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Wednesday, February 27, 2013



Bernanke Says Fed May Decide Not to Sell Securities

Federal Reserve Chairman Ben S. Bernanke said the central bank may decide to hold bonds on its $3.1 trillion balance sheet to maturity as part of a review of its strategy for an exit from record monetary easing.
Bernanke told lawmakers in Washington today that he expects to revisit “sometime soon” an exit plan that policy makers outlined in June 2011.
Federal Reserve Chairman Ben S. Bernanke is the third policy maker in the last week to voice support for altering the central bank’s exit strategy to delay or eliminate asset sales. Photographer: Andrew Harrer/Bloomberg 

“The one thing we could do differently” is “hold some of the securities a little longer,” Bernanke said in response to questions from members of the House Financial Services Committee. “We could even let them just run off.” 

Bernanke is the third policy maker in the last week to voice support for altering the central bank’s exit strategy to delay or eliminate asset sales. Governor Jerome Powell said Feb. 22 that the Fed could refrain from sales to avoid causing market disruptions and having the Fed take losses on the securities as interest rates rise.

San Francisco Fed President John Williams told reporters after a Feb. 21 speech in New York that, given the increase in the Fed’s balance sheet, the period of time over which it’s appropriate to sell assets “probably has lengthened.” Telling markets the Fed plans to hold assets for longer would strengthen monetary stimulus and be “beneficial to the economy,” he said.

Tuesday, February 26, 2013





Well said:

Egon von Greyerz, founder of Matterhorn Asset Management:

"The Fed may increase QE a shocking ten times in coming years.  I was expecting gold to make a low this week.  So far we had a closing low on Wednesday at around $1,564.  We will see if that holds.  As always, in these cases where we have some kind of cycle low there is always price action that cements that low. ”

“First of all, every day around the open or just before the open we have seen on the NYMEX the price of gold has been pushed down, which is clear paper manipulation of the price.  Then, of course the Fed minutes came out with some of the members saying that the Fed should stop QE.  Well, in my view that is absolute nonsense.

"It’s not possible to stop QE with a federal debt of $220 trillion, including unfunded liabilities....

“The cash deficit every year is currently running at $1.5 trillion, but if you include unfunded liabilities, the accounting deficit totals $6 trillion each year.  How can they ever stop QE?  You look at the banking system, they can only survive by valuing their toxic assets at phony values.

"Even student loans now total above $1 trillion, and the default rate currently amounts to 23%.  Some colleges have a default rate as high as 60%.  As youth unemployment increases, default rates will average 50% in my view.  If you look at Social Security, there are over 125 million on benefits, including food stamps. 

"I wouldn’t be surprised to see at least 150 million people in need of government assistance or standing in front of soup kitchens in the next few years.  All the while the Fed will be signaling the end of QE.  So there is nothing in the US that’s pointing to any improvement or anything that would allow for QE programs to cease.

"One thing that’s worried me and it continues to worry me is the divide between the rich and the poor.  It’s increasing continuously in the US and in the rest of the world.  The poor in the US and Europe are having trouble making ends meet, and this is a very, very dangerous trend for the world.

"Interestingly enough I was at a family office conference recently and this confirmed that the rich are still very rich, and they are buying all of the conventional assets, stocks, property, private equity, wines, art, etc.  But very few of them had any significant exposure to gold.  There will be a massive wealth destruction because many of the assets which have been financed by credit bubbles around the world, they will plummet massively in real terms. 

"If we move to the eurozone things are just getting worse.  The European Commission admitted that what they expected to be growth in 2013 is not going to be happening.  But optimists as they always are, they now say it will happen in 2014.  There is absolutely no chance there will be growth in Europe in 2014.
" The gold market will very soon begin to reflect the money printing that is guaranteed to happen in 2013.  I could easily see the Fed moving from $85 billion each month to a number ten times that amount in coming years.  This number could well grow to $850 billion each month from the Fed over the next few years, and that’s just on the US side.

When we discuss gold going up dramatically in a short period of time, most people think it can’t happen.  We’ve talked about the next targets of $4,000 to $5,000, and people in the mainstream media would say that’s crazy.  But below I am showing a chart of the 1979 to 1980 gold price action.

In 1979, in April, gold was $240, and in January of 1980 the price extended above $850.   Gold went up roughly 3.6 times in price in a matter of months.  So it is very possible that once this market starts moving that we will see a very fast move.  I could see this type of move being repeated in the next twelve months in terms having a very explosive move to the upside.

