Gold Speculator http://www.gold-speculator.com/ Gold Speculator - Investing in Gold, Silver and Commodities en Thu, 17 May 2012 06:21:11 GMT vBulletin 60 http://www.gold-speculator.com/images/misc/rss.jpg Gold Speculator http://www.gold-speculator.com/ What Will the Financial Repercussions Be If Greece Defaults or Leaves the Eurozone? http://www.gold-speculator.com/munknee/79424-what-will-financial-repercussions-if-greece-defaults-leaves-eurozone.html Thu, 17 May 2012 05:24:47 GMT I want you to under*stand the grav*ity of what Europe is fac*ing; Europe has BET THE FARM and the croupier is about to roll the dice. We are all fac*ing a momen*tous instant in time and all of the noise in the back*ground is quelled by the show*man announc*ing the main event.*Let’s Roll! Words: 625

So says Mark Grant (www.advisoranalyst.com) in edited excerpts from his original article.*
Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has edited the article below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.

Grant*goes on to say, in part:

Things that go Bump in the Night

Europe is head*ing for a show*down and in a num*ber of places:

1. France:*Per*haps the most impor*tant is the stand-off between France and the Euro*pean Com*mis*sion.

The EU bud*getary office is demand*ing that France reduce its deficit to 3.00% for 2012 while the pro*jec*tion is for 4.50% so that the Com*mis*sion is threat*en*ing France with large fines.

Mr. Hol*lande ran his cam*paign upon a reduc*tion in the retire*ment age, more gen*er*ous pen*sions, shorter work hours and more gov*ern*men*tal spend*ing so that the bud*getary miss is likely to be larger than fore*cast; some*where around 5.2% in my esti*ma*tion.

France then finds itself, one way or another, with a larger bud*getary deficit and if the EU then imposes fines and sanc*tions Paris may thumb its nose at Berlin/Brussels in what could be a rather nasty affair with unknown con*se*quences. Mrs. Merkel in one cor*ner and Mr. Hol*lande in another slug*ging it out will not make for har*mo*nious rela*tions.

2. Greece & Spain: Then there are the issues of Greece and Spain and the Social*ist reac*tion is bound to be very dif*fer*ent than the Aus*ter*ity impo*si*tion as demanded by Ger*many….

The new EU fis*cal pact is becom*ing some*thing of a devi*ated piece of humor as Spain is being released from its con*straints and Greece is now only con*strained by the fear and loathing of the coun*try remov*ing its hand from the honey pot. “Keep Eat*ing,” is the resound*ing cry from all of the Euro*pean politi*cians as they are truly fright*ened of the old bear not fol*low*ing orders.
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It may well be that the new polit*i*cal dandy in Greece is cor*rect; Europe may soon be beg*ging for Greece to take the money under almost any terms as they do not wish to dance the jig of con*tin*gent lia*bil*i*ties becom*ing real ones and hav*ing to be accounted for in actu*al*ity with all of the pend*ing losses that this would entail. What will they say in Berlin; “Mein Gott, waren wir nur ein Scherz“(My God, we were just kid*ding.)

The real debt of Greece is approx*i*mately $1.30 tril*lion and as con*tin*gent morphs into actual the impend*ing explo*sion may become real*ity. This amount of money is 40.60% of the entire GDP of Ger*many because it is a small coun*try that now has a giant debt given its pop*u*la*tion. Europe has, in fact, bet the farm and the…Greek elec*torate [did not has made the pay the price. The Euro*pean Union has played its hand badly and real*ity is very close to bit*ing off the hand that fed it!

Conclusion

If Greece defaults or leaves the Euro*zone then:

  • the ECB will be broke and have to be re-capitalized,
  • the IMF will take one seri*ous finan*cial hit,
  • the EIB will be seri*ously impaired and
  • the large European and American banks who hold...the munic*i*pal debt, the deriv*a*tives, the bank loans...will be forced to rec*og*nize thier losses.
Cha*rades is so much fun until some*one comes up with the answer.

*http://advisoranalyst.com/glablog/20...-bet-the-farm/**(To access the articles please copy the URL and paste it into your browser.)
Editor’s Note: The above article may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.

Related Articles:

1. Greek Fiscal Irresponsibility Is No Surprise! Here’s Why



Is it a coincidence that Greece, a country with a 40% smoking rate, has dug itself into such a financial mess? What is fiscal irresponsibility, if not an unwillingness to deal with discomfort today in exchange for future financial health? [Let me explain why an analogy to a country's addiction to smoking is so appropriate when considering the Greeks' attitude to their country's sovereign debt woes.] Words: 650

2. Greece: a Greek Tragedy or a Greek Comedy (of Fiscal Mismanagement)?



If the implications of the current Greek tragedy were not so serious it would have been seen more as a Greek comedy (of fiscal errors). In fact, however, to deploy another metaphor, Greece’s sovereign debt is seen as the proverbial canary in the coal mine – a microcosm of the relentlessly growing sovereign debt that has taken much of Europe by storm and is threatening to spread to the U.S.. Words: 1008

3. Financial Dominoes: First Greece, then Much of Europe and Finally the USA?



For decades, the governments of the western world have been warned that they were getting into way too much debt. For decades, the major banks and the big financial institutions were warned that they were becoming way too leveraged and were taking far too many risks. Well, nobody listened so now we get to watch a global financial nightmare play out in slow motion. Grab some popcorn and get ready. It is going to be quite a show. [Let me explain.] Words: 1075

4. U.S. Military Predictive Software Says Greece WILL Default



A predictive software program called Senturion, developed for the U.S. military and sporting a 85% accuracy rate, has concluded that Greece is going to default. [Let me explain further.] Words: 244

5. Massive Financial Crisis Could Result in a New “United States of Europe”



Are we about to see a huge push for a “United States of Europe”? As the sovereign debt crisis in Europe continues to spiral out of control, suddenly this term is popping up in the New York Times and in major newspapers all over Europe. Is this by accident? Surely not. The truth is that there is an overwhelming consensus among the political and financial elite of Europe that a “United States of Europe” is what would be best for the eurozone. However, they are likely going to need a massive financial crisis in order to reach their goal. [Let me explain.] Words: 1639

6. The U.S. and Greece are Frighteningly Similar! Here’s Why



The inability [of Congress] to reduce spending and tax its citizenry represents a competitive disadvantage for the U.S.. It is the mark of a country that cannot keep its fiscal house in order, does not care about repaying its debts and, [as such, it] may well be heading for collapse. Words: 978

7. Will Greece Default, the Euro Unravel and the U.S. Dollar be Saved?



Greece is going to default and even take the euro, and maybe the EU, with it. There will be 5 investment opportunities should that unfold as expected and one of them will be the U.S. dollar. [Let me explain.] Words: 1187

8. Will the U.S. Dollar or Euro Collapse and Cause Financial Armageddon?



What event could trigger an unstoppable domino affect leading to a financial meltdown? You may think [that such a possibility is extremly unlikely] but daily we move closer to the real possibility that a major fiat currency such as the US Dollar or the Euro could collapse in the blink of an eye. [Let's take a look [...]

9. Sovereign Debt Defaults = Social Unrest + Much Higher Gold and Silver Prices



The magnitude of current private and government debt, coupled with massive unfunded contingent liabilities for promises of future services to their citizens, will prove to be impossible for many nations to fund. Massive inflation in the money supply will become the preferred vehicle to deflect the default monster and will result in vastly devalued currencies and price inflation as a prelude to default. Such action will be a desperate attempt to buy time to stave off the inevitable and will result in social unrest caused by persons whose comfortable lifestyle and elevated standard of living is about to disintegrate before their very eyes. Words: 1525

10. Can the U.S. Expect the ‘Greek Tragedy’ to ‘Play’ Out in Its Own ‘Theater’?



It is appropriate that the fiscal crisis of the West has begun in Greece, the birthplace of Western civilization. Soon it will cross the channel to Britain. The key question, however, is when that crisis will reach the last bastion of Western power, on the other side of the Atlantic. Words: 609

11. Economic Alert: If You’re Not Worried Yet…You Should Be



For the past four years I have been covering the progression of the global economic crisis with an emphasis on the debilitating effects it has had on the American financial system. Only once before have I ever issued an economic alert, and this was at the onset of the very first credit downgrade in U.S. history by S&P. I do not take the word “alert” lightly. [Read on to to understand why I have issued an economic alert once again.] Words: 1904

12. Kunstler: Wake up, Sleepyheads! Things are Heating Up



Europe may soon be choking on that plat du jour of government a la Hollandaise with the side of chopped Greek salad. The whole world, in fact, has got something like a giant hairball stuck in its craw. The hairball is composed of filaments of lies wound over a core of supernatural indebtedness. The lies are promises that the debt will be paid back. Words: 710

13. The Coming Crisis in Europe Will Result in a MAJOR CRISIS in the U.S.! Here’s Why



In this article I lay out precisely why the coming Crisis in Europe will be THE Crisis I’ve been forecasting for the last 24 months, why it will have dire consequences on the U.S. and why the Fed can do absolutely nothing to stop it this time round. Words: 1334 ]]> Munknee RssFeed http://www.gold-speculator.com/munknee/79424-what-will-financial-repercussions-if-greece-defaults-leaves-eurozone.html Stephen Leeb: Precious Metals Investors Need to Hang in There!! http://www.gold-speculator.com/munknee/79423-stephen-leeb-precious-metals-investors-need-hang-there.html Thu, 17 May 2012 05:24:47 GMT If investors step back and look at this from a longer-term perspective, they will realize that politicians feel the only way out of this mess is to print more money. After the money printing will come the inflation. It will be higher inflation than anything we’ve seen in the post-World War II period and it will send gold, silver and all commodities skyrocketing.

So says*Stephen Leeb*in edited excerpts from an interview with King World News as provided by Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!). This paragraph must be included in its entirety in any re-posting to avoid copyright infringement.

Leeb*goes on to say, [you can read the full article here] in part:

You may see a situation where gold is at $1,400, and then two months later it’s at $2,500. That’s just one of many possible scenarios. We don’t know the bottom for sure right now, but one thing is certain, you are going to see new highs in gold.

Investors, just need to hang in there!
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Related Articles:

1. Precious Metals: Don’t Want To Play Anymore?



We suspect that many precious metals investors are saying, “We don’t want to play anymore!” and our reply is, “You mean you want to quit right now? Right at the bottom of this cycle? You must be crazy – and that is crazy with a capital C!” True, this is a very challenging market environment for resource shares, but we know what the ultimate outcome will be: higher share prices. The only question is “when” and our opinion is that we are very close in time (within days or a week or two at most) of being able to say that the lows are behind us. Let me explain. Words: 785

2. The Time to Buy Gold Is When There Is Blood In the Streets and That Time Is NOW!



As contrarian investor Baron Rothschild said, “the time to buy is when there’s blood in the streets.” Here are five reasons we believe this sell-off sets up a buying opportunity for gold. Words: 388

3. Richard Russell: NOW is the Time to Begin Amassing Your Future Fortune – Here’s Why and How



Great fortunes are made at super-bear market lows but you must have the money at the lows. [That is precisely] why gold is so singular and valuable. If you have gold at the bottom of the next bear market, you can exchange it for a collection of great common stocks or funds, and then sit back and relax.

4. Sprott: Current HUI Level Spells O-P-P-O-R-T-U-N-I-T-Y



Before we end the year we will hit new highs in both [gold and silver]. Then the mining stocks [will] react. The big problem has been [to date has been that] there is not this momentum in the prices of bullion, which is keeping people away from the gold stocks. If we can get the price of gold and silver going back up, I’m sure people will come back into the mining stocks.

5. John Embry: PM Stocks One of the Greatest Buying Opportunities of ALL Time!



If we’re not at a bottom [in gold and silver and precious metals stocks], we’re very close to it. The sentiment is dismal and you can see that particularly in the stocks which are almost tragic. I’m shocked quite frankly at the valuations and how low they are. In the fullness of time, this will be seen as one of the great buying opportunities of all-time.






]]> Munknee RssFeed http://www.gold-speculator.com/munknee/79423-stephen-leeb-precious-metals-investors-need-hang-there.html Gold Bouncing from Support in Asian Trade http://www.gold-speculator.com/trader-dan-norcini/79422-gold-bouncing-support-asian-trade.html Thu, 17 May 2012 01:21:24 GMT http://www.traderdannorcini.blogspot.com/
http://www.fortwealth.com/

After what seems like a nearly vertical fall in the gold price over the last 7 or 8 days, gold is finally getting a bit of a reprieve this evening as it enters Asian trade. The interesting thing about this most recent selloff is that reports of physical offtake have indicated good buying of the metal down here at these levels. Thas has been swamped by hedge fund liquidation and some fresh short selling as some in this category are moving onto the short side.

As you can see on the chart, gold fell nearly right to the very bottom of this 8 month long trading range before bouncing higher. It is not unexpected to see this sort of thing as those who instituted some fresh short positions a couple of weeks ago have made a very healthy profit and it never hurts being prudent and taking a bit of money off of the table after these kinds of gains.



We also probably have some bargain hunting and some bottom pickers coming in after a fall of this magnitude. Whether this is just what we traders call a "dead cat bounce" (if you drop a dead cat from a high enough altitude, even it will bounce when it hits the ground) before gold drops through the bottom of this range or whether this is indeed marks the end of this round of liquidation is unclear. I would not be rash enough to venture any guesses at this point as traders remain extremely nervous and very fearful of being caught flatfooted on the wrong side of these damned hedge funds.

I would not feel at all comfortable that the selling is finished until gold were to climb back above the $1600 level but barring any further negative developments out of Europe, it looks like it might want to consolidate a bit here. Again, that is unclear and will require a full trading session in New York tomorrow to get a better feel of things.

Regardless of the current technical washout, the interest rate environment continues to be one of low or negative "Real Yields" and is conducive to holding gold. I suspect a fairly large amount of the gold that is entering the system to be sold is coming from European banks selling off liquid assets in an attempt to raise cash in the attempt to help their pathetic balance sheets. After all, what can they sell that has much of any value at this point besides gold?

The Dollar is still having trouble with the 82 level on the USDX but the week is still not over. A weekly close ABOVE this level would be noteworthy.

]]> Trader Dan Norcini RssFeed http://www.gold-speculator.com/trader-dan-norcini/79422-gold-bouncing-support-asian-trade.html We?re In For a ?Bummer of a Summer? ? Here?s Why http://www.gold-speculator.com/munknee/79421-we-re-bummer-summer-here-s-why.html Wed, 16 May 2012 23:23:20 GMT We are in for another bummer of a summer, with the Dow tumbling over the next*several months to the 12,000-12,200 range….*[Let me explain why and how best to protect your portfolio*and profit from what is unfolding.]* Words: 580


So says Michael Larson, editor of the Florida-based Safe Money Report, one of the country’s more prominent bearish investment newsletters as reported by*Dan Dorfman (www.trimtabs.com) in edited excerpts from his original article.**
Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has edited the article below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.

Dorfman goes on to comment, in part:

Taking issue with the steady barrage of optimistic “things will be okay” comments from European officials, Larson*maintains that*it should be kept in mind that Europe’s underlying debt problems are far from over. Ditto, he says, the fallout spreading throughout the European economy, with double-dip recessions official in Italy, Belgium, Spain, the Netherlands, the Czech Republic and the United Kingdom.

With Europe mired in a spreading recession and Asia slowing, as well, Larson observes that if the U.S. slows further like the rest of the world is doing, earnings and stock prices here are bound to suffer. In fact, he points out, the ill effects are already being pretty powerfully felt. Indicative of this, he says, U.S. stocks are getting hammered…, commodities are imploding, bank stocks are falling world-wide and some European markets are selling at multi-year and even multi-decade lows.
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The general view among most economists is that the next couple of quarters will see U.S. GDP growth on the order of 2% to 3%. Larson believes that is much too optimistic…[His]expectation: “Ugly under 1% growth over the next two quarters as things overseas affect us.”

If he’s right, and that’s a big if, stock prices would surely take a thumping. Larson points out we’re already seeing clear signs of market deterioration, what with a lot of sectors heading down or threatening to break down. Included are energy, transports, semiconductors, many financials, agriculture, heavy industrial miners and gold miners.

How to Protect & Profit

So how can investors protect themselves in the shabby market environment he envisions?
  1. To capitalize on a skidding Euro, he suggests ProShares UltraShort Euro (EUO), a leveraged inverse ETF that he views as a worthwhile hedge, given the massive risks piling up overseas and which is designed to rise 2% for every 1% decline in the value of the Euro against the dollar. Needless to say, if the Euro should rise on any cheerful tidings from Europe, you’re going to lose money. In other words, it’s not for widows and orphans.
  2. For those investors seeking higher income…Larson favors Alerian MLP ETF (AMLP), which owns shares of master limited partnerships, companies that store and transport energy products and pay out above-average dividends. Alerian currently yields 6.1%.
  3. Short Financial ProShares (SEF) – a bet that financial stocks will head lower – is yet another inverse ETF that Larson is pitching. This ETF is designed to rise 2% for every 1% decline in the value of financial stocks.
  4. McCormick & Co. (MKC), a spice and seasonings maker, whose shares recently broke out to an all-time high of $57.13 (up from its 52-week low of $43.36), is one of our bear’s top stock picks. “It’s a steady-Eddie business and the company is firing on all cylinders,” he says.
  5. Larson’s final thought, another integral part of his current strategy, is his strong recommendation that investors “take profits off the table now.”
Or, put another way, watch out for that midsummer market nightmare.

Note: The opinions and views in this column do not necessarily represent those of TrimTabs Investment Research



* http://trimtabs.com/blog/2012/05/14/...ightmare/**(To access the articles please copy the URL and paste it into your browser.)
Editor’s Note: The above article may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.

Related Articles:

1. Pento: Markets Will Fall Significantly This Summer – Here’s Why



Investors are being told that the worsening sovereign debt crisis in Europe will leave the U.S. economy unscathed….[because,] since we don’t make many things to export to Europe, our GDP won’t suffer a significant decline at all…. What [has been] conveniently overlooked, [however'] is the fact that 40% of S&P 500 earnings are derived from foreign economies and the seventeen countries that make up the Eurozone have collapsed into recession. [Let me explain what effect that will have on the performance of the S&P 500 this summer.] Words: 325

2. Charles Nenner: Dow to Peak in 2012 and Then Decline to 5,000!



Charles Nenner has been accurately predicting movements in the liquid markets for more than 25 years, and his most recent cycle analysis predicts that the current stock market rally is going to last through Q2 and then begin a major descent in 2013 – with the Dow eventually reaching 5,000! Read on to learn how Nenner’s unique system works and what he forecasts for commodities, currencies, bonds, interest rates and more. Words: 400

3. We’re at the “Beginning of the End” for the Markets – Here’s Why



We are now at the mercy of oil and the commodity markets. Bernanke’s plan to print our way to prosperity is destined to fail. Ultimately, he is just going to spike inflation and collapse the global economy, resulting in a worse downturn than what we saw in 2008/09. Let me explain. Words: 510

4. Ignore Guru Opinions: 66% Get It WRONG More Than 50% of the Time! Here’s How They Compare



Can experts, whether self-proclaimed or endorsed by others (publications), provide reliable stock market timing guidance? Do some experts clearly show better intuition about overall market direction than others? [NO is the answer to the first question and YES to the second. Let us explain how we came to those conclusions.] Words:360

5. The Bull Market In Equities is NOT Over! Here’s Why



In spite of all the bearishness out there – the S&P 500 falling to 1,000 (David Tice),the market is overbought (John Hussman), its looking like the bear market of 2011 all over again (David Rosenberg), for example – I tend to disagree for 4 fundamental reasons. Let me explain. Words: 595

6. NOW Is the Time to Get Out of the Stock Market! Here’s Why



With the S&P 500 at its highest level since the summer of 2008, investors previously sidelined by reoccurring fears of a double dip recession and nagging worries about a disorderly Greek default may now be tempted to hold their noses and dive into the market where, presumably, they will be swept along to the land of outsized profits by the Dow 13,000 wave. Having said this, it is worth noting that often the best time to sell is when everyone else is buying. Now may be that time. [Let me explain.] Words: 885

7. S&P 500 Should Continue Climbing Until October and Then Decline 15-30%! – Here’s Why



At the end of November 2011 the U.S. behavioral indicator for the U.S. stock market, based on insights on investor psychology, touched the crisis threshold for the fifth time (1971,1979, 1986, 2006) since 1970. If the current case follows the four prior cases, we expect a similar positive return from November 2011 to the end of October 2012 as in the four prior periods followed by a decline somewhere between 15% and 30%. [Let me explain.] Words: 317

8. Marc Faber: We Could Have a Crash Like in 1987 This Fall! Here’s Why



Marc Faber has stated in an interview* on Bloomberg Television that “I think the market will have difficulties to move up strongly unless we have a massive QE3 (something Faber thinks would “definitely occur” if the S&P 500 dropped another 100 to 150 points. If it bounces back to 1,400, he said, the Fed will probably wait to see how the economy develops)….. If the market makes a new high, it will be with very few stocks pushing up and the majority of stocks having already rolled over….If it moves and makes a high above 1,422, the second half of the year could witness a crash, like in 1987.” Words: 708 ]]> Munknee RssFeed http://www.gold-speculator.com/munknee/79421-we-re-bummer-summer-here-s-why.html The $100 Billion Facebook Train Wreck? http://www.gold-speculator.com/wallstreetjournal-business-tv/79420-100-billion-facebook-train-wreck.html Wed, 16 May 2012 23:23:20 GMT Dennis Berman joins Mean Street to discuss which investors are in and which are out as Facebook faces its IPO Friday, and why it spells a gloomy forecast for the social media giant. Photo: Reuters.


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[url]http://online.wsj.com/video/the-100-billion-facebook-train-wreck/72AEF9D3-EC2D-4369-8417-BA88A8F1A0B6.html[/url]
Dennis Berman joins Mean Street to discuss which investors are in and which are out as Facebook faces its IPO Friday, and why it spells a gloomy forecast for the social media giant. Photo: Reuters.



]]> WallStreetJournal - Business TV RssFeed http://www.gold-speculator.com/wallstreetjournal-business-tv/79420-100-billion-facebook-train-wreck.html Seeking the Missing Five Million Workers http://www.gold-speculator.com/wallstreetjournal-business-tv/79419-seeking-missing-five-million-workers.html Wed, 16 May 2012 23:23:20 GMT In the past two years, the over-age-16 population of U.S. has grown by 5.4 million. But the "labor force" hasn't grown at all. David Wessel on The News Hub looks at what's behind the drop and why you should care. Photo: AFP/Getty Images.


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[url]http://online.wsj.com/video/seeking-the-missing-five-million-workers/737E513E-D0A3-4DFB-8C0C-F6C7C0A85733.html[/url]
In the past two years, the over-age-16 population of U.S. has grown by 5.4 million. But the "labor force" hasn't grown at all. David Wessel on The News Hub looks at what's behind the drop and why you should care. Photo: AFP/Getty Images.



]]> WallStreetJournal - Business TV RssFeed http://www.gold-speculator.com/wallstreetjournal-business-tv/79419-seeking-missing-five-million-workers.html <![CDATA[Vint Cerf Discusses Internet's Impact]]> http://www.gold-speculator.com/wallstreetjournal-business-tv/79418-vint-cerf-discusses-internets-impact.html Wed, 16 May 2012 23:23:20 GMT Vint Cerf, known as the father of the Internet, sat down for an interview with WSJ's Vanessa Mock about the impact of the technology. Says Cerf: "I don't think we've created a monster."


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[url]http://online.wsj.com/video/vint-cerf-discusses-internet-impact/65DF16E7-B167-452F-A1CB-B4C554406DE2.html[/url]
Vint Cerf, known as the father of the Internet, sat down for an interview with WSJ's Vanessa Mock about the impact of the technology. Says Cerf: "I don't think we've created a monster."



]]> WallStreetJournal - Business TV RssFeed http://www.gold-speculator.com/wallstreetjournal-business-tv/79418-vint-cerf-discusses-internets-impact.html Gerald Celente - Brian Sussman KFSO - May 15, 2012 http://www.gold-speculator.com/gerald-celente-video-channel/79417-gerald-celente-brian-sussman-kfso-may-15-2012-a.html Wed, 16 May 2012 23:23:20 GMT
Go to http://geraldcelentechannel.blogspot.com for more
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]]> Gerald Celente Video Channel GoldInvestor http://www.gold-speculator.com/gerald-celente-video-channel/79417-gerald-celente-brian-sussman-kfso-may-15-2012-a.html Recovery Via Shared Sacrifice: Lacy Hunt http://www.gold-speculator.com/gold-report/79416-recovery-via-shared-sacrifice-lacy-hunt.html Wed, 16 May 2012 21:22:41 GMT The Gold Report: In January, the Federal Reserve's extension of a near-zero rate interest policy to the end of 2014 stunned a good many investors. Unless the Fed changes its mind again, that will mean six years of artificially low rates. You've indicated that interest rates have nothing to do with the Fed and that they're really governed by the velocity of money and the health of the economy. Would you elaborate on that?

Lacy Hunt: To clarify, the Fed can control the short-term rates, but the long-term rates are in the hands of the marketplace. The Fed's influence there is very minuscule. Some may think the Fed has produced the low interest rates today and a long yield market. I don't think its influence has been that important. It is a reflection of the economy's poor performance.

The U.S. didn't have a Federal Reserve and the country was on the gold standard when it experienced a tremendous debt build-up in the 1860s and 1870s. Brought on by building the railroads and the industries that fed into them, the debt build-up badly damaged the economy. Economic activity languished. The panic year, 1873, launched a long, difficult period of economic adjustment. For 15 years in the late 19th century and the early part of the 20th century, long-term Treasuries were around 2%—without any type of central bank intervention.

Fast-forward to the 1920s and another huge build-up of debt. By then, the Federal Reserve existed. Indeed, Fed policies encouraged and facilitated this surge in debt. The debt bubble burst in the panic year of 1929. The Fed did some things—not as well as people wanted—to try to bring interest rates down. Its efforts certainly were not consistent; there was intermittent tightening during the period. But in 1941, when the U.S. entered World War II, the long-term Treasury yield was at 2% and trending lower. In other words, very low rates occurred in the aftermath of a huge period of over-indebtedness. Thus, there are two examples of extreme over-indebtedness, one with and one without central banks. But in both cases, long-term interest rates fell to very low rates and stayed there for a long time.

TGR: One of the core points you make is that the quality of debt determines the velocity of money. If the debt is productive, the velocity increases. At this time, the velocity of money is moving in the other direction. What's wrong with our debt?

LH: The debt problem is complex. U.S. debt is about 360% of the Gross Domestic Product (GDP), public and private—too much relative to GDP. We have about $55 trillion (T) in debt and only $15T of GDP. The debt-to-GDP ratio is more than 100 points higher than in 1997–1998, yet our standard of living is unchanged. A key problem is that the composition of the debt has deteriorated. A greater proportion now supports daily consumption, either directly by consumer borrowing or indirectly via the Fed. Such loans won't generate future income. The debt is unproductive or even counterproductive, and the more it grows, the more it diminishes our ability to service the debt. As long as we proceed along this course, the velocity of money will continue to decline.

It's a very interesting question you raise. Just within the last couple of years, velocity has fallen below the post-1900 mean of 1.68. In the first quarter, velocity fell to 1.58—a very significant deviation from the mean and about the lowest level in 50 years. The decline in velocity confirms that the quality of the debt is deteriorating.

There is another way to observe the deterioration. We need increases in productive lending to generate increases in output per hour, which in turn is necessary to generate increases in income. Prosperity is measured by income, not GDP. GDP only measures spending, and although we've had some GDP expansion, disposable income per capita has basically been close to zero for most of the last two years. The spending only supports daily consumption; it won't generate the productivity needed to raise our standard of living.

TGR: But isn't productivity being driven by the fact that companies are making money through development of high-tech products that consumers are buying? Aren't the free cash flow and the growing sums of cash these companies have on their balance sheets driving the economy?

LH: Individual firms are making good use of loans. As you suggest, there's investment in the high-tech sector, for instance, and substantial resources are going into developing shale and certain types of new oil products. But these investments amount to no more than $200 billion (B)—with a federal budget deficit at $1.3T and rising. So while some creative and productive things are going on, the bulk of our debt is going to counterproductive uses and we aren't going to be able to service this rising debt. We don't know what the outcome of the Affordable Care Act will be, but the Congressional Budget Office (CBO) says it will cost $200B a year. One of the Medicare Trust Fund trustees claims CBO's calculations are low; that it will cost at least $360B and maybe as much as $540B.

TGR: You've also written about a "bang point" that occurs when credit to government and private borrowers is cut off because the marketplace has no confidence the debts will be repaid.

LH: That's what's happening in some European countries today. In the U.S., during the first six months of the fiscal year that started in October 2011, for every dollar the federal government spent, $0.58 came from tax revenues and $0.42 was borrowed. Some of the weaker European countries, in the southern tier, have the reverse situation. They're trying to borrow 65%, 70%, 75% and an even higher percentage of the euros they spend, and the marketplace has no confidence that they can repay their previous loans. They've managed to put together interim financings to patch the system together, but basically the marketplace is no longer willing to lend and some of these governments are very close to the point at which they'll be forced to fall back on their revenue bases alone.

The U.S. has not reached the bang point, but covering 100% of its expenditures from the revenue base—instead of the 58% it is now—would create very destructive conditions. That's the path we'll take if we continue to let the debt rise relative to GDP and without turning it to productive purposes.

TGR: Does Congress have the will to make the necessary changes?

LH: I'd like to think we have the political will to try to tackle the problems, but I'm fearful we do not. Here's the problem. Federal outlays have been running at 25% of GDP for each of the last three years, which is the highest since 1942–1944. Based on existing laws that govern Social Security and Medicare, at that rate federal outlays will account for 40% of GDP in 25 years.

TGR: That's frightening.

LH: Yes, but I personally don't believe it can happen. We'd have to transfer 15% of our resources from working households to retired households, either through tax increases or indirectly through some other means. I cannot see that happening. Unfortunately, there doesn't seem to be any urgency to deal with the problem. Unless that changes, I'm afraid we'll reach the bang point, the markets will take control and we'll have to make the adjustments in some type of crisis situation. It will be much the same as it is now in some of the European countries, which have to make adjustments in the midst of market crisis.

TGR: How long will it take for the U.S. to get to the bang point?

LH: We really don't know. A lot of economic analysis historically has downplayed the role of debt. I've done an exhaustive search of the literature, and never found a model that indicates when you reach the bang point. A host of parameters can play into the situation, but one of the triggering elements concerns the percentage of the revenue base of the governmental entity that must go to interest expense. As the interest expense rises, it absorbs a bigger and bigger portion of the revenue.

TGR: Is there a typical tipping point?

LH: We haven't been able to identify one. There are some indications. Interest expense right now is about 10% of revenues. If you make the heroic assumption that market interest rates hold through 2030—which they won't—the interest expense would be 20% of federal revenues by the end of the decade and 35% by 2030. Right now, the largest components of the federal budget are Social Security, Medicare, defense and interest. By the end of the decade, interest jumps above defense. And that's under the heroic assumption that these market rates hold.

TGR: It also gets to your point of the makeup of the debt.

LH: Totally counterproductive. It doesn't build one bridge or create one innovative idea. It doesn't move you forward. So we're on a path here that historically has not worked. The sum of the problematic areas that occurred historically seemed to be when the interest expense gets above 50%.

TGR: But that means we have a long way to go.

LH: It may occur sooner than we think. If interest rates in the marketplace were to go up 200 basis points, it would add approximately $350B a year to the federal budget deficit. Of course, you'd have to borrow that, and then borrow more and more in succeeding years. So the interest expense is really a potential time bomb. I don't think a rise in long-term rates is at hand, but it's very problematic as we go forward.

TGR: You also write about a negative risk premium—when the total return of the S&P 500 is less than the return on long-term Treasuries and thus equity investors aren't being rewarded for the risks they take. It seems to contradict the concept that we're marching toward this bang point. Will the negative risk premium continue until we reach the bang point?

LH: First of all, let me explain a bit more about the negative risk premium. We know that over very long periods of time investors in stocks have received a premium over investors in long-term Treasuries. If that didn't hold true over the long run, people wouldn't take the risk. But there have been significant exceptions. Following the build-up of debt in the 1860s and 1870s, we had a 20-year span during which the S&P 500 return was lower than long-term Treasury returns. Then, even though World War II interrupted, another period of negative risk premiums lasted from 1928 to 1948. In both instances, 20 years was a long time to wait for risk to be rewarded. Certainly there were quarters, even years, during those spans when the S&P 500 returns were better than the Treasuries, but when you stand back and you look at the entire period, risk was not rewarded.

We've had another massive build-up of debt over the last 20 years, and since 1991 we've been in another negative risk premium cycle. We've past the 20-year point already, and if we continue along the path toward increased indebtedness, we'll extend the negative risk premium interval this time around. I think it will be very difficult for the normal economic conditions to prevail.

A lot of the pioneering work on the role of debt was done by Irving Fisher. He thought the economy operated on a normal business cycle model, one to two bad years, four to five good years. The one to two got a little testy, but it was over and you went on. That's why he was fooled by the Great Depression. He freely admitted he was fooled. He made some outrageous statements about the health of the economy in 1929, but he did his mea culpa, reexamined what he thought and concluded that the normal business cycle doesn't work in highly over-indebted situations. In those situations, the indebtedness controls nearly all other economic variables—including the risk premium. The normal bounds don't work, just as they did not work after the panics of 1873, 1929, and 1989, when risk was not rewarded.

So by trying to solve this over-indebtedness problem by getting further in debt, the standard of living will not rise and, in the final analysis, the stock market will reflect how well our people are doing. And our people are not doing well. Of course, the bang point is a point of calamitous development, but it would mark the climax of a prolonged period of underperformance and financial risk management. It's not at hand. We have the ability to control it, but we have to have the political will to do so. At present, it doesn't appear to be forthcoming.

