Gold Speculator

I love gold but I’ve turned*bearish. [While I admit]*if the Greeks were to quit the euro that gold could face a short-term bull wave I believe gold’s fundamentals are [too] weak to support the current price. [Here are 8 solid reasons why.] Words: 685

So says Balaji Viswanathan in edited excerpts from his original article* as posted on Seeking Alpha.
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.

*Viswanathan goes on to say, in part:

Gold has gone up over the past 13 years from around $250 in 1999 to $1,920 last year before correcting down to $1,620 or so. There are four factors that helped the rise of gold:

A period of sizable inflation (particularly in the commodity prices) from about 2002 to 2008.
A period of uncertainty in the global markets (2008 to the present), including the financial crisis of 2008 and the eurozone troubles in Greece and elsewhere.
The introduction of gold ETFs that allowed investors in the developed markets to bet on the yellow metal.
The growth in India and China, where consumers got more prosperous over the past decade and bought a lot of jewelry. In fact, China is now the world’s biggest consumer of gold.
[Be that as it may], however,*I believe gold’s honeymoon season is over and it could face significant downward pressures in the next few months. The following chart from the World Gold Council’s Q1 2012 report paints a picture of weak demand (look at the negative values in the highlighted portion of the chart).

Source: World Gold Council

I detail below the reasons why gold could go down:

The Asian jewelry market is slowing down. The World Gold Council*reported that the markets all over Asia are seeing a drop in jewelry demand (India -19%, Saudi Arabia -17%, Thailand -8%, Turkey -16%, Vietnam -10%).
The use of gold by industries fell 10% Q1 2012 (y-o-y), amounting to 10 tonnes of reduced gold consumption. The electronics industry is a major consumer of gold and the overall weak sales there will further reduce gold demand.
The rise in gold prices has prompted explorers around the world to prospect even more keenly for gold reserves. Mining production has grown 5% this year, due to the renewed efforts in gold exploration.
In India, the fast rise in gold prices, coupled with a drop in the rupee and the slowdown in the Indian economy, has priced out most of the middle class from buying gold. Bloomberg*reports that**”demand for gold and silver fell by about 20 percent to 25 percent this year because of higher taxes and prices… Investment demand dropped 46% and jewelry demand fell 19%.
While Mexican and Russian central banks are busily adding gold to their portfolios, the demand from other central banks is dropping. In Q1 2011, the demand was 137 tons, while in Q1 2012, it was a little more than 80 tons.
Inflationary pressures across the world have receded. Gold is typically seen as a hedge against inflation and normally tracks inflation in the long run. With the slowdown in the Indian and Chinese economies, along with the ever-increasing bad news flowing in from the eurozone, inflation fears have quickly evaporated from investors’ minds. Demand is expected to lag behind supply in most of the world, including in the emerging markets.
The Indian wedding season, which makes for one of the largest consumption periods for gold, is over and June-September is typically a dull season for the gold industry in the country. The seasonal factor is expected to put pressure on gold in the short term.
Chinese gold consumption growth is also falling as the major cities in the country reel from the economic slowdown. Though the growth is still positive, it is probable that Chinese consumers might follow the path of their counterparts in the rest of Asia.
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[The above are my reasons for being]… bearish on gold right now. [As I said at the beginning of the article]… in the long run, I believe the gold fundamentals are [too] weak to support the current price.

*http://seekingalpha.com/article/6587…iew&ifp=0**(To access the above article 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. Hathaway: Next Round of QE Will See Gold, Silver and Mining Stocks Go Ballistic! Here’s Why

“Even with the prospect of no QE, if you believe the Fed, gold has not made a new low [since December] so, in my opinion, the absence of QE is priced into gold. On the other hand, if market conditions hit emergency levels, the central banks will be forced to their knees and they will be doing QE by whatever name it’s called. I think at that stage you are going to see gold go ballistic because it will be an admission of failure on the part of policymakers….If investors don’t do something now and take advantage of this funky period we are in, this daily grind of back and forth, they are going to be paralyzed. They will just be bystanders when gold finally takes off.”

2. Update: 51 Analysts Now Maintain that Gold is Going to $5,500 – $6,500/ozt. in 2015!

Lately analyst after analyst (161 at last count) has been climbing on board the golden wagon with prognostications as to what the parabolic peak price for gold will eventually be. That being said, however, only 51 have been bold enough to include the year in which they think their peak price estimate will occur and they are listed below. Take a look at who is projecting what, by when and why. Words: 644

3. Goldrunner: Fractal Gold Analysis Says Gold On Way to $3,500 Mid-year!

Our Fractal Model suggests the wave for Gold in US Dollars will sweep up into the $3500 to $3600 area into the mid-year time-frame. The leading edge of that time-frame begins in May and extends out for a few months. A potential for Gold to spike to a $3900 extended fib level exists. Like all parabolic moves in Gold, the late stages create the biggest price movements. Personally, I would be happy with a huge Gold run up to the $3200 level. Words: 1400

4. Is Gold About to Go Parabolic to $3,495 in June ’13; $10,899 in Sept. ’14 and Top Out at $32,659 on Jan. 16, 2015?

According to a recent Elliott Wave theory analysis gold is about to go parabolic reaching $3,495 in June 2013, $6,233 in April 2014, $10,899 in Sept. 2014, $18,712 in December 2014 and culminating in a parabolic peak price of $31,672 on January 16th, 2015! See the chart below. Words: 600

5. David Nichols: Expect to See $2,750 – $3,000 Gold By June 2013 – Here’s Why

The interim peaks in gold have been spaced 21 months apart over the past 6 years and have seen gains from 80.2% to 97.3%. As such, given the fact that the low of this last correction came in at $1,524 four months ago, we can expect gold to reach a new peak price of $2,750 to $3,000 in 17 months time (i.e. June/July 2013). [Let me explain in more detail.] Words: 976

6. Leeb: Gold Going to $3,000 Before the End of 2012!

The Fed is [going to] keep interest rates at zero until the end of 2014 [and that] is as aggressive as it gets and as bullish as it gets for gold. Inflation will be let out of the bag, maybe for the next three to four years. In this environment gold and silver are the best investments around…We are really talking about the next leg higher in this bull market…This is the leg I expect to take gold to $3,000 before the end of 2012.

7. Rebound Ratio Suggests New High for Gold By Mid-year

[While] some investors are frustrated,, and a few are worried that gold seems stuck in a rut [such a] stall in price has happened before…[but has] always eventually powered to a new high…[Let’s] examine the size and length of past corrections and how long it took gold to reach new highs afterward. Words: 740

8. GOLDRUNNER FRACTAL ANALYSIS: 2012 SILVER TO $70++

Around this point in the fractal cycle in the late 70’s, Gold busted out of its channel to rise sharply higher, along with Silver. Silver’s channel top will lie up around $68 to $70 over the coming months which we believe will be reached in 2012. The next higher angled resistance bands for Silver run from $112 to $115, and then up at the $123 area. By the end of the Silver Bull, we expect to see Silver reach $500+. Words: 1765

9. James Turk: Silver Will Climb to $68-$70 in 2 to 3 Months

Silver will climb to $68-$70 in 2 to 3 months once resistance at $35 is taken out… In many ways silver is positioned today like it was back in the summer of 2010… Regarding gold, as goes oil, so goes gold…and the bottom line is that the wind is at the back of the bulls in both the gold and oil markets.

10. Stephen Leeb: Silver’s Going to $60, $70, by the End of 2012 – Easy!

I think scarcity in oil is a dramatic tailwind for gold. Politicians will inflate. They don’t want oil to bring down the economy like it did in 2008. Remember, this inflation will take place with commodity prices already high. So this will create significant inflation. This means higher gold and silver. Gold at $3,000 by the end of the year, easy. Silver $60, $70, easy.

May 31, 2012 Investors bail from stock mutual funds (again): Chris Mayer on how we’ve been here before, and why it’s no reason to give up on stocks altogether
A trio of disappointments: jobs, GDP, Midwest business activity
Hopscotching the world: One of Asia’s wealthiest men spots a bigger trend than China’s “hard landing”… while Jeffrey Tucker waxes on the vibrancy of Brazil
Gluing the neighbor’s locks to keep the neighborhood nice… Readers unload on fellow readers who insist they “paid in” to Social Security… a special notice for readers of Addison’s Apogee Advisory… and more!
Gosh, could it be the Facebook effect?

Investors yanked $7.02 billion out of stock mutual funds last week, according to the Investment Company Institute. That’s the most since the first week of 2012.

Domestic stock funds account for nearly all of the outflow; that category has seen net outflows for 14 straight weeks.

The total withdrawn so far this year: $45 billion, which puts us on a pace to easily exceed the $85 billion total for all of last year. But then, this is nothing new. “People have been yanking a lot of money out of the market,” Chris Mayer points out, “something like $1.4 trillion since 2007.”

“Some people will use these outflows,” Chris adds, “to say the market can’t or won’t rise. I think that’s a lot of baloney.”

Chris points to new research from the Leuthold Group. “A new market high could potentially occur with no help at all from the public,” writes Leuthold’s Doug Ramsey.

