In The Merry Old Land Of Oz

Briefly... The Greek Debt Crisis has been at the forefront of the currency markets for the past month. Speculation is rampant that a debt default by Greece will lead to the demise of the Euro. The Euro reached six month lows to close the week as the US Dollar Index "burst" through the 79 level with the Dollar at six month highs.

It is interesting that so much focus is on Greece relative to the Euro zone when it accounts for less than 3% of the Euro zone's total GDP. It is equally interesting that so little focus is on the debt crisis in the state of California here in the US. California represents 11% of the US GDP, and if it were a country, would have the World's 7th largest economy. Yet nobody seems to care that the state is virtually bankrupt and bordering on insolvency.

As interest rates have risen on Greek debt, crash alert flags have been raised by countless "currency experts" as to the "devastating effects" this is having on the Euro. Yet there is no mention of the "devastating effects" a debt default in California will represent to the US Dollar. In many ways, what is happening in Greece today, is just a tune up for what is about to wash over the remains of the West's floundering economies as sovereign debt default replaces sub prime mortgage default as the whipping boy of yet another banking crisis.

Hans Redeker, currency chief at BNP Paribas, said Greece will face "great trouble" if it has to pay 7% rates for long. Athens must raise €53 BILLION this year, mostly in the first half. It has a been relying on cheap short-term debt to fund the budget deficit of 13pc of GDP, but this raises "roll-over risk".

A national budget deficit that is 13% of GDP, and the need to raise €53 BILLION is being painted as some sort of Greek Tragedy. The US has a national budget deficit that is almost 11% of GDP, and has the need to raise over $2 TRILLION to cover unfunded expenses this year. It would appear the US faces "greater trouble" in the very near future. In the past week alone the US Treasury sold $118 BILLION of new debt. And the government is only further deluding themselves if they believe there will be no "roll-over risk" to funding their debt just because interest rates have thus far remained low. The US is whistling past the graveyard...

Funds flee Greece as Germany warns of "fatal" eurozone crisis
By Ambrose Evans-Pritchard
The yield on 10-year Greek bonds blasted upwards by over 40 basis points to 7.15pc in a day of wild trading. Spreads over German Bunds reached almost four percentage points, by far the highest since Greece joined the euro, and close to levels that risk a self-feeding spiral. Contagion hit Portuguese, Spanish, Irish, and Italian bonds.

George Papandreou, the Greek premier, said in Davos that his country had been singled out as the weak link in a "attack on the eurozone" by speculators and political foes. "We are being targeted, particularly by those with an ulterior motive."
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7095818/Funds-flee-Greece-as-Germany-warns-of-fatal-eurozone-crisis.html

STOP! Consider for a moment that this Greek Tragedy is less about Greece controlling its budget, and has more to do with "financial" players seeking to cash in a "big bet" ala Bear Stearns or Lehman Brothers. What if a large bank, or group of banks stood to make a windfall on the demise of Greek debt? Recall it was a fear of debt default that forced the hands of these two prominent banks to go belly up. Has the "casino" gone a step too far, and put an entire corner of the planet at risk of financial destruction all to win a bet? Will Japan be next? The UK? The USA?

Senate Approves Amendment to Raise Debt Ceiling by $1.9 Trillion
WASHINGTON—The Senate approved legislation Thursday increasing the federal government's borrowing limit by $1.9 trillion, enough to enable the Treasury to pay its bills through 2010.

The 60-39 vote was strictly along party lines with no Republicans joining the Democratic majority to approve the legislation.

Once the increase is signed into law, the federal government will be able to borrow up to $14.3 trillion, by far the highest amount of debt it has ever held on its books. The current limit of around $12.4 trillion would have been breached by the end of February.

House lawmakers must still take up the legislation and are expected to do so next week, according to a senior House Democratic aide.

The increase comes just over a month after Congress upped the borrowing cap by $290 billion from its previous limit of $12.1 trillion.
http://online.wsj.com/article/SB10001424052748704878904575031213535642690.html?mod=WSJ_WSJ_US_News_5

In other words, the US Senate has just authorized the Treasury/Fed to print up another $1.3 TRILLION batch of bills. This is outrageous. Debt limit? Why bother? It obviously has done nothing to slow down spending. With an increase to $14.3 TRILLION, the nations debt to the world will now increase to 98% of projected 2010 GDP. That projected GPD of just under $15 TRILLION rests precariously on the misguided assumption that economic growth in 2010 will exceed 2.5% annually. The economy shrunk by 2.4% in 2009.

How can anyone with merely a shred of common sense take this as anything less than an overt devaluation of the Dollar?

Best economic growth in six years
NEW YORK (CNNMoney.com) -- The U.S. economy grew at the fastest pace in more than six years during the fourth quarter of 2009, according to a government report Friday.

The nation's gross domestic product, the broadest measure of economic activity, rose at a 5.7% annual rate in the fourth quarter. That was much stronger than expected and provides another sign that a recovery in the economy is taking hold.

The growth in the fourth quarter was the highest since the third quarter of 2003. The economy rose at a 2.2% annual pace in the third quarter of last year.

But even with the strong growth in the second half of 2009, the economy shrunk by 2.4% last year. That was the biggest drop in 63 years and first annual decline for the economy since 1991.

Much of the improvement was driven by a turnaround in inventories, the supply of goods that businesses produce in anticipation of sales. Businesses slashed inventories in late 2008 and early 2009 due to concerns about worsening economic conditions.

According to Friday's report, 3.4 percentage points of growth in the fourth quarter came from the change in inventories. A pickup in auto production was a significant part of the inventory turnaround, even though auto sales themselves only rose modestly.

But the U.S. consumer was somewhat of a bystander in the fourth quarter, as personal consumption grew at only a 2% annual rate in the period. Spending by consumers accounts for more than two-thirds of economic activity.

An 18% jump in the value of exports also played a major role in the economy's rebound, contributing nearly 2 percentage points of growth. Silvia said exports have a chance to be a significant source of growth in the coming year, helped by the weaker dollar and stronger growth in developing economies, particularly in Asia.
http://money.cnn.com/2010/01/29/news/economy/gdp/index.htm

Another sign that a recovery in the economy is taking hold. LOL, another sign. So many signs that these financial media can't see the forrest through the trees. 3.4% of of growth in the fourth quarter came from a "change in inventories"? [More on that below] I can only wonder how this change in inventories will effect GDP in the coming quarters as it sits in warehouses and not in peoples homes and businesses. It would appear that little growth was derived from the all important consumer. The US Economy depends on the consumer for 70% of it's growth. How can there be any growth if 1 in 10 consumers [according to government statistics] is unemployed? The Dollar Bulls were so excited by this startling economic revelation that they pushed the Dollar ever higher off it's recent lows. So much for that jump in the value of exports being a "significant source of growth in the coming year" if the slump in the Dollar is over on such great growth news!

GDP data overstates economy's health
The U.S. economy turned in a surprisingly good performance in the fourth quarter, surging ahead by 5.7 percent on an annual basis, according to a government report released Friday.

Or did it?

With more than $1 trillion in additional government spending, bank bailout investment and loan guarantees, on top of another $1 trillion-plus in pump-priming from the Federal Reserve, it would be surprising if that money didn’t register a strong showing as it moves through the economy and financial markets.

But when you look a little more closely at the numbers, it quickly becomes apparent that it’s hardly time to start breaking out the champagne. A big part of the latest GDP gain comes from a statistical adjustment for changes in inventory levels that don’t reflect real growth. Over the past year, businesses cut deeply into those inventories — not wanting to get stuck with unsold goods. Now that they’ve cut them to the bone, the rate of inventory-cutting has slowed. The way the GDP is calculated, that slowdown adds to “growth” — even though it doesn’t reflect increased production or sales. If you back out that inventory adjustment, GDP grew only 2.2 percent.

Friday’s report was the preliminary reading on GDP, which will be revised twice before it’s final. Last time around, the number for the third quarter of 2009 started out at 3.5 percent before pared back to 2.2 percent for the final report. That could well happen this time around. Mike Englund at Action Economics thinks today’s number overestimated the drop in imports because the preliminary numbers may have overestimated the drop oil consumption. He says that accounted for a full percentage point of the 5.7 percent gain in the fourth quarter.
http://www.msnbc.msn.com/id/35149367/ns/business-answer_desk/

4th quarter's fast economic pace likely to wane
WASHINGTON (AP) -- The economy boomed at the end of 2009, growing at the fastest rate in more than six years. Now if only it could keep it up.

The economy expanded at an annual rate of 5.7 percent in the fourth quarter, the second straight quarter of growth. But analysts warn it's unsustainable.

Consumer spending, chilled by double-digit unemployment and scant wage gains, remains weak. And the benefits of government aid and higher company output to feed stockpiles will dwindle.

Many analysts predict gross domestic product will expand at a rate closer to 2.5 to 3 percent in the current quarter and 2.5 percent or less for the year.

That won't be enough to significantly reduce the unemployment rate, now 10 percent. In fact, most analysts expect the rate to keep rising for months and to remain close to 10 percent through year's end.

To drive down the jobless rate by just 1 percentage point this year, the economy would have to grow by 5 percent for the whole year. No one thinks that will happen.
http://finance.yahoo.com/news/4th-quarters-fast-economic-apf-3028347842.html?x=0&sec=topStories&pos=6&asset=&ccode

I guess this sentiment explains why the stock market did not rocket higher yesterday, the price of Oil continued to flounder, and most surprisingly of all the bond markets did not sell-off. Had yesterday's 4th qurater GDP number represented real solid economic growth, the bond markets would have gotten smashed on an upside surprise in GDP like we saw yesterday. The bond market's reaction to yesterdays "great economic news", as the White House would have you believe, suggests there is plenty to worry about as we move forward from here.

