Wednesday, January 2, 2013

The Fiscal Cliff And Gold

America will endure until the day Congress discovers that it can bribe the public with the public's money - Alexis de Tocqueville
I mentioned twice in November that the Fiscal Cliff would be averted with a last minute deal that would postpone America's budgetary day of reckoning.   And of course the clowns in Congress and in the White House once again did not fail to disappoint.

I just came across a fact about that new agreement that you will definitely NOT see mentioned in any of the mainstream media -  yesterday's deal included an extenstion of a big tax break for Hollywood: Movie Mogul Tax Break and for Warren Buffet:  And For Railroad Owners  The latter will benefit Phil Anschutz, Denver's local zillionaire.  I guess Buffet's big fundraising dinners for Obama paid off nicely.  I'm sure Phil takes care of the The Big O as well.

At any rate, I wrote piece published on Seekingalpha that explains why yesterday's Cliff deal will help grease the set-up for the next big run in gold/silver:  "the Fiscal Cliff deal will now lead to a much higher Treasury debt limit ceiling - if not the complete elimination of it, which has been proposed by Obama - and a much higher level of QE. How do you invest knowing this ahead of time?"  Here's the LINK

Next on deck will be the dealings over the debt ceiling limit, which was breached in late December.  You can be sure that Congress will pass a huge ceiling raise, if not a total elimination of the ceiling, because otherwise they won't get their paychecks and Harry Reid, John Boehner and Nancy Pelosi will have to furlough their limo drivers...


  1. Why we are going off the fiscal cliff deal or no deal.

    Take a look at the governent's own website showing historical levels of debt...

    You will see that it took from 1790-1982 (192 years) to reach 1 trillion dollars of federal debt. The US goes into debt 1 trillion dollars more in debt yearly. Maybe if the US is really lucky it will turn into Brazimerica instead of Mad Max land (one can hope)
    Got Gold?
    Got Silver?
    Got Luck?(we will need that too)

  2. Big Banks Are “Black Boxes,” Disclosure is “Woeful”

    The second is the heart of the article: How opaque, misleading, non-disclosing and — WTF, let’s just say it — fraudulent bank balance sheets are.

  3. Dave,

    After reading the movie mogul tax break article over at I noticed another article there written by a former DEA employee extolling the virtues of exchanging paper fiat for nickels, stating that we're currently in a time period with nickels similar to pre 1965 coinage. I can't magine this being a better investment than silver not to mention the challenges of storage. Your thoughts? here's the link

    1. LOL. Sounds like that dude was exposed to too much agent orange.

      Stick with 1 oz. silver eagles.

    2. The DEA guy is really "late to the dance" so to speak.
      There is a forum called Realcent where they talk about hoarding pre 82 pennies (which are worth currently 2 cents each) nickels (and the joy of finding the occasional silver war nickel to add to their hoard) gold, silver, basically trading in paper for metal at cost or below cost. I know some will roll their eyes at the idea of buying pennies and nickels, but those who do are investing far better than the sheeple who put their life savings in "safe" bonds. Laugh if you want, but to each his own.

  4. Phil Anschutz is a far-right evangelical Christian who has supported the Tea Party in the past. I doubt he would fund Obama for anything.

    Gold and gold stocks are having a selloff on the second trading day of the year. Could this finally be the year that gold drops despite the protestations of people like you, Dave?

    1. re gold: NO

      RE: Anschutz - yes I know all about Anschutz - very good friend of mine used to play squash with his son-in-law.

      If anything, despite public appearances, Anschutz is a political atheist. If you research his party donations over the years, he contributes heavily to both parties, like all elitists do.

      In fact, he is the reason that Michael Bennet - a HUGE democrat - was elected to the Senate in the 2010 election, despite heavy support for his primary opponent.

    2. People are just dumping the miners and gold, Dave, ever since the FOMC minutes came out. Seems that QE may have a limited lifespan after all. This is bad for bonds and bad for the metals plays, while its dollar-bullish. I think hubris may have ossified among the gold bugs since gold has gone up every year since the early 2000's. Reminds me of home speculators in the mid 2000's. Nothing can go wrong, right?

    3. "Nothing can go wrong" huh? Gold/silver have been highly manipulated for over 3 decades. GATA is doing a great job cataloging all the official documents coming out which acknowledge this.

      There's a reason gold has gone up for 12 straight years. It's controlled price appreciation. It's the best they can do. If anything, the fundamentals are getting stronger by the day, especially the demand vs. supply equation.

      Explain to me how the Fed can stop QE w/out either causing Treasury auction failure OR a missive spike higher in interest rates in order to induce new money?

      Seriously? The Fed has purchased something like 70% of all new Treasury bonds over the past 3 years. If they stop, who will replace them? Look at the growth in the Fed balance sheet. Most of that is Treasury purchases. Who will buy Treasuries if the Fed does not?

      Today was a good day to reload/add to positions. I reloaded party of what I took profits in yesterday.

