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Wednesday, December 12, 2012

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How Porter Stansberry is preparing for the fiscal cliff

Posted: 12 Dec 2012 12:54 PM PST

From The Gold Report:
 
With nary a glimmer of hope that economic sense will supplant political expedience, Stansberry & Associates Investment Research Founder Porter Stansberry expects rampant inflation to roar in once the cost of capital rises. How is he preparing himself? Stansberry tells The Gold Report he continues to buy and hold gold and also discusses how real estate can cushion against the fiscal cliff.
 
The Gold Report: Not a day goes by that we don't hear or read something about the fiscal cliff. To what extent are you worried about the fiscal cliff? Or do you foresee a resolution?
 
Porter Stansberry: You can be sure of a couple things from Washington. One is spending will not slow down. The increase to spending in 2013, 2014, 2015 will be the same kind of increases we have seen in previous years. We will continue to spend 24% of GDP at the federal level.
 
TGR: And what else can we be sure about?
 
PS: Some actions will be taken to increase the tax rates on some taxpayers, but they will produce no material change in revenue. The government will continue to take in far less than 20% of GDP in taxes, probably only 16% or 17% of GDP. Further, those changes also will narrow the tax base, which is to say that fewer people will be asked to pay more in taxes.
 
Those two things -- more spending and higher tax rates for some taxpayers -- will happen because they're the only politically expedient things that can happen. That's been driving politics and the budget since 30-40 years ago, and will continue to do so because voters demand more from the government and voters demand that they not pay. That will continue until the system completely collapses.
 
TGR: The fiscal cliff was set up a couple of years ago in theory to force Congress to do something. There's a lot of fear about it, but at what point will there be enough fear that voters say we can't proceed in this fashion anymore?
 
PS: People should fear not going over the cliff. If we go over the cliff...
 
 
More on Porter Stansberry:
 
 
 

Steven Feldman- “Average Institutional Investor Has Nothing (no Gold in the portfolio)”

Posted: 12 Dec 2012 12:16 PM PST

Steven Feldman, former partner at Goldman Sachs, joins us to discuss Gold Bullion International and his long-term outlook for the Gold market. He said the average retail investor portfolio owns maybe 0.5% of Gold while the average institutional investor owns nothing.

Is the Bull Market in Bullion Over?

Posted: 12 Dec 2012 12:05 PM PST

Why are central banks buying gold? Don't they know that gold holdings don't earn them any money? Don't they know they'd be better off with US Treasuries? Don't they know the dollar is as good as gold? Apparently not.

Oh What a Tangled Web We Weave

Posted: 12 Dec 2012 12:00 PM PST

By the age of 12 or so, most people have learned through bitter experience that dishonesty is hard to pull off, because one lie tends to require more lies, until the complexity of the situation exceeds the liar's ability keep everything straight.

This is just as true for governments as for individuals, especially when it comes to money. A currency that holds its value over long periods of time is nice but restrictive, because it limits a government's ability to fight multiple wars and buy votes with generous social programs. So every government eventually resorts to monetary inflation, which is a combination of theft and deceit – or fraud, as it's known in legal circles. By creating large amounts of new currency, a country lowers the value of each piece of currency in the hands of citizens, thus secretly taxing them to run the government. Then, to mask the effects of this stealth tax, governments distort their reported economic statistics to portray a world that's healthier than the one most people experience. The goal is to siphon off as much wealth as possible while keeping the victims docile for as long as possible. The longer the con runs, the richer the people at the top become.

Eventually the gap between government reports and individual experience grows so wide that the lie is revealed and the scam ends, either through some sort of revolution or a financial collapse or both. A sign that we're approaching that point is the following article, in which Time Magazine advocates making a heretofore-unspoken part of the con explicit government policy:

Fixing Inflation Adjustments Is the Smart Way to Shrink the Deficit

Let's face it: There's no way to reduce America's budget deficit that won't hurt someone, and that pain can't be limited only to the rich. A payroll tax, passed in 2010, is scheduled to expire at the end of this year, for example, and that will cost middle-class households anywhere from $600 to $1,200. In addition, more than 20 million taxpayers could become subject to the alternative minimum tax (AMT), adding several hundred dollars to their annual tax bills on average. On the spending side, budget cuts would not only reduce government services but could also eventually cost tens of thousands of Americans their jobs.

But there are other ways to make progress on the deficit over the long term that would be a lot less painful and would also be politically viable. In my last column, I wrote about the estimated $30 billion a year that the Federal government could save by getting really tough on fraud. Even more could be done, though, by changing the inflation adjustments for government spending.

Cost-of-living adjustments (COLAs) are used throughout the U.S. economy – for union contracts and income tax brackets, as well as for government entitlements. It may seem only fair to adjust contracts and government programs for inflation – otherwise recipients would see their standard of living steadily erode over time. But there are a lot of ways to adjust for inflation. Moreover, the most commonly used gauge, the Consumer Price Index (CPI), may overstate the adjustment needed. Switching to a more conservative measure could save as much as $200 billion over the coming decade.

