Friday, November 29, 2013

"Mall Brawl Thursday" - Has It Really Gotten This Bad?

Black Friday Thursday.  The entire term "holiday sales shopping" has been redefined.  And the word "Black" should now be replaced with "Mall Brawl."  Black Friday has become Mall Brawl Thursday.  In the most obvious sign of just how desperate everyone is to keep up with the euphemistic "Joneses," what used to be a nice family holiday shopping day has turned into something out of the movie "Mad Max."  Here's a nice sampling of actual videos:  Mall Brawl Thursday.

Make no mistake about it, this an overt and blatant signal about just how bad our system has already deteriorated.  Although it didn't start with George W. Bush, his tenure in office ushered in a transformation of our system into Rule by Fiat.  The term "fiat" was originally a Latin word meaning "let it be done" and represented a decree or pronouncement by a person or Government in the position of absolute authority to enforce it.  That's our Government.  A Rule by Fiat totalitarian regime.

Obama refused to negotiate over the budget and debt limit deal.  Why?  Because somehow, hidden from view, he had the leverage to avoid compromise and the authority to force the outcome he and his handlers wanted.  Now Obama is forcing Government implemented and managed healthcare down our throats. How about the way in which the NSA operates to spy on every aspect of our lives unfettered from any sort of regulation or restraint.  In fact, the NSA pretty much is our worst nightmare:  a known pedophile running a child daycare business out of his basement.

Throughout history, Governments move into totalitarian mode when  they have lost control of the economy.  Of course, if the system is free from Government control in the first place, then there's nothing of which the Government can lose control and you avoid the whole problem.  But here we are now with the biggest political charlatan in the history of the United States overseeing the collapse of our system economically, socially and politically.  And the implementation of Rule by Fiat is the last gasp of a Government that is letting the business and political elitists confiscate the remaining remnants of wealth that haven't been expropriated from the middle class since 1971.  Note:  1971 is when Nixon destroyed any legitimate chance of our system existing as it was given to us by the Founding Fathers when he pulled the plug on any connection between gold and the U.S. dollar, thereby creating a pure fiat currency.  And it's this fiat currency that belies the transformation of our Government into one of Rule by Fiat.

Another way of saying "Rule by Fiat" is "because they can."   The elitists running our system and using Obama as their front-man can pretty much do whatever they want because they can.  No one is even making an attempt at stopping them.  The very people who are capable of stopping them are instead shooting each other at the mall on Black Thursday in order to save a couple bucks on the latest fashion sweater or electronic gadget. And Obama is the perfect front-man for them because if you disagree with anything he says or does you are branded as a "rascist."

And while Obama has been the False Prophet of Hope and Change for everyone who voted for him, the U.S. dollar represents the largest financial Ponzi scheme in history. Circling back to this new era of Black Friday Thursday Mall Brawls, nothing could be more emblematic of the state of decline of our system or more reflective of the degree of desperation being felt by the masses than the violence precipitated by the scramble to put cheap gifts under the Christmas Tree.  Is this really how Jesus would have wanted people to behave as they prepared to observe the celebration of his birth?

Think about this while the news networks coerce you to bask in the glow of the White House Christmas tree and video footage of Barack and Michelle experiencing holiday glee.  They, their political colleagues and the wealthy elite do not have to worry about how they are going to try and make the holiday season joyful for their families.  But what exactly did Barack do to earn this right other than sell his soul and our country out to the highest bidders?

Wednesday, November 27, 2013

The Housing Market Approaches A Cliff

Things always become obvious after the fact 
  - Nassim Taleb

I issued a "sell" on the new homebuilder stocks at the end of January (Dow Jones Home Construction Index basis - DJUSHB).  Since then, the DJUSHB is down 18% and has been down as much as 26%.  This is a remarkable call considering that in the same time period the S&P 500 is up 20%.  During this same period, homebuilder company executives have been dumping their shares at a stunning pace.

I have been postulating that what has been promoted as a housing market recovery by the financial media, Wall Street and the Obama Government is really nothing more than a dead-cat bounce in a long term bear market that has been fueled by a couple trillion in taxpayer-backed Federal Reserve and Government stimulus programs.

Since the beginning of the year, I have written several articles explaining how and why the housing market has appeared to be in recovery when, in fact, both price and transaction volume has been artificially manufactured through the use of direct Fed money printing, Government implemented and tax-payer financed mortgage programs and outright bank accounting and operations fraud.   As for the latter, while some of the banks have been prosecuted and/or engaged in what seems to be large settlements for business and accounting fraud, they have found other ways to exploit the numerous accounting and regulatory loopholes in order to continue their schemes.  As my English major adviser in college used to say, "same old wine, new bottle."

At any rate, I published an article yesterday on Seeking Alpha which shows why the housing market "bounce" is now transforming quickly into a rapid decline.  Keep in mind that when you read news headlines or hear reports on financial tv, they are using year over year comparisons in order to broadcast continued "gains."  As I have writing about, in order to understand what's really going now, you need to look at the month-to-month sequential comparisons.  On this basis, the  housing bounce topped out in late spring and has been declining since June. 

You can read my latest article here:  The Housing Market: A Black Swan on the Horizon

What's most interesting about the sequential decline in almost every housing market metric is that this decline has been occurring in what should be the market's strongest seasonal period.  If you are looking to sell your house and get the kind of prices that realtors are promoting, it is likely too late.  If you want to sell your house, or have to, I would suggest getting it ready to be listed by mid-January and price it to sell, not to maximize profits.

Have a happy, healthy Thanksgiving and remember:  enjoy what you can, as much as you can, while you still can.

Monday, November 25, 2013

Zimbabwe Ben, Janet "von Havenstein" Yellen And The Taper That Will Never Happen

[T]he Federal Reserve’s long and large scale purchases have significantly lowered long-term Treasury yields.  - Ben Shalom Bernanke, Keynote Speech at the 2012 Jackson Hole Federal Reserve Conference LINK
For those of you who are unaware, Rudolph von Havenstein was head of the German Central Bank during the infamous Weimar hyperinflation/currency collapse period (1921 - 1923).  As most of you know, every German who had their wealth denominated in German marks on the night of November 13, 1923 woke up the next day to discover that their paper wealth was worthless.  Gold, for all intents and purposes, went to infinity as measured in the German mark (gold began the Weimar Republic period at 170 marks and peaked at 87 trillion marks).  

I mention this as background because, despite the Fed's lip service to the contrary about reducing QE (the "taper"), the Fed has no choice to not only continue printing money, but will soon be forced to increase its rate of printing.  Make no mistake, this is going to get crazy and they will probably eventually start buying assets other than Treasuries and mortgages, such as municipal bonds, pension liabilities and equities. 

