Don't Be Fooled By The Motely Fool...

The Motley Fool website posted a critical analysis of Hecla Mining (HL) today that is being credited for knocking 5% off the price of the stock.  Here's the piece:  GARBAGE  I felt compelled to post a response on the Yahoo/finance HL chatboard, even though trolling these types of venues is typically beneath me.  I did feel the need to clarify and post the golden truth.  Here's is what I wrote:

A very poor, amateur hack job.  To begin with, this information was released when HL released it's earnings last Thursday. The MF write-up has no new informational content.  Second, the guy makes it sound like they'll end up spending all of their cash to settle this. Wrong. The terms of what looks like will likely be close to the final settlement are clearly delineated in HL's earnings release. They'll have to use a little over $100mm up front and then use cash plus the exercise of warrants plus stock in amortizing payments out to 2014. For a company generating a run-rate of over $50mm cash flow/quarter with silver at $30, I'm not too worried about HL's ability to fund everything out of operations plus cash on hand.

Quite frankly I'm getting quite irritated by the all the amatuer, hack analysis on the precious metals and mining stock market that gets widely published.  Before I saw this MF train wreck analysis, I had mentioned to a long time colleague that I was getting really irritated by all the ignorance about this sector proliferating in the media and interenet.  The Motley Fool has proven time and again that they know as much about this sector as Ellen DeGeneres knows about the NFL.

This hit is a gift from the market. Enjoy it.

It took me all of about 5 minutes to pour thru HL's earnings release and figure out what was going on.  I'm sure I could justify a stock price of $22 for Hecla if I wanted to take the time to do a very thorough analysis of the latest 10K/Q plus spent 30 minutes on the phone with management.  I don't have time for that and I know HL is going to more than double from here eventually.  I took advantage of this market inefficiency (i.e. crap analysis) and doubled my position in the stock, as I was looking to put more stock on anyway!

Lazy Snowy Friday...

2nd round of club championships tomorrow morning at my tennis club...I have material for a post today and I may post something later.  In the meantime, everyone I'm sure can use a pre-weekend chuckle.  I posted this a few months ago but it still cracks me - I've got the translation below the video:



Here's what the Italian guy says:

"Che cosa?"  -  What?
"Tu sei un pazzo" -  You are a madman
"Va via di qui" -   Get out of here
"Sono stanco di te" -   I'm tired of you
"Pugno nella testa" -   I will punch you in the head
"Ti uccido con questa carne"  -  I'm going to kill you with this meat

ENJOY!

Is Obama Kidding? I Can't Believe He Made This Remark:

Businesses shouldn't worry about inflation: Obama

Who the hell is he kidding?  Why should ANYONE running a business take business advice from someone who has never earned a private-sector produced dime in his life?  He has NO experience running anything that has to with laws of economics and operating a private for-profit enterprise.  Obama has been a taxpayer leach his whole life.  I wouldn't put Obama in charge of running street hot dog stand for me.

Same goes for Geithner, who made similar remarks today.  Here's the LINK

The Economy And Housing Sink Further...And The Fed Telegraphs QE3

"The power of accurate observation is commonly called cynicism by those who have not got it."

- George Bernard Shaw

By now many of you have seen this, but James Bullard, the head of the St. Louis Federal Reserve Bank - one of the Federal Reserve member banks that has historically been more conservative with regard to loose monetary policies, I might add - gave a speech today in which he responded to a question about printing more money by saying "never say never to QE3."  Of course we know where this is going.  It's funny because I was chatting casually with some people last night about the stock market and the "QE" madness and I was asked with dismay if I thought QE3 would really happen.  You should have seen the look on faces when I said that QE will go a lot higher than 3...got gold?

Time to remove the beautiful gift-wrapping around the today's economic reports delivered by the mainstream media and stock-promoting cable news outlets.

Durable goods. The media gleefully reported a 2.7% jump in durable goods orders for January.  But if you dig through the report, the gain reflected a massive order for aircraft parts from Boeing.  If you exclude transportation - i.e. Boeing's order - capital goods orders actually dropped 3.6% vs. expectations of  a .5% increase.  Worse, excluding defense and aircraft orders, capital goods orders plunged 6.9%, the biggest decline in two years.  The expectation was for a drop of 1%.  How's QE1 and 2 working?  How are Wall Street forecasts lookin'?  How's reality look vs. what is dressed up in formal wear and presented by the media sources from which 90% of those who even bother to follow the news get their news?

Housing (ad nauseum).  New home sales for January reported today by the Census Bureau plunged 13% to an annual rate of 284k.  300k was the number expected by Wall Street's collective group of Einsteins.  The January number collapsed 18% from January 2010.  Even more horrifying, the total number of new homes sold in January was 19,000.  Just let that one sink in.  Annualized calculations are based on trailing 12 month sales rates.  As the rate of sales declines, so does the annualization calculation.  But I digress with practical matters...the 19k number was the lowest monthly new home sales number since the Census Bureau started keeping records.  Here's the link to the report:  LINK

Please don't pay attention to the inventory estimates.  To begin with, and I researched this several years ago and no one ever talks about it, when a new home goes under contract, a sale is recorded by the CB and a home is removed from their inventory count.  If the contract is cancelled, the CB does not revise its numbers.  For the last 5 or 6 years, at least, contract cancellations have been running around 20%, on average. Back in 2007-2008, when I used to scour homebuilder 10Q's every quarter, most homebuilders were reporting cancellation rates in excess of 30%. In other words, the inventory of homes reported is grossly underestimated. 

