Gold World News Flash |
- Resource boom not over, someone just hit the pause button
- Collapse Investing: Money and Wealth Preservation During Times of Uncertainty and Instability
- Irony 101 Or How The Fed Blew Up JPMorgan's 'Hedge' In 22 Tweets
- Silver Update 5/14/12 Cash is Trash
- Rogers: "Volume Is Not Going To Come Back. We've Had A Great 30 Years. That's Finished!"
- Mirror Mirror On The Wall We Are Socialist After all
- IMF to buy Gold worth $2.3 billion as credit risk increases
- 2011 COMPLETE COST FOR MINING SILVER
- Monday Hangover: JP Morgan Too Big to Manage?
- Gold Kisses Channel Goodbye
- Bob Moriarty: A Contrarian's Guide to Volatile Markets
- Goldman Market Summary: Dumb Money Joins The Dumpfest
- Must Read: "Another Perspective"
- Gold Price Lost $23 Ending at $1,560.60 Next Logical Stop is $1,523.90
- “A Little Political Turmoil”
- Your Greatest Enemy Is Your Emotions
- Inflation will always be chosen over austerity, Leeb tells King World News
- Ronald Stöferle and Alasdair Macleod on German gold, European elections, and precious metals price action
- Gold Seeker Closing Report: Gold and Silver Fall Roughly 2%
- Gold Daily and Silver Weekly Charts - The Unhappy Life of Sir Francis Bacon
- Ron Paul: Get government out of the money business
- Jim Rogers: Gold Has A Long Way To Go (UP)
- Andrew Hepburn: Charlie Munger vs. gold, history, and himself
- The Suspicious Growth of the Financial Industry
- Target reached on gold
- Greece Exit, Euro-Zone Collapse, Spain and Portugal Will Follow Within 6 Months
- German Parliament wants accounting of gold reserves; Bundesbank resisting
- The Difference Between Market and Government Swindles
- Pat Heller: U.S. govt. agency is specifically authorized to rig gold market
- Grandich Client Spanish Mountain Gold
| Resource boom not over, someone just hit the pause button Posted: 14 May 2012 04:59 PM PDT by Rick Mills, Mineweb
Many have called for very high levels of inflation possibly leading to hyperinflation. Their reasoning is that over printing of the US dollar will cause the dollar to weaken and inflation to set in – more money chasing the same amount, or less, of goods causes prices to rise. A rise in gold and silver (and commodities prices), would be the result. But the called for massive inflation hasn't yet happened. This brings up two questions:
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| Collapse Investing: Money and Wealth Preservation During Times of Uncertainty and Instability Posted: 14 May 2012 04:41 PM PDT  With some 403,000 Americans losing their jobless benefits in just the last few weeks, considering some alternative investment strategies may be in order. While traditional stock, bond and cash investments still have a place in today's economy, so too do strategies that your financial adviser would not only never recommend, but never even contemplate as "investments." For those who have lost their jobs and unemployment benefits to boot, the S has already hit the fan. The safety net on which millions have come to depend, for all intents and purposes, is progressively being torn to shreds.Unemployment assistance is no longer sufficient because there are no jobs to make up for those that have been lost, so eventually everyone will run out of these benefits and be left to fend for themselves. That's tens of millions of people that will have no way of paying their mortgage, their credit card payments, car loans, students loans, monthly utility bills and, most importantly, food (because let's be honest, $400 in nutritional assistance per month just isn't going to cut it). We hate to say it, but had those individuals taken preventative investment and preparedness measures several years ago, when we first recommended our physical commodity investment strategy, they would at least have been able to alleviate some of the pain they are experiencing today – especially the pain in their bellies. Read more..... 
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| Irony 101 Or How The Fed Blew Up JPMorgan's 'Hedge' In 22 Tweets Posted: 14 May 2012 03:22 PM PDT Many pixels have been 'spilled' trying to comprehend what exactly JPMorgan were up to, where they are now, and what the response will likely end up becoming. Our note from last week appears, given the mainstream media's 'similar' notes after it, to have struck a nerve with many as both sensible and fitting with the facts (and is well worth a read) but we have been asked again and again for a simplification. So here is our attempt, in 22 simple tweets (or sentences less than 140 characters in length) to describe what the smartest people in the room did and in possibly the most incredible irony ever, how the Fed (and the Central Banks of the world) were likely responsible for it all going pear-shaped for Bruno and Ina. Of course we do not know exactly what positions were undertaken and what the mandate was for the CIO Office but our assumption is that they are 'smart people', had no positional constraint (i.e. any asset class, any instrument), and more than likely were human emotionally. 1) Post QE2, JPM's CIO group needed to hedge tail-risk of bank debt portfolio. Credit risk was rising rapidly and had reached levels not seen since the crisis...as the real chance of tail events was creeping up fast...
2) JPM traders/risk managers are not stupid - can manage curves/levels in 'normal' market but firm needs 'extreme' risk hedge. Critically - these guys are not dummies - they don't simply buy/sell index protection or curves (as some have suggested) in ultra-massive quantities (since risk models would flash) unless there is an edge. More importantly, they can manage risk at desk levels on term structures and exposures (and even jump-to-default risk to some extent) but on the aggregate portfolio there is a lot of un-covered risk of an extreme event (which seems ever more present) occurring. 3) VaR risk model can 'comprehend' most of 'normal' market moves but not extreme tail risk (illiquidity, basis, correlation shocks). VaR models (even the most sophisticated Monte Carlo engines) will have significant problems integrating the kind of extreme risks that need to be hedged to avoid catastrophic loss (such as basis risk (the risk that a hedge disconnects from its underlying), illiquidity (some models incorporate a market-impact but very few do it well or even close to reality), and most assume correlations to be relatively stable (not a dynamic variable - which is critical to the pricing of many credit instruments). 4) Goal: Find as low-cost a 'systemic risk' hedge as possible (with longer maturity than options allow). So, likely at the behest of management, the CIO office set out to find cheap ways to manage this extreme risk. Equity protection was (and is) expensive as evidenced by skews and term structures but credit offered some room for value (and moving from options to tranches - not important what they are other than levered complex credit positions - allows a longer-maturity hedge to be placed - typically at lower cost than rolling options premia over time) 5) Hedge choice made:- Senior Tranche (Low cost, Low spread delta BUT hard to model risk in agg. book & very long correlation). Senior (or the highest position in the capital structure) tranche positions provide attractive hedges for a systemic (or even cyclical) tail-risk. As seen below, courtesy of Morgan Stanley, the hedge is 'low' /'medium' cost and has high sensitivity to systemic risk. Implicit in this is the fact that it is very sensitive to the correlation of asset defaults.
6) Bought CDX Tranche Q3/4 2011. Provides systemic hedge (will payoff if things are VERY bad but relatively calm if things are OK). See table above (perhaps was a more complex tranche term structure, cross-quality (IG-HY) or pairs-trade but the endgame was the same - to get long correlation, at a low cost, in a systemically careful - unsuspected - manner). 7) Tranche is sensitive to spread movements (low), volatility (medium - due to hedging gaps), and correlation (high). These characteristics appear fantastic at first glance - not too sensitive to spread movements overall (ceteris paribus), volatility will cause some drama (as the position will need to be rebalanced), and while correlation is a big sensitivity it is directionally in our favor and has relationships in line with spreads that should help us.
BUT, sometimes the tranches do not always behave exactly as one would expect - due to the second and third derivative interactions of the model parameters...
8) Correlation is market's way of thinking about systemic risk (low correlation equals idiosyncratic risk dominates). The critical part of our story is comprehending what it takes to crush the most senior part of a capital structure of a portfolio of credits. A few defaults here and there will not affect the most senior or 'secured' aspects of the balance sheet of a portfolio (which is what we call idiosyncratic risk - CHK there, ALLY here, EK then, SHLD soon etc.) but what really worries a manager is if systemic risk rises rapidly due to some event (say a huge liquidity crunch or Greece leaving the Euro and a run on Italian/Spanish bank deposits) which could cause many firms to default simultaneously from a total lack of funding or credit availability (think 2007/8/9). The probability of this 'systemic' event is priced into these credit tranches using the term 'correlation' - low correlation in generally good times when systemic risk is low and idiosyncratic risk dominates (individual firm balance sheets etc.); high correlation in systemically bad times (when something systemic is sinking all boats). As seen in the chart below - correlation had been stable from the start of Jan11 and was rising modestly as USA downgrade and European woes picked up - though not crazy enough to make pricing expensive...
9) Q3/4 2011: European/US Chaos reigns: Correlation high (hedge doing well) - CIO office reveling in glory of smartness. See chart above for Sept/Oct movement in correlation - rising 10) Nov2011: Fed/ECB start coord. global easing program -> starts to crush correlation as systemic risk is 'supposedly' removed from system.
11) JPM CIO office forced to sell IG9 protection to manage tranche position as correlation drops (think: delta rebalancing). What this meant was very important. The tranche - which had been purchased as a hedge for JPM's aggregate (likely long) book required rebalancing as the 'models' used to price and risk manage such positions would have demanded some hedging of the hedge. This is similar to maintaining a delta-hedge on an option position as the market moves one way or another and volatility (a secondary parameter) changes. The trouble is - these systemic risk tranches are HIGHLY sensitive to this somewhat 'magical' measure. 12) Q1 2012: Correlation plummets massively: the 'tail-risk' hedge is needing huge amounts of index rebalancing to keep it 'stable'. As correlation plummeted - i.e. the market pricing forced the inputs to the models to change which altered the risk sensitivities - so the tranche 'tail-risk' hedge itself needed to be hedged in increasing size. This is likely when Iksil began to be forced to sell IG9 (this is the index upon which the only liquid tranches are based) protection - an oddly bullish position given the bearish nature of the tranche hedge - as all sorts of wonderful second derivative interactions played havoc with his models. Given the size of the firm-wide tranche hedge, and the implicit leverage this tranche infers, this would have meant very heavy index protection selling (in what was not a hugely liquid index anyway.) 13) Mar/Apr 2012: JPM CIO corners IG9 index market as forced protection seller on tranche tail-risk hedge position. This meant that the JPM CIO office began to sell more and more protection at the index level (dark blue line below) which forced the index to trade differently to its intrinsic or fair-value. These kinds of disconnect (red arrow) are often arb'd by sophisticated hedge funds - but this time the arbs were being frustrated (orange line) by a SIZE player dominating the market and soaking up their demand for protection (the funds would be buying protection on the index - the opposite of JPM CIO - while selling the underlying names protection).
