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- Small Miner Reversal Possibly Underway
- iShares Silver Trust Adds 98 Tonnes
- EUR Short Covering Just Started?
- Silver Surges 21% in January - Silver Demand Is “Diminishing A Supply Surplus”
- Morning Outlook from the Trade Desk 01/31/12
- This chart shows it could be a great time to own tiny gold mining stocks
- The world could finally be waking up to a new "safe haven" currency
- This "forgotten" indicator could be warning of a new bear market
- ‘Currency Wars’ hotting up
- Gold Is The Hottest Currency In The World
- Mike Kosares: Survivalist George Soros
- Lehrman calls on Republicans to unite on 'sound dollar' platform
- Gold & Silver Market Morning, January 31, 2012
- Jim Sinclair: An Impending Undeclared Default
- Why Gold Is Shining Bright & What the Fed is Doing
- Mainstream Economics as Ideology: An Interview with Rod Hill and Tony Myatt — Part I
- Satyajit Das: Top Secret – The Chinese Envoy’s Briefing Paper On The Australian Economic Outlook (Part II)
- Secular Trends
- Interview - Chris Duane (Silver Shield) and Steve Quayle with the "Omega Man"
- GGR Excerpt - The Silver Plan
- Everything Isn't Fine in the US Economy
- The Coming Paradigm Shift in SILVER
- What the Facebook IPO Says About Your Most Valuable Asset
- Commodities and the European Debt Crisis, How Does it Work?
- Silver Powering 20 Million Homes as Supply Surplus Subsides: Commodities
- A Gold Standard Is Good?
- WATCH: Vision Victory on SRSrocco's Editorial
- WATCH: Pollock on Gold's Future
- Biderman: “Keep Buying Gold”
- MFGlobal and our vaporizing 1.2 billion dollars/Greece and Portugal/Gold and silver raid prior to first day notice
| Small Miner Reversal Possibly Underway Posted: 31 Jan 2012 05:48 AM PST HOUSTON -- Trading in the small and nano-cap resource-related companies we love to game here at Got Gold Report, has been looking up since the turn of the calendar into 2012. The chart just below is exactly what a reversal in trend looks like at the beginning. The chart is of the Market Vectors Junior Gold Miners Index ETF or GDXJ and it is a good proxy for the companies we affectionately call The Little Guys. It also happens to have been our Top Pick for 2012 in Steven Halpern's TheStockAdvisors.com event published just after the New Year.
So, is this the beginning of the long-awaited reversal of trader sentiment and the beginning of a positive liquidity event we have been expecting for The Little Guys? Only time will tell, but if we are going to see a change in sentiment; if we are going to see a technical reversal from a long, protracted negative liquidity event into its mirror image, this is exactly the kind of technical signature we might have looked for. Continued… Note please, that the GDXJ fetched up in the expected zone of "support" and as it did both of the momentum indicators were showing clear positive divergences (the RSI and the MACD shown). Note also, that the GDXJ cleared the down trend line (DTL) and the 50-day moving average (50-dma) without correcting there – a bullish omen. Here at Got Gold Report we track on technical charts something on the order of 60 small resource companies, all of which are or were a recommendation of the various resource company Gurus we follow – the best of the best independent research minds on the planet for this tiny sub-sector, as it were. Gurus famous for getting in and finding the undiscovered miners and explorers ahead of the pack – before the momentum crowd gets involved. We share about 35 to 40 of those graphs with our Vultures (Got Gold Report Subscirbers), under the banner "Vulture Bargain Companies of Interest" or VBCI issues. As we look down through the list of our VBCI issues today, at the end of January, we do indeed see improvement in the chart signatures for issue after issue, hinting that at least a small measure of tentative confidence is returning to this badly beaten up space. While we cannot yet definitely proclaim to the Four Winds that a sure-enough reversal has indeed arrived, we definitely can point to a promising looking beginning to one. What we can say with more than a little confidence is that from the very low, panic levels that many of our Guru-chosen small miners and explorers were driven to in the October – December near panic and horrible tax loss selling event; ... from the depths of the hellish negative liquidity event of 2011, it really doesn't take all that much buying pressure to move these promising junior miners – in quite large percentages.
From the depth of the nasty tax loss selling trough in December, Argus has doubled. It has done so on pretty convincing volume too in our view. Just below is a very much reduced snapshot of the chart of Argus that we share with our members. It is provided to put the volume candle chart above in context. Clearly we can say that Argus is attempting a reversal of both sentiment and confidence as we close out the first month of 2012.
Argus is representative of a number of our "Faves." So far so good and "steady as she goes…" That is all for now but there is more to come. |
| iShares Silver Trust Adds 98 Tonnes Posted: 31 Jan 2012 05:16 AM PST  By Tim Iacono: According to the latest data from iShares, their popular Silver Trust ETF (SLV) just saw the biggest one day addition to its holdings since late-September, that is, back when the price had plunged from above $40 an ounce to below $30. Some 98 tonnes were added to the trust yesterday - more than $100 million at current prices. What does this mean for investors? Well, it could be that one or more hedge funds have decided to make a bigger commitment to the silver market after the price surged more than 20% during the first four weeks of the year. Complete Story » |
| EUR Short Covering Just Started? Posted: 31 Jan 2012 05:11 AM PST By MarketPulse FX: By Dean Popplewell The EUR 1.32 handle was to be in the distant past. One Euro summit later, in tandem with month-end requirements, and we have a trading environment wishing to finally throw some volume about and a "lost" currency finding some of its mojo again. The dollar seems to have suffered the opposite fate over the last trading session, under-performing against its peers in response to the relatively constructive outcome from yesterday's flash EU summit in Brussels (the sixteenth in two years). It seems to be in the post summit, with reluctance, that the bears have been covering some of their longer term short EUR positions. The explanation that the Greek situation may be getting better is an explanation to fit the price action or is it the U.S., IMF and the Euro-zone working to combine the ESM and EFSF into a superfund with +EUR1.5t the reason? Investors have Complete Story » |
| Silver Surges 21% in January - Silver Demand Is “Diminishing A Supply Surplus” Posted: 31 Jan 2012 01:46 AM PST |
| Morning Outlook from the Trade Desk 01/31/12 Posted: 31 Jan 2012 01:23 AM PST Other than the Brits and the Czechs the balance of the European members have agreed to Germany's fiscal package, where as yet undefined, there will be penalties attached to being fiscally irresponsible. Great in theory, but will have to see the reaction of the populace, when the discipline is executed. No matter, the markets took this as a positive step forward and again bought the equities, which in turn was again price positive for the metals. The $1,720 support level held yesterday and now the $1,750 target is in sight, with a break on volume suggesting a try for $1,770 area. Any negative news on Europe will negate the momentum, but it appears we have until the end of the week before any Greek announcement, which suggests short term momentum is higher. The retail player as usual has missed this 10% upmove. When our volumes pick up and the balance of our orders are on the we sell side, look for a correction. |
| This chart shows it could be a great time to own tiny gold mining stocks Posted: 31 Jan 2012 12:18 AM PST From Frank Holmes of U.S. Global Investors: In volatile markets, small stocks typically lag larger companies as investors flee what they perceive to be risk. However, this love affair with large caps is generally short lived as investors return to the beaten-up small caps when the turmoil subsides. Historically, small caps have outperformed their larger counterparts. In 2011, junior miners were shunned, but Global Resources Fund (PSPFX) co-portfolio managers Evan Smith and Brian Hicks pointed out to me this week that we're beginning to see signs of small-cap strength. This chart compares the performance of the S&P TSX Venture Index (TSX), which holds a basket of junior resources stocks, to the returns of the Morgan Stanley Commodity Related Index (CRX). You can see that the junior stocks began... Read full article... More on junior resource stocks: How to make 1,000%-plus on junior mining stocks How to significantly reduce the risk of junior gold stocks Where the selloff in gold, silver, and junior miners could end |
