GOLD INVESTMENT REPORT PRECIOUS METAL & ENERGY CURRENCIES & STOCK INDEXES

GOLD INVESTMENT REPORT
PRECIOUS METAL & ENERGY
CURRENCIES & STOCK INDEXES
* Intro Golden Nuggets
* Gold Prepares for Lead Role
* Gold Price Soon to Shed Harness
* Metals War Heats Up
* Coin Demand Goes Ballistic
* Mining Stocks Depressed
* USEconomy Under Death Sentence
* Economic Impediments & Scars
* Housing Foreclosures & Litigation
HAT TRICK LETTER
Issue #105
Jim Willie CB,
“the Golden Jackass”
19 December 2012
"Big picture, my perspective remains unchanged: the long-term viability of the global economy is
being increasingly wrecked by short-sighted policies focused on avoiding short-term economic
adjustments, and at bottom, on avoiding the restructuring of unserviceable sovereign, mortgage,
and financial debt. Yet only that restructuring is capable of unchaining the economy from
reckless past misallocations. Only that restructuring is capable of unleashing robust new
demand that would form the basis for sustainable economic activity and job creation. You either
pull the bad tooth, or you provide every kind of pain killer and symptom reliever, and let the
problem rot indefinitely." ~ John Hussman
"Immigrants come with new skills and new ideas. They fill a critical part in our labor market.
They work hard for a better life. Not only do immigrants help build our economy, they help
invigorate our soul." ~ former President George W Bush (hard to argue with a genius, a
Yale University cheerleader, who hosted 911 for America)
"Gold value today and tomorrow will have nothing to do with economic supply and demand or
the cost to mine it. It will be forced to rise in value to help represent trading wealth currently
held and trapped in Dollars. The Euro could never do it alone. Of course, Dollar hyper-inflation
will gun the process, but physical Gold in real goods terms is heading way up! That is why I
laugh when people talk about $700 or $800 Gold being about right. That is not even close." ~
FOA (in year 2000 when Gold price was $285)
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"Demand for Gold American Eagles [coins] is off the chart since Obama's re-election. The
continuation of the explosive expansion of the money supply leads inexorably to Armageddontype inflation. Furthermore, corrupt banks and governments are selling contracts for Gold they
do not have and can never deliver. So smart investors want bars and coins only." ~ Tyler
Durden (editor of ZeroHedge)
"Empty your mind, be formless, shapeless, like water. If you put water into a cup, it becomes the
cup. You put water into a bottle and it becomes the bottle. You put it in a teapot, it becomes the
teapot. Now, water can flow or it can crash. Be water, my friend." ~ Bruce Lee (applying to
gold market, buy what they give, move it where it is permitted, and wait for the
liquidity problems to erupt patiently, since the crisis will reach climax)
"Gold is a soft metal, but a hard currency." ~ Ronald Stoferle (formerly gold analyst at
Ernst Group, now fund manager at Incrementum)
## INTRO GOLDEN NUGGETS
◄$$$ WITH GUARANTEE OF ENDLESS FREE MONEY, STOCK INVESTORS LOAD
ON MARGIN DEBT WHILE THEIR NET WORTH PLUNGES. INVESTORS ARE NOT
IN A POSITION TO DEFEND THEIR HIGH MARGIN LEVERAGE IN STOCK
HOLDINGS. THE STOCK MARKET IS THE PROVINCE OF SUSPENDED
VALUATION WITH HIDDEN USGOVT PROPS. THE BIG BANKS WILL JOIN THE
NATION'S CITIZENS AS MAJOR BAGHOLDERS. $$$
Margin debt in the US Stock market (NYSE) has risen to an 18-month high. Net Free
Credit has plunged to minus $44 billion. Propaganda notwithstanding, like the
baseless report of a Fiscal Cliff compromise, the data flashes disturbing. While the stock
indexes remains suspended at its 2012 peak, despite the powerful recession gripping
the national economy, investors are all in, fully invested, duped to the end, sheep to be
shorn. The official NYSE Margin Debt as of September 30th hit $315 billion, a cool
jump of $30 billion from last month, and the highest since March 2011. That
happened to be the time at which the stock market took a major swoon. No cash lies at
the ready to pay for margin calls in defense. By contrast, the total Net Worth in
September was the lowest level since April. The watchword is complacency amidst
blind trust held for the easy money USFed policy. As the October data arrived, the
Margin Debt rose again to $318 billion. However, the flash signal is that Net Free Credit
fell to minus $44 billion, the lowest since the summer of 2011. Net Free Credit is defined
as real disposable cash to meet margin calls. The consequence is simple. If the stock
margin goes into a decline, investors will have to liquidate their leveraged positions
since they have no extra cash to maintain the positions. The chart is pure ugly. See the
Zero Hedge article (CLICK HERE).
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◄$$$ THE ROMNEY HEDGE MUST BE PUT IN FOCUS. HE LOST THE ELECTION,
BUT WAS FORCED TO UNWIND HIS HEDGE. THAT MEANT A POOR MONTH
FOR GOLD IN NOVEMBER. THE WINNER WAS GOLDMAN SACHS, WHICH
TOOKS FEES COMING AND GOING. $$$
Thanks to the London Siren for decifering the Romney hedge. It goes like this. Goldman
Sachs was well-known to be the biggest contributor to Romney's campaign. So it stands
to reason they would handle his finances, manage his trades, including the election
hedge. The stock market perceived Romney as bullish for equities and bankers, hence
bearish for Gold. Logic dictates that the man would hedge the possibility of losing the
election. That constitutes going long the Obama trade, which is bullish for Gold,
bearish for equities. Notice the stock market performed very well indeed since election
day for two weeks. The rest is embellished, to make a point. So Romney approached
Obama after the outcome was sealed, fraud and all, to talk nice. The conversation was
not reported. Romney invited Obama to take over the hedge, already in the money as
they say, which means profitable. The president declined, claiming the Powers That Be
would chop off hit little boy onions. So reluctantly, Romney returned to GSax and
ordered the unwind of the entire hedge position. The venerable crime syndicate icon
proceeded to dump the Gold position and to buy the S&P500 stock index. That was the
the story for November. But best of all, GSax earned the commish when the unwind
took place, just like it did when the hedge was put on.
So GSax dumped Gold and bought the S&P, which enabled Romney to cover the Gold
short position and sell his S&P position. Romney was long Gold, short S&P. Notice a
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key point, how the Gold vs S&P differential remained stuck at 310 for days on end,
which tells you of the degree of control during the great unwind. Its size might
indicate that he indeed expected to lose, or better described, have the election stolen.
Remember that thousands of Somali aliens votes in Ohio, bussed in efficiently by the
party machine, a state where a hundred precincts recorded not a single Romney vote.
◄$$$ NICK BARISHEFF OFFERED A KEY QUOTE ON GOLD AND FIAT
CURRENCY. FIAT CURRENCY LIKE THE USDOLLAR HAS A LIMITED LIFE SPAN
BEFORE A MAJOR CRISIS ERUPTS. IT HAS ALREADY ERUPTED. THE REST IS THE
COLLAPSE AND DEFAULT. $$$
Nick Barisheff is the CEO of Bullion Mgmt Group, a firm with $650 million in annual
sales. He appeared on the USA Watchdog radio show with Greg Hunter. He made a
great comment. He said, "There has never been a fiat currency in history that did not end in
hyper-inflation and complete collapse. [Geithner's most recent call for an] unlimited ceiling on
USGovt debt for the US was just telling the truth on an open-ended money printing policy [by
the Fed]. All it is doing is postponing a problem [until] it makes it bigger and eventually it blows
up. [It is too late for remedies to the economy.] We have passed the point of this getting fixed. [A
formal audit of the Fed's official foreign gold accounts would cause a] gigantic short-covering
rally, multiple bankruptcies, and a massive loss of confidence in the dollar [because much of the
gold is gone or leased out.] The Gold price could easily double [from the current price]. What has
kept the price down is the artificial leased gold going onto the markets." Excuse my added
comments denoted by [--] to make the flow better, since the guest made numerous
references in such context during the full interview. See the Investment Watch
interview (CLICK HERE).
Fiat currencies always result in failure, whether debt default or unmanageable debt or
banking crises or distorted financial markets or serious irreconcilable trade imbalance.
In the case of the United States and England, add historically unprecedented criminal
fraud by the banks. The failure can be foretold and anticipated, but the exact
pathogenesis can never be fully laid out in advance. The only certainty is the finite
lifespan of fiat currencies. The previous record before the USDollar was 31 years. By
means of corruption, intimidation, and manipulation, the USDollar has lived a record
number of years. However, that means the crisis climax will be like nothing ever seen
before, when combined with a nazi coup d'etat and rampant banker corruption.
◄$$$ DIRECT USDOLLAR DEVALUATION IS A REAL THREAT. LOOK FOR SIGNS
OF INDELIBLY MARKING THE DOMESTICALLY HELD CURRENCY. THEN
PREPARE FOR A POSSIBLE FORCED EXCHANGE FOR NEWER USDOLLAR BILLS
HELD INSIDE THE UNITED STATES BORDERS. THE DEVALUATION MIGHT BE
SOMETHING LIKE 50%, AS IN ONE NEW BILL FOR EVERY TWO OLD BILLS. $$$
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It is becoming an increasing challenge to move large volumes of USDollars out of the
country. Primarily the big US banks are the obstacles and cooperative agents to make it
so hard. The tight borders on capital controls mean they are systematically trying to
trap domestic USDollars. Some alert observers with a keen nose for devious tactics
suspect that the over the course of four to six months, all US-based currency will be
replaced in a secretive manner. Just a theory, but with a purpose. It might not be a
sweeping new type of USDollar bill design, but rather perhaps a prominent red dot on
the back, or a glaring ZZ to begin the serial number. There has always been a secondary
motive regarding currency decisions to isolate syndicate money. Refer to mafia but also
drug cartel competitors to the US Intelligence agencies. Later, the marked bills will be
replaced by force with a steep devaluation amidst public hue and cry. They really do
not need a marker on the domestic USD to be set up for devaluation. The economy
will do the job, since the USD will be rejected globally. The impact would be to raise
prices across the entire USEconomy. The proposed marker on domestic USDollars
would be a perfect plan for direct devaluation, in an exchange of one new USD for two
old USD bills. Poof, a 50% devaluation. The event could occur during a contrived bank
holiday event, by whatever means.
◄$$$ B.R.I.C.S. NATIONS ARE CHARTING A NEW COURSE FOR A FINANCIAL
STRUCTURE AS FOUNDATION. THEY HAVE MADE DEFINITIVE MOVES AWAY
FROM THE INSOLVENT WEST AND THEIR CORRUPT PLATFORMS, CORRUPT
BANKER LORDS, CORRUPT DESIGNERS, AND CORRUPT AGENTS. A NEW
SYSTEM IS COMING LIKE A GIANT FRESH BLANKET. AN IMPORTANT STEP IS
THE CREATION OF FINANCIAL INSTITUTIONS TO PUSH OUT THE CORRUPT
RAFT OF TOOLS THAT FLOAT IN SUPPORT OF THE CURRENT SYSTEM. FOR
INSTANCE, A DEVELOPMENT BANK IS BEING FORMED, AN IMPRESSIVE
STRUCTURE WITH $240 BILLION. $$$
The BRICS nations (Brazil, Russia, India, China, South Africa) serve as the cornerstone
to the anti-USDollar movement, with China the lead. They are in the process of creating
their own financial institutions, a step of critical importance. The Russian Finance
Minister Anton Siluanov announced the BRICS countries plan to set up their own
regional bailout fund, which could be worth $240 billion. That eclipses the Intl
Monetary Fund and the World Bank, which has a new collection of executives. The
BRICS are frustrated, no patience left with the Anglo-Saxon hegemony, as they chart
their own growth course leaving the US and Europe to its own corrupted bankers and
vehicles such as the USFed, the Euro Central Bank, the European Commission, the Bank
of England, the IMF, the World Bank, the SWIFT bank system, and the debt ratings
agencies.
The regional fund could be similar in size to the Chiang Mai Initiative, which is a crisis
fund set up by China, Japan, South Korea, and the ASEAN economies. The new
regional fund will allow the BRICS to create their own system of mutual lending. Any
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BRICS member will be able to draw from the fund in proportion to its own
contribution, multiplied by a coefficient yet to be determined. The mutual fund will
provide the group its own financial reserve and remove the need to appeal humbly to
the IMF and World Bank. Too many conditions tilt favor to the big Western nations, like
austerity suicide pills and asset grabs from linked collateral. The fund could be used
toward large scale economic development issues faced by the BRICS countries, as
well as to fund financial operations such as currency interventions and loans to big
companies. Finally, the fund may also be utilized strategically to assist other nations to
forge new ties with the BRICS nations themselves. This same group is close to framing
another development bank to be used to fund infrastructure projects. Its exact
framework will be on the agenda for the next BRICS summit in March 2013.
A major shared concern among the nations is the global crisis, and rising raw material
costs. Some facts emphasis the BRICS role. China and India are the world's top
agricultural producers. Brazil produces more sugar and coffee than any other nation.
Russia is a global leader in oil & gas production, as China is in coal. When initiatives
like the mutual fund and the development bank become a regular feature with broad
usage, the bloc's role in the global economy will increase further. It is not yet known
which currency or assets will be used to store the reserves. The USDollar is an
option, along with the Special Drawing Rights (SDR) used by the IMFund. The
Chinese Yuan is another option, likely to be opposed by the other members. It would
have to be fully convertible as a condition. The next step in strengthening cooperation
between the BRICS would be to extend the role of national currencies in trade
settlement between member countries. As a group, the BRICS nations currently only
hold a combined 11% of the Intl Monetary Fund voting shares, a poor reflection of
global reality. Relatively small United Kingdom and France each have larger voting
shares than any of the large BRICS nations, an inequitable situation. The developing
nations behind BRICS push for their own version of an IMFund. The BRICS bank could
begin by funding projects in industries that the World Bank refuses to support, such as
biofuels, large dams, and nuclear power plants, which fail to meet its environmental
standards. See the Rossiyskaya Gazeta article (CLICK HERE).
Rajeev Sharma of The Diplomat in India summarized the challenge to devote a currency
for usage. The Chinese Yuan might eventually be tapped, but probably only if added to
the IMF SDR basket. He wrote, "One potential stumbling block the BRICS face is deciding
what currency(s) to use for the mutual fund and development bank. For a while now, China has
been pushing for its currency, the Yuan, to be added to the Special Drawing Rights (SDR),
which is the IMF's international reserve asset based on a basket of currencies. China is likely
to view the BRICS institutions as an avenue in which to boost the international
stature of its currency. Accordingly, it is likely to advocate including the Yuan as one of the
currencies the proposed institutions will use. The other member states, however, are similarly
likely to resist Chinese pressure in this area, and instead push for using the USDollar or the IMF
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SDR, which includes the Euro, Japanese Yen, British Pound Sterling, and the USDollar." See
the Zero Hedge article (CLICK HERE).
