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Wednesday, October 3, 2012

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Updating the SLV Chart

Posted: 03 Oct 2012 12:14 PM PDT

Gold COT: on the cusp of a short-covering extraveganza?

Posted: 03 Oct 2012 12:11 PM PDT

Olivut Resources - Playing The Supply/Demand Gap In The Diamond Sector

Posted: 03 Oct 2012 11:18 AM PDT

By Katchum:

Everyone is talking about gold and silver these days, but nobody talks about diamonds. Let's have a little peek inside this sector.

There are many types of diamonds in different colors and different grades. The higher the grade, the more precious the gem is. Aside from being pretty, diamonds can also be used in industrial applications (see Figure 1).

Figure 1: Diamonds in Industrial Applications

The year 2012 marks a major inflection point in the diamond market. From 2012 onward we will start to see diamond prices surge as the supply/demand gap starts to widen. Demand will keep growing while supply will diminish.

Let's take a look at the demand part of the equation. The largest diamond market is


Complete Story »

On The Edge Of A Recession

Posted: 03 Oct 2012 10:54 AM PDT

Market Notes
  • According to the latest CFTC Commitment of Trader report, which came out on Friday, hedge funds are now net long British Pound, despite continuous QE by the Bank of England as well as UK's economy contracting for the third month in the row. Since the start of the Global Financial Crisis in 2008, whenever hedge funds have built net long exposure towards the Pound, an intermediate top was almost always nearby. Furthermore, confirming the COT report, last time I've update Pound's sentiment survey we saw a lofty 62% of bullish readings. Those readings have now moved towards extreme levels of 70% bulls.
  • Unlimited QE has been launched by Federal Reserve Chairman Ben "Helicopter" Bernanke. So what did everybody do? They piled into Gold via the GLD ETF. The chart above shows how GLD's Tonne Holdings has now jumped to all time record high levels. This indicator is also confirmed by the rapid rise in Comex Gold's Open Interest activity. Furthermore, in the mid September post I showed how PMs sentiment surveys were reaching short term extremes. From a contrarian perspective, speculative activity and hot money could now signal that a short term pullback / consolidation is on the cards. Regardless of "Unlimited QE", I'd advise holding back from adding positions in this sector for the time being.


Featured Article

In recent weeks Short Side Of Long blog has argued that we are slowly but surely entering a global slowdown and moving towards a synchronised recession. You can read previous articles on these themes by clicking on the following clicks:
While I am not the only voice on this matter, when one watches financial media TV stations or reads the majority of independent blogs, the common impression one gets is that all is fine, because centrals banks and governments will support the recovery. Sometimes I feel like I am watching and reading opinions closer to Alice in Wonderland. There is a difference between hope and actual facts. As we always do, let us start of with the "economic facts" from the United States and move around the globe from Europe to Asia.

Let us consider the fact that this week's Manufacturing Durable Goods Orders collapsed, as we recorded a first year on year negative reading since the 2008/09 recession. You might remember it was only a few weeks ago that I was warning of further manufacturing weakness ahead and my view now is that we are seeing recession signals. Economist website, Markit summarises the report:

Orders for long-lasting goods fell sharply in August in the US, according to official data. Orders fell 13.2% on the previous month, a near record fall and the largest seen since the record 14.3% decline in January 2009. Orders, excluding volatile transportation goods, were down 3.3% in the three months to August compared to the prior three months, and with its forward-looking properties, suggest an ongoing deterioration in the manufacturing output trend.

These orders data suggest that manufacturing looks set for the worst quarter for three years in the third quarter, possibly stagnating, which is similar to the downbeat message from business surveys such as the PMI.

One interesting point from the Markit summary was the fact that we saw "a near record fall and the largest seen since the record 14.3% decline in January 2009." The chart above shows that during the current secular bear market and global de-leverging period, whenever Manufacturing Durable Goods Orders fell by more than 10%, the economy has either been in, or was about to enter a recession.

According to the Philly Fed Coincident State indicator, there are more and more US States slipping into a contraction and experiencing a slowdown. Looking at the chart above, the "breadth" of the US economy is narrowing, just like the breadth of the stock market is narrowing too. I hardly doubt that we can turn back into positive growth, when we have close to half of the US experiencing a slowdown already. In my opinion, it is only a matter of time until this reading increases and US officially enters a recession.

There has been an abundance of bulls pointing to strong Weekly Jobless Claims, decent Non Farm Payrolls data and a recovery in Housing. However, these bulls obviously do not understand how a business cycle works and it is a slump in Goods Orders that builds Inventory and eventually forces companies to pull back on Investment and increase Lay Offs. In other words, manufacturing leads employment and employment eventually creates confidence in Housing, not the other way around. At the same time, other bulls point to positive GDP as a sign that the economy is still growing. While not surprising to me, the US GDP figures were revised down to a complete stall speed of 1.25% this week. Let us remember that GDP is a lagging indicator, so we might already be close to a first quarterly contraction in Q3.

Moving across the Atlantic Ocean and towards the European manufacturing powerhouse of Germany, we found out this week that ifo Business Climate Index (a survey of more than 7,000 German CEOs) slumped yet again. German CEOs think we are now firmly in the down swing of the business cycle, as the recession risks remain decent. However, these CEOs might be a little too optimistic because there are signs that Germany might already be in a  recession. Expectation component of the ifo Index, a forward looking measure, shows that three months from now German GDP could be contracting.
In China, not much to report this week, as I have already discussed the fact that manufacturing remains weak and that the economy continues to slow, without any signs of stabilising for the time being. The chart above tracking Chinese Rail Cargo Volume, which tends to be one of the better leading indicators, also continues to signal that the current slowdown is as bad as 2008/09. However, there are some analysts who think that the Chinese slowdown this time around will be even worse, for the sheer fact that all the hot money is now leaving China for the first time since late 90s.
Sticking with Asia and moving across the East China Sea, I've also warned that Japan was on the verge of another slowdown the last time the OECD indicators were updated. According to recent economic data, Japan is now at the risk of a recession as Industrial Production sunk yet again in August, down over 4% year on year. This is now the fourth monthly decrease in the past five months, as the chart above shows and does not bode well for Japanese manufacturers.

This mornings data out of Japan confirmed that, as Tankan Manufacturing Conditions fell slightly in the third quarter of 2012. Bloomberg writes:

"Big Japanese manufacturers became more pessimistic as slowdowns in China and Europe sapped export demand and pushed the nation closer to an economic contraction. The quarterly Tankan index for large manufacturers fell in September to minus 3 from minus 1, the fourth negative reading, the Bank of Japan said today in Tokyo. 

'Japan's economy will probably have two consecutive quarters of contraction in the July-September and October- December periods,' said Kiichi Murashima, chief economist at Citigroup Global Markets Japan Inc. 'Exports are the main reason for the economic contraction.'"

