saveyourassetsfirst3 |
- VB Update Notes for May - June 2012 - What Reversal?
- Antidotes to The Most Investment-Destructive Force
- A Dangerous Market Full of Crosscurrents
- Gold Bubble? “More People That Own Apple Stock Than Gold”
- The Silver Bull Market Is Over?
- Gold premium over platinum increases
- LME CEO Expects Multiple Takeover Bids as Deadline Looms
- Metals Rally Following Disappointing Nonfarm Jobs Data
- Morning Outlook from the Trade Desk 05/04/12
- What Bubble? More Own Apple Stock than Bullion
- Could Opinion Shift to a Growth Pact in Europe Favor Gold?
- ECB rate decision pressures gold
- France May Lose Its Head – Europe to Follow?
- About That 3-Month Drop in Gold Prices
- James Dines: Paper Money Addicts
- The Real Debate On Gold And Money
- Shanghai Exchange to start Silver futures trading on May 10
- Precious Metals: Don’t Want To Play Anymore?
- Gold & Silver Market Morning, May 04 2012
- Is an Ounce of Gold Worth $10,000?
- A Wickedly Bumpy Ride for Gold Bulls
- Swiss Gold Stored at 'Decentralised Locations' -- But Did Not Disclose Where
- Swiss Gold Stored At 'Decentralised Locations' -- SNB Does Not Disclose Where
- Butler: Preparing for the Coming Global Gold Standard
- George Smith: Ben Bernanke vs. Gold
- Peter Daniels Talks On "Gold"
- Gold "Lackluster" in "Calm Before Storm" as Record-High Rupee Prices Boost …
- Markets and the Aurelius Vision
- The Return of Cheap Oil Prices?
- A Short History of the Gold Cartel
| VB Update Notes for May - June 2012 - What Reversal? Posted: 04 May 2012 06:28 AM PDT HOUSTON – What an ugly looking chart we all witnessed near the end of April as the effects of a protracted buyer's strike wormed their way into the indexes and ETFs which track the smaller, less liquid and more speculative issuers we follow and game – the companies we call The Little Guys. It is no less than the direct effects of a super-negative liquidity "towel storm" as the weary and disgusted threw in towels, chunking overly cheap and still falling miners and explorers overboard. Some because they just had enough of a falling market, some because they feared even further erosion in price and some because they literally had to sell or were forced to sell. (GDXJ/CDNX comparison chart.) There is little question now that The Little Guys, as a group, have purged most, if not all of the hot money and overly optimistic momentum premium that once defined this sub-sector. With the Market Vectors Junior Gold Miners Index or GDXJ having corrected as much as 41% just since September; with the Global X Gold Explorers ETF or GLDX having corrected as much as 48% over the same period; with the S&P Canadian Venture Exchange Index or CDNX following suit to the tune of -24% since September and close to -50% since March of 2011, prices for shares of the companies exploring for gold, silver, copper, and other important resources have gone on the figurative clearance sale rack in 2012 – again! The trouble with "sales" as wide spread as this one is that there have been so few profit ops lately that many gamers have little or no resources left to buy them. One of the common threads in our mail lately is from people who would love to take advantage of Ridiculous Cheap pricing, but have been "all in" since late 2011. (Ridiculous Cheap or RC on our charts is a technical term to us Vultures.) Indeed, we would be in the same boat (having deployed all the capital we might allocate to very high risk issuers like The Little Guys) if not for our own decision to sell a small portion of our accumulated metal holdings in order to take advantage of absurd panic-style prices on some of our Faves. Clearly, this current correction and buyer's strike has been one for the record books. Using the CDNX as our measuring stick and gold as the cipher, The Little Guys have reached levels no one (and we really do mean literally no one) a few years ago would have dreamed they would be with plus $1,600 gold and better than $30 silver. Take a look at the chart below. The chart shows the CDNX (right axis) with the gold price in green (left axis). Here are a few observations.
