"My Investing Model is ABCD: Anything Bernanke Cannot Destroy"

We are in the last innings of a very bad ball game. We are coping with the crash of a 30-year–long debt super-cycle and the aftermath of an unsustainable bubble  - David Stockman, interview linked below

This interview by The Gold Report (http://www.theaureport.com/)  is an excellent follow-up to my blog post from yesterday.  In this, Stockman does a superb job explaining how the Fed manipulates the cost of money and the cost of debt and how Wall Street takes advantage of this through the use of insiders, like former Goldman Sachs partner Bill Dudley, who runs the NY Fed:

The Fed is destroying the capital market by pegging and manipulating the price of money and debt capital. Interest rates signal nothing anymore because they are zero. The yield curve signals nothing anymore because it is totally manipulated by the Fed...there is also just plain crony capitalism that is not that different in character and it's what Wall Street does every day. Bill Dudley, who runs the New York Fed, was formerly chief economist for Goldman Sachs and he pretends to solicit an opinion about financial conditions from the current Goldman economist, who then pretends to opine as to what the economy and Fed might do next for the benefit of Goldman's traders, and possibly its clients.

This is a must-read interview - every word.  Stockman succinctly and clearly lays out what happened and why in 2008 and explains why the next wave that will hit our capital markets will be the final blow:  LINK

The only conclusion that anyone can draw from this - at least anyone willing to open their eyes to the truth and accept reality for what it is - is that the financial, fiat-currency driven disaster that is going to hit this country necessitates the conversion of as much of your paper wealth into gold as possible.

Is This What You Want For Your Country?

We have reached a profound point in economic history where the truth is unpalatable to the political class - and that truth is that the scale and magnitude of the problem is larger than their ability to respond - and it terrifies them.    - Hugh Hendry, Milken Institute Global Conference 2012

From yesterday's Huffington Post:  Oops! Air Force Drones Can Now (Accidentally) Spy On You
"As long as the Air Force pinky-swears it didn’t mean to, its drone fleet can keep tabs on the movements of Americans, far from the battlefields of Afghanistan, Pakistan or Yemen. And it can hold data on them for 90 days — studying it to see if the people it accidentally spied upon are actually legitimate targets of domestic surveillance."  Here's the LINK

If you think that air force drone spying is "accidental," I'd like to interest you in buying a bridge that connects NYC's upper east side with Queens.  I doubt you read about that in your local newspaper or heard about it on CNBC, Fox News, etc. 

I guess Obama conveniently forgot that he promised to reverse and eliminate the executive orders signed by Bush that authorized un-Constitutional invasion of our privacy.  It's amazing how many dogmatic, blind Obama supporters also seem to forget all of Obama's "hope and change" promises...

Here's another one, from today's HuffPo:  Support For War In Afghanistan Falls To New Low, Poll Shows:  "In results released Wednesday, 66 percent opposed the war, with 40 percent saying they were "strongly" opposed."  Here's the LINK

Once upon a time back in the summer/fall of 2008, I recall Obama spreading the message that he was going to get us completely out of Iraq with in his first 90 days, close Guantanamo within his first year, and work to reduce our involvement in Afghanistan.  I heard those words first-hand at his campaign rally in Denver in October that year.  Bin Laden is gone now.  Why are we still in Afghanistan spending money we have to borrow because our economy can not come close to supporting the Dept of Defense, let alone the massive and growing welfare system?

And now the Government wants us to believe that a rag tag band of Arab terrorists are going to stuff undetectable bombs in their underwear and get on board our airlines and blow them up.  Give me a break. It's getting to the point where you are going to have to take a tube of KY Jelly to the airport with you in case you get randomly singled out by the idiots running TSA security so they can give you a proctology exam to make sure you haven't stuffed plastic explosives up your ass.

Why is all of this happening?  See the above quote.  Before I finish up my rant today, please watch this scene from the movie "Goodwill Hunting."  This movie was scripted roughly 15 years ago.  Keep in mind that movies and literature usually reflect things that are occurring in society, often below the surface.  Much of what we're aware of today has been going on for a long time:



           
Now the NSA is building a massive taxpayer funded facility in Utah that is going to be capable of monitoring just about every aspect of your communicative life, including all emails, phone calls and probably what you watch on tv every night.  The former NSA employee who exposed the intent and abilities of this facility, who helped in its original development, was in the media recently saying that this country is within a inch of totalitarianism.  Why?  See the quote above.