◄$$$ EUROPE IN A QUICK SURVEY OF SOMBER PERCEPTIONS. $$$
In a paragraph that cannot do Europe justice, a summary of some major events. Italy is
coming apart at the seams. Mario Monti has one foot out the door, in the process of
being disposed and deposed as king with a Goldman Sachs crown. Monti is the GSax
insider tasked with stripping Italy of its assets and keeping all those nasty derivatives
tied down securely. Uncle Silvio Berlusconi might be making yet another comback, his
first step being to kick Monti onto the pavement. He will be lucky not to be tossed from
the palace balcony. Berlusconi wants to save Italy from the austerity and economic
downward spiral induced by Monti, but Silvio must overcome his feuds inside the
Parliament. See the Washington Post article (CLICK HERE) and the Acting Man article
(CLICK HERE).
Meanwhile, Hollande in France is in big trouble already as his deeper move toward
socialism has caused huge problems with capital flight, resistance to higher taxes,
supply disruptions, and debt downgrade. Next France threatens to nationalize the steel
industry, a step sure to open the door to huge inefficiencies and waste. See the Business
Week article (CLICK HERE).
DeutscheBank concealed $12 billion in losses to avoid a government bailout. The giant
bank shows signs of fraud to hide potential implosion. The story broke from three
former bank employees who filed complaints to US regulators. The chief of enforcement
among the regulators currently was none other than the General Counsel of
DeutscheBank at the time. See the Zero Hedge article (CLICK HERE).
Germans are gathering increasing quantities of gold. A recent survey showed that the
average German owns EUR 5750 worth of gold in various forms. The Steinbeis Research
Center for Financial Services in Berlin canvassed 2000 people. They found that 32% of
the gold owned in Germany in the form of bars and coins has been accumulated since
the financial and economic crises began in 2007. The number of Germans with a net
monthly income over EUR 4000 who say they plan to invest in gold has doubled in the
current year. On average, every German owns around 117 grams of gold, consisting of
55 grams in jewelry and 62 grams in bars and coins. See the German Local article
(CLICK HERE).
The UKGovt is reducing pension payouts due to the low returns gathered from the
pension funds themselves, a nasty consequence of the ultra-low bond yields. The
position in the United Kingdom might be worse than in the United States regarding the
poor state of affairs with private pension funds like the 401k. In the UK, the working
professionals were lured into building up the private pension pots. However, with the
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near 0% interest rates persisting, government actuaries apply yields on low coupon
government bonds to slash pension payments by 50% or more. One pension company
had the audacity to tell a pensioner that his fund will not pay out until he turns 120
years of age. Thanks to RobertW for comments across the pond. The perception of
London as the UK version of the vampire squid is forming gradually. It is a criminal
sink long recognized by the Jackass. See the Rowans article (CLICK HERE).
Turkey has rejected bans against doing business and banking with Iran. Being very
close to the skirmishes, the London Siren commented, "The Turkey double-cross is starting
to become quite apparent and vocal. They were insulted quite a few years ago, refused entry into
the European Union based on religion (quite shameful). Now China, Russia, and Iran are
putting bacon on the table for them while the West focuses mainly on saber rattling. The public
in Turkey is against this meddling in Syria. As for the Syrian war, they are really not doing
much. The money comes from Qatar and Saudi Arabia. The arms come from the United
States, the United Kingdom, and France. The military expertise comes from the UK and
France. The soldiers and cannon fodder come from illiterate youth from the Middle East. Turkey
is simply taking a commission for rent in lending out their territory." In war nothing seems to
change over the past century. See the PressTV article (CLICK HERE).
## GOLD PREPARES FOR LEAD ROLE
◄$$$ JPMORGAN INTERNAL RUMBLING. A STORY FROM A CONTACT IN
SOUTHERN CALIFORNIA. JPMORGAN IS SEEING HEAVY GOLD DEMAND IN AN
UNUSUAL WAY NOT SEEN BEFORE, FROM ITS WEALTHY CLIENTS. THE
REQUESTS COME FOR USAGE OF EXTERNAL VAULTS, NOT JPMORGAN
VAULTS, SOMETIMES FOREIGN VAULTS. $$$
The story will not reveal any identities or hints, by request of the source. Paraphrase
will be used, since quotes are altered to make the story flow. The contact of mine comes
from an urban center of California. A person close to the family showed up at a dinner,
where a discussion followed with his friend. Both younger fellows work at JPMorgan,
one an analyst whose group manages investments for High Net Worth clients. The
minimum requirement is $25 million in investable assets. Some from the group
involved have clients with over $1 billion invested. In an unsolicited comment while
talking about work, he said something big is going on. The JPM firm has received a
significant amount of calls for physical gold in a recent week. Some really large
purchases for actual gold are being sent to personal vaults, not public or JPMorgan
vaults. They want it in their houses or outside the United States in some cases in foreign
vaults. They do not favor gold stocks or futures contracts or mining stocks (or indexes)
or Exchange Traded Funds, all stated explicitly as undesirable. The internal buzz at the
giant firm is how the demands are extremely unusual. One can only conclude that
people are awakening. Whether they believe in Gold more than they trust JPMorgan is
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another matter. The remark about being unusual should be heard loud and clear, as a
corner has been turned on perception.
When the JPMorgan HNW client story was passed around for some feedback, an
interesting comment came back from my best source, The Voice. He wrote, "A very
prominent female attorney is triggering this movement to ship Gold out of big bank client
accounts. She and her heavy duty clients are on their way exiting the United States. She has a
brain like a bacon slicer and always does her homework. She must have someone who told her
how physical needs to be structured in order not be at the mercy of a crooked banks." A quick
interpretation, based on my many interactions. The message means he knows the
prominent female attorney, and might even advise her. Nothing for sure, but 90% sure
on the Jackass translation. He is coy but never deceptive.
◄$$$ A CRITICAL SLAM ON PERTH MINT AS A BAD PLAYER. THE TARNISH ON
THEIR IMAGE IS STICKING AFTER A STEADY STREAM OF NEGATIVE REPORTS.
THE PERTH MINT IS ILLICITLY USING CLIENT GOLD BARS, REPLACING THEM
WITH GOLD CERTIFICATES, JUST LIKE THE CRIMINAL BIG BANKS IN THE
WESTERN FINANCIAL CENTERS. $$$
Dave in Denver wrote a negative account against Perth Mint, actually a story passed
along from a person with direct contact. He made reference to the TFMetals website,
where the Jackass has done interviews. Dave wrote, "I just received an email from someone
who read my write-up. He told me about an incident involving the Perth Mint and its custodial
services. He wants to remain anonymous because of Perth Mint's reputation for being about the
nastiest and most litigious people on the planet (in his words).
An investment group who manages bullion positions for some very large holders was given the
management responsibilities for a very large bullion account that was being held at the Perth
Mint. When this group informed the Perth Mint about this and was told to hand
custody of the account over, the Perth Mint sent the new management group allocated
Perth Mint certificates in lieu of shipping them the bullion. The group ordered the Perth
Mint to have the bullion on the ramp and ready for shipping within 72 hours. The Mint claimed
that was not possible and could not honor that request. The new group threatened to go public
with this incident if the bullion was not provided as soon as possible. Apparently the Perth Mint
actually had to produce new bullion in order to fulfill the legal demand and avoid public
exposure of this incident. He also told me that this same management group has had similar
incidents with supposedly vaulted Gold at a number of Swiss Banks over the past few years. We
are talking 400-oz bullion bars, not minted coins or 100-oz COMEX bars. This person's final
comment was, 'I GET SICK OF READING HOW RIGHTEOUS AND SELFAGGRANDIZING THESE SCUMBAGS ARE AT THE PERTH MINT. THESE CLOWNS
HAVE MORE THAN THEIR FAIR SHARE OF SKELETONS HIDDEN IN THEIR OWN
CLOSETS.' "
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See the TFMetals Report article (CLICK HERE or HERE). The Jackass has had contact
with Dave in Denver on numerous occasions in the past, always an honest player,
always with great insights and valuable information. The Perth Mint is dirty,
hypothecating (stealing) client bullion, covering their tracks with Gold Certificates.
They are using client gold improperly, just like the corrupt Wall Street banks, the
London banks, and the Swiss banks.
◄$$$ VENEROSO WISDOM WAS COMMON AND DEEP AROUND 1999,
FOLLOWED BY HORRENDOUS MEGA-FORECAST CALLS. IF NOT RETIRED, HE IS
LIVING OFF HIS PAST SUCCESSES. HE FORESAW THE RAVAGING EFFECTS OF
PAPER WEALTH GENERALLY. $$$
Frank Veneroso used to do some brilliant work, when serving as consultant for several
central banks in the West. The following are all prescient quotes taken from his work in
1999. In the following years, he fell victim to poor analytic vision, with several dreadful
calls about major commodity prices. He expected them, like crude oil, to fall and stay
down as a result of widespread deflation forces. He would have therefore qualified to
join the Deflation Knuckleheads written in the past by the Jackass, in particular 2010
and 2011, when the folly was widely circulated. How any competent analyst could
ignore the powerful monetary inflation perpetrated by central banks and its direct effect
to encourage widespread hedging against the USDollar debasement is beyond my
comprehension. But Veneroso used to be brilliant, and deserves his time in the sun with
iced teas or mai tais. Note the following wisdom by Veneroso offered 13 years ago. He
referred to the ravages of inflation, which is greatly under-stated and under-reported.
The US Stock market must rise 8% per year to stay even with inflation effects on prices
and purchase power. He expected gold mining stocks to suffer, correctly. He expected
paper securities to suffer, correctly. He expected the financial systems built upon a
paper foundation to suffer, correctly.
Veneroso's first point is that short-term traders and gold mining stock investors will
suffer deep losses. His second point is that physical Gold need not be converted into
paper currency, since it will be desired in bullion form as contract ownership falls
victim generally to ruin. His third and last point is that fraudulent wealth has turned
into a cancer for the entire financial system, where personal ownership is of paramount
importance. He clearly warned that the entire Western paper wealth system is a fraud,
and will come apart. He warns that when the Gold market catches fire, the USDollar
will turn toxic, thereby rendering most businesses unprofitable. That is precisely the
Jackass point of ZIRP & QE killing capital, eliminating profitabilty, ruining
businesses, and wiping out jobs with income.
#1: "During the next five years, physical Gold is going to outlast and outperform not only the
current world derivative gold market, but outlive a large portion of the stockholders equity in
most gold mines. During the Death Throes of the gold marketplace, the dollar price could be all
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over the map! Simply put, most short term traders and long term paper gold (gold stocks
included) investors will be eaten alive as we witness a transition unlike anything ever seen."
#2: "There is a world of difference between saving real money as a wealth of ages and trying to
trade this world's paper derivatives. The lasting wealth of physical Gold does not have to
be converted into real things prior to a currencies destruction. It already represents the
new holding everyone will want. The coming Western economic dislocation will
devastate all forms of assets that are held in contract ownership. Be they stocks (most
gold stocks included), bonds, businesses or savings accounts, the loss of a major currency will
consume most of the equity these paper items represent. It has happened with every currency
ever created and will happen again with our dollars."
#3: "One of the unalienable truths that you speak of is that one cannot own what he does not
possess. The entire dollar/debt economy is built on the exact opposite of this concept. That being,
if you hold it in contract form, you possess its physical equivalent [which has been proved to be
totally false]. This can be extrapolated to include US stocks, Treasury debt and even dollars
themselves. This wholesale acceptance of fraudulent wealth has lead an entire
generation of Western workers into saving nothing and thinking it is something! Once
any tiny part of this concept is broken, it will call into question the validity of the
entire paper asset world. Break the Gold market pricing system and you will break the dollar.
Break the dollar and the complete dollar based business system becomes mark to the market. A
marking that brings currency pricing in line with on the minute supply of real things [in a
snapback to reality]. The resulting dollar inflation will wreck the ability of most businesses to
function at a profit."
◄$$$ SOME SILVER WHEATON ANALYSIS REVEALS A SUPERSTAR
INVESTMENT PROXY FOR THE SILVER PRICE. THEY WILL CONTINUE TO SOAR,
WHILE GATHERING MORE SILVER IN INVENTORY. THEIR GOAL IS 50 MILLION
SILVER OUNCES HELD. THEY AVOID THE COST SHOCKS SEEN IN SOME MAJOR
FIRMS, BY SIGNING LONG-TERM CONTRACTS. THE STOCK WILL TRIPLE AGAIN.
ITS BUSINESS MODEL IS EXTREMELY ROBUST, SECOND TO NONE. $$$
In an environment where many mining companies flounder, including some on the Hat
Trick Letter portfolio, Silver Wheaton (SLW) stands out as a model, an icon, a leader.
They are not a mining firm. They are a unique company that gobbles up silver output
from large mining companies, as the silver is not primary in production emphasis. They
set up long-term contracts to take the silver byproduct typically, locking in a low price
paid per ounce acquired. The mining firm wins by locking in an important revenue
stream, and call the source streaming. The SLW story will continue to burn bright.
Expect it to continue to rise in share price, accumulate a mountain more in silver bar
inventory, and serve as a tremendous proxy for silver. The Sprott Silver Trust and Silver
Wheaton stand like twin pillars, my favorites.
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Christopher Barker points out in some good analysis that Silver Wheaton relies upon
four pillars of growth: 1) Through gains in the price of silver, 2) through increasing
production as stream carrying projects enter production, 3) through the organic
resource expansion of its existing stream partners, and 4) through the forging of new
stream agreements. This growth capacity reflects the incredibly well design foundation
of the company in the underlying business model. By means of long-term contracts, it
can benefit from a fixed cost structure on production from long-life assets with
promising exploration upside. The partner mining firms absorb the risk.
Silver Wheaton won another excellent contract over the summer, which augments their
silver stream in a transaction with HudBay Minerals (symbol: HBM). The SLW
company has cited a goal of building annual production from 28 million silver
equivalent ounces (SEOs) in 2012 to an incredible 48 million SEOs by 2016. When they
win some copper in contracts, for instance, they convert to silver equivalents for
accounting purposes. The firm is in a position to continue to forge new deals, to commit
a portion of strong revenue stream, and to build. They decided to hold more Silver in
inventory in the last couple years, rather than to sell it. Silver is money after all, while
paper feces from the USTreasury is disguised debt. The recent recent $750 million
acquisition is yet another stellar deal. The business model enables its cash balance sheet
to grow and expand, in self-replenishment. Other firms rely upon stock dilution for
expansion of projects and potential growth. Silver Wheaton uses its income stream from
all previous deals to finance the next deal in a purely non-dilutive manner, like a string
of pearls.
