Pat Heller: Silver shortages growing and premiums rising
The "Muddle Through" Has Failed: BCG Says "There May Be Only Painful Ways Out Of The Crisis"
Denial. Denial is safe. Comforting. Religiously and relentlessly abused by politicians who don't want nor can face reality. A word synonymous with "muddle through." Ah yes, that "muddle through" which so many C-grade economists and pundits believe is the long-term status quo for the US and the world just because it worked for Japan for the past three decades, or, said otherwise, "just because." Well, too bad. As the following absolutely must read report, which comes not from some trader of dubious credibility interviewed by BBC, nor even from an impassioned executive from a doomed Italian bank, but from consultancy powerhouse Boston Consulting Group confirms, the "muddle through" is dead. And now it is time to face the facts. What facts? The facts which state that between household, corporate and government debt, the developed world has $20 trillion in debt over and above the sustainable threshold by the definition of "stable" debt to GDP of 180%. The facts according to which all attempts to eliminate the excess debt have failed, and for now even the Fed's relentless pursuit of inflating our way out this insurmountable debt load have been for nothing. The facts which state that the only way to resolve the massive debt load is through a global coordinated debt restructuring (which would, among other things, push all global banks into bankruptcy) which, when all is said and done, will have to be funded by the world's financial asset holders: the middle- and upper-class, which, if BCS is right, have a ~30% one-time tax on all their assets to look forward to as the great mean reversion finally arrives and the world is set back on a viable path. But not before the biggest episode of "transitory" pain, misery and suffering in the history of mankind. Good luck, politicians and holders of financial assets, you will need it because after Denial comes Anger, and only long after does Acceptance finally arrive.Goldman's Analyst Index Points To A Bleak September
As
the rapacious rally of this afternoon glides into a sulky sell-off,
Goldman's global economics team provide a little more kindling on top of
further Kiwi downgrades to help us on our way. The Goldman Sachs
Analyst Index (GSAI) fell below the 50 mark (signifying more
analysts see contraction in their sectors than expansion) for the first
time since AUG09. Combine that with the new orders index
registering the largest decline in the index's history (plummeting
22.5pts to 28.6) and the subdued growth outlook remains firmly in
place.Cambridge House International Interviews Doug Casey
We round off the early evening with this must watch interview by Tommy Humphrey of Cambridge House International with Casey Report's Doug Casey, familiar to all regulars of Zero Hedge, in which all the usual suspects are discussed: systemic downfall, alternative investments and flight to real, not mainstream media inspired, safety.Guest Post: China’s Rare Earths Monopoly - Peril or Opportunity?
REEs are found in everyday products, from laptops to iPods to flat screen televisions and hybrid cars, which use more than 20 pounds of REEs per car. Other RRE uses include phosphors in television displays, PDAs, lasers, green engine technology, fiber optics, magnets, catalytic converters, fluorescent lamps, rechargeable batteries, magnetic refrigeration, wind turbines, and, of most interest to the Pentagon, strategic military weaponry, including cruise missiles. Technology transfer is the essential overlooked component in China’s economic rise, and Beijing played Western greed on the subject like a Stradivarius, promising future access to China’s massive market in return, an opium dream that rarely occurred for most companies. You want unimpeded access to Chinese RREs? Fine – relocate a portion on your production lines here, or…Which brings us back to today’s topic.Rare earths and investment – where to go?Toxic Titles | Herkimer County Clerk to Nationwide Title Clearing “MERS Assignments and Satisfactions Do NOT Comply with NY Law"
09/29/2011 - 17:31
Market Commentary From Monty Guild
September 29, 2011, at 3:12 pm
by Monty Guild in the category Guild Investment | Print This Post Print This Post | Email This Post Email This Post
The Coming Euro Bail
Financial volatility and political incoherence have been the order of the day on the continent. However, with the German vote today there are distinct signs that a political consensus has taken shape in Europe. Now the job is to create a TARP like facility to stabilize the banking system and the sovereign debt crisis. As we see things, it looks likely that trillions of Euros will be injected into recapitalization of weak European banks. Funds would also be earmarked for buying the government debt of the three weakest countries ― Greece, and perhaps Ireland and Portugal ― for probably about 50 percent of the face value. Private owners, primarily the banks, would take the losses. One major goal of the plan is to try and keep contagion away from Spain and Italy, which would be massively expensive to bail out.
Cash for the bailout would be funneled through instrumentalities such as the European Central Bank, the European Financial Stability Facility fund, and the European Investment Bank.