Finally, for all Obama apologists, here's a list of some of Obama's campaign promises that have yet to be fulfilled:

- put all bills on the White House web site for five days before signing them
- have the congressional health care negotiations broadcast live on C-SPAN
- end earmarks
- keep unemployment from rising above 8%
- close the detention center a Guantanamo in the first year
- make peace with direct, no precondition talks with America 's most hate-filled enemies during his first
  year in office, ushering in a new era of global cooperation
- a new era of bipartisan cooperation in all areas

Remember these?  I remember them like it was yesterday.  I'm not sure any of his promises have been fulfilled, unless you want to count that massive disaster called the Health Care Legislation.  In few years, we'll all forget what it was like living in a country that was protected by the Constitution, Rule of Law and habeus corpas...

More On Gold And The Economy...

"These paper money addicts, who remain trapped in the fallacies of Keynesianism, are revealed as a vast intellectual Sahara. Won’t somebody inform them that overprinting caused this mess. More overprinting is obviously the wrong remedy. If a little arsenic is bad for you, then maybe a lot more is not good either.

Meanwhile, gold and silver are in long-term ‘Super Major Uptrends.’ That’s one way to protect yourself, and that’s for survival purposes, not for capital gains. Whatever happens next, sooner or later the world must return to wealth in the ground. So, I think that mining stocks deserve a place in all farsighted portfolios.”

That's a quote from James Dines in his latest interview at King World News:  LINK
 
So I guess myself and the other countless bloggers who shredded Charlie Munger over the weekend, and have previously disemboweled Warren Buffet's and Bernanke's comments about gold, are not the only ones understand the fundamental flaw in looking at gold as strictly an "investment."
 
And one has to wonder why the Becky Quicks of the bubblevision media world do not ask Munger or Buffet why China, India, Russia et al - plus many Central Banks - feel compelled to load up on physical gold and silver.  How do these investment gurus explain that?  Here's a good article not published by mainstream media that reviews the latest move by China to commence silver futures trading on the Shanghai Futures exchange:  LINK
 
Perhaps the Truth about Buffet's hatred of gold is best expressed in graph which shows the long term performance of Berkshire Hathaway stock priced in terms of gold - this is the market expressing it's view:

(Click on chart to enlarge)

 

(source:  link)

Priced in terms of gold, Buffet's wealth as represented by the price of his Berkshire Hathaway stock has declined 30.5% in the last three years and a staggering 77% since late 1999.  Did Warren or Charlie happen to bring up this little factoid at their annual shareholder soiree this past weekend?  Buffet's cult-like mush-brained followers slavishly follow him around lapping up any crumbs he might drop for them like the pied-piper, thus it wouldn't have mattered anyway...

On to the economy.  As a follow-up to Friday's employment report and it's immediate evisceration by the blog world, a lot of people are left wondering how all of the for-real unemployed people not counted as part of the labor force are feeding their families.  The answer lies in the welfare statistics.

As it turns out so far this year, nearly 1 million workers have applied to get on the Government's disability program.  More than 1/3 will eventually be enrolled, including 90,000 in April alone.  If you include spouses and children, the number of new people on welfare "disability" for 2012 is 539,000.  If you net that amount against the number of people dropped from the labor force so far this year, it represents a substantial portion of that manipulation metric.  All of a sudden the 1 million people who have applied for disability decided they were too "injured" to work?

In fact, since Obama took office over 5 million workers and their families have been enrolled in the disability program since Obama took office.  Here's the source for these numbers:  LINK  That's a lot of votes Obama has bought and paid for with Taxpayer money that Romney won't have a shot at unless he gets elected and opens the disability floodgates even more...

Who said there's no such thing as a free lunch?  Obama has been handing them out by the millions.  It's too bad most of the remaining taxpayers - those still healthy enough to hold down a job - are not aware of this fact...