Some cost shocks for major mining firms bring attention to the superior ancillary
role played by Silver Wheaton. Its contract strategy protects it from the spiraling cost
shocks. Look for some partner firms to force SLW into contracts of shorter duration, to
more equally share risk. Consider Barrick Gold, whose Pascua Lama mine project has
suffered mindboggling cost increase estimates to complete. The mine is located on the
remote Chile-Argentina border in the vast Andes mountain range. The contract with
Silver Wheaton supplied $625 million to Barrick Gold for 25% of the project's silver
output. At origin, the sum represented nearly one-quarter of the project's budget at the
time. Unfortunately for Barrick, that budget has since expanded by 160% to reach a
staggering $8.5 billion in cost. But Silver Wheaton will continue to reap 25% of the
project's silver output, a fixed ratio for its fixed amount invested. Other firms face cost
increases, and as they do, they sacrifice a portion of the mine output to the finance
agents that assist in furthering the projects to completion.
As the costs rise, the standard finance deals will turn challenging for other firms. It
weakens commercial loan avenues to the banks. It forces sacrifice of significant slices in
mine output to venture capitalist parners. It inhibits share investors when big outlays
are financed through secondary stock offerings. Silver Wheaton is the beneficiary of
these harmful effects on the run-of-the-mill mining firms and their stock investors. Thus
12
the rationale for Jackass disdain of mining stocks. SLW is not a mining stock. Demand
for project financing is very strong, and the SLW approach is very advantageous, well
structured. Still, look for partners to attempt to shorten the horizon on the SLW longterm deals. The underlying push for SLW remains the rising Silver price. See the Motley
Fool article by Christopher Barker (CLICK HERE).
CEO Randy Smallwood recently stated, "With currently more than $1 billion in capacity,
even after completing our first payment to Hudbay, we have one of the strongest balance sheets
in the industry and are very well-positioned to achieve our goals. While we believe there is a
place for streaming in any market given its unique benefits and flexible nature, we
think the value of this form of funding is particularly strong in this current market,
where access to traditional forms of financing such as debt and equity remains very
challenging. Essentially, we look for long-life low-cost operations with strong management
teams that can survive all phases of the commodity price cycle. We also look for assets that have
exploration or expansion upside as this is key to increasing a stream's value."
◄$$$ A GERMAN LAWSUIT AGAINST BARRICK HAS COME FORWARD. VERY
LITTLE DETAIL IS AVAILABLE. IT IS WORTH BRIEF MENTION. IF BARRICK
LOSES, THEN THEIR MAIN REVENUE STREAM IN AFRICA WILL BE FORFEITED.
$$$
Apparently, the large African mining rights and claims by Barrick are being challenged
in German courts, involving Duboise. A local German industrialist holds the mining
rights that Barrick claims are theirs. Some of the most important Barrick licenses have
expired in Africa. The plaintiff Duboise has re-registered them in his name. It is a very
complicated and complex case. The chance that Barrick will be denied many such
lucrative African claims is high, with the giant pulling the short end of the stick.
Time will tell from the litigation outcome. If Barrick loses the case, the firm stands to
lose its most important asset to produce Gold in the world in Africa. Few realize that
the scummy firm must repay DeutscheBank for a multi $billion Gold forward contract.
The firm Barrick is tied with the most nefarious and corrupt banker firms on its
executive boards, and has served as a key tool in the gold suppression projects over two
decades. We do not wish them good fortune in the court case. Their executive history
has been dominated by bankers, not mining engineers. Their specialty has been forward
sales of gold, coordinated with big banks and the central banks of the US, the UK, and
Canada. If Barrick loses its principal income stream, it would be cause for celebration.
The output would continue, but under a different (more honest) name and roof.
◄$$$ TURKEY AND THE U.A.E ARE SWAPPING GOLD FOR GAS. IT LOOKS LIKE
TURKEY AND THE U.A.E. ARE "FENCES" OR BROKERS FOR OTHER COUNTRIES.
THE IRAN WORKAROUND WILL LATER FORMALIZE INTO A GREATER
PLATFORM FOR TRADE. CERTAIN TRADE ROUTES ARE BEING TESTED,
OUTSIDE THE SHADOW OF ANGLO CONTROLS. $$$
13
Turkey has confirmed that Gold exports are linked to purchase of Iranian natural gas.
The outcast nation of Iran is not without friends. Iran has been purchasing between $1.5
and $2.0 billion in gold bullion per month in order to satisfy trade payments. To Turkey
has gone the ample supply of Iranian natgas. The Ankara officials in Turkey are not
interested in complying with meddlesome and diversionary games orchestrated by
the US, the UK, and its tail ally. Bear in mind that Turkey has almost stood alone in
objecting to Gaza violence, sending medical supplies to the zone. To be sure, Iran is
using creative ways to sidestep Western sanctions over its disputed nuclear program,
since being frozen out of the global banking system. The United Arab Emirates has been
another key player in receiving Turkish gold, clearly as a weigh station onto Iran
destination. The volumes surged following the March, when sanctions were put in
place. See the Wall Street Journal article (CLICK HERE).
Some lazy analysts might make nothing of the Iran and UAE connections with Turkey.
They would be very wrong. The Jackass believes we are starting to see the first face,
even a test run of the trade settlement system coming, which will have a gold core.
Gold is being circulated as payment, after being acquired for a banking trade function.
When posed with this hypothesis, my gold source The Voice replied, "Your
observations about trade settlement system being tested are intriguing and make a lot
of sense." For him, the words are laced with under-statement. He is confirming with a
slam of his quiet fist on the table. He is part of the design team for portions of the
complex alternative trade settlement system itself. It will have a Gold Core on shortterm notes, to manage Letters of Credit. He cannot speak freely, but the Jackass can
interpret reliably.
14
The Voice is not known for calm tranquil comments. So regard his comments as a
strong hint that Turkey is playing a vital role as test case in Gold payments. More
common are his descriptions of razor wire up banker rectums, smart clients or
colleagues with brains like bacon slicers, the derivative machinery being sabotaged by
big Eastern shoes without potential for recovery, or central bankers shoveling their own
feces before their steps, or rock & roll bands vanishing from view as the entire stage
collapses during a concert (like the USDollar monetary system). For a man with English
as his second language, his command of imagery is both excellent and entertaining. He
is trilingual, with full fluent command of another major language useful in German
trade dealings, using a different alphabet. My admiration for bilinguals is utmost. The
Jackass has the makings of trilingual, but the French never developed from school days
into conversational. The Spanish is a work in progress, with recognition of it spoken the
biggest challenge. Just airport and reading skill on the French. C'est dommage! Pas de
quoi!
## GOLD PRICE SOON TO SHED HARNESS
◄$$$ THE STAGE IS SET FOR ARBITRAGE OF THE HIGHER SHANGHAI GOLD
PRICE. A SNAPSHOT OF DECEMBER 7TH REVEALS THE DIFFERENTIAL. THE
POTENTIAL FOR ARBITRAGE EXISTS, WHICH COULD CONCEIVABLY WRECK
THE C.O.M.E.X. BY DRAINING IT. THE SUPPLY COULD GO TO SHANGHAI FOR
SALE. OF COURSE, THE NEW YORK GANG COULD REFUSE TO MAKE DELIVERY,
OR STEAL MORE CLIENT ACCOUNTS LIKE WITH MF-GLOBAL. THE PRICE
SPREAD WILL EVENTUALLY BECOME A TOPIC FOR COMPLIANCE AND RISK
DEPARTMENTS TO ADDRESS, AS THE MARKET WILL BE COMPELLED TO
EXPLAIN THE DISCREPANCY FROM A CORRUPT MARKET IN THE UNITED
STATES. $$$
Thanks to the London Siren for reporting on the price differentials between the COMEX
and Shanghai Gold price, which are not minor. A price arbitrage of $20 to $25 is plenty
to capture and to exploit. Consider a snapshot taken on December 7th. The Shanghai
Gold contract closed at 1728. At no point did the Gold price on the COMEX/Globex
trade at that level overnight, no touch. Alert parties with a global footprint will start
arbitraging this differential, since they can. They could sell gold in Shanghai, but buy
gold on COMEX. Anyone doing that would essentially be going against the cartel with
threat to bust the COMEX. The roadmap is there, which can be implemented for quick
exploit. Some logistics could interrupt the process. If supply is taken in New York, the
gold bars must be shipped to Shanghai for sale and delivery. That might cost must be
managed in arbitrage, if indeed delivery is permitted and taken. The New York side
might refuse to deliver if they see what is being done. They also might attempt to
engineer a more targeted account theft if they could isolate the party conducting sales in
Shanghai. It will be interesting to observe if the price differential expands.
15
Update with another snapshot taken on December 13th. The COMEX Gold futures
contract was trading at 1691 at one point when the London Siren checked the price. The
Shanghai Gold price closed at 1715. At no point did gold trade anywhere close to 1715
on COMEX overnight, no touch. The differential was $24 at that snapshot, equal to a
tiny 1.4% spread. Note also, the COMEX Silver futures contract was priced on
December 13th at 32.65, while at the India MCX it was 35.46, a very wide differential of
2.81 per ounce, equal to a ripe 8.6% spread. The COMEX Platinum also offers arbitrage
potential, since the COMEX Platinum futures price was 1616, but in Shanghai at 1690.
The dislocation between COMEX prices and Shanghai/India prices continues to grow,
equal to a 4.6% spread. Execution of the arb trade is possible, just must be managed
with certain challenges.
The London Siren made some conclusions. He wrote, "Some points are important to
understand in sequence. 1) The Gold arbitrage is a tool that China can now use against JPM,
GSax, USFed, USGovt, USTBonds anytime they want to cause a systemic failure. 2) They do
not have to sell USTBonds as most people believe, since they now have an alternative weapon of
mass financial destruction in the arbitrage. 3) China is now the price setter for gold. They would
not start trading gold in Shanghai unless very confident about its success. 4) This is another step
in making the Chinese Yuan a reserve currency, toward enabling its free convertiblity into Gold
in size."
Thorny issues must be addressed eventually, which strike at the heart of the corruption
behind the COMEX. Compliance and Risk Departments must determine which is the
16
true market price, and at what price client positions are marked to market for equity
determination and margin calls decisions. The logistics would not be any formidable
challenge to a wealthy well-equipped merchant player in execution of arbitrage trades
to exploit the price spread. A $25/oz spread translates to a $80.4k arbitrage potential
gain per kilogram. A private jet could be secured to manage the transported bullion
bars, loaded with several hundred kilograms. The key is actual delivery taken in the
devil's den of New York. Sophisticated traders with big accounts and big vault space
and assistant mules in both locations could conduct the arbitrage trades. However,
unless physical bars move, the trades remain trapped within the paper world on the
two sides, separated by a wall (two distinct markets) and ocean. Contracts are not
interchangeable. Other risks would be from robbery by employed JPMorgan thugs or
hired Blackrock thugs or dedicated FBI thugs working under the USGovt badges. If
believed far-fetched, then naive to the core. The level of financial crime and protection
by USGovt law enforcement and security agencies is astonishing, backed up by the US
courts. The FBI protected Goldman Sachs when their UNIX box for snagging order flow
data was stolen by the Russian employee. They painted the Russian as a theif and
protected the venerable GSax putrid house.
◄$$$ CENTRAL BANK GOLD HOLDINGS ARE ON THE RISE, DUE TO EASTERN
BUYERS AND MUCH SMALLER WESTERN OFFICIAL SALES. $$$
Central banks have begun to shun the sovereign bonds since 2009. They sense the death
of the USDollar as well as the Euro. The profound distress in Euro Govt Bonds from the
Southern nations accentuates the distress. However, on the US side the ultra-low yields
on the USTreasury Bonds also highlights distress of a different kind. The USTBonds are
supported by interest rate derivatives with $trillions leveraged behind them, to prevent
a collapse of the US bond market due to chronic $1.3 to $1.5 trillion in deficits and
almost non-existent foreign demand. The Asians generally observe the Western
breakdown, and the extraordinary mechanisms to support the broken Govt Bond
markets. So Eastern central banks are buyers of Gold bullion to rack up their reserves
for the storm and the unspeakable liquidity surges from monetary growth Weimar
style. They also are better aware of the Chinese-led movement to establish an
alternative trade settlement system outside the USDollar, in an Asian defiant initiative.
17
As of year 2012 through the third quarter, the net increases in central bank holdings
were 268 metric tons (8616 million oz), led primarily by emerging market central banks.
The official sector has now been a net buyer of gold each year since 2009. The corrupted
central banks in the developed (as in development of corruption and paper shill games)
have sold much smaller quantities of gold than a decade ago from official sales. Bear in
mind that probably at least half of the official gold claimed in Western inventory is
gone, sold through secretive leasing over two full decades. The important part of the
chart is the change in direction for gold holdings (bars), not the amount.
◄$$$ GOLDMAN SACHS HAS CALLED THE END OF THE GREAT GOLD BULL
MARKET. THEY SERVE AS A SOLID CONTRARY INDICATOR WITH OBVIOUS
INTERNAL BIAS. YET ANOTHER SECOND HALF RECOVERY FORECAST HAS
BEEN ISSUED (IMPRESSIVE DESPERATION), ALL OF WHICH HAVE PROVED TO
BE BASELESS CALLS JUST FAR ENOUGH AWAY TO BE OUT OF TOUCH. THE
ENTIRE GOLDMAN CALL COMES AFTER THE PERMANENT Q.E. TO INFINITY
MONETARY POLICY WAS CEMENTED FIRM AND FIXED. MORE GSAX
DISHONESTY TO FLEECE ITS CLIENTS AND DUPE THE PUBLIC. $$$
Goldman Sachs is a bastion of dishonesty, deceit, and treachery. Their Vice Presidents
make the grade only after proving a financial fraud on their resumes (a fact!). Their
deeply entrenched corruption assures them of control of the USGovt Treasury offices,
whose gold bullion they stole under the Robert Rubin watch during the Clinton Admin.
These are crime syndicates at work. In early December once more, Goldman Sachs
issued a pair of ludicrous forecasts, one on the economic resuscitation, the other on
the top for the Gold market. Both are as baseless as they are self-serving. Not two
18
weeks passed since USFed Chairman Bernanke announced reassurance of continued
ZIRP (0% free money) and QE (bond monetization) to prevail through 2015. They wish
to assure the USTBond carry trade players on Wall Street not to quit. They admit the
USGovt finances cannot withstand a rate hike to normalcy. They will never succumb to
revealing their vast interest rate derivative machinery that supports the broken
USTBond market. In no honest world would the gargantuan USGovt annual deficits
over $1.3 trillion be financed at near 0% for four consecutive years with their traditional
buyers making big retreats.
