Posted at 4:00 PM (CST) by & filed under General Editorial.

Jim,

This was published on the McClathy website. Their motto is ‘Truth to Power’. They tell it like it is and I found this article on the Yahoo news today.

CIGA Marty

New intelligence report says Pakistan is ‘on the edge’
By Jonathan S. Landay and John Walcott | McClatchy Newspapers

WASHINGTON – A growing al Qaida -backed insurgency, combined with the Pakistani army’s reluctance to launch an all-out crackdown, political infighting and energy and food shortages are plunging America’s key ally in the war on terror deeper into turmoil and violence, says a soon-to-be completed U.S. intelligence assessment.

A U.S. official who participated in drafting the top secret National Intelligence Estimate said it portrays the situation in Pakistan as “very bad.” Another official called the draft “very bleak,” and said it describesPakistan as being “on the edge.”

The first official summarized the estimate’s conclusions about the state of Pakistan as: “no money, no energy, no government.”

More…

Dear Jim,

Here are a few SFR (single family residence) statistics from a mortgage banker friend of mine. This information is focused on California, but you can probably get the general US message.

  • Foreclosures made up 47% of all CA SFR sales in August 08, up from 9% in August 07
  • Median CA SFR price was $350,000 in 8/08 down 40% from $590,000 in 8/07
  • 2008 SFR unit sales are on pace for 490,000 units, up from 313,000 in 2007
  • Current unsold inventory sits at 6.7 months VS 10.6 months in 8/07
  • New SFR permits are down 53% so far this year
  • Single family construction loans are now 12.5% delinquent, and condos 16.5%

Respectfully yours,
Monty Guild
www.GuildInvestment.com

Dear Jim,

I have had many people ask me about how ETF’s work. They often ask detailed questions about what happens to their ETF in scenario A, or scenario B. The answer is that all ETF’s work differently, and how they work is laid out in the legal language in the individual prospectus for each ETF.

Therefore, if JSMineset readers are interested in investing in ETF’s, they should read the prospectus closely and think about the implications of the legal structure. If they do not understand the consequences of the legal structure, they should hire a good securities lawyer to read and analyze the documents for them. We are not lawyers, and we do not want to get into the business of dispensing free legal advice to people. In our opinion, if you buy an ETF instrument you should know what you are buying.

Respectfully yours,
Monty Guild
www.GuildInvestment.com

Jim,

Did you know that Trichet is a mining engineer by training, and presumably has some knowledge of gold?

Could we be heading back to a gold standard or a reasonable facsimile in the near future?

Even Trichet is getting in the act.

It will not be long now, Jim. It is all happening as you said it would. I will profit from this, but I’m pretty sad about it.

David Duval

Trichet Calls for Return to the `Discipline’ of Bretton Woods
By John Fraher and Gabi Thesing

Oct. 15 (Bloomberg) — European Central Bank President Jean- Claude Trichet said officials reshaping the world’s financial system should try to return to the “discipline” that governed markets in the decades after World War II.

“Perhaps what we need is to go back to the first Bretton Woods, to go back to discipline,” Trichet said after giving a speech at the Economic Club of New York yesterday. “It’s absolutely clear that financial markets need discipline: macroeconomic discipline, monetary discipline, market discipline.’

More…

Dear David,

I have written many notes on the Federal Reserve Gold Certificate Ratio, modernized and revitalized, which will serve to meet the needs of discipline in a floating system. It is going to happen but not yet.

Jim

Posted at 3:38 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

It was more of the same type of price action that we have been seeing in gold for some time now. The market is torn between continued deleveraging from speculative
players on account of redemption requests from clients moving to cash versus safe haven buying.

It has been interesting reading the comments about this market in the financial press of late. The majority of gold pundits for the most part seems to be reading the same talking points which as usual are utterly and completely wrong. To hear them say it, gold as a safe haven is finished, over, kaput, pushing up daisies, swimming with the fishes, surfing its last wave, worm food, ad infinitum, ad nauseaum.