| The world could finally be waking up to a new "safe haven" currency Posted: 31 Jan 2012 12:10 AM PST From Forbes.com: ... Gold, you see, is not a commodity like oil and copper and wheat. It is rather an alternative currency -- one that finds buyers when paper currencies like the euro are being hugely increased in supply by the ECB to forestall a sovereign cum bank crisis in Europe. ... As the supply of gold cannot keep up with paper money (supply increases very little despite exploration), and it can be bought without loss of any real interest income, it seems clear that the gold bull market is alive and well. Central banks, obviously, are of the mind that gold's rise will make up for the decline in paper money and the lack of income on central bank liquid investments. ... The drop to $1,525 in December triggered the renewed buying by the Chinese, who are the new... Read full article... More on gold: This announcement could be a "game-changer" for gold Incredible charts show the entire world is printing money like crazy Yesterday's Fed announcement could be the No. 1 reason to buy gold and silver now |
| This "forgotten" indicator could be warning of a new bear market Posted: 31 Jan 2012 12:05 AM PST From Alt-Market.com: Much has been said about the Baltic Dry Index (BDI) over the course of the last four years, especially in light of the credit crisis and the effects it has had on the frequency of global shipping. Importing and exporting has never been quite the same since 2008, and this change is made most obvious through one of the few statistical measures left in the world that is not subject to direct manipulation by international corporate interests; the BDI. Today, the BDI is on the verge of making headlines once again, being that it is plummeting like a wingless 747 into the swampy mire of what I believe will soon be historical lows. The problem with the BDI is that it is little understood and often dismissed by less thoughtful economic analysts as a "volatile index" that is too "sensitive" to be used as a realistic indicator of future trends. What these analysts consistently seem to ignore is that... Read full article... More on stocks: One BIG reason to be worried about the rally in stocks Warning: Investors are becoming unbelievably complacent Veteran analyst Granville predicts a stock market crash in 2012 |
| Posted: 30 Jan 2012 09:30 PM PST Gold and silver prices paused for breath yesterday following their price breakouts last week. Gold for April delivery at the New York Comex settled down 0.1% at $1,734.40 per troy ounce, while silver ... |
| Gold Is The Hottest Currency In The World Posted: 30 Jan 2012 09:23 PM PST ¤ Yesterday in Gold and SilverThe gold price came under steady selling pressure starting at precisely 8:00 a.m. Hong Kong time on their Monday trading day. The sell off accelerated a bit shortly after London opened...and the low of the day was in about 9:30 a.m. GMT. The price bounced off that bottom a couple of times after that, but the moment that the Comex opened in New York at 8:20 a.m. Eastern time, it was up...up...and away. But once the price broke above $1,732 spot, there was obviously a seller there to make sure that the price didn't finish the day above the Friday New York close. Gold closed at $1,730.30 spot...down $7.00 on the day. Net volume was a very light 79,000 contracts...or thereabouts.
Silver's price path was similar...and it's low came at 11:30 a.m. in London, which might have been an early London silver fix. The subsequent rally ran out of gas at 11:00 a.m. in New York right on the button, which also happened to be the close of London trading. After the London close, silver got sold off about 40 cents, but gained about half of that back by the close of electronic trading in New York at 5:15 p.m. Eastern. Silver closed at $33.50 spot...down 49 cents on the day. Net volume was on the light side at 27,500 contracts, a lot of which would have been of the high-frequency trading variety.
The dollar index opened in a rally mode the moment that trading began in New York at 6:00 p.m. on Sunday evening...and at 9:00 a.m. Eastern time yesterday morning, was up about 55 basis points...and then spent the rest of the trading day giving back about 30 points of that gain. The dollar index closed at the 79.10 level...up about 25 basis points from Friday.
The gold stocks pretty much followed the gold price action...and the HUI finished down 1.08%.
Considering the fact that silver was down about 50 cents on the day, the shares themselves hung in their very well...and Nick Laird's Silver Sentiment Index only closed down 0.84%.
(Click on image to enlarge) Well, the CME's Daily Delivery Report showed all the deliveries for First Day Notice for the February delivery month in gold. There were 893 gold and 114 silver contracts posted for delivery tomorrow. The big short/issuer in gold was the Bank of Nova Scotia with 845 contracts...and taking the lion's share of the deliveries was Deutsche Bank with 472 contracts...and Credit Suisse First Boston with 247 contracts. In silver, it was the three 'usual suspects' with the lion's share of the action. This time Jefferies was joined by the Bank of Nova Scotia as a short/issuer...with 38 and 76 contracts respectively...and JPMorgan stopped/received 100 of those contracts...49 for its client account and 51 for its in-house [proprietary] trading account. The link to the Issuers and Stoppers Report, which is worth skimming, is here. The GLD ETF had no report yesterday...but the SLV ETF did. Authorized participants added 3,158,805 ounces of silver...replacing, almost to the ounce, everything that had been withdrawn since the end of December. Ted Butler suspects that much more is owed to the fund than that. The U.S. Mint had a sales report. They sold 1,500 ounces of gold eagles...1,000 one-ounce 24K gold buffaloes...and 385,000 silver eagles. Year-to-date the mint has sold 122,500 ounce of gold eagles...12,000 one-ounce 24K gold buffaloes...and 6,082,000 silver eagles. Friday was another busy day at the Comex-approved depositories. They reported receiving 927,431 troy ounces of silver...and shipped a smallish 83,501 ounces out the door. The link to that action is here. Silver analyst Ted Butler has his usual weekly review posted for his paying subscribers on Saturday...and here are two free paragraphs... "The price takedown starting in late-September and lasting through the end of December was all about commercial COT positioning and price manipulation. Especially in silver, the epic decline in price with the concurrent radical change in the COT structure was deliberate and intentional. Only a fool, or someone who refuses to see, would fail to recognize what just occurred. Silver (and gold) were driven lower in price to force speculative selling and to allow the commercials to buy massive quantities of what the speculators sold. After the commercials bought as much as they could possible buy, then prices rallied sharply. It's impossible for this commercial activity to have occurred with collusion and intent. That the CFTC sat by and allowed this to occur (once again) without defending and protecting the public or our free markets is beyond shameful. "The CFTC's failure to regulate aside, this last few months seem to have developed as explained in advance, if not predicted. I did not predict (or expect) the 35% price smash over the last few days of September; but I feel I have explained it adequately. There is no way that one can be invested in a market and not invested at the same time. All you can do is pay your money and take your chances. Risk grows as prices increase, but the structure of the COT is still bullish and not bearish. Maybe that will change in time, but until it does it is reasonable to expect higher prices. And maybe sharply higher prices." Reader and technical analyst, Scott Pluschau, has a few things to say in his current blog. His e-mail read "This week's COT report was an eye-opener in the 10-year treasury futures." If you're interested in this sort of thing, here's the link to his blog. Here's a graph that Washington state reader S.A. sent me yesterday. It looks suspiciously similar to the one that was posted in a zerohedge.com article headlined "Europe's Scariest Chart" that reader Richard Craggs sent me yesterday.