So enter Jon Hatzius, the well-spoken clownish German whiz kid residing on Wall
Street and London, lavish condos in both locations. He made a supposed important
forecast at the turn of December. He expects the sub-par post-crisis growth for the
USEconomy to come to an end in the second half of 2013. Once more, the corrupt band
of bond fraud kings rely upon the hackneyed Second Half Recovery. Wow! impressive!
Hatzius has reverted to a hack role to shove the overused placard on stage. We have
not seen it trotted out since 2008. It was trotted out in intellectual corrupt fashion in
2006, in 2007, in 2008, but replaced in 2009 by an even more corrupt Exit Strategy
malarchy. All the nonsense has been correctly dismissed by the Jackass in real-time.
Capital investment is on the decline, as in the National Diffusion, as are the payroll tax
receipts, as is the railway shipment indicator, as is the FedEx indicator.
Dismiss the Hatzius call as rubbish. In several years, the Jackass has observed Hatzius
as being rather competent and not a tool to be used on stage. This is a surprising vapid
useless forecast. If valid, then the USFed would not have been forced to conduct a
QE3 bond program or to assure the ZIRP (0% policy) for another three years. Shame
on Hatzius! Neither would be necessary, since a wondrous recovery was taking root.
Rubbish! If Hatzius had any great ability as an economist, he would realize that the
combination of ZIRP & QE in indefinite duration and unlimited dosage means that
capital within the USEconomy is under tremendous pressure from cost increase and
profit squeeze. If Hatzius had any great ability as an economist, he would realize that
the ObamaCare nightmare will conspire with the food price hikes to take free cash
directly out of small businesses and to take disposable income directly out of the
discretionary spending equation. If Hatzius had any great ability as an economist, he
would realize that the presence of China has removed the traction gear and any
capability of the USEconomy to respond to ultra-low interest rates. The United States is
mired in a death spiral, while the USFed monetary policy is a death sentence.
So Goldman Sachs expects another mysterious mythical but convenient second half
recovery to arrive. The Jackass point has always been that to announce a second half
recovery seven months in advance is far enough in the future to disregard later when
memories fade. It is far enough in the future to claim that other extraneous events
interfered with a true opportunity to recover, the blame usually on commodity markets
generally or the nasty Arabs for high energy costs or the ambitious Chinese for wishing
19
to topple the Western kings of finance. The Second Half Recovery call is akin to a rescue
by the Easter Bunny next year, riding on a White Horse.
Goldman Sachs followed their inept or insincere economic rebound call with an
equally corrupted baseless call for a top in the Gold Market. Imagine, the USFed
announced ZIRP forever and QE to Infinity, yet the Gold market will remain calm
and tranquil in the midst of free money, endless bond buying with electronic bits,
and a debasement of the USDollar to go down in history to rival the Weimar episode.
Trillions of scattered USDollar confetti will undermine the USDollar, prompt an
economic recovery, but force a stall in the Gold price. How laughable! How desperate!
Call me competent and no team player, but methinks the Gold price will rocket higher
in future months when the Tag Team of Diabolical Bankers glues their Weimar Foot on
the monetary pedal, and loses their chokehold on the Gold Market from rising global
awareness. The putrid brain trust at Goldman Sachs actually claimed that in the
medium term, the gold outlook is caught between the opposing forces of more Fed
easing and a gradual increase in US real rates on better US economic growth. Expect
no USFed rate hikes, period!
The sophisticated expanded modeling at the House of Goldman suggests that the
improving US growth outlook will outweigh further USFed balance sheet expansion
and that the cycle in gold prices will likely turn down in 2013. Excuse me, but they have
trotted out the other marquee bullcookie placard of an Exit Strategy. The central bank
is stuck at 0% official rate forever, and unlimited bond purchases forever. Let me
repeat, FOREVER. Four full years of extreme accommodation without a hint of healed
financial structures, and promises through year 2015, together translate to FOREVER in
our world. Well, at least until the USGovt debt default, or a systemic seizure in the US
banking system, or else basic supply chain disruptions from inadequate capital
structure critical mass. They call upon risks to their growth outlook given the
uncertainty around the fiscal cliff. The GSax forecast analysis is not worth a six-pack of
double-plied toilet paper, or a small carton of candy bars.
The Gold Bull market is powered by negative real rates, by debasement of the
USDollar, by toxic sovereign bonds, by banking system insolvency, and by general
hyper monetary inflation. All such factors are stuck immutably forever and a day. The
only factor holding down the Gold price is the corrupt naked shorting of giant slices of
global gold output in the futures market. The big US banks are immune from
prosecution on unlimited naked shorting, the sale of metal in contract terms without
benefit of any metal supply. The entire financial system is at extreme risk of breakdown
and collapse. It might not happen in an isolated manner, but rather in a complete
manner. The Western bank wizards and maestros operate on borrowed time, late in the
game, the hourglass of sand having descended totally.
20
◄$$$ MORGAN STANLEY HAS GONE IN OPPOSITION TO THE GOLDMAN
SACHS GOLD TOP CALL. THEY POINT TO THE EXTRAORDINARY USFED
MONETARY POLICY OF ENDLESS Q.E. BOND PURCHASES. MORGAN STANLEY
EVEN SUGGESTS THAT QE4 IS SOON TO BE ANNOUNCED. THEY ACTUALLY
MENTIONED NEGATIVE REAL RATES AS SUPPORTING THE GOLD PRICE. WHAT
A COMPETENT VIEWPOINT! $$$
Just one day after the shameless scoundrels at Goldman Sachs suggested their clients
should sell their gold during this so-called Gold top in the cycle, Morgan Stanley
announced a stern disagreement. The other Wall Street firm with more of a
commodity specialty in-house heralds Gold as its preferred fundamental metal
exposure for 2013. They expect Silver to outperform also. They reiterated how the
fundamental thesis for owning Gold is firm and fixed, linked to the adoption of QE3
and possibly a QE4. They pointed out a coordinated movement among key central
banks to debase the major global currencies. The Morgan Stanley mavens (competent
surprisingly) added that low nominal and negative real interest rates, ongoing
geopolitical risk in the Middle East, and continued mine supply issues are also
supportive.
Morgan Stanley amazingly seems to be buying what GSax is selling. Interesting, their
opposing views in the battle of bulge bracket is entertaining. GSax wishes to buy what
their clients are selling, as they cull the stupid clients out of existence, a predatory
maneuver. GSax might be migrating from USTBonds to Gold. See the Zero Hedge
article (CLICK HERE). The contrast is incredible. Goldman Sachs calls the Gold market
at a top, based on a mythical USEconomic recovery in 2H2013. Morgan Stanley calls
Gold their favorite metal for 2013, based on QE3/QE4 and negative real rates, the
constant main cylinder on the Gold Locomotive.
◄$$$ THE S.L.V. EXCHANGE TRADED FUND FUND WAS DRAINED OF 2.0
MILLION OZ SILVER ON NOVEMBER 23RD, AS THE GRAND DEPLETION
ACCELERATES. THE BANK CARTEL IS RUNNING OUT OF MAIN CHANNELS OF
SUPPLY. THEY TURN TO A VISIBLE SUPPLY WITH RISK OF DETECTION. $$$
To be clear, the Jackass contends that the SLV exchange traded fund is being actively
gutted of inventory by the big US banks. The investors are true sheep, clueless to the
end, almost deserving at this point in the Great Gold Game to be bagholders. To be fair,
some use the SLV as a trading tool for price movement effectively. Still too many
investors believe they own silver metal, when they own dazzling paper certificates with
ornate print, impressive embossing, nifty etchings, and worthless seal. The irrepressible
Turd Ferguson tracks the SLV inventory like a hawk. He noticed on November 23rd,
the SLV fund lost 1.984 million oz of silver on that single day. In one week the SLV
fund lost over 7.648 million oz in metal held in inventory. Curiously, the Silver price
rose $1.62 from $32.50 to $34.11 during that week. In the same time span, the Sprott
21
premiums collapsed, PSLV at 0.77% and PHYS at 1.17% respectively. Ferguson
speculates that some big player like a bullion bank sold their shares to a different party
who wanted physical or to a distinctly different ETFund that holds physical metal in
inventory. Ferguson wondered aloud as to motive, like an issue with the Fiscal Cliff that
is not widely known, or Germany demanding that Greece retrieve Gold held in New
York or London, or a downgrade for either USGovt debt or UKGovt debt been decided.
◄$$$ SPROTT CLAIMS SHORTS MAY NEED TO DELIVER 40 MILLION OUNCES OF
SILVER. NOTE THE SILVER LEASE RATE DATA HAS STOPPED BEING REPORTED,
MORE DARKNESS FOR THE CRIMINAL SYNDICATE. CONCLUDE GREAT STRESS
BEHIND THE SILVER MARKET. $$$
Precious metals prince Eric Sprott spoke with King World News about key players on
the COMEX that stand for delivery of up to a staggering 40 million ounces of silver.
Sprott diligently follows the Silver market for clues of the corrupt stranglehold
loosening. He is on record stating that if large Sprott Fund orders are not met, he will go
public and disclose as much of the details as possible concerning the corruption. Note
well that the Silver lease rate reporting has been eliminated. Interpret the imposed
darkness as a signal that great stress lies behind the curtain from view. Sprott expects
additional pressure to come from China, whose citizens are lining up to buy more gold
coins. As a nation, they distrust the West and their kooky paper money. They distrust
the Chinese kooky paper money too. Sprott expects constant strong pressures on the
Silver market from delivery demands, each month. The December contract has a small
legion of investors having filed under Notice for Delivery, like almost 40 million ounces
silver. He expects a COMEX failure sooner or later, nothing specific, since nobody
knows. He said we have the makings of such a failure at any time. See the News Doors
article (CLICK HERE).
Financial expert and industry icon Eric Sprott claims the physical gold in Western
central banks is likely gone, due to selling it into the market with motive to keep gold
prices low and to continue the illusion of stability. Sprott is always worth watching and
listening to, a man with strong integrity, deep commitment to the Gold movement, with
solid awareness of many inner workings to the currency and metal world. Every several
months, he is tasked with sourcing gold and silver metal for the Sprott Trust Funds for
the precious metals. The challenge is always revealing. See the USA Watchdog
interview (CLICK HERE).
## METALS WAR HEATS UP
◄$$$ CHINESE IMPORT OF GOLD VIA HONG KONG CONTINUES. DESPITE A
SLOWER PACE, THE FLOW PERSISTS UNABATED, STILL GIGANTIC. WITH GOLD
SHIFTS THE BALANCE OF GEOPOLITICAL POWER. $$$
22
China's October Gold imports from Hong Kong were 47,478 kilograms, disclosed on the
HKGovt website. The imports continue to decline but from an enormously high level a
year ago. It is difficult to call 47.5 metric tons a paltry or disappointing sum for a single
month. Gold imports to China from Hong Kong dropped 32% in October from a month
earlier. The slower economy inside China resulted in less demand. The total imports
including scrap and coins compared with 69,712 kilograms in September. Versus a year
ago, the reduced demand is more evident. Shipments were 45% less than the 86.3 metric
tons one year earlier. Put the gold import into better aggregate perspective. However,
shipments more than doubled to 629.3 metric tons in the first 10 months from 290.0
metric tons one year ago. Official data comes from the Census & Statistics Department
of the Hong Kong Govt. Despite all the hubbub in the economist drivel, the Chinese
Economy is set to expand 7.7% this year, although the weakest pace since 1999. The
import phenomenon is new and rocketing higher, which complements the domestic
Gold output, none of which goes to export.
◄$$$ HUGE SILVER ORDERS HAVE BEEN RECORDED, AS LONDON SEEKS
SUPPLY. ON DECEMBER 6TH, FOLLOWING AN AMBUSH DURING THE WEEK,
GOLD & SILVER REGAINED THE $1700 AND $33 PRICE LEVELS ON A SINGLE 10TON PHYSICAL GOLD ORDER. WITNESS EXTREME INVENTORY SHORTAGE IN
LONDON, BY VIRTURE OF AN UNUSUAL OTHER ORDER BY A UK-BASED
HEDGE FUND. $$$
The date of December 6th will be marked as a reverse Pearl Harbor Day. After the
standard COMEX open waterfalls replete with naked shorting on gigantic volumes,
which took the Gold price as low as $1684 and the Silver price under $32.50, both metals
23
made a vertical move to the upside around 10am EST. Gold quickly cleared $1700 in
trading, if a corrupt market can be called trading, while Silver quickly cleared $33, both
measures per ounce. The impetus for the move, according to internal observers,
appeared to be a massive physical gold buy order in the range of 10 metric tons. The
Silver Doctor also experienced a unique event, a very large order that was hardly
typical. The SDBullion outfit was approached by a UK hedge fund manger seeking
the acquisition of 20 metric tons of gold in good delivery bar form. That means bars
physically tested for purity above 0.9995 within the past five years. The event must be
digested slowly and deliberately. For a London fund manager to resort to contacting US
retail bullion dealers in attempt to fill a 20-ton gold order speaks volumes. Clearly, the
lack of available physical gold for delivery in London can be concluded, verifying the
extreme tightness in the physical market. Perhaps a test of the Silver Doc capability. See
the Silver Doctor article (CLICK HERE). In the Jackass opinion, the Silver price will
zoom north as an indicator of extreme duress in the precious metals market. The
inventory is fast vanishing amidst a controlled artificially low price.
◄$$$ INDIAN HOUSEHOLDS HAVE AMASSED A STAGGERING AMOUNT OF
GOLD IN SAVINGS, GREATER THAN THE MAJOR CENTRAL BANKS COMBINED.
THE NATION DISTRUSTS PAPER WEALTH, AN ARTIFACT OF THE BRITISH
COLONIAL ERA. EFFORTS TO HALT IMPORTS AND RENDER HARM TO THE
RUPEE EXCHANGE RATE HAVE NOT SUCCEEDED. THE INDIAN CITIZENS
EXHIBIT DEEP WISDOM AS TO WHAT CONSISTS OF WEALTH. $$$
Indian households have accumulated as much as 20,000 tonnes of gold, whose value
exceeds US$1.16 trillion, an historic high. Conclude easily that the Indian Govt efforts to
curtail overseas purchases of the shiftless asset (dead asset that earns no yield) have
failed badly. This so-called dead asset is the world's best, most secure, and strongest to
withstand the assault on paper wealth. The officials in New Delhi wish to halt the fall
in the Rupee currency that such imports have caused. Their gradual escalation of
imposed import duty was designed to reduce the Current Account deficit, but they
have not yielded the desired results. The Indian citizens stubbornly continue to hoard
wealth in gold. See the Financial Express article (CLICK HERE).
