FYI-I have noticed increased share prices and increased volume lately. A number of news releases are coming this month(Feb). A departure from a relatively no-news small explorer. The first news release comes tomorrow regarding some new land acquisitions. As I pointed out at the Whistler Conference 2011 these properties have a huge amount of past data to draw from and they have been totally unexplored since the 1930s using any kind of modern exploration machinery and technology.
Also speaking at the Whistler Conference 2011 was Douglas Macquarrie, ex-CEO of PMI GOLD(PMV). His new IPO Asante Gold will be coming out soon before the end of Feb. Another Ghana gold play worth a look, sandwiched right between some major gold properties of Perseus, AngloGold and PMI.
tradylady - When I first saw that $1.34BIL number I immediately thought of the Egypt M1 Abrams tank parts deal supported by the US Treasury through the DSCA-Defense Security Cooperation Agency! Although the M1 tank deal was only $1.329BIL not $1.34BIL. It goes to show you one measly little tank parts deal wipes out any amount of record booze exports!
Egypt - Co-production of M1A1 Abrams Tank
WASHINGTON, July 5, 2011 – The Defense Security Cooperation Agency notified Congress Friday of a possible Foreign Military Sale to the Government of Egypt for 125 M1A1 Abrams tank kits for co-production and associated weapons, equipment, parts, training and logistical support for an estimated cost of $1.329 billion.
I have gotten a few inquiries about the status of EAST COAL(ECX:TSXV), so here is my latest update. Note this is an anthracite coal project based in the Ukraine.
The Verticalnaya project is still ongoing with drifts being driven down to coal seams at VNP. There is rehabilitation work being done at the main mine site in the H8 seam. It appears that coal extraction, other than coal coming up with drift work now, will be occurring around September 2012.
Menhzinsky – ECX’s technical advisor is in Ukraine with the independent engineers who have prepared a NI 43-101 on the property. They are examining the existing mine dumps to determine how much coal is contained in those and ability of ECX to reprocess right away for immediate cash flow. This report will be combined with NI43-101 likely, to be delivered in February. All is progressing very well and at an accelerated pace.
The current share price is about equal with the last round of funding via private placement, so there is support here in the low $0.40CAD. All of the Western Coal(WTN) ex-management is now running ECX. Back in 2008 Western Coal was taken over by Walter Energy(WLT:NYSE) at a 56% premium for WTN shareholders, so we have a very experienced management team.
I was only interested in the ESF links to the IMF, World Bank, US FED, OSS and CIA. I think it is very important to "follow the money" and throughout America's history since FDR the ESF has been behind the scenes. The fact that confiscated US citizens gold funded the ESF and the IMF and World Bank is very disturbing, because now those 1960 innocuous millions for currency interventions are now billions turning rapidly into trillions. It is no longer just currency interventions either.
As Angelina Jolie asked how it is we tolerate these bloody wars I have to ask how it is we tolerate such an expandable monetary system that allows for the endless funding of constant warfare? In my report Dino Kos talks about the expanding role of credit and calls that a red flag, rightfully so, but he was speaking to consumer credit. I always speak to the Holy Grail of sovereign credit, which is really the "credit of last resort"!
I believe the true underlying issue here is if Ron Paul's noble goal of ending the US FED is accomplished it will shine light on the one underground organization that can stand the least light, the ESF. If you end the US FED then that means the NY FED also, the trading arm for the ESF. That, as I see it, would open up a flock of Black Dollar Swans.
Interesting history, but I am more concerned with the present and the future.
The issue is not that the Debt Ceiling gets raised again(a 70 year tradition), but how fast until we reach the $16.4TRIL limit and have to raise it again? These guys need to get passed the issue of the Debt Ceiling so that they are not bogged down in such debates just prior to election. I guess they figure another $1.2TRIL will for sure get them past the elections! They are also counting on the extremely short term memory of the US voter. Stockholm Syndrome kicks in as our captors "hubris quotient" rises!
When it comes to "confidence" ... the C WORD, we're all frogs in a boiling pot. What passed for monetary confidence when I was growing up is completely out the window today. Back in the 1960s there was confidence in long term monetary value, since most families had only one provider and that one provider could provide enough income to pay for the kids college educations and provide retirement income for both parents and live in a nice house and drive a nice car to boot. I rarely saw any family who had two income providers and in fact most of the single providers had only one career and one job, although I did know some who had two jobs. Yet even with a two job single income provider the wife still stayed home with the kids.
There is not a single person here unless they are CEO of Goldman Sachs who believes that they can work one job for 30+ years and retire. Nobody believes their money will still buy the same basket of goods and services in 30 years. In fact many here are wondering if this same monetary system will even exist in five years. Some question whether the Euro will be around next month. How can any long term sustainable vibrant economy be built on such shifting sands; such lack of confidence? The NFIB says that small business owners are afraid of the future due to its lack of predictability, stability and regulatory prudence. Just the recent SOPA-PIPA is evidence of the fear of impending regulatory mayhem. Jobs will never be created in such environments no matter how many misplaced incentives Congress throws out.
The only way to moderate that loss of long term monetary value is to leverage whatever wealth you now possess and the means to do that is as diverse as Chinese dialects and in some ways even more complex. Unless you are fluent in ever changing turbo exotic derivatives then Chinese might be easier to learn. Still I have been at this blog for many years now and I have not seen anyone talk about how their Turbo KIKO is doing. In those terms we are fairly vanilla in our leveraged modus operandi! About as complex as it gets here is option straddles, but then I might have blinked and missed something slightly more exotic.
When I was making $400k a year in the 1990s I was paying out $150k in taxes(Fed, SS, MED, CA State), so even at those income levels, which is rich according to Obama, I was not feeling all that safe. I was amazed at the giant "money gauntlet" I was running every month! In the 1970s I thought that making $30k per year would set me for life. What happens is "human nature" takes over so when you move to that $400k level of income so does your spending and your risk. Also make note that those amounts are "gross", so when Obama talks about increasing the tax rates on those earning more than $250k he speaks in "gross terminology" not "net"! As anyone who knows those income levels there is a world of difference between gross and net. I would like to ask the younger bloggers(under 30) here how much annual income would you need to make you feel you would be set for life? I doubt if any of you would say $30k!
In essence the very fact that you are at this blog and subscribing to other newsletters and financial services and have brokers or that you are working two plus jobs and having your wife work too is evidence that you have lost confidence in any future monetary value and stability. What has changed radically is the availability of credit in this society compared to the 1960s and 1970s. Credit has expanded exponentially at all income levels and age demographics. In my generation if you went to college you never considered you would have any student debt when you graduated. Going to a two year college in California back then was $5 per credit per semester. Heck, your book costs and your beer tab were a much greater fiscal worry!!! I mean can you believe that damn professor making me spend $25 on one lousy chemistry book??? Nowadays its almost a prerequisite to graduate with student debt! You get your degree and you're already in debt and you have yet to work a day in your life. You get a "debt degree" majoring in "Debtology" for four years ... Put that on your curriculum vitae!
Yes, we live in a culture of debt saturation, but it has all been sublime and carefully crafted that way for decades. I can not think of a better model for fiscal inefficiency and monetary degradation than the current model our American society lives under now. Just the idea of "suburbs" is vastly inefficient in relation to the supply chain dynamics, which forces us into long term energy dependence not independence. But ... hey, that's the American Dream and you don't mess with that! I was with my Hilo pals today down by the river talking about how family and community has been tossed aside and replaced by nanny state checks. A chicken in ever pot indeed! More unconscious debt dependence. Teach a man not to fish! In fact don't even tell him what a "hook" is!
The C WORD has been on the boil for a long time now. We still cling to our monetary Stockholm Syndrome ...
Les-Very compelling, but you are leaving out the typical issues with regards to plotting industries based on credit. In this environment of tight credit there are some similarities between housing and shipping. You may ask yourself what those two very different sectors have to do with your analysis. A good question.
Essentially the Baltic Dry tracks the average daily price for shipping dry bulk like coal, iron ore, wheat and soybeans. There are three things that make it such a good leading indicator. One, the index looks at raw materials, so it captures activity at the very beginning of the production process. Two, it looks at ocean shipping, so it reveals what's happening to international trade -- the critical driver of global growth. And, three, the shipping business depends heavily on credit, so the Baltic Dry indicates whether credit is tight or loose.
Historically that has been true, but now like the banks who own houses they cannot sell or whose value would cause huge losses if sold the shipping banks are holding these assets in "care and maintenance" until they perceive credit markets and lending improve for the private markets, which would indicate upturns economically.
One of the places that I follow the shipping trends and BDI issues is at the Virtual Shipbroker website and he addresses this new phenom in shipping whereby the shipping bank strategy is similar to the mortgage bank strategy.
These low rates that are described below would effect the BDI along with tighter credit, which is not as liquid as the margin credit for S&P 500 equities. Just another debt fundamental to your chart strategy ...
Banks are getting increasingly nervous - News that more and more shipping banks (those that lend to the sector) are losing patience and are now refusing extra cash injections, rejecting new investment pitches, being inflexible on repayment plans and are in fact calling in some of the moneys owing to them from shipping companies no longer able to trade as going concerns.
The problem for banks is that they are claiming ships back from clients at a fraction of their market worth from a few small years ago.
So they help finance a ship for USD 50 million, market crashes and same ship is worth 20 million and their client files for bankruptcy.....with 40 million still owing. What would you do if you were the bank?
They are either selling them for only a small portion of their previous market value, or even worse they are sending them straight to the scrap heap for the price of a song (for older cheaper ships).
Demolition yards are reporting more business, which to be fair is probably a good thing for the mid term viability of freight rates which are too low...
Instead of selling the ships to others or sending ships to the scrap heap another option banks are increasingly looking at and in fact doing are keeping the ships and entering into chartering and/or management agreements with some of the industries more reputable (and solvent) players.
So option 3 is keep the ships on the books, charter them out and wait till the market improves the asset values ............and then sell them. The key for many banks is if they sell they lock in a loss...a massive loss.
So some financially strong players like Oldendorff and Klaveness to name a few are being approached to handle "distressed assets"........and one can only imagine that the trade off for a good counterparty would be very attractive rates, terms and conditions. So put bluntly the strong larger shipowners are securing lucrative deals that others cannot get near.....because of smart prudent management over the last 3-5-10 years..
And its not just the banks. Some shipyards have seen customers disappear leaving them to hold the new born babies........so instead of accepting much cheaper prices in the current gloomy markets they too are partaking in interesting chartering deals with shipowners (in order to avoid booking in losses). Charter deals between shipowners and yards are nothing new in both low (current) and high markets.
Economists call this process "consolidation"....the inevitable result of a sustained economic downturn where the smart, secure and cashed up survive.
