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The comex would stack the deck and not deliver. They would only make a cash payout to avoid depleteing stockpiles. The end result would be the same, loss of confidence.
.......al
Funny thing, myself and many others I know saw this coming. Strange how our elected and appointed officials were blindsided by it.
......al
Queen baffled at delay in spotting credit crunch
Queen Elizabeth has been given an academic briefing on the origins of the credit crunch and wound up the "lesson" by asking why nobody had seen the crisis coming.
The 82-year-old monarch had the complexities of the current global financial crisis explained to her during the inauguration of a new building at the renowned London School of Economics (LSE).
The origins and effects of the crisis were explained to her by Professor Luis Garicano, director of research at the LSE's management department, the Press Association reported.
Prof Garicano said afterwards: "The Queen asked me: 'If these things were so large, how come everyone missed them? Why did nobody notice it'?"
When Garicano explained that at "every stage, someone was relying on somebody else and everyone thought they were doing the right thing", she commented: "Awful."
Hi Heppie- Funny thing I just emailed Tony and asked him if he could find out how many urns and caskets were taken to the convention and how many were returned to inventory. I'll post his reply
.........al
Ted Butler's latest:
The Real Story
By: Theodore Butler
-- Posted 10 November, 2008
There is compelling new proof of a silver (and gold) price manipulation. The evidence connects the investment bank JP Morgan Chase, the dominant force in world commodity trading, the U.S. Commodity Futures Trading Commission (CFTC), the primary commodity regulator, and the U.S. Treasury Department, the arranger of every conceivable bailout.
This week, I received a copy of a letter, dated October 8, sent from the CFTC to a California Congressman, Gary G. Miller. It discussed allegations of a silver market manipulation because of the data in the monthly Bank Participation Report. The data in that report for August showed that one or two U.S. banks held a massive short position in COMEX silver futures of 33,805 contracts, or more than 169 million ounces. This is equal to 25% of annual world mine production, and was up more than five-fold from the prior month’s report. After this position was established, silver prices fell more than 50%, in spite of a widespread shortage in retail forms of investment silver. Never before had there been a such a large concentrated position in any market, including every manipulation case in the CFTC’s history. Concentration and manipulation go hand in hand. You can’t have one without the other.
The letter was sent to me by a reader who had the foresight to write to his Congressman. Of course, the CFTC denied that a silver manipulation existed, as they always have. This proves that the Commission responds much quicker to a member of Congress than it does to hundreds of ordinary citizens and investors. In the future, should you decide to write to the CFTC, be sure to do so through your elected representatives.
What was remarkable (and disturbing) about the letter was that it strongly confirms an analysis I presented in an article dated September 2, titled, "Fact Versus Speculation" http://www.investmentrarities.com/09-02-08.html. In that article, I speculated that the shocking increase in the silver short position by one or two U.S. banks was related to the takeover of Bear Stearns by JP Morgan in March.
Here’s a quote from my article, dated September 2.
"I am going to speculate based upon the known facts. Maybe I will be proven correct, maybe not. However, the nature of this speculation is so disturbing, that I hope I am wrong. But I need to state it because if I am close to the mark, the implications for the silver market are profound.
I think the data in the COT and the Bank Participation Reports indicate that the U.S. Government may have bailed out the biggest COMEX silver short by arranging for a U.S. bank to take over their position. This coincides with JP Morgan’s takeover of Bear Stearns. In fact, it would not surprise me if the bailout was JP Morgan taking over Bear Stearns‘ short silver position, at the government‘s request. While this silver bailout (if it happened) was no doubt undertaken with financial system stability in mind, it has disturbing implications of legality and equity"
This is the relevant quote from the CFTC’s Oct 8 letter.
"In effect the increase [in the short position] reflected a one time acquisition of positions that were acquired through a merger in the industry, and not new trading by a bank. Thus, the assertion that there was new activity undertaken by the banks that led to a fall in silver prices is not correct since the "new" activity reflected in the CFTC’s report was in essence positions that had already existed in the market prior to July 1st."
The CFTC clearly confirms, in effect, that the big silver short position was related to JP Morgan’s takeover of Bear Stearns, since no other merger provides a plausible explanation. However, the Commission is not speaking truthfully about an increase in the concentrated short position. The CFTC’s own data, in weekly Commitment of Traders Reports (COT), show a sizable increase in concentrated short positions of some 12,000 contracts (60 million ounces) from levels before July 1st to the August Bank Participation Report.
More importantly, the real issue is not about when the one or two U.S. banks increased their short position, but how large that short position grew in the August Bank Participation Report. The CFTC is deceiving a U.S. Congressman by attempting to reduce the argument to when the short position was increased, not the obscene and manipulative size of the position. This is deception through omission and misrepresentation. What difference does it make when the manipulative position was established? The issue is how can a short position of 25% of the world production of any commodity, held by one or two U.S. banks, not be manipulative?
Bear Stearns held the largest concentrated short position in COMEX silver (and gold) futures at the time of its forced merger with JP Morgan in March. That position was not discovered until the publishing of the August Bank Participation Report followed by the October 8 letter from the CFTC to Congressman Miller. Furthermore, Bear Stearns had no legitimate backing to the short silver position, either in actual metal or cash. Otherwise it could have been delivered against or bought back, just as would have happened were it a long position.
The price of silver at the time of Bear Stearns implosion was $20 to $21 an ounce. A free market covering of a concentrated short position of this size would have driven silver prices to the $50 or $100 level and would have exposed the long-term manipulation. Rather than let the free market deal with the required short covering of such an uneconomic and unbacked short position, government authorities arranged to have the short position transferred to JP Morgan. This was undertaken by the U.S. Treasury Department, along with taxpayer guarantees against loss to Morgan worth billions of dollars. This was done, no doubt, to save the financial system from imploding. This was also patently illegal, as it aided and abetted the silver manipulation.
I’m sure the motive behind the illegal transfer of the silver short position was the mistaken assumption by Treasury that an explosion in the price of silver (and gold) would threaten overall financial stability. Well guess what - they succeeded in crushing the price of gold and silver, but to no avail, as financial stability has been shattered.
JP Morgan was not just an accommodative good corporate citizen in the illegal transfer of the manipulative silver (and gold) COMEX short position. In addition to undisclosed government guarantees against loss, JP Morgan was given free reign to liquidate the COMEX short position at their discretion, knowing full-well the regulators would look the other way, no matter what dirty tricks were necessary to cause the price to collapse. Nor was JP Morgan a neutral agent in the silver price collapse. Data from the Office of the Comptroller of the Currency (OCC) http://www.occ.gov/deriv/deriv.htm indicates that JP Morgan held a much larger Over The Counter (OTC) derivatives position in silver and gold than was transferred to them from Bear Stearns.
My analysis shows that Morgan has made many billions of dollars, perhaps tens of billions, from their downward engineering of silver and gold prices from their combined COMEX and OTC short positions. They have used that engineered price decline to buy back as many short positions as possible. If investors are wondering what caused the destruction of billions of dollars in gold and silver values, metal and share price alike, look no further than JP Morgan, and the government officials who enabled them.
There can be no question that the CFTC is complicit in all these illegal activities. Same with the CME Group, owner of the NYMEX/COMEX. It is not possible that they are not privy and an active party to this successful downward manipulation. To think that officials at the CFTC, from the top of the agency, to staffers and even the Inspector General, have taken oaths of office to uphold commodity law and then have allowed that law to be repeatedly violated is beyond repugnant. That they have knowingly participated in an organized cover-up of this manipulation and have taken to lying to a Congressman calls for criminal prosecution.
As bad as this is, it gets worse. The downward manipulation of the price of silver, initiated by the U.S. Treasury, undertaken by JP Morgan Chase and sanctioned and aided by the CFTC and the CME Group has proven so successful in destroying investment values that the low price of silver is now threatening to destroy tens of thousands of jobs of those who mine silver for a living, here in the US and throughout the world. Who do these people think they are that they can allow the artificial paper price to alter real supply/demand fundamentals? Those in charge of enforcing the law have enriched a few sleazy bankers who trade toxic paper derivatives at the expense of tens of thousands of innocent investors and now ordinary workers. This should make your blood boil.
While investors in silver will soon see a strong snap-back in silver prices, it is too late for those workers who have already lost their jobs due to the artificially depressed price of silver. At risk remain those jobs that will be lost if silver doesn’t rebound quickly. Silver mining is tough and dangerous for rank and file workers, much tougher than pushing paper derivatives. The fact that those who regulate our markets don’t see that distinction needs to be rectified.
One thing that I have never understood is why silver mine management has not taken a more active roll in pressing the regulators to more fully address the increasing evidence of a silver price manipulation. I suppose it has to do with fears of offending those Wall Street firms which may provide future financing and the false pride that goes with having denied in the past that a manipulation could exist. But surely those managers have now seen what a depressed price of silver has done to their stock prices and the fate of their companies. To still do and say nothing leaves their companies in grave danger.
I think it is time for the employees themselves, and the unions that represent them, to take some initiative to help themselves. Losing jobs due to crooked behavior by big banks and their regulators should be a lightening-rod issue for employees, unions and Congressional leadership in the districts affected. I’m certain that legal action against the parties responsible for the price manipulation would result in substantial financial damages awarded to rank and file workers hurt by the manipulation. To that end, I offer, as much as is reasonably possible time-wise and free of charge, any consultative advice to any union or Congressional representative interested in bringing action against those responsible for the manipulation.
For investors, conditions never looked better for the long-term merits of silver, precisely because of the recent crooked take down of the price. You should do two things. Buy as much silver as you can and write your elected officials to end the silver manipulation scam.
Jim Rogers on silver:
By: Peter J. Cooper
-- Posted 10 November, 2008
Legendary investor Jim Rogers, whose conversion to commodities as an investment class back in 1999 preceded the end of the 20-year bear market by a couple of months, is backing silver over gold as an asset class to beat inflation.
