Curried Wealth Building
Finding an Edge

If you want help with your finances, give me a call at 703-791-3243.
 
November 11, 2012
Issue 204 - What Now?
"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world’s greatest civilizations has been 200 years." Alexander Fraser Tytler (1747–1813).
We have passed the point mentioned in the quote. At this time, there is no turning back to yesteryear. The system is now destined to fail. As a society, the majority now think things which are verifiably false. From things like the "government will help me," to the "rich don't pay their fair share," we are now populated by people who really don't understand how things work. Perhaps they don't want to know. As long as they get their EBT, all is well.
Want more proof?

Californians Back Taxes to Avoid Education Cuts

But voters resoundingly endorsed Mr. Brown’s ballot initiative by 54 percent to 46 percent on Tuesday, confounding most pollsters who had been predicting a closer outcome, if not outright defeat.

The victory was a big one for Mr. Brown, who, experts said Wednesday, had persuaded the state’s electorate to raise taxes for the first time since 2004 by shrewdly framing the plan as the only way to save California’s underfinanced public schools. Mr. Brown, a Democrat, had run for office after promising not to raise taxes without directly asking voters.

“What happened here is perhaps something truly novel in American politics,” said Bill Whalen, a fellow at the Hoover Institution at Stanford University and a former speechwriter for Pete Wilson, a former Republican governor. “He ran on a promise, which was to take this to the voters. He indeed took it to the voters, and guess what? The voters responded to it positively. Go figure. It’s an enormous victory for him. He makes a lot of us who consider ourselves the cognoscenti look pretty stupid.”

Supporters of the plan said it would bring in $6 billion a year over the next seven years through a one-quarter-cent increase in the state sales tax and income tax rate increases for those earning more than $250,000 a year; the increases would last four years and seven years. Without the increases, Mr. Brown warned, California would have to cut $6 billion a year in spending, most of it from its beleaguered public education system.

Critics said that under Mr. Brown’s initiative, the new money would not be earmarked for education but funneled into the general fund and effectively used to help balance the state budget.

“His get-out-the-vote effort was very effective, as were his threats against education,” said Jon Coupal, the president of the Howard Jarvis Taxpayers Association, which opposed the initiative. “That was a brilliant political ploy, though I think it was inaccurate.”

The higher taxes, Mr. Coupal said, could lead wealthy Californians to move to states with lower taxes like Texas.

At this point, experts said it was unclear to what extent the new revenue would help with California’s chronic budget deficit, which soared to $15.7 billion this year.

“It’s a significant step forward, but there are still major issues with the state budget,” said Chris Hoene, the executive director of the California Budget Project, a nonpartisan research group.

Mr. Brown’s proposal survived attacks by Charles Munger Jr., a Republican who is the son of the billionaire investor Charles Munger; Mr. Munger spent more than $35 million in efforts to defeat the initiative. His sister Molly, a civil rights lawyer, spent more than $44 million on a rival tax measure, which was defeated 72 percent to 28 percent.

In other statewide ballots, Californians voted against eliminating the death penalty and rejected a measure that would have severely curtailed labor’s political activities.

In San Francisco, voters rejected a measure that would have led to the first step toward draining and restoring Yosemite National Park’s Hetch Hetchy Valley, which serves as a reservoir for the city’s water. In Richmond and El Monte, anti-obesity measures that would have taxed businesses selling soda and other sweetened drinks were soundly defeated.

A Los Angeles County ballot measure requiring actors in pornographic movies shot in the county to wear condoms was passed by voters on Tuesday, 56 percent to 44 percent. The measure also requires inspectors to visit sets to enforce the law and adds fees to filming permits for that.

The pornography industry trade group, which said consumers would not buy films shot with condoms, threatened to fight it in the courts and to move filming to another county or state. The industry employs about 1,200 actors and more than 5,000 other people in production and marketing; most films are made in the county’s San Fernando Valley.

Several interesting things about this article. First, the fact that taxpayers actually voted for a raise in taxes. That may be a first. Voters so stupid to think that increasing their own taxes will fix the overspending is laughable. Governments have no concept of proper management of money. It's not theirs after all. Why should they care?
Second, the class warfare employed to pass it. Only the "rich" will pay, first hike at $250,000 and then another increase at $1,000,000. Taxing the rich will only drive people out of California to lower taxed states. This will LOWER revenues. Bank on it.
Third, the part of this proposition that says the taxes will be temporary. We haven't had a temporary tax in over a century. Guaranteed this lasts longer than the 4 and 7 years proposed.
Last, but not least, the idea that this is only for education. Governments don't work that way. Money into the government all goes into the general fund in an accounting sense. This one is no different. This is a tax increase, NOT a tax increase for education. The people in California who voted for this surely thought it was the "right" thing. Unfortunately, they will be proven wrong. Jerry Brown, the governor surely used guilt trip politics to trick some into voting for this farce.
The president used plenty of similar tactics himself to ensure his relection. One reason I called the election wrong was that I misinterpreted the depth of our nations fall from self dependency. Of course I should have known given this statistic:

Foodstamps Surge By Most In One Year To New All Time Record, In Delayed Release

BLS Bureau of Labor Statistics

While there had been speculation that the BLS may delay the release of its October nonfarm payroll number until after the election, it turned out there was no reason to worry. Perhaps this is because the number, while at stall speed, was not quite as horrible as some had expected (even if the change in average hourly earnings did tumble to new all time lows) and so boosted Obama's reelection chances. There was, however, another closely tracked number which perhaps is far more indicative of the economic "growth" in the past 4 years, which certainly had a delayed release. The number of course is that showing how many Americans are on foodstamps, and usually is released at the end of the month, or the first day or two of the next month. This time the USDA delayed its release nine days past the semi-official deadline, far past the election, and until Friday night to report August foodstamp data. One glance at the number reveals why: at 47.1 million, this was not only a new all time record, but the monthly increase of 420,947 from July was the biggest monthly increase in one year. One can see why a reported surge in foodstamps ahead of the elections is something the USDA, and the administration may not have been too keen on disclosing.
First note in the article that this statistic was delayed until after the election. I'm sure it was a technical snafu.....yeah, sure.
What you see in the chart is jobs versus food stamp recipients. You don't happen to think that the president was helped by 21 million more people receiving food from the government? Nah! This 21 million more than offset the loss of 4.6 million jobs. If you don't have a job, the government giving you food is something I'm sure you'd be happy to repay with a simple vote. Of course it wasn't Obama's money, as some poor evidently believe, but the impressions are more important than facts in elections.
How about this fact, JP Morgan WANTS as many people as possible on food stamps. Sound hard to believe, read on:

JPM's Food Stamp Monopoly

JP Morgan is the largest processor of food stamp benefits in the United States. JP Morgan has contracted to provide food stamp debit cards in 26 U.S. states and the District of Columbia. JP Morgan is paid for each case that it handles, so that means that the more Americans that go on food stamps, the more profits JP Morgan makes. Yes, you read that correctly.

In the video posted above, JP Morgan executive Christopher Paton admits that this is "a very important business to JP Morgan" and that it is doing very well. Considering the fact that the number of Americans on food stamps has exploded from 26 million in 2007 to 43 million today, one can only imagine how much JP Morgan's profits in this area have soared. But doesn't this give JP Morgan an incentive to keep the number of Americans enrolled in the food stamp program as high as possible?

There are just some things that are a little too "creepy" to be "outsourced" to private corporations. The JP Morgan executive in the interview below does his best to put a positive spin on all this, but it just seems really unsavory for a big Wall Street bank to be making so much money off of the suffering of tens of millions of Americans....

So if unemployment goes down will this ruin JP Morgan's food stamp business?

Well, apparently not. In the interview Paton says that 40% of food stamp recipients are currently working, and he seems convinced that there could be further "growth" in that segment.

So is this what America is turning into?

A place where tens of millions of the unemployed and the working poor crawl over to Wal-Mart and the dollar store every month to use the food stamp debit cards provided to them by JP Morgan?

It turns out that JP Morgan also provides child support debit cards in 15 U.S. states and they also provide unemployment insurance benefit debit cards in seven states.

Apparently states have found that they can save millions of dollars by "outsourcing" the provision of these benefits to big financial firms like JP Morgan.

So what happens if you have a problem with your food stamp debit card?

Well, you call up a JP Morgan service center. When you do this, there is a very good chance that you are going to be helped by a JP Morgan call center employee in India.

That's right - it turns out that JP Morgan is saving money by "outsourcing" food stamp customer service calls to India.

When ABC News asked JP Morgan about this, the company would not tell ABC News which states have customer service calls sent to India and which states have them handled inside the United States....

  • JP Morgan is the only one today still operating public-assistance call centers overseas. The company refused to say which states had calls routed to India and which ones had calls stay domestically. That decision, the company said, was often left up to the individual states.

JP Morgan has been moving some of these call center jobs back inside the United States due to political pressure, but this whole situation is a really good example of what the "global economy" is doing to middle class Americans.

Just try to imagine the irony - a formerly middle class American that has lost a job to outsourcing calls up to get help with food stamp benefits only to be answered by a call center employee in India.

Welcome to the global economy, eh?

But wait, there is more.

It has just been announced that JP Morgan has admitted that they wrongly foreclosed on over a dozen military families and that they have been overcharging "thousands" of other military families on their mortgages.

Ouch.

It is a really bad public relations move to mess with military families.

Is anyone over at JP Morgan even paying attention?

JP Morgan has also been one of the primary financial institutions involved in the foreclosure "robo-signing" scandal.

They just seem to be having all kinds of problems lately. But they are not alone.

The truth is that we have gotten to the point where big Wall Street banks such as JP Morgan, Goldman Sachs, Citibank and Morgan Stanley just have way, way too much power.

The biggest Wall Street financial institutions had no trouble begging for bailouts from the U.S. government during the financial crisis, but when the American people have needed a little grace and mercy from them they have been less than helpful.

Isn't it fascinating that JP Morgan considers food stamps an "important" part of their business? You would think that if it was THAT profitable, the Feds should do it themselves. Of course, the government is THERE for Wall Street as I've said too many times to count. It seems this business has a most unusual effect in very poor wards of Philadelphia:

Vote was astronomical for Obama in some Philadelphia wards

November 09, 2012|By Miriam Hill, Jonathan Lai, and Andrew Seidman, Inquirer Staff Writers

Some Philadelphia neighborhoods outdid themselves in Tuesday's presidential election.

In a city where President Obama received more than 85 percent of the votes, in some places he received almost every one. In 13 Philadelphia wards, Obama received 99 percent of the vote or more.

Those wards, many with large African American populations, also swung heavily for Obama over John McCain in 2008. But the difficult economy seemed destined to dampen that enthusiasm four years later.

Not to worry. Ward leaders and voters said they were just as motivated this time.

