Gold World News Flash |
- Collapse Now Bad; Collapse Later Far Worse!
- Overheard At The Water Cooler: Trillion Dollar Stimulus
- Attacks on Maguire aim to defend 'paper charade' in gold market, Kaye says
- American Politics, Monetary Policy, and the Price of Gold
- LBMA Collapse, Gold & The Greatest Short Squeeze In History
- Why Did Silver Not Go Up?
- Would You Buy This Business?
- Daily Nugget – US Mess Keeps Gold Up
- 29 Uncomfortable Truths About Soaring Poverty In America
- Nobel Prize Winner: Bubbles Don't Exist
- In The News Today
- Embry surprised West lets its gold go; Turk says Asia sees undervaluation
- Gold’s Bad Luck With the Number 13
- Gold Tests 5-Week Highs. "Should Continue Pushing Higher": Citi
- Why Did Silver Not Go Up?
- Today Silver and Gold Prices Stalled with the Gold Price Closing at $1,352
- Today Silver and Gold Prices Stalled with the Gold Price Closing at $1,352
- Infographic: Worlds Highest Gold Producing Countries
- Marc Faber’s Surprising Gold Forecast
- As Good As It Gets... For A Buy
- Paper gold or physical gold in your IRA?
- Gold Daily and Silver Weekly Charts - Quiet Comex Option Expiration
- Gold Daily and Silver Weekly Charts - Quiet Comex Option Expiration
- Historic End Game - “A Collapse To End All Collapses”
- 40-Year Market Veteran Says Gold & Silver Will Super-Surge
- A Tale of Two Charts: Are We 2007 America or 2006 Zimbabwe?
- Not much reason to dump gold further anymore
- Indian gold demand soldiers on despite govt intervention – UBS
- SPDR gold ETF sales have no effect on gold price
- Can’t miss headlines: Gold gains continue, Western Africa M&A, & more
- Voluntary redundancies on offer at Cobar gold mine
- PART ONE: The Dollar Reserve Equilibrium Is Breaking Down – John Butler
- Efficient Markets' Nobel Nonsense
- Efficient Markets' Nobel Nonsense
- No Easy Answers in Gold Mining
- No Easy Answers in Gold Mining
- Indian Imports & Temple Gold
- Indian Imports & Temple Gold
- A Republic, If You Can Recognize It
- How America Was Bought & Sold
- How America Was Bought & Sold
- 2017: When the Commodity SuperCycle Returns
- 2017: When the Commodity SuperCycle Returns
- Dollar Breaking New Lows While These Junior Miners Are Breaking Out
- FOMC Seen Leaving QE Untouched; Outcome Would Be Gold Friendly
- The Daily Market Report
- Historic End Game - “A Collapse To End All Collapses”
- The Catalyst for an Obamacare Death Spiral
- Gold set a 6-week high of 1361.74 as soft data continue to erode Fed taper expectations.
- BYE BYE FAUX HOUSING RECOVERY
Collapse Now Bad; Collapse Later Far Worse! Posted: 29 Oct 2013 12:30 AM PDT from Charlie Mcgrath: |
Overheard At The Water Cooler: Trillion Dollar Stimulus Posted: 29 Oct 2013 12:00 AM PDT by Matt Insley, SilverBearCafe.com: There was a joke flying around the water cooler yesterday. It went something like this… "What if the government were to print a TRILLION dollars a year in stimulus? That'd be crazy, right!" One trillion. Bigger than 2008′s "shock and awe" bailout, and powerful enough to lift any ailing boat in the economy, eh? Ready for the punch line? After a quick scratch of the head and carrying of the one, you'll realize the government IS ALREADY printing a trillion dollars a year in stimulus! |
Attacks on Maguire aim to defend 'paper charade' in gold market, Kaye says Posted: 28 Oct 2013 10:36 PM PDT 4:35p AEST Tuesday, October 29, 2013 Dear Friend of GATA and Gold: Attacks on monetary metals market rigging whistleblower Andrew Maguire are meant to defend the "paper charade" that is the London "physical" gold market, whose massive leverage Maguire has been exposing, Hong Kong fund manager William Kaye says in an interview with King World News. It's excerpted at the King World News blog here: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/10/29_L... CHRIS POWELL, Secretary/Treasurer ADVERTISEMENT Jim Sinclair Plans Seminar in Florida Gold mining entrepreneur and gold advocate Jim Sinclair plans to hold his next financial seminar in Kissimmee, Florida, near Orlando, on Saturday, November 2. Details can be found at his Internet site, JSMineSet, here: http://www.jsmineset.com/2013/10/22/florida-qa-session-announced/ Join GATA here: Mines and Money Australia New Orleans Investment Conference https://jeffersoncompanies.com/landing/speakers?IDPromotion=613011610080... * * * Support GATA by purchasing DVDs of our London conference in August 2011 or our Dawson City conference in August 2006: http://www.goldrush21.com/order.html Or by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: |
American Politics, Monetary Policy, and the Price of Gold Posted: 28 Oct 2013 09:43 PM PDT Nichols on Gold |
LBMA Collapse, Gold & The Greatest Short Squeeze In History Posted: 28 Oct 2013 09:01 PM PDT With continued turmoil in global markets around the world, today one of the savviest and most well-connected hedge fund managers in the world spoke with King World News about the coming LBMA collapse, Andrew Maguire, gold, and what will be "the greatest short squeeze in modern financial history." William Kaye, who 25 years ago worked for Goldman Sachs in mergers and acquisitions, had this to say in his powerful interview. This posting includes an audio/video/photo media file: Download Now |
Posted: 28 Oct 2013 08:40 PM PDT from TruthNeverTold: |
Posted: 28 Oct 2013 08:27 PM PDT
I have a business I would like to sell you.
Let’s run over the numbers first.
First and foremost, I have to be honest, this business has not implemented a budget in five years. I know that seems like an insane way to run a business, but I can assure you that management is comprised of highly intelligent, ethical people.
These folks would never take advantage of shareholders. They’re all highly educated. And their corporate presentations and conference calls are extremely well written. Trust me, they know what they’re doing.
Having said that I also need to disclose that this business hasn’t been growing much at all. Indeed, it hasn’t even maintained annual growth of 3% in the last five years. On top of this, management has been caught fudging the company’s financials by several outside auditors. An honest assessment of its topline shows zero growth for the last few years.
I know I mentioned before that management are highly ethical. I can assure you they have a good reason to overstate their growth numbers: if the numbers reflected reality, they’d all be fired! We can’t have that can we? So they just “massage” things a bit to make the company’s growth look better than it is and to downplay the rise in costs that are squeezing its margins.
Speaking of which, this company isn’t profitable. In fact, it hasn’t been profitable for five years… actually it has only been profitable a few years out of the last five decades. And those years were “profitable” based on some really massaged numbers.
I know this sounds strange, but those honest folks in management think the best means for this company to grow is to spend way more than the company makes in its topline revenues. Sounds weird, I know. But again, these are very intelligent and ethical people. And none of the analysts covering the company ever ask about this. So what’s the problem?
Oh, and I almost forgot, the company has debt. A lot of it. Currently its debt is running north of 100% of its total market cap. Of course, this is based on some unusual accounting practices. If this company actually followed GAAP accounting rule for its pension expenses its debt load if over 400% of its market cap.
So, would you like to buy this business? How much would you pay for it?
I understand, you’d like to do some more due diligence. Ok, I’ll give you its stock symbol. Do you have a pen and paper ready? Ok, the stock symbol is:
USA.
For a FREE Special Report outlining how to protect your portfolio a market collapse, swing by: http://phoenixcapitalmarketing.com/special-reports.html
Best Regards,
Phoenix Capital Research
|
Daily Nugget – US Mess Keeps Gold Up Posted: 28 Oct 2013 08:00 PM PDT by Jan Skoyles, TheRealAsset.co.uk Early this morning the gold price touched a five-week high as traders bet the FOMC will refrain from tapering QE later this week. The two day meeting will commence tomorrow. The statement released post-meeting will be seen a crucial in terms of indicating when they will go ahead with tapering. Gold market speculators will be looking at the $1,350/oz level watching to see if the yellow metal can break past this key point of resistance. However in terms of a bullish upsurge many believe that this won't be able to happen until the gold price is above $1,430. Prior to the partial government shutdown many analysts had predicted that the Fed would start tapering before Christmas. |
29 Uncomfortable Truths About Soaring Poverty In America Posted: 28 Oct 2013 07:25 PM PDT Submitted by Michael Snyder of The Economic Collapse blog, Did you know that the number of Americans on welfare is higher than the number of Americans that have full-time jobs? Did you know that 1.2 million public school students in the U.S. are currently homeless? Anyone that uses the term "economic recovery" to describe what is happening in the United States today is being deeply insulting to the nearly 150 million Americans that are considered to be either "poor" or "low income" at this point. Yes, things are great in New York City, Washington D.C. and San Francisco, but almost everywhere else economic conditions continue to steadily get worse. The gap between the wealthy and the poor is at a level that America has never seen before, and this is beginning to create a "Robin Hood mentality" that could cause a tremendous amount of social chaos in the years ahead. Anger at the "haves" in America continues to rise at a very alarming pace, and the "have nots" are becoming increasingly desperate. At some point all of this anger is going to boil over, and you won't want to be anywhere around major population centers when that happens. Despite unprecedented borrowing by the federal government in recent years, and despite unprecedented money printing by the Federal Reserve, poverty in the United States keeps getting worse with each passing year. The following are 29 incredible facts which prove that poverty in America is absolutely exploding... 1. What can you say about a nation that has more people getting handouts from the federal government than working full-time? According to the latest numbers from the U.S. Census Bureau, the number of people receiving means-tested welfare benefits is greater than the number of full-time workers in the United States. 2. New numbers have just been released, and they show that the number of public school students in this country that are homeless is at an all-time record high. It is hard to believe, but right now 1.2 million students that attend public schools in America are homeless. That number has risen by 72 percent since the start of the last recession. 3. When I was growing up, it seemed like almost everyone was from a middle class home. But now that has all changed. One recent study discovered that nearly half of all public students in the United States come from low income homes. 4. How can anyone deny that we are a socialist nation when half the people are getting money from the federal government each month? According to the most recent numbers from the U.S. Census Bureau, 49.2 percent of all Americans are receiving benefits from at least one government program. 5. Signs of increasing poverty are even showing up in the wealthiest areas of the nation. According to the New York Post, New York subways are being "overrun with homeless". 6. According to the U.S. Census Bureau, approximately one out of every six Americans is now living in poverty. The number of Americans living in poverty is now at a level not seen since the 1960s. 7. The gap between the rich and the poor in the United States is at an all-time record high. The wealthy may not consider this to be much of a problem, but those at the other end of the spectrum are very aware of this. 8. The "working poor" is one of the fastest growing segments of the U.S. population. At this point, approximately one out of every four part-time workers in America is living below the poverty line. 9. According to numbers provided by Wal-Mart, more than half of their hourly workers make less than $25,000 a year. 10. A recent Businessweek article mentioned a study that discovered that 300 employees at one Wal-Mart in Wisconsin receive a combined total of nearly a million dollars a year in public assistance...
11. The stock market may be doing great (for the moment), but incomes for average Americans continue to decline. In fact, median household income in the United States has fallen for five years in a row. 12. The quality of the jobs in America has been steadily dropping for years. At this point, one out of every four American workers has a job that pays $10 an hour or less. 13. According to a Gallup poll that was recently released, 20.0% of all Americans did not have enough money to buy food that they or their families needed at some point over the past year. That is just under the record of 20.4% that was set back in November 2008. 14. Young adults are particularly feeling the sting of poverty these days. American families that have a head of household that is under the age of 30 have a poverty rate of 37 percent. 15. As I wrote about a few weeks ago, one out of every five households in the United States is on food stamps. Back in the 1970s, about one out of every 50 Americans was on food stamps. 16. The number of Americans on food stamps now exceeds the entire population of Spain. 17. According to one calculation, the number of Americans on food stamps now exceeds the combined populations of "Alaska, Arkansas, Connecticut, Delaware, District of Columbia, Hawaii, Idaho, Iowa, Kansas, Maine, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Dakota, Oklahoma, Oregon, Rhode Island, South Dakota, Utah, Vermont, West Virginia, and Wyoming." 18. We are told that we live in the "wealthiest nation" on the planet, and yet more than one out of every four children in the United States is enrolled in the food stamp program. 19. The average food stamp benefit breaks down to approximately $4 per person per day. 20. It is being projected that approximately 50 percent of all U.S. children will be on food stamps before they reach the age of 18. 21. Today, approximately 17 million children in the United States are facing food insecurity. In other words, that means that "one in four children in the country is living without consistent access to enough nutritious food to live a healthy life." 22. It may be hard to believe, but approximately 57 percent of all children in the United States are currently living in homes that are considered to be either "low income" or impoverished. 23. The number of children living on $2.00 a day or less in the United States has grown to 2.8 million. That number has increased by 130 percent since 1996. 24. In Miami, 45 percent of all children are living in poverty. 25. In Cleveland, more than 50 percent of all children are living in poverty. 26. According to a recently released report, 60 percent of all children in the city of Detroit are living in poverty. 27. According to a Feeding America hunger study, more than 37 million Americans are now being served by food pantries and soup kitchens. 28. The U.S. government has spent an astounding 3.7 trillion dollars on welfare programs over the past five years. 29. It has been reported that 4 out of every 5 adults in the United States "struggle with joblessness, near-poverty or reliance on welfare for at least parts of their lives". These poverty numbers keep getting worse year after year no matter what our politicians do. So is there anyone out there that would still like to argue that we are in an "economic recovery"? And as I mentioned above, the "have nots" are becoming increasingly angry at the "haves". For example, just check out the following excerpt from a recent New York Post article...
Sadly, this was not an isolated incident. All over the western world, a "Robin Hood mentality" is growing. This is something that I am so concerned about that I made it a big part of my new book. At this point, even wealthy Hollywood-types such as actor Russell Brand are calling for a socialist-style "revolution" and a "massive redistribution of wealth". Perhaps Brand does not understand that what he is calling for would mean redistributing most of his own wealth away from him. When the next major wave of the economic collapse strikes, I fear that all of this anger and frustration that are growing among the poor will boil over in some very frightening ways. I believe that we will see a huge spike in crime and that we will eventually see communities all over America looted and burning. But I am not the only one that is thinking along these lines. A new National Geographic Channel movie entitled "American Blackout" attempts to portray the social chaos that could erupt in the event of an extended national power failure...
