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Tuesday, July 31, 2012


No one owns real gold in the United States.   

If you go to gold touting sites like Gold Eagle and 321 Gold you can read dozens of articles giving good reasons to own gold.  Yet most of these analysts promote paper - not gold.  They tell you why paper like Junior Gold stocks, or Gold Tracking ETF's or Gold Futures are the superior gold investments.  

In Asia when they want to invest in gold they buy gold.  In India when they want to invest in gold they buy gold.  In Europe when they want to invest in gold they buy gold. 

Meaning real gold: bullion coins and bars.

In America when we want to invest in gold we buy paper.  Only in America can it seem reasonable to invest in a paper mirage. 

Is it because we Americans are just way more sophisticated than the rest of the world?  

Is it because here in the good old US of A we know better than those stupid imploding Europeans and those Medieval Asians?

Or is it because we are culturally mired in an obsession with leverage?  Every analyst promoting paper gold claims it will outperform real gold because it is a LEVERAGED PLAY ON GOLD.  



Do you really want to hedge yourself against a Debt implosion by using a DEBT SUBSTITUTE FOR REAL GOLD?

How is it that here in the USA we are so addicted to debt?  Has debt really been that good to us?

Has Debt really increased the Net worth of the Average American?

Take a look at the sobering chart below that shows the average Italian lives about twice as well as the average American and then think if you really want to buy in to the illusion of paper gold:


Thursday, July 26, 2012

is the gold correction over?

Is the gold correction over?

Yeah, probably.

Most technical analysts believe so.  Most analysts predicting the future based on market sentiment believe so.

The fact is if you're smart it doesn't matter.  If you're smart you're buying bullion - especially on the dips.  And you're not trying to call bottoms and tops.  That's a fool's game.

The fools calling bottoms and tops will call a thousand bottoms and a thousand tops and then point out a particularly good call in retrospect - leaving out all their misses.  Then they'll try to sell you on themselves, and their pet investments schemes.

If they were smart enough to call a bottom or a top, they'd be smart enough to be amassing bullion and they wouldn't care about bottoms and tops.  They'd know we're in a multi-year bull market that will go on until MONETARY STABILITY has been restored to the GLOBAL MONETARY SYSTEM.

When will that be?


Considering the fact that the global banking system is firmly in control of the global political system, that won't be until sometime after hell freezes over.

So don't hold your breath.

And don't be a moron.  Don't time paper gold.

Buy real gold.  And lots of it.

Wednesday, July 25, 2012

Michelle Bachman is probably not a child rapist

Let me be the first to say that I seriously doubt Michele Bachman, Newt Gingrich and Rush Limbaugh have been raping children.  I personally have no evidence to suggest they have been.

So they should certainly have no objections to a thorough investigation of every facet of their personal lives - an investigation that will surely clear them of any suggestion that they may have raped or may currently be raping children.

First, nobody is suggesting that they are raping children.

I certainly doubt they are child rapists.  I'm not aware of any allegations that they have been raping children.  Therefor, there should be no reasonable objections to clearing the air and laying this preposterous issue to rest once and for all.

I'm sure they will welcome a thorough investigation because I know they have nothing to hide.

Michelle Bachman most probably is not a child rapist.  Newt Gingrich is most probably not a child rapist.  Rush Limbaugh is most probably not a child rapist.

So let's have a thorough investigation of the questions regarding these public figures and child rape and clear the air once and for all.

Surely, they have nothing to hide.

Then, when we're done investigating these three we should take their suggestion and investigate Hillary and Obama to see whether they have been "infiltrated" by Muslim Terrorists.

After that, I think we should investigate Mitt Romney to make sure he was born on the Planet Earth.  I'm not suggesting he wasn't.  But if the man's going to be running for President we should at least know if he's human.

It's not like we have anything more important to investigate.

Monday, July 23, 2012

A Reason for Everything

Now that the Large Banks and Hedge Funds are pushing all the markets in random directions as  retail investors flee into the illusory safety of US DEBT - the copy writers at CNBC, FOX and BLOOMBERG need a host of new reasons to describe upward movement of risk assets.

Here are some of the most popular new causes for market euphoria:

1}  Things (manufacturing, durable goods orders, unemployment etc) are contracting at a slower rate.

2)  Things (housing, unemployment rate etc) appear to have bottomed.  (if you look at them kind of sideways and squint a little.)

3) A new Bail-out Fund has been created.

4) Billions of freshly created currency units are added to existing Bail Out Funds

5)  Absurdly lax safety regulations and standards (bank capitalization standards, accounting standards) have been further relaxed.

