Back To The Fundamentals

Fri, Feb 24, 2012 - 10:46am

At the risk of going all Marty McFly on you, I thought it was time to get Back To The Fundamentals and re-visit the fundamental case for buying and holding precious metal, regardless of the price action of any one day. And with The Battle Royale upon us, we'll need to keep the fundos in mind during the volatile days ahead.

When This Baby Hits 88 MPH ... Back to the Future Quote

By Eric Sprott and David Baker of Sprott Asset Management

Unintended Consequences

2012 is proving to be the 'Year of the Central Bank'. It is an exciting celebration of all the wonderful maneuvers central banks can employ to keep the system from falling apart. Western central banks have gone into complete overdrive since last November, convening, colluding and printing their way out of the mess that is the Eurozone. The scale and frequency of their maneuvering seems to increase with every passing week, and speaks to the desperate fragility that continues to define much of the financial system today.

The first major maneuver took place on November 30, 2011, when the world's G6 central banks (the Federal Reserve, the Bank of England, the Bank of Japan, the European Central Bank [ECB], the Swiss National Bank, and the Bank of Canada) announced "coordinated actions to enhance their capacity to provide liquidity support to the global financial system". Long story short, in an effort to avert a total collapse in the European banking system, the US Fed agreed to offer unlimited US dollar swap agreements with the other central banks. These US dollar swaps allow the other central banks, most notably the ECB, to borrow US dollars from the Federal Reserve and lend them to their respective national banks to meet withdrawals and make debt payments. The best part about these swaps is that they are limitless in scope - meaning that until February 1, 2013, the Federal Reserve is, and will be, prepared to lend as many US dollars as it takes to keep the financial system from imploding. It sounds absolutely great, and the Europeans should be nothing but thankful, except for the tiny little fact that to supply these unlimited US dollars, the Federal Reserve will have to print them out of thin air.

Don't worry, it gets better. Since unlimited US swap lines weren't enough to solve the problem, roughly three weeks later, on December 21, 2011, the European Central Bank launched the first tranche of its lauded Long Term Refinancing Operation (LTRO). This is the program where the ECB flooded 523 separate European banks with 489 billion euros worth of 3-year loans to keep them going through Christmas. A second tranche of LTRO loans is planned to launch at the end of February, with expectations for size ranging from 300 billion to more than 1 trillion euros of uptake. The good news is that Italian, Portuguese and Spanish bond yields have dropped since the first LTRO went through, which suggests that at least some of the initial LTRO funds have been reinvested back into sovereign debt auctions. The bad news is that the Eurozone banks may now be hooked on what is clearly a back-door quantitative easing (QE) program, and as the warning goes for addictive drugs - once you start, it can be very hard to stop.

Britain is definitely hooked. On February 9, 2012, the Bank of England announced another QE extension for 50 billion pounds, raising their total QE print to £325 billion since March 2009. Japan's hooked as well. On February 14, 2012, the Bank of Japan announced a ¥10 trillion ($129 billion) expansion to its own QE program, raising its total QE program to ¥65 trillion ($825 billion). Not to be outdone, in the most recent Fed news conference, US Fed Chairman Bernanke signaled that the Fed will keep interest rates near zero until late 2014, which is 18 months later than he had promised in Fed meetings last year. If Bernanke keeps his word, by the end of 2014 the US government will have enjoyed near zero interest rates for six years in a row. Granted, extended zero percent interest rates is not nearly as satisfying as a proper QE program, but who needs traditional QE when the Fed already buys 91 percent of all 20-30 year maturity US Treasury bonds? Perhaps they're saving traditional QE for the upcoming election.

All of this pervasive intervention most likely explains more than 90 percent of the market's positive performance this past January. Had the G6 NOT convened on swaps, had the ECB NOT launched the LTRO programs, and had Bernanke NOT expressed a continuation of zero interest rates, one wonders where the equity indices would trade today. One also wonders if the European banking system would have made it through December. Thank goodness for "coordinated action". It does work in the short-term.