What these mindless robots seem unable to grasp is that the Comex is NOT the gold market. It is a paper market which has been the recipient of large speculative buys by commodity index funds. These funds take large positions in an entire gamut of commodities based on the weightings of those particular commodities in the various commodity indices that they use as a benchmark. It some cases it might be the Goldman Sachs commodity index. In others it is the Reuters/Jefferies CRB index; it still others it is the Dow Jones Commodity Index. That means they buy gold, silver, crude oil, corn, wheat, nat gas, sugar… etc… in the same percentage terms as they are weighted in those indices. For example, if the weighting in one of these indices for gold happens to be 5%, then for every million dollars of client money invested, they are required to buy $50,000 worth of gold futures contracts at the Comex. When these funds get redemption requests from clients, who now want out of the commodity sector, they are forced to sell FUTURES across the board to generate the cash needed to send back to their clients. That is why, for the most part, the entire commodity complex is sinking whether it is corn or soybeans or wheat or platinum, etc. If $20 million of cash is required to meet client redemption requests, then $20 million of commodity futures must be sold REGARDLESS OF THE FUNDAMENTALS IN THAT PARTICULAR MARKET.  In other words, it is FORCED liquidation on account of redemption requests. That has NOTHING TO DO with the real physical gold market where demand remains at unprecedented levels, levels so high that it is producing serious shortages of bullion for would-be buyers. This is what is producing the increasing dichotomy between the Comex and the real gold market. I would go as far as saying that we are for all practical purposes seeing a BLACK MARKET in gold beginning to develop.

Having said all that, it should still be noted however that while every single commodity futures market is in the red today on account of this forced selling, GOLD IS STILL RELATIVELY STABLE! Hey, you dimwitted pundits who keep pooh-poohing the yellow metal’s safe haven status because it is not trading at $1000, take note. Even in spite of the forced liquidation, gold is hanging in there precisely because there are enough buyers to offset a great deal of this continued forced liquidation. And this is in the arena of the futures market.  In the real world,  gold is fetching $1000 an ounce out there in some instances. Premiums for one ounce gold bullion coins are running anywhere from $65 – $100 above the quoted spot price and certainly above the phony price quoted on the Comex. Last year at this time you could buy all the one ounce gold bullion coins you wanted for $20 – $30 over the spot price.

Meanwhile back in Fairy Tale land at the Comex, open interest registered a bit of an increase in yesterday’s session moving up nearly 2,500 contracts. I suspect that come this Friday, when we review the Commitments of Traders report, we are going to see increases in the fund SHORT category with a sharp drop in the fund long category alongside of short covering by the bullion banks who have been using the forced selling to cover their shorts in order to capture their paper profits allowing them to hit the metal on the next rally and do the same thing all over again.

To put things in perspective about this open interest decline – we are down to levels last seen in November 2006. Let’s state this in terms that perhaps convey what I have been trying to say for some time now. NEARLY ALL OF THE SPECULATIVE INTEREST THAT HAS BEEN DRIVING PAPER GOLD HIGHER FOR THE LAST TWO YEARS HAS NOW DISAPPEARED due to this forced liquidation. This is incredible when you think about it a bit. So much deleveraging in gold has already occurred, that nearly all the buyers from the last two years are gone from this market. And yet, in spite of this, gold is still sitting above the $800 level. Back in November 2006, front month gold closed at the price of $646.90. Today, we are nearly $200 higher than that and yet nearly all of the speculative long side interest going back to that date is gone. Someone is buying gold because they see value in it and that buying has been sufficient to hold the price relatively firm compared to nearly every other commodity out there. What can be said about gold cannot be said about any other single commodity out there. If you doubt this, pull up the continuous price charts of corn or soybeans or platinum or copper, etc., and just look at them. Look at the chart of crude oil. Look also at the gold/crude oil ratio which has shot up strongly in favor of gold. (By the way, this alone is the reason why many of the gold mining outfits with quality mines, good management and good balance sheets are going to show some strong profits and continue to be sold down to levels that are extremely undervalued). Gold is even outperforming even longer dated Treasuries right now.

To sum up, as the equity markets fall off the cliff thumbing their noses at the monetary authorities, expect further risk aversion to occur which means further forced liquidation in commodities. Watch the Euro/Yen cross and the Yen itself to get a sense of when the bulk of this will abate. The Yen as well as the Swiss Franc are benefiting from the unwinding of carry trades and will tend to be the stronger currencies out there ( along with the US Dollar) as long as the risk aversion play is in vogue.

Trader Dan

Posted at 1:51 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

It was more of the same type of price action that we have been seeing in gold for some time now. The market is torn between continued deleveraging from speculative
players on account of redemption requests from clients moving to cash versus safe haven buying.

It has been interesting reading the comments about this market in the financial press of late. The majority of gold pundits for the most part seems to be reading the same talking points which as usual are utterly and completely wrong. To hear them say it, gold as a safe haven is finished, over, kaput, pushing up daisies, swimming with the fishes, surfing its last wave, worm food, ad infinitum, ad nauseaum.