The folks at the Fed and US Treasury have plenty to worry about. This AIG scandle is really beginning to mushroom:

Secret Banking Cabal Emerges From AIG Shadows: David Reilly
The idea of secret banking cabals that control the country and global economy are a given among conspiracy theorists who stockpile ammo, bottled water and peanut butter. Wednesday’s hearing described a secretive group deploying billions of dollars to favored banks, operating with little oversight by the public or elected officials.

We’re talking about the Federal Reserve Bank of New York, whose role as the most influential part of the federal-reserve system -- apart from the matter of AIG’s bailout -- deserves further congressional scrutiny.

Treasury Secretary Timothy Geithner was head of the New York Fed at the time of the AIG moves. The hearing before the House Committee on Oversight and Government Reform also focused on what many in Congress believe was the New York Fed’s subsequent attempt to cover up buyout details and who benefited.

By pursuing this line of inquiry, the hearing revealed some of the inner workings of the New York Fed and the outsized role it plays in banking. This insight is especially valuable given that the New York Fed is a quasi-governmental institution that isn’t subject to citizen intrusions such as freedom of information requests, unlike the Federal Reserve.

This impenetrability comes in handy since the bank is the preferred vehicle for many of the Fed’s bailout programs. It’s as though the New York Fed was a black-ops outfit for the nation’s central bank.

As Representative Marcy Kaptur told Geithner at the hearing: “A lot of people think that the president of the New York Fed works for the U.S. government. But in fact you work for the private banks that elected you.”

Let’s take Geithner at his word that a failure to resolve the insurer’s default swaps would have led to financial Armageddon. Given the stakes, you might think Geithner would have coordinated actions with then-Treasury Secretary Henry Paulson. Yet Paulson testified that he wasn’t in the loop.

“I had no involvement at all, in the payment to the counterparties, no involvement whatsoever,” Paulson said.

Fed Chairman Bernanke also wasn’t involved. In a written response to questions from Representative Darrell Issa, Bernanke said he “was not directly involved in the negotiations” with AIG’s counterparty banks.

Geither said he recused himself from the bank’s day-to-day activities, even though he never actually signed a formal letter of recusal.

New York Fed staff and outside lawyers from Davis Polk & Wardell edited AIG communications to investors and intervened with the Securities and Exchange Commission to shield details about the buyout transactions, according to a report by Issa.

That the New York Fed, a quasi-governmental body, was able to push around the SEC, an executive-branch agency, deserves a congressional hearing all by itself.

Later, when it became clear information would be disclosed, New York Fed legal group staffer James Bergin e-mailed colleagues saying: “I have to think this train is probably going to leave the station soon and we need to focus our efforts on explaining the story as best we can. There were too many people involved in the deals -- too many counterparties, too many lawyers and advisors, too many people from AIG -- to keep a determined Congress from the information.”

Think of the enormity of that statement. A staffer at a body with little public accountability and that exists to serve bankers is lamenting the inability to keep Congress in the dark.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aaIuE.W8RAuU

What an odd little conspiracy. A conspiracy involving no one and staffers lamenting their inability to keep Congress in the dark. Geithner recused himself although there is no record of it, Paulson knows nothing about it and was not in the loop, and Bernanke either does not remember and/or was not involved.

Mike "Mish" Shedlock sums the AIG Conspiracy up best:

"Amazingly this conspiracy involves no one. It is a historic event. Hundred billion dollar bailout decisions just happened. No one made them, no one was responsible for them, and no one was in the loop, yet all those not involved agree the process must be kept secret."

Oops! It's not a secret any longer. The cat is out of the bag

Revealed: See Who Was Paid Off In The AIG Bailout
A key question at the heart of the controversial bailout of AIG is just how much money the government lost. The Federal Reserve and Treasury Department have worked to keep that number secret and to conceal who was on the winning end.

An unredacted document obtained by the Huffington Post list the damage in detail. Goldman Sachs alone, for instance, got $14 billion in government money for assets worth $6 billion at the time -- a de facto $8 billion subsidy, courtesy of taxpayers.

The list was produced as part of a congressional investigation led by the House Oversight and Government Reform Committee into the federal bailout of AIG.
http://www.huffingtonpost.com/2010/01/27/revealed-see-who-was-paid_n_438933.html

Oh! I almost forgot to mention the Precious Metals. I have been ignoring them as recent prices have NOT in any way, shape, or form represented fundamental reality. I do try to remain ever vigilant on bringing my readers sources of fundamental reality as it pertains to the Precious Metals. And today that fundamental reality revolves around the continued and growing physical demand for the Precious Metals, particularly Silver.

An interview with Ted Butler
"It's not developments...weakness in the physcial markets, that's accounting for price weakness. In fact, it's just the opposite. There is no evidence of selling in the physical markets, it's evidence only of demand."

"This price action that we've seen is ALL due to shenanigans on the Comex."
http://www.kingworldnews.com/kingworldnews/Broadcast_Gold+/Entries/2010/1/30_Ted_Butler_on_the_Metals_Market.html

The price of silver would explode
"To give you an idea of how concentrated the positions of the '4 or less' or '8 or less' bullion banks are in silver... the '4 or less' bullion banks are short 294.1 million ounces and the '8 or less' bullion banks are short 340.3 million ounces of silver. These amounts represent 107.5% and 124.4% of the net short position. What this means in plain English is that if the '4 or less' and '8 or less' bullion banks weren't there as the shorts of last resort... and what I call 'not-for-profit sellers'... the price of silver would explode to the outer edges of the known universe."

"Using the actual COT numbers, the '4 or less' and '8 or less' bullion banks in gold are short 20.4 and 25.1 million ounces of gold respectively. With the net short position being 24.9 million ounces... the '8 or less' bullion banks are basically short a bit more than the entire net short position. If they weren't there, the Commercial category of the COT report would be market neutral."
- Ed Steer, Case Research, Gold & Silver Daily http://www.caseyresearch.com/displayGsd.php

US Mint Sales: 2010 American Silver Eagles Break Record
January sales are at an all-time, record-smashing high.
3,225,000 of the 2010-dated bullion silver coins have been sold as of today. Combined with the 2009-dated sales of 367,500 from earlier this month, US Mint authorized buyers have now purchased a total of 3,592,500 Silver Eagle coins -- the most ever in a January, dating way back to the series launch in 1986. That, in spite of sliding silver prices, rationing and a week of unavailability between the time the 2009s sold out and the 2010s became available.
http://www.silvercoinstoday.com/us-mint-sales-2010-american-silver-eagles-break-record/101965/

US Mint Silver Eagle Sales Top 3 Million, Best Ever January
January 2010 is now in the history books. It is the best starting month of a year for the series that dates back to 1986. Despite all the aforementioned obstacles, authorized buyers scooped up 3,090,500 Silver Eagles from the United States Mint as of Friday, Jan. 22.

January is a traditionally strong month for these always popular coins, with over one million in sales registered in all but two years since 1999. Making this year’s three million plus start all the more impressive is the fact that even reaching the two million mark would have been historical. That happened only once before in Jan. 2008.

Why the big run-up? In short, availability and pent-up demand. Normally the Mint begins striking newly dated eagles in December to have them ready for the market in January. However, with little or no inventory in reserve coupled with unprecedented demand, the Mint was in a predicament. It made a decision in November to keep striking 2009-dated eagles through to the end of the year, hoping to build up enough of a supply to carry over until replaced by the 2010s.

That supply ran short. The Mint told its authorized dealers on Dec. 22 that it would begin selling 2010-dated eagles on Jan. 19 in an allocated, or rationed process. As happenstance would have it, its 2009 inventory was completely depleted on Jan. 12 after selling 367,500 for the month. Buyers had to wait an entire week to place orders. And while silver prices moved narrowly during that time frame (before falling off a cliff a few days later), that week of unavailability created its own buzz — especially for those who desired to own or sell newly dated eagles.

Demand for the 2010s was immediately apparent. 2010 Silver Eagle sales exploded as buyers quickly grabbed 2,480,000 within the first 48 hours. In that short time, the Mint sold over 8.6 percent of the total it had in all of 2009 — which was a record-breaking year for the series. And despite silver prices diving between last Wednesday and Friday, or perhaps because buyers were getting in on a perceived dip, another 243,000 left US Mint doors.
http://www.coinnews.net/2010/01/24/us-mint-silver-eagle-sales-top-3-million-best-ever-january/

Couple this stunning demand for US Silver Eagles with NO reported withdrawals of Silver from the Silver ETF, SLV the past week, and one wonders incredulously at the recent drop in Silver prices that began, oddly enough, the day after the 2010 Silver Eagles were released to the public to pent up demand. Silver has closed lower seven of the past 8 trading days beginning on January 20th.

Blame it on the CRIMEX. Or blame it on the CFTC. You decide. I'm blaming it on both.

Smoke On The Water

First things first. I have it on good authority that if you take a copy of the President's State Of The Union speech last night, shred it, and put it on your lawn this Spring...you will have a wonderfully lush green lawn all summer.

Second, if you missed the grilling of Treasury Secretary Geithner yesterday during the House Oversight Hearing on the AIG Bailout you can watch it here:

http://cspan.org/Watch/Media/2010/01/27/HP/A/28886/House+Oversight+Hearing+on+AIG+Bailout.aspx
This is PRICELESS. These Congressmen, one by one, took Tiny Tim to the woodshed, and beat him to a pulp. The hearing lasted nearly 2 and a half hours, but every minute is worth a view just to see this scoundrel squirm. If he's still in office by April 1st, then we've all been fooled.