And with exports affecting the Japanese economy, I would like to turn to global trade, which Morgan Stanley recently pointed out was in contraction mode from a year before. Breaking down the data, we can see that global exports are falling in all major regions including US, Europe, China and Japan. At the same time, import demand coming out of Eurozone and China has been weakening significantly. Obviously, this goes hand in hand with global exports as the overall cycle becomes self-enforcing. Furthermore, trade volumes link closely to global industrial production and the current data continues to signal weak demand and rising inventories (a recessionary condition).

The longer term investors amongst us would have noticed in recent times that the equity market has completely disconnected to the fundamentals discussed above, perfectly shown in the last chart. Global central bank stimulus measures have pushed risk asset prices higher for the time being, but the question is how long can this stimulus driven rally last?
While nobody can really give a precise answer, these disconnects usually recouple eventually and majority of the time it is the equity market playing catch up (rather quickly) to underlying economic conditions. Furthermore, the fact that the herd is very comfortable and complacent right now, while fundamentals continue to deteriorate at the end of the business cycle, is probably a major indicator that growth and corporate profits will disappoint significantly during the period ahead.
Trading Diary (Last update 05th of September 12)
  • Long Positioning: Long focus is towards the secular commodity bull market, with positions in Precious Metals and Agriculture. The largest commodity position is held in Silver, due to central banks gearing to print money, as the global economic activity deteriorates. If a negative reversal occurs and global risk asset volatility rises, reducing positions will be appropriate. NAV long exposure is about 100%.
  • Short Positioning: Short focus is towards the secular equity bear market due to deteriorating global economic activity. Exposure is held short in Junk Bonds, Technology, Discretionary and Dow Transportation. Tech stocks like the Apple parabolic and Amazon have been shorted with long dated OTM puts. Put options have also been purchased on the Pound and the Loonie (long USD). NAV short exposure is about 70%.
  • Watch-list: A major short in due time will be US Treasury long bonds, as they are extremely overbought and in a midst of a huge bubble mania. While Grains have exploded up, Softs still present amazing value for long term investors, with Sugar being my second favourite commodity (after Silver). Japanese equities are down about 80% from their all time high over two decades ago and offer some great value.

Gold Research Combines To Perform Microbial Alchemy

Posted: 03 Oct 2012 10:40 AM PDT

Fed Policy Is Working — Moral Hazard Is Back

Posted: 03 Oct 2012 10:35 AM PDT

A near-death experience isn't something one gets over right away. So it's no surprise that the US leveraged speculating community was a tad more cautious than usual for a while. Real estate investors, for instance, still bought houses, but only on very favorable terms where rental income would clearly exceed expenses. And investment banks still repackaged loans into asset backed securities, but on a very small scale, since there weren't that many willing/able buyers for exotica that was "toxic" so recently.

This was completely unacceptable to Washington, of course, since the only way an over-indebted economy can "grow" is if speculators can be induced to take unwise risks. So this year we entered the whatever-it-takes phase of the process, where borrowed money became nearly free and permanent, open-ended quantitative easing was promised.

It was a Hail Mary pass, but it seems to have worked, at least in the narrow, Twilight Zone terms in which today's system operates. That is, moral hazard — the sense that you can do pretty much anything you want because the government will bail you out — is back as a driver of deal making. See this on the return of a housing bubble fixture:

House flipping makes a comeback

Forget the carnage of the last few years. The allure of the quick buck endures as home flipping makes gains in hot real-estate markets.

Remember home flippers? How could anyone forget those villains of the housing market crash?

A Santa Rose Press Democrat blogger (tongue slightly in cheek) recalls them as "predatory fish prowling the turbulent waters of the real-estate market, feeding off of distressed properties and swimming away with quick profits."

Well, flipping is back. Investors and even some amateurs are venturing in, snatching up ruined, cheap foreclosures in the hope of making profits on rehabbing and selling or renting distressed homes.

RealtyTrac, in an instructional webinar on flipping (more on that in a minute), defines flipping as "buying a home … usually at (a) discounted price, rehabbing it to sell at full market value, and reselling that property — all within 90 days and ideally for a profit."

Flipping rises again

"When we see mold in the basement, we just say cha-ching," a New Jersey investor tells CNNMoney in this video. She shows off renovations to a home she purchased for $180,000, saying she plans to list it for $450,000.

CNNMoney says:

One in four homes that sold are actually bought by investors. Part of the reason is because of the millions of foreclosures on the market. With so many empty homes out there it's easier to find a good deal.

RealtyTrac publishes a database of bank-owned and foreclosure properties. It says that about 1,300 people – 47% of them classified themselves as "new investors" and 13% claimed to be "experienced investors" — recently signed up for its Foreclosure Flipping 101 webinar.

In a slide show from the webinar, RealtyTrac shares a few nuggets about flipping: In the first six months of 2012, there were 99,567 property flips, an increase of 25% from 2011, and an increase of 27% from 2010.

Hogging the market

Aggressive flippers are dominating housing markets in many cities. That puts first-time homebuyers at a competitive disadvantage. USA Today says that "instead of having their pick of homes to buy in some markets, they're losing houses to cash buyers and bidders with bigger down payments, or they're facing bidding wars spurred by shrinking numbers of homes for sale." (Post continues below video.)

And this on the growing appetite for exotic structured debt instruments:

They're back! Yield hunt pushes funds into CLOs, CDOs

NEW YORK (Reuters) – Fund managers are increasingly eyeing riskier exotic assets, some of which haven't been in fashion since the financial crisis, as yields on traditional investments get close to rock bottom.

Returns from investments in "junk" bonds, government guaranteed mortgage securities and even some battered euro-zone debt are plunging in the wake of global central bank policies intended to suppress borrowing costs.

In particular, the Federal Reserve's latest move to juice the U.S. economy by purchasing $40 billion of agency mortgage-backed securities every month is forcing some money managers who had previously been feasting on those securities to get more creative. The only problem is they may be getting out of their comfort zones and taking on too much risk.

"I would not be surprised if some managers are reaching outside of their expertise for a few extra basis points," said Bonnie Baha, a portfolio manager for DoubleLine's Global Developed Credit strategy.

To keep performance high, credit-focused managers are moving back into some of the risky assets that got tarnished during the financial crisis like collateralized loan obligations, or CLOs, securities cobbled together from pools of corporate loans.

LEANING TO LEVERAGED LOANS

Mark Okada, the co-founder and Chief Investment Officer of the $19 billion Highland Capital Management, said bank debt, CLOs, and some mortgage securities will provide the best returns in credit as the Fed continues to depress yields in the United States until the job market springs back to life.

"The government is in their market," Okada said of MBS, which has been so profitable for hedge funds this year. "The government isn't in my market buying loans and bonds."

That translates into big opportunities for Highland and other managers who have the expertise – and stomach – for such exotic securities. Of the $19 billion in assets Highland manages, $14 billion is invested in CLOs.

The firm's investments in $1.2 billion of secondary CLO assets are returning 27 percent this year, a person familiar with the firm said. Returns for the bulk of their CLO holdings could not be determined.

