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Sunday, December 23, 2012

Gold World News Flash

Gold World News Flash

Celente: This Will Usher In A Massive Financial Collapse in 2013

Posted: 22 Dec 2012 10:01 PM PST

Today top trends forecaster Gerald Celente spoke with King World News about what he believes will usher in a massive financial collapse in 2013. Celente also discussed the recent gold and silver smash, and told KWN he is buying physical gold and silver right now. Celente is the founder of Trends Research, and the man many consider to be the top trends forecaster in the world.

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

What Does It Mean to ‘Prepare for the Economic Collapse'?

Posted: 22 Dec 2012 09:50 PM PST

by Daisy Luther, Activist Post:

Last week I wrote an article in response to the media's vilification of preppers in the aftermath of the horrible tragedy in Newtown, Connecticut. The article was quoted in an article on Yahoo.com, to my great astonishment, and that is when I saw how little most people understand about prepping. You can see in most of the 4492 comments the article received that many folks just don't "get it".

My inbox was filled with a barrage of hate mail and a number of people felt compelled to leave angry (and rather ignorant) comments on my website. I got messages from people that called me "batsh*t crazy", messages from gun control advocates, messages from people who directly blamed me and all other preppers for the massacre, and even one particularly hate-filled email from a person who said "I hope that your kids are killed at the next school shooting."

All of this leads me to reconfirm my belief that people sincerely do not understand why we do what we do, and that ignorance leads to fear.

Read More @ Activist Post

How The Fiscal Cliff Talks Collapsed

Posted: 22 Dec 2012 08:40 PM PST

from Zero Hedge:

The collapse of the Fiscal Cliff talks should come as no surprise to anyone (except, of course, for all those "expert" political commentators virtually all of whom saw a deal by December 31: a full list of names is forthcoming). The reason: a simple one – a House torn, polarized to a record extreme, and a political environment in which the two parties, in the aftermath of a presidential election humiliating to the GOP, reached unseen before antagonism toward each other. In this context, it was absolutely inevitable that America would see a replica of last summer's debt ceiling collapse, which mandated a market intervention, in the form of a crash, and the wipeout of hundreds of billions in wealth – sadly the only catalyst that both parties and their electorate, understand. We had prefaced this explicitly in early November when we said that "the lame duck congress will posture, prance and pout. And it is a certainty that in the [time] remaining it will get nothing done. Which means, that once again, it will be up to the market, just like last August, just like October of 2008, to implode and to shock Congress into awakening and coming up with a compromise of sorts." Which of course brought us to Thursday night's mini-TARP moment. With all that said, there are those forensic detectives who are addicted to every single political twist and turn, and who are curious just where and when the Fiscal Cliff talks broke down in the past week. In this regard, the WSJ provides a useful timeline.

Read More @ Zero Hedge.com

A forecast for a silver default on the Comex

Posted: 22 Dec 2012 08:33 PM PST

10:31p ET Saturday, December 22, 2012

Dear Friend of GATA and Gold:

Interviewed by Lars Schall for GoldSwitzerland, GoldMoney research director and economist Alasdair Macleod explains why he thinks the New York Commodities Exchange will default on its silver contracts and why central banks put themselves in great jeopardy when they start being candid about their gold reserves. The interview is posted at GoldSwitzerland here:

http://goldswitzerland.com/a-failure-on-comex-silver-alasdair-macleod/

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


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Opinion Around the World Is Changing
in Favor of Gold -- Find Out Why

When Deutschebank calls gold "good money" and paper "bad money". ...

http://www.gata.org/node/11765

When the president of the German central bank, the Bundesbank, pays tribute to gold as "a timeless classic". ...

http://www.forbes.com/sites/ralphbenko/2012/09/24/signs-of-the-gold-stan...

When a leading member of the policy committee of the People's Bank of China calls the gold standard "an excellent monetary system". ...

http://www.forbes.com/sites/ralphbenko/2012/10/01/signs-of-the-gold-stan...

When a CNN reporter writes in The China Post that the "gold commission" plank in the 2012 Republican platform will "reverberate around the world". ...

http://www.thegoldstandardnow.org/key-blogs/1563-china-post-the-gop-gold...

When the Subcommittee on Domestic Monetary Policy of the U.S. House of Representatives twice called on economist, historian, and gold standard advocate Lewis E. Lehrman to testify. ...

World opinion is changing in favor of gold.

How can you learn why and what it will mean to you?

Read the newly updated and expanded edition of Lehrman's book, "The True Gold Standard."

Financial journalist James Grant says of "The True Gold Standard": "If you have ever wondered how the world can get from here to there -- from the chaos of depreciating paper to a convertible currency worthy of our children and our grandchildren -- wonder no more. The answer, brilliantly expounded, is between these covers. America has long needed a modern Alexander Hamilton. In Lewis E. Lehrman she has finally found him."

To buy a copy of "The True Gold Standard," please visit:

http://www.thegoldstandardnow.com/publications/the-true-gold-standard


Join GATA here:

Vancouver Resource Investment Conference
Sunday-Monday, January 20 and 21, 2013
Vancouver Convention Centre West
Vancouver, British Columbia, Canada
http://www.cambridgehouse.com/event/vancouver-resource-investment-confer...

* * *

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:

http://gata.org/tshirts

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:

http://www.gata.org

To contribute to GATA, please visit:

http://www.gata.org/node/16


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Fred Goldstein and Tim Murphy open All Pro Gold

Longtime GATA supporters Fred Goldstein and Tim Murphy have brought their many years of experience in the precious metals and numismatic coins to All Pro Gold as metals brokers who specialize in the delivery of gold and silver bullion bars and coins as well as numismatic gold and silver coins. Fred and Tim follow these markets closely and are assisted by a team of consultants in monitoring market trends. All Pro Gold offers GATA supporters competitive pricing on all bullion products and welcomes inquiries. Tim can be reached at 602-299-2585 and Tim@allprogold.com, Fred at 602-799-8378 and Fred@allprogold.com. Ask about their ratio strategy and the relationship of generic $20 dollar gold pieces to 1-ounce gold bullion coins. Visit their Internet site at http://www.allprogold.com/.

MORE EXCUSES, SPIN, PROPAGANDA & LIES

Posted: 22 Dec 2012 07:44 PM PST

Below are two MSM stories that have been put out in the last three days. Remember the massive MSM public relations campaign about the FANTASTIC Black Thursday/Friday sales. The projections for retail sales were parabolic. The optimism from the "neutral" National Retail Federation was bubbly. This was surely going to be the best holiday shopping season in years. The MSM dutifully transmitted all of the propaganda designed to excite the ignorant masses into a buying frenzy. But a funny thing happened on the way to retail riches – the middle class ran out of money.

This Christmas retail season is turning out to be a disaster. Not only aren't sales rising by the 4% to 5% predicted by the corporate media and the mouthpieces on Wall Street and at the NRF, they have fallen in December versus last year. Considering that real inflation is running over 5%, a sales decline of 1% is a real decline of 6%. These are the type of results you'd expect during a recession. Of course, in six months, when the government and MSM finally acknowledge that a recession began in July of 2012, this will all make sense.

If real, honest, non-captured journalists existed in the MSM, they would have questioned the false storyline from the beginning. Why would a rational person expect retail sales to be strong when:

  • Americans will have paid the highest average price for a gallon of gasoline in history in 2012.
  • Real wages have fallen for 22 consecutive months.
  • More people left the workforce (2.4 million) than got full-time jobs in the last year.
  • An additional 1.4 million people were added to the food stamp rolls, bringing the total to 47.7 million (20% of all households in the U.S.)
  • The number of people getting extended unemployment benefits has declined by 1.4 million (luckily most just signed up for SSDI).
  • With a savings rate of 3.6%, the disposable income has about run out.
  • There are 10,000 Boomers turning 65 per day and realizing they haven't saved shit for their retirement. This realization tends to reduce spending.

The MSM has no rational critical thinking journalists. They have corporate mouthpieces spewing the company line and attempting to convince the sheep that a recovery is underway and it is their duty to spend. The intelligencia actually believe that increased consumer spending using credit is self sustaining and desirable. They believe it is beneficial to their own agenda of enriching bankers, mega-corps, and the politicians in DC. They don't care that debt financed spending has ruined the middle class.

The results of three major consumer oriented companies this week were downplayed. Bed Bath & Beyond, Darden and Walgreens all reported terrible results:

  • Bed Bath and Beyond has been one of the best run retailers in the country for years. They always had comp store sales of 5% to 10%. This past quarter their comp store sales were 1.7%, less than inflation. Traffic was negative. Their profit was flat. Their inventory grew 50% greater than sales. If housing is truly recovering, why wouldn't their sales be growing?
  • Same store sales at Darden (Olive Garden, Red Lobster, Longhorn Steakhouse) were down 2.7% and traffic was plunging by 4% to 8% in the last two months. These are the restaurants of the middle class and their results reflect a consumer collapse.
  • Walgreens profits plunged by 25% with a 4.8% decrease in traffic and prescription sales down by 7%. They have overexpanded and have hit the wall. The Walgreens near my house has been open for two years. It has a parking lot with 50 spaces. I've never seen more than 5 cars in the lot. It will be closed within the next two years.

These are three of the biggest retail/restaurant chains in the country. They are sucking wind. The false storyline of economic recovery is revealed by these results. These companies have the benefit of massive advertising budgets and economies of scale. If they are struggling, this means the mom and pop retailers and restaurants are closing up on a mass scale. You may have noticed the Space Available signs dotting the landscape.

Now we are being provided with the bogus excuses to cover-up the fact we are in recession. The poor sales are now being blamed on Sandy, the fiscal cliff, and the Connecticut shooting. This is nothing but a load of bullshit. Sandy occurred a week before Thanksgiving. The Keynesians assured us that the pent up demand and sales related to rebuilding would actually increase sales after the storm. Now it is an excuse for poor national sales, even though it only impacted portions of a few states in the Northeast. This is pure crap.

Next we have the fiscal cliff crapola. At least 80% of the morons in this country don't even know how to spell fiscal cliff, let alone understand enough about it to keep them from buying an iPad. More people watched the grand finale of Jersey Shore than care about the fiscal cliff. Only the talking heads and government weasels are consumed by this fake crisis. Not one person in this country has changed their Christmas purchase plans due to the fiscal cliff.

Lastly, the MSM is blathering about the clueless consumers being deterred from hitting the mall because some kids were slaughtered by a madman. Yeah, the nation paused for about 10 hours on Friday to mourn for the children. Do you honestly think the malls were less crowded on Saturday due to the mourning? If so, you don't realize how shallow Americans are. There was probably a surge in Call of Duty PS3 game sales.

Now for the good news. The bargains in January are going to be epic. The going out of business sales in March will be even better. And then next November the MSM will tell you we're going to have great holiday sales. And so it goes. 

Retailers may see disappointing holiday sales

ShopperTrak cites school shooting, Sandy and fiscal cliff as it cuts holiday forecast

By Andria Cheng, MarketWatch

NEW YORK (MarketWatch) — A leading tracker of shopper traffic on Wednesday cut its seasonal sales forecast, saying the holiday selling period would have "a different tone" in the aftermath of the school shootings in Connecticut, superstorm Sandy and as talks drag on over avoiding the fiscal cliff.

"It's a change in mind-set," said Bill Martin, founder of ShopperTrak, which follows shopper traffic in malls. "Gifts may not be as important as spending time with family. This holiday season is just not going to be as robust."

ShopperTrak cut its holiday season forecast to a 2.5% increase in November and December, down from its original projection of a 3.3% gain in September, Martin said in an interview.

