Compilation of Comments

Friday, May 4, 2012 at 4:38 pm

For a weekend open thread and discussion, I though I'd give you a compilation of the comments I've added throughout the day to the previous thread. I do this for three reasons:

There are some pretty good insights that would be missed otherwise by those who only read the main threads and not the comments that follow.
I'm too lazy to type a new thread.
I'm out of time and I need to go cut the grass. Not that the grass needs mowing per se. But I need the stress relief and the Friday afternoon beer always tastes that much better after working up a good sweat.

Submitted by Turd Ferguson on May 4, 2012 - 10:43am.

MODERATOR

Remember, BoA recently repositioned $53T in CDS from their ML subsidiary to their BoA NA sub. In preparation for a default which they can pass along onto the American taxpayer??

http://www.zerohedge.com/news/gift-keeps-taking-bank-america-facing-62-billion-collateral-call

http://www.bloomberg.com/news/2011-10-18/bofa-said-to-split-regulators-over-moving-merrill-derivatives-to-bank-unit.html

Re: The Dying Comex

Submitted by Turd Ferguson on May 4, 2012 - 11:16am.

MODERATOR

This chart lays it out pretty well.

What is the bond market telling us?

Submitted by Turd Ferguson on May 4, 2012 - 11:51am.

MODERATOR

Based on bond prices alone, overt QE does not look imminent. However, why the rally today? And why is the 30-yr not participating at the same rate as the 10-yr? Note that the spread has compressed to just 120 basis points. And who, for the love of pete, is willing to give money to Uncle Sam for 30 years at an annual yield of just over 3%?

Regardless, block out all the noise about WOPRs and OI and CoTs and the like and you're left with an investment climate of negative, real interest rates. Negative, real rates have always been and always will be one of, if not the, driving factor behind precious metal accumulation. More here:

http://www.tfmetalsreport.com/blog/3325/case-you-missed-it

Here's a great Rick Santelli video from this morning:

http://video.cnbc.com/gallery/?video=3000088399&play=1

Lousy CoT

Submitted by Turd Ferguson on May 4, 2012 - 3:02pm.

MODERATOR

Yuck. From a CoT perspective, nothing to write home about this week.

GOLD

The rise of OI from the bottom near 395,000 was due to some new spec longs and some new bank longs absorbed by a 15,000 increase in The Cartel short position (net short addition of nearly 11,000). Looks like The Cartel is not ready to see gold rise anytime soon.

SILVER

The drop of OI was due to everybody exiting at once. Spec longs, EE longs, EE shorts all down and the EE net short ratio expanded to 1.56:1. Again, yuck.

After the good CoTs of the past few weeks, this one is s real downer. Looks like The Cartels are not expecting, nor are they going to allow, a significant move higher anytime soon.

On that note, have a happy weekend!

And, finally:

I've always thought that

Submitted by Turd Ferguson on May 4, 2012 - 3:13pm.

MODERATOR

I've always thought that Louise Yamada was the best technician on the planet. Heed her words:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/5/4_Yamada_-_Gold_%26_Silver_at_Critical_Points_in_This_Cycle.html

I HOPE THAT EVERYONE HAS A SAFE AND RELAXING WEEKEND! TF

p.s. I've got Bodemeister in The Derby tomorrow. Yes, I realize that no horse that was unraced as a 2-year old has won The Derby since, like, 1887 or something. Who cares. I'm on him!

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Comments

How the British Pound Sterling Fell From Grace

Submitted by Xty on May 5, 2012 - 4:03pm.

How the British Pound Sterling Fell From Grace

...

Well, to get to grips with the concept of a ‘reserve currency’, we have to briefly review the progress of monetary matters over the past few hundred years. As Rothbard wrote:

We can look back upon the “classical” gold standard, the Western world of the nineteenth and early twentieth centuries, as the literal and metaphorical Golden Age. With the exception of the troublesome problem of silver, the world was on a gold standard, which meant that each national currency (the dollar, pound, franc, etc.) was merely a name for a certain definite weight of gold. The “dollar,” for example, was defined as 1/20 of a gold ounce, the pound sterling as slightly less than 1/4 of a gold ounce, and so on. This meant that the “exchange rates” between the various national currencies were fixed, not because they were arbitrarily controlled by government, but in the same way that one pound of weight is defined as being equal to sixteen ounces.