After gold had that speculator move, Volcker came in and dramatically increased interest rates because inflation was spinning out of control, and subsequently the gold price fell.  But that is very unlikely to happen this time because it would bankrupt the government.

Saturday, February 23, 2013

How to know when the gold bull is over

Here's how you'll know when the gold bull is over:

1) Bernanke elucidates a specific cogent Exit Strategy for selling down the Fed's balance sheet without causing interest rates to spike thus cratering the world's risk markets.

2) Bernanke then explains how he'll prevent the Fund Universe from front running his strategy and cratering the world risk markets.

3) Bernanke starts to implement the Exit Strategy, and interest rates stay low.

4) Bernanke somehow prevents the Fund Universe from front running his Exit Strategy.

5) The world risk markets don't implode.

Sell your gold.

Thursday, February 21, 2013

Evrybody hates gold

At 1580, in the 10th year of a bull market, sentiment for gold is at an all time  low.  Of course the bull market could be over.  Just as it could have been over in 2004, 2006, 2008, 2011.  Sure maybe it's over now.  Maybe all the currency war, competitive devaluation, QE infiniti and quadrillions of debt are actually good for the economy like Nobel Laureate Krugman says. 

 But the monthly chart of gold still looks pretty good.  And the more people hate gold the better I like it.

Wednesday, February 20, 2013

Non iligitimi carbarundum

As gold dives day after day, we hear a chorus of Becauses:

Because the economy is strengthening
Because the unemployment situation is healing
Because housing is rebounding
Because Europe's ailments are behind them
Because the Market (stock Market) is a leading indicator looking out into the future and seeing good time ahead.

Not one of these becauses contain a grain of truth.

How do we know?

Because in a reasonably strong economy with reasonably strong employment and a stable housing market along with relatively healthy trading partners - there is no need for ZERO INTEREST RATES.


It's like saying the body is healthy because the breathing is stable, and the muscles are responsive to stimuli and the heart beat is normal, and the eyes respond to light.   All this indicates it is improving and will soon be back to normal.  Than why is it hooked up to life support machines?  For five solid years no less.  Five years on life support, yet it's healthy and improving?

Oh but the Fed is readying an exit strategy!  Really?  What is it?  Pulling the plug on Life Support?  That's a strategy?  With 120 Trillion dollars of nominal debt how can they normalize rates?

Remember: the longer you're at Zero Interest Rates - the more debt you accumulate.  Just as the longer you're on Life Support - the more dependent you are on the machines.  It's axiomatic.

So meanwhile why is gold diving?

The only question that can answer that is CUI BONO?

Who benefits.

Because in a fake market, a rigged market - such are the currency markets - such are the bond markets - such are the stock markets - you need only ask CUI BONO to understand the short term movements.

This will explain this SHORT TERM GOLD MOVE.

But whether they can push gold to 1550 or even 1500 it doesn't matter.  Because eventually the ECONOMY CORPSE will catch a cold.  And then the LIFE SUPPORT OF ZIRP will start to blink red again.  And all the rigging will be overwhelmed by the forces that no longer see it in their best interest to prop all this garbage up.

And the Real Primary Trends will assert themselves.

Thursday, February 14, 2013

News from the front: CURRENCY WARS

Kenneth Courtis: Former vice-chairman, Goldman Sachs (Asia) and co-founder of Themes Investment Management:

"The fundamental force driving markets is the coordinated and desperate action of the world’s central banks to offset powerful depressive forces released with the popping of the Bush Bubble and the contagion which resulted for the world financial system. Despite five years of an unprecedented global effort to dominate the crisis, global economic growth, employment, and world trade remain substantially below peak 2007 levels.
Financial systems and economies in OECD (Organisation for Economic Co-operation and Development) countries remain fragile, despite repeated claims of bankers and policy officials to the contrary.

With governments virtually everywhere in the developed world imposing austerity (in order to) reduce overall debt levels, the reality is that leverage has continued to increase in just about every OECD economy since the onset of the crisis. It seems that the greater the austerity, the greater has been the increase in debt levels! 

This equation has just become more powerful with the government in Tokyo committing to a surge in new deficit spending to dramatically increasing the levels of liquidity being injected into the system.