He recently told journalists that if pushed to choose between the two precious metals he would choose silver. Rogers has moved to Singapore and is in the process of selling all his dollar holdings because he believes the resumption of the US dollar’s long term devaluation is imminent. He is even shorting US treasury bonds.
Buying precious metals is clearly linked to Rogers negative stance on the US dollar which has an inverse correlation to gold and silver which have indeed suffered from dollar recovery over the past couple of months. Gold is down around 12 per cent to silver’s one-third sell-off.
Silver No1
Rogers admits that silver has been particularly battered down, and perhaps that is why he likes this precious metal. Silver is leveraged to the gold price, so when gold goes down, silver goes down further. But equally when gold prices rise, silver will rise even higher.
Why then should the fortunes of gold change in the near future? Rogers is surely right that the dollar is the key. President-elect Obama is currently putting his new executive team together, and we will have to wait-and-see its policies but the omens are not good.
We have already seen how economic circumstances have forced a Republican administration into a multi-trillion dollar bank bail-out plan. The follow-through is a fiscal spending package, and state bail-outs for the US car manufacturers. All this is going to require funding at a time when rising unemployment and falling company profits mean tax revenues are falling.
A huge increase in borrowing is therefore inevitable and flooding global capital markets with new dollar paper will be inflationary and devalue the US currency. How to profit from US dollar devaluation? You buy an inversely correlated asset like gold or silver.
Rogers leads the pack
Now if Jim Rogers is right - and he was the first major investor to call the commodities boom - then he is unlikely to be alone for long. Others will hear his call and act on it. Actually, markets are going in that direction whatever he says or does.
And why is silver leveraged against the gold price? It is simple really. Both are precious metals but the available supply of silver is less than one-tenth the size of the gold market, and the dynamics of supply and demand in such a situation are obvious.
Rogers has never been a gold or silver bug himself - and ridiculed long-term holders of precious metals in his classic book ‘Hot Commodities’ - so his conversion to this asset class is all the more significant. Perhaps he has also noted the pressure growing in the silver futures market where a call for physical delivery could shortly break the spot price mechanism and lead to much higher prices.
Even one rich Arabian investor would be able to buy enough silver futures and break the market by demanding physical delivery, as is the right of any contract holder. It is a one-way bet that somebody is bound to make very soon.
I am also of the mind that silver is the better investment for % returns. I accumulated as many K rands as I could afford until gold hit the $360 area. From that point on I continued with just silver in mostly US 90% coins. I was and would still use Tulving, however I am getting better deals on Ebay believe it or not. I also started putting away silver and non silver modern Roosies, all NGC and PCGS with a few ANACS and ICG. Always go for the top grades as they appreciate far more than lesser grades.
.......al
The Eastern cultures have an almost genetically inherent instinct for gold. It would be a far stretch to think the leadership is that far removed from the same tendancies. Who in their right minds would dump gold when they have a storehouse full of fiat currencies? I think someone's pen was writing before the thought processes became engaged.
.........al
It would seem with the lack of adequate disclosure and no way to force disclosure without violating TOU, then if an IRP starts posting on a particular stock board other posters should assume the IRP is there because he(she) is being compensated to promote the company. We all know this is not always true, but to protect yourself wouldn't it be prudent to assume the worst? I know many of us get stock promotions in their mailboxes all the time. If I see something that might be interesting, the first place I go to is the disclaimer. If I see compensation for promotion in it I immediately hit the delete button. Too many pump and dumps operating out there.
Bottom line here to me is the lack of adequate disclosure could backfire and eventually make all IRP posts suspect and do them harm unjustly.
.......al
Quick question here- scenario: An IRP starts posting on stock board XYZ. Another poster asks the IRP on a public post on that board if and how he(she) is being compensated for posting about the company. Is that a violation of Ihub TOU?
Thanks
........al
It's all in the globally interconnected financial network of which wall street is by far the biggest hub. Now wall street has the flu so the rest of the world must be getting pneumonia or in the case of Iceland and a few others, be on life support.
.......al
I wonder if the old adage of if I owe you $1000 I have to worry about it. If I owe you $1,000,000 you have to worry about it applies to China and the rest of foreign dollar holders. Wasn't it Kennedy's sec of treasury Connelly that told European leaders it our dollars but your problem. Just a thought.
.........al
RT- great insight on the China Arab connection to world finance. For several years now Arab finance ministers have been quietly talking up a gold backed monetary system. I believe it was Frank Veneroso that pointed this out a while ago. Also the fact that Oil rich nations were accumulating gold through European banks at a slow pace as to not affect the price. They were supposed to be big buyers at central bank sales. Isn't it funny how such a barbarous relic can be in such demand.
......al
From John Mauldin:
Posted Nov 07 2008, 10:21 PM
by John Mauldin
The Problems of Deleveraging
1.2 Million Jobs and Counting
Be Careful of Geeks Bearing Recovery Data
Back to 1982
New York, Birthdays, and Moving
In general, we consider it a good thing to save money and to "owe no man anything save love." But what happens when a debt-happy society wakes up and decides that saving is a good thing for everybody? What happens when banks and hedge funds decide (or are forced) to reduce their debt? What happens when businesses of all sizes find it harder to get loans to operate?
In this week's letter we discuss "The Great Unwind," that process of deleveraging that we are now in the midst of. We also explore some recent economic data on the economy. It's a lot of ground to cover, so let's jump right in.
1.2 Million Jobs and Counting
The unemployment numbers came out today and they were ugly. October showed a loss of 240,000 jobs. But the really bad part was the negative revision to August and September, by a further loss of 179,000. As I have written in the letter numerous times, downward revisions in a slowing economy are the rule. Unemployment estimates are largely based on recent past performance. There is no way the models can catch a change in the overall trend. All the statisticians can do is go back and modify the data as hard information becomes available.
What the data shows is that the economy has lost 1.2 million jobs since December, with over half of those losses in the last three months as the problems from the recession accelerate. While two-thirds of the losses are in manufacturing and goods production, the service economy is also starting to show signs of strain. One in five lost jobs are from the retail sector.
Philippa Dunne of The Liscio Report writes: "A stunning fact: yearly job losses in private services, 0.4%, now match the worst of the 1982 recession and exceed the worst of 1975; once upon a time, the service sector wasn't very cyclical. Now it is."
Just as disturbing is the jump in the unemployment rate. It leaped to 6.5%, far above even the most dismal of expectations. For reasons we will go into below, it is likely we will see another 1 million jobs lost over the next year, with the unemployment rate headed up as high as 8%. There are now ten million unemployed Americans. You have to go back to 1982 and a double-dip recession to find an 8% unemployment rate. Very few people under 50 remember what that is like.
Look at the chart below. Notice how swiftly unemployment rises during a recession and continues to rise even after the recession is over. Since I do not think the current recession will be over until the third quarter of next year, we could see unemployment continue to rise for the next 8-10 months. At least, I hope it doesn't last longer.
Be Careful of Geeks Bearing Recovery Data
Before we look at how weak the economic numbers were from both the manufacturing and service sector surveys, let me cover an important point about recessions. You are going to hear all sorts of analysts (including sometimes even this humble analyst!) quote statistics that in general sound like: "Since the end of WWII average recessions have lasted X months, and thus we are almost through the current one, so buy what I am selling." Or the ever popular "Stocks tend to find the bottom in the middle of a recession, so now is the time to buy."
Casey Report
There will be lots of variations that all assume that past performance is somehow indicative of future results. And such an assumption is a prescription for investment pain.
First, there are not enough data points about recessions between the end of WWII and now to have any statistical meaning. I count 11 recessions since WWII. In what other human endeavor would we use just 11 data points and then decide to bet our hard-earned money? While average data can have meaning and give some grounds for comparison, it should be treated with heavy levels of skepticism when used as an argument for investing with conviction.
Let me tell you what we do know. Each and every recession is different from all the others and in different ways. That stands to reason, as the background economic environment was different for each one. The '70s and '80s were subject to serious levels of inflation. The recession at the beginning of this decade saw fears of deflation. Some happen with a strong dollar and some with a weaker dollar.
This recession is the result of serious bubbles in the housing and credit markets imploding. It is not the result of excess inventory or overinvestment in manufacturing capacity. As I have written numerous times, these excesses took years to build up and will take at least 2.5-3 years to correct. We are 15 months into the correction process. That is unlike any other recession we have experienced. So be careful in your use of comparisons based on historical averages.
One more point: since we do not know how long this recession will last, nor do what the results will be from further stimulus packages and hidden surprises, it is a mug's game to try and pick a bottom in the stock market based on some theoretical halfway point of this recession. You are going to hear over and over that markets anticipate the recovery about six months in advance. Given that this may be a very long and slow recovery that could be quarters away, be very cautious when you hear some bullish commentator using that "anticipation" rhetoric.
And with that said, let me now turn and look at some comparisons with past recessions that do offer some insight. By looking at how severe this recession is compared to previous ones, we can glean some idea of the level of problems we face now.
Back to 1982
The Institute for Supply Management released their October survey this week, and it was a shocker, helping send the Dow down by 10% in two days. It showed much more weakness than expected. This survey is collected from a large number of manufacturing firms. The ISM then makes an index of the data. For instance, if 60% of the reporting companies see new orders rising, then that would yield an index number of 60 for new orders. Anything below 50 shows negative growth. Below 40 shows a serious recession
The overall manufacturing number came in at a very weak 38.9. We are now down to levels not seen since September 1982. (Chart courtesy of Paul Kasriel and Northern Trust)
The internal data was even worse. New orders fells to 32, suggesting further weakness in the manufacturing world. Backlog of orders was 29. New export orders, a source of growth in recent months, fell from 52 to 41, a rather large drop for a single month. This shows the rest of the world is beginning to slow down as well. Boding poorly for employment, only 43% of companies reported that they were planning to add additional employees.
