Friday, July 29, 2011

Obviously the GDP Number Was A Lot Worse Than Expected

by the overpaid geniuses on bubblevision TV and Wall Street.  Most of them really missed the boat badly on this one.  If a REAL inflation number was used to adjust nominal GDP into the number that was reported, I'd bet my last 1 oz. silver eagle that real GDP was negative by quite bit.

Here's a couple of other real economy news reports that should explain just how weak the economy is and just how imminent QE3 is:

Container-Ship Plunge Signals U.S. Slowdown - Plunging rates for chartering container vessels that carry sneakers, furniture and flat-screen TVs may signal a U.S. consumer slowdown and losses for shipping lines in what is traditionally their busiest time of the year.  LINK

Juniper Sends Grim Signal - Juniper Networks Inc. offered some new clues that the U.S. economy is stalling, warning of slowing sales growth that sent its stock plunging 21% in trading Wednesday.  LINK

Merck to Cut Up to 13,000 Jobs - Merck is cutting costs, expanding in emerging markets and spending on research and development...LINK

Good to see that Merck is following the example set by Obama's jobs Czar - GE's Jeffrey Immelt - and cutting jobs here and shifting the workforce to emerging markets.  I'm guessing this is Obama's implicit yet official jobs policy now.

And here is what a former Chinese central banker is now advising Chinese policy-makers:  Yu Yongding Says China Needs to Hold Less Treasuries as Safety a ‘Mirage’ - “U.S. bonds are not safe, but people think they are safe,” Yu, a researcher at a Beijing institute under the Chinese Academy of Social Sciences, told reporters at a briefing in Mumbai, India, today. “That is a mirage.”   LINK

It will be just wonderful if we get a new debt-limit deal - and we will.  But who the hell is going to buy all the new Treasury bonds that have to issued if our largest financier - the Chinese - decide to stop being the monetary crack dealer for our abusively reckless Government?  Are you?  I'm not...

Anyone not moving most of their investible money into gold and silver right now is an idiot.  I have 90% of my net worth in the physical metal and in mining stocks.  Everyone needs to understand that the dollar is going a LOT lower.  Knowing that, why on earth would you want to own anything denominated in dollars?  And that includes any metals ETF other than PHYS and PSLV.  Yes, technically mining stocks are dollar assets, but I anticipate that because their business is gold and silver, the price performance of mining stocks will far outpace the rate of decline in the dollar. 

Here's a good illustration of my point, with a chart from Sharelynx that shows how the value of your house is declined when you price it in terms of gold:


Off to play in a tennis tournament - have a great weekend everyone!


  1. "Everyone needs to understand that the dollar is going a LOT lower. Knowing that, why on earth would you want to own anything denominated in dollars? And that includes any metals ETF other than PHYS and PSLV." ...What about CEF and GTU?

  2. (Dave)

    I accidentally deleted someone's comment. If you see this please feel free to re-submit it so I can post it.

    RE CEF and GTU. Those two are fine for indexing gold/silver (CEF) and gold (GTU). I don't like them because they don't have a mechanism in them to allow shareholders to exchange their shares for delivery of the bars. That is the ultimate accountability trigger for a metals trust/ETF. Sprott's funds allow for this. Also, when you own an ETF, you still left holding dollars after you sell them.

    When I first started getting into the metals back 2001, the true, hard-core goldbugs were advocating ONLY owning physical gold/silver that you kept in your own possession, outside of any system. At first I thought it was a bit extreme, but eventually I came to understand why they take that view.

  3. As for GE and MRK moving jobs... why wouldn't they move if the talent pool exists and profitable. This country is sorely lacking in knowledgeable, competent, and skilled workers. Until this country produces a quality labor force expect more of the same.

    I find the "jobs need to stay here" argument hollow at best. Isn't this similar to selling your 1800sq/ft home in California, driving east, and buying a 4000sq/ft for the same price?

    And then there is the capital vs current account issue.

    I found your site sometime last year. I visit regularly and thoroughly enjoy your comments

  4. Yes, if you own etfs, you are still holding dollars after you sell them.

    But the same is true for physical gold when you sell it. And that's exactly what you will do some day in the future. Unless of course, you think your local grocery store is going to start accepting, say, 1 oz. Credit Suisse bars. Not gonna happen.

    Nothing at all wrong with holding physical. Many of us do. But at some point, you will turn them back into dollars.

  5. LONDON/DETROIT (Reuters) - In a rundown patch of Detroit, enclosed by a cyclone fence and barbed wire, stands an unremarkable warehouse that investment bank Goldman Sachs has transformed into a money-making machine.
    The derelict neighborhood off Michigan Avenue is a sharp contrast to Goldman's bustling skyscraper headquarters near Wall Street, but the two operations share one important element: management by the bank's savvy financial professionals.
    A string of warehouses in Detroit, most of them operated by Goldman, has stockpiled more than a million tonnes of the industrial metal aluminum, about a quarter of global reported inventories.
    Simply storing all that metal generates tens of millions of dollars in rental revenues for Goldman every year.
    There's just one problem: only a trickle of the aluminum is leaving the depots, creating a supply pinch for manufacturers of everything from soft drink cans to aircraft.
    The resulting spike in prices has sparked a clash between companies forced to pay more for their aluminum and wait months for it to be delivered, Goldman, which is keen to keep its cash machines humming and the London Metal Exchange (LME), the world's benchmark industrial metals market, which critics accuse of lax oversight.
    Analysts question why London's metals market allows big financial players like Goldman to own the warehouses which store huge quantities of metal even as they trade the commodity.
    Robin Bhar, a veteran metals analyst at Credit Agricole in London says the conflict of interest is so acute he wants U.S. and European anti-trust regulators to weigh in.
    "I think it makes a mockery of the market. It's a shame," Bhar said. "This is an anti-competitive situation. It puts (some) companies at an advantage, and clearly the rest of the market at a disadvantage. It's a real, genuine concern. And I think the regulators have to look at it."
    Goldman said its warehouse subsidiary Metro International Trade Services has done nothing illegal, and abides by the LME's warehousing rules. "Producers have chosen to store metal in Detroit with Metro," a Goldman spokeswoman said. "We follow the LME requirements in terms of storing and releasing metals from our warehouses."
    The London Metal Exchange defends its rules. "There is a perception that consumers have not been able to get to their metal when the reality is that it is big banks, financing companies and warehouses that are not able to get to their huge tonnages of metal fast enough," said LME business development manager Chris Evans.

    For more follow the link:

  6. Always like your comments. You mentioned you have 90% of your wealth in some form of precious metal assets.

    Would be interested and could you give an indication in percentage terms what you have in

    Trading paper
    Mining assets

    Would even be more interesting to separate how much in Gold and how much in Silver.

    Thank you for considering the answer.

  7. (Dave)

    I am roughly 50/50 physical gold/silver and mining stocks. Of the physical, I'm roughly 50/50 gold/silver. I keep only 1 oz. sovereign-minted coins. Our fund is 65/35 physical/stocks. Our physical is mostly 1 oz. sovereign coins because we need "fungibilty" because we allow our investors to receive their "pro rata" share of the bullion, at their option, when they cash out.

    To the person who thinks cash is cash and cash is fine: I disagree. I believe we will eventually see the day when a lot of businesses will not accept U.S. dollars. I know legally that is require, but they are not required to sell you anything. Furthermore, one of these days there will eventually be a massive devaluation and currency exchange like we saw in Weimar Germany and, recently, in Zimbabwe. Your cash in the bank and in your desk drawer will be worth a very small fraction of what it was worth the day before. BUT your physical gold and silver will not only hold its value, it will likely go up a lot in value that day. What happens if you happened to have sold a lot of CEF the day before and had that cash in your account? ROFLMAO. Whoops!

    Think I'm nuts? I have 5000 years of historical experience on my side of the bet because that is what ALWAYS happens to fiat systems.

