Golden Accumulation Opportunity
By Jim Willie CB
Oct 30 2009 3:18PM
Use the above link to subscribe to the paid research reports, which include coverage of several smallcap companies positioned to rise during the ongoing panicky attempt to sustain an unsustainable system burdened by numerous imbalances aggravated by global village forces. An historically unprecedented mess has been created by compromised central bankers and inept economic advisors, whose interference has irreversibly altered and damaged the world financial system, urgently pushed after the removed anchor of money to gold. Analysis features Gold, Crude Oil, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and US Federal Reserve monetary policy.
Actually, the golden opportunity is for buying silver at current prices. The motive for lifting the USDollar was the gargantuan $115 billion in USTreasurys offered this week. With bond yields rising from gargantuan supply, the USGovt and USDept Treasury and USFed did not wish to have both bond principal values fall and the USDollar fall. So the maestros engineered a meager semi-lifeless US$ rally, and a full 100-cent silver price discount. The claim again came that the bond auction bid/cover was strong at over 3:1 ratio. But 1.0 of that comes from the primary dealers who are bound to bid. The rest came in majority from foreign central banks. Same Modus Operandi by the Usual Suspects. The difference is that precious metals were taken down in price, using the typical shorting of futures contracts sponsored and endorsed by the USGovt, free of collateral regulatory requirements. Heck, we could all bring down the price of cotton, and make boxer shorts (jockeys too) cheap, if we all were permitted to sell in gargantuan quantities without benefit of cotton in possession. Now is yet another opportunity to gather in gold, and especially silver, at a hefty price discount. The silver price after some stabilizing days will be ready for a serious assault on the $20 price level. See the brief technical review later in this article.
HARDLY FLIGHT TO SAFE HAVEN
The stories pushed out by the increasingly lost USGovt officials, supported by the armada of Wall Street henchmen to carry out marching orders, and issued by the wholly subservient US financial press, have become downright laughable. In the last several days, on numerous occasions on the tube and on numerous occasions in published articles, the phrases ‘flight to safety’ or ‘seeking safe haven’ or ‘safety & security’ were heard and read. On its face, each description is an affront to any thinking man or woman, entirely in conflict with the Global Paradigm Shift movement away from the USDollar, and in sharp contrast with most deep seated monetary practices in full speed on American shores. The United States financial arena is the home of the most gargantuan monetary inflation in the history of mankind (as in scores of centuries), as central bank balance sheets hit $3000 billion. The United States financial arena is the home of the most gargantuan federal deficit, with almost no visible end. The United States financial arena is the home of the most gargantuan illicit (not well hidden) debt monetization, as each and every mammoth auction would fail without the purchase from the Printing Pre$$. The United States financial arena is the home of the most gargantuan secretive payment for ruinous credit derivative losses under its offered shelter for Fannie Mae mortgage toxic bond manager and the American Intl Group credit default swap insurer. The United States financial arena is the home of the most gargantuan carte blanche sacred budgets for war efforts of questionable motives. The point is that the fundamentals and financials of the United States contradict any hint of a global movement drawn to safety, security, stability, wisdom, or leadership. This is pure Orwellian rubbish!
The United States financial arena is the home of the most gargantuan array of liquidity facilities which are designed to enable the US Federal Reserve to function as a quasi-banking system, argued as requiring a program to keep up with the many types and functions. The United States financial arena is the home of the most gargantuan Medicare expense coverage for an aging population best described as the sickest and most medicated in the entire industrial world. The United States financial arena is the home of the most gargantuan prop initiatives for the stock market, which boasts over 70% of its volume from Wall Street program trades, and without the role of the Plunge Protection Team and the corrupted cover offered by relaxed accounting rules, would have plumbed the depths long ago. The United States financial arena is the home of the most gargantuan banker welfare programs disguised as systemic rescues, like the TARP fund. The United States financial arena is the home of the most gargantuan list of insolvent big banks acting like huge zombies. The United States financial arena is the home of the most gargantuan, and still growing, list of banks declared dead in official FDIC funeral services. The point is that the fundamentals and financials of the United States contradict any hint of a global movement drawn to safety, security, stability, wisdom, or leadership. This is pure Orwellian rubbish!
The United States financial arena is the home of the most gargantuan nationalization initiatives, none of which has any merit or longstanding stability to offer. The United States financial arena is the home of the most gargantuan consumption binge in the history of mankind, where wealth is often measured in a credit line rather than work or industrial capacity. The United States financial arena is the home of the most gargantuan flight of working capital ever witnessed by mankind, whose land is left with homes that once acted like engines of spending after conversion to automatic teller machines. The United States financial arena is the home of the most gargantuan destruction of home equity and home ownership loss via foreclosure. The United States financial arena is the home of the most gargantuan hidden inventory of bank owned property. Enough, stop there! Monotony does set in! The point is that the fundamentals and financials of the United States contradict any hint of a global movement drawn to safety, security, stability, wisdom, or leadership. This is pure Orwellian rubbish!
Tragically, the US financial arena has become a dangerous land of acidic minted paper posing as money, whose volumes are so gargantuan, that the corrosive effect on capital borders on total. The United States is the home of the worst economists ever to walk on the earth, who command iconic respect, yet who never properly justify their past string of failures, and past numerous chapters of baseless mythology upon which the USEconomy has been built and continues to rest. The US has adopted the Weimar financial plan, complete with high risks. The cast of foreign creditors and major trade partners have almost all begun deep commitments for a new IMF global reserve basket of currencies to temporary displace the USDollar. They have almost all begun deep commitments for international trade settlements outside the USDollar, like for crude oil. The primary adversary is clearly the Chinese, who have among other steps installed Yuan currency swap facilities worldwide. The combined effect is to knock the USDollar off its perch in global reserve currency status. The Chinese hold the spearhead to de-throne the USDollar. Behind the scenes, the Germans work steadily to remove the US and UK from their perch, clearly held by strong-arm means like with interventions in markets too numerous to name. The point is that the entire world has shown early and urgent commitment to move AWAY from the USDollar, not toward it. They do not seek safety and security in the USDollar arenas any longer. They drive the new Paradigm Shift in another direction.
PARADOX OF MONETARY SOURCE
A great paradox has come home to roost and be felt. Harken back to 1971 when the US under the errant leadership of Richard Nixon. The US broke the Bretton Woods Accord that dictated gold to anchor the USDollar in the global financial system. The Vietnam War and the Great Society programs at the time resulted in a quick run on US gold held in Fort Knox. That supply is 99% gone now, after the Clinton-Rubin Admin engineered their own Decade of Stolen Prosperity. They brought the gold lease rate to nearly zero, spawned a Gold Carry Trade, gutted the USTreasury of its gold, financed private gains for Wall Street in the hundreds of billion$, and rendered the US financial system vulnerable to collapse.
The paradox has come full circle. When a nation steps forward to declare itself the lead engine in the global economy, the lead police cop with global military reach, and the lead capital market in Wall Street, it does so at a great risk when it serves as custodian to the global reserve currency. In the initial decades, the risk is minimized. The risk is that the nation holding control of the global reserve currency, the USDollar, must supply new funds for capital formation, for credit extension, for government finance, for continued functions of myriad types. The grand wellspring has a US$ brand on its liquid product that is essentially inflated unendingly. In the initial decades, the monetary base was inflated for productive purposes. Some would argue fervently that the entire USMilitary buildup with so-called Star Wars was the basis of exiting the strong 1980 recession. The initiative earned the US a Pyrrhic Victory, leaving it wounded in victory. At least a significant swath of new money and new credit was devoted to capital formation in the next decade or two, in forming businesses, and development of the USEconomy. Not until after 2000, did the United States embark on highly destructive economic policies that would quickly fail. Refer to the dispatch of much US industrial base to China from 2000 to 2005. Refer to the rekindle of the housing bubble, the establishment of home equity ATM machines, the raid of home equity for consumption purposes. Refer to the wars in Iraq and Afghanistan, regardless of their purposes, but with heavy crippling ongoing costs. In the last year or more, the sanctioned purpose of new money and new credit, again without basis or tangible backstop, has been the flood of rescue funds to the banking sector. This is the same banking sector that spread fraudulent and toxic bonds around the globe during the same housing bubble, which has a matching mortgage finance bubble.
The destinations of the new money and new credit in the last year or more have been destructive, non-productive, and probably loaded with yet more fraud. An economy that must function without a sizeable portion of its industrial base cannot remain stable, yet alone thrive. An economy that has been led to dependence upon housing bubble equity, otherwise known as inflated asset as collateral, cannot remain stable, yet alone thrive. Refer to the challenge against the USFed itself to reveal first the usage of the TARP funds, and second their entire balance sheet. My view is straightforward. The destination of the majority of funds in the last few years has been for syndicate purposes, for private gain, with the defense establishment and the banking sector. My view is that extraordinary crimes are involved, with no plans for prosecution, and that USGovt agency protection is offered routinely.
Here we are at the end of an era, where the USDollar sacrificed itself for the system. The high risk of the paradox is that late in the pathogenesis, the nation that benefited early in the cycle must endure powerful forces that bring a collapse of the currency that provided the wellspring of false capital. THE RISK IS OF A USDOLLAR IMPLOSION, AND WRECKAGE OF THE US BANKING SYSTEM. The currency served its purpose, and the cycle comes to an end. Originally, the benefits were global toward the flourish of capitalism. Lately, the benefits have been for the syndicate in its war machinery and the banking sector responsible for bond fraud. The gradual and inexorable decline of the US banking system will continue without interruption, only pauses to fool the easily misled masses. The global revolt against the USDollar is surely a loud signal, enough to herald a new foundation in the making with key alternative structures. The US$ cannot co-exist with a new system underpinned by a different vehicle as foundation. The IMF basket of currencies is but a temporary device, as the new currencies backed by hard assets are to be delivered by the Monetary Stork. Their hatch will be difficult, require much careful planning, and must endure military threat. The end stage, part and parcel to the paradox stated, is that the USDollar must die its death, assured when departure from the gold backing was permitted and agreed upon. The more capably the economy and financial sector is managed, the longer the process before the forced death of the system itself. In this decade, the Mussolini Fascist Business Model has embraced and promoted syndicate activity, with merger of big business with the state, to such an extent that the system is ripe for failure. A failed state comes.
This process has a parallel, the human birth ensures an eventual death. The US$ without the gold tether guaranteed its death, all in time. The time is upon us, as the US$ is going through its stages of death. First is denial. Second is alternatives in construction. Third is anger with vengeance. Also, the US banking system is going through its stages of death. Their ongoing fresh asset losses continue to outpace their new infusion of capital or funny money funds granted by the USGovt, delivered from the Printing Pre$$. Refer to their hidden housing inventory from foreclosure, along with the Prime Option ARMortgage losses, in addition to the commercial loan losses. The US banks cannot be revived any more than Humpty Dumpty can have his shell glued back together after a fall in disgrace. The banks maintain a charade in order to continue to channel funds into their balance sheets, to enable stock sales to the public while executives sell out, and to permit elite overseas bank accounts to be filled. They are buying time hoping that borrowing at 0% and investing in long-term USTreasurys will replenish their balance sheets, mostly in safe keeping at the USFed itself, and NOT LENT. They race against the Grim Reaper seeking out toxic assets.
THE SILVER PALLETTE OFFERED
Few opportunities are so striking and promising. One can purchase silver under $17 per ounce. One very well connected colleague said recently “Silver is an absolute steal at any price under $20, but the coming breakdown in the Western banks and monetary system will be centered on their gold mismanagement.” The silver price filled an early October gap evident in the faster charts. In the view shown below, the old resistance, now new support at 16.1 held firm. The price revisited the 50-day moving average. The moving averages are all on the rise. Who knows? The price must have felt the urgent need to touch the 50dMA after having spent all this time since mid-August above it. Nah! The Powerz are scared white, are soiling their skivvies, and are increasingly desperate. Their continued chicanery, using paper still to push down metal prices, only angers the world further. They motivate the search and establishment of alternatives to the USDollar in its key role. The real motive was the huge $115 billion in USTreasury for sale at auction this week. They needed some cloud cover, and a listless US$ rally would serve the purpose. The ultimate problem they have is the grossly inadequate silver supply in physical form. They more they offer silver at a deep discount, the more they drain their physical supply for delivery, and the more they tighten the noose around their own necks.
The USDollar is the object of international scorn. No credible evidence whatsoever indicates a global flight to the USDollar. In fact, a deeply oversold condition has persisted for several months. The Buck cannot find its true value well below the 70 level unless it relieves the oversold condition, finds some semblance of contract balance, enables fresh new shorts to be put into place, and allows time to pass as the world continues its abandonment. The Paradigm Shift away from the beleaguered discredited USDollar continues on a path that cannot be reversed. The nations that depart from it will be the leaders of the next era, plainly spoken. The US$ DX index seems to search for technical validation, like a touch of the 50-day moving average just below the 77 level. Either passage of time or a slight increase will manifest a touch. By the way, now that the week is almost over, and most of the USTreasury auctions have been completed, the USDollar has executed an ‘Outside Day’ with a higher intraday high hit, but a strong selloff in reversal, to log a close at the daily low. It seeks its true wrecked value.
ABSENT REFORM VERSUS CONSTANT PROPS
The latest Gross Domestic Product data for 3Q2009 is illustrative, out today. The USEconomy supposedly grew by 3.5%, if you believe their methods. Not here! Fully half of that growth was attributed to the Clunker Car Program, which cost $9 to the USGovt for every $1 in saved fuel. Government at its best, trading amplified debt for ineffective so-called growth. Also, 0.9% of the growth announced was attributed to inventory drawdown. Lastly, imports grew at 16.4%, against 14.6% for exports in the quarter. So the USEconomy is attempting slowly to revert to its broken model of importing what it needs, often for consumption purposes. The buzz among financial commentators and anchors is that the USGovt cannot possibly withdraw its stimulus, because they would send the economy back to where it was before it required the stimulus. They are essentially admitting the USGovt financial leaders are stuck with constant state of stimulus. The Uncle Sam patient is stuck in the Intensive Care Ward. He cannot walk alone or even with a crutch, as he has too many intravenous lines and monitors plugged to his decrepit body, all necessary to survive another day.
True reform is noticeably absent in the last year. Liquidity facilities led by the USFed do not qualify for reform. USGovt purchase of the Treasury Inflation Protection Security (TIPS) that ruin the measure itself do not qualify for reform. Nationalization of the General Motors and Chrysler do not qualify for reform. Installation of numerous czars without Constitutional powers that form an American Politburo do not qualify for reform. Stop-gap futile programs like Clunker Cars certainly do not qualify for reform. Prosecution of a non-New Yorker hedge fund manager of Indian origin for insider trading does not qualify for reform.
Watch the battle to pass an expansion of the federal debt limit. That should be interesting, even explosive. Watch the battle for bank regulatory reform, which is nothing but a power grab by the banking elite after their deep lapses. Watch the vapid baseless inept running commentary from the USFed on solutions and the current national condition, along with the plans for an Exit Strategy. This same august clown crew offered continuous blessing of the housing & mortgage bubbles as legitimate, misjudged the bank loss magnitude, and did not even anticipate a recession. The battle is on against a status quo continuation of the US financial ministries and function, for banker control versus some semblance of populist control. Watch the battle for disclosure of the TARP funds and the USFed balance sheet. This is actually a legal crowbar that could seal the fate of the republic.
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Jim Willie CB
Editor of the "HAT TRICK LETTER"
Hat Trick Letter
October 30, 2009
Jim Willie CB is a statistical analyst in marketing research and retail forecasting. He holds a PhD in Statistics. His career has stretched over 24 years. He aspires to thrive in the financial editor world, unencumbered by the limitations of economic credentials. Visit his free website to find articles from topflight authors at www.GoldenJackass.com . For personal questions about subscriptions, contact him at JimWillieCB@aol.com