The Indian citizens well understand the paper money game. Over decades, their
government has attempet to institute various schemes to induce them to turn in Gold
for whatever scam program conjured up, but the wise citizens have refused, unlike their
supposedly more educated American (dupe) citizenry counterparts. The rest of the
world is slowly learning as the currency of last resort will become the currency of first
resort in a new global banking system. Even the central banks are back buying Gold for
reserves, as they face insolvency and annihilation. The love of paper wealth and
decades of extreme reckless consumer stupidity will earn the US citizens a residence in
the Third World. The Indian citizens understand wealth, which is not founded on paper
securities or government promises or banker contracts. India might have enormous
24
population problems, profound sewage problems, and deep challenges with poverty,
but they are a century more advanced than Americans in perception of true wealth.
◄$$$ A FORCE MAJEURE WAS DECLARED AT THE C.M.E. MANHATTAN GOLD
DEPOSITORY, AS THE DEFAULT OF PRECIOUS METALS MARKET APPROACHES.
THE DECEMBER GOLD DELIVERY IS IN JEOPARDY. THE EVENT OCCURRED IN
LATE NOVEMBER WITH LITTLE PRESS COVERAGE. ANOTHER MF-GLOBAL
THEFT MIGHT BE REQUIRED TO PREVENT A GOLD MARKET DEFAULT. THE
UPCOMING GOLD MARKET DEFAULT WILL OCCUR, WITH MUCH CONFUSION
AND DECEPTION, LIKELY FROM A VACATED C.O.M.E.X. INVENTORY AND
HALTS TO PERMITTED DELIVERY. $$$
The scummy officials at the CME blamed the force majeure on Hurricane Sandy, a bold
but produced fiction. On Monday November 26th, history was made. Rather than an
outright default, the market directors declared a natural event as cause for lack of
inventory to meet contractual demands. Regard the hurricane as providing a designed
alibi of another kind. The shortage of gold is acute, and pushing to the surface in visible
manner. Blame is put on the hurricane, an absurd claim. They will require a hurricane
or natural disaster every month, maybe another MF-Global theft.
The CME declared a force majeure at the PAMP gold depository at Manfra, Tordella,
and Brookes Inc. They stated the depository will not be able to deliver physical gold
due to operational limitations from Hurricane Sandy, in their words. Curiously, the
same natural event did not cause any limitations to the HSBC and JPM gold
depositories. Some experts to the situation made a further comment. Those holding
MTB warrants will be able to receive gold from Brinks. The inconvenience and extra
cost associated with arranging delivery from Brinks however will likely dissuade many
from standing for December delivery, which is probably the true motive for the
announcement. Expect Brinks to announce challenges in working through the backlog
or orders.
Manfra has served as the PAMP supplier in the United States. The explained shortage
due to the hurricane is very thin, seen widely as a stupid excuse. Note that it was the
PAMP Swiss bars from MTB that were recently found counterfeited in Manhattan. The
executives at the MTB reported the counterfeits to the US Secret Service. Bigtime heat
has started to be felt in the Lower Manhattan kitchen. See the Silver Doctor article
(CLICK HERE) and the Silver Vigilante article (CLICK HERE) and the Fox Business
New article (CLICK HERE). Precedent has been made, and coverage of this bogus story
has been widespread. The future gold market default will occur, but not without severe
cloud cover and deep deceptions. Be on the lookout for another MF-Global type event,
with stolen private accounts awaiting gold delivery. The motive is there, the precedent
set, the need acute.
25
◄$$$ GREAT FUN RANT BY BILL HOLTER, WHO DISPUTED THE FORCE
MAJEURE CLAIM BY THE C.M.E. GROUP METALS SUPPLIER. THEIR INVENTORY
COULD FIT NEATLY INSIDE A REGULAR SIZED CLOSET. NEITHER THE THREE
STOOGES WERE CALLED IN TO RETRIEVE THE SUBMERGED GOLD BARS, NOR
SCUBA DIVERS. $$$
The colorful and on-target Bill Holter took some shots at the corruption behind the
CME Group for their force majeure. Only the CME has suffered from the effects of the
Hurricane Sandy and its high storm waters. Holter informs that their 29,000 ounces of
Gold and 33,000 ounces of Palladium vaulted would fit in a large walk-in closet, or the
corner of a trailer home. This is one ton of each metal, easily stacked in a laundry room
closet. With sophisticated financial artistry, they do not deploy a sump pump, standard
issue in the western suburbs of Boston, where the Jackass personally installed two in
home basements, complete with cement housing. Holter wonders why professional
scuba divers were not dispatched to begin reclamation of waterlogged gold bars. The
Three Stooges could handle the job in an eight hour day, even if they crashed the
forklifts.
Meanwhile, on the same day of the force majeure announcement, nearly 7800 COMEX
Gold contracts were sold in less than five minutes. The amount comes to 780,000
ounces, equal to 1% of the entire annual global production of the mining industry. The
typical signature waterfall contract sales repeat after the price falls step by step, to
ensure the lowest possible price locked in successively. This is only done with corrupt
moves marred by absent supply, namely naked shorting. Holter concluded by saying
that anybody who trades on the COMEX does so against the house, against the
corruption, against those who can change the rules. Anybody who trades on the
COMEX should have their heads examined.
◄$$$ WHOLESALE GOLD INVENTORIES ARE EVAPORATING. SOME DEALERS
WILL PAY OVER SPOT PRICE TO OBTAIN SUPPLY. THE SHORTAGE IS BROAD,
WHICH IS OFTEN BLAMED ON GIGANTIC CHINESE CENTRAL BANK ORDERS
THAT HAVE DRAINED THE MARKET INVENTORY IN SEPTEMBER AND
OCTOBER. THE MIGRATION FROM THE CORRUPT G.L.D. FUND TO PRIVATE
PENSION FUNDS IS ON THE RISE. $$$
Host John Rubino of the Dollar Collapse website interviewed Tom Cloud, the gold
dealer from National Numismatic Associates. They covered the sudden decline in gold
inventories. The major gold wholesalers have not lately seen their usual level of
inventory. The following are opinions and personal accounts from Cloud. Of the seven
or eight major wholesalers that distribute price sheets, almost every one is having
supply issues. Some coins and bars are immediately available, but most take between a
few days and two weeks to deliver, due to tight supply. Many dealers will pay above
spot for Gold Eagles and other major coins and bars.
26
A direct cause is difficult to assess, but some dealers believe that the 58 tons that the
Chinese central bank purchased in September was responsible for coin shortages in
the United States. Let it be known that the same central bank purchased at least that
much volume in October. The shortages will persist, perhaps worsen. Cloud mentioned
that if a big seller wishes to conduct a transaction, the seller first contacts Chinese
authorities, the new normal. Sales of gold bars to central banks is a new phenomenon,
and Natl Numismatic Assoc just completed its first sale to such a central bank. Other
central banks are buying gold also. Until 2011, central banks were selling gold.
However, in the last two years hardly any central banks are selling and many are
buying. The effect of new Basel III rules has become an important factor. The dictatorial
fortress in Basel Switzerland handed down an edict which counts gold for its market
value rather than 50% of the amount. So big banks buy Gold to fend off their own death
events.
Another factor is the wave of American small buyers is beginning to make an impact.
Despite the wholesaler, the overall effect is tighter gold inventories. The process is slow
as the US public awakens to destroyed sovereign bonds, insolvent fraud-ridden banks,
and fraudulent securities. Therefore fraudulent money. The movement out of the GLD
exchange traded fund has become a mild torrent. The corrupt GLD fund continues to
sell at a discount. Its toxic subservient structure is a story for the history books, allowing
for major banks to short the stock and receive metal delivery on demand. The GLD
fund thus serves as a bullion banker backstop of the most obscene variety. More and
more US citizens are setting up self-directed IRAs that can hold bullion directly. Some
honest funds will permit delivery of gold bars, provided the proper tax forms are
completed. Any new USGovt law forcing conversion of such private pension funds will
undermine the movement totally. See the Dollar Collapse article (CLICK HERE).
## COIN DEMAND GOES BALLISTIC
◄$$$ US-BASED COIN SALES ARE ROBUST, VERY ROBUST. NEARLY THREE
QUARTER MILLION SILVER EAGLES AND 20,000 GOLD EAGLES WERE SOLD IN
THE FIRST THREE BUSINESS DAYS OF DECEMBER. INVESTORS REACT TO THE
FISCAL CLIFF MORASS, NEAR ZERO PERCENT BANK CERTIFICATES, ULTRALOW SOVEREIGN BOND YIELDS, A COSTLY SECOND TERM FOR OBAMA, AND
THE NEVERENDING CENTRAL BANK MONETARY EXCESS. $$$
In early December, the USMint updated its sales totals. Both gold and silver sales are
extremely strong, with 728,000 silver eagles, and 19,500 oz of gold eagles sold through
the first three business days of December. This compares to 2.009 million silver eagles,
and 65,500 gold eagles sold for the entire month of December 2011. This month will be a
very big month if the pace continues. The drain on scarce precious metal inventory
supply is enormous, precisely when the banks have difficulty maintaining their
balancing act with account thefts, naked futures contract shorting, raids of GLD & SLV
27
inventory, and brisk shipments overnight to avoid a metal default. See the Silver Doctor
article (CLICK HERE). Given the extreme situation, expect the pace to continue or even
ramp up further. The USGovt faces a debt limit and mandatory spending cuts, maybe
another debt downgrade. The Obama II Admin shows no signs of fiscal aptitude or
political skill, only personality flair. The USFed is stuck in QE to Infinity, the central
bank a den of heretics. The big banks are broken and desperately playing shell games in
the gold market, fending off court challenges for massive mortgage contract fraud. The
people react with self-protection in a natural way.
Meanwhile, coin premiums are rising for months. Here is a spot check from Captain
Steve in the Midwest US. "The $20 Liberties (containing less than 1 oz) graded MS-62
previously sold for under spot (as reported on Kitco). Example: $1700 spot netted seller $1650.
Now $1700 spot the seller nets $1840, which is $140 over spot. Dealers want slabbed twenties
and will pay $140 over. Premium has been rising steadily past months." The amount of
premium reflects shortage.
◄$$$ HUGE US-MINT COIN SALES ARE REPORTED. AMERICAN EAGLE GOLD
COIN SET FOR BEST THREE MONTH PERIOD SINCE 2008, AND THE BEST
NOVEMBER SINCE 1998. SILVER COIN SALES MORE THAN DOUBLED YEAR-ONYEAR IN NOVEMBER. DEMAND WAS ATTRIBUTED TO THE USGOVT FISCAL
CRISIS, THE HEATED ELECTION, AND SEARCH FOR SAFE HAVENS. THE PUBLIC
SEES A CENTRAL BANK OUT OF CONTROL IN CURRENCY DEBASEMENT. $$$
November sales at the USMint were grand. The November sales figures are as follows:
136,500 ounces of Gold Eagles, 16,500 one-ounce 24K Gold Buffaloes, and 3,159,500
Silver Eagles. Because of the huge number of ounces of gold sold by the mint in
November, especially during this past week, the silver/gold sales ratio dropped all the
way down to just over 20:1. It has been under 10:1 and even under 5:1 for months. The
Sprott folks see a 1:1 ratio often. Thanks to Ed Steer of Casey Research for the data.
Since late November, a sizeable boost was seen in bullion coin buying by investors and
speculators alike. Reports of a huge influx of demand from new high net worth
individuals has come, people buying a lot of gold, taking physical possession. Such is
the claim of Blanchard, one of the largest US retail coin and bullion dealers. Investors
have bought more than triple the quantity of American Eagles produced by the
USMint, compared to November of 2011. The monthly sales marked the strongest
November since 1998, according to the USMint website. The combination of political
breakdown, economic stagnation, central bank inflation, and debt limits all contribute
to the desire by the public to hedge against both inflation and systemic disaster. See the
Reuters article (CLICK HERE). The USGovt is mandated by law to produce coins for
public purchase, a process they cannot legally halt. They can delay but not halt. Thus
the drain on scarce metal supply.
28
◄$$$ SUDDENLY THE US-MINT HAS SHUT DOWN ALL SILVER EAGLE COIN
PRODUCTION. CONSIDER IT A FORCE MAJEURE IN RESPONSE TO STAGGERING
DEMAND AND DEPLETED SUPPLY. $$$
The USMint has sold out of Silver Eagle bullion coins, supply to resume after January
7th next year. All authorized purchasers must contend with a three week shutdown
period. All such coins have sold out and no additional coins will be struck. As with
other bullion programs, the US Mint does not sell Silver Eagle bullion coins directly to
the public, but distributes them through a network of authorized purchasers. The
primary distributors purchase the coins in bulk quantities at spot price plus premium.
The coins are then resold to other bullion dealers, coin dealers, and the public. Since
November the demand has been screaming hot, with sales of American Gold and
Silver Eagles more than twice the figures from the year ago. Adjustment shifts to
production schedules did not prevent the total depletion in sellout of the coins. Sales
figures published on the USMint website indicate sales of 1,403,000 for 1-oz Silver Eagle
bullion coins for the month of December. Year to date sales have reached 33,510,500 in a
staggering display. See the Coin Update article (CLICK HERE). The Silver default is
coming broadly, before the more anticipated Gold default.
◄$$$ QUICK INVENTORY CHECK AT APMEX. IT IS LOW LOW LOW. $$$
For Gold, no 99.99% 1-kg bars, often called LBMA good bars. They have currently 23 in
stock for 99.9 1-kg bars (not LBMA good bars). They have currently 23 in stock for
99.99% 100-gm bars. In entirety, calculate the gold inventory held at APMEX to be less
than 30 kilograms across the board. At $56k/kg value, it comes to approximately $1.2
million in inventory. Not much. For Silver, they have a total of 334 in stock for 100-oz
bars. Of these, 142 are from Johnson Matthey. At $3500/100oz value, it comes to
approximately $1.17 million. Not much. Expect news stories about orders not met,
vacant inventory, all in time.
