Boom Goes The Dynamite: Metals Explode Higher

After an attempted overnight take-down of gold and silver, aided by the fact that negative import premiums in India indicate that India was not a buyer last night, gold and silver exploded higher ten minutes after the Comex opened.  This is the second time this month this has occurred.  And both times were conspicuously unaccompanied by any apparent news event to trigger the move.  Here's the chart:

(click on chart to enlarge)

Here were my thoughts on this move today that I related to GATA's Bill Murphy (the author of the daily and indispensible Midas report at http://www.lemetropolecafe.com/):

Bill, we've had two significant reversals this month off of attempted overnight hits. This is really bullish, especially since, like the last one, there's not any obvious news that triggered the move. I think one of two things happened, and maybe a bit of both. First, I think the news that the IMF took its $500 billion cap off of its bank rescue facility PLUS established a new facility which will be made available to a broader array of banks is being received for what it is, which is covert printing. Second, I think some large funds like Hinde Capital are taking on the cartel. Ben Davies may well be following in Soros' footsteps (when he took on the Bank of England and broke the pound). Davies seems to be focused on silver and that may be why your Stalker source's new client is going for physical silver now. I've felt for a few weeks that this next move might well be led by the poor man's gold.

I want to add to this observation from Eric King's comment on his King News World blog, another must-read on a daily basis: 

Investors sometimes get caught up in the day to day and week to week movements in gold and silver. Don’t waste your time or energy on that, just accumulate. Standing in front of us is the greatest transfer of wealth in history. When the dust settles, those holding the gold will make the rules.

I recommend reading the comments on fiat currency/gold which accompany Eric King's wisdom.  Here's the link:  Richard Russell on fiat money/gold

It would appear to me that the behind-the-scenes battle going on among elite players, and now some big hedge funds, to accumulate actual physical gold/silver vs. paper promises (GLD, SLV, futures/forwards, etc) seems to be escalating.  In good time more of the public will want in on this action and then the real fireworks begin.

Hey Rube, James Kunstler Sounds Like Ayn Rand Here:

Maybe we should listen and think about how to make real change happen...

Here's Kunstler:

The failure at the political center is a conscious one of nerve and will, of elected officials in both major parties playing desperately for advantage in defiance of the truth -- this truth being that the USA went broke trying to swindle itself into prosperity. Add to this the failure of the law to go after the swindlers, which has undermined the fundamental belief in the rule of law that enabled this society to function as well as it did previously.

And here's Rand thru the voice of Francisco D'Anconia in "Atlas Shrugged:"

...when you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against you - when you see corruption being rewarded and honest becoming a self-sacrifice - you may know that your society is doomed.

I have to say, not just to stir up a rash of hostile comments and let some worlds collide on here, that I have to agree with Kunstler's characterization of Glenn Beck and his new female Igor, Sarah Palin.  And even better is his statement about Obama: 

Barack Obama personifies this failure these days, a politician proclaiming "change" who not only managed to change nothing, but promoted a continuation of the national self-swindling with legislation so dazzlingly prolix and complicated that no one can claim to have read either the Health Care Reform Act or the Financial Regulation bill, the two hallmarks of his tenure so far, neither of which will change anything about how we do these things.

However, not only will the healthcare abortion called "change" legislation and the financial crapola bill not only NOT change anything, but both of those disasterous pieces of legislation do nothing more than further ensconce the ability of the two respective industries, healthcare/insurance/Big Pharma and Wall Street to expand upon and extend the massive transfer of wealth that is occurring from the hoi polloi to the elitists who are in a position to make it happen.

Barack Obama has not only failed to enact any of the promises of "change" upon which he was elected, he has just failed period as a leader and President of this country.  In fact, he's been downright pathetic unless you're in a position to capitalize - legally and illegally - on his incompetence.

And I'll end this rant with the last paragraph in Kunstler's piece, because he states it succinctly and very accurately: 

The bigger mystery in all this -- if I may perhaps engage in some nostalgia of my own -- is: what happened to reasonable, rational, educated people of purpose in this country to drive them into such burrow of cowardice that they can't speak the truth, or act decisively, or even defend themselves against such a host of vicious morons in a time of troubles?

Here's the link to Kunstler's commentary:  Hey Rube.  I hate the blogger term "hat tip," which is customarily extended to one's source, but I give Jesse of Jesse's Cafe Americain and a friend and colleague of mine a courteous "hat tip" for sending me Kunstler's piece, as I rarely tune into what old Jim has to say...

The Senate Is Working To Put A Kill-Switch On The Internet

“The more corrupt the state, the more it legislates.” --Tacitus

Senators Harry Reid, Joe Lieberman and Jay Rockefeller are quietly working on legislation, to be buried in a big Bill out of sight from public scrutiny, which would give the Government the ability to limit internet access during times of "national emergency:" 

Lieberman let slip his real thoughts on the Internet Kill Switch in an interview with CNN’s Candy Crowley when he said, “Right now China — the government — can disconnect parts of its Internet in a case of war. We need to have the ability to do that, too.”

The idea is stick this legislation in some larger Bill which has bi-partisan support, and which inevitably gets voted on and passed with very little scrutiny from those doing to the voting (see the Patriot Acts, Homeland Security Bill and Detainee Bill for examples), in order to slip it through to Obama, who is salivating at any opportunity to censor internet content.  Here's a link to the report:  Bye bye 1st Amendment.

It feels more like "Animal Farm" everyday now in this country...

Silver Poised To Explode

Since my post on Wednesday didn't jinx the price of silver, I'm going to keep riding the horse.  In fact, contrary to the expectations of many, silver has moved higher thru Thursday's option expiry and thru most of the "roll" period in the futures from September to December.  Not only is this price action exceedingly bullish, but I can not recall anytime during the last 9 years that silver has moved sharply higher like this during Comex options expiration/futures roll (that's not to say it hasn't happend, I just can't remember it if it has).  This price/volumn action further underscores the bullishness of the market.

Here's is an updated weekly chart of September Comex silver.  I can't recall ever seeing a chart formation in silver that looked this bullish.  Recall that when gold broke out of its massive head n shoulders formation, it ran from $1030 to $1250, or 21%, in a short period of time.  Here's the chart:

(click on chart to enlarge)

Silver, which typically lags gold until the end of a bull move, is getting ready to break out of its massive HnS formation. When silver makes a big move, like in 2005-2006 for instance, it outperforms gold by at least 2-to-1. If we apply that metric to silver on its HnS breakout, that would give it an initial target of $26.  I know several chart technicians who believe silver can make an initial run to $30.  I'll stick with my view for now and enjoy being wrong if that's the case.

