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Silver price pessimism bottoming out ready for the next big rally
WEEKEND REPORT
HSBC Sues MF Global Over $850,000 of Gold and Silver
Extremely Important: More Fallout on Re-Hypothecation: physical gold/silver rehypothecated
LISTEN: Interview with Martin Armstrong
LISTEN: Interview with Ian Farrar
Eurozone Banking System on the Edge of Collapse
WATCH: “All Europeans See The Collapse Coming”
Turd: Three To Get Ready
Every “Solution” Involves Printing Money
Got Physical?
Are Central, Commercial Banks Lending or Selling Gold?
Gold Nears Weekend 2% Down as UK Quits New European "Fiscal Compact"…
The World May Be Turning To Seek Safety In The Gold and Silver Miners
Silver : the faboulous story of Cobalt, Ontario
Scott Gibson Interviews Got Gold Report’s Gene Arensberg
Has the Curtain Fallen on the Last Contango in Washington?
By the Numbers for the Week Ending December 9
S&P 500 Snapshot: Relief Rally For Markets
Friday ETF Roundup: EFA Soars On Euro Deal, VXX Plummets As Markets Rise
Welcome to the House of Debt
The 4 Gold Stocks That Beat Gold In 2011
The Fate Of Emerging Market ETFs In 2012
The ECB's Plunger Pushes Liquidity, Yet Interbank Lending Remains Intact
Smooth Portfolio Volatility With Small Cap Gold Stocks
A brilliant Op-Ed on the ongoing euro crisis stupidity
Gold Nears Weekend 2% Down as UK Quits New European “Fiscal Compact”, Politicians “Expect ECB Action”
Top African Gold Prospects: Brock Salier
What Can The ECB Do?
Goldman Bond Yields Float Higher, 8.55% From Down Under

Silver price pessimism bottoming out ready for the next big rally

Posted: 10 Dec 2011 04:48 AM PST

There is an intriguing commentary in The Daily Reckoning by Matt Badiali on silver. In particular he cites Jason Goepfert's SentimenTrader readings for silver. This service tracks investor sentiment towards different asset classes.

WEEKEND REPORT

Posted: 10 Dec 2011 04:35 AM PST

I think the weekend report is probably one of the most important reports I've written for gold traders and investors as to what I think is in store the next couple of months.

I'm going to make the report available over the weekend for $1. Actually you will have access to the entire site for the next two days for the price of one George Washington. You can either keep your subscription and it will convert to a monthly on Monday morning or cancel it Sunday night and you won't be charged another dime. Either way you will get access to a report that I think is important for every gold investor to read.

If you decide to cancel do so by following the directions on the home page of the website.
Click on the link above to go to the premium website and then click the subscribe link on the upper right side to link to the subscription page.

HSBC Sues MF Global Over $850,000 of Gold and Silver

Posted: 10 Dec 2011 01:38 AM PST

¤ Yesterday in Gold and Silver

The gold price spiked below its 50-day moving average for a brief moment shortly after 12 o'clock noon in the Far East...and no rally worthy of the name started until minutes before London opened.

The high tick of the day came four hours later at 12 o'clock noon in London...and from there it chopped lower into the close of electronic trading in New York at 5:15 p.m. Eastern time. The spot gold price closed at $1,711.30...up $5.50 on the day. The volume...112,000 contracts...wasn't overly heavy.

Silver's low price tick came shortly after 3:00 p.m. Hong Kong time...and from there the price began a long, slow rally that lasted until the London close at 4:00 p.m. GMT...which is 11:00 a.m. in New York. From there, the price made a hard turn to the right on the chart...and did nothing for the rest of the New York session.

It's easy to see from the Kitco silver chart below, that every rally attempt ran into a not-for-profit seller and, without doubt, the silver price would have finished much higher if the futures market in silver had been left to its own devices.

Silver closed the day at $32.23 spot...up 57 cents. Volume was around 35,000 contracts.

The gold price was pretty much influenced by what the dollar was doing yesterday...and the charts of both reflected that...and there was no wild price swings in the precious metals like occurred on Thursday morning.

The gold stocks spent most of the trading day in the black...and the HUI finished up a very respectable 1.01%.

Even though the silver price was only up 57 cents on the day, most of the silver equities turned in a much better performance than that. Nick Laird's Silver Sentiment Index close up 2.59%.

(Click on image to enlarge)

The CME's Daily Delivery Report showed that only 21 gold and 2 silver contracts were posted for delivery on Tuesday. The link to what little activity there was is here.

The GLD ETF showed a smallish decline of 13,195 ounces, which might have been a fee payment of some kind...and there were no reported changes in SLV.

There was no sales report from the U.S. Mint yesterday, either.

The Comex-approved depositories showed that 598,434 troy ounces of silver were deposited on Thursday...and only 156,490 ounces were withdrawn. The link to that action is here.

The Commitment of Traders Report for positions held at the end of Comex trading on Tuesday, November 6th showed that the Commercial traders added to their short positions in both silver and gold.

In silver, it was the small commercial traders [Ted Butler's raptors] selling their long positions for a profit that caused the deterioration. In gold, the '4 or less' traders actually increased their short position during the reporting week.

The COT for silver is still wildly bullish despite this week's reported deterioration. In gold, Ted Butler is slightly bullish, but with gold above its 50-day moving average...and the Commercial traders increasing their short positions over the last couple of reporting periods, he says that there's nothing stopping 'da boyz' from smacking the gold price...and taking silver with it.

We also got the monthly Bank Participation Report yesterday as well. All the data from this report comes from the COT data, so for this one day every month we get a snapshot of what the U.S. [and foreign] banks are up to in every Comex-traded commodity.

In silver, three U.S. bullion banks decreased their Comex short position by about 540 contracts. These three banks are now down to 16,662 Comex futures contracts held short, of which about 90% is held by JPMorgan.

The 12 non-U.S. banks that hold positions in the Comex futures market in silver increased their net short position by about 1,350 contracts during the last reporting month. These 12 non-U.S. banks hold a net short position of only 1,204 Comex contracts between them...about 100 contracts each. Their presence is definitely not a factor in the Comex futures market in silver.

But the eye-opener was gold. Ted mentioned on the phone yesterday that he wasn't happy with what he saw...and now that I've seen the numbers and have done the calculations, I'm not a happy camper either. During the last reporting month, which ended with the cut-off on Tuesday for yesterday's COT report...4 U.S. banks have increased their net short position by 18,344 Comex futures contracts. As of the Tuesday cut-off, these four banks are net short 101,019 Comex gold futures.