ShopperTrak's numbers show sales and foot traffic in the week ended Dec. 15 were down 4.3% and 4.4% respectively, while ShopperTrak had expected both measures would increase with less than two weeks to go before Christmas. Traffic and sales also were down in the week ended Dec. 8.

Despite strong Thanksgiving week sales, including the crucial Black Friday, retailers' November sales have already turned out disappointing as they weren't able to make up for lost demand from superstorm Sandy. Retailers' November miss raises holiday stake.

Friday's school shootings in Connecticut, superstorm Sandy and fiscal cliff discussions "have put a damper on the holiday season," Martin told MarketWatch. "We would have expected sales and traffic to go up (by now), but we've not hit that."

National Retail Federation said on Wednesday it isn't revising its holiday outlook at this time. It had projected holiday sales to rise 4.1% to $586.1 billion.

Because of the disappointing sales, retailers may now begin to change their plans and start to promote more heavily to lure traffic the next few days, Martin said.

"It's going to be at the expense of deep discounts," he said.

It remains to be seen how the discounts and promotions will shape up.

So far, retailers including Target Corp. (NYSE:TGT) , Sears Holdings Corp. (NASDAQ:SHLD) , Best Buy Co. (NYSE:BBY) , Macy's Inc. (NYSE:M) and Toys "R" Us have planned extended hours or different last minute sales heading to Christmas to draw shoppers. Stores won't rest till you've bought your gifts.

However, many of those promotions so far look to be part of their normal plan as the industry has controlled inventory better to reduce profit-eroding discounts, analysts have said.

Procrastinating shoppers also may deliver another wildcard to retailers. Industry giant Wal-Mart Stores Inc. (NYSE:WMT) said its customer survey showed 68% of shoppers haven't completed their shopping. One of its last-minute strategies is to ensure it's well stocked on popular holiday gifts including Wii U console and iPad mini as each of its stores has received truckloads of those new products the past week, the company said.

Retailers turn to discounts to boost holiday sales

Shoppers wary of spending as fiscal cliff looms

By Steve Gelsi, MarketWatch

NEW YORK (MarketWatch) — U.S. retailers looked to revive flagging holiday sales on the last shopping weekend before Christmas.

With the fiscal cliff and other economic jitters dampening prospects for the sector, shopping centers, malls and storefront establishments geared up Saturday for the heaviest sales weekend of the year ahead of Tuesday's gift-giving.

The peak of the holiday shopping season came as concerns mount over a downward move in the economy if lawmakers don't agree on a package of tax hikes and spending cuts to avert the so-called fiscal cliff. See Friday's story about stalled fiscal cliff efforts.

Expectations remained less than rosy since shoppers have already been putting the brakes on spending. Ree: Retailers may see disappointing holiday sales

"I don't think we're going to get a great pickup in the last few days here," retail analyst Ronald Friedman of Marcum LLP told Reuters.

Sales growth for the week ended Dec. 15 is running about 4% behind last year's pace, according to ShopperTrak data released Friday.

U.S. retail sales fell 1.2% below 2011's level in the first half of December, causing a downward shift in expectations.

In one hopeful sign, retail sales jumped 16.4% over the previous week.

"Shoppers took advantage of the mild weather in most parts of the country to shop for gifts and other seasonal merchandise," ShopperTrack said.

Retailers are expected to turn to deep discounts to lure Americans into more spending as the holiday shopping season comes to a climax.

But recent setbacks in Washington won't provide much of a lift for flagging consumer sentiment.

The drama took a turn for the worst on Friday, with no resolution reached ahead of the holiday break and only a few days of negotiations left before automatic spending cuts and tax increases take effect on Jan. 1.

President Barack Obama asked lawmakers to accept a scaled-back deal to extend unemployment insurance and tax cuts for those making $250,000 or less. He then headed off for his annual Christmas trip to Hawaii.

On the Republican side, House Speaker John Boehner earlier this week canceled the so-called "Plan B" tax vote linked to fiscal-cliff talks. See related story.

The failure to reach a resolution on the fiscal cliff has apparently impacted consumer confidence, according to data released Friday. See related story on consumer confidence.

"What could have been a merry Christmas is going to turn to a ho-hum Christmas, and we can thank our, you know, politicians for getting in the middle of it all," NPD analyst Marshal Cohen said in comments to Reuters in an article published on Saturday.

12 Gold Bugs Bring Christmas Cheer

Posted: 22 Dec 2012 07:30 PM PST

by Jeff Clark, Casey Research:

While the price of gold has languished in a trading range much of the year, leaving some investors scratching their heads, many have been buying – and in some cases, really loading up.

It's a tad puzzling that gold hasn't broken into new highs, despite enough catalysts to move a herd of stubborn mules. But that's the hand we're dealt right now. We can't get up from the table until the game reaches its conclusion. Besides, I think the stall in prices is giving us one last window to buy before prices break permanently into higher levels for this cycle.

At least that's how a number of prominent investors and institutions are viewing the price action right now. Here's a sampling of this year's "gold bugs" and what they've been doing about precious metals recently.

Read More @ CaseyResearch.com

Property Owners Rush to Sell Ahead of Fiscal Cliff | Fox Business Video

Posted: 22 Dec 2012 06:20 PM PST

Property Owners Rush to Sell Ahead of Fiscal Cliff Advertisement Prudential Douglas Elliman Vice...

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Gold Headed Toward Volatile 2013 GLD, IAU – TheStreet TV

Posted: 22 Dec 2012 06:15 PM PST

Ed Moy, former director of the U.S. Mint, says 2013 will be a very volatile year for gold prices,...

[[ This is a content summary only. Visit http://goldbasics.blogspot.com for full Content ]]

Dr. Marc Faber: My Greatest Concern−The US Could Confiscate Gold, Again (originally aired 09/06/12) “Best of 2012” Re-Broadcast | James J Puplava CFP | FINANCIAL SENSE

Posted: 22 Dec 2012 06:11 PM PST

Jim is pleased to welcome back Dr. Marc Faber, publisher of the “Gloom, Boom & Doom...

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David Mcalvany ~12%-15% Return For Gold in 2013

Posted: 22 Dec 2012 05:20 PM PST

David Mcalvany, CEO, McAlvany Financial Group explains why gold will still bring in returns next...

[[ This is a content summary only. Visit http://goldbasics.blogspot.com for full Content ]]

Maria Bartiromo Hits Congress ‘Are You Guys Just Incompetent, Or What?’

Posted: 22 Dec 2012 05:09 PM PST

Maria Hits Congress: ‘You Guys Incompetent?’  Thursday, 20 Dec 2012 | 3:20 PM ET...

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Friday's MOC Trades In Gold Shares

Posted: 22 Dec 2012 03:59 PM PST

Jim,

Although you have said the technicals are just painted charts, I was heartened by yesterday's action as most gold stocks were up on heavy volume except TRX, which did volume and didn't make a new low. It looks like a bottom to me.

I guess the perception as we go over the cliff

Continue reading Friday's MOC Trades In Gold Shares

GoldMoney's Turk gives outlook for gold from 2013-15

Posted: 22 Dec 2012 03:02 PM PST

5p ET Saturday, December 22, 2012

Dear Friend of GATA and Gold:

In a video posted this week at GoldMoney's Internet site, GoldMoney founder and GATA consultant James Turk reviews and elaborates on the forecast for gold he made in Forbes magazine in 2003, explaining why he still thinks the gold price will reach $8,000 by 2015. Currency debasement, Turk notes, is both policy and compelling politics in the West, and the long-term charts he presents prove it. Turk's presentation is titled "James Turk's Outlook for Gold for 2013 to 2015" and it's posted at the GoldMoney Internet site here:

http://www.goldmoney.com/video/james-turk-outlook-for-gold-for-2013-to-2...

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


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GoldMoney adds Singapore vaulting option

In addition to its precious metals storage facilities in Hong Kong, Switzerland, Toronto, and the United Kingdom, now with GoldMoney you can store gold and silver in Singapore in a high-security vault operated by Brink's Singapore Pte Limited. To celebrate the launch of this storage option, GoldMoney is offering a discount on buy and exchange fees at this vault for any orders above US$10,000 (or the equivalent) until January 11, 2013. Tthe gold buy rate is 0.98%, while the silver rate is 1.99%. Metal exchanges into Brink's Singapore will also be discounted for this period and will be charged at 0.78% for gold and 1.75% for silver. Simply place your order online and the above rates apply automatically until January 11, 2013, 15.00 UK time. To find out more about the new vault, please visit:

http://www.goldmoney.com/singapore?gmrefcode=gata

GoldMoney customers can take delivery of any number of gold, silver, platinum, and palladium bars from any GoldMoney vault, as well as personally collect their bars stored in the Hong Kong, Switzerland, and U.K. vaults.

It's easy to open an account, add funds, and liquidate your investment. For more information, visit:

http://www.goldmoney.com/?gmrefcode=gata


Join GATA here:

Vancouver Resource Investment Conference
Sunday-Monday, January 20 and 21, 2013
Vancouver Convention Centre West
Vancouver, British Columbia, Canada
http://www.cambridgehouse.com/event/vancouver-resource-investment-confer...

* * *

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:

http://gata.org/tshirts

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:

http://www.gata.org

To contribute to GATA, please visit:

http://www.gata.org/node/16

Silver to $80 By 2014? – YouTube

Posted: 22 Dec 2012 02:04 PM PST

I’m in total agreement with Don and you and this one. As a trader and investor, let’s...

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Trader Dan on King World News Metals Wrap

Posted: 22 Dec 2012 01:30 PM PST

[url]http://www.traderdannorcini.blogspot.com/[/url] [url]http://www.fortwealth.com/[/url] Please click on the following link to listen in to my regular weekly radio interview with Eric King on the KWN Markets and Metals Wrap. We will be discussing the price action of both gold and silver this week and the technically significant levels on the price charts. [URL]http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2012/12/22_KWN_Weekly_Metals_Wrap.html[/URL]...

Eric Sprott – There’s No Silver Left – The Government Lied – YouTube

Posted: 22 Dec 2012 01:01 PM PST

Isn’t silver inherited from one generation to the next where you live? We have several...

[[ This is a content summary only. Visit http://goldbasics.blogspot.com for full Content ]]

Eric Sprott: SILVER TO GO SUPERNOVA, PAPER MARKETS ARE A JOKE! – YouTube

Posted: 22 Dec 2012 12:59 PM PST

Eric Sprott – Paper Markets Are A Joke: Prepare for Bullion Prices to Go Supernova Silver...

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Bill Murphy ~ Gold Price Manipulation Explained and Why Silver Will Soon Go Ballistic – Bill Murphy of GATA.org – YouTube

Posted: 22 Dec 2012 12:50 PM PST

The Swiss pegged the franc to the euro to stave off ‘safe haven’ bond purchases. Not...

[[ This is a content summary only. Visit http://goldbasics.blogspot.com for full Content ]]

SAC Loses Anchor Investor As Noose Tightens Some More

Posted: 22 Dec 2012 11:44 AM PST

First it was Citi, then SocGen, now a third key investor has decided to pull their money from SAC - the once vaunted hedge fund which now everyone is now avoiding like the plague, and for which the only question now is "when" - when will Stevie close down shop, and will this happen before or after the paddywagons finally arrive at 72 Cummings Point road.

