The Only Possible Solution To This Problem Is Massive Money Printing

...or a massive cut-back in essential public services and widespread hunger:

Illinois Stops Paying Its Bills, but Can’t Stop Digging Hole

"For the last few years, California stood more or less unchallenged as a symbol of the fiscal collapse of states during the recession. Now Illinois has shouldered to the fore, as its dysfunctional political class refuses to pay the state’s bills and refuses to take the painful steps — cuts and tax increases — to close a deficit of at least $12 billion, equal to nearly half the state’s budget."

Here's the article link:  NY Times

If you think our policy makers and the guy in the Oval Office that most of you wouldn't put in charge of a hot dog stand are going to address the financial collapse in several States with anything BUT money printing, I would suggest that you layoff your medical marijuana for awhile.

BP Update

Oil is now hitting the shoreline of Texas and tar balls were found in Lake Ponchartrain, the large inland salt water lake that is bordered by New Orleans and several surrounding suburbs.  BP is now looking to global Sovereign Wealth Funds to invest in BP to help pay for this mess.  Anyone who takes that on is a complete moron.   I smell desperation on the part of BP.  Here's the article link:  It's Getting Worse

Obama urinates on more of his campaign platform and all over the 1st Amendment:  ""A photographer taking pictures of a BP refinery in Texas was detained by a BP security official, local police and a man who said he was from the Department of Homeland Security."   That quote is from Zerohedge - here is the article LINK

Sentiment Indicator Points To A Sharp Rally Coming In Gold

By one historically accurate contrary sentiment metric, the gold market is poised to stage a surprising move higher soon.  From the Hulbert Gold Sentiment Newsletter Index: 

over the three decades I've been tracking investment newsletters, the gold market has -- on average -- adhered to the contrarian pattern. That is, bullion has turned in far higher returns in the wake of low HGNSI levels than in the days and weeks following high readings.

Here's a link the full article:  Sentiment Pointing To Higher Gold Prices

If memory serves me correctly, I believe the HGNSI bottomed around the 18 level in October 2008 vs its current 23.5 reading.  Both sentiment readings point to extreme pessimism/bearishness, which typically forecasts a big move higher coming.

Back then gold disconnected from its correlation with the stock market and began a move from $700 to its current $1211 level, or 73%.   The fundamentals supporting the price of gold have only strengthened considerably since Oct 2008, including a global movement of gold investors seeking to take actual physical delivery.

One other point, the import premiums for India and Viet Nam on Friday snapped back sharply to unusually high levels, indicating that the $40 price drop stimulated widespread, aggressive buying in those two countries, the 2nd and 5th largest gold buying nations.

The market is telling us one thing for sure:  Americans may be clueless with regard to gold, but the rest of the world has become used to $1200 gold and will welcome any downside price manipulation by U.S. banks with widespread arms.

One Last Observation On Thursday's Price Ambush

Gold is in a long term bull market.  As such, all sell-offs, price pullbacks, secular price corrections and overt, illegal manipulative price attacks, like Thursday's, are to be bought - aggressively.  Feel free to take profits on part of your positions on big price rallies only if you have mining shares or paper surrogates (GLD, CEF, GTU, PHYS, etc).  Never, I mean NEVER, sell your physical gold/silver holdings until this long term bull has run its course.

On average, bull market cycles last 18-20 years.  We are only 9 years into the precious metals bull market cycle.  Historically, the most spectacular price gains occur in the latter stages of a bull cycle (think:  stocks, 1981 - 2001;  housing 1991 - 2007). 

Those of you/us who are willing to spend the time learning about, researching, investing in and trading the precious metals market will know what to look for when it is time to sell.  Until then, as per Jim Sinclair's perfect advice:  "never trade your core 2/3's position, always buy 'fishing line' sell-offs (like Thursday's) and take profits on 'rhino horn' price rallies."

Have a great holiday weekend.

What The Heck Happened Yesterday?

Knowledge without experience is not really knowledge...It finally dawned on me this morning how yesterday's manipulated Comex plunge was orchestrated, in reviewing the idea of the dollar losing 1.20 yesterday and gold losing $40. Doesn't make sense, right?

Here is my view on what happened. I base this on 9 years of trading, investing, researching and observing the precious metals market. This is an educated hunch based on experience. Recall that over the past 2-3 months, the large hedge funds have built a record short position in the euro and an offsetting long position in the dollar. For the past two months gold has been trading inversely with the euro and in near-perfect correlation with the dollar. The big banks, who are absurdly short paper gold, have built up near-record long positions in the euro and a short position in the dollar. You can find all the data which shows this using the COT (Commitment of Traders) report.

We know that big banks who are short an absurd amount of gold futures on the Comex like to ambush the market on low volumn, holiday affected trading days and do so by unloading an enormous amount of paper contracts as soon as the Comex opens. See my chart in yesterday's post. (Not) coincidentally, Canada was closed yesterday for a national holiday observance.