Adding this "credit based" strategy to the existing economic factors of shipping and you get a distorted BDI to the downside. Just debt flows from a slightly different angle.
This reveals that the total notional value increased from $601 trillion (with a “t”) at December 2010 to $707 trillion at June 2011. Nearly all of the increase was accounted for by interest rate contracts which now have a notional value of $553 trillion, some 78% of the total.
Well, Alf is over a month too late as I already posted all that BIS DERIVATIVES stuff awhile back in my SOUND MONEY report. Same tables ,etc. Except what Alf fails to mention is that a large number, around half, are non-reporters. There are only 11 central banks globally that report, but as I pointed out the derivatives disasters that have wiped out companies and banks are the foreign exotics. I used the KIKO as an example and the TARN which killed off billion dollar companies in Korea and Indonesia and China and have been banned.
I opined in that report that the large interest rate sensitive derivatives exposure also have the US FED crippled in the event a 1980 Volcker plan has to be initiated, virtually the only move that saved the USD. Are years of low rates saving the USD during this crisis? Always a crisis and always an emergency! We saw what happened to the AIG counterparty risk and that was just limited to lowly mortgage backed derivatives.
Alf also misses the "credit exposure" the BIS publishes which has come down as the notional increases, but then again that is based on a fair market value, which is like Maiden Lane. How can you have full market value and a less than BB rating? Instead of the once popular bumper sticker "S_it Happens" we now have "Accounting Happens"!
Dave-All well and good to pick prices, but the sad reality is that I do not need to buy a new house everyday like I need to buy a tank of gas. Also I would say the same about your "labor deflation" since if you look at bank and corporate management wages up to CEO levels we have a price spiral as well as most trade union wages. It really does not matter if you are a good CEO or even a good electrician since your performance is not based on free market labor. Once again more government price fixing. What would those bank CEO wages look like if their banks were allowed to fail? Would they even have a job?
At any rate you have been parroting my PRICE FIXING 101 model, whereby government fills in the free market gaps. Every politician knows they would never get re-elected in a true Depression, brought on by a financial system collapse of excessive credit expansion. What we have now is pure corruption at every level in order to prevent such an event. They do not even care if 1+1=0!
Still you should look into "confiscatory deflation". I believe that is where we would end up here in the USA if the political and monetary elite allowed the credit expansion to collapse. To see a modern example of that go here ...
What matters is what happens to the paper currency's value afterwards. In most such cases the paper currency is junk. Remember that almost any form of paper is simply a "promise to pay". Such promises have never been upheld under any inflation vs deflation monetary crisis.
Believe me I would love to see housing prices crash back down to 1970 levels and see a gallon of gas at a quarter, but what would our monetary system and our lives look like if that happened? I doubt you could even get any money out of your bank account or brokerage account in time to buy up any those hot "fire sale" deals! What good is cash if you cannot access it? Even if you did play that "deflation trade" perfectly ...
"So - we turn again to Japan. They're really the only recent example of a credit bubble pop followed by deflation under a fiat monetary system."
Dave-When I hear people throwing out ideas about how gold performs under deflationary events I search around for "actual" real time examples instead of mythical charts and formulas or jumping on the band wagon of the correction dujour.
Hey, Japan works for the deflationists to prove all things "deflation"! I only refer to Japan since it is one of the only major economies to experience long term low rates and a collapse of asset prices at the same time. The USA is relatively new to zero rates and collapsing asset prices in comparison. Now we have sliced and diced the inflation vs deflation debate down to "mild deflation". Hummm, how about "milder mild deflation" or "greater mild deflation". When will those enter the inflation vs deflation debate lexicon?
Still as I have been saying for a very long time I do not care about deflation or inflation as those are economic price values. What good is low prices if the US government defaults? Which it did in the 1930s. Or for that matter any government backed currency. Currency debasement and default happens in both deflation and inflation as you know since you have lived in Asia. Who was debating inflation vs deflation in Argentina except the Argentinian bond holders? Now that debt is currency where can you go to defend against constant debt downgrades? Constant unstable fraudulent sovereign debt and derivative counterparties? Did I not hear you say that you or someone you knew had a MF Global account? Who knew they were going under except management? Further who knew that the rule of law would be obfuscated during bankruptcy except JP Morgan? So much complacency still exists even after we saw the massive counterparty collapse in 2008. And of course there still is no improvement in transparency, so one has to assume the rule of law is up for grabs even in bankruptcy, segregated accounts or not! In a "real" Great Depression event the rule of law means nothing. We saw what FDR thought of personal property rights did we not? Sorry to say we were the only country in the World who threw away property rights except Nazi Germany! Not the company the Founding Fathers intended.
If you agree there is no true market transparency and the finances of sovereigns and market exchange dealers are susceptible to fraud then we can move on to the gold markets. Lately the negative lease rates to support liquidity has made me wonder about rehypothecation of the basis for gold leasing and swapping. If the Shadow Banking System has no problem reusing equity collateral many times over then why not reuse gold collateral many times over? There is no transparency at the central bank level or the sovereign level, especially in the USA. When it comes to the private member banks of the US FED squandering the wealth of the USA in order to save their monopolistic monetary power I do not rule out any such fraud. Where do I find real time data on the US Treasury gold reserves at various locations around the USA? The same for the US FED stored gold in NYC and various other locations? I won't even go down the COMEX route ...
Like I have said before in SOUND MONEY we are in uncharted monetary territory historically. When I see the USD rally based on the "lesser evil" concept triggered by a potential collapse of the Euro it does not give me comfort in the USD, but rather it makes me wonder if the USD is next! What was the high of the latest USD rally? I know what the US Treasury is capable of in terms of monetary injections. Not too many places do you see a $238BIL monetary injection in one routine day! Never mind a $700BIL one under extraordinary circumstances of highly imminent total financial collapse! Now over the past 30 years the USD has rallied off the 80 support level because of stronger economic fundamentals at times when US debt has been less than half of what it is now and there was no global debt contagion to consider. This time is different because the USD is not rallying off the 80 multi-decade support levels, it is rallying off all time multi-decade lows with a collapsing EU economy in support. Can you honestly say that you prefer to focus more on the inflation vs deflation debate rather than currency annihilation? That is like being on the Titanic and debating which end of the ship goes down first! Does the bow inflate first then deflate and sink or does the stern inflate first?
Even though I may be seen as a "gold bug" here I am actually not as highly invested in gold or gold stocks as some may think. It is foolish to rely on a limited wealth base. I am and have been way before I ever knew who Marc Faber was been in real estate, oil, art and at one time even in US Debt. I was buying Hawaii real estate in 1998 at its lows and if I had the support of my business network and/or family I would now be part owner of 330,000 acres of oceanfront property in Western Australia at the price of $2.91USD per acre. Not quite the $1USD per acre that Art Linkletter was buying Australian real estate at in the 1960s but good enough for 1998! Proof that you can be at the right place and at the right time and still not win!
In simple terms skip the inflation vs deflation debate and consider the end game being currency debasement to $0! That seems to be every major global central banks goal since central banks were legal! Don't believe me just go out and try to buy a gallon of gasoline for a dime(the price of gas in 1930). It is curious that as the power of central banks and their accomplice governments rise the purchasing power of the currency descends. And at no time since 1913 has that debasement accelerated faster than post 1971. A coincidence, I think not ...
If we ever were to see "real" Great Depression deflation again then the prudent question would not be whether to own gold or not, but to not be in debt, because chances are unemployment levels would only rise from here not descend. Major banks and corporations would collapse and so would the economy. A bank and market holiday would ensue. The people who lost the most in the Great Depression were the ones in debt, just like the ones in 2008. One thing you can be guaranteed of is that whatever President is in office at the time of the next Great Depression will not write an FDR style executive order to confiscate every US citizen's savings bond and treasury notes or their bond based ETFs.
Your Ron Paul remarks mean what exactly? That staying on a sure path to default and currency collapse is better than what? Not owning gold or owning it? Did you applaud the Katrina disaster too? That could be called "regional deflation" ...
NYUGrad - Good call there. Based on the prior two corrections you have listed 741.02 as a possible area of interest on a third correction.
Go post that in the reply comments at the NY Times! Sometimes I even send a reply to the author directly since they usually post their email address. That is how I got to know John B Taylor over at Stanford Economics. You never know where your QUESTION AUTHORITY emails will end up! Heck, if you do it enough you may even get a private audience with his Majesty, Sir Timothy Geithner, at the Square Office!
Whenever I want fast "go to" charts on currency based POG I go to Kitco and scroll to the very bottom in the currency box and then click on the YEN and it shows me the price of gold in Yen intraday all the way to 10 years.
On the ten year chart it shows the POG in Yen at $48,000Y in Jan 2002 and on Friday, Dec 2011, the POG in Yen closed at almost $121,000Y. That is near a 230% gain since 2002, which says what? That gold does not perform well in a deflationary environment?
To copy and paste that quick chart is a bitch since it always defaults back to the intraday. HEY KITCO FIX IT! Not sure why it does that, but you can click on the 10YEAR tab and see for yourself.
So what does that tell you about gold? Did that 230% gain over a ten year period of world renown deflation say that inflation was coming? That deflation is here to stay? Or was there ever really Great Depression type price deflation and unemployment in Japan? Was there a lot of government debt accumulation in Japan in those years? Or does it harken back to the old 1960's 007 movie GoldFinger where the Colonel explains to Bond that gold is a "talisman of fear". What fear? I think it is the fear of corrupted money and politics and all that goes with that, which we can all see so clearly today is not working for the enrichment of the masses. It used to be that the world was a gold backed currency, not debt. When the USA was downgraded a notch by the S&P what was gold's rating downgraded to? When Greece's 10yr bond jumped to 16%+ why didn't that resolve their debt issues? When people in Germany in 1923 during the Weimar were losing everything they ever owned they could have gotten on a boat or a plane and gone to America or many other countries and preserved that wealth. Now you cannot get on a boat or a plane to preserve your wealth anywhere. You see the destructive forces of debt in every country. Not even Switzerland is the same fiscal safe harbor it once was, not with an external per capita debt exceeding the annual per capita income of its citizens. What Swiss citizen voted for that? Heck what American citizen voted for our per capita debt? I did not see that on the ballot box! It has been a slow insidious perversion of representation brought on by corrupt monetary values adopted by the political and banking elite over many decades, starting in 1971 with Nixon then moving globally to the 1973 intervention of the Smithsonian Agreement. These 1970s "monetary accords" were the design of private banking cartels who foisted their rules on the global citizenry like Stalin did on Russia from 1941 to 1953. We now have been forced to live by these antiquated, draconian and ruinous monetary policies for nearly 40 years. I think we as the global masses deserve better and I am highly confident that in this modern era of high tech communications and media we can educate ourselves enough to make demands on those at the top to either make real changes or suffer the consequences. So far the elite political and banking class have opted for the "suffer the consequences" choice. I really do believe they see themselves as immune, but I think they are making a serious mistake and that they are forcing some long term repercussions on the World that we have not seen since WW2. I am not talking about a conventional military World War here, but it would have the same destructive effects on society as we now know it. These are highly dangerous people who now sit in political office around the World. Where's Gandhi when you need him?