TGR: You've indicated that the only way for developed nations to get out from under this debt burden is austerity, not inflation or more Quantitative Easing (QE). With the income of average American citizens stagnant, at best, for a decade already, what would spark the political will to force austerity measures on a beleaguered populace?

LH: No one wants austerity. Neither the politicians nor the public want it. The McKinsey Global Institute did an outstanding study of what happens to highly overleveraged countries that get into crisis situations. It found 32 cases that have fully played out, starting with the 1930s. In 16 cases of the 32—or half—austerity was required. Only eight cases were resolved by higher inflation, but they were all very small, emerging economies. A small country with no major role in world markets can get away with debasing its currency, but a major player cannot do that.

TGR: Exactly how does a country's role in world markets come into play when it comes to devaluing currencies?

LH: A major economy that tries to correct debt problems by dropping the value of its currency will bring on immediate retaliation—and a race to the bottom. In today's world, devaluation is not really an option. This isn't new. Starting in the late 1920s, there had been a huge build-up of debt around the world. Some of the heaviest build-up was in resource countries. We were on the gold standard at the time. The Dutch East Indies devalued because it could no longer service its debt and then Australia shortly thereafter. They gained a momentary advantage, but lost it when competitors in Latin America and elsewhere also were forced to devalue.

By 1931, the British devalued. A lot of the countries that had devalued previously devalued more. The U.S. tried to hang on to the gold standard, but between April 1933 and January 1934, the U.S. devalued by 60%. It had been devastated by a loss of export markets, as everyone else had been devaluing. Like the Dutch East Indies and Australia in the late 1920s, the U.S. temporarily regained some benefit, but lost it when France and the gold bloc countries devalued in 1937 and 1938.

Then, when the U.S. entered World War II, a tremendous surge in exports took place. We were able to sell anything American mines, factories and farms could produce. Its citizens were paid for that work, but with mandatory rationing, they couldn't spend the money they were making. They couldn't buy new cars, washing machines and houses.

TGR: The result was forced savings.

LH: People were willing to stand for the austerity because we were in an endeavor they believed was worthwhile. If they needed 10 pounds of sugar and could only get one, they took it. If they needed 20 gallons of gasoline and they could only get five, they stood for it. So they saved their funds. The saving rate went up to 25% for three consecutive years. We paid off the debt. By the end of World War II, the U.S. was a wealthy nation once again, and it fueled the post-war boom.

TGR: But that history doesn't appear likely to repeat itself.

LH: In the current environment, the European countries that are in trouble don't want austerity. France's budget deficit is deteriorating badly, but it's quite possible that it's going to engage in more deficit spending. It's not as bad as in Italy and Spain, but France already has a massive problem.

TGR: What if the European Central Bank (ECB) decided to devalue the euro? Would it just be the first domino to fall?

LH: Yes. It would start another race to the bottom.

TGR: What would happen to investments?

LH: Investment values would decline. It would be chaos.

TGR: We'd only have bonds in the secondary market at that point.

LH: You wouldn't want to be in debt. And you'd want assets you can control and have complete confidence in—assets such as an income-producing property that you're confident of the income stream or if you have an asset that is perfectly acceptable in exchange.

Europe today has not yet really gone to austerity. The ECB policy objective was to try to stimulate a recovery, boost the revenue base and bring their deficits under control. These bridge financings didn't solve the underlying problem. Instead, their economies deteriorated and the deficits worsened.

TGR: So if there is no willingness to save, will the endgame be either that bang point or QE?

LH: I think it will be the bang point, but it's hard to say.

TGR: If they go with the bang point, forced austerity would reverberate through other countries that export to Europe.

LH: There is a pathway out for the U.S., but it requires very intelligent uses of what we know about the multipliers for government expenditures, what we call the tax expenditures or loopholes, the marginal tax rates and general behavior. The U.S. has too much debt now and will have even more. The government expenditure multiplier is very close to zero; it might even be slightly negative. So the U.S. needs to cut down government spending, but is not going to be able to do so unless there's shared sacrifice by taxpayers. The magnitude of the problem is too great.

The U.S. has options on the tax side. It could raise the marginal tax rates or eliminate loopholes. The econometric work indicates that the multiplier on the marginal tax rates is between -2 and -3, meaning that raising the marginal tax rate by $1 would lower GDP by $3 after about three days. In other words, raising the marginal tax rate would be immediately counterproductive.

It appears that the multiplier on the tax loopholes may be only -0.5, a bet that is not nearly as powerful. The evidence for that is what happened in 1986. Bill Bradley, a Democratic Senator from New Jersey, and Ronald Reagan, a Republican president, worked out a revenue-neutral tax bill that brought marginal tax rates down and eliminated the loopholes. Ten years later, the economy progressed very nicely. So the U.S. could cut government spending and get the shared sacrifice on the tax side from the elimination of loopholes. From my standpoint, I would eliminate them all, let the private sector allocate that capital, and hold the marginal tax rates. The preferable thing would be to lower the marginal tax rates and substitute for them some type of small consumption-based tax.

The great philosopher who had a huge impact on Thomas Jefferson and the other founding fathers was Thomas Hobbes. He wrote a book called Leviathan, in which he said that income measures your contribution to society. Spending measures what you take from society. The U.S.' problem is that it has been overspending and has had insufficient income. So it needs to cut government spending. Social Security and Medicare certainly must be reformed. If that cannot be done, I wouldn't even try on the other proposals—just slide on toward the bang point.

But if we could cut government spending, reform Social Security, have sacrifice on the tax side by eliminating the loopholes, reducing the marginal tax rates a little bit and instituting a consumption-based tax, the economy would begin to grow over time. But this requires a lot of political will and leadership, plus some sort of mechanism to explain it and to get the American public on board. Right now, I can't be optimistic. There are some very smart people who have looked at this and basically most of the programs have these elements in them.

TGR: All of the scenarios we've been talking about are multi-years in the future. What should investors be focusing on now? Aside from physical assets that we can control and be confident about, what are the investment opportunities until we get to the bang point?

LH: For the time being, I think Treasuries will continue to perform strongly, but I think we'll see the long Treasury yields go down to 2.5%, possibly even 2% for a while. As I said, we went to 2% on the long Treasuries in the late 19th century and again in 1941. Japan has experienced less than 2% for many years. As long as the U.S. and European debt levels continue rising, we will see the longer Treasury yields continue to work irregularly lower and be very volatile. It's not for the faint of heart.

TGR: Thanks for your insights.

Lacy H. Hunt is executive vice president of Hoisington Investment Management Company (HIMCO), a Texas-based registered investment adviser specializing in the management of fixed-income portfolios for large institutional clients. The firm has more than $4.5 billion under management, with a client base of corporate and public funds, foundations, endowments, Taft-Hartley funds and insurance companies. An internationally known economist, Hunt joined HIMCO in 1996. His background includes roles as chief U.S. economist for the HSBC Group, one of the world's largest banks, executive vice president and chief economist for Fidelity Bank, vice president for monetary economics at Chase Econometrics Associates, Inc. and senior economist for the Federal Reserve Bank of Dallas.

A native of Texas, Hunt earned a Bachelor of Arts degree from the University of the South, a Master of Business Administration from the Wharton School of the University of Pennsylvania, and a doctorate in economics from Temple University. He has authored two books, A Time to Be Rich and Dynamics of Forecasting: Financial Cycles, Theory and Techniques, and numerous articles in leading magazines, periodicals and scholarly journals. He is an honorary life trustee of Temple University and served on the board from 1987–2010.

For more of Hunt's insights in HIMCO's Quarterly Reviews, click on "Economic Overview" at Hoisington Management's website.

Hunt was a speaker at the May 2-4 Strategic Investment Conference sponsored by Altegris and John Mauldin.

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DISCLOSURE:
From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise. Interviews are edited for clarity.

]]> The Gold Report RssFeed http://www.gold-speculator.com/gold-report/79416-recovery-via-shared-sacrifice-lacy-hunt.html Price is Right for More Action From the Fed http://www.gold-speculator.com/wallstreetjournal-business-tv/79415-price-right-more-action-fed.html Wed, 16 May 2012 21:22:41 GMT Sudeep Reddy and Spencer Jakab hunt for clues in the minutes from the last FOMC meeting to decide whether the Fed will take more action to boost the economy. Photo: Bloomberg.


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Sudeep Reddy and Spencer Jakab hunt for clues in the minutes from the last FOMC meeting to decide whether the Fed will take more action to boost the economy. Photo: Bloomberg.



]]> WallStreetJournal - Business TV RssFeed http://www.gold-speculator.com/wallstreetjournal-business-tv/79415-price-right-more-action-fed.html <![CDATA[Why Advertisers Don't Get Facebook]]> http://www.gold-speculator.com/wallstreetjournal-business-tv/79414-why-advertisers-dont-get-facebook.html Wed, 16 May 2012 21:22:41 GMT Do advertisers have any idea how to use Facebook to their advantage? The answer will determine if the social network sinks or swims in the public market, says Rolfe Winkler on Mean Street. Photo: Reuters.


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Do advertisers have any idea how to use Facebook to their advantage? The answer will determine if the social network sinks or swims in the public market, says Rolfe Winkler on Mean Street. Photo: Reuters.



]]> WallStreetJournal - Business TV RssFeed http://www.gold-speculator.com/wallstreetjournal-business-tv/79414-why-advertisers-dont-get-facebook.html The $100 Billion Facebook Train Wreck http://www.gold-speculator.com/wallstreetjournal-business-tv/79413-100-billion-facebook-train-wreck.html Wed, 16 May 2012 21:22:41 GMT Dennis Berman joins Mean Street to discuss which investors are in and which are out as Facebook faces its IPO Friday, and why it spells a gloomy forecast for the social media giant. Photo: Reuters.


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Dennis Berman joins Mean Street to discuss which investors are in and which are out as Facebook faces its IPO Friday, and why it spells a gloomy forecast for the social media giant. Photo: Reuters.



]]> WallStreetJournal - Business TV RssFeed http://www.gold-speculator.com/wallstreetjournal-business-tv/79413-100-billion-facebook-train-wreck.html Investors Bail on Too-Big-To-Fail http://www.gold-speculator.com/wallstreetjournal-business-tv/79412-investors-bail-too-big-fail.html Wed, 16 May 2012 21:22:41 GMT J.P. Morgan's huge trading loss highlights why investors weary of too-big-to-fail are turning to small banks in droves, says David Reilly on Markets Hub. Photo: AP.


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J.P. Morgan's huge trading loss highlights why investors weary of too-big-to-fail are turning to small banks in droves, says David Reilly on Markets Hub. Photo: AP.



]]> WallStreetJournal - Business TV RssFeed http://www.gold-speculator.com/wallstreetjournal-business-tv/79412-investors-bail-too-big-fail.html Stocks Suffer Fourth-Straight Drop http://www.gold-speculator.com/wallstreetjournal-business-tv/79411-stocks-suffer-fourth-straight-drop.html Wed, 16 May 2012 21:22:41 GMT The Dow Jones Industrial Average fell for a fourth-straight day as confusion over Greece's political future trumped firm U.S. economic data. Chris Dieterich has details on The News Hub. Photo: Reuters.


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The Dow Jones Industrial Average fell for a fourth-straight day as confusion over Greece's political future trumped firm U.S. economic data. Chris Dieterich has details on The News Hub. Photo: Reuters.



]]> WallStreetJournal - Business TV RssFeed http://www.gold-speculator.com/wallstreetjournal-business-tv/79411-stocks-suffer-fourth-straight-drop.html Seeking the Missing Five Million Workers http://www.gold-speculator.com/wallstreetjournal-business-tv/79410-seeking-missing-five-million-workers.html Wed, 16 May 2012 21:22:41 GMT In the past two years, the over-age-16 population of U.S. has grown by 5.4 million. But the "labor force" hasn't grown at all. David Wessel on The News Hub looks at what's behind the drop and why you should care. Photo: AFP/Getty Images.


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In the past two years, the over-age-16 population of U.S. has grown by 5.4 million. But the "labor force" hasn't grown at all. David Wessel on The News Hub looks at what's behind the drop and why you should care. Photo: AFP/Getty Images.



]]> WallStreetJournal - Business TV RssFeed http://www.gold-speculator.com/wallstreetjournal-business-tv/79410-seeking-missing-five-million-workers.html Stroke Victims Move Robot Arm With Thoughts http://www.gold-speculator.com/wallstreetjournal-business-tv/79409-stroke-victims-move-robot-arm-thoughts.html Wed, 16 May 2012 21:22:41 GMT Two patients, completely paralyzed by stroke, were able to use a thought-controlled robotic arm to reach and grasp three-dimensional objects. Gautam Naik has details on The News Hub. Photo: braingate2.org


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Two patients, completely paralyzed by stroke, were able to use a thought-controlled robotic arm to reach and grasp three-dimensional objects. Gautam Naik has details on The News Hub. Photo: braingate2.org



]]> WallStreetJournal - Business TV RssFeed http://www.gold-speculator.com/wallstreetjournal-business-tv/79409-stroke-victims-move-robot-arm-thoughts.html Lacy Hunt: Curing Debt with Debt – Bad Things Will Happen http://www.gold-speculator.com/casey-research/79408-lacy-hunt-curing-debt-debt-bad-things-will-happen.html Wed, 16 May 2012 21:22:41 GMT Synopsis:
A highly successful bond investor offers a simple, four-point plan for saving the economy from the "bang point."





Dear Readers,

Here is the next installment of the video conversations we recorded at our recent Recovery Reality Check Summit in Weston, Florida. In this interview, CET Editor Alex Daley converses with economist Lacy Hunt regarding the problems with the US economy and what should be done about them. Hunt is extraordinarily clear and makes a compelling case. I'd call for more huge spending cuts and no tax increases, rather than his balance of the two – but neither of us will get our wish anytime soon, so, as Hunt says: "Bad things will happen."

This conversation is not, however, just an academic observation. There are clear investment implications, such as our team presents in The Casey Report. This is a call to action.

Please note: due to the length of this interview, we are presenting it in two parts, with the first installment this week, and the second next week.

Thanks for watching and reading.

Sincerely,

Louis James


Senior Metals Investment Strategist
Casey Research




[Lacy Hunt gave a controversial presentation at our recent Summit, making a case for investing in government bonds. You can hear it, along with presentations from Doug Casey, former Director of the US Office of Management and Budget David Stockman, and 28 other financial experts, on the Summit Audio Collection.]

Interviewed by Alex Daley, Editor, Casey Extraordinary Technology

Alex Daley: Hello, I'm Alex Daley, and welcome to this edition of Conversations with Casey. Today we have with us Lacy Hunt, executive vice president of Hoisington Asset Management, one of the nation's top bond firms.

Lacy Hunt: Alex, great to be with you.

Alex: So, Lacy, what do you see as the major roadblocks to recovery in America?

Lacy: The main problem is that the country is excessively indebted. We have got too much debt – public and private – relative to GDP, and an increasing portion of this debt is unproductive or even counterproductive, which means that we are not going to be able to generate income in the future to service the debt.

It's already affecting us quite dramatically. In the last fifteen years, debt-to-GDP ratio has risen from roughly 250-260% to a hundred points higher, 360 today, and our standard of living is no higher. By "standard of living" I mean the median household income. It's really a tragic situation. We've taken on the debt, it's bought some gains in GDP, but it has not improved the welfare of the majority of our people.

Alex: Hasn't the United States been here before? Haven't we seen periods where we have had excessive government debt, say in the 1800s or the early part of the 20th century, and we've managed to climb out of that quite successfully and come out ahead?

Lacy: Yes, this is really the fourth episode of extreme indebtedness. Now to my way of thinking, I am looking at public and private debt, so when I have a debt-to-GDP ratio, I am talking about $55 trillion of debt. Part of that's in the government, part's in the private sector. This is the fourth episode. They have occurred at very long, irregular intervals. That's one of the difficulties, that the people weren't alive at the time of the prior ones.

The first occurred in the 1820s and the 1830s, when we were building the canals, the turnpikes, steamship lines. Initially, there were some good uses there, but then it was overdone and then credit was used to finance living beyond our means. The panic was 1838. The bubble burst, speculative prices collapsed in real estate, and a whole host of other things. The economy experienced a very difficult time all the way to the American Civil War, but we eventually saved, paid down the debt, and were able to recover.

The next major episode was in the 1860s, which was the building of the railroads. Initially, good purpose, we built what was known as the central route. Then we built northern and southern routes, and a whole host of feeder lines. Real-estate speculation occurred… other types of assets, stock market speculation, lavish consumption, living beyond our means. All of the railroads failed except one, and it was the one that was not financed by the government. Government involvement was very great. In other words, that government created the incentives, but the private sector bet on the incentives, was one of the characteristics.

Alex: So you're saying that in the previous two debt bubbles that we talked about, what we saw was effectively government-manipulated incentives which drove overinvestment in a particular area?

Lacy: That's correct, and overconsumption, and overspeculation. Charles Kindleberger, in his great book Manias, Panics, and Crashes, called it "overtrading." In other words, people do things beyond their fundamentals, and for a time it is very enjoyable. Incomes are rising, prices are rising, people are being employed, but the process can go too far; and then Kindleberger said that you eventually move into what is called "discredit." Discredit is when a certain discerning minority starts pulling their money out. And then discredit leads to revulsion, when the general population realizes that there are a lot of core problems and they try to pull out, and then you have your crash.

The crash years were 1838, then 1873 – then the 1920s. Here again, the incentive for the overspeculation was really the excessive liquidity of the Federal Reserve. The Federal Reserve did a very bad job. Now they were newly established at that time, had just come into existence in 1913. Interestingly, there were some Federal Reserve officials that were aware that the problem was out of control, but they were drowned out, because everybody was having too much of a good time, and so then we had a very difficult time period. And basically, the US economy didn't recover until we entered World War II.

But the austerity of World War II and the inability to spend your paycheck, which was mainly driven by gains in exports to our allies who were in war-torn situations, pushed the saving rate up to 25%. We repaid the debt, and this laid the foundation for the post-World War II boom. So the 1920s was the third episode, and the fourth episode was the last 20 years.

Again, the incentives came from the government sector, mainly the Federal Reserve, but the federal government played its hand through two government-sponsored corporations – Fanny Mae and Freddy Mac – that allowed the bundling and created the façade that the mortgage was secure regardless of how poor the fundamental characteristics of any individual loan were. Of course, that was a false notion, and so we have now had another very difficult time period and we are certainly not getting a normal recovery. The standard of living is continuing to fall, in spite of gains in GDP. We have a much more dramatic monetary and fiscal response, but therein lies the problem. We are not achieving a rise in the saving rate, the austerity that's needed.

Alex: Excuse me. You keep going back to the rise in the savings rate. I thought that, and I think the common wisdom is that World War II helped spawn recovery of the economy because of the increase in government spending. The government was out stimulating the economy, building troop transports and tanks and shipping people across the Atlantic Ocean. Wasn't that the cause of the recovery?

Lacy: There have been very substantial econometric studies by first-rate scholars: no. The thing that drove the expansion was really the exports. Robert Barro at Harvard University calculated the multipliers year by year. The largest increase in government spending ever was 1942, and government spending accounted for the largest share of GDP and the largest share of the gain. But when you look at the movements using very precise statistical measuring devices, the multiplier is only 0.6 in 1942, and it falls to 0.4 in 1943. And if you look at the longer time period, using all of the quarterly data up to recent times, Barro has found that the government expenditure multiplier is 0.01, but it has a negative sign in front of it.

When Barro's findings were established, an outstanding European econometrician by the name of Roberto Perotti, who at the time was on leave at the European Central Bank, was funded to do a study. This allowed him to calculate the government multipliers – not only for the United States, in order to determine whether Barro's findings were correct or not – but for five other countries: the UK, Germany, Australia, Canada, and Japan. And what he learned was that the government-expenditure multiplier in all six cases was very close to zero. Not negative, as Barro found – slightly positive, but clearly there was no benefit from it.

And so, here's the rub: if you are overindebted, and you try to cure the indebtedness problem by taking on more debt, you buy some transitory gains, which then makes the economy weaker in due course.

Alex: That's a lot like a family taking on excess debt. If you have ten thousand dollars in credit-card debt, and you decide to solve that by paying those bills with another five thousand in credit-card debt, you can live pretty well in the short term.

Lacy: In the short term. That is exactly right, said much better than I said.

Alex: The historical corollaries here really strike me amazingly. You keep going back to the savings rate and the increase there, and so really it was about America was exporting to the world to help supply the war effort, to help supply the rebuilding efforts around the world, yet we couldn't spend our own money, which sort of –

Lacy: Because of mandatory rationing.

Alex: Yes, it was almost enforced household austerity...

Lacy: That's correct, and our people understood it; and they were glad to do it. They supported the cause. And so when you got your paycheck from your export-driven gains, what people did is they either bought savings bonds or other types of liquid assets or paid down debt and so by, when World War II ended, a lot of the Keynesian economists thought we would go back into a slump. But they didn't understand that the cause for the problem in 1929 was excessive indebtedness, and we'd paid the debt down, so we had a very substantial recovery.

The problem for us night now is that we are not restoring saving rates. This is exactly what Japan has done in the last – since 1989. Their saving rate was 25%. It is now zero. They are trying to continue to live beyond their means. They are not willing to correct the problem, and so if we try to cure the indebtedness with more debt, we buy a little bit of happiness for a short-term period, and then we add to the problems down the road. Bad things will happen.

Alex: Interesting. I think Japan has a lot of lessons for the American government to take away, but where are we today relative to where we were in those other periods of time? How bad is our debt level, relative to, say, the 1930s or the 1860s?

Lacy: We are much higher. I mean, the past high-water mark – we are more than sixty points higher. And if you use the reference point of 1928, which was when the debt buildup was essentially complete, we are more than 100 percentage points higher. We are very indebted.

We are not as indebted today as Japan is. But take gross government debt – there is an alternative series privately held, but I think the gross is more important now – plus private debt. Then get the projections from the IMF – which will not be entirely correct, but they are impartial (they are trying to do a good job) – which have gross government debt rising sharply this year and next year. If you assume that private debt to GDP is stable, which is an optimistic assumption to say the least, the total debt levels rise in 2012 and further in 2013.

Alex: So we're twice as bad off as we were in terms of leverage in the economy as we were in the great crash that brought on the Great Depression.

Lacy: That's correct.

Alex: And we're still increasing that debt at a very rapid rate.

Lacy: That's correct.

Alex: So something has to give.

Lacy: Which suggests that the potential of another panic year is out there. In other words, yes, the 2008 panic year is behind us, but there may be another panic year ahead of us.

Alex: So we have all this potential built up in the United States economy, yet it seems all the attention today is focused on Europe. Why is that?

Lacy: Well, I think that the situation in Europe is even worse. I mean, we have about $55 trillion in debt and we have $15 trillion of GDP or a debt ratio of about 360. In the 17 countries that are in the euro, they have about $68 trillion of dollar-equivalent debt and only $14 trillion of GDP, so Europe is even more heavily indebted. Germany's in good shape, but most of the others are not. Spain, Portugal, Italy, the debt problems there are escalating much more than people are willing to admit, and even in France. And you have an ironic situation – it looks like after the French election, France is going to try more debt to cure its problem. That really won't work. So Europe is on a very unstable course, in my opinion.

Alex: Now, all the governments are taking on more debt, because they are trying to boost liquidity in their economies. Doesn't increased liquidity increase investments, and doesn't increased investment increase productivity and ultimately help us get out of this situation?

Lacy: Unfortunately, no. When the Fed expands its balance sheet or the European Central Bank expands their balance sheet, they inject liquidity into the system, and over the short run it will boost stock prices, it will boost commodity prices.

If you think of, say, a fundamental demand and supply curve – and one of the short-term influences of demand is liquidity – so if the Fed comes in and pumps liquidity into the system, they'll shift the demand curve outward. But once they inject the liquidity into the system, they have no control over it. And what happened in QE2 and also in the stealth easing since December is that more of the liquidity went into sensitive commodities, particularly gasoline. Well, gasoline is important to cost of living.

When the Fed began quantitative easing 2, in 2010, you had a situation where wages were rising two percent and prices were rising one. So at the end of the month, your modest and moderate income households were a little bit better off. The Fed expanded their balance sheet. Commodity prices shot up, and the inflation rate went up to four, but wages stayed at two. So what happened to real income? Real income declined, and the economy fell back.

When the Fed began the stealth easing, which was an expansion of the balance sheet to aid the European Central Bank, wages were still rising at two and inflation was rising at two. It had come back off, because QE2 had ended. Then we saw speculation in commodities. The inflation rate went up to three but wages stayed at two. So in the first quarter, we had a decline in real per-capita disposable income. We had a small gain in GDP, but the standard of living did not improve.

Alex: So the majority of Americans are becoming worse and worse off, progressively, as a result of these policies. These policies aren't necessarily getting us out of these problems, they are not increasing our productive economy. They are just sort of misaligning investments again. So what is the theory, why do Bernanke and the president continue to go after these? It didn't work in Japan, yet we're doing it here in the US, and they're doing it in Europe. What's the theory behind this, and why do they believe it will still work?

Lacy: Well, I'm afraid the theory is very flawed. I mean, the classical economists were of the view that what creates prosperity is the hard work, creativity, and ingenuity of our people, and there has been a prevalent view in the US and Europe for a long time that you can create prosperity through financial transactions. And I am afraid that that's simply not correct. We have to do it the old-fashioned way, and if we use our borrowing capacity and channel it into more and more unproductive uses, then we are not going to get gains in output per hour, which are essential to rising real wages.

Rising productivity, rising real wages are the key to an increasing standard of living. These types of policies, like the Federal Reserve's quantitative-easing operations, they do benefit some people. The stock market has recovered. There have been increases in wealth for some; but unfortunately, these types of policies have exacerbated what economists call the income or wealth divide. The majority of our people, their main resource is what they earn from their daily labor, and that's not generating a return, so we're skewing the distribution of income between those that are extremely well off and the majority of our people. The basic policies are, in my opinion, very hurtful, and counterproductive.

Alex: So President Obama went out in election mode and said he was all for a transfer of wealth between classes. But it seems that his policies have actually been transferring the wealth from the average individual to the wealthiest Americans.

Lacy: He has.

Alex: That's an ironic conclusion, that he really didn't specify what side.

Lacy: It is an ironic conclusion. He champions the little guy, but the little guy is considerably worse off. His rhetoric, of course, is that he's out to be their protector, but the net result – the decline in real disposable per capita income speaks for itself.

Alex: Now it's easy for us to pick on Obama, because we are feeling the pinch of these problems today. But this is not a uniquely Democrat or Republican, nor an Obama-specific problem.

Lacy: And I don't want to make it sound like that either, because one of the things that concerns me is that the simple solutions proposed by the Democrats and the Republicans are not going to solve the problem. It's going to require a great deal of shared sacrifice, and the Democrats are going to have to be willing to give, and the Republicans are going to have to be willing to give.

And by the way, I aggravate them both when I say what I am about to say: We are going to have to reform Social Security and Medicare.

We made promises that we cannot keep. If we can't do that, then we're not going to be able to get our house in order, because federal outlays without changes there – which are now 25% of GDP – are going to jump to 40% in just 25 years, which would mean we would have to transfer 15% of our GDP from our working households to our retired households. Well, that's not going to happen. Or we are going to have to borrow the money – and we can't borrow the money. So the process is going to come to an end. The debt levels are so high and the magnitude of the problem is so great that there are also going to have to be tax increases.

Now, here we have two options. There is a very harmful type of tax increase, and then there is a considerably less harmful type of tax increase.

On the tax side, we have marginal tax rates, and then we have what are called tax expenditures or "loopholes." Now, when you raise the marginal tax rates, you really hurt the economy. In fact, the studies show that if you raise the marginal tax rates by a dollar, you lower GDP between two and three dollars. You create a downward spiral. But we need shared sacrifice. In other words, we can't do it all on the spending side – the problem is too great. But what we could do is eliminate the loopholes.

My feeling is that the multiplier on the loopholes is only about -0.5, and my main evidence for that is what happened in 1986. We had a revenue-neutral tax bill, result of the ingenuity of a Republican president and a Democratic senator from New Jersey, Bill Bradley. And what they did did not increase the deficit; they lowered the marginal tax rates, and they eliminated loopholes. And 10 years later the economy accelerated substantially. So what my solution would be is to reform Social Security and Medicare. If we can't do that, we might as well just trot along down the road until disaster hits.

So that we can move forward, there has to be shared sacrifice. You try to hold the marginal tax rates where they are and eliminate the loopholes. You know, we have about 3,300-3,400 loopholes and they benefit individual groups. They're powerful in Washington. They protect themselves, but they are not benefitting the overall economy. And we are going to have to do one more thing – and I wish I did not have to say this, but I'm just trying to be realistic when I look at it. We are going to have to have some degree of a consumption-based tax, I would say probably only 4% or 5%, but that is preferable to raising the marginal tax rates.

Thomas Jefferson and the other founders of our republic were very heavily influenced by a man by the name of Thomas Hobbes, a great 17th-century thinker. He wrote a book called Leviathan, and he made a very valid point. He said that income measures what you contribute to society, and spending measures what you take from society. So your taxes, really – you don't want to tax what people are contributing, you want to tax what they're taking. So we're going to have to make wholesale changes, and it's going to require shared sacrifice on a lot of people's part, and it's going to require a bending of the simple but incorrect assumptions on both the Democrat and the Republican sides.

We're going to have to reform Social Security and Medicare. We're going to have to eliminate loopholes – which would be a shared sacrifice for the taxpayer – hold the marginal tax rates, and have some modest consumption-based tax. Other than that we can't solve the problem. Now, what I've just described is a very tall order, and it may well be that we don't have the political will.

Alex: I think a lot of Americans would agree that it seems neither party is going to step up to the plate and really talk about this…

Lacy: In that case what we do is we move along the road until we hit what Ken Rogoff and Carmen Reinhart called the "bang point." I don't think that that's immediately at hand, but the bang point occurs at the point in time in which governments are no longer able to borrow funds. In other words, the marketplace concludes that the current level of debt cannot be repaid, so they're not going to lend them any more. Bang points are very disruptive, socially disruptive. We're seeing that in Europe. In the first six months in the current fiscal year, our federal government had 58 cents of tax revenues and 42 cents of borrowing. Well, think what would be the consequence if the federal government had to fall back to its revenue base.

Alex: That means a 42% drop in federal spending.

Lacy: That's right.

Alex: Aren't we talking there about massive unemployment, a large number of people losing their jobs, and big federal government cuts in benefits?

Lacy: Absolutely. And what has happened in Greece, what's happening in Spain, Italy? There's social unrest. So the real risk here is that because the magnitude of the problem is so great – and increasing – that we move along toward the bang point. ]]> Casey Research RssFeed http://www.gold-speculator.com/casey-research/79408-lacy-hunt-curing-debt-debt-bad-things-will-happen.html Germany Faces Political Isolation http://www.gold-speculator.com/europaccapital/79407-germany-faces-political-isolation.html Wed, 16 May 2012 21:16:06 GMT By:
John Browne


Tuesday, May 15, 2012


One month ago it appeared that Germany held the whip hand in its titanic struggle against those seeking to cure all economic ills with the snake oil of currency debasement. Now, it appears that the ground beneath its feet is being swept away in a flood of popular unrest and political exploitation. The recent elections in Europe, which highlight both the strong grass roots revolt against Germanic demands in Greece and France show that the cause of sound money and fiscal prudence to be a lonely and difficult endeavor.

The political isolation will likely weigh on the Merkel administration to abandon their monetary obstructionism. Unfortunately, Merkel has suffered recent election losses at home that seriously undermines her grip on power (see last week's column). Having suffered the chaotic, and socially destructive consequences of a collapsed currency in the early 1920's, the German people are firm believers in hard, effective work and sound money. Despite having one of the strongest currencies, Germany had been the world's leading exporter, until only recently having been overtaken by China. But this preference does not appear to be shared by the nations in which she is bound by monetary union.

Germany accepted the formation of the eurozone on the condition that the euro would remain a sound currency. To her credit, France has largely honored her pledge to support this aim. However, the recent election of Francois Hollande as France's President has placed continued French support in question creating severe political problems for the German government. To make matters worse, the recent elections in Greece threaten to dissolve the budgetary demands that Germany imposed on Greece in exchange for bailout funds. These agreements took months to negotiate and now may not be worth the paper upon which they are written.

Germany's belief in sound money mandates that wasteful government spending must be reduced. Furthermore, the Germans believe that, despite recession, it is better to endure economic and social pain now to achieve real growth, sound money and social stability over the long-term. The Anglo-Americans believe the contrary, that austerity will create unacceptable social unrest and that governments should increase spending even if they have to borrow massively, recklessly expand the money supply, risking high inflation to do so. But as the teeth of these policies inflict short term pain, as they are designed to do, rank and file voters revolt.

In Greece, the right wing parties of LAOS, Golden Dawn and the Conservatives lost heavily, with their share of the vote shrinking by more than half in some cases. Even the Socialists lost heavily as votes flowed leftwards to the Democratic Left, SYRIZA, led by Mr. Tsipras, and to the Communists. As no party seems able to gather a majority coalition, most likely there will be further elections in June, when it is expected that the left will consolidate and increase its gains. All three of these left leaning parties have declared austerity to be dead on arrival.

Most Eurozone banks and governments hold Greek government paper. If the Greeks default, the Eurozone, the EU and possibly some major U.S. banks will be put at risk. In addition, if other Club-Med countries see this happen they may be tempted to join the ranks of Greece and Iceland as preferring default to foreign-imposed austerity.

If Italy or France were persuaded to default, the Germans would have to consider leaving the Eurozone. The euro would be in danger of collapse and with it possibly the EU superstate, reverting to its originally declared form of a free trade area. The collapse of the EU, now the world's largest economy with a GDP of some $17.4 trillion and the euro as the second currency, would be potentially devastating to the world economy and to the international fiat currency system.

Doubtless, massive diplomatic pressure is now being put on the German government to ignore its peoples' wishes for a sound currency and to join the Anglo-American led Keynesian club of monetary debasers. It's hard to imagine if the German's longstanding aversion to money printing can be overcome in order to maintain the status quo.

