How gold performs in deflation

Despite the undue attention that has been paid to the chimera of inflation this year, it should be clear by now that deflation is the far greater structural problem. One clue that deflation, not inflation, is the main issue can be seen in the biggest form of savings and investment among the U.S. middle class, namely real estate.

Real estate is an excellent asset to own during the inflationary phase of the long-term cycle of inflation/deflation but it’s one of the worst assets to own during hyper deflation. As an illiquid asset, housing prices tend to depreciate in the final years of the deflationary winter season, as many have discovered. This is one of the biggest proofs that the economic long wave, or Kondratieff Wave, is still in its deflationary phase and hasn’t bottomed yet.

Consider the following real estate prognosis from Doug Ramsey, an analyst with the Minneapolis investment firm Leuthold Group. Ramsey has calculated that single-family housing starts would have to increase from 60 to 70 percent from their current 50-year low of 419,000 annual rate just to reach the average low of the past six housing busts since 1960. Needless to say this would be asking a lot for even an energetic housing market.

Ramsey, who is an avid student of financial history and has studied numerous financial bubbles, has said that every housing statistic he follows has so far matched the price pattern following the bursting of other asset bubbles. According to Ramsey, asset bubble collapses tend to follow a similar pattern, including most famously the 1929 stock market crash and Japan’s 1989 Nikkei crash. He says it starts with a steep decline lasting three to four years followed by a brief rally that is followed by years of stagnation. He points out that the Dow Jones Industrial Average took 35 years to return to pre-crash levels. Japan’s Nikkei stock market index, meanwhile, trades at less than a third of its 1989 peak.

Ramsey concludes, “The housing decline will be a long, multiyear process, and the multiplier effect across the economy will be enormous.” Until housing prices bottom investors are safe in assuming that deflation is the dominant trend underscoring the economy, notwithstanding occasional periods of Fed-induced (QE) pockets of inflation.

Many investors have asked, “If deflation is the main problem facing the economy, why should I own gold?” Gold, they reason, is an inflationary hedge and if that be so, how can it possibly benefit from deflation?

Gold is more than an inflationary hedge, however. As Samuel Kress has shown in his cycle work, gold benefits from both extremes of the 60-year cycle, namely hyper inflation and hyper deflation. During the inflationary period of the current 60-year cycle in the 1970s, gold benefited from the extreme inflation as the cycle was peaking. In more recent times gold has benefited from deflation while the cycle is declining. Consequently, investors look to the precious metal for financial safety in times of uncertainty.

Gold has in fact become the new long-term investment vehicle of choice for retail investors. Traditional forms of savings such as real estate have become depreciating assets and no longer offer protection against the ravages of the long-term cycle. Meanwhile savers are punished with extremely low interest rates while the value of the currency diminishes through central bank money printing schemes. It’s no wonder then that investors are turning to the yellow metal as the safe haven du jour during the “winter” season of the 60-year/120-year cycle.

Gold is in the unique position of benefiting from Fed-driven inflation, as the recent quantitative easing program proved. Yet it also derives strength from uncertainty in the global financial and economic outlook. Certainly there have been more than a few instances of this in recent years. A survey of the year-to-date alone would suffice to provide enough examples of how gold has benefited by the recurrence of worry. The current worry among investors is how a potential Greek debt default would impact global markets. In the last few days since this worry has made headlines, the gold price has managed to climb from its June correction low of $1,483 to its latest high of $1,563.

The current leadership of the Federal Reserve are committed to fighting against the forces of long wave deflation and have shown a steely determination in carrying out an anti-deflationary policy. This can be clearly seen in the Fed’s first and second “quantitative easing” programs, a dignified term for fighting deflationary pressure by increasing debt. The latest round of quantitative easing (QE) ended on June 30, yet on Tuesday, July 12, the Fed released the minutes of its June meeting and hinted that a third round of QE may be in the offing. The minutes suggested that most members of the Fed’s board of governors would favor another round of QE if the economy continues to show signs of weakening. This may have been one reason behind gold’s spike to new highs on Tuesday.

Gold should ultimately benefit from either course of action, whether it be the uncertainty that accompanies long wave deflation or the artificial boost in asset prices brought about by quantitative easing. This is one reason why gold remains the investment safe haven du jour in the final years of the deflationary cycle.

Gold & Gold Stock Trading Simplified

With the long-term bull market in gold and mining stocks in full swing, there exist several fantastic opportunities for capturing profits and maximizing gains in the precious metals arena. Yet a common complaint is that small-to-medium sized traders have a hard time knowing when to buy and when to take profits. It doesn’t matter when so many pundits dispense conflicting advice in the financial media. This amounts to “analysis into paralysis” and results in the typical investor being unable to “pull the trigger” on a trade when the right time comes to buy.