But what about the long-term? What are the unintended consequences of repeatedly juicing the system? What are the repercussions of all this money printing? We can think of a few.

First and foremost, without continued central bank support, interbank liquidity may cease to function entirely in the coming year. Consider the implications of the ECB's LTRO program: when you create a loan program to save the EU banks and make its participation voluntary, every one of those 523 banks that participates is essentially admitting that they have a problem. How will they ever lend money to each other again? If you're a bank that participated in the LTRO program because you were on the verge of bankruptcy, how can you possibly trust other banks that took advantage of the same program? The ECB's LTRO program has the potential to be very dangerous, because if the EU banks start to rely on the loans too heavily, the ECB may find itself inadvertently attached to the broken EU banking system forever.

The second unintended consequence is the impact that interventions have had on the non-G6 countries' perception of western solvency. If you're a foreign lender to the United States, Britain, Europe or Japan today, how comfortable can you possibly be in lending them money? How do you lend to countries whose sole basis as a going concern rests in their ability to wrangle cash injections printed by their respective central banks? Going further, what happens when the rest of the world, the non-G6 world, starts to question the G6 Central Banks themselves? What entity exists to bailout the financial system if the market moves against the Fed or the ECB?

The fact remains that there are few rungs left in the financial confidence chain in 2012, and central banks may end up pushing their printing schemes too far. In 2008-2009, it was the banks that lost credibility and required massive bailouts by their respective sovereign states. In 2010-2011, it was the sovereigns, most notably those in Europe, that lost credibility and required massive bailouts by their respective central banks. But there is no lender of last resort for the central banks themselves. That the IMF is now trying to raise another $600 billion as a security buffer doesn't go unnoticed, but do they honestly think that's going to make any difference?

When reviewing today's macro environment, we keep coming back to the same conclusion. The non-G6 world isn't blind to the efforts of the Fed and the ECB. When the Fed openly targets a 2 percent inflation rate, foreign lenders know that means they will lose, at a minimum, at least 2 percent of purchasing power on their US loans in 2012. It therefore shouldn't surprise anyone to see those lenders piling into alternative assets that have a better chance at protecting their wealth, long-term.

This is likely why China reduced its US Treasury exposure by $32 billion in the month of December (See Figure 1). This is also why China, which produced 360 tonnes of gold internally last year, also imported an additional 428 tonnes in 2011, up from 119 tonnes in 2010. This may also be why China's copper imports hit a record high of 508,942 tonnes in December 2011, up 47.7 percent from the previous year, despite the fact that their GDP declined at year-end. Same goes for their crude oil imports, which hit a record high of 23.41 million metric tons this past January, up 7.4 percent year-over-year.10 The so-called experts have a habit of downplaying these numbers, but it seems pretty clear to us: China isn't waiting around for next QE program. They are accelerating their move away from paper currencies and into hard assets.

Figure 1: China Hong Kong Gold Imports vs. US Treasury Holdings

Source: US Treasury, UBS

China is not alone in this trend either. Russia has reportedly cut its US Treasury exposure by half since October 2010 (See Figure 2). Not surprisingly, Russia was also a big buyer of gold in 2011, adding approximately 95 tonnes to its gold reserves, with 33 tonnes added in the fourth quarter alone. It's not hard to envision higher gold prices if the rest of the non-G6 countries follow-suit.

Figure 2: Russia US Treasury Holdings ($BN)


The problem with central bank intervention is that it never works out as planned. The unintended consequences end up cancelling out the short-term benefits. Back in 2008, when the Fed introduced zero percent interest rates, everyone thought it was a great policy. Four years later, however, and we're finally beginning to appreciate the complete destruction it has wreaked on savers. Just look at the horror show that is the pension industry today: According to Credit Suisse, of the 341 companies in the S&P 500 index with defined benefit pension plans, 97 percent are underfunded today. According to a recent pension study by Seattle-based Milliman Inc., the combined deficit of the 100 largest defined-benefit plans in the US increased by $236.4 billion in 2011 alone. The main culprit for the increase? Depressed interest rates on government bonds.

