Tuesday, January 31, 2012

Martin A. Armstrong: The Sovereign Debt Crisis – WHEN?

by Martin Armstrong:
The real question that we face for all the markets is WHEN will the Sovereign Debt Crisis go into meltdown? We are in the 13th year from the Major Directional Change of 1999 that marked the birth of the Euro, low in gold and crude oil, and the bubble in shares that peaked in many countries in 2000.
Just as the United States has been obsessed with the Great Depression as government always is ready to stimulate and many see this as pending hyperinflation with the end of the world, Germany suffers from the opposite delusion. There, the fear is inflation and thus when the US tries to inflate its way out of every crisis, Germany seeks to impose austerity and create economic stagnation and decline.
Chancellor Angela Merkel managed to win in Europe when 25 out of 27 EU states agreed to a German- inspired pact for stricter budget discipline as the member states stand among the ashes of austerity with the walls crumbing around them. The two members who refused to go along with Germany were Britain and the Czech Republic. What will now dominate Europe is a quasi-automatic sanctioning mechanism that will be imposed upon any member state that now breaches the European Union budget deficit limits. The idea is to enshrine a balanced budget system that cannot possibly work.
Read More @ MartinArmstrong.org

Goldilocks Is Back - China PMI Rises To 50.5, Modest Beat Of Expectations, Shy Of Whisper Number

China's goal-seeked economy performed admirably in January, and its Manufacturing PMI came absolutely golidlocks at 50.5, an increase from 50.3, previously, just modestly beating Wall Street expectations of a slight contraction of 40.6, yet a less than earlier whisper numbers which put it at 52. As such, thereis absolutely no indication if the PBoC will further tighten or ease in the next month, just as the PBoC likes it, because while many have been demanding easing in the last several weeks, and especially the housing market, the reality is that hot pockets of inflation still remain. Furthermore, the last thing China needs is to proceed with full on easing just as Bernanke goes ahead and launches QE x which will export more hot money, and thus inflation, to China than anywhere else, with the possible exception of gold.

No Greek Settlement from the EU Summit/Portugal/Venezuela repatriates its gold/California short of cash

Good evening Ladies and Gentlemen: Gold closed up today by $5.80 to $1635.60  Silver fell by 42 cents to $33.08.  The European summit failed to settle on the Greek crisis while the Portuguese debt problem continues to hound the EU. Gold and silver were much higher in the European session but as soon as the second London fix was in, the banking cartel raided again.  The high frequency traders



Gold knocking on the door of resistance at $1750

Trader Dan at Trader Dan's Market Views - 3 hours ago
One thing in particular that really stands out to me in today's trading session is the resilience of the gold market even as the safe haven trades were being put back on by a decent sized contingent of traders. The Euro got knocked down about 50 points and the US Dollar saw a pop higher as traders were expressing signs of nervousness over both Greece and now Portugal. Additionally, the long bond rallied up nearly a full point and is once again at the top end of a trading range that is now three months in duration. This combined with the fact that Euro Gold is extremely strong tells ... more » 


Eric De Groot at Eric De Groot - 5 hours ago
Source: jsmineset.com [[ This is a content summary only. Visit my website for full links, other content, and more! ]]

So Be It

Dave in Denver at The Golden Truth - 5 hours ago
*"Fiat:" an arbitrary decree or pronouncement, especially by a person or group of persons having absolute authority to enforce it: The king ruled by fiat - *dictionary.com The big topic of discussion in the cyberworld today was an interview with Jim Sinclair, who discussed an imminent ruling by ISDA - the board of OTC derivatives rules and enforcement - which would pronounce that any massive haircut in value taken by Greek bondholders would not constitute an event of default. This is not new information, as it was reported as far back as October that ISDA would make this declara... more » 


What is Euro Gold telling us?

Trader Dan at Trader Dan's Market Views - 9 hours ago
Gold priced in terms of the Euro continues to be most impressive on the chart as it creeps ever closer to its all time high. This move upwards is a visual telegraph that there remains deep-seated concerns over the European sovereign debt situation, especially on the Continent itself, in spite of the recent euphoria over "free money" for the next two years. While the Fed has given the markets, and in particular, the wild-eyed hedge fund community, the green light to buy "risk assets", there is an underlying current of palpable worry which remains in our global markets. Short-term ori... more » 

Did God Hack Goldman Sachs?

It is oddly appropriate that when a reader opens the client portal of Goldman Sachs, also known as the bank that does God's work, in order to pull Jan Hatzius' take on today's economic data assortment, one would encounter the following amusingly intentional easter egg...

Dead Market Exhibit A: January Volume

Presented with little comment except to say that the total lack of volume (and massive concentration of what volume there is at the close) is hardly reflective of a market that is anything other than broken and dying. Last January (2011) the average number of stocks traded on the NYSE per day was 891mm shares vs 661mm for this January (a 26% drop YoY!) and this is down an incredible 59% from January 2008.

Gold, Silver Winning 2012 Asset Return Race With 11 Months Left

Gold outperformed (+0.5%) today (as the rest of its commodity peers lost ground on USD strength today) and Copper and Silver underperformed. But for January, Silver is the clear winner in the global asset return race (at almost a 20% gain) with Gold in 2nd place at around +11.2%. JGBs and the DXY (USD) along with UK Gilts and Oil lost the most ground among the major assets we track. The outperformance of the precious metals as the dollar ebbed along with the general 'last year's losers were January's winners' and vice-versa was evident as Asia Ex-Japan and EM equities surged along with Nasdaq (and Copper). Long-dated Treasuries have just limped into the money for the year as they rallied dramatically today - ending the day at their low yields (new record 5Y lows) with 30Y now -12bps on the week. FX markets gave a little of the USD strength back in the afternoon but the rally in stocks was almost entirely unsupported by risk assets in general (as it seemed like a desperate low-volume try to push ES back to VWAP into the close to hold the 50/200DMA golden cross in SPX) after this morning's dismal macro data. Financials rallied to fill some Friday close gaps but gave some back into the close as CDS inched wider and Energy underperformed as Oil came almost 3% off its early morning highs (managing to crawl back above $98 by the close). IG credit outperformed as HY and stocks were largely in sync but open to close, credit outperformed stocks on a beta basis (after overnight exuberance in stock futures faded).

Amazon Slides After Missing Revenues Expectations, Guides Much Lower

Amazon slides 10% after hours as it reports much weaker revenues of $17.43 billion on expectations of $18.26 billion. EPS are not really comparable but seems to beat EPS of $0.16 on Exp. of $0.38. This may not be apples to apples. More importantly, the company guides Q1 to Operating Loss of $200MM to Income of income of $100MM, on Wall Street Consensus of $268MM, and guides to Q1 revenue of just $120-$13.4 billion on Estimates of $13.4 billion: pretty wide range there... This is merely the latst time that the company has disappointed materially, yet Wall Street keeps giving it the benefit of the doubt, on hopes that the Kindle will finally become an iPad-like device. How much longer? Yet the take home message is that the US consumer, contrary to rumors otherwise, is actually not doing all that well.