Not surprisingly, many traders and investors are looking for a reliable and easy-to-follow system for participating in the precious metals bull market. They want a system that allows them to enter without guesswork and one that gets them out at the appropriate time and without any undue risks. They also want a system that automatically takes profits at precise points along the way while adjusting the stop loss continuously so as to lock in gains and minimize potential losses from whipsaws.

In my latest book, “Gold & Gold Stock Trading Simplified,” I remove the mystique behind gold and gold stock trading and reveal a completely simple and reliable system that allows the small-to-mid-size trader to profit from both up and down moves in the mining stock market. It’s the same system that I use each day in the Gold & Silver Stock Report the same system which has consistently generated profits for my subscribers and has kept them on the correct side of the gold and mining stock market for years. You won’t find a more straight forward and easy-to-follow system that actually works than the one explained in “Gold & Gold Stock Trading Simplified.”

The technical trading system revealed in “Gold & Gold Stock Trading Simplified” by itself is worth its weight in gold. Additionally, the book reveals several useful indicators that will increase your chances of scoring big profits in the mining stock sector. You’ll learn when to use reliable leading indicators for predicting when the mining stocks are about o break out. After all, nothing beats being on the right side of a market move before the move gets underway.

The methods revealed in “Gold & Gold Stock Trading Simplified” are the product of several year’s worth of writing, research and real time market trading/testing. It also contains the benefit of my 14 years worth of experience as a professional in the precious metals and PM mining share sector. The trading techniques discussed in the book have been carefully calibrated to match today’s fast moving and volatile market environment. You won’t find a more timely and useful book than this for capturing profits in today’s gold and gold stock market.

The book is now available for sale at:

Order today to receive your autographed copy and a FREE 1-month trial subscription to the Gold & Silver Stock Report newsletter. Published twice each week, the newsletter uses the method described in this book for making profitable trades among the actively traded gold mining shares.

Clif Droke is the editor of Gold & Silver Stock Report, published each Tuesday and Thursday. He is also the author of numerous books, including most recently, “Gold & Gold Stock Trading Simplified.” For more information visit Welcome to Clif Droke dot com

Bank of International Settlements Changed Silver Data

(From $203 to $93 Billion in Silver Liabilities?)

Silver Stock Report

by Jason Hommel, July 6th, 2011

The Bank of International Settlements (BIS) has changed, or revised, their silver derivatives data in their derivatives reports. The change took place between their June, 2010 report, and their December, 2010 report, for the period of June, 2009. The change was from $203 billion in “other precious metals” liabilities, changed down to $93 billion.

The change took place, in Table 22A: Amounts outstanding of OTC equity-linked and commodity derivatives, By instrument and counterparty, in the category of “other precious metals”, for June, 2009, Notional amounts outstanding.

In June, 2009, the silver price was about $15/oz.

This means that the $203 billion silver liability divided by $15/oz. shows that all the banks in the world that are tracked by the BIS owed 13.5 billion ounces of silver.

But the entire world silver mining production is only about 700 million oz. of silver annually, so this is an admission that the banks owed about 19.3 years worth of world annual mine production of silver.

The adjustment, from $203 billion, down to $93 billion was a drop of $110 billion, or more than half of the number! The lower number, $93 billion, is still absurdly large, at about 6.2 billion oz. of silver, or about 8.8 years of worth of world annual mine production of silver.

The obviously large and very excessive amounts are the smoking gun of silver fraud by the western world’s banks.

This BIS data is extremely important, because it is far larger than the excessive short selling amounts often noted at the COMEX, which typically is only about 1 billion ounces of silver, or less.

I attended the CFTC open hearings on silver manipulation. A banking representative was asked directly what the banks were hedging by being so massively short of silver at the COMEX. The answer was that the banks were “hedging client long positions in the OTC market”. That’s obviously an admission of manipulation, because client long positions do not need to be hedged, since the client obviously wants to be exposed to the changes in the silver prices, which is why they bought silver to be held by the large LBMA member banks in the first place. So if the banks are hedging client long positions, it means that the bank has not bought the silver, and that they want to prevent silver prices from going up, because if it does, then the banks will owe their clients a lot of money, so, to “hedge” that exposure, they short at the COMEX, which is the market that generates “price discovery”, since trades there create a trail and record of prices.

After all, imagine what the silver prices would be if the LBMA banks actually went into the market to buy 13 billion ounces of silver, or 19 years worth of annual production. Clearly, the silver prices could go hundreds if not thousands of times higher, and it could destroy the entire financial system of paper money.

The revision was an adjustment from $203 billion down to $93 billion, and the adjustment is strange, because it was the only number that was repeatedly and consistently highlighted in this silver stock report. It’s also strange because the amount of the value of the gold contracts, at $425 billion, and other commodities contracts, at $3101, went unchanged for that reporting period.

