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Saturday, January 26, 2013

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Four incredible facts about gold you might not know

Posted: 26 Jan 2013 12:20 PM PST

From Frank Holmes of U.S. Global Investors:
 
Our ever-popular Periodic Table of Commodity Returns has been updated through 2012. Investor Alert readers love this chart as it shows a decade of results across 14 different commodities, providing strikingly rich information in a very familiar format.
 
Last year, 11 commodities rose in value, with wheat rising as the top crop after seeing a significant decline in 2011. It was a similar rags-to-riches story for the next few leaders, including lead, zinc, natural gas, and platinum, which all climbed double digits in 2012 after falling in 2011.
 
Only three commodities declined over the year: Crude oil fell by 7 percent after rising 8 percent the previous year. Nickel declined for the second year in a row. In 2012, the metal lost 9 percent and in 2011, nickel fell another 24 percent.
 
Coal was the worst-performing commodity in 2012, falling nearly 17 percent. Coal's been going through a rough spell lately; in fact, the commodity has not been king for five years (although it did record a 31 percent increase in 2010). As Global Resources Fund Portfolio Manager Evan Smith explained to listeners during our recent presentation, for the first time ever in the U.S., natural gas provided more electricity and power than coal did.
 
As you can see from the table, commodities often have wide price fluctuations from year to year given the many factors affecting supply and demand, such as government policies, union strikes, and currency volatility. That's why when it comes to commodities and commodity producers, many investors "leave the driving" to active money managers who understand these specialized assets and the global trends affecting them.
 
Take gold and gold companies, for example. After investing in the mining industry for decades, we've taken note of several facts about gold that continue to surprise our investors. Here are four of the latest:
 
1. Gold Has Been A Consistent Performer Over The Decade
 
While the precious metal did not shoot the lights out in 2012, gold's bull rally goes on. It ended the year up 7 percent, making it a phenomenal 12th year in a row that gold rose in value. In a special gold bar version of the Periodic Table below, you can easily see gold's rotation among the commodities from year to year.
 
What's fascinating is...
 
 
More on gold:
 
 
 

Gold Rush Fever Hits Nome, Alaska

Posted: 26 Jan 2013 10:40 AM PST

Pilgrims, ascetics and processions of gold

Posted: 26 Jan 2013 09:56 AM PST

Maha Kumbh Mela, the 'greatest show on earth' is underway in India and it seems gold is taking a bigger part than ever before.

Yen Gold All-Time High Driven By Monetary Stimulus

Posted: 26 Jan 2013 08:27 AM PST

This week the Bank of Japan confirmed their commitment to increase their monetary stimulus by setting an inflation target of 2%. Just like the US Fed, the stimulus is open-ended which means that there are no limitations set to the stimulus in amount or time. The Telegraph quoted several Japanese officials who have shown their commitment to continue their monetary easing policy:

"This opens a passageway toward bold monetary easing," Mr Abe told reporters after the Bank of Japan and government jointly announced the inflation target and plans for "open-ended" central bank asset purchases similar to the strategy followed by the US Federal Reserve. Mr Abe began lobbying the central bank to ease monetary policy even before he took office late last month, saying more aggressive action was needed for the world's No. 3 economy to escape from years of falling prices that can dull consumer spending and business investment.

Bank of Japan governor Masaaki Shirakawa vowed to achieve the inflation benchmark "as soon as possible," but said that bold efforts were also needed from the government in order to achieve the target. Mr Shirakawa told a news conference that the two Bank of Japan board members, Takehiro Sato and Takahide Kiuchi, who dissented on setting the 2pc target argued that it far exceeded the pace of price growth that could be deemed sustainable in Japan, and that efforts must first be made to boost Japan's growth potential.

In his weekly commentary Michael Pento from Pento Portfolio Stragies has put this decision into perspective.

Japan has already suffered through a quarter century's worth of an economic malaise because they have refused to allow the free market to work its reconciliation magic. Their reliance on government borrowing and spending to rescue the economy has proven to be a miserable failure. Because of this fact, Japanese politicians have succeeded to increase the debt to GDP ratio to 237%, which should have already caused a collapse in Japanese Government Bonds (JGBs) and the Yen.

However, JGBs have held their value for two reasons: The Japanese own 92% of their sovereign debt; And, up until now, deflation has reigned over the island.

Since foreigners do not own a large portion of Japanese bonds, there isn't a big concern about a mass exit from JGBs due to the fear of a weakening Yen. If foreign ownership of sovereign debt was more in the area of 50% (like it is in the U.S.), there would be a palpable fear on the part of those creditors that their wealth could be wiped out upon currency repatriation—especially in light of the new administration's love affair with inflation and a falling currency. More importantly, since aggregate prices have dropped in 10 of the last 15 years and inflation has averaged a negative 0.6% in the last 4 years, holders of JGBs weren't so concerned about yields being so close to zero percent. Falling prices allowed the government of Japan to issue debt with very little cost.

As of now, the Japanese 10-year note yields just 0.75%. That's a very poor yield; but since holders of Yen are currently experiencing deflation, they still are provided with a real return on their investment. But if inflation does indeed rise to 2%, the yield on the 10-year note would have to rise above 3.3% in order to offer the same real yield seen today.

Indeed, the decision of the Japanese to inflate their economic growth is not an isolated decision. It could be that Japan is a closed market, they are not operating in a vacuum. The "unintended consequences" of their decision could reach to a global scale. In particular, the currency devaluation which is the result of the inflationary policy, is not exactly the type of outcome that the other economic powerhouses wished for. The US President has committed in his 2010 speech to drive up the US exports with 50% by 2014/5. The following charts show the declining value of the Yen and the increasing USD/Yen ratio. (Courtesy Stockcharts.com and Investing.com)

Japanese Yen January 25 2013 gold silver general

USD Yen January 25 2013 gold silver general

This trend brings the global currency war front stage globally. European Central Bank policymaker Jens Weidmann warned about the threat of a currency war as reported by Telegraph: "So far the international currency system has come through the crisis without a devaluation competition, and I hope very much that remains the case." Of course it would be wishful thinking to believe that the world can avoid a currency war.

In fact, author of the book "Currency wars" Jim Rickards keeps on repeating in a very outspoken way that we are in the early stages of such a war. He pointed earlier this week to the relationship between a currency and gold.

"You have to pick your currency. In dollar terms the gold price has not gone up that much but in yen terms, with the devaluation of the yen, gold is going up a lot. Gold is a function of the currency wars. The country that is weaking the currency the most is where gold is going up the most."

Yen gold is at all-time highs. Its gold price is simply reflecting the currency devaluation through the Bank of Japan balance sheet expansion and anticipating higher inflation. The Safest Way To Leverage The Coming Gold Mania

yen gold price 2012 2013 gold silver general

Herein lies part of the answer why dollar gold (as well as euro gold have not been appreciating lately). Precious metals strategist Konstantinos Xeroudakis sent us the following two charts. They show the expansion of the balance sheet of the Bank of Japan in 2012 while the US Fed's balance sheet did not expand significantly. It could appear counterintuitive in the light of the recent US Fed bond buying programs announced in Q3 and Q4, but the Fed has basically been buying an equal amount of bonds as the ones that have been maturing, which is bottom line a net net situation.

Bank of Japan vs GDP 2000 2012 gold silver general

US Fed assets 2008 2012 gold silver general

Equities, Miners and Commodities are Nearing Major Turning Points

Posted: 26 Jan 2013 08:25 AM PST

In recent weeks we've written about the decoupling or negative correlation between the equity market and mining equities. As the miners take a hard turn lower and the S&P 500 continues higher, this current trend is all the more obvious. At the same time, commodity prices have been in a cyclical bear and have struggled to gain traction. Our forecast for 2013 is for these cyclical trends to shift. It won't happen instantly but it will slowly evolve in the coming months and quarters. Today, we see that the equity market is ever more closer to that cyclical top, miners are about to retest a major bottom and hard assets have a new catalyst.

First let us take a look at the miners. From top to bottom we plot GDX, GDXJ (larger juniors) and SIL (silver miners). It doesn't take a technician to see where these markets are headed in the coming days. GDX will test $40, GDXJ will test $17 and SIL will test $19.50 and perhaps $17.

As we penn this, the S&P 500 is trading at 1501 and faces very strong 13-year resistance at 1550 as well as the all-time high at 1576. Look at the chart below. Does this look like a market you want to buy? How in the world will the market break past 13-year resistance, much less even sustain a breakout move after a four-year rally?

Nevertheless, the typical Wall Street cheerleaders, I mean strategists are predicting the usual 10-15% advance and are justifying that with the belief that the economy will strengthen and valuations will pick up. I guess they forgot that margins are at record highs and therefore corporate earnings have likely peaked. At the same time, the typical trader has hopped on board the trend yet can't rationalize his long position beyond the idea that "it's going up." I guess they forgot about the ominous economic headwinds, stagnant earnings and the blatantly obvious massive resistance at 1550.

Beyond the technicals, one should see that sentiment is arguing for caution. Below is the NAAIM survey of manager sentiment. This data results from money in the market and not opinion. At 86, the NAAIM survey is only points away from a five-year high.

Next, we show the amount of Rydex assets in their money market fund relative to all of their funds. The current figure is dangerously close to the excessive optimism line.

In other news, the latest survey from the American Association of Individual Investors showed bullish sentiment at a two-year high. It made its largest weekly jump in the past 19 months. Also, Sober Lookreports that the Vix is now at post-recession lows and junk bonds are at all time highs.

