2009: Quickie post mortem on predictions

I don’t know if I’m too depressed or too eager but I keep expecting the SHTF each and every year I make these predictions. This year it did not hit the fan so to speak but neither did we find ourselves in a real recovery like the rat bastards in Washington and Ottawa like to tell us we were. The economy continues collapse like a smoldering bonfire just waiting for a red neck with a can of gas to blow it up real good!

I really blew it this year on my predictions for silver and energy, for energy it makes sense as demand fell faster than supply did but I still cannot understand how, with gold going well over $1100 that silver could not hit a mere $20, a number that it took out last year. Silver still has heavy investment demand, silver is still being destroyed, and silver is still being heavily withdrawn from the Comex depositories closing the year down to about 112 million ounces. That said silver’s industrial demand is off and the level and concentration of silver shorts remains criminally high but that should not have kept it from reaching $20 and closing the silver/gold ratio.

If anything silver has gained more potential and volatility as this disparity in prices and ratio continues. Some day it will blow up, we just need to be more patient and continue to accumulate while bargain prices continue. Robert Kiyosaki of Rich Dad fame jumped on the silver wagon this year but typically got it wrong when told people to buy ETFs. Goof! Anyone who knows the real potential of silver knows that it’s the fraud and leverage involved in paper products that allows the prices to be manipulated. Had he really understood the silver story he would have told people to go buy a roll of rounds or a honkin big bar. Still he raised silver’s profile and perhaps some of his simpleton readers will do some additional research.

On the dollar index I was damn close to my prediction until the Dec rally hoofed me in the head.

On the positive side I did hit my highs on gold; I predicted at least $1100 and ending the year above $1050. Yeah for me, that looks pretty accurate. As well I hit my goal for bank failures of about 80 and then blew by it I think ending up at about 140.

Other general predictions fulfilled this year

CPI returning to the positive later in the year

No housing recovery

Increasing unemployment all year

Commercial real-estate would begin to hurt

Obama would prove to be little different than his predecessors, spending money he does not have and warmongering. Anyone who thinks the president runs the country is nuts; he may(but not necessarily) decide who to attack but he’s simply a low paid lackey who doed the banks bidding. If you expect him to hold the guilty responsible for last years fiasco you may as well start digging his grave now because they won't let it happen

Over all I had the trends right just not the scale.

I’ll post up a couple of interesting articles I’ve found as well as my own 2010 predictions in the next day or two.

Happy New Year.

More Chaos Ahead

It’s seems quite obvious that we are about to see something quite drastic happen. Chartists will tell you that gold is way over bought yet you have to wonder if the charts mean anything when the system starts breaking down and we start having massive failures throughout the economy, and those failures are out there.

The example of Dubai World should not be a shock to anyone, you can’t build up $60 billion of debt in a construction spree and expect to go unscathed in this depression; the bigger question is how many other Dubai Worlds are out there? My guess would be several to many!

What about the growing number of countries that could have their own crisis moments?

Japan has done everything but hand out printing presses to the public, yet deflation continues to pop up. To make things worse they have an insane level of government debt and the ability to sustain this debt and further stimulus is hampered by a drastically declined savings rate. I think Japan made a big mistake by not allowing deflation to take place naturally over the last 2 decades. The fact that they have a shrinking population should have allowed flat or slightly negative growth without the need to force growth through stimulus spending.

Greece has debt issues that could force the EU to bail it out or if they won’t it might force them to kick it out, or allow it to leave gracefully. The Baltic States look unlikely to qualify for Euro adoption as they struggle with massive GDP drops, debt and the need to maintain a stable peg to the Euro, while Spain, Portugal and Italy all face debt issues of their own.

The Fitch rating agency suggests the UK could have its debt downgraded next year and the UK has one hell of a lot of debt.

Even oil rich Russia has issues with large debts owed by both state and private enterprises such as Aluminum producer Rusal (which has defaulted on debt) and Gazprom, while both the Ukrainian state energy company and railroads require debt restructuring.

Can China maintain the growth it needs to keep all the peasants leaving rural areas busy and content?

There certainly has been a lot of growth in China but at what cost and how well planned was it. Monetary inflation is at high levels, the artificially weak Yuan is souring relations with the west as more and more jobs bleed to China. China has growing industrial capacity without markets for it. How exposed are Chinese banks should a recovery not allow them to utilize surplus plant and population?

China has been a wonder story of growth but lets face it, these guys are total novices in when it comes to running a market economy and since the experts screw up regularly its only a matter of time before something blows up in China’s face.

Bringing it back to the metals it’s no wonder that gold continues to move up so quickly (even when over bought) as no chart can tell you that the assumptions used to decipher it are no longer relevant and by what’s happening in rest of the economy taking these assumptions as valid and immutable is reckless at best.

An important item that does not seem to be getting any press right now is the rapid declines in the Comex silver stocks. I got out of the habit of checking these for a few months but when I came back I was surprised to find stock levels below 116 million ounces and even more shocked to see it fall to about 111.5 million ounces in just a few weeks. I don’t know what the magic number is but sooner or later industrial users are going to panic and the price won’t jump a buck or two but by $10 or more.

All I can say for sure is there will be more chaos ahead.


Friends of the Canadian Silver Bug might wish to help him out by voting for him in the 2009 Canadian Blog Awards. I'm nominated in the Professional life category and you many vote here, ranking as few or as many of the blogs as you see fit

Good news for India, Good news for Gold Bugs

Today it was announced that the Indian Central Bank purchased 200 tonnes of IMF gold for about $6.7 Billion between the dates of Oct 19 and Oct 30th, at market prices. This is a great piece of bullish news for the metals community

Why good news for India?

This is good for India because it shows they are serious about rebalancing their reserves away from crap like U.S. dollars. Its good news for India in that they got in to get their share before China gobbled it all up. Having one country monopolize gold ownership is exactly the model that the U.S. used to abuse the world with its reserve currency. If we are to ever achieve sound money again many countries need to hold large amounts of bullion to back their currency with, If only Canada had enough sense and balls to step up and buy the other half of the 403.3 tonnes the IMF is authorized to sell

Why should gold bugs care?

This sale gives a big psychological boost to the market as it not only validates the current price as a fair one but it also shows that the Indian Central Bank thinks it can appreciate further from this point. The sale was direct to a CB showing that the IMF was more interested in getting top dollar for their assets than attempting to flood the market and discredit the current price; this could have been disastrous for the spot price if it was simply dumped on the market.

We should be happy that China did not get first dibs on the gold and take it all. Disbursement rather than consolidation is good for the market. We also have the added satisfaction that the IMF has that much less bullion to manipulate the market with later.

All in all this is a good thing for the market! Gold jumped over $20 today on the news, and that it great grabbed a languishing silver by the short hairs and pulled it up too is an additional bonus.

Healthy silver

I've talked before about the power of silver as an anti-microbial agent and here is another example of it's continued growth in medicine as Advanced Medical Solutions releases a new wound dressing containing silver to the European market.

Silver micro threads or nano particles have now been incorporated into hospital curtains, surgical scrubs, Silver sulphadiazine creams for burn victims and now this new line of dressing materials which all help to control infections even those cause by MSRA.

In the old days people claimed a silver coin in a container of milk would keep it from spoiling as quickly, other references said that putting a silver coin into a wound to stop it from turning to rot; apparently they were on to something.

Silver's anti-microbial properties are now medically proven and some studies even suggest that the addition of nano silver to older ineffective antibiotics can make them usable again.

I don't believe however that the internal use of homemade or Internet purchased Colloidal silver products in a preventive regime is wise simply because long term exposure has not been studied and there are no standards for concentration, particle size or dose when using these products. I'd not chance self medicating with colloidal silver unless it was an emergency and there was no other choice. I don't think it would hurt to use it as a wash for sores or as a non caustic disinfectant.

While medical uses are not going to gobble up millions of ounces overnight, silver does prove again it is one of the most useful of metals as it constantly finds new uses and ever growing markets.

Silver Bugs are destined to have a shiny future.

Crystal balls : The Five Year View

A friend was asking just the other week what a group of us though was going to happen in the next 5 years and I figured I may as well jump on the topic and produce the worse case scenario, after all its expected of me. Then I figured if I’m going to write this up anyway I may as well post it and see if I can force them to come read my blog, something they usually avoid

Of course should the others who were asked this question produce a different scenario I’ll post theirs too. It’s only fair that it’s not just mine that gets picked apart in public.

Now 5 years is a long time but I think its pretty safe to say that the most important developments in that time will be centred on just a few themes which are already an everyday part of my doomer mantra.

Peak Oil, Financial/Currency crisis, Food shortages, The unraveling of Globalization and Political instability


Peak Oil

First of all those not paying attention to me for the last 5-6 years, peak oil is not the end of oil but simply a point where the easy and cheap oil is mostly used up and supply begins to drop. This appears to be happening today but the recent recession has lowered demand while the advent of bio fuels, tar sands, and natural gas condensates have supplemented dropping conventional supplies hidding the impending peak oil storm. An important factor to note is that some Biofuels (especially corn ethanol) is energy neutral at best and does little for energy supply. Oil crops like Palm involve deforestation of natural lands or a diversion from food production both of which are importance issues for biodiversity, and world food security. South American sugar cane ethanol also relies on slash and burn agriculture on thin topsoil creating ever increasing dead zones in the rain forest. Bio fuels as they are produced today are nothing but an ethical, environmental, and economic clusterfuck and will do little but create new and different problems.

Bio fuels and the water intensive processes to mine heavy oils will not be able to keep up with the depletion of conventional oil creating the possibilities of either world or regional oil shortages in the next 5 years. I believe that in 5 years we will be dealing with very volatile energy prices with peaks above $200 a barrel. Without huge conservation moves to curb demand prices at this level will bring endless stagnation, negative growth, extremely high unemployment as well as impacting the other themes for my predictions. Those countries that have moved towards conservation and efficiency will be the net winners as they will be less hurt by energy prices, have less concerns about shortages and will easily compete with inefficiency economies. WE WILL NOT BE ONE OF THE WINNERS IN THIS RACE!

While Canada does have energy and resources much of it owned by foreigners who will not use it for our benefit. Despite being an important exporter to the U.S. Canada is not a big net exporter buying nearly as much foreign oil for the eastern part of the country as we export to the U.S. from the west. NAFTA requirements that we export energy to the U.S. added to the lack of a Canadian Strategic Oik Reserve means Canada will constantly flirt with regional shortages by the end of the 5 year period.

The U.S. will be in even worse condition starting in as little as a year or two as Mexico’s oil fields deplete to the point they can no longer export to the U.S. This will not only cut off a great deal of the American oil supply but also leaves Mexico ( a country which recieves about 40% of their government budget from oil profits) broke and even more dysfunctional than it is now. Mexico is destined to be a failed state possibly fracturing into several domains run by drug lords in the north and possibly independence movements by indigenous peoples in the south.

Financial/Currency Crisis

The myth of green shoots is mostly bullshit! Yes we in Canada appear to be doing relatively ok right now, but there are still several other shoes to drop before this financial story is over.

U.S. unfunded liabilities are about $ 60 trillion dollars today closing in on 5X GDP. There is no way for the U.S. to get out of this mess without doing something drastic like destroying their currency through massive printing and eventual hyper inflation, hiking tax rates so high the 30s will look like a boom town, or simply defaulting on foreign debts. The U.S. is like Donald Trump, it survives on OPM (other people’s money) mostly borrowed from Japan, China and the Gulf States.

This model is not sustainable and will collapse on itself very soon and the collateral damage of a U.S. collapse on Canada will be huge.

The world derivative market is about 10 X the size of the entire world economy (about $600 trillion today) and any number of likely or unlikely events could trigger vast quantities of these toxic products leaving dead banks, dead insurance companies, dead corporations, dead pension funds and perhaps even dead governments who bought this crap from the banks in various bailout plans. When a market such as this exists for the sole purpose of high risk corporate gambling it’s simply a matter of time before a bad bet cascades through the system wrecking everything in its path.

Escalating residential option ARM mortgage resets, normal mortgages with negative equity, failed commercial mortgages and credit card loses which have killed 105 U.S. banks this year will accelerate destroying at least 1000 U.S banks in the next 5 years. The market leaders which seem to have an inordinate amount of control over the U.S. Government will not be allowed to fail but they will gobble up all the clients and assets of their smaller regional completion. The recent profits by U.S. banks have not been natural but rather because they were allowed to trade toxic assets for better ones. They are also allowed to borrow from the Fed at 0.25% and then buy treasuries yielding in the 3% range.

Goldman especially has made a killing on its high frequency trading software that allows it to basically skim the market as it makes millions of micro trades in advance of orders they know about from the outside. Banks that look profitable do so because they are not being held to Basal 2 and 3 reporting standards as they continue to value assets to model or face value NOT the market. Banks that do not adopt these accounting standards could be frozen out of the European market.

The current reports of a stabalizing housing market cannot be trusted because the banks have not foreclosed on all properties that qualify. In some cases manpower or legal costs have delayed or stalled the process making the true numbers higher than the reported ones. The banks have also held back a portion of the seized houses from the market lest they flood it even further and drop the prices another 10-20% in over saturated regions. One report claims 80,000 Pheonix houses are being held back, another claims 200,000 in Florida have not hit the market.

Don't thing all the problems are in North America: the Baltic States, Ukraine, Hungary, Spain, and Portugal all could have Icelandic style banking collapses which could bring down of number of overexposed EU banks and freeze credit once again. The additional stimulus required to free up a second credit crisis would cripple governments with debts they will never be able to pay without creating inflation. Greece is on the verge of collapse or ejection from the EU.

In five years I believe we will see several mauled or destroyed currencies including the U.S. dollar and the Sterling. I have no doubt it will happen, the only unknown is will whether Canada will join the currency death spiral in order to maintain its U.S. customer base or act to protect the purchasing power of those who behaved rationally and have saved.

I believe we will see very high inflation in the U.S. perhaps verging on hyperinflation and the PTB(powers that be) will be forced to acknowledge 20%+ unemployment even though it will probably be closer to 30% by the drastically more accurate work of John Williams at Shadowstats.com


Outright fraud and manipulation of the metals market will eventually lead to a Comex/LME default. Myself and others have documented the fraud around Bullion Certificates and the ETF’s show discrepancy in physical holdings and the likelihood that multiple claims exist for the bullion. 5 years is a long time to make an accurate prediction but I suspect $3000 gold $120 silver will be the norm by that time, the numbers if a default happen will be several times higher.

What we will realize in 5 years is that last years crash was the beginnings of a new depression that will reset the western model of over consumption and buy now pay later. We will also realize that the American empire is dying: VietNam was its Teutoburg Forest and the cycle of bread and circuses, wars for distractions, monetary debasement and rot will mimic that of Rome as it falls.



Food shortages:


Growing populations, a growing meat loving Asian middle class, desertification, drought, the collapse of ocean fisheries, blight, and the drive for bio fuels are all going to contribute to a food crisis that has been widely reported but mostly ignored in the last few years. Added to these issues is the financial crisis which has frozen credit for many third world farmers reducing he number of acres farmed, Many other farmers are trapped in the endless debt cycle caused by patented seeds which must be purchased each year and require considerable amounts of costly chemical and fertilizer applications. India for example is suffering an epidemic of debt ridden suiciding farmers who are unable to support their families.

The Saudis, self sufficient in grain for 20 years have announce their aquifers are nearly empty resulting in zero wheat production within 8 years time. In the U.S. Lake Mead is ½ empty, the mid west aquifers are well depleted, deserts are spreading in Africa and China, Monsoons are failing around India, and as Himalayan glaciers melt for good the rivers feeding India and Pakistan will shrink. All these water issues will cripple food production in coming years.

Peak oil will greatly increase the cost of energy used in the production, processing and shipping of foodstuffs. Malthus would have been correct in his predictions that stagnating food production would cap world populations if not for the discovery of cheap oil which allowed the industrialization of farming and the creation of chemical pesticides and fertilizers. The cheap energy that allowed millions to leave the farm while production increased is running out and we must expect food production to stagnate if not shrink drastically in the coming years.
Peak oil = Peak food

Further the damage done to fertility by over tilling and chemical applications will take a great deal of time to correct once we are forced to change our ways. Even if we do manage to keep up with growing demand for a time, prices will spike drastically when new energy prices are worked into the cost of eating. Currently 1/6the of the world suffers hunger, ¼ is soon possible.

I know that some economists and libertarians will state that the market will correct by increasing supply or lowering food demand, but in this case the former is probably not possible and the latter is simply a nice way of saying the poor will starve and the middle class will eat less and become the new poor.

5 years is not long enough for this problem to reach its peak but within 5 years we will see much more expensive food, more people starving abroad and at home. More people will begin to utilize their yards for food, more people will legally or illegally begin to raise livestock in the city, and people will begin to demand access to hydro corridors and vacant lots. In 5 years we might even see the decline of migrant farm workers as some Canadians will be forced to do work previously deemed “beneath them”

Globalization:

I believe that we are at or just past the point of maximum globalization; the increasing cost of energy and shipping will begin to erode the price advantage of cheap third world imports saving some existing manufacturing jobs but also allowing those with access to capital to begin rebuilding the local production of necessities. Countries have become far too interdependent and will not quickly change the course but in 5 years people will recognize that dependence on other countries for food, energy, drugs and basic necessities is not sustainable in a high cost energy future. Little progress will be made in localization initially but the public will begin to realize the dangers and businesses will realize the opportunities. The danger to the U.S. is that a destroyed dollar and a lack of skills may thwart any move towards reindustrialization. Jeff Rubin’s new book is a simple to understand but solid explanation on how Globalization will decline.

Globalization has also made us susceptible to economic blackmail as vital commodities beyond food and energy become more tightly controlled by nations that don’t worship the free market. China has long set taxes and quota on exports of strategic materials and has made it clear that Rare Earths used in permanent magnets, solar and electronic applications will be hoarded for domestic use. Manganese, Magnesium and other metals used in alloying steel have seen export limits and taxes to keep both resources and jobs at home, yet they roam the world buying all they can get of other materials. In theory globalization should be one great big open market but it’s not. The west is reliant on too many commodities and manufactured goods from countries that don’t necessarily care if we thrive. The west will begin to realize this and begin to support internal manufacturing and resource extraction. This revelation may be the only good thing that comes out of the next 5 years.

Political Instability.


Political stability rests entirely on 3 issues: the ability of governments to provide the services, order, protection and fiscal management citizens expect, the market’s ability to supply the necessities of life at an affordable price or the government’s ability to subjugate the public into submission.

The problem is that each year less countries, regions, municipalities are able to meet the expectations of their citizens. In most cases expectations were way too high to start with because of government’s lies and handouts which set these expectations in the fist place. It’s also the fault of the people for being so stupid as to think you can pay $100 dollars in tax, loose $20 of that in administration costs and corruption yet receive $120 dollars of service each and every year. This kind of accounting leads to endless deficits with an extra dollar or two moving to the administration column each year until the administration costs and carrying charges on the debt uses up the entire $100 leaving government to borrow or print the $120 for services.

Each of the other themes I have discussed can impact the ability to maintain political stability!

The financial crisis and housing collapse are destroying the tax base for many governments and I fully believe that a thousand or more villages, towns, and cities will default in the U.S. obliterating government services and pensions. Without massive federal aid there are at least a dozen U.S. states that could default within the next 5 years (all will run deficits), but of course there is no way this aid can be created without further debasing of the U.S. dollar through massive monetary inflation, say goodbye to the dollar or all government services, not much of a choice is it? The fiscal mismanagement of Canadian Conservatives which took a $ 16 billion surplus and made it into a 60 billion deficit in just a couple of years may well move our government to print money too, ditto for Europe. World wide inflation look out!!!

Peak oil won’t trash civilization in the next 5 years but the chances of regional and/or seasonal shortages will continue to grow and the affordability of home heating will drop, people will freeze in the dark, people will protest and demand subsidizes, further hurting the government bottom line. Don’t think that scrimping Canadians and Americans will cure the demand issue for oil, for every family that gets the heat turned off, 10 or 20 new Tata Nanos will hit the streets in Calcutta, or perhaps a few new Geely cars in Quandong

The west is still generally rich enough to buy what food it needs but there are many individuals in the west who are not so rich. The U.S. already has 35 million people on food stamps which represents 10% of the population. With unemployment rising, unemployment benefits running out, and food price inflation you can add more deaths, illness and disgruntled folks to the mix. 60 million or 20% of the U.S population may end up on food stamps in 5 years. Food and fuel riots are becoming more common in many parts of the world and peak oil, peak food and financial loss will only aggravate this problem.

Imagine the million man March of 1995. Now imagine it again but instead a peaceful march by the Nation of Islam, its leaders are pissed off middle class people who no longer own house, no longer have a pension, no longer have anything to lose but do own a gun. Riots, protests, civil disobedience, armed resistance to evictions and targeted attacks on the rich and elite will come to north American and Europe in the near future. Attacks on bankers and kidnappings of factory executives have already started to happen in Europe.

The U.S. is in crisis and once the States begin to go bankrupt and the Feds cannot or will not bail them out, what is the value of the Union? Already there are numerous secessionist movements in the U.S. and more State legislatures are chafing at the interference by Washington into areas of State jurisdiction. When the Feds were flush and could toss lots of money around states put up with it, but now there is much less incentive to bow to the Chief.

Mexico, Pakistan and most of the Countries in Africa are failed states. The U.S., UK, the Baltic States, Ukraine, Spain, Portugal, Greece are just some of the countries that are teetering on abyss and the strong actions required to save them are not palatable to the majority of the public, Just ask Ron Paul.


WRAP UP

Now this might seem long and lacking in concrete predictions but I can’t say that something in particular will happen next Tuesday I can only say that unless things change drastically this will happen eventually.

For those who want quotes to throw in my face later here it goes.

In 5 years we will still be suffering in a depression that started last year no matter how much the governments goose the numbers to show otherwise. Until the numbers at Shadowstats shows a recovery I will not believe the U.S. is out of recession. Canada by contagion will suffer low double digit unemployment, growing deficits and reduced government services for a decade. Unless we cozy up to the Chinese and soon it will get worse.

In the next 5 years 1000 U.S. banks will go under, including some biggies like Wells Fargo and JP Morgan

At least 5 U.S States will default, probably more, without searching out the stats I’d guess on California, Nevada, and Michigan as possible victims.

Many 100s of municipalities will join the states in default, municipal bonds will become worthless and AIG, AMBAC, FGIC, FSA and others who have their hands in the bond insurance market will get killed. The same muni disaster will destroy pension funds making retirement impossible just when there are not enough jobs to go around.

20% unemployment will officially be acknowledged, unfortunately it will only happen after unemployment hits 30%+ as per shadowstats.com

60 million will be on food stamps but they won’t be worth enough to eat on.

5-6 million homeless, some homeless will forced into FEMA camps and assigned work on government projects

High inflation will lead to massive poverty as government/private pensions don't keep up to the real cost of living

Numerous constitutional cases will be brought up by U.S. states to regain stolen jurisdiction

Several U.S. States will, in spite of the Feds, propose the legalization and taxing of marijuana in order to balance the budget.

Gold at least $3000 and silver $120,

If the Comex/LME does default on gold or silver the numbers could peak at $10,000 and $1000, this is what I’m banking on, and at less that $2000 dollars for a single 100 oz bar of silver everyone should be making such a low risk high potential bet.

Oil $200, NG $20

US dollar will lose at least another 30%

Obama will get defeated, that’s if he even lives to the end of the term. I hold no hostility towards the guy but I do believe he was elected to fail and this no win situation he’s in will assure it!

More Peter Shiff and Ron Paul clones will contest republican nominations for office.

The Federal Reserve will simply shut down and walk away from an unmanageable situation after they’ve diverted that last of U.S. wealth to foreign banking concerns.

Bankers will be hunted down and killed in their homes

Riots will happen in many U.S. cities. These riots will make the LA riots look like a cream pie fight from an old movie.

England also but throw in some race riots too, as unemployment, more refugees and religious tensions bring the pot to a boil

U.S. minute men militias will grow in numbers and begin killing illegal’s on the Mexican border. If there is a total breakdown in Mexico the U.S. government might sanction or deputize these groups.

A noticeable growth of Secessionist movements within certain states: Texas, Vermont, Alaska and the Republic of Lakotah being my choices.

Fidel and Raul Castro will both die and the embargo will be dropped ( there is no real rationel for this, it's just a "what the hell" prediction.) However access to well trained inexpensive doctors and a people experienced in adapting to peak oil through localized agriculture could be an invaluable resource for the U.S.

In Europe Swedish, Spanish, Portuguese banks will fail, Latvia, Lithuania, and Estonia will suffer fiscal crisis, be unable to pay off foreign loans, fail to hold their currencies to a Euro peg and will not qualify to adopt the Euro. Several of the Southern EU countries will be forced to pull out because they cannot maintain debt to GDP ratios mandated in the EU constitution, and/or cannot live with ECB monetary policy. Greece, Spain, Italy and Portugal are all good choices. Right wing parties with anti Muslim, anti African agendas will gain power.

Mexico will totally collapse, Pakistan will be in civil war, Afghanistan will be lost and the U.S. will be forced to pull back to Kuwait and Iraq where guarding the oil will be there only priority.

Japan will finally face a crisis over government debt levels.

Russia, China and India will begin to displace the U.S. as guarantor of security in the middle and Far East.

One or more country will launch a partially gold backed currency. Russia, China or a common Pan Arab currency are most likely. One Zimbabwean minister has already suggested that Zimbabwe should follow such a course, but I doubt they are on the ball enough to pull it off.

I could spew out more prediction buts lets argue these first.

Have at it!!!!

We still have a rough ride until year end.

We have about 12 weeks left to finish off 2009 and I expect this period will be a messy one with a series of events likely to hit the preverbal fan..

First of all it looks like Capmark Financial a commercial real estate made up of left overs from the crap heap once called GMAC is on the verge of bankruptcy. Now this is not huge in scale when compared to GM’s problems but it is certainly a sign of that the commercial property bubble is following the residential market down.


Even more damaging could be the expected bankruptcy filing for CIT

The impact to the U.S. economy could be huge if 1 million small businesses suddenly find themselves without a credit. Yes, some will find new banks, many however will flounder as they scramble to find new sources of credit either because banks are not lending or simply because they are so close to the edge that the very instant they loose their credit lines they will be forced to close shop. I don’t know how many people the average small business employs but if we say 10 employees each with a 10% failure rate after companies that lose their credit, we easily can add 1 million people to the unemployment rolls.

CIT has been trying to make a debt for equity swap deal with creditors but it’s starting to look more like a bankruptcy filing is imminent; today’s announcement the CEO plans to resign certainly seems like the old rat and sinking ship scenario.

The biggest issue could be Latvia’s failed attempts to meet the IMF’s austerity demands required for the more bailout money. Latvia’s foreign denominated debt makes it very hard for the Government to act in a way acceptable to their citizens, yet fulfill their IMF obligations. If they can’t sell more austerity to the populous the only other answer is to devaluate the currency, loosing EU and IMF financial aid and making default on foreign debt nearly inevitable. Recent government statements
claim they will meet the prerequisites for the international aid but how do they plan to sell more austerity when GDP is down nearly 20% and unemployment is rocketing?

A failure to make the required cuts and a forced evalution could also force Estonia and Lithuania to break their own currency pegs and endanger their planned adoption of the Euro. While the consensus says the EU and the world economy is now strong enough to weather a Baltic crisis it, other east bloc countries will face contagion and Swedish banks in particular will take some heavy hits that could dampen all the bold talk of recovery. Of course if the concensus is wrong it might plunge us back into a world wide crisis.

On top of these big stories small banks will continue to implode in the U.S. with the likelihood of reaching the 100 failed bank mark this Friday all while the FDIC struggles to deal with the losses.


So when someone comes on the TV and says commodities are over bought, gold has no real value and silver is simply a industrial metal remember that fiat money, equities, bonds, your business and even your job may only be fleeting things, but silver and gold have had real and substantial value throughout history.

I have no doubt that my $1100 and $20 target highs for the year will be attained very soon and maybe even greatly surpassed. I see that my blog hits are up, ad revenue has recovered and I’m getting more direct mail from bullion novices every week all indicating to me that the bull market in metals is certainly far from over.

Still bullish on silver.

I've been wary of jinxing the metals breakout by posting on it but here it goes. Some chartists are claiming that this week's new high is very significant and a signal for a continued bull move but just as many claim we are well over bought and are still due a significant correction, so what are you to believe?

I believe gold's new high means the next low will be higher than the previous low, all good for the long term. If it keeps running I'm OK with it but if it dips I know it will dip less than last time, so I'm OK with that too. Certainly no one is going to fix the fundamentals of debt, debasement of currency and fraudulent paper any time soon,so why worry? The bull will continue in its own time just be calm and patient.

Since I don't trade my bullion I do have a small gold ETF stake that I intend sell in the $1070-1100 range should it go there too quickly or it trades horizontally for more than a week. I figure fast gains mean fleeting exuberance; probably not the perfect strategy but I such at timing so I'm taking some off the table this leg rather than ride it both ways. If we actually hit $1200 this year as some are predicting I will reenter on in a bear ETF, expecting a $150-200 correction.

Despite the recent run up, silver still gets little mention, little respect and very few comments on the few occasions when a newspaper lowers itself to write on the subject.

It's also disheartening that on this leg up silver is no where near a new high. Obviously the argument that silver is no longer a monetary metal is tainting the "western" market but there are still good reasons to stay bullish on silver such as new mints generating retail sales in China and now the HDFC bank of India (a big retail gold seller) is looking at adding silver bars to its product line.

These are the biggest markets in the world and since both China and India believe gold and silver are monetary assets this can be seen as nothing but mega bullish for long term prices. What the west believes is becoming less and less relevant, if China and India declare Yaks are a form of money, yaks would be a very good investment. You heard it here first, we are going to the Yak standard!

Another bullish point reported by the Financial times is the possibility that new positional limits on futures may drive some institutional investors to physical ownership of commodities instead of paper. This is the kind of action that will help FIX the commodity market and in particular help end the comex fraud.

Things still look very bad for the U.S. economy and good for metals long term, don't be tricked by claims that this is the top and bail on your physical positions, sit tight and save up to accumulate more on the next dip.

Rolfe Winkler at Reuters writes a decent little piece on owning gold as insurance and with the silver market being even smaller, this argument is even more valid for silver investment.

Have a good week, keep watching the spot prices, and keep the cackles and the screams of "I told you so" to a bare minimum. I probably won't ;) but try to be a better person than me!

Summer in review

Even if the much touted recovery is real (which I do not believe) there is still a great deal of pain ahead for many people.


Over 500,000 U.S. workers still lost their jobs last month and while this number it may shrink over the next year or so what about all those fresh faced graduates who don’t get counted as unemployed having never been employed in the first place? What about all those people in the first wave of layoffs that are about to lose their unemployment benefits and will in some bizarre government accounting scheme no longer be counted as jobless?


These unemployed Americans (counted or uncounted) still have bills and mortgages to pay, Some of these will undoubtedly lose their homes; fail to pay their credit cards, property taxes and car payments. Banks, credit companies, car manufacturers, local and State governments will all share this pain as will debt free citizens who will have theirs savings and purchasing power devalued as more and more new money is created to keep the illusion alive for just a while longer. Commodities are rebounding with food and energy leading the pack; and you should remember that it is possible to have inflation in the money supply and rising prices in commodities while housing is destroyed simply because the obscene glut of properties which is still too big to be effected by the current level of money creation. Food and energy however are not in a major glut and will react much sooner to monetary inflation.



Here in Canada we’ve seen some signs of marginal growth in jobs (mostly part time, private sector) but with new bodies entering the work force this has not been enough to lower unemployment.

In Canada food costs are rising and even housing is stronger than I would have guessed despite all the deflationist arguments.



As for the reported recovery, if there is no employment growth who will spend enough to create this magical recovery? Canadian industrial capacity has dropped to 67.4%, this is not the sign of a recovery.



On the world stage this article from the weekend shows that a ghost fleet of 500 unutilized cargo ships is growing near Singapore as world trade dries up. Not only has shipping dropped off but orders for new ships are negligible and many existing new builds will be never be delivered as purchasers default on completion payments.

Long term some shippers and some ship builders will undoubtedly fail.


“Surely there is some sign of recovery?” you might ask.


Well the TV pundits certainly claim that renewed earnings and increased stock values show a recovery but how many of those earnings are from Government handouts or access to cheap money at the discount window? How much of those earnings are from cost cutting and efficiencies that cannot be repeated year after year? In my opinion unless things like total sales numbers and non service jobs improve there is no recovery. The false economy of having entire countries that do nothing but sell shit they didn't make with money they borrowed from overseas cannot and most certainly will not last much longer.


One major story of the summer was the continued destruction of U.S. regional banks now totally 92 for the year. My prediction for the year was only 78 and to pass that goal early in August makes it obvious that 120 by years end is now doable.


Perhaps the most important stories of the summer was the court ruling stating the Fed must disclose where the $1.5 Trillion they gave out went and list the assets pledged against it. The immediate appeal was no big surprise as transparency to the Fed is like sunlight to a vampire, a death sentence. Disclosure will prove the Fed and the Government used much of the $1.5 trillion to buy off foreign banks that were making waves about the crap CDO Wall Street was selling. Either way it will be seen that both domestic and foreign banks will have pledge nearly worthless assets to get this handout and that the tax payer is on the hook for the bill.


The next big story is the Audit the Fed legislation championed by Ron Paul who is perhaps the only honest man in Washington. Don't get me wrong I'm not an extreme libertarian but on many of these monetary issues Paul is the man!

This legislation is actually a rough situation for many politicians, if they come out against transparency the public with neuter them next election cycle. However, if the legislation passes the facts revealed will shake the nation. Thankfully most politicians are so stupid they don’t suspect what an audit will prove or how the public will react.

One recent "WTF" story were comments by China that they would allow state owned ventures to default and walk away from commodity based derivatives. Yes we all know that many of these derivatives are overly complex garbage bets masquerading as hedges but caveat emptor folks, I you’re too damn dumb to understand a contract you signed, too bad.

Whether these statements are truthful or just a warning shot it’s important to know that contracts and the rule of law in China are only as strong as the dictatorship wants them to be. Can the U.S., the worlds biggest debtor dare do anything against their biggest creditor should they default? Not bloody likely.

There is some good news from China for silver bugs as Official Chinese TV began flogging the ownership of silver bullion as a good investment that is cheaper and better valued than gold. With the size of China’s market investment demand is bound to expand and eat up a lot of physical demand, Yipee!




Overall the summer unfolded as it should with the U.S. dollar down, bullion up, banks failing and a growing recognition that the next wave of chaos caused by commercial properties, option ARMs and defaulting credit cards is about to break. The last part of the year should be colourful

What I did no my summer off,
(kinda like that grade 4 essay you did)

As peak oil and emergency preparations are also important issues to the Canadian silver bug, we spent our summer increasing our efforts at gardening, seed saving and canning, putting up tomato sauce, relish and jam so far with hopefully more to come.

While I've not been as successful as I'd have liked it is a start in the right direction in both lifestyle and expectation, as well we made progress regaining those skills lost to most of our generation. Should power or food distribution fail I suspect we could easily function for well over month on our food, both canned and commercially packaged. Once the root crops come in and I buy a winters worth of rice and wheat I think we could stretch it out to 3months. Storing adequate water however is a much bigger challenge, where the hell do you stash 1 gal/person/day?


Anyway my summer hiatus is over and I’ll be back again soon!

Morgan Stanley, selling bullion they don't have and getting away with it

aka

The crooks get fined, never admit guilt and nothing is done to force these villains make good on the damage their bogus bullion sales caused.

I originally caught wind of this case some time ago from the works of Ted Butler and I've blogged, blogged again and blogged more on this and other schemes by banks to sell non existent bullion and unbacked bullion certificates to unwary investors. These scum also got up to other mischief like charging people storage on bullion that was never purchased, cute huh! So after several years in civil court Morgan Stanley has made a deal to pay $4.4 million in fines and remediation but get off without admitting any crime. If you tried this kind of crap you'd be tried in criminal court and go to jail for life.

I'm not only quite disappointed that no guilt was attributed to Morgan Stanley in this case but also the fact that $4.4 million in payouts for 21 years of misleading thousands of investors is considered a reasonable settlement. That's a mere $209K for each of the years they wrongfully charged people for storage of bullion they never purchased, that's $209K for each year they thwarted the market and legitimate price discovery for Silver and Gold by not actually investing peoples money in the product they wanted to buy. This is a $30 Billion dollar company and this settlement is no deterrent but simply the cost of doing dirty business.

With 22,000 people in the class action against Morgan Stanley that's less than $10/year/victim

At bare minimum Morgan Stanley needs to refund all service charges and storage fees for the last 23 years, they need to do submit to an audit to prove they have now obtained the bullion needed to back all the products they sold and they should be required to move all bullion to a independent third party storage facility. Then throw $50 million in fines just to make a point that this behaviour is wrong.

During this court case Stanley admitted that not buying 100% of the bullion to back products was an industry norm. Seeing this statement governments and bank regulators should be issuing a memorandum to all banks that an audit of bullion accounts and certificates will be made mandatory in 6 months time and that they had better step into the market and cover their positions in that time frame or face fines and/or government oversight. This bullshit of selling people things they don't own has got to stop. People need to know that their purchases are real investments and not gimmicks to use their own money to bet against them in the futures market. Purchasing a commodity based investment should actually impact the supply and demand of that commodity and in return support its real price.

For Canadians don't think it's any better here. In the last year or so we've seen TD's unwillingness or inability to redeem silver Certificates and we have seen recent work showing that other Canadian Banks don't fully back bullion based financial instruments they sell, hell most don't even report their bullion holdings in their financials or answer simple questions from customers regarding these products. The MSM and Governments need to investigate this kind of corporate behaviour so I would ask you to complain to your elected officials, write letters of complaint to your financial institutions, letters to the editors of local and national papers, and ask business and crime reporters to investigate these scams.

I've been surprised a few times to find certificate investors among the people I interact with every day. Most of these folks do not consider themselves gold or silver bugs and because of that they don't see the information about manipulation and fraud most of us are saturated with. Go out on a limb and tell all those around you about this case and the likelihood that all other banks selling similar products are either marginally backed or not backed by bullion at all.

Questionable backing for silver certificates.

I'd like my readers, especially the Canadians who hold bullion certificates to read this most recent work by This is the Mad Scientist Speaking for his look at Scotiabank's silver assets(bullion) vs. their liabilities (certificates).


Remember a silver or gold certificate is just as artificial as a fiat note if you can't trust the issuers promise to fully back the certificate with bullion.

Silver and Gold and forgetting ones history

I have a friend who keeps telling me that gold and silver is to pricy to buy, that he can't risk his savings or retirement money, or that it generates no income.

I started to tell this fellow my worries about the economy long before I started to write this blog and for the most part he blew me off, in his mind gold was too expensive at $550 and certainly could not appreciate more from that point. He told me roughly the same things post Bear Stearns and when I bought more gold at $650 or when I came in walking kind of off center because there was 100 oz of silver in one coat pocket. I'd often go across to Scotia at lunch and I'd come back and show him my new purchase of silver which he'd admire and them convinced himself yet again that it would be a bad idea to buy some himself.

Now I'm sure many people have had the same experience (from both sides) so why do I dwell on this one fellow?

The reason this one guys refusal to be convinced really bothers me is because of his family history and the role gold played in keeping his family alive during the second world war. You see my friend's family lived through the Japanese occupation of China in the late 30s until the defeat of Japan and during that time they suffered great hardship. At some point Japan introduced their own money to the occupied areas and as old Chinese script dried up or was seized many vendors refused to accept the new occupation currency. Of course when Japanese soldiers demanded goods for the script vendors could not refuse but among the Chinese themselves a great deal of commerce even for basics like rice were done on the black market and the only acceptable payment was either barter or precious metals.

Much like the hack silver of the Viking age, Chinese who had gold or silver would carve or clip small pieces from coins or jewelry and trade them for staples like rice, oil, spices or medical care when the government script would buy them little.

No one can know exactly what will happen in the future but like buying life, car or house insurance, we all know that hedging one bets may cost us a little up front but should the need arise the protection is priceless. History however, either from a book or perhaps the verbal tales of ones own family tribulations tells us that crises do happen, wars do happen, natural disasters do happen, inflation happens, fiat money always fails and that gold and silver have been considered real money since the Lydian's began to strike their first coins of Electrum around 650 BC.



Sure you can ignore a bunch of goofs on Youtube yelling at you to buy metals. You can certainly ignore the salesman whose livelihood depends on convincing you to make a purchase. You can even ignore a guy like me who's only motivation is helping people and the meager (and seriously it is meager) revenue from my ads but you cannot ignore what 2600 hundred years of history says about the value of real silver and gold money, neither can you discount the personal tales of people who survived and even thrived living in an occupied country because of a small nest egg of sound money.

I'm not going to tell you that you have to have 5-10% of your worth in metals like some advocates do. If you've never bought metals before I undertand it will seem quite different and perhaps even scarey, especially if you're asked to move that much money suddenly. I am asking you to buy something, anything from your first silver round or two, to a single fractional gold coin. Compare your new bullion to a stock certificate or a twenty from your wallet. Consider the fragility of that paper , the fact that a stock, a 20 dollar bill or a bond is simply a promise and as we've seen in the recent GM fiasco a promises, legal liabilities and even contracts are hollow when the state no longer enforces them.

Just one small purchase, then you will understand and you will be on the side of history.

Ask the Germans, they know!

What do they know you may ask?

They know about the reality of a destroyed currency having suffered greatly from the hyperinflation of the early 1920s. At its worst inflation caused prices to double ever 2 days and by the end of 1923they had an exchange rate of 4,200,000,000,000 Marks to 1 US dollar compared to a modest 4.2:1 ratio from just a few years earlier. They know that aggressive monetization of debt is a good way of stoking inflation and if not corrected could mimic what we’ve more recently watched in Zimbabwe, where shelves were empty because of price controls and they could not print new notes fast enough to keep up with the need for more zeros.


German Chancellor Angela Merkel so understands the need for sound monetary policy that she has openly spoken out against quantitative easing criticizing the central bank of England, the U.S Fed and the ECB despite the long standing precedent giving these banks independence from political interference. Merkel knows the practice of buying ones own dept is wrong and can lead to heavy inflation and destruction of currencies; any perceived benefit is simply postponing and compounding the carnage.


Germans also remember the value of having real assets like gold and silver as seen by extreme retail shortages last summer when most dealers where not only out of bullion but were also being unable to assure future deliveries, stopped taking orders. While shortages in the market were not just a German problem one company TG-Gold Super Markt.De
apparently saw a market niche for an easier way to access small purchases of gold and have created the worlds fist bullion ATMs for the German, Austria and Swiss markets.


The first machine recently had its premiere and one day test at Frankfurt’s train station, future plans call for 500 units to be placed at other train stations, airports and busy malls this year

The premiums on the small 1,5,10 gram bars offered from the machine are quite high and might impact sales but as a promotion and educational tool for bullion and the companies other online products these ATMs should be invaluable.

I’m actually scared these things will come here and I’ll have to fight temptation each and every time I to to the mall or Toronto’s Union Station which I pass through 10 times a week. While I would normally refuse to pay such premiums the sizes offered in these ATMs could be purchased with the kind of cash I often have on hand, making impulse control an issue. If these machines pumped out silver I’d probably never have spending money in my pocket again.

It would seem that Germany is somewhat more savvy than rest of the western nations, still it’s too bad they took part in years of Central Bank gold sales to suppress the price.

I think the biggest issue with the German position is how it will destabilize the EU. Do the Germans know that? Could their sound money policy cause the inevitable break of the union or at least a return to their own currency? Eventually I think it will.

Interesting stuff!

Bullion Porn

It’s not a great week for metals so I thought maybe you would like to see some of the bullion that others have collected, so here are some examples of Youtube Bullion Porn, enjoy!







I’ll have to think about bringing all of mine together (or at least a representative sample) and do my own little porn movie for my readers.

These little videos create interest for both collectors and wanna be collectors/investors, they also stoke your greed to have more, help you believe that you're doing the right thing with your money and that you are not alone.

Me, I just like to see all the different products because when I'm buying I try to mix it up so get a variety shapes, sized and mint marks. I find this it makes it a little more interesting and when you are showing it off to others they sometimes understand the collectability aspect of getting all different bars more than just simple accumulation. Now given a big difference in premiums I won't go out of my way for most bars but I would love a Wall Street Mint silver bar, the 10 oz Maple, other sizes in Bache bars, more of the 2, 2.5 and 5 peso Mexican gold coins and a gold Sovereign or two.

What are the favourite pieces of your collection? What do you want?

More Pain Ahead

It looks as if my assumption/prediction that no less than 78 U.S. banks will fail this year is going to be easily met. So far 36 banks in less 5 months have gone south including the big juicy Bank United of Florida whose failure will cost the FDIC an estimated 4.9 billion.

As if this was not bad enough the FDIC has increased the number of “Problem” banks from 252 to 305 up 21% while the FDIC insurance fund from 17.3 to 13 Billion in the same period, prompting an emergency levy on the banks to raise more money.

While the FDIC states the industry as a whole showed a first quarter profit compared with a Q4 loss last year, 22% of banks are still taking losses and 59% are showing lower income than last year, which would seem to show there is room for many more failures both this year and next.

From the article I saw last week but can’t find the link(sorry) it would seem that banks are sitting in the eye of the storm. While things seem to be calmer with lower losses than last year, in reality we are simply in the period where most of the subprime mortgages have already reset but the vast majority of the ARMs have yet to hit their reset date. Claims by the banks or markets that things are better are simply lies to pump share prices ahead of share offerings needed to recapitalize for the next wave of losses. Don’t be fooled, not only is there a huge wave of ARM resets in the next two years but there are additional home loses from unemployment to consider, failing commercial mortgages and increasing credit card defaults as well.

Just today JP Morgan stated they expect 9% credit card defaults this year, while defaults at WaMu could range between 19-24% and with profits from gouging and fees curtailed by recent laws many banks will continue to hang on or bleed out slowly only to be hammer into submission Q4 or next year as the ARM products begin to be reset.

Me despite my fear of the U.S. dollar going all to shit I’ve actually bought my first U.S. stock in 2 years with a small purchase of FAZ, a 3 times leveraged financial bear ETF. The Bank index has recovered too much in my opinion and I expect financials to take another beating some time soon. I wish someone would explain why all he announced dilution of U.S. bank shares is not hurting the share price more, this makes no sense what so ever!

Meanwhile the debt, foreclosures, bankruptcies continue to pile up. If you want to send your eyes spinning and your mind reeling have at look at this all inclusive debt clock

and they want you to believe things are getting better, yeah right!

Imaginary plastic diseased green shoots

While all this talk of green shoots has many people exuberant that the big bad recession is over and we are already heading for a recovery, I just don’t see it. In fact for me all this good news and group hugging fills with me with even more fear and apprehension as I wait for then other shoe, or rather boot to drop. People who are not even healed from the last financial beating they took are jumping on the don’t worry, be happy bandwagon as if all the things they’ve seen over the last two years was just a bad dream. Idiots!

I had a conversation yesterday with someone who originally thought I was rather nuts and overly pessimistic; he no longer things I’m overly pessimistic. He said to me “this can’t be over this easily, what do you think will be the next crisis that ends this rally?”

In reality I don’t think it will take a new crisis but the simple progression of what’s already going on to bring about the next downward leg. Credit is still contracting despite the giant stimulus plans of most major governments, while banks have been raising money and taking government bailouts they have been losing a great deal of that money and shrinking limits on credit cards and credit lines. As long as credit is held back these so called green shoots cannot grow and prosper, instead I see them withering in a prolonged credit drought. Of course the same withering could take place without spending the money so why bother?

Of course there are very sound reasons for personal credit access to be shrinking so don’t expect to see this change unless governments step in and mandate loaning. An article in the NYtimes which may or may not be hidden behind a subscriber wall reported

According to estimates by Oliver Wyman, a management consulting firm, card losses at the nation’s biggest banks could reach $141.5 billion by 2010 if the regulators’ loss rate was applied to their entire credit card business. It could top $186 billion for the entire credit card industry.

This $186B is more than $100 billion larger than the worse case scenario used in the recent bank stress tests, so how valid were those stress tests? Additionally the unemployment rate used in the Government calculations has already been achieved so additional job losses will nullify the assumptions made in their tests. These stress tests were bogus and have understate the problem they same way they've understated this crisis from the get go.

Just today, Advanta a small business credit card company (one that I had never actually heard of) announced it was shutting down all 1 million accounts to preserve capital after defaults hit 20%. Advana will attempt to pay off its investors at somewhere between 65-75 cents on the dollar and close shop. This collapse leaves 800,000 businesses that were paying their bills without credit as of June 10. Many of these companies will have a very hard time finding new credit in this market. Green sprouts my ass!

The commercial real-estate market has certainly not bottomed and I don’t see how it can until retail bounces back. The big question is how can retail bounce back with 25 million unemployed and growing in the U.S. and personal credit being cut back? That’s right, it can’t!

China has just announced its exports are off 22% , the U.S. trade deficit is up and their budget deficit for 2009 is admitted to be heading for 1.8 Trillion by year end. I’m banking it will be well over $2 Trillion.

So see! We don’t need a new crisis we just have to wait for the ones we already have to finish unwinding.

From the how bad can it get file:
How about tearing down nearly complete homes because they are would cost too much to complete and sell?

This absolutely freaking insane, they were actually wrecking better stuff than I can hope to own! Man I wish I was close enough I could have scavenged a $40 granite counter top or new house windows for $20 in order to fix up my little hovel. Another story about the same development mentioned a lady who got enough lumber to build a shed in trade for a 6 pack of Corona.

Of course sometimes tearing down cities makes sense like in Flint where they are considering a consolidation of the city by tearing down nearly vacant communities and allowing people to move to other areas where there are enough people to support communities and retail. This is actually a brilliant proposal but even more so if they converted some of these empty blocs to urban farming creating some local jobs, keeping more of their food money local. Empty land near existing commercial buildings or residential blocs could become parks with huge community sized geothermal heating plants under them. Flint could become a model for sustainability.



Gold and Silver

I’m quite pleased to see a little strength appear in the metals market albeit later in the season than I would have expected; most years we start to tank about now and wallow until the summer holidays are over. This year perhaps the mantra will be not sell in May and go away, but something more like don’t be mental, covert to metal. Hey I don’t claim to be a poet! Silver is outperforming gold right now but after the beating we took last year it needs to outperform just to stay in the game.

I still can’t find 5, 10, 20, 50 or even oz bars locally but the silver shortage seems to be getting somewhat better with silver Maples and Eagles appearing in stores again even if their premiums still seem ludicrously high. Many coin stores/banks are charging a $5-6 premium for Maples when First Majestic Silver can be caught some days (before they adjust their prices) selling bars and rounds at premiums as low as .50 Personally I’d prefer a much bigger pile of silver rounds rather than pay a premium ranging around 35% for Government coins and then get dinged for provincial taxes on top. Majestic also has the hard to find 5oz, 10oz and kilo sizes with a commitment to add a 50oz bar soon.

Last months reduction in Comex silver of about 10 million oz was a nice surprise but rather than a new trend to clean the stockpiles out it seems this was probably just the silver ETF taking delivery of some of the silver its fund was short. Are they balanced now? Let’s hope not, I’d like to see them draw off another 10-20 million ounces before years end. Bwahahahahah

You can’t polish a turd!

I want to firmly state that I do not believe any of the Main Street Media hype that this rally in anything more than a suckers rally bought with about by massive propaganda and manufactured results. This is just one more attempt to fleece the sheeple before the hammer comes down and crushes the markets again. Nouriel Roubini shares my belief that this is a suckers rally; believe Jim Cramer if you want but Roubini has actually been right this decade, Cramer the Bear Stearns cheerleader, not so much.


Sure a few banks are claiming profit but at what cost to the public who’s picking up the bail out costs of TARP and other plans designed to benefit the guilty. You also have to wonder how many of these results are going to be restated later or are simply hiding the real numbers until years end.

It seems daily that the Government creates more schemes to let the biggest, baddest and guiltiest of the banks sell their toxic assets to the either the government directly or to other investors subsidised by the government. The end result? the Government moves that much closer to default or hyper inflation, the public moves that much closer to tax revolt or downright insurrection and the big banks get a “get out of jail free card” all while taking their mega wages and watching for opportunities to prey on small banks consolidating yet more market share and power.


So what is really happening?

1. Have defaults on houses stopped or even slowed? NO

2. Are defaults on credit cards increasing? Yes

3. Is the Employment situation improving? No

4. Won’t number 3 make 1 and 2 worse? Yes

5. Can stimulus create jobs faster than they are destroyed? No

6. Are Government revenues down at all levels? Yes

7. Can towns, cities or states balance their books any time soon? No

8. Are government debt sales fully subscribed? No

9. Are Governments buying their own debt and creating money? Yes

So what do the financial reporters see in this mess that makes them claim the worst is over? Oh yes, a memo from above telling them what’s this week truth should be, encouraging you to invest more money in those things they want to short next week. Don’t fall for it; follow the basic truths of money.

You cannot indefinitely spend more than you have.

No government can expect to meet obligations of 5-6X GDP with a plan that increases spending and borrowing while revenues fall, unless they resort to destroying their own currency. With GDP and revenues falling and spending increasing obligations could reach 7-8x GDP in no time at all. The point of no return is here or fast approaching and the failure of the U.S. in particular and the west in general is no longer just possible but probable

When governments destroy their own currency you must retreat to physical assets that will maintain their value over time. Since housing prices are still falling I will maintain as I have for 3 years that silver, gold, and productive land are the three best long term assets. If you must delve into equities metals, energy and food still represent items of limited supply trying to contend to an ever growing population.

Who's watching the Watchmen

I don’t often tackle a purely political topic on this blog but I think it’s imperative that you pay attention to this

A new bill called the cybersecurity Act of 2009 has been introduced in the U.S. congress that while claiming to improve security gives the U.S. government (that bastion of logic, fair play and non partisan behaviour) the "right to shut down the Internet in an emergency situation and disconnect critical infrastructure systems on national security". This bill will let the Gov step in, control and shut down private networks, further it gives them total access to private information.

Read the entire article here If you are a U.S. citizen complain about this before they steal your data or find a reason to turn off the ISPs of sites that don’t agree with Government propaganda and misinformation. There is no such thing as a free market anymore and if Bills like this get passed free speech and a right to privacy could also be eliminated.
Do you trust those bastards? I don't

Is there a run on silver at the COMEX?

Ok I hate when this happens, I get lazy for a few days and don’t bother checking the silver warehouse stocks and when I go back for a peak I have one of those WFT! moments as silver levels have dropped from 124 million just a few days ago to 115.6 million ounces. This is big!

Why are stocks dropping, and why so quickly?
Why would someone remove their silver from storage? A margin call and a need to liquidate perhaps, or getting their personal assets away from ground zero for fear of something messy like a default happening at the Comex? Or is it just late deliveries not keeping the stocks up

I don’t know at this point, it might just be a fluctuation in storage levels corrected later in the month by mass deliveries or it could be the start of a run on silver.

I’ve not noticed any bad physical shortages recently, Scotia seems to have maples in silver and gold and there have been less complaints recently about delays at NWT Mint, (at least I’ve heard less). Yet I’m told that for each of the last 5 trading days 2 million ounces of silver have been delivered putting us on track to hit the monthly delivery maximum of 15 million ounces. This looks big folks go make a physical purchase if you can manage it.

Just to note that on Wed the trend did not continue and there as a small change in category transaction and a modest delivery of around 200,000 ounces.

Spring Madness

I want to know why anyone especially the market was shocked by lasts weeks move to monetize 300 Billion dollars of U.S. debt?

It’s not as if many people like me aren’t screaming “The End is Nigh” and yet the market and people in general seem ignorant of the simple reality that new money to cover these massive stimulus and bailout packages must be either borrowed or created from nothing. They also seem oblivious to the idea that there is not an endless market for U.S debt ignoring the warnings of people like ex Comptroller General David Walker who spend his entire term of office pointlessly trying to convince a nation it was broke.

Last weeks announcement should not have been a surprise to anyone and more importantly neither should the next wave or forty waves of monetized debt that is destined to hit the market. This trend will come not only from the Fed but most of the worlds major central banks who can neither find enough suckers for their debt issues nor want to have their currency appreciate out or a normal trading range with their biggest customers.

This a wake up call for the many people who did not believe this moment would actually arise; you have been given fair warning that monetization, currency devaluation and inflation, instead of austerity are the chosen course for western nations. Now is the time to take any money you don’t want destroyed and place it in gold, silver, food, productive land, or some other real tangible asset. This is the very scenario that brought me to asset based investing several years ago and with this confirmation being so open and so blatant we can only expect that further moves to monetize debt will be fast and furious. You’ve been warned, Act!

Other stuff

In the too stupid to believe category the FDIC saw fit to criticize a Massachusetts bank that has managed to get through the recent credit crisis with no bad loans.

The bank, East Bridgewater Savings Bank was chastised for neither "lending enough" nor "promoting its loan products" enough.

Great time line, East Bridgewater savings gets shit upon on Tuesday, and then on Friday afternoon 5 financial institutions, 3 Banks and 2 Credit Unions fail, (FDIC numbers do not include credit unions) The people who run this small but sound bank should be held up as examples of good management not badgered for refusing to take unmanaged risk.

When I wrote The Great 2009 Bank die off on Feb 16 I noted 13 failures so far this year.
Since that time, a scant 5 weeks the tally has grown from 13 to 20 failed banks, and it’s only March people! We could easily hit the 80 failures I surmised earlier in the year


There is also some definite clumping of these bank failures, 3 Georgia, 3 Illinois, 3 California, 2 Florida and 2 Oregon, 10 of 20 failures in 5 states, with all but Georgia being in the top 10 foreclosure states.

Spring time warning.

I don’t care how secure you are with your little pile of gold and silver or that sweet job with benefits but you have to face the reality that very soon the shit is going to hit the fan at a velocity just short of warp 9. Be it civil unrest, dollar destruction, 30 % unemployment or simply the bankruptcy of major shipping or food processing companies, there are going to be major disruptions in the status quo. Take a little money a little time and put aside a little extra food and necessities. If you have the land and physical ability plant yourself a garden this spring and buy a book and the equipment for canning. While Silver and Gold are financial insurance, you can’t eat them and you can’t medicate your sick kids with them, so you should look to other aspects of your personal emergency plans.

New Silver Bugs and other stuff.

It would seem that the fear generated by all the failures, bailouts, evictions and graft is a great motivator in driving people to finally purchase silver. I’ve blogged for several years about supply deficits, historical ratios, the destruction of fiat money, inflation and general financial chaos but at no time have I seen so many people jump on board in such a short period of time as I have seen recently.

In the last two weeks I’ve had three acquaintances and one reader make their first silver purchase. I’ve also had several personal inquires asking for more information (apparently some work place sleuth has connected the real me to the web me). I’m glad to see this trend because in all honesty I’m all tapped out and can’t see myself accumulation very much more in the near future unless I suddenly become the best and most famous blogger in cyberdom and the ad revenue begins to reflects this. (Not bloody likely)
I’d really like to see this market pop sooner than later so I can turn my silver into land and finding others to absorb supply and spread the legitimacy of silver investments was the key reason to start this blog in the first place and I’m glad to see the recent growth.

Something I’ve told my friends who have bought silver recently is something like this. Even if you only bought a meagre 10 ounces you’ve now become a very rich person. World production sits at about 670 million ounces a year and world population is just over 6.7 billion, or 1/10 of an ounce per person per year. Your purchase represents 100x your share of the worlds silver money created this year. Estimates of the total world silver stockpile ranges from 1 to 10 billion ounces once again proving you have more than you share of the world’s real money. Silver is real money, silver is rare, silver is industrially vital and you have it.. In the famous worlds of Daffy Duck "I'm a Happy Miser"



I don’t have a lot to say these days as other concerns are keeping me busy but it looks like we might have a couple of weeks of correction, at least that’s what a couple of chart fetishers tell me. They say we are well overbought and that a correction and consolidation need to take place for further gains, they also tell me as long as it’s not too deep or prolonged this is a dip we should be looking to buy on. Me I’m no longer sure the chart can predict everything, sure some guys trade the chart exclusively but panic and the small size of the metals market could lead to a nasty surprise. I’m holding my HBP gold bull ETF and may even add a bit (a very small bit) gold correct below $900, as for the actually metal “From My Cold Dead Hands” or a 20 fold increase in price. As for silver, unless I trip over some rounds or junk silver on a good day when I have cash I can’t see me buying much this year.

For locals, Scotia Bank does have maples in stock, but I’m not sure what else. When you can find product right now there is little variety in manufacture or size, simply buy what you can find. First Majestic direct sales must be getting its act and supplies chain in order as the limits on some products have been increasing.

As I understand it, small gold is similarly scarce in the GTA.


Continued bloodshed is taking place in the markets with yet another bank, the Silver Falls Bank of Silverton, Oregon, failing last Friday and no doubt another or eight will be thrown on the bon fire tonight when the FDIC Ninjas descend.

The Big three story is getting just too stupid; there is too much supply, too much debt, and too few good products and much like the movie Highlander “There can be only one”, or at the very least one must be left to die so the others have a better chance.

Chrysler is private so let the fund that bought them bail them out, GM is hemorrhaging like an Ebola victim leaving Ford. As the only company not asking for money at this point Ford should be the victor. Their cars have got a lot better and if they started making or importing their European models for N.A. they could easily compete with the Japanese.

AIG, shudder I can’t even go there, what a mess

If that was not bad enough the IMF believes up to 16 countries face bankruptcy and has no funds to deal with the problem.

Lastly I’d like to remind you that financial troubles are not the only things that are endangering our way of life and invite you to peruse my post on the phenomena of Peak Oil Doomers

The Great 2009 Bank Die Off

I had to go back and check the date of my last post because I could not believe that the total bank failures for the year had jumped from 9 to 13 in a single week. This is quite an acceleration of the existing trend and definitely supports the view the U.S. is going to face a major bank die off this year.

The new banks failures reported on the FDIC site are the

Pinnacle Bank of Oregon, Beaverton, Oregon, with approximately $73.0 million in assets was closed. Washington Trust Bank, Spokane, Washington has agreed to assume all deposits (approximately $64.0 million).

Corn Belt Bank and Trust Company, Pittsfield, Illinois, with approximately $271.8 million in assets and approximately $234.4 million in deposits, was closed. The Carlinville National Bank, Carlinville, Illinois has agreed to assume all non-brokered deposits.

Riverside Bank of the Gulf Coast, Cape Coral, Florida, with approximately $539.0 million in assets and approximately $424.0 million in deposits, was closed. TIB Bank, Naples, Florida has agreed to assume all non-brokered deposits.

Sherman County Bank, Loup City, Nebraska, with approximately $129.8 million in assets was closed. Heritage Bank, Wood River, Nebraska has agreed to assume all deposits (approximately $85.1 million).

These new failures are expected cost the FDIC upwards of $330 million bringing the yearly total to about 1.5 billion, and its still February! How's that for a burn rate?

You have to remember that all the bail out money floating around has been going to the big banks that sold all the toxic products in the first place. While these little guys may have made some stupid mortgages to people they did not create the sea of derivatives that are bound to destroy the whole system, nor were they the ones advising their clients to buy the same products they were shorting. The system is corrupt and will let scores if not hundreds of these little banks fail.

How much more proof do we need to realize they don't give a crap about the little guys neither the small banks nor the public in general? This is all about saving the companies that politicians hope to work for some day, companies that politicians expect to get donations from or those companies already owed favours for past donations.

Most importantly these bailouts are designed to further the agenda of consolidating financial power to the detriment of the masses. These bailouts are corporate welfare of the worst kind because they are not even doing it fairly. The bigger, the guiltier and the more incestuous your relation to political power the more likely they will save your corporate ass.

"and the Guilty will inherit the Earth"

Dominos are falling

I just noticed that the several banks when under last Friday and I decided to go to the FDIC home page and get a total count for the year. While I was there I decided to look at other years failures to point out the trend and this is what I found

2007 1 lone failure
2008 24 failures
2009 9 already and its only Feb 9th



If this trend continues at only the average of 4.5 every month we could be heading for over twice last years failures, however if we go with the higher number of 1.5 banks a week so far this year we are looking at 78 failed banks.

From the existing 9 bank failures there is total cost to the FDIC of somewhere just over $1.2 Billion or $133 Million for each bank. Multiply that by 78 expected bank failures and the total losses for the FDIC would be about $10 billion which is actually not that high considering one of last years biggies like Indy Mac was estimated to cost the FDIC from between $4-8 billion alone.

Of course our 9 bank sample for this year is small and so far and does not reflect the presence of some of the larger banks that failed last year. My estimate for last year puts total cost to the FDIC at over 6.5 billion or 271 million per bank which extrapolated forward to our 78 bank target this year could put us at about $21 Billion.

NOTE, Last years numbers from the FDIC reports do not give an estimate FDIC cost for the WaMu failure, so real numbers could even be higher


So my quick and amateurish look at the FDIC liabilities for this year could range anywhere from about $10 billion to over $20 Billion.

I guess compared to TARP and the stimulus packages its pretty insignificant but it does show that FDIC will probably need a bailout next year if not later this year.


Just something else to consider.