The 18 non-U.S. banks increased their net short position in gold by 11,280 contracts during the same period. These 18 banks are net short 39,540 Comex gold contracts.

In a month, the world's bullion banks have increased their net short position in gold on the Comex by a hair under 30,000 futures contracts. Based on that data alone, I can see why Ted is wary of the short-term price direction in gold.

And, like the last COT report, I'm posting the links to the detailed analysis of yesterday's COT report. Once again it was kindly provided by reader by EWF over at ewfresearch.com. The link to the Gold COT/Bank Participation Report is here...and the Silver COT/Bank Participation Report is here. The data and charts provided are worth more than a few minutes of your time.

To: Ed Steer...From: reader S.S...Subject: Fed, BIS & BOE Gold Sales Time: 11:11 a.m. Mountain Standard Time, January 9, 2011

"Ed, for all the hand-wringing about reported coordinated gold sales, (which, by the way, remain unconfirmed by any other source fully 24 hours after the initial report)... these guys barely even moved the needle. Since the end of September, there have been 6 days with bigger downside price movement in gold. Apparently the amateur manipulators are better than the Feds 'cause heaven knows that gold never goes down unless it is manipulated lower... right?

"Let's assume though that this story has even a grain of truth to it. If so, then what a paltry result they got for all their devious contriving. And in such a tiny market, all in all, a pretty pathetic result from such a high powered group of market movers don't you think?

"I'm as hard core a believer in gold investing as you'll find, but this "story" looks bogus from top to bottom"...S.S.

Well, reader S.S. proved to be 100% correct. The story regarding the sale of gold has now been officially retracted...and all the details about this are posted further down in the 'Critical Read' section.

I have the usual number of stories for a weekend, which means I have quite a few...several of which I've been saving all week. I hope you can find the time to at least peruse the bits I have posted on each...but there is one must read in particular that requires your undivided attention.

Now that the central bank gold sales story turned out to be false, I would guess that the big spike down in the gold price on Thursday was the bullion banks up to their usual tricks.

Market News International retracts report about central bank gold sales. Pullbacks in Perspective: Jeff Clark. Gold Christmas Tree worth nearly $2 million dollars.

¤ Critical Reads

Q3 2011 "Flow of Funds"

"The bottom line remains that the U.S economy continues to tread water, staying afloat by a historic expansion of federal debt. I have maintained that the explosion of federal debt was a Bubble, and that our fiscal train wreck would not be avoided through a resumption of private-sector debt growth. The U.S. Household sector does not want to add debt, and the corporate sector does not need to. I have as well noted the disturbing parallels between the eruption of subprime and the Greek debt crisis. From my perspective, at this point it is only a matter of time before the markets begin to impose discipline upon Washington."

Doug Noland is on another tear with this week's edition of his Credit Bubble Bulletin. It's posted over at the prudentbear.com website...and I thank reader U.D. for bringing it to my attention. It's a short read this week, but well worth your time...and the link is here.

View full GSD edition

Ben Davies: Your country needs your money

Chris Powell writes a rather longish introduction to this King World News blog...and I don't wish to steal his thunder. Your first read of the day is a must read...and the link to the GATA release is here. NOTE!!! Since I wrote the previous sentence, Eric King has provided me with the audio interview...and after you've read Chris Powell's preamble, you can skip the blog...and go straight to the audio track, which is linked here.

View full GSD edition

Felix Zulauf: Watch Out for these events in 2012

"I think the periphery goes into depression. When you look at a country like Greece, it's now been in recession for three years. GDP is probably down 15% from the top. The stock market is down 90%, which is the equivalent of 1929 to 1932 in the US. This is depression-like."

"More and more economies will fall into that situation. That creates the problem of people revolting. Right now we have new governments not elected by the voters, the citizens of those countries, but implanted as technocrats by the EU center, by Brussels. So they will be very disliked and I think you will see some revolutions starting or intensifying next year.

Then I expect next year one country, probably three, will exit the euro. That will make 2012 very interesting because there are no rules on how to exit the euro. A country exiting the euro means the next day, when they exit, their banking system is bust. That means the banking system has to be immediately nationalized in a new currency."

This King World News blog is well worth your time...and the link is here.

View full GSD edition

German Vision Prevails as Leaders Agree on Fiscal Pact

Europe's worst financial crisis in generations is forging a new European Union, pushing Britain to the sidelines and creating a more integrated, fiscally disciplined core of nations under the auspices of a resurgent Germany.

The agreement was a clear victory for Mrs. Merkel, and it prompted a sharp rally in stock markets in Europe and the United States. But it is viewed as unlikely to calm fears that Europe is unwilling to muster the financial firepower to defend the sovereign debts of big member states, including Italy and Spain, that have little or no economic growth and have big debt bills coming due soon.

This story appeared in The New York Times yesterday. The original headline read "New Treaty to Save the Euro May Also Divide Europe". The 'thought police' over at the NYT decided on something else. I thank reader Phil Barlett for sending me this story...and the link is here.

View full GSD edition

Europe's blithering idiots and their flim-flam treaty

What remarkable petulance and stupidity.

The leaders of France and Germany have more or less bulldozed Britain out of the European Union for the sake of a treaty that offers absolutely no solution to the crisis at hand, or indeed any future crisis. It is EU institutional chair shuffling at its worst, with venom for good measure.

It is risky to reach instant conclusions on a fast-moving story but it looks as if the EU may soon be reduced to a shell, with a new union forming among the core.

Ambrose Evans-Pritchard over at The Telegraph plays the part of 'The Grinch' here...and really lets fly. This is Roy Stephens first offering of the day...and the link is here.

View full GSD edition

Extremely Important: More Fallout on Re-Hypothecation: physical gold/silver rehypothecated

Posted: 10 Dec 2011 01:14 AM PST

LISTEN: Interview with Martin Armstrong

Posted: 09 Dec 2011 10:45 PM PST

From KerryLutz.com:

Martin Armstrong is back on the show to talk about what's really happening to the world financial markets. He explains how flimsy the entire Euro structure was from the get-go. He advised the leaders to unify Europe both monetarily and fiscally, but they rejected that advice, rightly believing that theexpanded European Union would never have been approved. His only surprise is that the entire structure held together as long as it has. He believes that Germany will be forced to inflate, because no one is willing to accept the consequences of massive deflation, complete with bank failures and widespread unemployment. Therefore, the politicians will take the path of least resistance as they always do.

