saveyourassetsfirst3 |
- Investing In A Reverse Volcker Moment
- Leveraged Gold Miner ETF Surges 133% In 2 Months
- Top 5 Stocks With Insider Sells Filed On September 21 To Consider
- 3 Stocks Upgraded On September 20 To Consider
- Bart Chilton: Silver Market Investigation Statement Coming Soon
- RBI to issue gold sovereign bonds to strengthen rupee
- One dead, four injured in clash near Barrick Gold's Peru mine
- Three King World News Blogs/Audio Interviews
- Top 5 Stocks With Insider Buys Filed On September 21 To Consider
- Links for 2012-09-21 [del.icio.us]
- Gold-Silver Ratio Declining As U.S. Dollar Collapses
- Examining This New Silver Upleg
- Simon Johnson, Peter Boone: The Doomsday Cycle Turns: Who’s Next?
- Gold stock investing made easier
- Mark Twain’s Lost Gold Mine
- By the Numbers for the Week Ending September 21
- Traveling With Precious Metals
- What is the Government Smoking?
- Gold and Silver Disaggregated COT Report (DCOT) for September 21
- Neglia: Look for $2400 Gold in Next Few Years
- Precious Metals Update (Long-Term)
- Examining This New Silver Upleg
- Critical Trends for Investors
- Two Reasons Silver Has Surpassed Gold As The Trendiest Metal To Wear
| Investing In A Reverse Volcker Moment Posted: 22 Sep 2012 10:42 AM PDT By Faisal Humayun: Dr. Mohamed A. El-Erian, the PIMCO CEO, is of the opinion that the Federal Reserve and Chairman Ben Bernanke not only are willing to tolerate inflation, but are actually trying to create higher inflation. Mr. El-Erian calls the policy a "Reverse Volcker Moment." This article looks into the reasons for believing that inflation will be meaningfully higher in the medium to long-term. In line with this expectation, the best investment options are discussed. The bear market for Treasury bonds ended in the early 1980's after Mr. Volcker's strategy of controlling inflation through high interest rates yielded results. (click to enlarge) Since then, interest rates have been trending down and will remain at near-zero levels for an extended period. Even if interest rates trend higher, they will remain negative (adjusted for inflation). The reverse Volcker moment, combined with QE3, has the potential to create runaway inflation like the 1980's over the Complete Story » |
| Leveraged Gold Miner ETF Surges 133% In 2 Months Posted: 22 Sep 2012 08:57 AM PDT By Sammy Pollack: Shares of Direxion Daily Gold Miners Bull 3x Shares ETF (NUGT) are up 133% over the past two months. Click to enlarge Central Bank Stimulus The major driver of the move higher in NUGT has been the rally in gold itself. As shown by the chart below, gold prices have surged more than 12% over the past two months. The catalyst for the rally in gold has been central bank action. The most recent round of central bank stimulus began in early September, with the ECB's announcement of its newest program called "Monetary Outright Purchases." The ECB's program seems to have removed the risk of an ugly deflationary situation in Europe. However, the positive impact on gold from this program may be muted as the program will be sterilized, meaning the ECB will not engage in an operation which will increase the money supply. Following the Complete Story » |
| Top 5 Stocks With Insider Sells Filed On September 21 To Consider Posted: 22 Sep 2012 08:00 AM PDT By Markus Aarnio: I screened with Open Insider for insider sell transactions filed on September 21. I then checked with Stock Charts if the stocks had bearish Point and Figure counts. From this list, I chose the top 5 stocks with insider selling in dollar terms. Here is a look at the top 5 stocks: 1. Garmin (GRMN) and its subsidiaries have designed, manufactured, marketed and sold navigation, communication and information devices and applications since 1989 - most of which are enabled by GPS technology. Garmin's products serve automotive, mobile, wireless, outdoor recreation, marine, aviation, and OEM applications. Garmin is incorporated in Switzerland, and its principal subsidiaries are located in the United States, Taiwan and the United Kingdom. Click to enlarge Insider sells Min Kao sold 113,476 shares on September 19-21, 350,000 shares on September 14-17, 466,000 shares on September 12-13, 150,300 shares on September 7-10, 474,000 shares on September 4-6 and 300,000 Complete Story » |
| 3 Stocks Upgraded On September 20 To Consider Posted: 22 Sep 2012 07:09 AM PDT By Jorge Aura: Speculating on companies that have recently changed their ratings can be a good short-term strategy. Normally, companies will see increases in their prices after these changes. The ratings are updated daily and can therefore change daily. They can change because of a change in the analyst's estimate of the stock's fair value, a change in the analyst's assessment of a company's business risk, or a combination of any of these factors. I assessed companies that were upgraded on September 20, and I chose the top three companies with a change on ratings. These significant changes are:
These ratings are a way to qualify how the analyst views the potential for stock price appreciation. When an analyst changes his/her Complete Story » |
| Bart Chilton: Silver Market Investigation Statement Coming Soon Posted: 22 Sep 2012 05:21 AM PDT ¤ Yesterday in Gold and SilverThe gold price chopped and flopped around through all of Far East and most of early London trading yesterday...and was up about five bucks by lunchtime in London. Then, about ten minutes before Comex trading began in New York, a rally of some significance got underway. That rally got capped in less than an hour...and from there the price traded more or less sideways until a not-for-profit seller showed up at 10:40 a.m. Eastern time...and thirty minutes later, the gold price was back below where the rally had started. The subsequent rally petered out...and the price drifted lower from there, before trading sideways from 2:30 p.m. Eastern time onwards into the electronic close. Gold closed the Friday trading day at $1,773.00 spot...up $4.50 from Thursday's close. Volume was sky high at 195,000 contracts.
It was precisely the same story in silver at precisely the same times, except for the sell-off that came at 10:40 a.m. Eastern time. The not-for-profit seller had silver down almost a dollar in less than ten minutes. After that pounding was over, silver traded in the same pattern as gold into the 5:15 p.m. Eastern time electronic close. Silver's high around 9:00 a.m. Eastern time was $35.32 spot...and the low around 10:45 a.m. was $34.23 spot. The silver price, which had been up 66 cents at one point, closed on Friday at $34.52 spot...down 12 cents on the day. Volume was monstrous at 68,000 contracts.
Here's the New York Spot Silver [Bid] chart on its own so you can see the stunning waterfall decline in much greater detail.
A mini-version of that happened in platinum as well...but there was no sign of it all in palladium. These rallies/price smashes were gold and silver specific...and the 10:40 a.m. price declines were as far away from free-market price action as you can get. The dollar index moved mostly lower in Far East, London and early trading in New York. The two low price ticks...just above 79.05...coming at precisely 10:00 a.m. in London and precisely 9:00 a.m. in New York. After the second low, the index rallied about 32 basis points and finished the Friday trading session basically unchanged from Thursday's close, at 79.39. It only takes a cursory glance to see that there was no co-relation between gold and silver prices...and the dollar index...during the New York trading session.
Not surprisingly, the gold stocks gapped up strongly at the open...and headed lower from there. They went slightly negative when gold got hit...but bounced back into positive territory immediately...and stayed there for the rest of the day. The HUI finished up 0.64%.
Despite the fact that silver finished down on the day, the silver stocks that mattered, did pretty well for themselves...and Nick Laird's Silver Sentiment Index closed up 0.99%.
(Click on image to enlarge) The CME's Daily Delivery Report showed that 24 gold and 222 silver contracts were posted for delivery on Tuesday within the Comex-approved depositories. The short/issuer turned out to be none other than Deutsche Bank with all 222 contracts. These contracts will be received by seven different long/stoppers. Most will be delivered to JPMorgan, the Bank of Nova Scotia...and Jefferies. The link to yesterday's Issuers and Stoppers Report is here...and it's worth a peek. There was a really big deposit into the GLD ETF, as an authorized participant added 300,538 troy ounces yesterday. There were no reported changes in SLV. Nick Laird informed me that Sprott's Physical Silver Trust [PSLV] added another 285,000 ounces to their fund yesterday. The U.S. Mint had another sales report. They sold 6,500 ounces of gold eagles...500 one-ounce 24K gold buffaloes...and 314,000 silver eagles. Month-to-date the mint has sold 45,000 ounces of gold eagles...7,000 one-ounce 24K gold buffaloes...and 2,275,000 silver eagles. It's been a pretty decent sales month so far...and there are still five business days left. It was a busy day over at the Comex-approved depositories on Thursday. They reported receiving 627,405 troy ounces of silver...and shipped a very chunky 1,516,525 troy ounces out the door. The link to that activity is here. As expected, it was another pretty unhappy looking Commitment of Traders Report yesterday. In silver, the Commercial traders increased their net short position by another 3,202 contracts, or 16.0 million ounces and, according to Ted Butler, about 2,500 of that was Morgan. The Commercial net short position currently stands at 252.4 million ounces of silver and, according to Ted, JPMorgan is currently short 147.5 million ounces of silver all by itself. JPMorgan's holdings represents 58.4% of the Commercial net short position in silver...and dare I mention that JPM holds short 28.5% of the entire Comex futures market in silver on a net basis. The 'Big 4' traders...including JPMorgan...are short 44.7% of the entire Comex futures market in silver on a net basis...and the '5 through 8' largest traders are short an additional 8.8 percentage points. As a group, the 'Big 8' short holders hold short 53.5% of the Comex silver futures market on a net basis...and that's a minimum number. In gold, the Commercial net short position increased by 1,254,200 troy ounces...and now stands at 24.96 million ounces of gold. Ted says that it was all the 'Big 4'..as they increased their short position by about 1.65 million ounces...and the '5 through 8' and the raptors didn't do much. As of the Tuesday cut-off, the 'Big 4' traders on the short side are short 14.36 million ounces of gold...and the '5 through 8' traders are short an additional 5.36 million ounces...for a total of 19.72 million ounces held short by the 'Big 8' traders. As a percentage of the Comex gold market on a net basis, the 'Big 4' are short 31.9%...and the '5 through 8' are short an additional 11.9 percentage points. So, altogether, the 'Big 8' traders are short 43.8% of the Comex gold market on a net basis and, once again, those are minimum numbers. Reader E.W.F. pointed out in his weekly e-mail to me yesterday that..."The non-reportable gold traders (small speculators) hold their largest net long position since February 4, 2002." Here's Nick Laird's "Days of World Production to Cover Short Contracts" updated with Tuesday's COT data...