"In this election, you had to point out to the people what was at stake. And in many cases, they felt that the Romney doctrine was not going to favor the working man," said Edgar "Sonny" Campbell.

Is that group think or what? How can so many believe in such fairy tales. Obama is helping them? Yet, they have record unemployment, record crime, record one parent families (hmm...think that might be a void that the government will fill), and record abortions? The support of someone who presided over that much deterioration is mind boggling. The rest of the article has a quote from a man who was "surprised" that Romeny even got 1 vote! Contrasting viewpoints discouraged here! It is a prime example of the old saw, "if everyone thinks the same thing, no one is thinking."
Now let me repeat that in no way do I think Romney would fix things. His plans were vague and unworkable. Yet, one would think that people feeling the brunt of deteriorating conditions would vote for a change. Even as the people were experiencing less disposable income, they voted for the status quo. More evidence of the decay:

When $0.99 Becomes Unaffordable, We Have A Problem

Earlier today, fast food juggernaut McDonalds reported same store sales for the month October. At -1.8%, this number was well below expectations of -1.1%, and a drop from September's 1.9%. It was driven by a 2%+ drop in comp store sales across all locations: US, Europea and APMEA, with the US performing just as bad as Europe. Most importantly, this was the first monthly drop in MCD comp sales since March 2003! So our question is: at what point does the perpetually self-deluded US population finally admit to itself that when even 99 cent meals are no longer affordable, that this country has a problem?

If Macdonald's is having issues, do you really think things are getting better? I don't. In fact we are possibly approaching a huge sell-off in the stock market. Here is an interesting chart:

The green line is the current stock market overlayed on the 1987 stock market which crashed like a black hole. Do we repeat history? I wouldn't bet against it. In fact I'm out of stocks and will continue to be until something improves. If there were a large drop where would I want my money? Gold and silver. You might say that gold and silver went down in 2008. You are right, but they actually rose in 1987. Look what has happened over the last week:
Gold is decoupling from the rest of the markets here. I expect the next crash to mimic these results and copy 1987. You MUST have some physical gold and silver for the coming turbulence. You'll be glad you do.
Positions
Mexus Gold (closed $.57, up $.185, average price paid, $.13)
Mexus has made an incredible move. There are tons of rumors on the message boards and some people have reported what is happening in Mexico. There was supposed to be a press release on Friday, but it was delayed. I'll hold off on a full commentary until it comes out. At this point we might be a tad ahead of ourselves in price. Will probably pull back unless the news is blockbuster. I still like this stock long term at anything up to about $.70-75. This stock is volatile and nothing is certain. Money invested here should be risk capital.
SLW (closed $40.39, up $.90, average price paid $34.20)
MBIA (closed $8.57, down $1.15, average price paid $10.)
This stock seems to go up to $11 and then down to this level. The settlement is still out there waiting, so this seems like a low risk time to buy. The Street actually made change in their rating of MBIA which is highly unusual: hold to sell. This is about as rare as hens' teeth. I don't take that as a negative. In fact, at times, this outfit has been linked to short hedge funds. This could have been a big favor to them. Time will tell.
Still hold 50% Treasuries and 50% bonds in my broad retirement account, no stocks.
Physical Gold (closed $1731, up $58, average price paid $395)
Physical Silver (closed $32.63, up $1.72, average price paid $5.31)
I'll close this week with a video of a very talented young singer with his take on Taylor Swift. Sounds strange I know, but give it a listen, he has an incredible voice. Have a great week!
 
November 4, 2012
Issue 203 - About That Election Thing
The election is on Tuesday and I expect that Romney will win. The polls showing Obama ahead are virtually all using the turnout from 2008 as their modeling. This gives a large boost to the democrats and that is very unlikely to be duplicated. Typically I vote Libertarian, but this Benghazi issue is so outrageous that I'm voting for Romney. That does NOT mean that I think Romney has a plan that will "fix" anything. All politicians lie, but when decisions are made that leave our men out on an island, with no backup, that's WAY over the line. Politics should play no part in the lives of our foreign deployed people. To make matters worse, the major networks aren't covering the story in their attempts to protect "their" president. Here is a short article with the key facts:

The Smoking Gun of the Benghazi Cover-up

Pat Buchanan's column is released twice a week.

On June 6 of this year, a bomb planted at the U.S. compound in Benghazi ripped a 12-foot-wide hole in the outer wall.

On June 11, the British ambassador's motorcade was hit by a rocket-propelled grenade, wounding a medic and doctor. The next day, the ambassador was gone and the British Benghazi post was closed.

At the same time, the Red Cross, after a second attack, shut down and fled the city.

"When that occurred," says Lt. Col. Andrew Wood, who headed the military security team in Tripoli, "we were the last flag flying in Benghazi; we were the last thing on their target list to remove."

On Aug. 15, at the U.S. compound in Benghazi, an emergency meeting was convened to discuss the 10 Islamist militias and their training camps in the area, among them al-Qaida and Ansar al-Sharia.

On Aug. 16, a cable went to the State Department describing the imminent danger, saying the compound could not defend itself against a "coordinated attack."

The cable was sent to Hillary Clinton — and signed by Ambassador Chris Stevens.

On Sept. 11, Ambassador Stevens died in a coordinated attack on the Benghazi compound by elements of Ansar al-Sharia and al-Qaida.

Catherine Herridge of Fox News, who unearthed the Aug. 16 cable, calls it the "smoking gun."

Yet, on Oct. 11, Joe Biden, during the vice presidential debate, asserted, "We weren't told they wanted more security there."

While House spokesman Jay Carney said Biden's "we" applied only to Biden, Obama and the White House. As the National Security Council is part of the White House, Carney was saying the NSC was in the dark over the Aug. 16 cable that had warned about the exact attack that occurred.

What else have we lately learned?

The State Department was following the Benghazi assault in real time.

Three emails came from the compound that night. The first described the attack; the second came as the firing stopped; the third reported that Ansar al-Sharia was claiming credit.

From an Oct. 26 report by Jennifer Griffin, also of Fox News, we now know there were two drones over Benghazi the night of Sept. 11 capable of sending pictures to U.S. commanders within reach of Benghazi, and to the CIA, Pentagon and White House.

We also know that ex-SEAL Ty Woods, in the CIA safe house a mile away, was denied permission to go to the rescue of the compound, and that he disobeyed orders, went and brought back the body of diplomat Sean Smith.

After the attack on the compound, the battle shifted to the safe house — for four more hours. Another ex-SEAL, Glen Doherty, made it to Benghazi from Tripoli. Seven hours after the initial assault that killed Ambassador Stevens and Smith, Doherty and Woods were still returning fire, when, having been abandoned on the orders of someone higher up, they were killed by a direct mortar hit.

Due to stonewalling and the complicity of the Big Media in ignoring or downplaying the Benghazi story during the last weeks of the campaign, the Obamaites may get past the post on Nov. 6 without being called to account.

But the truth is coming out, and an accounting is coming. For the character, competence and credibility of Obama's entire national security team have been called into question.

Hillary Clinton said she takes full responsibility for any security failure by her department at the Benghazi compound. But what does that mean? Did she see the Aug. 16 secret cable sent to her by Stevens describing his perilous situation? Was she oblivious to the battle in her department over security in Benghazi?

This failure that occurred in her shop and on her watch, that Stevens warned about in his Aug. 16 cable, resulted in his death and the most successful terrorist attack on this country since 9/11.

Why has Hillary not explained her inaction — or stepped down?

The CIA has issued a terse statement saying it gave no order to anyone not to try to rescue the ambassador or not to move forces to aid Doherty and Woods, who died because no help came.

Who, then, did refuse to send help? Who did give the orders to "stand down"?

The president says he is keeping Americans informed as we learn the truth. But is that still credible?

When did Obama learn that State was following the Benghazi attack in real time, that camera-carrying drones were over the city that night, that a seven-hour battle was fought, that desperate cries for help were being turned down.

The CIA had to know all this. Did Tom Donilon of the NSC not know it? Did he not tell the president?

Five days after Benghazi, Susan Rice went on five national TV shows to say the attack was a spontaneous protest over an anti-Muslim video.

Did the president not know she was talking nonsense? Could he himself have still been clueless about what went on in Benghazi?

Two attacks on the consulate and requests for increased security are denied? I'm not sure what was going on here but this is just unacceptable. We have 4 dead Americans and no answers. Whether the president knew or not, he SHOULD have known. Attacks on OUR people in other countries must be a priority. So he either didn't know, unacceptable, or he knew and agreed that no more security was necessary, unacceptable. Someone should have been fired immediately. Is there anyone taking the fire here? Why is the White House not releasing what THEY knew. They keep saying that an investigation is ongoing but why no report about what the president did. Is that a mystery to the White House? How could that be? The President and Secretary of State's actions should have been made public within a week.
There are emails that show the White House situation room being made aware that the attack was conducted by terrorists on the day of the attack. Yet, the President, Secretary of State and Vice President were claiming there was a video that somehow precipitated this event. This claim continued for nearly 2 weeks. Those pronouncements were lies. This act is grounds to be removed from office. I urge you to vote against this President and his deception.
I know some of you may argue that they all lie, so I'm voting for my ideology. Fair enough, just remember that voting red and blue leads to this:

Capitol Assets: Congress’s wealthiest mostly shielded from effects of deep recession

By , , and , Published: October 6

If you could peer deeply into how the 535 members of Congress handle their money, what would you find?

You would see a diversity of investment strategies and results, from those who put their money into riskier, high-growth funds to those who own safe municipal bonds. The legislators range from the super-rich to the deep-in-debt, from inherited wealth to married wealth to no wealth at all. They are entrepreneurs and farmers, oilmen and ranchers, lawyers and real estate developers.

You would find that, contrary to many popular perceptions, lawmakers don’t get rich by merely being in Congress. Rich people who go to Congress, though, keep getting richer while they’re there.

The wealthiest one-third of lawmakers were largely immune from the Great Recession, taking the fewest financial hits and watching their investments quickly recover and rise to new heights. But more than 20 percent of the members of the current Congress— 121 lawmakers — appeared to be worse off in 2010 than they had been six years earlier, and 24 saw their reported wealth slide into negative territory.

Those findings emerge from an ongoing examination of congressional finances by The Washington Post, which analyzed thousands of financial disclosure forms and public records for all members of Congress.

Most members weathered the financial crisis better than the average American, who saw median household net worth drop 39 percent from 2007 to 2010. The median estimated wealth of members of the current Congress rose 5 percent during the same period, according to their reported assets and liabilities. The wealthiest one-third of Congress gained 14 percent.

Because lawmakers are allowed to report their holdings and debts in broad ranges, it is impossible for the public to determine their precise net worth. They also are not required to reveal the value of their homes, the salaries of their spouses or money kept in non-
interest-bearing bank accounts and their congressional retirement plan.

For its analysis, The Post used the midpoint of the range of each reported holding and tracked the figures over time to determine whether the relative wealth of lawmakers had increased or declined between 2004 and 2010. Previous studies of congressional wealth have looked at Congress as a whole, rather than tracking the financial trend for each individual lawmaker. The Post created an in-depth financial portrait of each member of Congress.

Among the findings:

●The estimated wealth of Republicans was 44 percent higher than Democrats in 2004, but that disparity has virtually disappeared.

●The number of millionaires in Congress dropped after the Great Recession; the 253 who have served during the current session are the smallest group since 2004. The numbers are likely to be underestimated because lawmakers are not required to list their homes among their assets.

●Between 2004 and 2010, 72 lawmakers appeared to have doubled their estimated wealth.

●At least 150 lawmakers reported receiving more income from outside jobs and investments than from their congressional salaries of $174,000 for rank-and-file members.

●Representatives in 2010 had a median estimated wealth of 6,000; senators had .6 million.

●Since 2004, lawmakers reported more than 3,500 outside jobs paying their spouses more than $1,000 a year. The lawmakers are not required to report how much the spouses are paid or what they did for the money.

●Lawmakers’ wealth is held in a variety of ways: 127 primarily in real estate, 117 in institutional funds, 75 in their spouses’ names, 51 in essentially cash, 36 in specific stocks and bonds, 32 in high-turnover trading, 30 in business ownership and 20 in agriculture. More than 40 had reported assets of $25,000 or less.

The Post also found that some congressional financial interests intersected with public actions taken by legislators: 73 lawmakers sponsored or co-sponsored legislation that could have benefitted businesses or industries in which either they or their families were involved or invested. The Post will report on several of those cases Monday.

Because of the imprecise financial disclosure system, estimations of wealth can be off by millions. For example, reports for Rep. Nita M. Lowey (D-N.Y.) between 2004 and 2010 show that her wealth most likely increased by as little as $1 million or as much as $20 million, as framed by the changes to the lowest and highest possible totals of her reported assets. The Post analysis, which takes the midpoint of the ranges, estimated the increase at $11 million.

That figure is inaccurate, said her spokesman, Matt Dennis.

“The Loweys’ net worth did not increase by anywhere near $11m from 2004-2010 — the metric you’re using presents a hugely distorted picture,” Dennis said in an e-mail.

He declined to provide more accurate values for the assets of Lowey, a 12-term congresswoman, who is married to a partner in a White Plains, N.Y., law firm.

“They’re entitled to a certain level of privacy with their finances,” Dennis said in an interview. “That’s why the system is the way it is. They want a certain standard of disclosure without sacrificing their personal privacy.”

Rebound after recession

The analysis shows that lawmakers who were well-off before the financial crisis of 2008 saw portions of their portfolios level off during the darkest days. But most of these lawmakers managed to maintain their financial footing and emerge far wealthier than they had been earlier in the decade.

Some of the richest members of Congress watched their portfolios soar between 2004 and 2010. Of the 72 lawmakers whose estimated wealth doubled during that time, it appears that 11 increased their portfolios by at least $10 million, based on the midpoint of their reported ranges.

Rep. Kenny Marchant (R-Tex.) posted an estimated $22 million gain. House Minority Leader Nancy Pelosi (D-Calif.) saw an estimated $60 million increase in her reported wealth as the value of her husband’s commercial real estate holdings in San Francisco climbed dramatically during the first decade of the century.

“This is really driven by real estate that he has held, some of it inherited, for a number of years,” Pelosi spokesman Drew Hammill said. “San Francisco is one of the places where the market has skyrocketed in terms of price per square foot and has been fairly insulated in terms of the 2008 financial crisis.”

Another Californian has consistently ranked in the top five of the richest House members: Rep. Darrell Issa (R). He has also been one of the most successful investors on Capitol Hill, with estimated wealth of $448 million in 2010, according to The Post’s analysis.

Issa came to Congress in 2000 with a fortune he made from the sale of an electronics company that specialized in car alarms. One of his alarm systems carried a recording of his voice warning, “Please step away from the car,” if anyone got too close.

Now most of Issa’s investments are in mutual funds, bonds and securities. Issa’s chief of staff said the securities have provided an annual rate of return of between 6 and 7 percent. He also has significant investments in commercial real estate.

“He isn’t speculating on individual stocks. He isn’t a property speculator,” said Dale Neugebauer, the congressman’s chief of staff. “The properties are usually mature real estate with established renters and a predictable rate of return.”

Issa appeared to lose about $90 million in 2008, but his portfolio regained an estimated $197 million within two years of the financial meltdown. The rises were fueled by his commercial real estate ventures in San Diego and successful investments in mutual funds, bonds and other securities.

For Issa, staying patient and holding assets during the downturn paid off.

“Mr. Issa was fortunate enough to be very successful before he was elected to Congress,” Neugebauer said.

Among his real estate ventures, Greene Properties Inc. has gained the most. Issa valued the property holding company at $25 million to $50 million in 2004, a figure that would eventually exceed $50 million.

Issa presents a particular challenge of analysis. In the system Congress set up for itself, the disclosure form’s highest category of value is “more than $50 million,” with no upper limit. As with the other richest legislators who report assets in that category, there is no way for the public to tell how much Issa is worth.

The same is true of Rep. Trent Franks (R-Ariz.). The Post analysis using the midpoints of his reported ranges shows that his estimated wealth rose from $6 million in 2004 to $34 million in 2010, boosted by stock in Trinity Petroleum and holdings in Providence Trust.

He reported the value of each of those assets as between $5 million to $25 million in 2010, up from $1 million to $5 million the year before. But such ranges obscure the real value of his assets, which could have risen just enough to switch categories or by many millions of dollars.

A spokesman for Franks did not respond to requests for comment.

A very large majority of these congressmen are becoming RICH in office. Why is that? They are getting insider information, that's why. This is why these clowns should be required to only own mutual funds or ETFs. No individual stocks or partnerships. It's nearly impossible to catch these guys breaking the insider trading law so it must be made illegal.
Another thing that drives me crazy about the left is the "pay your fair share" nonsense. This little story explains it better than I ever could: (thanks to Bob W.)

Subject: Beer and Taxes


Suppose that every day, ten men go out for a beer and the bill for all ten comes to $100.

If they paid their bill the way we pay our taxes, it would go something like this:

• The first four men (the poorest) would pay nothing
• The fifth would pay $1.00
• The sixth would pay $3.00
• The seventh would pay $7.00
...• The eighth would pay $12.00
• The ninth would pay $18.00
• The tenth man (the richest) would pay $59.00

So that’s what they decided to do. The men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve.

“Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily beer by $20.00.”

Drinks for the ten men now cost just $80.00.

The group still wanted to pay their bill the way we pay our taxes, so the first four men were unaffected. They would still drink for free. But what about the other six men – the paying customers? How could they divide the $20 windfall so that everyone would get their “fair share?” They realized that $20.00 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay. And so:

• The fifth man, like the first four, now paid nothing (100% savings).
• The sixth now paid $2 instead of $3 (33% savings).
• The seventh now paid $5 instead of $7 (28% savings).
• The eighth now paid $9 instead of $12 (25% savings).
• The ninth now paid $14 instead of $18 (22% savings).
• The tenth now paid $50 instead of $59 (15% savings)

Each of the six was better off than before! And the first four continued to drink for free. But once outside the bar, the men began to compare their savings.

“I only got a dollar out of the $20” declared the sixth man. He pointed to the tenth man, “but he got $9!”

“Yeah, that’s right, shouted the seventh man. “Why should he get $9 back when I got only two? The wealthy get all the breaks!”

“Wait a minute,” yelled the first four men in the group. “We didn’t get anything at all!. The system exploits the poor!”

The nine men surrounded the tenth and beat him up.

Now NOTE What happens!! The next night the tenth man didn’t show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. THEY didn't have enough money between them all . . . . . for even half the bill!!

And THAT, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

For those who understand, no explanation is needed.

For those who do not understand, no explanation is possible.

Perfect analogy. The "rich" will ALWAYS get most of the advantage from a tax cut. It's just math. To demonize people because they are wealthy is the bottom of the barrel in political strategies. To me that means you are bereft of ideas. One thing that really bothers me about the current administration is the promise to clean up things and move forward by changing the way things are done. How is that going? Look at this chart:
Obama had every opportunity to prosecute these skunks on Wall Street and what do we see....nothing, nada. Compare with the prosecutions under Clinton. I hardly hold Clinton up as the model of propriety and yet they prosectuted THOUSANDS. Yet, the crisis in 2008, which was at least 10 times bigger than the S&L crisis, has no prosecutions. Ridiculous.
Wall Street sharks have literally robbed us blind with nary a single jailing. Can anything be done about this? I believe there is and here it is:

Bair: 5 Steps to Fix Wall Street

By Barry Ritholtz - October 29th, 2012, 12:00PM

I like this short list of fixes from Sheila Bair:

1. Break up the “too big to fail” banks
Giant institutions and untested “living wills” is make financial system unstable. When the Fed is artificially keeping lending rates at near zero, that’s a flaw.

Solution: Make ‘em smaller

2. Publicly commit to end bailouts
Market must punish the boneheads.” We should learn from post-2008 bailouts is we should never allow ourselves to be in that position again. Wall Street cannot have an indefinite option to “put” its losses to the Treasury and to taxpayers.

Solution: Make penalties for asking for and getting bailouts egregious — wipe out shareholders, fire management.

3. Cap leverage at large financial institutions
Bank capital levels maybe isn’t a mainstream issue, but it should be;” Limit banks’ abilities to take on risk via leverage or derivatives or whatever the latest “idiotic new innovation” Wall Street becomes infatuated with.

Solution: Go back to firm 10 to 1 leverage rules.

4. End speculation in the credit derivatives market
If arsonists can’t buy fire insurance on someone else’s house, why allow speculation using credit derivatives? Credit default swaps with no vested interested are the same thing.

Solution: Require CDS buyers to demonstrate a specific interest. Even better regulate CDS as insurance products.

5. End the revolving door between regulators and banks
Separating regulators from the regulated is crucial. Ending regulatory capture is key.

Solution: Require longer periods of time between industry and regulator service.

Good stuff . . .

These steps would drastically limit the ability of these crooks to continue to loot our system. The "get out of jail free" card for Wall Street must be revoked. One thing I would add to the list is that all offers to buy or sell stock stocks must be good for at least 5 seconds. That sounds ridiculous to normal investors but the machines that currently run the markets would not work with that simple rule. High frequency trading must be stopped and the one sure way to do it is to stop stock offers that last small fractions of a second. They exist for only one reason....to fleece you and me.
Here is another example of the absolute craziness of Wall Street:
Can you imagine a legitimate need for that quantity of ANY financial instrument? This is absurd. These derivatives are being used to control markets and that must stop also. What you'll never hear from either candidate is that they want to clean up Wall Street and the big banks. Think that's an accident? Not likely.
One of the biggest tools that has been used to bail out Wall Street and the banks is quantitative easing. This refers to the Federal Reserves efforts to "jump start" the economy. Look at this chart:
What you see here is a lessening of the effects from these bailouts. I believe that the lastest QE is nearing an end in effectiveness. That's one of the reasons I'm out of the market. I fully expect an other QE to be announced no matter who wins on Tuesday.
Positions
Mexus Gold (closed $.39.5, up $.065, average price paid, $.13)
Many exciting things happening with Mexus. It seems that they are very close to closing the deal on the plant which I showed last week. Once it is official we will have the details and rumor has it that they will be producing multimillion dollars of gold a month! That would be an incredible acquisition. They are also due to release 3rd quarter results this month. If they show that they produced any significant amounts of gold, that could propel the stock much higher. At this point I would have no problem buying more.
SLW (closed $39.49, up $.23, average price paid $34.20)
MBIA (closed $9.72, $.06, average price paid $10.)
Still hold 50% Treasuries and 50% bonds in my broad retirement account.
Physical Gold (closed $1677, down $39, average price paid $395)
Physical Silver (closed $30.91, down $.75, average price paid $5.31)
I'll close this week with a video that shows amazingly fast workers from around the world. Have a great week!

October 28, 2012

Issue 202 - The Hits Keep Coming
It just seems that the current administration has thrown caution to the wind and has fully politicized the economic numbers. Not just some of them, ALL of them. How do we know? The numbers LOOK like lies. Let's review.
Job claims:
Data Massaging Continues: Initial Claims Tumble To 339K Lowest Since 2008, Far Below Lowest Expectation


This is just getting stupid. After expectations of a rebound in initial claims from 367K last week (naturally revised higher to 369K), to 370K (with the lowest of all sellside expectations at 355K), the past week mysteriously, yet so very unsurprisingly in the aftermath of the fudged BLS unemployment number, saw claims tumble to a number that is so ridiculous not even CNBC's Steve Liesman bothered defending it, or 339K. Ironically, not even the Labor Department is defending it: it said that "one large state didn't report some quarterly figures." Great, but what was reported was a headline grabbing number that is just stunning for reelection purposes. This was the lowest number since 2008. The only point to have this print? For 2-3 bulletin talking points at the Vice Presidential debate tonight. Everything else is now noise.
That's interesting, we get the biggest drop in initial unemployment claims in 4 years and lo and behold a "large" state was incomplete. You don't suppose that the missing data would make the number look worse do you? Nah! This playing of games with economic numbers, which has been going on for years, just seems to be getting more brazen. Even when we have CONFIRMED evidence that the LIBOR interest rate was manipulated, we still have some (mostly the main stream media), who see nothing amiss when number after number is so far from observable reality that it stretches all credulity.
More Unemployment Nonsense:
Reason For Today's Unemployment Rate Plunge: Part-Time Jobs For Economic Reasons Surge Most Since QE1 Announcement

We already noted the absolutely stunning surge in reported Household Survey jobs which "added" 873,000 jobs, or the most since 2003 and the second most in the past decade, which was just a little bit off the Household Survey used in the monthly NFP jobs changes, which came at 114,000, or about 8 times less. But what was the reason for this epic jump in Household survey jobs? Simple, and those who have read our series on America's transition to a part-time worker society know the answer. The reason is that the number of part-time people employed for economic reasons soared by 582,000 to 8,613,000, the most since October 2011, and the largest one month jump since February 2009, when "restoring" confidence in the economy was all the rage... and just before the Fed announced the full blown QE1 in March of 2009.

So the unemployment rate drops the most in years? That just doesn't make sense. Digging in deeper and we find that the main reason was a gigantic increase in part-time people who took jobs for economic reasons. Understand what that means? They were broke! Without getting a job, they wouldn't be functioning in society. And that's good? Not in my book. To make matters worse, the jobs were part-time and it just doesn't pass the smell test. Things aren't getting better quick.
Incredible housing number:
Housing Starts Surge 15% To 872,000, Highest Since July 2008

The pre-election barrage of "six-sigma" economic beats continues, with today the trophy going to Housing Starts, which soared by a whopping 15% from a revised 758K to 872K. The highest forecast called for a 800,000 print with consensus expecting an increase to 770,000K. Did we say 6 sigma? We meant a 9 sigma beat to consensus. The numbers being thrown about are so ridiculous they are almost credible in their political talking point ridiculousness. Expect this outlier printing to continue at least until the election. In the meantime, prepare for a barrage that housing start soared to the highest since July 2008. Looking inside the numbers, the print for single family rose to 603K from a revised 543K, while multi-family houses increased to 260K from 208K. The geographical breakdown is as follows Northeast down 4K to 75K, Midwest modestly higher to 143K from 134K, West a little more higher from 169K to 203K, and the biggest surge was in the South from 376K to 451K. At this point the best one can hope for is for a return to some normal data reporting after the election, because it is now obvious that every data series will be skewed and 'seasonally adjusted' substantially higher.

So housing starts just EXPLODED? Or did they? How is it that the largest guess for housing starts was 800,000 and we come in at 872,000? How could it be that far off? It's rigged, that's how. Months later when the numbers are "corrected," no one will notice, report, or care. All that matters to these guys is getting elected. As I said earlier it's not just a Democratic thing, but it's just so frustrating that no one seems to be honest anymore.
Manipulating the market:
Isn't that fascinating? The stock market goes up on debate days???? But falls cumulatively on the other days? Do you think that's by coincidence? If so, maybe you still believe in unicorns and the tooth fairy.
This is clear manipulation. The odds of the stock market being up ONLY on those days is infinitesimal.
If the administration is great at manipulating data, they are terrible at picking companies with whom to invest:
Taxpayers To Recover Nothing On Solyndra


It will come as no surprise to some but the bankruptcy court hearing for Solyndra just threw up all over any hopes that our taxpayer-funded loans to this solar sinkhole will be recovered:
  • *SOLYNDRA HAS ABOUT $71 MILLION IN NET DISTRIBUTABLE ASSETS
  • *SOLYNDRA LENDERS AHEAD OF GOVERNMENT OWED ABOUT $77 MILLION

So it looks like a recovery for us - US Government: Picking Losers One Sector At A Time.

How in the world is it that the United States is not at the HEAD of the line of creditors? Does that make sense? Shouldn't ANY endeavor that the U.S. puts tax payer dollars behind, be giving us dibs on a failure? Not when you are giving money to friends and allies. In those instances, there are no provisions made for moving up the creditor list in case of bankruptcy. That's a common problem when you are lending someone ELSE'S money.
In the larger context of things, $71 million is virtually nothing, not to you and me, but compared to the national budget. In fact, as I've said before we are bankrupt. Here's why you can't balance the budget:
Mandatory spending is so high, that cutting ALL discretionary spending to ZERO doesn't even balance the budget! To bring that idea home, that is like a family who is spending more on housing, food, gas and insurance than they have in household income. That means that cutting out all other activities and expenditures for the family would not balance their deficit. It's absolutely sobering that this is the case. This means that there are NO easy solutions to our financial situation.
Here's a chart that shows very clearly that the idea of consumer deleveraging (paying down debt) is completely wrong:
What this chart shows is that people have basically defaulted on mortgage debt, not paid it down. This is a vast difference from what the talking heads would have you believe. The consumer is improving....etc... The consumer is basically bankrupt and they are just turning in the keys. Almost all of the improvement in debt levels is related to default. Not good.
Another area that the current administration points to in regards to improvement is modest GDP growth. I believe that is being done through gamesmanship and manipulation of data. To figure out if the headline numbers are bogus, one only needs to look at those figures that are very hard to rig. Here's one:

What Recovery? Petroleum Deliveries Lowest Since September 2008; Weakest July Demand Since 1995


While the Achilles heel to the endless "economic data" BS coming out of China may be its electric production and demand, both of which show a vastly different picture than what the Beijing politburo's very wide brush strokes paint, the US itself is not immune from indicators that confirm that anything the BEA dishes out should be taken with a grain of salt. One data set that we showed recently that paints a drastically different (read slowing) picture of the US economy which we noted recently is railcar loading of waste and scrap for the simple reason that "The more we demand, the more waste is generated by that production." Of course, the propaganda manipulation machinery only focuses on the "entrance" of production, and completely ignore the "exit." But an even far more important metric of the general health of the US economy may be none other than broad energy demand, in the form of petroleum deliveries and gasoline demand. If this is indeed the relevant metric to observe, then things are about to get far, far worse. As Dow Jones notes: "U.S. petroleum deliveries, a measure of demand, fell by 2.7% in July from a year earlier to the lowest level in any month since September 2008, the American Petroleum Institute, an industry group, said Friday." It gets worse: "Demand in the world's biggest oil consumer, at 18.062 million barrels a day, was the weakest for the month of July since 1995, the API said. Year-to-date demand is down 2.3% from the same period in 2011."

Petroleum runs the world. If it is being consumed in lower amounts, that can't be good for the economy. We are at 4 year lows. That does not bode well for our future.
A few words about the election. As I've been predicting since the summer, it looks like Romney will win the election. Obama's first debate performance was just the nail in the coffin. Obama's main problem is the economy. There is NO more important topic if things are going poorly. Guess what? They're going poorly. People may be fooled by charm and smooth talk, but the pocket book doesn't lie. This chart is the final straw:
Hmmmm.....the government's private hedge fund (Goldman Sachs) is now supporting Romney while in 2008 strongly supporting Obama? Sorry Obama supporters, that looks like game over...
Positions
Mexus Gold (closed $.33, up $.05, average price paid, $.13)
Mexus should be announcing a the purchase of a leach pad that another miner failed to operate properly. They have been requesting private placement money to finance the buy. If purchased, Don Philips, a private investor, suggests that they will take 75% of the profits for operating. Here is a picture he took:
That is an impressive set up. If they can get it cheap, and get it running quickly, which shouldn't be a problem, that would be a third income source for Mexus. Still a strong buy at anything under TEMPORARY_BODY_TAG.55.
SLW (closed $39.26, down $.45, average price paid $34.20)
MBIA (closed $9.66, down $.89, average price paid $10.)
I have sold my broad stock positions and small cap holdings and am now 50% Treasuries and 50% bonds in my broad retirement account. Was planning to hold until right before election, but my gut says the market could break earlier.
Physical Gold (closed $1716, down $51, average price paid $395)
Physical Silver (closed $31.67, down $2.12, average price paid $5.31)
I'll close with a video of the space shuttle Endeavor being moved. What a complicated job! Have a great week!
 
October 14, 2012
Issue 201  -  They All Lie
 
 
Well as I suspected, Obama will probably be defeated.  Defending his lack of follow through on practically ANYTHING he promised is tough.  It just took someone pointing it out without someone running cover.  I don't have any great hopes for Romney but at the the very least we know who he is.  (unlike the President)  In case you think you know who he is, take a look at this picture:
 
 
 
 
Which of the two men above looks like Obama?  Would you be surprized to know that Barack Senior never lived with Barack Junior?  Yet, President Obama stayed with Frank Marshall Davis (the man on the top right) on numerous occasions.  We have a man in the White House that is a mystery.  There are so many questions about this guy that I am dumbfounded that no one in the main stream media is even the slightest bit interested.  In fact, when someone actually asks a question about legitimate issues, they are ridiculed by the main stream press.  Everything from the birth certificate (which is an obvious fake) to his Connecticut issued social security number (he or his supposed parents never lived there) to his unreleased school records, there are nothing BUT questions.  I wouldn't hire this guy in my company, that's for damn sure. 
 
That all being said, I'm not a great Romney fan.  I don't believe he can fix the situation.  He may delay the inevitable longer than Obama, but the destination is still the same, bankruptcy.  As I've said before, it's all about math.  It's simple and very, very bad:
 
 
 
As you can see, our interest payments are skyrocketing.  This is especially troubling when one considers that interest rates are at all-time lows.  If those rates start to tick up, we are basically screwed.  To really show how fiscally irresponsible and out of control we have become, here is a chart showing the spending of the U.S.  The green bars show the surplus/deficit.  The blue line is tax revenues and the red line is spending.  The chart covers over 100 years:
 
 
 
What is truly disturbing here is growth of the green bars as they became deficits.  We are spending WAY too much and the country would literally collapse if this spending were "balanced."  Won't happen no matter who wins in November, because if something CAN'T happen, it won't.  Of course, if headlines like this don't stop, then why should the corrupt stop?:

From The SEC To Goldman Sachs In One Easy Step: The Revolving Door Farce Full Frontal


This particular news from Goldman and the SEC needs absolutely no introduction, explanation, or conclusion. It is, as Homer J. Simpson would say, "a tidy little package."

  • GOLDMAN HIRES EX-SEC INVESTMENT MGMT CHIEF BUDDY DONOHUE: MEMO
  • GOLDMAN NAMES DONOHUE GENERAL COUNSEL OF GSAM INVESTMENT COS

Shocking. Absolutely shocking. Elsewhere, completely unfounded rumors that various DOJ staffers are planning to join assorted Mexican drug cartels shortly.

 
This is sickening.  The fact that the SEC is basically a stepping stone to the "too big to fail" banks is disturbing.  While I know Obama must not see anything wrong with this, I fear that Romney won't either.  The banks rule all.  They are the only things that matter.  It is in their best interests that the band keeps playing.  Even if the house is burning to the ground:
 
 
 
That chart shows capital expenditures for large companies.  Companies are pull their horns in, not expanding.  If the job market was truly getting better, this chart would show companies expanding.  They are not.  If the economy was greatly improving, there is no way the engine of the company, corporations, would be spending less.  The spending is actually CONTRACTING.  This is confirmed 100% in this chart which shows corporate cash on hand:
 
 
 
 
Companies are FLOATING in cash.  Why are they not spending?  Are they preparing for tough times?  This is huge predictor of the near term future outlook for the economy.  Here is another big strike against a robust economy, hourly wages:
 
 
The growth in wages has been shrinking since the 2008 collapse.  That we are still losing ground here is just about the best indicator one can imagine to show that the economy is not improving.  Even if people are getting jobs, if those jobs are paying less, we are NOT better off as a country.  The dismal job market is one of the reasons, we are so unprepared for retirement.  Here's an interesting summary of a study on Americans and retirement:
 
According to a March 2012 survey by the Employee Benefit Research Institute for “retirement confidence”, the majority of Americans are vastly underprepared for retirement, with very few savings or even none at all. A few key takeaways from the report:
  • Only 58% of us are even saving for retirement in the first place. Of that group, 60% have less than $25,000 put away, not including home equity or defined benefit plans. Even worse, a full 30% have less than $1,000. A meager 10% have $250,000 or more. (For comparison’s sake, a quick survey of different retirement advisors’ websites showed that the average recommended savings is about 8x-10x final salary – by some estimates, around $1 million)
  • While these low savings might be expected of the youngest age cohort, almost half (48%) of workers ages 45 and up have less than $25,000 saved.
  • Savings rates and the amount saved are strongly positively correlated to education, income, and health status. 93% of those making more than $75,000 are saving, compared to 35% of those with and income of $35,000 or less.
  • Only 38% of all American workers participate in an employer-sponsored retirement savings plan. That said, only 74% are offered this kind of plan. Of those that choose to participate (81%), savings and investments typically total at least $50,000.
  • 34% of workers that had saved said they have had to dip into their savings to pay for everyday expenses. 22% of retirees claim they’re taking more than they thought they would out of their accounts, depleting their savings even faster than they anticipated.
  • Overall it’s a pretty bleak picture. On the whole, Americans are hugely underprepared for retirement, leading quite a few of them (22%) to put off retirement to a later date, or not retire at all (7%).

But why the lack of preparation? Several complementary reasons might reveal the answer:

1. Lack of financial literacy. Americans on the whole are not versed in the ways of financial planning. A study by Lusardi and Mitchell in 2005 found that less than half of a sample of US adults 50 and older was able to answer simple questions about inflation and compounding interest. Another study, by McKensie and Liersch in 2011, showed that a majority of adults misunderstood savings growth: they expected it grew linearly rather than exponentially, therefore underestimating the potential return a small investment could have over several years. When exponential growth of savings was demonstrated, real employees chose to save more for retirement (see the study here). To top it all off, 34% of those surveyed by the EBRI estimated they needed less than $250,000 to retire.

It’s plain correlation, here – the more you know about retirement planning, the more likely you are to do it. Most Americans don’t even calculate how much they might need, leading them to grossly underestimate the costs. A good portion of them (79%, according to the EBRI) also think that Social Security will be a dependable source of income during retirement – much more so than retirees in the 20th century. While that may be true for the Baby Boomers, my generation can’t bank on SS being there when we turn 65. Instead, it’s important that we understand the importance of saving for retirement – or, more likely, the risks of not doing so.

 
 
So we have a disaster in the making as millions of Americans are NOT ready to face a restirement.  They are counting on a Social Security "system" that is in no way able to meet the promises planned.  It is absolutely stunning that 30% of people have less than $1,000 in a retirement account AND think that they could retire on $250,000.  This has tears all over it. 
 
Of course I believe that financial literacy is feared by the power brokers.  The last thing the government and banks want is people to understand what is actually going on.  They would rather have people dependent on them.  Do you think that if people really understood our system, that they wouldn't be saving any money? (at least those that were able)  
 
Here's Edward Griffin, author of the Creature from Jekyll Island, explaining the scam:
 
 
 
 
Positions
Mexus Gold (closed $..28, down $.10,  average price paid, $.13)
 
For those of you with Mexus, this is NORMAL.  These penny stocks are incredibly volatile.  It's all part of the game.  If this is too stressful for you, then you have too much money in this stock.  I was looking to buy more, but the stock went back up before I pulled the trigger.  There was some rather good news this week:  (this establishes that they have at least 300,000 ounces of gold)
 

Mexus Gold US Announces Geological Report Received Covering the Julio Property

 

CARSON CITY, Nev., Oct. 12, 2012 (GLOBE NEWSWIRE) -- Mexus Gold US (MXSG) is a company engaged in the evaluation, acquisition, exploration, development and production of mining properties and conducts salvage operations for the recovery of precious metals.

Mexus Gold received a geological report prepared by an independent geologist covering part of the Julio Property near the current placer plant and northward toward the Julio Vein. The property is situated on or near the Mojave-Sonora Mega Shear Zone which is well known as a major source of gold bearing zones presently being mined by several major gold production companies. The following is a summary of the findings of the report:

An initial group of 164 samples over a relatively small area of the Julio Property form the basis for the report. A tentative tonnage estimate of 3,676,400 grams gold with a cutoff of one gram was based on study of six veins visible on the surface and located in parallel running southeast toward the northwest. The values of the samples ranged from 0.92 grams to 7.26 grams. The Julio Vein extends more than 800 meters before it buries and is known for high bonanza grades which includes the underground mining site on the property and is estimated at 415,000 tons on the surface with a minimum of 5 grams per ton. The report states that the vein is expected to become a combination open pit and underground operation upon further geological study and exploration activities. There are also four shear zones recognized in the area. Shear Zone 1 is coincident with the Julio Vein and had a sample graded at 11.5 grams. Shear Zone 2 is 400 meters to the south east and parallel to the vein system 1 through 5. Shear Zone 3 contains a bonanza pocket which had sample results as high as 19 grams was graded at an average of 5.5 grams from assayed sample results. Shear Zone 4 presently contains some pits, adits and shafts and graded 2 grams from eight samples. This area can be a mining area relative quickly with the construction of roads and drilling to delineate the ore body. The report states that the 6 major vein structures identified in the area south of the Julio shaft account for nearly 4,000,000 tons of ore with an average gold grade of 2.5 grams with three times as much in Silver. The report also suggests additional mapping, sampling, drilling of the vein structures and shear zones 3 and 4 and the Julio vein and EM to trace concealed shear zones.

Comments regarding the report: the cutoff for minable ore areas was 1 gram which is the normal cutoff for the major mines in the area.

Paul Thompson, President, stated, "We knew the area had good gold bearing ores in various areas but this report is really important to us because some of the samples were a mile away from the plant area and had values as high as 18.33 grams and 4.79 grams with a number of samples over 2 grams or more. We have plenty of exploration work just in this four square mile area and look forward to getting some drilling done as soon as we can. The results in the report are great and we have the geologist doing additional work right now."

SLW (closed $38.87, down $.84, average price paid $34.20)
 
MBIA (closed $10.55, up $.32, average price paid $10.)
I have my broad retirement accounts spread out between bonds, S&P 500, and Small cap stocks, this position will be held until right before the election.
Physical Gold (closed $1767, down $9, average price paid $395)
Physical Silver (closed $33.79, down $.94, average price paid $5.31)
I'll close this week with a video of maybe the coolest puzzle box ever, and this guy made it for his daughter!  Have a great week!
 
 
September 30, 2012
Issue 200  -  Who's Zoomin' Who?
 
 
 
I believe that the current buyers of gold are quite possibly being "zoomed."  Zoomed is an urban term meaning fooled and there is plenty of that going on in the metals market.  In case you missed it, tungsten filled "gold" bars are being found again:
 

Tungsten-Filled 10 Oz Gold Bar Found In The Middle Of Manhattan's Jewelry District

It is one thing for tungsten-filled gold bars to appear in the UK, or in Germany: after all out of sight, and across the Atlantic, certainly must mean out of mind, and out of the safe. However, when a 10 ounce 999.9 gold bar bearing the stamp of the reputable Swiss Produits Artistiques Métaux Précieux (PAMP, with owner MTP) and a serial number (serial #038892, likely rehypothecated in at least 10 gold ETFs across the world but that's a different story), mysteriously emerges in the heart of the world's jewerly district located on 47th street in Manhattan, things get real quick. Moments ago, Myfoxny reported that a 10-ounce gold bar costing nearly $18,000 turned out to be a counterfeit. The discovery was made by the dealer Ibrahim Fadl, who bought the PAMP bar in question from a merchant who has sold him real gold before. "But he heard counterfeit gold bars were going around, so he drilled into several of his gold bars worth $100,000 and saw gray tungsten -- not gold. The bar was filled with tungsten, which weighs nearly the same as gold but costs just over a dollar an ounce."

What makes so devious is a real gold bar is purchased with the serial numbers and papers, then it is hollowed out, the gold is sold, the tungsten is put in, then the bar is closed up. That is a sophisticated operation.

MTB, the Swiss manufacturer of the gold bars, said customers should only buy from a reputable merchant. The problem, he admits, is Ibrahim Fadl is a very reputable merchant.

Raymond Nessim, CEO Manfra, Tordell & Brookes, said he has reported the situation to the FBI and Secret Service.

The Secret Service, which deals with counterfeits, said it is investigating.

And cue panic on the realization that virtually any gold bar in the world, not just those in Europe and Australia, which have already had close encounters with Tungsten substitutes, but also New York may be hollowed out and have a real worth of a few dollars max. Which, sadly, is fitting considering our main story from last night was the realization that an unknown amount of Chinese iron ore had either never existed or had simply vaporized, and was no longer serving as the secured collateral to various liabilities circulating in the electronic ether. After all, only the most naive out there could conceive of gold being sacrosanct when every other asset class is being diluted to infinity by a regime that has long since run out of money.

As for gold-based transactions on West 47th street: look for that market to grind to a halt at least for as long as it takes for this scandal to be forgotten too.

The only open question remaining will be how much of the gold located 90 feet below Libert 33 is in the same Tungstenized format. For what it's worth: it is unlikely we will ever find out.

This is what glaring gold counterfeiting looks like.

 
Notice the pilot drill hole.  Now here's what's inside that $18,000 "gold bar":
 
 
Now that can't make anyone who owns a gold bar feel very warm or fuzzy.  If there are 10 at one dealer, how many are there out "there?"  A lot, that's how many.  As if that wasn't bad enough, now it appears that the often recommended gold coins might not be that safe:
 
Tungsten Heavy Alloy Scan Gold Coin

Tungsten is the only lower value metal that has a specific density close enough to gold to fabricate passable counterfeit pieces of the same size and weight as genuine Pictures of tungsten fake gold coins and ingots. Over the years, there have been a few isolated reports of smaller tungsten fake gold coin found to have been drilled to remove some of the gold which was replaced with tungsten. However, tungsten fake gold coin is far more profitable to fabricate larger original bars of tungsten that are then scanning gold.

Because the existence of counterfeit tungsten fake gold coin could have such a huge impact on the financial markets, there is a huge potential for deception and misinformation to be passed around. Be very careful about automatically believing any story you may hear. For your own protection, tungsten fake gold coin would be better to take physical possession of the smaller sizes of tungsten fake gold coins and now, and know that what you own genuine solid tungsten fake gold coin.

Notice: Chinatungsten Online (Xiamen) Manu.& Sales Corp. is a very professional and serious company, specializing in manufacturing and selling tungsten fake gold coin and other tungsten related products for more than two decades. We are a professional tungsten fake gold coin manufacturer.Our tungsten gold fake coin is only for souvenir and decoration purpose. Here we declare: Please do not use our tungsten fake gold coin and other fake gold coin products for any illegal purpose. We can provide all kinds of tungsten fake gold coin as your requirements.Our tungsten fake gold coin products are qualified.

Pictures of Tungsten Fake Gold Coins:

 
 

The gold coins above aren't made of tungsten, they are real gold coins, and just for display.

Therefore, if you are interest in tungsten fake gold coin, please feel free to contact sales@chinatungsten.com, or telephone 86 592 512 9696

Notice the picture shows a South African Kruggerand.  That is the most plentiful gold coin on the planet.  If you can't trust coins, what is one to do?  At this point I can't recommend buying gold unless you are getting smaller coins, like a 1/10 ouncer.  Unfortunately, these coins sell for a large premium in regards to the contained gold. 
 
That leaves you with silver.  Silver bars and coins, while less profitable for a counterfeiter, could still be fake.  Wow, what is left?  Junk silver.  I'm still recommending junk silver.  Junk silver is very difficult to fake.  It is over 50 years old, which gives wear and discoloring.  If you get dimes, it makes it almost impossible to counterfeit and make money.  That's where you want to be. 
 
Of course you can own the gold miners, and they should outperform also.  The fact of the matter is that we may have reached peak gold.  Gold is a limited commodity.  There is only so much available.  Look at this chart which shows in a crystal clear way, that peak gold is in fact a reality:
 
 
 
Supply and demand dynamics dictate that an increase in demand, with a reduction in supply, leads to a rise in price.  A rising price typically attracts others into a market to get their piece of the pie.  Supply than rises which, lacking more demand, causes a drop in prices.  So what has happened here?  Prices in 1999 were about $250.  Prices today are about 7 times higher.  Yet, supply is DOWN!  This shouldn't be possible.  It means to me that gold is being brought to market as quickly as possible.  It is unlikely that the gold supply will EVER rise significantly.  If a 7x rise in price hasn't brought more supply into the market, it can be reasonably assumed that no further increase in supply is possible/likely. 
 
Anyone suggesting that gold is in a bubble is either uninformed or duplicitous.  There is no other option.  Make sure you are exposed to this market.
 
Why is gold and silver going higher?  Increased demand.  Why is there increased demand?  Unlimited money printing and credit creation.  This is causing increases in prices.  Here's a great chart showing the increases:
 
 
This chart is very telling.  You can see the two areas of unbridled inflation.  First, medical care is up 600% in 34 years.  That is crazy and lends further credence to my blog last week.  There is something SERIOUSLY corrupt about our medical system.  That slope on costs is not supported by anything but corruption and outsized profits. 
 
The other ski slope is not caused by corruption.  It is caused by rampant credit creation.  We have more kids in college than ever before.  Why?  Government guaranteed loans.  There is no other reason.  School loans are now THE driving force to higher tuitions.  Without this free money, college would be much cheaper.  What other reason can you come up with to explain the exponential growth in tuition?  Of course with free money (and education) there is a downside.  A big downside:

College students defaulting at record rate

Student loan defaults have risen for the fifth straight year, as students from traditional non-profit universities have an increasingly difficult time paying off their college debt.

Numbers released by the Department of Education Friday show that of the 4.1 million borrowers who began making payments in late 2009 and early 2010, 9.1% defaulted within two years, up from 8.8% the year before.

"Student loan defaults still continue to plague too many borrowers," said Debbie Cochrane, research director for the Institute for College Access & Success. "The numbers are distressing, and they needn't be so high."

Experts credited the combination of skyrocketing student debt, the poor economy and a lack of borrower education for the increase. Unlike previous years, when default rates rose because borrowers at for-profit universities were having trouble paying off their loans, this year's rise was attributed to borrowers who attended more traditional non-profit public and private universities. Public school borrowers defaulted at a rate of 8.3%, up from 5.9% just four years ago.

Gee, let me think this through.  Immature kids are taking on thousands of dollars in student loans.  There is NO requirement to study anything that is useful.  Job market stinks, especially in this age group:
 
 
 
So we have a huge spike in unemployment among these immature kids.  Of course you can get delays in paying the loan, but they run out and you are sitting there with no job and a huge debt.  Wonder how that works out?  Oh, and the government now backs almost ALL student loans, so there is no incentive by banks to have any criteria for the loan process.  Hmmm......didn't something like that happen in housing...nevermind, I'm sure it's unrelated.
 
This kind of crap is continuing on and on and on.  Yet, we still sit back and think Obama will fix it if given 4 more years, or Romney will make all well.  Guess what?  They won't.  They aren't even talking about the biggest problems facing us and when they do, they focus on "solutions" that will not change anything and may even make things worse.
 
We need a sound money system without ever expanding, unbacked credit creation.  We need to take the obscene profitability out of health care by enforcing the laws and actually ENCOURAGING competition.  (wow, that's a novel concept)  We need to imprison Wall Streeters who break the law.  (a nice start would be just to indict someone as we still wait patiently for the FIRST indictment from the Obama Justice department)  We need to enforce the constitution.  (a lot of elected officials carry the constitution and display it, but very, very few follow it)  What needs to be done is easy.  Having the guts and backbone to do it is difficult. 
 
These types of reforms will eventually be made.  I just hope they aren't installed in a disorderly fashion.  Until then, THEY will continue to zoom you.
 
 
Positions
Mexus Gold (closed $..38,  down $.02,  average price paid, $.13)
SLW (closed $39.71, down $.20, average price paid $34.20)
 
MBIA (closed $10.13, down $1.03, average price paid $10.)
I have my broad retirement accounts spread out between bonds, S&P 500, and Small cap stocks, this position will be held until right before the election.
Physical Gold (closed $1776, up $14, average price paid $395)
Physical Silver (closed $34.65, up $.92, average price paid $5.31)
This week's video can be accessed here and has a very talented artist, have a great week!




.
September 23, 2012
Issue 199 - The Elephant in the Room
Contrary to what you might hear in the campaigns, THE key issue to the future stability of our country is health care. That it is barely mentioned these days is quite telling. Even more telling is the fact that neither of the candidates talks about what is truly wrong with the system. Romney wants to repeal Obamacare, but he will replace it with nothing better. I'm convinced that Obamacare is a poorly designed program, which will lead to a worsening of the problem. Then the "fix" of a single payer will be introduced. Before digging into the details, take a look at this chart:
What you see here is Federal government spending broken up into broad categories and shown in three timeframes. What is quite remarkable in regards to healthcare spending is the complete explosion of the spending. The trend is UNTENABLE. There is no trend that rises this fast without failing. None. Medicare and Medicaid related costs now account for 23.2% of the entire budget. Does that make sense to you? Can a country spend nearly 1/4 of it's budget on healthcare and remain solvent. I'll say no. Here is the trend in a line graph:
As you can see, social security isn't THAT out of control. (but I'm sure this chart counts the "IOUs" in that government file cabinet which was shown years ago on 60 minutes) What I don't like about the chart, and politicians have been doing this more and more, is the comparison to GDP. This is a bogus assumption in my opinion. GDP is NOT the income for the government. These figures should be based on the revenues of the government using current tax law. This would show a much worse situation. The GDP comparison is just another trick to make things seem better.
The real problem, and you can readily see it, is that even WITH the GDP comparison, medicare is a runaway freight train. Remember that old say, "If something can't continue, it will stop." So what can we do? Is there a solution? I believe there is. A lot of this blog is based on the work of Karl Denninger of the Market Ticker. Feel free to read more on his site.
First off, what's wrong with our current system There are four major things:
1. Undisclosed prices.
There is no other industry that doesn't publish prices BEFORE you get the item/service. Imagine filling up your tank with gas and THEN the station tells you what it will cost. Would that stand? Of course not. In the health care industry this is the NORM! The prices are hidden for a reason. If they were published, you could make an INFORMED decision of where to go. Competition would ensue and prices would come down. Of course prices aren't the only thing to look at, but it sure as heck is a good start. In every other business this is illegal. Some businesses must provide written estimates BEFORE work starts. The health care industry needs to move toward that model. In the event of an incapacitated patient, the price would come from their menu, not a dart thrown at a board. The farther the patient is removed from the cost, the less competition is seen. At present, the patient isn't even in the same area code as costs. That needs to change.
2. Different prices based on the source of payment.
Before continuing, I must mention that the angry woman in the above photo is totally incorrect. There is nothing in the Constitution that mentions healthcare. You have to right to PURSUE health and health care, it is NOT a right. That being said, there is nothing preventing all from healthcare except cost. Why is the cost so high? Why in the world should a service or product cost vary, based on how the bill is being paid? Now I'm not talking about credit versus cash, I'm talking Blue Cross versus cash. I'm talking medicare versus Aetna. It is against the law for businesses to charge two different people, different amounts for the same service if this will lessen competition. Yet, this is done all the time in the health care industry. They are given a pass by congress based on industry (and lobbyists) alone. There is no reason to charge different amounts in this way. It all relates to number 3:
3. Cost shifting

If the insurance industry is so profitable, as the chart above shows, why are they always claiming poverty? It's a racket, that's why. If an uninsured person walks into the hospital and doesn't have
insurance, they are charged "full" price. However, if a medicare patient walks in, they are charged less. Much less. Sometimes 1/10 as much. This requires that the cost of the medicare patient be shifted to others, like the uninsured. This is outrageous. It all ties back to the government being involved and "saving" us from "evil" businesses. Truth be known, if the government wasn't involved in any way, the costs of health care would be much, much lower.
Karl Denninger tells of having his birth bill from the hospital in 1961. The total bill was about $120. With inflation, this cost should be about $900 in 2012. Do you think it costs $900 to give birth today? Me either. If it did, there would be no need for insurance. You could pay that yourself in short order. Of course that is what people did when I was growing up. I recall my mother paying a doctor for an office visit in cash. Is it really that more expensive to do thing today? No. The cost of "insurance" has skyrocketed. Why? That is #4:
4. Insurance has become prepaid medical services
Before I get into #4 here's a prime example of just flat out gouging:
Ouch! Hospital to review woman's $83,046 scorpion sting bill

CHANDLER, Ariz. – A hospital that billed a woman $83,046 for a visit that included administering two doses of scorpion antivenom said Wednesday that it plans to adjust the woman's bill and review its price for the specialty medication.

Marcie Edmonds provided a copy of her bill to The Arizona Republic last week that showed Chandler Regional Medical Center charged her $39,652 per dose of Anascorp, a scorpion antivenom approved by the Food and Drug Administration last summer. She received two doses to treat her symptoms during a three-hour stay in June after a bark scorpion sting.

Edmonds' insurer, Humana, paid Chandler Regional $57,509 for the bill. The hospital has asked Edmonds for the balance of $25,537. She also has received another bill from the hospital's emergency-room physician for $1,302.

It's unclear whether Chandler Regional will agree to drop the entire balance of Edmonds' bill, but the hospital apologized to Edmonds for any distress caused by the treatment cost.

"Our patient financial-services team is working directly with Ms. Edmonds to adjust the high out-of-network cost of the Anascorp antivenom she received," the hospital said in a statement Wednesday. "In addition, we are also currently reviewing our pricing of this expensive specialty medication."

Chandler Regional Medical Center said several insurance companies don't cover the cost of Anascorp.

Edmonds was tearing open a box of air-conditioner filters in her garage in June when she felt a sharp sting in her abdomen. She had no intention of seeking medical help, but within an hour of the sting, Edmonds' mild tingling sensation worsened with throat tightness, blurry vision, darting eyes and tense muscles. She could not walk and had trouble breathing.

The Arizona Republic reported last year about the pricey markup Arizona hospitals were charging for the antivenom made in Mexico. Pharmacies in Mexico charge about $100 per dose.

After the Food and Drug Administration approved the drug last year, Tennessee-based Rare Disease Therapeutics sold the drug to a distributor for $3,500 per dose. The distributor charged hospitals about $3,780 per dose.

Edmonds said Wednesday that she was advised by her attorney not to discuss her hospital bill until it's resolved.

Edmonds, who is a counselor, said last week that she knows the intricacies of health care billing, but she believes the hospital's charges should be explained to the public.

"Everyone I talk to says, 'You've got to be kidding,'" she said last week.

So let me get this straight. This medicine costs $100 in Mexico. The hospital pays $3780. They charge the patient $39,652! Could this happen in any other industry? Do you think the hospital would put that price on a menu of their services? I don't think so. That might draw some attention. However, they will put it to an insurance company and they will end up paying much less. How much profit is enough here?
Another thing that is abundantly clear is that we really don't have insurance. Insurance is for something that is low probability, like death in your 40's. After you get married, is it a low probability that you have a baby? Not so much. This is an expected event. Getting a cold or the flu is just part of life. This is also the reason, that Obamacare outlaws catastrophic insurance. They want everyone to have prepaid medical. A young person in no way needs anything other than catastrophic insurance, but he/she MUST get prepaid medical. That is nuts. That doesn't make sense unless you are driving things to a single payer system.
5. End of life efforts
Here is a very difficult area to talk about. The unfortunate truth is that we don't have unlimited funds for everything, let alone health care. Check out this chart:
Notice something? Yeah, we spend A LOT on end of life care. This is unsustainable. We have so many drugs and procedures that prolong life, that the costs have skyrocketed. Now, no one is trying to deny someone as much life as possible, but should everyone else have to pay for it? Prostate cancer is nearly 100% fatal. There is a drug which costs $100,000, which on average, extends life 4 1/2 months. Should you be forced to pay for that? How about if the guy was 92 years old? I think not.
If said 92 year old guy has $100,000 laying around and wants to pay for the drug, so be it. Good for him. However, forcing everyone else to pay (through higher health care costs) isn't right or fair. The basic issue is that we are mortal. We ALL die. Father time is undefeated. Limited resources require that we make decisions that in a perfect (unlimited) world, wouldn't be necessary. If you've got a fatal disease, there is no reason that others should forego procedures that have a high degree of success, so that you can live a few months longer. It sounds harsh but the math is the math and we don't have the money for this type of treatment.
Solution?
Here's Karl Denniger's

If we want to fix the health care pricing problem we can do so. It isn't very difficult. Here's the prescription:

  1. All health care providers must publish a price list for the procedures and services they offer and the patient must be presented, when possible, with that information before services are performed or goods (e.g. medication) supplied, consenting to the charge in each case. All normal anti-trust provisions with regards to collusion between providers apply. If a physician doesn't like "flat-rate" billing they're free to publish a per-hour fee much like an attorney.
  2. No physician or group may discriminate based on the form of any external payment. If they want to internally finance procedure(s), that's fine - they can charge interest or discount for that, or whatever. But for anyone who pays via any other means (including the government) money is money - the price may not change based on the source of payment.
  3. No event caused by your presence in a medical facility or the actions of an employee there can come with cost to you. It is absolutely common for people to be billed for treatment of MRSA infections acquired in the hospital! That is equivalent to a mechanic that through incompetence or even malice cuts a wiring harness in your car while it is on the rack having the oil changed and then tries to charge you to fix what he broke!

Now clearly #1 doesn't work so well when you're unconscious due to a heart attack or just wrecking your car. But setting your broken leg or performing a cardiac procedure is something that's done for people who aren't incapacitated too, so guess what - the price is already published and thus the charge known.

This prevents the common practice of hospitals gouging private payers, it exposes prices and brings competition to pricing, and allows the free market to work. It ends the preference for "insurance" on routine procedures.

Next up, if you want to sell "insurance" in a market you must sell it to all persons in that market, defined as an area of at least one US State. You may discriminate in your pricing only based on age and gender - nothing else. If you sell that "insurance" product to any person you must sell to all persons within that state at the same price, and you must publish all your plans and offering prices.

"Insurance" products that are not true insurance products may not discriminate on reimbursement dependent on where the service is performed. The practice of requiring "in network" doctors or even hospitals lest you get "rejected" must end. In addition pre-qualification for any bona-fide non-elective procedure must be absolutely barred as a matter of law.

Finally, all providers of "insurance" must sell a true insurance product. Common HMO/PPO plans are not insurance - they are pre-paid medical care. Insurance is the purchase of a contract to cover damage caused by an unexpected event. Everyone needs health care of some form. Those who want to sell "pre-paid health plans" may do so, but they must also offer true insurance (e.g. covering ONLY hospitalization and related events, etc.)

These changes instantly destroy the connection between health "insurance" and employment. If you leave your job you have the absolute right to keep your health plan by continuing to pay for it. If you don't like your health plan or move out of the state you can buy any plan offered to anyone in your state, at your choice, for the same price they pay.

This would get rid of most of the issues and cause health care costs to plummet. The way things are set up now is a scam. The government involvement has actually allowed those in the industry to bleed us dry. Unfortunately, none of the candidates, including the Libertarian, are talking about ANY of this.
If you have time, I would highly recommend you watch this video. This is an interview of a doctor in Oklahoma operating a hospital that advertises it's rates. Imagine that. He goes into a lot of detail that is eye opening including the fact that people from Canada are coming down to his clinic for procedures. Well worth the 30 minutes.
Positions
Mexus Gold (closed $.40, average price paid, $.13)
SLW (closed $39.91, average price paid $34.20)
MBIA (closed $11.16, average price paid $10.)
I have my broad retirement accounts spread out between bonds, S&P 500, and Small cap stocks, this position will be held until right before the election.
Physical Gold (closed $1762, average price paid $395)
Physical Silver (closed $33.73, average price paid $5.31)
I'll close with a video prank. How this guy reacts to the sound of a gun is uncanny. Have a great week!
 