Third, I will refrain from commenting on the prices of Gold and Silver this evening as they at present do not in any way, shape, or form represent fundamental reality. As the folks at the MIDAS Report said yesterday in what may be the understatement of the century, "Rigging Of US Financial Markets Going Off The Charts."

Fourth, I will comment of the Fed's claim yesterday that "the economy continues to show signs of recovery". What a load of complete crap...the economy is dead in the water. No jobs, no recovery. I can't explain it any simpler than that. To believe otherwise is simply wishful thinking.

Fifth, the Treasury successfully completed the auction of $118 BILLION of debt this week, today. With, of course, the Fed buying all of it, indirectly, with Dollars they swapped to the European banks last year. More on those swaps below. It would appear these banks have grown weary of this scam and wish to close the door on this deceit...

And finally, after promising Harry Reid that he will flood the world with US Dollars, Bumbling Ben Bernanke was reconfirmed to another four year term as Federal Reserve Chairman. May God have mercy on us all...

Durable Goods Orders Rise Below Expectations
WASHINGTON -(Dow Jones)- Orders for long-lasting goods rose in December much less than expected following a pair of declines, according to a report signaling manufacturing's recovery will be slow.

Manufacturers' orders for the durables increased 0.3% to a seasonally adjusted $167.91 billion, the Commerce Department said Thursday. Economists surveyed by Dow Jones Newswires had projected a 2.0% increase.

Durables in all of 2009 fell on an unadjusted basis by 20.2%.

November durables dropped 0.4%, revised from a previously reported 0.7% drop. October orders dipped 0.1%.

A sign within Thursday's data of future demand for durables, unfilled manufacturers' orders, tumbled 1.2%, the 15th decline in a row.
http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=ff72923d-ba70-424a-9b33-955b6247775a

I left out all the excuses for the poor data, as we are only interested in the facts. I am sick of excuses. For a real load of excuses, check out the new jobless claims report below:

Jump in jobless claims blamed on special factors
Weekly initial jobless claims jumped 36,000 in the latest week to 482,000, easily exceeding the forecast offered by Bloomberg of 440,000. The 4-week moving average
rose 7,000 to 448,250, while continuing claims dropped a scant 18,000 to 4.6 million.

Continuing claims are over 2 million below the peak set last year, though the steep drop is unlikely the result of increases in employment but mostly do to unemployed workers losing standard benefits, which normally run six months.

Before we go setting of any alarms bells over the unexpectedly-large rise in weekly claims, let’s look at an explanation offered up by Bloomberg News:

The Labor Department said claims piled up due to short holiday staffing at state processing centers. Market News International is quoting a Labor Department analyst as saying the week's gain is "not economic, but administrative."

Starting with the next report, the government analyst expects the effect to reverse making for a steady decline in coming weeks. An implication here is that short-staffing this year was greater than prior years and is not offset by seasonal adjustments. Note also that data from an unusually large number of seven states had to be estimated for the current report.
http://economytodaytomorrow.blogspot.com/2010/01/jump-in-jobless-claims-blamed-on.html

"Roll up your window and hold yer nose, dead skunk in the middle of the road." WTF? Can you believe this crap? Desperation is too soft a word to describe this "report". What will the excuse be next week when new jobless claims are once again "worse than expected"? And damn it, expected by whom?

How Paulson's People Colluded With Goldman to Destroy AIG And Get A Backdoor Bailout
To understand what happened, you need to remember that the top guys at Goldman are really, really smart. They are like champion chess players who anticipate the possible moves of their opponent. The guys at Goldman can quickly grasp how pieces of a financial transaction work together, like the pieces on a chessboard, to game out different scenarios. This attribute is not unique to the guys at Goldman; it's an essential quality of every good banker. But it does mean that the guys at Goldman cannot credibly profess to being oblivious.

The other thing that you must remember is that the dagger hanging over AIG and Goldman -- the eventual payout to the CDO counterparties -- was a zero-sum game between the two financial giants. On June 30, 2008, AIG's net worth was $79 billion and its CDO obligations totaled $62 billion. On August 27, 2008 Goldman's net worth was $42 billion and its share of the infamous CDO portfolio was $22 billion. The stakes were huge.

Also, none of the critical elements that led to AIG's demise were obscure. In retrospect they seem quite obvious. Unfortunately, few in the financial media have attempted to understand those critical elements.
http://www.huffingtonpost.com/david-fiderer/how-paulsons-people-collu_b_435549.html

Fascinating reading if you have the time.

Is Bernanke Hiding A Smoking Gun?
A Republican senator said Tuesday that documents showing Federal Reserve Board Chairman Ben Bernake covered up the fact that his staff recommended he not bailout AIG are being kept from the public. And a House Republican charged that a whistleblower had alerted Congress to specific documents provide "troubling details" of Bernanke's role in the AIG bailout.

Sen. Jim Bunning (R-Ky.), a Bernanke critic, said on CNBC that he has seen documents showing that Bernanke overruled such a recommendation. If that's the case, it raises questions about whether bailing out AIG was actually necessary, and what Bernanke's motives were.
http://www.huffingtonpost.com/2010/01/26/is-bernanke-hiding-a-smok_n_437509.html

Two at Fed Had Doubts Over Payout by A.I.G.
Weeks after rescuing the American International Group with an $85 billion taxpayer loan in late 2008, Federal Reserve Board officials rejected a proposal that would have forced the insurer’s trading partners to return $30 billion in cash that they had received from A.I.G. in the preceding months.

The Fed chose instead to let the banks keep the cash and to receive additional billions from taxpayers. This decision was made, internal documents show, after two Fed governors expressed concern that such a plan might be “a gift” to the company’s trading partners, including Goldman Sachs and Société Générale, a major French bank. The documents were provided to Congressional investigators by the Federal Reserve and were obtained by The New York Times.

Donald L. Kohn, the vice chairman of the Federal Reserve Board, has also come under fire for his role in the A.I.G. bailout. Testifying before Congress last March, Mr. Kohn refused to identify those banks that received taxpayer funds as A.I.G. counterparties, saying that the stability of the financial markets would be undermined if the insurer’s trading partners were disclosed.

According to the documents, Mr. Kohn is one of the two Fed governors — the other was Kevin M. Warsh — who expressed worry that paying the counterparties receipt of 100 cents on the dollar to unwind their insurance contracts could be a gift to the banks.
http://www.nytimes.com/2010/01/27/business/27aig.html?ref=business

S&P cuts Japan outlook to ‘negative’
Standard & Poor’s has warned that it might cut its sovereign debt rating on Japan for the first time since 2002, a move that highlights doubts about the fiscal health of the world’s second-largest economy and the policies of its new Democratic party government.

The decision by S&P to change to negative the outlook on Japan’s AA long-term rating comes amid heightened international wariness towards sovereign risk as government deficits surge in the aftermath of the global financial crisis.
http://www.ft.com/cms/s/0/f24b0b52-0a33-11df-8b23-00144feabdc0.html

ECB, Other Central Banks To Stop Dollar Swaps With Fed
FRANKFURT -(Dow Jones)- The European Central Bank said Wednesday it has decided, along with other central banks, to stop providing liquidity to banks in dollars through swap agreements with the U.S. Federal Reserve.

The ECB said that it, the Bank of England, the Bank of Japan and the Swiss National Bank would stop conducting any such operations after Jan. 31.

The step had been widely expected after the discontinuation of longer-term foreign currency swaps with the Fed in September and the end of a swap agreement between the ECB and the SNB earlier this month.

"These lines, which were established to counter pressures in global funding markets, are no longer needed given the improvements seen in the functioning of financial markets over the past year," the ECB said in a statement.

The foreign currency liquidity provision was one of five non-conventional measures adopted by the ECB to stem the financial market panic that erupted after the collapse of Lehman Brothers in September 2008. It is the first of the five to be completely ended.

Of the remaining four, two have clearly defined ends while the other two are being phased out gradually as the level of stress in financial markets retreats to levels seen before the crisis.
http://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=201001271456dowjonesdjonline000634&title=ecbother-central-banks-to-stop-dollar-swaps-with-fed

We wonder what this may imply, but we have to assume that whatever it does, it will be messy.

India Jan 1-27 gold imports at 35-40 tonnes-trade
NEW DELHI, Jan 27 (Reuters) - India has imported 35-40 tonnes of gold during January 1-27, up from 9.8 tonnes in the whole of the same month last year, the head of a trade body and bank dealers said on Wednesday.
http://in.reuters.com/article/domesticNews/idINSGE60Q0HS20100127?rpc=401&feedType=RSS&feedName=domesticNews&rpc=401&sp=true

I'm sorry I just can't find any good reasons to sell Gold or Silver. Of course we know nobody is really selling any REAL Gold and Silver right now, just paper claims to Gold that DOES NOT EXIST. I guess if the banking regulators can miss the sub prime crisis in the housing market, they are allowed to miss the shenanigans in the phony Precious Metals market in New York. Isn't it amazing that laws put on the books by our own government are broken by the cops put in place by our own government to enforce them? Yeah, it's a great country, ain't it? Whoever said crime doesn't pay must have never had a job with the US Government.

It's Vigilante Time

Gold put in a rather stunning performance today in the face of numerous roadblocks: options expiration on the February CRIMEX Gold contract, a well bid US Dollar, and a "successful" US Treasury auction. Gold closed on the CRIMEX this afternoon up $14 off it's low of the day, a rather significant reversal.

Silver on the other hand was once again beaten with an ugly stick. It never ceases to amaze me the ease with which the CRIMEX crooks can have their way with Silver. And these exchanges are used for "price discovery"? For how much longer can this ever so obvious crime be allowed to continue unchecked by our watchful [wink-wink] regulators at the CFTC?