At the same time, the US (Fed) remains committed to increasing liquidity again this year, and the ECB (European Central Bank) and the Bank of England are on standby to do “whatever it takes”. We will continue to have a highly powerful, sustained effort by central banks to force investors to take on more and more risk.With world trade flat and the weak economies of the developed world leading exporters everywhere into pressuring governments to generate more competitive currencies, we have entered into a period of competitive devaluations."
Currency wars have begun and they are very serious, difficult to predict, and cannot be easily reversed. Excessive money printing is the cause.

Republicans vow to expand their brand

The Republican Congress vowed today to block home plate, second base, lay-ups. shots on goal, and all crosswalks, passing lanes and crowded aisles, in an effort to expand their brand.  "Sure it's easy enough to block legislation and nominees when you work in the government," said House Majority Whip Kevin McCarthy, "But we'd like to take it to the next level.  So we're urging athletes, automobile drivers, and even pedestrians to show their solidarity and just block and gum up whatever the hell you can, until everything everywhere ceases to function in any way whatsoever.  Even if you're just carrying fifty items into the express land and then paying with a bag full of pennies, it might not seem like much, but believe me, you're helping the cause.

After all, we're Americans, gosh darn it, and Branding is the most important activity of any business at any level.  So it's time we got our unique brand out into all facets of American life.

Wednesday, February 13, 2013

The cost of zero interest rates on paper money:

THE GOVERNMENT SAYS THERE'S NO INFLATION ANYWAY.  THAT'S TRUE IF YOU DON"T GET SICK, HAVE KIDS WHO GO TO SCHOOL, EAT, DRIVE, HEAT YOUR HOME...  But, gee, the cost of making a video of your big toe on your phone sure has come down (thanks to the genius of Steve Jobs, a true 21st century hero)


Education Inflation



Monday, February 11, 2013

The certainty of now.

Predicting the future is a fool's game.  Other than to say big, powerful, unexpected crises will occur and totally damage all models and predictions, anything else you predict is pretty much spitting in the wind.

Predicting the present is much easier.  And predicting that the things that are happening right now - that are being largely ignored - will have great consequences - is a pretty sure bet.

For example - money printing.  Yeah sure, "everyone" knows the government is printing money.  But how much?  And how is it being distributed?  Who's getting it?  Who isn't?

Go on, ask your neighbor.  Google it.  Try to get a straight answer - or any kind of answer from 99 percent of your human acquaintances.  Chances are they don't know.  Chances are they don't really care. 

So predicting that all this money printing will have an enormous effect on the quotidian economy is more than a safe bet.  It's a certainty.

Will that effect be Inflationary - Deflationary - cause a total collapse - provoke a world war - induce totalitarian government, cause massive food shortages, etc etc?

Who knows.

So what good does it do you to know it will produce a huge effect?

A lot of good.  Because all of these outcomes share one major characteristic.  They are hugely destabilizing to the quotidian economy.  To your daily life.  To your economy.  To your Oikonomos: the way you manage your household.

So do all that you can to become as stable as you can right now.

To me, that includes owning some physical gold because if the destabilization is caused by massive money printing - you're going to want a certain amount of stable currency - at some point.

And unfortunately, when that point comes, it will certainly be too late to get any.

Currency wars means competitive devaluation of paper money

James Rickards: Global Monetary System Headed for Collapse

Wednesday, 06 Feb 2013 07:29 PM

By Dan Weil © 2013 Moneynews.

G-7 Said to Discuss Statement to Calm Currency War Concern


Who Will Win The Currency Wars?

Forbes Asia 2/09/2013 @ 3:22PM 

Morning business round-up: Fears of 'currency wars'

   the BBC


Let's play global currency wars 

By Jim Jubak on MSN Money2/8/2013 9:15 PM ET

Sunday, February 10, 2013

Putin Turns Black Gold Into Bullion as Russia Out-Buys World

When Vladimir Putin says the U.S. is endangering the global economy by abusing its dollar monopoly, he’s not just talking. He’s betting on it.
Not only has Putin made Russia the world’s largest oil producer, he’s also made it the biggest gold buyer. His central bank has added 570 metric tons of the metal in the past decade, a quarter more than runner-up China, according to IMF data compiled by Bloomberg. 
Russia's Prime Minister Vladimir Putin, center, holds a gold bar while visiting the Central Depository of the Bank of Russia. Photographer: Alexsey Druginyn/AFP/Getty Images 