The issuance of new CLOs fell off a cliff in 2008 during the financial crisis, after reaching a peak of roughly $100 billion in 2007. CLO activity has slowly been ticking back up, and JP Morgan research analysts forecast $35 billion in new CLO supply this year, almost triple the $12.6 billion issued in 2011.

Some thoughts
The policy hope is that energized speculators will kick-start a virtuous feedback loop in which regular people once again borrow and spend, creating an economy that grows unaided by extraordinary monetary stimulus. This is more Keynesian fever dream than reasonable possibility, since if American citizens and local governments are too indebted to borrow more today (which they are, as credit card debt is replaced by student loans and unfunded pension liabilities explode) then it will take a lot more than slightly higher home prices to turn them back into rampant consumers.

What will it take? A widespread realization that the dollar is falling and will continue to fall for years, which means debts taken on today will become easier to manage in the future as they're repaid in ever-cheaper currency. Borrowing then becomes shorting the dollar, a financial speculation, with consumption a mere byproduct. What you acquire with the borrowed money is almost beside the point.

In this scenario, individuals and municipalities become financial intermediaries, funneling newly-borrowed dollars from banks to road builders, car makers, home builders, and, crucially, to precious metals dealers. Gold and silver are tiny markets compared to cars and houses, and will go parabolic if they get even a modest slice of this pie.

Do Western Central Banks Have Any Gold Left???

Posted: 03 Oct 2012 09:55 AM PDT

from news.goldseek.com:

Somewhere deep in the bowels of the world's Western central banks lie vaults holding gargantuan piles of physical gold bars… or at least that's what they all claim. The gold bars are part of their respective foreign currency reserves, which include all the usual fiat currencies like the dollar, the pound, the yen and the euro.

Collectively, the governments/central banks of the United States, United Kingdom, Japan, Switzerland, Eurozone and the International Monetary Fund (IMF) are believed to hold an impressive 23,349 tonnes of gold in their respective reserves, representing more than $1.3 trillion at today's gold price. Beyond the suggested tonnage, however, very little is actually known about the gold that makes up this massive stockpile. Western central banks disclose next to nothing about where it's stored, in what form, or how much of the gold reserves are utilized for other purposes. We are assured that it's all there, of course, but little effort has ever been made by the central banks to provide any details beyond the arbitrary references in their various financial reserve reports.

Keep on reading @ news.goldseek.com

Potential Intermediate Term Targets for Gold & Gold Stocks

Posted: 03 Oct 2012 09:52 AM PDT

from news.goldseek.com:

The precious metals complex rebounded strongly in August and September, which is typical when the larger trend is bullish. We believe the larger trend turned bullish with the bottom in May. However, weeks ago we noted targets of $1800 for Gold and 57 for GDX as resistance points. The market has begun a corrective period which should last deep into October. Nevertheless, such a correction would provide an excellent entry point before the market makes its next move higher. Today we examine potential medium term and intermediate term targets for Gold and the gold stocks.

Starting with Gold, we find it correcting and consolidating after reaching resistance at $1800, which was an obvious short-term target. Upon a break past $1800, the initial target would be $1900. Since $1800 is stronger resistance than $1900 we can apply its distance from the bottom ($1550) and that projects to another target of $2050. Upon a breakout past $1900, the market could be setting up for a potential cup and handle pattern which projects to a minimum of $2250.

Keep on reading @ news.goldseek.com

In The News Today – October 2, 2012

Posted: 03 Oct 2012 09:50 AM PDT

from jsmineset.com:

My Dear Friends,

We are of course Good King Arthur. The Black Knight appropriately represents the gold banks. The bridge in this battle represents $1775, a number with no deep technical meaning before it was selected as the gold line in the sand by some unseen muktar.

The following video explains what is happening and outlines the final resolution of the shorts versus the longs at $1775.

Keep on reading @ jsmineset.com

Race To Debase – 2012 Q3 – Fiat Currencies vs Gold & Silver

Posted: 03 Oct 2012 09:43 AM PDT

from goldsilver.com:

Welcome back to the Worldwide Fiat Currency Race to Debase!

Gold has recently touched new all time highs in terms of euros, Swiss francs, and Brazilian real.

Below you will find a report on 75 different fiat currencies vs gold and silver from around the globe.

Note how they have ALL lost value to gold and silver thus far in 2012.

With recent announcements of even further central bank monetary easing policies (QE3, Japan, Brazil, etc.) we fully expect the current gold bull market and silver bull market revaluation trend to not only continue, but to quicken moving forward.

Be sure to also click here and see how fiat currencies have performed against gold and silver over the last 12+ years.

Keep on reading @ goldsilver.com

Unraveling Why A Fed President Just Suggested Doubling QE3

Posted: 03 Oct 2012 09:41 AM PDT

from news.goldseek.com:

Chicago Federal Reserve Bank President Charles Evans was interviewed on CNBC on Monday, and he indicated that he was in favor of continuing asset purchases at a rate of $85 billion per month all the way through 2013. If approved by the rest of the Fed, this would have the effect of about doubling the size of "QE3″, or Quantitative Easing Three, the massive Federal Reserve monetary creation and market intervention program announced only three weeks ago.

QE3 combines mortgage security purchases of $40 billion per month until the labor market substantially improves, while continuing "Operation Twist", with the Federal Reserve switching another $45 billion a month out of short term Treasuries and into long term Treasury bonds through December. There is a total of $85 billion per month in asset purchases, of which $40 billion a month is to be financed by creating new money out of thin air. Importantly, the amount of market interventions is scheduled to drop in half at the end of 2012.

Keep on reading @ news.goldseek.com

How Foreclosures Ate America: Incredible Interactive Map Shows Wave of Property Repossession Over the Past Five Years

Posted: 03 Oct 2012 09:40 AM PDT

from dailymail.co.uk:

A new map that illustrates foreclosure rates across the country from January 2007 to July 2012 makes uncomfortable reading for President Obama and his team who insist that Americans are better off than they were four years ago.

Charting the collapse of the housing boom in 2007, through the election of President Obama and the world financial crisis, the map shows vast swaths of the Southeast, Midwest and West turn purple indicating extremely high numbers of foreclosures.

The fascinating and disturbing colour-coded interactive map reveals the most recent data in July 2012 doesn't look much better than past maps as the foreclosure epidemic in the United States is laid bare.

Keep on reading @ dailymail.co.uk

Yamada – Here Are The Key Levels To Watch On Gold & Silver

Posted: 03 Oct 2012 09:38 AM PDT

from kingworldnews.com:

With gold trading near the $1,800 level and silver around $34.50, today King World News is pleased to share a piece of legendary technical analyst Louise Yamada's "Technical Perspectives" report. This information is not available to the public and we are grateful to Louise for sharing her incredible work with KWN readers globally.