This development is to be welcomed. Until recently, many authorities in Europe have been acting as if their heads are stuck in the sand. They have tried to assure the markets about the health of European banks and that no bailout was needed by for Europe’s weakest members. The pretend game has been absurd, and market participants have long been aware of the charade. Politicians lie to suit their own needs but financial markets know better and by and large ignore the foolishness. The public, in Europe and globally, is learning to do the same.
Information has been leaked out to the financial markets in recent days indicative of a credible and large (2+ trillion Euro) plan. Should this materialize, as we think it will, you can expect rallies in global stock markets and in gold. From our side, we will try to determine when this will happen, and communicate our findings to you.
U.S. Job growth ― Go the Reagan Route
The President and Congress are not in harmony on many important issues these days. One thing they are in tune on is this: American job growth is a priority. Their ideas for making this happen, however, have not worked.
We suggest taking a page from former President Ronald Reagan’s playbook. During the 1980s he created a tax regime for new investment which eventually led to the biggest economic miracle that the U.S. had seen for decades: a high-tech boom that came a few years after he implemented a cut in the capital gains tax and new rules to stimulate capital formation.
In our opinion, it was this plan which incentivized the capital investment that created the technology and internet booms. This plan opened the door for the venture capital industry to grow and attract more investors. As it grew, the industry funded the tech revolution and the creation of many new companies. Whole new enterprises emerged, such as internet search engines, web portals, internet security, social media, mobile telephony, software and hardware technology and much biotechnology.
The new industries created many jobs for creative and highly-skilled workers. They cut costs for companies all over the world and improved the global flow of information and communication. U.S. computer scientists, other cutting edge scientists, and many engineers enjoyed a big increase in their personal standard of living, while immigrants with a background in technology flocked to the U.S. to satisfy the demand for expertise; which improved the overall national standard of living.
Eventually many of the companies financed by venture capital went public. The capital gains taxes spawned by this incentive were massive. When paid, the revenue allowed subsequent presidents, starting with President Clinton, to balance the budget and create a robust job market for technology workers.
These actions worked superbly back then…and we believe something similar would work now. We are not alone in this view. It is also the view of Nobel Prize winning economist Robert Lucas of the University of Chicago, who the majority of economists believe is the most influential U.S. macroeconomist of the last 40 years. He is not of the left or of the right. He prefers to remain in his academic roost and write books that have shaped economic thinking for decades. He does not work with politicians of either party. More importantly he stated in a recent interview that “if you want to stimulate growth in investment, productivity, and income, cut taxes on capital.”
We agree. Why do we agree? Because people and businesses plan ahead. As Dr. Lucas pointed out decades ago, businesses hire people because they think that they will be able to make money when their project comes to fruition. If the administration and Congress want to stimulate employment, they need to act to lower taxes on capital investment. We’ve said this before. We’re saying it again…and so is a transcendent Nobel Prize winner.
President Obama and Congress are arguing about taxes. Some say increase taxes, and some say cut taxes. Whatever is done, they should strongly consider tax cuts for capital investment.
When businesses have ideas for expansion, and capital to pull it off, they hire people. They produce newer and better products and services. This is the action plan that would solve the problems of the U.S., Europe, and Japan. All three ailing regions need to think in these terms.
Brazil Institutes Protectionism ― A Big Mistake
Recently Brazil’s finance minister announced a major tax on cars and parts made outside of the Latin free trade block. Why such an unwise move? The bottom line: cars are 60 percent more expensive to build in Brazil than in China.
Protectionism doesn’t work. It is far better to improve the economy and make it more competitive than to stimulate sloth and inefficiency by putting up protectionist barriers. The old saying still rings true: “Competition is for the competent.”
Even land purchases in Brazil have fallen under the influence of protectionism. When foreign sovereign wealth funds or foreign companies seek land they face a limit on the amount they can buy. As a result, billions in foreign agriculture investments are being lost. Investors recently have been shunning Brazil and these behaviors are part of the reason.
Brazilian Bovespa Index (5 year chart)
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The Plight of the Volcker Rule
A few weeks ago we reported on the Volker Rule as a critical action necessary to restrict banks from involvement in the kind of speculative investment activity that contributed to the current financial crisis. The rule was created by the former U.S. Federal Reserve Chairman Paul Volcker and is contained in the Congressional financial and consumer protection overhaul legislation.
The banks, however, are fighting the reform. They are trying to dilute the requirement that would minimize their leveraged bets on the direction of markets for stock bonds and commodities. This increases the chance that the taxpayer will have to bail them out once again.