Meanwhile, commodities (which includes precious metals) have been in a cyclical bear market for 23 months! The CCI may have bottomed last June but we won't know for certain for a while. Tiho Brkan's chart shows the CCI and the weighting of asset managers surveyed in the Merrill Lynch fund manager's survey. At present, we see that a net 2% of managers are underweight commodities. Compare that to 2009-2011 when 30% of managers were routinely overweight the sector.

On the fundamental side, note that after a nearly two-year consolidation, the adjusted monetary base has broken out to a new all-time high. Hat tip to Biiwii The Adjusted Monetary Base is the sum of currency in circulation outside Federal Reserve Banks and the U.S. Treasury, plus deposits held by depository institutions at Federal Reserve Banks.

Let's sum up the facts. The equity market and mining equities have been in a strong decoupling for 17 months. The mining equities are going to retest their 50% retracement and major support amid record low valuations and terrible sentiment. The equity market is going to test its all-time high and 13 years of major resistance amid bullish sentiment which could reach extremes after more gains. Meanwhile, commodities have been in a cyclical bear market for nearly two years and the average fund manager is very slightly underweight the sector. Finally, after consolidating for two years, the monetary base is breaking out to new highs. Surely this is all a sign of a major new bull market in stocks!

The bottom line is recent cyclical trends appear to be in the 9th inning. Equities are very close to an important top while mining equities could form a major double bottom (on monthly and long-term charts). Meanwhile, the cyclical bear market in commodities is just about over. Are we saying these trend changes will happen instantly? Of course not. Cyclical changes take months and perhaps quarters to complete. The key is to ignore the day to day noise and focus on long-term charts. We've been patient with the miners and have held an ample cash position ready to put to work. We plan to do so next week as the major lows are tested. If you'd be interested in professional guidance in uncovering the producers and explorers poised for big gains then we invite you to learn more about our service.

Good Luck!

Jordan Roy-Byrne, CMT
Jordan@TheDailyGold.com

Jim Sinclair About Gold: Do Nothing To Confuse The Shorts

Posted: 26 Jan 2013 08:23 AM PST

When Jim Sinclair (JSMineset) talks you better listen carefully. He is one of the most experienced investors in the gold industry. He has made a fortune with gold trading in the 70′s and is now running a royalty based gold company in Africa.

In a two part series to his subscribers he explains his prospects for gold. More importantly he advices what every "gold investor" should do and explains the current market dynamics. Hence he puts the recent sudden price take downs and the 1.5 year consolidation into perspective.

Jim Sinclair confirms once again that the gold price fundamentals and ongoing currency wars underwrite a recovery in the gold price. We can expect a move to new highs soon. The core of his message is the following:

"You have a weapon that has ultimate power to frustrate the price manipulation. All you need to do is to do nothing whatsoever which will confuse the shorts."

The market

Although the gold price has been going up on average between 12% and 17% per year for 12 consecutive years now, the gold price is being suppressed as described in detail in earlier articles including gold manipulation proven on the charts, how can the gold price drop in a matter of milliseconds, manipulation of gold price, silver manipulation explained in a simple way. Now this should not scare anyone off, because price suppression is "the new normal" in a lot of markets. Every individual makes use of interest rates. Well, the core interest rate (LIBOR) has been manipulated for many years. We all became victim of it, mostly without noticing. Jim Sinclair reveals on a high level how the gold price suppression is being played by the manipulators.

The manipulators that focus on moving price down and not selling volumes of gold to accomplish it wager on the fear mechanism of price decline to pressure you beyond your ability to reason logically. What the gold banks and short of gold share funds count on is that you will injure yourself just to stop the pain of loss.

Clearly the gold banks will try to get gold into a capitulation point. Hear me: We are right in front of that time when the market performs a classic bottom both in shares and physical. From this point gold is going to and through $3500. That is why what happened today is happening in the first place.

How the shorts are playing it

Every gold investor should stay calm and rely on his belief in the fundamentals. Short term prices do not make a market. For sure it is scary to witness sudden price drops without any reasonable explanation. But that this the whole idea: shake you out of your long position.

Stay away from the well known chat sites that harbor paid-for bashers that say nearly insane things to scare the hell out of you. If the big boys cannot terrify you to the point of taking your position away from you, a firm bottom will come into play very soon.

Technicals are good, but simply stated, the manufactured downside pressure stops only when it does not work. Those pressuring gold and silver prices clearly are not long position sellers looking to change their positions into cash dollars. This is a solid fact based on the manner of their selling.

Take comfort knowing that the early AM takedown and takedowns in late Asia time are not valid sellers, but painters of the price for their best interest. Nobody is so stupid as to announce they want to sell a major part of one year's production of gold or silver when there is no market to absorb any reasonable part of it.

Detect the weak spot of your "opponent"

So if this is "a game" as Jim Sinclair explains then you should participate as in a real contest. The weak spot of the opponent is what you should focus on. Everyone has his weak spot. The weakness of the long investor is to get fooled by irrational price drops (as discussed in the previous paragraph). The weak spot of the short investor is that the longs are not influenced by their moves and simply … do nothing! As simple as it sounds, this is just very smart.

Please do not be duped by the giant bastards playing you. Every day that passes is one day closer to the day manipulators change sides to long, just like they did in the 1970s. Please let them play their numbers game but do not give them one ounce of your gold or one share of your gold companies for whom all things are progressing well. Soon you will know that you beat them at their own game for the first time. You can be proactive by simply having courage of your and my convictions, therefore not giving them any of your product. There will be great satisfaction when you face down the bully who is basically full of it. This is our last battle before victory. I will be there and I want you to be also. Let them play their price game but do not give them product. Stand tall and stare the bully down. He will flee as this is the last thing he expects.

Jim Sinclair: Gold is the Ultimate Battle Between Good & Evil!

Posted: 26 Jan 2013 08:15 AM PST

Legendary gold trader Jim Sinclair has sent email subscribers another alert this weekend regarding Friday's cartel take-down of the gold market.  Sinclair states that Gold is the ultimate battle between good and evil. It is the ultimate battle between deficits and surpluses. Gold is the battle between paper currency backed by nothing and guaranteed by [...]
Check out these similar articles:
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  3. Jim Sinclair: Charts & TA Are Totally Useless in Manipulated, Manufactured Gold & Silver Markets

Jim Sinclair: This is the Big One!

Posted: 26 Jan 2013 07:55 AM PST

Legendary gold trader Jim Sinclair has sent another email alert to subscribers today, warning that the current reaction in gold is the big one, and the last play by the bullion banks to denude gold and silver investors of their … Continue reading →

Timmins Gold CEO notes the paper gold fraud

Posted: 26 Jan 2013 05:37 AM PST

Timmins Gold CEO notes the paper gold fraud

In an interview with Tekoa Da Silva of Bull Market Thinking, Timmins Gold CEO Bruce Bragagnolo sounds like an applicant for a GATA tin-foil hat.

"Gold lends itself to the physical market," Bragagnolo says. "A lot of the exchange-traded funds are simply options on gold and I think there has to be some catalyst here that will drive up the price of gold. The catalyst may come in the form of some ETF defaulting, not having the physical gold in their accounts, and not being able to option their way out of it. ...

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If China likes silver, maybe we should too

Posted: 26 Jan 2013 05:37 AM PST

If China likes silver, maybe we should too

Silver's drawing more and more attention as an investment these days, especially from China.

"Investment demand, not industrial demand, is what drives silver prices right now," said Mark Thomas, author of email-alert service provider SilverPriceAdvisor.com. "World investment demand is starting to really pick up."

Chinese citizens are "now buying silver because gold topped out in 2011 and silver is much more affordable," said Thomas, a silver bull who has recently tripled his exposure to the white metal.

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Turd Ferguson: Silver market rigging foes are fighting back

Posted: 26 Jan 2013 05:37 AM PST

Turd Ferguson: Silver market rigging foes are fighting back

Turd Ferguson of the TF Metals Report has some encouraging analysis of the revised silver market-rigging class action lawsuit in U.S. District Court for the Southern District of New York.

I thank Chris Powell once again for wordsmithing 'all of the above' for me.  Ferguson's commentary is headlined "Fighting Back"...and it's posted at the TF Metals Report.com Internet site here.

Suspicion about Bundesbank's gold dealings with Fed is getting respectable

Posted: 26 Jan 2013 05:37 AM PST

Suspicion about Bundesbank's gold dealings with Fed is getting respectable

Interviewed today for market analysis by Daniela Cambone of Kitco News, Cameron Hanover Managing Partner Vince Lanci disparages the Bundesbank for "lying" as it changed positions on repatriating Germany's gold reserves. Lanci also speculates that the German gold may not be readily available because the Federal Reserve Bank of New York may have loaned it to bullion banks to facilitate the gold carry trade over the years.

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Reinstatement Sought for Silver Market Rigging Class-Action Lawsuit

Posted: 26 Jan 2013 05:37 AM PST

Author: 
Ed Steer

Yesterday in Gold and Silver

Ed_GSD
January 26, 2013 1:37pm GMT

The gold price traded pretty flat all through Far East trading...and only began to head south around 11:00 a.m. in London.  It hit its low tick at 10:00 a.m. Eastern time...the 3:00 p.m. GMT London gold fix.

The smallish rally that followed died within a few hours...and gold traded flat into the close from 12:30 p.m. Eastern time onward.  The high tick [about $1,672 spot] was around 3:00 p.m. Hong Kong time...and the low tick at the p.m. gold fix was $1,654.90 spot.

Gold closed on Friday at $1,6529.30 spot...down $8.10 on the day.  Net volume wasn't overly heavy at 111,000 contracts.

It was pretty much the same chart pattern for silver...and the big difference between the two was that the low tick for silver was nowhere near the London p.m. gold fix.  Instead, it came in electronic trading shortly after the Comex close.  Like gold, silver traded virtually sideways from 12:30 p.m. onwards...except for the spike low.