Let's also not forget the public sector pension shortfalls, which are outright frightening. In Europe, unfunded state pension obligations are estimated to total

$39 trillion dollars, which is approximately five times higher than Europe's combined gross debt.15 In the United States, unfunded pension obligations increased by $2.9 trillion in 2011. If the US actually acknowledged these costs in their deficit calculations, their official 2011 fiscal deficit would have risen from the reported $1.3 trillion to $4.2 trillion.16 Written the long way, that's a deficit of $4,200,000,000,000,… in one year.

There is unfortunately no economic textbook to guide us through these strange times, but common sense suggests we should be extremely wary of the continued maneuvering by central banks. The more central banks print to save the system, the more the system will rely on their printing to stay solvent - and you cannot solve a debt problem with more debt, and you cannot print money without serious repercussions. The central banks are fueling a growing distrust among the creditor nations that is forcing them to take pre-emptive actions with their currency reserves. Individual investors should take note and follow-suit, because it will be a lot easier to enjoy the "Year of the Central Bank" if you own things that can actually benefit from all their printing, as opposed to things that can only be destroyed by it.

If you want to stop reading right now, close up your computer and head off to the nearest coin or metal shop to buy more phyzz, go right ahead. I won't be offended. If you choose, instead, to continue reading, we'll keep going.

I lifted this chart from a ZH article today. From Bloomberg, this chart shows that total global money supply has risen by an incredible $11,000,000,000,000 (yes, that's 11 trillion) in just the past 30 months!

Now, let's go back to the same daily charts I've been posting for a few days now. We've been in these steeply ascending channels for two months now. After reading the excellent summary above, do you now see why? After reading the excellent summary above, do you expect these channels to be breaking down anytime soon? Again, please notice that the gold channel rises almost exactly $100/month. If this trend continues, the bottom of the gold channel will be at new all-time high territory by mid-April. Silver is rising at a pace of $4/month. Following this trend, silver will be back in the $40s by April. Could/should these trends continue? Again, ask yourself if you think the global liquidity spigot will be turned off anytime soon. Could/should these trends accelerate? Ahhhh, now that's a fun thing to consider, isn't it? As Doc Brown would say: "Great Scott!".

The Sprott folks only left out one critical element of the fundamental story: Negative, real interest rates. For a refresher, please go back and read this:

Remember, the key to any big market advance is liquidity and the key to added liquidity in the PMs is awareness. How many high net worth investors own gold in size? How many hedge funds? How many institutions? As we know, not many. Why? Normalcy bias, mainly. The mindset of the brainless, status quo types can be summarized by this: Why would I own gold when it doesn't pay interest or a dividend? Well, when all of a sudden nothing else does, either, then why not own gold? Especially when you come to terms with all of the fundamental reasons stated so eloquently above! As this rationalization gradually sinks in over the next few moths, do you think more money or less will be flowing into the metals?

Also, I've been meaning to cover this and Sprott mentions it, too:

According to Credit Suisse, of the 341 companies in the S&P 500 index with defined benefit pension plans, 97 percent are underfunded today. According to a recent pension study by Seattle-based Milliman Inc., the combined deficit of the 100 largest defined-benefit plans in the US increased by $236.4 billion in 2011 alone. The main culprit for the increase? Depressed interest rates on government bonds.

THIS IS A HUGE PROBLEM. HUGE! Many insurance companies and defined-benefit plans are restricted from buying anything but AAA-rated debt. Most have the ability to "reach for yield" by purchasing a small amount of lower-rated, "riskier" bonds but, by and large, entire portfolios must be constituted with U.S. treasuries and other, AAA-rated sovereign and corporate debt. A treasury yield "curve" that stretches from 0% to 3% simply blows up the actuarial assumptions and return expectations that many d.b. plans and insurance companies rely upon. Some are being forced to search for yield by purchasing increasingly "risky" assets. THIS WILL NOT WORK OVER TIME AND WILL ONLY COMPOUND THE SHORTFALL AND SOLVENCY ISSUES. This all draws back to the unwind of The Great Ponzi. Rates must be kept low to slow the pace of the U.S. government debt spiral. However, the future insolvency and collapse of insurance companies and defined-benefit plans will only accelerate the debt spiral.

