Friday, September 21, 2012

"Gold Seen Luring Wealthy As Central Bankers Expand Stimulus"

Right now, the best expression of our macro view is still to own gold and silver because we believe this is ultimately going to be the survivor of this Debt Supercycle.  We believe it’s going to be the surviving collateral...You have to countenance into the largest Debt Supercycle that’s known to man, that what happened in the late 1970s could pale in significance relative to what could happen in the next five years here. I think September 12th might well have marked the day the world embarked on serial debasement of the reserve currency, and set the train in motion for a really gigantic move in gold over the next five years.  There is no limit to the price.  - Ben Davies, King World News LINK
I think most people are aware that Ron Paul's legislation requiring a thorough, independent audit of the Fed has passed in the House.  I also think most people are unaware that Senate Majority Leader, Harry Reid, is trying to kill this legislation in the Senate.  Does anyone see the irony here?  The Democrats stormed DC in 2008 on a campaign platform of "Change."  Obama promised to clean up the corruption on Capitol Hill and make Government more transparent.  After all, isn't it supposed to be a "Government of the People, by the People, for People?"  It seems Obama and Harry Reid skipped over that part of the history lesson in grade school.  In fact, Obama is supposedly a Constitutional Law expert.  But from the legislation and Executive Orders signed by Obama during his 1st term, I have every reason to believe he's never even read the Bill of Rights (the first 10 Amendments).  As an example:  Sayonara habeas corpus

At any rate, there seems to be significant resistance from the Democrats for legislation requiring an audit of the Fed.  This makes no sense because aren't the Democrats supposed to be the party of the 99%'ers?  What gives?  It took getting the swishy Democrat, Barney Frank, out of the way of the House Finance Committee in order to get Ron Paul's legislation out of committee and to the House floor, where it passed overwhelmingly.  But now Harry Reid stands in the way.  If you want to voice your opinion on this matter, please fill out this form and hit "send my fax:"  LINK  I don't know about anyone else, but at the very least I would like to see what the Fed is doing with the gold swap transactions alluded to by former Fed Chief Counsel, Kevin Warsh, and I would like to see how the dollars are being directed in Europe from the Fed's massive currency swap facility.

A news item in the Financial Times - and likely one that will not be repeated by U.S. media sources - that caught my eye this morning was the Brazilian Finance Minister lashing out at the Fed over QE3:
Guido Mantega, Brazil’s finance minister, has warned that the US Federal Reserve’s “protectionist” move to roll out more quantitative easing will reignite the currency wars with potentially drastic consequences for the rest of the world.  LINK
Brazil?  A lot of people might dismiss commentary like that from Brazil's Government.  But Brazil is one of the faster growing economies of the world right now, it's a large trading partner with the U.S. and it has begun to economically and financially ally itself with China/Russia.  This China alliance includes the implementation of a currency swap facility which enables China and Brazil to conduct trade in their respective currencies, thereby bypassing the U.S. dollar as the trading medium and rendering the dollar irrelevant for such purposes. The point here is that the U.S. dollar is losing its status as the world's reserve currency.  And more quickly than most realize, I might add.

The only way to protect your wealth against the incipient currency wars (see the quote above), is to move as much of your paper wealth as possible into gold and silver.  It seems this is becoming a trend among the so-called 1%'ers - of the world:
Gold has historically been considered to be a store of value and an inflation hedge and increasingly it is being utilized as a monetary instrument,” said Mark Smallwood, head of Asia-Pacific wealth-management solutions. “There is a growing interest among our clients to gain exposure,” he said, with an increased preference for physical holdings
Here's the source of that quote from Bloomberg News:  LINK  Please note the direct and explicit reference to "physical holdings."  That is the most important aspect of holding gold as a currency and wealth hedge.  This is a point that is completely dismissed and ignored by 99% of all financial advisers and 99% of all people who think they own gold by owning GLD, SLV, CEF, GTU.   With those vehicles you only own a security certificate and when you sell it you are left with - fiat dollars.  This is a tragic misunderstanding of the gold dynamic and it will end badly for those who remain blind to it.