MF Global was another disaster of massive proportions. It is now obvious that your money is unsafe no matter where it is being kept, except perhaps in physical gold and silver. The clearinghouse was always supposed be the ultimate guarantor of customer funds, making good on customer accounts when companies failed. However, this never happened in the MF Global failure and there are many thousands of investors left holding the bag. But more importantly, confidence in an already shaky system has been furtger undermined. The eventual results could be devastating to all investors any place on the globe.

Much more @ KerryLutz.com or @ 347.460.LUTZ

LISTEN: Interview with Ian Farrar

Posted: 09 Dec 2011 10:44 PM PST

From KerryLutz.com:

Ian Farrar was fortunate to connect with legendary investor Jim Sinclair. Sinclair has been one of the acknowledged masters of precious metals investing. And he should be, he's been doing it for many decades now. In 2001, he predicted that gold would hit $1650 per ounce by January 11, 2011. He was only a few months off, a pretty amazing call made so many years ago.

What did Jim Sinclair know that the rest of us didn't? He understood what governments do in times of trouble, and he understood that the greatest currency collapse in history was on the horizon. While it is very difficult to predict the price of any security or commodity in the short term, some people are able to recognize and follow a long term trend. Gold and Silver have been in 11 year bull markets. You can trace the beginnings of their moves back to the end of the DotComm (DotBomb) era.

While many others have piled on into the precious metals bandwagon and have provided valuable commentary, only a few were spot on in 2001. Ian has followed Jim's advice to the "T" and has gotten through much of the Global Financial Collapse unscathed. But the good news is, it's not too late for you to do the same.

Much more @ KerryLutz.com or @ 347.460.LUTZ

Eurozone Banking System on the Edge of Collapse

Posted: 09 Dec 2011 10:43 PM PST

The eurozone banking system is on the edge of collapse as major lenders begin to run out of the assets they need to keep vital funding lines open.

by Harry Wilson, Telegraph.co.uk:

Senior analysts and traders warned of impending bank failures as a summit intended to solve the European crisis failed to deliver a solution that eased concerns over bank funding.

The European Central Bank admitted it had held meetings about providing emergency funding to the region's struggling banks, however City figures said a "collateral crunch" was looming.

"If anyone thinks things are getting better then they simply don't understand how severe the problems are. I think a major bank could fail within weeks," said one London-based executive at a major global bank.

Many banks, including some French, Italian and Spanish lenders, have already run out of many of the acceptable forms of collateral such as US Treasuries and other liquid securities used to finance short-term loans and have been forced to resort to lending out their gold reserves to maintain access to dollar funding.

Hubble on Housing Bubble Trouble

Today I'm going to get deeper in thought about debt but before I do, let's look at the Australian housing market...

'End of the Property Dream' - Business Review Weekly

'In the ten months to October, seasonally adjusted home prices in Melbourne are down 5.8 per cent, second only to Brisbane's 7.5 per cent fall in that period, according to RP Data.' - The Age

'Glut and doubt blow house prices down - The value of houses and apartments fell for the 10th consecutive month in October ... a glut of unsold properties.' - AFR 1st Dec

'There's still more than 300,000 homes for sale around Australia' - Tim Lawless, RP Data

The housing bubble is striking closer to home for more Australians by the day.

Now that most of my cousins have left home, Auntie Julie and Uncle Ian mentioned they might sell up and downsize. But they're worried they won't get the same price they paid in 2004. And there's been quite a few years of inflation since then.

Of course, the Robinson Rabble, as they are known, didn't buy their house as an investment. And the house they choose to buy when they do downsize will have fallen in price about as much as their current house did. So they will be no better or worse off in the end.

But if you agree with that notion, you have to agree it applies to rising house prices too. It's the irony of investing for house price growth. If the price of your house goes up, the price of the next house you buy will probably have gone up just as much. And, in real terms, you're left no better off than when you started.

But here's the problem with this kind of thinking: Don't forget debt.

In fact, that's probably the phrase that sums up everything you need to know about finance and economics in general. At least, we are becoming increasingly convinced of the idea that debt is what the real worlds of finance and economics boil down to. Houses, banks and governments have been the big economic stories of the decade. All are going through debt crises right now.

Surprise, surprise, then that academic economics doesn't make a mention of debt. (There are a few exceptions of course.) The logic for overlooking debt goes something like this: Because one person's debt is another person's asset, the two cancel each other out. Debt doesn't matter. Of course, this doesn't quite square off with fractional reserve banking, but that's not the point we want to make. The point is - mainstream economics ignores the most important factor driving the real world today - debt.

Surely the academics of finance do a better job? Nope.

Good old Wikipedia reminded us of the sort of delusions taught at University finance classes:

The Modigliani-Miller theorem (of Franco Modigliani, Merton Miller) forms the basis for modern thinking on capital structure. The basic theorem states that the value of a firm is unaffected by how that firm is financed. It does not matter if the firm's capital is raised by issuing stock or selling debt. It does not matter what the firm's dividend policy is. Therefore, the Modigliani-Miller theorem is also often called the capital structure irrelevance principle.

Yes. Once again, debt doesn't matter. If this defies your belief, a more complete explanation will fill in the gaps:

The basic theorem states that, under a certain market price process (the classical random walk), in the absence of taxes, bankruptcy costs, agency costs, and asymmetric information, and in an efficient market, the value of a firm is unaffected by how that firm is financed.

With a list of assumptions as long as Miller and Modigliani put together, we could prove just about anything. What's even funnier than the list of assumptions is the following: 'Modigliani was awarded the 1985 Nobel Prize in Economics for this and other contributions.'

Yes. If you invent an imaginary land where people are omniscient, not taxed, don't need lawyers - and so on - and then prove something is the case in that imaginary land, it gets you a Nobel Prize in Economics.

And people forget about debt.

The hedge fund Long Term Capital Management illustrated nicely how these theories work in practice. In a keynote speech to the Financial Management Association, a Professor Stulz pointed out 'LTCM was mostly engaged in transactions that would be close to the Modigliani-Miller arbitrage transactions if markets were perfect.' After a couple of good years, it lost billions in just a few months (back when billions were a big deal). The firm had to be rescued under the supervision of the American central bank.

The academics-turned-traders at LTCM used leverage to make bets on bonds. They ignored the risks of the debt used to fund their investments and they ignored the risks of the debt they invested in. It ended very badly.

So now you know that mainstream economics and finance are blind to debt. And that this occasionally blows up in the face of mainstream followers. But how does all this apply to the Australian housing bubble?

Well, Aussies have bid up the price of houses to absurd levels using debt. The debt that the mainstream will tell you doesn't matter. But it does.

We won't get into just how bad our debt bubble is. Economist Steve Keen does a great job explaining the housing bubble and how it formed here. Instead, let's try and find an optimistic future beyond the debt bubble. Is there an opportunity coming down the road? What happens after housing prices tumble?

Once an asset bubble truly pops, you can't reflate it with more money and debt. It's like trying to inflate a balloon with a hole in it - it just makes a rude noise. You will know it's time to buy back into an asset class when discussing it is impolite. When people's retirement has taken such a big hit they can't talk about it. But buying property at that time won't be a good idea if you're buying to make a quick buck on capital growth. Capital gains don't re-emerge for post-bubble assets for quite some time.

Instead, what you'd be looking for are cash flows in the rubble of asset bubbles. Here's an example.

Your editor's new desk buddy, named Woody because of his last name, owns a property in the UK. While the price of his house fell during the financial crisis, his mortgage payments fell more. The yield he gets in rent is now almost three times his mortgage payments!

Sounds like a snazzy investment. In cash flow terms. Of course, Woody took a hit when house prices fell. But he doesn't plan to sell when the house is earning him so much cash.

Here is the really interesting part: Woody reckons wealthy people have little choice but to park their savings in a house investment. Owning a home is the replacement for a savings account because interest rates are so low.

In other words, post-bubble assets are great places to go hunting for 'yield' when central banks suppress interest rates.

The beauty of property investing after a bubble is that it is nicely hedged against inflation too. Property has a real value to it. So even if central bankers do manage to overcome deflation, you are well positioned.

Yes, believe it or not, one day you will read in the Daily Reckoning that it's time to buy property. In the meantime, we're sticking with what has been working very nicely for our subscribers - real assets like gold and silver. Dr Alex Cowie reckons he has found six red hot stocks that will turn steadily rising resource prices into far larger gains for investors. You can find out more here.

Until next week,

Nickolai Hubble.
The Daily Reckoning Weekend Edition

Posted: 09 Dec 2011 08:47 AM PST

By Thomas Kelly:

Its no secret that 2011 has been a lackluster year for gold mining stocks. While gold (as measured by the GLD) has soared 24% over the last year, gold mining stocks have not fared nearly so well.

As a shareholder in several mining companies, and having tracked about 60 US-listed gold miners, I was keenly aware of the underperformance, but I was still taken aback recently by taking a broader look at the damage. Not only have gold miners underperformed the price of gold, but they've had a terrible year even when compared to the overall stock market.

Taking a broad look, while GLD has returned 24% for the year, GDX has returned -4.3%, dramatically lagging gold and even lagging the beleaguered S&P 500 by roughly 5%. The GDXJ, an index of more speculative junior miners, has performed pathetically, chalking up a return of -27% for the year. Far from

Complete Story »

The Fate Of Emerging Market ETFs In 2012

Posted: 09 Dec 2011 08:35 AM PST

By Gary Gordon:

Popular emerging markets in the BRIC configuration – Brazil, Russia, India, China – suffered through severe bear markets in 2011. Yet far too many writers attribute the 20%-33% declines to Europe's sovereign debt crisis alone.

It is true that the debt mess sent the U.S. dollar higher at the expense of the ruble, real and the rupee. Contagion containment has also damaged the prospects for emerging market companies to export their wares to the eurozone.

That said, one cannot explain 2000-3000 basis point differences in performance between emerging market stocks and U.S. stocks by simply pointing to a "greater adverse impact" notion. In reality, the bearishness is primarily due to gruesome inflationary pressures.

Consider China since 11/2010. With increasingly high levels of real estate lending as well as runaway consumer prices, officials chose to raise interest rates. They also developed restrictive monetary policies such as hiking the amount of dollars

Complete Story »

The ECB's Plunger Pushes Liquidity, Yet Interbank Lending Remains Intact

Posted: 09 Dec 2011 08:23 AM PST

Global politicians forged ahead with stop gap plans designed to bridge the liquidity gap. Last week, the dollar funding crisis was averted by coordinated policy changes which included discounted dollar access. This week, we saw the ECB throw a series of new policies at the market in hopes of unclogging interbank money flow.

The ECB policies include a 25 basis point cut to its lending rate, the introduction of three-year liquidity loans, a halving of reserve requirements and the loosening of collateral standards. Clearly, the ECB is increasingly concerned that banks hoarding reserves will deliver rapidly decelerating euro region GDP.

Lower rates help bank spreads and prime the demand pump. The three-year facility provides funding clarity for lending activity. A steep cut to reserves offers banks' wiggle room and collateral expansion serves as a rescue line to Italian and Spanish banks sitting on assets where bond ratings are declining.

The

Complete Story »

Smooth Portfolio Volatility With Small Cap Gold Stocks

Posted: 09 Dec 2011 07:57 AM PST

By Aggressive Dividends:

When looking at the S&P 500 charts, I get that sick feeling in the pit of my stomach that I would get when the local fair came to town and I got aboard the Tilt-A-Whirl after an enormous feed on cotton candy. As investors watch their stock portfolios jump 10% one week followed by a 15% drop over the next two weeks, how can they smooth out the bumps for a calmer ride?

Diversification Holds the Key

Diversification is a broad concept that simply refers to having a variety of investments that are somewhat dissimilar. Financial advisors keep telling their clients to balance bonds, equity and cash. What about diversification within the stock market?

Finding low-correlation, publicly traded investment products is increasingly challenging as globalization ties international markets closer together. A deep recession in one country will see its citizens selling their equities - and many of these holdings are

Complete Story »

A brilliant Op-Ed on the ongoing euro crisis stupidity

Posted: 09 Dec 2011 07:56 AM PST

From Bloomberg:

The never-ending comedy that is Europe's sovereign-debt crisis has reached its Otter moment. That's when the world realizes the fundamental principle guiding every important government decision is this: "I think that this situation absolutely requires a really futile and stupid gesture be done on somebody's part!"

The quote comes from the 1978 movie "Animal House." After the dean of the fictitious college tells the Delta House boys that he's expelling them all, the fraternity's smooth-talking rush chairman, Eric "Otter" Stratton, delivers those famed words of inspiration to his downtrodden brethren. Bluto, the drunk with a 0.0 grade-point average played by John Belushi, says: "We're just the guys to do it." Mayhem ensues.

Europe is imitating art. We keep getting futile gestures from its political leaders in response to the euro area's debt troubles. It matters little what form these take, as long as they placate the markets until the next ad-hoc plan can be floated. One day it's "firewalls," whatever those are. The next it's "bazookas." Now it's German domination of European political and economic life. There are too many proposals flying around to keep track.

