Real Deficit

My posts have been sporadic lately, but the news has been mostly the same.  Europe, Europe, and more Europe.  I was trying to find my post from last year that started the same way.  I'll say the same thing I'm sure I did then.  IT'S NOT GOING TO BE "FIXED".  The good news for the US is that it makes the dollar look like it's safe.  Boy is that scary.

I saw this in the USA Today.  The typical American household would have to pay nearly all it's income in taxes to offset the budget deficit.  That is if the government used standard accounting rules.  The current average, per-household income in the United States is $49,000 a year. The U.S. actual, real deficit, according to existing accounting standards, totaled $42,000 per household last year… or just a little more than $5 trillion.

This comment is from Stansberry Research:
Unlike every other institution in the United States (and just about every other government in the world)… Congress exempts itself from normal accounting standards. Specifically, it doesn't include the cost of future retirement benefits. If any other institution in the U.S. – including corporations, state governments, local governments, or banks – did their accounting this way, they would go to jail.  But the U.S. Congress… That bastion of decency, tradition, and stature… the place where our national future is charted… where our credit and honor are housed? Nope. It doesn't have to include any of those expenses. And so the public is routinely lied to… every year… by every major media outlet…

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There is a major currency war going on right now.  It's a battle to debase the fastest.  The next few articles discuss this.

Gold Breaks Downtrend, Sort Of...

American gold traders see gold prices in a downtrend, and wonder whether the December 2011 bottom will hold as a support level.  There is not much to like in the chart of gold prices, as priced in U.S. dollars.

But European gold traders see a much different picture.  The chart plot of gold prices measured in euros has now broken its declining tops line, and appears to be in a much more favorable configuration.

So who is right?

Generally speaking, when the dollar price of gold disagrees with the euro price, it is usually the euro price plot that ends up being correct about where both are heading.  So there is important information to be gained by not just looking at each price plot, but also comparing the two.

These differences in behavior show up most obviously in the form of divergent tops or bottoms.  If the dollar price of gold makes a higher high, for example, while the euro price makes a lower high, it is time to worry.

But differences in behavior can also show up in a more subtle way, and that is what we are seeing right now.  The dollar price of gold is still in a downtrend, but the euro price has already broken its equivalent declining tops line.  Generally speaking, the breaking of trendlines like this in the euro quite often precedes the breaking of the equivalent line on the dollar price chart.

Interestingly, this same principle does not work for some reason when we look at silver prices in each currency.  Silver prices generally move in sympathy with gold prices, but silver tends to be more volatile than gold, and thus it tends to attract the "hot money".  I like to say that it helps to think of gold as the dog, and silver is the tail of the dog. The tail is going to go wherever the dog goes, but it will follow along much more excitedly.

Because silver trades with so much greater volatility than gold prices, it is harder to see the differences in the price plots that are caused by currency translations.  There is just not as much of a difference than what we see in the gold price charts.  When divergences appear, it is usually at price tops, and here we see the big difference in behavior.  For silver divergences, for some reason it is usually the dollar price plot that tells the truer story about where both are headed.

Coming back to gold, this sign of a downtrend break in the euro price of gold arrives at a time when investor sentiment toward gold is at a bearish extreme.

The non-reportable traders are owners of futures contracts whose total position size is considered by the CFTC to be so small that they are not worth having those positions reported individually.  They are considered to be the small-time speculators, and thus the opposite of the presumably "smart money" commercial traders. The recent data show that this group of traders is at its lowest net long position in years, as they are expressing a more bearish view toward gold. Seeing the small speculators get scared out of the gold market is a sign that the mission of the downtrend is about done.

Tom McClellan
Editor, The McClellan Market Report

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And The Currency Wars Heat Up

I don’t know about you but to me events seem to be accelerating in pace as we hurtle along towards what feels like another crisis point.  These are historic times we are living through as the global monetary system undergoes realignment.  The last time something like this happened World Wars I and II were fought and the global banking system moved its center from London to New York.

Some of the events of the past week have piqued my spidey-sense which is reacting to the sheer number of them in such a short period of time.   And the CME Group (NYSE:CME) stands at the center of it.


The Three Signs
The CME Group was involved in three major announcements this week, individually they mean very little but in conjunction say a lot:

The margin requirements for Gold and Crude Oil contracts were cut by 13% and 10% respectively.
They announced a 5 for 1 stock split and extended grain trading hours.
Both CME and Intercontinental Exchange (NYSE:ICE) were designated as systemic by the U.S. Dept. of the Treasury
By lowering the margin requirements for both gold and oil, this tells me, along with a few other factors that the floor has been put under the price of both commodities.  Lowering margin requirements makes it easier for speculative money to flow into the market.  With volumes and open interest in gold futures at levels not seen since late 2008, enticing more activity on the exchange makes sense. The SPDR Gold ETF (AMEX:GLD) saw inflows this week of $1.1 billion after losing $2.4 billion in redemptions for the first three weeks in May.

By opening up grain trading hours and lowering margins the CME is attempting to increase profitability and transaction volume on the exchange.  Now that they are no longer in the running to purchase the London Metals Exchange, which is down to ICE and the Hong Kong Exchange Company, CME has to react to the very negative past year with MFGlobal and the relentless Silver and Gold manipulation stories emanating from the trading community.

But, the timing of this announced split is odd.  CME’s chart is uninspiring.  The stock has been stuck in a decaying consolidation pattern for the past 3 years.  It looks to be trading near fair value, so why split it unless there was some other motive to entice retail investors to come on board at a lower price in conjunction with the recently announced dividend?

The Iranian Connection
The last portent is the most important, however, for its potential implications given the timing and the rest of the global macro situation.  Last week I went over in detail the devaluations of the currencies of those who have publicly stood by Iran since their expulsion from the SWIFT international bank transfer system.  Recently the Tehran Times reported that Iran had developed an alternative to SWIFT that was now operational; allowing Iranian banks and the Central Bank of Iran to do business with the outside world, bypassing the effects of the SWIFT dis-invitation.

As well, China announced that they would now be accepting Japanese Yen as well as U.S. Dollars in exchange for Yuan. Now the Yen can be used for the settlement of trade with China and not just the U.S. Dollar.  This is very bullish for the CurrencyShares Japanese Yen ETF (AMEX:FXJ) especially considering how quickly the Japanese are moving in their investments around Southeast Asia in countries like Vietnam, Cambodia, Myanmar and Indonesia.  This is also another direct blow to the U.S. petrodollar system.  The Yen was chosen not because of its strong fundamentals but because it is the most liquid of the currencies of Southeast Asia at this point.  I would expect to hear of other such conversions into the Hong Kong and Singapore Dollars in the coming months.

So, when we add those things to the announcement that both major U.S. commodity exchanges have been given an explicit bailout guarantee by the Federal Reserve to go into effect around the same time as sanctions against all friends of Iran go into effect we get a very worrisome thought.

Golden Signals
When you operate under the assumption that there are no coincidences then you have to wonder why this announcement now going into effect when it does?  The CME and ICE have been given these resources because those resources need to be in place.  If there was to be a failure of the COMEX or ICE due to an inability to deliver product to those longs who stand for delivery then the following course of action would take place:

The COMEX would declare force majeure and settle all contracts in Dollars.  Stiffing the longs who stood for delivery.
Those dollars would have to come from the Federal Reserve
Current Open interest in gold is 435,000+ contracts.  June open interest is currently 93,790 or 9.379 million ounces.  The COMEX states they have 11+ million on hand of which 8.5 million is eligible for delivery.  While under normal circumstances the number of contracts that settle physically are very small, in a panic situation that could change rapidly.  And if there was something that caused a run on the COMEX gold reserves, that would necessitate a bailout from the Federal Reserve.  
This is the vaunted commercial signal failure scenario that many gold commentators have been predicting would or could happen as the end-game for the Federal Reserve’s current policy of managing the rising gold price.  And if that were to occur, the CME group would need a bailout from the Federal Reserve.

On Friday, May 25th, 24,887 June contracts were settled and re-applied further out in time, with the lion’s share moving out to August, 17,437 of them. 
The failed talks between the U.S. and Iran over Iran’s nuclear program in which there were no negotiations only a hard line stance from the U.S. who refused to back off on sanctions.  The headlines this weekend were filled with stories of Iran building two reactors; it was front page on the Drudge Report along with a report from Reuters that Iran has enriched nuclear fuel to 27%.

The rhetorical war is heating up again.  Gold and oil have been given the green light for accumulation.  At this point it would not surprise me if there was some form of attack on Iran in the next 30-60 days.  If an attack on Iran or a failure of the Eurozone to work out their problems on the periphery were to occur, the gold and/or oil markets would go ballistic and the exchanges would have to be protected.  The groundwork is being laid for major events and I would recommend protecting yourself accordingly.

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Euro On The Brink



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More Fast Food Rage

This guy in Ohio crashed into the Taco Bell because they forgot one of his tacos.  I can't make this stuff up.

Today’s instance of drive-thru rage comes from Huber Heights, Ohio, where a 23-year-old man allegedly crashed his truck into a Taco Bell after he “did not get one of the tacos he ordered,” according to police.

Michael Smith was arrested early this morning for felony vandalism in connection with the bizarre 12:15 AM incident at the fast food restaurant. Smith, pictured in the mug shot at right, is being held in the Montgomery County jail.

Police were summoned to the Taco Bell by workers who reported that a “white male in a white truck struck” the eatery’s entrance and then fled the scene. Cops tracked a fluid trail leaking from the vehicle to Smith’s home, where he was arrested.

Smith, cops noted, admitted “intentionally striking the building after realizing he did not get one of the tacos he ordered.” Smith’s crash shattered windows and caused other damage to the Taco Bell, where a taco retails for 99 cents.
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I know the Facebook IPO has been an epic fail, but I think Zuckerburg made enough where he could at least tip his waitstaff.  Apparently, this is the second time on his trip this has happened.  What a douche...

Facebook founder Mark Zuckerberg left no tip after Rome lunch

The owners of the kosher restaurant in Rome's Jewish Ghetto – a historic quarter in the centre of the city – were surprised when Mr Zuckerberg and Priscilla Chan walked away without leaving a gratuity.
Their bill came to just 32 euros after a lunch consisting of deep-fried artichokes – a Roman Jewish speciality – fried pumpkin flowers and ravioli stuffed with sea bass and artichokes.
Instead of wine or beer they opted for a bottle of water and a pot of tea.

Waiters at Nonna Betta, which specialises in Roman Jewish cuisine, were amazed by Mr Zuckerberg's parsimony, not just because of his huge wealth but because of Americans' reputation for tipping generously, as is expected of them at home.
It was not a case of not enjoying the meal, said the owner of the restaurant.
"I asked him 'how was it?' and he said 'very good'", the owner, identified only as Umberto, told Corriere della Sera newspaper. "I had gone up to him and said 'Are you ...?' and he said 'Yes'."
It was not the first time that the multi-billionaire chose not to tip – he reportedly did the same thing the night before at Pierluigi, a historic trattoria near Campo de' Fiori, a pizza in the heart of Rome.
The couple's honeymoon was a closely guarded secret until a Polish tourist spotted them in the Sistine Chapel, snapped a blurry photograph, and posted it on Twitter – Facebook's social network rival.
True to his casual style, the young internet tycoon was wearing jeans, a T-shirt and trainers.
They left Rome on Monday, with speculation that they might be heading towards the Amalfi Coast south of Naples before heading back to the US.
Mr Zuckerberg, 28, whose shares in Facebook are worth nearly $20 billion, married his long-time girlfriend on May 19 in Palo Alto, California.
Their wedding took place a day after Facebook's initial public offering on the NASDAQ stock exchange.
The couple had planned the exchange of vows for four months, but surprised their guests, who thought they were to celebrate Miss Chan's recent graduation from medical school, a celebrity magazine reported.
Mr Zuckerberg, Time magazine's Person of the Year in 2010, started Facebook in his Harvard University dorm room eight years ago, before dropping out of the Ivy League school.
Ms Chan just graduated from medical school at the University of California, San Francisco. The couple met while at Harvard.

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If anyone thinks higher taxes is the cure, this is what happens when you tax people to death.

Escape From New York? High-Taxing Empire State Loses 3.4 Million Residents in 10 Years

(CNSNews.com) – New York State accounted for the biggest migration exodus of any state in the nation between 2000 and 2010, with 3.4 million residents leaving over that period, according to the Tax Foundation.

Over that decade the state gained 2.1 million, so net migration amounted to 1.3 million, representing a loss of $45.6 billion in income.

Where are they escaping to?  The Tax Foundation found that more than 600,000 New York residents moved to Florida over the decade – opting perhaps for the Sunshine State’s more lenient tax system – taking nearly $20 billion in adjusted growth income with them.

Over that same time period, 208,794 Pennsylvanians moved to Florida, taking $8 billion in income.

“Many of these New York and Pennsylvania residents no doubt moved to Florida for the warm weather,” says the foundation, a nonpartisan research group. “[B]ut many more may have moved there because the state does not have an individual income tax, an estate tax, nor an inheritance tax.”

The Tax Foundation has created a “migration calculator” based on data from the Internal Revenue Service, tabulating the number of individuals moving between states each year, and income affected by the shifts.

The calculator shows that 612,520 people renounced their citizenship in New York State and moved to Florida in the 10-year period, taking with them $19.7 billion in adjusted growth income.

Between 2009 and 2010 alone, 40,195 New York residents moved to Florida, taking $1.3 billion in income.

According to the group, New York ranked second among the states for the highest state and local tax burden in 2009.  The Empire State was ranked highest for tax burden every year from 1977 until 2006, except in 1984 when it was ranked second.

New York State has a progressive personal income tax rate ranging from 6.45 percent to 8.82 percent for those earning over $2 million. Sales varies by county, and is between seven and eight percent.  In Manhattan, the sales tax is 8.875 percent.

According to the Retirement Living Center, which examines tax burdens by state for those nearing retirement, New York also levies a gasoline tax at 49.0 cents per gallon and a cigarette tax of $4.35 per pack, along with an additional $1.50 per pack in New York City.

New York is also one of 17 states plus the District of Columbia that collects an estate tax, with a $1 million exemption and a progressive rate from 0.8 percent to 16 percent.

In 2007, New York State collected $1.1 billion from its estate and gift taxes, the highest of any of the states, according to the Tax Foundation.

California is also known for more onerous taxes and regulations, and the foundation shows similar trends of migration from there to other states like Texas and Arizona.

The Tax Foundation ranked the Golden State sixth highest in the nation for state and local tax burden in 2009.

Between 2000 and 2010, the most recent data available, 551,914 people left California for Texas, taking $14.3 billion in income.  Texas has no state income tax or estate tax.

A total of 48,877 people moved to Texas from California between 2009 and 2010 alone, totaling $1.2 billion in income.  Another 28,088 from California relocated to Nevada and 30,663 to Arizona, a loss of  $699.1 million and $707.8 million in income respectively.

Overall, California had the most departures between 2009 and 2010 – 406,883 people, representing a loss of $10.6 billion in income. Over that year 365,763 people moved there, representing a net loss of 41,120 residents.

Since 2000 1.2 million more people have left California than have moved there, the second biggest net loss, after New York.

Florida, meanwhile, had a negative net migration of 966,934 between 2000 and 2010 – meaning nearly a million more people moved to the state than left. Texas also has a negative net migration – 807,552 – during the same time period.

Florida and Texas rank the two lowest in net migration over the decade, followed by North Carolina, Arizona and Georgia, each of which has a negative rate.

The Tax Foundation acknowledges that taxes are not the only reason to flee a state. “Taxes are one of hundreds of factors that go into a person's decision to move,” it says on its website. “Others include age, technology, job prospects and the quality/quantity of government services provided.”

The foundation also points out that the migration calculator is not definitive.  “A true study that sought to quantify the importance of taxes for locational decisions would need to account for as many other factors as possible, in addition to possible serial correlation issues between variables, especially taxes.”

Feels Like Forever

It feels like forever, since I've posted.  I finally feel caught up from being gone.  Here is a warning to all the new parents out there.  DISNEY IS NOT A VACATION.  I know it mostly wore Courtney and I out.  I have some good info that has piled up.  I hope you enjoy it.

First, I would like to say I'm very proud of Arkansas and Kentucky.  These states have through a big middle finger to Obama yesterday.

From Business Insider:

At least this closer-than-expected call was to a living, breathing person.
Hours after President Barack Obama lost 40 percent of the vote in Kentucky to "Uncommitted," Democratic challenger and human being John Wolfe gave him another contest in Arkansas, in what has become a recurring theme the past two weeks in Appalachia.
The Associated Press called Arkansas for Obama around 11:20 p.m. ET on Tuesday, nearly three hours after the polls closed there.
As of 12:40 a.m. ET on Wednesday, it looked like Wolfe, a perennial candidate and attorney from Tennessee, would get more than 40 percent of the vote. He stood at 41 percent with 89 percent of precincts reporting.
This adds to a string of recent setbacks in southern and Appalachian states for Obama. The first embarrassment came two weeks ago in West Virginia, when 41 percent of Democrats there voted for felon Keith Judd, who is currently in jail.
With almost 100 percent reporting in Kentucky by 12:30 p.m. ET, it was clear that Obama had suffered the most humiliating close call to "Uncommitted" — that choice garnered more than 42 percent of the vote.
A couple things to note here: These results are largely symbolic, if anything. Though they will give Republicans plenty of fodder for the campaign season — especially, say, in three Kentucky counties bordering Ohio that Obama actually lost to "Uncommitted." That said, Obama isn't going to win Kentucky, Arkansas or West Virginia in November.
Also, it's worth pointing out that in Kentucky, Obama actually compiled more votes than Republican winner — and general election challenger — Mitt Romney. Both contests are now symbolic, of course, but Republicans still have more of a reason to go out and vote in their primary. Ron Paul, Rick Santorum, Newt Gingrich and Republicans' version of "Uncommitted" combined for about 33 percent in Kentucky.
In Arkansas, Obama did not get more votes than Romney. Romney received just less than 70 percent of the vote there.
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This presentation is fantastic.  It's a little long so I'm going to show you just a few that really stood out to me.

Gold Has Worldwide Appeal Year Round

Frank Holmes recently gave a monster presentation that included over 70 charts supporting his bullish call on gold.  Here's one of the more informal charts that captures the idea that gold is loved across cultures.

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This is a great interview that Krieger did with TF Metals.  It's about 30 minutes long, but it's something everyone should listen to.  Click on the play arrow.

Liberty, Miners, and Jaime Dimon

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From Larry Levin:

Sorry Fraud street bankers, your friends at the Treasury may be limiting your access to the golden goose.

According to a report released by Reuters (http://www.reuters.com/article/2012/05/21/us-usa-treasuries-china-idUSBRE84K11720120521), China can now bypass Wall Street when buying U.S. government debt and go straight to the U.S. Treasury.  This is the Treasury’s first ever direct relationship with a foreign government.

Only certain Wall Street banks can serve as primary dealers of U.S. Treasuries, which will then bid on the government’s behalf at Treasury auctions. The other central banks that are large purchasers of U.S. Treasuries, including the Bank of Japan, continue to use these designated banks as the go between.

It’s the classic example of how Wall Street plays a rigged game where they are the only player so they always win.

On one hand, by bidding directly, China stops the Fraud Street banksters from exploiting their inter-twisted relationship with the Fed. The collusive Wall Street banks can drive up the auction price with their enormous purchasing power in a given Treasury auction.

Unfortunately, giving China direct bidder status may be giving a not-so friendly foreign superpower way too much leverage, as it currently holds $1.17 trillion in U.S. Treasuries.

Food for thought.

Trade well and follow the trend, not the so-called “experts.”

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From By The Numbers:

The median down payment (stated as a percentage of the home purchase price) made by first-time home buyers in calendar year 2011 was just 5% (source: National Association of Realtors).

American consumers spent $46.6 billion at gas stations in April 2012, $20.1 billion more than the $26.5 billion spent at gas stations 3 years earlier in April 2009, i.e., Americans spent $670 million a day more at gas stations in April 2012 when compared to amounts spent in April 2009 (source: Commerce Department).

Medicare enrollment is projected to rise from 49 million in 2011 to 66 million in 2021, an increase of +35% over the next 10 years. Medicare expenditures over the same 10 years are projected to rise from $549 billion in 2011 to $1 trillion in 2021, an increase of +83% (source: Medicare).

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This is the funniest thing I've seen on TV in a while.  If you don't watch How I Met Your Mother, you are missing out.  Barney Stinson is a fantastic character.  I don't even think of NPH as Doogie Howser anymore. 

Death to Precious Metals

Silver Plunges Below Marginal Cost: Commentary from a Retired Geologist

Posted on May 15, 2012 From Krieger's Blog

Last week as silver headed toward the $29/oz level, I received an excellent piece of commentary from a retired Canadian geologist that goes by the handle “Rhody.”  In it he states that at sub $30/oz silver is below cost, which I take to mean marginal cost.  For those not familiar with the commodity markets, marginal cost is the price that must be maintained to support new projects in order to keep supply growing to meet demand.  This cost includes capital investment in addition to all other costs as well as an implied return on investment.  I am not sure if Rhody included a return on capital in his $29/oz figure so it could be even higher.  In any event, he goes on to make some extraordinarily poignant statements on the overall macro backdrop in general.  So much so that I asked him if I could post it and he agreed.  Without any further ado…

Hi Guys:
Silver has now dropped below its total cost of production, which averages about $29.   Back in 2007, producers could produce silver at about $22 (which was above the spot price of the time as well) but at a 10% inflation rate, cost per ounce now, about 4 years later is going to be around $30.   Ignore mining companies that say they can produce silver at 5 or $6.   That’s just mining costs and ignores exploration, smelting, refining and shipping.   Back in 2007, if you looked at the top three miners, looked at their production and profits, you could calculate their total cost at $20-$24 back while the spot price was $18.    Essentially, silver has been produced below total costs since the 1930′s, which is why only 22% of silver mines subsist on silver alone and the other 78% survive on their other metal production with silver as a mere by-product.    No straight silver mine makes money, unless it is very, very high grade.

So as of this morning, we are below cost in the spot market.    This is back to normal for silver.   Silver has re-joined the ranks of food, and forestry as industries which operate below total costs.   100,000 third world farmers committed suicide last year because of their horrible economic circumstances.   Meanwhile there were food riots in middle eastern cities of North Africa, and Syria because of the “high” food prices.    Does anyone else perceive the logical disconnect here?    The problem of course is fiat money, and pricing commodities with derivatives that steal from everyone.

To get back to the thread below, gold and the dollar have risen together until 6 months ago when gold was crushed in the derivative markets but the Dollar held up.    The firm Dollar is because Europe is under attack and with it it’s banks and currency.    So Europeans pull their money out of their banks and buy either Dollars or gold as a flight to quality.    The Establishment doesn’t like the gold buying so a very effective campaign of disinformation, derivative based suppression, and selling by Western central banks has sent the gold market down by 15% over the past 6 months.    This cheapened metal has gone east, never to return.

Meanwhile the miners have been devastated and the Dollar has firmed.    This is the intent.    The World monetary system can be viewed as a huge tent, with a central pole (the U.S. Dollar), surrounded by secondary poles and tie downs.    The central pole has become unstable, and as it does, it is the secondary poles and the tie downs that rip out of the ground and fail first, eventually leading to the collapse of the central pole.    As the surrounding poles and tie downs (other fiat currencies) fail, their citizens flee to the remaining currencies that still survive, particularly the dollar, and its value rises because of the increased demand.    Some, but not a lot of this liquidity flows to gold and other tangibles causing price inflation.    So, in the end, gold and the Dollar will appear to rise together.    Well, gold has stopped rising, so we are not at the ‘end’ yet.    When we do reach the end, I expect a hyperinflationary event, which will drive gold in Dollars to levels which don’t bare mentioning, because in the end, no amount of dollars will buy an ounce of gold.   The precious metals have been purposely knocked down here.   People forget that although the metals are being slammed in the derivative markets, the decline has only been 15%, which is a moderate correction as these things go…..   This could be your last chance to buy politically cheapened ounces.   Don’t get upset, buy some more….

The dollar is terminal, for reasons that would take too long to describe.    Let us just say that a credit-based fiat currency is eventually destroyed by the build up of debt that it produces.    The Dollar’s debt burden has now become so huge that the entire world cannot support the interest payments to keep it viable, even at interest rates barely above zero.    So, you have two choices: hold dollars as a storehouse of value for your savings, or gold/silver.    There are other things you could convert your savings into, but they are far more cumbersome than Dollars and precious metals, so pick one or the other.    One is about to disappear, so choose wisely.

Rhody

P.S.   Yesterday, the 30 year U.S. Treasury dropped to 2.83% and even the CAD went below 3%.    Would you lend a government money for 10 years at interest rates only one third the real inflation rate???!    What is going on here is a manufactured perception that we are in a deflation.    This will be the excuse that the central banks use to impose another round of Quantitative Easing, probably this summer.    QE bails out the banks at the expense of stealing your savings via inflation.

This is a response posted on his site:
First Majestic, the largest pure silver miner in the world, just reported their results today. In them was a complete confirmation of what Rhody referred to for marginal cost of production. From First Magistic today:” Total Production Cost per Tonne was $29.24, a decrease of 3% from Q1
2011.” So taking the largest silver miner in the world total production costs of $29.24 does indeed confirm this. No wonder silver supply has been consistently shrinking for decades and decades.
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American Serfdom in One Chart
Posted on May 14, 2012 From Krieger's Blog
This is what you get when a society allows financial oligarchs to take over the economy and rape and pillage at will with zero repercussions.

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I had this nice little paragraph written about Seabridge, my favorite gold stock.  Unfortunately, the internet at the Swan in Disney is awful and I lost it.  Here is the meat of it.  The stock is trading at about $350 million market cap.  They have over $100 million in cash!  Their latest feasibilty report was great.  They will have permits for their biggest project in the 4th quarter.  So a deal with a major miner should be done around that time.  They have proven reserves of 38.2 million ounces of gold.  Using the $1,244 an oz price they quoted, that's $48,000,000,000 just in gold.  That isn't even figuring the silver, copper, and other metals in the ground.  The mine has an expect life of 55 years and at $1,244 an oz gold, it will pay for itself in 6 years.  All the mining stocks are being traded like they are going out of business.  This isn't going to happen.  It's just another attempt by the Central Planners to scare people out of their metal positions so they can print more money.  The Fed is buying 62% of all US Treasuries.  If they don't continue that pace, who do you think will pick up the slack?

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I usually try to stay away from religion on the blog.  It's too inflammatory a topic for most people.  However, I thought this was a good add by the Catholic church.

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You know you here how we've added all these new jobs lately.  Here is the real issue.  The class of 2012 college graduates is 1.8 million new people into the workforce.  So we have to grow 150,000 jobs a month just to keep up with graduates.  Good thing they have CHANGE and HOPIUM to live off of.

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Greetings From Disney World

Our Christmas present to our boys was to go to Disney World. I'm not sure what we were thinking.  This is a very tiring vacation.  Owen was so tired last night that he fell asleep at the dinner table.  12 hours later, he was awake.  The world economy can't be too bad because this place is packed.  If a family of 4 sits down to eat, it's at least $100 after tip.  Sausalito, CA is the only place I've been that is more expensive.  I've collected some articles over the week, so if you've seen some of them, my apologies.

It looks like more massive selling across the board in today's markets.  I echoed Krieger's comments a couple weeks ago that the Central Planners would try their hardest to drive down commodity prices in advance of more money printing.  It looks like they are getting it done.  Remember this is pure manipulation.  I can't imagine that people want to invest in their money in treasuries.  That is a losing trade, guaranteed.  The real rate of return is -2.5% right now.  And that's if you believe inflation is only 3.5%.

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Disney isn't the only thing that cost a lot of money with raising a child.

The Inflation of Life

Your little bundle of joy is going to require a wad of cash.

The cost of raising a child from birth to age 17 has surged 25 percent over the last 10 years, due largely to the rising cost of groceries and medical care, according to the Department of Agriculture, which tracks annual expenditures on children by families.

The government's most recent annual report reveals a middle-income family with a child born in 2010 can expect to spend roughly $227,000 for food, shelter and other expenses necessary to raise that child - $287,000 when you factor in projected inflation.

And, no, the bill does not include the cost of college or anything related to the pregnancy and delivery.

"If you sat down to tally up the total cost of having children, you'd never have them," says Timothy Knotts, a father of four and a certified financial planner with The Hogan-Knotts Financial Group in Red Bank N.J. "It's a very expensive adventure."

Talk about a life-changing event. That's a lot of vacations, clothing, and restaurant dinners you may no longer enjoy.

Plan Early

Ultimately, of course, the decision on whether or not to expand your family has little to do with dollar signs.

For most prospective parents, kids are the central priority around which all other lifestyle decisions get made - career moves, housing choices, where to live.

Because of its financial impact, however, it's wise to begin planning for parenthood as early as possible, says Matthew Saneholtz, a certified financial adviser with Tobias Financial Advisors in Plantation, Fla.

"You don't want to get too hung up on whether you're ready financially, because no one is ever really ready and it works out in the end, but you do want to think about how you see that first year with a new baby," he says.

Among the first issues you'll want to address:

Will you both return to work or will one of you quit to care for the child?
Does your employer offer maternity or paternity benefits?
Are you going to need a bigger car?
How much will your health insurance premiums climb after baby makes three?
You won't necessarily have control over the process, but you should also discuss how many children you'd like to have and when you'd like to have them, as that affects the timeline for getting your financial house in order.

Ideally, says Saneholtz, you should pay off your credit cards and put retirement savings on autopilot before you welcome a baby.

The four-bedroom house with a fully equipped nursery can wait.

Couples should resist the urge to splurge on a house at the top of their dual-income budget, says Knotts, since you may change your mind about whether or not to return to the office after the baby arrives.

"Our advice to clients is any time there's a life changing event, be it a baby or your own retirement, don't make any huge changes," he says. "Take your time. Do you want to be in a different school district, or closer to relatives or work? There's a lot to think about."

Testing 1-2-3

Prudent parents-to-be should also practice living on less before the big day arrives, says Chuck Donalies, a certified financial planner with Investment Planning Associates in Rockville, Md.

"Review all your expenses and cut out what you can," he says. "Almost every household budget has some fat in it."

Keep in mind that your annual medical expenses will almost certainly rise after you bring your newborn home.

Mark Lino, a USDA economist, notes that healthcare costs for the average family have increased 58 percent over the last decade, faster than any other expense component in the survey.

"With kids in particular, you're going to have emergencies, and while you might go without for yourself, you're going to take your kids to the doctor when they have a fever," says Knotts. "Someone's going to break an arm or knock out a tooth, and that could cost you a few hundred or thousand dollars each time."

As a starting point, Knotts suggests living on 90 percent of your after-tax income, using the money you save to fund an emergency account worth three to six months of living expenses.

If one of you plans to quit work to care for the child, your new spending plan should reflect the projected loss of income.

You can also apply those dollars toward a life insurance policy after the baby comes along, says Donalies, providing protection for your little one (and your spouse) in the event something happens to the breadwinner.

Donalies recommends a term life policy that covers your family until well after your child is out of college.

"The cost of a term life policy is so low that you should have a policy until your child reaches age 30," he says.

Ka-ching: Child Care

If you both plan to continue working, and you don't have family willing to provide free labor, you'll have to factor child care costs into your budget.

Such costs vary by region, as does the type of care provided, but the average annual price tag for full-time care in 2010 for an infant in a child care center ranged from $4,650 in Mississippi to $18,200 in the District of Columbia, the National Association of Child Care Resource & Referral Agencies reports.

The average annual cost for full-time care of a 4-year old drops to $3,900 in Mississippi to $14,050 in the District of Columbia.

Nannies are more expensive still.

According to the International Nanny Association, nannies who live outside your home can cost more than $3,000 per month for full-time care, and as an employer you'll be required to pay their Social Security taxes.

Ka-ching: College Tuition

There's no rule that says you have to help your child with college expenses, of course, but if you plan to do so, you'd better start budgeting for that as well.

The average cost of a four-year college for in-state residents, including tuition, fees, room and board, climbed 6 percent for the 2011 and 2012 academic year, averaging $17,131, the College Board reports.

A public four-year school for out-of-state students cost an average $29,657 this year, while four-year private colleges cost more than $38,000 per year.

Knotts cautions parents, however, to save for retirement first before throwing money into a tax-advantaged 529 college savings plan. After all, there are no scholarships or loans for retirement.

Manage Money and Expectations

Finally, remember that it's ultimately you who decides how much you're willing to spend on your kids.

Families with higher incomes, for example, tend to spend more on discretionary expenses like Apple (AAPL - News) iPods and Decker Outdoor's Uggs - things your child may want, but doesn't need.

The USDA report shows that a family earning less than $57,600 per year can expect to spend a total of $163,440 on a child from birth through high school; parents with an income between $57,600 and $99,730 can expect to spend $226,920; and families earning more than $99,730 can expect to drop $377,040.

"Kids don't have to have all this stuff," says Knotts. "We are a generation where we feel like we need to give our kids all of these experiences, but you can do a lot with your kids without spending a lot of money."

Children may be a blessing, but they don't come cheap. Families that plan ahead not only have better control over their budgets, but are often able to do more with less. They're also better positioned to ensure their own financial goals don't get derailed along the way.

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The next few pieces are from Krieger's blog.

CIA Whistle Blower, Robert D Steele, Reveals The Truth About Government
Posted on May 9, 2012
This is an extremely powerful 10 minute clip that I suggest everyone take the time to watch.  What I find so remarkable about it is the fact that this speech was given over two years ago and I am just seeing it today for the first time.  It demonstrates that there are many, many brave people speaking out, but the mainstream media just has a total blackout on these sorts of folks in what must be at this point a deliberate strategy to keep most Americans stupid, ignorant debt slaves.  What I really found interesting, particularly given my recent launch of this blog, is the emphasis he put on such activities as being key to turning this whole thing around.  The concept of “citizen journalists” being extremely important, which certainly appears to be taking off.  His description of the Bilderberg group as “nobodies who wanna be somebodies combined with somebodies on their way down” is just classic.  This guy is good…



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House of “Representatives” Fails to Fully Fund Mortgage Task Force

Posted on May 9, 2012
My Take:  There is no rule of law in America.  I repeat.  There is no rule of law in America.  I mean this is incredible, the House of “Representatives” couldn’t come up with $55 million to fund a task force to investigate mortgage fraud.  $55 million.  Yet we printed trillions to bail out the people and institutions that destroyed the economy with zero hesitation.  This is why no one believes in this country’s institutions or Federal Government any longer.  It is a criminal syndicate.  Ah just another day in the United States of Banana Republic.

Key Quotes:
When New York attorney general Eric Schneiderman appeared before the Congressional Progressive Caucus in late April, he asked the members to help him obtain funding for the Residential Mortgage-Backed Securities working group, which he co-chairs. “If you want to help me badger everybody, that’s good,” he said. “I’m a good badger by myself but I know there are some experts in this room.”

The bill provided only a fraction of the $55 million the DoJ asked for in its budget request for “investigating and prosecuting financial and mortgage fraud.” Waters proposed re-appropriating some money in the bill from the NASA program to fully fund the $55 million request.

Representative Brad Miller also rose in support of Waters’ amendment. Though Miller was turned down for the job of executive director—because, he believes, the working group was afraid of industry blowback.

Unfortunately, when put up for a voice vote, the Waters amendment failed in the Republican-dominated chamber. Her case wasn’t helped when Representative Chaka Fattah, also a member of the progressive caucus, spoke in opposition to the amendment, citing concerns about the loss of NASA funding.

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324,000 women dropped out of the nation’s civilian labor force in March and April as the number of women not in the labor force hit an all-time historical high of 53,321,000, according to the
Bureau of Labor Statistics.

The civilian labor force consists of all people in the United States 16 years or older who are not in the military, a prison, or another institution such as a nursing home or mental hospital and who either have a job or are unemployed but have actively sought work in the previous four weeks and are currently available to work.

The civilian labor force is a subset of what BLS calls the civilian noninstitutional population, which includes all people in the country 16 or older who are not in the military, a prison, or another institution such as a nursing home or mental hospital.

This year (in both January and April), only 57.6 percent of the women in the civilian noninstitutional population were in the labor force. That is the
lowest rate
of labor force participation by American women since April 1993, according to historical data maintained by BLS.

The rate of female participation in the civilian workforce peaked twelve years ago--in April 2000--when hit 60.3 percent.

In February, according to BLS’s seasonally adjusted data, 52,833,000 American women were not in the labor force. In March that climbed to 53,090,000—a one-month increase of 257,000. In April, it climbed again to the historical high of 53,321,000—a one-month increase of 231,000 from March and a two-month increase of 488,000 from February.

In February, there was an historical high of 72,706,000 women in the labor force. But in March, that dropped to 72,529,000—a decline of 177,000. And in April, it dropped to 72,382,000—a decline of another 147,000.

Thus, in March and April, according to the BLS data, a total of 324,000 American women dropped out of the civilian labor force.

The number of women added to those not in the labor force in March and April (488,000) exceeds the number of women who dropped out of the labor force during those two months (324,000) because women who newly turned 16, or left the military, or were released from prison or another institution during those two months and then did not seek a job were added to the ranks of those not in the labor force.

BLS says that for a one-month change in the number of women in the labor force to be statistically significant it has to be greater than about 260,000. For a three-month change to be statistically significant it has to be greater than 400,000. Thus, the two-month increase of 488,000 in the number of women not in the labor force is a statistically significant trend, but the two-month increase of 324,000 women who dropped out of the labor force is not. However, if at least 76,000 additional women drop out of the labor force in May the trend will become statistically significant.

Moreover, BLS says the decline of female participation in the workforce over the past year has been statistically significant—dropping from 58.3 percent in April 2011 to 57.6 percent this April.

For both males and females combined, the rate of participation in the labor force dropped to 63.6 percent in April—the lowest rate since December 1981.

Recently, however, women have been leaving the labor force in larger numbers than men.

From February to March, the number of men in the labor force actually increased by 14,000—rising from 82,165,000 to 82,179,000, according to BLS. From March to April, it dropped back down to 81,983,000—a one-month decline of 196,000.

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ICBC has been the most aggressive of China's "big four" banks in expanding overseas.

According to the Fed the bank has total assets of roughly $2.5 trillion.

It will buy up to 80 percent of the US unit of the Hong Kong-based Bank of East Asia, which operates 13 branches in New York and California.

As part of the deal ICBC and two state-backed financial firms -- China's sovereign wealth fund the China Investment Corporation (CIC), and Central Huijin Investment -- will be recognized as bank holding companies, regulated as commercial US banks.

The broad expansion of China's footprint in the US market comes amid a series of financial reforms in China that could begin to open the lucrative market to US firms.

After the May 3-4 meeting, the US Treasury noted China had made "encouraging progress" on a number of issues sought by the Obama administration, including taking steps toward a more open and market-oriented financial system.

The Fed said Wednesday that the ICBC proposed acquisition, which is "relatively small," would not have much of an impact on the banking market.

"The combined deposits of the relevant institutions in the Metropolitan New York banking market represent less than one percent of market deposits," the central bank noted.

The competition includes Bank of China branches in the New York metropolitan area, and CIC, which has a noncontrolling stake in Morgan Stanley.

ICBC will pay $140 million to buy an 80 percent interest in Bank of East Asia USA, China's state news agency Xinhua reported in January 2011, at the time the deal was signed.

"This unprecedented acquisition of a controlling stake in a US commercial bank by a mainland bank is strategically significant," Xinhua quoted ICBC chairman Jiang Jianqing as saying.

The Fed said its Board also consulted with the China Banking Regulatory Commission, the country's main banking regulator, and pointed to steady improvement in regulation since its founding in 2003.

"For a number of years, authorities in China have continued to enhance the standards of consolidated supervision to which banks in China are subject, including through additional or refined statutory authority, regulations, and guidance," it said.

In other Fed board decisions, Bank of China, the third-largest bank, won approval for a branch in Chicago. Bank of China operates two insured federal branches in New York City and an uninsured branch in Los Angeles.

Agricultural Bank of China, the fourth-largest bank, was set to establish a branch in New York City, where it already operates a representative office.

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This is from CNBC last week.

Wall Street is starting to sound a little spooked.
Citigroup  on Wednesday issued a client note that just a few weeks ago would have read like satire. “We think central banks in the U.S., euro area, Japan, and the U.K. could and should do much more” to stimulate growth, said the firm’s economists, led by Willem Buiter. Yes, these institutions, which have already pushed their respective interest rates to historic lows and made unprecedented efforts to buy government bonds and other securities, are not being aggressive enough, the firm argues.

Specifically, Citi advocates a three-pronged approach: First, lower interest rates “all the way to zero” in the two regions, the U.K. and euro area, where they aren’t basically at zero already. Second, carry out “more imaginative forms” of quantitative easing  of any or all types of “less liquid and higher credit risk securities” beyond government bonds. And third, engage in “helicopter money drops,” by which they mean the fiscal authorities in each region should join forces with the central bank to pump money directly into their respective economies.

It is these latter two — the most controversial of the bunch — which Citi argues will be most effective in boosting growth across these four struggling regions. There are two primary factors, however, holding many policy makers (and much of the public) back.

One is fear of the known — that is, inflation   . Today’s troubles couldn’t be more different from the supply-side woes that hurt growth and fueled inflation in the 1970s and ‘80s, but plenty still don’t see it that way (and many who have lived through hyperinflation   episodes in the past are understandably fearful of a repeat). There is also a legitimate case to be made that broad deflation would serve developed economies far better than continued inflation; the trouble, however, is that advanced economies are not well-equipped to manage deflation, especially wage deflation, and that deflation in isolation is a far different story than deflation coupled with high debt loads, which is unfortunately the situation advanced economies are stuck in today.

The second is fear of the unknown. Citi is basically calling on policy makers to try anything and everything to boost growth. The trouble is that policy makers aren’t programmed to work like that. Entrepreneurs, maybe. But policy makers, who have to answer to the public, to political opponents, to themselves? They are perhaps the least likely group of people in the world to baldly adopt a “try anything” approach for fear of the many unintended consequences it could have (consequences that will define their legacies, no less). This is why the “muddle through” approach is almost always the default one. Indeed, even the grandest of gestures (think the U.S. “bazooka” stimulus and bailout schemes) are rarely as grand as they are billed at the time.

Knowing this, Citi nevertheless rattles off a series of “try anything” schemes that policy makers could adopt: “abolishing currency completely and moving to E-money on which negative interest rates can be paid as easily as zero or positive rates,” for one. Taxing holdings of bank notes (originally a Depression-era suggestion), for another.

The firm acknowledges that the case for such drastic moves to lower real interest rates is not “quite as strong today, especially in the U.S. and U.K., as it was in the ‘08-’09 period.” Citi also acknowledges that as U.K. inflation has been persistently running higher than the Bank of England’s target, policy rates there perhaps “should actually be higher.” And it admits that while recessions   wreak havoc on pension funding capabilities, so too do extended periods of ultra-low long-term interest rates. It adds that policy makers are partly standing in their own way by not being more explicit about the lengths to which they are willing to go to generate growth. And that in some cases, such as financial reform, supply-side issues may be impeding effective monetary stimulus and ultimately growth.

Still, the firm insists the benefits of further drastic action outweigh the costs. Citi cautions that “quantitative easing,” or central bank asset-buying programs, likely have diminishing effects over time, such that “even doubling or tripling the size would not multiply the effects.” It says the U.S. and U.K. should stop buying government bonds as they have been and, taking a cue from Europe, start buying assets that are less liquid “and/or high credit risk.” (One can hardly blame policy makers for fearing those consequences.) To be sure, Citi’s economists say they doubt policy makers will pursue anything remotely this aggressive.

If there is an area where everyone can agree, however, it may be on taxation. Citi says the “helicopter money drop” they advocate can take the form of infrastructure investment, direct government payments to households, or a “temporary tax cut” (emphasis theirs), any of which would be funded by a “permanent increase in the monetary base.” It should be immediately clear which of these options, at least in the U.S., would be most likely. (A tax cut funded by an increase in the money supply, which is a demand-side stimulus program, by the way, should not be confused with a tax cut that shrinks the size of government, even though it would likely be phrased as such to win over the public.)

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Frustration

Is anyone else frustrated with what is going on in the world and financial markets?  I know I am.  I'm not sure how many times I've said, "This makes no sense to me on a fundamental basis.", over the last 2 weeks.  Then I saw this article a friend sent me and I realized computers don't think like that. If we are to have real markets again, we need to get rid of these High Frequency Trading machines.  Almost all trading has turned into momentum / volume driven speed trading.

84% of All Stock Trades Are By High-Frequency Computers … Only 16% Are Done By Human Traders

~~~

Machines Dominate the Market … Real Human Traders Are Only Very Small Fish In a Big Pond

As of 2010, 50-70% of all stock trades were done by high frequency trading computer algorithms.

And many other asset classes are dominated by high frequency trading as well.

High-frequency trading distorts the markets.  And see this and   this.  And it lets the big banks peak at what the real traders are buying and selling, and then trade on the insider information. See this, this, this, and this.

Morgan Stanley has just shown (via the Financial Times) that the percentage of high frequency trading in the stock market has skyrocketed to 84%:

Trading by “real” investors is taking up the smallest share of US stock market volumes [since Morgan Stanley  started keeping track 10 years ago.]

The findings highlight how US trading activity is increasingly being fuelled by fast turnover of shares by independent firms and the market-making desks of brokerages, many using high-frequency trading engines. [actually all of the market-making desks are using it.]

***

The proportion of US trading activity represented by buy and sell orders from mutual funds, hedge funds, pensions and brokerages, referred to as “real money” or institutional investors, accounted for just 16 per cent of total market volume in the form of buying, and 13 per cent via selling in the final quarter of last year, according to analysis by Morgan Stanley’s Quantitative and Derivative Strategies group.

It’s not just the U.S. High frequency trading dominates in the U.K. as well.

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You all know I think gold is going to be much higher in a couple years.  It has taken a little longer than I thought to play out, but that's because of the belief in the mainstream media's propaganda machine.  You think it's a coincidence that Warren Buffet, who recently put on a huge short on gold, has had these statements released?  He then gets his best buddy, Bill Gates to stutter on about gold on CNBC.  I borrowed these from Mike Krieger's blog.

What is the Deal with Crony Capitalists and Ice Cream Cones?
Posted on May 5, 2012
So today Warren Buffet and Berkshire Hathaway host their annual pilgrimage of automatons to the heartland of America to meet the country’s richest guy who is “just like you.”  Why is he just like you?  Because he eats hamburgers, drinks cherry coke and loves ice cream cones.  This just a day after his right hand man, Charlie Munger called people that buy gold uncivilized and made some disgusting comment about how only Jews in Nazi Germany before getting thrown in a train to a concentration camp have any reason to buy it.  As a close friend of mine stated yesterday: “MUNGER TELLS CNBC `CIVILIZED PEOPLE DON’T BUY GOLD’…yeah what they do is they insider trade Lubrizol.”

What I found interesting is how many of the articles I have read on this meeting mention how he is eating ice cream at the meeting.  Then I recalled how many times I noticed pictures of Barrack Obama with his face in a cone.  Is there a connection between crony capitalism and ice cream cones?  Well of course Obama isn’t a crony capitalist.  He is just a crony.

So on that note please check out these top 30 pics of our President eating ice cream.  Is this also in the playbook?  Lie, cheat and steal but publicly eat ice cream and the sheeple won’t suspect a thing?

***
Watch Bill Gates Stutter Like a Moron on Gold
Posted on May 7, 2012
You know the system is in trouble when it rolls out every multi-billionaire status quo gatekeeper to appear on CNBC and regurgitate the same trite propaganda lines to scare people away from protecting their financial well being via the one asset that has proven timeless and portable for thousands of years.  What the sheeple still cannot get through their minds thanks to constant misdirection from people such as Bill Gates “being on the same page” as Buffett and Charlie “only Jews about to be gassed should buy gold” Munger on the subject of precious metals is that government can and will steal your money and assets when they are backed into a corner.  While you can’t sow your E*TRADE account or steel plant into your garments you can with gold.

Billy Gates’ comments on gold are so ridiculous only a caveman could believe them.  He uses a lot of fear tactics in the brief commentary.  He uses the tried and true what if the “IMF and Central Banks start selling” line.  This is hilarious because it is only very recently that Central Banks have been net buyers of gold after decades of selling.  Furthermore, the emerging market Central Banks, especially China, have merely 1%-5% of their FX reserves in gold (no one knows the exact number) so they will take every ounce the Western Central Banks are stupid enough to put up for sale.  He implies that Central Banks could sell gold because it does “nothing for its citizens.”  A more ridiculous statement has never been uttered.  First of all why would these sophisticated financial wizards running these institutions hold gold in the first place?  Why would Nixon close the gold window in 1971 to prevent the loss of more U.S. gold if gold doesn’t matter?  Why would all the up and coming economies be buying it and why are some of the smartest investors in the world buying physical gold?  Gates is trying to imply these investors are all stupid, mentally weak individuals.  Finally, as if what these governments are doing at the moment is good for their citizens?!  Yeah, just look at the skyrocketing suicide rate in Greece for your proof.  I’m sorry the best thing a government can do is to hold as much gold as possible for its citizens so they have a chance to start over once this house of cards implodes publicly.

He also states that once people want to sell “there is no floor.”  I mean come on man.  Gold is the only currency that has survived purchasing power intact since the ancient Egyptians.  The worst part about him saying all this publicly is that he is actively discouraging the sheeple who actually listen to him from protecting themselves.  That is morally repugnant.






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What is interesting to me about this poll, gold makes up less than 2% of the investment holdings of Americans.

 According to a recent Gallop Poll…

28% of Americans voted gold as the best investment.

It beat out real estate (20%), stocks (19%), savings accounts (14%)… Even bonds (8%).

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As I was typing this blog I received this from a friend.  I didn't see the piece on CNBC because I'm banning from my watch list.

Ok - So I am listening to CNBC this morning and they had Jordan Belfort on, the author of "The Wolf of Wall Street".  They handed him a Book Award for his great story which consists of under 30 millionaire on wall street who ended up in prison for ripping people off, plus he has made a whole movie about it too.  Take a look at the story on CNBC.



My point is not so much him, but rather the fact that CNBC is glorifying someone who not only ripped people off, but went to f***ing prison for front running!!!  I thought maybe you could say a few words in your blog about it.  No wonder the culture doesn't change.  How do you get rid of greed when you glorify it?  YOU DON'T!  The path will never change for crony capitalism and we have to prepare for further mayhem in the markets - it will never change!  

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So let me get back to the economics of it all.  Businesses are making good money, but this is not good for the 99%.  Unemployment was down last week to 8.1%.  Here's why...

The U.S. unemployment rate fell to 8.1 percent in April, but investors are quick to point out that much of this decline could be generated by a drop in labor force participation, not true jobs growth.
In fact, labor force participation hit 63.6 percent in April, down from 63.8 percent in March. That's the lowest rate since 1981.
From expert Reuters chartist Scott Barber, this is what's happened to labor force participation over the years:

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That chart coincides with this one.  Americans are receiving as much money from govt benefits as they are paying in taxes.  I'm sure that is sustainable.


Economists have been touting consumer strength as the economic recovery has appeared to gain steam in the last few months.
But there's a good reason to believe this development isn't all it's cracked up to be.
According to research from Morgan Stanley global strategist Gerard Minack, the U.S. government is actually "paying out as much in benefits as it receives in taxes from households."
And analysts already concerned about a fiscal cliff ahead around the start of 2013 when the government dramatically cuts back expenditures, the power of the consumer might be much weaker than the numbers would suggest.

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I'm glad I didn't spend 6 figures to get a PhD ;)  Again this is from Krieger's Blog.

Number Of PhD Recipients Using Food Stamps Soars
Posted on May 7, 2012
This article from the Huffington Post really says it all.  If you aren’t on Wall Street borrowing from the Federal Reserve at 0% and buying financial assets on leverage or stealing from the citizenry in the cesspool we call Washington D.C., you are becoming poor.  How’s that for Hope and Change.

Key quotes:
The number of PhD recipients on food stamps and other forms of welfare more than tripled between 2007 and 2010 to 33,655, according to an Urban Institute analysis cited by the Chronicle of Higher Education. The number of master’s degree holders on food stamps and other forms of welfare nearly tripled during that same time period to 293,029, according to the same analysis.

The sluggish economy has pushed graduates with law degrees to look for jobs outside of the legal profession, according to U.S. News and World Report.

Many adjunct faculty members are likely to be on welfare, since they live on “poverty wages,” the Chronicle of Higher Education reports.

All of these factors, plus a less-than-stellar job market, have forced many PhDs to work in menial jobs. There are 5,057 janitors with PhDs, according to Bureau of Labor Statistics data cited by the Houston Chronicle.

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The total debt of the US government has increased by $6.7 trillion in the last 5 years and by $9.6 trillion in the last decade. The total debt of the government was $15.58 trillion as of 3/31/12, up from $8.85 trillion as of 3/31/07 and $6.01 trillion as of 3/31/02. Our nation’s total debt is the sum of the money we owe our creditors plus surplus funds from Social Security and Medicare that have been invested in Treasury securities, i.e., intergovernmental debt (source: Treasury Department).

In the first 6 months of fiscal year 2012 (10/01/11-3/31/12), the US government spent $1.84 trillion.
For the entire fiscal year 2001, the US government spent $1.86 trillion, an amount that at the time was an all-time record (source: Treasury Department).

When FDR signed the Social Security legislation in 1935, the life expectancy of a 65-year old American was 12.5 years. Today, the life expectancy of a 65-year old American is 19.2 years (source: CDC).

Full Day

I'm going to be traveling on business tomorrow, so this will be my last post for the week.  This will give you all weekend to read everything.  I will expect your reports on my desk by Monday morning ;)

I'm spending the post on unemployment, the dollar, and precious metal prices.

THE INFLATION TRADE IS ON: BERNANKE HAS BROKEN THE DOLLAR RALLY
It may not seem like much happened yesterday, but a very important event occurred. Yesterday the dollar index breached 78.65. The reason that is significant is because 78.65 marked the intraday low of the prior daily cycle. A penetration of that level indicates that the current daily cycle has now topped in a left translated manner and a new pattern of lower lows and lower highs has begun. Any time a daily cycle tops in a left translated manner it almost always indicates that the intermediate cycle has also topped.

In this case it would indicate that the intermediate dollar cycle topped on week two and should now move generally lower for the next 10-12 weeks, bottoming sometime in late June or early July, about the time Operation Twist ends. 

Now that we have confirmation that Bernanke has broken the dollar rally I'm confident in calling April 4th an intermediate bottom (B-Wave bottom) in the gold market. Gold should now be entering the consolidation phase of the next C-Wave. I expect a test of the all-time highs sometime this summer as the dollar moves down into its intermediate bottom.

 That being said I have no interest in a 15% rally in gold. The real money will be made as the mining stocks exit their bear market, re-enter the consolidation zone between 500 and 600, and move up to retest the old highs. It's not inconceivable that we could see a 30-45% gain in mining stocks over the next 2 1/2 months.

Sentiment in the mining index has reached the same levels of bearishness that were seen in the fall of 2008. That black pessimism drove a 300+ percent rally over the next two years. I have little doubt this time will be any different.

Now what we need to see is a change in character. We need the mining stocks to stop generating these sharp bear market rallies and transition into the wall of worry type rally that characterizes a bull market. So far that is exactly what is happening. The miners are rallying very hesitantly, and as long as this continues it will camouflage the move and keep sentiment depressed. That's exactly what we need to happen to drive a long sustained rally back up to the old highs. 

The problem with the rocket launch type rallies we've seen over the last year and a half is that they swing sentiment very quickly to the bullish side and we run out of buyers.

As long as the bottoming process proceeds gradually I think there's a very good chance the HUI could break back above the 200 day moving average, and possibly test the 600 level by mid-July.



So far all of the pieces are starting to fall in place to initiate the very early stages of what I think will eventually become another huge momentum move similar to what happened in silver and gold last year. This scenario may well culminate in a parabolic blow-off top sometime in late 2014 as the dollar moves down into its next three year cycle low.
 


Now is the time to invest in this sector as it struggles to transition from a bear market back to the secular bull trend. The time to enter is at the very beginning when no one believes. This is when the really big money is made. If you wait till your emotions give you the all clear, half the move will be over.

Most traders are going to jump back into the general stock market, or tech stocks. You have to be smarter than that. The stock market, including tech, have already generated a massive move out of the October bottom. That kind of move usually leads to a multiweek, or month, consolidation. The odds of another 20 to 30% rally in the stock market are very slim.

The odds of a 20 to 30% rally as the mining stocks resume the secular bull trend are extremely high.

The combination of extreme downside momentum and irrational human nature has created the kind of oversold conditions and extreme undervaluation that generates an opportunity that only comes around once or twice a decade.

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Moneynews
Pimco's Gross: US at Risk of Another Credit Downgrade
Tuesday, May 1, 2012 04:31 PM
By: Forrest Jones

The U.S. could suffer another credit downgrade, similar to the Standard & Poor's decision to strip the country of its coveted AAA rating in 2011, says Bill Gross, founder of Pimco, manager of the world's largest bond fund.

The U.S. is running a structural deficit, a deficit a country would post even while running at full capacity, that is seriously jeopardizing the country's health.  Until the government addresses massive liabilities, the country is headed for another downgrade.

Standard & Poor's currently rates the country at AA, while Moody's rates the country at AAA.
Editor's Note: You Deserve to Know What Obama and Bernanke Are Hiding From Americans

"Let's look to the liability structure of the United States. It's not just $15 trillion in terms of current debt, but it's probably three to four times that in terms of Medicare and Medicaid and Social Security," Gross tells CNBC.

"Unless the United States begins to make some inroads, that's called the structural deficit that the CBO and the IMF basically identified as, perhaps 6 percent to 7 percent to 8 percent greater than any other country other than Japan and the United Kingdom — until we address that structural deficit, yes, we're headed to that territory."

Adding to the country's more short-term woes is a fiscal cliff fast approaching.

At the end of this year, the Bush tax cuts are set to expire while automatic spending cuts are due to kick in, a combination that will immediately siphon hundreds of billions of dollars out of the economy and threaten to counter what little growth the economy is posting.

Only Congress and the White House can change that, and not the more autonomous and decisive Federal Reserve. Many worry that nothing will get done during the election year.

Others say the problem is so dire that elected officials will check their egos and political interests at the door and solve the problem quickly.

"I think coming up to the edge of Niagara Falls in the rowboat might finally force Congress and the president to do something," says Keith Poole, a professor at the University of Georgia who has studied political polarization, according to the AFP newswire.

Standard & Poor's downgraded the U.S. in 2011, when the country waited to the last second to raise its debt ceiling and avoid default.

Editor's Note: You Deserve to Know What Obama and Bernanke Are Hiding From Americans

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The next couple things are from Krieger.

Martin Feldstein Suggests Spain Should Force Citizens and Companies to Buy Government Debt
Posted on May 2, 2012
My Take:  Martin Feldstein’s article in the FT from a couple of days ago is so frightening I feel compelled to turn everyone’s attention to it if they have not read it yet.  The focus of the piece is Spain and he spends much of it talking about how “confidence” is the key (one of the 10 Commandments of the Keynesian religion).  While that is to be expected, he then goes on to state that the Spanish government should consider forcing its citizens and corporations to buy sovereign debt.  Here are the key paragraphs:

An alternative emergency approach would be to mandate, on a temporary basis, bond purchases by Spanish households and businesses. Here is how such a plan might work.

The Spanish government could use the income tax system to levy a temporary “lending surcharge” on individual incomes. In exchange for those surcharge payments, the households would receive an interest-bearing government bond with a maturity of five to 10 years. A similar surcharge could be levied on businesses based on corporate profits or the businesses’ value added.

If that doesn’t scare you I don’t know what will.  So let me get this straight.  Banks and governments took on massive debt and leverage.  Then they blow up the entire global financial system. Then the Central Banks bail them both out.  Washington D.C. is now the wealthiest area in America yet they produce nothing and take everything.  Now what is this genius’ solution to it all?  Force the citizenry and companies “based on corporate profits” to fund the government, which of course is just another backdoor bankster bailout.  This is plain and simple financial serfdom, brought to you by a Professor of Economics at Harvard (supposedly one of the best educations in America) and an adviser to Reagan (sounds more like he advised Stalin).  Just remember your money is not your money according to these guys…

The full article is here although you may not be able to read it without a subscription.  It’s titled “Time for householders to buy bonds and save Spain” from April 30, 2012 if you want to try to find it another way.







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I'm not sure how this continues to be ignored.  It's even more disturbing that they use this chart to tell Americans that everything is ok.  Don't worry US youth, you could have been born in Europe.

Spanish youth unemployment climbed to 51.1 percent in March, from 50.9 percent the previous month. This number was 6.2 percentage points higher than the 44.9 percent youth unemployment rate a year ago.
Compared with Spanish numbers and the euro area's 22.1 percent rate, America's 16.4 percent youth unemployment rate seems low. Germany, Austria, The Netherlands and Malta are the only countries in the EU27 that have youth unemployment rates lower than the U.S.
Here's a chart from Scott Barber and Thomson Reuters showing youth unemployment in the eurozone:



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Stansberry vs Katusa

At the latest Casey Research conference, respected investment analyst Porter Stansberry stood at the podium and predicted that the price of oil will fall below US$40 per barrel within the next 12 months. Part of his reasoning revolves around the impact that the shale gas revolution has had in the United States – he believes a similar thing will happen with oil.

Porter is a friend of mine and a very smart, successful individual… but I think not.

From my perspective, the pressures at play in the oil market are all pushing prices in the opposite direction: up. Global supplies are tightening, costs are rising, and demand is not falling. Prices are going to remain high, and then go higher. And there will not be a shale oil revolution anytime soon.

I'm the kind of guy who puts his money where his mouth is, so I challenge Porter to a bet. I bet Mr. Stansberry that the price of oil will stay above $40 a barrel over the next 12 months. The wager? 100 ounces of silver.

Porter has made a lot of good calls in his career. I highly recommend watching his video The End of America, an interesting and entertaining look at his prediction that the US will soon drown in its debts and cease to be a global economic powerhouse, a transition that will lead to riots across the country.

Porter and I agree on a lot of things, but on this one he's wrong. Below are my top ten reasons that high oil prices are here to stay.

Ten Reasons

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