David vs. Goliath

I wanted to bring to your attention how the SEC goes after small investment advisory firms and then issues grand press releases which announce the fines and punishment doled out to these "criminals."  As you are reading thru this, keep in mind that while the SEC and other financial markets regulatory offices, like the CFTC for instance, are looking the other way while big investment firms rape and pillage freely, the big bad SEC is clamping down on small firms that fail to "adopt and implement written compliance policies and procedures."  Oh boy, it's okay to embezzle $1.2 billion in customer assets to make margin calls on your firm trading account, but if you don't have your internal written policies handy for the SEC to walk in and look at whenever they want you get in big trouble.  Here's the LINK

I can guarantee you that this fact has a lot to do with how, and against whom, the Government decides to enforce the laws:

Lobbying outlays by the five biggest spenders in the commercial banking sector increased 12 percent in the first three quarters of 2011 over the same period last year, a McClatchy/Tribune analysis of federal lobbying disclosure records shows.

Here's the LINK

This is just more evidence that is piling up which points the fact that this country is deteriorating into a large-scale banana republic.  I can vividly recall in the 1970's reading countless stories about the way in which Governments and businesess operated in Central and South American "banana republic" countries.  If you were wealthy and owned your own politician, you could essentially operate your enterprise with absolutely no regard for the laws or fear of prosecution.  All it took was big "donations" to the politicians.  How is that any different from what is now happening in this country?  Seriously. Why does Jon Corzine get wait a month before he has to appear before Congress to answer questions about MF Global?  Why is he not in District Court right NOW answering questions from a judge?   He hasn't even issued any public statements?  Leads me to wonder if he's hiding in the closet of his good buddy Barack Obama and peeling bananas to feed to the politicians...

On another note, I have been fielding several inquiries about silver and the recent price action of silver vs. gold.  Well this comment from Ted Butler sums it up as well anything and rather than reinvent the wheel and create my own similar comment, I embezzled this from Ed Steers Gold & Silver Daily (which you can get for free everyday by email): 

The recent underperformance of silver relative to gold and other commodities presents an added reason to consider silver as undervalued. While many investors view relative price weakness as a reason to avoid purchase, that reaction is incorrect for a market already manipulated to the downside, like silver. In fact, an objective analysis of the relative price moves this year in gold and silver should bring that out. Silver and gold have more in common than any other commodity, making them an ideal relative comparison. As I write this, gold is up $325 (23%) year to date, while silver is up $2 (6.5%). (Admittedly, silver has generally outperformed gold on different time spans). Since there are 3 billion ounces of gold bullion in the world (out of 5 billion oz total), the value of those bullion ounces have increased this year by almost $1 trillion, to over $5.2 trillion. The total value of the world’s one billion ounces of silver bullion has increase ed by $2 billion to $33 billion. In other words, the increase alone in the value of the world’s gold bullion this year is 30 times greater than the total value of all the world’s silver bullion. Please think about that for a moment.

My point is that there is not much difference in the investment merits of gold and silver to warrant such a mismatch in the value of each. Both are precious metals valued by world investors in times of economic stress and loss of confidence. That the dollar value of gold is almost 175 times greater than the dollar value of silver is absurd. Let me be clear in what I am saying. I am not saying that gold is valued at absurd levels; I am saying that silver is being valued at absurdly low levels relative to gold. It is absurd that a ten dollar change in the gold price is equal to the total value of all the world’s silver bullion. The true absurdity is that this mismatch in relative values is not yet recognized by the world’s investors, even the big and sharp hedge fund operators. As and when it is recognized, those investors will rush to buy silver. In a very real sense, the higher gold prices climb, the better it is for silver. A higher gold price is the silver investor’s best friend.

That pretty much says what needs to be said.  And since I said yesterday that I felt that silver would minimally go to $200-300/oz., and on the assumption that we will ultimately see the gold/silver ratio regress back to at least 16, you can back into an implied price target $3200 - $4800 for gold.  But remember, $200-300 is only my publicly disclosed view...

Finally, I realized last night that I had made a comment about Bank of America's stock nearly breaching $5/share to the downside and that the comment might have puzzled a few people.  Typically once a big cap stock goes below $5 and holds there it is because it is less than 12 months from filing bankruptcy.  But this comment sums it up, and I forget the source from which I embezzled this early today (apologies in advance to the source):

If BAC had fallen below $5, there could have been avalanche selling because some institutions cannot buy or hold a stock that is less than $5 per share. A cascading BAC could have generated an ‘Emperor has no clothes’ moment for BAC. Buffett would have been chagrined. So it was imperative that someone closed BAC above $5 on Tuesday and that some scheme had to be implemented to drive the price higher on Wednesday.