It's a football Friday and the Broncos have another tough match-up this week, hosting a big game this Sunday vs. the Houston Texans.  Manning had a rough outing last week against the Falcons, but despite four 1st half turnovers, the Broncos had a shot at winning that game late in the 4th quarter.  The Texans won't be as lucky as the Falcons were against Manning and I expect that Denver will easily cover the 2 points Vegas is giving them.  Have a great weekend:


  1. Sadly, I don't think "most people" know about the audit legislation and Harry Reid blocking it. If most people knew of the economic peril the world was in, physical gold and silver demand would be insane.

  2. How to Lose Weight Fast the Deutsche Bank Way

    Imagine if I told you I could reduce my own body weight by 80 percent or more, on paper, through a series of calculations utilizing my own proprietary mathematical models, the details of which are so complex and highly prized that I couldn’t divulge them.
    You would be right not to believe me, and might think I’m nuts. Yet this, in essence, is what regulators let banks do all the time with their balance sheets. Huge swaths of assets are allowed to vanish, making too-big-to-fail financial institutions seem leaner and safer than they are.

    Under the system known as risk weighting, banks get away with this because they are allowed to stipulate that some assets carry little, if any, risk. Many government bonds, for instance, fall into the riskless category for purposes of determining regulatory-capital ratios. So a bank can assume it won’t incur losses on them, which allows it to keep a lower capital cushion. The flaw here is that rulemakers aren’t good at predicting what kinds of assets might blow up. Some governments, especially in Europe, are in awful shape and pose a real risk of defaulting.

    In other words, the notion of risk weighting is a farce, at least the way it is practiced now.

    Speaking Out
    The American speaking out against the latest Basel proposal is Thomas Hoenig, the former head of the Federal Reserve Bank of Kansas City who now sits on the Federal Deposit Insurance Corp.’s board. And to see why he is right to do so, take a look at Germany’s largest bank, Deutsche Bank AG. (DBK)

    Deutsche Bank had 2.24 trillion euros ($2.84 trillion) of assets on its June 30 balance sheet, which was prepared using the International Accounting Standards Board’s rules. Yet the company said it had only 372.6 billion euros of risk-weighted assets. That’s the figure it used to come up with a 10.2 percent capital ratio for regulatory purposes.

    So, somehow Deutsche Bank made 83 percent of its assets disappear, which really is all you need to know to realize that the whole Basel construct is a sham.

  3. It is quite clear that Harry Reid wants to keep certain hidden agendas alive and well. The man would be sent packing by our forefathers if somehow time could be brought back to that period and this scumbag could be tried !

    We have mostly the inept in office right now.

    There are good and true leaders out there that would step up to the plate should the political environment be right for the position.

    Unfortunately the only classification that is worthy of the present day Washington D.C. climate is one big clown shoe.

  4. The entire charade is a sham. Ron Paul had good intentions, but neither party will truly support it. And what in fact would it accomplish? Public awareness of what? That 14 generational banking dynasty's control the fate of the world through their influence of the centrally planned systemic order defined by the FED and its primary dealers, ECB and their equivalents, UST, CIA, ESF, IMF and BIS?
    Those who matter (in other countries) already know this and are well along dealing with it. As for the sheople here who will never open their eyes to reality, they neither matter, no will a FED audit convince them.
    We are WELL beyond the utility of such an action, being so close to the next stage in the plan.
    But of course, it is fun to sit back on the sidelines and watch the hilarity of the motions, or the acts playing out in this well known but yet compelling drama ;0)

  5. Blackstone to buy $1 billion worth of Tampa Bay homes for rentals

    A Wall Street behemoth plans to spend $1 billion on Tampa Bay's hobbled housing market, dispatching teams of brokers to scour neighborhoods and buy hundreds of homes a month.

    But rather than resell the homes, the Blackstone Group is opting to become a landlord, renting the homes to tenants including foreclosed ex-homeowners burned by the housing crash.

    Blackstone, one of the nation's largest private-equity firms, plans to buy as many as 15,000 homes in Tampa Bay over the next three years, many of them foreclosures, capitalizing on decimated home prices and growing rents.

    The shopping spree, and those of half a dozen other big investment firms and hedge funds, could radically change the local home landscape, as big-money brokers compete with first-time buyers and mom-and-pop landlords over homes in tight supply.

    "It's a land grab unlike anything we've ever seen," said Peter Murphy, CEO of Home Encounter, the largest manager of rental homes in Tampa Bay. "You're going to drive through parts of town and all of it is going to be institutionally owned."
    Blackstone would install its own property manager and cover maintenance, taxes and insurance, Pavonetti said. He would not specify rental rates, but brokers seeking homes for other funds said rents would hover around 1 percent of the home's purchase price, or about $1,500 a month on a $150,000 home.
    The competition is not just for rent checks.