One last observation: Once the CDNX does find good support it exhibits a tendency to rise violently as it overcorrects the overcorrection. The condition of negative liquidity and a buyer's strike tends to feed on itself in a relentless trend as prices for the juniors keep falling. In part because of the continued assault on small resource company gamer confidence, but more importantly because falling prices rob the tiny market of its lifeblood – the profits to those very same gamers a rising market bestows. To state the obvious, funding for the juniors is enhanced by rising, not falling prices. Rising prices produce profits – falling prices the opposite. Investors are more willing to risk their resources on juniors if they have just taken big profits on one or more juniors. They are loathe to take a chance when the juniors have done nothing but clobber their portfolio or after they have taken sizable losses. Puny Profits Panic Paradox It is a paradox without a good name (that we know of). The paradox of feast or famine on steroids. The one constant we know of is that the best time to buy these companies is during the famine part - when almost no one wants to buy them, when fund and portfolio managers are getting redemptions and are literally forced to sell them at way-too-low prices and few have any resources left to catch their involuntary hurtling towels – like now, for instance. And, nothing says that the condition of this sick market patient won't get worse before it gets better. It very well might, this being May. But, and this is the anchor that we hold onto with both hands, it would be arrogant and very highly likely incorrect to suggest that the current condition will continue as-is for the rest of this year. That we doubt. Needless to say, the developing inverted head and shoulders pattern we thought might come into play in the last full VB update utterly and completely failed to materialize for the CDNX. Instead the CDNX has come down to test critical support – again. And, as we said we would if the weakness continued, since the last full report we have added shares in a number of our Faves, including Northern Tiger (NTR.V or NTGSF) – a high risk, high reward explorer in the Yukon that has already made a high grade discovery; Timberline Resources (TLR), a soon-to-be low-cost gold producer working in Montana and Nevada; Riverstone Resources (RVS.V or RVREF), an advanced gold exploration company working in Burkina Faso that has already proved up 2.7 million ounces of the "good stuff" and is very likely on its way well above 3 million ounces; Millrock Resources (MRO.V or MLRKF), a promising, self sustaining project generator working in "elephant country" in Alaska and Arizona, and Guyana Goldfields (GUY or GUYFF), an advanced gold explorer with a high grade, 6-million ounce plus deposit in Guyana, South America. We even added to issues we deem as "pure lotto tickets," such as Argus Metals (AML.V or ARGXF) as one example, because, as we have said before, we Vultures aim to buy when the market for these promising issues is at its worst and most unloved. We added to these and several other Vulture Bargain Candidates of Interest (VBCIs) as noted on the individual thirty-something VB and VBCI charts available to Got Gold Report Subscribers. We have, however, also lightened up on a very few of our positions, including exiting one Vulture Bargain (VB) company at a modest profit, also as disclosed in the charts and below in the VB Roundup. Our attitude has not changed; we are operating under the assumption that no condition in the stock markets lasts forever and we very strongly believe that to include nasty, tide lowering buyer's strikes for junior miners and exploration companies like the one that has been underway. *** We will continue to try to be extra diligent about putting notations in the various VB and VBCI charts as we make additional changes just ahead. We continue to believe that there has already been too much liquidity "Hoovered" out of the juniors, and so we are looking for the negative liquidity event to end soon, if it isn't already in the process of doing so. If not "soon" then, as we are wont to say, our positioning is for "as long as it takes." We say that not just as a slogan – it is a Vulture way of life. We do so in the context of a market where our accumulated gold has never had more purchasing power relative to the miners in general and the smaller resource companies in particular. By definition, then, we look for the opposite condition, positive liquidity, to return, with the market opening a can of "positive liquidity vengeance" soon thereafter. We are convinced that change is coming, although the catalyst which will ignite that event has yet to surface. We are in good company when doing so, but the number of players with the tenacity and determination necessary to maintain their confidence until a sure-enough market reversal arrives – the number of True Vultures – almost certainly is being winnowed down to its core. In short, we believe the sure-enough reversal is coming. The only unanswered question is: When? *** As always, the first place to look for new commentary is directly in the charts themselves (available to Subscribers). As we move forward the charts will become more and more the focus and these too-long written reports less and less the focus. On to this May-June edition of our Vulture Bargain (VB) notes, then… for our tenacious, bargain loving and Ridiculous Cheap seeking Vulture members. To continue reading, please log in or click here to subscribe to a Got Gold Report Membership |
| Antidotes to The Most Investment-Destructive Force Posted: 04 May 2012 05:10 AM PDT |
| A Dangerous Market Full of Crosscurrents Posted: 04 May 2012 03:55 AM PDT  click to enlarge I recently had the opportunity to go out for drinks during the week. I turned it down, saying I can't consume alcohol on a school night. Friend's response: "You mean a work night?" "Nope. For traders they are school nights — because if you don't rest up and do your homework, the market schools you good." Within the context of the Mercenary trading style, doing our homework means staying on top of key developments, both fundamental and technical. And not just somewhat on top of things, but COMPLETELY on top of things — "like Pamela Anderson on a can of spam," as an old colleague used to say. (Not sure what that means exactly, but it stuck…) Anyway, in the interest of maximum awareness, we recently added a feature to our flagship advisory service — the Live Feed Trend Tracker, as shown on right. (Click image to enlarge.) In addition to the market analysis and top down perspectives you see in the main post stream (and receive via the Mercenary Dispatch), we regularly broadcast more portfolio-specific and trade-action specific material — including real time trade executions, position sizing guidelines, portfolio dynamics, and more — within the Live Feed. Below is an example of our open book thought processes, posted to the feed stream early this morning (prior to the day's carnage). To find out more about the Live Feed — or get a free 14-day trial — go here.