You can view a clip of the film that was made available by NatGeo for the SHTFplan.com community right here. What would you do if something like that happened to you? How would you handle desperate, hungry people at your fence asking for food? And what if those people were armed and were not "asking nicely" for your food? Don't ignore what is happening in America right now. It is setting the stage for some very chaotic times. |
Nobel Prize Winner: Bubbles Don't Exist Posted: 28 Oct 2013 06:54 PM PDT Submitted by Doug French via Casey Research, No wonder investors don't take economists seriously. Or if they do, they shouldn't. Since Richard Nixon interrupted Hoss and Little Joe on a Sunday night in August 1971, it's been one boom and bust after another. But don't tell that to the latest Nobel Prize co-winner, Eugene Fama, the founder of the efficient-market hypothesis. The efficient-market hypothesis asserts that financial markets are "informationally efficient," claiming one cannot consistently achieve returns in excess of average market returns on a risk-adjusted basis. "Fama's research at the end of the 1960s and the beginning of the 1970s showed how incredibly difficult it is to beat the market, and how incredibly difficult it is to predict how share prices will develop in a day's or a week's time," said Peter Englund, secretary of the committee that awards the Nobel Prize in Economic Sciences. "That shows that there is no point for the common person to get involved in share analysis. It's much better to invest in a broadly composed portfolio of shares." Fama is not just a Nobel laureate. He also co-authored the textbook, The Theory of Finance, with another Nobel winner, Merton H. Miller. He won the 2005 Deutsche Bank Prize in Financial Economics as well as the 2008 Morgan Stanley-American Finance Association Award. He is seriously a big deal in the economics world. So if Fama has it right, investors should just throw in the towel, shove their money into index funds, and blissfully wait until they need the money. Before you do that, read what Fama had to say about the 2008 financial crisis. The New Yorker's John Cassidy asked Fama how he thought the efficient-market hypothesis had held up during the recent financial crisis. The new Nobel laureate responded: "I think it did quite well in this episode. Prices started to decline in advance of when people recognized that it was a recession and then continued to decline. There was nothing unusual about that. That was exactly what you would expect if markets were efficient." When Cassidy mentioned the credit bubble that led to the housing bubble and ultimate bust, the famed professor said: "I don't even know what that means. People who get credit have to get it from somewhere. Does a credit bubble mean that people save too much during that period? I don't know what a credit bubble means. I don't even know what a bubble means. These words have become popular. I don't think they have any meaning." No matter the facts, Fama has his story and he's sticking to it. "I think most bubbles are 20/20 hindsight," Fama told Cassidy. When asked to clarify whether he thought bubbles could exist, Fama answered, "They have to be predictable phenomena." The rest of us, who lived through the tech and real estate booms while Fama was locked in his ivory tower, know that in a boom people go crazy. There's a reason the other term for bubble is mania. According to Webster's, "mania" is defined in an individual as an "excitement of psychotic proportions manifested by mental and physical hyperactivity, disorganization of behavior, and elevation of mood." Financial bubbles have occurred for centuries. In January 1637, the price of the common Witte Croonen tulip bulb rose 26 times, only to crash to 1/20th of its peak price a week later. Eighty years later in France, John Law flooded the French economy with paper money and shares of the Mississippi Company. The public went wild for stock in a company that had no real assets. The shares rose twentyfold in a year, only to crash. Law, a hero in the boom, was run out of France in disgrace. At the same time across the channel, the British public bid up South Sea Company shares from ?300 to ?1,000 in a matter of weeks. Even the brilliant Sir Isaac Newton was caught up in the frenzy. He got in early and sold early. But he then jumped back in near the top and went broke in the crash. In the modern era, booms and busts are too numerous to count: Japanese stocks and property, real estate (multiple times), stocks, commodities, stocks again, farmland (multiple times), and art are just a few. Yet the newest co-Nobelist denies the existence of booms and busts and advises you to put your money in index funds and hope for the best. However, investor returns have not been the best. The last complete calendar decade for stocks ending in 2009 was the worst in history. The Wall Street Journal reported, "Since the end of 1999, stocks traded on the New York Stock Exchange have lost an average of 0.5% a year thanks to the twin bear markets this decade." When you adjust that for inflation, the results were even worse, with the S&P 500 losing an average of 3.3% per year. This decade, stocks have been on a tear—as have bonds, farmland, and art. At first glance, it's nonsensical that the price of virtually everything is rising. But when you remember that the Federal Reserve's cheap money has flooded Wall Street but hasn't come close to Main Street, it becomes clear. The money has to go somewhere. If Fama were correct, there would be no legendary investors like Doug Casey or Rick Rule. There would be no opportunities for ten-baggers and twenty-baggers in resource stocks. Fama is like the economist in the old joke who sees a hundred-dollar bill on the ground but doesn't pick it up. "Why didn't you pick it up?" a friend asks. The economist replies, "It's impossible—a hundred-dollar bill would have already been picked up by now." Of course savvy investors know there are hundred-dollar bills to be picked up in the market. With tax-selling season upon us, now is the time to be shopping for bargains. Doug's friend Rick Rule often says, "You can either be a contrarian or a victim." Taking Fama's advice will make you a victim. The path to wealth is to run against the herd, not with it. Learn how to be a contrarian… how to make handsome gains from the best precious metals, energy, and technology stocks… how to find investment opportunities even in the most unlikely places… how to recognize profitable trends before they start. Read all this and more in our free daily e-letter, the Casey Daily Dispatch—click here to get it now. |
Posted: 28 Oct 2013 06:42 PM PDT Jim Sinclair’s Commentary John Williams clarifies for us: - Production Jump Was Due to Irregular Surge in Utilities Usage - Economy Remains in Stagnation/Renewed Downturn Jim Sinclair’s Commentary Not dollar positive! NSA oversight dismissed as ‘illusory’ as anger intensifies in Europe and beyond Condemnation by Latin American panel comes as US fields worsening outrage... Read more » The post In The News Today appeared first on Jim Sinclair's Mineset. |
Embry surprised West lets its gold go; Turk says Asia sees undervaluation Posted: 28 Oct 2013 05:57 PM PDT 11:49a AEST Tuesday, October 29, 2013 Dear Friend of GATA and Gold: Sprott Asset Management's John Embry tells King World News he's surprised that the West is allowing a hastened transfer of gold to China: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/10/28_H... And GoldMoney founder James Turk tells King World News that Asia understands the undervaluation of gold just as Europe understood it in the last days of the London Gold Pool in 1968: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/10/28_4... CHRIS POWELL, Secretary/Treasurer ADVERTISEMENT How to profit with silver -- Future Money Trends is offering a special 16-page silver report with our forecast for 2013 that includes profiles of nine companies and technical analysis of their stock performance. Six of the companies have market capitalizations of less than $800 million and one company has a market cap of only $30 million. The most exciting of these companies will begin production in a few weeks and has a market cap of just $150 million. Half of all proceeds from the sale of this report will be donated to the Gold Anti-Trust Action Committee to support its efforts exposing manipulation and fraud in the gold and silver markets. To learn about this report, please visit: http://www.futuremoneytrends.com/index.php?option=com_content&id=376&tmp... Join GATA here: Mines and Money Australia New Orleans Investment Conference https://jeffersoncompanies.com/landing/speakers?IDPromotion=613011610080... * * * Support GATA by purchasing DVDs of our London conference in August 2011 or our Dawson City conference in August 2006: http://www.goldrush21.com/order.html Or by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Buy metals at GoldMoney and enjoy international storage GoldMoney was established in 2001 by James and Geoff Turk and is safeguarding more than $1.7 billion in metals and currencies. Buy gold, silver, platinum, and palladium from GoldMoney over the Internet and store them in vaults in Canada, Hong Kong, Singapore, Switzerland, and the United Kingdom, taking advantage of GoldMoney's low storage rates, among the most competitive in the industry. GoldMoney also offers delivery of 100-gram and 1-kilogram gold bars and 1-kilogram silver bars. To learn more, please visit: http://www.goldmoney.com/?gmrefcode=gata |
Gold’s Bad Luck With the Number 13 Posted: 28 Oct 2013 05:38 PM PDT Gold has been on a rampage since the early 2000's with yearly gains for 12 years in a row. Nothing lasts forever and the number 13 is starting to look very unlucky for gold. Barring a major upset in the world financial system, it looks increasing likely that gold will decline in the 13th year [...] |
Gold Tests 5-Week Highs. "Should Continue Pushing Higher": Citi Posted: 28 Oct 2013 04:54 PM PDT On the back of dismal data this morning merely compounding the belief that whatever happens, there will be no Taper anytime soon (and record high physical premiums over spot as Indian demand surges), gold prices broke back above $1360 this morning to five-week highs. Of course, that 'rise' was very quickly squelched as stocks POMO'd higher from the US open; but, as Citi's FX technicals group notes, the break of $1343 points to a test of $1430 and a bias to testing back above the $1522-32 region.
Via Citi, Gold and Silver should continue pushing higher – Gold is breaking through resistance around $1,343 and should move towards the $1,430. We continue to be of the bias that Gold is setting up for a multi-year rally and a break above the $1,522-$1,532 area would solidify this view. – In periods in which Gold does well, Silver actually outperforms. It is already setting up a double bottom which targets $24.40 and an overshoot of that area could take Silver towards $26 in the near term. Gold is pushing higher Gold is pushing higher through the 55 day moving average and we continue to expect higher levels in both the near and long-term. The next resistance level to watch in the short-term is the $1,430 area, where the 200 day moving average converges with the August high. Through there the $1,522-$1,533 area could provide further resistance. This area held well as support in 2011 and 2012 and the break below this year led to accelerated losses. A break higher through that area would suggest to us that the correction for this year is over and that the long-term uptrend has resume (as we have previously articulated, we remain of the bias that Gold will continue to see gains in the coming years and maintain a long-term target of $3,500 – this is further supported by the idea of no Fed tapering for the foreseeable future) Silver outperforms when Gold moves higher We have seen over the last decade that in the periods where Gold rallied, Silver actually outperformed (red arrows). During periods where Gold prices declined, Silver did worse than Gold (green arrows). If we are in fact seeing the beginning of a long-term Gold rally, we would expect Silver to once again outperform. Levels to watch on Silver Silver is now through the neckline of a double bottom which targets $24.40, in line with resistance around the $24.24-$25.00 area, where the 200 day moving average converges with the late April and August highs. Through there $26 is an important resistance area (lows from late 2011 and 2012) and a move through there suggests much higher levels for Silver going forward. |
Posted: 28 Oct 2013 04:27 PM PDT Why did silver not go up? Let's look at what has changed in the past few years , There will be a reversion to the mean in the world that will affect wealth and populations. Everything... [[ This is a content summary only. Visit http://goldbasics.blogspot.com or http://www.newsbooze.com or http://www.figanews.com for full links, other content, and more! ]] |
Today Silver and Gold Prices Stalled with the Gold Price Closing at $1,352 Posted: 28 Oct 2013 04:19 PM PDT Gold Price Close Today : 1352.00 Change : -0.40 or -0.03% Silver Price Close Today : 22.498 Change : -0.105 or -0.46% Gold Silver Ratio Today : 60.094 Change : 0.261 or 0.44% Silver Gold Ratio Today : 0.01664 Change : -0.000073 or -0.44% Platinum Price Close Today : 1470.10 Change : 17.60 or 1.21% Palladium Price Close Today : 749.45 Change : 2.55 or 0.34% S&P 500 : 1,762.11 Change : 2.34 or 0.13% Dow In GOLD$ : $238.05 Change : $ 0.05 or 0.02% Dow in GOLD oz : 11.515 Change : 0.002 or 0.02% Dow in SILVER oz : 692.01 Change : 3.15 or 0.46% Dow Industrial : 15,568.93 Change : -1.35 or -0.01% US Dollar Index : 79.343 Change : 0.142 or 0.18% Today both silver and GOLD PRICES stalled. Gold lost 40 cents to $1,352 while silver lost 10.5 cents and ended 2249.8c. Y'all know always to buy a rising market only, right? That must be correct because that's what everybody does, only they wait until the market has already made a huge rise to do it. It's human nature. They feel comfortable in a crowd, like lemmings. The folks who make the money -- the ones who look for oversold markets that offer real value -- are vanishingly scarce. Human nature. WHEREFORE, now while silver and GOLD PRICES, it seems, have finished their corrections, nobody wants to buy, so they will wait until gold has climbed from $1,350 to $1,900 so they can be "sure" it's going to rise. One other item: most likely, the Fed won't taper. Not at all. None. Oh, I know they are rattling their tongues (their sharpest weapon) about tapering again. Fed took the Adjusted Monetary Base, the fuel for inflation, from about $850 billion in August 2008 to about $3.5 trillion lately. I am waiting for somebody to explain to me how, facing the present deflationary and depressionary headwinds, the fed will WITHDRAW high-powered money from the economy at all, or even taper off its monthly purchases (new money creation at an $85 bn monthly rate or $1.02 trillion yearly). More likely, in fact, is that the Fed INCREASES money creation, because they are now wed to the notion that money creation alone will fix the depression. And while that inflation causes both poor and great to suffer, it drives silver and gold higher and higher. And it's coming. It's already baked into the cake, at least, that's what Adjusted Monetary Base says. Last week silver and gold prices performed just about perfectly. They jumped through two resistance levels on Monday, backed off Tuesday to the highest resistance, and Wednesday jumped to higher levels still. Gold jumped over its 50 day moving average (DMA), as did silver. Only silver's weakness Friday marred the week. Let's realistically face the outcomes here. First, there remaineth the possibility of one further leg down, taking gold toward $1,200 and the SILVER PRICE toward $18. Seasonally both are moving out of the time when seasonality makes new lows likely. But until gold closes above its 200 DMA (now $1,432) and last peak $1,434, this possibility remains alive. Should it occur, it will mark a solid double bottom with the June low. Second outcome is that I really am seeing upside-down head and shoulders patterns on both charts, which really are targeting $1,675 and $31.83. But first like all good runners, silver and gold must make it over the hurdles without tripping. Nearby silver must beat the 2300c mark that whipped it last week, although it has already better the last peak (2252c). I am most anxious to witness a close above 2355, then over 2512c, the August peak and the neckline. In between lies silver's 200 DMA at 2427c. In the same rally outcome, the gold price needs to rise above $1,376, then $1,400. Big leap comes at the August high of $1,434 and the 200 DMA ($1,432.77). The really clench it all down hurdle is $1,550, where gold broke down in April. However, technically momentum turns upward when gold closes over the 200 DMA. Buttressing the case for higher gold and silver are the Dow in Gold and Dow in Silver. While stocks are making new highs, both indicators are falling, revealing the relative strength in metals. Dow in gold today closed roughly unchanged at 11.515 oz (G$238.05 gold dollars). Dow in Silver rose 3.15 oz (0.46%) to 692.01 oz. Trend favors metals, 'cause it's down. Stocks continue to levitate, but with a few bluebirds of unhappiness flying by. Dow Theory says that a new high in the Transports or Industrials needs to be confirmed by a new high in the other. Dow Industrials has stubbornly resisted making a new high while the S&P500 made daily new highs. The Dow Transports made 4 new highs in the last 5 days, while the Dow Industrials have not. Maybe the Industrials will catch up? Dow fell 1.35 (0.01%) to 15,568.93 while the S&P500 rose 2.34 (0.13%) to a new high at 1,762.11. S&P500 has broken out above the upper trend line but the Dow laggeth onward. Meanwhile, margin debt has reached levels not seen since the 2007 peak. Does that mean anything? US dollar index remains floating above 79, refusing to follow through on its breakdown. Closed today at 79.343, up 14.2 basis points (0.18%). Euro has risen to $1.3785, higher than last week but down 0.13% today. It's only edging forward. Yen ended today at 102.38, down 0.30% and little changed in the last week. Friends, Volume 2 of At Home In Dogwood Mudhole (Best Thing We Ever Did) is now available for preorder at www.dogwoodmudhole.com. It went to the printer today and we estimate it will be ready to ship the first week in December, in time for Christmas. I must be crazy generous, but if you will use the discount code HOGWILD I will give you free shipping to US addresses, up to $6 (enough for 2 copies). Offer expires Sunday, 30 November 2013. Also, the PDF version will be available for sale and immediate download tomorrow, with Kindle and ePub editions coming in a few weeks. Argentum et aurum comparenda sunt -- -- Gold and silver must be bought. - Franklin Sanders, The Moneychanger The-MoneyChanger.com © 2013, The Moneychanger. May not be republished in any form, including electronically, without our express permission. To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold or 18 ounces of silver. or 18 ounces of silver. US $ and US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down. WARNING AND DISCLAIMER. Be advised and warned: Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that short term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures. NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day one or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps. NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced. NOR do I recommend buying gold and silver on margin or with debt. What DO I recommend? Physical gold and silver coins and bars in your own hands. One final warning: NEVER insert a 747 Jumbo Jet up your nose.> |