After all, the S&P more than doubled from its March 2009 low, even as the outflows proceeded apace.

There is precedent for this: the bear market of the 1970s.

You want to talk about “weak volume” and “no public participation” in today’s market? Old-timers like technician Ralph Acampora will regale you with tales of traders flying paper airplanes on the New York Stock Exchange floor in the ’70s — so little trading there was to do.

Within the 1966-82 bear, there was a stretch from 1974-80 when the broad market rose 120%. Small caps did even better.

And within that six-year span, there was a vicious shakeout. “The sharp market declines of mid-2010 and mid-2011,” Leuthold’s Ramsey writes, “have probably served the same purpose as the 1976-77 decline — flushing out retail investors just as they were finally preparing to tiptoe back in.”

“It’s an interesting observation,” says Chris. “Stocks, as a class, then, perhaps are getting a bad rap.”

“People remember the headline-grabbing stories — and usually they are the stocks that blew up. Meanwhile, there are many stocks that just keep plodding along.”

“There are enough companies with good managers and decent businesses that give a fair shake to their owners. On a portfolio basis, such stocks can make the little guy a lot of money over time.”

Chris shares some of his favorites right here.

Meanwhile, the “headline-grabbing stories” bring little joy today.

As we write, U.S. stocks are reversing big losses early in the day on “news” that the International Monetary Fund will spend out of an empty pocket to fill the black hole known as Bankia. That’s a giant and busted Spanish bank cobbled together from a bunch of smaller and busted Spanish banks 18 months ago.

No, the eurozone is no closer to being fixed now than it was a few hours ago… but the S&P has managed to recover 1,300.

(Facebook, meanwhile, could sink below $27 before day’s end. Heh.)

Tomorrow’s market action will be “data-driven”, with the Labor Department’s monthly jobs report issued before the open and the ISM manufacturing survey after.

In a preview of the jobs report, we have the following numbers this morning:

Private-sector jobs: up 133,000 this month, according to the payroll firm ADP. Manufacturing jobs, however, turned in a second straight month of decline
Small-business jobs: up 40,000 in May according to Intuit… but that’s fewer than April’s 60,000. Hours have been cut, too
First-time unemployment claims: up 10,000 last week, to 383,000. That breaks several weeks of stagnant numbers… and in the wrong direction
All of those numbers were worse than the vaunted “expert consensus.”

For further evidence of a U.S. slowdown, we have the Commerce Department’s latest guess on first-quarter GDP.

The initial guess a month ago came in at an annualized 2.2%. This morning, it’s 1.9%.

To complete the trifecta of disappointments, the “Chicago PMI” number, reflecting business activity in the City of Big Shoulders and its environs, came in way below expectations.

At 52.7, it’s still above the 50 dividing line between expansion and contraction. But here too the Street was counting on something much better. The figure is now the lowest since September 2009.

Gold is holding steady after recovering lost ground yesterday. The spot price is currently $1,561.

Silver, however, is still stuck below $28, at $27.79.

Hot money is again flowing into the dollar and Treasuries today. The dollar index just crested 83; the yield on a 10-year T-note is down to… drumroll, please… a record 1.58%.

One of Asia’s wealthiest businessmen isn’t giving up on Chinese real estate yet.

“Li Ka-shing Stays Long on Mainland Property,” reads the headline by Dee Woo, a contributor to the fledgling Chinese edition of The Daily Reckoning, and republished at 文å*¦Ã¥ŸŽ – Ã¥?³Ã¦—¶Ã¦»šÃ¥Š¨Ã¦–°Ã©—», 本地新é—», çƒ*点论å?›, Ã¥?šÃ¥®¢ – wenxuecity.com — a site read by many affluent Chinese. (You can read a poor English translation at this link.)

At age 83, Li — known in Hong Kong as “Superman” — has an estimated net worth of $25 billion. And despite the talk of a “hard landing” in mainland China, Li is moving full speed ahead with property development there.

The reason? The Chinese central bank is cranking out unlimited quantities of yuan to keep pace with the Fed’s unlimited quantities of dollars. Real estate, in contrast, still has a limited supply… and Li is playing for the long haul.

“Brazil is a marvelous and massive country,” writes Jeffrey Tucker, continuing a quick hopscotch around the world. He’s back from a recent trip speaking to the Instituto Ludwig von Mises Brasil.

It’s a place “where private wealth thrives without embarrassment, where well-protected and healthy familial dynasties form the infrastructure of social and economic life, where technology is popular and beloved by everyone, where the police leave you alone and where Americans can feel right at home.” “My most-surprising findings in Brazil, aside from the amazing fruits that I didn’t know existed because the U.S. government doesn’t think I need them, were the young American kids who have moved here to find economic opportunity. This I had not expected, but now fully understand.”

“The world is changing fast. Freedom in America is slipping away so quickly that we are already seeing a wave of young people leaving in search of new opportunities, just as people from around the world once came to America to live the dream.”

Back in the States, people find themselves resorting to teenage pranks just to keep their neighborhoods from going to hell.

Last fall, someone moved into a vacant foreclosure house in the high-end Palmer Woods section of Detroit. Ordinarily, this would be good news. Unfortunately, he didn’t buy the six-bedroom Tudor revival; he was a squatter.

“Neighbors took matters into their own hands,” says a post at the Consumerist site. “First they got the utility company to cut off gas and electric service to the house.”

Didn’t work. Enter the teenage pranks. “One neighbor spent an entire day placing large rocks in the property’s driveway. Another thought that putting glue in the locks would do the trick.”

In the end, the only thing that worked was the filing of 11 felony counts against the squatter. He stands accused of filing false paperwork claiming ownership of three Detroit properties.

The real estate broker trying to unload the joint says the inside of the house is in fine shape and he expects a bidding war once the house goes up for sale.

Good luck with that: There are 10 vacant homes, says The Detroit News, in a neighborhood of about 300.

“I just got my first $1,600 Social Security check last week,” writes a reader stirring the pot in reply to yesterday’s mailbag. “I am 64 and expect to live to, say, 88. So I am anticipating 24 years x 12 months x $1,600 = $460,800 in government checks.”

“I was self-employed for 40 years and thus earned and put in all of the taxes myself toward Social Security and Medicare. Most of your Social Security crybabies probably only put in half their own payments and had their bosses pay in the other half for them. I believe I paid in around $120,000. Can any of your email complainers that say ‘I am not receiving a government handout, I paid into the system, it hurts my feelings when you speak meanly about me’ do any frigging math?”

“OK, so my first $120k I get back will be my own money I paid in. So ask your ‘feelings hurt crybabies’ where does the rest of my, and their, extra money windfall come from?”

“They neglect to mention they are probably going to receive three times more dinero than they, and their employers, paid in — from their government. ‘Not receiving government handouts?’ My arse.”

“How in the hell can such a badly designed system ever be sustainable?”

“I never got unemployment or any other benefit from any governmental agency, federal, state or local,” writes another.

“Now at age 72, I get Social Security, which represents only a small percentage of the total amount which my employers and I paid into the Social Security fund over the more than 50 years I worked. I did get about $150 per month from the government for serving in the U.S. Army in the U.S. and Korea.”

“I did not sign up for Part B Medicare coverage at age 65 so I now pay about $150 per month for Part B plus about $16 per month for Part D. All in all, considering all the money paid into Social Security and Medicare, my return on investment is the worst of all the investments I ever made except one I made in a company that subsequently went bankrupt.”

“I just pray the Social Security Administration doesn’t do the same. If my Social Security and Medicare benefits are a drain on the U.S. economy, just give me back the money I paid for these benefits and we’ll call it even. By the way, I am still paying into Social Security and Medicare as I write this email.”

“I get a Veteran’s disability pension and soon I’ll be getting Social Security payments. In addition I have a very small computer consulting business that doesn’t earn enough money to pay taxes, but it keeps me supplied with computer equipment and software, which is my hobby/occupation.”

“The VA pension isn’t enough to live on in Southern California, nor would Social Security or my business be. All combined, I just scrape by, and I even was able to earn enough from my business to subscribe to the Equity Reserve, and later on, by selling some gold and silver and a small loan to open a brokerage account, to do some meager investing. (The loan has since been paid back.)”

“While I am partially living on the dole, I have no illusions about where the money comes from. As you and many others have pointed out, the money comes NOT from some fund, but from general revenue. The taxes I paid ‘into the system’ were merely another TAX that went into the same general fund.”

“I also realize that the days of my or anyone receiving these ‘benefits’ (aka stolen money) are numbered not in decades, but in months or even days. So in answer, I’m getting mine while I still can. I am steadily buying precious metals and other valuable goods in preparation for the coming currency collapse.”

“I make no excuses for my ‘larceny, nor do I apologize for it. What others may call entitlements (I paid into it, or I’m poor, etc.) are, in fact, financed by the many taxes, fees and other extortions and the borrowing, which in effect results in the devaluation of the dollar which is ipso facto just another tax of the most insidious sort.”