◄$$$ ALL US-BASED AND CANADA-BASED SMALL COINS WILL BE PHASED
OUT IN JANUARY 2013. THE 1-CENT AND 5-CENTS PIECES WILL GO AWAY,
SINCE INFLATION KILLED THEM. THEIR COST OF PRODUCTION IS MULTIPLES
HIGHER THAN THEIR VALUE, WHICH EXPOSES THE INFLATION. MERCHANTS
WILL ROUND TRANSACTIONS TO THE NEAREST 10 CENTS. $$$
In the United States and Canada, the smallest coins will go away in 2013, victims of
inflation. The cost of producing the coins is much higher than face value. The fast
conclusion is that money is fake and inflation is much worse than cited. Historically,
coins have revealed the fraud of money and the manifested central bank ruin of money
since the Roman Empire. The Canadian Govt will phase out their penny (1-cent piece).
In lockstep, the USGovt announced both the penny and nickel (5-cent piece) will be
phased out. Treasury Secretary Geithner announced that the USMint will remove the
29
penny and nickel coins from circulation, the process to begin in early January 2013. The
shocker is costs. Due to the rising costs of zinc and production related expenses, the
USMint spends 4.8 cents to make a penny. The cost of copper and nickel have
inflated the cost to create a nickel coin to 16.2 cents. The ratio comes to 3.24 over face.
They could not reduce the size of each coin by 5-fold without causing an uproar of
laughter and mockery. In 2011, the USMint made over 4.9 billion pennies. So at a cost of
$118 million, it produced what circulates as only $49 million in metal currency. Minting
the nickel coin also represents a significant loss in revenue. By comparison, the dime
(which costs 9.2 cents to mint) and the quarter (21.31 cents) are economically more
feasible, and will continue in circulation through 2013. These slugs contain trivial
amounts of silver. Wood might be more appropriate for nickels.
Once the phase out of pennies and nickels begins, merchants must adjust prices by
rounding all transactions to the nearest 10-cent increment. Credit card, debit card, and
check payments would also be subject to the rounding rule. The rounding procedure
will not result in higher costs for purchases or losses for merchants. All those who
saved numismatic coins before the great coin sham four decades ago will be richly
rewarded, including a Jackass family member. Pennies and nickels will be redeemed in
at financial institutions, sent to the USMint, where they will be recycled in a highly
profitable little project. See the Skew News article (CLICK HERE). My view is that the
phase-out is cost driven, not with motive to expose criminal hoards. That event comes
later in USDollar bill transitions.
An Aussie from Down Under pitched in a comment. "In Australia our smallest coin
denomination is five cents. We lost the one and two cent coins many years ago, and the economy
did not collapse. However, I do believe once coins or paper currency is removed, it will help
transition to greater control over the individuals wealth. When our currency changed from
pounds and shillings and pence in 1966, to receive the new currency, all hidden wealth was
exposed."
## MINING STOCKS DEPRESSED
◄$$$ MINING STOCKS HAVE FALLEN SEVERELY IN COMPARISON TO THE
PRECIOUS METALS PRICE BENCHMARK IN THE LAST YEAR. THE PAPER
PROBLEM IS GROWING WORSE. METAL (BARS & COINS) WILL FARE MUCH
BETTER THAN PAPER SECURITIES OF ANY KIND, WHETHER STOCKS OR BONDS
OR MORTGAGES. THE POOR PERFORMANCE OF MINING STOCKS IS GAINING
ATTENTION. $$$
The Jackass urged subscribers and investors to exit mining stocks in early 2008. In 2011
and 2012 the outcome is clear. The mining stocks continue to erode against the
precious metals price, the slide versus the benchmark Gold price ongoing still.
Trader Dan Norcini is a fine analyst. He displays the ratio of the HUI and XAU indexes
30
versus the Gold price to make the point that the stocks are doing very badly, as
expected within the Hat Trick Letter. To be clear, the QE program of extreme volume in
USFed bond purchase via direct monetization is the manifestation of hyper monetary
inflation. Since 2010, the QE has bolstered the Gold price, but not the mining stocks. The
USGovt stock props have been active, but they selectively and secretly choose the
S&P500 mainstream stocks to support since approved, excluding the mining stocks.
This is further proof that the sector is not a good investment in general, although the
astute few investors can continue to do well with certain individual stocks. Metal in the
form of bars and coins is far superior. The mining shares will continue to erode further
against Gold as the paper securities plague goes on, festers further, and ravages wealth.
Trader Dan remains hopeful, but my suspicion is that hope should yield to stark
realization of a deep infection in paper securities. He urges the CEO's of mining
companies to listen to the message of the market, then to make the necessary changes to
their organizations. He suggests they cut expenses and offer investors dividends. My
firm belief is that neither will work. Expenses are rising from material costs, labor costs,
and defense against jurisdiction threats. Dividends cannot be provided easily, since
funds are in short supply. That is precisely why the mining firms regularly put
investors through the other inflation ringer. They issue more stock in addition to the
executive bonus outlays. Dilution of shares is a ravaging effect that the Jackass often
points out in criticism of the mining stocks. Labor strikes are the newest threat, as the
cost of living has risen sharply for the working class. Each nation differs in taxes and
fees for various items like environment impact. The United States imposes taxes from
the Environmental Protection Agency, with further fees.
Trader Dan acknowledges that relative to Gold, some of these shares are as cheap as
they have ever been. That has NEVER been a good argument to invest. So when they
are even cheaper, the proof will be even more clear that metal (bars, coins) are superior
investments, so goes the broken logic. Dan concludes, "Checking in with the HUI, some of
31
the shares that comprise that index are as cheap, relative to Gold itself, as they have been in
ELEVEN years." Ok, so exit them before they are the cheapest in 20 years. See the Trader
Dan article (CLICK HERE). The problem is deeper than Norcini describes. Noricini is a
fine gentleman, but he seems committed to the shares come hell or high water. The high
water has been seen in the NorthEast. Next comes the hell. Distrust of paper wealth is
the root, as the paper based platforms of wealth are being destroyed systematically. The
Jackass saw this in 2008 before the Lehman firm collapse. The world makes a gradual
important Paradigm Shift to a gold-based trade settlement system to displace the
USDollar from its corrupted perch that permits hegemony. Dilution of mining shares is
a constant inflation effect. Costs are rising to be sure, but so is confiscation risk and
labor strike risk.
◄$$$ THE TORONTO STOCK EXCHANGE IS SLOWLY FADING INTO THE PAPER
MACHE SUNSET. THEY MIGHT AVOID A DECLINE IN THE MAIN INDEX BY
ADDING MORE STOCKS IN VOLUME TO COMPENSATE FOR THE SEVERE PRICE
DECLINES IN SHARES. $$$
The StockWatch website offered an intriguing quote recently. They wrote, "Earlier this
month the TMX Group was touting the 26 new issuers it welcomed in October. Ten
were from the mining sector and of those 10, seven listed on the TSX-V. The TSX-V now
has 2436 companies listed, many of which are in the mining sector. What the exchange
has not been touting, however, are the low prices of its battered listings. As of today,
1266 TSX-V-listed companies, or 51.9%, closed at 10 cents or under, while 743
companies, or 30.5%, closed at five cents or under." This is a horrendous admission of
failure stock security performance, hardly a feature to attract investors. It is an
argument to liquidate. The Jackass will list some Junior mining stocks aside my favorite
Silver Wheaton (uniquely different), since clients wish to know my best picks. Most fish
caught in the sewer tributaries are not worth eating. See the Stock Watch article (CLICK
HERE).
## USECONOMY UNDER DEATH SENTENCE
◄$$$ THE USECONOMY IS DIMINISHING AS A PLAYER IN THE GLOBAL
ECONOMY. ITS SHARE OF THE GLOBAL ECONOMY HAS FALLEN BY 10% IN THE
LAST TEN YEARS, WHEN THE NATION BEGAN TO BEHAVE IN AN ABERRANT
MANNER. SUSPICION OF THREATS HAS DISCOURAGED FOREIGN RELATIONS
IN BROAD TERMS. AMERICANS ARE DELUSIONAL ABOUT ITS CONSTANT
PRIMARY IMPORTANCE. ISOLATION IS TAKE PLACE RAPIDLY. THE NATION
HAS BECOME JUST ANOTHER BIG MARKET, NOT A LEADER. FURTHER
ISOLATION COMES WITH GREAT RISK. $$$
First comes isolation of the USEconomy, then comes the rejection of the USDollar which
will dismiss it into the Third World. The bust of the tech-telecom asset bubble in 2000
32
marked a seminal event. Few observers appear to have noticed that afterwards, when
the recovery took place, it was very aberrant in makeup. The 911 events soon followed.
The United States as a nation has begun to follow a dangerous path of seeming
paranoia and pre-occupation with foreign threats. The great majority are imaginary, as
the great threat is internal. The effect is seen in the graph of US Gross Domestic
Product, as it has diminished in the global perspective. The rest of the world did not
abandon the US, but pulled back. As the USEconomy shrinks further as a global player,
it risks sliding into the Third World as soon as its currency is no longer considered
acceptable to pay for trade shipments, better called vast imports. That is the next major
event.
◄$$$ CHICAGO NATIONAL DIFFUSION INDEX IS FLASHING LOUD WARNING
SIGNALS. IT IS THE MOST OMINOUS ECONOMIC INDICATOR FROM THE USFED.
ITS ACCURACY IS WELL UNDERSTOOD, THEREFORE IGNORED. $$$
While the USCongress and White House argue over the budget and debt limit, the
USEconomy slides with tremendous momentum. The trains and trucks have already
gone over the cliff, as the impact awaits. The USFed has continually warned that the
central bank cannot alone pull the nation out of the morass. The combination of bank
sector fraud, government fiscal deficits, endless war, and wretched discouraging tax
policy has put the USEconomy on a path with such momentum that no single decision
to come will rescue from the impact crater below. The Chicago Fed National Activity
Index (CFNAI) flashes a loud warning of decline. It has been featured in the recent
past. This is no simplistic indicator assembled in haphazard manner. It is an index
comprised of 85 established economic indicators and trends drawn from all areas of the
economy. It was first compiled in 1967 and has a remarkable record for identifying early
when the economy has entered a recession. It is almost never discussed in the financial
33
media or by Wall Street firms, since it is accurate, and since they promote an opposing
point of view for their corrupt agenda.
The monthly reading of the index was in negative territory for five consecutive months
before improving to the flat-line at zero in September. Unfortunately, that improvement
lasted only one month. The report in early December showed a sizable drop to minus
0.56 in October. The critically important 3-month moving average is on course for eight
consecutive negative monthly readings. Just a slight additional decline to the minus
0.70 level, and the USFed will see its own internal trigger pulled, to announce a
recession has begun with high likelihood. The most recent occasions with red signals
were flashed in 2001 and 2008. Risk is rising as the squabble in WashingtonDC
continues in a never ending cycle of futility.
◄$$$ CAPITAL SPENDING IS FALLING DANGEROUSLY. THE USECONOMIC
RECESSION IS RECEIVING A POWERFUL DOSE OF HEMLOCK FROM THE USFED
IN THE FORM OF Z.I.R.P. & Q.E. THAT KILLS CAPITAL. THE RETIREMENT AND
LIQUIDATION OF EXISTING CAPITAL EQUIPMENT AND INHIBITED OUTLAYS
OF NEW CAPITAL EQUIPMENT ARE DEVASTATING IN A SLOW CORROSION
PROCESS. THE ULTRA-LOW INTEREST RATES DO NOT LEAD TO BUSINESS
INVESTMENT IN THIS CLIMATE. CENTRAL BANK POLICY CANNOT LIFT
INVESTMENT LEVELS EVEN TO THE DOWNTREND LINE. $$$
Awareness is rising slowly of reduced capital spending and capital formation in the
developed industrialized world. Tax policy has had a severe dampening role as socialist
policies take root at a time when the Western economies adjust to a decade of forfeited
industry to China. The United States and Western Europe have followed a disastrous
path since China awakened. Legitimate income sources have largely been replaced by
speculation and financial sector debt securities paper shuffling, often called
34
sophisticated clean industry. It is neither, since the sophistication is mere cover from
leveraged recklessness in supposed risk offload. The clean aspect is a defiant lie, since
toxic paper is a closer cousin to acid than fresh water. The US and West has truly lost
its comprehension of, dedication to, and implementation of capital formation as the
concept of productivity has turned into a deceptive tool to lavish self-admiration. The
United States has lost its sense of capitalism, and no longer comprehends how to build
businesses or to create jobs. Only the good economists recognize the lost art and heresy
from the USFed itself. The majority are Wall Street harlots, equity fund pimps, or
university shamans, not worthy of any respect.
The current trend in the US board rooms has been to shun new capacity, to protect
market share, while the entire pie (national economy) shrinks in size. The pattern seen
has been to cut capacity, to reduce costs, to cut the work force, and to show greater
profit, while the entire pie (national economy) shrinks in size. Thus the micro
successes lead to macro failure. The nasty winds of government taxes and burdensome
regulations have resulted in seeking more favorable trade winds in other lands, moving
headquarters after already having moved manufacturing operations, while the entire
pie (national economy) shrinks in size. In past decades, US businesses responded to
hostile labor unions. Now they respond to hostile economic conditions, hostile cost
structure, and hostile socialist government hands. Companies invest more in their own
stock buyback programs than in business equipment and machinery. In 2012, the
stock buybacks are at obscene levels, around $500 billion. A tipping point of stock
speculation over business investment was reached back in 2007 and 2008, reported in
the Hat Trick Letter. The trend continues. If the USGovt and its Working Group for
Financial Markets are not buying the US stock market, then the US corporate board
rooms are. The small investor is largely gone. The flash trade programs continue.
Traditional types of volume are drying up, a horrible symptom.
35
Capital spending in the United States is falling sharply. The staff under Jeremy
Grantham put together the above graph. It is disturbing, and confirms the Jackass view
that since 2006, not only the US but also Western Europe have been on a severe
downward path with no hint of recovery, only collapse. The staff points out a 25%
correlation between savings and investment with the economic (GDP) growth. The
circled area highlights an abnormally depressed level of capital spending, which
augurs for a very poor future marred by deepening crippling recession. Notice how
the QE and QE2 and Operation Twist and QE3 have done nothing to restore the
capital spending. It remains below the downtrend line. The current reduced
investment level appears to be 4% below the decline in the growth trend. The USFed
monetary policy addresses none of the national ills, led by insolvency, fraud, and overtaxation. See the Market Oracle article by John Mauldin (CLICK HERE). He must wish
he could eat his words, too often stated over the last decade, even monotonously stated
since so often and so wrong, about muddling through. Such facades of optimism have
no place in competent analysis. The US did not muddle through, but rather has suffered
a collapse as forecasted in the Hat Trick Letter, which never bends to conventional
optimistic mainstream vapid analysis.