I want to finish with a quote from James Turk's interview this week with Eric King on King News World:  "More people will be jumping on as we go higher but we're still in the very early stages of what is going to be a major bull market in silver over the next several years."

I can attest to this statement, as I was at a party this weekend and several people who poo-poo'd my economic and metals market analysis several years ago were grilling me about buying gold and silver.  Many of them laughed at me when I sold my house in 2004, but admitted they are now bummed they didn't do the same.  As I stated yesterday, the housing market is still far from a bottom and the precious metals bull still has a long way to run.

I regard Turk as knowing and understanding as much about the precious metals market as anyone out there. He explains clearly and succinctly exactly why the bull market in gold/silver, and specifically in silver, is still very young.  Here's the link and I would recommend paying close attention:  James Turk on silver

Of course, now that I've jinxed silver, if the bullion banks decide to raid the Comex this week in light pre-holiday trading, make sure you hold your breath and buy with both hands.  Silver is going much higher before the end of the year.

GLD Managing Director Jason Toussaint Does Not Own ANY GLD Shares...

BUT he owns physical gold and mining stocks. Greg in Chicago alerted me to a blog post by Jeff Nielson on seekingalpha.com. It regards an interview of Toussaint on Canada's Business News Network (BNN). As Nielson points out, Touissant admits at the end of the interview that he owns physical gold but does not mention that he owns any GLD. Here is the link to interview - I've linked part 2: Toussaint = The Big Whiff The relevant comment starts at the 5:44 mark. The 10-K I've linked below confirms that Toussaint indeed does not own ANY GLD shares.

But there's so much more if you listen to both parts of the interview. Let's get the basics out of the way.  Jason Touissant is the Managing Director the GLD Trust and a principle executive officer of the World Gold Trust Services, the sponsor of the GLD Trust.  All of this information can be gleaned from the GLD 10-K, which I've linked here:  GLD 10-K

Note that on page 76, as Jeff Nielson picked up on from the BNN interview, that NO officers and directors of the World Gold Council or of the GLD Trust own ANY shares.  No insiders own shares.  Why would that be the case?  If GLD is as good as owing physical gold, and is fully backed by physical gold, why would Toussaint admit to owning his own physical gold, but not express confidence in the fund that he oversees by owning some the stock in GLD?  We would NEVER own any mining stocks in our fund in which insiders did not own a meaningful amount of shares.  In fact, with our junior mining stock holdings, insiders typically own 10-20% of the company.

Now let's get to other interesting aspects of the interview that Nielson did not cover.  At the 4:25 mark in Part 2, Toussaint makes the statement that the bar auditor of GLD audits the bars twice a year and physically handles each of the bars once per year.  HOWEVER, the auditor, Inspectorate, only looks at the bars in the HSBC vault.  As per the prospectus, HSBC has subcustodians with which there is no formal contractual agreement and the prospectus specifically states that no one can have access legally to the subcustodian vaults.  Here is the latest inspection report from Inspectorate, the inspection firm:  LINK  This particular report describes the semi-annual random sample audit. 

This is great that an inspection firm goes into the HSBC vault and samples the bars for authenticity and serial numbers, but what about the bars that are at the subcustodians?  And you are asking me to believe that Inspectorate counts all 104,325 bars (the number of bars that would be in the vault as of 8/26) and verifies serial numbers and stamps and reconciles them with the Custodian's records?  I refuse to believe that. I would bet that the annual audit is another statistical sample BECAUSE no one is allowed to have access to the subcustodian vaults.  In fact, now that I think about it, there have been articles in the recent past which have demonstrated dozens of inconsistencies at GLD and SLV between the actual serial numbers on many of the bars and records kept by the Custodian of each Trust.

Finally, Toussaint makes the statement that the bars are held in allocated form, meaning that within HSBC's vault, all of the GLD bars are placed in a separate holding area and the shareholders of GLD have direct claim to those bars.  If HSBC blows up, something that is within the realm of possibilities, the GLD Trust gold is not part of HSBC's asset/liability list.  HOWEVER, the prospectus specifically states that gold which is being transported in and out of the vault and the gold which is being held for redemption by an authorized participant exchaning a minumum of 10,000 shares for bars in the Trust, sit in unallocated form.  And the bars at the subcustodian are in unallocated form. 

The significance of this is that if HSBC blows up, any unallocated bars become part of the claim of the general creditors to the HSBC bankruptcy proceedings, and the GLD Trust has to stand in line with all of the other unsecured creditors to receive payment, if any, on its claims.  The Prospectus specifically states that, in the event of an HSBC bankruptcy, unallocated bullion bars could result in material loss to the Trust. 

Perhaps this is why no World Gold Council officers and directors, and specifically Jason Toussaint, the Managing Director of the GLD Trust for the WGC, do not own any personal shares of GLD.  They know the Golden Truth.

Remember, this is real 400 oz. gold bars: 

                                                                 This is NOT:

                                  

The Bank of Korea Is Now Buying Gold...

“Given that central banks in India, Russia and China have bought gold for defense, the Bank of Korea can’t help but feel under pressure to consider purchases for diversification,” said Oh Kyu Chan, Seoul-based head of the overseas fund of funds team at Shinhan BNP, which operates Korea’s biggest gold fund. Here's the story from Bloomberg:  Link

I Know, I Know - Everytime I Make Bullish Call On Silver...

it gets hit hard by the illegal manipulative activities of JP Morgan and HSBC.  BUT, here I go again.  I will preface this by saying that silver has an extraordinary reversal off of its 200 dma over the past 2 trading sessions - $17.75 to $19, or nearly 10% - so a consolidating pullback here would not surprise me.  Having said that, if you look at the chart below, silver appears poised to make a big move, with seasonal factors now blowing some wind into the sails of the poor man's gold.  I slightly modified this chart, which was posted in tonight's Midas at http://www.lemetropolecafe.com/ courtesy of  "Richard from the Scarborough Bullion Desk:"

(click on chart to enlarge)

This is a weekly chart of silver, and the relative positioning of the standard momentum indicators are tremendously bullish.  Also, as Richard pointed out, the bollinger bands have become quite narrow, indicative of a tightly "coiled" trading behavior which often makes a big break up or down.  As you can see, the last two "coils" made huge moves to the upside.  And finally, there's that massive inverse head n shoulders formation, with the "right shoulder" oscillating just below a potential breakout to the upside.  I know several long-time participants in the silver market think we could see the low $20's before the end of the year.  I also know one chart technician who believes this silver chart is pointing toward $30 sometime in the next 6-9 months. 

Personally, I'm not putting any price objectives on silver here.  I think if silver can get over the $19.60 area and hold, the sky is the limit.  Certainly new highs in the low-mid $20's would be my expectation.

