Posts Categorized: General Editorial

Posted by & filed under General Editorial, Trader Dan Norcini.

Dear Friends,

Please examine the following set of charts of gold as priced in various major currencies. As you can see, it is either making new all time highs or just right off of those levels when viewed in several of these currency valuations.

Keep this in mind whenever you read some of the deflationist arguments about why the price of gold has to go lower in a deflationary spiral. Gold is a currency—something those who adhere to that particular economic view seem to have forgotten.

Also – just a side note – I mentioned in my midday commentary that gold in Euro terms had made a new all time high at the London PM Fix of today (1-22-2009). That was incorrect. The all time high is 646.590 made back in October of last year. I apologize for missing that one.

Also, please note the gold/long bond ratio chart which is also shown to give you an idea which of the two is performing better as a safe haven.

Dan

 

Click here to view today’s charts of Gold in various major currencies with commentary from Trader Dan Norcini

Click here to view today’s Gold/Bond Ratio chart with commentary from Trader Dan Norcini

Posted by & filed under General Editorial.

Dear Extended Family,

A few important observations:

1. The Euro Zone financial and general business system has been bailed out at the rate of 6% of their 2007 GDP (2007 last reported).

2. The US financial and general business system has been bailed out at a rate of 5% of 2007 GDP (2007 last reported).

3. The US dollar has appreciated from the low of .72 to the high of .89 on the USDX.

4. That represents a 26.3% appreciation for the dollar versus the euro.

5. The difference between 5% and 6% can be argued as a 20% increase in percentage of GDP (not absolute bailout funds) higher in the Euro Zone.

6. Rate of interest returns in the Euro Zone are on average more than 100% higher than the US but that is not a factor because it does not serve the interest of the dollar longs. This keeps the media quiet.

Conclusion:

Algorithms and technical short term dollar flows are the very short term of the dollar rally.

Regards,
Jim

Posted by & filed under General Editorial.

Dear CIGAs,

All play and no work would make Jimmy a dull boy. Note the fellow in the pickup is smarter with his mask on. Directly in front of us is a solid wall of rock – a very good reason for stopping. The little pack on my side gives you 40 minutes to live, just in case. All this is thanks to CIGA Anton E. who happens to be the Director all companies pray for but rarely get and to Anton’s lady who found this mine now in the building process. She is busy now bringing in a diamond property. You have to love love in RSA. In the Anton household diamonds and gold are forever.

Jim the Gold Miner_2 - 20090121_194810

The "after" picture. It is amazing what a few billion Indian parasites and a lot of really strong antibiotics will do to a man. I might have been falling forward at that moment. Note my reverse smile. At least the shovel is gold!

Burnstone Tree Planting_2 - 20090121_195750

Posted by & filed under General Editorial.

Dear CIGAs,

Further to Jim’s comments yesterday regarding the true history of President Abraham Lincoln’s economic and other policies, today’s Globe and Mail contains a very good short history of those policies and their
economic fallout.

While Obama will find in Lincoln much to emulate, he’ll also find much to shun.

CIGA RM

Honest Abe’s spending legacy is a cautionary tale
NEIL REYNOLDS
Globe and Mail Update
January 21, 2009 at 6:00 AM EST

In February, 1861, three weeks before his inauguration, U.S. Republican president-elect Abraham Lincoln assured the troubled country that his first priority as president would be higher tariffs – an economic policy he had championed throughout his political career. In 1832, announcing his candidacy for a seat in the Illinois legislature, Lincoln had said: “I presume you all know who I am. I am humble Abraham Lincoln. My politics are short and sweet, like the old woman’s dance. I am in favour of a national bank, the internal improvement system and a high protective tariff.”

Honest Abe indeed. For 30 years, he pursued these three policy objectives with remarkable consistency and dedication. As a state legislator and as a congressman, he promoted the internal improvement system, a euphemistic phrase that meant deficit spending to fund extravagant economic stimulus programs. As president, he established a central bank to print paper money not supported by gold (the first easy-money “greenbacks”) and raised U.S. protective tariffs to the highest levels in the country’s history.