This BIS change is significant, both in the relatively large silver amounts, and the reporting period. The change took place after I began publishing this BIS data, and soon after I filed the first anti trust complaint against JP Morgan with the Justice Department, in April, 2010.

This data change also took place after the filing of approximately 25 lawsuits against JP Morgan over silver manipulation.

It has been difficult to document the BIS data change, since they often change the web links to their reports, and they change the reports directly. But a helpful reader has discovered the original reports at the BIS website.

From 2009, Dec report: $203 billion for the June, 2009 period.

From the 2010, June report: $203 billion for the June, 2009 period.

From the 2010, December report: $93 billion for the June, 2009 period.

From the 2011, June report: $93 billion for the June, 2009 period.

Since the BIS changes their urls and reports, I saved all of these pdf files, which are archived here:

And since the BIS changes their urls and reports, I also captured a print screen of these pdf files being opened directly on the BIS website:

In conclusion, it’s not a “conspiracy theory” that the banks are manipulating the silver market. The BIS bank data shows the conspiracy.

And when the banks are saying indirectly, “don’t trust us”, given both the large amounts and large changes in their published data, it would be foolish to trust them.

It’s a mathematical certainty that silver prices will explode upwards in price, and only people who hold their own silver will benefit from the major value change that’s coming.

You can buy real silver from us at

We have much lower prices, or premiums over spot, right now. Everyone wants to buy on a dip. Now’s your chance!


I strongly advise you to take possession of real gold and silver, at anywhere near today’s prices, while you still can. The fundamentals of silver indicate rising prices for decades to come, and a major price spike can happen at any time.

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JH MINT & Coin Shop, Grass Valley, CA — minimum order $5000 for free shipping, USA shipping only.
Open 10AM to 5PM Pacific Time, Monday to Friday, closed weekends and bank holidays.
(530) 273-8175
Kerri handles internet phone orders:
(530) 273-8822

You can also buy silver from my mom at
Mom will ship overseas, and also in lots of more or less than 100 ounces.
3510 Auburn Blvd #12
Sacramento, CA 95821


Jason Hommel

Bull Market in Stocks, Bear Market in Gold? Only on TV!

Mark J. Lundeen
01 July 2011

The week ended with the Dow Jones up 4.48%, and gold down 0.92%. On CNBC, as usual, much was made of the Dow’s performance, with the term of “bull market” frequently used to describe this week’s gain in the Dow. Gold, on the other hand, is portrayed as “clearly in a bear market”, with no shortage of “financial experts” pessimistic over the future prospects for gold and silver. It would seem that the risk of higher-interest rates is placing tremendous downward pressure on the precious metals. As you will see further down in my article, higher-interest rates are actually good for gold and silver! Where do the big networks find these “experts?”

But one issue never discussed in the media, is the inflationary consequences caused forty years ago when the US abandoned the fixed price of gold at $35 an ounce which had been pegged there since the Bretton Woods Agreements in 1944, and ended the redemption of US dollars for gold by foreign governments at any price. Bull market in stocks, bear market in gold? Is that what you see below? Seeing gold would outperform stocks forty years after it was kicked out of the world’s monetary system is something to be expected!

Since the world was taken off the gold standard, gold has in no uncertain terms outperformed the Dow Jones. This chart’s data was personally compiled by the author from old issues of Barron’s, week by week, so you can trust what you’re seeing above. It’s scandalous how CNBC passes on mostly poor quality marketing material from Wall-Street bucket shops as investment advice to retail investors.

Well, if gold and silver are the only shows in town worth buying a ticket to, why should we follow the Dow Jones? I spend a lot of time with the Dow Jones as the Dow is always in the background of whatever else is happening in the financial or commodity markets. Ask the man (or woman) on the street what is happening in the much larger and more important bond market; chances are they don’t know or even care. But when people watch one of the legacy-networks’ nightly news program, they believes it was a better day when the Dow Jones (just 30 blue-chip stocks) closed up 100 points, than down. The “policy makers” understand the importance of the Dow Jones on public opinion, and for that reason they are currently working very hard keeping the Dow above its 12,000 line. A little excitement in the Dow Jones, like this week’s 4.48% gain, goes a long way in shaping public opinion on the economy.

Let’s look at the chart below, the Dow Jones has been trading in a fixed range since 1996 (blue plot, red square). Fifteen years of doing nothing for investors. However, since 2000, the Dow Jones is actually a story of investors paying capital-gains taxes on inflationary losses in the stock market. Why is that? Because since 1913, when Congress created the Federal Reserve, “monetary policy” has greatly increased the number of US dollars in circulation (CinC). There are now 8 dollars in circulation for each dollar in circulation in 1980. On an inflation adjusted basis (red plot below), blue-chip stocks when priced in constant 1980 dollars, have delivered significant negative returns for the past twelve years. The Dow Jones is 38% below its inflation adjusted highs of April 1999. Since 1980, blue-chip stocks have provided only a 78% pre-tax return in inflation-adjusted capital gains, and that would be substantially lower after paying capital gain taxes on the nominal gains of ~900%.

