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The Noose Tightens

26 Thursday Feb 2009

Posted by jschulmansr in 10 year Treasuries, 20 yr Treasuries, Austrian school, Bailout News, banking crisis, banks, bear market, bull market, Comex, commodities, Copper, Currencies, currency, Currency and Currencies, depression, DGP, dollar denominated, dollar denominated investments, Fundamental Analysis, futures markets, GDX, GLD, gold, Gold Bubble, Gold Bullion, Gold Investments, gold miners, Gold Price Manipulation, How To Invest, How To Make Money, hyper-inflation, IAU, inflation, Investing, investments, Jschulmansr, Junior Gold Miners, Latest News, Make Money Investing, manipulation, Market Bubble, market crash, Markets, mid-tier, mining companies, mining stocks, palladium, Peter Grandich, physical gold, platinum, platinum miners, precious metals, price, price manipulation, prices, producers, production, silver, silver miners, Silver Price Manipulation, spot, spot price, stagflation, Stimulus, Stocks, Technical Analysis, The Fed, Tier 1, Tier 2, Tier 3, TIPS, U.S. Dollar, Uncategorized, XAU

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ANV, Austrian school, AUY, Bailout News, banking crisis, banks, bear market, Bollinger Bands Saudi Arabia, Brian Tang, bull market, CDE, central banks, China, Comex, commodities, Copper, Currencies, currency, deflation, Dennis Gartman, depression, DGP, dollar denominated, dollar denominated investments, Doug Casey, economic, economic trends, economy, EGO, Federal Deficit, financial, Forex, FRG, futures, futures markets, gata, GDX, GG, GLD, gold, gold miners, hard assets, HL, hyper-inflation, IAU, India, inflation, investments, Jeffrey Nichols, Jim Rogers, Keith Fitz-Gerald, majors, Marc Faber, market crash, Markets, Michael Zielinski, mid-tier, mining companies, monetization, Moving Averages, NGC, NXG, PAL, palladium, Peter Grandich, Peter Schiff, physical gold, platinum, platinum miners, precious metals, price, price manipulation, prices, producers, production, protection, recession, risk, run on banks, safety, Sean Rakhimov, silver, silver miners, SLW, small caps, sovereign, spot, spot price, stagflation, Technical Analysis, TIPS, U.S., U.S. Dollar, volatility, warrants, XAU

As I write Gold down $3.00 to $366 oz (April Contract). Things are getting very interesting, Japan’s exports drop a new record level. The Wall Street Journal has a quick article about investors wanting Gold in Hand (taking Delivery). As I wrote a few days ago the fastest way to create a short squeeze is to take delivery. Especially on Comex in both Gold and Silver. Is the noose getting tighter? Gold is in a consolidation pattern getting ready to take off? Some say yes other’s in fact a majority are saying no it’s time for a correction. As I mentioned yesterday when most of the crowd is saying one thing the market usually does exactly the opposite. We will see as I am keeping a very careful eye on the Gold market and will let you know via this blog and Twitter when I am getting out of the Long DGP trade. Finally! Cramer has finally decided to give Gold some coverage after a $200 rally, quick excerp below. Let the fun begin! Good Investing! – jschulmansr

Follow Me on Twitter and be notified whenever I make a new post!

Here is where I buy my Bullion, get one free gram of Gold just for opening an account! Catch the New Bull! – Buy Gold Online – Get 1 gram free just for opening account– just click here and then again on the Gold Bar!, no minimums – Buy Safely, quickly, and at low prices, guaranteed! – Bullion Vault.com

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Cramer’s Mad Money- The EGO Has Landed (2/25/09) – Seeking Alpha

 

Source: SA Editor
Miriam Metzinger

Good As Gold: Agnico Eagle Mines (AEM), Eldorado (EGO), SPDR Gold Shares (GLD), Yamana (AUY), Goldcorp (GG), Newmont (NEM)

In spite of gold’s dip from $1,000 to $950, Cramer thinks the uncertainty in the U.S. and in Europe will be good news for the traditional hedge. The question is how to invest in gold. One way is to buy bullion or gold coins, but Cramer prefers stocks. SPDR Gold Shares is a good way to track the price of gold. Cramer would buy a fourth of a position at $90, another at $88, then $85 and $82. He reminded viewers that gold stocks have unique metrics; production growth, sensitivity of earnings to changes in gold prices and price-to-net-asset value. Two gold stocks worth looking at are Agnico Eagle Mines and Eldorado. Agnico has an impressive 344% growth rate, with Yamana at 56% and Eldorado at 27%. Eldorado keeps production costs very low at $286 per ounce: Goldcorp’s expenses are $397, Yamana $411 and Agnico is $483. Even though Agnico’s production costs are at the top, Cramer says they are going down. However, EGO is less sensitive than gold prices than AEM. According to the price-to-net-asset value, AEM is the most expensive, with EGO and Newmont behind. In short, Agnico has an impressive growth rate, but Eldorado might be a better value.

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Worried Investors Want Gold on Hand – Wall Street Journal

Source: WSJ Online

 

Some investors are so worried about the prospect of economic collapse that they are buying gold and having it delivered to them, rather than holding the precious metal in the form of futures contracts or other securities.

The global recession and worries about the stability of the financial system have sent the price of gold to $1,000 an ounce. But more surprising is that buyers are taking the unusual and expensive step of taking possession of it.

“We’re having some of our strongest months ever,” said Scott Thomas, president and chief executive of American Precious Metals Exchange, a precious-metals dealer …

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Oil, Dollar and Gold – Peter Grandich’s Blog
Source:  Peter Grandich’s Blog

One’s bottoming, one’s topping and one’s consolidating. Can you guess which is which?

Give yourself a cigar if you said oil, U.S. Dollar and gold.

The 50-Day Moving Average is just pennies away ($42.50). A close above it could bring in some technical buying. Some early signs of peak supply is showing up and with more people believing OPEC is living up to its quota’s, the mid $30’s look more and more like the bottom.

We’re at one of the more critical technical points in quite some time. We either have a triple top just above 88 or a major breakout above 90. Because I’m so bearish long-term, I’m currently positioned on the short side. A break above 90 will cause me to rethink my position. Stay tuned.

The magical $1,000 level has for now proven to be just a news story. I, myself, received several requests for interviews and comments last Friday on $1,000 gold from media people who don’t normally cover gold. This suggested to me that we got a little ahead of ourselves. The $925-$950 area should be the limit to this consolidation. Don’t be surprised if we shoot above $1,000 in the coming days.

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Late Flash: They’re trying to manipulate the Gold market again or else the traders are trying the push. I have been stopped out of DGP @ $958. Nice trade. I will now be looking at my next entry point to jump back in again. Gold currently $943.60 (April Contract). I think the lowest April will correct to will be $925 oz (April Contract) and then we are back to challenging $1000 and the all time highs again. Remember 3’s a charm! Good Investing! – jschulmansr

Catch the New Bull! – Buy Gold Online – Get 1 gram free just for opening account– just click here and then again on the Gold Bar!, no minimums – Buy Safely, quickly, and at low prices, guaranteed! – Bullion Vault.com

Follow Me on Twitter and be notified whenever I make a new post!

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Nothing in today’s post should be considered as an offer to buy or sell any securities or other investments; it is presented for informational purposes only. As a good investor, consult your Investment Advisor/s, Do Your Due Diligence, Read All Prospectus/s and related information carefully before you make any investing decisions and/or investments. –  jschulmansr

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Support At the Pit Stop

24 Tuesday Feb 2009

Posted by jschulmansr in banks, bull market, Comex, Currencies, currency, Currency and Currencies, deflation, depression, DGP, dollar denominated, dollar denominated investments, Economic Recovery, economic trends, economy, Federal Deficit, federal reserve, Finance, financial, Forex, Fundamental Analysis, futures, futures markets, GLD, gold, Gold Bubble, Gold Bullion, Gold Investments, gold miners, Gold Price Manipulation, How To Invest, How To Make Money, hyper-inflation, IAU, inflation, Investing, investments, Junior Gold Miners, Latest News, majors, Make Money Investing, Market Bubble, Markets, mid-tier, mining companies, mining stocks, oil, palladium, physical gold, platinum, platinum miners, precious metals, price, price manipulation, producers, production, silver, silver miners, spot, spot price, stagflation, Stimulus, Stocks, Technical Analysis, The Fed, Tier 1, Tier 2, Tier 3, U.S. Dollar, Uncategorized, XAU

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ANV, Austrian school, AUY, Bailout News, banking crisis, banks, bear market, Bollinger Bands Saudi Arabia, Brian Tang, bull market, CDE, central banks, China, Comex, commodities, Copper, Currencies, currency, deflation, Dennis Gartman, depression, DGP, dollar denominated, dollar denominated investments, Doug Casey, economic, economic trends, economy, EGO, Federal Deficit, financial, Forex, FRG, futures, futures markets, gata, GDX, GG, GLD, gold, gold miners, hard assets, HL, hyper-inflation, IAU, India, inflation, investments, Jeffrey Nichols, Jim Rogers, Keith Fitz-Gerald, majors, Marc Faber, market crash, Markets, Michael Zielinski, mid-tier, mining companies, monetization, Moving Averages, NGC, NXG, PAL, palladium, Peter Grandich, Peter Schiff, physical gold, platinum, platinum miners, precious metals, price, price manipulation, prices, producers, production, protection, recession, risk, run on banks, safety, Sean Rakhimov, silver, silver miners, SLW, small caps, sovereign, spot, spot price, stagflation, Technical Analysis, TIPS, U.S., U.S. Dollar, volatility, warrants, XAU

Gold is resting today, taking a quick pitstop allowing people to jump in on the next rally to $1033 and then if clear that $1050+. All of this talk of the Gold bubble. Bubble or not there is some serious money to be made here- even at these levels. Have some stories to tell your Grandchildren and Great Grandchildren of how you “caught” the Gold Bull.  Get in now or you will regret it!  Gold currently holding above the key support level of $985. Gold needs to clear the $1026 to $1033 level to be sustained in it’s upward rally. A note of caution if it fails at $1033, retracement back down to $900 is possible, I would put in a trailing stop to protect your current profits.  I recommend a 20-25% trailing stop so you don’t get caught in a whipsaw market action. Stay tuned as I am still long DGP and will tell you when I am getting out. Good Investing! – jschulmansr 

ps- Follow Me on Twitter and be notified whenever I make a new post!

 Here is where I buy my Bullion, get one free gram of Gold just for opening an account! Catch the New Bull! – Buy Gold Online – Get 1 gram free just for opening account– just click here and then again on the Gold Bar!, no minimums – Buy Safely, quickly, and at low prices, guaranteed! – Bullion Vault.com

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Protecting Yourself from a Gold ETF Bubble- Seeking alpha

BY: Tom Lydon of ETFT Trends

 

Are gold ETFs entering a bubble? More and more people seem to think so.

Last week, we noted a story that contained 12 reasons to short gold. Barron’s raises the question, too, now that gold is priced above $1,000 an ounce. The price is equivalent to more than 25 barrels of oil, a ratio that has rarely been exceeded in the last 35 years, says Michael Santoli for Barron’s.

There are two sides to the argument:

Owning gold seems logical now, given that the turmoil has gone completely global. Gold has also been rising, even as the U.S. dollar is gaining strength, too.

On the other hand, SPDR Gold Shares (GLD) is now routinely turning over $2 billion worth of trading each day, which might give investors pause. Is it becoming a herd mentality?

Meanwhile, Brett Arends for The Wall Street Journal gives the ins and outs of gold investing, including that gold is volatile and no one knows its true worth. For that reason, the mania is to be taken with a pinch of salt, he says.

While gold can be a volatile metal, right now, the trend is there. You can’t fight it. But if you’re in gold, have an exit strategy at the ready (we get out either 8% off the recent high or when it falls below the 200-day moving average). This will help protect investors from further losses, and may even preserve some gains that might have been made.

 

 

 

 

 

 

 

 

 

 

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My Note: The reason I put my stops at a greater percentage than 8% is from my days as a futures trader. Traders on the floor love tight stops of 5%, 10%, and even 15% and will often bid a commodity down 10%-15% to catch people’s stops and then let the market rise and pocket the money. This happens especially on days of lower volumes of trades. Watch carefully and his idea about exit after a close below the 200 day moving average is sound, remember though that it is a daily close (end of day) below the moving average not intraday trading. For those who already know this remember I have readers who are newbies and don’t know all the ins and outs, this is for them as I care about all my readers! – jschulmansr

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Next Here is the Article mentioned above…

Gold: Where to Invest and What to Avoid – Wall Street Journal

Source: Brent Arends of WSJ.com

Great news. The next bubble has already begun!

We’re still in intensive care from the stock market, housing and credit bubbles, but a gold bubble is now underway.

The precious metal crossed $1,000 per ounce on Friday, as investors around the world rushed to “shelter” their money from financial meltdown and spendthrift governments. And many people think it may rise to $2,000 or even $3,000.

Ordinary investors are jumping aboard. They’re buying gold coins or the gold exchange-traded fund, GLD.

I’m not against investing in gold-mining stocks. I recommended them here a few months ago — just before they began skyrocketing. It could certainly make sense to put 5% or 10% of a portfolio in the right precious metals fund. I have one suggestion below.

But look out before buying actual coins, bullion, or the ETF. This is risky.

First: Gold is incredibly volatile. It can halve, or double, in short order. This is not like a normal mutual fund.

Second: No one really knows what gold is worth, because it generates no cash flow. Any numbers are pure guesswork.

And third: Investing directly in gold violates the old adage that you should never get into bed with anyone crazy. Gold fanatics are far-out nuts. No kidding. If you met these people you’d run a mile.

Even some intelligent, and otherwise sensible, people aren’t immune from the madness. They will pound the table and insist gold is the only “real” money because it’s been coveted since ancient Egypt, if not before.

Please. Ancient superstition is no argument. People around the world used to think only a monarchy could be a “real government”. Sorry, I’m not buying the Divine Right of Gold any more than I buy the Divine Right of Kings.

Ancients coveted gold for three reasons. It was pretty. It’s really soft, so it was easy to manipulate with primitive tools. And they didn’t have many other material things worth desiring, like split-level oceanfront homes or flat screen TVs or first-class tickets to Hawaii. The ancients were short on opportunities for retail therapy.

The world has changed since, so take gold mania with a certain pinch of salt.

[How to Invest in Gold] Associated Press

Gold ingots from Switzerland, America and Germany are shown on display at The Coin Broker store, in Palo Alto, Calif.

Nonetheless gold has some value. So do other precious metals. (I think the long-term case for platinum is stronger – but that’s another column.)

Every government on the planet is printing money in the trillions to stave off a prolonged depression, and they’re going to continue to do so until it works. Precious metals cannot be manufactured in the same way. So you can expect them to rise in price.

Shares in the big gold miners, like Barrick and Newmont, have been booming for a few months.

But the smaller ones are still looking very cheap – especially compared to the gold price. (See chart.)

These stocks got absolutely crushed last year, along with gold prices and small company stocks.

Although they have started rallying too, they have much further still to go. Ordinary retail investors haven’t started buying them – yet.

Don’t go it alone. Investing in gold minnows is tricky.

One mutual fund worth a look: US Global Investors’ World Precious Minerals Fund. It’s one of the few to focus mainly on smaller gold stocks.

Manager Frank Holmes, a 20-year industry veteran, agrees the juniors are comparatively cheap. And he sees takeovers starting as well. “Eventually the seniors will have to gobble (the juniors) up,” he says. “They can’t find enough gold to replenish their production.”

Write to Brett Arends at brett.arends@wsj.com

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My Note: What Have I been telling you about the juniors? Remember as a general rule I buy those junior miners which currently are producing or are about to start production in the very near term. These companies I believe are the ones who will be the most attractive takeover candidates. My disclosure: I am Long GLD, UNPWX, along with many of the juniors too-jschulmansr

Catch the New Bull! – Buy Gold Online – Get 1 gram free just for opening account– just click here and then again on the Gold Bar!, no minimums – Buy Safely, quickly, and at low prices, guaranteed! – Bullion Vault.com

=========================================

Nothing in today’s post should be considered as an offer to buy or sell any securities or other investments; it is presented for informational purposes only. As a good investor, consult your Investment Advisor/s, Do Your Due Diligence, Read All Prospectus/s and related information carefully before you make any investing decisions and/or investments. –  jschulmansr

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Can You Sense It? The Calm Before The Storm

03 Tuesday Feb 2009

Posted by jschulmansr in 10 year Treasuries, 20 yr Treasuries, Bailout News, banking crisis, banks, bear market, capitalism, China, Comex, Credit Default, Currencies, Currency and Currencies, deflation, depression, dollar denominated, dollar denominated investments, economic, Economic Recovery, economic trends, economy, Fed Fund Rate, Federal Deficit, federal reserve, Finance, financial, Forex, Fundamental Analysis, futures, futures markets, gold, Gold Bullion, Gold Investments, gold miners, hard assets, How To Invest, How To Make Money, hyper-inflation, India, inflation, Investing, investments, Junior Gold Miners, Latest News, Make Money Investing, market crash, Markets, mining companies, mining stocks, oil, palladium, physical gold, platinum, platinum miners, precious metals, price, price manipulation, prices, producers, production, protection, recession, run on banks, Saudi Arabia, Short Bonds, silver, silver miners, small caps, spot, spot price, stagflation, Stimulus, Stocks, TARP, The Fed, Today, U.S. Dollar, Uncategorized

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agricultural commodities, alternate energy, Austrian school, Bailout News, banking crisis, banks, bear market, Bollinger Bands, bull market, capitalism, central banks, China, Comex, commodities, communism, Copper, Currencies, currency, deflation, Dennis Gartman, depression, diamonds, dollar denominated, dollar denominated investments, economic, economic trends, economy, Federal Deficit, financial, Forex, futures, futures markets, gold, gold miners, hard assets, heating oil, India, inflation, investments, Keith Fitz-Gerald, Marc Faber, Mark Hulbert, market crash, Markets, mining companies, Moving Averages, natural gas, oil, palladium, Peter Brimelow, Peter Schiff, physical gold, platinum, platinum miners, precious metals, price, price manipulation, prices, producers, production, protection, rare earth metals, recession, risk, run on banks, safety, Saudi Arabia, Sean Rakhimov, silver, silver miners, socialism, sovereign, spot, spot price, stagflation, Technical Analysis, timber, U.S. Dollar, volatility, warrants, Water

Can you sense it? There seems to be an eerie calm in all of the markets. Could this be the calm before the coming financial storm round 2? Since Gold is considered a safe haven investment in times of financial uncertainty, it would seem to tell us something is about to break wide open. As I enter this post Gold is up $5 oz to $912.50. We saw some retracement yesterday but support levels at $900 oz held. It appears that prices are taking a breather. This comes after an approximate $95 dollar an oz rise in just the past 14 days! As I mentioned in my post from a few days ago It’s Official Gold is in a new Bull Market. 

Quick sample of some recent headlines:

  • The Associated Press writes, “Gold Prices Soar as Investors Flee Wall Street.”

  • The Bullion Vault claims, “Gold Prices Poised to Move Higher.”

  • Forbes observes, “Gold Prices Resume Long-Term Uptrend

  • So What’s next? Read on…-Good Investing! -jschulmansr 

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    Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

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    Gold Prices Could Hit $1500, fears Merrill Lynch CIO- Business 24/7

    By: Shashank Shekhar of Business 24/7

     

    Gold prices may hit $1,500 (Dh5,509) an ounce in the next 12 to 15 months, Gary Dugan, the Chief Investment Officer (CIO) of Merrill Lynch, said yesterday.

    Dugan termed his apprehensions of gold striking such a high as a “fear” that may come true. He reasoned that such a price would mean the other commodities and streams of investments have been shunned by investors.

    With confidence in currencies shaken to the core, the yellow metal is increasingly assuming the role of “the most trusted currency”, Dugan said. “We have never seen such a rush to buy gold. It’s bringing in security and it’s still affordable.”

    Merrill Lynch commodity price forecast authored by Dugan showed that gold prices can rise from the currently prevailing $913/oz to $1,100/oz in the first quarter of 2009 and to $1,150/oz in the second quarter. “While demand for gold has been rising production has been declining. South Africa, which accounts for the major share of global gold production, is facing political issues and has energy problems,” Dugan said.

    With reports of declining returns from other investment options, “cash” – keeping money safe in banks and investing in government bonds – is the option in front of investors, Dugan said.

    “Fear” and eventual decline of the greenback are the two factors that will drive gold prices, he said. While commodity markets could also bounce back in the first half of the year, a rebound is likely to be short-lived in the absence of strong US consumer demand.

    Precious metals, led by gold, could enjoy a more sustained rally with gold benefiting from a weakening of the dollar in the second half of the year, Dugan said.

    Dugan said the greenback, which has been strengthening for the past few months, will decline in value by the middle of this year. “That’s when people will begin to realise that President Obama’s policies are not having the desired impact,” he said.

    Investors could also look to private equity, which produced strong returns during the downturns in 1991 and 2001, on an opportunistic basis. Some hedge fund strategies may be worth following but hedge funds should be treated with caution, Dugan said.

    Returns from private equity should remain in single digits in 2009 and a return of beyond 10 per cent should be treated as “fair value”, he said. “Investors should remain cautious. They need to be prepared to take profits. We think any such rally would run out of steam by the second half of the year.”

    Low risk assets could offer private investors the best prospects of attractive returns in 2009 as the world’s leading industrialised nations face recession, Dugan said. With governments around the world striving to tackle the economic crisis, private investors could find value in a cautious approach towards asset allocation. Options include high-grade corporate bonds and high-quality, high-yielding equities in defensive industries.

    “Investors will look to long-term US government bonds as an important barometer of the progress of global recovery,” said Dugan. “Sharply rising bond yields will show that the governments have overspent.”

    While earnings downgrades are likely to dominate the first quarter of 2009, a rally in global equity markets could be on the cards for the first half of the year with consumer and cyclical stocks among the potential beneficiaries, Dugan said.

    Broad equities indices could also offer trading opportunities to private investors. “Equities could outperform as an asset class in 2009 unless there is a serious deflation risk. Our view is that deflation will be avoided,” he added.

    Selective investment in high-grade corporate bonds could also provide attractive returns, Dugan said.

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    Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

    ==================================

    Is a New Cyclical Bull Market on It’s Way? – Seeking Alpha

    By: Simit Patel of Informed Trades.com

     Puru Saxena of Money Matters recently wrote an article entitled ‘Birth of a New Cyclical Bull?‘ in which he offers arguments for why we may see 2009 be a bullish year for equities. His basic points:

     Inflationary actions by the Fed and a declining TED Spread have proven effective in fighting falling asset prices and reducing risk

    • Treasury bonds need to have higher yields or money will go into equities
    • Equities have “overshot” to the downside, thus resulting in excessively low valuations

    I agree with Saxena’s basic premise that the Fed’s actions will be successful in creating inflation in the aggregate; it is only a matter of which asset class will reap the benefits of that inflation, and who will pay for it. The chart below compares various asset classes against one another for the month of January.

    click to enlarge

    A key question we may wish to begin asking and examining is just how much inflation the Fed has really created for us, something that will become more apparent as lending resumes and money that is “on the sidelines” returns to the game. I’m of the viewpoint that the global economy is currently improperly structured, and needs a complete restructuring, one that will likely require abandonment of the US dollar as world reserve currency, a corresponding decline in US consumption, and a significant restructuring of the FIRE (finance, insurance, real estate) economy in the United States.

    From that perspective, an equities rally will be unsustainable, unless there is currency debasement to the extent that all markets rise nominally. If that is the case, though, the inflation will result in significant dollar devaluation.

    Trading Implications: The fall in Treasuries was the story for January, and will be of importance so long as it continues. If money comes out of Treasuries and into equities and commodities, it increases the likelihood of seeing consumer price inflation. As I’ve stated before, though, I expect commodities to outperform equities once money comes out of Treasuries and dollar devaluation resumes. And as all currencies around the world are having trouble, gold will rise as fiat currencies continue to struggle.

    Disclosure: Long gold.

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     Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

    ===============================

    U.S. Debt Default, Dollar Collapse Altogether Likely – Seeking Alpha

    By: James West of Midas Letter

    The prospect of the United States defaulting on its debt is not just likely. It’s inevitable, and imminent.

     

    The regulatory black holes into which sanity and reason disappear on a daily basis are soon to collapse under the mass of their sheer size. The circle jerk going on among G7 governments has to end – the steady advance of gold, even in the face of a managed price, exposes the real value of the U.S. dollar, as opposed to its apparent value expressed in the dollar index.

    Is 2009 the year that the United States formally defaults? And with that, will the dollar collapse be rolled back ten for one or more?

    There are a lot of reasons to support that theory. To Wall Street economists, such an event is heresy and therefore unthinkable. Yet Wall Street is the very La-la-land that bred the idea of a perpetually indebted nation in the first place.

    Number one among the indicators favoring this scenario is what is happening in the U.S. Treasuries auction market.

    Last Thursday, an $30 billion auction in five-year notes failed to stir the interest of traditional primary dealers. The auction itself was saved by an anonymous “indirect” bid.

    Buyers are discouraged by the prospect of what is expected to amount to $2 trillion total issuance for the full year of 2009. The further out the maturities on notes, the more bearish the sentiment towards them. The only way to entice buyers is through the increase in yields.

    But with yields at 1.82 per cent, five-year notes were met with a demand for 1.98 times the amount offered – the lowest bid-to-cover ratio since September. A sell-off in treasuries began in earnest upon the conclusion of that auction.

    The U.S. Federal Reserve suggested last week that it was going to step up its treasury-buying activity, and the mainstream media interprets this as a form of market support. What it actually is evidence of growing anxiety and desperation on the part of the Fed as the realization dawns that demand for treasuries is progressively evaporating.

    The increased demand for gold as an investment witnessed throughout the last two weeks that has pushed gold to a 4 month high is further evidence that investors across the board are gravitating more towards gold and away from U.S. debt.

    So what is the catalyzing event that will precipitate outright capitulation?

    I think the spin-controlled version of events will make the collapse of the derivatives market the red herring that facilitates the aw-shucks-we-have-no-choice shoe-gazing moment possible, and that’s exactly the parachute the government needs to retain a veneer of credibility – at least in its own delusional mirror.

    The announcement that the CFTC was about to become the target of a regulatory overhaul supports this theory. Consistent with his unfortunate proclivity to hiring foxes to guard chickens, Barack Obama’s choice for CFTC commissioner Gary Gensler was the undersecretary of the U.S. Treasury when the Commodity Futures Modernization Act of 2000 was passed, and is one of its architects. This was the piece of legislation that was put forth to appease the opposition to “dark market” trading in certain OTC derivatives first noisily derided by CFTC commissioner Brooksley Born in 1998.

    Ignoring Born’s admonishments with this act, it exempted credit default swaps (CDO’s) from regulation, resulting in the somewhere between 58 and 300 trillion dollars in value presently under threat if the positions were to be unwound. Because of their unregulated status, counterparties in the largest transactions can simply “roll forward” contracts, instead of the losing party in the transaction covering their loss with a transfer of money. It is this massive “nominal” value that could be the Achilles heel of what’s left of the U.S. banking system, and by extension, the U.S. dollar.

    I don’t arrive at this conclusion because I like making catastrophic outlandish predictions. Its merely the result of following certain logical paths to their most likely outcome based on what has happened in the past.

    In discussions on this topic with editors of top tier financial publications, such speculation is dismissed out of hand, and the argument to refute the likelihood of such outcomes is never brought forward.

    Gold exchange traded funds (ETFs) are now the largest holders of physical gold, and as a proxy for investors who don’t want to be encumbered with taking delivery of the physical, provide a simple way to participate in the gold market.

    United States citizens should bear in mind, however, that should the banking system be brought down completely by the collapse of the futures market, proxies for gold such as ETF’s and bullion funds could theoretically be targeted by a government desperate for possession of value. The risk from security in holding physical bullion is matched by the risk of confiscation by government in these volatile times. Don’t forget, the government confiscated and outlawed private ownership of gold in 1933 in support of an ill-conceived gold standard, which to some extent, was that era’s spin to halt the flight of gold (and real value) from U.S. soil.

    Don’t think for a minute such drastic events are outside the realm of possibility. If somebody had told you in 1998 that a bunch of angry crazy pseudo-Muslims were going to fly jetliners into the World Trade Center, what would you have said?

    ======================================

    My note: Very Scarey, 10-1 Trade In on Dollars? Gold Confiscated? This is one of the reasons why I use Bullion Vault, check them out for the details…jschulmansr

    Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

    Good Investing! – Jschulmansr

    =======================================


    Nothing in today’s post should be considered as an offer to buy or sell or as a recommendation for  any securities or other investments, it is presented for informational purposes only. As a good investor, consult your Investment Advisor, Do Your Due Diligence, Read All Prospectus/s and related information carefully before you make any investments. –  jschulmansr

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    Gold Taking a Breather but Fundamentals are Stronger!

    02 Monday Feb 2009

    Posted by jschulmansr in 10 year Treasuries, 20 yr Treasuries, banking crisis, banks, bear market, bull market, capitalism, central banks, China, commodities, Copper, Currencies, currency, Currency and Currencies, dollar denominated, dollar denominated investments, economic, Economic Recovery, economic trends, economy, Fed Fund Rate, Federal Deficit, federal reserve, Finance, financial, Forex, Fundamental Analysis, futures, futures markets, gold, Gold Bullion, Gold Investments, gold miners, hard assets, How To Invest, How To Make Money, India, inflation, Investing, investments, Junior Gold Miners, Latest News, Long Bonds, Make Money Investing, market crash, Markets, mining companies, mining stocks, Moving Averages, palladium, physical gold, platinum, platinum miners, precious, precious metals, price, price manipulation, prices, producers, production, SEO, Short Bonds, silver, silver miners, spot, spot price, stagflation, Stimilus, Stimulus, Stocks, TARP, The Fed, U.S. Dollar, Uncategorized

    ≈ Comments Off on Gold Taking a Breather but Fundamentals are Stronger!

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    agricultural commodities, alternate energy, Austrian school, Bailout News, banking crisis, banks, bear market, Bollinger Bands, bull market, capitalism, central banks, China, Comex, commodities, communism, Copper, Currencies, currency, deflation, Dennis Gartman, depression, diamonds, dollar denominated, dollar denominated investments, economic, economic trends, economy, Federal Deficit, financial, Forex, futures, futures markets, gold, gold miners, hard assets, heating oil, India, inflation, investments, Keith Fitz-Gerald, Marc Faber, Mark Hulbert, market crash, Markets, mining companies, Moving Averages, natural gas, oil, palladium, Peter Brimelow, Peter Schiff, physical gold, platinum, platinum miners, precious metals, price, price manipulation, prices, producers, production, protection, rare earth metals, recession, risk, run on banks, safety, Saudi Arabia, Sean Rakhimov, silver, silver miners, socialism, sovereign, spot, spot price, stagflation, Technical Analysis, timber, U.S. Dollar, volatility, warrants, Water

    Currently Gold is down $14-$15 dollars per oz. around the $914 level. As I wrote in my last post if we hold this level then $950 will be our next target. If it fails here then we may have a test back to $885 – $890. Either way I’m taking the opportunity to buy on dips since long term inflation is certainly due to happen and Gold is where you want to be when that happens.  Personally, I think $900 to $925 is the new base and we have avery real possibility of $1000+ Gold price before the summer truly begins.- Good Investing – Jschulmansr

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    Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

    ==================================

    Update on the Gold Trade – Seeking Alpha

    By: Trader Mark of My Mutual Fund

    Last Friday we said gold might finally have it’s real breakout here [Jan 23: Could be the Real Breakout in Gold] I wrote:

    Things to like:
    1) a series of higher lows
    2) the trendline of lower highs has been penetrated

    Things to see for confirmation:
    1) any pullback is bought
    2) price prints over October 2008’s highs, signaling the end of “lower highs”

    This was what the chart looked like at the time:

    Now?

    Without benefit of the orange line – you can see condition #1 has been fulfilled – we “backfilled”, tested the area we broke out of and people were eager to buy. On that, an aggressive trader would be buying. A reader mentioned this outcome last week.

    For someone more conservative in orientation, you want to see #2 “a price point over October 2008’s highs” – then we end our half year of lower highs. We are withing spitting distance here with GLD at $91.40 and the October intraday high at $92.

    It’s hard to get behind gold fully because there is no “earnings” behind it; it’s all about sentiment. But the theory is that as all the world’s troubled countries race to devalue their currencies (print, print,print) to “save the system,” a hard asset should retain its value. Silver is likewise breakout out, although silver has a lot of industrial uses as well.

    I hate to chase a move, but from a technical set up, a lot of institutional money could be set to finally jump in here….

    Now the question of what instrument to use – keep it simple or go with a miner? etc.

    Disclosure: No position

    =================================

    My Note- Great call by Trader Makr but I have to ask, why no position Trader Mark? – jschulmansr

    =================================

    Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

    =================================

    Fed Monetizes Debt Leading Investors to Embrac Gold – Seeking Alpha

    By: Boris Sobolev of Resource StockGuide.com

    In January gold rose significantly against all major world currencies. In most currencies except in the US dollar and the Japanese yen, gold actually made an all-time-high.

    January Performance

    GOLD / USD 5.3%

    GOLD / EUR 16.7%

    GOLD / AUD 16.5%

    GOLD / JPY 4.4%

    GOLD / GBP 5.8%

    GOLD / CHF 16.3%

    10-Yr Yield 13.0%

    click to enlarge

    At the same time, most capital markets have been falling.

    January performance

    DOW -11.5%

    S&P -11.4%

    NASDAQ -9.0%

    FTSE -6.4%

    DAX -9.8%

    Nikkei -9.8%

    Shanghai -9.3%

    The governments around the world are trying to take initiative while private capital is sitting on the sidelines, preferring the safety of government bonds and precious metals.

    Investors typically do not trust the governments to implement any effective economic solutions. Moreover, this lack of faith in central planning continues to grow since the US government has no other plan of action than to save the old, compromised and untrustworthy financial system.

    What the Federal Reserve together with the Department of Treasury has shown is that they will inject a vast amount of newly created money into a hugely ineffective financial system.

    While in the fall of last year, in fear of devastating deflation, analysts were competing in downward projections for the price of gold, now the competition is to estimate the amount of losses incurred by the financial institutions around the world. The maximum assessment is now at $4 trillion, with Nouriel Roubini coming in close second at $3.6 trillion.

    But the main problem is not so much in the amount of credit losses or the amount needed for recapitalization efforts but in that the new government is committed to continue to transfer huge capital into the hands of the same group of people who were largely responsible for the world financial crash in the first place. Wall Street, though transformed, will remain in control.

    The lack of trust in the ability of insolvent financial institutions to run the modern financial system is moving investors into gold.

    An even more important gold catalyst was the Federal Reserve. In comparing the two latest Fed statements, two things stand out. Here is the evolution in wording:

    December Statement: “In light of the declines in the prices of energy and other commodities and the weaker prospects for economic activity, the Committee expects inflation to moderate further in coming quarters.”

    January Statement: “In light of the declines in the prices of energy and other commodities in recent months and the prospects for considerable economic slack, the Committee expects that inflation pressures will remain subdued in coming quarters. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.”

    December Statement: “The Committee is also evaluating the potential benefits of purchasing longer-term Treasury securities.”

    January Statement: “The Committee also is prepared to purchase longer-term Treasury securities if evolving circumstances indicate that such transactions would be particularly effective in improving conditions in private credit markets.”

    First, the FOMC sees a threat of deflation and second it is prepared to counter this threat by purchasing longer-term treasuries.

    Purchases of long term bonds is the most inflationary move that a central bank can undertake because it represents direct monetization of the government debt and hence an unconcealed debasement of national currency. (This is happening at the same time as the new Secretary of Treasury is chastising China – the main US creditor – for currency manipulation.)

    Why did the Fed make such a determined statement, with one member even voting to begin long term treasury purchases immediately? First and foremost, the real estate market is not showing any signs of life. House prices are falling, time required to sell new homes is rising and most importantly, after a steep fall in December, average mortgage rates began to rise again, reaching 5.34% as of last Friday.

    Since mortgage rates are closely tied to the 10-year treasury yield, the Fed stands ready to buy government debt and help make housing more affordable via low mortgage rates. The hope is that such action would help put an end to a decline in asset prices and stop the deflationary spiral.

    In fact, the latest Fed balance sheet showed that long term treasury purchases have already started, with around $1 billion in notes (5-10-year maturity) purchased for the week ended January 21st. This is a modest amount, but it is a statement that the Fed is ready to do more than just talk. Traders have indeed sensed this development and Treasury Inflation-Protected Securities (TIPS) (TIP) are also beginning to reflect greater inflation expectations.

