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November 20, 2010
Issue 123  -  Insanity, the New Normal
This country is, unfortunately, on the wrong path.  A path of less rights, more corruption, more lying, and a general deterioration.  This has been a gradual thing but recently, its seems things have the downside.  At the top of the list for me is the increased idiocy of the TSA.  This group of inadequately trained thugs, who I'll admit, are merely following orders, have reached new lows:
Feel safer yet?  Me either.  This complete descent into idiocy is becoming so unbearable for me, that I am seriously wondering what country I live in.  Is this Nazi Germany?  What's the reaction of the populace?  Let's see:
Different?  It's ok????  I'm sorry, but these are words of sheep.  Even my wife sometimes falls for this "safety" argument, "Well if it keeps the plane from getting blown up, I'll do it."  You see the problem with this argument is that it's NOT one or the other.  Safety OR infringements on my rights.  There are other options, other courses of action, the best of which is what Israel does, profiling.  But we can't do that, it might hurt someone's feelings.  I ask you to remember the great words of one of the founders:
"They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety. -Benjamin Franklin (1775)"
You only have the rights that you claim.  If you voluntarily give up your rights, you no longer have them.  This is a giant indoctrination scheme to set the stage for more right thefts.  I'll bet you didn't know that airports can opt out of the TSA.  Some are looking into doing just that.  You know what will happen to business at these airports?  It will go up.  People just aren't thinking here.  The bogeyman in the shadows is the perfect mask for these egregious infringements.  Former Governor/wrestler/seal Jesse Ventura has in fact, decided to not fly anymore.
Penn Jellette of Penn and Teller, called the police when the TSA official touched his "junk".  He told the official that it is assault to do that without asking and the official replied that, "Once you cross that line, I can do whatever I want."  REAAAAALLLLLY Mr. TSA official?  So could you shoot him?  Kick him?  You see, these "officials" have such meager training that they really aren't even thinking through what they are doing.  I'll tell you this, NO line allows you to do "whatever you want." 
Where else is the squeeze on our freedoms?  Health care.  Now for a video about what is happening in that area that will make your blood boil:  (thanks to Bob W.)
The biggest WTF in this video is the idea that a doctor is going to HAVE to tell Washington DC what the patient is exhibiting and then do what THEY say?  Or else face a $100,000 fine???  Second offense, go to jail!  Even if the doctor knows that the prescribed treatment is not the best for the patient IN FRONT OF them!  How in the hell can someone hundreds or thousands of miles away be a better judge of the treatment needed than the in room doctor?  There is also talk of already forcing groups into the "voluntary" government plan.  This was the plan from the beginning.  Amass everyone into the government plan and it's just as good as a single payer system.  As far as this ever reducing costs, don't hold your breath:

S&P: US Healthcare Costs Rise 7.08% Over the 12-Months Ending September 2010

PR Newswire

NEW YORK, Nov. 18, 2010

NEW YORK, Nov. 18, 2010 /PRNewswire/ -- Data released today by Standard & Poor's for the S&P Healthcare Economic Composite Index indicates that the average per capita cost of healthcare services covered by commercial insurance and Medicare programs rose 7.08% over the 12 months ending September 2010. This is a slight deceleration from the +7.31% reported for the 12 months ending in August 2010.

Claim costs associated with hospital and professional services for patients covered under commercial health plans rose 8.54% over the last year, as measured by the S&P Healthcare Economic Commercial Index. On the other hand, Medicare claim costs for services rendered by hospitals and physicians rose by a more modest 4.68%, as depicted by the S&P Healthcare Economic Medicare Index. These two indices also saw some growth deceleration versus their August reports of +8.64% and +5.07%, respectively.

This will become the norm.  There is no savings on a government program that is implemented in a piece meal manner.  A straight across the board government run program would save money. (and I'm totally against that idea)  A mish mash of multiple systems all kluged together will not.  These same government knuckleheads saying this new system will save money, are still pulling this nonsense: (from GATA)

Remember last Friday's payrolls numbers--the ones that blew away expectations about the number of jobs created and got everyone talking about recovery again?

Well, even at the time those payroll numbers were confusing, because the other part of the jobs report--the "household survey"--showed yet another crappy number.

But by pointing to the crappy household number and ignoring the payroll number, the bears seemed to be trying to make lemons out of lemonade.

But it turns out that there was a simple reason why the payroll numbers looked so good--a reason that had nothing to do with underlying strength of the jobs market.

What was that reason?

The government changed the "seasonal adjustment" it made to the payroll numbers--and, in so doing, boosted the number of "jobs" created in October by 100,000.

