Thursday, March 28, 2013

Friday Humor On Thursday

The individual has always had to struggle to keep from being overwhelmed by the tribe. If you try it, you will be lonely often, and sometimes frightened. But no price is too high to pay for the privilege of owning yourself.  -  Friedrich Nietzsche
I thought it would be interesting to take a poll of a cross-section of Americans and find out just how many actually know what went down in Cyprus over these last two weeks.  I would bet good money that, at most, 20% could tell you that "something" happened with the banks, that another 30% have heard of Cyprus and a full 50% have no clue.  It would be interesting to see what percentage of those that have no clue are part of the now 48 million Americans receiving food stamps as of the end of December (which means the real number is closer to 49 million now)

At any rate, I'm sure the readers of blogs like this one are well aware of the bank stress tests that have been performed by western Central Banks on the big banks in their respective countries.  I'm also sure most you are aware of just what joke those stress tests are.

Well, for those you who think the stress tests have merit, here's a headline from the July 16, 2011 Cyprus Mail, which is Cyprus' leading newspaper:
Cyprus banks pass EU stress test
And here's the article from that edition:  LINK

I guess a lot of skeptics will want to believe that Cyprus is a little out of the way country with an unsophisticated Central Bank and that the U.S. Fed's bank stress tests are bona fide.  But then again, those are the same people who read the headline in the Wall Street Journal announcing that a record number of American joined the food stamp payroll even though the economy is getting better:   "Use of Food Stamps Swells Even as Economy Improves"  LINK

Call me crazy but the idea that "food stamp usage swelling/improving economy" seems like an oxymoron.  More like, only a moron would believe that the economy is improving.

In honor of the language of one the next countries to enjoy a successful bank stress test and which will likely be one of the next two or three countries to experience a bank "bail-in"/uninsured bank deposit confiscation operation:  buon fine settimana lungo a tutti.

Wednesday, March 27, 2013

Are The BRICS Tossing One Through The United States' Window?

Clearly we should take notice. If central banks are preparing for a major change in the value of the dollar, shouldn't we? The fact remains that the US dollar cannot and will not survive the ongoing abuse heaped upon it by government planners and federal officials. That not only means the gold price will rise, but that many, if not most currencies, will lose a significant amount of purchasing power.  - Jeff Clark, Casey Research - in reference to that fact that eastern hemisphere Central Banks are loading up on gold and Bloomberg News is erroneously reporting China's involvement.
If you are at all curious about what is going on globally in terms of gold, the article which is the source of the above quote is a must-read:  LINK.

The reason why the above quote is important to this post is that it underlies a "tectonic" shift in the global financial landscape going on that is not really being reported by the U.S. media.  The BRICS countries (Brazil, Russia, India, China, South Africa) LINK met for a summit in South Africa today.  They kicked off the summit by pre-announcing two significant events:  1) a work-in-progress to establish a new development bank that would rival the World Bank/IMF;  2) Significantly, they signed a trade and currency deal in which the BRICS will conduct trade amongst themselves in their own respective currencies, altogether bypassing use of the U.S. dollar:  LINK

While both events are significant, the latter is another nail in the dollar's coffin.  I wrote about this power shift taking place in an article published by Seeking Alpha:   BRICS Game-Changer

While an agreement which would establish the new development could not be formed, the BRICS did establish a $100 billion fund designed to address any financial crises that might occur in developing economies:  LINK

I thought it was interesting that while Bloomberg News reported the inability to establish the new bank as a "failure," if you read that last link from an Indian newspaper, it would actually appear that the $100 billion fund that was established is a pre-cursor to eventually getting a new development bank formed in order to by-pass the U.S.-controlled World Bank and IMF.