14) Funds complain of richness of IG9 to intrinsics and how technicals are crushing their attempts to arb - the Whale Is Born. See chart above (red arrow) as the whale began to dominate the market flow. This means that no matter what effort the hedge funds put into the arbitrage (to try and move the orange line higher - back to its more normal zero level) - they made no difference - and in fact were often hurt significantly 15) Momentum takes over and Iksil becomes self-aware - and potentially presses his position (unbalancing the hedge). We suspect that at some point the daily rebalancing of the hedge's hedge and the constant and consistent rally in credit and equity markets became too much for Iksil who just became another momo monkey, perhaps leaving a little too much long index protection on the basis of the rally extending...i.e. over-hedging LONG his implicitly short credit/systemic hedge 15) European sovereign, China slowdown, and US growth risks spur deterioration in credit risk - meaning losses on IG9 index position. Between his huge size and the velocity of the shifts in the index as things began to go wrong fundamentally, Iksil was in trouble. Not only that but 'correlation' began to pick up and so the hedge of the hedge needed to be unwound... 16) JPM CIO faces huge losses from small move in spreads since they have sold so much protection and tranche unbalanced. He found himself the dominant long player in a market in which fundamentals, technicals (arbs), and his own models (correlation) were saying unwind/short - which starts the pain trade for Ina and Bruno and more than likely this is when the bells started to go off in risk manager's ears and Dimon got the call... 17) Funds arb the skew and press IG indices knowing JPM needs to unwind/hedge the index hedge of the 'tail-risk' hedge. It was a poorly kept secret obviously and left a market smelling blood. JPM looks for any way to manage this position - i.e. find any liquid hedge to cover the overly-long index protection that Iksil had over-hedged the original tail-risk hedge with. There's not enough liquidity in the original instrument so any and every credit instrument gets hit... 18) All credit instruments blow wider (as JPM - or front-run by peers) look for any and every liquid hedge to manage over-hedging. last week or so this has been occurring with the worst happening post Dimon's call... 19) IG9 skews normalize (today) relieving some pressure - seen this the last 2 days. The arbitrage between the index and its intrinsic value has smashed back to almost zero (-3bps or so - see chart above) as the technical pressure from the whale is relieved and the arbitrageurs flow can 'correct' the index back to its idiosyncratic reality. This likely slows the pain trade as the arbs will unwind their position removing some pressure from JPM now. 20) HY18 massively cheap (and HYG underperforming) - suggests long HY position but scary technicals remain. The on-the-run high yield credit index (meaning the most recent vintage HY spread index in credit derivative land) has seen its index spread (dotted line red arrow) explode relative to its intrinsic value (orange arrow). This is an example of the 'technical' flow that reaching for any and every liquid hedge has caused in the last few days - and leaves HY18 extremely cheap to its fair-value.
Today also saw HYG (the high-yield bond ETF drop dramatically) as another example - and most notably - perhaps JPM was the cause of the HYG collapse relative to NAV at the start of April (orange ovals below)...
21) Did JPM unwind some of tail-risk hedge? What further losses did they take on index hedge of tranches? We can only hope so - and would suspect so given the recent gappiness but it is unclear what losses they faced on those positions and what model parameters they are now using to price the underlying tail-risk hedge that is likely up in value significantly in the last few days - this is where we suspect the truth is being hidden. At some point the market will once again force a rerack of the model parameters and we suspect the worst is not over here - especially if we see systemic risks continue to rise rapidly - more rapidly than the unwind can occur - key to this will be the number of defaults but the MtM volatility will pressure JPM's earnings without doubt - though it seems unlikely that JPM would not have managed to hedge a lot of this systemic over-exposure - though basis risks become even more complex. 22) Summary: JPM tail-risk hedge imploded thanks to Central Banks' Systemic Risk reduction - unintended consequence... The key factor is that if systemic risk had remained in even a 'normal' range of possible regions based on history, then the JPM CIO office would have had no need to over-hedge their tail-risk hedge position, no greed-driven need to press the momentum, and no need for such an epic collapse as we are seeing now. The point is - this was a trader/manager with a good idea (hedge tail risk) that was executed poorly (and with arrogance) but exaggerated by the unintended consequences of the Central-Banks-of-the-world's actions (and 'models behaving badly' as Derman would say).
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| Silver Update 5/14/12 Cash is Trash Posted: 14 May 2012 03:10 PM PDT |
| Posted: 14 May 2012 02:23 PM PDT Jim Rogers is hedging his gold (and silver) positions reflecting that this is normal, following such a tremendous run, and that this is good for the precious metal in the long-run. In his discussion with Maria Bartiromo this afternoon, he notes India's anti-gold 'protectionism' (and its potential balance of payments issues) that are trying to force the hoarding into risky 'productive' assets (as others might say). The immutable commodity maven suggests JPMorgan (and its peers) could be behind the drops in the overall commodity complex as the uncertainty of their positions (and liquidation potential to raise cash as bank examiners begin their forensics) becomes more important. He holds the USD, which he hates; has a number of equity shorts; and is most fearful of banks - specifically admitting he is a serial seller of calls on JPMorgan. His advice, and perhaps Maria should look into it given their ratings recently, is to become a farmer; own farmland; and speculate on agriculture. On the dismal 'ethical' state of our leaders and management, the thoughtful Rogers opines, "You can read world history for decades. There are always people doing things wrong. We have not changed our human nature and we will continue to have scandals and problems" and in a follow-up to CNBC's standard 'money-on-the-sidelines' argument he crushes the money-honey's dreams: "Finance had a great 30 years. That's finished. Now to advance, we have too many people, too many MBAs, too much leverage and too many governments that don't like us". A must-see rebuttal to the 'normal' CNBC hopium with more on China's slowdown, a US recession, Europe and a Greek exit, QE3, and 'tractors'.
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| Mirror Mirror On The Wall We Are Socialist After all Posted: 14 May 2012 01:45 PM PDT from ArmstrongEconomics:
Read More @ ArmstrongEconomics.org
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| IMF to buy Gold worth $2.3 billion as credit risk increases Posted: 14 May 2012 01:30 PM PDT [Ed. Note: Hilarious! Although Munger and Buffet think gold is "uncivilized", the IMF clearly believes otherwise.] from Commodity Online:
"The Fund is facing increased credit risk in light of a surge in program lending in the context of the global crisis. While the Fund has a multi-layered framework for managing credit risks, including the strength of its lending policies and its preferred creditor status, there is a need to increase the Fund's reserves in order to help mitigate the elevated credit risks", Bloomberg quotes a report by an IMF staff while also adding that a $2.3 billion gold purchase is in the planning. IMF's borrowers include Eurozone countries like Greece and Portugal. Greece is IMF's biggest borrower and the nation is currently caught in a political deadlock that seems bent on denying itself the much needed bailout fund. Read More @ CommodityOnline.com
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| 2011 COMPLETE COST FOR MINING SILVER Posted: 14 May 2012 01:15 PM PDT by SRSrocco, Silver Doctors:
This is an update of the complete cost for mining silver in 2011. Miners use the CASH COST to compare just how cheap it is to mine silver. They arrive at their CASH COST by adding all the by-product revenue against an ounce of silver. For example, if a miner has some Gold, Lead and Zinc in a ton of ore, they take the revenue received from those by-product credits and get an INSANELY LOW CASH COST. In 2011, HECLA had a CASH COST of only $1.15 an ounce for silver. To the layman they would think that they would have all this wonderful profit – but they don't.
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| Monday Hangover: JP Morgan Too Big to Manage? Posted: 14 May 2012 01:04 PM PDT from TheAlyonaShow: The fallout continues after JP Morgan's whale fail 2 billion dollar loss. 3 of the highest ranking executives with direct ties to investments will resign this week, but not CEO Jamie Dimon. No in fact, Dimon went on Meet the Press this weekend to lay out his defense. Alyona is joined by William Black, Associate Professor of Law and Economics at the University of Missouri-Kansas City and Jake Brewer, Chief Strategy Officer at Fission strategy to discuss.
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| Posted: 14 May 2012 12:54 PM PDT courtesy of DailyFX.com May 14, 2012 02:12 PM Weekly Bars Prepared by Jamie Saettele, CMT Gold has broken below a major trendline (and channel) that extends off of lows in 2008, 2010, and 2011. Focus is now on the December low at 1522.50 and then support from May 2011 and resistance from December 2010 at 1430/60. Look lower against the Monday high of 1586. LEVELS: 1612 1586 1522.50 1477 1462 1448 1431...
