They Are Never Coming Back Our politicians all try to tell us how good they are at creating jobs. But what is the truth? The truth is that a total of zero jobs were created last decade. The following is a quote from a recent article in Washington Monthly....
Last decade we opened up our trade with the rest of the world more than ever before. But instead of creating jobs it destroyed them. Our trade deficits exploded and unemployment skyrocketed. The Economic Policy Institute says that since 2001 America has lost approximately 2.8 million jobs due to our trade deficit with China alone. So if you are unemployed, that is probably what happened to the job you are supposed to have. It went overseas and it is not coming back. #3 America Is Being Deindustrialized At A Blistering Pace Thanks To Globalism The advocates of "free trade" cannot dispute the cold, hard facts.... *The United States has lost an average of 50,000 manufacturing jobs per month since China joined the World Trade Organization in 2001. *The United States has lost a staggering 32 percent of its manufacturing jobs since the year 2000. *If you can believe it, more than 42,000 manufacturing facilities in the United States have been closed down since 2001. *Between December 2000 and December 2010, 38 percent of the manufacturing jobs in Ohio were lost, 42 percent of the manufacturing jobs in North Carolina were lost and 48 percent of the manufacturing jobs in Michigan were lost. *Back in 1970, 25 percent of all jobs in the United States were manufacturing jobs. Today, only 9 percent of the jobs in the United States are manufacturing jobs. #4 (For Conservatives) True Conservatives Should Be Horrified That We Are Being Taken Advantage Of By A Hardcore Communist Nation That Hates Us Ronald Reagan would have never engaged in "free trade" with the Soviet Union. The Communist Party is in complete control of China and while we may regard China as a "frenemy", they really do believe that they will totally defeat us someday. If you doubt this, just read what the top generals and politicians in China are writing. It is so incredibly stupid what we are doing. Our trade relationship with China has enabled the largest communist economy in the world to go from third world status to superpower status. China is now the second largest economy in the world, and that would have never happened without our help. A lot of people like to talk about how "capitalist" China is becoming, but the truth is that they have never wavered from their pure belief in communism. 7 of the 10 largest corporations in China are owned by the government. A host of other corporations in China are very deeply subsidized by the government. U.S. businesses have a very hard time competing with foreign businesses that are deeply subsidized by their own national governments. It is called cheating, and we let other countries get away with it. So our businesses die and their products fill up our store shelves. #5 We Are Endangering Our National Security By Greatly Enriching Our Biggest Potential Enemies The biggest threats to the United States are not some goat herders hiding out in the caves of Afghanistan. The biggest threats to the United States are actually China and Russia. Conservatives are supposed to be the ones that are so concerned about national security. But instead of expressing concerns about China, they just keep pushing for more free trade. As a result, China has been able to become a true global military superpower. Someday we will deeply, deeply regret that. #6 China Brazenly Steals Technology From Anyone And Everyone That They Can China gets away with bloody murder when it comes to stealing technology. They will do it "legally" if they can, and they will do it in "other ways" if they have to. At this point, China has invented a whole host of ways to extract technology from any firms that wants to do business in China. The following is a short excerpt from a recent article on CNN....
#7 We Should Never Trade With Any Nation That Has A "One Child" Policy China has a very strict "one child policy" which should be absolutely abhorrent to all Americans. Most Americans have no idea what is really going on over in China. The following is from a recent article in the Epoch Times....
All over China, mobile abortion vans are used to help enforce the one child policy. What women in China must endure is absolutely sickening, and this kind of behavior should never be accepted in the global community. But instead of penalizing China, we reward them for this behavior. They even get awards at the United Nations for it. Look, conservatives are supposed to be pro-life. If you are a social conservative, then it goes against everything that you believe to support trade with China. You can support trade with China if you want, but then don't even try to call yourself "pro-life" again. We should never trade with any nation that has a "one child policy". Such a policy is against everything that America is supposed to stand for. #8 Our Horrendous Trade Imbalance Has Allowed Other Nations To Accumulate Gigantic Amounts Of Our Debt Every month, we send much more money to the rest of the world than they send to us. One thing that those other nations are doing with all of that money is that they are buying up our debt. Our trade deficit with China has enabled them to accumulate nearly a trillion dollars of our debt. This gives them tremendous leverage over us and is a very serious threat to our economy and to our national security. So now China can threaten the stability of our financial system with just a phone call. #9 Globalist Trade Institutions Are A Serious Threat To Our National Sovereignty Today, the "global economy" is governed by globalist institutions such as the G20, the WTO, the IMF and the World Bank. The United States has given up huge amounts of national sovereignty to these organizations. If you are a true conservative, this should greatly disturb you. We don't want faceless international bureaucrats telling us what our trade policies will be. But to a large degree that is the situation that we have gotten ourselves into. #10 Liberals (And All Americans) Are Supposed To Care About What Is Best For American Workers Millions of working class jobs have been shipped overseas, and yet Barack Obama just keeps pushing for more "free trade" agreements which will make the problem even worse. But instead of screaming bloody murder, liberals keep on supporting Obama. It's disgusting. The truth is that the Obama administration actually says that there are certain kinds of jobs that we "don't want" in the United States. For example, the following is what U.S. Trade Representative Ron Kirk recently told Tim Robertson of the Huffington Post about the Obama administration's attitude toward keeping manufacturing jobs in America....
