uhhh.

ugly ppi numbers! core up 0,4!

this one could be one for the

wall street edition

of

"you don´t know jack" :-)

http://immobilienblasen.blogspot.com/

Very ugly numbers...

8:30 AM ET, Mar 15, 2007 - 2 minutes ago
19. U.S. Feb. core PPI up 0.4% vs. 0.2% expected
8:30 AM ET, Mar 15, 2007 - 2 minutes ago
20. U.S. Feb. PPI up 1.3% vs. 0.6% expected
8:30 AM ET, Mar 15, 2007 - 2 minutes ago

Anyone else find it funny that Goldman is involved in helping the sub-prime issue? Paulson's involvement in policy making, GS record earnings in a very mediocre market quarter. I get the wierd feeling that Goldman could be using inside fed knowledge, and the fed is using Goldman to help steer the market. Maybe just overthinking but how convenient for Goldman to announce now that they are expanding there sub-prime business. Just odd.

gs quarter was not effected from the meltdown.

the problems in the markets started just days after the quarter ended.

we will see the impact in the next quarter.

Bill mentions the "RSI-7 gets over 70-75 on the Daily price series data". Where can I access this information. Thanks.

I hesitate to quibble with a Merill Lynch economist, but please consider this.

Tightening lending standards will have a considerable effect on the mortgage market; it may not be possible to prop up either the subprime/Alt-A markets or inflated real estate asset values with reductions in interest rates. Credit availability might matter more than price. I am already reading anecdotal reports of subprime borrowers unable to refinance because they cannot find a willing lender. There are reports of difficulties in finding buyers for subprime MBSs.

There are also hints that foreign buyers of treasuries are getting skittish. The Fed may not be able to lower interest rates as much as they might want.

Bill,
Your post above really sizes up what a problem it is for the $usd. New reader here and it's getting soo much clearer and convincing. If I understand you....The fed is boxed in by errors of the big swinging dicks (right?) and inflation. On the little dip this a.m. bought a 4% position for my port divided by slw and gfi. The juniors you mentioned look too junior for me; this is my ira account. Any comments on risk here? GLD, I take it is lacking for you. The other options for PM purchase you mention just seem too different for me, but open with a little more explanation. My broker is Fidelity.

Wow, wonderful to have you be posting!But, please not at the expense of rest.

ALOHA !!

Well Bill I believe you are right on the Central Bank interventions into ALL "free" markets and especially gold and silver, monetary metals. I however believe there will be a demand for gold so long as governments worldwide debase currency. People will want to preserve purchasing power. The US dollar is under pressure from more than just wars and real estate loans since next year the baby-boomers start retiring. Every major western country faces the same baby-boomer scenario where once valuable tax revenues turn into massive deficits. This is not just a USA phenomenon regarding future deficits and currency debasement.

Add to the fire this news release today on gold ... The biggest gold producing countries are now reporting lower production levels of gold. South Africa gold production is at its lowest since 1922. Yesterday Australia reported a near 10% drop in annual production.

Central Bank gold holdings fall to lowest since 1948, IMF says

15 Mar 2007 bbj.huGold holdings by central banks and other government organizations declined for the eighth straight year in 2006, to the lowest in almost 60 years, figures from the International Monetary Fund show.

Link: http://www.bbj.hu/main/news_24081_central%2Bbank%2Bgold%2Bholdings%2Bfall%2Bto%2Blowest%2Bsince%2B1948%2Bimf%2Bsays.html

Now add that data to the stock levels of the LME and NYMEX for the base metals. A lot of base metals, especially nickel and zinc and lead, are on historic lows. In September last year the LME nickel inventory dropped to "zero" for one day!! China reported that in Feb. 2007 their copper imports were up over 70% compared to Jan 2007. Copper prices are now near $3 again. The 3 billion potential rioters that China and India have can only be placated by more government spending and loans to keep them employed. I believe the Chinese have wised up to Mao's austerity policies as a sure fire way to lose power. Yet both China and India inflate their currencies at breakneck speeds. The one commonality all fiat currencies have ... debasement equals less purchasing power.

As an aside the Shanghai Metals Index only went down 0.02% during the stock market crash over the past two weeks. It is now back up near its highs of 36000.

To see for yourself the inventory levels of the LME and other markets go to this link.

Link: http://www.kitcometals.com/charts/lmewarehouse.html

With the inventories of nickel, lead and zinc down to historical lows and the world populace hoarding gold and silver as currency hedges I think certain PM equities will certainly benefit. One of my picks is ECU SILVER(ECU.V ECUXF.PK). ECU is a "producer" and not just an explorer. Don't be fooled by the word "Silver" in the name either since they also have quite respectable "gold" assays as well. Also byproducts of silver are ... lead, zinc and nickel. All rising in price due to extremely low worldwide inventories(stocks).

Here is a MUST READ for investing in ECU SILVER:
Link http://www.ecu.ca/i/pdf/AdrianDouglasRpt.pdf

I'll try to help out the newbies with a quick synopsis of the issue -

Greenspan fought the various crisis of the 1990's (LTCM, Y2K, etc) with liquidity pumping. The Y2k liquidity infusion helped increase the 2000 stock market bubble.