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| Bob Moriarty: A Contrarian's Guide to Volatile Markets Posted: 14 May 2012 12:00 PM PDT The Gold Report: We're hearing many people these days warning that it's not a good time for investing in junior mining stocks. The TSX Venture Exchange has been experiencing some of its lowest volumes in six to nine months. What do you believe investors should do this summer? Bob Moriarty: Anybody following my website for years will be familiar with me saying this: You can ignore technical analysis. You can ignore seasonality. You can ignore fundamentals. The only thing you can ever absolutely make money in is being a contrarian. Some very big names in the mining industry, including Rick Rule and Eric Sprott, have said, yes we're in the bottom but it'll be several months before you should invest. Where were they April 25 last year, when I said we'd reached the top in silver? For months afterward, the very best place to be was in cash. You have to look at what people say and when they say it. Very few people got it last year, but I clearly was one of them. We are at a major bottom in ...
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| Goldman Market Summary: Dumb Money Joins The Dumpfest Posted: 14 May 2012 11:58 AM PDT Last week the hedgies were dumping, as the "momo whale" dumb money was chasing things higher on low volume intraday levitation. Today, idiot money (which is known thus for a reason) joins the dump fest. And according to Goldman, "the selling pressure is still muted." And unless the Politburo of the Developed World comes up with a Deus ex Printerium fast, muted may soon go to Max Volume. From Goldman:
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| Must Read: "Another Perspective" Posted: 14 May 2012 11:07 AM PDT From Paul Brodsky and Lee Quaintance of QBAMCO Another Perspective (pdf) Two weeks ago, before Jamie Dimon's thoughtful diversion, Charlie Munger of Berkshire Hathaway instructed viewers of CNBC that "civilized people don't buy gold, they invest in productive businesses". Munger was right in that civilized people invest in productive businesses and was right to imply that gold is a non-productive rock, but, in our humble opinion, he was wrong to suggest that gold does not have significant upside as an investment currently (even more than BRK/A?). Gold has always been money, as are dollars, euros and yen. It is not a currency or media of exchange presently because no one directly exchanges it for goods, services or assets and it has not formally collateralized other currencies since 1971. However, were gold to once again back today's baseless currencies, then it would be astonishingly cheap at today's exchange rates with them (i.e. gold prices), and by extension cheap to most operating businesses denominated in today's currencies. Gold today is a speculation that someday it will again have recognized monetary status. Gold is a store of purchasing power bought at certain exchange rates to other currencies – as we write this, about $1,600 an ounce to the dollar, €1,232 an ounce to the Euro, £988 an ounce to sterling, and ¥127,790 an ounce to yen. In the current monetary system in which all global currencies are uncollateralized, the perception of gold's exchange rate (price) ultimately derives from its status as potential monetary collateral that might someday back government-sanctioned (fiat) money. Thus, when gold is money or formally backs currencies, people save gold. Given its un-sanctioned monetary status today, gold may be considered an investment. Given its intrinsic cheapness vis-à-vis paper currencies today and economic conditions that make it highly likely it will become even cheaper to them, very civilized people across the world have been replacing a portion of their fiat cash and financial asset portfolios with gold not held in their investment portfolios. (The only way to hold physical bullion in a financial asset portfolio would be to own shares in mining companies, which provide direct ownership of physical bullion inventories held below ground.) Despite the incessant negative chatter about gold by people in positions of influence, (or more likely because of it), there has been only a trifling allocation to it among financial asset investors. The vast majority of dedicated financial asset and derivative investors, including pension funds, mutual funds, individuals, and even futures speculators, remain either; a) unable to invest in it by charter, b) unconvinced that gold's price will appreciate over a time horizon that matches their mandates, c) convinced that gold is a poor investment at today's pricing because authorities will let bank system credit fail, or d) oblivious to what gold is and the economic forces behind it. Precious metals allocations account for only about 0.15% of global pension fund assets. Within the gold futures market, only 0.50% of front month contracts typically take delivery of bullion, implying gold futures remain a source of financial return among speculators, not a means of amassing a physical position. Meanwhile, all gold and silver ETFs combined held only 90 million gold-equivalent ounces as of the end of April, which at about $1,650 an ounce equaled only about $150 billion. (Compare that to Apple's market cap.) And perhaps the most telling indicator of indifference to gold among financial asset investors: the total market capitalization of all publicly traded precious metal miners (representing trillions in below-ground physical reserves) is only about $360 billion. We think there are four main questions to be asked and answered: 1) how does one handicap what would be a multi-sigma event – whether or not gold will again gain formal monetary status; 2) over what time horizon might the perception of a significant change in the global monetary system occur (and would it include gold); 3) what would be a range of investment outcomes should such an event occur; and 4) how would such pro forma returns compare with the range of returns of other investments? We have devoted much of our research since 2007 to these questions and have written extensively about them. This paper, however, will only seek to place gold in proper perspective for Mr. Munger (and perhaps Mr. Dimon too). What's it all About, Charlie? The difference between saving and investing is that savers seek to maintain their purchasing power and investors seek to increase theirs. In the current environment it is impossible to save at a positive real rate of return given that interest rates are near zero and central banks are diluting purchasing power through monetary inflation. Everyone is forced to speculate – even cash and (especially) bondholders. Currently, cash, bank deposits and bond holdings denominated in baseless currencies are being diluted by global central banks and losing significant purchasing power, which means "savers" in these instruments are actually speculating this established trend will stop. Their real (inflation-adjusted) returns are already negative (against CPI), and so, by implication, they believe the return of the majority (but not all) of their purchasing power is better than "speculating" in productive businesses to try to generate a positive return on their current purchasing power. In this, we agree with Charlie Munger's partner, Warren Buffett; productive assets are better than cash and bonds denominated in baseless currencies. We agree with any implication that saving in fiat cash or fiat-denominated fixed-income instruments is a loser's game at current pricing. But we would disagree with any implication that it is not the right time to exchange baseless currencies or most productive businesses denominated in them for gold. A Bit of Theory Consider that price is the quantity of money assigned to a good, service or asset, yet changing prices may not necessarily have anything to do with the changing value of goods, services and assets. For example, the value to society of a good, service or asset in relation to its quantity can remain constant or even fall; yet its price can rise substantially if the quantity of money increases more than the increase in demand relative to supply. The more monetary units available to chase the same supply/demand equilibrium, the higher the general price level for goods, services and assets must be. This means that expectations of increasing or decreasing demand in an economy can only partially rationalize future price changes. The more moving parts (e.g. immigration, innovation, government spending, the whims of independent money issuers, etc.) that affect the supply and demand for goods, services, assets, AND MONEY; the less visibility there will be for prices -- even if expected value is reasonably knowable. So, in the current monetary system, currencies are indeterminate claims on wealth and purchasing power kept in currency is an imperfect marker of wealth. (Of course, we know currency, per se, is not wealth because if it were then wealth could be created simply by creating more currency.) An easy way to envision how to quantify purchasing power is to imagine two buckets: the first contains all of the world's money and the second contains all things not-money. We may debate about the proper relative value of the various items in the money bucket (e.g. dollars, euros, yen, gold, etc.), and debate even more vociferously (and do) about the proper relative values of the items in the all-things-not-money bucket (e.g. toothpaste, labor, accounting fees, stocks, bonds, commodities, iPods, etc); however, it would be illogical to think that the aggregate value of the money bucket should not equal the aggregate value of the all-things-not-money bucket at all times. Conceptually, all the stuff in the world that can be purchased must have a means to be purchased, and so the aggregate value of each bucket must always equal the aggregate value of the other. So then: if wealth is current and future sustainable purchasing power, and judging the future value of goods, services and assets relies on also judging the quantity of money, and the quantity of money and all the stuff it can buy must always be at equilibrium, then one of the first-order economic considerations among all members of society should be to judge the money in which he or she a) is compensated in, and b) chooses to invest or save in. Practicalities Very few people today think about the sustainable value of their money, including, it seems, Messrs. Munger and Buffett. If stocks are cheap to baseless cash, as they rightly argue, and stocks are cheap to gold, as they seemingly imply, then nothing has been determined (or even implied) regarding the relative value of gold to fiat cash within the money bucket. Somewhat strangely, their argument reduces to the contention that money in whatever form it may take – dollars or gold -- has no economic function of value. They argue one should hold stocks as a residual claim on productive assets instead. We would vehemently disagree. We see the value in productive businesses; however, one must also consider the possibility that, even if they are intrinsically undervalued in fiat cash terms, productive business may be intrinsically overvalued in gold terms. (Judging by subsequent performance, it certainly seems BRK/A shares were quite overvalued vis-à-vis gold in 2000.) When objectively defined and properly priced by the marketplace, the presence of money as a savings vehicle enhances the well-being of society. When subjectively rendered and manipulated by goal-oriented policy objectives, the value of money becomes distorted vis-à-vis goods, services, assets and labor. The difference today between investing in baseless currency-denominated productive businesses and exchanging baseless currencies for gold defines the difference between solving for nominal vs. real returns. Investors in most financial assets denominated in over-leveraged currencies today will receive nominal relative returns while gold holders store absolute real purchasing power (save in real terms). Which is the better bet? The global gold stock increases about 1%-2% a year as compared to the global fiat money stock which increases many multiples of that. This should be the fundamental consideration when it comes to choosing a money form in which to speculate or in which to price one's investments: which will have its purchasing power diluted less? If Berkshire Hathaway shares rise 25% in the coming years but the US dollars these shares are denominated in fall 35% versus consumer goods and