The WSJ reports: "Titan Advisors LLC recently told clients that it had decided to withdraw its entire investment from SAC, said clients who received phone calls from Titan.  "They've told us they still think SAC is a good firm but Titan doesn't need the headline risk, and we sure don't," said Tom Taneyhill, executive director of the Fire & Police Employees' Retirement System of the City of Baltimore, on Friday.  Sociรฉtรฉ Gรฉnรฉrale SA, which has client money in SAC through its Lyxor asset-management arm, also decided to pull its money from SAC, The Wall Street Journal reported earlier this month. At the time, an SAC spokesman declined to comment. Titan's departure is significant given SAC's long-standing relationship with one of Titan's founders. Titan co-founder George Fox began investing in SAC in the mid-90s, several years after Mr. Cohen started what became the firm in 1992."

And while an avalanche of outside money is now being pulled out of SAC with breathtaking speed, one man - the person who made the abysmal sequel to Wall Street almost singlehandedly possible - Anthony Scaramucci, and whose livelihood depends on the credibility of SAC, continues to think Cohen is "not one of the rogues." We'll see how long this particular fund of funds lasts once its owner's naive posturing, too, is proven wrong.

In the meantime the noose continues to tighten:

The insider-trading indictment of ex-SAC Capital Advisors LP portfolio manager Mathew Martoma sets in motion a criminal trial process that puts new pressure on him to cooperate with the government's investigation of the hedge- fund firm founded by billionaire Steven A. Cohen.

 

"It's another step on the government's march into Cohen's office," Erik Gordon, a professor at the University of Michigan Law School and Ross School of Business, said in an e-mail after the indictment. "Given the prosecutors' success in getting convictions and serious jail sentences, it's time for anyone at SAC who is connected with insider trading to start having nightmares."

So... all of them?

The bigger question is how much stock volume will remain once SAC is shut down, in a market already best known for ridiculously low volume - but at least one having "liquidity" courtesy of the same HFTs that bring you nightly ES flash crashes possible. And how much in "soft dollar"-based commission will Wall Street's already desperate for revenue Sales teams lose once the firm responsible for 5-10% of daily NYSE volume is gone.

“NUTS”

Posted: 22 Dec 2012 10:16 AM PST

On the 68th anniversary of General McAuliffe's immortal response to the German commander during the Battle of Bastogne, I thought it would be worthwhile to post an article I wrote in April 2010, before the current version of TBP existed. During these times, we need leaders with the backbones of McAuliffe and Patton to step forward and lead. The current batch of leaders are proving unworthy.  

"Now I want you to remember that no bastard ever won a war by dying for his country. He won it by making the other poor dumb bastard die for his country. Now there's another thing I want you to remember. I don't want to get any messages saying that "we are holding our position." We're not holding anything. Let the Hun do that. We are advancing constantly and we're not interested in holding onto anything except the enemy. We're going to hold onto him by the nose and we're going to kick him in the ass. We're going to kick the hell out of him all the time and we're going to go through him like crap through a goose!"

"Men, all this stuff you've heard about America not wanting to fight, wanting to stay out of the war, is a lot of horse dung. Americans traditionally love to fight. All real Americans love the sting of battle. When you were kids, you all admired the champion marble shooter, the fastest runner, big league ball players, the toughest boxers. Americans love a winner and will not tolerate a loser. Americans play to win all the time. I wouldn't give a hoot in hell for a man who lost and laughed. That's why Americans have never lost, and will never lose a war… because the very thought of losing is hateful to Americans." -    George C. Scott as General Patton in opening scene of Patton

To the U.S.A. Commander of the encircled town of Bastogne.

"The fortune of war is changing. This time the U.S.A. forces in and near Bastogne have been encircled by strong German armored units. More German armored units have crossed the river Our near Ortheuville, have taken Marche and reached St. Hubert by passing through Hompre-Sibret-Tillet. Libramont is in German hands. There is only one possibility to save the encircled U.S.A. troops from total annihilation: that is the honorable surrender of the encircled town. In order to think it over a term of two hours will be granted beginning with the presentation of this note. If this proposal should be rejected one German Artillery Corps and six heavy A. A. Battalions are ready to annihilate the U.S.A. troops in and near Bastogne. The order for firing will be given immediately after this two hours term. All the serious civilian losses caused by this artillery fire would not correspond with the well-known American humanity." – The German Commander

 

"To the German Commander, NUTS!" – Brigadier General Anthony McAuliffe

General McAuliffe was the acting commanding officer of the 101st Airborne in December 1944, besieged by a much larger German force surrounding the town of Bastogne, Belgium.  Adolf Hitler launched a stunning surprise counterattack in the Ardennes Forest on December 16, 1944 committing 55 Divisions consisting of 500,000 soldiers, 1,800 tanks and 1,900 artillery pieces. The goal of the German offensive was the harbor at Antwerp. In order to reach it before the Allies could regroup and bring their superior air power to bear, German mechanized forces had to seize the roadways through eastern Belgium. Because all seven main roads in the Ardennes mountain range converged on the small town of Bastogne, control of its crossroads was vital to the German attack. The Allied command knew that Bastogne was the key to foiling the German offensive.

The 101st Airborne had performed fabulously during the Normandy Invasion and fighting in Holland. They were in reserve when the attack struck. General Eisenhower dispatched them to Bastogne on a 107 mile forced march at night in freezing rain on December 18. General McAuliffe was the acting commander, as General Maxwell Taylor was elsewhere. All seven highways leading to Bastogne were cut by German forces by noon of December 21, and by nightfall the assortment of airborne and armored infantry forces realized they were surrounded. The American soldiers were outnumbered and lacking in cold weather gear, ammunition, food, medical supplies, and leadership. Due to some of the worst winter weather in years, the surrounded U.S. forces could not be resupplied by air nor was tactical air support available. There were 11,800 American soldiers and they held off four Divisions (including 2 Armored) for one week.

Lesser men would have surrendered. The situation was hopeless but not desperate. Instead, General McAuliffe basically told the German General Luttwitz to go to hell. The Academy Award winning movie Patton captured the gung-ho never say die attitude of the World War II leaders.

General Smith: Our concern is that von Rundstedt has the 101st Airborne trapped here at Bastogne. Bastogne, by the way, is the key to this entire area. If we can hold it, we can break up the entire German offensive. If they take it, we're in serious trouble. Ike wants to know if anybody can go and relieve the 101st before they're torn to pieces.

General Tedder: There's nothing Montgomery can do. At any rate, not for some weeks.

General Smith: What about you, George?

General Patton: I can attack with three divisions in 24 hours.

General Tedder: I'd give myself some leeway.

General Smith: Ike wants a realistic estimate, George. You're in the middle of a fight now. It's over a hundred miles to Bastogne.

General Patton: My staff's already working out the details.

General Tedder: Frankly, I don't see how it's possible. Not in this kind of weather. I should have thought you'd want to fall back and regroup.

General Patton: Not me. I don't like to pay for the same real estate twice.

General Tedder: But what about your men? You can't cart them off 100 miles, expecting them to attack without rest.

General Patton: I trained these men. They'll do what I tell them to do.

General Smith: We hadn't realized you were so popular with your troops, general.

General Patton: I'm not. They'll do it because they're good soldiers. And because they realize, as I do, that we can still lose this war.

General Tedder: Then I think I can speak for Field Marshal Montgomery. He'd say you're asking the impossible of your men.

General Patton: Of course he would, because he's never realized that's what we're in business for.

 

In a later scene, as his men make phenomenal progress in their efforts to relieve Bastogne Patton tells one of his subordinates:

"This is where it pays off, the training and the discipline. No other outfit in the world could pull out of a winter battle, move a hundred miles, go into a major attack with no rest, no sleep, no hot food. God… God, I'm proud of these men!"

 

I consider the movie Patton one of the greatest movies ever made. George C. Scott gives a performance worthy of the Academy Award he refused to accept. It is not surprising that the screenplay was so brilliant. It was written by a thirty year old Francis Ford Coppola, three years before his masterpiece – The Godfather. The movie was made in 1970. The greatest song of all-time, American Pie, and one of the greatest movies of all-time were both produced at the same juncture in U.S. history. I don't think this was a coincidence. The movie and the song came out amidst the Great Awakening period known as the Consciousness Revolution from 1964 until 1984. Both works of art reflected a longing for a different time in U.S. history. Don McLean, born in 1945, longed for the 1950s High of his youth, when music meant something and Americans cared about each other. Francis Ford Coppola was born in 1939 and longed for the splendor, glory and tenacity of the Generals and the bravery of the GI's he admired as a child. But, there was no turning back. Every generation must fulfill their role in the four turnings of history.

THE LOST GENERATION

I think I'm drawn to the main characters in the movie Patton because they were all Nomads. I'm from the current Nomad generation referred to as the 13th Generation or Generation X. For those unfamiliar with Strauss & Howe's book The Fourth Turning, here is a chart clarifying the concept of generation theory:

 

A human life lasts 80 to 100 years. Our lives pass through four stages: childhood, young adulthood, mid-life, and old age. Each 20 to 25 years represents a season of life. Strauss & Howe describe the four turnings of a generational saeculum:

The four turnings comprise a quaternal social cycle of growth, maturation, entropy, and death (and rebirth).  In a spring like High, a society fortifies and builds and converges in an era of promise.  In a summerlike Awakening, it dreams and plays and exults in an era of euphoria.  In an autumnal Unraveling, it harvests and consumes and diverges in an era of anxiety.  In a hibernal Crisis, it focuses and struggles and sacrifices in an era of survival.  When the saeculum is in motion, therefore, no long human lifetime can go by without a society confronting its deepest spiritual and worldly needs.

Essentially, as humans pass through life they react in a predictable way to worldly circumstances. Each generation has a role to play during each Turning. The particular specifics of each Turning will be different, but the reaction of each generation will be the same. The social mood of the country changes at the outset of each Turning. We have entered the Fourth Turning. This Crisis period is a decisive era of secular upheaval, when the values regime propels the replacement of the old civic order with a new one.  Old Artists disappear, Prophets enter elderhood, Nomads enter midlife, Heroes enter young adulthood—and a new generation of child Artists is born.

I have been looking for clues to how my generation will react during this Crisis.   

WORLD WAR II CRISIS

"Wars may be fought with weapons, but they are won by men. It is the spirit of men who follow and of the man who leads that gains the victory." - George S. Patton

 

George Patton, Omar Bradley, Anthony McAuliffe, and Dwight D. Eisenhower were all members of the Lost Generation, born between 1883 and 1900. During a Fourth Turning Crisis every generation must play their assigned role. During this critical era of worldly mayhem, the old civic order is replaced with a new one.  During the last Crisis, Prophets like Franklin Roosevelt, Douglas MacArthur, and George Marshall performed their roles as principled moralists, summoners of human sacrifice, and wagers of righteous wars. Everyone knows what the GI Generation Heroes did. They stormed the beaches of Normandy. They fought life or death battles with Japanese on volcanic islands in the Pacific. They sacrificed their lives during World War II. The Silent Generation was the overprotected children of the last Crisis. The generation that interests me the most is the Lost Generation. Strauss & Howe described these Nomads in this way:

"The Lost Generation (Nomad, born 1883-1900) grew up amidst urban blight, unregulated drug use, child "sweat shops," and massive immigration.  Their independent, streetwise attitude lent them a "bad kid" reputation.  After coming of age as "flaming youth," doughboys, and flappers, they were alienated by a war whose homecoming turned sour.  Their young-adult novelists, barnstormers, gangsters, sports stars, and film celebrities gave the roar to the '20s.  The Great Depression hit them in midlife, at the peak of their careers.  The "buck stopped" with their pugnacious battlefield and home front managers of a hot war—and their frugal and straight-talking leaders of a new "cold" one.  As elders, they paid high tax rates to support their world-conquering juniors, while asking little for themselves." 