The writing is on the wall for everyone to see:  at some point within the next 3-5 years, most likely, China is going to assert its economic power by rolling out some kind of gold-backed currency that will be used to replace the dollar as  the global trade reserve currency.  They have been slowly chipping away at the dollar over the last several years, although no one in the west is paying attention.  At some point I expect that the new gold-backed currency will also involve a significant upward revaluation of the price of gold.  And that will be a game-changer for everyone, especially for those have gold in their possession and, even more so, for those who don't.

As friends and colleagues of mine know, the views I have taken on over the the last 10 years with regard to the U.S. economy, political/banking corruption, housing and precious metals have been accurate (not views unique to me, of course).  In terms of my view on an eventual new currency/gold revaluation, I am 100% confident.

Friday, March 22, 2013

Reality Bites

FDIC gives us comfort, but does not function in a systemic crisis  - Jim Sinclair
Given the track record of our Government and Wall Street working hand-in-hand to lie, cheat and steal from us, Americans are sure giving the Government/financial system a lot of leeway on what is being promoted about the economy and the safety of bank deposits in the banking system.

As for the economy, the initial reading on Q4 GDP for 2012 was that it went negative.  The first revision, after some questionable "adjustments," turned the GDP reading barely positive.  This is IF you really believe inflation is as low as the Government says it it.  I do not.  Based on all the presented evidence, plus my own personal spending experience, inflation is significantly higher than we're being told.  Therefore, on a real inflation-adjusted basis, the real GDP is negative and probably was negative for all of 2012.  Just because a unit of food costs more than it did last year, doesn't mean that anything happened to incrementally increase GDP.  If anything, higher prices reduce demand.

As for the supposed "economic recovery."  Let's look at some company earnings reports this week - companies that are directly related to and contribute to the GDP.   First, AK Steel released earnings and warned of a weak first quarter today:  AK Steel  AK Steel produces steel products for the auto,  infrastructure (bridges, roads, housing) and manufacturing industries.  If pricing and demand is weak, so are the basic GDP-contributing industries.

How about Caterpillar?  Earlier this week it announced that it's retail machine sales were dropping globally, including a 12% in drop in North America (i.e. the U.S.):  LINK  How about the restaurant industry?  Earlier this week it was announced that casual dining spending fell 5.4% in February:  LINK  If there's any business segment that reflects the mood of the consumer and the amount of discretionary/disposable income of the middle class, it is the restaurant business.

Finally, there was a full-page ad in today's Denver Post in which a large furniture retailer here is offering 5 years, 4 months (64 months) of no-interest/no down payment financing.  Free money for over 5 years.  There is obviously a bank behind this scheme, but it's certainly consistent with the drop in furniture sales that were reported in the last Census Bureau retail sales report.  How can the housing industry truly be seeing any strength if the banks have to finance a new furniture "give-away?"  Stay tuned on housing, I will writing an extensive post soon that outlines in detail why the housing market is rolling over and the next leg down could be very painful.

Turning to the safety of your money in the banking system.  The situation in Cyprus is not getting a lot of mainstream media airplay other than superficial reporting.  To really follow what's going on, the significance and implications of what's going on, requires accessing good news blogs and international news websites.

Essentially the proposed bailout of the Cypriot banking system involves annexing some percentage of money sitting in Cyprus bank accounts.  Now, people in the United States are being told that the Cyprus situation is a small little irritation in a far off island country and not relevant to the U.S.  If it's not relevant, then why did the U.S. Government, via the IMF, join the EU in raising funds and in leading the proposed restructuring, which includes taking depositor accounts?

Here's Ben Bernanke's response to a question yesterday about the Cyprus situation:   "As someone mentioned Cyprus is a tiny economy. I don’t think these issues as worrisome as they are and as concerned as we would be for the Cyprus people, I don’t think that they have a direct implications for the U.S. economy."  I recommend reading this entire analysis:  LINK  If this is true, Ben, then why did the Federal Reserve print up $100 billion last week and move into the excess reserve accounts of the U.S. subsidiaries of European banks?  Why is 50% of the entire $1.9 trillion in excess reserves - U.S. taxpayer guaranteed money - sitting in EU bank U.S. subsidiaries?  Something smells rotten in the State of DC, where the IMF is headquartered, by the way.

