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Saturday, April 7, 2012

Gold World News Flash

Gold World News Flash

The Largest Short-Term Threat to Humanity: The Fuel Pools of Fukushima

Posted: 06 Apr 2012 06:19 PM PDT

The Greatest Single Threat to Humanity: Fuel Pool Number 4

We noted days after the Japanese earthquake that the biggest threat was from the spent fuel rods in the fuel pool at Fukushima unit number 4, and not from the reactors themselves. See this and this.

We noted in February:

Scientists say that there is a 70% chance of a magnitude 7.0 earthquake hitting Fukushima this year, and a 98% chance within the next 3 years.

Given that nuclear expert Arnie Gundersen says that an earthquake of 7.0 or larger could cause the entire fuel pool structure collapse, it is urgent that everything humanly possible is done to stabilize the structure housing the fuel pools at reactor number 4.

Tepco is doing some construction at the building … it is a race against time under very difficult circumstances, and hopefully Tepco will win.

As AP points out:

The structural integrity of the damaged Unit 4 reactor building has long been a major concern among experts because a collapse of its spent fuel cooling pool could cause a disaster worse than the three reactor meltdowns.

***

Gundersen (who used to build spent fuel pools) explains that there is no protection surrounding the radioactive fuel in the pools. He warns that – if the fuel pools at reactor 4 collapse due to an earthquake – people should get out of Japan, and residents of the West Coast of America and Canada should shut all of their windows and stay inside for a while.

The fuel pool number 4 is apparently not in great shape, and there have already been countless earthquakes near the Fukushima region since the 9.0 earthquake last March.

Germany's ZDF tv quotes nuclear engineer Yukitero Naka as saying:

If another earthquake occurs then the building [number 4] could collapse and another chain reaction could very likely occur.

(Unit 4 contains plutonium as well as other radioactive wastes.)

Mainchi reported on Monday:

The storage pool in the No. 4 reactor building has a total of 1,535 fuel rods, or 460 tons of nuclear fuel, in it. The 7-story building itself has suffered great damage, with the storage pool barely intact on the building's third and fourth floors. The roof has been blown away. If the storage pool breaks and runs dry, the nuclear fuel inside will overheat and explode, causing a massive amount of radioactive substances to spread over a wide area. Both the U.S. Nuclear Regulatory Commission (NRC) and French nuclear energy company Areva have warned about this risk.

A report released in February by the Independent Investigation Commission on the Fukushima Daiichi Nuclear Accident stated that the storage pool of the plant's No. 4 reactor has clearly been shown to be "the weakest link" in the parallel, chain-reaction crises of the nuclear disaster. The worse-case scenario drawn up by the government includes not only the collapse of the No. 4 reactor pool, but the disintegration of spent fuel rods from all the plant's other reactors. If this were to happen, residents in the Tokyo metropolitan area would be forced to evacuate.

Former Minister of Land, Infrastructure, Transport and Tourism Sumio Mabuchi, who was appointed to the post of then Prime Minister Naoto Kan's advisor on the nuclear disaster immediately after its outbreak, proposed the injection of concrete from below the No. 4 reactor to the bottom of the storage pool, Chernobyl-style.

***

"Because sea water was being pumped into the reactor, the soundness of the structure (concrete corrosion and deterioration) was questionable. There also were doubts about the calculations made on earthquake resistance as well," said one government source familiar with what took place at the time. "[F]uel rod removal will take three years. Will the structure remain standing for that long?

Asahi noted last month that - if Unit 4 pool gets a crack from an earthquake and leaks, it would be the end for Tokyo.

Kevin Kamps said last month:

Unit 4 storage pool… The entire building is listing including the pool. What they have is steel jacks underneath the pool to try to keep the floor from falling out or the pool from flipping over.

If that cooling water supply is lost, it will be just a few hours at most before that waste is on fire. 135 tons outside of any radioactive containment. They would be direct releases into the environment. 100% of cesium-137 could be released to the environment.

Former U.N. adviser Akio Matsumura - whose praises have been sung by Mikhail Gorbachev, U.S. Ambassadors Stephen Bosworth and Glenn Olds, and former U.S. Deputy Secretary of State and Goldman Sachs co-chair John C. Whitehead - notes:

The unit suffered enormous damage during the tsunami—a hydrogen explosion blew the roof off, leaving the highly radioactive fuel pool exposed to the open air. If another high level earthquake hits the area, the building will certainly collapse. Japanese and American meteorologists have predicted that such a strong earthquake is indeed likely to hit this year.

The meltdown and unprecedented release of radiation that would ensue is the worst case scenario that then-Prime Minister Kan and other former officials have discussed in the past months. He warned during his speech at the World Economic Forum in Davos that such an accident would force the evacuation of the 35 million people in Tokyo, close half of Japan and compromise the nation's sovereignty. Such a humanitarian and environmental catastrophe is unimaginable. Hiroshi Tasaka, a nuclear engineer and special adviser to Prime Minister Kan immediately following the crisis, said the crisis "just opened Pandora's Box."

The current Japanese government has not yet mentioned the looming disaster, ostensibly to not incite panic in the public. Nevertheless, action must be taken quickly. This website over the last year has published a running commentary from scientists explaining why Reactor 4 must be stabilized immediately, who might be able to accomplish such a task, and why the situation has largely gone unnoticed. We believe an independent, international team of structural engineers and other advisers must be assembled and deployed immediately. Mounting public pressure would force the Japanese government to take action. We hope these resources are helpful in educating the public about the crisis that we face.

As the eminent German physicist Dr. Hans-Peter Durr said ten months ago, if the spent fuel pool spills, we will be in a situation where science never imagined we could be.

Matsumura was told that if the fuel pool at unit 4 collapses or the water spills out, so much radiation will spew out for 50 years that no one will be able to approach Fukushima:

Even more dramatically, Matsumura writes:

Japan's former Ambassador to Switzerland, Mr. Mitsuhei Murata, was invited to speak at the Public Hearing of the Budgetary Committee of the House of Councilors on March 22, 2012, on the Fukushima nuclear power plants accident. Before the Committee, Ambassador Murata strongly stated that if the crippled building of reactor unit 4—with 1,535 fuel rods in the spent fuel pool 100 feet (30 meters) above the ground—collapses, not only will it cause a shutdown of all six reactors but will also affect the common spent fuel pool containing 6,375 fuel rods, located some 50 meters from reactor 4. In both cases the radioactive rods are not protected by a containment vessel; dangerously, they are open to the air. This would certainly cause a global catastrophe like we have never before experienced. He stressed that the responsibility of Japan to the rest of the world is immeasurable. Such a catastrophe would affect us all for centuries. Ambassador Murata informed us that the total numbers of the spent fuel rods at the Fukushima Daiichi site excluding the rods in the pressure vessel is 11,421 (396+615+566+1,535+994+940+6375).

I asked top spent-fuel pools expert Mr. Robert Alvarez, former Senior Policy Adviser to the Secretary and Deputy Assistant Secretary for National Security and the Environment at the U.S. Department of Energy, for an explanation of the potential impact of the 11,421 rods.

I received an astounding response from Mr. Alvarez [updated 4/5/12]:

In recent times, more information about the spent fuel situation at the Fukushima-Dai-Ichi site has become known. It is my understanding that of the 1,532 spent fuel assemblies in reactor No. 304 assemblies are fresh and unirradiated. This then leaves 1,231 irradiated spent fuel rods in pool No. 4, which contain roughly 37 million curies (~1.4E+18 Becquerel) of long-lived radioactivity. The No. 4 pool is about 100 feet above ground, is structurally damaged and is exposed to the open elements. If an earthquake or other event were to cause this pool to drain this could result in a catastrophic radiological fire involving nearly 10 times the amount of Cs-137 released by the Chernobyl accident.

The infrastructure to safely remove this material was destroyed as it was at the other three reactors. Spent reactor fuel cannot be simply lifted into the air by a crane as if it were routine cargo. In order to prevent severe radiation exposures, fires and possible explosions, it must be transferred at all times in water and heavily shielded structures into dry casks.. As this has never been done before, the removal of the spent fuel from the pools at the damaged Fukushima-Dai-Ichi reactors will require a major and time-consuming re-construction effort and will be charting in unknown waters. Despite the enormous destruction cased at the Da–Ichi site, dry casks holding a smaller amount of spent fuel appear to be unscathed.

Based on U.S. Energy Department data, assuming a total of 11,138 spent fuel assemblies are being stored at the Dai-Ichi site, nearly all, which is in pools. They contain roughly 336 million curies (~1.2 E+19 Bq) of long-lived radioactivity. About 134 million curies is Cesium-137 — roughly 85 times the amount of Cs-137 released at the Chernobyl accident as estimated by the U.S. National Council on Radiation Protection (NCRP). The total spent reactor fuel inventory at the Fukushima-Daichi site contains nearly half of the total amount of Cs-137 estimated by the NCRP to have been released by all atmospheric nuclear weapons testing, Chernobyl, and world-wide reprocessing plants (~270 million curies or ~9.9 E+18 Becquerel).