I wrote an article for Seeking Alpha that seems to be getting a lot of attention around the internet on this subject:
Since Bernanke first uttered the word "taper" in mid-May, the financial media circus cycle of "they'll taper this time around" has been repeating itself before every FOMC meeting and after the subsequent release of the FOMC meeting minutes. And yet, the Fed continues to defer reducing its QE policy after every meeting despite constant overtures to the contrary. The truth is that reducing the level of QE right now would likely cause a repeat of the 2008 near-collapse of the financial system, hurling the economy into a serious depression.
 You can read the entire piece here:  Don't Fall For The Taper Talk - Again

The first indication that I may be on to something here is the price pattern of the U.S. dollar.  Despite all the dollar bulls permeating the airwaves of financial media with their mindless drivel, this latest manipulated dead-cat bounce in the dollar appears to have run out steam pretty quickly:

(click on graph to enlarge)

As you can see from this chart, the USDX was unable to even bounce back up to its 200 day moving average in this latest dead-cat bounce.  It appears ready to resume the nasty decline that began in July, after the Fed deferred tapering QE despite Zimbabwe Ben's threat to taper in May.   In other words, the smart money (the Chinese, for instance) understands what's happening in this country and it (the smart money) is using every bounce in the dollar to dump (not just the Chinese, by the way). 

For those who are unaware, Janet Yellen gave a policy speech in which she stated that negative interest rates may be necessary to stimulate employment.  Just like Zimbabwe Ben's infamous "helicopter" speech in 2002, Yellen's speech offers insight into how she thinks about the implementation of monetary policy as a means of attempting to manipulate the economy.  The USDX knows this.  Most people who get their market news from CNBC or Bloomberg do not.

We are going to see higher rates that will kill the economy once and for all unless the Fed increases its bond buying program.  The market is telling us that, not me.  It's gotten so silly in terms of the perma-bull analysis - or what passes for analysis in this day and age - that I read an article over the weekend in which the money manager argued that higher interest rates would be bullish for the economy. Sorry pal, the only thing higher rates will signal is that the Fed is printing even more money in a desperate attempt to keep the bond and stock markets from collapsing.  This may well drive the Dow higher, but please review the history of the Weimar Republic leading up to and including November 14, 1923 if you want to see how this ends.  Here, I'll make it easy for you:  LINK

What is even more frightening, especially given the degree of ramped up U.S. militarism, and the role played by the NSA in this, is to contemplate what happened in Germany after the Weimar Government collapsed...wouldn't it be diabolically ironic - in fact, tragically amusing - if Ben Shalom Bernanke and his successor, Janet Yellen, were the ones who ushered the U.S. into a similar type of Government that succeeded Germany's Weimar period...

Friday, November 22, 2013

China Is Getting Closer To Pulling The Plug On The Dollar

"...the reason for living was to get ready to stay dead for a long time" - Addie from, "As I Lay Dying by William Faulkner
Many of you are aware by now that China has been methodically eradicating the use of the dollar in its bi-lateral trade with most of its largest trading partners.  It has put in place large yuan-based currency swaps which are now used to settle trade with most of Asia and some large western hemisphere countries, including France and the UK.  You are also aware of the enormous amount of gold that China has been importing and accumulating (LINK, for example).  It's funny how research and investment analysts can find the data to prove this but somehow the World Gold Council and the GFMS seem to be unable to find it.

It looks like China is now getting ready to take the next step in "unplugging" the U.S. dollar as the world's reserve currency:

The People’s Bank of China said the country does not benefit any more from increases in its foreign-currency holdings, adding to signs policy makers will rein in dollar purchases that limit the yuan’s appreciation - LINK
I have been thinking for quite some time - dating back to 2003, to be exact - that China's end game, "check mate" move would be to eventually eliminate the dollar from its trade activities and roll out a new currency that would be backed by gold.  At the same time China would implement a huge revaluation of gold in yuan terms in order to establish the necessary market value of its gold hoard to create an effective backing of the new currency.  Now, of course, it won't happen exactly like this but in order to envision how a global currency reset will occur we need to think along those lines.   However the mechanism is effected, the result will be a massive devaluation of the dollar.  This is something that we all know is an inevitable event and that the natural forces of the market would eventually enforce,  but something that the U.S. elitists have been deferring  by means of insidious political and military-based  coercion.  And in order for it occur it will likely require that China tosses a straw on the camel's back in order to help the natural market forces override the U.S. repression of them.

There's really no way of determining a time-frame for the actual event so please don't ask me my view of when it will happen.  What I will say is that we can observe certain "environmental" signals to let us know whether its sooner or later.  Based on the blatant and extreme corruption exhibited by our political and business leaders and based on what I sense is desperation and unrest being reflected by a growing number of dissatisfied middle class people ("middle class" here is defined as anyone who does not have enough liquid wealth to buy their own politician, so 99.9% of us),  I suspect that "the event" is a lot closer than most us can possibly discern.

And it looks like the U.S. dollar and the American way of life is getting ready to stay dead for a long time.

Thursday, November 21, 2013

An Insightful Description Of What Is Occurring On Main Street

As I have been saying would happen, the housing market bounce of the last 18 months is starting to crack.  This is a crack that I expect will widen into a big canyon, into which home sales and prices will fall.  It will be a resumption of the bear market trend in the housing market that began in mid-2005 and which needs to go a lot lower and exact a lot more pain before the excesses of the Greenspan/Bernanke/Bush/Obama era have even a chance of being cleansed and fixed.

Existing home sales for October were released yesterday.  And while the year over year headline result was announced as being a big positive, it turns out that if you dig into the actual month-to-month numbers the housing market is slowing down - quickly.  You can read my analysis of the numbers and the overall housing market here:  October Existing Home Sales

Meanwhile, as the stock market plows inexorably toward the moon and then, with a lot more QE, onto Pluto, I was discussing with a friend how QE has done nothing for the economy other than help out a few homebuilders, realtors and most of the corporate insiders who are unloading their company shares at a record pace.  In the context of chatting about the rampant systemic Government and corporate corruption, we discussed how small businesses and individuals have been left in the satanic dust created by the Government and Wall Street.  His commentary on this was too priceless not to share:
It's a horror show.  I know 2 guys in their 50's and 60's who are close to running out of money.  For younger people, generally blue collar guys are the only ones who'll talk openly and freely about reality, and they're angry. The white collar set is brainwashed into pretending that they're keeping up with the Joneses, too stupid to question if their neighbors are living an illusion propped up on credit cards. I freely tell whitey to stop watching TV or it'll finish the chemical conversion of their brains into cat food.

The real "tell" is the Kohl's parking lot (visible from McDonald's where I take coffee every day w/a friend), always brimming with minivans and hot mommy ass. Whence comes Kohl's meteoric popularity of late?  The answer lies in the high-end faux upper middle class stores like Williams-Sonoma--barren without stragglers seeking elusive bargains there.

Society's veneer is down to rice paper. After Christmas, it'll be gossamer.