 

The Nomad generation is hell raisers in their youth. By midlife they become cunning hard to fool realists. No task is seen as impossible. Planning a secret amphibious invasion across the English Channel consisting of 1.3 million men, 7,000 Navy vessels, 12,000 aircraft was left to the Nomads of the Lost Generation like Dwight Eisenhower and Omar Bradley. Nomad leaders like George Patton didn't flinch when required to disengage his entire Third Army from battle in the face of the enemy, march 100 miles in blizzard conditions in 48 hours, and immediately go into battle to relieve the siege of Bastogne. Nomads are hands on get it done leaders. Patton & Bradley weren't sitting at desks directing their troops. They were with their troops, under fire. Patton was so intent on defeating his enemy that he commanded his chaplain to write a prayer to improve the weather. It worked. Even God had to admire his tenacity.

"Almighty and most merciful Father, we humbly beseech Thee of Thy great goodness to restrain this immoderate weather with which we have had to contend. Grant us fair weather for battle. Graciously harken to us as solders who call upon Thee that, armed with Thy power, we may advance from victory to victory, and crush the oppression and wickedness of our enemies, and establish Thy justice among men and nations. AMEN." – George C. Scott as Patton

  

Nomads are introverted warriors who prefer to meet crisis and opponents one on one. In the movie, Patton reflected upon his desire to meet his chief adversary on the field of battle:

"You know, Dick, if I had my way, I'd meet Rommel face to face; him in his tank and me in mine. We'd meet out there somewhere… salute each other, maybe drink a toast, then we'd button up and do battle. The winner would decide the outcome of the entire war." – George C. Scott as Patton

Nomads have always made great soldiers. George Washington and Ulysses S. Grant were Nomad warriors during the previous two Crisis periods who lead Heroes into battle and onto victory. The Lost Generation had to make the tough decisions. They had to send thousands of people to certain death in order to achieve the ultimate victory over their foes. Eisenhower made the decision to launch the Normandy Invasion that resulted in 120,000 Allied casualties. Harry Truman ordered the dropping of two atomic bombs resulting in the deaths of 200,000 Japanese in order to avoid the estimated 1 million casualties from an Allied invasion of mainland Japan. Patton regularly expected the impossible from his troops and they delivered. Why did these men have the intestinal fortitude to make such decisions? They were blessed with a thirst for liberty, a survival instinct and a sense of honor.

"Better to fight for something than live for nothing."  -    George S. Patton

  

Nomads suffer a lifetime of criticism. During their youth their elders berate them as stupid, lazy and morally bankrupt. In midlife they are blamed for the decadence of the unraveling period. In old age they are seen as too cautious, old-fashioned and pessimistic. This lifetime of criticism makes Nomads tough as nails. They don't care what people think about them. They are secure in their own judgment and don't blink in the face of adversity. Their entire lives consist of hardship, danger, and harsh choices. Strauss & Howe described the adversity endured by the Lost Generation:

"During the First World War, the alleged stupidity of American youth became a raging issue when IQ tests indicated that half of all draftees had a mental age of under twelve. Afterwards, their morals came under attack from aging Missionaries. In the dark days of the Depression, when FDR blasted "a generation of self-seekers" for wrecking "the temple of our civilization," clearly he meant the middle aged Lost, who throughout the 1930s were attacked as "Copperheads", nay-sayers, "Irresponsibles," and (as war approached) "isolationists."

The Lost Generation grew up amidst intense social unrest, spiritual revivalism, enormous immigration, and unbridled drug abuse. World War I disillusioned them as they did not understand the purpose. During the 1920s they worked hard and partied hard. The Great Depression introduced doubt and loss of faith in them. But, their gritty upbringing came in handy during the hardscrabble 1930s. Their rough and tough upbringing prepared them for the ultimate test of World War II. They were prepared to do the "dirty work" that lie ahead. Strauss & Howe described their impact on that war:

"When World War II hit, the Lost shed their isolationism and provided the war-winning generals whose daring (Patton), warmth (Bradley), and persistence (Eisenhower) energized younger troops. At home, they managed the world's most efficient war machine. With little philosophizing, their first president dropped two atom bombs and then arranged a peace that was less vengeful and more secure than the one he recalled from his own soldier days."

The Lost Generation willingly sacrificed in their old age by paying exorbitant tax rates in order to allow younger generations to live a better life. Eisenhower's eight years in the White House were marked by conservative fiscal policies, choosing to not use deficit financing and building a stable economic foundation for the benefit of future generations. They died as one of the poorest generations, fulfilling their moral obligation to past and future generations of giving more than they received. Eisenhower warned the younger generations about the dangers of a military industrial complex. His wisdom was ignored.

13TH GENERATION

 

As a member of the latest Nomad generation I'm anxious to know what will be expected of me during the Crisis period we have entered. By thoroughly analyzing the Lost Generation, I hope to gain an understanding of my possible role over the next 15 to 20 years. Strauss & Howe named my generation the 13th, while it is commonly referred to as Generation X. This generation consists of everyone born between 1961 and 1981. Strauss & Howe summarize the generation as follows:

The 13th Generation (Nomad, born 1961-1981) survived a "hurried" childhood of divorce, latchkeys, open classrooms, devil-child movies, and a shift from G to R ratings.  They came of age curtailing the earlier rise in youth crime and fall in test scores—yet heard themselves denounced as so wild and stupid as to put The Nation At Risk.  As young adults, maneuvering through a sexual battlescape of AIDS and blighted courtship rituals—they date and marry cautiously.  In jobs, they embrace risk and prefer free agency over loyal corporatism.  From grunge to hip-hop, their splintery culture reveals a hardened edge.  Politically, they lean toward pragmatism and nonaffiliation, and would rather volunteer than vote.  Widely criticized as "Xers" or "slackers," they inhabit a Reality Bites economy of declining young-adult living standards.

In every Fourth Turning the catalyst is predictable but the culmination is not. We entered the current Fourth Turning Crisis period in 2008. It will likely not conclude until the early 2020s. Each generation will need to play their part. The Baby Boomer Prophets will push to resolve ever-deepening moral choices, addressing issues that have been ignored for decades. The Millennial Heroes will challenge the political failure of elder-led crusades, fueling a society-wide secular crisis. The Artist children will be over-protected and shielded from the coming turmoil. My Nomad Generation X cohorts will provide the pragmatic ideas, realistic solutions, and no nonsense leadership required during a Crisis. We will apply toughness and resolution to defend society while safeguarding the interests of the young. As our Lost Generation forefathers displayed, we will sacrifice our financial well being on behalf of our children and their children. Our sense of duty will not allow us to kick the difficult decisions down the road like the Boomer generation has done.   

I was born in 1963. My noteworthy memories as a child were of the Vietnam War, hippies, Watergate, gas lines, refinery fires, and a strike that broke my Dad's union. I was brought up by Silent Generation conformist parents. I grew up during a period of social upheaval, a divisive war, gas shortages, failed Presidencies, inflation and high crime rates. As children we were unsupervised and free to roam the town on our bikes. The drinking age was 18, but most kids were drinking beer by the age of 14. Drugs were easily accessible, even in Catholic school. I wasn't given anything that I didn't earn. I went to Drexel University because it had a Co-op program that allowed me to work and pay for my education. I graduated from college in 1986 at the outset of the Unraveling. I've always had confidence in my own abilities, got my CPA license and went to school at night for 3 years to earn my MBA. I've worked for eight different companies over the last 24 years. Hard work, honesty, common sense, a skeptical nature and living below my means has left my family, at the age of 46, in good financial condition.

Personal success and public cynicism marked the period from 1984 until 2005. Reagan provided the jolt of confidence after the disastrous Carter years. The rhetoric was more convincing than the results. This was a common theme over the last twenty years. Politicians proclaimed that our economy was the strongest in the world and American ingenuity and exceptionalism would lead the new global economy. But, a funny thing happened on the way to Mount Olympus. The Boomer politicians ran the National Debt from $1.6 trillion to $8 trillion by 2005. National problems like unfunded liabilities for Social Security and Medicare, energy dependence on the Middle East, and the gutting of American industry by corporate oligarchs and Wall Street were ignored and downplayed by those in power. Individualism, materialism and greed were the chief traits exhibited by Nomads and Boomers alike. Real weekly average earnings were $279 in 1984. Real weekly average earnings were $278 in 2005. The average American got nowhere in two decades. Instead, the average American was lured into a false sense of wealth by bankers who offered "easy" credit. While wages stagnated, consumer debt soared from $450 billion in 1984 to $2.3 trillion by 2005. While the middle class sunk further into debt, the richest of the rich reaped ungodly profits. Corporate CEOs made 500 times more than the lowest paid workers as they generated profits by shipping US jobs to China. While financial hurricanes swirled over the horizon, the country was distracted by meaningless side issues like Presidential blowjobs, gay marriage, the internet, day trading, house flipping and gays in the military. The mood darkened as terror attacks, Middle Eastern wars, government expansion and financial booms and busts have led to widespread distrust of politicians in Washington and bankers on Wall Street.

  

MILLENNIAL  CRISIS

 

So now what? The spark that triggered the current Crisis was the fraudulent housing boom that led to the collapse of the worldwide financial system in 2008. The Stamp Acts catalyzed the American Revolution, the election of Lincoln catalyzed the Civil War, the Crash of '29 catalyzed the Depression/WW II era. We are currently in the midst of the Greater Depression. Once every 80 to 100 years, the archetypes reach an explosive mixture, vividly lowering the threshold for a spark of history to ignite a Crisis. Anyone who does not acknowledge a dramatic change in the mood of the country in the last 5 years isn't paying attention. Many dogmatic linear thinkers are being blindsided by the passion and anger being exhibited across the land. They attempt to dismiss this mood transformation as a passing storm. The Boomer Prophets have led the country into this Crisis, as they have controlled the levers of government and Wall Street for the last ten years. Their unchecked and unregulated actions caused the financial Crisis we are still confronting. Doug Casey assesses the danger of having this generation in charge during this Crisis:

 "The Boomers in Elderhood will be dogmatic, harsh, puritanical, and quite willing to burn down the barn in order to destroy whatever rats they see."

In past Crisis periods strong leader Prophets like Lincoln and Roosevelt guided the nation through the Crisis. Nomads like Washington, Grant, Eisenhower, Patton, Bradley, and Truman did the heavy lifting. They gave the orders that killed thousands but saved millions. I have difficulty recognizing people in positions of power today that measure up to these standard bearers of American history. Hope is not one of my strongest traits. I prefer factual analysis, logical solutions, and honest debate. Who will rise to the occasion now? Strauss & Howe's assessment of how my Nomad generation will react during this Crisis matches what I would expect from myself:

"Playing to win but half expecting to lose, Nomad generations enter midlife with a sense of exhaustion. By now they take for granted widening gaps between classes, ethnicities, regions and gender roles. The ablest among them emerge as cunning, pragmatic, and colorful public figures. When the Crisis hits, they find their lives painfully split between the old order and new. But they rise fiercely (and sacrificially) to the occasion, able to make hard and fast choices without fretting much about what others think. Exalting the workable over the ideal, midlife Nomads forge an effective alliance with the elder Prophets. Yet people of other ages are quick to criticize them and slow to give them praise."  

My fellow Nomads are now 29 to 49 years old. I'm accused of being negative, Mr. Doom & Gloom, and a cynical son of a bitch. Those are my best traits. I personally think I'm a pugnacious realist who uses facts to analyze every issue. Ideologues on both sides of the aisle irritate me to the point of distraction. People who blather on with slogans and talking points with no substance infuriate me and regularly feel my wrath. I couldn't care less what people think about me or my ideas. I do feel caught between the old order and the new order. I am willing to sacrifice my future for the future of my children. I am ready to fiercely tackle

2012 Year In Review - Free Markets, Rule of Law, And Other Urban Legends

Posted: 22 Dec 2012 09:52 AM PST

Submitted by Dave Collum via Peak Prosperity,

Background

I was just trying to figure it all out.