Should Germany succumb, the world probably will experience a short-term boom before sliding into a long and severe period of depression, hyperinflation and ultimately stagflation. From my perspective, this could lead to a renewed global polarization with some countries drifting toward Communism while others drift towards the stability of a new international gold standard.

John Browne is a Senior Economic Consultant to Euro Pacific Capital. Opinions expressed are those of the writer, and may or may not reflect those held by Euro Pacific Capital, or its CEO, Peter Schiff.

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]]> EuroPacCapital RssFeed http://www.gold-speculator.com/europaccapital/79407-germany-faces-political-isolation.html Debt crisis: Greek euro exit looms closer as banks crumble http://www.gold-speculator.com/ambrose-evans-pritchard/79406-debt-crisis-greek-euro-exit-looms-closer-banks-crumble.html Wed, 16 May 2012 21:16:06 GMT Image: http://www.gold-speculator.com/attachments/ambrose-evans-pritchard/6395d1262800941-gilts-sell-off-britain-joins-italy-debt-house-telegraph.png Image: http://www.gold-speculator.com/attachments/ambrose-evans-pritchard/6396d1262801074-gilts-sell-off-britain-joins-italy-debt-house-comm_ambroseevensp_1201525h.jpg May 16, 2012 10:50 AM - A tsunami of capital flight from Greece threatens to overwhelm the authorities, forcing the country out of the euro before fresh elections in June.Image: http://telegraph.feedsportal.com/c/32726/f/568320/s/1f6c7056/mf.gif Read the full article at the Telegraph... (http://telegraph.feedsportal.com/c/32726/f/568320/s/1f6c7056/l/0L0Stelegraph0O0Cfinance0Cfinancialcrisis0C9270A8840CDebt0Ecrisis0EGreek0Eeuro0Eexit0Elooms0Ecloser0Eas0Ebanks0Ecrumble0Bhtml/story01.htm)



May 16, 2012 10:50 AM - A tsunami of capital flight from Greece threatens to overwhelm the authorities, forcing the country out of the euro before fresh elections in June.

Read the full article at the Telegraph... ]]> Ambrose Evans-Pritchard RssFeed http://www.gold-speculator.com/ambrose-evans-pritchard/79406-debt-crisis-greek-euro-exit-looms-closer-banks-crumble.html British Pound Sterling Losses “Safe-Haven” Status http://www.gold-speculator.com/daily-reckoning/79405-british-pound-sterling-losses-safe-haven-status.html Wed, 16 May 2012 21:16:06 GMT May 16, 2012 07:28 AM - Good day. Another busy day on the desk yesterday, as the increased volatility in the currency markets had the phones ringing. Many of the clients calling the desk were worried about the recent drop in the currencies and metals. Some want to bail out, while others are seeing the fall in prices as a good buying opportunity.

We continue to remind callers that diversification is the key to long-term investing success, and the best strategy is to make an investment plan and stick with it. But before I get in trouble with the lawyers, I better get back to the purpose of this letter, which is to give readers a recap of what is going on in the currency markets.

The Greek crisis jumped back onto all of the trading screens last night after the Greeks finally admitted they couldn’t form a coalition government, and planned another election in June. The problem with these new elections is that there is a high risk that leftists opposed to the terms of an EU bailout will sweep to victory in this next election and send the eurozone into a deeper crisis.

Both of the parties who won the largest percentage of the last vote want to remain in the euro (EUR), but promised to “renegotiate” the terms of the bailout agreement. The second round of elections could shift the results further left, making the withdrawal of Greece from the euro a higher probability.

In addition to the Greek crisis, yields on both Spanish and Italian bonds rose yesterday as investors sold and sought safer havens. Moody’s Investors Service downgraded 26 Italian bank ratings, citing Italy’s recession and increasing bad debt. It also warned that Spanish banks face additional challenges.

And there is probably more bad news to come from the rating agency, as a Moody’s official said the rating agency is postponing possible downgrades on more than 100 banks worldwide as it assesses the fallout from JPMorgan Chase’s trading losses.

None of this was good for the euro, and the single currency unit approached the 12-month low of 1.2624, which it reached on Jan. 13. Bad news for the euro corresponded to an up day for the U.S. dollar, which is seen as the only “safe haven” in the most-recent crisis. The U.K. economy fell into a second recession, while Europe has avoided the double dip, according to official numbers released yesterday.

The pound sterling (GBP) was seen as a safe haven from the euro crisis, but the pound weakened the most in a month versus the U.S. dollar after the BOE said the U.K. economic growth was likely to remain “subdued” in the near term.

Central bank Governor Mervyn King admitted the U.K. faced threats from the euro crisis as he released the quarterly report on inflation. “Concerns about the possibility of a disorderly resolution” in the euro area have “adversely influenced asset prices, bank-funding costs and confidence,” the BOE said in the report. “The MPC [Monetary Policy Committee] judges it likely that the possibility of such extreme outcomes crystallizing will continue to weigh on U.K. activity for some time, even if these outcomes do not actually occur.”

Shifting to the U.S., markets will be eagerly awaiting the release of the minutes from the last FOMC meeting, scheduled to be released early this afternoon. Chairman Bernanke said after the most-recent meeting that he is prepared to “do more” to boost economic recovery, which the markets took to mean another round of quantitative easing.

Investors will be analyzing the minutes of the last meeting to try and get a sense of whether or not QE3 is in our future. If there is any indication that another round of easing is in the offering, the equity markets will run higher and the dollar will get sold.

But before we get the minutes this afternoon, we will also get a boatload of other data releases here in the U.S. Housing starts are expected at 685,000, a slight increase from last month’s 654,000, and the month-over-month increase is expected to be a much-better 4.7% increase, compared with last month’s dismal 5.8% fall.

We will also get a report on building permits, which is a more “forward looking” report. Permits are expected to have fallen in April, down 4.5% from March levels. We will also see industrial production and capacity utilization, both of which are expected to show a slight increase during April.

Yesterday was chock-full of data with the release of the CPI and retail sales data. The inflation data showed consumer prices here in the U.S. rose at an annual rate of 2.3% in April, just as a majority of economists had predicted. Readers know neither Chuck nor I put much faith in this “official measure” of prices, and would rather look at John William’s ShadowStats, which pegs the price increases to a more-realistic 10%.

The retail sales numbers weren’t as encouraging, as sales slowed to a 0.1% increase during April, down from a 0.8% gain in March. Other data showed the New York state manufacturing activity improved, mostly due to falling energy prices, and business inventories were up a bit, at a 0.3% increase.

One of the most-important pieces of data released yesterday didn’t get any press in the mainstream media (no surprise there). Data showed the total net TIC flows dropped $49.9 billion in March, but the newsies chose to focus on China’s increase in its holdings of U.S. Treasuries in March. Our friends over at The 5 Min. Forecast had some interesting things to say about the increase:

“Yes, China beefed up its holdings of U.S. Treasuries in March, according to figures out this morning from the Treasury Department. But if you widen the scope and go back six years, a couple of interesting things happen. First, the increase in March was so small as to barely show up on the chart…

“And second… China’s holdings peaked last July. Coincidentally, that was the last month before Uncle Sam lost its AAA rating. The numbers declined markedly through the end of 2011, and stabilized in the first three months of 2012. This is especially interesting when you consider how Chinese imports of gold grew at the same time Chinese purchases of Treasuries were shrinking.”

They point out that China is slowly accumulating gold, but you wouldn’t know that by the recent price movements. The shiny metal dropped again yesterday, to a new low for 2012, at $1,526.97. It has bounced back up from its lows, but is still trading in the $1,540 range.

I pointed out my thoughts that gold is an excellent place for investors seeking a safe haven, but the recent trading patterns show that most investors feel it is more of a “risk” asset. The correlation between gold and the dollar has been moving closer to –1, which would indicate a perfectly negative correlation (a negative correlation indicates gold moves down as the dollar moves higher). The 30-week correlation coefficient between the greenback and bullion is now at -0.66, compared with -0.24 in September.

But some of the biggest investors feel gold will rebound from its current levels. Bloomberg reports that the median estimate of 11 analysts who track gold indicates the price will average $1,740 in 2012. Goldman Sachs’ commodity research team believes the Fed will start a third round of QE in June, which will push the value of gold higher.

Billionaire George Soros raised his stake in gold, according to a filing yesterday reflecting first-quarter holdings. Central banks are buying bullion at the fastest pace in five decades, adding 439.7 tons in 2011, and they will probably purchase a similar amount this year, according to the World Gold Council. Sounds like a good opportunity to increase metals holdings at good prices!

Chuck is working out in Las Vegas this week, giving a couple of talks to packed rooms as usual. I miss attending these shows with Chuck, who is treated a lot like a rock star at them. Fans constantly drop by the booth to shake his hand and pick his brain on the markets. He sent me the following reflections from the floor of the Las Vegas MoneyShow:

“Most people here at the Las Vegas MoneyShow believe, as I do, that the back side of the storm is about to hit the U.S. But then again, 250 of them were Pfennig readers in this humongous room I was in yesterday!

“I said something to the people there when talking about the Pfennig, and it hit me like a brick! I’ve been writing the Pfennig in one shape or form for 20 years now! WOW! Who would have thought that those handwritten notes to salesmen each morning would turn into this 20 years later!

“Even when I was ‘retired,’ after Mercantile performed ethnic cleansing on Mark Twain employees, I wrote the Pfennig from home. Back then, Alex was only 3, and used to sit on my lap and pound away on the keyboard so that portions of the Pfennig looked like this: : )*%PLKE#&^)*!

“Alex is almost 17 now — amazing how time flies, eh? But the point here is that longtime readers that go back to Mark Twain Bank days have been with me through a lot. I’m thankful for your loyalty.”

Chris again. Yes, I remember back 20 years ago, when I would find a handwritten note from Chuck on my desk when I arrived each morning. Back then, we didn’t have the Internet, so he would jot down his thoughts and leave copies on everyone’s desk. We started passing these notes along to the investors we were talking to via fax, and eventually Chuck switched to passing it out electronically.

Then there was this. I haven’t commented on JPMorgan Chase’s $2 billion trading loss, which really put egg on the face of Jamie Dimon, the outspoken CEO of the company. Dimon was one of the loudest voices protesting the additional banking regulations working their way through Washington.

Yesterday, I read a story that I immediately thought would be a great story for this morning’s “Then there was this.” The story, which appeared on Bloomberg and was also picked up by our local paper, was titled “Fed Conflict Raised for JPMorgan.” The article points out that Dimon is one of three bankers sitting on the board of the New York Fed, as required by law.

That’s right, the Federal Reserve Act of 1913 actually mandated that three of the nine seats on the regional reserve bank board be occupied by bankers. The article quotes Sen. Bernard Sanders, who sees an obvious conflict in Dimon’s two roles. “It is an obvious conflict of interest for Jamie Dimon, the CEO of the largest bank in America, to serve on the New York Fed’s board of directors,” Sanders said in an emailed statement. “This is a clear example of the fox guarding the henhouse.”

To recap. Greeks will be returning to the polls in June, and the currency markets are worried about the outcome. The euro dropped again, both on the new Greek elections and a cut to Italian bank ratings by Moody’s. The pound sterling dropped, and may not be the “safe haven” that some investors thought. We got a boatload of data released yesterday, and will get even more out this morning. Most of the data showed the U.S. economy continues to “muddle through.” China is continuing to increase its gold holdings, along with some very influential investors. And I ended today’s Pfennig with a note from Chuck, who is speaking to the masses out in Las Vegas.

Chris Gaffney
for The Daily Reckoning

British Pound Sterling Losses “Safe-Haven” Status originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas. Recently Agora Financial released a video titled "What Causes Gas Price to Increase?".


]]> The Daily Reckoning RssFeed http://www.gold-speculator.com/daily-reckoning/79405-british-pound-sterling-losses-safe-haven-status.html “Jon Corzine – What’s Going On?” http://www.gold-speculator.com/daily-reckoning/79404-jon-corzine-what-s-going.html Wed, 16 May 2012 21:16:06 GMT May 16, 2012 09:56 AM - It pays to be rich, powerful and a Democrat with friends in Washington. While Anna Gristina, a Connecticut mother accused of being a New York “madam” sits in a cell on Riker’s Island, Jon Corzine, the former CEO of MF Global sits at home in his New Jersey mansion. MF Global had been a publically traded securities firm with $40 billion in assets, but with liabilities even larger, filed for bankruptcy late last year, after being accused of co-mingling customer funds with its own, a flagrant violation of securities law.

As we all know, prostitution is illegal. Ms. Gristina has been charged with providing attractive young women to testosteronic men for money — a crime, but largely victim-less. Nevertheless, she has already spent two months on Riker’s Island, awaiting a June 21st hearing. Bail for her was set at $2 million in a bond, or $1 million in cash. Despite the misappropriation of an estimated $1.6 billion, Mr. Corzine has yet to be charged. Yet 36,000 clients had their money appropriated under his watch. It is hard not to believe that his status as a former Senator from and Governor of New Jersey, and major bundler for President Obama’s campaign has not provided him special privileges. Is not justice supposed to be blind?

It is hard to imagine that Ms. Gristina, whose business was to introduce consenting adults, could be an enormous risk to society. On the other hand, a wealthy and powerful man who appears to have cheated his clients is a fraud and a menace. MF Global was a public company, until it became the nation’s 8th largest bankruptcy when it filed last October. Thus, not only are customers, for whose funds Mr. Corzine had a fiduciary responsibility, out their money, but shareholders of MF Global lost their investment as well. Of course, it is perfectly possible that the morally challenged Mr. Corzine was unaware that embezzling is a crime. However, as CEO he is responsible for financial transgressions within his firm. It is unfortunate that he is not man enough to admit it.

Mr. Corzine testified before Congress, and claimed not to have been aware that anything amiss was going on. “I simply do not know where the money is.” What a whopper! Keep in mind this is a man who had been senior partner of Goldman Sachs, so not a naïf when it came to financial matters. Until the bankruptcy, Mr. Corzine was on President Obama’s short-list to replace Timothy Geithner as Secretary of Treasury. He was not only the CEO of MF Global, Mr. Corzine, according to some reports, was chiefly responsible for the bets on European bonds that got them into trouble in the first place. An e-mail from MF Global’s assistant treasurer appeared to implicate Mr. Corzine in the wrongful transfer of $200 million to JP Morgan, a transfer which included customer funds. But when Ms. O’Brien was asked questions at a Congressional hearing she pleaded the fifth. Why? Was she afraid of Mr. Corzine? Did she feel threatened by the prosecutors? Surely she did not transfer funds of that amount without some higher-ups’ approval. A lot of us would like the answer to a question recently asked by a reporter for The Financial Times: why wasn’t she granted immunity from prosecution, in exchange for her testimony? Are the prosecutors concerned as to where the answers might lead?

This is not the first time that rich, powerful and politically connected Wall Street types have walked away from prosecution. Prosecutors also took passes on Angelo Mozilo, former chairman and CEO of Countrywide and Richard Fuld, former CEO of Lehman Brothers. Both men disgraced their companies and their industries, while losing millions of dollars for investors who had entrusted their savings with them. Crony capitalism does not only lead to criminal behavior, it reflects a moral decay that threatens our capitalist system and the democracy that underlies it. When the defense uses what Matt Taibbi of Rolling Stone calls a “Wizard of Oz” defense — that the stealing was not deliberate; the misplacement of client funds was due to the chaos that attended the firm’s last few days — it’s obvious the perpetrators, with help from their attorneys, are obfuscating the truth.

Regulatory bodies spend millions of our tax dollars every year supposedly supervising those they are charged with overseeing. The events that led to the financial crisis did not happen because of a lack of regulation; it was a lack of enforcement of existing rules. The response in Washington was, of course, to create new rules, not to punish regulators who did not regulate. The Obama Administration is not afraid of lawsuits and charges. Look at the legal problems his Environmental Protection Agency (EPA) is causing the energy industry. But it is telling that this administration, theoretically so friendly to the poor and defenseless, has not sent one person to jail for the near collapse of the financial system four years ago. They could start by looking at Congress. When it comes to investigating the true causes of the near-financial collapse, this administration is the antithesis of Teddy Roosevelt — talk loudly and carry a wiffle bat.

As insulting, has been the response of the Trustee, James W. Giddings. The role of a Trustee is political in the sense that they are awarded by the courts. And they are meaningful in terms of compensation. For example, Irving Picard, Trustee of what is left of the Madoff Ponzi scheme, through last October had billed $225 million. Mr. Giddings’ firm, Hughes Hubbard, has billed $168.7 million thus far for the Lehman bankruptcy. With that sort of money on the table there is plenty of room and opportunity for shenanigans. Mr. Giddings acknowledged that $1.2 billion has gone missing and that a commingling of customer accounts and corporate funds did take place. But it was, in his opinion, at least in part, due to “sloppy” bookkeeping, and computers and employees who could not keep up. That sounds to me like a “Wizard of Oz” defense. Sloppy bookkeeping! Give me a break! This was stealing.

Incredibly, no one has been arrested. Republican Congressman Michael Grimm from New York City has asked for an independent counsel to take over the federal criminal probe being conducted by the Department of Justice (DOJ.) James Koultas, the leader of the Commodity Customer Coalition, an advocacy group for former MF Global clients recently noted the obvious: “I don’t think the DOJ is going to go up against one of the President’s biggest bundlers without an independent counsel being appointed.”

The near-collapse of the financial system four years ago spooked investors. Taxpayers are already rightfully concerned about the cost to them caused by a few rogue traders, who saw millions in personal profits, and lawmakers whose concern about re-election overcame any worries about the consequences of their legislation. When the guilty go unpunished, crime only increases. Joe Nocera, writing a couple of weeks ago in The New York Times, put it this way: “Giving the big guys a pass isn’t good for the financial markets. And it isn’t good for democracy either.” It is the inverse of James Q. Wilson’s “broken windows” theory that says if broken windows are repaired immediately the incidence of crime will decline. When criminal activities such as these go unpunished, the crime rate goes up.

Everyday small time criminals get busted — drug pushers, hookers, purse snatchers and small-time robbers — but wear a white shirt, steal a few million dollars and have friends in high places, and you can stay at home. It is crony capitalism at its worst. Court appointed lawyers get rich; politicians, who have become wealthy, pay back their friends and remain in office. Very few bad guys go to prison. It is a terrible message, if we want to restore faith and confidence in our markets. Democracy is based on property rights and the rule of law. When property is not protected, the law is meaningless. What really is going on with Mr. Corzine?

Regards,

Sydney Williams,
for The Daily Reckoning

“Jon Corzine – What’s Going On?” originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas. Recently Agora Financial released a video titled "What Causes Gas Price to Increase?".


]]> The Daily Reckoning RssFeed http://www.gold-speculator.com/daily-reckoning/79404-jon-corzine-what-s-going.html Why the World’s Unemployed Youth are Flocking to Brazil http://www.gold-speculator.com/daily-reckoning/79403-why-world-s-unemployed-youth-flocking-brazil.html Wed, 16 May 2012 21:16:06 GMT May 16, 2012 12:14 PM - Man wasn’t supposed to labor like this. Not under these conditions…with a clear view of a clearer sea…a white sandy beach below his room…the sound of the crashing waves gently carrying through his window…

…and his head stuck firmly in his computer screen.

But we will soldier on, Fellow Reckoner. We will ignore the blissful and beckoning distractions of one of the world’s most famous esplanades just across the way. We will pretend the little cabanas down by Ipanema’s Post 10 have exhausted their supplies of frosted, cachaça-based refreshments and that the hot bods tanning on the sand and frolicking in the water are really just figments of our imagination. We will turn away from this little heaven on earth and cast our gaze, instead, upon its equal and opposing force…

…but not just yet.

We’re here in South America’s largest economy to scope out opportunities in the local business scene. The country is booming, as you’ve no doubt heard. And as far as the BRIC countries go, Brazil might just be our favorite. Well, at least it’s our favorite to visit. Unlike China, Brazil’s demographics are favorable. Unlike India, its social mobility is flexible. And Unlike Russia, the weather is agreeable. Also, the South American nation didn’t just “re-elect” Vladimir Putin. Then again, many would argue, neither did Russia.

All of which is not to say the place is without its “fair share” of problems. It has many. Official growth here has slowed. Considerably. The parasite class — politicians in Brasília — had forecast a growth rate of 4.5% for the year 2012. Now they figure it will be closer to 2.7%. Policy makers are “under pressure,” say the papers, to “do something.”

A standard quote from The Financial Times:

With the world economy slowing, many argue Brazil needs a fresh spark to keep it growing. Policy makers are under pressure to consider a second generation of reforms in areas such as taxation, infrastructure and education to make the country globally competitive.

Hmm… Maybe policy makers do have a role to play. But we’d bet that role is best served by getting out of the way and allowing the magic of the market to work its wonders.

Fortunately, there is a growing contingent of young entrepreneurs who are advocating just that. Your editor was delighted to meet a handful of them at the III Conferência de Escola Austríaca hosted by the Instituto Ludwig von Mises Brazil, this past weekend. A crowd of young and excited attendees sat glued to their seats while absorbing presentations from a host of Austrian School superstars, including Laissez Faire Book’s own Jeffrey Tucker…the only man to inspire a standing ovation after his spectacular speech on Intellectual Property in the Digital Age.

Imagining what a country like Brazil could do if the ideas of liberty and freedom were to take hold here is, in itself, an inspiring thought experiment. And the blossoming trend of independent young thinkers and innovative entrepreneurs is one we hope to be a part of in the very near future. As, it seems, do many others.

Tellingly, attendees at the conference hailed not only from around Brazil, but also from Europe and the US, both struggling markets that promise little or no future for the generation currently graduating from universities there. And these fugitive career seekers are not alone.

Portugal’s official unemployment rate — not atypical for the PIIGS economies — stands above 14%. The reality on the ground, however, is likely much worse than that. Among youths, the figure is closer to 40% and, as one Reuters journalist writing from Lisbon put it recently, the former colonial power offers “little hope for a sharp, job-generating recovery any time soon.”

Conversely, Brazil’s official unemployment rate hovers around multi-decade lows (between 5-6%). Given the common language, it’s hardly surprising therefore to find youth flocking to the opportunity rich South American powerhouse. Continued the Reuters piece:

Emigrating is fast becoming a preferred option for many seeking a decent living as their bailed-out economy suffers under debt, low growth and poor competitiveness. Portugal’s booming ex-colonies in Africa and Brazil are a natural choice.

Similarly, the employment situation in the US is inspiring many fresh-faced college grads…inspiring them to learn a new language and to seek jobs abroad, in healthier, more promising markets. And why not?

While student loan debt in the US recently surpassed outstanding credit card debt, unemployment data for the youth demographic suggests the cost of education might not have been worth it. Data from 2011 reveal that more than half of all US graduates with a bachelor’s degree were either unemployed or underemployed at the end of last year. What does underemployed mean? From a recent CNBC article:

In the last year, [students with bachelor’s degrees] were more likely to be employed as waiters, waitresses, bartenders and food-service helpers than as engineers, physicists, chemists and mathematicians combined (100,000 versus 90,000). There were more working in office-related jobs such as receptionist or payroll clerk than in all computer professional jobs (163,000 versus 100,000). More also were employed as cashiers, retail clerks and customer representatives than engineers (125,000 versus 80,000).

Why flip burgers in Alabama, Kentucky, Mississippi or Tennessee (states with the highest rates of youth unemployment, along with the Mountain West region) when you could move to Rio de Janeiro and start an online business of your own? Why hang around waiting for government handouts on the streets of Lisbon when you could be flashing your skills in São Paulo’s bustling professional scene?

For many, the “service and protection” of the US government is no longer an adequate response…in fact, it’s becoming the very reason to leave. More on that, tomorrow…

Joel Bowman
for The Daily Reckoning

Why the World’s Unemployed Youth are Flocking to Brazil originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas. Recently Agora Financial released a video titled "What Causes Gas Price to Increase?".


]]> The Daily Reckoning RssFeed http://www.gold-speculator.com/daily-reckoning/79403-why-world-s-unemployed-youth-flocking-brazil.html The Clash of Generations http://www.gold-speculator.com/outside-box/79402-clash-generations.html Wed, 16 May 2012 21:16:06 GMT There are plenty of books about the entitlement disaster in our future, but few come with the backing of an academic press. The Clash of Generations is an exception. Written by economist Larry Kotlikoff, one of the creators of generational accounting, and my good friend of long standing, Scott Burns, Clash shows what current policies have already done to young people, tells stories about how both parties have allowed it to happen, and offers actual policy solutions– for banking, taxes, healthcare, and Social Security.

But it's way more than a "policy book." It also tells us what we can do to protect ourselves if the politicians fail.

Nobel Laureate George Akerlof writes that the book "is so well written that Scott Burns and Laurence Kotlikoff should be considered the Stieg Larssons of economics." For today's Outside the Box, I asked Scott to give us some excerpts from the book, with an emphasis on policy matters rather than personal investing. This is a book you will want to read, and I hope our policy makers read it as well, to get a clue about the impending crisis, should they fail to take action. Will you like all of their solutions? I can guarantee you won't, as they will gore a lot of sacred oxen; but then any real set of solutions will. We have gone far past the point where there were easy solutions.

You can get the book at http://www.amazon.com/clash. And while you're at it, you should get a copy of my new book, The Little Book of Bull's Eye Investing. It is getting a lot of great reviews, and I am pleased with the response so far.

I am in Stamford, Connecticut tonight, where I will speak tomorrow morning at a private conference for Pitney-Bowes. They have brought in a rather solid line-up of speakers, trying to get a peek into the future so they set an effective business strategy. I am looking forward to listening and learning as much as I can.

Right now I am off to dinner with the other speakers, so it should be a fun evening with lots of interesting conversation, which I really enjoy. Wednesday and Thursday I am in NYC, with a lot of media appearances and interviews and a few meetings and speeches worked in here and there. It will be a very busy schedule, especially since I am trying to keep up with my reading and work on my own next book. Have a great week!

Your wondering how we solve the entitlement crisis analyst,

John Mauldin, Editor
Outside the Box

The Clash of Generations

By Laurence Kotlikoff and Scott Burns

Prologue: The Last Straw

The day was coming—for years, decades, really.

Warnings had been sounded, loud, clear, and often.

Most heard, few listened. The problem was distant, its size unclear.

"No worries. We'll fix it. The next election, the next party, the next leader."

There was time.

There wasn't.

The contract was simple: 100,000 barrels of oil, delivered to this country, at this port, on this day. Payment in Chinese yuan.

The seller was big and always insisted on dollars.

Not that day.

Thanks to U.S. pressure, the yuan was floating free. You could buy and sell it anywhere.

The yuan was strong and rising. The dollar was weak and falling.

No wonder: America's economy was awful; over 30 million, mostly young, looking for work; and Uncle Sam was broke. But Sam's ace in the hole was the dollar—the world's reserve currency. If Sam needed money, he'd print it, and everyone would take it.

No longer.

"Our shareholders come first. The dollar's too risky. Let's settle in yuan."

And so the contract said yuan.

The medium of exchange was the message, and the message was broadcast, posted, e-mailed, tweeted, Facebook'd, and texted around the globe, in seconds.

"They switched. We should too."

Denominating contracts in anything but dollars became routine.

If only. If only that company had waited or kept it quiet. If only that company was smaller or foreign.

But there it was. A major U.S. oil company had publicly called it quits on the greenback.

America's economic death was quick and painful.

In short order, the dollar plunged. Interest rates soared. Bond and stock markets vaporized. Towns, cities, states, and businesses—large and small—started declaring bankruptcy.

And massive layoffs began. The young got the first pink slips.

The Fed rode to the rescue.

"Not to worry. We'll print more dollars, buy bonds, and lower rates."

"Worked before."

"You need a loan. Step right up. We've got money."

This time was not different.

This time, ancient economic law prevailed: more money begets higher prices.

With prices rising, the dollar became a hot potato. No wonder. The longer you held it, the less it would buy.

And faster money pushed prices even higher.

Next came the bank runs.

Deposit insurance didn't matter. Everyone wanted to get and spend their money before it became worthless.

Uncle Sam printed trillions of dollars to honor insurance and other guarantees to depositors, money market funds, bondholders—you name it.

Inflation reached double digits.

Per month, per week, per day, per hour.

The economy was unraveling.

And then the next generation took to the streets.

From Chapter 2: Catastrophic Success

Centenarians, Left, Right, and Center

As one example of the lurking danger of the-really-long-retirement problem, consider America's fastest-growing population. We're not talking illegal immigrants. We're talking centenarians—those aged one hundred and over. Today there are 79,000 members of the old old-old. By 2050 (when today's newborns are middle aged), this figure will reach 601,000. That's enough centenarians to fill up Washington, D.C. We can imagine movies being remade to suit an older demography, such as Butch Cassidy and the Sunda nce Centenarian. Coming soon.

Next, contemplate a much scarier vision: the annual health care costs, circa 2050, of these projected 601,000 residents of the new Century City.

Later in Chapter 2

Your Money or Your Life

We could solve the financial problem Social Security and Medicare represent simply by reducing life expectancy, but there is a remarkable lack of public enthusiasm for the idea. No politician has suggested a new program with special tickets to shorter lives. Unlike the 1973 science-fiction movie Soylent Green, there are no arrangements for a few glorious final moments before being turned into food for the young. And when palliative care was part of the 2010 health care reform bill, it was quickly labeled "death squads" and removed from the bill.

We like being alive, thank you, and aim to stay that way for as long as possible.

What we have never faced up to, however, is that we literally have a your-money-or-your-life decision. The operative word here is or—but we want both. We won't give up our growing years of life, but we don't want to pay for them. Politicians of both parties know this and act accordingly. They promise more public benefits because that's what we want. Then they hide the bill in the diaper of a newborn. This would be a minor issue if the advances in life expectancy were not so great and supporting the elderly at the style to which they've become accustomed so expensive.

Further in Chapter 2

Modern Aging and the Arrival of the Lupies

Science-fiction writer Richard Matheson offered a brand-new perspective on our terminal state. His 1956 novella, "I Am Legend," introduced us to the "living un-dead," otherwise known as "lupies," and death in life hasn't been the same since. As many sad newspaper stories tell it, the real death in life can be found in the Alzheimer's unit of any nursing home. This is simply too painful to bear, so our culture offers us the darkly comic movies that tell us about what might be called the Modern Zombie.

The first of those movies was the classic 1968 B flick directed by George Romero, Night of the Living Dead. Scott's favorite line from it is, "We may not enjoy living together, but dying isn't going to solve anything either."

So even as the baby boomers were coming of age and learning about birth control pills, some other part of the public imagination was worrying about what was going to happen when this crowd got to be really old. Imagination answered: it will be hell. The truly living young will be outnumbered, isolated, and besieged by the living undead. The actual situation of our young will be physically far less frightening and contain less visual drama, but in reality, young people will be defending themselves from the ever increasing demands of the elderly.

From Chapter 3: Living beyond Our Children's Means

Doing Ponzi Proud

The $30,000 combined Social Security, Medicare, and Medicaid payment that is being handed, on average, to each of today's elderly equals almost two-thirds of per capita GDP. By the time the boomers are fully retired, the figure could exceed 100 percent of per capita GDP. Whoever said America isn't a welfare state? It is a welfare state, but the welfare is for the elderly, not the poor. While our two parties argue over the haves and have-nots, we are blind to what the nows are doing to the laters.

And later in the chapter

Uncle Sam's Fiscal Gap

When you add up all our unofficial future bills and net out all the future taxes that will be available to pay them, the difference, that is, the fiscal gap, is staggering. Since a dollar in the future is not the same as a dollar today, we have to make sure this adding up makes less of (discounts the value of) dollars paid or received down the road. Once you do so, using the government's preferred 3 percent real (inflation-adjusted) discount rate, you learn that the value in the present (the present value) of all the future bills, less all the future taxes, is $201 trillion. The icing on this enormous debt cake is the $10 trillion of official U.S. debt in the hands of the public. Add that with a deft hand, and you've got a fiscal gap of $211 trillion! Public discussion is all about the icing. It's never about the whole cake.

Further in Chapter 3



Voodoo Economics

Maybe we've missed something, but we've yet to hear any politician advocate raising all taxes by 64 percent for, well, forever. Nor have we heard any politicians advocate a 40 percent immediate and permanent cut in federal outlays.

On the contrary, Republicans want to cut taxes and Democrats want to increase spending. Both groups are engaged in what President George H. W. Bush called voodoo economics. Republican supply siders are sure that every federal tax would produce more revenue if only it were cut. We think setting all tax rates to zero and forcing Republicans to announce each day's tax collections would change their tune, but maybe not.

Democrat demand siders are equally subject to magical thinking. They believe that raising federal spending, even if it entails paying people to dig ditches and fill them back up, will stimulate the economy so much it will pay for itself through extra taxes. We think providing all Americans a year's free vacation and forcing Democrats to provide daily revenue reports would alter their thinking, but who knows.

In the dream world of our political parties, their favorite action always "pays for itself." Republicans buy votes by reducing taxes and claiming they pay for themselves. Democrats buy votes by spending money and calling it an "investment." Setting just one set of these loonies loose on the economy would be damaging enough, but in recent years we've opened the asylum. We've watched them combine forces to both raise spending and cut tax rates. The bill goes to the kids who, conveniently, are never in the room.

Also from Chapter 3

Is the United States in the Worst Fiscal Shape?

Based on official debt figures, the United States appears to be in relatively good fiscal shape compared to other developed countries. Its 69 percent debt-to-GDP ratio is, for example, roughly half of the comparable ratio for Greece. But on a fiscal gap basis, the United States appears to be in either worse or much worse fiscal shape than its co-members in the the Organization for Economic Cooperation and Development (OECD), the club for developed economies.

The U.S. fiscal gap now stands at fourteen times U.S. GDP. For Greece, this figure is roughly twelve times GDP. Compare the two numbers and you see the naked emperor: on a fiscal gap basis, the United States is in worse fiscal shape than Greece even though its ratio of official debt to GDP is roughly half that of Greece.