Taken together, these policies changed U.S. history perhaps as much as his Emancipation Proclamation. Charles Dickens certainly thought so, asserting as early as 1861 that Lincoln’s high tariffs must be regarded as the fundamental cause of the American Civil War.

In 1860, the United States had one of the lowest tariff schedules in the world (average rate: 17 per cent). In 1861, it raised tariffs twice, the first time to 26 per cent, the second time to 36 per cent. In 1862, it raised tariffs to 48 per cent and levied them on a much broader range of goods (including every single farm crop). They remained in effect until the First World War.

Economists say 80 per cent of the costs imposed by these tariffs fell on the import-dependent southern states. In his inaugural speech, Lincoln explicitly promised these states that he would not invade them – provided they paid all “the duties and imposts” that the federal government levied on them.

Perhaps more instructive of Lincoln’s economic instincts, though, was his commitment to the internal improvement system. Railways and canals were the fashionable infrastructure projects of the time – and the great American debate in the years preceding the Civil War was less about slavery than about using public debt to fund the laying of private railway track.

More…

Posted by & filed under General Editorial.

Dear Extended Family,

My thanks go to CIGA Christopher for sending us the just released 2009 Report on Financial Reform by the Group Of Thirty, chaired by Volcker, for review:

 

Click here to view the report…

 

This well designed report deals with the world on the day after. It does not provide a means of addressing the present time meltdown of OTC derivatives that have no substantive means of valuation, being devoid of true markets.

The report focuses on legislation, regulation and supervision going forward, but offers no means of addressing the current conditions to right the wreckage of the world financial system or deal with the downward spiral of business conditions. Sorry.

In a nut shell, it is business as usual, not a Second Coming or the Advent of the Economic Master of the Universe as some anticipate

Respectfully,
Jim

Posted by & filed under General Editorial.

Dear Friends,

There is no chance whatsoever that we will sidestep on a global basis the sins of our financial fathers. No administration will make it correct or even better. The best case scenario is a double dip depression, but a depression is in gear and there is no clutch action to shift those gears.

Obama’s fiscal stimulation program is becoming modestly readable. He is hoping to put off major funding inflows into cement and rebar as long as possible in the hope that the monetary stimulation will have an effect, but as below you can see that monetary policy has not and will not do anything positive for the economy. The Fat Cats have all that in their pocketbooks, be it corporate or individual. It has paid off legal claims, attorney’s fees and multiple types of funds due to others.

As soon as they go easy but PR hard the fiscal stimulation fails. The knee jerk reaction will open the flood gates. Banks and financial institutions are still on the begging bowl loan and donation line. Business is just awful and unemployment is in depression territory certainly if viewed through the truth window of Shadow Statistics (www.ShadowStats.com).

The cut in the dividend of GE is simply a harbinger of more problems there. Confidence of builders is in the tank. Consumers are spent out and taken out on a stretcher. There is only one way to go when the problem at the basis of all this remains hidden and unattended to.

When Lehman was thrown under the bus, the $60 trillion plus pile of credit default derivatives imploded. That pile can NEVER have a clearinghouse and it is that pile now sitting on any business recovery of merit. Geitner, our possible new Secretary of the Treasury, fluffed off questions about regulating the OTC derivative market.

You can anticipate piles of BS daily with the media continuing to educate you with disinformation. All of this is like intoxicating the terminally ill patient in order to convince that patient that he can anticipate a long and healthy life. It may be kind but will not make the patient live one more day.

Respectfully yours,
Jim

Commercial Bank Asset Growth Rates

Dear CIGAs,

There is an old saying that you can lead a horse to water, but you cannot make him drink.

This saying certainly applies to the quantitative easing strategy currently being employed by the Fed. Once the derivatives began to collapse in the Fall of 2008, the Fed began to liquefy the banking as the buyer of last resort of bad assets. Over a period of three months, the net free reserve position of the Federal Reserve Bank have been "repaired."

