Is Gold Getting Ready To Launch?

As you can see from the chart posted, the price of gold has been "coiling" into an ever-tighter pennant formation.   This technical formation can often lead to a substantial upside breakouts. 

(click on chart to enlarge)

We are now entering into what is historically the best seasonal period of the year for the price of gold and mining stocks.  It looks like the European Central Banks are largely done dumping their citizens' gold, which will only add to the very tight market conditions.  India, historically the largest gold buying country in the world (China recently surpassed India)  is entering into its biggest gold buying time of the year.  It is in the autumn in which Indian farmers tend to invest their profits into gold.  An even bigger component is the gold buying which occurs for Indian weddings, which tend to happen during the festivals in October and November.  It is estimated that 40% of Indian gold demand occurs during the autumn.

Finally, in what can be seen as incredibly bullish for the price of gold,  the Central Central Fund of Canada (CEF) just filed a prospectus filing for periodic share offerings up to $1 billion.  CEF issues stock and then uses the proceeds to buy gold and silver bars, which CEF holds in trust.  Unlike GLD, which refuses to show the world whether or not it really holds the gold it supposedly buys with shareholder money, CEF will accomodate any visitor who would like to view the CEF vault with their own eyes.  CEF is seeing enormous demand for their shares from big funds, but typically only issues shares when the stock trades around 15% above the value of the underlying gold and silver in the trust.  This filing is HUGELY bullish. 

Keep an eye on the $960 and $980 price levels.  If you wait until gold breaks over $1000, you might find yourself waiting for a pullback that never comes.

When Will This Country Stop Senator Chris Dodd?

We know that Dodd received a "FOA" mortgage from Countrywide.  "FOA" is Friends of Angelo Mozilo, the disgraced and corrupt ex-Countrywide CEO who is under massive class-action lawsuits which total in the $100's of billions.  In fact, one of Dodd's mortgages was underwritten in DC stating that it was his "primary" residence, when in fact his primary home is in Connecticut.  This means is he received much more favorable terms and a lower mortgage rate.  We also know that Dodd was responsible for engineering legislation that helped usher in the proliferation of subprime mortgages, especially with regard to the ability of Fannie Mae and Freddie Mac to underwrite these garbage loans, many of them fraudulent. 

And now we see via Forbes, that Senator Dodd went to bat for a big Connecticut hedge fund, which also owns a mortgage servicing business, in order for this fund to attain access to the TALF program (Term Asset-Backed Lending Facility).  TALF is a  Federal Reserve loan facility to support toxic asset-backed securities, many of which were packaged by Wall Street.  Wall Street couldn't unload them on the public and so now the Fed is bailing out Wall Street.  HOWEVER, so is the Taxpayer.  The TALF program is back-stopped with $20 billion of credit protection guarantees from the Tim Geithner-led U.S. Treasury (anyone vote for this when they voted for Obama?).  This means that the Taxpayer pays for the first $20 billion of losses on these securities that the Fed bought from Wall Street firms.  The problem is, we don't know to what extent the Fed has overpayed for these assets, because Barney Frank and the Senate won't pass legislation allowing the Taxpayer to audit the Fed so we can find out how much Taxpayer money is being transferred directlty to Wall Street. This link comes from Clusterstock.com:

Chris Dodd may have put pressure on the Fed to aid a troubled mortgage servicer. Forbes is reporting that the Senator from Connecticut helped Carrington Mortgage by sending a letter to the Federal Reserve urging easier terms for mortgage servicers taking part in the TALF program.  And when the Fed changed the TALF program, it turned out that Carrington was the only company to benefit. Carrington is owned by a hedge fund based in Greenwich, Connecticut.

Here's the link:  The Helping Hand of Chris Dodd

When will this wholesale pillage by Dodd of the U.S. taxpayer end?

Another Nail in the Dollar's Coffin...

In an event that will inevitably be downplayed by the U.S. media spinmeisters (CNBC, Wall Street, the Obama Administration), the Democratic Party of Japan overwhelmingly took control of the Japanese Government in elections this weekend.  Why do we care, you ask?  Take a look at this statement by Masaharu Nakagawa, the chief finance spokesman in the DPJ:

the nation should consider shifting its $1 trillion of foreign reserves away from the dollar and buying  International Monetary Fund bonds. “In the medium to long term, we need to do what we can to avoid the risk of currency losses or economic turbulence that could result if the dollar were to swing,” Masaharu Nakagawa, the shadow finance minister in the Democratic Party of Japan, said in an interview in Tokyo on July 9. “Many countries are starting to diversify their reserves.”