And ending Chapter 3

Darkness at the End of the Tunnel

If you're not thoroughly bummed out at this point, we haven't done our job. You've learned that our country is in much far worse fiscal shape than any politician has let on and that our official debt bears no intrinsic relationship to our nation's true indebtedness. But don't stop reading. The story gets worse. Our reckless, generationally immoral fiscal policy has done terrible damage to the underlying economy. Yet few economists, let alone politicians, have connected the dots.

From Chapter 4: Economic Fallout

America's scariest economic chart is a snapshot of postwar American economic decline. Figure 4.1 shows that our country is now saving nothing and investing next to nothing. This isn't anything new. Hop onto either the saving curve or the investment curve in 1950 and you'll take a ride downhill, with some uphill stretches, over the next sixty years.

Countries that don't save don't have the wherewithal to invest, so it's not surprising that our nation's net domestic investment rate has followed our national saving rate down the tubes. But there is one way for a spendthrift country to experience investment: let other countries invest in our stead. That's what the green bars show—the U.S. current account deficit (measured as a share of national income). They measure the difference between our rate of saving and our rate of investment. When our national saving is less than our domestic investment, as has been the case for decades, our current account is negative (a deficit). This means foreigners are investing more in the United States than we Americans are investing abroad.

Later in Chapter 4

Like AARP's most ardent supporters, we're old. Some of our best friends are old. One of us, Larry, has a ninety-two-year-old mother whom he loves dearly and who is getting younger by the year, thanks to Medicare's assistance and her own spirit and exercise routine. And yes, the poverty rate among the elderly in 1960 was 35 percent. By 1995, it was down to 10 percent. That's a fabulous achievement, and we give Social Security, Medicare, and Medicaid full credit for achieving this success.

But the achievement was not a free lunch. At the same time poverty rates were dramatically lowered for the elderly, they were little changed for the young. Today over one in five children live in poverty. Among minorities, the child poverty rate is about one-third and 35 percent live in "food insecure households." Back in 1960, one in four children lived in poverty. So we've made some progress, again thanks in large part to Social Security, Medicaid, and Medicare (which covers disabled children), yet we're sitting here today with 13 million impoverished children. Another 16 million children live in households with very low levels of income, albeit that exceed the poverty threshold. To be clear, we consider the current distribution of wealth, income, and consumption to be outrageous. When some children go hungry while others are whisked to summer camp on the family private jet, you know the maldistribution of income has gone too far. Yet how to reduce inequality is open to debate.

But our main point here is that most of the massive postwar redistribution from the young to the old has not been from rich young people to poor old people. It has mostly been from middle-class young people, who pay high employment taxes, to middle-class old people who receive them. And that redistribution has left the young with a fiscal sword of Damocles suspended over their heads. Furthermore, that redistribution has cut our national saving rate from 15 percent to 0 percent. It has cut our domestic investment rate from 15 percent to 4 percent, and it has contributed to the lack of real wage growth, which marks the death knell of the American dream. Reducing poverty among the elderly (or any other group) is a wonderful goal, one that we should pursue. But we seriously doubt that anyone, of any political or chronological persuasion, would want to do it at the cost of literally wrecking the country.

From Chapter 5: Beatings without Bruises

A Rare and Modern Wedding

To say the wedding was long awaited is an understatement. Beyond the area where the bride and groom would exchange vows, a gentle creek is backed by a dramatic escarpment. The location is Driftwood, Texas, about twenty miles outside Austin. Behind the bucolic scene, a rustic building is ready with a waiting band, servers, food, and champagne. The slightly balding groom walks carefully with his arms held slightly ahead of his body. He is cradling his six-month-old daughter. He is in his early forties, an executive with a rapidly growing Internet-based firm. The bride follows with her father. The bride, dark haired, lovely, and in her mid-thirties, is a court judge.

The ceremony is short, sweet, and serious. The groom promises to cherish his bride forever, but hopes she will forgive his occasional lapse from vegetarian meals. If there is a leitmotif here, it is intentionality and consciousness. These two know exactly what they are doing. They have waited a long time. They are sure. And they are telling the world they are sure.

In an odd way, this wedding opens a window on how we have changed over the past half-century and how much different our world looks to the young than it did a few decades ago. For starters, weddings are getting to be rare events. And this couple, unlike the many who don't dare these days, can marry with confidence. Both have good jobs, both have good educations, and they own a home. They are ready. No one can say they were impulsive.

They are fortunate. And their child is particularly fortunate, or so it would seem. Unlike more and more children, this child will grow up with a decent living standard, excellent education, and, most important, two parents to help her reach adulthood. But there's the rub. Once she's released into the world of grownups, things are likely to be very difficult as they are for so many young adults today.

From Chapter 8: Unsafe at Any Speed

The financial meltdown that's surely coming and will do more lasting damage to our kids won't be triggered, like the last one was, by the production and sale of trillions of dollars in fraudulent securities. It will be a run on the Treasury and the Fed triggered by the global realization that Uncle Sam is in far worse fiscal shape than ever imagined.

The moment of reckoning can come at any time, and when the markets finally realize that our fiscal problem is enormous and cannot indefinitely be papered over by the Fed's money creation, things will change abruptly. We'll have a tremendous financial collapse that hits the bond and the stock markets, and not on a short-term basis. That will accelerate the fiscal collapse, which will reinforce the financial collapse—in short, a vicious cycle. By design, our financial institutions have built no firewalls separating themselves from one another. Instead, there are only fire paths, waiting to ignite.

The hour is extremely late. We can no longer afford doing too little too late, putting off tough decisions for tomorrow, and enduring political gridlock. To fix America, we need to start from the ground up. Only radical, fundamental reforms of the financial system, the tax system, the health care system, and Social Security will solve our problems and get our country turned around. But it can be turned around.

From Chapter 12: Becoming Our Own Solution

In an ideal world, one inhabited by wise and compassionate human beings blessed with flexibility and foresight, our postcard solutions might become a reality. We'd have a broad consensus on our social contract. Government would be the primary instrument for having that contract work. The problems we face would be solved.

But that isn't our world.

Since 1935 the budget of the U.S. government has been in surplus (and you've seen how unreal that is) a total of eight years. Other than 1999 and 2000, you have to go back a half-century, to 1960, to find another year of surplus. And the 1960 surplus was trivially small—a mere $3.9 billion in today's dollars. Over the long sweep of seventy-five years, the evidence is clear: balanced budgets are un-American. We do deficits.

Unfortunately, as discussed above, official deficits—changes in the stock of federal debt—represent less than the tip of the iceberg when it comes to the growth in our overall liabilities. While federal debt owned by the public is now approaching an entire year of U.S. output, our nation's true debt—the fiscal gap, which includes all of Uncle Sam's unofficial spending commitments, net of all the taxes he'll likely to collect to cover these commitments—is a gargantuan 14 times GDP.

We're broke beyond broke. But like General Motors before its bankruptcy, we're lumbering on because of our enormous size and borrowing capacity. And given our long history of dumping both formal and informal debts in the laps of youngsters, while legislating greater and greater benefits for oldsters, don't hold your breath awaiting a rational solution. The most likely scenario is the simultaneous and colossal fiscal, financial, and economic meltdown portrayed in the prologue.

This returns to the question you have, no doubt, been asking since page 1: How can we protect ourselves?

We're all asking this question, and the answers are getting more and more unusual. A visit to a bookstore is instructive. While Barnes and Noble saw the vampire romance trend early and created an entire section devoted to "teen paranormal romance" novels, it has yet to create an "American Armageddon" section. But the books are there, mixed in with the ever-growing shelf of survivalist tomes. So if you think the future will require having emergency food and water supplies that you defend with your newly purchased AK-47 or assault rifle, there are a lot of instruction manuals you can buy.

Our personal salvation advice is far less extreme. There are lots of straightforward small steps you and your family members can take that will leave you in a safer position for facing what's coming. So there's no need to join freedom fighters in Montana, transcendent new age groupies in California, or defiant religious cult members in Texas.

Let's start with a mental reboot—an understanding that we can change our personal fate far more readily and quickly than government policy.

Trust Yourself, Not Short-Lived Institutions

Most of us have years of conditioning telling us that we are small and temporary while the institutions around us are big and permanent. Nothing could be further from the truth. The notion of small and temporary versus big and permanent persists in spite of some obvious realities. It is a good bet, for instance, that regardless of your age or marital status, you've had your name longer than your current bank has had its name. One banker Scott knows likes to tell people about having worked at the same desk, in the same office, for thirty years while the bank he works for has been taken over, digested, and renamed four times.

With Americans now living an expected eighty years, few things or institutions have our duration. In the material world, we're outlasting our computers, our cars, our home appliances, our household goods, even some of our homes, and certainly the tenure of whatever political party is in office.

Only one of the original twelve companies in the Dow Jones Industrial Average still has the same name: General Electric. The other eleven companies have been sold, renamed, liquidated, or otherwise become something else since 1885. According to Jeremy Siegel's classic Stocks for the Long Run, 987 new names were added to the Standard & Poor's 500 Index (an index of large-capitalization stocks that accounts for about 74 percent of all stock market value in the United States) between its creation in 1957 and 2006. In its single greatest year of change, 1976, a whopping sixty new stocks were added to the list and sixty were displaced. However you slice it, most of us will be around longer than a typical large American enterprise whose average life expectancy is less than fifty years, about the life span of the average American more than a century ago.

As individuals we are a lot stronger and more durable than we think, and we are likely to become more so. In futurist Alvin Toffler's prescient 1970 book Future Shock, his driving theme was accelerating change in technology, information, knowledge, products, and businesses. In addition to the idea of the information economy, much the same was predicted in Fritz Mazlop's classic 1972 book, The Production and Distribution of Knowledge. Both authors were incredibly prescient about a growing truth—things don't last.

In the last chaotic decade alone we've seen the decline of the newspaper industry, a revolution in the distribution of music that has now spread to movies and books, a need to dramatically shrink the U.S. Post Office because people aren't using traditional mail, and the familiar list of big corporate failures. We're not talking about the constant change in small retail stores or restaurants. We're talking about the institutions that define our world. And the fact that they are relatively short-lived makes their long-term promises inherently untrustworthy.

Think about it. Thirty years from now, today's politicians and all their lofty promises will be gone. Many of today's banks and insurance companies will be gone. Many of today's investment advisors will be gone. Many of today's employers will be gone. Many of today's pension funds will be gone. Many of our tax breaks and benefits will be gone. Much of our good climate may be gone. Our two-party political system may be gone, and the list goes on.

They'll be gone, but we'll, for the most part, still be here. It's an uncomfortable mind reset, but the truly durable institutions in society are people—that is, us. We generally outlive the supposedly eternal institutions that we rely upon so heavily. As a we have no option but to make careful long-term plans for ourselves. That's a big responsibility and most of us aren't prepared for it because we are beset by thinking traps, unrecognized cognitive failures.

From Chapter 14: The Coming Generational Storm

There are about 70 million Americans between eighteen and thirty-five years old. Imagine they all march on Washington. Imagine they let their elders know they aren't happy with their treatment. Imagine they join together in a party—the Generational Equity Party—and start voting for candidates who represent the interest of today's and tomorrow's young generations. Imagine how that would change the conversation.

And imagine those older than sixty seeing their faces and hearing their voices and saying Yes, they're right. These are our children and grandchildren. We need to protect them. They are on earth, if not in heaven, our only true future.








Click here for the original post... ]]> Outside The Box RssFeed http://www.gold-speculator.com/outside-box/79402-clash-generations.html The Yemen Exception http://www.gold-speculator.com/5min-forecast/79401-yemen-exception.html Wed, 16 May 2012 21:01:43 GMT May 16, 2012 * Watch your language: The unlikely offense that could get your bank account frozen * Greek bank run: Addison on how the entire euro experiment is “in jeopardy” * Dollar jumps... for now. But what about your purchasing power? * Come on Eduardo, there’s no shame in it: Facebook co-founder’s savings from giving up his U.S. citizenship * Soros’ latest gold move... a grim economic indicator from NASCAR nation... preparing for a zombie apocalypse in Vancouver (uh-oh)... and more! Image: http://agorafinancial.com/temp/timestamps/z0000.gif *“Apparently,” writes journalist Jeremy Scahill, “the First Amendment had an exception about Yemen in it that I missed.”* Violate that exception as of today and the federal government might deny you access to your bank account. Seriously. This is of no small interest to us here: More than two years ago, Addison wrote in Apogee Advisory about how the place is a tinderbox. Nearly half the population is under 16. Nearly half is in poverty. There’s almost no arable land. “Oil, which accounts for 75% of government revenue, will likely run dry by 2020,” he noted. Sure enough, the place blew up during the Arab Spring last year. The longtime U.S.-backed dictator Saleh was chased from office, agreeing to a U.S.-brokered “transition.” As part of that “transition” a Saleh stooge named Hadi won an election in which he was the only candidate. Having pronounced the election “successful,” Secretary of State Hillary Clinton ensures that Hadi, like Saleh before him, collects beaucoup bucks and weapons to do Washington’s bidding. Yemenis, realizing they were had, are restive. Image: http://agorafinancial.com/temp/timestamps/z0027.gif *So the president issued an executive order this morning — authorizing the Treasury Department to freeze the U.S.-based assets of anyone the feds believe “engaged in acts that directly or indirectly threaten the peace, security or stability of Yemen.”* Included are “acts that obstruct the implementation” of the “transition” agreement. “In other words,” writes Salon’s civil liberties blogger Glenn Greenwald, “the U.S. government will now punish anyone who is determined — in the sole discretion of the U.S. government — even to ‘indirectly’ obstruct the full transition of power to President Hadi.” As part of this transition, the U.S. military has carried out more drone strikes in Yemen this month than in the preceding 10 years combined. Yemen is also the place where last fall, a U.S. drone summarily executed a U.S. citizen — with no trial or other vestige of due process, merely the president’s say-so. Would criticism of these policies constitute an act that “directly or indirectly threaten[s] the peace, security or stability of Yemen”? Probably not. Not yet, anyway. But if you’re the sort of person who doesn’t like the government freezing his assets, we pass this along as a public service. Image: http://agorafinancial.com/temp/timestamps/z0053.gif *In a rerun of yesterday, the major U.S. indexes are up a bit — traders having set aside their worries about Greece.* Of course, by the close yesterday, all those gains were wiped out, and then some — thanks, we’re told, to “news” of a bank run in Greece. We put “news” in quotation marks because even now, nearly 24 hours later, nobody has a clue what’s going on. Here’s a sampling of media coverage... CNBC: “Greek depositors withdrew 700 million euros ($900 million) from the nation’s local banks recently, said President Karolos Papoulias, though the exact timing of the transfer was unclear.” Wall Street Journal: “Greek depositors withdrew €700 million ($898 million) from the country’s banks on Monday... Greek President Karolos Papoulias told the country’s political leaders that bank withdrawals plus buy orders received by Greek banks for German bunds totaled some €800 million on Monday, a transcript of his comments said. A central bank official confirmed the figures.” London Telegraph: “Citing a secret government document, [Papoulias] said Greeks were already pulling £80 million a day out of the country’s banks. Almost €1 billion (£795 million) has been withdrawn since the last elections, on May 6.” From this we can deduce that ordinary Greeks withdrew a large but indeterminate sum of money sometime in the last 10 days. Maybe. Don’t be surprised if there’s a repeat of yesterday’s late-day drop: The wild card this afternoon could be the release of minutes from the Federal Reserve’s meeting last month. Image: http://agorafinancial.com/temp/timestamps/z0126.gif *“The whole experiment is in jeopardy,”* Addison writes of the euro in The Little Book of the Shrinking Dollar (http://clicks.dailyreckoning.com//t/AQ/AArIow/AArboQ/AAahWA/AQ/AcM-yQ/fhU9). “The differences between the fiscal trajectories of the various eurozone states are of degree only, not direction. In this game, we’d put our bets that Germany — the last AAA standing — will call the shots. And they could well kick Greece or one of the other paltry PIIGS outta the union.” Image: http://agorafinancial.com/temp/timestamps/z0133.gif *As this forecast unfolds in real-time, hot money is again fleeing for the greenback. The euro is down this morning to $1.274.* The dollar index — of which the euro makes up 57% — is up to 81.24. The “DXY” has risen for 13 straight days, something it’s never done before.
Image: http://www.ezimages.net/upload/5MIN/201205165MinRangeBound.gif
Thus it stands at the high end of the range where it’s traded since Fed chief Ben Bernanke gave a wink to the world in Jackson Hole, Wyo., in August 2010 and all but said “QE2” was in the bag. Image: http://agorafinancial.com/temp/timestamps/z0145.gif *“The best wool that the feds can pull over your eyes is that they have all this under control,”* writes Addison in the book (http://clicks.dailyreckoning.com//t/AQ/AArIow/AArboQ/AAahWA/Ag/AcM-yQ/5IZ1). “They don’t.” “They’ve got prejudices and working theories, but remember, there’s nothing hard about the ‘science of economics.’” “If you hear CNBC or Bloomberg declare: ‘Prices are up 10% over the past year.’ don’t just switch off the TV and shrug.” “Instead, acknowledge that ‘last year’s dollar is worth 90 cents today’ and work on what you can do about it when it comes to your own wallet and your bank account.” The book has ample guidance to help you do so. In fact, our publisher Joe Schriefer counts 47 solutions. (He shares five of them with you right here (http://clicks.dailyreckoning.com//t/AQ/AArIow/AArboQ/AAahWA/Aw/AcM-yQ/4VoU).) Some are easier to implement than others. But no matter your net worth or your income, you’ll find plenty of take-aways you can put to work the moment you set the book down. And for a limited time, Joe’s worked out a way to get you a copy of the book — free. Learn how to get your own — on us — at this link (http://clicks.dailyreckoning.com//t/AQ/AArIow/AArboQ/AAahWA/BA/AcM-yQ/w_Lh). Image: http://agorafinancial.com/temp/timestamps/z0207.gif *Gold is sinking further toward Vancouver (http://clicks.dailyreckoning.com//t/AQ/AArIow/AArboQ/AAaLTA/AQ/AcM-yQ/-gr1) speaker Marc Faber’s potential target of $1,400-1,500.* At last check, the spot price was $1,540 — below its low set at the end of last year. Silver, for the moment, is holding above its year-end 2011 low... barely... at $27.42. Image: http://agorafinancial.com/temp/timestamps/z0210.gif *George Soros quadrupled his gold exposure in the first quarter, according to his latest 13-F filed with the SEC.* His stake of 85,000 GLD shares during Q4 2011 grew to 320,000 at the end of March. That’s still a far cry from the 4.67 million shares Soros held at the end of 2010. He dumped almost all of it in the following three months... when gold still traded between $1,340-1,440. Even at today’s “relatively” depressed price, that looks like a bad trade. Soros also loaded up on J.P. Morgan Chase during the first quarter. Yeah, that’s working out really well right now. Image: http://agorafinancial.com/temp/timestamps/z0224.gif *The morning’s read on the housing market: Meh.* The Commerce Department says housing starts grew 2.6% last month... essentially offsetting a 2.6% drop the previous month. Permits — a better indicator of future activity — fell 7%, largely offsetting an 8.8% increase the month before. Activity was strongest in the South, weakest in the Northeast. Image: http://agorafinancial.com/temp/timestamps/z0236.gif *There’s now a number on the savings Facebook co-founder Eduardo Saverin will achieve by giving up his U.S. citizenship: $67 million.* Bloomberg figures it this way: Saverin owns 4% of the company, which has 1.9 billion shares outstanding. When he surrendered citizenship last September, shares were privately auctioned for $32.10. The IPO this week could be as high as $38. The difference between the last two values works out to $448 million. Apply 15% capital gains tax — which goes up at the end of this year — and you get $67 million. A Saverin spokesman challenges Bloomberg’s methodology and sticks to his story that came out this weekend: “His motive had nothing to do with tax and everything to do with his desire to live and work in Singapore.” We’re not sure why Saverin and his minions are so determined to downplay the tax angle. “The United States is the only developed country taxing its citizens regardless of where they live,” Addison writes in The Little Book of the Shrinking Dollar (http://clicks.dailyreckoning.com//t/AQ/AArIow/AArboQ/AAahWA/BQ/AcM-yQ/Q5iz). No matter: Saverin’s move has inspired much weeping and gnashing of teeth. “Rather than paying back, he is moving on,” complains Yale law professor Bruce Ackerman in the Los Angeles Times. “I don’t agree,” Addison says via email this morning, “with Ackerman’s assertion that Saverin should ‘pay back’ anything. Rather, the U.S. should have a tax system that makes it attractive for him to want to stay.” Imagine that... Image: http://agorafinancial.com/temp/timestamps/z0308.gif *Heads up if you’re joining us in Vancouver (http://clicks.dailyreckoning.com//t/AQ/AArIow/AArboQ/AAaLTA/Ag/AcM-yQ/wL-m) this summer: Watch out for zombies.* The 5 has been on zombie alert going back more than 18 months (http://clicks.dailyreckoning.com//t/AQ/AArIow/AArboQ/AAK5wg/AQ/AcM-yQ/LMj2). More recently, we took note of a course at Michigan State instructing students in “Surviving the Zombie Apocalypse.” Now comes a new section on the website of British Columbia’s Emergency Management office: Evidently, it’s Zombie Preparedness Week in Canada’s westernmost province. “The threat of zombie attack is a popular phenomenon around the globe,” the site says, “and with it comes the message to ‘be prepared.’” “Earthquakes, tsunamis, floods, landslides, avalanches, interface fires, severe storms and hazardous material spills are some of the dangers that could threaten lives and cause extensive damage in British Columbia,” it goes on. “And while the chance of zombies a-knockin’ on your door is pretty slim, we do believe that if you’re ready for zombies, you’re ready for any disaster.” The site includes links to several YouTube clips of preparedness steps, produced by the agency. They must be seen to be believed: We’re finally starting to understand some of the mock public-service announcements those Canucks on SCTV were doing 30-odd years ago...
Image: http://www.ezimages.net/upload/5MIN/201205165MinZombieRules.png
We’re reasonably sure zombies will leave us untroubled in Vancouver the week of July 24. There’s still time to register and come join us for our best lineup of speakers ever, listed here (http://clicks.dailyreckoning.com//t/AQ/AArIow/AArboQ/AAaLTA/Aw/AcM-yQ/4Dog). You’ll want to move quickly, though: We expect to be full up before the end of the month (http://clicks.dailyreckoning.com//t/AQ/AArIow/AArboQ/AAaLTA/BA/AcM-yQ/bk0X). Image: http://agorafinancial.com/temp/timestamps/z0329.gif *“Addison’s discussion about debt to GDP ratios with finance students at Towson University,”* a Canadian reader writes, “reminded me of a class I taught many years ago (being a businessman, I volunteered with Junior Achievement to teach business basics to school kids).” “Sadly, the current crop of Towson students seem as ignorant and misinformed about business, economics and finance as the Grade 8 kids I taught.” “For example, a multiple choice exam asked my kids what the profit was when McDonald’s sells a $1.00 hamburger. All of them selected either 90 cents or $1.00 as their answer. They were shocked when I explained what it costs to make that hamburger and the few pennies left for profit after all costs are paid.” “Most of the kids in my class were from upper-income families whose parents were either business people, professionals or well-paid skilled workers. Yet they knew nothing about business, the economy or finance. Nothing.” “It is truly scary that my Grade 8 kids in Canada and Addison’s university students in the USA were so ignorant about what makes the world go round, and such ignorance is deeply embedded in our education systems.” “But at least this explains why voters keep demanding their governments and unions do things that are sure to lead to economic and social ruin (Greece is a prime and current example).” “If only we could force them all to read The 5 starting when they are in diapers.” *The 5:* Hmmm.... Image: http://agorafinancial.com/temp/timestamps/z0351.gif *“I have been using NASCAR attendance to tell me the truth about the supposed recovery for several years now,”* a reader writes after yesterday’s episode, “since I live within half a mile of Bristol Motor Speedway and rent out space in my yard for campers. “I have been doing this for over 10 years and never had a vacancy until last year. The one race that was run this year had the lowest attendance ever and I had nearly a third of my yard empty. Since I haven’t raised my camping rate ever, it all has to do with the economy and gas prices.” “So I’ll believe in a recovery when the fans are back in my yard.” Image: http://agorafinancial.com/temp/timestamps/z0408.gif *“In November of last year,”* writes a reader with a follow-up, “I read in The 5 that the Indiana Supreme Court had just shredded the basic right of its citizenry to defend themselves in their own home — a right dating back to the 13th century and the Magna Carta.” “I was shocked to learn that six months earlier, the case of Barnes v. Indiana had gone almost unmentioned. As Indiana is my home, I was especially moved to prevent this ruling from taking hold.” “Fortunately, despite the downplay given by the media, many of us here, myself included, objected loudly. Our state senators and representatives heard from us, and agreed, using words like ‘shocked’ and ‘appalling’ in reference to the ruling in their replies to me.” “As a result of our efforts, Senate Bill 1 of 2012 was written to overturn the ruling; passed by an overwhelming majority; and, effective July 1, 2012, will become law, handing back the right of the individual to defend his or her home and property against unlawful entry by the police, using force if necessary.” “I wanted to thank you for calling this incredible breach of justice to our attention. It was your action that informed me and doubtless many other Indiana residents of what was happening in our state. Thanks in part to you, we have stopped the court from stripping Indiana residents of a basic right. Others may complain of the nonfinancial content that we find in The 5 from time to time. I am not one of them.” “Thanks for the financial advice, political heads up and always entertaining read.” *The 5:* You’re welcome. And we invite you to join kindred spirits, wherever they might live, at the Laissez Faire Club (http://clicks.dailyreckoning.com//t/AQ/AArIow/AArboQ/AAaLSw/AQ/AcM-yQ/Z0lB). Cheers, Dave Gonigam The 5 Min. Forecast]]>
May 16, 2012
  • Watch your language: The unlikely offense that could get your bank account frozen
  • Greek bank run: Addison on how the entire euro experiment is “in jeopardy”
  • Dollar jumps... for now. But what about your purchasing power?
  • Come on Eduardo, there’s no shame in it: Facebook co-founder’s savings from giving up his U.S. citizenship
  • Soros’ latest gold move... a grim economic indicator from NASCAR nation... preparing for a zombie apocalypse in Vancouver (uh-oh)... and more!
“Apparently,” writes journalist Jeremy Scahill, “the First Amendment had an exception about Yemen in it that I missed.”

Violate that exception as of today and the federal government might deny you access to your bank account. Seriously.

This is of no small interest to us here: More than two years ago, Addison wrote in Apogee Advisory about how the place is a tinderbox. Nearly half the population is under 16. Nearly half is in poverty. There’s almost no arable land. “Oil, which accounts for 75% of government revenue, will likely run dry by 2020,” he noted.

Sure enough, the place blew up during the Arab Spring last year. The longtime U.S.-backed dictator Saleh was chased from office, agreeing to a U.S.-brokered “transition.”

As part of that “transition” a Saleh stooge named Hadi won an election in which he was the only candidate.

Having pronounced the election “successful,” Secretary of State Hillary Clinton ensures that Hadi, like Saleh before him, collects beaucoup bucks and weapons to do Washington’s bidding.

Yemenis, realizing they were had, are restive.

So the president issued an executive order this morning — authorizing the Treasury Department to freeze the U.S.-based assets of anyone the feds believe “engaged in acts that directly or indirectly threaten the peace, security or stability of Yemen.”

Included are “acts that obstruct the implementation” of the “transition” agreement.

“In other words,” writes Salon’s civil liberties blogger Glenn Greenwald, “the U.S. government will now punish anyone who is determined — in the sole discretion of the U.S. government — even to ‘indirectly’ obstruct the full transition of power to President Hadi.”

As part of this transition, the U.S. military has carried out more drone strikes in Yemen this month than in the preceding 10 years combined. Yemen is also the place where last fall, a U.S. drone summarily executed a U.S. citizen — with no trial or other vestige of due process, merely the president’s say-so.

Would criticism of these policies constitute an act that “directly or indirectly threaten[s] the peace, security or stability of Yemen”? Probably not.

Not yet, anyway. But if you’re the sort of person who doesn’t like the government freezing his assets, we pass this along as a public service.

In a rerun of yesterday, the major U.S. indexes are up a bit — traders having set aside their worries about Greece.

Of course, by the close yesterday, all those gains were wiped out, and then some — thanks, we’re told, to “news” of a bank run in Greece.

We put “news” in quotation marks because even now, nearly 24 hours later, nobody has a clue what’s going on. Here’s a sampling of media coverage...
CNBC: “Greek depositors withdrew 700 million euros ($900 million) from the nation’s local banks recently, said President Karolos Papoulias, though the exact timing of the transfer was unclear.”

Wall Street Journal: “Greek depositors withdrew €700 million ($898 million) from the country’s banks on Monday... Greek President Karolos Papoulias told the country’s political leaders that bank withdrawals plus buy orders received by Greek banks for German bunds totaled some €800 million on Monday, a transcript of his comments said. A central bank official confirmed the figures.”

London Telegraph: “Citing a secret government document, [Papoulias] said Greeks were already pulling £80 million a day out of the country’s banks. Almost €1 billion (£795 million) has been withdrawn since the last elections, on May 6.”
From this we can deduce that ordinary Greeks withdrew a large but indeterminate sum of money sometime in the last 10 days. Maybe.

Don’t be surprised if there’s a repeat of yesterday’s late-day drop: The wild card this afternoon could be the release of minutes from the Federal Reserve’s meeting last month.

“The whole experiment is in jeopardy,” Addison writes of the euro in The Little Book of the Shrinking Dollar.

“The differences between the fiscal trajectories of the various eurozone states are of degree only, not direction. In this game, we’d put our bets that Germany — the last AAA standing — will call the shots. And they could well kick Greece or one of the other paltry PIIGS outta the union.”

As this forecast unfolds in real-time, hot money is again fleeing for the greenback. The euro is down this morning to $1.274.

The dollar index — of which the euro makes up 57% — is up to 81.24. The “DXY” has risen for 13 straight days, something it’s never done before.



Thus it stands at the high end of the range where it’s traded since Fed chief Ben Bernanke gave a wink to the world in Jackson Hole, Wyo., in August 2010 and all but said “QE2” was in the bag.

“The best wool that the feds can pull over your eyes is that they have all this under control,” writes Addison in the book. “They don’t.”

“They’ve got prejudices and working theories, but remember, there’s nothing hard about the ‘science of economics.’”

“If you hear CNBC or Bloomberg declare: ‘Prices are up 10% over the past year.’ don’t just switch off the TV and shrug.”

“Instead, acknowledge that ‘last year’s dollar is worth 90 cents today’ and work on what you can do about it when it comes to your own wallet and your bank account.”

The book has ample guidance to help you do so. In fact, our publisher Joe Schriefer counts 47 solutions. (He shares five of them with you right here.) Some are easier to implement than others. But no matter your net worth or your income, you’ll find plenty of take-aways you can put to work the moment you set the book down.

And for a limited time, Joe’s worked out a way to get you a copy of the book — free. Learn how to get your own — on us — at this link.

Gold is sinking further toward Vancouver speaker Marc Faber’s potential target of $1,400-1,500.

At last check, the spot price was $1,540 — below its low set at the end of last year.

Silver, for the moment, is holding above its year-end 2011 low... barely... at $27.42.

George Soros quadrupled his gold exposure in the first quarter, according to his latest 13-F filed with the SEC.

His stake of 85,000 GLD shares during Q4 2011 grew to 320,000 at the end of March.

That’s still a far cry from the 4.67 million shares Soros held at the end of 2010. He dumped almost all of it in the following three months... when gold still traded between $1,340-1,440. Even at today’s “relatively” depressed price, that looks like a bad trade.

Soros also loaded up on J.P. Morgan Chase during the first quarter. Yeah, that’s working out really well right now.

The morning’s read on the housing market: Meh. The Commerce Department says housing starts grew 2.6% last month... essentially offsetting a 2.6% drop the previous month.

Permits — a better indicator of future activity — fell 7%, largely offsetting an 8.8% increase the month before.

Activity was strongest in the South, weakest in the Northeast.

There’s now a number on the savings Facebook co-founder Eduardo Saverin will achieve by giving up his U.S. citizenship: $67 million.

Bloomberg figures it this way: Saverin owns 4% of the company, which has 1.9 billion shares outstanding. When he surrendered citizenship last September, shares were privately auctioned for $32.10. The IPO this week could be as high as $38.

The difference between the last two values works out to $448 million. Apply 15% capital gains tax — which goes up at the end of this year — and you get $67 million.

A Saverin spokesman challenges Bloomberg’s methodology and sticks to his story that came out this weekend: “His motive had nothing to do with tax and everything to do with his desire to live and work in Singapore.”

We’re not sure why Saverin and his minions are so determined to downplay the tax angle. “The United States is the only developed country taxing its citizens regardless of where they live,” Addison writes in The Little Book of the Shrinking Dollar.

No matter: Saverin’s move has inspired much weeping and gnashing of teeth. “Rather than paying back, he is moving on,” complains Yale law professor Bruce Ackerman in the Los Angeles Times.

“I don’t agree,” Addison says via email this morning, “with Ackerman’s assertion that Saverin should ‘pay back’ anything. Rather, the U.S. should have a tax system that makes it attractive for him to want to stay.”

Imagine that...

Heads up if you’re joining us in Vancouver this summer: Watch out for zombies.

The 5 has been on zombie alert going back more than 18 months. More recently, we took note of a course at Michigan State instructing students in “Surviving the Zombie Apocalypse.”

Now comes a new section on the website of British Columbia’s Emergency Management office: Evidently, it’s Zombie Preparedness Week in Canada’s westernmost province.

“The threat of zombie attack is a popular phenomenon around the globe,” the site says, “and with it comes the message to ‘be prepared.’”