Les-Now take your FINVIZ chart and click on "performance" then hit the YTD or one year chart. Its a sad day when the 10yr and 30yr bonds are in the top ten performers for the year when those investments do nothing but indebt us and our kids further and further and produce nothing but the funds necessary for a corrupt government to malinvest into more corruption, which if we are lucky will not result in another World War. Its hard to say that "debt" is a "safe haven" when viewed with the wide angle lens! Those "investments" only make the World safe for politicians and bankers. Instead of putting those "debt funds" to work in the private sector the fearful public and our trading partners have foolishly put those huge sums into the hands of the least productive people on the face of the Earth. I am being too kind by calling them "least productive". In fact these are the most "anti-productive" and "anti-freedom" humans the World has ever known. In an insidious way they rival the fiscal achievements of Stalin and Mao. I take that back since Stalin and Mao only ruined and brutalized their own countries. The new Stalins and Maos have been given "centralized" permission to ruin and brutalized the entire World!
If gold is not money then why is debt money? Now you know. It gives unlimited control of our future to politicians and bankers and not us. This unlimited control of debt issuance only limits our Freedom not theirs. The US Constitution was written with the intent of the complete opposite. We could repeal that law and make gold money again. Right now we do have a "One World" currency that all financial institutions and central banks and governments operate with ... its called the "BS-O"! I mean come on ... how much more of their debt BS do they think we can swallow? We need to call a global "general strike" where everyone who is not a politician or a banker just stays home for one day. How would they do a days work? Who would open the door for them? Serve them their three hour lunch? I think we should let them do all the heavy lifting for once ...
But how would we know what is BS as hardly any of us are alive to have known a life without the unlimited control, the monopoly, the politicians and bankers now possess. If you are 100 years old then you lived before the first and only US central bank, but you were only a toddler! You would have to be 120 years old today to have an adult perspective on life before central banks. Any 120 year olds here at the blog? I have been alive over 50 years and I can say my business and financial life has gotten worse not better. I used to be able to live quite comfortably on $500 a month as a student in the 1970s living in Southern California no less! Only by modern medicine has my life improved otherwise I would have died at age 32. But even medicine and those innovations are not cheap. Most Americans end up going bankrupt from one really bad car accident if it puts you out of work for longer than a few months! There are so many more challenges in finances these days no matter where you live or what your job is. When we sold our condo in the San Francisco bay area in 2001 our mortgage payment was $1,127USD per month. Our HMSA health insurance monthly payment is $1,064USD and will go up in 2012. Since we moved here in 2002 it always goes up. Its been outperforming real estate prices! No Great Depression there ... Even with that though HMSA still sends me a letter every year complaining that they do not make enough profit. Maybe they need to get the permission of the federal and state governments to change their business model!
I believe what has complicated life so much now is the corruption of money, which has filtered down through every segment of the economy. To "reset" prices via free markets now would bankrupt many more people, businesses and governments just like it did in the 1930s. There are no good choices left only prudent ones that would make our fiscal future less ominous. I believe we owe that to our youth ...
Now I offer another chart ... This chart covers Jan 2007 to Dec 2011. With this chart you can see who the market rewarded since the bank created credit crisis began in 2007. The first three are all "debt holders", TLT, EIA and IEF, the safe haven plays, and the other four are private sector asset plays, which all required more risk. Risk factors for the private plays varied from almost no risk, since some of those corporate bonds were rated higher than the other public debt entities, to a lot of risk. Still the amount of risk you employ dictates the amount you can potentially realize.
Not many people prospered by holding over-valued and over-rated debt over the past four years. Mr. Livermore did not get to where he got at his zenith by owning debt. At his zenith he was worth between $1BIL-$1.3BIL in today's money. Still this is how he ended up after the 1929 crash when he made his fortune ...
"Dorothy finally filed for divorce and took up temporary residence in Reno, Nevada, with her new lover, (and later 2nd husband) Walter Longcope. On September 16, 1932, Dorothy divorced Livermore on grounds of desertion. They had been married 14 years. Dorothy retained custody of their boys."
"On March 28, 1933, Livermore married 38 year old Harriet Metz Noble in Geneva, Illinois; there was no honeymoon. It was Harriet's fifth marriage; all four of her previous husbands had committed suicide.
"Through unknown mechanisms, he yet again lost much of his trading capital, accumulated through 1929. Thus, on March 7, 1934, the bankrupt Livermore was automatically suspended as a member of the Chicago Board of Trade. It was never disclosed to anyone what happened to the great fortune he had made in the crash of 1929, but he had lost it all."
The "casino" finally won! I would not marry a woman whose previous four husbands committed suicide. The odds are it would be a very foolish trade!
Then his life ended this way ...
"On November 28, 1940, Livermore shot and killed himself in the cloakroom of the Sherry Netherland Hotel in Manhattan. The police revealed that there was a suicide note of eight small handwritten pages in Livermore's personal notebook. It was reported in the November 30 issue of the New York Tribune. The press wanted to know what it said, and the police tersely responded: “There was a leather-bound memo book found in Mr. Livermore's pocket. It was addressed to his wife.” A police spokesman read from the notebook: “My dear Nina: Can’t help it. Things have been bad with me. I am tired of fighting. Can’t carry on any longer. This is the only way out. I am unworthy of your love. I am a failure. I am truly sorry, but this is the only way out for me. Love Laurie”.
What's that guy on the radio say? "And now you now the rest of the story ..."
What does Buddah say about life? The Four Noble Truths ... Actually it is "dukkha" which is more like this:
1-Suffering or pain (dukkha-dukkha)
2-Impermanence or change (viparinama-dukkha)
3-Conditioned states (samkhara-dukkh
Les-Can you get a 5 and 10 year POG chart denominated in Yen so we can see if gold was worth holding in one of the most long term deflationary countries on the planet?
Japan is rated as the 11th most expensive country to live in according to the Cost of Living Index. So far the only asset price charts that I have seen that show the most "deflation" is some sort of "asset" that is denominated(secured) by debt ... Like say US real estate for instance.
I do not own debt and I do not buy other people's debt(OPD). I used to have US savings bonds in 2001 but I traded them in for gold.
If Ben Bernanke were the surgeon general he'd be telling you that smoking is good for you!
Another $1.2TRIL? Convenient time to ask Congress now that they won't be back until Jan 17th! The myth of the Federal Reserve Act back in 1913 was the same, where they were out at Christmas and the vote occurred Christmas Eve. The fact is though there were enough votes for the Act to pass as Senators voted via proxy, however out of 100 69 voted, but 2/3 is as 2/3 does!
Lets add up the total debt increases since August 2nd, less than five months.
August = $400BIL
Sept = $500BIL
Dec = $1.2TRIL
TOTAL = $2.1TRIL
That would bring the official debt ceiling up to $16.4TRIL USD. Imagine paying 3% on that or how about the VOLCKER FFR of 14%? Those much higher FFR were the only thing that saved the global banking system in 1980. That option does not exist today. Then what options do exist? The only option left is a new monetary system, but you will never hear that on the mainstream media.
And what sort of "austerity" measures did Congress have to give up? It works out to be spending cuts of $120BIL per year for ten years starting in 2013.
European banks are falling into a "collateral hole" so it makes me wonder what sort of collateral any of these "irredeemable governments" can possibly possess to backstop anything. The well worn idea that taxpayers are collateral in a raging global "liability bubble" is absurd. As I pointed out in the last SOUND MONEY there aren't enough people(meaning taxpayers) to cover the liabilities of just the derivatives markets much less what sort of sovereign debt arises. Much of which is being wagered in the form of interest rate and credit default swap derivatives and a whole slew of unregulated exotics that are prevalent in the emerging markets and totally unreported by the 10 reporting countries and the BIS.
I have long asserted that if you do not own an "asset" out right you own only someone elses counterparty and nothing more than rehypothecated "faith and credit". Desperate times will produce desperate regulations and limits on capital and capital flows. Chaotic times are not optimal for positioning and I can only see more and more chaotic times on the horizon. It has nothing to do with economies or well endowed equities, but everything to do with the C WORD. The greatest concentration of assetless collateral reside at every global governments treasury and their central banks.
CHART#4-Note that investment demand in North America is at 1990 levels when the POG was virtually flat! Also Europe is way behind as well. For North America to reach investment demand of 1980(last bubble) we need another 18%+. For Europe to obtain the same 1980 demand it would have to increase 14%+. It seems East Asia and India have picked up the slack of North America and Europe.
CHART#7-Distribution matches 1980 as net central bank sales and "disinvestment" have completely dried up. Now all that is left is recycle and mine supply, which you will notice recycle is edging up as those who fall financially either through job loss or real estate gambles must sell off their PM to make ends meet. Also do not ignore any institutional who must liquidate PM holdings to cover losses.
CHART#9-Confirms what we already knew which makes explorers turned producers like SLR that much more valuable.
CHART#14-Explains what I was saying years ago about GLD which is that they will not have enough supply to meet their business model, but since the average investor will not be able to access physical the big institutionals(US FED member banks) will own the GLD supply thanks to the little guys. Notice that tonnage has been range bound since Q2-2010 even as the POG has increased from $1200 to $1700. Does anyone holding GLD or any of the other HB&B PM products really think those vehicles were designed to benefit you in the long run?
CHART#15-Then I look at what the gold pundits say about the huge jewelry demand from India and you see that has been a lie for the past year. The jewelry demand based on tonnage is not coming from India but China, Hong Kong, Japan and Russia! With the large majority coming from Hong Kong and Russia. Russian demand is not even on the map of these pundits.
CHART#22-Yep, the Europeans and the Chinese obviously want more physical gold! They take their "money" more seriously! Americans are more complacent along with our debt saturation, which immobilizes any investment funds we may have accumulated to this point. I see that so often in my own sphere. "Hey, if I had any free cash I'd have bought gold and silver a long time ago but I'm all tied up in real estate and my mortgage and the cost of basics is through the roof!" Not quite the same picture of Americans pre-dotcom bubble in the 1990s! WHAM-BAM!! The tech crash and the real estate crash have crushed US investors free cash flows. Those HB&Bers were so clever to rig the real estate market right after the tech crash because all I ever heard from people I knew then in 2002 was that they would never get back into the stock market since they preferred to stay in real estate. The common reasoning was that they have never gotten burned in real estate since prices always went up and it was something they "know" ... something "tangible"! So where does that leave long term investors? Most of them look to the "faith and credit" assets, which are massive liabilities in disguise. That will be the Mother of all Busts when you see how much interest rate derivatives are depending on low rates. Coming soon in the next SOUND MONEY! Now there is a growth sector that is way outpacing global gold mine production!