Metals: Gold & Silver
By Louise Yamada Technical Research Advisors, LLC ("LYA")

Keep on reading @ kingworldnews.com

Bill Gross Says Only Gold and Real Assets Will Thrive in Fiscal ‘Ring of Fire’

Posted: 03 Oct 2012 09:36 AM PDT

from caseyresearch.com:

Yesterday in Gold and Silver

It was a nothing sort of day in gold on Tuesday, unless you knew what to look for. As I've been pointing out for almost a week now, every time the gold price made an attempt to breach the $1,780 spot price mark, it got quietly sold off. This occurred during the Far East, London…and New York trading days on Tuesday.

The most prominent of those attempts began at 1:00 p.m. in London…about twenty minutes before the Comex open. The spike high at 1:15 p.m. in London…$1,783.60 spot…came five minutes before the Comex open… and then got hammered flat by 1:30 p.m. in London, ten minutes after the Comex open…8:30 a.m. in New York.

From there, gold bumped against the $1,780 price ceiling many times before getting sold off to $1,774 spot going into the 1:30 p.m. Comex close…and from there it traded flat into the 5:15 p.m. Eastern electronic close.

Keep on reading @ caseyresearch.com

Riverstone Announces Update of Gold Mineralization at Karma Project

Posted: 03 Oct 2012 09:08 AM PDT

Riverstone Resources Inc. (TSX-V: RVS) ("Riverstone" or the "Company") announces an updated independent NI 43-101 compliant Mineral Resource estimate, that shows an increase of 27% for the Indicated in-pit mineral inventory and 23% for the global mineral inventory compared to the January, 2012 resource estimate at its flagship Karma gold project (the "Karma Project") in Burkina Faso, West Africa (See Riverstone's news release dated January 9, 2012). The NI 43-101 compliant resource estimate has been completed by P&E Mining Consultants Inc. ("P&E") of Brampton, ON. The estimate was completed on the Goulagou I, Goulagou II, Kao, Rambo and Nami deposits, which are all in close proximity to each other.

HIGHLIGHTS (resources are contained within five Whittle open pit shells)
  • Global Mineral Inventory (inside and outside of Whittle pit shells) consists of Indicated gold mineralization totalling 2,252,000 ounces of gold in 68.8 Mt at an average grade of 1.02 g/t Au and Inferred gold mineralization totaling 1,115,000 ounces of gold in 40.4 Mt at an average grade of 0.86 g/t Au.

  • A significant portion of the gold resources are at shallow depth (less than 200 metres vertical depth) and over 72% of the global mineral inventory is contained with the five Whittle pit shells.

  • Total Indicated gold resources within five Whittle pits are 1,943,000 ounces of gold in 56.5 Mt at an average grade of 1.07 g/t Au.

  • Total Inferred gold resources within five Whittle pits are 492,000 ounces of gold in 15.4 Mt at an average grade of 1.00 g/t Au.

  • 80% of the resources within the Whittle pit shells are classified as Indicated gold resources.

  • Mineralization remains open at depth and along strike in at least one direction for all deposits.

  • This resource will be used as the basis for proceeding with a definitive Feasibility Study (FS) commencing in Q4, 2012 based on total Indicated resources of leachable material containing 1,030,000 ounces of gold, an increase of 24% compared to the resources used in the August 20, 2012 PEA.
"We are very encouraged with the increase of resources at Karma", commented Dwayne L. Melrose, President and CEO of Riverstone Resources Inc. "This will provide a solid base for going forward with engineering and economic studies in 2012/2013 to establish Karma as one of the premier gold projects in West Africa. There also remains significant potential to continue to increase the gold resource with further drilling in the future".

The Karma Project consists of five separate deposits, which are located in close proximity to each other. A summary of the resource estimates within a Whittle pit shell for each deposit is presented in the table below:


KARMA PROJECT IN PIT RESOURCE ESTIMATE(1)(2)(3)(4)(5)(6)(7)
(Within Whittle pit shells)(6)
Deposit Category Cut Off Au g/t Type Tonnes Grade (g/t) Au--oz
GOULAGOU  I Indicated 0.20  Oxide 6,651,000 0.62 132,500
    0.22 Transition 2,757,000 0.71   62,600
    0.50 Sulphide 5,739,000 1.07 197,100
      Subtotal 15,147,000 0.81 392,200
 
  Inferred 0.20  Oxide 1,518,000 0.79 38,400
    0.22 Transition    561,000 0.81 14,500
    0.50 Sulphide 2,762,000 1.04 92,400
      Subtotal 4,841,000 0.93 145,300
 
GOULAGOU  II Indicated 0.20  Oxide 6,403,000 1.16 237,900
    0.22 Transition 1,835,000 1.44   85,000
    0.50 Sulphide 4,744,000 1.67 255,500
      Subtotal 12,982,000 1.39 578,400
 
  Inferred 0.20  Oxide     709,000 0.74 17,000
    0.22 Transition    339,000 1.05 11,400
    0.50 Sulphide 1,432,000 1.35 62,200
      Subtotal 2,480,000 1.14 90,600
 
KAO Indicated 0.20  Oxide    9,552,000 0.87 268,300
    0.22 Transition    2,953,000 0.97   92,200
    0.50 Sulphide 11,743,000 1.22 459,900
      Subtotal 24,248,000 1.05 820,400
 
  Inferred 0.20  Oxide 2,355,000 0.60 45,100
    0.22 Transition   345,000 0.73   8,100
    0.50 Sulphide 4,654,000 1.22 182,700
      Subtotal 7,354,000 1.00 235,900
 
NAMI Indicated 0.20  Oxide   656,000 0.96 20,200
    0.22 Transition 1,063,000 0.72 24,700
    0.22 Sulphide 1,561,000 0.82 40,900
      Subtotal 3,280,000 0.81 85,800
 
  Inferred 0.20  Oxide 127,000 0.85 3,500
    0.22 Transition 167,000 0.79 4,200
    0.22 Sulphide 198,000 0.74 4,700
      Subtotal 492,000 0.79 12,400
 
RAMBO Indicated 0.20  Oxide 200,000 2.19 14,100
    0.22 Transition 261,000 2.83 23,800
    0.22 Sulphide 357,000 2.46 28,300
      Subtotal 818,000 2.51 66,200
 
  Inferred 0.20  Oxide 115,000 1.33 4,900
    0.22 Transition  51,000 0.53     900
    0.22 Sulphide  43,000 1.52 2,100
      Subtotal 209,000 1.17 7,900
 
TOTAL Indicated 0.20  Oxide 23,462,000 0.89 672,900
    0.22 Transition    8,869,000 1.01 288,200
    0.22 & 0.50 Sulphide 24,145,000 1.26 981,700
      Total 56,476,000 1.07 1,942,800
 