So where is the outrage? Is anyone even awake out there? Even the construction of many of our roads and bridges is being outsourced to China. Just check out the following quote from a recent ABC News article....
Liberals are supposed to be working to defend the working class. So why won't they openly go after Obama on these issues? Our unfair trade agreements have put American workers in direct competition for jobs with the cheapest labor on the globe. Until this is fixed, you will continue to hear a "great sucking sound" as millions of jobs continue to leave the United States and go to places where labor is ten to twenty times cheaper. It is insanity what we are doing. We allow big corporations to send their manufacturing offshore and also to ship their products back into the United States for free. Where in that equation is good news for the American worker? #11 Liberals (And All Americans) Should Be Horrified By The Exploitation Of Slave Labor Around The Globe All over the globe, workers toil in nightmarish conditions for slave labor pay just so that Americans can feed their addiction for cheap foreign products. Big corporations and collectivist governments such as China are getting unbelievably rich by exploiting this slave labor pool. Get educated about this and find out the truth. It just might totally change the way that you view "free trade". #12 Liberals (And All Americans) Should Be Horrified By The Damage To The Environment Our Trade Relationships Cause Liberals are supposed to deeply care about the environment. But our trade relationship with nations on the other side of the globe result in thousands of factories and businesses leaving our shores and ending up in countries where the environmental regulations are not nearly as strict. In fact, nations such as China are a complete and total environmental nightmare at this point. If liberals truly cared about the environment they would want to keep factories and businesses here. #13 Very Dangerous Products Continue To Flood Into This Country From Overseas Isn't product safety supposed to be a big thing for liberals? Today, a huge percentage of the products we buy are made outside the United States far from the watchful eyes of our regulatory agencies. Over the past couple of years, there has been headline after headline about dangerous products made in China. The following is just one example of this: 10 Babies Die Mysteriously At Fort Bragg: Toxic Drywall From China Used In Base Homes The Culprit? #14 The Globalization Of The Economy Causes Income Inequality To Grow By paying slave labor wages to workers overseas, the big corporations are becoming very wealthy. At the same time, that means that there are much fewer jobs for average working class Americans, and wages for the jobs that remain are pushed down because of increased competition for jobs. So the rich get richer and the poor get poorer. If you don't believe that income inequality in the United States has become a huge problem, just check out this chart. #15 Because Of All Of The Cheating And All Of The Predatory Behavior That Is Going On, Our Trade Relationships Have Become Incredibly Imbalanced Today, the United States spends about 4 dollars on goods and services from China for every one dollar that China spends on goods and services from the United States. So how is that even close to "fair"? Our store shelves are absolutely packed with stuff from China. In 2010, the number one U.S. export to China was "scrap and trash". Even in high technology products we are being destroyed. In 2002, the United States had a trade deficit in "advanced technology products" of $16 billion with the rest of the world. In 2010, that number skyrocketed to $82 billion. #16 Our Gigantic Trade Deficit Is Destroying Our National Wealth The United States has had a negative trade balance every single year since 1976, and since that time the United States has run a total trade deficit of more than 7.5 trillion dollars with the rest of the world. Our gigantic trade deficits are making us poorer as a nation each and every month. Each year, somewhere around half a trillion dollars of our national wealth gets transferred out of the United States. That half a trillion dollars could be going to support U.S. businesses and U.S. jobs. Taxes could be paid on that half a trillion dollars. But instead it leaves the country and makes other nations wealthier. #17 The Globalization Of The Economy Has Caused Unemployment In The United States To Explode If you gathered together all of the workers that are "officially" unemployed in the United States today, they would constitute the 68th largest country in the world. #18 As Our Cities Are Deindustrialized, Many Of Them Are Being Transformed Into Absolute Hellholes The other day, I wrote the following about what is happening in cities and towns across the United States....