My point on this is that, for some insane reason, the average U.S. citizen places a high degree of trust in the idea that the U.S. Government will always protect bank accounts.  That's just not true.  I bet 98% of you reading this do not even realize that a deposit into a bank is a loan from you to the bank.  How many understand this?  If you go to any bank balance sheet, you'll see that "deposits" are a liability account - a debt obligation from the bank to the depositor.

What this means is that in times of crisis, a bank depositor is just as exposed to a restructuring "haircut" or even full loss of money "loaned."  Ultimately a depositor is nothing more than another creditor in a bankruptcy.  The U.S. Government hides this risk by implementation of FDIC insurance.  But the amount of FDIC liquidity available to cover a major crisis is minuscule.  In 2008, the Fed and the U.S. Treasury printed up a couple trillion dollars and gave it to the banks to head off a bank run by depositors.  If you think this can't happen in this country, ask anyone who was around in March 1933, when U.S. banks had either closed down or place restrictions on money being kept in banks....

When reality bites the average U.S. citizen, it is going to be extremely painful. The Cyprus bank crisis is a lot more significant that most people realize.  It's also been the entire focus of the EU/IMF for the last week.   It is also very significant for gold - gold vs. fiat currency and physical gold vs. paper gold (ETFs, futures):
Confidence in the banking system and trust in policy makers has been shattered and, regardless of what happens in the tiny Mediterranean nation, this will drive more investors around the world to seek safety in precious metals.  LINK
Have a great weekend!

Tuesday, March 19, 2013

Gold: The Bottom Is In And We're Going MUCH Higher

Gold is about to take out $1,600...We may never see that $1,600 level ever again. - Jim Sinclair on King World News - Jim Sinclair, King World News interview  LINK
I highly recommend reading all of Jim Sinclair's recent interview postings on King World News, as he does a great job explaining the significance of the Cyprus crisis, what it means for gold and why the mainstream media is completely missing the mark in reporting the situation.

The way I see the Cyprus situation, it is the trigger we've been waiting for to ignite the next big, long-term move in gold:
Based on the current QE program, the Fed's monetary base projects out to be at $4 trillion by 2014 - a 31% increase from where it is today. If we assume that gold does a "mean reversion" in its correlation with the Fed's monetary base - a high probability assumption given the high correlation observed since 2008 - a 31% increase in the price of gold as of today - $1610 - would imply that gold has a high probability of going to $2100 by the end of 2013. In fact, I will make that my price prediction for gold for 2013.
You can read my entire commentary on this - and the indicators I'm using as my "sign-posts" here:  LINK

Those who have known me for awhile know that - because of the massive Central Bank/Government intervention in the gold markets (and all the markets) - I do not usually put out specific price and time-frame targets for gold.  But I remember the last time Jim Sinclair put out a specific price target - $1650 - he was low by $250.   Since he's forecasting $1900 on this move, I feel pretty good with my $2100 by year-end target, especially since my target is based on observable statistics.

Quite frankly, if my target is wrong by proving to be too low, then it means my worst fears about what is really going on behind the scenes in the global financial system - especially as it applies to this country - are correct.

The fact that U.S. Mint silver eagle sales midway thru March are already at 33% of 2012's full year totals - LINK - tells me that a lot more people in this country are starting to understand the same things I can see going on.  It also means that the price of silver (and gold) can not possibly stay down this low relative to the fundamentals for much longer.

Sunday, March 17, 2013

Will The Cyprus Bailout Trigger The Next Financial Crisis?

In an a deal that needs to still be approved by the Cypriot Parliament, an international banking consortium led by the IMF agreed to bailout of Cyprus.  Part of the deal includes the imposition of a levy on bank on bank savings accounts:  10% on bank balances in excess of 100,000 euros ($131,000) and 6.75% on balances below 100,000 euros.  Cypriots lined up at ATM machines over the weekend - they can withdraw cash until the ATMs run out of cash up to the amount that has already been set aside for the levy.