Overall, the overhaul restrictions of the Dodd-Frank bill are too heavy-handed in many respects. However, the Volcker Rule in our opinion represents the best part of the bill and hopefully will prevail over banking greed. If it becomes diluted, the results, once again, may be harmful for taxpayers.
A recent article in the Wall Street Journal sheds light on one of the ways the banks are trying to lobby around this issue. To quote from the article, “Banks could be allowed to continue making risky bets with their own capital, according to a draft version of the so-called Volcker rule that dilutes the provision’s original ban on proprietary trading.” To read the article, click here Wall Street Journal Article
India watch
India’s economy is moving along at a strong and steady clip. The GDP will rise by over 7 percent in 2011 and will probably do the same next year. As we have been reporting, India has enacted multiple interest rate hikes in the past few months to combat a strong and rising inflation rate. Inflation stems from many causes, primary among them a steep increase in agricultural prices.
The good news for India has been a fortuitous combination of strong monsoon rainfall and minimal flooding. The result is a bumper summer crop of most farm products. Looking ahead, the rivers in northern India are full for a good winter crop. With its very warm climate, India can produce more than one crop per year in most of the country. Increased agricultural production will moderate inflation at least temporarily.
Summary
If the optimists are to be believed, Europe will come to grips with its critical financial problems and conduct a massive restructuring of the banking system and bail out the irresponsible countries that overspent. If the pessimists are correct, the world is a mess and will stay that way.
We are moving toward the optimistic side. We see that Europe is finally recognizing that the all-is-well charade is no longer working. Investors are too smart and more cynical than in the past. Moreover, information travels fast these days. European banks need capital. If they get it, investors may see a sizeable stock market rally in much of the world.
On dips gold remains a good long term buy in our opinion.
Thank You
We thank you for reading our newsletter and look forward to hearing from you. To request information about Guild Investment Management services and offerings please call (310) 826-8600 or email us at guild@guildinvestment.com.
September 29, 2011, at 3:09 pm
by Jim Sinclair in the category Jim's Mailbox |
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by Jim Sinclair in the category Jim's Mailbox |
Print This Post | Email This PostGold Share Broke Out To New Highs
CIGA Eric
Any investor pessimistic about the gold stocks is not listening to the message of the market. What’s that message? Gold leads and the gold stocks follow. The most recent yellow box (green lined) illustrates this leadership. When gold stocks follow in the coming weeks/months will anyone but the talking heads be surprised? Let’s hope not.
Source: Gold leading Gold Shares
The gold shares finally broke out to new highs in September. This effort was promptly rewarded by a big league takedown. Don’t rush to proclaim the gold shares dead money quite yet. Paper operations only dislocate the short-term trend.
The gold stocks have broken out. They will recognized and be controlled by stronger hands during the next advance.
Gold and Gold Stocks Side by Side Comparison
![clip_image001[5]](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgVPKWlt003gyMDPvUwXl9GVwwnIM5uPy1gU_I96ytDBuNmQw5w3PmUZ0ttlR6kEI1Y4wFXkvMNkx9auQ8FD0TYCkL9xV2vfHzBPa2irKRh_zY3mI_Yb1KuVeiELD2-OajoEh6lh7LQABg/s1600/GPM+vs+Gold.JPG "clip_image001[5]")
More…
Is There Blood In The Streets?
CIGA Eric
Fear is the key element to control. Panic, induced by fear, generates selling. Bouts of intense selling keeps buyers disorganized just enough to prevent physical demand from overwhelming paper supply and maintain confidence in the old paradigm a little longer. Investors that recognize extreme through rare TA and money flows setups, or what traders often refer to as recognizing and buying "Blood In The Streets" survive and prosper despite ruthless, organized takedowns.
COT money flows in the coming weeks should confirm and quantify the extreme nature of the current decline in gold, silver, and equity related plays.
A Technical Look "Blood In The Streets"
Arrow mark extreme speculative flushes during organized paper operations. The earliest inflection point would be October.
Gold 2x to Gold Ratio
The selling in silver, likely motivated behind the curtain, has been even more extreme. A two standard deviation decline of leveraged silver to silver ratio suggests not only an intense but also extreme speculative flush.
Silver 2x to Silver Ratio
Extreme selling, likely margin related, has been punishing the junior miners as well. Here the relative selling is approaching three standard deviations; three standard deviation setups are extremely rare.
Gold Miners Index to Junior Gold Miners Index Ratio
As a rule, extreme or “blood in the streets” tend to precede major inflection points. This, however, is usually recognized well after the fact by the public. Don’t expect the organized takedown to subside until Thursday’s option expiration passes.
More…
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_2.gif)
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/silver/t24_ag_en_usoz_2.gif)
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