saveyourassetsfirst3

Precious Metals: The Only Alternative
Italy and its Debt to GDP/Greece debt problems/USA Debt Problems/Gold and silver raid/
SilverFuturust: Where to Keep Your Silver
Gold, Silver, War, Systemic Collapse & Social Unrest: Gerald Celente
Gold advocate Pollitt 'cared more about being right than being rich'
Permanent Gold Backwardation
Celente - Gold, Silver, War, Systemic Collapse & Social Unrest
The Dollar Confirms a Possible Silver Pullback
Gold and Silver Will Go Up Forever
Links 2/11/12
Why Mark Zuckerberg Shouldn't Listen To Management Gurus
The Early Gold Wars
By the Numbers for the Week Ending February 10
Reflections On The New ECB Collateral Rules
Friday ETF Roundup: VXX Surges On Greek Woes, FXI Falls On Negative Chinese Outlook
A Crash Proof Investment Strategy
Dylan Grice: The Man With One Hand
This terrible trend in Detroit could be a warning of things to come
Pimco: This is who's actually going to be punished by the mortgage fraud settlement
Gold & Silver Investors and Traders.
Two rock-solid reasons why gold is not a bubble
Gold and Silver Disaggregated COT Report (DCOT) for February 10
Bob Chapman - Gold Radio Cafe - February 10, 2012
Gold Down on Week Following Rejection of “Weak” Greek Reforms, Draghi Denies “Stigma” of ECB Lending
Profit From Volatility In Gold and Silver Prices
This Is What An Economic Depression Looks Like In The 21st Century
Buffett: "Right To Be Fearful" of "Paper Money" - Favours Stocks Over Cash, Bonds and Gold
What the Mortgage Deal Reveals About The Obama Administration

Posted: 11 Feb 2012 04:41 AM PST

One of the reasons why I stay very active in discussions with readers on our forum is that it is a wonderful way of keeping in touch with what the ordinary investor is thinking. More specifically, such interaction is frequently the inspiration for my commentaries, and that is once again the case with this topic.

The scenario is a familiar one for veteran investors in this sector. Gold and silver have again become temporarily imprisoned in a trading range. Meanwhile the anti-gold and silver propaganda machine is busy sowing doubt and creating uncertainty. Their goal is simple: play upon the fears of newer investors to the sector, or wear them out via ordinary impatience.

This piece is especially aimed at those newer investors, because it delivers a simple yet irrefutable message: you have no choice other than to protect yourselves with precious metals. To illustrate how the bankers and their servant politicians have forced us into focusing our investments in precious metals requires visiting and understanding three concepts.

Turn Back The Clock:

Go back even 15 years in time, and the world of investing bears absolutely no resemblance to the Carnival of Fools which we see today. Back in that era, the vast majority of financial advisors preached a single mantra: "buy and hold".

The premise is (was) simple: those people who place short-term bets in the market are not investors, they are gamblers – period. Investing by definition implies positioning one's self in a particular sector/company, and then allowing the time for that investment opportunity to mature/ripen. The principle factor which separates investing from gambling is time.

Put another way, investors (as opposed to gamblers) provide themselves with the luxury of waiting for the optimal time to harvest their profits. They give their investment the necessary time for the fundamentals which support that investment to assert themselves. Conversely the gamblers who do nothing but make serial, short-term bets are merely momentum players. Time their bet perfectly (or nearly so) and they will make a profit. Fail to do so and they suffer inevitable losses.

How did the world of investing devolve from the sober, careful allocation of funds into frantically flitting from one (short-term) bet to another like a swarm of rabid butterflies? Simple. The vast majority of financial advisors finally became aware of their own gross incompetence. Not having the slightest clue about where our economies have been headed, these "experts" eventually acknowledged (after being surprised by one market crash after another) that when it came to investing they were much better at destroying fortunes than creating them.

At the same time, these highly-paid professionals(?) were not prepared to publicly acknowledge their own, massive deficiencies (and forgo the commissions which they parasitically rake-in). Thus instead of admitting that they were no longer capable of providing competent advice for investing, they absurdly announced that investing itself no longer existed. "Buy and hold is dead," they (nearly) unanimously proclaimed.

Italy and its Debt to GDP/Greece debt problems/USA Debt Problems/Gold and silver raid/

Posted: 11 Feb 2012 02:08 AM PST

SilverFuturust: Where to Keep Your Silver

Posted: 11 Feb 2012 01:33 AM PST

from silver futurist:
If you pay somebody to hold your silver using the silver to pay them, the size of your silver stack will shrink over time and approach zero over a long enough time frame!

~TVR

Gold, Silver, War, Systemic Collapse & Social Unrest: Gerald Celente

Posted: 11 Feb 2012 01:28 AM PST

¤ Yesterday in Gold and Silver

As I mentioned in 'The Wrap' section of yesterday's column, the gold price didn't do much in the Far East on Friday until about fifteen minutes before the London open...and then a not-for-profit seller showed up on the Globex trading system...and had gold down about fifteen bucks in short order.

From there it traded sideways to up until about 11:30 a.m. local time in London. Then another seller showed up...and the gold price declined to its low of the day...$1,703.40 spot...with the low occurring about five minutes after the Comex opened in New York.

The subsequent $20 rally lasted until about 11:10 a.m. Eastern...with the price topping out around the $1,724 spot mark. After that, the gold price traded more or less sideways for the rest of the New York trading session...although it did get sold off a bit once the Comex closed at 1:30 p.m...and the trading in the New York Access Market began.

Gold closed at $1,722.10 spot...down $7.00 on the day. Net volume was pretty brisk at around 159,000 contracts...most of it of the meaningless HFT variety.

The silver price mirrored the gold price pretty much all day on Friday. Like gold, the low tick of the day in silver came at 7:25 a.m. Eastern...five minutes after Comex trading began in New York.

From that low tick, $33.09 spot, silver also rallied, but ran into the same not-for-profit seller at 11:10 a.m. just as it was about to take out Thursday's closing price and penetrate the $34.00 spot price level once again.

After the high was in, silver got sold off until well into the electronic trading session...and then proceeded to recover about half that loss going into the 5:15 p.m. close.

Silver closed at $33.59 spot...down 31 cents on the day. Net volume was pretty decent at 37,000 contracts.

Here's the 30-day silver chart. Note how the $34.00 spot price level is being defended. One has to wonder why...and by whom? I think I know the answer to both.

(Click on image to enlarge)

The dollar index chopped around between 78.6 and 78.8 until precisely 7:00 a.m. New York time, before a rally of some substance put in an appearance...and by 8:45 a.m. the dollar index had risen 40 basis points to 79.20. It could not hold that price level...and slid back to the 79 cent mark right at the close of trading in New York at 5:15 p.m.

If you can match the precious metals price action to the dollar index movements, you've got a better eye than I do.

Like the rest of the U.S. equity markets, the gold shares gapped down...and then more or less followed the gold price from there. The HUI closed down 1.72% for the day...and 3.23% on the week.

The silver shares finished mixed on the day...and Nick Laird's Silver Sentiment Index closed down 1.05%.

(Click on image to enlarge)

The CME's Daily Delivery Report showed that only 27 gold contracts and zero silver contracts were posted for delivery on Tuesday.

The authorized participants deposited a very tiny 9,718 troy ounces of gold into GLD yesterday...and there were no reported changes in SLV.

For the second day in a row there was no sales report from the U.S. Mint.

Over at the Comex-approved depositories on Thursday, they reported receiving 681,699 ounces of silver...and shipped 832,769 ounces of the stuff out the door. The link to that activity is here.

Well, the Commitment of Traders Report lived up to my worst fears. In silver, the Commercial traders were the not-for-profit sellers once again...as they increased their short position by a monstrous 5,921 contracts, or 29.6 million ounces. The total Commercial net short position in silver is now up to 34,650 contracts, or 173.3 million ounces.

Back at the end of December, when silver hit $26 the ounce, the Commercial net short position in silver was all the way down at 14,100 contracts, or only about 71.0 million ounces. So, in the space of less than six weeks, the Commercial traders have added a bit over 20,000 contracts to their short positions...or 100 million ounces.

If these commercial traders, who neither produce nor consume the metal, were not there to go short against all the new long positions being placed, then the price of silver would be well north of $100 the ounce right now. Readers ask me what I mean by 'not-for-profit' sellers...well, here they are.

The Commercial traders are only there for one reason and one reason only...and that's to prevent the price from exploding to the outer edges of the known universe. Their rewards for doing this dirty work, besides making big profits on their engineered price declines, is protection from prosecution by the CME and the CFTC.

It is also obvious to me that JPMorgan and the other large Commercial traders are in no rush to cover their obscene short positions. I'll have more on that when I discuss the Bank Participation Report further down.