~ Michael Burry, hedge fund manager

Every December, I write a Year in Review that has now found a home at Chris Martenson's website PeakProsperity.com.1,2,3 What started as a simple summary intended for a couple dozen people morphed over time into a much more detailed account that accrued over 25,000 clicks last year.4 'Year in Review' is a bit of a misnomer in that it is both a collage of what happened, plus a smattering of issues that are on my radar right now. As to why people care what an organic chemist thinks about investing, economics, monetary policy, and societal moods I can only offer a few thoughts.

For starters, in 33 years of investing with a decidedly undiversified portfolio, I had only one year in which my total wealth decreased in nominal dollars. For the 13 years beginning 01/01/00—the 13 toughest investing years of the new millennium!—I have been able to compound my personal wealth at an 11% annualized rate. This holds up well against the pros. I am also fairly good at distilling complexity down to simplicity and seem to be a congenital contrarian. I also have been a devout follower of Austrian business cycle theory—i.e., free market economics—since the late 1990s.4

Each review begins with a highly personalized analysis of my efforts to get through another year of investing followed by a more holistic overview of what is now a 33-year quest for a ramen-soup-free retirement. These details may be instructive for those interested in my approach to investing. The bulk of the review, however, describes thoughts and observations—the year's events told as a narrative. The links are copious, albeit not comprehensive. Some are flagged with enthusiasm. Everything can be found here.5

I have tried to avoid themes covered amply in my previous reviews. There is no silver bullet, however, against global crises, credit bubbles, and feckless central bankers. Debt permeates all levels of society, demanding comment every year. Precious metals and natural resources are a personal favorite. This year was particularly distorted by the elections; I offer my opinions as to why. Sections on Baptists, Bankers, The Federal Reserve, and Bootleggers describe the players in Jack Bogle's Battle for the Soul of Capitalism.6 Special attention is given to a financial crime diaspora fueled by globally overreaching monetary policies. Everything distills down to a relentlessly debated question: What is the role of government? I finish light with the year's book list that shaped my thinking. I acknowledge individuals who have made pondering capitalism a blast through direct exchanges over the years. They brought wisdom; I brought the chips and dip. You already know who you are. And then there are those characters whose behavior is so erratic, sociopathic, criminal, or just plain inexplicable—you guys are central to the plot. I leapfrog Rome and Titanic metaphors and go straight to the Lusitania.

One last caveat: I subscribe to the Aristotelian notion that one can entertain ideas without necessarily endorsing them, often causing me to color way outside the lines. With trillions of dollars circumnavigating the globe daily, nefarious activities are not only possible but near certainties. If you are prone to denounce conspiracy theories and conspiracy theorists to avoid unpleasant thoughts, you should stop reading now. I'm sure there's another Black Something sale at Walmart. If you are a bull, you should also bail out or buckle up. This is the bear case. I will remain a permabear until some catharsis knocks me off my stance and they find a cure for my market- and politics-induced PTSD.

As this review was being completed, Lauren Lyster and Demetri Kofinas recently uploaded a companion interview on the Year in Review I did with Capital Accounts on RT_America (to be aired on December 21st and posted on Youtube.)7 In this context I offer wisdom from the Master:

If there is ever a medium to display your ignorance, television is it.

~ Jon Stewart

Footnote superscripts appear extensively throughout this review. The actual footnotes and associated hyperlinks can be found here.

Contents

Investing

The elevated prices of financial assets have already eaten the future.

~ John Hussman, CEO of Hussman Funds

With rebalancing achieved only by directing my savings, I have changed almost nothing consequentially in my portfolio year over year. The total portfolio as of 12/15/12 is as follows:

Precious Metals et al.: 52%

Energy: 15%

Cash Equiv (short-term): 30%

Other: 3%

Most asset classes lurched off the starting line in January like Lance Armstrong. My portfolio eventually settled down and spent most of the year snorkeling slightly up or slightly underwater. In a relatively rare instance, an overall return on investment (ROI) of 4% was beat handily by both the S&P 500 (13%) and Berkshire Hathaway (17%), although nearly the entire return of the S&P was p/e expansion.8 A majority of hedge funds struggled to beat the S&P this year as well.9

My precious metals are distributed in approximately three equal portions to the gold-silver holding company Central Fund of Canada (CEF), Fidelity's precious metal fund (FSAGX), and physical metals (Figure 1). Gains in gold (17%) and silver (8%) were offset by a horrendously lagging performance for the second year in a row by the corresponding precious metal-based equities (-10%). The metal-equity divergence began in January 2011 and continues to baffle the hard-asset crowd (Figure 2). A plot of the ratio of the silver ETF (SLV) versus the world's largest silver miner, Pan American Silver (PAAS), is striking (Figure 3). In May I emailed a dozen gurus for opinions about arbitraging (swapping) an SLV position for PAAS. Realizing that collectively these folks controlled billions of dollars, I felt I had to move on the idea pronto (my only portfolio change for the year). After a few weeks of an overwhelming sense of superiority, gyrations eventually left the arbitrage at about break-even. I'm guardedly optimistic about the precious-metal equities, but they have been widowmakers for two years.

Figure 1. Precious-metal-based indices (GLD in green, XAU in red, SLV in brown, and XAU in red) versus the S&P 500 (in blue) for 2012.

Figure 2. Relative performance of gold-based equities (XAU in red) vs. gold (GLD in blue).

Figure 3. SLV/PAAS ratio over three years.

A basket of Fidelity-based energy and materials funds afforded 2-16%. They are represented emblematically by the XLE spider (3%) and XNG Amex natural gas index (1%) in Figure 4. I am wildly bullish on natural gas for reasons discussed in detail two years ago.2 Unfortunately, Fidelity's natural gas fund (FSNGX) foisted upon me by Cornell got crushed in 2009 and subsequent years relative to its peers. Making the right calls is hard enough without that kind of headwind. New management as of 2010 seems to be finally tracking the XNG. I keep adding to an already chunky position. Friends deeply embedded in the energy complex suggest that the fracking glut will take 2-3 years to burn off. (It is also claimed that the derivatives traders are whacking out the price discovery; what else is new?)10 A global shift toward natural gas should reward patience.

Figure 4. Energy-based indices (XLE in red and XNG in green) versus the S&P 500 (in blue) for 2011.

Cash was in a U.S. Treasury-backed money-market bunker returning 0%. I had a $25K money market fund that failed to reach the IRS taxable threshold! I could care less what risky gangplank Bernanke wishes that I walk. Buying ten-year Treasurys returning <2%, with or without your finger quivering over the sell command, is a fool's game: I'll take the yield hit. The bond market will eventually become a killing field. Those who are pair trading—long bonds/short brains—will get their organs harvested. This seems like a near certainty.

The most disappointing part of the year was a personal savings equivalent of only 11% of my gross income compared with 29% last year and 20-30% in typical years. Unusual expenses in the form of a year of college education, a serious violin upgrade, and very large landscaping costs don't excuse the fact that we chose lower savings over lower consumption. This troubles me deeply. Profound austerity is not a cause but an effect, something the Europeans may be just now figuring out.

To understand my lifetime returns, you must understand two unusual premises that have dominated my thoughts and actions. First, you must become wedded to an investment. Did I just say that? Yep. You've got to be a true believer to resist being shaken out of good investments or suckered into bad ones. Many say it's never a bad time to take a profit. Total hooey. Those ten-baggers—the miracles of compounding—will never materialize if you bail after 20%. Just ask the Microsoft investors who exited in 1990 for a handsome profit.

My second premise is that you have to get it right only about once a decade. One of my favorite bloggers and an e-pal, Grant Williams, illustrated how daisy-chaining four secular bull markets—Gold, Nikkei, NASDAQ, and Gold—could have produced a virtual return of 640,000%—a 6400-bagger (Figure 5).11 Admittedly, this kind of luck is only found in Narnia. Statistically, somebody might have done this, although not likely in such a Texas Hold'em all-in fashion.

Figure 5. Sequential investments in secular bull markets starting in 1970.11

My variant of such a sequential trek via imbalanced portfolios changed in decadal rhythms as follows:

1980-88: exclusively bonds (100%)

1988-99: classic 60:40 equities:bonds

1999-2001: cash, precious metals, shorts (minor)

2001-2012: cash, precious metals, energy, tobacco (minor)

My total wealth accumulated through a combination of savings and investment as shown in Figure 6. (I redacted the dollar amounts along the y-axis.) Avoiding 1987 and 2000 equity crashes and capturing the bull market in precious metals proved fortuitous. You can see that 2008 was the only down year. Berkshire has dropped five years since 1991. A 13-year accumulation rate beginning 01/01/00 of 11% annualized compares favorably to an annualized return on the S&P of -0.03% and on Berkshire of 7%.

Figure 6. Total wealth accumulated (ex-housing) versus year of employment. Absolute dollar values have been omitted.

I also monitor overall progress by what I call a salary multiple, which is defined as the total accumulated investable wealth (excluding my house) divided by annual salary (line 22 of the 1099 form excluding capital gains). Over 33 years my salary (actually total income) rose twelve-fold, which I can fairly accurately dissect into a fourfold gain resulting from inflation and a threefold gain (relative to starting salaries of newly minted assistant professors) due to increasing sources of income and merit-based pay raises. My accumulated wealth normalized to the moving benchmark of a rising income is plotted versus time in Figure 7. The fluctuations visible in Figure 7 not apparent in Figure 6 result from income variations.

Figure 7. Total wealth accumulated measured as a multiple of annual salary versus years of investing.

To clarify the origins of a 13-year return of 11% per year I offer Figure 8. By plunging into the precious-metal and energy sector early and avoiding all other forms of investments (S&P in particular), I was able to capture the entire hard-asset bull market. According to Money magazine's calculator,12 I can spike the ball in the endzone and dance. They are wrong. My ultimate target—a valid target—is to accumulate 20 salary equivalents over the next 12 years (age 70). This will require an inflation-adjusted (real) annual growth of 4-5%. Some of that will come from savings. As you can tell by the Hussman quote and discussions below, however, such gains are not assured.

Figure 8. Plot of Central Fund of Canada (CEF; 1:1 gold:silver by value), XLE, and S&P.

Thinking About Capitalism

When the blind lead the blind get out of the way.

~ First grader

I realize that is what I do—I think about capitalism. It's not deep stuff; more like taking a weed whacker to a hay field of information. This year, however, there was something askew—something corrupting the information flow. It was the presidential elections. This is a good starting point.

Election Year

No serious person would question the integrity of the Bureau of Labor Statistics. These numbers are put together by career employees.

~ Alan Krueger, White House Council of Economic Advisers

To a news and economic data junkie, presidential elections are profoundly distorting. The news feeds are inundated by election analyses that are mundane at best and nauseating on a bad day. It's a variant of Gresham's Law—bad information pushes out good. The pundits are either talking about the elections explicitly or couching potentially credible news stories in the context of the election. Terrorist attacks in Benghazi mutate into Obama's Big Screw Up. The news feeds are further corrupted by billions of campaign dollars spent to deceive us. Frank Rich, award-winning New York Times journalist, estimates that George Bush had 120 "journalists" on payroll. They get overtime and hazard pay during elections. The shenanigans go deeper.

