Curried Wealth Building
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July 10, 2011
Metals Buyers,
Take Your Marks
 
 
The system we operate under is under increasing pressure and the time of reckoning is closer than ever.  As we continue to get results like this, an economic recovery seems remote:
 

Breaking down the bleak June jobs report

2 days ago by Adam Rombel

Weak. Dismal. Awful. Grim.

Choose any of those words to describe this morning's national employment report for June and you would not be wrong.

The U.S. Bureau of Labor Statistics (BLS)  reported that nonfarm payrolls increased by only 18,000 jobs in June, far below the roughly 100,000 jobs that economists and analysts were expecting. The unemployment rate rose to 9.2 percent in June from 9.1 percent in May. It was the second straight month in which the unemployment rate increased, and it would have been worse if discouraged workers who dropped out of the labor force were counted.

According to the BLS data, the civilian labor force declined by 272,000 in June, compared to May, and the number of people not in the labor force increased by 449,000.

The labor-force participation rate fell to a fresh 30-year low of 64.1 percent.

Oh, remember a month ago when economists were similarly shocked by the disappointing May employment report? That's the one in which BLS said nonfarm payrolls only grew by 54,000, when economists were looking for between 150,000 and 200,000 jobs. Well, today the agency revised that figure down to a gain of only 25,000.

Average together the May and June payroll figures and you get an average increase of 21,500 jobs. At that rate of puny job growth, it will take 372 months, or 31 years, to replace the 8 million jobs believed to have been lost in the Great Recession.

Economists say we need monthly payroll growth of 125,000 jobs just to keep with population growth.

There were still more bad numbers in the June report. The so-called "underemployed rate," which counts discouraged workers who dropped out of the labor force and those working part time when they would prefer a full-time job, rose to 16.2 percent from 15.8 percent in May.

The average workweek and hourly earnings also declined slightly.

"June's employment report doesn't have a single redeeming feature," Paul Ashworth, an economist at Capital Economics, said in an Associated Press story this morning. "It's awful from start to finish."

I'd say, that's about right.

Adam Rombel 

 

 

This type of report is now the norm.  People are almost numb to it and don't fully see the ramifications of such poor results.  They also don't delve into the multipage pdf showing all the horror.  For instance, the total unemployment rate counting all people rose from 15.8 to 16.2%.  That is the TRUE unemployment rate.  The "adjustments" they make to past months is also a joke.  Why don't they just give the net number for the month.  Add the adjustments with the current months number and release that.  If they had done that this week we would have seen a negative number.  Also the birth/death model, which supposedly accounts for the births of new businesses and those they employ added 131,000 jobs this past month.   Does anyone believe new businesses did that?
 
All the while government spending takes off like a rocket ship while revenues.....well you can see for yourself:
 
 
 
Do you see a problem with this chart?  I thought you could.  If your spending is increasing, and revenue is flat or decreasing, you're going to have a serious problem, sooner rather than later.  We are on a crash course with disaster and nothing being proposed now by either party will solve or even alleviate this train wreck.  Then we've got these knuckleheads running around saying the social security isn't a problem because it's running a surplus.  Of course it's running a surplus, they are stealing 13% of incomes to fund it.  The idea that this is some great program because they've "never missed a payment," as one proponent claimed shows how out of touch they have become.  Most of these people are making their income due to the continuation of social security so it's no surprise they defend it.  The fact is that it is bankrupt and all of these IOUs which are claimed as social security surpluses are just so much hot air.  Take a look at this chart:
 
 
This shows the projected federal debt out to 2050.  Doesn't that look doable?  This is not being made up out of whole cloth either, this comes from government sources.  This is all nearly inevitable as we are constructing a society that is becoming more and more used to the nanny government.  Here is exhibit A:
 
 
Since the IRS is notoriously slow updating their data, this only updates through 2009, which means the current percentage is higher.  Some estimate it at 47%.  That means that almost 1/2 of all people don't pay income taxes.  But it gets worse.  Remember, that a lot of these people get tax credits.  These credits, unlike deductions, don't stop when your taxes are reduced to zero. They keep going, which means a lot of these people are getting a refund in ADDITION to not paying income taxes.   Here is a nice short video describing our current situation:
 
 
The choices of the government are indeed limited.  I say they inflate like crazy.  This will collapse the system, but at least the debt burden will not consume everything.  What to do? 
 
This leads us to one inevitable investing choice...the metals.  They have stood the test of time and all types of calamities and disasters.  They have been a portable wealth for centuries and will continue to be.  The time has come, I believe, to go "all in" to the metals.  I believe we are very close to a tipping point that could make the coming price jumps make current levels seem low.  Other than the skyrocketing inflation, what are the other catalysts out there?  Here's a big one:
 

How China Intends to Take Down the COMEX

Andrew Maguire, the man who in Nov. 2009 told U.S. authorities of a silver manipulation scheme in progress led by the Fed through its primary dealers JP Morgan and HSBC, said China’s new Pan Asia Gold Exchange will overwhelm the manipulators in the gold and silver market and create a historic short squeeze in those markets.

In an interview with King World News, Maguire said he believes the rapid rise of China’s middle class will force the pricing mechanism in the precious metals markets to shift to the PAGE, and away from the Comex, where the manipulation continues.

“The launch of this new gold and silver exchange has flown under the radar, but certainly has my attention,” said Maguire.  “I firmly believe we are marking a pivotal point that will in very short order affect current precious metals price discovery dynamics.”

And those dynamics “will ultimately destroy the remaining short positions in both gold and silver,” leaving the scheme exposed to the world as another example of a broken, desperate and corrupt U.S.-led global financial system.  China poses as the largest threat to dollar hegemony, which now includes the Achilles heal of that privilege—the bullion market.

For decades, the Comex and its cohorts at the LBMA have controlled the precious metals market, and was a regret of former Fed chairman Paul Volker that he didn’t control the gold price more during his inflation battle during the 1979-82 period of runaway consumer prices.

But that control is about to collapse, said Maguire.  He expects the 1.3 billion Chinese, who, until 2009 have been banned from owning gold and silver in the People’s Republic of China, will overwhelm the global bullion market now that the Chinese people can buy gold as easily through their local bank.

Because of the difficulty of unloading $2 trillion of debt assets in time before a dollar collapse, Beijing has decided to take a page out of Mao’s playbook instead.

“China is keen to diversify their cash holdings and is also encouraging citizens to make investments in gold and silver,” Maguire continued.  “The Pan Asia Gold Exchange is another step in this direction by opening up ease of access to physical gold and silver to their bank customers. This physical backed exchange is going to be a big game-changer.

“Just look at the scale of this to get an idea of how massive this game-changer will be.  The Agricultural Bank of China has over 320 million retail customers and 2.7 million corporate customers and has integrated its customer account information system with this platform.”

Maguire suspects that bullion analysts have not factored in the China effect slated to hit the market in the coming years, a variable that could push the Comex to  resort to cash settlement in a similar manner to the London Gold Pool in March of 1968, when it collapsed.

“I believe the leveraged and naked existing short side concentration in silver will be blind-sided by this,” added Magurie.  “In my opinion it will create a massive short squeeze.

“None of this potential new physical demand has been factored in by analysts and I expect a large and unanticipated draw down of physical gold and silver over the next few months, ahead of the international contracts going ‘live.’”


China is well aware that the COMEX is a paper game with very little metal to back the positions held.  If McGuire is correct and the Chinese start to move into the metals, even in a small way, fireworks will ensue.  If people view the Chinese exchange as more honest, they will migrate there.  This will be devastating to the COMEX and the prices there will sink as physical rises.  Those contracts at the COMEX are not backed and will be discounted by the market, once there is a viable alternative.  
 
Summer is traditionally the slow time for metals as India, the largest buyer, doesn't buy in the summer.  As the market has become more global, this effect seems to be lessening, which makes sense.  If the dominate buyer becomes less important, they're not buying will be less influential.  I think this summer, especially in gold you can see that the price has remained strong.  Silver is still relatively high also.  
 
So how high could the metals go?  Here's one prediction from an old time guru, James Dines:  (via King World News)
 
 Dines Predicts Silver to Go to $300-500 an Ounce
 
 
 
I actually think this will be low and that a spike to $1,000 or more an ounce is very possible.  Silver is running out and it is REQUIRED for so many applications that a panic spike in the price is almost certain.  If this spike does happen it must be sold and that is what I'll do.  In fact right now I'm determining how to convert some stock holdings into physical.  Physical is very important too, as these types of stories should become more common:
 

Kitco moves into creditor protection

 
 
 Faced with tax claims of more than $300 million from Revenu Quebec, embattled Montreal-based gold trader Kitco Metals Inc. now is officially in creditor protection, until July 27.

Superior Court Judge Mark Schrager this week granted the application by the company and its monitor, RSM Richter.

It's now spared from any legal proceeding until it submits an offer to creditors, the largest of which is Revenu Quebec, which has outstanding assessments against it of $227 million and $85 million.

Kitco, which is contesting the tax assessments, can continue to carry on business as before under the court ruling.

The company was one of more than 100 targeted in a Revenu Quebec investigation that last month resulted in searches and seizures at 70 locations in and around Montreal.

The tax department said a false-billing scheme in Quebec's gold market had snowballed into a fraud of more than $100 million.

Kitco has denied doing anything illegal.

 
Kitco, the largest supplier of gold and silver charts and price quotes, and huge purveyor of gold and silver, is now bankrupt.  Imagine what might happen if the "pooled" accounts, where Kitco supposedly holds peoples metals all in a big pile, are actually only fractional accounts?  This means they will lose their product and perhaps even a fiat settlement.  Don't mess around with pooled accounts.  Take possession and secure it.  Remember, physical metals are the ONE asset that is nobody's liability.  If you have paid in full metal, in your physical possession, you will not be wiped out.  It takes very little metal to protect your whole net worth.  I'd say 3-5% will prevent you from a disaster.  Of course if you increase this, which I have done, you stand to prosper.  Hopefully you will have the wherewithal to help others who weren't as fortunate or as forward looking.  If you need help with this, let me know and I'll try to point you in the right direction.
 
Positions
 
GORO  (closed $22.98, down  $1.12, average price paid $6) 
 
The large operation which is shorting this stock, threw everything they could at GORO this week and it actually held up pretty well.  The rise in gold and silver helped ease the fall and I expect that they will continue their assault.  There is no way to know what the short term outcome will be but long term I see GORO much higher. 
 
Mexus Gold  (closed $.19.5, down $.005, average price paid, $.22)  The rumor mill has the tub and barge heading to Alaska later this week.  Keep your fingers crossed and month or so from now we could be seeing the first sale of cable. 
 
Alexco Resource Corporation -  AXU  (closed $8.06, up .87, recommended at $7.90)
 
Stocks    (Current status, out, sold on March 18)
 
Still in a holding pattern as the market bounces up and down.
 
Physical Gold  (Closed $1,544,  up $58,  average price paid $395)
 
Physical Silver  (Closed $36.71,  up $2.86,  average price paid $5.31)
 
This week's video shows an art form that not many are familiar with as there are very few who practice the art.  Have a great week!