services, then Munger and Buffet will have invested in productive businesses that made profits yet they would have lost purchasing power in the aggregate for shareholders. This dynamic illustrates precisely what has occurred since 2000. (Safe) Harborous Relic What exactly are the economics of shiny rocks as they relate to our very civilized contemporary society? The working figure for the amount of all the above-ground gold ever mined is about 170,000 metric tons, which converts to almost 5.5 billion troy ounces (5,465,619,000). At $1,600 an ounce this implies the recognized total value of all the mined gold in the world is a bit over $8.7 trillion today ($8,744,990,400). Should we believe the 170,000 metric ton figure? Well, annual worldwide production of gold is about 50 million troy ounces. If we were to assume 50 million ounces mined over the last 200 years, (perhaps generous but this assumption would also be sufficient to include ancient mining since the time of the Aztecs), then there would be about 10 billion ounces mined since antiquity. Unlike other metals with industrial uses, gold is not consumed. Every ounce ever mined still exists. At $1,600 an ounce, the total amount of above-ground gold would equal about $16 trillion. So let's say gold is currently valued somewhere between $8 trillion and $16 trillion. Governments and their designated central bank currency issuers do not own most of the above-ground gold in the world. The World Gold Council reports that total official gold holdings throughout the world totals almost 31 thousand metric tons (30,878.2 tonnes), which, at today's pricing, equals about $1.6 trillion ($1,588,357,750,464). Depending on how much gold has actually been mined, 5.5 or 10 billion ounces, the world's treasury ministries and central banks only have somewhere between 10% and 18% of it. This presents a problem for governments that would like to control the perceived value of money. There are no currencies today (since 1971) formally linked to gold or any other relatively finite collateral. This implies that virtually all global governments prefer to have direct control over their budgets, rather than allowing the collective will of their societies determine the scale of government spending. Authoritarian and representative governments alike prefer a global monetary system in which money is effectively issued by fiat and directed by appointed monetary policy makers (usually central banks). The great challenge for elected and appointed monetary policy makers is to try to manage the quantity and pricing of their fiat currencies consistent with the multi-faceted and unpredictable dynamics of the global economy. Fiat currencies must be widely perceived to be priced more or less equitably, not only by the factors of production and wealth holders within each society but also by the various global governments overseeing economies with greatly different resources, social values and natural economic growth rates. If global money, formally comprised today of all various baseless fiat currencies, were to begin to be perceived in the commercial marketplace as an insufficient marker of the future value for goods, services and assets, (domestically or internationally); then the global monetary system would be in jeopardy. In short, confidence is lost if and when currency is no longer perceived as a sufficient store of value. In such a scenario currency holders would discard it for goods, services and assets at an accelerating pace. Importantly, they would not necessarily exchange their baseless currency for labor or production, which would be an economic stimulant (or for shares of BRK/A). Prices would rise as economic factors of production, private wealth holders, and participating governments further accelerate their consumption of goods or assets they feel would store value better. Baseless currencies would ultimately lose credibility and the the global monetary system would fail. When systems fail it does not mean that the values of goods, services and assets change, only that the numeraire of money is reset. (The numeraire is the value reference used to base a unit of account.) Global monetary systems periodically need resetting, most frequently in 1933, 1945 and 1971. Changing the numeraire requires the support of global economic agents, including the private marketplace and international government authorities. This, in turn, requires widespread confidence that the value and nature of the re-setting would not lead to an imminent need for further re-settings. This is precisely why gold remains relevant today. The more "sophisticated" unreserved credit and its uses become, the more unknowable future purchasing power becomes. The more remote baseless currencies that comprise our global monetary system stray from being sustainable stores of value, the likelier it becomes they will be called into question. (Enter JP Morgan's public recognition that it has an unwieldy balance sheet.) Perhaps this is why governments and central banks have continued to own gold? You may recall not too long ago Ben Bernanke was asked if he considered gold to be money and he said "no". When asked why the Fed still owned it, he shrugged and murmured something about "tradition". You may also recall that more recently he was asked if the Fed owned gold, and he seemed to do his best to appear perplexed. He looked back and forth over his shoulder until finally an aide confirmed that indeed the Fed does hold gold certificates (which give the Fed rights to Treasury's bullion). It shouldn't be shocking that the manufacturer of the world's reserve currency expresses public bewilderment with the fascination over anachronistic, inert rocks by a few gentlemen with southern accents. What else could he say: pay no attention to gold's long history of resetting societies' wealth valuation mechanism against failed currencies? Or pay no attention to other central banks buying gold hand over fist currently? (Perhaps they are doing so because they want to be more traditional?) All the Right People, Darling The absolute amount of gold held in official hands – 10%, 18% or even 25% -- is meaningless. The important concept to keep in mind is that the stock of official gold holdings throughout all economies is quite small relative to privately held bullion. Somewhere in the world there is between $7 and $15 trillion of gold wealth (at current spot pricing) held in private hands (vs. $1.6 trillion in official accounts). Private wealth holders across the world have been saving gold bullion for generations; in Europe, the Middle East, China, India, Japan, Russia, South America and the United States (even in private pockets on Wall Street, believe it not, where there's an old saying: "make it on Wall Street, bury it on Main Street"). It should not be surprising that global central banks have begun buying gold bullion in ever increasing amounts. It was just reported this month that Hong Kong shipped almost 63 metric tons of gold to China in March, a 59% increase over February and a 587% increase year over year. Russia has been a consistent buyer of about 5,000 tonnes each month and has recently accelerated its purchases. Other high growth economies including India cannot seem to get sufficient supplies of bullion. Clearly the governments of these countries want to exchange their baseless and diluting reserves for a scarcer money form. And just this week the IMF – yes, the same IMF that had been selling its bullion to central banks of emerging economies with surplus reserves – announced it was buying $2 billion of gold. The reason: "there is a need to increase the Fund's reserves in order to help mitigate…elevated credit risks". Meanwhile, central banks of developed debtor economies are being pressured by their contracting debt-based economies to manufacture more fiat currencies through the process of debt monetization – issuing even more debt and paying for it with newly-created base money (currency and/or bank reserves held at central banks). They are devaluing their currencies for savers and investors and destroying the future purchasing power of surplus reserves held abroad. If past is prologue, the baseless currencies of developed economies will eventually be subjected to asset monetization. Greece could solve its debt problems tomorrow if it sold Mykonos for $400 billion and the US could halve its Treasury debt if it sold Alaska for $8 trillion. However, such asset sales seem far more unlikely (and in Alaska's case, impossible – who could buy it?) than simply revaluing an asset already held in official hands -- the asset monetary issuers have always used; the only monetary asset on their balance sheets that can be re-valued higher against the currency they manufacture; (one might say the "traditional" one): gold. We argue the final outcome must be to devalue current baseless currencies against gold and that governments of high-growth economies are buying official gold in increasing amounts so they have a representative share when gold becomes the basis for a new global monetary system. Have global private gold savers/investors that comprise the great majority of its holders been buying in advance of a more formal currency reset (devaluation) of baseless paper against gold? Who are central banks buying their physical gold from currently? (Certainly they are not buying it from global commodities exchanges.) The only answer is that they must be buying all they can from the 80% to 90% of private gold holders in the world. And we should ask ourselves this: who has been buying gold consistently since 2000, when it traded around $250 an ounce, 11 years before central banks became net buyers? Could the buyers have been private holders around the world that understand wealth doesn't begin and end with leveraged Western financial assets and baseless fiat currencies? This would make sense. Still, the volume of physical gold traded relative to its stock remains tiny, implying that relatively few physical holders are willing to part with most of their gold. If central banks want to stock their shelves prior to devaluation then they would have to employ a bit of finesse. If we were a sovereign in search of gold we would short gold futures and take physical bullion off the market at synthetically low prices (the same way other sovereigns might manipulate, say, interest rates). And finally, who are the private bullion-owning wealth holders that are leaking gold out to hungry governments and central banks? By definition they are collectively The Powers That Be. Whether they are disaggregated or conspiratorially linked, private gold holders are the true unencumbered savers among us. They are the ones that have a chunk of their wealth in a money form that stores purchasing power no matter what. And unlike fiduciaries overseeing the encumbered wealth of financial asset investors, there is no one and no system between them and their purchasing power. We suspect most of these quiet savers are quite sophisticated, know exactly what they are doing, and view the preponderance of levered financial assets with suspicion regardless of whatever value they may have relative to one another. (Would it be that much of a stretch to believe these individuals holding trillions in inert rocks might also have great influence over global resources, monetary systems, banking systems and governments?) Sophisticated Sophism While Mr. Munger's comments represent those of a power structure nominally larger and far more organized than private gold holders, it is a power structure that is unsustainable. Financial assets denominated in baseless paper currencies are marked-to-market many times higher than gold presently; however this pricing is only supported by the full faith and credit of a temporary authority, not by sustainable power. Functionally insolvent banking systems are supporting rotating politicians and policy makers, who, in turn, are furiously trying to reverse declining real output stemming from organic pressures for systemic de-leveraging. (During the leveraging process productive capital was greatly misallocated. During the de-leveraging process, it is logical that real productivity is declining.) It would seem sustainable power no longer resides with the fellows, the institutions or the policies that promote a system in which higher numbers equal the false perception of sustainable wealth. It must reside in the commercial marketplace and among capital holders (those who own sustainable resources or sustainable savings that can buy resources no matter what the inflation-adjusted price is). Is it any wonder Bob Rubin, who gamed the capital markets so well at Goldman Sachs and the FX markets so well at Treasury, chose the academic Larry Summers to follow in his footsteps? Summers, the child of two highly regarded Keynesian economists and the nephew of Paul Samuelson, (the man who literally wrote the book for all budding economists on how to manage economies), leant an air of intellectual rigor to Rubin's market manipulations. True to form Summers recoiled and shrieked "gold is the creationism of economics!" this past winter in response to a question of whether he thought a gold standard might provide more discipline to runaway fiscal spending. The particular economic canon he and the vast majority of contemporary economists worship is a theory called "political economics", which assumes sustainable and growing economies are best ensured by actively synthesizing constant demand growth through fiscal, monetary and trade policies, not by overseeing human commercial incentives and the private marketplace. We ask you: which requires more faith? Nor should we be surprised that Paul O'Neill and John Snow, actual businessmen, were run out of Washington after a couple of years and replaced by a money man, Hank Paulson. The Republican Paulson and the Democrat, New York Fed President, Tim Geithner, (who would replace Paulson after the peaceful transition of power in 2008), bought "illiquid" (i.e. mismarked) bank assets with newly created base money. Demand was temporarily synthesized by bringing future purchasing power forward and effectively transferring it from taxpayers to commercial banks. Though the pain would have been felt only in the financial sector had nothing been done, "independent" policy makers were able to avoid a counter-factual called "deep depression", and both parties were able to take credit. While politics may stop at the water's edge, it clearly begins on the corner of Wall and Broad. Calvin Coolidge said in January 1925 that "the chief business of the American people is business". He did not say (although 85 years later he certainly might have); "the business of America is having banks create unreserved credit so that the broader economy would then have to focus on repaying its debts to banks." The difference between the two principles is that the former suggests human industry sorts resources best while the latter institutionalizes producers and consumers into an encumbered mass to be managed by a few. (Again, please forget politics here. We are not advocating how much to tax, who to tax or what to spend it on, only pointing out a corrupt and failing monetary system.) Whether they know it or not, our authority figures today are working on behalf of banking systems. Banks borrow capital from the factors of production and create bookkeeping assets many multiples of that capital for themselves in the form of unreserved credit. Meanwhile, the credit they extend becomes debt for their borrowers, fully-collateralized for banks by the borrowers' assets and future labor. Fractionally reserved banking systems effectively permit banks to conjure future claims on currency where no currency exists today; creating "when-issued money" from thin air that must eventually be settled by their central banks. This ensures inflation. Political economics not only accommodates fractional reserve lending -- it relies on it. Its aim is to perpetuate nominal demand growth at all times to achieve full employment. This is a noble goal but it has a dark side too. Consistent demand growth requires consistent credit growth, which requires consistent debt growth and, in turn, public servitude to bank lenders. Policy makers ultimately find that inflation becomes an economic imperative in their effort to ease the nominal burden of repaying debts. (The business of America, the next President might say, is finance. This would seem entirely reasonable given that the next president will either be a proven budget buster or a professional leverager – a dismal tie in economic terms, a win in gold terms.) Piffle & Baffle Against this backdrop, Munger, Buffett, Bernanke, Geithner, Draghi, Lagarde, Rumpuy, Obama, Romney, McConnell, Boehner, Reid, Pelosi, Kudlow, Krugman, Roubini, Wolf, Hilsenrath, Kernen, etc. etc., seek to instill confidence among the factors of production and investors they influence. They are good and kind, highly intelligent and well-intentioned. But so what? Collectively they are wrong-headed. The fractional reserve banking system and debt money system they help sustain is directly responsible for the wealth and income inequality currently being experienced. (When they yell at the mention of this assertion ask them to disprove it.) Promoting finance for the sake of financial return when it no longer produces
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| Gold Price Lost $23 Ending at $1,560.60 Next Logical Stop is $1,523.90 Posted: 14 May 2012 10:51 AM PDT Gold Price Close Today : 1560.60 Change : (23.00) or -1.45% Silver Price Close Today : 2831.90 Change : 53.9 cents or -1.87% Gold Silver Ratio Today : 55.108 Change : 0.232 or 0.42% Silver Gold Ratio Today : 0.01815 Change : -0.000077 or -0.42% Platinum Price Close Today : 1443.00 Change : -15.90 or -1.09% Palladium Price Close Today : 594.85 Change : -4.95 or -0.83% S&P 500 : 1,338.35 Change : -15.04 or -1.11% Dow In GOLD$ : $168.16 Change : $ 0.82 or 0.49% Dow in GOLD oz : 8.135 Change : 0.040 or 0.49% Dow in SILVER oz : 448.30 Change : 4.03 or 0.91% Dow Industrial : 12,695.35 Change : -125.25 or -0.98% US Dollar Index : 80.64 Change : 0.342 or 0.43% The GOLD PRICE lost $23 today and ended at $1,560.60. The SILVER PRICE lost 53.9 cents to close at 2831.9c. Bloody, as I warned. The GOLD PRICE high today at $1,582 never even reached Friday's $1,583.6 close. Gold posted a new low for the move, and of course these lower prices have demolished any thought of a rally from that now spoiled falling wedge. Gold stopped today at a $1,556.10 low, about the location ($1,562.50) of its next to the last December low. Ultimate low came at $1,523.90. Most likely this gold decline, which has lasted now 11 weeks, is nearing its completion. Still, that last (December) low at $1,523.90 is the next logical stopping place. RSI is more oversold than it was at the December low. The SILVER PRICE 2819c low today matched its early December 2312c low. Comparing silver's position against its 300 day moving average today shows it at the same percentage asat the December low. Nothing says it cannot tumble more, but that number and other moving averages suggest silver will find its feet sometime soon. Ultimate December low was 2615c, making that the logical target. Personally I am guessing it will stop around 2800c. GOLD/SILVER RATIO today inched over 55 to stop at 55.107. If you still have gold to swap for silver and no longer want to wait for my 57.5 target, I wouldn't blame you for swapping here. Have y'all ever watched a cat staring at a mouse hole in the woodwork? He stares and stares with infinite patience, until at last he snares a mouse. Right now, silver and gold investors have to possess that selfsame patience. On Friday I warned y'all it could be a bloody week. The bloodletting started early. US DOLLAR INDEX continues to rise. During the day it added 34.2 basis points (0.44%) to trade at 80.643, and in the last couple of hours in the aftermarket it has risen to 80.696. Dollar strength stabbed the euro today. It lost 0.74% for a new 4-1/2 month low. 'Twas only lower at the bottom it made middle of January ($1.2624). Euro gapped down today and wound up at $1.2824. Watch out! Everybody in the world is short euros, which sets the market up for a sudden, sharp (as in knife in your back) rally. The yen temporized, rose 0.9% to 125.23c (Y79.85/US$1). Trending treetop-ward. Between the dollar index and 89 stands only thin resistance about 81.75. Of course, who can scope out, much less foretell, what will move the minds of central banking Nice Government Men? Today they're all strong dollar, tomorrow without warning they go weak dollar. This is not a rational undertaking, so we just look at the chart and watch. Folks are confused about why stocks and silver and gold are moving together. Life is more subtle than you might expect. Inflation drives both stocks and silver and gold as people run to buy real things to escape depreciating currency. At some remove, stocks do represent the brick and mortar of the underlying firm (if they have any bricks or mortar and not merely software and a website), but because stocks' performance is bound to the economy and because inflation wrecks an economy, stocks never perform as well as silver and gold over the life of an inflation. Far less profitable. However, that's the long term and in the short term investors have convinced themselves that the dollar (in the teeth of the European crisis) is "low risk" and everything else is "high risk," and they are running for cover. This will pass, and stocks and metals again decouple when inflation perceptions again rise. Proof that stocks underperform is found on the Dow/Gold or Dow/Silver chart. So far stocks have lost about 80% of their value against metals. They will lose another 80% or more before this inflationary episode or Depression ends. Look at the five-day Dow chart at http://quotes.ino.com/chart/?s=INDEX_DJI You can plainly see that it breached support put in place from Wednesday to Thursday around 12,800. Thence it fell nearly to 12,650, so 12,800 now becomes resistance to any Dow rally. Dow closed today at 12,695.35, down 125.25 or 0.98%. S&P 500 lost 15.4 (1.11%) to 1,338.35. Dow in Gold Dollars offers the only question mark here. It has NOT been falling. That is, both stocks and gold have fallen, but gold has fallen minutely more. This sends the DiG$ bumping against its last high. Why doesn't that signal it is about to break higher? Because it has formed a diamond, a topping formation, and these frustrating patterns, especially in slow turning stocks, can take a long time to finish. Please note that I will be traveling from 19 May through 1 June, and will not be publishing commentaries during that time. I will, however, have prices sent to y'all daily. Yes, I am taking a vacation with my wife, doing something we never before have done: taking a cruise. Argentum et aurum comparenda sunt -- -- Gold and silver must be bought. - Franklin Sanders, The Moneychanger The-MoneyChanger.com 1-888-218-9226 10:00am-5:00pm CST, Monday-Friday © 2012, The Moneychanger. May not be republished in any form, including electronically, without our express permission. To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down. WARNING AND DISCLAIMER. Be advised and warned: Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that short term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures. NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day one or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps. NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced. NOR do I recommend buying gold and silver on margin or with debt. What DO I recommend? Physical gold and silver coins and bars in your own hands. One final warning: NEVER insert a 747 Jumbo Jet up your nose. No, I don't. 
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| Posted: 14 May 2012 10:05 AM PDT Dave Gonigam – May 14, 2012
And that's before we even get to what's happening in Greece.
In January, it was $9.2 billion. Now Gov. Jerry Brown says it's $16 billion. Whoops, guess the "recovery" isn't everything it's cracked up to be: "Taxes fell short of expectations," says the Los Angeles Times, "particularly in April, the most important month for income taxes." The only remedy, Brown says, is a "temporary" increase in the sales tax for everyone… and an increase in the income tax for people who earn $250,000 or more. Which comes up for referendum in November. Good times.
No one can forge a majority in parliament. Which means yet another election is likely next month. And that one will amount to a referendum on what currency Greece will use going forward. Or maybe backward. "Suddenly," writes Harvard historian Niall Ferguson today in Newsweek, "it is no longer so hard to imagine a Greek politician deciding to gamble on exiting the eurozone, restoring the drachma and letting a drastic devaluation do its work. "Suddenly, it is no longer so hard to imagine the horrendous consequences, with investors asking the obvious question: 'If they can leave, who will be next?'"
"What is relevant," he tells Bloomberg TV, "are two countries — China and India — 2.5 billion people combined. They are a huge market for goods, and these economies are slowing down massively at the present time."
The move frees "an estimated 400 billion yuan ($63.5 billion) for lending to head off the risk of the sudden economic slowdown," according to Reuters. Loose-money moves by the central bank here in the United States are aimed explicitly at goosing the stock market. If that's what the Chinese had in mind, it didn't work; the Shanghai Composite fell 0.6% today, on top of the 2.3% it shed last week.
"The inability of the U.S. government to reduce record debt and deficits is being rewarded in the bond market," says a Bloomberg article attempting hip irony today. "Servicing debt can be easy, so long as you can do so at a nice low rate," writes Addison in The Little Book of the Shrinking Dollar. "However, as we've seen recently with Greece, all it takes is a little political turmoil on the back of a lot of debt to spike borrowing costs up." Uncle Sam's debt-to-GDP ratio surged past 100% last year; at $15.67 trillion, the national debt is larger than the nation's annual economic output. And that's before you throw in the unfunded liabilities of Social Security and Medicare. Other countries are saddled with their own old-age and medical obligations, too… but the United States is in, well, unique company…  "Eventually," writes Addison, "when your Treasury bondholders start to wonder where the next batch of money is going to come from, they demand higher compensation for holding the increasingly risky investment." The book has ample guidance about how to prepare for when that day arrives.
That's what The Wall Street Journal says Ina Drew will get to "retire" from her post as head of the chief investment office that blew the $2 billion in derivatives trades. "Sheer size of this trade makes it far more accurate to describe this as speculation than hedge," says Barry Ritholtz, elaborating on his thoughts we shared in Friday's 5. "The loss was the tell. A true hedge would have been offset by the underlying position that was being hedged — so any loss should have been insignificant. Even a minor correlation error should not lead to a $2 billion hit." "If we are going to define this trade as a hedge, then there is no other conclusion to reach except that everything at a huge bank is a hedge. And once you define everything as a hedge, well then, nothing is a hedge."
Byron is in Madagascar — the big island nation off the eastern coast of Africa. "I've spent the past two days walking along and across the absolute dividing line between two ancient continents — a mountain range of the lost Gondwana that was, in its day, higher than the Himalayas.  "This tear in the outer fabric of the planet is a pathway by which the hottest, richest metal-bearing liquids migrate up toward the surface — making Madagascar a mineralogical and resource treasure house. Add in the fact that Madagascar is so isolated that it's never truly been explored." Until now. "The company I'm visiting is making astonishing progress in identifying a major world-class resource play." He'll soon reveal all to readers of his high-end advisory Energy & Scarcity Investor… and we're pretty sure he'll elaborate at the Agora Financial Investment Symposium this July. Everyone we've quoted in today's 5 will be speaking there: Messrs. King, Ritholtz, Faber and Ferguson. Professor Ferguson's appearance will be especially timely; his latest book and PBS documentary series, Civilization, gets to the heart of this year's Symposium theme, which we're unveiling today…
"Innovate or die." It holds true if you're in business. And it holds true for empires. When Spain could no longer innovate, the Dutch took over. When the Dutch ran out of gas, the torch passed to the British. When the British ceased to innovate, it was the turn of the United States. And now? What do you do with your money at precisely this turning point? We've assembled an impressive array of experts to guide you around the minefields laid by government and to the immense opportunities offered by the innovators of the 21st century. Whether it's tiny biotechs identified by venture capitalist Juan Enriquez or our own Patrick Cox… mining and energy plays singled out by Rick Rule or our own Byron King… or global opportunities spotlighted by a Thailand-based fund manager or our own Chris Mayer… they'll all be there to share their best ideas. The colorful oil field geologist Marcio Mello is back for a return engagement… and Laissez Faire Books executive editor Jeffrey Tucker will be joining us for the first time. It might well be our best lineup ever. Even better than last year, when we won praise from attendees like this…
Last year's event sold out by Memorial Day; we anticipate the same this year. That means time is limited; but we're still offering a substantial discount off the full price of registration. Your invitation to join us in beautiful Vancouver is at this link.
"One of the smart [or very dumb] things that the U.K. government did to get a large portion of trading and traders domiciled in London was to remove all limits. Thus, the U.S. markets are used for trading and the London market is used for betting." "Investors may think they have some protection from U.S. securities law, but they have no way of knowing if their trades are executed in London. In fact, they have no way of knowing if their account is held in London — thus the surprise to U.S. investors when MF Global went under; their brokerage accounts were held in London."
"But it's a lazy philosophy. At some point, the people of this country will have to pay for greed and ineptness of our so-called leaders." "We can master our own destiny; there are many avenues to take back what our Founding Fathers had in mind. It will take backbone and courage for sure — time is running out for a nonviolent action. I would implore readers to unite and act posthaste: our loved ones and our country are at stake." The 5: Many avenues, indeed; have you started to share them with your fellow readers? That's one of the unique benefits of our latest project.
"They made the comparison to U.S. silver coins. If these nickels are a good investment, let's compare them with pre-1983 US copper pennies: At current copper prices, these coins are worth in excess of 2 cents each, due to their metal content." "If a person were to have thousands of dollars in U.S. pre-1983 pennies, how do they cash them in? It seems that the more recent comparison to other base metal coins is better than the silver comparison." The 5: You're on. For starters, Congress is looking at doing away with the penny once and for all. Canada decided to do so six weeks ago. "If the laws change and the Mint decides to abolish the penny," ABC News reported late last year, "people would be free to melt them down for the copper." But you don't have to wait that long to perform penny arbitrage. Whiskey & Gunpowder's Gary Gibson points us to an eBay listing where you can buy $100 face value 1959-82 pennies… for $202.50. "It is currently illegal to melt these, and I can only sell in the U.S., as it is illegal to export," the seller advises. Junk copper — love it! Cheers, Dave Gonigam P.S. The dollar is also benefiting from the safety trade today. The dollar index is up to 80.6 — a four-month high. The euro is down to $1.288. Meanwhile, it takes 80.09 Japanese yen to equal one U.S. dollar. "The USDJPY has been a safe-haven basket for global crises," says Abe Cofnas, introducing this week's "mock trade." "It is in an ascending triangle, which means the lows are getting higher and it is positioned for a breakout to new highs."  With that in mind, Abe is going for another high-potential play this week. If the yen can push above 80.25 by the close on Friday, it means a 122% gain. Stay tuned…
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| Your Greatest Enemy Is Your Emotions Posted: 14 May 2012 09:38 AM PDT Jim Sinclair's Mineset My Dear Extended Family, Your greatest enemy now is your emotions. In fact it is the only tool that can be used against you. If you have not taken margin your worst case scenario is the pain of quoting. I have suggested at various times since $248 gold that you dig a hole, jump in and pull a rock over your head. Each time I did I was derided thoroughly by the shorts. Each time I did the price of gold went significantly higher. The price of gold is going much higher. The problems that give gold its reason to go higher are growing, not waning. The entire thesis for gold is illustrated by the three Skiers posted on the weekend. There is no political will for the results of an EU break up. There is no way the Fed is going austere as the austerity is exploding in the face of Europe politically. There has been no decline in the amount of notional value of OTC derivatives outstanding. If you think Morgan is the only derivative pr...
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| Inflation will always be chosen over austerity, Leeb tells King World News Posted: 14 May 2012 08:45 AM PDT 4:45p ET Monday, May 14, 2012 Dear Friend of GATA and Gold: Fund manager Stephen Leeb today tells King World News that forced to choose between austerity and inflation, countries will always choose the latter, and that ensures higher prices for the monetary metals and real assets. But, he says, getting there will be a rough journey. An excerpt from the interview is posted at the King World News blog here: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/5/14_Le... CHRIS POWELL, Secretary/Treasurer ADVERTISEMENT Prophecy Platinum (TSXV: NKL) and Ursa Major Minerals Company Press Release 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... Join GATA here: Las Vegas Money Show Committee for Monetary Research and Education Vancouver World Resource Investment Conference Standard Chartered's Earth Resources Conference Hong Kong Gold Investment Forum Toronto Resource Investment Conference New Orleans Investment Conference * * * Support GATA by purchasing DVDs of our London conference in August 2011 or our Dawson City conference in August 2006: http://www.goldrush21.com/order.html Or by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Sona Discovers Potential High-Grade Gold Mineralization From a Company Press Release 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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| Posted: 14 May 2012 08:30 AM PDT In this podcast, Ronald-Peter Stöferle - gold analyst at Erste Bank and writer of the gold report "In GOLD we TRUST" - and Alasdair Macleod of the GoldMoney Foundation ...
This posting includes an audio/video/photo media file: Download Now |
| Gold Seeker Closing Report: Gold and Silver Fall Roughly 2% Posted: 14 May 2012 08:14 AM PDT Gold fell to as low as $1556.81 in early New York trade before it bounced back higher at times, but it still ended with a loss of 1.44%. Silver slipped to as low as $28.19 and ended with a loss of 2.35%.