#19 Without Good Jobs, An Increasing Number Of Americans Are Having To Turn To Government Assistance We are going to support U.S. workers one way or another. Either we are going to provide them with good jobs, or we are going to let their jobs be shipped out of the country and we are going to pay for the government to feed and house t |
| eBay emerges as new destination for physical gold, silver buyers Posted: 14 Oct 2011 08:45 AM PDT From India, no less. eBay emerges as new destination for physical gold, silver buyers Read more : ebay,ecommerce,bullion,gold and silver 4  By George Avalos London and New York City may be the primary epicenters to trade Gold and silver, yet more investors are finding new ways to buy and sell the two precious metals. One of the newest major channels is eBay's Bullion Center, which opened in May. eBay's online bazaar for gold and Silver trading joins several ETFs and Internet-based sites for dealing and storing bullion. San Jose-based eBay touts its Bullion Center as a one-stop shop that links shoppers for precious metals in a single marketplace experience. The featured sellers in the Bullion Center provide free shipping, no hidden fees and no minimum purchase amount. "The Bullion Center was created as consumer demand for gold and silver increased," said Todd Witkemper, a spokesman for eBay Marketplaces. Listings from all sellers that have relevant inventory to hawk to buyers will appear in eBay's Bullion Center. "Across the site, and in the Bullion Center, inventory from eBay top-rated sellers surface at the top of search results and are designated by a badge on their listings" said Johnna Hoff, an eBay spokeswoman. "These sellers consistently meet high standards of service across various attributes, including fast shipping, as-described items and more." The featured sellers inside the Bullion Center offer some of the most competitive prices on the Web, along with free shipping. "These benefits provide buyers with highly competitive prices and average seller premiums that are lower or comparable to other bullion sites," Witkemper said. A recent spot check showed that gold prices were a bit lower on eBay than on Kitco or on BullionVault: -For 10 ounces of gold, prices were running at $16,365 on eBay; $16,400 at BullionVault; and $16,450 on Kitco. -For 10 ounces of silver, prices were running at $295.10 on eBay; $270 on BullionVault; and $300.20 on Kitco. The prospect of the Federal Reserve's money-printing machine being unleashed in a new round of monetary stimulus, Europe's sovereign debt crisis and market volatility as a whole have all helped to bolster gold. "In line with recent economic activity, the Bullion Center has seen significant increases in activity as well," Witkemper said. In early August, the number of sellers of gold bullion in eBay's Bullion Center was up 14 percent compared with the weekly average for 2011. Over the same period, the number of unique gold bullion buyers was 11 percent higher compared with the weekly average. And it looks as if eBay is attracting new buyers for transactions in the Bullion Center, based on statistics for the second quarter that covered the April-June period. "New buyers who had not purchased bullion on eBay in the past 12 months accounted for 68 percent of sold gold bullion items," Witkemper said. The eBay marketplace is only one of the latest venues that enable people to buy and sell gold and other precious metals. "The market is definitely getting more competitive," said Sharlene Dozois, a marketing director for Kitco Inc., a Canadian retailer in bullion and other precious metals products. "Gold prices are going up and there are more opportunities to set up stores online." Kitco provides a wide range of bullion and other precious metal products in gold, silver, platinum, Palladium and rhodium. It also offers metals for custodial storage programs to individual investors and companies. "We also have partners through which investors can purchase precious metals and put them into an IRA," Dozois said. "eBay is physical only." More and more investors have turned to gold and silver exchange-traded funds as vehicles to jump into metals trading. But for many bullion investors, actually holding the physical asset is of great importance. For investors who want to securely store gold and silver, London-based BullionVault offers buying and selling of the metal, as well as storage of the physical commodities. "If you want to get gold, and pay for the gold alone, get good delivery bullion, in a vault, where its quality and safety is certain," said Adrian Ash, head of research with BullionVault. Although eBay auction prices tend to undercut those of other sites such as Kitco and BullionVault, buyers have to arrange separately for storage. Kitco says its pool customers don't have to pay storage fees. But it requires a minimum $25,000 value for any bullion that is stored. On Sept. 7, Kitco launched an administrative fee for all purchase and sale transactions that involve pool customers. This fee is $14.99 for transactions conducted over the telephone and $8.98 for transactions conducted online. The administrative fee is being charged in a customer's transaction currency if it is U.S. or Canadian dollars. If a customer is transacting in any other currency, the administrative fee will be charged in its U.S. dollar equivalent. BullionVault says the minimum purchase is 1 gram, so for gold, that would be $57. Because the company charges $4 a month for storage, BullionVault suggests that customers buy at least $2,000 worth of bullion, Ash says. Companies that handle ETFs — such as State Street, iShares and ETF Securities — generally don't provide for physical delivery of Gold or silver, with few exceptions. "In the rare case that an investor wishes to exchange shares for physical gold, the investor would