Nowhere was that illustrated more than in the auto sector. Last year sales were running at about 17 million new cars a year. Last month's annualized rate was 10.5 million, the lowest level since 1983. And a recovery might not be in sight for several years.
There is now about one car in the US for every person of driving age. An article in the Financial Times estimates that an extra 1.5 million cars a year have been purchased due to cheap financing, rebates, etc. If consumers decided they did not need more than one car, which would imply a flat growth rate, sales could drop by 3.5 million cars a year from the pre-crisis levels, which means Detroit would have a lot of spare capacity even after an economic recovery.
Further, I remember buying a car as a young man and not expecting it to last more than 80,000 miles before it needed major work or replacing. I now drive a 4-year-old Cadillac Escalade (I am a Texan, after all!) and it has 65,000 miles. I have a friend with an identical car that has 270,000 miles on it, and it is still running fine. My car could easily last me another four years, as could the cars of many people who bought new ones in recent years.
Basically, automobile manufacturers, in their drive to sell as much as possible, "brought forward" future sales of cars and, as a side effect, put lots of still quite good used cars on the road. New car sales are likely to be depressed for some time. It is somewhat like the housing problem. There is just too much inventory on the road that will have to be worked through. When Detroit gives me a real reason to buy another car, like an electric-powered vehicle, I will. And a lot of Americans, with a need to save money for retirement, are going to feel the same way.
As noted above, it seems that the service sector is now cyclical. The ISM Non-Manufacturing Survey results show broad-based weakness. The headline composite index dropped to 44.4 in October from 50.2 in September. This is the lowest in the 11-year history of this index. Indexes tracking new orders and employment also fell sharply, to 45 and 42 respectfully.
The data shows that we are sadly not yet close to the end of this recession. It is going to be a long slow Muddle Through Recovery. Do not expect a typical V-shaped recovery.
Casey Charts
The Problems of Deleveraging
There is a quite humorous series of quote about the demise of the American consumer, starting with a Fed chairman in 1954 and going through one after another major financial figure in the ensuing decades. They have all been wrong. Predicting that the American consumer will change his profligate ways has not been a recipe for forecasting accuracy. This time, it may be different. Not because US consumers really wants to change, but that they may be forced to.
Look at the explosion of consumer debt (credit cards, auto loans, bank loans) over the last 20 years, rising to $2.6 trillion. Household debt, including mortgages, skyrocketed from 47% of personal income in 1959 to 117% in the fourth quarter of 2007. And from 25% of GDP in the first quarter of 1952 to 98%. (Gary Shilling)
Let's look at some numbers. Since 1 January, 2008, owners of stocks of US corporations have suffered about $8 trillion in losses, as their holdings declined in value from $20 trillion to $12 trillion. (Losses in other countries have averaged about 40%.) Homeowners will soon see their equity down by as much as $8 trillion, and those losses are likely to increase.
As highlighted here repeatedly, mortgage equity withdrawals counted for a full 3% of annual GDP growth in the period from 2002-2007. MEWs have fallen by 95%, and are falling again this quarter. Credit card debt is being reigned in. In fact, as the chart below shows, bankers are not surprisingly tightening lending standards to consumers, and raising their rates. (Again, from Haver Analytics, courtesy of Northern Trust)
Much of US GDP growth has been fueled by debt. And that debt is now going to be much harder to get, as equity in both houses and stocks has fallen precipitously.
Further, as detailed last week, US consumers are clearly cutting back. The retail sales figures that came out this week are dismal. J.C. Penney stores are down 13% year over year! At Nordstrom's, one of my favorite stores, sales are down almost 16% (six months ago they were growing at 10%!). Sales at major discounter Costco were down 1%. The Gap, The Limited, Target - store after store is down. Limited Brand sales are down by 70% from October of last year. All this does not bode well for Christmas sales. (Thanks to Greg Weldon of www.weldononline.com for that data.)
Remember how I talked about how auto manufacturers had cannibalized future sales? Credit cards have allowed many retailers to do the same. Money that goes to cut down credit card debt is money not spent today.
Consumers leveraged their way to higher levels of consumption, and now are going to be forced to reduce that leverage. Many others are going to see the need to increase savings to shore up retirement funds. People (and not just in the US, but throughout Europe) have learned that a home is not an investment.
Hedge funds are also being forced to de-lever. While for most styles of hedge funds, leverage was not all that high (an average of about 1.4 times equity), large redemptions, especially by funds of funds, are forcing sales of all types of assets, but in particular stocks. As an aside, this selling is not over. Mutual funds are seeing large withdrawals, and are also selling.
Large banks are being forced to reduce credit lines in order to shore up capital, as they must deal with subprime debt and other mortgage-related problems. Smaller banks are just now starting to deal with losses on commercial loans due to the economic downturn. That means that they will have to reduce their loan portfolios to meet capital requirements.
This is happening all over the world. Whole countries are imploding. Iceland? What were they thinking? Italian sovereign debt is now suspect, calling into question their ability to meet their deficits.
Just as consumers used debt to buy "stuff" they wanted now, so did businesses, banks, and governments. It powered a huge global growth boom. The Great Unwind will have the opposite affect, softening demand and weakening spending and growth. What leveraging did for growth, deleveraging will take back. It is likely to be a long, Muddle Through trip.
The IMF now projects that the developed world will slow by a collective 1% next year, dragging world growth close to zero. The export growth that has been powered by a cheap US dollar is destined to slow as world demand falls.
The good news? Oil prices are likely to fall even more, which will free up some money to be used in other ways. The ISM data showed that prices paid are falling, making inflation less likely. The US government deficit, under Democratic control, is likely to be $2 trillion in 2009, a staggering number to be sure. Without the pressure of inflation, and with the threat of outright deflation, it may even be that such a deficit can be managed. In the short term, this massive debt will provide a stimulus, lessening the effects of a deep recession.
The sad thing is that our children will be saddled with the debt for a very long time. Hopefully we spend it on things like infrastructure, which will be of some use to them, rather than on an endless stream of consumer stimulus packages that simply add to current debt.
As investors, businesses, and employers/employees, we will have to deal with the outcome of a major resetting of consumer spending. Unemployment will rise. Whatever stimulus package is enacted will mostly be used to draw down debt, and not actually spent. Businesses all over the world are going to have to rethink their growth plans to the extent that they were based on ever-rising US consumer spending. Earnings are going to be under real challenge in most industries. This is going to become more obvious as time goes by, and is going to challenge whatever bear market rally can be mounted.
All is not gloom and doom. The last major recession and problem period, in the '70s, saw a number of new businesses start and prosper (Microsoft, Apple, Intel, etc.). Businesses that have access to capital are going to be able to take market share and come out of this recession in much better shape. It is just a recession, after all, and will end. But I would suggest keeping your powder dry and being nimble. There are opportunities which will arise, as they do in every downturn. Just don't expect this recession to be like any past recession. Make your plans accordingly.
Make a note. I showed a chart a few months ago which illustrated that imports were falling, even as the trade deficit was not. This was because of the high price of oil. Oil at that time accounted for two-thirds of the trade deficit. When they tally the trade deficit for November in a few months, I think everyone will be surprised at how much the trade deficit has fallen.
This is something we will discuss in a future letter, as a lower trade deficit means there will be fewer dollars to buy US debt, just at a time when US debt will explode. That means that US citizens must save and buy that debt, or the Fed will have to monetize it, or rates will have to rise to attract capital. These are somewhat counterintuitive concepts and need explaining. But not this week. It is time to hit the send button.
Want to see a real revolution? Just let them persue this:
Carolina Journal Exclusives
Dems Target Private Retirement Accounts
Democratic leaders in the U.S. House discuss confiscating 401(k)s, IRAs
By Karen McMahan
November 04, 2008
RALEIGH — Democrats in the U.S. House have been conducting hearings on proposals to confiscate workers’ personal retirement accounts — including 401(k)s and IRAs — and convert them to accounts managed by the Social Security Administration.
Triggered by the financial crisis the past two months, the hearings reportedly were meant to stem losses incurred by many workers and retirees whose 401(k) and IRA balances have been shrinking rapidly.
The testimony of Teresa Ghilarducci, professor of economic policy analysis at the New School for Social Research in New York, in hearings Oct. 7 drew the most attention and criticism. Testifying for the House Committee on Education and Labor, Ghilarducci proposed that the government eliminate tax breaks for 401(k) and similar retirement accounts, such as IRAs, and confiscate workers’ retirement plan accounts and convert them to universal Guaranteed Retirement Accounts (GRAs) managed by the Social Security Administration.
Rep. George Miller, D-Calif., chairman of the House Committee on Education and Labor, in prepared remarks for the hearing on “The Impact of the Financial Crisis on Workers’ Retirement Security,” blamed Wall Street for the financial crisis and said his committee will “strengthen and protect Americans’ 401(k)s, pensions, and other retirement plans” and the “Democratic Congress will continue to conduct this much-needed oversight on behalf of the American people.”
Currently, 401(k) plans allow Americans to invest pretax money and their employers match up to a defined percentage, which not only increases workers’ retirement savings but also reduces their annual income tax. The balances are fully inheritable, subject to income tax, meaning workers pass on their wealth to their heirs, unlike Social Security. Even when they leave an employer and go to one that doesn’t offer a 401(k) or pension, workers can transfer their balances to a qualified IRA.
Mandating Equality
Ghilarducci’s plan first appeared in a paper for the Economic Policy Institute: Agenda for Shared Prosperity on Nov. 20, 2007, in which she said GRAs will rescue the flawed American retirement income system (www.sharedprosperity.org/bp204/bp204.pdf).
The current retirement system, Ghilarducci said, “exacerbates income and wealth inequalities” because tax breaks for voluntary retirement accounts are “skewed to the wealthy because it is easier for them to save, and because they receive bigger tax breaks when they do.”