Perhaps the market itself will put an end to these villains cocky behaviour with a little vigilante regulation of it's own. Perhaps a building supply deficit will stop this crime in it's tracks. The Day Of Reckoning may be fast approaching.

From Harvey Organ's - The Daily Gold
Wednesday night is the last day for options on a gold contract. All standing option holders will receive a February contract,

Generally, the majority of option holders that stand , take delivery. Also option holders are generally more sophisticated than regular holders of contracts.

On Wednesday night, the Feb contract goes off the board. However you can still trade until Thursday night.

On Friday morning everyone gets to see everyone else hand. The long holders must deposit the full dollars of gold purchase.

If they have bought 1 futures contract say at 1100.00 usa then they would need to have on deposit at their brokers 1100 usa x 100 oz (one standard contract)
or 110,000 usa.

The seller receives notice of the buyers intentions. Thus this day is referred to as first day notice.

Deliveries commence on the first day of the month. A few years ago 95% of the commodity contracts like silver and gold were hit on the first of the month. The reason is simple. Why would the seller continue to pay storage and insurance fees for the entire month if he could unload the contract at the first of the month?

Lately however, most of the contracts are stopped at the end of the month due to scarcity of metals.

Once the seller obtains the sufficient quantity of metal to satisfy a buyer, the broker is notified by fax and the amount of purchase is subtracted from the buyers commodity
account.

The buyer gets a proper delivery bar with a weight to 3 decimal places and a bar number and the locale where the bar originated.The actual delivery can take a few days or it can take months. However, a delivery slip must be issued by the last day of the month which signifies location of a bar or bars of gold to be delivered!

I hope this will give you a simplistic view of the ongoings in the comex gold. The open interest for the front month February remains very high with 171788 standing. As I pointed out to you, Thursday is the last day that one can trade a February contract.

The comex supposedly has 1.8 million oz of gold "ready for sale". This is what is referred to as dealer inventory (or registered inventory). This represents 18,000 contracts.

If we see on Friday morning, say 30,000 contracts standing, the comex will be desparately trying to obtain the necessary gold to cover these contracts.

I have recently suggested that a determined group of Precious Metal buyers may be holding their contracts tight fisted awaiting the opportunity to pounce of the CRIMEX goons with a little raid of their own. Lying in wait to take delivery when they know the CRIMEX goons have no chance to wiggle free of a delivery default. It is no secret that the CRIMEX warehouses do not possess the Gold and Silver to back the open interest in these metals as they went to expiration this week. Now word comes that the LBMA warehouse is basically empty, the Gold is all gone:

From Jim Willie, CB via The Midas Report (http://www.lemetropolecafe.com/)

During the trend decline or the counter rally for the USDollar, a constant event persists. The London metal inventory is being totally depleted of gold bullion. Fast approaching is the event of GAME OVER for London, a condition that has already reached critical level according to a key reliable source of information with London connections and direct experience there. The paper gold market and the physical gold bullion market have finally separated in a practical manner, meaning actual gold has almost no role anymore in London paper contract settlement.

The absence of gold in London requires extraordinary tactics to settle contracts and to obtain gold bullion. Intimidation and bribes accompany gold delivery demands. They have almost zero gold, its supply having been drained in high volumes since early December, a process currently in acceleration. The opportunity to convert fiat money into precious metal weight is closing, at least at prices considered reasonable. The London gold banker said, "There is going on a lot more than meets the eye. The physical system is actually consolidating bigtime and is organizing itself with lightning speed, totally hidden from pretty much anyone, even the so-called insiders. The paper precious metal market and the physical precious metal market have defacto disconnected. The paper and physical gold markets currently operate in parallel universes. The outflow of physical metal from bank vaults is happening at a mind bending pace."

The true gold price might very soon become unknown, an extremely positive development. Gold market disruption leads to chaos, followed by much greater clarity. Like a bankruptcy process, the event is sudden but the cleanup takes weeks as dust settles. Right now, we see strong attempts using naked gold short contracts at the London metals exchange (LBMA) and the COMEX in the United States to drive down the gold price. It is all illegal and permitted. Margin calls have hit, forcing further selling of paper contracts. Before long, no gold metal will be available until clarity and prosecutions begin.

How Long Before the Demand for Physical Gold Blows Through the Paper Supply?
by Dave in Denver, The Golden Truth
For at least the last 15 years, the price of gold has been set by the highly manipulated paper markets in New York and London. As physical supply becomes scarce at current price levels, we are transitioning into a market in which the real price is defined by the price level at which a large seller of physical is willing to sell to a large buyer. India's 200 ton purchase from the IMF established the low end of this range at $1049. As of now, the IMF is the only entity that visibly has a big chunk of gold for sale. And we know both India and China have expressed interest in acquiring all of the IMF gold, not just the announced 403 tons for sale. Assuming the IMF - in the spirit of maximizing sales proceeds - isn't waiting to see if the price goes lower before it sells more, it's safe to assume the rest of the IMF gold for sale won't change hands until the price of gold is at least as high as the recent all-time high of $1220, otherwise it would have sold the rest around that level to either China or India. If the information from Jim Willie's insider source in London is accurate, it is reasonable to assume that we will see a much higher trading range for the price of gold in the near future, as the market will have to adjust to a higher price level as a mechanism of price discovery in order to "discover" the price at which a large seller is willing to sell.
http://truthingold.blogspot.com/2010/01/how-long-before-demand-for-physical.html

Could the rumblings of a Gold default in either or both the LBMA and CRIMEX be fuelling Gold's stubborn refusal to go down just because the CRIMEX says to? Are these default rumours behind the strength of the determined buyers that have stifled the CRIMEX goons ceaseless efforts to shake gold from the tight fisted money mangers? The clock is ticking, time will tell. Action come the end of the week could be frightening.

Every day now there are ridiculous headlines and stories that follow them proclaiming a recovery in the US economy is underway. Today we came across this piece of fiction on Yahoo Finance after the markets closed:

Poised for recovery, economy is lurching forward
A long way to go, but unmistakable signs of life for economy in confidence, housing results
http://finance.yahoo.com/news/Poised-for-recovery-economy-apf-518364660.html?x=0&sec=topStories&pos=5&asset=&ccode

Unmistakable signs of life for economy? These wizards of the written word could polish a turd...I swear.

The "spin" is never ending and changes by the hour. For instance, yesterday we got the December Existing Home Sales report. The first headline and report on this "news" was at 11AM and was decidedly negative:

December Home Sales Plunge Nearly 17 Percent- AP
Sales of previously occupied homes took the largest monthly drop in more than 40 years last month, plunging far deeper than expected after lawmakers gave buyers extended time to use a tax credit.
http://finance.yahoo.com/news/December-home-sales-down-apf-2729493334.html?x=0&sec=topStories&pos=main&asset=&ccode=

By 3PM the "tone" of the story changed and was given a decidely more positive slant:

Home sales rose in '09 as prices plunged 12 pct. -AP
Sales of previously occupied homes rose in 2009 for the first time in four years, despite a December slump that was due to a tax credit that led many buyers to complete sales earlier.
http://finance.yahoo.com/news/Home-sales-rose-in-09-as-apf-617614634.html?x=0&sec=topStories&pos=main&asset=&ccode

From the largest drop in 40 years to the first rise in four years... in just four hours. It's disgusting! And then they blame the fall in December on a tax credit that was "supposed" to expire in November. Geeze, damn those tax credits!

"Expect Gold To Gain More Than 30% This Year"
By John Embry
http://www.goldseek.com/email/lt/t_go.php?i=2185&e=MTI2MDQ1&l=-http--www.sprott.com/Docs/InvestorsDigest/2010/01_29_2010%20Expect%20gold%20to%20gain%20more%20than%2030%20this%20year.pdf

This brief essay by Mr. Embry is a must read. It is a succinct summation of the past eight weeks of the Gold market and why he believes Gold's recent reaction is nothing to worry about, and everything to embrace. He nails it...

Water Under The Bridge

“Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power.”
- Benito Mussolini

Last week is now just "water under the bridge". Gold and Silver traders got screwed, but the fundamental reasons for owning physical bullion could not be stronger. It is my firm belief that Gold and Silver are on the cusp of a mind blowing move higher in price as the gulf between paper Precious Metals and the REAL THING grows ever wider by the day.

Once again overnight in the Asian markets the bid for Precious Metals was strong. At 5:30AM est Gold was up $12. The Asian markets had closed and the first of the soon to be in default markets, the LBMA was just gearing up for the day. On a $5 vertical spike higher, to a new overnight high at this time, the Gold Market gets whacked by an obvious not for profit seller, and the "drift" lower begins once again into today's CRIMEX open.

It's so obvious that the western banks cannot tolerate a rise in the price of Gold. The Asians obviously cannot get enough of the Precious Metal. For how much longer can the Gold Cartel believe they can hold back this raging Gold Bull? For how much longer can the Gold Cartel hide behind the misrepresentation of the forces driving Gold prices higher by the western financial media? I seriously doubt too much longer. Huge blanks are beginning to appear on their paper Gold promises.

This from Harvey Organ's - The Daily Gold :

The volume of gold trading at the comex on Thursday turned out to be 328000. In a rather strange development, the open interest declined by only 2400 contracts on that huge volume.

This no doubt infuriated our banking cartel as they could not shake the leaves off the tree. The bankers had their own problems to contend with, with the announcement of Obama that the USA was going to restrict trading by bankers.

As for silver, the volume on the comex was an astounding 51000 contracts (250 million oz). To give you an idea of the amount of silver offered: the world produces 500 million oz of silver in a given year and have no above ground strategic supplies like their richer cousin, gold.