  5. The Global Derivative Graveyard Problem


    A major hallmark of SIFIs is their activity in financial derivatives markets. The analysis of this paper has one clear message. The global derivatives markets in the post Lehman period, despite considerable compression of bilateral positions, are unstable and they can bring about catastrophic failure. Quite simply, a threat of failure to any of the SIFIs is an immediate threat to the others. The network topology where the very high percentage of exposures is concentrated among a few highly interconnected banks implies that they will stand and fall together. This topological fragility of the derivatives markets as risk sharing institutions has an implicit moral hazard problem that undermines their social usefulness. The empirically calibrated network for derivatives liabilities manifests a highly clustered core- periphery structure and extreme form of TITF as seen in Figures 5.a- 5.f. The implied socialized losses are very large (to the tune of US$350 billion) and the liabilities arising from extant derivatives network structures cannot be supported by the existing capital base. The good news is that the highly clustered network structure permits targeted management of systemic risk. One of the main contributions of the paper is to use network analysis to design a set of surcharges that will enable the SIFIs in the derivatives markets to internalize the costs imposed on other FIs and also the tax payer by their failure.

  6. I-T finds Tirupur man with US bonds worth $5bn

    COIMBATORE: The investigation wing of the Income Tax (I-T) department in Coimbatore has seized US treasury bonds worth about Rs 27,500 crore from a 45-year- old man claiming to be a financial broker-cum-business consultant in Dharapuram in Tirupur district.

    I-T sleuths here said the bonds were seized in a raid on December 31 at the residence of T M Ramalingam on Dharapuram-Palani Road near Upputhurai, about 80 kms from Coimbatore, in Tirupur district. The bonds are worth $5 billion. The investigating officers have also seized other financial documents from him including Rs 1.5 crore in fixed deposit receipts from banks in Tirupur district.

    They have sent the seized bonds to the financial intelligence unit wing in New Delhi for verifying its authenticity. They will also probe his source of income and financial status to confirm whether he had procured the bonds on his own or was acting as a conduit for any other industrial baron in the state, especially in the western region.

    "We have seized the bonds and are now trying to verify whether those are genuine. The raid was conducted on Wednesday on the basis of a tip-off from financial consultants. This appears to be the most baffling raid as the individual does not seem like a person who could raise such a huge amount. But we are verifying and tracking his financial transaction and business dealings to confirm these details," said a senior I-T official here in Coimbatore.
    According to I-T officials, Ramalingam, who claims to be a financial broker involved in numerous business deals, was in possession of the bonds issued by the US Federal Reserve, which had his name and address printed on it. Sources claimed the dates mentioned on the bonds were 2014 and 2015. "It looks genuine but we cannot confirm anything at the moment," said a senior I-T official.

  7. The rout is on. The weak hands and lemmings are fleeing.

    1. I guess you will be a lemming holding on back to 5 dollars for silver. This manipulation crap is just that crap - more and more see it that way. The physical sellers have yet to run out of silver. Silver was suppost to be a hedge against bad and good times - well according to the S&P things are good - so Silver isn't!!

      And for that "whistleblower" - he isn't even an insider - so how can he be a whistleblower? Ted Butler and Andrew Maguire are the lemmings!! Read a bit of screwtapes files blog.

      One thing everyone always says - don't fight the Central Banks and the big money and yet in gold all these newsletter writers continue to want to fight them - it has become a fruitless exercise.

      And this bullshit about low volume take downs, it's the low volume upticks and the large volume down drafts you need to wake up to. this bravado is funny about buying more on the way down.

      Even from a country such as India - which is supposed to be gold friendly it's becoming a problem and they are in there manipulating just as heavily as everyone else.

  8. S.E.C. Ends Scrutiny of Former Top Aide to Buffett

    The Securities and Exchange Commission has decided not to file insider trading charges against David L. Sokol, a onetime top lieutenant at Berkshire Hathaway, Mr. Sokol's lawyer said Thursday.

    Mr. Sokol came under scrutiny in 2011 after abruptly resigning as chairman of Berkshire's MidAmerican Energy Holdings, one of the many holdings of the investment conglomerate run by the billionaire Warren E. Buffett. At the time, Berkshire revealed that Mr. Sokol bought shares in Lubrizol, a maker of lubricants that he wanted Mr. Buffett to buy. Mr. Sokol bought the shares about two months before Berkshire announced a $9 billion acquisition of the company. After the deal was announced, the value of his Lubrizol stake rose by $3 million.

    But Mr. Sokol's lawyer, Barry Wm. Levine, said that the S.E.C. informed his client on Thursday that it had completed its inquiry and decided not to pursue a civil enforcement action.

    Mr. Levine said he was happy that his client was "exonerated" and that Mr. Sokol never acted improperly in the trades. "He is the paragon of rectitude," said Mr. Levine, a partner at the law firm Dickstein Shapiro in Washington.

  9. Would love to see the elimination of the debt ceiling GLD & SLV would go parabolic with effectively no limit on the mad printing that is going on.

    1. LOL. We don't really have one in place now, but ya I agree. It will happen in time