(Click on image to enlarge) And here are a couple of charts that Washington state reader S.A. sent my way yesterday...and I would suspect that he stole them for some Zero Hedge article. The first chart shows the gold price against various currencies and indexes both before and after the Swiss pegged the franc to the euro. The euro is the dark blue trace.
(Click on image to enlarge) The second chart is the euro chart on its own going back just over two years. Note the break out in the last few days.
(Click on image to enlarge) It should come as no surprise that I have a lot of stories in today's column...and I hope you can find the time over what's left of the weekend to read the ones that interest you the most. I'm still as nervous as a long-tailed cat in a room full of rocking chairs about what JPMorgan et al will do in the very short term Dalio on Gold: Buffett is Making a Big Mistake. Gold Seen Luring Wealthy as Central Bankers Expand Stimulus. Now China has the claim on Venezuela's Las Cristinas gold mine. ¤ Critical ReadsSubscribe$2.5 billion sent to victims of Madoff's fraudBernard Madoff's victims will soon receive $2.48 billion to help cover their losses, by far the largest payout since the swindler's massive fraud was uncovered nearly four years ago. Checks ranging from $1,784 to $526.9 million were mailed Wednesday to 1,230 former customers of Bernard L. Madoff Investment Securities, according to Irving Picard, the trustee liquidating the firm. The latest payout more than triples the total recovery to $3.63 billion, Picard said Thursday. Thus 1,074 customers with valid claims, or 44 percent of the total number, will be fully repaid, he added. Customers had previously recovered $1.15 billion, including sums committed by the Securities Investor Protection Corp., which helps customers of failed brokerages. The average payout in Wednesday's distribution was $2.02 million. This story showed up on The Washington Post's Internet site on Thursday sometime...and I thank Donald Sinclair for our first story of the day. The link is here.  Peregrine customers to get first payoutPeregrine Financial Group customers will receive their first payout — totaling roughly $123 million — after a federal bankruptcy judge Thursday approved a distribution plan from trustee Ira Bodenstein. The first wave of funds will go to customers with accounts totaling less $50,000, and will be distributed on or before Oct. 8. A second distribution to be made on or before Oct. 29 will include customers with account balances of more than $50,000, provided that the trustee's office is able to determine the validity to those accounts. This short story showed up on the futuresmag.com website yesterday...and is Donald Sinclair's second offering in a row. The link is here.  Senate JPMorgan Probe Said to Seek Tougher Volcker RuleA U.S. Senate panel probing the multibillion-dollar trading loss by JPMorgan Chase & Co. (JPM) plans to unveil its findings at a hearing this year to press regulators to tighten the Volcker rule, according to three people briefed on the matter. Staff members of the Permanent Subcommittee on Investigations, headed by Senator Carl Levin, have interviewed JPMorgan officials as well as examiners and supervisors at the institution's regulator, the Office of the Comptroller of the Currency, said the people, who spoke on condition of anonymity because the inquiry isn't public. One focus of the queries is whether JPMorgan's wrong-way bets on derivatives would have been permitted under regulators' initial draft of the Volcker ban on proprietary trading, the people said. The lender lost $5.8 billion on the trades in the first six months of the year. This Bloomberg story from yesterday was sent to me by reader 'David in California'...and the link is here.  Housing, Diminishing Returns and Opportunity CostThe Fed's policies of keeping interest rates at zero and buying mortgage-backed securities are intended, we're assured, to bolster the housing market by making it cheaper for buyers to borrow money. With mortgage rates under 4% and a trillion (soon to be two) dollars of dodgy mortgages transferred from the banks' tottering balance sheets to the Fed's wonderfully opaque balance sheet, then this appears plausible. But of course it's all a PR ruse, like everything else the Fed says. If the Fed wanted to "save" housing and not the banks, why not buy mortgages directly from homeowners? Instead of buying underwater mortgages from the banks, why not just buy the entire $10 trillion of residential mortgages outstanding and charge the homeowners the same rate the Fed charges banks, i.e. zero? The Fed's goal is not to relieve debt-serfdom, it's to enforce it. The entire purpose of the Fed's policies is to ensure homeowners keep paying interest to banks for the rest of the lives, and to encourage those who are not yet debt-serfs to join the serfdom with a "cheap" mortgage. This short story by Charles Hugh Smith was posted over at the financialsense.com Internet site yesterday...and is your first must read of the day. I thank reader U.D. for bringing it to our attention...and the link is here.  Doug Noland: Credit Bubble Bulletin - Z1, QE3 and Deleveraging"Our economic structure certainly enjoys unmatched capacity to absorb Credit excess without engendering traditional consumer price inflation. Yet there is indeed a huge problem that no one seems to want to recognize: Our system also has an unprecedented capacity to expand Credit that is backed by little in the way of wealth-creating capacity. Our government literally throws Trillions at the economy – Credit that inflates incomes and sustains consumption and elevates asset prices. The downside of this economic miracle is that, at the end of the day, there's little left to show for the whole exercise except for an ever-expanding mountain of suspect financial claims. Moreover, market values of these claims are sustained only by the unrelenting expansion of additional claims/Credit. This is Minsky's "Ponzi Finance" at a systemic level." Doug's 'big picture' view of the world's credit markets are always worth reading...and his missive from yesterday certainly falls into that category. The link is here.  Debt Relief: Lenders Reportedly Consider New Greek HaircutIn order to restore the country's debt sustainability, Greece's lenders are reportedly considering further relief in the form of a partial debt haircut for the crisis-wracked country, the Financial Times Deutschland reported on Friday. Citing unnamed "euro-zone sources," the paper said the focus was on bilateral loans from the currency union's first bailout program for the country, the nearly €53-billion ($69 billion) Greek Loan Facility, which ran from May 2010 to the end of 2011. "There is a discussion," a high-level official told the paper. Martin Blessing, chairman of Germany's second-largest bank, Commerzbank, has also said a second debt haircut is likely. "In the end we will see another debt haircut for Greece, in which all creditors will take part," he said on Thursday in Frankfurt. Sooner or later, all the world's debt will disappear...either by hyperinflation or by default. This story appeared on the German website spiegel.de yesterday...and I thank Roy Stephens for his first offering of the day. The link is here.  RBI to issue gold sovereign bonds to strengthen rupee Posted: 22 Sep 2012 05:21 AM PDT  The Reserve Bank of India is planning to set up a panel to suggest a roadmap to tap into India's gold holdings reports CNBC-TV18's Siddharth Zarabi. |
| One dead, four injured in clash near Barrick Gold's Peru mine Posted: 22 Sep 2012 05:21 AM PDT  One person died and four were injured when police clashed with protesters blocking a road leading to top gold miner Barrick's Peruvian mine Pierina, company and police officials said on Thursday. Protesters were demanding that the mining company provide water infrastructure to towns near the mine, which sits 13,400 feet (4,100 m) high in the Andes, when the clash occurred late on Wednesday. So far 19 people have died in clashes over natural resources since President Ollanta Humala took office in July, 2011. Peru's human rights agency says there are hundreds of lingering disputes over water, mining, and oil projects in rural Peru. |
| Three King World News Blogs/Audio Interviews Posted: 22 Sep 2012 05:21 AM PDT  The first blog is with Egon von Greyerz. It's headlined "Gold, Silver, the US, Europe & the Tungsten Scare". The second blog is with Caesar Bryan...and it's entitled "Gold to Advance Another $700 - $1,200 Within Months". The audio interview is with Dr. |
| Top 5 Stocks With Insider Buys Filed On September 21 To Consider Posted: 22 Sep 2012 03:44 AM PDT By Markus Aarnio: I screened with Open Insider for insider buy transactions filed on September 21. I then checked with Stock Charts if the stocks had bullish Point and Figure counts. From this list I chose the top 5 stocks with insider buying in dollar terms. Here is a look at the top 5 stocks: 1. First National Community Bancorp (FNCB.PK) is the bank holding company of First National Community Bank, which provides personal, small business and commercial banking services to individuals and businesses throughout Lackawanna, Luzerne, Monroe and Wayne Counties in Northeastern Pennsylvania. The institution was established as a National Banking Association in 1910 as The First National Bank of Dunmore, and has been operating under its current name since 1988. Click to enlarge Insider buys
Complete Story » |
| Links for 2012-09-21 [del.icio.us] Posted: 22 Sep 2012 12:00 AM PDT
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| Gold-Silver Ratio Declining As U.S. Dollar Collapses Posted: 21 Sep 2012 11:50 PM PDT |
| Examining This New Silver Upleg Posted: 21 Sep 2012 11:36 PM PDT |
| Simon Johnson, Peter Boone: The Doomsday Cycle Turns: Who’s Next? Posted: 21 Sep 2012 10:51 PM PDT By Simon Johnson, Peter Boone. Johnson is Professor of Entrepreneurship, Sloan School of Management, MIT and CEPR Research Fellow. Boone is Research Associate, Centre for Economic Performance, LSE. Originally published at VoxEU. Industrialised countries today face serious risks – for their financial sectors, for their public finances, and for their growth prospects. This column explains how, through our financial systems, we have created enormous, complex financial structures that can inflict tragic consequences with failure and yet are inherently difficult to regulate and control. It explains how this has happened and why there are more and worse crises to come. There is a common problem underlying the economic troubles of Europe, Japan, and the US: the symbiotic relationship between politicians who heed narrow interests and the growth of a financial sector that has become increasingly opaque (Igan and Mishra 2011). Bailouts have encouraged reckless behaviour in the financial sector, which builds up further risks – and will lead to another round of shocks, collapses, and bailouts. This is what we have called the 'doomsday cycle' (Boone and Johnson 2010). The cycle turned in 2007-8 and was most dramatically manifest in the weeks and months that followed the fall of Lehman Brothers, the collapse of Iceland's banks and the botched 'rescue' of the big three Irish financial institutions. The consequences have included sovereign debt restructuring by Greece, as well as continuing problems – and lending programmes by the IMF and the EU – for Greece, Ireland, and Portugal. Italy, Spain and other parts of the Eurozone remain under intense pressure. Yet in some circles, there is a sense that the countries of the Eurozone have put the worst of their problems behind them. Following a string of summits, it is argued, Europe is now more decisively on the path to a unified financial system backed by what will become the substance of a fiscal union. The doomsday cycle is indeed turning – and problems are undoubtedly heading towards Japan and the US: the current level of complacency among policymakers in those countries is alarming. But the next turn of the global cycle looks likely to hit Europe again and probably harder than before. The structure of the doomsday cycle In the 1980s and 1990s, deep economic crises occurred primarily in middle- and low-income countries that were too small to have direct global effects. The crises we should fear today are in relatively rich countries that are big enough to reduce growth around the world. The problem is that the modern financial infrastructure makes it possible to borrow a great deal relative to the size of an economy – and far more than is sustainable relative to growth prospects. The expectation of bailouts has become built into the system, in terms of government and central bank support. But this expectation is also faulty because, at times, the claims on the system are more than can ultimately be paid.