Once again, if you want more insight into how real traders, deploying real capital, make integrated portfolio decisions in real time, go here. wondering where the rum's gone, JS  |
| Gold Bubble? “More People That Own Apple Stock Than Gold” Posted: 04 May 2012 02:11 AM PDT gold.ie |
| The Silver Bull Market Is Over? Posted: 04 May 2012 02:03 AM PDT |
| Gold premium over platinum increases Posted: 04 May 2012 02:00 AM PDT In recent weeks the platinum price has been clearly underperforming in relation to gold, with gold now more than $100 more expensive than platinum. According to the latest report from the ... |
| LME CEO Expects Multiple Takeover Bids as Deadline Looms Posted: 04 May 2012 12:32 AM PDT |
| Metals Rally Following Disappointing Nonfarm Jobs Data Posted: 04 May 2012 12:27 AM PDT US dollar gold prices rallied to $1,640 an ounce Friday, following the release of disappointing US nonfarm jobs data, though they remained more than 1% down on last Friday. Silver prices also spiked – touching $30.19 per ounce – but was still 3.4% down on the week. |
| Morning Outlook from the Trade Desk 05/04/12 Posted: 03 May 2012 11:56 PM PDT |
| What Bubble? More Own Apple Stock than Bullion Posted: 03 May 2012 11:50 PM PDT Gold is down 1.6% on the week. The gold market has seen peculiar, lackluster, low volume trading this week punctuated with sudden, oddly timed, very large sell orders. This leads to quick price falls followed either by slow, gradual recovery or a sharp bounce. |
| Could Opinion Shift to a Growth Pact in Europe Favor Gold? Posted: 03 May 2012 11:31 PM PDT Gold futures dropped four days in a row by about 1.8% and ended at $1,634.80 on Thursday. The last time gold futures fell consecutively for four days was in December when the dollar surged and fear of European banking problems caused investors to rush to liquidity. |
| ECB rate decision pressures gold Posted: 03 May 2012 11:00 PM PDT The European Central Bank's decision yesterday to leave interest rates unchanged at 1% pushed more traders out of commodities, with precious metals coming under more selling pressure following ... |
| France May Lose Its Head – Europe to Follow? Posted: 03 May 2012 10:55 PM PDT Putting on our investor's cap, the way to take advantage of the hastening decline of the world's second currency is to gain exposure to its oldest form of money – precious metals. Major European banks are reporting increasing outflows from euros into gold. |
| About That 3-Month Drop in Gold Prices Posted: 03 May 2012 10:28 PM PDT So, is this three-month tumble the last straw for gold prices, breaking the camel's hump of 2011's big top above $1900 per ounce at last? The big top of January 1980 took nearly a year to deliver a three-month run of falling prices. They came thick and fast after that. |
| James Dines: Paper Money Addicts Posted: 03 May 2012 09:09 PM PDT
from kingworldnews.com: With continued uncertainty in global markets, today King World News interviewed legendary James Dines, author of The Dines Letter. Dines told KWN the world will see a "Coming Great Depression." He also discussed whether gold and silver remain in 'Super Major Uptrends.' Here is what Dines had to say about what is taking place: "All nations are now suppressing their own interest rates. People who are looking for income either have to buy the higher yielding risky bonds or buy stocks. So, government's low interest rate policies are forcing investors to take more risks." James Dines continues: Keep on reading @ kingworldnews.com |
| The Real Debate On Gold And Money Posted: 03 May 2012 09:07 PM PDT
from zerohedge.com: Monetary adjustments, heavy as they have been in these past four years, will remain a permanent part of our economic landscape so long as central banks remain committed to their current course. Now that the annual excitation of economists and their dreams of recovery are waning, and the "unexpected" decline in the economy has returned right on schedule, the discussion needs to turn toward those monetary interventions. I have had many discussions with clients and members of the general public on the topic of the gold standard over the past few years, especially in the past several weeks as Chairman Bernanke deliberately broadcasts his specific problems with it from the perspective of a central banker tasked with "saving" the economy. Even getting past the glaze of apparent anachronism, largely that something so archaic seems utterly incompatible with our modern electronic society, the persistent, and otherwise extremely healthy, mistrust of banks prevents a further discussion of how the gold standard really works. For those that actually know the US paper dollar was primarily issued by banks prior to 1913 in the form of deposit claims on "reserve" assets, it is simply asserted that the principle of "universal currency" issued by the government, with its full faith and credit backing it, is a better fit, a more complete system befitting our digital age. This simple line of thinking confuses the needs for clearing money imbalances with money itself, more than anything, but it also misses the central transformation of the 20th century. Keep on reading @ zerohedge.com |
| Shanghai Exchange to start Silver futures trading on May 10 Posted: 03 May 2012 09:06 PM PDT