Lastly, I would be remiss if I didn't give you and updated chart of The Pig. It is currently breaking down and out of its 4-week range. At this point it looks headed to at least 78, maybe even 77.50 before it finds buyers.

I've got to stop somewhere so it might as well be here. I'll leave you today with a little more Doc Brown. Enjoy your Friday and have a great weekend! TF

1.21 gigawatts?! - Dr. Brown & Marty - Back to the future

About the Author

turd [at] tfmetalsreport [dot] com ()


Titus Andronicus
Feb 24, 2012 - 10:50am



(LOL. Never even tried to do that before.)

Feb 24, 2012 - 10:50am

Second Dingleberry

Too slow this morning

Dr G
Feb 24, 2012 - 10:53am

Thurd. Great post, Turd! 

Thurd. Great post, Turd! I want to know how long it took you to compile this one?

Feb 24, 2012 - 10:53am



Feb 24, 2012 - 10:54am

LBMA 11:30 beatdown... GO LONG

Anywhere at 1770 area, I'm going long. 1765 would be a gift. Volume is weak enough for them to push it around. They don't have the cover to do a full fledged bear raid, and instead are doing these mini $5 to $10 raids.

Typically, I would think you would get another bite at the apple for the 1:30 crimex close beatdown. In any event, if volume stays this weak, and silver can't get abouve 35.50, it remains vulnerable to a "real" beatdown at a future date.

That said, as long as the cartel beats down gold and tries to get silver to fall in sympathy , they are showing their hand... NO PHYSICAL at the crimex vaults, with 20K still standing for delivery (as of yesterday). It could drop on a beatdown to 33 support, but after that... away she goes.

Feb 24, 2012 - 10:57am

How I see the liquidity / inflation issue

Unintended consequences is absolutely right TF. Once the velocity of money accelerates those who unleashed it will be powerless to halt what they have wrought.

And ClinkinKY- yup, on the loose today!

Feb 24, 2012 - 10:57am

There has been a really nice run up..

There should be a pause that refreshes any ways. I just cant stand those blatant raids of constant selling pressure

Feb 24, 2012 - 11:03am


They're all going to be either stolen or inflated away. I predict in 5 years, you'll get bitter smiles from people when you mention words like 401(k) or IRA.

And like I said before, they can naked short it, they can algo it, but they can't do the one thing that truly matters - stop printing money. They can delay when gold catches up to the money supply, but catch up it will.

Dr G
Feb 24, 2012 - 11:07am

@lairdwd, so there is no way.

@lairdwd, so there is no way--absolutely no possibility--that a $5 drop in gold over a period of 25 minutes could simply be profit taking? That has the hallmark of a "raid"?

This raid talk is getting to be absurd. I think that when the Cartel chooses to kick us in the nuts we will know it. There will be no question.

Feb 24, 2012 - 11:08am






Feb 24, 2012 - 11:09am

low rates - high rates - catch22

perfect Catch22 scenario:

Turd’s quote:

“Rates must be kept low to slow the pace of the U.S. government debt spiral. However, the future insolvency and collapse of insurance companies and defined-benefit plans will only accelerate the debt spiral.”

Trying to solve one problem for one side (gov. debt) will cause problems for the other side (pension plans/insurance co.) and vice versa.

Feb 24, 2012 - 11:14am


All of you folks that keep calling for a raid here and a raid there, you really aren't doing anyone a service--call what you want, but I don't see any evidence of a raid coming..voliatilty..yes..i haven't seen any assessment on those calling a are just putting fear out there, the fear should be not about the RAID but about owning USD and NOT buying the PMs. And if there's one WTFC. I'll respect the board and the posts, but will have to call out that it just feels everyone is in fear mode and no one can justify their POV. I'd fire most of you if you worked for me and came into my office and started screaming this shit.

Now, maybe you'll get lucky and call it right. I don't know, but I'm with Dr. G...everytime we take a little dive it's not a raid, especially when you not the correlation to the down of the other markets. Maybe there's profit taking, maybe there's not...i don't know...

so for those that want to call me an asshole..ill save you the trouble. I can be the biggest asshole in the world if you let me.

Stop worrying about the Raids and get back to living in where we should be living and what is about to happen

Feb 24, 2012 - 11:17am

Just a pause for a cause

Remember good people at Turdville, the PM game is a game of resilience. You must be mentally able to stand VOLATILITY. In a battle such as this , we are fighting for our lives. Do not doubt it one second, and do not forget the EVIL EMPIRE is also fighting for their way of life to keep on trucking ; fleecing the sheeple at every turn. Now that said- when buying you have to analyze where you are in build of THE STACK.

1. If you are just starting then start. Pay no attention to the charts bc you will wait for the buy and never get in unless you are very lucky. Cost average in every week if you are just beginning. I don't care if you are 20something and can only buy 10 a week , 1 a week, 20 a week. Remember Tuesdays have been historically down i believe and therefore buy on Wed and Thursday. But BUY and stack. You are building a fortress and you must start somewhere.

2. If you have been cost averaging and have some ............refer to #1. Keep stacking, a firm foundation is all that will be able to withstand the flood of fiat that is coming. Build on a ROCK. The rock must be heavy.

3. If your ROCK is heavy already- that is when Turd's charts are handy if you are not well schooled in TA yourself. Plan your buys on weakness. Always buy weakness with a buy program. What that means is you look at your charts and buy support on drops, when it drops that support your program says buy next support. Your buys will start small and get larger on every support level. NEVER EVER EVER EVER use all your powder........EVER. I will have bullets left for whatever battle the EVIL EMPIRE wants to fight me in. Meaning if silver is 10/oz i still have cash to deploy. Again this is a war

That said folks , as i look back over the 8 years I have been doing this, I have made mistakes that have taught me the 3 principles i have laid out. Keep stacking-Do I ever sell yes........if anyone is interested I will discuss that too , but RARELY have i sold in the 8 years. Good luck all and God bless
Feb 24, 2012 - 11:18am

Worldwide Fiat Ponzi

A ponzi is a scam which pays early investors out of the investments of later investors. In a sense, the world’s monetary system is one giant fiat ponzi scheme with the only question being when will the ponzi end, not if it will end.

The problem is growth is no longer able to keep up with the malinvestments caused by cheap money (0% rates + QE). Either cheaper money is increasingly provided in order to cover up the malinvestment (more QE, or purchasing of MBS, or printing money to purchase anything), or the malinvestments become exposed.

Allowing the malinvestments to become exposed is politically unfeasible, so cheaper money will be provided in order to keep the malinvestments hidden. In a sense, the new investor is the newly created currency..once the new currency stops or even slows, the ponzi fails, but keep the new currency coming in faster and faster and hyperinflation is the end result.

Feb 24, 2012 - 11:21am

Fundamentals =

Fundamentals = FunwithMetals

For me it has been the most fun and profitable experience putting paper to work over the past 30 years, I only wish I could have shared it with more of my family and friends.

Feb 24, 2012 - 11:22am

gold chart

I was looking at the gold chart as priced in yen (on Andy Hoffman's Miles Franklin blog) but any gold chart would likely show the same.

the last 3 years .... whenever gold made a big movement like it has the last month or has Always been followed by at least a moderate correction and usually a big correction. Look at the chart. Every single time. Will this latest wave up ' be different' ? will Sinclair's magical 1764 price point keep gold from correcting? or the global economic chaos? maybe this time will be different and gold will hold above ... ?? 1730/1700.... etc

but if we do see a real correction.... there is the convergence of 200MA and 50 MA around the 1665 price can that not be seen as the next major target for a pullback. ? It Has to be seen as Still in Play. target 1665-1680

Add to this idea....... one question to answer.... Does the Cartel have no more power at all ? are they finished? can they do no more shorting? is the game over ? is that all there is ? thats it ? theyve lost all their power to manipulate the metals? Wow. That was easy. It Must be clear sailing up up and away now..... and for the miners too I guess.

This must be the same kind of feeling folks had last year when silver went soaring from 40 to 49 and people/sheeple piled in. and then got fleeced.

Look at a long term gold chart..... there was always some kind of real correction. that took a few months to play out,or at least a few weeks.

I'm afraid to miss the chance to buy gold and silver...sure..... but logic and reason, and evidence tells me to wait for the pullback. and the chart tells me the target zone is around 1665 area. 1675. the casino game spidey sense tells me to wait for 1650 . maybe that means waiting until july or august even.....

BagOfGold Pining 4 the Fjords
Feb 24, 2012 - 11:22am


You deserve to be first...on that one...& will always be first in my book!...Your pictures are worth 10,000+ words!...


Bag Of Gold

Feb 24, 2012 - 11:27am

Found this on...

Found this piece on Financial Fascism coming to the west world at warp speed, time is running out to begin the repair and restoration of the American republic.

Before I get into today’s topic I’d like to hope I helped some of you short sellers this morning when you read the very end of yesterday’s missive, “All of this is interesting and shows some weakness but without real volatility, it may simply be a tiny pullback of no major importance whatsoever. Why? Despite the aggressive selling, long term passive buyers were at the lows buying everything in site.” Although the market went a wee-bit lower after the open, the passive buyers didn’t cancel any orders; all sellers were absorbed and the market went up just as the central banking meddlers ordered it.

In the prior missive I said “In the latest bank bailout via the Greek people, we learned that Puppet Papademos and Company agreed to more austerity for more cash - $172billion to be precise. In order to get this, private bondholders are being forced to accept higher losses without being paid on their insurance policies (CDSs), the ECB accepts no losses, the ECB retroactively changed all bond language so they wouldn’t lose money which radically changes all bond sales going forward, and Greece will be placed under a new wicked type ofFinancial Fascism by the EU that will make all decisions for the people of Greece.”

As it turns out, the Financial Fascism is worse than I thought and is getting worse by the day. Sure, I understand that if one “borrows” money one must have collateral that would be coughed up if the loan goes sour but let’s get real – none of that applies here. The Greek people are paying for bad loans made by the European banking syndicate to pay back the very same banking mafia, which was all promised by crooked politicians.

Excuse me, but aren’t the “bankers” said to be so unbelievably intelligent that nobody should ever question their actions as that would indeed question their intelligence? Isn’t it odd that when these same scum-sucking bankers make horrifically bad loans based on the KNOWN lies of known low-life politicians that all of a sudden we’re supposed to feel bad for the banking mafia’s losses? Oh, and then all of a sudden the people who had no say in the ridiculous loan arrangements have to pay for them?

I’m sorry but this is where I get ticked-the-f*c#-off, because the answer today is FINANCIAL FASCISM! The people of Greece, NOT the politicians, are paying the ultimate price. And guess what Portugal, Ireland, Spain, and others – this is your future!

According to the FT (,Authorised=false.html?

“European creditor countries are demanding 38 specific changes in Greek tax, spending and wage policiesby the end of this month and have laid out extra reforms that amount to micromanaging the country’s government for two years, according to documents obtained by the Financial Times.

“Among the measures that must be completed in the next seven days are reducing state spending on pharmaceuticals by €1.1bn; completing 75 full-scale audits and 225 value added tax audits of large taxpayers; and liberalising professions such as beauty salons, tour guides and diet centres.”

You see that folks? The Financial Fascists are taking away granny’s meds. Let’s take a detour for a second and consider the USSA. Do you think we can avoid this just because we’re the formerly known country: USA? How is it that the laws of finance stop at the shores of the USSA? Just because our super-large military would make John Holmes (read: other countries) blush by comparison? Really? I seem to remember that Rome, Spain, and England had that same “super-large military” complex. How’d that work out for them in the long run again? Oh wait, but this time its different, right?

By the way, there is an election coming up soon so if you do NOT want financial fascism in this country I would suggest that you vote out the current loser in office, regardless of their indifferent D or R affiliation. Just my 2-cents. Then again, I highly doubt that even that would work in this sickeningly corrupt country. (Not one bankster is behind bars for the housing scam and/or 2008 collapse, etc)

Back to the sacking of Greece…

According to the New York Times Greece may be forced to give up its gold. Said another way - the banking mafia is getting exactly what it wants: Greece’s hoard of 111 tonnes of gold.

In the fine print of the 400-plus-page document — which Parliament members had a weekend to read and sign — Greece relinquished fundamental parts of its sovereignty to its foreign lenders, the European Commission, the European Central Bank and the International Monetary Fund.

“This is the first time ever that a European and probably an O.E.C.D. state abdicates its rights of immunity over all its assets to its lenders,” said Louka Katseli, an independent member of Parliament who previously represented the Socialist Party, using the abbreviation for the Organization for Economic Cooperation and Development.

Ms. Katseli, an economist who was labor minister in the government of George Papandreou until she left in a cabinet reshuffle last June, was also upset that Greece’s lenders will have the right to seize the gold reserves in the Bank of Greece under the terms of the new deal, and that future bonds issued will be governed by English law and in Luxembourg courts, conditions more favorable to creditors.

What happens when the banking syndicate steals the Greek gold and then drops Greece from the EU? Let’s look at a mathematical formula. Greece – gold = Zimbabwe.

Call me crazy but when a bunch of global banking thieves loan money out at interest, they should be responsible for the consequences if said loans go sour. What’s happening, however, is that these bastards are getting away with stealing what’s left of a county’s dignity, assets, and its national sovereignty.

I simply cannot believe that the people of Greece haven’t revolted to the point of a coup d'état – a genuinely new government.

For better or worse, at least the thieving banking mafia wouldn’t be in charge!
Trade well and follow the trend, not the so-called “experts.” Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the
Doc1800 T
Feb 24, 2012 - 11:30am


The Cartel is wounded which makes them that much more dangerous. Again if you have a nice stack and are sure it would carry you- then have your buy at those levels you mention using the daily chart. Start there, then hit it at the other supports as well. If we get a "crap the bed " moment like 08, we will have a party buying up what is being thrown out with the bathwater. I have seen the power of the cartel curtailed in the last 3 years , but still they have power. Have your cash ready and good luck

Feb 24, 2012 - 11:33am

The Real Price of Crude

Jim Sinclair posted something about the price of crude in terms of Gold. So, for interest, I put together a couple of quick charts which highlight the issue of Oil prices vs the dollar nicely.

We keep thinking that the price of Oil is rising - gasoline prices, in turn will be much higher later this year - at least according to the MSM. But, in terms of Oz of Gold - the price of Oil is actually LOW!

Compare the two charts - the green line is Oil is USD and the yellow line is Oil in Gold. (Now, I know that there are many other factors that weigh into this - it's an overly simplified analysis - but, if we had true sound money and a sound economy, I dare say that the yellow line would be dead flat - that blip up in mid 2008 would not exist).

The green line shows us clearly what bull-crap the Federal Reserve has wrought upon us - the yellow chart shows us the effect of using "sound money".

Dr G
Feb 24, 2012 - 11:36am

I have no cash ready because

I have no cash ready because I spent it all at at 33, where silver based for 5 weeks straight. If it went to 30, which it won't, then it wouldn't make a lick of difference in my personal plan, because I have metal in hand.

If you are waiting to purchase 3 monster boxes, then I guess wait for the dip. If you are waiting to purchase a tube or 3 of Maples, then you are crazy to be waiting for any dip.

Feb 24, 2012 - 11:37am

Define(d) Ben(efits)

So it would appear that the govt. has as usual been spending money it doesn't have hand over fist for decades (or for a lifetime depending on your age) and now the hole is appearing in defined benefit pension plans?

Why is that not so surprising, where have I heard that (ripping off pension plans that is) before?

Sounds like a plan out of you know who's playbook. G5 in Chicago? Naturally lol

Feb 24, 2012 - 11:40am


Thanks for the excellent update, Turd. China is doing what we're all trying to do, (move out of the ponzi paper economy into hard assets) but on a massive scale. My wife and I have both been studying Mandarin for the past year - all part of our preparation plans.

Feb 24, 2012 - 11:46am
Feb 24, 2012 - 11:46am

Could it be?

I know many of us are guilty of yelling "raid" all too often - on any down move. But call me a nut if you will - it's a Friday near OPEX and we DID just have a good move up. I'm looking at the chart and past trading history, and my gut tells me that we are having a raid in the COMEX today - it just isn't working too well. Gold is marginally vulnerable and silver has a stake in the ground.

What we are far too acclimated to is raids over the last year - big ones. What we are not very used to is the cartel raiding and it doesn't work at all. There's a interesting view of a "normalcy bias".

Doc1800 Dr G
Feb 24, 2012 - 11:47am

Dr. G

If you are still building then you are right just cost average in all the way up. IF you have stacked to a pt of insanity, I think buying support levels is the way to go. Like I have posted above, everyone has to know where they are in their BUILD and then plan accordingly. Your build is probably much larger than most and your build is great at 33- good luck to you.

Feb 24, 2012 - 11:48am

I only know two things in Chinese

1. Please bring me another TsingTao.

2. Confucius say: Man with hand in pocket feel cocky. Confucius also say: Go to bed with itchy bottom, wake up with stinky finger.

Feb 24, 2012 - 11:49am

@ Turd

I think you misinterpreted my comment from the last post. I too originally thought Sprott would have gone directly to Canadian mines. If this is the case I would expect to see bars from Canadian mines in the bar inventory found here:

They are not Canadian mines. I see Chineese mines and the largest miners in Europe among the origins of the bars. Granted, these bars were PSLV original so we would have to wait and see if the new offering was filled in the same manner as the original offering. I assume it would. We can clearly see that the bar inventory is not from Canadian mines.

Not saying Sprott is buying on the comex... I doubt he is as well...

By process of elimination that leaves us with Bullion banks as the source of silver into the trust. Unless I am missing something or wrong in my assumptions..

Is it possible that he is buying directly from the bullion banks (who in turn obtained leased silver from central banks)? If so this would also explain the negative lease rate we have seen lately. It would go a long way to explain tightness when lease rates are negative and a want by the TPTB to raid Silver shortely thereafter. If this in fact how the silver was purchased, the leased silver would have to be purchased by the bullion banks at a later date to repay the lease. Could and would the bullion banks use comex to obtain the supply required to repay the lease? If so, I would expect the COT reports to show significant orders standing for delivery (ie bullion banks acquiring silver to repay the lease) this would be very bullish for Silver as it would be forcing delivery setting up for a possible short squeeze...

I think most will agree Sprott had a dramatic effect on Silver last year with the introduction of PSLV. The question is "Is this what happened last year and is it happening again?". We weren't looking at lease rates any tying them to COT reports & original PSLV offering last Feb-April... Be interesting to see..

Ferd Torgerson
Feb 24, 2012 - 11:51am

Calm Down

You can only be sure it's a raid if Turd initiates the warning system

[Admin Note: Oh my, I think I just about had a seizure looking at that. For those who want to see what was removed, feel free to click the link here. Not for the faint of heart or those who dislike strobe lights.]

Feb 24, 2012 - 11:51am

The real price of gasoline

Was it Ron Paul that said if you divided $4T (Iraq and Afghanistan war cost) into 10 years worth of gasoline in the US it would come out to $12.50/gallon?


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