The stock market bubble collapse led to more money supply creation AND a lowering of interest rates to stave off a major recession.

The lowering of interest rates and easy lending practices led to a housing bubble which is receding now. The debt bubble is also bursting.

The government has been printing money which causes inflation. Since Clinton's Administration, the government has been changing the calculation of CPI so that they could say that "inflation is contained". They also sell gold off for the same reason.

Increased money supply + decreasing interest rates = Greenspan/Bernanke bubbles in stocks and real estate.

Government will continue to try to print money to keep liquidity in the system without raising interest rates because that would cause the housing market to collapse and lead to major recession or worse.

With the help of global central banks and our money center banks, they may be able to keep the bubbles inflated. Maybe not.

The actions of government are pro Gold regardless of whether they succeed. Gold will go up more in the long run if money is fleeing stocks.

Hope that made sense, I am in a big rush this am.

Good luck

Also, GLD may go up as miners go down along with the stock market, should we see a crash. GLD, IMO, is the best way to get your toes wet, coins if you can.

ALOHA !!

Kiron posted:
"There are also hints that foreign buyers of treasuries are getting skittish. The Fed may not be able to lower interest rates as much as they might want."

There are many similarties in the US economy and US Dollar compared to the Japanes crash in the 1980s. Perhaps the US dollar will become the "NEW YEN" and a new carry trade with a 0% rate!!

In 1999 some ten plus years after the Japanese collapse I was looking at oceanfront properties in Kona selling for $549kUSD that were owned by Japanese Banks that bought in the 1980s for $3-$5milUSD. Of course these were repos where the bank was left holding the bag! That shows you the extent of losses and the potential longevity of the subprimes and CDOs.

g034 ... I would reverse your logic and get my toes wet with bullion coins and then buy GLD or SLV only if you have money that you don't want! At any time GLD assets(your paper gold)could be taken by creditors looking for repayment on bad CDOs as part of the banks "general assets". Do you think your GLD investment is safe from a custodial bank failure? You get no "warning" in such scenarios. Such a news release would send GLD price plummeting in seconds!! GLD = ENRON in that case. You have no such hidden liabilities with gold bullion coins. Build your core fiat hedge with the "real deal" ...

kaimu,

so...how does one go about gettng delivery on hard pm? This sounds extreme to me, but I'm here to learn. thanks to all.

ALOHA !!

Jasper ... Many reputable sources exist. Depends on your funds. If you want to buy one coin at a time you either go to your local coin dealer or EBay dealers. The bigger dealers require minimums like $2000 or so.

Two I know are APMEX and CNI. Here are their websites ...

CNI
Link: http://www.golddealer.com/bullionpage.html

APMEX
Link: http://www.apmex.com/

Kaimu,

I'm totally with you.

IMO, for someone that is simply trying to diversify their portfolio, without any knowledge of their personal wealth, time frame etc. I would say GLD is best due to the issues that you stated above.

For someone that is SURE that they want to hold on to the coins for a while and will not incur the ridiculous loss of capital due to the spread on trading those coins, then coins are the way to go.

Confiscation? I already have my tent packed, and plane ticket to Hawaii bought. How does that little corner of your property look for a campsite? ;-)

Food prices are on a tear! Up at an annual rate 18%:

http://www.marketwatch.com/news/story/us-producer-prices-jump-unexpected/story.aspx?guid=%7B66A64FF4%2DF345%2D48DC%2D8F68%2D894FBCBBF667%7D&dist=MostReadHome

Using corn to make ethanol....mas tortillas por favor.

Bill, other knowledgable gold investors: When you refer to RSI-7 over 70-75, are you using GLD, or GDX as the reference, or individual miners? Or ^XAU?

g034 - Great synopsis of the market situation !

Kaimu - Junior miners offer such a huge multiple on the price of the metal. Coins offer none. Do you advocate a small core holding of coins, with much more invested in junior miners? Aren't large-scale failures of banks and brokers still a low liklihood over the next few years?

Sorry about this OT question - using the new charting program in Yahoo Finance, how can one display weekly or monthly charts?

Also can someone recommend a free charting program (other than stockcharts.com) - based on delayed intraday data - where one can draw trendlines, get Fibo lines etc.?

Thanks

A good source of information on Gold (and everything else in the world) is wikipedia.

http://en.wikipedia.org/wiki/Gold_as_an_investment

From wiki:
"Many argue that gold's role in the world's monetary system has ended, and that it will never again represent the store of value that it once was. The gold price peaked at around $850/oz t ($27,300,000 per tonne) in 1980, and in real terms is still well below that. However, since April 2001 the gold price has more than doubled in value against the US dollar (as seen here), speculation circulates that this long secular bear market (or the Great Commodities Depression) has ended and a bull market has returned [37] [38]."

Really, isn't it just supply vs. demand driving the price right now, with the GLD ETF making demand more liquid? Kaimu is right that GLD could = Enron at some point if the books aren't accurate, though this should also decrease the $ value of real gold, so what's the point of hauling around a heavy depleting asset that costs money to store anyway?

Reading up on ECU, they say that there are some external pressures being put upon them in terms of the labor supply focusing on Platinum mines vs. Gold & Silver mines.

Do platinum mines pay their employees more? Are there any references out there to pay scales for miners in different countries?