have to come to the appropriate arrangements with his or her broker," State Street said in an emailed response. "The investor can only take physical delivery if he or she is a client of an authorized participant of the Trust. The authorized participant would then facilitate the transfer of physical gold through its affiliated gold trading desk to the investor." ETF Securities and iShares also typically don't provide for physical delivery. "We don't do that at the retail level," said William Rhind, managing director of ETF Securities US. That's primarily because of the overarching philosophy of ETFs. "ETFs are precious metal investing for the iPad generation, they are a 21st-century way of investing," Rhind said. "Our investors want to invest in the price of gold and the price of silver." Like other transactions conducted on eBay, no guarantees exist that sellers are offering the real deal in gold. BullionVault and Kitco offer recourse in transactions. "The vast majority of transactions on eBay are positive," eBay's Witkemper said. "In the rare instance something goes wrong, we encourage sellers and buyers to work together." The eBay Bullion Center also includes featured sellers from the company's various marketplaces. These sellers specialize in bullion and also are top-rated eBay sellers, Witkemper said. "While we have high standards for the marketplace and have put tools in place for buyers and sellers to research each other pretransaction, we don't control the inventory," Witkemper said. Buyers pay no fees to obtain gold through the eBay marketplace. Buyers pay the cost of the item. "There are no minimum purchases required for buyers, unlike other bullion sites," Witkemper said. Sellers who subscribe to an eBay store pay an insertion fee to list their items for sale. They also pay eBay a percentage of the selling price, including shipping. Buyers also pay to ship the bullion, which is a standard industry practice. However, many sellers on eBay provide free shipping for the bullion items they sell, Witkemper said. eBay says its prices compare favorably with other bullion marketplaces such as Kitco. eBay said a recent comparison determined that prices of bullion on eBay were about 1 percent less than those of competitors. "We believe eBay is the most trusted destination for buying and selling bullion online," Witkemper said. "The eBay Bullion Center provides what we believe to be the best all-in bullion prices on the Web." http://www.commodityonline.com/news/...42964-3-1.html |
| Why Intel Can Be A Money Maker For Investors Posted: 14 Oct 2011 07:52 AM PDT By John Mylant: Intel Corporation (INTC) is due to report earnings after the closing bell on October 18. I believe that the analysts are expecting an improvement of about $.07 in earnings per share. Last quarter the company was at $.54 per share so we are looking for something around $.61 this time around. If INTC continues like expected, it will come out on the high side of this. This brings us to INTC as a company to invest in. How good is the company at controlling its costs? This is sometimes referred to as the net profit margin. If we divide the net profit by net revenue we come up with a %. The higher the % the better the company is at money management. INTC's net profit margin is 25.29%. So, for every dollar it makes (after taxes) REAL profit is 25.29 cents. We look for companies that will make usComplete Story » |
| Gold Seeker Weekly Wrap-Up: Gold and Silver Gain About 3% on the Week Posted: 14 Oct 2011 07:32 AM PDT Gold climbed $16.60 to $1683.60 by about 9:15AM EST before it fell back to almost unchanged by late morning in New York, but it then rallied back higher in afternoon trade and ended with a gain of 0.86%. Silver rose to as high as $32.52 before it also fell back near unchanged, but it too rallied back higher in late trade and ended with a gain of 1.1%. |
| Inflation onDemand & Along the ‘Continuum’ Posted: 14 Oct 2011 07:26 AM PDT Global markets are in the midst of a predictable relief rally to the technical bear market that recently became actualized off of various topping patterns that were in force for most of 2011. It is important to note that this is coming off of a similarly predictable whiff of a deflation scare, as US and European debt 'imbalances' (a polite way to put it) spooked the public out of asset markets and into US Treasury bonds, among other 'safe' havens.Ben Bernanke, the current US Fed Chief, is a deflation scholar after all. He is the man for the job and if he was hesitant to do his job, as was the case last spring amid the 'austerity movement' and a red-lined long term T bond yield, he can be less so now. The 'bad cops' (Fisher, Plosser, Bullard, etc.) at the Fed have been marginalized for the time being with people like Robert Reich and Paul Krugman, along with their decidedly less financially austere views, are back in the public consciousness. This is what happens during what NFTRH calls the 'continuum', which is the secular trend in T bond yields. For decades now, one could simply navigate the alternative pinging of the upper boundary (100 month exponential moving average; inflation fears brewing at red arrows) and the lower boundary (green dotted line for a routine deflation issue and sold green line for a whopper of a deflation event) and manage risk as needed.  