What these mindless robots seem unable to grasp is that the Comex is NOT the gold market. It is a paper market which has been the recipient of large speculative buys by commodity index funds. These funds take large positions in an entire gamut of commodities based on the weightings of those particular commodities in the various commodity indices that they use as a benchmark. It some cases it might be the Goldman Sachs commodity index. In others it is the Reuters/Jefferies CRB index; it still others it is the Dow Jones Commodity Index. That means they buy gold, silver, crude oil, corn, wheat, nat gas, sugar… etc… in the same percentage terms as they are weighted in those indices. For example, if the weighting in one of these indices for gold happens to be 5%, then for every million dollars of client money invested, they are required to buy $50,000 worth of gold futures contracts at the Comex. When these funds get redemption requests from clients, who now want out of the commodity sector, they are forced to sell FUTURES across the board to generate the cash needed to send back to their clients. That is why, for the most part, the entire commodity complex is sinking whether it is corn or soybeans or wheat or platinum, etc. If $20 million of cash is required to meet client redemption requests, then $20 million of commodity futures must be sold REGARDLESS OF THE FUNDAMENTALS IN THAT PARTICULAR MARKET.  In other words, it is FORCED liquidation on account of redemption requests. That has NOTHING TO DO with the real physical gold market where demand remains at unprecedented levels, levels so high that it is producing serious shortages of bullion for would-be buyers. This is what is producing the increasing dichotomy between the Comex and the real gold market. I would go as far as saying that we are for all practical purposes seeing a BLACK MARKET in gold beginning to develop.

Having said all that, it should still be noted however that while every single commodity futures market is in the red today on account of this forced selling, GOLD IS STILL RELATIVELY STABLE! Hey, you dimwitted pundits who keep pooh-poohing the yellow metal’s safe haven status because it is not trading at $1000, take note. Even in spite of the forced liquidation, gold is hanging in there precisely because there are enough buyers to offset a great deal of this continued forced liquidation. And this is in the arena of the futures market.  In the real world,  gold is fetching $1000 an ounce out there in some instances. Premiums for one ounce gold bullion coins are running anywhere from $65 – $100 above the quoted spot price and certainly above the phony price quoted on the Comex. Last year at this time you could buy all the one ounce gold bullion coins you wanted for $20 – $30 over the spot price.

Meanwhile back in Fairy Tale land at the Comex, open interest registered a bit of an increase in yesterday’s session moving up nearly 2,500 contracts. I suspect that come this Friday, when we review the Commitments of Traders report, we are going to see increases in the fund SHORT category with a sharp drop in the fund long category alongside of short covering by the bullion banks who have been using the forced selling to cover their shorts in order to capture their paper profits allowing them to hit the metal on the next rally and do the same thing all over again.

To put things in perspective about this open interest decline – we are down to levels last seen in November 2006. Let’s state this in terms that perhaps convey what I have been trying to say for some time now. NEARLY ALL OF THE SPECULATIVE INTEREST THAT HAS BEEN DRIVING PAPER GOLD HIGHER FOR THE LAST TWO YEARS HAS NOW DISAPPEARED due to this forced liquidation. This is incredible when you think about it a bit. So much deleveraging in gold has already occurred, that nearly all the buyers from the last two years are gone from this market. And yet, in spite of this, gold is still sitting above the $800 level. Back in November 2006, front month gold closed at the price of $646.90. Today, we are nearly $200 higher than that and yet nearly all of the speculative long side interest going back to that date is gone. Someone is buying gold because they see value in it and that buying has been sufficient to hold the price relatively firm compared to nearly every other commodity out there. What can be said about gold cannot be said about any other single commodity out there. If you doubt this, pull up the continuous price charts of corn or soybeans or platinum or copper, etc., and just look at them. Look at the chart of crude oil. Look also at the gold/crude oil ratio which has shot up strongly in favor of gold. (By the way, this alone is the reason why many of the gold mining outfits with quality mines, good management and good balance sheets are going to show some strong profits and continue to be sold down to levels that are extremely undervalued). Gold is even outperforming even longer dated Treasuries right now.

To sum up, as the equity markets fall off the cliff thumbing their noses at the monetary authorities, expect further risk aversion to occur which means further forced liquidation in commodities. Watch the Euro/Yen cross and the Yen itself to get a sense of when the bulk of this will abate. The Yen as well as the Swiss Franc are benefiting from the unwinding of carry trades and will tend to be the stronger currencies out there ( along with the US Dollar) as long as the risk aversion play is in vogue.

Click chart to enlarge today’s 12 hour action in gold in PDF format as of 12:30 pm CDT with commentary from Trader Dan Norcini.

Posted at 9:30 AM (CST) by & filed under General Editorial.

Current LIBOR Rate

LIBOR is an abbreviation for the “London Interbank Offered Rate,” and is the interest rate offered by a specific group of London banks for U.S. dollar deposits of a stated maturity. LIBOR is used as a base index for setting rates of some adjustable rate financial instruments, including Adjustable Rate Mortgages (ARM’s)

Today’s LIBOR Interest Rates are listed below and updated daily:

LIBOR – 1 Yr  4.131%  -0.038%
LIBOR – 6 Mo  4.376%  -0.018%
LIBOR – 3 Mo  4.750%  -0.002%
LIBOR – 1 Mo  4.560%  -0.027%
Treasury – 30 Yr  4.14%  0.05%
Treasury – 10 Yr  3.84%  0.12%
Fed Prime Rate  4.50%  0.00%

as of 14-Oct-08 09:32 ET
sources: DTN, Federal Reserve
© theFinancials.com

Posted at 5:55 PM (CST) by & filed under General Editorial.

Dear Jim,

The government likes to sell us on the idea that we are not in a recession. Even establishment figures like Paul Volcker say we are now in a recession. This is obvious to any observer. The recession could be a long and difficult one which I and many other observers will call a depression. At least 2 or 3 years of difficult economic times lie ahead.

In such times leverage in the world and the standard of living in the developed countries will decline. People will become more rational, and less egocentric.

Respectfully yours,
Monty Guild
www.GuildInvestment.com

Former Fed chief says U.S. now in recession

SINGAPORE (Reuters) – Former Federal Reserve Chairman Paul Volcker said on Tuesday the U.S. housing sector faced more losses and the economy was in recession even as authorities moved to stabilize the financial system.

Volcker said the priority for U.S. authorities in the credit crisis was to stabilize the financial system even though that meant heavy government intrusion.

“The first priority is to stabilize the financial system. It is necessary even though the cost involved is heavy government intrusion in markets that should be private,” he said in a speech at a seminar in Singapore.
“House prices in the U.S. are still declining. There are still more losses to come there. The economy, I believe, is in recession.”

Volcker is chairman of the board of trustees of the Group of 30, an international body composed of central bank governors, leading economists and private financial sector experts.

He is credited for battling double-digit inflation that flared in the 1970s.

More…

Dear Monty,

I always agree with the revered Volcker. He is one of the few that hasn’t spoken with the standard forked tongue.

You really think the hoard of Greenwich and Toronto hedgies will lose their egocentric character? You must expect them all to get bird flu, naturally or otherwise.

Your thoughts call for a review of the Formula.

Click here to review the Formula

All the best,
Jim

Dear Jim;

Today David Rosenberg, chief North American economist for Merrill Lynch, made a few very important points for all investors. Rosenberg has distinguished himself by being by far the most realistic US economist of any major investment bank. He was calling for a difficult economic period in the US months ago.

He agrees with me that we are currently seeing depression like activity in the US economy. His point today is one that you and I have often made, but he has Merrill Lynch and Bank of America listening to him.

He points out that over the next few years, the supply of gold will grow at a much slower rate than the amount of any fiat currency. He points out that the monetary base is growing at the rate of 19% per year, and when you add to that the swap lines that the US will institute to loosen up the world banking transactions, the growth rate will be much higher. He goes on to say, “the supply of gold is going to be rising at a much slower rate than the growth of fiat currencies, and likely buy a huge margin.” Thus, as an alternative to depreciating currencies, gold is a very a very attractive investment vehicle. He further states,” If gold, in real terms, were to retest its old glory highs of the early 1980’s, it would end up testing $2,000 an ounce”.

Over time, the wiser of the big investment company economists are starting to endorse what you and your website have long stated. With money supply exploding as it currently is, the massive amounts of money that have been created by many countries in Europe and North America (especially the US) will force currencies down and gold up. It is a simple example of the law of supply and demand.

Respectfully yours,
Monty Guild
www.GuildInvestment.com

My Dear Friend Monty,

Amen to that Brother.

Respectfully yours,
Jim

Posted at 2:06 PM (CST) by & filed under General Editorial.

Dear Friends,

To answer the deluge of question today breaking over me like Hurricane Katrina:

If this disaster was under control there would not be three financial giants speaking so far today. Actually I want another Nobel Laureate, Dr. Brenner, to stand up and be counted.

Iceland’s collapse is no small event. It is not something meaningless that cannot be applied to a broke giant like the USA whose debt to non US entities are enormous problem from banks to government.

This morning the stock market in Iceland, after a three day stop, opened up down 77%. The Krona is in the tank.