    Bankers are looking at bundling the future payments as trusts or securities to sell to investors, much like mortgages were pooled and sold during the housing boom.

    Banks and mortgage giants are getting in on the growing rental market. Earlier this month, in its first bulk sale of foreclosures, Fannie Mae sold 699 Florida rental homes to a San Diego investment firm for nearly $80 million.

    what a game...

  6. Federal agents are investigating the peddling of bogus gold bars in Midtown.

    The Post has learned as many as 10 fake gold bars -- made up mostly of relatively worthless tungsten -- were sold recently to unsuspecting dealers in Manhattan's Midtown Diamond District.

    The price of gold has risen more than 600 percent since January 2000, while the S&P 500 index is down 0.6 percent over the same period.

    The 10-ounce gold bars are hugely popular with Main Street investors, and it is not known how many of the fake gold bars were sold to dealers -- or if any fake bars were purchased by the public.

  7. Dave,

    I've watched several good gold miner interviews in the past few days/weeks: Giustra, McEwen, Casey, Nolan Watson, Sinclair, and others. A common thread among them all is that good stock picking for gold/silver miners starts with following the smart money/experienced management teams.

    Any thoughts/ideas on how to research who these people are and where they are working and investing? There is a crap ton of websites and newsletters on gold mining, but as newb, for the most part, I can't tell the wheat from the chaffe. And from what I'm hearing in the interviews, there's lots of chaffe. Which means, there is propably lots of bogus self promotion, posing as objective journalism.

    Love your site/insights.


    1. Thanks for the feedback. I appreciate it.

      I think with mining stocks you pretty much have to do your own due diligence. I scan the publicly available information for as many new ideas as possible and then I narrow it down pretty quickly based on the criteria I use to evaluate mid-tiers and juniors. Quite frankly, I don't trust anyone else's work other than my own.

      A good place to start is to comb thru the holdings of the mutual funds that hold junior mining stocks. I'm not really interested in the large cap miners other than GG, AEM, HL and GORO (I guess OSK can be considered a large cap too. Most of the really big mining companies are depleting much faster than they are replacing, are poorly managed, and have litigation issues in a lot of jurisdictions.

    2. Yes, I did start with looking at what stocks were held by the gold funds and the ETFs, and then I looked for management that was related to Goldcorp. Not very sophisticated, but...

      I know you've a lot of accounting skill, unfortunately I don't, so I would not trust my own work on that end.

      I just talked to our coal/emissions trader at work (who apparently years ago ran a small gold mining company - I didn't know this 1 hr ago), and he recco'd sticking with ETFs given my experience level in the mining business. I'll probaby do that with the bulk of my mining equity, and maybe try to do some additional cherry picking based on momentum/relative strength.

      I know the worst thing to do is to get the concept right, "Precious Metals/Mining Stocks", and then try to be cute picking just "the best", and picking the wrong ones and, thus missing most of the move.

    3. I'd love to post everything I invest in, but my fund clients pay fees for investing in our fund. I have posted some names we own in the past like Eurasian Minerals, Rye Patch Gold, etc. I recently added Almaden Minerals below 2.20 and I can say with confidence that would be a good one to start accumulating on pullbacks. Same deal with EMXX and RPM.V/RPMGF.

      The other problem I have is that once I start posting stock ideas and they don't work out, I get a lot of shit. Just not worth it. I make mistakes, but my home runs more than make up for mistakes.

      I don't think the junior ETF's offer much return potential over and above a mutual fund or the large cap ETF's. The "junior" ETFs have way too many holdings in them (diversify away the reason to own juniors) and most of the stocks are pretty large cap anyway. You'd be just as well off owning GDX or NUGT.

      Start with the 3 I just mentioned and then try your hand at looking at a few on your own. I like to use this site: and this site: for ideas. In fact I got AAU from and interview on The Gold Report.

    4. Thanks, I appreciate. I'll check those out. Doug Casey said only 4 of the Explorers were worth holding (Which? I don't know), and there are a lot more than that in GLDX.