“Earthquakes, tsunamis, floods, landslides, avalanches, interface fires, severe storms and hazardous material spills are some of the dangers that could threaten lives and cause extensive damage in British Columbia,” it goes on. “And while the chance of zombies a-knockin’ on your door is pretty slim, we do believe that if you’re ready for zombies, you’re ready for any disaster.”

The site includes links to several YouTube clips of preparedness steps, produced by the agency. They must be seen to be believed: We’re finally starting to understand some of the mock public-service announcements those Canucks on SCTV were doing 30-odd years ago...



We’re reasonably sure zombies will leave us untroubled in Vancouver the week of July 24. There’s still time to register and come join us for our best lineup of speakers ever, listed here. You’ll want to move quickly, though: We expect to be full up before the end of the month.

“Addison’s discussion about debt to GDP ratios with finance students at Towson University,” a Canadian reader writes, “reminded me of a class I taught many years ago (being a businessman, I volunteered with Junior Achievement to teach business basics to school kids).”

“Sadly, the current crop of Towson students seem as ignorant and misinformed about business, economics and finance as the Grade 8 kids I taught.”

“For example, a multiple choice exam asked my kids what the profit was when McDonald’s sells a $1.00 hamburger. All of them selected either 90 cents or $1.00 as their answer. They were shocked when I explained what it costs to make that hamburger and the few pennies left for profit after all costs are paid.”

“Most of the kids in my class were from upper-income families whose parents were either business people, professionals or well-paid skilled workers. Yet they knew nothing about business, the economy or finance. Nothing.”

“It is truly scary that my Grade 8 kids in Canada and Addison’s university students in the USA were so ignorant about what makes the world go round, and such ignorance is deeply embedded in our education systems.”

“But at least this explains why voters keep demanding their governments and unions do things that are sure to lead to economic and social ruin (Greece is a prime and current example).”

“If only we could force them all to read The 5 starting when they are in diapers.”

The 5: Hmmm....

“I have been using NASCAR attendance to tell me the truth about the supposed recovery for several years now,” a reader writes after yesterday’s episode, “since I live within half a mile of Bristol Motor Speedway and rent out space in my yard for campers.

“I have been doing this for over 10 years and never had a vacancy until last year. The one race that was run this year had the lowest attendance ever and I had nearly a third of my yard empty. Since I haven’t raised my camping rate ever, it all has to do with the economy and gas prices.”

“So I’ll believe in a recovery when the fans are back in my yard.”

“In November of last year,” writes a reader with a follow-up, “I read in The 5 that the Indiana Supreme Court had just shredded the basic right of its citizenry to defend themselves in their own home — a right dating back to the 13th century and the Magna Carta.”

“I was shocked to learn that six months earlier, the case of Barnes v. Indiana had gone almost unmentioned. As Indiana is my home, I was especially moved to prevent this ruling from taking hold.”

“Fortunately, despite the downplay given by the media, many of us here, myself included, objected loudly. Our state senators and representatives heard from us, and agreed, using words like ‘shocked’ and ‘appalling’ in reference to the ruling in their replies to me.”

“As a result of our efforts, Senate Bill 1 of 2012 was written to overturn the ruling; passed by an overwhelming majority; and, effective July 1, 2012, will become law, handing back the right of the individual to defend his or her home and property against unlawful entry by the police, using force if necessary.”

“I wanted to thank you for calling this incredible breach of justice to our attention. It was your action that informed me and doubtless many other Indiana residents of what was happening in our state. Thanks in part to you, we have stopped the court from stripping Indiana residents of a basic right. Others may complain of the nonfinancial content that we find in The 5 from time to time. I am not one of them.”

“Thanks for the financial advice, political heads up and always entertaining read.”

The 5: You’re welcome. And we invite you to join kindred spirits, wherever they might live, at the Laissez Faire Club.

Cheers,

Dave Gonigam
The 5 Min. Forecast ]]> 5min Forecast GoldSpeculator http://www.gold-speculator.com/5min-forecast/79401-yemen-exception.html Making Diamonds More Like Apple iPads http://www.gold-speculator.com/wallstreetjournal-business-tv/79400-making-diamonds-more-like-apple-ipads.html Wed, 16 May 2012 19:22:09 GMT Hearts on Fire, which currently sells its diamond jewelry through specialty retailers, is launching its own retail network of high-tech stores. Christina Binkley has details on Lunch Break. Photo: Michal Czerwonka for The Wall Street Journal.


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Hearts on Fire, which currently sells its diamond jewelry through specialty retailers, is launching its own retail network of high-tech stores. Christina Binkley has details on Lunch Break. Photo: Michal Czerwonka for The Wall Street Journal.



]]> WallStreetJournal - Business TV RssFeed http://www.gold-speculator.com/wallstreetjournal-business-tv/79400-making-diamonds-more-like-apple-ipads.html Aaron Sorkin Set to Write Steve Jobs Biopic http://www.gold-speculator.com/wallstreetjournal-business-tv/79399-aaron-sorkin-set-write-steve-jobs-biopic.html Wed, 16 May 2012 19:22:09 GMT Steve Jobs will come to life on screen courtesy of writer Aaron Sorkin, who is set to pen a movie about the Apple co-founder's life. Erica Orden reports on digits. Photo: Getty Images.


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Steve Jobs will come to life on screen courtesy of writer Aaron Sorkin, who is set to pen a movie about the Apple co-founder's life. Erica Orden reports on digits. Photo: Getty Images.



]]> WallStreetJournal - Business TV RssFeed http://www.gold-speculator.com/wallstreetjournal-business-tv/79399-aaron-sorkin-set-write-steve-jobs-biopic.html Longtime Holders Are Cashing Out of Facebook http://www.gold-speculator.com/wallstreetjournal-business-tv/79398-longtime-holders-cashing-out-facebook.html Wed, 16 May 2012 19:22:09 GMT Some of Facebook's biggest shareholders are now selling as much as half of their stakes in the company, just days after the company raised its expected IPO price range, Anupreeta Das reports on digits. Photo: AP.


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Some of Facebook's biggest shareholders are now selling as much as half of their stakes in the company, just days after the company raised its expected IPO price range, Anupreeta Das reports on digits. Photo: AP.



]]> WallStreetJournal - Business TV RssFeed http://www.gold-speculator.com/wallstreetjournal-business-tv/79398-longtime-holders-cashing-out-facebook.html Mossberg: Microsoft Cleans Up Windows http://www.gold-speculator.com/wallstreetjournal-business-tv/79397-mossberg-microsoft-cleans-up-windows.html Wed, 16 May 2012 19:22:09 GMT Microsoft is selling customized versions of popular PC models from many manufacturers that have been streamlined for a cleaner look and better performance, dubbed "Signature" models, Walt Mossberg reports on digits. Photo: Microsoft.


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Microsoft is selling customized versions of popular PC models from many manufacturers that have been streamlined for a cleaner look and better performance, dubbed "Signature" models, Walt Mossberg reports on digits. Photo: Microsoft.



]]> WallStreetJournal - Business TV RssFeed http://www.gold-speculator.com/wallstreetjournal-business-tv/79397-mossberg-microsoft-cleans-up-windows.html <![CDATA[Boehret: Bing's New Social Look]]> http://www.gold-speculator.com/wallstreetjournal-business-tv/79396-boehret-bings-new-social-look.html Wed, 16 May 2012 19:22:09 GMT Bing's new makeover leaves lots of white space and adds a new column for tasks like movie reservations and movie times, Katherine Boehret reports on digits. Photo: Bing.


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Bing's new makeover leaves lots of white space and adds a new column for tasks like movie reservations and movie times, Katherine Boehret reports on digits. Photo: Bing.



]]> WallStreetJournal - Business TV RssFeed http://www.gold-speculator.com/wallstreetjournal-business-tv/79396-boehret-bings-new-social-look.html Why the Delay from the Fed in Announcing Additional Stimulus Measures http://www.gold-speculator.com/trader-dan-norcini/79395-why-delay-fed-announcing-additional-stimulus-measures.html Wed, 16 May 2012 18:30:25 GMT http://www.traderdannorcini.blogspot.com/
http://www.fortwealth.com/

With all the turmoil and commotion occurring in Europe, with slowing growth in China and with mixed signals coming out of the US, and now, especially with global stock markets reeling and talk of "US fiscal cliffs" abounding, one would expect the doves on the Fed to begin making noises and talking nicely to the investment community about future plans for additional QE measures. Some have even suggested that one of the things that the Fed also might do is to further push back their date for any rate hike until "late in 2014". For now however we are getting an eerie silence. Even today's minutes of the recent FOMC meeting are rather vague, pretty much just stating what everyone already knows - the Fed will act if they think conditions warrant them so doing. What gives?

Take a look at the following chart of unleaded gasoline which might possibly provide a clue. It seems to me that gasoline prices have become a sort of marker as this commodity is perhaps one that has the greatest impact on the general public at large since it is so obvious as price boards for it are stationed practically everywhere one looks. Notice how gasoline prices have formed a double top on the chart above the $3.40 (these are wholesale prices with no federal or state taxes added) and have begun to come down having fallen some 55 cents or so over the last few weeks.



However, they still remain quite expensive by historical standards and are more than 16% expensive than last fall. My guess is that the policy makers understand full well that any certainty in regards to the advent of a new round of bond purchases by the Fed would turn this chart to the upside faster than one can say "Whoa Nellie".

It is very difficult to deny that while the Fed attempts to stimulate or to provide stimulus to the economy, if gasoline prices rise too highly as a result, it tends to short circuit the impact from such stimulus as higher gasoline/energy prices in general have a depressing or slowing impact on overall economic growth. I suspect that the Fed is hoping and waiting for speculative selling to push gasoline prices even lower yet so that the next round of stimulus will have gasoline prices back closer to levels seen late last year.

The problem for these Central Planners however remains the same, how do they herd speculative money OUT of the COMMODITY MARKETS and particular the ENERGY MARKETS and yet at the same time keep them from abandoning the EQUITY MARKETS? Remember, the more that people talk up the "SLOWING GLOBAL GROWTH" theme to push commodity markets lower the harder it is to justify stock prices at current levels. AFter all, what is good for the goose is also good for the gander and if the prices of basic commodities are plunging due to slowing growth concerns, then it is extremely difficult if not downright impossible to talk up the stock markets. Rising stocks need an economy that is growing and strongly rising stock prices need an economy that is growing strongly. You cannot have rising stock prices and falling commodity prices simultaneously as it is a logical aberration.