This story has received close to no coverage in the U.S. despite the potential implications for people who keep their money in banks in every country.  As a result of this situation in Cyprus, there's now fear that depositors all over southern Europe will take their money out of banks out of fear of this type of deal becoming a model for the next round of sovereign bailouts in general.  A Washington Post blog article does a good job summarizing the situation:
The European Central Bank will now be on high alert, monitoring activity in Greece, Spain and beyond for evidence that the Cyprus precedent will result in new runs on those nations’ banks. Expect a flood of central bank liquidity into those nations if there is any hint that depositors across Europe seem to be thinking that Cyprus is the new normal and that their seemingly safe bank deposits could be reduced 10 percent without warning  (LINK).
The "flood" of Central Bank liquidity referenced above largely refers to the Federal Reserve, which has been quietly funding a massive "ghost" bailout of the European banking system all along.  For those of you who are unaware, 50% of the $1.8 trillion in the Federal Reserve bank excess reserve account is money that has been given to the U.S. subsidiaries of the European Banks who are Primary Dealers in this country (LINK).  In other words, the U.S. is pretty much keeping Europe from collapsing right now.

Without that flood of U.S.-based liquidity into the European too-big-to-fails, there is no question that either interest rates in the ECB system would shoot through the roof in order to attract capital OR the ECB system would be insolvent.  The reason the Fed is the savior in this process is that U.S. too-big-to-fail/prosecute are inextricably tied to the fate of ECB banks via a massive and deadly web of OTC off-balance-sheet derivatives.

The Cyprus situation may in fact ignite a run on the banks in Europe and - for those paying attention in this country (which isn't very many) - a small run in this country.  Myself and others have been advising people to keep only a minimal amount of cash in the banking system for quite some time.  The reason?  Even though great pains have been taken by DC/Wall Street to ensure us that "the water is fine" in the banking system, the world is one unforeseen "small" event away from a global liquidity crisis.  Quite frankly, anyone who can read and think, and who still trusts the banking system in this country, is either incredibly naive or tragically stupid, especially after Eric Holders wonderful Senate testimony two weeks ago about the big banks being too big to prosecute for crimes.

Why is any of this relevant to gold/silver?  Again, for those who are paying attention and understand how corrupt and fragile the global fiat-based banking system is, the best alternative is - and has been for the last 12 years - to move as much money OUT of the banking system as possible in INTO physical gold and silver that is privately secured outside of the banking system.  Don't think for one second that bank deposit confiscation and bank holidays are limited to obscure Grecian islands in the middle of the Mediterranean Sea.  This could indeed to be the spark that ignites the global flood of printed napalm paper currencies.

Jim Sinclair has another angle on why this largely unnoticed bailout of Cyprus could have major implications for the next big move in gold that is a must-read:  LINK

Whether Sinclair's scenario kicks into gear or not, this event is yet another signal for us that the fiat currency-based banking system is ultimately doomed and the only way to protect yourself from going down with the ship is to move as much of your paper wealth into physical gold/silver as possible.  Capito?

Thursday, March 14, 2013

Gold Is Technically Set-Up As The Ultimate Contrarian Bet

People are going to see moves in gold that will shock them. Some of the advances will be spectacular, but right now people are focused on short-term weakness so they are missing the big picture. - John Embry, King World News LINK
The longer the bullion banks and hedge funds try to sit on the price of gold/silver, the more violent and extreme will be the eventual upside counter-move.  This market tendency has held tried and true for the entire 12-yr bull market in precious metals.