It enables them to buy favour and win re-election. The problems will become apparent, they calculate, on someone else's watch. So repeated bailouts have become the expectation not the exception.
The complexity and scale of modern finance make it easy to hide what is going on. The regulated financial sector has little interest in speaking truth to authority; that would just undercut their business. Banks that are 'too big to fail' benefit from giant, hidden and very dangerous government subsidies. Yet despite repeated failures, many top officials pretend that 'the market' or 'smart regulators' can take care of this problem.
The issues are abstract and lack the personal drama that grabs headlines. The policy community does not understand the issues or becomes complicit in the schemes of politicians and big banks. The true costs of bailouts are disguised and not broadly understood. Millions of jobs are lost, lives ruined, fiscal balance sheets damaged – and for what, exactly? Over the past four centuries, financial development has strongly supported economic development. The market-based creation of new institutions and products encouraged savings by a broad cross-section of society, allowing capital to flow into more productive uses. But in recent decades, parts of our financial development have gone badly off-track – becoming much more a 'rent-seeking' mechanism that draws support from politicians because it facilitates irresponsible public policy.
There are three prominent candidates: Japan, the US, and the Eurozone. Japan's long march to collapse Figure 1 shows the path of Japan's ratio of debt to GDP over the last 30 years, including IMF forecasts to 2016. Figure 1
This is a worrying picture:
The average Japanese woman today has 1.39 children, far fewer than is needed to replace the elderly. This means that the total population is set to decline by 26% by 2050. Having peaked in the mid-1990s, the country's working age population will decline by a staggering 40% between 1995 and 2050. Naturally, many of the ageing Japanese have been saving for their retirement for decades. They deposit those funds in banks, buy government bonds, hold cash savings or buy Japanese equities.
With an ageing population and slower growth, the broad outlines of responsible policy are straightforward. Japan should become a big investor in countries with younger populations, providing the capital investment needed to generate growth. Those countries can then return the savings to the Japanese as they retire. Singapore's government does just that via one of the world's largest investment funds. Instead, for the last two decades, Japan's government has been running large deficits, borrowing and then spending the savings of the young. When the elderly finally demand their savings back in the form of pensions, the government will need to reduce its budget deficit of 8% of GDP and start running a sizeable budget surplus. Unless there is a sudden burst of romance and fertility, there will be far fewer Japanese taxpayers in the future to pay this debt. The government has not been willing to raise taxes in a timely manner to match its spending. The latest agreement is for a modest (5%) increase in the retail sales tax, which would only be fully implemented in 2015. Why would it do so in the future when the burden on the remaining workers will need to be ever larger? Japan is saved from immediate pressure by the fact that about 95% of its government debt is held by domestic residents. As long as these investors are satisfied with very low – or perhaps negative – real rates, this situation can continue. But sooner or later, Japan's dreadful fiscal mathematics will catch up with the government. There is no sign yet of a broad loss of confidence, but major shifts in market sentiment are not typically signalled in advance. America's reckless private finance In the US, the symptoms are different. Figure 2 illustrates the US version of the doomsday cycle: the rise of total credit as a fraction of national income. Major players in the financial system have become too big to be allowed to fail – and consequently receive large subsidies. Figure 2
The latest crisis has led to the largest monetary and fiscal bailouts on record. The Congressional Budget Office estimates that the final fiscal impact of the crisis of 2007-8 will end up increasing debt relative to GDP by about 50 percentage points. This is the second largest debt shock in US history; measured in this way, only the Second World War cost more. (For more detail, see Johnson and Kwak 2012.) The alliance that leads to unsustainable finance here is simple: the US financial system earns large 'rents' (excess returns to labour and capital) from the implicit subsidies offered by taxpayers. These rents finance a massive system of lobbyists and campaign donations that ensures 'pro-bailout' politicians win elections regularly. Each time the US has a crisis, politicians and technocrats admit their errors and buttress regulators to ensure that 'it never happens again'. Yet still it happens, again and again. We are now on our third round of the so-called Basel international rules for banks, with the architects of each new reform admonishing the previous architects for their mistakes. There's no doubt that the US will someday soon be correcting Basel 3 and moving on to Basel 4, 5, 6 and more. The problem that the country faces is that with each crisis, the financial risks are getting larger. If continued in this manner, bailing out the system will eventually be unaffordable. When the US finally runs out of enough savers to buy the bonds needed to bail out the system, it will suffer the ultimate collapse. (For more detail, see Schularick and Taylor 2012.) Roughly half of all US federal debt is currently held by non-residents. So US fiscal policy remains viable only as long as the dollar is seen as the ultimate safe haven for investors. But what is the competition? Japan is not appealing today as a haven and it is unlikely to become more appealing in the near term. A great deal of the prospects for the US budget and growth therefore rest on what happens in the Eurozone. The Eurozone: Flawed dreams There is no sign that the Eurozone will emerge from crisis any time soon. The incentive structure of the Eurozone ensured that each country's financial sector clamoured to join it. The key feature that made it so attractive was the liquidity window at the ECB. For smaller countries, the ECB is a modern day Rumpelstiltskin. Rather than spinning straw into gold, the ECB converts unattractive government and bank-issued securities into highly liquid 'collateral' that can be readily swapped for cash from the ECB. This feature instantly made sovereign and bank bonds very attractive debt instruments. Knowing that the borrowers had essentially unlimited access to liquidity from the ECB, investors became willing lenders at low interest rates to all banks in the Eurozone. Given such attractive features, it is easy to understand why 17 countries mastered the political debate to join the Eurozone. It is also easy to understand how the system got abused and why it will be so difficult ever to make it 'safe'. If the Japanese can't control their public finances and if the US can't control its too-big-to-fail banks, the added complexity of merging 17 regulators and 17 national governments into a system where someone else can be made responsible for bailing out the intransigents seems a financial and regulatory nightmare. Such a system is sure to be crisis-prone. The Federal Reserve and the US federal government's attempt to provide bailouts when there is trouble in the US. But in Europe, the bailouts are only partial. No country has a 'lender of last resort' like the Federal Reserve or the Bank of Japan – so markets are now learning that large risk premia are needed to reflect default risk in troubled countries. Flexible exchange rates would undoubtedly make it easier to manage these crises. Devaluations instantly reduce wages and raise countries' competitiveness. If Greece had managed a large devaluation, it could probably have avoided much of the unemployment and social turmoil we see today. Instead, each troubled country in Europe now suffers when having to force down wages and prices during adjustment. This system poses great dangers to global financial stability. The Eurozone faces myriad problems, including insufficient bank capital, high levels of private and public debt, and the chronic inability of some member countries to grow. It is now common to hear policymakers blackmailing populations: unless the Eurozone survives, tragedy will result. And it is true that tragedy will result; we only need to look at the rise of complex derivatives and the dangers they pose were the Eurozone to dismantle. (For a broader discussion of Europe's problems, see Boone and Johnson 2011 and 2012.) Figure 3 illustrates the growth of euro-denominated interest rate derivatives, the notional value of which now totals more than 10 times the GDP of the Eurozone. Regulators commonly use net figures when they consider ultimate risk for banks and this makes sense under the usual circumstances of bankruptcy. But when a currency area breaks up, the practice of netting off contracts needs to change dramatically and banks will be facing far more risks than regulators and risk officers currently report. Figure 3
For example, if a German bank has a contract with a French bank and an opposite identical contract with a German pension fund, it can net those two contracts and report the ultimate risk as zero. (Of course there is counterparty risk, but under standard agreements, derivatives are cleared instantly at liquidation so the counterparty risks can be netted). But if investors start to believe that there will be new currencies in each country, then the two contracts in this example are no longer offsetting so they must not be netted. It is reasonable to think that after any demise of the euro, the contracts between two German counterparties will be converted into deutsche marks, while contracts with international partners will be disputed or maintained in a euro proxy. As a result, risk officers at banks should understand that if the Eurozone breaks up, all banks in Europe face enormous and unaccountable currency risk. Each of their 'euro' assets and liabilities needs to be examined to understand into which currency it would be converted. (For more discussion on redenomination issues, see Nordvig and Firoozye 2012.) The threat of future crises The tragedy of the Eurozone appears unavoidable, but it reflects far greater risks that will spread to Japan, the US, and other advanced economies. The continuing crisis in the Eurozone merely buys times for Japan and the US. Investors are seeking refuge in these two countries only because the dangers are most imminent in the Eurozone. Will these countries take this time to fix their underlying fiscal and financial problems? That seems unlikely. The lesson from all these troubles is clear: the relatively recent rise of the institutions of complex financial markets, around the world, has permitted the growth of large, unsustainable finance. We rely on our political systems to check these dangers, but instead the politicians naturally develop symbiotic relationships that encourage irresponsible growth. The nature of 'irresponsible growth' is different in each country and region – but it is similarly unsustainable and it is still growing. There are more crises to come and they are likely to be worse than the last one. Editor's note: this piece first appeared in CentrePiece magazine (Centre for Economic Performance, LSE). References Boone, Peter and Simon Johnson (2010), "The Doomsday Cycle", CentrePiece, 14:3. NOTE Lambert here. A question Johnson and Boone do not ask: Is there really such a thing as 'responsible growth'? (How would we tell?) Some have argued not; see The Waning of the Modern Ages, from Links, yesterday.