“It is somewhat sad to realize,” writes our final correspondent, “that there are some who read The 5 Min. Forecast who actually think that they are ‘collecting what is due’ when no such contract exists between the government and you as a payer into the Social Security system.”

“The Social Security Administration owes you nothing regardless of how long or how much you have paid into the system. There are no guarantees you will receive or are entitled to anything. To stress the point, please refer your readers to the Supreme Court case of Flemming v. Nestor in 1960.”

“In its ruling, the Court established the principle that entitlement to Social Security benefits is not contractual right.”

“Also note that Congress can change the law anytime it wants. If anyone thinks that Congress cannot reduce what you think you should get as a ‘government benefit’ or make you pay more into the system, they should think again.”

“While in my 40s, I would have completely agreed with the writer who said he’d be a millionaire if he did not have to pay into the system, I am now nearly 56, and when I finally start receiving ‘what is due,’ I promise to suck as much of those government benefits as they will allow me to until the system collapses.”

The 5: The Social Security Administration was also refreshingly blunt in the “annual statements” it used to send out. “Your estimated benefits are based on current law,” it said in fine print. “Congress has made changes to the law in the past and can do so at any time.”

Cheers,

Dave Gonigam
The 5 Min. Forecast

[You are being forwarned – again – that Europe and the U.S. are now on a collision course with a second Lehman-type megashock….A snowball of events -*bank runs spreading across Europe -*are*bringing us a few steps closer. What [can we expect]*next? Let me explain. Words: 1795

So says*Martin D. Weiss, Ph.D. (www.moneyandmarkets.com) in edited (marginally) 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.

Weiss goes on to say, and I quote:

This is not the first time we’ve warned you about an imminent financial megashock.
In our Money and Markets of December 3, 2007, we [forewarned you] specifically naming Lehman Brothers as the next major firm to collapse on Wall Street. (See “Dangerously Close to a Money Panic.”)
In our Money and Markets of March 17, 2008, precisely 182 days before its failure, we [again forewarned you]*naming Lehman, making it abundantly clear that it could be the trigger of a financial meltdown. (See “Closer to a Financial Meltdown.”)
Now, starting with last week’s edition, we are [fore]warning you of ANOTHER Lehman-type megashock.
A new telltale sign bank runs, the final nail in the coffin of any modern economy are spreading among the PIIGS countries of Europe � and possibly beyond.
In Greece it’s already a tsunami � a desperate effort by millions of citizens to get their money out of danger before Greece is forced to leave the euro zone.
In Spain, it’s quickly turning into a flood, as individuals and businesses � with $1.25 trillion in total bank deposits � wonder if their country will be the next to leave the union.
In Portugal, Ireland, Italy or even France, banks are vulnerable to similar outflows and, once the stampede strikes more than two or three major countries, you could see bank runs all across Europe.
[Does all of the above] sound familiar? It should, because last year we witnessed a very similar contagion when investors stampeded from the bonds of the weakest European countries. Much like today, the first to be attacked was Greece, the weakest link in the chain. Then, Spain, Portugal, Italy and even France got hit hard. Soon, nearly all of Europe was infected, prompting its central bankers to suddenly break their solemn vows of monetary piety and print more than $1 trillion worth of new euros but now, despite all those efforts, they’re facing a new contagion of a second kind � by bank depositors.

How Dangerous Are Bank Runs?

Bank runs are far more infectious, and dangerous, than investor stampedes they spill out onto the streets and onto the airwaves and*invoke frightening flashbacks to the Great Depression and they immediately threaten the entire banking system.

According to the New York Times, “the havoc that a stampede might cause to the Continent’s financial system would greatly complicate efforts by European Union officials to fashion a longer-term plan to ease the debt crisis and revive Europe’s economy, because authorities would have to cope with the staggering added costs of shoring up banks and a*bank run can happen very quickly.”
Take Note: If you like what this site has to offer go here to receive Your Daily Intelligence Report with links to the latest articles posted on munKNEE.com. It’s FREE! An easy �unsubscribe� feature is provided should you decide to cancel at any time.

Just as I explained here last week, the Times points out that it “was a similar liquidity crisis on Wall Street in September 2008 � which started with nervous investors pulling money from troubled institutions, then quickly from healthier ones � that set off the financial crisis.”

I repeat: It was just last Monday that I showed you how Europe and the U.S. are now on a collision course with a second Lehman-type megashock and here we are today, only seven days later, with the snowball of events bringing us a few steps closer.

Will This Time Be Worse Than 2008?

Politicians and investors all over the world are now trying to prepare for the inevitable consequences. What they don’t seem to realize is that the next major megashock could be more severe than the Lehman Brothers failure.

Never forget the key differences between then and now:
In 2008, it was strictly individual financial institutions that were on the edge of collapse. Today, entire nations are on the brink.
In 2008, the U.S. federal deficit of the prior fiscal year was $161 billion. Today, it’s $1.327 trillion, or 8.2 times larger.
In 2008, most of the megabanks at the epicenter of the crisis were in the United States. Today, although some U.S. megabanks are still taking excessive risk, it’s primarily the far LARGER European banks that are in the most trouble. In fact the weak European banks are so large, their total assets are greater than the total assets of ALL U.S. commercial banks combined.
In 2008, governments had not yet deployed their “big gun” cures for the debt crisis. So they still had the firing power to squelch the crisis with a series of unprecedented rescues. Today, we have seen the rapidly diminishing returns � or outright failure � of nearly every possible stimulus plan, bailout deal or austerity measures known to man.
In 2008, governments encountered little public resistance to major new policy initiatives. Today, millions of citizens are rebelling at the polls � or on the streets � in France, Greece, Portugal, Spain, Italy, and even Germany.
Most important, until late 2008, central banks restricted their role to traditional manipulation of interest rates. Now, however, four of the most powerful central banks in the world (the Fed, ECB, BOE and BOJ) have departed radically from tradition and embarked on the greatest wave of money printing in the history of mankind.
What REALLY Happened During -*and After the Lehman Collapse?

Over a single weekend in mid-September 2008, the Fed chairman, the Treasury secretary, and other high officials huddled at the New York Fed’s offices in downtown Manhattan to sseriously considered bailing out Lehman, but they ran into two hurdles:
Lehman’s assets were too sick � so diseased, in fact, even the federal government didn’t want to touch them with a 10-foot pole. Nor were there any private buyers remotely interested in a shotgun marriage.
Foreshadowing the public rebellion that would later bust onto the scene in the Tea Party movement, there was a new sentiment on Wall Street that was previously unheard of: a*small, but vocal, minority was getting sick and tired of bailouts. “Let them fail,” they said. “Teach those bastards a lesson!” was the new rallying cry.
For the Fed chairman and Treasury secretary, it was the long-dreaded day of reckoning. It was the fateful moment in history that demanded a life-or-death decision regarding one of the biggest financial institutions in the world � bigger than General Motors, Ford, and Chrysler put together. Should they save it? Or should they let it fail? Their decision: make a break with the past let Lehman fail.

As in the prior Bear Stearns failure, America’s largest banking conglomerate (JPMorgan Chase) promptly appeared on the scene and swooped up the outstanding trades and, as with Bear Stearns, the Fed acted as a backstop. Lehman’s demise was unique, however,*because it was thrown into bankruptcy and put on the chopping block for liquidation.

[You were forewarned of that collapse ] exactly 182 days earlier, when we warned that it could be the financial earthquake that would change the world and it was. Until that day, nearly everyone assumed that giant firms like Lehman were “too big to fail,” that the government would always step in to save them but that myth was shattered on September 15, 2008, when the U.S. government decided to abandon its long tradition of largesse and let Lehman go under -and that had major negative repercussuins:]
A major U.S. money market fund, the Reserve Primary Fund, immediately suffered a direct hit in its portfolio from exposure to Lehman securities, pushing its share value below $1 � an unprecedented event that spread panic in the entire industry.
Money funds, mutual funds and other institutions refused to buy the short-term IOUs (commercial paper) that thousands of companies rely on for ready cash.
All over the world, investors recoiled in horror, abandoning short-term credit markets � the lifeblood of the global financial system.
Bank lending froze.
Borrowing costs went through the roof.
Corporate bonds tanked.
The entire world seemed like it was coming unglued.
“I guess we goofed!” were, in essence, the words of admission heard at the Fed and Treasury. “Now, instead of just a bailout for Lehman, what we’re really going to need is the Mother of All Bailouts � for the entire financial system.” The U.S. government promptly complied, delivering precisely what they asked for:
a $700-billion Troubled Asset Relief Program (TARP), rushed through Congress and signed into law by President Bush in record time and, in addition, loaned, invested, or committed
$300 billion to nationalize the world’s two largest mortgage companies, Fannie Mae and Freddie Mac,
over $42 billion for the Big Three auto manufacturers,
$29 billion for Bear Stearns,
$150 billion for AIG, and $350 billion for Citigroup,
$300 billion for the Federal Housing Administration Rescue Bill to refinance bad mortgages,
$87 billion to pay back JPMorgan Chase for bad Lehman Brothers trades,
$200 billion in loans to banks under the Federal Reserve’s Term Auction Facility (TAF),
$50 billion to support short-term corporate IOUs held by money market mutual funds,
$500 billion to rescue various credit markets,
$620 billion for foreign central banks,
trillions more to guarantee the Federal Deposit Insurance Corporation’s (FDIC’s) new, expanded bank deposit insurance coverage from $100,000 to $250,000,
plus trillions more in bailouts and for other sweeping guarantees.
Governments of the UK and the European Union followed a similar pattern and everywhere, both inside and outside of government, apologists for these mega-rescues argued that it was “the lesser of the evils,” the only way to save the world from an even direr fate.