And then there's the physical problem.  I know that Sprott is going to float its silver trust sometime in mid-late October.  I mentioned to a colleague that they may find it difficult to find $200 million worth of silver (the proposed offering size, roughly).  He said that they are aware of that issue...

More evidence piles up:  Let's not forget the old gold/silver ratio.  In Roman times, the gold/silver exchange ratio was fixed at 8.  After The Fall, the ratio floated in mostly the teens.  Since the world has been on a steady fiat currency diet, the ration has spend most of its time somewhere between and 50 and 80, although in 1980 it fell back to 17.  Currently the ratio is approximately 64.  I expect that eventually we will see some regression to a long term mean ratio, but it will hit the teens again before the metals bull is over.  Here's an article from Bloomberg:   LINK Zombie U.S. investors are clueless, but as you can see, the real precious metals players globally understand the gig.

The Existing Home Sales Data Bomb

As everyone knows by now, existing home sales for July plunged a record 27% from July and were 25% below July 2009.  This was a record sales drop, as sales of single-family homes fell to a 15-year low.  The Einsteins on Wall Street were expecting a 13% decline, demonstrating once again the uselessness of Wall Street research. Here's the news link:  NAR press release

The National Association of Realtors and CNBC and other mass media of course are finding a silver lining in the fact that the median price was up .7% (that's "point seven percent") from 2009 to 2010.  I would suggest that the home-buyer tax credit was responsible for temporarily stabilizing prices and that the data massaging, otherwise known as "seasonal adjustments," likely produced arithmetic which gives the illusion of slightly higher prices.  At the end of the day because of all of the data manipulation it can argued that a .7% change in the data from July 2009 to July 2010 is not statistically significant/meaningful.  Moreover, the measured inventory (vs. the shadow inventory we all know is out there) increased, suggesting that supply and the lack of tax incentives will negatively influence prices going forward.

Ironically, July is supposed to be one of the peak selling months for homes.  If that's the case, the housing market for the rest of 2010 is doomed.  The Government and the Federal Reserve market interventions have served no purpose other than to keep a market artificially and temporarily propped up, which will ultimately lead to further damage going forward.  The country can not afford to continue tax-subsidizing home buyers at the expense of everyone else and the Fed is largely out of interest rate bullets.  Essentially, all the Government tax subsidy did was keep housing prices artificially high, thereby transferring a massive amount of wealth to the sellers, real estate brokers and mortgage banks at the expense of the moronic buyers and the rest of us.

At some point the bond market will start regressing back up to some mean level of interest rates - i.e. interest rates will head higher - and then we will see a serious wipeout in housing values.  I am not going to put a timeframe on when this will occur, I just know that it will occur and it will start happening when it is least expected.  Of course, judging by the record amount of investor cash flowing into bond funds - see this Bloomberg article:  The bond bubble - it appears as if investors are currently least expecting the bond market to tank. Perhaps the current timeline of the bond market may be analogous to that of the internet stock bubble in 1999.  And we all know what happened in the spring of 2000...

Boom Goes The Silver Dynamite

This morning Goldman released a research report which concluded that the Fed will be forced to implement "sizeable" QE.  Of course, I forecasted this event several months ago.  Wall Street sure has a knack for overstating the obvious (Harold Bloom described the fatuously verbose Polonius in "Hamlet" as being an "ass absolute" - Goldman is our ass absolute).  Here's what the precious metals do when a "print or die" comment hits the general media and the bullion banks are forced to cover their insanely large paper shorts:

(click on chart to enlarge)

Zerohedge broke the Goldman report to the mass media, which can be found here:  QE to Infinity

And here is an article about how India is buying a lot of physical silver bullion this year and which somehow eluded widespread public media reporting:  Comex silver shorts take heed

Everyone who has and does scrutinize the precious metals market on a daily basis is well aware that the physical supply of gold and silver is getting scarce, especially relative to the size of the massive paper short positions taken on by the big bullion banks here and in Europe.  Silver as I write this is now pressing $18.40 - 20 cents higher than in the chart above.  One of these days a big foreign buyer is going to attempt to take a large silver delivery from the Comex and the Comex will default.  It will be "game over" then for our system and a devastating currency crisis will erupt, along with hyperinflation.  Prepare accordingly.

Tim Geithner/Obama Are Full Of Sh%t

with regard to demanding a stronger yuan from China.  The price inflation consequences for this country would be disasterous.  Think about what percentage of everyday necessities consumed in this country comes from China.  Walmart's prices would go through the roof.  Food stamp and unemployment benefit leeches will be doomed.

Just a little nugget of golden truth for this beautiful Denver Saturday.  "Joe's" comment in yesterday's post triggered this thought.  IF you do see China letting its currency revalue significantly higher, better make sure you have a lot of your wealth moved into physical gold/silver.  As soon as the sheeple in this country get just a real whiff of price inflation, we will get to see what a real gold rush looks like.

Huh? No Inflation?

The mass of men lead lives of quiet desperation - Henry David Thoreau

This article from Bloomberg News this morning grabbed my eyeballs:  "Dollar Dinners From ConAgra Threatened By Costs."  Heck, I didn't even know there was such an item.  It looks to be the food-stamp- family-equivalent of Ramen Noodles for college students (I did a baked potato with melted cheese and hot sauce for variety when I was at the U of Chicago grad school).  At any rate, if you read through the article, it would appear that ConAgra can no longer keep the price point at a buck by cutting costs and will have to either raise the price somewhere between 20% and 50% or reduce the size and quality of the portion.  Here's the article link:  No Inflation?

So I decided to update some prices of select everyday commodities - the kinds of goods that the Government conveniently overlooks when calculating its PPI/CPI metrics.  This should be eye-opening: measured over the last 12 months, prices of all these items have increased by:  copper 37%, corn 35%, pork bellies (bacon anyone?) 350%, cotton 74% and heating oil 33%.  The last one bummed me out because I hate a chilly home and winter is coming.  Here's the data link if you want to check my numbers:  LINK

Let's be clear about one thing.  The true definition of inflation is not higher prices of assets, goods and services. Prices in the system that we observe and experience are nothing more than the manifestation of the underlying cause, which is currency devaluation from an increase in the money supply in excess of a country's real economic output.  You can't look at this over a short period of time.  Take a look at this long term graph of the basic money supply measure, MZM, which is now one of the popular money supply metrics now that the Fed has hidden M3,  the real money supply metric used by every other Central Bank:

So ya, over the past few months, the money supply appears to have contracted - slightly (although, it can be argued that MZM under-reports the true money supply, see this  LINK and this True Money Supply  if you care to be enlightened).  Just think about the cost of a cadillac or a college education in 1970 vs. now.  An even better measure of the money devaluation that has occurred is that since roughly the mid-1980's, it takes a 2-income household to maintain the same standard of living that a 1-income household could maintain back in 1970.  In fact, stripping away the benefits of technology, a lot of analysts would argue that the overall standard of living today with 2-income households is lower than with 1 in 1970.  THAT's inflation/dollar devaluation at work.  That miniscule drop in MZM that has deflationists chasing their own tail in what can be termed "intellectual sloppiness" is not going to undo the damage of over 50 years of money supply expansion.