A DPJ-led Japan Will Start Unloading Dollars

In an interview with  BBC News back in May, Mr. Nakagawa asserted that Japan should only buy U.S. Treasury bonds if they were denominated in yen, rather than dollars.  At the time, the BBC believed that the DPJ had no chance of taking power in Japan:

More Headwinds For the U.S. Dollar

It is clear that Japanese citizens voted for sweeping changes to be made in the Japanese Government.  One of the major policies in the DPJ's platform is to reduce Japan's exposure to the U.S. dollar.  Now we will see if the Japanese will get real change or "Obama Change." Obama Change is no change other than to change the rate of ongoing financial and political decay in the U.S.  If the DPJ holds firm to its campaign platform, real change in Japan will mean a substantial change in the wealth of America - to the downside.

Obama Government Seeks Control Of Internet During Security Emergencies

In a move which further erodes the First Amendment of the Consitution and completely undermines the civil liberties implied in the Constitution and Bill of Rights, the Senate is working on a Bill which would give President Obama the ability to essentially shut down the internet in the event of a national emergency:

Details of a revamped version of the Cybersecurity Act of 2009 show the Senate bill could give the president a "kill switch" on the Internet and allow him to shut out private networks from online access.

First Amendment Killer?

My view on this is that the Government is getting more concerned about the growing unrest with the Government's failure to reign in the growing corruption in our banking and political systems and is looking for ways to limit the dissemination of information to the public by cutting off internet access.  Given the low probability of terrorism from sources external to the country, I would suspect that this means that the Government is increasingly concerned about how the public would respond to another massive banking crisis.  Please note that the Patriot Act enables to the President to regard banking and financial market disruptions as "security threats."

Update on my over/under bank failure challenge to Meredith Whitney:

I publicly challenged Meredith Whitney to a bet on her call that 300 banks would fail before this crisis is over. I offered to give her 310 and I would take the over.  I offer the same to that pathetic, faux-analyst Dick Bove.  I'm still waiting for Meredith to contact me on my offer.

Former North Fork CEO, John Kanas, was on CNBC saying that there would be ANOTHER 1,000 bank failures, which would put the total over 1,000.  As a speculator, would you bet on an industry insider like Kanas, or would you put your money on Wall Street pimps like Whitney and Bove?  Here's a link to Kanas' interview:

Is the real number 300 or 1,000?

My inclination would be to still wager on over 1,000 failures, but it certainly makes it seem more like an even-money propostion.  How 'bout it, Meredith?

59% of Cash For Clunkers Sales Went to Foreign Cars

"According to the Department of Transportation, as of Friday, 59 percent of vehicles bought with Clunkers cash were foreign. The top two sellers were the Toyota Corolla and Honda Civic, both made by Japanese auto manufacturers. The only Detroit vehicles in the top 10 were the Ford Focus and Escape."  Taxpayer-owned GM and Chrysler didn't even really benefit...

Your Tax Money Went To Japan

Readers can draw their own conclusions as to the usefulness and value-added of this program.  I would like to know who's brain-child it was - we know who signed off on it.

Was Today's New Home Sales Number For Real?

To be blunt:  No.  As has been discussed and analyzed ad nauseum, the Government likes to release, and the mainstream media and Wall Street thiefs like to report, economic number numbers which have been "seasonally adjusted" and often bear no resemblence to reality and typically are subjected to future downward revisions which no one pays attention to.

With that in mind, let's review today's new home sales release, which was greeted with great fanfare on Wall Street and CNBC, as it was announced that July's new home sales (seasonally adjusted) increased 9.6% from June.

Let's look at the raw, unadjusted data, which can be found buried here: Census Bureau New Home Sales.  July '08 to July '09 new home sales declined 9.3%.  June to July this year did increase 8.3%, but was less than the "seasonally adjusted" nonsense, but keep in mind that your $8k taxpayer subsidy has fueled a small boom in lower priced homes, which is reflected in the decline in the home price metric. The median home price declined 13% $210,000.  And finally, as Calculatedriskblog.com points out, July's non-seasonally adjusted new home sales number was the 3rd lowest for the month of July since the Census Bureau started tracking sales in 1963.

Oh, and one more point, as per homebuilder earnings reports for the 2nd quarter, cancellation rates are still running generally in excess of 20% (usually financing falls through).  The Census Bureau does not take that into account and they do not back out actual cancellations when they revise past calculations. 

Do not be sucked into the fanatasy that the Government and Wall Street is spinning right now.  There is a monster wave of prime mortgage-financed homes which will hit the market before the end of the year and if Obama doesn't extend the Taxpayer Cash for Homes program, expect a cliff-dive in home sales at the lower end, as homebuyers are now allowed to credit the $8k tax credit as part of the their down payment - back to almost no-money-down mortgages again.  Just like with the Taxpayer Cash to GM/Ford program, which saw interest and usage run out well before it was slated to expire, in all likelihood by the time Dec 1 arrives, most people who could get financing for a home using the tax credit will have already done so and even an extension of the program will not maintain current sales rates.