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| Gold stock investing made easier Posted: 21 Sep 2012 10:30 PM PDT 321 Gold |
| Posted: 21 Sep 2012 10:04 PM PDT E-Goldprospecting |
| By the Numbers for the Week Ending September 21 Posted: 21 Sep 2012 08:59 PM PDT This week's closing table is just below.
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| Traveling With Precious Metals Posted: 21 Sep 2012 05:34 PM PDT Traveling With Precious Metals Friday, 21 September 2012 09:19 Written by International Man By Robert E. Bauman Offshore Confidential Imagine you are docilely going through the long security line at John F. Kennedy International Airport, headed for your overnight flight to London Heathrow. As your carry-on bag goes through the X-ray, a burly TSA agent is called over to confer with the machine operator. He then looks at you and says: "Please come with me, sir." As you are led to a small cubicle, you nervously try to think of what you might have done wrong. While you open your bag as instructed, the stern-faced TSA agent points to a small package and demands to know what it contains. Inside are antique, collectible gold coins that you intend to sell to the same British dealer from whom you bought them years ago, but now they are worth much more. Now the agent says: "I'm sorry, sir, I will have to confiscate them, but I will give you a receipt. You have the right to file an appeal." You stand there dumbfounded, the whole purpose of your journey destroyed. Safely Transporting Your Coins or Precious Metals Serious problems can arise when gold or silver coins (or any precious metals) are transported personally out of the U.S. to other countries by auto, airplane, boat or public transportation - or the reverse, when entering the U.S. In May 2010, the Houston reported that U.S. Immigration and Customs (ICE) agents and Border Protection officers at Houston's George Bush Intercontinental Airport confiscated more than $250,000 in cash and almost $160,000 in gold and silver in 14 separate seizures from individual travelers during that one month alone. At the time, I checked with several precious-metal experts and none had ever heard of government agents doing what these ICE agents did. It was news to them - and to me. And Houston, of course, is one of many international airports and entry and exit points in the U.S. So those figures could be multiplied many times over. Because of the confiscations that already have occurred, I urge you not to travel with precious metals in any form, including coins. Any border crossing with more than $10,000 or more in U.S. dollars or foreign equivalent in any form must be reported on U.S. Customs Declaration Form 6059B. If you're moving U.S.-issued gold or silver coins, some advisors claim that you need to declare only the face value; $50 for a one-ounce gold Eagle, for instance, but that may cause trouble. Your friendly Homeland Security Administration agent isn't likely to be terribly sympathetic to this argument, and just might seize your coins. Also, when you arrive in your intended foreign country you may face another Customs gauntlet. However, if you declare the gold as "cash," you'll hopefully be permitted to proceed. If you must personally carry coins, my advice is to contact the nearest office of the U.S. Customs and Border Protection Agency, well ahead of travel, and explain what you propose to do and ask them how you can conform to the law. You should ask for and receive a written response so that you can show it if questioned by ICE agents. Also ask Customs if you need to notify them of your date and departure flight as a precaution against the very real possibility that a local Customs agent at the airport may not know the rules that cover this situation. You will need to complete and bring with you a Census Bureau Form 7525-V, Shipper's Export Declaration. This form is required for exported commodities with a value exceeding $2,500. At current silver and gold prices, many coins would exceed this reporting threshold. Failure to file this declaration can result in seizure. The consequences for stating incorrect information are severe, including confiscation. They may also result in a fine of up to $10,000 and/or imprisonment. If you have difficulty dealing with the U.S. Customs office, call the office of your local Member of the U.S. House of Representatives or one of your U.S. Senators and ask for their assistance. They should be pleased to help you. There probably will be reporting formalities and Customs duties payable when you enter a foreign country. Most require you to fill out, sign and submit Customs Declarations upon entry, asking if you are importing currency or the equivalent. You should contact your destination country's embassy or consulate here in the U.S. to determine how they deal with silver and gold imports or exports. Don't give them any definitive identification or travel information in case they put you on a travelers watch list. If you intend to import gold or silver coins from offshore, it is advisable to hire a U.S. customs broker in advance of your travel. The customs broker can appraise the value of the coins and arrange for payment of the foreign country's Customs or other goods and services taxes. Your local FedEx or UPS office can advise you about how to contact customs brokers in your area. Of course, you should also bring with you proof of your ownership of specific coins or precious metals, as well as a statement of appraised value from a recognized appraiser. |
| What is the Government Smoking? Posted: 21 Sep 2012 04:05 PM PDT
'Everyone is on the edge of his seat. It's been a crucial two weeks. Germany's constitutional court ruled that the European bailout fund is legal. Ben Bernanke, Mario Draghi and Masaaki Shirakawa fiddled with the money supply in America, Europe and Japan. The result was impressive. Not much happened. That about sums up the last few years, too. The most tumultuous economic times we've seen for decades globally and nothing much happens in Australian asset markets. It doesn't matter whether you use a 1 year, 5 year, or 10 year chart, the Aussie stock market has been in the doldrums. Here's the last four years of going nowhere: ASX200 4 Year Chart  So much for diversification and index investing. If you picked your stocks carefully and reinvested dividends, you might have done ok. Adding insult to injury, the Aussie dollar has absorbed the supposedly positive effects of money printing around the world. It remains very high, keeping a lid on the Australian stock market. While US stocks rally to 2007 highs, their Australian cousins remain in no-man's land. In the face of all this, your best investment option has been to go on holiday overseas to take advantage of the high dollar. But be careful where you go. Our clandestine roving reporter in Europe has this to report:
'I'm in Athens at the moment. So much graffiti and a lot of apartments are empty. A lot of the people in Athens work for nothing just so they have a job when the economy picks up. On the islands you wouldn't know there was a problem with the economy.' Economic reality has been rampaging through people's personal lives everywhere other than Australia. American median income is back to 1995 levels. European unemployment is at depression levels. Japanese elderly are resorting to shoplifting for food and a cheap thrill. In the face of all this ridiculous economic and financial news, it's time to discuss something more serious. Back when prohibition was enacted in many places around the world, your average man was turned into a criminal. Smokers today are ostracised from social settings by law. And taxes on many guilty pleasures make them more guilty than pleasurable. You can't fish, sail, swim, build or shoot as you please, even on your own land. It's pretty tough to come up with solutions for enjoying life in the face of a government trying to stop you. We're working on some at the moment. And Kris Sayce, editor of the Australian Small Cap Investigator, is preparing for the launch of an entire new eletter dedicated to something similar. All we really know so far is that he got fined for jaywalking outside our office. Now he's all fired up and has decided to make the new eletter free. While we wait for the newsletter launch, let's go through some ways the government is busy ruining your lifestyle: Compliance Not only does the government come up with stupid policies and schemes, it forces you to comply with them. And that is a direct cost to your quality of life. Here are some examples from home and elsewhere:
So what happens when we don't comply with stupid government rules? Well, if you abolish road rules it makes traffic safer and more efficient. At least two trials have proven it so far. X is Dangerous The idea that dangerous things must be banned, or restricted, is a government favourite. The cigarette industry has been the recent victim of this idea. But cars do damage too. So do kitchen knives. In fact, just about everything can give you cancer these days. If you believe the studies, that is. When the government bans things because they are dangerous, it hands them over to the black market. Prohibition tore communities apart, as does the drug war today. But the black market is very efficient too. Many people claim drugs are more available than alcohol in American schools. Occasionally, the government gets some positive effects out of their stupid policies. Like the attempt to tackle obesity at the Australian Tax Office. The pen pushers will get some exercise out of their latest cigarette clampdown:
'Tax commissioner Michael D'Ascenzo says he is "looking forward to donning a pair of galoshes to help the team out" as they help squelch and squash hundreds of millions of unsold branded cigarettes when plain packaging begins. "Between October and December 2012, there will be up to 100 cubic metres a day being destroyed, which means squelched and squashed and graded into landfill," Mr D'Ascenzo said in his internal weekly column. "For smokers, it will be approximately 540 million cigarettes destroyed as each stick is individually branded."' Notice the language. We know how many cigarettes will be destroyed 'for smokers'. But we're not sure how many cigarettes will be destroyed 'for non smokers'. Protect the X Government policies to protect things backfire in ways that require another policy to deal with. The cane toad is a good example. The government's favourite fuel policy to protect the environment is even more instructive. All around the world, subsidies, tax cuts and research grants were dished out to support the use of ethanol as fuel. Australia's policies included a bounty, excise, exemption and subsidy. Here's the impressive result:
'A report by Dr. Indur Goklany, writing in the Journal of American Physicians and Surgeons (Volume 16 Number 1, Spring 2011), estimates that at least 192,000 excess deaths and 6.7 million additional Disability-Adjusted Life Years lost to disease have been caused by using food crops to make ethanol for fuel. These deaths have been mainly in third world countries where the rise in price of food staples or the loss of availability of food puts people over the edge.' Oops. If you've been doing your bit for the environment at the petrol pump, you are now a murderer on the side as well. Ok, we'll downgrade it to manslaughter. The EU is in the process of limiting the use of ethanol in fuel. A few thousand deaths are reasonable, but not 192,000. Probably because the ethanol industry is worth 17 billion euro a year. Just imagine the lobbying. But it's too late. People in Africa need food! Aid and welfare The welfare mob is the same globally. It doesn't matter whether they're in a rich country or a poor country. In Africa, development aid in the form of cash was given to malnourished people. They bought TVs with the cash. So the development economists came up with the ingenious idea of giving them food directly. They sold the food and bought TVs with the cash. So the development economists came up with another idea, by which time the local farmers had gone bankrupt because of all the food provided to the local area by aid programs. In Germany, welfare recipients are getting around laws restricting what they can buy with their welfare cheques in a clever way. They buy mineral water, send it down the drain outside the shop, go back into the shop, collect the cash refund given for bottles, and spend that cash on, you guessed it, cigarettes. In America, people use government provided food stamps for all sorts of questionable consumption items. But our favourite welfare trend from the new world is keeping dead people in your home to collect their social security cheque. In one case, a full on mummification featured. Science Proves Possibly the worst government intervention is one that seems scientifically justified. That's because science, politics and government policy never combine to bring a good result. Not that the government even cares about the expected result in the first place:
And we're in a pessimistic mood about science again after listening to this podcast. The transcript hasn't been posted yet, but here is the gist: Most studies are utter rubbish. So you ethanol users might not have killed anyone after all. At this point, we don't know what's worse. Science tainted by politics or politics tainted by so called science. Your average Joe is well informed though. Commenting on a study which revealed that a barbeque pollutes more than a truck, one incredibly intelligent individual said this:
' "Either way, we're living in a world (where) we're still going through pollution. But the difference is we are getting some type of benefit from (the burger)," said Maria Segura.' Yes, trucks do not provide a benefit. In a true democracy, such people are unable to find the polling booth to vote. But in Australia we force them to vote anyway. Until then, Nickolai Hubble. About the author: having escaped from academia, Nick decided to drop his tights (the required attire of a trapeze artist) and joined Port Phillip Publishing. Instead of telling everyone about the Daily Reckoning, he now spends his time writing for the weekend edition. From the Archives... Be Very, Very Scared How QE Favours the Rich To the Barricades! The Power of Pork Waiting on Beijing
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| Gold and Silver Disaggregated COT Report (DCOT) for September 21 Posted: 21 Sep 2012 01:54 PM PDT Table Totals Mask Stunning Changes in Commercial Trader Positioning HOUSTON -- This week's Commodity Futures Trading Commission (CFTC) disaggregated commitments of traders (DCOT) report was released at 15:30 ET Friday. Our recap of the changes in weekly positioning by the disaggregated trader classes, as compiled by the CFTC, is just below. The recap masks massive changes in positioning by the traders the CFTC classes as "commercial." Continued... In the DCOT table above a net short position shows as a negative figure in red. A net long position shows in black. In the Change column, a negative number indicates either an increase to an existing net short position or a reduction of a net long position. A black figure in the Change column indicates an increase to an existing long position or a reduction of an existing net short position. The way to think of it is that black figures in the Change column are traders getting "longer" and red figures are traders getting less long or shorter. All of the trader's positions are calculated net of spreading contracts as of the Tuesday disaggregated COT report. Vultures, (Got Gold Report Subscribers) please note that updates to our linked technical charts, including our comments about the COT reports and the week's technical changes, should be completed by the usual time on Sunday (by 18:00 ET). If one was looking just at the legacy COT report, and only at the net positioning of commercial traders, they would have seen an increase of 12,542 contracts (5.3%) to the combined commercial net short positioning (LCNS), which is perhaps less of an increase in commercial hedging than we might expect for a $39.85 or 2.3% advance in the price of gold - with gold near potential technical resistance. They would have also missed the almost 30,000-lot evaporation of the Producer/Merchants from both the long and short sides of the battlefield. The graph below shows the legacy COT positioning of the combined commercial traders, which includes both the Producer Merchants and the Swap Delaers as a group. The combined commercial traders held a net short position of 249,633 lots on the COMEX as of September 18, the largest combined commercial net short position for gold futures since August 2, 2011 (287,634 lots net short then with $1,659 gold). Gold would peak five weeks and $266 later in September near $1,923, but not before the combined commercial traders had reduced their collective net short hedges by more than 59,000 contracts in a rare, but dramatic short covering retreat (to 227,714 contracts net short on September 6, 2011). While we are at it, there was similar activity in the COMEX futures for silver. Just below is the graph for the Producer/Merchants for silver futures short positions, showing a huge 12,618-lot (19.6%) reduction in PM short positions, to show 51,855 lots short. Meanwhile, traders the CFTC classes as Swap Dealers, the mercenary banks and firms that sell swaps in other markets and then hedge those derivatives using futures, reported a similarly large 11,681-lot (117%) increase in their pure short positions to show 21,650 contracts short - the highest number of Swap Dealer short bets since March 19, 2011 (21,914 then with $43.94 silver). Below is a chart of just the Swap Dealer short positioning for reference. Interestingly, just since June 26, the Swap Dealers have gone from being record net long to their largest net short positioning since February 22, 2011. On June 26 the SDs were net long 19,681 contracts. By Tuesday, September 18, they reported 7,875 lots net short. Below is a graph of the Swap Dealer net positioning in COMEX silver futures. In the words of Sammy Wright, "there's something funny going on." More later this weekend for subscribers. |
| Neglia: Look for $2400 Gold in Next Few Years Posted: 21 Sep 2012 12:42 PM PDT Anthony Neglia, president at Tower Trading LLC, Sarah Quinlan, chief investment office at Qam and John Netto, president at M3 Capital, talk with Bloomberg's Alix Steel and Adam Johnson about what is driving the gold trade and just how high futures can be expected to climb. They speak on Bloomberg Television's "Lunch Money."
