Archive | May, 2012

Is Gold a Bubble? Will it be Useful for TEOTWAWKI/SHTF?

29 May

Mark Dice recently interviewed at least a dozen people right next to a coin shop. No one has any idea what it is worth. If you think precious metals are in a bubble you are mistaken. Although Dice is a bit abrasive, the addition of the coin shop right next to him to the scenario is incredibly telling. Most people simply dismiss him, regardless of the benefit a little investigation might bring.

Additionally, this should probably indicate that storing gold or silver for a SHTF scenario may be a bad idea. It will likely be worth a lot and people still won’t care. When will this change? It will change when any economy tries to recover from the fiat money-printing fiasco.


Former Assistant Treasury Secretary on Capital Account

24 May

This is one of the few “insiders” who has come out to expose what is really going on in the Government/Financial complex of America. Lauren Lyster’s intelligent questions bring out a panoply of interesting responses from Fmr. Asst. Treasury Secretary Paul Craig Roberts. Those who watched the PBS documentary on the financial crisis will immediately understand the context of Roberts’ remarks.


PBS Frontline Documentary on the Financial Crisis

18 May

This is a 4 hour series that does an excellent job of describing how credit derivatives are at the core of nearly every major financial problem of the 21st century thus far.

I can’t imagine a series that interviews more key players in the game. The access you get through this series is uncanny in terms of the inside perspective from bankers who created and manipulated these financial instruments for their banks.

This is must see for anyone who wants to understand where we are financially today.


Fascinating Interview with Biographer of Blythe Masters (in English)

17 May

This interview presents the raw perspective of a journalist, Pierre Jovanovic, who spent several years researching the career of Blythe Masters. His comments are extremely insightful for everyone who wants to understand who she is and what she has done. Unfortunately, his book is only available in French. This interview is the only means I know of to access the core of what he addresses in his book.

For those of us who are familiar with Masters, much of what he has to say is merely confirmation of we know. What’s interesting is how seriously this man, who is more of a journalist than an economist, reacts to Masters’ effect on the global landscape.

I am deeply grateful for this opportunity to finally hear his thoughts. I encourage you to check out his website that says more about the book: Thankfully, non-French speakers can use translation features in their browser (available at least in Chrome) to understand the page. Hopefully the book comes out in English too.

Buying the Long-Term Trend

15 May

The best way to figure out when to purchase gold or silver is by following long (at least 10 year) trends. In my opinion, short term analysis gives you short sighted impulses. Long term trends give you sustainable expectations.

With that said, look at this chart and note the similarity between now and the 2008

10 year gold price per ounce

And for silver, note the return to the 2008 trend:

10 Year Silver Price

With both of these charts, you see the one crucial thing: silver and gold are placing themselves in an area that is highly synchronous with a long-term, multi-year, trend.

It seems like silver may come close to its low of 26, but I can’t imagine that you could buy it any more than you could 5 months ago, when it was last there. And gold may go a bit lower, but based on this chart, I have a hard time imagining it will break lower than 1500.

I’m curious for anyone else to give his/her input, but to me, it seems like a good time to buy. What do you think?

Jamie Dimon’s Obfuscation = JP Morgan’s Guilt?

13 May

I want to draw your attention to one of the most important things Jamie Dimon said to David Gregory in their recent conversation of JPM’s $2 billion proprietary trading loss:

GREGORY: The immediate question, the SEC is looking into this: Did the bank break any laws? Did it violate any accounting rules or SEC rules?

DIMON: So we’ve had audit, legal, risk, compliance, some of our best people looking at all of that. We know we were sloppy. We know we were stupid. We know there was bad judgment. We don’t know if any of that is true yet. Of course regulators should look at something like this, that’s their jobs. So we are totally open to regulators and they will come to their own conclusions. But we intend to fix it and learn from it and be a better company when it’s done.

The question Gregory asked was extremely simple: did you break any laws, accounting rules, or SEC rules? The answer Dimon gave was essentially this: “We’ve looked into it and I know the answer, but I’m not going to say right now what it is.”

Think about all the different things he could have said. Think about why he might have said this. This is bad, folks.

When baseball players are asked to testify before Congress about steroid usage, they obfuscate like this. When cyclists are asked to testify about blood doping, they obfuscate like this. When Jon Corzine responds to questions about MF Global, he obfuscated like this. Why? Because the level of cover-up is so massive that drawing any attention to the truth is overwhelmingly frightening for them. What you see from Mr. Dimon is a high level of fear about what this problem means for him, his bank, America, and the world.

Don’t Get Caught Up

12 May

JPMorgan Chase's offices in San Francisco - JPMorgan Chase's offices in San Francisco

As the massive losses of JPM begin to show up, people are clamoring to arrive at conclusions about what is going on. I am not. This is not a shock to me and many others who have simply tried to understand the fundamentals of the present financial system.

The first thing my mind reverts to is something I’ve wondered a long time about: the JPM/Silver ratio. For a long time, I’ve noticed an interesting correlation of silver to the stock price of JPM. No, it doesn’t particularly matter that they both move around the 30-40 range lately. What matters is that, since JPM has a massive short position, suppressing the price of silver, the value of their stock must reflect the way they engage silver over the long term. They must take a loss if they are to dump their own money into bets that go wrong. When they do well in this short position, this too is reflected. I encourage you to look into this for yourself. It’s interesting, if nothing else. I wonder what a $2 billion flub will do to silver. I wonder what silver going through the roof last year was like for JPM. There’s a correlation there.

I also wonder about the nature of the ensuing cover up. This $2 billion blunder must certainly be the tip of the iceberg, as many have called it. And yet anyone who is familiar with the complex web of support between major banks and central banks knows that this kind of problem need not have instantaneous backlash if the right steps are taken to paper over the problem. It’s bad for reputation, but when a bank can borrow money for free, how much of this is just perception? How much will it really affect the ability of a bank to just continue doing what it’s doing? What seems certain is that nothing will really unravel until the paper money of major central banks is one day ignored for what it really is: an increasingly irrelevant form of manipulation.

Mostly, I simply realize that patience is all I need right now. I can’t tell you how many times I’ve grown tired with the panic-mode reaction of other people who are interested in silver and gold as a hedge against inflation. Instead of just dwelling on the low price of precious metals at the moment, think about this: do you think it’s just a coincidence that JPM has come forward with massive problems right in the middle of a sell-off in precious metals?

I don’t have all the answers. But I don’t need them right now. Things make plenty of sense if you step back from the moment. Volatility is simply the outcome of the psychological warfare that is taking place for the minds of the financial world. Common sense is prevailing, but it takes time. Normalcy bias seems like such an apt substitute for common sense to many people. But as people have their hopes dashed over and over, they will first be jaded, then cynical, then they will begin to look for alternative theories to explain what  they thought they have taken for granted for so long. Then you will see a massive shift.

Unfortunately, when there’s a massive shift away from paper to precious metals, who will want to sell to those people? That’s a question worth thinking about. Undoubtedly, with the impending rise of precious metals, you will see massive shortages, and some people will be willing to part with their metal if only in order to survive. It won’t be a ‘trade’. It will be an exchange of necessities. So much ‘wealth’ we be erased.

So for now, do the right thing. Mostly, that means being patient.