Here's the amazing part. The gestures often work. Just like that, the debt crisis seems to be in remission, if only for a few days. Last month the annual yield on Italy's 10-year bonds soared past 7 percent, the same tripwire that spelled doom for Greece, Ireland and Portugal. This week it fell below 6 percent. Spain's 10-year bonds now yield less than 5.4 percent, down from 6.6 percent last week.

Something Awful

The roller-coaster pattern is familiar to anyone who has watched Europe's leaders try to keep the global capital markets at bay the past two years. First, something awful happens that shatters the public's trust, say Greece going broke, or a big European bank needing a bailout right after getting a clean bill of health from regulators. The bond markets panic.

Eventually the credit raters get around to taking notice, and maybe even downgrading a country here or there. Standard & Poor's this week placed the European Union and 15 euro-area nations on review for possible downgrades. (France still has a AAA rating from S&P somehow, even though the U.S. doesn't. Go figure.) Europe's leaders blame the raters -- anyone but themselves.

All the while the same leaders, or at least the ones who have managed to avoid getting thrown out of office, promise changes to make things better, regardless of their ability to follow through. The empty words, coupled with the possible threat someday of large sovereign-debt purchases by the European Central Bank, prove enough to frighten the markets' skeptics and buy the politicians some time. A total financial collapse is averted. Then the cycle starts anew.

There's always another grand meeting or summit just around the bend that euro-area leaders can point to. This week's happens to be in Brussels. They assure us: Just wait till the leaders (make that technocrats, now) meet there, and you will see -- problems will be solved, panaceas found. And they never are.

One difference lately is that the elites are getting more ambitious about the sheer amount of time they're seeking to buy themselves per gesture. It used to be they would delay carrying out short-term fixes for a week, or maybe a month. Now they want several months.

This week German Chancellor Angela Merkel and French President Nicolas Sarkozy called for rewriting treaties so that European countries' national budgets would be subject to greater centralized control, as well as automatic penalties in case of violations. There's a catch, naturally.

Just Wait

Sarkozy said the changes wouldn't be drafted until March, and the amendments wouldn't be ratified by his country for at least six months. (How convenient!) There are French elections that must be held first, you see, including for Sarkozy's own office. So whatever the French decide, under this latest plan, investors will just have to wait patiently until next summer before deciding which European countries and financial institutions they will push to the brink of disaster next.

The markets won't wait, of course. Plus, other countries might want a say before handing over their sovereignty. Not that such details matter for these purposes. The objective here is to come up with something -- anything -- that might have even the slightest chance of looking plausible to an untrained eye. If and when the plan falls apart, as these things tend to do, the next step is simply to dream up another one that's a bit snappier, more persuasive.

Make no mistake, though, one day the futile and stupid gestures will end. Either Europe's governments will find a way to continue paying their debt holders on time, or they won't. And the longer the charades go on, the more painful the reckoning will be for everyone. Nobody in this game is fooling anyone.

(Jonathan Weil is a Bloomberg View columnist. The opinions expressed are his own.)

To contact the writer of this article: Jonathan Weil in New York at jweil6@bloomberg.net.

To contact the editor responsible for this article: James Greiff at jgreiff@bloomberg.net.

More on the euro crisis:

This is the euro announcement that set off today's selloff

Top Wall Street analysts: This week's euro summit has failed

Top UBS analyst: Buy precious metals, canned goods, and small-caliber weapons

Gold Nears Weekend 2% Down as UK Quits New European “Fiscal Compact”, Politicians “Expect ECB Action”

Posted: 09 Dec 2011 07:45 AM PST

BullionVault
Fri 9 Dec., 10:05 EST

Gold Nears Weekend 2% Down as UK Quits New European "Fiscal Compact", Politicians "Expect ECB Action"

WHOLESALE MARKET gold prices fell back to this week's low of $1705 per ounce Friday lunchtime in London, as Asian equities closed sharply lower but Eurozone and US equities rallied following news of the "fiscal discipline" being agreed by political leaders meeting in Brussels.

All 17 heads of state in the currency union have agreed to being bound by European Commission approval of their national budgets, with "automatic sanctions" hitting any member whose annual budget deficit exceeds 3% of GDP.

That same level was set by the pre-Euro Growth & Stability Pact in 1997, but has since breached by all but two members – Luxembourg and Finland.

A further €200 billion is being added to the Eurozone's Stability Fund rescue package for weaker states, with the start date brought forward to January 2012.

A further 6 or perhaps 9 non-Euro states will also join the new fiscal agreement, according to various press reports, but British prime minister David Cameron quit the talks last night after making what French president Nicholas Sarkozy called "unacceptable demands" to stymie treaty change and block a Europe-wide tax on financial transactions.

Gold prices measured in the single currency held flat around €41,200 per kilo – down some 1.7% for the week – as the Euro ticked lower vs. the Dollar.

US investors saw the gold price open New York trade 2.1% lower from last Friday's finish of $1745 per ounce.

The price of silver bullion crept higher towards $32 per ounce, some 1.9% down for the week.

"It's going to be the basis for a good fiscal compact and more discipline in economic policy in the Euro-area members," said Mario Draghi – president of the European Central Bank since October – of the overnight negotiations in Brussels.

Draghi yesterday cut Eurozone interest rates but repeated that the ECB cannot provide direct financial aid to member states under the terms of its treaty.

Quoting anonymous central-bank sources, the Reuters news-wire says the ECB will continue cap its government bond-buying – now totaling €270 billion – at €20bn per week. But last week's move to provide unlimited funds to commercial banks "means that each state can turn to its banks, which will have liquidity at their disposal," said France's Sarkozy today.

Ireland's minister for Europe Lucinda Creighton says she "and many other member states" expect the ECB to become more "pro-active…in the weeks ahead," according to Reuters.

Greek, Italian and Portuguese government bonds meantime slipped in price Friday, pushing interest rates higher despite Germany's Angela Merkel ceding her call for private-sector bondholders to "share the cost" of aiding over-indebted Euro states by suffering a write-down on their value.

"To put it bluntly, our first approach to [private-sector involvement], which had a very negative effect on debt markets, is now officially over," said the European Union's president Herman Van Rompuy this morning.

The Moody's rating agency today cut the credit status of France's biggest banks, saying that "Liquidity and funding conditions have deteriorated significantly."

France's own national credit rating is at risk, the Standard & Poor's agency said this week, because of the weakness in its banking sector.