They were wrong, and we told them so on September 25, 2008 when Safe Money Report editor Mike Larson and I submitted a white paper to the U.S. Congress specifically documenting why the government bailouts would ultimately transform the debt crisis into a sovereign debt crisis. In effect, we argued, “Sure, governments can bail out big banks, brokers and insurers but when the next crisis strikes, who will bail out the governments?”…

Yes, with trillions in bailouts since the 2008 debt crisis, the governments of the U.S. and Europe were able to calm the waters and restore credit markets but no government anywhere can create wealth and prosperity with worthless paper, and no government can repeal the laws of gravity or change the laws of thermodynamics.

Summary

When investors sell bad government bonds, the value of those bonds must plunge, making it next to impossible for those governments to borrow. When savers run to safety, money must flood from the weakest banks to the strongest, making it impossible for the weak banks to survive. That’s what is happening now, and what will continue to happen in the weeks ahead, until (and unless) the authorities unleash a new wave of money printing that makes previous waves look puny by comparison.

Stand by for our team’s specific instructions on how to protect yourself and profit.

Good luck and God bless!

Martin

*http://www.moneyandmarkets.com/bank-…ext-49763**(To access the above article 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.

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8. European Election Results Harbinger of Future U.S. Elections � Here�s Why

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*

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12. Events Accelerating Towards an Ultimate Dollar Catastrophe! Here�s Why

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15. The U.S. is Headed Toward a Complete and Utter Collapse of its Financial System

*
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*
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*

*
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A top analyst at Citibank has told King World News that global stock markets are set to plunge 27%. Fitzpatrick…the panic will move global bond markets to extreme levels, but gold will remain firm.

So says*Tom Fitzpatrick*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.

Specifically Fitzpatrick said, in part [you can read the full article here, complete with enlightening charts]:

“We think that, short-term,*the S&P 500 and the DJIA*will head down to their 200 day moving averages in a similar fashion to what we saw last year which would be*1277 and 12,000 respectively [Go here to see*his chart].

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Jim Sinclair’s Mineset

Dear CIGAs,

Gold is officially replacing the US dollar June 28th. The cat is out of the bag.

Phil, you are booting any nation that dares to refuse to be legislated by any other body than themselves out of the SWIFT system.

You have officially made gold money. Now what are you going to do, declare economic war on China? They will fire dollars back at you.

You just might end the economic world as you knew it.

The Best Reason in the World to Buy Gold
CIGA Eric

Have no doubt, emotions generated by short-term price action will be influencing investor decision-making a hundred years from now. We may have substituted iPad for the telegraph over the past hundred years, but we’re still fairly lousy traders as a species. The real world makes decision based on reality rather than perceptions generated by emotions. Well, at least the real world that stays in business. The Chinese are buying gold while the public panics and sells. Nuf said.

Headline: The Best Reason in the World to Buy Gold

“Beijing is planning to avoid U.S. financial sanctions on Iran by paying for oil with gold. China’s imports of the metal are already large, and you can guess what additional purchases are going to do to prices. On the last day of 2011, President Obama signed the National Defense Authorization Act for Fiscal Year 2012. The NDAA, as it is called, attempts to reduce Iran’s revenue from the sale of petroleum by imposing sanctions on foreign financial institutions conducting transactions with Iranian financial institutions in connection with those sales. This provision, which essentially cuts off sanctioned institutions from the U.S. financial system, takes effect on June 28.”

Source: forbes.com

More…

The following is automatically syndicated from Grandich’s blog. You can view the original post here. Stay up to date on his model portfolio!
April 17, 2012 03:33 AM

To say the junior resource market has been “acting like a pig” is an understatement. To say simply I’ve been wrong about them being undervalued only irritates those already wishing they hadn’t purchased… (just ask my wife—I would, but she stopped speaking to me after looking at our last brokerage statement).

It’s about 25 years since I first started speculating (gambling) in the junior resource market, and I can’t recall a stronger sense of dislike, disgust and hopelessness (maybe some Canucks fans feel close to this) in this sector than I am seeing and feeling now.

While I didn’t need a metal detector at the door, I just had many readers at a local seminar and from them sensed a high level of frustration and a wanting to throw in the towel. (It was my wife who was giving me the really dirty looks). The common theme among their questions and comments was, “Why are the mining and exploration stocks doing so poorly despite metal prices still much closer to their decade highs versus lows?:

Because I never felt they could be selling where they are at today (my own personal portfolio of juniors is down seven figures in the last couple of months), I no longer deserve to be the one to answer their questions. However, I will tell you what I told my wife and hope you hold off seeking a divorce attorney as she has (at least, I hope she has).

Despite metals prices up anywhere from 100% to 500% or more from where they were a decade ago, the vast majority of producers and exploration stocks have not remotely come close to reflecting those appreciations in their share prices. The thought used to be that mining shares were actually better to own than the physical metal as they were to offer better leverage to metal prices going up. Nothing has seemingly been further from the truth.

Here are my “crying towel” reasons for why I think we are where we are:
The audience for mining and especially exploration shares has shrunk despite the dramatic increases in metals prices themselves. A clear example of that is the dramatic drop in the primary “end users” that used to be a key part of the demand side – brokers.
Years back, hundreds if not thousands of brokers built part or much of their book of business around the buying and selling of mining and exploration stocks. They each had 100 or even 500 clients and many of them ended up buyers of these shares. Unfortunately, these folks are now asset gathers and commission-driven buying and selling is ancient history. They no longer are active in the mining and exploration sector. This is also unfolding in the Canadian financial industry.
While the 43-101 rule truly reformed what used to be like the wild, wild west in the junior sector, it also removed any sizzle from the promotional side of things. While not a bad thing when one recalls what used to go on in this area, the downside to it is companies who are mostly sizzle and not yet steak can’t even light a match when speaking of their potential, let alone stroke the fire. That may be a good thing, too, but it wasn’t the case when these shares did much better as a group a decade or more ago (and a reason one must consider now whether they like it or not).
Regulatory and/or compliance factors have made it much tougher for juniors to attract attention. Again, this may or may not be a good thing, but it’s a fact of life as far as I’m concerned. In the States, most brokerage firms no longer allow solicitation of companies not trading on the NYSE or major NASDAQ markets. Some even don’t allow unsolicited orders anymore. Many compliance departments have made it difficult or impossible for their advisers to buy juniors-period.
Canadian investors may be surprised to find most Americans don’t find natural resources as “second nature” to them. Americans’ biggest concerns about natural resources are availability of gas to drive their cars and oil to heat their homes. They’re not keen on natural resource stocks and still think for the most part a gold mine is a hole in the ground with a liar standing next to it.
The junior sector is a “pimple” of an industry, yet 1,000 to 1,500 juniors are trying to find a few dozen so-called experts who can appreciate and talk about them in a mostly what’s-in-it-for-me mindset. The ability to get their story known is perhaps the biggest challenge and drag for a junior these days.
Reducing the hold period on private placements to just four months has hampered the juniors. Companies just can’t advance themselves up the corporate ladder in such short periods to warrant enough new interest to gobble up all these new free trading shares that come to market.
Investment bankers now play the “warrant” game in order to keep deal flow going. They turn to their institutional buyer and suggest selling the shares that are coming free trading for either side of breakeven and hold the warrant as their leverage. Meanwhile, they take the freed up capital and buy their next deal.
Discount brokerage has also greatly added to what seems like an endless supply of shares. Years back, one held juniors at times simply because they couldn’t profit from selling them after just a few cents rise. Now, thanks to deep discount commissions, one can profit from the sale even if the share price is barely up.
I’m certain there are other reasons, but I believe the above is a good part of why we’re where we are today. The question now is does this mean the mining and exploration stocks are no longer worthy?

I’ve had discussions with many different players in the junior sector of late and they’re all either sitting on their hands, in a state of disbelief, and/or feeling life as they knew it has ended. Like I said at the beginning, in 25 years I have not seen such a dire state relative to when gold was well below $300 and it seemed like “last one out of juniors turn out the lights.”

So, the end result of all this appears to be only three possibilities:
It is indeed the end of juniors as we know it and we die off as former buggy whip players did at the turn of last century;
Like it did a decade ago, the juniors become mostly non-existent price-wise and they rally simply because they really can’t go any lower;
Something not imaginable (good or bad) occurs and we go from there.
On the basis it’s like a decade ago and we’re at or close to a major bottom, there are a host of juniors at which one could almost toss a dart at this juncture. Whether it’s those with a pile of cash, a sector like uranium that fundamentals seemingly demand attention to (my Tracking List has several juniors in that sector), or special situations that appear to be crying out for attention ASAP.