6)  Drastic Emergency regulations have been implemented (rules against short sales, rules limiting capital flows).

7) and the current favorite cause for euphoria: Disaster has been temporarily delayed.

Sunday, July 22, 2012




Dedicated to restoring Constitutional government to the United States of America

Fed Proposal Allows Banks To Seize Your Money

The New York Fed has introduced a framework to give banks the right to suspend account withdrawals at will to defend against financial panic.
The shadow central planners have proposed new contigency plans to prevent the Great Depression style bank runs that are hitting Europe from spreading to America.
Their solution is the creation of a framework that consists of “capital controls” which allow financial institutions that find themselves in hot water to limit or outright suspend customer account withdrawals.
Our beloved regulators seem not to care the slightest that these institutions put themselves in hot water in the first place by taking up certain financial positions that put their customers’ money and the global financial system at risk.
Instead the message is clear – Our banks are too big to fail and if they need to seize their customers deposits to prevent them from failing then we must allow it.

MF Global and the great Wall St re-hypothecation scandal

 By Christopher Elias (UK)    
 (Business Law Currents) A legal loophole in international brokerage regulations means that few, if any, clients of MF Global are likely to get their money back. Although details of the drama are still unfolding, it appears that MF Global and some of its Wall Street counterparts have been actively and aggressively circumventing U.S. securities rules at the expense (quite literally) of their clients.
MF Global's bankruptcy revelations concerning missing client money suggest that funds were not inadvertently misplaced or gobbled up in MF’s dying hours, but were instead appropriated as part of a mass Wall St manipulation of brokerage rules that allowed for the wholesale acquisition and sale of client funds through re-hypothecation. A loophole appears to have allowed MF Global, and many others, to use its own clients’ funds to finance an enormous $6.2 billion Eurozone repo bet. 
* Corzine denies knowledge of any European loan
* A persistent MF Global won NY Fed dealer status
* Exclusive: Regulators know what happened to funds
* James Giddens: member of small trustees club
* Judge approves cash for MF Global bankruptcy
* MF Global drew up survival manual in final days
* Full coverage of MF Global from Reuters Legal
 If anyone thought that you couldn’t have your cake and eat it too in the world of finance, MF Global shows how you can have your cake, eat it, eat someone else’s cake and then let your clients pick up the bill. Hard cheese for many as their dough goes missing.
Current estimates for the shortfall in MF Global customer funds have now reached $1.2 billion as revelations break that the use of client money appears widespread. Up until now the assumption has been that the funds missing had been misappropriated by MF Global as it desperately sought to avoid bankruptcy.
Sadly, the truth is likely to be that MF Global took advantage of an asymmetry in brokerage borrowing rules that allow firms to legally use client money to buy assets in their own name - a legal loophole that may mean that MF Global clients never get their money back.

Wednesday, July 18, 2012


The July-August summer season is fairly quiet in most of the fine art auction fields, and Numismatics is no exception.  On the sell side very little is being offered and on the buy side a nervousness pervades the market.  On the very high end top buyers are still diversifying out paper and snapping up anything of very high quality.

The Bru Sale offered opportunities in both ancients and medieval gold this spring-summer,  like the beautiful portrait stater of Ptolemy I above - the first coin with a portrait of a living king.  The coin hammered at 24,000 Euros which amounts to about $35,000 including the hammer fee.  This was a fair price by historical standards, for a rare well preserved historically interesting coin, even if the reverse is a bit off center.  And compared to other forms of fine art it still must be considered a bargain. 

The price was especially attractive  considering the same coin might have sold for many times that amount when certain high profile bidders were active a few months earlier.  But at least one of these bidders has thus far failed to honor several million dollars of purchases. It remains to be seen if this buyer re-emerges at the fall auctions.

Of course it's hard to measure purchases at the high end because very little true high end material is coming to market.  Morton and Eden auctioned off 4 gorgeous Sicilian Silver pieces from the signing period (Circa 400 BCE) at over a million British pounds total.  And Heritage auctioned off several Judaean rarities at their Shoshana Collection Sale, where a prototype Jewish war shekel and a rare Gold Judaea Capta Aureus both went for over a million dollars.

But the middle and low end buyers are understandably tight-fisted and nervous at the moment, as they wait to see whether the global economy continues to sputter along, or whether it simply collapses. 

The mess in Europe is currently causing the US dollar and US dollar denominated debt (!) to act as a safe haven investment - to the detriment of all other investments.  How long this can and will continue is anybody's guess.