◄$$$ A QUICK PASS OVER THE FRAUDULENT NON-FARM JOBS REPORT. THE
JOBLESS RATE REMAINS AT DEPRESSION LEVELS. DOWNWARD REVISIONS IN
SEPTEMBER AND OCTOBER WERE VERY EXPECTED, AS ROSY MONTHS WERE
PAINTED DURING THE CAMPAIGN. WITH THE RE-ELECTION COMPLETE,
REALITY DICTATES THE FACADE REMOVED. $$$
Again, the deception deserves a splash of reality in dispute. The monthly exercise must
be done to dismiss the economic drivel with spin from the Non-Farm Jobs report. It will
36
not be given much time, out of respect for honesty and integrity. The Novermber Jobs
added supposedly 146 thousand new jobs, in their fictional world led by deception and
chicanery in full view. Theirs is a shell game without the shells. The deeply biased
unemployment rate fell to 7.7%, as hundreds of thousands fell off the jobless
insurance bus, no longer counted. The proof in the pudding again was the decline in
the participation rate, down to 63.6% in a nation of discouraged workers. The preelection deception was blatant, lifting September and October, only to reduce them in
revisions in November. The two pre-election months were revised down by 49
thousand jobs. The reality is presented in the upper graph, as the accurate depiction
lies in a 22.9% jobless rate. It has not come down from depression levels. Great work as
always by the Shadow Govt Statistics folks. The labor market reporting by the USGovt
continues in a series of politicized disgusting reports that bring travesty to USEconomic
reporting, and shame to the statistical analyst trade.
◄$$$ FED-EX IS TYPICAL OF AMERICAN BUSINESSES, AS THEY FEEL THE PINCH
TO PROFITS. REGARD THEM AS A BELLWETHER INDICATOR FOR THE
USECONOMY. FED-EX IS RAISING PRICES DUE TO HIGHER COSTS. THEY PLAN
TO TRIM THE FIRM AND TO IMPROVE PROFITABILITY. $$$
The message is very clear, a harsh indicator of the USEconomy. As Fed-Ex goes, so goes
the national economy, simply put. The shipment firm that covers the nation completely
is as good an indicator for the nationwide economy as payroll tax receipts. Both are
flashing lousy. The shipping firm is feeling the ZIRP & QE shock more than most. They
have recently announced another hike in delivery rates up 5%, as well as offering
current employees a volunteer buyout. The company claims it needs to cut expenses of
$1.7 billion in three years. Job cuts, along with fleet upgrades and efficiency
37
improvements led by certain technology installations, are part of an initiative to
improve profitability by $1.7 billion per year by 2016.
Employees will be notified by mid-February on eligibility to accept the buyout offer.
The buyout packages offer up to two years of base pay plus $25,000 in assistance on
health care expenses. The company expects a big response from workers. This is not a
recovery statement, but a defensive reaction to harsh recession conditions. An
economist in Las Vegas might summarize that Fed-Ex is being hammered with the
trifecta of the USFed monetary policy, the disastrous wrecking ball. They are hit by 1)
Higher energy costs and increased expenses, 2) Business clients shrinking, and 3) FedEx revenue shrinking with no yield on cash reserves. See the Commerical Appeal article
(CLICK HERE). No evidence of national economic recovery here.
◄$$$ DATA STORAGE COSTS ARE RISING VERY FAST. THEY ARE UP 50% FROM
FIVE YEARS AGO, AND ARE SET TO RISE ANOTHER 25% NEXT YEAR. SINCE A
SMALL PART OF THE OVERALL BUSINESS, THE ATTENTION HAS NOT BEEN
GIVEN. $$$
An interview of AML Technology cited that data storage costs are rising fast. Hardware
costs have risen from 20% of the total level five years ago toward a 50% current pace.
The blame is put on absent technology growth for hard disk storage. Advancements
have not kept pace with the exponentially growing demand to hold data from sales,
inventory, supply lines, staff profiles, customer records, and more. The increased usage
of cloud storage, sometimes called virtual storage, is one possible solution in the near
future. The costs are expected to rise. Gartner Research forecasts the costs of managing
the data storage systems will rise about 25% next year. In addition, the energy costs of
running businesses, including the data farm, are also rising. For years, storage has been
assumed to be cheap forever. Many firms have gone out of business.
## ECONOMIC IMPEDIMENTS & SCARS
◄$$$ THE SOCIALIST DRAG ON THE USECONOMY WORSENS, AS 73% OF NEW
JOBS CREATED IN THE LAST 5 MONTHS ARE IN GOVERNMENT. THE BUSINESS
SECTOR HAS BEEN BRACING FOR THE SHOCK OF OBAMA-CARE. THE USGOVT
SECTOR HAS BEEN BUILDING UP THE SOCIALIST SYSTEM NETWORK OF
BUREAUCRACY, OVERHEAD, AND IMPEDIMENTS TO EFFICIENCY AT GREAT
COST. THEIR FRINGE BENEFIT COVERAGE IS LOCKED IN, COST AND ALL. THE
SOCIALIST EFFECT MATCHES THE POLICE STATE EFFECT, MUCH GREATER
COSTS WITH NO TANGIBLE CONTRIBUTIONS. $$$
CNS News has discovered that a whopping 73% of the new jobs created over the past
five months within the USEconomy are government jobs. The majority of new job
creation therefore does not contribute much to the economic vibrancy. What is not
38
service is overhead and bureaucracy. The real productive USEconomy is being drained,
or better described as operating with a great burden shared nationwide. The socialist
system acts like a gigantic yoke to bear, spreading the misery, adding to the weight
being pulled by the two-legged farm animals that voted for the disastrous path. France
and the United States will be visible examples of crushing costs and inefficiency as they
collapse in full view.
The Bureau of Labor Statistics provides the gorey details. Between June and November
2012, the total population employed within the United States grew from 142,415,000 to
143,262,000. The figures include those employed by federal, state, and local
governments. Of the overall increase of 847,000 in the six months since June, the
government sector was responsible for an increase of 621,000 to 20,559,000. These
621,000 new government jobs created in the last five months equal 73.3% of the 847,000
new jobs created overall. No breakdown for the federal portion is available. See the
CNS News article (CLICK HERE). Keep in mind that many small businesses eluded the
official count, but the sector is under siege and not expanding. A sneid colleague added
a scary comment. He wrote, "I am hearing about extensive hiring for FEMA camps, which
needs officers. Also broad hiring in Homeland Security with urban assault forces, since the 15
thousand urban assault vehicles will require drivers." My reply to him directed attention to
greater hiring in the private sector for bankruptcy and foreclosure counseling, and
foreclosed home lot cleaning crews, all new growth areas. It is all cynical talk, but
perhaps containing some reality.
◄$$$ FOOD PRICES TO ACT AS BARRIER TO ECONOMIC GROWTH NEXT YEAR.
THE COMBINATION OF NEW OBAMA-CARE COSTS AND HIGHER FOOD COSTS
WILL BE VERY STRONG WITH BIG NEGATIVE OVERALL EFFECT. THE MIDWEST
DROUGHT IN THE UNITED STATES HAS NOT GONE AWAY. IT MORPHED INTO
A WINTER DROUGHT. THE MISSISSIPPI WATERWAY EFFECTS WILL BE
AGGRAVATED, AS SHIPPING IS CURTAILED. THE SUPPLY CHAIN IS SERIOUSLY
ALTERED. FOOD COSTS WILL RISE, BLAMED ON THE DROUGHT AND RIVER. IN
REALITY, THE USFED MONETARY POLICIES ARE ALSO A FACTOR IN HIGHER
FOOD PRICES. WORSE, THE LOWER FARM OUTPUT IS A GLOBAL
PHENOMENON. THE FOOD PRICE EFFECT IS GLOBAL. MIDEAST OIL
PRODUCERS MIGHT WISH FOR HIGHER OIL PRICES TO MANAGE DOMESTIC
FOOD PROGRAMS AND PRICE SUBSIDIES BEFORE MORE SOCIAL ERUPTIONS.
$$$
The Jackass summary points above pertain to the United States. However, the drought
affected the entire Northern Hemisphere. The data is compelling for a global effect. If
the rest of the world cannot produce adequately in grains, then the reliance upon the
US supply will be greater. The US produces over half the world grain. The US supply
line is interrupted. Big global food price rises will come this year, evident in the next
few months. The United Nations lowered its estimate of world grain stocks for the
39
season ending in 2013 by 5% to 495 million tonnes, also its estimate of production lower
by 2.8% to 2.282 million tonnes. According to the USDept Agriculture, grain stocks
globally are the lowest since 1998 at just 4.32% of demand usage. In the United States,
the corn inventory is expected to decline to 5.63% of demand, the lowest since 1996
when it fell to 4.98% and the lowest ever recorded. Records began in 1960 for
Bloomberg data. By comparison, the average for corn since 1960 has been 17.92%, but it
has been 11.1% since 1990.
The leading Iowa State University agricultural scientist Elwynn Taylor offered details
on soil effects. He expects lower corn output in 2013 for the fourth year in a row,
although not as bad as last year. Subsoil moisture in the big crop states is already rated
more than 90% short to very short, a condition not expected to rapidly improve. He
concluded some serious root development damage in the soil. The crops are desperate,
as the shortage of rain resulted in corn and soybean roots to extend over eight feet
down. The plants tried to obtain soil moisture. More rain will be required to replenish
the root systems, which is not happening. The rivers will not be in a position to aid
irrigation efforts in compensation. The impact is being felt in livestock inventory. The
US cattle stocks are the lowest in 60 years. The meat market is effectively borrowing
from the future. Higher beef prices are a guaranteed event later on.
Rival supplies from South America and the Black Sea (Eastern Europe) region are
exhausted. Brazil has its own shortage, the factor in a 17% price rise for corn over the
previous month alone. The Argentinian exporters have stopped offering corn for sale
until at least March or April. Corn prices in the Ukraine have surged to levels
equivalent to US prices, but with lower quality corn to offer the market. The nations of
Japan, Mexico, and Taiwan wll turn to the US for shipments, no longer able to have
orders met by Brazilian suppliers.
Even Russia saw its harvest fall by one third due to hot dry weather. They are the #3
wheat producer globally. Its exportable surplus has been exhausted. The Russian
farmer union has asked for a formal relaxation of the rules, in order to permit more
imported wheat and rye from Kazakhstan and Germany. A shortage is anticipated by
the spring. Wheat yields are down in Australia, and so is its average protein content.
Their harvest fell in volume, thus reducing the wheat inventory to 11.5% of demand
usage, down from the normal range of 13.5% to 14%. Soil damage has taken place in
Australia, as the two La Nina events brought rain that washed away the valuable
nitrogen in the soil. It must be replenished with fertilizer, adding to the cost of
production. The situation in the United States was not much better with the winter
wheat crop, as many crop ratings are well below normal in Kansas and Nebraska, the
wheat belt.
Morgan Stanley is the leading Wall Street firm involved with commodity contract
trading for a variety of items, most notably energy and grains. The firm expects corn to
40
be the best performing commodity in the first half of 2013, with an forecasted price
rise of 34%, as record low supply prompts nasty competition between food and
ethanol. The current food price index maintained by the United Nations is actually
below all-time highs set in the recent past. But the developments in 2013 assure a new
record level to be reached. The UN food prices are 6.9% below April 2008 highs in
cereal, 3.5% below November 2011 highs in meat, while the overall food index is 11.3%
lower than their February 2011 record level. More to the point is trend, and the grain
prices are above the winter prices a year ago at this time. The political impact is clear.
With grain prices 9.4% higher than the previous December record set in 2010, danger
looms. The launching pad for MidEast instability in Egypt and elsewhere was built by
the late 2010 jump in food prices. That is when it began, the infamous Arab Spring.
Ironically, MidEast oil producers will require a still higher oil price in order to
accommodate food subsidy programs that address the increased social demands and
related political strains.
Two important truths will be manifested in early 2013:
1) Higher food prices will worsen economic and social instability, a survival issue.
2) Higher food prices will worsen economic recession, removing diposable income.
Watch for a renewal of Arab Spring from global supply problems aggravated by the
drought in the global breadbasket, the US plain states. The financial crisis has not
provided an adequate environment in which to permit a catch-up in supply. The
imbalance is growing worse. Neither price rise nor demand destruction can avoid an
even deeper imbalance and crisis later on. Expect industrial demand to be priced out,
like for food factories and ethanol centers. Substitutes will be sought, probably in vain.
History shows that food price hikes are at the root cause of most periods of political
upheaval and change agents politically. The unavoidable economic effect is that as more
household funds are spent in the USEconomy for food, less will be spent on other
consumption, less on business investment, less for everything. The food crisis will be
all consuming in attention, focus, with rising alarm. It will be an important factor in
the systemic failure of the nation. Several nations might go down the same ugly tragic
path.
◄$$$ OBAMA-CARE PRE-EXISTING CONDITION FEE TO COST COMPANIES $63
PER PERSON AND HIT EMPLOYERS WITH $MILLIONS MORE IN COSTS. THE
TRUE COST WILL BE BETTER KNOWN BY THE PUBLIC OVER TIME. EXPECT
OBSTACLES FOR HEALTH CARE BUT MORE MANAGED DEATH. $$$
The ObamaCare health plan is loaded with costs for all employers, the worst felt by the
small businesses. But additional hidden costs have come to light. Expect the hidden cost
imposed at $63 per person to be passed onto the employee, for those nagging pre41
existing conditions. The charge is buried in a recent regulations and the fine print
documentation. The pre-existing medical condition cost feature will cost tens of
$millions for the largest companies. It is a sleeper issue with significant financial
consequences and nothing in return for company output. The drag on the economy is
clear. Based upon estimates, the employer and individual health plans covering an
estimated 190 million Americans could owe the per-person fee. The Obama Admin
calls it a temporary assessment levied for three years starting in 2014, designed to raise
$25 billion. It starts at $63 and then declines. Most of the money will go into a fund
administered by the USDept Health & Human Services, used to cushion health
insurance companies from the initial costs of covering uninsured people with medical
problems. To be sure, a smaller amount of $5 billion will go directly to the USTreasury
till, designed to offset the cost hit for early retirees.
The $25 billion fee is part of a bigger package of taxes and fees to finance the entire
health care program. The total cost comes to $700 billion over 10 years. Expect a severe
damper imposed on the entire USEconomy that makes the entrenched recession must
worse. In a parallel tax hike, higher Medicare taxes will go into effect this January on
individuals making more than $200,000 per year or couples making more than $250,000.
People above those threshold amounts also face an additional 3.8% tax on their
investment income. But the insurance fee had been overlooked as employers focused on
other baseline costs in the law, including fines for medium and large firms that fail to
provide coverage. See the Huffington Post article (CLICK HERE). Do not expect better
health care, only wider coverage. Expect instead roadblocks to receiving health care in
the form of a sprawling meddlesome bureaucracy. Expect also more obstacles designed
to ensure that many people die from denied treatment. This is a death care program in
many ways, but honestly much treatment is useless and wasteful for the seriously sick,
where hospice makes more sense.