While the ESF and other entities would like to see this aberration - notwithstanding the impossibility of it occurring, if push comes to shove and they have to choose between falling equity prices or rising commodity prices, they will opt for the former every time, particularly in an election year. ]]> Trader Dan Norcini RssFeed http://www.gold-speculator.com/trader-dan-norcini/79395-why-delay-fed-announcing-additional-stimulus-measures.html Checking the Vaults: Germans Fret About Their Foreign Gold Reserves http://www.gold-speculator.com/ed-steer/79394-checking-vaults-germans-fret-about-their-foreign-gold-reserves.html Wed, 16 May 2012 17:29:03 GMT
*Image: http://www.caseyresearch.com/images/arrow.gif Yesterday in Gold and Silver * Gold set another new low for this move down about an hour before London opened yesterday. From that low, the gold price rallied right a bit right up until the Comex open...and was under a bit of selling pressure from that point onward. But the major selling pressure came once the Comex was through trading at 1:30 p.m. Eastern time...with the low price tick of the day [$1,540.70 spot] coming just moments before 4:00 p.m. in New York in the very thinly traded electronic market. From that low, gold recovered a few dollars going into the close at 5:15 p.m. Eastern. Gold finished the Thursday trading day at $1,544.30...down another $12.20. Net volume was pretty decent at around 143,000 contracts. Image: http://www.caseyresearch.com/gsd/sites/default/files/resize/gold_404-469x297.gif (http://sg2.caseyresearch.com/wf/click?upn=flkojQoVnV4U9n9PwF8wibXq-2F8JL1n1-2BeRHxW0SD9QSfuB9Gu5Kg3aOb79YO7RF88wHgKs9AfjE7PFzlu2iy3v4Yuc5oBXym73dHgIladOQ-3D_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXYmLjZcmVOUs8qKEpnAB4-2F7vf1lSBI3NzSWjmOmMsxKkxi95KNvit598Cx8GIq-2BOfM0LmLyuNDY2O74Dc2jCZBfzVFoCzyW7ArnCEhZIDvFcrAF3LDp695hVBIDJUfvuug-3D-3D) It was pretty much the same price pattern in silver...except the engineered sell-off was far more intense. Silver's low price tick [$27.51 spot] came at the same time as gold's...and the silver price recovered about 20 cents going into the electronic close. Silver closed the day at $27.72 spot...down 46 cents from Monday. Net volume was pretty high at 37,000 contracts, more or less. Image: http://www.caseyresearch.com/gsd/sites/default/files/resize/silver_389-469x298.gif (http://sg2.caseyresearch.com/wf/click?upn=flkojQoVnV4U9n9PwF8wibXq-2F8JL1n1-2BeRHxW0SD9QSfuB9Gu5Kg3aOb79YO7RF8OIdaRmeAOoSqoDjctFxKkuEinhhXAeq4njEqimGGbdY-3D_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXbNLSXpmCkL5FZdd4EBy40DGwU0f9Yt-2BlEbx4Om7GrhbkKNVuy1XDyfHPp-2FZcAZs8AVIA56faFMUqpw3XOLuNt6bMnTApsBJF9Mtit0yjmtz26g3YzWgGwae1gOii8j9dQ-3D-3D) The dollar index traded in a narrow 10 basis point range of 80.60 for a goodly portion of Tuesday. That lasted until shortly before 9:00 a.m. in New York...and then away it went to the upside until about 3:20 p.m. Eastern time where it traded sideways into the close. The dollar index closed up about 65 basis points. Image: http://www.caseyresearch.com/gsd/sites/default/files/resize/intraday_149-470x307.gif (http://sg2.caseyresearch.com/wf/click?upn=flkojQoVnV4U9n9PwF8wibXq-2F8JL1n1-2BeRHxW0SD9QSfuB9Gu5Kg3aOb79YO7RF8MNkUESMGUoP9KJfEaaUPV2dPrQ3JBpTbJ0hRnBfL0Fo-3D_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXeWJiwKn-2BC9N8Cx1vOVm0I-2Bvud-2B3rGRUKQyKtGhxSvQvjaNxbQWWpt4eaoeXJBzuTUm-2Fc0D4YdJiHuGdulOXhiFW-2FAuei0ee-2BduMp-2BMxM3glL7wiIgOseJO5K4ET0EAdqw-3D-3D) The gold stocks started off in positive territory...and then got sold off...but recovered back to unchanged just before lunch in New York. It was all down hill from there. The *HUI* got smacked for another 3.83%. Image: http://www.caseyresearch.com/gsd/sites/default/files/resize/HUI_376-470x264.png (http://sg2.caseyresearch.com/wf/click?upn=flkojQoVnV4U9n9PwF8wibXq-2F8JL1n1-2BeRHxW0SD9QSfuB9Gu5Kg3aOb79YO7RF8hGqR6Qs8HKiZ6GwebRqrAjpJDNhi-2BROAhkUUNpXhgaM-3D_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXe8Olkt5qJMgar-2BAYqmHxOqPBZObJ0iMG4Wi-2BIthPB0yBOScQVYmJ-2BuzUBGkFa2RC5JWaG30JhJp0yMwWONoprISERpsT3oTodd3nD6vmZqhIWDWRHgysStWZwRXXHyJGg-3D-3D) The silver stocks really got crucified again...and Nick Laird's *Silver Sentiment Index* took it on the chin for another 5.95%. Image: http://www.caseyresearch.com/gsd/sites/default/files/resize/Silver%207_336-470x293.png (http://sg2.caseyresearch.com/wf/click?upn=flkojQoVnV4U9n9PwF8wibXq-2F8JL1n1-2BeRHxW0SD9QSfuB9Gu5Kg3aOb79YO7RF8onNrjm6ZmpQeXVEg-2Fb1reeL4Q6NKvSGD7pb0EL5qRR0-3D_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXRWqNgoHxcZ4rd9Q4hoTTkQQfrAlOHRXviNvVCp3hEyrgpSA8TOTJJ5BTpZsdpKaq3jXaDT7FVTIpuMjw0W7sg2tBkFW2Dx4s75DURGyge-2B6HHYe6TiHWzn8Ck2EOga4bg-3D-3D) (Click on image to enlarge) The CME's *Daily Delivery Report* showed that 1 gold and 123 silver contracts were posted for delivery on Friday. The big short/issuer was Merrill with 113 contracts...and the short/stoppers were a mixed bag. The link to the *Issuers and Stoppers Report* is here (http://sg2.caseyresearch.com/wf/click?upn=flkojQoVnV4U9n9PwF8wiURyyQw0sfn9UaQNrv-2FfNeUNLOvwD5byQ0ej2hEsoozd-2B0pDE0LXSruFT8REPUVU9paF3yiIdrQLYtU7J52Nt3c-3D_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXVUqiTLPj-2BJJznGxc29-2BQUgO06IkG6jKFodQHo-2BKqNjg9-2FMOqltiMbSJ4Br0dp6KrR12HFnc-2FeYAG0MZJf3l26qIdFa6o2nx00XU1hFgbIg2Kr5z4azX6p-2BcJDX-2BdUCfPw-3D-3D). There were no changes in either GLD or SLV yesterday. Ted Butler and I were discussing the big 1.6 million ounce surprise deposit in SLV on Monday...and Ted figured it probably had something to do with covering a short position in SLV shares. We'll know more when the new report is posted over at Short Interest Stock Short Selling Data, Shorts, Stocks: Short Squeeze (http://shortsqueeze.com) a week from today. The U.S. Mint had a sales report worthy of the name yesterday. The sold 3,000 ounces of gold eagles...500 one-ounce 24K gold buffaloes...and 150,000 silver eagles. Month-to-date the mint has sold 34,500 ounces of gold eagles...1,500 one-ounce 24K gold buffaloes...and 1,135,000 silver eagles. It was a busy day over at the Comex-approved depositories on Monday. They reported receiving 1,526,942 troy ounces of silver...and shipped 305,421 ounces of the stuff out the door. The link to that action is here (http://sg2.caseyresearch.com/wf/click?upn=flkojQoVnV4U9n9PwF8wiURyyQw0sfn9UaQNrv-2FfNeVZl7IQGjwn7-2FtQOk95uG1NjWjOiJtFAuRfs-2FaPFUwabA-3D-3D_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXWQNlgoodFyWOMx123htX95WdF-2FJgpDFJq0oO8WGmGNgPFtY7ZpDWRyugvOmQCvmV0-2FEFhktyf-2Bn7WqHQZH6edz3fCSWH8gmJE-2Fe7o0UiGrpNuclxQr0snsKoHLKeoHsbA-3D-3D). German gold analyst Dimitri Speck was kind enough to send me several of his excellent charts...and I'm more than happy to post them here. I'll post the gold charts today...and the silver charts tomorrow. The first chart shows the "Intraday Price Movements" in gold over about eighteen years. The high at the London open...and the low at the London p.m. gold fix...are the most prominent features. Image: http://www.caseyresearch.com/gsd/sites/default/files/resize/18%20year%20gold-470x372.gif (http://sg2.caseyresearch.com/wf/click?upn=flkojQoVnV4U9n9PwF8wibXq-2F8JL1n1-2BeRHxW0SD9QSfuB9Gu5Kg3aOb79YO7RF82pn6PDVTeyOfS1dDTSD20SMfWZa35iTEYiwMnJs1wqA-3D_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXQD5LcjeI-2Bsxl8TcOrMw6NCiv1Q89AaGG9jG87ZIA1y0u1svfjsFUT9-2F30WiAf-2FaJlP-2FBPeO3YAzq9n5a79V5qiZnTdPlxu7E79cBWztUFLvtPXnjQsJZwI6Nlgxyq3d9Q-3D-3D) (Click on image to enlarge) The second chart shows the intraday price movements for the first quarter of 2012...and there are subtle differences, but the overall price pattern is the same...and only the times of the highs and lows have shifted. Image: http://www.caseyresearch.com/gsd/sites/default/files/resize/Q1%20-%202012-468x372.gif (http://sg2.caseyresearch.com/wf/click?upn=flkojQoVnV4U9n9PwF8wibXq-2F8JL1n1-2BeRHxW0SD9QSfuB9Gu5Kg3aOb79YO7RF8UjX7qFKB0zCcgbjQviG5FIQTiLtizAqh1z6lJrTr9Sw-3D_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXQ9cTqR-2Fak4TNJAbRWuX4xrblbPGZZWoG08q-2FnAg-2BPwdYKSRj-2Fb2SX87hTRrH3lBiUng2wTXYnjJUS5aj4b37PjhSkPB9zsNHxvbaYnNdnSTD4bkP8SoKdr63Yj1C6m4lw-3D-3D) (Click on image to enlarge) And lastly, here's the chart for 2011 on its own...the same, but slightly different once again. The negative price bias in London really stands out in this chart. Image: http://www.caseyresearch.com/gsd/sites/default/files/resize/Gold%202011-470x372.gif (http://sg2.caseyresearch.com/wf/click?upn=flkojQoVnV4U9n9PwF8wibXq-2F8JL1n1-2BeRHxW0SD9QSfuB9Gu5Kg3aOb79YO7RF8r0PkZU7ANYqFeWkCYTUSKRacpHei2DtiIHW3CPcL5WA-3D_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXQoDV3N38lNCej-2BMgB7r4bi2TjxxaKRza8FA30gBTehXjo2GlUOVd0gRHNuWzIR6kMTP-2BCXIeYsHq2iIoKcE3lbgPEsIlpNyyuAQ3-2BDJVOXl0CflZNcv1HFnphRkQXeu-2Bg-3D-3D) (Click on image to enlarge) I have *a lot* of stories again today...and I hope you have time to read through most of them
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Image: http://www.caseyresearch.com/gsd/sites/default/files/imagecache/critical_read_thumbnail/critical_read/bloomberg_225.jpg *The "London Whale" Swamps JPMorgan* Bloomberg's Stephanie Ruhle reports on Jamie Dimon's disclosure of JPMorgan's $2 billion trading loss, how regulations may have forced his hand in revealing the loss and that there may be further losses yet to come. This 1:36 minute video was posted over at the Bloomberg - Business, Financial & Economic News, Stock Quotes (http://bloomberg.com) website on Monday...and Casey Research's own David Galland sent it around to everyone yesterday morning. It's a *must watch for sure*...and the link is here (http://sg2.caseyresearch.com/wf/click?upn=flkojQoVnV4U9n9PwF8wiXeB3KoPsdPfb7iGzvy90lBNu4XAVTjB56ki7dNBKyf0_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXS0A0lCTcDxw68msvozCwSEihU6W7SxWeI1r0C8zxyg4f0mZ6dn4arru4R-2BBOzyLyE-2BW5-2Fc56cr-2BuXsZB7tONVKAk6MP5oxMCzljVeIVSdknxBtj1hH43HKzO05WhopkiQ-3D-3D).
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Image: http://www.caseyresearch.com/gsd/sites/default/files/imagecache/critical_read_thumbnail/critical_read/voices-author-male_892.jpg *JPM Losses already $3-4 bln; Europe's Core Emergency Ongoing bank runs: Greece to Re-default: Eric Sprott* My friend Aaron Krowne over at ml-implode-explode.com (http://ml-implode-explode.com) reported on the highlights of Eric Sprott's speech at the New York 2012 Hard Assets Conference that's going on now. It's a short *must read*...and the link is here (http://sg2.caseyresearch.com/wf/click?upn=xhXEIox1mbnK6u-2FJq6eav-2FmXRRo5WMMtdCTcXWfgIJ9XbkSrt16l0DqmDB2YtC-2BUjH6iaBP5aeCTYs9uXORNpzrn-2Bg7-2BG5l9XvssX3eL823L0BgKcKE4VF0swXYIu4Iir0E0jR0zr3fK1bhMbyGh1z0KMJ-2FgeEAKa8eH4pJXUQU-3D_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXZJ39SIAlWs32IYNjQ4ZTXZ43uPJxvgOwmrcYT-2B-2Bvk0kfO1fLPK03SD7E3HriUFHn-2BeXvt2yrGv-2B4adnekg7TVFI1xEX4f9TeDhn5BP8QqvZVEp6WM0buvf-2FEWzFM2CibA-3D-3D).
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Image: http://www.caseyresearch.com/gsd/sites/default/files/imagecache/critical_read_thumbnail/critical_read/bloomberg_226.jpg *Dodd-Frank Swaps Legislation Delayed After JPMorgan Trade Losses* U.S. House lawmakers, acting after JPMorgan Chase & Co. (JPM) announced $2 billion in derivatives trading losses, delayed a committee vote on legislation easing Dodd- Frank Act swaps rules. The U.S. House Agriculture Committee postponed a May 17 committee meeting to vote on the measures, which would limit the international reach of the 2010 regulatory-overhaul law’s swaps regulations and allow more derivatives trading to occur in federally insured banks. “As always, Washington has a tendency to overreact. While the news of JPMorgan’s trading loss is unfortunate, the bipartisan legislation the committee was scheduled to consider is unrelated to the cause of the trading loss,” Representative Frank D. Lucas, an Oklahoma Republican and chairman of the committee, said in a statement. “However, this committee will take the time to gather all relevant information before we proceed to ensure there are no unintended consequences of the legislation that would encourage recklessness in our financial institutions,” Lucas said. This Bloomberg story from yesterday is courtesy of Australian reader Wesley Legrand...and the link is here (http://sg2.caseyresearch.com/wf/click?upn=flkojQoVnV4U9n9PwF8wiS-2BIbzi69zdEq1nqq5IX9Z-2Biy4lesIToBKKjyp7jZWqQPcTWi4X7q5RIU5L4gHJJFFbu2m150oEFezVkDHA9j8ysYp5V9-2BJRwsS3S9nJjTxM3D2n1ZHLS2Mglq1EjPLsMHg5yUFIWnaIpQaU5dH7l8o-3D_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXRMAX3unvrpLeE6UGbXVzdr9jIATAX1l0tI3DBBjn8rJAG0DhceF8RhDZ41clBV6CjYSoOCowPowDrbxPYqoI7JhVfBd98VgX4rsdoGMYakqOpWLgqjjdmREUj0bUpEKVQ-3D-3D).
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Image: http://www.caseyresearch.com/gsd/sites/default/files/imagecache/critical_read_thumbnail/critical_read/rollingstone_29.gif *Accidentally Released - and Incredibly Embarrassing - Documents Show How Goldman et al Engaged in 'Naked Short Selling'* It doesn’t happen often, but sometimes God smiles on us. Last week, he smiled on investigative reporters everywhere, when the lawyers for Goldman, Sachs slipped on one whopper of a legal banana peel, inadvertently delivering some of the bank’s darker secrets into the hands of the public. The lawyers for Goldman and Bank of America/Merrill Lynch have been involved in a legal battle for some time – primarily with the retail giant Overstock.com, but also with Rolling Stone, the Economist, Bloomberg, and the New York Times. The banks have been fighting us to keep sealed certain documents that surfaced in the discovery process of an ultimately unsuccessful lawsuit filed by Overstock against the banks. Last week, in response to an Overstock.com motion to unseal certain documents, the banks’ lawyers, apparently accidentally, filed an unredacted version of Overstock’s motion as an exhibit in their declaration of opposition to that motion. In doing so, they inadvertently entered into the public record a sort of greatest-hits selection of the very material they’ve been fighting for years to keep sealed. This *Matt Taibbi* blog was posted over at the Rolling Stone website yesterday afternoon. It's a long, but *very interesting read*...and I'm sure this issue isn't going away. I thank Roy Stephens for sending me this...and the link is here (http://sg2.caseyresearch.com/wf/click?upn=flkojQoVnV4U9n9PwF8wiVXL92PJR5vl0gjykslrOSi2fPDEbvMErBvUyUX8P-2FB-2FlO-2BVhEa4CqFEn9OsiLdV-2ByC-2Fd9IWnCqUE-2F6zrc8zo-2FIHfVNpdf99sP5sHhh7Gv-2BXEqWhKf0q2xCpT-2FfgEic9li9CuZMsMBqBTNogo2O3WkebkSC-2Bu38whx8T0wW3uGkTIPxIJNn4iW2Wr-2B9auEqORpWm2xgl3JMj2BGVaYpPUnbJEpJlButoJG-2FMprYrQDuN_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXTm-2Bs-2F5fm-2FtFFx1LOfgTqjqwwue1uSfA6NToT0M4ZceGxR2-2BIvFXcmSEHVkg1B4Ov2p-2FPO2DGa93dstVLCEkDIyVbVl-2F9jweFwsSTw-2BY4fLICnvr7p3bIDwu4nu2yhEVaA-3D-3D).
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Image: http://www.caseyresearch.com/gsd/sites/default/files/imagecache/critical_read_thumbnail/critical_read/newyorktimes_197.gif *Foreigners Boost Buys of Long-Term U.S. Securities: Treasury* Foreigners increased purchases of long-dated U.S. securities, including government bonds, in March, the U.S. Treasury said on Tuesday, but lightened up on short-term assets such as bills. Overseas investors bought a net $36.19 billion in long-term assets in March, above February's inflow of $10.14 billion. They increased Treasury holdings by $20.47 billion after buying a net $15.35 billion the prior month. China, the largest foreign U.S. creditor increased its Treasury holdings to $1.170 trillion from a downwardly adjusted total of $1.155 trillion in February. Brazil increased its holdings by $9 billion to $237.4 billion. This story from yesterday's New York Times was posted on their website yesterday morning...and I thank Phil Barlett for sending it along. The link is here (http://sg2.caseyresearch.com/wf/click?upn=flkojQoVnV4U9n9PwF8wiaPmuXpv9ht732u9ELumU7VqRhUbAGYEgGr-2BSXTTqkZn0T4FXKkw5Aspuq04QwrTz3xs9e064a91TbBAn2IeL70cX2yRS4zB6OGixGQ0-2Fy7JOuQRfbtWTz8-2Bvcuc02-2Bhjg-3D-3D_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXfJPAu2YICJFJV1WGIJPzaJDD2GKgz6uipw6pmHnE2gaGQS-2BGLbAuwhTmrGOKDysmAEz9vi0mymGYDbLzaSRlc3aKWz2hzLbvcKWAu52-2B3gx42KsJW7S1J-2BB6FO0U5qwSw-3D-3D).
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Image: http://www.caseyresearch.com/gsd/sites/default/files/imagecache/critical_read_thumbnail/critical_read/ZeroHedge_311.jpg *Homebuilder Confidence Rises To 5 Year High As Actual Sales Remain Near All Time Lows* America may not sell many new homes (read - sales are near or at all time lows), but that does not prevent homebuilders from having a dream, or in this case confidence that soon, *soon, **_SOON_*, things will finally improve. Sure enough, in May the NAHB homebuilder confidence soared to 29, from 24, on expectations of a 26 print. Of course, these numbers are completely meaningless, and only serve to get the algos ramping momentum in an upward direction. In the meantime, the reality of actual *sales, *can be seen on the chart below. These two paragraphs comprised the entire ZeroHedge | On a long enough timeline the survival rate for everyone drops to zero (http://zerohedge.com) article yesterday...but the graph mentioned is well worth looking at...and the link is here (http://sg2.caseyresearch.com/wf/click?upn=flkojQoVnV4U9n9PwF8wicdzd0FbDHTbIW1T-2FFwgJn5jfaKCwMHIHg3ClroXjwxg8hg46jGWuW2QfiOLFFjT-2Bn0FWjuscDdlUs8IppMRcjslW3fzn7dsKHeePs91VUdP0RYAz91jAJO-2BVVz-2BgM4WpJSsF-2BBl2tYroHDQesAGirE-3D_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXaMi7UveGlTDH32CUpuFcz9SOZF0yU-2F07GOTz2m2JL2L-2FrZEKSaRQ6ovLa8LWbVI04eYsIo8xF5ib-2BggYn-2F53SoqyaRNUJJGm8Qc8kDFq1vBmzK2mbxFSy8NZn8xT7Ik6g-3D-3D). I thank Phil Barlett for his second contribution in a row.
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Image: http://www.caseyresearch.com/gsd/sites/default/files/imagecache/critical_read_thumbnail/critical_read/voices-author-male_893.jpg *Scottish pensions crisis: Scots born today ‘will retire at 77’ * Scots infants will be forced to work until they are 77 years old before they become eligible for a state pension, according to a new report that paints a grim picture of aged toil. The age at which the public becomes eligible for a state pension is set to rise to 77 for today’s children, with the following generation likely to work until they are 85. As the UK government announced in the Queen’s Speech that the state pension age will now be linked to how long the average person lives, and will rise to 67 in 2028, the new study predicts it will go up again to 68 by 2031, adding an extra year of work for those aged 48 or younger. This story showed up over at the Scotsman.com (http://scotsman.com) website yesterday...and I thank Andrew Holland for sending it along. The link is here (http://sg2.caseyresearch.com/wf/click?upn=flkojQoVnV4U9n9PwF8wiWF8CyiLougIpNvJQVcK6wXbnAhmYCZbiw1BjMIDJAu7899kEFGL2u5-2BirAnLfv8qLfdhp-2FkiiAWW-2F5RtNWm24ff1dY-2FUt84g3hGZG3PKrNvwJKjea-2Fd-2Fh8QYqxP0a5YNCtq3MK44ZO7fneEnB2OJV8-3D_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXcqhAv56zGEx7YLJSjJELR5Rdl8QauxiyStt139Pf1I6R1GZrU3UdqQWXFq07yQXrdoP9Lf9D7-2FDBYJHy8jx7JUlTIVYZhdpMlAMD-2FgVBP25oB21QpQw5QNFdBdF3eh4gw-3D-3D).
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Image: http://www.caseyresearch.com/gsd/sites/default/files/imagecache/critical_read_thumbnail/critical_read/spiegel_258.gif *New Elections in June Markets Fall after Greek Talks Collapse* It was the final act in the tragedy surrounding the attempts to form a Greek government -- and it had a dramatic ending. Greece will hold a new election in June after politicians failed to form a government on Tuesday, nine days after a vote that produced a stalemate.Image: http://adserv.quality-channel.de/RealMedia/ads/adstream_nx.ads/www.spiegel.de/international/artikel/1318596457@Sub1,Sub2,Top1,Top2,TopRight,Left,Right,Right1,Right2,Right3,Right4,Right5,Middle,Middle1,Middle2,Middle3,Bottom,Bottom1,Bottom2,Bottom3,Position1,Position2,x01,x02,x03,x04,x05,x06,x07,x08,x09,x10,x11,x12,x20,x21,x22,x23,x70,VMiddle2,VMiddle,VRight,Spezial%21Middle2 Athens now faces at least another month of political uncertainty that threatens to push Greece closer to bankruptcy and an exit from the euro. After a third day of failed talks with political leaders, a spokesman for President Karolos Papoulias said the process of seeking a compromise had failed and a new vote must be held. Elections rules suggest it will be in mid-June, possibly June 17. A caretaker government is to be formed on Wednesday to lead the country until the new vote can be held. This story was posted over at the German website SPIEGEL ONLINE - Nachrichten (http://spiegel.de) yesterday...and I thank Roy Stephens once again for sending it along. The link is here (http://sg2.caseyresearch.com/wf/click?upn=flkojQoVnV4U9n9PwF8widCbd9TUeh-2FD9MjZo5M6Y8hdvkhY3qV8EbvXNKgBp53IsFsS1-2BNZMJrJVhGmTec8XVft5VvAcjQBwhatTCJR0pUEujGX8qmLnmuR6h6vGDCFDy63LHIRYcH3sBxFy2-2BOTpmZJk8PP0BptnJqJ1Crw6WPDlQeTRSiwCXnQaAsJgMM_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXYoZf3c8gWz08foZoNBF5JcHXldH0zjflNILc-2FkEu9W910tjmrfTAWHg57zR-2BuGGhkqnCI2XbmUKpq-2FXX-2FLX74mNM0ycJW2TOKp2HCa0rx017a-2BZ7uf2lp3yW9EY4Chayw-3D-3D).
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Image: http://www.caseyresearch.com/gsd/sites/default/files/imagecache/critical_read_thumbnail/critical_read/WSJ2_74.gif *Greek Bank Run accelerates: Depositors withdrew $898 million from Banks Monday * Greek depositors withdrew €700 million ($898 million) from the country's banks on Monday, fueling fears of a bank run amid the growing political disarray. With deposits falling, Greek banks become even more dependent on the European Central Bank to meet their funding needs, exposing the central bank to potentially huge losses if Greece leaves the euro area. Greek President Karolos Papoulias told the country's political leaders that bank withdrawals plus buy orders received by Greek banks for German bunds totaled some €800 million on Monday, a transcript of his comments said. A central bank official confirmed the figures. This subscriber-protected story was posted in The Wall Street Journal yesterday...and the link to what's available for public viewing is here (http://sg2.caseyresearch.com/wf/click?upn=c8VcjFEoKOX-2BqxOPIgGbmsncfR1FODllKibKBop1bjjsVvy147BXbLw-2BmHk92jcrkHjh7vbtw4o15ukVmjkgrXbpgKCTgEt1lF-2BicDop8Zjv2zEAW5A2LJfzlcN8LgYv_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXTU6yKDYO4PBt46H1NDDwi9COz8NBukjTG2spI5xpnwI2LVgOPrtRA0nzsd6zDUsh5RVGarEGXUpNIjzQga8BsPEFNZQ-2BGmxISdw8Tln3nUG-2FOx59fWNm39wVDIVTlyN-2BA-3D-3D). I thank reader U.D. for sending it.
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Image: http://www.caseyresearch.com/gsd/sites/default/files/imagecache/critical_read_thumbnail/critical_read/Telegraph_co_uk_562.jpg *Global lenders face 'killer losses' on Greek debt* The euro tumbled to a four-month low and European stock markets dropped as political leaders and economists warned that the next round of elections called in Athens amounted to a vote on Greek membership of the euro “What’s at stake isn’t just the next Greek government,” said Guido Westerwelle, Germany’s foreign minister. “What’s at stake is the Greek people’s commitment to Europe and the euro.” “A second vote means Greece is edging closer to the point where it’s inevitable they have to exit the euro,” Fredrik Erixon, head of the European Centre for International Political Economy in Brussels, said. “No other course of events is now likely.” This story was filed in The Telegraph late last night...and I thank Roy Stephens for bringing it to our attention. The link is here (http://sg2.caseyresearch.com/wf/click?upn=flkojQoVnV4U9n9PwF8wiSzav2nRmSuUijJ-2B9K4zmw4Nxn-2BU6twJAMQXCMmb-2BYn5y3oXkrvHm0zvR9-2FwjEac-2BH5RrwxqG-2F69TsL18h3lO9NFri8qfTFCLn5sX2l8EYmS7iKni0zt4vdDyGqEbX50De19eG-2BcIL0vLeWSbkDOdvg-3D_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXY37zg1ISeqbNLbcaeEZeqWgfL99XiNeZKe1Up4pLqBpquCQzh4dUEY-2BpnKPFzfM4C7-2FMAFqiGVYHtTVYDTpqx7tdW8w8oWC5RGxxQb2qO6Ont-2BvDs8C2aGccZPHnFU6-2BA-3D-3D).
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Image: http://www.caseyresearch.com/gsd/sites/default/files/imagecache/critical_read_thumbnail/critical_read/Telegraph_co_uk_563.jpg *This is how the euro ends – not with a whimper but a bang * So it's still possible that Greeks will, when push comes to shove, simply surrender and take their punishment. It hardly needs saying that such an outcome would resolve nothing. And the other possible outcome? Greece is indeed forced in despair to quit. With the precedent set, there would follow a mass flight of deposits out of Italy and Spain into safer havens, such as Germany and even the US and the UK. Indeed, this process has already begun. The only way of stopping it is to impose capital controls, but once major economies begin to do this, the euro is essentially over. It's no longer a single currency. With or without capital controls, the European Central Bank would in any case need to step into the breach to stop the Italian and Spanish banking systems from collapsing. Ironically, the liquidity to do this would come from Germany and other surplus nations such as Finland and Austria, setting in train a giant, money merry-go-round. Think about it. The Italian depositor removes his money and places it in a "safe" German bank account. There's nothing safe to invest in, so the German banker places the money on deposit with the Bundesbank, which then lends it to the ECB, which lends it back to the original Italian bank struggling with funding because of the flight of capital. The upshot is a massive build up of German central bank claims on Italy and Spain. In Germany alone, these contingent liabilities already exceed €600bn, or around a quarter of German GDP. This is another story from The Telegraph yesterday...and it's also courtesy of Roy Stephens. The link is here (http://sg2.caseyresearch.com/wf/click?upn=K9BPxHp-2BezRH0LDZ4Q46hbS8dpVkOjFTQopwhi-2FIRrhBNJPZHA1PP4wLS29SiIqLswxuB8AF6-2Ba-2BxDfMXbASXQ8IbCfmd2KLdTTmPGVcE6n70PChP-2BQ4fgqxKxUdG6HC-2BM-2FohJVUH2lgiailuUu1pBS1QUJcJIuC8ifWllT2MZc-3D_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXdFhdRg1wqRfc67yhdpKuDSa1pFApwg5m8M6V6Q2canhW0T9LrKAcO2I47Uh6-2BE-2FgPYnebcAtc92eMcZ-2B1IdxYoIkSo9btJJBHYWd2E0ma4NJ4Y-2BROMuTurK536fASAwog-3D-3D).
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Image: http://www.caseyresearch.com/gsd/sites/default/files/imagecache/critical_read_thumbnail/critical_read/voices-author-male_894.jpg *China: Listed firms offer bleak outlook* Almost half of the companies listed on the mainland's two bourses that have so far released financial forecasts for the first six months expect to see a decline in earnings or to fall into the red, primarily due to falling demand amid an economic slowdown. According to Wind Information Co Ltd, a leading provider of economic data and financial information, 845 companies listed on the *Shenzhen and Shanghai stock exchanges* had released January-June financial performance forecasts as of May 13. A total of 384 companies forecast a slump in their net profit or a loss, accounting for 45.4 percent. This is no real surprise...and confirms that China's economy is following the rest of the world into the proverbial dumpster. I thank Hong Kong reader Graham C. for sharing this story with us. It was posted over at the Chinadaily US Edition (http://chinadaily.com.cn) website yesterday morning...and the link is here (http://sg2.caseyresearch.com/wf/click?upn=flkojQoVnV4U9n9PwF8wifkHNKZwFcxqYbNRcvaFSRsMeh69-2FIKVKlO-2BaMRDeqcp6yfVabbnnyCFKQBpSmP8lugKCiU4rkNtEmQCAOtDJ7A-3D_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXbKEROfKWGbzig8Rn64UqOYkJf6Puvt96RjCF09CtD8ZMv-2FUd2bAYLyJEDxjUIMuVT7VrSz7pqQxmQUWzeVVSH9TRU9oXPSZhZtMnmJNILGOcOByYeO2d-2FHYk9kvwW4zLA-3D-3D).
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Image: http://www.caseyresearch.com/gsd/sites/default/files/imagecache/critical_read_thumbnail/critical_read/spiegel_259.gif *Checking the Vaults: Germans Fret about Their Foreign Gold Reserves* A large portion of Germany's massive gold reserves are stored abroad, mainly in the Federal Reserve in New York. But are the bars really where they are supposed to be? A dispute has broken out over whether the central bank needs to check on its gold, or if Germany can trust its international partners. Germany has gold reserves of just under 3,400 tons, the second-largest reserves in the world after the United States. Much of that is in the safekeeping of central banks outside Germany, especially in the US Federal Reserve in New York. One would think that with such a valuable stash, worth around €133 billion ($170 billion), the German government would want to keep a close eye on its whereabouts. But now a bizarre dispute has broken out between different German institutions over how closely the reserves should be checked.Image: http://adserv.quality-channel.de/RealMedia/ads/adstream_nx.ads/www.spiegel.de/international/artikel/1933073221@Sub1,Sub2,Top1,Top2,TopRight,Left,Right,Right1,Right2,Right3,Right4,Right5,Middle,Middle1,Middle2,Middle3,Bottom,Bottom1,Bottom2,Bottom3,Position1,Position2,x01,x02,x03,x04,x05,x06,x07,x08,x09,x10,x11,x12,x20,x21,x22,x23,x70,VMiddle2,VMiddle,VRight,Spezial%21Middle2 (http://sg2.caseyresearch.com/wf/click?upn=-2FzKMOHcsq-2BD4hOc6uVX8u0QQH87gzr2j6zHI3LprIGaW7WO6zP61mPKodV-2FwBKtMUv6HkhrZHOhd61RDnbzCR0Ad-2FmUSNEzWlZjCV4TmdCUFmT-2FLYZtouRYFdSLHqoBGJHuKCB5La8AH4fg5WYCrRl-2BKwVgmwhlKUlbXVxBV9fiAps28dzM5OdP-2B7sOSmjFZS1QOQNbKb39YoDfBKJkWlHSHqdy7-2F8EXR0iwhZmQLhmQzasgeSEqgUi-2Foq8umU-2BpogqVBwsaOhomwJ-2BCRDZCe-2BsOI2EaHyFKU99UliEGsI-2Fg88Jw8No4J5RSwO47YdnGWAzSmHUQzXjRiYGT0fvvBqMPSrPlblxAzPsN-2Fp9y9sbCnl-2FPhg2uqsA3b-2FtrqRnWdGuvnoasMNI3pxnrCqyczL32haWQidjv2lZMPXXKBc2cYzJ3kk69QuDT4NMQYyTLlk0Tpw6HBs9TLW2xNOd-2Bq7npMpPx4dnwg7QXaMLVID0vztR3H-2FDDaVettfhqkkGP_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXe3b2zWNWCA1saosMiZzUlvblhVfefdBb-2FYHNl6ifERlU-2B5kDoNZffMQdTs5n40lKMNoX-2FpDcHcZsoPDInuLHUv21XfOL53THFeGLQXjEkFl2GhK1EEYPvpszrO7mPuZ1w-3D-3D) Germany's federal audit office, the Bundesrechnungshof, which monitors the German government's financial management, is unhappy with how Germany's central bank, the Bundesbank, keeps tabs on its gold. According to media reports, the auditors are dissatisfied with the fact that gold reserves in Frankfurt are more closely monitored than those held abroad. In Germany, spot checks are carried out to make sure that the gold bars are in the right place. But for the German gold that is stored on the Bundesbank's behalf by the US Federal Reserve in New York, the Bank of England in London and the Banque de France in France, the German central bank relies on the assurances of its foreign counterparts that the gold is where it should be. The three foreign central banks give the Bundesbank annual statements confirming the size of the reserves, but the Germans do not usually carry out physical inspections of the bars. The rest of this SPIEGEL ONLINE - Nachrichten (http://spiegel.de) story from yesterday is posted on their Internet site...and the link to this *must read* story is here (http://sg2.caseyresearch.com/wf/click?upn=flkojQoVnV4U9n9PwF8widCbd9TUeh-2FD9MjZo5M6Y8jjASEMtaJ7sLLwJflIqEBk2kUWwDOOEm9Rfhi7qqOrXvkuoAqE7Cnq05tBVbyLQYxzAiN54valMXlsVOzp8vOuBsJjpoPRcpZbX9cNa8W-2Bn-2B-2FUzZhPbzoDa-2FZ9-2BQ5jsbA-3D_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXb0o-2BYs0VRGeH-2BWOdMv2bs3z5h5tQJLAcf5KEyki4qHSUDmE9UqvtfZlS1wOVc-2FX4BFWmrBH-2BJrEzuS6sP5JsbwE0g1HuYs0vBov7wFWeW8cSq8r3-2BP-2FA9OvuKXgn-2FNbiw-3D-3D). Roy Stephens provided this story as well.
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Image: http://www.caseyresearch.com/gsd/sites/default/files/imagecache/critical_read_thumbnail/critical_read/goldcore_0.jpg *Bundesbank Confirms German Gold Held By FED, BOE and Banque De France* This story was posted over at the Gold Bullion, Investing in Gold Bars & Gold Coins - GoldCore.com (http://goldcore.com) website yesterday...and is certainly worth reading. It covers a lot of territory, including the surge in gold demand coming out of the Far East...which is certainly no surprise to me. I thank Richard Craggs for sending me this story...and as I said in the previous paragraph, it's *worth your time*. The link is here (http://sg2.caseyresearch.com/wf/click?upn=flkojQoVnV4U9n9PwF8wiXaeim7Hq2H1ex4cxSPPeekD6tRIHh5uVe-2BWMEYX3YXiyh0CHDEMvzqwbavig-2FQhzOhtK33gDLI0tyVzgnro9DbsZrQXf8HBkKIlNlvyE3l2hGEbINBpS8ZQsZjQEjQUenhIT8m-2BwFnNZaWiqAy67MyrkEMjGpH56C-2BV2v5lopRX_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXR5faw7CXWNTzwGBDFqzmFv6i6En4EycFaSnkAMRjWTXCKMJMnFCTeSS98gm2Pcnr6qnekNiF-2F-2F2KrZIDgDhaG9vqRsQfLusKzqasv7XGdqWm7VDmcnRCpdck7IXka8Ekw-3D-3D).
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Image: http://www.caseyresearch.com/gsd/sites/default/files/imagecache/critical_read_thumbnail/critical_read/goldmoney_57.gif *Stoferle, Macleod discuss clamor for gold reserve repatriation* In an audio discussion at GoldMoney's Internet site, Erste Bank gold market analyst Ronald Stoferle and economist Alasdair Macleod discuss the market and calls to repatriate national gold reserves held by foreign central banks. I borrowed the headline and the introductory paragraph from a GATA release yesterday. It's certainly *worth the listen*...and the link is here (http://sg2.caseyresearch.com/wf/click?upn=flkojQoVnV4U9n9PwF8wiTbkGN2YAIq7SkVW4cSriXF59jM8nAmXxbZ97nQdRA7QVchI-2FbzbC3pLvl-2BJBko2O5bBiY-2BK6oH6yTLstTDmjFOtaXGfbFLrhyPzncFG7r50tZQV3yruf-2B-2BW-2FAashZGtcOzA9i66nEsxNg1wMu0Jxsc-3D_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXfm0RnEJXKIIVGUX2qfXqrsnQr0Pk3mkSPeeWUUe7pVVoXTY-2Fgo1olq8CyZGIk8sS-2FKmAzQ0iOXJ5KMlooL-2Bo6lnD9cHiCewH-2BqCCECY-2F6mz4-2FT8dcdkJbV7isbgE0brlA-3D-3D).
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Image: http://www.caseyresearch.com/gsd/sites/default/files/imagecache/critical_read_thumbnail/critical_read/KingWorldNewsBlog_619.jpg *Three King World News Blogs* The first one is with *Paul Brodsky*...and it's headlined "The Paralyzing Fear Among Investors Today (http://sg2.caseyresearch.com/wf/click?upn=AF8E4XFSJ3NLyGfcTwKn6oRwcS-2BFOuuPBzFK41MXbaa8BGn7X3AtOhYxJ7Al5E86jND-2FvtoQ3-2BAEQZvvQVa-2FWX9mh4MJkkaygzBA8QNyGH1T7XLFAAp4qXXBrEJSCQyFbNtCf85C690AiJ1O97qrwT5zciGlDixMnmpC7UinhHMqr3F9PX82bIZVEv2s30F7_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXbY97-2FhZ0kZTF6yYig06dA2hwFDweZdUzThfVCxpzEXDk85sfc41OYfh2NmRfW5uAU-2Bx86ec2RWeBlEL-2B5bLu5-2F6yC3QWy3LIfls-2B-2BJjVjyVajjbzLUbckH2QMGYLhkbIw-3D-3D)". The second blog features *Michael Pento*...and it bears the title "Here is What is Facing Investors & The World Today (http://sg2.caseyresearch.com/wf/click?upn=AF8E4XFSJ3NLyGfcTwKn6oRwcS-2BFOuuPBzFK41MXbaa8BGn7X3AtOhYxJ7Al5E86jND-2FvtoQ3-2BAEQZvvQVa-2FWTfOb3l63IGAm0pWgru3Uz3dOq523525OrXp1qPMgjGPpoUFUa1KvplpwS4BDD5iwhYI10rDG458n177-2FsBEY3PXVby0kdLkmaBT7uZM9HwF_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXeB4kE-2BiX88NRPBBVW1G8HA2aFCE7BAq-2Fq61y2IK79uMx32atwU4k6sWrePYOZIQv-2F4xLuk4eTan-2BsZPl4SCzSqa-2FbG0yO2bnKj1X7CVM20wCEp29pFK47lmannAnK625g-3D-3D)". And lastly is this blog with *James Turk*...and it's headlined "Expect Tremendous Chaos, Europe Deterorating Rapidly (http://sg2.caseyresearch.com/wf/click?upn=AF8E4XFSJ3NLyGfcTwKn6oRwcS-2BFOuuPBzFK41MXbaa8BGn7X3AtOhYxJ7Al5E86jND-2FvtoQ3-2BAEQZvvQVa-2FWQDLf9JEAT-2BD2mRBWlTPp7Lb5wxpm3AeNx8uU7p3xbXcARNX4WKlkl0iTOtj-2FZf1JANU0n7FbeWAzdJCJ8B-2FeMaBaGC9DDQulJwLK0AQYz8n_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXeT9-2BRasmbUTUij3j2Zbyjl1ZrdEbI7qbOX3KNrC-2Flrl7FAD18W1aT1dGCpEd69zmr3IV9m7xh8rSeALHqUJx4MfwBtOkUn9Ry4LDs6d6QqQoRjdjiRY0XFujyfNOPIOlw-3D-3D)".
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Image: http://www.caseyresearch.com/gsd/sites/default/files/imagecache/critical_read_thumbnail/critical_read/commodityonline_8.jpg *Palladium shortage to be 714,000 ounces in 2012: UBS* The palladium market is expected to be in a 714,000 ounce deficit in 2012 as demand for the commodity continues to exceed supply, UBS stated in a report. In view of the same, the bank has raised its palladium price forecast for 2012 to $760/oz from the previous $725/oz. This shortage in the market is expected to continue for about the next 3 years until 2016 when the palladium will shift into surplus. Meanwhile, its cousin platinum will see a 143,000 ounce surplus this year. But despite this, the bank has raised its price forecast to $1,700/oz from $1,675/oz. Platinum and its related metals are expected to benefit in Q2 largely due to improved growth in the US and emerging economies. This story was posted over at the Commodity Market,Commodity Prices,Gold Price,Silver Price,Crude Oil Price,MCX (http://commodityonline.com) website on Monday...and I thank reader Richard Craggs for sending it along. The link is here (http://sg2.caseyresearch.com/wf/click?upn=flkojQoVnV4U9n9PwF8wiXeYsHdoDapFWwxTjgqSMXFauFMsb9GbXl7MfBGvum-2FceoF-2BCU4VTw26CmY1gtIaIR8Jg8SNm4BQckxtSGnD3A2-2F0u-2FRXq3BVFIQ7mqLP-2FDrv82c-2Fba9hiiQxdQFLwIr1w-3D-3D_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXUPqGoRo6z1ovBZp1CXx5waDMNoQ6vkJtmqsrsdw0L5n7M1T8U1ESEvDJ890Nsm3rQ-2F3dTakSh6Z304X9FXPkaAQ2hdVavEvUUL4btLwI1CatXLGsM1aorHIFQ5vxx-2FiLg-3D-3D).
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Image: http://www.caseyresearch.com/gsd/sites/default/files/imagecache/critical_read_thumbnail/critical_read/yahoofinance_46.gif *Gold Slides to New 2012 Low: Buying Opportunity or Bull Market Breakdown?* Casey Research's own Louis James was interviewed by the good folks over at Yahoo! Finance - Business Finance, Stock Market, Quotes, News (http://finance.yahoo.com) yesterday. The video clip runs for 4:14 minutes...or you can read the transcript. It's a *must watch/listen*...and the link is here (http://sg2.caseyresearch.com/wf/click?upn=iJ7SV52QEgLFYrhgDcVzrDC93iEE-2FSSFiE6N9nP99oUJC-2FgbVUArGT4ztYIBzjhAXKE-2B-2FptToNqlNU6u1uZazGLG6IogFjh9fYGQd3S-2FQQOWmELKcrDzV7XUrUInpQ8s9juEVIzBU5RyeA5MqpqDIg-3D-3D_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXeH-2BlrYhKBXyXdQ0dKP7b-2F-2FNfvzteyJgk2s0PIv52gG1-2B2T5NX-2FLBHbBFv1dvp-2BlWAFYLsKZMKJ6Qwcs-2FQtV-2FCt-2Bef-2FiPjLbPNVUYSdur-2FqmILSzIMd9RkXKuVwB1qw4OQ-3D-3D).
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Image: http://www.caseyresearch.com/gsd/sites/default/files/imagecache/critical_read_thumbnail/critical_read/GATA_468.jpg *Brodsky and Quaintance: Central banks aim to redistribute gold and push it way up * In their May letter, Paul Brodsky and Lee Quaintance of QB Asset Management in New York argue that the investment case for gold is to a great extent a matter of its likely official revaluation upward to support confidence-based currencies that have lost the market's confidence. As improbable as it may seem lately, what with the constant suppression of gold and silver prices on the futures markets, Brodsky and Quaintance conclude that central banks now really mean to push the gold price up -- way up -- once the gold necessary for the plan has been obtained and redistributed among central banks. This is one of my pet theories as well...and it's the last arrow in the quiver of the fiat currency crowd. We certainly won't see a convertible currency from it, but certainly a much higher gold price. If in fact this scenario does materialize, my estimate is somewhere between $8,000 and $18,000 the ounce. These are about the same numbers that Jim Rickards has thrown around from time to time. The rest of Chris Powell's comments, plus the link to their May newsletter, is contained in this GATA release...and the link is here (http://sg2.caseyresearch.com/wf/click?upn=flkojQoVnV4U9n9PwF8wielsrovrr1vI3ikugmY4EDYSGzPx3tHWjHVcMH99j3mf_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXbEySQWtl08TnzbfRsFrza64upExbURPaZUf184ggIai-2Btl3uL72KhuWP5YiG1nTnt5aSGsQTjTL2HXOVV1Bf0ZjWV0F3xir9KiScpqox-2BsYuqMADvV5yFjHjLqcOOS-2Buw-3D-3D). It's *well worth reading*.
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Image: http://www.caseyresearch.com/gsd/sites/default/files/imagecache/critical_read_thumbnail/critical_read/Reuters_211.jpg *Miners will need $3,000 gold price to be profitable, WGC head says* Sharp increases in mining costs mean gold will need to reach $3,000 an ounce in five years for the industry to stay profitable, World Gold Council chief executive Aram Shishmanian said on Monday. Miners currently needed a gold price of $1,300 to survive, Shishmanian said, but faced steep rises in mining costs, along with the cost of dividends and host nation taxes. "If this continues for the next five years the gold price needs to be at least $3,000 just to stay in the business," he said. However, he was optimistic sustained demand would drive prices higher over the long term. I found this Reuters story posted in a GATA release yesterday...and the link is here (http://sg2.caseyresearch.com/wf/click?upn=flkojQoVnV4U9n9PwF8wieM1vY0ekiB6PXbxw4zC5J-2FxQFSzN4IH6fmaM1Rlr4pX3ftgVzFmDrvHex3RFk3X0M-2BRwnG3YFq8n9BvsWuyK04k-2ByHRcwOQOKDwd84WNRM7_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXRF6sJsUQagZW-2BASwiJGPC-2Bbg39q6JJDBAxHCbrA5IHVzKDnPu-2FlvAWrZlmZyS5RkPR-2BhQJxEtl-2BGUDNe2HxxUI5uCoWiQN7f6KFsEl5nmrsHoMvPWq11dSVw0gNlGL6hQ-3D-3D).
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Image: http://www.caseyresearch.com/gsd/sites/default/files/imagecache/critical_read_thumbnail/critical_read/barrons_3.jpg *Soros Ramps Up Gold ETF Holdings* Soros Fund Management picked up a new stake in J.P. Morgan Chase in the first quarter, sold out of Google and nearly quadrupled exposure to the SPDR Gold Trust, a quarterly portfolio disclosure shows. This *very short* story was posted over in Barron's late yesterday afternoon...and the link is here (http://sg2.caseyresearch.com/wf/click?upn=K9BPxHp-2BezRH0LDZ4Q46hVkQeimHUfo-2BmiUgTTg2VTHgLdqN61jOQ8E1Ar-2FRvXlw8079SaXXohO8WJyeBcrBrevOmL6a0lf2k1yZubHFZGLSLQR9bjPcqn0WKMHJOuJG1-2Bs7S1DEFc9Bk4sCA2KT0Zofwfu3JMmc5pXKA7pnCTEL5I0E-2BJ3SZBMTkkgUCV-2BI_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXZDmR6lL66qhYeO6ldbk3RQZpNAK5l4d6VgXZUUtTC6tN4PCUE3y-2FCPccvyE3S6xzYhOuUjwfHcaHAQ3-2BBedBAUVA-2BPlZ99WzWNvuPEqqwVMukTiiDDiOJPy2EoT41-2Fy-2BA-3D-3D).
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Image: http://www.caseyresearch.com/gsd/sites/default/files/imagecache/critical_read_thumbnail/critical_read/financialsense_16.jpg *Jim Puplava: Keeping the Faith: Holding Onto Your Gold Stocks When Your Emotions Tell You To Sell* This 50-minute audio commentary was posted over at the FINANCIAL SENSE | Applying Common Sense to the Markets (http://financialsense.com) website on Saturday...and if you have the time, it's *worth the listen*. I thank reader Howard Brown for sending it along...and the link is here (http://sg2.caseyresearch.com/wf/click?upn=flkojQoVnV4U9n9PwF8wifzOulGWCui7DohYKqL0-2FG-2By0WjGd9muyJ2sNYKitnaj-2BeB7RkMQVy03g4c2cvIe-2Bfqax7-2FDaPrxnEgHItPX9M-2FxpUfbEeMEGBJudZ26aKBiotZ6xvoZvvVKwd1OZqwySwhJD3vNm-2BSSxSBu2vRx4ls2x-2BEOX5uWrdYdVs0A9nFEQIcArUSbh6absIxADkp0fQ-3D-3D_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXbDG3maDZ4fdvzWAmZ5w5zdVdBS4soWilu2e-2F1YsPoV-2FDbCjF2LNTnEektPkAhGMYXEue4uCaSvbbU15z-2BsVc2YxKVd5YfHBD6z4xMOrefMl99SmIbVamXrE3BjFAGUQGw-3D-3D).
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Image: http://www.caseyresearch.com/images/arrow.gif The Funnies
Image: http://www.caseyresearch.com/gsd/sites/default/files/resize/The%20Whale-470x329.jpg (http://sg2.caseyresearch.com/wf/click?upn=flkojQoVnV4U9n9PwF8wibXq-2F8JL1n1-2BeRHxW0SD9QSfuB9Gu5Kg3aOb79YO7RF8Kj5za4SLBviZ0dwz6AiYsc6CZ5VWevinvbeY9R0kOd4-3D_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXYWgiMOszem-2BoYG-2BrYwWBXtCrneHB5piW-2BD-2BrKSzFzKwEKb5IRxsDRca-2BzsHCOofN7OU2DKsEO9YxsQ3pBs3GlFAm-2FKNhDy-2FAKmAvDnEzhqN-2B4Q-2BPiFXfe7YrCJnq-2B0nqw-3D-3D) Image: http://www.caseyresearch.com/gsd/sites/default/files/resize/Traffic%20Laws-469x330.jpg (http://sg2.caseyresearch.com/wf/click?upn=flkojQoVnV4U9n9PwF8wibXq-2F8JL1n1-2BeRHxW0SD9QSfuB9Gu5Kg3aOb79YO7RF84v5GeM1cHwDJg9oL8JobNHLo3eLqJWDgjP6mYTSwJ0s-3D_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXeLRM6i2Sz3cDt44Xt01QA1KzLVSOuO1hScuejJJzFf4093Gz2WammDLZ9hFq755p6euV6RUKNB8tq7fTEBIZGRkPweP6fLuubbdsASAfMrZpnk1He34zcDkqJk2kt-2F8Vw-3D-3D) Image: http://www.caseyresearch.com/gsd/sites/default/files/resize/Greek%20Tragedy-470x352.jpg (http://sg2.caseyresearch.com/wf/click?upn=flkojQoVnV4U9n9PwF8wibXq-2F8JL1n1-2BeRHxW0SD9QSfuB9Gu5Kg3aOb79YO7RF86hIvs-2BEjNp511eCROKylBaqfli88yMhqlD7wOS7cx9M-3D_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXbeOiKqgbj9YeYyEoNT9p613oF-2BCcBY-2Fev6NluQ4d0Z5h39NXstzIPf6qSkd0qLaVz93WeYUa-2BzPmsV-2FtuBp68NdJW-2BnWFKXZUIlj-2BLkcFB7sDGeIApa6c-2BDCKFcWRr6wg-3D-3D)
Image: http://www.caseyresearch.com/images/arrow.gif The Wrap
While the US Dollar and Treasury debt are the twin foundations of the system, the major modern indicators of how the system is functioning are the stock market and the precious metals, Gold in particular but also Silver. A stock market investment is a bet ON the system, a purchase of physical Gold and/or Silver is a bet AGAINST it. This is clearly shown by the lengths to which the financial powers that be will go to support the stock market - and to undermine the price of the precious metals. - Bill Buckler, The Privateer (http://sg2.caseyresearch.com/wf/click?upn=flkojQoVnV4U9n9PwF8wiaVcroUIs21Ml6UBfRCFshEPr6rhioV2MyC0SnDwQT-2Bi_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXXbHInJUCdPrd4fBmUpFYEZVLD3q4UuaLgqw0o1tlQWbXK1UvXdj-2FuRQM7jwRPcbUiUR0YLqpZZx2stI8RF8o7-2BTD2E5P-2BJhrw1YVOTWj2f9m53P66h-2B1jNfvG1-2BZ4AzBw-3D-3D), 12 May 2012 Well, the pain continued unabated again yesterday. Everything that occurred up to and including the close of Comex trading at 1:30 p.m. in New York yesterday, should be in this Friday's Commitment of Traders Report...and as I pointed out in this space yesterday, it should be a stunner. Unfortunately, 'da boyz' leaned on the precious metals particularly hard after the Comex close yesterday...and that data won't be in Friday's report. Here are the 3-year charts for all four precious metals, with the exception of palladium, which had a price bounce yesterday, every other precious metal is more oversold than its been in the last three years. Image: http://www.caseyresearch.com/gsd/sites/default/files/resize/3-year%20gold_31-468x354.png (http://sg2.caseyresearch.com/wf/click?upn=flkojQoVnV4U9n9PwF8wibXq-2F8JL1n1-2BeRHxW0SD9QSfuB9Gu5Kg3aOb79YO7RF8X4-2B2R15BAJDvf6BVEJeLx0WlXek3gbs7ThbxaXZMQvY-3D_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXV-2FFhX4JKd6GteAsK-2BT5vGGeEMzQdYRbKRm6D6C2sBTnFqoyE1KCsJRZtT4MHIEn9SkovemhEdoWaIgq6uZJoNLiWpoBh6Lvj6OeLofV2CsXsSoerhMGUWT0vlxO4Ogk9w-3D-3D) (Click on image to enlarge) Image: http://www.caseyresearch.com/gsd/sites/default/files/resize/3-year%20silver_38-469x354.png (http://sg2.caseyresearch.com/wf/click?upn=flkojQoVnV4U9n9PwF8wibXq-2F8JL1n1-2BeRHxW0SD9QSfuB9Gu5Kg3aOb79YO7RF8X4-2B2R15BAJDvf6BVEJeLx3SXKTcwRcAQHczA7Wn7HHjL-2Fszh47OfeSOaqG5QLCne_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXQt1-2BybcKIOMyV-2Babyeirlk27IW3P4IM5NSe5OHCeO9BvQ3SSSGhb3K7fWcXIQEClADeyt03aqLwYmBrLIg-2BpsWCuZ1rhAboWq7B048AKTLAsffermojJKYTyOQgza-2BE1g-3D-3D) (Click on image to enlarge) Image: http://www.caseyresearch.com/gsd/sites/default/files/resize/3-year%20platinum_0-470x355.png (http://sg2.caseyresearch.com/wf/click?upn=flkojQoVnV4U9n9PwF8wibXq-2F8JL1n1-2BeRHxW0SD9QSfuB9Gu5Kg3aOb79YO7RF8X4-2B2R15BAJDvf6BVEJeLx2XNP-2B6b7jbVUWmBVcc02Eo7ob9aJ8H210DvhLJMjtkf_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXVXhUZEROEXedF2zlyhhlB7OvnZ6bjRYCVX8pFkfKTD-2FcRp0FL3TPea0PgSCV1kzKqb-2FrVHGCLZzwSo08OnnR-2BySPuOT9CjLeuL7UnjoR-2BnD2pZq9u7tLkeWL3AVPh3CKA-3D-3D) (Click on image to enlarge) Image: http://www.caseyresearch.com/gsd/sites/default/files/resize/3-year%20palladium_0-470x358.png (http://sg2.caseyresearch.com/wf/click?upn=flkojQoVnV4U9n9PwF8wibXq-2F8JL1n1-2BeRHxW0SD9QSfuB9Gu5Kg3aOb79YO7RF8X4-2B2R15BAJDvf6BVEJeLxxWPjqdfbR-2BwNSsLTbpkyXwvXTQh63zdynMUQqUssbQW_lkLnd9bHiq8VMNCy6vpz6nsP4gyv4Kwqx86o5wgsnpw-2BXStGadtrL-2BDx0LLYJiRgUbKWeeO3DKdpOFr6PzNcXZ1F-2Bxyce2SWK4qFW2e2knAj8cl4BwYWKNiKf-2Bm-2FWOUHBCpax6SjKIqwiSsJ-2Fx9foyJM5KlUvKvsE0VxfFocF3L7pncreAaABGr-2BzsrrVPSCm-2FZJdzCfRGmdXL9UwnepfA-3D-3D) (Click on image to enlarge) As I mentioned further up in this column, you have to ask yourself why the precious metals are getting trashed in the face of one of the biggest financial crisis of our lifetimes. One only has to read Bill Buckler's quote above to understand. But once this engineered 'correction' has run its course, it's my guess that JPMorgan et al will be nowhere to be found [fingers crossed!] on the next rally...unless it's a short-covering rally that they themselves instigate. I've been watching the precious metals ever since they opened for trading in the Far East earlier today...and in London this morning. Once again, the 'salami is being sliced' to the downside...as more new lows were set in all four precious metals shortly after the London open. Net volumes as of 4:49 a.m. Eastern time were monstrous in both metals. In gold it was 46,000 contracts...and in silver it was just under 10,000 contracts. The dollar index rallied about 25 basis points overnight, but topped out shortly after the London open...and is now back to virtually unchanged from Tuesday's New York close. One has to wonder just how much more 'oversold' this market can get, as we are already in record territory in that regard...and I'll be watching the price activity during the Comex trading session in New York with great interest when I get out of bed later this morning. See you on Thursday. Image: http://www.caseyresearch.com/images/Ed_Sig.jpg ]]> "You have to ask yourself why the precious metals are getting trashed in the face of one of the biggest financial crisis of our lifetimes."