To make matters worse (sorry housing market optimists), last month new homebuilders reported an increase in housing starts - news which the market loved. BUT, and here's the golden truth, even more inventory will be building up with unsold new home sales plunging, more unsold new homes being built, a lot more existing homes on the market - the inventory of which we learned from a private, independent home data provider may be currently underreported by as much as 20% - accelerating foreclosures, bank inventory hitting the market, AND declining demand as more people - in truth and reality - lose their jobs and fall off the jobless benefits (work force welfare) payroll.

The basic law of supply and demand tells us how this Romeo and Juliet will end.  Much lower prices and much more pain ahead for the housing market.  I'm now actually starting to see some "fringe" Wall Street firms publish economic reports which forecast big declines for housing values, so I'm not the only one who sees this coming...

When you look at media reports, you can't just look at the headline number, which often shows a percentage gain from the previous month, and take it for face value.  You have to pull up the actual report released by the entity which released it, dig through the details and analyze it in the context of a much longer timeframe than just month to month. 

Wow - This Is Timely:

Here's the link to the website:  Atlas Shrugged

The trailer shows promise, but I'm sure Hollywood will screw up the true message of the book.

"Whenever destroyers appear among men, they start by destroying money (think:  the Fed/U.S. Treasury), for money is men's protection and the base of a moral existence.  Destroyers seize gold and leave to its owners a counterfeit pile of paper (think:  FDR 1933).  This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values.  Gold was an objective value, an equivalent of wealth produced.  Paper is a mortgage on wealth that does not exist...Paper is a check drawn by legal looters upon an account which is not theirs:  upon the virtue of the victims."

Quick Update On Housing...

The housing stocks were annihilated today.  That tells you all you need to know....buona serata a tutti!

Gotta Read This One:

Barack Obama recently made the following statement to American families that are struggling to survive in this economy: "If you’re a family trying to cut back, you might skip going out to dinner, or you might put off a vacation." A few days after making that statement Obama sent his wife and children off on yet another vacation, this time to a luxury ski hotel in Vail, Colorado...

Here's the link - steady Obama supporters should read this slowly and carefully:  LINK The only HOPE Obama delivered is his family's hope to live 4 years like aristocrats.  Enjoy it while it lasts, Barack...

Don't Hold Your Breath...

On housing, the economy or the dollar.  Regarding the latter, I will sum my thoughts on this with a quote from James Turk from his interview with Eric King: 

But the lingering question in my mind is whether the strong hands who hold silver are unwilling to take a fiat currency. If that is the case, and this backwardation in silver eventually leads to a backwardation in gold, the implications for the US dollar, and indeed all of the fiat currencies in the world are ominous (Here's the LINK)

While our policy-makers playing "kick the can down the road" with the catastrophically unmanageable financial problems in this country, the rest of the world is slowly transitioning away from the U.S. dollar and its use as a "reserve" currency.  The evidence abounds.  Suffice it to say that several countries now trade directly with each other in their local currencies.  At some point the rest of the world will not accept dollars anymore and all the paper millionaires in this country will be paper paupers.  This tragedy can be avoided by moving as much as you can, while you can, into physical gold and silver.  And not CEF, GTU, GLD, SLV (or even PHYS and PSLV unless you buy enough shares to exchange for physical - about $500k for gold and I'm not sure with the silver but for sure 6-figures).

Housing continues its acceleration into oblivion.  To begin with, the Case-Shiller (leave off the "er" for "shill") monthly housing price index was published today and it showed a 2.4% year/year price decline for December.  I did some research into how this index is put together and, first it's a statistical composite of 20 metro areas, and it looks like the numbers are skewed toward non-distressed sales.  In other words, it understates the decline in prices being experienced in many areas and it overstates, on average, the price that has to be paid by buyers for homes.  It would also not include seller-"soft" concessions, which can be substantial, because those are not factored into the sale price reported to local recording offices.  What this means is that the true state of the housing market is much worse than is being reported even by independent data manipulators.  Here's the press release for C/S:  LINK

To make matters worse, it now looks like the National Association of Realtors has overstated the number total home sales going back to 2006 by at least 20%.  I actually had mentioned this report last week, I believe, but now it's been thrust into the mainstream media.  Core-logic has done the work on this and you can read about it HERE  The implications of this are quite ominous.  To begin with, if this is true - and I would bet good money that it is - it means that the true inventory of unsold homes is much larger than is being reported by the industry and the census bureau.  Oops.  It also means that most people who bought a home in the last 5 years did so without good information about the true economic condition of the market and probably overpaid because their realtor hyped them on dwindling supply and a much higher level of sales activity than was actually occuring.  Oh well it's only fiat money, right?  But even more ominous is that not only is the inventory of unsold home much higher than is being reported right now, but the situation will get even worse as banks are forced to start unloading their inventory of foreclosed homes to make room for the avalanche of foreclosure activity that started in January.

The bottom line here is the value of the entire housing market was bid up on a house of cards - so to speak -  fueled by lack of credit standards, fraud and lots of printed fiat currency, and now this mess is unwinding and the snap-back in the other direction will be just as large in magnitude and it will be catastrophic in effect.  Sorry, but I told anyone who was willing to listen back in 2004, when I unloaded my home, that the market was eventually going to collapse...now a lot of those same people want to know what I think is going to happen next and I refuse to even answer because they won't believe what I think will happen now any more than they did back then...history repeats the first time as a tragedy and the second time as a farce...