But risk management has very different meanings at the each of the opposite poles. At the top of the continuum, risk must be managed against a failure of the inflation tout as commodities and ultimately most asset markets top out. At the red arrow, the herd has bought the play and gone all in. The result? Predictably, as long as the continuum remains intact, the result is a lot of pain for a lot of trend followers. Hello future deflation scare. But do we really believe that an actual enduring deflation can come about? Part of my personal risk management at the most recent (inflationary) red arrow was to be aware of the lower probability that the continuum could break upward (above the EMA 100). Currently, I also respect the deflation case until such time as enough indicators trip and policy is enacted that shift the odds to a scenario that sees the same herd that got stuck in commodities at the most recent top get stuck in Treasury bonds at their highs. A hint in this regard is the gold-silver ratio, which is currently NFTRH's most critical tool for measuring market liquidity and lack thereof. But there is no need to force things. I hold my core of gold stocks which, for reasons tracked each week in the newsletter, are the right asset class for the counter-cycle. I also hold a relatively large percentage of cash due to the message of the continuum and with respect to the deflation argument. If however, the more probable scenario holds, with the continuum remaining intact – and this does not prove to be the 'final deflation' – the system will wheeze, grind and churn forward ultimately toward the next intense bout of inflationary hysterics. Cash would most definitely be 'trash' once again. As the continuum grinds along, gold grinds higher. Much to the dismay of many deflationists, I might add. What the 'dBoys' fail to account for in my opinion, is the 'lever' that a deflation impulse represents. In other words, it is the lever that a certain policy maker may pull in order to promote more inflation along the continuum. Gold is one of the very few assets not to be fooled by this macro economic Kabuki dance. Gold is a monetary barometer after all. That is its main job within the Keynesian system of credit and paper creation; to reflect the pressure on the paper monetary system.  But you, astute monetary student, know all about gold and its inherent value proposition in a world with very little else in the way of strict monetary insurance. So let's move on. People who look at prices and scream INFLATION! are behind the curve. The inflation is cooked up in the money supply, not as a result of rising prices. Rising prices is the symptom; the long term and ongoing symptom in many cases. Let's look at the big picture of several important 'symptoms' of the ongoing inflation that has been promoted over the cycles, up down, inflationary, deflationary, decade after decade…  You want to feed your family? Well, that is an endeavor of value and despite the implied threat of deflation, things of value rise in a system of paper money creation out of non-productive means. Incidentally, does this 'hockey stick' look similar to the golden one in the chart above? I realize the time frames are different, but the age of inflation onDemand (i.e. when the Fed no longer saw fit to even hold the pretense that it was an inflation fighter – thank you Mr. Greenspan) began right about the time that gold's hockey stick began to form its blade, in and around the secular changes of 2001.  You want to educate your kids you say? Well, get in line and prepare to figure out a way to keep up with inflation.  Healthcare… yes that is a very important one as well.  Another essential, housing, has taken a break in its relentless drive upward in prices. This is due to the levels of credit creation employed to game this market into 2005 (again, compliments of Greenspan). Credit is unwinding and housing is decelerating post-2008 recession. I am not qualified to speak about how official policy aimed at avoiding a housing implosion may be affecting the graph. But housing is, at least temporarily, a candidate to 'deflate' further, absent additional 'bailout' policy aimed directly at mortgages.  Now for the stuff that gets the inflationists really excited, the money supply. M2 is doing as it has done well, forever. It is rising impulsively. I have seen credible analysis stating that this is due to a repatriation of USD to US shores in the wake of the Euro crisis. So don't get too excited just yet. The point is driven home by M2′s velocity, or lack thereof, which gets the dBoys all worked up.  Rut Roh… with this kind of structure and long term deceleration of 'free money', one wonders about how hard policy makers are pushing on that string as M2 velocity has declined for a decade now.  MZM hockey stick…  MZM velocity is a stick in the mud.  Institutional money, which is likely smarter than you or me, has not been buying the US 'recovery' since 2008. Along with the money velocity data, this argues that the deflation case should be respected even as we look forward to the promotion of a coming inflation cycle. It is the promotion of this cycle that we will be interested in, not necessarily its perceived success. We are either nearing the next great contrarian opportunity along the continuum in the age of Inflation onDemand, or the end of the system as we know it. In other words, what I affectionately call 'Prechter Time'. Place your bets ladies and gentlemen, but do so with all due risk management as applies to the very different conditions represented by the two opposite poles along the continuum. There is inflation and there is deflation, but as yet, the all clear is not signaled toward the inflation case, in which a new 'asset grab' would ensue toward markets and resources of value. I do not have the ultimate answers, but I can guarantee you that I work as hard as possible to illustrate the current conditions and status within the ongoing inflation/deflation struggle at any given time to keep my newsletter on the right side of the markets. I invite you to give Notes From the Rabbit Hole a try on a monthly basis (for subscription flexibility) or a discounted annual basis. You can also go to the blog (http://www.biiwii.blogspot.com) and pick up a free sample copy of NFTRH156, dated 10/9/11, to review further.