But the moment doubt creeps into the investment consciousness concerning the long term viability of the US dollar, you can be sure that safe havens that have proven their value of the course of thousands of years will continue to appreciate.

When you consider the fact that Government Debt is now close to 100 percent of GDP and total debt is 350 percent of GDP - and the the US Central Bank is currently purchasing over 70 percent of all Government Debt - that time shouldn't be far off.

Monday, July 16, 2012

Wecome to Modern Morals 101

Libor: They all knew – and no one acted

Regulator’s claim it knew nothing thrown into doubt as documents show authorities were told of rate-rigging in 2008

Sunday, July 15, 2012

Causation or correlation?






Friday, July 13, 2012

Is the gold market manipulated?

We know for a fact that Libor has been wantonly manipulated for years by a cabal of Big Banks.

We know for a fact that by manipulating Libor the Big Banks manipulate the price of hundreds of trillions of dollars of debt derivatives.

We know for a fact that the US government sponsored Working Group on Financial Markets (otherwise know as the Plunge Protection Team) exists specifically to manipulate the Stock Market.

We know for a fact that the Fed openly manipulates the Bond Market with well publicized programs with cute names such as Operation Twist.

These massive markets are clearly manipulated every day.

But what about the tiny gold market?  Somehow many commentators still can't believe that gold is manipulated.

Over at 321gold, the site's owner - a tireless junior gold stock shill - has put forth the argument we hear over and over to "debunk" the idea of gold manipulation.  "If gold is manipulated how come it's risen from $300 to $1600?"

This is like asking: "If the sun is so hot how come it's only 100 degrees in the summer.  Why not 110?  or 1000? 

It's a nonsense argument.  Utterly meaningless.  There's obviously no way of knowing how a given number would change if events unfolded in an entirely different manner in some alternate universe.

Let's consider what do know about this Universe:

A) There are obviously many ways to profit from market manipulation. 

B)  And there are obviously many ways for large players in the markets (banks and central banks) to manipulate the markets.

The only relevant question then is: Given the opportunity to profit from manipulation - in an environment where manipulation is clearly possible, and in environment where there are virtually no negative repercussions - why wouldn't manipulation exist?

Thursday, July 12, 2012


Do the actions of a few bad actors tarnish a whole industry?


This was the question asked in a letter sent today by my old futures trading brokers in response to yet another futures trading firm going under due to fraud - just after the MF Global scandal where 1.2 billion was stolen from traders and still nobody has been prosecuted.  (see below)  And not to mention the Libor fixing scandal - affecting 1000 trillion dollars worth of derivatives - which is easilythe largest scale fraud in the history of the world.


Can this level of dishonesty be anomalous?


Yesterday, by chance, I went to my commercial bank (Chase) where I was offered the chance to participate in a 'virtually risk free' opportunity to invest in a fund guaranteed to yield over 3 percent!  Wow - 3 whole percent!  I marveled at this opportunity.  What was the catch?


Well, principal of course was not guaranteed, but of course I'll get the principal back, I was assured.  It barely fluctuates.


What about interest rate event risk?  What if rates rise?


That's the marvelous thing, I was told, if rates rise the fund does even better because of the clever way it's been assembled.


Wow!  What's in it? I asked.


Well, we can't tell you that.   That's the "Special Sauce."  Besides, it's always changing.  But, keep in mind this is Chase Bank and the fund is assembled by our brightest managers, the ones you see on CNBC all the time.


Gee, that sounds great!  How about giving me a peek at a model portfolio?


No, we don't provide that.  


Now, let's just say i was enticed by this incredible 3 percent return and  let's say I did invest a lot of my money, and let's just say the "special sauce" went sour, and I lost a lot of my money.  


Is Chase Bank liable at all for misleading me?  No!  Not at all.  


Nothing in this conversation is illegal.  Yet it is as fundamentally dishonest as being assured that the house I was purchasing was "Virtually structurally sound" but you can't see it, or look at blue prints.  Just be assured that we're the biggest and best home builder around.  


Who would buy that house?  Nobody.  But lots of people put their money in Chase's fund. 


How does a bank get away with this?  How is it that a bank floor officer feels comfortable talking this way?   I don't think he realized he sounded more corrupt than the most cynical used car salesman.  This is what he's taught to say.  He probably even believes he's presenting me with a terrific opportunity.  This is what we've come to.


How long can it last?   And how wide spread is it?  


Which markets do you suppose are free of corruption, manipulation and fraud?


Exclusive: U.S. probing failed broker PFGBest's use of small auditor

Published: Wednesday, 11 Jul 2012 | 10:30 PM ET

WASHINGTON/CHICAGO (Reuters) - U.S. futures industry investigators are looking into why Iowa-based collapsed brokerage PFGBest used a tiny accounting firm that appears to be operating from inside a suburban Chicago home to audit its books, according to a person familiar with the matter.

Tuesday, July 10, 2012

Risk Management?

JPMorgan Silence on Risk Model Spurs Calls for Disclosure

JPMorgan Chase & Co. (JPM)’s multibillion- dollar trading loss exposed an industry practice that U.S. regulators are now likely to clamp down on: Banks keep investors in the dark about how they calculate trading risks. 

The dispute revolves around value-at-risk, the main and sometimes only empirical gauge that investors get as they try to fathom how much a bank could lose if its trading bets go bad. Wall Street firms routinely give only broad outlines of how their mathematicians calculate VaR, according to data compiled by Bloomberg, and almost nothing about changes in statistical assumptions or the prices they choose to feed into their models. 

---That's because the calculation of trading risk involves choosing randomly from a set of input variables that are essentially INFINITE, leading to "Statistical Assumptions" that are all but meaningless and thus creating risk quotients that are essentially worthless.

Let's say you're playing roulette and betting on red - you can calculate the exact risk because you know half the numbers are red, half are black and there's also a double zero that's neither red nor black.  Easy.

Now let's say you're gaming out the risk of betting on red but there's an unknown number of roulette wheels in the game, each with a variable number of red and black possibilities and your risk depends on an unknown combination of spins of an unknown number of wheels with a unknown number of red and black combinations.  

And of course there's the Added Event Risk of Unknown and Infinite possible events that could change all the inputs.

Now, I'm sure you can come up with a computer model of risk for that game.  What would it be worth?

Monday, July 9, 2012

Political Lexicon

A political lexicon to help understand current politi-speak:

Unconstitutional: I don't like it.
Job Killing: I don't like it one bit.
Anti American: I don't like it at all.
Socialist: It stinks
Communist: Super stinky awful
Anti Capitalist: I don't like it one bit.
Elitist: It stinks.
Populist: It stinks too.

Pro Growth: I like it!
Pro American: I like it a lot.
Pro Business: I like it, really.
Pro Middle Class: I like it a whole super lot.
Pro Job creation: It's super awesome!
Fair: I like it.
Fair Share: I really like it.
Balanced: I like it too.

Friday, July 6, 2012

A Financial Lexicon

Like everything in the financial world, language is something not intended to convey meaning, but to obscure meaning.  Here are some current terms in heavy usage, along with their real meaning.

Hedge:  Risk.  When a bank or a Hedge Fund, refers to a Hedge, they are referring to an extremely risky gamble.  The word Hedge implies the defraying of risk.  In current usage it means the adopting of extreme risk.

Alpha: Risk.  Creating Alpha, delivering Alpha, searching for Alpha make it sound like Wall Street is doing something very sophisticated, when in fact, it just means taking on tremendous risk in the hope of great rewards.

Political Will: (to deal with debt.)  Political Will in this case is a code term for the will to take on infinite new levels of debt.  You'd think it would mean the will to suffer a draw down of debt.  In fact, it means just the opposite.

Back Stop: (ie the debt crisis):  Create infinite amounts of new debt.

QE, Quantitative Easing: Creating tons of New Debt.  You can think of it as "printing money"
which is a quaint industrial age equivalent.  But printing money means creating debt.  

Free Market: The Free Market is a mythological financial beast, admired by the hopelessly naive much in the way that unicorns are admired by young girls.  All economies are controlled by Central Banks.  Central Banks control the issue and distribution of all money/debt.  What's "free market" about that?

Diversified Portfolio.  A diversified portfolio means you simply buy a little of everything available.  It is a term meant to signify a complex and sophisticated investment strategy, when in fact is it a most simple minded and naive strategy employed by those with no investment point of view.

Uncertainty: as in "the markets hate uncertainty," or "business hates uncertainty".  In a financial sense, Uncertainty is synonymous with "The Bogey Man."  Any time the market outcome is not what one would prefer, you can always try to sound intelligent by blaming "Uncertainty," because, after all, the future is always uncertain, 100 percent of the time.  

Clarity:  When a particular issue is resolved in exactly the way a particular commentator desires this is said to produce "Clarity."   Supposedly the markets, and business like Clarity.  And in a linear, two dimensional world where issues occur and are solved one at a time, this might be true.  Unfortunately, that world doesn't exist.

Liquidity Crisis vs Solvency Crisis:
In current terms, Liquidity refers to Central Banks keeping rates artificially low or negative to create easy access to new debt.

Solvency refers to the fact that debt levels are so high that no amount of "liquidity" has any real effect on the economy.

Wednesday, July 4, 2012

Take a look at Germany, Savior of Europe:

The final seasonally adjusted Markit Germany Composite Output Index – which measures the combined output of the manufacturing and service sectors – registered 48.1 in June, down from 49.3 during May:

As in the recent 49 reading in the June US manufacturing PMI, anything under 50 indicates CONTRACTION.

Similar charts in Spain, France, Italy, Portugal, Ireland and the UK are worse:

World manufacturing downturn deepest in 3 years: PMI

(Reuters) - Global manufacturing activity contracted in June at the fastest pace in three years, dragged down by the euro zone but also by weakness at U.S. and Chinese factories, a business survey showed on Monday.
The JPMorgan Global Manufacturing PMI fell to 48.9 in June from 50.6 in May, dropping below the 50 mark that divides growth from contraction for the first time November, and its lowest reading since June 2009.

But Don't Worry.  If there's any way at all to game Global Contraction, and suck out every last cent of Capital, Goldman Sachs and JP Morgan will figure out how to do it.

Meanwhile you can count on Obama and Romney to spend all their time arguing about Health Care and Immigration.  Even after they're elected.

Tuesday, July 3, 2012


Everyone is trying to figure out whether we are experiencing massive Debt Deflation, or incipient Hyper-Inflation due to furious central bank printing to combat the debt deflation.

As these two brutal forces battle it out, how will Gold react?

The most important thing to understand in figuring this out is that Gold is a Currency.

Most analysts still don't get this.

But if Gold is a currency how come I can't buy bread with it?

Gold has been a currency for 5000 years at least, and nobody has ever been able to buy bread with it.  Gold has always been far too valuable for quotidian purchases.  Gold has always been a unit of account and a store of value for GOVERNMENTS and the extremely wealthy, not common citizens.

Right now, as I write, all the major central banks of the world are using Gold as a Reserve Currency.  Right now, as I write, the Central Banks are preparing rules that make gold a Tier One Reserve Currency for Commercial Banks.

Some analysts will still be very confused by the fact that they still can't buy bread with it.  Or eggs.  Or toilet paper.  So they will just never get that gold is a currency.

But let's just say you can get your head around the fact that gold is a currency.

So what does this mean in terms of the Inflation Deflation debate?

It means that if we have massive or hyper inflation down the road, gold, like all tangible assets will appreciate.

But if we have Deflation, then gold - as the only Currency that can not be printed - will become far more valuable. 

During Deflation wealth accrues to the most stable CURRENCY.   THAT IS GOLD.

Some analysts get very confused when they look at the last Deflation in the 1930's and they see Gold Stocks did very well.  But that was because private ownership of gold was outlawed.  That is not the case now.  It will not be outlawed because it is now a Global Currency.

Don't be confused.  Only Physical Gold is a currency.  Only Physical Gold will survive the settling of massive Debt.

Sunday, July 1, 2012

Debt derivatives Vs Health Care

There are an estimated $ 10 trillion of loans priced off LIBOR. 

However, this is dwarfed by the value of interest rate swaps priced off LIBOR, which amount to  
$402 trillion (OTC notionals as at end 2011 according to the BIS). 

Then there are OTC forward rate agreements at about $50 trillion notional and and then there's the euro-dollar futures market  (A single Eurodollar future is similar to a forward rate agreement to borrow or lend US$1,000,000 for three months) , clocking in at about $560 trillion notional.

It follows that a single basis point up or down in LIBOR has enormous effects on all these markets in toto.  

All of these THOUSAND TRILLION (Quadrillion) Dollars worth of Debt Derivatives are completely unregulated, opaque, over the counter deals. 

And it is safe to say that nobody on earth has any real idea of what the counterparty risk of any individual participating bank might be at any given time.

It is also safe to say that none of these Quadrillion dollars of sheer high risk gambles can be considered "A Hedge."

Now you know why the global banking system is truly Too Big To Fail, and why all the world's productive capital is now being sucked into this insatiable vortex of Capital Destruction.

Good thing we spend all our time arguing over whether 1/2 a trillion dollars of health care fees should be considered a penalty or a tax. 

Maybe when we solve the pressing issue of those 1/2 trillion dollars we can turn our attention to the 1000 Trillion Dollars of Debt Derivatives that are about to destroy the Global Economy.