And now the overall economy.  If you want to read a great analysis as to why the retail sales numbers that are being reported completely overestimate the truth, go to http://www.shadowstats.com/ and get John Williams brilliant work.  Here's the summary intro to his latest piece:

Broad economic activity generally is viewed in real (inflation-adjusted) terms, as seen in headline Gross Domestic Product (GDP) reporting, for example.  With sales numbers stripped of inflation gains, or of pricing effects from distortions in monetary policy, the residual growth is a measure of straight economic activity.  Accordingly, when retail sales increase by the same amount as the underlying prices in those sales, underlying demand is flat

Williams' work aside, Walmart reported that its same-store-sales for the quarter ending Jan 28 fell 1.8%.  This is a huge miss, given that the CEO in October said the sss would be positive.  Oops.  I did write a couple weeks ago about a report circulating that said insiders at Walmart were concerned about this quarter's revenues.  Where there's smoke there's fire.  Walmart represents something like 10% of all retail sales in this country.  If sss sales declined 1.8% - and make no mistake, a negative sales result like this is HUGE for retail - imagine what the unit volumn is if you strip out the portion of revenues attributable to inflation. 

Bottom line here:  the grass roots economy is in a downward tailspin net of the reporting mirage created by inflation, the Government and non-independent private entities (Nat'l Assoc of Realtors, Wall Street).  Imagine how bad this will get if the Government actually tries to keep its spending levels constant with last year and eventually stops extending the duration of jobless benefits (aka Labor Force welfare)...

The spike higher we are seeing in gold and silver these past few days is not the signal of blow-off top in a market that is in a bubble.  Quite frankly most seasoned precious metals veterans are starting to conclude that we truly haven't even started Stage 2 of the bull market cycle for gold/silver.  (To review:  Stage 2 would be when big institutions pile heavily into a market sector - we have not seen that yet with the precious metals).  The bubble stage occurs after Stage 3 (to review:  everyone you know can't buy enough) is 50% over.  The move in the metals right now is a warning shot being fired by the market that the financial and economic tsunami about to hit the United States is getting very close and it will be a lot bigger than the one that hit in 2008.  I will wager any amount with anyone that I am right on this...

The Gold/Silver Ratio Plummets

The gold/silver ratio is an indicator with a few thousand years of track record.  When ancient Rome was on a strict gold/silver standard and in its peak as an empire, this ratio was fixed at 8.  For most of the balance of history up until the founding of the Federal Reserve in 1913, this ratio typically averaged around 15.  Many of us believe that we will eventually see a GSR of 15 and maybe even lower.  Here's where we are now:

(click on chart to enlarge)

You all can work out your own math in terms of price targets using a GSR of 15.  I know we will see at least $3000/oz gold eventually (and I believe a lot higher but most of you would not believe my target range so I'll keep it to myself and close colleagues).  But assume $2000/oz gold and and GSR of 20.  That yields $100/oz silver.  Not a bad ROI, so who cares if you pay $33/oz and it corrects to $30 before heading higher?

Silver has been ramping in price over the past few days.  Given the degree of paper short interest vs. actual availability of physical supply to deliver - I'm referencing 1000 oz. bars and not 1 oz. bullion coins or lesser "junk" silver - it could get pretty "messy" to the upside in the silver market. Yesterday I was chatting with  with a long-time expert in the precious metals market - and someone who I believe is as knowledgeable about this market as anyone actively participating now - who thinks that the house of cards that is the U.S. could potentially cave-in this year and the melt-up in the precious metals could be breathtaking.  Of course, that will also lead to the implementation of unprecedented Governmental authority in this country and a lot of pain for most you out there. 

For all of those who do not believe that the above scenario is possible in this country, I will resurrect a previous "Friday, enjoy the weekend" tune - Buona fine settimana a tutti:

SILVER BABY!

BOOM GOES THE DYNAMITE

Couple Of Quickies Today (More On Housing (sorry))...

The Mortgage Bankers Association posted its weekly mortgage applications index today.  Applications to purchase homes are absolutely plummeting in free-fall fashion.  The non-adjusted/non-manipulated number was down 18.2% from last year. Here's the  LINK

Deflationism should be dead by now.  I just got off the phone with a good friend/colleague who operates a food retailing business.  He told me standard non-organic hothouse tomatoes have gone up in price to $51 per case from $25 last week and $42 per case this last Monday.  He said he's selling bulk food containers like there's no tomorrow.  Here's a nice little quickie on inflation:  LINK

Finally, I don't normally like to litter my blog with garbage from clusterstock.com, but this is a great guest post that was on there today that nicely summarizes the catastrophic problems which are taking this country down.  You just need to look at the graphs, most of which are from the Fed:  LINK

Make no mistake about it, assuming it is available, your ability to buy food will be protected ONLY if you have plenty of gold and silver - physical gold/silver, not CEF, GLD, SLV, GTU, or even PHYS, unless yo have enough money to buy enough share PHYS shares to convert into gold (about $550k today).

Buona giornata/serata a tutti!

An Imminent Silver Explosion? And Some More On Housing...

With the ever-shrinking stockpile of physical silver, as evidenced by the unusual degree of backwardation in the price structure of silver futures, the noose is clearly tightening around the necks of the bullion bank(s), which are short an absurd amount of silver.  I haven't seen anyone write about this yet, so maybe my thinking is out of whack, but there also seems to be another inverse head-and-shoulders forming in the daily silver chart.  Here see for yourself:

(click on chart to enlarge)

It's there - see it?  The last inverse HnS formation was formed roughly from late 2009 to April 2010. It then consolidated sideways until August 2010, when it exploded up to $30 - A 67% move. It would appear that this inverse HnS is forming around the $30 level.  We have no way of knowing how long it will take to either fail or resolve with another big move higher.  However, given that the basic supply/demand fundamentals, plus the underlying monetary fundamentals which are fueling gold and silver, are even stronger now than during all of 2010, I am placing my bet on a much higher price of silver sometime during 2011.