(Click on image to enlarge) Since it's Tuesday, I have more than the usual number of stories posted, so I hope you have the time to skim them all. As Ted Butler pointed out on Saturday, the configuration of Friday's COT report for both gold and silver is still very bullish, with lots of room to run to the upside. Spring festival sparks a 'gold rush' in China. Von Greyerz sees gold ready for big move up. Turk expects imminent launch for monetary metals. Rick Rule - Gold, Silver, Takeovers & 2,000% Gains. ¤ Critical ReadsSubscribeFreddie Mac Bets Against American HomeownersFreddie Mac, the taxpayer-owned mortgage giant, has placed multibillion-dollar bets that pay off if homeowners stay trapped in expensive mortgages with interest rates well above current rates. Freddie began increasing these bets dramatically in late 2010, the same time that the company was making it harder for homeowners to get out of such high-interest mortgages. "We were actually shocked they did this," says Scott Simon, who as the head of the giant bond fund PIMCO's mortgage-backed securities team is one of the world's biggest mortgage bond traders. "It seemed so out of line with their mission." The trades "put them squarely against the homeowner," he says. This story was posted over at the propublica.org website yesterday...and I thank reader 'David in California' for sending it along. The link is here.  Goldman Sachs Among Banks Fighting to Exempt Half of Swaps BooksMore than half of the derivatives- trading business of Goldman Sachs, Morgan Stanley and three other large banks could fall largely outside the Dodd- Frank Act if they succeed in lobbying regulators to exempt their overseas operations, government records show. The debate over the reach of Dodd-Frank has been among the most contentious aspects of the regulatory overhaul enacted by President Barack Obama after the 2008 credit crisis. The banks have met with regulators, testified to Congress and filed dozens of letters contending that they will suffer a competitive disadvantage if the regulations apply to their foreign arms. This Bloomberg story was posted on their website late Sunday night...and I thank Washington state reader S.A. for sharing it with us. The link is here.  Walker's World: So Much for DavosWhat a difference a week makes. Had the latest downgrades by Fitch or the leak of the latest German plan to impose discipline on the Greek economy come as the Davos elite were gathering, the mood in the Alps would have been much colder. The tone for Davos was set by some temporary and probably mistaken signs of good news: The U.S. economy seemed to be recovering and consumer confidence was rising. China seemed to be avoiding a hard landing. The eurozone remained in crisis but the worst fears of a credit crunch had been eased by the extraordinary surge of $500 billion in low-cost lending by the European Central Bank. Even Spain and Italy seemed to be able to sell their latest bonds at less than punitive yields. As a result, the Davos consensus was relatively upbeat, assuming that the world (if not Europe) would avoid a double-dip recession and that even the Germans were coming to realize that the single-minded pursuit of austerity would have to be balanced by some commitment to restoring growth. But had Davos opened this week, the mood would have been different. This UPI story was posted from Zurich yesterday...and is Roys Stephens first offering of the day. The link is here.  RBS top bankers set to share £30m bonus potFive top investment bankers at RBS are in line to pick up around £30m in bonuses and pay despite the fierce public backlash against bumper pay-outs at the taxpayer-controlled lender. They are in line to take a big share of the bank's controversial £500m bonus pot. Speaking at the at the EU Leaders Summit in Brussels David Cameron hit out at RBS, saying the bank needed to "do a better job," especially "when they have had so much money from the taxpayer and they had made so many mistakes in the past." "What needs to happen is a sense of restraint, which is what the Government urged on RBS," said Mr Cameron. This is Roy Stephens second story of the day. It was posted in The Telegraph on Monday...and the link is here.  Spain's Finance Minister Cristobal Montoro admits unemployment rate has jumped to 24pcMr Montoro told a parliamentary commission on Thursday that official figures due out Friday will show 5.4m people were out of work at the end of December, up from 4.9m in the third quarter, when the jobless rate was 21.5pc. Spain already has the highest unemployment rate in the 17-nation eurozone and is near its record of 24.5pc unemployment, set in 1993. The new conservative Popular Party government has pledged major labor reforms in a desperate bid to halt further job losses. A similarly-aimed reform in 2010 by the previous Socialist government appears not to have had a major effect on the labor market. The economy is expected to fall back into recession this quarter - GDP fell 0.3pc during the last three months of 2011 and is expected to slide further through March. This third Roy Stephens offering was posted in The Telegraph last Thursday...and the link is here.  Mario Draghi, the Latin Bloc's monetarist avengerThe eurozone money supply is contracting at an accelerating pace on all fronts. The broad M3 gauge has fallen for the last three months in a row. A slump is already baked in the pie. Credit to hous |
| Mike Kosares: Survivalist George Soros Posted: 30 Jan 2012 09:23 PM PST  Billionaire investor George Soros is supposed to have sold his gold exchange-traded fund holdings, but Mike Kosares of Centennial Precious Metals observes that amid the world financial crisis Soros sounds more than ever like a gold investor. Soros, Kosares writes, now "seems to have moved away from politics as a final recourse to the crisis and begun to think about the practical business of personally surviving it." I thank Chris Powell for providing the above introduction...and the story is posted over at the usagold.com internet site. It's definitely worth your time...and the link is here. |
| Lehrman calls on Republicans to unite on 'sound dollar' platform Posted: 30 Jan 2012 09:23 PM PST  Writing for The New York Sun, the industrialist, philanthropist, and Reagan gold commission member Lewis H. Lehrman urges the Republican presidential candidates to unite around a platform of returning the United States to a system of sound money anchored by the gold standard, but one carefully reconfigured for the modern age so it can last. Lehrman's commentary is headlined "Lehrman To Romney, Santorum: Join the Alliance for a Sound Dollar". I borrowed the story, along with Chris Powell's preamble, from a GATA release yesterday. It's posted in yesterday's edition of The New York Sun..and the link is here. |
| Gold & Silver Market Morning, January 31, 2012 Posted: 30 Jan 2012 09:00 PM PST |
| Jim Sinclair: An Impending Undeclared Default Posted: 30 Jan 2012 08:40 PM PST In this "Breaking New"s unedited interview with Ellis Martin, Jim Sinclair reveals an impending undeclared default of 5 major US banks this week per the ISDA International Swaps and Derivatives Association related to events in Europe. Listen and learn from January 30, 2012.
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| Why Gold Is Shining Bright & What the Fed is Doing Posted: 30 Jan 2012 04:48 PM PST |
| Mainstream Economics as Ideology: An Interview with Rod Hill and Tony Myatt — Part I Posted: 30 Jan 2012 04:12 PM PST Rod Hill and Tony Myatt are Professors of Economics at the Department of Social Science at the University of New Brunswick in Saint John. Their new book, The Economics Anti-Textbook is available from Amazon. They also run a blog at www.economics-antitextbook.com. Interview conducted by Philip Pilkington. Philip Pilkington: Your book seems to me a much needed antidote to the mainstream economics textbooks and can either be read alone or together with them. I think that's a great approach because it allows students to become familiar with what is being taught in the classroom but also allows them to take a critical perspective on this material. So, let's start with the format of these textbooks. In the book you say that they "cloak themselves in an aura of objectivity". You then relate this to the fact that economics is not a value-free discipline and contains necessary ideological judgements. Could you talk about this a bit? Tony Myatt: That's correct. We say the texts cloak themselves with an aura of objectivity while at the same time implicitly (and repeatedly) making value judgements that reflect a particular ideology. Indeed, one of our main objectives in our Anti-Textbook is to provide overwhelming evidence of that. We believe that students subjected to the mainstream textbooks sense the bias in those texts (and the courses that rely on them) and it turns them off. They realize they are being sold something. They don't like being bamboozled. Evidence for this is provided by the recent walkout from Mankiw's introductory economics course. Even though the students could not elaborate very clearly the nature of the bias (in the letter they wrote explaining their actions), which unfortunately made them seem quite naive, those students were correct that the bias is there. One might say they intuitively sensed it. Delightfully for us, Mankiw replied to these students in his New York Times column, saying "I don't view the study of economics as laden with ideology…It is a method rather than a doctrine….a technique for thinking, which helps the possessor to draw correct conclusions." Notice the wording he uses, "correct conclusions." If there were "correct conclusions" to be drawn from using the economic method of thinking, there would be a consensus among economists on most positive economic questions. And while the mainstream texts always claim that such a consensus exists, the evidence suggests otherwise. I'm not just talking here about the profession's response to the financial meltdown and the ongoing economic crisis, but even more mundane questions such as the effect on unemployment of an increase in the minimum wage. So, Mankiw is simply showing his own bias by implicitly claiming a consensus, by saying there are "correct" conclusions to be drawn. Our