    Feel free to believe that America is unique and the greatest every blah blah blah, but I like like the probability of my view being correct because for 5,000 years the probability has been 100%


    Define bubble in gold price ala 1980...110%(Money Supply)
    Gold during depression...40% money supply

    8000 gold today~money supply supply moving target.

    ie...not even close to bubble territory

  9. Does it really matter if you work in government? Seems not...what a schmuck I am.

    A dozen O.C. city managers hit $300K-plus club

    We noted the five most-handsomely-compensated CMs (Laguna Hills, Buena Park, Lake Forest, Anaheim, Santa Ana) and the five most soberly-compensated CMs (Villa Park, Los Alamitos, La Habra, Yorba Linda, Stanton). But what of the other 24 cities?!

    The answer is on the lovely chart below. Add these cities to the $300K City Manager Club:

    Irvine, $335,765 (benefits make up 25%)
    Laguna Niguel, $333,823 (benefits make up 32%)
    Garden Grove, $328,525 (benefits make up 29%)
    Huntington Beach, $317,234 (benefits make up 22%)
    Mission Viejo, $308,786 (benefits make up 36%)
    San Clemente, $303,342 (benefits make up 36%)
    Orange, $302,810, (benefits make up 30%)

    Benefits averaged 26 percent of the total, but were much higher, and much lower, in some cases.

    The spread between the highest comp ($378,427 in Laguna Hills) and the lowest comp ($185,045 in Villa Park) was a rather striking $193,382.

    The Laguna Hills city manager’s comp includes a onetime payout of $30,097 for unused paid time off.

  10. Dave hop all is well.

    Note: Sit down.



    Listen if you have interest in gold markets
    ned naylor-leyland

  12. Nails it....

    Because strong enforcement of laws against fraud is a basic prerequisite for trust, I believe Smith would be disgusted by the lack of prosecution of Wall Street fraudsters today.

    And Smith warned against the pitfalls of fiat currencies unpegged to anything real:

    The problem with fiat money is that it rewards the minority that can handle money, but fools the generation that has worked and saved money.

    It is certain that Smith would rail against our current financial, monetary, economic and legal systems as violating the most important foundations of sound economics.

  13. What's wrong with this picture?..

    Biden charging Secret Service for cottage rental

    The U.S. Secret Service does more than protect Vice President Joseph R. Biden Jr. — the agency also pays him rent.

    Since April, Mr. Biden has collected more than $13,000 from the agency charged with protecting him and his family, for use of a rental cottage adjacent to the waterfront home he owns in a Wilmington, Del., neighborhood.

    Officials say the arrangement came about when a previous tenant moved out of the cottage and the Secret Service moved in.

    Edwin M. Donovan, special agent in charge at the Secret Service's Office of Government and Public Affairs in Washington, said the agency pays $2,200 in rent per-month, the same amount a previous tenant had paid before moving out.

    “He should be afforded every single protection available to him and his family, as should every vice president and president,” said Leslie Paige, spokeswoman for the Washington-based Citizens Against Government Waste.

    “But this arrangement seems bizarre to me,” she added. “You’d think the vice president, who shepherded the deficit committee, would think twice about charging the Secret Service rent. Why would he need the money? I don’t get it.”

  14. Do NOT swing by my site tonight if you are hungry, made a killer pulled pork! New debt deal, trillions more on the way. It never ends.

  15. Its amazing how Silver really gets shafted from both ends always....

    When it suits traders silver is a commodity on the other hand when it suits them its a monetary metal. Its a Schizophrenic metal.

    This trader culture has lead us into this hole the world is in. Wanting to make money doing nothing productive but swings in prices. Its not the bankers, politician and people themselves but their culture of flipping things at a profit for no added value to the world.

    Free lunches

  16. How many people truly understand how money is formed? pass around this cartoon

    About Banks and Money

    As the cartoon says at the end...End The Fed!

  17. I would not buy PSLV at this time since it sells at a 16% premium to NAV. Now would be a good time to buy Phys since the premium is only 2%.