Working on Gold/Currencies Analysis

It will likely be this weekend before weekly market analysis is complete. There are several confusing signs out there. Thus far, the preponderance of the evidence suggests we may be at a very short term turn up for the dollar and a sell-off in gold. This is likely not going to be a substantial move, and the dollar is not likely to exceed 80/81 on the USDX. We're currently looking at other markets for confirmation. Once the analysis is done, we will post the results. It will be done before markets open Monday morning in Asia.

Read more...

From the "Those Who Can, Do, and Those Who Can't, Teach" Files

We stand in amazement at how many economists seem to not understand economics.

Perhaps, instead of Galbraith's recommendations, we could simply all print however much money we need so no one has to worry about working anymore.  It follows the same logical principle..





Galbraith is right from one perspective--no Republican is going to live up to the promise of cutting any significant costs. The "reality" that said politician will never work again if s/he delivers on the promise of cuts will sink in and eliminate any chance of cutting anything substantial. The sheep know no for which they ask.

This insanity knows no bounds. Readers had best take specific actions to protect themselves. No one else is going to, and these decisions will have very real consequences.

Read more...

Happy Guy Fawkes' Day

"Remember remember the fifth of November

Gunpowder, treason and plot.

I see no reason why gunpowder, treason

Should ever be forgot..."

On this day in 1605, the Gunpowder Plot was uncovered, ultimately leading to the torture, death and martyrdom of Guy Fawkes.  This day is typically celebrated for the survival of the King instead of the the celebration of the plot itself, though given our modern times the purpose of celebration appears to be changing. 

There are those that believe that the votes they so recently cast are the modern form of revolt against slavery.  We don't share that belief.  We tend to believe more in the Aldous Huxley-esque vision where mankind enslaves itself while believing it had free choice. At its core, we believe that to be free--truly free--man must have privacy, economic freedom, and be knowledgeable about history, economics, and human behavior.  Our mission is to try and convey that information to help others and allow them to make herd-independent choices.  Sign up for our newsletter, the first issue of which will be out soon.

In other news, the USD tripped our stops yesterday and immediately turned to the upside today.  That's the kind of market we have, folks.  We're preparing the end of the week market view for posting later tonight.

In closing....

"Voila! In view, a humble vaudevillian veteran, cast vicariously as both victim and villain by the vicissitudes of fate. This visage, no mere veneer of vanity, is a vestige of the vox populi, now vacant, vanished. However, this valorous visitation of a bygone vexation stands vivified, and has vowed to vanquish these venal and virulent vermin vanguarding vice and vouchsafing the violently vicious and voracious violation of volition. The only verdict is vengeance; a vendetta held as a votive, not in vain, for the value and veracity of such shall one day vindicate the vigilant and the virtuous. Verily, this vichyssoise of verbiage veers most verbose, so let me simply add that it's my very good honor to meet you and you may call me V."--V for Vendetta

Read more...

Out of Popcorn: FOMC Announcement

From the horse's mouth.  In short, the move was roughly in line with expectations.  Initial "vindication" rally in the euro and stocks.  Now we expect a reversal for a few weeks with a dollar rally and stock market pullback (starting to get that now) before the market moves higher and the dollar moves lower.

Dramatic moves in currencies.  Amazing.  More on this later.

Get your funds ready for precious metals purchases.

Press Release

Release Date: November 3, 2010

For immediate release

Information received since the Federal Open Market Committee met in September confirms that the pace of recovery in output and employment continues to be slow. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. Housing starts continue to be depressed. Longer-term inflation expectations have remained stable, but measures of underlying inflation have trended lower in recent quarters.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate. Although the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, progress toward its objectives has been disappointingly slow.
To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to expand its holdings of securities. The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month. The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.
The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.
The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate. 
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Sandra Pianalto; Sarah Bloom Raskin; Eric S. Rosengren; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.
Voting against the policy was Thomas M. Hoenig. Mr. Hoenig believed the risks of additional securities purchases outweighed the benefits. Mr. Hoenig also was concerned that this continued high level of monetary accommodation increased the risks of future financial imbalances and, over time, would cause an increase in long-term inflation expectations that could destabilize the economy.
Statement from Federal Reserve Bank of New York

Read more...

With Bated Breath....

Popcorn ready.  Stops in place.  Waiting for Helicopter Ben and Turbo Tim to tell us much they're going to print up.  We're still anticipating the marketing will be disappointed, though we must add that the dollar is very close to key support.  A break here is a virtually guaranteed visit to 74 for a quick coffee and 70/71 for counseling.

Below that rests a lot of space and a lot of guesses.

Let's see if Ben can print money and still force a short term dollar rally.

Best grab a strong drink, too...

More after the announcement and some analysis time.

Read more...