CHART#25-Mine production is higher than ever over the past three years which means those who are actually producing have done well to boost cash flow considering the POG has risen substantially from the $1000USD level. I would look to producers who are low cost and ramping up production for best share price appreciation over the long run. Naturally the ones with no debt and no hedging float to the top.
Now look at the share prices of the major gold producers since the peak of 2008 ...
LINK: http://tinyurl.com/6r6n46w
"Yes, about 21% of Rep. Paul’s holdings are in real estate and roughly 14% in cash. But he owns no bonds or bond funds and has only 0.1% in stock funds. Furthermore, the stock funds that Rep. Paul does own are all “short,” or make bets against, U.S. stocks. One is a “double inverse” fund that, on a daily basis, goes up twice as much as its stock benchmark goes down. The remainder of Rep. Paul’s portfolio – fully 64% of his assets – is entirely in gold and silver mining stocks."
I would be willing to bet he has some bullion somewhere!
Here is a WSJ analyst interpretation of that portfolio ... "This portfolio is a half-step away from a cellar-full of canned goods and nine-millimeter rounds ..."
It is obvious that WSJ analyst never met a mining CEO!
In 2004 GLD was created by HB&B. Before that you were considered a fool by a Morgan Stanley or Merrill Lynch broker for spending a dime on anything "gold" or "silver". Was that pre-2004 "gold view" by mainstream brokers because they did not have a horse in the bullion race other than large short positions at the COMEX? Their post-2004 view on gold has changed. The HB&B recommended gold positions for clients are GLD and ABX, not in that order! Pre-2004 you never saw gold and silver price scrolling quotes on CNBC either, now you do.
If you go to the link below you get all the "belief systems" attached to such a portfolio. These guys will use every trick in the book including guilt and anti-Americanism to get you out of your positions. They want to convince you that economic values are the same as monetary values. They do not understand the difference between GE stock and a one ounce gold Maple Leaf. What ever happened to just plain old monetary fundamentals and free cash flow? Too sinful I suppose.
Was he the only Congressman out 535 who called the gold/silver bull?
Like "beauty" it seems "lies" are in the eye of the beholder ...
Every Empire and every country and every man, woman and child utilize the concept of "vital lies" in order to survive. We skew our most intimate relationships, our day-to-day lives, and our common reality by burying painful insights and memories. This self-deception is our means of psychic self-preservation, the currency of survival in which an entire society colludes. But although self-deception is sometimes benign, it can also be dangerous and life-diminishing.
My Father was one of the most kindest and nicest guys ever to drop bombs on tens of thousands of Japanese citizens from his B-29 Super Fortress. I have met some of the nicest people when I worked at the IRS. Every time I call or write my Congressman in Honolulu I get the most kindest replies and service. I have also spoken with US Treasury representatives who were very courteous and knowledgeable.
We live in a country that was founded on some truly grand principles that were designed to enhance and provide as much Freedom and Happiness to each citizen who dared to dream of a better life. It blows me away that some old revolutionary guys back 230 years ago actually wrote a political document that had the word "HAPPINESS" in it. On the other side of that "reality coin" many of them owned slaves. Where is that word in Fidel Castro's dictatorship or in Mao's Little Red Book or the Communist Manifesto? Is it even in the EU Constitution? Where in those documents is "Freedom and Happiness" guaranteed? Yet the US Constitution and the Bill of Rights and the Declaration of Independence have been intentionally skewed into "vital lies" that provide for the survival of the political class and banks and corporations more than its own citizens Constitutional rights. The diminishment of those "rights" happens most frequently during crisis mode, whether it be a banking crisis or a war crisis. Two of the most frequent crisis America has faced historically. While you are hard pressed to find the word or concept of "centralization" in the US Constitution it appears quite frequently in Maoisms and Soviet doctrine. Yet "centralization" is alive and well here in America. Private banking has been centralized by the US FED. Warfare has been centralized by the Pentagon's Defense contractors and the CIA. Politics has been centralized into just two parties. We have devolved that way.
TARP was yet another "crisis" mode whereby bank fraud created political and monetary gains for the exact people who created the fraud. There were I am sure some very nice people who made those SubPrime loans and who issued CDO and ABS at Goldman Sachs. I have no doubt there were nice interns, staffers and pages who helped move that TARP drafted legislation into law. There are of course, even today, many very kind and respectable people who assist consumers in achieving their "debt" goals. I must also reminisce of the countless number of very friendly and sympathetic bartenders I have encountered during my life. It is of course a "free country". Americans seem to be most susceptible to looking for guarantees in a guaranteeless world. We apply limitless and liberal blame when perceived guarantees are broken. I speak in general terms, as like every rule in life, there are exceptions. We chose our paths and I do not judge as we all do what we must do to survive. I certainly have ...
I have read that Albert Einstein said on his deathbed that the most important question is, "Is the universe friendly?" He must know the answer to that question by now.
Forgive these end of year musings ... Yes, "grace and kindness" instead of "conflict and chaos" would be a grand accomplishment for mankind. I would wish that on our "friendly universe"!
To take it another step forward my pal over at the CUNNING REALIST, who was one of the HB&B trading desks, tried to get Bernanke to answer direct questions at his confirmation hearings. Of course Obama approved the confirmation of Bernanke no matter ...
Tuesday, January 05, 2010
Follow-Up For Bernanke
Recap: Before Ben Bernanke's confirmation hearing by the Senate Banking Committee, I posted this list of questions to ask him. After the hearing, Sen. Jim Bunning submitted my questions in writing to Bernanke, along with many of his own. The full set of questions and answers is here. Bernanke failed to respond completely to this question of mine (page 25):
Before the financial crisis there was a widespread sense, especially on Wall Street trading desks, that the stock market was strangely resilient. This encouraged excessive risk-taking in various types of assets. Do you have direct or indirect knowledge of the Federal Reserve or any government entity or proxy ever intervening to support the stock market (or any individual stock) via futures or in any other way? If yes, who decides the timing of such intervention and with what criteria? How is it funded? Which Wall Street firm handles the orders, and who sees them before they are executed?
Bernanke's response:
The Federal Reserve has not intervened to provide support to the stock market or individual stocks by trading in futures or any other financial instrument. I have no knowledge of any other U.S. government entity providing such support.
Bernanke's answer was incomplete because he ignored the word "proxy," an important part of the question. John Crudele then wrote this column in which he referenced my question verbatim.
This is an important issue for several reasons. As my question posits, in the years leading up to the financial crisis there was a widespread belief that the stock market was backstopped. As a former trader on one of Wall Street's top sell-side desks, I've experienced this firsthand and seen how it influences the perception of risk among society's biggest risk-takers. Current conversations with friends on bailed-out trading desks, where risk and leverage have surged in recent months, indicate that this belief is as strong and widespread now as it was in the period that preceded the crisis.
The issue of intervention is also important for other reasons, which I wrote about in this article for The American Conservative in January 2008:
The Dow is composed of only a handful of companies, but there’s no more important barometer of public psychology. The behavior of that small group of stocks can paper over a lot of distress under the surface. So what happens if that barometer starts to fall and interest-rate policy, a blunt tool that works with a lag, isn’t enough? The possibility of direct intervention in the stock market has been the subject of much debate in the financial community. Some believe that the government -- either the Federal Reserve, the Treasury, or a proxy -- has intervened in the past to prop up the stock market. If that’s indeed the case, a national debate about it should take place. Government-sanctioned intervention in the stock market would have serious implications, including the use of public money to buy stocks while corporate insiders are selling, select Wall Street trading desks profiting from knowledge of the intervention, and the ability to boost the market prior to an election or other event. We know from the past few years that much can be justified when a nation is “at war.”
Bernanke must now give a clear and complete answer on this, preferably before the Senate votes on his confirmation. Other select Fed officials need to be questioned as well, and that should certainly include William Dudley and Brian Sack from the New York Fed. Tim Geithner and top Treasury officials also must be included, for reasons Crudele explains. Get everyone on the record, in writing and in person if possible.
I phrased the original question to leave as little wiggle room as possible, since it's not enough to ask, "Does the Fed intervene in the stock market?" Follow-up needs to be as comprehensive and specific as possible. My suggestion:
Has the Federal Reserve, Treasury, or any part of the government ever directed or otherwise engaged a proxy or intermediary -- including but not limited to a private sector entity, foreign central bank, or foreign government -- to take action intended to support the U.S. stock market (or an individual stock) via futures purchases or in any other way? Has the Federal Reserve, Treasury, or any part of the government ever had an understanding with or given any assurances to a private sector entity, foreign central bank, foreign government, or any other party regarding compensation or consideration for losses related to intervention in the U.S. stock market or an individual stock? Has the Federal Reserve, Treasury, or any part of the government ever been involved in any type of effort -- via the Exchange Stabilization Fund, foreign custody accounts, System Open Market Account, or any other account or mechanism -- to intervene in or support the stock market or an individual stock?
These questions are important, as is the specific phrasing. Because of Bernanke's conspicuously incomplete response and the return of the stock market's perceived backstop, they need to be asked immediately.
Posted by The Cunning Realist at Tuesday, January 05, 2010
ALOHA!!
FYI-I have noticed increased share prices and increased volume lately. A number of news releases are coming this month(Feb). A departure from a relatively no-news small explorer. The first news release comes tomorrow regarding some new land acquisitions. As I pointed out at the Whistler Conference 2011 these properties have a huge amount of past data to draw from and they have been totally unexplored since the 1930s using any kind of modern exploration machinery and technology.
Also speaking at the Whistler Conference 2011 was Douglas Macquarrie, ex-CEO of PMI GOLD(PMV). His new IPO Asante Gold will be coming out soon before the end of Feb. Another Ghana gold play worth a look, sandwiched right between some major gold properties of Perseus, AngloGold and PMI.
LINK: http://www.asantegold.com/i/pdf/factsheet.pdf
FD: Shares are held in both companies ...
ALOHA!!
tradylady - When I first saw that $1.34BIL number I immediately thought of the Egypt M1 Abrams tank parts deal supported by the US Treasury through the DSCA-Defense Security Cooperation Agency! Although the M1 tank deal was only $1.329BIL not $1.34BIL. It goes to show you one measly little tank parts deal wipes out any amount of record booze exports!
Egypt - Co-production of M1A1 Abrams Tank
WASHINGTON, July 5, 2011 – The Defense Security Cooperation Agency notified Congress Friday of a possible Foreign Military Sale to the Government of Egypt for 125 M1A1 Abrams tank kits for co-production and associated weapons, equipment, parts, training and logistical support for an estimated cost of $1.329 billion.
Your tax dollars at work!
ALOHA!!
Mahalo!! No VP run ... nothing! Too busy with farming and TV and Hawaii sunshine!
ALOHA!!
Mahalo for that one! Catchy tune! Is that the official Ron Paul for Prez song? If not it should be... Isn't that your Son?
I do not have an IPod or IPad or IThingy so no downloadie for me!
ALOHA!!
I have gotten a few inquiries about the status of EAST COAL(ECX:TSXV), so here is my latest update. Note this is an anthracite coal project based in the Ukraine.
The Verticalnaya project is still ongoing with drifts being driven down to coal seams at VNP. There is rehabilitation work being done at the main mine site in the H8 seam. It appears that coal extraction, other than coal coming up with drift work now, will be occurring around September 2012.
Menhzinsky – ECX’s technical advisor is in Ukraine with the independent engineers who have prepared a NI 43-101 on the property. They are examining the existing mine dumps to determine how much coal is contained in those and ability of ECX to reprocess right away for immediate cash flow. This report will be combined with NI43-101 likely, to be delivered in February. All is progressing very well and at an accelerated pace.
The current share price is about equal with the last round of funding via private placement, so there is support here in the low $0.40CAD. All of the Western Coal(WTN) ex-management is now running ECX. Back in 2008 Western Coal was taken over by Walter Energy(WLT:NYSE) at a 56% premium for WTN shareholders, so we have a very experienced management team.
ALOHA!!
Mahalo for your kind words.
I was only interested in the ESF links to the IMF, World Bank, US FED, OSS and CIA. I think it is very important to "follow the money" and throughout America's history since FDR the ESF has been behind the scenes. The fact that confiscated US citizens gold funded the ESF and the IMF and World Bank is very disturbing, because now those 1960 innocuous millions for currency interventions are now billions turning rapidly into trillions. It is no longer just currency interventions either.
As Angelina Jolie asked how it is we tolerate these bloody wars I have to ask how it is we tolerate such an expandable monetary system that allows for the endless funding of constant warfare? In my report Dino Kos talks about the expanding role of credit and calls that a red flag, rightfully so, but he was speaking to consumer credit. I always speak to the Holy Grail of sovereign credit, which is really the "credit of last resort"!
I believe the true underlying issue here is if Ron Paul's noble goal of ending the US FED is accomplished it will shine light on the one underground organization that can stand the least light, the ESF. If you end the US FED then that means the NY FED also, the trading arm for the ESF. That, as I see it, would open up a flock of Black Dollar Swans.
Interesting history, but I am more concerned with the present and the future.
The issue is not that the Debt Ceiling gets raised again(a 70 year tradition), but how fast until we reach the $16.4TRIL limit and have to raise it again? These guys need to get passed the issue of the Debt Ceiling so that they are not bogged down in such debates just prior to election. I guess they figure another $1.2TRIL will for sure get them past the elections! They are also counting on the extremely short term memory of the US voter. Stockholm Syndrome kicks in as our captors "hubris quotient" rises!
ALOHA!!
When it comes to "confidence" ... the C WORD, we're all frogs in a boiling pot. What passed for monetary confidence when I was growing up is completely out the window today. Back in the 1960s there was confidence in long term monetary value, since most families had only one provider and that one provider could provide enough income to pay for the kids college educations and provide retirement income for both parents and live in a nice house and drive a nice car to boot. I rarely saw any family who had two income providers and in fact most of the single providers had only one career and one job, although I did know some who had two jobs. Yet even with a two job single income provider the wife still stayed home with the kids.
There is not a single person here unless they are CEO of Goldman Sachs who believes that they can work one job for 30+ years and retire. Nobody believes their money will still buy the same basket of goods and services in 30 years. In fact many here are wondering if this same monetary system will even exist in five years. Some question whether the Euro will be around next month. How can any long term sustainable vibrant economy be built on such shifting sands; such lack of confidence? The NFIB says that small business owners are afraid of the future due to its lack of predictability, stability and regulatory prudence. Just the recent SOPA-PIPA is evidence of the fear of impending regulatory mayhem. Jobs will never be created in such environments no matter how many misplaced incentives Congress throws out.
The only way to moderate that loss of long term monetary value is to leverage whatever wealth you now possess and the means to do that is as diverse as Chinese dialects and in some ways even more complex. Unless you are fluent in ever changing turbo exotic derivatives then Chinese might be easier to learn. Still I have been at this blog for many years now and I have not seen anyone talk about how their Turbo KIKO is doing. In those terms we are fairly vanilla in our leveraged modus operandi! About as complex as it gets here is option straddles, but then I might have blinked and missed something slightly more exotic.
When I was making $400k a year in the 1990s I was paying out $150k in taxes(Fed, SS, MED, CA State), so even at those income levels, which is rich according to Obama, I was not feeling all that safe. I was amazed at the giant "money gauntlet" I was running every month! In the 1970s I thought that making $30k per year would set me for life. What happens is "human nature" takes over so when you move to that $400k level of income so does your spending and your risk. Also make note that those amounts are "gross", so when Obama talks about increasing the tax rates on those earning more than $250k he speaks in "gross terminology" not "net"! As anyone who knows those income levels there is a world of difference between gross and net. I would like to ask the younger bloggers(under 30) here how much annual income would you need to make you feel you would be set for life? I doubt if any of you would say $30k!
In essence the very fact that you are at this blog and subscribing to other newsletters and financial services and have brokers or that you are working two plus jobs and having your wife work too is evidence that you have lost confidence in any future monetary value and stability. What has changed radically is the availability of credit in this society compared to the 1960s and 1970s. Credit has expanded exponentially at all income levels and age demographics. In my generation if you went to college you never considered you would have any student debt when you graduated. Going to a two year college in California back then was $5 per credit per semester. Heck, your book costs and your beer tab were a much greater fiscal worry!!! I mean can you believe that damn professor making me spend $25 on one lousy chemistry book??? Nowadays its almost a prerequisite to graduate with student debt! You get your degree and you're already in debt and you have yet to work a day in your life. You get a "debt degree" majoring in "Debtology" for four years ... Put that on your curriculum vitae!
Yes, we live in a culture of debt saturation, but it has all been sublime and carefully crafted that way for decades. I can not think of a better model for fiscal inefficiency and monetary degradation than the current model our American society lives under now. Just the idea of "suburbs" is vastly inefficient in relation to the supply chain dynamics, which forces us into long term energy dependence not independence. But ... hey, that's the American Dream and you don't mess with that! I was with my Hilo pals today down by the river talking about how family and community has been tossed aside and replaced by nanny state checks. A chicken in ever pot indeed! More unconscious debt dependence. Teach a man not to fish! In fact don't even tell him what a "hook" is!
The C WORD has been on the boil for a long time now. We still cling to our monetary Stockholm Syndrome ...
ALOHA!!
Les-Very compelling, but you are leaving out the typical issues with regards to plotting industries based on credit. In this environment of tight credit there are some similarities between housing and shipping. You may ask yourself what those two very different sectors have to do with your analysis. A good question.
Essentially the Baltic Dry tracks the average daily price for shipping dry bulk like coal, iron ore, wheat and soybeans. There are three things that make it such a good leading indicator. One, the index looks at raw materials, so it captures activity at the very beginning of the production process. Two, it looks at ocean shipping, so it reveals what's happening to international trade -- the critical driver of global growth. And, three, the shipping business depends heavily on credit, so the Baltic Dry indicates whether credit is tight or loose.
Historically that has been true, but now like the banks who own houses they cannot sell or whose value would cause huge losses if sold the shipping banks are holding these assets in "care and maintenance" until they perceive credit markets and lending improve for the private markets, which would indicate upturns economically.
One of the places that I follow the shipping trends and BDI issues is at the Virtual Shipbroker website and he addresses this new phenom in shipping whereby the shipping bank strategy is similar to the mortgage bank strategy.
These low rates that are described below would effect the BDI along with tighter credit, which is not as liquid as the margin credit for S&P 500 equities. Just another debt fundamental to your chart strategy ...
Banks are getting increasingly nervous - News that more and more shipping banks (those that lend to the sector) are losing patience and are now refusing extra cash injections, rejecting new investment pitches, being inflexible on repayment plans and are in fact calling in some of the moneys owing to them from shipping companies no longer able to trade as going concerns.
The problem for banks is that they are claiming ships back from clients at a fraction of their market worth from a few small years ago.
So they help finance a ship for USD 50 million, market crashes and same ship is worth 20 million and their client files for bankruptcy.....with 40 million still owing. What would you do if you were the bank?
They are either selling them for only a small portion of their previous market value, or even worse they are sending them straight to the scrap heap for the price of a song (for older cheaper ships).
Demolition yards are reporting more business, which to be fair is probably a good thing for the mid term viability of freight rates which are too low...
Instead of selling the ships to others or sending ships to the scrap heap another option banks are increasingly looking at and in fact doing are keeping the ships and entering into chartering and/or management agreements with some of the industries more reputable (and solvent) players.
So option 3 is keep the ships on the books, charter them out and wait till the market improves the asset values ............and then sell them. The key for many banks is if they sell they lock in a loss...a massive loss.
So some financially strong players like Oldendorff and Klaveness to name a few are being approached to handle "distressed assets"........and one can only imagine that the trade off for a good counterparty would be very attractive rates, terms and conditions. So put bluntly the strong larger shipowners are securing lucrative deals that others cannot get near.....because of smart prudent management over the last 3-5-10 years..
And its not just the banks. Some shipyards have seen customers disappear leaving them to hold the new born babies........so instead of accepting much cheaper prices in the current gloomy markets they too are partaking in interesting chartering deals with shipowners (in order to avoid booking in losses). Charter deals between shipowners and yards are nothing new in both low (current) and high markets.
Economists call this process "consolidation"....the inevitable result of a sustained economic downturn where the smart, secure and cashed up survive.
Adding this "credit based" strategy to the existing economic factors of shipping and you get a distorted BDI to the downside. Just debt flows from a slightly different angle.
ALOHA!!
This reveals that the total notional value increased from $601 trillion (with a “t”) at December 2010 to $707 trillion at June 2011. Nearly all of the increase was accounted for by interest rate contracts which now have a notional value of $553 trillion, some 78% of the total.