The high tick [around $31.75 spot] came shortly after 3:00 p.m. in Hong Kong...and the low [$31.04 spot] was printed around 1:50 p.m. in New York.

Silver closed at $31.18 spot...down 44 cents from Thursday.  Volume was 'average'...around 39,000 contracts.

It was a far different story in both platinum and palladium, as both finished in positive territory.  Palladium was on fire...up 2.07%.  Platinum was up 0.71%.  Gold finished down 0.49%...and silver closed down 1.39%.

Never have I seen such a dichotomy in chart patterns...and I'm not sure what to make of it.

The dollar index opened at 79.99...and climbed a hair to around 80.06 by noon in Hong Kong...and then dropped off a 20 basis point cliff shortly before 3:00 p.m. Hong Kong time.  After that, the index chopped its way slowly lower....with its nadir [79.68] coming just minutes before 11:00 a.m. in New York.  It closed at 79.74...down 25 basis points from Thursday's close.

If you can fit the dollar index action to any of the precious metal charts above, I'd like to see how you did it.

Like Wednesday and Thursday action, the gold stocks opened down...and headed lower almost immediately.  The low tick came at 11:00 a.m...and the stocks tried valiantly to recover some lost ground...but got sold off again in the last few minutes of the trading day.  The HUI closed down 2.68%...and slightly below the 400 mark at 399.04.

Here's the HUI for the last five business days...and it ain't pretty.  There was no chart on January 21...because it was Martin Luther King Day in the U.S...and the markets were closed.

The silver stocks finished down as well, but there was the odd green arrow in the list of stocks I track.  Nick Laird's Intraday Silver Sentiment Index closed down 2.50%.

(Click on image to enlarge)

Here's the long-term Silver Sentiment Index that shows how these silver stocks have behaved over about five years.

(Click on image to enlarge)

The CME's Daily Delivery Report showed no activity in either gold or silver.  Almost all the deliveries on Tuesday were in copper...and a couple of contracts in platinum.

There was more withdrawal activity from both GLD and SLV yesterday.  The withdrawal from GLD was 58,087 troy ounces...and from SLV it was 918,796 ounces.

Silver ETF Bar Guru, Joshua Gibbons updated his webpage with all the data from the big deposit of 18.3 million ounces into SLV last Thursday...and you can read all about it here.  If you're new to the site...and most readers are...it's worth a few minutes of your time to poke around a bit.

Over at Switzerland's Zürcher Kantonalbank for the period ending January 24th...they reported that 22,639 troy ounces of gold were withdrawn from that particular ETF...but their silver ETF reported adding 423,554 troy ounces.

There was a tiny sales report from the U.S. Mint...500 ounces of gold eagles...and 500 one-ounce 24K gold buffaloes.  Month-to-date the mint has sold 132,000 ounces of gold eagles...67,000 one-ounce 24K gold buffaloes...and 6,007,000 silver eagles.  That gives a silver/gold sales ratio of 30 to 1.  No doubt it would have been larger than that if there had been more silver eagles available to sell.

It was another active day in silver over at the Comex-approved depositories on Thursday.  They reported receiving 1,354,601 troy ounces of the stuff..and shipped only 37,301 troy ounces out the door.  The link to that activity is here.

I forgot all about yesterday's Commitment of Traders Report when it came out at 3:30 p.m. Eastern time yesterday afternoon...and it only came to mind as I began writing today's column yesterday evening.  You'll just get the Reader's Digest version today, as I have lots of stories to post.

Because of rising prices in silver and gold, I was expecting an increase in the Commercial net short position in both metals...as "da boyz" were obviously going short against all comers...and that's precisely what the report showed.

Silver's net short position jumped a huge 5,366 contracts, or 26.8 million troy ounces of paper silver, so it was obvious that JPMorgan et al had to aggressively sell this market short to prevent the price from blowing out to the upside during the reporting week.

Gold's Commercial net short position increased by 10,837 contracts, or 1.08 million paper troy ounces.

But all this data was as of the Tuesday cut-off for this report...and is now "yesterday's news" as Ted Butler is wont to say.  The big engineered price declines in both gold and silver that began after the Tuesday cut-off have reversed all of the above data...and then some.

We have two more days left [Monday and Tuesday] in the reporting week for next Friday's COT report..and we'll have to wait impatiently for time to pass.

Here's Nick Laird's weekly "Days of World Production to Cover Short Positions" chart updated with Tuesday's COT data.  The 'Big 8' have added seven days of world silver production to their short positions since last week's update.  The link to the long-term interactive COT charts for both silver and gold are here...and here.

I have lots of stories for your weekend reading 'pleasure'...and I hope you can find the time to read the ones that interest you the most.

Well...are JPMorgan et al done to the downside yet? That's the first question that needs an answer.
If China likes silver, maybe we should too. Visualizing Platinum & Palladium's Place In The World. Suspicion about Bundesbank's gold dealings with Fed is getting respectable. Timmins Gold CEO notes the paper gold fraud.

Critical Reads

Bank of America issues `bond crash' alert on Fed tightening fears

Ed_GSD
January 26, 2013 1:37pm GMT

The US lender said investors face a treacherous moment as central banks start fretting about inflation and shift gears, threatening a surge in bond yields.

Bank of America said the "Great Rotation" under way from bonds into equities closely tracks the pattern of 1994, with bank stocks leading the way.

Over the past seven years US investors have pulled $600bn from US equity funds and poured $800bn instead into bond funds. This process is going into reverse. Equity funds have drawn $35bn over the last 13 trading days alone, creating the risk of an unstable "melt-up" in stocks over coming months.

The Bank for International Settlements has issued an alert on the high-yield `junk' bonds and mortgage debt, currently trading at record lows. The Swiss-based watchdog said parts of the credit market credit are "highly valued in a historical context relative to indicators of their riskiness."

This Ambrose Evans-Pritchard offering from early Thursday evening GMT is courtesy of Roy Stephens...and I thank him for today's first story.  The link is here.

Choice of Mary Jo White to Head SEC Puts Fox In Charge of Hen House

Ed_GSD
January 26, 2013 1:37pm GMT

I was shocked when I heard that Mary Jo White, a former U.S. Attorney and a partner for the white-shoe Wall Street defense firm Debevoise and Plimpton, had been named the new head of the SEC.

I thought to myself: Couldn't they have found someone who wasn't a key figure in one of the most notorious scandals to hit the SEC in the past two decades? And couldn't they have found someone who isn't a perfect symbol of the revolving-door culture under which regulators go soft on suspected Wall Street criminals, knowing they have million-dollar jobs waiting for them at hotshot defense firms as long as they play nice with the banks while still in office?

Matt Taibbi is on another rant once again...and I must admit that I'm not surprised.  This commentary showed up on the Rolling Stone magazine website early yesterday morning...and I thank Roy Stephens for sending it.  The link is here.

Tina Turner becoming Swiss citizen; hometown mayor 'surprised'

Ed_GSD
January 26, 2013 1:37pm GMT

What Gerard Depardieu is to France, Tina Turner may be to the United States.

The Nutbush, Tenn. native is giving up her US passport, in favor of a Swiss one.

"I'm very happy in Switzerland and I feel at home here. ... I cannot imagine a better place to live," Turner told the German newspaper Blick.

Turner has lived in the Zurich suburb of Kuesnacht since the mid-1990s. The local Zuerichsee-Zeitung newspaper said on its website the local council announced its decision to grant the 73-year-old Turner citizenship in an official notice published in Friday's edition.

Seventy-three years old?  Wow...that really dates me.  This story showed up on the foxnews.com Internet site yesterday...and it's courtesy of reader "Nick G"...and the link is here.

Eric Sprott & Etienne Bordeleau: Ignoring the Obvious

Ed_GSD
January 26, 2013 1:37pm GMT

Not a day goes by without hearing about the fiscal cliff, the debt ceiling or another political deadlock. We would not disagree that some of these are important issues that need resolving but, in the grand scheme of things, they are relatively superficial.

As we all know, central banks around the world have been frantically expanding their balance sheets. While exceptional times might warrant exceptional measures, Figure 1 below paints a rather troubling picture. The monetary base, the amount of money in circulation in the economy, has expanded at an incredible pace. Since the mid-80s, the U.S. monetary base had been very stable at around 5-6% of GDP. Through fractional reserve banking, this amount was sufficient to maintain annual inflation around 2-3%. With the banking system collapsing in 2008-2009, it was necessary for the Fed to increase the monetary base. However, banks are now in much better shape than they were in that period and the benefits of monetary expansion seem to be waning.

The Fed is not the solution to every economic and social woe and trying to hide real problems (e.g.. structurally high unemployment and rampant poverty, unsustainable income inequality and exploding government liabilities) with money printing achieves nothing constructive.

This is the January edition of Sprott Asset Management's Market at a Glance feature commentary...and it's definitely worth reading.  The link is here.

Doug Noland: Liquidity Bubble

Ed_GSD
January 26, 2013 1:37pm GMT

Ray Dalio is one of the foremost economic thinkers and investors of this era.  His hedge fund empire now manages $130bn.  He has taken on a higher public profile of late, including notable interviews and speaking engagements this week at Davos (43rd World Economic Forum Annual Meeting).  In previous CBBs, I highlighted Mr. Dalio's "beautiful deleveraging" thesis.  His comments Thursday and Friday from Davos raised some eyebrows – and are certainly worthy of analytical focus.