One other point to which I would like to draw your attention.  You can see from the above chart the increase in money supply has accelerated since 1995.  In theory, that increase in money supply should have been backed by a concomitant increase in the GDP.  Of course, this was not even close to being the case.  What resulted was the series of paper asset bubbles, each one ultimately inflicting more damage on our system.  (emerging market debt, internet/tech stocks, housing - housing is a "paper" bubble because it was fueled by the mortgage bubble - and now the Treasury bond bubble, which some would call ultimately the dollar bubble).

Another way to look at the devaluation of the dollar is to measure it against the price of gold.  After all, up until FDR did his magic in 1933, anyone could exchange their dollar bills for gold or silver at the Fed "window." In 1971, when Nixon completely shuttered the gold window, thereby completely unleashing the dollar from its tether to to gold, the price of gold was $35. This chart shows what has happened since then:

As you can see, the price of gold has increased 3500%, or the dollar has lost 97% of its value since 1971.  Again, try to think about the long term affects of this insidious, long term devaluation of the dollar.  My parents bought the home I grew up in 1969 for about $45k.  The last sale I heard about around the peak of Denver real estate was $450,000.  Given the devaluation of the dollar vs. gold, they would have been much better off taking that $45,000 and buying gold and renting.

Let's tie this back to the opening comments about the surprisingly large 12 month price increases in basic commodities. I would argue that a significant portion of the money that the Fed/Treasury has printed and injected into the system since the credit crisis of 2008 has flowed into commodities.  This would be a natural place, besides gold and silver (up 31% and 37% respectively over the last 12 months), for printed money to flow into, as they represent consumable, depletable goods which have value to everyone and could ulitmately be used in a barter system if/when the dollar is ultimately rejected as a medium of exchange.  Are you better off holding gold, silver and select commodities or holding paper dollars backed by a Government that would be insolvent if it weren't for its ability to use the printing press?  What about the folks who depend on those $1 meals from ConAgra?  If I were one of them, I would rush out and buy as much of what is left for a $1 as would fit in my freezer before the price goes up or the content of the package is reduced. 

Of course, then again, this is how the hyperinflationary price escalation got started in Weimar Germany and, recently, in Zimbabwe.  No inflation?  Better check your premises because the facts do not contradict reality.  And the reality is that the deflationists are wrong.  To conclude, gold is going to go MUCH higher as this drama unfolds.

Late edition. I just read this piece by Egon von Greyerz LINK - Good read I thought this chart was a perfect addition to what I presented above:

Is Germany Defaulting On Gold Bearer Bonds?

[T]he likely moral of the story is the following: If you want to invest in gold, invest in gold — not a paper-linked contract backed by a bankrupt sovereign

This is a fascinating story which I came across on the Financial Times news blog, FT Alphaville.  Apparently Germany issued gold-bearer bonds back in the 1920's and 1930 to U.S. investors.  A U.S. investor has possession of some of these bonds and a U.S. court of appeals has upheld a ruling that Germany must face the default-claim lawsuit and that the U.S. has jurisdiction.  Here's the link to the story:  Germany Defaults On Gold Bonds? and here's the original news release from Bloomberg:  LINK

More interesting is the fact that these are "gold-bearer" bonds, which means that the bonds are redeemable by the investor in gold.  I actually don't want to make more of this situation than should be made of it at this point in time. If you review the facts as presented in the two articles, it looks like Germany should be on the hook for these bonds and may be jockeying for some kind of settlement.

HOWEVER, that being the case, will Germany be willing to settle this lawsuit in gold?  And is Germany dragging its feet on this case because it does not want to pay the claim in gold?  It has been long-suspected by those who have studied the metals markets for over a decade that Germany's sovereign gold has been largely swapped out and leased, similiar to that of the United States.  For a provocative and well-researched article on this subject, please refer to this 2002 must-read article by James Turk:  Where's all The Gold?

If you read that piece by Turk and then take another look at the above lawsuit, you might have a different perspective on this whole situation and understand why I wanted to bring it to your attention and the relevance of the opening quote from the FT.

Treasury Bond Yields: Gloom, Doom or Collapse? (Or All Three?)

It is with complete awe - and yet with complete and shuddering horrification - that myself and a few colleagues watch as the price of 10/30yr. Treasury bonds climbs inexorably higher into the stratosphere; and conversely, the yield across the entire Treasury curve grinds toward zero.  Of course, there has been heated debate about the implied message of the market.  Deflation?  Recession? Insanity?  Here's chart of the 30-yr. Treasury bond (aka "the big daddy") to get your mind spinning:

(click on chart to enlarge)

The last time the market chased Treasury bonds like this was December 2008.  Recall that this was a period when the banking system seized up in insolvency and was subsequently bailed out with a couple trillion dollars of printed money, taxpayer money and taxpayer guarantees (I would argue, probably successfully, that the banking system indeed suffered a de facto collapse).  It also preceeded a near-collapse in the Dow/S&P 500. 

To be sure, I can understand why hoards of money might flood into the short end of the yield curve, driving yields in 30/60-day T-Bills negative.  And we did experience negative yields on the short end of the curve during 2008.  The reason an investor might accept a negative return on a T-bill is because the return of that money is guaranteed by the Government's ability to print money in order to make good on the security.  Conrast this with keeping your money in a demand deposit account at a bank, there is chance, albeit slight, that you might have to wait to get that money (a bank holiday scenario) or you don't get it at all (your bank goes under and your checking account exceeds the amount of FDIC coverage). 

In effect, buying a T-bill on a negative yield means that an investor is willing to PAY for the safety of knowing that he will actually get his money back.  I know this sound crazy, but if you have a large sum of money and lack the foresight to buy and hold gold and silver, the only guarantee of getting your money back in a collapsing system is ability of the Government to print that money and distribute it to Treasury bond investors.  This works even when Tim Geithner helps the big banks loot the Treasury of cash.

My best guess with regard to the message of today's bond market - and I say this in the context that for sure a lot of the Fed's QE cash is flowing heavily into the bond market (yesterday's post) - is that we (the U.S./Europe) are headed toward another credit crisis of some sort - or maybe of all sorts.