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| Corvus Expands Resource at North Bullfrog (Nevada) Posted: 14 Oct 2011 07:21 AM PDT Corvus Gold Inc. has released the results from its follow-up resource expansion program on its North Bullfrog project near Beatty, Nev. The updated independent estimate has expanded the district-wide indicated gold resource to 182,000 contained ounces at an average grade of 0.37 gram per tonne, plus an additional inferred gold resource of 1.41 million contained ounces at an average grade of 0.28 g/t, both at a cut-off grade of 0.20 g/t gold. This new, much larger resource reflects a major new discovery in the northern part of the company's land area which consists of three deposits separated by large undrilled areas. In addition, some of the resource areas contain higher grade resources as well as high-grade vein systems which could be targets for early mining. The company has began acquiring the necessary information required for completion of a preliminary economic assessment, as well as designing and permitting a major follow-up grid drilling resource expansion program which will focus on both the bulk-tonnage and high-grade vein potential of the area. NORTH BULLFROG ESTIMATED INDICATED AND INFERRED RESOURCE (using a 0.20 g/t gold cut-off grade)(i) Grade greater than cut-off Contained Tonnes greater Resource than cut-off Gold Silver Gold Silver category (tonnes) (g/t) (g/t) (oz) (oz) Indicated 15,230,000 0.37 0.44 182,577 215,187 Inferred 155,630,000 0.28 0.84 1,410,096 4,212,532 (i) Mineral resources which are not mineral reserves do not have demonstrated economic viability. The estimate of mineral resources may be materially affected by environmental, permitting, legal, marketing, or other relevant issues. Jeff Pontius, chief executive officer of Corvus, stated: "We are extremely pleased with the very large expansion in the estimated resources at our North Bullfrog project and the potential that it indicates for further growth of this major new Nevada gold discovery. In addition to its increased size, the new resource is dominantly oxidized rock which has shown high gold recoveries in initial bottle roll tests. These early positive metallurgical results are currently being followed up with large-diameter column tests which will help evaluate the potential for low-cost run of mine, heap leach processing for gold extraction. The metallurgical results coupled with a geometry which may allow a very low strip ratio greatly enhance the project's development potential. The North Bullfrog project is truly emerging as a major catalyst for the future evolution of Corvus into a premier North American gold company." Bulk tonnage resource The resource update is focused on four of several targets in the North Bullfrog district, all of which remain open with potential to grow significantly. The primary host unit for the majority of the resource is a thick, oxidized, shallowly dipping volcanic unit which is commonly exposed at surface, thereby offering the potential for very low strip ratio. The continuity of the mineralization within the primary host unit is considered to be very good, and there is a high probability that the resource will increase with future step-out and infill drilling around the current widely spaced holes. In addition, the individually reported deposits are separated by undrilled areas which have projections of the favourable host unit between them, and which could therefore offer additional potential for resource expansion. Approximately 57 per cent of the current estimated resource is oxide material occurring at surface, which has returned highly encouraging cyanide bottle roll test results suggesting potential for low-cost heap leach recovery. Continuing metallurgical work is focusing on evaluating the potential of the bulk tonnage oxide deposits for heap leaching and, in particular, coarse run-of-mine material. The North Bullfrog property has a large number of areas that the company believes would be suitable for a large heap leach operation as well as ready access to key infrastructure and water. High-grade potential Drilling at the North Bullfrog project has returned a number of high-grade drill intersections similar to the historic high-grade veins that were mined seven kilometres to the south in the main Bullfrog district. Several high-grade gold and silver veins have been encountered in a number of areas, such as Yellowjacket (6.1 metres at 11.9 grams per tonne gold and 8.8 g/t silver), Mayflower (9.1 m at 7.18 g/t gold and 15.2 m at 2.87 g/t gold) and Connection (6.1 m at 2.67 g/t gold and 15.2 m at 2.44 g/t gold). As part of its follow-up grid drilling program, the company will be targeting high-grade structural zones to evaluate this promising style of mineralization. SUMMARY OF INDICATED AND INFERRED RESOURCES AT NORTH BULLFROG BY DEPOSIT Au Ag grade grade Tonnes (g/t) (g/t) Con- Con- Au greater greater