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| Precious Metals Update (Long-Term) Posted: 21 Sep 2012 12:14 PM PDT Courtesy of Short Side of Long In the first part of a two part Precious Metals Update, we looked at the way Gold, Silver, Platinum and other Precious Metal assets broke out above various technical resistance levels. We also covered sentiment and fund flows, while we discussed a huge short squeeze going on in GLD and SLV ETFs earlier in the month. All in all, the conclusion stated that:
Regardless of whether we have seen a major low or not, in the second part of the update I would like to focus on the long term Precious Metals picture, while eliminating short term market noise. So to do that, we should re-focus on why we are investing into Precious Metals and how to value the asset. Let us begin: Everyone has their own reasons for investing in a certain asset class, but instead of covering them all and getting side tracked, I will just explain the reason why I invest in the Precious Metals sector. I have my own wealth and also the wealth of my clients to manage. These people have worked hard for the last few years to acquire, save and create their wealth. Their main priority, as well as my own, is not to lose it. In these uncertain times with high volatility and limited growth, the basic linear way of thinking is that the safest investment would be cash. After all, that is usually considered the most risk-free asset class. While conventional wisdom like that might hold some truth to it, one has to pay close attention to current events (and also those throughout history), because one of the easiest ways to lose wealth during turbulent economic periods, is through monetary devaluation or money printing. You see, in plain English, global central banks throughout history have always tried to stimulate economies via currency devaluation during periods of low economic growth. They have always failed, because printing money does not create prosperity, but nevertheless they always seem to have "another crack at it" and this time is no different.  The chart above shows major central bank balance sheet expansions from the beginning of the Global Financial Crisis in 2007. Do keep in mind that the chart is slightly outdated, because in recent times the Fed, ECB and BoJ have all announced new "money printing" programs. Federal Reserve's QE∞ (infinity) has already started as of last Friday and plans to print money until the unemployment rate moves below 7% and closer to 6% in the US. In other words, the printing of money will continue as far as the eye can see. It is during these periods that Precious Metals like Gold and Silver retain their purchasing power and act as an alternative currency to the fiat paper system. In Human Action, on page 401, Ludwig von Mises states that:
As a matter of fact, I think the current currency devaluation programs are just the tip of the iceberg. Now, I am not saying that the current programs will get automatically expanded in the near term. After all, I didn't even think the Federal Reserve would start QE until there was a catalyst for it (I elected a stock market pullback first), but it seems that Bernanke & Co are just too eager. The chart above shows that the Federal Reserve voting members are extremely dovish in 2012 and even more so in 2013. That essentially guarantees Precious Metal investors that the Fed will not tighten dramatically. Furthermore, as the economy continues to weaken, it could also mean that the Fed will stimulate even more. Here on the Short Side of Long blog, we regularly track global leading indicators. Let us summarise recent posts regarding the state of global economy:
We are on the edge of another global recession. Basically, the worse that the data gets, the more money will be printed; and the lower stock markets go, the more money will be printed; and when geopolitical tensions escalate around the world, more money will be printed; and finally as governments run larger and larger deficits… you guessed it… even more money will be printed!  In other words, fundamentals continue to improve from Precious Metals and continue to deteriorate for the stock market (money printing doesn't help earnings forever). Furthermore, the last point mentioned above was Government deficits, which brings me to another major fundamental positive for Precious Metals. In his recent article dating back to July, Chris Puplava concluded that the top 10 global economies have over 15 trillion dollars (with a capital T) maturing into 2015 (chart above). He concluded that:
 Interestingly, not only Mr Puplava, but quite a few other wise investors talk about Gold's "mania phase" as the main reason they continue to stay long this asset class. Basically, to simplify the theory and eliminate a lot of when, why and what, we are currently in an inflationary monetary phase, as opposed to a stabilising monetary phase (chart above). What usually occurs during monetary inflation (fancy world for currency devaluation) is that Gold tends to move rapidly higher in value until it reaches a price where it essentially backs the monetary system. This historical phenomena which occurred in 1933 and in 1979, is created through investor fear, a primary component of human emotion which tends to spike Gold prices towards dizzying heights. Based on the monetary expansion by central banks, if Gold was to back the system as of today, the price would essentially rise towards $8,000 per ounce.  Moving away from Gold's valuation linked with the monetary base, we turn to valuing Gold relative to other financial assets such as stocks. Personally, this is a much more preferred measure, because market participants buy and sell these assets everyday (free market). In the chart above, we can see how Gold and the Dow Jones Industrial performed in nominal price during the 1970s. While equities stayed flat for more than a decade, Gold entered a "mania phase" in the latter parts of the 1970s and then went parabolic into 1979, and finally touching the nominal value of the Dow Jones in the early parts of 1980.  True die hard Gold bugs will argue that we are in for a 1:1 Dow Gold ratio again. Rather than try to guess what will happen in the future, I prefer to leave that to weather forecasters, card readers, crystal ball fortune tellers and astrologists. I am not the one to agree or disagree, but if this event was to occur in a similar time span as during the 1970s, then Gold has a lot of catching up to do, because today the Dow Jones Industrial trades at 13,597 points. Even if the Dow Jones was to experience a 30% bear market, which is quite possible during a secular sideways trading range just like the 1970s, Gold would still have to reach at least $9,500 per ounce to arrive at the 1:1 ratio.  Another way to value Gold relative to the stock market is comparing the ratio of S&P 500 and Gold. Because most investors only look at one side of the ratio, S&P 500 vs Gold (black line), they easily arrive at a conclusion that stocks are extremely cheap relative to Gold as of today, and therefore Gold must be extremely expensive. This could not be further from the truth. Since every story has two sides, one cannot just focus on one and disregard the other. By simply switching the ratio over to Gold vs S&P 500 (gold line), we can see that Gold is extremely undervalued relative to the S&P 500. Overvaluation tends to occur when Gold trades at 3 to 4 times the value of the S&P 500, however in 1979/80 mania it went as far as 6 times the value. Today, the S&P 500 trades at 1,460 so even if stocks were to experience a 30% bear market (as already stated above), Gold could move towards $4,000 per ounce. Higher targets could occur if the ratio was to move to 6 times or more.  However, stocks are not the only overvalued asset class, relative to the last Gold peak in 1980. Bonds, which have experienced a super powerful secular bull market since 1981, are also extremely overvalued relative to Gold (even more so than stocks). The chart above shows just how cheap Gold is relative to its 1980 nominal ratio against Stocks and Bonds. If you are a believer that Gold will spike back to its former glory days of the late 1970s, then in percentage terms Gold is still more than 80% below its ratio all time high. That is still extremely cheap, despite Gold rising 500% in the last 11 years! Having said that, Gold might only reach this stage for a short amount of time, before financial assets once again start to outperform. In their July Gold report, which is a must read for any investor, Erste Group writes:
 The chart above explains that quote from the report rather well. If the price action was to track the Pareto distribution, or also known as the 80/20 rule, then we could expect some serious Gold movements in the coming months, quarters and years as we witness a fast parabolic movement towards the sky (and much higher). In the last several years of this secular bull market, Gold could accelerate rather quickly and approximately hit a target of $8,000 per ounce or even higher, according to the chart above.  While we can talk about the Precious Metals bull market for days on end, especially if true die hard Gold bugs are present in the discussion, the main point is that Precious Metals are still a good investment today. Furthermore, in my opinion we haven't even seen the major phase of the current secular bull market just yet. If you consider the chart above, you can see that all of the largest daily percentage changes on both the upside and downside occurred during the last great bull market of 1970s. Days when we see Gold rise 5% or even 10% in a single day are still in front of us. Consider that these prices movements could be $100 to $300 per day in the future. These will be the days when retail investors and dumb money, as well as all the current bull market disbelievers and remainder of the general public, start piling into Precious Metals. Finally, the question that I get asked all the time regarding my Silver investment – how high could it go? The short answer is I do not know, but the longer answer would state that if history is any guide, Gold's smaller cousin Silver, could move towards its historical ratio of at least 16 Silver ounces for 1 Gold ounce. You can do the maths yourself…
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| Examining This New Silver Upleg Posted: 21 Sep 2012 12:13 PM PDT Because this surge looks nearly vertical on short-term charts, some traders are getting nervous about this rally's staying power. While silver may indeed be temporarily overbought, its recent strength actually looks like the vanguard of a major new upleg. |
