Monday, September 26, 2011

It's Getting Very Ugly Out "There"

Here's a statement made by an independent trader in London interviewed by the BBC - it's hard to disagree with this assessment:  "This economic crisis is like a cancer, if you just wait and wait hoping it is going to go away, just like a cancer it is going to grow and it will be too late!"  He goes on to warn that you need to be prepared before the real shit hits the fan.  You can see the 3-minute video at

Rest assured, of course, that you will never see a brutally truthful interview like that aired on mainstream network media in this country. 

One thing I've been debating with a colleague is whether or not this current timeframe and cycle of events is going to repeat the same cycle as in 2008.  If that's the case, it means there could be some more downside for gold and silver.  HOWEVER, at this point it is my view that, because so many analysts and market participants are of the belief that we're in for a 2008 repeat, it will be a self-fulfilling prophecy - if you will - that 2011 won't be like 2008.  In many ways the next 12 months will be significantly worse. 

I will say that the public's continued ignorance about what is really happening - and ignorance about precious metals - continues unabated.  Anectdotally I had a conversation with an acquaintance on Saturday who asked what I do for a living.  When I told  him he said "seems like a lot of people are into gold these days."  To that I responded:  "you'd be surprised how few people actually own any gold and silver - especially if you don't include GLD - nor do they understand why you need to own them."  And to that he said: "well, count me as one of the ones who don't get it and don't own any."  Poor slob.  I then went on to hammer him quickly in a tennis match tiebreak 10-4...

But don't take any of this from me, read/listen to what James Turk has to say about this.  King World News posted an interview with Turk over the weekend.  Turk is one of the few analysts that I believe are worth paying attention to when they share their wisdom:
We're going through something - it's not just a cyclical problem that we're dealing with, we're dealing with a structural problem.  And that's why what we're heading into is probably going to be much worse than what we saw in 2008.  So, in that kind of environment, I feel very very comfortable owning physical gold and owning physical silver as well as the mining shares because to me they still represent good value and they have usefulness because you know they don't have counterparty risk when you own them...
Here's the link to that interview and I highly recommend taking the time to listen:  LINK

The overnight hit in gold and silver occurred when the Shanghai metal exchange raised the margins for paper silver by 20% last night.  However, we know from the premiums being reported out of India, Viet Nam and China that investors were buying up physical gold and silver at these lower levels.  At some point - likely soon - the paper manipulators will once again be overwhelmed by the sheer size of demand for physically delivered metal.


  1. Thanks, Dave, your commentary is invaluable.

  2. New York Sun: Lehrman to present plan for return to gold standard

  3. Dave, bring some levity to the situation and watch Ron Paul on The Daily Show tonight.

  4. Hey Chico,

    Good stuff on la Cancha.

    The mighty USD and YEN. Rally has just begun.
    Wait for Eurotarp and the Trichet rate drops.

    Time to go get some metals with my mighty FIAT.

    Need a oz Chico?

  5. (Dave)

    Thanks. An ounce of what? LOL

  6. Vietnam brainstorms on awaking the 500 tons of gold

    Especially, people can use the gold certificates as collateral for borrowing money or transfer the certificates, while no need to use in-kind gold, which proves to be safer than using real estate as the mortgaged assets for loans.

    “This should be seen as one of the very important solutions to create a financial tool for the finance market in particular and the national economy in general,” Nghia said.

    Experts say that after mobilizing gold from the public, the State Bank can use the gold to stabilize the market or use the gold as the mortgaged assets, for borrowing money from foreign sources to serve the development of the national economy.

  7. "Hi- I would like to buy the house and property on the water that you have had a For Sale sign on for a 1/2 a much ?...150 ounces of silver and you'll be thrilled!? No problem !"

    " How much will you take for that side of beef butchered - 3 silver quarters - ? Here you go ! "

    " Fill er up - how much ? - 2 silver dimes - hold it - Thanks! "

    Just getting it down by role playing ...

  8. The paper shorts can cheer to oblivion as JPM and the Hang Shen recycle paper gains back into consolidation.

    But when the confidence in paper fails completely what will they consolidate with then? When the paper is less than fit to wipe ass, what good is cash settlement?

    As debt defaults the confidence fails. Printing parties do not "produce" a sovereign out of insolvency.

    Gold must be mined, produced, refined. It is HARD money to work for. Paper promises are EASY to make, EASY to break.

    There is nothing to explain or apologise for. It is sheer illusion to accept the wealth reserve asset of last resort as being "priced in debt".

    There is no need to have bad dreams over a magic trick. The LONG run will be parabolic.