Today Silver and Gold Prices Stalled with the Gold Price Closing at $1,352 Posted: 28 Oct 2013 04:19 PM PDT Gold Price Close Today : 1352.00 Change : -0.40 or -0.03% Silver Price Close Today : 22.498 Change : -0.105 or -0.46% Gold Silver Ratio Today : 60.094 Change : 0.261 or 0.44% Silver Gold Ratio Today : 0.01664 Change : -0.000073 or -0.44% Platinum Price Close Today : 1470.10 Change : 17.60 or 1.21% Palladium Price Close Today : 749.45 Change : 2.55 or 0.34% S&P 500 : 1,762.11 Change : 2.34 or 0.13% Dow In GOLD$ : $238.05 Change : $ 0.05 or 0.02% Dow in GOLD oz : 11.515 Change : 0.002 or 0.02% Dow in SILVER oz : 692.01 Change : 3.15 or 0.46% Dow Industrial : 15,568.93 Change : -1.35 or -0.01% US Dollar Index : 79.343 Change : 0.142 or 0.18% Today both silver and GOLD PRICES stalled. Gold lost 40 cents to $1,352 while silver lost 10.5 cents and ended 2249.8c. Y'all know always to buy a rising market only, right? That must be correct because that's what everybody does, only they wait until the market has already made a huge rise to do it. It's human nature. They feel comfortable in a crowd, like lemmings. The folks who make the money -- the ones who look for oversold markets that offer real value -- are vanishingly scarce. Human nature. WHEREFORE, now while silver and GOLD PRICES, it seems, have finished their corrections, nobody wants to buy, so they will wait until gold has climbed from $1,350 to $1,900 so they can be "sure" it's going to rise. One other item: most likely, the Fed won't taper. Not at all. None. Oh, I know they are rattling their tongues (their sharpest weapon) about tapering again. Fed took the Adjusted Monetary Base, the fuel for inflation, from about $850 billion in August 2008 to about $3.5 trillion lately. I am waiting for somebody to explain to me how, facing the present deflationary and depressionary headwinds, the fed will WITHDRAW high-powered money from the economy at all, or even taper off its monthly purchases (new money creation at an $85 bn monthly rate or $1.02 trillion yearly). More likely, in fact, is that the Fed INCREASES money creation, because they are now wed to the notion that money creation alone will fix the depression. And while that inflation causes both poor and great to suffer, it drives silver and gold higher and higher. And it's coming. It's already baked into the cake, at least, that's what Adjusted Monetary Base says. Last week silver and gold prices performed just about perfectly. They jumped through two resistance levels on Monday, backed off Tuesday to the highest resistance, and Wednesday jumped to higher levels still. Gold jumped over its 50 day moving average (DMA), as did silver. Only silver's weakness Friday marred the week. Let's realistically face the outcomes here. First, there remaineth the possibility of one further leg down, taking gold toward $1,200 and the SILVER PRICE toward $18. Seasonally both are moving out of the time when seasonality makes new lows likely. But until gold closes above its 200 DMA (now $1,432) and last peak $1,434, this possibility remains alive. Should it occur, it will mark a solid double bottom with the June low. Second outcome is that I really am seeing upside-down head and shoulders patterns on both charts, which really are targeting $1,675 and $31.83. But first like all good runners, silver and gold must make it over the hurdles without tripping. Nearby silver must beat the 2300c mark that whipped it last week, although it has already better the last peak (2252c). I am most anxious to witness a close above 2355, then over 2512c, the August peak and the neckline. In between lies silver's 200 DMA at 2427c. In the same rally outcome, the gold price needs to rise above $1,376, then $1,400. Big leap comes at the August high of $1,434 and the 200 DMA ($1,432.77). The really clench it all down hurdle is $1,550, where gold broke down in April. However, technically momentum turns upward when gold closes over the 200 DMA. Buttressing the case for higher gold and silver are the Dow in Gold and Dow in Silver. While stocks are making new highs, both indicators are falling, revealing the relative strength in metals. Dow in gold today closed roughly unchanged at 11.515 oz (G$238.05 gold dollars). Dow in Silver rose 3.15 oz (0.46%) to 692.01 oz. Trend favors metals, 'cause it's down. Stocks continue to levitate, but with a few bluebirds of unhappiness flying by. Dow Theory says that a new high in the Transports or Industrials needs to be confirmed by a new high in the other. Dow Industrials has stubbornly resisted making a new high while the S&P500 made daily new highs. The Dow Transports made 4 new highs in the last 5 days, while the Dow Industrials have not. Maybe the Industrials will catch up? Dow fell 1.35 (0.01%) to 15,568.93 while the S&P500 rose 2.34 (0.13%) to a new high at 1,762.11. S&P500 has broken out above the upper trend line but the Dow laggeth onward. Meanwhile, margin debt has reached levels not seen since the 2007 peak. Does that mean anything? US dollar index remains floating above 79, refusing to follow through on its breakdown. Closed today at 79.343, up 14.2 basis points (0.18%). Euro has risen to $1.3785, higher than last week but down 0.13% today. It's only edging forward. Yen ended today at 102.38, down 0.30% and little changed in the last week. Friends, Volume 2 of At Home In Dogwood Mudhole (Best Thing We Ever Did) is now available for preorder at www.dogwoodmudhole.com. It went to the printer today and we estimate it will be ready to ship the first week in December, in time for Christmas. I must be crazy generous, but if you will use the discount code HOGWILD I will give you free shipping to US addresses, up to $6 (enough for 2 copies). Offer expires Sunday, 30 November 2013. Also, the PDF version will be available for sale and immediate download tomorrow, with Kindle and ePub editions coming in a few weeks. Argentum et aurum comparenda sunt -- -- Gold and silver must be bought. - Franklin Sanders, The Moneychanger The-MoneyChanger.com © 2013, The Moneychanger. May not be republished in any form, including electronically, without our express permission. To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold or 18 ounces of silver. or 18 ounces of silver. US $ and US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down. WARNING AND DISCLAIMER. Be advised and warned: Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that short term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures. NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day one or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps. NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced. NOR do I recommend buying gold and silver on margin or with debt. What DO I recommend? Physical gold and silver coins and bars in your own hands. One final warning: NEVER insert a 747 Jumbo Jet up your nose.> |
Infographic: Worlds Highest Gold Producing Countries Posted: 28 Oct 2013 03:31 PM PDT Perth Mint Blog. |
Marc Faber’s Surprising Gold Forecast Posted: 28 Oct 2013 02:30 PM PDT In an interview with Barron's, Marc Faber, editor of The Gloom, Boom & Doom report gives his take on where the gold market is headed and why certain investments related to gold might be very risky. Marc Faber, never at a loss for a good soundbite, says gold is "in a correction mode" but seemed [...] |
As Good As It Gets... For A Buy Posted: 28 Oct 2013 02:06 PM PDT Many events moved the market this month. Gold demand was stable but more important, gold is getting a boost from the weaker U.S. dollar. The U.S. dollar is now clearly bearish, and since gold and the U.S. dollar generally move in ... Read More... |
Paper gold or physical gold in your IRA? Posted: 28 Oct 2013 01:50 PM PDT 28-Oct (USAGOLD) A common topic of discussion for first-time gold buyers is the difference between paper gold in the form of exchange traded funds (ETFs) or certificate programs and actual physical bars and coins that are allocated and segregated in a custodial vault. The principle reason for owning gold is to have something in the portfolio detached from the financial system and counter-party risk (think Lehman Brothers 2008). For those who understand the basic reasons for owning physical gold, buying paper gold in their retirement plan is a step in the wrong direction. There is a certain amount of comfort in knowing their metal actually existis in a box sitting on a shelf separate from everyone else’s as is the nature of allocated gold ownership in a USAGOLD IRA. Long-time gold analyst and GoldMoney founder, James Turk makes this observation with respect to gold ETF’s: “Investments in gold [within an ETF] can be nearly anything gold related, and for example, include gold certificates and other promises to pay gold. GLD [a noted ETF] does not have to prove to its auditor that each share in issue is backed by gold in the vault. Rather, all GLD has to do to satisfy its auditor is to simply show them an account statement (i.e., a piece of paper) from any subcustodian or sub-subcustodian that says gold is owed by them to GLD.” In other words, the ETF gold is subject to the vagaries of counterparty risk. Elsewhere on this website you will find a detailed discussion about China’s deep and abiding interest in the physical gold market. Thus far in 2013, over 1000 tonnes of gold (roughly 40% of annual global mine production) has been delivered out London-based ETFs to Switzerland for reprocessing into smaller bars for ultimate shipment to Chinese consumers, investors and its central bank. China knows the difference between a paper promise and the real thing, as do most of the investors who have already converted paper gold to allocated coins and bullion in their own individual retirement accounts. For regular updates on utilizing precious metals in your IRA, we invite you to visit our retirement planning page. |
Gold Daily and Silver Weekly Charts - Quiet Comex Option Expiration Posted: 28 Oct 2013 01:36 PM PDT |
Gold Daily and Silver Weekly Charts - Quiet Comex Option Expiration Posted: 28 Oct 2013 01:36 PM PDT |
Historic End Game - “A Collapse To End All Collapses” Posted: 28 Oct 2013 01:35 PM PDT John Embry With the world continuing to face great uncertainty, today a man who has been involved in the financial markets for 50 years, and whose business partner is billionaire Eric Sprott, told King World News that “we are now in a historic end game.” He also spoke warned about the West experiencing “a collapse to end all collapses,” and also discussed what this all means for key markets such as gold and silver. Below is what John Embry had to say in this powerful interview. Embry: “The West is headed into |
40-Year Market Veteran Says Gold & Silver Will Super-Surge Posted: 28 Oct 2013 12:36 PM PDT On the heels of what appears to be an eerie calmness in global markets, today a man who has been trading major markets for over four decades told King World News that the gold and silver markets are now set up to super-surge. He also provided two powerful charts which illustrate why the metals are now set up to soar. Below is what James Turk had to say in this tremendous and timely interview. This posting includes an audio/video/photo media file: Download Now |
A Tale of Two Charts: Are We 2007 America or 2006 Zimbabwe? Posted: 28 Oct 2013 12:34 PM PDT The US equity markets are back in record territory, at least in nominal terms. The last two times they spiked this way, the following year was pretty brutal. See the next chart, which tracks the S&P 500 and margin debt, the amount of money investors are borrowing against their shares of stock to buy more stock. The chart seems to show that when investors are optimistic enough to use leverage to invest in already-risky stocks, then the good times have pretty much run their course and something nasty is imminent. If recent history is our guide, it is now time to either take some money off the table or short the hell out of the big indexes – or whatever else you like to do when the market looks overbought. But this conclusion is only valid if we're in the same stage of the credit bubble as during those two previous sentiment peaks. In 2000 and 2007, to take just one measure of financial stability, the federal government's debt was $6 trillion and $8 trillion, respectively, versus $17 trillion today. Plenty of other leverage metrics are also way up, indicating that the US is much further down the path of currency debasement than it was just a few years ago. So the question becomes: at what point does a quantitative difference become qualitative? When does the phase change occur? The next chart shows why this question is more than academic. In the early stages of Zimbabwe's epic hyperinflation its stock market rose from 2,000 to over 40,000 in one year. Presumably a lot of indicators similar to margin debt were by then pointing to a blow-off top and screaming "sell" to students of history. Then the market proceeded to run up to 4,000,000. What happened? The country ran its printing press flat-out and inflated away its currency, so the price of pretty much every tangible asset, when measured in Zimbabwean dollars, went parabolic. Since equities represent part ownership of companies, and most non-financial companies own tangible assets, their value went up as well. Not enough to increase in real terms (versus gold, for instance) but enough to make shorting that market a really bad idea. So are we 2007 America or 2006 Zimbabwe? A lot is riding on the answer. Note: This article originally appeared at Dollarcollapse.com P.S. The Daily Reckoning email edition is full of great insights, wisdom and advice for the savvy investor. Learn how to profit from today's big market moves by subscribing today. Just click here. |
Not much reason to dump gold further anymore Posted: 28 Oct 2013 12:33 PM PDT The US central bank begins a two-day meeting on Tuesday and many analysts expect it to stick with $85 billion of monthly QE. |
Indian gold demand soldiers on despite govt intervention – UBS Posted: 28 Oct 2013 12:33 PM PDT Recent government regulations have hindered investment demand for gold in India, UBS says, but much of the country’s overall demand should remain intact. |
SPDR gold ETF sales have no effect on gold price Posted: 28 Oct 2013 12:33 PM PDT Sales from the SPDR gold ETF holdings yesterday had no effect on the gold price as it rose slightly to $1,350, reports Julian Phillips. |
Can’t miss headlines: Gold gains continue, Western Africa M&A, & more Posted: 28 Oct 2013 12:33 PM PDT Looking to copper, China, as ever, watched carefully this week as key economic data comes out and meantime gold edges back up. |
Voluntary redundancies on offer at Cobar gold mine Posted: 28 Oct 2013 12:33 PM PDT NewGold is looking to cut production costs, offering 45 voluntary redundancies at its Peak Gold Mines in Cobar, New South Wales. |
PART ONE: The Dollar Reserve Equilibrium Is Breaking Down – John Butler Posted: 28 Oct 2013 12:26 PM PDT “The Matterhorn Interview – 28 Oct. 2013: John Butler – Part 1″On behalf of Matterhorn Asset Management Zurich, London-based investment manager John Butler met with German financial journalist Lars Schall in Munich to discuss some of the major aspects of international affairs as they relate to the sphere of finance. In Part 1 (18 minutes) of this tremendous and informative video interview they focus in particular on the U.S. dollar and the challenges that may arise if China would back the yuan with gold. Butler: if gold would be remonetized in a historical proper fashion, its price would be a lot higher. Egon von Greyerz In Part Two (20 minutes), which we publish On October 29, John Butler will touch upon the collapse of the paper gold market, the prospect of trading nations refusing paper money in exchange for their exports and why the euro was perhaps in principal a fine idea, but won’t survive in its current form. "Part 1: The Dollar Reserve Equilibrium Is Breaking Down"John Butler, who studied economics, history, philosophy and international politics, has worked for over 15 years as an interest rate, currency and commodity strategist at major investment banks in North America and Europe. He was Managing Director and Head of the Index Strategies Group at Deutsche Bank in London, and Managing Director and Head of European Interest Rate Strategy at Lehman Brothers in London. He's now the Chief Investment Officer of Amphora Capital, an independent investment and advisory firm in the City of London. In 2012 he published the book "The Golden Revolution: How to Prepare for the Coming Global Gold Standard," published by John Wiley and Sons. |
Efficient Markets' Nobel Nonsense Posted: 28 Oct 2013 11:58 AM PDT All the information about an asset is held in its price at any one time. Apparently... NO WONDER investors don't take economists seriously, writes Doug French for Casey Research. Or if they do, they shouldn't. Since Richard Nixon interrupted Hoss and Little Joe on a Sunday night in August 1971, it's been one boom and bust after another. But don't tell that to the latest Nobel Prize co-winner, Eugene Fama, the founder of the efficient-market hypothesis. The efficient-market hypothesis asserts that financial markets are "informationally efficient," claiming one cannot consistently achieve returns in excess of average market returns on a risk-adjusted basis.