Well, Alf is over a month too late as I already posted all that BIS DERIVATIVES stuff awhile back in my SOUND MONEY report. Same tables ,etc. Except what Alf fails to mention is that a large number, around half, are non-reporters. There are only 11 central banks globally that report, but as I pointed out the derivatives disasters that have wiped out companies and banks are the foreign exotics. I used the KIKO as an example and the TARN which killed off billion dollar companies in Korea and Indonesia and China and have been banned.
I opined in that report that the large interest rate sensitive derivatives exposure also have the US FED crippled in the event a 1980 Volcker plan has to be initiated, virtually the only move that saved the USD. Are years of low rates saving the USD during this crisis? Always a crisis and always an emergency! We saw what happened to the AIG counterparty risk and that was just limited to lowly mortgage backed derivatives.
Alf also misses the "credit exposure" the BIS publishes which has come down as the notional increases, but then again that is based on a fair market value, which is like Maiden Lane. How can you have full market value and a less than BB rating? Instead of the once popular bumper sticker "S_it Happens" we now have "Accounting Happens"!
ALOHA!!
Dave-All well and good to pick prices, but the sad reality is that I do not need to buy a new house everyday like I need to buy a tank of gas. Also I would say the same about your "labor deflation" since if you look at bank and corporate management wages up to CEO levels we have a price spiral as well as most trade union wages. It really does not matter if you are a good CEO or even a good electrician since your performance is not based on free market labor. Once again more government price fixing. What would those bank CEO wages look like if their banks were allowed to fail? Would they even have a job?
At any rate you have been parroting my PRICE FIXING 101 model, whereby government fills in the free market gaps. Every politician knows they would never get re-elected in a true Depression, brought on by a financial system collapse of excessive credit expansion. What we have now is pure corruption at every level in order to prevent such an event. They do not even care if 1+1=0!
Still you should look into "confiscatory deflation". I believe that is where we would end up here in the USA if the political and monetary elite allowed the credit expansion to collapse. To see a modern example of that go here ...
LINK: http://mises.org/daily/890
Now go here to see how it played out for the POG ...
LINK: http://tinyurl.com/6r79rl3
What matters is what happens to the paper currency's value afterwards. In most such cases the paper currency is junk. Remember that almost any form of paper is simply a "promise to pay". Such promises have never been upheld under any inflation vs deflation monetary crisis.
Believe me I would love to see housing prices crash back down to 1970 levels and see a gallon of gas at a quarter, but what would our monetary system and our lives look like if that happened? I doubt you could even get any money out of your bank account or brokerage account in time to buy up any those hot "fire sale" deals! What good is cash if you cannot access it? Even if you did play that "deflation trade" perfectly ...
When it comes to such events all bets are off ...
Gotta go deliver flowers ... Mahalo!
ALOHA!!
"So - we turn again to Japan. They're really the only recent example of a credit bubble pop followed by deflation under a fiat monetary system."
Dave-When I hear people throwing out ideas about how gold performs under deflationary events I search around for "actual" real time examples instead of mythical charts and formulas or jumping on the band wagon of the correction dujour.
Hey, Japan works for the deflationists to prove all things "deflation"! I only refer to Japan since it is one of the only major economies to experience long term low rates and a collapse of asset prices at the same time. The USA is relatively new to zero rates and collapsing asset prices in comparison. Now we have sliced and diced the inflation vs deflation debate down to "mild deflation". Hummm, how about "milder mild deflation" or "greater mild deflation". When will those enter the inflation vs deflation debate lexicon?
Still as I have been saying for a very long time I do not care about deflation or inflation as those are economic price values. What good is low prices if the US government defaults? Which it did in the 1930s. Or for that matter any government backed currency. Currency debasement and default happens in both deflation and inflation as you know since you have lived in Asia. Who was debating inflation vs deflation in Argentina except the Argentinian bond holders? Now that debt is currency where can you go to defend against constant debt downgrades? Constant unstable fraudulent sovereign debt and derivative counterparties? Did I not hear you say that you or someone you knew had a MF Global account? Who knew they were going under except management? Further who knew that the rule of law would be obfuscated during bankruptcy except JP Morgan? So much complacency still exists even after we saw the massive counterparty collapse in 2008. And of course there still is no improvement in transparency, so one has to assume the rule of law is up for grabs even in bankruptcy, segregated accounts or not! In a "real" Great Depression event the rule of law means nothing. We saw what FDR thought of personal property rights did we not? Sorry to say we were the only country in the World who threw away property rights except Nazi Germany! Not the company the Founding Fathers intended.
If you agree there is no true market transparency and the finances of sovereigns and market exchange dealers are susceptible to fraud then we can move on to the gold markets. Lately the negative lease rates to support liquidity has made me wonder about rehypothecation of the basis for gold leasing and swapping. If the Shadow Banking System has no problem reusing equity collateral many times over then why not reuse gold collateral many times over? There is no transparency at the central bank level or the sovereign level, especially in the USA. When it comes to the private member banks of the US FED squandering the wealth of the USA in order to save their monopolistic monetary power I do not rule out any such fraud. Where do I find real time data on the US Treasury gold reserves at various locations around the USA? The same for the US FED stored gold in NYC and various other locations? I won't even go down the COMEX route ...
Like I have said before in SOUND MONEY we are in uncharted monetary territory historically. When I see the USD rally based on the "lesser evil" concept triggered by a potential collapse of the Euro it does not give me comfort in the USD, but rather it makes me wonder if the USD is next! What was the high of the latest USD rally? I know what the US Treasury is capable of in terms of monetary injections. Not too many places do you see a $238BIL monetary injection in one routine day! Never mind a $700BIL one under extraordinary circumstances of highly imminent total financial collapse! Now over the past 30 years the USD has rallied off the 80 support level because of stronger economic fundamentals at times when US debt has been less than half of what it is now and there was no global debt contagion to consider. This time is different because the USD is not rallying off the 80 multi-decade support levels, it is rallying off all time multi-decade lows with a collapsing EU economy in support. Can you honestly say that you prefer to focus more on the inflation vs deflation debate rather than currency annihilation? That is like being on the Titanic and debating which end of the ship goes down first! Does the bow inflate first then deflate and sink or does the stern inflate first?
Even though I may be seen as a "gold bug" here I am actually not as highly invested in gold or gold stocks as some may think. It is foolish to rely on a limited wealth base. I am and have been way before I ever knew who Marc Faber was been in real estate, oil, art and at one time even in US Debt. I was buying Hawaii real estate in 1998 at its lows and if I had the support of my business network and/or family I would now be part owner of 330,000 acres of oceanfront property in Western Australia at the price of $2.91USD per acre. Not quite the $1USD per acre that Art Linkletter was buying Australian real estate at in the 1960s but good enough for 1998! Proof that you can be at the right place and at the right time and still not win!
In simple terms skip the inflation vs deflation debate and consider the end game being currency debasement to $0! That seems to be every major global central banks goal since central banks were legal! Don't believe me just go out and try to buy a gallon of gasoline for a dime(the price of gas in 1930). It is curious that as the power of central banks and their accomplice governments rise the purchasing power of the currency descends. And at no time since 1913 has that debasement accelerated faster than post 1971. A coincidence, I think not ...
If we ever were to see "real" Great Depression deflation again then the prudent question would not be whether to own gold or not, but to not be in debt, because chances are unemployment levels would only rise from here not descend. Major banks and corporations would collapse and so would the economy. A bank and market holiday would ensue. The people who lost the most in the Great Depression were the ones in debt, just like the ones in 2008. One thing you can be guaranteed of is that whatever President is in office at the time of the next Great Depression will not write an FDR style executive order to confiscate every US citizen's savings bond and treasury notes or their bond based ETFs.
Your Ron Paul remarks mean what exactly? That staying on a sure path to default and currency collapse is better than what? Not owning gold or owning it? Did you applaud the Katrina disaster too? That could be called "regional deflation" ...
More food for thought to add into the whole debatism mentality ...
LINK: http://www.gordontlong.com/LONGWave.asp?sid=agr
ALOHA!!
NYUGrad - Good call there. Based on the prior two corrections you have listed 741.02 as a possible area of interest on a third correction.
Go post that in the reply comments at the NY Times! Sometimes I even send a reply to the author directly since they usually post their email address. That is how I got to know John B Taylor over at Stanford Economics. You never know where your QUESTION AUTHORITY emails will end up! Heck, if you do it enough you may even get a private audience with his Majesty, Sir Timothy Geithner, at the Square Office!
ALOHA!!
Les-Thanks ...
Whenever I want fast "go to" charts on currency based POG I go to Kitco and scroll to the very bottom in the currency box and then click on the YEN and it shows me the price of gold in Yen intraday all the way to 10 years.
On the ten year chart it shows the POG in Yen at $48,000Y in Jan 2002 and on Friday, Dec 2011, the POG in Yen closed at almost $121,000Y. That is near a 230% gain since 2002, which says what? That gold does not perform well in a deflationary environment?
LINK: http://www.kitco.com/gold_currency/charts.htm?JPY
To copy and paste that quick chart is a bitch since it always defaults back to the intraday. HEY KITCO FIX IT! Not sure why it does that, but you can click on the 10YEAR tab and see for yourself.
So what does that tell you about gold? Did that 230% gain over a ten year period of world renown deflation say that inflation was coming? That deflation is here to stay? Or was there ever really Great Depression type price deflation and unemployment in Japan? Was there a lot of government debt accumulation in Japan in those years? Or does it harken back to the old 1960's 007 movie GoldFinger where the Colonel explains to Bond that gold is a "talisman of fear". What fear? I think it is the fear of corrupted money and politics and all that goes with that, which we can all see so clearly today is not working for the enrichment of the masses. It used to be that the world was a gold backed currency, not debt. When the USA was downgraded a notch by the S&P what was gold's rating downgraded to? When Greece's 10yr bond jumped to 16%+ why didn't that resolve their debt issues? When people in Germany in 1923 during the Weimar were losing everything they ever owned they could have gotten on a boat or a plane and gone to America or many other countries and preserved that wealth. Now you cannot get on a boat or a plane to preserve your wealth anywhere. You see the destructive forces of debt in every country. Not even Switzerland is the same fiscal safe harbor it once was, not with an external per capita debt exceeding the annual per capita income of its citizens. What Swiss citizen voted for that? Heck what American citizen voted for our per capita debt? I did not see that on the ballot box! It has been a slow insidious perversion of representation brought on by corrupt monetary values adopted by the political and banking elite over many decades, starting in 1971 with Nixon then moving globally to the 1973 intervention of the Smithsonian Agreement. These 1970s "monetary accords" were the design of private banking cartels who foisted their rules on the global citizenry like Stalin did on Russia from 1941 to 1953. We now have been forced to live by these antiquated, draconian and ruinous monetary policies for nearly 40 years. I think we as the global masses deserve better and I am highly confident that in this modern era of high tech communications and media we can educate ourselves enough to make demands on those at the top to either make real changes or suffer the consequences. So far the elite political and banking class have opted for the "suffer the consequences" choice. I really do believe they see themselves as immune, but I think they are making a serious mistake and that they are forcing some long term repercussions on the World that we have not seen since WW2. I am not talking about a conventional military World War here, but it would have the same destructive effects on society as we now know it. These are highly dangerous people who now sit in political office around the World. Where's Gandhi when you need him?