"Gold prices are still holding fairly well supported," reckons VTB Capital's Andrey Kryuchenkov in note, "and any negative reaction to the summit today would only see limited losses in gold as opposed to other…more volatile precious metals, also suffering from growth concerns.

"On the downside [however] a break below $1700 would see losses to our key support at $1680 and the longer term January uptrend."

Beijing is meantime planning to launch an aggressive investment fund to run $300 billion of China's $3 trillion foreign exchange reserves, reports Reuters.

Part of the State Administration of Foreign Exchange (SAFE) – which acted to buy gold for China's national hoard according to its last reserves update of 1054 tonnes in 2009 – an un-named official says the fund will target US and European assets.

Now the world's second-largest private gold consumer, China saw consumer price inflation and industrial output both slip in October, under-shooting analyst forecasts at 4.2% and 12.4% respectively.

"Inflation is not a policy constraint [for the People's Bank of China] anymore," believes Tao Wang, an economist at UBS in Hong Kong.

Future PBoC policy "is more a function of the economy slowing and foreign exchange inflows drying up," says Wang.

Adrian Ash
BullionVault

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Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK's leading financial advisory for private investors, Adrian Ash is head of research at BullionVault – winner of the Queen's Award for Enterprise Innovation, 2009 and now backed by the World Gold Council market-development and research body – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Top African Gold Prospects: Brock Salier

Posted: 09 Dec 2011 07:41 AM PST

Source: Brian Sylvester of The Gold Report (12/9/11)

Brock Salier, a mining analyst with GMP Securities Europe, sees plenty of gold coming out of Africa in the coming months and years. In this exclusive Gold Report interview, he says increasing political stability, good geological prospects and governmental recognition of the benefits of mining operations are reasons to look there for growth.

Companies Mentioned: African Barrick Gold Plc – Avocet Mining Plc – Banro Corporation – Gold Fields Ltd. – Loncor Resources Inc. – Orezone Gold Corporation – Roxgold Inc. – Sable Mining Africa Ltd. – Teranga Gold Corp. – Tiger Resources Ltd.

The Gold Report: Brock, you cover many companies based in Africa. What do African countries offer that other jurisdictions do not?

Brock Salier: I would have to say geological prospectivity. African countries are relatively underexplored and underdeveloped. That means African exploration and mining companies have far greater likelihood of discovering new ounces and of expanding production at existing mines.

The other key is sovereign risk, which is relatively good in Africa. We define sovereign risk as the number of assets that have been nationalized or taken away from mining companies. When I compare Africa to Southeast Asia and the former Soviet Union, Africa scores much higher.

TGR: Are brokerages like GMP being forced to look at countries operating in Africa for growth?

BS: Quite the opposite. We have a choice of jurisdictions and we've chosen Africa as one of our focus areas. For us, the African asset base is attractive. We see more listed companies operating there and a lot more success stories relative to elsewhere.

TGR: Are there any traditional gold mining countries that you might take a flier on, perhaps Ivory Coast?

BS: Absolutely. We're actively working in Côte d'Ivoire. Despite recent civil unrest, the country has transitioned to a new democratically elected head of state. The geological prospectivity is so high that mining companies are flooding in. The asset quality is stunning. I would target the Ivory Coast as a favorite investment location.

Liberia and Sierra Leone are relatively underexplored compared to Ghana and Burkina Faso, both of which have democratically elected heads of state. Despite very recent civil unrest, Liberia and Sierra Leone are now stable, open for investing and have some really exciting targets.

Neighboring Ghana is much better known for its gold, yet it's also much more explored and the explorers have smaller licenses; the producing assets are more mature. The Democratic Republic of Congo (DRC), which has had an up-and-down history, is one of our favorite investment destinations because of the geological prospectivity.

TGR: What accounts for the increased stability in West Africa and what are your preferred jurisdictions there?

BS: Wealth generation has played a role in the region's stability. The wealth generated in Ghana in the last 20 years has made many of that country's neighbors want to emulate its success. To have ongoing, direct foreign investment, you need a sustained, peaceful state. There is an incentive for them to push toward stability.

From a geological perspective, my preferred destinations are Mali, the Kénieba inlier in Senegal and Burkina Faso. The Ivory Coast is another exciting destination, given its geological proximity to the highly mineralized Ghanaian gold belts and historic underinvestment. In the last 12 months, Liberia has seen a huge influx of gold juniors. I wouldn't be surprised to see exploration success increasing there.

TGR: In some regions, we are seeing project nationalization in various forms. Will that find its way into the African countries?

BS: I genuinely believe nationalization is not a major issue in Africa. Looking at the historic incidence of nationalization, it's not common in Africa. It did happen in the DRC with First Quantum Minerals Ltd. (FM:TSX). In the DRC's case, there is such a strong desire to create an environment suitable for foreign investment, it genuinely does not want to send a message of nationalization to the foreign community.

TGR: In your company models, you typically value gold companies using a gold price of $1,575/ounce (oz) of production and $80/oz in the ground. The gold spot price has been volatile lately, and your price per ounce of production might be considered high by some analysts. Do you plan to make any adjustments?

BS: It's important to point out that we use a gold price assumption rather than a forecast. We typically choose $1,575/oz as a stable price and then look at the sensitivity. We suggest that investors take their own view on the gold price.

Having spent a lot of time on new development projects in Africa, I see a lot of support at $1,100–1,200/oz because of supply constraints. The assets are maturing. The grades are falling. The diesel price is escalating, along with taxes and royalties in some places. Costs are higher.

TGR: Brokerages in Toronto typically use a 5% discount rate for companies operating in Canada. You use a discount rate of 6% for companies operating in Africa. Does that extra 1% account for the additional risk in Africa?

BS: Ironically, most European brokerages use a 10% discount rate for African gold projects. We use 10% for base metal projects, but 6% for gold projects because gold companies are far more scalable than other commodities. There are more deposits to be found. It's easy to develop gold deposits.

In response to the 5% vs. 6% question, we capture that difference in net asset value (NAV) multiples. When we value African gold companies, we use a variety of NAV multiples. While we use a higher discount rate, we account for that by using a different NAV multiple.

The key thing for any investor looking at a gold analyst's research is to make sure the discount rate and the gold price are consistent. We use the same discount rate and gold price across the firm. Then we look at our valuations relative to our coverage universe.

TGR: Would you consider your model aggressive?