I'm ok with "liquidity Bubble" terminology - and I'd be ok with "money Bubble."  The key to the analysis is to recognize it remains an unprecedented monetary Bubble – an integral facet to sustaining a global Credit Bubble.  I agree with Dalio that a flight out of this "money" holds the potential for an extraordinary 2013.  I wish I could be as sanguine.  I worry about what this "money" might do.  But my greater fear is that global policymakers have impaired the creditworthiness of "money" – the foundation of global finance.  They fell for the same monetary inflation trap that has cursed humanity throughout history.   

Unprecedented "money printing" has continued for too many years.  The debits and Credit add to the Trillions.  Along the way, the Fed has tried to assure that they do indeed have an exit strategy.  I have all along the way argued there would be No Exit.  The Fed has theorized how they would withdraw liquidity before it could fuel higher inflation.  From a global Bubble perspective, I've seen the greater risks in asset inflation and rejuvenated market Bubbles.

The Fed would be well served to go immediately back its drawing board and try to figure out how to stop all this liquidity from turning inflated and highly speculative global risk markets into an out of control mania.  I'm not holding my breath.

Doug Noland is at the top of his game in his Friday Credit Bubble Bulletin posted over at the prudentbear.com Internet site.  It's definitely worth reading...and the link is here.

Venezuela is Struggling With a Historic Food Shortage

Ed_GSD
January 26, 2013 1:37pm GMT

In December, the Central Bank said its scarcity index, which tracks the percentage of consumer goods missing from grocery store shelves, rose to a four-year high of 16.3 percent in December.

In light of the situation, some supermarkets and bakeries are restricting the amount people can buy. Some Caracas restaurants are even cutting back on their menu offerings.

"January is always a tricky month because distributors go on vacation in December but by mid-month inventories are usually restocked," said Edgar Parra, manager of a sparsely stocked grocery store in Caracas where customers scrounged for items. "Not this time around."

This AFP story was picked up by the businessinsider.com Internet site late yesterday afternoon Eastern time...and it's also courtesy of Roy Stephens.  The link is here.

Britain is experiencing 'worse slump than during Great Depression'

Ed_GSD
January 26, 2013 1:37pm GMT

Ministers today admitted Britain is facing "very, very grave difficulties" after figures showed the economy did not grow at all in 2012.

Both George Osborne, the Chancellor, and Danny Alexander, the Chief Secretary to the Treasury, said they do not underestimate the scale of the challenge but insisted the Government is on a "path of repairing our public finances".

Despite their optimism, City analysts warned that the economy is still "in crisis", more than four years after the financial crash of autumn 2008.

It's Doug Casey's "greater depression"...and it's only just started.  This article showed up on the telegraph.co.uk Internet site early yesterday afternoon GMT...and it's courtesy of reader "David in California".  The link is

Gold and silver whacked again/Silver OI explodes higher/Swiss Parliamentarians trying to force SNB to repatriate gold held offshore/

Posted: 26 Jan 2013 05:19 AM PST

Links Australia Day 2013

Posted: 25 Jan 2013 11:14 PM PST

Slideshow: Sperm Whales Adopt Deformed Dolphin Science (Aquifer). Aaaw.

New PIOMAS vid Arctic Sea Ice Blog (Chuck L)

Andean glaciers melting at 'unprecedented' rates Guardian (Aquifer)

Great Lakes Map Shows Greatest Ecosystem Stress in Lakes Erie and Ontario Circle of Blue (Aquifer). Lake Michigan stressed near Escanaba ….and Escanaba has only 12,000 people

Antibiotic-resistant diseases pose 'apocalyptic' threat, top expert says Guardian

Davos take note: we don't trust you Gillian Tett, Financial Times. The poll was of the "informed public" as in "uninformed" don't count. Jonathan R noted the informed are:

Note: Informed publics are defined as people age 25 to 64, college-educated and in the top quartile of incomes for their age group in each country, who say they regularly follow the news. Figures are based on online responses from 500 people in China and the United States and 200 in other countries. Surveys were conducted in October and November of the preceding year.

So if are working age and unemployed, for instance, you can't be informed, unless you are a trust fund baby.

Lagarde: Women promoted to 'basket case' jobs Telegraph. OK, I take it back, not everything said at Davos is useless, just pretty much everything. But what about Carly Fiorina? She destroyed Lucent (she was responsible for selling equipment and getting paid in dot coms' stock) and she somehow got the nod at HP. (In fairness, Lagarde said "often" not "always")

Cyprus's now-certain default Felix Salmon (Scott)

Britain is experiencing "worse slump than during Great Depression" Telegraph (George Washington). Some caveats in order. Britain didn't do too badly in the Depression because 1. it was a debtor and 2. it left the gold standard early

Sarah Palin Parts Ways With FOX News Real Clear Politics (Scott via Clusterstock)

Assault Weapons Ban Lacks Democratic Votes to Pass Senate Bloomberg. Obama didn't have the votes in the Senate to get Bernanke confirmed either, until he whipped for him personally. We said his speech on gun control (by its noteworthy absence of his typical Orwellianisms) indicated he was going through the motions on this fight (with a Republican majority in the House, this was theater from the get go). Expect him to get at most something token passed (the article suggests a ban on high capacity magazines as a fallback) and move on.

Stuff about the inaugural speech riverdaughter (Lambert). Nails it.

Colley Cibber redivivus Stop Me Before I Vote Again (Lambert)

Stephen King: 'How many have to die before we will give up these dangerous toys?' Raw Story

Everything is awful Grist (Aquifer). Um, he noticed only now? :-) Although the particulars, like filibuster non-reform, are interesting.

White House condemns court ruling on 'unconstitutional' Obama appointments Guardian. So much for his 11th dimensional chess move of not putting his weight behind filibuster reform.

More Than 300 Labor Board Decisions Could Be Nullified New York Times

Catholic Hospital Argues Fetuses Are Not People In Malpractice Suit Huffington Post. See, not everything is awful.

Can Silicon Valley Save Grover Norquist? Atlantic (Paul Tioxon). Hoping Grover Norquist will randomly not be awful will not make him not awful.

Grover Norquist to push for statehood for Puerto Rico Daily Caller (Paul Tioxon). Ooh, the Republicans are trying to make friends in the Latino community.

Geithner ruling out a move into top Fed job Independent

Timothy Geithner On 'Justice' After Financial Crisis: 'I Never Felt That Was My Thing' Huffington Post (Aquifer)

Dispatches XXIV: Please Proceed Governor Menzie Chinn, Econbrowser. Nicely done.

Cloudy future for REO-to-rental asset class Housing Wire. Analysts take "show me" stance on promoter claims that they can achieve operating efficiencies.

Longform meltdown (cont.) Columbia Journalism Review

Manhattan to Get First 'Micro-Unit' Apartment Building Bloomberg

JPMorgan Chase Trying To Block Shareholder Vote On Breaking Up Bank Reuters

Restoring the Commons Archdruid

The Red and the Black Jacobin (Avedon)

Antidote du jour (Brindle):

2013-01-24 Citigroup and Morgan Stanley Gold Price Forecast

Posted: 25 Jan 2013 10:58 PM PST

New gold price predictions from Citibank and Morgan Stanley.

Citi

2013: $1,675/oz
2014: $1,653/oz

Morgan Stanley

2013: $1,773/oz
2014: $1,845/oz

Read in detail:

Marc Faber sees US stock correction imminent as February normally a weak month

Posted: 25 Jan 2013 09:22 PM PST

Marc Faber, publisher of the Gloom, Doom & Boom Report, told Bloomberg TV's Betty Liu on 'In the Loop' today that 'regardless of what the markets do, near-term, a correction is overdue' on the S&P.

Faber also said: 'The only thing I know is one day the markets will punish the interventionists, the Keynesians and the monetary policy that the Federal Reserve and ECB has enforced because the markets will be more powerful one day. How will this look like? Will the bond market collapse or equity markets become a bubble, which would be embarrassing for the Fed's sake if the US market became a gigantic bubble and at the same time the economy does not recover.'

Faber: on whether he agrees with George Soros that Europe has been stabilized:

'It has been stabilized for now, but the big question as he said is the imbalances have not been solved and these could come back and harm the markets and the euro at some point in the future. In terms of stock markets, I have advocated one year ago between April and June of last year to buy European stocks in Portugal, Spain, Italy, Greece and France because they were extremely depressed. Since then, the markets have rallied very sharply. Greece is up from the lows by 100 per cent. That tells you anything can go up when you print money.'

On whether he's getting out of European markets:

'Not really because we made the secular low roughly one year ago, but I have argued that it is the time right now to reduce equity positions. I think the markets are at the difficult juncture between overbought and a euphoric state. I am not ruling out that they could go up somewhat more like in 1987, going up 40 per cent between January and August, but we also fell 40 per cent in two months' time. So the gains were wiped out quickly. In March of 2009 we are close to 1500. We had already a huge bull market, and a lot of the good news has been discounted already.'

On whether there will be a correction on the S&P:

'I think regardless of what the markets do, near-term, a correction is overdue and usually February is a seasonally weak month…It will be interesting to see how the correction unfolds.'

On why he's not going big on any short in the market:

'The problem with shorting the markets nowadays is that you have this huge intervention by governments. Look at bonds of Italy Portugal and Spain – they rallied last year, there was a huge profit opportunity, and I admit that I missed it, but the profit opportunity came about as a result of government intervention. I feel the markets are – some people say it is intervention. I can call it manipulation. If manipulation continues, you do not know how far they will go.

'The only thing I know is one day the markets will punish the interventionists, the Keynesians and the monetary that the Federal Reserve and ECB has enforced because the markets will be more powerful one day. How will this look like?

'Will the bond market collapse or equity markets become a bubble, which would be embarrassing for the Fed's sake if the US market became a gigantic bubble and at the same time the economy does not recover.'