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| Gold Daily and Silver Weekly Charts - The Unhappy Life of Sir Francis Bacon Posted: 14 May 2012 08:05 AM PDT |
| Ron Paul: Get government out of the money business Posted: 14 May 2012 07:39 AM PDT By U.S. Rep. Ron Paul http://paul.house.gov/index.php?option=com_content&view=article&id=1973:... Last week I held a hearing to examine the various proposals that have been put forth both to mend and to end the Fed. The purpose was to spur a vigorous and long-lasting discussion about the Fed's problems, hopefully leading to concrete actions to rein in the Fed. First, it is important to understand the Federal Reserve System. Some people claim it is a secret cabal of elite bankers, while others claim it is part of the federal government. In reality it is a bit of both. The Federal Reserve System is the collusion of big government and big business to profit at the expense of taxpayers. The Fed's bailout of large banks during the financial crisis propped up poorly-run corporations that should have gone under, giving them a market-distorting advantage that no business in the United States should receive. The recent news about JP Morgan is a case in point. JP Morgan, a recipient of $25 billion in bailout money, recently announced it lost another $2 billion. If a corporation shows itself to be a bottomless money pit of "errors, sloppiness and bad judgment," the Fed shouldn't have expected $25 billion in free money to change that or teach anyone a lesson in fiscal discipline. But it determined that this form of deliberate capital destruction was preferable to one business suffering bankruptcy. Clearly, some changes need to be made. Several reforms for the Fed were discussed at the hearing. One was a call for the full employment mandate to be repealed, in order to allow the Fed to focus solely on stable prices. ... Dispatch continues below ... ADVERTISEMENT Sona Discovers Potential High-Grade Gold Mineralization From a Company Press Release 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 Another reform calls for changes to the composition of the Federal Open Market Committee. Still another proposal was for outright nationalization of the Fed or of its functions. But if what the Fed does now is bad and inflationary, allowing the Treasury to print and issue money at-will would be even worse, and could possibly lead to a Weimar-like hyperinflation. The problems and advantages of the gold standard were discussed at the hearing. The era of the classical gold standard was undoubtedly one of the greatest eras in human history. For a period of several decades in the late 19th century, the West made enormous advances. However, the gold standard was still run by government. The temptation to suspend gold redemption reared its head again with the outbreak of World War I. Once the tie to gold was severed and fiscal restraint thrown to the wind, undoing the damage would have required great fiscal austerity. Instead, the Western world proceeded to set up a gold-exchange standard which lasted not even a decade before easy money led to the Great Depression. While returning to the gold standard would certainly be far better than maintaining the current fiat paper system, as long as the government retains the power to go off gold we may end up repeating the same mistakes. The only viable solution is to get government out of the money business permanently. The way to bring this about is through currency competition: Allow parallel currencies to circulate without receiving any special recognition or favor from the government. Fiat paper monetary standards throughout history have always collapsed due to their inflationary nature, and our current fiat paper standard will be no different. It is imperative that the American people be educated on the dangers of the Fed and the importance of restoring sound money. The laying of the groundwork must begin today, so that the American people will be prepared for the day when the mirage the Fed has created evaporates completely. The full hearing footage is available on my website and I would encourage every American to take a look. Join GATA here: Las Vegas Money Show Committee for Monetary Research and Education Vancouver World Resource Investment Conference Standard Chartered's Earth Resources Conference Hong Kong Gold Investment Forum Toronto Resource Investment Conference New Orleans Investment Conference * * * Support GATA by purchasing DVDs of our London conference in August 2011 or our Dawson City conference in August 2006: http://www.goldrush21.com/order.html Or by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Prophecy Platinum (TSXV: NKL) and Ursa Major Minerals Company Press Release 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...
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| Jim Rogers: Gold Has A Long Way To Go (UP) Posted: 14 May 2012 07:37 AM PDT
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| Andrew Hepburn: Charlie Munger vs. gold, history, and himself Posted: 14 May 2012 07:31 AM PDT 3:25p ET Monday, May 14, 2012 Dear Friend of GATA and Gold: Our consultant Andrew Hepburn, writing today at Business Insider, notes the hypocrisy of Berkshire Hathaway executive Charles Munger's recent denunciation of gold investors as "uncivilized." Munger's own company, Hepburn notes, once made a big score in the other monetary metal, silver. Hepburn's commentary is headlined "Charlie Munger Vs. Gold, History, and Himself" and it's posted at Business Insider here: http://articles.businessinsider.com/2012-05-13/wall_street/31684655_1_ch... CHRIS POWELL, Secretary/Treasurer ADVERTISEMENT Be Part of a Chance to Discover Northaven Resources Corp. (TSX-V:NTV) is advancing five gold and silver projects in highly prospective and politically stable British Columbia, Canada. Check out the exploration program on our Allco gold/silver project : -- A large (13,000 hectare) property, covering more than 15 square kilometers of a regional mineralized trend just 3km from a recently announced 1.2-million-ounce gold and 15-million-ounce silver deposit. -- The property hosts historic high-grade silver workings and many mineral showings as well as former mines at the property's northern and southern boundaries. -- A deep-penetrating airborne geophysics survey has just been completed on the entire property and neighboring deposits and its results are eagerly awaited. To learn more about the Allco property or Northaven's other gold and silver projects, please visit: http://www.northavenresources.com Or call Northaven CEO Allen Leschert at 604-696-3600. Join GATA here: Las Vegas Money Show Committee for Monetary Research and Education Vancouver World Resource Investment Conference Standard Chartered's Earth Resources Conference Hong Kong Gold Investment Forum Toronto Resource Investment Conference New Orleans Investment Conference * * * Support GATA by purchasing DVDs of our London conference in August 2011 or our Dawson City conference in August 2006: http://www.goldrush21.com/order.html Or by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit:
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| The Suspicious Growth of the Financial Industry Posted: 14 May 2012 07:30 AM PDT Societies become more complex as they age. Each challenge…or opportunity…is met with a new rig of some sort. A tax. A regulation. An organizational fix. As time goes by, these fixes act like friction…they slow the machine. They make it hard to move…inflexible and unresponsive. And over time, more people gain access to a fix — each lobbying group and special interest, each with his own bailout or subsidy…and each desperate to hold onto it. Output is thus shifted to unproductive activities. The real producers are punished — with taxes and regulations — while unproductive activities are rewarded, with bailouts, handouts and sweetheart deals. The financial industry was 2.5% of the economy when WWII ended. Now, it is 8.5%. How did it get so big? What does it do for all the money? The answer to the first question is that it grew as the economy became 'financialized.' More and more laws were passed granting more and more special favors and protections to the financial industry. Just read the tax code. Go ahead, we dare you! You will find special allowances and deals for the insurance industry on almost every page. And there are rules and regulations for pension funds. And pensions themselves. ERISA. 401k. 501C3. SEC. FDIC. Dodd-Frank. CFPB. Everything is regulated…controlled…protected… And all of this happened on the back of the biggest expansion of financial instruments in world history. The feds transformed the economy from one that made things…at a profit…to one that just made money. The money supply in the US increased by 1,300% in the 40 years after Richard Nixon 'shut the gold window' at the Treasury. That 'wealth' did not take the form of new factories in New England or new tractors in the Old South. It went mostly into money instruments…funneled through the financial industry to the rich people who owned financial assets. Every potential new competitor had to comply with such a mountain of rules and regulations that he quickly gave up. Even if approved, he could not hope to provide a new product. Instead, he could only provide the same approved services and products that the big, entrenched players already had in stock. John Kay, writing in The Financial Times, explains what would have happened had the computer industry been tied in the same knots. "If you needed a licence to enter the US computer business, you can imagine the Computer Regulation Agency interviewing Bill Gates and Steve Jobs in the 1970s. What dutiful regulator would allow someone who had not even completed his Harvard degree to sell software to the public?" Protected. Coddled. The financial industry went rogue. It was supposed to match investors with worthy investments, helping to bring genuine growth and prosperity to the US. Instead, it matched up most of the new money with itself. The typical American was impoverished. Forty years after America's money went rogue, he has not a dime's more earning power per hour. And 4.5 times more debt, adjusted for inflation. Regards, Bill Bonner, The Suspicious Growth of the Financial Industry 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 Causes Gas Price to Increase?".
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| Posted: 14 May 2012 07:22 AM PDT I am trying to buy gold for the intermediate to long term, but it hasn't been possible. The only "buy" using my methodology would have been on a breakout to the upside from the triangle. However I don't have any issues waiting on the sidelines for the next phase of development to take place either. Stay tuned as I hope to be laying out the case for it when it happens. Let's see if $1,550 becomes a stopping price or a rest for another leg down.
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| Greece Exit, Euro-Zone Collapse, Spain and Portugal Will Follow Within 6 Months Posted: 14 May 2012 07:11 AM PDT This analysis continues on from my last article in light of the recent French and Greek elections where voters rejected economic austerity in favour of money printing Inflation stealth debt default as politically an smoke and mirrors Inflationary depression is being seen as far more palatable for populations than a deflationary depression slow motion economic collapse. However to be able to print money inline with the true state of the respective competitiveness of euro-zone economies, then these countries governments have no choice but to exit the euro-zone, or be forced out as they one by one fail to follow through on agreed austerity measures. Greece Slow Motion Economic Collapse in Progress What may be lost in the noise that is the mainstream press is the fact that Greece has not been in a recession or even a depression, Greece has been in a state of slow motion economic collapse on the scale of past economic collapses such as that of Argentina but so far without t...