The Greatest bull market in the 20th century has only been an inflationary illusion.

Returning to the nominal dollar blue-plot above, will the Dow Jones break decisively upwards out of its box? Don’t hold your breath! My expectations are, that we will see the Dow break decisively below its lows of March 2009, as the Federal Reserve relentlessly expands CinC towards infinity. Before this bear market is over, I expect the Dow’s huge head and shoulders formation will be completed in a particularly nasty manner for the bulls.

How far could the Dow Jones fall? Well, stock-market investors have been in a bullish mood for decades, and bull’s don’t give a sweet-rat’s petutti about dividend yields. They never have, and they never will. But historically, dividend considerations eventually become paramount in bear markets, after the investing public accepts the new reality that capital gains are only distant memories and wishful thinking.

Let’s take a look at the Dow’s dividend yield from 1925 to 2011. Bull markets in the chart below can be identified by the Dow’s dividend yield falling down to the 3% line. In Bear Markets we see the Dow’s dividend yield rise from a 3% yield to above the Dow’s 6% line. From 1925 to 1987 (62 years), this relationship held fast. But then Doctor Greenspan became Fed Chairman in August 1987, and nothing has been the same since.

The bubble Doctor Greenspan inflated into the stock market has yet to deflate. I can say this with certainty, by simply pointing out the fact that since 1993, the Dow has been yielding less than 3%. What about that little 4.7% spike we see in the far right of the chart above? Oh, you must be referring to the Dow’s March 2009 bottom, also known as the #2 Dow Jones Bear Market bottom since 1885!

The astonishing thing is that the Dow’s yield increased to only 4.7% in March of 2009, resulting in the second deepest bear market bottom since 1885! This is not only an indication of how grossly inflated stock market values were in January 2000, when it yielded a miniscule 1.30%, but how painful it will be for shareholder values when the Dow Jones once again sees a dividend yield above 6%; which someday it will. Currently, the Dow is paying $300 a year in dividend payouts, yielding 2.39%. Assuming the Dow Jones can maintain its current dividend payout, the table below tells us what happens to the Dow when its dividend yield reaches 6%: the Dow Jones declines to 5000! That would be a 65% decline in the Dow Jones from its highs of October 2007.
Valuating The DJIA with Dividend Payouts & Yields

Range of Possible DJIA Dividend Yields

Div P/O2.0%4.0%6.0%8.0%10.0%12.0%$30015000 7500 50003750 3000 2500 $25012500 6250 4167 3125 2500 2083 $20010000 5000 33332500 2000 1667 $1507500 3750 2500 18751500 1250 $1005000 2500 1667 1250 1000 833 $502500 1250 833 625 500 417 Historically, Dividend Yields Have Always Risen in Bear Markets.
Sometimes Dividend Payouts Fall.

Source Barron’s
Graphic by Mark J Lundeen

Most people alive today only understand the stock market from the perspective of a bull. So pricing the Dow in terms of yields is alien to them. But the relationship between valuation, payout and yield is simple, mathematical, and non-negotiable. It applies in bull markets too, but bulls are rather stupid animals. Other than how many dollars they are up or down this day or week, the fundamental mathematics of the stock market is beyond them. I remember watching CNBC in January 2000, as the Dow topped out. Not a single stupid bull commentated that the Dow was yielding only 1.30%, making the stock market in January 2000 the most overpriced in the history of American finance. The provided link shows that some bulls in 1999 believed 36,000 for the Dow was reasonable!

But Mr Bear is a very clever animal, one who takes great delight in the simple mathematics (complex for bulls) seen in the table above. He’s a real bastard, too. For the simple joy of seeing the bulls flee like rats from the stock market, he’s not above driving the yield for the Dow Jones up past 8% with a 50% reduction in the payout. Such a move is well within the historical range of possibilities. Looking at the table above, this would drive the Dow down to 1875 for a bear market low of -87% from the Dow’s October 2007 high. This would rival the -89% drop the Dow made in 1929-1932 for the all time bear market bottom.

How likely is this? It is unavoidable in my opinion! Dividend yields will increase greatly as bond yields and interest rates increase to double digits. And rising interest rates will crush the public’s personal finances and corporate profits, making cuts in dividend payments a top priority by management.

How likely are interest rates to rise? Very likely! During the 30 years from 1971 to 2001, the trends in the price of gold (blue plot, left scale) and the US long bond yield (red plot, right scale) were closely correlated, with the price of gold frequently a leading indicator of future trends in bond yields. With rising consumer prices being the great levitator of bond yields – and gold, the chart below is a record of wealth fleeing fixed income, into gold from 1971 to 1980.