Much is being made in the financial media about the recent "huge" ongoing liquidation of gold from GLD and other gold ETFs.  But what is not being reported and discussed is the fact that, in the past, big GLD liquidations have preceded a massive run-up in the price of gold. In other words, when investors dump GLD, it's the ultimate contrarian bet.  I wrote an article for Seeking Alpha about this market fact:
the current drop in total ETF gold holdings is visually the largest on record. But in the context of the overall ETF gold holdings it is not significant. You can also see visually that when large drops in ETF holdings have occurred (late 2008, for instance), the drop correlates with a subsequent big move higher in the price of gold. Furthermore, the biggest liquidation of GLD began on February 20, when the price of gold was $1564. The price today is $1592. The point is, the price has actually climbed higher since GLD began heavily liquidating. This is actually very bullish, as the market has absorbed the 4 million ounces of gold liquidated from GLD while grinding higher. Makes you wonder who is buying the gold being liquidated.
You can read my entire here:  Gold: Currently, The Ultimate Contrarian Bet  You might be surprised by difference between the actual facts and what is being reported in the media.    In addition, The Got Gold Report published a report which comes to the same conclusion as I have, BUT it also points out that, while gold ETFs are selling out, silver ETFs are seeing big investor inflows.  Please note that in the past, this investor behavior was not present and it further reinforces the bullishness implied by the liquidation in GLD.

With the gold/silver ratio currently at 54 vs. its very long term average of 16, this verifies to me that the retail investor - the "little guy" - is beginning to understand the importance of investing in precious metals.  The fact that retail is selling gold and buying silver is a testament to the old adage that "silver is poor man's gold."

With only an estimated 2-3% of the public putting some money in to the precious metals sector, imagine what the effect will be when a lot more people figure out the truth about the dollar and start moving money into the precious metals sector.  Let's put this in perspective.  Assuming that the U.S. really has 8100 tonnes of unencumbered gold.  The current market value of this about $435 billion.  The total size of the U.S. retirement asset base is about $17 trillion.  If U.S. investors were to move just 10% of their retirement assets into gold, it would buy the entire amount of gold owned by the U.S. Government three times over.  Think about the price implications for gold/silver...

Wednesday, March 13, 2013

What's Going With Reported Economic News vs. Reality?

Today retail sales for February were released.  The number came in at a quite surprisingly robust 1.1% gain (annualized basis) over January.  Aside from the fact that the number has been put through the customary "seasonally adjusted" meat grinder, it's just not a credible number.  It is likely that the number includes a high inflation factor.  Given that a big part of the gain was a 5% jump in gasoline sales, and given that February's average gasoline price per gallon nationwide was at an all-time high for February, that would explain most of the "gain."

But, in fact, if you strip on the "seasonal adjustment" - the unadjusted actual number is buried in the report - it turns out that sales declined from Jan to Feb, the first month to month decline in 3 years. This makes more sense, as consumers are being squeezed by higher payroll taxes, higher gasoline costs, higher food costs (a whole roaster chicken the other day cost me $1/lb vs. .80/lb six months ago).  And the fact that consumer's disposable income is getting squeezed shows up in the Feb numbers for furniture sales (-1.6%), electronics (-0.2%) and sporting goods (-0.9%). 

Here's what John Williams ( had to say about the matter: 
Reporting here of positive real monthly growth runs counter to various indications out of the business sector, including retailers, retail suppliers and those delivering product, and to indications of a build-up in unwanted inventories.  It also runs counter to the implications of constraints on consumption from the intense, structural-liquidity woes besetting the consumer.  Without real growth in income, and without the ability or willingness to take on meaningful new debt, the consumer cannot sustain real growth in retail sales or in the broader personal-consumption measure of GDP.  As usual, monthly reporting also is skewed meaningfully by seasonal-adjustment issues.
Well, other than that, Mrs. Lincoln, did you enjoy the play?