from commodityonline.com: The Shanghai Futures Exchange (SHFE) is all set to launch silver futures trading on May 10, 2012. China is one of the biggest producers and consumers of silver in the world. This will be the second precious metals futures contract on offer by the SHFE following gold and will be aimed a proving an efficient hedging tool for producers and consumers in China. "China's miners, manufacturers, retailers and other enterprises, which rely on the precious metal, will undoubtedly welcome the start of domestic silver futures trading, which will allow them to hedge against fluctuating global silver prices", the Global Times had quoted Li Ning of Shanghai Cifco Futures earlier. The contract size is set at 15 Kg (500 troy ounces) with a minimum margin requirement of 7%. The daily price range has been fixed at 5% Keep on reading @ commodityonline.com |
| Precious Metals: Don’t Want To Play Anymore? Posted: 03 May 2012 09:04 PM PDT
from news.goldseek.com: We suspect that many precious metals investors are saying, "We don't want to play anymore!" and our reply is, "You want to quit right now, right at the bottom of this cycle? You must be crazy – crazy with a capital C!" True, this is a very challenging market environment for resource shares, but we know what the ultimate outcome will be: higher share prices. The only question is "when" and our opinion is that we are very close in time (within days or a week or two at most) of being able to say that the lows are behind us. Let me explain. Unfortunately, most resource investors, especially those new to this sector, are greatly disillusioned, have little staying power and are just scared to death. Who can blame them? They have spent all of their psychological capital and the theme of the day for them is, "How low can they go?" Sure, we understand why investors are upset watching their portfolio go down, virtually day after day, but this current depressed environment is the seed for making investors wealthy. The buying opportunities are everywhere. As the expression goes, to make money you need to 'buy low and sell high'. We believe we are near enough to a bottom that if you have some remaining cash you should be putting it to work very soon. No one is going to ring a bell and call you and tell you the bottom is in place, you must make that decision for yourself. In our opinion, now is the time to suck it up, put on your big boys pants, keep your positions, and ride this out. To quit now would be the worst possible thing to do. The day will come when we look back on this time as being one of the best buying opportunities for the entire bull market and yes, we are still in a bull market. Keep on reading @ news.goldseek.com |
| Gold & Silver Market Morning, May 04 2012 Posted: 03 May 2012 09:00 PM PDT |
| Is an Ounce of Gold Worth $10,000? Posted: 03 May 2012 08:57 PM PDT
from caseyresearch.com: Gold at $1,650 an ounce seems pricey to most investors simply because it costs five times more than it did a decade ago. However, $1,650 an ounce is actually a bargain if one were to price gold using the same formula that the US government used for many years. In the past, the federal government agreed to exchange gold for dollars at a fixed price of $35 per ounce. Gold's fixed price wasn't pulled out of thin air: it was established under the Bretton Woods system by dividing US gold reserves by the monetary base. Gold reserves represent the total amount of gold the government is hoarding. The monetary base is the amount of dollars held by the public, in addition to the amount of dollars held as bank reserves. Currently, the US government reportedly holds roughly 260 million ounces of gold. Thanks to Benny and his inkjets, the monetary base is currently flirting with the nosebleed level of $2.7 trillion. Using the government's gold price formula of yesteryear, gold's "shadow price" is roughly $10,000 an ounce ($2.7T/260 million). The chart below tracks the market price of gold vs. what the price "should be" based on the Bretton Woods pricing method. Keep on reading @ caseyresearch.com |
| A Wickedly Bumpy Ride for Gold Bulls Posted: 03 May 2012 08:55 PM PDT |
| Swiss Gold Stored at 'Decentralised Locations' -- But Did Not Disclose Where Posted: 03 May 2012 08:33 PM PDT ¤ Yesterday in Gold and SilverGold was under slight downward price pressure right from the open in New York on Wednesday night...and by the time that the Comex began to trade at 8:20 a.m. Eastern time, gold was down about ten bucks from Wednesday's close. And that was when the selling pressure increased in intensity, with the low price tick of the day [$1,630.00 spot] coming about fifteen minutes before the close of Comex trading at 1:30 p.m. in New York. From there, the price rallied a few dollars into the close of electronic trading at 5:15 p.m. The gold price closed at $1,635.80 spot...down $17.90 on the day. Net volume was decent...around 128,000 contracts.
The silver price declined about twenty cents during mid-morning trading in the Far East...and then sat at that level until 8:45 a.m. in New York. It was all down hill from there, with the low of the day [$29.74 spot] coming at the same time as gold's low price tick...about fifteen minutes before the Comex close. The silver price rallied sharply in the last fifteen minutes of Comex trading...and then a bit into the electronic trading session, before trading sideways for the rest of the day. Silver closed at $30.07 spot...down another 58 cents from Wednesday. Net volume was pretty decent at 37,000 contracts. Thursday's low price tick took out the previous low of last Wednesday, April 25th.