There have been numerous accusations of voter fraud. From my recollection, it was mostly the left accusing the right (the CEO of Diebold in particular). A window opened when the mischievous computer hackers, Anonymous, did a smash-and-grab on Stratfor's server, obtaining over 5 million emails. Stratfor provides confidential intelligence services to large corporations and government agencies, including the U.S. Department of Homeland Security, U.S. Marines, and U.S. Defense Intelligence Agency. From 971 emails released to date (by Wikileaks), we find that Democrats stuffed the ballot boxes in Pennsylvania in 2008 that went unchallenged by McCain. Jesse Jackson shook down Obama for a six-digit payoff.13 Emails detailing the Bin Laden capture are worth a peek.

The most insidious election year distortion may be the tainting of economic data feeds that the marketplace relies on. Data coming from career statisticians in the federal government are always suspect. The inflation numbers, for example, are widely believed to be cooked beyond recognition using corrections recommended by the Boskin Commission.14,15 This year, however, the data massaging morphed into an all-out rub 'n' tug to ensure a happy ending for the Democrats.

The data from the Bureau of Labor Statistics (BLS) are especially susceptible to corruption. The Birth-Death Model, for example, estimates new jobs being created that nobody can detect.16 Apparently, the absence of data demands that some get fabricated. These embryonic jobs have reached epidemic proportions—hundreds of thousands per month—oftentimes overwhelming the detectable jobs. Curiously, no administration ever fabricates undetectable job losses.

Another trick is a very simple iterative process for reporting statistics: Step 1—Announce inflated economic statistics as good news; Step 2—correct the inflated statistics at some later date to a very deflated number, hope nobody notices, and call it "old news anyway"; Step 3—Report new inflated numbers that are spectacular improvements relative to the recently deflated statistics. Rinse, lather, repeat.17

The fibbing gets serious during an election year. When pre-election unemployment numbers plummeted by 0.4%—a monumental drop—the response was immediate, visceral, and seemingly uncontestable disbelief. David Rosenberg expressed it well:

I don't believe in conspiracy theories, but I don't believe in today's jobs report either.

~ David Rosenberg, Gluskin Sheff and ex-Merrill Lynch

Well, Rosie, apparently you do believe in conspiracy theories. Within minutes of the report Jack Welch, no neophyte to creative bookkeeping, released his now-infamous Tweet:

Unbelievable jobs numbers...these Chicago guys will do anything... can't debate so change numbers.

~ Jack Welch, former CEO of General Electric

It was an election year, however, so the goofy employment numbers morphed into a hot-button issue. Right-wing pundits accused the Obama administration of cooking the books. Left-wing pundits fired back with the shrill accusation, "Conspiracy theorists!" Few remembered that the GOP accused the Democrats of cooking the same numbers back in 2003.18

The whole sordid affair took a strange turn when Zero Hedge noted an odd mathematical relationship between the two carefully measured employment statistics:

Measured employment numbers:

fully employed/partially employed = 873,000/582,000 = 1.5000…

Gosh. What are the odds that those numbers were actually measured? I would say about 2.000…%.19

Counting those who no longer receive unemployment benefits as no longer unemployed, an accounting gimmick that became chronic once the crisis began, by no means was invented by Team Obama. None of this is new. LBJ was rumored to send economic statistics back to the kitchen for more cooking. The U-6 unemployment numbers account for that mechanical engineer who is now a part-time "deposit bottle recycling engineer and firewood procurement officer." U-6 is a more accurate measure of the employment stress and is staying persistently above 14%.20

Election year pandering may contribute to a very odd stock cycle.21,22 If you break the 20th and 21st century into 27 four-year fragments corresponding to the election cycle—2009-2012 being the most recent—and average the returns, you get what is called the Presidential Election Cycle (Figure 9). What causes this cycle? One cannot exclude the role of friendly central bankers (sado-monetarists) juicing the markets. Mitt Romney, when he promised to fire Bernanke, may have sealed his fate.

Figure 9. Four-year election stock cycle throughout the 20th century.21

Maybe the four-year cycle in Figure 9 is a statistical anomaly and, even if real, we may not have a clue why it occurs. Nevertheless, it suggests that "Sell in May and go away" has a longer wavelength variant: "Buy the midterm and sell the Presidential." Urban legend or not, 2013 is looking dangerous.

Events

Dan, quit embarrassing yourself.

~ Caroline Baum of Bloomberg Tweeting to a money guru who claimed that Hurricane Sandy will be stimulative

Acts of God—force majeure—tantalize market watchers and sophists alike but seem to have little effect on even the intermediate term: Economies and markets just keep marc

John Embry to preside at GATA fundraiser with Bob Bishop in Vancouver

Posted: 22 Dec 2012 08:33 AM PST

10:40a ET Saturday, December 22, 2012

Dear Friend of GATA and Gold:

Sprott Asset Management's chief investment strategist, John Embry, will be master of ceremonies for GATA's fundraising reception with retired newsletter writer Bob Bishop at the conclusion of the Vancouver Resource Investment Conference on Monday, January 21.

Embry, known worldwide for his advocacy of ownership of the monetary metals and the companies that mine them, is a longtime GATA supporter and will be speaking during the Vancouver conference as well.

Bishop, retired editor of the Gold Mining Stock Report newsletter, spoke at GATA's Washington conference in 2008 and his expertise long has been sought by thousands in the precious metals sector.


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Fred Goldstein and Tim Murphy open All Pro Gold

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The GATA party will be held in the Cypress Room at the Pan Pacific hotel (a block from the Vancouver Convention Centre West, where the conference is being held) from 5 to 7:30 p.m. on Monday, January 21. There will be free snacks and a cash bar, and while there will be no admission charge, it won't be much of a fundraiser if people who attend aren't prepared to help fill your secretary/treasurer's pockets with ever-depreciating fiat currency, bank checks drawn on the same, or monetary metals.

GATA will know how to give value to such donations, as by undertaking new freedom-of-information lawsuits against the U.S. Federal Reserve, Federal Open Market Committee, Treasury Department, and State Department:

http://www.gata.org/node/11606

Such inquiries by GATA have proven embarrassing for central bank market-rigging operations and enlightening for investors. GATA's first Freedom of Information Act litigation against the Fed, begun in 2009 and concluded in 2011 in U.S. District Court for the District of Columbia, extracted confirmations that the Fed has secret gold swap arrangements with foreign banks and that the G-10 Gold and Foreign Exchange Committee meets secretly to coordinate gold market rigging:

http://www.gata.org/node/9917

This month GATA's research obtained a secret International Monetary Fund report showing that Western central banks insist on concealing their gold loans and swaps because transparency would impair their secret market interventions:

http://www.gata.org/node/12016

With a few million dollars, GATA might be able to tear the central bank gold price suppression scheme apart pretty quickly. With a few hundred thousand dollars, GATA might be able to stay in business for another year, at least keeping a flag flying for the monetary metals, free markets, and accountable and limited government.

Admission to the Vancouver Resource Investment Conference is free for those who register in advance, and the conference has arranged discount rates for attendees at two beautiful hotels next to the convention center, the Pan Pacific and the Fairmont Waterfront.

The conference's Internet site is here:

http://www.cambridgehouse.com/event/vancouver-resource-investment-confer...

Vancouver is a spectacularly beautiful and cosmopolitan city, the Vancouver conference is always bustling and informative, and GATA needs your help, so please consider joining us there.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Commmittee Inc.

* * *

Join GATA here:

Vancouver Resource Investment Conference
Sunday-Monday, January 20 and 21, 2013
Vancouver Convention Centre West
Vancouver, British Columbia, Canada
http://www.cambridgehouse.com/event/vancouver-resource-investment-confer...

* * *

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:

http://gata.org/tshirts

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:

http://www.gata.org

To contribute to GATA, please visit:

http://www.gata.org/node/16


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Opinion Around the World Is Changing
in Favor of Gold -- Find Out Why

When Deutschebank calls gold "good money" and paper "bad money". ...

http://www.gata.org/node/11765

When the president of the German central bank, the Bundesbank, pays tribute to gold as "a timeless classic". ...

http://www.forbes.com/sites/ralphbenko/2012/09/24/signs-of-the-gold-stan...

When a leading member of the policy committee of the People's Bank of China calls the gold standard "an excellent monetary system". ...

http://www.forbes.com/sites/ralphbenko/2012/10/01/signs-of-the-gold-stan...

When a CNN reporter writes in The China Post that the "gold commission" plank in the 2012 Republican platform will "reverberate around the world". ...

http://www.thegoldstandardnow.org/key-blogs/1563-china-post-the-gop-gold...

When the Subcommittee on Domestic Monetary Policy of the U.S. House of Representatives twice called on economist, historian, and gold standard advocate Lewis E. Lehrman to testify. ...

World opinion is changing in favor of gold.

How can you learn why and what it will mean to you?

Read the newly updated and expanded edition of Lehrman's book, "The True Gold Standard."

Financial journalist James Grant says of "The True Gold Standard": "If you have ever wondered how the world can get from here to there -- from the chaos of depreciating paper to a convertible currency worthy of our children and our grandchildren -- wonder no more. The answer, brilliantly expounded, is between these covers. America has long needed a modern Alexander Hamilton. In Lewis E. Lehrman she has finally found him."

To buy a copy of "The True Gold Standard," please visit:

http://www.thegoldstandardnow.com/publications/the-true-gold-standard

Central bankers rethink their devotion to slaying inflation

Posted: 22 Dec 2012 07:54 AM PST

By Jonathan Spicer
Reuters
Thursday, December 20, 2012

http://www.reuters.com/article/2012/12/20/us-centralbanks-idUSBRE8BJ0T12...

NEW YORK -- A subtle shift in monetary policymaking is afoot with a new generation of central bankers, striving to secure global economic recovery, prepared to challenge the old doctrine of inflation-fighting at all costs.

Mark Carney, the governor of the Bank of Canada and soon-to-be head of the Bank of England, may or may not have intended to spark a high-level debate last week over how diligently central banks should fend off inflation.

But he did just that with his speech in Toronto on the Bank of Canada's flexible approach to prices, and his musings on alternative approaches to policy that the Canadian central bank had considered but dismissed.

Within two days, Britain's finance minister, two BoE policymakers, and numerous economists had weighed in on what Carney's comments meant for the country and for the future of central banking.

... Dispatch continues below ...


ADVERTISEMENT

Opinion Around the World Is Changing
in Favor of Gold -- Find Out Why

When Deutschebank calls gold "good money" and paper "bad money". ...

http://www.gata.org/node/11765

When the president of the German central bank, the Bundesbank, pays tribute to gold as "a timeless classic". ...

http://www.forbes.com/sites/ralphbenko/2012/09/24/signs-of-the-gold-stan...

When a leading member of the policy committee of the People's Bank of China calls the gold standard "an excellent monetary system". ...

http://www.forbes.com/sites/ralphbenko/2012/10/01/signs-of-the-gold-stan...

When a CNN reporter writes in The China Post that the "gold commission" plank in the 2012 Republican platform will "reverberate around the world". ...

http://www.thegoldstandardnow.org/key-blogs/1563-china-post-the-gop-gold...

When the Subcommittee on Domestic Monetary Policy of the U.S. House of Representatives twice called on economist, historian, and gold standard advocate Lewis E. Lehrman to testify. ...

World opinion is changing in favor of gold.

How can you learn why and what it will mean to you?

Read the newly updated and expanded edition of Lehrman's book, "The True Gold Standard."

Financial journalist James Grant says of "The True Gold Standard": "If you have ever wondered how the world can get from here to there -- from the chaos of depreciating paper to a convertible currency worthy of our children and our grandchildren -- wonder no more. The answer, brilliantly expounded, is between these covers. America has long needed a modern Alexander Hamilton. In Lewis E. Lehrman she has finally found him."