California To Run Out Of Cash In One Month, Controller Warns

If anyone is tired of the daily European soap opera with surrealistic tragicomic overtones, they can simply shift their gaze to the 8th largest economy in the world: the insolvent state of California, whose controller just told legislators has just over a month worth of cash left. From the Sacramento Bee: "California will run out of cash by early March if the state does not take swift action to find $3.3 billion through payment delays and borrowing, according to a letter state Controller John Chiang sent to state lawmakers today. The announcement is surprising since lawmakers previously believed the state had enough cash to last through the fiscal year that ends in June." ....uh, oops? But sure, fix the problem of excess debt by more "borrowing" why not. As for the math: "But Chiang said additional cash management solutions are needed because state tax revenues are $2.6 billion less than what Gov. Jerry Brown and state lawmakers assumed in their optimistic budget last year. Meanwhile, Chiang said, the state is spending $2.6 billion more than state leaders planned on." Quick, someone come up with a plan that involves subsidies and tariffs on China, or something else that deflects from what the source of the problem really is. Because the last thing that anyone in America would want to bring up is this thing called "responsibility" for their actions, or, as in now becoming the default case, the lack thereof. And why do that, when time spent so much more productively scapegoating this, and blaming that for one's own massive errors of judgment.

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Biderman’s Daily Edge 1/31/2012: Feeling Like a One-Eyed Man in the Land of the Blind

David Morgan: Silver in the Next Decade [Transcript: 2012 Virtual Silver Conference]

The following is the transcript of David Morgan‘s presentation at today’s Virtual Silver Investment Conference.To listen to the audio and view the slides associated with the presentation, please attend the conference here.And I’m doing a presentation for SilverSeek on Silver in the Next Decade, brought to you by myself, and obviously I’m the founder of Silver-Investor.com, lots of good information for free.But silver price has been very interesting over the last several years.In the last decade we’ve had a nice move up in the silver market.This chart is not current as of the date of this presentation, but it clearly gives the idea that we have gone mostly north, been as high as $48.00 in the recent – last year or so, down in about $34.00 range as we’re doing this at the end of January 2012.
Read More @ SilverSeek.com

James Turk Reaffirms His $400 Long-Term Silver Target [Transcript: 2012 Virtual Silver Conference]

The following is the transcript of James Turk’s presentation at today’s Virtual Silver Investment Conference.To listen to the audio and view the slides associated with the presentation, please attend the conference here. This is James Turk and I’m pleased to be participating in this virtual silver investment conference hosted by silverseek.com.If people have read my material or have heard me speak in the past, they know that I’m more bullish on silver than I am on gold. As bullish as I am on gold I think there’s a lot more potential for silver but I’ll say right up front, silver comes with a lot of volatility and therefore it may not be for everyone.But if you own, if you purchase and own physical silver, have a long term view, continue to accumulate it, view it to be a form of savings just like you do physical gold to be a form of savings, I think you’re gonna be quite happy with your silver purchases.
Read More @ SilverSeek.com

Why Will Capital Controls Boost Silver Prices? [Transcript: 2012 Virtual Silver Conference]

The following is the transcript of Julian Phillips’ presentation at today’s Virtual Silver Investment Conference.To listen to the audio and view the slides associated with the presentation, please attend the conference here. My name is Julian Phillips, and I’m very pleased to be talking to you on the SilverSeek Investment Conference 2012.I think it’s a most opportune time for silver in particular, as well as gold, because of events that have been taking place in the last two years.But in fact, these events were initiated way back in 1971, when the gold price was delinked from the monetary system and allowed to float.At the time, the dollar was devalued against silver – sorry, against gold, all the way through to the mid-1980s.
Read More @ SilverSeek.com

A Financial System Built to Fail: 2008 vs 2012


Rippling Impacts of Iran Oil Embargoes

from CaseyResearch.com:
Discussions around the US and EU embargoes on Iranian oil generally focus on one thing: the price of oil. Iran produces 3.6 million barrels of oil a day and exports 2.5 million of those barrels, representing 3% of world supply. If the embargoes were to succeed in preventing half that oil from getting to market, oil prices would immediately jump 20 to 30%, according to the International Monetary Fund (IMF).
There’s no doubt that the price of oil is important and deserves comment. But as both embargoes take effect, they will create a ripple of impacts across the oil markets that go beyond just price. From European refinery closures to a Greek default, the impacts of the embargoes would spread far beyond Iran.
Let’s start with Greece. Athens has been vocal in its concern about the embargoes, as Iran has become a key supplier to the economically beleaguered country. Greece’s existing contracts with Iran do not require financial guarantees, providing Athens with much-needed flexibility. To date, none of Greece’s other suppliers have been willing to work on such terms, which left Greece buying 100,000 barrels of Iranian oil a day to feed 30% of its demand.
Read More @ CaseyResearch.com

Manifest Destiny Derailed: Treason From Within

Something very unusual recently occurred in financial journalism. If you are from or rely on the mainstream western financial press as your primary means of being informed – you surely wouldn’t have noticed – because this ‘oddity’ involved a real act of investigative journalism by one Lars Schall. Mr. Schall is a German freelance journalist who noted an ‘old quote’ of former Federal Reserve Chairman, Paul Volcker. Paul Volcker was the U.S. Treasury Department’s undersecretary for international monetary affairs from 1969 to 1974 and became Fed chairman in 1979 – a post he held until 1987. More recently, Mr. Volcker has been a top economic advisor to President Obama. The quote that intrigued Mr. Schall was excerpted from Mr. Volcker’s memoirs and published in The Nikkei Weekly back on November 15, 2004:
Read More @ GoldSeek.com

Congressional Budget Office Reports Another $1 Trillion Deficit

The government faces a fourth year of trillion-plus deficits in 2012, according to new projections released Tuesday—numbers which also show little relief in the future unless Washington comes to grips with needed changes in its tax and spending policies. Like Aunt Cassandra coming down from the attic, the Congressional Budget Office steps squarely into the 2012 campaign season with the 147-page report which might have been subtitled “It’s not just the economy stupid, it’s also the debt.”
The $1.079 trillion deficit now projected for this fiscal year ending Sept. 30 is a step backwards from what CBO had predicted in August. And to punch home its message, the non-partisan agency outlines an especially grim scenario in which Congress not only extends all the current Bush-era tax cuts but pulls the plug on the $1.2 trillion in sequester set in motion by the Budget Control Act last summer.
Read More @ Politico.com

Currency Warfare: What are the Real Targets of the E.U. Oil Embargo against Iran?