TOTAL Inferred 0.20  Oxide 4,825,000 0.70 108,900
    0.22 Transition 1,463,000 0.83  39,200
    0.22 & 0.50 Sulphide 9,090,000 1.18 344,100
      Total 15,378,000 1.00 492,200
  1. Resource estimates were based on a gold price of US$1,415 per ounce, a 92% to 85%, 90% to 76% respective leach recoveries for oxide and transition and flotation recoveries of 89% to 96% for sulphides; oxide and transition mining costs of US$1.60/tonne and US$1.80 per tonne for sulphide; process costs of US$6.20/tonne for oxide and transition and US$17.00 per tonne for sulphide; and General & Administrative costs of US$1.70 tonne were used to determine the respective 0.20, 0.22 and 0.50 oxide, transition and sulphide open pit cut-off grades.
  2. Au grades were estimated in a 5m x 5m x 5m block model (except Rambo at 2.5m x 2.5m x 2.5m blocks) from capped 2.0m composites utilizing inverse distance cubed interpolation. Composites were capped up to 45 g/t depending on the individual mineralized domain.
  3. Mineral resources which are not mineral reserves do not have demonstrated economic viability. The estimate of mineral resources may be materially affected by environmental, permitting, legal, title, taxation, sociopolitical, marketing, or other relevant issues.
  4. The quantity and grade of reported Inferred resources in this estimation are uncertain in nature and there has been insufficient exploration to define these Inferred resources as an Indicated or Measured mineral resource and it is uncertain if further exploration will result in upgrading them to an Indicated or Measured mineral resource category.
  5. The mineral resources in this press release were estimated using the Canadian Institute of Mining, Metallurgy and Petroleum (CIM), CIM Standards on Mineral Resources and Reserves, Definitions and Guidelines prepared by the CIM Standing Committee on Reserve Definitions and adopted by CIM Council.
  6. Material within Whittle pit shells have engineering mining aspects derived from the Sep 2012 Preliminary Economic Assessment applied to the global mineral inventory.
  7. Readers are cautioned that at the time of this press release, the exploration permits covering the Goulagou I, Goulagou II, Rambo and Nami deposits are expired pending the issuance of an exploitation permit over the Goulagou I, Goulagou II and Rambo deposits by the Ministry of Mines for Burkina Faso. There is a reasonable expectation, however no guarantee, that in the near future that these exploitation permits will be issued. The exploration permit for the Kao deposit expires September 2013.


The resource estimation is based on a total of 1,220 diamond and reverse circulation drill holes for 183,374 metres. Subsequent to the January 2012 resource estimation, a total of 383 new diamond and reverse circulation holes for 77,641 metres are credited to the resource update.

Riverstone will continue with the on-going drill program to further extend and upgrade the resource quality of the 5 deposits and also to test regional targets throughout the remainder of 2012 and into 2013.

All reported resources fell within the limits of the mineralized wire frames. All interpolated grade blocks or partial blocks within the resource wire frames need to have at least three composites from two holes within 50 metres to be classified as Indicated Resource. Inferred Resources were determined from the remaining blocks, or partial blocks that lie within the wire frames.

KARMA PROJECT GLOBAL MINERAL INVENTORY ESTIMATE
(within and outside of Whittle pit shells)

Deposit Category Cut Off Au g/t Type Tonnes Grade (g/t) Au--oz
GOULAGOU  I Indicated 0.20  Oxide 7,131,000 0.61 139,200
    0.22 Transition 3,338,000 0.67   71,900
    0.50 Sulphide 8,720,000 0.96 269,700
      Subtotal 19,189,000 0.78 480,800
 
  Inferred 0.20  Oxide 1,794,000 0.73 42,300
    0.22 Transition 1,039,000 0.67 22,400
    0.50 Sulphide 7,586,000 0.85 207,200
      Subtotal 10,419,000 0.81 271,900
 
GOULAGOU  II Indicated 0.20  Oxide 6,480,000 1.15 239,000
    0.22 Transition 1,961,000 1.38  87,000
 

Fighting the Inflation Boogeyman

Posted: 03 Oct 2012 08:45 AM PDT

Investors are concerned about inflation. But how can investors attempt to inflation-proof their portfolios? Buy TIPS? Short Treasury bonds? Stocks? Real Estate? Commodities? Gold? Currencies? Or regard warnings about inflation as fear mongering?

Sean Brodrick on Global Economy, Gold, Silver & Gold Miners

Posted: 03 Oct 2012 07:37 AM PDT

Sean Brodrick, natural resources analyst at  UncommonWisdomDaily discusses the global economy, gold, silver and miners.

More of Sean's work can be seen here.

Gold Wars revisited

Posted: 03 Oct 2012 07:00 AM PDT

The following is an essay version of a speech given by Spanish trader and economist Felix Moreno de la Cova, at a recent event in Madrid to mark the publication of the Spanish version of Gold ...

Gartman Says 'Everyone Needs to Own Some Gold'

Posted: 03 Oct 2012 06:33 AM PDT

Spot market gold prices rallied to $1,781 per ounce ahead of Wednesday's US session, recovering from slight losses earlier in the day to stay in line with recent trading, while stock markets were broadly flat and the Euro reversed earlier gains.

'Mugabenomics' From Zimbabwe To UK: 'Gold Is Good'

Posted: 03 Oct 2012 06:14 AM PDT

Gold continues to hover near its 11 month high in dollar terms and near new records and the €1,400 level in euro terms. The lack of confidence over Spain's finances has kept investors alert as they await a US jobless report on Friday.

Attack of the Blob: How Professional Democrats and Professional Republicans Ran America Into the Ground

Posted: 03 Oct 2012 06:00 AM PDT

This is a review of the new book by former Senate staffer and super-lobbyist Jeff Connaughton, Payoff: Why Wall Street Always Wins. The review is written by Roosevelt Institute fellow Matt Stoller, who you can follow on Twitter at http://www.twitter.com/matthewstoller.

There's a slate of important books coming out by reformers this year on what it was like to fight, and lose, for better policy during the financial reform fight. Neil Barofsky talked about facing the administration and Wall Street in Bailout, Sheila Bair has written about her experience at the FDIC, and now former Senate chief of staff for reform Senate Ted Kaufman, Jeff Connaughton, has provided his own memoir. Connaughton is not a rube, and doesn't pretend to be shocked by DC corruption. His whole career is an anomaly, an idealist turned corporate super-lobbyist in the 1990s turned unlikely reformer in 2009. As such, he is uniquely positioned to describe how our political leaders, and which political leaders, think and act.

One anecdote in his new book The Payoff: Why Wall Street Always Wins really gets at when the failsafe mechanisms for our financial system were in the midst of collapsing. The crisis of 2008 was when the dam broke, but the actual structural weaknesses appeared long before, in the 1970s, and accelerated in the 1990s. Connaughton was a player in both the period of accelerating weakness, in the 1990s, and in the collapse itself.

Throughout the book, Connaughton shows how the system was corrupted by ensuring that only voices within the establishment were heard. For instance, in 1995, Connaughton was a lawyer in the White House, and he and his colleagues had persuaded Bill Clinton to stand up to Wall Street by vetoing the Private Securities Litigation Reform Act of 1995.  This bill would make it harder to prosecute securities fraud when CEOs made positive statements about their own company while selling company stock. It would undercut SEC Chair Arthur Levitt, who was furious at the way Congress leveraged its appropriations power to challenge his agency's ability to protect the capital markets. More importantly, it was Bill Clinton's most significant and last attempt to stand up to the power of big finance. Senator Chris Dodd and then White House deputy Chief of Staff Erskine Bowles were carrying water for Wall Street in an attempt to loosen the ability to commit securities fraud, but Connaughton had managed to work the White House levers to go around them and get to Clinton himself. After the meeting where Clinton was persuaded to oppose the bill, Clinton saw Connaughton standing alone in the White House hallway. The President went up him, and revealed his unease at what he was about to do.