It is important for the public to understand that reactors that have been operating for decades, such as those at the Fukushima-Dai-Ichi site have generated some of the largest concentrations of radioactivity on the planet.

Many of our readers might find it difficult to appreciate the actual meaning of the figure, yet we can grasp what 85 times more Cesium-137 than the Chernobyl would mean. It would destroy the world environment and our civilization. This is not rocket science, nor does it connect to the pugilistic debate over nuclear power plants. This is an issue of human survival.

There was a Nuclear Security Summit Conference in Seoul on March 26 and 27, and Ambassador Murata and I made a concerted effort to find someone to inform the participants from 54 nations of the potential global catastrophe of reactor unit 4. We asked several participants to share the idea of an Independent Assessment team comprised of a broad group of international experts to deal with this urgent issue.

I would like to introduce Ambassador Murata's letter to the UN Secretary General Ban Ki-moon to convey this urgent message and also his letter to Japan's Prime Minister Yoshihiko Noda for Japanese readers. He emphasized in the statement that we should bring human wisdom to tackle this unprecedented challenge.

Ambassador Murata's letter says:

It is no exaggeration to say that the fate of Japan and the whole world depends on NO.4 reactor. This is confirmed by most reliable experts like Dr. Arnie Gundersen or Dr. Fumiaki Koide.

Anti-nuclear physician Dr. Helen Caldicott says that if fuel pool 4 collapses, she will evacuate her family from Boston and move them to the Southern Hemisphere. This is an especially dramatic statement given that the West Coast is much more directly in the path of Fukushima radiation than the East Coast.

Will humanity rise to the occasion, and figure out how to stabilize fuel pool number 4 before catastrophe strikes?

Or will modern civilization win a Darwin award for failing to pay attention to the real threats?


Strategic Metals - Gold, Tungsten & Molybdenum

Posted: 06 Apr 2012 05:30 PM PDT

The week end miner


The JOBS Act Signing: A Giant Step for Entrepreneurship in America

Posted: 06 Apr 2012 04:37 PM PDT

At the White House yesterday, I had the pleasure of watching one of the most forward-thinking pieces of pro-business bipartisan legislation to date signed into law by President Obama: the Jumpstart Our Business Startups (JOBS) Act.

The JOBS Act reduces many of the regulatory barriers that have, up to this point, made it nearly impossible for young startups to raise much-needed capital from investors. If hundreds of Members of Congress and thousands of young American entrepreneurs, myself included, are correct — and I believe we are — this historic moment is going to redefine business as we know it.

Among other capital formation measures, including the expansion of mini-IPOs, the amended JOBS Act includes an edited version of Congressman Patrick McHenry's "crowd funding bill," which allows startups and small businesses to raise up to $1 million annually through a number of small-dollar donations using web-based crowdfunding platforms.

Even amid concerns about the long-term potential investor fraud (which was answered, in part, by an amendment from the Senate designed to protect non-accredited investors), the United States Congress still went forward and did the right thing: they stepped up, with majorities in both the House and the Senate, to overwhelmingly support a bill that many young entrepreneurs feel will significantly improve the U.S. startup ecosystem. Read more.......


This posting includes an audio/video/photo media file: Download Now

By the Numbers for the Week Ending April 6

Posted: 06 Apr 2012 01:35 PM PDT

 This week's closing table.

20120406-Table

If the image is too small click on it for a larger version.

Please note, the Cash Market close for gold and silver includes thin trade on Good Friday following the U.S. non-farm payroll report, which came in much lower than expectations with a headline number of 120,000 jobs added for March.  Gold closed Thursday, March 5 at $1,630.95 - Silver closed Thursday at $31.67. 

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

GATA’s Chris Powell – JPM’s Metals Positions Client Positions

Posted: 06 Apr 2012 10:21 AM PDT

But who are the clients?   

GATA's Chris Powell weighs in on the Thursday, April 5 video interview of JP Morgan's  Head of Global Commodities, Blythe Masters, by CNBC's Sharon Epperson.  (Video two posts below.)  Powell begins : "Though the monetary metals have been under the most severe attack for the last few weeks, today may be considered a great victory for our side, insofar as a softball interviewer on CNBC managed to question JPMorganChase commodity executive Blythe Masters about whether the bank is manipulating the metals markets:
http://video.cnbc.com/gallery/?video=3000082631

Continued...

Masters acknowledged that this has become an issue. "There's been a tremendous amount of speculation, particularly in the blogosphere, on this topic," she told CNBC. "I think the challenge is it represents a misunderstanding of the nature of our business. ... Our business is a client-driven business where we execute on behalf of clients to achieve their financial and risk-management objectives. ... We have offsetting positions. We have no stake in whether prices rise or decline."

The latter remark caused a bit of a sensation and mockery on our side but it was, in fact, only what JP Morgan Chase CEO Jamie Dimon said several times a few years ago when similar questions about monetary metals market manipulation were put to him -- that the bank has little exposure of its own in those markets and that the metals positions on the bank's books are client positions.
As Morgan's positions in not only the monetary metals markets but also the interest-rate derivatives markets are beyond comprehension and what any private company could possibly carry on its own, GATA has always believed Dimon (and today believes Masters too) and has long maintained that the positions on Morgan's books are actually U.S. government positions and that the bank is essentially a government agency. …" – Mr. Powell's commentary continues at the link below.


Source: GATA 
http://www.gata.org/node/11216

In Its Latest Nonfarm Payroll Mea Culpa, Goldman Stumbles On THE Answer... And Changes The Rules Of The Game

Posted: 06 Apr 2012 10:12 AM PDT

One has to read very carefully and all the way through the latest Jan Hatzius NFP post-mortem, to catch what may be the most important piece of information Goldman has ever telegraphed to clients, and thus, to the Fed. But first, why the note? As a reminder, after predicting correctly just what the impact of the record warm weather would be on today's NFP print (recall "Is A Bad NFP Print Days Away - Goldman Says Warm Weather Added 70,000-100,000 Jobs; Now It's Payback Time", something Zero Hedge warned first 2 months prior in "Is It The Weather, Stupid? David Rosenberg On What "April In January" Means For Seasonal Adjustments", but that's beside the point) yesterday Goldman was kind enough to tell us precisely what to expect when it hiked its NFP forecast from 175,000 to 200,000 ("If Goldman's recent predictive track record is any indication, tomorrow's NFP will be a disaster.") Of course, betting against Goldman's clients continues to be the winningest trade of the year, if not the millennium.

But that's not the point. Neither is Goldman's attempt to mollify what little muppets are left following its latest faux pas ("we believe that the underlying trend in payroll employment growth is around 175,000 as of the March report"), or to once again shift its focus to a bearish one having flip flopped worse than Dennis Gartman in recent weeks (see The Muppets Are Confused How Goldman Is Both Bullish And Bearish On Stocks At The Same Time) after saying that "we would expect the headline number for April to fall short of this figure, partly because the weather payback is likely to be substantially larger in April than in March and partly because the underlying trend may be decelerating slightly." Nor is the point that Goldman once again attempts to handicap the next latest and greatest New iPad, pardon, New QE. What's the point - QE is inevitable, and it will happen. But at a time that Obama deems appropriate - the one overriding consideration this year is to boost Obama's popularity into the election by any means possible, with structural inflation and employment taking a back seat.

No, all of these are secondary items. Here is what is of absolutely critical importance in the just released Goldman letter, nested deep in Hatzius' final paragraph, where it would otherwise be missed by most:

...we have found some evidence that at the very long end of the yield curve, where Operation Twist is concentrated, it may be not just the stock of securities held by the Fed but also the ongoing flow of purchases that matters for yields...

For those who are aware of the Fed's sentiment vis-a-vis the debate of stock vs flow of money effect, this will be a stunning revelation. Especially since it vindicates what we have been saying since day one, namely that when it comes to securities price formation in a centrally-planned regime, it is flow not stock that matters. And as those who follow the Fed's thinking know too well, the Fed is convinced it is stock, not flow that serves as a consistent catalyst for subjective risk valuation. The above quote is just the first crack in the Fed's thinking, because if Goldman now believes this, so will Bill Dudley, following his next meeting with Jan Hatzius at the Pound and Pence, and shortly thereafter, it will become canon at the Fed.

One way of visualizing what this means is to think of a shark which has to be constantly in motion in order to survive. Well, the allegory of Jaws can be applied to liquidity addicted capital markets. Translated simply, it means that it is irrelevant if the Fed's balance sheet is $1 million, $1 trillion or $1,000 quadrillion. A primacy of flow over stock means that UNLESS THE FED IS ACTIVELY ENGAGING IN MONETIZATION AT EVERY GIVEN MOMENT, THE IMPACT FROM EASING DIMINISHES PROGRESSIVELY, ULTIMATELY APPROACHING ZERO AND SUBSEQUENTLY BECOMING NEGATIVE!