Against whom is the European Union’s so-called “oil embargo on Iran” really aimed at?
This is an important geo-strategic question. Aside from rejecting the new E.U. measures against Iran as counter-productive, Tehran has warned the member states of the European Union that the E.U. oil embargo against Iran will hurt them and their economies far more than Iran.
Tehran has thus warned the leaders of the E.U. countries that the new sanctions are foolish and against their national and bloc interests. But is this correct? At the end of the day, who will benefit from the chain of events that are being set into motion?
Are Oil Embargos against Iran New?
Oil embargos against Iran are not new. In 1951, the Iranian government of Prime Minister Mohammed Mossadegh with the support of the Iranian Parliament nationalized the Iranian oil industry. As a result of Dr. Mossadegh’s nationalization program, the British militarily blockaded the territorial waters and national ports of Iran with the British Royal Navy and prevented Iran from exporting its oil. They also militarily prevented Iranian trade. London also froze Iranian assets and started a campaign to isolate Iran with sanctions. The government of Dr. Mossadegh was democratic and could not be vilified easily domestically by the British, so they began to portray Mossadegh as a pawn of the Soviet Union who would turn Iran into a communist country together with his Marxist political allies.
Read More @ GlobalResearch.ca

Stephen Leeb: Silver to Break $100 This Year & Gold Bull on the Move

With gold and silver off to an incredibly strong start for 2012, today King World News interviewed acclaimed money manager Stephen Leeb, Chairman & Chief Investment Officer of Leeb Capital Management. Leeb surprised KWN by predicting that silver will hit $100 this year. But first, here is what Leeb had to say about Bill Fleckenstein’s comments on KWN earlier today about the public coming into the gold market: “I think (Bill) Fleckenstein is totally correct. The kind of environment he’s talking about is the one I alluded to a little bit earlier, namely the 1970s, where we did have this kind of stagflation. In the mid 70s we had very high inflation, a recession, etc., yeah, that’s exactly the kind of environment we are headed for.”
Stephen Leeb continues: Read More @ KingWorldNews.com

Europe’s Central Bank Can’t Fix ‘Dysfunctional’ EU: Gross

The European Central Bank won’t solve the euro zone’s debt crisis as long as the European Union behaves like a “dysfunctional” family, Bill Gross, Pimco founder and co-chief investment officer, told CNBC on Tuesday. The main problem is the split between North and South Europe, Gross said: The northern countries have low debt and are export oriented, while the southern economies’ debt ratios are high and their economies are based more on domestic consumption.
“Their ability to get out from under that straightjacket I think is their biggest problem,” he said, adding that a recent summit of European Union leaders had no significant contribution to solving the euro zone’s problems.
“The EU’s 16th summit was anything but sweet,” he said. In Gross’ opinion, Greece and Portugal are “increasingly on death rows…and Merkel speaks about austerity.”
Read More @ CNBC.com

Mike Maloney: Gold and Silver Represent Freedom and Independence

Facebook IPO Is US Intel Operation?

[Ed. Note: So there's 7 billion people on planet earth, and Facebook is "worth" $100 billion, or $14.29 for every person on planet earth, regardless of whether or not that person is a Facebook user. Over-valued? Pssssh... Only if you're finally ready to sell your Enron stock.]
from The Daily Bell:

Media reports suggest that Facebook will file for an IPO this week that could value the company at $100 billion — and leave the company sitting on $10 billion in cash. I’m not a financial analyst, so I’ll leave it to Wall Street to discuss and debate that valuation. But the fact is this newfound wealth could not only allow Facebook to solve its biggest business challenges, it could also help Facebook finally achieve its longstanding goal to change how marketing works. So how should Facebook use its IPO windfall? − Nate Elliott’s Blog
Dominant Social Theme: This Facebook IPO is very exciting and shows that young people can create incredible value in a short period of time. Mark Zuckerberg is a genius.
Free-Market Analysis: No, we don’t believe the hype. It’s directed history, perhaps, not reality. Zuckerberg is in his later twenties. Did you ever meet anyone who’d built a US$100 billion company in a single decade, much less at a time when most young men and women are still deciding on career choices?
Read More @ TheDailyBell.com

US Government More Threatening Than Hitler to This Swiss Bank

by Simon Black, Sovereign Man:
Wegelin & Co used to be Switzerland’s oldest private bank. Founded in 1741, they managed to survive every threat across three centuries: revolution, financial disaster, and war… from being invaded by Napoleon to the Sonderbundskrieg civil war to Adolf Hitler.
Every threat except for one, that is: the United States Government.
I say that Wegelin “used to be” Switzerland’s oldest private bank because they’re now finished, courtesy of Uncle Sam. They had no office in the United States, no employees in the United States. They were 100% Swiss, and violated no Swiss law whatsoever.
Yet US authorities believed that a handful of Wegelin’s US clients were hiding assets and not paying taxes. The fact that the bank wasn’t subject to US law was irrelevant. The fact that the bank has zero legal responsibility in ensuring their customers filed tax forms was irrelevant.
The government crushed Wegelin regardless.
Read More @ SovereignMan.com

Eric Sprott: Mania. Manipulation. Meltdown. [Transcript: 2012 Virtual Silver Conference]

The following is the transcript of Eric Sprott’s presentation at today’s Virtual Silver Investment Conference.To listen to the audio and view the slides associated with the presentation, please attend the conference here.
Good day ladies and gentlemen.This is Eric Sprott.It’s my pleasure to present to this virtual forum thoughts that we have on one, the financial markets and more particularly on gold and silver as the – where they stand in this environment.The title of my talk is Mania, Manipulation, Meltdown which is a topic I use very often because obviously there’s been – there was a mania that led up to the NASDAQ peak and the moving into what I’ve regarded as secular bear market for the last ten years.Throughout this period we’ve had manipulation of interest rates and currency prices and precious metals and so on and the meltdown really has to do with where we think the whole system is going.
Read More @ SilverSeek.com

America’s “Poor” In Pretty Good Shape

According recent studies from the Department of Agriculture, children are hungry in about .25 percent of homes in the United States. A 96% majority of all parents say their children have never gone hungry because they were unable to purchase food. Moreover, a Scott Rasmussen poll found that 63 percent of the “poor” have cable or satellite, 50 percent have a computer, 30 percent have at least two cars, and 23 percent use TiVo.
Rasmussen asserts that even those Americans living below poverty line aren’t living in extremely foul conditions, as many Americans imagine. Most of them have sufficient shelter, food, clothing, and medical attention.
Read More (and Watch the Video) @ WealthWire.com

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2012: The Year Of Hyperactive Central Banks

Back in January 2010, when in complete disgust of the farce that the market has become, and where fundamentals were completely trumped by central bank intervention, we said, that "Zero Hedge long ago gave up discussing corporate fundamentals due to our long-held tenet that currently the only relevant pieces of financial information are contained in the Fed's H.4.1, H.3 statements." This capitulation in light of the advent of the Central Planner of Last Resort juggernaut was predicated by our belief that ever since 2008, the only thing that would keep the world from keeling over and succumbing to the $20+ trillion in excess debt (excess to a global debt/GDP ratio of 180%, not like even that is sustainable!) would be relentless central bank dilution of monetary intermediaries, read, legacy currencies, all to the benefit of hard currencies such as gold. Needless to say gold back then was just over $1000. Slowly but surely, following several additional central bank intervention attempts, the world is once again starting to realize that everything else is noise, and the only thing that matters is what the Fed, the ECB, the BOE, the SNB, the PBOC and the BOJ will do. Which brings us to today's George Glynos, head of research at Tradition, who basically comes to the same conclusion that we reached 2 years ago, and which the market is slowly understand is the only way out today (not the relentless bid under financial names). The note's title? "If 2011 was the year of the eurozone crisis, 2012 will be the year of the central banks." George is spot on. And it is this why we are virtually certain that by the end of the year, gold will once again be if not the best performing assets, then certainly well north of $2000 as the 2009-2011 playbook is refreshed. Cutting to the chase, here are Glynos' conclusions.