On Tim Geithner's legacy and whether anything will change under Jack Lew:

'I doubt there will be much change. To be fair to Mr. Geithner, he inherited a colossal mess. he is involved in politics and he has to listen to what the politicians want to do. He did an ok job. Where it is not ok is that basically nobody that has committed financial fraud or contributed to the fraud was prosecuted.'

Chinese publish regulations for their first gold ETFs opening 1.3 billion people to electronic gold investment

Posted: 25 Jan 2013 09:06 PM PST

Gold exchange traded funds have revolutionized gold investment around the world over the past decade. Yesterday the Shanghai Daily reported that the China Securities Regulatory Commission has published provisional regulations for the operation of such gold ETFs in the People's Republic for the first time.

There was no timetable laid out for the introduction of the ETFs. CSRC officials said they need to study throughily how to protect investor interests in the new products. But clearly this is something of a red letter day for gold.

Biggest gold market

China is already the world's biggest gold producer and consumer, with its gold output reaching 361 tonnes in 2011, according to the China Gold Association. That year the value of gold product transactions surged 53 per cent year-on-year to $395 billion at the Shanghai Gold Exchange.

Last month ArabianMoney reported that China's Ministry of Industry and Information Technology expects gold consumption to surpass 1000 tonnes by the end of 2015 (click here). It said this would 'widen the fundamental market shortage' and noted that the shortage of supply will persist in the coming few years as domestic gold supply 'might only reach 450 tons by that time.'

China is the sleeping giant in the gold market that is about to wake up with its 1.3 billion people soon to have access to gold investment via the very convenient method of ETFs. Think what this new demand will mean for a commodity whose supply cannot be expanded anything like so easily.

Time to buy?

Rising demand and limited supply must equal higher prices, and that will lead to higher demand again and still higher prices. It is amazing to see such long faces on the gold bugs today when such a prospect is only just around the corner. That of course means present price set backs are just a buying opportunity.

What will $50 or $100 on or off the price of gold mean in the context of $11,000 an ounce gold? Peanuts really unless it scares you out of the market altogether and you miss out on the lot!

By the Numbers for the Week Ending January 25

Posted: 25 Jan 2013 06:55 PM PST

This week's closing table is just below. 

20130125-Table

If the image is too small click on it for a larger version.   (More...)

Vultures, (Got Gold Report Subscribers) please note that updates to our linked technical charts, including our comments about the COT reports and the week's technical changes, should be completed by the usual time on Sunday (by 18:00 ET).    

To subscribe to Got Gold Report please click on the "Subscribe to GGR" button at top right.  Join us today.  

Reserve Bank of Australia declares on Australia Day that it is happy that Pommie Bankers hold 99.9% of its Gold

Posted: 25 Jan 2013 06:52 PM PST

On the eve of Australia Day I received a reply to my email to the Reserve Bank of Australia (RBA). It seems even on Australia Day, and every other day for the foreseeable future, the RBA is willing to trust … Continue reading →

Production Commences at the Del Toro Silver Mine

Posted: 25 Jan 2013 06:27 PM PST

First Majestic Silver Corp. ("First Majestic" or the "Company") is proud to announce that the Del Toro Silver Mine, located in the state of Zacatecas, Mexico, has achieved initial silver production.

The Del Toro Silver Mine was inaugurated in a special ceremony on January 23, 2013 which declared the new plant as officially open. Approximately 250 people attended the event including several Mexican Federal, State and Municipal authorities. The State Government was represented by Governor Lic. Miguel Alonso Reyes, the Governor of Zacatecas.

Keith Neumeyer, President and CEO stated; "The start-up of the Del Toro Silver Mine marks a very important milestone for First Majestic. This year, the Company will celebrate its 10 year anniversary by breaking through 10 million ounces of silver production as a result of Del Toro coming on stream. I would like to send my deepest appreciation to everyone on our team who have all worked so hard in getting our fifth producing mine up and running."

Underground development within the three mines which comprise the Del Toro Silver Mine (San Juan, Perseverancia/San Nicolas and Dolores) has produced 97,700 tonnes of stockpiled ore which is currently supplying feed to the processing plant. Commercialization of the 1,000 tonnes per day (tpd) flotation circuit is anticipated by April 1, 2013. Further development in the first half of 2013 will be focused on preparing the mines for phase two of production, which will include the addition of a 1,000 tpd cyanidation circuit. Phase two start-up is expected by July 1, 2013, at which time, the mill is expected to be running at a combined throughput rate of 2,000 tpd (1,000 tpd flotation and 1,000 tpd cyanidation).

The Company also remains on schedule for the third and final phase of production (2,000 tpd flotation and 2,000 tpd cyanidation) by the third quarter of 2014 at which time Del Toro is expected to become the Company's largest operation and is projected to produce at an annualized rate of approximately 6 million ounces of silver per year, and significant amounts of lead and zinc.

First Majestic is a producing silver company focused on silver production in México. The Company is aggressively pursuing its business plan of becoming a senior silver producer through the development of its existing mineral properties and the pursuit through acquisition of additional mineral assets which contribute to the Company achieving its aggressive corporate growth objectives.

FOR FURTHER INFORMATION contact info@firstmajestic.com, visit our website at www.firstmajestic.com or call our toll free number 1.866.529.2807.

FIRST MAJESTIC SILVER CORP.

"signed"

Keith Neumeyer, President & CEO

(Fiscal) Deal or No Deal

Posted: 25 Jan 2013 06:00 PM PST

Read the Thursday Afternoon Wrap-Up for 1/24/2013 and the Friday Morning Commentary for 1/25/2013

Last month, the MSM was abuzz over the potentially CATASTROPHIC "fiscal cliff" conundrum.  During the first debt ceiling debacle – in Summer 2011 – Congress successfully "kicked the can" past the 2012 elections with the Budget Control Act, an economically LETHAL dose of spending cuts scheduled to go into effect in January 201.  Sadly, said spending cuts – even when coupled with simultaneous expiration of the "Bush tax cuts" – would still not make a significant dent in spiraling U.S. deficits and debt.

Contrary to Congress' prayers, 2013 did in fact arrive – yielding the need to address this GARGANTUAN pink elephant threatening to stomp the last glimmer of hope of an actual economic "recovery."

Thus, with the maximum amount of sentiment-destroying bipartisan drama, Congress weaseled its way to an eleventh hour "deal" – barely avoiding going "off the cliff."  Essentially, ALL the aforementioned spending cuts were delayed by two months, while NEARLY ALL the Bush Tax cuts were left in place.  In the end game, ONLY the ultra-rich will have to fork over higher income taxes – which ultimately, will reduce government tax revenues and private sector job creation; while the ENTIRE POPULATION will pay 2% more due to the untouched expiration of the payroll tax cut.

Since summer 2011, the global economy has dramatically declined – across the board.  However, government MONEY PRINTING, MARKET MANIPULATION, and PROPAGANDA – accelerated to spiritual levels – has given the false perception of a "recovery"; despite ALL empirical evidence suggesting otherwise.  Whether it's the "President's Working Group on Financial Markets" supporting the stock market, the Fed supporting Treasury and mortgage bonds with "QE," or the suppressive efforts of the Gold Cartel; the government has its hand in ALL pies; poisoning ALL it touches.

As the January 1st "fiscal cliff deal" did NOTHING to address the issues the Budget Control Act was created to tackle, PM prices and interest rates should have EXPLODED in its aftermath.  Both have since moved upward, but in scope have been minimal care of the aforementioned government interventions; not the least of which, has been the PPT generating a prototypical "DEAD RINGER" support algorithm for the "DOW JONES PROPAGANDA AVERAGE" essentially EVERY day.

However, now that the deal's "afterglow" has subsided – and Obama's inauguration is in the rear view mirror – it's time to PAY THE PIPER.  Economic data – worldwide – continues to soften; but once again, the new "fiscal cliff deadline" is coming upon us.  March 1st is barely a month away, and EVERYTHING that wasn't dealt with on January 1st must be addressed – NOW!

Already, Congress is commencing the same, playground-level bickering, spin, and PROPAGANDA we saw in December; with the Republicans wasting time with their "no debt ceiling without a budget" platform, while Obama arrogantly says he won't even discuss the notion of maintaining the current, $16.394 TRILLION debt ceiling – despite Congressional approval being mandated by the Constitution.

As noted above, said spending cuts – engendering MASSIVE layoffs and entitlement reductions across the entire economy – would be the equivalent of injecting a LETHAL dose of arsenic into America.  Yet, if Congress "kicks the can" again by delaying the cuts, it will likely yield credit rating debt downgrades, surging interest rates, and a plunging dollar.

And again, the SADDEST part of all is that even if the spending "sequester" does in fact hit America full force; it not only won't dent the deficit, but will probably WORSEN it – as tax revenues collapse amidst the resultant economic CONFLAGRATION.

As in summer 2011, Precious Metal prices would likely EXPLODE; and keep in mind, silver is already in shortage as I write – before this potentially CATASTROPHIC crisis even begins…

US Mint Runs Out Of American Eagle Silver Coins, Suspends Sales

Thus, I ask you, do you expect a "(FISCAL) DEAL OR NO DEAL?"

http://www.youtube.com/watch?v=6ehYdqLwUVw

 PROTECT YOURSELF, and do it NOW!

Call Miles Franklin at 800-822-8080, and talk to one of our brokers.  Through industry-leading customer service and competitive pricing, we aim to EARN your business.Similar Posts:

Lessons in Hubris from the Herbalife Spectacle

Posted: 25 Jan 2013 04:54 PM PST

"I beseech thee, in the bowels of Christ, think it possible you may be mistaken."

 ~ Oliver Cromwell, to the General Assembly of Kirk

It's interesting when traders (and investors) blow up. Sometimes you can see it coming, based on telltale actions or statements.