This fact is not widely recognized by “investment experts” today, but historically, the price of gold feeds on the flow of flight capital from fixed income as bond yields rise with consumer prices. The reverse is also true. Note that ever since the price of gold was released from its Bretton Wood’s $35 to one ounce of gold fix, the price of gold has suffered when * declining * bond yields caused investment flows to reverse, as is clearly evident below.

But this was only true until August 2001, when bond yields continued declining in the face of rising gold prices. Since 2001, the bull market in financial assets has been really creepy! Yes, “creepy” is precisely the correct word to describe what the Dow Jones and the US Treasury bond market have been doing in the face of rising gold prices. There is something really wrong with this picture, but it’s not the rising price of gold!

Rising gold prices on declining bond yields, along with the Dow’s dividend yield stubbornly below 3% for the past eighteen years while the Dow has risen from 4000 to 12,000, are solid indications that the prices of financial assets are set by the needs of “policy”, rather than by supply and demand fundamentals.

What in the hell does that mean? Just look at the chart below where I’ve charted the US Treasury holdings of the Federal Reserve and the world’s central banks, in terms of percentages of the US national debt. Since 2001, central banks have been in an inflationary feeding frenzy in the US Treasury debt markets, monetizing Uncle Sam’s I-Owe-You-Nothings, into their rapidly depreciating money. So it’s really no mystery why gold has been rising for the past ten years, as bond yields continued to decline: the managers of the world’s currencies are committing monetary suicide.

Obviously, the price of gold for the past ten years is not feeding on flight capital from deflating bond prices. So where is the money coming from that is driving gold higher? From the Fed’s “monetary policy”; as stated by Doctor Bernanke himself.

“By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services.”
– Ben S. Bernanke, Federal Reserve Board Governor, November 21, 2002

Helicopter Ben has been good to his word of “reducing the value of the US dollar in terms of goods and services.” People who understood the implications of Doctor Bernanke’s inflationary “policy” have been buying gold and silver for the past 10 years to protect themselves from the inevitable monetary collapse to come.

When bond yields begin to rise, trillions-of-dollars will begin fleeing the fixed-income and stock markets, and seek a store of wealth that cannot be inflated to worthlessness by central banks: gold and silver. In the past I’ve mentioned the possibility of gold rising above $30,000 an ounce. Nothing has changed my mind on this. Historically, governments have often destroyed their money by inflating it to worthlessness. This has happened many times in the history of finance, since the Roman Empire. A day is coming when gold and silver will become simply unaffordable to the impoverished masses. Gold at $1500, and silver at $33? Cheap!

But rising yields in fixed income and dividends are milestones that we have yet to pass, and the Dow Jones is only 30 large blue-chip stocks. Are there other indications that financial assets are in trouble? You betcha! Let’s take a look at the money market, where business borrows funds for their short-term money requirements.

The chart below shows the money market in dollars (blue plot, left scale), with a Bear’s Eye View (BEV) plot (red plot, right scale). The money market was very small in 1980, but had grown to just under four trillion in January 2009. It currently stands at 2.7 trillion dollars.

The money market provides us with an important insight into the health of business, since businesses use it for short term financing. And what does business use short-term money for? To finance inventory. Ideally, business wants its inventory to come into their warehouses one day, and out the next, all financed with other people’s money. This is a good arrangement, one that provides savers an income from the profitable operations of business in a thriving economy. At least it did, until Doctor Bernanke lowered short-term interest rates to zero in December 2008.

When the economy is in full gear, business is good, so the demand for 90 day money (money market funds) is high. This indicates that inventory is quickly flowing into, and out of warehouses; as fast as salesmen can get customers to sign contracts. But when the economy is doing poorly, commissioned sales personnel sit around a phone that doesn’t ring, and businesses lay off their employees. So the money market contracts as business slows, since companies don’t purchase inventory that can’t readily be sold.

Currently, the earnings for the Dow Jones are at all-time highs. But the two year, 1.3 trillion dollar collapse in the money market casts GREAT DOUBTS on the validity of the Dow’s current rise in earnings, and the Dow’s ability to sustain its current dividend payout. If the Federal government’s “regulators” were worth their salt, they’d already be investigating this divergence. But they aren’t, so be advised: the current dividend payout in the Dow Jones is vulnerable to unannounced cuts. The above chart is telling us that business is really bad in the United States. If you’ve forgotten what that portends for the Dow Jones’ valuation, go back and review my above table for yields, payouts and valuation for the Dows Jones.

The Bear’s Eye View (BEV) (red plot, right scale) earns its name in the Money Market Funds chart above! The BEV plot uses the same data from the dollar plot (blue plot, left scale) and expresses these dollars in percentages terms. Each new all-time high is reduced to a 0% (BEV Zero). All weekly values in the chart’s blue plot above that are * NOT * a new all-time high are converted into negative percentages * FROM * their last all-time high. The Bear’s Eye View plot above, compresses price data into a range of percentage spanning from 0% (new all-time high) to -100% (a total wipeout).