Why An Outsized LTRO Will Actually Be Bad For European Banks

The post-hoc (correlation implies causation) reasons for why the initial LTRO spurred bond buying are many-fold but as Nomura points out in a recent note (confirming our thoughts from last week) investors (especially bank stock and bondholders) should be very nervous at the size of the next LTRO. Whether it was anticipation of carry trades becoming self-reinforcing, bank liquidity shock buffering, or pre-funding private debt market needs, financials and sovereigns have rallied handsomely, squeezing new liquidity realities into a still-insolvent (and no-growth / austerity-driven) region. Concerns about the durability of the rally are already appearing as Greek PSI shocks, Portugal contagion, mark-to-market risks impacting repo and margin call event risk, increased dispersion among European (core and peripheral) curves, and the dramatic rise in ECB Deposits (or negative carry and entirely unproductive liquidity use) show all is not Utopian. However, the largest concern, specifically for bondholders of the now sacrosanct European financials, is if LTRO 2.0 sees heavy demand (EUR200-300bn expected, EUR500bn would be an approximate trigger for 'outsize' concerns) since, as we pointed out previously, this ECB-provided liquidity is effectively senior to all other unsecured claims on the banks' balance sheets and so implicitly subordinates all existing unsecured senior and subordinated debt holders dramatically (and could potentially reduce any future willingness of private investors to take up demand from capital markets issuance - another unintended consequence). We have long suggested that with the stigma gone and markets remaining mostly closed, banks will see this as their all-in moment and grab any and every ounce of LTRO they can muster (which again will implicitly reduce all the collateral that was supporting the rest of their balance sheets even more). Perhaps the hope of ECB implicit QE in the trillions is not the medicine that so many money-printing-addicts will crave and a well-placed hedge (Senior-Sub decompression or 3s5s10s butterfly on financials) or simple underweight to the equity most exposed to the capital structure (and collateral constrained) impact of LTRO will prove fruitful.

20 Signs That Europe Is Plunging Into A Full-Blown Economic Depression

MF Global Client Money Feared Gone

India Abandons US Dollar to Purchase Iranian Oil



How to Prepare For the Coming Global "Write Off" on Social Programs and Government Outlays

Return of $500/$1,000/$5,000 Bills?

Gold Ready to Smash Through $2,000, Exploding Higher

Illinois "Assault Weapons Ban" is Back & the Fight Is On

The Danger of Having a Weak Economy with a Strong Stock Market

by Sam Chee Kong, MarketOracle.co.uk:
For the past two to three decades, there has been a radical structural transformation of the American economy from being a production economy to a service economy with consumer driving 60% of its GDP. Due to the so called Globalization, much of America’s manufacturing facilities have been transferred overseas and hence with its jobs as well. Since the beginning of the 21st century America has lost more than 50,000 manufacturing facilities either due to uncompetitive closure or being shifted overseas. As a result more than 5 million jobs have been lost along the way.
This has also resulted in a loss of more than 10% of the middle class jobs where during the early 2000s there are more than 72 million middle class jobs. Now there are less than 65 million middle class jobs.
Read More @ MarketOracle.co.uk

The 5 Major US Banks Control 97% of All Credit Derivative Swaps

Today’s daily is EXTRA important. Please take the time to read it all!!!
As I write this, at 3:30 a.m., gold and silver are moving up fast and have recaptured all of yesterday’s losses.
Jim Sinclair issued the following announcement early last night:

January 30, 2012, at 7:37 pm
Dear Friends,
I was interviewed today concerning the most powerful body in the financial world that now holds in its hands the near future of all markets, from currencies to commodities, based on a single edict to be given.

Read More @ MilesFranklin.com

Scientists Created Bird Flu Superbug That Could Set Off Next Global Pandemic

by Jonathan Benson, NaturalNews.com:
(NaturalNews) During roughly the same time period that health experts worldwide have been warning that the infamous H5N1 avian flu virus could soon morph into a highly-transmissible, exceedingly-deadly “super strain” capable of killing millions, scientists from around the world have been exposed deliberately developing such a strain in laboratories.

Last month, we reported about research work conducted by Ron Fouchier from Erasmus Medical College in the Netherlands that had successfully created a super-deadly strain of H5N1. Fouchier and his colleagues had originally planned to publish their controversial findings in medical journals until the scientific community and many members of the public decried the research, calling for an immediate end to it (http://www.naturalnews.com/034228_bioterrorism_flu_strain.html).

Not only is the publishing of critical data about a deadly new strain of H5N1 a massive public health risk, but the research itself is a huge risk as well, as the strain could end up escaping from labs and quickly spreading around the world. Bio-terrorists could also gain hold of the strain — or produce a similar one themselves — to be used for starting the next global pandemic (http://www.naturalnews.com/033480_bird_flu_scare_tactics.html).
Read More @ NaturalNews.com

Worship of the Mob

by Ben O’Neill, Mises.org:

Several months ago, I was visiting some friends in Sydney and was invited to the house of a friend-of-a-friend for some late night drinks and a chat. My host and his friends were left-wing bohemian types and had been informed by my friend that I am a “free-market anarchist,” or something like that. They found this notion intriguing, and so they quizzed me on what that means, and this naturally led into a discussion of the merits of a free market versus a democracy.
The discussion was a cordial one, and went as most of these discussions do when one is chatting with people who have never previously been exposed to consistent libertarian philosophy. My host and his friends raised most of the standard objections to the free market and to the idea of a stateless private-law society, and I explained why I regard each of those objections as erroneous.[1] Though the attending group appeared to find my arguments on these individual points thought provoking, they remained unconvinced. The main sticking point to the discussion was a pervasive concern that the free market does not allow for democratic state action — that “the people” should have the right to collectively determine “the rules of the game” by voting their preferred politicians into power, and that their determinations should legitimately bind the members of the society they are in.
Read More @ Mises.org

