Sunday, February 28, 2010

Sunday Night Precious Metals Pornography...

(click on image to enlarge)

The U.S. monetary base jumped to 2.18 trillion as of 2/24/10 - a new record:

(click to enlarge)

Saturday, February 27, 2010

Regarding Whether or Not To Take Bernanke Seriously

when he said in front of Congress that the Fed would stop printing money...there has been a short debate in the comment section of the Greenspan post. I thought that in order to settle the debate, I would resurrect one of my original masthead quotes. This should answer any questions/doubts: 
"The last duty of a central banker is to tell the public the truth."  -- Alan Blinder, [then] Vice Chairman of the Federal Reserve, on PBS's Nightly Business Report in 1994

I think that quote speaks for itself and needs no additional commentary.  Please note that Alan Blinder is an economics professor at Princeton, where Bernanke was Chairman of the economics department...'nuff said.

Friday, February 26, 2010

Is Alan Greenspan Senile, Stupid or Both?

This is a direct quote from a Bloomberg news story 3 days ago:  Greenspan said he wants the subprime mortgage market to return. “I hope we can find a way of resurrecting the subprime market,” because it was working well until those mortgages were widely securitized, he said.

Hat tip to Ed Steer of Casey's Research Link.  Here's the original Bloomberg news story, because the statement is so outrageously unbelievable, I wanted to make sure it was bona fide:  Greenspan = MORON

Obama May Make the Housing Problem Even Worse

Seriously, who the F$%K voted for this guy?

"Obama May Prohibit Home-Loan Foreclosures Without HAMP Review  The Obama administration may expand efforts to ease the housing crisis by banning all foreclosures on home loans unless they have been screened and rejected by the government’s Home Affordable Modification Program."  Bloomberg Link

Honestly, this will create such a backlog of non-paying mortgages and delay payment resolution that ultimately it will do nothing more than stimulate and incentivize "jingle mail,"  in which underwater, cash-strapped homeowners turn in their keys to the bank and simply walk away from the situation.  Distressed homes will pile up, creating a massive inventory problem and the decline in home values will accelerate.

Furthermore, it will create a massive delay in the disbursement/payment of ANY cash flow to banks holding the mortgages and to the investors in the mortgage trusts which helped finance the housing bubble.  Of course, this may also set up the direct subsidization of dead-beat homeowners, as banks bleeding dry from lack of cash flow from the defaulted mortgages will cry to Obama and Congress, who will then authorize the payment of Treasury/Taxpayer money directly to the banks until the defaulted mortgages are restructured.

The bottom line is that the Government should absolutely not be using Taxpayer money to subsidize the banks and distressed homeowners.  This is not a social or legal or national security issue.  This is a business problem that should be settled between the homeowners who took on more than they could pay and banks who were willing to lend to them.  Why should I be required to take money out of my pocket to help settle a bad business decision made by others?

It just gets worse by the day...

Why Are the Taxpayers Keeping AIG Alive?

AIG posts $8.9 billion loss...NEW YORK (Reuters) - American International Group Inc (NYSE:AIG - News) reported a quarterly loss of $8.9 billion on Friday and warned that it may need additional U.S. government support, even as it tries to pay back taxpayers after a $182.3 billion bailout.

Here's the news release: LET AIG FAIL

The degree of corruption here involving Henry Paulson, Ben Bernanke, Tim Geithner, Larry Summers, Lloyd Blankfein and others smells worse than a broken sewage holding tank in New York City in the heat and humidity of August. 

And here's an AIG spokesman spewing forth massive lies:  "We think the combination of strategic asset sales and reviving businesses will generate sufficient funds to repay the taxpayer, mooting the need to pursue the previously contemplated life insurance securitization," AIG spokesman Mark Herr said.

Let me be clear about this:  nearly every significant asset sale tee'd up by AIG has either failed or has fallen far short of the originally estimated sales value.  AIG has NO HOPE of EVER repaying Taxpayer money used to keep AIG and Goldman Sachs, et al alive.

It's clear to me, and probably most people, that the decision to save AIG was based on the decision to indirectly bailout Goldman Sachs, and other Wall Street banks.  Recall that the ex-CEO of GS was the Secretary of Treasury and the then-head of the NY Fed, Tim Geithner, is Robert Rubin's robot - Rubin being the former Co-Chairman of GS several years ago.  Anyone doubt the motive?

It's also clear to me that AIG has NO hope whatsoever to pay back any of the $182 billion owed to the Government.  The Government - aka Taxpayer - owns just under 80% of AIG.  Please be aware that the % of ownership is not arbitrary.  One reason for this is it allows the Government to not include AIG's liabilities as part of the Government's balance sheet, even though the Government is giving billions to AIG ever quarter.

And what to do we get in return? We get to watch AIG pay its employees billions in total compensation; we get to watch AIG funnel billions to Goldman Sachs and other big banks.  Now it looks like AIG will be on the hook for billions in Greek debt-relatged Credit Default Swaps, with Goldman used as the underwriting conduit for this garbage.  The media has done a great job of covering this up, but it's there.

When you open the paper tomorrow and read about the growing civil unrest in California over State education budget cuts, and you start reading about the massive teacher layoffs in your own State from budget cutbacks, keep in mind how much money Obama/Geithner/Bernanke is funnelling to Wall Street, in order to keep the big banks solvent and keep the fat bonus checks flowing.

Thursday, February 25, 2010

JUMP BALL For the IMF Gold...

Looks like India is now going to compete for the IMF gold, along with China.  From The Daily Times of Pakistan: 
India’s central bank, which has increased its gold holdings to diversify its reserves, looks set to be a buyer again when the International Monetary Fund begins selling 191.3 tonnes of the precious metal amid volatility in major currencies...The uncertain outlook for two of the world’s major reserve currencies — the dollar and euro — provides a spur for central banks, including India’s, to buy gold. India’s gold holdings lag those of major economies despite a big purchase in October.
Here's the full link:  India Wants More Gold

This reinforces the idea that the 191 tons of IMF gold for sale is the only large chunk of gold available in the context of the current price range ($1000 - 1200/oz.).   This raises the possibility that the big buyers of gold out there, once this 191 tons clears the market, could be motivated to drive the price of gold a lot higher, up to the next price level at which a large seller might be induced to put a large "chunk" up for auction.

2010 could be a very interesting year for the yellow dog.

BOOM! Goes the Dynamite

Gold and silver exploding despite the big sell-off in the general stock market.  Perhaps a delayed reaction to the China news?


You know what they say: While the U.S. middle class dumps it's gold, the rest of the world buys...