Lauding GRAs as a way to effectively increase retirement savings, Ghilarducci wrote that savings incentives are unequal for rich and poor families because tax deferrals “provide a much larger ‘carrot’ to wealthy families than to middle-class families — and none whatsoever for families too poor to owe taxes.”
GRAs would guarantee a fixed 3 percent annual rate of return, although later in her article Ghilarducci explained that participants would not “earn a 3% real return in perpetuity.” In place of tax breaks workers now receive for contributions and thus a lower tax rate, workers would receive $600 annually from the government, inflation-adjusted. For low-income workers whose annual contributions are less than $600, the government would deposit whatever amount it would take to equal the minimum $600 for all participants.
In a radio interview with Kirby Wilbur in Seattle on Oct. 27, 2008, Ghilarducci explained that her proposal doesn’t eliminate the tax breaks, rather, “I’m just rearranging the tax breaks that are available now for 401(k)s and spreading — spreading the wealth.”
All workers would have 5 percent of their annual pay deducted from their paychecks and deposited to the GRA. They would still be paying Social Security and Medicare taxes, as would the employers. The GRA contribution would be shared equally by the worker and the employee. Employers no longer would be able to write off their contributions. Any capital gains would be taxable year-on-year.
Analysts point to another disturbing part of the plan. With a GRA, workers could bequeath only half of their account balances to their heirs, unlike full balances from existing 401(k) and IRA accounts. For workers who die after retiring, they could bequeath just their own contributions plus the interest but minus any benefits received and minus the employer contributions.
Another justification for Ghilarducci’s plan is to eliminate investment risk. In her testimony, Ghilarducci said, “humans often lack the foresight, discipline, and investing skills required to sustain a savings plan.” She cited the 2004 HSBC global survey on the Future of Retirement, in which she claimed that “a third of Americans wanted the government to force them to save more for retirement.”
What the survey actually reported was that 33 percent of Americans wanted the government to “enforce additional private savings,” a vastly different meaning than mandatory government-run savings. Of the four potential sources of retirement support, which were government, employer, family, and self, the majority of Americans said “self” was the most important contributor, followed by “government.” When broken out by family income, low-income U.S. households said the “government” was the most important retirement support, whereas high-income families ranked “government” last and “self” first (www.hsbc.com/retirement).
On Oct. 22, The Wall Street Journal reported that the Argentinean government had seized all private pension and retirement accounts to fund government programs and to address a ballooning deficit. Fearing an economic collapse, foreign investors quickly pulled out, forcing the Argentinean stock market to shut down several times. More than 10 years ago, nationalization of private savings sent Argentina’s economy into a long-term downward spiral.
Income and Wealth Redistribution
The majority of witness testimony during recent hearings before the House Committee on Education and Labor showed that congressional Democrats intend to address income and wealth inequality through redistribution.
On July 31, 2008, Robert Greenstein, executive director of the Center on Budget and Policy Priorities, testified before the subcommittee on workforce protections that “from the standpoint of equal treatment of people with different incomes, there is a fundamental flaw” in tax code incentives because they are “provided in the form of deductions, exemptions, and exclusions rather than in the form of refundable tax credits.”
Even people who don’t pay taxes should get money from the government, paid for by higher-income Americans, he said. “There is no obvious reason why lower-income taxpayers or people who do not file income taxes should get smaller incentives (or no tax incentives at all),” Greenstein said.
“Moving to refundable tax credits for promoting socially worthwhile activities would be an important step toward enhancing progressivity in the tax code in a way that would improve economic efficiency and performance at the same time,” Greenstein said, and “reducing barriers to labor organizing, preserving the real value of the minimum wage, and the other workforce security concerns . . . would contribute to an economy with less glaring and sharply widening inequality.”
When asked whether committee members seriously were considering Ghilarducci’s proposal for GSAs, Aaron Albright, press secretary for the Committee on Education and Labor, said Miller and other members were listening to all ideas.
Miller’s biggest priority has been on legislation aimed at greater transparency in 401(k)s and other retirement plan administration, specifically regarding fees, Albright said, and he sent a link to a Fox News interview of Miller on Oct. 24, 2008, to show that the congressman had not made a decision.
After repeated questions asked by Neil Cavuto of Fox News, Miller said he would not be in favor of “killing the 401(k)” or of “killing the tax advantages for 401(k)s.”
Arguing against liberal prescriptions, William Beach, director of the Center for Data Analysis at the Heritage Foundation, testified on Oct. 24 that the “roots of the current crisis are firmly planted in public policy mistakes” by the Federal Reserve and Congress. He cautioned Congress against raising taxes, increasing burdensome regulations, or withdrawing from international product or capital markets. “Congress can ill afford to repeat the awesome errors of its predecessor in the early days of the Great Depression,” Beach said.
Instead, Beach said, Congress could best address the financial crisis by making the tax reductions of 2001 and 2003 permanent, stopping dependence on demand-side stimulus, lowering the corporate profits tax, and reducing or eliminating taxes on capital gains and dividends.
Testifying before the same committee in early October, Jerry Bramlett, president and CEO of BenefitStreet, Inc., an independent 401(k) plan administrator, said one of the best ways to ensure retirement security would be to have the U.S. Department of Labor develop educational materials for workers so they could make better investment decisions, not exchange equity investments in retirement accounts for Treasury bills, as proposed in the GSAs.
Should Sen. Barack Obama win the presidency, congressional Democrats might have stronger support for their “spreading the wealth” agenda. On Oct. 27, the American Thinker posted a video of an interview with Obama on public radio station WBEZ-FM from 2001.
In the interview, Obama said, “The Supreme Court never ventured into the issues of redistribution of wealth, and of more basic issues such as political and economic justice in society.” The Constitution says only what “the states can’t do to you. Says what the Federal government can’t do to you,” and Obama added that the Warren Court wasn’t that radical.
Although in 2001 Obama said he was not “optimistic about bringing major redistributive change through the courts,” as president, he would likely have the opportunity to appoint one or more Supreme Court justices.
“The real tragedy of the civil rights movement was, um, because the civil rights movement became so court focused that I think there was a tendency to lose track of the political and community organizing and activities on the ground that are able to put together the actual coalition of powers through which you bring about redistributive change,” Obama said.
Karen McMahan is a contributing editor of Carolina Journal.
Notice this:
The Fed has lent $1.5 trillion to banks, including Citigroup Inc. and Goldman Sachs Group Inc., through programs such as its discount window, the Primary Dealer Credit Facility and the Term Securities Lending Facility.
....al
This ought to be a hornet's nest:
By Mark Pittman
Bloomberg News
Friday, November 7, 2008
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aKr.oY2YKc2g
NEW YORK -- Bloomberg News asked a U.S. court today to force the Federal Reserve to disclose securities the central bank is accepting on behalf of American taxpayers as collateral for $1.5 trillion of loans to banks.
The lawsuit is based on the U.S. Freedom of Information Act, which requires federal agencies to make government documents available to the press and the public, according to the complaint. The suit, filed in New York, doesn't seek money damages.
"The American taxpayer is entitled to know the risks, costs and methodology associated with the unprecedented government bailout of the U.S. financial industry," said Matthew Winkler, the editor-in-chief of Bloomberg News, a unit of New York-based Bloomberg LP, in an e-mail.
The Fed has lent $1.5 trillion to banks, including Citigroup Inc. and Goldman Sachs Group Inc., through programs such as its discount window, the Primary Dealer Credit Facility and the Term Securities Lending Facility. Collateral is an asset pledged to a lender in the event that a loan payment isn't made.
The Fed made the loans under 11 programs in response to the biggest financial crisis since the Great Depression. The total doesn't include an additional $700 billion approved by Congress in a bailout package.
... Fed's Position
Bloomberg News on May 21 asked the Fed to provide data on the collateral posted between April 4 and May 20. The central bank said on June 19 that it needed until July 3 to search out the documents and determine whether it would make them public. Bloomberg never received a formal response that would enable it to file an appeal. On Oct. 25, Bloomberg filed another request and has yet to receive a reply.
The Fed staff planned to recommend that Bloomberg's request be denied under an exemption protecting "confidential commercial information," according to Alison Thro, the Fed's FOIA Service Center senior counsel. The Fed in Washington has about 30 pages pertaining to the request, Thro said today before the filing of the suit. The bulk of the documents Bloomberg sought are at the Federal Reserve Bank of New York, which she said isn't subject to the freedom of information law.
"This type of information is considered highly sensitive, and it would remain so for some time in the future," Thro said.
The Fed didn't give Bloomberg a formal response because "it got caught in the vortex of the things going on here," said Michael O'Rourke, another member of the Fed's FOIA staff.
Thro declined to comment on the lawsuit.
The case is Bloomberg LP v. Federal Reserve, U.S. District Court, Southern District of New York (Manhattan).
By Simon Kennedy and Craig Torres
Bloomberg News
Friday, November 7, 2008
http://www.bloomberg.com/apps/news?pid=20601109&sid=ayE0YPzpdD38&refer=h...
The age of free money may be at hand.
As major central banks slash interest rates with unexpected speed, benchmark borrowing costs are now below core inflation for the first time since the early 1980s, and policy makers are signaling they will go deeper.
Yesterday's cuts by the Bank of England and European Central Bank, which came with the Federal Reserve and Bank of Japan on the cusp of zero rates, are a bid to shock life back into their recessionary economies and strained money markets. It may be an uphill battle as consumers and businesses show greater interest in saving than spending, and banks hoard capital rather than lend it.
"It's the race to zero," said Stewart Robertson, an economist at Aviva Investors Ltd. in London, which manages about $230 billion. "There's no obstacle to more rate cuts."
The U.K. central bank led by Governor Mervyn King yesterday axed its benchmark rate to 3 percent, the lowest level since 1955. The reduction of 1.5 percentage points was the biggest in 16 years. The ECB followed with its second half-point cut in a month, to 3.25 percent, and President Jean-Claude Trichet declined to rule out further moves south.