Thus in one day, the comex traded 1/2 its yearly production. What is also strange, the comex is not the world's largest trader in silver and gold. That belongs to the LBMA which trades on a daily basis of around 100,000 contracts or 500 million oz of silver and for gold around 2100 metric tonnes. (75000 contracts) In gold that equates to a full years production of gold sold at the LBMA in one day.

In another strange development, the OI in silver (basis Thursday) rose by 721 contracts to 126941. Please recall that silver has lost almost 2.00$ per oz and yet the OI has gone up????

As for gold, we are nearing the completion of the Feb contract. It goes off the board on Jan 26.10 as does the options. The OI for February stands tonight at 197000 which is extremely high for 4 days to go.

In another development we are seeing strange announcements at the comex at the various warehouses.

For gold: 16 tonnes of gold (physical) was adjusted out of the dealer inventory into the investor's inventory. This caused the dealer inventory to fall to a dangerously low 1.8 million oz or 18,000 contracts.
This is the amount of gold that is available to be delivered upon!

For silver: 2.4 million oz were removed from the dealer inventory to investor inventory. This caused the level of dealer inventory to fall to a dangerously low 47 million oz of silver or 9400 contracts of silver.

To boot, for January options (January is a non delivery month for both silver and gold) in gold, a huge 2808 contracts are already standing for delivery (280 thousand oz of gold or 10 tonnes of gold)
This is extremely high for just options in a non delivery month. Not only that, but a further 45 contracts are standing which have not been hit.

I would like to point out, that this does not include February options which expire Jan 26.10. There is no doubt that our wicked bankers will be trying to keep the option holders from exercising contracts.

In silver: the January options hit for metal total 286 contracts or 1.43 million oz of silver. Only 1 contract remains to be hit.

There is no doubt that this coming week will be extremely volatile as the bankers wish to get those long holders from taking delivery.

Very interesting indead, but the shinanigans in the Silver warehouses is where we need to focus more attention:

Silver: The Race Is On
By Ed Zimmer
On Wednesday, January 20th, prices in New York for silver plummeted 4.7%, down 89 cents on the day. Yet the World Spot price not only stops the crash, but turns slightly positive in the first few minutes of trade. It would appear that traders outside the US have a different view of the value of the silver metal.

Tuesday, January 19th. the COMEX totals of silver on deposit shows 113 Moz of silver combined on deposit. While that is up slightly from the 112.6Moz in December, the numbers are seriously misleading. On the 8th of January, total stocks were at 111.5 Moz of which 54 Moz were registered to cover contract positions, 57 Moz was eligible to cover contracts, but were actually owned by someone who had them on deposit at a COMEX depository.

Just 11 days later, the stocks of registered silver have fallen to 47.4 Moz while the eligible stocks rose to 65 Moz. As of the 15th, over 128,000 silver contracts were open, amounting to a trade of more than 640 Moz with just 47 Moz available to cover demands for delivery. That's right, there is only physical silver to cover slightly more than 7% of the open silver contracts on the COMEX. Do the math -- 93% of the COMEX contracts can only be covered if the short side can find someone to sell them silver or the long is willing to settle in paper money for a paper silver contract.

Basically, nearly 15% of what was the available COMEX silver is now owned by someone. It only took 11 days for that much silver to disappear into personal hands. Only 47 Moz remains, at which point the shorts develope a new term for "naked short selling", because the only way they can then satisfiy the counterparties is to settle 1) Buy Silver on the open market to settle the demand for delivery or 2) force a settlement in cash, which is the same thing as a default.
http://seekingalpha.com/article/183662-silver-the-race-is-on?source=email

Combine this observation with suggestions that the Silver ETF [SLV, JP Morgan custodian] is leasing out it's Silver and one begins to wonder if the end game in the Great Silver scam is fast approaching. Once Silver supply can not meet demand, the paper Silver deception will go down in flames.

What I find fascinating about this whole flow of events is that by drilling the price of Silver lower, the shorts only raise demand for the metal itself. This demand begins to quickly drain "available supply" and only makes a bad situation worse for those on the short side of this market.

Consider the COT open interest numbers in both Silver AND Gold. Open interest should be falling with the price, but it is not. Either the CRIMEX goons have run up against a determined bunch of buyers, or the CRIMEX goons are buying the metals themselves to cover their tracks on the short side of the market. This raises the question: Is the CRIMEX just a circle jerk? Is all the volume indicated there just a swirl of contracts being bought and sold "in house" by the likes of JP Morgan. In other words, is JP Morgan's left hand short, and it's right hand long?

Think about it. All futures contracts have a buyer and seller. ALL of them. If JP Mrogan sells a contract short, there has to be a buyer out there to take that short from them and go long against it. If there are no "non-affiliated" buyers present in the markets, you get a downdraft in price as the bids plummet for lack of buyers.

All too often we are told that "prices plunged because the funds dumped their positions". Have they, or are they simply on a buyers strike? JP Morgan is selling, but nobody is buying so the "price" must fall. If the open interest is not falling with price, then the funds must not be selling.
This must piss of the CRIMEX goons to no end for they cannot cover their mountainous short position if nobody will sell to them.

This then begs the question, are the funds looking to rout the CRIMEX by holding their cards close to their vests? Could they be planning a raid of their own by standing for delivery when they know the CRIMEX goons have NO CHANCE of making delivery on their obligations. Never forget, the party that goes long against the short in a futures transaction holds all the cards becasue he is now owed all the metal that that contract represents and the short side is on the hook for it.

With options expiration on the February Precious Metals tomorrow, this week could not only be very interesting, but historic in hindsight down the road. Particularly in light of the vote to renominate Bumbling Ben Bernanke as Fed Chairman, the Congress' grilling Geithner on his AIG shinanigans, a Fed Interest Rate decision, $166 BILLION in NEW Treasury Debt Auctions, and Fourth Quarter GDP announcement this week. Tighten your seatbelts, the ride just up ahead looks turbulent.

The Bernanke Nomination
There's no doubt that some of this reconfirmation panic is nothing but political opportunism. When we opposed Mr. Bernanke's reconfirmation on December 3, the facile consensus was that the Fed chief was a master of the universe who had saved the world from depression. But after Scott Brown's victory in Massachusetts last week, Senate Democrats are suddenly looking for a financial political sacrifice. President Obama doesn't look ready to throw over Treasury Secretary Tim Geithner, so Mr. Bernanke is the designated spear catcher.

The Democrats' loudest complaint, moreover, is that Mr. Bernanke and the Fed haven't been easy enough in printing money. Majority Leader Harry Reid declared his support for Mr. Bernanke on Friday, but not before extracting what he said were concessions about future Fed policy.

The Fed chief promised, said Mr. Reid, that he would "redouble his efforts" to make credit available and that Mr. Bernanke "has assured me that he will soon outline plans for making that happen, and I eagerly await them."

Redouble? The Fed has already kept interest rates at near zero for more than a year, and it is buying $1.25 trillion in mortgage-backed securities to refloat the housing bubble, among other interventions into fiscal policy and credit allocation. Is the Fed going to buy another $1.25 trillion, or promise to keep rates at zero for another 14 months?

Mr. Reid's declaration of a confirmation quid pro quo will not reassure global investors who already fear that the Fed lacks the political will to withdraw its historic post-crisis liquidity binge soon enough to avoid new asset bubbles.
http://online.wsj.com/article/SB10001424052748704562504575021704013095196.html?mod=WSJ-WSJ-US-News-5

Hey now, I thought Bumbling Ben Bernanke was adamant that the Fed must maintain it's independence so as not to give the impression of "political influence" on monetary policy? I guess that was only true when his reconfirmation as Fed Chairman was never in doubt. It appears Ben is now willing to sell his soul to save his job. Shocking to learn that Harry Reid, top Senate shiester in the Health Care vote buying, has made a "deal" with the seated Fed Chaiman to assure him the votes for reconfimation and keep his job. Woe is America. Where is the outrage? Harry Reid has signed the Dollars death warrant.

The Nation: Geithner Must Go
by William Greider
Tim Geithner is standing in the middle of the muck because he was still president of the New York Fed in the fall of 2008 when it rescued AIG with tons of public money (now totaling $180 billion). The facts of the deal are catching up with him now and none are good, since they raise doubts about his competence and his public integrity. This scandal has smoldered for several weeks in newspaper business sections, but is about to grab front-page attention.

The House Oversight Committee, chaired by Edolphus Towns, has turned up damning evidence and called Geithner to testify the week of January 27. Committee investigators are poring through some 250,000 e-mails and subpoenaed documents and finding smoking revelations. House Republicans smell blood. House Democrats, given the present climate of popular discontent, are unlikely to rally around tainted goods.

Perhaps the most explosive revelation is that Geithner's subordinates at the New York Fed instructed AIG executives to evade securities law and conceal from the public the $62 billion the insurance company paid out on contracts with the largest investment houses and banks. AIG was already bankrupt and 80 percent owned by the government, kept afloat solely with the billions being injected by the central bank. Yet the Fed told the company to pay off the bankers at full value—100 percent on the dollar—without negotiating a better deal for the public. The bankers would not have collected a dime if the government hadn't come to the rescue.

The Fed, other words, gave the largest, most prestigious banks a very sweet deal—much sweeter than anything the banks or the federal government will offer to homeowners facing mortgage foreclosure. The central bank, in effect, was operating a backdoor bank bailout that nobody could see. The public billions devoted to AIG went in one door at the insurance company and came out another door to the private banks. Goldman Sachs alone collected $13 billion.