So what happens when interest rates revert to reality and spike up, destroying even the ability to pretend all is well?  That's when the fun starts.

As a nation, we're a kerosene-doused tinder box awaiting a flame. No accident, this.

I strongly suspect that even the very well-to-do are hurting, fretting many a country club membership and private school tuition check.
I wasn't kidding about the cat food thing...

"Even a dog knows the difference between being tripped over and being kicked." -Oliver Wendell Holmes

Americans are being kicked to death, and do nothing but expire in the lambent glow of TV's illusion, less significant than dead dogs.

Wednesday, November 20, 2013

Holiday Sales Expected To Be Dismal This Year

Gallup released a poll last week that showed consumers expect to spend 10% less this year than they did last year.  In fact, it will be only second time year over year holiday spending per person declines in the last 10 years.  The other time being 2008.

I have written an analysis of what I expect for the upcoming holiday season in terms of spending and I believe it may actually be worse than even bearish analysts expect.  You can read my article here:  Expect Disappointing Holiday Sales This Year

Obamacare is going to put a huge dent in per capita real disposable income going forward and, as we've seen even by the Government's own data - the actual number of people with jobs as percentage of the population has hit a low not seen the late 1970's.  Recall that back then two-wage earning households were not as common as they are today.

I hate to say it, but it really is "worse than you think."

Tuesday, November 19, 2013

"It's Worse Than You Think"

As you all know, I've been saying that something - some kind of "black swan" event - is coming at us that is really ugly. 

Yesterday I had a long conversation with a guy here in Denver who is a local businessman and who knows as much if not more than most GATA followers about just how bad things are with our system - the corruption, fraud, wealth stealing, market manipulation, the inexorable systemic debt and derivatives accumulation, ransacked industrial/economic foundation etc.  He's about as pessimistic as me and he is extremely well-read/researched.  His neighbor is a retired General with deep ties into the Pentagon.  A few weeks ago the businessman asked the General, "how bad is it, really (the problems with our system)?"  The General replied, "it's worse than you think."  It also sounds like this General thinks that they can't keep the system going much past 2015.

This fits with many other former Establishment insiders from the 1970's and 1980's are now coming and discussing openly.  Guys like Paul Craig Roberts and David Stockman.

The attorney who helped me with the CME/Comex analysis and I were chatting about the above comment and other topics last night.  To summarize our discussion, he sent this quote about our system which is just too profound to not share in its full, unedited form:
Our government is far more illegitimate than King George's was in early 1776. Revolution is the only way out. Unfortunately America is addicted to TV, which causes brain rot and leads to any number of other debilitating physical maladies.

In fact, our country is no longer sovereign, having been taken over by a global criminal cartel, who rules by fiat (notwithstanding the ludicrous pretense of a republic).

Obama's entire 2nd term is purely about securing the consent of the governed - not difficult when 99% of the population is brain dead. That is, while Obama (1st term) and Bush were all about tearing up the Constitution, Obama's 2nd term mission is to destroy the Declaration of Independence, which provides the legal predicate (sovereignty; consent) on which the Constitution rests.

Meanwhile, dumbf#ck Americans are glued to the red-blue pro wrestling show of conservative-liberal, etc.  As a nation, we deserve the monster c@ck that's being shoved up our ass, sans lube
It would have ruined the full effect and spirit of what my friend expressed if I had edited that last part and I second every thing he puts forth in that comment.  Buona sera a tutti - enjoy what you what you can, as much as you can, while you still can...

Sunday, November 17, 2013

An Analysis Of The CME's Comex Gold/Silver Inventory Report Legal Disclaimer

The information in this report is taken from sources believed to be reliable; however, the Commodity Exchange, Inc. disclaims all liability whatsoever with regard to its accuracy or completeness. This report is produced for information purposes only.   - CME legal disclaimer placed on the Comex daily gold and silver warehouse stock reports
I wanted to elaborate on Friday's post to make it crystal clear to everyone WHY the CME suddenly slapped that disclaimer on the Comex gold/silver warehouse inventory reports.  It seemed to me that the CME might be liable for legal claims - when the Comex ultimately defaults - which seek damages based on the argument that the Plaintiff relied on the CME reports in making a decision to invest in a gold/silver futures contract prior to the date that the disclaimer first appeared.

What I'm really trying to ferret out here is exactly why the CME waited five years after acquiring the Comex before applying the disclaimer to the inventory report.  My assessment is that, per my article Friday, given the extreme decline in gold inventory on the Comex the beginning of the year, the CME - by invoking the disclaimer - is worried about the reliability of the gold/silver inventory reports.  Recall that the reports are generated based on paper reports submitted by banks who operate the Comex vaults.  In other words, the CME is relying on the reliability of these reports without actually verifying that the content of the reports is based on a provable fact - i.e. that the inventory reported by the banks exists as reported without doing an independent physical audit to verify that the reports are legally valid.

As it turns out, based on Federal Rules of Civil Procedure (FRCP), even though the CME waited 5 years before invoking and applying the disclaimer on the inventory reports, the CME has for all intents and purposes legally insulated itself for any legal claims that may arise from publishing the inventory when the Comex defaults and has shifted the burden to the individual vault operators who submit the data that the reports are based on. I called on a friend and colleague who is one of the sharpest attorneys I have ever met to give his assessment of the timing of the CME's application of the inventory report disclaimer:
The disclaimer language at issue appears to be tailored specifically not only to forestall ALL fraud cases based on that element, but to do so at the pleading stage of the case, i.e., BEFORE THERE IS ANY DISCOVERY OF THE DEFENDANT'S DOCUMENTS AND INFORMATION, by way of a dismissal under [Federal Civil Rules of Procedure] 12(b)(6) or the State court equivalent.

One of the trickier elements in a civil fraud case (criminal is slightly different on this point) is proving that you reasonably relied on the misrepresentation at issue, meaning you did in fact rely on it, and that your reliance was reasonable (an objective standard to winnow out idiotic plaintiffs).  The intent behind the disclaimer is to provide a legal override of such facts, like a trump card.
Federal Civil Rules of Procedure 12(b)(6) allows a defendant to ask a judge to dismiss the lawsuit before any real litigation takes place based on a "failure to state a claim even accepting all facts stated in plaintiff's complaint as true."  In order to compel a judge to deny the Defendant's motion to dismiss under this Rule, the Plaintiff must show that it's possible for him to prove a set of facts in court that shows he is legally entitled to the "relief " (damages from investing in this situation) requested in the legal claim because he bought Comex futures in reliance on the truthfulness of the CME Comex inventory reports at the time he made the investment. As my friend states:  "the intent behind the disclaimer is to provide a legal override of such facts, like a trump card" - which leads to the Defendant's argument that the Plaintiff failed to state a claim.  As applied to the CME situation, the Plaintiff will fail in its pursuit in damages against the CME.