Reject the Ruling Psychopathology

Tom Ridge is a Republican and a notable U.S. political figure.
Tom Ridge wants the U.S. to overturn or subvert the Iranian regime from within. See his op-ed here. The International Atomic Energy Agency (IAEA) inspectors are once again inspecting Iran in a 3-day visit right now, but Ridge wants the U.S. to act “unilaterally and decisively.” He wants the U.S. openly to support (and fund? and train? and make promises to?) anti-regime groups. He wants the U.S. to declare that it’s out for “regime change” in Iran.
He means it when he uses the word “unilateral”, for he speaks of the “impotence” of the U.N. resolutions and the West’s sanctions.
Is subversion an act of war? There is no book of international law that answers this question. Some people say yes, some say no. It clearly depends on the nature of the subversive acts, which can range from protests to assassinations and sabotage. But no matter how it is classified, U.S. support of subversion and open declaration of a goal of regime change is or would be hostile. It is open interference and intervention into Iran’s political processes by the U.S. government. How would the U.S. react if Iran supported groups inside America who wanted drastic regime change here?
Read More @ LewRockwell.com

Venezuela Completes Repatriation Of 160 Tons Of Gold, Gold At 2012 Highs

Slowly but surely, ever more physical gold is being removed from circulation in conventional channels. Yesterday, it was Sprott who a week after doing a follow on offering in his PSLV ETF (i.e., adding more physical), reported that he was going to buy an as of yet undisclosed amount of gold for PHYS. This came just as Venezuela completed the rapatriation of its gold from European vaults, which means that it is substantially ahead of all of its other international peers who confidently continue to hold their gold stashed away in vaults situated primarily in London and NY. From Bloomberg: “Venezuela today received the last shipment of gold bars in an operation that repatriated 160 tons of the South American country’s reserves of the metal held abroad, said Nelson Merentes, president of the country’s central bank. Fourteen tons of gold arrived at the Caracas airport today on a flight from Europe, Merentes said. The gold bars were transported in a caravan, broadcast on state television, to vaults at the central bank where street banners proclaimed “Mission Complete.”” So now that the defections in the golden game theory equilibrium have commenced, the question is: who is next?
Read More @ ZeroHedge.com

Silver Surges 21% in January – Silver Demand Is “Diminishing A Supply Surplus”

from GoldCore:
Gold’s London AM fix this morning was USD 1,738.00, GBP 1,102.23, and EUR 1,317.27 per ounce.
Yesterday’s AM fix was USD 1,720.50, GBP 1,097.40, and EUR 1,310.06 per ounce.
Gold edged higher in Asian and again in European trading today. Gold has broken through all major moving averages and Fibonacci levels this week due to a weakening dollar and geopolitical concerns regarding Iran and the European solvency crisis.
Euro gold appears to be breaking above resistance which should lead to new record highs above €1,359/oz.
Gold at €1,315/oz is now just 3% below the record high from September 2011. The correction and consolidation of recent months was necessary and healthy, and the intractable Eurozone debt crisis should result in further falls in the euro and €1,400/oz gold is likely.
Read More @ GoldCore.com

Commodities and the European Debt Crisis, How Does it Work?

from WealthCycles:
While it may have very little on effect on the actual goings-on of the world, we are always interested in what the prognosticators might say about debt crises and their effects on commodity prices. On one hand, a faltering euro leaves only the dollar as a “safe” currency—meaning the debt crisis in Europe is good for the dollar and bad for commodity prices. But any deep analysis will show the entire system build on faith in fiat is deeply flawed—and destined to collapse.
A big component that analysts have failed to recognize is that the ecosystem of largely European banks that once lent essential short-term loans to commodity projects has failed. In today’s Financial Times Commodities Note, commodities analyst Javier Blas says this:
Read More @ WealthCycles.com

Baltic Dry Index Signals Renewed Market Collapse

There is No Economic Recovery
by Brandon Smith, Alt-Market.com:
Much has been said about the Baltic Dry Index over the course of the last four years, especially in light of the credit crisis and the effects it has had on the frequency of global shipping. Importing and exporting has never been quite the same since 2008, and this change is made most obvious through one of the few statistical measures left in the world that is not subject to direct manipulation by international corporate interests; the BDI. Today, the BDI is on the verge of making headlines once again, being that is plummeting like a wingless 747 into the swampy mire of what I believe will soon be historical lows.
The problem with the BDI is that it is little understood and often dismissed by less thoughtful economic analysts as a “volatile index” that is too “sensitive” to be used as a realistic indicator of future trends. What these analysts consistently seem to ignore is that regardless of their narrow opinion, the BDI has been proven to lead economic derision in the market movements of the past. That is to say, the BDI has been volatile exactly BECAUSE markets have been volatile and unstable, and is a far more accurate thermometer than those that most mainstream economists currently rely on. If only they would look back at the numbers further than one year ago, they might see their own folly more clearly.
Read More @ Alt-Market.com

Counterfeit Money, Counterfeit Policy

by Charles Hugh Smith, OfTwoMinds.com:
What is the difference between printing money and counterfeiting? There is none.
Counterfeiting is illegal because it is the false creation of value. The counterfeiter takes low-value paper and turns it into high-value money, which is fundamentally a claim on the real productive value of the economy that issues the currency and recognizes it as a proxy means of exchanging that productive value.
Counterfeiting is illegal because the counterfeiter creates no additional value–he creates only the proxy for value. Creating real value–adding meaningful goods or services to the economy–is tedious, hard work. How much easier to simply transform near-worthless paper into a claim on actual goods and services.
If this is illegal, then would somebody please arrest the Board of the Federal Reserve for counterfeiting? The Fed has blatantly printed money without creating any real value to back up their added claims on productive value. Hence they are counterfeiting, pure and simple. A government based on rule of law would arrest these fraudsters and cons at the earliest possible convenience.
Read More @ OfTwoMinds.com

Rick Rule: Gold, Silver, Takeovers & 2,000% Gains

from King World News:
With continued volatility in gold, silver and global stock markets, today King World News interviewed Rick Rule, Founder of Global Resource Investments and one of the most street smart pros in the resource sector. KWN reached out to Rick, who is currently in New Zealand, to find out what his thoughts were on how investors can make money in 2012. First, here is what Rule had to say about the action in gold and silver: “I continue to believe that when rational people are confronted with the choice between owning dollars or euros or owning gold, increasingly people are owning gold. I continue to believe the intermediate and longer-term move in the gold price is higher. I think the gold price, in US dollar terms, moves inexorably higher.”
Rick Rule continues: Read More @ KingWorldNews.com

‘Currency Wars’ Hotting Up

from GoldMoney.com:
The Forbidden City, Beijing Gold and silver prices paused for breath yesterday following their price breakouts last week. Gold for April delivery at the New York Comex settled down 0.1% at $1,734.40 per troy ounce, while silver for March delivery lost 26 cents (0.8%), settling at $33.53 per troy ounce. Both metals have however put in good showings in trading today, with the gold price hitting $1,740 and silver just a whisker away from $34.
Gains in the US dollar yesterday hurt commodities generally, though this morning the Dollar Index has fallen back below 79. This is largely because of growing optimism among traders that eurozone officials and Greece’s private creditors are close to some sort of deal to “restructure” that nation’s debt.
Read More @ GoldMoney.com