"You think I'm doing the right thing, don't you?"

"Absolutely, Mr. President. You can't undercut the Chairman of the Securities and Exchange Commission on a question of securities fraud."

"Yeah, that's right. And Levitt is an Establishment figure, right?"

"Yes, Mr. President, that's right."

Clinton, even in opposition to big finance, cowered before the opinions of the establishment. Of course, the stamp of approval from Levitt wasn't enough. Senator Chris Dodd went to work. First, Dodd killed a Clinton endorsed Senate amendment put forward by Paul Sarbanes designed to remedy the problem, forcing Clinton to veto the whole bill. Dodd then went for an override. Connaughton implies that Clinton put the word out that he wouldn't really mind if the override succeeded, and with that, the political opposition to the bill collapsed. Even Ted Kennedy voted for Dodd's bill. And so another brick in the wall that had guarded against white collar fraud came down.

These kinds of stories, which are far less operatic than the petty office politics dressed up as high melodrama by Bob Woodward, help show in a powerful way the cowardice and methods of the politicians and bureaucrats in the 1990s who set the stage for the destruction of our democratic system. The author describes a system of influence-peddling, financial rewards for unethical behavior, and of weakness. But he also, and this is where the book shines, talks about the individuals who ran this system. Jeff Connaughton is as close as you're going to get to the point person for the financial reform fight. A former Wall Street banker, super-lobbyist, Democratic establishment player, and most recently, chief of staff to ardent crusading Senator Ted Kaufman in 2009-2010, Connaughton was the consummate insider who made enormous sums of money selling his lobbying services and connections to corporate elites. But something snapped in him in 2009, and he began to build a more honest life for himself, turning his deep connections and expertise on the nexus between Wall Street and Washington into a fight for reform of capital markets.

There are three stories in this book. The first is that of Jeff Connaughton, the Professional Democrat. This is the story of how Connaughton went to Wall Street after college, sought to break into Joe Biden's inner circle, became a member of the permanent political class in DC, and then a co-founder of one of the biggest and most important lobbying firms, earning fabulous riches in the process. This is a process he maintains happens to thousands of young people in DC, turning them from idealistic potential agents of change into ardent careerist bureaucrats seeking wealth and access. The second is the financial reform fight, how Connaughton worked in the Senate as chief of staff for Senator Ted Kaufman, the replacement for Joe Biden and as Arianna Huffington put it in 2010, an "accidental Senator" and leader for financial reform. The third can best be described as how Connaughton transitioned from the first to the second. That piece of the story is seemingly simple – Connaughton lost a bunch of money in the financial crisis, and then he realized that Joe Biden had been a total disloyal asshole to him for decades, and he was tired of faking a good relationship with Biden just to make money as a corporate lobbyist. He had lost his taste for the game – the excitement, the money, the corrupt culture of DC. Connaughton really lays into his former boss Biden throughout the book, and I'm actually surprised the press hasn't picked up on his vicious characterization of the current Vice President. The telling of the true nature of this important relationship has its purpose – he was willing to endure it for decades because DC has a feudal order, with lords and serfs. Connaughton was a "Biden" guy, and his loyalty to the system that paid him meant he had to stomach rank public dishonesty about it. It's an echo of the financial fraud on Wall Street, where banks must pretend to be solvent even when they know they aren't.

While most people will focus on the financial reform fight, how Connaughton became a member in good standing of the professional class is actually the best part of the book. As a 19 year old college student in Alabama, he invited Joe Biden to speak before a political group he had founded. Biden gave an impressive speech, and then signed a personal note that said, in essence, stay in politics. Biden's human touch inspired the impressionable Connaughton, giving him the sense that being in politics had meaning. Politics would be the animating force for Connaughton's entire life. After being convinced that Biden would be the Kennedy of his era, Connaughton spent a good amount of effort trying to get employment with the Senator, but couldn't. So after college, he elected to go to business school, and then a Wall Street firm. After six years, he finally got his chance to work for what he assumed would soon be the Biden White House. He joined Biden's 1988 Presidential campaign as part of the fundraising team. He wrote a campaign manual on fundraising called "The Bible", which explicitly limited all access to Biden to those who would give money and encourage others to raise money in an Obama campaign-like Amway-style operation. It worked, and the Biden campaign was swimming in cash (for the time, anyway). But Biden lost the race in a plagiarism scandal. Ted Kaufman, who was on the campaign, brought Connaughton back to DC as a Senate staffer for Biden.

The Senate was a strange and disillusioning place for Connaughton. Though quite skilled, Connaughton never quite penetrated Biden's inner circle. The problem was, he and Biden just didn't like each other: "In Alabama, I'd watch him train his charisma beam on people of all ages and, as far as I could tell, win them all over. In Washington, he would do the same thing with complete strangers, especially if there was any hint that they might be from Delaware. Yet, behind the scenes, Biden acted like an egomaniacal autocrat and apparently was determined to manage his staff through fear." At one point, Connaughton was sitting in a meeting where the staff were trying to get headlines for Biden on the problem of crack-cocaine addiction, and Connaughton realized that they were already doing a hearing and a press conference a week on it. The meeting was strategizing for political gain, and irrelevant to good policy; it seemed like they were looking for nine different ways "of skinning a cat".

Connaughton soon left and went to Stanford Law School, becoming a clerk with Judge Abner Mikva. As it turns out, Mikva was brought in to be Bill Clinton's General Counsel, which meant Connaughton would have a shot at his lifelong dream – working in the White House. So Connaughton sought Biden's help to encourage Mikva to bring him to the White House, seeking to cash in on the chips he thought he had acquired with fundraising and Senate staff work. But Biden refused to call and put in a good word. "This isn't personal," explained a Biden staffer. Biden just doesn't like Mikva. "Biden is an equal opportunity disappointer." Another former Biden staffer consoled him this way: "Jeff, the difference between Ted Kennedy, who has spent decades promoting his staff into government jobs, and Joe Biden, is Kennedy believes in force projection. Kennedy Democrats share an ideology. Biden is only about himself becoming President, he doesn't care about force projection, so he never helps his former staff get jobs." Biden repeatedly shows up in the book, usually to pull some stunt like refusing to thank someone for busting ass on his behalf , condescending to Connaughton on the transition team,or trying to back out of a fundraiser after giving his word he'd show up. Connaughton is also Biden's biggest fundraiser throughout, from the mid-1990s to 2008, even though the two have a relationship based entirely on image – Connaughton gets to pretend he's close with Biden, and Biden gets to treat Connaughton as an afterthought to whom unpleasant duties can be foisted. The telling of this relationship isn't sour grapes, it is meant to evoke the sentiment of fraud, not the Wall Street version, but how it worked in DC. Finance and politics paralleled each other, really as parts of the same system, though the tools and institutions differed depending on the industry.