The most commonly proposed change is to replace the CPI with another index called the "chained CPI." Basically, inflation is calculated based on putting together a basket of commonly bought goods and services and then tracking the price increases for them. In reality, though, people don't consistently buy the same things. If one particular item – steak, for example – gets very expensive, people will typically buy something cheaper instead, such as chicken. The chained CPI takes into account the substitution of cheaper items for things that get too expensive, and is therefore arguably more accurate than the regular CPI. It also rises a little bit more slowly.

The result of replacing the regular CPI with the chained CPI would be slightly slower increases in monthly Social Security payments and some other government benefits. The new measure would also modestly boost tax revenues. The reason: tax brackets are indexed to inflation and would ratchet up more slowly if the chained CPI were used to adjust them. For many taxpayers, that would mean that some of their income would fall in a higher bracket.

Further savings could come from changing the formula used to calculate initial Social Security benefits. Because Social Security was originally designed to mimic a pension plan rather than look like a welfare entitlement, initial benefits are pegged to retirees' earnings over their working lives. Because the general standard of living improves over time, wages and salaries normally outpace inflation – and so do initial Social Security benefits. (After benefits have begun, further increases are based on a more usual cost-of-living adjustment.) Some economists have long argued for altering the formula for initial benefits. Keeping the current more generous earnings-based calculation for lower-income retirees but switching to an inflation-based calculation for the more-affluent half of the population could eliminate half of the Social Security deficit over the next 75 years.

Such fixes to benefit plans are not uncontroversial. When a recent Republican budget proposal included changes to the way the Federal government calculates inflation, the idea was swiftly rejected by some Democrats. Opponents of the idea objected that retirees face higher inflation than the average American because of health-care costs and that some of the tax increases would fall on the middle class. It's true, of course, that altering inflation adjustments will limit future benefit increases and cause an upward creep in income taxes. But the idea that the Federal deficit can be brought down to sustainable levels without anyone giving up anything is simply unrealistic. Hiking tax rates on the rich alone will raise enough revenue to cut the deficit only by about 8%. In the end, simple arithmetic ensures that the bulk of deficit reduction will come from the middle class – the challenge is to minimize the pain.

Unfortunately, tinkering with inflation adjustments will be little help with other runaway costs – most significantly health care, which presents even greater long-term budget problems than Social Security does. Advances in medicine often make treatment more expensive. In addition, health care is labor intensive, and in all service sectors it's hard to offset rising labor costs with the sort of productivity gains that can be achieved in manufacturing. Doctors can only see so many patients an hour, teachers can only correct so many papers, and there's a limit to how fast a pianist can play the minute waltz.

But where rising costs are chiefly the result of inflation adjustments, fine-tuning those mechanisms may be the least painful way to start bringing down the long-term deficit. The spending cuts that are currently scheduled to go into effect next year in the absence of a budget deal look horrific and could result in 7% to 9% reductions in a broad range of Federal programs. Surely it seems more rational to minimize the need for such sudden, deep, and indiscriminate cuts in the near term by accepting smaller increases in government spending over the coming decades.

Some thoughts
This is a perfect example of how lying sometimes corrupts both liar and victim. The honest approach to a situation where there's not enough wealth would be to explain that everything from the military empire to the welfare state will henceforth have to live smaller. But that's both hard to say and hard to hear, which makes the lie relatively painless for both sides. Just keep telling citizens that they'll get everything they expect, while actually giving them a little less each year. Government gets the inflation-generated resources it wants, and the recipients of government spending get to pretend for a while longer that they're taken care of. The problem is pushed into the future for tomorrow's leaders and the children of today's recipients to deal with.

Put more clearly, US voters are enabling the liars because – despite the mounting evidence that the lies are coming at our expense – we prefer the comfort of those lies to the harsh reality of no more free money for the lifestyles we thought were our birthright.

The result of dishonest public policy being enabled by voters in denial is a corrupt society, where lying – as in the article reprinted above – becomes acceptable public policy. We're not far from the old Soviet joke, "we pretend to work and they pretend to pay us."

Can Gold Make Sense If the Dollar Does Not Collapse?

Posted: 12 Dec 2012 11:33 AM PST


We follow up on our essay on gold and the dollar collapse from December 4, 2012. In that essay, we speculated what could happen with gold if the U.S. defaulted on its debt in real terms. Today, we describe possible scenarios in the opposite case where the greenback is not destroyed in spite of excessive debt.

The "imminent" collapse of the dollar has been spoken of years now. Since 2008 this talk has been fueled largely by consecutive rounds of quantitative easing (QE). With QEs at $2.25 trillion and counting, the number of borrowed dollars is hitting new highs and it's no wonder that the ability of the U.S. to sustain such programs in the future is being questioned.