I have to say that I am quite excited by the reports, if they are true, about some big silver mining companies hedging out some of their production. On one hand, it's not an imprudent business decision to lock-in some profits and create some predicability in the revenue stream.  On the other hand, just like Barrick and Anglo-Ashanti, these silver mining companies will likely lose a lot of money on their hedges.  And this will create a massive short-cover bid in the future that will drive the price of silver even higher.

Most of you have likely already seen this article about some Asian buyers who are taking a big position in SLV as a means of accumulating a lot of silver (with SLV you can convert your shares if you own, a minimum very large amount, into the delivery of physical silver held by the trust, assuming the silver is not leased out or otherwise encumbered), but here's the link in case you have not had a chance to read this:  LINK

Now for a quick update on housing.  There was an article on Sunday in the New York Times which discussed how the housing crash is starting to affect cities that were previously thought to be immune from big price declines.  Ya know, I can't tell you how many people with whom I've chatted over the past couple of years always have a reason why their block/neighborhood/city/State will not be hit by the housing crisis. It's usually 3/4's denial and 1/4 stupidity.  To be sure, some areas will decline less than others - after all, there are factors which foster "relative" value - but this still has long way to go and a lot lower to fall - everywhere.  My favorite discussion is when someone in Denver tells me their 'hood really hasn't lost value.  And then I have to ask them if they knew that Denver is ranked 10th in terms foreclosures.  Of course, they have no idea.  Then I have to suggest they find a new realtor who will tell the truth or have them go look at some actual sales in their 'hood.  Anyway, here's the article from Sunday Times (the NYT requires an account so I copied the article and pdf'd it): 

HousingNYT -

Finally, after the Nat'l Assoc of Homebuilder's sentiment index was released today, I happened to catch this article about the poor outlook for new home sales:  Homebuilders have yet to see a turnaround in the housing market after the worst year for new-home sales in a half-century. Here's the LINK

I hate to keep belaboring the point about housing, but a lot of people who are not underwater on their mortgage and can still make their payments think that the market will stabilize and the worst is over.  Sorry, this is going to get a lot worse than any of us can imagine...And I insist on continuing to post all of the evidence that is available in the published data in an attempt to proliferate the truth...

Gold In A Bubble? And Other Irritations - Like Obama's Budget...

By now everyone has seen the article this weekend in the Wall Street Journal about gold being in a bubble.  The media keeps rolling out these financial "experts" to explain why gold is risky now - yet not one of these experts even remotely understands what he is talking about.  Most of these "experts" are so clueless that it's beyond the proportions of Dickensian absurdity. But how come no one in the financial media is referring to Netflix stock as being in a bubble?  Here is a great analysis on gold from Victor Sperandeo, notable for having worked for George Soros, that summarizes the golden truth about gold: 

Sperandeo explained that history showed that in 30 examined cases of hyperinflation exactly this amount of capital preceded an uncontrollable inflationary development. The current situation was therefore comparable with these historic cases. The US dollar is very much threatened by this development and will become subject to an enormous devaluation. In this context gold and silver are expected to continue to develop extremely well, since investors are hedging against a bond and US dollar crash by purchasing precious metals. According to Sperandeo, the current development in the precious metals prices was nothing more than a correction in a continuing bull market. As long as policy makers do not find another solution to their dilemma than printing more and more money, things will just stay the same.

Here's the link to the article from James Turk's http://www.goldmoney.com/:    LINK

As for NFLX, today it is up over 6% and trading at 83x trailing earnings.  Someone on Bloomberg TV just jubilantly proclaimed that Wall Street's new price target for NFLX is $316.  Now, without examining NFLX's earnings, let me just state that the quality of NFLX's earnings is likely very questionable.  GAAP requirements for accounting for fulfillment costs, thanks to Jeff Bezos and Amazon.com, are very "loose." In brief, the cost-accounting for fulfillment costs are similar to that of a ponzi scheme, and as long as revenues keep growing, a company with heavy fulfillment expenses, like NFLX, can hide the cash flow and earnings from what in effect are hidden cash expenses that don't run through the income statement.  Just ask Bezos why he's on a program to unload stock every month if he really thinks AMZN stock is cheap. Same deal in terms of the accounting with NFLX.

But the big question for me is how come Wall Street's anti-christ, gold, is continually labelled a bubble and ponzi stocks like NFLX get more adoration and cult status the more overvalued they become?  Yes, this question is strictly rhetorical in nature. But here is a daily price performance chart of NFLX vs. GLD.  You tell me which one is in an investment mania/bubble:

(click on chart to enlarge)

When I woke to the horrifying nightmare referred to as "Obama's 2012 budget," I was going to dissect and pontificate the reasons why what he has proposed is patently absurd in terms of reducing this country's absurdly tragic fiscal spending disaster.  But instead I'll just make a few general observations so I can relieve the nagging irritation I'm feeling. And I'll add that Obama has completely discredited his abilitly to lead with this budget proposal (as if he hasn't done that already...).

To begin with, for him to seriously put forth projections that show budget deficit contraction after a couple of years of even larger projected deficits is retarded.  Our Government can't even accurately report last month's economic numbers.  So to think that it can project the likelihood of reduced budget deficits 10 years from now is insane.  I truly hope Obama doesn't think any of us are stupid enough to buy into that joke he presented today.

But let me just say that trillion dollar deficits require the phase-in of $100's of billions of dollars in spending cuts.  Not the insiginficant snipping of a couple hundred million here and maybe a billion from a program that shouldn't even exist. Obama projects $1.1 trillion in deficit reduction over the next 10 years.  But this forecast relies substantially on the Government's ability to grow revenues faster than expenses grow.  And revenue growth relies on economic growth.  Obama expects to achieve this by closing tax-loopholes, letting tax benefits expire and increasing some taxes.  But to increase revenues from taxes, you need to have big growth in employment and income.  Where will that come from, Barack?  Given that the definitive trend in employment is being emasculated by a rapidly shrinking labor force, I would be a lot more curious to see how Obama would expand the labor force and enable personal income growth...