Eventually, Connaughton makes it into the White House without Biden's help. This is unusual, because Connaughton recognizes the dynamic of DC – you are always someone's "guy", and he was Biden's, whether he liked it or not. That's how the establishment worked, and the establishment always won (and still does win). At the White House, Connaughton fought the good fight against Wall Street, but was overwhelmed by Clinton's weakness and Dodd's alliances with the big banks. And then he left, and joined a law firm where he began working with Jack Quinn, a Democratic super lobbyist.

As he writes, "When I started lobbying, I was 38 and had few assets; no house, a cheap car, and a four-figure bank account. I'd made modest salaries in government and spent all my Wall Street savings on law school. I'd stayed in Washington for reasons that had little to do with issues or ideology; for me it was now mainly about establishing a DC profile, making money, and helping Democrats beat Republicans." He, Quinn, and Ed Gillespie formed a powerhouse firm Quinn Gillespie, which was well positioned going into the 2000 election. Republicans and Democrats at the firm joked that they were all "members of the green party". His firm's motto was "we don't lose sleep on election nights."  And because of Gillespie's role in the Bush recount team, "a Bush presidency wasn't my preference for the country, but it was great for our firm."

This is a great part of the book, where Connaughton explains the wider circle of influence. "Professional Democrats are not just lobbyists. The term applies to almost all Democrats in the legal, policy, foreign policy, and even national security worlds, each one of whom is trying to climb the greasy pole of power." These well-paid bureaucrats pass from a public position to a private position, hoping that Team Blue or Team Red wins so they can increase their monetary and political value. But the status quo is paramount, and anything threatening that brings the two teams together (as does, well, cash). This dynamic is well-covered by sociologist Janine Wedel's Shadow Elite as a core element of corrupt economic organizations, this is a narrative documentation of it.

At Quinn Gillespie, Connaughton (a minor partner) helped design the modern corporate lobbying campaign. During the 1990s, corporate money spent on influence and campaigns tripled, and the culture changed. Quinn Gillespie led this change – the firm's employees were early adopters of Blackberries, and the firm moved away from hourly billing to a compensation structure modeled on the financial services industry. Rather than lobbying being a spinoff of a large white shoe law firm, or the result of a key relationship between a former official and Committee chairs (like the original super lobbyist Tommy Corcoran), lobbying would now become about manipulating the press, implementing a grassroots campaign, and aggressive full-blanket coverage of Capitol Hill and the agencies. He described how the Banking Committee worked in this ecosystem – staffers close to Dodd and Shelby would leak tidbits to friendly lobbyists, who would relay them to clients. These clients would use the Financial Services Roundtable as a clearinghouse for this info, and it would circulate back out to the entire nexus of lobbying. Other staffers, even other Senators, would have no idea how to even find out what was in a bill, but K Street would have copies of it circulated and analyzed within a few hours.

The seedy anecdotes he details in this book are useful. He reminds me of scandals I had forgotten, like Hillary Clinton's brother Hugh Rodham being paid $200,000 and securing pardons for two felons in the waning days of the Clinton administration. The narrative also throws the impeachment of Clinton into a new light, and gives the reader a glimpse of the rise of cable news as a vehicle for intra-elite dialogue. During that period, Quinn Gillespie supplied multiple surrogates to cable news to rebut the arguments put forward by Republicans. These surrogates included Jack Quinn, and then Connaughton himself. Connaughton was particularly skilled at this, and became a regular on the cable news circuit. His presence on TV generated accolades from friends, clients, and Republican colleagues. Impeachment was good for business, a sales opportunity. Over the course of the next ten years, from 1998 to 2008, Connaughton marinated in the world of DC, raising large sums of money for Joe Biden, working on behalf of corporate interests, helping Democrats get elected, and becoming a very wealthy man.

Then came the crisis, when Connaughton jumped from lobbying back into government, returning to his career as a reformer who wanted a strong public response to the crisis. In 2009, After Biden became VP, Biden's former chief of staff Ted Kaufman was appointed to the Senate to fill the empty seate. Kaufman offered Connaughton  a deal – become chief of staff, and they would spend two years doing their best to make a difference. Kaufman wouldn't run for office, wouldn't raise a dime in campaign contributions. Connaughton was already a millionaire, so the revolving door wasn't particularly appealing to him any more. As with Barofsky's path in SIGTARP or Elizabeth Warren's at the Congressional Oversight Panel (and to some extent Alan Grayson's work on auditing the Fed in the House), the circumstances were unusual enough to allow some genuine power to be exercised from the inside on behalf of the public interest.

Of course, we know what happened during the reform fight. The details Connaughton provides add to our understanding of how reform was undermined by various Senators and most importantly, the administration and Senator Chris Dodd. Kaufman starts out as a Senator excited to have the Bush administration gone, and having a high opinion of Geithner and the Rubinites. Connaughton, having been a high powered lobbyist and with a bit more of a real politick bent, knew this was nonsense from the get-go. Kaufman was disabused quickly. His first bill was to authorize a task force investigating criminality central to the crisis. It passed, with accolades for all involved, especially a freshman Senator who had hit the ground running.

Kaufman and Connaughton were excited that the bill passed, but soon noticed some problems. Senator Barbara Mikulski of Maryland, who had voted for the bill, was in charge of allocating the money for the new task force. And her staff simply refused to fund it. A high profile bill touting an upcoming criminal investigation was thus effectively turned into a press release. Connaughton was also hearing rumors from his long career in Democratic politics about Rahm Emanuel, "Two sources were telling me that Christine Varney, the assistant attorney general for the Antitrust Division, were complaining to friends that Rahm Emanuel, then White House chief of staff, had sent her a message: in effect, throttle back on antitrust enforcement, because the top priority is economic recovery. I was concerned that Attorney General Holder had gotten the same message about investigating Wall Street crime."

The administration had a policy of not prosecuting, but Kaufman didn't realize this until it was too late. They picked up clues early. Connaugton recalled a presentation by FBI official Kevin Perkins, who unveiled an "impressive" matrix of FBI investigations – but all of the targets were mortgage brokers and small timers, and there were no Wall Street banks on the list. At one point, they heard from the US Attorney for the Southern District of New York, the office that had the resources to tackle Wall Street crime. His office's main focus, he said, was cybercrime. Despite this, and that the SECs head of enforcement Robert Khuzumi continually brushed off Kaufman's inquiries and oversight questions, Kaufman continued to defend him throughout his two years in office. Towards the end of his term, Kaufman was able to hold oversight hearings about prosecutions, but it was too late.