greater tained tained Pros- Oxide cut-off than than than ounces ounces pect state Class (g/t) cut-off cut-off cut-off gold silver Jolly Oxidized Indi- 0.2 10,090,000 0.29 0.49 94,000 159,000 Jane cated May- Oxidized Indi- 0.2 5,140,000 0.54 0.34 88,577 56,187 flower cated Total indicated 0.2 15,230,000 0.37 0.44 182,577 215,187 Conne- Oxidized Inf- 0.2 550,000 0.49 9,000 ction erred Jolly Oxidized Inf- 0.2 15,900,000 0.25 0.38 129,000 194,000 Jane erred May- Oxidized Inf- 0.2 3,090,000 0.46 0.26 46,096 25,532 flower erred Sierra Oxidized Inf- 0.2 61,790,000 0.27 0.94 540,000 1,867,000 Blanca erred Sierra Un- Inf- 0.2 74,300,000 0.29 0.89 686,000 2,126,000 Blanca oxidized erred Total inferred 0.2 155,630,000 0.28 0.84 1,410,096 4,212,532 Resource estimate The company retained Gary Giroux, MSc, PEng, of Giroux Consultants Ltd., to prepare an updated mineral resource estimate for the North Bullfrog project. The updated mineral resource estimate for each area of North Bullfrog is based on three-dimensional geologic models developed by Corvus geologists using geology logs from the drill holes along with alteration and geochemical data. The grade distributions for gold and silver were evaluated using lognormal cumulative frequency plots for samples within both the mineralized solid and the surrounding waste. Drill holes were compared with the mineralized solids and the points each hole entered and left the solids were recorded. Uniform down hole composites, plus-5.0/minus-2.5 metres in length, were formed and made to honour the solid boundaries. Pairwise relative semi-variograms were produced from composites within the mineralized solid for both gold and silver. For this resource estimate, the averages of the specific gravities for numerous samples were used to calculate the densities for the different geologic units in the models. A block model with blocks 10 m by 10 m by five m in dimension was superimposed over the mineralized solids. At Mayflower the model was rotated 45 degrees to better fit the solid but other areas were not rotated. Grades for gold and silver were interpolated into all blocks, with some percentage within the mineralized solid, by ordinary kriging. Corvus will file the full NI 43-101 resource report on SEDAR by Nov. 11, 2011. SUMMARY OF 72-HOUR CYANIDE BOTTLE ROLL RECOVERY TESTS FOR NORTH BULLFROG PROJECT Gold Four-hour Total Test ID Target area (g/t) Oxidation recovery recovery 48436 B Sierra Blanca 0.51 Oxide 87% 94% 48436 C Sierra Blanca 0.45 Oxide 96% 93% 48434 B Sierra Blanca 0.29 Oxide 79% 90% 48433 C Sierra Blanca 0.47 Oxide 79% 77% 48433 A Sierra Blanca 0.71 Mostly oxide 79% 87% 48433 D Sierra Blanca 0.37 Mostly oxide 69% 70% 48434 D Sierra Blanca 0.35 Mixed ox/sulphide 68% 72% 48433 B Sierra Blanca 0.36 Mixed ox/sulphide 46% 47% 48436 A Sierra Blanca 0.35 Mixed ox/sulphide 42% 40% 3165-6 Mayflower 1.10 Oxide 61% 90% 3165-5 Mayflower 1.70 Oxide 60% 83% 3165-4 Mayflower 0.60 Oxide 76% 3165-7 Mayflower 2.40 Oxide 56% 71% 3165-8 Mayflower 11.10 Mostly oxide 41% 91% 3165-9 Mayflower 1.20 Mostly oxide 33% 68% 48432 B Jolly Jane 0.55 Oxide 94% 95% 48432 A Jolly Jane 0.46 Oxide 93% 90% 48432 C Jolly Jane 0.37 Oxide 85% 89% 48432 D Jolly Jane 0.32 Oxide 87% 85% 48456 B Connection 4.23 Oxide 78% 91% 48456 A Connection 5.87 Mixed ox/sulphide 32% 48% The bottle roll tests were conducted on 75-micron material from oxidized and partially oxidized RC drill samples collected at various North Bullfrog prospects. The four-hour recovery indicates the percentage of gold that went into solution in the first four hours. The total recovery indicates the total amount of gold that was dissolved in 72 hours. About the North Bullfrog project, Nevada Corvus controls 100 per cent of its North Bullfrog project, which covers approximately 24 square kilometres in southern Nevada just north of the historic Bullfrog gold mine formerly operated by Barrick. The property package is made up of a number of private mineral leases of patented federal mining claims and 161 federal unpatented mining claims. The project has excellent infrastructure, being adjacent to a major highway and power corridor. The project currently includes numerous prospective gold targets with four (Mayflower, Sierra Blanca, Jolly Jane and Connection) containing an NI 43-101-compliant estimated indicated resource of 15 million tonnes at an average grade of 0.37 gram per tonne gold for 182,000 ounces of gold and an inferred resource of 156 million tonnes at 0.28 g/t gold for 1.41 million ounces of gold (both at a 0.2 g/t cut-off), with appreciable silver credits. Mineralization occurs in two primary forms: (1) broad stratabound bulk-tonnage gold zones such as the Sierra Blanca and Jolly Jane systems; and (2) moderately thick zones of high-grade gold and silver mineralization hosted by structural zones with breccias and quartz-sulphide vein stockworks such as the Mayflower and Yellowjacket targets. The company