Think about what FRCP 12(b)(6) requires if someone were to go after the CME because they bought a gold futures contract in May 2013 - before the disclaimer was slapped on the Comex gold inventory report - expecting to stand for delivery of the gold at contract expiry.  The Comex defaults.  The Plaintiff (person who bought the contract) files a claim against the CME for fraudulent misrepresentation because the Plaintiff relied on the Comex gold inventory report published by the CME in making his decision to get long the contract on the basis that the Comex had enough gold to make on the delivery of the gold. 

You see the problem here in satisfying the requirement under FRCP (or State-equivalent) 12(b)(6)?  The Plaintiff has to produce evidence showing several things, including some kind of proof that shows beyond reasonable doubt that his decision (the "claim") was made specifically with reliance on the CME/Comex report before the disclaimer was slapped on it.  In order to satisfy that a bona fide claim has been stated under the Rules of Evidence requirement,  it would minimally have to be something like a dated journal entry with a date-stamp on it and a witness affidavit that testifies that the witness watched the plaintiff make the journal entry on the date as shown. Even that would be questionable.  The only thing I can think of that would satisfy this would be to write yourself a memo and mail it to yourself in order to get a postal stamp on the envelope and leave the envelope sealed.  Anyone ever go to this length before executing a trade?

It is clear to me, and to my friend who is an attorney, that the CME's lawyers determined it was necessary at this point in time to invoke the disclaimer because the risk of fraud is clear and present with regard to the reports being submitted by JP Morgan, HSBC and Scotia in relation to the extreme and unprecedented rate of decline in the reported Comex gold and silver inventory.  And this particular disclaimer gives the CME a shield of legal protection that extends all the way back to its date of acquisition.

The bottom line here is that it is highly probable that the real inventory that is sitting in the gold and silver vaults of JP Morgan, HSBC and Scotia is quite a bit less than the inventory being reported in the daily stock reports.  This conclusion, of course, is consistent with the type of fraudulent behavior for which these banks have already been  successfully prosecuted and/or forced to settle.  What it implies is that the Comex may indeed be closer to default than any of us can possibly understand.   In this context, and notwithstanding Ted Butler's dismissal of this matter, it is clear that CME is concerned enough about this possibility and was compelled to invoke a powerful  legal shield from liability in order to evade the potential legal liability to which its member banks will be exposed.  It is also clear that business entities that rely on the Comex as a source of safekeeping and of deliverable physical gold are taking an increasingly large amount risk in relying on the Comex for this purpose.

Friday, November 15, 2013

The Comex Fraud Is Growing Larger - 69 Times More Paper Than Gold

The information in this report is taken from sources believed to be reliable; however, the Commodity Exchange, Inc. disclaims all liability whatsoever with regard to its accuracy or completeness. This report is produced for information purposes only. 
The above liability disclaimer was added to the Comex gold and silver warehouse stock reports about 5 months ago.  I have a post on this blog about the time it showed up if you need an exact date.  You can see the Comex stock report and disclaimer at the bottom here:  Comex Gold Stock Report

The question I had at the time was, "why now?"   The CME completed its acquisition of the Comex in August 2008.  It took nearly 5 years before the CME's lawyers decided to add that disclaimer to its Comex gold/silver warehouse stock reports.  Having worked on corporate finance deals in my past and knowing how anal and attention-to-deal good lawyers are, I can assure you that it is not some capricious oversight that the CME decided to correct five years ex post facto, as one prominent silver newsletter seller would have us believe.

Here's a graph of the stunning plunge in the "registered" gold sitting in Comex bank vaults - "registered" means gold that has been designated by its legal owners as being available for delivery to holders of futures contracts and has been certified as a bona fide gold bar per Comex standards (source of chart is, edits are mine):
(click on chart to enlarge)

There are 6 entities that operate designated Comex gold vaults:  JP Morgan, Scotia Mocatta, HSBC, Brinks and a small private vault company, Manfra, Tordella & Brookes.   The three banks account for 96.4% of the total amount of gold being "safekept" in Comex-designated vaults.  They account for 78% of the "registered" gold on the Comex.  As you can guess, most of the deliverable gold that has been removed from Comex since April has come from the vaults of JP Morgan, HSBC and Scotia.

The "eligible" gold account is the gold that is being kept for safekeeping at the Comex vaults by investors who theoretically have title to that gold.  For the record,  knowing what I know about big bank fraud, I unequivocally do not believe that the entire amount of gold being reported by the big banks who operate the depositories is actually either physically in the vaults or that it has not been hypothecated via lease obligations by the banks who control the vaults.  If it has been hypothecated, it might actually be there but the owners have lost their physical claim on the metal.  See the court decision in the MF Global bankruptcy if you do not believe me.  The owners of silver held by MF Global were deprived of their bars and are being settled in cash.

As of Wednesday's open interest report for Comex gold futures, there were a total of 403,947 open gold futures representing 40,394,700 ounces of gold.   As of yesterday, there were 587,234 ounces of "registered," available for delivery ounces of gold.  That's a mind-boggling 69x times more open interest of paper gold than available physical gold to deliver to the holders of those contracts.  Think about that for a minute.  If more than 1.4% of those longs stands for delivery, the Comex defaults.

Now, the majority of those contracts  extend all the way out to December 2015.  But there's 166,540 open gold contracts for delivery this December (first notice of delivery is 9 trading days away including today, on November 27).  Those contracts represent 28x the amount of available gold to deliver on the Comex.  If more than 3.5% of those contracts stand for delivery, the Comex defaults.  Historically, maybe 1% of the open interest in a delivery month takes delivery.  The odds are that will be the case this December.  But at the rate that the gold is being drained from the Comex, this is going to be a real problem in the future.

Now we know why Germany wants its gold back, why the Chinese and other BRIC countries are loading up on gold and demanding delivery and why the owners of Comex gold are taking delivery off the Comex.  The Comex is a giant Ponzi scheme.   "In paper we trust" is the motto of anyone who has a long position in  Comex futures OR who safekeeps their gold at Comex vaults.

As for the truth in reporting issue, does anyone out there besides Ted Butler actually trust those banks to  send computer-generated reports that are accurate and honest to the CME.  Have these big, Too Big To Fail bailed out banks given us any reason whatsoever to trust them?   Ya, neither does the CME apparently, which is why they stuck that disclaimer on the inventory reports in June.  In fact, we know that both HSBC and JPM have several criminal investigations for fraud and market manipulation going on against them by the "regulatory" authorities in both the UK and the U.S.  They have both settled numerous others with big cash payments to make the charges go away.

I can walk anyone carefully through JP Morgan's SEC-filed financials to show them where JP Morgan is committing fraud in reporting its financials to the SEC.  I guess Butler trusts those financial filings just like he trusts the reports on open interest and warehouse stock filed with the CME by JPM, HSBC and Scotia.