The money market’s BEV plot captured the severe recession of the early 1980’s, revealing a 30% contraction in the demand for short-term money that was barely noticeable on the blue dollar plot. The severity of the aftermath of Greenspan’s high-tech bubble is seen as a 21% decline in demand for 90-day money in the 2000s. However, the post credit crisis economy has produced the largest decline in demand for short-term money in the past 31 years; a 31% decline that shows no sign of abating!

This 31% contraction in demand for short-term money is also an indicator of how corrupt the political management of the economy has become. The last all-time high in Money Market Funds (Terminal Zero) occurred in January 2009, just days after President Obama was sworn in as president. Since then, quantitative easing, bailouts, direct subsidies to “green jobs”, and increases in Federal spending has sent many trillions of dollars flooding into the economies of all 50 states. I don’t know where this vast sum of money went, but the money market’s BEV Plot is telling us with certainty that these trillions in “stimulus” * DID NOTHING * for employers in the private sector. Well what else could we expect from a society where more and more power, is flowing into fewer and fewer hands, further and further away from where you and I make our living? Unions used to be local organizations funded by local union dues. But today, for the most part, the locals are controlled from their national headquarters in Washington, because these days, that’s where the money is!

One more item before I close: a look at the abnormal pattern in trading volume for the stock market since 2000. Ask yourself: what makes the stock market go up? Simple; people who were sitting on the sidelines, looking at all the EASY MONEY other people were making buying stocks, decided to come into the market too. So bull markets start with relatively few people buying stocks, but end with everyone and their grandmothers lusting after easy capital gains too. The result is an explosion in trading volume at the end of the bull market. But during bear markets, people one by one exit the market, and trading volume contracts. A good illustration of the expansion and contraction in trading volume during bull and bear markets can be seen in the NYSE’s trading volume, from 1926-42. I used a 40 week moving average to smooth the plot out.

From 1926 to the 1929 top, NYSE trading volume’s 40 week moving average exploded by 150%, then returned to 1926 levels at the market bottom in July 1932. From July 1932 to March 1937, the Dow Jones itself gained 372% during the Great Depression. But the NYSE’s trading volume tells us that those investors who survived the July 1932, -89% bottom were wary. Trading volume collapsed in April 1936, a full year before the Dow saw its 1937 top. After the 1937 top, the Dow saw some good rallies, but the trading volume required to sustain higher prices in the Dow just wasn’t there. What Wall Street did have from 1929 to 1942 were three massive bear markets (stars in the chart below). By the bottom of the 1942 bear market, the NYSE trading volume’s 40Wk M/A had contracted by 90% from its highs of 1929. By 1942, retail investors were as rare as dinosaurs on Wall Street.

But if we are to believe what we see below, “everyone and their grandmothers” in our generation are made of sterner stuff! Not only did trading volume increase going into the January 2000 top (as expected), but trading volume EXPLODED as the Dow Jones entered a 33 month, -38% bear market from January 2000 to October 2002, and then went BALLISTIC as the Dow Jones descended into the second greatest, all-time bear market bottom in March 2009. This pattern of trading volume can only be described as surreal.

Most peculiarly, since March 2009 the Dow Jones has entered into a regular CNBC “bull market” while trading volume in the stock market collapsed. Since March 2009, the fewer shares that trade on the NYSE, the higher the Dow Jones goes. It’s a scene from: Wall Street, the Theatre-of-the-Absurd!

As far as the stock market goes; I subscribe to the old fashioned idea of keeping out of it until the bear market is over! All things considered, waiting until the Dow is yielding 8% with a 50% cut in dividend payouts before you go back into the stock market is probably the best investment tip you’ll get in 2011.

So, we all have a lot of time on our hands until it’s time to start getting bullish again on stocks. So maybe you’ll have the time to read the following recent articles from Casey Research,and othershave shown that a return of over 1 million percent could have been achieved with just one single trade per decade, by identifying and riding the long term trends, * WITHOUT * using any leverage or derivatives, just 5 simple trades to turn $1000 into more than $10 million over a 40 year period. Notice that real estate was not the winning investment during any of the last four decades. The challenge we face now is to use our historical insight to determine where the safe place will be to perpetuate wealth over the coming, turbulent decade. Me, I’m thinking of physical gold and silver.

Mark J. Lundeen
01 July 2011

Rupert Murdoch’s Failing Attempts to Control the Internet Reformation

The Daily Bell

Saturday, July 02, 2011 by Anthony Wile

Anthony Wile

Rupert Murdoch lost nearly his entire investment in MySpace the other day when he sold the failing social network to musician and actor Justin Timberlake and an ad agency he backs for some US$30 million. This was a good deal less than the US$500 million-plus Murdoch paid for it.