This officially confirms the old adage that a rumor isn't true until it's been denied three times by official sources.  That China was interested in the rest of the IMF gold was denied at least three times.
China has confirmed the intention to purchase 191.3 tons of gold from the International Monetary Fund at an open auction, Finmarket news agency said...“Chinese officials have confirmed previous announcements from IMF experts and said that the purchasing of 191 tons of gold would not exert negative influence on the world market. China is interested in the development of the domestic consumer market,” the agency reports...Here's the link:  ChinaGold
So there you have it.  China, India, George Soros...who else is loading up the boat on the world's oldest and truest form of currency?

The most significant aspect of this announcement is that it is the first time, at least that I'm aware of, that China has publicly revealed its appetite for large "chunks" of gold.  If you really analyze the message here, it's China's signal to the whole world that if someone has large quantity of gold to sell, they are the buyer.

Orwell Is Smiling...

It seems like the more the U.S. media and financial reporting ramps up the rhetoric on the dire situation in Greece/Europe, the closer California steps toward bankruptcy.  I don't care what anyone says, if California collapses - or even if Obama is instructed by his handlers to give California the $20 billion it needs - the consequences for the U.S. dollar and the global economy are much worse than if the PIIGS hit the wall. From yesterday:  California One Step Closer To Insolvency After State Cancels $2 Billion General Obligation Bond Sale Failed bond auction

Also lost in the shuffle is that fact that Goldman Sachs broke laws in helping Greece fraudulently hide some of its debt; AIG is on obligor on who knows how much in Greek Govt debt Credit Default Swaps; AND Bernanke had that evasive, timid, "I'm lyin' my ass off" look in his eyes when Ron Paul inquired as to whether or not the Fed was going to pitch in on the bailout of Greece.  If you connect GS and AIG with the fact that the Fed is legally permitted to buy foreign debt under the Monetary Control Act of 1980 with U.S. dollars, it would seem obvious what is going on here.

It's a shame that most Americans either have no clue about what's going on because they are too busy watching "Reality TV," or the ones that do bother to follow the superficial U.S. media will not believe the Golden Truth unless they hear it from Katie Couric or read it in their local garbage rag (i.e. NY Times, WashPost, Denver Post, etc).  No wonder Orwell's Smile just erupted into a full-blown belly laugh...

Wednesday, February 24, 2010

Global gold buyers vs. global gold sellers

I thought that I would publish this list, put together by my friend and colleague, Andy H., in order to put the global demand for gold in perspective.   Please keep in mind that many of the sovereign buyers were, at various times in the last 15 years, sellers of gold.  Also keep in mind that, on average over the last 15 years, the global demand for gold has been exceeding the globaly supply by roughly 1000 tons per year.  This deficit historically has been filled by Central Bank selling.  In addition to most Central Banks now acting as buyers, the global mining output has been in steady decline over the past few years, even with China displacing South Aftrica as the largest gold producer.

As you can see, there are only two known "official" sellers/lessors of gold.  With regard to the recent IMF 212 ton transaction, it is questionable as to whether or not this was an outright sale and transfer of physical gold OR an accounting transfer, in which India, Sri Lanka and Mauritius simply withdrew their gold "deposit" as part of their IMF membership terms.  All three countries have IMF gold depositories and the "sale" would have required nothing more than an accounting transfer.  I have yet to see the IMF or any other official source dispute this.  Here is the list:


1. Chinese government
2. Chinese population
3. Indian government
4. Indian population
5. Viet Nam
6. Russia
7. Middle East (Turkey, etc.)
8. Cambodia
9. European population (record demand)
10. American population (record demand)
11. Basically ALL populations (record demand)
12. CBGA signatories (at least no longer selling)
13. Gold companies, particularly Barrick
14. ETFs, such as GLD (record holdings, new funds being created every month)
15. Major hedge fund managers, such as Paulson, Soros, and Tudor Jones


1. U.S. government, via acknowledged swaps
2. U.S. government, via derivatives/paper gold futures contracts via bullion banks
3. U.S. government, via Federal Reserve, via Warsh et al admissions
4. U.S. government, via IMF, likely via U.S. government-owned or leased gold
5. Bank of England via sales or leasing
6. Bank of Canada (hat tip to Mike - see his comment posted in the comments section)

I think we can all come to the same conclusion about what happens when you have a commodity that has a large structural deficit between demand and supply...

Tuesday, February 23, 2010

Is the Consumer Confidence Index an Economic Smoking Gun?

The Conference Board's Consumer Confidence Index took an unexpected cliff-dive today, as the index dropped 11 points to 46, from last month's 56 level and and expected reading of 55.9 for this month.  The "Present Situation Index" component dropped to its lowest reading in 27 years.  This component of the index is derived from the consumer's view of current business conditions and the job market. The short-term outlook also dropped hard, as consumers expressed pessismism about job prospects and anxiety over keeping a job.

Clearly, this datapoint is in direct conflict with the manipulated Government data that's being released and with the "soft-sell" optimism eminating from our President and Fed policy-makers - collectively a.k.a. now known as "The Oracle of Orwell in DC."

The key is to look at what is really going on beneath the Orwellian veneer that's been liberally applied and highly polished by the Fed, Wall Street and the Obama Administration.  Here is a good example of reality:  Mass layoffs surge in January, highest level since July 2009:  Link from; or how about the fact that mortgage delinquency rates hit a new record high in January:  Link from Bloomberg;  or perhaps the explosive commercial real estate disaster has people worried:  Link from CNN.

I'm not even scratching the surface on a whole viper's nest of fundamental economic problems which are converging all at once.  Some of these include the growing State unemployment insurance fund deficits rapidly expanding in several States, the rapidly growing FDIC funding deficit, and the fact that there is a growing number of people who have become perpetually dependent on continued extension of unemployment benefits by the Federal Government, which now stands at 2 1/2 years.

All things considered, I'm surprised the Conference Board confidence index was still in the 40's.

Monday, February 22, 2010

Obama Ignores the Voice of the Public

I was stunned to learn last week that Obama was still trying to jam healthcare "reform" through Congress.  Interestingly, I'm not the only one, as Obama's approval rating, as measured by Rasmussen, has hit new lows.  As of yesterday, only 22% Strongly Approve vs. 41% who Strongly Disapprove.  Here's the link:  Obama Tanking.  Moreover, a large majority of polled voters oppose Obama's healthcare proposals.  In fact less than 40% of those polled favor the plan:  LINK.

The REAL problem with healthcare is that Big Pharma, Big Hospital and Big Insurance now control Congress with monied PACs just like Big Banks and Big Defense.  The fact of the matter is that Big Money Corporate America now completely controls our system.  Until that CHANGES, the promise on which Obama was elected, nothing will change.  Here's is the REAL problem with healthcare, as documented by Craig Harris of Earthblog news: 
Healthcare in America today is delivered by an exclusive club. This exclusive club consists of providers, hospitals, insurers and big pharma. Big pharma alone has six lobbyists for every member of congress and funds the FDA which acts as a wholly owned subsidiary...Over the past 40 years, the cost of healthcare in America has risen at an annual rate of approximately 12 percent. This is the root of the healthcare crisis in America. $100 dollars spent on healthcare 40 years ago increasing at an annual rate of 12 percent costs $9,300 dollars today. During this same 40 year period, $100 dollars in average income has increased to about $220.
Everone now see the problem?  Here's the link to the entire commentary (I've been reading Craig Harris for quite some time and his analysis is very accurate and backed with facts):  The Golden Truth about Healthcare

Which leads me back to Obama.  The optimistic view of Obama and his motives would be that he is way too inexperienced, lacks deep political connections and is either a blind ideologue or bit of an idiot (maybe both). I really can't believe he's back humping a healthcare bill again after the Massachusetts massacre. He is completely ignoring the message being sent by the electorate.  The NJ/VA Gov elections should have been a loud signal to Obama,  BUT  Massachusetts should have been a hard hit over the head. And the announced retirement of well-respected and firmly entrenched Democratic Senator Evan Bayh was the coup de grace.  Based on his continued determination to ignore the voters who put him into office, I can only conclude that Obama is either completely controlled by Corporate America or just stupid.  Fact is, it's probably both.

Saturday, February 20, 2010

Two Short Videos For Your Weekend Viewing Pleasure

Mike Maloney is considered an expert on economic and monetary history.  In the two short videos below, he makes a case for $15,000 gold and, based on his outlook for gold, makes the case that silver is an even better investment than gold.  His thesis is based on the historically tried and true idea that "silver is poor man's gold."  As Mike explains:  "when the common man turns toward silver because gold is too expensive, that's when the price of silver explodes.  Enjoy:

Thursday, February 18, 2010

Bernanke Hikes the Discount Rate: zzzzzzzzzzz...

I described in my post on Feb 10  Link, why Bernanke will do nothing more than bluff about draining liquidity from the system and raising short term rates.  I mentioned that raising the discount rate was his loudest toothless tiger in this regard.  Well, Banana Ben raised the discount rate, the rate which banks borrow directly from the Fed.  Here's my description of why this act is meaningless, useless and ineffective - which means he really does not want to do anything other than give the impression to our massive foreign creditors that he's not really a fiat currency main-lining drug addict: 
Bernanke's first proposal would be to raise the discount rate. The discount rate is the rate charged by the Fed when banks borrow directly from the Fed. Raising the discount rate is meaningless right now as a tool to regulate systemic liquidity because the banks have plenty of money to lend out in the form of excess reserves. Excess reserves are bank deposits kept at the Fed in excess of reserve requirements. As of 12/31/09, banks had around $1.1 trillion in excess reserves. The banks thus have no need to borrow money from the Fed - and thus will not be affected at all by a rising discount rate. As of Feb 3, Discount Window loans were an insignificant $14.7 billion. As you can see, the discount window is not even a source of bank liquidity in comparison to the liquidity the banks already have on deposit at the Fed. Raising the discount rate would be about as useful as taking away ice machines in Antartica. In Banana Ben's own words today (Feb 10): raising the discount rate is “not expected to lead to tighter financial conditions for households and businesses and should not be interpreted as signaling any change in the outlook for monetary policy." So why even bother mentioning this unless Banana Ben's intent is to remain consistent with his unstated policy of blowing smoke?
The fact of the matter is that Bernanke has two choices:  he can raise real rates and try to drain liquidity from the system, which will lead to a rapid collapse our economy, OR he can play "poker" with the market and send out false signals. Judging from his inability to hide lies from his facial expressions when he's in front of Congress, he's a crappy poker player. He knows full well the consequences of both alternatives, but why not try to kick the can down the road and let his successor deal with it or hope for Moses to come down from Mt. Sinai and deliver another miracle?  In the meantime expect Banana Ben to keep delivering a series of empty threats.

This Is a Bad Sign For Our System - the Irreversible Debt Spiral

Hawaii, North Carolina and apparently soon New York will be delaying the disbursement of State tax refunds.  Here's the article from  LINK.

It's a really bad sign when a debtor goes delinquent on money owed.  In this case, technically the State is indebted to the Taxpayer and it looks like the Taxpayer will now have to stand in line to get paid.  When a business or individual starts delaying payement of their bills, it's usually the first sign of financial stress leading to bankruptcy.  To be sure, there is always the possibility that a wounded debtor may recover and eventually catch up on bills and debt repayment. But in the case of most States AND the Federal Government, spending budgets keep ballooning while tax revenues keep dropping - not the signal of recovery.  In the junk bond business we called bonds issued by companies in this situation "IDS" bonds:  Irreversible Debt Spiral bonds.

It's bad enough that the Government gets to use the float on taxes withheld from paychecks until tax returns are filed and processed. But to be quite frank, I'm not sure what the difference would be at this point between what these States are doing and a check kiting or Ponzi scheme.  Anyone who sees news like this and still believes that Greece/Spain/Europe is in worse shape than the U.S. needs to either lay off the Prozac or stop doing bong hits.

The Gold-Buying World Responds to the IMF Gold Sales Announcement...

and rejects the blatantly overt attempt by the IMF to knock down the price of gold - this artwork is courtesy of Rob Kirby of

Wednesday, February 17, 2010

IMF To Sell the other 191 Tonnes of Gold It Has For Sale - This GREAT NEWS!

Recall, the IMF sold 200 tonnes to India at $1049 and another 12 tonnes to Mauritius and Sri Lanka back in December. It is now going to sell the remaining 191 tonnes in "phased-in" open market operations.   For some reason the IMF thinks that selling the whole 191 tonnes at once would disrupt the market.  I'm sure one phone call to China or Russia and they could move the whole load.  The other possibility is that the IMF is actually seeking to be a "profit maximizer" and is looking to be a "scale" seller as the price moves higher.  Some might view this as overt price-capping.  Au contraire, I suspect that the IMF may have created a potential feeding frenzy, as there are plenty of countries, hedge funds and very wealthy individuals who I'm sure would like to buy a large amount of gold at one price without running up the price. 

As Jim Sinclair has pointed out in the past:  "The history of IMF sales in the 1970s is that they allowed huge buyers to enter the market at one price. That attracts the major buyers... Selling of gold like this occurs only in bull markets and has historically been useless to stop the price increase. In fact in the 1970s these sales pushed gold higher by facilitating demand from huge interests, and will do so even more so now."  Article link:  Sinclair on IMF Gold Sales

The more interesting aspect of this situation is that the IMF is the only known seller in the world of a multi-100 tonne "chunk" of gold.  My view has been that the real price of gold would not be, obviously, the paper price on the Comex or the odd-lot price of physical trading in London,  but the price at which a large seller would be willing to sell a large amount to a big buyer or buyers.  We don't know who those buyers would be because it would behoove them to show their bid until they can define where a big block would be offered (this is basic illiquid asset trading technique).  Well, based on the nature of this announcement by the IMF, i.e. phased-in "on market" sales, we still don't necessarily have a real market price at which a large chunk of gold would be offered.  I can assure you, based on 9 years of trading illiquid securities at a large Wall St. bank, that the "large block" price is several hundred dollars above the current spot price.

Time To Get Rid of ALL Taxpayer-Financed Housing Bailout Programs

The only way to "cleanse" the system is to let market forces take the housing market to whatever level is necessary to stabilize the market.  It will be a long, painful process, especially for the financiers who fueled the housing bubble, the Government regulators who looked the other way with regard to the massive fraud perpetrated by the financiers and especially for the individuals who overpaid for a house using a mortgage they had no hope of ever repaying barring some kind of miracle.  The "miracle" is not to spread the cost of these problems and decisions over the broad spectrum of taxpayers, many of whom either own their house outright or rent.

The latest policy being implemented is known as HAFA. Here's how it works in a nutshell: It incentivizes short sales and distressed sales, especially in the cases where a 2nd mortgage of some sort is holding up the whole process by taking Taxpayer money and paying the deadbeat borrower $1500 to vacate, $1000 to the people who process the mortgage paper work (the servicers), $1000 to the new "investor" who is buying the property AND $3000 to the second mortgage holders to induce them to sign the papers releasing all liens.  Here is a link to the details:   LINK  Please note that this information is hosted on the website of the National Association of Realtors.

I exchanged some emails with Mark Hanson, of, a.k.a. "Mr Mortgage," who has done an incredible job historically of analyzing and presenting the details of the housing bubble and its demise.  But in his latest public blog post, LINK, he promotes the HAFA program as a means of speeding up the process of distressed housing sales. I'm all for speeding this process up, but not with MY money or Taxpayer money.  Let the market sort this out.  Here's is what I concluded in my email exchange with Mark: 
The failed economics of a bad housing transaction - from the buyer's overpaying and taking on too much debt to the lender willingly funding the buyer's bad economic choice - should not be subsidized by the many who chose not to engage in bad econmic decisions. Why should I be required to reach into my pocket to help an idiot move out his disaster, help the new buyer try to make money on this disaster (many will still fail), partially cover the subordinated lender's mistake, and let the real estate broker make what is ultimately a subsidized commission?

The taxpayers have subsidized enough of the housing disaster. It figures that the NAR loves this program because it ramps up the volumn and velocity of home sales and prohibits the servicer from forcing the real estate broker from taking a hit on a commission. That's total b.s. and I wouldn't be surprised if the NAR was influential in the drafting of this program.

You do great work. But the only way to cleanse the system is to let the market - free from any kind of Govt intervention of any kind - take the market to where it needs to go. This market either naturally or unnaturally is eventually going to go a lot lower.
I concluded with: 
Why do we need any Govt intervention, especially when it involves penalizing everyone by transferring wealth from all of the taxpayers to those who screwed up? In fact, the brokers and lenders have made money every step of the way, a lot of it based on Govt implemented wealth transfers, like HAMP and now HAFA.
If the Govt would just step aside altogether, we can get the nasty process of correcting the problem out of the way. Govt intervention of any sort only drags out the process, makes it worse and unfairly penalizes those who refrained from drinking the spiked kool-aide.
And one more point, the primary lender banks ultimately are not taking losses. Those losses are being monetized by the Fed and the Treasury, whether you realize it or not. The second lien lenders may be the ones holding up the process and maybe HAFA greases the wheels to get them out of the way, but the whole process STILL requires that I reach into my pocket and give everyone at the table some of MY money. At this point, HAFA will only serve to transfer overvalued homes from deadbeats to new "distressed" investors, most of whom will end up walking away once they can't rent out their "investment" or it continues to tank in value, which it will.

Again, all HAFA does is stimulate the velocity and volumn of housing sales, while using taxpayer subsidies to artificially hold up price levels and facilitate continued misallocation of money and economic resources.

Monday, February 15, 2010

FDIC Leases Massive Space in Chicago - This is Not Good

I just pulled this from Friday evening's Midas report at  A reader sent this excerpt in from the Chicago Sun-Times: 
BIG DEPOSIT: This could end up as one of the largest suburban leases of the year, but it can't be good. The Federal Deposit Insurance Corp. has leased 150,000 square feet, the entire building, at the Woodfield Corporate Center, 200 N. Martingale in Schaumburg. The federal guarantor of bank accounts needs what it calls a "temporary Midwest satellite office" as it processes receiverships and asset sales involving Midwestern banks. The FDIC said it will move in beginning in March and that the office will have up to 500 workers
(Schaumberg just outside of Chicago, to the northwest).  It doesn't take a genius to read into the meaning of this.  I think we can expect a surge in bank failures throughout the rust-belt region this year.  If you keep more than a checking account with enough money to pay your bills each month, it would probably be a good idea to either move your money to a too-big-to-fail bank or, even better, pull your money out and buy gold and silver bullion with it.

A reader in the comment section inquired about other FDIC "satellite" offices that have been opened:  "The FDIC has similar offices in Irvine, Calif., and Jacksonville, Fla., and the number of bank failures in those states picked up dramatically after the FDIC opened those quarters.  Here's the link from the Chicago Tribune:  LINK

This also means that we can expect the FDIC to receive massive funding from Banana Ben's printing press via the U.S. Treasury.

Saturday, February 13, 2010

CRE Dealt a Huge Blow in Denver

Qwest, which leases one of the largest and highest profile buildings in Denver has notified its landlord that it is not going to renew the lease.  Qwest was required to lease the whole building, of which it subleases out about half of the space, in order to hang its obnoxious neon blue sign at the top.

Here's the link to the article:  Qwest downsizes, leaves a big hole in Denver CRE

This is a huge blow to the commercial real estate market.  My guess is the best shot anyone has at filling up that space is if Obama gives some "stimulus" money to a windmill or solar energy company to replace the space being vacated by Qwest.

Friday, February 12, 2010

Howard Davidowitz is Always Worth Listening To:

"January is 6% of the retail year...when you look at the real numbers, we're going nowhere"

Greece is Irrelevant Compared to What's Unfolding in the U.S.

It just boggles my mind that the whole world, especially the mainstream media in this country, is completely - no, tragically - focused on the possible collapse of tiny Greece, when the real story is unfolding right under our nose in the U.S.  Keep in mind as you read this that Greece's GDP is roughly 3% of total EU GDP.

We all know about California's problems. Right now that State is staring at a $21 billion budget deficit - that forecast is probably too optimistic - and California already is over $6 billion in the hole on its unemployment insurance fund and is borrowing from the Feds to fund payments.  Many States are now borrowing from the Government to fund unemployment claims. California represents 13% of total U.S. GDP, is the seventh largest economy in the world and has well over $500 billion in total debt outstanding (largely muni paper). Compare that to Greece, which has a little over $400 billion in debt and is insignificant in terms of global economic output. Yes,. Greece will default on its debt if it isn't bailed out, but what about California?

How about this piece of news which hit the wires yesterday afternoon after the stock market was safely closed:  the New Jersey Governor declared a "fiscal emergency" because the latest budget proposal now has an $11 billion deficit, up from an $8 billion forecast deficit as recently as November, and up from the deficit in the current year which is projected to be $2.2 billion.  Here's the Reuters link: NJ To Take a Dirt Nap? Last year New Jersey ranked 7th in relative economic output by State.

How about Pennsylvania? In a little-reported event last week, the State capitol city of Harrisburg is contemplating a Chapter 9 bankruptcy filing. Pennsylvania ranks 6th in economic output. New York is running toward the brick wall of insolvency. NY ranks 3rd in economic output. Ditto Illinois, which ranks 5th. Same for North Carolina, which ranks 9th. Michigan, Ohio, Nevada...

Anyone now think Greece looks problematic in the grand scheme of economic problems? And this analysis does not address the Federal Government debt swamp. Let me just say that anyone who believes Obama's forecast of $1.6 trillion for the next fiscal year is doing way too many bong hits. That budget deficit projection does not include an accounting calculation of the Government guaranteed entitlement payouts from all of the long term legacy psuedo-welfare programs like Social Security, Medicare, etc. From a financial accounting standpoint, that calculation needs to be taken into account annually, similar to the way it is required for all businesses. It also does not include several $100 billion in "off-budget" military expenditures. And the amount of total Treasury debt outstanding currently should include, but does not, some calculation that takes into account all of the recent guarantees issued by the Treasury in the last year which back trillions in banking system liablilities. Included in this number would be the $6 trillion of FNM/FRE debt being guaranteed, $600 billion in FHA mortgage paper, and the $1.25 trillion in mortgage paper purchased by the Fed.  There are several other financial guarantee programs that will require billions in funding this year, like FDIC.

Anyone see any problems here? When you stack all of the above up against Greece, or even an aggregate of the so-called PIIGS + the UK, I think I'd rather have the EU problems than the catastrophic Debt Bubble getting ready to explode in the U.S. Make no mistake about it, Bernanke will soon be forced to seriously crank up his electronic printing press and dispatch a whole fleet of B-52 bombers to implement his infamous cash drop on a collapsing empire.  It's exactly this predicament that is causing gold to move inexorably higher, making all those who forecast gold's price demise and lack of value look like complete idiots.

Thursday, February 11, 2010

More B.S. in the Press About Gold...

Marketwatch has an article out that attributes the big move in gold today to the fact that Greece will not be selling any gold in order to raise funds as part of its bailout. Here's the link:  Garbage reporting.  One analyst in the article referenced the Washington Agreement which limits the amount of gold the ECB can sell to 400 tonnes.  We're four months into the current WA year and the ECB has barely sold any gold, leaving plenty of room for Greece to sell its gold if it so chooses.

Here's what's really going on with gold.  To begin with, Greece reports holding 112 tonnes.  If Greece wanted to sell all of it, make no mistake about it, China or India or Russia would jump at the chance to pay the current spot price for all of it.  That would leave plenty of room for other ECB member banks to sell gold this year if they so choose.  That would raise roughly $4.2 billion for Greece.  Why wouldn't they sell?

Gold shot up today for several reasons, not the least of which is the fact that a committed bailout of Greece will involve using the euro printing press to monetize part of the situation.  The printing of fiat currency is the nemesis of gold and nothing makes gold move up more quickly than the smell of the fiat printing presses running overtime.  Second, Viet Nam devalued its currency yesterday, and based on the premium of $54 over the spot price of gold being paid in Viet Nam, it would appear that the population there is scrambling to buy physical gold.  Viet Nam is quietly one of the largest buyers of gold in the world.  And finally, the bailout of Greece is the first in a long chain of sovereign bailouts, including big State bailouts in the U.S., which will require massive fiat currency monetization.  Gold smells that stench and has screamed higher accordingly.

Always remember,  there's the Orwellian Ministry of Truth truth, and there's The Golden Truth.

Wednesday, February 10, 2010

Bernanke Blows Smoke in His Attempt to Blow More Bubbles

Banana Ben Bernanke released a transcript of his scheduled testimony to Congress regarding his plans for removing the trillions he's printed and injected into the system (the appearance was cancelled due to the blizzard hitting DC). In his remarks, Bernanke outlines a few policy tools he plans on rolling out if and when he decides monetary policy needs to be tightened. Since he missed forecasting the housing bubble and the ensuing economic collapse, I'm not sure why anyone would trust him to determine the appropriate time to drain the system in order to prevent hyperinflation. Here's a link to the Bloomberg article on Bernanke's remarks: LINK

Bernanke's first proposal would be to raise the discount rate.  The discount rate is the rate charged by the Fed when banks borrow directly from the Fed. Raising the discount rate is meaningless right now as a tool to regulate systemic liquidity because the banks have plenty of money to lend out in the form of excess reserves. Excess reserves are bank deposits kept at the Fed in excess of reserve requirements. As of 12/31/09, banks had around $1.1 trillion in excess reserves. Here is a graphic portrayal of the amount of excess reserves being kept at the Fed right now:  Excess Reserves.  The banks thus have no need to borrow money from the Fed. As of Feb 3, Discount Window loans were an insignificant $14.7 billion. As you can see, the discount window is not even a source of bank liquidity in comparison to the liquidity the banks already have on deposit at the Fed. Raising the discount rate would be about as useful as taking away ice machines in Antartica. In Banana Ben's own words today: raising the discount rate is “not expected to lead to tighter financial conditions for households and businesses and should not be interpreted as signaling any change in the outlook for monetary policy." So why even bother mentioning this unless Banana Ben's intent is to remain consistent with his unstated policy of blowing smoke?

Bernanke goes on to say that he has other tools he can use to drain liquidity and tighten monetary policy when the economic growth warrants those actions. Quite frankly, the way Obama is throwing around Q4 GDP growth of 5.7% as evidence of a strong economy, one would think the time would be now. Of course, anyone who tracks what is really happening in the economy knows better, and so does Bernanke. But, in the fairy tale world of the Federal Reserve and the U.S. Government,  assume Banana Ben will get a chance to unleash his liquidity-draining monetary tools on the system. Let's take a look at why his other tools are useless.

His next tool would be to raise the interest rate being paid on bank excess reserves. The idea would be that banks will be incentivized to keep those reserves with the Fed rather than use them to fund lending. The problem is that those excess reserves have built up to the extent that they have because the banks were bailed out of bad business loans that should have never been made in the first place. Furthermore, given the very poor outlook for any kind of meaningful economic expansion for the foreseeable future, banks will be quite content holding onto that cash and keeping it at the Fed. In fact, Bernanke could probably refrain from paying any interest rate on that money because it's a safe place for banks to keep that cash and avoid the risk of that money not being returned (unlike general business loans, money market funds, commercial paper etc.). Of course, Bernanke being an ivory tower academic and nothing more, is clueless about the nature of this dynamic. But you can see why this policy tool is useless. Would you want to keep your cash in a place where you know you can get it back, or lend money to a real estate developer or hamburger franchiser right now? How about a Ferrari dealer who wants to expand in Ohio? The point is that IF the time comes when the economy offers favorable risk/return lending opportunities to the banks, they will unleash those excess reserves and Banana Ben will have no control using his sleepy excess reserve interest rate tool.

His third policy tool is what is called a reverse-repo operation. The idea behind this concept is that the Fed can sell back the roughly $1.5 trillion toxic assets it purchased from banks to keep them from collapsing, and thereby "drain" that $1.5 trillion in cash from the system. Correct me if I'm wrong, but I believe the Treasury also issued a guarantee against loss to the Fed on those purchases. Here's the problem. We have no idea what value the Fed placed on that $1.5 trillion of crap when it removed the assets from bank balance sheets. The Fed is spending millions to keep us from finding out. In all probability, not only did the Fed overpay for those assets, but the market value of most those assets has likely declined precipitously. The Fed certainly can't force the banks to reload those assets back onto their balance sheet, because it will put the banks in even worse financial condition than when the Fed assumed them. And if the banks could not have disposed of those assets in the market back when this occurred, imagine how ugly the bid side for that toxic crap is now. In other words, the Fed WAS the ONLY buyer back then and IS the ONLY buyer now. See the problem?

So, if my analysis is correct, this leads us back to where we were before Bernanke unveiled his policy ideas to the world: no change in the Fed's monetary policy for the foreseeable future, trillions in excess reserves, zero percent interest rates and a Federal Reserve with no idea how it will, for all practical purposes, remove the trillions it has injected into the system. In his own words, Bernanke stated to today that this policy is warranted "for an extended period of time."

How About Obama Calling Blankfein and Dimon "Savvy?"

“'I know both those guys; they are very savvy businessmen,' Obama said in the interview yesterday in the Oval Office with Bloomberg BusinessWeek." LINK

I guess if I were a whore politician I would refer to two of my largest campaign donors as "savvy" as well.  Of course, the only part of "savvy" that can be attributed to Blankfein and Dimon is in the way in which they ripped off tens of billions of taxpayer money.  Obama goes on to compare the compensation of Blankfein and Dimon to that of baseball players.  “[T]here are some baseball players who are making more than that and don’t get to the World Series either, so I’m shocked by that as well.”

Here's the difference.  Those baseball players provide daily entertainment to millions of viewers and fans worldwide.  And the fact of the matter is that, for sure Goldman and likely JP Morgan, these big banks would have collapsed last year if it weren't for the $100s of billions of taxpayer largesse funnelled by the Bush and Obama adminstrations from the Treasury and Fed to Wall Street. To compare Wall Street CEO compensation to that of baseball players is thus beyond absurd.  People willingly pay for tickets to games and they willingly turn on the t.v. and endure advertising in order to watch their favorite teams and players.  I don't think any Taxpayer willlingly offered up their tax money to Blankfein and Dimon. 

The funniest part of about Obama's comments is that, whether he understands it or not, and somehow I don't think he does, both Blankfein and Dimon robbed this country blind under Obama's watch.  Obama had a chance to halt the bailouts when he took office.  In Wall Street terminology, when a trader executes a trade that makes a lot money off of a client - especially when the trader has all the information advantages - it is known as "skull-f&#king" the client.  Thanks to Obama's policy of enablement, Wall Street has "skull-f$#ked" both the Obama Government and the Taxpayer.

Monday, February 8, 2010

Some Monday Observations...

First, the run on bullion last week in the U.S. was bona fide.  We were trying to buy some sealed mint boxes of 1 oz. silver eagles today. One national dealer had 4 boxes only and wanted spot + $2.69. Tulving, APMEX and CNI are cleaned out. Tulving told me they didn't know when their next order from the Mint would be in and would not sell any with an "expected delivery" date. This is what was interesting: CNI also would not sell sealed mint boxes with an "as of" ticket AND they told me that the Mint has become very unreliable in terms of sticking to an announced delivery date. This is the first time I can recall that sealed mint boxes were not available on an "expected delivery" date basis. Sealed boxes of silver maple leafs are still available, but what makes the silver eagle situation interesting is that the U.S. Mint is legally obligated to produce enough silver eagles to meet demand.  January set a record for silver eagle sales in the U.S. and we still have a very small percentage of the population buying bullion. Imagine what this will be like when a much higher percentage of the population decides that holding U.S.dollars is too risky.

Second, in the irony of all ironies, the Mortgage Bankers Association just unloaded it's headquarters, which it purchased less than two years ago, for a whopping 48% loss.  Here's the link to the story which I sourced from   I don't want to be labelled as a grave-dancer, but that story makes me laugh.

Third, the delinquency rate of Prime Jumbo mortgages inreased for the 32nd straight month to just under 10%.  This would be the category of mortgage that was used to finance McMansions bought by white collar social climbers who didn't have enough for a down payment large enough to make the monthly payment manageable and who likely have lost their job or have income tied directly to the bubble areas of the economy (think real estate brokers, high end car salesmen, stockbrokers, mortgage bankers, etc).  Here's a link to the article:  Housing Situation Getting Worse.

Finally, I'm starting to see a lot more commentary which points out how absurd it is that the financial media in this country insists on reporting about how bad the sovereign troubles are in Europe, when in reality the situation in the U.S. is worse than in Europe, with several large States on the brink of bankruptcy.  Case in point, Greece has about $408 billion of outstanding debt, of which roughly $152 billion is external. California has around $540 billion in total debt, including general obigation bonds, municipal bonds and special project/funding facilities.  Add to that the $21 billion projected budget deficit for this year plus the fact that California is currently borrowing heavily from the Treasury to pay unemployment claims and essentially California is completely bankrupt.

The point is that, despite what you hear in the news, the economic conditions in this country continue to deteriorate.  I mean, what's the message being signalled by the fact that the Mortgage Bankers Association, of all entities, has decided to sell its building rather than wait for the market to improve?  Obviously insiders do not believe in the "improving economy" theme or the "real estate is at a bottom" theme that is being propagated by the propaganda machine in this country.  And, as suggested by the run on gold and silver bullion last week, increasingly people are starting to understand the Truth and are expressing this understanding by exchanging "full faith and credit of the U.S. Govt. notes" (i.e. dollars) for gold and silver, otherwise known as "real money" for the better part of 5000 years.

Best Super Bowl Ad in My View:

I think most of the ads were overrated, especially the sappy one with Betty White that everyone seems to like.  This ad ran before the coin toss, so if you were refilling your beer you probably missed it, but I thought this one with Larry Bird at the end was the most entertaining:

"He's takin' our lunch..."

Sunday, February 7, 2010

It Looks Like There's Been a Run on Bullion...

Just got off the phone with a colleague who told me he spoke to several primary coin dealers up and down the East Coast yesterday and the general consensus was that there was a run on bullion last week.  A reader posted in the comment section on Friday's post who said:  "had the same experience with my metals guys on Thurs and Friday buying several thousand ounces. Tulving and California Numismatic were swamped." 

I can confirm that Tulving was "swamped" on Friday, as it took me 10 minutes to get through.  I purchased 1 oz. gold Austrian Philharmonics and I just noticed they no longer have those for sale.  Their inventory list is smaller than it was Friday and they have jacked up the premium on sealed boxes of 2010  1 oz. silver eagles.

It would appear that more people are starting to understand the problems which are catastrophically infecting our system, to realize that the Obama administration continues enablement of these problems and that this country is essentially a runaway freight train with no brakes and headed for cliff.

Friday, February 5, 2010

Fed Already Signalling Possible Need to Extend Mortgage QE

Laughing my ass off.  I said in a post in early December that I would bet a large sum that the Fed, within the first quarter of 2010, would announced that it was extending and expanding its QE, a.k.a. money printing operation, in order to support a failing economic system.   Well, here it is from the pages of the Washing Post - William Dudley, Prez of the infamous NY Fed spills the beans:  More Fed Printing on Deck

I truly hope that everyone used this latest correction in the gold/silver/mining stock market to pick up some more gold and silver bullion and add to their favorite mining stock positions.  When I purchased a slug of 1 oz. Austrian Philharmonics from Tulving, it took me 10 minutes to get through (I've never even experienced a busy signal there).  When I asked if they were busy with buyers or sellers, they said they were selling tons of silver today.

The U.S. is in Worse Shape Than Any Other Country

It's awesome the way the Government/Wall Street can blow smoke up our ass and people still believe it.  But let's examine some facts.  First, Obama did NOT include the Government guarantee of Fannie and Freddie in his absurd budget proposal.  BUT, the U.S. is guaranteeing roughly $6 trillion of FNM/FRE mortgage debt. Given current default rates, it's not unreasonable to assume a 10% loss on that paper this year.  That means you add another $600 billion on top of Big O's budget numbers.  There's plenty of other off-budget black holes just like that, although maybe not as large (GMAC, AIG, etc.).

What about the myth that we have a deflationary debt contraction going on?  That would be news to anyone who examines the numbers. Please see this chart:
(click to enlarge)
Someone please wake me up when you can find evidence of overall debt in this country contracting - and  that would be the sum Govt + individual + corporate.  What HAS happened is that Wall Street and CNBC are pimping the story that banking system debt is lower.  And it is.  But it's been transferred to the public sector in the form of outright bailouts and guarantees.  Make no mistake, all of that mortgage paper - $1.25 trillion - being purchased by the Fed is guaranteed to YOU, the taxpayer.

Regarding today's employment number, the BLS statisticians and Orwellian press release experts were working overtime this week to produce an employment number that bears no more resemblence to reality than a Bugs Bunny cartoon.  Here's the only chart you need to see, and it uses "unadjusted" (i.e. semi-unmanipulated) data:
(click on chart to enlarge)

I sourced this chart from and recommend that you read their entire post:  LINK

One more chart that I would like to show that readers may have missed.  It is sourced from  This chart shows the "loss severity rate" of home foreclosures in the tri-state area of NY, NJ and Connecticut (number on the chart is the amount of loss sustained by the mortgage holder, so a .7 loss is a 30% "recovery rate"):
(click to enlarge)

As you can see, the amount of money recovered by banks from foreclosed homes is about 30%. Statistically, it's probably not unreasonable to extrapolate this data to the whole country.  But keep in mind, the banks are not taking the hit on this, as they have largely "marked to market" back up all of the charges they took on toxic mortgage paper and you, the taxpayers, are going to bear those losses because a large portion of those losses have been transferred to the Fed and the Treasury. Rest assured, next year's Obama budget did not contain an expense provision for this.  And no, the recovery rate shown on that chart has not bottomed.  In fact, if Obama lets the homebuyer tax credit expire in April, and as banks start to unload all of the foreclosed homes on their balance sheet in order to raise capital, the whole housing market will experience another painful leg down.

And finally, just a quick note on the situation in Europe. It's stuns me that everyone one in this country is focused on the financial troubles occurring in Greece right now. Greece is about 3% of the total EU GDP. In reality, the bell tolling for California right now is much worse in terms of its potential impact on the global economy. California is about 13% of the U.S. GDP and California is the world's 7th largest economy. And what about the list of other States teetering on bankruptcy: Illinois, Michigan, Pennsylvania, New Jersey, New seems to me that the financial media, Wall Street and the Obama Government is spending a lot of energy keeping Europe front and center in front of everyone when, in reality, we should be looking at ourselves.

The golden truth is that the Fed is going to be forced to embark on a money printing operation that will blow our minds.  It will be interesting to see what kind of smoke screens they put up in order to mask the truth.  At some point this nasty short-squeeze rally in the dollar will rip in reverse and the rest of the world will flee from the dollar the way they are fleeing from the euro right now.  When that happens, gold will finally become the ultimate safe haven investment and those who poo-poo it now will be left chasing a train that leaves the station suddenly, quickly and with a sharp move higher.

Thursday, February 4, 2010

Quote of the Day

Sourced from
Nassim Taleb, who speaking at a Moscow conference today, the same place where Roubini said to get the hell out of the dollar, said that "it is a no brainer [that] every single human being" should be short Treasuries," citing the policies of Federal Reserve Chairman Ben S. Bernanke and the Obama administration...Deficits are like putting dynamite in the hands of children,” Taleb said in an interview with Bloomberg Television. “They can get out of control very quickly.”
I was wondering when someone with a high public profile was going to make that statement.  Make no mistake, the Chinese will not ignore that comment.  The more interesting question is:  at what point will the market crossover from using the US dollar as a flight-to-safey instrument to using gold?  There is plenty of evidence to suggest that this transition is beginning to take place.  It can't help when people examine the reality that California is about ready to collapse unless Obama prints up some big loans ($20 billion or so) to that State. California has a larger economy than Greece and Spain combined - especially when looked at as a percentage of the overall U.S. economy.

Please keep in mind that Moody's is now making noises about the potential ratings downgrade of the U.S. Government.  Remember that Moody's failed to officially downgrade Enron until just before Enron collapsed.  In other words, Moody's is usually way behind the curve on risk analysis, so if Moody's is expressing concern, it's far too late to fix the problem.

Wednesday, February 3, 2010

How Many Jobs Did Obama Claim To Have Saved...

with his useless stimulus legislation and the assumption of another trillion of related indebtedness?  I think the last number I saw coming from the White House was in the 700k range.  You better read this before you are willing to believe that garbage - from
Last October the BLS announced it would revise historical payrolls lower by 824,000 on February 5 (this Friday's NFP release). While this number will not impact the actual January NFP report ...while we know what the current revision will be, the scarier prospect is that the next historical adjustment, due out in early 2011, will be even larger, at least 990,000. This means that the government has overrepresented running payroll data by over 1.8 million jobs over the past 20 months.  Here's the link:  More Obama Lies
The country got what it voted for:  garbage in, garbage out.

Tuesday, February 2, 2010

Why Are the Taxpayers Funding AIG Bonuses?

AIG plans to pay about $100 million in bonuses Wednesday

From the Wash Post:  AIG Bonuses

The idea is that the employees had contractual bonuses due to them.  However, if I enter a business contract and the counterparty fails to honor payments under the contract, I have to stand in line with other creditors at the bankruptcy court.  Why are these AIG employees being paid with Taxpayer money?  You all can thank Bush, Paulson, Obama and Geithner for this.

One has to wonder how long it will be before public anger boils over into civil unrest. 

Quote of the Year So Far...

This quote is from Institutional Risk Analytics, and I sourced it from here:   Jesse's Cafe Americain 
the AIG bailout, a hideous political contrivance that ranks with the great acts of political corruption and thievery in the history of the United States
It would appear that the tax-cheating, lying Tim Geithner has survived yet another brutal public undressing, with Obama apparently more than happy to keep Geithner as the Government Thief in charge of Tax Revenues.  I guess the Massachusetts election did not send much of a message to Obama.  Since I refuse to believe that Obama is stupid, the only other conclusion is that, as per many other points of evidence, the big banks are completely in control of our Government and will go to any lengths in order to confiscate your wealth.  I think this picture pretty much sums it all up, as this is Obama's chief economic advisor, Larry Summers, on the job:

Monday, February 1, 2010

Gold vs. the S&P 500 Index: Is There a Message Here?

Something that I watch all day long, and something on which I never see any market commentary  - even on goldbug websites - is the price spread between gold and the S&P 500 Index.  For purposes of illustration, I use the front-month gold future contract, which is April, and the March SPX contract. 

On Friday, April gold was $1081 when the stock market opened and $1081 when the stock market closed.  At the open, there was a $10 spread between Apr gold and Mar SPX, with Mar SPX $10 higher than gold. By the close of the stock market, the Apr gold/Mar SPX spread had reversed and closed with Apr gold $12 higher than Mar SPX.  Gold significantly outperformed the stock market during that incredible reversal sell-off in stocks Friday. 

Currently, the spread has continued to widen, with Apr gold $23 higher than Mar SPX.  This same spread action occurred at the end of October '09, when gold was trading roughly even dollar, and the spread widened out to $115 by the time gold hit an interim price peak at $1220.

Are we seeing gold beginning to be used as a flight to safety vehicle?  Friday's spread action for sure would indicate that is a possibility.  To be sure, I need to see how gold behaves going forward on a few more days in which the SPX sells off.  I will say that we know several facts which can be observed in the market:

1)  The premiums being paid for physical gold in Asia/India continue to persist and, in some cases, have widened considerably during this sell-off in gold.  This is the unmistakable sign of aggressive demand and growing tightness of supply in the physical market.

2)  There have been persistent accounts from several sources about a growing shortage of physical supply of gold bullion in London, evidenced by reports of delivery delays and offers by those required to deliver to settle in cash at substantial market premiums.  It will be interesting to see how this plays out.

3)  The options for big investors to park large amounts of money risklessly have become very limited.  Obviously there is a high degree of risk in bank CDs and commercial paper.  The SEC just issued a ruling that allows money market funds to restrict withdrawals which, in effect, makes that instrument a lot more risky if you want 100% liquidity.  30-day T-bills are now persistently exhibiting negative yields, indicating the market's willingness to pay a small fee to insure 100% liquidity (in the worst scenario, the Govt can always print money to redeem T-bills).

4) Then there's gold...I am hearing reports now that big foreign money is ignoring George Soros and starting to move cash into gold.  Are these reports true?  I don't know, but I do know the gold/SPX price spread definitively supports that thesis, at least for now.

What I do know for sure is that, with gold, I don't have to worry about the SEC restricting my sales of gold, I don't have to worry about a bank CD or commercial paper issuer defaulting, and I don't have to worry about dollar devaluation when the Fed has to print more money to pay off maturing Treasuries.  In fact, the value of my gold increases against the dollar as the latter occurs.  Finally, I can take my gold anywhere in the world and find buyers.  That is not true with U.S. dollar investments.