Fama is not just a Nobel laureate. He also co-authored the textbook, The Theory of Finance, with another Nobel winner, Merton H. Miller. He won the 2005 Deutsche Bank Prize in Financial Economics as well as the 2008 Morgan Stanley-American Finance Association Award. He is seriously a big deal in the economics world. So if Fama has it right, investors should just throw in the towel, shove their money into index funds, and blissfully wait until they need the money. Before you do that, read what Fama had to say about the 2008 financial crisis. The New Yorker's John Cassidy asked Fama how he thought the efficient-market hypothesis had held up during the recent financial crisis. The new Nobel laureate responded:
When Cassidy mentioned the credit bubble that led to the housing bubble and ultimate bust, the famed professor said:
No matter the facts, Fama has his story and he's sticking to it. "I think most bubbles are 20/20 hindsight," Fama told Cassidy. When asked to clarify whether he thought bubbles could exist, Fama answered, "They have to be predictable phenomena." The rest of us, who lived through the tech and real estate booms while Fama was locked in his ivory tower, know that in a boom people go crazy. There's a reason the other term for bubble is mania. According to Webster's, "mania" is defined in an individual as an "excitement of psychotic proportions manifested by mental and physical hyperactivity, disorganization of behavior, and elevation of mood." Financial bubbles have occurred for centuries. In January 1637, the price of the common Witte Croonen tulip bulb rose 26 times, only to crash to 1/20th of its peak price a week later. Eighty years later in France, John Law flooded the French economy with paper money and shares of the Mississippi Company. The public went wild for stock in a company that had no real assets. The shares rose twentyfold in a year, only to crash. Law, a hero in the boom, was run out of France in disgrace. At the same time across the channel, the British public bid up South Sea Company shares from £300 to £1,000 in a matter of weeks. Even the brilliant Sir Isaac Newton was caught up in the frenzy. He got in early and sold early. But he then jumped back in near the top and went broke in the crash. In the modern era, booms and busts are too numerous to count: Japanese stocks and property, real estate (multiple times), stocks, commodities, stocks again, farmland (multiple times), and art are just a few. Yet the newest co-Nobelist denies the existence of booms and busts and advises you to put your money in index funds and hope for the best. However, investor returns have not been the best. The last complete calendar decade for stocks ending in 2009 was the worst in history. The Wall Street Journal reported, "Since the end of 1999, stocks traded on the New York Stock Exchange have lost an average of 0.5% a year thanks to the twin bear markets this decade." When you adjust that for inflation, the results were even worse, with the S&P 500 losing an average of 3.3% per year. This decade, stocks have been on a tear – as have bonds, farmland, and art. At first glance, it's nonsensical that the price of virtually everything is rising. But when you remember that the Federal Reserve's cheap money has flooded Wall Street but hasn't come close to Main Street, it becomes clear. The money has to go somewhere. If Fama were correct, there would be no legendary investors like Doug Casey or Rick Rule. There would be no opportunities for ten-baggers and twenty-baggers in resource stocks. Fama is like the economist in the old joke who sees a hundred-Dollar bill on the ground but doesn't pick it up. "Why didn't you pick it up?" a friend asks. The economist replies, "It's impossible – a hundred-Dollar bill would have already been picked up by now." Of course savvy investors know there are hundred-Dollar bills to be picked up in the market. With tax-selling season upon us, now is the time to be shopping for bargains. Doug's friend Rick Rule often says, "You can either be a contrarian or a victim." Taking Fama's advice will make you a victim. The path to wealth is to run against the herd, not with it. You can learn more about how to be a contrarian in Casey Research's free daily e-letter, the Casey Daily Dispatch. |
Efficient Markets' Nobel Nonsense Posted: 28 Oct 2013 11:58 AM PDT All the information about an asset is held in its price at any one time. Apparently... NO WONDER investors don't take economists seriously, writes Doug French for Casey Research. Or if they do, they shouldn't. Since Richard Nixon interrupted Hoss and Little Joe on a Sunday night in August 1971, it's been one boom and bust after another. But don't tell that to the latest Nobel Prize co-winner, Eugene Fama, the founder of the efficient-market hypothesis. The efficient-market hypothesis asserts that financial markets are "informationally efficient," claiming one cannot consistently achieve returns in excess of average market returns on a risk-adjusted basis.
Fama is not just a Nobel laureate. He also co-authored the textbook, The Theory of Finance, with another Nobel winner, Merton H. Miller. He won the 2005 Deutsche Bank Prize in Financial Economics as well as the 2008 Morgan Stanley-American Finance Association Award. He is seriously a big deal in the economics world. So if Fama has it right, investors should just throw in the towel, shove their money into index funds, and blissfully wait until they need the money. Before you do that, read what Fama had to say about the 2008 financial crisis. The New Yorker's John Cassidy asked Fama how he thought the efficient-market hypothesis had held up during the recent financial crisis. The new Nobel laureate responded:
When Cassidy mentioned the credit bubble that led to the housing bubble and ultimate bust, the famed professor said:
No matter the facts, Fama has his story and he's sticking to it. "I think most bubbles are 20/20 hindsight," Fama told Cassidy. When asked to clarify whether he thought bubbles could exist, Fama answered, "They have to be predictable phenomena." The rest of us, who lived through the tech and real estate booms while Fama was locked in his ivory tower, know that in a boom people go crazy. There's a reason the other term for bubble is mania. According to Webster's, "mania" is defined in an individual as an "excitement of psychotic proportions manifested by mental and physical hyperactivity, disorganization of behavior, and elevation of mood." Financial bubbles have occurred for centuries. In January 1637, the price of the common Witte Croonen tulip bulb rose 26 times, only to crash to 1/20th of its peak price a week later. Eighty years later in France, John Law flooded the French economy with paper money and shares of the Mississippi Company. The public went wild for stock in a company that had no real assets. The shares rose twentyfold in a year, only to crash. Law, a hero in the boom, was run out of France in disgrace. At the same time across the channel, the British public bid up South Sea Company shares from £300 to £1,000 in a matter of weeks. Even the brilliant Sir Isaac Newton was caught up in the frenzy. He got in early and sold early. But he then jumped back in near the top and went broke in the crash. In the modern era, booms and busts are too numerous to count: Japanese stocks and property, real estate (multiple times), stocks, commodities, stocks again, farmland (multiple times), and art are just a few. Yet the newest co-Nobelist denies the existence of booms and busts and advises you to put your money in index funds and hope for the best. However, investor returns have not been the best. The last complete calendar decade for stocks ending in 2009 was the worst in history. The Wall Street Journal reported, "Since the end of 1999, stocks traded on the New York Stock Exchange have lost an average of 0.5% a year thanks to the twin bear markets this decade." When you adjust that for inflation, the results were even worse, with the S&P 500 losing an average of 3.3% per year. This decade, stocks have been on a tear – as have bonds, farmland, and art. At first glance, it's nonsensical that the price of virtually everything is rising. But when you remember that the Federal Reserve's cheap money has flooded Wall Street but hasn't come close to Main Street, it becomes clear. The money has to go somewhere. If Fama were correct, there would be no legendary investors like Doug Casey or Rick Rule. There would be no opportunities for ten-baggers and twenty-baggers in resource stocks. Fama is like the economist in the old joke who sees a hundred-Dollar bill on the ground but doesn't pick it up. "Why didn't you pick it up?" a friend asks. The economist replies, "It's impossible – a hundred-Dollar bill would have already been picked up by now." Of course savvy investors know there are hundred-Dollar bills to be picked up in the market. With tax-selling season upon us, now is the time to be shopping for bargains. Doug's friend Rick Rule often says, "You can either be a contrarian or a victim." Taking Fama's advice will make you a victim. The path to wealth is to run against the herd, not with it. You can learn more about how to be a contrarian in Casey Research's free daily e-letter, the Casey Daily Dispatch. |
No Easy Answers in Gold Mining Posted: 28 Oct 2013 11:54 AM PDT Tough times now, tougher times ahead. But that doesn't mean you can't profit... KERRY SMITH, research analyst at Haywood Securities, has been a mining analyst since 1992. He was a mining engineer with 10 years of mine experience, and holds a Master of Business Administration degree. Here Kerry Smith talks to The Gold Report about why there are no easy answers in the gold mining market right now. Companies and investors alike have to hunker down and make tough calls. But that doesn't mean companies and investors can't make money, even in the short term... The Gold Report: Haywood Securities recently published its Q3/13 Junior Exploration Report, which tells prospective investors about 17 exploration companies across a range of mine commodities. There were 20 companies covered in the Q2/13 report. Six of those have since been removed, while three new companies were added. Why does the report have such a short-term investment horizon? Kerry Smith: Our focus is to identify companies that will have meaningful news in the next three months that could impact the share price. We're looking for companies with projects that we like from an exploration perspective and we have a PhD. geologist who is charged with making sure the names in the report offer geologic potential. TGR: Investors typically take a longer-term view of gold mining equities, but do you believe you can make money with a short-term horizon? Kerry Smith: If a company has meaningful catalysts coming in the next three months, money can be made by investing in it. I would agree that, ultimately, the way investors make real money in the space is by investing in an exploration play that makes a discovery and staying invested until it has been drilled off to a resource stage. Typically, investors would want to sell before the company starts talking about permitting, construction and project finance because that's when a company goes into a huge vacuum – there is no news and the stock rolls over. We're trying to find companies that can deliver decent catalysts in the short term. It's a constantly evolving list. We roll names off, and we roll names on. TGR: There are hundreds of exploration plays. At a time when investors are eschewing risk in gold mining, what do those three new companies in the report have in common? Kerry Smith: We like the projects that they are working on. There is the potential for a discovery or they already have a discovery with the potential to grow. The corollary is that the valuations are relatively modest. Our primary criterion is the potential to deliver an economic discovery with compelling margin potential and high project returns. TGR: Did any new investment themes come to light while assembling the report? Kerry Smith: The market is looking for projects with high grades, low political risk and lower capital expenses (capex). It's impossible to finance a 1 billion ton ore deposit with $2-4 billion in capex. The market is looking for bite-size projects, like a heap-leach project with a $100 million capex. Investors are also interested in open-pit milling operations where the mill is a straightforward, cyanide-leach circuit. It's not complicated metallurgy and companies can get good recoveries. It all comes down to margin. You can have a good-grade, open-pit deposit, but if the strip ratio is 20:1, it's not going to be very interesting economically. In my opinion no junior company should be focused on a project that delivers less than a 30% return after tax at a gold price of about $1200 per ounce). A project that needs $1300 per ounce gold to get a 15% or 20% return is destined to fail in the near term. There are way too many projects that are being pursued and promoted that aren't high-return projects. TGR: The commodity price charts in your report look fairly stable, perhaps with the exception of uranium. Which commodities are you most bullish on? Kerry Smith: We are the most bullish on the commodities that are most out of favor: zinc, uranium, iron ore and gold. The longer these metals stay out of favor and the less new supply comes into the market, the better the fundamentals will be going forward. TGR: Most of the companies in the report are working on projects in North America, which is a safe jurisdiction. What are some of those companies? Kerry Smith: One of our themes is to pick stable jurisdictions. That tends to be the US, Canada, Mexico, Australia and Chile, to a certain extent. TGR: Do you expect a lot of significant news from mining companies in Q4/13? Kerry Smith: There are about 3,000 exploration companies. Probably three-quarters aren't spending any money at all. There are companies that have some money, but they're doing nothing. In some cases, it's actually the right strategy because the risk an explorer runs in a market like this is that it depletes its treasury and the news it gets has no meaningful impact on valuation. If that's the case, a company is better off just sitting on the project. Probably 85% of those 3,000 companies don't have projects that make much sense in this market, either because the grade is a bit skinny or the capex is so prohibitively large that even if they did manage to drill it off and get a feasibility done, they'd have no way to finance it. And those projects aren't the kind the majors want to buy. The gold is not going bad in the ground. Just sit on the project. Wait until the market is more receptive and live to fight another day. TGR: The report notes that financings dropped to less than 600 year-to-date versus more than 1,275 financings during the same period of 2012. The total cash raise dropped to about $2.25bn in 2013 from $8.83bn in 2012. Is that trend showing any sign of a slowdown or reversal? Kerry Smith: It's not getting any better. The only money out there for a junior exploration company is flow-through, which means it has to be in Canada. Additionally, if larger companies can deliver growing, free cash flow and can raise their dividends, share prices will move up. Eventually, the valuations on the majors will reach a level where they would be prepared to buy something. Companies just have to hunker down and conserve their cash as best they can. It's not an easy market. TGR: Thanks for your insights. |
No Easy Answers in Gold Mining Posted: 28 Oct 2013 11:54 AM PDT Tough times now, tougher times ahead. But that doesn't mean you can't profit... KERRY SMITH, research analyst at Haywood Securities, has been a mining analyst since 1992. He was a mining engineer with 10 years of mine experience, and holds a Master of Business Administration degree. Here Kerry Smith talks to The Gold Report about why there are no easy answers in the gold mining market right now. Companies and investors alike have to hunker down and make tough calls. But that doesn't mean companies and investors can't make money, even in the short term... The Gold Report: Haywood Securities recently published its Q3/13 Junior Exploration Report, which tells prospective investors about 17 exploration companies across a range of mine commodities. There were 20 companies covered in the Q2/13 report. Six of those have since been removed, while three new companies were added. Why does the report have such a short-term investment horizon? Kerry Smith: Our focus is to identify companies that will have meaningful news in the next three months that could impact the share price. We're looking for companies with projects that we like from an exploration perspective and we have a PhD. geologist who is charged with making sure the names in the report offer geologic potential. TGR: Investors typically take a longer-term view of gold mining equities, but do you believe you can make money with a short-term horizon? Kerry Smith: If a company has meaningful catalysts coming in the next three months, money can be made by investing in it. I would agree that, ultimately, the way investors make real money in the space is by investing in an exploration play that makes a discovery and staying invested until it has been drilled off to a resource stage. Typically, investors would want to sell before the company starts talking about permitting, construction and project finance because that's when a company goes into a huge vacuum – there is no news and the stock rolls over. We're trying to find companies that can deliver decent catalysts in the short term. It's a constantly evolving list. We roll names off, and we roll names on. TGR: There are hundreds of exploration plays. At a time when investors are eschewing risk in gold mining, what do those three new companies in the report have in common? Kerry Smith: We like the projects that they are working on. There is the potential for a discovery or they already have a discovery with the potential to grow. The corollary is that the valuations are relatively modest. Our primary criterion is the potential to deliver an economic discovery with compelling margin potential and high project returns. TGR: Did any new investment themes come to light while assembling the report? Kerry Smith: The market is looking for projects with high grades, low political risk and lower capital expenses (capex). It's impossible to finance a 1 billion ton ore deposit with $2-4 billion in capex. The market is looking for bite-size projects, like a heap-leach project with a $100 million capex. Investors are also interested in open-pit milling operations where the mill is a straightforward, cyanide-leach circuit. It's not complicated metallurgy and companies can get good recoveries. It all comes down to margin. You can have a good-grade, open-pit deposit, but if the strip ratio is 20:1, it's not going to be very interesting economically. In my opinion no junior company should be focused on a project that delivers less than a 30% return after tax at a gold price of about $1200 per ounce). A project that needs $1300 per ounce gold to get a 15% or 20% return is destined to fail in the near term. There are way too many projects that are being pursued and promoted that aren't high-return projects. TGR: The commodity price charts in your report look fairly stable, perhaps with the exception of uranium. Which commodities are you most bullish on? Kerry Smith: We are the most bullish on the commodities that are most out of favor: zinc, uranium, iron ore and gold. The longer these metals stay out of favor and the less new supply comes into the market, the better the fundamentals will be going forward. TGR: Most of the companies in the report are working on projects in North America, which is a safe jurisdiction. What are some of those companies? Kerry Smith: One of our themes is to pick stable jurisdictions. That tends to be the US, Canada, Mexico, Australia and Chile, to a certain extent. TGR: Do you expect a lot of significant news from mining companies in Q4/13? Kerry Smith: There are about 3,000 exploration companies. Probably three-quarters aren't spending any money at all. There are companies that have some money, but they're doing nothing. In some cases, it's actually the right strategy because the risk an explorer runs in a market like this is that it depletes its treasury and the news it gets has no meaningful impact on valuation. If that's the case, a company is better off just sitting on the project. Probably 85% of those 3,000 companies don't have projects that make much sense in this market, either because the grade is a bit skinny or the capex is so prohibitively large that even if they did manage to drill it off and get a feasibility done, they'd have no way to finance it. And those projects aren't the kind the majors want to buy. The gold is not going bad in the ground. Just sit on the project. Wait until the market is more receptive and live to fight another day. TGR: The report notes that financings dropped to less than 600 year-to-date versus more than 1,275 financings during the same period of 2012. The total cash raise dropped to about $2.25bn in 2013 from $8.83bn in 2012. Is that trend showing any sign of a slowdown or reversal? Kerry Smith: It's not getting any better. The only money out there for a junior exploration company is flow-through, which means it has to be in Canada. Additionally, if larger companies can deliver growing, free cash flow and can raise their dividends, share prices will move up. Eventually, the valuations on the majors will reach a level where they would be prepared to buy something. Companies just have to hunker down and conserve their cash as best they can. It's not an easy market. TGR: Thanks for your insights. |
Posted: 28 Oct 2013 11:50 AM PDT India is the world's heaviest gold importer. Its temples are the heaviest gold owners... WE FEEL it important to raise the topic of Indian gold imports and India's temple gold because Societe Generale, the French bank, has said that if the Indian government does not handle this matter well there could be a further run on the Indian Rupee, writes Julian Phillips at GoldForecaster. Why? There's no doubt that if the Indian government could harness locally-owned gold (total around 25,000 tonnes), the Rupee would then be the best backed currency in the world and shouldn't suffer declines if its gold were used as collateral for its foreign currency needs. The trouble is the Indian people would be furious and the government would most likely lose the next election (because of the feelings the Indian people have towards gold). So, with elections due next year, they're currently exploring ways to achieve this without creating uproar. Hence temple gold, where there are around 2,000 tonnes of gold held by them overall. Much of this is already stored in banks in the country, so technically represent unsecured loans to the banks. Again technically, as in the investment product offering of unallocated gold in the developed world, the banks/government can already access it (provided they can return it). So the warning by Societe Generale is quite right. On the one hand, such moves could create uproar and on the other, the signal would go to the rest of the world that India was in deep financial trouble and could not reduce its Current Account Deficit (CAD) paving the way for a major debt to reserves ratio problem. We think this is coming anyway. Last month's imported gold to India was 7 tonnes and the month before 3.5 tonnes, when these figures should be close to 100 tonnes and 70 tonnes respectively. The result is that the premium on an ounce of gold has jumped in a volatile manner from as low as $5 per ounce to current levels of around $140. We believe that smuggled gold into India is rising fast and accounts for the overall volatility of these premiums. We expect a far greater figure than 250 tonnes to be smuggled in. This raises several issues for gold and India's global monetary situation:
The harnessing of locally-owned gold will happen; it is simply a matter of time and method. This will be a form of confiscation even if government and its agencies continue to recognize the original owner with an eventual promise of returning it. India could well be among the first countries to take citizen's gold to support their currency, but certainly not the last. It will monetize its gold to some extent and provide a preview of what's to come when the Chinese Yuan becomes a reserve currency. The absence of direct Indian demand is holding down the US Dollar price of gold at the moment. It is also preventing global demand from overtaking global supplies, thus stopping the gold price from returning to record highs. And in so doing, India will lead the way into what we see as a new monetary order with gold taking a pivotal position in that reformed system. |
Posted: 28 Oct 2013 11:50 AM PDT India is the world's heaviest gold importer. Its temples are the heaviest gold owners... WE FEEL it important to raise the topic of Indian gold imports and India's temple gold because Societe Generale, the French bank, has said that if the Indian government does not handle this matter well there could be a further run on the Indian Rupee, writes Julian Phillips at GoldForecaster. Why? There's no doubt that if the Indian government could harness locally-owned gold (total around 25,000 tonnes), the Rupee would then be the best backed currency in the world and shouldn't suffer declines if its gold were used as collateral for its foreign currency needs. The trouble is the Indian people would be furious and the government would most likely lose the next election (because of the feelings the Indian people have towards gold). So, with elections due next year, they're currently exploring ways to achieve this without creating uproar. Hence temple gold, where there are around 2,000 tonnes of gold held by them overall. Much of this is already stored in banks in the country, so technically represent unsecured loans to the banks. Again technically, as in the investment product offering of unallocated gold in the developed world, the banks/government can already access it (provided they can return it). So the warning by Societe Generale is quite right. On the one hand, such moves could create uproar and on the other, the signal would go to the rest of the world that India was in deep financial trouble and could not reduce its Current Account Deficit (CAD) paving the way for a major debt to reserves ratio problem. We think this is coming anyway. Last month's imported gold to India was 7 tonnes and the month before 3.5 tonnes, when these figures should be close to 100 tonnes and 70 tonnes respectively. The result is that the premium on an ounce of gold has jumped in a volatile manner from as low as $5 per ounce to current levels of around $140. We believe that smuggled gold into India is rising fast and accounts for the overall volatility of these premiums. We expect a far greater figure than 250 tonnes to be smuggled in. This raises several issues for gold and India's global monetary situation:
The harnessing of locally-owned gold will happen; it is simply a matter of time and method. This will be a form of confiscation even if government and its agencies continue to recognize the original owner with an eventual promise of returning it. India could well be among the first countries to take citizen's gold to support their currency, but certainly not the last. It will monetize its gold to some extent and provide a preview of what's to come when the Chinese Yuan becomes a reserve currency. The absence of direct Indian demand is holding down the US Dollar price of gold at the moment. It is also preventing global demand from overtaking global supplies, thus stopping the gold price from returning to record highs. And in so doing, India will lead the way into what we see as a new monetary order with gold taking a pivotal position in that reformed system. |
A Republic, If You Can Recognize It Posted: 28 Oct 2013 11:38 AM PDT Over two hundred years ago the United States Constitution was written as a guide for America’s unique experiment in freedom. Today the free society that the Founders envisaged is barely identifiable. America is no longer a bastion of freedom. Prevailing ideology, grounded in economic ignorance and careless disregard for individual liberty, is nurtured by a multitude of self-serving, power-seeking politicians spouting platitudes of compassion for the poor who are created by their own philosophy. Reelection is paramount in the minds of most of those who represent us, while freedom and constitutional restraint of power are considered old-fashioned and unwise. Most people today fail to accept the obvious fact that government largesse can come only as a result of a systematic scheme of government theft. The feeling of frustration prevalent in the country today is certainly understandable. Government is so big and the bureaucracy so cumbersome that the average person has little to say about his economic destiny unless he resorts to the underground economy. In a free society, of course, individual initiative and ability are the principal factors in determining one’s economic well-being. Not surprisingly, half of the people don’t register to vote and less than half of those who do rarely vote. When permitted on the ballot, “None Of The Above” is the most attractive candidate. Something certainly has gone wrong. The role of government and the people’s attitude toward government have changed dramatically since 1787, with most of the changes occurring in the twentieth century. It appears that we are in the waning days of the American Republic. Has America become known for lies? Our presidents lie about foreign affairs while secretly carrying out activities never approved by Congress. Scientists falsify records for career purposes. Wall Street is filled with stories of lies and scandals. Sadly, lying and deceit have become a way of life for many in America today. Samuel Adams, at the time of the Constitutional Convention, accurately warned: "Neither the wisest constitution nor the wisest laws will secure the liberty and happiness of a people whose manners are universally corrupt." We certainly are blessed with a unique and inspired Constitution, probably the best in the history of man, despite its shortcomings. Yet today, two hundred-plus years since its ratification, the Constitution doesn't restrain the pernicious and steady growth of government at the expense of personal liberty. Our manners are now corrupt. We have been conditioned to accept debt as part of every aspect of our lives. Individuals, corporations, and nations are swimming in debt so great that no one ever expects repayment. The short-term benefit of government borrowing is a political expediency that, in spite of the rhetoric of the balanced budget, is growing ever more popular. Sadly, we rarely hear serious proposals for limiting the role of government to that of protecting liberty. Both liberals and conservatives give lip service to limited government ideas, but only to serve some special view of government that they might endorse, rather than to promote consistently the principles of freedom. In the twentieth century we have come to accept demands and needs as rights at the expense of someone else's rights. Responsibility for our own acts and livelihood has been replaced by lawsuits demanding and getting unrealistic settlements. We have a massive government, passing out wealth stolen from one group and giving it to another. Those with clout in Washington do well, while those who do not understand the lobbying system and seek only their individual freedom are left out. The survival of a car company like Chrysler is now more dependent on lobbying tactics than on management skills. Government has come to mean something entirely different than what was intended by the writers of the Constitution. It is an entity capable of confiscating and distributing wealth ad infinitum. Government no longer serves the people by guaranteeing equal rights to all. Government is now expected to provide profits, medical care, jobs, homes, and food whenever the people demand these benefits as a right. Most people today fail to accept the obvious fact that government largesse can come only as a result of a systematic scheme of government theft. Compromise is universally accepted as the only tool for political stability, while the leaders argue that anything less is rigid and confrontational and will inevitably lead to chaos. Yet this so-called tool of compromise, on each occasion it is used, is an attack on someone’s freedom. Most fail to see that interventionism, welfarism, and socialism are very rigid philosophies. Continued sacrifice of a portion of one’s rights has led to a disintegration of self reliance in America today. The latter part of the twentieth century has permitted the acceptance of the idea that “society” owes everyone a living. Vandalism by many is no longer seen as a crime, but only as an opportunity to get what is deserved or owed to them. Once the principle of government wealth-distribution is accepted at face value, it is logical to expect some individuals to bypass the slow-moving bureaucracy, especially in a time of crisis, and take what they claim is rightfully theirs. This principle is the reverse of Frederic Bastiat’s moral law. Bastiat stated that a law is immoral if it does something that an individual himself is not allowed to do (such as transfer wealth from one to another). Once we accept, as we have these past 75 years, that it’s a proper function of government to transfer wealth, it’s not difficult to understand the “logic” of the vandal who breaks windows during storms, floods, or power outages and takes whatever he needs without a sense of guilt. Throughout the twentieth century, the trend has been away from limited government and toward big government’s intervening in every aspect of our lives. It has been financed with borrowed money and a fraudulent paper money system. We have come a long way from the Republic envisioned by the Founders. Today, by majority vote, government can easily cancel out the earnings or rights of individuals without any debate as to constitutionality. The only debate is between the competing special interests, deciding who will benefit and who will suffer. We are witnessing the end stage of the Republic as we drift closer and closer to pure dictatorship. Dictatorship of the majority is every bit as oppressive as the dictatorship of the few. It is also more difficult to attack, since so many accept the notion that the majority has the authority to redefine rights. Political leaders today are more interested in opinion polls than they are in the Constitution and freedom principles. Any event of importance is quickly analyzed by a poll, which the politician takes to heart and responds to in an appropriate way. Keeping up with computer assessments of the people’s superficial feelings has been the road to success for many modern politicians. Individuals seeking leadership are prodded to answer incessant and continuous surveys. The leaderless, disorganized, disinterested masses, through poll results, are collectively and unknowingly leading the leaders. These instantaneous recordings, designed to tell the politician what to do, cannot provide reassurance that our rights will be protected in the foreseeable future. The main problem we face today is that we lack enough champions of freedom. Leadership in the freedom movement has always come from intellectuals who have studied natural law and understood the benefits of the free market. When political oppression is accompanied by serious economic problems, the people will frequently, after years of suffering, overthrow the tyrants. But a wealthy nation, grown soft on the prosperity produced by a previously free generation, tends to vote for that individual who promises the biggest piece of the pie to his constituents. Ironically the prosperity that comes from a free society is the fuel that feeds the fire which brings on the demise of that society. Materially we are much better off today than people were in 1776, but our philosophy of freedom is in much worse shape. During the twentieth century, America went through a transition that radically changed the political system established by the Founding Fathers. Although many seeds of statism were sown in the nineteenth century, they matured in the twentieth century. The trends in legislation in this century are clearly anti-free-market, starting with the Sherman Antitrust Act passed in 1890 to the strong federal control over trade with the Clayton Act of 1914. With the establishment of the FTC to current-day regulations, this century has certainly witnessed a loss of confidence in a truly free market. Even the term “laissez faire” is universally shunned by all politicians who fear that in championing capitalism, support will be lost. The erosion of freedom seems of little concern where the promise of government security motivates the people and encourages the politicians’ extravagant ways. Theodore Roosevelt and Woodrow Wilson revolutionized foreign policy, dramatically changing our traditional belief in neutrality to one of perpetual meddling in the affairs of every nation throughout the world. Today it is mind-boggling that extensive emergency powers are available to the President. Literal dictatorial control of the country is available to an aggressive president faced with a contrived or real crisis. The executive orders, which have the force of law, are issued on a routine basis. Secret agreements and commitments by our presidents are routine and no longer considered unconstitutional. The usual thing is that Congress almost always accepts the secret and dangerous agreements as if they were law. The year 1913 certainly was a banner year for the anti-constitutional movement. The Sixteenth Amendment, the Personal Income Tax, and the Federal Reserve Act were all passed. The central bank monopoly guaranteed the destruction of our gold dollar. The recessions, depressions, and inflations of the twentieth century can be laid at the doorstep of the Federal Reserve. The Founding Fathers intended that the federal government be totally dependent on the individual states and their legislatures for the collection of taxes and the election of Senators. Since that time, we have abandoned the concept of sovereign individual states and accepted a strong centralized federal government. The Senate was intended to protect states rights and impede the natural tendency of government to grow large, abusive, and centralized. In 1915 the popular election of senators changed our attitudes regarding the protection of the sovereignty of the states. The power of state legislatures to call a constitutional convention, although never used, fortunately is still available to us to circumvent the obstructionist federal Congress. The electoral college emphasized the importance of state power over central authority. This feature, although considered important by the writers of the Constitution, was never a practical part of the election process. The twentieth century’s near deathblow to the concept of individual liberty has today produced a multitude of problems. The people’s manners are now universally corrupt. Violent crime continues to grow at a rapid rate and can be expected to continue as economic conditions worsen. Thousands of new prisoners are sentenced each week. Many of those who are sentenced should not be, and many of those who are out on the streets, tragically, should be in prison. Our government routinely lies to us and uses “disinformation. ” The luxuries of the current generation are financed by the sweat and blood of the next. Yet flowery slogans are used to describe the wonderful prosperity we enjoy, with few realizing the seriousness of the indebtedness incurred in the process. In the midst of a market glut, more and more people each year get pushed into the poverty class. Liberty has become a term that offends establishment intellectual leaders. Feeble attempts at fairness in the forceful redistribution of wealth is considered noble, but principles that guarantee free-market incentive systems are considered immoral and selfish. Even the businessman today is more accustomed to getting special privileges or contracts from the government than in minimizing the role of government. Difficult choices by our national leaders are postponed, and gimmicks are devised to further consume the wealth and capital of the country instead. Passion for liberty has faded from the hearts of most Americans and is now cherished only by a remnant diligently working to reestablish its rightful place as one of our most important concerns. The challenge to keep alive the legacy of the Founding Fathers is overwhelming. Now is certainly an appropriate time to restate and emphasize the importance of the freedoms embodied in this great document. The erosion of freedom seems of little concern where the promise of government security motivates the people and encourages the politicians’ extravagant ways. Living for immediate material benefits has replaced concern for long-term freedom principles necessary to guarantee peace and prosperity for the next generation. American society is characterized by hopelessness and operates without a moral, constitutional, or monetary standard. A basic understanding of the problems we face is vital if we expect to reestablish the constitutional principle of equal rights. Regards, Ron Paul (Excerpted with permission from Dr. Paul's FREE Foundation work, Freedom Under Siege.) Ed Note: You might be thinking: "So, how do I reclaim the liberties I've lost?" Glad you asked! Readers of The Daily Reckoning email edition were given the opportunity to access a never-before-seen book that provides simple solutions for how to reduce your tax bill… protect your privacy… lower your health care costs… build your own "retirement fortress" and much more. It’s just one of the many “thank yous” you get for signing up. So what are you waiting for? Sign up for The Daily Reckoning email edition, for FREE, right here. |
Posted: 28 Oct 2013 11:32 AM PDT A little bit of America, sold to investors in China, that says a great deal... A BUILDING – One Chase Plaza – was sold this month in New York for $750 million, writes Porter Stansberry in Daily Wealth. Not surprisingly, the building was bought by a Chinese asset-management firm, Fosun. Behind this deal lie massive economic forces. The story of One Chase Plaza is the story of how America was sold to its bankers. It's the story of how inflation plundered our wages. It's the story of how credit, rather than savings, came to dominate our economy and transform our way of life. It's the story of how America was packaged and sold to our foreign creditors – mostly the Chinese... Since 1996, the Chinese have made 51 major acquisitions in America, including deals to own or control iconic US assets like computer giant IBM, carmaker GM, meat producer Smithfield Foods, US power company AES Corp., major airplane lessor International Lease Finance Corp., investment bank Morgan Stanley, and private-equity firm Blackstone Group. They've also bought trophy real estate around the US, like the GM Tower. These deals didn't happen by accident. They happened because the US continues to consume far more than it produces. We finance this consumption with debt that's owned in large measure by foreign creditors. Take the US Treasury debt, for example. At nearly $17 trillion, this is the world's largest pile of obligations. If you exclude Treasury obligations held by the US government and the Federal Reserve, 54% of the remaining obligations are held by foreign creditors. And these foreign debts continue to grow rapidly – at about $500 billion annually. Debt service on these obligations allows our foreign creditors to continually buy America's best assets. Today, foreign creditors directly own and control US assets worth more than $25 trillion. That's roughly a third of all the wealth in America. And that's far more than what Americans own overseas: Americans only own about $20 trillion of foreign assets. Every year that goes by, our foreign rivals will earn more on their American assets than we're able to earn on our foreign investments. They will grow wealthier and wealthier...while we become poorer and poorer in comparison. As Warren Buffett famously said about this situation 10 years ago: "We have entered the world of negative compounding – goodbye pleasure, hello pain." How did this happen? Why is it continuing? And why is it almost certain to lead to an enormous currency crisis? The story starts with One Chase Plaza... In 1957, America was the most powerful country in the world. We controlled roughly 75% of all of the world's economic activity, and we owned the three most important corporations in the world: General Motors, Exxon (Standard Oil), and Chase Bank (the Rockefeller Bank). Our country's products – like the '57 Chevy – were the finest available in the world. We dominated every foreign competitor in manufacturing, energy, banking, and just about every other industry, too. At the time, you might recall, our Dollar was literally as good as gold: By international agreement, our foreign creditors could exchange their Dollars for gold for $35 per ounce at the Federal Reserve Bank of New York. This firm limit on the value of the Dollar protected the middle class in America, guaranteeing that every wage-earner in the economy would share in gains from increased productivity. As productivity increased, the Dollar bought more goods and services. As a result, real after-tax income increased. What was good for GM actually was good for America, too. The firm value of the US Dollar also protected America from the temptation of credit. By linking the Dollar to gold, expansion of credit required an increase in gold reserves. Under these rules, the supply of additional gold bullion (through new production or trade) limited the banks' ability to create new credit. This made credit expensive (in real terms) and encouraged savings. Those savings then powered stable investment into our economy. Thus, the US government debt actually declined in 1957, falling by $2.2 billion. Surely, no sane person in 1957 imagined that would be the last time the total debt of the US government would ever again decline on an annual basis. In 1957, work also began on the first modern skyscraper in lower Manhattan. Commissioned by legendary banker David Rockefeller, One Chase Plaza featured space-age materials (anodized aluminum panels) and soared 60 stories high. Covered in glass, it reflected light, unlike the older sandstone buildings around it that absorbed light. The building would serve as a glowing new headquarters for Chase Bank. It was a towering statement proclaiming the bank's growing influence around the world. Even today, One Chase Plaza is a signature piece of New York real estate. It remains the 15th-tallest building in Manhattan. Surrounded by Pine, Liberty, and Nassau streets, it offers tenants a direct connection to the Nos. 2 and 3 subway trains. It is even thought of as a key part of the infrastructure of the United States – housing the largest privately owned bullion vault, five stories underground. Winston Churchill remarked that "we shape our buildings; thereafter they shape us." Just 10 years after the completion of Rockefeller's global banking trophy at One Chase Plaza (construction was completed in 1961)...the link between the Dollar and gold would be permanently broken. Richard Nixon closed the gold-exchange window in 1971. America reneged on its debts to foreign creditors. Even more important, banks no longer had to back up their loans with reserves linked to gold. Now, all public and private credit would be backed by "Federal Reserve notes" – so-called "fiat," or paper, money. As a result, banks no longer faced any physical limit to how much credit they could extend. And the US Dollar no longer had any firm value. Nothing guaranteed the real value of wages. Nothing linked increases in productivity to increases in wages. Nothing protected the middle class from the rising tide of inflation...or the soaring power of the banks. You can see how the change is destroying the middle class. Today, gains in productivity benefit our creditors...not our wage earners. Take a look at this chart, based on one originally published by the Economic Policy Institute think tank. Based on Bureau of Labor Statistics figures, the chart shows the cumulative growth in hourly productivity for the total economy compared with cumulative growth in inflation-adjusted hourly compensation... These changes transformed our economy and the nature of capitalism itself. No longer would our economy be driven by investments fueled by savings. Instead, our economy is funded by debt. Debt of every kind has soared. Measured in inflation-adjusted Dollars, America's total debt has increased from $5 trillion in 1957 to more than $60 trillion today – a 12-fold increase. Meanwhile, our gross domestic product has only increased from $2.5 trillion to $16 trillion, a six-fold increase. As a nation, we've mistaken credit-fueled booms for true prosperity. But there is a major difference, of course. Credit must be repaid. While real prosperity leads to greater abundances, increasing debt produces greater burdens. The cost of servicing our debts has become so large that our creditors now routinely buy our country's best assets using the debt-service payments we send abroad. Ironically...the "butcher's bill" of servicing our debts now includes the iconic building that launched America's credit bubble. On August 16, the New York Times broke the story that One Chase Plaza was for sale. J.P.Morgan Chase & Co., the successor entity to David Rockefeller's bank, was shopping the building through CBRE, the international commercial realty firm. Speculation at the time was that the building might be converted into condominiums and fetch $1 billion. Last Thursday, news broke that Fosun bought the building for $750 million. And so...America has become just a little bit poorer. Our ability to generate wealth has been marginally decreased. One of Manhattan's most valuable buildings has been sold. The rents will now be sent overseas to China. The real earning power of our currency has declined just a bit. For now, the changes seem small and have such a minor impact that hardly anyone notices. But the compounding nature of this shift in wealth is incredibly powerful and very, very hard to stop. Over time...real wages will continue to fall. Over time...our ability to service our debts without additional inflation will erode. (That's why the Fed can't stop its bond-buying program of quantitative easing.) One day, no one knows when, the world will simply decide that we're not creditworthy anymore. We will have burned too much of the family furniture trying to keep our house warm. On that day, you won't want to be holding US Dollars or Treasury bonds...or be dependent on the US government. When that day comes, people will look back on the sale of One Chase Plaza and realize...it was one of the last, most obvious warnings, that something had gone badly wrong with America. |
Posted: 28 Oct 2013 11:32 AM PDT A little bit of America, sold to investors in China, that says a great deal... A BUILDING – One Chase Plaza – was sold this month in New York for $750 million, writes Porter Stansberry in Daily Wealth. Not surprisingly, the building was bought by a Chinese asset-management firm, Fosun. Behind this deal lie massive economic forces. The story of One Chase Plaza is the story of how America was sold to its bankers. It's the story of how inflation plundered our wages. It's the story of how credit, rather than savings, came to dominate our economy and transform our way of life. It's the story of how America was packaged and sold to our foreign creditors – mostly the Chinese... Since 1996, the Chinese have made 51 major acquisitions in America, including deals to own or control iconic US assets like computer giant IBM, carmaker GM, meat producer Smithfield Foods, US power company AES Corp., major airplane lessor International Lease Finance Corp., investment bank Morgan Stanley, and private-equity firm Blackstone Group. They've also bought trophy real estate around the US, like the GM Tower. These deals didn't happen by accident. They happened because the US continues to consume far more than it produces. We finance this consumption with debt that's owned in large measure by foreign creditors. Take the US Treasury debt, for example. At nearly $17 trillion, this is the world's largest pile of obligations. If you exclude Treasury obligations held by the US government and the Federal Reserve, 54% of the remaining obligations are held by foreign creditors. And these foreign debts continue to grow rapidly – at about $500 billion annually. Debt service on these obligations allows our foreign creditors to continually buy America's best assets. Today, foreign creditors directly own and control US assets worth more than $25 trillion. That's roughly a third of all the wealth in America. And that's far more than what Americans own overseas: Americans only own about $20 trillion of foreign assets. Every year that goes by, our foreign rivals will earn more on their American assets than we're able to earn on our foreign investments. They will grow wealthier and wealthier...while we become poorer and poorer in comparison. As Warren Buffett famously said about this situation 10 years ago: "We have entered the world of negative compounding – goodbye pleasure, hello pain." How did this happen? Why is it continuing? And why is it almost certain to lead to an enormous currency crisis? The story starts with One Chase Plaza... In 1957, America was the most powerful country in the world. We controlled roughly 75% of all of the world's economic activity, and we owned the three most important corporations in the world: General Motors, Exxon (Standard Oil), and Chase Bank (the Rockefeller Bank). Our country's products – like the '57 Chevy – were the finest available in the world. We dominated every foreign competitor in manufacturing, energy, banking, and just about every other industry, too. At the time, you might recall, our Dollar was literally as good as gold: By international agreement, our foreign creditors could exchange their Dollars for gold for $35 per ounce at the Federal Reserve Bank of New York. This firm limit on the value of the Dollar protected the middle class in America, guaranteeing that every wage-earner in the economy would share in gains from increased productivity. As productivity increased, the Dollar bought more goods and services. As a result, real after-tax income increased. What was good for GM actually was good for America, too. The firm value of the US Dollar also protected America from the temptation of credit. By linking the Dollar to gold, expansion of credit required an increase in gold reserves. Under these rules, the supply of additional gold bullion (through new production or trade) limited the banks' ability to create new credit. This made credit expensive (in real terms) and encouraged savings. Those savings then powered stable investment into our economy. Thus, the US government debt actually declined in 1957, falling by $2.2 billion. Surely, no sane person in 1957 imagined that would be the last time the total debt of the US government would ever again decline on an annual basis. In 1957, work also began on the first modern skyscraper in lower Manhattan. Commissioned by legendary banker David Rockefeller, One Chase Plaza featured space-age materials (anodized aluminum panels) and soared 60 stories high. Covered in glass, it reflected light, unlike the older sandstone buildings around it that absorbed light. The building would serve as a glowing new headquarters for Chase Bank. It was a towering statement proclaiming the bank's growing influence around the world. Even today, One Chase Plaza is a signature piece of New York real estate. It remains the 15th-tallest building in Manhattan. Surrounded by Pine, Liberty, and Nassau streets, it offers tenants a direct connection to the Nos. 2 and 3 subway trains. It is even thought of as a key part of the infrastructure of the United States – housing the largest privately owned bullion vault, five stories underground. Winston Churchill remarked that "we shape our buildings; thereafter they shape us." Just 10 years after the completion of Rockefeller's global banking trophy at One Chase Plaza (construction was completed in 1961)...the link between the Dollar and gold would be permanently broken. Richard Nixon closed the gold-exchange window in 1971. America reneged on its debts to foreign creditors. Even more important, banks no longer had to back up their loans with reserves linked to gold. Now, all public and private credit would be backed by "Federal Reserve notes" – so-called "fiat," or paper, money. As a result, banks no longer faced any physical limit to how much credit they could extend. And the US Dollar no longer had any firm value. Nothing guaranteed the real value of wages. Nothing linked increases in productivity to increases in wages. Nothing protected the middle class from the rising tide of inflation...or the soaring power of the banks. You can see how the change is destroying the middle class. Today, gains in productivity benefit our creditors...not our wage earners. Take a look at this chart, based on one originally published by the Economic Policy Institute think tank. Based on Bureau of Labor Statistics figures, the chart shows the cumulative growth in hourly productivity for the total economy compared with cumulative growth in inflation-adjusted hourly compensation... These changes transformed our economy and the nature of capitalism itself. No longer would our economy be driven by investments fueled by savings. Instead, our economy is funded by debt. Debt of every kind has soared. Measured in inflation-adjusted Dollars, America's total debt has increased from $5 trillion in 1957 to more than $60 trillion today – a 12-fold increase. Meanwhile, our gross domestic product has only increased from $2.5 trillion to $16 trillion, a six-fold increase. As a nation, we've mistaken credit-fueled booms for true prosperity. But there is a major difference, of course. Credit must be repaid. While real prosperity leads to greater abundances, increasing debt produces greater burdens. The cost of servicing our debts has become so large that our creditors now routinely buy our country's best assets using the debt-service payments we send abroad. Ironically...the "butcher's bill" of servicing our debts now includes the iconic building that launched America's credit bubble. On August 16, the New York Times broke the story that One Chase Plaza was for sale. J.P.Morgan Chase & Co., the successor entity to David Rockefeller's bank, was shopping the building through CBRE, the international commercial realty firm. Speculation at the time was that the building might be converted into condominiums and fetch $1 billion. Last Thursday, news broke that Fosun bought the building for $750 million. And so...America has become just a little bit poorer. Our ability to generate wealth has been marginally decreased. One of Manhattan's most valuable buildings has been sold. The rents will now be sent overseas to China. The real earning power of our currency has declined just a bit. For now, the changes seem small and have such a minor impact that hardly anyone notices. But the compounding nature of this shift in wealth is incredibly powerful and very, very hard to stop. Over time...real wages will continue to fall. Over time...our ability to service our debts without additional inflation will erode. (That's why the Fed can't stop its bond-buying program of quantitative easing.) One day, no one knows when, the world will simply decide that we're not creditworthy anymore. We will have burned too much of the family furniture trying to keep our house warm. On that day, you won't want to be holding US Dollars or Treasury bonds...or be dependent on the US government. When that day comes, people will look back on the sale of One Chase Plaza and realize...it was one of the last, most obvious warnings, that something had gone badly wrong with America. |
2017: When the Commodity SuperCycle Returns Posted: 28 Oct 2013 11:22 AM PDT And meantime, you need strategies for success in this flat commodity market... INVESTORS COULD be waiting until 2017 before the commodity supercycle is evident again, reckons John Kaiser, a mining analyst with more than 25 years of experience. Now producing Kaiser Research Online, he speaks here to The Gold Report's new sister title, The Mining Report, about this lull in the commodity supercycle should encourage miners to develop new, innovative approaches to their business... The Mining Report: John, you have characterized the current resource market as a bear market unlikely to have higher metal prices in the next year, with the possible exception of zinc. Why are you drawing a different conclusion than other analysts who believe we are in a resource supercycle? John Kaiser: I believe the general supercycle is still intact as nations with very large populations are embracing capitalist methods. Because they are starting with much lower standards of living, they have a long way to grow. However, I do think we are in a bit of a pause. We are still dealing with the fallout from the 2008 financial crisis, a dysfunctional political system in the United States and Europe's issues. Also, China's growth rate is slowing and the country is shifting from a capital-intensive development of infrastructure and production capacity to more domestic consumption spending. On top of this, the mining industry generated a lot of supply in response to the higher real prices of the past decade. So there is a supply glut coming as demand cycles downward, and we're going to see weak prices for a while. Unfortunately, or perhaps fortunately depending on what hat you are wearing, we have also seen rising costs, the response to which may curtail the supply glut sooner than expected. I would say by 2017, however, the supercycle will be evident again, because this bear market is creating the same supply/demand imbalance conditions that existed 10 years ago, when the big bull market started. TMR: What indicators will tell us we might see the supercycle in 2017? John Kaiser: What we have to watch is the world's gross domestic product growth. The International Monetary Fund scaled back expectations in its October World Economic Outlook. We also have to see how the US deals with its debt ceiling problem, and the US won't get any traction until there is a political change where nothing blocks spending the money to get the economy ramping up again. We also want to see which mines in the pipeline actually come onstream. This applies more to the raw materials that are used in the real world as opposed to gold, which is treated largely as an insurance policy hedging various future outcomes. A lot of projects are being shelved right now because of escalating costs. All this misery that we're witnessing will actually underpin a future bull market in the commodity sector. TMR: What gold price is required to make mines economic these days? John Kaiser: The average all-in cost for gold production is about $1200 per ounce. Even though we're looking at a gold price that has increased three, four times since 1980's stabilized price, the costs have risen right along with it. We need something around $1500 per ounce-plus to justify putting a lot of these deposits into production. TMR: Are the costs for getting copper out of the ground also higher than the selling price? John Kaiser: In the past five years, we have seen above-average cost escalation in the mining sector. Both capital costs and operating costs have been increasing about 10% annually. In the case of copper, if your all-in cost was $2.49 per pound ($2.49 per pound) in 2007 and you apply 10% inflation each year, you're looking at a $4 per pound copper price just to break even, and we're currently at $3.20-3.30 per pound. Now some of these costs are going to come down, but we're still looking at numbers that are at or higher than the current spot prices for gold and copper. It is not a wonderful situation for deposits where they have reduced the cutoff grade and started mining lower-grade deposits to meet the increase in demand. We're in a situation where we're going to have to just wait to see higher prices materialize to justify a fresh push of putting deposits into production. TMR: If most of these commodities and the juniors that mine them are waiting for prices to go up, what does that mean for the juniors' common exit strategy – being taken over by a major? John Kaiser: During the past seven to eight years, we've had a tremendous round of takeover bids, where 200-plus Canadian juniors were taken over at a value of over $128 billion. A lot of these deposits are waiting to be developed. The other companies out there own deposits that tend to be lower grade and have a more expensive cost structure. There is no appetite amongst the majors right now for that type of deposit, and the capital markets are not going to be interested in directly funding development because the profit margin just isn't there. The one group that has not yet made a big move is Chinese sovereign wealth companies, which we know have been studying the landscape looking for opportunities. When these Chinese national companies start buying cheap gold assets, that will be a signal that the turnaround for gold is coming sooner rather than later. TMR: While we're waiting for that to happen, what strategies should investors know about when looking for companies that will be successful? John Kaiser: Look for a company that has a high enough deposit grade so that even at the current metal price there is still a decent profit margin. These companies are available at bargain prices. TMR: So look for a company with a higher-grade deposit. What's another strategy? John Kaiser: I like the strategy of a discovery within a discovery that could completely eclipse the original low-grade resource. Looking for higher grade zones within the system is a way a gold junior can revitalize an existing deposit that doesn't work at current low metal prices. TMR: So look for a discovery within a discovery. Can you give us another approach? John Kaiser: Look for companies that have an innovative target-generation strategy. All the easy gold that's at surface has been found and harvested. You now have to look deeper. TMR: Sounds like an interesting target-generating approach. Any other strategies you think could work between now and 2017? TMR: Any thoughts on rare earths? John Kaiser: Let's talk about nickel, an unpopular metal, currently around $6.25 per pound. Used in stainless steel, it was selling for $25 per pound in 2007. A seemingly unlimited supply of nickel pig iron is haunting the market right now. Nickel pig iron is made in Chinese blast furnaces from low-quality laterite ore direct shipped from Indonesia and the Philippines, which have in recent years emerged as the world's biggest nickel suppliers. Experts are pretty negative about the supply/demand surplus deficit in the next four years, but by 2018 they expect this to reverse. By then we will start seeing that the Philippines' supply of laterite for nickel pig iron production is not infinite and that perhaps Indonesia has put a stop to exporting raw ore. Then once again we're caught off balance because the big guys during the interim have had to scale back their development plans because of this current glut of supply that's depressing the metal prices. It's a bit of a longer-term speculation, but it's based on a different processing style targeting a different type of mineral. TMR: Can you give us one more idea that's completely different? John Kaiser: Okay, how about diamonds? We know that as long as the world doesn't go into a depression, demand for quality diamonds will continue to grow. Explorers have not found any giant diamond mines in a very long time, and no big new diamond mines are coming onstream. TMR: Interesting. Can you leave us with advice for investors who are trying to survive 2013, or as Rick Rule says, thrive, because fortunes are made in bear markets rather than bull markets? John Kaiser: Fortunes are made in resource sector bear markets by those with great patience, especially when you target juniors with deposits that are near worthless at prevailing metal prices. However, if higher real metal prices take a long time to arrive, such juniors run the risk of diluting away their upside to stay alive, or getting swallowed cheaply by predators with deep pockets and even greater patience. Most investors do not have Rick Rule's capacity to influence the destinies of the companies in which they make investments. The resource sector juniors that I generally target in the current bear market climate are ones with innovative stories that can flourish and create shareholder value whether or not higher metal prices materialize. If we do get into a stronger overall market, it's companies like these, which have well-articulated stories, that will accelerate out of the bottom faster than other companies with deposits that require a substantially higher metal price to be back in the money. TMR: Thanks for giving us that wrap-up. We appreciate your time. John Kaiser: You're welcome. |
2017: When the Commodity SuperCycle Returns Posted: 28 Oct 2013 11:22 AM PDT And meantime, you need strategies for success in this flat commodity market... INVESTORS COULD be waiting until 2017 before the commodity supercycle is evident again, reckons John Kaiser, a mining analyst with more than 25 years of experience. Now producing Kaiser Research Online, he speaks here to The Gold Report's new sister title, The Mining Report, about this lull in the commodity supercycle should encourage miners to develop new, innovative approaches to their business... The Mining Report: John, you have characterized the current resource market as a bear market unlikely to have higher metal prices in the next year, with the possible exception of zinc. Why are you drawing a different conclusion than other analysts who believe we are in a resource supercycle? John Kaiser: I believe the general supercycle is still intact as nations with very large populations are embracing capitalist methods. Because they are starting with much lower standards of living, they have a long way to grow. However, I do think we are in a bit of a pause. We are still dealing with the fallout from the 2008 financial crisis, a dysfunctional political system in the United States and Europe's issues. Also, China's growth rate is slowing and the country is shifting from a capital-intensive development of infrastructure and production capacity to more domestic consumption spending. On top of this, the mining industry generated a lot of supply in response to the higher real prices of the past decade. So there is a supply glut coming as demand cycles downward, and we're going to see weak prices for a while. Unfortunately, or perhaps fortunately depending on what hat you are wearing, we have also seen rising costs, the response to which may curtail the supply glut sooner than expected. I would say by 2017, however, the supercycle will be evident again, because this bear market is creating the same supply/demand imbalance conditions that existed 10 years ago, when the big bull market started. TMR: What indicators will tell us we might see the supercycle in 2017? John Kaiser: What we have to watch is the world's gross domestic product growth. The International Monetary Fund scaled back expectations in its October World Economic Outlook. We also have to see how the US deals with its debt ceiling problem, and the US won't get any traction until there is a political change where nothing blocks spending the money to get the economy ramping up again. We also want to see which mines in the pipeline actually come onstream. This applies more to the raw materials that are used in the real world as opposed to gold, which is treated largely as an insurance policy hedging various future outcomes. A lot of projects are being shelved right now because of escalating costs. All this misery that we're witnessing will actually underpin a future bull market in the commodity sector. TMR: What gold price is required to make mines economic these days? John Kaiser: The average all-in cost for gold production is about $1200 per ounce. Even though we're looking at a gold price that has increased three, four times since 1980's stabilized price, the costs have risen right along with it. We need something around $1500 per ounce-plus to justify putting a lot of these deposits into production. TMR: Are the costs for getting copper out of the ground also higher than the selling price? John Kaiser: In the past five years, we have seen above-average cost escalation in the mining sector. Both capital costs and operating costs have been increasing about 10% annually. In the case of copper, if your all-in cost was $2.49 per pound ($2.49 per pound) in 2007 and you apply 10% inflation each year, you're looking at a $4 per pound copper price just to break even, and we're currently at $3.20-3.30 per pound. Now some of these costs are going to come down, but we're still looking at numbers that are at or higher than the current spot prices for gold and copper. It is not a wonderful situation for deposits where they have reduced the cutoff grade and started mining lower-grade deposits to meet the increase in demand. We're in a situation where we're going to have to just wait to see higher prices materialize to justify a fresh push of putting deposits into production. TMR: If most of these commodities and the juniors that mine them are waiting for prices to go up, what does that mean for the juniors' common exit strategy – being taken over by a major? John Kaiser: During the past seven to eight years, we've had a tremendous round of takeover bids, where 200-plus Canadian juniors were taken over at a value of over $128 billion. A lot of these deposits are waiting to be developed. The other companies out there own deposits that tend to be lower grade and have a more expensive cost structure. There is no appetite amongst the majors right now for that type of deposit, and the capital markets are not going to be interested in directly funding development because the profit margin just isn't there. The one group that has not yet made a big move is Chinese sovereign wealth companies, which we know have been studying the landscape looking for opportunities. When these Chinese national companies start buying cheap gold assets, that will be a signal that the turnaround for gold is coming sooner rather than later. TMR: While we're waiting for that to happen, what strategies should investors know about when looking for companies that will be successful? John Kaiser: Look for a company that has a high enough deposit grade so that even at the current metal price there is still a decent profit margin. These companies are available at bargain prices. TMR: So look for a company with a higher-grade deposit. What's another strategy? John Kaiser: I like the strategy of a discovery within a discovery that could completely eclipse the original low-grade resource. Looking for higher grade zones within the system is a way a gold junior can revitalize an existing deposit that doesn't work at current low metal prices. TMR: So look for a discovery within a discovery. Can you give us another approach? John Kaiser: Look for companies that have an innovative target-generation strategy. All the easy gold that's at surface has been found and harvested. You now have to look deeper. TMR: Sounds like an interesting target-generating approach. Any other strategies you think could work between now and 2017? TMR: Any thoughts on rare earths? John Kaiser: Let's talk about nickel, an unpopular metal, currently around $6.25 per pound. Used in stainless steel, it was selling for $25 per pound in 2007. A seemingly unlimited supply of nickel pig iron is haunting the market right now. Nickel pig iron is made in Chinese blast furnaces from low-quality laterite ore direct shipped from Indonesia and the Philippines, which have in recent years emerged as the world's biggest nickel suppliers. Experts are pretty negative about the supply/demand surplus deficit in the next four years, but by 2018 they expect this to reverse. By then we will start seeing that the Philippines' supply of laterite for nickel pig iron production is not infinite and that perhaps Indonesia has put a stop to exporting raw ore. Then once again we're caught off balance because the big guys during the interim have had to scale back their development plans because of this current glut of supply that's depressing the metal prices. It's a bit of a longer-term speculation, but it's based on a different processing style targeting a different type of mineral. TMR: Can you give us one more idea that's completely different? John Kaiser: Okay, how about diamonds? We know that as long as the world doesn't go into a depression, demand for quality diamonds will continue to grow. Explorers have not found any giant diamond mines in a very long time, and no big new diamond mines are coming onstream. TMR: Interesting. Can you leave us with advice for investors who are trying to survive 2013, or as Rick Rule says, thrive, because fortunes are made in bear markets rather than bull markets? John Kaiser: Fortunes are made in resource sector bear markets by those with great patience, especially when you target juniors with deposits that are near worthless at prevailing metal prices. However, if higher real metal prices take a long time to arrive, such juniors run the risk of diluting away their upside to stay alive, or getting swallowed cheaply by predators with deep pockets and even greater patience. Most investors do not have Rick Rule's capacity to influence the destinies of the companies in which they make investments. The resource sector juniors that I generally target in the current bear market climate are ones with innovative stories that can flourish and create shareholder value whether or not higher metal prices materialize. If we do get into a stronger overall market, it's companies like these, which have well-articulated stories, that will accelerate out of the bottom faster than other companies with deposits that require a substantially higher metal price to be back in the money. TMR: Thanks for giving us that wrap-up. We appreciate your time. John Kaiser: You're welcome. |