Have You Ever….

from End of The American Dream:
Have you ever wondered what our world is going to look like five or ten years down the road? Well, today our world is changing at a pace that is faster than ever before, and the decisions that we all make right now are going to have a dramatic affect on the years ahead. In many ways, 2012 represents a huge turning point for America. There will be a presidential election, 33 seats in the U.S. Senate will be contested and every single seat in the U.S. House of Representatives will be up for grabs. But the changes that are happening in America go much deeper than politics. Anger and frustration are growing to frightening levels, and we have become a deeply divided nation. Our affluence is rapidly crumbling and our national values are being transformed at a staggering pace. America is drowning in debt, addicted to entertainment and full of people that think they know it all. America is arrogant, cocky, smug, brash and full of pride. But if we continue down the road that we are currently on, we will be greatly humbled someday. It is just a matter of time.
In life, sometimes the questions are almost more important than the answers.
Read More @ EndOfTheAmericanDream.com

Panopticon Coming to a Neighbourhood Near You!

from DollarVigilante.com:

The US is fast becoming one massive open air prison camp. Few realize that one by one their natural rights are being stripped by the fascist “criminal” law system. As we’ve noted in the past, more than 30% of those under 23 have been arrested as the fascist US Government works to ensnare as many as possible into permanent indentured servitude through a criminal record. From the New Yorker
Over all, there are now more people under “correctional supervision” in America—more than six million—than were in the Gulag Archipelago under Stalin at its height. That city of the confined and the controlled, Lockuptown, is now the second largest in the United States.
Once you have that special status the doors quickly close for you, and you will never be able to legally escape from the US. Your travel will be restricted and you will not be eligible to apply for a foreign passport.
Read More @ DollarVigilante.com

Economics Lesson 1

by Dr. Paul Craig Roberts, PaulCraigRoberts.org:

Last Friday (January 27) the US Bureau of Economic Analysis announced its advance estimate that in the last quarter of 2011 the economy grew at an annual rate of 2.8% in real inflation-adjusted terms, an increase from the annual rate of growth in the third quarter.
Good news, right?
Wrong. If you want to know what is really happening, you must turn to John Williams at shadowstats.com.
What the presstitute media did not tell us is that almost the entire gain In GDP growth was due to “involuntary inventory build-up,” that is, more goods were produced than were sold.
Net of the unsold goods, the annualized real growth rate was eight-tenths of one percent.
Read More @ PaulCraigRoberts.org

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The Impending Undeclared Default Of 5 Major US Banks

Dear CIGAs,

The following interview with Ellis Martin of www.EllisMartinReport.com covers in detail the impending undeclared default of 5 major US banks this week by the International Swaps and Derivatives Association.
This even has the potential to cause a second financial crisis that would require significant financial intervention. If you have time to spare, listen to this interview. If you don’t have time to spare, listen to it anyway.

Silver Coin Sales Hit Record Pace, Outshine Gold

from EconomicTimes.IndiaTimes.com:
NEW YORK: Less than one year after silver’s breathtaking collapse from its record-setting rally, investors are again snapping up coins at an unprecedented pace, suggesting the white metal could leave gold in the dust.
Even before the U.S. Federal Reserve’s promise of further stimulus rejuvenated interest in precious metals last week, U.S. retail investors were already buying up freshly minted coins in droves, undaunted by last year’s painful volatility. Gold coin sales, while rising, have been far less robust.
At Dillon Gage Metals, a leading U.S. precious metals dealer, dollar sales of silver and gold products reached parity in January for the first time in its history – even though bullion costs 50 times more. Some hedge funds are now interested in silver coins, a top executive said.
Rival Blanchard & Co said it was selling now more 500 one-ounce Silver American Eagle “Monster Boxes” than ever. Last week, one client bought 17 of the $18,500 boxes at once — a more than $300,000 purchase, said vice president David Beahm.
Read More @ EconomicTimes.IndiaTimes.com

What is Euro Gold telling us?

Trader Dan at Trader Dan's Market Views - 31 minutes ago
Gold priced in terms of the Euro continues to be most impressive on the chart as it creeps ever closer to its all time high. This move upwards is a visual telegraph that there remains deep-seated concerns over the European sovereign debt situation, especially on the Continent itself, in spite of the recent euphoria over "free money" for the next two years. While the Fed has given the markets, and in particular, the wild-eyed hedge fund community, the green light to buy "risk assets", there is an underlying current of palpable worry which remains in our global markets. Short-term ori... more » 


No Country Will Exit The Euro Zone This Year

Admin at Jim Rogers Blog - 1 hour ago
CNBC video interview: No country will exit the euro zone this year but a solution to the debt crisis remains elusive, Jim Rogers, CEO and Chairman at Rogers Holdings, told CNBC *Jim Rogers is an author, financial commentator and successful international investor. He has been frequently featured in Time, The New York Times, Barron’s, Forbes, Fortune, The Wall Street Journal, The Financial Times and is a regular guest on Bloomberg and CNBC.* more »

Money Printing Will Have An Impact in Bonds And Equities

Admin at Marc Faber Blog - 2 hours ago
In 1929 we didn't have social security, Medicare, Medicaid and the unfunded liabilities we have now. The U.S. will print money, the ECB (European Central Bank) will do the same, and that will have an impact on the purchasing power of paper money. And that has an investment implication for bonds and equities. - *in this year's annual forecast dinner put on by the Edmonton CFA Society of financial analysts* *Related ETFs, SPDR S&P 500 ETF (SPY), iShares Barclays 20+ Yr Treasury Bond ETF (TLT), ProShares UltraShort 20+ Year Trea ETF (TBT) * *Marc Faber is an international investor kno... more » 


1-2-3 Gold

Eric De Groot at Eric De Groot - 3 hours ago
Emotions have nasty habit of pulling traders off the fence at a point where dispassionate mathematical discipline encourages patience. The opportunity to buy 2 of 1-2-3 has passed. The setup of 3 is still possible. This possibility demands patience. London PM Fixed Gold and GLD (ETF) Total Assets WA Stochastic [[ This is a content summary only. Visit my website for full links, other content, and more! ]]

Investors 'Overly Bullish' On Nasdaq 100 Is Not Always A Harbinger Of Sharp Declines

Eric De Groot at Eric De Groot - 3 hours ago

As the article below suggests, retail money has become concentrated on the bullish side. This concentration implies a sharp decline is imminent. Table 1 which highlights money flows by reportable (specs), commercial (smart money) and nonreportable (retail money) confirms this concentration. The table clearly shows heavy retail and commercial inflows and outflows, respectively. This money flow... [[ This is a content summary only. Visit my website for full links, other content, and more! ]]

Art Cashin Explains Why Several Hundred Thousand Jobs Are About To "Vaporize"

Two days ago we learned that when MF Global goes bankrupt, billions in cash can just "vaporize" (no, really - see here, and of course, in the passive voice. can't say something like Jon Corzine vaporized $1.2+ billion in client money now can we). Next we have Art Cashin explain why it is that the US economy is about to see several hundred thousand jobs "vaporize" as well. Perhaps "vaporize" should be the motto of the current Administration: confidence "vaporized", hope "vaporized", and "evaporation" you can believe in, as it condenses on the teleprompter...