And the bulk of the spending problems in this country come from defense spending and entitlements.  Those areas of spending were largely left untouched.  Unfortunately, this country is engaged in a policy of castrophically unsustainable domestic welfare - yes, this includes social security, medicare, food stamps and unemployment benefits - and international imperialism, which together the President AND both political parties refuse to touch.  Until our Government significantly slashes and restructures the Governmental anatomies of defense spending and entitlement programs, this country is on a definitive path of collapse. In the words of Victor Sperandeo from the article linked above: 

[T]he political leadership in the United States will continue to print large amounts of fresh money until foreign investors lose their confidence in the repayment of the outstanding US debts. This would eventually lead to a panic at the bond markets. The incipient bond sales avalanche would then trigger the outbreak of a hyperinflation in the United States.

And hyperinflation precedes systemic collapse.

Our Worst Nightmares Unfolding

The Ministry of Truth:  war is peace; freedom is slavery; ignorance is strength. 

A complete failure of democracy and Rule of Law is happening in epic Orwellian/Randian proportion as I write this.  The truth of this statement hit me hard when I was reading through the latest economic report by John Williams, which can be procured at http://www.shadowstats.com/.  Caution:  only read his work if you are willing and desire to know what is really going on this country.  After reading through it, I commented to a long-time colleague: "how can you do anything except slit your wrists after reading this? lol."

It had occurred to me that the portrait of our system as fabricated by the Government and Wall Street becomes more distorted from reality by the day.  Williams describes meticulously why the recent data on key economic data released by the Government is highly inaccurate. The Government is surely aware of the problems with their data series if an outsider like Williams can figure out the problems.  And yet the Government does nothing to correct the problem. Complete Government deception:  this is one of the crucial aspects of Orwell's dire warning as presented in "Animal Farm."

"When the truth is found, to be lies..." Let's look at housing. I almost fell off my chair howling in laughter when I saw that Alan Greenspan gave a speech in which he proclaimed that the value of housing in this country needed to increase by 10% in order for a sustainable economic recovery to happen.  Who slipped him some LSD? 

At the same time, a report was issued by Zillow.com, which maintains a comprehensive nationally-based real estate database, which stated that close to 30% of all homes are now underwater vs. the mortgages on them.  What would be even more interesting to see is a breakdown of how much these homes are underwater.  And even more interesting would be to see the true percentage of homes that are underwater using rigorous mark-to-market values for these homes. 

For instance, there was a report in the Denver Post two days ago that home prices rose in Denver by over 7% from Jan 2010 to Jan 2011.  I would bet the ranch that the values used to calculate the Jan 2011 are egregiously incorrect.  I can't tell you how many "price reduced" signs have sprouted up on top of "for sale" signs all around the metro-Denver area, and in every neighborhood based on wealth demographics.  Maybe the Denver Post is using the "offered" price to caculate its metric rather than the ultimate "short sale" or "negotiated much lower" actual closing price.  I also know that the now-prolific "closing concessions" from the seller are never factored in to the closing price that is reported.  These include real dollar items like broker fee concessions, money spent on required physical improvements, seller financing deals, etc.

The fact of the matter is that the housing situation in this country gets worse by the day, despite the fictitious fabrications of economic vitality ("green shoots") and low inflation ("geez the CPI shows 2% inflation this year, that's too low" - Bernanke) conjured up by our Government, Wall Street and the media - collectively known as our Ministry of Truth.  And to make matters worse, it appears as if this country's largest housing banker, China, is getting ready to pull the plug on its massive holdings of Fannie Mae and Freddie Mac paper.  Get ready for QE3-cubed when the dam holding that flood of worthless garbage breaks.

Speaking of inflation, is there anyone reading this who truly believes that inflation is not a problem? That paraphrase above I tributed to Bernanke is actually a paraphrase of a statement he made during his testimony in front of the House Budget Committee last week. And if you read/listen/watch only to the mass media (even NPR for chrissakes), you would believe Bernanke's proclamation. But if you pay attention to what is happening globally across all commodities or see the reports coming from every single sector of the chain of food production and distribution business in this country, you will know that you will soon be experiencing double-digit price increases at the grocery store, in your utility bills and at the gas pump. Actually, my cost of gasoline has already increased close to 10% since November 2010.

Cotton, wheat, rice and soybean prices are starting to go parabolic globally.  That's the truth.  The real, true, meticulously calculated jobless rate in this country is likely well over 20%.  That would include the whole pool of employed people working part-time who want to work full-time and the pool of people who have altogether given up looking for work, especially since they can sit for 2 1/2 years and collect jobless benefits or qualify outright for food stamps and other forms of Government largesse.  Let's look at hard numbers:  close to 15% of the population is now getting food stamps and 14% of the labor force (those working plus those not working but supposedly looking) are collecting long term jobless benefits.

There is a way to shelter yourself from this brewing economic hurricane if you are fortunate to still have enough money to jump into the game in a meaningful way.  That would be to move as much of your dollar-based wealth into precious metals as possible.  But here's what I said to one of  the largest investors in our fund when he asked me yesterday about safe-havens: 

Panama is good. Brazil, Colombia, Argentina, Peru. I don't really know for sure and I'm not sure anywhere really will be safe. Hopefully this takes longer to collapse than we think it might...I've always told people that I can tell them how to get to "the other side of what's coming," but I'm not sure you're going to want to see the other side...