Finally, just to beat this dead horse into the ground, posted a nice summary of the economic outlook released by the Business Roundtable, a consortium of leading corporate CEO's:
expectations for higher Sales, CapEx, and Employment are as bad as they have been since early 2010. CapEx, the much-vaunted miracle driver of revenues this year, is below Q4 2009 levels of expectation...
Here's the LINK   As you can see, the "seasonally adjusted" number released by the Census Bureau is completely inconsistent with real world data points.  The same holds true for recently released home sales, construction spending and employment numbers.  More on housing soon, as I'm working on an in-depth piece that explains why the housing market is rolling over again.

The Orwellian fog being blown over our system is getting worse.  We learned just the other day that the Dept of Defense has removed all data from its website related to drone strikes in Afghanistan:  LINK  Wonder what else the Government is hiding from us?

There's no question the Government is working overtime to try and juice up our "confidence" in the economy by manufacturing bullish economic numbers and printing more and more money and funneling a significant amount of it into the stock market via the banks.  Makes you wonder just how bad things really are, given that the Fed is buying 50% of all new debt being issued by the Treasury...

Friday, March 8, 2013

They Did It Again: There's No BS Like BLS

The character of what’s in this gold market is so different from the bull market of the 1970s.  The bull market of the 1970s was mostly traders and some central banks, but there wasn’t a huge sovereign interest...What you are dealing with now is China and Russia, who are doing what they are doing in terms of accumulating gold because they know the end game.  The manipulators of the market will come face to face with that physical reality.  When they mess with these markets now they are playing with China and Russia.  - Jim "Mr. Gold" Sinclair (LINK)
The statistical magicians at the Bureau of Labor Statistics (BLS) managed to manufacture a headline grabbing non-farm payroll report that added jobs in February beyond anyone's expectations - or even imagination.

The headlines suggested that our economy in February added 236,000 jobs.  And unemployment fell to 7.7%.  But, once again, when you dig through the details, the facts are not surprisingly significantly different than the hype.

If you review the trading pattern of the S&P 500 and gold/silver futures, you'll find that the SPX spiked and gold/silver did a waterfall when the headline number hit.  Over the next 90 mintues, the SPX faded hard and the metals and the mining stocks hit their highs of the day.  Why, you might ask? Because the market had digested the analysis as I'm laying it out just below and adjusted accordingly.

To begin with, and most significantly, the statistical magicians use an "adjustment" to the numbers with something they dreamed up called "the birth-death model."  Briefly, this model guesstimates the number of jobs that would have been created and deleted - on a net basis - by guesstimating how many new businesses opened and closed during the month.  According the BLS, this number was 102,000 in February, adding that many theoretical jobs to the monthly not seasonally adjusted jobs number.  Then the BLS does its seasonal adjust hocus pocus and spits out the headline number.

You can see where the new businesses supposedly opened up last month, creating 102,000 jobs here: LINK.  All service-based industries highly dependent on either consumer disposable income or Government spending.  Does it make any sense whatsoever that leisure, hospitality and business service businesses started up, given that the consumer is getting squeezed both by increased payroll taxes AND record gasoline prices for the month of February?

Here's the distribution by industry of the jobs supposedly created by the economy overall, including the birth-death adjustment for February:  LINK  You'll note that retail trade supposedly added 24,000 jobs in February.   But how can this possibly be true when we know that retail sales have been coming in nearly flat on a nominal (with inflation) basis and negative on a real (inflation-adjusted) basis?  Not only that but I posted a piece several weeks back which highlighted the massive number of store-closings that would occur this year by many of largest, national chain retailers.  How can that retail trade number have any credibility whatsoever, given this?  14,000 jobs created in manufacturing.  Manufacturing what?  Printing presses for the Fed?   Professional and business services at 73,000 stands out as a serious outlier.  This is almost 1/3 of the total jobs gains in both the BLS headline calculation and the in the birth-death model plug.  I would love to see the back-up inputs for that number.