To buy a copy of "The True Gold Standard," please visit:

http://www.thegoldstandardnow.com/publications/the-true-gold-standard


The sharp reaction reflects unease with a change in the way the world's major central banks approach policy in an era of slow recovery from world economic crisis.

Policymakers from the U.S. Federal Reserve to the Bank of Japan have reconsidered or relaxed their inflation targets -- long the raison d'etre of monetary policy -- and have given more emphasis to economic growth, even if that is not an official mandate.

"They have reduced their slavish devotion to the sole goal of inflation targeting," said Carl Tannenbaum, a former Fed official who is now chief economist at U.S. asset manager Northern Trust.

No central banker is going to tolerate an inflation spike in order to boost employment or foster more growth.

Policymakers have also largely dismissed some of the more radical alternatives to achieving their goals, most notably targeting levels of nominal gross domestic product (real GDP plus inflation).

Yet with the financial crisis having starkly exposed central banks' failure to stave off danger, and policymakers having responded by flooding world markets with trillions of dollars in cheap funding, a small run-up in inflation may no longer be the anathema it once was.

In the world's largest economy, Fed Chairman Ben Bernanke has unleashed some $2.5 trillion in asset purchases in the last few years to boost hiring and economic growth, squarely focusing on the employment side of the U.S. central bank's dual mandate.

His approach differs to that of his veteran predecessor Alan Greenspan. The same goes for Mario Draghi who took over from Jean-Claude Trichet at the ECB and it looks like Carney, replacing Britain's Mervyn King, fits the same pattern.

The Fed last week tied low interest rates to a drop in the jobless rate to 6.5 percent -- it stood at 7.7 percent last month -- as long as inflation did not threaten to top 2.5 percent.

The unprecedented move may represent the culmination of its departure from the inflation-centric model pursued by former Fed chairmen Greenspan and Paul Volcker and gave a clear signal that it would tolerate inflation above its 2 percent target if that was the cost of getting more Americans back to work.

Eric Green of TD Securities, a former New York Fed economist, wrote that "Bernanke has relaxed the inflation constraint", effectively raising the Fed's core inflation target over time from 1.75 percent to 2.5 percent.

North of the border, the Bank of Canada has long had an inflation target of 2 percent within a range of 1 to 3 percent.

But unlike past BoC governors, Carney, 47, has emphasized the idea of "flexible targeting" in which inflation could be allowed to stray from the target for longer than would normally be tolerated in order to stabilize financial markets or the economy.

Carney said earlier this month that the BoC explored the idea of changing its inflation targeting mandate altogether but decided that was too risky.

He stressed he was not dropping hints about his plans for Britain yet BoE policymakers were quick to push back on any notion the country should change its approach to policy.

Paul Fisher, the BoE's executive director for markets, said Britain should be wary of changing the central bank's 2-percent inflation target and had no need to adopt the longer-term commitments its North American counterparts have made on interest rates.

But while BoE Chief Economist Spencer Dale warned "there is no free lunch" when it comes to changing the central bank's target, British finance minister George Osborne surprised some when he welcomed Carney's opening of the debate.

"If you want to change the regime you have to make a pretty strong case for doing so," Osborne told members of parliament.

In July, Carney will replace King, considered among the last of the old guard of inflation-fighting central bankers -- despite mixed success in that regard -- which also included BoJ Governor Masaaki Shirakawa and former ECB head Trichet.

Draghi, who succeeded Trichet last year, has been careful to stick to the ECB's price stability mantra, which is enshrined in the EU treaty and fiercely defended by Germans who are still haunted by the memory of hyperinflation in the 1920s.

Yet he has also flooded the financial sector with more than one trillion euros this year and pledged to buy euro zone government bonds in whatever amounts are needed to shore up the currency bloc.

Two hardline ECB policymakers, Axel Weber and Juergen Stark, resigned last year over the bank's previous bond-buying program. The pair said they felt it strayed into the realm of fiscal policy and could ultimately pose inflation risks.

In Japan, Shirakawa is under unusually explicit pressure from incoming Prime Minister Shinzo Abe to boost the BoJ's inflation target to 2 percent, from 1 percent, to help battle the deflation that has mired the country for the past 15 years.

Abe's party was swept to power on Sunday in part on a pledge of "unlimited" monetary easing to achieve higher inflation.

In a private meeting on Tuesday, Shirakawa was said to have sat in silence as Abe reiterated his request for the BoJ to boost its inflation target. The BOJ duly delivered its third shot of monetary stimulus in four months earlier on Thursday.

Masaaki Kanno, a former colleague of Shirakawa at the BOJ and now chief economist at JPMorgan Securities in Japan, says Shirakawa will be the last "normal" BoJ governor, one who worries about the risks posed by printing money.

"There are more and more people in Japan who want deflation to be eliminated and feel that the BoJ should be forced to use its 'magic wand' to create inflation," Kanno said.

"The only option left for Japan might be for the BOJ to print money by buying more bonds," he added. "If that's what the public wants, (Shirakawa's) successor will probably have to go down that route."

* * *

Join GATA here:

Vancouver Resource Investment Conference
Sunday-Monday, January 20 and 21, 2013
Vancouver Convention Centre West
Vancouver, British Columbia, Canada
http://www.cambridgehouse.com/event/vancouver-resource-investment-confer...

* * *

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:

http://gata.org/tshirts

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:

http://www.gata.org

To contribute to GATA, please visit:

http://www.gata.org/node/16


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Fred Goldstein and Tim Murphy open All Pro Gold

Longtime GATA supporters Fred Goldstein and Tim Murphy have brought their many years of experience in the precious metals and numismatic coins to All Pro Gold as metals brokers who specialize in the delivery of gold and silver bullion bars and coins as well as numismatic gold and silver coins. Fred and Tim follow these markets closely and are assisted by a team of consultants in monitoring market trends. All Pro Gold offers GATA supporters competitive pricing on all bullion products and welcomes inquiries. Tim can be reached at 602-299-2585 and Tim@allprogold.com, Fred at 602-799-8378 and Fred@allprogold.com. Ask about their ratio strategy and the relationship of generic $20 dollar gold pieces to 1-ounce gold bullion coins. Visit their Internet site at http://www.allprogold.com/.

Light at the End of the Tunnel for Gold

Posted: 22 Dec 2012 07:49 AM PST

Frank Holmes, CEO and Chief Investment Officer, U.S. Global Investors writes:

Intuition was telling me something was going on these past few days in the gold market. Our investment team was watching gold and gold stocks take a tumble for no obvious reason. It wasn't only us who felt this way: many analysts were caught off-guard. One comment from Barclays Research indicated that the week was unusually "brutal … with quite a few confused participants with some seemingly positive aspects of the market not having an impact."

My hunch was realized only days later when Zero Hedge posted that Morgan Stanley Wealth Management recommended that its clients dump two of John Paulson's funds. As MS clients redeemed their shares, the hedge fund giant became a forced seller of gold and gold stocks.

What complicates the gold market is the fact that Paulson is such a big fan of the yellow metal that he offers a "gold share class" to investors, meaning shares are denominated in physical gold. The drawback is when an investor redeems shares, his firm has to convert from gold back to dollars, which forces him to sell his hedged position in the SPDR Gold Shares ETF (GLD). The unfortunate consequence of his actions is a short-term decline in the gold price as the market adjusts.

The chart below highlights how gold, the S&P 500 Index and the 10-Year Treasury yield were plodding along together, until December 12, when the metal dramatically dropped off. This is possibly the day "Paulson may have gotten the redemption fax," says Zero Hedge.

Gold Near a Buy Signal?

Paulson is only one high-profile example of a stream of hedge fund managers who have suffered liquidations this year. Much to our chagrin, gold and the gold mining industry have been on the wrong side of these trades.

The metal also took a hit recently when a large investor, or a group of investors, made a negative bet on gold futures, with a speculative put position from January to February nearly doubling in size. Credit Suisse suggests it may be the action of a hedge fund.

Paulson's loss can be your gain. At U.S. Global Investors, we study probability and statistical models to help us improve our odds in the market. It's like counting cards in Vegas—there's no guarantee you'll hit the jackpot, but you usually improve your odds if you understand the math of probabilities and place your bets accordingly.

One of our favorite charts is the oscillator which shows the probability of gold returning to its mean after a dramatic rise or fall. We believe it helps investors put the current correction in context with historical moves and determines potential buying and selling opportunities.

Based on the last 10 years of data, gold seems to be approaching an oversold position after this latest correction. In standard deviation terms, the percentage change in year-over-year rolling returns, gold has made a downward move of 1.2 standard deviations. An event like this only happens about 10 percent of the time, with high odds favoring a reversion to the mean.

Gold Near a Buy Signal?

Life is about managing expectations. With gold and gold stocks, there will be short-term anomalies, such as hedge funds' liquidation. Another historical difference for gold stocks relates to the presidential election year cycle. As we have mentioned before, gold miners tend to perform poorly in the year of a U.S. presidential election.

Regardless of which party is in the White House and which party wants to take it back, going back to 1984, the Philadelphia Stock Exchange Gold and Silver Index (XAU) has declined an average of 18.4 percent in the year Americans are busy thinking about voting for a leader.

XAU GOLD SILVER

It's not the end of the world for gold and gold stocks. Take a look at what happens the year following a U.S. presidential election: Going back to 1985, the XAU historically has increased substantially in post-election federal years, rising 23.4 percent, on average.

philadelphia stock exchange

With governments lacking courage for fiscal discipline, I expect that interest rates will remain in negative territory for a long time. Central bankers will continue to keep the printing presses warm as policies aren't expected to change. I believe this will keep the Fear Trade buying gold throughout 2013.

In addition, emerging market central banks have been diversifying into gold. Net official sector purchases of 425 tons year-to-date is a drastic difference compared to only a few years ago when central banks were net sellers of the precious metal. Only recently, UBS reported that in November, Russia purchased nearly 3 tons of gold and Brazil bought almost 15 tons. Iraq—a notable new buyer—bought 25 tons from August through October. Given that this is the country's first increase since the early 2000s, "having a new buyer in the central bank space and especially from a new region is an important development," says UBS.

While the Love Trade has been subdued this year, we see light at the end of the tunnel, not a train. One recent development is the increase in mutual fund flows of $32 billion into emerging markets since the announcement of the third round of quantitative easing (QE) in the U.S. This appears to be a powerful precursor for a stronger 2013, which would reignite the Love Trade in China and India.

Cumulative inflows to emerging market funds

As we head into the final days of the year, I'd like to take this opportunity to thank our faithful readers for following, reading and sharing our thoughts on the markets. We appreciate your confidence and trust and look forward to a prosperous new year.

Here's wishing you and your loved ones a very safe and joyful holiday season!

December 21, 2012 (Source: U S Global Investors)

http://www.usfunds.com/investor-resources/investor-alert/#.UNXHEG9QVSA

Confession: Banks Ignore Risk &amp; Sell Unethically

Posted: 22 Dec 2012 06:29 AM PST

Sad. Scary. Unethical. That is how we describe the information revealed by Paul Morre, former top executive of a big bank in Scotland. We have never attended board meetings inside a bank to confirm that these statements are correct. However, basic logic combined with the evolution of the financial and banking crisis are the criteria we would use to accept this confession as evidence. Courtesy of PositiveMoney.org.

Obviously most of us "intuitively" know that the most of the information contained in this confession is true. Still, it is different to hear someone "from within" talking about. The interview contains some terrific quotes which we listed at the end of this article. They provide insights on a micro level which is more or less inside a bank. On a higher level, economic and even societal, the following two quotes stand out.