The dollar index gained about 25 basis points between the Far East open on Thursday morning...and 8:30 a.m. in New York. Then all those gains vanished in the next thirty minutes. From there, the dollar index gained a handful of basis points, closing a hair higher than on Wednesday. Nothing to see here.
The gold shares gapped down...and then headed for the nether reaches of the earth. The low came at the low price tick in both metals....1:15 p.m. in New York. From there, they rallied a percent or so going into the close. It's just as well, because the HUI finished down 3.92% as it was...so at the low, it was down 5 percent. That's pretty amazing considering the fact that gold only had an intraday move of 1.5 percent.
The silver shares got it in the neck for the second day running, as Nick Laird's Silver Sentiment Index closed down 3.45%.
(Click on image to enlarge) The CME's Daily Delivery Report for 'Day 5' of the May delivery month showed that 7 gold and 252 silver contracts were posted for delivery on Monday. In silver, the surprise short/issuer was Merrill with 217 contracts. The biggest long/stoppers were Deutsche Bank [91]...JPMorgan [61]...and the Bank of Nova Scotia with 24 contracts to be received. The link to yesterday's Issuers and Stoppers Report is here. There were no reported changes in GLD yesterday...but the SLV ETF reported its first withdrawal since April 20th...and it was 469,843 troy ounces. Over at Switzerland's Zürcher Kantonalbank, they reported adding 20,969 troy ounces of gold...and 42,520 ounces of silver to their respective ETFs between April 20th and 30th. The U.S. Mint had a sales report. They sold another 10,000 ounces of gold eagles...plus 100,000 silver eagles. We're only three business days into May, and the Mint has already sold as many ounces of gold eagles as they did in all of April. Someone with very deep pockets is obviously buying while "blood is running in the streets"...as should you, dear reader. I was a buyer yesterday as well. But I was buying silver, not gold. Over at the Comex-approved depositories on Wednesday, they reported receiving 523,121 troy ounces of silver...and shipped 15,001 ounces out the door. The link to that action is here. Washington state reader S.A. provided our first chart of the day. It's a plot of the gold price against the junior mining stocks on the Toronto Venture Exchange. It's not pretty, is it? And you also have to ask yourself why this is the case...but whatever the reason, I'd bet money that most of the junior producers are selling for well under their respective replacement costs if you had to rebuild their infrastructures from scratch starting today.
The second chart is courtesy of Nick Laird. It shows the GDX and the GLD indexes...and the ratio between the two...which is similar to the chart above. One is just confirming the other, but from slightly different perspectives. As Nick pointed out..."This chart clearly shows how gold stocks have underperformed the last four years." And you have to ask whether this is natural or not. I'm guessing that the share price is rigged just like the metals themselves, but don't have any proof except for these charts. But it just doesn't pass the smell test.
(Click on image to enlarge) I have a lot of stories for you today...and I hope you have time to at least skim them all. We get the jobs report this morning at 8:30 a.m. Eastern time, I'm particularly interested in how the gold price will react to that news. David Einhorn Explains Why Only Gold Is An Antidote To The Fed's Destructive "Jelly Donut Policy". Hugo Salinas Price: The gold price -- the reds against the blues. ¤ Critical ReadsSubscribeJim Grant: "The Federal Reserve Is The Vampire Squid Of Vampire Squids"The world in which we invest is a world of immense wall to wall manipulations by our friends in Washington. And people get off on Goldman Sachs because it has done this and this, it is pulling wires...The Federal Reserve is the giant squid of squids, it is the vampire squid of vampire squids." He continues: "They - the vampire squids - have manipulated virtually every single price and valuation in the capital markets. People ought to recognize when they invest that one of the unspoken risks is the risk that this hall of mirrors, this Barnum and Bailey world that the Fed has created for us is going to vanish one day because they will not be able to hold it any more... It's not as if there is nothing to do in investing, but one must always keep in mind that the valuations that we see, that the prices that we watch flicker across the tape are prices that are fundamentally manipulated by these well-intended, dangerous people in Washington called the Federal Reserve". This zerohedge.com piece contains a 9:34 minute Bloomberg interview with Mr. Grant which is an absolute must watch. I thank reader U.D. for bringing it to our attention. The link is here.  The Violent, Scandalous Origins of JPMorgan ChaseAmericans like to imagine that the Founding Fathers were virtuous and civic-minded giants bestriding the continent. But many of them kept a sharp eye on the main chance, alert to opportunities for personal profit. The birth of the mega-bank JPMorgan Chase & Co. (JPM) may be traced to two such figures: Aaron Burr, the dark star of America's early years, and his longtime nemesis, Alexander Hamilton, the first secretary of the Treasury. In the 1790s, New York was emerging as the nation's commercial center, but it had only two banks: the Bank of New York and a branch of the Bank of the United States. Both were dominated by wealthy Federalist merchants. Republicans such as Burr often found the banks' credit windows closed tightly against them. This short and very interesting read, was posted on the Bloomberg website yesterday. I thank Washington state reader S.A. for sending it...and the link is here.  State Bonds in Jeopardy as Tobacco Cash FadesSteady declines in smoking, a big win for public health, are creating problems for municipal bond investors. A handful of bonds backed by yearly payments from tobacco companies under a landmark settlement with 46 states are in the earliest stages of default, and more distress is expected. So far, California, Ohio and Virginia, as well as Nassau County in New York, have resorted to tapping special tobacco-bond reserves to pay their bondholders, something analysts consider a technical default because it effectively means the bondholders are being paid with their own money. One analysis of a sample of the roughly $55 billion in outstanding tobacco bonds foresees the potential for a handful of full-blown defaults more than a decade from now, but the continuing legal dispute could mean deeper problems sooner. This story is from yesterday's edition of The New York Times...and I thank Phil Barlett for sending it along. The link is here.  Taking On the Little Guy, but Missing the Bigger OnesThe S.E.C. brought a civil case against a tiny, iconoclastic ratings agency called Egan-Jones, run by the outspoken Sean Egan, accusing it, essentially, of filling out forms wrong. Before the S.E.C. charges, Egan-Jones was best known for two things: having made some bold calls about shaky credit prospects and having a business model that was different from that of the big boys — Moody's Investors Service, Standard & Poor's and Fitch. Mr. Egan's outfit gets paid by the users of his ratings; the oligopoly gets paid by the issuers whose debt is going to be rated. You don't need to be a hedge fund quant to see the conflict of interest: the more ratings, the more profits to the ratings agencies, so the temptation is to be extra lenient. And, boy, were they. This op-ed piece showed up in The New York Times on Tuesday...and it goes into much more detail than the piece I posted about this issue before. I thank Phil Barlett once again for bringing it to my attention. The link is here.  Progress Is Seen in Advancing a Final Volcker RuleA major new rule that has drawn the ire of Wall Street is on track for completion sooner than some bankers had expected, dashing the hopes of financial industry lobbyists, who have pressed for a delay. Regulators are making significant progress on a final draft of the regulation, the Volcker Rule, and some officials expected to complete it by September and possibly as early as this summer, people with direct knowledge of the matter said. The people, who spoke on the condition of anonymity, cautioned that regulators have not set a firm date for completing the rule. The Volcker Rule aims to rein in risky trading on Wall Street. Named for Paul A. Volcker, the former chairman of the Federal Reserve, it would ban banks from placing bets with their own money, a practice known as proprietary trading. It's also called 'in-house' trading...and you see it all the time in the CME's Daily Delivery Report where they are bidding alongside their own clients...and sometimes even against them. This story was posted in The New York Times on Wednesday...and I thank Phil Barlett again. The link is here.  CFTC Said to Delay Derivatives Exchange Rule Opposed by CMEThe U.S. Commodity Futures Trading Commission will delay a final vote on a rule governing derivatives exchanges amid internal dissent that it may restrict CME Group Inc. (CME), owner of the world's largest futures exchange, according to four people briefed on the matter. The rule, proposed in 2010, sought to require at least 85 percent of a contract's trading to occur on a central market. The agency will meet on May 10 to approve a series of other exchange requirements, the CFTC said. The commissioners will delay the provision setting percentage levels, said the people, who spoke on condition of anonymity because the rulemaking process is not public. Under the proposal, an exchange would be forced to de-list a contract if it didn't meet the 85 percent level. The proposed rule would restrict CME's ClearPort service, which acts as a clearinghouse for swaps traded outside of the company's central market, Chicago-based CME said last year. ClearPort, which generates the highest fees per contract at CME, allows energy swaps, for example, to be converted into cleared futures contracts. Clearinghouses reduce risk in trades by guaranteeing trades between buyers and sellers. You can pretty much bet that if the CME is bitching about it, it's probably in the public's best interest for the rule to be passed as written. This Bloomberg story was posted on their website yesterday...and I thank West Virginia reader Elliot Simon for sharing it with us...and the link is here.  CME Raises Margins for Non-Hedged Accounts to Meet CFTC RuleCME Group Inc. (CME), the world's largest futures exchange, is raising futures margins for non-hedged positions to comply with new regulations. Members will be treated as speculators for outright positions, paying a higher margin, said the exchange, which trades everything from energy, agriculture and metals to interest rates and equity indexes. Members are now treated as hedgers rather than speculators even if they have a speculative position. The change is effective May 7, it said in a statement. President Barack Obama last month urged Congress to bolster federal supervision of oil markets, including bigger penalties for market manipulation and greater power for regulators to increase the money traders must put up to back their bets. Regulators are seeking to limit speculation in commodities and ban so-called proprietary trading at banks. I asked Ted Butler if it meant anything in the grand scheme of things...meaning gold and silver. He said it was no big deal, as it applies to the longs and shorts in all Comex futures contract types...and since it has to be done by the end of trading today, whatever effect it will have will be known soon enough. This Bloomberg story was posted on their website on Wednesday...and I thank Edmonton reader "Ray" for sending it along. The link is here.  |
| Swiss Gold Stored At 'Decentralised Locations' -- SNB Does Not Disclose Where Posted: 03 May 2012 08:33 PM PDT  GoldCore's Mark O'Byrne today relays a report that the Swiss National Bank, while refusing to specify the location of its gold reserves, acknowledges that they are held both domestically and internationally, the latter locations providing "access to a gold market where stocks could be liquidated if necessary." Presumably "necessary" includes the sort of surreptitious currency market intervention seen against gold simultaneously with the Swiss franc's devaluation last September. |
| Butler: Preparing for the Coming Global Gold Standard Posted: 03 May 2012 07:07 PM PDT
A reserve currency can only function as such if there is a general consensus that it provides a stable store of value. Without this trust, money, no matter what form it takes, will be abandoned—either suddenly in a crisis, or gradually over time—in favor of something else. The Golden Revolution looks at how the world is rapidly moving toward some form of global metallic standard, in which money, at least in official, international transactions, is linked directly to gold, silver, or both. The Golden Revolution: How to Prepare for the Coming Global Gold Standard From Jim Puplava and Financial Sense: Full of advice on how investors can profit and protect themselves during this critical time of change, the book knows that those who are prepared will prosper, while those who won't stand to lose it all. |
| George Smith: Ben Bernanke vs. Gold Posted: 03 May 2012 07:06 PM PDT A commentary on Ben Bernanke's remarks about the gold standard during a lecture at George Washington University on March 20, 2012. from CufZheXMPjFRT6czlDOvsA: ~TVR |
| Posted: 03 May 2012 05:00 PM PDT |
| Gold "Lackluster" in "Calm Before Storm" as Record-High Rupee Prices Boost … Posted: 03 May 2012 04:52 PM PDT |
| Markets and the Aurelius Vision Posted: 03 May 2012 04:46 PM PDT We've spent the past week moving house and family from Sydney to Melbourne. We don't recommend the experience. You spend weeks packing all your belongings. Then some blokes come along and squeeze it all into a shipping container in a matter of hours. A few days later some other blokes unload the container in even less time, leaving you swamped with boxes and stuff you forgot you even had...and can't find any room for. Our wife and daughter flew down yesterday. Melbourne welcomed them with a pleasant blast of Antarctic air and persistent rain. We welcomed them with a wall of boxes and a lounge room that looked like a Picasso painting. As much as we wanted to continue to find space for things we don't need and don't use, we couldn't neglect our Daily Reckoning duties any longer. So we came into DR headquarters in St Kilda this morning to reckon. But about what? We've had no time to keep up with the world this past week. We've slipped into ignorance. And, as the saying goes, ignorance is bliss. We have worried less about the world this week. Everything seems fine when you're not looking too hard. Sound bites and headlines only make you think you know what is happening. They provide no context, no details. Here's our impression of the world following a week of ignorance.
Of course these points tell you nothing. They're simply statements. That's the problem with living in a world that fires information at you 24/7 at 360 degrees. Which is where the Daily Reckoning comes into your life. We aim to piece the absurd and nonsensical together and give you some context. You may not always agree with what we say, but if we make you think each day then we've done at least part of our job. Because the informed and thinking investor is much better equipped than the ignorant investor. Ignorance breeds complacency. Complacency leads you to put off making important decisions about your finances. And you generally remain complacent until it's too late. Back in late 2006, we moved our parents' superannuation portfolio into cash. That was after speaking to their financial adviser whom we concluded was ignorant about the market and therefore complacent. We didn't want him advising our parents in what we saw was a highly riskly environment. So we sold and moved into cash. The trick is to panic before everyone else...or at least before the complacent investor. So, what is going on in the world? Financial markets are grinding higher...feeding the complacency. Well, nothing has really changed, dear reader. Put simply, too much unproductive debt is weighing on the global economy. It's 'unproductive' because the projects the debt helped to finance don't generate enough cashflow to even service the interest repayments, let alone repay the principle. It is 'bad' debt. Instead of recognising this and liquidating these 'bad' investments, governments and central banks prop up the system through the creation of even more debt. It is a policy based on hope. We would suggest it's a policy bordering on insanity. Which brings us to Marcus Aurelius. He was Emperor of Rome from 161 to 180AD. According to Edward Gibbon, author of the Decline and Fall of the Roman Empire, the decline started following Marcus Aurelius' death and the ascension of his son, Commodus. We bring up Marcus Aurelius because we stumbled upon some of his writings when unpacking. And instead of getting on with the job, we sat on a box and flicked through them. The following quotes from Aurelius are worth pondering in today's complacent environment. They serve as a reminder that wisdom is not evolutionary. It is timeless. Despite all the 'progress' humans have made over the centuries, we are just as dumb as we've ever been.
'The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane.' When really pressed to think about it, even the ignorant observer would acknowledge that the creation of ever greater amounts of debt to solve a crisis caused by too much debt is insane.
'Everything we hear is an opinion, not a fact. Everything we see is a perspective, not the truth.' Truth, like beauty, is in the eye of the beholder. There really is no such thing as the truth in financial markets. There are lies aplenty...but the truth?
'Look back over the past, with its changing empires that rose and fell, and you can foresee the future too.' This is practically our mantra at the Daily Reckoning. We look to the past to give us a guide to the future. Without knowledge of history you're flying blind in today's investment world. Armed with just a little history, a few things are certain. That is, today's policymakers will continue to make the same mistakes made in the past - just under a different guise. And gold will continue to fulfil its role as the ultimate form of money. Until next week... Regards, Greg Canavan
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| The Return of Cheap Oil Prices? Posted: 03 May 2012 04:43 PM PDT Reckoning from Sea Island, Georgia... Will new energy discoveries and new technology sink oil prices? Will lower oil prices rescue the world from the Great Correction? Maybe, say Porter Stansberry and a good number of the analysts and experts here. We're attending an investment conference - for professionals only. It's a beautiful place for one. The island is a barrier island, mostly sand...surrounded by ocean or marshland. There is a golf course...tennis courts...bocce courts... Maybe even a kangaroo court. Or an appeals court. And a royal court. Not to mention a food court. The lodge looks like it was built in the '20s...it has that glamorous look that seems to call out for a white sweater and white flannel pants... You feel you should dress like Cary Grant and hope to meet Claudette Colbert on the lawn. The rooms are luxurious...large and quiet, while the lobby is lush with rich fabrics and comfortable chairs. The staff is poised, gracious and almost genteel. They would be good people to look after you if you were going broke or insane. Not that we're planning on either. But it's always a good idea to be prepared. Whether you lost your mind or your money, the nice people running the place would probably wait a few days before kicking you out. There seems to be almost no one here. The lobby is empty most of the day. We wonder how it stays in business. This is also where George W. Bush convened a meeting of the G7 heads of state. In the room next to ours, the walls are hung with photos of Tony Blair, Silvio Berlusconi, George W. Bush...and others. They're all gone from office now. Except one, Vladimir Putin, a man who looks like he might never leave. But the news down here is upbeat. Thanks to fracking and horizontal drilling. They say these techniques are making billions of barrels of oil available. Believe it or not, the US is set to be the world's top producer by 2020, according to a Goldman Sachs study. An oilman from Texas showed us a map. It included a large chunk of Southwest Texas, colored to show where drillers had bought oil rights and where they were operating. Heck, there is hardly an empty county in the whole state! The expert took the map apart, analyzing who was working where...and how much oil they were likely to get. The results were staggering. "Oil will fall below $40 a barrel," predicted Porter Stansberry, our host. Whether that will happen or not, we don't know. But it got the group talking excitedly. "Cheap oil will set off an industrial renaissance in America," one suggested. "Sell the oil and gas companies," recommended another. "It will help put the US economy on the road to real recovery," said another. But hold on a minute. A report at the Financial Times tells us that "the era of cheap oil is over," because "marginal oil production costs are heading towards $100 a barrel":
Tracking data from the 50 largest listed oil and gas producing companies globally (ex FSU) indicates that cash, production and unit costs in 2011 grew at a rate significantly faster than the 10 year average. Last year production costs increased 26% y-o-y, while the unit cost of production increased by 21% y-o-y to US$35.88/bbl. This is significantly higher than the longer term cost growth rates, highlighting continued cost pressures faced by the E&P industry as the incremental barrel continues to become more expensive to produce. The marginal cost of the 50 largest oil and gas producers globally increased to US$92/bbl in 2011, an increase of 11% y-o-y and in-line with historical average CAGR growth. Assuming another double digit increase this year, marginal costs for the 50 largest oil and gas producers could reach close to US$100/bbl. Here at The Daily Reckoning we're not getting worked up one way or another. We'd like to pay less for oil. But we'll wait to get excited until we see lower oil prices. Regards, Bill Bonner From the Archives... How to Use Preference Shares to Become an Absolutist Investor Why Politicians Can't Solve Economic Problems Pozieres Investor Choices - Do You Have a Lifeboat or a Bottle of Brandy? A Bankrupt Idea Whose Time Has Gone
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| A Short History of the Gold Cartel Posted: 03 May 2012 04:42 PM PDT |
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