Finally, Zerohedge did a nice job pointing out some more inconsistencies with the "quality" of the BLS number.  The number of full-time jobs declined by 77,000 and the number of part-time workers rose by 27,467.  Also, the number of multiple jobs holders rose by 340,000.  Either people who can get them are taking more than one job because they're struggling financially or the employment number as calculated is completely bogus.  Either way, it's not a healthy number.  Here's the LINK

On another note, an interesting occurrence has surfaced in the precious metals and mining stock bounce that we've had this week.  The best moves during the trading day for this sector have been occurring when the Dow/SPX sell-off.   I bring this up because someone sent me an interesting chart that suggests that the Dow/SPX have a high probability of selling off severely:

 (click on chart to enlarge)
I apologize to whomever devised this chart because I don't know whom to credit.  But, having said that, this chart shows the relative value of the S&P 500 based on price-earnings multiples.  You'll see that when relative p/e's get up to where they are now, the stock market tanks - hard.

The reason I mentioned that gold/silver/mining stocks were "decoupling" from their correlation with the equity markets is that I've suggested privately to colleagues that the next big move in the precious metals sector might occur with the metals/miners moving in the opposite direction of the stock market.  In fact, the tremendous gains that occurred after October 2008 started when the Dow/SPX started tanking hard into the end of 2008 thru March 2009 and the precious metals/mining stocks - starting  in October 2008 - spent the next 3 1/2 years ramping up to new all-time highs (silver up to its 1980 all-time high).

Have a great weekend.

Wednesday, March 6, 2013


"I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do will have a negative impact on the national economy"  - Eric Holder, Attorney General, United States of America, 3/6/2013  LINK
Think about what Holder just said there for a moment.  He just said that the banks can get away with whatever they want because if the law is enforced upon them, it might hurt the economy.  

This is truly mind-blowing.  Basically, the Attorney General of the United States has said that the big banks are completely above the law.  There's nothing left for us to do.  Eric Holder has officially turned this country over to the big Wall Street banks. 

This means that Obama and Eric Holder have COMPLETELY FAILED to do the job they are elected to do.  Which is to uphold the Constitution and Rule of Law. 

The United States is OFFICIALLY a Banana Republic governed by The Rule of Banks.

Tuesday, March 5, 2013

Can You See It Coming? "Fund'Em"

By the time most people see the giant systemic "two-by-four" being swung at their collective heads, it will be too late to duck - Dave in Denver, circa 2005...That systemic two-by-four is getting a lot closer - Dave in Denver, 3/5/2013
A long-time colleague sent me an article about a former Countrywide Mortgage employee turned whistle-blower.  The whistle-blower was completely amazed that Angelo Mozilo, Countrywide's CEO and the country's pioneer in the massively fraudulent mortgage bubble, was never put on trial.  Not only that, but the whistle-blower's $3+ million court case award for wrongful termination from Countrywide/Bank of America was recently overturned by California's Appellate Court.  You can read about just how corrupt Countrywide was and other sordid details here:  LINK

My response to the above article was this:
Don't hold your breath on the Judiciary Committee hearing of Holder.  Holder will be well rehearsed and we already know what the questions will be.  Don't forget, Holder is the guy who wrote the Marc Rich pardon letter that Clinton signed as he was walking out of the Oval Office for the last time.

This country is completely corrupted from State legislatures to the Supreme Court.  Look at that verdict overturn in the article.  Corrupted court system.  The apparatus has been put in place, for those in a position to do so, to steal everything before the country collapses.   IRA/401-k's are next.

The bottom line is that the citizens of this country are ultimately to blame.  Guys like us sit around and dig up the evidence, yet we do nothing.  95% of the middle class could give a shit. They're robotic drones who basically go through the day lapping up what's fed to them and losing themselves in prime time garbage tv.

Anyone who thinks our system can be saved is hopelessly naive or tragically ignorant.
I bring this up because Charles Hugh Smith hits the cover off the ball with an article in which he outlines some of the key sources of "energy" fueling that two-by-four being swung at our collective heads:
At ~18% of the labor force employed part-time, those 50% grads who do not obtain full-time private employment outside health care must compete for the 1 of 5 jobs in the labor force that are part-time, implying that no more than 59-60% of college grads will obtain ANY employment under current labor market conditions, leaving ~40% of grads with no prospects for earning purchasing power.

