Here are a few statistics I saw last week. Frightening...
DOUBLE-DIP - If every American paid twice as much in federal income tax (FIT) during fiscal year 2011 (i.e., the 12 months ending 9/30/11), the USA would still have had a $207 billion deficit instead of the $1.3 trillion deficit we actually had. Total FIT collected during the fiscal year was $1.1 trillion, up +21.5% from the $899 billion of FIT collected in fiscal year 2010 (source: Treasury Department).
WHAT ARE THEY THINKING? - 30% of “middle class” Americans ages 60-69 have accumulated retirement savings less than $25,000 (source: Wells Fargo).
IMPACT ON SOCIAL SECURITY? - Social Security tax receipts are projected to drop by $110 billion in 2011 compared to 2010, largely due to the 2% reduction (from 6.2% to 4.2%) of the employee Social Security payroll tax rate that was effective for calendar year 2011. If the employee payroll tax rate is reduced to 3.1% (instead of reverting back to 6.2% as it is currently scheduled to do) for calendar year 2012 and if the employer payroll tax rate is also cut to 3.1% on the first $5 million of payroll, Social Security payroll tax receipts are projected to drop by $265 billion next year. The 2012 proposal was debated in Congress last week (source: Social Security). I wonder who's going to pay for that?
On the brighter side: I’LL DRINK TO THAT - Today is the 78th anniversary of the ratification of the 21st Amendment to the US Constitution (12/05/33). The 21st Amendment repealed the 18th Amendment which had mandated Prohibition nationwide (source: United States Constitution).
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More on Silver...
Silver is an amazing metal… which is why it's likely to soar over the coming years…
You see, silver has more than 10,000 uses. It's one of the world's best conductors of heat and electricity. Inventors filed more patents on silver uses than any other precious metal in the world. And when silver is used for most industrial and technological purposes, it is used up forever… It simply costs too much to try to recycle the tiny bit of silver from every cell phone or casino chip.
I'm not saying industry is going to use up all the world's silver. That simply can't happen. But scarcity is a real issue.
Our rapid consumption of silver leaves very little to meet any uptick in demand from investors. A spike in interest will send prices spiraling higher…
Here's a breakdown of the silver market. The table below shows the percentage of the total amount of silver consumed by each category over the past four years…
I can't get the chart to enter correctly
As you can see from the table above, only 12% of the silver supplied to the market made it to bullion in 2010. That means only a little more than 100 million ounces of silver became bullion for the entire investing world.
That's a tiny fraction to sop up all the investment interest in the world.
Of that silver, about 43 million ounces went to exchange-traded funds like the iShares Silver Trust (SLV) and the Sprott Physical Silver Trust (PSLV).
That means you could buy all the extra silver bullion for about $2 billion. We could buy all the surplus silver bullion from the last four years for about $10 billion.
That's the same as the market value of the iShares Silver Trust today. If you wanted to build another silver fund, you couldn't. There just isn't enough silver bullion out there to fill the order.
Even trying to amass that much physical silver would send the silver price soaring. It's a simple market fact… When there is more demand than supply, it drives the price up.
And the economic problems confronting Europe and the United States have increased interest in precious metals… Silver gained a colossal 174% from August 2010 to April 2011.
In May 2011, however, the price collapsed 31% in just four weeks. The bull market simply ran up too far, too fast… and the decline wiped out many highly leveraged silver traders.
As I showed you on Wednesday, this has temporarily dampened sentiment toward silver. The "big money" – commodity trading advisors, pool operators, and hedge funds – isn't interested in silver at all…
The current bottom in sentiment is a great signal for us to add silver positions. The big money will eventually return to silver… The economic forces (namely Western debt) driving people away from paper money and toward precious metals aren't going away any time soon.
As those big traders come back into the market, they have the capital to tie up all the excess silver production in the world. Remember… you could buy all the extra silver production over the last four years for less than $10 billion. Those traders could invest far more money than that.
When they do, the silver market will tighten up, and the price will roar upward. That's what we see EVERY TIME sentiment bottoms. When those big traders stop being bearish, they put enough money into silver to move its price. Sometimes it's 28%… Sometimes it's 405%… But it always goes up. (You can find the full story on that here.)
If gold and silver prices are nearly certain to rise over the next few years (and probably rise dramatically), the simplest way to play that trend is to buy bullion… real, hold-in-your-hand silver coins.
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Last week I sent out an email about the indefinite detention waiver getting passed around DC. Here is Jon Stewart bashing Obama on the Today Show.
Part 1
Part 2
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Don't worry, this can't happen where you live. CNBC says everything is getting better. The good news is that thieves are going after commercial/government sites instead of our homes right now.
Campuses in the Dallas Independent School District (DISD) have been the repeated victims of copper thieves.
The district has suffered thousands of dollars in damage, as a result of the thefts.
“Included in those [thefts] are gonna be some HVAC units,” explained DISD police chief Craig Miller. “And two HVAC units were damaged and that’s $37,000 apiece, so it gets to be very expensive.”
In the month of November alone, copper thieves targeted nine schools.
The school district has released surveillance video from Peeler Elementary School that shows two men removing copper piping from the plumbing system.
Miller said there is a two-prong investigation — trying to find out who is stealing the copper and also who is buying it. “Recently, there was 200 feet of copper that was taken and there’s obviously a market in metal recycling where this product is sold.”
Copper theft isn’t the only problem facing the Dallas ISD. Over the past month, there have been 41 campus break-ins. Thieves are stealing computers, and other equipment.
During the next month or so, the DISD is taking special steps to guard schools. “Each of the Dallas police department investigative units/substations has a copper metal theft [division] and we’re working with them on this,” said Miller. “I mean obviously we’re gonna have a task force that goes on during the holidays.”
Let Them Eat iPads!
Thieves stole at least 125 Apple iPads from a Best Buy electronics store in San Carlos Thursday night, according to the San Mateo County Sheriff’s Office.
Deputies reported to the store at 1127 Industrial Road at about 11:50 p.m., one minute after the commercial alarm began sounding when the suspects pried open the store’s front doors and a security roll-up door, according to the sheriff’s office.
The deputies determined that the suspects slid under the jacked-up security gate and dragged a large locked steel rack containing the 125 tablet computers through a fire exit door and onto a vehicle.
Sheriff’s officials said the loss to the store is estimated to be more than $100,000. According to Best Buy’s website, the latest generation iPads retail for between $500 and $830, depending on storage and networking options.
The suspects fled the scene and had not been found as of Friday morning. The sheriff’s office said there was no description immediately available for them or their vehicle.
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Gold was steady in trade in Asia until 0322 GMT when sharp selling saw gold fall 1.3% from $1,708/oz to $1,684.75/oz in minutes. The fall may have been technical in nature after last week’s 2% fall in US dollar terms. The selling had the hallmarks of a large sell order or liquidation and Reuters reports that “the approaching year-end and funding difficulties caused by financial market turmoil have reduced liquidity in the gold market.”
Market reaction to the failed EU Summit was that gold, the euro, European equities and ‘PIGS’ debt all came under selling pressure this morning.
Gold is again testing support at the 144 day moving average at $1,674/oz. Below that is the major support of $1,617.25/oz (see chart above).
Gold Spot $/oz (30 days)
With concerns about liquidity and solvency in the European banking system, there is lending and possibly even selling of gold by banks to raise much needed cash. This may be creating short term weakness in gold bit is bullish for gold in the long term.
The FT reported last week that “gold dealers” said that banks – “primarily based in France and Italy – had been actively lending gold in the market in exchange for dollars.”
The key question is who is lending and is their lending simply liquidity driven - to raise dollars or euros?
John Dizard, who frequently comments on gold in the Financial Times wrote on Saturday that,
“Gold market people say European commercial banks are being driven to lend gold for dollars at negative interest rates just to raise some extra cash for a few weeks.
There’s not a lot of transparency about where the banks are getting the gold they are lending out, but it could be lent to them by either their national central banks, or by gold exchange traded funds.”
Cross Currency Table
If this is the case it will raise further concerns about the possibility of double accounting of gold and concerns that much of the gold investments in the market are in fact ‘paper gold’ and not backed by physical as is believed by investors.
It will add to deepening concerns about the emerging scandal of rehypothecation where some banks, brokerages and dealers have been reusing the collateral pledged by its clients as collateral for their own borrowing.
Owners of gold exchange traded funds (ETFs) would be surprised and worried to discover that certain banks might be lending out gold that they have bought and believe that they own.
The leading gold ETF, GLD has been criticized by many analysts for its extremely complex structure and prospectus. Critics have also pointed out the possible conflict of interest in its relationships with HSBC and JPMorgan Chase which are believed to have large short positions in gold and overall lack of transparency.
If as has been suggested, European banks are lending gold into the market that has come from exchange traded funds then this would validate the many concerns raised about the gold ETF market. Questions would again be asked as to whether many of the ETFs are fully backed by the gold that they claim to own in trust on behalf of clients.
Already some hedge funds managers and investors have liquidated their ETF positions in favour of allocated physical bullion and we would expect that trend to accelerate as prudent investors rightly seek to avoid counter party and systemic risk.
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