The action in Europe, which extended to reductions in the Czech Republic, Switzerland and Denmark, followed decisions last week by the Fed to drop its key rate to 1 percent, matching the lowest in a half-century, and the Bank of Japan to cut to 0.3 percent in its first paring in seven years. The central bank of South Korea today cut its benchmark for a third time in a month.
... Harsher Blows
Monetary policy is being eased because the 15-month credit crisis is inflicting harsher blows to growth and inflation than central bankers anticipated just two months ago. Yesterday the International Monetary Fund cut its month-old forecast for next year's global expansion to 2.2 percent from 3 percent, and predicted the first contraction in advanced economies since it was created in 1945. It estimated prices would rise just 1.4 percent in rich nations, less than half of this year's pace.
The conundrum for central banks is that their rate cuts may still not be packing a punch, even on top of record injections of cash and a willingness to accept lower-rated collateral for their loans.
One reason: Credit markets remain fragile, indicating that financial institutions are still conserving cash after recording losses and writedowns of about $691 billion. The London interbank offered rate for three-month loans fell to 2.29 percent today from 4.82 percent on Oct. 10. The record drop still leaves Libor 129 basis points above the Fed's benchmark, compared with an average of 22 basis points in the five years before the global credit crisis began in August 2007.
... Problems 'Severe'
"The problems in money markets are still quite severe," said Dario Perkins, an economist at ABN Amro Holding NV in London. "Market rates are above where central banks have their rates, and that's alarming them."
Credit standards for loans to companies tightened "significantly" in the third quarter and will probably tighten again in the current quarter, the Frankfurt-based ECB said in its quarterly bank lending survey.
At the same time, companies and consumers are retrenching in the face of slowing growth and tighter credit. In the U.S., Cisco Systems Inc., the top maker of networking equipment, is forecasting the first revenue drop in five years because of the financial crisis. Across the Atlantic, Luxembourg-based ArcelorMittal, the world's biggest steelmaker, this week said diminished demand is forcing it to double production cuts.
... Companies Retrenching
Automakers and retailers are among the companies being battered by a collapse in consumer demand. In Japan, Toyota Motor Corp., the world's second-largest, yesterday forecast the biggest drop in profit in at least 18 years. Macy's Inc., Target Corp. and Gap Inc. all posted October sales declines in the U.S.
U.S. payrolls shrank by 240,000 workers last month, the Labor Department said today, taking the two-month decline to the biggest since 2001. The jobless rate rose to 6.5 percent, the highest in 14 years.
Another complication for central banks is that some financial institutions are proving averse to passing on lower rates to borrowers. HSBC Holdings Plc, Barclays Plc and HBOS Plc are among U.K. mortgage lenders that have still to decide whether to follow the Bank of England's rate cut by paring their own standard variable rates. In the euro area, banks yesterday deposited a record 297.4 billion euros overnight with the ECB rather than lend it elsewhere.
"We expect the banking sector to make its contribution to restore confidence," Trichet said yesterday.
... Cautious Banks
The combination of cautious banks and reluctant spenders is forcing central banks to cut interest rates below inflation. JPMorgan Chase & Co. calculates that borrowing costs adjusted for underlying inflation in developed markets fell below zero last month for the first time since the early 1980s and are still declining.
Central banks are betting that negative real interest rates will induce people to spend rather than save money that is declining in value, economists said. The strategy also aims to jolt investors and banks into seeking higher yields by making riskier long-term loans.
"It's clear you need to have interest rates that are lower than inflation going forward," said Jan Amrit Poser, chief economist at Bank Sarasin in Zurich. "Central banks are rushing to get interest rates down."
... 'Too Early'
Still, it's "far too early" to talk about zero interest rates throughout the industrial world, given inflation expectations remain positive, says Jim O'Neill, chief economist at Goldman Sachs Group Inc. in London.
"People should be wary of rushing to shift the debate from inflation to deflation," he said.
Rapid rate cuts are intended to avoid the fate of Japan, which endured a decade-long slump after its asset bubble burst in 1990 in part because its central bank was "initially too timid and too slow to react," economists at Deutsche Bank AG said in a report yesterday.
As rates fall further, central banks will have to consider less conventional steps to cushion their economies. Among them: making a public commitment to keep rates low, and lowering long-term borrowing by pumping large amounts of cash into banks with direct purchases of government securities.
The debate over what comes next could begin at the Fed as soon as Dec. 16, when policy makers next meet amid expectations for another quarter-point cut.
"We've got a global deflationary environment now and central banks will have to respond," said Stuart Thomson, who helps oversee $46 billion in bonds at Resolution Investment Management.
Bullwinkle, you are absolutely correct. Deflation is the big monster everyone seems to be worried about right now. All those trillions of dollars and yen floating around are still only electronic digits on balance sheets and are not monetized. The deflation will come first then the monetization of those currencies will bring on whopper inflation. Good for precious metals.
.......al
OS count updated in iBox. Only 10 million shares in 3 weeks. Looks like things are slowing down.
.......al
Gold miners dehedging:
By Nicholas Larkin
Bloomberg News
Friday, November 7, 2008
http://www.bloomberg.com/apps/news?pid=20601116&sid=aaMpDG7Hzo3g
LONDON -- Gold miners reduced forward sales contracts by 2.3 million ounces in the third quarter to 16.5 million ounces, London-based researcher VM Group said.
The industry's so-called hedge book compares with 29.1 million ounces a year earlier and 41.5 million ounces at the end of the third quarter of 2006, according to the VM report co- published by Haliburton Mineral Services in Toronto and sponsored by Fortis. Toronto-based Barrick Gold Corp. accounted for 1 million ounces of the decline.
"Continued dehedging from Barrick and AngloGold Ashanti Ltd. meant another large quarter of dehedging," VM Group analyst Matthew Turner said in the report. "However, this rate is not sustainable and from now on we are likely to see much lower dehedging volumes."
Forward gold sales usually allow miners to sell the metal at an agreed price at a future date in a bet that prices will fall below the locked-in level. Hedges have been a "bad bet" since 2002, VM Group said in August. Mining companies reduced hedges by 10.3 million ounces in the nine months through September.
Johannesburg-based AngloGold reduced 600,000 ounces of sales in the third quarter by delivering mined gold into maturing contracts and early buybacks, according to the report.
VM Group said its forecast for global dehedging this year remains 12 million ounces or less as dehedging in the fourth quarter should "slow sharply." The slowdown will continue into 2009 as AngloGold will have finished its program.
Gold for immediate delivery, currently trading at about $730 an ounce in London, is headed for its first decline in eight years.
#0001 Red Sox casket:
http://www.wickedlocal.com/abington/news/x1720643554/Sox-fan-for-life-and-death
Sox fan for life and death
By Mikaela Slaney
Thu Nov 06, 2008, 05:06 PM EST
Abington -
If being a Red Sox fan was a life-long passion for a deceased loved one, the staff at the Magoun-Biggins Funeral Home on Union Street wants to ensure that passion for the hometown team never ends.
Over the past several months Magoun-Biggins has offered a popular official Red Sox line of urns, and now they are providing a Red Sox line of caskets.
Co-owners Dan and Robert Biggins said they are trying to offer personalized caskets that celebrate the life and interests of the person who is buried inside them.
“It truly honors someone who was a big Red Sox fan,” Robert said. “It’s a niche product. It allows us to make a funeral personal. Consumers want things that reflect the life and love of a person who has died.”
Dan said his funeral home first became aware of the new official sports-themed caskets and urns from Eternal Image at the National Funeral Directors Association annual convention in October of 2007.
“Red Sox was appropriate for us,” Dan said. “It was really a great idea because a lot of people have different interests and we encourage everyone to celebrate what they liked. We have the first Red Sox casket ever in production, right now. It’s certificate 0001.”
Dan said people had been asking about sports-themed caskets for several months before that.
“Unfortunately because it was copywrited, up until today, we weren’t able to do that,” Dan said. “We now have the unique opportunity to provide families with that.”
On Wednesday, Robert said the first Red Sox-themed casket was already pre-ordered.
“We’ve had several families come in,” Robert said. “We had one family come in yesterday to pre-arrange and selected it.”
Robert said the casket was selected for an older man who had loved Red Sox since his childhood.
Although the Red Sox-themed casket was only made available this week, Magoun-Biggins has been offering Red Sox-themed urns from Eternal Image for the past several months, and several of them have been sold.
One was purchased by two adult siblings for their 80-year-old mother, who had passed.
“My favorite memory is that they chose it because of the importance of Red Sox to their parent’s life, and their memories of watching the game when they were little,” Robert said. “They also expressed interest in purchasing one for their father for when that blessed event happened.”
Robert said the Red Sox theme reaches multiple generations.
“That’s the most amazing part about it,” Dan said. “The people who expressed interest, it was a 104 year old woman right down to people in their early 50s.”
Other official available themes include NASCAR, Division 1 college sports, the Vatican Library Collection, Star Trek, and other professional baseball themes.
“Of course we don’t carry any Yankees urns in our building,” Dan Biggins said.
For more information contact the Magoun-Biggins Funeral Home at 135 Union St., 781-878-1775.
If I may inject somewhat of an analogy here. If you bought a car at a dealership and after signing the papers got in and went to drive away and the car wouldn't start and the dealer calls a tow truck at your expense to get your piece of junk off his lot, wouldn't it make you feel better if you could paint it yellow, put a sign on it "this lemon bought at XXXX dealership" and park it directly across the street from the dealer? It takes far less time to post a few words on a message board.
..........al
from Eric Sprott-
www.sprott.com
Allow us to preface this article by saying that we’ll be making no mention of the ‘manipulation’ of
the price of gold. Let’s put that issue aside for now because, in the long run, it just won’t matter.