We don't have sufficient time to go into the nuances of what this revolutionary run-on sentence means on this good Friday, suffice to say that it makes virtually all the literature on modern monetary theory (in practice of course, the theoretical part is such gibberish that only fans of MMT and Neo-Keynesianism care about it - something nobody actually in the market gives a rat's ass about) obsolete. It also means that absent "flow" or instantaneous Fed monetization engagement at any given moment, risk will collapse, regardless of the actual size of the Fed's balance sheet (which of course has other structural limitations). What is most critical is that this one statement from Hatzius sows the seeds of doubt, and provides a decoupling between prevalent risk prices, and explicit levels of historical Fed monetization. Because what the ascendancy of the flow model means is that unless the Fed is willing to telegraph that it will monetize devaluing assets in perpetuity, thus providing the "flow", the Fed is assured at failing at its only real mandate: keeping the Russell 2000 pumped up.

And while the Fed may be happy to sacrifice its balance sheet at the altar of Dow 36,000 just to preserve the Wealth Effect fallacy, the other counterliability, the US Treasury stock, which by implication will have to rise as it will be the security monetized the most to keep the deficit funded, may not be quite as pliable, and eager to rise parabolically, especially in a time when more and more question the reserve status of the USD, when faced with the ascendancy of the CNY.

Finally, the market still having a trace of discounting left in it, will become quite aware of all these considerations and deliberations, and will promptly demand a practical application of the "flow" model. Which also means that absent constant, ongoing monetization, either sterilized or not (although as we pointed out earlier this week, the opportunity for ongoing sterilization by the Fed is now almost finished as it will have just 3 months of short-end bonds left to sell past June), stocks will crash.

Unwittingly, Goldman may have just resorted to the nuclear option to force the Fed to engage in monetization much faster than it would have otherwise done so, by diametrically changing how Goldman, the Fed, and thus the market perceives Fed intervention.

Or maybe it was all too "wittingly"...

Full Jan Hatzius note:

US Views : Payback (Hatzius)

 

1. The March employment report was a disappointment. Although the unemployment rate fell, this was due to a drop in the labor force as household employment gave back some of its prior big increases. More importantly, the job gain in the establishment survey of just 120,000 fell well short of anyone's estimate. The big question is how much of the slowdown from February's 240,000 gain was due to special factors, including "payback" for the unseasonably warm winter, and how much reflects weakness in the underlying trend.

 

2. We do think the warm weather has been an important driver of stronger payroll numbers over the past few months. As we have shown, all of the acceleration in nonfarm payrolls since the fall has occurred in the (normally) cold states, and our state-by-state panel analysis suggests that weather has boosted February's level of payrolls by 100k or a bit more (see "Payroll Payback?" US Economics Analyst, 12/14, April 5, 2012). This state-level model suggests that none of the inevitable payback for this boost should have occurred yet, since March was just as warm relative to the seasonal norm as February. That said, weather-sensitive sectors such as mining and building construction did show some weakness, so we would pencil in 10k-20k for weather "payback" in March.

 

3. In addition, the 37,000 drop in retail employment was partly related to one-off job reductions in the department store industry, and should probably not be included in an estimate of the underlying employment trend. Taken together, we believe that the underlying trend in payroll employment growth is around 175,000 as of the March report. At this point, we would expect the headline number for April to fall short of this figure, partly because the weather payback is likely to be substantially larger in April than in March and partly because the underlying trend may be decelerating slightly (as suggested, e.g., by the drop in temporary help services employment in March).

 

4. Largely because of the weakness in the employment report, our standard metrics for evaluating the US data flow have also started to send a less upbeat message. Our current activity indicator (CAI), which summarizes all of the key monthly and weekly activity data, is showing a preliminary 2.5% for March, down from 3.5% in February. Likewise, our US-MAP, which compares the data with the Bloomberg consensus, has averaged negative readings since late February, after six months of positive surprises. All this reinforces our view that the discrepancies in the US economic data will be resolved mainly via deceleration in the job market indicators rather than acceleration in GDP.

 

5. We admit to being puzzled by the twists and turns in Fed communications over the past few months. On January 25, Chairman Bernanke said that under the FOMC's projections, he saw a "very strong case" for finding "additional tools" to support economic expansion. But in the March 13 minutes, only "a couple" (i.e., two) of the committee's ten voting members—a number so small that it probably does not include the chairman, whose position makes it unlikely that he would be in such a small minority—thought that additional stimulus could become necessary, and even that only "if the economy lost momentum" or inflation looked likely to undershoot. All this would make perfect sense if there had been a sharp upgrade of the committee's central forecast over the past few months. But the minutes also said that "…the economic outlook, while a bit stronger overall, was broadly similar to that at the time of their January meeting." And Chairman Bernanke, in particular, last week went out of his way to cast doubt on the not on that the stronger jobs data through February were indicative of a sharp pickup in growth. Our conclusion is that there has been a shift in the Fed's reaction function back to the hawkish side, and there may be a bit more complacency about the risks to the outlook than suggested by the committee's decision to retain the assessment of "significant downside risks" in the March 13 statement.

 

6. So what can we expect from the Fed? Easing at the April 24-25 meeting looks highly unlikely, although the tone of the statement and the Chairman's press conference may take a fresh turn toward the dovish side. Easing at the June 19-20 meeting, in contrast, still looks more likely than not, at least under our forecast of weaker activity and benign inflation. Our baseline remains a renewed asset purchase program which involves Treasuries and MBS and whose impact on the monetary base is sterilized via reverse repos or term deposits, but it is also possible that the committee would extend Operation Twist; there is approximately another $200 billion available, and it would only take a small reduction in the flow of purchases to make this number last until yearend.

 

7. Stepping back from the tactics, we still see a strong fundamental case for following up Operation Twist with a successor program. First, even under its own forecast, the committee expects to be far from fulfilling the employment side of its mandate by 2013-2014, so it is easy to sympathize with Chicago Fed President Evans's call for more action. Second, growth could well disappoint the committee's forecasts, given all the usual uncertainties around the weather impact, the inventory cycle, energy prices, and the "fiscal cliff" at the end of 2012. Third, a failure to do more might imply a tightening of conditions, assuming financial markets are still discounting some probability of easing. In addition, we have found some evidence that at the very long end of the yield curve, where Operation Twist is concentrated, it may be not just the stock of securities held by the Fed but also the ongoing flow of purchases that matters for yields. And fourth, the risk of a material inflation overshoot seems low given the still-large amount of spare capacity, not to mention the Fed's ability to reverse course and tighten financial conditions substantially via forward guidance, rate hikes, or even asset sales should the need arise.

Swiss franc 'safe haven' trade is mistake, von Greyerz tells King World News

Posted: 06 Apr 2012 09:58 AM PDT

5:58p ET Friday, April 6, 2012

Dear Friend of GATA and Gold:

Fund manager Egon von Greyerz tells King World News today that there's a misguided "safe haven" trade into the Swiss franc again as it strengthens against the euro, but Switzerland is doing no better than the rest of Europe and soon gold will be seen as the only "safe haven" currency. An excerpt from the interview is posted at the King World News blog here:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/4/6_Gre...

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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Sona Discovers Potential High-Grade Gold Mineralization
at Blackdome in British Columbia -- 13.6g over 1.5 Meters

From a Company Press Release
November 22, 2011

VANCOUVER, British Columbia -- With its latest surface diamond drilling program at its 100-percent-owned, formerly producing Blackdome gold mine in southern British Columbia, Sona Resources Corp. has discovered a potentially high-grade gold-mineralized area, with one hole intersecting 13.6 grams of gold in 1.5 meters of core drilling.

"We intersected a promising new mineralized zone, and we feel optimistic about the assay results," says Sona's president and CEO, John P. Thompson. "We have undertaken an aggressive exploration program that has tested a number of target zones. Our discovery of this new gold-bearing structure is significant, and it represents a positive development for the company."

Sona aims to bring its permitted Blackdome mill back into production over the next year and a half, at a rate of 200 tonnes per day, with feed from the formerly producing Blackdome mine and the nearby Elizabeth gold deposit property. A positive preliminary economic assessment by Micon International Ltd., based on a gold price of $950 per ounce over eight years, has estimated a cash cost of $208 per tonne milled, or $686 per gold ounce recovered.

For the company's complete press release, please visit:

http://www.sonaresources.com/_resources/news/SONA_NR18_2011-opt.pdf


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Help keep GATA going

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Prophecy Platinum (TSXV: NKL) and Ursa Major Minerals
Sign Combination Agreement

Company Press Release
Friday, March 2, 2012

VANCOUVER, British Columbia, Canada -- Prophecy Platinum Corp. (TSX-V: NKL, OTC-QX: PNIKF, Frankfurt: P94P) and Ursa Major Minerals Inc. have signed a binding letter of agreement for a business combination through a proposed all-share transaction. In doing so Prophecy and Ursa have acted at arm's length and the transaction has been negotiated at arm's length.