    HANG and HOLD.
    (anyone wishing to read the archives at letthemfail can contact me at for a valid user pass)

  9. Just an observation I made at my coin dealer concerning the things he has for sale-

    His gold and gold coins are kept in the safe

    His silver and silver coins are kept in the display case

    His paper money from foreign countries (i.e. worthless fiat) is left in a plastic bin that anyone can sort through (not that anyone does.)

  10. September 26, 2011
    When There's Nothing Left to Lose
    Saving the Rich, Losing the Economy

    When consumer debt could rise no further, the large fraudulent component in mortgage-backed derivatives and the unreserved swaps (AIG, for example) threatened financial institutions with insolvency and froze the banking system. Banks no longer trusted one another. Cash was hoarded. Treasury Secretary Paulson, browbeat Congress into massive taxpayer loans to financial institutions that functioned as casinos. The Paulson Bailout (TARP) was large but insignificant compared to the $16.1 trillion (a sum larger than US GDP or national debt) that the Federal Reserve lent to private financial institutions in the US and Europe.

    In making these loans, the Federal Reserve violated its own rules. At this point, capitalism ceased to function. The financial institutions were “too big to fail,” and thus taxpayer subsidies took the place of bankruptcy and reorganization. In a word, the US financial system was socialized as the losses of the American financial institutions were transferred to taxpayers.

  11. Is this supposed to create a chilling effect??

    The Federal Reserve Plans To Identify “Key Bloggers” And Monitor Billions Of Conversations About The Fed On Facebook, Twitter...

    As first reported on Zero Hedge, the Federal Reserve Bank of New York has issued a "Request for Proposal" to suppliers who may be interested in participating in the development of a "Sentiment Analysis And Social Media Monitoring Solution". In other words, the Federal Reserve wants to develop a highly sophisticated system that will gather everything that you and I say about the Federal Reserve on the Internet and that will analyze what our feelings about the Fed are. Obviously, any "positive" feelings about the Fed would not be a problem. What they really want to do is to gather information on everyone that views the Federal Reserve negatively. It is unclear how they plan to use this information once they have it, but considering how many alternative media sources have been shut down lately, this is obviously a very troubling sign.

    You can read this "Request for Proposal" right here. Posted below are some of the key quotes from the document (in bold) with some of my own commentary in between the quotes....

    "The intent is to establish a fair and equitable partnership with a market leader who will who gather data from various social media outlets and news sources and provide applicable reporting to FRBNY. This Request for Proposal ("RFP") was created in an effort to support FRBNY's Social Media Listening Platforms initiative."“key-bloggers”-and-monitor-billions-conversations-about-f?

  12. Izabella Kaminska: How central banks use ETFs to keep gold down

    Drawing on research by gold price suppression litigator Reginald H. Howe, Kaminska writes:

    "While the likes of GLD insist that every share outstanding is matched by a gold bar -- and this is almost definitely true -- what they can't claim is that there's a way to differentiate gold with previous claims on it from gold without previous claims on it within its reserves (i.e., borrowed gold). It is consequently entirely possible that gold ETFs are sitting on mountains of borrowed central bank gold.

    "GLD's defence, of course, is that prior claims on its reserves are not their concern. They are the liablity of the party that delivered the gold to GLD (almost certainly a bullion bank). Thus it is the bullion bank that risks being squeezed on delivery in the physical market, not GLD.

    "Of course, with a negative interest rate for borrowing gold, the bullion banks are being more than compensated for the risk of a squeeze. On top of everything they can always create new GLD shares ad infinitum, if needs be. (At least until all central bank gold stock has been lent into gold ETFs, arguably forcing central banks to replenish the gold lending pool via market purchases.)

    "In the above scenario -- in which bullion banks are possibly recycling borrowed gold into GLD shares to sell into the market -- these short sales will put pressure on GLD units themselves."

  13. Seems Like Mexico Purchased 110 Tons Of Gold That Don't Exist

    By entering into such arrangements, the Bank of Mexico has become an unsecured creditor of the bullion bank that sold them on the deal. Like so many other institutional and private investors, Banxico has made the mistake of trusting the London bullion bankers. It was duped into buying what is essentially an unsecured "bond" giving a claim not on gold, but rather, merely upon the general assets of the selling bank.

    Banxico clearly does not know what it has bought. It is almost certain that neither legal title nor the actual bars of gold have been transferred to Mexico. Thankfully, the issue is now out in the open. As a result, I have no doubt that when top Mexican banking officials cross examine the London bankers about this a show will be privately made to assure the Mexicans that delivery can be made at any time. But a number of gold bars could be shown to them, including bar numbers, weights, etc., even though the bars also have other claims on them.