We are in the midst of a financial crisis – not just any financial crisis mind you, but arguably the
worst and most pervasive the world has seen in almost a century (second only to the Great
Depression… thus far). In the sea of financial assets and currencies that are being decimated
the world over, the one true safe haven continues to be gold.
During these times, it is understandable that the prevailing investor sentiment is fear. People
are fearful of their savings, fearful of their jobs, and especially fearful of risk, having just
witnessed how quickly a bear market can decimate portfolios. The other major factor currently
affecting markets is deleveraging. As we all know by now, the 2002-2007 credit bubble was all
about leverage. Leverage in housing and real estate. Leverage in the banking system.
Leveraged hedge funds. As long as all asset classes continued to go up, then leverage was the
winning formula. Although such a myopic strategy paid handsomely in the short run, the
premise of the preceding sentence is, of course, false over the longer term. Thus, the winning
strategy of yesteryear is now a ruinous one, leading to a vicious circle of deleveraging that is
gutting the value of almost all assets. In this respect, gold is proving to be no exception. On the
flip side of deleveraging is the frenetic buying of what was on the short side of the leveraged
trade, namely, US dollars and Japanese yen. As currencies with low interest rates, they were
borrowed to effect the leverage and are now benefiting from what is essentially short covering as
leverage is unwound. This is another reason that the price of gold, in US dollar terms, is down
over the past month – albeit, not nearly as much as other assets that were on the long side of
the leveraged trade.
That said, we must confess to being perplexed (although far from discouraged) by the recent
price action of gold. It is not behaving the way one would expect it to behave during times of
financial crisis; namely, as the consummate safe haven asset of choice when all other assets
are being shunned. Mind you, gold isn’t performing badly by any means. In Canadian and
Australian dollar terms the price of gold is at or near all-time highs. Such is the case in most of
the world’s currencies. Even in Euro terms, the price of gold is within 5% of the high it reached
earlier this year. But gold has yet to catch a wind under its sails in all currencies. Is it really the
‘barbarous relic’, rendered obsolete by the stability and prosperity of the paper-based fiatcurrency
global financial system? Laughably, this argument was once used by anti-gold
proponents as the main reason not to own gold. How quickly things have changed! Today’s
financial system, with the institution of the central bank at its foundation, has proven to be
anything but as stable and prosperous as once thought. For the first time in a long while, the
very foundations of capitalism are being put into question. Once infallible central banks of
developed nations have become almost irrelevant. The financial markets, even the stock
markets, are completely ignoring them. Central banks have shown, to their chagrin, that they
can only solve one problem by causing another. The system is in such a state of disarray that
the leaders of many of the world’s developed countries, including the US, Britain, France and
others, are now proposing some sort of massive overhaul in the way the world does finance.
How it will all play out remains to be seen. Certainly it will involve greater government
involvement and therefore greater waste and inefficiency. But be that as it may, we would not
consider any paper-based asset as ‘safe’ right now. Especially not currencies, as we will explain
shortly. When the markets realize this, the outcome should be highly bullish for gold.
One of the key features of gold, and by gold we mean physical gold (not ETF’s, not futures), is
that it is one of the very few assets that has no one else’s liability attached to it. We believe this
point is particularly relevant today. At its heart, this financial crisis is all about the systematic
lack of trust in the liabilities of others. Everybody is worried about default/counterparty risk. One
example, yet to fully play itself out, is derivatives. The fallout in this area could be disastrous, as
we’ve written about several times in the past, adding fuel to the fire of the global financial rout.
But the problem, clearly, is by no means only relegated to derivatives. It’s the problem with all
financial assets, even the traditionally safest ones. Banks don’t want to lend to each other
because they don’t want an asset that is another bank’s liability. The money markets seized up
because nobody wanted to own another business’s liability, even over the very short term. Even
bank deposits, traditionally one of the ‘safest’ assets around, is some bank’s liability and
therefore a newfound cause for concern. Like it or not, in the financial world everything is
someone else’s liability and every financial asset has default risk. Even cash under the mattress
is someone else’s liability… it’s the liability of the central bank. Which is why nobody should be
breathing a sigh of relief that central banks are now guaranteeing everything. They guaranteed
all bank deposits. They guaranteed money market funds. They guaranteed interbank lending.
But at what cost? As they are wont to do, they only traded one problem for another. For what
does a government guarantee really mean? It means they are the buyer of last resort for other
people’s liabilities. It means they are ready, willing, and able to print money in any quantity to
back the guarantee. It means they are trying to solve the problem of default risk by causing the
equally nefarious problem of purchasing power/inflation risk. (Conversely they could tax their
citizenry into oblivion, but this would be much less politically acceptable than printing money,
especially in a debtor nation such as the US.) During times of financial crisis, it is best not to
trust anybody, especially not the central banks. When even the safest counterparties can no
longer be trusted, gold should be the asset of choice. It is the only asset that has absolutely no
default risk whatsoever and, in our opinion, it is the only true safe haven asset.
For now (though we believe it a temporary state of affairs) the markets seem to believe that cash
is king. They are still content to own paper in times of trouble, particularly US dollars and US
Treasuries. But such confidence is misplaced, for many reasons. In the current environment,
deflation à la the Great Depression is highly unlikely. Ben Bernanke, the head of the Federal
Reserve, is already on record as saying deflation cannot happen, using the helicopter drop
analogy to prove his point. Under a fiat currency system this is true enough, and made
abundantly clear with the central banks assuming the role of buyer and guarantor of last resort.
But regardless of what the central bank does, we believe the fundamentals have never looked
worse for the US dollar. On top of the money to be spent bailing out the financial system (at
least $1 trillion… likely $2 trillion and more), there is also the recession to deal with. Even during
the best of times the US government ran sizable deficits, in the worst of times these deficits will
go through the roof. Going forward they could easily exceed $1 trillion per year. Then there are
the social security and medicare payments the US government has promised to baby boomers,
that will begin to escalate exponentially as they begin to retire starting this year. The present
value of these obligations, according to the 2007 Financial Report of the United States
Government, is $41 trillion using a 75-year horizon and $90 trillion using an infinite horizon. 1
We stress that this is present value, which is like compounding backwards. It is the amount of
money that needs to be set aside today in order to meet the obligation in the future. It’s not a
long run problem anymore. It’s here and now.
For the above reasons, we believe the current flight to US dollars is a knee jerk reaction that
won’t have staying power. When asset prices fall, people take comfort in the fact that one US
dollar will always be worth one US dollar. But this stability is only illusory. The real question
should be, what will one US dollar be able to buy in the future? Is a sub-4% yield sufficient to
preserve wealth over the next 10 years? Much less, is a 2.7% yield likely to preserve wealth
over the next five? We find it highly unlikely, especially in this environment where the Federal
Reserve is throwing everything it’s got at the crisis. We believe the next leg of the crisis will see
people becoming fearful of cash and bonds. Although, to date, the US dollar has fared relatively
well versus other currencies, in the long run we believe it’ll fare relatively poorly versus gold.
In other countries, people would have done well, as this crisis was unfolding, to be fearful of
cash. In Iceland for example, where the krona has been devalued by 80%, people are probably
wishing they had owned gold. All over the world, countries are experiencing violent currency
movements. The Brazilian real and the Mexican peso have lost a third of their value in the past
three months. Even in relatively developed countries, like South Korea, the won has lost a third
of its value. There is a currency crisis unfolding in Eastern Europe right now, with many
currencies down 20% versus the Euro in a single month. This is causing considerable hardship
in countries like Hungary, where people took out loans and mortgages in foreign currencies in
order to avoid high interest rates. 2 The cost of repaying those loans is now significantly higher
than what they anticipated. There are huge swaths of the world where cash has proven to be
anything but safe. They are all wishing they bought gold. We believe that holders of US dollars
will soon be wishing the same thing.
With gold coins in a physical shortage and selling at a premium to spot, there is evidence that
investors are starting to flock towards gold. It won’t take much buying to catalyze the price of
gold. At today’s price, the total amount of gold ever produced is worth only $3.5 trillion, a mere
drop in the bucket compared to the world’s financial assets which, financial crisis
notwithstanding, still total somewhere in the neighbourhood of $100-$150 trillion. If some of
these paper assets were to be redistributed to gold – nothing would be more prudent –
then the recent drop in the price of gold presents a tremendous buying opportunity for the astute
investor.
Taxpayers on the hook for execs legal fees-
http://www.foxnews.com/story/0,2933,447784,00.html
Taxpayers May Pay Legal Fees for Mortgage Execs
Thursday, November 06, 2008
WASHINGTON — When the government took over mortgage giants Fannie Mae and Freddie Mac, taxpayers inherited more than just bad debts. They're also potentially on the hook for tens of millions of dollars in legal fees for the executives at the center of the housing market's collapse.
With the Justice Department investigating companies involved in the mortgage and financial meltdown, executives around the country are hiring defense lawyers. Like many large companies, Fannie and Freddie had contracts promising to cover legal bills for their executives.
When the Treasury Department delivered a $200 billion bailout to Fannie and Freddie, that obligation passed to the government, which may find itself paying for the lawyers defending the executives against the government's own prosecutors.
"Who'd have thought we might be on the hook for paying the defense costs when we're also paying the prosecution costs?" said Doug Heller, executive director of Consumer Watchdog, a Santa Monica, Calif.-based group that has been critical of the financial bailout packages. "To defend the economy from the havoc that's been created, we're going to defend the havoc creators?"
The Bush administration is working to avoid it. The Federal Housing Finance Agency, which controls Fannie and Freddie, said in regulatory filings it soon will try to prohibit the two companies from paying legal fees to their executives. But such a prohibition almost certainly would lead to a costly court fight over who's responsible for the bills when the Justice Department comes knocking.
Fannie's and Freddie's contracts also cover legal fees from shareholder lawsuits. Taxpayers could be forced to pay those legal bills, too. If the shareholders win — if they can prove the companies were mismanaged — the government could be liable for millions of dollars to make up for the executives' failures.
It wouldn't be the first time federal money intended to prop up the financial industry was used for unintended purposes. Days after it received an $85 billion federal bailout loan, the huge insurer American International Group Inc. spent $440,000 on an executive retreat with spa treatments, banquets and golf outings.
Both Fannie Mae and Freddie Mac have been subpoenaed as part of the wide-ranging Justice Department investigation into the companies' accounting, disclosure and governance practices. The two companies are key to the U.S. mortgage industry. After banks make loans to home buyers, Fannie and Freddie buy the mortgages from the banks so bankers can have cash on hand to make more loans and keep the economy humming. Fannie and Freddie then bundle those loans and sell them as mortgage-backed securities. The proceeds of those sales help buy more mortgages.
In recent years, however, the companies purchased more risky, subprime mortgages. When the housing bubble burst and the subprime industry imploded, investors feared the risk of buying Fannie and Freddie's mortgage-backed securities, making it harder for the companies to raise money.
Combined, Fannie and Freddie own or guarantee nearly half of all U.S. mortgages. The Treasury Department stepped in to keep the companies from collapsing and taking the mortgage industry with them.
Neither Fannie nor Freddie has said whether they already have advanced any legal fees to former executives. The companies are required to make general disclosures about such payments but only on quarterly corporate filings.
When the government took over, Fannie Mae chief executive Daniel H. Mudd, Freddie Mac chief executive Richard F. Syron and the rest of the companies' leadership was dismissed. All those executives would be entitled to have their legal fees covered.
The obligations could easily stretch into millions of dollars. Both companies have promised to pay legal fees for all current and former board members, executives and employees charged or investigated in connection with their employment.
Legal fees can add up quickly. After Freddie Mac restated its earnings in 2003, it became embroiled in several investigations and lawsuits. By the middle of 2005, the company had paid $16.8 million in legal fees for its executives and employees.
Executives who are convicted of wrongdoing are required to give the money back. Those who are acquitted, who are merely witnesses or who are investigated but never charged do not need to reimburse the company.
It's impossible to determine how much money might be at stake. In taking over the two mortgage giants, the government pledged to spend up to $200 billion to keep both companies afloat. The amount the government actually will spend depends on how well the companies perform in a changing mortgage industry.
With so much money at stake, defense attorneys are watching closely to see how broadly housing regulators restrict any future legal payments. The Fannie and Freddie contracts give the executives the right to sue to force the companies to pay their legal fees. If the executives win, the cost of those lawsuits gets passed to Fannie and Freddie, and potentially to the taxpayers.
Hello Chris- keep your eyes open and read up on the info available. Then close them and imagine a 20-50 bagger from here. But think longer term. If you're looking for a quick swing trade this is not the place to look. If you have a longer term perspective for a nice return and have the patience to stick it out, it is the opinion of many here that your time and patience will be rewarded. Look back at some of the posts I've made on this board. You will find millions in free advertising from news sources about this company and their products. GL2U
.......al
Haven't heard that one yet either. From what I've been reading the banks are using the bailout money topay dividends and bonuses, and to buy up other banks. Never a mention of gold purchases.
.........al
Butler's latest:
More Signs Of A Silver Shortage
By: Theodore Butler and Israel Friedman
-- Posted 4 November, 2008 | Digg This ArticleDigg It! | Discuss This Article - Comments: 3
The evidence of a wholesale silver shortage continues to build. This is in addition to the current retail shortage. The continuing tightening in the price differentials between the trading months in COMEX futures has continued and become more dramatic.
One of the clearest indicators of a shortage in a physical commodity occurs when the nearby futures months trade at a premium to more deferred trading months. That means buyers are willing to pay more for a commodity because it is not immediately available. Remember, the definition of a commodity shortage revolves around delays and premiums. While the nearby months in COMEX silver futures haven’t yet grown to a premium over the more deferred months (called backwardation or an inverted market), they have moved noticeably in that direction.
A second sign was the unusual and persistent buying of the recently concluded October COMEX silver futures contract, which recorded almost 1300 contracts delivered (6.5 million ounces) for the month. The bulk of these contracts resulted in a removal of silver from COMEX silver warehouses.
Finally, the big silver ETF, SLV, reported a decline of around 4.5 million ounces over a two day period recently. It is impossible to tell whether declines in the metal holdings in the ETFs are due to investor share liquidation or if shareholders are removing metal for other purposes, such as industrial consumption. Looking at the share trading volume and price action for the period corresponding to this drop, I’m inclined to think it was due to removal, rather than liquidation. Recent reports of big inflows by air transport of silver from London to India seem to explain the declines in SLV more than investor liquidation. If I am correct, wholesale silver is a lot tighter than most assume.
The draw down in visible silver inventories coincides with a new theory that my mentor and friend, Izzy Friedman, conveyed to me a month ago. Izzy remarked to me then that if visible inventories stopped growing and began to decline, that might signal the silver crunch was at hand. At first, I tended to dismiss his new theory. But, after further contemplating his theory, I concluded he may be on to something.
Don’t Be Fooled
By Israel Friedman
(Israel Friedman is a friend and mentor to Theodore Butler. He has followed silver for many decades.)
Sooner or later the COMEX will close their doors for one reason only - they will be considered as only a paper exchange. I write this for those people who intend to take delivery on their futures contracts. Don’t bank on receiving actual silver for your contracts.
We have signs that the supply of physical silver is drying up. Investors are buying 1000 oz bars in quantity and the miners and smelters are cutting production. The two US banks were successful to bring low prices on the COMEX by destroying the mining industry, but you the physical investor will benefit from their actions.
I was reading a study that said that twenty years from now, due to growing global demand, we will need the equivalent of a new planet to supply us with the resources we will need. Today silver is closer to a shortage situation than ever, only the price doesn’t show it. If you have decided to invest in silver, think big. 1000 oz of silver in the long run will buy you a two bedroom apartment in Trump Towers.
My crystal ball tells me that when the users panic, don’t be surprised that the price of silver could double in a week, and we could reach $40 in less than two months, and move quickly to $100, only because there is no silver available.
Be careful, those who have certificates from COMEX, don’t deliver your contracts for paper futures contracts no matter how attractive the spreads become. Don’t give real silver for paper obligations. It is not sure if your paper contract will be worth more than the paper it is printed on. Learn that one bird in the hand is worth more than ten birds on the tree. It is better to have 1000 oz in your hand than 10,000 oz in paper futures contracts.
It’s time to be very careful. These moderns gangsters are looking for ways to trick you by discouraging you from buying silver or to swindle you out from the silver you already own, by offering you many goodies like backwardation, leasing your silver with high interest rates and many other tricks. The organizations will offer you all the guarantees in the world for your silver, but remember, they can’t do that legitimately because there is less and less silver in the world.
Hold your silver close to your heart and remember that the real gold is silver. When the price of silver is equal to the price of gold, then think of profit taking. If you don’t have silver, you won’t be able to take profits.
WHY THE SILVER USERS WILL PANIC
By Theodore Butler
An integral component of my analysis has been that, as the inevitable shortage of wholesale silver became apparent, the industrial users would panic and attempt to build inventories of physical metal. Faced with prolonged delays of a material that threatened to shut down their production lines, the users would rush to buy enough physical silver to prevent those shut downs. This would provide a bullish price thrust that few comprehend.
Recently, I had an experience that may drive home why the silver users will panic and why that will cause the price of silver to explode. About a month ago, I drove home to Florida from Maine. Normally, I take a slightly longer, but more scenic route, than the straight run down I-95. This year, because I was sensitive to reports of gasoline shortages along the route I normally take, I swung over to I-95 further north than I usually do, to avoid any problems getting fuel. It seemed that Hurricane Ike and pipeline problems were causing gas shortages throughout the Southeast U.S.
Having navigated successfully over to I-95 (over much pouting and resistance from my wife, a strong proponent for the scenic route), I thought I was headed home gas-worry free. However, at a rest stop in South Carolina, a traveler approached me with the warning that gas was now a problem on I-95. He related to me that he just came from a gas station that was sold out and had heard that there "was no gasoline at all in Georgia." Georgia was still 100 miles ahead, and there is no other way to get to Florida.
Since I had less than half a tank of gas, I decided to fill up at the next gas station. Sure enough, that station had long lines and the dreaded plastic bags over many of the fuel nozzles, indicating empty tanks for premium and mid-grade gas. Fortunately, my car only requires regular gas, so I was able to fill up with no great difficulty.
I must tell you that such an experience wakes you up and focuses your attention on something you normally take for granted. I confess that 75 miles down the road, in stopping at a hotel for the evening, I pulled into an empty gas station and topped off my tank with 2 gallons. I wanted to get home.
It occurred to me that it didn’t matter if your vehicle was worth $1000 or a hundred times that amount; without fuel, it was of no use. You need fuel to run your car. Same thing with silver for an industrial consumer - your $100 million factory could grind to a halt without silver.
I related to my wife that the price of a gallon of gas was no longer a concern, only its availability. If there was a way to insure a guaranteed supply of gas for the next year or so, I would sign up. But that’s impossible, as the problem was that there was no practical way of storing such a supply, as we are all limited by the capacity of our vehicles’ fuel tanks. Where would you put 1000 gallons of gasoline?
It occurred to me that there was no practical way for anyone to hedge against a shortage of fuel, save build your own tanks to store the fuel. Even those that had successfully hedged the price of fuel in the past, like Southwest Airlines and others, were hedging against just the price and couldn’t guarantee themselves actual supply in a shortage. For fuel and many other commodities, there was no practical protection against a shortage of the commodity.