America's "Largest Minority-Owned And Operated Investment Bank" Shuts Down

Solyndra, Ener1, and now Kaufman Bros - The current economy may not be very good at creating jobs, even minority-focused ones, but its track record in inverse job creation is rapidly becoming second to none. Bloomberg reports that "Kaufman Bros. LP, the minority-owned investment bank that helped unwind U.S. stakes in bailed-out financial companies, ceased operations as of yesterday, according to a notice posted on its website. Chief Executive Officer Benny Lorenzo told employees that New York-based Kaufman was closing immediately in a meeting yesterday after trading closed, according to two people with knowledge of the matter, who declined to be identified because they weren’t authorized to speak publicly. Neither Lorenzo nor Chief Financial Officer Gerard Durkin returned messages left on their office and mobile phones yesterday and today." More amusing is the following description: "The company, which also has offices in San Francisco, said it was sought out by institutional investors, hedge funds and government agencies to help meet diversity goals." No comment. The closure notice can be found on the company's website. And so another bank bites the dust. Many more coming.

Sears Plunges As CIT Reins In Loans (Again)

While so many were hoping for the siren-call of private-equity or perhaps a reverse-merger MBO with RadioShack, CIT has once again managed to pour well-risk-managed-credit-extension cold water on Sears short-squeeze. SHLD is down 6% following Reuters reports (via The Orlando Sentinel) that CIT will again stop providing loans to suppliers of Sears Holdings as the lender/factor awaits further information of the company's health. Volume picked up dramatically as the stock fell and we note that SRAC (the more active 5Y CDS contract) is leaking wider but has surged around 400bps (to 1800bps) in the last week (as the stock has been treading water off its spike squeeze highs on 1/23).

Latest Congressional Budget Outlook For 2012-2022 Released, Says Real Unemployment Rate Is 10%

What do the NAR, Consumer Confidence and CBO forecasts have in common? If you said, "they are all completely worthless" you are absolutely correct. Alas, the market needs to "trade" off numbers, which is why the just released CBO numbers apparently are important... And the fact that the CBO predicted negative $2.5 trillion in net debt by 2011 back in 2011 is largely ignored. Anyway, here are some of the highlights, but here is the kicker: "Had that portion of the decline in the labor force participation rate since 2007 that is attributable to neither the aging of the baby boomers nor the downturn in the business cycle (on the basis of the experience in previous downturns) not occurred, the unemployment rate in the fourth quarter of 2011 would have been about 1¼ percentage points higher than the actual rate of 8.7 percent"- translation: CBO just admitted that the BLS numbers are bogus and real unemployment is 10%. Thank you.

Markets React To Reality

Following three-in-a-row weak macro prints, the market broadly speaking is not happy. The S&P is 10 points off its pre-Case-Shiller highs, EURUSD is dropping rapidly back towards 1.31, Treasury yields are falling 3-5bps across the curve, and Commodities are giving back their spike gains from pre-US day session open. FX carry seems like a major driver for now with AUDJPY and EURJPY most notable while the drop in the curve and levels of the Treasury complex are adding to downward pressure on stocks. Credit and equity markets are dropping in lockstep for now (with HYG more volatile than its peers). The rally in European sovereigns has stalled here as longer-dated spreads are now widening off their intraday tights (10Y BTP back up to 6% yield) while PGBs give back some of their ECB-enthused rally (~20bps off tights now). US equities and CONTEXT (the broad risk proxy) are in line as they drop here.

Back on January 16, Zero Hedge, once again just a "little bit" ahead of the general press posted an article titled: "A Shocking €1 Trillion LTRO On Deck? CLSA Explains Why Massive Quanto-Easing By The ECB May Be Coming Next Month." Today, the market has finally awoken to this probability following an FT article which comes to precisely this conclusion (not to mention an FTD article which throws around a €1.5 trillion number, which at this rate will soon hit the CS whisper number of €10 trillion). Of course, better late than never. But what does that mean? Reverting back to our trust key correlation of 2012, namely the comparison of the Fed and ECB balance sheet, it would mean that absent a propotional Fed response, the fair value of the EURUSD would collapse to a shocking 1.12 as the ECB's balance sheet following this LTRO would grow from €2.7 trillion to €3.7 trillion. This can be seen on the attached chart.

Chicago PMI Misses, Prints At 60.2, Down From 62.2, Dashes Hopes For Rebound

And so, the predicted gradual softening of the economy is starting to materialize in order to fit with the Chairman's world view (and to set the stage for QE X with a healthy helping of LSAPs). The January Chicago PMI just printed at 60.2, missing expectations of an increase to 63, and down from December's 62.2. And it gets worse: the employment index was the lowest since August at 54.7, while the order backlog number came at 48.2, the lowest since October 2009. This also means that the upcoming manufacturing ISM will also likely be a miss. What recovery again? Or is it China's turn to bail out the world all over again.

Will Seasonal Slump Drive Derisking?

The so-called January-Effect is almost at an end and if the market closes near these levels, the S&P 500 will have managed a 4.4% gain or its 20th best January since 1928 (84 years) and best since 1997. The outperformance of banks and sovereigns (LTRO) and the worst-of-the-worst quality names (most-shorted Russell 3000 stocks +9% YTD vs Russell 3000 +5.2%), as Morgan Stanley noted recently, is not entirely surprising since the January effect is considerably larger in mid-cap and junk quality names than any other size or quality cohorts. We have pointed to the seasonal positives in high-yield credit and volatility and along with the obvious short squeeze in S&P futures (which has seen net spec shorts come back to balance recently), we, like MS, are concerned that the tailwinds of exuberance that virtuously reflect from seemingly pivotal securities (such as short-dated BTPs now or Greek Cash-CDS basis previously) very quickly revert to a sense of reality (earnings and outlook changes) and perhaps the slowing rally and rising volatility of the last few days is the start of that turbulence.

No Housing Bottom: Home Prices Decline For 7th Consecutive Month, Lowest Since 2003

The November Case Shiller is out and while not surprising to most, some of those calling for a near-term housing bottom may be advised to reassess (for the 5th year in a row). According to the Top 20 City index composite, prices declined in 17 of 20 MSAs, with gains posted only in Phoenix, Denver and Minneapolis. At 137.52, the Seasonally Adjusted composite dropped to the lowest since February 2003, and is now a third lower than the housing peak in April 2006. Yet the worst news is that, even with a 2 month delay, the housing drop accelerated into the end of the year, and the sequential drop of 0.7% was the biggest decline since March 2011. Which means that except for that errant spike in home prices in April 2011, we have now seen 18 consecutive months of housing price declines since that "rebound" in late 2009. "Despite continued low interest rates and better real GDP growth in the fourth quarter, home prices continue to fall," David Blitzer, chairman of the index committee at Standard & Poor's, said in a statement. "The trend is down and there are few, if any, signs in the numbers that a turning point is close at hand." Yet just like in Europe, the improvement is coming. Aaaaany minute now.