Here are my six largest personal holdings dollar-wise as of today. It would come as no surprise to me that any and all of these might either merge, get taken over and/or get strategic partners before the year is out:

Cap-Ex Explorations (CEV-TSX-V $.74 )– Forbes and Manhattan have shown themselves to be on the forefront of the iron-ore plays in Canada by being key players in Consolidated Thompson and Alderon Iron Ore (a client of mine and a company I still own a substantial amount of shares in). They’re now leading CEV, which should be considered special when compared to its peers. A major drill program begins soon and the shares seem to be on fire sale at the moment.

Excelsior Mining (MIN-TSX-V $.48 ) is led by Mark Morabito, who took Alderon Iron Ore from birth to doing what should end up to be a billion-plus deal when all is said and done. I think we shall see a good part of his focus now on MIN and a major strategic partner like ADV received is not a pie in the sky possibility.

Geologix Explorations (GIX-TSX $.26 )only problem in my biased opinion outside of a collapse of metal prices or something unforeseen, is going to be being bought out for maybe just a dollar or so versus the potential for at least twice that if the junior market doesn’t get better. I will just have to learn to accept that and suffer on the way to the bank if and when that happens.

Oromin Explorations (OLE-TSX $.78 ) of all my companies and personal holdings, this is the no-brainer in terms of takeover/merger. The company has already told us they continue to have discussions and I suspect if not for some recent political factors in the country where OLE does business, such actions may have already occurred. The fact that the company is expected to update its resources and feasibility is only a plus in my prejudiced mind and like this report seems to suggest, risk appears to be pennies to the downside while upside potential is many times more than that.

Sunridge Gold (SGC-TSX-V $.39) and another company in Eritrea,Nevsun Resources, are prime targets of the Chinese in my biased view. I suspect when SGC feasibility comes out soon, we shall find the company’s Net Asset Value (NAV) more than its entire market cap. Like GIX, I think the worst case barring metals collapse or something unforeseen is I eventually sell my shares for $.90 or a buck versus $1.90 or two bucks. Here, too, I expect to adjust.

Spanish Mountain Gold (SPA-TSX-V $.45) after announcing it was skipping pre-feasibility and going straight to bankable status, the share price lost about half of its value. Go-figure. Fifty-cents or below feels like fishing in a fish farm.

I like to suggest given where shares stand today versus the actual metals, the time has come to add to my Tracking List. The fact that one of the handful of experts I take the time to listen to, Mr. Frank Holmes seems to agree, encourages me to add to my Tracking List today the following companies:
Agnico Eagle Mines AEM-NYSE $32.57
Hecla Mining HL-NYSE $4.16
Keegan Resources KGN-NYSE $3.16
McEwen Mining MUX-NYSE $3.82
“Often the difference between a successful person and a failure is not one has better abilities or ideas, but the courage that one has to bet on one’s ideas, to take a calculated risk and to act.” * *Andre Malraux

http://www.grandich.com/
grandich.com

Today, more than 60% of all foreign currency reserves in the world are in U.S. dollars but there are big changes on the horizon…Some of the biggest economies on earth have been making agreements with each other to move away from using the U.S. dollar in international trade…[and this shift]*is going to have massive implications for the U.S. economy. [Let me explain what is underway.] Words: 1583

So says Michael T. Snyder (www.theeconomiccollapseblog.com)**in edited excerpts from his original article* (which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has further edited 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.)

Snyder*goes on to say, in part:

China has the second largest economy on the face of the earth, and the size of the Chinese economy is projected to pass the size of the U.S. economy by 2016 [and projected to become three times larger than the U.S. economy by the year 2040 by at least one economist. [As such,]*China is sitting there and wondering why the U.S. dollar should continue to be so preeminent if the Chinese economy is about to become the number one economy on the planet. [Read: Why America Should Relinquish Reserve Status for its Dollar]

China, and other emerging powers such as Russia, have been quietly making agreements to move away from the U.S. dollar in international trade over the past few years [and, as such,]*the supremacy of the U.S. dollar is not nearly as solid as most Americans believe it to be.**[Read: The U.S. Dollar: Too Big to Fail?]
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As the U.S. economy continues to fade, it is going to be really hard to argue that the U.S. dollar should continue to function as the primary reserve currency of the world. Things are rapidly changing, and most Americans have no idea where these trends are taking us. [Read: Is There a Viable Alternative to the Dollar as the Reserve Currency?]

The following are 10 reasons why the reign of the dollar as the world reserve currency is about to come to an end:

#1: China And Japan To Use Own Currencies In Bilateral Trade

A few months ago, the second largest economy on earth (China) and the third largest economy on earth (Japan) struck a deal which will promote the use of their own currencies (rather than the U.S. dollar) when trading with each other. This was an incredibly important agreement that was virtually totally ignored by the U.S. media. The following is from a BBC report about that agreement:
China and Japan have unveiled plans to promote direct exchange of their currencies in a bid to cut costs for companies and boost bilateral trade. The deal will allow firms to convert the Chinese and Japanese currencies directly into each other. Currently businesses in both countries need to buy US dollars before converting them into the desired currency, adding extra costs.

*#2: The BRICS Plan To Use Own Currencies When Trading With Each Other

The BRICS continue to flex their muscles. A new agreement will promote the use of their own national currencies when trading with each other rather than the U.S. dollar. The following is from a news source in India:
The five major emerging economies of BRICS — Brazil, Russia, India, China and South Africa — are set to inject greater economic momentum into their grouping by signing two pacts for promoting intra-BRICS trade…The two agreements will enable credit facility in local currency for businesses of BRICS countries…[which is] expected to scale up intra-BRICS trade*that has been growing at the rate of 28% over the last few years but, at $230 billion, remains much below the potential of the five economic powerhouses.

#3: China and Russia*Use Own Currencies In Bilateral Trade

Leaders from both Russia and China have been strongly advocating for a new global reserve currency for several years, and both nations seem determined to break the power that the U.S. dollar has over international trade. [In fact,] Russia and China have been using their own national currencies when trading with each other for more than a year now. [Read: Will the Trickle Out of the U.S. Dollar Now Become a Torrent?]

#4: Use Of Chinese Currency Growing*In Africa

Who do you think is Africa’s biggest trading partner? It isn’t the United States. In 2009, China became Africa’s biggest trading partner, and China is now aggressively seeking to expand the use of Chinese currency on that continent.

A report from Africa�s largest bank, Standard Bank, recently stated the following:
We expect at least $100 billion (about R768 billion) in Sino-African trade � more than the total bilateral trade between China and Africa in 2010 � to be settled in the renminbi by 2015.

China seems absolutely determined to change the way that international trade is done. At this point, approximately 70,000 Chinese companies are using Chinese currency in cross-border transactions.

#5: China and United Arab Emirates To Use Own Currencies In Bilateral Trade

China and the United Arab Emirates have agreed to ditch the U.S. dollar and use their own currencies in oil transactions with each other.

The UAE is a fairly small player, but this is definitely a threat to the petrodollar system. What will happen to the petrodollar if other oil producing countries in the Middle East follow suit?

#6: India To Use Gold To Buy Oil From Iran

Iran has been one of the most aggressive nations when it comes to moving away from the U.S. dollar in international trade. For example, it has been reported that India will begin to use gold to buy oil from Iran. [See: Video: India to Pay for Iranian Crude Oil in Gold Instead of Dollars]

#7: Saudi Arabia Likely to Abandon*Use of*Petrodollar in Dealings With China

Who imports the most oil from Saudi Arabia? It is not the United States, it is China…Saudi Arabia and China have teamed up to construct a massive new oil refinery in Saudi Arabia…so how long is Saudi Arabia going to stick with the petrodollar if China is their most important customer? [Read:**2012: The Beginning of the END for the U.S. �Petrodollar�!]

#8: The United Nations*Continues to*Push For A New World Reserve Currency

The United Nations has been issuing reports that openly call for an alternative to the U.S. dollar as the reserve currency of the world. In particular, one UN report envisions “a new global reserve system…that no longer relies on the United States dollar as the single major reserve currency.”

#9: The IMF Has Been Pushing For A New World Reserve Currency

The International Monetary Fund has also published a series of reports calling for the U.S. dollar to be replaced as the reserve currency of the world. In particular, one IMF paper entitled “Reserve Accumulation and International Monetary Stability” actually proposed that a future global currency be named the “Bancor” and that a future global central bank could be put in charge of issuing it…. [Read: IMF Proposing New World Currency to Replace U.S. Dollar and Other National Currencies!]
A global currency, bancor, issued by a global central bank (see Supplement 1, section V) would be designed as a stable store of value that is not tied exclusively to the conditions of any particular economy. As trade and finance continue to grow rapidly and global integration increases, the importance of this broader perspective is expected to continue growing.

*#10: Most Of The Rest Of The World Hates The United States

Global sentiment toward the United States has dramatically shifted, and this should not be underestimated. Decades ago, we were one of the most loved nations on earth [but] bow we are one of the most hated. If you doubt this, just do some international traveling. Even in Europe (where we are supposed to have friends), Americans are treated like dirt. Many American travelers have resorted to wearing Canadian pins so that they will not be treated like garbage while traveling over there.