That’s when it dawned on me to write this article. Silver is a lot different than fuel in that not only is it a lot easier and less dangerous to store, it is more likely to go into a shortage, given silver’s investment demand. Not only could the silver industrial consumers hedge themselves against the giant silver price increases ahead (buying futures), they could easily guarantee actual supplies before the coming inevitable shortage. All the users have to do is buy actual silver, not paper contracts, but real silver. Just like you do. The users buying actual silver to protect against both price increases and availability is as easy as falling off a log. Plus, it is a very rational act.
The silver industrial users have yet to initiate any type of buying protection program, either with paper contracts or with the actual metal. But, the users are run by people who are human. When they can’t get timely delivery of actual silver, like what has occurred to investors for the past months, they will do what I did in North Carolina; they will top off, and keep topping off. Only they won’t be limited by a 15-gallon gas tank. Because of the physical nature of silver and its ease of storage, the users will be able to buy as much silver as they care to, price permitting. They will buy more silver than they need because they will fear not being able to get it, once the delays in shipments start. This will set off a chain reaction, exacerbating the shortage and causing more silver users to do the same thing. This chain reaction will set off a price spiral that will shock the world.
COT Update
The most recent Commitment of Traders Report (COT) indicated a market structure that supports a strong move to the upside in silver and gold. While there was no improvement in the latest COT for silver despite strong downside price pressure during the reporting week, I believe that is due to the washed out condition of the market. How much blood (long liquidation) can you get out of a stone?
In gold, however, there was a dramatic cleansing of speculative longs and even notable speculative new short selling. This enabled the commercials to buy many gold contracts. I believe gold is now as washed out as silver. In more measurements than not, both the gold and silver market structure is as good as it has been in years. That means low downside and large potential upside.
I read an article today in the Idaho Statesman concerning layoffs at a local silver mine, due to the low price of silver. I took the occasion to write the following e-mail to various officials at the CFTC -
From: fasttedb@aol.com
To: wlukken@cftc.gov mdunn@cftc.gov Bchilton@cftc.gov jsommers@cftc.gov sobie@cftc.gov cryall@cftc.gov
Cc: alavik@cftc.gov
Sent: Tue Nov 04 05:34:33 2008
Subject: silver manipulation
While you dot i's and cross t's, and look for ways to look the other way, instead of doing what you know you should be doing, here's a tiny sliver of the harm you are causing to innocent bystanders. You are directly responsible for these people losing their jobs and for the pain and stress it is bringing to their families. You should be ashamed of yourselves for allowing this crime in progress to exist
http://www.idahostatesman.com/business/story/559426.html
Ted Butler
I'd love to say it's the start of many more to come. However, it will take some time for all these electronic dollars being created to become monetized. When that starts to happen then watch the swings as the PPT tries it's best to keep the lid on.
.......al
Thanks for your insight. I think there are some players that want to break the comex as they think the comex is the nerve center of a suppression scheme. There are always 2 sides to the coin.
............al
Very interesting. But as investor demand outstrips supply which has been the force separating the physical from the paper market, how do you think the overall market will react in time? It sounds as if there are 2 distinct pipelines with one overflowing and the other running at a trickle. Thanks for your views and insight. It's good to hear from someone in the industry.
........al
I've re read that several times in the past. Isn't it funny how joining the political arena can corrupt values so quickly.
........al
That is very surprising given the current shortages being reported all over the world. Question is how long will it last and how many are they minting.
.........al
I have heard pretty much the same thing throughout the industry. The large 1000 oz bars seem to be the only silver available in any kind of quantities. The retail market has dried up due to lack of product to sell.
......al
Thanks everyone. Been with precious metals since the late 70's and seen a lot of famine between then and now. I firmly believe the time for gold and silver is here, now. The bull started a few years back and has many more years to run. I also push holding physical over paper. If you have it your posession it can't be confiscated, lost in a 3rd party bankruptcy or swindle, attached by a civil court, taxed, or have liens placed on it. I have traded PM stocks in the past but am out right now. I have gold but right now I see silver as the better investment for % return. It's tough to find out there but look hard and it can be found. I read quite a bit and will post items with substance that bear reading. Best of luck to all here.
.............al
Is the silver futures market about to crack wide open?
By: Peter J. Cooper
-- Posted 3 November, 2008 | Digg This ArticleDigg It! | Discuss This Article - Comments: 1
By: Peter J. Cooper
The silver market has been looking interesting for months, despite the price collapse. Beneath the surface of the recent spot price falls the structure of the market is changing in such a way that a powerful bull market is being set up.
Metal holdings for Barclay’s iShares Silver Trust (SLV) have so overwhelmed selling pressure that the trust has added a total of 68,921,884 ounces of silver to its holdings so far this year, reported resourceinvestor.com. Yet late last week the COMEX futures market reportedly held 131,530,256 ounces of silver in its warehouses.
This so far in 2008 the leading silver exchange traded fund SLV has added the equivalent of 52.4% of all the silver metal that the COMEX futures market has in its vaults. That surely represents amazing buying pressure at a time when silver prices are in crashing. Something is not right clearly.
False market
Then as resourceinvestor.com comments: “if we consider all of the 95,873 open contracts for silver on the COMEX as of last Tuesday, then we find that the COMEX traders are trading contracts either side, long and short, of 479.4 million ounces of silver but only have 131.5 million ounces behind it.”
Why then have silver prices been falling? That brings us back to the alleged manipulation of the market by two US banks over the summer, now under investigation by the regulator.
Resourceinvestor.com says: “Exactly two U.S. banks continued to keep their thumb on the COMEX silver market as of October 7 when the silver price had already declined from $19.00 to $11.00 and change in the face of severe physical silver shortages of metal on the street. As of October 7 the two largest commercial banks still held a scandalous 23,308 net short silver contracts when the entire commercial net short position was 29,829 contracts. That’s right, two banks still dominated the small silver futures market with over 78% of all the commercial net short positioning.”
This is not only downright illegal and unfair, it is producing a false market. And in false markets things can change very rapidly. Is it any wonder that metal is now flowing out of the COMEX and into the physical market. SLV investors sense a bargain and are effectively pulling silver stocks out of the futures market where the price is false.
COMEX exit
Resourceinvestors.com notes that over two million ounces of silver have fled the vaults of the COMEX in just the last five trading days alone. How long before that trickle becomes a flood and the futures market in silver is effectively shut down and the physical spot market takes over?
Expect to see silver prices head to the moon. In the late 1970s it was a bungled price manipulation by the Hunt Brothers that sent silver prices super high, and bust the market for the next two decades. Silver today is trading at around $10 an ounce compared with an average price of $24 an ounce in 1980. What else today costs a fraction of the price 28 years’ ago?
Now it will be a bungled price manipulation by US banks that releases the silver price from its artificially depressed state. Silver bugs have gotten silver hair waiting for this to happen, but it is finally upon us and nothing and nobody can stop it.
An investment tip: stock up on physical silver, bars, coins and ‘pure play’ silver equities which should deliver the most outstanding profits of all. These are extraordinary times in capital markets and exactly the sort of period when such extraordinary events happen.
There are a lot more of us than you realize, but in insufficient numbers to matter right now. As long as people are comfortable in their comfort zone, roof overhead, food on the table, etc, there will be very little done in the way of political or social activism. We are voices in the wind and not being heard right now. Most people still believe the people we send to Washington will not let anything really bad happen to us. Boy do I have a lot of bridges to sell them. The truth is our government is an entity that will do whatever it takes to survive. Which is not a bad thing except for the fact that it will sacrifice as many of it's citizens as it takes to accomplish that end.
I wonder how welcome "W" will be back in Texas when his term expires in January. The Bush legacy- 2 very costly, in lives and money, unfinished wars, an econmy in shambles, and he paved the way for the first African American president in history. Although I'm still a Ron Paul guy, I do think Obama has a better chance of cleaning up the mess than McCain. I'm normally a "gridlock is good" person because when gov't is gridlocked, they are too busy pandering to the press and posturing to look good back home to get anything accomplished and the less they do the better off we are. Also, and I hope I'm not stepping on too many toes here, the idea of Palin, a fundamentalist Christian looking forward to the rapture, with her hand so close to the nuclear button does scare me.
Whoever gets in, it will take years to straighten out the mess we are in if it will ever be done at all. It didn't happen overnight and won't be fixed overnight. All Paulson is doing is taking care of his buddies on wall street as parting gifts. Hoard your gold and silver.
............al
Everyone that reads this should copy and paste it in a letter to their congressman and both senators, and ask what is being done to investigate these allegations.
..........al
With the money that has been pissed away in Iraq and the trillions ( that 700 billion is just what congress appropriated, the federal reserve has already passed out trillions thru the begging window) we taxpayers are on the hook for given to wall street, we could have built enough wind turbines and solar panels to generate enough electricity for every household in America. No more coal, no more natural gas, no nukes, all clean energy and far less dependance on foreign suppliers for energy. Add in some R & D for efficient electric cars and bingo, no more oil money to supply terrorists throughout the world. Gee, if I weren't so dumb that would sound like a win-win situation for the US, but what do I know.
.........al
A very good rule. EOM
.......al
Hi camguy- having read extra's posts on shorting also, let me chip in a little. I do agree that the way to make lots of money on this stock is to short it into oblivion. I'm sure it's done- offshore. Hedge funds make a lot of money naked shorting stocks offshore. Can an individual do it? Possibly. I've checked into it myself some years ago. 2 problems. #1 if the offshore brokerage decides to screw you you have little recourse. None in US courts and in country of origin very little as it's the same story there as here ie big money controls everything and you are only a small fish making some noise. They will shut you up in a hurry. #2 the margin requirements for naked shorting penny stocks is outrageous to the tune 3-6 for one. An individual investor could tie up $20,000 for a naked $4000 short. It's all in the potential volatility. We have all seen penny stocks make 5-10 baggers in a day's trading. The brokerages want that possibility covered. I hope that helps a little. Idon't know how he shorts or for whom but thta's the info I have on it.
...........al