The Market Says CYA LTRO To Yesterday's Negativity

The market is back to being excited and bullish. Yesterday’s announcement out of Europe was underwhelming, but no one cares as a Greek PSI announcement is expected any moment.  It will be interesting to finally find out how many bonds sign on at the time of the agreement and who the potential holdouts are. More importantly, once again LTRO is the talk of the town.  Talk is that the demand will be €1 trillion or more (as ZeroHedge discussed here first over two weeks ago).  It will be interesting to see if the number approaches that or is far smaller.  We continue to believe that banks are using it to prefund redemptions and not as cheap financing to start a new round of asset gathering.  All the talk about the “carry” trade makes it sound like something new that the banks have just figured out, when it is the exact trade that got them in trouble in the first place.  Why did banks sell naked CDS on companies and countries (write protection)?  Because they got carry with no funding worries. Listening to the “chatter” you would think the market is on fire, yet S&P is barely up in almost 2 weeks (it closed 1308 on the 18th).  For the past couple of weeks, fading rallies has been working well, and we don’t see that changing as more and more people become convinced that “Europe is priced in” and ignore that strong earnings were priced in and aren’t really materializing.

Socialist Hollande, Who Wants Full European Treaty Renegotiation, Increases Lead Over Sarkozy

With under 3 months left until the first round of the French presidential election on April 22, it maybe prudent to start paying attention to France, where socialist presidential candidate Francois Hollande has just widened his lead over President Nicolas Sarkozy despite a flurry of measures being advanced by the conservative leader to boost employment and competitiveness, a poll showed on Tuesday. This is quite relevant for Europe, as Hollande has made it very clear that none of the recent treaties and agreements would stand in their current version if elected, in the process overturning austerity and the position of the ECB in Europe's bailout org chart, and will gradually add an element of uncertainty to the second most important country in Europe's core, even if no longer AAA-rated. And for those who say there is no chance Hollande could take over, according to IFOP Hollande would trash Sarkozy in a runoff election by a whopping 58% to 42%, a result that even Romney and Diebold would be envious of.

Venezuela Completes Repatriation Of 160 Tons Of Gold, Gold At 2012 Highs

Slowly but surely, ever more physical gold is being removed from circulation in conventional channels. Yesterday, it was Sprott who a week after doing a follow on offering in his PSLV ETF (i.e., adding more physical), reported that he was going to buy an as of yet undisclosed amount of gold for PHYS. This came just as Venezuela completed the rapatriation of its gold from European vaults, which means that it is substantially ahead of all of its other international peers who confidently continue to hold their gold stashed away in vaults situated primarily in London and NY. From Bloomberg: "Venezuela today received the last shipment of gold bars in an operation that repatriated 160 tons of the South American country’s reserves of the metal held abroad, said Nelson Merentes, president of the country’s central bank. Fourteen tons of gold arrived at the Caracas airport today on a flight from Europe, Merentes said. The gold bars were transported in a caravan, broadcast on state television, to vaults at the central bank where street banners proclaimed “Mission Complete.”" So now that the defections in the golden game theory equilibrium have commenced, the question is: who is next?

Preview Of Today's Key Events: Chicago PMI And Case Shiller

Busy day for headline chasers (which these days is everyone) with the ISM-leading Chicago PMI taking center stage at 9:45 am. At some point the economy will have to start 'confirming' the Bernanke Bear case or else one may get the impression that the Chairman was merely posturing with providing a perpetual LSAP open backstop to the Russell 2000. Also, the Case Shiller index which will report the 7th consecutive home price drop will likely not get a whole lot of attention.

Goldman Stopped Out Of Short 10 Year Trade

Back on January 23 we first reported that Goldman had opened a new trade whereby it was shorting 10 Year bonds. To wit: As of a few hours ago, Goldman's Francesco Garzarelli has officially told the firm's clients to go ahead and short 10 Year Treasurys via March 2012 futures, with a 126-00 target. While Garzarelli is hardly Stolper, the fact that Goldman is now openly buying Treasurys two days ahead of this week's FOMC statement makes us wonder just how much of a rates positive statement will the Fed make on Wednesday at 2:15 pm. From Goldman: "Since the end of last August, we have argued that 10-yr US Treasury yields would not be able to sustain levels much below 2% in this cycle. Yields have traded in a tight range around an average 2% since September, including so far into 2012. We are now of the view that a break to the upside, to 2.25-2.50%, is likely and recommend going tactically short. Using Mar-12 futures contracts, which closed on Friday at 130-08, we would aim for a target of 126-00 and stops on a close above 132-00." As a reminder, don't do what Goldman says, do what it does, especially when one looks the firm's Top 6 trades for 2012, of which 5 are losing money, and 2 have been stopped out less than a month into the year." Sure enough, we just got this: "On January 23, we recommended going short 10-yr US Treasuries using Mar-12 futures, for a target of 126-00 (roughly corresponding to 2.5% on the 10-yr rate). At yesterday’s close, we hit our stop loss set at a close above 132-00. We reiterate our fundamental conviction in this directional stance, and would look for opportunities to re-engage. With a large structural deficit, rising trailing inflation and a central bank emphasizing job creation, longer-maturity US Treasury bonds do not rest on solid foundations." 

Guest Post: Confidence And Ruin Amongst The PIIGS

For today's installment we'll take a look at the debt:gold ratio for the PIIGS countries to see who puts the IG in PIIGS (perhaps you've already guessed). the ratio represents the multiple by which the country's debt exceeds its gold holdings. To an optimist, a high ratio means that the rest of the world has great confidence in the economy of the country in question. To a pessimist, a high ratio means the country is ruined. At a quick glance, it appears that Italy is no worse off than America--assuming that both countries actually have the gold the World Gold Council claims they have. Italy may have trouble getting theirs from New York, if that is where it is. Notice the decline in the ratio over the past decade--that is a reflection of the rising price of gold, not a decline in these nations' debts. Debt has increased over the past decade. The price of gold has apparently risen more. So does this mean these countries are becoming solvent? Can a rising price of gold solve our economic woes? Historically, a decline in this ratio can been used by governments to justify monetary expansion, particularly if it happened during an episode of such expansion. Why not? The improvement of the ratio suggests that the government isn't printing enough. The destruction of the value of the currency (and the country's debt) begins to occur faster than the rate of monetary creation (thus the label in the US graph "Ben proposes, the Market disposes"). The government counters this by printing faster, but the destruction of the currency's value is faster still.

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