BS: I would say not, because of the huge support in the gold price and the huge demand for gold mining companies. Gold equities are outperforming other mining equities because there is a lot of investment support and gold companies are the easiest to understand and take into production. They're the most scalable. On that basis, gold equities definitely trade at a premium to many base metal and bulk commodity producers.

TGR: Let's get into your coverage sector. You cover African Barrick Gold Plc (ABG:LSE), which operates the Bulyanhulu gold mine in Tanzania. In your Oct. 20 research report, you basically said that African Barrick is seeking a takeover target. What sort of catalyst would that be for the company's shares?

BS: The key catalyst to any gold producer is increased production on an accretive basis, meaning increased production on a per-share basis. African Barrick struggled to increase production in Tanzania with mature assets. Given its strong cash balance, I believe the company will be able to buy production without issuing new shares. That could prove to be a tremendous, positive catalyst for the stock.

TGR: Which juniors would be likely targets?

BS: We believe a company like African Barrick will look for juniors in a stable country, with numerous future growth opportunities, existing production and growth projects. As outlined in our initiation report the two that stand out are Teranga Gold Corp. (TGZ:TSX; TGZ:ASX) and Avocet Mining Plc (AVM:LSE). Both have existing production in the 120–250 thousand ounces per year (Koz/year) range, lots of exploration upside and, most importantly, would be affordable with capitalizations well under $1 billion (B).

TGR: Will African Barrick ever get to the large-cap producer status of some of African players like IAMGOLD Corp. (IMG:TSX; IAG:NYSE) or Gold Fields Ltd. (GFI:NYSE)?

BS: If it did acquire a junior producing 200 Koz/year, production could very quickly lift over 1 million ounces per year (Moz/year). That immediately takes it to production well above a company like Randgold Resources Ltd. (GOLD:NASDAQ), a far higher-rated peer in London.

Looking to the future, it would be all about additional acquisitions and exploration. We'll have to wait and see what acquisition strategy it executes.

TGR: Let's move on to Banro Corporation (BAA:TSX; BAA:NYSE), another Canada-domiciled company. Banro reported its first gold at Twangiza in early October. Banro is a preferred stock you cover. What are the catalysts for Banro?

BS: Banro is an extremely lucky developer and producer in that, in addition to the Twangiza mine, it has two large, undeveloped gold assets that, geologically, should become mines: Namoya and Lugushwa.

In our recent initiation we noted that the key catalysts for Banro are taking its second and third projects, Namoya and Lugushwa, into production. In the short term, the milestones are those that enable progress toward production. We expect the final engineering study for Namoya around year-end, with construction to start early next year. Lugushwa is expected to release a revised resource around year-end and we expect a preliminary economic assessment shortly thereafter. That means analysts will be able to value Lugushwa on a discounted cash flow (DCF) basis for the first time.

TGR: It will take about $120 million (M) in capital expenditures (capex) to bring Namoya into development. When is production slated to start?

BS: We expect the company will start construction around March 2012. There will be a 12-month build, so it can get a targeted first gold pour around March 2013.

TGR: Does Banro have enough money to fund that capex for 12 months?

BS: Namoya's capex estimate is around $120M. We recently published a report in which we estimate that Twangiza should generate $140M of free cash flow to fund Namoya. Obviously, the budgets are difficult to tie down. But broadly speaking, Banro should be able to cover the capex at Namoya.

TGR: How is production going at Twangiza?

BS: The company has only just announced its first pour; we'll have to wait and see. When I visited, I was impressed with the engineering team and the design and build, which was being done extremely quickly in an arduous environment. No doubt there will be teething issues, but I'm confident that ramp up should happen in line with target at year-end.

TGR: You mentioned that the DRC nationalized some of First Quantum's assets, and Banro had its exploration concessions seized back in the early part of the last decade. What kind of relationship does Banro have with the DRC government?

BS: Banro works extremely closely with the government. The government is very happy to see new mines in the eastern part of the country for the first time in modern history and the first modern gold mine to be commissioned as well. The DRC is seeing a big influx of skills, as well as taxes and royalties being paid. In the long term, driven by the copper industry, the DRC sees how well it can do from mining and how it can help the country. My view is that the government intends to maintain a peaceful outlook and to keep the mining industry going.

TGR: GMP follows exploration companies like Loncor Resources Inc. (LN:TSX.V; LON:NYSE.A), Roxgold Inc. (ROG:TSX.V) and Orezone Gold Corporation (ORE:TSX), plays that are not getting support in the market.

BS: Valuation is very difficult. As a geologist by training, I pick producers where I think the resource is, or has potential to be, big enough to be mined and where the geological conditions support additional discoveries.

Loncor, Roxgold and Orezone have already drilled what will eventually be delineated as mineable projects. All have a very good likelihood of finding new projects, although that is always more speculative.

It is difficult to value an exploration company on a DCF basis, so we use the enterprise-value-per-ounces-delineated method and compare that to the peer group. Most listed African pre-producers trade at an average of $80/oz. Then we put a higher valuation on those deposits that have more readily mineable ore—such as higher grades or open pit mineable—and a lower valuation on those with lower grades or more difficult jurisdictions or mining conditions.

TGR: Loncor is a preferred stock you cover; its Makapela project in the eastern DRC doesn't have a resource yet. How big do you think that resource could get?

BS: I think Makapela will define more than 1 Moz. The company still has a lot of drilling to do and we should see results in mid-2012.

The beauty of Makapela is that there are almost certainly subparallel zones there. Thinking about the next one to three years, I'm convinced it will find more zones and grow over time. From what we've seen so far, the potential for more than 1 Moz is there. And, the grades at Makapela are stunning.

We often use the adage that grade is king, and certainly at 9 grams per ton (g/t) even over the narrowest 4–5 meter (m) width, Makapela is very easily mineable mechanically and economically. That should give good returns.

TGR: How does Makapela compare to projects belonging to Roxgold and Orezone?

BS: It's very similar to Roxgold's resources. Roxgold recently found slightly narrower veins, but extremely high grade. It's very different from the resources you typically find in Africa, which are more likely to be around the 2 g/t range, open pit mining and much larger deposits.

One of Loncor's advantages is its joint venture with Newmont Mining Corp. (NEM:NYSE). That agreement targets a 5 Moz, lower-grade, perhaps 2–3 g/t, open pit deposit. Between Makapela and the joint agreement, Loncor has a strong twofold strategy.

TGR: And Orezone?

BS: Orezone fits in a new breed of deposits we're seeing in Burkina Faso, alongside Volta Resources Inc. (VTR:TSX). Those companies have relatively lower grades at 1 g/t, but huge size. All of them have potential for 3–5 Moz. The attraction of those deposits is not the grades, but the sheer scale.