Ok, so the pound, dollar, franc etc. were originally redeemable for certain weights of gold. So how did pounds end up ‘backing’ all of those currencies? This – we contend – was attributable to the great temptation that has intrigued, haunted and coaxed bankers throughout the history of man: – the temptation to issue receipts for the stored items (in this case, gold) in excess of what is actually held. For each currency (the pound, dollar, franc and so on), there was a stock of issued notes (each supposedly redeemable into gold at a specific rate) and a stock of reserves backing the entire stock of issued notes. Governments, lacking the constraint of competition and benefiting from the protection of the gun, inevitably issued notes in excess of the stock of reserves backing their currencies. However, the market was not stupid! The aggregated convictions of alert speculators and traders were able to draw out the reality from the farce by subsequently bidding down currencies in relation to gold. But since different currency issuers did this at different rates, this could bring about a rather unfavorable situation for currency issuers…

http://www.marketoracle.co.uk/Article29174.html

In-depth, and very informative.

100 yr. DOW Chart/Gold Cycles

Submitted by DrkPurpleHaze on May 5, 2012 - 4:06pm.

Charts: Historical Perspectives

Submitted by DrkPurpleHaze on May 5, 2012 - 4:09pm.

http://bloodywallstreet.files.wordpress.com/2010/02/100dow.gif

@all: great reading, thanks

Submitted by bbacq on May 5, 2012 - 4:13pm.

Barter: When words get co-opted, ditch 'em. Hard to corrupt "liberty" and "coercion". "Freedom" and "equality" are already long gone, I fear...

"I believed that we could educate people to value their own freedom more than control over (and theft from) their neighbors."

I think we need to starve the bastards, thus my belief in attacking the central banks that allow them to insidiously tax through inflation, which keeps the whole farce in play. "John Galt" posts above (thanks!). I know who he is, and don't need to ask. My mind is currently on strike, within their system, and fairly active in this one. Starve the beast. Exit the fiat game. Become untaxable to the greatest extent you can.

The folks that you have argued with and failed to convince are likely follower-types who don't do much independent thinking. I had some independent thoughts yesterday, perhaps a bit Randian/objectivist, that I think are important to keep in front of these coercive bozos (I am -almost- always polite in actual discourse) ie that:

a) They are wrong and cannot create a reasoned argument supporting their position that stands scrutiny. Reduce them to "but I am entitled to take your stuff!". Nope you are not. Confront everyone with their own cowardly coercive nature.

b) The side that they are on may have been winning for a while, but not much longer.

I love watching all the bureaucrats' expressions change (I live in Ottawa) when I inform them that their pension was granted under false pretense and are just yet another unfunded government liability, governments everywhere are bankrupt, and they should start rethinking their future. Fun watching them sweat.

I think point b is really quite important. Intellectual followers seek safety and shun uncertainty. They want to be on the winning side. In your particular case, an argument such as "Do you have any idea how many millions of Americans understand what is going on and are armed and ready to defend the Constitution, as it itself spells out is our duty?" Show them your gun collection, and let them know that if TSHTF, and they are supporting federal government coercion, you really would be willing to point yours and pull triggers. Then smile a nice, honest smile, and say "But, it's not going to come to that, is it?" Sorry to tell you what to do, but I am jealous of you, I have no such authority I can fall back on, and I bet your gun collection is better than mine.

It is important to confront muddy thought from the safety of moral high ground. I now enjoy watching people get itchy and nervous as I speak truth to them, because it means their moral compass is every-so-slowly turning.

I too have frustrated myself arguing with people, and Thomas Sowell, a great American thinker, straightened me out on why: we had conflicting visions. There is no point arguing policy with someone of another vision. First the vision must be changed.

Barter, thanks for stimulating me to rant a bit. Please do not give up using reason instead of guns, but I must say I am happy there are people south of me who understand their constitution and are willing to defend it and the rights it grants them. You may be my only hope.

I would like to believe that

Submitted by Groaner on May 5, 2012 - 4:21pm.

Maybe Turd or others could comment on this.

it would seem like Harvey would have mentioned that possibility

DOW: ON Gold Standard vs. OFF Gold Standard

Submitted by DrkPurpleHaze on May 5, 2012 - 4:33pm.

You'll need to go here to scroll the chart better...

http://www.advisorperspectives.com/dshort/charts/guest/2012/atradersrant...

As you contemplate...

Submitted by cpnscarlet on May 5, 2012 - 4:41pm.

the PM situation, one thing you can be sure of ....

Gold/USD Chart

Submitted by DrkPurpleHaze on May 5, 2012 - 4:42pm.

Chart is about 9 months old but close enough to illustrate the trend.

An Interesting Blog

Submitted by WhyMeLord on May 5, 2012 - 4:45pm.

Finem Respice

Not so much to do with PM's as with Economics in general. Seems to to be updated on a weekly basis.

What got me going was the author's erudite ability to express herself.

Almost at the wordsmith level of James Howard Kunstler, but definitely NOT a one trick pony...

Enjoyed reading:

Fiscal Effects of French Heroin in Drug-Resistant Tuberculosis Patients

and was absolutely fascinated by

Calculating The Present Value of Discounted Cash Flows to My Vagina

But that's just me, YMMV...

Gold rallies ahead of French, Greek elections

Submitted by Xty on May 5, 2012 - 4:56pm.

Saturday 05, May 2012 by Gerhard Schubert

Gold rallies ahead of French, Greek elections

The latest US non-farm-payroll figures were released and 115,000 new Jobs have been created. The unemployment head line rate has been reduced to 8.1 per cent. These numbers have been interpreted as disappointing, as the median expectation was looking for the creation of approx. 160,000 jobs. Standard & Poor’s raised the rating for Greek bonds to CCC. The Greek population votes on Sunday, 6 May, in a general election, and the world looks nervously to Athens.

The presidential election in France will also be decided on Sunday, 6 May. The result might have ramifications for the Euro and obviously also for Euro/Gold. It will be interesting to see if the Euro zone will have a continuation of the “Merkozy” period, or if we will look at a new “Merllande” constellation.

Australia lowered its growth forecast for 2012 to three per cent from 3.5 per cent. Australia’s economy is very much a resource exporting economy, and the global economy seems to be slowing down.

The Shanghai Futures Exchange will start with the trading of Silver futures contracts on the 10th May. The CME introduces changes into the way they measure margin requirements, which seems to make the holding of positions for speculators more expensive.

Gold: $1643.00 – down $19 from last week. The Commitment of Traders Report (COTR) shows an increase of long positions and a reduction of short positions. Gold drifted lower all week long, which culminated in a test of the support area around US$1625 before rallying and closing in the $1640’s.

Gold has risen against the Euro as the results of the Greek and French elections are expected. There seems to be plenty of scope for uncertainty resulting out of the proceedings in the Euro zone. All “white” industrial precious metals have given up a lot of ground, with the premium for gold over platinum rising to $120. This can easily be interpreted as political risk premium paid for gold over the diminishing prospects for the world economy.

Silver: $30.35 – down $0.87 from last week. Silver tried and succeeded in breaking the $30 level. Silver went down to the $29.70 level before some short covering lifted the price up to the week’s closing level at $30.35. A small amount of Silver short positions as well as long positions have been covered during last week, according to the Commitment of Traders Report (COTR).

The Dubai Precious Metals Conference last week spent a lot of time discussing if the silver bubble had burst. The resulting poll showed that the audience believed more strongly that the rally is by no means over, and that silver could rise to $100, according to Ross Norman, CEO of Sharps Pixley, in the not too distant future....

http://www.cpifinancial.net/blog/post/13848/gold-rallies-ahead-of-french-greek-elections

Macrotrends gold/silver prices 1915-present

Submitted by DrkPurpleHaze on May 5, 2012 - 5:03pm.

Hope you like the historical comparisons.

Gold and Silver Prices Since 1915
Charts the monthly inflation-adjusted price levels of gold and silver since 1915.

Ten interactive charts found here...

http://www.macrotrends.org/1333/gold-and-silver-prices-since-1915

A Threat???

Submitted by Mariposa de Oro on May 5, 2012 - 5:11pm.

"Sunday will decide if we stay in Europe and in the euro . . . or if we send the country down the road of bankruptcy and its people to massive poverty," Venizelos said.

Aren't the people already experiencing massive poverty? Leaving the Euro is supposed to be a threat?? I'd say its their best hope at this point.....

what Munger was responding to:

Submitted by Xty on May 5, 2012 - 5:13pm.

From the golden truth

SATURDAY, MAY 5, 2012

I Can't Believe Charlie Munger (Buffet) Said This On TV

"gold is a great thing to sew onto your garments if you're a Jewish family in Vienna in 1939 but civilized people don't buy gold" - Charlie Munger on CNBC LINK

Is that the first salvo by the elitists to start pointing the finger at the Jews and placing blame for the economic apocalypse brewing on anyone beside themselves? This hauntingly reverberates of Germany circa 1934.

He made that remark in response to comments that hedge fund manager David Einhorn - who is obviously Jewish - made with regard to why he keeps a high percentage of gold in his fund

If we didn’t have a Jelly Donut monetary policy, I would sell gold, sell bonds and buy stocks. But, the Fed is filled with academics who thoughtlessly rely on econometric models that reflexively indicate that repeated Jelly Donut orgies are the best way to get a sugar rush into the economy. And, the Fed Chairman seems to have no trouble rationalizing any policy failure on the basis that ‘monetary policy cannot be a panacea,’ or ‘it’s bad luck,’ or as proof that he just hasn’t force fed us enough Jelly Donuts, yet. As long as this is the case, it seems unlikely the Fed will change course.”

“As a result, I will keep a substantial long exposure to gold — which serves as a Jelly Donut antidote for my portfolio. While I’d love for our leaders to adopt sensible policies that would reduce the tail risks so that I could sell our gold, one nice thing about gold is that it doesn’t even have quarterly conference calls.”

...

http://truthingold.blogspot.ca/

I think this is a threat:

Submitted by Xty on May 5, 2012 - 5:15pm.

The "troika" of IMF, European Union and European Central Bank lenders say the May 6 election could put at risk the fiscal cuts and reforms Greece must deliver in exchange for the money it needs to stay solvent and turn its ailing economy around, including 11.7 billion euros of new savings due in June.

"The future government in Greece must abide by the country's commitments," Schaeuble said in a speech to his ruling centre-right Christian Democrats. "If Greek voters were to vote for a majority that does not honour those agreements, then Greece will have to bear the consequences of that"....

http://www.canada.com/business/Greek+euro+membership+stake+Sunday+election+Socialists/6568002/story.html

RE: MF Global 2.0 May Be Unfolding Now

Submitted by Bohemian on May 5, 2012 - 5:26pm.

OutLookingIn wrote --

"Norway has expunged all toxic European foreign bond debt, held by it's sovereign wealth fund. The Norwegians own one of the worlds largest 'rainy day' nest eggs, funded by North Sea oil sales. Those canny Vikings again!"

This sovereign wealth fund was established in 1998. I don't think we can talk about some long track record here.

At first, let's try this, from September 9, 2010:

Norway Buys Greek Debt as Sovereign Wealth Fund Sees No Default. Norway, which has amassed the world’s second-biggest sovereign wealth fund, says Greece won’t default on its debts. The Nordic nation’s $450 billion Government Pension Fund Global has stocked up on Greek debt, as well as bonds of Spain, Italy and Portugal. Finance Minister Sigbjoern Johnsen says he backs the strategy, which contributed to a 3.4 percent loss on European fixed income in the second quarter, compared with gains on bonds in Asia and the Americas. "“Even though the situation is difficult and will continue to be difficult, you get compensated with regard to the yields you are getting,” Slyngstad said. [Source: Norges Bank via Bloomberg.] “The point is, do you expect these guys to default?” said Harvinder Sian, senior fixed-income strategist at Royal Bank of Scotland Group Plc, in an interview. “Norway has taken the view that they will not. The Greek holdings are particularly interesting because the consensus in the market is that they will at some point restructure or default.” Norway says its long-term perspective will protect it from losses. “One could say we are investing for infinity,” Johnsen said in an Aug. 27 interview. “It is important when you look at the time scope of the fund and the investments that there should be a portion of active management.”

And yesterday:

"Norway’s sovereign wealth fund lost $15-billion (U.S.) last year as equity markets were hit by euro zone debt fears. The $600-billion fund, which invests the Norwegian state’s tax revenues from oil and gas activities abroad, suffered its third-worst result in percentage terms since its inception in 1998, declining 2.5 per cent.... Yngve Slyngstad, chief executive officer of Norges Bank Investment Management, which manages the fund, said the steep losses reflect substantial declines in share prices in 2011 and increased uncertainty about government debt in the euro area. The fund’s equity investments, which amount to about $360-billion, or 60 per cent of the fund, lost 8.8 per cent over the year. The worst-performing stocks were French bank Société Générale followed by German car maker Daimler and U.K. bank HSBC. The best performers in the portfolio were Apple, the U.S. technology giant, followed by U.K. drug maker GlaxoSmithKline and U.S. oil company Exxon Mobil. The fund’s equity losses were cushioned by a 7-per-cent return on its fixed income investments thanks to the rising price of government bonds in countries perceived to be havens, such as the U.S., the U.K. and Germany."

Xty

Submitted by Mariposa de Oro on May 5, 2012 - 5:27pm.

That whole comment of his disturbed me from the first moment I heard it. All this gold bashing seems to be leading up to something. I can't really articulate it now. My intuition is throwing the red flag into the air. Will there be an American Krystal Nacht? I was living near Frankfurt Germany on the 50th anniversry of Krystal Nacht. It got me looking into what happened back then. For years I wondered how all that insanity came to pass. I think now I'm beginning to understand. It scares me.

Recent central bank news constructive for Gold

Submitted by Xty on May 5, 2012 - 5:32pm.

Last Updated : 28 April 2012 at 11:05 IST

Most recent central bank news constructive for Gold: Sharps Pixley

...

Further, Sharps Pixley cites a monthly International Monetary Fund report this week saying central banks purchased some 58 metric tons of gold. “Central bankers see gold as a safer alternative to fiat currency,” Sharps Pixley added.

...

http://www.commodityonline.com/news/most-recent-central-bank-news-constructive-for-gold-sharps-pixley-47762-3-47763.html

Oh, uh, Charlie? Charlie Munger? Civilized people don't . .

Submitted by Fred Hayek on May 5, 2012 - 5:42pm.

Civilized people don't act like bailout whores greedily snorting at the government spending trough for the average taxpayer to rescue the many insolvent corporations in which they've invested.

Civilized people don't inject themselves into public debates about estate taxes arguing for keeping them without acknowledging that they acquire many companies solely as a result of the estate tax forcing heirs to take actions they would not otherwise.

But most importantly, civilized people don't make statements that encourage their fellow citizens to be vulnerable to the predations of their government's misguided policies.

Suck it up and admit that truth, Charlie!

The evolution of currency.

Submitted by Lumpy on May 5, 2012 - 5:57pm.

http://mintchipchallenge.com/

Lumpy

Submitted by Xty on May 5, 2012 - 6:17pm.

at least it is coloured gold. I note the main prize was a whole bunch of gold, and they have had so many applications they have had to stop accepting new ones. Dang - no good for the Jobs Forum.

Mariposa de Oro

Submitted by Xty on May 5, 2012 - 6:21pm.

I fear for Europe. (I know, everywhere has serious problems - but Europe feels imminent.)

Europe

Submitted by Mariposa de Oro on May 5, 2012 - 6:26pm.

I agree but also think America will be right behind, like in weeks behind. Everything is so tied together than when one goes down, it takes the others with it.

Agreed

Submitted by Xty on May 5, 2012 - 6:30pm.

the pace quickens exponentially.

@Prize Fighter - ..more clarity to whom is TPTB?

Submitted by SilverRunNW on May 5, 2012 - 7:09pm.

Topic Warning - my link below leads to what many would consider religious, but is more historic in nature.

http://www.tfmetalsreport.com/comment/162189#comment-162189

Just wanted to comment on your post from page one. I listened to that audio of Benjamin Freedman, and also went directly to that website to finish the whole presentation. Wow!! Gives a whole new meaning (for me) to the term TPTB!

Following on that is this: http://iamthewitness.com/FreedmanFactsAreFacts.html

I'll warn you now, it's 62 pages long, and reveals what Benjamin Freedman claims is the history and origin of todays' "Zionists" and linking back to the Khazars from Russia/Eastern Europe (100 - 1200 a.d. ?)

FWIW?

Facebook IPO

Submitted by johnnydow on May 5, 2012 - 7:34pm.

May 18th, 2012

I doubt gold will soar during the largest IPO ever. Just a hunch. Buy GLL and FB

Soybean short looking good.

Good luck traders.

Mark Lundeen...

Submitted by Teach on May 5, 2012 - 7:53pm.

This fellow has some unique (to me) statistical approaches to interpreting economic data. I find his analysis more comprehensible than some of the hardcore financial / trader charts:

http://www.gold-eagle.com/editorials_12/lundeen042812.html

The Exam Cram:Why Stress Can Hurt Your Test Scores

Submitted by DrkPurpleHaze on May 5, 2012 - 7:55pm.

http://dailyinfographic.com/cramming-for-your-exam-infographic/final-exam

A Question Regarding the Federal Reserve 99 Year Lease

Submitted by John Galt on May 5, 2012 - 8:05pm.

There is some interesting discussion going on here, and I'll reply in more detail later.

Right now I have a question that hopefully adds to the dialog.

The fabled Mayan Calendar completes its great cycle on December 21st of this year.

On almost the very same day the 99 year lease of the Federal Reserve (which gives it the right to print and administer the money supply) also comes to an end.

What happens when that lease expires? We'll be in the midst of a lame duck session in Washington, falling between the election of O'bomney as President and his inauguration in January.

Does the lame duck session simply roll over and renew the lease? Does a crisis ensue to add urgency to the lease being renewed? Or, perhaps, will the lease be allowed to run out and the Federal Reserve be no more?

If that happens, what becomes of all the FRNs in circulation? Who ends up holding the bag for all those IOUs?

If these FRNs are issued by an entity that is no longer recognized as the custodian of fiat coinage, will these notes suddenly become worthless?

Perhaps that is the time to usher in a new and improved global currency, perhaps one which has an arbitrary exchange value of 10 of your old notes for one of the new.

SILVER MANIPULATION QUIZ & ANSWERS

Submitted by DrkPurpleHaze on May 5, 2012 - 8:12pm.

SILVER MANIPULATION QUIZ & ANSWERS

1) Which monetary metal is the MOST manipulated on a daily basis by the banking cabal?

a) Gold

b) Silver

c) Platinum

d) None of the above

ANSWER: b) Silver

The reason silver is the most manipulated is because it is the smallest in dollar value, largest in industrial importance and unbelievably scare. Although gold is the most famous "monetary metal" silver is just as much a monetary metal if not much more. Silver is also an indispensable industrial metal used in everything from flat screen TV's to cell phones. Silver is being pulled from all sides and will soon break free from the banking cabal that controls it on a daily basis with computer programs.

Once silver is cut free from the banking cabal there will be no doubts that silver is a very important monetary metal...if not the MOST important.

The rest of the quiz follows...

http://www.roadtoroota.com/public/223.cfm

Evolution of currency: Mintchip.

Submitted by bbacq on May 5, 2012 - 8:14pm.

Thanks for that link, Lump.

My reactions, as I went through it and got deeper:

- uh oh, Big brother...

- wait, maybe it is ok, no intermediaries, peer-to-peer, multi-platform

- looks a lot like digital cash!

- oh, I see, it is just a hardware smartchip, same as smart-cards, boring...

- I wonder if there are any security holes?

Bingo:

-----------------------------------------------

Am I missing something, or is this an enormous security flaw with MintChip? (CSRF vulnerability)

Michael R 14 days ago

Consider the following simple HTML page, copied to pastebin to preserve formatting: http://pastebin.com/yzJ7sgTh

Assuming the MintChip ID in the action URL is valid, this will immediately attempt to create a value message for 1 cent. What's the problem? This is done with no user interaction at all--and once the value message is created, the money is gone! You can see in the remote Mint Chip management UI that the money is deducted from your mint chip account.

http://mintchipchallenge.com/forum_topics/925

----------------------------------------------------------------

We'll see if it is pluggable... if not, mintchip is dead. There was no response from mintchip yet. Might be re-architect time, maybe not.

Check out www.bitcoin.org