I do not trust those reports and neither should you.  The Comex is living on the life-support of those who still trust them enough to conduct business on the Comex.  Sooner or later that trust will be shattered.  Judging by the current drain of gold from the Comex and from GLD, "later" is probably not too far away...When that happens, the world price of gold will go "bid without" (meaning all buyers, no sellers) and the dollar will drop off a cliff.

Thursday, November 14, 2013

Unfortunately, I'm Going To Right About The Housing Market - Again

Home prices, as with aggregate wealth, only really ever increase at the rate of population growth.  So if the population of households and home owners is actually declining, as it is today, what does this imply for future home price appreciation and personal wealth?  - Alex Pollock, Resident Scholar - American Enterprise Institute
Fortunately, if you have not been unfortunate enough to get sucked into buying a home in the last 12 months at these QE/Cheap debt-fueled prices, consider yourself better off.  If you have a house you are trying to sell and want to really sell it, do it now and price it to move.

DR Horton, the nation's largest new homebuilder  reported its Q4 and full year results two days ago.  I pulled up the SEC-filed financials and dug into them a lot deeper than any Wall Street analyst does, or at least presents to the public.  What I found was quite troubling, especially considering that DR Horton is the best possible statistical representation of what is going on fundamentally because it's the largest homebuilder and caters to the middle to lower-middle market demographics.

Keep in mind that headline reports only offer year over year comparisons which, given the amount of QE and Government stimulus pumped into the housing market over the past 3 years, is an easy beat.  But I have been analyzing quarter to quarter comparisons for the homebuilders' last two quarters through September because they incorporate the 6 best home selling months of the year on a seasonal basis.  The drop in numbers from the June quarter to the September is quite startling, and so far it's been across the board with the companies who have reported.

As an example, DR Horton's new order backlog dropped 17% from its fiscal Q3 to Q4 this year.  Please note that its fiscal Q4 includes July and August, which are typically the 2nd and 3rd best seasonal months for sales, so one would think that at best case DHI's orders should have been flat.  It's cancellation rate spiked up to 31% from 24% in Q3.  That's big.  The market was expecting a 25% cancellation rate.  The list goes on.   You can read my article here:   Red Flags All Over DHI's Earnings Report.   You will also note that DHI's management has been very heavy sellers the stock this year, especially compared with the scant number of buys - one to be exact in the last 12 months.

If you want to see the true fundamentals underlying the housing market, here it is in 3 graphs - these graphs tell us that the economy is not generating jobs and income to even come close to supporting growth in the housing market - in fact, it's telling us that the housing market is getting ready to drop hard again (please click on the graphs to enlarge):

(Read median household income)

(Home ownership rate in the U.S.)

Either a substantial amount of QE is coming in order to prop up this mess, or the housing market - and the stock market - are set up for a bigger fall than we saw in 2008.

Wednesday, November 13, 2013

The Stock Market Has Become Insane

Common calculations of aggregate ‘wealth’ take the entire stock of an asset class and multiply it by the bubble prices, on the theory that financial value is what you can sell something for.  Of course, some clever or lucky individuals succeed in selling at the bubble highs, but the aggregate bubble prices can never be realized by sale.  As soon as any very great number of the owners of a bubble asset try to sell it, the bubble collapses, the evanescent “wealth” disappears, and the long-term trend reasserts itself  - Alex Pollock, Resident Scholar at the American Enterprise Institute

I was chatting with someone earlier about how the current market reminds me of the tech bubble in 1999-early 2000.  The NASDAQ peaked a little over 5,000 in March 2000.  There were maybe a few lucky souls who sold at the top but anyone else who claimed to do so is lying to cover up the accidents in their 401k's.  Then I looked to see where the Naz is right now and I discovered it was a shade below 4,000.  I stopped watching the Naz a long time ago because it reminds me of the penny stock markets in Denver and Salt Lake of the 1970's.  Mostly fraudulent.

Then I looked for comparative purposes at the S&P 500 futures, as I was watching it ramp higher today unceasingly in the last hour to close up over 13 points (close to 1%) despite opening the day down about 9 points.  No news or fundamental reason for the ramp.  Unless you consider the Federal Reserve's money printing program to be of fundamental value.  Hmmmm, let's see.  The Fed issues 1 dollar and it's a one banana world, so it costs $1 to buy the banana.  Then the Fed issues another dollar but there's no more bananas produced and I'm hungry so the guy who has the banana charges me $2 dollars.  I felt wealthier when I had $2, but it still cost me $2 to buy the banana.  That's an absurd simplification, but that's basically what the Fed is doing.  You call that value-added?  You call that wealth creating?  In it's most simple-to-understand form it's "inflation."

We might not see the immediate affects of inflation tomorrow when we go buy food at the grocery store, because those dollars being printed are piling blindly and foolishly into the stock market.  Why?  Because the demand for mortgages for buying homes and refinancing existing mortgages is quickly disappearing, so all that printed money has to go somewhere. It was previously going into cheap mortgages used to buy homes to flip.  That game is over now.  The housing bubble is popping. Here's where the money IS going:

If you think there's any semblance of fundamentals driving this market other than massive quantities of Fed "cheese," then please review the graph I posted on the upper right side of this blog.

Now, for those of you who think that you'll have the discipline to hold on until this thing peaks, then I will tell you that in 1999 when the Naz was at 3000 and I thought that was the peak, it ran up another 66% from there.  Could that happen with the SPX?  Sure.  But also know that in January 1923 the German stock market index was 21,400.  By November 13, 1923 it had run up 26,890,000.  Don't blink or rub your eyes, you can look it up.  Then on November 14, 1923 the German billionaires woke up and found themselves destitute, as the German Government revalued the mark at 1 for 1 billion.  Your billion in the stock market was now worth 1.  You didn't even get a chance to sell.

Don't think that won't happen here, because it can and probably will.  And you better pray that's how this grand Keynes/Volker/Greenspan/Bernanke/Yellen experiment turns out, because the alternative is that the U.S. starts a world war (we've heard that before, twice when Germany ruled the globe) because China is the country that forced the revaluation of the dollar.  If you want to see how that ends, read "The Road."  Just remember:  Arbeit macht frei...

Monday, November 11, 2013

Retail Sales Confirm That Economy Is In Trouble - Twitter Already In A Bear Market

Just a quick "administrative" note first.  The homebuilder stocks took a big hit on Friday despite the massive ramp in the Dow/S&P 500.  At one point the homebuilder stock index was down 4%.  I have called a new bear market in housing when the DJUSHB (Dow Jones Home Construction index) hit 515 at the end of  January.  It's trading down another 1% today as I write this.  It's down 20% even from my call on January 29.  You can read about my call here:  Short The Housing Stocks.  That piece focuses on DR Horton and why that's a great short. You sort through my other articles to catch up on my housing market analysis.  I was a bit early on my call as the DJUSHB ran up to 550.  But that just means that the index has been in an even bigger bear market (the 20% decline rule) than measuring from when I made my initial call.  Then again, I was early in calling the demise of the first big housing bubble, but ultimately I proved to be 100% right.  History will repeat here, I assure you.

Also, I am still waiting to hear back from Pulte Homes' Jim Zeumer, who jumped all over my analysis of his company's accounting management techniques and responded promptly to my email replies. That is, all but the one in which I challenge he and his upper management team to take after-tax income cash from their bank accounts and buy a meaningful amount of shares if he was so confident that my work was wrong.  You see, PHM insiders sold copious amounts of stock all summer long and the company used $83 million shareholder money to buy back shares.  So why isn't management buying shares if they like the outlook for new home sales?  Please note, I don't expect to hear back from him and that was a strictly rhetorical question.  But I will say that it's always best to invest in companies/sectors where management is putting their money where their mouth is.  We are seeing that in a big way in junior mining shares.

So, retail sales are starting to decline on a week-to-week basis, which is contrary to the bullish headline year over year reports.  I wrote an analysis of retail sales for Seeking Alpha, which you can read here:  Retail Sales Tanking/Retailers Sending A Bad Signal.

It's incredible to me that these big retailers are going to open on Thanksgiving Day, starting with K-Mart opening at 6:00 a.m.  It's bad enough that Walmart started the trend years ago by opening at midnite on Black Friday.  But if you step back and think about what it means, it means that the retailers are fearful about the prospects for holiday sales this year.  Abercrombie & Fitch has already warned about their holiday sales expectations and The Gap is already heavily discounting.  That's about all you need to know because the cash register is where "the rubber meets the road" of truth - not media-hyped headlines and Wall Street financial tv "news" programs.

Twitter stock, which came public at an insanely high multiple of sales and is highly reminiscent of what happened of the top of the last internet stock bubble, actually hit bear market territory this morning as it traded over 20% below it's high price print on Thursday, the day it came public.  Of course, I'm sure CNBN, Bloomberg and Fox Biz will not report this fact...

Friday, November 8, 2013

I'm Not Sure How The Government Can Report GDP And Payroll Numbers This Absurd And Expect Anyone To Believe Them

Just when you think things can’t get any more ridiculous, magically they do. Your country’s revised GDP number is an insult to the intelligence of anyone with an I.Q exceeding that of a gerbil.  My conclusion is that there is something horribly wrong in the overall system and the powers- that- be are trying to groom things prior to the revelation of the truth.  -  A well-known Investment Strategist in private correspondence with me yesterday (private except for NSA surveillance)
I was going to write out a detailed analysis of yesterday's "advance GDP estimate" for Q3 and not get into the employment report number just released today.  But today's jobs gain report for October was so absurd that I'm not really sure it matters the extent to which the details are dissected and analyzed for credibility because the headline print for both numbers is so unbelievable that it would stretch the imagination of history's greatest fiction novel writers to come up with them.  When you write fiction, you have to give your audience some small thread of a reason to "suspend disbelief."   But the GDP and Non-Farm Payroll reports are just too inconsistent with just about every private survey on the economy to allow even for the temporary suspension of disbelief.

I almost feel like I would be insulting the intelligence of the reader to dive into some of the most troubling sub-components of the headline data because the headline numbers themselves are just too absurdly beyond credibility.  Here's what John Williams of, who's collected, analyzed and written about Government economic reports for decades, has to say about the GDP report:
The GDP remains the most-worthless and the most-heavily modeled, massaged and politically-manipulated of government economic series.  It does not reflect properly or accurately the changes to the underlying fundamentals that drive the economy.
Just briefly on GDP:  Yesterday's 2.8% headline number - and remember this is a "seasonally adjusted annualized" number - included .89% which was attributable to inventory build.  Now, we know most big manufacturing firms are posting flat or declining revenues, which means end-user demand is declining.  So I'm not sure why businesses would be building inventories, especially since the inventory build added .5% to Q2's GDP print.  Why they would continue to build even more of something that no one seems to be buying is beyond logic.  I explained this dynamic with regard to automobile sales reported for October, which you can read about here:  Misleading Auto Sales Report.   I will say that the GDP headline number was 50% higher than Wall Street was expecting and most of that 50% is comprised of this inventory build.  No one expected it because it doesn't make sense to anyone based on the true fundamentals of the real economy.

But then again credit is free right now and it doesn't cost them anything to borrow in order to finance the inventory build.  What this does mean is that at some point, probably in Q4 and Q1 next year, businesses will have to cut back and that will subtract from GDP.  If you subtract the inventory build from GDP, you get a 1.8% number.  The inflation index was 1.9%.  If you subtract the effect of inflation from the nominal GDP number, it means that ex-inflation and ex-inventory build, GDP actually contracted on a real basis.  That's a recession and an economic recession is consistent with just about every non-Government economic and consumer report available.

As for today's jobs number.  I'm just not sure how that headline print has any kind of credibility whatsoever.  I was just informed by an esteemed colleague that the birth-death model (that fictitious job creation device the Government uses to make jobs appear out of thing air)  added 126,000 jobs - the most of any October going back to 2003.

Furthermore, buried in the Government's own report is a statistic that shows that 935,000 people dropped out of the labor force.  Where did they go?   They applied for and now receive some kind of Government support:  Welfare/food stamps - the welfare rolls grow by the thousands every month - the last number I saw showed close to 50 million people receiving food stamps; Social Security Disability - Obama liberalized the qualification hurdle for SSDI and there's 11 million people receiving it now vs. 7.3mm when Obama took office - that's 3.7 million more people than in December 2008 - a 51% increase;  people who can't find jobs have no problem getting student loans to go to schools like DeVries and University of Phoenix, where they learn how to change hub caps and paint fingernails - when you get a student loan and go to school, you drop out of the labor force - student loans and auto loans made up 99% of all non-mortgage loans received in the last 12 months.

That's where most of the nearly 1 million people went last month who are no longer considered part of the job market.  The rest just disappear down the proverbial rabbit hole.  But the labor force participation rate is now under 63% of the population.  It's where it was in 1978 when most households were still one-worker homes and women stayed home to raise the family.

One last point about how absurdly fraudulent these Government reports are and I have not seen this mentioned yet in any analysis.  If you look at a breakdown of the GDP report in terms the change of the components from Q2 to Q3, you find that consumer spending, service spending, fixed investment and exports all declined in terms of subtracting from the growth rate as calculated.   Think about that for a minute.  How can private businesses be hiring people if consumers are spending less, service businesses are seeing a decline in demand and capital expenditures are declining?  It just goes to show you what an insult to our intelligence these numbers are.