Back to wikipedia, platinum is used in Automobile Emmissions Devices... don't see any gold or silver in my tailpipe. :)

http://en.wikipedia.org/wiki/Platinum

The one-ounce platinum coin displays the highest face value ($100) ever to appear on a U.S. coin.

http://www.usmint.gov/mint_programs/american_eagles/index.cfm?flash=yes&Action=american_eagle_platinum

Hi All,

The more that I read about all the government intervention in the different markets I am so disgusted. And I hate conspiracy theories! Its just that it makes too much sense to not to be true.

Anyways.....the best approach that I have ever read is the one that Soros takes. It is discussed in greatest detail in the Alchemy of Finance, but his basic thesis is this. At major turning points in the markets, business cycles, etc. - no analysis is complete without evaluating the government/regulatory response.

In other words - any analysis that just takes into account the market dynamics (supply/demand) is not complete - you must also look at what the government will most likely do to intervene in that market.

The quality of the analysis on this board is GREAT - because most contributors are taking a realistic view of what we might expect from the US government over the next 2-3 years.

I have to admit that I am also in the camp that the Fed stays hell bent on reflation and that Congress also cooks up multiple bailouts for the housing and lending sectors. The bill on this one is going to get into the trillions. But we're just talking dollars I guess.......no biggy.

Best regards,

Soulek1

I'm finding I have no short-term bias at this point (mid-term bias still down), and my trading horizons are now down to daily position changes. Exiting all of my XAU now, and starting a position in SDS. A high level of cash still looks good.

KM, www.stockcharts.com will give you RSI 7 values.

Bill,

If you were to buy Maple Leafs from an online Canadian site, where would you go?

Kaimu,

The difference between the current US situation and Japan at the beginning of their financial meltdown is that the US has a massive debt and Japan didn't. The US needs to borrow around $2 billion a day in order to pay its employees, pay for programs and pay its debt obligations. Otherwise the US would go bankrupt.

I am new at this, so feel free to add comments. I fail to see why foreign investors would buy $2 billion or more treasury bills each day, with zero percent interest, the concerns of a plunging dollar (relative to their currencies) and a failing economy. A path to the US dollar as the new carry trade would be enormously painful.

Depending on how bad things get, the Fed might be forced to keep interest rates higher in order to sell American debt, even if it has serious consequences for the economy and the stock market.

ALOHA !!

Okay ... I can't believe anyone would bring up the issue of "storage" when buying bullion coins or bars. Ever see a ten coin tube or a twenty coin tube. Just so you know a ten coin mint tube which holds ten one ounce Canadian Maple Leaf gold coins measures 1.5"(4cms)in length and 1.25"(3cms)in diameter. Total US dollar value $6500 if POG is at $650/oz. I'd like to see anyone roll up 6500 one dollar bills into a smaller space than a ten coin mint tube! Some $150kUSD worth of gold coins could fit in a cigar box. I could make a funky gangstah rapper ring out of a "ten tube" (10 Canadian Maple Leafs) and hip-hop(for older readers "waltz")across the border to Mexico!

I say ... get some gold coins for pocket change in case the banks close their doors or the internet crashes or any emergency scenario. Take the US Air Force lead here and do as they do. They provide British Gold Sovereigns in the pilot rescue kit in the event one of their planes is shot down in hostile territory. They know gold is 100% accepted in the Middle East or anywhere hostile to the USA.

I believe at least 10% of one's portfolio should be in physical gold/silver. I personally hold more than 10% ...

aleisen - thanks for the site, I see how to get it now - GLD or XAU seem to be about the same. km

I'm not a gold bug and don't want to be one, for the record. This is strictly a decision of sector rotation interfacing with some domestic macro factors. I think it helps to know one's longer term bias. I'm 20% in equities from zero. Started buying a few days ago. This morning I allocated 6% to gld, slw, and gdi. I made some decent money on slv last go around on PM. This is my first time buying miners. Somewhat nervous becuase miners are known for holding up in down trends. I hope Bill will be able to keep us posted on the fundamentals of miners, like slw and gdi..I assume these two are regarded as "seniors?". Fwiw, yesterday started scaling into asia etf: EPP...best relative strength of all broad intl sectors.

Greenspan is still crunching the numbers. He must feel free as a bird to finally start talking straight. His wife , one day, is going to have an interesting book to write.

2nd_ave, I have purchased Maple Leafs from Kitco.com without any hassels, and they have a wide variety of bullion products to choose from. Never tried from anywhere else, but know kitco did the job...

fyi, I live in Canada and took delivery in Canada. Looks like Kitco maintains offices in both Canada and the US, give CDN or US pricing, etc.

Buying gold does not make you a "gold bug", don't worry. It is simply another security that is different from paper stocks and bonds. For hundreds or thousands of years, the major asset classes that have been available for investment are; stocks, bonds and gold. It is only recently, in the broad scheme of things, that gold has been maligned. This has been because politicians want to print money.

Buying gold makes you smart. Selling gold at higher levels makes you smart just like buying stocks at that time will probably make you smart also.

Every investment has it's day and today's best fundamental story is gold. It's really that simple.

g034, Kaimu or anybody,

Been reading this blog for awhile and I like the idea of buying physical gold, but after it is bought and say we have a good run up to $800 or even higher $900/oz. How do you go about selling the physical gold? I don't know much about this type of investing, so any response or answers are appreciated. I do remember a long time ago though, early 90's, finding my parents stash of Silver and Gold coins in their nice, little velvetty boxes. Always wondered why they would stock up on something like that, but it was an investment to them.

westo4,

all of the sites i looked at today (which include the ones mentioned by kaimu and proudPapa) buy as well as sell. you simply ship the coins back fully insured, and they can either wire money to your bank, or send you a check.

With the meltdown in the sub-prime mortgage sector now laid bare, many on Wall Street desperately cling to the notion that the pain will be localized. The prevalent delusion is that the overall mortgage, housing and stock markets will be little impacted by the carnage ravaging the sub-prime sector. As such, renewed stock market weakness is seen as an over-reaction and a great buying opportunity. For example, today, LEND exploded 56.16% higher. These assumptions represent wishful thinking in the extreme.

Those who think that the sub-prime market is unrelated to the broader economy do not understand that the problem is not just the fiscal responsibility of marginal borrowers, but the inherent weakness of the entire U.S. economy. It’s just that the sub-prime sector, being one of the most vulnerable spots, is where the problems are first surfacing.

Think of the U.S. economy as an unstable dam. The first leaks will be seen in the dam’s most vulnerable spot. But there will be many more leaks to follow. Before long the entire dam will collapse. It would be a fatal mistake for those living downstream to assume a leak is an isolated event, unrelated to the integrity of the dam itself. But that is exactly what those on Wall Street are doing with respect the horrific data emanating from the sub-prime market.

The bottom line is that far too many Americas, not simply those with low credit scores, have borrowed more money then they are realistically capable of repaying. The credit boom was created by initially low adjustable rate mortgages, interest only, or negative amortization loans, and an appreciating real estate market that allowed homeowners to extract equity to help make mortgage payments. Now that real estate prices have stopped rising, and mortgage payments are resetting higher, borrowers can no longer afford to make these payments.

Significantly, most sub-prime loans involved low teaser rates that lasted for only two years. In contrast, teaser rates for most prime ARMs typically last for five years. This difference, rather than any inherent distinction in the fiscal health or credit worthiness of the borrowers, explains why the delinquencies are so much higher in the sub-prime sector.

Of course, the vast majority of home loans in the last few years, sub-prime or otherwise, should never have been made in the first place. However, when real estate prices were rising, no one cared about the wildly optimistic assumptions or the out-and-out fraud inherent in the loan process. Everyone was making money. Borrowers, regardless of their ability to pay off their loans, thought they were getting rich as real estate prices rose. On the other side, home builders, real estate agents, appraisers, mortgage brokers, mortgage originators, Wall Street brokerages that securitized the loans and the hedge fund clients who bought them, were all getting rich as a result of booming credit. For the charade to continue, borrowers pretended they could pay and lenders pretended that they would be paid.

The fix now being suggested by some members of the U.S. Congress demonstrates how Washington completely misunderstands market dynamics. Their legislative proposals will require that lenders make potential borrowers verify their incomes and restrict credit only to those who can afford the payments after the teaser periods end. Washington fails to grasp that a return to traditional lending standards would precipitate a return to traditional prices, which are way below current levels. There is just no way to crack down on lenders without causing a crash in the real estate market. However, continuing to look the other way is no panacea either as the real estate market is already in the process of collapsing under its own weight.

It is also typical and very disingenuous for lawmakers to feign outrage, or to have waited until a collapse occurs before taking action. Just like with the Internet bubble of the late 1990’s, the government refused to act in advance of the crisis. Had the government taken preemptive action with regard to mortgage lending, the real estate bubble never would have been inflated to the degree that it has. However, a slower housing market would have resulted in a much weaker U.S. economy. More modest home valuations would not have allowed consumers to cash-out phony real estate wealth. Instead, home owners would have been forced to make higher mortgage payments and had even less money to spend on consumption. They might have actually considered saving some money for the future as their homes would not have been doing the saving for them.

In reality, the problem goes way beyond housing. Nearly every big ticket item that Americans consume is paid for with borrowed money, with foreign lenders supplying the credit. Without access to low cost credit, the spending stops. When the spending stops the service sector jobs associated with robust spending will disappear as well. Without paychecks, even those with low fixed-rate mortgages and high credit scores will not make their payments.

The bursting of the technology stock bubble of the 1990’s was simply the opening act. What we are about to experience with the real estate bubble is the main event. In that respect, though it may be March of 2007 it sure feels a lot like March of 2000. However, instead of a mild recession, this collapse will be followed by the most severe recession since the Great Depression. The main risk is that Ben Bernanke and his buddies at the Fed panic, producing something far worse; a hyper-inflationary bust similar to the one experienced by the Weimar Republic in Germany. Let’s hope that cooler heads prevail, but get your wheelbarrow ready just in case.

More confirmation of Bill's outlook and many on this blog site, read on:

Housing mess risks recession unless Fed cuts: Merrill
3:15 p.m. 03/15/2007 Provided by


NEW YORK (Reuters) - House prices could tumble 10 percent this year and raise the chances the United States may slip into recession unless the Federal Reserve cuts interest rates to cushion the fall in economic growth, Merrill Lynch said in research notes this week.

If correct, the prospects of this scenario will prove troubling for equities investors, who could face a stock market decline of 30 percent or more as measured by the S&P 500 index (SPX), the brokerage said.

Merrill said the biggest concern is that tighter lending standards in the mortgage market, even if confined to lower-quality borrowers, will constrain overall housing demand and hamper recovery in the struggling housing market.

"It is not inconceivable (given what is happening now to mortgage originations) that we end up with something closer to a 10 percent decline in home prices this year," Merrill Lynch said.

Merrill said this alone would slow the economic expansion to a rate of about 1.5 percent to 1.75 percent this year, which it termed a "growth recession."

The traditional definition of a recession is two consecutive quarters of declining gross domestic product.

However, if the inflation-fighting Federal Reserve were to keep rates unchanged to contain price growth -- instead of cutting by 1 percentage point in the second half of 2007 as Merrill expects -- then this would put the probability of an outright recession in the second half at "very close to 100 percent."

In the past, moves by financial markets to price in some risk of a recession, without a recession actually occurring, have led to an average drop in the S&P 500 of 16 percent in sell-offs lasting 13 weeks.

"But if we do end up seeing a recession, then it's game over: the historical record shows that the average decline in the S&P 500 is 34 percent and the average duration is 37 weeks - more than double the magnitude and triple the duration of classic non-recessionary correction," Merrill added.

The Merrill notes reflect the debate in financial markets in recent days, which has centered on whether the crisis in the subprime mortgage market can be contained.

Former Federal Reserve Chairman Alan Greenspan said on Thursday there was a risk that rising defaults in subprime mortgage markets could spill over into other economic sectors.

Greenspan said that subprime woes were "not a small issue" and seemed to result primarily from buyers coming into lofty housing markets late after big price run-ups that had left them vulnerable to hikes in adjustable mortgage rates.


Copyright © Reuters 2005

Thanks 2nd_ave.

And by the way, if anybody is watching the CFO of Crystallex resigned or was replaced.

Link: http://www.marketwire.com/mw/release_html_b1?release_id=227312

What does this mean, it looks like in after hours its not good...the fun of KRY

junior gold explorers:

RBC Capital Markets released an industry comment yesterday on 29 junior gold explorers.

re: WGDF - based on a share price of $1.69, the Adjusted Market Cap per resource ounce of NI 43-101 compliant resource is $19.00!!

and re KRY - based on share price of $3.51, AMC is $43.00.

I own the 'best' on the list - Mundoro Mining - at $1.40/share, AMC is $6.00; which will rise hugely when the longsuffering company gets its permits.

Looks like my N.O. source had an acurate contrarian take a few days ago (I posted a few days ago)on the sub prime lenders rebounding. I didn't take any positions, but learn more every day.

I chuckle when I hear Greenspan states a recession is coming. He didn't see any recesssions coming during his Fed Chairman term and didn't know when he was in one until it ended. His track record is not good, but I guess the odds he'll eventually be right once may come into play.

Last I heard Don Coxe doesn't think we're going into a recession and had a similar viewpoint of Greenspan's prognostications.

For the record, I've believed for months we are headed for a recession as this credit bubble bursts. But I'm just a student of the game and that's my 2 cents. That's why I'm long PMs and weakening dollar plays.

Kaimu you probably shouldn't be advertising your $6500 ten coin mint tubes if you're going to have squatters on your land (g034's campsite).
LOL. Appreciate your posts.

ALOHA !!

Kiron ... just thinking outside the box here. No fiat currency is sacred. The Euro is just as big a piece of IOU crap as the US dollar or the Yen or the Yuan or the Peso or the Franc or the Pound. I love how most of the G7 have sacrificied their gold reserves for the US Federal Reserve fiat Ponzi scheme. Look at how Brown sold off the UKs gold for a song($300 an ounce). Canada's gold reserves are what? Zero? Australia ... what do you have? Near zero?

Yes the US is in debt but so is every other country including China and Japan. How do you measure a nation's "wealth"? Capital assets? If thats the case then Americans are better off than the Japanese. If it is passbook savings accounts then the Japanese are doing better. Is it natural resources? Well, the Japanese have nearly zero of that! Now if all the fiat currencies crashed the US would be bad off like the rest. But if I can believe the IMF numbers then the USA easily has the largest gold reserves. If fiat were done away with and a gold standard either partial or 100% were implemented then the US dollar would be the winning currency again just based on reserve size. I find it curious that everytime the IMF brings up selling gold the US says "NO" ... There are many holes in US government and IMF data that make credibility less than favorable such as the line entry called "deep storage".

All I know is the US has more gold and its always been that way since WW2. Would we ever be forced to hand over our gold to foreign creditors? I believe they'd be told to "Come and get it"!! Perhaps with the phrase "Over my dead body!" before it... I am sure the Federeal Reserve in New York still has a large quantity of gold in storage for other foreign countries. What's the saying about possession? It's 9/10th of the law ...

Anything is possible with "monopoly money"! That's the nature of corrupt money ...

FROM 1971:
"When confronted with complaints about the falling value of the dollar, the U.S. official is said to have responded to his European visitors: "The dollar is our currency, but it's your problem." That was in 1971. The politician to whom this statement is attributed was John Connally, who at that time served as the secretary of the U.S. Treasury. His boss was Richard Nixon, the same President who used a word for the Italian lira which politeness prohibits repeating. Nevertheless, Connally and Nixon made clear how matters were."

Link: http://www.mises.org/story/1759

I own gold because the alternative is worse. Does that make me a "gold bug" or just prudent? If someone wants to label me a "gold bug" then I am in the good company of our Founding Fathers who in my estimation have been "right" about 95% of the time on 100% of the issues!

a great thread again today...thanks all...

from Bill's earlier post :

I suspect that a couple hedge funds (maybe more) -- using OPM -- will pony up the billion dollar ante to call Bernanke. Deepest pockets always win.

Posted by: Bill Cara at March 15, 2007 9:34 AM

the acronym OPM... a translation please? what does it mean?

thanks.

Now KRY has a new CFO.

March 15 (Reuters) - Canadian miner Crystallex International Corp. (KRY) said it would appoint Hemdat Sawh as chief financial officer, effective upon the departure of Dan Hamilton. Hamilton's role and responsibilities as Crystallex CFO will end on March 31, the companysaid in a statement.

Hamilton has agreed to provide consulting and transition services in April, it added. (Reporting by Aditi Samajpati in Bangalore)

Posted by: Leisa [TypeKey Profile Page] at March 15, 2007 5:21 PM

Now, the CFO leaving on the heels of Deloitte stepping down....that cannot portend anything good.

Posted by: Leisa [TypeKey Profile Page] at March 15, 2007 5:22 PM
-------------------------------
I posted this in the other section...I meant to post here.

Kaimu:
Thanks for sharing your skepticism about the viablity of GLD. I had not previously considered what would happen in the event of a custodial bank failure to all the ETFs of that bank. Like everyone else, I have been led to assume the ETFs would continue to have the value or inverse value of the various indexes or currencies they track. But based on your observation regarding GLD, all ETFs of a failed custodian would be worthless. Isn't that ironic.

Kaimu,

Thanks for posting so often lately, I always look forward to what you have to see, and like the rest of us here, appreciate all this information. Information that we can relate to what is happening everyday, and why, and...well I'm just so happy I stumbled across this blog. Bill's right, it is quite the community we have here.

Leisa, your posts are always great too. It has been interesting watching the KRY story unravel. Hopefully something good comes out of it for the shareholders.

Bill, get well soon. You are el capitano.le capitaine.

Cheers everyone.

ALOHA !!

Lessmore ... yes "anything" is possible. Of course nobody believes that until "anything" happens! Then they go ... "AH DAMN, I should have seen that!!"

Extrapolate that same scenario to the US dollar. A US dollar crisis would turn WalMart prices into Neiman Marcus prices. Anything imported would skyrocket in price especially oil and gas products. The only thing that will NOT skyrocket is your pay check! What will you choose faced with paying your mortgage or food? How long will your savings last when a loaf of bread is $25 or $50? Don't laugh ... in the 1980s a glass of orange juice in Tokyo was as high as $8USD during the Asian currency crises. Are we to assume the USA will not have a currency crises? Only fools assume in the first place and BIGEGR fools assume the USA is immune from "anything" !!!

This is the basis of my rants regarding paying off your mortgage and debts now! A US dollar crises will tank the US stock market and your savings, even those of you now waiting on the "sidelines" with your "dollar winnings"!!

I can tell you this ... YOU WILL HAVE NO WARNING! During the 1920s banking and stock market failures people woke up one morning to hear all the banks were closed and they were officially BROKE!!

Somehow people will go out of their way to buy up life insurance, car insurance, home insurance, medical insurance ... but they won't spend a dime on "money insurance"! The only insurance from a currency collapse is "gold and silver" not GLD or SLV! Why? Guess what they hand you when you cash out of GLD? After a moteary collapse or even a mild "crisis" you'll wonder why you even bought into GLD ... I guarantee you that all these websites that sell physical gold coins and bars won't have any supply under such circumstances. Talk to any Katrina survivor and they will say ... "I should have had insurance!" After the crisis its too late !!

Bill what are your thoughts on the GLD discussion...do you see real risk there. i.e. default by the custodian?

I've been holding (paper) gold via Central Gold Trust and futures but now getting set up to buy physical. Couple places have tried to talk me into buying certificates instead of taking delivery, but that doesn't really appeal to me. If I'm going to buy physical, I may as well hold physical.

Couple questions to Kaimu or anyone else:
- is it better to hold 1 oz in quantity rather than 5 or 10 oz bars.
- You talked about coins. On Kitco the 1 oz coins are $23 more than the wafers. Is there an advantage to the coins?

As far as storage, for gold it isn't a factor but I was looking at buying 100 oz bars of silver. That's the same as a stack of 6 lbs of butter isn't it? You'd have to cover it with fabric and make a doorstop out of it.

Thanks for any comments.

I was in a coin dealers shop once and overheard a conversation saying the wafers are nice cause they stack better... Oh, to have such problems ;)

The only difference I could see is in acceptability, where krugerands, maple leafs, sovereigns, etc. are more readily recognized and accepted by institutions.

However, in a crisis the scale of which Kaimu and others have hinted to in todays thread, I think it would probably be less important than the absolute amount of gold. Besides, any value above and beyond the value of the actual metal content is really just another 'fiat' amount, i.e. worth what someone promises it's worth, no?

RBC (Royal Bank of Canada) issued a buy rec on the PM miners today citing the same indicator as used by Hussman in an earlier weekly e-mail:

Taken from Globeinvestor website.
"Gold indicator says it's time"
LEONARD ZEHR AND DAVID PARKINSON
15:15 EST Thursday, Mar 15, 2007

"RBC Dominion Securities has sent out a “buy” signal on gold stocks, using an indicator it follows and claims has the best track record for making money in the sector: the ratio of the gold spot price to the Philadelphia Gold & Silver Index (XAU).
Analyst Myles Zyblock says the indicator seems to do a great job of locating times when gold stocks are trading cheaply relative to the underlying commodity.
The gold-to-XAU ratio crossed the 5.0 threshold on Tuesday's close. When the ratio has reached or exceeded 5.0 in the past, the average return on a one-year holding period for the XAU has been 40 per cent. Amazingly, in the past 32 times with the ratio at 5.0 there has been only one occasion when an investor lost money on the XAU with a one-year horizon. The actual loss on that occasion was 12 per cent.
Bottom Line: investors with a one-year horizon looking for the possibility of strong absolute returns should buy gold shares right here, he urges."

Hussman:

"To reiterate my remarks on the Gold/XAU ratio from the May 2, 2005 comment:

“To put some historical context on this measure, since 1974, the Gold/XAU ratio has been greater than 5.0 about 15% of the time. When the ratio has been this high, the XAU has followed with annualized gains of 89.6%, on average – a figure that remains high even if the data is split into multiple samples. When the ratio has been greater than 4.0, the XAU has followed with average annualized gains of 27.4% (though the finer profile of returns has been sensitive to other conditions such as interest rates, economic trends, and inflation). In contrast, when the ratio has been less than 3.0 (meaning that the gold stocks are very elevated relative to the actual metal), the XAU has declined at an annualized rate of -36.6%, on average.

“Importantly, the return/risk profile for precious metals shares is strengthened further if the economy is experiencing weakness. For example, when the Gold/XAU ratio has been greater than 5.0 and the ISM Purchasing Managers Index has been less than 50 (indicating a contracting U.S. manufacturing sector), gold shares have appreciated at an average annualized rate of 125.6%. In contrast, when the Gold/XAU ratio has been less than 3.0 and the Purchasing Managers Index has been greater than 50, precious metals shares have plunged at an average annualized rate of -49.9%.”

Such strong periods for gold are also generally associated with weakness in the U.S. dollar. Something to think about as the economic picture evolves in the months ahead."

What a load of doom and gloom I am reading today. I think I will sign up for a stint on the show "Lost". I understand everyone is going to be killed off which sound alot like what I am reading today.

If people want to sleep at night I suggest they get out of the market quickly and keep their paper money in the mattress as gold bars might shove the bed into the basement.

The sky is not falling. The world is not going to end. If you want to have gold then your local bank will provide you with a large safety deposit box at a minimal charge. I recommend gold bars at the 1k level. You can fit about 6 into a large box.

Some people on here will be in a large box sooner than later if they dont stop worrying.

You guys be careful with all your gold clinking around! Forget about the collapse of the financial markets, you'll end up with some goon with a gun that will take you out!

Now, it is time for a wine recommendation--Oyster Bay, Sauvignon Blanc. (About $14 USD). Now I do not have much of a wine palate, but I'm developing it. Practice! Practice! Nothing is easier to discern in SB's than a NZ Marlborough. Flinty and crisp--like a starched shirt. Similarly a Mosel-Saar Riesling v. a Rhine Valley--both a bit sweeter than the NZ's or the Alsatian whites. Mosel has the flint Rhine has the lush. A California SB will be lush compared to Marlborough. It's merely preference--a Jamie Lee Curtis v. a Catherine Deneuve. Both beautiful and neither will embarrass you nor require apologies.

Here's the suggestion for you business folks who drink beer/liquor but must entertain clients with a wine selection. Trimbach (Alsatian) Gewurztraminer or Riesling--please try one of these, for they are divine (or any NZ Marlbourough selection). Expect to pay $18 or so USD in the market for Trimbach. In the restaurant--an embarrassing $60 USD. Pair them with some spicy chicken barbeque or Thai/Vietnamese food.

Did you know? When cooking with wine, when a recipe calls for white wine ALWAYS use a Sauvignon Blanc. Also anytime you cook with wine you the same quality that you would drink. This concludes by public service announcement for wine and food. Why care about capital markets if you cannot eat and drink?

An aside: I was at Djanga in NYC a fusion restaurant and I made the mistake of asking how sweet (or dry) the Alsatian Riesling selection was. (This was before I had my wine class so my ignorance ran deep--now I have shallow ignorance) I was informed by the sommelier (French for wine snob)in a most insulting way that "all of the Alsatian whites were dry". This sort of thing makes wine, one of the most ordinary of beverages, intimidating. I was almost too embarrassed to order.

bobj and others, regarding buying/holding PM,

I split precious metal holdings evenly between gold 'numismatic' American Eagles (in 1 oz or 1/4 oz. denominations) and bags 'Walking Liberty' silver half dollars (90% silver, 71.5 oz. silver per $100 face value). Their cost represents a slight premium above the PM value, but I regard this as paying for both convenience and insurance. Convenience because the coins are easily recognizable as legitimate. Insurance because as numismatic issues they are less liable to gold confiscation (based on the experience of the 1930's when FDR's executive order exempted numismatic holdings. By the way, it is quite eye-opening to read the text off FDR's order and understand how quickly Constitutional assurances of 'due process' may be set aside in times of 'national emergency'.).

I buy both gold and silver from APMEX (www.apmex.com) because they accept credit card orders (which is paid off immediately!) for transactions. I have been unable to find any other vendors offering card purchase convenience and I have been quite pleased with all my experiences via APMEX.

And, Horatio, you're right: the sky is not falling and the world is not ending. But all empires DO fall--and very few with merely a whimper. As for safety deposit boxes, during the 1930's banks were instructed to keep boxes sealed unless a Federal official is present to inspect their contents and seize 'hoarded gold'.

Bill,

First of all I am wishing you better health.

As per your having to monitor the blog or considering having your publisher assume it administration please consider the following.

For the brief time I have begun to follow your blog (a month) I have found the discussion to be at an elevated level. I may not agree with everyone, and recently have felt that extreme pessimism has been conveyed possibly with good reason. But I do feel that the "crowd" has the ability to monitor itself. We will call out those who cannot maintain a civil discussion.

Again, I wish you the best. Besides one's spirit, one's health is the most important aspect of one's being.

http://www2.fdic.gov/qbp/2006dec/qbp.pdf

Since I gave you a wine selection, you must drink before you review this sight. Here is the FDIC site. I'd like to say for your viewing pleasure, but it might be a snoozer. But I promise you this....the reading will get more and more interesting as the year wears on.

Leisa. Thank you for the wine update, but I never cook with wine. That would be a venial sin. May I suggest for your drinking pleasure "Chateau Latour Pauillac 1990. Simply divine.

Johojo. Fortunately I am " Beyone the Pale" from Federal observers.

No, Horatio, cooking with a wine is divine. A standing rib roast in a thyme, garlic and red wine reduction sauce is sublime!

Hi all,

Although I've been an avid reader of this blog for some time now this is my first posting. Hopefully I'll start to contribute to the discussion as I lose some of that newbie (rather than PM) shine.

I have become concerned as the discussion seems to get more and more negative as the uncertainty in the market increases (although I liquidated most of my stock holdings in November). While I may sleep better at night, I don't think I'm one who would liquidate my trading accounts to stack gold bars in the basement. I was just wondering if anyone can shed any light on exactly what can happen in the event of a bank failure? I do understand the role of the CPIF and the CDIC but it's not clear to me how my stock holdings would be treated in the event the bank that my discount broker goes belly up. What can us regular folk do to protect our assets as much as possible?

Thanks again for the free education you've all offered so far.

Doug Kass on the Four Culprits of the Subprime Mess (there's a good chance someone has already provided a link to this or has mentioned it, but for those who missed it): http://www.thestreet.com/_tscs/markets/activetraderupdate/10344345.html

In order of culpability: 1) Alan Greenspan (for lowering rates too much and for too long, and for encouraging homeowners to look at alternatives to the fixed rate mortgage at exactly the wrong time), 2) "Irrational" lenders (eg, LEND, Option One, New Century, and Novastar) for originating billions in loans with few checks and little common sense, 3) Wall Street for packaging and trading mortgage securities with little objective research or concern for the investor, and 4) ratings agencies for being lax in their downgrades of the subprime market.

I am the busier than I have ever been in my 34 years in floor covering in San Diego, CA. I sell and install expensive hardwood floors that are a luxury item. I am not seeing a recession on the horizon. Business has "always" slowed 50% to 60% prior to recession for me and that dates back to 1973 to the present. This move down could be the buying opportunity of a lifetime. Of course, that is if you know where the bottom will settle. LOL to all.

Oddlots

Thanks for the Globeinvestor article.
Also I noticed Uranium was up again: $91 lb!

http://www.freebuck.com/basemetals.shtml

Where can I get uranium coins? :)

But seriously, does it make sense to buy the gold pool at Kitco, and are there any hidden fees involved in buying/selling the gold pool there? This appears to be a way to avoid commissions until the gold is physically delivered.

Leisa, thanks for the wine reviews - keep them coming.

My wife and I went to a casino in Las Vegas for dinner a few years ago, and asked the waitress what 'number' the wine was (in Canada, they number the wines by sugar level). We explained to her what it meant and she went back to the sommelier to ask him.

He came out personally and was so fascinated because he had never heard of this!

I think we could consider sipping one of Leisa's wine suggestions while reading...her blog! (Usual cautions apply: wait until the evening, etc., etc.!)

Click on Leisa's name.

My bad. Cut & paste mistake did not include the title and author of an article I posted to this board earlier. My apologies.

“From the Subprime to the Ridiculous”
Peter D. Schiff, President
Euro Pacific Capital, Inc.
http://www.europac.net/externalframeset.asp?from=home&id=8016