Prophecy will issue one common share in exchange for every 25 outstanding common shares of Ursa. Ursa options and warrants will be exchanged for options and warrants of Prophecy on an agreed schedule.

Prophecy's offer represents a value of about $0.15 per each common share of Ursa based on Prophecy's share price of $3.70 as at March 1, representing a premium of 130 percent to Ursa's March 1 closing price of $0.065.

Prophecy is to subscribe for $1 million common shares of Ursa by way of private placement financing at $0.06 per share, subject to regulatory approval. Upon placement completion, John Lee and Greg Hall, current Prophecy directors, will be appointed to Ursa's board.

Prophecy thus will become a mid-tier resource company with a robust and
diversified pipeline of platinum nickel projects, including:

-- The fully permitted open-pit Shakespeare PGM-Ni-Cu mine close to Sudbury, Ontario, infrastructure with near-term production capabilities.

-- The flagship Wellgreen (Yukon) PGM-Ni-Cu project with more than 10 million ounces of Pt-Pd-Au inferred resource. Drilling is under way and a preliminary economic assessment study is pending.

-- Manitoba's Lynn Lake Ni-Cu project with more than 262 million pounds Ni and 138 million pounds Cu measured and indicated.

For the complete announcement, please visit Prophecy Platinum's Internet site here:

http://www.prophecyplat.com/news_2012_mar02_prophecy_platinum_ursa_major...

Gold and Silver Disaggregated COT Report (DCOT) for April 6

Posted: 06 Apr 2012 09:52 AM PDT

 HOUSTON -- This week's Commodity Futures Trading Commission (CFTC) disaggregated commitments of traders (DCOT) report was released at 15:30 ET Friday.  Our recap of the changes in weekly positioning by the disaggregated trader classes, as compiled by the CFTC, is just below. 

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.

20120406-DCOT

(DCOT Table for Friday, April 6, 2012, for data as of the close on Tuesday, April 3.   Source CFTC for COT data, Cash Market for gold and silver.) 

Continued…


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 (around 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 directly in the charts often.


Have a good holiday weekend everyone.

20120329-Vik
"An Easter/Passover buying op?  Another bleeping buying op!  When do we get to the "fun" part, Mr. Got Gold Report man?" 

Greyerz - Gold Bottom, $25 Trillion in Debt, ECB & Swiss Franc

Posted: 06 Apr 2012 09:08 AM PDT

Today Egon von Greyerz told King World News that around the world, the average debt to GDP is at a staggering 350%. Egon von Greyerz is founder and managing partner at Matterhorn Asset Management out of Switzerland. Von Greyerz also stated that even if the number was cut in half, to 175% debt to GDP, it would require the elimination of $25 trillion of debt. But first, here is what Greyerz had to say about what is happening in Europe: "Yesterday the Swiss franc came very close to the 1.20 level versus the euro.  This is happening because bad economic news is coming out of Europe.  Industrial production is falling and Spanish rates versus German rates, there is now a 4% gap, now people are getting worried about that again.  So they are buying the Swiss franc."


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Gold's Decade-Long Bull Run is Dead

Posted: 06 Apr 2012 08:50 AM PDT

The time to have negative feelings was late last summer. The time to think like a capitalist is now. Read More...



Dr. Marc Faber: Global Central Banks Are In The Money Printing Business − There Will Be More QE

Posted: 06 Apr 2012 08:44 AM PDT

Faber: Inflation will come first, then eventually deflation

from Financial Sense:

Jim welcomes back Dr. Marc Faber of the Gloom, Boom & Doom Report this week. Dr. Faber believes shorting the markets can be a risky proposition when the global central banks will print money at the drop of a hat. He believes it is very important to stay diversified in this environment. Dr. Faber recommends dividend-paying stocks, gold, emerging market stocks and real estate.

Click Here to Listen


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Moving Parts

Posted: 06 Apr 2012 08:26 AM PDT

Synopsis: 

An analysis of the moving parts that power the economy strongly suggests our modest recovery is doomed.


Dear Reader,

In last week's edition of these musings, I expressed my frustration that most Americans are paying next to no attention to the government's plowing under of the individual liberties that made this country the economic and political bastion it once was.

In response, a number of dear readers wrote in expressing that they shared my concerns and encouraging me to continue writing about the ongoing outrages of governments gone rogue.

While I appreciate your nice words and encouragements, per my comments last week, I don't intend to dwell on such subjects today, but I do want to share a few follow-up remarks that I think are relevant to the state of the state, which I do a bit later on in this edition.

First, however, with all the volatility in precious metals and broader markets this week, some quick comments and, I fear, somewhat scattered observations on current markets.


Moving Parts

It has often been observed that being a successful investor is not easy. And how could it be, given that much of what drives investment returns can be tracked to the economies that serve as the foundation for those investments. That, in turn, brings into play the study of economics, which is where things begin to get very wiggly.

That's because, other than in the most primitive societies, the modern economy is a complex system containing so many moving yet interlocking parts as to make predicting outcomes impossible.

Even so, there have been periods in history when the largest of the moving parts were relatively stable, in which case, in the absence of a black swan, a certain predictability was possible.

This is not one of those periods.

Which brings me to a quick review of just a couple of the larger moving parts in today's economy. While my perspective is largely derived from the fact that my derriere is presently parked in the USA, globalization has served to link up these same moving markets across any number of economies.

So, what are these moving parts? In no particular order…

Trade. The amount a country exports vs. imports can be netted out to give you some sense of the vibrancy of an economy. Simplistically, a trade surplus typically means that there is external demand for the products and services produced by a country. Because trading partners usually need to first buy your currency before buying your output, a trade surplus is supportive of a country's currency.

The importance of a trade surplus can be seen in the case of Japan where – despite the weight of many worries on the back of that country's economy – the demand for its cars, electronics and so forth has, until recently, kept it in surplus and therefore helped to support the yen. With that country's trade now in deficit, things could get very dicey, very quickly. 

(As an aside, the switch over from trade surplus to deficit in Japan is due to a number of factors, not the least of which was the overreaction to the Fukushima fiasco that caused the politicians to close down all but one of the nation's nuclear power plants, requiring the resource-weak country to spend billions importing oil.)

A trade deficit of a sufficient size and duration can have the opposite effect of a surplus, effectively requiring a nation to export its wealth to trading partners in exchange for products people want – flat-screen televisions and cars and such – as well as resources the country needs, such as oil.

The net effect of the trade deficit, in the case of the US, is that much of what we import ultimately adds nothing to the country's capital stock or productive capacity, but rather is burned up or ends up in landfills. Concurrently, our trading partners end up with lots of American cash – credible estimates put the number at roughly $7 trillion – which they can then use to buy up assets with tangible value, from real estate and US businesses, to gold and other useful commodities.

This is, of course, a simplistic view of the situation – because, for instance, many of those expatriated dollars have been reinvested in Treasury bills or otherwise parked and are at risk of suffering from the same devaluation as all dollar-based investments. Thus, the country's primary trading partners, if caught unawares, could end up watching their dollar holdings go down with the sinking ship… or, growing concerned, could start unloading those dollars by dumping Treasuries and using the proceeds to buy "stuff," helping to greatly exacerbate the coming inflation.

So, how has the whole trade thing been going in these United States over the last little while?

(Click on image to enlarge)

The reality is much worse than even that dismal chart reflects, because the last time the US ran a trade surplus was in 1975, almost four decades ago.

Government Spending. A government that spends a lot more than it takes in will eventually be forced to engage in all manner of machinations and manipulations in order to cover its bills – bills that include the cost of paying interest on all the debt it has racked up.

Saving myself some time in raking together all the data points on how things have been going with this particularly important moving part, following are a couple of data points from a recent article by periodic Casey Report collaborator James Quinn, writing on his BurningPlatform.com blog.

  • We've increased our national debt by $5.6 trillion in the last three and a half years. It took from 1789 until 2000, two hundred and eleven years, to accumulate the first $5.6 trillion of debt.
  • Our average annual deficit from 2000 through 2008 was $190 billion. Our average annual deficits since 2008 have been $1.3 trillion. Our deficits never exceeded 4% of GDP prior to 2008, but now they exceed 9%.
  • The national debt will reach $20 trillion by 2015, and if interest rates normalized to the same level they were in 2007 (5%), annual interest expense would be $1 trillion, or 45% of current tax revenue. (Ed. Note: More on interest rates momentarily.)
  • The unfunded liabilities of Medicare, Medicaid and Social Security exceed $100 trillion and cannot possibly be honored, leaving future generations to fend for themselves.

In other words, the moving part of government spending is moving quickly… in the opposite direction of where it should be moving. So much so that yesterday the Egan-Jones rating service downgraded the credit rating of the US to AA from AA+ yesterday, stating:

"When debt-to-GDP exceeds 100 percent, a country's financial flexibility becomes increasingly strained," Managing Director Sean Egan wrote in his report on the downgrade. "For the first time since World War II, U.S. debt exceeds 100 percent."

As far as machinations are concerned, the list is far too long and too complex to recap here, but because of the size of the debt at this point, no machination is of greater importance to the government than keeping interest rates capped at or near today's historic lows. That's because, as James Quinn points out, the consequences of interest rates rising even to the 5% level last seen in 2007 would be as devastating as a tornado on the nation's already fragile finances.

Given the size and unpayable nature of the government's many obligations, the odds are very good that once rates start to rise, they will not only hit 5% but blow past that level… perhaps to 10% or higher. Which means that, if it were possible for it to happen (which it isn't, things will melt down well before that point), virtually all US government revenues would have to go to paying interest. 

At that point, everything changes, and none of it for the good (at least in the short run). 

And that brings me to an analysis prepared in the wee hours this morning for today's edition by Casey Research Chief Economist Bud Conrad. (When I say wee hours, I'm not exaggerating – I received the first email from Bud at 3:00 am his time. Thanks, Bud!)

In addition to interest rates, he touches on the closely related matter of credit, another of the big moving parts in an economy.

The Recovery in Lending May Pressure Rates Higher

By Bud Conrad

When the economy is growing, there is a demand for credit. We have just gone through the biggest collapse in credit since the Great Depression. But credit is now rising again, as banks are making loans.

(Click on image to enlarge)

The chart below indicates what loan recovery may mean for interest rates. When credit demand is low, as it was in the crisis of 2008, banks are not making new loans and total bank credit collapses.

The blue line shows the annual growth in credit, which was actually in decline for the first time in the data available. The red line of the fed funds rate was forced to zero by the Fed, and that matched the low growth in credit. But bank credit is now rising, indicating the potential of pressure on rates to rise as well. The correlation is not precise, and there are other forces, but there is a relationship. We are seeing recovery in the economy, so it is logical to expect that the Fed could let the fed funds rate rise from the record-low and record-long zero-interest-rate level.

(Click on image to enlarge)

In support of the potential that the Fed may be forced to raise rates, Fed governors are now openly discussing the possibility: on April 4, speaking on Bloomberg television, Fed Governor Jeffrey Lacker suggested that the economic recovery might bring a rise in rates in 2013. The Fed would have to institute further massive Quantitative Easing to continue to keep rates so low, and the Fed minutes show no indication that they are currently preparing another round.

A Note on the Data from the Fed on Total Bank Credit

The closer picture of total bank credit is presented below, with two versions of the data. The Fed's data on total bank credit shows two big jumps in 2008 and in 2010, of $400 billion in one week. Banks did not suddenly adjust their balance sheet by such a huge sum in one week.

I removed the spikes to smooth the data. The data of the red line was used in the analysis above. Without the decreases from what I claim is distorted data, the picture of increased credit would be even more supportive of rates rising. Here is a close-up of the data from the Fed, and my correction.

(Click on image to enlarge)

Understanding credit markets, which have been distorted greatly by the government in recent years, will be essential in projecting the future of the US economy. Interest rates are driven by the supply and demand for credit.

My upcoming article to be published in The Casey Report next week analyzes the forces of demand for credit from the federal government compared to the supply from the Fed to explain these pressures. I am also analyzing what effect higher rates might have on government deficits.

(Ed. Note: There's never been a more important time to understand the most powerful economic trends in motion and how to invest to take advantage of those trends – the mandate of The Casey Report. But don't take our word for it – instead click here to take us up on our no-risk trial subscription offer.)

David again. As this stuff is quite complex, it's easy to lose the thread (something I am prone to under the best of circumstances). But the point is that the government has to finance its historic levels of spending somehow. Once investors are able to deploy their funds into more attractive income-producing investments, or get scared that the money they are lending to the government via Treasury bill purchases isn't safe, the government will have almost no good options left when it comes to preventing interest rates from rising.

For instance, one way that the Fed has suppressed interest rates in recent years is by directly or indirectly buying up Treasuries at the regular auctions – but as it is already buying the stuff by the boatload (61% of all Treasuries issued in 2011), any more aggressive buying is likely to set off the alarm bells about the ill effects of monetizing government debt, causing investors to demand even higher rates.

As we have discussed at some length in past editions of The Casey Report, the problem is already exacerbated by the exodus of foreign investors from Treasury auctions. Quoting a recent article from Newsmax, further quoting the Wall Street Journal quoting former Treasury official Lawrence Goodman…

Goodman notes that foreign investors like Japan and China that once scooped up U.S. debt are shunning it. In 2009, such foreign purchases of U.S. debt amounted to 6 percent of GDP and have since fallen by over eighty percent to a paltry 0.9 percent.

The bottom line is that US interest rates cannot be maintained at historic lows in the face of historic levels of debt and deficits. And so rise they must. Getting back to the point of this exercise, the challenge for investors is deciding where and when to deploy their money to take advantage of rising rates or, more importantly, ducking the falling piano increasing rates will cut loose.

While avoiding anything but short-term bonds (and with rates as low as they are, why bother investing in them at all?) is one obvious conclusion you might come to, what about the US stock market? Commodities? After all, if the government is forced to cut back its excesses, then the barely recovering economy is likely to get crushed and, along with it, the stock market that represents that economy.

There is, of course, the other alternative – the one governments throughout the ages have fallen back on in times of trouble: monetizing the debt and debasing the currency as a form of hidden taxation and wealth transfer. More on this momentarily.

For now, it's back to the larger moving parts.

Employment (or Lack Thereof). Again setting the tone, I lean on James Quinn, whose writing on the topic of employment seems to indicate a certain skepticism, and even a dose of sarcasm.

  • There are 242 million working-age Americans, and 100 million of them are not working. But don't concern yourself. The federal government reports that only 13 million of these people are actually unemployed. The other 87 million are just kicking back and living off their accumulated riches.
  • The economic recovery has been so great that the 7.5 million people added to the food-stamp rolls since the recession officially ended in December 2009 isn't really an indication of severe stress among the 99%. Only 46.5 million Americans (15% of the population) need food stamps to survive.

Just to keep even with population growth, the job market has to add on the order of 250,000 jobs a month. In the latest data, out today, a recent upwards blip in employment was again reversed, with just 120,000 jobs added last month.

So, what's the government to do (because, of course, it always feels compelled to do "something")?

Cut the egregious spending? Hardly. Not when the prevailing wisdom is that the government needs to be doing more, not less, to stimulate the economy. Otherwise there is very real (and justifiable) concern that government will find itself confronted with the sort of social unrest now breaking out in places like Greece and elsewhere that austerity is even hinted at.

Leaving the only politically acceptable alternative of more spending, more debt and more currency debasement.

Energy Prices. There's no two ways around it, energy makes the world go 'round. The correlation between energy use and GDP growth is well established, and for obvious reasons. If a nation can't effectively access the energy it needs to make stuff, or grow crops, or get from point A to B, then forward progress will slow, stop or even go into reverse.

The bad news is that even though the Western economies remain stagnant, the price of oil has risen by over 340% over the last ten years and has remained at over $100 a barrel going on a year now. Meanwhile the Luddites are continuing to turn new supplies back at the gate – most notably oil from the Canadian oil sands. 

If today's high oil prices truly are the "new normal," then the economy is in for a rough ride, as the price of everything that relies on energy – which is most things – will have to continually adjust upwards.

Government. While there are a multitude of moving parts that one needs to pay attention to when setting a course for an investment portfolio, I will begin to wrap up with the moving part that should be obvious to all as the most important of the lot: government.

The US government – and of all the governments of the major deadbeat economies – are jumping around like a cat on a hot griddle (what a horrible metaphor, I wonder what sick twist came up with that one?) to avoid getting burned. 

The resulting machinations, manipulations and changeable regulatory environment makes predicting the future near impossible for individuals, business owners and investors alike. To name just one example, we think the Bush tax moratorium will come to an end, so we convert our retirement accounts to Roth IRAs and look to sell stocks before the capital gains rates go up. Could that help send the stock market into a tailspin? But if the Republicans win, could those trillions in new taxes be postponed?

Will the Fed actually cut back its spending, or unleash QE3? It says it won't do the latter, but only the most naïve believe that the Fed will step aside should the nascent recovery begin to falter as it almost certainly will. If the Fed doesn't unleash more QE, won't interest rates have to rise? If they do, won't interest rates have to eventually rise even higher (either way, interest rates are going to have to rise)?

The list of moving parts directly linked to the government makes it a fulcrum whose actions are amplified throughout the economy – and most investment markets.

Speaking frankly, unless and until these governments become so thoroughly discredited that the politicians are forced to take lessons on the finer points of dodging shoes, the magnitude of their meddling will continue to make every investment sector unpredictable and therefore an active risk to your wealth.

Over the past decade, we have advocated the hard assets of gold and silver as a core portfolio component – and that has generally been the right call. But even the safety of the monetary metals can't be guaranteed – at least not over the short to medium term – for the simple reason that the government and its minions can literally change the rules overnight.

So, what's an investor to do? Some thoughts:

  1. Be cautious. While the government has, with all its unsupported spending, managed to eke out a modest recovery, the biggest of the moving parts remain highly unstable and, in the case of the debt, broken beyond repair.
  1. Diversify. With all sectors at risk, the best hope you have for coming through this without getting wiped out is by spreading your assets around a variety of investment sectors.
  1. Focus on quality. While there is a healthy debate about the merits of value vs. growth, given the likely pressure on growth, I personally skew toward the deep-value stuff myself. The way I see it, if you can buy a truly excellent company with a rock-solid franchise and do so at rock-bottom prices – and you are able to hold on for the next few years until the dust settles – you stand a good chance of coming out just fine. But, per #2, a mix of growth and deep value probably makes the most sense.
  1. Don't forget the hard stuff. Precious metals definitely have a role to play. Whether it's our 33% recommended allocation or a smaller number for the more traditional among you – the thing that counts is to have exposure to the only real form of money, then forget about it. That said, at this point pretty much any tangible asset makes sense, including real estate – but only if the price is right, the carrying costs manageable and the local market prospective.
  1. Gold and silver stocks. While gold stocks don't quite fit into either the growth or value category, by historic metrics, they are undervalued at this point and so should offer portfolio-lifting returns over the next year or two. (More on a special program Casey Research is putting on momentarily.)
  1. Go international.  It is foolish to keep all of your eggs in one basket, not when the world offers so many opportunities – if you know where to look. The only service I recommend for investors looking  to build a core of deep-value international investments is the new World Money Analyst from InternationalMan.com.
  1. Cash isn't trash (yet). It will be, but for now having powder to act on new opportunities, or as a buffer against some very bad days, makes a lot of sense to me.

There are more things you can do – for instance, either pay off your debt or refinance it for 30 years at today's ridiculously low rates. And you can shore up your personal value through a daily course of study on something you are interested in – investments, for instance.

A Closing Thought

As I said at the beginning, realistically there is no way to predict where things will stand a year from now – though the totality of the inputs suggests that the economy, and by extension most investment markets, will remain in a state of uncertainty and heightened risk for quite some time to come. By the time it's over, it wouldn't surprise me in the slightest to see some serious social unrest. That's because, as should be obvious to everyone, the template the world operated on until a few years ago is broken and can't be fixed.

The transition to whatever's next is unlikely to be smooth. There's no need to panic; just be extra thoughtful as you go about arranging your affairs. If there's good news, it's that being aware of the way things stand puts you well ahead of the crowd.


Golden Learning Opportunity

The Casey Research metals team just sent something across that many of you might find of interest.

Next week we're doing something quite unique.

We know there's a lot of questions about the gold market right now. As should be expected when a bull market is neck-deep in the "Wall of Worry" phase. Gold's been struggling since September. The shares have taken it even harder.

It's even led the mainstream pundits to simply drop their claims that "the gold bull is dead," on the pure assumption that it is.

Yet all the fundamental signs that gold should continue higher – much higher – remain. 

The money supply has ballooned enormously, yet inflationary expectations still loom largely unfulfilled. And central banks have shown through their behavior – and often against their words – that they'll continue to feed this fire until the economy is "normal" again. 

Sovereign debts are only rising, digging a deeper hole for the United States and everyone else. And frankly, the world economy is still rife with systemic problems. Problems that will be almost impossible to work out in any way that doesn't result in a world of financial hurt for, well, everybody.

Yet the NASDAQ was up 18% in the first quarter, and market darling Apple was up 48% while gold stocks – measured by HUI – were down 5% on top of bigger losses in late 2011.

It's enough to have even the most optimistic gold bulls second-guessing their convictions. I think our own Louis James hit it on the head in quoting Thomas Paine:

THESE are the times that try men's souls. The summer soldier and the sunshine patriot will, in this crisis, shrink from the service of their country; but he that stands by it now, deserves the love and thanks of man and woman. Tyranny, like hell, is not easily conquered; yet we have this consolation with us, that the harder the conflict, the more glorious the triumph…

They don't call this the "Wall of Worry" for nothing. This is certainly reflected in the messages we've been getting from readers. There's plenty of doubt and plenty of questions about what comes next for gold and preciou


Tedbits: 2012 Outlook, Part 1 - When Leverage Fails

Posted: 06 Apr 2012 08:25 AM PDT

The saga continues as we head into 2012.  That saga is the demise of Ponzi finance and an ASSET-backed economic model in the developed world.  We do not know whether the currency and financial system extinction event will occur this year or ten years from now.  The questions we hope to answer in this 2012 economic analysis regard only the unfolding of short to intermediate-term ups and downs in economies, financial systems and societies.  We will be covering different sectors of the 2012 economy (stocks, bonds, precious metals, commodities, real estate, etc.) over the next several editions of TedBits; this is part one -- a global-macro Austrian overview, the BIG PICTURE so to speak. Don't miss future issues; subscriptions to TedBits are FREE at www.traderview.com/subscribe/

What we do know is that the demise of the DEVELOPED world's currencies, financial systems and economies are set in stone, just as one's fate is sealed when they slip below the EVENT horizon of a cosmic BLACK hole.  This time the black hole is INCOME destruction from centrally-planned economies, runaway welfare states, crony capitalism, regulation, taxation and endless MONEY printing out of thin air… a toxic cocktail of wealth destruction.

A DEPRESSION has been written into law in the United States by the Socialist-progressive, legislative supermajorities of 2008 to 2010 in the form of (1) Permanent government expansion (20-25%) via the misnamed STIMULUS Bill, Obama Care (which is no more than NATIONALIZING, further politicizing and tax goodies for sale to the highest bidder/campaign contributor) along with the health care industry, and finally Dodd Frank  (more financial regulation for sale and political allocation of credit). 

100 million dollar rules    

These bills are wrapping themselves like PYTHONS around the largest economy in the world.  And (2), SQUEEZING the life out of the economy via 80,000 pages of new regulations a year (sold to the highest bidder from K Street, aka lobbyist row and the biggest campaign contributors), poorly written and in haste by unelected bureaucrats  who have no experience in the industries and businesses they are regulating. 

Finish reading this article here.

Buy a House!

Posted: 06 Apr 2012 08:15 AM PDT

A little more than a year ago, a very successful professional investor declared, "If you don't own a home, buy one. If you own one home, buy another one, and if you own two homes, buy a third and lend your relatives the money to buy a home."

Since that declaration, house prices have continued drifting lower in most parts of the country. The Case-Shiller index of national home prices is down about 4% year over year. Even so, we're betting this professional investor was merely early…not wrong. US housing isn't just cheap; it is the cheapest it has been in more than 40 years. And when one considers the possibility that inflation may rear its head soon, housing looks even cheaper still.

If you think we're crazy, you're not alone. The housing market is a complete bust right now. The following chart shows the median home price in terms of per capita disposable income. Based on this calculation, home prices are lower than they have been in 40 years!

US Median Home Price as a Percentage of Average Annual Per Capita Disposable Income

And it isn't just that home prices have fallen a long way. For most home buyers, the price of the home is only one part of the true cost of a home. Mortgage rates matter as much, or more, than the purchase price itself. In other words, buying a house is not just a bet on real estate; it is also a bet against interest rates. For the typical buyer of a home who takes out a 30-year mortgage, an increase in interest rates is just like an increase in the price of a home.

Today, because home prices and interest rates are both at extremely low levels, the cost of buying a home with a 30-year mortgage is at an all-time low. To illustrate this stunning fact, the chart below shows the average monthly mortgage payment on the median-priced home, expressed as a percentage of per capita disposable income.

Average Monthly Mortgage Payment on Median Priced Homes

If you can get a mortgage, you are basically taking a reverse bet on the bond market. You could be a long-term borrower at fixed rates, instead of a long-term lender. Right now, you can borrow for 30 years at around 3.3%. After the mortgage tax deduction, for some people the net effective interest rate is nearer to 2%! That's going to prove an awesome deal if we see inflation again.

But here's the factor that clinches the case for investing in residential real estate: the long-term supply and demand for housing. Let's start with supply.

Consider how long it will take to bring new supply to the market. As investors, we want new supply to come slowly.

The number of housing starts is currently lower than at any time in at least the past 50 years. Moreover, new construction is only about half the long-term average. Again, good news for investors in housing, since this means that new supply is growing very slowly.

Meanwhile, housing demand — based simply on demographic trends — should rise inexorably for years to come. Take the growth in households — driven by population growth — and apply a home ownership rate. Demographically, the US is still a growing country. By 2030, there will be 370 million Americans. Even using the long-term average home ownership rate means we'll need 1.1-1.2 million new single-family homes per year.

In other words, busted markets don't last forever. The cure for low prices, as the old saw goes, is low prices. Furthermore, a bet on the housing market is not merely a bet on real estate; it is also a bet that inflation will rise.

The US economy may be idling in neutral for the moment, but inflation is revving its engines. How should you prepare?

"Buy gold" is the time-honored answer, and we don't quarrel with it. But an alternative answer, especially this time around, might be: "Buy a house."

That's the advice offered by a growing — but still small — number of very successful investors. John Paulson is one of them. He is the guy who said about a year ago, "If you don't own a home, buy one. If you own one home, buy another one, and if you own two homes, buy a third and lend your relatives the money to buy a home."

He was early…and his hedge fund performed very poorly last year, mostly because he was too early betting big on a rebound in the US economy. Double wrong! But we still think Paulson's call on housing may be close to the mark.

Despite his dismal performance in 2011, Paulson is the guy who turned one of the greatest trades of all time. Betting against the housing market, he netted a cool billion dollars for himself in 2007. One fund he managed rose 590% that year. Today, he is one of the richest men in America…still.

His advice today is very different than it was in 2007. "Buy a house," he says.

And he has put money where his mouth is…He already owns posh digs in Manhattan on 86th Street, plus a Southampton house he nabbed in 2008. In 2010, he snapped up an 8-acre ranch in Aspen for a cool $24.5 million, before buying a Fifth Avenue condo at a 23% discount to the asking price. (This 26th-floor pied-à-terre will be his "guest house.")

Let's flash back in time for a second…

Another successful investor gave similar advice in 1971 — the dawn of one of America's biggest housing bull markets. The investor was Adam Smith (George Goodman) on The Dick Cavett Show. Here is a snippet from that conversation:

Smith: The best investment you can make is a house. That one is easy.

Cavett: A house? We were talking about the stock market. Investments…

Smith: You asked me the best investment. There are always individual stocks that will go up more, but you don't want to give tips on a television show. For most people, the best investment is a house.

Cavett: I already own a house. Now what?

Smith: Buy another one.

How good was that advice?

Houses, as an investment, trounced stocks during the inflationary 1970s. The chart below tells the tale.

Inflation Adjusted Performance of Median Home Prices vs. S&P 500, 1968-1979

In the 1970s, US stocks returned about 5% annually — failing to keep pace with inflation. Still, it was an up-and-down ride. In 1974, the stock market fell 49%. But here are the average selling prices for existing homes in the 1970s, as inflation heated up:

1972 — $30,000
1973 — $32,900
1974 — $35,800
1975 — $39,000
1976 — $42,200
1977 — $47,900
1978 — $55,500
1979 — $64,200

That was a pretty impressive run-up in home prices. Today, I think we could be on the threshold of another once-in-a-generation buying opportunity in the housing market.

The homebuilding stocks seem to agree. Many of them have doubled during the last five months from their very depressed levels. Although the ISE Homebuilders Index is still down about 80% from its 2006 peak, it has been gaining steady ground relative to the rest of the stock market.

The chart below shows the rolling three-year price performance of the S&P 500 index, minus the rolling three-year price performance of the ISE Index. As you can see, the ISE has been lagging far behind the S&P 500 for most of the last five years. But during the last few months, this index has been closing the gap…and looks like it is about to begin a period of outperformance relative to the rest of the stock market.

Rolling 3-Year Return of S&P 500 Index Minus Rolling 3-Year Return of ISE Homebuilders Index

So we like select homebuilding stocks, but we don't love them. Unlike the housing market itself, homebuilding stocks have priced in quite a bit of good news already. Not surprisingly, therefore, the insiders at these companies have been doing a lot more selling of their own shares than buying. (Pulte is one conspicuous exception.)

We also like housing-related stocks. As Chris Mayer, our colleague over at Capital & Crisis, observes, "Companies such as Lowe's (LOW) and Home Depot (HD) would benefit from a recovering housing market…as would the makers of flooring, Mohawk Industries (MHK), the makers of kitchen cabinets, Fortune Brands Home & Security (FBHS) and a whole bunch of stuff in between…In a robust housing market, good fortune would also smile on A.O. Smith (AOS), which makes water heaters for homes."

But again, we don't love these stocks. Not at their relatively rich valuations. Even so, we'll be combing through this sector very carefully for promising investment ideas. In the meantime, for those with the means and the inclination, the best buy in the housing sector is an actual house!

This picture is unequivocal. US home prices are very, very cheap today. "Cheap" does not preclude "even cheaper," of course. Home prices could certainly continue sliding. But even if that were to occur, mortgage rates might begin rising, which would cause the effective price of a home to increase.

Obviously, buying residential real estate at both a housing market low and an inflationary low would be the optimal entry point — in fact, it would be a screaming buy. And that's exactly what today's circumstances seem to be offering.

Perhaps that's why a large number of very successful professional investors are licking their chops over opportunities in the US residential real estate market.

This out-of-favor asset class has attracted the attention of David Ackman, a hedge fund manager with a fondness for contrarian investments. He calls them SFHRPs, an acronym for "Single Family Home Rental Property."

"The best investments we have made are the ones no one else would touch," Ackman explains.

As housing prices have continued drifting even lower, Paulson and Ackman have picked up a little bit of company. The US housing market is becoming a central focus of several "deep value" investors. Over the past weeks, I've bumped into three very successful professional investors who were much more eager to talk about their real estate investments than about their stock market investments.

One gentleman in particular, who has made billions of dollars for his investors by buying deep value stocks, was much more eager to talk about his recent real estate investments than his recent stock market investments. He was talking glowingly — if not giddily — about the opportunities in real estate he was coming across.

"I'm not finding much to buy in the stock market at the moment," he explained. "But real estate is a different story. I wish I had the capital to act on more of the ideas that are coming across my desk."

We asked this investor if he was concerned about the risk of real estate prices falling even further.

"Nah," he said as he waved the question aside, "I assume the housing market will remain soft for a while. But the kinds of deals we're finding should work out well, even if the housing market keeps sliding for a bit. Besides, there's one lesson I've learned repeatedly as a value investor in the stock market: You can have good news or cheap prices. You can't have both."

The US housing market has absolutely no good news…but plenty of cheap prices.

Regards,

Addison Wiggin & Samantha Buker,
for The Daily Reckoning

Buy a House! originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas. Recently Agora Financial released a video titled "What is Fracking?".

PROPAGANDA ALERT – Silver: Poor Man's Gold Turning to Fool's Gold?

Posted: 06 Apr 2012 08:00 AM PDT

[Ed. Note: The dominant theme here is that silver is most certainly NOT money and is rightfully returning to its lowly role as a boring industrial metal. Nuthin' to see here folks, go buy some stocks n' bonds.]

from CNBC:

Silver bulls may be hoping that the metal's healthy first-quarter price rise is the first step back toward record highs. Not so fast.

Its advocates say silver which occupies a middle ground between industrial metals like copper and investment vehicles like gold, can benefit both from the fledgling economic recovery that is lifting copper and from the investment that is driving gold.

But record-high mine supply and questions over demand have left a long shadow over silver's underlying fundamentals, while huge price volatility last year, when the metal crashed 35 percent in a matter of days on two occasions, has undermined its appeal to investors as a cheaper alternative to gold.

The broad investment environment is also bleaker than it was last year for friends of silver.

"There are two issues that in the short term suggest we are not going to head back towards $50," Mitsui Precious Metals strategist David Jollie said. "One is that margins on Comex are still higher than they were last year, so investors are going to have to come back in in more weight to drive the price further." He added, "At the same time, silver turnover on the Shanghai Gold Exchange is relatively low compared to where it was last year.

Read More @ CNBC.com

COT Gold, Silver and US Dollar Index Report - April 6, 2012

Posted: 06 Apr 2012 07:34 AM PDT

COT Gold, Silver and US Dollar Index Report - April 6, 2012


A Positive Approach to the US Economic Downturn

Posted: 06 Apr 2012 07:29 AM PDT

In the spirit of Good Friday, we'll keep our message upbeat today.

For starters, all government offices are closed. So there's some good news right off the bat! The financial markets are also closed, which is probably good news for the holders of gold and silver. If the markets are closed, no one can enter a "Sell" order.

Let's see…what else?

Well, the US economy continues to merely muddle along…and that's not all bad. A booming economy is grossly over-rated. It's impossible to get a reservation in a top restaurant, the flights to Tahiti are always overbooked and the waiting list for a new Ferrari can extend for months.

Give us a slow-growth economy any day!

But we won't complain either way. As regular readers of this column know very well, we're glass-half-full folks. Always on the prowl for that silver lining, that ray of sunshine, that glass with something in it…even if it's not half-full.

Intriguingly, these positives often appear where you would least expect to find them.

Good Friday, itself, is a textbook example.

According to the Biblical account, none of the disciples were whooping it up and popping champagne corks while Jesus was hanging on the cross. Quite the opposite. No one was feeling very good about this very first Good Friday. In fact, this Friday would not become "Good" until three days later, when the Resurrection would place the crucifixion in an entirely different context.

From that day forward, the Roman's cross of death would become the Christian's cross of eternal life.

But the Christian faith, we have learned, does not possess a monopoly on counter-intuitive blessings. Many of life's richest moments arise from the crucible of adversity. In fact, death itself provides many of life's most profound pleasures.

Dying maple leaves and rotting cabernet grapes come to mind…as do agave plants. They are "monocarpic," which means they flower just once, then die. The blooms are spectacular.

Two years ago, we compared the US economy to an agave plant. "The US is like a monocarpic plant that has just flowered," we observed. "The US just enjoyed one of the most incredible economic performances of any nation ever, which morphed into one of the most spectacular credit bubbles of all time. But it feels like that's over now. The ensuing bust won't unfold all at once, but it will unfold."

Since offering this prediction, some portions of the US economy have staged a tepid rebound. But the housing market has continued busting.

Should we lament our fate? Should we weep and moan? Or should we get out our checkbook?

Eric Fry
for The Daily Reckoning

A Positive Approach to the US Economic Downturn originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas. Recently Agora Financial released a video titled "What is Fracking?".

Manipulators 'seriously overplaying their hand,' Embry tells King World News

Posted: 06 Apr 2012 07:01 AM PDT

3p ET Friday, April 6, 2012

Dear Friend of GATA and Gold:

Sprott Asset Management's John Embry today tells King World News that the gold and silver market manipulators "are seriously overplaying their hand" and driving demand for real metal way up as paper prices are forced down. An excerpt from Embry's interview is posted at the King World News blog here:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/4/6_Emb...

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


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A Rare Opportunity with Collectible Gold Coins
Whose Premiums Are Far Below Normal

Sovereign debt problems in the United States as well as Europe will worsen this year. The mainstream financial media may never report about the likely inflationary consequences of bailouts and "quantitative easing," nor are they likely ever to recommend tangible assets for financial protection. But at Swiss America Trading Corp. we believe that it is no longer a luxury to own gold and silver coins but rather a necessity.

At the moment the public is showing little interest in Double Eagle U.S. $20 gold coins, so the price premiums above the intrinsic melt values (.9675 ounce of gold in each coin) are historically low. The ratio of price to bullion content for these coins has been 2:1 but today it is only about 1.25:1.

This is a real opportunity. So give us a call or e-mail and we will be glad to discuss the potential of these coins and how to use a ratio strategy to increase your gold ounces without money out of pocket.

In the January edition of his Early Warning Report, Richard Maybury writes: "As they are inherently in very limited supply, I believe that high-quality numismatics will become tulips, eventually rising a thousand percent or more in real terms, when money velocity goes into mid-second stage. In late stage, who knows -- 2,000 percent? 3,000?"

All inquiries will receive without charge (while supplies last) our latest book, "The Inflation Deception," as well as our newsletter "Real Money Perspectives."

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Telephone: 1-800-289-2646

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Gold Juniors Available at Bargain Prices: Brien Lundin

Posted: 06 Apr 2012 06:41 AM PDT

The Gold Report: You've compared the gold market to the weather because it's about that predictable. What does your experience tell you about navigating a market like this? Brien Lundin: You have to be nimble and keep your eye on the big picture. Every asset class is searching for a trend. The U.S. economy is in transition. The equity markets are in transition. Everything is in limbo searching for the next trend line. There's just no telling whether that next direction is upward or downward. In times like this, investors need to look beyond the day-to-day headlines. They need to keep the bigger picture in mind, focus on buying value on the dips and not getting too aggressive in any case. TGR: You were recently at the Prospectors and Developers Association Conference in Toronto. What's the common refrain you're hearing from investors and what's your response? BL: They're wondering when things are going to turn around. I wish I could provide them with the answer because I'm searchin...


Embry: Gartman Inept, CNBC Wrong, Gold Demand off the Hook

Posted: 06 Apr 2012 06:09 AM PDT

With tremendous volatility in gold and silver, and oil holding well above the $103 level, King World News interviewed John Embry, Chief Investment Strategist of the $10 billion strong Sprott Asset Management. Embry told KWN that bullion dealers are telling him phones are ring off the hook and demand is incredible. But first, here is what Embry had to say about recent events and what is happening in the gold market: "I think perhaps the most bullish thing I saw yesterday was that Dennis Gartman has pronounced the end of the gold bull market as a result of the Fed's actions.  Nothing could be further from the truth. Given Dennis's unbelievably inept record at calling the gold price, in both directions, I regard this event as wildly bullish."


This posting includes an audio/video/photo media file: Download Now

Gold QE3 Scares

Posted: 06 Apr 2012 06:04 AM PDT

Sellers hammered gold again this week on news from the Fed.  The minutes from its latest FOMC meeting convinced traders the odds for a third round of quantitative easing are waning.  This was the latest in a long line of QE3 scares that have become the bane of gold’s existence.  But they are merely a distraction from the Fed’s ongoing massive monetary inflation behind the scenes, which is very bullish for gold.


One of the 'Masters' of the Universe Gets a Market Manipulation Question on CNBC

Posted: 06 Apr 2012 05:50 AM PDT

"As of yesterday's close, the gold price was about $60 under its 200-day moving average...and the silver price was about $3.00 under its." ...


How and Why of Silver Price Manipulation

Posted: 06 Apr 2012 05:49 AM PDT

Peter Krauth, Global Resources Specialist, Money Morning : No one knows the machinations of the day-to-day silver price better than Ted Butler. Ted publishes bi-weekly commentary at www.butlerresearch.com, with a special focus on the silver market, which he's been closely following for over 30 years. Ted is an expert's expert.


What Happens to Gold if We Enter a Recession or Depression?

Posted: 06 Apr 2012 05:47 AM PDT

By Jeff Clark, Casey Research Mayan prophecies aside, many of the senior Casey Research staff believe that economic, monetary, and fiscal pressures could come to a head this year. The massive buildup of global debt, continued reckless deficit spending, and the lack of sound political leadership to reverse either trend point to a potentially ugly tipping point. What happens to our investments if we enter another recession or – gulp – a depression? Here's an updated snapshot of the gold price during each recession since 1955. Clearly, one should not assume that gold will perform poorly during a recession. Even in the crash of 2008, gold still ended the year with a 5% gain. And with the amount of currency dilution we've undergone since that time, it seems more likely gold will rise in any economic contraction than fall. Indeed, if the response of government to a recession is more money printing, precious metals will be a critical asset to have in your possessi...


QE 3 Will Surpass 1 and 2

Posted: 06 Apr 2012 05:46 AM PDT

Dear CIGAs, QE to infinity is as sure as death and taxes. The recovery in the US economy is not going to reach any take off speed, but rather return for a second recessionary experience post June of 2012. QE 3 will surpass 1 and 2. Gold will trade next between $1700 and $2111 before moving higher. The Gold Cartel will abandon their shorts over the next three years, having met their match in the marketplace . Regards, Jim U.S. economy gains 120,000 jobs in March Less-than-expected increase is smallest since last fall By Jeffry Bartash, MarketWatch April 6, 2012, 10:31 a.m. EDT WASHINGTON (MarketWatch) - The U.S. economy added 120,000 jobs in March, the smallest increase in five months, to break a recent string of strong employment gains, the government reported Friday. The number of jobs created last month, seasonally adjusted, fell well below expectations and failed to top the 200,000 mark for the first time since November. The March repo...


Posted: 06 Apr 2012 05:38 AM PDT

Gold Easter Egg Hunt by Morris Hubbartt UUP (US Dollar Proxy) Volume Chart My technical work continues to paint a dismal future for the dollar. The Fed's announcement on Tuesday that no further quantitative easing is needed caused the dollar … Continue reading →

Does the Ubiquitous Red in the Silver Herald a Trend Reversal or Higher Future Profits?

Posted: 06 Apr 2012 05:30 AM PDT

Yellow and silver are our favorite colors, but red is what we are seeing on the boards this week after the U.S. central bank dashed hopes for more monetary stimulus and a weakened euro weighed on sentiment. Read More...



Ron Paul Answers a Question About Gold – How Should a Gold Standard Work?

Posted: 06 Apr 2012 05:27 AM PDT

from rizzle662 :

Killing the golden goose that lays the golden egg

Posted: 06 Apr 2012 05:23 AM PDT

In the first quarter of 2012 we have seen a few high profile criticisms of the gold standard. Reading them back now, and considering it’s Easter time, I was reminded of a famous fable. ‘The goose that lays the golden egg’ is a fable in which a farmer and his wife are fortunate enough to have a goose which day after day produces a golden egg. The eggs are produced regularly and therefore the couple could rely on this source of income.


Gold Investor Opportunity Window

Posted: 06 Apr 2012 05:17 AM PDT

“Investments that are denominated in a given currency include money-market funds, bonds, mortgages, bank deposits, and other instruments. Most of these currency-based investments are thought of as “safe.” In truth they are among the most dangerous of assets.”   Warren Buffet, Fortune Magazine, 2/9/2012


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