In gold, the not-for-profit Commercial traders added 11,210 contracts to their short positions, as the large and small speculators added to their long positions. The Commercial net short position is back up to 22.1 million ounces, which I'm sure Ted Butler isn't happy about either.

I haven't posted this "Days of World Production to Cover Short Positions" graph for quite a while. Ted Butler asked Nick Laird to make it up for him many years ago. It's obvious from the chart that the four precious metals are the center of attention for the bullion banks...with silver being the most controlled...and that the '4 or less' traders [mostly JPMorgan in all four metals] are totally dominant in each, as the '5-8' traders [the difference between the green and red bars] are a very small portion of the total 'Days to Cover'.

(Click on image to enlarge)

In silver, as of Tuesday, the '4 or less' traders were short 176.5 million ounces of the stuff, which is 3 million ounces more than the entire Commercial net short position. The '5 through 8' Commercial traders are short 38.2 million ounces of silver on top of that. When you remove the market-neutral spread trades from the Non-Commercial category, these eight traders hold more than 50% of the entire short position in the Comex futures market in silver. That's called a 'concentrated short position'...and the reason why silver is at $34/ounce, instead of $134/ounce...or more.

The February Bank Participation Report, for positions held at the close of trading on Tuesday, February 7th, did not make for happy reading either.

This data comes directly from the same data that the COT report is derived from, so for this one day per month, it's possible to see where the U.S. bullion banks fit into the grand scheme of things in the weekly COT report.

In silver, four U.S. bullion banks are net short 20,840 Comex futures contracts. That's a 5,000 contract increase from the January report...and exactly what Ted Butler said it would be. I'd bet a lot of money that well north of 90% of this short position is held by JPMorgan and HSBC. When you remove the market-neutral spread trades from the Non-Commercial category, these four U.S. bullion banks are short 24.2% [minimum] of the Comex futures market in silver all by themselves.

In February, the twelve non-U.S. banks that hold Comex future contracts were net short 1,195 between them...about 100 contracts each. In the January report, these same twelve banks were net long 100 contracts each! As you can tell, the price fixing operation in silver is strictly a U.S. bullion bank affair.

In gold, the February Bank Participation Report showed that five U.S. bullion banks were net short 104,717 Comex futures contracts...which was an increase in their net short position of 24,791 Comex in one month. As of Tuesday, these five U.S. bullion banks were net short 25.4% of the Comex futures market in gold.

In February, the nineteen non-U.S. banks were net short 35,747 Comex futures contract, which is an increase of about 4,100 contracts since the January report. On average, each non-U.S. bank is short less than 2,000 Comex contracts...but it's my guess that the short positions in gold are not equally distributed between banks, as some would be carrying larger short positions than others. Too bad they don't list the names of the banks as well...LOL!

These nineteen non-U.S. banks hold a net short position of about 8.3% of the net open interest in gold. Once again it's obvious that the gold price fixing scheme is mostly 'Made in the U.S.A.' as well.

Here's a chart that I dug up the other day. I have the website bookmarked, but rarely check it. However a story I read on Friday sort of jogged my memory. This is the Baltic Dry Index...and it's just set a new 10-year low. It's a combination of lousy international economic conditions...and the fact that a lot of shipping that was ordered in the boom times is now being delivered, further depressing the price.

The graph below is courtesy of Washington state reader S.A....and requires no further explanation from me.

Lastly is this Global Indices chart that Nick Laird sent me just after midnight. This last rally in the world's equity markets was on very narrow [and declining] volume...and as Nick said in his covering e-mail..."Appears to have topped out here. Soon we'll find out if the fiat-drenched rally is genuine or not." I agree.

(Click on image to enlarge)

I have a lot of stories for your reading pleasure this weekend...and some of them are pretty big reads that I've been saving for today's column. So I hope you have time to read them all, as they are certainly worth it.

It's obvious that the CFTC and the CME Group will do nothing to reign in the crooks in the Comex futures market.

Permanent Gold Backwardation. Gold advocate Pollitt 'cared more about being right than being rich'. Withholding Consent from the Khan.

¤ Critical Reads

MF Global Trustee Sees $1.6 Billion Customer Shortfall

MF Global commodity customers whose cash vanished when the firm collapsed last year are owed $1.6 billion — up significantly from previous estimates — the trustee tasked with recovering the money said on Friday.

The revised figure reflects growing concerns that the trustee will not be able to claw back $700 million in customer money trapped overseas. Until now, the trustee did not include the $700 million when projecting the shortfall, hoping to avoid a battle with MF Global's British arm, which is holding the customer money.

But now the trustee, James W. Giddens, has acknowledged that he is making little headway in recovering the money from KPMG, the court-appointed administrator for MF Global's British subsidiary. That money, Mr. Giddens said, was held for American clients who traded on foreign exchanges.

This story was posted on The New York Times website late yesterday afternoon...and I thank reader Phil Barlett for sending it to me in the wee hours of this morning. The link is here.

View full GSD edition

Pimco: Foreclosure Deal Cheaper Than Pensions

In what the U.S. called the largest federal-state civil settlement in the nation's history, five banks including Bank of America Corp. and JPMorgan Chase & Co. committed $20 billion in various forms of mortgage relief plus payments of $5 billion to state and federal governments yesterday.

"This was a relatively cheap resolution for the banks," said Simon, the mortgage head at Pimco, which runs the world's largest bond fund. "A lot of the principal reductions would have happened on their loans anyway, and they're using other people's money to pay for a ton of this. Pension funds, 401(k)s and mutual funds are going to pick up a lot of the load."

This Bloomberg story was posted yesterday afternoon...and I thank West Virginia reader Elliot Simon for providing it...and the link is here.

View full GSD edition

Office & Retail Delinquencies Hit New Highs as Overall CMBS Late-Pays Drop

Delinquencies for office and retail loans have hit their highest-ever levels while overall U.S. CMBS delinquencies fell for the sixth straight month, according to the latest index results from Fitch Ratings.

CMBS late-pays declined five basis points (bps) in January to 8.32% from 8.37% a month earlier. The improvement was driven by multifamily loans, which saw a 165-bp plunge in its rate month-over-month to 12.77%. The delinquency rates for office and retail rose to all-time highs of 7.30% and 7.21%, respectively.

January marked the first time post-recession that the office delinquency rate surpassed that of retail. Office is the only major property type that Fitch Ratings has a negative outlook on for 2012. Office delinquencies are expected to continue rising as leases made at the height of the real estate boom roll to market, impacting income available to cover debt service.

This story was posted on the fitchratings.com website...and I thank reader "Ryan" for sending it my way. The link is here.

Gold advocate Pollitt 'cared more about being right than being rich'

Posted: 11 Feb 2012 01:28 AM PST

Gold advocate Pollitt 'cared more about being right than being rich'

Murray Hoult Pollitt was a stockbroker, entrepreneur, and adviser to Canada's financial elite. Raised in the entourage of some of Canada's wealthiest and most powerful families -- he was the nephew of Bud McDougald and grew up near Conrad Black -- Pollitt preferred his father's approach of building wealth through industry rather than through financial engineering.

Pollitt died last Sunday while watching the Super Bowl at home after a 12-year battle with prostate cancer. He was 70.

Permanent Gold Backwardation

Posted: 11 Feb 2012 01:28 AM PST

Permanent Gold Backwardation

Could backwardation happen with gold? Gold is not in shortage. One just has to measure abundance using the right metric. If you look at the inventories divided by annual mine production, the World Gold Council estimates this number to be around 80 years.

In all other commodities (except silver), inventories represent a few months of production. Other commodities can even have "gluts," which usually lead to a price collapse. As an aside, this fact makes gold good for money. The price of gold does not decline, no matter how much of the stuff is produced. Production will certainly not lead to a "glut" in the gold market pulling prices downward.

Celente - Gold, Silver, War, Systemic Collapse & Social Unrest

Posted: 11 Feb 2012 01:28 AM PST

Celente - Gold, Silver, War, Systemic Collapse & Social Unrest

With growing fears about the stability of the financial system, a looming war and a stampede of wealthy investors into hard assets, today King World News interviewed Gerald Celente, Founder of Trends Research and the man many consider to be the top trends forecaster in the world. Celente had this to say about an increased number of investors that have been crowding into gold and other hard assets: "The smart people are (buying gold) and more and more people are waking up to it. So the people that are going to survive and thrive are going to be the ones that are prepared, the ones that are going to see history before it happens and get ready for it and there are very few."