If the rest of the world still loved us, they would probably be glad to continue using the U.S. dollar but because we are now so unpopular, that gives other nations even more incentive to dump the dollar in international trade.

What will happen if the U.S. dollar’s reign*as the world reserve currency comes to an end?

The demise of the dollar will also bring radical changes to the American lifestyle. When this economic tsunami hits America, it will make the 2008 recession and its aftermath look like no more than a slight bump in the road. It will bring very undesirable changes to the American lifestyle through:

1. massive inflation,

2. high interest rates on mortgages and cars,

3. substantial increases in the cost of food, clothing and gasoline and*

4. the U.S. government is going to have a much harder time financing its debt. Right now, there is a huge demand for U.S. dollars and for U.S. government debt since countries around the world have to keep huge reserves of U.S. currency lying around for the sake of international trade but what if… the appetite for U.S. dollars and U.S. debt dried up dramatically? That is something to think about.

Conclusion

At the moment, the global financial system is centered on the United States but that will not always be the case. The things talked about in this article will not happen overnight, but it is important to note that these changes are picking up steam. Under the right conditions, a shift in momentum can become a landslide or an avalanche. [Read: What Would USD Collapse Mean for the World?]

Clearly, the conditions are right for a significant move away from the U.S. dollar in international trade. When will this major shift occur? Only time will tell.

*http://theeconomiccollapseblog.com/a…come-to-an-end *(To access the article please copy the URL and paste it into your browser.)
Editor�s Note: The above article has been has 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.

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8. What Would USD Collapse Mean for the World?

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Mark J. Lundeen
Mlundeen2@Comcast.net
19 March 2012

So how’s the bull market in gold and silver going? As seen below, they are doing just fine. In fact gold and silver are doing better than the Dow Jones 1982-2000 bull market was at its day 2,746 on June 24, 1993. If we compare the progress of gold and silver to the Dow Jones, and all too many analysts mistakenly do, we might come to a conclusion that we are at, or have passed the mid-point of possible gains for our favorite metals.

But why use the Dow Jones, or any stock market index as a bench-market for what is possible for the old monetary metals? Look at the situation this way; the price of anything, and everything, is determined by the supply and demand in the market. This is true even with our current “regulated market” system.

It’s important to realize that if the Federal Reserve’s “Wiz Kids” could have “stabilized” the markets during, and after the credit crisis * without * printing money to support financial-asset valuations, they’d have done so. But to feign demand for financial assets that is absent in the market, central banks are forced to bloat their balance sheets by trillions of dollars, euros, or whatever unit of currency they print. So, governments and their bankers still find themselves subservient to the law of supply and demand. If they want prices higher in the stock and bond markets than market’s natural fundamentals would have them, the “policy makers” have to step in and become top bidders in the markets, paying prices no one else will, using as many tens of billions, or trillions of dollars of monetary inflation as it takes to achieve today’s contrived asset prices.

In any event, the supply and demand characteristics for the stock market are completely different than for the old monetary metals’ market. Take a look at the number of stocks trading at the NYSE and the NASDAQ from 1938 to today. The supply of listed stocks trading on the NYSE and NASDAQ expanded greatly, until the end of the high-tech boom. This is especially so after the start of the 1982-2000 bull market in stocks. I don’t have the data, but due to secondary offerings and stock splits from 1980 to 2000, companies like General Electric must have increased their total authorized stock float by at least a factor of ten. The huge increase in common stock listings, and the increasing number of shares traded from stock splits and secondary offerings, had a huge effect in the valuation of stocks and indexes, as money coming into the market had more and more choices to flow into.

I’m not suggesting that there is anything wrong with this. Well, actually there was with the NASDAQ from 1995-2000, as Wall Street’s M&A boys flooded the stock market with garbage IPOs for internet stock, but that is another story. I’m just noting that in a free market system, the success of Coke Cola in the stock market will always result in a Pepsi Cola being eventually listed too; it’s called competition.

But gold and silver are completely different, because Wall Street can’t increase the supply of * Actual * gold and silver in the physical metals market via IPOs, as “investment bankers” did in the stock market from 1982-2000. Only exploration and mining companies can increase real metal in the metals markets. Also, ounces of gold and silver never declare stock splits. The relatively fixed nature of the available supply of metal exposes the price of gold and silver bullion to the full impact of money panicking towards it. Or at least will after the New York and London paper markets and precious metals ETF managed by the big NY banks such as GLD & SIL are weighed, and found wanting.

It’s also important to realize that during the 20th century, financial assets, * not * gold and silver, were the primary beneficiaries of monetary inflation. Twice since 1920, the US Treasury increased dollars in circulation beyond the US Treasury’s gold reserves needed to redeem them. Ultimately, this inflation caused the US government to reneging on its US dollar’s gold obligations, but before these defaults, the Dow Jones experienced massive-inflationary bull markets. The first gold default was in 1934, which resulted in the Federal government confiscating its domestic gold coin and bullion. Then again in 1971, Washington defaulted on its global gold obligations. However, before paper dollar inflation forced a gold default, in both cases the stock market saw significant bull markets from 1921-29, and 1948-66.

A small note (and table), for the next chart is necessary here. If the 1949-66, 1982-2000 and 2002-07 Dow Jones bull markets don’t appear as much of a bull market in the next chart, it’s because these plots for the Dow Jones and the BGMI are corrected for CinC inflation. In other words, they are plotted in 1920 dollars. The table below, using weekly closing values, gives the specifics for US Currency in Circulation (CinC) and the Dow Jones. Look at the 1921-2007 totals. I think this makes the case that since 1921, after taxes and inflation, the Dow Jones has been a losing investment as the Federal Reserve, year after year, has relentlessly inflated the US money supply, and the Internal Revenue Service taxes phantom capital gains.

Note in the table below, the beginning of each Dow Jones bull market starts at a value below its former bull market top (see arrows), while the Fed’s CinC after 1929 (listed in billions), only increases year after year.

Returning to the chart below; since 1920, bull markets for the Dow Jones and the Barron’s Gold Mining Index have had a relationship with monetary inflation. Inflation is the prime mover for Dow Jones bull markets, until the inevitable monetary crisis arrives. At which point the BGMI is driven upwards as flight capital floods into mining shares, as wealth seek safety from deflating financial assets. It’s as simple as that. Now for the third time in ninety years, this pattern is about to repeat itself with the BGMI, and mining and exploration stocks on the edge of their biggest bull market in its history.

In fact, it has already begun. Since 2001, the BGMI has outperformed the Dow Jones in inflation corrected, and nominal terms. I’ll be the first to admit the junior producers and exploration companies have been in a funk since 1997, but since 2001 the major gold and silver producers have been great investments, and will continue to be for a long time to come.

That the financial media has chosen to ignore these long-term trends is largely due to how investment advice is propagated in today’s media: by star, know-nothing reporters who have chosen to focus on the opinions of beached whales in the financial assets markets, or hot traders looking for fast money, people whose time horizon is never longer than a few months. But this ninety-two year chart tells the real story: the BGMI is just a currency crisis away from once again blasting-off to amazing, inflation adjusted highs. Take a few moments and study this chart carefully.

It’s obvious that two major 20th century Dow Jones bull markets occurred during an inflationary cycle * before * a monetary crisis resulting in a US Treasury gold default. * AND * after the default, the BGMI saw a tremendous bull market that exceeded the gains seen in the previous Dow Jones’ bull market. And it looks like the BGMI is going to do it again.

Today the US Treasury cannot directly default on its gold, as it demonetized gold in 1971, so it has no direct gold obligations to default on. But ejecting gold from the global money supply forty years ago will make the coming monetary crisis even more destructive. Also for decades, governments and their central banks have actively suppressed the market price of gold and silver by using phantom gold and silver in the New York and London paper markets. In March 2010, Jeffrey Christian of the CPM Group testified before the CFTC that the NY and London gold markets had 100:1 leverage in their paper contracts. That’s insane, even criminal; selling every one ounce of gold they had to one hundred people in a futures market. What happens if only 2% of the contract holders ask for delivery? These markets will be exposed as fraudulent.

Think of this! That means that the current price of gold is based on the assumption that there is 100 times more the gold than is currently in existence! Also, European governments are becoming concerned with what the Federal Reserve is doing with their nation’s gold stored in New York; which the Fed is in no hurry to explain.

“Fraud and falsehood only dread examination. Truth invites it…Whoever commits a fraud is guilty not only of the particular injury to him who he deceives, but of the diminution of that * confidence * which constitutes not only the ease but the existence of society.”
-Dr. Samuel Johnson, 1709-1784: English man of Letters and Moralist

All and all, a historic collapse in “confidence” in financial assets, and national fiat currencies is at hand. A day is soon coming when a panic into the actual precious metals will start. The large gold and silver miners in the BGMI will perform as they always have in the past: wonderfully. But I expect the gains in the junior producers and exploration companies will be breadth taking. Why might that be? Because in the past ten years, central banks and Wall Street have polluted the balance sheets of pension, mutual funds and insurance companies with trillions of dollars of toxic byproducts from their derivatives operations. The markets for physical gold and silver, and their major producers are simply too small to contain the coming derivative blow back into precious metals. Smaller companies will finally catch monster bids as fiduciaries and hedge funds decide that even moose pasture in Northern Canada is a safer risk than US mortgages and Treasury bonds.