      BTW, my coworker said that while running the Gold Miner, industry wags would call and say, "if you give us 50,000 shares" we'll say nice things about your company." Hard to believe, right? ;)

      Regarding picks, I remember in 2004 or so, Gartman was calling for a bull market in "things that will hurt if you dropped them on your foot." He was way right on the call, but he focused on just 4 stocks, and they ended up being the dogs of the sector/trend.

      Who are the columnists/interview subjects on Gold Report, etal. that you'd recco reading/following? There's a lot on stuff on that site, so...

      Thanks again,

    5. that's why i don't listen to Doug Casey on mining stocks period. coincidentally, Casey Research likes Rye Patch Gold, but I didn't source the idea from him. In fact, I delete any of his stock research emails without reading them.

      again, most of the stocks held in GDXJ and JUNR are not technically "junior" explorers. Most of them have pretty big mkt caps. Many of them are already in production.

      the ideal junior has a mkt cap under 100mm, mgmt owns at least 10%, enough cash to fund operations for at least a year, and large cap major mining company who has at least a 10% "look-see" stake in the equity. Rye Patch fits all of the above...

    6. Dave looks like there is a close association with Mr. Casey and another one of your faves:

      "Almaden's experienced management

      Duane Poliquin, Chairman and founder of Almaden, is a professional geological engineer and a member of Casey Research's Explorers’ League with over 40+ years of world-wide experience including the discovery of several mines.

      Morgan Poliquin, Almaden's President and CEO, is a professional geological engineer with Ph.D in Geology and a member of Casey Research's NexTen."

  8. Now China has the claim on Venezuela's Las Cristinas gold mine

    CARACAS, Venezuela -- Chinese and Venezuelan officials signed an agreement Friday to jointly develop one of the world's largest gold mines.

    The agreement to develop the Las Cristinas gold mine was signed by officials of the Venezuelan government and the Chinese company China International Trust and Investment Corp., or Citic. The mine in southern Bolivar state has been estimated to hold about 17 million ounces of gold.

    President Hugo Chavez called it an agreement to begin exploiting both gold and copper deposits at the mine. He called Las Cristinas "one of the biggest reservoirs of gold that exists -- not only in Venezuela, not only in Latin America, but in the world."

    China's ties with Venezuela have grown rapidly in recent years. China also has become the country's biggest creditor, offering Chavez's government more than $36 billion in loans, which are being paid off largely with increasing oil shipments.

  9. "Occupy the Economy: Challenging Capitalism"
    David Barsamian; Richard Wolff
    About the Program

    Richard Wolff and David Barsamian talk about our economic crisis and argue that it can be traced back to the 1970s, when our economic system shifted from benefiting a vast majority of Americans to one which mostly benefits only the very rich. This event was hosted by City Lights Bookstore in San Francisco.

  10. I am not sure I would call it "irony."

    Lies comes to mind. Fraud, Two-Faced, etc.

    The whole thing with Paul's bill reminds me of a game I used to play with my puppy. Tug of war. I'd let the pup have a lot of slack, allowing him to think he was winning. Until he reached the end of the rope. Snap.

    Of course the interesting thing was, as the pup turned into an adult dog that game got a lot more difficult and that big dog would win.

    Hopefully, we'll get to that point here as well.

  11. Germany Eyes Gold Standard
    That’s just for openers. The report then goes on to assert that gold is misunderstood and doesn’t really belong in the basket of “commodities” used by so many economists. Gold is money, according to the Deutsche Bank. Says it: “We would go further however, and argue that gold could be characterised as ‘good’ money as opposed to ‘bad’ money which would be represented by many of today’s fiat currencies.” It refers to Gresham’s Law and suggests “the undervalued money (good) will leave the country or disappear from circulation into hoards, while the overvalued money (bad) will flood into circulation.”
    There follows a discussion that would make Ron Paul blush, though it doesn’t mention the congressman who, with the businessman scholar Lewis Lehrman, has been pushing this issue all these years. Deutsche Bank notes that discussion of the gold standard has become a common theme, a development that “says much about the change in attitudes by investors, many who would have ridiculed the mere mention of such a thing as little as five years ago.” It suggests the talk “perhaps gives a hint as to the desperation of investors.”

    This gives rise to the thought that if America is not going to lead on monetary reform, Germany is in a position to do so. There has, after all, been a bit of talk lately about how it should be not Greece but Germany that leaves the Euro. If Berlin wanted to take that course, a campaign for “good” money, as the Deutsche Bank calls it, would certainly be the strategy.