The housing market is beginning to plummet, foreclosures are hitting new highs after a slight hiatus during the first quarter of the year - which will begin to weigh heavily again on banks - deficits have become catastrophic in several large States and the commercial real estate credit problem is going to start accelerating as the economy heads quickly south again.  While ALL of the above credit-related problems were never properly addressed/fixed (they were papered over temporarily), the credit crisis in commercial real estate has been completely swept under the rug, with banks carrying a hefty portion of their commercial loans - and of course the associated derivatives postions - at or near full value.  A good friend of who is in the credit restructuring consulting business told me that there is very little restructuring work going on right now because the banks refuse to take the pain as long as the Fed is keeping them liquid.  This is especially true in the area of commercial real estate loans.  In fact, you can blame the next credit catastrophe that hits on the complete failure of leaders in both Government and business to address and remedy the true underlying systemic problems.

The point here is that I would suggest that the price/yield action in the Treasury bond market largely reflects the expectations that a credit crisis is brewing once again.  One possible indicator to watch will be yields in the high yield bond market. I like to use this link to monitor that:  High Bond Yields.  Back in 2008, yields on this junk bond index spiked over 20% several months before capital flooded into the Treasury bond market. 

Also watch gold.  Gold is going to continue its inexorable bull market until the system is completely cleansed and rebuilt from ground zero.  Any number of painful events will force this to happen.  I'll leave that you to do some historical research on what types of events, but the "w" word is always one of them.  Right now gold is nearly 25% higher in price than it was in March 2009, which was when the Dow went below 6700.  That is a message that would foolish to ignore.

What the heck is going on with the negative yields seen in 5-yr TIPS?

The mass media/blog view seems to be that a negative TIPS yield implies slow or negative economic growth/deflation ahead. I have a different perspective on the negative TIPS yield. The rate of return by the investor in a TIPS bond is determined by the coupon as set by the market at issuance plus the adjustment made to the principal amount of the bond as determined by the Government-calculated Consumer Price Index. In theory, the total rate of return over any 6-month period should equal the rate of inflation in the economy, thereby giving the the TIP security the quality of preserving purchasing power of money invested. But does anyone really believe that the cost of living over the past year is equal to the 1.3% that is reported by the Government? Reeeally?

So, why would you pay a price for a 5-yr. TIPS bond which starts you out with a negative yield? Those who have suggested that a negative yield implies that the market is forecasting deflation are wrong. The way a TIPS return is calculated, in the event that the CPI were to go negative, the principal amount of your investment would decline. Who would invest in that? I guess Dennis Gartman might.

The only reason I can think of that a sophisticated investor would buy into an inflation-adjusted investment at an initial price which yields a negative return is because the investor believes that there will be substantial positive principal adjustments between now and the maturity of the bond 5 years later. In other words, the investor believes that even the fraudulent Government-calculated CPI will have to reflect much higher levels of inflation in the near future. There can be no other rational explanation. Hell, even Warren Buffet is now warning about inflation, so the smart money must see something that monkeys on CNBC and in the mainstream financial advisory/money management business can not.

Those of us who understand that the Fed/Govt is inextricably painted into an inflate or collapse corner also understand that today's asset deflation (mainly housing and banks) will lead to Bernanke's attempt inflate/hyperinflate the money supply to fight this deflation. Otherwise his famous speech in 2002 was a complete lie.  While Treasury bonds may seem like a relatively safe-haven right now, the only way to protect yourself from the impending credit crisis part deux and concomitant acceleration in inflation is to load up on physical gold and silver.

Is Bernanke Engaging In Covert QE?

One theory I've been thinking about with regard to the Fed's attempt to reinflate the economy is that Bernanke would attempt to inject money into the system in ways which go largely undetected.  One way in which this is occurring is happening right in front of our eyes with very little commentary about it. You will see from the graphs below that the amount of Treasury securities held by banks has gone parabolic since the Fed has set the Fed funds target rate at basically zero.  But not only does this allow the Fed to inject free liquidity into the banking system, it gives the Government a very low cost source of funding - near-zero in the case of T-bill issuance.  This is pretty much the definition of a printing press.

With the Fed funds rate at essentially zero, banks are borrowing money at little or no cost and using the proceeds to load up on longer-dated Treasury bonds at a substantial yield pick-up, especially when considering the leverage banks can utilize at which to do this.  In other words, with a zero Fed funds rate, banks are literally printing their own cash flow by taking free money and earning a "carry" income by borrowing for free and clipping Treasury bond coupons. Isn't this the definition of a printing press? 

Why do the banks require this source of liquidity if they are posting huge income every quarter now?  Simple.  Most of that income is derived from the non-cash source of marking up their toxic, untradeable securities like mortgage-backed securities and off-balance-sheet securities like CDOs and OTC derivatives.  The banks are recognizing large "income" gains, but this does not generate cash flow. 

However, if Bernanke sets the Fed funds at level at 0-.25 (current posted Fed funds is .25), banks can borrow at a 10:1 leverage ratio at .25 and purchase last week's 30yr. Treasury bond at 3.9% and generate essentially free cash flow.  What a fabulous way to inject cash into the banking system in what can be viewed as a covert QE operation.

Just to put some numbers behind my theory, take a look at the two charts below.  The charts show the amount of Treasury bonds/notes/bills held by banks and the Fed funds rate.  Note the acceleration in bank holdings of Treausries that correlates with Ben "Buzz Lighyear" Bernanke's move to take Fed fund to essentially zero. 

(click on charts to enlarge)

If the banks were not buying these securities, thereby giving the Government very low cost funding, who would be buying them and at what interest rate would this massive volumn of Treasury issuance clear the market? This "covert" QE both keeps the banks solvent by generating risk-free cash cash flow (as opposed to non-cash accounting income) and allows the Government to fund its ever-expanding deficit at a cost this is well below that which would be set by a free market. At the end of the day, the eventual cost burden will accrue to the Taxpayer in the form of much higher inflation.

Thoreau Came To Mind Today...

"Disobedience is the true foundation of liberty. The obedient must be slaves."

“Most men lead lives of quiet desperation and go to the grave with the song still in them.”

I thought both of these quotes were appropriate in the context of what is unfolding politically, economically and socially in this country today.

Another Lazy Friday Afternoon...

I swear I have a real blog post that I'm working on.  Just lacking some motivation ahead of the weekend to finish putting it together and I have some more elements I want to incorporate.  So that being the case, and in the context of a very good friend of mine who had frat buddies at U of Colorado who knew Obama growing up and said that he was literally a walking bong hit as a teenager, I thought I would post an awesome version of Eric Clapton covering Bob Dylan's Rainy Day Women #12 & 35. 




I'm thinking Barak may actually have been enjoying this scenario while Michelle was off in Spain lavishly spending Taxpayer money on herself and all of her closest friends:



Enjoy the weekend!

