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November 13, 2011
Issue 173  Corruption Everywhere You Look
The world is now just one giant rig job with con men and crooks running things.  The outrages continue to pile up as high as you can see.  Let's just take a small sample.
One of the biggest was the Penn State fiasco.  We have a pedophile who not only took advantage of troubled youths to satisfy his sick desires, he also set up a charity to build a "pipe line" of targets.  The mere fact he is out walking around in the community is all the proof you need of corruption.  The judge who gave him UNSECURED bail was a volunteer for the same charity.  Why was this allowed?  This pedophile's autobiography was still in the Penn State book store as of last Friday!  Can you believe it?  Meanwhile the Penn State students were ticked that ole "I followed procedures" Joe Pa was canned.  I just can't fathom the mentality of these alumni who blindly back obvious enablers of the worst type of criminal.   It is a testament to our societal deification of celebrities over people of substance which is perfectly illustrated here.  Then we have financial malfeasance:
MF Global Files Bankruptcy as Broker-Dealer Unit Liquidates

Nov. 1 (Bloomberg) -- MF Global Holdings Ltd., the holding company for the broker-dealer run by ex-Goldman Sachs Group Inc. co-chairman Jon Corzine, filed for bankruptcy protection as it seeks to reorganize after making bets on European sovereign debt. Its broker-dealer unit, MF Global Inc., faces liquidation.

The firm listed debt of $39.7 billion and assets of $41 billion in Chapter 11 papers filed yesterday in U.S. Bankruptcy Court in Manhattan. MF Global's board met through the weekend to consider options including sale, a person with direct knowledge of the situation said.

The filing came as MF Global told regulators of potential "deficiencies" in some customer accounts, according to a statement by the U.S. Securities and Exchange Commission and Commodity Futures Trading Commission. Regulators are investigating whether hundreds of millions of dollars are missing from client accounts, according to a person with knowledge of the matter.

"They were trying to get a deal but at the end of the day the majority of their business is built on trust," Scott Peltz, the national leader of RSM McGladrey's Financial Advisory Services Group in Chicago, said yesterday in an interview. "They had a huge position in European debt, which led to a lot of the troubles. There will be questions about that."

This is a LARGE holding company that is now gone.  Where were the regulators?  You don't suppose that they were looking the other way due to who was employed there......

MF Global's Corzine Met with CFTC in Protest of Repurchase Rule

Published: Monday, 14 Nov 2011 | 2:52 PM ET
: Lori Ann LaRocco
CNBC Sr. Talent Producer


Ten months before MF Global declared bankruptcy, Chairman and CEO Jon Corzine met with Commodities Futures Trading Commissioner Bart Chilton on two occasions, CNBC has learned.

Corzine met with Chilton to argue against the Commission's proposed rule that would prohibit companies from allowing internal repurchase agreements. Corzine met twice in person with Chilton and once on the phone.

"Corzine was one of many financial CEOs who commented on the proposed rule, telling me the CFTC didn't understand the impact of the rule and it would be a big mistake for the CFTC to pass it because it would impact the way they do business," Chilton said.

Corzine met with Chilton in December of 2010 and by phone over the Summer in July. The disgraced former CEO also met with CFTC Chairman Gary Gensler. The General Counsel of MF Global and Newedge USA also submitted a comment letter suggesting the CFTC to scrap the proposed rule:

"In our view, this proposal will unnecessarily restrict a very liquid and secure investmcnt that has provided important flexibility as well as reasonable returns for FCMs and their customers. We believe the CFTC should focus on the critical fact that the customer segregated account and the secured amount will be fully collateralized with qualified Rule 1.25 products at all times, even in the event of a counterparty default on a reverse repurchase agreement."

A total of 67 comment letters were received into the CFTC but not all were in favor of not passing the rule.

"I think he (Corzine) thought we were considering of reopening the comment period so they (MF) could come back in and make their case against the rule," said Chilton. "We never did reopen the comment period, but we also didn't pass the rule. In retrospect I wish we did pass it."

Chilton said the CFTC is expected to vote on this rule on December fifth.

That's former senator Corzine.  Former CEO of Goldman Sachs.  CEO of this stinking pile.  Wonder if he received the same treatment as you or I would?  Not only that, but it seems they also stole some money....make that a lot of 600 million or so....

10 November 2011

It's Official: Wall Street Firms May Legally Steal From Their Customers

...and they may not have to pay them back.
"This means they can take segregated funds and leverage them to kingdom come. It means nothing is safe."

Andy Abraham

If you have a commodity account with Wall Street, they may gamble with your money, with your assets, the rule on segregated accounts be damned. If they lose the money you might be reimbursed, or not. The losses may have to be 'socialized.'

In a way it is just making the general relationship between Wall Street and its customers official.

It means that customers are bearing hidden counterparty risks on assets to which they thought they had clear title, such as Treasuries and foreign currencies and warehouse receipts.

This sort of arbitrary distribution of gains and losses occurs more frequently than you might imagine on Wall Street from what I have seen and heard, and not just with commodity brokers. I have even heard of specially privileged customers who can make $100,000 in a few trading days without even having any knowledge of the markets in which they have 'traded.'
So if it's possible that a firm can have SEGREGATED funds for customers, steal it, and then not pay it back or if not, then someone goes to jail, then we truly live in the wild wild west.  Then again, stories like this are now the norm:

Two weeks ago we reported with sheer disgust that the outgoing CEO of bankrupt Freddie Mac, Ed Haldeman, was to pocket over $4 million for his brief two year stay at the nationalized GSE, which money was to reward him for lots of hard work collecting bail out cash from the Treasury. $21 billion to be precise. Apparently it is not easy to beg from Tim Geithner which explains the compensation for a task which is essentially supervising a financial black hole with an attached run off portfolio. Nonetheless the optics of this farce are rather unpleasant which is why we said that this is the (one of many) reason "why people in America are very, very pissed." Today Congress, which has yet to ban itself from trading on inside information, has decided to at least rectify this one sticking point, and moved forward with a "bill to block multimillion-dollar executive pay packages at Fannie Mae and Freddie Mac even as their regulator defended them as necessary to retain top talent and limit taxpayer losses at the bailed-out companies." And where are they going to go: MF Global? Morgan Stanley? RBS? Jefferies? As for what new pay wil be: "The committee adopted an amendment that would use the pay scale that applies to independent financial regulators, such as the Federal Deposit Insurance Corp, which allows for higher pay than at most federal agencies. Representative Al Green, who offered the amendment, said this would have the effect of limiting the highest salaries to about $260,000 per year." While still about 3 times more than what they deserve, this is a good start. And an even better one would be to if not unwind the GSEs, then to at least recognize that their $7 trillion in debt should be counted toward the US Federal debt, as Peter Orzsag suggested once. Naturally were that to happen US total debt/GDP would be over 150%, and the bond vigilantes would suddenly be confused whether their time is not better spent on this side of the Atlantic. Yet the biggest twist in this story, is that not only are the GSEs bankrupt, but as the NYT reported earlier, the FHA itself has a "close to 50% chance of requiring a bailout." Add to that that the corporate retirement guys (PBGC) and the post office (USPS) are now effectively broke as well, and very soon being the CEO of a bankrupt company will be the new killing it.

From Reuters:

Lawmakers from both parties have expressed shock at revelations the two government-owned mortgage finance firms, which have been propped up with about $169 billion in federal aid, were paying out $12.79 million in bonuses for 10 executives. "The taxpayer-funded bailout of Fannie Mae and Freddie Mac is the biggest bailout in history," said Representative Spencer Bachus of Alabama, chairman of the House panel. "Adding insult to injury, the top executives of these failed companies receive multi-million-dollar pay packages."

One wonders, inversely, just how shocked the public would be to find out how many congressmen and women traded in advance of congress itself legislating new rules as relate specifically to the GSEs.

The response, of course, is that nobody would ever surf porn all day for the paltry sum of $260,000:

DeMarco said the firms, the top two providers of funding for U.S. mortgages, need to be able to compete with other financial service companies for highly skilled executives.

"We have an entire competitive marketplace in the industry that suggests compensation is an important factor in attracting and retaining top talent," he said.

As the regulator, DeMarco has broad authority to direct the companies' activities, and he approved the pay in consultation with the Treasury Department. The pay packages have followed the same pattern over the last few years; the structure was set in 2009.

He said one of the "biggest concerns that has driven" the the executive compensation packages is an apprehension that the two companies will lose key staff if they are not fully compensated for their marketable skills. As employees leave, DeMarco has tried to reduce pay levels for their replacements.

Senate Banking Committee Chairman Tim Johnson, a South Dakota Democrat, expressed concern that tying pay to a government scale could do more harm than good.

"I fear that the federal pay scale will chase away the knowledgeable people we have and rely on to do a great job in a highly complex situation," he told Reuters.

Acording to DeMarco it is best to phase in reforms ala Italy: 2 years over 15 years or something.

DeMarco told the Senate committee any changes in pay should not be a "sudden shock" and said the best way to reduce compensation would be for lawmakers and the Obama administration to agree on a future course.

"Then we could have a final resolution of Fannie Mae and Freddie Mac in conservatorship, which would resolve the compensation issue once and for all," he said.

Because who knows what chaos would ensue if the overseer of a bunch of insolvent loans with massive negative equity decided to go wild and act all irresponsible. Let's see: none?

And in other news, while the expert insider traders squabble over other people's pay, even as they "hit the bid" all day long, yet another housing entity is about to get the chop... and thus billions more in taxpayer funds.

The Federal Housing Administration has a “close to 50” percent chance of requiring a bailout if the housing market deteriorates next year, the agency’s independent auditor said in a report released Tuesday.

The F.H.A., which offers private lenders guarantees against homeowner default, has just $2.6 billion in cash reserves, the report found, down from $4.7 billion last year.

The agency’s woes stem from the national foreclosure crisis. In the last three years, the F.H.A. has paid $37 billion in insurance claims against defaulting homeowners, shrinking its cash cushion.

The auditors determined the agency’s level of supplemental cash reserves by projecting losses on its mortgage portfolio and counting them against expected premium revenue. This year, the audit found that the F.H.A. supplemental reserve was less than one-quarter of a percentage point of its current portfolio: $2.6 billion against a $1.1 trillion mortgage portfolio, as of Sept. 30. Legally, the housing agency is required to keep a 2 percent cash buffer, a target it has not met since 2008.

F.H.A. officials argue that the likelihood the 77-year-old agency will need its first taxpayer bailout is slim. “It would take very significant home price declines to create a situation in which the portfolio would require any additional support,” said Carol Galante, acting commissioner. “There is no evidence or widespread prediction that home prices are going to decline to the kind of levels” requiring a bailout, she said.

Where does one even start...

Maybe by pointing out that in addition to all of the above, both the PBGC and the USPS are also bankrupt.

Now if that doesn't totally piss you off, nothing will.  These clowns take firms into the ice berg and then they "retire" or leave in disgrace, but get their full golden parachute. 
Instead of going to jail or being dismissed in disgrace, it's all the money they can carry...into the sunset.  Sickening.  Then again, those who are making the laws don't seem to have much in the way of ethics....
Ever wonder how so many enter congress as middle class but a few short years later are reporting million dollar portfolios?  But of course its congress that has set up programs like the EBT which has caused more and more people to not even worry about working.  Here is a music video from a young singer about the EBT.  That's the food stamp card that is now used.  This is a little raunchy but the song is representative of the way it is.  We are doomed...(you probably will not want to listen to the whole song as its absolutely terrible, but make sure you watch the last 30 seconds) (thanks to Linda for the link of this singer being interviewed)
Here is a chart showing the growing spread in interest rates between Europe and the U.S.  Believe it or not, the dollar is less bad then the Euro.  The Euro is likely on its last legs.
All of this leads back to true money.  Here is an interesting article about the chicanery in the gold swap market:

Important: US-UK Gold Swap Contract

It looks like its the contract for the gold swap that the US Treasury did with the UK Treasury as part of the Iran hostage deal in January 1981.

The Iranians had gold at the Fed. This was seized. Then for some reason the US Treasury had to source some other gold as part of the deal. Where did the original Iranian gold go? And it's puzzling as to why they couldn't source good delivery bars and had to use US-government stamped bars. Notice the wording is vague about fineness for these bars. A certain number of bars just has to add up to the approximate total fineness of the London bars.

Anyway, it raises questions as to why they needed to do this swap in the first place, and how long was it outstanding, and whether similar swaps (but not through the UN) were done subsequently; and it's a good template if any legal people want to examine it as an example.

Respectfully, this smoking gun evidence that the U.S. Treasury [via the N.Y. Fed] was involved in gold quality swaps with the Bank of England as early as 1981 does MUCH MORE than raise questions – it PROVIDES ANSWERS:

The referenced gold quality swap was for the expressed purpose of procuring “good delivery bars” of gold bullion. What the good delivery bars were required for at that time is moot. Known [advertised] U.S. gold reserves [8,100 metric tonnes] are supposed to contain 4,500 tonnes of good delivery bars of gold bullion – which the U.S. Treasury has steadfastly maintained has not been altered or otherwise “in play” for decades. The fact that America needed to procure good delivery bars tells us that back in 1981 – the U.S. DID NOT POSSESS ANY GOOD DELIVERY BARS of gold bullion. Additionally, the notion that America needed to mobilize “coin melt” as early as 1981 would carry with it the strong likelihood that the U.S. has “burned through” or squandered their ENTIRE STASH of sovereign gold bullion – and perhaps owns NONE.

Do note how the communications between the U.K. Treasury and U.S. Treasury are addressed to the N.Y. Fed on behalf of the U.S. Treasury [specifically, this would be for the Exchange Stabilisation Fund or ESF – a secretive arm of the U.S. Treasury unaccountable to Congress that EXCLUSIVEY operates through the N.Y. Fed]:

In the case of the United States Treasury to:

Federal Reserve Bank of New York
Fiscal Agent of the United States
33 Liberty Street
New York, New York 10045
Attention:Foreign Department

And in the case of the U.K.:

In the case of HMG to:

Bank of England
Threadneedle Street
London, EC2R BAH
Attention: Foreign Exchange Division

Note how the Bank of England deals with gold bullion through their foreign exchange division. This underscores and serves as further confirmation that GOLD IS AND ALWAYS HAS BEEN MONEY.


What these revelations tell us is that Central Bankers LIE, DECEIVE and HARVEST what is sacred / the tangible wealth of countries in which they operate. The notion that such atrocities could and do happen without being widely disclosed should no longer be hard for anyone to grasp. Powerful men and “leaders” entrusted to safeguard what society holds dear have clearly demonstrated their propensity to conspire, hide, obstruct and remain silent even when confronted with OVERWHELMING EVIDENCE - while that cherished treasure is defiled, stolen, sodomized or discarded in the name of protecting and perpetuating the status quo.

“We came, We saw, We stole”

Whatever is being “stored” at Ft. Knox – rest assured IT IS NOT GOOD DELIVERY BARS OF SOVEREIGN U.S. GOLD BULLION. It’s likely not gold at all.

Wake up people.

The US gold is likely gone.  At least its not where its supposed to be.  Gold will be higher in the future.  If Europe fails this could accelerate.

Is Italy Next to Fail and Will Gold Go to $3,000 an Ounce?

Tuesday, November 08, 2011

Commentary by Peter Morici, Ph.D.

Europe is approaching the end game. Credit markets and other governments know what its leaders won't admit, namely the euro is failing. And then gold, more than the dollar, is set to rocket in value as the crisis unfolds.

In addition to looser monetary policy, i.e., generous European Central Bank purchases of member country bonds,and austerity-higher taxes and less spending across most of the EU states, Eurozone governments have a three pronged policy for avoiding a contagion: the European Financial Stability Fund to purchase and insure bonds of troubled governments; IMF supervision of finances for those governments; and direct loans to several governments -- and in Greece's case, a 50 percent haircut on private holders of the debt. None of those three policies are working out.

Even with the haircut for private bondholders, Greece will have a debt to GDP ratio of 120 percent a decade from now, if everything goes right. Virtually no independent economist expects things to go that well, and most regard the situation as wholly unmanageable.

In 2012, Eurozone growth will be near zero and the continent may fall into a serious recession. With the austerity imposed by the bailout on Athens, the Greek economy will almost certainly contract substantially, and unemployment in Greece, now at 16.5 percent, could easily increase into the low twenties or even double. The crippling effects on tax receipts and demands for social assistance would thrust Greece into a second default, imposing even greater losses on private creditors, who are likely to get only 25 cents on a euro, if that much, when the music stops.

Much like a tropical depression incubating into a terrible hurricane, the Mediterranean contagion is likely already underway. Borrowing rates on Italian debt are nearing what financial analysts and economists view as the tipping point, seven percent. Investors are correctly nervous that Italy too will renege on a portion of its private debt, and fall of the Berlusconi government only makes their uncertainty worse.

A massive bailout from Germany with contributions from France and smaller northern states will ultimately be needed, or Italy will follow Greece into default. Such a bailout is not likely manageable given the resources and political climates in these countries. The collapse of Italy would mark the end of the euro.

The ESFS was established to backstop governments, like Italy, by purchasing some of their debt and offering private investors some insurance on their bonds. Initially, established with 440 million euro in contributions from Eurozone states, the fund cannot find private investors who will purchase its bonds at affordable interest rates, or backers among sovereign governments with available cash outside Europe.

Simply, private investors and other governments, notably cash-rich China and other big exporters, expect Italian and other European sovereign debt to fail. They are concerned the euro will simply implode all together, and then no European government will have both the resources and inclination to stand behind the ESFS's failing bonds.

With the implosion of Italy, Portugal and Spain would not be far behind, and French debt will come under closer scrutiny. At that point, investors will stampede from the euro-denominated debt of most governments, but with rates so low on U.S. Treasuries and too little Japanese and Chinese sovereign debt in open circulation, gold would become the asset of choice.

Moreover, all this could easily unfold as the Super Committee in the U.S. Congress races toward a stalemate on an acceptable combination of tax increases and spending cuts. With such dysfunction in Washington, investors would realize that U.S. debt, though still manageable, is racing to an unsustainable level mighty fast, and would start fleeing Treasuries.

At that point, nothing is left but gold. Now trading at $1790, it could zoom right past $2000 to $3000 an ounce.

Peter Morici is a professor at the Smith School of Business, University of Maryland School, and former Chief Economist at the U.S. International Trade Commission.

There is no way that this will end well.  The short term is likely to be very volatile.  Get liquid so that you can take advantage of the any large drops.
GORO (closed $22.30, down $1.20, average price paid $6)
GORO had excellent results this week:
Gold Resource Corporation Reports Record Third Quarter Results; Increases Precious Metal Gold Equivalent Production by 88% Over Q2 2011

COLORADO SPRINGS, CO--(Marketwire -11/09/11)- Gold Resource Corporation (AMEX: GORO - News) today announced record results for its third quarter ending September 30, 2011, including record profits and an increase of 88% in production of precious metal gold equivalent over the second quarter of 2011. Gold Resource Corporation is a low-cost gold producer with operations in the southern state of Oaxaca, Mexico. The Company has returned over $30 million to shareholders in monthly dividends since declaring commercial production July 1, 2010.


  • Record production of 25,289 ounces precious metal gold equivalent (AuEq)
  • Record 88% AuEq production increase over Q2, 2011
  • Record revenue of $37.8 million
  • Cash cost of $154 per ounce AuEq
  • Record mine gross profit generated $31.2 million
  • Record pretax income of $24.3 million or $0.46 per share
  • Record net income of $15.2 million or $0.29 per share
  • Record dividend distributions of $7.4 million, or $0.14 per share for quarter
  • Physical gold and silver treasury of $1.7 million
  • Stock repurchase of 51,000 shares
  • Increased cash in bank to $45 million

Overview of Q3 2011 Results from El Aguila Project

Gold Resource Corporation's El Aguila Project produced 25,289 ounces of precious metal gold equivalent (AuEq) at a cash cost of $154 per AuEq ounce and realized average prices of $1,702 per ounce gold and $38 per ounce silver for its sales during the third quarter. The mine generated gross profit of $31.2 million. The Company paid $7.4 million to shareholders in dividends, converted $2 million of its newly generated cash into physical treasury of gold and silver to potentially mint into coins and repurchased 51,000 shares at an average share price of $19.01, after which the Company increased its bank account by $2.9 million over the previous quarter. In addition, the Company had receivables of $14.7 million.

"Our excellent team at the Aguila Project continues to execute and build the Company. We believe that Gold Resource Corporation's trajectory, with record production, record revenues and record dividends, is set on aggressive growth," stated Gold Resource Corporation's President, Mr. Jason Reid. "Optimization of our operations over last quarter includes a 40% increase in the average tonnes mined per day, increases of metal recoveries across the board, a 65% gold grade increase and 27% silver grade increase. In addition, gold production was up 134% and silver production up 82% compared to the second quarter 2011."

Mr. Reid continued, "We are on track to reach our production goal for 2011, targeting a range of 60,000 to 70,000 precious metal gold equivalent ounces."

Below is a table of the key production statistics for our El Aguila Project during the three months ended September 30, 2011.

These are outstanding results and are a great indication that the future is bright for GORO. 
Mexus Gold (closed $..09, down $.01, average price paid, $.22)
Mexus continues to fall like a rock.  There is no real change in the company other than things are not going to be as easy as thought.  If you have any quantity of this, its nearly impossible to sell as there is limited volume.  As I warned many times, don't put money here that you can't afford to lose.  Believe it or not, this could still be a home run. 
Alexco Resource Corporation - AXU (closed $7.11, down $.75, recommended at $7.90)
Stocks (Current status, short, short initiated October 15)
I continue to accumlate cash.  The stock market is very dangerous at this time.  
Physical Gold (Closed $1773, up $24, average price paid $395)
Physical Silver (Closed $33.77, down $.87, average price paid $5.31)
I'll close with a video that is quite an interesting social experiment.  Have a great week!