perspective is that there is an ideology that pervades mainstream economics, especially in the way it is currently practiced and taught. There is an important point here: that we can distinguish between neoclassical economics itself, and the mainstream practice and teaching of neoclassical economics. The point is that it is more difficult to argue that there is a bias in neoclassical economics itself. The neoclassical paradigm is remarkably malleable. It is capable of transforming itself, of shedding many an unappealing feature in the hands of 'this analyst' or 'that analyst' or 'this paper' or 'that paper'. Moreover, the boundaries of mainstream neoclassical economics are blurry. It is not clear, for example, whether recent work on 'limited rationality' lies within the neoclassical paradigm or is a direct assault upon it. As another example, the work on imperfect information by Joseph Stiglitz overthrows many of the neoclassical presumptions about the efficiency of otherwise competitive markets, and the harmfulness of government intervention, and we see his work as being squarely within the neoclassical paradigm. One could even use neoclassical economics to show the importance of community ties and social cohesion, even though in the normal practice and teaching of neoclassical economics these things are totally ignored. That's why we called our book an "Anti-Textbook". The mainstream textbooks are remarkably uniform and do reflect a narrow range of world views. This is a much easier target to attack. And the mainstream textbooks do reflect the core beliefs of mainstream economists that inform their policy prescriptions. Your question to us was to explain why we feel economics is not a value-free discipline and necessarily contains ideological judgements. We can answer that question. But first, to understand what we did in our book, let's answer the easier question of why textbooks must necessarily contain ideological judgements. The textbooks necessarily contain ideological judgements because they are necessarily selective. They must include and emphasize some things and exclude or downplay others. They ask certain questions and not others. They place some topics and questions in the forefront, and put others in the background or leave them out entirely. Those decisions reflect implicit value judgements about what is interesting and important. No 'objective' account is possible. For most people – including many economists – this is not a controversial claim. So, our methodology, our way of getting around the amorphous nature of the neoclassical paradigm, is to focus on the mainstream neoclassical textbooks themselves. We point out their biases of omission and commission. We notice when claims are made without any supporting evidence, or when the so-called evidence is irrelevant or out of date. We notice when two thirds of the text assumes perfectly functioning markets which prohibits (by assumption) the importance of power. This focus on the textbooks does not mean that we feel there is no bias in neoclassical economics itself. Far from it. Every approach has a bias just as all economists have a bias. Our perspective is that it's best to acknowledge that fact at the outset. But I've said enough. Better let Rod have a turn… PP: The issue of power is an interesting one. I think what many students who feel instinctively critical of economics courses note from the outset is that the theories taught imply some sort of level playing field. Yet, you would have to be blind not to notice divisions of class and race in even the most prosperous societies. Could you talk about this a bit? Rod Hill: I think power is central to understanding the reality of economic life. For that reason, it's important that it be effectively obscured in the principles texts as students are taught how to 'think like an economist'. The texts typically manage this very well, although I'm sure their authors have no conscious intention to set out to do this. (This remarkable aspect of our propaganda system helps to make it so effective.) The texts do indeed imply a sort of 'level playing field' between buyers and sellers in both markets for goods and services as well as in the labour market. This follows from the central place that's given to the supply and demand model (which is "short-hand" for the perfectly competitive market). There, everyone is a 'price taker'. There is no room for businesses to use their bargaining power to squeeze workers' wages, to prevent workers from unionizing, to force down their suppliers' prices, or to raise their selling prices once they've eliminated their competition. (Think Walmart.) But 'market power', the ability to push the price away from a hypothetical competitive level, is just the tip of the power iceberg. At least the texts acknowledge this form of power, even if they downplay it. If students think for themselves, they could realize the practical irrelevance of the perfectly competitive market structure. More likely, at least with those who stick with economics, they will start to see the world as composed of competitive markets, regardless of their actual structure. Indeed, some textbooks explicitly justify this by asserting that most markets are 'competitive enough' to be approximated by perfect competition. Most aspects of power remain discreetly out of sight in the texts, even though, as you say, you'd have to be blind not to see them in real life. I like to paraphrase a line from Ben Bagdikian's The Media Monopoly: the texts can't tell you what to think, but they can tell you what to think about. So while they focus students' attention on these powerless markets, they say little or nothing at all about the power of the wealthy, or the businesses they own, and how they can influence the 'rules of the game'. As Ha-Joon Chang reminds us in the first chapter of 23 Things They Don't Tell You About Capitalism, there is no such thing as a 'free market': all market exchange takes place within a set of rules and institutions and those matter to market outcomes. But any serious discussion of what determines them would draw attention to the links between economic and political power. It would also provide an extra reason to be concerned about the rapid growth of economic inequality in many countries. In the world of the texts, the managers of profit-maximizing firms allegedly spend all their time trying to hire the right combinations of labour and capital while spending no time trying to increase profits by influencing laws and regulations. In the world of reality, small armies of lobbyists and corporate lawyers work to do just that, even helpfully drafting laws for busy legislators whose political campaigns they help to finance. Incidentally, the one notable exception to this in the texts is the discussion of regulating monopoly. The story is that regulators are often 'captured' by the industry they are supposed to regulate so that with government screwing up (as it often does in textbook examples) no regulation might be the better option. An ideologically convenient story! Other aspects of power are also absent. The firm is largely treated as a black box, so authoritarian relations within it are ignored; questions of economic democracy do not arise. The analysis of trade and foreign investment ignores the effects of the relative power of different countries. I can't prove how all this affects students. But in my own case I feel I was effectively blinded for an embarrassingly long time to many of these obvious aspects of the world. PP: And how do you think the textbooks go about hiding these sorts of assumptions? Rod Hill: In a way, I think the texts hide these assumptions in plain sight while using the magician's trick of focussing the students' attention elsewhere. When the supply and demand model is introduced, the texts don't stress the unrealistic assumptions of the perfectly competitive model (perfect costless information, no geography so that all transactions take place on the head of a pin, no one has any power over prices, no product differentiation). In part, this is because these are deemed to be not important for the questions being asked. Students' attention is directed to questions where the model's predictions seem to accord with common sense: demand goes up, prices rise; costs go up, prices rise, and so on. The student might think this looks plausible and, for much of the text and the course, it's the only game in town. But the model also predicts 'no advertising', 'no political contributions by firms', 'little or no research and development spending', 'all sellers sell identical goods for the same price' , and 'people doing the same work get the same wages' in the labour market. However, no questions about those things are asked, so the predictions are not confronted by the evidence that would refute them. Students would have to figure this out for themselves. And not coincidentally, these questions also raise issues of power: firms' power over consumers, firms' power in the political arena, firms' power over their workers. So independent-minded students could ask these questions, but (unless they stick around long enough to go to graduate seminars) they are not shown any way of thinking about them in their principles of economics class. Tony Myatt: And I'd add to that it's not just a question of emphasis – that the texts assume perfectly competitive markets for three quarters of the book. It's also a question of placement and progression. The usual progression is an early chapter on methodology, which emphasizes that the realism of assumptions doesn't matter – it's predictive power that matters. This is followed by a section often called 'How Markets Work', which applies demand and supply to every conceivable type of market. If students are paying attention they might notice that the results of these applications are usually treated as facts – not predictions that need to be tested against the evidence – and certainly not treated as predictions that need to be compared against the predictions of alternative models. And this is a real irony: having sold the student on the unimportance of the realism of assumptions and the overriding importance of predictive power, the texts don't follow their own methodology. They never take the business of