Failure to disclose is a big no-no in corporate finance. People can go to jail if they willfully withhold material information from shareholders and the Securities and Exchange Commission (SEC), or they may be sued for investor fraud. Yet that is what the New York Fed told AIG to do. The company officers wanted to report fully to the SEC. Their Fed overseers told them to take out the disclosure out of their report to the SEC (the facts were ultimately not disclosed until five months later). The Fed, remember, is the government's principal banking regulator. It is supposed to enforce the laws, not tell regulated firms to break them.
http://www.npr.org/templates/story/story.php?storyId=122940019

Little Timmy, that is a Bozo No-No. Of course he will feign either ignorance or the droll excuse that "this had to be done to save the system". BULLSHIT! This guy is a proven crook, a tax cheat. Any and all that voted to confirm him as Treasury Secretary should be held accountable in the November mid-term elections. If Obama fails to send him packing he deserves to be run out of town on a rail himself. ALL ties to Goldman Sachs and the Treasury Department need to be severed immediately.

The fed's interest rate decison this week is sure to get lost in the headlines as they are certain to maintain there zero interest rate policy. Look for hints that the Fed will continue or increase purchases of mortgage backed securities from Fannie and Freddie. Also be on the lookout for lies pertaining to the Fed's "draining liquidity"...the whole world knows that is impossible if the governemnt wants to keep the illusion of economic recovery in the headlines.

MORE Treasury Debt to swamp bond markets this week? This is always one to keep tabs on particularly this week in light of the Chinese backing away from that table recently, stuffed and on the verge of puking up their overwhelming holdings.

Forth Quarter GDP numbers will most likely come in "strong", at or near +4%. This number is absolute rubish, and is representative of one thing ONLY...government spending. How can a nation with now chronic 10% unemployment [by government estimates] have any growth at all when the consumer represents 70% of that growth and it is CLEAR the consumer is NOT spending money it has, let alone money it doesn't via credit cards. The lie of economic recovery can be substatiated only as long as the people believe it. The people have suspended belief in anything and everything coming out of the mouths of governemnt officials. That should have been made clear by the results of last weeks election in Massachusetts.

"The last time one out of six Americans was out of work was the Great Depression when one out of four was unemployed."
- Charles Biderman

Charles Biderman Bloomberg TV January 19, 2010 [video, must watch]
Charles Biderman, founder and CEO of Trim Tabs Investment Research, discusses the possible role of U.S. government cash in the current stock market rally with Bloomberg's Lori Rothman. He basically says that the markets are rigged, the Fed [through its primary dealers] is pumping the overnight futures market and is the stock buyer of last resort. He says that when it ends, the markets will crash.
http://www.youtube.com/watch?v=cQyFxBG6dhY

This interview paints a pretty clear picture. Who has been buying stocks the past 9 months if all the tradional sources of funds for the equity markets are sitting on the sidelines or selling? You decide.

Marc Faber: White House should let markets work [video, short and SWEET]
The US administration’s interventions in the market will not solve problems and will bring about unintended consequences, Marc Faber, author and publisher of the Gloom, Boom & Doom Report, told CNBC on Friday.

President Barack Obama on Thursday proposed new limits on the size and trading practices of big banks, to prevent excessive risk-taking.

“I don’t have a very high opinion of Mr. Obama,” Faber told CNBC’s Squawk Box Europe. “I was negative of Mr. Bush but I think Mr. Obama makes him look like a genius.”

“Basically I think everybody will agree that in an economic system the market solves problems best.”
http://www.investmentpostcards.com/2010/01/25/marc-faber-white-house-should-let-markets-work/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+wordpress%2FVYxj+%28Investment+Postcards+from+Cape+Town%29

The Story Of Paper Gold And The BIC Lighter

There is Bullshit, and there is Absolute Bullshit. What we have witnessed in the Gold and Silver Markets over the past 48 hours has been nothing short of pure ABSOLUTE BULLSHIT.

I'm not going to cry about it, and neither should you. Facts are facts, and the fact is the Gold and Silver markets are rigged. If you ever needed proof, look no further than the performance of these "markets" over the past 24 hours.

Not since the Bear Stearns bailout in March of 2008, have these two Precious Metal markets behaved as irrationally as they have over the past two days. Gold should have made it halfway to the Moon then, and it should be half way there now.

The technical breakouts that occurred this past Tuesday were legitimate and warranted. Is it a coincidence that the wheels began to come off the Obama Carnival on Tuesday evening, and the "sudden" reversal in the Precious Metals the following morning n New York? Hardly!

Gold is a barometer. It measures many things, chiefly Inflation. It is also a measure of rising uncertainty and turmoil in the markets, in geopolitics, and in Washington, DC. In the past Gold has always risen in times of doubt and fear. Rising Gold was a signal to "run for cover", "seek shelter from the storm", and "protect yourself". But not anymore...

Every time there is a crisis now, the banking cartel leans on the Precious Metals, and pulls the plug on them. "The canary in the coal mine mustn't sing." As if silencing Gold was going to avert the panic... "Oh look, Gold is falling, this must be a false alarm." Do the clowns really believe people are that naive, that stupid?

If Greece was really about to default, and the Euro was about to join the Buffalo on the great prairie in the sky, do you really think Europeans would dump their Gold en mass and buy US Dollars to save themselves? Not likely, but we are being led to believe that they are.

China reports a 4th quarter GDP this morning of 10.6%...annual GDP above 8%. The Chinese central bank deems the country's growth profile to be accelerating too fast, they make the wise decision to raise their interest rates FRACTIONALLY to PROTECT their countrymen and their currency from inflation. Do you think every Chinese is running to his local bank to dump his Gold because his country is so successful economically? Not likely, but that is what we are being led to believe.

The Chinese are facing an inflation "event". The Euro zone is facing a monetary crisis. Aren't inflation and monetary crisis two of the biggest reasons to buy and hold Gold? Then why are they selling their Gold? BECAUSE THE ARE NOT SELLING THEIR GOLD! As a matter of fact, nobody is selling their Gold...REAL Gold that is.

The only Gold that has been sold the past 48 hours has been fake paper Gold. The kind they manufacture on the CRIMEX in NEW YORK CITY. New York City: THE CAPITOL OF FINANCIAL CRIME.

Look at the chart posted above courtesy of Kitco.com. Focus on the Red line, and the Green line. The red line is the price of Gold on Wednesday, the Green line is the price of Gold today. The bottom of the chart has listed the various time zones that Gold trades in daily. It is beyond obvious that the ONLY time frame that saw ANY SIGNIFICANT selling [falling prices] was during the time frame labeled New York NYMEX [aka The CRIMEX].

"Now isn't that special."

There is a supposed "potential" currency crisis in Europe, and a REAL threat of Inflation in China. The Europeans and the Chinese appear to be holding onto their Gold, yet the Americans sell it as if it were radioactive. Either Americans are the dumbest inhabitants of the planet, or they know something the rest of the World doesn't know about Gold.

I don't know about you, but I'm pretty certain that the rest of the World knows a whole lot more about Gold than the Americans do. Not only does the rest of the World know the TRUTH about Gold, but they know the Americans don't have any...and that the Americans will do anything they can to prevent the rest of the World from profiting from this knowledge.

You see, Gold is the anti-Dollar. The World knows this now. The Americans just don't know that the rest of the World knows this now. They will soon enough. For it is the anti-Dollar that is about to crush the paper Dollar, and burn down it's house of paper Gold.

DO NOT BE DUPED BY THE STUPID AMERICANS. Hold onto your Gold as if your life depended on it...it just might one day soon. The price of Gold in Dollars will be meaningless when Dollars are no longer accepted for payment.

Russia’s Central Bank Boosts Gold Holdings 4.1% in Month
Jan. 21 (Bloomberg) -- Russia’s central bank addded 800,000 troy ounces of gold to its reserves last month, increasing its holdings of the metal in dollar terms to $22.4 billion as of Jan. 1, Bank Rossii said on its Web site.

The bank’s gold reserves climbed to 20.5 million ounces from 19.7 million the previous month.
http://www.bloomberg.com/apps/news?pid=20601012&sid=af8ronprmsBE

GOLD POSITIVE.

Russia moves into Canadian dollars
Russia’s central bank announced on Wednesday it had started buying Canadian dollars and securities in a bid to diversify its forex reserves. Analysts said the move could herald growing diversification of emerging market central bank assets away from the dollar and into other commodity-linked currencies and assets, such as the Australian dollar. Russia’s forex reserves, the world’s third largest, stood at $439bn in December and were evenly split between dollars and euros.
http://ftalphaville.ft.com/blog/2010/01/21/130766/russia-moves-into-canadian-dollars/

DOLLAR NEGATIVE.

New jobless claims unexpectedly rise, more people receive extended benefits
WASHINGTON (AP) -- A surprising jump in first-time claims for unemployment aid sent a painful reminder Thursday that jobs remain scarce six months into the economic recovery.

The surge in last week's claims deflated hopes among some analysts that the economy would produce a net gain in jobs in January and help fuel the recovery.

In its report on jobless claims, the Labor Department said initial claims for unemployment aid rose by 36,000 to a seasonally adjusted 482,000. Wall Street economists had expected a small drop, according to Thomson Reuters.The four-week average, which smooths fluctuations, rose for the first time since August, to 448,250.

The Labor Department report said the number of people continuing to claim regular benefits dropped slightly to just under 4.6 million. The continuing claims data lags behind initial claims by a week.

But the so-called continuing claims do not include millions of people who have used up the regular 26 weeks of benefits customarily provided by states and are now receiving extended benefits for up to 73 additional weeks, paid for by the federal government.

More than 5.9 million people received extended benefits in the week that ended Jan. 2, the latest period for which data are available. That's an increase of more than 600,000 from the previous week. The data for emergency benefits lags behind initial claims by two weeks.

The rising number of people claiming extended unemployment insurance indicates that even as layoffs are declining, hiring hasn't picked up. That leaves people out of work for longer periods.
http://finance.yahoo.com/news/Rise-in-jobless-claims-apf-3027105474.html?x=0

DOLLAR NEGATIVE.

Democrats propose $1.9T increase in debt limit
Senate Democrats on Wednesday proposed allowing the federal government to borrow an additional $1.9 trillion to pay its bills, a record increase that would permit the national debt to reach $14.3 trillion.

The unpopular legislation is needed to allow the federal government to issue bonds to fund programs and prevent a first-time default on obligations. It promises to be a challenging debate for Democrats, who, as the party in power, hold the responsibility for passing the legislation.

It's hardly the debate Democrats want or need in the wake of Sen.-elect Scott Brown's victory in Massachusetts. Arguing over the debt limit provides a forum for Republicans to blame Democrats for rising deficits and spiraling debt, even though responsibility for the government's financial straits can be shared by both political parties.

The measure came to the floor under rules requiring 60 votes to pass. That's an unprecedented step that could mean that every Democrat, no matter how politically endangered, may have to vote for it next week before Brown takes office and Democrats lose their 60-vote majority.

Democratic leaders are also worried that Sen. Evan Bayh, D-Ind., who opposed the debt limit increase approved last month, will vote against the measure.

The record increase in the so-called debt limit is required because the budget deficit has spiraled out of control in the wake of a recession that cut tax revenues, the Wall Street bailout, and increased spending by the Democratic-controlled Congress. Last year's deficit hit a phenomenal $1.4 trillion, and the current year's deficit promises to be as high or higher.

Congress has never failed to increase the borrowing limit.

"We have gone to the restaurant. We have eaten the meal. Now the only question is whether we will pay the check," said Finance Committee Chairman Max Baucus, D-Mont. "We simply must do so."

A White House policy statement said the increase "is critically important to make sure that financing of federal government operations can continue without interruption and that the creditworthiness of the United States is not called into question."
http://www.businessweek.com/ap/financialnews/D9DBP30G3.htm

As DOLLAR NEGATIVE as it gets.

U.S. commercial paper market shrinks in week
NEW YORK, Jan 21 (Reuters) - The U.S. commercial paper market contracted in the latest week, Federal Reserve data showed on Thursday, hinting at a still fragile economic recovery.

Businesses use short-term borrowing to finance restocking of shelves and pay salaries, so any sustained increase in issuance would indicate the U.S. economy is continuing to grow, albeit anemically.

Yet analysts said this latest week's data is inconclusive and does not suggest a definitive trend in the commercial paper market.

For the week ended Jan. 20, the size of the U.S. commercial paper market, a vital source of short-term funding for companies' day-to-day operations, fell by $10.0 billion to $1.092 trillion outstanding from $1.102 trillion a week earlier.

The market is about half its peak size in August 2007 when the credit crisis started.
http://www.reuters.com/article/idUSN2121587720100121

Yep, DOLLAR NEGATIVE.

Philly Fed factory index falls in January
NEW YORK (Reuters) - Factory activity slowed more than expected in the U.S. Mid-Atlantic region in January, paring expectations of manufacturing's role in helping a U.S. economic recovery, a survey showed on Thursday.

The Philadelphia Federal Reserve Bank said its business activity index slipped to 15.2 from 22.5 in December, which was a 4-1/2-year high.

Analysts polled by Reuters had expected a January reading of 18.0.

Any reading above zero indicates growth in the region's manufacturing sector.

The survey covers factories in a region encompassing eastern Pennsylvania, southern New Jersey and Delaware and is looked at closely as one of the first indicators of the health of the U.S. manufacturing sector.
http://www.washingtonpost.com/wp-dyn/content/article/2010/01/21/AR2010012101759.html

Oops, more DOLLAR NEGATIVE.

Funny, all this Dollar negative news and the Dollar keeps it's bid all day, and Gold falls like a stone in the ocean. Need more proof the Precious metal markets are rigged? Hey, it's out there...

The Dollar appeared to have hit a wall this morning after a very brief burst above 78.50. It's no secret that this "Dollar Rally" is being faded by the pros in the futures markets. When the hot air holding it up begins to cool, watch for a quick reversal in the Dollars fortunes and a panic back into Gold.

Bill Holter had some insightful comments at Le Metropole on the Republic victory in Massachusetts Tuesday:

To all; the big news today is the Republican win in Massachusetts. No more super majority (the ability to ram legislation down our throats) and at least SOME debate on legislation. As you may have heard over the weekend, Jim Cramer forecast a rip roaring stock market rally with a Republican win. Oh well you can't win 'em all and theoretically he made this one without inside information. What we did get is a rip roaring Dollar rally which has been perceived as equity bearish for the last couple of years.

The thinking goes that spending will be curtailed and is Dollar bullish. Can this move higher continue? Of course but not on a sustained basis in my opinion. I believe the Dollar cake has already been baked and is in jeopardy of catching on fire! It does not matter whether or not the most fiscally responsible people in the world assumed all of the government posts as once a barrel goes over Niagara Falls there is no retrieving it until it hits bottom. In other words, we are bankrupt because of past spending and debt which will not go away without a devaluation.

2010 will be the year where past spin is proven completely wrong and should display itself in much much lower stock prices. As you already know mortgage resets and rolls are a giant bulge in the python coming our way and will need to be addressed this year. As I have mentioned for the last several weeks it feels to me like another deflationary breeze is gathering strength and debt is NOT where you want to be. The Shakespeare quote "neither a borrower nor a lender be" is so fitting for where we are today because if you borrow you may lose your asset and as a lender you have counterparty risk which cannot be gaged in this environment.

Remember, Dollars and all other fiat monies are "debt created" and are nothing more than IOU's. While you do want enough cash to spend until it becomes "unspendable", a large cash position is asking for trouble if it is not at least equaled by a metals position. The dangers of "out of control events" are as high today as they have ever been and complacency is running very high! I plan to write more about fraud in the next couple of days as I believe this may very well be what pushes the ultimate panic button. The fact that The Fed is under further attack is very important in my opinion and will probably expose fraud or at a minimum shady dealings. The stars are not aligning well to say the least! Regards, Bill H.

Nice summation Bill!

The Great American Gold Sale continues, while supplies last!

Is the SLV leasing Silver to the CRIMEX and the LBMA in an effort to stem a default? Something smells fishy....

Dollar Rally? A Fundamental Flop

"Well, son of a bitch... That sucks!"

I couldn't agree more. The Dollar hits a five month high versus the Euro and yesterday's breakouts in Gold in Silver become yesterdays news, pffft, just like that. But it just a setback, not a collapse. Higher Gold and Silver prices are baked into the cake.

Euro tumbles on Greek woes; China hurts risk appetite
NEW YORK (Reuters) - The euro fell to a five-month low against the dollar on Wednesday amid worries about Greece's ability to finance its deficit, while fear that China is trying to slow bank lending dulled demand for commodity currencies.

Analysts said the dollar also rose on hopes that the Republican upset victory for the vacant U.S. Senate seat from Massachusetts will force Congress to rein in the fiscal deficit.

"The momentum clearly favors the dollar right now, and the market seems willing to latch onto any reason to buy it," said Matthew Strauss, senior currency strategist at RBC Capital Markets in Toronto.

He said reports that Chinese banks were told to curb lending weighed on commodity currencies such as the Australian dollar and boosted the greenback. Tighter policy may slow China's recovery and cut demand for commodities, analysts said.
http://www.reuters.com/article/idUSTRE5BF27F20100120

Ah, but no fears that California will be able to finance it's debt... China is doing the right thing. China is actually an economy that has growth, GREAT GROWTH. Tomorrow it is likely that China will announce fourth quarter GDP in excess of 10%. That's right, 10%. Their economy IS hot, and the flame does need to be turned down a bit. But is China's growth going to evaporate because they raise interest rats less that 1/2 of 1% and curb reckless lending? Not likely. Another knee jerk reaction to "analysts" portraying an Asian success story by trying to sully it with Western beliefs about "the economy". Have these analysts not come to the realization that the Western way of doing and looking at things has turned out to be a COLOSSAL failure? The Chinese, the damn communists, have learned from the West's mistakes at managing an economy and are merely moving to prevent the same mistakes from unraveling their Asian success story. It is really that simple.

These moves China is making will ultimately lead to a strengthening of their currency, and that strength in the Chinese Juan will lead to further weakness in the US Dollar. Give it time, the Chinese aren't stupid, the Western financial analysts are the stupid ones...and those "rushing to buy the US Dollar. I pity the fools...

Gold Sage Jim Sinclair summed it upped succinctly on his web site this morning:

Due to the Republican victory in Massachusetts yesterday, the general commentary on F-TV is that the USA looks really good. The MOPE on Greece is going wild.

The dollar is no safe haven and will not guarantee the maintenance of buying power.

The large purchases by non US entities of US Treasuries in the TIC report smells like Limburger cheese. The US dollar economic recovery is nothing more than pixie dust.

To sustain a US economic recovery, there first needs to be an economic recovery to sustain.

Unemployment now becomes an increasing concern for both parties.

The Fed is locked into QE and in all probability is supporting the US Treasury market via the Caymans and other countries internationally.

Buy the dollar and sell gold? You have to be kidding. That is the madness of the crowd and the actions of the Crimex in paper gold.
http://jsmineset.com/2010/01/20/in-the-news-today-436/

Regarding the stunning Republican victory in Massachsetts yesterday, at best it will help create a stalemate in Washington, but reign in deficit spending? That's a stretch. Both parties are addicted to spending. America may see the Health Care Bill crushed, but look out for the BIG JOBS STIMULUS BILL coming out of the Capitol sooner than you think...more spending is on the way. The election of Mr Brown to the Senate in no way makes the accrued deficit of over $12 TRILLION disappear or dissolve, and it doesn't change the fact that the US government needs to rollover $2 TRILLION of old debt this year and fund a government spending shortfall in the current fiscal year projected in excess of $1.5 TRILLION. There is still not one single fundamental reason to buy the US Dollar.

Home construction dips; permit applications surge
December's cold weather, especially in the Northeast, was seen as the main reason for the divergent results. "Old man winter might just be to blame for a substantial portion of today's construction anomaly," wrote Guy LeBas, an analyst with Janney Montgomery Scott.

Regardless of the cause, "the fact remains that housing is still the weak link in the economy," wrote Jennifer Lee, an analyst with BMO Capital Markets.

The industry has dramatically scaled back construction amid the worst housing bust in decades. Thousands of foreclosed homes have been dumped on the market at bargain prices that make it difficult for the builders to compete.

New home construction is down 75 percent from the peak nearly four years ago, but up 14 percent from the bottom last January.

For all of last year, builders started construction on more than 550,000 homes, down nearly 40 percent from a year earlier and lowest on records dating back to 1959.

The report comes after a survey showed builders' sentiment about the market remains weak. The National Association of Home Builders said Tuesday its index of industry confidence fell in January to the lowest level since last summer. The drop reflects fears that demand for new homes will be sluggish despite the extension of a federal tax credit.

To give a boost to the still-struggling housing market, Congress decided in November to extend the deadline for a tax credit of up to $8,000 for first-time homebuyers until April and expanded it to include $6,500 for existing homeowners who move.
http://finance.yahoo.com/news/Home-construction-dips-permit-apf-2476088537.html?x=0&sec=topStories&pos=4&asset=&ccode=

When in doubt, blame the weather. The housing market sucks no matter how the media tries to paint the picture. I don't know many folks without jobs that can afford to buy a house no matter how much of a "credit" the government offers. By the way, how many homes would even be being bought these days if there was no tax credit to entice buyers? The housing market is not in recovery. At best it is simply bouncing along the bottom.

Producer price up 4.4 percent in 2009
WASHINGTON, Jan. 20 (UPI) -- The Producer Price Index
for finished goods in the United States climbed 4.4 percent in 2009, the Bureau of Labor Statistics reported Wednesday.

The annual increase was one tenth of a point less than economists had predicted. The consensus estimate called for a 4.5 percent price rise.

For the month, prices rose 0.2 percent in December, following a 1.3 percent increase in November and a 0.3 percent increase in October, the bureau said.

Core prices in the month -- prices with the variables of food and energy prices taken out -- were flat, while food prices rose 1.4 percent and energy prices fell 0.4 percent after rising in the two previous months.

http://www.upi.com/Business_News/2010/01/20/Producer-price-up-44-percent-in-2009/UPI-10941264012019/

"But there is no inflation..." ...yeah, whatever.

US Debt: Look At It This Way
By: Adrian Ash, BullionVault
Seven ways to put the United States' national debt into perspective...

The SHEER SIZE of the US government's debt hasn't put off new bond buyers so far in 2010.

You've got to wonder what kind of news – or debt – it might take to deter them.

In just two days this week, the Treasury issued $61 billion in new debt – twice as much money as Japanese households put into their domestic equity funds during all of 2009, itself a 50% jump from 2008.

Yet one "big bidder" still opted to lend the federal government one fifth of that sum, according to bond analysts speaking to the Financial Times at least. And overall, the government's creditors offered to lend Washington three times the money it sought.

Now, if the Treasury didn't need that $61,000,000,000 to cover 6.3 days of spending, the money raised in new bonds between Tuesday and Wednesday this week could cover 12 days of interest due on the outstanding debt, already running above $12.3 trillion and outweighing the market value of every company listed on the New York Stock Exchange.

Put another way, the United States national debt is greater than the GDP forecast this year for Japan, China, Brazil and Canada added together. (That's excluding the $107 trillion of unfunded liabilities yet to come, of course.) If today's lenders ever see their money again, they could just about buy all the gold ever mined in history – all 165,500 tonnes of the stuff – twice over at today's prices.

Or they could simply pay twice today's gold price, of course.

Repaying the US national debt looks a struggle, however. Settling $1 per second – rather than racking up an extra $37,132 every second, as the federal government's scheduled to do in 2010 – would take until the start of February A.D. 392,372. Settled for cash, and piled up in $1 bills, the current US debt would reach to the moon...and back...and back to the moon again...and then round the moon's equator ten or perhaps 20 times, depending on how much you squashed them.

Or to put the US national debt into historical perspective – a very historical perspective – the US government has borrowed the equivalent of $2.46 each and every day since the beginning of time...last computed to have occurred some 12.7 billion years ago, back when $2.46 really meant something.

For creationists sticking with Archbishop Ussher, that's $2 billion per year since God said "Let there be light"...back when fiat really meant something, too.

And lo! The bond market still kept on buying.
http://news.goldseek.com/BullionVault/1263580200.php

Gold Outlook for 2010 - Gold Resuming its Historical Monetary Role – as the Anti-Currency [informative reading]
by Nick Barisheff
In 2009 gold resumed its historical monetary role - as the anti-currency. Therefore, the influences and events that affect its price are not simple commodity supply/demand fundamentals, but the more complex global monetary issues.

So let's start with the obvious gold events of the past year. It was the first time in 20 years that gold purchases for investment purposes outpaced gold purchases for jewellery demand. However, in terms of significance, central bank buying of gold this past year upstaged all other events. For the first time in over 20 years, central banks became net buyers rather than net sellers of gold. This is a watershed event.

The next level of news events had implications that might not have been so obvious at first glance. On October 6, Robert Fisk, a veteran Middle East correspondent writing for the UK’s Independent, published an article entitled "The Demise of the Dollar." The article described how "Arab states have launched secret moves with China, Russia and France to stop using the US currency for oil trading." Although the central banks immediately rejected these rumours, the market treated their denials as a clear admission of guilt and gold broke through year-long resistance at $1,020 an ounce into an entirely new trading range that day.

Another event whose implications may require some extrapolation was the move by the Chinese government to encourage and facilitate gold buying by the Chinese public. China watchers know the Chinese have a long-term love for gold. In fact, on December 9, Reuters announced that China had surpassed India as the world’s largest gold buyer, for the first time in recorded history. The Chinese have also demonstrated a strong propensity for saving. With their government making no secret of its displeasure with the US dollar, and with few other safe investment options available, the Chinese public could provide the fuel to move the gold price to new highs. One ounce purchased by each of the 80 million middle-class Chinese would equate to 2,500 tonnes of gold. It is important to remember that during the last gold bull, the Chinese public was unable to participate. This is a story that definitely bears watching.

Finally, in the third category, is the news we might compare to the first spark of a match that either extinguishes uneventfully or ignites a raging, out-of-control forest fire. Most of us in the gold industry have discovered that we ignore these flickers at our own peril. Many of the stories that started as hints or rumours a few years ago are now accepted as fact. The first of these issues we are watching is the imbalance between gold derivatives and paper proxies and the amount of physical gold in existence. This is important because despite its best efforts, Wall Street still cannot print gold.

Since almost all the gold ever mined remains in existence and gold reserves and production estimates are monitored meticulously, such discrepancies will show up faster in the relatively small gold market than they might with other commodities. As Wall Street churns out new gold investment vehicles, people are starting to do the math. If it becomes apparent that financial institutions have sold more paper gold than actually exists in physical form, then the price of paper gold and physical gold could diverge.

This year, many analysts began to apply increased scrutiny to the gold and silver ETFs. In mid–July, hedge fund giant Greenlight Capital announced they were moving assets out of the world’s largest gold ETF – SPDR Gold Shares – and into physical gold. Greenlight is an industry leader whose movements are carefully studied and often emulated. Although Greenlight’s manager, David Einhorn, claimed it was cheaper to own and store physical gold than it was to pay the ETF fees, the fact that a major, industry-leading fund would move to physical bullion set off many alarm bells.

Since ETFs do not actually purchase their assets, there is nothing prohibiting Authorized Participants from contributing baskets of borrowed gold. The amount of borrowed gold held by ETFs is a matter of speculation. With multiple claims on the bullion, ETF investors may suffer unexpected losses under stress conditions when they need their gold the most.

Along with many others in the gold industry, we have noticed that fund managers are starting to buy gold as long-term insurance, which they intend to hold for several years. By one estimate, if the world’s pension funds and hedge funds moved only five percent of their assets into gold, which these days seems quite conservative, gold would trade above $5,000. With leading wealth managers such as David Einhorn, John Paulson and Paul Tudor Jones allocating significant amounts of their portfolios to gold, the process may have already begun.

In conclusion, the events of the past year bode well for the price of gold in 2010. At the recent highs of $1,200 many thought that gold was overbought. For those who feel this way, I would like to close with some recent words from investment legend Richard Russell who said, "If gold is going parabolic, then there’s no such thing as 'overbought'," Almost any of the events of 2009 I have highlighted could trigger such a parabolic rise. Right now the Chinese and Indian public, the non-Western central banks, the sovereign wealth funds, the pension funds and the hedge funds of the world are all looking for ways to increase their long-term gold holdings. The pull-back from the recent highs of $1,200 seems to be over, providing an attractive entry point for investors. In 2010 we will likely see prices rise to at least $1,300 to $1,500.
http://www.bmginc.ca/lib.pl?rm=show_document&record_id=648

Yeah, I think I better dump my Gold and Silver and rush out to get me some of those fiat Dollars. The Precious Metals are a long-term bet. Trade them at your own peril. Was Gold a good buy at 1137? Was Silver a good buy at 18.62? In hindsight 24 hours deep, maybe not. But, in the big sheme of things, there is no bad buy when it comes to Gold and Silver these days. Get some while you still can!