is actively pursuing both types of mineralization. A video of the North Bullfrog project showing location, infrastructure access and 2010 winter drilling is available on the company's website. Qualified person and quality control/quality assurance Jeffrey A. Pontius (CPG 11044), a qualified person as defined by National Instrument 43-101, has supervised the preparation of the scientific and technical information (other than the resource estimate) that form the basis for this news release and has approved the disclosure herein. Mr. Pontius is not independent of Corvus, as he is the chief executive officer, and holds common shares and incentive stock options. Gary Giroux, MSc, PEng (British Columbia), a consulting geological engineer employed by Giroux Consultants Ltd., has acted as the qualified person, as defined in NI 43-101, for Giroux's mineral resource estimate. He has over 30 years of experience in all stages of mineral exploration, development and production. Mr. Giroux specializes in computer applications in ore reserve estimation, and has consulted both nationally and internationally in this field. He has authored many papers on geostatistics and ore reserve estimation, and has practised as a geological engineer since 1970 and provided geostatistical services to the industry since 1976. Both Mr. Giroux and Giroux Consultants Ltd. are independent of the company under NI 43-101. The work program at North Bullfrog was designed and supervised by Russell Myers (CPG 11433), president of Corvus, and Mark Reischman, Corvus Nevada's exploration manager, who are responsible for all aspects of the work, including the quality control/quality assurance program. On-site personnel at the project log and track all samples prior to sealing and shipping. All sample shipments are sealed and shipped to ALS Chemex in Reno, Nev., for preparation and then on to ALS Chemex in Reno, Nev., or Vancouver, B.C., for assaying. ALS Chemex's quality system complies with the requirements for the International Standards ISO 9001:2000 and ISO 17025:1999. Analytical accuracy and precision are monitored by the analysis of reagent blanks, reference material and replicate samples. Quality control is further assured by the use of international and in-house standards. Finally, representative blind duplicate samples are forwarded to ALS Chemex and an ISO-compliant third party laboratory for additional quality control. We seek Safe Harbor.
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| Why We’re Ungovernable, Part 2: Battle Lines Posted: 14 Oct 2011 07:12 AM PDT It's a pretty straightforward idea: When a country borrows too much money it becomes ungovernable because interest payments eat up the cash that previously went to satisfying voters. Whoever is in charge gets blamed, and every election becomes a "throw the bums out" event. That this is happening in the developed countries with the most debt — and that US discontent is causing groups like the Tea Party and Occupy Wall Street to coalesce around competing narratives — should come as no surprise. Yet it does seem to have caught most of the mainstream media and political establishment flat-footed. Tune into MSNBC or most other liberal outlets and you'll hear about the racist knuckle-walkers who populate the Tea Party, while Fox News and the Wall Street Journal dismiss Occupy Wall Street a bunch of unwashed, economically-illiterate hippies. Rage is met with rage, which leads to neither understanding nor successful governance. I've been swapping emails with a good friend, a New Yorker who was ecstatic when Barack Obama was elected. Three years later, not so much:
And here's an interview with an author who speaks for a growing number of people on the left: So…who's right? But only the Tea Party seems to understand that the root cause isn't the current generation of rich folks, but a financial system that was born in 1913 with the creation of the Federal Reserve and came to maturity when the US left the gold standard in 1971. It is the Fed that has allowed debt to explode at every level of society while corrupting the banks and politicians with easy money. Today's mess couldn't have happened without the ability to create unlimited amounts of currency. And it won't be fixed without a return to constitutionally limited government and sound money. Is chaos inevitable? Is this the first step towards civil war? Right now this is a political civil war with a 1960s feel. But back then the fix was easy: pull out of Vietnam and extend civil rights to easily-identified and undeniably worthy minorities. Today there's no way to resolve an overwhelming debt burden without depression or hyperinflation. So the argument has just begun and will almost certainly escalate. What can individuals do? |
| COT Silver Report - October 14, 2011 Posted: 14 Oct 2011 07:00 AM PDT COT Silver Report - October 14, 2011 |
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