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| German Parliament wants accounting of gold reserves; Bundesbank resisting Posted: 14 May 2012 06:34 AM PDT German Bundestag Examines Assesment of Gold Reserves From Reuters http://www.welt.de/finanzen/article106305876/Bundestag-prueft-Bewertung-... Translation by Lars Schall The German parliament, the Bundestag, is looking at the accounting of German gold reserves at the Bundesbank. Parliament's Budget Committee has requested, in opposition to the Bundesbank, a critical report by the Federal Audit Office, the newspaper Bild reports. "The decision has been unanimous," the paper quoted the Christian Social Union budget expert Herbert Frankenhauser. The newspaper report alleged "account cheating" regarding the German gold reserves. According to the Bild report, the federal auditing office complained of "inadequate dilegence of the accounting of the gold reserves, which are stored in some foreign countries. Repatriation of the gold reserves is encouraged. The German gold reserves are in part held at foreign central banks. ... Dispatch continues below ... ADVERTISEMENT Prophecy Platinum (TSXV: NKL) and Ursa Major Minerals Company Press Release 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... The federal audit office wants to weaken the report in regard to the security of other countries and provide to the parliament a shorter summary that could be read only in the secret shelter of the Bundestag. Bundesbank President Jens Weidman was trying to convince the leadership of the Union parliamentary group to prevent the demand for the report. Germany has with 3,400 tons of gold, the world's second largest gold reserves. They are managed by the Bundesbank and are part of the country's currency reserves.
Join GATA here: Las Vegas Money Show Committee for Monetary Research and Education Vancouver World Resource Investment Conference Standard Chartered's Earth Resources Conference Hong Kong Gold Investment Forum Toronto Resource Investment Conference New Orleans Investment Conference * * * Support GATA by purchasing DVDs of our London conference in August 2011 or our Dawson City conference in August 2006: http://www.goldrush21.com/order.html Or by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Sona Discovers Potential High-Grade Gold Mineralization From a Company Press Release 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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| The Difference Between Market and Government Swindles Posted: 14 May 2012 06:30 AM PDT What's going on in the markets? Well, a gloriously strong chávena de café at one of this city's many colorful, street side vendors (not Starbucks) will set you back one Brazilian real, or around fifty cents. In other words, pretty cheap. A Caipirinha on the deck of what is surely the most unique hotel bar your editor has recently visited, however, will cost you the equivalent of maybe forty chávenas de café — about twenty dollars. Still, you pay for the view…and for the city skyline in the background. As for those other markets — the kind with ticker symbols and stock charts — they're a bit harder to get a handle on. The little arrows have been almost exclusively red this month…and the little squiggly lines tracking index performance have been trending almost exclusively south. In fact, the Dow achieved its so-far high for May at 1pm on the very first day. Since then it's been down…down…down… Gold is lower too…down another $15 an ounce overnight. The Midas metal is back to where it began the year, at about $1,565. But how could that be? Aren't central banks around the world working furiously to debase their flimsy fiat notes? And aren't the Chinese buying the stuff hand over fist? As Eric Fry showed last week (in his essay "China Buys Gold…No Matter Who's Selling"), the squiggly line representing the Middle Kingdom's monthly gold imports from Hong Kong is trending almost exclusively upward. Yes, Fellow Reckoner, it's tough to know quite what's going on in those other markets. Government-caused distortions abound. Price fixing — including for the price of money itself! — sends strange signals to buyers and sellers, convincing them to do things they ordinarily wouldn't do. Like buy a house they could never afford or speculate in the stock market instead of save their hard-earned for a rainy day. Thus are false booms fueled…and real corrections avoided. For a time… At least when we pay outrageous prices for a cocktail at a tourist trap we know we're being taken for a ride. But it's a ride we're willing to pay for. Conversely, when the state takes us for a ride, we don't have any choice. That's why we have to look for alternative investments…market workarounds…contrarian viewpoints… Speaking of which, we received the following "letter" from a Fellow Reckoner in response to our Lysander Spooner vs. the USPS musing last week. Writes our friend David S… Glad to have an excuse to write to you about my own area of research — postal history. We talked a little about postal history near the end of the Rancho Santana Sessions in March. The Wikipedia article that you cited is inaccurate in part. The United States Post Office did not have a 12-cent stamp in 1844 when Spooner started his American Letter Mail Company; in fact it had yet to issue any stamps. A few local postmasters were permitted to experiment with stamps in 1845; the first national postage stamps in the United States were issued in 1847. In 1844, when Spooner started his company the letter rates in the US were based upon distance and the number of sheets of paper, ranging from 6 cents under 30 miles to 25 cents over 400 miles for a single sheet of paper. And, none of the rates were 12 cents. Since envelopes counted as a second sheet of paper, they were not generally used. The Post Office Act of 1845, besides strengthening the monopoly on letter mail, reduced the postage rates to 5 cents per half ounce under 300 miles and 10 cents per half ounce over 300 miles. By matching the rates of the private mail companies (there were others besides Spooner) it was easier for the government to force them out of business. By the time the 3-cent letter rate was established in 1851, Spooner had sold his mail business and moved on to other things. That rate reduction was not so much in response to Spooner as to other reformers. And, the 3-cent rate was not short-lived, but in fact rates were reduced even more. The 3-cent letter rate continued until 1883 when it was reduced to 2 cents; the rate was essentially halved in 1885 when the weight step was raised from half an ounce to a full ounce. The 2-cent per ounce rate lasted from 1885 until 1932 except for a couple years during World War I when the letter rate was 3 cents to raise money for the war effort. All of this is simply factual background on postal operations in the 1840s — it does not change the essential points about Spooner's argument against the Post Office Department (as it was known then, the USPS dates to 1971) or refute your conclusions about private business. I just like to see the story accurately told. There is however, one additional point to consider when seeking to understand Spooner. He was an abolitionist and cheap postage was a major focus of that movement until the 1851 3-cent rate. They needed cheaper rates of postage for mailing anti-slavery tracts. So in many respects the cheap postage reformers of the 1840s were more interested in their other agendas than just in reforming the Post Office. For more on this perspective, you might read my paper, "Cheap Postage: A Tool for Social Reform" published by the Smithsonian two years ago in their postal history anthology. Mine is the final paper in the volume. I enjoy your columns and I am always happy to discuss postal history. Thanks for the corrections, David. We're always happy to discover new and more accurate information…especially when it comes from our Fellow Reckoners. Joel Bowman The Difference Between Market and Government Swindles 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 Causes Gas Price to Increase?".
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| Pat Heller: U.S. govt. agency is specifically authorized to rig gold market Posted: 14 May 2012 05:58 AM PDT 1:50p ET Monday, May 14, 2012 Dear Friend of GATA and Gold: The new commentary at Coin Week by Patrick A. Heller of Liberty Coin Service in Lansing, Michigan, is a reminder that the U.S. government has a secretive financial agency, the Exchange Stabilization Fund, specifically authorized by statute to manipulate the gold market in the name of regulating the value of the dollar. So it's hard to understand why complaints of gold price suppression should be dismissed peremptorily as crazy talk even as financial journalists fail to question the work of the ESF. Just today currency market intervention by the Reserve Bank of India could be reported on an unofficial basis by The Wall Street Journal, but that newspaper cannot be troubled to pursue complaints of "financial repression" undertaken by the U.S. government even when such complaints come from a former member of the Federal Reserve Board and are voiced on the editorial page of the Journal itself: http://www.gata.org/node/10839 This is a news blackout in the West. Heller's commentary is headlined "Is U.S. Government Gold Price Suppression Illegal?" and it's posted at Coin Week here: http://www.coinweek.com/coin-guide/numismatic-history/is-us-government-g... CHRIS POWELL, Secretary/Treasurer ADVERTISEMENT Sona Discovers Potential High-Grade Gold Mineralization From a Company Press Release 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 Join GATA here: Las Vegas Money Show Committee for Monetary Research and Education Vancouver World Resource Investment Conference Standard Chartered's Earth Resources Conference Hong Kong Gold Investment Forum Toronto Resource Investment Conference New Orleans Investment Conference * * * Support GATA by purchasing DVDs of our London conference in August 2011 or our Dawson City conference in August 2006: http://www.goldrush21.com/order.html Or by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Prophecy Platinum (TSXV: NKL) and Ursa Major Minerals Company Press Release 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...
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| Grandich Client Spanish Mountain Gold Posted: 14 May 2012 05:51 AM PDT The following is automatically syndicated from Grandich's blog. You can view the original post here. Stay up to date on his model portfolio! May 14, 2012 07:33 AM Listen [url]http://www.grandich.com/[/url] grandich.com...
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According to Rick Mills, given recent political events, single minded money printing has to be the next stage and this will be positive for commodities.
MY BALLPARK FORMULA FOR CALCULATING COMPLETE MINING COSTS FOR SILVER
Ugly realities, long suppressed, finally came home to roost over the weekend: Political deadlock. A flat-broke government. And no ability to print money to get out of the mess.
California's budget deficit has exploded 73% in a mere four months.
Events in Greece will come to a head much sooner than that.
And with that, the safety trade is on…
"People focus on Greece, but Greece is completely irrelevant," says the inestimable Marc Faber.
With that in mind, we see over the weekend the Chinese government cut the banks' reserve requirements for the third time in six months.
Demand for U.S. Treasuries is such that the yield on a 30-year bond is back below 3% this morning.
We now know the reward for overseeing a division that loses your company $2 billion, with the firm's shareholder meeting right around the corner: $14.65 million.
"Within about five months — by November 2012 — this part of the world will 'officially' be on record as holding one of the most significant energy-related discoveries of our time," reports Byron King from the far side of the globe.
"The U.S. government sets limits on the amount of leverage a bank/investor can use on each trade," writes a reader, adding insight after we mentioned in passing on Friday that most of the great scams of the last decade, from AIG to MF Global, were run from London-based offices.
"I am from a former British colony," writes a Canadian reader adding his own insight, "and I could tell you why the sun never set on the British Empire — God never trusted an Englishman in the dark."
"Not a bad philosophy," says a reader after we reiterated Addison's outlook of "Sauve qui peut" in Friday's episode.
"I saw the 
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