Stephanie Pomboy of MacroMavens (via John Mauldin) explains:

" 'The seasonal bar which the payroll data must jump was (inexplicably and dramatically) lowered from prior Octobers.

" 'Thus, in October 2009, the BLS set the bar at 870,000 jobs, similar to the 840,000 it anticipated in October 2008. This year, by contrast, it lowered the bar to 768,000. Mumbo, jumbo, payrolls presented "an upside surprise" of 100,000.'

Alan Abelson of Barrons (again via John Mauldin) adds the following:

"According to John Williams at Shadow Government Statistics, the BLS' fiddling with the figures via what he calls 'seasonal-factor games' actually created 200,000 phantom jobs last month. John cites such finagling as the reason his prediction of an October decline and a rise in the jobless rate was wrong. It also explains why seasonally adjusted payrolls were revised upward by 110,000 in September, including 56,000 in August."

In other words, it wasn't that there were a surprising number of jobs created in October. It was that the government changed its "seasonal adjustment" assumption in a way that made it look as though there were a surprising number of jobs created in October.

Now, seasonal adjustment is an art not a science. And maybe the new seasonal adjustment is more defensible than the old one. But if our government is going to publish a number like this that represents such a major "surprise," we would expect it to at least be upfront about the reasons for the surprise. And in this case those reasons had NOTHING to do with the jobs market, and EVERYTHING to do with the seasonal adustment assumption.

More "adjustments" that just happen to make things look better?  Say it ain't so.  As I've said in the past to the point of nausea, things are so bad that officials have no choice except to jigger and lie.  It is the norm, but you don't have to believe them.  Use your brain and stop watching CNBC.   
On another front of fraud, this chart comes from zerohedge where a guy created this chart to show where his mortgage note had been: (thanks to Jim)
This chart shows the complete nonsense that is our mortgage industry.  Can you look at this and tell me the mortgage mess is just a "paperwork" issue?  Probably, but that implies fixing it will be easy, it won't be.  This could take years to work out.  I hope it ends with some of these crooks going to jail.  I'm not holding my breath. 
Speaking of confusion and trickery, how about that SLV ETF:

ALERT: Questions Raised Over Audit at iShares Silver Trust ETF

A blog site, Stock Psychology, is raising some serious questions about an audit document that appears to be on the site of the iShares Silver Trust ETF.

The iShares Silver Trust ETF audit document purports to be an audit of the silver held by the ETF. However, the, at times, casual tone and limited detail of the audit document relative to other audit reports by the auditor, Inspectorate, is causing Stock Psychology to question whether the audit document was indeed issued by Inspectorate.

Here's the audit document posted on what appears to be the web site of iShares Silver Trust ETF. Here's an audit document from Inspectorate for another audit they completed. Notice, the difference in the size, tone and detail of the two audits.

Stock Psychology is suggesting that the audit certificate posted by iShares Silver Trust ETF is not genuine. Because of the late hour no one was available for comment. I'll have more tomorrow. Here's the
full Stock Psychology post, which was written by someone whose first language is obviously not English.

The sponsor of the ETF is BlackRock Asset Management International Inc. The trustee of the ETF is The Bank of New York Mellon and the custodian is JP Morgan Chase Bank N.A., London branch, so there are clearly heavy hitters behind this. But the remarkable difference in every aspect of the two audit documents cries out for explanations.

These "investments" should be avoided at all costs.  Not only could they blow up at any moment, but they are in fact, hurting the price of the very thing you are trying to buy.  People buying this crap are taking REAL demand away from the physical market and shifting it to make believe.  Zerohedge also had another discovery regarding this ETF:

SLV ETF Adds Massive 523 Tonnes Of Silver In Current Week
Submitted by Tyler Durden on 11/12/2010 17:06 -0500

Commodity Futures Trading CommissionExchange Traded Fund

There were some very odd occurrences in the world's largest silver ETF, the iShares SLV. After the exponential increase of the price of silver in the spot market, almost hitting $30/share on November 9, the SLV ETF, which like GLD purports to holding the underlying precious metal, saw a massive basket creation demand, amounting to a whopping 523 tonnes of actual silver added to the fund's holdings (equivalent to 16.8 million ounces, at a cost of about $456 million) for the week ending November 12, currently at a record 10,718 tonnes. While we don't purport to knowing how much free silver is available in the open market, the possibility that any one entity could have managed to purchase such a massive amount of actual silver, of which 352 tonnes was supposedly acquired on November 10, without completely destabilizing the actual supply and demand mechanics, and creating a vicious loop where basket creation leads to a further surge in prices, is just slightly mind boggling. As we have speculated earlier, we expect comparable activity in the GLD ETF to follow suit. Additionally, we will shortly look at this week's CFTC COT data to determine just how massively JPM's silver short has impacted the firm's P&L.

P.S. for those who may be wondering, the custodian, i.e., entity in charge of vaulting the "silver", is good oleO-lawsuit embroiled HSBC. (full SLV prospectus link)

So they added 352 tons in one day???  That's over 11 million ounces.  I sure would like to know how the mint can't get enough silver blanks to mint silver eagles and yet this outfit can get 11 millions ounces in one day.  Does that pass the smell test?  AVOID these things like the plaque.  They are there to control the prices of the underlying asset, not to track the commodity.
There was news this week on Mexus Gold:

Photo Release -- Mexus Gold U.S. Announces Successful Alaska Cable Pulling Operations

CARSON CITY, Nev., Nov 18, 2010 (GlobeNewswire via COMTEX) -- Mexus Gold U.S. /quotes/comstock/11k!mxsg (MXSG 0.27, -0.03, -10.00%) , is a mining company engaged in the evaluation, acquisition, exploration, salvage and recovery of gold, silver and copper projects. Mexus is pleased to announce the results of its recent cable pulling operations in Alaska were successful. On October 29, 2010, the Mexus tugboat "Caleb" and its 230 foot barge arrived in Ketchikan, Alaska. The tug and barge are fully equipped with automated cable pulling and underwater electrical equipment, magnetometer, underwater cable identifier, remote cameras and a high definition scanning sensor, and a cable left buoy marking system.

CEO, Paul Thompson stated, "The automated cable pulling equipment worked as designed. On November 11, 2010, we located our target cable, and then we were able to grapple on to the cable. We pulled one end into our cable pulling machine, pulled it up and cut the cable into 7' foot lengths. We were able to retrieve the material at the rate of approximately sixty feet per minute. Samples of the cable retrieved in this initial operation will be sent to the processing center for analysis to create a procedure for bulk processing of the salvaged material. We plan on shipping a container load of the salvaged cable to Walnut Grove, California, for analysis." Paul Thompson went on to state, "The operation put the crew and equipment through a vigorous test due to weather conditions and everything went extremely well with no mishaps. The tug boat, barge and equipment are now in transport to its home base in Washington. Mexus plans to add additional personal quarters aboard the barge so we can operate 24 hours a day stating as early as mid March 2011, weather permitting."

This news is good, but not what some were expecting as the stock sold off.   Here a couple of pictures that were linked with the press release.
This shows the cable being pulled into the boat.  Here is a shot of the cable that has already been cut.
So where does that leave Mexus?  Let's start with the bad.  The first thing that you'll notice in the pictures is that the cable is nowhere near as big as what I've shown previously.  This is a smaller cable.  That being said, they have presented their estimates for the spring on the knowledge of this size so they are planning to collect more of the smaller cable and that will give a similar value per load.  I believe the thicker cable is in deeper water.  A second negative is that they are not going to get any income from this shipment as it was apparently pretty small.  The last negative is that news might be lacking this winter which could lead to further share price weakness.
Now for the positives.   They announced that they will be up and running this spring.  From their previous estimates this will be very profitable.  Pulling millions of pounds of cable will make them lots of money.  This should prevent them from having to issue more shares which is a big positive.  The key news to me here is that the puller works.  If that wasn't the case, that would be serious trouble.  Yes, they didn't pull that much, but the weather was rough up there with rain every day and temps in the 40s.
So where does this leave us?  The share price dropped quite a bit this week and I wouldn't be surprised to see further deterioration.  I don't think this is a stock to sell at this point.  Patience is usually rewarded in this type of effort.  I expect to see activity on their gold properties this winter which could provide news and they could begin efforts to pull cable in the deep (warmer) water.  Pulling all year seems like a no brainer now that the concept is proven.  I imagine this will take different equipment   By the same token, I wouldn't be buying just quite yet here.  If the stock gets back to the 16-18 cent range, I would then be back in there buying.  You can't panic with this type of stock and if you're too worried here, then you didn't take heed of my warning that this is a SPECULATION.  Money you can't afford to lose shouldn't be put in this company.  On an overall basis, I'm very satisfied with the announcement from the company.
Goro  (closed at $23.10, unchanged, average price paid, $6.10) 
Mexus Gold  (closed .27, down 9 cents, average price paid, $0.20)   
GORO June 11, call options, strike $20 (closed at $5.80, up $0.30, average price paid, $5.60)
I'll close with a video of a Japanese girl who is doing the arcade pop a shot basketball game.  Before watching, take a guess how many shots she takes and makes in 1 minute.  I'll bet your guess is too low.....have a great week!