But what do I know? I know that Robert Rubin, Secretary of the Treasury for President Clinton, and the architect of the 1990s “strong dollar policy” is becoming concerned that he has too many dollars! From Bloomberg:

Rubin Says He Has Too Many Dollars 13 Years After Departing U.S. Treasury

Robert Rubin, who as U.S. Treasury secretary in the 1990s promoted a stronger dollar, said he has too much of his personal investments in the currency.

A “disproportionate amount” of his assets are in cash and he “should be more allocated away from the dollar,” Rubin, 73, said yesterday in a speech at the TradeTech conference in New York. He said he also was “greatly overweighted” in private equity and had investments in hedge funds.

This is an incredible statement. I assure you that during the gold standard, no one had any fears of owning too many dollars.

For your information, Mr. Rubin along with Alan Greenspan, was instrumental in allowing the US banking system to create the OTC derivative market, as an “unregulated” (read secret and untraceable) institution. Thirteen years after he left the US Treasury, he’s now concerned that he too may reap what he has sown.

Here is the problem for the “policy makers” (like Robert Rubin); since 1980 they have expanded their money supply by orders of magnitude. How many times could our money supply, in a stack of $1 bills, go to the moon and back? Something like 27 times the last I heard. But all the gold mined on Earth in the past 5000 years can still fit comfortably inside Yankee Stadium’s infield, and there is less silver above ground than gold!

So keep an iron hand on the tiller, and keep buying gold, silver as a core position, and mining shares to maximize capital gains, as they are really cheap!

How cheap? Well, really cheap when we look at their prices in 1920 dollars, as I did for the Dow Jones and BGMI in the chart above. In the following charts, we see how the Federal Reserve, the Great Engine of Inflation, has increased US Currency in Circulation by a factor of 244 since 1920. Deflating the price of gold with constant 1920 dollars gives us a current price of gold of only $6.78 (1920 dollars) as of the close of last week. This is far from gold’s January 1980 high of $30 (1920 dollars) for an ounce of gold. For gold to once again see $30 in 1920 terms, it would have to increase to $7350 in today’s dollars. But this price is a moving target, as the Fed will continue to inflate the supply of paper dollars in circulation until armed guards bar the doors to Doctor Bernanke at the Washington Fed. I don’t know if that would make a difference, as the good doctor would most likely go to the nearest park bench and create more dollars with his I-Phone.

Let’s look at silver. At the close of last Friday, silver was going for $0.133 in constant 1920 dollars.

This is all very interesting, but most of you realize that gold and silver are now purchased in Secretary Robert Rubin’s “strong dollars”; dollars that even he now wants distance from. Sad but true. But these charts strongly suggest that that most of the potential gains in the current bull market in gold, silver, and by proxy, gold and silver mining shares are still in their infancy, with most of the really big gains yet to come. For the third time in the past ninety years, the BGMI is sitting on the launch pad, with all systems go except for the final monetary crisis. I know it, Mr. “Strong Dollar” fears it, and now you should strongly consider what these charts are telling us.

Mark J. Lundeen
Mlundeen2@Comcast.net
19 March 2012

March 1, 2012

Dear CIGAs,

What happened to gold on 29 February 2012? The precious metal dropped from $1792 to a low of $1686 in one day!

How does this shape up with our Elliott Wave expectations?

The answer is that the market is tracking well in line with expectations. Before dealing with the current move, it is an idea to go over what our expectations are. What we know so far is that Intermediate Wave III started at $1523 and that we have a target of $4,500 for the end of Wave III. We also know that Wave III will consist of five regular waves which we will label 1 2 3 4 and 5. Regular waves 2 and 4 will be the anticipated 13% downward corrections described in my speech to the Sydney Gold Symposium. Link at: Keynote Speech At Sydney Gold Symposium: November 2011

Regular wave 1 will consist of 5 minor waves which we label (i) (ii) (iii) (iv) and (v). Waves (ii) and (iv) will be downward corrective waves one degree small than the regular waves. Thus they should be about half the magnitude of the 13% of the regular sized declines, say about 6%.

Minor wave (i) should consist of five minuette waves which we can label i ii iii iv and v. Again the minuette waves ii and iv will be downward corrective waves about half the size of the minor wave corrections of 6%. Thus the minuette corrections should be approximately 3%.

The following is the analysis of minor wave (i) showing the five minuette waves:

i 1523 to 1665 +142 +9%
ii 1665 to 1620 45 -2.7%
iii 1620 to 1765 +145 +9%
iv 1765 to 1706 59 -3.3%
v 1706 to 1792 + 86 +5%
(i) 1523 to 1792 +269 +17.7%

The two corrective waves are approximately 3% as expected. Waves i and iii are equal at 9% while wave v is almost exactly 61.8% of waves i and iii. This wave count is as perfect as one could wish for. Thus we can conclude that minor wave (i) was completed at $1792.

As described above, minor wave (ii) should be a correction of approximately 6%, but could range from 5% to 8%. A decline of 6% from the $1792 peak gives a target of $1685. In after hours trading yesterday gold reached $1686.
The Comex chart, however, shows a low point of $1696.

It is possible that the entire correction in minor wave (ii) occurred in one day. A rally followed by a further decline to test the $1685 area is a more likely outcome. An 8% decline would bring the $1650 area into play. If gold drops below this level we will have to consider other possibilities.

Once the bottom of minor wave (ii) is in place in a convincing fashion it will be possible to make some more accurate longer term gold price forecasts.

Alf Field
1 March 2012
Comments to ajfield@attglobal.net

March 2, 2012 Whither the defined-benefit pension? How low interest rates, the “fraudclosure” scandal and one bloated dinosaur of a company are conspiring to wreck your retirement
In search of a mystery seller: Separating the signals from the noise after gold’s beat-down
Take that, Warren Buffett: How gold really can generate an income stream
Spanish town looks to collect revenue from a few of its… best buds
The economic fever-chill cycle… a query about ETFs… Ron Paul raises his silver shield… and more!
If you thought the Fed’s penchant for low interest rates were a bear because you can’t get a decent return on a bank CD, think about this: The typical pension plan of an S&P 1500 company can meet only 75% of its obligations as of year-end 2011 — a post-World War II low.

In 2010, the funded ratio was still 81%.

Put together all the S&P 1500 companies, and they’re staring at a $484 billion aggregate pension deficit.

Big companies that still maintain “DB” pensions will have to scrape together $100 billion to keep their pensions funded this year, according to the consultant Milliman Inc.

That’s $100 billion they won’t have for dividends, or stock buybacks, or — heaven forfend — expanding operations.

The situation only gets worse as the era of low interest rates persists.

“Companies from defense contractor Lockheed Martin Corp. to aviation-electronics maker Honeywell International Inc. are caught in a vise,” according to Bloomberg.

“The Federal Reserve Board’s vow to keep rates at current levels until 2014 means pension plans’ fixed-income investments are stagnating just as new rules shorten the time available to shore up funding.”

General Electric, 3M and Boeing also find themselves in the same fix.

“With the declining interest rates here in 2011,” says 3M’s CFO David Meline, “our liabilities did increase.”

Meanwhile, one of the primary “assets” held by pension funds is looking more and more shaky, thanks to the recent “fraudclosure” settlement between the major banks, the Justice Department and 49 state attorneys general.

A provision in the deal “allows for the banks to reduce borrowers’ balances in home loans that back securities which have been sold to investors, such as U.S. pension funds,” the Financial Times reported yesterday.

“Investors say they are being penalized for mistakes made by the banks, and have launched a campaign to limit potential losses to their holdings.”

Bondholders versus banks: If Vegas were laying down odds, you’d be better off picking one of 36 numbers at a roulette table.

True, private pensions are backstopped by the government’s Pension Benefit Guaranty Corp. Unfortunately, the PBGC is about to choke on the pension obligations of just one company.

American Airlines — the carrier our Dan Amoss saw as a “dead man flying” months before it filed for Chapter 11 last November — wants to terminate the pensions of 130,000 workers, foisting them on the PBGC.

“Josh Gotbaum, the PBGC’s director, has mounted an unusual public campaign against American,” Reuters columnist Mark Miller wrote two days ago, “arguing that the airline hasn’t made the case that it needs to terminate the plans.”

No wonder: The PBGC is already $26 billion in the red after the dust settled from the first phase of the Great Correction. American’s pensions would swell its future obligations by $10.2 billion.

“The use of bankruptcy court to shed pensions,” Miller writes, “raises questions about the long-term viability of the PBGC, and potential burden on taxpayers. While the PBGC has plenty of cash on hand to meet near-term obligations, the pressures could become unmanageable if a succession of underfunded plans were transferred to the agency.”