Yesterday the dollar started dropping off of a cliff at 3 a.m. NY time, but gold drifted higher until just after the London a.m. price fixing. From there it flat-lined until exactly the 8:20 NY time Comex open. Comex volumn was enormous from second it opened up until 11 a.m., which is when the largest part of the $40 drop occurred. I believe that the manipulating banks used massive sell orders to trigger stop losses (as per usual), as the hedge funds were scrambling to cover record short positions in the euro and their long position in the dollar. Why else did it take until the Comex open for gold to plunge, over 5 hours after the dollar had started plunging? Sorry Zerohedge, but that is not "asset liquidation."

That's what I believe occcurred yesterday, for the most part, and the bullion banks were helped by the fact that it was a pre-holiday, low volumn week and that Canada was closed. Having said all that, I've been wondering what it would take to break the euro/gold inverse relationship - and the corresponding dollar/gold correlation - once the dollar rolled over and started eventually to seek new lows. Yesterday may have taken care of most of that process. I actually expected to see more downside today in gold/silver, but gold has been relatively strong relative to the rest of the market. At least for today, it has moved inversely with the dollar.

BP/Gulf Disaster Update

As for the Gulf oil situation. I was chatting with a friend who is originally from New Orleans today and she said that her people down there are saying that everything being reported about the BP effort is complete b.s. She said that no claims are being paid and BP seems to be going to minimal effort and expense to work on cleaning the mess. She said they told her not to believe anything being reported in the media about BP's efforts - that it is a total media whitewash. She was recently in Pensacola, Florida and said the beaches are getting decimated with oil and that the oil is now hitting the beaches further east of Pensacola.

Anyone wonder why the worst ecological disaster in the history of the planet all of a sudden has been minimized in terms of reporting lately? Ask the guy in charge who most of us wouldn't put in charge of a hot dog stand...

Zerohedge Shows Its Ignorance Twice Today

Earlier today Zerohedge announced in marquee lights that AIG manipulated the metals markets. They acted like they unveiled the splitting of the atom. Those of us who have been involved in this market for this past decade and who support GATA, have been aware since at least 2002 that AIG has been, was, one of the main manipulators in the silver market. All of the evidence has been there for those who cared to understand the facts.

Second, Zerohedge is blaming today's action in gold on "asset liquidations." Today was not about asset liquidations. Today was about Gary Gensler and the CFTC letting the bullion banks, who have manipulated the markets unfettered for the past 20 years, run riot with a paper selling avalanche that triggered black box hedge fund stop-loss orders.  Today was a classic drop in gold that was triggered by an avalanche of selling exactly at the open of Comex trading. This trading action has occurred almost every day over the past two weeks and 100's of times over the last 9 years that I've been trading this market. It is criminal and enabled by a Government that enables widespread fraud and corruption. Here's the chart:

(click on chart to enlarge)

I guess the pundits would say that today's action was coincidental to the fact that Comex is edging closer to a condition of defaulting on its physical gold/silver deliveries...

Zerohedge is a good source for intel on a lot subjects.  The precious metals market is not one of them.

The Housing Market Is "Lights Out - Look Out Below"

"The number of buyers who signed contracts to purchase homes dropped in May to the lowest level on record, a sign the housing recovery can't survive without government incentives" link: The Irreversible Death Spiral

This tells me that the Fed/Govt will soon start throwing trillions of manufactured paper money into the system, perhaps even sooner than I anticipate. Gold will soon start anticipating this policy action.

Bernanke and Geithner Dupe The U.S. Taxpayers For Billions

Read this story from Bloomberg and then try to tell me, minimally, that Bernanke and Geithner should not be immediately fired and put under criminal fraud investigation: 

Federal Reserve Chairman Ben S. Bernanke and then-New York Fed President Timothy Geithner told senators on April 3, 2008, that the tens of billions of dollars in “assets” the government agreed to purchase in the rescue of Bear Stearns Cos. were “investment-grade.” They didn’t share everything the Fed knew about the money.

Bernanke and the Fed have the best financial data-gathering resources in the world.  Anyone who thinks that Bernanke was not aware of exactly how distressed the 10's of billions of assets were that he unloaded onto the Taxpayer balance is either hopelessly naive, hopelessly stupid - or both: 

“The Federal Reserve was not straightforward with the American people regarding the risks they were taking with taxpayer money, despite my efforts to obtain such clarity at the time,” U.S. Senator Richard Shelby of Alabama, the Senate Banking Committee’s top Republican, told Bloomberg News. “It is apparent that the Fed withheld from the Congress and the public material information about the condition of these securities.”

Just so everyone reading this is aware of the truth, the Fed has another $1.5 trillion in what will end up being largely worthless mortgage assets that were purchased under the guise of "quantitative easing."  Most people are not aware that Geither, as Treasury Secretary, agreed to guarantee that garbage on behalf of the taxpayer.

I knew when I watched the bank rescue horror show unfold that the taxpayers were going to end up ultimately with, likely, a few trillion in worthless assets.  Bernanke knew it too.  Geithner?  Hard to say.  Geithner reminds me of the obedient puppy dog who will do what it's told for a treat. 

Here's the link to the entire article:  Bernanke Is A Criminal.  If this news does not fire up the American public to start taking some action to end the looting by the banking elite of this country, then we deserve to end up with what we get when this saga ends in the destruction of our system.

Don't take it from me, take it from long-time Wall Street veteran Howard Davidowitz:  The Whole Thing Is A Fraud