The Dollar Confirms a Possible Silver Pullback

Posted: 11 Feb 2012 01:00 AM PST

SunshineProfits

Gold and Silver Will Go Up Forever

Posted: 10 Feb 2012 11:31 PM PST

:biggrin:

Not really. Is that coffee?

http://goldchat.blogspot.com/

Links 2/11/12

Posted: 10 Feb 2012 07:40 PM PST

Some recession-hit horse owners freeing animals into wild herds McClatchy (hat tip Lambert)

At an Airline That Caters to Pets, the Humans Are Howling New York Times

Two people are dead because they unfriended woman on Facebook NetTech (hat tip reader furzy mouse)

Somali famine 'will kill tens of thousands' BBC (hat tip reader May S)

Have Americans Given Up On McMansions? Atlantic Cities (hat tip reader May S)

The plan behind open-plan Gillian Tett, Financial Times. I suspect how you feel about this issue depends entirely on how extraverted you are.
Nuclear Regulatory Commission Ignores Fukushima, Green-Lights First New Reactors in 34 Years Truthout (hat tip reader May S)

Greeks inflamed by bail-out demands Financial Times

Venizelos, uncut FT Alphaville

Greek Endgame in Sight Philomila Tsoukala, Credit Slips

The neocons' big Iran lie Salon (hat tip reader May S)

Israel, MEK and state sponsor of Terror groups Glenn Greenwald (hat tip reader furzy mouse)

US JUSTICE DEPT: Switzerland's Largest Private Bank Is A 'Fugitive' Associated Press

Romney Calls Himself 'Severely Conservative' Bloomberg. Finally, some truth in political advertising.

By contrast, we have Obama budget promises deficit cuts with growth Financial Times

Richard Nixon gets it Ed Harrison

SEC Launches Inquiry Aimed at Private Equity Wall Street Journal. This is way too obvious. The issues are legit. The timing is not.

False dawns and public fury: the 1930s are not so far away Martin Taylor, Financial Times

Glencore Gets Free Ship With a Fuel Discount as Charter Rates Go Negative Bloomberg (hat tip reader furzy mouse)

Petroleum 3-Month Rolling Average Turns Sharply Lower; Negative Shipping Rates; Collapse in Global Trade Michael Shedlock

Mind-Blowing Charts From the Senate's Income Inequality Hearing Mother Jones (hat tip reader May S)

Lanny Breuer's Theory of Chatting Accountability for CEOs Marcy Wheeler

The big banks win again Matt Stoller, Salon

MF Global Trustee Sees $1.6 Billion Customer Shortfall New York Times. Aieee! Just like Lehman, the black hole is growing.

Antidote du jour:

Why Mark Zuckerberg Shouldn't Listen To Management Gurus

Posted: 10 Feb 2012 06:09 PM PST

By Felix Salmon:

This is why Mark Zuckerberg was smart to stay in complete control of Facebook and not listen to anybody telling him that a multi-billion-dollar company needed a seasoned, professional CEO in charge.

Jack and Suzy Welch are onto something when they diagnose a potential class problem at Facebook, post-IPO.

After its IPO, Facebook is going to have two classes of citizens. That's just reality. Some of its 3,000 or so employees — several hundred in number by some counts — will have significant riches in the hand. Newer hires, though — well, they'll mostly have options in the bush.

Where they go hilariously wrong is in their proposed solution to the

Complete Story »

The Early Gold Wars

Posted: 10 Feb 2012 04:45 PM PST

The Privateer

By the Numbers for the Week Ending February 10

Posted: 10 Feb 2012 02:14 PM PST

HOUSTON -- Just below is this week's closing table. The CFTC disaggregated commitments of traders (DCOT) recap table was posted previously.

If the images are too small click on them for a larger version.

Vultures, (Got Gold Report Subscribers) please note that updates to our linked technical charts, including our comments about the COT reports and the week's technical changes, should be completed by the usual time on Sunday evening (by 18:00 ET).

As a reminder, the linked charts for gold, silver, mining shares indexes and important ratios are located in the subscriber pages. In addition Vultures have access anytime to all 30-something Vulture Bargain (VB) and Vulture Bargain Candidates of Interest (VBCI) tracking charts – the small resource-related companies that we attempt to game here at Got Gold Report. Continue to look for new commentary often. This was a week of consolidation of the gains our "Faves" have seen over the past month. As expected, both gold and silver seem to be taking a breather from the recent rallies. We believe the signs support that breather for the time being, but likely not very long.

Continued…

Remember that the linked charts on the subscriber pages are always the first place to look for new commentary at GGR. In the future we intend to rely more on the charts to communicate, especially when it comes to our own trades. If we decide to make changes to our stop levels for our silver and GDXJ trades underway, we will note them on Sunday evening also.

It's an exciting time to be a Bargain Hunting Vulture. We are close to going to "Free Shares" on a number of our small, micro-cap issues following an excellent January. For new readers "Free Shares" is the term we use to describe our remaining position after easing out of a portion of our stake in a company, usually, but not always, after it has at least doubled in price.

That is all for now, but there is more to come.

Reflections On The New ECB Collateral Rules

Posted: 10 Feb 2012 11:07 AM PST

By Marc Chandler:

It is not just that a Greece deal continues to prove elusive that is challenging the euro. Market participants are also digesting the implications of the ECB collateral rule changes. While it appears more likely that the ECB will not cut the main repo rate in March, as previously appeared to be the case, the collateral rule changes mean that the ECB's balance sheet is likely to expand significantly in the period ahead.

In recent months, there has been a clear shift in focus from interest rates per se to central bank balance sheet considerations. In this respect, the fact that many observers remain convinced that the Federal Reserve's balance sheet will expand under a third round of asset purchases in a few months is a significant barrier to stronger US dollar sentiment. The greenback's recovery in latter part of last year is understood by many as more a function

Complete Story »

Friday ETF Roundup: VXX Surges On Greek Woes, FXI Falls On Negative Chinese Outlook

Posted: 10 Feb 2012 10:01 AM PST

By Jarred Cummans:

Déjà vu struck as investors welcomed the worst day of the year thus far. With downgrades, poor economic data and more troubles from Greece, today felt a lot more like 2011 than it did the bullish 2012 that we have been enjoying. The Dow capped off the day with losses of nearly 90 points while the S&P 500 lost about 0.7%. All but one of the 30 Dow components finished in the black while all 10 S&P sectors posted losses on this dismal trading day. The VIX, which is the CBOE Volatility Index, jumped 11.6%, the highest one-day rise in over three months.

As far as commodities are concerned, not even gold's safe haven qualities could keep it afloat today, as the precious metal promptly lost $18.4/oz. while crude oil dipped by $0.84. Commodities had been enjoying a rather strong year, but volatility struck the markets this week, preying on

Complete Story »

A Crash Proof Investment Strategy

Posted: 10 Feb 2012 09:00 AM PST

Financial markets and institutions are mighty unstable no matter where you look these days. Europe, America, China, Australia. Where are you supposed to go to invest your money?

Geography isn't the only maze full of dead ends. Traditional asset allocation theory has its knickers in a twist too. None of the asset classes are doing what they are supposed to.

Government bonds are proving dangerous, particularly in Europe. Academic theory tells you they're risk free (which explains how the Greeks got away with profligacy for so long).
Stocks have been going sideways for years. They are supposed to go up with the occasional correction. That's the whole point of having such a large part of your Superannuation invested in them.
2011 proved that property prices do not always go up, even in Australia.
Gold, that barbarous relic which pays no interest, has been going up in virtually a straight line, to paraphrase Alan Kohler when we spotted him on TV sometime last week.

And we've learned from the MF Global scandal that your brokerage might not actually have the things you supposedly own with them. Clients discovered their investments and cash were both outside of their trusty brokers reach.

Of course, everything that can go wrong is interconnected. A crash or default in any one asset class or country will unleash havoc in the others. That's what happened in 2008 - a problem in the obscure sub-prime lending market had investment banks dropping like flies within the year. Or faith in a major institution could be the cause of another global economic slowdown - another Lehman moment. The trigger everyone has their eye on this time around is of course Greece. It only takes one domino to fall before the rest reach their tipping point.

Then again, some plonkers seem to think that lining up dominoes decreases the chances of any specific one being knocked over.

Ian Verrender in The Age:

The only way that we will experience a US-style property crash here is if there is a serious rise in unemployment - a change that would spark loan defaults and flood of distressed property on to the market... For a US-style property collapse to occur here, we would need sovereign debt defaults across Europe, the disintegration of the European Union and a banking crisis that would cripple even China.

It only takes one of the scenarios Verrender mentions to happen, not all of them, for Australian property to be in trouble. Because all will follow on from each other.

For example, the IMF recently released a report warning China that Europe's woes are set to halve Chinese GDP growth. 'That would entail a growth rate far below the level the ruling Communist Party has identified as necessary to create enough jobs for it to maintain its grip on power.' Let alone prevent the expected banking crisis!

But wondering which domino will fall first may prove academic. It won't take you long to find evidence that all three criteria needed, according to Verrender, to set off a house price crash in Australia are already being met. Rising unemployment in Australia, sovereign debt defaults across Europe and a banking crisis in China. And Verrender may have causation the wrong way around to begin with. Falling house prices, as we had in 2011, can cause the unemployment that sees house prices continue to fall. In other words, the Australian house price bubble could be the first domino to fall, triggering the others.

When Is a Crash a Crash?

Of course, Australia wouldn't be the only country in trouble in a world of banking crises, sovereign debt defaults and crashing asset prices.

Despite all this, equity markets are plodding along nicely so far this year. But the suddenness of a turning point can change that very quickly. A seemingly insignificant event on the global stage, like the bursting of a housing bubble in Australia, has the power to trigger a heck of a lot of global turmoil in a short space of time.

Turning points come in many shapes and sizes. Let's sample a few of the past:

Property - Gareth Brown, also upset with Ian Verrender's analysis of the Australian property market, reminds us that 'the Case Shiller Index of US big city house prices fell a lesser 4.3 per cent in the year to September 30, 2007. By the time 2010 rolled around, it was down 30 per cent.' Not to mention the global financial crisis the property crash triggered.

Shares - Monday 19 October 1987 saw a 22% drop in the Dow Jones Industrial Average. Australia's stock market went on to fall 40% by the end of month. Marc Faber, who warned people to get out of the stock market a week before 'Black Monday', recently said 'I think the stock market this year has started in a similar way as in 1987'. We still don't really know what caused the 1987 selloff. But it happened in a similar year.

Sovereign bonds - Our favourite sovereign bond crisis is the Russian Ruble Crisis of 1998. Long Term Capital Management, a hedge fund run by the academics whose theories university students now learn, needed a bailout after that episode. Bailouts have been priced into sovereign bond investing ever since. The trigger, on August 13, was a 200% yield on Russian bonds. Also worth mentioning is that $5 billion in World Bank and IMF aid loans were stolen on arrival.

Bank failures - It's not just nations that fail. Lehman Brothers' botched bailout and subsequent disappearance showed how a single failure can cause mayhem throughout the entire global financial system.

So there's your summary of some of the crises and their turning points. Now get this. Australians are nicely lined up to experience all these types of problems at once.

We face a sovereign bond crisis in Europe, a property bubble here, banks overexposed to both of these, a resource sector over exposed to a Chinese construction bubble and a stock market made up of banks and resource companies.

If turning points and triggers start showing up in any of these exposures, things could go downhill fast. And you will want to ready your portfolio to weather the storm. So you have to ask yourself the following questions:

At what point is a falling stock market a crash?
At what point is a falling property market a crash?
At what point is a state going to default?
At what point is a bank insolvent?
At what point is a 20-year recession-free run going to come to a crashing halt?

When we finally learn the answers to those questions the hard way, it will be too late for the vast majority of people to protect their wealth. Or they will have done it inadequately. This video demonstrates nicely how a crisis trigger can have unexpected effects. While your attention is drawn to the action, the real crisis draws near behind you.

We don't have any particularly good answers to the questions about when a fall becomes a crash, a liquidity problem becomes a solvency problem and a recession becomes a depression. But you don't have to answer those questions about the timing of a crisis to protect your wealth if you can answer this one: How do you make the questions less relevant? We have an answer for you this week. At least part of it. The other half remains hidden, except to subscribers of Australian Wealth Gameplan.

The solution to unstable investment markets is a stable portfolio. And what's more stable than permanent?

Graham's Intelligent Investor vs. Browne's Permanent Portfolio

We tried to read Benjamin Graham's famous book 'The Intelligent Investor' over the last few months. It was like being back at university - that place where you learn things while they are being disproven in the real world. The first few chapters of the book explained why bonds were a good bet in the current environment. Inflation isn't likely to take off, Graham reckoned. 'We think it would be reasonable for an investor at this point to base his thinking and decisions on a probable (far from certain) rate of future inflation of, say 3% per annum.' Unfortunately, we were reading the 1972 edition. Eight years later, inflation was running at five times the assumed rate. And it spent the next decade above 3%.

Inflation 1965 - 2011

US inflation took off in 1973, reaching 15% by 1980

Reading pages and pages about why inflation should stay low and bonds are a good investment, knowing the disastrous consequences for those who followed his advice, made the book, to the point we kept reading, rather unpleasant.

Here is where Graham went wrong with his advice. Famed investor Warren Buffett wrote in his introduction to the book that 'the underlying principles of sound investment should not alter from decade to decade, but the application of these principles must be adapted to significant changes in financial mechanisms and climate.' Adapting principles is how you introduce human error. The whole point of a principle is that, if you stick by it, you won't stuff up the adaptation.

That's why we prefer Libertarian Harry Browne's 'permanent' solution to Benjamin Graham's 'adaptations of principles'. What's ironic is that Browne's book, published in 1970, made the accurate prediction about inflation that it didn't need to make for the strategy to pay off. Browne foresaw the very thing Graham got explicitly wrong - the inflation experienced from Nixon going off the gold standard. Well, Browne expected a devaluation, not a complete decoupling. But his strategy didn't depend on it. Despite calling his book 'How you can profit from the coming devaluation', the investment strategy Browne championed was a completely neutral one - the Permanent Portfolio. The idea being that you didn't have to adapt diddly squat to any 'changes in financial mechanisms and climate'. Apart from reweighting occasionally, you don't have to give the asset allocation a bit of thought. It's all laid out for you.

So what's in the Permanent Portfolio? Australian Wealth Gameplan subscribers have known since August. They've also been profiting from what editor Dan Denning calls 'The Revolution in the Desert' since June. And in this case, profit means two tips up over 120% at last count.

To get in on the action click here.

Nickolai Hubble.
The Daily Reckoning Weekend Edition

ALSO THIS WEEK in The Daily Reckoning Australia...

Natural Gas: The Big Transition in Energy
By Dan Denning

Yes. It's getting pretty interesting in the world's energy markets. We sense that we're on the verge of a big transition from one era to another. Not everyone is happy with that. For example, this Washington Post article reports what we've been saying since last summer: shale gas is a disruptive technology that changes the game in global energy markets.

Buying Gold in Uncertain Times
By Bill Bonner

During the Great Depression, for example, the price of gold rose...against dollars...even though the prices of food, clothing and other consumer items...as well as the prices of investment assets...were falling in dollar terms. Why? Because money gains value - relative to things - in a depression. Gold is money. It is the best money. It is the only money that has stood the test of time.

Goldman Sachs is a "Sell"
By Eric Fry

For once, we agree with the insiders at Goldman Sachs. The company's stock is a "Sell."

Okay, so the insiders didn't exactly say their stock is a "sell," but they didn't need to. Their feet did all the talking. Nine Goldman insiders scurried away from their stock as fast as the law would let them.

Stock Market Hindsight versus Foresight
By Greg Canavan

Bear market rallies are tailor-made to make you think things are getting better when they're not. Actually, they're designed to make you stop thinking, full stop. After worrying for months about Europe and Greece and the slowdown in China, a rising stock market makes you think all is well. You don't examine the reasons behind the rally - you just accept them

Posted: 10 Feb 2012 08:26 AM PST

From SHTFplan:

... The city of Detroit, which has been a harbinger for future trends soon to take hold across major metropolitan areas around the country, has no doubt experienced the worst of the depression thus far. Entire city blocks have become unlivable due to foreclosures and rampant crime, the jobless rate in 2009 exceeded 50%, and a mass exodus has left the population at levels not seen since 1910.

By all accounts, the Motor City is ground zero for the collapse of America as we know it. Reminiscent of poverty-stricken third world countries, it's gotten so bad in Detroit that there are areas of the city where police and emergency services personnel refuse to go.

This has left law-abiding residents of the city no choice but to arm themselves and start taking matters into their own hands...

Read full article...

More on the "End of America":

A post that every American should be required to read immediately

Porter Stansberry: These facts show the "End of America" is coming

"End of America" warning: Hollywood mogul is preparing to leave the U.S.

Pimco: This is who's actually going to be punished by the mortgage fraud settlement

Posted: 10 Feb 2012 08:11 AM PST

From Bloomberg:

The government's deal with banks over their foreclosure practices after 16 months of investigations is cheap for the loan servicers while costly for bond investors including pension funds, according to Pacific Investment Management Co.'s Scott Simon.

In what the U.S. called the largest federal-state civil settlement in the nation's history, five banks including Bank of America Corp. (BAC) and JPMorgan Chase & Co. (JPM) committed $20 billion in various forms of mortgage relief plus payments of $5 billion to state and federal governments yesterday.

"This was a relatively cheap resolution for the banks," said Simon, the mortgage head at Pimco, which runs the world's largest bond fund. "A lot of the principal reductions would have happened on their loans anyway, and they're using other people's money to pay for a ton of this. Pension funds, 401(k)s and mutual funds are going to pick up a lot of the load."

Asset managers are frustrated with the deal because, in addition to the debt the banks own, it gives credit to the lenders for changes to loans they hold no interest in and oversee for investors. That "treats people's 401(k)s and pensions," which hold mortgage securities, "like perpetrators as opposed to victims," Simon said.

The deal comes after all 50 states announced a probe into foreclosures in 2010 following disclosures of faulty documents used to seize homes, costing bondholders as liquidations of bad debt were delayed.

"Think about this, you tell your kid, 'You did something bad, I'm going to fine you $10, but if you can steal $22 from your mom, you can pay me with that,'" Simon said yesterday in a telephone interview from Newport Beach, California.

Borrower Aid

Government officials say the costs will be "funded primarily by the banks, not third-party investors," according to a statement posted yesterday on a website created for the settlement. The five banks will get different amounts of credit for various types of borrower aid, with loans in government- backed mortgage bonds exempted.

The $250 billion Pimco Total Return Fund (PTTRX) last month was 50 percent invested in mortgage debt, typically government-backed securities, according to its disclosures. It also owns home-loan bonds in private funds for institutional clients.

Simon has said for more than two years that Pimco supports the greater use of principal cuts on debt that exceeds homes' values. It isn't clear how often reductions for individual borrowers sparked by yesterday's deal will be large enough to help, he said.

Principal Reduction

Laurie Goodman, the Amherst Securities Group LP analyst who has advocated mortgage forgiveness in testimony to Congress, joined him in criticizing the agreement yesterday.

"There is no one who has been more vocal in support of principal reduction than I have been," she said in a telephone interview. "There is a difference between principal reductions and giving banks credit for spending other people's money."
Investors have criticized servicers for allegedly basing decisions on loan modifications on their ownership of second- lien home-equity debt, which foreclosures can wipe out. Another allegation is that banks have hindered efforts to force repurchases of faulty mortgages and didn't have enough staff for troubled loans.

Such complaints were included in a letter sent to Bank of America in 2010 by a lawyer for a group including Pimco that later struck a proposed $8.5 billion settlement with the lender, which needs court approval.

Working Out Loans

Yesterday's deal does "encourage servicers to do what they are supposed to do" and try to work out loans, Simon said. It will also help the housing market and provide aid to homeowners and foreclosed-upon borrowers, with limited releases of legal liabilities for banks, he said.

In return, banks won't need to completely write down their home-equity debt before reducing mortgages, a "big deal for them" that "makes it incredibly difficult for the private market to develop," Simon said. After the worst housing slump since the 1930s, the government is helping to finance about 90 percent of new loans, according to newsletter Inside Mortgage Finance.

"Property rights and contract law once again take a beating," Simon said. "It ultimately means the private market will take longer to develop and credit will be less available. You'll need bigger down payments and higher rates. That's the problem you won't see for a while. Investors won't get tricked again."

'Small Share'

U.S. Housing Secretary Shaun Donovan told reporters yesterday that "a relatively small share, in the range of 15 percent, of the principal reduction" resulting from the settlement will come from investor-owned loans.

"Nothing in it requires any trustee or servicer to reduce principal where it's not allowed legally by the underlying documents," Donovan said. "The misunderstanding somehow that investors will be paying the banks' share is just false."

While officials said servicers will only rework mortgages when it is in bondholders' best interest, banks are now "doubly" incentivized, by the deal and their second-lien holdings, to skew such calculations, Goodman said.

Insufficient penalties imposed on banks for breaking rules may fail to prevent that from happening again, Simon said.

"There's a moral hazard element here," he said. "This settlement makes that potentially more likely to occur, not less."

To contact the reporter on this story: Jody Shenn in New York at jshenn@bloomberg.net.

To contact the editors responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net.

More on pensions:

Texas pension fund manager is calling for $10,000 gold

Massive fraud uncovered at California's giant public pension fund

Must-read: After Europe implodes, this could be the next big crisis

Gold & Silver Investors and Traders.

Posted: 10 Feb 2012 08:04 AM PST

The Dollar Confirms a Possible Silver Pullback

Based on the February 10th, 2012 Premium Update. Visit our archives for more gold & silver analysis.

"It was the best of times, it was the worst of times, it was the age of wisdom (for those who invest in gold) , it was the age of (central bank) foolishness, it was the epoch of belief (in Chinese growth) , it was the epoch of incredulity (in fiat money), it was the season of Light, it was the season of Darkness, it was the (Arab) spring of hope, it was the winter of (Syrian) despair."

With several of our own additions in parenthesis, these are the opening lines of the famous novel "A Tale of Two Cities," by Charles Dickens whose 200th year birthday was celebrated around the world this week. His words seem just as true and relevant today as in the time in which they were written.

Greece played the Artful Dodger this week and missed another deadline to approve conditions for a second €130bn bail-out on Tuesday night because of last-minute haggling with international lenders over emergency spending cuts. Negotiations to save Greece from a disorderly default are now teetering on the edge.

The delay fueled anxieties that Athens may be forced into a messy default next month and triggered concern over whether Greece remains committed to fiscal reform after two years of failing to implement measures agreed in return for financial support. Greece has already missed two deadlines this week. Finally a deal was presented for approval at a meeting of eurozone finance ministers Wednesday only to be sent back to Greece as incomplete with a fresh set of demands and an urgent deadline. The eurozone finance ministers dismissed as incomplete a reputed €3.3bn package of Greek budget cuts and sent the country's finance minister back to Athens with a fresh set of demands and an urgent deadline. They also warned of more intensive involvement in the Greek economy to improve tax collection and accelerate the sale of state-owned assets.

Earlier in the week the Great Expectations that a Greek rescue plan will be completed drove the dollar down sharply against the euro and boosted gold 1.5 per cent on Tuesday.

Gold could face a short-term pullback if Greece strikes a deal, as it may hurt the appeal of safe-haven assets, but on the other hand it will be good for the euro (bearish for USD Index), which might be bullish for gold. In the long run, the lingering euro zone debt crisis is expected to support sentiment in gold.

Charles Dickens said: "Do all the good you can and make as little fuss about it as possible." To see what good we can do for precious metals investors, let's begin the technical part with the analysis of the USD Index. We will start with the very long-term chart (charts courtesy by http://stockcharts.com.)

In the very long-term USD Index chart we see no significant changes. Thursday's closing index level is slightly below that of a week ago, but the recent move back below the long-term resistance line has not yet been confirmed. The index level is now more or less right at this support-resistance line, and the medium/long-term situation is slightly more bearish than not.

In the short-term USD Index chart, we see that the index "somewhat bottomed" at the cyclical turning point. Instead of a rally, a pause has followed with some sideways trading and small moves to the downside although declining at a much slower pace than seen in previous weeks. It seems likely that the index could actually rally in the very short term but the outlook for the medium term is bearish.

The situation for the USD Index appears rather bearish for the medium term but bullish for the short term, which might be a bearish short-term indication for the precious metals sector. It is also consistent with our recent view on the mining stocks part of the precious metals sector published on February 3rd, 2012 in our essay on the likely top in mining stocks:

(…) the medium- and long-term outlook for the gold and silver mining stocks is positive, however a correction is likely to be seen soon – perhaps it will start next week. Long-term investors should consider purchasing junior mining stocks, while short-term traders might want to trade the coming correction.(…) if you've been considering trying out our Premium Service, it appears to be a good idea to do so now.

Since the dollar is negatively correlated with the precious metals market, the likelihood of a rally is bearish factor for the precious metals sector – also for silver.

A look at the very long-term chart (if you're reading this essay at www.sunshineprofits.com, you may click on the above chart to enlarge it) reveals a rather uneventful week. Silver's price has been in a sideways trading pattern during the past two weeks after a strong rally in which the red support-resistance line was pierced and volume levels were significant. With silver now above this line, it seems that a move back to it, a test of the breakout may in fact be seen. The 38.2% Fibonacci retracement level based on the 2002 to 2011 rally is also in play and will likely assist in stopping a decline as well.

Summing up, the medium and long-term outlook for silver remains bullish but – also based on the analysis of the USD Index – the short term is now more bearish than not.

To make sure that you are notified once the new features are implemented, and get immediate access to my free thoughts on the market, including information not available publicly, we urge you to sign up for our free e-mail list. Gold & Silver Investors should definitely join us today and additionally get free, 7-day access to the Premium Sections on our website, including valuable tools and unique charts. It's free and you may unsubscribe at any time.

Thank you for reading. Have a great weekend and profitable week!

P. Radomski
Editor
www.SunshineProfits.com

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All essays, research and information found above represent analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments.

By reading Mr. Radomski's essays or reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Radomski, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Two rock-solid reasons why gold is not a bubble

Posted: 10 Feb 2012 08:03 AM PST

From Sovereign Man:

After more than a decade of year-over-year appreciation, many people are wondering if gold is just another bubble waiting to burst. No commodity or asset class in our historical record has ever shown such long-term growth, and consequently, the "B-word" is being tossed around regularly in financial media.

... Ultimately, a bubble isn’' something whose price keeps going up. It's something that is steadily expanding, supported by nothing but hot air.

The exponential growth in Facebook users (or other digital platforms like Skype, Angry Birds, etc.) is underpinned by perceived value... not hot air. The growth in FBI background checks and firearm sales is underpinned by legitimate consumer demand, not phony speculation.

The growth rates in U.S. citizenship renunciants and U.S. government Google-user requests are equally underpinned by a legitimate (though unfortunate) trend of declining liberty. This is certainly not hot air.

The value of gold is...

Read full article...

More on gold:

A new reason gold stocks could soar

Why Warren Buffett's latest gold rant is completely wrong

Top gold manager Embry: This will be the strongest year for gold yet

Gold and Silver Disaggregated COT Report (DCOT) for February 10

Posted: 10 Feb 2012 07:32 AM PST

This week's Commodity Futures Trading Commission (CFTC) commitments of traders (COT) report suggests stepped up "opposition" to the gold and silver rallies by the usual "hedgers." The disaggregated COT report (DCOT) more or less "confirms" it. In the DCOT table below a net short position shows as a negative figure in red. A net long position shows in black. In the Change column, a negative number indicates either an increase to an existing net short position or a reduction of a net long position. A black figure in the Change column indicates an increase to an existing long position or a reduction of an existing net short position. The way to think of it is that black figures in the Change column are traders getting "longer" and red figures are traders getting less long or shorter.

All of the trader's positions are calculated net of spreading contracts as of the Tuesday disaggregated COT report.

(DCOT Table for Friday, February 10, 2012, for data as of the close on Tuesday, February 7. Source CFTC for COT data, Cash Market for gold and silver.)

Vultures, (Got Gold Report Subscribers) please note that updates to our linked technical charts, including our comments about the COT reports and the week's technical changes, should be completed by the usual time on Sunday evening (by 18:00 ET).

*** We will have more about the COT in the linked technical charts for Vultures by Sunday evening, including a very large jump in the combined commercial net short positioning for silver as the hedgers put up increasing opposition to both of the most popular precious metals. As shown above, the Producer/Merchants and the Swap Dealers were on the same page of the same playbook in that opposition this week, indicating their appetite to hedge was elevated as of Tuesday. ***

Combined (legacy, not disaggregated) Commercial Net Short Position for Silver, then Gold below. Source CFTC for COT, Cash market for gold and silver.

That is all. Carry on.

Bob Chapman - Gold Radio Cafe - February 10, 2012

Posted: 10 Feb 2012 07:15 AM PST

Bob Chapman - Gold Radio Cafe - February 10, 2012 : Greece is on the edge of...

[[ This is a content summary only. Visit my blog http://www.bobchapman.blogspot.com for the full Story ]]

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Gold Down on Week Following Rejection of “Weak” Greek Reforms, Draghi Denies “Stigma” of ECB Lending

Posted: 10 Feb 2012 07:06 AM PST

Friday 10 February 2012, 09:00 EST

Gold Down on Week Following Rejection of "Weak" Greek Reforms, Draghi Denies "Stigma" of ECB Lending

U.S. DOLLAR gold prices were on course for a second weekly fall Friday lunchtime in London, heading down towards $1700 an ounce following European ministers' rejection yesterday of Greece's latest austerity reforms.

Silver prices also traded lower, hitting $33.27 per ounce – 1.4% down on last week's close.
Stocks, commodities and the Euro all fell, while the Dollar gained along with prices for major nation government bonds.

"Gains in the US Dollar and consistent disappointment from the European Union regarding the Greece debt deal are curbing any gains in gold," reckons Pradeep Unni, senior analyst at commodity brokerage Richcomm Global Services in Dubai.

"People are just throwing in the towel because we didn't see a rally," adds Afshin Nabavi, senior vice president at Swiss precious metals refiner MKS.

Spot market gold prices were down 1.2% for the week Friday lunchtime, hitting $1706 per ounce, their lowest level since Jan.25, the day the US Federal Reserve confirmed its policymakers expect near-zero interest rates until at least late 2014.

Eurozone finance ministers yesterday dismissed a reported €3.3 billion package of spending cuts presented to them by Greece's leaders, who have now been asked to find an additional €325 million in savings.

"No disbursement before implementation," said Luxembourg prime minister Jean-Claude Juncker, who chairs the Eurogroup of single currency finance ministers.

"We can't live with this system where promises are repeated and repeated and repeated and implementation measures are sometimes too weak."

The Eurogroup also suggested that there could be greater external involvement in the Greek economy, with the aim of improving tax collection and speeding up privatization of state assets. German finance minister Wolfgang Schaeuble meantime said the ministers "will certainly not discuss a top-up" of Greece's €130 billion second bailout.

"If we see the salvation and future of the country in the Euro area," said Greek finance minister Evangelos Venizelos, "[then] we have to do whatever we have to do to get the program approved."
"Venizelos, like some officials before him, is playing the 'in or out' card," says this morning's note from Standard Bank currency analysts Steve Barrow and Jeremy Stevens.

"We suspect [the Eurogroup's conditions] will be delivered, but not without some acrimony."
Thousands took to the streets in Athens Friday as unions called a two-day protest strike, the second this week following Tuesday's 24 hour action.

"With Greek elections planned for April 2012, it may be the case that the politicians who sign off on agreements to receive Euroland aid next week may be replaced quite swiftly by less amenable types," notes one gold bullion dealer here in London.

If the second bailout is not approved, Greece will be unable to pay over €14 billion of debt that matures on March 20.

"[Greek politicians] must get this deal agreed really within the next few days to enable them sufficient time and have the new bailout money disbursed before that bond is due," says Tony Stringer, managing director of global sovereigns at ratings agency Fitch.

"If they don't manage to achieve that, then it could be in the realm of a disorderly default."

European Central Bank president Mario Draghi meantime denied a suggestion put to him at Thursday's press conference that the ECB's three year longer term refinancing operation – at which European banks can borrow from the central bank at low rates – represents "hidden government financing" that some banks would prefer not to access.

Deutsche Bank chief executive Josef Ackermann said last week that: "the fact that we have never taken any money from the government has made us, from a reputation point of view, so attractive with so many clients in the world that we would be very reluctant to give that up."

"There is no stigma whatsoever attached to these facilities," said Draghi yesterday, adding that some bankers' statements were "statements of virility" and that many banks whose chiefs have made such comments have actually accessed the LTRO or other ECB credit facilities.

The ECB also announced Thursday that it is changing the rules on collateral banks can post against their ECB borrowing to widen eligibility, although the Governing Council decision was not unanimous.

Regulated commodity futures exchange CME has lowered its margin on gold futures trades, along with margins on silver and copper.

"The announcement…has failed to inspire much interest [in gold]" says Marc Ground, commodities strategist at Standard Bank.

CME raised its margin on gold trading in both August and September last year, "contributing to the sharp fall" in gold prices seen over those weeks, according to a note from Commerzbank this morning.

Ben Traynor
BullionVault

Gold value calculator | Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK's longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.

(c) BullionVault 2011

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.

