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February 6, 2010
Issue 82  -  The Time is Now
 
 
 
The time to buy gold and silver is now.  If you don't have any, it is time to act.  Gold was attacked this week and drilled for close to $50 in one day.  It made a slight recovery today but was still near it's lows.  Silver was even worse as it was crushed over $1.50.  However, now is NOT the time to get afraid of gold and silver, it is the time to buy.  Think of it as a gift.  Silver is especially attractive.  Think about it.  Why did gold and silver fall?  Did someone discover a giant gold nugget as big as a car?  No.  Did a miner discovery the mother of all veins?  No.  Then why did gold go down?  Let's check a headline or two:
 

Gold futures hit by global worries


By Myra P. Saefong & Nick Godt, MarketWatch

NEW YORK (MarketWatch) -- Gold futures finished the week 2.4% lower on Friday, slumping to their lowest level in a month, hit by concerns that China's moves to curb lending will dampen growth, reducing the precious metal's appeal as a hedge against weak currencies and inflation.

 
Hmmmmm.....that doesn't make sense.  Global worries would make gold go LOWER????  If countries are having trouble with their currencies wouldn't that make gold attractive?  Another:
 
 

Gold Falls to Three-Month Low as Dollar Gain Damps Metal Demand

February 05, 2010, 02:46 PM EST
 

By Pham-Duy Nguyen

Feb. 5 (Bloomberg) -- Gold futures fell to a three-month low in New York as the dollar’s rally reduced demand for the precious metal as an alternative investment.

The euro fell to an eight-month low against the greenback on mounting budget concerns in countries such as Greece, Spain and Portugal. Gold capped a fourth straight weekly loss and the ninth decline in the past 10 weeks.

“The dollar just keeps gaining momentum,” said Tom Schweer, a senior market strategist at LaSalle Futures Group Inc. in Chicago. “Gold could fall another $20 to $40 before people start to load up again.”

Gold futures for April delivery fell $10.20, or 1 percent, to $1,052.80 an ounce on the New York Mercantile Exchange’s Comex unit. Earlier, the most-active contract touched $1,044.50, the lowest price since Nov. 2. The metal declined 2.9 percent this week, paring its gain to 15 percent in the past 12 months.

Bullion may fall to $800 before rebounding to a record when investors realize the U.S. government has exhausted tools to revive the economy, said Tom Winmill, a New-York based portfolio manager of the Midas Fund. In December, he predicted gold may average $1,500 in the fourth quarter of 2010.

Yesterday, gold tumbled 4.4 percent, the most since Dec. 1, 2008, while the dollar jumped 1.2 percent against the euro.
 
 
 
So the dollar goes up by 1.2% and gold drops 4.4% and that's supposed to be an inverse relationship?  These headlines have no basis in reality.  The writers are trying to match an obviously unexplainable event (the huge drop in gold) with anything they can glom onto.  Neither of these headlines makes sense.  If something doesn't make sense, you should ignore it as noise or disinformation.   This is probably meant to mislead the public.  (that's you)  Ignore this noise and look at what is really happening:
 
00:29 Federal Housing Administration default data indicates crush of foreclosures coming - Washington Post
As of December, 9.1% of borrowers had missed at least three payments, vs year-ago 6.5%. If the trend continues, the FHA may run out of cash, forcing the federal government to use taxpayer money to cover the losses. Officials say they expect loss growth to slow as loans from 2007-8 go bad and clear from the agency's books. Loans made in 2009 tended to be of higher quality.

* * * * *
 
 
Ok, so housing is looking bad and almost 10% of borrows are having trouble with their loans.  That's not bad for gold is it?  Maybe the government is starting to improve it's finances:
 

US food stamps set ever-higher record-32.8 million

WASHINGTON, Feb 5 (Reuters) - A record 38.2 million Americans were enrolled in the food stamp program at latest count, up 246,000 from the previous month and the latest in record-high monthly tallies that began in December 2008.
Food stamps are the primary federal anti-hunger program, helping poor people buy groceries. The Agriculture Department updated enrollment data on Friday with a preliminary figure for November.
USDA estimates up to $58 billion will be spent on food stamps this fiscal year, which ends Sept 30, with average enrollment of 40.5 million people. Food stamps were renamed the Supplemental Nutritional Assistance Program in 2008.
Participation has surged since the financial-market turmoil of late 2008 and has set records each month since December 2008, when it reached 31.78 million. Enrollment is highest during times of economic distress. (Reporting by Charles Abbott; Editing by David Gregorio)
 
One quarter of a million people were added to the food stamp program last MONTH!  That's a lot.  But wait, what's this:
 

US payrolls fall in Jan, jobless rate at 5-mo low

* U.S. nonfarm payrolls fall 20,000 in January
* Revisions show deeper losses than previously thought
*Unemployment rate drops to 9.7 pct, lowest in five months

WASHINGTON, Feb 5 (Reuters) - U.S. employers unexpectedly cut 20,000 in January, but the unemployment rate surprisingly fell to a five-month low of 9.7 percent, according to a government report on Friday that hinted at some labor market improvement starting to take root.

The Labor Department said the economy shed 150,000 jobs in December, compared to 85,000 previously reported, but November was revised to a gain of 64,000, up from 4,000. Annual benchmark revisions to payrolls data showed the economy has purged 8.4 million jobs since the start of the recession in December 2007.

 
Wow, I'm really confused, the unemployment rate dropped in the same month that we lost 20,000 jobs?  How can we lose jobs and the unemployment go down?  The only way is to lower the total number of employees in the United States.  Some people have a hard time getting this so let me try and explain.  Let's assume there are 140 people in a country called Zoop.  In Zoop there 100 people 18 and older.  This is the total number of people who can be employed.  Now in December, 10 people were out of work meaning that the unemployment rate is 10%.  (10 divided by the 100)  In January on more person lost their job.  That means the unemployment should go up to 11%.  (11 divided by 100)  BUT, let's say that 2 of the 10 original people stopped looking for work.  The unemployment rate would now be 9.2%. (9 divided by 98)   That's what our government does.  They just drop them off the list.  If they haven't looked for a job in the last 4 weeks they are just "vanished".  Neat trick.  The key to the deception here is to look at the other numbers.  How is it conceivable that 246,000 people were put on food stamps and yet the unemployment rate dropped?  It's not, obviously. You don't go on food stamps when you just got a job. 
 
What other things can we look at to judge the true condition of things?  Here's one:
 

December consumer credit down for 11th straight month

WASHINGTON (Reuters) - A weak job market and tight credit conditions caused consumer credit to fall $1.73 billion in December, the eleventh straight monthly decline, a report from the Federal Reserve showed on Friday.

December consumer credit outstanding fell at a 0.8 percent annual rate to $2.457 trillion, following a sharp downward revision to November's record drop. November credit fell $21.83 billion, or a 10.6 percent rate, compared to the record $17.5 billion first reported.

 
 
So consumers are spending less and yet unemployment is dropping.  No way!  Don't be stupid!  They are playing us for fools.  Here is an absolutely amazing article from Fortune Magazine, please read the whole thing:
 
Next in Line for a Bailout: Social Security
by Allan Sloan
Thursday, February 4, 2010

Don't look now. But even as the bank bailout is winding down, another huge bailout is starting, this time for the Social Security system.

A report from the Congressional Budget Office shows that for the first time in 25 years, Social Security is taking in less in taxes than it is spending on benefits.

Instead of helping to finance the rest of the government, as it has done for decades, our nation's biggest social program needs help from the Treasury to keep benefit checks from bouncing -- in other words, a taxpayer bailout.


No one has officially announced that Social Security will be cash-negative this year. But you can figure it out for yourself, as I did, by comparing two numbers in the recent federal budget update that the nonpartisan CBO issued last week.

The first number is $120 billion, the interest that Social Security will earn on its trust fund in fiscal 2010 (see page 74 of the CBO report). The second is $92 billion, the overall Social Security surplus for fiscal 2010 (see page 116).

This means that without the interest income, Social Security will be $28 billion in the hole this fiscal year, which ends Sept. 30.

Why disregard the interest? Because as people like me have said repeatedly over the years, the interest, which consists of Treasury IOUs that the Social Security trust fund gets on its holdings of government securities, doesn't provide Social Security with any cash that it can use to pay its bills. The interest is merely an accounting entry with no economic significance.

Social Security hasn't been cash-negative since the early 1980s, when it came so close to running out of money that it was making plans to stop sending out benefit checks. That led to the famous Greenspan Commission report, which recommended trimming benefits and raising taxes, which Congress did. Those actions produced hefty cash surpluses, which until this year have helped finance the rest of the government.

But even then, it was clear the surpluses would be temporary. Now, years earlier than projected, Social Security is adding to the government's borrowing needs, even though the program still shows a surplus on paper.

If you go to the aforementioned pages in the CBO update and consult the tables on them, you see that the budget office projects smaller cash deficits (about $19 billion annually) for fiscal 2011 and 2012. Then the program approaches break-even for a while before the deficits resume.

Social Security currently provides more than half the income for a majority of retirees. Given the declines in stock prices and home values that have whacked millions of people, the program seems likely to become more important in the future as a source of retirement income, rather than less important.

It would have been a lot simpler to fix the system years ago, when we could have used Social Security's cash surpluses to buy non-Treasury securities, such as government-backed mortgage bonds or high-grade corporates that would have helped cover future cash shortfalls. Now it's too late.

Even though an economic recovery might produce some small, fleeting cash surpluses, Social Security's days of being flush are over.

To be sure -- three of the most dangerous words in journalism -- the current Social Security cash deficits aren't all that big, given that Social Security is a $700 billion program this year, and that the government expects to borrow about $1.5 trillion in fiscal 2010 to cover its other obligations, about the same as it borrowed in fiscal 2009.

But this year's Social Security cash shortfall is a watershed event. Until this year, Social Security was a problem for the future. Now it's a problem for the present. 

Copyrighted, Fortune. All rights reserved.
 
 
This is a huge story and NO ONE is talking about it.  Instead we are talking about adding a new government program (which thankfully looks like it's dead in the water) and adding to the deficit.  Irresponsible beyond all comprehension.  Let's make this as simple as possible.....WE CAN'T AFFORD A NEW PROGRAM!  We are broke!  Don't believe me?  I'm not the only one:
 

It Is Now Mathematically Impossible To Pay Off The U.S. National Debt

A lot of people are very upset about the rapidly increasing U.S. national debt these days and they are  demanding a solution. What they don't realize is that there simply is not a solution under the current U.S. financial system. It is now mathematically impossible for the U.S. government to pay off the U.S. national debt. You see, the truth is that the U.S. government now owes more dollars than actually exist. If the U.S. government went out today and took every single penny from every single American bank, business and taxpayer, they still would not be able to pay off the national debt. And if they did that, obviously American society would stop functioning because nobody would have any money to buy or sell anything.

And the U.S. government would still be massively in debt.

 
 
 This is from a blog you can see here if you want to read the whole article.  Basically it says that all the money in existence is still not enough to pay off the debt.  How can you pay off something that is more then the total money available?  You can't.  That doesn't even take into account the interest that needs to be paid.  We are hosed. 
 
So now is the time to stop the procrastinating.  You've told yourself that you should probably get a little gold or silver but you haven't done it.  (If you have, now is the time to add to your position.)  Let me first say, that I have NO idea where gold or silver are going next week.  They could plunge again, or surge, I'm not a swami.  What I do know is that the country is in dire straits and things are not improving.  I also know that gold and silver have been money for thousands of years and they will be money again in the future. I also know that you need some.   Here are two web sites that have gold and silver and I know to be reliable:
 
apmex.com
tulving.com
 
If you need help with the purchase, let me know.  I'll close this week with a video in honor of the blizzard in DC.  Here's a meteorologist that has a sense of humor, have a great week!