The very few in Iceland that survived their crisis are those that, against all advice from every corner, held gold. They are sound and solvent. When this happens to a country their distribution means melts down. Then it is a rush to buy everything you will need for a minimum of 90 days, maybe much longer.

Gold was up $20 in non-US hours, but got mauled by intervention to the negatives and is now slightly higher regardless of the US dollar’s nature.

Think about the load of garbage suggestion that Europe has more problems than the US. That is an Urban Legend without substance. You will see!

This window dressing has 21 days to go because it is more political than it is economic.

That does not mean the Exchange Stabilization fund is non-existent except as an order from the Secretary of the USA to his preferred brokerage firm to sell gold in the paper market. That broker does not even try to hide their actions in either the gold market or equity index related vehicles. The second Goldman appears, every local jumps to whatever side they proudly demonstrated. Such a position of ego usually occurs only at or near the end of that Financial God’s fame.

Those of you that erroneously think this can never end have never lived through this before. I have lived here for 50 years and am well aware of how the ultimate currency acts.

Gold is insurance against bailouts, busted banks, money market funds like Reserve Funds which have missed their promised payback today, conflagration in the OTC credit default and other varieties of credit derivatives, enormous and unprecedented flood of newly and electronically created US dollars everywhere.

I told you about that lady that I felt so bad about 8 days ago. She sounded quite mature. Her total wealth is in a Reserve Money Market Fund. She was told they would pay her back in eight days. That was yesterday and NO repayment was made.

Please read this publication before calling me. Please use the search engine provided here before calling me. Please make an effort to research your question using other tools before calling me.

You are giving me ever-deepening battle fatigue so I have to pull back. I have no other choice. 90% of the questions asked have already been answered here in detail repeatedly.

The same callers who need their hands held are tiring me. To be honest, constant whining by the same people is starting to piss me off.

Everything you see done is more of exactly the same thing that caused this problem. It is certainly coddling the real criminals that caused all this.

If you really buy the crap that anything other than freedom of markets to do their thing and truthful valuation of items on any concerned party’s balance sheet can fix the problem, you are too damn dumb for me to help you.

If you believe that governments are bigger than the currency markets or the ultimate insurance currency, gold, what are you doing owning gold? Please do me, the market and yourself a favor and go away.

Now I am going to call this mature lady and give her the less than good news. Gold would have done a lot more for her than a Treasury instrument money market fund that was in all probability up to the greedy eyeballs in OTC derivatives.

Gold will trade at $1200 and $1650 on or before January 14th, 2011. It does not become more of a reality if you call me to hear me say it. Yes, I am 100% in gold and will grow as additional funds become available to me. The difference between you and I is that I stand on my bank as it is underground.

Regards,
Jim

Posted at 9:44 AM (CST) by & filed under General Editorial.

Dear CIGAs,

The following are the respective LIBOR rates. To view the daily updated rates, click the link at the top of the home page.

Current LIBOR Rate

LIBOR is an abbreviation for the “London Interbank Offered Rate,” and is the interest rate offered by a specific group of London banks for U.S. dollar deposits of a stated maturity. LIBOR is used as a base index for setting rates of some adjustable rate financial instruments, including Adjustable Rate Mortgages (ARM’s)

Today’s LIBOR Interest Rates are listed below and updated daily:

LIBOR – 1 Yr  4.131%  -0.038%
LIBOR – 6 Mo  4.376%  -0.018%
LIBOR – 3 Mo  4.750%  -0.002%
LIBOR – 1 Mo  4.560%  -0.027%
Treasury – 30 Yr  4.14%  0.05%
Treasury – 10 Yr  3.84%  0.12%
Fed Prime Rate  4.50%  0.00%

as of 14-Oct-08 09:32 ET
sources: DTN, Federal Reserve
© theFinancials.com

Posted at 7:44 PM (CST) by & filed under General Editorial.

Dear CIGAs,

To sum up today:

Once again the exact economic actions that caused former market bubbles, today’s credit crisis (that is made up of massive legal financial fabrications) and enormous injections of US dollars into the world monetary system by the Fed (Helicopter Drop) were taken.

The FASB has once again allowed egregious financial fabrication in the valuing of OTC derivatives outrageously far away from the reality of their true worthless value.

The injection of dollars into the world monetary system, assuming you understand the mechanism of swaps, and the number that non US central banks said was going to be utilized ($2 trillion NOW) is monetary stimulation faster and larger by orders of magnitude than any monetary action in the history of economics, even when adjusted for inflation.

If you do the same things but to a factor of ten you might get CONSEQUENCES times 100, but hey, it might fool the world for 22 more days.