I will end with one note, which I believe signifies that my analysis is 100% accurate.  I have been bearish on the housing market for many reasons.  You can read through my articles posted on Seeking Alpha to see my analysis which is backed with hard data, starting with this one:  The Housing Bear Is Back.  Well today, despite the massive ramp higher in the Dow and the S&P 500, the Dow Jones Homebuilder Index (DJUSBH) is down 3.4%.   That's a big drop for any day in that index, but on a day when the broad equity indices are up nearly 1%, it is sending a very ominous signal about the economy.  After all, if the economy is doing so well per the Government reports today and yesterday, how come the housing stock index down 25% from its high print early this year?  If the mark of a bear market is when a stock or an index drops 20%, how come no one in the financial media - or even ANY analysts besides me - are not talking about the new bear market in housing?  The housing mini-bubble has been about 80% of any economic strength over the last 2 years.  That is now gone.

Have a great weekend.  Enjoy what you can, as much as you can, for as long as you can - there's no telling when we'll wake up a the collapse.

Tuesday, November 5, 2013

The U.S. Government's Totalitarian Creep Is Turning Into A "Grip"

I first want to preface my remarks by saying that, although Obama has tragically and immorally failed to deliver any of the promises on which he rode into the Presidency in 2008, it's not his fault.  He is nothing but a pawn, maybe at best a bishop or rook, on the insidious chessboard of political and economic power and control that is dominated by big bank, oil, defense and other corporate interests and long time elitists like Henry Kissinger and Zbigniew Bryzezinski.  Many of the rooks and "royal" players do not have identities because they stay behind the scenes.  But many you've heard of, like Robert Rubin, George Soros and Warren Buffet.  The person who gets put in the charge of the Fed is also a lower-ranking piece on the board, like the President.  This is not about Democrats vs Republicans - that's the distraction they throw out like fish bait to deflect your attention from the real story.  Behind the scenes the big monied interests donate equally to both parties.  They don't care which party fills the seats as long as they control the votes.

Another piece of the overall puzzle fell into place for me when I chatted with a good friend of mine today who was going home from a hedge fund conference.   He said the majority of people there were completely disgusted with our markets and the big buzz was about how the markets are completely out of touch with reality and that it was impossible to value anything.  As an example:  Sovereign Ghana bonds are yielding only 7%.  Ghana for chrissakes. That's a lower rate of interest than many muni bond issues in this country.  They were also disgusted and mystified by the relentless move higher in the U.S. stock market.

He also said that people were talking about how big Wall Street firms were starting to withdraw from trading a lot of markets, especially commodities because they are impossible to trade, so it's not just gold and silver.  As participants and capital leave markets, they become less liquid.

That's when it occurred to me:  this is what the Government and elitists who control the Government want.  To the extent that markets are liquid and freely trading, it's harder for the Government to control them. 

Let me explain this control thing.  I've noticed since the Patriot Act was passed that the Government has been slowly taking away civil and Constitutional rights and taking more control of our lives.  It happened somewhat slowly at first but it's starting to happen very quickly now.  Obamacare is a prime example.  Obamacare is going to "blow up" - doctors are opting out en masse, there will be a shortage of doctors to service patients in the system and many people will only buy insurance when they have to because pre-existing conditions must now be accepted. etc etc.   It will give the Government the perfect excuse to consolidate even more control over our lives by moving the role of healthcare management into the Executive Branch of Government.  All it will take is yet another Executive Order signed by Lefty (for those who never noticed, Obama is left-handed, I'm ashamed to say as a lefty).

Same deal with the markets.   In July the average NYSE volume per day was 952mm shares.  It has declined at a remarkable rate.  Yesterday NYSE volume was under 700mm shares.  It's that way below that on many days.  It's easier for the Fed, with the big banks as their proxy, to keep the market from tanking when the volume is low.  When volume is low a $1.8 billion QE operation like today is all it takes to keep the market from cliff-diving, which it started to do at the open, until the Fed was done with its POMO operation (QE bond buying - today it bought $1.8 billion of 30yr Treasuries).

If the Government can force liquidity to withdraw from the markets, it makes it easier for it to control the markets.  Here's what this means with gold and silver:  Gold and silver have been under oppressive price-capping manipulation since peaking in 2011.  The price of metals were a run-away freight train back then and it was getting to the point at which the dollar's "supremacy" was threatened.  Gold and silver bottomed in June and have been slowly drifting higher, despite daily paper bombing attacks from Australia, London and the Comex.  The underlying strength of the physical market in the eastern hemisphere is preventing them from pushing the metals lower other than an occasional blatant paper raid, typically on Friday when the Comex is the only game going around the world.  From here, I believe gold and silver will start to "leak" higher as we get closer to the tipping point for the U.S. dollar.  At some point the paper manipulators will receive delivery demands that can't be met.  At that point in time gold and silver will go bid without, the dollar collapses and our system implodes.  I don't know how long that will take, but I see that the Government's pace of implementing totalitarian control is moving along a lot more quickly now than it was 10 years ago when I first starting thinking about the end game.

Here's some more unmistakable signs:  1)  The debt ceiling limit is removed, supposedly temporarily.  The jury is out on the "temporary" nature of that - I bet the "no ceiling" status gets extended in February.  No debt ceiling limitation essentially gives the Government its own printing press  2)  Capital controls.  Many are poo-poo'ing JPM's move to limit the ability of depositors to wire money in and out of the country, but I have read that other banks are going to follow suit and I would bet big money that it's a "creep" toward capital controls.  3) NSA.  Diane Feinstein surveillance legislation - need I say more?

There are other signs but those are the big ones.  Whether my overall scenario for how the exact events unfold is accurate or not is not important.  I am becoming more convinced that my thesis is correct.  It doesn't have to be accurate for things to become unbearable here, just correct.  After all, "1984," "Animal Farm" and "Atlas Shrugged" are not necessarily "accurate" in their portrayal of the unfolding of actual events but they sure are correct in their underlying modelling of what has been happening and what will happen.

This is a concept that anyone who has kids, or even only grand kids they care about, can't accept because the implications of what it means about where life in the U.S. is headed are too horrible to contemplate.  Denial sets in and fears are rationalized away as being "irrational" and those "irrational" fears are replaced by hope.   The only "hope" I have right now is that Cormac McCarthy's "The Road" is not only not accurate but not correct.

Monday, November 4, 2013

How Much More Gold Can They Drain From GLD Before It Loses All Credibility?

And thus I clothe my naked villainy
With odd old ends stol'n out of holy writ;
And seem a saint, when most I play the devil
           - Shakespeare, "Richard III"

We have witnessed a stunning drain of gold from the GLD ETF trust.  Through last Friday, an incredible 479 tonnes - more than 35% - of GLD's gold has been removed and has disappeared, most likely to Asia - in the space of about 10 months.  The biggest chunk of that 479 tonnes was removed shortly after Germany's Bundesbank issued it's feeble and hopeless request to the U.S. that the Federal Reserve start shipping back some portion of the 1500 tonnes of gold that is supposedly being "safe-kept" on behalf of Germany by the Fed in its vault in New York City.   Gold luck, Angela...

I have looked at GLD suspiciously ever since James Turk issued the first analysis of GLD's prospectus back in 2004.  Those of us who are familiar with securities laws and investor "safe guards" supposedly enforced by the SEC were absolutely shocked that the SEC approved the GLD prospectus as it was filed because of the egregious lack of GLD sponsor and custodian legal accountability standards typically required by the SEC for publicly traded securities.

Given this fact, I believed at the time that GLD was a scheme devised to suck  in retail and institutional cash that might otherwise flow in massive quantities into actual physical gold that would be safe-kept in private vaults in this country.  Although GLD has a mechanism to enable investors with a minimum of 100,000 shares to convert those shares into gold that would be delivered to the investor, the procedure is exceedingly cumbersome and expensive and there's a mechanism embedded in the language of the prospectus that enables the trustee of GLD to deny such requests.

But I also knew - through GATA's invaluable research - that there would eventually be a shortage of physical gold that would be available to allow the western Central Banks and bullion banks to maintain their oppressive and incessant manipulation of the paper gold market for the purposes of maintaining a cap on the price of gold, for the purposes of defending the credibility of the U.S. dollar.  I figured that at some point the gold in GLD would used for this purpose once the Central Bank stocks of gold were largely if not fully depleted.  In this context, please recall that about three years, the ECB system, which had been selling 400 tonnes per year on average, pretty much stopped selling any gold.  That's sign-post #1 that I was right.

Then along comes the Bundesbank in early 2013, with a request that the Fed start shipping Germany's gold held in in New York back to Germany.  That's when all hell broke loose:

(Please note:  the original graph is from the TF Metals Report. I sourced it from my esteemed colleague, "Jesse," of Jesse's Cafe Americain.  Solid circle edits are mine to enhance visual readability of the chart.  Jesse's original post can be read here: Collapse in GLD gold holdings).

There's something really wrong with that picture because the intuitive response from the market by Germany's request of the Fed should have been a quickly rising price of gold.  But as you we all know, the Fed defaulted on the request - for all intents and purposes - and that's when the massive drain of gold from GLD commenced. 

The truth is that my original hunch was correct.  100% correct.  The gold in the GLD trust is being used to satisfy the enormous physical delivery demands from China and the other big gold buying countries because the western Central Banks have run out of gold to deliver.  That is an unmistakable fact. Reports and data ad nauseum have been published in the last six months describing and verifying the voluminous, unprecedented amount of gold bars that have been moved - literally physical transferred - from the Comex in NY and  the LBMA and Bank of England vaults in London to Switzerland and then on to Hong Kong, where it flows to its ultimate destinations in China.  Anyone who would deny that this is the case has a blatant and catastrophic disregard for the truth as supported by provable facts.

So the question is, how much longer can the depletion of gold from GLD continue before this scheme falls apart?  Let me first say that it is likely that the U.S Government's "Waterloo" in this situation will be the gross miscalculation - when GLD was originally devised - of the growth and size of China's appetite for physical gold for which actual physical delivery is demanded.

With that in mind, my best guess is that if the gold in GLD were to be depleted by another 35% from here, the largest remaining shareholders of GLD would likely start exercising their legally ambiguous "right" to convert their shares into physical gold and have that gold delivered out of JPM's custodial vault and into their possession.

Think about the Hobson's Choice faced by the sponsor, trustee and custodian of GLD:  if they don't honor shareholder conversion requests to convert and deliver gold, it will send the "default" signal to the world that indeed GLD is a fraud, that GATA has been right along.  The price of gold will literally go straight up, "bid without"  - meaning huge bids will appear at much higher levels and there won't be any offers.  The other side of this "choice" is that it is likely that the physical gold - at that point in time - to honor such requests is actually not available in HSBC's vault to be delivered and the trustee will attempt to settle in cash.  Gold goes bid without.

At this point there's really no telling just how much longer GLD can be drained of gold before the western Central Bank/BIS fiat paper gold system inevitably collapses, but with each passing day of increasing awareness and understanding of what is happening with the world's physical gold vs.the derivative paper claims on that gold, and with each additional day the LMBA GOFO rate is negative, the time to collapse is quickly shrinking.  I do believe that, in what ironically was devised as a "fool-proof" tool manufactured to allow the west to "manage" the physical gold vs. paper problem for a long time, will likely be the Icarus wings of the U.S. Government's fiat money scheme.

Note:  I am in the processing of revising and updating my original analysis of the GLD trust and why the shares in ETF are fraudulent - stay tuned...

Saturday, November 2, 2013

Senator Diane Feinstein Wants To Make NSA Spying On YOU A Law

As an update to my saga challenging Pulte Home executive, Jim Zeumer, to having himself and his management taking their own after-tax money in the bank and buying shares of PHM, so far there's been no response.  He was quick to jump all over me with his disagreement of my analysis of PHM's use of GAAP accounting to exaggerate the company's earnings.  But when I asked him how come he's happy to use $83 million of shareholder money to buy back stock while insiders dump their shares, I get no response.  Nothing.  Crickets.  Still waiting, Jim...

I think next to Harry Reid, Diane Feinstein has to be one of the most vile, hypocritical and power-mongering politicians not named Barack Obama.  I hate to say it, but for as much as I despised Bush and his gang of Republican criminals, the Democrats in power make the previous regime look like choir boys.

I vividly remember in the early 1990's being forced to contribute to Feinstein's Congressional campaign by the guy who ran leveraged finance at Bankers Trust because Ron Burkle (who made a fortune doing grocery store leveraged buyouts) was one of BT's biggest fee-paying clients and Burkle was in the process of buying out Feinstein.  I'm still bitter about that to this day.

Feinstein is leading an effort in the Senate to make it a law of the land for the NSA to listen in to every single phone call - landline or cell - that is made in this country.  In her words, " People believe it's surveillance, but it's not."   Then what is it, Diane?  George Orwell Was Right

I shudder to think that this might actually pass both houses of congress because Obama will gleefully sign the bill.  Does everyone remember that Obama, as one of the planks in his campaign platform, promised to make an effort to repeal the Executive Orders signed by Bush which enabled comprehensive cell phone surveillance of every American?

I'll bet that nearly everyone who voted for Obama does not remember.  Like blind sheep following the  guileful Shepherd to the slaughterhouse, Obama supporters seem to have selective memory of Obama's promises.  I vividly remember because I was at one of his rallies in Denver in October 2008 and I can recall all the promises he made, none of which he has followed through on.

Although I don't think anyone really believes Obama when he expresses denial of knowing the extent of the NSA's spying on the whole world - it's truly amazing how closely the unfolding events of today reflect the vision of George Orwell's "1984," which was published back in 1949: