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GOLD
 
Gold is only one thing, money.  It's not a commodity.  It's not a liability.  It's not an asset class.  It is money.  What is the future for gold?  I think it is up.  Time frames are not predictable, but the ultimate direction is.  Gold is an ABSOLUTE necessity for your portfolio.  No excuses.  Gold has made new highs for 10 straight years.  Do you know of any other investment that did that?  There isn't any.  One thing that most people don't know is that the gold of the United States is never audited.  Why is this?  How hard could it be.  EVERY government agency does an audit of all equipment over a couple thousand bucks.  Why isn't the gold counted.  Is something being hidden?  Is it gone?  From GATA:
 

"WhyWon't the Fed Show Us (the Taxpayer) Our Gold?

For some reason, Ben Bernanke and the Federal Reserve have decided that they do not need to show the world, and especially all the inquiring U.S. Taxpayers, proof that the U.S. Mint holds in physical custody the 8100 tons of gold that the U.S. has been reporting going back to the Bretton Woods Treaty signed in 1944. The last time a genuine independent audit of the 8100 tons was performed was when Eisenhower was President.

The question is raised then, how come the Federal Reserve is putting up a formidable legal blockade in order to prevent GATA (the Gold Anti-Trust Action Committee) from gaining access under repeated Freedom Of Information Act inquiries? Wouldn't everyone reading this like to see, for sure, that the 8100 tons really exists? This is OUR gold folks.

Here's a link to the latest attempt by GATA to force the Federal Reserve to show proof to the world that the United States' gold holdings is bona fide:

Please Ben, Show Us Our Gold

Undoubtedly, this issue among several, are the reasons why the Fed hired the former Enron chief lobbyist, Linda Robertson, and is spending millions to fight the attempt of Congress to force an audit of the Fed. At last count, Ron Paul's HR 1207 had 282 co-sponsors - and Barney Frank is sitting on that Bill in Committee and it would overwhelmingly pass a Floor vote - and Bernie Sander's similar Bill in the Senate now has 23 co-sponsor's. Moreover, polls show that 75% of all Americans would like to see this Legislation passed into law.

Here's my compromise: forget the full audit, just show us our gold. What are you trying to hide Ben?"

 

What if the gold is not there?  Do you suppose that would have a positive effect on the price of gold?  Might the government want to keep the "canary in a gold mine", so to speak, under wraps?  I firmly believe that gold is a fundatmental concern of the Fed and they will do anything necessary to keep it's price under control.  I intend to use this information to my benefit.  The key to the gold price suppression is the physical market.  When a physical market runs out of physical, the paper market loses.  That day in gold is much closer to happening.  This also applies to silver, although in a less significant way.  Here is some very encouraging news for silver, again from GATA:
 
"For the last two years I have followed the economic events with a bit of disbelief that the cartel could repair the damage. There have been so many bullish events for gold and silver which have had little or no effect on their prices, that when another bullish event occurs, it is human nature to think it will have little effect also. I think the recent moves by China are going to change this status quo. One of their moves was to nearly eliminate exports of rare earth minerals of which China produces nearly 90% of the world total. Their most recent stunning move was the declaration that their government run companies reserve the right to default on their derivatives. The one that will kill the cartel though is their legalization of silver ownership by Chinese citizens. As far as I can tell, Chinese officials announced this change on July 30, 2009. The silver price at that time was $13.40/oz. The price now is $15.38/oz which is a $2 gain in one month. This has to have the cartel talking to themselves with a sense of impending doom. America was supposed to be the free and capitalistic country and China was supposed to be socialist at best, but now Chinese officials are promoting silver to their citizens and telling them that it is undervalued. Can you imagine U.S. Press Secretary Robert Gibbs doing that? The bars for sale to the Chinese public are ½, 1, 2, and 5 kilograms of silver which equate to 16, 32, 64, and 161 ounces each. There are 400,000,000 households in China and the government is recommending that they invest 3 to 5% in precious metals. Can you imagine if just 10% of these households buy a ½ kg bar per year? That is 40,000,000 x 16 = 640,000,000 ounces of silver per year. That’s your total world annual silver mine production right there. If Bunker Hunt and a couple of Arabs could take silver to $50, what can 1,300,000,000 Chinese do? Pick a number, $50 silver? $100 silver? Regards,
Bryant"
 
Silver, the poor man's gold, will outperform gold.  This is due to it's relative shortage.  Remember that silver is rarer than gold and that will be reflected in it's price, sometime in the future. 
 
 
 
October 25, 2009
Why Gold Will Save You
 
There are many of you reading this who still haven't purchased any gold or silver.  I am going to try to convince everyone reading this that you NEED gold.  Not only will it go up in price but it may be the only thing left standing after the collapse which I see coming sometime within the next three years.  This could happen next week for all I know but I am convinced it will happen in the next few years.  If I'm right, and you don't have gold you could literally be wiped out.
 
First of all, why don't you have gold?  It has been going up for 8 straight years.  It has been the best performing asset class on the planet:
 
 
 
 
 
 
I showed this chart awhile back but it is important.  Don't you think if stocks had went up for the last 10 years at better than 10% a year that it would be a headline?  I wonder why it's not a headline when gold does that?  Do you think that's on purpose?  I do.  The elite have run the financial curriculum in the major universities for decades and there is an antigold bias.  Gold is a direct competitor to the fiat (fake) money that we use today.  Gold is always viewed as "risky" or volatile.  It is volatile, but that is also on purpose.  The central banks and government make sure the price of gold is "managed". This management makes the price gyrate at much wilder swings then would otherwise occur.  This is mostly done on takedowns of the price.  These are harrowing rollercoaster drops which leave anyone holding gold with increased anxiety and doubt.
 
 
  
 
 
This is to dissuade you from getting involved in this area.  It's "scary".  "That's not for me, I can't take the drops."  This is the mindset that they want to infuse in you.  You have to ignore this and look at the chart above.  This is the true story of gold.  Let's see if anyone else things gold has merit:
 
 
"Pension funds will increase gold holdings to acquire "financial insurance," pushing prices higher as currencies drop, according to Shayne McGuire, director of global research at the Teacher Retirement System of Texas.

"I think the largest institutions like our own are realizing that we barely own any," McGuire said in an interview in Hong Kong. "The same thing applies to most of the pension funds which manage trillions of dollars in world wealth." Record government debt and interest rates close to zero percent are pushing gold higher for a ninth straight year as investors seek to protect their wealth against the prospect of rising inflation and currency debasement. Teacher Retirement, backed by $95 billion in assets, has launched its first internally managed gold fund, worth $250 million, invested in precious metals, mining stocks and exchange-traded funds.

McGuire is the portfolio manager of this new fund. The fund is "a reflection of our interest in gold," said McGuire, the author of "Buy Gold Now" published in March 2008 that correctly predicted the metal will rally. "That's mostly because of diversification" that benefits our overall portfolio.

Gold represents only 0.4 percent of total global financial assets valued at around $200 trillion in 2007, McGuire said, adding the future focus for the metal was investment demand.

"The interest in the gold sector continues to be strong," said Stephen Goodman, investment banker with New York-based Casimir Capital L.P. "We are pleased to connect a growing number of institutional investors globally with opportunities."

 
 
There are several interesting things in this clip.  First, the fact that something that has been money for over 5000 years is barely owned, makes my mouth salivate with anticipation of the future. The key thing here is the number .4%.  That is total value of gold compared to all other assets.  Hmmmmmm....  that doesn't seem very high.  If the total were to increase to 1% that would mean an increase of 150% in demand.  If demand went up that much, how high do you think gold would go?  The low for gold as a percentage of financial assets was around 2000-2001.  I estimate that the percentage was around .2% at that time.  Going from .2% to .4% has caused gold to go up about $800 dollars.  Going to 1% gives another $2400 gain, or a price of $3450 per ounce.  As the financial system goes into more stress, more people will start buying "insurance".   You must own gold.
 

"Our Drunken Uncle

Posted 10/21/2009 07:23 PM ET

Spending: According to two separate Government Accountability Office scenarios, America's long-term fiscal outlook is "unsustainable." No surprise, since Uncle Sam is spending like a drunken sailor.

The GAO, Congress' in-house think tank, warns that in "little over 10 years, debt held by the public as a percent of GDP" will hit a record high, exceeding the debt-to-GDP ratio seen after World War II. Then it will "grow at a steady rate thereafter," according to the government forecasters.

"Social Security cash surpluses, which have been used to help finance other government activities, are projected to turn to cash deficits by 2016," the GAO warns.

The agency's fall update of its "Long-Term Fiscal Outlook" adds that "the Social Security trust fund will be exhausted in 2037, 4 years earlier than estimated last year." The Medicare trust fund's day of reckoning, meanwhile, "was also moved forward by 2 years to 2017."

The GAO used two simulations, an optimistic one making the assumption of historically lower-than-average nonentitlement spending and higher-than-average tax revenues, and a second model assuming that spending and revenues would keep to historical averages. But "both simulations show that the federal government is on an unsustainable fiscal path."

The non-optimistic simulation "shows persistent annual budget deficits in excess of 7% of GDP — levels not seen since the aftermath of World War II." Under that scenario, "roughly 92 cents of every dollar of federal revenue will be spent on the major entitlement programs and net interest costs by 2019."

Even if revenue remains constant at 20.2% of GDP — higher than the historical average — by 2030 there will be little room for "all other spending," which includes "national defense, homeland security, investment in highways and mass transit and alternative energy sources, plus smaller entitlement programs such as Supplemental Security Income, Temporary Assistance for Needy Families, and farm price supports."

It sounds like doomsday. But the politicians who run Washington are ignoring the dire warnings.

This week, House Speaker Nancy Pelosi is convening a gaggle of ideologically friendly economists with the aim of getting cover for yet another stimulus — even though the last one of $787 billion made no discernible dent in unemployment, which threatens to reach double digits.

And Sen. Ben Cardin, D-Md., appearing on Fox News Wednesday, spoke for lots of his fellow liberals in blithely proposing a brand-new, massive entitlement in the form of a government-run health scheme, claiming that "a public option helps bring down the costs."

Also appearing on Fox Wednesday, Sen. Judd Gregg, R-N.H., after accusing Democrats on the Senate floor of a "Bernie Madoff approach to (health care) funding," warned that when disguised funding is tallied up, the true cost of Congress' proposed government health takeover — even without the public option — is $1.8 trillion.

Government spending is burning our children's futures to the ground, yet our "leaders" in Washington think it's time to spray the kerosene of still more spending on the fire."

 
 Unsustainable.  That's the one word that describes this country's behavior and especially the government's.  Things WILL change.  Either by choice or necessity.  How fast is the government going broke?: (from contraryinvestor.com)
 
"One last economic/financial market theme for this discussion we see emerging from the Flow of Funds numbers.  As you already know, Federal Government debt has been almost geometrically expanding over the last four quarters.  It’s a veritable explosion.  Over the last four quarters, “stated” Federal debt in the FOF numbers is up 36%, or $1.9 trillion.  Just for perspective, $1.9 trillion was the sum total of stated government debt in the FOF report (which we know is wildly understated) at year end 1987.  It’s also equal to the total growth in stated government debt since 2001 through the second quarter of 2008.  Are these big numbers?  These are big numbers."
 
How does this look graphically?  This was the accompanying chart:
 
 
 
 
That is one horrific looking chart.  Does that look like something that will easily go back to "normal"?  No, it doesn't.  In fact it's probably impossible at this point to back off and stop the party.  The course has been set and the car started down the track.  Get prepared.  The only thing that will ABSOLUTELY save you is owning physical gold.  Nothing else.  Nothing.  I've looked.  It doesn't exist.  With nonsense like this continuing, you better believe me:  (From GATA)
 
 
 
"Here is the Goldman, Sachs & Co. revenue break down for the past 3 months:
  • Financial Advisory-M/A: 325 million.
  • Equity Underwriting: 363 million.
  • Debt Underwriting: 211 million.
  • Trading-Principal Investments: 10 billion.

Notice that 10 billion is much bigger than two or three hundred million made from the traditional Wall Street businesses.

That $10 billion is evidence of their magic trick. For we the taxpayer gave Goldman Sachs the following:

  • 10 Billion in TARP
  • 11 Billion from the Fed
  • 30 Billion from the FDIC
  • 13 Billion from AIG"

 

Now notice that the amount given to Goldman is WAY more than their "profits".  In fact, profits from normal sources are pretty small, they are only in millions.  How can a company be given so much money (thousands of times more than they normally make) and then they are lauded and cheered when they show they "made" money by how........trading.  Wait....trading?  How could they be so much better traders than others?  Hmmmmm.....maybe this cartoon has something to do with it:
 
 
 
 
 
 
Now, I think we're on the right track.  All these guys "advising" us are from Goldman.  You don't think they would tip off their "expert" traders about what was coming down the pike do you?   Nah...that's nutty.  They wouldn't be padding their own wallets before times get tough?  Not likely.  But you know, just in case I'm going to keep my gold and if you don't have any, it is imperative that you get some.  It might come in handy some day.  If need help buying let me know. 
 
 
 
I did a little research this week in regards to the ETF GLD.  An ETF is like a mutual fund but can be traded throughout the day instead of just at day's end.  There are now hundreds of these things tracking everything from the Dow Jones Industrials to the price of natural gas.  GLD is a gold ETF which supposedly is backed by enough real gold to have all shares exchanged for the real thing.  If true, this would be a great alternative to taking delivery and storing it yourself.  The ETF charges a management fee, but this would be close to same as your storage fees, about 1% a year. 
 
I took the prices of both gold and GLD and divided gold by GLD.  This should be real close to 100% if investors were confident in the fact that the ETF had the gold they claimed.  Here is what I found:
 
Date                  GOLD            GLD            Gold/GLD
12/20/2004        $442              $443.40          99.7%
6/27/2005          $439.20         $439.1           100%
12/5/2005          $508              $507.8           100%
6/19/2006          $566              $563.60        100.4%
12/26/2006        $624              $619.80         100.6%
6/11/2007          $653              $647.0           100.9%
12/3/2007          $791              $782.8           101%
6/16/2008          $883              $870.10         101.5%
12/22/2008        $847              $834.6           101.5%
6/15/2009          $955              $937.1           101.9%
12/7/2009          $1158            $1131            102.4%
12/17/2010        $1376            $1343             102.5%
 
 
As you can see the value was at parity for about a year (GLD was started in 2004) and then slowly started to trade lower and lower in relaiton to the real deal.  This shows a few things.  First, for about a year GLD was viewed as EQUAL to gold.  Remember investors as a whole are smart and figure things out if they are amiss.  Information will eventually leak out if shenanigans are in play.  So for a year, everything was fine.  Then, things started to change as the price of gold moved further and further ahead of the the physical.  The real item now trades almost 2 1/2 percent higher than the fake GLD gold.  Now if GLD truly had it's shares backed by 100% gold, this shouldn't be possible.  As I said the storage fees should about equal the management fees of an ETF.  So what is up?
 
I firmly believe that GLD is a SCAM.  No one can audit their gold.  It can be stored anywhere and the prospectus is about as clear as mud.  The Central Fund of Canada (Symbol CEF and another investment vehicle that represents real gold) on the other hand has audits and shows actual bar numbers.  Which seems more trustworthy?  Don't buy GLD or SLV (silver's ETF) as they are only vehicles to syphon demand away from the physical market to dampen prices.  If you buy these, you are in effect, LOWERING the price of gold.  Not exactly why you buy them, eh?