Paul Brodsky on Gold, Paper Currencies, Inflation and Deflation

Longer term readers and those that know us personally will find Paul Brodsky's comments from his presentation at the BCA Fall Investment Conference on October 25 very familiar.  Read the full text at Ritholtz's Big Bicture blog, but we'll highlight select areas:

• From 1994 until 2006, the Fed's overnight credit facility distributed term-funded throughout the global economic system, first flowing into financial markets until 2000, then into housing, and then in 2007 it flowed back to the Fed.
• The global boom that resulted was simply based on credit, and was not a real generation of wealth.  The end result is that most of the standard of living that people have is not based on wealth generated, and thus will be at risk.
• Today we have a major debt bubble that needs to deflate.  History shows that governments will not allow them to deflate and will debase the currency instead (inflate).
• The Fed would have to created 7x more dollars than exist today for the Treasury to cover its obligations (side note: expect QE3, QE4, QE5....)  The US is levered at roughly 35:1 today.
• Forget what policy makers say or intend and rely on logic and history as a guide in these times.  (side note: Amen!)
• Western economies are too big in nominal terms to support real production.  Debt must be defaulted upon, or devalued.  The latter option is more appealing to indebted voters and governments, so it will be the option chosen.  (side note: He correctly defines inflation and deflation.  We're dancing for joy!)
• Most investors are not prepared for inflation.  They weren't prepared in the 1970s either until it was too late.
• It's a race to the bottom in currencies.  They'll all be devalued.  All fiat money is in trouble.
• Only scare resources are good investments (side note:  How long have we been pounding the commodity table?)
• Greatest upside/least risk is in gold.  Dividing US monetary base by (supposed) US gold holdings yields upwards of $8,000 per ounce for a target gold price.
• The Fed will ultimately devalue the dollar against gold and then policy will focus on the gold/dollar exchange rate.  (side note: Jim Sinclair has been calling for this for some time.)
• Gold is still underinvested in.  All miners together have a lower market cap than Google, and pension funds have 0.56% of their investment in gold.
  

Read more...

For Your Evening Entertainment

This should be just the thing after a long day at the poles, voting for no change...

We've been "on again, off again" with the videos from inflation.us. This one is worth watching. Grab a chair and some Rolaids.

Note that we don't entirely agree with everything in the video, though we do agree with most of it. It is our opinion that the proposed solutions--hiding out on a farm with your precious metals and food stores when the time comes and "banding together" to bring about real change are all in the realm of fantasy (also known as "hope," a four letter word). If and when things get bad enough for a currency collapse--or the "corollary that ends the same", deflationary default and collapse--then what you need are the tools to be far away with as many of your assets untouchable as possible. If the US government ever builds a wall to protect its borders, it will be to keep Americans in, not foreigners out.

Preparing yourself by legally structuring businesses, legally obtaining a second citizenship, legally hold overseas assets, guarding your privacy, and safeguarding your money are not in the realm of fantasy. Forget Mad Max. If the situation ever gets that bad, you want options. You're no Mel Gibson.

Read more...

What to Expect in the Newsletter

We had a couple of questions about the newsletter regarding content.  Perhaps it involves a bit more explanation, and we'll try to cover what to expect today, with a bit of background to add color.

Those that have followed the blog, and many who have kept up with us directly even when the blog was on hiatus, know that our push has been primarily financial.  In fact, the purpose of this blog was originally to attempt to educate people on the upcoming devaluation of currencies in the West, notably the US.  In fact, to those that knew us on financial boards, we had been preaching the gold investment game since 2003 (and we were late to the dance on that one by a couple of years!).  What is happening now is nothing new--it is the result of mankind's cyclical behavior.  There really is nothing new under the sun.  The world moves in cycles, and mankind's behavior is the result of predictable human behavior over a long enough timeline.  Once you study it, it truly is remarkably predictable, and as a result, manmade structures and events (like financial markets and governments) are very cyclical in nature.

Unfortunately, the truth is that very few people will ever use history as a guide to determine what's likely to come.  People are more concerned with leisure and convenience than with work and understanding.  The herd is infinitely predictable, which is why they always end up being wrong!

Thus, the original goal of this blog--education--was largely a failed enterprise.  People don't want to be educated, they want to fattened up and not know that the fattening is for the slaughterhouse.  Thus, this blog has existed in relative obscurity since inception.

Meanwhile, we have been busy both protecting ourselves financially AND from the rest of the largely predictable outcome of current events:  at some point, things will become very disorderly.  Governments will grasp onto the last vestiges of their power with everything they have left before they die.  This is the way of the free markets and the results of government largess and human lethargy.  Most fail to see that what we face is the destruction of institutions trying to control the free (natural) markets and course of events.  This is, in a perverse way, creative destruction.