◄$$$ THE WORKING CLASS SOON WILL DEMONSTRATE FRUSTRATION WITH
THE HIGHER COST OF LIVING. THE PHENOMENON COULD SPREAD LIKE
WILDFIRE. THE USFED MONETARY POLICY HAS LIFTED THE ENTIRE COST
STRUCTURE. THE PRESSURE POINT IS THE WORKING CLASS. WATCH THE
EFFECT ON SERVICES GENERALLY. THE SHOPS WILL RAISE PRICES OR SHUT
DOWN. $$$
The fast rising cost of living will soon be pervasive and noticed everywhere. Labor
unrest from deep frustration is going to spread like wildfire. Curiously, it is already
responsible for gold mine project strikes around the world. Expect the frustration to be
noticed and observed and manifested in the USEconomy very soon. The next chapter is
for labor unrest to lead to civil unrest then grand disorder. In my view, the trigger for
much disorder to come soon will be from the working class being unable to manage
their rising costs, already under strain. The service sector relies heavily upon this
group to arrive at work and to provide service. To date, the effects of the highly
42
destructive USFed monetary policy of ZIRP & QE have undergone little notice. The
capital destruction and systemic failure forces are well hidden within the cost structure.
Rising costs are the result, simply stated. The pressure points are most acute on the
working class, since the poorest. The effect will will be broadly felt in the labor market,
since they cannot afford the rising cost of living. They are the most vulnerable. Already,
fast food workers have gone on strike in New York City, where the costs are greatest.
Watch for some feedback reactions like much higher prices and some burger joints shut
down. See the PressTV article (CLICK HERE). An observer from England pitched in
with a comment, since the effect is similar in London. He wrote, "The tone is slowly
changing among the lower middle class, where a sense of desperation will lead to social unrest. It
is a natural progression of events."
## HOUSING FORECLOSURES & LITIGATION
◄$$$ THE HOME FORECLOSURE PIPELINE REMAINS MASSIVE WITH OVER FIVE
MILLION HOMES READY TO BE SEIZED. THE SEIZURE RATE HAS COME DOWN
FROM THE PEAK, BUT THE INVENTORY IS ENORMOUS AND TRAGIC. THE
BLOAT ASSURES NO PRICE RECOVERY IN THE FORESEEABLE FUTURE. THE
NATION IS FAST MOVING TOWARD A RENTAL HOUSING MARKET FOR HALF
THE POPULATION. $$$
Over 5.3 million mortgages lie in the foreclosure pipeline. Stable prices or rising home
values make it easier for banks to unload these properties through various sales
mechanisms. Bear in mind that the banks themselves produce the artificial market
that gives the appearance of stable prices, by conducting short sales in private, where
the home price is not recorded in national statistics. No recovery is occurring. In that
respect, it is the same deception as discouraged workers not counted as unemployed in
the labor market. Think discouraged home falling off the market. The US housing
market is not recovering. A ripe 100 thousand homes are being put back into the
foreclosure pipeline each month, a situation that remains concerning. Back in 2008,
the Jackass forecasted two more years of housing market declines. In 2009, the forecast
was repeated. In 2010 and 2011 and 2012 the same forecast has been repeated. The
conclusion is more simply stated: permanent US housing market decline. This is a truly
wrecked market. Ironically, the home is not a hard asset. It is rather an abused asset
attached to corrupted financial instruments called mortgages, which are thrust into the
Wall Street cauldron of contemptible corruption. The last year has seen no notable
improvement in either foreclosure starts or completions. No wind down is evident. See
the Dr Housing Bubble article (CLICK HERE) and his excellent chart. The banks are
becoming the primary landlord, as the collectivism sweeps the nation, eradicates
capitalism, and installs marxism with a fascist slap in the face.
43
◄$$$ MORE HOME EQUITY LINE OF CREDIT EXTENSION OF CREDIT HAS
SURGED. THE PROBLEM IS REPEATING IN PURE AMERICAN ABUSIVE STYLE.
THE SUBPRIME CANCER MERELY METASTASIZED IN A DIFFERENT LOCATION.
THE NATION CANNOT BE CURED WITHOUT A COMPLETE LIQUIDATION. A
PARALLEL IS SEEN IN CORPORATE DEBT ABUSE ALSO, WHICH IS USED IN
STOCK SHARE BUYBACKS. $$$
Bloomberg reported that HELOC (home equity lines of credit) will result in mortgage
equity withdrawals to rise 30% this year to $79.6 billion. Since that marks the highest
since 2008, it is safe to conclude the mortgage cancer has returned in a more localized
metastasis. The other cancer ground is the FHA with its same old sub-5% down
payment, and returned high default rates, recently reported in the Hat Trick Letter.
Nothing seems to change in the United States housing market. The deeply aberrant
behavior just shifts locations or offices as underwriter. Moodys forecasts that the
HELOC equity withdrawals will rise by 31% next year to $104 billion. Their stated
justification is actually an absurd platform that national housing stock value is rising. If
they believe unemployment is falling, then they probably accept rising home value too.
Bring back the second half recovery, the green shoots, and the exit strategy too. The
perceived positive effect is that consumers are spending again, burning their furniture
again, buying things they do not need again, in a celebration of consumerism all over
again. They will flame out like moths chasing a light source, since they are borrowing to
sustain their consumption. Nothing changed in the main.
Note a parallel of abuse. The corporate boardrooms are doing the same thing. A recent
report by Albert Edwards notes that the increase in corporate leverage seen recently
has been used almost step for step matched the share buybacks financed. The
corporations are not making further investments in plant, equipment, or worker
44
training. They are gambling, just like the big banks do with USTreasury Bond carry
trade. Furthermore, much of the most recent corporate bond issuance has been devoted
to covering the dividend payouts, in order to take advantage of upcoming changes in
the law. This is NOT how an economy recovery occurs. Consume for today and
tomorrow be damned, the American way. See the Bloomberg article (CLICK HERE).
◄$$$ THE PARADE OF LAWSUITS RELATED TO MORTGAGES CONTINUES
UNABATED. THE TRIFLING SETTLEMENTS TO DATE DO NOT METE OUT
JUSTICE. THE AGGRIEVED SEEK JUSTICE. TREBLE DAMAGES COULD COME IN
SOME CASES. THE CASES PILE UP, UNRESOLVED. SOME SETTLED CASES ARE
BEING REOPENED. THE RASH OF MORTGAGE FRAUD WILL NOT GO AWAY,
MAINLY BECAUSE VERY LITTLE JUSTICE HAS BEEN SERVED. AT GREATEST
RISK IS BANK OF AMERICA, THE PRIMARY NARCO MONEY LAUNDERING
BANK. $$$
The mortgage litigation problem refuses to go away. The big US banks face a fresh
torrent of lawsuits asserting that they sold impaired mortgage securities that imploded
during the financial crisis. They stand to lose much more than the sweet deals settled in
court to date, which the Jackass has called paltry in settlement at perhaps 5% to 10% of
actual potential awards. The tens of $billions the banks have already paid to settle
cases will be dwarfed by what comes. Some old cases will be reopened, since they
were defended fraudulently as well. Regulators, prosecutors, investors, and insurers
have filed dozens of new claims against Bank of America, JPMorgan Chase, Wells
Fargo, Citigroup, and other banks, linked to over $1 trillion worth of securities backed
by residential mortgages. At risk is the massive sum of $300 billion if the firms lose all
of the cases in litigation (court outcomes). Most cases are open and shut to prove the
fraud. Previous attempts by the banking industry have been blatant attempts to corrall
the entire mortgage fraud cosmos without legal grounds. The mainstream news spin is
pathetic, with warnings that bank profits could collapse and economic recovery could
be badly hindered. The better solution is to liquidate the big US banks under RICO law
prosecution, and to distribution the receivership sales of assets to the aggrieved
homeowners and bond investors. The USGovt offices would be quickly freed from
corrupt influence.
The banks are battling on three vulnerable fronts. 1) prosecutors who accuse them of
fraud, 2) regulators who claim that they duped investors into buying bad mortgage
securities, and 3) investors seeking restitution on buyback of soured loans. A landmark
case is the lawsuit brought by the Federal Housing Finance Agency against 17 banks
last year, claiming that they duped the mortgage finance giants into buying poor
quality securities with horrid underwriting. Although the case is high stakes, it pits the
USGovt corruption clearinghouse acid pit versus the banks which control the USGovt
finance ministry. So a cushy deal will be struck that creates a precedent, precisely when
the USFed is backing up the truck to clear the most toxic and fraudridden of mortgage
45
bonds. The Manhattan courts are proving to be hostile and unsympathetic to the big
banks, denying their motions of time extensions. But monstrous syndicate pressure
could turn the tide, like if the judge has a family threatened or a daughter run over by a
car, or a nanny slit the children's throats (see the CNBC executive crime scene).
Precedent is aplenty. The big banks seek a settlement with the agencies that have
colluded for years with massive mutually beneficial fraud. Some bank analysts actually
believe the potential losses from mortgage litigation cases could exceed that of LIBOR
fraud court case losses. My expectation is that the mortgages losses will come first, the
LIBOR price rigging second, with greater losses later. Most experts cannot see past six
months. The Jackass looks more than a year out.
Several big banks have begun to set aside funds to manage eventual settlement deals
or hostile judgments. Five in particular have set aside $22.5 billion as of June 30th just
to cushion themselves against future demands. The more realistic outlooks foresee
future settlements that will dwarf the payouts awarded and agreed upon to date. The
banks have settled only a small fraction of the lawsuits against them. JPMorgan Chase
and Credit Suisse, for instance, agreed in November to settle mortgage securities cases
with the SEC for $417 million, but $billions in other cases remain outstanding. Another
bank at risk is Credit Suisse, which was accused in November of selling $11.2 billion in
fraudulent mortgage backed securities. According to the complaint, the bank dismissed
flaws in the loans packaged into securities, even while assuring investors that the
quality was sound.
The most wobbly is Bank of America, which could face the death sentence. Its
acquisition of the criminal subprime lender Countrywide Financial will prove to be an
unending nightmare. Last year, Bank of America paid $2.5 billion to repurchase
troubled mortgages from Fannie Mae & Freddie Mac, and $1.6 billion to Assured
Guaranty, which insured the toxic package of mortgage bonds. The Countrywide
fraudulent pathways to the court rooms continue to be paved by fresh cases and more
revelations. Lax oversight and reckless underwriting could be declared by New York
courts, pushing a settlement well beyond $1 billion. At work is treble damages, since
the USDept Justice sued the bank under a law that could allow roughly triple the
damages incurred by taxpayers. All Bank of America attempts to resolve rafts of
mortgage litigation with an umbrella settlement have run aground. In June 2011, the
BOA criminal organization agreed to pay $8.5 billion to ward off investors, including
the New York Fed and PIMCO, after the two firms lost $billions in outright fraud. But
the case might win reopening, after being challenged by investors. Counsel
representing the investors plans to pursue Morgan Stanley and Wells Fargo next.
An amazing statistic must be cited. Of more than $1 trillion in toxic and impaired
mortgage backed securities on the table, Bank of America owns $417 billion from
Countrywide alone, according to an analysis of lawsuits and company filings. The bank
does not disclose the volume of its mortgage litigation reserves. Keep in mind always
46
that Bank of America is the primary narco money laundering bank among the big New
York banks, with deep pockets. In September 2010, Papa Bush reloaded their kitty with
$13 billion in an emergency overnight loan that amazingly was confirmed in identical
detail by two independent Jackass sources, one from the gold world, the other from the
military security world. No doubt the source was narco funds from the aging legendary
trillionaire American success story. The man is not permitted to be listed among the
Forbes most wealthy even though his amassed dirty fortune is well over ten times
Buffet or Gates.
Not to be left out, JPMorgan must defend against lawsuits in New York State Supreme
Court directed at Bear Stearns, which JPM acquired in 2008. Another potentially costly
case for the banks features demands from a number of private investors who want the
banks to buy back securities that violated representations and warranties vouching for
the loans. JPMorgan disclosed in 2Q2012 that it was contending with $3.5 billion in
repurchase demands. In the same quarter, it received over $1.5 billion in fresh
demands. This is a veritable torrent that is an attack on the Big US Bank equity in a
constant storm. As of Q2, Bank of America reported that it was dealing with more
than $22 billion in unresolved demands, with $8 billion received during that quarter.
The torrent runs broad against the elite criminal bank sector. See the New York Times
article (CLICK HERE). May they all be liquidated and have all assets seized under the
RICO law, which was designed for crime syndicates.
◄$$$ SHIPPING CONTAINERS HAVE BECOME CONDOS IN DETROIT. THE
UNITED STATES HAS LITTLE TO EXPORT IN TANGIBLE FORM. LIKE LEGOS, THE
NEW URBAN GENTRY DOMICILE EMERGES. LOOK FOR WALL STREET LEGO
BONDS COMING SOON. $$$
The first multi-family condominium built from used shipping containers is slated to
break ground in Detroit early in 2013. Strong, durable, and portable, at 20 feet by 40 feet
in size, the shipping containers stack easily and link together like Legos. About 25
million containers occupy loading docks, terminals, railways, and truck lines that
supply the nation its goods in a lifeline. Few return full to Asia. As they retire from
service in delivering consumer goods across the United States, designers assemble them
into usable structures. Although cheap at $2500 per unit, over 90% of the cost in
construction goes beyond the Trucker Legos. Not only in ravaged Detroit Michigan, but
also in Amsterdam for student housing, the chic (kitchi) tone has seen usage for the
cast-off boxes as artist studios, emergency shelters, health clinics, even office buildings.
Given how the USEconomy exports little except toxic bonds, military hardware,
computer system software, movies, and music, the containers are collecting around the
nation, from coastal ports to shipyards to truck terminals. Estimates of the glut of
unused idle cargo containers widely range from 12,000 to half a million units. Veteran
adaptive container builder Joel Egan of HyBrid Architecture in Seattle coined the term
47
Cargotecture to describe the method of construction. See the Yahoo News article
(CLICK HERE).
This story serves up irony illustrating the USEconomy. The USGovt exports inflation,
while the USEconomy shed its industry to Asia. Hilarious for a moment, sad the next.
What is next, securitized bonds for condo spaces under bridges, promoted by Wall
Street along with Lego Mortgage Bonds?? If you are not laughing, you are probably
crying.
## THANKS
Thanks to the following for charts StockCharts, Financial Times, UK Independent, Wall
Street Journal, Zero Hedge, Business Insider, Calculated Risk, Shadow Govt Statistics,
Market Watch.
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