comparative model testing seriously. And for practicing economists, we know that's where the real fun begins. Emphasizing (or assuming) perfect competition is the same as assuming away power because in this market structure there are no 'large' market participants who can exercise influence over either market outcomes or political outcomes. Neither buyers nor sellers have influence over prices. Sellers are small and lean, just covering their costs. On their own, they lack resources and the incentive to lobby politicians. Such firms would also lack resources to invest heavily in research and development. And this is another irony, because technological change is the one thing that you could say capitalism has done well. Yet, the texts emphasize a market structure that is incapable of explaining this exact feature! PP: You say that no alternative models are taught in the classroom. I've heard this criticism raised many times before and it has always struck me as rather strange. In just about every other social sciences class it is a prerequisite that the lecturer teach the major different approaches, to do otherwise would be considered biased. In your opinions, how do economists get away with this where others cannot? Tony Myatt: Well, we need to be careful here. Other models of market structure besides perfect competition are taught. Monopoly, monopsony, imperfect competition, and oligopoly are all taught. But they are placed towards the end of the book. Later, when we need to explain the distribution of income, or the benefits of trade, the texts return to assuming perfect competition, to the demand and supply framework, as if that intervening stuff never happened. The argument is that perfect competition is simpler, and is good enough as a first approximation to all markets. But perfect competition is actually a lot more complicated than monopoly. Why not apply monopoly as a first approximation? But that would have a huge ideological impact. It would mean that power, cronyism, and exploitation are potentially important. It would mean that the economy doesn't necessarily operate efficiently (as a first approximation), and that unions don't necessarily cause inefficiencies. It would mean that there is a potentially much bigger role for government regulation. And the point is, when discussing a particular topic – international trade say – the texts don't say "if we assume perfect competition we get these predictions; if we assume imperfect competition we get these predictions; now let's compare the predictions to the facts". This is thought to be too complicated, too advanced. But this is a cop out, a dereliction of duty, and is inconsistent with the methodology which the textbooks purport to endorse. So, while other models of market structure are taught, they are downplayed. On the other hand, no other paradigms are taught. The mainstream textbooks only contain information about the neo-classical paradigm. How do they get away with this? Again, it's a question of keeping things simple. They argue they don't want to confuse the student. It's hard enough to teach neoclassical concepts without further confusing students with critiques of what they are learning. There's a nice video of Stephen Marglin addressing the Occupy Harvard movement where he discusses this. (Here's the link http://www.youtube.com/watch?v=Pf0-E8X-GHo ). He tells how, in his "critical perspectives" introductory economics course, he begins by teaching the neoclassical theory. Then he introduces several critical perspectives. And he acknowledges that this is a huge undertaking. He acknowledges that it takes most students most of their time to get their heads around the neoclassical concepts. But he also acknowledges that in most economics departments there is never a good time for the critique. If it's too hard for first-year economics students, it's certainly too hard for high-school students. And then graduate students need to have a ton of maths packed into the curriculum, so there's no time there. So, as he says, "economists are all for critical thinking, just not today…tomorrow." In fact in my own "critical perspectives" course I use our Anti-Textbook. I teach the mainstream material (that's the first part of each chapter). And the students teach the Anti-Text material (the second part of each chapter). They enjoy shooting me down! So far, it seems to work well. But I've been fortunate to have a small class. Rod Hill: I'd just add that the dominance of the neo-classical paradigm (at least in the English-speaking world) means that there's less internal pressure within the profession to provide other viewpoints in a principles course than there might be in, say, sociology. Lecturers trained only in neo-classical economics are comfortable using textbooks that contain only that viewpoint. Most students come to their undergraduate studies in economics with no knowledge of different approaches so they are not in a position to ask 'Hey, what would ecological economics have to say about that?' They rely on their instructors to tell them what economics is. I remember as an undergraduate stumbling upon a copy of Galbraith's The New Industrial State in a used book shop, reading it and finding it interesting, and wondering 'Why have I not heard about this in my courses?' But I rarely asked such questions and had no access to the kind of guidance that we're trying to provide in The Economics Anti-Textbook.
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| Posted: 30 Jan 2012 04:05 PM PST By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2006 and 2010) Your Excellency, I am pleased to present the requested report on the economic outlook for the Great Southern Province of China, currently referred to by the local population as "Australia". For convenience I will refer to the country by this older name. We will now turn to the outlook. A Fork in the Economic Road … The commodity boom has created a "two track" economy – as your Excellency know economists prominent in the media love glib "sound bites". The mining and commodity boom benefits a small part of the economy whilst simultaneously creating problems for other parts. The mining and energy sector account for less than 10% of the Australian economy. This is smaller than the Australian finance sector or manufacturing industry. Mining and mining-related sectors, such as construction, manufacturing and services industries which benefit from mining activity, make up about 20% GDP. These sectors will contribute approximately two-thirds of the projected 4% GDP in 2011/12. The remaining 80% of economy will contribute one-third of growth. Mining employs 1.5% of the workforce reflecting its capital intensive nature. Unfortunately, a portion of the equipment needed is imported adding to the current account problem, especially in the short run. A combination of high domestic costs and the strong Australian dollar means that a significant portion of project related work is now done offshore. The revenue earned and the overall contribution to national income does boost the economy and creates employment. But dividends and interest payments to overseas investors reduce the amount of earnings that stays in Australia. The concentration of mining activity in Western Australia and Queensland also creates imbalances within the domestic economy. Skill shortages in mining means rising salaries, attracting workers from other industries and placing pressure on general wage levels. It also exaggerates property price increases in some areas. This creates inflationary pressure that forces the Reserve Bank of Australia to raise interest rates. The rising demand for Australia's mineral exports also pushed up the value of the Australian dollar. Since deregulation in 1983, one Australia dollar has purchased, on average, around 77 US cents. The commodity boom and Australia's high interest rates relative to the rest of the world increased the value to around 95 to 100 US cents, peaking at around 110 US cents. The high Australian dollar places exporters at a cost disadvantage and also makes it difficult to compete with cheaper imports. Affected sectors include key Australian export industries that are significant employers such as education services, tourism and manufacturing. Australia may lose up to 170,000 manufacturing jobs over the next 10 years, almost double lost jobs in the past decade. Unhappy Homes… The domestic economy remains lack lustre. Consumers are affected by significant debt levels and weak wage growth. Public spending has fallen reflecting pressure to return the budget to surplus. Business investment has been weak, reflecting sluggish demand. Debt levels remain high. Between 1991 and 2011, household debt rose from around 49% to 156% of disposable income. In 1989, when mortgage rates were 17%, the ratio of interest payments to disposable income was 9%. Currently, despite the fact that mortgage rates are around 7.5%, the ratio has increased to around 12%. As households increase savings and reduce debt, consumption is lower contributing to slower growth. Slow growth in credit, reflecting households reducing debt and problem in the banking sector, also constrains growth. Employment in manufacturing, retail and financial services is weakening, with major employers announcing layoffs. There are other unresolved problems. Housing prices remain high based on traditional measures such as affordability and rental returns. According to the latest Economist survey (published on 26 November 2011), Australian house prices were overvalued by 53% based on rents and 38% measured against income levels relative to long run averages. According to The Economist, Australian home prices are overvalued by at least 25% based on the average of these two measures. The level of overvaluation is greater than in America at the peak of its housing bubble. As your Excellency personally experienced during his visit to Australia, no subject excites greater passion among the locals than house prices. This is a staple of conversation and people excitedly compare the size of their mortgages and the value of their accommodation. There is heated disagreement between those who believe that house prices will not fall and other who forecast substantial price falls. The real issue is over investment in housing stock, which produces low or nil return. Encouraged by complex subsidies, large amounts of capital are locked up in housing, unavailable for more productive wealth creating activities such as new industries. In international rankings, Australia regularly performs poorly in competitiveness, productivity and innovation. This is inconsistent with the national character, which prides over achievement in competitive sports. Australia believes it can "punch above its weight". In a recent paper entitled "Productivity – The Lost Decade", economist Saul Eslake found that Australia's productivity growth during the 2000s was 0.50% below that of the 1990s, when it was broadly comparable to the OECD average. Between the mid 1990s and the mid 2000s, annual labour productivity declined from 2.8% to 0.9% per annum. Over a similar periods, broader measures of productivity that incorporate capital as well as labour fell from 1.6% to near zero. The GE Global Innovation Barometer ranked Australia 16th out of 30 countries, well behind the leaders like the US and Japan. While 18% of local business leader, perhaps blinded by patriotism, nominated Australia, only 2% of global senior business executives citing the country as an innovation champion. The GFC also significantly reduced the wealth of individuals, especially retirees. The value of their investments declined. At the same time, income and returns from investments also declined. The "wealth effect" limits consumption but also encourages those planning for retirement to increase their savings. These problems mean that Australia's non-mining sector is forecast to grow at a modest 1% per annum, compared to the mining sector which is forecast to grow at 5%. Where are We Now… Your excellency, the country is a fest of complacency. Locals are convinced that there is no end in sight for the mining boom driven by China's growth. They believe that they are protected against the problems in Europe and elsewhere. Anyone who points out the risks is dismissed as a pessimist and doomsayer. Despite the recovery, many parts of the economy, other than the buoyant mining sector, remain subdued. The stock market, although not an accurate measure of economic health, remains over 30% below its levels before the crisis. Interest rates for 3 and 10 year government bonds have fallen sharply to record lows, reflecting increased pessimism amongst investors about economic prospects. Australia remains vulnerable. A slowdown in Chinese growth and fall in commodity prices and volumes would affect the economy adversely. Australian history suggests that mining booms are finite and end suddenly causing significant disruption. Problems in sovereign debt and attendant pressures on banking system may decrease available funding and increase borrowing costs for Australian banks and companies. Overvalued house prices and high household debt increases vulnerability to an economic slowdown, with an accompanying rise in unemployment or to higher mortgage rates. A credit crunch or recession could cause house prices to fall worsening domestic conditions, which would in turn affect domestic banks. The perfect storm for Australia would be the coincidence of those events. Australia has some flexibility. Public debt around A$250 billion is a modest 22% of GDP providing flexibility to stimulate the economic. But this capacity can be over estimated. Prior to the GFC, Ireland's debt levels were modest around 25% of GDP but the need to bailout troubled banks and the collapse of the real estate market led to debt levels increasing rapidly. Australian interest rates are relatively high (official rates are 4.25%), providing flexibility to cut borrowing costs to buffer any shock. The currency is flexible and a fall in value of the Australian dollar would help cushion any weakness, as was the case in 1997/1998 Asian crisis and again in the GFC. Your Excellency will also be aware that Australia Treasurer Wayne Swan was recently anointed as the world's best Finance Minister. His skills may assist in navigating through any crisis, should such an event occur. But it is worth noting that a previous Australian Treasurer received similar accolades in 1984, only to subsequently preside over a deep recession, which "the country had to have". Your Excellency has requested my recommendations for whether we should launch our bid for Australia, to be renamed the "Great Southern Province of China". I believe that we should await developments. We should be able to acquire Australia at a cheaper price in the not too distant future. Yours truly The Chinese Envoy
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| Posted: 30 Jan 2012 02:54 PM PST Below is an excerpt from a commentary originally posted at www.speculative-investor.com on 29th January 2012. The three best ways to view the secular stock market trend are via: 1. A long-term chart of the market's price/earnings ratio. 2. A long-term price chart with the price data adjusted for changes in money supply, productivity and population. 3. A long-term chart of the market's performance relative to gold. One reason that these are effective methods of viewing the secular trend is that they remove changes in currency purchasing power from the picture. An alternative would be to look at a chart showing performance in nominal currency terms, but such a chart could be deceptive due to the real trend being masked by currency depreciation. The US stock market's real trend was masked by currency depreciation from the mid-1960s through to the early-1980s. During this period, a large reduction in the US dollar's purchasing power transformed a major downward trend into a horizontal trading range. Something similar has happened over the past 12 years. After we remove changes in the US dollar's purchasing power from the equation it not only becomes clear that the US stock market has been in a secular decline over the past 12 years, but also that the US stock market's most recent secular decline is unfolding in a similar way to the preceding episode (the secular bear market that lasted from the mid-1960s through to the early-1980s). The similarities are illustrated below via charts of the Dow/gold ratio.
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| Interview - Chris Duane (Silver Shield) and Steve Quayle with the "Omega Man" Posted: 30 Jan 2012 02:26 PM PST |
| Posted: 30 Jan 2012 02:18 PM PST An old (2010) post but a good one GGR Excerpt - The Silver Plan HOUSTON – With gold thrusting higher, very close to its all time highs; with silver probing new bull market highs in the $34s and the gold/silver ratio at 30-year lows near 41 ounces of silver to "buy" an ounce of gold, we present below a short excerpt of Sunday's full Got Gold Report. The full report was delivered to Vultures (Got Gold Report subscribers) Sunday afternoon via email and posted on the password-protected GGR subscriber pages then. This particular excerpt sets out our own plan for what to do with our holdings of physical silver. It is therefore our "game plan" for the silver "endgame." Each investor must make up their own minds about such things and our plan is uniquely suited to our own situation, expectations, temperament, etc., so it is unlikely to be appropriate for everyone. In short, this excerpt of the full report gives Vultures an idea of what our plans are – as merely an idea, a starting point to consider in their own careful deliberations for their situation. With that intro, below is an excerpt of the full 27-page Got Gold Report from Sunday, February 27, 2011. To subscribe to the Got Gold Report, please click on the GGR Subscribe link above and to the right, and thank you for doing so. Subscribers help to make GGR possible. The Silver Plan It has been a long time coming, this major silver "catch up" move to gold's big rally (or the dollar's demise, whichever one prefers). We cannot know for sure, indeed no one can, but we are of the firm opinion that silver has begun its rapid march to reclaim its historic relationship to gold. If it unfolds even close to the way we expect it will, before this secular bull market for silver expires in the future, we expect that silver will have returned to something between 15 and 20 ounces of silver to one ounce of gold. charts: http://www.gotgoldreport.com/2011/03...ver-plan-.html |
| Everything Isn't Fine in the US Economy Posted: 30 Jan 2012 12:52 PM PST Reckoning today from Baltimore, Maryland... Tutto va bene... That was what the crew told passengers on the Costa Concordia just before it sank. And it was what the crew of the USS America - the biggest cruise ship of all - were telling passengers last week. Tutto va bene. Trouble was, tutto was not going as bene as they claimed. Instead, the ship is sinking. Stocks sank on Friday. Oil slipped below $100. And the yield on a 10-year T-note dropped to 1.89%. Gold kept going up. None of these are signs that the voyage is going well. The US economy has come back to output levels of '07. But this feeble rebound not only holds the title of "weakest post-war recovery ever," it also shows that something else is going on. Most economists have no idea what. So, they just think this "recovery" is unusually slow. Ben Bernanke, for example, has pledged to hold down interest rates (at negative real levels) for another three years. He also let it be known that he has his finger on the trigger, ready to blast out some more QE at a moment's notice. Last week produced news that the US economy expanded in the previous quarter. It went up at a 1.8% annual rate, far below the 3% consensus estimate of economists. That returned it to '07 output levels, but at what cost? The feds have added $6 trillion in new debt to regain some $600 billion in annual output. Whoa! And indications are that growth will be just as disappointing this year as it was last. Bloomberg has the story:
US economic growth may not top 2 percent this year and a third round of quantitative easing by the Federal Reserve would have little effect, said Martin Feldstein, a professor of economics at Harvard University. Another Bloomberg report tells that consumer spending is already weakening:
Spending at retailers lost momentum each month in the fourth quarter, slowing from a 0.7 percent gain in October to a 0.1 percent increase last month. Merchants including Macy's Inc., Gap Inc. and Target Corp. cut prices to attract more business during the holiday shopping season... Our guess is that consumer spending will weaken further as the bear market in housing gets worse. December house sales were the worst in nearly half a century. AP is on the beat:
The Commerce Department said Thursday new-home sales fell 2.2 percent last month to a seasonally adjusted annual pace of 307,000. The pace is less than half the 700,000 that economists say must be sold in a healthy economy. And guess what? The outlook for housing is still not improving. Business Insider explains why:
Michelle Meyer, the well-known housing analyst for BofA/ML, has some bad news: The housing crisis isn't over. Ms. Meyer's estimates seem rather optimistic to us. We'd guess that house prices will go down another 20%. Maybe more. Because, people have less money to spend on housing. Real disposable incomes are lower today than they were a year ago. People who buy houses don't really worry too much about the price. What concerns them is the monthly payment. They buy as much house as their monthly income will allow. That was the real driver of the housing bubble of '05-'07. Interest rates had been going down for 30 years, lowering monthly mortgage payments. That made it easier to pay a mortgage. Housing prices were going up steadily, giving the impression that houses were a good investment. And the mortgage industry would lend to anyone, solvent or insolvent, jobless or working, dead or alive. That put a lot of air into the housing market. Now, interest rates are still going down, as near as we can tell. But with incomes going down and lenders much more cautious, the air has whooshed out of the market. It's no longer pressure-packed. Now it's vacuum-sealed. Remember, household debt-to-income was only 70% at the beginning of the '80s. Now, it's 120%. In order to get it down, households need to unload debt - especially mortgage debt. That is, they need to save. Savings rates have recently fallen...to 3.5% down from 5.7%. They will probably go back up as the Great Correction continues. Which will mean...housing will fall, maybe by 20% more. Let's see, housing falling...incomes falling...consumers retrenching...negligible GDP growth... Tutto va bene! Regards, Bill Bonner |
| The Coming Paradigm Shift in SILVER Posted: 30 Jan 2012 12:51 PM PST http://www.tfmetalsreport.com/blog/3...m-shift-silver Very good article. Especially if you want to get some perspective into the economy/PMs from a macro point of view. For those thinking of investing in PMs, take the time to read this. For those who have already invested in PMs, here's some more reassurance that you're doing the right thing. |
| What the Facebook IPO Says About Your Most Valuable Asset Posted: 30 Jan 2012 12:51 PM PST Did you hear that social networking site Facebook may go public this week? This is important. Facebook has 800 million users (who pay nothing). The fact that the company is ready to sell shares to the public and Wall Street is underwriting for the initial public offering (IPO) can only mean one thing: the age of superficial communication devoid of real content and real meaning may be peaking...as soon as tomorrow! We'll get to how Facebook diminishes the quality of your thought in a moment. But first, Mark Zuckerberg is about to find out that in order to cash in you have to reveal. The upside of an IPO is that your equity in a private enterprise is now liquid and usually trades at a much higher value than what you paid for it. That's the good news. The downside of becoming a public company is increased transparency. Your shareholders know how you make your money and how you spend it. The public can see where you generate your revenue and how (or if) your business model works. This is problematic for Facebook. The company probably makes some hefty coin selling space to advertisers. But Facebook's most valuable asset is harder to value. Its most valuable asset is the data it's accumulated on you...what you look at...what you buy...where you live...who you're friends with. CNBC's Jim Cramer reckons Facebook is a buy with a market value of $70 billion but a sell if it goes public at $110 billion. Bless him. IPOs like this can only happen when the public has an appetite for growth stories. But the stories can't be too detailed. That would get in the way of an accurate valuation. IPOs are about the future. And you can't put a price on that, can you? The image below (ironically captured from a friend's Facebook page) shows this tension between how Facebook is perceived and what is really going on under the hood. Facebook is valuable as long as users pour their time and information into it. The data you generate as a user is what's making Zuckerberg rich (and good on him, by the way). 
Has the coordinated reflation of stock markets by central banks since Lehman Brothers collapsed in 2008 actually been a giant pump-and-dump exercise? Were QEI and QEII like mini-IPOS for the stock market in general, a kind of re-selling and rebranding of stocks as an asset class? And so here we are, eight months later. Greece is still cracking. The Fed has committed to keeping US interest rates low until the end of 2014. Central banks are expanding their balance sheets. This could inject lots of low-cost money into the stock market and risk assets to keep financial asset prices from collapsing. Into this wave of confidence in stocks, Facebook goes public. In point of fact, the All Ord's are down about 5% since we wrote that article last June. The S&P 500 is up 3.5% over the same time. Of course, an Aussie-dollar-based investor would have done far worse in real terms buying US stocks because of the strong Australian dollar over the same period.  We'll have to wait and see whether the Facebook IPO takes on any historical significance. Is it really the high-water mark for the age of superficial communication? Are we being too hard on it? After all, what's wrong with people sharing inspirational sayings or taking pictures of their food for the rest of us to see? There's nothing sinister in it. But it IS telling that the biggest American business success story of 2012 - at least in IPO terms - could be a company that doesn't really make anything. It sells data. And that data is only valuable as long as you continue to consume, or as long as the world's growth is driven by consumption. When you look at it that way, it DOES seem like a high-water mark for the age of credit-driven growth. We'll get back to that subject tomorrow. But yes, there is a more interesting angle here. Facebook isn't all fun and games. Our growing belief is that the human central nervous system is not evolved to survive when bombarded by so much useless, time-consuming news and information. And we're referring to the whole world of online and mobile information, of which Facebook is just the most visible example. This kind of mediation of reality could be making everyone crazy, or at the very least, uninteresting to talk to. The neurochemistry of the human brain is pretty sophisticated. But it evolved for a world where the kind of information we processed didn't change for tens of thousands of years. That information was primarily sensory: big tiger footprint ahead in the mud. Hmm. Tiger must be near! Great Caesar's ghost! Tiger must be near! Fight? Flight! The human brain produces cortisol to heighten focus during stressful situations, like being hunted by a tiger. The brain alters its own chemistry so that we can concentrate on the immediate threat. But over time, heightened stress levels impair other cognitive functions and may even affect our memory. A brain under constant life/death/threat pressure is not a healthy brain. In fact, human beings can only operate under highly stressful conditions for a limited period of time before we're physically and mentally exhausted. Cortisol is a stimulant to promote survival in life or death situations. But like anything, too much of it over time is not good. Besides, operating at maximums stress all the time would prevent us from doing other things with our frontal lobes, like developing speech, inventing the steam engine, serenading Juliet on her balcony, painting the Sistine chapel, or curing polio. In other words, it would be a colossal disappointment for our species, in evolutionary terms, if information overload - with its constant stream of mostly superfluous but mildly stressful news items - degraded our cognitive capacity over time. What if the Internet is making us more dumber? At the very least, processing a large quantity of mostly irrelevant (non-threatening)information occupies more of our conscious thought and time than it used to. We have less time to think deeply about things. If we fall into bad habits, we spend more time watching videos or responding to stimuli of an unimportant nature. On the plus side, at least tigers aren't chasing us. The Apex Predator in the human ecosystem is now the State, not the lion, tiger, or bear. And there are some amazing, collaborative things that are only possible on the Internet. Check out this Star Wars Uncut project, in which hundreds of strangers re-created a 15-second segment of the original Star Wars movie to create something incredible. It's amazing the power that story still has to inspire interest and wonder. But at the worst, if we persist with our modern way of gadget-mediated living, it's possible we're actually reprogramming/adapting our brain to operate in a world of information overload. This probably does not promote our survival as a species. The Daily Reckoning is valuable information, of course. So it is exempted from this discussion. Your best survival strategy? Turn off the wi-fi, shut off the ringer on your phone, pick up a book or go for a run. Time is your most valuable asset. And it's the one asset we all have equal amounts of. How we use it is what distinguishes us from one another. We'll need other survival skills in the 21st century, and they won't include writing a clever status update on Facebook. Regards, Dan Denning |
| Commodities and the European Debt Crisis, How Does it Work? Posted: 30 Jan 2012 12:34 PM PST While it may have very little on effect on the actual goings-on of the world, we are always interested in what the prognosticators might say about debt crises and their effects on commodity prices. On one hand, a faltering euro leaves only the dollar as a "safe" currency—meaning the debt crisis in Europe is good for the dollar and bad for commodity prices. But any deep analysis will show the entire system build on faith in fiat is deeply flawed—and destined to collapse. A big component that analysts have failed to recognize is that the ecosystem of largely European banks that once lent essential short-term loans to commodity projects has failed. In today's Financial Times Commodities Note, commodities analyst Javier Blas says this: |
| Silver Powering 20 Million Homes as Supply Surplus Subsides: Commodities Posted: 30 Jan 2012 11:46 AM PST Record industrial demand for silver and resurging investor interest is diminishing a supply surplus, driving the metal used in everything from solar panels to batteries into its best start to a year in almost three decades. Manufacturers will use 15,415 metric tons, 2.5 percent more than in 2011 and reducing the glut by 41 percent to 3,297 tons, Barclays Capital estimates. Investors may buy 2,000 tons through exchange-traded products, after selling 1,300 tons last year, Morgan Stanley predicts. Prices will average $37.50 an ounce in the fourth quarter, 12 percent more than now, the median estimate in a Bloomberg survey of 13 analysts shows. The metal rallied 23 percent since closing at an 11-month low in December, entering a bull market on mounting confidence that another global recession will be avoided even as the World Bank and International Monetary Fund cut their growth forecasts. Prices had plunged 44 percent in eight months, making it the most volatile of any metal tracked by Bloomberg, as expansion slowed from Europe to China, crimping demand for commodities. "Silver got hammered and now we're into a phase where it will do quite well," said Dan Smith, an analyst at Standard Chartered Plc in London, and the second-most accurate price forecaster tracked by Bloomberg Rankings in the past eight quarters. "Appeal comes from its widespread use in both industry and investment. I think it's relatively cheap." Standard & Poor's The commodity advanced 20 percent since Dec. 31 to $33.3875, the best start to a year since 1983. The Standard & Poor's GSCI Total Return Index of 24 commodities rose 2.6 percent and the MSCI (MXWD) All-Country World Index of equities 4.7 percent. Treasuries lost less than 0.1 percent, a Bank of America Corp. index shows. This year's anticipated gains in silver will mean record profit for Coeur d'Alene Mines Corp. (CDE) and Fresnillo Plc (FRES), analyst estimates compiled by Bloomberg show. Economies may still pose the biggest threat to the rally. The IMF cut its 2012 forecast on Jan. 24 to 3.3 percent from 4 percent and warned that Europe's debt crisis threatened to derail the world economy. The World Bank reduced its estimate by the most in three years on Jan. 18, to 2.5 percent from 3.6 percent. Global industrial production will expand 2.3 percent, from 4.9 percent in 2011, Macquarie Group Ltd. predicts. The 0.5 percent contraction in the 17-nation euro region seen by the IMF may curb demand for imported goods. Chinese exports rose 13.4 percent in December from a year earlier, the slowest pace since February, according to customs data. The nation imported 235 tons of silver in December, 36 percent less than the average over the past two years, the data show. Industrial Demand "In the face of weak industrial demand, the short-term investment argument is not entirely convincing," said David Jollie, an analyst at Mitsui & Co. Precious Metals Inc. in London and the most accurate forecaster in the London Bullion Market Association's 2011 price survey. "It's much more difficult to get people to invest for the long term in times of economic uncertainty." For now, speculators are getting more bullish. Hedge funds and other money managers more than doubled wagers on higher prices this year, Commodity Futures Trading Commission data show. They held 16,034 futures and options in the week ended Jan. 24, the most since mid-September. The most widely held option gives the owners the right to buy silver at $40 by June, data from the Comex in New York show. The three biggest holdings are all call options at 20 percent or more above prices today. Investors added 196 tons to their ETP holdings this month, taking the total to 17,492 tons valued at $18.8 billion, within 7 percent of the record reached in April, according to data compiled by Bloomberg. They also bought 5.697 million ounces (177 tons) of American Eagle silver coins, the most in a year, data on the U.S. Mint's website shows. Kodachrome Film Those sales are witling away the supply glut as industrial consumption strengthens. Global solar-panel installations increased capacity by 70 percent last year, creating enough generating power to supply about 20 million homes, according to the European Photovoltaic Industry Association. The metal is also used in electrical conductors, wood preservatives and alloys, compensating for a slump in photographic film demand. Eastman Kodak Co. (EK), based in Rochester, New York, said in 2009 it would stop making Kodachrome film after more than seven decades and on Jan. 19 filed for bankruptcy. Demand for silver from photographic-film makers slid at least 66 percent in the past decade, the Washington-based Silver Institute estimates. Gold Ratio Silver may still cheap relative to gold, with a price ratio of 51.5, down from 57.4 in December. It averaged 32.4 in 1980, when silver reached a record $50.35 in New York trading. Nelson and William Hunt of Dallas were convicted eight years later of conspiracy for attempting to manipulate prices and were ordered to pay $130 million. In inflation-adjusted terms, that peak would be equal to $138.31 as of last year, according to a calculator from the Federal Reserve Bank of Minneapolis. Crystalline silicon solar panels use as much as 0.12 grams of silver per watt, and as much as 40 grams go into a 32-inch plasma television, according to VM Group, a London-based research company. Electronic-equipment manufacturing will expand 5 percent this year, according to Los Altos, California-based researcher Henderson Ventures in a December report. Coeur d'Alene, which gets about 69 percent of its revenue from silver, will report profit of $241.50 million this year, compared with an estimated $120.25 million in 2011, according to the mean of four analysts' estimates compiled by Bloomberg. Shares of the Idaho-based company gained 19 percent since the start of January. Most Accurate Forecaster Fresnillo will report net income of $988.7 million this year, compared with an estimated $945 million in 2011, the mean of six estimates shows. Shares of the Mexico City-based company jumped 17 percent in London this year. "Silver is a hybrid," said Bart Melek, the head of commodity strategy at TD Securities Inc. in Toronto and the most accurate forecaster tracked by Bloomberg Rankings in the past eight quarters. "It benefits from being precious. Later on in the year we're going to see a bit of a recovery in industrial demand." To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net. To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net. http://www.bloomberg.com/news/2012-0...mmodities.html |
| Posted: 30 Jan 2012 11:43 AM PST from The Daily Bell:
Return of the Gold Standard Imminent … The gold standard will precipitate a massive deflation. The ensuing chaos will help usher in their coveted New World Order and World Currency. What has been in the cards for decades is now fully on the agenda: the return of the Gold Standard. Gold as currency is a weapon. It is a wealth transfer to those holding Gold, which is not the 99%, and will precipitate a massive deflation. The ensuing chaos will help usher in their coveted New World Order and World Currency. – Anthony Migchels / HenryMakow.com Dominant Social Theme: Gold is a barbaric metal. Free-Market Analysis: Energetic social-credit entrepreneur Anthony Migchels is back with a spirited criticism of a "gold standard." His article appears – as have others by him – on Henry Makow's website and is focused on a few main points that have in part been made by other critics of a gold standard. We are grateful to Mr. Migchels – and to neo-Greenbacker Ellen Brown – for continuing to advance a larger monetary debate over fiat versus money metals, even though we think to some degree it aids those who want even bigger government than we already have. Read More @ TheDailyBell.com |
| WATCH: Vision Victory on SRSrocco's Editorial Posted: 30 Jan 2012 11:42 AM PST VV comments on "a very disturbing chart and a MUST READ Article on silver written by Steve Angelo. from VisionVictory: ~TVR |
| WATCH: Pollock on Gold's Future Posted: 30 Jan 2012 11:35 AM PST Using a 2003 white paper I (Warren Pollock) authored; I ask some critical thinking questions about gold in the future. Will gold continue to become a currency? We know international countries are trading gold for oil so that is a positive. Will Gold transcend the crisis? It has historically? A difficult question to ask is "Will a breakdown crisis enable gold to be used as a local currency?" Will there be more effective currencies? From 2012 into the future is that "The real game changer for gold will be stability of law." I contrast my 2003 view with an analysis of current events and changes. 2003 – Integrated and global societies have highly complex currency systems largely predicated on common values. Law, stability, and property rights allow people to enjoy the benefits of a fast moving multiplied economy with a high velocity of money. Liberty may be an additional component or its presence may be reflected in the rights to protection of property. The three basic precepts, of law stability and property rights, combined with currency provide the very basis for productivity and most importantly these conditions foster investment and innovation with the objective of societal returns. |
| Biderman: “Keep Buying Gold” Posted: 30 Jan 2012 11:25 AM PST US Stocks in Bear Market Priced in Gold, Keep Buying Gold from TrimTabs: ~TVR |
| Posted: 30 Jan 2012 10:48 AM PST |
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