Is it a surprise why student loan delinquencies have begun to soar? How will the housing market grow with as many as 40-50% of high school and college grads unemployed, underemployed, or unemployable?

From my experience, perhaps as few as 10% of the population know the information above. Most in the top 10% don't know because they are largely unaffected and thus don't care and will not be persuaded that they should care until they have to (i.e. when their children experience the aforementioned conditions).
This is a MUST-READ article that you should be able to knock off tonight in between a couple commercial breaks during "American Idol:"  The Hollowing Out Of Private Sector Employment

Saturday, March 2, 2013

Sit Tight And Be Right

Big movements take time to develop... Men who can both be right and sit tight are uncommon. - Jesse Livermore
If you look at a long term chart of gold, you'll see it's forming a giant "wedge" formation:


You can see the price of gold "basing" in the $1525 - 1550 area.  We know based on the huge import premiums vs. the world spot price in India, China, Indonesia, Viet Nam and other Asian countries, that the big physical buying countries are aggressively buying gold on every price dip.  This is physical gold that is removed from the global trading supply and disappears into Central Bank and private vaults.

At some point, the paper trading markets in NY and London will not be able to contain the free market forces of supply and demand.  In this country, February was a record sales month for U.S. Mint silver eagles.  

I wrote an article for Seeking Alpha which discusses a very important technical indicator that has always worked in periods of "extreme" highs and lows.  You can read about that and another indicator that is signalling that this current price correction is nearly over:  Patience Will Be Rewarded

Finally, downward "wedge" formations like the one above almost always "resolve" with a big move to the upside.  Typically, the size and duration of the move higher is proportionate to the length of the base of the wedge. 

Friday, March 1, 2013

Friday Humor - This Is So Incredible You Couldn't Make It Up

We see huge orders from China, which are even bigger than the size of buying before the Lunar New Year...Demand from Indonesia was also robust, thanks to a stronger rupiah that kept domestic prices low.  - Singapore-based bullion dealer LINK

Rather than add more analysis about why this is the best time to step into the precious metals market since 2001, I thought I'd take a break and let everyone see for themselves how incredibly pathetic our Congresspeople are.

I will make one point of note first.  What is occurring right now is the hedge funds are recklessly trying to push the precious metals sector lower in order to try and maximize their gains on their record long short position in paper Comex gold futures:  Record Hedge Fund Short

But just like the hedge funds recklessly pushed AAPL to $700, they are recklessly trying to push the precious metals sector lower.  How well did the AAPL stunt work?  Let's look:  since September 21, AAPL stock is down 40%.  Gold is down 12.3%.  The precious metals sector is going to do the upside what AAPL did to the downside when the hedge funds start to cover.  I guarantee it.

Now for our dear pathetic Congressmoron, Maxine Waters.  Apparently Maxine somehow got through the educational system with out having to pass math and English..  According to Maxine, the "secrestration" cuts are going to cause 170 million job losses.  Don't believe me?  Watch for yourself:

"Secrestration?"  I'm sorry, can someone tell me what that word means.  I can't seem to find it in the Oxford English Dictionary.  In fact, I can't even find it in my Scrabble Dictionary and that dictionary has imaginary words in it.  Maybe someone has a copy of an Ebonics dictionary and it's in there...As for pathetic Maxine's math.  170 million jobs?  According to the most recent BLS employment report, the total number of jobs in the economy is 143 million. I said, you can't make it up.

It reminds of the joke about the high school spelling bee.

Teacher:  "Maxine, please spell "before."
Maxine:  "B-E-F-O-R-E"
Teacher:  "Very good, now use it in a sentence."
Maxine:  "Two and two be four"

Have a great weekend.