As we discussed in the above-mentioned essay, it is possible for the U.S. to default on its obligations. Not default in the technical sense of the word but in a more intuitive sense. Let's explain that. All the U.S. obligations (bonds, treasury bills etc.) are denominated in dollars. So, the U.S. government is to repay its debt in a pre-specified amount of dollars (currently $16.37 trillion). If you consider the fact that the authorities have the sole right to print dollars, it becomes obvious that, at the end of the day, they can simply print money to cover any debt outstanding. This is unlikely, and would have disastrous consequences for the economy, but it's possible. In such a scenario all the debt would be paid off, but the money the creditors would get would be worth near to nothing. This is what we call a default in real terms. Precious metals investors are holding on to gold as a hedge against such a possibility.

The common misconception, already pointed out, is that the collapse of the dollar is "imminent," "sure" or "certain." It's not. Just as nobody knows what will happen in the future, nobody can say that the dollar will collapse for sure. And, even if somebody is personally quite convinced that the dollar is heading for the gutter, there's absolutely no certainty when this will happen.

Even though the number of borrowed dollars has never been higher, current debt levels in relation to GDP are not at their historical highs. As of 2011, the U.S. debt to GDP ratio stood at 98.1%. The chart below shows that, in terms of debt, the U.S. economy has already been here.

In 1946, one year after the end of WWII, the debt to GDP ratio stood at 121.3%, its highest historical level so far. Obviously, the economic conditions after WWII were quite different than the conditions we have today, but the point is that in the past the U.S. economy was able to recover from enormous debt levels. It is still possible that it will recover from all the debt the QEs have been amassing.

The implosion of the dollar and the global currency system is not imminent. Can anyone – with 100% certainty – rule out the case in which the countries around the world agree to inflate all currencies gradually until the debts are mostly erased? Or – again with 100% certainty – can anyone say that nobody will come up with a solution that would not lead to U.S. dollar's destruction?

If the widely discussed collapse of the dollar never materializes, in spite of the current debt levels, can it still be a good idea to hold on to gold? It can, particularly if you consider that we are in a bull market and there are no clear indications that this market is to end any time soon. What is more, we haven't seen a pronounced phase of exponential growth in prices, nor have we experienced the craze of the third stage of the bull market when everybody and their brother would jump at the opportunity to buy precious metals. We provide some comparisons in the chart below.

The yellow line represents the price of a troy ounce of gold between 1980 and 2012. The solid red line is the price of gold during the 1980 top ($850) corrected for the official U.S. inflation numbers and the dashed red line is the same price corrected for inflation numbers as they would have been calculated prior to a change in the methodology of inflation calculation (accidentally, this change coincides with the 1980 top). In other words, the solid red line shows you how expensive gold would have to be to buy you the same things it bought in 1980 if you followed official data. The dashed line shows you how expensive gold would have to be if you took into account unofficial data.

As of the end of November 2012, according to official U.S. Bureau of Labor Statistics, gold would have had to trade at $2,527.24 to match the 1980 top. It traded at $1,719.00, which could imply that if the top were to be seen in the nearest future (very unlikely), gold could shoot up by 47.0%.

Taking a look at the unofficial data, gold would have to appreciate to $9,548.34 to be able to buy you the same amount of goods it did in 1980. Compared to the price of $$1,719.00 (end of November 2012), this would mean an appreciation of 455.5% (!). The target of $10,000 without the collapse of the dollar seems far-fetched, but even if the unofficial numbers exaggerate the inflation, and the latter has been so far somewhere between the official and unofficial numbers, this would mean a possible price for gold beyond $2,500.

If the bull market continues throughout the next years and plays out similarly as the previous one without the collapse of the dollar, we see the gold-going-to-$2,500 scenario as a worst case one and the gold-going-to-$10,000 as a possibility. $2,500 might be a worst-case scenario because:

  • The longer it takes for the bull market to end, the higher the nominal target will be (because of the inflation).

  • The bull market of 1980 was limited to the U.S. and Western Europe. Right now, there is a much broader audience to participate in the bull market. For instance, countries from Central and Eastern Europe, as well as China and India.

  • Technological advances have made the information flow considerably easier than in 1980. It is easier now to enter the market quickly. To reverse one's position is just a matter of seconds or minutes rather than hours, which suggests that the volatility and price moves in the end phase of the bull market, may be substantial.

In short, if the 1980 top is anything to go by, then even if there's no dollar collapse ahead of us, it still may be a good idea to be invested in precious metals.

This essay concludes our two-parter on gold and the U.S. dollar. If you haven't read the first part on gold and the collapse of the dollar yet, you can do so now. Also, if you've read both essays and wonder what kind of approach would allow you to get your portfolio ready for both of the scenarios (the dollar collapsing and not), please read our piece on gold and silver portfolio structure.

To read the complete version of this study that is 12 times bigger and sign up for our free mailing list use the following link. You'll also receive 12 gold best practice e-mails.

Thank you for reading. Have a great and profitable week!

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Gold & Silver Investment & Trading Website – SunshineProfits.com

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About Sunshine Profits

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and best silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

“Scope for Gold at $2400″ as US Monetary Policy “Designed to Weaken the Dollar”

Posted: 12 Dec 2012 11:30 AM PST

THE SPOT gold price climbed back above $1715 an ounce Wednesday morning, around ten Dollars up from last week's close, as stocks, commodities and the Euro also edged higher and US Treasuries dipped, ahead of today's Federal Reserve policy announcement.

Silver meantime edged above $33.20 an ounce this morning, a slight gain on where it started the week.

Several analysts have predicted the Fed will today announce open-ended Treasury bond purchases worth $45 billion a month. In September the Fed announced it will buy $40 billion of mortgage-backed securities a month, while its maturity extension program Operation Twist, through which it sells shorter-dated bonds to buy longer-dated ones, ends this month.

"We have a six-month [gold price] target of $2000 an ounce, but see scope as well for prices to rise to $2400 an ounce by the end of 2014," says the 2013 outlook from Bank of America Merrill Lynch metals strategists this morning, in contrast with the Goldman Sachs gold forecast for 2014 made last week.

"These targets reflect our view that the Fed will maintain mortgage purchases until the end of 2014 and will move to buy Treasuries following the end of Operation Twist in December 2012."

"Quite clearly the US wants a lower Dollar and its monetary policy is certainly geared to deliver it," says currency strategist Steve Barrow at Standard Bank in a note this morning.

"If policy is geared to weaken the Dollar even more, through further monetary easing today, it won't stop any short-term safe haven demand for the Dollar that might arise out of fiscal cliff, but it could impair the ability of the Dollar to continue any such strength into the longer term."

President Obama and House of Representatives speaker John Boehner exchanged new proposals on how to reduce the US deficit yesterday, press reports says, as part of ongoing negotiations aimed at avoiding the so-called fiscal cliff of tax rises and spending cuts currently due at the end of the month unless Congress passes legislation to prevent them.

Obama has reduced his request for additional tax revenue over the next decade from $1.6 trillion to $1.4 trillion, Associated Press reports, but has not changed his call for top income tax rates to be raised.

"I'm pretty confident that Republicans would not hold middle-class taxes hostage to trying to protect tax cuts for high-income individuals," Obama told ABC News Tuesday.

The two sides are yet to reach an agreement.

In Toronto meantime Bank of Canada governor Mark Carney, who takes over at the Bank of England next year, suggested Tuesday that central banks might consider adopting nominal gross domestic product targets as an alternative to inflation targeting.

Under NGDP targeting, a central bank would aim to promote economic growth by targeting a given level of economic output in a given year.

"Adopting a nominal GDP-level target could in many respects be more powerful than employing thresholds under flexible inflation targeting," Carney said.

"This is because doing so would add 'history dependence' to monetary policy. Under NGDP targeting, bygones are not bygones and the central bank is compelled to make up for past misses on the path of nominal GDP."

Greece concluded its debt buyback program Tuesday, with unnamed official sources reporting it has received bids to sell bonds with €31.8 billion face value – above the €30 billion needed to secure Greece's next tranche of bailout funding.

The average price paid for the bonds was however slightly above that targeted, meaning Greece's debt to GDP ratio was reduced by 9.5 percentage points rather than the 11 targeted, according to the source.

The Euro extended yesterday's gains against the Dollar Wednesday, climbing back above $1.30.
China, the world's biggest gold producer and the second-biggest source of private demand last year, produced 34.6 tonnes of gold in October, China's Ministry of Industry and Technology said today.

October's production brings the total for the first 10 months of 2012 to 322.8 tonnes, an 11% increase on the same period last year.

Over in India, which imports most of its gold and is traditionally the world's number one source of demand, efforts should be made to reduce imports of gold and so lower the current account deficit that has risen to record levels, the All India Gems & Jewellery Trade Federation said Wednesday.

Lending 10% of the gold held with temples and householders to jewelers would provide three years' worth of supply, according to federation chairman Bachhraj Bamalwa.

"The only way India can reduce its dependence on imports is to tap the gold lying with individuals and temples," agrees Kishore Narne, head of commodity and currency at Mumbai broker Motilal Oswal.

"By doing this, the country can reduce influx of gold at these high prices. Appetite for gold is never going to diminish."

Ben Traynor
BullionVault

Gold value calculator   |   Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK's longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics. Ben writes and presents BullionVault's weekly gold market summary on YouTube and can be found on Google+

(c) BullionVault 2012

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Panama Orange: The Charts, Volatility, XLY, and Silver

Posted: 12 Dec 2012 10:37 AM PST

Three charts. Three takes.

from daytradeshow:

~TVR

Another Fed Policy Decision Means Buy Gold, Silver, And Yamana

Posted: 12 Dec 2012 10:34 AM PST

ByChristopher F. Davis:

Gold and silver have pulled back from their recent highs hit on Oct. 4 this year, after spiking significantly following global central bank actions in August and September. The most popular gold and silver ETFs, the SPDR Gold Trust (GLD) and the iShares Silver Trust (SLV), are down 0.9% and 0.1%, respectively, in the last month alone. In contrast, the ETFs that track the miners of these metals such as the Market Vectors Gold Miners ETF (GDX), the Market Vectors Junior Gold Miners ETF (GDXJ), and the Global X Silver Miners ETF (SIL), are down even further in the last month, losing 6.2%, 9.6%, and 3.0%, respectively. All are down well over 10% each from the highs in October.

With today's Federal Reserve announcement to accelerate its debt buying program, known as quantitative easing, to the tune of another $40 billion to $45 billion a month to


Complete Story »

Silver Ready to Overcome 32-Year Price Suppression

Posted: 12 Dec 2012 10:25 AM PST

Traders at the Sharjah Gold Souk in Dubai are forecasting a 30% price hike for 2013 after a disappointing 15% over the past 12 months. Is this the year silver will catch up with years of price suppression and finally break through its 1980 all-time high of $50 an ounce?...

The Price Of Gold Is Headed Much Higher - Here's Why

Posted: 12 Dec 2012 10:14 AM PST

By Dave Kranzler:

The Basel III Accord (BA3) is scheduled to be implemented starting in January 2013. As part of this agreement, gold will be elevated to a tier 1 bank reserve asset. Because of this, gold will be de facto reasserted into the global financial system as a currency. This should add a new dimension to the ongoing bull market in gold and silver, as banks globally now have incentive to accumulate and hold gold as a valuable, liquid asset which can be leveraged as an operating asset.

The BA3 is the latest iteration of a global regulatory standard that governs bank capital and risk exposure. To summarize, BA3 will require banks globally to hold a higher amount of capital as "reserve" capital. This reserve capital is what theoretically buffers banks from the volatility and risk embedded in holding business assets. Reserve capital is the foundation upon which the fractional


Complete Story »

Silver: Time to Sell

Posted: 12 Dec 2012 10:12 AM PST

I mean, "the" with a ?

from daytradeshow:

~TVR

Doves Rule At The FOMC

Posted: 12 Dec 2012 10:07 AM PST

By Marc Chandler:

The Federal Reserve was as aggressively dovish as any one expected. It added to QE $45 bln a month in U.S. Treasuries, keeping the $40 bln of month of MBS purchases. It also changed from time reference for guidance to use of inflation and even there, it is dovish, indicating rates will remains low as long as inflation is below 2.5% and unemployment is above 6.5%.

This was the main focus of the statement. The general economic assessment seemed little changed, and Lacker continued with his dissent, opposing the new asset purchases and the "characterization of conditions" that exceptionally low interest rates would be justified.

The euro had been bid just prior to the FOMC statement on news that Berlusconi indicated he may withdraw his candidacy if Monti would run. The FOMC announcement saw the dollar decline across the board. Treasury yields rose. The 30-year yield was already


Complete Story »

ECB : increase of oz in1519,97 gold and gold receivables

Posted: 12 Dec 2012 09:58 AM PST

From AC to Biloxi

Posted: 12 Dec 2012 09:57 AM PST

We came, we saw… we didn't conquer but we did ok…

The first Mercenary trip to Atlantic City did not produce any WSOP final tables. But Mike cashed in the $1125 event, and Jack (yours truly) crushed the cash games for thousands, so things worked out.  The Maker methodology proved itself strong once again, holding up against a tough Main Event table full of seasoned pros and fueling a solid run into day 2.

We'll definitely be back to Atlantic City… though next time we'll stay at the Borgata. Harrah's AC is on the shabby side , but the Borgata is gorgeous. The Borgata poker room is also stunning – the largest, busiest and most well appointed we've seen.

The math of large field tournament trips is intriguing:

We estimate a roughly 20 percent chance of cashing in any large field tournament event. The first 10% represents a baseline draw against randomness (as 10% of the field is paid on average)… another 5% represents the presence of dead money (players so awful they have nil chance of cashing as a collective group)… and the final 5% represents the net skill gap between us and the average competitor in the field.

With two Mercenaries entering an event, the odds of at least one cash rise to 36 percent. Playing at least two events per series, the odds of at least one cash – 36 percent twice – rise to 59 percent.

On top of this, add a cash game edge that is much, much larger than just 5 percent (for a whole host of reasons, from capitalization to skill differential to reduced N factor), and the odds of a net profitable outing further jump by a significant percentage, perhaps to 80 percent.

Last but not least, the ever present optionality of a potential six or even seven figure cash (if the prize pool is large enough)… and the fact we are able to do normal research and trading work at the tables. (The WSOP doesn't care about mini laptops.)

In the second Market Wizards installment, Blair Hull talked about the mathematical advantage of multiple blackjack experts playing off the same bankroll. The same idea applies here in respect to 'team' capitalization and the enhanced odds of making a majority of all trips profitable. In that light, a third or even a fourth 'Team Mercenary' member, trained up to the same skill level, would make the numbers even more compelling.

In that regard, there have been inquiries as to whether we will sell the Maker methodology. The short answer is not likely (or at least, not until we've pulled a few million out first).

For one thing, the  methodology itself is still in experimental  phase, undergoing incremental development at the margins; for another, the application of Maker is more akin to learning a martial art than following a set of computerized rules. There are strategies and analysis techniques that, similar to a memorized martial arts kata, have to be physically practiced until they can be fluidly executed in real time – favoring a learning process laden with heavy interaction and feedback.

We will keep writing about poker in the context of trading, though… and of course, the deep and rich connection to trading is what completes the circle. Many of the things that work in poker also work in trading, and many of the exploitable weaknesses at the table apply in markets.

Take, for example, the concept of Absolute Money Pressure, or AMP. Many poker players, by dint of poor capitalization, are overly sensitive to the absolute dollar size of a bet, when they should instead be focused on EV (expected value) percentages in relation to implied odds, hand ranges, and the size of the pot.

As a result of this, the thinly capitalized player has a permanent weakness: A smart opponent can (and should) apply 'max amperage', raising the maximum amount possible that still allows for positive EV in relation to the situation at hand.

In plain English, this means the player who understands the Absolute Money Pressure (amperage) concept – and can apply it with mathematical consistency – has a weapon he can wield like Thor's Hammer against undercapitalized opponents.

Seem far removed from markets? Not in the world of global macro… and particularly forex, where large bets, placed at strategic pressure points, are reminiscent of poker play.

Consider, for example, this anecdote via Colm O' Shea in Hedge Fund Market Wizards:

 As you may know, I worked for George Soros before starting my own fund. My favorite George Soros story concerns an interview with chancellor Norman Lamont, who stated that the Bank of England had £10 billion in reserve to defend the pound against speculators. George apparently was reading an account of this interview in the next morning's paper and thought to himself, "£10 billion. What a remarkable coincidence — that's exactly the size of the position I was thinking of taking."

Our next event stop will be the Beau Rivage in Biloxi, Mississippi, January 3rd through 9th. If you'd like to meet up in that window, shoot us an email…

Silver sales set to outshine gold in India

Posted: 12 Dec 2012 09:44 AM PST

Charleston Voice

Gold and Silver poised for major move.

Posted: 12 Dec 2012 09:40 AM PST

Gold mining CEOs told to fix slump as investors prove restless

Posted: 12 Dec 2012 09:39 AM PST

Eli Lilly's Brave Alzheimer's Talk

Posted: 12 Dec 2012 09:18 AM PST

derek loweBy Derek Lowe:

I'm a bit baffled by Eli Lilly's (LLY) strategy on Alzheimer's. Not the scientific side of it -- they're going strongly after the amyloid hypothesis with secretase inhibitors and antibody therapies, and if I were committed to the amyloid hypothesis, that's probably what I'd be doing too. It is, after all, the strongest idea out there for the underlying mechanism of the disease. (But is it strong enough? Whether or not amyloid is the way to go is the multibillion-dollar question that can really only be answered by spending the big money in Phase III trials against it, unfortunately).

No, what puzzles me is the company's publicity effort. As detailed here and here, the company recently made too much (it seemed to me and many others) of the results for solanezumab, their leading antibody therapy. Less hopeful eyes could look at the numbers and conclude that it


Complete Story »

'Scope for Gold at $2,400' on US Monetary Policy

Posted: 12 Dec 2012 05:25 AM PST

The spot gold price climbed back above $1,715 an ounce Wednesday morning, around ten dollars up from last week's close, as stocks, commodities and the euro also edged higher and US Treasuries dipped, ahead of today's Federal Reserve policy announcement.

Obama Likely to Approve Gold Sanctions on Iran

Posted: 12 Dec 2012 05:02 AM PST

Gold is hovering unchanged ahead of the US FOMC policy statement that takes place at 1730 GMT and Ben Bernanke's news conference is at 1915 GMT. Investors believe that the Fed will reveal more bond purchases and a continued loose monetary stance.

Catalysts for Gold’s Price Beyond the FOMC

Posted: 12 Dec 2012 04:42 AM PST

What if the Fed disappoints? Physical demand has responded well in the recent gold price dips with central banks and gold-backed ETP investors picking up the slack. Also, the uncertainties from the fiscal cliff and the debt ceiling negotiations should boost demand for gold.

India Must Tap Household, Temple Gold to Reduce Imports

Posted: 12 Dec 2012 04:14 AM PST

More anti-gold propaganda from TPTB in India.


India Must Tap Household, Temple Gold to Reduce Imports

By Pratik Parija - Dec 12, 2012 2:59 AM MT


Pankaj Nangia/Bloomberg
Visitors sit in front of the Golden Temple in Amritsar, India.

India, the world's largest bullion buyer, should mobilize idle gold lying with its citizens to curb imports and lower a record current-account deficit, according to the All India Gems & Jewellery Trade Federation.

Dec. 11 (Bloomberg) -- Kenneth Hoffman, senior analyst for metals and mining at Bloomberg Industries, discusses private-equity interest in mining companies and gold prices. He talks with Guy Johnson on Bloomberg Television's "The Pulse." (Source: Bloomberg)

Households and temples carry about 25,000 metric tons and a successful plan to gather at least 10 percent of the gold reserves for lending to jewelers will ensure supplies for three years, Bachhraj Bamalwa, chairman of the federation, which represents about 300,000 jewelers, said in a phone interview. The plan should be run by the central bank, which can help India halt imports for three years, he said.

India is grappling with the highest ever current-account deficit, the broadest measure of trade, mainly because of its gold and crude oil imports, weakening the rupee to a record against the U.S. dollar. The central bank is mulling a gold investment plan to curb the deficit, Deputy Governor Subir Gokarn said last month. Imports climbed to a record 969 tons last year, according to the World Gold Council.

"The only way India can reduce its dependence on imports is to tap the gold lying with individuals and temples," Kishore Narne, head of commodity and currency at Motilal Oswal Commodity Broker Pvt., said in a phone interview. "By doing this, the country can reduce influx of gold at these high prices. Appetite for gold is never going to diminish."


Investment Demand

Imports more than doubled in three years through 2011 as the economy grew an average 7.8 percent in the past decade, boosting disposable incomes and spending on ornaments, cars, televisions and fridges. Investment demand for gold has climbed almost fivefold to 366 tons in the same period as a rally for 12 straight years boosted bullion's appeal as a store of value.

India's current-account deficit widened to a record $21.8 billion in the quarter through March and was $16.6 billion in the three months through June, official data show. That's weakened the rupee 2 percent this year to 54.1700 per dollar after an almost 16 percent plunge in 2011. A weaker currency raises import costs and fuels inflation in a country that meets more than 80 percent of its oil requirements from overseas and is the world's biggest user of gold.

Bullion for immediate delivery rose 0.2 percent to $1,714.48 an ounce at 3:26 p.m. in Mumbai. The contract for delivery in February was little changed at 31,390 rupees ($579) per 10 grams on the Multi Commodity Exchange of India Ltd. Futures climbed to a record 32,464 rupees on Nov. 26.

Tax Incentives

India can cut imports by offering investment plans that offer returns equivalent to gold, extend tax incentives, easy liquidity and redemption in physical gold through tie-ups with banks and jewelers, said Nilesh Shah, president for corporate banking at Axis Bank Ltd. (AXSB)
"The benefits of lower gold imports will be reflected by way of stronger rupee, lower interest rates, higher liquidity, higher investments, higher employment generation, higher growth, higher tax collection, lower trade and fiscal deficit, higher credit rating and lower poverty levels," Shah said in a note.

Gold imports account for 80 percent of the current-account deficit, the central bank's Gokarn said Nov. 25. The monetary authority last month issued guidelines prohibiting commercial banks from lending funds for purchases of gold, other than for jewelers' working capital needs.
The objective of any investment plan should be to put the idle gold into productive use and provide people an opportunity to earn interest income on their holdings, said Prithviraj Kothari, a former president of the Bombay Bullion Association.

Futures Trading

India has eased restrictions on the metal in the past decade to stop it being smuggled into the country. A plan to allow banks accept gold deposits against bonds that pay interest in 1999 failed to attract investors. In November 2003, a four- decade-old ban on futures trading was ended. The import duty was doubled to 4 percent this year to check the surge in imports.

"The only way to reduce gold imports is to increase the import tariff and one can hope that demand then goes down," said Madan Sabnavis, chief economist with Credit Analysis & Research Ltd.

India's official gold stockpiles are estimated at 557.7 tons, compared with world reserves of 31,491 tons, according to the gold council. The Reserve Bank of India held $27.8 billion worth of gold, or 9.4 percent of its $294.51 billion of foreign exchange reserves as of Nov. 30.

"Even if the depositors bring in unaccounted gold, the government should not ask them about the source," the federation's Bamalwa said. "Indians will continue spending on gold on marriages and in festivals. In a country like India, there is no scheme for social security, and investment in gold is like a social security."

http://www.bloomberg.com/news/2012-1...e-imports.html

Peter Grandich: Visualize a Turnaround in Gold Juniors

Posted: 12 Dec 2012 04:04 AM PST

The fundamentals at many junior mining companies have improved, yet their stock prices continue to languish. Market guru Peter Grandich gives his thoughts on when this may end and where gold is headed in 2013, and names some of his picks in unlikely jurisdictions.

Silver Update: Collectivist Collapse 12.11.12

Posted: 12 Dec 2012 03:07 AM PST

brotherjohnf: Silver Update 12/11/12 Collectivist Collapse

from brotherjohnf:

~TVR

Paul Craig Roberts: America Will Crash.. Big Time

Posted: 12 Dec 2012 03:02 AM PST

Dr. Paul Craig Roberts thinks there is "an impending collapse of the exchange value," and the U.S. dollar could unexpectedly plunge in buying power. Dr. Roberts contends, "All of a sudden, people walk into Walmart, as usual, and they think they've walked into Neiman Marcus." Dr. Roberts says there are no quick fixes to the bulging debt because "there's no way to close this deficit when corporations are moving the tax base off-shore." Join Greg Hunter as he goes One-on-One with Dr. Paul Craig Roberts.

from usawatchdog:

~TVR

Gold and Silver Market morning, December 12, 2012

Posted: 12 Dec 2012 03:00 AM PST

How Average Joe Can Save Himself … & America

Posted: 12 Dec 2012 01:54 AM PST

Stop the Duke, Go for Gold! Is a story John Butler, of Amphora Capital, told me a while back which has played on my mind ever since. It's a story of middle-classes fighting back at politicians, their weapon? Gold.

Porter Stansberry: Gold and Real Estate Are My Hedges for the Fiscal Cliff

Posted: 12 Dec 2012 12:00 AM PST

With nary a glimmer of hope that economic sense will supplant political expedience, Stansberry & Associates Investment Research Founder Porter Stansberry expects rampant inflation to roar in once the...

Visit the aureport.com for more information and for a free newsletter

Links 12/12/12

Posted: 11 Dec 2012 11:37 PM PST

Cat v. Internet Oatmeal (Scott). This is an antidote to Richard Smith's anti-antidote.

Fighting the information war (but only on behalf of rich people) mathbabe

White House: North Korea Missile Launch 'Highly Provocative' Huffington Post

China's shadow ponzi FT Alphaville

Investing in China — Pitfalls and Promise Big Picture

Japan should scare the eurozone Stephen Mallaby, Financial Times

Europe's 2013 will bring more of the same MacroBusiness

Mario Monti's exit is only way to save Italy Ambrose Evans-Pritchard, Telegraph

Return of the Undead: Berlusconi Revival Puts EU Leaders in Tight Spot Der Spiegel

On the sad algebra of the Greek Debt Buyback Yanis Varoufakis

Secret Talks Behind Central Banks' Bets Wall Street Journal

Vast sums of aid continue to be stolen in Afghanistan Christian Science Monitor

How Bad do Sanctions Really Hurt Iran? OilPrice

The Not-So-Bright Bulbs at the White House and Pentagon CounterPunch (Carol B)

Loopholes to Some, Lifelines to Others New York Times. Including tax simplification in the fiscal slope deal introduces more things to fight over. You don't increase the complexity of your negotiations if you want to get a deal done on a tight timetable. I don't see how they get a deal done by Dec. 31, unless they patch together something to tide them over for six months. A 2 phase deal was long planned, but I don't see how you do this plus entitlement "reform" in any reasonable time frame.

Fiscal Cliff Update Kevin Drum

White House to States: All or Nothing on the Medicaid Expansion David Dayen, Firedoglake

On the Way Out, Schapiro Steps In to 'Volcker' Rift Wall Street Journal

TSA's Grip on Internal Travel is Tightening Dollar Vigilante (furzy mouse). Yes, I know, this is a somewhat paranoid source, but just because you are paranoid does not mean they are not out to get you. And it's well sourced, so you can validate its claims should you feel the need.

California law enforcement moves to buy drones, draws controversy arstechnica

Small-business owners pessimistic about economic growth and recovery Guardian

Three arrested in Libor manipulation investigation Guardian

Bloomberg to fall short of revenue targets Financial Times

Bank Fraud: Underlings Arrested, Banks Too Big to Indict Global Economic Intersection

William Hogeland: How Big Finance Won the American Revolution Boston Review (Robert M)

Remembering Albert Hirschman Rajiv Sethi

Antidote du jour:

How to Feed a Chihuahua

Posted: 11 Dec 2012 11:33 PM PST

The fiscal cliff debate could take a while. In the meantime, our personal wealth is in jeopardy. And we've got precious little time to protect it. The good thing is that the markets have pushed gold and precious metals prices sideways instead of to the moon.
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