    Gold investors are also sniffing out the coming price reflation as they piled into the SPDR Gold Shares (GLD) at an increasing rate.

    For the month of January, GLD gold holdings rose 8.2% or close to a record setting 63 tonnes. At this rate, GLD will soon surpass Switzerland in its gold holdings, thus becoming the world’s sixth largest gold owner after the US, Germany, the IMF, France and Italy.

    If the Fed continues to purchase long term treasuries, it is clear that there is only one way for gold and gold stocks and it is up.

    ================================

    Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

    ================================

    Gold as Part of a Portfolio – Seeking Alpha

    By: San Olesky of Olesky Capital Management

    Many investors have been thinking about gold recently. Some have considered it because it has been a relatively strong performer with the iShares COMEX Gold Trust (IAU) closing up 5.4% in 2008. It’s up 2% year-to-date as of Wednesday’s close. The iShares S&P 500 Index ETF (IVV) was down 36.94% in 2008 and is down 6.17% year-to-date as of Wednesday’s close. Other investors or traders have bought or considered gold as a classic safe haven.

    My inclination is to refute the efficacy of buying or holding gold for security either in the form of an ETF or, more so, in the case of gold bullion bars or gold coins. However, as the financial crisis became more severe last year, a couple of clients approached me about adding gold to their portfolios. Rather than diplomatically rejecting the proposal, I told them that I would investigate the historic effects of holding gold in a portfolio. Long story short, I found that adding a small, reasonable allocation to gold reduced portfolio volatility substantially and increased return slightly.

    A simple diversified portfolio consisting of 1/3 S&P 500, 1/3 Real Estate Investment Trusts (REITs), and 1/3 10 year U.S. Treasuries would have produced a compound annual growth rate (CAGR) of 8.47% with 11.15% volatility (standard deviation – SD) from 1993 to 2008. For comparison, the S&P 500 produced a 6.67% CAGR with a 20.16% SD. Although few investors would implement this 1/3 – 1/3 – 1/3 allocation, diversification is proving its strengths here. All of these statistics incorporate rebalancing annually.

    Let’s take the same 1/3 – 1/3 – 1/3 portfolio and alter it to include a relatively small allocation to gold. That allocation will be 30% S&P 500, 30% REITs, 30% Treasuries, and 10% gold. Over the same timeframe the portfolio with gold produced an 8.49% CAGR with a 9.86% SD. The portfolio with gold produced a slightly better CAGR with volatility that was 11.6% lower than the 1/3 – 1/3 – 1/3 portfolio. The diversified portfolio with gold produced a CAGR that was 27.3% higher than the S&P 500 and 51.1% less volatile than the S&P 500. The S&P 500 had 4 losing years with the worst being a loss of 37% last year. The 1/3 – 1/3 – 1/3 portfolio had 3 losing years with the worst being a loss of 18.15% last year. The portfolio with gold had only 2 losing years with the worst being 15.74% last year.

    In constructing sound and productive portfolios we would like to include assets that have high returns, low volatility, and low correlation to the other assets in the portfolio. Looking at gold’s average annual returns, relative volatility, and relevant correlations, one should expect that gold would be a constructive addition to many portfolio allocations. In fact, gold even has a relatively low correlation with commodities in general (S&P Goldman Sachs Commodity Index). However, we should learn from the past but not expect it to repeat itself exactly. There is much to be learned from historic returns, volatilities, and correlations of asset classes. With all due respect to history and math, we must use reason when constructing portfolios. I view gold as a very narrow and idiosyncratic asset. So, I do not feel that it is wise to strategically allocate as much as 10% to the asset although the historic, mathematically optimal amount would be higher in the context of some portfolios.

    What did I do? Based on my tests and observations, I bought a little gold last year for some of my clients. I have incorporated a small allocation to gold into their continuing strategic allocations.

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    My Note: This is great news even the Non Gold Bugs are become cautiously bullish!-jschulmansr

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    Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

    ====================================

    Finally and extremely interesting article you want to read! Be sure to click on the chart links too…- jschulmansr

    Economy Watch: What if Stocks Were Priced in Gold?- Seeking Alpha

    By: Paco Ahlgren of Ahlgren Multiverse

    “Everything has its limit — iron ore cannot be educated into gold.”

    — Mark Twain

    Several charts have been floating around the Internet for some time, showing the historical Dow Jones Industrial Average, priced in terms of gold. The simplest explanation entails thinking of the Dow divided by one ounce of gold; if the Dow is at 5000, and gold is at 500, then Dow-to-gold is 10. But it’s important to remember as you’re considering this ratio that the Dow is calculated in terms of dollars. So essentially, when we determine the Dow-to-gold ratio, it’s not just a simple ratio of gold to shares in the Dow, but rather it is a three-part ratio — Dow, expressed in dollars, to an ounce of gold.

    Wouldn’t it just be easier to express gold in terms of dollars, or the Dow in terms of dollars? Well, those are certainly useful ratios — and we use them all the time — but what we’re really going after when we look at a historical Dow-to-gold chart is how well the Dow has performed, relative to the dollar, and relative to gold. What have inflationary pressures done to the Dow, in terms of gold and the dollar, over the past century? How have the three components moved in the various historical boom-bust scenarios? The results are interesting.

    Let’s shift gears for a moment. Just off the top of your head, what would you expect stocks to do in periods of inflation? The dollar loses value rapidly, right? And that means prices of goods and services move higher, presumably with wages. So wouldn’t it stand to reason, intuitively, if corporations were making more money as prices increased, profits would increase too? And if profits increase, shouldn’t share prices go higher in response?

    It turns out that inflationary price increases are bad for the stock market, and no period in history establishes this more concretely than the late 1970s and the early 1980s. Interest rates and prices soared, along with the price of gold, but stocks were flat. I want you to think about what I’m saying here: prices in general were going up, and yet the stock market was not. What this means is while stocks, in nominal terms, looked to be relatively stagnant, in real terms they were getting crushed. This is why the Dow-to-gold ratio is so significant as an indicator of relative value.

    There is an elegant, simple truism that comprises every single transaction between buyers and sellers, and yet most people don’t even think about it: whenever you buy something, you are selling something else. When you buy corn, you are selling dollars. When you buy a Ford, you are selling dollars. If you are in Mexico and you buy a chicken, you are selling pesos. Of course, if you came from the U.S., you first sold dollars, bought pesos, and then sold pesos to buy the chicken. I know most of you already understand this concept, but I’m trying to emphasize that even when currency is used, every transaction is merely a trade; that is to say, the transaction is nothing more than negotiation that results in the exchange of two things — whether goods, services, or currency.

    With that in mind, consider this: when prices rise because of inflation (printing of money), it isn’t so much that goods and services are getting more valuable — rather it’s much more accurate to say the currency is simply getting less valuable relative to everything else. If the dollar collapses, for instance, and the cost of a loaf of bread goes from $1 to $20 at the same time a share of Microsoft (MSFT) goes from $20 to $30, then Microsoft is severely under-performing — in inflation-adjusted dollars. A loaf of bread will cost you 20 times what it used to — not because it is more valuable, but because the dollar is less valuable. Meanwhile Microsoft is worth only 50% more. Relative to the dollar, shares of Microsoft are actually losing money — in a big way.

    If you look at a chart of inflation from 1978 to 1982, you’ll notice a huge spike. If you look at a chart of the Dow Jones Industrial average during the same period, you’ll see that stocks traded sideways in a fairly well-defined range over the same period. But that doesn’t tell the whole story; if you adjust for the meteoric rise in prices during that five-year period, the stock market actually performed much worse than the nominal dollar fluctuations presented in the historical chart. In other words, the price of just about everything was going up dramatically, but stocks were not. So if you adjust prices back to “normal” levels, and adjust stocks accordingly, the picture for equities would have been horrible.

    Now for the pièce de résistance…

    Here is a series of charts of historical nominal gold prices (not adjusted for inflation), in several different currencies — the first of which is U.S. dollars. Take a look at the spike in the price of gold from 1977 to 1981. Now, if we go back to our original chart above, showing the Dow Jones Industrial Average, in direct relation to an ounce of gold (Dow-to-gold), you can see that the ratio went roughly 1:1 in 1980 — at the peak of the inflationary price surges. To clarify, the Dow was at about 750, as was gold.

    But didn’t we say that, relative to rising prices, the Dow actually underperformed dramatically? So if you bought gold in the mid-1970s, not only was your investment skyrocketing, but the stock market — which was flat in nominal dollars — was actually doing very poorly relative to rising prices. Bear in mind that both the Dow and gold were priced in terms of nominal dollars at the time; they essentially “cancel out” — that is to say, relative to rising prices, gold also failed to perform as well as the nominal dollar-price. Still, it did offer an excellent hedge against rising prices, and even outperformed during the period.

    What does all this mean? Well, for starters the average Dow-to-gold ratio over the last century has been about 9.5, and we are currently at about 8.5. So you’re probably thinking we’re oversold and due for a correction. In other words, the Dow-to-gold ratio is probably going higher, right? Well that was my first conclusion too, but actually on closer examination it turns out that’s probably not right at all.

    For much of the last century the dollar was tied to gold, and while the relationship was never perfect — and the U.S. government betrayed the union many times, in many different ways — there was at least some relationship, which helped pull the ratio down. Eventually, excessive inflationary printing caught up with the government in the 1960s, and it became clear it wouldn’t be able to honor redemptions against the dollar at the price it had fixed. Nixon essentially defaulted on the U.S. promise to redeem dollars for gold by taking the U.S. off the standard in the 1970s — and this, more than anything else, allowed inflationary pressure to drive general prices into the stratosphere. This was the moment the Dow-to-gold ratio approached 1:1. To fight rising prices, Paul Volcker, the Fed Chairman at the time, pushed the Fed’s target interest rate past 20% and barely saved the U.S. economy from collapse.

    For most of the next 20 years, gold fell and stock prices rose. Meanwhile, the U.S. government capitalized on the lie it had created and printed more and more money. Who really cared? Everyone was making money in the stock market, and prices remained relatively stable. In fact, every time prices failed to act “correctly,” the Fed simply changed the rate at which it would lend to banks. But the illusion of the monetary policy game couldn’t last forever; people used easy money printed by the government to buy assets they couldn’t afford throughout the economy — especially houses. Finally the pressure was just too much, and everything started unraveling in 2007. But the gold market seemed to understand the game couldn’t last, and around 2000 it started a slow, steady rise.

    Relative to everything, the number of dollars in the system in early 2009 is almost incomprehensible. Once de-leveraging reaches its nadir — and it’s coming soon — those dollars are going to hit the economy and drive prices much higher.

    What have we learned about stocks in such periods of rising prices? Not only do they fail to perform, but adjusted for inflationary price pressures, they actually under perform. General prices and unemployment will continue to rise. The consumer will continue to be unable to consume. Corporate earnings and dividends will continue to collapse as a result. Stocks are going lower — probably much lower.

    And what about the price of gold? It will almost certainly continue to increase — not only because people will flock to its long historical stability and consistency, but also because there are simply so many more dollars (and yen, and rubles, and euros) in the world. Remember, the U.S. isn’t the only country printing innumerable sheets of currency. And in that context, remember also that inflationary price increases have almost nothing to do with increased demand, but rather they are the result of currency devaluation and destruction — through printing.

    I just want to share two more charts with you. The first should give you a little perspective — it is a historical chart of gold, in both nominal and real dollars. Notice the real price of gold in 1980 (in 2007 dollars) was $2272 per ounce. If I’m correct about inflation and the fate of the dollar — and I’m confident I am — then we are nowhere near the historical high in gold. But I don’t think we’re merely going to re-test that high — I think we’re going to blow through it as the dollar loses value.

    In the 1930s, as corporate earnings and dividends disintegrated, the Dow lost nearly 90% of its value from peak to trough. The U.S. was a creditor nation with a huge manufacturing base. The dollar was tied closely to gold. Since its peak in October 2007, the Dow has lost less than 50% of its value. The U.S. is a debtor nation with a relatively small manufacturing base. I can’t say it enough: we borrow profusely, we manufacture very little, and we consume gluttonously. Nonetheless, the consumer has now lost almost all his purchasing power, and corporate earnings and dividends are going to suffer massively as a result.

    In 2007, the Dow peaked at about 14,150. To give you some perspective, an 85% drop in the Dow from peak to trough would put it at about 2100.

    I know it’s easy to imagine the Fed has magical powers. I’ve fantasized about such things myself at times of extreme weakness — that maybe the Fed will “somehow” figure out a way to fight and defeat the unprecedented evil specter of inflation it is foisting on its unsuspecting children. Sometimes I do believe that our Lord and Savior Barack Obama will wave his charmed “unicorn horn of change” and all will be well again. Likewise, at times I feel like I could let Uncle Ben Bernanke take me just about anywhere in his helicopter of prosperity. My faith in the reverend John Maynard Keynes runs deep, as I hope, and hope, and hope. I find myself gleefully clicking my heels together and repeating, “the dollar is almighty, and the Stars and Stripes will prevail.” And when I am in this wonderful place, I have confidence that someday soon, we’ll all be buying houses with no money down, and with no jobs. Our driveways and backyards will once again overflow with boats, motorcycles, and sports cars.

    Then I think about the 1930s. And suddenly I am wide-awake.

    Let me ask you a simple question, and I want you to actually think about it. Do you really think we can’t get to the 1930s again? Do you really think that we’re going to return to the exuberant excess of the past few decades? If so, let me disabuse you of the notion: the United States was in much better shape, economically, going into the Great Depression than it is now. Prosperity is not coming back to the U.S. as we know it. We are in a lot of trouble.

    Is a Dow-to-gold ratio of 1:1 so incomprehensible? Again, it has happened before — several times. But I’ll even take it a step further: what about a Dow-to-gold ratio of .5? Or less? I promise you, if the Fed fails to soak up all the dollars it’s putting in the system, that’s exactly where we’re going. And what, you may ask, does the Fed use to “soak up dollars?”

    I’ll be glad to tell you that too. When the Fed needs to take dollars out of the system, it sells Treasuries (which means it buys dollars). The problem is, the U.S. debt-load is astronomical. Who, exactly, is going to buy that debt from the Fed? And at what interest rate? Remember, if the Fed is desperately trying to take dollars out of the system, there can be only one reason: it is scared of rising prices caused by inflation. But if the Fed floods the market with Treasuries, it will achieve exactly the opposite effect it’s looking for — it will cause rates to rise, probably dramatically. Do you really think the Chinese and the Japanese are going to buy Treasuries at a 2% yield if the Fed is panicking and trying to buy dollars to stop an inflationary price explosion? If so, you’re delusional. Chinese and Japanese people are smart. They’re not going to fund an inflationary dollar at 2%. Ever.

    In the past it might have worked. Of course, in the past, the U.S. money supply was much smaller, and our ability to borrow was much stronger. But those days are gone.

    As if I haven’t terrified you enough, the last thing I’m going to leave you with is really scary. It is a link to an excellent article by Mark J. Lundeen, whose insight into this economic catastrophe has been stupefying since long before all of this even started. Embedded in the article is a chart that shows historical dollars-in-circulation, relative to U.S. gold.

    With that, I think I’ll let you do the rest of the math. Sleep well.

    Disclosures: Paco is long gold.

    Copyright 2009, Paco Ahlgren. All Rights Reserved.

    ==================================

    If you have done the math…

    Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

    =================================

    That’ it for now – Good Investing – Jschulmansr


    Nothing in today’s post should be considered as an offer to buy or sell any securities or other investments, it is presented for informational purposes only. As a good investor, consult your Investment Advisor, Do Your Due Diligence, Read All Prospectus/s and related information carefully before you make any investments. –  jschulmansr

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    You Are At Risk – Late Breaking News…

    29 Thursday Jan 2009

    Posted by jschulmansr in Uncategorized

    ≈ 5 Comments

    Late breaking news, you are definitely at risk! Read on for further details of how criminals are about to get you and me. A must read. Also, Gold today started off lower, tested support and exploded upward like a rocket to close at $906.50 oz- jschulmansr

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    Data Scams have kicked into highgear as markets tumble- USA Today

    Source: USA Today.com

    Facebook, founded by Mark Zuckerberg, above, has been used by cybercrooks to spread viruses
    Facebook, founded by Mark Zuckerberg, above, has been used by cybercrooks to spread viruses
    By Byron Acohido and Jon Swartz, USA TODAY
    Cybercriminals have launched a massive new wave of Internet-based schemes to steal personal data and carry out financial scams in an effort to take advantage of the fear and confusion created by tumbling financial markets, security specialists say.

    The schemes — often involving online promotions touting fake computer virus protection, get-rich scams and funny or lurid videos — already were rising last fall when financial markets took a dive. With consumers around the world panicking, the number of scams on the Web soared.

    The number of malicious programs circulating on the Internet tripled to more than 31,000 a day in mid-September, coinciding with the sudden collapse of the U.S. financial sector, according to Panda Security, an Internet security firm.

    It wasn’t a coincidence, says Ryan Sherstobitoff, chief corporate evangelist at Panda.

    “The criminal economy is closely interrelated with our own economy,” he says. “Criminal organizations closely watch market performance and adapt as needed to ensure maximum profit.”

    FIND MORE STORIES IN: Internet | London | Seattle | Social Security | Trojans | Wachovia Corp. | MySpace | Bank of America | Facebook | mid-September | Verizon | Internet-based | Twitter | Monster.com | MacBook Pro | SecureWorks | Heartland Payment Systems | Panda Security | Hackers | Authentium | Fortify Software

    Among those caught in the most recent barrage of scams was Justin Terrazas, 27, a beverage merchandiser from Seattle. He clicked on a Web link that infected his MacBook Pro laptop with a data-stealing program. Not realizing the laptop was compromised, Terrazas later typed his Bank of America debit card number and PIN to pay his Verizon cellphone bill online. The data-stealer swiftly siphoned his information.

    A few days later, someone used Terrazas’ debit card account to make a $501.41 online purchase from Modabrand.com, a designer clothing store. The merchandise was shipped to London, leaving Terrazas to unravel a big mess.

    “This is definitely something you don’t need in your life,” he says.

    The boom in cyberthreats that occurred during the last three months of 2008 could accelerate, especially if the economy continues to falter, security specialists say. Organized cybercrime groups have become increasingly efficient at assembling massive networks of infected computers, called botnets, and deploying them to amass large caches of stolen data, according to several surveys and dozens of interviews with security and privacy analysts. Meanwhile, scammers have honed the trickery used to turn stolen data into cash.

    “There is a well-funded, well-educated horde continually probing for cracks and finding their way in” to consumers’ financial information, says Roger Thornton, chief technology officer of security firm Fortify Software.

    “They are breaching … the highest levels of the global finance infrastructure and a majority of our home computers.”

    Last fall, virulent programs called Trojans began to circulate more widely in e-mail and instant-message spam, got embedded in tens of thousands popular Web pages and spread in a widening barrage of online ads. Click on the wrong thing, and you would download an invisible Trojan crafted to steal sensitive data and allow the attacker to control your computer.

    All types of con games — from e-mail phishing scams, which try to trick you into typing sensitive data at fake websites, to cyberhijacking, in which crooks use stolen user names and passwords to pilfer online accounts — increased, according to security firms, government regulators and law enforcement officials.

    Targeting data storehouses

    Hackers also are intensifying attacks on data storehouses.

    Last week, Heartland Payment Systems disclosed that intruders cracked into the system it uses to process 100 million payment card transactions a month.

    And Tuesday, Monster.com announced it would impose a mandatory password change for all North American and Western European users of its popular employment website. Thieves recently broke into Monster’s databases to steal user IDs, passwords and other data that could be useful in a variety of scams.

    “There are limitless opportunities in data of this quality,” says Robert Sandilands, anti-virus director at the security firm Authentium.

    To cybergangs, the implosion of the financial markets and widespread job cuts have translated into more opportunities.

    Not long after banking giant Wachovia failed, phishing e-mail began circulating asking current and former customers to type in personal information to a website to complete mandatory installation of a new Internet security certificate. The website was a counterfeit, and some users who fell for the scam had their computers infected with the Gozi Trojan, which funnels stolen data to a computer server equipped to instantly sell the data to other criminals, according to the security firm SecureWorks.

    Some thieves have stuck to the path of least resistance, snaring account user names, passwords and Social Security numbers. Cybercrime groups have gone further, sending tainted links in e-mail and instant messages, and spreading viruses via the direct messaging systems used on the social-networking websites Facebook, MySpace and Twitter.

    Facebook encourages users to report any suspicious messages, but there’s only so much it — and the other networking sites — can do to stop cybercriminals.

    “We’ll investigate and take appropriate action, which may include disabling the sender’s account and blocking certain links from being posted,” says Facebook spokesman Barry Schnitt.

    But cybergangs now routinely activate hundreds of accounts by the minute, dedicating them to criminal pursuits.

    Tainted links also are increasingly turning up in routine search queries on Google, Yahoo search and Windows Live search. The search companies also say they can do little to stem the rising tide of cybercrime. Google spokesman Jay Nancarrow says only that the search giant has “strict policies” against fraudulent practices, which it takes pains to enforce.

    The FBI and Secret Service have created partnerships with police agencies around the world to combat cybercrimes. U.S. agents have been able to infiltrate several organized crime groups to make dozens of arrests, says Shawn Henry, assistant director of the FBI Cyber Division. Even so, “The offense tends to outpace the defense,” Henry says. “The cyberthieves are extremely creative.”

    The threat from insiders

    Some cybercriminals have begun to spread malicious programs by corrupting online banner ads. Security firm Finjan reports that new tools being sold on criminal forums can be used to infect online ads that use Adobe’s popular Flash player.

    The wide availability of such tools — and the fact that thousands of tech-savvy workers are being laid off in today’s economy — is raising concerns that some of the jobless might see cybercrime as a way to survive.

    “Unemployed IT personnel potentially can find easy income by purchasing and using crimeware,” says Finjan CTO Yuval Ben-Itzhak. “We expect a rising number of people will try.”

    Some novice cybercrooks won’t need anything fancier than a Web browser to get rolling. M. Eric Johnson, director of the Center for Digital Strategies at the Tuck School of Business at Dartmouth College, recently tried typing simple search queries, such as “insurance record,” in Google and on file-sharing networks Gnutella and LimeWire.

    He collected 3,328 files with potentially sensitive medical information; about 5% held data that could be used to fraudulently buy drugs or bill treatments. Data thieves are using such simple steps, too, he says.

    Data-stealing gangs could begin reaching out to laid-off or disgruntled employees who know their employers’ tech systems, security experts warn. Database security firm Application Security’s recent audits of 179 organizations found 56% had suffered at least one data breach in the past 12 months. The survey does not reveal how any particular breach happened.

    “It’s a three-legged beast,” says Pat Clawson, CEO of Lumension Security. “There is an absolute crunch in IT spending, there are more profit-minded hackers, and employees with access to valuable data” are willing to sell access to criminals.

    About 75% of the 1,400 tech operations and information management professionals recently surveyed by Lumension and Ponemon Institute said cybercrime remains a major concern, despite efforts to thwart hackers.

    “In the next year or two, these challenges will increase in both breadth and depth of threats,” says Larry Ponemon, chairman of Ponemon Institute.

    ‘It’s so easy’

    In a recent episode that reflected the complexity of leading-edge attacks, three different thieves collaborated to steal $99,000 from a credit union, says Tom Miltonberger, CEO of security firm Guardian Analytics.

    The first thief pilfered a credit union member’s online account user ID and password, and gave it to a second thief. That person then logged on several times to see images of cleared checks and to monitor the balance available on a pre-approved home equity line of credit, says Miltonberger, who investigated the case.

    That information went to a third thief, who drew up a forged fax request with instructions to transfer funds from the home equity line of credit into the checking account, and then to wire those funds to another account. Because the forged signature was so good, the credit union carried out the transfer.

    No one has been arrested in the case.

    In another recent attack, someone acquired the user name and password for a system administrator at CheckFree.com, the nation’s largest e-bill payment system. Using those log-in credentials, an intruder gained access to CheckFree’s domain name service account — an account that permits the administrator to redirect traffic trying to access CheckFree’s home page to other legitimate company pages.

    For several hours, the intruder redirected anyone typing http://www.mycheckfree.com to a Web server in the Ukraine that tried to install a password-stealing Trojan. Although as many as 160,000 customers may have been affected, none had any of his or her data stolen, says Lori Stafford-Thomas, a spokeswoman for Fiserv, the parent company of CheckFree. “CheckFree sites are all up and running properly and securely,” she says.

    But the attempt was a sign of things to come, says Amit Klein, CTO of security firm Trusteer.

    “The moral of this attack is that it’s so easy to take over your (website),” Klein says. “I just need to get ahold of your user name and password once. And we all know how easy it is to get your credentials.”

    Beverage merchandiser Terrazas knows all too well the downside of having one’s sensitive data stolen. He says Bank of America covered the illicit charge to his debit card and gave him a new card account number. But he had to alter several other financial accounts to reflect the change, and he no longer trusts using his debit card to pay bills or make purchases online.

    “It’s a bummer that somebody took my information,” he says. “But if I don’t want this to happen again, this is what I have to do.”

    =================================

    Make sure you get Anti Virus, Anti Spyware, Firewall Software/Hardware to protect yourself. Don’t click on links you get from people or organizations you don’t know. Also, if it smells like a phish it probably is a fishy scam!-jschulmansr!

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    Today’s Technical Corner – Gold Whats Next?

    28 Wednesday Jan 2009

    Posted by jschulmansr in agricultural commodities, Bailout News, banking crisis, banks, bear market, Bollinger Bands, bull market, capitalism, central banks, China, Comex, Copper, Currencies, currency, Currency and Currencies, deflation, depression, dollar denominated, dollar denominated investments, economic, Economic Recovery, economic trends, economy, Federal Deficit, Finance, financial, Forex, Fundamental Analysis, futures, futures markets, gold, Gold Bullion, Gold Investments, gold miners, hard assets, How To Invest, How To Make Money, India, inflation, Investing, investments, Jim Sinclair, Junior Gold Miners, Latest News, Make Money Investing, market crash, Markets, mining companies, mining stocks, Moving Averages, oil, palladium, physical gold, platinum, platinum miners, precious metals, price, price manipulation, prices, producers, production, silver, silver miners, small caps, spot, spot price, stagflation, Stimulus, Stocks, TARP, Technical Analysis, U.S. Dollar, Uncategorized

    ≈ 1 Comment

    As I write Gold is currently down $10.80 at $886.90, taking a much needed breather from its recent upward thrust. If Gold can hold and consolidate around this level the next target will be $920 and then $950. Today’s post contains articles on how to trade gold for those who don’t like risk, much tecnical analysis and more… -jschulmansr

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    Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

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    A Guide To Buying Gold for the Risk Averse – Seeking Alpha

    By: J Clinton Hill of Hillbent.com

     

    Lately, there has been plenty of talk about gold and a growing consensus that favors bullish fundamentals. Here’s my take on gold based upon the Spyder Gold Trust ETF (GLD) and its most recent wave, i.e. from its 1-15-09 bottom at 78.87 to its 1-26-09 top at 90.19.

     

     

    Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

    ================================================.

    That’s it for today click on one of the subscribe buttons to receive all the latest news for Gold and Precious Metals, and much more!

    Good Investing! – Jschulmansr

     

    Nothing in today’s post should be considered as an offer to buy or sell any securities or other investments, it is presented for informational purposes only. As a good investor, consult your Investment Advisor, Do Your Due Diligence, Read All Prospectus/s and related information carefully before you make any investments. –  jschulmansr

     

     

    Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

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    Hourly Action In Gold From Trader Dan

    Source: Trader Dan Norcini of JRMineset

    Gold appears to have run into resistance near the $920 level which is blocking its upward path for now. Since we know that the funds are purely technical traders and have been buying, both adding new longs and for those who were short, getting out by covering, while open interest has been steadily increasing, it is safe to say that the bullion banks are the ones blocking the upward trajectory. Nothing new there and it does not take much observation for those who have been watching gold the last 8 years to know this.

    The inability of the mining shares to continue higher yesterday, even in the face of a much higher bullion price, gave some paper longs at the Comex a reason to cash in some profits and emboldened the bears to dig in their heels.

    To show you how fickle these markets have become, do you remember when gold was following the equity markets around not all that long ago. They went down – it went down. They went up – it went up. It was all about the famous “risk aversion” or deleveraging trade. Now the exact opposite seems to be happening. The equities go up and gold goes down. Well guess what they have come up with to now explain this turn of events? Yes – risk aversion!

    Here’s the latest – equities are going up because supposedly some of the news from the banking sector is not as dire as many have come to expect. The bearish sentiment in the equity markets is misplaced. Gold has been going up because of banking sector fears and currency risk. Ergo – gold should now go down as those fears are overblown because the risk averse psychology has become too excessive. In other words – all’s clear and the water is just lovely so dive on in!

    I could not make this stuff up if I tried.

    Had enough – how about this one?  – Gold has now broken its relation to the Dollar. The fact that the Dollar was being bid up was evidence of a panic into safety. Now that the Dollar is going down it means that the panic is subsiding. Therefore gold should go down as well which means the inverse relationship between gold and the Dollar has been severed.

    Again, I am just repeating the latest mantra du jour.

    Just wait and see – when gold starts going up as the Dollar starts going down the same guys who came up with the latest explanations will be singing how the historic relationship between gold and the Dollar has been restored once again. No matter what happens – they will have proven to be right! Geniuses all!

    It reminds me of the global warming crowd. When droughts were springing up and record highs were being shattered it was called global warming. When record snowfalls suddenly showed up and record lows were being set as people all over the globe freezing their keisters off,  it morphed into climate change. No matter which way the temperatures go, that crowd will always be right! Shame on you climate destroyers for not cramming your family into something that more closely resembles a go-kart rather than an automobile on your assorted trips around town. If you had any concern for the planet you would be riding a horse to work. Then again that creature gives off methane gas which is actually being seriously considered as a pollutant and thus liable to be taxed by the idiots in Washington DC, so no matter what you do, you are royally screwed. It’s too bad that there remains no undiscovered country where freedom loving people who believe in honest money and limited government could sail off to and found a nation where the money changers and government control freaks would be banned from entering.

    By the way, did you notice that the new President just signed the death sentence for the US automotive industry yesterday by mandating new mileage efficiency standards – all in the name of saving us from a problem that does not exist? Yep – nothing like telling an industry already on life support that their most profitable units, the bigger and safer vehicles, will have to go in favor of smaller, less profitable ones. Don’t touch the unions however whose demands have forced the US auto industry into concentrating their efforts on the more profitable lines (the larger vehicles) in an effort to offset the financial drain imposed upon them by the exorbitant salaries and benefits that they are forced to pay these same unionized workers.

    Remember that big move up in Copper yesterday? Remember how the existing home sales number ran all the shorts out and pushed the market right into technical chart resistance threatening an upside breakout? Well, that is history today as it went “KERPLUNK”! To show you how utterly insane these markets have become and the farce that the hedge funds have turned them into, consider this – Copper closed at 1.4720 on Friday. On Monday it rallied sharply blasting upwards closing at 1.5865 reaching a high of 1.6310. Today it collapsed making a low of 1.4545 and closed at 1.4850, down 10 cents a pound. In other words, it went NO WHERE in TWO DAYS but in the process it careened all over the place blowing out upside buy stops before triggering a wave of downside sell stops today. And to think this hedge-fund created madness has become the price discovery mechanism by which commercial producers and end users are somehow supposed to be able to enter into contracts and hedge risk to ensure profitability. I have been watching these futures markets for more than 20 years and I have never seen such idiocy. This is what happens when computers have taken over trading decisions based on nothing but the latest price tick. I know it sounds excessive to some, but I honestly have come to believe that the entire futures industry is very close to being destroyed by these out of control hedge funds. A commercial entity simply cannot use these markets to hedge and without commercials these markets cannot survive since they will serve no useful purpose whatsoever as all that will be left is hedge funds trading their algorithms against the algorithms of other hedge funds with the commercials using forward contracts amongst themselves and bypassing the futures markets altogether.

    Back to gold – technically gold still looks very good although it has stalled just below the $920 level. Ideally, it would hold support on any subsequent RE-test of the Downsloping trendline of the wedge formation on the weekly chart which is drawn off the July and October highs. That comes in near the $880 level. I would prefer to see it consolidate above the $880 level but would view an ability to hold above the $870 level as still friendly. Failure at $870 would give the shorts enough impetus to try to shove it back to $850- $840.

    Upside resistance remains near $920 while more formidable resistance comes in near the $945-$950 region. That corresponds to both Downsloping trendline resistance drawn off the peak high made back in early 2008 and the July high which also happens to be the highs made back in October last year. Those are the parameters we are working with technically.

    On the daily chart, all of the major moving averages, including the 100 day moving average are all now trending solidly upwards. The 10 day is close to making a bullish upside crossover of the 20 day which will give some trend following funds a reason to buy while the RSI remains below the 70 level. So we have room to run to the upside IF, and this is a big IF, the market can push through the bullion bank selling near $920. The inability of the mining shares to continue moving higher does concern me however. In an ideal bullish environment for gold, the shares move higher alongside the bullion price.

    It looks to me like the weakness in crude oil today is contributing some downward pressure in gold as many of those fund algorithms use its price action as a factor in their selling or buying of commodities. Weaker crude oil prices give rise to the deflation scenario and that still leads some to sell gold because of misguided notions of how it will perform during periods of general price deflation. Again, gold is primarily a currency – not a commodity, and it will rise when faith in paper currencies falters, all of the arguments of the deflationists notwithstanding. When governments slash interest rates to NOTHING and issue more and more paper IOU’s, the sheer supply guarantees that they will lose value meaning that investors seeking wealth preservation are buying scraps of paper that pay zero return and lose any “value” that they might have once possessed. Gold thrives in such periods as it is solid, substantial and cannot be diluted by conniving Central Bankers. Which would you rather have in your hand during times of financial chaos and upheaval – a promise by a politician or a metal which has stood the test of 6,000 years? If you have any problem making a decision, I suggest you take a good look at the price chart of the British Pound and especially the price of gold in Sterling terms.

    The HUI and the XAU were unable to manage strong closes above their former double tops make back in mid-December of last year and early January of this year in yesterday’s session meeting up with selling from the opening bell and never quite being able to shrug that off. Still, their charts look good as they are consolidating right around that former double top. I would like to see them hold above the 10 and 20 day moving averages near the 115 – 116 level in the XAU and 279 – 282 in the HUI.

    Bonds finally saw an up day today which is to be expected given the beating that they have taken of late. The downdraft in bonds could be called “parabolic in reverse”. Jim likes to call it a “waterfall”, which is an apt description considering the fact that if one were long while this has occurred, they have indeed taken a bath in their trading accounts or better yet, drowned under a sea of red ink.

    The Dollar is generally weaker today although it has bobbed back and forth between a small gain and a small loss. The charts still appear to show a technical failure near the 88 level. It is treading water above the 50 day moving average (barely) while the 100 day lies near the 83.50 level. A breach of that level and it should move back down to retest 80.

    Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini

    January2709Gold1230pmCDT.jpg

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    1. Before 2009 is out the next major economic shock will become obvious. There is not one major funded retirement program intact thanks to the manufacturers and distributors of OTC derivatives. The unfunded ones are a total loss. Retirement in the future is totally out of the question. Many now retired will end up in the same situation as those trying to live off fixed income. Both categories are being culled from the human gene pool.
     
    2. By my 68th birthday Obama will recognize his position as a bagged President, knowing then that the economic situation does not have any practical solution.
     
    3. By July 4th, 2009 the rally in the US dollar will have become a simple hope for the lows to hold.
     
    4. My long held targets of $1250 and $1650 for Gold that were once laughed at as outrageously high can now be laughed at for being painfully too low.
     
    5. Only gold and related shares are insurance against the economic cataclysm now taking place.

    Everyone is looking for where and when the top in gold will come. Will it be Jim’s $1650 or Alf Field’s $10,000 plus before it comes back down?
     
    To put it nicely, you are all wrong. Gold is going up and STAYING up.
     
    There is no top to look for because like all things people strive for, the top does not exist.
     
    Gold will trade within $200 of a given point as a product of the Master of the Financial Universe, Paul Volcker, taking control when all this is totally out of control. He will instate the revitalized and modernized Federal Reserve Gold Certificate Ratio, not gold convertibility, and not tied to interest rates as an automaticity. Only then can Volcker put in place policy backed by the sitting administration that has a provable history of starting the change from deficit to surplus, his price of saving the world one more time.
     
    The Gold mining business will then be the best business there is and the highest dividend paying monetary utility.
     
    Respectfully yours,
    Jim
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    Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

    ==================================================

    The Resurgence of Junior Gold Miners – Seeking Alpha

    Junior mining stocks were all the rage back in the early stages of the gold bull market. During the time frame of 2002-2006 many junior miners were putting in annual gains of 200%, 300% or more. Some junior miners like Seabridge Gold (SA) produced 3-year returns in excess of 1500%! It seemed like you could close your eyes and randomly point your finger at a list of junior gold miners, buy the stock and sell a few weeks later for a gain of 30% or more. No feasibility study, no permits, no management experience or path to production… no problem!

    But volatile stocks are volatile in both directions and when the gold market corrected, junior miners lost all of those gains and then some. Amateur investors that were patting themselves on the back and recommending investments to their buddies based on their recent success were caught off-guard by the severity of the decline in the junior mining sector and suddenly found that they gave back most or all of their gains. To be sure, some booked profits and got out before the ship sank, but most were caught unsuspecting and unwilling to believe the party could be over so quickly. Many junior miners lost 80% or more of their market cap during the past year or two.

    Precious metals investors have a sour taste in their mouth in regards to junior miners and have largely dismissed the entire sector as too risky. For many investors, junior miners have been removed from their portfolios, watch lists and consideration set for future investments. Newsletter writers and analysts that couldn’t contain their excitement over the next “5-bagger” rarely mention a word about juniors these days. While much of this condemnation is warranted, I think we should be careful not to throw the baby out with the bath water.

    While I will acknowledge that 75% or more of junior mining companies are not good investments and many will go out of business with credit markets contracting, there are still quite a few impressive juniors that deserve a second look now that the dust has settled. Mine production is decreasing and the larger miners will need to acquire junior miners with quality properties in order to add to their pipeline and keep their production numbers growing. After a massive sell-off that brought the entire sector crashing down, some of the most promising juniors have finished a bottoming pattern, consolidated and have already began moving up very impressively. Cash-strapped investors and weak hands have been shaken free of their junior mining shares as the focus has shifted to more “safe” and liquid investments. Has this produced an opportunity for savvy precious metals investors to pick up quality mining companies at undervalued prices? Here are my main criteria for selecting which junior mining companies are worth my investment dollars.

    1. Already producing or moving toward production in the next 1-2 years
    2. Quality properties in politically-stable areas with necessary road access
    3. Proven and probable resources that justify a higher market cap
    4. Seasoned management that has a track record of bringing projects to production
    5. Healthy balance sheet with cash on hand and/or the ability to raise capital easily

    Many of the companies that meet most or all of the criteria above have already bottomed and are quietly posting exceptional gains that outpace those of the major producers. Even with today’s decline in gold equities, many of my favorite juniors are up 100% or more since their respective Q4 2008 lows. A few of these companies were recommended in the premium subscription service and have been masked out of respect to paying subscribers. All of the gains listed below were produced in just 1-3 months and illustrate the explosion in junior miners that most analysts and newsletter writers seem to be missing.

    click to enlarge

    As the entire gold and silver sector has done well over the time period, I have included the PHLX Gold and Silver Index (XAU) index at the bottom for comparison sake. While the XAU is up 85%, the average gain for the junior mining companies that we track over the same time period is 171% or double the gain of XAU. Junior miners are not only joining in this latest rally, they are leading the rally and gaining at twice the pace of the major gold mining companies.

    Those that are comfortable with a higher risk/reward proposition might want to take a second look at junior mining companies during 2009. If the trend continues or accelerates as investors warm back up to juniors, we could see the return of another explosive few years for junior mining companies as gold pushes above $1,000 on its way towards its inflation-adjusted high of $2,300.

    Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

    ===================================================

    Now From One of the Masters’ Himself Jim Sinclair

    Jim’s Outlook On 2009

     

    First, to keep things in proper perspective, GLD has already appreciated 27% since Nov 12, 2008. Also, let us not forget that central banks have a perverted sense of humor and plenty of “funny money” and other diversionary tricks up their sleeves to defer the inevitable arrival of inflation. With this as our background, I will jump right into my strategic analysis for trading or investing in gold.

    GLD hit resistance at 90.19, has retreated and appears headed to test support at 86.50 with the possibility of also filling a minor gap at the 85 level.

    If support holds, the natural inclination is to buy (entry at 86.75 with a stop loss at 84.12 for -3% maximum loss). Assuming one is playing this trade for an exit at its most recent resistance, i.e. at 90.19, the risk to reward ratio is only at 1.33. In a fear-driven market environment, I am strongly inclined to pass on these odds (even with beer goggles).

    Ideally, a trade with a minimum risk to reward ratio at 3 or 4 is much more seductive, even in interesting times like these. However, to find the ideal opportunity, one needs to be patient and think counter-intuitive to the buy low and sell high paradigm. Hypothetically (I only say “hypothetically” because I have been long GLD at 74.85 since Oct 29, 2008), I would wait for GLD to break above its resistance at 90.19 and buy at $90.50. This would confirm that there is additional demand and fresh support at this level.

    Here is where the trade can get a little tricky. There is some resistance at the 92 level and one should probably anticipate a minor pullback and retest of the newly established level of support at the 90 area. However, if support is violated, I am willing to accept a stop loss at 89 for a -1.5% maximum loss of capital. In the majority of instances when support fails the “retest”, this signals a false breakout.

    Now let’s get to the good part. If the breakout is legitimate, then GLD should run to the 97.50 area, which is its next level of major resistance and also where I would definitely be inclined to book some short-term profits or at least hedge my position with long puts and/or short calls. Under this scenario, this trade presents a much more attractive risk to reward ratio at 5.24.

    Gold certainly has both technical and fundamental positives going for it. The short, intermediate, and long term are all trending upward while the monetary policies of global central banks reflect a desperate willingness to accept future inflation to avert the immediate threat of deflation. Another tail wind, also aiding gold’s bullish movement, is the recent weakness and apparent correction in the U.S. Dollar Index.

    In summary, the example of the above trading strategy is an opinion on how to play gold for those who are risk averse and can ill afford to lose more capital. Otherwise, for those turned on by a fundamentally bullish or bearish bias towards the precious metal, assume the position (pun intended) and enjoy the ride along with all its ups and downs. Yeah Baby!!!

    Disclosures: Hillbent.com, Inc. or its affiliates may own positions in the equities mentioned in our reports. We do not receive any compensation from any of the companies covered in our reports

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    Is this the Move? Gold is Breaking Out!

    26 Monday Jan 2009

    Posted by jschulmansr in agricultural commodities, banking crisis, banks, bear market, bible, Bollinger Bands, bull market, capitalism, central banks, China, Comex, commodities, Copper, Currencies, currency, Currency and Currencies, deflation, Dennis Gartman, depression, dollar denominated, dollar denominated investments, economic, Economic Recovery, economic trends, economy, Federal Deficit, Finance, financial, Forex, Fundamental Analysis, futures, futures markets, gold, gold miners, hard assets, How To Invest, How To Make Money, id theft, India, inflation, Investing, investments, Latest News, Make Money Investing, market crash, Markets, mining companies, mining stocks, natural gas, oil, palladium, physical gold, platinum, platinum miners, precious, precious metals, price, price manipulation, prices, producers, production, silver, silver miners, small caps, spot, spot price, stagflation, Stimilus, Stimulus, Stocks, TARP, Technical Analysis, timber, Today, U.S. Dollar, Uncategorized, uranium, volatility

    ≈ Comments Off on Is this the Move? Gold is Breaking Out!

    Tags

    agricultural commodities, alternate energy, Austrian school, Bailout News, banking crisis, banks, bear market, Bollinger Bands, bull market, capitalism, central banks, China, Comex, commodities, communism, Copper, Currencies, currency, deflation, Dennis Gartman, depression, diamonds, dollar denominated, dollar denominated investments, economic, economic trends, economy, Federal Deficit, financial, Forex, futures, futures markets, gold, gold miners, hard assets, heating oil, India, inflation, investments, Keith Fitz-Gerald, Marc Faber, market crash, Markets, mining companies, Moving Averages, natural gas, oil, palladium, Peter Schiff, physical gold, platinum, platinum miners, precious metals, price, price manipulation, prices, producers, production, protection, rare earth metals, recession, risk, run on banks, safety, Saudi Arabia, Sean Rakhimov, silver, silver miners, socialism, sovereign, spot, spot price, stagflation, Technical Analysis, timber, U.S. Dollar, volatility, warrants, Water

    As I write Gold currently is up another $9.30 oz today! Even more importantly it is well above the psychologically important price level of $900 oz. A new high will confirm the breakout and BANG! we’re off to the races. Todays past has some good articles detailing why could could be breaking out here. Enjoy and Good Investing!- jschulmansr

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    Could There Be a Real Breakout In Gold?— Seeking Alpha

    By: Trader Mark of Fund My Mutual Fund

    After a series of head fakes much of the past half year, the most watched move in the market might finally be “real” this time. With all the world’s printing presses going on overdrive, and currencies being mocked – gold “should” have been rocketing. Many theories persist on why it hasn’t, but really it does not matter. The price action is all that matters and this type of movement will get the technicians very interested.

    Things to like
    1) a series of higher lows
    2) the trendline of lower highs has been penetrated

    Things to see for confirmation
    1) any pullback is bought
    2) price prints over October 2008’s highs, signaling the end of “lower highs”

    When last we looked about 6 weeks ago [Dec 11: Dollar v Gold – Can we Trust this Change?] , it was just another headfake – this formation on the chart does look more promising.

    These are 2 names; one in gold and one in silver we’ve had our eyes on.

    Or just play it simple and go double long gold

     

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    Happy Days For Gold? —Seeking Alpha

    By: Jeff Pierce of Zen Trader

    Gold was in the spotlight on Friday in a big way, nearly moving $39. Is this a hat tip to the big move that many goldbugs have been anticipating? Is all the money printing that the Federal Reserve finally catching up with the US Dollar? Should you have bought gold on Friday because it’s a straight line up from here? Let me preface my answers by saying that I’m a short term trader that will sometimes allow a trade to turn into a longer term trade but that doesn’t happen very often. I’m currently flat precious metals but will be looking for a good risk/reward, but for anybody reading this know that this analysis is from a momentum based perspective.

    So the answers to the previous questions I believe are yes, yes, and no.

    gld

    I’m a big fan of gold for a number of reasons (fundamental, technical, historical) but I know from experience that it trades much different from a momentum point of view. It tends to sell off once it goes outside it’s upper bollinger band as seen by the arrows above. Just when it looks like gold is going to bust out and move to blue skies it seems to run out of buyers and reverses. As you can see GLD and many individual gold miners moved outside this indicator on Friday and I expect a small pullback before it begins a new wave up.

    Judging by the negative divergence on the RSI you can easily see that momentum is waning. As the stock has been making higher highs, the RSI has not been confirming the move. We could possibly move up to the 92 level before profit taking hits, but I just don’t see a good entry at this point if you’re not already invested in these stocks. It would be more prudent to wait for a slight low volume pullback before entering. The only problem with this way of thinking is there could possibly be many with this outlook and that could actually propel gold to higher levels, but I’m willing to risk that because if it does move up even more, then that will confirm the strength and I’ll buy even more on the eventual dip.

    If you are long from lower levels I would consider taking some profits off the table now to prevent yourself from giving up any of your gains.

    “I made all my money selling to soon.” ~ JP Morgan

    slv

    I like silver’s chart a tad better from a technical aspect as the base that it’s been building since last September seems a little more stable. The RSI trendline has been steadily moving higher as the price has been trending higher which is very bullish. I think we’re a tad overbought here and will be looking to get long stocks such as PAAS, SLW, and SSRI when we pullback or move sideways for a week or two.

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    Now- Some Commentary by Dennis Gartman

    Dennis Gartman on Gold, Oil, Government and the Economy- Seeking Alpha

    Source: The Gold Report

    With a real roller-coaster year behind us, how would you characterize your macro overview of major economic trends for 2009?

    Dennis Gartman: It’s abundantly clear that we have been in recession; we’re in a recession; and we’re likely to remain in a recession through the greatest portion of 2009. The monetary authorities around the world have done all the things they’re supposed to do, which is during a period of economic weakness throw liquidity in the system as abundantly, as swiftly, as manifestly as possible and expect the liquidity eventually to wend its way through the economy and strengthen economic circumstances. That may be sometime late in 2009. In the meantime, we’ll see continued bad economic data and continued increases in unemployment. It’s going to seem like things are really, really, really bad.

    But let’s remember that things are always their worst at the bottom. By definition, recessions begin at the peak of economic activity when all economic data looks its best. So while things will start to look very bad through the rest of 2009, I bet that by late this year and early 2010 we will start to see economic strength coming at us because of the liquidity injections going on everywhere.

    TGR: What will be the first signs that we’ve reached the bottom in terms of the recession and are starting to turn around?

    DG: The signs of a turnaround will be that everybody believes that there are no signs of a turnaround. We’ll see Newsweek writing a series of cover stories talking about the end of Western civilization. The Financial Times of London headlines will read, “The Recession Seems Endless” and “Depression Is Upon Us.” Every day’s Wall Street Journal articles will be just manifestly bleak in nature. That’s what the signs will be.

    And then all of a sudden, things shall begin to turn around. But the signs are always their worst at the bottom. That’s how things function.

    TGR: So the popular press is in essence on a delay mode.

    DG: Oh, it always is.

    TGR: By three months, by six months, by a year?

    DG: It’s probably a little less slow to react than it used to be, but let’s say three months.

    TGR: So you like the fact that the monetary authorities have put liquidity into the system?

    DG: Absolutely.

    TGR: And it sounds as if you think it just takes time to work through the system.

    DG: Always has; always will. That’s how these things go about. You have recessions because you had an economic advance where, in Greenspan’s terms, “irrational exuberance took over.” You have to dash that irrational exuberance and make it into irrational depression. Irrational, manifestly bleak, black philosophies have to make their way to the public. That’s just how these things happen; it’s happened time and time again.

    The recession that I recall the most clearly is that of ’72-’74. We have to remember that unemployment was high up in double digits. We saw plenty of articles in the press about the new depression. If you go back and read articles from July through September of 1974, you will be convinced that we will never have an economic rebound in our lives again. Well, clearly, that’s just not the case.

    TGR: What about the bearish people who say we’ve never seen worldwide conditions like this and that we’re in the “new era”?

    DG: We probably haven’t seen the world going into recession at one time such as we are now. But I think that’s simply indicative of the fact that today’s communications are so much better. People in the United States or Canada or Europe really never would have known much about a recession in India 20 years ago, because the news media would not have covered it. Nothing told you about economic circumstances abroad. Now, with the Internet, information comes at you absolutely one-on-one.

    All correlations have gone to one in this present environment. When stocks go down in the United States, they go down in India. When they go down in India, they go down in Vietnam. When they go down in Vietnam, they go down in Australia. That wasn’t the case 20 years ago; you didn’t have the small world united through communications that we have now. And now the correlations of emerging markets and large markets have all come together.

    TGR: If that’s true, and worldwide financial markets are all tied together, could any given country “emerge” as a growth country while the rest remain in recession?

    DG: Oh, it’s possible, but I don’t think we’ll call them “emerging markets” anymore. You’ll just find that one country pursued better economic policies, probably by cutting taxes or increasing government spending or doing away with some onerous legal circumstance that might have previously inhibited economic activity. The Chinese are doing any number of good things at this point, and that country may just have been more enlightened and it may come out of the recession faster than the others do. But now they won’t do it on their own, and anybody who does do it will be watched and understood much more swiftly than in the past. For example, did you ever know what was going on in Iceland 10 years ago? Of course not; but now you do.

    TGR: Right. The only emerging markets we heard about were China and India. No one ever discussed South America.

    DG: And now they’ve emerged. But now we understand. We hear news from Venezuela every day. Now we hear news from Sri Lanka every day if we want it; we can get it very easily. We couldn’t do that 10 years ago; 20 years ago clearly we couldn’t. That’s been the big change. Information travels so much more rapidly. That’s why all the correlations have gone to one. We are now one large economic machine that maybe one of the component parts does a little bit better, but it won’t shock anybody, and there won’t be anything “emerging.”

    TGR: Back to the bear people. You referenced the ’72-’74 economy, but this time, many are pointing to the debt situation that the U.S. and probably a bunch of the world economies are in and the fact that we’re committing to billions—and in the U.S., trillions—of dollars more. Won’t that influx of new money have some kind of significant bear impact going forward?

    DG: No, it will have a bullish impact. Unless all the rules of economics have been rescinded, money pushed into a system will push economic activity higher.

    TGR: But it will also push inflation higher.

    DG: Oh, that’s very likely to happen. The question is whether it will be inflation of 1%, 2%, 5%, or will it be a Zimbabwean-like inflation? The latter isn’t going to happen, and 1% isn’t likely going to happen. But 2% to 5% inflation? Yes, that’s likely to happen several years down the line.

    TGR: Gold bugs are saying, “Buy gold now.” What would be your advice under these circumstances?

    DG: I happen to be modestly bullish on the gold market, but not because of inflationary concerns. It’s more that I think gold has quietly moved up the ladder of reservable assets, a reservable asset being one that central banks are willing to keep on their balance sheets, all things being equal. Dollars are still the world’s dominant reservable asset. The Euro is next and gold is probably the third.

    The Fed has thrown off a lot of other assets and taken on securities, debt instruments, mortgages and the like, but I think they’re doing exactly the right thing. Some central banks with a lot of U.S. government securities on the balance sheet may decide that going forward, they may buy more gold rather than more U.S. government securities if they’re running an imbalance of trade surplus. For instance, if I’m the Bank of China and I hold a minuscule sum of gold, maybe I should own a slightly larger minuscule sum.

    TGR: That’s really diversifying your monetary assets.

    DG: I think that’s all that will drive the gold prices quietly higher. I am not a gold bug; I don’t think the world’s coming to an end. I think the history of man is to progress. And yes, we have relatively large amounts of debt, but you can go back to the recession of 1974; you can go back to 1980-81; you can go back to the recession of 1907, and you will see the same arguments—that the world is too debt-laden. And the same arguments, the same language, the same verbiage was always written in exactly the same circumstances. Guess what? We moved on. This time might be different, but I’ll bet that it won’t be.

    TGR: What would your recommendation for investors to do in gold? If they want to do any type of holding assets in monetary value, should they be looking at holding physical gold or buying ETFs or buying into the equity?

    DG: For the past several years, I’ve told people that if they’re going to make the implied bet on gold, bet on gold. The gold bugs tell you that you have to own bullion. I say, no, you should really own the GLD, the ETF. It trades tick-for-tick with gold. If some truly untoward chaotic circumstance ran through the world’s banking system I guess maybe GLD and bullion would diverge at some point, but we’d have other problems long before that would occur. So if you’re going to make the implied bet on gold, bet on gold. Do the GLD.

    TGR: But not physical gold?

    DG: I do own some physical gold. But do I own a lot of it? No. And quite honestly, I hope I lose money on the physical gold I have. It’s an insurance policy. Nothing more than that.

    TGR:: Are you looking at physical gold as the insurance policy or any investment in gold as an insurance policy?

    DG: There’s the old saying, “Those aren’t eatin’ sardines; them is trading sardines.” Some gold I consider to be tradable, and that’s ETF-type stuff, and I have a small amount in the lockbox in the form of gold coins. That’s my insurance policy.

    TGR: That would be what the typical investment broker might advise, 5% to 10% in gold.

    DG: That’s it. Exactly, that’s it. Don’t get overwhelmed by it.

    TGR: How about mining stocks?

    DG: If you’re going to bet on gold, there’s nothing worse than being bullish on gold and owning some mine—especially in some junior fly-by-night—and walking in one morning and finding out that the mine you thought you had got flooded or all of your workers were unionized and walked off or management was somewhat derelict. You may have been right on the direction of gold, but your stock went down. So I’ve told people to stay away from the juniors; that’s a terrible bet on gold. If you’re going to bet on gold, bet on gold.

    Maybe you’ll want to start punting on Barrick Gold Corporation (NYSE: ABX) or Newmont Mining Corp. (NYSE: NEM) or the real large names, rather than the juniors. There’s just too much risk in the juniors. Yes, everybody says, “I bought this junior at a nickel and now it’s at 15 cents.” Well, jolly for you, but you probably bought 15 others at a nickel, and they’re all bankrupt. If you’re going to bet on gold, bet on gold.

    TGR: So you’re saying with that advice that if you want to bet on gold equity, bet on blue-chip gold equity stocks that have just been hammered down through the market.

    DG: That’s correct, Agnico-Eagle Mines (TSX: AEM), ASA Ltd. (NYSE: ASA), the Newmonts, the Barricks, that sort of thing.

    TGR: If we take that logic and look across the broad array of sectors, would you also recommend looking at other blue chips that have just been battered? Or do you think that some sectors will recover faster than others? Such as the financial sector, the energy sector, the housing sector, the precious metals sector?

    DG: I’m really quite bullish on infrastructure—the movers and the makers of the things that if you drop them on your foot, it will hurt. I think I want to own steel and copper and railroads and tractors because I think we’re going to be building roads and bridges. That’s probably one of the things that probably will bring us out of the economic morass. Along those lines, I wouldn’t mind owning a little bit of gold at the same time.

    TGR: Unlike gold that you can buy and own, if you look at steel and copper, are there specific companies and equities that are appealing to you?

    DG: Again, as in gold, if I am going to buy gold equities, I’m going to buy the biggest names. If I’m going to buy steel, I’m going to buy the biggest names. U.S. Steel comes to mind. That’s the easiest; that’s the best; that’s where liquidity lives. It has been bashed down from the highs made last July; it’s down—what?—75% from its high. Recently it stopped going down and is in fact starting to go up now on bad news. So if you’re going to buy steel, buy the most obvious ones—U.S. Steel or buy Newcorp.

    TGR: You talked about the energy market being weak in one of your recent newsletters. Do you see this weakness continuing or do you see a turnaround happening in ’09?

    DG: The one thing that we can rest assured in the rest of the world is that OPEC chiefs cheat on each other—they always have and they always will. So when OPEC says that it’s cut production, that’s a lovely thing. No, they haven’t, and they don’t. Because the problem OPEC has is they’ve all raised their standards of living and the expectations of their people, and they all have cash flow requirements. You have to sell three times as much $50 crude oils as you sold $150 crude oil to meet the demands of your populace that you have increased. So the lovely thing from a North American perspective is that Chavez finds himself in a very uncomfortable position and needs to produce a lot more crude oil to keep his public happy. It’s rather comical, isn’t it, that Chavez was giving crude oil away to the Kennedy family to be distributed to people in the Northeastern United States until two weeks ago when he had to stop. He had to stop because he needs the crude oil on his own to sell, not to give away, to meet cash flow demands.

    Iran is in exactly the same position. Isn’t it lovely to see that Putin, who was really feeling his military oats six months ago with $150 oil, has to pick fights with Ukraine and smaller countries now with crude at $45 a barrel? Where is crude going to go? I wouldn’t be surprised if we make new lows.

    TGR: Will there be new lows for ’09? Are you buying into this whole peak oil argument that production eventually will be unable to meet demand?

    DG: Do I believe that we’re going to run out of crude oil in the next 100 years? Not on your life. Sometime in the next 10,000 years we probably will run out of crude oil. In that instance, I am a peak oil believer. It’s not going to happen soon though. I remember they told me when I was in undergraduate school back in the late ’60s that we would be out of crude oil by 1984.

    TGR: Do you mean out of oil? Or at a point where demand exceeds production?

    DG: We would be out! Gone, done! There would be no more. Isn’t it interesting? We’ve pumped crude oil for 28 more years. This is an interesting statistic: We have either seven or eight times more proven reserves now than we had in 1969. And I think we have used a bit of crude oil between now and 1969.

    TGR: Just a wee bit.

    DG: A wee bit, and yet we have seven or eight times more proven reserves. Every year we have more proven reserves. So, yes, I’m a peak oil believer. Sometime in the next 10,000 years we will run out of crude.

    TGR: With Obama now in office and talking about getting off our reliance on foreign oil, what’s your view of the future on all the alternative energies that are being so pushed by many people in the U.S. government?

    DG: I think it’s wonderful job-creation programs, none of which will prove to be of much merit at all. All of the Birkenstock-wearing greens will feel very good about having their rooftops covered by solar panels, but is that going to resolve any energy problems we have? No. No. Nuclear power will do that. Maybe using the oceans will do that, but wind power, probably not. Solar power, probably not. It makes everybody feel good, but are we going to power our cars in the next 40 years with solar power? I doubt it. Do I expect some sort of material technological breakthrough in the next 100 years that will change what we use as energy? Oh, absolutely. Do I have any idea what it will be? Of course not.

    TGR: If the price of oil if it remains low, is there a role for nuclear in the next 50 years?

    DG: Oh, absolutely.

    TGR: What will drive that?

    DG: It’s absurd that we don’t use nuclear energy. Even the French derive 80% of their electricity from nuclear energy, cleanly, efficiently, without any problems whatsoever. Why we don’t do the same in the United States other than the left and the eco-radicals keeping us from doing it is really quite beyond me.

    TGR: So, given that we still have eco-radicals and a big push toward alternative energies, do you see anything happening in the U.S. in nuclear in the near future?

    DG: Yes, actually. It’s interesting. There are a lot of new nuclear facilities on the drawing boards, and they’re probably going to be approved. If there’s going to be one surprise by the Obama Administration, it will be that you don’t get nuclear energy advances under a right-wing government; you always get them under a left-wing government. Obama will be smart enough to understand that that’s the only way—that’s the best and cleanest methodology to use. And the left won’t argue with a fellow leftist pushing for nuclear energy. Only Nixon could go to China; only Obama can push nuclear energy.

    TGR: And you think that he will?

    DG: Oh, yeah, he’s smart enough to understand that.

    TGR: Going back to your investment strategy, which big blue chip players in oil and nuclear would you point out as good investments?

    DG: In oil, I’d want to take a look at companies such as ConocoPhillips (NYSE: COP), which dropped 70% from its highs. How can you go wrong with the Conocos and the Marathons and the large oil companies whose price-to-earnings multiples are down to at single digits and their dividend streams are 5%, 6%, and 7%? Why would you not want to own those? That’s the best investment.

    And at the same time, the volatility indices on the stock market are so high that, gee, you can buy Conoco, get the dividend, and sell out of the money calls at very high premiums and ramp your dividend yield up. It’s like a gift; it’s like manna.

    TGR: Well, what about in terms of the nuclear sector and uranium?

    DG: I really don’t understand uranium. I don’t know where to go, and I don’t how to buy it yet. So I’ll just say there’s a future for it, but I don’t know what to do with it.

    TGR: What other sectors should be looking at for 2009?

    DG: Banks, banks.

    TGR: They’re making a comeback. Do you think there will be more consolidations?

    DG: There will be more consolidations; there has to be. But look at the yield curve—what a year to be a bank! The overnight Fed funds rate, the rate banks are going to pay depositors for their demand deposits or checking accounts is zero. And you’re going to be able to lend that out to hungry borrowers at 7%, 8%, 9%, 10% and 12%. The next three years will be the greatest three years banks have ever seen. Banks will just make money hand over bloody fist in the next three years.

    TGR: Are you talking about the big boys?

    DG: No, I’m talking about the regionals. The big boys have problems in toxic assets. I am not even sure there is a Peoples Bank & Trust in Rocky Mount, North Carolina, but a bank like that—or the First National Bank of Keokuk, Iowa or the First National, or the Peoples Bank & Trust of Park City, Utah—those are the banks that are going to make lots of money.

    TGR: Do you see an explosion in regional banks? Will move of them come into the marketplace?

    DG: I think we’ve probably got all we need. It’s just that they’re very cheap.

    TGR: What will the role of the international banks be?

    DG: Mopping up the disasters that they’ve created for themselves for the past decade, trying to survive, being envious of the decent regional banks that are going to be earning enormous yields on this positively sloped yield curve and wishing they were they.

    TGR: Do you see a role long term for international banks?

    DG: Oh, sure, of course. How could there not be? It’s a smaller world; it’s an international world; it’s a global world. International banks will be back in full force a decade from now. They’ve got some wound-licking to do, and they’ll do it.

    TGR: In addition to regional banks as being a great play to look at for ’09, ’10, any other interesting plays to bring up?

    DG: You want to own food and grains again.

    TGR: Are you talking about grains or food producers like Nabisco?

    DG: No, I think you want to own grains. If you’re going to make a speculation, I think you want to own on the grain markets again.

    TGR: Grain for human consumption or grain for livestock consumption?

    DG: Yes and yes.

    TGR: Are you looking at buying that on the commodities market?

    DG: You can actually buy that on ETFs now. The wonderful world of ETFs is just extraordinary. You can actually buy a grain ETF now. DBA (DB Agriculture Fund) is one; JJG (iPath Grains) is another. Those are basically long positions in the grain market. Wonderful things to use.

    TGR: You like ETFs; but the naysayers will say that ETFs could be encumbered and there’s actually no guarantee that they hold any assets.

    DG: That’s true; that’s correct.

    TGR: But you’re comfortable that people should go into an ETF for grains?

    DG: I didn’t say that. What I said is if you wish to trade in grain, there are ETFs that will do that. Do I know for sure that they will all perform perfectly and that if the world were to come to a chaotic banking circumstance that there wouldn’t be problems? I don’t know that. Does that bother me? No. It doesn’t bother me even slightly.

    Should you worry about [not trading] an ETF just because there might be some problem under an untoward economic environment? No, it’s illogical. And shame on those people who say those sorts of things or who tell you not to use them because they ETF may not function properly if there is some total breakdown in the banking system. Well, if that happens, we have other problems.

    TGR: And what’s your projection for the overall investment market? We’ve been hearing speculation that it will rise through April, bottom out even deeper than it is today, and then a slow climb in 2010.

    DG: Gee, I have no idea. I just think that stock prices will be higher six months from now than they are now, much higher 12 months than they will be six months from now, and higher still in 24 months than they will be 12 months from now. But where will they be in April? Golly, I don’t know. I think the worst is far behind us and better circumstances lie ahead. And that’s the first time in a loooonnnng while that I’ve said that.

    TGR: Yeah, now if the media will just catch up with you, we can enjoy watching it again.

    DG: It won’t. Watch the news; it will just get bleaker and bleaker as the year goes on. And watch the unemployment rate; it’s going to be a lot higher.

    TGR: Other than Barack Obama saying we’re going to start building infrastructure, do you anticipate any dramatic changes in the U.S.? Right now we’re a services country, and we need to move back to being a manufacturing country.

    DG: We’ll never move back to being a manufacturing country. Won’t happen. Here’s an interesting bit of data. Do you know what year that we had the absolute high number—not just as a percentage of population—but the absolute high number of manufacturing jobs was in the United States?

    TGR: Somewhere around the World War II era.

    DG: Very good, 1943. We have lost manufacturing jobs since 1943. I think that’s a fairly well-established trend.

    TGR: Is there a future for the services sector, though? That’s the key.

    DG: It will be larger. And so what? It’s like saying we need more farmers. No. We need fewer farmers. We have one-hundredth as many farmers as we had at the turn of the 20th century. We now 500 times more grain? Seems to me every time we lose a small farmer, we get better. So, we need fewer farmers. And we need fewer manufacturing jobs.

    TGR: But doesn’t that put the onus on the United States as the economic world leader? Considering the fact that, as you mentioned, information now is instantly available everywhere, just in terms of worldwide confidence; it seems like every time we hiccup, the planet hears it?

    DG: There is probably some truth to that fact. But it is probably not us that will lead; it’s probably Australia or New Zealand or the Baltic States or some smaller country that actually changes policies and frees up markets and cuts taxes, and all of a sudden their economy starts to turn around. Then people elsewhere will say, “Oh, look! That’s the right thing to do. Let’s us go do that.”

    TGR: Really? Economic recovery worldwide will not come from the United States?

    DG: Well, if we don’t recover, the rest of the world won’t, but we won’t be the first. What I am saying is that some smaller country will do the right things faster than we do.

    TGR: Isn’t what Australia does irrelevant to what the U.S. needs to do?

    DG: No, it’s dramatically relevant. If Australia starts to do things properly—if Australia were to suddenly come out and slash taxes and go to a flat tax and cut paperwork by 50% and it’s economy starts to turn higher, wouldn’t that be a good incentive for us to do the same thing?

    TGR: But that implies that every country should use the same economic strategy; that we’re all basically at the same state in our economic development. That what will work for Zimbabwe or China will work for the U.S.

    DG: I think anywhere in the world that you have smaller government, lesser taxes—every time you do that, that economy, no matter where it is, does better. It does better. And anywhere you put higher taxes and more government, that economy usually does worse. It does; it just does.

    TGR: You’re looking at it from a macro point of view.

    DG: I’m looking at it just from an economic point of view, whether macro or micro. Look at Ireland, for example. Why was Ireland for many years the “Celtic Tiger” of Europe? Their tax regime was lower than the rest of Continental Europe. The Germans and the French, who are statists, who are collectivists, instead of emulating the Irish, kept trying to drag Ireland down to their level. Now, that was stupid, wasn’t it? That didn’t work.

    My favorite example is New Zealand back in the 1980s. Every year from the 1970s through the 1980s, New Zealand ran a budget deficit and a trade deficit. Every year the IMF said, “You must raise your taxes and cut the value of your currency to try to balance your budget and run a trade surplus.” So New Zealand would do that, and every year the deficit got worse and their trade imbalance grew larger. They did this for five or six years and it got worse every time they did it—every time they followed the IMF tactic of raising taxes and cutting the value of the currency.

    Finally New Zealand Treasury Secretary Graham Scott (Secretary from 1986–93) told the IMF, “Don’t ever come back here. Everything you’ve told us to do has proven to be utterly worthless. We’re going the other way. We’re slashing taxes.” From I think a 75% marginal tax rate, over the course of five years, they cut it to like 18%. And every year they took in more money—more money—every time they cut taxes they took in more money. And when they strengthened their currency, their exports picked up; as their currency got stronger, they exported more stuff. Isn’t it fascinating?

    TGR: That’s the paradox.

    DG: It got to be so interesting—it wasn’t Gordon Campbell—I’m trying to remember; I just went blank for his name. But he passed the baton on to a woman by the name of Ruth Richardson, who was a little more leftwing than her predecessor—the tax rate was down to a flat 18%. They asked her if she was going to cut it again, and she said, “You know, I don’t think I can cut it any more; I can’t spend the revenue I am taking in now.” It’s a classic line. So, what does she do? They actually started raising the tax rates again, and what happened? Tax revenues fell.

    But New Zealand had taught a lot of people that cutting taxes and strengthening your currency is the best thing you can do. And as they were cutting taxes, they kept cutting prohibitions and regulations; they kept chopping them back. They were the real precursors of the Free Market Movement that developed in the early ’90s and the early ’00s.

    TGR: Let’s hope the United States learns from that. Obama announced his tax cuts; we’ll see what comes of that.

    DG: He said entitlements are even on the table. Can you imagine a Republican ever making that statement? They would boo him. But here’s a leftist who puts it on the table. He can say that.

    Irreverent, outspoken, entertaining, sardonic and—in his own words, a “glib S-O-B,” Dennis Gartman has been producing The Gartman Letter for more than 20 years. His daily commentary on global capital markets as well as short- and long-term perspectives on political, economic and technical circumstances goes to leading banks, brokerage firms, hedge funds, mutual funds, energy companies and grain traders around the world.

    A 1972 graduate of the University of Akron (Ohio), he undertook graduate studies at North Carolina State University in Raleigh (where he remains involved as a member of the Investment Committee.

    Before devoting himself full-time to The Gartman Letter, Dennis analyzed cotton supply and demand in the U.S. textile industry as an economist for Cotton, Inc.; traded foreign exchange and money market instruments at North Carolina National Bank, went to Chicago to serve as A.G. Becker & Company’s Chief Financial Futures Analyst and then become an independent member of the Chicago Board of Trade, dealing in treasury bonds and notes and GNMA futures contracts; and moved to Virginia to run Virginia National Bank’s futures brokerage operation.

    In addition to publishing The Gartman Letter, Dennis delivers speeches to audiences around the world (including central banks, finance ministries, and trade groups), teaches classes on derivatives for the Federal Reserve Bank’s School for Bank Examiners, and makes frequent guest appearances on CNBC, ROB-TV and Bloomberg television.

    ==============================================

    Finally for the Technical Analysis Junkies (like me!) here is an awesome article!

    ===============================================

    Market Leaders Hesitate on Stimulus Plan— Seeking Alpha

    By: Chris Ciovacco of Ciovacco Capital Management

    Proposed Economic Stimulus Plan May Not Stimulate Much

    The new administration is proposing an $825 billion “stimulus” plan. Most of the package is geared toward helping existing or expanded programs such as unemployment assistance, law enforcement, food stamps, etc. Much of this spending will “save” existing jobs or keep existing programs already in place. This may help prevent things from getting worse, but it will offer little in the way of providing new stimulation for the economy. Another large portion of the stimulus plan is in the form of tax cuts. While depreciation incentives may spur some new business spending, credits to individuals may offer little incentive to spend given the state of their balance sheets and concerns about employment. After all the hype about infrastructure spending, only about 25% of the package is geared toward this area.

    Tug of War Between Liquidity and Economic Weakness

    The chart below was created on the website of the Federal Reserve Bank of St. Louis. It shows the eye-popping expansion of the money supply as financial institutions have swapped securities and other “assets” for cash via borrowing from the Federal Reserve. Borrowing prior to this crisis is barely visible on the graph. Recent borrowing is an extreme example of the term “spike” on a graph. Despite the never before seen tapping of the Fed, financial assets show little evidence of reflation taking place.

    Borrowing From FEDU.S. Stocks: Downtrend Remains In Place

    If you compare the long S&P 500 ETF (SPY) to the short S&P 500 ETF (SH), it is clear the short side of the market is in better shape. There is little in the way of fundamentals, except hope of government bailouts, to expect any change to these trends.

    S&P 500 ETF - SPY - LongRecent weakness in the S&P 500 Index leaves open the possibility that we will revisit the November 2008 lows around 740 (intraday). If those lows do not hold, a move back toward 600 becomes quite possible. On Friday (1/23/09) the S&P 500 closed at 832. A drop back to 740 is a loss of 11%. A move back to 600 would be a drop of 28%. These figures along with the current downtrend highlight the importance of principal protection and hedging strategies. SH, the short S&P 500 ETF, can be used to protect long positions or to play the short side of the market.

    2009 Investing Deflation Inflation Outlook StrategyGold & Gold Stocks Still Face Hurdles

    Friday’s big moves in gold (GLD) and gold mining stocks (GDX) have some calling a new uptrend. While recent moves have been impressive some hurdles remain.

    Gold At Important LevelsGold stocks (GDX) look a little stronger than gold, but any entry in the market should be modest in size. If $38.88 can be exceeded, our confidence would increase and possibly our exposure.

    2009 Investing Deflation Inflation Outlook StrategyRun In Treasuries Is Long In The Tooth

    Investments with the highest probability of success are those with positive fundamentals and positive technicals. Conversely, the least attractive investments have poor fundamentals and poor technicals. With the U.S. government issuing new bonds at an alarming rate, a continued deterioration in the technicals could signal the end of the Treasury bubble.

    2009 Investing Deflation Inflation Outlook StrategyTBT offers a way to possibly profit from the negative forces aligning against U.S. Treasury bonds.

    2009 Investing Deflation Inflation Outlook StrategyStrength In Bonds Shows Little Fear of Price Inflation

    The government’s policies are attempting to stem the tide of falling asset prices. They hope to reinflate economic activity along with asset prices. The charts here show:

    •  
      • A weak stock market (see SPY above), and
      • An improvement in many fixed income investments (below: LQD, AGG, BMT, PHK, and AWF).

    Weak stocks and stronger bonds tell us the government’s reflation efforts are thus far not working. If concerns about deflation remain more prevalent than concerns about inflation, fixed income assets may offer us an apportunity. With money markets, CDs, and Treasuries paying next to nothing, we may be able to find improved yields in the following:

    •  
      • LQD – Investment Grade Corporate Bonds
      • AGG – Investment Grade Bonds – Diversified
      • BMT – Insured Municipal Bonds
      • PHK – High Yield Bonds
      • AWF – Emerging Market Government Bonds

    With the economy in a weakened and fragile state, we need to tread carefully in these markets. Some key levels which may improve the odds of success are shown in the charts below. Erring on the side of not taking positions is still prudent. The markets remain in a “prove it to me” mode where we would like to see the markets move through key levels before putting capital at risk.

    2009 Investing Deflation Inflation Outlook Strategy 2009 Investing Deflation Inflation Outlook Strategy 2009 Investing Deflation Inflation Outlook Strategy 2009 Investing Deflation Inflation Outlook Strategy 2009 Investing Deflation Inflation Outlook StrategyU.S. Dollar Remains Firm

    From a technical perspective, the dollar continues to look strong. Its strength supports the continuation of concerns about deflation, rather than inflation.

    2009 Investing Deflation Inflation Outlook StrategyDisclosure: Ciovacco Capital Management (CCM) and their clients hold positions in SH, GLD, and PHK. CCM may take long positions in GDX, TBT, LQD, AGG, BMT, and AWF.

    =============================================

    Catch the New Bull! – Buy Gold Online – Safely, quickly, and at low prices, guaranteed! Bullion Vault.com

    =============================================

    Nothing in today’s post should be considered as an offer to buy or sell any securities or other investments, it is presented for informational purposes only. As a good investor, consult you Investment Advisor,  Do Your Due Diligence, Read All Prospectus/s and related information before you make any investments. – jschulmansr

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    Latest Obama Eligibility News and More…

    25 Sunday Jan 2009

    Posted by jschulmansr in 2008 Election, Achievement, Barack Obama, bible, communism, Electoral College, id theft, John McCain, Presidential Election, socialism, Today, u.s. constitution, U.S. Dollar, Uncategorized

    ≈ 2 Comments

    Tags

    2008 Election, Barack Dunham, Barack Hussein Obama, Barack Obama, Barry Dunham, Barry Soetoro, capitalism, Chicago Tribune, Columbia University, Currency and Currencies, D.c. press club, Electoral College, Electors, Finance, fraud, Free Speech, gold, Harvard Law School, hawaii, id theft, Indonesia, Indonesian Citizenship, Investing, investments, Joe Biden, John McCain, Latest News, legal documents, Markets, name change, natural born citizen, Oath of Allegiance of the President of the United State, Occidental College, Phillip Berg, Politics, poser, Presidential Election, Sarah Palin, socialism, Stocks, Today, treason, u.s. constitution, U.S. Dollar, Uncategorized, voter fraud, we the people foundation

    Well here we are, Obama’s 1st act was to flub his oath of office, there are still cases on Obama eligibility filtering up. One thing we should be aware of, when has it become legal for a person to consult with the judges who are going to hear and potentially try his case? Once again total dis-regard and disdain for the Constitution. Yes, I know it was a “courtesy” trip, however, timed conveniently before the judges are set to see if the latest eligibility case has merit? And was there a secret session? Watch the 1st Video First! ***Eye Opening-***jschulmansr

    ==================================================

    Where Is Your Birth Certificate? Mr Open President?

    ==================================================

    Religious Leader On Obama’s Birth Certificate

    Dr. James David Manning, PhD (ATLAH Church) is angered by Barack Obama’s failure to present his Birth Certificate.


    ================================================

    Why The Oath Was Retaken

    By: Joseph Farah World Net Daily

    When Supreme Court Chief Justice John Roberts and President-elect Barack Obama flubbed the oath of office on inauguration day, WND was pilloried for prominently noting the problem.

    “Oh, come on,” wrote one emailer. “This is just being nitpicky. Your antipathy for Obama is showing in your willingness to jump on him for everything.”

    Yet, one day later, Roberts and Obama agreed to repeat the oath of office – this time in a more private setting and following the specific requirements of the U.S. Constitution.

    Maybe paying strict attention to the Constitution isn’t nitpicky after all?

    Article II, Section 1 of the Constitution stipulates the exact 35 words of a proper oath of office: “I do solemnly swear (or affirm) that I will faithfully execute the Office of President of the United States, and will to the best of my Ability, preserve, protect and defend the Constitution of the United States.”

    Since some of those words were transposed and left out of the original oath on the day of inauguration, Roberts feared the matter could become a point of contention. Twice before in American history presidents Chester A. Arthur and Calvin Coolidge needed to repeat their oaths because of similar mistakes.

    I’m glad someone still takes at least part of the Constitution seriously. Unfortunately, another part of Article II, Section 1 was completely trampled upon during the 2008 election process and right up through the swearing in ceremony. That is the issue of whether Obama is indeed, as the Constitution requires, a “natural born citizen.” Perhaps he is, perhaps he isn’t. Perhaps we’ll never know, because no controlling legal authority has ever required proof and publicly affirmed its validity.

    Again, when such issues were raised, many have suggested it’s simply nitpicking.

    But the Constitution either means precisely what it says or it doesn’t. If we’re going to fudge on such simple, straightforward matters as eligibility requirements for the president and oaths of office, where does the fudging end?

    And, conversely, if it is so critically important to recite the specific and exact 35 words of the oath of office as delineated in the Constitution, why was it not important to establish Obama’s eligibility beyond any shadow of a doubt?

    Should this matter now be dropped?

    Or should it be relentlessly pursued?

    What would happen now if it were determined that Obama was not, in fact, constitutionally eligible to become president? It’s certainly not a simple matter like restating the oath.

    On the other hand, because of the enormous potential for raising a constitutional crisis, should the American people just sweep the matter under the rug

    ?

    These are the tough questions we have been left with by Obama and all those in authority who allowed this question of eligibility to fester for so long.

    Once again, they provide us with some practical arguments for taking the Constitution seriously and literally in all matters. The Constitution is the bedrock of our system

    of governance. It is the tie that binds our nation together. It is the foundation for the rule of law in America.

    There is nothing frivolous about its requirements.

    There is nothing nitpicky about adhering to them.

    So, I’ll ask the pointed question one more time: “Where’s the birth certificate?”

    Where’s the proof Barack Obama was born in the U.S. or that he fulfills the “natural-born American” clause in the Constitution? If you still want to see it, join more than 200,000 others and sign the petition demanding proof of eligibility now!

    Maybe we need a national movement of people asking the same question in venue after venue – anywhere and everywhere the new president appears. Maybe we need rallies on the National Mall where ordinary Americans bring copies of their birth certificates and display them proudly with accompanying signs that say: “I’ll show you mine if you show me yours.”

    Do we need a national uprising of the American people simply to get the Constitution observed and taken seriously and literally?

    It seems like a lot to ask.

    Yet, on the other hand, is there a more important national cause?

    ===============================================

    Okay this part of the constitution is important but proving eligibility to be the President under the constitution is not? I am confused!

    ===============================================

    President’s meeting with Judges questioned

    Lawyer challenging eligibility raises issue of secret conference

    Source: World Net Daily

    A lawyer working on a case before the U.S. Supreme Court that challenges the eligibility of President Obama is raising concerns over a meeting between the defendant in the case and the judges who are expected to review it.

    The case is one of many brought before U.S. courts that allege Obama doesn’t meet the “natural born” requirement of the U.S. Constitution for the president. It’s one of about half a dozen that have reached the U.S. Supreme Court, which already has declined to grant hearings to several cases.

    Orly Taitz, whose case is scheduled to be heard tomorrow in a conference among justices – a private meeting at which they review cases and decide whether they should hold a hearing – confirmed on her website today that a supplemental brief in her arguments had been distributed.

    But the website also reported she “had to explain … many of us citizens are also concerned about the eight out of nine justices meeting privately with Mr. Obama (while the cases are pending).”

    The blog continued, “No reporters were allowed. No attorneys were invited on behalf of the plaintiffs. This causes many of us citizens to question the rules of judicial ethics and causes us to question the impartiality on behalf of the justices.”

    The report said “quite a number of people” have raised their questions with their U.S. representatives over the issues.

    According to a CBS report, Obama visited the Supreme Court before his inauguration at the invitation of Chief Justice John Roberts. The report described it as a protocol visit.

    According to a separate published report, Obama and then-Vice President-elect Joe Biden met in a court conference room with Roberts and seven other justices for about 45 minutes.

    The report said the only absent justice was Samuel Alito.

    Where’s the proof Barack Obama was born in the U.S. or that he fulfills the “natural-born American” clause in the Constitution? If you still want to see it, join more than 215,000 others and sign the petition demanding proof of eligibility now!

    The supplemental documents in the Taitz case cite an executive order concerning qualifications issued by President Bush Jan. 16.

    “This action is seeking the mandate for the U.S. State Department, the FBI and the Director of the Personnel Department to seek the documents for verifying Obama’s legitimacy as president and also his citizenship of the United States,” the blog reported.

    The Supreme Court document reveals that the Taitz case is scheduled for conference tomorrow, and her supplemental briefs have been distributed to the justices.

    Taitz said her arguments rest on precedents from both the California Supreme Court, which years ago removed a candidate for president from the ballot because he was only 34, and the U.S. Supreme Court’s affirmation of the ruling. The Constitution requires a president to be 35. Her case raises the issue of Obama’s birthplace and citizenship status, which also are specified in the Constitution.

    The lawsuits allege in various ways that Obama does not meet the “natural born citizen” clause of the U.S. Constitution, Article 2, Section 1, which reads, “No Person except a natural born Citizen, or a Citizen of the United States, at the time of the Adoption of this Constitution, shall be eligible to the Office of President.”

    Some allege his birth took place in Kenya, and his mother was a minor at the time of his birth – too young to confer American citizenship. They argue Obama’s father, Barack Obama Sr., was a Kenyan citizen subject to the jurisdiction of the United Kingdom at the time and would have handed down British citizenship.

    There also are questions raised about Obama’s move to Indonesia when he was a child and his attendance at school there when only Indonesian citizens were allowed and his travel to Pakistan in the ’80s when such travel was forbidden to American citizens.

    One case, handled by Gary Kreep of the United States Justice Foundation, is seeking Obama’s school records from Occidental College, which could reveal if Obama attended class on aid intended for foreign students.

    Another lawyer working on similar allegations, Philip J. Berg, has written to Congress seeking an investigation, while Taitz’s filings have been before the U.S. Supreme Court.

    Berg, whose information is on his ObamaCrimes.com website, said the issue isn’t going to disappear.

    Others agreed.

    “Should Senator Obama be discovered, after he takes office, to be ineligible for the Office of President of the United States of America and, thereby, his election declared void,” argues a California case brought on behalf of Ambassador Alan Keyes, also a presidential candidate. “Americans will suffer irreparable harm in that (a) usurper will be sitting as the President of the United States, and none of the treaties, laws, or executive orders signed by him will be valid or legal.”

    WND twice has organized opportunities for readers to send FedEx letters to the Supreme Court, asking for consideration of the issue on its merits.

    The most recent campaign generated 12,096 messages, following the earlier effort that resulted in 60,128 letters.

    Obama has claimed in his autobiography and elsewhere that he was born in Hawaii in 1961 to parents Barack Hussein Obama Sr., a Kenyan national, and Stanley Ann Dunham, a minor. But details about which hospital handled the birth and other details provided on the complete birth certificate have been withheld by Obama despite lawsuits and public demands for release.

    Meanwhile, a separate report has emerged in the Buffalo, N.Y., News about a woman who said she recalled being told about Obama’s birth in Hawaii. Barbara Nelson reported she was having a dinner with Dr. Rodney T. West, an obstetrician, when he discussed the birth of a baby boy to Stanley Ann Dunham, Obama’s mother.

    She said she later taught Obama as a high school student in Hawaii.

    WND senior reporter Jerome Corsi went to both Kenya and Hawaii prior to the election to investigate issues surrounding Obama’s birth. But his research and discoveries only raised more questions.

    The biggest question was why, if a Hawaii birth certificate exists as his campaign has stated, Obama hasn’t simply ordered it made available to settle the rumors.

    The governor’s office in Hawaii said there is a valid certificate but rejected requests for access and left ambiguous its origin: Does the certificate on file with the Department of Health indicate a Hawaii birth or was it generated after the Obama family registered a Kenyan birth in Hawaii?

    =================================================

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    Latest Obama News and The Ad “They” Don’t Want You To See!

    10 Saturday Jan 2009

    Posted by jschulmansr in 2008 Election, Barack Obama, communism, Conservative, Conservative Resistance, Currencies, currency, Currency and Currencies, dollar denominated, dollar denominated investments, economic, economic trends, economy, Electoral College, Finance, financial, Free Speech, Fundamental Analysis, futures, futures markets, id theft, inflation, Investing, investments, Latest News, market crash, Markets, Presidential Election, resistance, socialism, Today, u.s. constitution, U.S. Dollar, Uncategorized

    ≈ 2 Comments

    Tags

    2008 Election, Barack Dunham, Barack Hussein Obama, Barack Obama, Barry Dunham, Barry Soetoro, capitalism, Chicago Tribune, Columbia University, Currency and Currencies, D.c. press club, Electoral College, Electors, Finance, fraud, Free Speech, gold, Harvard Law School, hawaii, id theft, Indonesia, Indonesian Citizenship, Investing, investments, Joe Biden, John McCain, Latest News, legal documents, Markets, name change, natural born citizen, Oath of Allegiance of the President of the United State, Occidental College, Phillip Berg, Politics, poser, Presidential Election, Sarah Palin, socialism, Stocks, Today, treason, u.s. constitution, U.S. Dollar, Uncategorized, voter fraud, we the people foundation

    Why are the major news networks refusing to allow the Obama ad below? Yes, even Fox News has refused to sell airtime to run the ad- Why? The cases and lawsuits keep trickling their way to the Supreme Court, so his “eligibility” issues will continue even after he is inaugurated. Obama- “Please just show us the Birth Certificate as any patriotic citizen would do when asked.” Why are you hiring teams at last count (3) different legal teams to prevent your birth certificate from being produced? What is Obama hiding? Could it truly be he is not eligible to be the President of The United States? Fellow citizens is our Constitution no longer important or relevant? You decide- read below…- jschulmansr

    Eligibility Issue to Follow Obama into the Oval Office – World Net Daily

    By Bob Unruh
    © 2009 WorldNetDaily

    A legal challenge that alleges Barack Obama isn’t a “natural born” citizen and therefore constitutionally ineligible to be president of the United States will follow the Democrat into the Oval Office, with a U.S. Supreme Court conference on the dispute set after the Jan. 20 inauguration.

    The court’s website today announced that a fourth case on the issue will be reviewed by justices Jan. 23.

    The court previously heard two cases in conference – private meetings at which justices consider which cases to accept – and denied both Cort Wrotnowski and Leo Donofrio full hearings.

    The court now has a conference scheduled Friday on a case raised by attorney Philip Berg, with another conference on a matter related to the same Berg case on Jan. 16. Then today the court website revealed the case Gail Lightfoot et al v. Debra Bowen, California Secretary of State, will be heard in conference Jan. 23.

    The case initially appeared at the Supreme Court Dec. 12 but was rejected. It then was submitted to Chief Justice John Roberts, and today’s notice confirmed it was distributed for the Jan. 23 conference.

    Orly Taitz, the California attorney handling the case, said, “The timing of this decision by the chief justice of the Supreme Court, John Roberts, is absolutely remarkable. On January 7, one day before the January 8 vote by Congress and Senate whether to approve or object to the electoral vote of Barack Hussein Obama, aka Barry Soetoro, as president of the United States, Chief Justice Roberts is sending a message to them: ‘Hold on, not so fast, there is value in this case, read it.'”

    She noted the available procedure during congressional review for a member of Congress to object to the Electoral College results and demand documentation regarding Obama’s citizenship.

    Join the campaign to urge the Supreme Court to take the eligibility question seriously by FedExing the justices.

    “Each and every member of the U.S. Congress and Senate owes it to 320 million American citizens to do his due diligence and demand all necessary records,” she said.

    Members of Congress, she said, “can spend a day or two of their time defending this Constitution, reviewing necessary documents, in order to see if Barack Hussein Obama is a natural born citizen…

    “This is the message that the chief justice of the Supreme Court is sending to them. … (The) truth will come out, no matter how many millions Obama is spending to hide it,” she said.

    The plaintiffs in the case include a vice presidential candidate on the California election ballot, four electors and two others.

    She said her case was rejected by the California Supreme Court with a single-word decision, “Denied.” And she said her arguments rest on precedents from both the California Supreme Court, which years ago removed a candidate for president from the ballot because he was only 34, while the Constitution requires candidates to be 35, and the U.S. Supreme Court’s affirmation of that ruling.

    “We’ll see what happens,” she told WND. “This is not going to go away.”

    WND has reported extensively on questions raised about Obama’s eligibility, and the resulting lawsuits. The Taitz case is the fourth to earn a hearing at a Supreme Court conference.

    Twice before the justices have heard the questions, in cases brought by Wrotnowski and Donofrio, and twice before they’ve decided to ignore them.

    The result is that the questions remain unanswered and cloud the impending presidency of a man whose relatives have reported he was born in Kenya and who has decided, for whatever reason, not to release a bona fide copy of his original birth certificate in its complete form.

    The lawsuits allege Obama does not meet the “natural born citizen” clause of the U.S. Constitution, Article 2, Section 1, which reads, “No Person except a natural born Citizen, or a Citizen of the United States, at the time of the Adoption of this Constitution, shall be eligible to the Office of President.”

    Some allege his birth took place in Kenya and his mother was a minor at the time of his birth – too young to confer American citizenship. They report Obama’s father, Barack Obama Sr., was a Kenyan citizen subject to the jurisdiction of the United Kingdom at the time, and would have handed down British citizenship.

    Where’s the proof Barack Obama was born in the U.S. or that he fulfills the “natural-born American” clause in the Constitution? If you still want to see it, join more than 200,000 others and sign the petition demanding proof of eligibility now!

    There also are questions raised about Obama’s move to Indonesia when he was a child and his attendance at school there when only Indonesian citizens were allowed in that nation’s schools and his travel to Pakistan in the ’80s when such travel was forbidden to American citizens.

    On Friday the justices will consider Philip J. Berg’s Petition for Writ of Certiorari.

    “This is a historic occasion that will impact the office of the president of the United States as never before. No one has ever brought an action against a president-elect candidate challenging his eligibility to serve based on the ‘natural born’ citizen requirement provided in the United States Constitution, Article II Section 1,” said a statement on Berg’s ObamaCrimes.com website.

    Berg suggested if Obama “is allowed to be sworn in as president of the United States, there will be substantial and irrevocable harm to the stability of the United States of America and to its citizens.”

    “Because Barack Obama is not a ‘natural born’ citizen as required by the United States Constitution, then all of his actions as president would be null and void,” Berg said.

    Last month, WND reported similar concerns raised in a separate lawsuit filed in California.

    “Should Senator Obama be discovered, after he takes office, to be ineligible for the Office of President of the United States of America and, thereby, his election declared void,” argues a case brought on behalf of Ambassador Alan Keyes, also a presidential candidate. “Americans will suffer irreparable harm in that (a) usurper will be sitting as the President of the United States, and none of the treaties, laws, or executive orders signed by him will be valid or legal.”

    Because of the high stakes, WND earlier launched a letter campaign to contact Electoral College members and urge them to review the controversy.

    That followed a campaign that sent more than 60,000 letters by overnight delivery to the U.S. Supreme Court when one case contesting Obama’s eligibility for the Oval Office was pending.

    A separate petition, already signed by more than 200,000 also is ongoing asking authorities in the election to seek proof Obama was born in the U.S. or that he fulfills the “natural-born American” clause in the Constitution.

    WND senior reporter Jerome Corsi went to both Kenya and Hawaii prior to the election to investigate issues surrounding Obama’s birth. But his research and discoveries only raised more questions.

    The biggest question was why, if a Hawaii birth certificate exists as his campaign has stated, Obama hasn’t simply ordered it made available to settle the rumors.

    The governor’s office in Hawaii said there is a valid certificate but rejected requests for access and left ambiguous its origin: Does the certificate on file with the Department of Health indicate a Hawaii birth or was it generated after the Obama family registered a Kenyan birth in Hawaii?

    Join the campaign to urge the Supreme Court to take the eligibility question seriously by FedExing the justices.

    ===============================================

    Watch The Obama commercial they don’t want you to see- FOX, CNN, MSNBC questioning Barak’s Eligibility refuse ads

    Source: World Net Daily

    Barack Obama’s campaign officials and transition office repeatedly have rejected reporters’ requests for comment on questions raised over his lack of documentation regarding his birth and the resulting concerns over his eligibility to be president. Now a number of media organizations apparently don’t want questions raised either.

    WND columnist Janet Porter told WND she found that out when her organization, Faith2Action.org, tried to purchase airtime to publicize information about the eligibility concerns.

    She told WND that national networks that refused to sell her time for a 60-second commercial included CNBC, MSNBC, Headline News, CNN and Fox. Washington, D.C., outlets for the same organizations did the same.

    “With the date for congressional approval (of the Electoral College today), we wanted them to have access to the facts,” she told WND. “Congress is sworn to uphold the Constitution.”

    She said the donors who contributed the funding that was to be used for the ads were being contacted to find out whether they wanted to reach another direction in the media.

    The ad to be broadcast already is available on YouTube, and also is embedded here:

    “Heard rumors about Barack Obama’s citizenship? These are the facts,” the ad states.

    It cites a statement from the president-elect’s paternal grandmother that she was present at his birth in Kenya, his refusal to release his original birth certificate, his attendance at school in Indonesia “as Barry Soetoro when only Indonesia citizens were permitted to attend,” and Obama’s travel to Pakistan in 1981 “when it was illegal to enter as a U.S. citizen.”

    Join the campaign to urge the Supreme Court to take the eligibility question seriously by FedExing the justices.

    It concludes, “Our Constitution still matters.”

    “As requested, we backed up every sentence of this ad, and still it was rejected,” Porter said. “What does that say about freedom of speech when we not only cannot count on the media to cover the story, but we can’t even buy time to publicize what may be the biggest story of the century.”

    She raised several questions about the issue in her recent column.

    “What if an impostor from another country ran for the presidency and won?” she asks. “What if the media blocked any news of his birthplace and citizenship? What if the media censorship even blocked paid advertising which tried to expose it?

    “What if no one had the courage to challenge or verify it? What if he was inaugurated illegally? What if the military had to answer to a commander in chief who was illegitimate? What if every law he signed was invalid?”

    And, she wonders, “What if it all happened on our watch?”

    WND reported the U.S. Supreme Court has scheduled Friday a conference – a private meeting at which justices consider whether to take individual cases – on a lawsuit challenging Obama’s eligibility.

    Twice before the justices have heard the questions, and twice before they’ve decided to ignore them.

    The lingering questions continue to leave a cloud over the impending presidency of a man whose relatives have reported he was born in Kenya and who has decided, for whatever reason, not to release a bona fide copy of his original birth certificate in its complete form.

    Multiple lawsuits have been filed around the nation alleging Obama does not meet the “natural born citizen” clause of the U.S. Constitution, Article 2, Section 1, which reads, “No Person except a natural born Citizen, or a Citizen of the United States, at the time of the Adoption of this Constitution, shall be eligible to the Office of President.”

    Some of the legal challenges have alleged Obama was not born in Hawaii, as he insists, but in Kenya. The woman identified by Obama as his American mother, the suits contend, was too young at the time of his birth to confer American citizenship to her son under the law at the time – especially if it took place in a foreign country and the man identified as his father, Barack Obama Sr., was a Kenyan citizen.

    Where’s the proof Barack Obama was born in the U.S. or that he fulfills the “natural-born American” clause in the Constitution? If you still want to see it, join more than 200,000 others and sign the petition demanding proof of eligibility now!

    Other challenges also have focused on Obama’s citizenship through his father, a Kenyan subject to the jurisdiction of the United Kingdom at the time of his birth, thus making him a dual citizen. Such cases contend the framers of the Constitution excluded dual citizens from qualifying as natural born.

    Several details of Obama’s past have added twists to the question of his eligibility and citizenship, including his family’s move to Indonesia when he was a child, his travel to Pakistan in the ’80s when such travel was forbidden to American citizens and conflicting reports from Obama’s family about his place of birth.

    On Friday the justices will consider Philip J. Berg’s Petition for Writ of Certiorari.

    “This is a historic occasion that will impact the office of the president of the United States as never before. No one has ever brought an action against a president-elect candidate challenging his eligibility to serve based on the ‘natural born’ citizen requirement provided in the United States Constitution, Article II Section 1,” said a statement on Berg’s ObamaCrimes.com website.

    Berg suggested if Obama “is allowed to be sworn in as president of the United States, there will be substantial and irrevocable harm to the stability of the United States of America and to its citizens.”

    “Because Barack Obama is not a ‘natural born’ citizen as required by the United States Constitution, then all of his actions as president would be null and void,” Berg said.

    Last month, WND reported similar concerns raised in a lawsuit filed in California.

    “Should Senator Obama be discovered, after he takes office, to be ineligible for the Office of President of the United States of America and, thereby, his election declared void,” argues a case brought on behalf of Ambassador Alan Keyes, also a presidential candidate. “Americans will suffer irreparable harm in that (a) usurper will be sitting as the President of the United States, and none of the treaties, laws, or executive orders signed by him will be valid or legal.”

    Berg, who has another case on the issue pending on behalf of a retired military officer, earlier stated, “I am determined, on behalf of the 320 million citizens in the United States, to see that ‘our U.S. Constitution’ is followed. Specifically, in the case of Soetoro a/k/a Obama, does he meet the constitutional qualifications for president?

    “I am appalled that the mainstream media continue to ignore this issue as we are headed to a ‘constitutional crisis.’ There is nothing more important than our U.S. Constitution and it must be enforced,” he said.

    The Supreme Court also has another hearing on an issue raised by Berg for Jan. 16, and the Supreme Court just confirmed today yet another conference is scheduled Jan. 23 on a separate case, this one handled by California attorney Orly Taitz, challenging Obama’s eligibility.

    Because of the high stakes, WND earlier launched a letter campaign to contact Electoral College members and urge them to review the controversy.

    That followed a campaign that sent more than 60,000 letters by overnight delivery to the U.S. Supreme Court when one case contesting Obama’s eligibility for the Oval Office was pending.

    A separate petition, already signed by more than 200,000 also is ongoing asking authorities in the election to seek proof Obama was born in the U.S. or that he fulfills the “natural-born American” clause in the Constitution.

    WND senior reporter Jerome Corsi went to both Kenya and Hawaii prior to the election to investigate issues surrounding Obama’s birth. But his research and discoveries only raised more questions.

    The biggest question was why, if a Hawaii birth certificate exists as his campaign has stated, Obama hasn’t simply ordered it made available to settle the rumors

    The governor’s office in Hawaii said there is a valid certificate but rejected requests for access and left ambiguous its origin: Does the certificate on file with the Department of Health indicate a Hawaii birth or was it generated after the Obama family registered a Kenyan birth in Hawaii?

    ====================================================

    Join The Resistance

    This group is not intended to encourage animosity or malice toward President Obama or to bolster personal, ad hominem attacks so often used in political discourse.

    On the contrary, it is imperative that conservatives maintain a love for country and respect for our institutions as we defend this nation against the threats posed by the Obama Administration. Our disagreements with President Obama must be based on ideology and public policy, not personal attacks. From this firm foundation, we can mount a patriotic, resilient, conservative resistances to Obama’s agenda.

    Specifically we resist:
    • Wealth distribution and higher taxes
    • Government takeover of more and more of our lives
    • Open borders, amnesty and undermining of our uniquely American culture
    • Taxpayer-funded abortions and a radical anti-life agenda
    • The weakening of our military and retreat in the War on Terror
    • Socialized health care
    • The end of marriage and the exaltation of LGBT rights
    • International taxation and submitting our nation to the ideals of “global citizenship”
    • The Courts stacked with leftist judges who betray our Constitution
    • Weakening of the 2nd Amendment through unconstitutional gun laws that take away our firearms and our ability to defend our family, property, and ourselves

    Sign The Petition and Find Out More


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    The Obama Ad Nobody Wants You To See? – Why?

    09 Friday Jan 2009

    Posted by jschulmansr in 2008 Election, Barack Obama, communism, economy, Electoral College, Free Speech, Fundamental Analysis, id theft, Latest News, Presidential Election, socialism, Stocks, u.s. constitution, U.S. Dollar, Uncategorized

    ≈ Comments Off on The Obama Ad Nobody Wants You To See? – Why?

    Tags

    2008 Election, Barack Dunham, Barack Hussein Obama, Barack Obama, Barry Dunham, Barry Soetoro, capitalism, Chicago Tribune, Columbia University, Currency and Currencies, D.c. press club, Electoral College, Electors, Finance, fraud, Free Speech, gold, Harvard Law School, hawaii, id theft, Indonesia, Indonesian Citizenship, Investing, investments, Joe Biden, John McCain, Latest News, legal documents, Markets, name change, natural born citizen, Oath of Allegiance of the President of the United State, Occidental College, Phillip Berg, Politics, poser, Presidential Election, Sarah Palin, socialism, Stocks, Today, treason, u.s. constitution, U.S. Dollar, Uncategorized, voter fraud, we the people foundation

    Why is Obama still refusing to come up with his Birth certificate and just end all of this? Again I ask “Obama what are you hiding?”. Check Out this video on the ad “They” don’t want you to see! – jschulmansr

     

    Come On Obama- Give It Up! (the Birth Certificate)

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    The U.S. Dollar and Deficit-Gold Relationships

    08 Thursday Jan 2009

    Posted by jschulmansr in Bollinger Bands, capitalism, commodities, Copper, Currency and Currencies, deflation, Finance, Fundamental Analysis, gold, hard assets, How To Invest, How To Make Money, Investing, investments, Latest News, Make Money Investing, Markets, mining companies, mining stocks, Moving Averages, oil, platinum, precious metals, silver, small caps, Stocks, Technical Analysis, Today, U.S. Dollar, Uncategorized

    ≈ Comments Off on The U.S. Dollar and Deficit-Gold Relationships

    Tags

    agricultural commodities, alternate energy, Austrian school, banking crisis, banks, bear market, Bollinger Bands, bull market, capitalism, central banks, China, Comex, commodities, communism, Copper, Currencies, currency, deflation, depression, diamonds, dollar denominated, dollar denominated investments, economic, economic trends, economy, financial, Forex, futures, futures markets, gold, gold miners, hard assets, heating oil, India, inflation, investments, Keith Fitz-Gerald, market crash, Markets, mining companies, Moving Averages, natural gas, oil, palladium, Peter Schiff, physical gold, platinum, platinum miners, precious metals, price, price manipulation, prices, producers, production, protection, rare earth metals, recession, risk, run on banks, safety, Saudi Arabia, Sean Rakhimov, silver, silver miners, socialism, sovereign, spot, spot price, stagflation, Technical Analysis, timber, U.S. Dollar, volatility, warrants, Water

    My Note- Gold came roaring back today and being beaten down yesterday, currently Gold is up $15 at $856+ and holding above the $850 level. Today’s articles explore the relationship of the U.S. Dollar, the Deficit and National Debt; and their relationship to Gold prices. If you are not alarmed by the current deficit you should be! Now with Obama predicting a yearly deficit of over 1 Trillion dollars what does this mean for the Economy, the Dollar and the price of Gold? Read On and Find Out… Good Investing – jschulmansr

    Things We Don’t Talk About (But Should); National Debt and the $2 Trillion Deficits- Seeking Alpha

    By: Jonathan O’Shaughnessy of Emerginvest Blog & Emerginvest 

    It has been around for decades, and has been ignored by many for just as long. However, the US national debt stands to finally be thrown into the forefront of political discussion as the record for a single-year deficit looks to be beaten – by threefold.

    According to the government-run TreasuryDirect.gov, US national debt is the largest it has been in history at $10.6 trillion, or $10,638,425,746,293.80. This is at a time when the US is facing the worst economic crisis since the Great Depression, which requires record-shattering government spending to stabilize the faltering economy. In addition, global demand for US national debt is waning as countries world-wide are implementing their own financial stimulus packages. Yet economists are virtually unanimously advocating for radical government spending to stabilize the economy, which leaves future generations of Americans holding extremely large amounts of national debt.

    The problem for the average American is twofold: national debt doesn’t seemingly affect their daily lives and $10.6 trillion is a hard number to conceptualize. After a certain point, the human brain stops comprehending the magnitude of a given number, and simply categorizes it as “extremely large.” Subsequently, there is little public outrage or discussion when the US has run up a few hundred billion dollar deficit in years past. It doesn’t seem to affect their lives, no government projects are cut, and adding $0.2T onto $10.6T seems relatively insignificant.

    However, when viewed in another light, the enormity of the national debt is astonishing. According to the 2007 United States budget, and TreasuryDirect.gov, the interest alone on national debt is approximately $460 billion. It accounts for the second-highest expenditure on the US budget and if the US could forgo paying that interest on national debt for one year, the United States government could:

    1) Pay for the entire education budget of the United States six times over

    2) Reduce federal taxes by 33% for all Americans, or

    3) Write a check to every man, woman, and child in the United States for $1,500.

    Yet, that $460 billion in annual interest looks to grow substantially with looming deficits in the years to come.

    A New York Times article entitled “Obama Warns of Prospect for Trillion-Dollar Deficits,” stated: “President-elect Barack Obama on Tuesday braced Americans for the unparalleled prospect of ‘trillion-dollar deficits for years to come.’” President-elect Obama did not give details about the size of the deficit, but projections place the proposed deficit at close to $1.2 trillion for 2009, shattering the record from President Bush last year at $455B.

    That is not counting the proposed $800B 2-year stimulus package which could easily raise the deficit into the $1.7 trillion range – bringing the national debt to roughly $12.3 trillion by the end of 2009. Assuming deficits run at approximately $1 trillion per year for the next two years, which may or may not be conservative, the US could see its national debt as high as $15 trillion in three years.

    Subsequently, Obama added emphasis on tighter government regulation, quoted in the NYTimes article as saying: “’ We’re not going to be able to expect the American people to support this critical effort unless we take extraordinary steps to ensure that the investments are made wisely and managed well.’” In correlation, he created a new position, chief performance officer, in charge of eradicating government inefficiencies.

    This comes at a time however, when global demand for US debt is falling sharply. A prime example is China, one of the largest creditors to the US, which has heavily curtailed its purchases of US debt in light of the recent financial crisis. Another NYTimes article entitled: “China Losing Taste for Debt from U.S.,” states that: “China’s foreign reserves will increase by $177 billion this year — a large number, but down sharply from an estimated $415 billion last year.” The Chinese government is dealing with their own economic woes – a stock market which has shed two thirds of its value in the last year – and is attempting to implement their own economic stimulus package. Furthermore, the sharp outflow of foreign direct investment in China has further complicated the issue. The situation is similar across the world, as the Emerginvest heat map shows the damage from the past quarter (click to enlarge):

    The lack of global demand for US national debt could put severe pressure on US interest rates in the years to come if demand continues to shrink drastically. However, there is a political buffer, as the article stated that: “China’s leadership is likely to avoid any complete halt to purchases of Treasuries for fear of appearing to be torpedoing American chances for an economic recovery at a vulnerable time, said Paul Tang, the chief economist at the Bank of East Asia. ‘This is a political decision,’ he said. ‘This is not purely an investment decision.’”

    Yet even in the face of significant strain on government debt and sagging global demand, economists are virtually unanimous in calling for exorbitant amounts of government spending to stabilize the economy. Yet another NYTimes article entitled: “A Crisis Trumps Constraint,” states that: “To a degree that would have been unimaginable two years ago, economists and politicians from across the political spectrum have put aside calls for fiscal restraint and decided that Congress should spend whatever it takes to rescue the economy,” in addition to: “’It pains me to say that because I am a fiscal conservative who dislikes budget deficits and increases in government spending,’ Mr. Feldstein told the lawmakers. But he said, ‘Reviving the economy requires major fiscal stimulus from tax cuts and increased government spending.’”

    Therefore, it looks as if the U.S. is inexorably tied to unparalleled government spending in the short term, nearly guaranteeing a national debt of over $14 trillion within a few years. The Obama administration has hinted at overhauling Medicare and Social Security as ways of dampening the gargantuan deficits, but the method, and certainly the net effect of such an undertaking remains ambiguous until the budget is revealed. It seems as if, in the interest of short term self-preservation, future generations of Americans will be inevitably saddled with incomparable amounts of national debt which will heavily shape future American fiscal policy for decades.

    Disclosure: Emerginvest is an international finance portal, providing analysis and data on 120+ world markets to help individuals find investments from around the world. Emerginvest provides impartial information about world stock markets, and does not have any holdings in foreign equities.

    ===============================================

    Government Panic Could Herald Dollar Panic – Seeking Alpha

    Source: John Browne of Euro Pacific Capital

    One of the few things more troubling for an economy than government intervention is government intervention driven by panic. Time and again, history has shown that when governments rush to engineer solutions to pressing problems, unintended difficulties arise.

    In the current crisis, there is growing evidence that Washington is in a state of increasing panic. Despite its massive cash injections, market manipulations and ‘rescue’ plans, the recession is clearly deepening and spreading. With little to show thus far, politicians don’t know if they should redouble past efforts, break ground on new initiatives, or both. However all agree, unfortunately, that the consequences of doing too little far outweigh the consequences of doing too much.

    Although there are many parallels between the current crisis and the Crash of 1929, one key difference is the global profile of the U.S. dollar. In 1929, the dollar was on the rise, and would soon eclipse the British Pound Sterling as the world’s ‘reserve’ currency. Furthermore, the American economy was fundamentally so strong that in 1934 America was the only major nation able to maintain a currency tied to gold.

    Ever since, the U.S. dollar’s privileged ‘reserve’ status has been a principal factor in America’s continued prosperity. The dollar’s unassailable position has enabled successive American governments to disguise the vast depletion of America’s wealth and to successfully increase U.S. Treasury debt to where the published debt now accounts for some 100 percent of GDP. The total of U.S. government debt, including IOU’s and unfunded programs, now stands at a staggering $50 trillion, or five times GDP! If the dollar were just another currency, this never would have been possible.

    In today’s crisis however, the dollar is likely making its last star turn as the leading man in the global financial drama. Other stronger, less burdened currencies are waiting in the wings for the old gent to take his final bows.

    The dollar’s demise is being catalyzed by the neglect of the Federal government. Instead of enacting policies that would restructure the U.S. economy, and restore productive, non-inflationary wealth creation, Congress is simply financing the old crumbling edifice.

    Faced with the growing realization that America is not doing the work necessary to right its economic ship, it will not be long before America’s primary creditors begin to seriously question the nation’s ability to service, let alone repay, its debts.

    There is now the prospect (inconceivable until recently), that America could lose its prestigious ‘triple-A’ credit rating. In today’s risk adverse market, this could cost the Treasury one percent in interest on long bonds. Each additional percentage point of interest would cost America some $10 billion a year on each trillion dollars of new debt, or some $300 billion over the life of a 30-year bond.

    Many of the foreign governments who hold huge amounts of U.S. dollar Treasury debt, such as China and Japan, have announced plans to spend money on their own ailing economies. Should these foreign central banks divert to domestic initiatives some of the funds used to buy U.S. Treasuries, serious upward pressure on U.S. interest rates will result. Should they actually sell parts or all of their holdings they will likely put serious downward pressure on the U.S. dollar. Last week, a Chinese official claimed the U.S. dollar should be phased out as the world’s ‘reserve’ currency.

    In the short term, as dollar ‘carry-trades’ continue to be unwound and questions of political will and falling interest rates haunt the Euro and some other currencies, the U.S. dollar may be the recipient of some upward appreciation. But with the American government appearing increasingly to be in panic mode, a run on the U.S. dollar could develop rapidly into cascading devaluation. Even if no such panic run materializes the long-term outlook for the U.S. dollar is one of high risk and low return. This beckons major upward pressure on precious metals.

    ========================================

    What is Going On With Gold? – Seeking Alpha

    Source: The Pragmatic Capitalist

    Gold (ETF:GLD) is one of the most fascinating and talked about assets on the planet. There are more conspiracy theories and story lines behind gold than just about anything on earth. Heck, the followers of the asset even have their own club: the goldbugs. You can’t go a day without seeing a commercial about gold. If you google “buy gold” you get almost as many results as if you search “buy real estate” (15.4MM vs 16MM).

    But gold has been acting funny lately. The conspiracy theories have been running even crazier than usual (from government conspiracy to backwardation) and the goldbugs are angry. As the world economy deteriorates and the U.S. prints money like it’s going out of style, gold has not appreciated. If you had told me in December of 2007 that the global stock market would fall 40% in 2008 I would have told you to buy gold and nothing else because of its safehaven characteristics. But a funny thing happened on the way to the demise of the global economy: Gold fell.

    After rallying into the second quarter of 2008, gold went on a gut wrenching 6 month decline of over 30% – all in the midst of one of the greatest financial collapses ever. It was, if nothing else, quite a paradox. Even crazier, the US dollar stabilized and then rallied into the end of 2008. Why did this happen? How could gold fall in such an environment?

    Gold remains an anti-dollar investment. It’s as simple as that. When you buy gold you’re essentially buying a hard asset currency with the hope that one day it will become the world’s choice of currency again. If the dollar (UUP) weakens or one day fails the likelihood of a gold based currency increases. In essence, buying gold is a way of betting against the greenback and U.S. economic dominance. You can argue the extent of my argument, but you can’t really argue with the inverse correlation in the two assets:

    Click to enlarge

    The correlation is clear. If you’re betting on a rise in gold you’re betting on a falling dollar. I’ve been banking on a higher dollar for over 6 months for one reason: it’s the best currency in a bad lot. Jim Cramer should change his area of expertise to currencies, because while there isn’t always a bull market in stocks and commodities, there is always a bull market somewhere in the currency market. Trades are paired in Forex and unfortunately, it’s hard at this time to make an argument in favor of other currencies over the greenback. And as long as the greenback remains strong it’s unlikely that gold will make any sustainable run.

    So why is the dollar the best of the worst? It’s quite simple in my mind. Two major currencies on the planet now effectively bear zero interest: the dollar and the Yen. Of the two, the U.S. is the far superior economy. In essence, neither country can really devalue their currency all that much more unless they decide to print money to the point of insanity and although I believe the U.S. is printing wildly I am not incredibly alarmed as of yet simply because the destructive deflationary forces at work are so much greater than the inflationary response by the Fed. Inflation is certain to rear its ugly head in the coming years, but I suspect it will be relatively mild as the economic rebound is slow and the overall monetary destruction of this deflationary phase proves to be incredible.

    So, getting back to the greenback – the U.S. was first to enter a recession and it now looks like the world is catching pneumonia from our cold. Unfortunately Europe and Asia still have relatively high interest rates (read: room for currency devaluation) and simply don’t carry the same status as the U.S. – we are the reserve currency and the only true AAA nation. Yes, you can certainly make the argument that the U.S. is no longer a AAA rated country, but if we’re AA then what does that make Japan (the world’s second largest economy) or Germany? Much worse, in my opinion.

    So what we’re seeing is essentially a flight to quality in a time of financial distress? Yes, that’s right, the U.S. dollar is a higher quality asset right now than just about any currency on the planet. And if you’re a U.S. citizen you should be thanking your lucky stars it’s THE reserve currency because this crisis would likely be even worse if that wasn’t the case.

    So, before you go placing bets on gold it might be better to research the greenback first.

    ==================================================

    Not Time To Exit Commodity Positions – Seeking Alpha

    By: J.D. Steinhilber of Agile Investing

    Diversified commodities have suffered approximately the same one-year decline as stocks, but the descent has been more violent since broad commodity indexes peaked in the middle of 2008, whereas most stock indexes peaked in October 2007. Just as it is not the time to abandon stock market commitments, this is certainly not the time to exit commodity positions in the context of a diversified multi-asset portfolio.

    Cyclical commodities are not a valuable hedge to a stock portfolio in a deflationary bust and a liquidity crisis such as we have seen, but those conditions are not likely to persist over any investment horizon measured in years rather than months. Massive government reflation and stimulus efforts will support hard assets in 2009. Infrastructure spending is bullish for commodity prices, and tighter credit conditions, along with lower prices, puts pressure on the supply of commodities as suppliers curtail production.

    Gold finished the year on a very strong note and managed to produce another year of positive returns in 2008. Gold has the most attractive three and five year annualized returns of all the asset classes we track. Gold will continue to be whip-sawed by the volatility in the currency markets.

    We hold Gold (GLD) in our portfolios as an insurance policy against financial crisis and paper currency devaluation. The opportunity cost of holding gold, which produces no dividend or interest income, is now very low given that the Federal Reserve has cut the official U.S. overnight lending rate to zero to 0.25%, and has stated that “weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.”

    [click to enlarge]

     

     

     

     

     

     

     

     

     

     

    ===================================================

    How Will Obama’s “Trillion Dollar Deficits” Affect the Markets? – Seeking Alpha

    By: Simit Patel of Informed Trades.com

    The New York Times has an article this week reporting on US President-elect Barack Obama’s warning that there will be ‘trillion-dollar deficits for years to come.” What does that mean for the markets?

    The first line of recourse will be the issuance of Treasury bonds; in other words, the US government will look to borrow money, offering to pay it back with interest. The key question, though, is to what extent buyers of Treasuries will be easily found. As we have discussed previously, the very low yield on bonds coupled with the fact that the economic pains are being felt all around the world suggest one of two possibilities: bond rates will have to go up or the Federal Reserve will have to “monetize the debt” — meaning it will simply have to print more money.

    I have stated and continue to believe that the result of increased deficit spending, due largely to government bailouts, in this environment will be debt monetization (even if there is a rate hike, that will only increase the future debt, and thus will only delay and exacerbate debt monetization). I believe this will prove to be inflationary, that it will devalue the US dollar, and that this is the real way the bailouts will be paid for; not via a direct tax, but rather a tax through inflation. Economist Mike Shedlock, however, offers a counter viewpoint:

    The Fed at some point will resort to out and out monetization, and that will have the inflationists screaming at the top of their lungs. However, banks will still be reluctant to lend, and consumers and businesses will be reluctant to borrow. In addition, I expect the velocity of money printed to be close to zero and for the savings rate to rise. In aggregate, these are not hyperinflationary things. Heck, they are not even inflationary things.

    Admittedly, I am one of those inflationists who will be screaming at the top of my lungs.

    There are two reasons I believe debt monetization will be inflationary:

    1. I disagree with the notion that banks won’t lend and consumers won’t borrow. As I recently noted, we are seeing a declining TED spread as well as an increase in many money supply metrics (M1, M2, MZM). And even in this environment, we have seen companies like Verizon be able to secure a massive $17 billion loan.
    2. Even if lending is reduced due to the economic climate, debt monetization increases the likelihood that foreigners will not only stop buying Treasuries, but that they will sell the ones they have, and will dump US dollar holdings out of a concern of dollar devaluation by the part of the Federal Reserve. This suggests there will be a “run on the currency,” similar to what was seen in Argentina. See our previous article on the similiarities between the US economic crisis and the Argentinian crisis of 2001 for more on this subject.

    How to Trade This Scenario

    Timing is the key issue for trading this; we are currently seeing a rally in the market, though I expect that at some point in the second half of 2009 we will see the concerns about the Treasury market begin to manifest. As a trend-following trader I look for momentum that corresponds to my fundamental viewpoint, with the exception of precious metals, which I treat as buy and hold type investments.

    With that in mind, here are the conclusions I am making based on the trillion dollar deficit scenario:

    1. US dollar will fall in value. For stock market traders, UDN is an ETF to watch.
    2. Dollar hedges like gold and silver will rise. GLD and SLV are corresponding ETFs.
    3. Both monetization of debt as well as a hike in interest rates will send bond prices falling, as a rate hike devalues all bonds previously issued at a lower rate while monetization of debt introduces inflation concerns and the possiblity of the bond being paid back with a currency that is worth less.
    4. A rate hike, which I think is increasingly unlikely given the Fed’s behavior though still possible, will be bearish for US stocks. DOG and SH are inverse ETFs worth considering in such a scenario.

    Disclosure: Long gold and silver; currently short US dollar against Australian dollar.

    ==============================================

    My Note: Whether as “Portfolio Insurance”, or as a Speculative Investment, I think now is the time to buy and Invest in  Gold and Precious Metals in any form. I am calling for $1000 to $1250 Gold later this year and even higher if the Middle East Situation disintergrates and gets worse. Other factors are mentioned in detail above, don’t kick yourself later, buy Precious Metals and Miners at these ridiculously low levels NOW!

    My- Disclosure: I am long Physical Precious Metals, Etf’s, and Mining/Producer Stocks. I.e. my money is where my mouth is! Remember to do your own Due Diligence and read all Prospectus’s before making any investment. -jschulmansr

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    Gold-History Repeating Itself?

    06 Tuesday Jan 2009

    Posted by jschulmansr in Bollinger Bands, capitalism, commodities, Copper, Currency and Currencies, Finance, Fundamental Analysis, gold, hard assets, How To Invest, How To Make Money, inflation, Investing, investments, Jschulmansr, Latest News, Make Money Investing, Markets, mining stocks, Moving Averages, oil, precious metals, silver, small caps, Stocks, Technical Analysis, Today, U.S. Dollar, Uncategorized

    ≈ Comments Off on Gold-History Repeating Itself?

    Tags

    agricultural commodities, alternate energy, Austrian school, banking crisis, banks, bear market, Bollinger Bands, bull market, capitalism, central banks, China, Comex, commodities, communism, Copper, Currencies, currency, deflation, depression, diamonds, dollar denominated, dollar denominated investments, economic, economic trends, economy, financial, Forex, futures, futures markets, gold, gold miners, hard assets, heating oil, India, inflation, investments, Keith Fitz-Gerald, market crash, Markets, mining companies, Moving Averages, natural gas, oil, palladium, Peter Schiff, physical gold, platinum, platinum miners, precious metals, price, price manipulation, prices, producers, production, protection, rare earth metals, recession, risk, run on banks, safety, Saudi Arabia, silver, silver miners, socialism, sovereign, spot, spot price, stagflation, Technical Analysis, timber, U.S. Dollar, volatility, warrants, Water

    Today’s action: Gold opened down by a few dollars and now has reversed itself and is cusrrently up $7-10 oz. Based off of chart formations it would appear that  Gold is breaking out to the upside and getting ready to challenge the $900 level, If it can break that then we are set up for a test of the $950-$975 level. If it fails here, a pullback to the $800 level (support base) will probably occur. Today’s articles include one about a new 2yr gold price cycle that appears to be forming. Next some questions answered about the markets for 2009. Finally a special report from Gold World about Gold Backed Banking. Enjoy and good investing! – jschulmansr

    Gold’s 2-year cycle – MineWeb

    A Mineweb reader has noticed a recent two-year cycle for gold price behaviour which, if it continues will likely give some guidance to price movements this year and next.

    By: Joseph Cafariello

    EDMONTON, CANADA –

    There seems to be a two-year cycle in the gold price which has been repeating itself since about 2004.  The even years follow one pattern, while the odd years follow another pattern.  The even years tend to reach exaggerated extremes to the upside and to the downside on a percentage basis, while the odd years tend to be a little calmer with less volatility.

    For example, 2008 went very much like 2006, with exaggerated highs reached in the spring of each year, and a late start to the traditional autumn-winter-spring upswing, which began around October/November of 06 and 08.  On the odd-number side, 2007 went much like 2005, with moderate highs reached in May of each year, and an early start to the traditional autumn-winter-spring upswing, which began around August/September of 05 and 07.

    If this is indeed a reliable cycle, we can expect 2009 to be much like 2005 and 2007 all throughout the year.  The first half of 2009 should see gold follow the same pattern as the first halves of 2005 and 2007.  In the springs of 05 and 07, gold kept hitting its head against the previous year’s high all throughout the spring.  More than once during the spring of 2007, gold topped out at about $690, coming to within about 5% of the 2006 high of $735.  Similarly, the spring of 09 should see gold hitting its head against 2008’s high of $1,035, coming to within 5% of it, or up to about $985.  That will be the high for the first half of 2009 at around the beginning of May, though this will not be the high for 2009 as a whole.

    Given the odd-number year pattern, we might also expect the back half of 2009 to be much like the back halves of 2005 and 2007.  In both 2005 and 2007, the summertime pull-backs were modest, and the autumn-winter-spring upswings started early, at around August/September of 05 and 07.  The latter half of 2009, then, should see a modest summer-time pull-back of about 5% to 7% of its spring 09 high, taking gold down from $985 in May 09 to about $925 by August 09.  However, the low for 2009 will still be the upcoming January low of $800, which is now only about a week or two away.  The lows of January 2005 and January 2007 were also “the” or “close to the” annual lows for those years.  So the low of 2009 will be at around $800 in January.

    The high for 2009 will come in December.  The traditional autumn-winter-spring upswing in 2009-10 will be much as it was in 2005-06 and 2007-08, with an early start.  The year-end run for 09 will begin around August or the beginning of September, jumping from about $925 in Aug/Sep 09 and rising steadily until the end of December 09.  The annual highs for 2005 and 2007 were hit in or near December of each year, and each high was about 20% higher than the average of their first halves.  Thus, the annual high of 2009 will be hit in or near December, and will be 20% higher than the average of its first half, putting the 2009 high at about $1,150 in December.

    The traditional autumn-winter-spring upswing, however, will certainly not end in 2009, but will spill over into the spring of 2010 much as it did in the springs of 2006 and 2008.  The high in the spring of 2008 was about 40% higher than high in the spring of 2006.  Hence, the high in the spring of 2010 will be about 40% higher than 2008’s high of $1,035, putting gold at about $1,450 in the spring of 2010.  Then, the summertime pull back of 2010 will be just as stark as were the summertime pullbacks of 2006 and 2008.

    And so the two-year cycle will continue, where even-number years follow a pattern of extremes, while the odd-number years are calmer, but with a nice upward kick at the end.  This two-year cycle with even-number years on the extreme side and odd-number years on the moderate side will continue until the commodity boom is over (say around the year 2030, when the populations of China and India finally achieve a 75% middle-class), and until the US dollar recovers at around the same year (2030), when the rest of the world will be looking to the US as a nice place to shop given its then-to-be dirt-cheap dollar.

    The above comment was contributed by Mineweb reader Joseph Cafariello who describes himself as “A raving gold bug and proud of it”

    ==========================================

    2009 Market Q&A: Four Questions Answered – Seeking Alpha

    Source: Eric Roseman of The Sovereign Society

    By Eric Roseman

    Over the last several weeks I’ve received numerous questions from Sovereign Society subscribers, including individuals who frequent our daily blog.

    As we start 2009, I thought this would be an ideal forum to collect some of these important questions and attempt to give you my best conclusions. I can’t reprint all of these inquiries; but I’ve compiled several excellent questions from our members.

    Overall, I don’t like forecasting. I generally believe it’s a total waste of time and most consensus estimates ahead of 2008 ended in the basement with the majority of analysts dead wrong about the economy, the market and just about everything else.

    I have to admit that I never expected the markets to crash, the banking system to go bust or the dollar to skyrocket in the midst of the worst financial crisis in 75 years. To be fair, I think most pros failed to make accurate predictions.

    Question: I’m a retired investor living on income. Prior to the big rally in Treasury bonds, I held most of my savings in short-term Treasury’s and bank term deposits. But with short-term rates under 1% and government bonds yielding a pittance, I’m nervous. What should I do to supplement my income?

    Comment: This is perhaps the most challenging environment for retirees in more than a generation. With money-market funds yielding almost nothing, Treasury bonds yielding around 2% and bank CDs paying under 1%, retirees must supplement their income.

    My advice is to take a small portion of your savings, say 20%, and scatter that sum across a dozen or more investment grade corporate bonds. I emphasize “investment grade” and not junk debt. Investment grade debt includes anything rated BBB or better in my book and, to make it easier, I would stick to issues rated A- or higher.

    The Dow Jones Corporate Bond Index now yields 6.90% – down from its post-crash high yield of 8.87% in early $100 bill imageOctober. Still, investors can tap into non-financial bonds like IBM, Johnson & Johnson (JNJ), Wal-Mart (WMT) and Kraft Foods (KFT) – all paying 5.5% or more. Or, look at corporate bonds issued by America’s largest banks, including JPMorgan Chase (JPM), Goldman Sachs (GS), Wells Fargo (WFC) and US Bancorp (USB). These banks won’t default.

    A good strategy to keep things simple is to buy a laddered portfolio of corporate bonds ranging from two years all the way to seven years. This should at least give your nest egg a boost and if you feel comfortable with this formula, then increase your position to say 35% of your portfolio. But remember, don’t go whole-hog; at some point over the next 12 months, perhaps later, Treasury bond prices will get smashed and long-term rates will head higher as the government expands credit to the moon. Keep your powder dry.

    Question: Do you think we’ll avoid another Great Depression? Despite all the money thrown at the markets since late 2007 we’re still in the midst of a severe credit contraction and the global economy has literally fallen off a cliff since October.

    Comment: I think we’ll avoid another Great Depression but only because government will nationalize or partially nationalize key industries. Without government intervention, the free market would have resulted in massive failures and a total collapse of the banking system and the broader global economy. There’s no doubt in my mind that the government made a big mistake not rescuing Lehman Brothers last September. Once you’re bailing out major banks, then do it right. But in all honesty, we don’t know what transpires behind the Fed’s walls or the Treasury’s. There’s some crazy buddy system in progress with special interests influencing government policy. The government doesn’t give a damn about you or me. What they care about is protecting their interests. That’s why we must protect our assets and, in the end, I believe gold will triumph above all paper money, especially against the dollar.

    I don’t advocate government intervention; but these are not normal times and the consequences might have resulted in the death of capitalism and perhaps the emergence of a new social order, similar to what occurred in post-Weimar Germany in the 1920s. Harsh economic times usually result in a new socio-economic regime. If the Fed and Treasury fail to rescue the credit system, then we might face similar consequences. The world as we know it will come to an end.

    It’s hard to know exactly what goes on behind the Federal Reserve’s closed doors and at the Treasury’s. Thus far, government efforts have been bold since the October crash, including major central banks worldwide. Major credit indicators have indeed improved since November but the housing market – the crux of the crisis – is still in a freefall. Housing must stabilize before this severe recession ends.

    In my eyes, it seems that bailouts and backstops are not addressing the real problem; most TARP money is ending up in bank coffers again and, in most cases, these institutions aren’t lending. The core of this credit crisis lies with the consumer and with housing. If you’re going to fork out several trillion dollars to fix or remedy this crisis then give the money to the consumer – not the banks. The consumer is in a severe bear market with personal assets plummeting over the last 18 months, including real estate, stocks, most bonds and now, possibly his or her job might be next on the chopping block.

    Give consumer households $50,000 or more and allow them to clean-up their busted balance sheets, keep their homes (service mortgages) and pay off installment debt. You might not agree with me and, in all fairness, it’s against the tenets of the Sovereign Individual; but what good will all this money do if it’s basically squandered by government and ending up in the pockets of reckless bankers again? I have serious doubts about how the government is dealing with this crisis and I don’t think Obama’s spending package will help much at all despite perhaps growing the economy for a few quarters.

    Question: What about the banks? With governments now standing behind their biggest financial institutions, is the worst over?

    Comment: The global banking system, for all intents and purposes, is effectively bust or bankrupt. This is especially the case in the United States, Europe and, to a lesser extent, in Japan. More than a dozen emerging market banks are totally bust, including Iceland, the Baltics, Hungary, Romania, Bolivia, Ukraine, Ecuador, Argentina, etc. Not a pretty picture.

    I think we’re more than 75% through the worst at this juncture. Governments now stand behind the largest banks in each country and, in some cases, even guarantee entire deposits until 2010 (e.g. European Union). I wouldn’t worry about the largest banks failing at this point. The worst is now behind us.

    Question: I know you’re a big gold bug, but isn’t the euro a strong currency and do you think it’s a better hedge against the dollar than gold? Is it too late to purchase gold coins and, if not, where would you suggest I buy coins?

    Comment: I have absolutely zero faith in the U.S. dollar and other currencies, including the euro or yen. In the end, all currencies will decline vis-à-vis gold and, in fact, since 2005 the world’s currencies have been losing their relative value to gold bullion. Despite big moves by the yen and euro over the last several years, they pale against gold.

    Increasingly, the average man in the street will realize that paper money is not protecting his purchasing power and will revolt against fiat money. At The Sovereign Society, we’ve driven home this message since our first year of publication in 1997. Gold is the only asset in this world that isn’t someone else’s liability; with U.S. interest rates effectively at 0%, paper money now competes with gold, which also pays 0% interest. In a zero percent world, which asset would you rather own? I think the answer is obvious.

    The government’s enormous spending plans to rescue the financial system and bailout almost every ailing industry Gold Coin Imageassures dollar destruction because the Fed is now on course to print money like never before to quash deflation. We all better hope and prey that the Fed can drain excess bank liquidity very quickly when this credit crisis ends. If not, we’ll have some serious inflation – much worse than what we saw prior to July 2008.

    I think every investor should hold at least 10% of his assets in physical gold. This means coins, wafers or bars. Getting gold coins today is difficult because the U.S. Mint has stopped selling Eagles since last summer while other dealers are complaining about tight supplies amid booming investor demand. I suggest KITCO or First Federal Coin Corporation.

    Also, I would not hold or store all of my physical gold at my home domicile. I strongly suggest parking some of your gold in Switzerland, too. Remember, you must report assets outside of the United States and Canada.

    I’m convinced we’ll see some sort of government confiscation of gold again just like we did in the 1930s. Back then, FDR did allow Americans to hold a maximum of 100 ounces. I’m not so sure the next confiscation will be so generous.

    I hope you found this helpful.

    ===============================================

    2009 Gold Outlook – Gold World

    How To Invest in Gold in 2009

    By Luke Burgess

    The investment markets are yielding to the fact that the global economy will remain weak for the better part of 2009.

    As a result, investors will continue to seek safe havens.

    Under normal conditions, these safe haven investments would include land and real estate. These assets have intrinsic value; or in other words, their value will never fall to zero. But with falling prices, investing in real estate is out of the question for most people right now. And there’s little doubt that investors will look elsewhere for safety against financial crisis.

    The best safe haven asset in the world right now is still gold because it is never considered to be a liability.

    And we believe that safe haven investment demand will drive gold prices during 2009. With this in mind, we would like to present a broad overview of Gold World‘s 2009 gold outlook. But before we get into that, let’s review what happened to gold prices in 2008.

    Gold Was One of the Best Investments of 2008

    In March 2008, gold prices hit a record high of $1,033 an ounce as the gold bull market entered its seventh year of life. This was followed by a normal 18% correction, which drove gold prices back down to $850 an ounce.

    Gold prices subsequently rebounded and were once again closing in on the $1,000 level in mid-July. At the same time, however, the fundamental and psychological effects of the slowing housing and credit markets were just beginning to devalue significantly the investment markets across the board.

    As a result, many long gold positions had to be sold in order to cover losses from investments in other markets. Over the next several months, this forced selling pressure pushed gold prices down.

    Gold prices were also held down during the second half of 2008 as the U.S. dollar enjoyed a +20% rally. Foreign governments, institutions, and banks began buying the U.S. dollar, which despite a legion of problems continues to be the world’s most important reserve currency, as a hedge against domestic economic turmoil.

    20090105_2009_gold_outlook.png

    These factors contributed to a significant drop in the price of gold, which officially bottomed out for the year at an intraday low of $683 an ounce in October 2008.

    Gold prices have subsequently bounced off of the $700 level as major selling has dried up, and fresh buying has come into the market.

    Despite three 20% corrections and serious deflation in the market, gold exited 2008 with a positive 5.4% gain for the year. Although subtle, this gain outperformed every major equity index and commodity in the world. Here are just a few examples…

    Index/Commodity
    Percent Change During 2008
    Dow Jones
    -34%
    NASDAQ
    -41%
    S&P 500
    -39%
    TSX -35%
    TSX Venture -74%
    Oil
    -55%
    Silver
    -23%
    Copper
    -54%
    Gold
    +5%

    This made gold one of the best investments of 2008.

    And the 2009 gold outlook looks just as strong.

    Gold’s 2009 Outlook

    Despite a bit of downside in the immediate future, we expect gold to have a stellar year.

    Global economic turmoil and deflation will undoubtedly continue to influence gold prices in the near-term. A short-term pullback in gold prices from current levels to $800—maybe even a bit lower—is not out of the question. However, we expect gold prices to break new records during 2009.

    For our current perspective, we expect gold prices to reach as high as $1,300 during 2009, which would be a profit of over 50% from current levels.

    Gold prices in 2009 will be supported more heavily by supply/demand fundamentals than in the previous years of this gold bull market.

    As we’ve previously discussed, during the third quarter of 2008, world gold demand outstripped supply by 10.5 million ounces. This deficit was worth $8.5 billion and was the largest supply/demand deficit since the gold bull market of the 1970s.

    Official 4Q 2008 world gold supply/demand figures will be calculated and reported later this month. Gold World will report them to you when the data is released.

    In the meantime, though, all estimates suggest that there will be another very large deficit in world gold supplies from the fourth-quarter, with investment demand continuing to drive the market.

    We expect that a continuing surge in investment demand could push gold prices as high as $1,300 at one point during 2009.

    There will likely be a bit more volatility in the gold market in 2009 as more and more speculators come into the market. It is likely that the gold market will experience three or four price peaks (selling points) during 2009.

    How to Invest in Gold for 2009

    As we expect a near-term drop in gold prices as a result of continuing deflation, we are advising our readers to hold off on any physical gold buying for the immediate future. As previously mentioned, gold prices could dip back down to $800 before recovering again.

    Nevertheless, we expect 2009 to be another great year for gold investors.

    Good Investing,

    Luke Burgess and the Gold World Research Team
    www.GoldWorld.com

    =================================================

    Gold World Special Report – Gold Backed Banking

    Special Report – Here’s How To Get Your Own Copy – Simply Subscribe

    January, 2009

    Gold Backed Banking

    It’s a wonder Americans aren’t rioting in the streets.

    Not including the $700 billion blank check issued to the banks and signed by the US taxpayer, the sum of liabilities assumed by the US government from the finance industry in the past 6 months alone exceeds 50% of the GDP.

    Despite this unprecedented government intervention, the solvency of other every commercial and investment bank is still at stake!

    Recognize this all-but-forgotten quote?

    “The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution. I am an Enemy to all banks discounting bills or notes for anything but Coin. If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered.”
    — Thomas Jefferson, Founding Father, Third President of the United States, and the principal author of the US Declaration of Independence

    How bout a drink from the cup of truth…

    The Bush administration’s $700 billion bailout plan may keep some banks afloat for the time being. But fundamental problems are still deeply rooted within the financial markets that threaten to bring down the whole system.

    The hard truth is that there is no 100% safe place to keep your money.

    Physical cash and gold are the safest places to hold your wealth right now. Anyone who tells you otherwise has either a motive or no clue.

    Those with the means to do so should be holding at least some physical cash and gold.

    Of course, people will debate why you should hold these assets…

    Gold is the ultimate in hedging against financial turmoil. But as it stands today, it’s quite rare to find someone willing to trade a product or service for gold. In other words, it’s difficult to spend gold like money, which has been a criticism of owning physical gold for decades.

    Today’s digital age allows consumers to move electronic fiat money around at speeds exponentially faster than ever before. This morning I paid my cable bill with my check card. The entire transaction was completed within 5 minutes. Had I paid by mailing a check, it could have taken up 1-2 days to reach the cable company and 3-5 days to clear my account.

    So what if there was a way gold could be used as easily as electronic money?

    The World’s Only “100% Backed-by-Gold Bank”

    You might have a hard time believing this, but you can actually put yourself on a personal gold standard with a new kind of currency, and it’s rapidly growing among gold bugs.

    Understand first, this new currency is not legal tender issued by any government. That means there’s no debt, inflation, geopolitical turmoil, or any other considerations normally associated with government-issued currency.

    The currency comes in electronic form, but can be used like any other currency in the world today to pay for goods and services, and even settle debt. But there’s one major difference that sets this currency apart from every other in the world:

    It’s 100% backed by gold.

    In fact, in most cases you can instantly exchange this currency for physical gold at any time… a feature taken away from the US dollar decades ago.

    This currency has a new system fully established, making it as easy to use as the current banking industry’s electronic money. Right now, in fact, there are already over 3,000 outfits—and climbing—in which you can pay online using this currency.

    How the “Gold Bank” Works

    Customers transfer funds from traditional bank accounts into these unique gold-backed bank accounts, and earn interest on their funds prior to placing an order.

    Meanwhile, for customers already holding gold and silver in secured (and insured) vaults, their metals are insured and held in specialized bullion vaults. Their metals assets go through an annual audit, and are fully reported to customers.

    Once customers’ funds are in the database, customers’ orders are made through its secure online system. Database servers record all transactions and store currency and metal balances.

    The Advantages of Using this Currency?

    Being backed by gold, the purchasing power of this currency fluctuates in relation to the price of gold.

    This means that as the price of gold increases, the purchasing power of the account increases. On the flip side, however, if the price of gold falls, so does the value of the account. Nonetheless, the risk of significant price fluctuation in gold is small compared to the risk of value fluctuations among fiat currencies, especially the US dollar.

    And despite a short-term correction, the price of gold has increased significantly over the past five years. So this factor has worked out to the advantage of anyone holding this currency over that period. And with +$2,000 gold on the horizon, holders of this currency should do quite well in the future.

    Now you should know that I’m in no way affiliated with this service, nor do I receive any compensation from it. That said…

    I Recently Put the Final Touches on my New Research Report…

    This report shares all the details about the new gold-backed electronic currency, and it’s yours free after you take a risk-free trial of the Mining Speculator service.

    It’s your chance to get in on the biggest and best buying opportunity in junior gold and silver stocks… ever.

    That’s right. The junior gold market is about to blast off, after a brutal beat-down sparked by the financial crisis. Truth is, it’s pushed many gold and silver stocks to new lows…

    … Which is why you don’t want to wait a minute longer to position yourself in the Mining Speculator’s mining and precious metals portfolio. Our team of analysts scour the earth for opportunities in gold, as protection against the financial uncertainties engulfing the U.S. and world markets.

    It’s the ultimate opportunity in a period of great crisis.

    You see, as our government continues to lose control of its ability to manage and prop up markets, gold and silver will undoubtedly make meteoric moves that will stun the populace.

    And just in case you still harbor doubts about gold, consider this… reported last week in the Financial Times…

    “… Investors in gold are demanding ‘unprecedented’ amounts of bullion bars and coins and moving them into their own vaults as fears about the health of the global financial system deepen.”

    And since gold bullion is getting harder and harder to come by, more investors are looking for the next best alternative, and that’s…

    Precious Metals Mining Stocks

    Bottom line: Junior mining stocks will begin to make major moves to the upside, rewarding those who got in early and held on… and those who get in now at what are, frankly, bargain share prices.

    You see, nothing can keep gold from doubling up and hitting $2,000 an ounce… causing shares in our mining exploration companies to skyrocket.

    I’m talking about junior mining stocks with the potential to double, triple—even quadruple!

    Of course, many people have trouble accepting gold as an investment—even now that they’ve witnessed a financial upheaval that’s shaken our country by the shoulders.

    But I also know that those who have heard me out-and followed through with my research and recommendations-have made extraordinary, life-altering returns.

    Which is why I maintain…

    There’s never been a better time-a more crucial time-to protect your portfolio with gold and precious metals.

    And for a brief time, we’re making it easy to do just that… for as little as $25.

    To get immediate inside access to the junior mining companies poised for major run-ups – the ones I’ve visited firsthand and carefully selected after exhaustive research and quality controls – simply take a trial of my Mining Speculator advisory.

    When you sign up for Mining Speculator, I will immediately send you the free report on the new gold-backed currency mentioned in this editorial.

    So, for only $25 you’ll begin to receive my Mining Speculator junior stock advisory… one that held an average 212% gain over five years… plus you’ll get our new special report on “The World’s Only 100% Backed-by-Gold Bank.”

    All you have to do is click here to get started.

    Good investing,

    Greg McCoach, Investment Director, Mining Speculator
    Luke Burgess, Editor, Gold World

    ====================================================

    My Note: I do not receive any renumeration or commissions for recommending either the Gold backed banking or the Mining Speculator. As Always be sure to do your own due diligence and read the prospectus before making any investments or deposits into financial institutions.-jschulmansr

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    Warning! Info The Central Banks and the IMF Does Not Want You To Know

    30 Tuesday Dec 2008

    Posted by jschulmansr in Bollinger Bands, capitalism, commodities, Copper, Currency and Currencies, deflation, Finance, Fundamental Analysis, gold, hard assets, inflation, Investing, investments, Latest News, Markets, mining stocks, oil, precious metals, silver, small caps, Stocks, Technical Analysis, Today, U.S. Dollar, Uncategorized

    ≈ Comments Off on Warning! Info The Central Banks and the IMF Does Not Want You To Know

    Tags

    agricultural commodities, alternate energy, Austrian school, banking crisis, banks, bear market, Bollinger Bands, bull market, capitalism, central banks, China, Comex, commodities, communism, Copper, Currencies, currency, deflation, depression, diamonds, dollar denominated, dollar denominated investments, economic, economic trends, economy, financial, Forex, futures, futures markets, gold, gold miners, hard assets, heating oil, India, inflation, investments, Keith Fitz-Gerald, Marc Faber, market crash, Markets, mining companies, Moving Averages, natural gas, oil, palladium, Peter Schiff, physical gold, platinum, platinum miners, precious metals, price, price manipulation, prices, producers, production, protection, rare earth metals, recession, risk, run on banks, safety, Saudi Arabia, Sean Rakhimov, silver, silver miners, socialism, sovereign, spot, spot price, stagflation, Technical Analysis, timber, U.S. Dollar, volatility, warrants, Water

    Warning! Today’s post includes information the Central Banks and The IMF DO NOT Want you to Know! New Peter Schiff on Gold and more… If everyone would start taking delivery on their Gold and Silver Contracts we could create the “rumored” Short Squeeze since there s not enough physical Gold and Silver available to cover all of the Open Short Contracts; and at the same time sustain new buying. The same thing would also apply to taking delivery of Stock Certs in the Precious Metals Mining Companies. Such actions would create massive buying and become a self fulfillingprophecy unto itself. Enjoy! – jschulmansr

    President of Euro Pacific Capital On Gold and the Dollar – Peter Schiff–Seeking Alpha

    Source: Hard Assests Investor

    Mike Norman, HardAssetsInvestor.com (Norman): Well, he’s back. Mr. Doom and Gloom is here … Peter Schiff, president of Euro Pacific Capital and author of the new book just out, “Bull Moves in Bear Markets.”

    Peter Schiff, president of Euro Pacific Capital (Schiff): “The Little Book …”

    Norman: “The Little Book …”; it’s in The Little Book Series. Well look … the last time you were here, things were kind of going your way, but it looks like things have turned upside down.


    All kidding aside, I know your big thing over the last seven or eight years has been gold. We’re very supportive of gold on this show; we think that probably people should have some gold as part of their overall portfolio mix. But let’s just look at what happened.

    Several weeks ago, the U.S. stock market had its worst week in history … even going back to the 1930s … worst week in history. I saw a breakdown of various assets – all assets really – stocks, bonds, gold, commodities, oil. Gold was at the bottom of the list. The top-performing asset, and something that you hate, was the U.S dollar.

    So how do you explain that? If we are going through the worst economic and financial crisis in history – precisely what gold is supposed to protect against – why would it perform so bad?

    Schiff: Well, I think it will perform very well; you got to give it a little bit more time.

    Norman: More time or more decimation?

    Schiff: No, what’s happening right now, Mike, is just de-leveraging, and so gold is going down for the same reason a lot of stocks are going down, a lot of commodities are going down. There’s a lot of leverage in this system, there’s a lot of margin calls, a lot of liquidation; a lot of people are having to sell whatever they own to pay off their debts.

    Norman: But look at where the money is going … the money is going into U.S. sovereigns, Treasuries … it’s going into the U.S. dollar.

    Schiff: For now.

    Norman: Why for now?

    Schiff: Right now there’s some perception of safety there, but it’s the opposite of the leveraging. If you’re selling your assets, you’re accumulating dollars; but ultimately right now, it’s like there’s been this gigantic nuclear explosion in the United States, and everybody is running toward the blast. Pretty soon they’re going to figure out they’re going in the wrong direction.

    Norman: You always talk about gold as a currency, and we have seen currencies appreciate – the yen, for example, the dollar tremendously, for example, but gold has not held up.

    Schiff: Well, if you actually look at gold versus other currencies, in the last couple of weeks gold has made new record highs in terms of the South African rand, the Canadian and Australian dollars … so gold was not doing as poorly as many of the currencies, and I think this is all short term.

    I think you’re going to see a lot of money moving into gold, and if you look at how much gold has gone down from the peak, the peak was about a thousand … it’s off about 25%. Stocks are off 40%. Gold is still up during this year against the Dow.

    Norman: Let’s see the performance from this point forward; we’ll look back at this again and we’ll revisit this issue.

    Let’s talk about something else, something that you have also … and I just mentioned it … the U.S. dollar. You were very, very negative. In the last month, we have seen unprecedented actions by the U.S. Fed in terms of expansion of the monetary basis; in other words, printing money … what you call printing money … and despite that, the dollar has remained incredibly strong.

    How do you explain that according to your logic?

    Schiff: Everything the government is doing is inherently negative for the dollar, and all of this…

    Norman: It’s not playing out that way.

    Schiff: It will; you’ve got to give it time.

    I remember when I was on television talking about the subprime and people were telling me it’s no big deal, and I said, just wait a while; give it time.

    Look, everything that we’re doing – all the bailouts, all the stimulus packages – this is all being financed by inflation. It’s inherently terrible for the dollar.

    Norman: But you just said yourself that everything is deflating.

    Schiff: But right now, Mike, you’re getting this de-leveraging, and this is benefitting the dollar, so despite the horrific fundamentals for the dollar, it’s going up anyway.

    But ultimately, when this phony rally runs out of steam, the dollar is going to collapse, and that’s when we’re going to have a much greater crisis because now you’re going to have a collapsing dollar, which is going to push long-term interest rates up, commodity prices up.

    Norman: I still don’t understand why the dollar is going to collapse. So you’re saying that the Fed is just going to allow … or leave this enormous amount of liquidity in there, that at some point down the road, if we recover, they’re not going Scto take it out?

    Schiff: Look, they have no control over it. The Fed is trying to artificially reflate our phony economy, right?

    We had this economy that was based on Americans borrowing money and then spending it on products. We have this huge debt finance bubble which is collapsing, and it’s being supported by foreigners.

    But when this artificial demand for Treasuries goes away, the Fed is going to try to print a lot of money and the dollar is going to get killed.

    Norman: All right; I’m going to ask you to hold on. Folks, check back because we’re going to do the second part of my interview with Peter Schiff, so check back to this site. This is Mike Norman; bye for now.

    =============================================

    The Manipulation of Gold and Silver Prices – Seeking Alpha

    By Peter De Graaf of Pdegraff.com

    Here is an article you may want to forward to your favorite mining CEO.

    This article deals with the blatant manipulation that has been occurring in the gold and silver markets, and offers a solution. While this scandal has been going on for many years, at last more and more people are becoming aware that it is going on.

    One of the first people to document the ongoing attempts to suppress the gold price was Frank Veneroso. Next was Bill Murphy of GATA.org. GATA continues to press the issue. Gata has discovered that the IMF instructed its member banks to treat gold that had been leased to bullion banks and sold into the market as if it were still in the vault! Imagine if an entrepreneur was running his business in this underhanded manner – how long would the government allow that?

    A few years ago John Embry, while he was Portfolio Manager at RBC Global Investment Fund – a multi-billion dollar resource fund at the Royal Bank – prepared a memo for the bank’s clients that detailed the manipulation in the gold market.

    Ted Butler has written extensively on the manipulation in the silver market.

    This is something I have observed first hand since I became interested in silver in the mid-1960’s. It seemed that every time silver reached a peak, an invisible hand came out of nowhere and knocked the price back down to the starting point again. I wrote an article about this titled: ‘Once upon a time, in Never-Never Land.’

    Every time a geo-political event, or a serious economic happening, such as the collapse of Bear-Stearns, causes gold to rise, (as it would be expected to do since it has always been a ‘safe haven investment’), the price immediately gets trounced, and investors and producers accept this new price as ‘THE price,’ since the new event has now been discounted.

    Whenever common sense tells you something is happening that should cause a rise in the price of gold and silver, you can count on intervention to cap the price. As a result, millions of investors and mining companies have lost billions of dollars that they would have earned if these markets had been allowed to run their normal course.

    The manipulation is obvious in the following charts:

    click to enlarge

    This chart shows steady buying interest that took price from the low at 955.00 on July 14th to 985.00 the next day. The buying took place in Asia, then Europe, and carried over for about an hour in New York, when suddenly, in the space of minutes, an unseen entity dumped gold in the form of futures contracts (green line), without any attempt to obtain the best price possible. In about 5 minutes the gold price was down by 15.00, and the rise was over, as price drifted sideways for the rest of the day.

    It was discovered later that several large banks, suspected to be HSBC (HBC) and JPMorgan Chase (JPM) and possibly one other bank, had switched from being ‘net long’ 5,381 gold contracts at the beginning of July 2008, to being ‘net short’ 87,609 gold contracts by the end of July. That is a 94,000 contract ‘turnaround’ and smacks of blatant interference in the market place, since these banks do not produce gold, nor are they likely to be hedging against that much gold in the vaults, since they do not own physical gold. Such a dramatic switch without any change in fundamentals is beyond reason.

    Featured is the daily gold chart from October 13th. The blue line shows steady demand followed by consolidation early on Oct 14th, as recorded via the red line. Then a mysterious seller showed up shortly after the COMEX began trading in New York, and in the space of minutes the price was knocked down by 30.00. This is totally illogical, since the seller has no interest in obtaining the best price. His only interest is to destroy the price.

    “In 1980 we neglected to control the price of gold. That was a mistake.” Paul Volcker.

    “Central banks are ready to lease gold, should the price rise.” Alan Greenspan during Congressional testimony July 24/1998).

    Featured is the price action right after the COMEX began trading in New York on October 16th. Within a few minutes the price was knocked down by 35.00 (green line), after the price had established a solid trading range between 830.00 and 850.00 during the previous two days (red and blue lines). This illogical dumping of gold contracts caused margin related selling to bring the price down another 15.00 before bargain hunters were able to level the price around the 800.00 mark.

    These are just some of the examples of ‘irrational behavior’ on the part of several large traders on the COMEX, whose actions are not being controlled by the people who oversee the COMEX. While this article deals primarily with gold, the same manipulation exists in the silver markets. To repeat an earlier comment, ‘millions of investors (including miners), have lost billions of dollars because of the manipulation.’ The US government is able to interfere in the markets by way of the Exchange Stabilization Fund which is run by the Federal Reserve and the Treasury Department. The size of the manipulation referred to in this article could not take place without the encouragement that is very likely provided by people who are highly placed in government.

    CAUSE AND EFFECT

    The effect of this manipulation in the gold and silver markets is an artificial low price. In view of the fact that bullish events are not being allowed to permit prices to rise, nevertheless these events will eventually have a positive effect on the price. The cause is real, but the effect is delayed. The steam in the kettle continues to boil, despite the lid being clamped down. The artificial low price stops the development of mining projects that would have been profitable at the higher price. The artificial low price also cuts into profit margins at every producing mine, making it more difficult to obtain funding for exploration to increase resources. Every mine in the world is at all times a ‘depleting asset’ and needs exploration to postpone the day when the last ounce is mined.

    THE MANIPULATORS ONLY HAVE TWO WEAPONS

    The ammunition used by the manipulators is provided by two sources: Central banks (including the IMF), and the COMEX. While there is nothing anyone can do about the gold selling that originates with the central banks, there are ways to choke off the amount of precious metal that flows into the COMEX warehouses.
    Those of us who are tired of the manipulators picking our pockets need to become active.
    In 1978 – 1979 it was a rising silver price that caused gold to rise – silver was the leader. It makes sense therefore to concentrate on silver, especially since the central banks do not have hoards of silver.

    A SOLUTION!

    Mining companies that supply silver to the COMEX need to find a way to turn their silver into small bars (1 oz to 100 oz), and 1 oz rounds and sell these to the public. Already some mines are doing this by selling from their website, and they are obtaining a hefty premium over the spot price. If your production is limited, join forces with a mine that is already merchandising silver products, or form a sales organization with other small mines. Hire some cracker-jack salespeople; there is a big market out there! Starve the COMEX if you want to see silver sell to realistic prices. Adjusted for inflation, the silver price of 48.00 that we saw in February of 1980, is trading at 4.00 today. (In 1980’s dollars, silver is now selling for 4.00 an ounce!)

    Next, (and still communicating to mining CEO’s), instead of keeping money in the bank, or in various kinds of short-term notes, store up silver, and show us that you believe in the product you are producing. Instead of cash on hand, buy futures contracts, and keep rolling them over.

    Coin dealers and wholesalers need to buy 5,000 oz bars from the COMEX, take delivery, and contact a refiner who will turn the silver into retail products. If your operation is not large enough for a 5,000 oz purchase then buy silver from people like Jason Hommel, who was smart enough to start doing this on a large scale.

    Investors who can afford to spend $55,000.00 should consider buying a silver contract from the COMEX and taking delivery. James Sinclair at JSMineset.com will show you how to go about that.

    Finally, anyone who holds any kind of a certificate that promises to deliver silver, needs to make sure that the bank or institution that stores the silver, is willing to provide bar numbers. Otherwise when the day comes to collect, you may find that the silver does not exist. On my website you will find an article that I wrote about a fund that stores gold and silver at a bank in Western Canada. They invite auditors twice a year to audit the inventory.

    Cartoon courtesy Gary Varvel, Indy Star.

    The Madoff scheme is but one example of the lack of oversight on the part of people who have been placed in the position of protecting the public. In the US Congress, two of the people responsible for the mess that was created by Freddie Mac (FRE) and Fannie Mae (FNM): Congressman Barney Franks and Senator Chris Dodd, are now part of the group that is trying to ‘fix’ the problem. The foxes are in the henhouse! It was Franks and Dodd, who for years received money from Fannie and Freddie, while they stood in the way of people who wanted to tighten the lending standard at these two mortgage lending institutions. Whatever happened to responsibility? Where is the outrage?

    Featured is the weekly gold chart. Price is ready to breakout on the upside. The supporting indicators are positive (green dashed arrows). The 7 – 8 week cycles have been short (twice at 6 weeks). We are due for a longer cycle. A close above the blue arrow will indicate that week #4 is the start of a run up to the green arrow. Once 925.00 is reached, then 975 is next. Since Labor day, the Federal Reserve’s assets (including huge amounts of toxic assets), have increased from 905.7 billion to 2.3 trillion dollars. This, along with the increase in the monetary base is going to add to price inflation and will cause a lot of investment money to enter the gold market. The gold rally that started in November has only just begun.

    Featured is the weekly silver chart. Price has been rising since late October. The supporting indicators are positive (green dashed arrows). A close above the blue arrow sets up a target at the green arrow.

    Thanks to Eric Hommelberg for the idea to use ‘historic spot charts’ to make my case. I applied the 11th commandment: “Thou shalt use every good idea thou comest upon.”

    =====================================================

    Noteworthy Pundit: Marc Faber’s 2009 Predictions

    Source: Tim Iacono of Iacono Research

    Despite the stumbling introduction by Joe Kernen and some bizarre in-studio camera work on what appears to be a very old picture of Dr. Doom, this is a pretty good interview.

    ==================================================

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    All That Glitters! – Gold is Looking Good!

    22 Monday Dec 2008

    Posted by jschulmansr in Bollinger Bands, capitalism, commodities, Copper, Currency and Currencies, Finance, Fundamental Analysis, gold, hard assets, inflation, Investing, investments, Latest News, Markets, mining stocks, precious metals, silver, small caps, Stocks, Technical Analysis, Today, U.S. Dollar, Uncategorized

    ≈ Comments Off on All That Glitters! – Gold is Looking Good!

    Tags

    agricultural commodities, alternate energy, Austrian school, banking crisis, banks, bear market, Bollinger Bands, bull market, capitalism, central banks, China, Comex, commodities, communism, Copper, Currencies, currency, deflation, depression, diamonds, dollar denominated, dollar denominated investments, economic, economic trends, economy, financial, Forex, futures, futures markets, gold, gold miners, hard assets, heating oil, India, inflation, investments, Keith Fitz-Gerald, market crash, Markets, mining companies, Moving Averages, natural gas, oil, palladium, Peter Schiff, physical gold, platinum, platinum miners, precious metals, price, price manipulation, prices, producers, production, protection, rare earth metals, recession, risk, run on banks, safety, Saudi Arabia, Sean Rakhimov, silver, silver miners, socialism, sovereign, spot, spot price, stagflation, Technical Analysis, timber, U.S. Dollar, volatility, warrants, Water

    My Note: The Charts are looking great for Gold and Silver. Included in today’s post, the latest from Peter Schiff on Gold, An overview of the Charts for Gold and Silver. Finally, a very interesting article on Comex and a short squeeze, what could happen? My Disclosure Long Precious Metals and Stocks and more… Get aboard the Gold Train now… Last Call! – jschulmansr

    Peter Schiff: Outlook for The Gold Market

    By: Peter Schiff of Euro Pacific Capital

    The Wall Street Transcript recently interviewed Peter Schiff, President and Chief Global Strategist of Euro Pacific Capital, Inc., on his outlook for the gold market. Key excerpts follow:

    TWST: These are somewhat trying times. What has this meant so far for the gold market and where do we go from here?

    Mr. Schiff: Gold has actually held up very well compared to other asset classes. If you look at the price of gold relative to its peak, it’s only off about 25%, whereas if you look at stock markets around the world, most are off 50% or more, certainly if you price them in US dollars. If you look at how gold has held up relative to industrial metals, relative to energy, relative to agriculture, gold has done extremely well. I think the fact that it has gone down in dollars has caused a lot of people to assume that gold is not performing in this correction whereas, in fact, it has. Also if you look at gold in terms of other currencies, recently you’ve seen all-time record highs in the price of gold in South African rand, in Australian dollars, in Canadian dollars. So gold has actually had a very strong, stealth move when viewed from the prism of something other than the US dollar.

    TWST: Why does everybody key in on the US dollar side of the equation?

    Mr. Schiff: Because gold was priced in dollars, it’s traded in dollars and so we all look at it as the dollar price, and the fact that gold has not made a new high in dollars during this economic crisis has led some to believe that maybe it’s lost its luster, it’s not a safe haven. But this rise of the dollar is very suspicious to me, I don’t think it’s justified. But it’s been the unlikely beneficiary of all the problems. You’ve got the problem centered in the US economy; the epicenter of the financial crisis is in America. The reason that the world is in trouble is mainly because of bad loans made to Americans and it’s our economy that I think is a complete facade, a house of cards that has now collapsed, so this dollar rally actually makes no sense.

    And especially in light of the monetary policies that we pursued over the course of the last six months, the bailouts, the stimulus, all of the things that are likely to happen with Barack Obama saying that the sky is the limit on budget deficits, we’re going to print money until we run out of trees. Everything that we are doing is so negative for the dollar, yet the dollar has managed to rally. So I think temporarily the fundamentals are on hold, but I think once the dollar really resumes its decline, you’re going to see gold really shine again not only in terms of the dollar. It will continue to do well against other currencies, but it will do particularly well against the dollar.

    TWST: Isn’t gold normally the “safe haven” that investors seek?

    Mr. Schiff: I think it’s a safe haven. A lot of people are seeking safety right now in the US dollar, but that makes no sense to me. That’s like jumping out of the frying pan into the fire. I think the dollar is a fundamentally flawed currency that is doomed to collapse, and temporarily it’s benefiting from the fact that it’s seen as the alternative to everything else. People are worried about all asset classes, nobody wants to own anything and somehow by default, the dollar is the opposite of owning other things. People are keeping score in terms of dollars and I’d certainly think that some of the most impaired financial institutions are in the United States. I think some of the losses are very heavy here and that has made a lot of American institutions — investment banks, hedge funds, mutual funds —liquidate assets all around the world, many assets in other countries; those institutions require the liquidation of those currencies to repatriate the dollars necessary to meet their margin calls, to fund their redemptions, and so that might also be temporarily propping up the dollar.

    TWST: Has the supply/demand situation in gold changed at this point because of the problems with the hedge funds?

    Mr. Schiff: Yes, I think that the credit crunch has certainly put the screws on a lot of gold exploration. A lot of the junior miners are basically on the verge of going bankrupt right now. I’m sure a lot of projects are on hold; a lot of exploration is simply not going to get funded. This is simply improving the supply and demand imbalances that have favored gold for some time and other commodities too. Certainly in industrial metals, in the energy complex, a lot of exploration, a lot of development projects have been cancelled or are never going to see the light of day for many, many years because of the credit crunch and because of the fear of falling prices, which I think is unwarranted. But even when prices start to recover, I think there will be a lot of suspicion of the rally. So people are going to be reluctant to commit capital to a market they have no confidence in.

    So I think the supply and demand imbalances for commodities are going to continue, and that commodities themselves are still one of the best asset classes around the world to own. As for the commodity producers, it all depends on their balance sheets. Some of them are going to be spectacular buys. Looking at the gold complex, I think one positive development I’ve seen has been the strength of the South African miners, which seem to have bottomed first. They started to decline before the overall sector; when many of the Canadian miners were making new highs, the South African stocks were falling. But it seems like the South Africans have bottomed here. They’ve made significant rallies, some of them have even doubled from their lows and they seem to be stronger. So they topped out first; maybe the fact that they have bottomed first is a positive sign. Maybe they are going to lead on the way up just like they led on the way down.

    TWST: How about on the political side of the equation? What’s going to be the position of central banks now relative to gold?

    Mr. Schiff: The Bank of Canada just slashed rates down to 1.5%. Central banks all around the world are reducing interest rates. It’s the most inflationary monetary policy globally that we have ever experienced and ever will experience in our lifetime. That’s a very favorable market for gold. When central banks are just putting the pedal to the metal on the printing presses and driving interest rates down to nothing, how can you not own gold? Gold is money, the supply of gold is going to grow very slowly over time, and the supply of all fiat currencies is going to grow rapidly. You’re looking at maybe 10%, 20% per year or more annual increases in money supply in every country in the world, and then they pay you next to nothing for holding it. If you want to take currency that is rapidly being debased and you want to deposit it someplace, you are barely getting interest, so why not own gold instead? Even though gold doesn’t pay interest, at least it’s not being debased.

    TWST: What about the central banks selling gold? Are they going to back off now due to the financial crisis?

    Mr. Schiff: At some point, the central bank selling is going to turn into buying. Who are these guys kidding? They need to have real reserves behind their currencies. They can’t simply hold the US dollars and say our currency has real value because it’s backed by the dollar. When the dollar is backed by nothing and being rapidly debased and paying no interest — our rates are down to 1% and likely to head lower. What’s the justification for foreign central banks holding dollar deposits rather than gold, when the dollar yields next to nothing? It doesn’t make any sense. So I think central banks are going to become buyers and the central banks that own the most gold are going to have the most influence, the strongest currencies, etc. I think people are going to see that and right now, if you look at the percentage of gold owned by central banks, it’s at the lowest it’s ever been.

    TWST: Silver and platinum have come down much more than gold. Is that because of supply/demand or just because of what’s going on in the market?

    Mr. Schiff: I think there are more industrial uses for those metals and so more of this whole idea that the global economy is going to collapse and no one is going to buy anything is hurting those metals relative to gold. I think gold is more of a pure monetary metal. Sure there’s some jewelry demand for gold, but it’s not used as much in industry, and I think it’s more of a monetary metal, a safe haven metal and so, because of that function, it is holding on to its value. I think there are a number of individuals around the world who understand the difference between gold and fiat money, and I think a lot of people are worried and want to protect their wealth. There is a minority of investors who see through the smokescreen and are not buying US Treasuries, they are buying gold. At some point, the people who are doing that are going to be the ones who are going to be vindicated as gold prices ultimately make new highs, and I still think that we could hit $2,000 an ounce next year in the price of gold.

    ps- Peter Schiff has been very accurate recently!-jschulmansr

    ============================================

    Great Looking Precious Metals Charts

    By: Jeff Pierce of Zen Trader

    I’ve had mixed results trading gold stocks in the past but those stocks have some of the best looking charts in the market pointing to higher prices very soon. I’m not going to speculate on why they’re rising when you consider how much money has been printed by the US and the inflation/deflation debate, but the fact is, they are rising and have the right price/volume action you want to see for near term price appreciation.

    While I am near term cautious on the overall markets, I do have a buy signal on the gold/silver stocks as they have the capability to rise even when the general markets are falling.

    aipc

    While SLV didn’t rebound like the individual stocks in the silver sector did on Friday, it does look poised to move higher after a retest of the higher trendline of the triangle formation below.

    aipc

    ============================================

    Gold and Precious Metals Likely to Improve in 2009

    By: Boris Sobolev of Resource Stock Guide

     

    In this short update we focus on the long term technical picture for gold and precious metals stocks since the fundamentals have not changed and remain bullish. The technical picture, however, is getting very interesting.

    Gold price action in the past half a year can best be characterized (especially after the recent rally) as consolidation. Such a consolidation is reasonable after a huge spike last year into early 2008, where gold exploded from $650 to over $1000 per ounce.

    The long term monthly chart is encouraging. There is the clearly evident higher lows pattern, the RSI has bottomed and the MACD histogram is starting to curve higher.

    Most importantly the 20-month Exponential Moving Average (EMA) is turning up, reversing a first-time-in-eight-years bearish turn downward. It is very important to see gold close above the 20-month EMA two months in a row; this would give further evidence of a bullish reversal.

    The bull market in gold will resume in full force after gold penetrates its downtrend line which is currently at around $930.

    Another bullish factor for gold is the renewed investment demand by the StreetTRACKS Gold Shares (GLD). Gold holdings have now reached an all-time-high of 775 tonnes.

    On the monthly charts of a Gold Bugs Index ($HUI), highly significant buy signals have been generated. There have been successively higher lows for three months in a row, the RSI has bottomed and started moving higher, the stochastic indicator reversed from a very low level (a rare signal) and the MACD histogram is starting to curve.

    Chart15

    These long term reversals in indicators are highly reliable and rarely fail. There is a good probability that 2009 will turn out to be a complete opposite of the brutal 2008 for the precious metal stocks.

    As stated several times before, we are starting to accumulate precious metals stocks having low exposure to base metals, with high gold and silver grade deposits, healthy balance sheets and prospects for internal growth.

    ===============================================

    Will Comex Default on Gold and Silver?

    By: Avery Goodman

    Avery B. Goodman is a licensed attorney concentrating in securities law related cases. He holds a B.A. in history from Emory University, and a Juris Doctorate from the University of California at Los Angeles Law School. He is a member of the roster of neutral arbitrators of the National Futures Association (NFA) and the Financial Industry Regulatory Authority (FINRA).

     

     

    With investment advisors like the former NASDAQ Chairman Bernard Madoff being prosecuted for fraud, it is natural for people to begin to seek stores of wealth that are not subject to counterparty risk. The precious metals have been relatively safe stores of wealth for the past 10,000 years. Many people are going back to basics, turning back to the precious metals, as places to put their money, in these uncertain times.

    Gold and silver were once the most stable of all goods. Extreme volatility, however, is now a part of their nature. It comes from being made a part of the commodities casino, known as the American futures market, where speculators are allowed to use margin to control 14 times as much metal as they actually have money to buy. When the price drops a little, the “stop loss” orders of these leveraged players are triggered, and that amplifies the price move such that the price collapses on the futures market. Similarly, when gold fever begins, the prices can shoot into the sky, as the leveraged longs begin buying again. That is why the price for futures based gold and silver is still very low compared to March, 2008, even though the real world investment demand for both metals is higher than it was, back then (higher than ever before in history, actually), mining supply for gold is down by 5%, and the mine based supply of silver has utterly collapsed.

    It should be noted that precious metal volatility is a short and sometimes medium term phenomenon. Since 1913, when the Federal Reserve was created, the dollar has depreciated by 97% against gold. The dollar has depreciated by about 90% against silver in that same 95 year time period. Gold has also appreciated tremendously in price as compared to 8 years ago, 2.5 times against the Euro and 3 times against the dollar. Rational people, therefore, cannot deny that, using a multi-year or, even more, a century long point of view, gold and silver are the best stores of wealth. When looking at long term family legacies, therefore, a large position in gold and silver should be a part of every estate plan. That is especially true now, given that demand currently substantially exceeds supply, the imbalance has every likelihood of becoming more severe in the near future, and the “futures” exchange prices are now very low compared to the real market.

    In the last decade, central banks selling and leasing made up the long time shortfall between supply and demand. But, given the financial crisis, and the fear that the U.S. dollar will eventually collapse, central banks no longer want to hold all their exchange reserves in U.S. dollar cash, U.S. dollar denominated bonds and other investments. They are also unwilling to hold everything in other paper currencies, like the Euro. Some governments, including those in Europe and the USA, still have large gold hoards. But, China wants to buy 3,600 tons of additional gold for its reserves. The only way that this demand can be fulfilling without exploding the price is through a “privately negotiated” off-market sale of IMF gold. European banks don’t want to continue selling what gold hoards they still have left, after 20 to 30 years of participation of selling and leasing gold.

    In the case of silver, almost all government stockpiles are now gone. The only ones left are in Russia and China, and China restricted the export of silver last year. The U.S.A., for example, has already expended every last ounce of its strategic silver reserves years ago. The U.K. and all other western nations exhausted their supplies even before the U.S.A. Newly mined supplies have never been sufficient, and demand continues to increase. The imbalance between supply and demand is becoming especially severe, and, in the case of silver, is going to increasingly be a difficult industrial use issue in the next few years.

    Because of the severe shortages, retail dealers are charging hefty premiums for both gold and silver. This is dissuading many people from buying, but it shouldn’t, because there are ways to buy the metals without paying any premium at all. Gold and silver are selling cheaply, without premiums, on the American futures markets. Most futures contracts allow buyers to demand delivery of the metal, so the futures market is an excellent way to obtain comparatively cheap precious metals. This has already been noticed by astute investors. In the past, most traders used futures markets solely for purposes of speculation. Normally, delivery demands average less than 1% each month. Now, however, because of the premiums available in the real market, buying a futures contract and demanding physical delivery upon maturity has become a cheap method of obtaining substantial quantities of physical gold and silver. With respect to the December contract, for example, exchange records show that more than 5% of people holding open standard sized (100 ounce) gold futures contracts, and about 10% holding open silver futures contracts (5,000 ounce) demanded delivery. The delivery demands are happening even more often among deliverable mini-contracts (33.2 ounce gold/1,000 ounce silver) purchased on the NYSE-Liffe exchange.

    Some speculate that clearing members of the exchanges, who have sold gold and silver short on the futures market, will eventually be bankrupted by these delivery demands. According to these skeptics, the gold and silver consists mostly of fake claims to vaulted supplies that do not exist. They say that futures contracts are nothing more than “fake paper gold” and most refuse to buy on the futures markets, opting, instead, to pay huge premiums at retail gold and silver dealers. The skeptics may be right about the failure to keep adequate supplies of vaulted metal, but it doesn’t really matter. If you buy gold and silver on the futures exchanges, you will get your metal, whether or not the short sellers are trying to defraud you, and I’ll now explain why.

    The Commodities Futures Trading Commission is charged with the responsibility to monitor and regulate American futures markets. In spite of this, the futures markets have morphed from a legitimate place to hedge the risk of commodities, into a worldwide casino, which has a gaming commission that claims all of games of chance are really “investing”. This is nonsense. The exchanges are mostly used as gambling halls, with banks as casino operators, and speculators serving in the role of casino guests. All types of bets, from taking odds on interest rates to taking odds on the volatility of the stock markets (with no underlying security except the VIX!) are allowed, and are available to anyone who enjoys games of chance. If the CFTC ever bothered to enforce its own enabling act, and associated regulations, most of these games of chance would be quickly closed. For example, CFTC regulations require 90% of all deliverable commodity contracts (including gold and silver) to be covered by stockpiles of the real commodity, and/or real forward contracts from real producers (like miners). In practice, however, CFTC has never done a spot audit of even one vault. We really have no idea whether or not short sellers really have the gold or silver that they claim to have. We can assume that they probably don’t, given that the number of futures contracts issued has often exceeded the entire known supply of silver, for example, in the entire world.

    Indeed, in spite of rampant speculation as to their identity, in truth, we don’t even know who the short sellers are. Other countries, like Japan, have full disclosure of identities and positioning, in open and transparent futures markets, but this is not true of the much larger futures markets based in America. American futures markets are mostly opaque, because the CFTC keeps the information secret. Lack of transparency always is a recipe for fraud and corruption. The likelihood of widespread violations, occurring at exchanges regulated by CFTC, is very high. Logical people, therefore, can make some reasonable assumptions. It is quite likely that the sellers on COMEX do not have 90% of their silver contracts, for example, backed by stockpiles of the metal.

    Yet, adherence to Federal regulation is an implicit provision in the terms and conditions of every futures contract. If COMEX and/or NYSE-Liffe short sellers are entering into naked short contracts, they are violating market rules, falsely presenting their contracts to the public, and doing all this with a premeditated intent to defraud buyers. Knowingly making false assertions and promises is fraud in the inducement. Violation of the market rules is also “fraud upon the market”, and a federal and state felony level crime that can result in a long jail sentence. The vast majority of short positions in gold and silver appear to be held by only 2 – 3 American banks, so, it would be extraordinarily easy to pinpoint the perpetrators. Potentially, they could be prosecuted for market manipulation, common law fraud, state and federal RICO actions, as well as other counts.

    In other words, a large scale default on COMEX or NYSE-Liffe would not only trigger the paying of money damages, but would also involve criminal liability. Even if a few individuals within the federal government are complicit, as has been alleged, and the U.S. Justice Department refused to prosecute, there are enough politically ambitious state prosecutors to take up the baton. Futures market short sellers would pay a heavy price if there were ever a big default. Because of this, they will spend whatever money is needed to make sure it never happens.

    If a clearing member of an exchange fails to deliver, the futures exchanges are legally liable on the debt. If a clearing member goes bankrupt, performance becomes the obligation of the exchange. If a short position holder cannot or does not deliver, the exchange must either deliver, or pay in an amount equal to the difference between the contract price, and the amount of money needed to buy the physical commodity in the open market. Generally speaking, contract holders are allowed to purchase silver or gold on the spot market in a reasonably prompt manner, and all costs of doing so must be reimbursed.

    Contrary to the claims of some sincere but misguided metal aficionados, while gold and silver may be occasionally in so called “backwardation”, both are readily available at the right price. That price, of course, may be considerably higher than the reported prices on futures markets. Precious metal will continue to be available so long as the price is “right”. If short sellers on COMEX are really as naked as some claim, the only result of technical “default” at the COMEX will be a huge “short squeeze”, sending precious metals prices to the roof. During this squeeze, movement of the U.S. dollar, up or down, will be irrelevant. If delivery demands exceed supplies in futures market warehouses, metal will be purchased on the spot market. Short sellers or the exchange will be forced to make good on whatever price is paid.

    Here’s how it would work. Let’s say you buy a futures contract for February delivery of 100 ounces of gold at $800 per ounce in December. In February, spot gold is selling for $1,000 per ounce, and you deposit the full cash cost of your futures contract into your account, instructing your broker to issue a demand for delivery. The counterparty can’t deliver because the COMEX warehouse runs out of “registered” metal. There is a huge short squeeze as short sellers run around the world physical market, trying to buy gold. The short seller misses the last day to deliver. Because everyone starts hearing about the missed deliveries, by the next day after the last possible delivery date, spot gold in London starts selling for $1,359 per ounce. Your commodities broker must take the money you deposited and buy the commodity on the spot market for $1,359. The broker will be reimbursed by the short seller and/or the exchange in the amount of $55,900, plus any expenses you incurred in buying physical gold on the spot market. In the end, you get your gold or silver at the price you paid for the futures contract, regardless of the default.

    A number of well intentioned, but misinformed, precious metal commentators have claimed that exchanges will escape from this obligation by a declaring a co-called “force majeure” event. Force majeure is a legal doctrine which says that compliance with a contract is excused if an “act of God” makes it impossible to comply. Formal force majeure provisions exist in many NYMEX contracts, including gas and oil contracts, for example. After recent hurricanes in Louisiana, a NYMEX committee declared force majeure, and an extension of time for delivery of natural gas pursuant to the contracts. Unlike gas, however, which is produced from the ground, or must be moved long distances under sometimes difficult conditions, gold and silver are commodities that normally reside in vaults, and are easily transported. It should be noted that, as of this date, no formal written force majeure provision exists in the specifications of COMEX gold and silver contracts. Admittedly, force majeure is a legal doctrine that is implied in every contract, and need not be written down. However, higher gold prices and/or failure to comply with the 90% cover rule are not acts of God and will not excuse contract performance.

    Let’s say, as some claim, that short sellers have enmeshed themselves in a web of fake contracts, wherein third parties are contracted to deliver metal to them, even though both the short sellers and the third parties know that these contracts are fake, and there really is no metal to deliver. This web of lies assumedly is designed to protect against claims that they are selling “naked” shorts. The existence of such contracts doesn’t matter to the concept of force majeure. The obligation to deliver cannot be changed by a mere failure of “third” parties to deliver. Failure of contracts owed to short sellers are not acts of God. Failure of third parties to honor their contracts does not excuse performance of the short seller’s obligation to deliver to the final contract holder. It certainly does not alter the obligation of the exchange to guarantee delivery.

    Some are still skeptical. What if the entire COMEX and NYSE-Liffe exchanges fail? I doubt that will happen. First, let me say that I do not agree with bailouts. Companies, whether in the financial district or in Detroit, should fend for themselves. No one should be allowed to become parasites who feed on the taxpayers, as the big banks and automakers have now become. If companies make mistakes, behaving in an inefficient and/or outright stupid manner, they and their executives should pay the price. The process of creative destruction is essential to prosperity in a capitalist system. Bad actors and inefficient operators should be swept away to make room for innovation and steadier hands. But, my views are not shared by the U.S. government or most other governments around the world. A large number of the clearing members of both COMEX and NYSE-Liffe have already been bailed out by their respective governments. Huge institutions like JP Morgan (JPM), Citigroup (C), Morgan Stanley (MS), Merrill Lynch (MER), Goldman Sachs (GS), Bank of America (BAC), UBS and Credit Suisse (CS) are considered “too big to fail.”

    Can you imagine the exchanges not being too big to fail, when their individual members are? What chance do you think there is of the Federal Reserve allowing the entire COMEX or NYSE-Liffe exchange going bankrupt? In my opinion, the chance is close to zero. A massive failure to deliver is highly unlikely, but, if it did happen, and if the exchanges were unable to comply with their legally binding guarantee, the government will step in and provide gold from Fort Knox and enough money to buy silver in the open market, no matter what the price. The end result will merely be a huge price increase, and an end to the assumed legitimacy of futures market prices, not a default.

    Summing things up, if you want to buy gold and silver, but don’t want to pay high premiums, buy them on futures exchanges. First, open a futures account with a commodities broker. Make sure it is a real commodities broker and not an imitation. Stock brokers, like Interactive Brokers, ThinkorSwim, MBTrading, and a number of others claim to be “futures brokers.” In truth, they are not. They can only offer you speculation, and not hedging services. They will not deliver, and will forcibly sell you out of your positions, even at great loss to you, if it comes too close to the delivery date. So, instead, make certain that you open your account with a real commodities broker, like RJOFutures.com, PFGBest, lind-waldock.com, MF Global, e-futures.com or any other broker willing to arrange deliveries. You can speculate just as easily, using a commodities broker, as you can using a stock broker that dabbles in futures. But, if you want delivery, you must have a real commodities broker. Steer clear of stock brokers unless you want to buy stocks.

    Middle class families, looking for safety in precious metals, but who don’t have enough money to buy 100 ounce contracts, can buy deliverable mini-gold and mini-silver contracts on the NYSE-Liffe futures exchange. The mini-contracts require delivery of as little as 33.2 ounces of gold and 1,000 ounces of silver. If you want delivery, however, make sure you do not buy COMEX based miNY gold and/or miNY silver contracts. These COMEX mini-contracts are cash settled. The standard contracts, however, on both the COMEX and the NYSE-Liffe (consisting of 100 ounces of gold and 5,000 ounces of silver) are all deliverable.

    The highly leveraged nature of gold and silver futures contracts create high levels of volatility. That should be kept in mind when you decide to put a large portion of your investment assets into precious metal. Big price rises and deep dips are commonplace. Most of these market movements occur without much regard for the forces of supply and demand in the real world market. If you need the money tomorrow, steer clear. But, if you want to preserve your family legacy with something that will take you safely through depressions and hyperinflations, over years and decades, gold and silver are good choices.

    If you demand delivery and just put your bars in a safe place, you don’t need to worry about the volatility. The price is sure to rise in the longer term because of the fundamentals. Remember, as you watch the dizzying roller coaster of so-called “official spot” prices, that you are buying for the long term and/or for emergency use. Day to day price fluctuations should be ignored.

    By way of disclosure, I hold interests in GLD, IAU and SLV as well as
    physical gold.

    ================================================

    Final Note: The more buyers who take delivery on their Gold or Silver contracts, the greater the chance of a “short squeeze”- jschulmansr

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    New Breaking News on Gold! + New AOL Poll Says Obama Needs To Prove Eligibility!

    18 Thursday Dec 2008

    Posted by jschulmansr in 2008 Election, Achievement, Barack Obama, capitalism, commodities, Copper, Currency and Currencies, Electoral College, Finance, Free Speech, Fundamental Analysis, gold, hard assets, id theft, inflation, Investing, investments, Latest News, Markets, mining stocks, Politics, precious metals, Presidential Election, silver, socialism, Stocks, Technical Analysis, Today, u.s. constitution, U.S. Dollar, Uncategorized

    ≈ Comments Off on New Breaking News on Gold! + New AOL Poll Says Obama Needs To Prove Eligibility!

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    2008 Election, agricultural commodities, alternate energy, Austrian school, banking crisis, banks, Barack Dunham, Barack Hussein Obama, Barack Obama, Barry Dunham, Barry Soetoro, bear market, Bollinger Bands, bull market, capitalism, central banks, Chicago Tribune, China, Columbia University, Comex, commodities, communism, Copper, Currencies, currency, Currency and Currencies, D.c. press club, deflation, depression, diamonds, dollar denominated, dollar denominated investments, economic, economic trends, economy, Electoral College, Electors, Finance, financial, Forex, fraud, Free Speech, futures, futures markets, gold, gold miners, hard assets, Harvard Law School, hawaii, heating oil, id theft, India, Indonesia, Indonesian Citizenship, inflation, Investing, investments, Joe Biden, John McCain, Keith Fitz-Gerald, Latest News, legal documents, market crash, Markets, mining companies, Moving Averages, name change, natural born citizen, natural gas, Oath of Allegiance of the President of the United State, Occidental College, oil, palladium, Peter Schiff, Phillip Berg, physical gold, platinum, platinum miners, Politics, poser, precious metals, Presidential Election, price, price manipulation, prices, producers, production, protection, rare earth metals, recession, risk, run on banks, safety, Sarah Palin, Saudi Arabia, Sean Rakhimov, silver, silver miners, socialism, sovereign, spot, spot price, stagflation, Stocks, Technical Analysis, timber, Today, treason, u.s. constitution, U.S. Dollar, Uncategorized, volatility, voter fraud, warrants, Water, we the people foundation

    My Note: New AOL poll shows a majority of Americans would like to see  Obama prove “eligibility” to be US President. My question still is and has been why doesn’t Obama just show the Birth Certificate instead of spending gobs of money on 3! defense attorney firms to prevent him from having to. What is he hiding? Or is he just letting his pride get into the way? All of us have to show our Birth Certificates for eligibility purpose i.e. get a drivers license and etc. As president elect he should be taking the lead in obeying identification/eligibility rules and regulations, not fighting them! Just show us the Birth Certificate!

    Next, more great news on the Gold Market with the Fed confirming now is the time to BUY gold! Plus I have included some very good articles on everything from more junior miners to new alerts on Buying Gold-

    Enjoy! – jschulmansr 

    Fed Says Buy Gold the Start of a Bullish Pattern!

    By: David Nichols of Fractal Gold Report

    On Tuesday we received direct confirmation from the Fed that the U.S. dollar will continue to be sacrificed to resuscitate ailing credit and asset markets. “Helicopter Ben” is finally living up to his advance billing, as dollars are set to rain down on the economy.

    Gold markets got a huge burst of upside energy immediately following this surprisingly forthright Fed statement, and the long-anticipated move up to $875 is well underway. This is of course great news for our long positions, and it looks now like $875 will only be a temporary waypoint on the way back up to the all-time highs.

    On a related note, the trading program for the Fractal Gold Report has captured the majority of the move up off the bottom, with our initial long position coming way back at $710. While many hedge funds and money managers have had a disastrous year, the program has not only come through this tough period unscathed, but is well into positive territory, and that includes all fees and commissions. (Past results are not necessarily indicative of future results. There is risk of loss in all trading.) Subscribers to the Fractal Gold Report are eligible for participation in the trading program if they meet the brokerage firm requirements.

    As the New Year approaches, this is the perfect time to assess which methods have been successful during this historic market shake-out. As they say, it’s easy to be a genius in a bull market. But the real “value-added” is most apparent during the turbulent periods.

    My road-map for gold in 2008 called for a top around $1,010 in late March, followed by a lengthy and difficult corrective period which was likely to carry gold all the way back down to $730, which I subsequently adjusted to $675 as the correction was underway.

    The actual high was $1,033 in late March. Then after a difficult six month corrective period, gold bottomed out at $681 in late October.

    But the most important thing to notice on this monthly chart is how the correction has already accomplished its main job, which was to bring the monthly fractal dimension back over 55. This means that gold is again in position to rocket to the upside. A monthly trend in gold can carry prices up $400 or even $500. These are huge moves. There is still plenty of room to extend higher, even in the short-term.

    The 150-minute fractal dimension has dropped quickly with this very strong breakout move, but it’s only down to 41, so there should be more than enough energy left to take gold up to $875 on Wednesday.

    At this point my plan is to take profits at $875 if the 150-minute fractal dimension is again down in the low 30s or high 20s as gold is stretching up to this target. As we just saw at $810, there is little risk of missing out on further upside in such a scenario, and it can greatly reduce risk, as we can side-step that period of time when gold is highly unlikely to make further upside progress, and is much more likely to correct back down.

    But after this expected short-term correction off the $875 energy level, we will be looking to get right back in for the next phase of this very exciting bullish pattern.

    As always, I will provide daily updates on gold in the Fractal Gold Report, and subscribers with the annual plan also receive the Fractal Silver Report.

    ==============================================

    Gold and Silver Forcaster Market Alert!

    By: Julian Phillips

    Gold has now entered the next and major leg of the long-term gold bull market after correcting down from $1,035.   We believe it is now targeting $1,000, initially.   This will be achieved with pullbacks and periods of consolidation.

     

    We believe, too, that gold shares will benefit to a greater extent than gold itself, in the next moves up.  In particular, we feel that soundly based gold “Junior” mining companies will benefit strongly.

     

    Please refer to our latest issues for our preferred shares.

     

    The move has been triggered by the clear signal from the Fed that the deflationary spiral gripping the global economy is far more serious than realized until now.   The initial impact has already been seen in the precipitous fall of the U.S.$ to over $1.41 so far.   As repeated attempts to re-invigorate the flow of liquidity have failed, the U.S. Federal Reserve had to do more, much more. 

     

    q       The Fed’s interest rate cuts and ‘Quantative Easing” will soon be followed by central banks across the world.   

    q       The swamping of the global economy with liquidity will stem deflation, but will also badly damage confidence in the world’s monetary system and give rise to explosive inflation.   

    q       The time it takes to reflate the global economy will be far shorter than most commentators expect.   

    q       The strains that the world will now feel, particularly in the different world economies, will become in many instances, unbearable, so we expect to see restrictive local action in those economies to manage the huge capital flows that will be experienced.   

     

    All of these prospects are very positive for gold.

     

    We last issued a similar Alert early in September in 2007.   History shows how correct we were!      

     

    This alert is to prompt you to act now before the market really takes off.

     

    As you know, we at Gold & Silver Forecaster are dedicated to following these developments so that Investors can maximize their understanding and profits from the gold and silver [and platinum] markets.  As a result we expect to see the gold market shine far brighter than we have seen to date.

     

    If you have not followed the newsletter, we recommend that you subscribe quickly to it so as to see which shares we believe will benefit investors the most and to keep your fingers ‘on the pulse’ of the gold price.   Our coverage of the global economy is focused on the factors driving the gold price including oil, the $, and other relevant markets.   

     

     
      

    We will always keep the global perspective, making our letter “must-have” reading in these markets.

     

    Kind regards,

     

    Gold & Silver Forecaster

    www.goldforecaster.com

    www.silverforecaster.com

    — Posted Wednesday, 17 December 2008

    Previous Articles by Julian D. W. Phillips, Gold/Silver Forecaster – Global Watch

    =================================================

    Risky Opportunity Awaits in Junior Gold Sector

    By: James West of the Midas Letter


    The biggest error an investor might make in the burgeoning third phase of the gold bull market is thinking the boat has been missed after new price territory is reached. Limiting your gains by trading in and out of the physical is insanity. Physical gold should only be considered if you plan to hold on to it for years, not months. Transportation, storage and security issues will chew up short term gains.

    Moving into the market we are, where the US Dollar is going to crash in value, and gold is going to head in the opposite direction, it’s time to allocate investments intelligently among various asset classes that will benefit from the gold bull.

    Producing mining companies are a great way to capture the upside gold will impart, and provides a very limited exposure to risk – especially if you’re considering one of the major producers such as Barrick, (NYSE: ABX) Newmont (NYSE: NEM) or Goldcorp (NYSE: GG), who tend to develop assets with strong economics in relatively stable countries.

    South African senior producers have a special set of challenges ahead of them that make investment there riskier than in their North American counterparts. Electrical infrastructure is in major need of upgrade, and the depths to which these mines now extend negatively impact production costs going forward.

    As you proceed down the list of producers, risk is intensified. This is because mid-tier producers typically gain access only to projects too small, too risky or too expensive for the big players. With increased risk comes the potential for a greater reward – especially with companies who have not yet defined the limits of deposits under development, or where the political situation is uncertain.

    The biggest leverage right now, especially considering the drubbing they’ve experienced this year, are among the junior explorers. The juniors also occupy the highest risk segment, but no pain, no gain…or at least, little gain.

    The current market is not differentiating efficiently the companies with potentially world class deposits and management from the “wanna be’s” who are probably never “gonna-be’s.” And in that lack of efficiency lies tremendous opportunity for risk-tolerant and patient investors.

    You’ve probably heard a lot of talking heads on business stations suggesting that the economic stimulus initiatives are going to have a positive impact on stocks, and how the worst is over, and blah blah blah blah…the same guys were saying the worst is over back in August of last year. All data suggests that we are heading for a prolonged DEPRESSION, and just as in every long bear cycle, there will be little bullish corrections that will snag the naïve predictably.

    The pressure on gold will be accordingly intensified. The premium will be on physical and senior production, which is why right now is the time be accumulating gold juniors. Historically, they are the last to benefit from strengthening gold fundamentals, and in this new environment of mistrust and paranoia, it will be no different.

    Again, the primary consideration here must be advanced exploration/near-term production, plenty of cash on hand, and aggressive but sensible management. In the last year, I’ve visited several gold deposits, all of which have exceptional potential, and will continue to do so in the months ahead.

    When I say exceptional potential, I mean companies that have the potential to earn investors ten times the money, just because they have not yet published a Canadian National Instrument #43-101 report, which is quickly becoming the accepted standard worldwide for mineral resource reporting.

    The key is in looking closely at the exploration results and ignoring the headlines. There is a tendency emerging to call everything over 2 grams per tonne gold “high grade”, which is just plain misleading. And high grades can be less relevant where huge tonnage potential exists near infrastructure or existing milling operations, especially if they start at or near surface and have low strip ratios.

    The key to evaluating results from a lay person’s perspective is continuity. Long intercepts of low grade mineralization that start near surface are better than short intercepts of higher grades at depth. If mineralization doesn’t start anywhere in the exploration zone above 200 metres in depth, there’s a lot of overburden to go through to reach the good stuff.

    Similarly, and what NovaGold (NYSE: NG) is discovering, you can have a monstrous low-grade high tonnage deposit, and discover that the cost of building access and infrastructure can discourage investors and derail the path to production.

    In NovaGold’s case though, as long as it is able to navigate through this troubled period where raising cash is tough, the economics improve as gold increases in value and construction materials and energy costs decline. Financing for these projects will become available as these economic factors solidify.

    2009 will be a devastating year for many investors. Those with no experience or with little tolerance for risk will miss out on what will become the most profitable phase of the long term bull market for gold that began in 2002. Investors who buy a diverse basket of the very best juniors are going to make out very well, both in the short term and the longer.

    ===============================================

    Now For Obama…

    Obama citizenship issue has merit, AOL poll says

    Nation Seeks Answers to questions about the president-elect’s eligibility…

    Baro also sent investigators to the newspaper offices to examine files, but the Advertiser could not confirm who actually placed the ad.

    According to Baro’s affidavit, Beatrice Arakaki affirmed she was a neighbor of the address listed. She has lived at her current residence of 6075 Kalanianaole Highway from before 1961 to the present.

    Moreover, Arakaki said she believed that when Obama lived with the Dunhams, his grandparents, the family address was in Waikiki, not on Kalanianaole Highway.

    Baro was able to determine the previous owners of the residence at 6085 Kalanianaole Highway – the alleged address of Obama’s parents when he was born – were Orland S. and Thelma S. (Young) Lefforge, both of whom are deceased.

    Baro’s affidavit also documents that the Certification of Live Birth that Obama posted on his campaign website is not the original “long form” birth certificate issued in 1961 by the obstetrician or physician giving birth and the hospital where the baby was born.

    Baro’s investigators learned that a “Certificate of Hawaiian Birth Program” established in 1911 during the territorial era and terminated in 1972 during the statehood era allowed Hawaiian residents to apply for a “Late Birth Certificate,” called a “Certificate of Hawaiian Birth,” which appears identical to the “birth certificate” Obama posted on his campaign website.

    “This raised the question in my mind as to whether the ‘Certification of Live Birth,’ which is the only document that has been produced and as previously stated solely handled by the representatives of factcheck.org outside Obama’s campaign, is a certification of a live birth or a late birth,” Baro stated in his affidavit.

    “I am left with the conclusion that a simple request from Senator Barack Obama to produce the ‘long form’ (redacted if necessary) would end any speculation or question as to his birthplace,” Baro’s affidavit continued. “His continued denial to do so is suspect, in my professional opinion.”

    Baro also pointed out that factcheck.org is funded by the Annenberg Foundation, which “is at the center of the ongoing Obama-Bill Ayers controversy – hardly an unbiased source for information in my view.”

     

     

    By Chelsea Schilling
    © 2008 WorldNetDaily

    America Online is conducting a new poll asking readers whether they believe there is any merit to the controversy surrounding Barack Obama’s citizenship – and most respondents say “yes.”

    There are more than 88,000 national votes in the unscientific survery. A full 52 percent of nationwide respondents believe people should be concerned about Obama’s citizenship, 42 percent say the controversy has no merit and 6 percent of voters remain undecided.

    In all, 43 states agree that there could be merit to the Obama citizenship controversy.

    Where’s the proof Barack Obama was born in the U.S. or that he fulfills the “natural-born American” clause in the Constitution? If you still want to see it, join more than 190,000 others and sign up now!

    Among voters who said Obama’s citizenship shouldn’t be an issue, represented by 7 yellow states, an average only 50 percent of those states’ respondents sided with Obama.

    However, Washington, D.C., voters overwhelmingly sided with Obama – with 74 percent voting to drop the issue.

    On a similar note, WND poll asked readers, “Are you satisfied Obama is constitutionally eligible to assume the presidency?” A full 97 percent of 6,000 voters said “no.”

    The top three answers were:

    • No, if I can’t get a driver’s license without an original birth certificate, how can Obama become president without one?
    • No, and Americans should continue to dog him about it through his term
    • No, there’s a reason why he’s unwilling to disclose his original birth certificate

      

    AOL readers posted comments under its poll results, including the following:

    • No, I don’t think it has any merit. A birth certificate was posted on his web site showing his birth in Hawaii and a story to go with it. Those who are keeping it alive are just sore losers.
    • This could be put to rest with a $10 copy from the government, and yet Obama has spent somewhere between $500,000 and $800,000 to block this. Why does he waste taxpayers money on this foolishness.
    • The birth certificate thing is just more racism under a smoke screen. You birthers can keep this going as long as you want with no results, just as the “Impeach Bush” folks never got anywhere for the past 8 years.
    • Why spend thousands of dollars to block lawsuits that are requesting him to do what John McCain willfully and freely did?
    • It’s sad that every pathetic, Republican racist out there is clinging to the hope that President Obama is not a red-blooded, red, white and blue right down to his soxs American citizen! President Obama is a God given gift to America. He has a big job ahead of him … cleaning up Bush’s mess!
    • Now isn’t that interesting that the slime states of the left which are in the most trouble with their budgets are the ones who think this thug is real.

    =====================================================

    Investigator Casts Doubt on Obama’s Birth Residence

    By Jerome R. Corsi
    © 2008 WorldNetDaily

     A private investigator has released to WND an affidavit that casts doubt on whether Barack Obama’s family lived at the address listed in the published notice of his birth in 1961.Jorge Baro was hired by WND to investigate issues related to Obama’s birth amid allegations the Democrat does not meet the Constitution’s requirement that a president be a “natural born citizen.”

    Baro’s affidavit documents an interview his staff conducted with Beatrice Arakaki, who has lived at 6075 Kalanianaole Highway in Honolulu since before Obama was born.

    The affadivit is at the center of a federal lawsuit filed prior to the November election in Hattiesburg, Miss., before U.S. District Judge Keith Starrett. The suit is one of several yet to be adjudicated that calls for proof of Obama being a “natural born citizen” as required by the Constitution.

    Baro is the in-house senior investigator for Elite Legal Services, LLC, in Royal Palm Beach, Fla.

     

     


    WND Exclusive


    OBAMA WATCH CENTRAL

    Investigator casts doubt on Obama’s birth residence

    Neighbor believes family didn’t live at address in newspaper announcement


    Posted: December 16, 2008
    10:09 pm Eastern 

    By Jerome R. Corsi
    © 2008 WorldNetDaily

     


    Barack Obama and his mother, Anne Dunham

    A private investigator has released to WND an affidavit that casts doubt on whether Barack Obama’s family lived at the address listed in the published notice of his birth in 1961.

    Jorge Baro was hired by WND to investigate issues related to Obama’s birth amid allegations the Democrat does not meet the Constitution’s requirement that a president be a “natural born citizen.”

    Baro’s affidavit documents an interview his staff conducted with Beatrice Arakaki, who has lived at 6075 Kalanianaole Highway in Honolulu since before Obama was born.

    The affadivit is at the center of a federal lawsuit filed prior to the November election in Hattiesburg, Miss., before U.S. District Judge Keith Starrett. The suit is one of several yet to be adjudicated that calls for proof of Obama being a “natural born citizen” as required by the Constitution.

    Baro is the in-house senior investigator for Elite Legal Services, LLC, in Royal Palm Beach, Fla.

    In Hawaii, WND was able to locate at the Honolulu public library microfilm of a notice placed in the Sunday Advertiser Aug. 13, 1961. The announcement in the “Births, Marriages, Death” section read: “Mr. and Mrs. Barack H. Obama, 6085 Kalanianaole Hwy., son, Aug. 4.”

    Arakaki told Baro’s investigators she had no recollection of Obama being born or of the family living next door having a black child born to a white mother.

    Baro sent a team of investigators to Honolulu to explore records regarding current residents of Kalanianaole Highway and to track down residents back to 1961.

    Baro’s investigators were unable to locate any current or past resident of Kalanianaole Highway who could recall Obama or his family living at the address listed in the Sunday Advertiser announcement.

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    Gold Supply and Demand + Troubling Questions For Obama

    12 Friday Dec 2008

    Posted by jschulmansr in 2008 Election, Barack Obama, capitalism, commodities, Copper, Currency and Currencies, deflation, Electoral College, Finance, Free Speech, Fundamental Analysis, gold, hard assets, id theft, inflation, Investing, investments, Markets, mining stocks, oil, Politics, precious metals, Presidential Election, silver, small caps, socialism, Stocks, Technical Analysis, Today, u.s. constitution, U.S. Dollar, Uncategorized

    ≈ Comments Off on Gold Supply and Demand + Troubling Questions For Obama

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    Gold Supply and Demand

    By Luke Burgess of  Gold World

    Jesse Lauriston Livermore is perhaps the most famous stock trader of the early 20th century.

    Famous for amassing and subsequently losing several multi-million dollar fortunes, Livermore also shorted the stock market heavily during the crashes of 1907 and 1929.

    Livermore, who was also known as the Boy Plunger, is famed for making—and losing—several multi-million dollar fortunes and short selling during the stock market crashes in 1907 and 1929.

    One of Livermore’s core trading rules was…

    Be Right and Sit Tight

    It’s simple…

    Invest in a growing trend and have the courage to hold long-term for really big gains.

    Clearly, the gold bull market is one such growing trend. And investors who “sit tight” will undoutbly see big gains by owning the precious metal now.

    Buy Gold Now

    The bull market has already pushed gold prices over 300% higher since 2001. And now with the world’s demand for gold is starting to significantly outpace supplies, even higher prices are on the horizon.

    During the third-quarter there was a colossal 10.5 million ounce deficit (worth $8.5 billion) in world’s supply and demand of gold. World gold demand increased over 50% since the second-quarter while supplies dropped 64% year-on-year.

    Gold demand, particularly in the investment sector, is currently at all-time highs. But estimates suggest that the world will only produce 76.8 million troy ounces during 2008. This represents a 9% decline in world gold production since 2001.

    20081208_world_gold_production.png

    Gold Mine Supplies to Continue Falling

    The world financial meltdown has forced the shut down of hundreds of gold mines around the world and slashed exploration and development budgets across the board. And the near-term future of new investment still looks pretty grim.

    The effects of these budget cutbacks won’t be felt in the gold market for several months to years. But the lack of investment money going into gold mines right now-and probably for over the next several months-will certainly have an effect on global gold supplies in the future.

     

    And the lack of these supplies will positively affect gold prices.

    The global economic crisis has motivated miners of all metals to cut back on exploration and development activities. Below is a just partial list of mine closures and delays that have been announced over the past several weeks:

    August 21
    HudBay Minerals [TSX: HBM] closes its Balmat zinc mine and concentrator.

    October 13
    Intrepid Mines [TSX: IAU, ASX: IAU] postpones the development of the Mines Casposo gold/silver project.

    October 20
    Polymetal, Russia’s largest silver miner, cuts its production forecast and says it will consider revising its investment plan for next year.

    October 20
    First Nickel [TSX: FNI] suspends production at its Lockerby nickel mine.

    October 21
    Freeport-McMoRan Copper & Gold [NYSE: FCX] announced that the company will defer mine expansions and put off restarting at least one operation.

    October 21
    North American Palladium [AMEX: PAL, TSX: PDL] temporarily closes its Lac des Iles platinum-group metals mine.

    November 6
    Thompson Creek Metals [NYSE: TC, TSX: TCM] postpones the development of its Davidson molybdenum mine.

    November 10
    Rio Tinto [NYSE: RTP, LON: RIO] cut its Australian iron-ore production by about 10%.

    November 10
    Freeport-McMoRan Copper & Gold [NYSE: FCX] cut molybdenum production at its Henderson mine by 25%.

    November 10
    Platinum and chrome producer Xstrata Alloys and its South African joint-venture partner, Merafe Resources, temporarily suspends six furnaces of the Xstrata-Merafe chrome venture.

    November 11
    Arehada Mining [TSX: AHD] temporarily shut down of operations at its zinc/lead/silver mine and plant.

    November 11
    Frontera Copper [TSX: FCC] suspends mining activities at its Piedras Verdes operation.

    November 13
    Lundin Mining [NYSE: LMC, TSX: LUN] suspends zinc production from its Neves-Corvo copper/zinc mine, and put another operation, Aljustrel, on care and maintenance until metal prices recover.

    November 13
    Anvil Mining [TSX: AVM, ASX: AVM] suspends the fabrication and construction works for its Kinsevere Stage II solvent extraction-electrowinning plant.

    November 14
    Geovic Mining [TSX: GMC] delays construction and financing for its Nkamouna cobalt project.

    November 17
    Teal Exploration & Mining [TSX: TL] cut output at the Lupoto copper project’s small-scale mining operation

    November 18
    Stillwater Mining [NYSE: SWC] scales down operations at its East Boulder mine, reduces capital expenditure and cut jobs.

    November 18
    The world’s third-largest platinum-miner, Lonmin, announces the closure of South African mines, and says it will halt growth projects.

    November 19

    First Majestic Silver [TSX: FR] temporarily suspends all activities at its Cuitaboca project.

    November 19
    Weatherly International [LON: WTI] announces the closing two of its copper mining projects in Namibia.

    November 20
    Hochschild Mining [LON: HOC] announces that the company will delay its San Felipe zinc project.

    November 21
    Katanga Mining [TSX: KAT] temporarily halts mining operations at the Tilwezembe open pit and ore processing at its Kolwezi concentrator.

    Novmeber 21
    Apogee Minerals [TSX-V: APE] halts production at its La Solucion silver/lead/zinc mine, in Bolivia.

    November 24
    Norilsk Nickel put its Waterloo and Silver Swan underground mines into care and maintenance.

    November 26
    Bindura Nickel announces the closure of two nickel mines, and its smelter and refinery operations.

    December 1
    The Xstrata-Merafe joint venture suspends operations at another five ferrochrome furnaces, bringing the company’s offline capacity to 906,000 tonnes per year, or more than half of its annual production capability.

    December 3
    BHP Billiton [NYSE: BHP, ASX: BHP] reduces manganese and alloy production.

    December 8
    Companhia Vale do Rio Doce, the world’s biggest iron-ore producer, has suspended operations at two pellet plants.

    With demand soaring and supplies plummeting, there’s never been a better time to own gold. Gold prices could go to as high as $5,000 once this gold bull market plays out.

    Be right and sit tight.

    Buy gold.

    Good Investing,

    Luke Burgess
    Managing Editor, Gold World

    P.S. It’s simple, really. Demand is soaring. Supplies are plummeting. And if you don’t buy gold now, you may not get the chance to later.

    ==============================================

    Troubling Questions For Obama Team

    By: Linda Chavez of GOPUSA

    A corruption scandal in President-elect Obama’s backyard is the last thing this country needs. But like it or not, that’s exactly what we have in the unfolding drama of Illinois Gov. Rod Blagojevich’s arrest earlier this week for trying to sell Barack Obama’s Senate seat. The federal prosecutor in the case — Patrick Fitzgerald, the man whose investigation of the Valerie Plame leak case nearly paralyzed the Bush White House for a time — has made it clear that nothing ties Obama directly to the Blagojevich scheme. But the timing of Fitzgerald’s announcement raises some serious questions.

    Apparently, Fitzgerald knew that Blagojevich was trolling for bidders for the Obama seat in the waning days of the general election. Before the first votes were counted to elect Obama president, Blagojevich was so confident in Obama’s victory he was already soliciting bids for the seat. And Fitzgerald already had substantial evidence that Blagojevich was engaged in major corruption before the governor put a “for sale” sign on the Senate seat. So why didn’t the federal prosecutor act prior to the election? Had he done so, of course, it could have damaged Obama.

    Many would argue that bringing down another Illinois Democrat before the election would have smelled like a dirty trick. The federal prosecutor, after all, was a Republican appointee, and the McCain campaign had already run ads trying to tie Obama to political corruption in Chicago. One of Obama’s early financial supporters, land developer Tony Rezko, was convicted on corruption charges earlier this year, and Rezko figures prominently in the Blagojevich scandal. Had Blagojevich been forced to do a perp walk before Election Day, voters might have asked why Obama had endorsed Blagojevich just two years earlier, considering the governor was at that time under investigation for taking bribes. The endorsement would have been yet another example of Obama’s bad judgment in his associations from Rezko to the Rev. Wright to Bill Ayers.

    But even if Fitzgerald acted fairly and prudently by not moving against Blagojevich in the heat of a political campaign, why did he decide to act this week? His explanation was that he was trying to stop “a political corruption crime spree.” Under existing Illinois law, the governor has final authority to appoint someone to fill a vacant U.S. Senate seat and wiretaps suggest Blagojevich was about to do just that. According to the criminal complaint, Blagojevich had found at least one bidder — identified only as Senate Candidate 5 — who offered to raise the governor $500,000 and another $1 million if he got the appointment. Perhaps Fitzgerald simply wanted to go public before Blagojevich sealed the deal.

    But there are other possible explanations. Fitzgerald’s hand may have been forced by the Chicago Tribune, which reported Dec. 5 that Blagojevich’s phone lines were being tapped. This information signaled everyone — the governor and anyone talking to the governor or his aides — that they could become ensnared in a huge criminal investigation leading to indictments.

    President-elect Obama has emphatically denied that he ever talked to Blagojevich about his Senate replacement. And certainly Fitzgerald has done everything he can to confirm that Obama is not implicated in any way. But there are a number of unanswered questions about what contact members of the president-elect’s team might have had with the governor or his aides, directly or through intermediaries. A number of aides, including the incoming White House Chief of Staff, Rahm Emmanuel, and former campaign leader David Axelrod, have long-standing ties to Blagojevich. And Axelrod has already had to revise his earlier assertion that Obama had spoken with Blagojevich about candidates to replace him in the Senate.

    The president-elect has said “I want to gather all the facts about any staff contact that may have taken place. We’ll have those in the next few days and we’ll present them.”

    The president-elect’s credibility is on the line. For the good of the country, we must all hope this scandal doesn’t infect anyone in the new administration. The best way to ensure that is for the president-elect and his aides to be forthcoming quickly.

    —

    Linda Chavez is the author of “An Unlikely Conservative: The Transformation of an Ex-Liberal.”

    COPYRIGHT 2008 CREATORS SYNDICATE, INC.

    ============================================

    Chicago Politics Stains Obama 

    By: Michael Barone of US News And World Report

    I have not seen it recorded whether John F. Kennedy, after he was elected president in 1960, held conversations with Massachusetts Gov. Foster Furcolo as to who would be appointed to fill his seat in the Senate. History does record that Furcolo, just nine days before turning the governorship over to the Republican elected to succeed him, appointed one Benjamin A. Smith II, a college roommate of Kennedy’s and former mayor of Gloucester, who chose not to seek the seat in the next election in 1962, which happened to be the year in which Edward Kennedy turned 30 and was therefore old enough to run for it.

    Memory tells me that there was little fuss made of this at the time. Ambassador Joseph P. Kennedy obviously wanted someone appointed to keep the seat warm for Teddy, and so it was done. And Edward Kennedy has turned out to be an able and accomplished senator.

    That was a different tableau from the one we have seen unfold in Chicago this past week. Furcolo was an intelligent man, disappointed to have failed to win the state’s other Senate seat and destined not to win elective office again. But he knew that it would not pay to buck the Kennedys.

    Rod Blagojevich, the governor who under Illinois statute has the power to appoint a senator to fill out the remaining two years of Barack Obama’s Senate term, is made of different stuff. He was arrested last Tuesday, and the U.S. attorney filed a criminal complaint and made public tapes of Blagojevich seeking personal favors in return for the Senate seat.

    Obama denied having conversations with Blagojevich about his choice, though his political strategist David Axelrod said last month that Obama had. Obama declined further comment when asked whether his staff members had discussed the matter with the governor, but he then promised to reveal the details later.

    In the ordinary course of things, there would be nothing wrong with such conversations (did Foster Furcolo decide on Benjamin A. Smith II without prompting?). And the construction of the evidence most negative to Obama one can currently make is that someone in Team Obama suggested nominating Obama insider Valerie Jarrett, Blagojevich simply refused or asked for something improper in return and Team Obama promptly broke off communications. Any impropriety in this version was on Blagojevich’s part, not on Obama’s.

    Still, these are not headlines the Obama transition team wants. So far, the president-elect has won wide approval for his performance since the election, with poll numbers significantly higher than George W. Bush or Bill Clinton got in their transition periods. His leading foreign, defense and economic appointments have won high praise from all sides, in some cases more from conservatives than liberals. And in a time of financial crisis and foreign threats, he has seemed to keep a clear head and a steady hand.

    He has appeared to avoid all but small mistakes, and his theme of unifying the nation — muted perhaps necessarily in the adversary environment of the campaign — has come forth loud and clear.

    From all this the Blagojevich scandal is an unwanted distraction. It is a reminder that, for all his inspirational talk of hope and change, Obama, like Blagojevich, are both products of Chicago Democratic politics, which is capable of producing leaders both sublime and sordid.

    Obama has not always avoided the latter. For 20 years he attended the church of the Rev. Jeremiah Wright, now thrown under the bus, and for more than a decade engaged in mutually beneficial exchanges political and financial with the political fixer Tony Rezko, now in federal custody.

    Blagojevich, never a close political ally, has now been thrown under the bus, too, and seems likely to share Rezko’s fate. Obama fans can point out, truthfully, that other revered presidents had seamy associates and made common cause on their way up with men who turned out to be scoundrels. Franklin Roosevelt happily did business with Chicago Mayor Ed Kelly, though warned that he was skimming off money from federal contracts. John Kennedy no more thought to deny a request from the Mayor Daley of his day than Obama has thought to buck the Mayor Daley of his.

    But as Kennedy supposedly said of a redolent Massachusetts politician, “Sometimes party loyalty asks too much.” The man in question was the Democratic nominee for governor and was not elected. Until Patrick Fitzgerald released his tapes, Barack Obama never said the same of Rod Blagojevich.

    Obama has profited greatly from his careful climb through Chicago politics. But there is an old saying that in politics nothing is free — there is just some question about when you pay the price. Obama is paying it now.

    To read more political analysis by Michael Barone, visit http://www.usnews.com/baroneblog

    COPYRIGHT 2008 U.S. NEWS AND WORLD REPORT

    DISTRIBUTED BY CREATORS SYNDICATE INC.

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    The Dollar Gets Slammed+Understanding Warrants

    11 Thursday Dec 2008

    Posted by jschulmansr in Uncategorized

    ≈ Comments Off on The Dollar Gets Slammed+Understanding Warrants

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    The Dollar Gets Slammed – Seeking Alpha

    Source: Bespoke Investment Group

    While investors have been focused on the S&P 500 and its attempt to break through its 50-day moving average, the Dollar had no problems breaking through its 50-day. Unfortunately, the break was to the downside. With a decline of 1.5% today, the US Dollar index traded below its 50-day moving average for the first time since late July.

    At the same time the Dollar has been falling, the Euro has been rallying, as it broke above its 50-day moving average for the first time in months. Was the negative yield on the three month T-Bill a wake up call to foreign investors that holding cash in Dollars is not a very attractive option?

    click to enlarge

    Not surprisingly, Gold is benefiting from the Dollar’s weakness with a gain of 3% today. A look at this chart shows that the commodity is still nowhere near breaking its downtrend. However, it is currently trading right at a short-term resistance level of around $830. How it acts in the weeks and months ahead will be a good indication of how concerned the market is regarding inflation.

    ==============================================

    Confused About Warrants? Using Goldcorp To Explain

    By: Dudley Baker of Precious Metals Warrants.com

    Warrants are being mentioned more and more in the traditional media as the U.S. government moves to receive warrants in connection with some of the bailout/rescue plans for the Big Three auto manufactures and also with AIG back in September.

    Warrants have a long history going back into the 1920s, but the average investor has absolutely no idea what this investment vehicle is all about.

    So let’s make this simple and provide you with a brief understanding of warrants and why you should perhaps consider warrants in your investment plans. (After all, this is not rocket science!)

    Warrants are a security issued by a company usually in connection with a financing arrangement or a public offering of shares giving the holder the right, but not the obligation, to acquire the underlying security at a specific price and expiring on a specific date in the future. Sounds a lot like a call option, doesn’t it? Yes, very similar but with a few important differences, namely, how they are issued and how they are traded.

    While understanding the term warrants is essential, the next most important question is a warrant on what? The underlying company is of utmost importance because if the company does not perform, execute on its business plans and thus the shares price rising in the markets, then the warrants can not be expected to go up and we are all about making money.

    A common question from investors is why would I buy a warrant when I just want to own the common shares of the company? Good question and we have a very easy answer. An investor would purchase a warrant because of the expectation of a greater gain than purchasing the common shares and this term is usually referred to as leverage. See our analysis below on Goldcorp (GG). We would normally suggest investors attempt to seek a leverage of 2 to 1, meaning if the common shares rise by 100% we would expect the warrants to increase by 200%. Another benefit of buying the warrant is that it will cost you much less money thus lowering your investment cost and potentially increasing your return on your investment.

    Perhaps a detailed example would clarify any questions you may still have on warrants.

    Let’s say you are a believer in the return of the long term bull market in the precious metals and commodity sector and you are aware that one of the major gold producers is Goldcorp which trades on the NYSE and the TSX. As you hear many analysts commenting on Goldcorp, you are thinking maybe this would be a good addition to your portfolio. You do some more research (due diligence) and find that Goldcorp, a Canadian company headquartered in Vancouver, Canada, employs more than 9,000 people worldwide has has 16 world class operations and development projects focused throughout the Americas with over 70% of reserves in low risk NAFTA and they do not hedge or sell forward its gold production.

    Now you are excited. You have found that Goldcorp meets all of your criteria and you see the potential for the shares to rise perhaps to $70 to $100 due to your bullish views on the precious metals markets within the next 2 years.

    This is where we encourage investors, before purchasing the common shares, to ask the question, does Goldcorp (or any other company you are considering in your portfolio) have a long-term warrant which is trading which may provide me with a better return on my investment? We know that Goldcorp does in fact have a warrant which is trading and the issue now becomes, what is the exercise price, when does the warrant expire and does this warrant offer me great upside leverage as the common shares increase in price?

    As of the close on Friday, December the 5th, Goldcorp common shares were at C$27.85 and the warrants at C$7.34. The warrants have an exercise price of C$45.75 and will expire on June 9, 2011. At a projected share price of $100 you would have a gain of 259% and with the common at $100, the warrants would have a minimum gain of 639% for a leverage of 2.5 times.

    We would like to stress that this is an example and not a recommendation of the Goldcorp warrants. However with the warrant trading on Goldcorp if the answers to your questions are answered satisfactorily the warrant should then be purchased in lieu of the common shares after performing your due diligence and consulting with one’s investment advisor.

    Currently there are warrants trading on some of the large producers as well as many of the smaller junior mining companies with expiration dates of 2011 and out to 2017 providing investors with some incredible opportunities

    More Info on Warrant Can Be Found Here

    ============================================

    What Does Backwardisation Mean For Gold & Silver Prices?

    By: Peter Cooper of Arabian Money.net

    Antal E. Fekete, a professor at Intermountain Institute of Science and Applied Mathematics, and frequent writer on precious metals, answers a timely question:

    Q: People from around the world keep asking me what advance warning for the collapse of our international monetary system, based as it is on irredeemable promises to pay, they should be looking for.

    A: My answer invariably is: ‘watch for the last contango in silver’.

    It takes a little bit of explaining what this cryptic message means. Contango is that condition whereby more distant futures prices are at a premium over the nearby. The opposite is called backwardation which obtains when the nearby futures sell at a premium and the more distant futures are at a discount.

    When contango gives way to backwardation in all contract spreads, never again to return, it is a foolproof indication that no deliverable monetary silver exists.

    Silver price hike

    Thank you professor! This is really an extension of the argument on this website dating back to before the summer rout of precious metal prices.

    Physical stocks are low and the futures price has been distorted by big hedge fund forced-sales – now we are coming to the day of reckoning when the physical shortage starts to determine the spot price, and not the futures market.

    The upside – which should have been there all along – will now come back with a vengeance and smash the few remaining shorts. This is likely to be spectacular – but after the culling of bulls recently not all precious metal fans will be there to benefit.

     

     

    Backwardation means BIG GOLD Price Rally Coming!

    By: Peter Cooper of Arabian Money.Net

    Please forgive this late contribution – I have been distracted by the delights of ancient Egypt in Luxor – but this is highly significant.

    Professor Emeritus of Mathematics Antal E. Fekete says that Dec 2nd. marked the beginning of the end for paper currencies and wealth based on such currencies.

    Since at least 1972, the price of gold futures has been higher than the spot price. But on December 2nd, the futures price went below the spot price – and has stayed there for several days.

    Fekete argues that this means that gold owners are hoarding their gold because (1) they’re not confident that they’ll be able to buy it back in the future, and (2) they have lost all faith in paper currency. He says:

    Back to the future

    ‘Once entrenched, backwardation in gold means that the cancer of the dollar has reached its terminal stages. The  progressively evaporating trust in the value of the irredeemable dollar can no longer be stopped.

    Negative basis (backwardation) means that people controlling the supply of monetary gold cannot be persuaded to part with it, regardless of the bait. These people are no speculators. They are neither Scrooges nor Shylocks.

    They are highly capable businessmen with a conservative frame of mind. They are determined to preserve their capital come hell or high water, for saner times, so they can re-deploy it under a saner government and a saner monetary system.

    Their instrument is the ownership of monetary gold. They blithely ignore the siren song promising risk-free profits. Indeed, they could sell their physical gold in the spot market and buy it back at a discount in the futures market for delivery in 30 days.

    In any other commodity, traders controlling supply would jump at the opportunity. The lure of risk-free profits would be irresistible. Not so in the case of gold. Owners refuse to be coaxed out of their gold holdings, however large the bait may be. Why?

    Well, they don’t believe that the physical gold will be there and available for delivery in 30 days’ time. They don’t want to be stuck with paper gold, which is useless for their purposes of capital preservation.’

    A big change

    PhD economist James Conrad confirms the backwardation of gold:

    ‘Backwardation is always the first sign that a huge price rise is about to happen. In the absence of backwardation, there is no rational explanation as to why HSBC, Bank of Nova Scotia(BNS), Goldman Sachs, and others are forcing COMEX to make large deliveries.

    Things … are changing fast … the first major mini-panic among COMEX gold short sellers happened last Friday. As of Wednesday morning, about 11,500 delivery demands for 100 ounce ingots were made at COMEX, which represents about 5% of the previous open interest.

    Another 2,000 contracts are still open, and a large percentage of those will probably demand delivery. These demands compare to the usual ½ to 1% of all contracts.

    European central banks no longer want to sell gold. China wants to buy 360 tons of it as soon as humanly possible, and as soon as it can be done without sending the price into the stratosphere. A close look at the Federal Reserve balance sheet tells us that Ben Bernanke eventually intends to devalue the U.S. dollar against gold.

    Anyone who reads the written works of our Fed Chairman knows that Bernanke’s long term plan involves devaluing the dollar against gold. This is the exact opposite of most prior Fed Chairmen. He has overtly stated his intentions toward gold, many times, in various articles, speeches and treatises written before he became Fed Chairman.

    He often extols the virtues of former President Franklin Roosevelt’s gold revaluation/dollar devaluation, back in 1934, and credits it with saving he nation from the Great Depression. According to Bernanke, devaluation of the dollar against gold was so effective in stimulating economic activity that the stock market rose sharply in 1934, immediately thereafter. That is something that the Fed wants to see happen again.

    Huge international banking firms normally do not take metal deliveries from futures markets. They normally buy on the London spot market. The fact that they are demanding delivery from COMEX means one of two things. Either the London bullion exchanges have run out of gold, or these firms are finding it cheaper to buy gold as a ‘future’ than as a spot exchange.

    Smart traders at big firms may be              buying on COMEX to sell into the spot market, for a profit. This pricing condition is known as backwardation.’

    ==============================================

     

     

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    Gold (H)edges Gold Stocks + New CBOE Gold and Silver Options

    09 Tuesday Dec 2008

    Posted by jschulmansr in capitalism, commodities, Copper, Currency and Currencies, deflation, Finance, Fundamental Analysis, gold, hard assets, inflation, Investing, investments, Latest News, Markets, mining stocks, oil, precious metals, silver, small caps, Stocks, Technical Analysis, U.S. Dollar, Uncategorized, uranium

    ≈ Comments Off on Gold (H)edges Gold Stocks + New CBOE Gold and Silver Options

    Tags

    agricultural commodities, alternate energy, Austrian school, banking crisis, banks, bear market, Bollinger Bands, bull market, capitalism, central banks, China, Comex, commodities, communism, Copper, Currencies, currency, deflation, depression, diamonds, dollar denominated, dollar denominated investments, economic, economic trends, economy, financial, Forex, futures, futures markets, gold, gold miners, hard assets, heating oil, India, inflation, investments, Keith Fitz-Gerald, market crash, Markets, mining companies, Moving Averages, natural gas, oil, palladium, Peter Schiff, physical gold, platinum, platinum miners, precious metals, price, price manipulation, prices, producers, production, protection, rare earth metals, recession, risk, run on banks, safety, Saudi Arabia, Sean Rakhimov, silver, silver miners, socialism, sovereign, spot, spot price, stagflation, Technical Analysis, timber, U.S. Dollar, volatility, warrants, Water

    Gold (H)edges Gold Stocks – Features and Interviews – Hard Assets Investor

    By: Brad Zigler of Hard Assets Investor

    This is an excellent teaching article- jschulmansr

    I suppose I shouldn’t have been surprised by the number of visitors to the San Francisco Hard Assets Conference who wanted to talk about wrestling the risk of their gold stock investments. After all, 2008 has turned out brutal for gold miners. Witness the AMEX Gold Miners Index off by 46% for the year.

    Some of the conferees have been puzzling over their hedging options. And there are plenty of them: options, futures and exchange-traded notes, to name a few. This array leaves many wondering which hedge is optimal.

    If you’re pondering that question yourself, you first have to ask yourself just what risk you want to hedge. In a so-called “perfect” hedge, price risk is completely checked, effectively locking in the present value of an asset until the hedge is lifted.

    Is that what you really want, though?

    A less-than-perfect hedge neutralizes only a portion of the risk subsumed within an investment. Gold stocks, for example, provide exposure to both the gold and equity markets. Hedging a gold stock with an instrument that derives its value solely from gold may dampen the volatility impact of the metal market upon your portfolio, but leaves you with equity risk. This may be perfectly acceptable if you feel stocks in general – and your issues in particular – are likely to appreciate. Hedge out the gold exposure and you’re more likely to see the value that the company’s management adds. If any.

    We touched on this subject in recent Desktop columns (see “Gold Hedging: Up Close And Personal” and “More On Hedging Gold Stocks“).

    More than one Desktop reader asked why the articles proposed a hedge strategy employing inverse gold exchange-traded notes – namely, the PowerShares DB Gold Double Short ETN (NYSE Arca: DZZ) – instead of stock-based derivatives such as options on the Market Vectors Gold Miners ETF (NYSE Arca: GDX).

    Well, we’ve mentioned one of the advantages of a gold-based hedge already, but the question deserves a more detailed answer. Let’s suppose, for illustrative purposes, you hold 1,000 shares of a gold mining issue now trading at $50 and are concerned about future downside volatility. [Note: The prices shown in the illustrations below are derived from actual market values.]

    AMEX Gold Miners Index And ETF

    The AMEX Gold Miners Index is a modified market-capitalization-weighted benchmark comprised of 33 publicly traded gold and silver mining companies.

    While price movements in the index are generally correlated with the fluctuations of its components and other mining issues, the relationship isn’t perfect. Close, but not perfect. The Gold Miners Index represents the market risk, or beta, specific to gold equities. Any hedge that employs an index-based derivative will need to be beta-adjusted to compensate for any differences in the securities’ volatilities.

    You have to consider the proper index-based derivative to be used in the hedge. The GDX exchange-traded fund could be shorted, but that would require the use of margin, something that some investors might abhor.

    If you’re not put off by margin, you’ll first need to size your hedge. And for that, you’ll need a beta coefficient for your stock. A quick-and-dirty beta can be approximated by taking the quotient of the securities’ volatilities or standard deviations (you can get a stock’s standard deviation through Web sites such as Morningstar and SmartMoney, or you can derive a beta more formally through a spreadsheet program such as Excel).

    Gold Stock Volatility ÷ ETF Volatility = 94.8% ÷ 81.8% = 1.16

    The ratio tells you how to calculate the dollar size of your hedge. If your stock is trading at $50, your $50,000 position would require $58,000 worth of GDX shares sold short. If GDX is $23 a copy, that means you‘ll need to short 2,522 shares.

    Once hedged, you’ll still carry residual risk. The volatility correlation could shift over the life of the trade, leaving you over- or underhedged. So you’ll need to monitor the position for possible adds or subtractions. Hedging is not a “get it and forget it” proposition.

    You’ll also need fresh capital to place and maintain the hedge. There’s the initial cash requirement of $29,000 (50% of $58,000) and possibly more if you hold your hedge through significant rises in GDX’s price.

    GDX Options

    You can avoid margin altogether by using certain GDX options instead of a short sale. Purchasing puts on GDX, for example, gives you open-ended hedge protection against declines in gold equities like a GDX short sale but with a clearly defined and limited risk. There’s no margin required, but you’ll have to pay a cash premium to buy the insurance protection. And, like an insurance contract, the coverage is time-limited.

    Let’s say you can purchase a one-month option that permits you to sell 100 GDX shares, at $22 a copy, for a premium of $245. Keep in mind that the put conveys a right, not an obligation. You’re not required to sell GDX shares. At any time before expiration, you can instead sell your put to realize its current value, or you can allow the option to expire if it’s not worth selling.

    Just how does the put protect you? Let’s imagine that, just before expiration, GDX shares have fallen to $10. Your put guarantees you the right to sell GDX shares at a price that’s now $12 better than the current market. That’s what your option should be worth: $12 a share, or $1,200. If you sell it now, you’d realize a $955 gain that can be used to offset any concomitant losses on your gold stock.

    To figure out how many puts are necessary to fully hedge your stock position, you’ll need to extend the ratio math used previously.

    Option prices only move in lockstep with their underlying stocks when they’re “in the money” like the put illustrated above. The expected change in an option premium is expressed in the delta coefficient. If the delta of the $22 put, when GDX is $23, is .40, the option premium is expected to appreciate by 40 cents for every $1 GDX loses.

    The arithmetic used to construct the full hedge is:

    [Stock Value ÷ (Delta x 100 Shares)] x Beta = [$50,000 ÷ (.40 x 100)] x 1.16 = 1,450 puts

    Here’s where the efficacy of the GDX options hedge really breaks down. GDX’s high price volatility has inflated the cost of hedge protection to impractical levels. The hedge would cost $245 x 1,450, or $355,250; much more than the potential loss that would be incurred if you remained unprotected. Clearly, the cost of hedging gold equity market risk, like the cost of insurance after a catastrophe, has been puffed up to protect the insurer.

    Of course, you can elect to hedge only a portion of your stock position, but the high premium necessitates a large “deductible” on your market risk.

    Wrapping Up

    You’ll note that some gold mining issues have options themselves. Using these as hedges in the current market presents another set of problems.

    Given that the volatilities for individual issues are higher than that of GDX, the stock contracts are even more expensive than index options. Using stock options, too, would hedge away management alpha. Individual options, as well, are inefficient if you hold multiple mining issues in portfolio.

    Now, consider the contrasting benefits attached to using the DZZ double inverse gold notes in your hedge: 1) no overpriced insurance cover, 2) you get to keep your stock’s equity and management risk; you’re only hedging out gold’s volatility, 3) a single purchase can hedge any number of mining issues in portfolio, and 4) your insurance doesn’t expire.

    Seems to me that DZZ has the edge.

    ===============================================

    Today’s Grab Bag- Brad Ziegler Hard Assets Investor

    Cheaper Oil and Silver + Gold Options 

    Real-time Inflation Indicator (per annum): 7.9%

    A couple of quick items for your consideration this morning.

    Merry New Year from the EIA

    The U.S. Energy Information Administration (EIA) has issued its monthly short-term forecasts for oil prices. In the words of this little corner of sunshine in the Department of Energy:

     “The current global economic slowdown is now projected to be more severe and longer than in last month’s Outlook, leading to further reductions of global energy demand and additional declines in crude oil and other energy prices.”

    The EIA has set an average price forecast for West Texas Intermediate (WTI) crude oil at $100 per barrel. That’s the average for all of 2008. Keep in mind that, year-to-date, WTI has traded at an average barrel price of about $104. Now, we’ve only got 15 trading days left in 2008. To bring the current average price down $4 in that time, the sell-off pace has to quicken some.

    In essence, the EIA – if you put any faith in its forecasts – is telling you to short oil. And this while the quarterly NYMEX oil contango has ballooned to a record $7.21 a barrel (need background on contango? See “Oil Demand Perking Or Peaking?”).

     NYMEX Crude Oil Quarterly Contango 

    NYMEX Crude Oil Quarterly Contango

    Back in November, the EIA eyed a $112 average price for 2008. Do I need to tell you that they missed the mark on that one?

    Looking ahead, the EIA thinks WTI crude will average $51 a barrel in 2009.

    Never let it be said that your stingy government didn’t give you something for the holidays.

    And now, ladies and gentlemen, SLV options

    Frustrated that you haven’t been able to play your favorite option trades in the silver market? Be vexed no longer. The Chicago Board Options Exchange (CBOE) has come to your rescue. Yesterday, CBOE launched option trading on two metals grantor trusts, the iShares COMEX Gold Trust (NYSE Arca: IAU) and the iShares Silver Trust (NYSE Arca: SLV). Both trusts hold physical metals.

    This is both a first and a “two-fer” for the options bourse. Back in June, CBOE inaugurated trading in the SPDR Gold Shares Trust (NYSE Arca: GLD); options on a silver grantor trust haven’t been traded on an organized exchange before.

    The American-style options will trade on the January expiration cycle, initially with contracts maturing in December, January, April and July.

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    Obama Eligibility dispute, Part 2, Latest News

    09 Tuesday Dec 2008

    Posted by jschulmansr in 2008 Election, Barack Obama, capitalism, Electoral College, Finance, Free Speech, id theft, Investing, investments, Joe Biden, John McCain, Latest News, Markets, Politics, Presidential Election, Sarah Palin, socialism, Stocks, Today, u.s. constitution, U.S. Dollar, Uncategorized

    ≈ 2 Comments

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    Eligibility dispute, Part 2, scheduled by Supremes

    By Bob Unruh
    © 2008 WorldNetDaily

    Not even the U.S. Supreme Court can kill the dispute that has developed over Sen. Barak Obama’s eligibility to occupy the Oval Office based on questions raised over his birthplace and citizenship and his steadfast refusal to provide documentation on the issue.

    The high court today denied a request to listen to arguments in a case, Donofrio v. Wells, from New Jersey that addressed the issues. But literally within minutes, the court’s website confirmed that another conference is scheduled for Friday on another case raising the same worries.

    The case of Leo C. Donofrio v. New Jersey Secretary of StateNina Mitchell Wells claimed Obama does not meet the Constitution’s Article 2, Section 1 “natural-born citizen” requirement for president because of his dual citizenship at birth.

     

    The new case, Cort Wrotnowski v. Susan Bysiewicz, Connecticut secretary of state, also makes a dual citizenship argument. It had been rejected by Justice Ruth Ginsburg Nov. 26 but then was resubmitted to Justice Antonin Scalia. There was no word of its fate for about 10 days, then today the court’s website confirmed it has been distributed for Friday’s conference, a meeting at which the justices consider whether to take cases.

    Where’s the proof Barack Obama was born in the U.S. or that he fulfills the “natural-born American” clause in the Constitution? If you still want to see it, sign WND’s petition demanding the release of his birth certificate.

    Donofrio, whose case was rejected today, said he’s hopeful Wrotnowski’s complaint will find a more receptive panel.

    “It includes a more solid brief and a less treacherous lower court procedural history,” Donofrio writes on his Natural Born Citizen blog. “I must stress that [Wrotnowski] does not have the same procedural hang up that mine does.”

     

    The website explained an appeals judge in New Jersey had incorrectly characterized Donofrio’s original complaint as a “motion for leave to appeal” rather than a “direct appeal.”

    “If Cort’s application is also denied then the fat lady can sing,” the website stated. “Until then, the same exact issue is before SCOTUS as was in my case. Cort’s application before SCOTUS incorporates all of the arguments and law in mine, but we improved on the arguments in Cort’s quite a bit as we had more time to prepare it.”

    Besides the plaintiffs for these two and about a dozen other legal actions that challenge Obama’s eligibility in courts around the country, there are tens of thousands of people who are alarmed by the unanswered questions about Obama.

    More than 60,000 letters were generated by WND readers specifically asking the U.S. Supreme Court to review Obama’s eligibility.

    The campaign included 6,682 packages of nine letters each delivered to the court on the case about Obama’s eligibility under the “a natural born citizen” requirement

     

     

    “If we didn’t do everything possible to let the Supreme Court justices know what a concern this is to millions of Americans, I would feel like I was letting down the Constitution and the men who framed it – not to mention every citizen of the United States living now and in the future,” Joseph Farah, WND’s founder and editor, said of the campaign. “This constitutional eligibility test has become a key issue with me because if the plain language of the Constitution is no longer taken seriously by our nation’s controlling legal authorities, we have become an outlaw nation – no longer under the rule of law but under the rule of men.”

    A petition drive Farah launched also has collected more than 175,000 signatures – so far – from people who want to know the truth.

    Last month WND reported worries over a “constitutional crisis” that could be looming over the issue of Obama’s citizenship. The concerns were raised in a lawsuit in California asking state officials to prevent Electoral College members from voting for Obama until they investigated his eligibility, a case being handled by the United States Justice Foundation.

    WND senior reporter Jerome Corsi had gone both to Kenya and Hawaii prior to the election to investigate issues surrounding Obama’s birth. But his research and discoveries only raised more questions.

    The biggest question is why Obama, if a Hawaii birth certificate exists as his campaign has stated, hasn’t simply ordered it made available to settle the rumors.

    The governor’s office in Hawaii said there is a valid certificate but rejected requests for access and left ambiguous its origin: Does the certificate on file with the Department of Health indicate a Hawaii birth or was it generated after the Obama family registered a Kenyan birth in Hawaii?

    Obama’s half-sister, Maya Soetoro, has named two different Hawaii hospitals where Obama could have been born. There have been other allegations that Obama actually was born in Kenya during a time when his father was a British subject. A one point a Kenyan ambassador said Obama’s birthplace in Kenya already was being recognized.

    Among the plaintiffs in the California case is presidential candidate Alan Keyes.

    “Should Senator Obama be discovered, after he takes office, to be ineligible for the office of president of the United States of America and, thereby, his election declared void, petitioners, as well as other Americans, will suffer irreparable harm in that (a) usurper will be sitting as the president of the United States, and none of the treaties, laws, or executive orders signed by him will be valid or legal,” the action challenges.

    Wrotnowski’s case challenges the courts to review allegations of election fraud, suggesting the Connecticut secretary of state should not have placed Obama’s name on the ballot without verification of his eligibility.

    After state courts refused to take the case, he said the point was, “this document has not been produced.”

    “I’m not the first, not the last, just among a growing number of people across the country who’ve become distressed about the lack of disclosure,”

    Donofrio had alleged that Obama’s dual citizenship disqualifies him. Obama’s campaign said the British citizenship expired, leaving him with “natural-born” U.S. citizenship.

    Obama’s Fight the Smears website confirms Donofrio is correct about the Democrat’s citizenship at birth.

    Donofrio’s case originally was denied a conference of the judges by Justice David H. Souter, but Justice Clarence Thomas agreed to bring it back for consideration last week. To go forward, from conference to a full hearing, the case needed the approval of four of the Supreme Court’s nine justices.

    Also, the “certification of live birth” posted by the Obama campaign cannot be viewed as authoritative, critics allege.

    “Hawaii Revised Statute 338-178 allows registration of birth in Hawaii for a child that was born outside of Hawaii to parents who, for a year preceding the child’s birth, claimed Hawaii as their place of residence,” according to reports. “The only way to know where Senator Obama was actually born is to view Senator Obama’s original birth certificate from 1961 that shows the name of the hospital and the name and signature of the doctor that delivered him.”

    Critics also raise the circumstances of Obama’s time during his youth in Indonesia, where he was listed as having Indonesian citizenship. Indonesia does not allow dual citizenship, raising the possibility of Obama’s mother having given up his U.S. citizenship.

    Any subsequent U.S. citizenship then, the case claims, would be “naturalized,” not “natural-born.”

    WND’s petition is available online, and more information is available at this link.

    ====================================================

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    IAMGOLD: Expect a Move Higher – Seeking Alpha

    08 Monday Dec 2008

    Posted by jschulmansr in capitalism, commodities, Copper, Currency and Currencies, Finance, Fundamental Analysis, gold, hard assets, inflation, Investing, investments, Latest News, Markets, mining stocks, Moving Averages, precious metals, silver, small caps, Stocks, Technical Analysis, Today, U.S. Dollar, Uncategorized

    ≈ 1 Comment

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    IAMGOLD: Expect a Move Higher – Seeking Alpha

    By: Glenn Cutler of The Winners Forum.com

    IAMGOLD Corp (IAG) is a Canadian based mining company that participates in worldwide exploration and development of mineral resources and produces roughly 1 million ounces of gold annually from eight property locations on three continents: North America, South America and Africa. The company boasts the largest cash flow ratio on investment in the entire industry and is second among top mining companies in terms of achieving earnings per $1000 invested. Revenue, adjusted net earnings and cash flow have all risen sharply through the first 9 months of 2008.

    IAG MAINTAINS STRONG FINANCIAL POSITION

    Given recent concerns about the economy and in particular, debt and leverage, stocks which are most likely to attract investor attention are those of companies that have bullet proof balance sheets, stable or growing cash flow and access to capital. IAG is a gold star candidate, with a low Debt/Equity Ratio and recent liquid assets as published in their 2008 TWP Presentation document as follows:

    • CASH and CASH EQUIVALENTS – $153 million
    • GOLD BULLION (at market value) – $154 million
    • 5-YEAR UNDRAWN CREDIT FACILITY – $140 million
    • TOTAL FUNDS AVAILABLE – $447 million
    • YTD 9 MONTH OPERATING CASH FLOW – $189 million

    GOLD PRODUCTION/GEOGRAPHIC DIVERSIFICATION – This company produced 253,000 ounces, a 5% increase in the latest quarter. They are on track to produce 950,000 ounces in 2008. Production costs are $476/ounce slightly below the estimated $480-490 range. Geographic diversification is another important factor for investors. IAG has production at 8 different facilities which breaks down as 51% (Africa), 30% (Suriname) and 19% (Quebec). Its current goal is to double total production to 1.8 million ounces in 2012.

    RESERVES and RESOURCES

    Mines Proven & Probable Measured & Indicated* Inferred
    Rosebel 3,233,000 8,283,000 79,000
    Doyon Division* 206,000 662,000 576,000
    Mupane 311,000 792,000 7,000
    Tarkwa 2,307,000 2,752,000 733,000
    Sadiola 394,000 1,609,000 325,000
    Yatela 200,000 234,000 103,000
    Damang 274,000 468,000 266,000
    Total 6,925,000 14,800,000 2,089,000

    IAMGOLD Acquires 71.6% of EURO RESSOURCES S. A. (EUR.TO) for $1.20 / Reopens Offer

    On December 3rd, IAMGOLD Corp announced results of its $1.20/share tender offer for French company Euro Ressources S.A. That company’s principal asset is a 10% royalty interest in the Rosebel Gold Mine in Suriname which is operated by IAMGOLD. This mine which is estimated to have 10 million ounces, achieved record throughput and the $44 million expansion and optimization project in on target for completion in early 2009. According to the CEO of IAMGOLD, this strategic purchase will reduce cash costs by about $45 per ounce produced at this specific property.

    With the recent decline in the foreign exchange rate of the Euro currency, IAG was able to move quickly to purchase Euros and lock in the transaction cost at an average rate of 1.27, approximately 15% below the 1.47 exchange rate the date they announced the deal. Regulations require the offer be reopened for an additional 10 days at the same price, until December 17th.

    IAG STOCK – Recent Price Activity

    Typical of most mining stocks, IAG has been in a steady downtrend over the past year. Shares were banging around $10 when the year began and then gradually declined. The price stair-stepped its way down, spending time in each support zone before breaking down to the next area where buyers would regroup. The $5-6 range held from April through most of September, and then when financial markets cracked the price tumbled hard and fast to print a recent new low around $2.22 a share. Shares have been trending modestly higher since hitting their lows, and it’s possible we could see a new pattern of higher lows and higher highs on a recovery.

    Given its outstanding balance sheet and strong positive cash flow, downside investment risk is small. Technical patterns indicate a high probability for shares to move up into their recent congestion zone between $5.50 and $6.50, where there will be overhead supply to work through before the stock could continue higher. As with all mining stocks, performance relates directly to how the underlying precious metals perform, so it’s critical that gold move in either a sideways manner where mining stocks can consolidate and base build or trend modestly higher. Or, if the gold market can rally strong, there is no doubt shares of mining stocks will also rise nicely.

    Based on a multi-decade chart of gold, there is reason to believe a move higher is not far off. A more detailed discussion of the technical outlook for gold is available in a published report at TheWinnersForum.com – Cutler’s Stock Market Blog.

    OTHER FUNDAMENTAL FACTORS – Considerations for Investment

    UNDERVALUED MARKET VALUATION VERSUS PEERS – The slide in the share price to below $4 now values the entire company at $1.2 billion, which is now only 1.5x trailing 12-month revenue, far below industry peers. To compare: Agnico-Eagle Mines (AEM) trades at 10x, Kinross Gold (KGC) trades at 6.5x, Newmont Mining (NEM) trades at 2.2x and Barrick Gold (ABX) trades at nearly 3x revenue.

    RECENT ACQUISITION OF DOYON ROYALTY – In July, with a focus on reducing cash costs, the firm acquired the participation royalty in the Doyon/Westwood Property located in Quebec from Barrick Gold for $13 million. The acquisition eliminated royalty payments which was 25% of gold prices above $375 an ounce. The savings was about $140 an ounce. The participation royalty also extended to the Westwood Development Project, about 2 kilometers from the Doyon mine. Westwood production was also freed from royalty obligations.

    Other Mining Activities / Projects

    Niobium Mine in Quebec – Through its Niobec Mine in Quebec the company mines a lesser known metal called Niobium. Originally known as Columbium, this 41st element is a paramagnetic metal which has a high melting point and low density. One of its noteworthy characteristics is that it is corrosion resistant. It has superconductivity properties. It is used as an alloy in the steel industry because it increases the toughness strength and weldability of steel. It is also used in producing commemorative coins. According the company, the addition of $4 of niobium can reduce the weight of mid-sized cars by 100kg which save .05l/100 km in fuel consumption. It is also used in construction and land based turbine and jet engines. They company forecast to produce 4300 tons in 2008.

    Quimsacocha gold Project in Ecuador – A new constitution took effect in Ecuador in October which received 64% of a referendum vote. This is a positive development that will enable a new mining law to allow responsible mining in the country. The 100% owned 3.5 million ounce Quimsacocha Project will complete its feasibility study in 2009.

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