Dollar Breaking New Lows While These Junior Miners Are Breaking Out Posted: 28 Oct 2013 11:01 AM PDT Governments Supporting Uranium and Rare Earth Mining The high volume breakout in the uranium sector may have occurred this past Friday when the uranium mining ETF soared over 6% on more than five times average volume. The uranium mining ETF’s largest holders are Cameco (CCJ), Denison (DNN) and Paladin (OTC:PALAF). The real reason for the jump last week was the decision of the Greenland government to overturn a 25 year old ban on uranium and rare earth mining. One of the positions in the uranium miners ETF which benefited from this move is Greenland Minerals (OTC:GDLNF) which soared over 60%. This reminds me of the move by the Australian Government to overturn the uranium mining ban in Queensland back in 2012. Countries are realizing that there is great demand for uranium as more nuclear reactors are being built now than before the Fukushima Accident. Uranium and rare earth mining (REMX) could be two areas where Austrailia and Greenland could create a lot of wealth over the coming decade when uranium demand will exceed supply. Outside of Germany, governments around the world support uranium mining and nuclear power. Sweden and the EU are actively supporting this heavy rare earth miner which I updated my premium readers earlier this month. The stock has reacted nicely to the update on high volume. This company owns the 4th largest heavy rare earth asset in the world with one of the highest percentages of heavy rare earths. Sweden is very supportive of mining and is one of the most supportive jurisdictions in the world. This asset could be essential to some of the large end users in Germany such as Mercedes Benz, Volkswagon and/or Siemens. . Keep a close eye on the junior uranium miners which could see incredible growth over the long term. We may be witnessing a short term uranium glut from the shutdown reactors in Germany and Japan, but over the longer term we will enter a supply deficit as there are more reactors being built now than from before the Japanese Nuclear Accident in March of 2011. As 2013 ends, so does the Russian uranium supply agreement which provided around 25 million pounds of yellowcake to the U.S. annually. Now the U.S. will have to make up that deficit with new U.S. producers. Look to the Wyoming junior uranium miners which I have followed for years. I could never imagine that they would be priced this cheaply as they began entering production. One of the uranium miners in production which I own and follow in my premium service just announced they received $34 million from the State of Wyoming at a very low 5.75% interest rate. This is big news as the State is supporting low cost uranium production. This announcement may soon benefit this NYSE uranium miner in the exciting Powder River Basin who should receive its $20 million State of Wyoming loan shortly. One can buy them near all time lows despite being in construction and on the verge of receiving a $20 million low interest rate loan from Wyoming. Read my full article, “Why Did The Uranium Mining ETF Advance On Its Highest Volume In 3 Years?” A catalyst for this rotation into junior miners could be caused by a large sovereign nation selling U.S. debt and dollars and not finding willing buyers. We could see increased volatility in the foreign exchange markets, interest rates and commodities due to capital seeking inflationary havens. There is a rising fear of a U.S. dollar collapse. The real estate and banking sectors could turn lower quickly with interest rate spikes forcing the Fed to stop all taper talk and possibly increase QE. The weak housing numbers and high unemployment rate shows the economy is still on shaky legs. It is important to remember that some junior gold miners are so undervalued with minuscule market caps that are only fractions of what they spent on advancing the project. This junior gold miner with a resource of over 20 million ounces of gold sports a market cap of less than $50 million and has invested over $250 million advancing this project through feasibility. This sounds like a discount bargain opportunity to me. Since our last update to premium subscribers last week the stock has risen close to 70% on high volume. Read the full article, “Avoiding The Dollar Crash With Historically Discounted Gold And Silver Junior Miners”. I will be meeting with many of the mining companies at the New Orleans Investment Conference from November 10-13th and will report my findings to you in my premium newsletter. I hope some of my subscribers may be able to join me there. I would love to meet you in person. It is an excellent chance to attend, network, hear the great list of speakers and meet with some of the active companies that are still attractive even in this depressed market. We may be at a crucial turning point in market history and I will be going to learn, network and search for only the best stories which have been able to thrive and advance their projects in this difficult market. If you want to be a part of this year’s event visit www.neworleansconference.com to register and to see which companies are exhibiting.
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FOMC Seen Leaving QE Untouched; Outcome Would Be Gold Friendly Posted: 28 Oct 2013 10:56 AM PDT 28-Oct (KitcoNews via Forbes) — The expected outcome of a Federal Open Market Committee meeting this week should be supportive for gold even if policy-makers do what traders already expect by leaving ultra-loose monetary accommodation in place, with greater potential for upside if officials go one step further and make it clear that they cannot taper under current conditions, strategists said. …However, in this instance, some veteran strategists say, the Fed maintaining QE could offer further upside gold. The precious metal has posted a gain so far in October, but the uptick has not been dramatic, observers said. "There has been a hesitancy to buy into the precious metals," said Phil Flynn, senior market analyst with at Price Futures Group. "I get the sense that a lot of people say it (no taper this week) is already priced in. Well, it is and it isn't. The market hasn't exactly acted really strongly. It's been kind of a quiet rally. "I think it (no taper) will give more confidence to the buyers of gold (if they) see the Fed confirm everybody's suspicions. So I would assume that we may see a little volatility, but once you're done … no tapering should be supportive the precious metals. So I think we could rally even though it's already somewhat anticipated." [source] |
Posted: 28 Oct 2013 09:49 AM PDT Gold Firms as Soft Data Further Diminishes Fed Taper Expectations
While September industrial production came in better than expected at +0.6%, pending home sales in September and the October Dallas Fed index were terrible. Recall that the Fed justified the ‘no taper’ decision in September — even though it was widely anticipated — by saying such a move simply wasn’t supported by the data. Given that the data seemingly has taken a turn for the worse more recently, a taper this year is looking increasingly less likely. A number of serious FedWatchers now don’t expect any downward adjustment to asset purchases until March of next year. The March 19-20 FOMC meeting would be the first presided over by Fed-chair nominee Janet Yellen. Bernanke’s term ends January 31, the day after the January 29-30 FOMC meeting. As discussed in the past, Janet Yellen is arguably even more dovish than the current Fed chairman, I seriously doubt she’d taper in her first go as chairperson. I’d continue to watch the data, and if it remains soft through Q1-14, I wouldn’t be surprised in the least if Yellen’s first move was to boost QE. I trust you all read Mike Kosares’ excellent piece last week entitled China's London-Zurich-Hong Kong gold conduit — a major financial coup d'etat. Mike continues to connect the dots regarding the massive flows of physical gold making its way from west to east. He cranked out another article this past weekend that may explain why the gold is flowing through Switzerland before making its way to China. Be sure to read Screen-traded fiat gold could get very violent wake-up call. |
Historic End Game - “A Collapse To End All Collapses” Posted: 28 Oct 2013 09:06 AM PDT With the world continuing to face great uncertainty, today a man who has been involved in the financial markets for 50 years, and whose business partner is billionaire Eric Sprott, told King World News that "we are now in a historic end game." He also spoke warned about the West experiencing "a collapse to end all collapses," and also discussed what this all means for key markets such as gold and silver. Below is what John Embry had to say in this powerful interview. This posting includes an audio/video/photo media file: Download Now |
The Catalyst for an Obamacare Death Spiral Posted: 28 Oct 2013 09:04 AM PDT A handful of reports last week suggested that the Obama administration had moved to delay the health law's individual mandate — the penalty the law imposes on those who are uninsured. That's not quite right: Instead, the administration will align the 2014 penalty date, which had been February 15, with the end of Obamacare's open enrollment period, March 31. It had been possible to buy insurance between February 15 and March 31 next year and still pay a pro-rated uninsurance penalty — something the Obama administration only found out a few weeks ago when a tax prep firm let them know. Delaying the individual mandate might seem like an obvious response to the ongoing failure of the federal exchange system. But it's a rather drastic step. And, in isolation, a potentially problematic one. The larger worry is that we may be on track for an insurance market meltdown no matter what happens with the individual mandate. That's because the premiums that health insurers calculated for the exchanges this year were determined based on the assumption that the penalty for remaining uninsured would be in effect, and would encourage people to buy into the market. If you change the enrollment requirements — by, for example, ditching the mandate — while leaving the law's pre-existing condition rules in place, health plan participation will likely be lower. The result, as one insurance official told NPR recently, is that insurers will want to change their premiums. And in this case, "change" means "raise." That's where the real trouble starts. Insurers raising prices as a result of lower than anticipated enrollment is an early step toward an insurance death spiral, in which premiums spike and enrollment figures drop until the only participants who remain in the market are the very people paying very high premiums. We know because we've seen it before — in New York, Washington, and handful of other states that enacted preexisting condition regulations similar to Obamacare's but without an individual mandate. New York state's guaranteed issue and community rating rules — the two regulations that limit how insurers can charge based on health history and require them to sell policies to all comers — took effect in 1994. At the time, there were about 752,000 policyholders in the state's individual market, or about 4.7 percent of the non-Medicare population. But by 2009, according to a Manhattan Institute report by Stephen Parente and Tarren Bragdon, the state's individual market had practically disappeared, leaving just 34,000 participants, or about 0.2% of the non-elderly population. Individual insurance premiums, meanwhile, were among the highest in the nation — about $388 on average in 2007, compared with just $151 in California, another big Democratic-leaning state. In New York City, the annualized premium cost for individuals was more than $9,300 and more than $26,400 for a family. A death spiral that shifts some premium income around is still a death spiral. The result, in other words, was a combination of sky-high premiums and far fewer insured individuals. Around the same time that New York was overhauling its insurance market, Washington state was implementing a similar set of health plan rules. Insurers faced new regulations regarding plans sold to individuals with preexisting conditions, and the requirement that they sell to everyone. For a brief period, there was a coverage mandate, but that never went into effect. The state's individual market deteriorated. One insurer raised premiums by 78% in a three year period. As premiums rose, relatively healthier people left the market, and insurers were left covering a lot of very sick, very expensive individuals. In the end, many insurers simply dropped out of the market rather than lose money. According to a report on the reforms commissioned by the insurance industry, there were 19 carriers in the individual market in 1993. By 1999, there were just two — and they weren't taking new applicants. The individual market was effectively killed off by the reforms. A delay of just the individual mandate would likely put the federal exchange system — which facilitates the sale of guaranteed issue, community-rated plans — on the same track. (The administration, it should be noted, has made it quite clear that it thinks the mandate is absolutely essential to the larger insurance scheme, arguing repeatedly in court that the law cannot function without it.) Now, it's true, as The Incidental Economist's Adrianna McIntrye points out, that there are risk adjustment mechanisms built into the law designed to protect insurers who end up with too many sick individuals. But as a Health Affairs brief on the law's risk adjustment provisions makes clear, those provisions are designed to make sure that no one plan gets stuck with too many sick individuals. Plans with fewer sick people pay into a fund that creates a backstop for plans with a greater than expected share of sick policyholders. That helps mitigate individual plan risk. But it doesn't really solve the problem if the entire pool, across most all of the insurance plans, is smaller and sicker than expected. A death spiral that shifts some premium income around is still a death spiral. The larger worry is that we may be on track for an insurance market meltdown no matter what happens with the individual mandate. If too few young and healthy people sign up for insurance through the exchanges, for whatever reason, insurers will have to adjust their prices eventually. The access problems in the exchanges exacerbate this risk by making it more frustrating to buy policies; as a result, only the most motivated people — which is to say, the sickest and most desirous of coverage — will end up buying coverage. The same goes for the high individual market premiums that many young adults will be faced with. A mandate delay would make the risk even higher. But it may be the case that Obamacare is heading toward a death spiral no matter what, and that if it remains in place, no plausible policy response will avoid it. Regards, Peter Suderman Ed. Note: As Obamacare creeps further down the spiral, so too does the entire health care industry… and those unfortunate souls who’ve put their faith in it. But there is a way to “opt-out” of Obamacare, that could save you a ton of money in the process. You can read all about it in a free report, if you sign up for Laissez Faire Today, for free, right here. It’s just an added free gift to go along with your free subscription. And it could mean all the difference when it comes to the future of your health care. So don’t wait. Sign up for free, right here, and get all the info your missing on the Obamacare debacle. Original article posted on Laissez Faire Today |
Gold set a 6-week high of 1361.74 as soft data continue to erode Fed taper expectations. Posted: 28 Oct 2013 08:53 AM PDT |
Posted: 28 Oct 2013 08:48 AM PDT All it took was a slight increase in mortgage rates and the housing market is in collapse mode. The Wall Street shysters will running for the exits before prices begin to collapse. Who are they going to sell to? I can’t wait to see the burned bodies piled up at the chained exit doors. Burn […] |
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