"Do the top people who are making the key strategic and policy decisions inside banks, understand and thoroughly consider their impact on the wider economy? I don't ever remember in all my time any discussion, anywhere, in any bank I have ever been. They do consider whether the economy would impact the bank, but not whether the bank affects the economy. Because the company's law system drives them to consider the fiduciary duties of the directors to the company, not to the shareholders. But it has been interpreted as if the only stakeholder is the shareholder. And who represents the shareholder? The investment analist. What do they want? Short term growth. The system in so many respects needs to be revised. It is a huge shame that we didn't use the banking crisis to investigate exactly how decisions are made."

"An economy without ethics ultimately destroys wealth and creates poverty. The banking crisis drove more than a hundred million people back into poverty. Mortality statistics from people that go into poverty rise hugely for a whole range of reasons. So the banking crisis was not only about making people poorer than before, but also about killing people's wealth."

In line with these statements, we recently summarized the unintended consequences of (excessive) money printing as explained by Marc Faber. He pointed out that central banks simply cannot determine what happens with the newly created money. He added to it that inflation, as a result of excessive money printing, does not necessarily occur in wage inflation or consumer prices. The additional liquidity, however, can create unpredictable sorts of inflations. Bubbles are the destructive manifestation of this.

What follows are a couple of statements from the video interview that show how a bank operates from the inside and shows what the thinking of the organization is.

  • "We will never hit our sales target and sell ethically", a quote by an employee in one of the branches. [at 00:50]
  • "Investment analists who demand short term results from executives. Executives come up with systems to generate profit as quickly as humanly possible, ignoring the long term risk and consequences of that." [at 01:15]
  • "In between the top management [setting the sales targets] and the people who need to do the work [in the branches], were lots of people who had a culture of fear." [at 04:20]
  • "One of the major causes of the crisis was excessive reliance on mathematical models [by the automated credit risk management system(s)] for which the assumptions could not be validated." [at 04:46]
  • "The whole system was about selling and it did not matter if it was credit, insurance, bonds, …" [at 05:45]
  • "Banks don't really do what they are supposed to do, which is fuel both ordinary families and businesses. The vast majority of their lending is property lending, the numbers are really staggering." [at 07:20]
  • "Politicians need people with deep, long term practitioners experience to help them understand what the real issues are and what needs to be done." [at 09:10]

Our key take-away from this confession is that it proves the dire state of the banking system, the risk of holding assets within a bank and the unprecedented risks by excessive money creation. When inflation hits, it could hit unexpectedly and hard as explained by Claudio Grass. That is the number one reason to hold physical gold and silver outside the banking system as we have been advocating for a long time.

Jim Rogers: &#8220;This is Not The 1920s, There's No Reason For The Government To Manipulate Gold Or Silver, I Don't Buy It&#8221;

Posted: 22 Dec 2012 05:32 AM PST

I reconnected yesterday with legendary investor and commodities bull, Jim Rogers. He shared thoughts on the US Fed's recent announcement of over $1.2 trillion in annual debt monitization, the current correction in precious metals & corresponding debates of manipulation, agriculture, as well as the best long and short positions in the world at this time.

Starting our conversation on the recent correction in precious metals, Jim said, "The CFTC numbers show that the number of speculators piling into gold and silver has gone up a lot in the last several weeks. You have twice as many people buying gold calls as buying gold puts—there's a lot of bullishness in gold, so it's not surprising to me at all that it's correcting." 

In view of further downside, Jim added that, "Precious metals in my view need to continue to correct. Gold has been up 12 years in a row, which is extremely unusual in my experience. Also gold has only had one 30% correction in 12 years. That too is extremely unusual in markets…Most things even in a bull market correct 30% every one or two or three years…India  [for example] is the largest buyer of gold in the world and has been for a long time, so if India does something to hit gold, or to cut imports, it could have a big drop."

When asked his thoughts on political or trading manipulation in the metals, he quipped, "This is not the 1920s or 1930s, when gold was central to the world monetary system. There's no reason for them to manipulate it. In my view that's mainly been disgruntled bulls over the past 30 years…I don't buy it. There's no reason for the government to manipulate gold or silver."

In response to the US Fed's escalating debt monitization, and ensuing global currency devaluations, he said, "Everybody's joining in the currency war…the new Japanese Prime minister says he's going to print unlimited amounts of money, they're all doing it...Many countries are printing money…This is all going to end badly, whether that's currency collapse, economic collapse, more bankruptcies, higher inflation, or higher interest rates—these are the things that have always happened in the past, and I presume they will happen again."

Additionally, Jim commented on his upcoming book release entitled "Street Smarts", which is currently available on pre-order through Amazon.

This is another interview of required listening for all serious market students and investors, as Jim's wisdom and experience cannot be missed.

To listen to the interview, left click the following link and/or right click and "save target as" or "save link as" to to your desktop:

>>Interview with Jim Rogers (MP3)

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Thanks,
Tekoa Da Silva
Bull Market Thinking

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Currency Positioning and Technical Outlook Holiday Mode

Posted: 22 Dec 2012 05:28 AM PST

 

The US dollar rebounded smartly at the end of last week as the realization that it was increasingly likely the US would go over the fiscal cliff.  This has been our base case, but many seemed to expect it to be averted and were looking past it.   

 

The collapse of Boehner's so-called Plan B, due to the lack of sufficient Republican support, would not have passed the Senate, where the Democrats enjoy a slim majority, in any event.  The entire negotiations are now in disarray, as is the national Republican Party.

 

After a holiday break, new negotiations will begin on December 27, giving officials five days to reach an agreement.   A fall back plan--an interim agreement--aimed at avoiding the tax increases and spending cuts that would drive the economy over he cliff, risking new increases in unemployment,  will also being discussed.  

 

The dollar's recovery, ironically, was a product of the heightened concerns about the US political dysfunction and market positioning.  We have noted in our recent weekly reviews that the speculators  in the futures market were reducing short currency positions and building on the longs.  Respecting the holidays and the lighter market participation, we offer an abbreviated review of currency positioning and technical outlook.  We share the following six observations.

 

1.  The recent trend lower in the dollar against the major foreign currencies began in mid-Nov.  A correction to that move is underway.  Price action is often exaggerated in thin markets.  We will look to fade this year-end sell-off come the New Year.  In particular, of the currencies reviewed here, we like the Canadian dollar and Mexican peso. While the losses in the Australian (and New Zealand) dollar may also be exaggerated, offering opportunities for short-term participants, value investors must recognize the Australian dollar is among the most over-valued currencies tracked by the OECD.

 

2.  The break down in the currencies (excluding the Japanese yen) took place after the reporting period reviewed below.   That said, in most of the currency futures, there was an increase in both gross longs and shorts.  This means that while many participants were positioning for a continuation of the recent trend, top pickers were also positioning for a reversal or correction.  

 

3.  Given the lower participation, we suspect that the sell-off in currencies at the end of the week was more a function of long liquidation, on stop loss selling, rather than the establishment of new shorts.  

 

4.   The price action at midweek, with the shooting star in Japanese candlestick termswe noted in the euro and sterling, signaled the pullback seen in the second half of the week.    It could simply be a case of some position squaring, profit-taking ahead of the holidays.  Thin markets exacerbated the move with stop-losses being triggered.   Euro support is see near $1.3140 and then $1.3060.  Sterling support is seen initially in the $1.6110-25 band.  

 

5. Many technical indicators look stretched for the yen, but nothing to suggest a recovery is in the offing.  Rather than correcting lower, which we had thought likely on a "buy the rumor sell the fact" after the election, the dollar has moved broadly sideways.  After the initial response to the election and despite the BOJ expanding its asset purchase program by another JPY10 trillion, most of the dollar's price action was confined to the range set on Monday Dec 17 immediately following the election (roughly JPY83.60-JPY84.50.  A break of this range should be respected.  

 

6.  The dollar-bloc under-performed even before the risk-off in the second half of the week.  The poor closes on the week warns of the risk of follow through selling in the holiday-shortened week ahead.  The Australian dollar closed on the low, just below $1.04.  More stops probably lie below $1.0390 and $1.0370.  The US dollar finished the week above its 20-day moving average against the Canadian dollar for the first time since Nov 16. It stopped just ahead of the CAD0.9970 area, which if taken out, would signal technical potential toward the upper end of the H2 range that extends into the CAD.10050-85 area.  

 

 

 

 

week ending Dec 18

              Commitment of Traders

  
   

(speculative position in 000's of contracts)

    
 

Net 

Prior Week

Gross Long

Change

Gross Short 

Change

  

Euro

-9.7

-31.6

69.5

17.9

79.2

-4.0

  

Yen

-89.2

-94.4

27.9

11.6

117.1

6.3

  

Sterling

28.0

28.0

79.4

14.6

51.3

14.5

  

Swiss Franc

4.3

3.2

17.4

6.1

13.1

5.0

  

C$

74.3

62.5

81.5

7.3

7.2

-4.5

  

A$

97.5

103.0

145.0

5.4

47.5

11.3

  

Mexican Peso

148.0

149.0

169.4

14.1

21.7

15.6

Gold Bugs Christmas Cheer

Posted: 22 Dec 2012 04:24 AM PST

While the price of gold has languished in a trading range much of the year, leaving some investors scratching their heads, many have been buying รข€" and in some cases, really loading up. It's a tad puzzling that gold hasn't broken into new highs, despite enough catalysts to move a herd of stubborn mules. But that's the hand we're dealt right now. We can't get up from the table until the game reaches its conclusion. Besides, I think the stall in prices is giving us one last window to buy before prices break permanently into higher levels for this cycle.

Stock Market Breather &amp; Gold Yearly Cycle Low

Posted: 22 Dec 2012 03:52 AM PST

The stock market has known all along that the fiscal cliff issue was going to be pushed out to the last minute. This is just how Washington works. Nothing is ever settled until everybody gets all of the pork needed to buy their vote. The correction today is nothing more than a short-term breather before the market makes a final push to test the all-time highs, probably by the first week in January. I'm guessing we will get some kind of stopgap measure, or extension of the deadline next week that will trigger another explosive move up to test those September highs. At that point the market will find some excuse to drift down into a daily cycle low around the middle of January.

Gold Bull Market Forecast to Pause in 2013

Posted: 22 Dec 2012 03:27 AM PST

Many gold analysts are forecasting much higher gold prices in 2013. In this interview with The Gold Report, Rohit Savant, senior commodity analyst at the CPM Group, says he believes all of the positive gold fundamentals, such as global turmoil, are already factored into the gold price. So, in 2013, he sees the trend being flat to down a bit. He also discusses what roles India, China and central banks play in the gold price.   The Gold Report: Rohit, in a recent interview you said gold is "not a guaranteed safe haven." In your view, what are effective ways to preserve capital?

Gold in Doesn't-Beat-Stocks Shocker!

Posted: 22 Dec 2012 02:50 AM PST

Gold in 2012 is set to underperform the US stock market for the first time since 2004... SO the WORLD DIDN'T END on the shortest day of 2012, as forecast by no-one beyond lazy journalists and internet frauds.

AFTER (THOUGHTS!)

Posted: 22 Dec 2012 01:25 AM PST

My Christmas present to you this year is AFTER (THOUGHTS!). It is what I mentioned in these three comments, and it is a complete chronological archive of all of ANOTHER's and FOA's comments that came after (hence the name) ANOTHER (THOUGHTS!). It is more complete than what I previously posted by at least 700 pages, and that's not counting the Gold Trail posts which are also intermixed with
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