The U.S. Is In Deep Trouble

"Contradictions do not exist. Whenever you think that you are facing a contradiction, check your premises. You will find that one of them is wrong" (John Galt, "Atlas Shrugged").

The idea for this post started with an email from a colleague who was wondering about the relative strength in the yen vs. the dollar.  After all, isn't the mainstream media and zombie-worshipped CNBC telling us that Japan is the next Europe?  What the heck?  Isn't the strength in the yen vs. the dollar seemingly a contradiction?  I say flat out, "no."  Let's look at a chart - I love weekly charts in order to look at long term trends and eliminate the daytrader/technical/algorithmic noise (click on the chart to enlarge)

It would be hard to argue that this chart is anything but bullish.  And it has been in a bull trend for over 8 years (almost as long as the bull trend in gold!).  So where's the non-contradiction that appears to be a contradiction?  Examine the fundamental economic condition of Japan vs. the U.S.  You can google for the data.  The easiest one would be total country debt/GDP.  Bubblevision likes to look at just Government debt to GDP.  Japan has a lot of Government debt.  However, the U.S. has a lot of overt Government debt - over $13 trillion now - and an absurdly enormous amount of off-balance-sheet implied debt (the net present value of all of the entitlement programs which take total U.S. Government obligations to north of $50 trillion on a GAAP accounting basis), AND an enormous amount of private sector debt. The Japanese people are net savers. When you combine all of the U.S. debt in aggregate, the U.S. systemically has more debt than anyplace that we know of in the universe.  As the article linked below alludes, the total U.S. debt/GDP is 360% (this excludes the entitlement obligation component). 

Furthermore, the U.S. spending deficit, when you include on and off-budget spending (see yesterday's post), dwarfs the spending deficits and borrowing requirements of Europe and Japan.  Can you see now why investors with a big dollar exposure would be quietly, under the cover and distraction of the false information promoted on CNBC,  be swapping out of dollars and into yen? Per the chart above, this has been occurring for over 8 years.  I would bet good money (i.e. gold) that smart money, Chinese money, Russian money, etc is using the yen as a diversification instrument because the yen is probably the second most liquid piece of paper after dollars and Japan is in better shape fiscally than the U.S.

In support of my view, I am linking a fabulous essay written by David Stockman, who was one of Reagan's Budget Directors.  As you read his piece, one has to wonder if Stockman is now more of the Libertarian view of Government, given that Reagan's Administration was really the first one to take advantage of an unbacked, fiat U.S. dollar reserve currency and the ability to issue more debt than could be serviced out of economic growth.  Of course, back then, our system was just starting to really gorge on deficit spending and debt issuance.  Now, we're past the tipping point. In this piece, Stockman points out the necessity of looking at both public and private debt combined.  He also demonstrates that total debt in the U.S. has been increasing, contrary to the financial media/deflationist myth that the private sector is deleveraging (remember, check those premises):  

Under present realities, though, the problem isn't the flows; it's the massive, never-before-seen stock of combined public and private debt that's depressing the economy, which overwhelms any "flow" effects from fiscal policy. Specifically, at $52 trillion, credit-market debt today is 3.6 times that of GDP...

Here's the link to the article - warning: it's full of dry numerical analysis - you know, the kind of stuff that's seeded in Truth:  Must read  If you read through this, you will have a much greater understanding why the yen is in a bull market vs. the U.S. dollar AND you will see why this is not a contradiction.

Obama's Dangerously and Rapidly Expanding Government

“The only proper purpose of a government is to protect man's rights, which means: to protect him from physical violence...The only proper functions of a government are: the police, to protect you from criminals; the army, to protect you from foreign invaders; and the courts, to protect your property and contracts from breach or fraud by others, to settle disputes by rational rules, according to objective law.” (John Galt, "Atlas Shrugged").

I think we can all agree that Government does not create wealth. I'm not a fan or advocate of Glenn Beck, however this is a must-watch video excerpt which explicitly outlines just how insidiously expansive and invasive the Government is becoming under Obama's Presidency:



Anyone who watches that and is not completely horrified and fearful needs to have their head examined.  Is this what everyone who supported/supports Obama voted for?

This brings me to my next point.  The House is set to pass legislation today which will require that the Government borrow ANOTHER $26 billion in order to keep Government employees employed. Let's take a look at Government employee pay vs. private sector pay.  In March, USA Today released a study which showed that Government employees earned $67,691 on average vs. $60,046 for private sector workers.  This disparity becomes grotesque when you include Federal employee benefits valued at $40,785 vs. $9,882 for those employed by real businesses.  That's total average compensation of $108,476 for mostly useless, non-productive Government piss-ants vs. $50,667 total compensation for those trying to make an honest living and contribute to the country's real economy.  Here's the link:  Unbelievable, horrific Still feel good about voting for Obama?

The reason Obama is dumping massive pay and benefits - and extending unemployment benefits ad infinitum - is contained in the wisdom of George Bernard Shaw:  "A Government that robs Peter to pay Paul can always count on Paul's support."  I guarantee you that Obama is doing nothing more than counting the votes of more and more Government leeches every time he signs this kind of legislation.

Here's the problem:  Government spending is largely nothing more than a massive transfer of wealth and income from the private sector to the Government and its increasingly loyal employees.  Nothing more.  In fact, at this stage of the ongoing systemic, slow-motion collapse of the U.S., the Government has to now borrow 45 cents for every dollar it spends.  How do I arrive at this?  The stated Federal budget for FY 2010 was $3.55 trillion.  At the end of 2009, Treasury debt outstanding was $11.9 trillion. It is projected to be $13.9 trillion for 2010.  The projected deficit was forecast to be $1.17 trillion.  Yet the Treasury will be issuing $2 trillion in debt this year.  The difference is explained by the off-budget spending like the war on terror, the bailout of FNM/FRE/GM etc.  So the real Government spending will be around $4.38 trillion, of which $2 trillion is borrowed.  Got it?  The amount of debt issued by Treasury is 45% of total spending, or 45 cents for every dollar spent.  I'd really love to see a transparent and true accounting of all of that "off-budget" spending, which will be around 19% of total spending.  Didn't Barak Hussein promise us a more transparent and open Government?  Hmmm...

One more point of rant today.  The FOMC announced today that the Fed will be buying more Treasury debt to help support the economy.  Can someone please explain to me how enabling the Government to borrow even more more money actually supports the economy? The only way you can hope to protect yourself against the abuses of the Obama Government and corrupt banking system he enables is to move as much of your wealth as possible into physical gold and silver and some into mining stocks.

We Miss You Jerry - RIP - 8/9/1995

It was long strange trip while he was alive and it's been a longer, stranger trip since his death. Here's the encore show of the Dead's 7/8/78 show at Red Rocks.  I was there and don't ask me how, but I remember this encore:

Just When You Think The Taxpayer Bailout Of Real Estate Crooks And Banks

can't get any more absurd, you wake up to this (sourced from zerohedge.com) disclosure that the commercial real estate lobby is asking for Congress to borrow even more money and give it to the banks to bail them out of their commercial real estate disasters: 

The undersigned commercial real estate industry associations strongly support the Community Recovery and Enhancement Act (CRE Act), important legislation introduced by Congresswoman Shelley Berkley to help incentivize equity investment in distressed commercial real estate assets and to address the pending crisis threatening community banks that currently hold significant real estate debt on their books.

Here's the link:  It's Gets More Absurd

Please note that this pathetic entreaty specifically refers to community banks as being the primary beneficiary. Let me state for the record that the real problem with underwater CRE loans is sitting on the balance sheets of Citicorp, Bank of America, JP Morgan and other big banks.  I know this for a fact.  I know from a very good friend of mine who is a commercial real estate investment consultant to pension funds that these big banks do not mark down their real estate assets at all until a forced restructuring occurs. And many of  the mega-deals that are at least 50% underwater.  This means the equity is wiped out and the bank loans yet be restructured are worth, AT MOST, 50 cents on the dollar.
The big banks don't care about the community/regional banks other than to let them die so the big banks can pick over the carcasses.  Make no mistake, this is another big bank bailout in process.  Is everyone interested in seeing more of their tax money going into the pockets of the big banks and the people who run them?  That's where this is headed...

The Congressman who introduced this - Shelley Berkley from Las Vegas - is a lifelong politician and no doubt has been heavily controlled and likely PAC-subsidized by the casino industry (i.e. lots of corruptions and graft to toss around).  Here's her bio:  Scumbag  The casino industry has completely overbuilt Vegas and the big banks have underwritten most of the debt to finance the overbuilding. Here is a breakdown of Berkeley's money-givers: The Less You Bet, The More You Lose When You Win

Quote Of The Week...

The U.S. is already finished, it's just a matter time for the elites to finish looting before they let everything collapse. Fait accompli - Dave in Denver 8/6/2010

Good riddance to Christina Romer.  In true Orwellian fashion, she commented that today's employment report shows "steady growth." Would you really want to take an economics course from her? Reeeally?

What an embarrassment for Cal Berkely.

The fact of the matter is that there is just no possible positive spin that anyone can put on that employment report. And don't forget, this is a report that has been highly massaged and manipulated in a way that would be the equivalent of making up Rosie O'Donnell to look like Jennifer Aniston. Good luck...

Even more shocking is the magnitude of the June revision. The economy shed twice as many jobs as originally reported. Of course, the downward revision will be conveniently ignored by the media from which most Americans - at least those that do pay attention to the news - source their highly manipulated information.

So here's your team who is in full control of Obama's economic policy: Tax-Evading Tim Geithner who brags about spending his entire career as a public servant. I'm guessing - since Geithner didn't have a pot to piss in when enterered Treasury - will be well taken care of financially by the banks who control him.  And here's Obama's chief economic advisor:

And I'll stop ranting with this:  ask yourself, why are Obama's operatives, especially Tim Geithner - who we know is completely controlled by the banks - vigorously opposing the possible appointment of Elizabeth Warren to the Ministry of Consumer Financial Protection? She is the ONE person who actually has attempted to restrain and regulate the banks. Isn't that the type of reformer that Obama promised to give us when he was bamboozling us with what has turned out to be slick ghetto-jive when he was campaigning?

MIssouri Gives Obama The Middle Finger

By a nearly 3-to-1 margin, Missouri voters overwhelmingly rejected the mandatory healthcare provision of King Obama's healthcare legislation.  I will link the relevant articles, but I view this as yet another indication - aside from the fact that Obama's approval rating is at a record low for any President at this point in his term - that the American people will hammer the Obama agenda at the polls this November.  Here's the news link: Healthcare referendum: Obama Gets Hammered

Here's some interesting data compiled by FoxNews (for the record, I normally refuse to use Fox as a source for information, but this is pure numerical data).  Keep in mind that the registered party split in Mizzou is roughly 50/50:  Yes 667,680/No 271,102;  Total Republican primary votes cast: 577,615; Subtract the Republicans from the "yeses"...and you have 90,065 "yeses" that came from non-Republicans - most of those "yeses" came from Democrats.  Here's the link:  Take THAT Obama.

What would be even more interesting to me is if States would place ballot referundums contesting the entire healthcare legislation this November.  I believe that, other than in the heavily-dependent welfare/entitlement States like California, New York and Illionois, that voters would overturn this piece of garbage legislation. 

I'm looking forward to seeing how the general vote plays out in November, but my view right now is that there will be voting backlash against Obama that will be even more overwhelming that one we saw against Bush in 2006/2008.

Huh? No Inflation?

Does anyone really believe that?  Does Banana (Republic) Ben Bernanke really believe that?  If Bernanke truly believes that there is no inflation in the system, then he is a complete idiot.  If he understands the truth but continues to pontificate about no inflation, then he is a psychopathic serial liar.  In either instance he should be removed from the Fed.

But I digress.  I think by now most people understand that the Government-reported Consumer Price Index is not only a complete farce, but is a complete insult to the intelligence of anyone paying attention or not on entitlement program payments.  The most rediculous measure of price inflation, and the one that Bernanke insists on shoving up our ass, is the "core" CPI reading, which excludes food and energy.  Ummm, let's see.  If I don't eat and I don't heat my home or drive my car, then I don't have to worry about inflation.

Let's take a look at some charts and you can decide if you think price inflation is building in the system:

Heres' the CRB Commodity Channel Index, and index of 28 global commodities - it happens to be up 58% since its December 2008 low (please click on the charts to enlarge):

Feeder Cattle - Up 25% since December

Hogs - up 95% in the last year

Oil - up 37% in the last year

Orange Juice - up 93% in the last year

Wheat - up 57% since July 2010!

Anyone NOT see price inflation?  I was having a conversation with someone who has been a long-time goldbug the other night.  He mentioned that he was worried about deflation.  I asked him to explain to me where he was seeing deflation, other than in the price of housing.  He could not point out any examples. 

What's more baffling to me is that those who are making the deflation argument point to debt destruction and the money supply.  Can someone explain to me where there is ANY debt destruction occurring?  Yes, the financial sector has experienced a big decline in debt outstanding, but that's STRICTLY because the Fed, aka Banana (Republic) Ben Bernanke, has monetized over $1 trillion of bad assets from the banks and banks have shifted $100's of billions of debt to the Treasury via TARP (yes Virginia, most of the TARP money has not been repaid). 