Profit From Volatility In Gold and Silver Prices

Posted: 10 Feb 2012 07:01 AM PST

Gold's (GLD) accelerated move to $1900 in the summer of 2011 past overhead resistance indicated the market was waiting for an inflationary QE3. The market got a surprise as Bernanke waited until 2012. This was no surprise for my readers and precious metals declined lower in the second half depicting a surprise move with gaps lower.
We were able to call the top in silver (SLV) in April 2011 and gold in September 2011 as it reached overbought conditions, locking in partial profits. On April 28, 2011 I wrote, "Remember that I am recommending partial profits if your winnings enable you to play with the house's money and you are still holding silver from our August 2010 Buy Signal at $18. Other readers who have not been able to build a position can wait for the inevitable pullback as additional buying opportunities." A few days later in May we saw a volatile decline in silver of close to 40%.
Likewise in August of 2011, I became concerned of a correction in gold as it reached overbought territory. On August 5, 2011 I wrote, "Although the technical picture for precious metals is improving, there will be periods of volatility as the global markets shake. A consolidation in gold would be normal and healthy." A few weeks later gold topped and corrected for the rest of 2011.
Mining equities (GDX) and precious metals sold off hard in the third and fourth quarter of 2011. When such unexpected short term pullbacks occur we must monitor the rebound. Negative news which causes a temporary decline with a powerful recovery indicates strength and resilience.
The precious metals and natural resource market appears to be finding its footing and now may return to close some of those downside gaps in 2012 . The recent selling panic in gold and silver bullion has abated and reversals are beginning to occur. We are on the verge of a breakout at $35 in silver, $4 copper (JJC) and $1800 gold could be significant. Junior mining stocks (GDXJ) are also making dramatic moves higher especially in the uranium (URA) and rare earths (REMX).
One should never get caught up with a selling panic like the end of 2011 especially in gold and silver bullion which has had significant up moves over the past 18 months and past ten decades. Recently gold's accelerated move to $1900 and silver's to $50 was overdue for a restorative, healthy pullback.
It must be emphasized acting in a knee jerk fashion following the herd and panic by selling at discounted levels for pennies on the dollar must be avoided. Some analysts were caught up with the decline irrationally calling the end to a 10 year bull trend. How foolish!
Gold and silver are finding support and the end of 2011 was not a time to call the end of a trend, but to realize that gold and silver was providing a discounted buying opportunity. The mining shares have never been so oversold in this entire decade long run as it was in the end of 2011. The recent volatile selloff created an extreme oversold condition where reversals occur. Although the recent rise has been on volume, a break above the 200 day on increased volume for the miners and silver could indicate that the downside gaps made in 2011 may be closed sooner rather than later and potentially very quickly.
Gold Stock Trades has weathered several corrections in miners, gold and silver over the past 10 years and each time we have maintained a strong hand.
It is normal and necessary to have corrections. Quality mining equities and precious metals begin new bases and reach compelling valuations that long term, contrarian investors can use to their benefit by adding to positions or initiating purchases in favorite stocks or sectors which one has not participated in yet.
One must not be discouraged or give up during volatile selloffs like 2008 or 2010 or 2011 and run to cash. One must use short term volatility to one's advantage and go against the latest fad. We buy winter coats in the summer.
We must stay focussed on the long term trends and realize that the mining stocks have been beaten down in 2011 to dramatically oversold levels. It is time to pick up resource stocks especially in uranium, rare earths and gold/silver explorers (SIL) selling at great discounts.
Despite recent carnage silver and the industrial metals are exhibiting relative strength to gold in 2012. The long term trend for silver is intact and it appears to have found support at its long term trend around $30. The momentum indicators have bounced off oversold levels. Silver has all the right criteria for a fast move to test all time highs.
It is no surprise why the uptrend in commodities is intact. The West is monetizing debt and printing dollars at a record pace to alleviate the debt crisis. Risk on has been the name of the game in 2012.
Those on the sidelines in cash (UUP) and treasuries(TLT), playing risk off are in fact playing a very risky game as inflation appears to be the flavor of the day.
Look for technical breakouts in gold, silver, copper, uranium and rare earths as they all appear to be reversing higher as the moving averages transition upward. Don't be unsettled by short term pullbacks or day to day volatility. Use pullbacks as opportunities on this long term upward trend in gold and silver. The risk off trade in Treasuries and the U.S. dollar appears to be losing momentum and dangerously teetering on a decline. Pay attention to the ball not the windup as we may be witnessing a trend change. To get scouting reports, specific targets and up to the minute updates on the natural resource market click here.

This Is What An Economic Depression Looks Like In The 21st Century

Posted: 10 Feb 2012 06:10 AM PST

Do you want to see what a 21st century economic depression looks like? Just look at Greece. Once upon a time, the Greek economy was thriving, the Greek government was borrowing money like there was no tomorrow and Greek citizens were thoroughly enjoying the bubble of false prosperity that all that debt created. Those that warned that Greece was headed for a financial collapse were laughed at and were called "doom and gloomers". Well, nobody is laughing now. You see, the truth is that debt is a very cruel master. Greeks were able to live way beyond their means for many, many years but eventually a day of reckoning arrived. At this point, the Greek economy has been in a recession for five years in a row, and the economic crisis in that country is rapidly getting even worse. It was just recently announced that the overall rate of unemployment in Greece has soared above 20 percent and the youth unemployment rate has risen to an astounding 48 percent. One out of every five retail stores has been shut down and parents are literally abandoning children in the streets. The frightening thing is that this is just the beginning. Things are going to get a lot worse in Greece. And in case you haven't been paying attention, these kinds of conditions are coming to the United States as well. We are heading down the exact same road as Greece went down, and the economic pain that this country is eventually going to suffer is going to be beyond anything that most Americans would dare to imagine.

All debt spirals eventually come to an end. For years, Greece borrowed huge amounts of very cheap money, but there came a point when the debt became absolutely strangling and the rest of the world refused to lend the Greek government money at such cheap rates anymore.

Greece would have defaulted long before now if the EU and the IMF had not stepped in to bail them out. But along with those bailouts came strings. The EU and the IMF insisted that the Greek government cut spending and raise taxes.

Well, those spending cuts and tax increases caused the economy to slow down. Tax revenues decreased and deficit reduction targets were missed. So the EU and the IMF insisted on even more spending cuts and tax increases.

Even after all of the spending cuts and all of the tax increases that we have seen, the debt to GDP ratio in Greece is still higher than it was before the crisis began. Today, the Greek national debt is sitting at 142 percent of GDP.

Now the EU and the IMF are demanding even more austerity measures before they will release any more bailout money.

Needless to say, the Greek people are pretty much exasperated by all of this. They created this mess by going into so much debt, but they certainly don't like the solutions that are being imposed upon them.

Protesters in Greece are absolutely outraged that the EU and the IMF are now demanding a 22 percent reduction in the minimum wage.

Most families in Greece are just barely surviving at this point. Unfortunately, Greece is probably looking at depression conditions for many years to come.

Over the past three years, the size of the Greek economy has shrunk by 16 percent.

In 2012, it is being projected that the Greek economy will shrink by another 5 percent.

Sadly, that projection is probably way too optimistic.

Over the past couple of months, it has been like someone has pulled the rug out from under the Greek economy. Just check out the following numbers from an article in the Telegraph by Ambrose Evans-Pritchard....

Another normal day at the Hellenic Statistical Authority.

We learn that:

Greece's manufacturing output contracted by 15.5pc in December from a year earlier.

Industrial output fell 11.3pc, compared to minus 7.8pc in November.

Unemployment jumped to 20.9pc in November, up from 18.2pc a month earlier.

I have little further to add. This is what a death spiral looks like.

Can you imagine unemployment going up by 2.7 percent in one month?

This is what a 21st century economic depression looks like.

And needless to say, civil unrest is rampant in Greece.

The following is how a USA Today article described some of the protests that we saw in Greece this week....

Scores of youths, in hoods and gas masks, used sledge hammers to smash up marble paving stones in Athens' main Syntagma Square before hurling the rubble at riot police.

The country's two biggest labor unions stopped railway, ferry and public transport schedules, and hospitals worked on skeleton staff while most public services were disrupted. Unions were planning protests in Athens and other cities around midday.

Greek citizens are exasperated by the endless rounds of austerity that are being imposed upon them. They wonder how far all of this is going to go.

How much higher can taxes go in Greece? Greece already has tax rates that are among the highest in Europe....

Greece has the third highest rate of VAT in Europe, second highest gas/petrol tax, third highest tax on social insurance contributions, fifth highest VAT on alcohol, highest property tax and one of the worst corporate tax rates, without the quality of living or competitiveness to match.

How much farther can government pay be cut? Greek civil servants have had their incomes slashed by about 40 percent since 2010.

How would you feel if your pay was reduced by 40 percent?

Large numbers of Greeks are rapidly reaching the end of their ropes. The following is from a recent article in the Independent....

"People are scared and haven't really realised what's happening yet," George Pantsios, an electrician for the country's public power corporation, said. He has only been receiving half of his €850 monthly wage since August. "But once we all lose our jobs and can't feed our kids, that's when it'll go boom and we'll turn into Tahrir Square."

Instead of turning violent, others are simply giving in to despair. According to the Daily Mail, large numbers of Greek children are being abandoned because their parents simply cannot afford to take care of them anymore. The note that one mother left with her little toddler was absolutely heartbreaking....

One mother, it said, ran away after handing over her two-year-old daughter Natasha.

Four-year-old Anna was found by a teacher clutching a note that read: 'I will not be coming to pick up Anna today because I cannot afford to look after her. Please take good care of her. Sorry.'

Sadly, there are an increasing number of Greeks that are giving up on life entirely. The number of suicides in Greece rose by 40 percent during just one recent 12 month time period.

But we haven't even seen the worst in Greece yet. The worst is still yet to come.

And the people of Greece are going to get angrier and angrier and angrier.

According to one recent poll, about 90 percent all of Greeks are unhappy with the interim government led by Prime Minister Lucas Papademos.

This week, that government has started to fall apart. Over just the past few days, 6 members of the 48-member government cabinet have resigned. Not only is there real doubt if the new austerity measures will be approved, there is very real doubt if this government will be able to hold together much longer.

Frustration with the EU and the IMF has reached a fever pitch in Greece. Just check out what Reuters is reporting....

In a letter obtained by Reuters on Friday, the Federation of Greek Police accused the officials of "...blackmail, covertly abolishing or eroding democracy and national sovereignty" and said one target of its warrants would be the IMF's top official for Greece, Poul Thomsen.

So what is going to happen next in Greece?

The truth is that nobody knows.

But whatever kind of "deals" are reached, the reality is that nothing is going to keep Greece from continuing to experience depression-like conditions for quite some time.