I Can't Believe Charlie Munger (Buffet) Said This On TV

                                                        
 "gold is a great thing to sew onto your garments if you're a Jewish family in Vienna in 1939 but civilized people don't buy gold"   - Charlie Munger on CNBC  LINK

Is that the first salvo by the elitists to start pointing the finger at the Jews and placing blame for the economic apocalypse brewing on anyone beside themselves?  This hauntingly reverberates of Germany circa 1934.

He made that remark in response to comments that hedge fund manager David Einhorn - who is obviously Jewish - made with regard to why he keeps a high percentage of gold in his fund

If we didn’t have a Jelly Donut monetary policy, I would sell gold, sell bonds and buy stocks. But, the Fed is filled with academics who thoughtlessly rely on econometric models that reflexively indicate that repeated Jelly Donut orgies are the best way to get a sugar rush into the economy. And, the Fed Chairman seems to have no trouble rationalizing any policy failure on the basis that ‘monetary policy cannot be a panacea,’ or ‘it’s bad luck,’ or as proof that he just hasn’t force fed us enough Jelly Donuts, yet. As long as this is the case, it seems unlikely the Fed will change course.”

“As a result, I will keep a substantial long exposure to gold — which serves as a Jelly Donut antidote for my portfolio. While I’d love for our leaders to adopt sensible policies that would reduce the tail risks so that I could sell our gold, one nice thing about gold is that it doesn’t even have quarterly conference calls.”

Here's the link from the HuffPo:  LINK

I have just two quick comments: 

1)  Gold is NOT an investment, per se.   Gold is the world's oldest currency and you exchange your fiat currency (dollars, euros, yen, yuan) into gold as an insurance policy against catastrophic Central Bank and Government policies which serve to destroy the value of fiat currencies and destroy democracy.  Gold can ONLY be considered an investment to the extent that it remains significantly and historically undervalued in relation to the fiat currencies against which its value is measured.

2)   I seriously can't believe that Charlie Munger made that comment for public consumption.  The Buffet Klan is slowly throwing gasoline on themselves and lighting themselves on fire in the eye of the public.  Anyone has the right to be a racist or harbor hate.  But for a highly public official or corporate officer - someone considered a business or political leader - to make those remarks on t.v. for public consumption, reveals just how infected our entire system has become with corruption, defamation, deception and overall societal decay.  It shows the extent to which our system is sliding in fascism and totalitarianism....

As it has been said..."good luck and good night."

The Non-Farm Payroll Catastrophe

Give me control of a nation's money and I care not who makes the laws

                                                                    - Mayer Amschel Rothschild

As a self-proclaimed Talmudic scholar and student of history, there is no question that Ben Shalom Bernanke is eminently aware of this famous quote from Mayer Rothschild.  He is even more aware of the significance of it, as Chairman of the Federal Reserve.  

For those who don't know, please understand that the Fed is NOT part of the Government, none of the officials are elected and it does NOT represent the interests of the citizens of the United States.   The Federal Reserve is a private entity that is owned by several banks, the true identity of which has never been publicly disclosed:

Some people think that the Federal Reserve Banks are United States Government institutions. They are private monopolies which prey upon the people of these United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers; and rich and predatory money lenders.  – The Honorable Louis McFadden, Chairman of the House Banking and Currency Committee in the 1930s

Although there are plenty lists available on the internet that outline what is likely a fairly accurate presumption of the controlling banks. I leave it to you to find the list that you think is accurate, but there is not doubt in anyone's mind that the successor banks to the bankers who attended the famous meeting on Jekyl Island in 1910 - arranged by J.P. Morgan (the man) as a precursor to founding and establishing the Federal Reserve as the Central Bank for the United States - are most of thebanks that own the Fed (also there: representatives from the Rothschild and Warburg banking dynasties). It is likely that JP Morgan Chase is the controlling shareholder, as JP Morgan has acquired several of the predecessor entities which were original Fed shareholders, including Chase, which was owned by the Rockefeller family.  Other influential shareholders would  include Goldman Sachs, Bank of New York  (which owns Mellon bank now), Lazard Inc (Lazard Freres/Lazard Brothers) and Rothschild & Compagnie.

At any rate, I bring all of this up because I was having a discussion with a long-time friend who opined that Romney had a shot to beat Obama in November (he's either not voting or writing in Ron Paul).  I replied by saying "not a chance."  Why?  Because Bernanke will lose his job as the most powerful front-man in the United States (see the quote above) and he isn't going to relinquish that.  Romney already said that Bernanke is gone if he's elected.  All Bernanke has to do is shift his money printing and helicopter dropping into high-gear in June and we'll experience a big move higher in all the markets (especially the metals and miners) and a superficial, Government-hiring/stimulated (more road work) economic bounce by October.  Election done - in June.

I bring all of this up because, not only was the headline employment report today a disaster, the details behind the headlines and in the footnotes were an unmitigated catastrophe.  The headline number reported an increase of 115,000 supposed jobs in April, well below the 165,000 consensus expectation and even below the lowest big bank forecast (125k by Goldman, revised lower a couple days ago).   The headline unemployment rate was 8.1%, a slight decline from the March print.  What was not in the headline was the fact that 522,000 people were erased from the labor force by Government statisticians, which was the source of the decline in the unemployment rate.  The labor force participation rate of 64.3%, a 30-year low.  Think about that statistic for a moment:  the Government capriciously decided that 522,000 thousand people had stopped looking for work, and no longer wanted work, in April.  Someone in the Federal Government is hallucinating.

Furthermore, of the 115,000 alleged jobs added, 22,000 were from "seasonal" add-backs and 206,000 were imputed from the birth-death model, the nefarious "plug" number calculated by the Government pin-heads who take a wild "guesstimate" at the number of jobs created and lost by new business creation and closure.  Anyone want to place any faith in that absurd estimate?

There's plenty of other statistical manipulations and Government misrepresentations in the April employment report.  I'm sure several other blogs will pull the report apart and lay out the analysis.  The way I look at it is if you add back the number of people dropped into jobless hell - the 522,000 worker dropouts - and assume the birth/death/seasonal manipulations created another 200,000 fantasy jobs, then April likely saw close to 600,000 jobs lost (115,000 - 522,000 - 200,000).  To try and fine-tune or debate the actual change in employment beyond that is absurd because the real unemployment rate is so far removed from what is reported that to split-hairs over the monthly tally produced by the Government is impossible.

At some point we are going to see a massive QE/money printing/helicopter drop of paper/electronic fiat currency program from the Fed, as Bernanke will heed Mayer Rothschild's wisdom and exercise his control over the U.S. money supply...got gold?

Things Just Got Interesting

Reminder of things to come from the Telegraph UK archives...

Russia backs return to Gold Standard to solve financial crisis...

Russia has become the first major country to call for a partial restoration of the Gold Standard to uphold discipline in the world financial system....

Chinese and Russian leaders both plan to open debate on an SDR-based reserve currency as an alternative to the US dollar at the G20 summit in London this week...

A long-time friend and colleague had told me early last week that someone he knows who lives in Switzerland said that the financial circles had been buzzing with a rumor that the BRICs were going to unveil a new currency trading/clearing system that would enable the world to conduct commercial trade without using the dollar or the nefarious SWIFT system.

Looks like there may be some truth to that rumor - here's the article:  LINK
I want to point out and correct one egregiously incorrect statement in the article.  The author avers that the dollar inflation caused by the Viet Nam War and the Great Society social welfare programs forced Nixon to "close" the gold window.

Actually what happened was that the Bretton Woods Agreement created a gold-backed system in which the United States could only issue debt to the extent that it had gold to back the amount of debt outstanding. Foreign sovereign creditors had the option of redeeming their debt claims for gold at the Fed "window."  Eventually it became obvious to those paying attention - i.e. Charles De Gaullle - that the U.S. had issued debt well in excess of its gold holdings.  The French began to redeem their Treasury notes for gold.  When it was rumored that the Swiss were going to start doing the same, it became necessary for Nixon to close the gold window or risk a run on the U.S. gold "bank" and being exposed for violating Bretton Woods by issuing more debt there was gold in Ft. Knox to back it.

The rest, as they say, is history.  Many of us have been arguing that eventually the Chinese/Russians/etc would eventually reassert a gold standard.  When this happens the dollar price of gold will do a space launch and the standard of living in this country - for those who don't have any gold and silver - will decline to 3rd World standards...