That is what I said verbatim.  At this point I'm going to continue accumulating precious metals, enjoy what I can while I can and continue to place faith, ultimately, in the ability of the human spirit and ingenuity to figure out a way to get rid of what we have now and start from scratch using the Constitution as platform.  But until that happens, it's going to get a lot more Orwellian/Randian and brutal in this country.  If you want to see how this unfolding, read/re-read "Animal Farm" and "Atlas Shrugged" and then use the lenses of vision provided in those prophesies to see what is really occuring in our system.

I'm going to go skiing for the rest of the weekend with friends and family.  I hope everyone else has plans to enjoy the weekend!  Ciao.

Is The Consumer "Recovering?"

Let's breakdown the December trade deficit numbers released today.  For all of December, the trade deficit was $40.6 billion, roughly in-line with expectations and up $2.7 billion from November.  The media is already pointing to the fact that imports increased by $5.1 billon from December to November as the signal that the U.S. consumer has returned and the economy is improving.

But let's look at the golden truth.  The total value of goods imported in December was $116.6 billion, up $2.9 billion from November.  Of that, $22.5 billion was oil, up $2.7 billion from November.  THUS, of the total amount of the increase in goods imported from November to December, $2.7 billion - almost 100% - of that was oil. Does that look like the consumer is spending more money on "consumables and durables?"  Rest assured, the full amount of the value of oil imported was from higher prices.  The consumer in this country is now spending an even bigger percentage of his monthly paycheck on oil.  THAT is bad for the health of the economy.

What is more interesting, in terms of the inflation picture, is the fact that China appears to be taking measures to "repatriate" inflation back to the U.S. by raising interest rates and slowly strengthening the value of the yuan.  This will cause the price of Chinese imports (i.e. Walmart, Best Buy, Target, etc) to rise in value, further exacerbating the accelerating price inflation in this country.

This will be GREAT for gold/silver.  Make no mistake about that.  And another little tidbit of news that you won't find reported on most U.S. media sources is that Viet Nam, the 5th largest importer of gold in the world, just devalued its currency by 7% - a huge amount in terms of currency devals. Here's the LINK  This will further fuel inflation in Viet Nam AND further fuel the demand for gold by the population in that country.

It's so simple to weed thru the garbage reported in this country to get at the truth. It's stunning how few people are interested in doing this.  I just heard about someone I know, who I thought had a lot of money socked away.  It turns out he's scrambling now to make ends meet.  This is someone who used to be a big corporate executive and I tried to convince him to unload his real estate and move into gold over 8 years ago...oh well, it is what it is...Have a great weekend everyone (Avete una grande fine settimane, ognuno)

More "BS" From The BLS

The media will no doubt grab onto today's jobless claims report as more evidence that the economy is improving.  But recall that Bernanke stated clearly yesterday that  high unemployment is going to persist for a long time.  Also, not widely reported, is that for the second month in a row it was reported yesterday that job openings in December were lower again and that the metric fell to its lowest level since September.  Not only that, but the number of employees hired also declined.  Here's the report: LINK

So todays lower-than-expected jobless claims report has to be greeted with a high degree of skepticism and a real desire to see exactly how the Government creates its "seasonal" adjustments.  I guess there could be a high correlation between new claim filings and the bad snow storms hitting a large part of the country.  But shouldn't there be "adjustments" to normalize for that? 

And actually, on an "unadjusted" basis, the number of claims actually were about 20k higher than expected. Even more troublesome, and something that will absolutely not be reported in most daily newspapers or local news broadcasts, was the fact that the number of claims for extended benefits - these are the people who are on the 2 1/2 year benefit roll (aka welfare) - increased by over 100,000 to 9.4 million.  Let's put this number in perspective.  The BLS reported that the labor force was around 63 million.  With 9.4 million of those receiving jobless bennies, this means that a full 15% of the "labor force" is essentially part of the welfare expenditures.  Here's the full report:  LINK

Also not widely pointed out was the fact that Obama has proposed a moratorium on interest payments for States which have had to borrow from the Federal Govt (that means you, the Taxpayer) in order to fund State unemployment benefit programs.  IF this proposal becomes a reality, and States like California stop making payments to you and me, collectively the Taxpayers, how is this any different than a de facto debt default?  This is indeed a default because it means that these States had the choice of not making payments under Federal claims OR not making payments to ALL creditors, including municipal bond holders like Pimco.  THIS WILL BE A DEBT DEFAULT.

The only difference between this and a default is that Obama, on behalf of Us, has the authority to propose and legislate a "deferral, thereby technically circumventing a legal default.  Of course, you can refer to money printing as "quantitative easing" so that it appears to be something other than that which it really is.  And you can call "stronzata" a "rose," but it will still smell like stronzata.

It's getting worse by the day, not better like Bernanke and Obama and the media would have you believe.  The reports of silver and gold bullion shortages in Australia, Asia, Europe and Canada are now proliferating and have a high degree of credibility, especially as reflected in the soaring lease rate for silver.  This tells me that the rest of the world smells the stronzata eminating from Washington, DC and Wall Street...

This Statement From Obama Is RIGHT Out Of "Atlas Shrugged"

Obama Urges U.S. Business Leaders to Increase Spending for Good of Country

Recall that in "Atlas Shrugged," Ayn Rand lays out a vision in which the Government takes control the avenues commerce, first by trying to impose its will on private enterprise and then, ultimately, seizing complete control.

I have been saying all along that what is unfolding right now economically, politically, socially and morally in this country fits Rand's vision (and Orwell's in "Animal Farm") like a fine leather Hermes dress glove: 

President Barack Obama joined patriotism with economics as he urged U.S. business leaders to “get in the game” in support of their country by spending more cash.