“The more gold a country has, the more sovereignty it will have if there’s a cataclysm with the dollar, the euro, the pound or any other reserve currency,” Evgeny Fedorov, a lawmaker for Putin’s United Russia party in the lower house of parliament, said in a telephone interview in Moscow.
Gold, coveted by Russian rulers including Tsar Nicholas II and the Bolshevik leader whose forces assassinated him, Vladimir Lenin, has soared almost 400 percent in the period of Putin’s purchases. Central banks around the world have printed money to escape the global financial crisis, sapping investor appetite for dollars and euros and setting off a scramble for safety.
In 1998, the year Russia defaulted on $40 billion of domestic debt, it took as many as 28 barrels of crude to buy an ounce of gold, Bloomberg data show. That ratio tumbled to 11.5 by the time Putin first came to power a year later and in 2005, after it touched 6.5 -- less than half what it is now -- the president told the central bank to buy.

Thursday, February 7, 2013

Gold Run? 43 Tonnes of Gold Stand for February Delivery on 1st Notice Day

empty COMEX vaultT

It seems that the gold repatriation request from Germany gave ideas to many investors, countries and sovereign or investment funds. Case in point, if we analyse the delivery requests on the COMEX for the month of February, we see that they are reaching the astronomical amount of 43,26 tons of physical gold, or 1,391,000 ounces of gold to deliver.

Why is this information paramount ?
As explained by Harvey Organ :

Because, for comparison purposes, delivery requests for the month of December 2012, normally a record month for deliveries, amounted to only 10 tons of gold.

Secondly, because the COMEX is normally a « paper » gold market in which investors rarely request converting their contracts into physical gold. Large investors, bullion banks and investment funds looking to acquire physical gold generally do it on the LBMA in London. Thus it’s possible that the LBMA is also showing signs of scarcity, with this movement toward the COMEX to acquire physical gold.

And, thirdly, because since the ‘70s, it’s the first time that there is such a request for physical gold delivery from the COMEX.

Gold and Human nature

Paper is a promise.  When the banks and the insurance companies went down in 2008 trillions of dollars of paper promises would have been defaulted upon - had the Government not stepped in to bail out the banks and insurance companies with trillions of dollars of tax payer money.  Everything from Credit Default swaps to Life insurance policies to AAA corporate bonds to Pension Plans. 

In effect they're now being paid off to the people who paid into them - with their own money.  Tax money, and the commensurately debased dollars in their bank accounts.

Most Social Security payments will likely be defaulted upon at some point.  Most Pension Plans will be defaulted upon at some point.  And everybody's paper dollars are being constantly debased.

These all represent promises that are constantly being reneged upon.

Gold is the only form of currency - in fact, the only financial instrument - that does not involve a promise.

That is the virtue of gold.

Some people call it a barbarous relic.  Most financial analysts consider it to be outdated, useless in today's complex sophisticated financial world.  That's because these are the folks making promises.  And they hate the idea that there should be any limit or accountability to their promises.

Here's how you will know when gold has become outdated and useless:

Human Nature has changed.  And everybody tells the truth all the time.  And everybody honors all their promises all the time.

When that happens gold will have become a barbarous relic.

Tuesday, February 5, 2013

Just today's headlines from Cheatopia

S&P Analyst Joked of ‘Bringing Down the House’ Before Crash


Standard & Poor’s employees joked about the company’s willingness to rate deals “structured by cows” and sang and danced to a mock song inspired by “Burning Down the House” before the 2008 global financial collapse, according to a U.S. government lawsuit.
Two S&P analysts in April 2007 discussed the company’s model for collateralized debt obligations, with one messaging that a deal was “ridiculous” and that S&P “should not be rating it,” according to the complaint filed yesterday in federal court in Los Angeles.

RBS Said to Face Up To $783 Million Fine for Manipulating Libor

Simon Dawson/Bloomberg
Royal Bank of Scotland Group Plc is set to pay 400 million to 500 million pounds ($783 million) in fines for manipulating interest rates, the second-biggest penalty imposed in a global regulatory probe, two people with knowledge of the matter said. 
The penalty is the biggest blow to Chief Executive Officer Stephen Hester’s attempt to overhaul the Edinburgh-based bank after it took 45.5 billion pounds in a 2008 taxpayer bailout, the largest in history. 
The fine, the third to result so far from the global probe, would exceed the 290 million pounds Barclays Plc (BARC) paid in June, and be second only to the $1.5 billion UBS AG (UBSN) paid in December. Chancellor of the Exchequer George Osborne said this week that RBS should pay the U.S. fines by clawing back bonuses from its investment bankers.  