For instance, I remember reading Vic Niederhoffer's "Education of a Speculator" in the  mid-1990s and telling multiple friends and colleagues:  "This guy is definitely going to blow up."

In various spots, Niederhoffer bragged about his near-death experiences — wearing them as a weird badge of pride — including a story in which George Soros tells him point blank: "Get out… You're in over your head!"

Soros was right. Niederhoffer's bragged about almost-blow-ups later became actual blow-ups – more than one, for more than one trading fund – in a multi-year sweep of self-fulfilling prophecy. (A habit of selling naked option premium played a role too.)

Another well-telegraphed example is Bill Miller of the Legg Mason funds. At one point Miller was a mutual fund superstar, famous for having beaten the S&P 15 years in a row. His reputation was built on long side contrarianism — taking positions at odds with the general consensus.

But Miller was also terminally arrogant. He considered himself a student of poker, latticework, and multidisciplinary study — and was even a supporter of the Santa Fe Institute — yet proceeded to completely ignore every risk control lesson these pursuits had to offer.

When convinced he was right, the chance of being wrong never crossed Miller's mind. On being asked how long he would keep adding to a position going against him, the reply was: "Until there is no longer a price quote."

You can't invent that kind of hubris… which helps explain why Miller loaded his funds with black-box financial positions, then plunged headlong into the abyss.

And then, of course, you have the Long Term Capital Management guys. As the old joke goes, LTCM had not one, but TWO Nobel laureates. With one they might have had a chance… with two they were doomed from the start.


Smart traders and investors take a keen interest in blow-ups for a simple reason: They don't want to blow up themselves.

Witnessing and dissecting other blow-ups, then, is akin to careful drivers analyzing a fatal car accident. The question is, "Could that have been me in some unforeseen circumstance? What could I have done differently to ensure my survival?"

In trading and investing, excellent risk control requires walking a fine line between confidence and paranoia.

On the one hand, you take confidence in knowing that you never flirt with blow-up risk, ever… and that your risk-mitigating processes and protocols are so strong you never touch the borderline.

On the other hand, you never want to become so confident as to think "that can't happen to me no matter what"… because a sense of permanent vigilance is one of the things that guarantees survival in the first place.

If you lose that sense of vigilance – a sort of healthy paranoia of the Andy Grove variety – it can be problematic.

This discussion comes about in relation to the Herbalife spectacle. In case you haven't been following it, Herbalife (HLF) is a publically traded multi-level-marketing company with a slightly dodgy business model.

As a business, HLF is cash-rich. The questions revolve around whether Herbalife actually makes money from its products, or merely milks its "distributors" – i.e. get new recruits to buy product, find more recruits ad infinitum – which would make the company a pyramid scheme.

Bill Ackman, an extremely high profile hedge fund manager, publically announced a massive Herbalife short in December.

In essence Ackman declared himself "all in" – shorting more than a billion dollars worth of shares – and pounded the table for the company as a "zero" (in the assumption the SEC would take Ackman's side, though Herbalife has been around since 1980, and shut the company down).

Herbalife shares plummeted on Ackman's high profile presentation – a full on media event – then later reversed as other hedgies pushed back.

Robert Chapman, of Chapman Capital, put out an extensive piece titled "Herbalife: Why I Made It a 35% Position After the Bill Ackman Bear Raid." And Dan Loeb of Third Point Advisors, another hedge fund heavyweight, announced an 8% longside stake.

Here are some background articles for the timeline:

And a recent chart (to the right). The acapulco cliff dive is Ackman's big-gun presentation against HLF. The V-shaped rebound is the reassessment and Chapman / Loeb one-two punch.

(Full disclosure: We took a small long-side trading position in HLF this week.)

Some of the best work on the Herbalife story has been done by John Hempton of Bronte Capital (who took a long HLF position shortly after the Ackman news).

In a piece titled "Notes on visiting an Herbalife nutrition club in Queens," Hempton comes to this devastating conclusion:

Herbalife is a company which combines a lot of good (think the life-saved diabetic above) with some pretty ugly features.

But this is not really a story about Herbalife - Herbalife will survive globally. Like all multi-level marketing schemes it will have its ups and downs. There will be all sorts of problems (such as tax compliance throughout the scheme, cash handling, perhaps even using Herbalife accounts to launder money).

What this has (deservedly) become is the story about how Bill Ackman can be so wrong. He spent (by his own admission) a year and a half analysing this company and his thesis can be falsified by visiting a few clubs in his home city. Bill Ackman's thesis is the most easily falsified bear-thesis I have seen from a major hedge fund ever.

You have to wonder how this happened. So I am going to tell you: 

Bill Ackman a Harvard educated (magna cum laude) billionaire New York hedge fund manager bet over a billion dollars on a short position (imperilling his fund and his reputation) without checking the facts.

And he did not check the facts because he was so rigid with a misplaced silver spoon that he could not stoop to sit on a subway for thirty minutes and talk with poor people for ninety minutes.

Let's take a minute to discuss the mechanics of short selling here.

Many investors are afraid to sell short, pointing to the potential for unlimited capital loss. In most cases this fear is overblown and a canard, because it is just as likely for stocks to fall sharply as rise sharply – think "accounting scandal" as the flipside of "corporate buyout" – and it is possible to manage one's shorts with a high degree of risk control. (Those same investors who "fear" going short often show little fear of getting hurt by oversized long positions with no risk point.)

To sell short responsibly, one can do things like 1) make sure your position is small relative to total assets; 2) make sure your position is small relative to share float; 3) make sure to use stop losses and only short liquid names; or even 4) use options to define your risk of loss 100%.

Ackman, however, did none of these things.

Instead he eagerly made himself the poster-boy of short seller blow-up risk:

  • He took a huge position relative to his $10B fund (more than a billion dollars' worth)
  • He took a huge position relative to the stock float (roughly 20% of HLF shares)
  • He made it impossible to employ a stop loss (far too big and public a holding)
  • He basically dared the world to squeeze him (which may now happen)

Yours truly was a wet-behind-the-ears commodity broker in 1998. Some early market memories thus formed around the Long Term Capital Management (LTCM) unraveling.

One wild aspect of that LTCM unwind was the bottle-rocket price action in the Japanese yen.

Basically, all of Wall Street knew LTCM was massively short yen… and all of Wall Street also knew LTCM would have to unwind those yen positions (buy them back) at any cost. The result was a bloodbath (for trapped yen shorts) as USDJPY went vertical, in a moonshot reminiscent of the energizer bunny — it just kept going, and going, and going…

Time will tell, but the same thing could happen to Ackman with Herbalife.

If the Chapman / Loeb base case is correct, a reassessment of HLF fundamentals, combined with the potential for HLF share buybacks and knowledge that a great white whale (Ackman) is vulnerable, could lead to a historical recounting of Colonel Vanderbilt's merciless squeeze of Daniel Drew, complete with the phrase: "He who sells what isn't his'n / Must buy it back or go to pris'n."

It's fascinating, really.

Why would any super-successful money manager (or businessperson of any kind) willingly put their neck in a noose? Messiah complex? Compulsive need for attention? Megalomania? As with Niederhoffer and Miller, the warning signs went back a long way (years and years)…


Ackman is a billionaire, with a track record of great success. Now he is risking it all on a reverse asymmetric bet. If he wins, he gets another boost to his ego. If he loses, potentially everything he has built goes up in flames.

In a recent review of "Antifragile," we discussed the importance of optionality – finding situations that offer large upside with limited and defined downside.

One can build a career, and a life, from basic optionality principles. With Herbalife Ackman managed to do the EXACT OPPOSITE… taking the mother of all "concave" positions (limited upside, non-trivial potential for absolute disaster) for reasons that are hard to fathom.

So what are some lessons from the Herbalife spectacle – useful takeaways regardless of how things play out?

Here are a couple:

BE WARY OF ARROGANCE.  

This should go without saying, but in hiring managers to run their money, investors fail to heed the basic lesson over and over again. When seeking a financial professional, you want confidence born of excellence and an ability to do the job. But confidence and arrogance are not the same thing.

Guys who are so arrogant they act as if they can walk on water (ahem, Ackman, cough) are prime candidates for blow-up risk, because their supreme smugness eventually gets the best of them (or fuels the situation that invites disaster in the first place).

For examples of confidence with humility (rather than arrogance), keep reading…

PUT PROCESS OVER OUTCOME. 

The enduring lesson of LTCM is that understanding process is every bit as important, if not far more important, than pure track record.

This is because bad habits, hidden hubris, and gross deficiencies of risk control can lay in wait for years before blowing up in investors' faces.

Worse still, a bad process – rife with hubris – can contribute to the illusion of reliable profitability in the first place, before the fullness of time calls forth catastrophe.

DON'T PICK GNAT SHIT OUT OF PEPPER. 

Never has the expression felt more appropriate. As Hempton points out, Ackman spent more than a year and a half researching the Herbalife short thesis (by his own admission), and yet missed major disconfirming factors right under his nose.

The clear lesson here is that knowledge, especially fundamental knowledge of a trade or investment, has absolute limits. You can never get all the puzzle pieces — and even if you could, there's no guarantee you will weigh all the variables correctly (one might dominate the others), or anticipate the X factor that derails your thesis.

As we wrote of Ackman on a message board last year (well before Herbalife unfolded):

That kind of granular activity makes sense for, say, private equity, where you are actually diving into the guts of a company, restructuring it and rebuilding it from the inside out — or for distressed debt investing, where the visibility is seriously opaque and it takes real forensics to get a true sense of risk levels — but from the stock-picking perspective as to which investment valuations will rise or fall, it's the racehorse handicapper fallacy writ large: The false idea that if 10 variables are helpful, 60 variables are even better etc — or in Ackman's case 600 variables. If he were a handicapper he would be sticking a periscope up the horse's ass and taking bacterial cultures, then writing a 10,000 word thesis on the petri dish findings... For all his digging, Ackman is congenitally optimistic, to a potentially dangerous degree, and has happily admitted as much. Overkill on the micro side does not cancel out disregard of the macro side, though many seem to think it does, mainly because it can take a long time to see who's swimming naked.

EMPHASIZE RISK CONTROL, MISTAKES, AND SURVIVAL. 

Paul Tudor Jones: "…at the end of the day, the most important thing is how good you are at risk control. Ninety percent of any great trader is going to be the risk control."

Michael Steinhardt: "One of the advantages of trading the way I do — being a long-term investor, short-term trader, individual stock selector, market timer, sector analyst — is that I have made so many decisions and mistakes that it has made me wise beyond my years as an investor."

Ray Dalio: "Anyone who has been involved in the markets knows that you can never be absolutely confident. There is never a trade that you know you are right on. If you approach trading that way, then you will always be looking at where you mght be wrong. You don't have a false confidence. You value what you don't know."

And last but not least, Howard Marks: "Sun Tzu said if you sit by the river long enough, you'll see the bodies of your enemies float by. The key is "long enough." If you live long enough, you have to be the survivor…  if you look at distressed debt where we started in 1988, I could tell you who our number one competitor was in every year through 1995 and not one is a main competitor today. And it's not because of what we did; all we did is perform consistently. They crapped out. It sounds simplistic to say, but the first requirement for success is survival…"

There's a reason those guys are all legends…

JS (jack@mercenarytrader.com)

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The U.S. Has An Even Larger Gap Between The Rich And The Poor Than Downton Abbey Does

Posted: 25 Jan 2013 03:53 PM PST

The U.S. Has An Even Larger Gap Between The Rich And The Poor Than Downton Abbey DoesThere are two very different Americas today.  In one, the stock market is soaring, high end homes are selling briskly, big banks and hedge funds are rolling in money as if the last financial crisis never even happened, and life is really, really good.  In the other America, good jobs are incredibly scarce, incomes are declining, and poverty is skyrocketing to levels that we have never seen before.  The gap between the wealthy and the poor in America is getting wider with each passing day.  In fact, it is my contention that the U.S. has an even larger gap between the rich and the poor than Downton Abbey does.  If you have never seen Downton Abbey, you really should.  It is one of the most extraordinary shows to appear on television in years.  It is a drama set in the UK which follows the lives of the aristocratic Crawley family and their servants throughout the early part of the 20th Century.  It can be a bit jarring to watch servants wait on their masters hand and foot and refer to them by such titles as "Lord" and "Lady", but the truth is that in many ways there is more inequality today than there was back then.  As far as people living in the worst areas of cities such as Detroit and Cleveland are concerned, the socialites that live on Fifth Avenue in New York City or in multi-million dollar homes out in the Hamptons might as well be from another planet.  If you have lots of money, America is still a really great place to live.  If you barely have any money, America can be really cold and cruel.  Sadly, our politicians continue to pursue policies that make things even better for those working for the establishment in places such as Washington D.C. and Manhattan, and worse for all the rest of us.  This has especially been true over the course of the past four years.  If nothing is done, the gaping chasm between the rich and the poor will continue to get even worse, and in the end that will have some really severe consequences for our society.

So is the answer to raise taxes and "redistribute" more money to the poor?  Of course not.  Today, we are already paying dozens of different kinds of taxes every year and the government is handing out more money to people than ever before.  But poverty just continues to explode.

What the poor in the U.S. desperately need are good jobs, but we continue to ship millions of good jobs out of the country and Barack Obama continues to pursue policies that are killing the U.S. economy.

There is not much help on the horizon for the poor or the middle class in America, and that should be distressing for all of us.

But things in the wealthy parts of America are going absolutely wonderfully right now.  Let's take a few moments and contrast what life is like in the two Americas right now...

In the "good America", stocks are absolutely soaring.  In fact, the S&P 500 closed above 1,500 on Friday for the very first time in more than five years.

In the "bad America", poverty statistics just continue to get worse.  According to a newly released report, 60 percent of all children in the city of Detroit are living in poverty.

In the "good America", hedge funds are rolling in the profits.  The Dow just had its best January since January of 1994, and many analysts are projecting that 2013 will be a banner year for the markets.

In the "bad America", median household income has fallen for four years in a row, and millions of families are really struggling to find a way to pay the bills each month.

In the "good America", expensive homes are selling at a pace that we have not seen in years.  Just check out what is happening in the Hamptons.  According to the National Association of Realtors, sales of homes worth at least a million dollars were 51 percent higher in November 2012 than they were in November 2011.

In the "bad America", there are hordes of young adults that cannot find jobs and cannot take care of themselves.  Shockingly, U.S. families that have a head of household that is under the age of 30 have a poverty rate of 37 percent.

In the "good America", the "too big to fail" banks are partying like it was 2005 again.  For example, revenues at Goldman Sachs increased by about 30 percent in 2012 and Goldman stock has soared by more than 40 percent over the past 12 months.

In the "bad America", poverty is exploding and government dependence has become a way of life.  If you can believe it, the number of Americans on food stamps has grown from about 17 million in the year 2000 to more than 47 million today.

In the "good America", those working for the establishment will do just about anything to make a buck.  For instance, Goldman Sachs made 400 million dollars driving up food prices in 2012 while hundreds of millions around the world existed on the edge of starvation.

In the "bad America", millions of families are wondering how they will make it until next month.  If you can believe it, more than a million public school students in the United States are homeless.  This is the first time that has ever happened in our history.

In the "good America", everyone has a good ride.  In fact, sales of luxury German-made vehicles set new all-time records in 2012.

In the "bad America", those that have lost everything are shunned and ostracized.  In fact, many communities all over America are actually making feeding the homeless illegal.

The fact that there is poverty in America should not alarm you.  Every country in the world has poverty.  What should alarm you is how rapidly it is growing.  Even though the Obama administration tells us that we are in an "economic recovery", things just continue to get worse.  The wealthy elitists in Washington D.C. and New York City may be doing wonderfully, but the truth is that the middle class continues to shrink and just about every poverty statistic that you can think of continues to rise.

If you are convinced that we do not have a "wealth gap" problem in the United States today, just check out the following statistics.  Most of them are from one of my previous articles entitled "The Middle Class In America Is Being Wiped Out – Here Are 60 Facts That Prove It"...

-According to the Economic Policy Institute, the wealthiest one percent of all Americans households on average have 288 times the amount of wealth that the average middle class American family does.

-In the United States today, the wealthiest one percent of all Americans have a greater net worth than the bottom 90 percent combined.

-According to Forbes, the 400 wealthiest Americans have more wealth than the bottom 150 million Americans combined.

-The six heirs of Wal-Mart founder Sam Walton have as much wealth as the bottom one-third of all Americans combined.

-At this point, the poorest 50 percent of all Americans collectively own just 2.5% of all the wealth in the United States.

-The United States now ranks 93rd in the world in income inequality.

-The average CEO now makes approximately 350 times as much as the average American worker makes.

-Today, corporate profits as a percentage of U.S. GDP are at an all-time high, but wages as a percentage of U.S. GDP are near an all-time low.

Sometimes, when the "good America" and the "bad America" collide, the results are quite humorous.

For example, a 23-year-old homeless Brazilian man and his friends recently decided to "move in" to a 7,522 square foot house down in Florida that is valued at $2.1 million.  The following is from a recent article in the Orlando Sentinel...

Bank of America has filed to evict nine squatters from a $2.5-million mansion in a posh Boca Raton neighborhood.

In a filing in Palm Beach County court that names 23-year-old Andre De Palma Barbosa and eight other unknown people, the bank claims rightful ownership of the home – despite Barbosa's attempt to stake his claim on the foreclosed waterside property by using an obscure Florida real estate law.

Barbosa has been invoking a state law called "adverse possession," which allows someone to move into a property and claim the title – if they can stay there seven years.

A signed copy of that note is also posted in the home's front window.

Yeah, they will be able to get him and his friends out of there eventually, but in future years I fear that the conflicts between the rich and the poor will not be so nice.

Already, a very ominous "Robin Hood mentality" is building among the poor in this country.  Many wealthy people don't even realize that it is happening.  But someday when desperate "flash mobs" are roaming through their neighborhoods looking to do a little "creative redistribution", then they will get it.

Our society is starting to come apart at the seams, and there is an incredible amount of tension between the rich and the poor.  This is unfortunate, but instead of calming things down many of our politicians are actually exploiting this tension.

When our economy crashes, the class warfare of today may actually turn into real war in the streets.  Desperate people do desperate things, and when people are hungry and they can't feed their families, many of them will not be afraid to go over to the wealthy neighborhoods and take what they want.

A lot of people don't want to see them, but dark clouds are building.  According to a recent Gallup poll, Americans are more negative about where America will be five years from now than they have ever been before.  Most people know that we are on the edge of something really bad, even if they can't really explain it.

It is time to get ready for what is coming.  Even though the stock market is soaring right now, that could change at any moment.  All of the long-term economic and societal trends are pointing to some really bad things in the years ahead, and sticking our heads in the sand and pretending that everything is going to be okay somehow is not going to help.

So what do you think about all of this?

Do you think that the U.S. has an even larger gap between the rich and the poor than Downton Abbey does?

Please feel free to post a comment with your thoughts below...

Downton Abbey

Gold & Silver Cycle Charts Look Constructive

Posted: 25 Jan 2013 03:25 PM PST

  Articles: Gold Silver Prices

Although no price appreciation since writing the weekend report, the Gold Cycle nevertheless is constructive.  We've seen a 14 day streak that has quietly and patiently added 4.3% since the last Cycle Low.  The fact that gold has generally ascended (while dips bought) for 14 days has almost ensured that our Cycle phasing as a 1st Daily Cycle is correct.  This is important; the first step is to understand which Cycle we're in.

But gold continues to do a wonderful job of confusing investors while keeping sentiment subdued.  The lack of a surge out of deep lows has kept many lightly exposed and believing that a new decline is directly ahead.  I'm also afraid those who are faithlessly invested here might be shaken out by what should be an imminent and minor 2-3 session drop into a Half Cycle Low.

Gold Daily Chart 23 January 2013 gold silver price news

So if we remain committed to the 1st Daily Cycle framework, then we must be ready to accept a minor Half Cycle decline on the way up to a much larger 1st Daily Cycle top.  These 1st Daily Cycle average a full 28 trading days, so there is plenty of time and no reason to expect a significant move above $1,700 will not unfold.

If Silver is any indication of the coming strength, then we're in good hands.  The action out of Silver is showing extreme strength, the type of move that 1st Daily Cycles are known for.  Whenever Silver makes a bullish move, it quickly finds the top of the Bollinger Band and rides it all the way to a Cycle top.  Seeing this type of development here is encouraging, you want to see Silver leading the pack.  This move has been deliberately strong while not overly exuberant.  We're not seeing the extreme moves that land Silver outside of the Bollinger Bands that often mark the end of a premature run.

But as gold is in need of a Half Cycle Low and Silver extended in the short term, I expect that Silver's powerful 8 session winning streak will need to take a breather.  A quick move back to the $31.50 level over 3 sessions would be more than enough of a "re-charge" before Silver sets off into the 2nd half of the Cycle.

Silver Daily Chart 23 January 2013 gold silver price news

But the miners continue to cast a grey cloud over the gold Cycle.  Maybe this weakness is helping to mask sentiment; it could be what is helping gold/silver rally here.  Whatever the reason for the extreme negative sentiment and technical weakness, lets again hope it's not a leading indicator for the gold Cycle.

The best hope for the miners is that they're forming a 3-4 month rounded bottoming pattern while gold begins the process of moving up in a new Investor Cycle.  I have noted before that the miners have appeared to bottom and look to be in the process of forming a solid base or foundation.  If this were true, then we should expect to see a little more weakness followed by the beginnings of a long, powerful, and sustained rally.  But the threat is that the rounded bottoming pattern gives way and followed by a test of the Dec lows ($43.70 area).  Failure to hold that level should open the gates for a swift 10% drop back to the $40 level.

GDX Daily Chart 22 January 2013 gold silver price news

This as is an excerpt from this mid week's premium update published on Wednesday (1.23)  focusing on precious metals from the The Financial Tap, which is dedicated to helping people learn to grow into successful investors by providing cycle research on multiple markets delivered twice weekly, as well as real time trade alerts to profit from market inefficiencies. They offer a FREE 15-day trial where you'll receive complete access to the entire site. Coupon code (ZEN) saves you 15%.

Gold and Silver Disaggregated COT Report (DCOT) for January 25

Posted: 25 Jan 2013 12:40 PM PST

HOUSTON -- This week's Commodity Futures Trading Commission (CFTC) disaggregated commitments of traders (DCOT) report was released at 15:30 ET Friday. Our recap of the changes in weekly positioning by the disaggregated trader classes, as compiled by the CFTC, is just below.

20130125-DCOT

(DCOT Table for January 25, 2013, for data as of the close on Tuesday, January 22.   Source CFTC for COT data, Cash Market for gold and silver.) 

More...

In the DCOT table above a net short position shows as a negative figure in red. A net long position shows in black. In the Change column, a negative number indicates either an increase to an existing net short position or a reduction of a net long position. A black figure in the Change column indicates an increase to an existing long position or a reduction of an existing net short position. The way to think of it is that black figures in the Change column are traders getting "longer" and red figures are traders getting less long or shorter.

All of the trader's positions are calculated net of spreading contracts as of the Tuesday disaggregated COT report.

Gold and inflation call it quits

Posted: 25 Jan 2013 12:08 PM PST

After having once again failed at the $1,696 resistance level on Wednesday, gold prices headed lower for a third straight session this morning. In the process, the pivotal 200-day moving average price near the $1,608 level was breached by sellers.

Buying Phyzz today?

Posted: 25 Jan 2013 11:48 AM PST

I did,

click the silvergoldbull banner on right hand side and enter discount code SGB-SGS when in checkout.


They have some sick new Trivium SLAVE queens, check them out in the silver section.

I should have time for an update this sunday. I have been keeping busy.

I also just bought a Browning 300 Ultra Mag. #BOOM.

Technical Failure Continues to Haunt Gold

Posted: 25 Jan 2013 10:55 AM PST

continued selling in gold after yesterday's confirmation of a failure to take out overhead resistance near the 50 day moving average and its further retreat from psychological resistance at the $1700 level.

Today price once again fell below the 200 day moving average as the double whammy from long liquidation from short-term oriented bulls, in conjunction with fresh short selling from speculators, has overwhelmed bids coming from the swap dealers and bullion banks who are covering previoulsy established shorts up near the overhead resistance zone.


The RSI continues to confirm the move lower within the broad sideways trading pattern that has now existed since the middle of December last year.

It is the same story for the present - speculators are not interested in gold or in anything related to gold, such as shares right now, as they are after a chance to secure better returns on investment into the broader equity markets.

Once again the S&P 500 has made yet another fresh 5 year high! (at least the bond market is finally showing some signs of rationality as it is sinking sharply). The yield on the TEn Year is knocking on the door of a 9 month high right now as it is currently sitting at 1.934%.

What is missing in gold and in the gold shares is money flows. It is really that simple. Heck, even a crude oil price that is rising, in spite of not especially bullish fundamentals, cannot seem to generate any inflation-based buying in gold right now. It is simply off the radar screen of the big hedge funds and momentum based buyers. I am not sure what it will take to recapture their enthusiasm from a fundamental standpoint at this juncture but from a technical standpoint it still goes back to the fact that gold must get a "17" handle in front of it to generate any bullish excitement.

Downside support still remains in place between $1640-$1630 on the chart having not as of yet been tested. One can assume that the same buyers whose actions have forged out that technical base of support still remain viable but we will need to see evidence of their eagerness to buy before just presuming that it is so.

Again, there is no help whatsoever coming from the mining shares which continue to effectively undercut any hint of bullish sentiment that might dare to form in the actual metals as far as the Comex futures go. I am beginning to get a sense of real capitulation selling in the mining sector. The despair, anger, frustration and downright disgust being expressed by even some long term holders of the miners is growing, rightfully so I might add as money invested in them was lost opportunity elsewhere. We will continue to look for signs therefore of a lasting bottom in that sector but so far, I do not see it as of now.

The HUI is perched periously atop major support - if that gives way for any reason - and it does not matter what that reason might or might not be at this point - the final washout in the mining sector will be underway with the transition to some very strong hands. It should be kept in mind however strong hands are "strong" because they are willing and ABLE to sit on trading losses long after weaker and less capitalized holders have thrown in the towel.

Just be careful about willy-nilly buying dips in price in these mining shares right now. Wait until you see some evidence that the selling has been exhausted. Generally speaking, that tends to take the form of a spike bottom in the gold mining shares but of course, no two days in trading are ever the same. That is what makes it difficult and requires constant diligence and flexibility.

Note on the chart below, a monthly chart, that the HUI is pressing very hard against that support level coming in near the 400 level. It is imperative that it does not close below that level before this month ends or else it will more than likely move lower and test the 370-360 level.




Considering that the price of gold was sitting closer to $1100 back in January 2010 when the HUI last had a MONTHLY CLOSE below this level, it is astonishing how pitiful the mining sector has performed especially seeing that gold is trading over $500 an ounce higher than it was back then. Why in the hell cannot some of these miners show any significantly stronger profits and offer a better return on investment for their shareholders? Thankfully there are some well run companies out there but their stocks tend to get lumped into the same outhouse as the rest of them do. I have said it before and will say it again, unless the CEO's of some of these mining companies get serious about returning shareholders value (and that means making hard decisions to rein in costs and become more efficient) they should not be surprised to see those same shareholders voting with their feet and taking their hard earned investment dollars elsewhere.

Icahn vs Ackman on CNBC

Posted: 25 Jan 2013 10:28 AM PST

Ring side seat to a hedge fund prize fight. 

Nothing to do with gold and silver, but the CNBC video below is a compelling prize fight style live TV confrontation between Bill Ackman, who is very publically short Herbalife stock (NYSE:HLF), and Carl Icahn.  The street believes, rightly or wrongly, that Icahn is long HLF.

Preliminary segment with Bill Ackman.

Carl Ichan joins the interview in Segment 2

We have long had nothing but contempt for Carl Icahn, whom we believe is a chest-beating bully with the appearance of a sociopath.  We have a new respect for Ackman, but we know less about him than we would like.

We'd have to give the match to Ackman, a TKO on points, with credit for class and style versus Icahn's gutter mouth, which does not work well on national cable TV. 

Source:  CNBC

Segment 1
http://video.cnbc.com/gallery/?video=3000143709 

Segment 2

http://video.cnbc.com/gallery/?video=3000143591 

The price of silver in the age of broken promises

Posted: 25 Jan 2013 10:28 AM PST

The price of silver remains at the mercy of the big banks that make of the majority of the short side at Comex — which is still the primary paper pricing mechanism for silver.
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