Why did Murdoch make such a bad investment? Because he hoped to use the network as a vehicle from which he could disseminate news. He wanted to make MySpace into a mechanism to deliver current-events content. When it didn’t work out and he must have known that fairly soon he obviously lost interest. And as his interest waned, so did MySpace.

This speaks to Murdoch’s desperation and mainstream media’s generally. In a digital world, he is willing to burn US$500 million simply to confirm that a social network is not a news delivery system. I could have told him that for a much lower fee.

This also shows us the importance of news to the powers-that-be. The Anglosphere elites for whom Murdoch evidently and obviously works are determined (thus far without much success) to find a way to protect their failing information franchise.

Nothing in the past 300 years or so, while the elites have advanced their one-world-order, has been so devastating to their plans as the Internet and the rise of the alternative media driven Internet Reformation. It has poisoned the chalice and befouled the well; it has unbalanced the clarity of the concoction and clouded it with truth. A bitter brew … for them!

Western power elites will do ANYTHING to reclaim their news franchise. When one looks at 20th century media development one is struck by its massive size and strategic composition. Every part of Western 20th century media worked seamlessly together. The whole idea was to create an increasingly militarized society that would accept global government as part of the natural order of things.

Hollywood delivered messages of violence and fear; the magazines and newspapers rehashed the same sorts of information and television that unique, talking box broadcast alarm and resolution-of-the same 24-hours a day.

There was no escape from it. If the world was not in death throes, that’s only because the wise men clustered at the top of the West’s painstakingly created authoritarian systems were saving the world on a real-time basis.

It is news dissemination that the power elite craves. Everything else is just a backdrop. The entertainment, the talk shows, the game shows, these were all merely the wrapper supporting the main act. Everything in Western media in the 20th century led up to the News Program. And the talking heads providing the “news” were glorified as great intellects worthy of the most arduous approbation.

Walter Cronkite, a febrile and shallow socialist, was the “most trusted man in news.” Dan Rather, a compulsive self-aggrandizer, was a countrified, attack-dog. These individuals did nothing but read the news; but they were revered. Today, things have changed. Mainstream news … very little. As a delivery mechanism of mind control it is failing. In fact, every part of the intricate system is failing.

In order to build a new world order, people must be either frightened or enticed into cooperating. It is a great deal easier to scare people than to bribe them, less costly too. But when the delivery mechanism fails, when people begin to tune it out as they have in the 21st century, then the message is muddled and gradually grows more insignificant.

Murdoch’s properties are supposed to provide the conservative half of a worldwide Hegelian dialectic. He’s been funded by Western elites to provide this vision because if one is to move society toward global governance, a conversation is necessary. Thesis, antithesis … synthesis. Murdoch provides the antithesis, with relish.

As a major facilitator of the one-world conspiracy, Murdoch is tasked with taming the Internet Reformation. It must be brought under control and the Internet made to work on behalf of a larger world order.

One can watch him writhe, these days. We’ve compared him to Hamlet, especially a few years ago when he really seemed at a loss and began to lash out while mumbling to himself. He bought MySpace and ruined it like a petulant child when it didn’t perform as planned. When he began MySpace had nearly 75 million users. It now has less than 35 million.

He’s onto the next gambit increasingly known in the mainstream media as “fail walls.” These pay walls encircle Internet content like moats around castles. Instead of seeing articles for free, readers are enticed with an occasional news story and then urged to sign up and pay for access to fuller content.

The New York Times tried this a few years ago and saw its on-line circulation plunge; it is trying again now with a different model known as “freemium” a mix of free and paid content which is said to be working marginally better.

Murdoch, however, is the most active participant in this futile circus. He’s placed paywalls around his properties in Britain, The Times and Sunday Times, in the US with such publications as The Wall Street Journal and is now transplanting the strategy to his Australian publications. The fairly thick walls around his UK publications have indeed kept casual browsers out. Reports claim that the UK Times has blocked 20 million viewers and replaced them with 79,000 digital subscribers.

This is heralded as a “success” in the brave new world of the Internet era. Meanwhile, circulation figures from ABC show that The Times and Sunday Times print sales fell 14.8% and 9.5% year-on-year. The UK Guardian News & Media Group have pursued a non-paywall approach and reportedly generated a 50 per cent increase in digital advertising revenue in the first six months of the financial year. Free content open access works better than pay walls.

Murdoch has also started a dedicated, online newspaper known as The Daily. It is delivered through Apple aps and people pay for it. But the problem is no different; the information being delivered hasn’t changed, only the delivery system. Murdoch keeps tinkering with the hardware when it’s the software that is the problem.