HAPPY NEW YEAR TO ALL ...
Hau'oli Makahiki Hou
LINK: http://www.discoverhawaiitours.com/blog/wp-content...
Like one of my favorite flower customers(Walter you know who you are)here at the nursery always tells me, "Carry on bravely!" Indeed ...
ALOHA!!
Les-Now take your FINVIZ chart and click on "performance" then hit the YTD or one year chart. Its a sad day when the 10yr and 30yr bonds are in the top ten performers for the year when those investments do nothing but indebt us and our kids further and further and produce nothing but the funds necessary for a corrupt government to malinvest into more corruption, which if we are lucky will not result in another World War. Its hard to say that "debt" is a "safe haven" when viewed with the wide angle lens! Those "investments" only make the World safe for politicians and bankers. Instead of putting those "debt funds" to work in the private sector the fearful public and our trading partners have foolishly put those huge sums into the hands of the least productive people on the face of the Earth. I am being too kind by calling them "least productive". In fact these are the most "anti-productive" and "anti-freedom" humans the World has ever known. In an insidious way they rival the fiscal achievements of Stalin and Mao. I take that back since Stalin and Mao only ruined and brutalized their own countries. The new Stalins and Maos have been given "centralized" permission to ruin and brutalized the entire World!
If gold is not money then why is debt money? Now you know. It gives unlimited control of our future to politicians and bankers and not us. This unlimited control of debt issuance only limits our Freedom not theirs. The US Constitution was written with the intent of the complete opposite. We could repeal that law and make gold money again. Right now we do have a "One World" currency that all financial institutions and central banks and governments operate with ... its called the "BS-O"! I mean come on ... how much more of their debt BS do they think we can swallow? We need to call a global "general strike" where everyone who is not a politician or a banker just stays home for one day. How would they do a days work? Who would open the door for them? Serve them their three hour lunch? I think we should let them do all the heavy lifting for once ...
But how would we know what is BS as hardly any of us are alive to have known a life without the unlimited control, the monopoly, the politicians and bankers now possess. If you are 100 years old then you lived before the first and only US central bank, but you were only a toddler! You would have to be 120 years old today to have an adult perspective on life before central banks. Any 120 year olds here at the blog? I have been alive over 50 years and I can say my business and financial life has gotten worse not better. I used to be able to live quite comfortably on $500 a month as a student in the 1970s living in Southern California no less! Only by modern medicine has my life improved otherwise I would have died at age 32. But even medicine and those innovations are not cheap. Most Americans end up going bankrupt from one really bad car accident if it puts you out of work for longer than a few months! There are so many more challenges in finances these days no matter where you live or what your job is. When we sold our condo in the San Francisco bay area in 2001 our mortgage payment was $1,127USD per month. Our HMSA health insurance monthly payment is $1,064USD and will go up in 2012. Since we moved here in 2002 it always goes up. Its been outperforming real estate prices! No Great Depression there ... Even with that though HMSA still sends me a letter every year complaining that they do not make enough profit. Maybe they need to get the permission of the federal and state governments to change their business model!
I believe what has complicated life so much now is the corruption of money, which has filtered down through every segment of the economy. To "reset" prices via free markets now would bankrupt many more people, businesses and governments just like it did in the 1930s. There are no good choices left only prudent ones that would make our fiscal future less ominous. I believe we owe that to our youth ...
Now I offer another chart ... This chart covers Jan 2007 to Dec 2011. With this chart you can see who the market rewarded since the bank created credit crisis began in 2007. The first three are all "debt holders", TLT, EIA and IEF, the safe haven plays, and the other four are private sector asset plays, which all required more risk. Risk factors for the private plays varied from almost no risk, since some of those corporate bonds were rated higher than the other public debt entities, to a lot of risk. Still the amount of risk you employ dictates the amount you can potentially realize.
LINK: http://tinyurl.com/8yc9x5l
Not many people prospered by holding over-valued and over-rated debt over the past four years. Mr. Livermore did not get to where he got at his zenith by owning debt. At his zenith he was worth between $1BIL-$1.3BIL in today's money. Still this is how he ended up after the 1929 crash when he made his fortune ...
"Dorothy finally filed for divorce and took up temporary residence in Reno, Nevada, with her new lover, (and later 2nd husband) Walter Longcope. On September 16, 1932, Dorothy divorced Livermore on grounds of desertion. They had been married 14 years. Dorothy retained custody of their boys."
"On March 28, 1933, Livermore married 38 year old Harriet Metz Noble in Geneva, Illinois; there was no honeymoon. It was Harriet's fifth marriage; all four of her previous husbands had committed suicide.
"Through unknown mechanisms, he yet again lost much of his trading capital, accumulated through 1929. Thus, on March 7, 1934, the bankrupt Livermore was automatically suspended as a member of the Chicago Board of Trade. It was never disclosed to anyone what happened to the great fortune he had made in the crash of 1929, but he had lost it all."
The "casino" finally won! I would not marry a woman whose previous four husbands committed suicide. The odds are it would be a very foolish trade!
Then his life ended this way ...
"On November 28, 1940, Livermore shot and killed himself in the cloakroom of the Sherry Netherland Hotel in Manhattan. The police revealed that there was a suicide note of eight small handwritten pages in Livermore's personal notebook. It was reported in the November 30 issue of the New York Tribune. The press wanted to know what it said, and the police tersely responded: “There was a leather-bound memo book found in Mr. Livermore's pocket. It was addressed to his wife.” A police spokesman read from the notebook: “My dear Nina: Can’t help it. Things have been bad with me. I am tired of fighting. Can’t carry on any longer. This is the only way out. I am unworthy of your love. I am a failure. I am truly sorry, but this is the only way out for me. Love Laurie”.
What's that guy on the radio say? "And now you now the rest of the story ..."
What does Buddah say about life? The Four Noble Truths ... Actually it is "dukkha" which is more like this:
1-Suffering or pain (dukkha-dukkha)
2-Impermanence or change (viparinama-dukkha)
3-Conditioned states (samkhara-dukkh
How about "life is tough" ...
ALOHA!!
Les-Can you get a 5 and 10 year POG chart denominated in Yen so we can see if gold was worth holding in one of the most long term deflationary countries on the planet?
Japan is rated as the 11th most expensive country to live in according to the Cost of Living Index. So far the only asset price charts that I have seen that show the most "deflation" is some sort of "asset" that is denominated(secured) by debt ... Like say US real estate for instance.
I do not own debt and I do not buy other people's debt(OPD). I used to have US savings bonds in 2001 but I traded them in for gold.
If Ben Bernanke were the surgeon general he'd be telling you that smoking is good for you!
ALOHA!!
Another $1.2TRIL? Convenient time to ask Congress now that they won't be back until Jan 17th! The myth of the Federal Reserve Act back in 1913 was the same, where they were out at Christmas and the vote occurred Christmas Eve. The fact is though there were enough votes for the Act to pass as Senators voted via proxy, however out of 100 69 voted, but 2/3 is as 2/3 does!
Lets add up the total debt increases since August 2nd, less than five months.
August = $400BIL
Sept = $500BIL
Dec = $1.2TRIL
TOTAL = $2.1TRIL
That would bring the official debt ceiling up to $16.4TRIL USD. Imagine paying 3% on that or how about the VOLCKER FFR of 14%? Those much higher FFR were the only thing that saved the global banking system in 1980. That option does not exist today. Then what options do exist? The only option left is a new monetary system, but you will never hear that on the mainstream media.
And what sort of "austerity" measures did Congress have to give up? It works out to be spending cuts of $120BIL per year for ten years starting in 2013.
European banks are falling into a "collateral hole" so it makes me wonder what sort of collateral any of these "irredeemable governments" can possibly possess to backstop anything. The well worn idea that taxpayers are collateral in a raging global "liability bubble" is absurd. As I pointed out in the last SOUND MONEY there aren't enough people(meaning taxpayers) to cover the liabilities of just the derivatives markets much less what sort of sovereign debt arises. Much of which is being wagered in the form of interest rate and credit default swap derivatives and a whole slew of unregulated exotics that are prevalent in the emerging markets and totally unreported by the 10 reporting countries and the BIS.
I have long asserted that if you do not own an "asset" out right you own only someone elses counterparty and nothing more than rehypothecated "faith and credit". Desperate times will produce desperate regulations and limits on capital and capital flows. Chaotic times are not optimal for positioning and I can only see more and more chaotic times on the horizon. It has nothing to do with economies or well endowed equities, but everything to do with the C WORD. The greatest concentration of assetless collateral reside at every global governments treasury and their central banks.
ALOHA!!
CHART#4-Note that investment demand in North America is at 1990 levels when the POG was virtually flat! Also Europe is way behind as well. For North America to reach investment demand of 1980(last bubble) we need another 18%+. For Europe to obtain the same 1980 demand it would have to increase 14%+. It seems East Asia and India have picked up the slack of North America and Europe.
CHART#7-Distribution matches 1980 as net central bank sales and "disinvestment" have completely dried up. Now all that is left is recycle and mine supply, which you will notice recycle is edging up as those who fall financially either through job loss or real estate gambles must sell off their PM to make ends meet. Also do not ignore any institutional who must liquidate PM holdings to cover losses.
CHART#9-Confirms what we already knew which makes explorers turned producers like SLR that much more valuable.
CHART#14-Explains what I was saying years ago about GLD which is that they will not have enough supply to meet their business model, but since the average investor will not be able to access physical the big institutionals(US FED member banks) will own the GLD supply thanks to the little guys. Notice that tonnage has been range bound since Q2-2010 even as the POG has increased from $1200 to $1700. Does anyone holding GLD or any of the other HB&B PM products really think those vehicles were designed to benefit you in the long run?
CHART#15-Then I look at what the gold pundits say about the huge jewelry demand from India and you see that has been a lie for the past year. The jewelry demand based on tonnage is not coming from India but China, Hong Kong, Japan and Russia! With the large majority coming from Hong Kong and Russia. Russian demand is not even on the map of these pundits.
CHART#22-Yep, the Europeans and the Chinese obviously want more physical gold! They take their "money" more seriously! Americans are more complacent along with our debt saturation, which immobilizes any investment funds we may have accumulated to this point. I see that so often in my own sphere. "Hey, if I had any free cash I'd have bought gold and silver a long time ago but I'm all tied up in real estate and my mortgage and the cost of basics is through the roof!" Not quite the same picture of Americans pre-dotcom bubble in the 1990s! WHAM-BAM!! The tech crash and the real estate crash have crushed US investors free cash flows. Those HB&Bers were so clever to rig the real estate market right after the tech crash because all I ever heard from people I knew then in 2002 was that they would never get back into the stock market since they preferred to stay in real estate. The common reasoning was that they have never gotten burned in real estate since prices always went up and it was something they "know" ... something "tangible"! So where does that leave long term investors? Most of them look to the "faith and credit" assets, which are massive liabilities in disguise. That will be the Mother of all Busts when you see how much interest rate derivatives are depending on low rates. Coming soon in the next SOUND MONEY! Now there is a growth sector that is way outpacing global gold mine production!
CHART#25-Mine production is higher than ever over the past three years which means those who are actually producing have done well to boost cash flow considering the POG has risen substantially from the $1000USD level. I would look to producers who are low cost and ramping up production for best share price appreciation over the long run. Naturally the ones with no debt and no hedging float to the top.
Now look at the share prices of the major gold producers since the peak of 2008 ...
LINK: http://tinyurl.com/6r6n46w
ALOHA!!
Here it is ...
"Yes, about 21% of Rep. Paul’s holdings are in real estate and roughly 14% in cash. But he owns no bonds or bond funds and has only 0.1% in stock funds. Furthermore, the stock funds that Rep. Paul does own are all “short,” or make bets against, U.S. stocks. One is a “double inverse” fund that, on a daily basis, goes up twice as much as its stock benchmark goes down. The remainder of Rep. Paul’s portfolio – fully 64% of his assets – is entirely in gold and silver mining stocks."
I would be willing to bet he has some bullion somewhere!
Here is a WSJ analyst interpretation of that portfolio ...
"This portfolio is a half-step away from a cellar-full of canned goods and nine-millimeter rounds ..."
It is obvious that WSJ analyst never met a mining CEO!
In 2004 GLD was created by HB&B. Before that you were considered a fool by a Morgan Stanley or Merrill Lynch broker for spending a dime on anything "gold" or "silver". Was that pre-2004 "gold view" by mainstream brokers because they did not have a horse in the bullion race other than large short positions at the COMEX? Their post-2004 view on gold has changed. The HB&B recommended gold positions for clients are GLD and ABX, not in that order! Pre-2004 you never saw gold and silver price scrolling quotes on CNBC either, now you do.
If you go to the link below you get all the "belief systems" attached to such a portfolio. These guys will use every trick in the book including guilt and anti-Americanism to get you out of your positions. They want to convince you that economic values are the same as monetary values. They do not understand the difference between GE stock and a one ounce gold Maple Leaf. What ever happened to just plain old monetary fundamentals and free cash flow? Too sinful I suppose.
Was he the only Congressman out 535 who called the gold/silver bull?
From MODELED BEHAVIOR ...
LINK: http://modeledbehavior.com/2011/12/23/what-ron-pau...
Ron Paul's gold and silver mining stocks ...
LINK: http://pfds.opensecrets.org/N00005906_2010.pdf
How about those "value" disclosure brackets?
$1,001-$15,000
$100,000-$250,000
Make note Ron Paul does hold ABX, but no GLD! His only trades for the year was that he sold Goldcorp and bought Allied Nevada and Hecla.
ALOHA!!
Like "beauty" it seems "lies" are in the eye of the beholder ...
Every Empire and every country and every man, woman and child utilize the concept of "vital lies" in order to survive. We skew our most intimate relationships, our day-to-day lives, and our common reality by burying painful insights and memories. This self-deception is our means of psychic self-preservation, the currency of survival in which an entire society colludes. But although self-deception is sometimes benign, it can also be dangerous and life-diminishing.
My Father was one of the most kindest and nicest guys ever to drop bombs on tens of thousands of Japanese citizens from his B-29 Super Fortress. I have met some of the nicest people when I worked at the IRS. Every time I call or write my Congressman in Honolulu I get the most kindest replies and service. I have also spoken with US Treasury representatives who were very courteous and knowledgeable.
We live in a country that was founded on some truly grand principles that were designed to enhance and provide as much Freedom and Happiness to each citizen who dared to dream of a better life. It blows me away that some old revolutionary guys back 230 years ago actually wrote a political document that had the word "HAPPINESS" in it. On the other side of that "reality coin" many of them owned slaves. Where is that word in Fidel Castro's dictatorship or in Mao's Little Red Book or the Communist Manifesto? Is it even in the EU Constitution? Where in those documents is "Freedom and Happiness" guaranteed? Yet the US Constitution and the Bill of Rights and the Declaration of Independence have been intentionally skewed into "vital lies" that provide for the survival of the political class and banks and corporations more than its own citizens Constitutional rights. The diminishment of those "rights" happens most frequently during crisis mode, whether it be a banking crisis or a war crisis. Two of the most frequent crisis America has faced historically. While you are hard pressed to find the word or concept of "centralization" in the US Constitution it appears quite frequently in Maoisms and Soviet doctrine. Yet "centralization" is alive and well here in America. Private banking has been centralized by the US FED. Warfare has been centralized by the Pentagon's Defense contractors and the CIA. Politics has been centralized into just two parties. We have devolved that way.
TARP was yet another "crisis" mode whereby bank fraud created political and monetary gains for the exact people who created the fraud. There were I am sure some very nice people who made those SubPrime loans and who issued CDO and ABS at Goldman Sachs. I have no doubt there were nice interns, staffers and pages who helped move that TARP drafted legislation into law. There are of course, even today, many very kind and respectable people who assist consumers in achieving their "debt" goals. I must also reminisce of the countless number of very friendly and sympathetic bartenders I have encountered during my life. It is of course a "free country". Americans seem to be most susceptible to looking for guarantees in a guaranteeless world. We apply limitless and liberal blame when perceived guarantees are broken. I speak in general terms, as like every rule in life, there are exceptions. We chose our paths and I do not judge as we all do what we must do to survive. I certainly have ...
I have read that Albert Einstein said on his deathbed that the most important question is, "Is the universe friendly?" He must know the answer to that question by now.
Forgive these end of year musings ... Yes, "grace and kindness" instead of "conflict and chaos" would be a grand accomplishment for mankind. I would wish that on our "friendly universe"!
Mele Kalikimaka from a very rainy Hawaii ...
ALOHA!!
Mahalo to you Dave!
To take it another step forward my pal over at the CUNNING REALIST, who was one of the HB&B trading desks, tried to get Bernanke to answer direct questions at his confirmation hearings. Of course Obama approved the confirmation of Bernanke no matter ...
Tuesday, January 05, 2010
Follow-Up For Bernanke
Recap: Before Ben Bernanke's confirmation hearing by the Senate Banking Committee, I posted this list of questions to ask him. After the hearing, Sen. Jim Bunning submitted my questions in writing to Bernanke, along with many of his own. The full set of questions and answers is here. Bernanke failed to respond completely to this question of mine (page 25):
Before the financial crisis there was a widespread sense, especially on Wall Street trading desks, that the stock market was strangely resilient. This encouraged excessive risk-taking in various types of assets. Do you have direct or indirect knowledge of the Federal Reserve or any government entity or proxy ever intervening to support the stock market (or any individual stock) via futures or in any other way? If yes, who decides the timing of such intervention and with what criteria? How is it funded? Which Wall Street firm handles the orders, and who sees them before they are executed?
Bernanke's response:
The Federal Reserve has not intervened to provide support to the stock market or individual stocks by trading in futures or any other financial instrument. I have no knowledge of any other U.S. government entity providing such support.
Bernanke's answer was incomplete because he ignored the word "proxy," an important part of the question. John Crudele then wrote this column in which he referenced my question verbatim.
This is an important issue for several reasons. As my question posits, in the years leading up to the financial crisis there was a widespread belief that the stock market was backstopped. As a former trader on one of Wall Street's top sell-side desks, I've experienced this firsthand and seen how it influences the perception of risk among society's biggest risk-takers. Current conversations with friends on bailed-out trading desks, where risk and leverage have surged in recent months, indicate that this belief is as strong and widespread now as it was in the period that preceded the crisis.
The issue of intervention is also important for other reasons, which I wrote about in this article for The American Conservative in January 2008:
The Dow is composed of only a handful of companies, but there’s no more important barometer of public psychology. The behavior of that small group of stocks can paper over a lot of distress under the surface. So what happens if that barometer starts to fall and interest-rate policy, a blunt tool that works with a lag, isn’t enough? The possibility of direct intervention in the stock market has been the subject of much debate in the financial community. Some believe that the government -- either the Federal Reserve, the Treasury, or a proxy -- has intervened in the past to prop up the stock market. If that’s indeed the case, a national debate about it should take place. Government-sanctioned intervention in the stock market would have serious implications, including the use of public money to buy stocks while corporate insiders are selling, select Wall Street trading desks profiting from knowledge of the intervention, and the ability to boost the market prior to an election or other event. We know from the past few years that much can be justified when a nation is “at war.”
Bernanke must now give a clear and complete answer on this, preferably before the Senate votes on his confirmation. Other select Fed officials need to be questioned as well, and that should certainly include William Dudley and Brian Sack from the New York Fed. Tim Geithner and top Treasury officials also must be included, for reasons Crudele explains. Get everyone on the record, in writing and in person if possible.
I phrased the original question to leave as little wiggle room as possible, since it's not enough to ask, "Does the Fed intervene in the stock market?" Follow-up needs to be as comprehensive and specific as possible. My suggestion:
Has the Federal Reserve, Treasury, or any part of the government ever directed or otherwise engaged a proxy or intermediary -- including but not limited to a private sector entity, foreign central bank, or foreign government -- to take action intended to support the U.S. stock market (or an individual stock) via futures purchases or in any other way? Has the Federal Reserve, Treasury, or any part of the government ever had an understanding with or given any assurances to a private sector entity, foreign central bank, foreign government, or any other party regarding compensation or consideration for losses related to intervention in the U.S. stock market or an individual stock? Has the Federal Reserve, Treasury, or any part of the government ever been involved in any type of effort -- via the Exchange Stabilization Fund, foreign custody accounts, System Open Market Account, or any other account or mechanism -- to intervene in or support the stock market or an individual stock?
These questions are important, as is the specific phrasing. Because of Bernanke's conspicuously incomplete response and the return of the stock market's perceived backstop, they need to be asked immediately.
Posted by The Cunning Realist at Tuesday, January 05, 2010