The fact of the matter is that spending cash for the sake of spending cash will not benefit anyone. The Government will borrow at least 4.1 billion per day this year to spend money for the sake of keeping its massive bureaucracy and egregiously wasteful programs in place - to the benefit of no one, other than the Government employees who are kept employed and overpaid by this spending and the businesses who control how the Government spends its money.  THAT is right out of "Atlas Shrugged."

Here's the news story from Bloomberg:  LINK.  Read and weep for our country...And then go buy more gold and silver!

Must-Watch Interview With David Stockman From CNBC

"When the Fed stops buying, who's going to these [Treasury] bonds?"

David Stockman was the Director of the OMB during Reagan's first term.  Even back then he was known as a crusader against deficit spending and the accumulation of Government debt.  My estimation of him was raised considerably when he recently was highly critical of Reagonomics and the extension of the Bush tax cuts:  "We're simply deferring massive taxes unfairly and immorally putting huge debt burdens on future generations and that is just wrong."  Stockman supported the tax cuts under Reagan, but ONLY if they were accompanied by a commensurate amount of spending cuts.  They were not...

He was on CNBC Friday for his take on the jobs report:  Re CNBC's reporting on the employement report:  "I heard more spin-control when I came out this morning than I ever heard in the White House."

On the fraudulently constructed unemployment rate metric of 9%:  "if we had the same [labor force] participation rate this January that we had a year ago...the unemployment rate reported this morning would have been 9.9% rather than 9...the 103.2mm jobs that were in the economy reported this morning is a number that was first reached in October 1999." Thus there's been no net job creation over the last 12 years.

And on the Fed money-printing policy:  The Fed policy is (so) dangerous. They say they are printing money like there's no tomorrow...to somehow stimulate jobs when it's pretty clear that the only thing that's happening is that all of these new high-powered reserves are flowing into the world economy creating the most vicious commodity hyperinflation"

Here's is the segment, which starts around the 3 min mark.  Unfortunatey Faber and the other douchebag on CNBC cut-off Stockman several times while he's making some insightful comments, but this is worth watching:

Pre-Weekend Comments...

Another lazy Friday today.  The post-NFP excitement in the markets dissipated pretty quickly and now it's back to business as usual for the usual smoke-blowers.  I don't have much to add to the commentary put out by my friend and colleague "Jesse" on the employment report.  You've likely already read his wisdom and insight but, if not, the link is HERE 

I will dress that up with a few facts that can be found if you bother to read the actual BLS report, which is HERE.  Briefly:  the labor force participation rate dropped to a 26 yr. low.  This is the pool of humans that the Govt determines to either be working or not working but actively looking for a job.  The reason the unemployment rate dropped to 9% is because the Govt cut 504,000 people out of their labor force calculation.  It's an absolute farce because what it tells us is that there's really no hope for many of these people to ever find work in this country.  On a not seasonally adjusted basis, the more comprehensive U-6 report showed an unemployment rate of 17.3%.  That's a lot closer to the truth but still low according the work done by John Williams on the matter.  I guess the most remarkable aspect of today's huge miss vs. expectations is the fact that the number diverged so much from the much-cheered ADP employment report released earlier this week.  Both ADP and the BLS use a very similar method of calculating (note: massaging) the data and calculating their cesspoolified number. 

Remember, it's the BLS - leave the "L" out for the truth about what it really is and what the people who work there are full of...

Please read this comment published last night on inflation and gold by James Turk linked HERE.  I've said this before and I'll say it now:  In 10 years of doing exclusively the precious metals sector and analyzing the truth about our system, I respect James Turk's writing and analysis as much as anyone's out there.

Finally, here's the Friday tune from Charles "Mad Dog" Sheffield, a little-known musician from the Louisiana creole blues movement which proliferated when this country really was great:



Avete un divertimento fine settimana ognuno! (Have a fun weekend everyone!)

Bernanke Either Is Smoking Some Strong Weed Or Is A Malicious Liar

"History repeats itself, first as tragedy, second as farce" - Karl Marx

I don't think it's any coincidence that today's spike in gold coincided with Bernanke's smoke-blowing session in front of the National Press Club.  What is really sad and pathetic is that most of the country that bothers to read/follow the news will wake up tomorrow morning to headlines which proclaim that Bernanke said the economy is improving.  BUT, if you look at the real TRUTH behind the economic numbers released lately, you will see that the indices used to measure economic activity have been skewed to the upside primarily by price inflation at the "non-core" level, where "non-core" as defined by the Fed/Govt is "the cost of food and energy."  Yes, 'tis indeed a massive farce.

Let's use today's factory orders report as an example, which posted a .2% gain vs. an expected .4% decline. If you read thru the details of the report, which you can do HERE, you will find that the index gains were driven primarily by an increase in the output of non-durable goods and inventory build-up.  If you read thru the data table, you'll find that "petroleum and coal products" were nearly 15% of the total value of the index and represented one of the largest % increase in value from Nov to Dec.  Given that we know that the price of oil increased during November by almost 13%, it stands to reason that a large percentage of the gain in the factor order index was the price of oil (and coal).  Furthermore, the price of steel has been climbing sharply, ergo the increase in the value of the durable goods component of the index. 

Given that new orders for durables were down, and unfilled orders also declined (meaning there was plenty of inventory to fill orders) AND that inventories continued to grow during the month, end user unit demand was flat to down. Thus, the increase in the value of many of the components of the factory order index would have been derived from price increases.  Analysts should be quite troubled by the fact that inventories continue building with little evidence of ultimate end-user (consumers, ultimately) demand.  We saw more evidence of this dynamic with the auto sales report, which was largely driven by a massive spike in GM sales, but which proved to be largely a function of GM selling cars to dealers, as dealer inventory exploded month over month.  There is an excellent accounting of that dynamic HERE.

Anybody read about, or hear/see, any of the above in their local newspaper or nightly news broadcast?  How about the geniuses in CNN or CNBC or Fox Biz?  Did any of those news sources go over this?

There's more.  The Purchasing Manager's Index reported the other day showed an unexpected increase.  But you'll find, if you read thru the details of the report, that one of the largest - by far - components in the increase of this index came from a large increase in prices.  Not only that, but that the trend in higher prices has sustained for 19 months.  To further bolster the lack of end-user (consumer) real demand, the customer inventory metric is still contracting - and has been for 22 months.  What's even more frightening, is that per a NY Post business section (yes, the NY Post, believe it or not, has one of the more credible business editors in medialand) featured an article two days ago in which some anonymous insiders at Walmart were fearing a much larger than expected comparable sales decline this quarter and that they were working toward reducing inventories and reducing new orders.  That article is HERE.

Finally, there is the Government's "estimate" of 4th quarter GDP, which was glorified and worshipped by the media. The stock market initially did an end zone dance, but then sold off.  Now why would that be?  I'll direct everyone's attention to an excerpt from the highly regarded King report, which explains the farce that is the Government GDP calculation:

"The Q4 GDP estimate is a total fraud. The BEA made the estimate with only two months of data. Though the usual suspects emphasized that the decline in inventory growth subtracted 3.70 percentage points from GDP, they ignored that fooling with the deflator added 1.77% percentage points and goofy trade accounting added 3.44 percentage points to GDP. 

The fraud in the GDP report is evinced by the fact that despite roaring inflation in Q4 government toadies reduced its inflation measure, the GDP Implicit Deflator, to 0.26% in Q4 from 2.03% in Q3!Even the bogus CPI shows 2.6% inflation in Q4!!! And PPI shows 4% inflation!!!! The most infuriating and disgusting scam in the GDP report is that the BEA states inflation at 0.26% to overstate GDP and then it puts import inflation at 21.8% annualized.

The toadies at the US Ministry of Truth report negligible inflation to overstate GDP and also report huge inflation in imports, which allows the deceivers to reduce imports, which increases GDP. The sharp decline in imports grossly conflicts with the biggest surge in consumption in years – unless the trade deficit has suddenly disappeared!!!!

Consumer Metrics Institute: Ironically, the flip-side of the low "deflater" being used for the entire economy is the extremely high 21.8% annualized "deflater" that was used to inflation-adjust the amounts of goods that were imported during the quarter. This huge spike in the imported goods "deflater" (up 31% from a -9.2% dis-inflationary number used in the third quarter) partially explains the dramatic drop in reported imports in the GDP equation (and that consequently boosted the overall GDP growth rate by over 4.9%). Given the recent movement in commodity prices (especially oil) it is hard to quarrel with the 21.8% number per se (even if it brings the 0.3% overall "deflater" into question), but the impact of that "deflater" has certainly added to the noise present in this GDP release, if not to the headline number itself."
 
Next time you see a bullish economic report from the Government, remember that they are usually fabricated from estimates, incomplete data and outright data manipulation.  Yes, Bernanke is either completely stoned or a calculated liar.  And, yes, the farce continues...

Even More On Housing - Sorry But It's Getting Worse...

In previous posts I have focused on supply, demand, employment levels, credit availability, and the still relatively high price of housing as the variables which would force home sales and values much lower for the foreseeable future.  Now the unlikely source of cnbc.com has brought to light yet another variable: the number of vacant homes.  Based on the latest census report on homeownership, the homeowership rate of the population dropped to 66.5% in Q4, down from the 2004 peak of 69.2%.  Even more startling was the fact that 11 percent of housing units are vacant. Here's the LINK  Think of it this way:  1 out of every 9 homes is sitting empty...

I think that the implications of that data really do not require commentary.  One more point.  I mentioned a 105% Fannie Mae refinancing program the other day.  I was mistaken about the specific details.  And the reality is that the program will make things even worse down the road than what I had originally thought. I heard the ad again yesterday.  The program allows people with "good" credit scores and who have 1st and 2nd mortgages to refinance 105% of the amount of the 1st mortgage - while leaving the 2nd mortgage in place - in order to "weather this storm and wait for the market to recover."  Quite horrifying if you ask me, as it enables a homeowner to basically take cash out of a home that is underwater, cramming down the 2nd mortgage, and add to the overall leverage on the house.  My question would be this:  if someone has good credit, why do they need "to weather the storm?"

It's getting worse by the day...

QE3 On Deck! This Confirms The "Good" Economic Reports Are Bogus

Feb 1 (Reuters) - The Federal Reserve could debate extending its bond-buying program beyond June if U.S. economic data prove weaker than policymakers expect, Kansas City Fed President Thomas Hoenig said. Another round of bond buying "may get discussed" if the numbers look "disappointing," Hoenig told Market News International in an interview published on Tuesday.  Here's the LINK

This confirms that the string of economic reports from GDP to employment, and even today's auto sales, are manipulated and misleading.  If the "good news" was bona fide, the Fed would be discussing the tightening of monetary policy - raising interest rates and unwinding QE1/2. 

But the golden truth is that the only policy keeping the banking system from collapsing and the U.S. Government funded is the Fed's printing press.

Got gold?  Just like diamonds are a girl's best friend, quantitative easing/money printing/currency debasement is a gold investor's best friend!  I'm not going to post the charts, but the daily charts for gold and silver look as bullish as I've seen in a long time.  The price correction in January has likely set up a very big move in the metals.  Pray to whatever you pray to that Eric Sprott's technical analyst is wrong about how high gold/silver may go by this spring, because that would imply that this country is on the verge of some very painful economic/social turmoil...