It could be that the open-access model is the one that works the best. It certainly makes the most sense. The 20th century, as we’ve written before, was a time of artificial news scarcity. The 21st century is one of news plenty. In such a brave new world, how can one successfully charge for content?
Better to give it away and try to surround it with ads or, in the case of the Daily Bell, operate a non-profit, advertising free site and rely on the generotisty of readers to help make the message grow.

But the trouble for the mainstream press is that the information has to be compelling in order to compete with the alternative media. DB reports a kind of truth; the mainstream media promotes fear and globalism.

In an environment where there is a plethora of product, the only distinguishing factor is quality. Power-elite media does not “do” quality very well. That is not why it exists. This is another problem Murdoch has when it comes to trying to charge for product. His news and information are a tool designed to advance the larger conversation and move it in the direction of international governance.
He is not a free agent in this regard.

In order to compete with the Internet’s alternative media, Murdoch’s media has changed its tone. It is much more strident than in the past about “conservative” issues. This is because the free-market thinking that’s driving the Internet Reformation is pulling the dialogue in a libertarian direction. Murdoch compensates with conservative viewpoints but gradually the fulcrum of the conversation is shifting.

In the 21st century, the larger social conversation is gradually repolarizing itself around what is natural and normal. The more people learn, the less convincing his conservative editorial thrust becomes; and the more strident authoritarian voices like Bill O’Relly’s become. People, once they understand their own manipulation, trend toward the libertarian point of view, which is why in the US, libertarian Texas Congressman Ron Paul is increasingly popular.

In order to accommodate the realigned conversation, Murdoch is forced to go along with it. This accounts for the rise of people like Glenn Beck. There is no way that Beck’s increasingly libertarian viewpoints would have been tolerated in the 20th century and evidently not in the 21st century either.

Obviously, the Glenn Beck experiment proved too arduous for Murdoch’s Fox as Beck has been released and is now starting his own TV channel. It may be that Beck proves more successful on his own than with Fox. He claims to have retained his soul. This is another problem that Murdoch’s media has it doesn’t appear to have much of a soul.

As the conversation shifts, Murdoch has to shift with it. But in order to accommodate the changing conversation he begins to BECOME exactly what his elite backers hoped to eradicate. To retain credibility he must present a version free-market thinking; yet this is anathema to his sponsors who wish only to promote covert and overt globalism. It is a conundrum.

This puzzle shall remain with the elites. The Internet Reformation, in fact, is a process not an episode. The trends that the Internet has produced are only going to get more powerful. As with the Gutenberg Press, the Internet’s effects will not easily be tamed. The apparent results of the Gutenberg Press the Renaissance, Reformation, etc. reverberated long after its inception. The changes began to occur with rapidity some 100 years its invention. The changes spawned by the Internet began after about 20 years.

From this we can see, mathematically speaking, that the ratio between the Internet and the Press is perhaps one-to-five. It took the elites about 350- 400 years to control the Press and to begin to monopolize its output. Thus, it may take the elites about 50-75 years to control the Internet.

But there is something else to consider. Assume for the sake argument that the mainstream media historical timeline is an accurate one (which we no longer do, necessarily) there can be no doubt things have speeded up. There was a 25,000 year gap between cave paintings and incised tablets. There was perhaps a 10,000 year gap between tablets and papyrus. There was perhaps a 5,000 year gap between papyrus and the printing press. There was a 500 year gap between the invention of the press and the advent of the Internet.

It may be that just about the time the elites have managed to fully control the Internet in say 50 years a NEW technology will come along and make life difficult all over again. The competition between the elites and the middle class was fully joined with the advent of the Gutenberg Press. This marked a fundamental shift in human history from what we can tell, defining history as a race between technology and elite mind control. The confrontation has only sharpened in the Internet era.

We may be at the early stages of a great Internet-inspired Reformation. The initial Reformation gave rise to fundamental shifts in society 500 years ago and redefined the relationship between peasantry and the elites of the day. It also kicked off a series of low-level, pan-European wars.

If one studies the Gutenberg Press and its impacts, one can see plenty of parallels between what is occurring now and what occurred then. At the time, the elites struggled to advance their control and maintain what they had already achieved. But it seems to me they lost control, despite the wars, at least temporarily, and now they are losing control again. For those in tune with what is happening, the 21st century may eventually prove a fine time to be alive and working.

At some point, the confluence of modern free-market thinking may force the powers-that-be to take a step back. Murdoch’s struggles are not made up. One only has to look at them over the past ten years to see a concretization of the theoretical proposals we’ve been presenting.

These issues are real. They may have great ramifications as the Internet Reformation rolls on, affecting everything from investments to lifestyle choices. In fact, I’d argue the impact is already a powerful one, even though people may not realize just what is occurring. Murdoch believes that he can regain control of the message with social networks, paywalls and dedicated content. He will likely go to his deathbed (he is not a young man) believing this. He and his backers and handlers may be wrong.


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