Eaton CEO Says China GDP Report Overstates Growth Rate

China’s official 7.8 percent economic growth for 2012 may have overstated expansion by twice the real rate, and is only now headed for a “legitimate” 8 percent gain, Eaton Corp. Chief Executive Officer Sandy Cutler said.

The 'ugly story' A-Rod and other stars must confront

They may be innocent until proven guilty in a court of law, but this is baseball, where suddenly no one is innocent.
New York Yankees star Alex Rodriguez and five of his peers will be interrogated, cross-examined and grilled when they report to spring training camp.
And this will be done simply by the baseball reporters.
Major League Baseball investigators, and perhaps Drug Enforcement Agency officials, also are eagerly and anxiously waiting for answers.
"This is an ugly story that we wish didn't exist, but it's there," Yankees general manager Brian Cashman told reporters at a charity benefit Monday night. "We'll take the time to let it process."
The names of six players appeared in documents obtained by the Miami New Times revealing they allegedly received performance-enhancing drugs from a South Florida biochemist. There were handwritten dates, notations, cash payments, doses and schedules.

A culture of cheating

It's a business platitude that there is no business without trust.

If you suspect that anyone and everyone with whom you do business will cheat you - if they have any reasonable expectation of getting away with it - eventually all trust dies.  And all business suffers.

In sports we are outraged that Lance Armstrong cheated his whole life.  But then, we say, everybody in cycling is doping.

We are now outraged that Alex Rodriguez was cheating his whole Yankee career - but then we say - everybody in baseball is doping.

Jamie Dimon was on CNBC commenting on Lance Armstrong: "Can you imagine" he said, "What would happen to a Bank's reputation, if it behaved like Lance Armstrong."  Or an insurance company?  Or a car salesman?  Or a pharmaceutical company?  Or  a petroleum company?

Gee, we can only imagine.  Would would happen if a bank bundled junk mortgages, got the bundle graded AAA, then sold the bundles to smaller institutions, then shorted the bundles?   And the entire economy collapsed.  Wow, can you imagine if that happened?

Or how about this?  Can you imagine if the US taxpayer "lent" an insurance company (AIG) 3 trillion dollars, then the insurance company turned around and sued the US taxpayer (AIG).  Can you imagine that?

At the same time we love to call China currency cheaters.  And they are.  Just like we are.  Because the biggest cheating game in the world right now is currency manipulation (cheating).  Here's a list a banks currently engaged in open currency manipulation (cheating):

The United States (We admit to buying 90 percent of all of our own newly issued debt)  We also printed 19 trillion dollars to "support" our banks.
Japan: Openly admits to buying its own debt to weaken the yen.
Switzerland; Openly claims to pegging the SFR to the Euro.
Brazil: Openly claims to be protecting the Real from US currency manipulation through a financial operations tax.
China: Official policy of pegging the Yuan.

That leaves only the ECB - which is printing trillions to support their banks, but does not yet have a facility to openly buy their own debt.

So - Who do you trust?

Friday, February 1, 2013

The No-Wealth Effect

Why is the Dow over 14,000?

It's no secret the Fed is making Unlimited loans to the Banks at Zero percent and the banks are gambling this money in the Stock Market.

But there's no conspiracy here.  There's no Fed memo ordering the banks to support the Dow.  The banks are buying the Dow for one reason and one reason only.

What's that reason?

Is it that on an absolute value basis the Dow is undervalued?


Is it that they sense "the recovery" is picking up steam?


It's simpler than that.  It's that they know the retail investor is not in the market.  The retail investor is afraid. 

But the banks know that eventually the retail investor will get suckered back into the market.

The Ponzi scheme is good as long as there's a sure fire pool of suckers yet to be lured in.

As soon as the retail investor comes in, the banks know that the Free Trade is over, and they'll sell the market back down to 5000.

And all that money created by the Fed will stay in the banks.

And the retail investor, who funded all that money out of their taxes, will lose all the money they have left - in the market.

THE BIG LIE: The Dow has outperformed gold

Here's one you hear all the time:

Over the last 115 years the Dow has substantially out performed gold.

The truth: over the last 115 years, all but 2 Dow companies extant in 1900 have gone BANKRUPT or been bought out.  Of the 8 the went bankrupt that means their price has gone to ZERO.  The 4 bought out companies are worth something now as tiny components of conglomerates.  You figure out their value.  GE still exists.

During the same period gold has moved from $20 and ounce to $1650 an ounce.

Which has performed better?

Dow Components in 1900: