Curried Wealth Building
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October 9, 2010
Issue 117  -  Dollar Daze
 
 
I want to start this week with a chart which was shown at Lemetropolecafe.com:
 
 
That's a chart of the value of the dollar over the last 35 years.  That's just one sad picture.  We are dropping in buying power, year by year, and hardly anyone is aware.  Those of you reading this are a HUGE minority in the general populace.  Most of the sheeple just plod through life without a worry in the world.  All the while, the PTB sell this country down the river.  What's really sad is the sinking standard of living that is occurring.  This has been masked by the increases in productivity which have allowed countries like China to continue to lower prices.  As the dollar falls further, this will become more and more apparent.
 
A lot of people believe that low interest rates are signaling a coming deflation.  This is not the reason interest rates are falling.  Interest rates are low because there is a massive demand for the bonds from safe harbor buyers and also other countries trying to prop up their currencies.  Of course, if the demand isn't sufficient to keep rates low enough, the Fed steps in and just prints money out of thin air to take up the demand slack.  This has, of course, driven interest rates even further down:
 
Mortgage Rates at Record Lows
By Julie Haviv
October 7, 2010
 
NEW YORK (Reuters) - U.S. mortgage rates reached new record lows in the latest week as economic data raised the appeal of safe-haven government debt, according to a survey released on Thursday by Freddie Mac, the second-largest U.S. mortgage finance company.

While rock-bottom rates offer a glimmer of hope for a housing market struggling to find footing in the aftermath of the expiration of popular home buyer tax credits, their impact on home loan demand has been tepid. A weak jobs market and flailing economy continue to weigh on consumer confidence.

Interest rates on U.S. 30-year fixed-rate mortgages, the most widely used loan, averaged 4.27 percent for the week ended October 7, down from the previous week's 4.32 percent and the lowest on record, according to the survey.

This article was so interesting to me that I went and looked up rates, even though I just refinanced at the end of 2009.  What I found was truly astounding.  My rate in December was 4.75%, which was incredibly low.  Now, I can get a 3.875%!  This is just crazy.  Our system is in much worse shape than we are being told.  Add into that, this:
 

Bank of America halts foreclosure sales nationwide

California homeowner loans under a cloud as Bank of America halts foreclosure sales
By Patrick May pmay@mercurynews.com
Posted: 10/09/2010 07:34:19 AM PDT
Updated: 10/09/2010 07:38:51 AM PDT

The nation's accelerating home-mortgage crisis deepened Friday when Bank of America said it would immediately halt foreclosure sales in all 50 states, a development that for the first time pulls struggling California homeowners into the scandal surrounding questionable tactics by big lenders.

The decision by the nation's largest mortgage lender goes well beyond similar moves by other large banks that have frozen foreclosures only in the 23 states that have a "judicial foreclosure'' process, citing concerns about how legal documents were processed. California was unaffected by those moves because it has a nonjudicial foreclosure process, but BofA's decision could impact tens of thousands of borrowers in this state fighting to hold on to their homes.

"We're being overly cautious on this,'' said Bank of America spokesman Rick Simon, who added the review "should take a few weeks. We'll continue to process delinquent loans, but we won't proceed to judgment or sales while we review our processes.''

Several lenders have acknowledged recently that tens of thousands of legal affidavits were signed without the underlying facts being verified, casting a shadow on the legality of the foreclosures. BofA's action, said Kevin Stein of the advocacy group California Reinvestment Coalition, moves the crisis "beyond the judicial versus nonjudicial distinction. Putting a hold on foreclosures in all 50 states tells me they can't be sure they haven't been foreclosing on people unlawfully, regardless of what state they're in."
 
 
The whole system is being held together with duct tape and staples.  Officials signing documents without doing due diligence?  I don't buy the idea that this is entirely about delaying the final reckoning on house prices.  I believe that they literally DON'T have the proper paperwork.  They can't withstand any challenge in court, so they are trying to get things straightened out.  This will delay the inevitable. Also, why is no one going to jail?  Why isn't anyone even being INVESTIGATED?  This would lead to opening larger cans of worms that we just can't afford to be opened at this time.  So the band plays on while the Fed gets ready to "act" again:
 

More Fed help for economy now just a matter of time

October 8, 2010 | 

If there was any doubt left on Wall Street about a new flood of money coming from the Federal Reserve, the lousy September employment data reported Friday should have put it to rest.

Now it’s only a matter of time -- and a matter of how much the Fed wants to try to pump into the financial system initially via ramped-up purchases of Treasury bonds and possibly other assets. That is what so-called quantitative easing, or QE, is all about.

Financial markets’ reaction to the September jobs report has been relatively muted, but the trends of the last few weeks are staying in place: Bond yields are down and stocks are up -- the Dow index closed above 11,000, at a five-month high -- while the dollar is weaker.

Commodities were the standout Friday, with a key index of raw-materials prices surging 2.7% to a two-year high. They’re benefiting from the dollar’s woes and also from a surprise cut in U.S. crop-supply forecasts.

As for QE, Bank of America Merrill Lynch economists said in a note Friday that they expected an initial Fed bond-purchase program of $500 billion over six months, beginning in November.

The launch of that program should “assure a further decline in [bond] rates,” the economists said. They predicted that the 10-year Treasury note yield would fall to 2% by year’s end. If they're right, more record lows are coming for mortgage rates.

But there’s still a ways to go from current yield levels, and bond buyers seemed a bit cautious Friday: The 10-year T-note yield was at 2.38% at about 1 p.m. PDT, a new 21-month low but down just slightly from 2.39% on Thursday.

Some analysts aren’t convinced that QE will lead to lower bond yields. They think the market already has priced in future Fed bond purchases, with the 10-year T-note down from 2.96% just since the beginning of August.

 
What does the Fed have to show for the first round of QE?  (other than their large bank buddies still sitting relatively pretty)
 
 
That's right....nothing.  It's all a farce.  The big money interests protect their stuff, while you get fleeced.  It happens because they can get away with things like this from the Struther's Resource Stock Report:
 

The CRB index underestimates inflation by 100%
 
You can find the report at this link with all the supporting charts - Dated Sept 28th

Small Excerpt:

Black Box CRB Commodity Index Misleads Investors

I have reported on this a number of times in the past and as far as I know I am the only one to do so. For new readers, I have previously pointed out that the CRB Commodity Index that is widely followed and quoted in the main stream media is designed to severely understate commodity inflation or rising prices. The index was redesigned in 2005 and could not be explained with facts and numbers because the calculation on the new index is a 'black box'. We do know that the index is continuously rebalanced and weighted to commodities that are falling in price. That is all that we have been told on the Reuters/CRB web site until this year they published details on the calculation.

But before I get to that, the proof is obvious in the pudding. The index started 2005 at 310 and is now about 280 (down 10%) You go try to find any commodity that is lower in price now then it was in 2005. The exception might be Natural Gas and that is all. In fact all the other commodities in the index are way higher yet the index that measures them is lower. That says it all.

Struther's Resource Stock Report

This is all about misdirection.  Bread and circuses.  Can you otherwise explain how the commodity index is DOWN since 2005?  Almost every single commodity is up.  Let's see:
 
Gold 2005 about $500, today over $1300
Silver 2005 about $8, today over $23
Oil  2005 about $50, today over $80
Wheat 2005 about $160, today over $250
Coffee 2005 about $1.20, today over $2
 
Other than natural gas, which is extremely volatile, there is hardly a single commodity that isn't significantly higher.  So why is the index down 10%?  Deception.  It's that simple.  The dollar is headed much, much lower over the next decade.  Make sure you have gold and silver for protection.  You might even make some money.
 
Mexus
 
I've been doing some more computations on Mexus Gold.  Specifically, the submarine cable recovery.  Although it seems like they have some pretty good metal properties, the thing that REALLY interests me is the cable.  Here's a new photo of the automatic cable puller which is being affixed to the barge and hopefully nearing completion:
 
 
 
 
I wanted to get a better idea of what this company could be worth.  I took a picture of the cable and adjusted the size so that it was about life size.  I then measured the various portions of the cable.  The interior copper core is 1 1/2" in diameter.  The lead layer is 1/2" thick with an outside diameter is 2 1/4".  The outside is probably (this is uncertain at this point, but there have been sources saying that the other portions of the cable are more valuable than the copper which my analysis seems to confirm) an alloy of nickel and copper which is used for it's strength and non-corrosive properties.  These alloys usually have at least 60% nickel.  There were thirty one 1/4" diameter wires in the cable.  
 
I'll spare you all the calculations but the cable has the following amount of metal per foot of cable: (starting with the area of each metal from the cross section)
 
lead  -  1.57 sq in. x 12 = 18.84 cu. in per foot x .409 pounds in a cu in= 7.72 lbs of lead per linear foot.  Lead is about $1 a pound or $7.72 a foot.
 
nickel  -   .9114 sq in. x 12 = 10.94 cu. in per foot x .321 pounds per cu. in = 3.51 lbs per linear foot.  Nickel is about $10.75 a pound or $37.73 a foot.
 
copper  -  2.378 sq in x 12 = 28.536 cu in per foot x .323 pounds per cu. in = 9.22 lbs per linear foot.  Copper is about $3.60 or $33.19 a foot.
 
Latest prices of metals:
 
MetalPrices.com
   
LB KG MT
 USD/LB Cash 3m 15m
Aluminum 1.0528 1.0657 1.0918
Alum Alloy 1.0024 .9866 .9662
NA Alloy 1.0188 1.0297 1.0342
Copper 3.6761 3.6809 3.6242
LME Officials 08 Oct 2010
 USD/LB Cash 3m 15m
Nickel 10.7524 10.7751 10.5007
Lead .9975 1.0092 1.0129
Tin 11.8048 11.8388 11.5099
Zinc 1.0124 1.0256 1.0469
 
 
Total value per foot is $78.64
Total value per mile is $415,219
 
What's very interesting here is that the nickel is more valuable than the copper.  Interesting, because the company doesn't really mention this in any of their publications or press releases. 
 
Let's say the refiner is going to pay 60% overhead and scrap sales discounts yields $207,609 a mile.  Scrap typically pays 60% of spot price 
 
Puller can yield 10 miles of cable a day but let's assume they can only pull 50% of that.  This means they will be making over $1,000,000 a day!  Working for 250 days a year and we're talking $250,000,000 a year.  They also have to pay the original owner of the cable about 25% of the gross revenue.  This lowers the amount to $188,000,000.  Now let me ask you this:  if they can produce that much profit in the first year, would the current valuation of $35 million for the whole company be realistic?  Of course not.  This is why I've taken a position in this stock.  It could be a grand slam. 
 
The one fly in the ointment is that we don't know how much cable there is.  We do have the company's estimate of 400,000,000 pounds of copper.  Working from that, we have 3.6 pounds of copper per foot, or 19,000 pounds per mile.  Dividing this yields 21,000 miles of cable.  It is highly doubtful there is that much cable but we do know that the deep sea cable is much bigger and would have more copper.  In any case, it looks like they could pull cable for years. 
 
 
Bottom line, it looks like there is a LOT of money to be made here.  If they can get this thing cranking this week, and have a positive press release of even pulling 1 mile a day, that is $27,500,000 in profit a year. (after subtracting the 25% royalty)  For a company this small, it will mean fireworks.  The price to earnings ratio of even the lowest ranked stocks is typically at least 10:1.  This would mean a market cap of $375,000,000.  Taking the 150 million shares outstanding gives a share price of $2.50!  This is without the gold and silver properties.  I don't see them having any problems that could result in only a 10% cable pulling capacity per day, so that price should be on the low side.   
 
Now factor in the possibility of securing rights to another cable and the mind boggles.  If they can get this working, why wouldn't you look for other cables?  They'll have plenty of money to buy those rights too.
 
Then add in the potential for gold and silver income and you have the makings of huge gainer.  Please do your own due diligence and make your own decision and please don't put any money in this that you can't afford to lose. 
 
In any case, with the dollar on a one way slide down over the next decade, gold and silver WILL be going higher.  Take advantage of any price weakness to load up.  I'll finish this week with a video of an active lava pit.  These guys went down into the volcano and got some amazing (almost fake looking) video.  They were interviewed on television and said they were 300 feet from the actual lava which is about 2,200 degrees!  Have a great week!