Thus, our mission here has changed somewhat.  The people that survive this upcoming event, figuratively (and perhaps, literally) speaking, will do so because they have prepared themselves.  There's a very real chance than buckling down and hiding out on a remote piece of property with stored food and weapons won't really cut it at all.  What is needed for protection is something different--an ability to remove oneself and one's property from the reactionary nature of failed states and institutions.  If you and your property are within their grasp, you and it are not safe.

Broken institutions are dying.  They will take down many people.  To avoid being one of those people, you need options.  Having options requires having knowledge, and at this stage, connections.  We have the tools that can supply you with those options.  That's what the newsletter will cover.

To be free, you need a few things:

• an understanding of what freedom is and is not (shattering of your illusions)
• financial freedom (a means of independent self-sustainability)
• privacy (a means of minimizing your risk to dying institutions struggling to maintain the status quo)

We will be focusing on these items and the step-by-step plans necessary to achieve freedom and independence.  It will not be an easy process, and since more people are waking up, the risks and costs are rising.

In addition to education and providing actionable steps and options, we will uncover new opportunities to protect what you have and take advantage of this once-in-a-lifetime-or-two historical event.  Dislocations are the source of opportunity if you are prepared for them.

When the Titanic first struck the iceberg, the vast majority of passengers ignored the event while a few headed for the exits.  By the time the masses realized the magnitude of what had occurred, the run on lifeboats was tremendous.  Which group of people do you want to mimic?  Contact us directly or sign up to the newsletter sign up list below if you want to get on a lifeboat before it's too late.

join the mailing list

* indicates required

Email Address *

Close

Read more...

Schneier TED Talk on Reconceptualizing Security

A brief explanation on the paradigm in which humans live and why they make poor choices about their security.  You should watch this 20 minute video.

Read more...

Dollar's Short Term Rally May Be Shorter Than Anticipated

The dollar is really struggling on election day in the US.  Perhaps it realizes that it can't win, regardless of which party wins?

The very short term upward trendline has been decisively broken, but the lows are holding--at least at this moment.  A breakdown below 76.15 spells trouble, and perhaps the beginning of things becoming disorderly in the decline, as suggested by John Hathaway on Bloomberg.

We still remain of the opinion that the Fed will actually disappoint.  As long as the lows hold, we'll hold that conviction.  As we suggested last week, the markets may expect upwards of $1T for QE2.  The Fed has been ratcheting down expectations and used the term "a few hundred billion," which set the low for the dollar.  According to today's economist survey results, the consensus is $500B for QE2.  Keep those numbers in mind for tomorrow's FOMC announcement.  We anticipate that the Fed will announce $500B +/- $50B for QE2 while leaving the door open for future QE rounds.  This will likely disappoint the market, leading to a dollar upward move and an asset/precious metals pullback.  That will create a buying opportunity.

The longer term trend remains the same.  Fiat currencies are going to be devastated, and the USD will likely lose its reserve currency status.  But this game is played in short timeframes with volatility being the norm, not the exception.


We will have to see tomorrow how it all goes down.

If you haven't already done so, contact us to be placed on the list for the first newsletter.  We do not and will not ever sell entrusted information to any party.  The newsletter will contain more in-depth analysis of commodities, precious metals, equities, and currency markets, segments on personal and asset protection for the coming times, protecting your privacy, and a host of other information which may prove invaluable within a much shorter period of time than you may expect.

Read more...

Not Good, But Stuff You Should Know: Generational Implications of Retiring Boomers

Take 10 minutes of your life to understand this issue, if you don't already.

Think of what the Fed and government will do.

If you're not ACTIVELY protecting yourself, you're gambling with your own future and the future of your children. You can either hope for the best ("hope" is a four letter word) or you take matters into your own hands.

We are providing services to protect peoples' assets and create a layer between themselves and what's coming. Do it yourself or get some help, but do something.

Hope is for losers. Action is for winners. Good luck convincing millions of your fellow citizens to get on the same page. Protect yourself and your family first. You only have yourself to blame if you do nothing.

Read more...

Does Anyone Still Listen to this Guy?

Krugman was at it again on Sunday.  Apparently to him, solving a debt crisis with more spending is just what the doctor ordered.  Of course, he's right on one item--not spending will create a bona fide deflationary depression.  The "pro austerity" camp, for the most part, has no idea what it's asking for.  On the other hand, the "pro-spending" camp, which includes the Keynesians like Krugman and Bernanke (and secretly every politician that wants to keep his or her office), will have to destroy the currency in order to fight the debt tidal wave.

Damned if you do, damned if you don't.

As long term readers know, we are in neither camp.  We are simply going to capitalize on the situation and believe that the politicians will do whatever it takes to defeat the debt deflation--and in doing so will unleash a terrible inflation.  Hence, we are inflationists at the end of the day, but whichever direction the tide turns, rest assured we won't be swimming upstream.

In case you haven't seen it, here's Krugman's New York Times Halloween editorial on the subject.  In the spirit of the season, it certainly is scary.


Mugged by the Moralizers
PAUL KRUGMAN
Published: October 31, 2010
“How many of you people want to pay for your neighbor’s mortgage that has an extra bathroom and can’t pay their bills?” That’s the question CNBC’s Rick Santelli famously asked in 2009, in a rant widely credited with giving birth to the Tea Party movement.

It’s a sentiment that resonates not just in America but in much of the world. The tone differs from place to place — listening to a German official denounce deficits, my wife whispered, “We’ll all be handed whips as we leave, so we can flagellate ourselves.” But the message is the same: debt is evil, debtors must pay for their sins, and from now on we all must live within our means.

And that kind of moralizing is the reason we’re mired in a seemingly endless slump.

The years leading up to the 2008 crisis were indeed marked by unsustainable borrowing, going far beyond the subprime loans many people still believe, wrongly, were at the heart of the problem. Real estate speculation ran wild in Florida and Nevada, but also in Spain, Ireland and Latvia. And all of it was paid for with borrowed money.

This borrowing made the world as a whole neither richer nor poorer: one person’s debt is another person’s asset. But it made the world vulnerable. When lenders suddenly decided that they had lent too much, that debt levels were excessive, debtors were forced to slash spending. This pushed the world into the deepest recession since the 1930s. And recovery, such as it is, has been weak and uncertain — which is exactly what we should have expected, given the overhang of debt.

The key thing to bear in mind is that for the world as a whole, spending equals income. If one group of people — those with excessive debts — is forced to cut spending to pay down its debts, one of two things must happen: either someone else must spend more, or world income will fall.

Yet those parts of the private sector not burdened by high levels of debt see little reason to increase spending. Corporations are flush with cash — but why expand when so much of the capacity they already have is sitting idle? Consumers who didn’t overborrow can get loans at low rates — but that incentive to spend is more than outweighed by worries about a weak job market. Nobody in the private sector is willing to fill the hole created by the debt overhang.

So what should we be doing? First, governments should be spending while the private sector won’t, so that debtors can pay down their debts without perpetuating a global slump. Second, governments should be promoting widespread debt relief: reducing obligations to levels the debtors can handle is the fastest way to eliminate that debt overhang.

But the moralizers will have none of it. They denounce deficit spending, declaring that you can’t solve debt problems with more debt. They denounce debt relief, calling it a reward for the undeserving.

And if you point out that their arguments don’t add up, they fly into a rage. Try to explain that when debtors spend less, the economy will be depressed unless somebody else spends more, and they call you a socialist.

Try to explain why mortgage relief is better for America than foreclosing on homes that must be sold at a huge loss, and they start ranting like Mr. Santelli. No question about it: the moralizers are filled with a passionate intensity.

And those who should know better lack all conviction.

John Boehner, the House minority leader, was widely mocked last year when he declared that “It’s time for government to tighten their belts” — in the face of depressed private spending, the government should spend more, not less. But since then President Obama has repeatedly used the same metaphor, promising to match private belt-tightening with public belt-tightening. Does he lack the courage to challenge popular misconceptions, or is this just intellectual laziness? Either way, if the president won’t defend the logic of his own policies, who will?

Meanwhile, the administration’s mortgage modification program — the program that inspired the Santelli rant — has, in the end, accomplished almost nothing. At least part of the reason is that officials were so worried that they might be accused of helping the undeserving that they ended up helping almost nobody.

So the moralizers are winning. More and more voters, both here and in Europe, are convinced that what we need is not more stimulus but more punishment. Governments must tighten their belts; debtors must pay what they owe.

The irony is that in their determination to punish the undeserving, voters are punishing themselves: by rejecting fiscal stimulus and debt relief, they’re perpetuating high unemployment. They are, in effect, cutting off their own jobs to spite their neighbors.

But they don’t know that. And because they don’t, the slump will go on. 

Of course, since Krugman's piece went directly after Rick Santelli, you can expect some return commentary.




P.S. This link added by a commentator. Great follow-up. http://www.americanthinker.com/2010/08/paul_krugman_gives_up_1.html

Read more...

Marc Faber on Bloomber - Stocks and Fed Policy

We are, once again, very much in agreement with Dr. Faber's assessment.  The Fed is likely to disappoint since QE2 expectations are so high.  The dollar appears to be bottoming for a rally (see our discussion last week).  This should, in turn, take stocks and precious metals down for a bit, which spells and excellent buying opportunity.  We'll be looking for the bottom, and newsletter subscribers will get the detailed information.  Contact us to join the mailing list.  The first newsletter will come out this coming weekend!



If you haven't protected yourself with physical, precious metals purchases, consider joining the newsletter to get the details on an outstanding allocated, audited offshore account.

Read more...