The "repair", however, has had little effect on lending. In fact, since the end of Summer 2009 the growth rate of total loans which includes business, real estate and consumer loans continues to deteriorate. Even more shocking is that the cash assets growth rate has gone parabolic since the Fall of 2008. In other words, banks are hoarding cash and curtailing loans. The return of the real estate and consumer spending (bubbles) cannot happen without access to easy credit.

Times have changed.  I will post more about this on my website.  If I ever get the time…

Take care,
CIGA Eric

Click any chart to enlarge all in PDF format

LTC.ht23 - 20090121_111525 Asset Growth CBUS 1948-present - 20090121_111525

 Asset Growth CBUS 2003-present - 20090121_111525

Posted by & filed under General Editorial.

Dear CIGAs

I have spoken to 3 of the 4 warehouses that hold the COMEX precious metals. It seems that a lot of metals are being withdrawn. Each warehouse states the same bottom line – people/entities are removing metals and it’s far above what the employees would call normal.

With that in mind, we have some difficulties that fall onto the warehouses. These people are very courteous and truly want to help, but the load they have been given has slowed the process down quite a bit. I suggest to all, not to leave a message on their answering machines, but to keep calling till someone picks up the phone. Please be courteous with these people – they are working way too hard to keep up with demand.

Each warehouse has its own procedure for delivery. In order to alleviate some of the headaches for my clients, we are setting up a system where we will do all the leg work (for an additional fee of course) for them. So opening an account to take the physical along with the delivery can now be done within our system.

Our delivery fees have been inflated, so from this point forward the commissions and processing fees are $350 per 100 ounce bar. That price will get one up to the final step which is the arrangement for delivery thru each warehouse. I will give instructions to anyone or brokerage house that needs help in this delivery process.

Most of the question I’ve been getting is where should people store their gold. Should it go to a warehouse in Zurich, Switzerland, Austria? What’s the safest? In earnest, I think the safest place is in your own possession. We’re going back to old times again where you privately kept your wealth with you.

Something else came up in regards to mini gold deliveries. If one wanted to take delivery of a mini bar, they now have to buy 3 instead of one. It seems that this is really a dispute over language than anything else, but the point is being missed. The exchanges were created so that a farmer from Minnesota who has a crop of wheat could take his crop into Chicago and sell it to someone who needed it from another state and to do true hedging. The contracts have a specified size and a buy and sell would commence. In practice you are allowed to trade a mini in the gold market, but the minimum for delivery in gold is still 100 ounces in size. Because of this, I see no point in trading mini gold because of the strings attached.

The delivery process is really not that difficult, it just can be time consuming. Either way, I’m at your service and understand the procedures well enough to offer my services.

JB Slear

Fort Wealth Trading Co. LLC
www.FortWealth.com
866-443-0868 ext 104

Posted by & filed under General Editorial.

Dear Extended Family,

The Second Coming of Obama is a guarantee that there will be an impact of fiscal stimulation.

Expectations assist results of fiscal stimulation. The buying of cement and rebar will increase jobs and therefore impact economic statistics.

The banking system has healed the interests of the Fat Cats, but done nothing at all in terms of increasing the willingness of financial institutions to make loans.

The buying of cement and rebar will definitely impact business conditions and the statistics thereupon.

In terms of real accomplishments the predictable result of fiscal stimulation will be to transmit monetary potential inflation into real inflation.

A drop in the high level of confidence because of the main predictable result reflected by the numbers at today’s inaugural will cause a hyper-inflation that is a currency event based on the loss of confidence.

The up cycle in inflation therefore stands on a basis of loss of confidence in the new management of the new administration.

The risk of loss of confidence is heightened by the level of today’s expectations of a form of the Second Coming.

Gold is headed to $1250 on its way to $1650, after which Alf will be right. The short sellers in gold and shares thereupon should just sit tight so they can experience the loss of all time.

The problem shown in the picture below has no possibility to correct whatsoever in the either the near or long term.

Respectfully yours,
Jim

xnissan-6163 - 20090120_075451