We’ll confidently make this forecast: Count on it.

The gold watch? Ancient history. And pension promises are next…

“This pension underfunding issue,” says Strategic Short Report’s Dan Amoss, “will grow to a crisis within a few years if the Fed keeps suppressing 10-year Treasury rates in the current 2% range.

“There’s no way underfunded pensions, under this low-interest rate scenario, will be able to achieve projected portfolio returns. So pensions will require massive draws of cash from their corporate sponsors” — just as GE, 3M and Boeing will have to do this year.

We know you don’t want to hear about this, especially with the weekend coming up. It’s one more bad piece of news for your retirement income, on top of low interest rates and the drawdown of the Social Security “trust fund.”

But we have a new idea that could help you fight back. More after we survey the markets…

Stocks are again cast adrift today. As of this writing, the major indexes are all down, but not much.

The S&P is holding above the 1,365 level that Jonas Elmerraji’s been watching. Small caps are taking the bigger hit; the Russell 2000 is down about 0.8%.

Oil is selling off today, after poking above $110 late yesterday. That’s when Iran’s Press TV reported a pipeline explosion in Saudi Arabia… which Saudi Arabian officials immediately denied.

Hmmm… More Sunni-Shia New War skulduggery?

In any event, with the passage of time, traders have followed the sage guidance that comes from Internet message boards: “Pix, or it didn’t happen!”

With no pictures forthcoming, oil’s back to $106.57.

Gold is losing a bit of the ground it regained yesterday after Wednesday’s vicious sell-off. The bid is currently $1,709. Silver’s getting stomped again, down to $34.77.

And the picture of what happened on Wednesday is starting to come into focus.

“Looks like a large seller of gold in the market, as a 10,000 contract traded, downticked the price by $40 per ounce, and represents 1 million ounces of gold sold,” reads a note from CIBC World Markets.

“Unusual to see such a large single trade,” it added. “Not likely due to contract expiry, either.”

“Ordinarily,” adds a note from the London firm Sharps Pixley, “if a seller wanted to get the best price for his metal, he would seek to finesse the selling over time, hunting out liquidity (finding people who are the other side of his sell order) and thereby ensure he gets the best possible profit.”

Who did it? Depends on whom you want to believe. We see claims of “a large U.S. fund” along with a claim J.P. Morgan executed the order on behalf of “an Asian fund”.

Whoever it was, “this seller,” concludes Sharps Pixley, “was clearly simply out for effect.”

“I would buy gold at almost any price,” says Evy Hambro, manager of BlackRock Gold & General, the U.K.’s best-performing commodities fund,” as long as the fundamentals are strong.

“Gold has been incredibly strong for most of the past 10 years, and I see that trend continuing… Long-term fundamentals in the gold market appear supportive of prices, driven by constrained supply and rising demand.”

“Gold mine supply,” meanwhile, “was effectively flat from 2001-2010, despite the huge increase in the gold price over that period.”

“My favorite aspect of gold is that it is still a finite resource,” chimes in our income specialist Jim Nelson. “Of course,” he adds, “there are two sides to everything.”

“Obviously, gold comes with incredible security and wealth protection against inflating central bankers and weak fiat currencies. But you can’t live on that.”

True enough. For all his gold bashing, Warren Buffett does have this fact on his side: It doesn’t pay you an income stream.

“Protecting your wealth means nothing when you are trying to pay your bills, fund your children’s college education or plan a vacation,” says Jim.

“And until now, this has been the No. 1 problem facing gold investors. Sure, bury your gold in your backyard. Fill your safe with gold coins and bullion. But don’t expect to live off it. At least that’s always been the case.”

But no more. For the past seven months, Jim has been refining a strategy in which you can generate income from gold.

One of his recommendations can deliver a 24% every year in cash paychecks. Another can give you monthly double-digit income.

This is the best of all worlds: You get the peace of mind that comes with gold… plus steady income that crushes anything you can get from Treasuries, CDs or blue-chip dividend payers.

Jim calls it his “Gold-tirement” plan: It can make any of your worries about Social Security, low interest rates or dwindling pension funds a distant memory.

A big claim, we know… But Jim has the goods to back it up. You can see for yourself right here.

In the United States, cash-strapped cities and states often look to casinos as a quick fix to fill their coffers. In Spain, they’re just going to pot.

The Catalonian town of Rasquera will allow a “cannabis club” to plant marijuana on 17 acres of city-owned property. “This is a chance to bring in money and create jobs,” says mayor Bernat Pellisa. The club will pay the town 650,000 euros annually.

Restoring solvency, stoner style…

Spain’s marijuana laws are, in the words of the UK Guardian, “ambiguous.” Growing and possessing pot for one’s own use is legal; cannabis clubs say all they’re doing is making it easier to do so. The mayor says he’s vetted the idea with lawyers and it, um, meets the smell test.

“The deal will turn Rasquera, where local produce traditionally includes olives, almonds and goats, into one of the biggest legal suppliers of cannabis in Europe,” the Guardian says.

Two thoughts occur to us: 1) The Greeks, themselves known for olives, might want to look into this. 2) We’re wondering why we haven’t heard anything from our office in Spain in a while. We’re headed over there next month to check up on them…

“I always find The 5 Min. Forecast very useful and entertaining, but so far, I haven’t seen anyone commenting on the near-term impacts from the impending confluence of several macroeconomic trends in the USA.”

“Those trends are: The ultra-bloated money supply, super-low velocity of money, incoming cash from the panicky eurozone, downward-trending leading indicators pointing to a recession on the horizon and the bubble du jour stock market.”

“Specifically, how can we know whether or not the bloated money supply will create sufficient inflation in the stock market prices to offset declining real (but increasingly inflated) earnings? How does one play such a situation when not only is the game constantly changing, but the value of the chips is no longer stable?”

“If the stock market is now rising on low volume due to liquidity created by the bloated world money supply as well as a lack of profitable alternative investments in Europe, will the mild recession forecast by ECRI be able to overcome the inflation and fear trade and cause a pullback in U.S. stock prices, or will it just appear to slow stock price growth (maybe like what’s going on in China)?

“To short (the market) or not to short, that is the question.”

The 5: This comes back to the fever-and-chills scenario we painted briefly on Monday. The economy and market recovered for much of 2009 and then slowed down after QE1 ended. Then came QE2 in the second half of 2010 and things took off again. Then QE2 wound down and everything started looking ugly in the late summer/early fall of 2011.

Now the Fed is promising ultra-low rates through 2014 and smashing the long end of the yield curve. You could be forgiven for thinking of it as QE3 by another name. And sure enough, there’s fever again.

This fever-and-chill cycle could drag on longer than you might think. But it can’t go on forever, and when it ends, it will end in tears.

“This is just a very curious story!” a reader writes. “I was investing in the Global X Farming ETF (BARN) because The 5 mentioned many times over that investments in farming should pay off handsomely in the future.”

“As this was a listed security, I was of the opinion that the responsible bourses would let only reputable companies issue and trade ETFs and they would also supervise these entities. Now I realize that the Global X Farming ETF does not exist anymore. How is such a thing possible in a totally regulated financial market like the USA?”

“Can you explain how such things happen, and also draw your readers to the fact that this company, obviously, is not trustworthy?”

The 5: Nothing suspicious as far as we can tell. Global X shut down eight ETFs last month, including BARN, because they couldn’t attract enough assets to make their operation profitable.

There’s a lesson in here about not jumping into brand-new ETFs until they get a chance to establish themselves. If it’s ag exposure you want, there’s ample liquidity in MOO for stocks and DBA for farm commodities.

“The powers that be,” writes a reader with another theory about why gold got whacked on Wednesday, “know that Ron Paul will take his best damn shot and use gold and silver as the best money.”

“What better way to give Bennie an ‘out’ than by thrashing gold and silver prices once he starts, so he can smugly point at the gold gyrations and claim the dollar is more stable and less prone to those damn speculators in the shadows?”

The 5: Hmmm… As coincidence would have it, the good doctor hauled out a Silver Eagle during Bernanke’s testimony on Wednesday, explaining it could buy four gallons of gasoline in 2006 and 11 gallons today. “That’s preservation of value.”

Silver had already fallen from $37.50 to $36 when he said that… but it plummeted to nearly $34 in the following 15 minutes.

Just sayin’…

Have a good weekend,

Addison Wiggin
The 5 Min. Forecast

P.S. “It’s a win!” says an email just in from Abe Cofnas.

We were on the edge of our seat wondering how Abe’s mock trade in the binary options market would make out this week… enough to hold off publishing today’s 5 till after the close.

“When our Wall Street 30 binaries expired at 4:00 p.m. today,” says Abe, “the underlying Dow futures were trading for 12,968 — more than enough to put our 12,925 binaries in the money. A winning binary always pays out $100. That means we made a $17.75 profit for each of our binary positions.”

All told, a 24% gain between Monday and Friday. “I dare you,” Abe adds audaciously, “to name another investment vehicle with that kind of reliable profit potential in four days or less!”

Stay tuned for another mock trade next week… followed soon by a chance to get in on the action yourself.
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