TGR: Very few people know much about Burkina Faso. Can you give us a brief overview of its stability?

BS: I was in Burkina Faso last week. It had issues earlier in the year, when civil unrest in Côte d'Ivoire interrupted the supply chains for staples such as fuel and food into Burkina Faso. As a consequence, food prices went up, and the local populace grew uneasy. Now, the supply lines have been re-established and the populace is very supportive of the long-term head of state, Blaise Compaoré. The mining industry is flying ahead. Burkina Faso is one of the best destinations in Africa to invest in from stability and geological prospectivity bases.

TGR: Some of our readers like base metals plays, and you follow a small copper play in the DRC called Tiger Resources Ltd. (TGS:TSX; TGS:ASX). What brought you to that name?

BS: In this economic climate, I believe it's important to pick mining stocks that don't have large, upfront capital requirements. That can often be an insurmountable hurdle if the share markets aren't open for fundraisers.

We recently initiated coverage on Tiger Resources, which alongside all the copper producers in the DRC, has the advantage of a small, exceptionally high-grade starter resource. For less than $30M capex, the company built a plant producing 30,000 tons per annum of copper in concentrate. Similar to Banro's expansion model, Tiger self-funds a large component of its expansions. We love the geology of the DRC. We think it's far more prospective than the much-lower grade copper deposits in Botswana, and for Tiger that means there is a lot more opportunity for Tiger to pursue a merger or acquisition, now that it's an established producer.

TGR: Do you have any other preferred stocks you would like to share with our readers?

BS: One of my preferred stocks is Sable Mining Africa Ltd. (SBLM:LSE). Its current market cap is $150M. It has a strong balance sheet, $110M back in March. As we outlined in our recent initiation report, it's about to start drilling on what I think are the most exciting and largest iron ore exploration targets in West Africa. Looking at its two targets in Liberia, I see potential for some of the largest iron ore discoveries to be delineated in the last decade. They are both within 70 kilometers (km) of existing railway, so there is good infrastructure as well.

TGR: That is a significant distance. Will Sable be building rail?

BS: Absolutely. Many of the iron ore deposits being discovered in West Africa are 150km or more from the nearest port or existing rail project. So, while a 70-km railway sounds like a lot, compared to other West African projects, it is far closer than most. The attraction is the potential for in excess of 10 billion tons (Bt) of iron ore, which is a phenomenal amount and more than warrants building 70km of railway.

TGR: Sable also has some coal projects in its portfolio. What can you tell us about those?

BS: Its South African project is almost ready for a bankable feasibility study to fund construction. Its project in Zimbabwe is even more exciting. Its portfolio there has the potential for 4 Bt of thermal coal with coking coal. Although Zimbabwe is going through a period of reform, we believe the current investment climate is suitable for exploration, which enables Sable to undertake exploration and feasibility studies. As such, for Sable investors, the key value lies in the iron ore portfolio.

TGR: What is the upcoming news flow for Sable?

BS: The company has spent some 18 months acquiring projects, undertaking geophysics and establishing road infrastructure to drill the targets. This means there has been limited news flow, but with the drilling starting in January across the iron ore portfolio in Liberia, we expect the news flow will significantly pick up.

TGR: Is there a good spot on the Internet where people can go to see new resource stories coming to market?

BS: It's very difficult to track. Probably the best source for people in North America is the Producers and Developers of Canada International Convention Trade Show & Investors Exchange, which is a huge attraction for these stories.

TGR: Brock, thank you for your time and insights.

Brock Salier is a mining analyst with GMP Securities Europe.

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DISCLOSURE:
1) Brian Sylvester of The Gold Report conducted this interview. He personally and/or his family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Gold Report: Loncor Resources Inc., Roxgold Inc., Orezone Gold Corp., Banro Corporation and Gold Fields Ltd. Streetwise Reports does not accept stock in exchange for services.
3) Brock Salier: I personally and/or my family own shares of the following companies mentioned in this interview: Sable Mining Africa Ltd. I personally and/or my family am paid by the following companies mentioned in this interview: None. Brock Salier was not paid by Streetwise for participating in this story.
4) GMP Securities Europe does not cover Gold Fields. Orezone and Iamgold are covered by GMP but not by Brock Salier.
5) Brock Salier has seen material operations of the following companies he covers mentioned in this interview: Avocet Mining, Banro Corporation, Loncor Resources, Sable Mining Africa and Tiger Resources.
6) GMP Securities Europe LLP and/or any of its group affiliated companies has, within the previous 12 months, provided paid investment banking services or acted as underwriter to the following issuers mentioned in this interview: Banro Corporation, Loncor Resources Inc. and Sable Mining Africa.

What Can The ECB Do?

Posted: 09 Dec 2011 07:25 AM PST

By Antonio Fatas:

It seems that many economists agree that the ECB has to get more involved in dealing with the current crisis in the euro area. Politicians (at least some of them) disagree. They cite fear of inflation, take moral stance on past recklessness, argue that sinners have to repent and repay, etc. By now, hundreds of articles have been written on the potential damages from the collapse of the euro area, so I am not going to repeat them here. I want to focus on what the ECB can do to stop the self-fulfilling collapse of several European economies.

The standard view on ECB is that they have to print money in order to buy bonds of governments in trouble like Greece, Italy, Portugal, etc. But there is another thing that they can do. About 18 months ago, the chief economist of Citigroup, Willem Buiter, wrote an article in which he

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Goldman Bond Yields Float Higher, 8.55% From Down Under

Posted: 09 Dec 2011 07:22 AM PST

By Randy Durig:

Goldman Sachs (GS) has a floating rate debt issue denominated in Australian dollars, which resets its coupon rate quarterly at the Australian Bank Bill Swap Reference Rate (BBSW) plus 0.51%, matures in 41 months, and currently indicates a yield to maturity over 8.50%. The high yield and shorter maturity of this Kangaroo bond, when considered with its solid A- rating and enviable position, compares extremely favorably in relationship to other high yield instruments in our Foreign and World Fixed Income holdings.

We believe that the dollar's longer-term weakening trend against many world currencies remains a major concern for investors seeking protection against its devaluation and a further erosion of its buying power, and we continue to address the concerns of our clients in protecting existing wealth by utilizing the higher yields of sound issuers in many the world's strongest economies.

Wealth Preservation Concerns

The equity and commodity markets continue thrashing

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Save Your ASSets First

Saturday, December 10, 2011