| Posted: 21 Sep 2012 12:01 PM PDT "Thirteen years ago, it took a bit more than 42 ounces of gold to buy the DOW. In the year 2007, when the DOW made a brand new all time high in nominal terms, it took half the amount of gold to buy that same Dow, namely a bit more than 20 ounces. Today, as the DOW is once again flirting with moving back towards the all time high in 2007, it takes an astonishing LESS THAN 8 OUNCES of GOLD to buy that same DOW! "Are you getting the point of all this? All that the elitist monetary masters are creating in their alchemy laboratories is a RAMPANT case of paper asset inflation of the stock market. Stocks are losing value against gold and have been so doing since 1999. The more QE the Fed wants to spit out, the further this ratio is going to collapse until at some point it will probably end up with 3-4 ounces of gold being able to purchase the DOW. "Another way of stating this is: Do not be hoodwinked by the claptrap coming from the mouth of the monetary elites at the FOMC that inflation is tame and that expectations are subdued. We are witnessing one of the single greatest instances of inflation in the stock market in our domestic history!" "Stock Market Rally Nothing but Paper Asset Inflation", Dan Norcini, traderdannorcini.blogspot.com, 9/13/2012 The trend to which the most Astute Trader Dan refers – ongoing and accelerating Paper Asset Price Inflation – is a Reality Now, and for the future. (Indeed, Real Price Inflation is already Threshold Hyperinflationary at, for example, 9.33% in the U.S. per shadowstats.com – see Note 1). Dan rightly refers to the claim that "Inflation is tame" as the "claptrap coming from Monetary Elites." That "claptrap" is just another in a series of lies, frankly, coming from those Elites – And that too is a reflection of another trend we earlier named "Disinformation to Infinity." Going forward, Savvy Investors should expect more such Disinformation more often, and seek Independent sources of Information. Focusing on the Real Trends and disregarding Disinformation is essential for Investors' Profit and Protection. Yet Another Key Ongoing Trend is the increasingly flawed actions of the Central Banks – flawed that is, if rescuing The Middle Class or The Economies of Sovereign Nations is one's Primary Goal. For example, even though the Central Banks' Quantitative Easing 1 and QE2 have not achieved the CB's stated goals for them – improving economies and decreasing unemployment – (of course their Real Goal is to facilitate the Mega-Banks continuing Profitability) both The Fed and ECB have recently decided to give out more QE ad infinitum via QE3. This Trend reflects continuing avoidance of addressing the Real Structural Economic Problems (e.g., Debt Saturation) and instead reflects a decision to Kick the Can Down the Road to the Cliff. Indeed, increasingly Risky and Irresponsible actions are Odiferously Emanating from the Central Banks such as … "On 6 September 2012 the Governing Council of the European Central Bank (ECB) decided on additional measures to preserve collateral availability for counterparties in order to maintain their access to the Eurosystem's liquidity-providing operations. "Change in eligibility for central government assets: The Governing Council of the ECB has decided to suspend the application of the minimum credit rating threshold in the collateral eligibility requirements for the purposes of the Eurosystem's credit operations ... "Any way you choose to slice or dice this, it means the ECB is taking on more credit risk as it significantly expands its own balance sheet. … "And this exposure flows indirectly into the Bundesbank balance sheet. This should help you understand why Germany is so keen on controlling budgets of the other countries it is effectively exposing itself to." (emphasis added) "Next on the ECB's Collateral List: Goats, Wine, and Cheese Wheels?", Jack Crooks, moneyandmarkets.com, 09/08/12 Another Key Trend is that the CBs have helped, and will continue to help, so long as they are allowed to be laws unto themselves, mainly the Mega-Banks [of course, the CB's Public Statements that they act 'to help the economy, the unemployed' etc, are just Political Cover.] Indeed, the Record Reveals that their mainly and arguably their only beneficiaries are the Mega-Banks, some of which in the private for-Profit Fed's case are its shareholders – Quite Incestuous. "The first ever GAO (Government Accountability Office) audit of the US Federal Reserve was recently carried out due to the Ron Paul/Alan Grayson Amendment to the Dodd-Frank bill passed in 2010. Jim DeMint, a Republican Senator, and Bernie Sanders, an independent Senator, while leading the charge for an audit in the Senate, watered down the original language of house bill (HR1207) so that a complete audit would not be carried out. Ben Bernanke, Alan Greenspan, and others, opposed the audit. "What the audit revealed was incredible: between December 2007 and June 2010, the Federal Reserve had secretly bailed out many of the world's banks, corporations, and governments by giving them US$16,000,000,000,000.00 – that's 16 TRILLION dollars." "It gets worse, much worse, in fact it's downright incestuous…. "* Banks like JP Morgan benefited from the foreign bailouts - they are some of the largest creditors of the bailed out countries. Instead of having to write off their foreign losses the US Federal Reserve bailouts enabled them to be paid in full. … "In Dimon's (JPMorgan Chase CEO Jamie Dimon)case, JPMorgan received some $391 billion of the $4 trillion in emergency Fed funds at the same time his bank was used by the Fed as a clearinghouse for emergency lending programs. In March of 2008, the Fed provided JPMorgan with $29 billion in financing to acquire Bear Stearns. Dimon also got the Fed to provide JPMorgan Chase with an 18-month exemption from risk-based leverage and capital requirements. And he convinced the Fed to take risky mortgage-related assets off of Bear Stearns balance sheet before JP Morgan Chase acquired the troubled investment bank. "During the Financial crisis, Citibank received over $2.4 Trillion in total financial assistance from The Fed… "Another high-profile conflict involved Stephen Friedman, the former chairman of the New York Fed's board of directors. Late in 2008, the New York Fed approved an application from Goldman Sachs to become a bank holding company giving it access to cheap loans from the Federal Reserve. During that period, Friedman sat on the Goldman Sachs board. He also owned Goldman stock, something that was prohibited by Federal Reserve conflict of interest regulations. Although it was not publicly disclosed at the time, Friedman received a waiver from the Fed's conflict of interest rules in late 2008. Unbeknownst to the Fed, Friedman continued to purchase shares in Goldman from November 2008 through January of 2009, according to the GAO. … "The Fed outsourced virtually all of the operations of their emergency lending programs to private contractors like JP Morgan Chase, Morgan Stanley, and Wells Fargo. …Altogether some two-thirds of the contracts that the Fed awarded to manage its emergency lending programs were no-bid contracts. Morgan Stanley was given the largest no-bid contract worth $108.4 million to help manage the Fed bailout of AIG." Mises.ca "Conclusion "The financial sector parasites, the banksters and their political puppets, that have historically fed on our society have never been so brazen. … "This is all happening because our elected politicians do not work for the people, our elected leaders have stuck their snouts deep in the trough of power and self indulgence, representative democracy has been co-opted by big-moneyed interests and political parties represent their establishment not the people's interests. "The lending suites that were set up for months and years, beyond the initial crisis point, were focused on how to keep banks profitable, not just how to keep them alive. The banks were able to access emergency lending facilities, or change themselves into bank holding companies overnight, to borrow at next to nothing, and if they chose, lend back to the government at a tidy profit. You didn't have to think at all to make money. And you didn't have to worry about that toxic balance sheet, because the government was going to help you grow your way out of it. They will also facilitate mergers to help decimate your competition. The money that the banks borrowed for nothing could have just as easily gone to underwater homeowners. There's nothing special about the banks except that they know the Fed policymakers personally." David Dayen, firedoglake.com "Fed loans at near-zero interest rates, incestuous bailouts, secret waivers, no-bid contracts, and a failed representative democracy should be on all our radar screens. Are they on yours? Rick Mills, Ahead of the Herd, Wealthwire.com, 09/17/2012 The Fed's Printing of $16 Trillion, and more, decreases the Purchasing Power of $US Holders (as does the ECB's Euro-printing the Purchasing Power of Euro Holders) thus constituting a de facto tax on Businesses and Citizens, a Tax in effect "paid" to the Mega-Banks. The one-time, limited(!) GAO Audit thus provides an insight into the Extraordinary Power of the Major Central Banks and other Shareholder/Client Banks. But perhaps even more relevant to Citizen-Investors is the Audit's clear Revelation: The Fed and ECB act almost entirely to support the Major Banks and Maintain their profitability, contrary to the Mega-Banks Public Statements. And if those Actions occasionally also benefit Sovereign Nations, Citizens or Businesses, that appears to be accidental. So what are the prospects for reform? Neil Barofsky, Special Inspector-General of the TARP Program gives his sophisticated view. HR: Were the original goals ever accomplished? Neil Barofsky: No. If you look at the original goals, you can only conclude that the TARP was a failure. … Neil Barofsky: The justification for putting money into banks was that it was going to increase lending. Having used that justification, there was an obligation, in my view, to take policy steps to achieve that goal, but Treasury officials didn't even try to do it. The way it was implemented, there were no conditions or incentives to increase lending. HR: What policy steps could the U.S. Department of the Treasury have taken to help the economy? Neil Barofsky: There are all sorts of things that Treasury could have done. For example, they could have reduced the dividend rate—the amount of money that the banks had to pay in exchange for being bailed out—for lending over a baseline, which would have decreased the bank's obligations. Or, they could have insisted on greater transparency so that banks had to disclose what they were doing with the funds. Treasury chose not to do any of these things. … Neil Barofsky: The real issue is the potential for another financial crisis because we haven't fixed the core problems of our financial system. We still have banks that are "too big to fail." Standard & Poor's estimated last year that the up-front cost of another crisis, including bailing out the biggest banks yet again, would be roughly 1/3 of the U.S. gross domestic product (GDP) or about $5 trillion. The resulting problems will be even bigger. HR: What were the problems resulting from the 2008 financial crisis? Neil Barofsky: When you look at the fiscal impact of the 2008 crisis, you have to look at it not only in terms of lost tax revenues and increased government debt, but also in terms of the loss of household wealth. People who became unemployed suffered tremendous losses and the government's social benefit costs expanded accordingly. One of the reasons we had the debt ceiling debate last year, when the U.S. credit rating was downgraded, and why we are facing a fiscal cliff ahead is the legacy of the 2008 crisis. We have a lot less dry powder to deal with a new crisis and we almost certainly will have one. (emphasis added) HR: Why do you expect another financial crisis? Neil Barofsky: It just comes down to incentives. A normally functioning free market disciplines businesses. The presumption of bailout for "too big to fail" institutions changes the incentives of a normally functioning free market. In a free market, if an institution loads up on risky assets with too little capital standing behind them, it will be punished by the market. Institutions will refuse to lend them money without extracting a significant penalty. Counterparties will be wary of doing business with companies that have too much risk and too little capital. Allowing "too big to fail" institutions to exist removes that discipline. The presumption is that the government will stand in and make the obligations whole even if the bank blows up. That basic perversion of the free market incentivizes additional risk. HR: Are "too big to fail" banks taking more risks today than they did before? Neil Barofsky: Bailouts give bank executives an incentive to max out short term profits and get huge bonuses, because if the bank blows up, taxpayers will pick up the tab. The presumption of bailout increases systemic risk by taking away the incentives of creditors and counterparties to do their jobs by imposing market discipline and by incentivizing banks to act in ways that make a bailout more likely to occur. HR: Is it just a matter of the size of banking institutions? Neil Barofsky: The big banks are 20-25% bigger now than they were before the crisis. The "too big to fail" banks are also too big to manage effectively. They've become Frankenstein monsters. Even the most