Unfortunately, Greece is not an isolated case.

Portugal, Ireland, Italy and Spain are all going down the same path and Europe does not have enough money to bail all of them out.

To get an idea of how much money it would take to bail out the financially troubled nations of Europe, just check out this infographic that was recently posted on ZeroHedge.

A day of reckoning is coming for the United States as well. As CNBC recently noted, the U.S. debt problem is far worse than the European debt problem is.

That is why I have written over and over about the U.S. national debt and about how the U.S. government is spending too much money.

Right now, the U.S. government is still able to borrow gigantic mountains of very cheap money and is spending money as if tomorrow will never come.

Well, just like we saw in Greece, when debt gets out of control a day of great pain eventually arrives.

What we are watching unfold in Greece right now is coming to America.

You better get ready.

Buffett: "Right To Be Fearful" of "Paper Money" - Favours Stocks Over Cash, Bonds and Gold

Posted: 10 Feb 2012 05:55 AM PST

Our friends at Stephen Flood's GoldCore.com write: "Warren Buffett, the billionaire chairman of Berkshire Hathaway, has released an interesting, if contradictory, adaptation from his upcoming shareholder letter - Warren Buffett: Why stocks beat gold and bonds .
In it, Buffett again extols the virtues of stocks over paper money, bonds and gold.

The Oracle of Omaha acknowledges and correctly warns that investors are "right to be fearful" of "paper money." Buffett said low interest rates and inflation should dissuade investors from buying bonds and cash. "They are among the most dangerous of assets."

Buffett again reaffirmed his opinion about gold's "significant shortcomings." He said that gold is "neither of much use nor procreative." He also suggested that gold was a bubble and compared it to the internet stock and housing bubbles.

Buffett Incorrect Regarding Gold

Buffett's thoughts regarding gold are a rehash of similar negative views on gold repeated in recent years.

Buffett criticises gold for having two shortcomings – it is "neither of much use nor procreative".
This is true, however Buffett completely ignores gold's primary use throughout history and today which is as finite money, a monetary safe haven asset, as financial insurance and as a store of value.
Buffett contradicts himself by suggesting that those who buy gold are fearful and they believe "that the ranks of the fearful will grow."

However, in the same article, he says that investors are "right to be fearful" of "paper money."
Buffett should have a chat with James Grant or other monetary authorities who realise gold is the ultimate form of cash. As Grant says "nothing beats a little cash in a bear market, of course, and the oldest form of cash is gold."

Buffett suggests that gold is a bubble and that the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. He writes that as "bandwagon" investors join any party, they create their own truth -- for a while.
His article also shows a lack of knowledge regarding gold - Buffett says that gold is "currently a huge favourite of investors."

The data and statistical evidence shows that gold remains a fringe investment and remains under owned by retail investors in the western world. This is beginning to change and ownership has increased in recent years but ownership remains miniscule when looked at in historical context and when viewed versus ownership of stocks, bonds and cash today.

Buffett compares gold to the internet stock and housing bubbles.

This is a highly simplistic and dubious comparison. The very uncertain world of 2012, with a myriad of significant investment risks is leading to continuing strong fundamental demand for gold bullion amid constrained global supply.

These real fundamentals driving today's gold market were absent in the final years of the dotcom and property bubbles.

The fundamentals driving the gold market are not going to disappear in the foreseeable future and may be with us for the rest of this decade.

Also, gold so massively underperformed in the 1980s and 1990s (after huge outperformance in the 1970s and a parabolic price move in late 1979, January 1980) that gold has in effect been playing "catch up" with other assets in recent years.

The charts and tables show that gold's performance, since the start of Buffett's Berkshire Hathaway, has been equivalent to that of stocks (MSCI World and S&P 500) and with similar volatility.

Berkshire's Hathaway's performance has been phenomenal and must be respected, however Buffett's over concentration and allocation on stocks since 2000 has cost him and his shareholders dearly – and may do so again in the coming years. – GoldCore.com. More at the link below.

Source: GoldCore.com
http://www.goldcore.com/goldcore_blog/buffett-says-right-be-fearful-paper-money-favours-stocks-over-cash-bonds-and-gold

What the Mortgage Deal Reveals About The Obama Administration

Posted: 10 Feb 2012 05:28 AM PST

Edward Harrison here. I was reading Yves' excellent post on The Top Twelve Reasons Why You Should Hate the Mortgage Settlement and I thought about a post I wrote a year ago on what this was all about. I am re-posting this post verbatim below but I just want to say a few words first.

Clearly, the Obama Administration is positioning itself for the 2012 general election. The goal is to do the right things and say just enough to make the Administration's policies appear successful. The messaging is designed to build up a base from which to contrast Obama from the eventual Republican nominee in order to get out the vote. I doubt seriously that Obama's people want any of these mortgage fraud initiatives to have teeth. After all, the President is going for the Super PAC money.

This is kabuki theater for the masses. it is designed to give those people inclined to vote for a Democrat a reason to do so in November, nothing more.

Original post from 8 Mar 2011 below

Yves Smith wrote a post this morning highlighting the $20 billion mortgage settlement the Obama Administration, the banks and the State Attorneys General are hashing out. Her conclusion is that this is this is a Bailout as Reward for Institutionalized Fraud. Read the post. It is quite good.

Here is my take.

The Administration has now moved into re-election mode. Uppermost in their mind is the need to demonstrate that they have taken the right policy steps on the economy all along. And this means making the recovery stick.

-Obama's economic agenda for re-election, Nov 2010

What that means is that there will be no foreclosure moratoria, and certainly no 'fat cats on Wall Street' rhetoric. The Obama Administration is looking to cultivate a pro-business profile. This is why erstwhile Obama-basher and GE CEO Jeff Immelt has been brought on side as well. That's also why Obama has brought Bill Daley into the tent as Chief of Staff. Call it the Jamie Dimon comeback – that's what I am calling it. Call it whatever you like. The fact is the old Obama Administration already set policy early in 2009 and the new Obama Administration now has to defend it if the President wants to be re-elected, which he clearly does.

So, of course they are going to push for a mortgage settlement. As with the Goldman case this past summer, the number is eye-poppingly large enough to throw a bone to the anti-Wall Street crowd but small enough that it doesn't jeopardize the still fragile US financial system. Bankers can continue business as usual. And that is the goal, of course. Remember Tim Geithner's statement about the Administration's needing to do "deeply unpopular, deeply hard to understand" things to right the economic ship?

I watched exceptionally capable people just get killed in the court of public opinion as they defended those policies on the Hill. This is a necessary part of the office, certainly in financial crises. I think this really says something important about the president, not about me. The test is whether you have people willing to do the things that are deeply unpopular, deeply hard to understand, knowing that they're necessary to do and better than the alternatives.

More than ever, Tim Geithner runs the show for economic policy. He is the last man standing of the Old Obama team. Volcker, Summers, Orszag, and Romer are all gone. So Geithner's vision of bailouts and settlements is the one that carries the most weight.

What is Geithner saying with his policies?

The financial system was on the verge of collapse. We all know that now – about US banks and European ones too. Fed Chair Ben Bernanke has said so as has Bank of England head Mervyn King. The WikiLeaks cables affirmed systemic insolvency as the real issue most demonstrably.
When presented with a choice of Japan or Sweden as the model for crisis resolution, the US felt the Japan banking crisis response was the best historical precedent. It is still unclear whether this was a political or an economic decision.
The most difficult political aspect of the banking crisis response was socialising bank losses. All banking crisis bailouts involve some form of loss socialisation and this is a policy which citizens find abhorrent. That's what Geithner meant most directly about 'deeply unpopular, deeply hard to understand'.
Using pro-inflationary monetary policy and fiscal stimulus, the U.S. can put this crisis in the rear view mirror. Low interest rates and a steep yield curve combined with bailouts, stress tests, dividend reductions and private capital will allow time to heal all wounds. That is the Geithner view.
Once the system is healthy again, it should expand. The reason you need to bail the banks out is that they have expansion opportunities abroad. As emerging markets develop more sophisticated financial markets, the Treasury secretary believes American banks are well positioned to profit. American finance can't profit if you break up the banks.

I would argue that Tim Geithner believes we are almost at that final stage where the banks are now healthy enough to get bigger and take share in emerging markets. His view is that a more robust regulatory environment will keep things in check and prevent another financial crisis.

I hope this helps to explain why the Obama Administration is keen to get this $20 billion mortgage settlement done. The prevailing view in the Administration is that the U.S. is in a fragile but sustainable recovery. With emerging markets leading the economic recovery and U.S. banks on sounder footing, now is the time to resume the expansion of U.S. financial services. I should also add that given the balance sheet recession in the U.S., the only way banks can expand is via an expansion abroad.

I strongly disagree with this vision of America's future economic development. But this is the road we are on.