I'm Back
September 12, 2012 - Issue 198
After a well needed rest, I'm back at the keyboard and ready to go. I thought I'd start off fresh and give my current thoughts on where I think you should be investing right now. Before going into that, here is the only thing driving my investment strategy right now: (zerohedge)
 
Fed Folds: Will Do Open-Ended MBS Buying, Extends Operation Twist

Bernanke has acquiesced and is now the 4th branch of the status quo- and all is well in the world:

  • *FED TO KEEP POLICY STIMULATIVE FOR `CONSIDERABLE TIME'
  • *FED WILL ADD TO PURCHASES IF LABOR MARKET DOESN'T IMPROVE
  • *FED DOES NOT SAY WHEN MBS PURCHASE PROGRAM TO END
  • *FED TO BUY $40B MBS MONTHLY, CONTINUE `OPERATION TWIST'
  • *FED TO BUY MBS, EXTENDS ZERO-RATE POLICY INTO 2015

To summarize:

  • The good news: The Fed's NEWER, OPEN-ENDED and NEVERENDING QE is bigger, longer, and has a Retina display (however its battery life is far shorter).
  • The bad news: The Fed has now confirmed it is merely a sad, political, self-frontrunning caricature of what a central bank should be.
 
So that is all that matters at this point because Mr. Bernanke has decided that the only thing left to do is print. And then print some more. This of course will lead to massive inflation at some point, but also surging gold and commodities right away. Let's cover the topics.
 
Stock Market
 
 
The market has been rising gradually this year in an almost magical way. Volume is WAY down and the retail investor(that's you and me) have been leaving the market in droves. It's basically machine versus machine and I don't like my chances against a machine. With the announcement of QE3 I feel compelled to at least jump back in with part of my retirement funds, but I'm a little reluctant. There are several reasons for this but the complete bullishness is a big one. Here's one of those contrarian indicators, the infamous Baron's cover. It seems to be an almost definitive contra-indicator. What are they showing now? An indestructible bull. I'm not jumping all the way in yet, I'll bide my time:
Bonds (interest rates)
 
I currently have some of my 401k in the broad bond market as I expect interest rates to fall through early 2013. This is due to the expiration of the unlimited FDIC deposit insurance in January. This will literally force those wealthy individuals who only care about safety, to move funds from banks into the only other thing safe enough for them: treasury bonds. This will force interest rates down. This effect will at least stop rates from jumping rapidly.
 
 
Gold and Silver
 
Gold and silver have been pretty much dead for months. Recently, they have both exploded higher, especially silver. September is the traditional strong month for the metals and I expect both to be substanially higher by year's end. I hope that each of you have bought at these depressed levels. The last 12 months has been a gift for cheap metals. I am of the opinion that now is an excellent time to acquire gold and silver, especially on pull backs. I'm not the only one who feels that way:
 
 
'Best Climate' Don Coxe Has Ever Seen for Gold Price Increases

Source: Dorothy Kosich, Mineweb (9/12/12)

"During an address at the Denver Gold Forum conference, Coxe urged fund managers, mining analysts and mining executives to prepare for significantly higher gold prices and higher gold mining stock valuations."

Global commodities strategist Don Coxe declares now "is the best climate I have ever seen for an increase in gold prices."

During an address to Denver Gold Forum conference, Coxe urged fund managers, mining analysts, and mining executives to prepare for significantly higher gold prices and higher gold mining stock valuations.

He believes a "lustrous" rally in gold mining stocks will happen before a year passes. "The opportunities ahead are the best I've seen," Coxe declared.

Although Coxe admitted the stock market could be better for junior mining and exploration companies, he feels a new gold rush is ahead for investment in gold mining stocks.

While capital cost over-runs and project financing concerns are, at times, making things difficult for mining companies in their relationships with investors, Coxe suggested the mining industry is regrouping and rebuilding and will be prepared to capitalize on higher gold prices.

 
This is a very smart guy and I believe he is right on the money. Make sure you load up on silver and gold in your possession before anything else is done.
 
 
Gold and Silver Stocks
 
 
I believe that the gold and silver stocks have been manipulated down in an effort to keep the excitement down in the whole sector. As with any manipulation, it can't continue forever. I see the next up leg in the metals finally leading to much higher stock prices. These stocks have recently starting moving higher. My current favorites:
 
Mexus Gold
 
Mexus is my largest holding at this time and congratulations to anyone who bought this on my original recommendation. They have made tremendous progress over the last year and are currently producing gold. The main reason I originally purchased this stock was the cable recovery off the west coast. This was less than successful due to the small diameter of the cable and the need to clean the deck of the barge frequently. They are planning to build a bigger rig and tackle the cable using cash flow from the mine in Mexico. They are going to tackle the large diameter cable at a later point and that should be very profitable. For now, this is not a reason to buy the company.
 
 
The here and now is gold. They have a mine up and running. This has been the case since July. They have been fine tuning the mine with the waste rock that remain from the previous miner. This waste averages 1/4 of ounce gold per ton. That is a large amount of gold for "waste." The real jewel is the Julio vein which supposedly averages 3 ounces gold per ton. That is absolutely huge in the world of mines.
 
 
Their mill can process 120 tonnes of material a day. Running the numbers gives some rather stunning possibilities.
 
 
1. 120 tonnes x 3 ounces = 360 ounces a day.
2.This is $612,000 a day at $1700 gold.
3. Assume that processing the gold takes that down to $500,000.
4. Assume they operate20 days a month, that's $10,000,000.
5. That's $120,000,000 a year.
6. They also have a placer ore body which is currently being mined to the tune of nearly 4 ounces a day.
7. They must give 25% of that gold to the previous owners. That leaves 2.5 ounces a day, being conservative.
8. Assuming the same work days gives $4,250 a day gross, $3,000 net.
9. $3,000 x 20 days a month = $60,000
10. $60,000 x 12 months = $720,000 a year.
11. Total profit $120,720,000 a year.
12. Assuming a PE of 10 yields a stock price of $6.21.
13. Assuming a worst case scenario of only 10% meeting of goals gives a share price of TEMPORARY_BODY_TAG.62.  This about 35% above current prices.
14. Mexus is badly undervalued if they can perform as expected.
 
 
They also have identified a third ore body which they intend to develop into a third income stream. This is unheard of in the mining world. Most companies spend millions on a resource estimate and then numerous studies. This takes years and leads to hundreds of million shares being issued. Mexus currently has about 192 million shares. While this isn't great, it's not too terrible and with the income streams in place now, there should be no need to additional issuance of shares. That's a big plus.
 
Now everything isn't sunshine and lollipops. They have had several hiccups getting the mine running and the waste rock, which is plentiful, is difficult to judge in regards to richness of ore. This is the reason they moved quickly to the high value Julio vein ore. This high grade ore should move into the production pipeline before the end of the month. This is still a startup operation and there can be set backs. This is far from risk free. Very far. However, with gold being produced as we speak, the pressure (and risk) is greatly reduced. I believe this is also the reason for the drastic run up in share price.
 
The third quarter should show some results from this addition but the big jump should occur in the 4th quarter. This rich ore should make them madly profitable. A report from someone who called the CEO this past week reported that the company is in the black, producing gold and should have a press release in the next 2-4 weeks. The fact that they are in the black, is a tremendous plus and means the odds of further share issuance is low.
 
 
Mexus has run up from about 6 cents to the current 46 cents. If you have been holding this stock for over a year, I'm sure you have been frustrated as it just drifted lower. This is the nature of small stocks and why they are so hard to invest in. Most would have sold this past year and missed the run up. That's just human nature. I hope that doesn't apply to any of you reading. As far as buying now, I have recently added more shares and believe buying here is still a safe bet with a great chance of success up to $.55 or so. For me to pay more than that will require more hard numbers.
 
Silver Wheaton
 
 
For a silver stock, it's hard to beat SLW. They aren't a miner. They aren't an explorer. They are a silver streaming company. They approach companies who need financing for a mine and fund the mine in exchange for the silver coming out of the mine. Typically the mine is gold or copper mine. The silver is merely a byproduct. The brilliant idea of the company is that they contract with the company to roughly 4 bucks an ounce for the mined silver. SLW turns around and sells the silver for market price. (currently $34) They have multiple mines producing all around the world and they expect to increase their ounces sold by 90% over the next 4 years. The company is currently about $36 a share. I can easily see this stock over $100, especially if silver starts to ramp up. This is a superbly run and diverse company with 13 different partner companies all over the globe. This stock is a no brainer for anyone investing in the metal stocks. I have a rather large position here.
 
 
Tocqueville Gold Fund
 
This is the Cadillac of gold mutual funds. Run by one of the smartest guys in the business and well diversified. If you don't want to take a chance on individual stocks, this is your best bet. I hold a large position in this via a retirement account. They have lagged just like gold stocks but have recently started to surge. This is the perfect metal investment choice if you don't want the risk of an individual stock.
 
Other Gold/Silver Stocks
 
 
I am of the opinion that most gold and silver stocks will go higher in the coming years. This will be entirely due to the rise in the metals. The largest stocks will move first, and they already are, while the smaller stocks move later. Some of the smaller stocks have started to move. I see this rally taking us much higher from here.
 
One stock that I have loved forever, GORO, is currently out of my portfolio. I don't see anything blatantly wrong with it but there have been some issues which give me pause. They have had some water issues in their mine. This is common in mining but typically becomes worse as you go deeper. GORO is still in the upper part of their planned mine. They also haven't done any drilling (at least they haven't reported any) of their other properties. I don't know what to make of this other than they may have limited their ability to fund this type of activity with their generous dividend. I LOVE the dividends, but the downdraft in the metal prices has reduced their income and I believe their exploration.
 
They were also supposed to be mining the El Rey property by now. This property is planned to supply ore for the currently idle part of the mill. Why this isn't in play now is unclear.
 
If you have GORO now, I am telling people that I would sell and move into Mexus and Silver Wheaton.
 
Another stock I really like is Alexco. They are silver producer in Canada. They have run into mining difficulties much like GORO. They have fallen in price much further than GORO. For me, it doesn't make sense to buy this stock for silver price increases when you can get much of the same gains from SLW without as much risk. As an aside GORO gets over half of their income from silver also.
 
Other Stocks
 
 
I purchased MBIA (symbol MBI) stock due to its ongoing lawsuits with Bank of America. BOA wrote many fraudulent mortgages and MBIA wrote the insurance on many of them. For insurance to be legitimate, it must be based on facts. If you say you don't smoke while applying for life insurance, and then die of lung cancer, the insurance can withhold payment. The same applies here. The judge in this case is expected to make a ruling sometime this year and she has been making statements that favor MBIA. Given that damages in this type of case can run into the multi-billions and MBIA and is only valued at roughly 2 billion now, this one could take off. I would sell after a ruling even though the stock could run higher as they would then be free to write new business. I'm holding fast here.
 
There are many other stocks that I find interesting, but I don't have any money in them so I'll not go into them today.
 
This picture came out this past week and I love it.
 
 
 
Yes, Big Ben Bernanke is like the pizza delivery guy, bringing the banks their QE to infinity. This latest round won't save our economy, and will only make things worse. The real reason our economy is in so much trouble is the health care system and I'll be going into that in depth, next week.
 
I'll finish with a video that recently went viral. It's not in English but it doesn't matter. The easiest way to separate a yolk from a white ever, have a great week!