Grinsanity

• *GREENSPAN SAYS EQUITY STIMULUS IS HELPING TO DRIVE ECONOMY
• *GREENSPAN SAYS EQUITY STIMULUS IS UNDERESTIMATED
• *GREENSPAN SAYS EQUITY IS COLLATERAL OF FINANCIAL SYSTEM

- Alan Greenspan on CNBC (sourced from zerohedge)

I guess all you can do is let Greenspan's remarks put a grin on your face.  The source of the grin being the knowledge that Greenspan is now nothing more than a senile old man who will go down in history as the one who started the fiat monetary inflation (printing) of our system that will ultimately be its demise.

Let's consider for a moment what exactly it would mean if "equity," meaning the stock market, were truly the "collateral" of the financial system.  "Collateral" is something of perceived value that a borrower puts up to secure a loan.  Gold is now being used as the collateral of necessity for interbank lending purposes in Europe.  Why?  Because lenders do not trust anything else that's allowed to be used for that purpose.  In an opaque, tenuous form the U.S. Government's "full faith and credit" is being used as "collateral" to back its catastrophically enormous debt issuance and the money being printed up to fund that debt.  "Home equity" was the collateral source of the housing market bubble and collapse.

GAAP Accrual Accounting Methodology Is At The Root Of Financial Fraud

Let's think about this in terms of using an individual stock as "collateral" by taking a quick peak at Amazon.com (AMZN).  I have maintained for over a decade that AMZN takes fraudulent advantage of GAAP accounting gray areas - i.e. stretches them beyond the "grey" area of legality - in order to generate GAAP income.  As we know ad nauseum, this wouldn't be the first case in which the SEC and FINRA look the other way. Without going into technical details that would put you to sleep unless you love hard core accounting, in effect AMZN is a giant ponzi scheme which relies on the ability to grow sales every quarter in order to generate enough cash to cover last quarter's expenses.

The perfect example of this process starting to sputter and fail is AMZN's latest quarterly report.  In that, AMZN used non-cash gimmicks to generate almost 70% of its reported net income (equity method of income from investments).  It also sustained a $3 billion drawdown in its cash balances in order to pay off its bulging accounts payable account.  It's sales margins were almost negligible because AMZN subsidized the cost of everthing it ships (fulfillment) in order to generate sales.

At any rate, here's a look at AMZN's value as equity "collateral:"  It has a market cap of $104 billion; a p/e ratio of 191 - note: the true p/e ratio calculated by stripping away accounting games is likely at 4-5 times higher;  book value is $7.2 billion BUT nearly 50% of this is comprised of the intangibles of deferred tax assets and goodwill;  strip away intangibles and tangible book value is $3.8 billion, leaving a market cap to book value ratio of 27x.  One note of caveat, the tangible book value assumes a prima facie acceptance of AMZN's fixed assets, listed at $4.6 billion.  No doubt the market value of AMZN's fixed assets is likely lower.

So there you have it.  A good example of equity "collateral" according to Greenspan is a stock that trades at a near infinite multiple of true earnings and an absurd multiple of book value (most banks trade at a book value multiple of 1 or less).  Please indicate to me if you would lend your money against AMZN (if so, I may want to borrow some money from you lol).

Don't get me wrong, I love AMZN's service.  If I don't need something immediately, I can shop on AMZN and get a better price on almost anything than at any competing store in Denver.  Not only that, the price includes shipping in most cases.  It's great for the consumer.  But AMZN is one of the "poster child" stocks that represents the extreme liquidity and fraud bubble that now permeates every aspect of Wall Street and DC.  Eventually AMZN will collapse.

So looking behind the words that came out of Greenspan's mouth on CNBC - aka Bubblevision - we can see the true absurdity of the [Money Printing] Maestro's comments.  It's actually quite poignant to see the incredible intellectual decay of the author of "Gold and Economic Freedom" (1966) LINK  into a senile old babbling apologist for the monetary policies destroying this country.  In a way, the path of degeneration from the 1966 Greenspan to the 2012 Greenspan is emblematic of the path of decline of the United States...