We know that the U.S. Government debt outstanding is going to approach $14 trillion by the end of the year.  It began 2010 just below $12 trillion.  And here's the household mortgage debt, once again:

I'd love for a deflationist to explain to me where there is bona fide debt "destruction" occurring in the system...As for the money supply, my colleague and friend, "Jesse," wrote a blog a few weeks ago in which he presented the money supply as determined by the Austrian School of Economics.  Here's the link to his essay, which contains the definition of the Austrian's "True Money Supply," TMS.  And here's the chart:

Well, there you have it.  The two pillars beneath the deflation argument turn out to be pillars of sand.  Overall the level of debt in the system is not being "destroyed," and the money supply is not contracting in the way the Orwellian metrics are presented by the Fed.  Yes, the value of your home is crashing, but that may be the only real asset falling in price.  Well, golf course green fees and country club memberships are dropping in price too.

I know that based on my personal experience with the overall cost of living of my life, it seems to get more expensive every month.  But just wait until the price of the commodities above begin to work their way through the producer channels and into the grocery store, gas station, utility bills etc.  And soon we will feel the effects of the healthcare legislation (unless of course you are one of Obama's chosen category to receive healthcare which is paid for by the rest of us).   Oh ya, and then there's this:

That shows those nefarious excess bank reserves.  The Fed has been paying the banks interest on those reserves as a means of keeping QE1 from flooding the system and unleashing another source of price inflation:  more dollar devaluation.  That money shown above is printed money that has not hit the economy yet. However, in a futile attempt to pull the economy out of its current cliff-dive, the Fed has indicated it may stop paying interest on this money.  I suspect the money will be put to use financing Treausury issuance and into the stock market.  But since Government deficit spending is inflationary, this money will contribute to what I believe will be an acceleration in price inflation.  Rest assurred, however, that the Government reported measure of inflation will not show much, if any price increases.

And one more point I'd like to make.  There's a reason gold keeps moving higher.  It is the ultimate barometer of currency devaluation, which is the tautological twin of price inflation.  Gold has increased nearly 450% since its $250 bottom at the start of the decade.  If you don't think that's a measurement of the devaluation of the U.S. dollar, that's fine - but you are wrong.  But here's an article of interest from the world's second largest - formerly largest until China took over - buyer of gold.  It turns out that India is experiencing double-digit price inflation:  Rampant Inflation In India.  I got news for you in case you haven't figured this out:  expect that the demand for gold from India will accelerate this year.  I would surmise that is why the nearly 100,000 gold contract COT liquidation has produced only an 8% price correction.  Historically a massive COT liquidation produced 20-40% price corrections.  Got gold?

The Last Days Of America?

It is now estimated that the Clinton wedding - a complete cultural and social abortion, a new high-water mark of American hideousness - cost a total of $5 million, of which $2 million was covered by the U.S. Taxpayer for security.  Paul Craig Roberts has a must-read commentary, the stark truth of which I dare anyone to refute.  Here's some excerpts: 

Before we attend to the poor political judgment of such an extravagant affair during times of economic distress, let us wonder aloud where a poor boy who became governor of Arkansas and president of the United States got such a fortune that he can blow $3,000,000 on a wedding.  The American people did not take up a collection to reward him for his service to them.  Where did the money come from? Who was he really serving during his eight years in office?...While Chelsea’s wedding guests eat a $11,000 wedding cake and admire $250,000 floral displays, Lisa Roberts in Ohio is struggling to raise contributions for her food pantry in order to feed 3,000 local people, whose financial independence was destroyed by investment bankers, job offshoring, and unaffordable wars. The Americans dependent on Lisa Roberts’ food pantry are living out of vans and cars. Those with a house roof still over their heads are packed in as many as 14 per household according to the Chillicothe Gazette in Ohio.

Think about that while you read PCR's commentary:  LINK

Gold/Silver Charts Looking Rodeo - Dollar Chart Looking Purgatorial...

I have to say, moving away from the large August gold contract "roll" period/options expiry and moving into the traditional period of seasonally strong buying in India, that gold/silver fundamentally and technically looks very bullish.  Here is a bit of useful color from today's "JB" commentary in LeMet's Midas report: 

The Istanbul Gold Exchange has reported Turkey’s July gold imports as 19.929 tonnes, 39.1% above last July and the largest quantity since September 2008...The Istanbul Gold Exchange has reported Turkey’s July gold imports as 19.929 tonnes, 39.1% above last July and the largest quantity since September 2008

Indian premiums overnight were also quite robust.  Clearly the gold-buying world has aptly adjusted to the idea of paying $1200/ounce for deliverable gold.  Again, the key to understanding this next phase of the gold/silver bull is to understand the dynamics of the physical market.  This is why dopes like Dennis Gartman will make incessant asses of themselves as they pontificate sweet nothings about the precious metals market.

Here's some charts:

The U.S. dollar chart looks like it has contracted HIV.   I'm sure it is reflecting the anticipation of whatever impending QE program Bernanke is getting ready to unveil.  I personally believe that we'll see a "shock and awe" number - like something north of $2 trillion.  Remember the ECB announced a $1 trillion program.  The U.S. financial condition is easily more than two times worse than that of the EU.  And the U.S. economy - contrary to the stinky excrement coming out of Bernanke's mouth today, is falling off of a cliff.  Here's the chart: 

The dollar needs to hold at the 80 level and rally from there, or it is going to test the 2008 lows at the 71-ish level.  If the dollar were to fail at 71, I would suggest that it's time to start stockpiling food, ammo, propane and precious metals, if you have not begun to do so already.  I'm serious about that.

Here is the utterly idiotic garbage put forth by Bernanke today at some southern redneck legislative symposium: "[T]he household sector, growth in real consumer spending seems likely to pick up in coming quarters from its recent modest pace, supported by gains in income and improving credit conditions."  Here's the link:  Bernanke: Insane or Stupid?.  Now, compare Bernanke's crapola to reality, in which "[m]ore than two-thirds of the nation's 3,141 counties, and 37 of 50 states, endured more hardship in June than in May, the AP's Economic Stress Index shows"  Link.   That's real data that reflects the true condition of the U.S. economy. 

Can someone explain to me from which sewer Bernanke is sourcing his views?  He also made an appeal to the States to build up "rainy" day slush funds.  Excuse me?  Nearly every State out there is running massive deficits, the bulk of which are being "doctored" with questionable accounting and the looting of State pension funds.  How the hell does Bernanke propose that the individual States save money?  Colorado has a balanced budget requirement and will probably fall at least $200 million under budget this year.  California/Illinois/New York/Texas - fuggedaboudit. 

Someone must have shoved that ivory tower, the one at Princeton which used to encase Bernanke's head, pretty far up Bernanke's ass because he sure made an ass out of himself with that speech.