This dynamic of obfuscation and dishonesty in the process reappeared constantly and frustrated efforts at fixing the system. During the fight over the reform bill itself, Connaughton encountered what he called "The Blob", a network of bank regulators, staffers, lobbyists, think tank denizens, and corporate officers who worked together to undermine efforts at reform [using a cover of partisanship]. At one point, he and Kaufman began criticizing the SEC for not ensuring that the short-selling process had effective rules to protect investors. A financial services lobbyist and former Dodd staffer threatened Connaughton, telling him it would be bad for his career if he kept going after short-selling. The two of them found the same problem in their attempt to deal with high frequency trading, where trading firms would use a variety of tricks and traps to squeeze pennies from investors and circumvent traditional stability enhancing rules for the equity markets. Largely ignored until the flash crash, Connaughton and Kaufman developed credibility on financial reform when the Dow inexplicably dropped by 1000 points in a few minutes. But the Blob was there, fighting against HFT reforms and aggressively seeking to weaken Dodd-Frank.

The Blob was aided in their efforts by the Obama administration and Chris Dodd. Dodd had insisted that the final bill would need to be as bipartisan as possible. This was, Connaughton notes, a cynical ruse to make the bill as weak as possible by claiming it needed to get GOP votes. The negotiating over the particulars of the bill were telling – Kaufman and Connaughton could get no info on what was happening behind Dodd's closed door. Connaughton called his former lobbying partner, Jack Quinn, to vent about the secrecy of the process. Quinn was surprised, and said "I just spent 45 minutes with Dodd yesterday." Wall Street, unsurprisingly, was writing the bill.

Eventually, Kaufman cracked the process open. He began blasting Dodd-Frank publicly, on the floor of the Senate. Dodd, miffed, called and asked him to stop saying bad things about the bill. Other Senators then got involved. Carl Levin and Jeff Merkley proposed the Volcker rule, which would crack down on prop trading by banks. Blanche Lincoln, in a cynical move to deal with a left-wing primary, got aggressive on derivatives reform. And of course, Sherrod Brown and Ted Kaufman proposed Brown-Kaufman, an amendment that would break up the biggest banks. This amendment struck at the heart of the financial crisis, proposing a genuine structural change in the banking system.

The reaction of different Senators and administration officials to the bill, and to the Brown-Kauman amendment specifically, was telling. Harry Reid wouldn't talk Wall Street reform even though he knew that blasting Wall Street was a vote getter, because Wall Street was bankrolling his 2010 campaign. The cynical Senator and Democratic whip, Dick Durbin, noted that "the banks own the place" but then said that breaking up the banks was going "a bridge too far." Durbin even said to Kaufman at one point, "Jamie Dimon asked me to tell you 'it was the small banks that failed'". Tim Geithner said the administration would deal with Too Big To Fail Banks at Basil, through capital requirements negotiated at the international level. Republican Banking Ranking Member Richard Shelby assented to all of Dodd's unanimous consent requests because he knew that Dodd wanted the weakest bill imaginable. And though newly elected Senator Scott Brown wanted to punch a hole through the Volcker rule, the Obama administration actually wanted a bigger loophole than Scott Brown did for proprietary investments by banks.

My favorite Senatorial reaction was from Dianne Feinstein. Dodd, knowing Brown-Kaufman was gaining strength but didn't yet have enough votes to pass, called a snap vote. Connaughton wrote about the vote that "no one could confuse the issue, or so I thought. But, just before voting, Senator Dianne Feinstein (D-CA) – one of the most liberal members of the Senate — asked Durbin, the majority whip, "What's this amendment?" According to Durbin, who later told Ted, he replied, "To break up the banks." Giving the thumbs-down sign, Feinstein said bemusedly: "This is still America, isn't it?"

Connaughton and Kaufman fought, as aggressively as they could, for two years. And Connaughton is clear-eyed about what happened. They had accomplished very little, and his career in Democratic politics and on Wall Street was over. As he put it in the conclusion of the book, "In Washington, as a Professional Democrat, I could count on the corporate marketplace to play me for the value I provided in access, insights, strategy, influence, hard work and – most especially – results. In politics, the box comes with no guarantee. When I finally opened mine, it was empty." The corporate world pays for results, the political world is simply about the random luck you have in working for a Joe Biden who isn't a disloyal asshole. Wall Street and the K-Street empire it supports, in other words, is reliable. The electoral world isn't.

Most books on politics with a polemical edge end with some sort of uplifting narrative. The narrative goes, here's this insurmountable terrible problem, but we can fix it, somehow, somewhere. The Payoff is not like that. At a certain point, Kaufman suggested that the two of them start a nonprofit to continue their reform fight, but Connaughton turns him down and leaves to live a different kind of life in Georgia. He has no illusions about the power of Wall Street and the political system. It isn't fixable within the current model. Nonprofits are outgunned, political money is too powerful, and the careerist allure Professional Democrats and Professional Republicans is overwhelming. He has no solutions, just his own witnessing of how the people who rule us think and act when we're not in the room.

Connaughton is going to pay a heavy price for this book, and for his reform-minded behavior in the last three years. He told stories that you aren't supposed to tell, gives away open secrets that should remain circulating only among insiders. He blew up his connections in the world of politics, burned all his insider bridges. I don't quite know why he wrote this book – though the book itself is deeply pessimistic, the act of writing is in and of itself an act laden with hope. I don't think Connaughton necessarily included his real motivations in the book. It's not as if he says that he met a victim of his earlier career, and realized what he had done. Perhaps he lost a bunch of his wealth in the crash, which opened his eyes to the mirage of what wealth was. Then, he was a helper on Biden's transition team, but was kicked off because he was a lobbyist who had raised Biden money. It seems actually that his turn was completed because he realized that the relationship with Joe Biden, the man who had inspired his life's work – was based on fraud, narcissism, and transactional dishonesty. And the timing of Ted Kaufman's ascension to the Senate was the final kicker.

Sometimes, circumstances and a conscience can intrude at opportune moments. It seems like that's what happened with Connaughton and his remarkable last two years. And now, he has quit the game, with this book — and perhaps "The Blob", which may join the vernacular – as his legacy. He tried his best for two years, and it wasn't enough. The fight is over, and the bad guys won. It's a sad conclusion for someone like Connaughton, and for all those who fought the good fight over the last four years. But it's hard to argue he's wrong.

Bullion Function Debated as Futures Rose 10.4% in Q3

Posted: 03 Oct 2012 05:26 AM PDT

Comex gold futures beat most of the other major markets and rose 10.4% in Q3 this year, the second largest quarterly increase since the 11.91% jump in Q2 2010.

New! Gold Investor Index

Posted: 03 Oct 2012 04:41 AM PDT

BullionVault's new Gold Investor Index "an innovation in gold-market data"...

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

Bull Trend Intact" for Gold, But "Zero Silver Demand" Seen in India

Posted: 03 Oct 2012 04:30 AM PDT

Global Markets Rally on Stimulus

Posted: 03 Oct 2012 04:21 AM PDT

In sum, we are not convinced the global stock market rally will continue at least in the near term. Gold, however, is more likely to sustain gains from this expansion in the money supply.

Gold & Silver Market Morning

Posted: 03 Oct 2012 04:00 AM PDT
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