Yesterday in Gold and Silver

 Gold set another new low for this move down about an hour before London opened yesterday. From that low, the gold price rallied right a bit right up until the Comex open...and was under a bit of selling pressure from that point onward.

But the major selling pressure came once the Comex was through trading at 1:30 p.m. Eastern time...with the low price tick of the day [$1,540.70 spot] coming just moments before 4:00 p.m. in New York in the very thinly traded electronic market. From that low, gold recovered a few dollars going into the close at 5:15 p.m. Eastern.

Gold finished the Thursday trading day at $1,544.30...down another $12.20. Net volume was pretty decent at around 143,000 contracts.


It was pretty much the same price pattern in silver...except the engineered sell-off was far more intense. Silver's low price tick [$27.51 spot] came at the same time as gold's...and the silver price recovered about 20 cents going into the electronic close.
Silver closed the day at $27.72 spot...down 46 cents from Monday. Net volume was pretty high at 37,000 contracts, more or less.


The dollar index traded in a narrow 10 basis point range of 80.60 for a goodly portion of Tuesday. That lasted until shortly before 9:00 a.m. in New York...and then away it went to the upside until about 3:20 p.m. Eastern time where it traded sideways into the close. The dollar index closed up about 65 basis points.


The gold stocks started off in positive territory...and then got sold off...but recovered back to unchanged just before lunch in New York. It was all down hill from there. The HUI got smacked for another 3.83%.


The silver stocks really got crucified again...and Nick Laird's Silver Sentiment Index took it on the chin for another 5.95%.

(Click on image to enlarge)

The CME's Daily Delivery Report showed that 1 gold and 123 silver contracts were posted for delivery on Friday. The big short/issuer was Merrill with 113 contracts...and the short/stoppers were a mixed bag. The link to the Issuers and Stoppers Report is here.

There were no changes in either GLD or SLV yesterday. Ted Butler and I were discussing the big 1.6 million ounce surprise deposit in SLV on Monday...and Ted figured it probably had something to do with covering a short position in SLV shares. We'll know more when the new report is posted over at Short Interest Stock Short Selling Data, Shorts, Stocks: Short Squeeze a week from today.

The U.S. Mint had a sales report worthy of the name yesterday. The sold 3,000 ounces of gold eagles...500 one-ounce 24K gold buffaloes...and 150,000 silver eagles. Month-to-date the mint has sold 34,500 ounces of gold eagles...1,500 one-ounce 24K gold buffaloes...and 1,135,000 silver eagles.

It was a busy day over at the Comex-approved depositories on Monday. They reported receiving 1,526,942 troy ounces of silver...and shipped 305,421 ounces of the stuff out the door. The link to that action is here.

German gold analyst Dimitri Speck was kind enough to send me several of his excellent charts...and I'm more than happy to post them here. I'll post the gold charts today...and the silver charts tomorrow.

The first chart shows the "Intraday Price Movements" in gold over about eighteen years. The high at the London open...and the low at the London p.m. gold fix...are the most prominent features.

(Click on image to enlarge)

The second chart shows the intraday price movements for the first quarter of 2012...and there are subtle differences, but the overall price pattern is the same...and only the times of the highs and lows have shifted.

(Click on image to enlarge)

And lastly, here's the chart for 2011 on its own...the same, but slightly different once again. The negative price bias in London really stands out in this chart.

(Click on image to enlarge)

I have a lot of stories again today...and I hope you have time to read through most of them





Critical Reads


The "London Whale" Swamps JPMorgan

Bloomberg's Stephanie Ruhle reports on Jamie Dimon's disclosure of JPMorgan's $2 billion trading loss, how regulations may have forced his hand in revealing the loss and that there may be further losses yet to come.
This 1:36 minute video was posted over at the Bloomberg - Business, Financial & Economic News, Stock Quotes website on Monday...and Casey Research's own David Galland sent it around to everyone yesterday morning. It's a must watch for sure...and the link is here.



JPM Losses already $3-4 bln; Europe's Core Emergency Ongoing bank runs: Greece to Re-default: Eric Sprott

My friend Aaron Krowne over at ml-implode-explode.com reported on the highlights of Eric Sprott's speech at the New York 2012 Hard Assets Conference that's going on now. It's a short must read...and the link is here.



Dodd-Frank Swaps Legislation Delayed After JPMorgan Trade Losses

U.S. House lawmakers, acting after JPMorgan Chase & Co. (JPM) announced $2 billion in derivatives trading losses, delayed a committee vote on legislation easing Dodd- Frank Act swaps rules.
The U.S. House Agriculture Committee postponed a May 17 committee meeting to vote on the measures, which would limit the international reach of the 2010 regulatory-overhaul law’s swaps regulations and allow more derivatives trading to occur in federally insured banks.
“As always, Washington has a tendency to overreact. While the news of JPMorgan’s trading loss is unfortunate, the bipartisan legislation the committee was scheduled to consider is unrelated to the cause of the trading loss,” Representative Frank D. Lucas, an Oklahoma Republican and chairman of the committee, said in a statement.
“However, this committee will take the time to gather all relevant information before we proceed to ensure there are no unintended consequences of the legislation that would encourage recklessness in our financial institutions,” Lucas said.
This Bloomberg story from yesterday is courtesy of Australian reader Wesley Legrand...and the link is here.



Accidentally Released - and Incredibly Embarrassing - Documents Show How Goldman et al Engaged in 'Naked Short Selling'

It doesn’t happen often, but sometimes God smiles on us. Last week, he smiled on investigative reporters everywhere, when the lawyers for Goldman, Sachs slipped on one whopper of a legal banana peel, inadvertently delivering some of the bank’s darker secrets into the hands of the public.
The lawyers for Goldman and Bank of America/Merrill Lynch have been involved in a legal battle for some time – primarily with the retail giant Overstock.com, but also with Rolling Stone, the Economist, Bloomberg, and the New York Times. The banks have been fighting us to keep sealed certain documents that surfaced in the discovery process of an ultimately unsuccessful lawsuit filed by Overstock against the banks.
Last week, in response to an Overstock.com motion to unseal certain documents, the banks’ lawyers, apparently accidentally, filed an unredacted version of Overstock’s motion as an exhibit in their declaration of opposition to that motion. In doing so, they inadvertently entered into the public record a sort of greatest-hits selection of the very material they’ve been fighting for years to keep sealed.
This Matt Taibbi blog was posted over at the Rolling Stone website yesterday afternoon. It's a long, but very interesting read...and I'm sure this issue isn't going away. I thank Roy Stephens for sending me this...and the link is here.



Foreigners Boost Buys of Long-Term U.S. Securities: Treasury

Foreigners increased purchases of long-dated U.S. securities, including government bonds, in March, the U.S. Treasury said on Tuesday, but lightened up on short-term assets such as bills.
Overseas investors bought a net $36.19 billion in long-term assets in March, above February's inflow of $10.14 billion. They increased Treasury holdings by $20.47 billion after buying a net $15.35 billion the prior month.
China, the largest foreign U.S. creditor increased its Treasury holdings to $1.170 trillion from a downwardly adjusted total of $1.155 trillion in February. Brazil increased its holdings by $9 billion to $237.4 billion.
This story from yesterday's New York Times was posted on their website yesterday morning...and I thank Phil Barlett for sending it along. The link is here.



Homebuilder Confidence Rises To 5 Year High As Actual Sales Remain Near All Time Lows

America may not sell many new homes (read - sales are near or at all time lows), but that does not prevent homebuilders from having a dream, or in this case confidence that soon, soon, SOON, things will finally improve. Sure enough, in May the NAHB homebuilder confidence soared to 29, from 24, on expectations of a 26 print.
Of course, these numbers are completely meaningless, and only serve to get the algos ramping momentum in an upward direction. In the meantime, the reality of actual sales, can be seen on the chart below.
These two paragraphs comprised the entire ZeroHedge | On a long enough timeline the survival rate for everyone drops to zero article yesterday...but the graph mentioned is well worth looking at...and the link is here. I thank Phil Barlett for his second contribution in a row.



Scottish pensions crisis: Scots born today ‘will retire at 77’

Scots infants will be forced to work until they are 77 years old before they become eligible for a state pension, according to a new report that paints a grim picture of aged toil.
The age at which the public becomes eligible for a state pension is set to rise to 77 for today’s children, with the following generation likely to work until they are 85.
As the UK government announced in the Queen’s Speech that the state pension age will now be linked to how long the average person lives, and will rise to 67 in 2028, the new study predicts it will go up again to 68 by 2031, adding an extra year of work for those aged 48 or younger.
This story showed up over at the Scotsman.com website yesterday...and I thank Andrew Holland for sending it along. The link is here.



New Elections in June Markets Fall after Greek Talks Collapse

It was the final act in the tragedy surrounding the attempts to form a Greek government -- and it had a dramatic ending. Greece will hold a new election in June after politicians failed to form a government on Tuesday, nine days after a vote that produced a stalemate.
Athens now faces at least another month of political uncertainty that threatens to push Greece closer to bankruptcy and an exit from the euro.
After a third day of failed talks with political leaders, a spokesman for President Karolos Papoulias said the process of seeking a compromise had failed and a new vote must be held. Elections rules suggest it will be in mid-June, possibly June 17. A caretaker government is to be formed on Wednesday to lead the country until the new vote can be held.
This story was posted over at the German website SPIEGEL ONLINE - Nachrichten yesterday...and I thank Roy Stephens once again for sending it along. The link is here.



Greek Bank Run accelerates: Depositors withdrew $898 million from Banks Monday

Greek depositors withdrew €700 million ($898 million) from the country's banks on Monday, fueling fears of a bank run amid the growing political disarray.
With deposits falling, Greek banks become even more dependent on the European Central Bank to meet their funding needs, exposing the central bank to potentially huge losses if Greece leaves the euro area.
Greek President Karolos Papoulias told the country's political leaders that bank withdrawals plus buy orders received by Greek banks for German bunds totaled some €800 million on Monday, a transcript of his comments said. A central bank official confirmed the figures.
This subscriber-protected story was posted in The Wall Street Journal yesterday...and the link to what's available for public viewing is here. I thank reader U.D. for sending it.



Global lenders face 'killer losses' on Greek debt

The euro tumbled to a four-month low and European stock markets dropped as political leaders and economists warned that the next round of elections called in Athens amounted to a vote on Greek membership of the euro
“What’s at stake isn’t just the next Greek government,” said Guido Westerwelle, Germany’s foreign minister. “What’s at stake is the Greek people’s commitment to Europe and the euro.”
“A second vote means Greece is edging closer to the point where it’s inevitable they have to exit the euro,” Fredrik Erixon, head of the European Centre for International
Political Economy in Brussels, said. “No other course of events is now likely.”
This story was filed in The Telegraph late last night...and I thank Roy Stephens for bringing it to our attention. The link is here.



This is how the euro ends – not with a whimper but a bang

So it's still possible that Greeks will, when push comes to shove, simply surrender and take their punishment. It hardly needs saying that such an outcome would resolve nothing.
And the other possible outcome? Greece is indeed forced in despair to quit. With the precedent set, there would follow a mass flight of deposits out of Italy and Spain into safer havens, such as Germany and even the US and the UK. Indeed, this process has already begun. The only way of stopping it is to impose capital controls, but once major economies begin to do this, the euro is essentially over. It's no longer a single currency.
With or without capital controls, the European Central Bank would in any case need to step into the breach to stop the Italian and Spanish banking systems from collapsing. Ironically, the liquidity to do this would come from Germany and other surplus nations such as Finland and Austria, setting in train a giant, money merry-go-round.
Think about it. The Italian depositor removes his money and places it in a "safe" German bank account. There's nothing safe to invest in, so the German banker places the money on deposit with the Bundesbank, which then lends it to the ECB, which lends it back to the original Italian bank struggling with funding because of the flight of capital. The upshot is a massive build up of German central bank claims on Italy and Spain. In Germany alone, these contingent liabilities already exceed €600bn, or around a quarter of German GDP.
This is another story from The Telegraph yesterday...and it's also courtesy of Roy Stephens. The link is here.



China: Listed firms offer bleak outlook

Almost half of the companies listed on the mainland's two bourses that have so far released financial forecasts for the first six months expect to see a decline in earnings or to fall into the red, primarily due to falling demand amid an economic slowdown.
According to Wind Information Co Ltd, a leading provider of economic data and financial information, 845 companies listed on the Shenzhen and Shanghai stock exchanges had released January-June financial performance forecasts as of May 13.
A total of 384 companies forecast a slump in their net profit or a loss, accounting for 45.4 percent.
This is no real surprise...and confirms that China's economy is following the rest of the world into the proverbial dumpster. I thank Hong Kong reader Graham C. for sharing this story with us. It was posted over at the Chinadaily US Edition website yesterday morning...and the link is here.



Checking the Vaults: Germans Fret about Their Foreign Gold Reserves

A large portion of Germany's massive gold reserves are stored abroad, mainly in the Federal Reserve in New York. But are the bars really where they are supposed to be? A dispute has broken out over whether the central bank needs to check on its gold, or if Germany can trust its international partners.
Germany has gold reserves of just under 3,400 tons, the second-largest reserves in the world after the United States. Much of that is in the safekeeping of central banks outside Germany, especially in the US Federal Reserve in New York. One would think that with such a valuable stash, worth around €133 billion ($170 billion), the German government would want to keep a close eye on its whereabouts. But now a bizarre dispute has broken out between different German institutions over how closely the reserves should be checked.
Germany's federal audit office, the Bundesrechnungshof, which monitors the German government's financial management, is unhappy with how Germany's central bank, the Bundesbank, keeps tabs on its gold. According to media reports, the auditors are dissatisfied with the fact that gold reserves in Frankfurt are more closely monitored than those held abroad.
In Germany, spot checks are carried out to make sure that the gold bars are in the right place. But for the German gold that is stored on the Bundesbank's behalf by the US Federal Reserve in New York, the Bank of England in London and the Banque de France in France, the German central bank relies on the assurances of its foreign counterparts that the gold is where it should be. The three foreign central banks give the Bundesbank annual statements confirming the size of the reserves, but the Germans do not usually carry out physical inspections of the bars.
The rest of this SPIEGEL ONLINE - Nachrichten story from yesterday is posted on their Internet site...and the link to this must read story is here. Roy Stephens provided this story as well.



Bundesbank Confirms German Gold Held By FED, BOE and Banque De France

This story was posted over at the Gold Bullion, Investing in Gold Bars & Gold Coins - GoldCore.com website yesterday...and is certainly worth reading. It covers a lot of territory, including the surge in gold demand coming out of the Far East...which is certainly no surprise to me.
I thank Richard Craggs for sending me this story...and as I said in the previous paragraph, it's worth your time. The link is here.



Stoferle, Macleod discuss clamor for gold reserve repatriation

In an audio discussion at GoldMoney's Internet site, Erste Bank gold market analyst Ronald Stoferle and economist Alasdair Macleod discuss the market and calls to repatriate national gold reserves held by foreign central banks.
I borrowed the headline and the introductory paragraph from a GATA release yesterday. It's certainly worth the listen...and the link is here.



Three King World News Blogs

The first one is with Paul Brodsky...and it's headlined "The Paralyzing Fear Among Investors Today". The second blog features Michael Pento...and it bears the title "Here is What is Facing Investors & The World Today". And lastly is this blog with James Turk...and it's headlined "Expect Tremendous Chaos, Europe Deterorating Rapidly".



Palladium shortage to be 714,000 ounces in 2012: UBS

The palladium market is expected to be in a 714,000 ounce deficit in 2012 as demand for the commodity continues to exceed supply, UBS stated in a report.
In view of the same, the bank has raised its palladium price forecast for 2012 to $760/oz from the previous $725/oz. This shortage in the market is expected to continue for about the next 3 years until 2016 when the palladium will shift into surplus.
Meanwhile, its cousin platinum will see a 143,000 ounce surplus this year. But despite this, the bank has raised its price forecast to $1,700/oz from $1,675/oz. Platinum and its related metals are expected to benefit in Q2 largely due to improved growth in the US and emerging economies.
This story was posted over at the Commodity Market,Commodity Prices,Gold Price,Silver Price,Crude Oil Price,MCX website on Monday...and I thank reader Richard Craggs for sending it along. The link is here.



Gold Slides to New 2012 Low: Buying Opportunity or Bull Market Breakdown?

Casey Research's own Louis James was interviewed by the good folks over at Yahoo! Finance - Business Finance, Stock Market, Quotes, News yesterday. The video clip runs for 4:14 minutes...or you can read the transcript. It's a must watch/listen...and the link is here.



Brodsky and Quaintance: Central banks aim to redistribute gold and push it way up

In their May letter, Paul Brodsky and Lee Quaintance of QB Asset Management in New York argue that the investment case for gold is to a great extent a matter of its likely official revaluation upward to support confidence-based currencies that have lost the market's confidence.
As improbable as it may seem lately, what with the constant suppression of gold and silver prices on the futures markets, Brodsky and Quaintance conclude that central banks now really mean to push the gold price up -- way up -- once the gold necessary for the plan has been obtained and redistributed among central banks.
This is one of my pet theories as well...and it's the last arrow in the quiver of the fiat currency crowd. We certainly won't see a convertible currency from it, but certainly a much higher gold price. If in fact this scenario does materialize, my estimate is somewhere between $8,000 and $18,000 the ounce. These are about the same numbers that Jim Rickards has thrown around from time to time.
The rest of Chris Powell's comments, plus the link to their May newsletter, is contained in this GATA release...and the link is here. It's well worth reading.



Miners will need $3,000 gold price to be profitable, WGC head says

Sharp increases in mining costs mean gold will need to reach $3,000 an ounce in five years for the industry to stay profitable, World Gold Council chief executive Aram Shishmanian said on Monday.
Miners currently needed a gold price of $1,300 to survive, Shishmanian said, but faced steep rises in mining costs, along with the cost of dividends and host nation taxes.
"If this continues for the next five years the gold price needs to be at least $3,000 just to stay in the business," he said. However, he was optimistic sustained demand would drive prices higher over the long term.
I found this Reuters story posted in a GATA release yesterday...and the link is here.



Soros Ramps Up Gold ETF Holdings

Soros Fund Management picked up a new stake in J.P. Morgan Chase in the first quarter, sold out of Google and nearly quadrupled exposure to the SPDR Gold Trust, a quarterly portfolio disclosure shows.
This very short story was posted over in Barron's late yesterday afternoon...and the link is here.



Jim Puplava: Keeping the Faith: Holding Onto Your Gold Stocks When Your Emotions Tell You To Sell

This 50-minute audio commentary was posted over at the FINANCIAL SENSE | Applying Common Sense to the Markets website on Saturday...and if you have the time, it's worth the listen. I thank reader Howard Brown for sending it along...and the link is here.




The Funnies




The Wrap
While the US Dollar and Treasury debt are the twin foundations of the system, the major modern indicators of how the system is functioning are the stock market and the precious metals, Gold in particular but also Silver. A stock market investment is a bet ON the system, a purchase of physical Gold and/or Silver is a bet AGAINST it. This is clearly shown by the lengths to which the financial powers that be will go to support the stock market - and to undermine the price of the precious metals. - Bill Buckler, The Privateer, 12 May 2012

Well, the pain continued unabated again yesterday. Everything that occurred up to and including the close of Comex trading at 1:30 p.m. in New York yesterday, should be in this Friday's Commitment of Traders Report...and as I pointed out in this space yesterday, it should be a stunner.

Unfortunately, 'da boyz' leaned on the precious metals particularly hard after the Comex close yesterday...and that data won't be in Friday's report.

Here are the 3-year charts for all four precious metals, with the exception of palladium, which had a price bounce yesterday, every other precious metal is more oversold than its been in the last three years.

(Click on image to enlarge)

(Click on image to enlarge)

(Click on image to enlarge)

(Click on image to enlarge)

As I mentioned further up in this column, you have to ask yourself why the precious metals are getting trashed in the face of one of the biggest financial crisis of our lifetimes. One only has to read Bill Buckler's quote above to understand.

But once this engineered 'correction' has run its course, it's my guess that JPMorgan et al will be nowhere to be found [fingers crossed!] on the next rally...unless it's a short-covering rally that they themselves instigate.

I've been watching the precious metals ever since they opened for trading in the Far East earlier today...and in London this morning. Once again, the 'salami is being sliced' to the downside...as more new lows were set in all four precious metals shortly after the London open. Net volumes as of 4:49 a.m. Eastern time were monstrous in both metals. In gold it was 46,000 contracts...and in silver it was just under 10,000 contracts. The dollar index rallied about 25 basis points overnight, but topped out shortly after the London open...and is now back to virtually unchanged from Tuesday's New York close.

One has to wonder just how much more 'oversold' this market can get, as we are already in record territory in that regard...and I'll be watching the price activity during the Comex trading session in New York with great interest when I get out of bed later this morning.

See you on Thursday.

 ]]> Ed Steer GoldSpeculator http://www.gold-speculator.com/ed-steer/79394-checking-vaults-germans-fret-about-their-foreign-gold-reserves.html <![CDATA[LGMR: Liquidation of "Crowded" Gold Trade Pauses But "Clean-Out of Weak Hands Necessary"]]> http://www.gold-speculator.com/bullionvault/79393-lgmr-liquidation-crowded-gold-trade-pauses-but-clean-out-weak-hands-necessary.html Wed, 16 May 2012 17:24:26 GMT London Gold Market Report
from Adrian Ash
BullionVault
Weds 16 May, 08:40 EST



BENCHMARK prices to buy gold for London settlement rallied more than $10 an ounce off new five-month lows beneath $1528 on Wednesday morning, bouncing as the Euro, world stock markets and commodity prices also paused this month's sharp liquidation.

Spanish and Italian bond yields also eased back but remaind over 6% after Spain's prime minister Mariano Rajoy told the parliament in Madrid there is "a serious risk that the markets won't lend to us or lend only at astronomical prices."

Over in Greece – where the daily "bank run" of withdrawn Euro deposits is now totaling some €700m per day – president Karolos Papoulias meantime appointed a judge to act as interim prime minister and set the date for an election re-run as 17th June.

"[Gold] selling continued in Asia today across all exchanges," says Swiss refinery and finance group MKS in a note.

"Market participants have given up waiting for a bounce," says a Singapore dealer. "The market will do what it needs to do to clean out the weakly margined before it becomes healthy once again."

Hedge-fund legend George Soros opted to buy gold in the first quarter of 2012, reversing previous sales according to new data from March 31st released yesterday and showing his fund more than trebling its position in the $60 billion New York-listed SPDR gold ETF.

Fellow billionaire hedge-fund manager John Paulson – who represents the largest single holder of SPDR Gold shares – maintained his clients' stake, leaving it unchanged for the first time since June 2011 at the equivalent of 53.8 tonnes.

Losing 8% since end-March, prices to buy gold have now lost one-fifth from the record Dollar peak of September last year – "the common definition of a bear market," notes Bloomberg News.

"This is an example of our old friend 'the crowded trade'," reckons John Ventre, manager of Skandia's Spectrum and multi-asset funds, speaking to Investment Week.

"Very many investors now own the asset, even though the market is in fact incredibly small. As investors – particularly levered ones like hedge funds – take losses in other parts of their portfolio, then selling pressure emerges across the board as investors pull their horns in."

The spot-price to buy gold "is not far from our downside target zone at the September and December 2011 lows," says the latest weekly report from technical analyst Axel Rudolph at Commerzbank in Luxembourg.

"Over the next few days a minor bounce back towards the breached 2008-12 uptrend line is likely to be seen before another down leg rears its head, probably by next week."

Together with gold Wednesday morning, silver bullion also bounced from new five-month lows, adding 50¢ to trade above $27.70 per ounce.

Over on the Hong Kong stock exchange, however, shares in Chow Tai Fook Jewellery Group – the world's biggest publicly listed jewelry retailer – closed 10% down at an all-time record low.

Along with the rest of Asia, the Hang Seng Index overall fell for the 9th session in ten, while US crude oil dropped through $93 per barrel and copper contracts dropped another 1.5% on the day.

"Gold's slide has to be put in perspective with other commodities," says Walter de Wet at Standard Bank in London, pointing to the 1-month drops in crude oil, platinum and copper.

While prices to buy gold have lost 7%, "Even [emerging-market] currencies such as the Brazilian Real and the South African Rand have depreciated 7.9% and 5% respectively against the US Dollar.

"Liquidation is taking place irrespective of market fundamentals."

"Jewelers don't know what to do," says Ronald Leung, head of Hong Kong's Lee Cheong Gold Dealers, speaking to Reuters.

"Maybe when the price has stabilised at some levels, they will start to reenter the market. There's a bit of scale-down buying."

Some wire reports said Wednesday that demand to buy gold had picked up despite a fresh record low in the Indian Rupee capping the new lows in the world's #1 consumer market.

"Amid drying-up demand in off season," says NDTV – pointing to the traditional summer lull between wedding and festival periods – these lower gold prices "could ease the burden on [India's] import bill."

India's gold bullion imports equaled some 2.6% of GDP last year, almost equal to the country's entire balance of trade deficit.

On top of 2012's quadrupling of import duty, "Gold imports could be discouraged by creating opportunities for more productive investments in the economy," writes RV Kanoria, president of the Federation of Indian Chambers of Commerce & Industry (FICCI) – fresh from urging the privatization of India's coal-mining sector – in the Economic Times of India today.

"A better investment climate through focus on reforms will steer investors to look towards ventures than just stock up gold."

Adrian Ash
BullionVault

Gold price chart, no delay | Buy gold online at live prices

Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2012

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

 ]]> BullionVault GoldSpeculator http://www.gold-speculator.com/bullionvault/79393-lgmr-liquidation-crowded-gold-trade-pauses-but-clean-out-weak-hands-necessary.html Commodities Sold on Greece Woes, May Extend Losses on Fed Minutes http://www.gold-speculator.com/dailyfx/79392-commodities-sold-greece-woes-may-extend-losses-fed-minutes.html Wed, 16 May 2012 17:20:17 GMT courtesy of DailyFX.com
May 16, 2012 03:08 AM

Commodity prices fell in Europe as Greece-linked risk aversion gripped markets. Minutes from the Fed’s April meeting may compound losses as QE3 bets fade.
Talking Points


  • Crude Oil, Copper Sold on Greece Woes – Fed Minutes Key Ahead
  • Gold and Silver Vulnerable if Fed Minutes Dent QE3 Expectations

Commodity prices are trading broadly lower in European hours as risk aversion grips financial markets, weighing on sentiment-linked crude oil and copper prices while boosting the safe-haven US Dollar to put de-facto downward pressure on gold and silver. The sour mood comes after continued gridlock in Greece spurred the country’s lawmakers to call for new elections, which traders fear may produce a ruling majority for anti-austerity parties (and in particular, Syriza). This threatens to lead Athens to renege on its obligations under the EU/IMF bailout agreement, which may ultimately see the country leave the Eurozone.



Looking ahead, the spotlight turns to theFederal Reserve as the central bank publishes minutes from its late-April policy meeting. As we discussed previously, markets seized on Chairman Bernanke saying the bank was “prepared to do more” to help the economy if growth faltered, singling out additional QE as still “on the table” and boosting risk appetite in the process. However, the Fed chief likewise said that it would be “very reckless” to allow higher inflation for the sake of reducing unemployment while his colleagues upgraded bets on US jobs, employment and price growth.



This painted a rather different picture, wherein the Fed kept its options open just in case but was broadly leaning against further asset purchases. Risk aversion may find a further catalyst if that side of the story reemerges in the minutes and finally gets its chance to be thoroughly priced in, driving crude oil and copper lower still. Such an outcome is also likely to punish precious metals as demand for alternative stores of value evaporates along with fading US Dollar dilution fears.





WTI Crude Oil (NY Close): $93.98 // -0.80 // -0.84%



Prices are testing support at 92.51, the December 16 low, with a break below that on a daily closing basis exposing the next layer of support at 90.49. Near-term resistance is at 95.41, the February 2 session low.



Daily Chart - Created Using FXCM Marketscope 2.0







Spot Gold (NY Close): $1544.21 // -12.51 // -0.80%



Prices surpassed the measured target of a Triangle chart pattern carved out since late March at 1548.21 to probe below support at 1543.98, the 76.4% Fibonacci expansion. A break below this boundary sees supports at 1532.45 and 1522.50, the September 26 and December 29 spike lows respectively, followed by the 100% expansion at 1502.15. Initial resistance lines up at 1569.99, the 61.8% Fib.



Daily Chart - Created Using FXCM Marketscope 2.0







Spot Silver (NY Close): $27.73 // -0.42 // -1.50%



Prices are testing support at 27.06 marked by the December 28 session close. A break below this boundary exposes the 26.05-15 area marked by the September 26 and December 29 spike lows. Near-term resistance is at 28.70.



Daily Chart - Created Using FXCM Marketscope 2.0







COMEX E-Mini Copper (NY Close): $3.518 // -0.036 // -1.01%



Prices broke support at 3.516, the 61.8% Fibonacci retracement, with sellers now targeting the 76.4% boundary at 3.404. The 61.8% Fib has been recast as near-term resistance.



Daily Chart - Created Using FXCM Marketscope 2.0







--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com



To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak



To be added to Ilya's e-mail distribution list, send a note with subject line "Distribution List" to ispivak@dailyfx.com ]]> DailyFX RssFeed http://www.gold-speculator.com/dailyfx/79392-commodities-sold-greece-woes-may-extend-losses-fed-minutes.html Two Shareholder Suits Filed Against J.P. Morgan http://www.gold-speculator.com/wallstreetjournal-business-tv/79391-two-shareholder-suits-filed-against-j-p-morgan.html Wed, 16 May 2012 17:20:17 GMT Two shareholder suits were filed against J.P. Morgan Chase over trading losses, claiming Chief Executive Jamie Dimon misrepresented risk to investors. Chad Bray has details on Markets Hub. Photo: Reuters.


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Two shareholder suits were filed against J.P. Morgan Chase over trading losses, claiming Chief Executive Jamie Dimon misrepresented risk to investors. Chad Bray has details on Markets Hub. Photo: Reuters.



]]> WallStreetJournal - Business TV RssFeed http://www.gold-speculator.com/wallstreetjournal-business-tv/79391-two-shareholder-suits-filed-against-j-p-morgan.html Investors Abuzz Over Facebook IPO at Vegas Show http://www.gold-speculator.com/wallstreetjournal-business-tv/79390-investors-abuzz-over-facebook-ipo-vegas-show.html Wed, 16 May 2012 17:20:17 GMT Investors gathering at the Money Show in Las Vegas traded strategy and tips, but the big topic in the room was Facebook's upcoming IPO, Mark Hulbert reports on Markets Hub. Photo: AFP/Getty Images.


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Investors gathering at the Money Show in Las Vegas traded strategy and tips, but the big topic in the room was Facebook's upcoming IPO, Mark Hulbert reports on Markets Hub. Photo: AFP/Getty Images.



]]> WallStreetJournal - Business TV RssFeed http://www.gold-speculator.com/wallstreetjournal-business-tv/79390-investors-abuzz-over-facebook-ipo-vegas-show.html <![CDATA[J.C. Penney's Ron Johnson Faces Turnaround Hurdles]]> http://www.gold-speculator.com/wallstreetjournal-business-tv/79389-j-c-penneys-ron-johnson-faces-turnaround-hurdles.html Wed, 16 May 2012 17:20:17 GMT J.C. Penney Chief Executive Ron Johnson arrived to the company with great fanfare, but after a disappointing earnings report, his turnaround strategy is facing hurdles, Dana Mattioli reports on Markets Hub. Photo: AP.


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J.C. Penney Chief Executive Ron Johnson arrived to the company with great fanfare, but after a disappointing earnings report, his turnaround strategy is facing hurdles, Dana Mattioli reports on Markets Hub. Photo: AP.



]]> WallStreetJournal - Business TV RssFeed http://www.gold-speculator.com/wallstreetjournal-business-tv/79389-j-c-penneys-ron-johnson-faces-turnaround-hurdles.html <![CDATA[What Facebook's IPO and Treasurys Have in Common]]> http://www.gold-speculator.com/wallstreetjournal-business-tv/79388-what-facebooks-ipo-treasurys-have-common.html Wed, 16 May 2012 17:20:17 GMT Facebook's forthcoming stock offering and United States Treasury notes would seem to be at different ends of the investing spectrum but there are similarities. Jack Hough reports on Markets Hub. Photo: AFP/Getty Images.


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Facebook's forthcoming stock offering and United States Treasury notes would seem to be at different ends of the investing spectrum but there are similarities. Jack Hough reports on Markets Hub. Photo: AFP/Getty Images.



]]> WallStreetJournal - Business TV RssFeed http://www.gold-speculator.com/wallstreetjournal-business-tv/79388-what-facebooks-ipo-treasurys-have-common.html Europe Weighs Implications of Greece Leaving Euro http://www.gold-speculator.com/wallstreetjournal-business-tv/79387-europe-weighs-implications-greece-leaving-euro.html Wed, 16 May 2012 17:20:17 GMT As Greece's talks teetered and depositors withdrew millions from banks on Monday, Europe considered the ramifications of Greece leaving the euro zone. Charles Forelle reports on Markets Hub. Photo: AFP/Getty Images.


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As Greece's talks teetered and depositors withdrew millions from banks on Monday, Europe considered the ramifications of Greece leaving the euro zone. Charles Forelle reports on Markets Hub. Photo: AFP/Getty Images.



]]> WallStreetJournal - Business TV RssFeed http://www.gold-speculator.com/wallstreetjournal-business-tv/79387-europe-weighs-implications-greece-leaving-euro.html Making Diamonds More Like Apple iPads http://www.gold-speculator.com/wallstreetjournal-business-tv/79386-making-diamonds-more-like-apple-ipads.html Wed, 16 May 2012 17:20:17 GMT Hearts on Fire, which currently sells its diamond jewelry through specialty retailers, is launching its own retail network of hi-tech stores designed by 8 Inc, the people who created Apple stores and the Virgin lounge at Heathrow. Christina Binkley has details on Lunch Break.


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Hearts on Fire, which currently sells its diamond jewelry through specialty retailers, is launching its own retail network of hi-tech stores designed by 8 Inc, the people who created Apple stores and the Virgin lounge at Heathrow. Christina Binkley has details on Lunch Break.



]]> WallStreetJournal - Business TV RssFeed http://www.gold-speculator.com/wallstreetjournal-business-tv/79386-making-diamonds-more-like-apple-ipads.html <![CDATA[What Lies Ahead for Junior E&Ps: Bruce Edgelow]]> http://www.gold-speculator.com/energy-report/79385-what-lies-ahead-junior-e-ps-bruce-edgelow.html Wed, 16 May 2012 17:20:17 GMT *Bruce Edgelow:* Juniors have begun to transition from drilling moderately priced individual vertical wells to drilling much more capital-intensive resource plays. For example, in 2000 the cost to drill and complete one well in Pembina was ~$330,000. By 2010, the cost had ballooned to ~$2.75 million (M) due to horizontal drilling and more complex completion techniques. This trend is expected to continue as resource plays become increasingly dominant and as larger budgets, bigger capital bases and higher production become more commonplace. As such, access to capital will be more vital for juniors than it has been in the past. We expect consolidation to occur as a result of the critical mass needed to meet these increased capital requirements. Liquidity-challenged small producers may be attractive targets for larger, well capitalized companies looking to expand their asset bases. In this landscape, juniors will need to be nimble early movers. Those that can jump on a niche emerging resource play and pioneer economic extraction techniques will have an advantage. *TER:* Which resource plays will remain hot spots for junior E&Ps? *BE:* Development plays such as the Cardium, Viking and Bakken shales should continue to dominate the oil and gas landscape. These repeatable development-style plays require ample land inventory to provide sufficient drilling opportunities. Given increasing operating prices, juniors will need enough capital to fund full-cycle economics. Moreover, drilling and completion costs are likely to further increase as even more advanced technology will be required to unlock the full resource potential. On the other hand, demand for conventional plays with smaller pools bearing exploration risk is reducing. The appetite to fund natural gas activity is virtually non existent unless the producer is in a niche play that can still be economic at current depressed prices. Investors and capital providers will need to develop an increasingly keen eye toward overall corporate economics in order to determine if a company has the scale, talent and asset profile to exploit the opportunities available. *TER:* You've addressed the higher costs associated with horizontal drilling. How are revolutionized extraction techniques benefiting juniors? *BE:* The industry is reporting fewer dry holes. Technological innovation has made previously uneconomic plays much more viable. Five years from now, one can expect significant advances in fracturing technology to have further increased economies of scale. It is expected that there will be a significant uptick in the number of plays that are not even on the radar screen at this time. Going forward, the industry will likely find that larger pools are repeatable and that the technology being deployed is increasingly efficient. *TER:* Can you tell us more about full-cycle economics and why they matter? *BE:* The full cycle growth story will be the preeminent method whereby juniors thrive in a changing marketplace. This includes organic growth, acquisitions, farm-ins and joint ventures. As in the past, juniors will continue to drill using cash flow, available debt and equity to grow with the end goal being a corporate sale to a larger company with excess capital looking to diversify. Full-cycle economics refers to this entire trajectory from small- to mid- or large-cap companies. Investors will have to assess a junior's ability to progress to the next few stages. *TER:* What kinds of business strategies will boost a junior's odds of making the leap to the next market-cap level? *BE:* A land accumulation strategy could be a viable and successful method for a junior company over the coming years. For instance, with the Duvernay in its infancy and largely unproven at this time, a junior might choose to assemble a strong land base and sit on it without expending the large capital requirements to drill. It may be able to wait for better-capitalized players to prove up the regional play with the exit strategy to sell their land at higher values. *TER:* You've placed a lot of emphasis on organic growth and scalability. Are the days numbered for small companies out there? *BE:* Junior oil and gas companies will still be very active in this space in five years. However, there will likely be fewer of them as a result of consolidation and incrementally higher entry costs. We expect that the overall environment for juniors will be made more difficult as significant equity support will be imperative for juniors. We expect a $10M starter kit will not meet the capital needs of a junior going forward. To have a greater probability of success, a junior may require $100M or more to sustain an adequate capital program for one to two years. To receive this backing from investors, juniors will need to deliver top-quartile reserves, production and cash flow growth on a per share basis. If they don't perform at these levels, investors will be much more likely to deploy their capital to more stable mid-cap companies that yield a higher risk-adjusted return, including dividend income. The number of juniors in the defined universe has increased nominally in recent years in comparison to significant growth in revenue and capital spending [see table below]. As I alluded to earlier, we expect this number to reduce due to consolidation and further increased capital requirements. Image: http://www.theenergyreport.com/images/miniGraph.jpg *TER:* So what will it take for an undercapitalized junior E&P to attract investment? *BE:* For a junior oil and gas company to thrive in an increasingly competitive market, numerous attributes will be critical. A quality, experienced management team will be more important than ever before. It is crucial that management maintains a strong balance sheet and keeps capital spending within board-approved budgets. Furthermore, maintaining an optimal capital structure with reasonable and serviceable debt levels will be of the utmost importance. We expect to see a greater number of juniors succumb to high debt, while others will risk the company on the success of a few high-risk wells. Executives will need to manage risk appropriately in terms of effective deployment of capital as well as hedging commodity price fluctuations. They will also need to plan for potential higher-interest costs on debt and manage those costs through a stand-alone interest-rate hedging program. *TER:* Currently, natural gas prices are lagging far behind oil prices. Do you think this trend will continue? *BE:* The commodity pricing environment will likely dictate that plays be oil focused with strong netbacks. Notwithstanding, juniors will likely require multiple core areas of strong assets that each add economic value and the ability to increase reserves, production and cash flow on a per share basis. Finally, a company must not fall in love with their assets, but be willing to adapt quickly to changing market conditions. But who knows? With all the conversion to oil activity and some recent positive signs for natural gas demand, it may not be too soon before there is a swing back into the currently abandoned natural gas space. Time will tell. *TER:* Thank you for sharing your thoughts on what's to come in this space. *BE:* Thank you for having me. Bruce Edgelow (http://www.theenergyreport.com/pub/htdocs/expert.html?id=5432) is responsible for helping to build ATB Financial's energy business and capabilities. His team consists of industry specialists in all aspects of the energy industry, including drilling and service, pipelines, utilities, midstream, exploration and production. Before joining ATB, Edgelow was a senior Royal banker and has more than 39 years of experience with a focus on the oil and gas industry. He is a Fellow of the Institute of Canadian Bankers, has attained the ICD.D designation, and is a very active participant in community and church activities. He also serves as a director for the Calgary Counselling Centre and sits on SAIT's Board Advisory Council. Edgelow has also been a speaker at numerous oil and gas industry seminars on finance. *Upcoming SEPAC Presenters:* * Hyperion Exploration Corp. (HYX:TSX.V) (http://www.theenergyreport.com/pub/co/3958) * Paramount Resources Ltd. (POU:TSX) (http://www.theenergyreport.com/pub/co/3649) * Vero Energy Inc. (VRO:TSX) (http://www.theenergyreport.com/pub/co/1221) * Sure Energy Inc. (SHR:TSX) (http://www.theenergyreport.com/pub/co/2670) * Guide Exploration Ltd. (GO:TSX) (http://www.theenergyreport.com/pub/co/5000) * Palliser Oil & Gas Corp. (PXL:TSX.V) (http://www.theenergyreport.com/pub/co/2630) * Surge Energy Inc. (SGY:TSX) (http://www.theenergyreport.com/pub/co/2699) * Cequence Energy Ltd. (CQE:TSX) (http://www.theenergyreport.com/pub/co/2916) * 3MV Energy Corp. (CVE:TMV) (http://www.theenergyreport.com/pub/co/5075) * Tuscany Energy Ltd. (TUS:TSX.V) (http://www.theenergyreport.com/pub/co/3259) * Yoho Resources Inc. (YO:TSX.V) (http://www.theenergyreport.com/pub/co/3652) * Crown Point Ventures Ltd. (CWV:TSX.V) (http://www.theenergyreport.com/pub/co/3349) * Mountainview Energy Ltd. (MVW:TSX.V) (http://www.theenergyreport.com/pub/co/3267) * Trilogy Energy Corp. (TET:TSX) (http://www.theenergyreport.com/pub/co/3651) * Mako Hydrocarbons Ltd. (MKE:ASX) (http://www.theenergyreport.com/pub/co/5076) * Invicta Energy Corp. (VCA:TSX.V) (http://www.theenergyreport.com/pub/co/5077) * Twin Butte Energy Ltd. (TBE:TSX) (http://www.theenergyreport.com/pub/co/1686) * Shoal Point Energy Ltd. (SHP:CNSX) (http://www.theenergyreport.com/pub/co/3650) * Exall Energy Corp. (EE:TSX) (http://www.theenergyreport.com/pub/co/3255)

For more information on the SEPAC Oil & Gas Investor Showcase, click here (http://www.sepac.ca/). Want to read more exclusive Energy Report interviews like this? Sign up (http://www.theenergyreport.com/cs/user/print/htdocs/38) for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Exclusive Interviews (http://www.theenergyreport.com/pub/htdocs/exclusive.html) page. *DISCLOSURE:* From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise. Image: http://www.theenergyreport.com/cgi-bin/image.pl?id=13369 ]]> The Energy Report: Bruce, what major changes do you see under way for junior explorers and producers (E&Ps)?

Bruce Edgelow: Juniors have begun to transition from drilling moderately priced individual vertical wells to drilling much more capital-intensive resource plays. For example, in 2000 the cost to drill and complete one well in Pembina was ~$330,000. By 2010, the cost had ballooned to ~$2.75 million (M) due to horizontal drilling and more complex completion techniques. This trend is expected to continue as resource plays become increasingly dominant and as larger budgets, bigger capital bases and higher production become more commonplace. As such, access to capital will be more vital for juniors than it has been in the past.

We expect consolidation to occur as a result of the critical mass needed to meet these increased capital requirements. Liquidity-challenged small producers may be attractive targets for larger, well capitalized companies looking to expand their asset bases. In this landscape, juniors will need to be nimble early movers. Those that can jump on a niche emerging resource play and pioneer economic extraction techniques will have an advantage.

TER: Which resource plays will remain hot spots for junior E&Ps?

BE: Development plays such as the Cardium, Viking and Bakken shales should continue to dominate the oil and gas landscape. These repeatable development-style plays require ample land inventory to provide sufficient drilling opportunities. Given increasing operating prices, juniors will need enough capital to fund full-cycle economics. Moreover, drilling and completion costs are likely to further increase as even more advanced technology will be required to unlock the full resource potential.

On the other hand, demand for conventional plays with smaller pools bearing exploration risk is reducing. The appetite to fund natural gas activity is virtually non existent unless the producer is in a niche play that can still be economic at current depressed prices. Investors and capital providers will need to develop an increasingly keen eye toward overall corporate economics in order to determine if a company has the scale, talent and asset profile to exploit the opportunities available.

TER: You've addressed the higher costs associated with horizontal drilling. How are revolutionized extraction techniques benefiting juniors?

BE: The industry is reporting fewer dry holes. Technological innovation has made previously uneconomic plays much more viable. Five years from now, one can expect significant advances in fracturing technology to have further increased economies of scale. It is expected that there will be a significant uptick in the number of plays that are not even on the radar screen at this time. Going forward, the industry will likely find that larger pools are repeatable and that the technology being deployed is increasingly efficient.

TER: Can you tell us more about full-cycle economics and why they matter?

BE: The full cycle growth story will be the preeminent method whereby juniors thrive in a changing marketplace. This includes organic growth, acquisitions, farm-ins and joint ventures. As in the past, juniors will continue to drill using cash flow, available debt and equity to grow with the end goal being a corporate sale to a larger company with excess capital looking to diversify. Full-cycle economics refers to this entire trajectory from small- to mid- or large-cap companies. Investors will have to assess a junior's ability to progress to the next few stages.

TER: What kinds of business strategies will boost a junior's odds of making the leap to the next market-cap level?

BE: A land accumulation strategy could be a viable and successful method for a junior company over the coming years. For instance, with the Duvernay in its infancy and largely unproven at this time, a junior might choose to assemble a strong land base and sit on it without expending the large capital requirements to drill. It may be able to wait for better-capitalized players to prove up the regional play with the exit strategy to sell their land at higher values.

TER: You've placed a lot of emphasis on organic growth and scalability. Are the days numbered for small companies out there?

BE: Junior oil and gas companies will still be very active in this space in five years. However, there will likely be fewer of them as a result of consolidation and incrementally higher entry costs. We expect that the overall environment for juniors will be made more difficult as significant equity support will be imperative for juniors. We expect a $10M starter kit will not meet the capital needs of a junior going forward. To have a greater probability of success, a junior may require $100M or more to sustain an adequate capital program for one to two years. To receive this backing from investors, juniors will need to deliver top-quartile reserves, production and cash flow growth on a per share basis. If they don't perform at these levels, investors will be much more likely to deploy their capital to more stable mid-cap companies that yield a higher risk-adjusted return, including dividend income.

The number of juniors in the defined universe has increased nominally in recent years in comparison to significant growth in revenue and capital spending [see table below]. As I alluded to earlier, we expect this number to reduce due to consolidation and further increased capital requirements.


TER: So what will it take for an undercapitalized junior E&P to attract investment?

BE: For a junior oil and gas company to thrive in an increasingly competitive market, numerous attributes will be critical. A quality, experienced management team will be more important than ever before. It is crucial that management maintains a strong balance sheet and keeps capital spending within board-approved budgets. Furthermore, maintaining an optimal capital structure with reasonable and serviceable debt levels will be of the utmost importance. We expect to see a greater number of juniors succumb to high debt, while others will risk the company on the success of a few high-risk wells. Executives will need to manage risk appropriately in terms of effective deployment of capital as well as hedging commodity price fluctuations. They will also need to plan for potential higher-interest costs on debt and manage those costs through a stand-alone interest-rate hedging program.

TER: Currently, natural gas prices are lagging far behind oil prices. Do you think this trend will continue?

BE: The commodity pricing environment will likely dictate that plays be oil focused with strong netbacks. Notwithstanding, juniors will likely require multiple core areas of strong assets that each add economic value and the ability to increase reserves, production and cash flow on a per share basis. Finally, a company must not fall in love with their assets, but be willing to adapt quickly to changing market conditions. But who knows? With all the conversion to oil activity and some recent positive signs for natural gas demand, it may not be too soon before there is a swing back into the currently abandoned natural gas space. Time will tell.

TER: Thank you for sharing your thoughts on what's to come in this space.

BE: Thank you for having me.

Bruce Edgelow is responsible for helping to build ATB Financial's energy business and capabilities. His team consists of industry specialists in all aspects of the energy industry, including drilling and service, pipelines, utilities, midstream, exploration and production. Before joining ATB, Edgelow was a senior Royal banker and has more than 39 years of experience with a focus on the oil and gas industry. He is a Fellow of the Institute of Canadian Bankers, has attained the ICD.D designation, and is a very active participant in community and church activities. He also serves as a director for the Calgary Counselling Centre and sits on SAIT's Board Advisory Council. Edgelow has also been a speaker at numerous oil and gas industry seminars on finance.

Upcoming SEPAC Presenters:

For more information on the SEPAC Oil & Gas Investor Showcase, click here.

Want to read more exclusive Energy Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Exclusive Interviews page.

DISCLOSURE: From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.

]]> The Energy Report RssFeed http://www.gold-speculator.com/energy-report/79385-what-lies-ahead-junior-e-ps-bruce-edgelow.html Correction Fighting: How Feds Prolong Economic Depressions http://www.gold-speculator.com/bill-bonner/79384-correction-fighting-how-feds-prolong-economic-depressions.html Wed, 16 May 2012 17:20:17 GMT Bill Bonner
View the original article.
May 16, 2012 08:02 AM

“Liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate… it will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people.”

— Andrew Mellon

Down, down, down…

Oil is at a 5-month low. Russian stocks are 20% below their high. Commodities are back to 2010 levels.

Everything is going down. Even gold.

Wait a minute. Since we know from Einstein that all motion is relative, everything CAN’T be going down. If everything were going down, everything would be standing still. Something must be going up as a point of reference.

So what’s going up?

Cash!

Cash is going up against oil, houses, stocks, copper, commodities of all sorts…and just about everything else.

Cash is king.

Why? Because we are in a Great Correction. And in a great correction, prices are corrected. In a bubble, prices tend to go up. This tends to push up animal spirits…encouraging investors and business people to do things that they will later regret. They build houses no one can afford…and shopping centers no one really needs. Then, these things — and the loans against them — appear as “assets” on the books of banks, pension funds, hedge funds, private equity outfits…you name it.

Later, as the correction continues, markets discover that these ‘assets’ are not worth quite as much as they thought. Prices go down. Some ‘assets’ become liabilities. They are underwater, with more debt than equity.

Labor rates fall too. There are fewer projects that “make sense”…and they need fewer workers. Business falls off. Unemployment goes up. Salaries go down.

As prices fall, they must fall against something. So they fall against cash. Cash becomes more valuable. You can buy more real assets with every unit. People who hold their cash through a correction usually do well. They are able to buy quality assets, at the bottom, at large discounts to their previous prices.

That’s why so many people are willing to lend money to the feds for such low interest rates. They figure it’s as good as cash.

All this is obvious and hardly worth mentioning. In a better world, we’d all know what was going on…and we could all predict what would happen next: the mistakes would be written off, defaulted on, foreclosed, and marked down…

…and then, the economy could get up, dust itself off, and get back to work.

That’s what used to happen. The first American depression came in 1819. Cotton prices collapsed. Farms were foreclosed. Banks failed. It was over by 1821 — 2 years later.

Then, there was the Panic of 1837. New York brokerage houses failed. Farm prices collapsed. A bank president committed suicide. But it was over by 1843 — 6 years later.

The Panic of 1857 was triggered by the bankruptcy of Ohio Life Insurance and Trust Company. Railroad speculators were ruined. Stocks plunged. Nearly a thousand companies went broke. The resulting depression was hard…but short. Recovery began two years later.

The Panic of 1873 led to a 5-year depression. And the Panic of 1893 hit even harder — with a crash on Wall Street, 16,000 business failures and a 15% unemployment rate. Four years later, the economy was running hot again.

The aftermath of WWI brought the Depression of 1921. By many measures it was as bad as the Great Depression. But it was quick — two years later it was over.

And then, came the Great Depression itself. What made it so great? The feds! Until the 1930s, the feds let the economy take care of itself. Interest rates? They were set by willing buyers and sellers, not by economists working for the government. Monetary policy? Fiscal policy? There were none.

When it was time for a correction, Mr. Market took out a wrecking ball and knocked down the mistakes of the previous boom. The debris was quickly swept away…and it was off to the races again.

Even as late as the 1930s, Andrew Mellon, then Secretary of the US Treasury, advised president Hoover to “liquidate” everything. His idea was to give the correction a helping hand… Rather than wait for the correction to do its work, he’d swing the wrecking ball himself.

That is just what he did in the 1920s. He was Treasury Secretary in 1921 too. And instead of trying to fight the slump of ’21-’23, he helped it on its way. Instead of “countercyclical stimulus” measures, he gave the nation “pro-cyclical” measures. That is, he didn’t increase government spending in order to provide the economy with fiscal stimulus. He cut government spending in order to leave more money in the hands of consumers, investors, and business people.

And it worked. Scarcely 24 months after the beginning of the depression it was over…with unemployment back to 5%.

But the world changed between ’21 and ’31. By the ’30s, the feds had the bit between their teeth. In Germany, the Nazis were already consolidating power and gathering tinder for the Reichstag. In Italy, Mussolini and his gang were wearing funny outfits and plotting out an empire. Stalin was reorganizing Soviet agriculture — which would result in millions of deaths by starvation. And in the western democracies, the meddlers were taking over too.

Instead of thanking Mellon for his input, the feds tried to impeach him! In a few months, Mellon was gone. And then US economic policy was firmly in the hands of people who thought they could do better.

The gist of the new policy was that corrections must be stopped — at all cost. Depressions must be fought. Bankruptcies must be prevented… Markets must be controlled! By bureaucrats!

This new policy was what made the Great Depression great. Mr. Market may have wanted to correct his mistakes; but the feds wouldn’t let him. The depression continued, off and on, throughout the ’30s…and the ’40s too. It didn’t really end until the 1950s.

You might expect the feds would have learned from that experience. Compared to the laissez faire policies of Andrew Mellon their activism was a complete, miserable failure.

Learn? Are you kidding? We’re now in year the 6th year of the crisis that began with the collapse of subprime in April ’07. Does it show any sign of letting up? Any sign of coming to an end?

Nope?

The feds have fought the correction every step of the way…with everything they’ve got. They’ve tried monetary stimulus — taking rates down to zero. They’ve tried fiscal stimulus — with $1 trillion budget deficits for the last 4 years…and no end in sight. They’ve tried “unconventional” measures too — such as QEI, QEII and The Twist. Last year, the Fed funded more than 60% of the US deficit with printed money. And the Fed has increased its holdings of US debt some 3.5 times since 2008, from $479 billion in September, 2008 to $1.66 trillion in March, 2012.

So, put on your seat belts. Sit back. Relax.

Eventually, the correction will do its work. But it could take a long, long time.

Regards,

Bill Bonner
for The Daily Reckoning

Correction Fighting: How Feds Prolong Economic Depressions originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas. Recently Agora Financial released a video titled "What Causes Gas Price to Increase?".

]]> Bill Bonner RssFeed http://www.gold-speculator.com/bill-bonner/79384-correction-fighting-how-feds-prolong-economic-depressions.html U.S. Stock Futures Creep Higher http://www.gold-speculator.com/wallstreetjournal-business-tv/79383-u-s-stock-futures-creep-higher.html Wed, 16 May 2012 15:16:05 GMT U.S. stock futures edged higher, but concerns about the outlook for Greece kept investors cautious as U.S. housing starts rose in April. Michael Casey has details on The News Hub. Photo: Bloomberg.


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U.S. stock futures edged higher, but concerns about the outlook for Greece kept investors cautious as U.S. housing starts rose in April. Michael Casey has details on The News Hub. Photo: Bloomberg.



]]> WallStreetJournal - Business TV RssFeed http://www.gold-speculator.com/wallstreetjournal-business-tv/79383-u-s-stock-futures-creep-higher.html Facebook IPO: Shareholders Look To Cash Out http://www.gold-speculator.com/wallstreetjournal-business-tv/79382-facebook-ipo-shareholders-look-cash-out.html Wed, 16 May 2012 15:16:05 GMT Facebook on Wednesday increased the size of its initial public offering to more than 400 million shares, one day after it raised the IPO's expected price range. George Stahl has the latest on The News Hub. Photo: Bloomberg.


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Facebook on Wednesday increased the size of its initial public offering to more than 400 million shares, one day after it raised the IPO's expected price range. George Stahl has the latest on The News Hub. Photo: Bloomberg.



]]> WallStreetJournal - Business TV RssFeed http://www.gold-speculator.com/wallstreetjournal-business-tv/79382-facebook-ipo-shareholders-look-cash-out.html J.P. Morgan Moves Raise Strategy Questions http://www.gold-speculator.com/wallstreetjournal-business-tv/79381-j-p-morgan-moves-raise-strategy-questions.html Wed, 16 May 2012 15:16:05 GMT J.P. Morgan's trading losses of more than $2 billion centered on a complicated three-step strategy that could raise questions about whether the bank was hedging its risks or making a big bet. Katy Burne has details on The News Hub. Photo: AFP/Getty Images.


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J.P. Morgan's trading losses of more than $2 billion centered on a complicated three-step strategy that could raise questions about whether the bank was hedging its risks or making a big bet. Katy Burne has details on The News Hub. Photo: AFP/Getty Images.



]]> WallStreetJournal - Business TV RssFeed http://www.gold-speculator.com/wallstreetjournal-business-tv/79381-j-p-morgan-moves-raise-strategy-questions.html Update http://www.gold-speculator.com/grandich-blog/79380-update.html Wed, 16 May 2012 15:16:05 GMT The following is automatically syndicated from Grandich's blog. You can view the original post here. Stay up to date on his model portfolio!
May 16, 2012 06:07 AM


This shall be rather short but directly to the point.

U.S. Stock Market – I’m neither a major bull nor bear but believe by this time next year, I would want to be virtually out of all non-metals related U.S. equities. The secular bear market that began in late 2007 and was correctly perceived to be interrupted by the single greatest bear market rally of all-time, is anticipated to resume no matter who wins in November. Only a Romney win can delay by only a matter of months the inevitable Greece-like scenario to unfold here in America (Read may 9th commentary).

U.S. Bonds – My patience to await a 10-yr T-Bond yield under 1.75% to short into may finally be rewarded. Stay tuned.

U.S. Dollar – I’ve spoken about shorting the U.S. Dollar Index if it can get to 83-84 and despite most seemingly thinking a major dollar rally is upon us, I’m not certain it can even get to that level barring a total collapse in Europe. But if and when it does, I shall again remind you of the scenario I painted in my May 9th commentary and the rest shall be up to you.

Oil and Natural Gas – If we should get so fortunate to see oil pull back to the mid $80s, I would think that’s a gift for getting long. Natural gas remains an avoid.





Gold and Silver – As you can see from the charts, both gold and silver have entered not only key support areas, but are recording some of the most oversold readings in quite some time. This is without a doubt the most bearish overall mood I felt since gold bottomed at the start of the millennium. While there shall be no quick fix and the pain can linger awhile longer, the “mother’ of all bull markets is far from over. I think my views have been cleared in all my recent interviews and commentaries. The boat of real and no-hedge gold bulls has only a few passengers left (and I’m glad to see Captain Jim Sinclair still at the helm) while the gold bear boat is filled up and sailing under the S.S. Titanic 2012 model.

Mining and Exploration Shares – Having loss more money on paper then I ever imagined I could have possessed in my lifetime, I stood in front of the mirror last night and asked myself was I committing two of the worse investment strategies I’ve told people for years not to:

1-**** The ultimate crime in investing is not being wrong but staying wrong.

2-**** Hope is a wonderful spiritual strategy but the worse investment strategy one can employ.

The response I got back (besides you could lose 30lbs) was to remain strong in my convictions and to know for the most part, my holdings should withstand this incredible onslaught of towels being thrown in everywhere.

For those who choose like I have for myself, we must also realize at best, we shall get an “L” shape recovery in the juniors for many months if and when we actually bottom. Numerous companies won’t survive in their present form but that shall also make the ones thrown out with the bathwater that much more attractive when people actually grab buy tickets again in our lifetime (Yesterday, the TSX looked very much like it was in a final capitulation frame of mind).

I’ve upgraded many companies on my “Tracking list” and also for the first time in years, suggested more ownership now going forward of mining and exploration shares versus the metals themselves.

I remind the few, the proud, the metals and mining bulls of our theme song and to remember this battle when it seems the odds are overwhelming against us and the perma bears chant throughout the media the bull market os over and they’re going in for the kill..




http://www.grandich.com/
grandich.com ]]> Grandich Blog RssFeed http://www.gold-speculator.com/grandich-blog/79380-update.html Door Is Left Open for U.K. Monetary Stimulus http://www.gold-speculator.com/wallstreetjournal-business-tv/79379-door-left-open-u-k-monetary-stimulus.html Wed, 16 May 2012 13:10:40 GMT The Bank of England said inflation in the U.K. will probably take longer to return to target than previously thought, while economic growth will be weaker, leaving open the possibility of fresh monetary stimulus. WSJ's Cassell Bryan-Low reports. Photo: Getty Images


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The Bank of England said inflation in the U.K. will probably take longer to return to target than previously thought, while economic growth will be weaker, leaving open the possibility of fresh monetary stimulus. WSJ's Cassell Bryan-Low reports. Photo: Getty Images



]]> WallStreetJournal - Business TV RssFeed http://www.gold-speculator.com/wallstreetjournal-business-tv/79379-door-left-open-u-k-monetary-stimulus.html Vancouver Conference June 3-4 http://www.gold-speculator.com/grandich-blog/79378-vancouver-conference-june-3-4-a.html Wed, 16 May 2012 13:10:40 GMT The following is automatically syndicated from Grandich's blog. You can view the original post here. Stay up to date on his model portfolio!
May 16, 2012 03:37 AM


Please join me at


Cambridge House Investment Conference: Vancouver
June 3-4, 2012



Click here for more information and to register.





http://www.grandich.com/
grandich.com ]]> Grandich Blog RssFeed http://www.gold-speculator.com/grandich-blog/79378-vancouver-conference-june-3-4-a.html Grandich Client Northern Dynasty Minerals http://www.gold-speculator.com/grandich-blog/79377-grandich-client-northern-dynasty-minerals.html Wed, 16 May 2012 11:10:38 GMT The following is automatically syndicated from Grandich's blog. You can view the original post here. Stay up to date on his model portfolio!
May 16, 2012 03:01 AM


Read **ndm____________northern_15may2012_150705_id66510m2 0




http://www.grandich.com/
grandich.com ]]> Grandich Blog RssFeed http://www.gold-speculator.com/grandich-blog/79377-grandich-client-northern-dynasty-minerals.html Grandich Interview http://www.gold-speculator.com/grandich-blog/79376-grandich-interview.html Wed, 16 May 2012 11:10:38 GMT The following is automatically syndicated from Grandich's blog. You can view the original post here. Stay up to date on his model portfolio!
May 16, 2012 03:02 AM


Listen




http://www.grandich.com/
grandich.com ]]> Grandich Blog RssFeed http://www.gold-speculator.com/grandich-blog/79376-grandich-interview.html Fraser Alexander celebrating 100 years of service to mining http://www.gold-speculator.com/mining-weekly-tv/79375-fraser-alexander-celebrating-100-years-service-mining.html Wed, 16 May 2012 09:01:23 GMT
JOHANNESBURG (miningweekly.com) -- South Africa's Fraser Alexander, which has been providing customised solutions to the mining industry since 1912, this year celebrates 100 years of service to the resources sector.
Views: 1
0 ratings
Time: 06:33 More in News & Politics
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#93;
JOHANNESBURG (miningweekly.com) -- South Africa's Fraser Alexander, which has been providing customised solutions to the mining industry since 1912, this year celebrates 100 years of service to the resources sector.
Views:
1


0
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Time:
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]]> Mining Weekly TV RssFeed http://www.gold-speculator.com/mining-weekly-tv/79375-fraser-alexander-celebrating-100-years-service-mining.html