gifted executives can't manage all of the risks, which increases the likelihood of a future bailout. HR: Since bank executives are accountable to their shareholders, won't they regulate themselves? Neil Barofsky: The big banks are not just "too big to fail," they're 'too big to jail.' We've seen zero criminal cases arising out of the financial crisis. The reality is that these large institutions can't be threatened with indictment because if they were taken down by criminal charges, they would bring the entire financial system down with them. There is a similar danger with respect to their top executives, so they won't be indited in a federal criminal case almost no matter what they do. The presumption of bailout thus removes for the executives the disincentive in pushing the ethical envelope. If people know they won't be held accountable, that too will encourage more risk taking in the drive towards profits. HR: So, it's just a matter of time before there's another crisis? Neil Barofsky: Yes… HR: How are OTC derivatives related to the risk of a new financial crisis? Neil Barofsky: Credit default swaps (CDS) were specifically what brought down AIG, and synthetic CDOs, which are entirely dependent on derivatives contracts, contributed significantly to the financial crisis. When you look at the mind numbing notional values of OTC derivatives, which are in the hundreds of trillions, the taxpayer is basically standing behind the institutions participating in these very opaque and, potentially, very dangerous markets. OTC derivatives could be where the risks come from in the next financial crisis. HR: Can anything be done to prevent another financial crisis? Neil Barofsky: We have to get beyond having institutions, any one of which can bring down the financial system. For example, Wells Fargo alone does 1/3rd of all mortgage originations. Nothing can ever happen to Wells Fargo because it could bring down the entire economy. We need to break up the "too big to fail" banks. We have to make them small enough to fail so that the free market can take over again. … HR: Do you think the U.S. presidential election will change anything? Neil Barofsky: No. There's very little daylight between Romney and Obama on the crucial issue of "too big to fail" banks. Romney recently said, basically, that he thinks big banks are great and the Obama Administration fought against efforts to break up "too big to fail" banks in the Dodd-Frank bill. Geithner, serving the Obama White House, lobbied against the Brown-Kaufman Act, which would have broken up the "too big to fail" banks. HR: What will it take for U.S. lawmakers to finally take on the largest banks? Neil Barofsky: Some candidates have made reforms like reinstating Glass-Steagall part of their campaigns but the size and power of the largest banks in terms of lobbying campaign contributions is incredible. It may well take another financial crisis before we deal with this. "Neil Barofsky: Another Financial Crisis All But Inevitable" Ron Hera, Hera Research, LLC, 09/18/2012, via lemetropolecafe.com So the Bankers are not likely to cede or lose Power any time soon. And The Icelandic Solution (see Deepcaster's earlier article, "Gaining from Gargantua" in the 'Articles by Deepcaster Cache' at deepcaster.com ) appears further and further out of reach for some Sovereign Nations, but is still a Realistic Alternative for others. (See Notes 2 & 3 below re Deepcaster's Recommendations aimed at Profit and Protection despite the foregoing Challenges.) But what will likely happen in the Markets and Economy as this QE to Infinity and Disinformation to Infinity proceeds? Daryl R. Schoon has the correct Forecast. We know "IT" is correct because "IT" – Stagflation – has begun already. One needs merely to look at the Real Numbers (Note 1) rather than the Bogus Official Ones. "Stagflation is where economic growth slows, unemployment is high and prices rise. "Stagflation's appearance in the 1970s was like an outbreak of three-headed children. It wasn't supposed to happen. Prevailing wisdom—an oxymoron among economists—held that high employment and rising prices were economic handmaidens; and that, conversely, slowing economies and inflation were mutually exclusive … "In the 1970s, for the first time in capitalism's history stagflation appeared, i.e. prices rose and economic growth stagnated; and, while economists would search for reasons to explain the apparently inexplicable, it was only because they avoided the obvious that they did not find the answer. "In August 1971, President Nixon upon the advice of Milton Friedman—the same Milton Friedman who erroneously taught Ben Bernanke economic contractions can be reversed by monetary expansion—ended the convertibility of the US dollar to gold. "The consequences of cutting ties between paper money and gold were not what Friedman expected. Friedman believed—belief is the operant word here—that 'FREE-market forces' would bring floating currencies into orderly market-driven valuations. Friedman was wrong—again. "The historic severing of ties between money and gold instead would result in extreme currency swings along with slowing growth, rising unemployment and rising prices, i.e. stagflation…. "…Previously, the US dollar was linked to gold, and other currencies were linked to the dollar. Everything was stable. It is no longer so. Once the pin connecting gold and paper money was removed, everything changed. The axle of international commerce began to vibrate and lately it's been getting much worse. The fear is that the wheels are now about to come off. "Stagflation was the result. No longer constrained by the need to exchange costly gold for increasingly worthless pieces of paper money, governments began to debase their currencies until monetary restraint was as rare as celibacy in an era of drug induced free-love. "Cutting the link between the US dollar and gold not only allowed governments to debase their currencies (the US dollar had previously connected all currencies to gold), it would eventually bring about the destruction of capitalism itself via excessive levels of debt…. "Capitalism's demise could well result from today's hyper-variant form of stagflation—stagflation in extremis. Instead of a slowing economy and rising prices as in the 1970s, today we are facing a contracting economy along with unceasing money printing by central banks. "As a result, hyperinflation… "Today, we are about to experience stagflation but this time it will be stagflation in extremis; and this time gold's rise will be explosive. … "Stagflation compared to the 1970s, i.e. in extremis, is now in motion…. "Gold's final resting place will be atop the banker's crematorium where the ashes of their paper money will be the only evidence left of the immense power they once held over humanity…. "Buy gold, buy silver, have faith." "Stagflation in Extremis & the Explosive Rise of Gold," Daryl R. Schoon, via lemetropolecafe.com, 09/18/2012 Yes indeed, Buy Gold. Buy Silver. But in addition to Faith, One Needs Knowledge and Wisdom – Stay Independently Informed. Best regards, Deepcaster September 21, 2012 Note 1: *Shadowstats.com calculates Key Statistics the way they were calculated in the 1980s and 1990s before Official Data Manipulation began in earnest. Consider Bogus Official Numbers vs. Real Numbers (per Shadowstats.com) Annual U.S. Consumer Price Inflation reported September 14, 2012 1.41% / 9.33% U.S. Unemployment reported September 7, 2012 8.3% / 22.8% U.S. GDP Annual Growth/Decline reported August 29, 2012 2.21% / -2.15% U.S. M3 reported September 15, 2012 (Month of August, Y.O.Y.) No Official Report / 3.15% Note 2: There are Magnificent Opportunities in the Ongoing Crises of Debt Saturation, Rising Unemployment, negative Real GDP growth, over 9.0% Real U.S. Inflation (per Shadowstats.com) and prospective Sovereign and other Defaults. One Sector full of Opportunities is the High-Yield Sector. Deepcaster's High Yield Portfolio is aimed at generating Total Return (Gain + Yield) well in excess of Real Consumer Price Inflation (9% per year in the U.S. per Shadowstats.com). To consider our High-Yield Stocks Portfolio with Recent Yields of 10.6%, 18.5%, 26%, 15.6%, 8%, 6.7%, 8.6%, 10%, 14.9%, 10.4%, 15.4%, and 10.7% when added to the portfolio; go to www.deepcaster.com and click on 'High Yield Portfolio'. Note 3: Deepcaster addresses the questions of Profit and Protection in light of Fiat Currency Purchasing Power Destruction and provides Guidelines in his article – "Essentials for Wealth Acquisition Acceleration" found in 'Articles by Deepcaster' Cache. Using such Guidelines facilitated Deepcaster's making buy and sell recommendations resulting in remarkable profits recently if acquired and liquidated when we recommended, approximately*: 245% Profit on Gold Stock Call on September 17, 2012 after just 110 days (i.e., about 820% annualized) 50% Profit on Gold Stock Call on September 7, 2012 after just 101 days (i.e., about 180% annualized) 80% Profit on Gold Stock Call on August 29, 2012 after just 98 days (i.e., about 300% annualized) 30% Profit on Energy ETF on July 30, 2012 after just 54 days (i.e., about 200% annualized) 56% Profit on Premium Gold Miner on June 1, 2012 after just 2 days (i.e., about 10,100% annualized!) 87% Profit on Agricultural Blue Chip (Tr. 2) on April 23, 2012 after just 208 days (i.e., about 152% annualized) 57% Profit on Agricultural Blue Chip on February 24, 2012 after just 149 days (i.e., about 140% annualized) 45% Profit on Platinum ETF on February 8, 2012 after just 42 days (i.e., about 390% annualized!) 40% Profit on March 2012 $55 GDX Calls on January 27, 2012 after just 23 days (i.e., about 635% annualized!) 34% Profit on Gold Royalty Streaming Company on December 5, 2011 after just 166 days (i.e., about 74% annualized!) 42% Profit on Volatility Index Futures ETN on October 3, 2011 after just 292 days (i.e. about 52% annualized!) 36% Profit on Double Short Euro ETF on September 7, 2011 after just 43 days (i.e. about 300% annualized!) 35% Profit on Double Long Gold ETN on August 23, 2011 after just 41 days (i.e. about 280% annualized!) 26% Profit on Double Long Gold ETN on August 17, 2011 after just 35 days (i.e. about 260% annualized!) 25% Profit on Gold Stock on August 8, 2011 after just 201 days (i.e. about 45% annualized!) 150% Profit on Gold Stock Calls on July 13, 2011 after just 56 days (i.e. about 975% annualized!) *Past Profitable Performance is no assurance of future Profitable Performance. |
| Two Reasons Silver Has Surpassed Gold As The Trendiest Metal To Wear Posted: 21 Sep 2012 11:45 AM PDT http://www.businessinsider.com/silve...lusterStock%29 Silver, once the lesser metal, has become trendier than gold in luxury jewelry. Tiffany & Co.'s CEO said this year that it would be focusing on expanding its silver collection. New York Fashion Week was full of silver accessories. And retailer Pommellato announced it would be premiering a silver jewelry line at Milan Fashion week. When even the highest echelon of jewelers are featuring silver over gold, there has to be something going on. We believe that two factors contributed to this trend: 1. Gold has become too expensive and silver's perceived value is shifting With the price of gold skyrocketing, many jewelers can't afford to take a risk on creating fashion pieces that won't sell. But the price of silver has gone up too, adding to its perceived value. Silver is now pricey enough to seem valuable, but cheap enough for retailers to buy. 2. Luxury consumers won't shell out for gold jewelry With the rich getting poorer, many of Tiffany's customers are holding back. While they can't justify shelling out for gold jewelry, luxury silver jewelry is usually priced at under $400. Retailers are even getting creative with silver. Tiffany added small amounts of gold and copper to the metal to create a rosy-colored hybrid called Rubedo. Pommellato used an oxidizing process on some pieces that make them appear smoky and dark. Even with this recent trend, we believe that gold will reign supreme as the ultimate jewelry metal. |
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