Very few things are going right!

One of the few high points in the last couple of weeks is the strength in metals and especially Silvers out performance of gold. I’m also happy to see a great bit of volatility in the silver Nymex stocks as well as what appears to a constant draw down. I think it’s going to take a few months to see if how supply/demand destruction is going to play out for the year but with recent deposits not keeping up with deliveries I think it’s looking good for silver holders and certainly offer incentives to make that one last big purchase while you can to both secure your own future but to crush the Nymex.

I did finally receive my First Majestic silver rounds and I was pleased with the rounds themselves and the packaging and shipping. Of course my pleasure was tempered by the difficulty I had with my first lost order and the subsequent snooty response when I wrote asking for confirmation immediately after placing the second order. The business rounds and the various small bars have sold out and been restocked several times now so it looks like they are getting their act in gear and moving a fair bit of bullion. I’d really like to know how much they’ve delivered.


The only smart thing I’ve seen recently is a program by Freddie Mac that will allow foreclosed home owners and existing renters in foreclosed properties to stay in their homes and rent. While I’ve not seen full details the plans numbers seem awfully low which would indicate that they either have far too stringent criteria for remaining in the houses or a far too optimistic estimate of how many houses will be in default this year, I suspect both!

I certainly home other lenders make similar plans to keep people in houses. I’ve been harping on this issue for 2 year at least and it makes sense to keep people in their houses for a number of reasons. It stops communities from becoming dysfunctional ghost towns, it keeps people off the street or from living in their cars, it is good for the banks to generate some cash flow rather than sit on an empty house for who knows how long, and finally it allows the house to retain more value than if it was left empty, unmaintained and potentially squatted in or vandalized.

Unemployment contiunes to excellerate in the U.S. while Canada took a sharp kick to the groin with 126,000 job loses in January, taking the market by surprise. So much for the claims of strong fundamentals and no threat to Canada. It's obvious we cant trust these shitheads who lead our country. Tweedledum 1 and Tweedledumer 2

There are a couple of must read articles from last week I would ask you to glance at that deal with the coming crisis rather than just reporting the current symptoms, Ambrose Evans-Prichard’s piece WILL CHINA LEAD THE WORLD INTO DEPRESSION Is quite an eye opener as was a SPIEGEL ONLINE article Can countries really go bankrupt


It seems pretty obvious to me that nearly every major country will be floating a stimulus package or 8 in the next year and with the exception of China they will need to do it on credit. China will be hoarding their reserves to either maintain their own stimulus plans or to buy up bargain basement resource assets. They will not have the desire, ability, nor the suicidal tendency to buy up all the western debt that will soon be offered on the market. The Gulf states income is down on soft oil prices and they've already been abused on their banking investments, so it's doubtful they will come riding to the rescue this time either.

Also, look at those yields! Why the hell would anybody buy debt at today’s interest rates? The U.S. having such low rates will have stiff competition from the Europeans, Canada, Australia, and a host of corporate paper that is offer extremely attractive yields in comparison. Also at such low yields you may as well buy metals since gov bonds will give you next to nothing and be backed by nothing. Metals offer no yield but are real and undilutable , I know which I would buy.

If Government debt cannot be sold the central banks will just deposit T-bills and issue money as pure monetized debt. This is scenario we’ve been dreading for years but knew would ultimately happen, straightforward devaluation of most major currencies and inflation. I think these bond offerings and their failure to be fully subscribed will be one of the most important issue this year. Watch the MSM ignore it totally!!!!!!

Can the U.S. dollar collapse? Some seem to think so .

As does Willem Buiter,

Marc Faber is also in the collapse camp as is Peter Schiff who in defending himself from recent criticisms reiterates his position that a USD index of 40 is likely which would be a 50% hair cut for the dollar


The important question is, how do you measure the value of your currency if all your major trading partners are following the same dangerous path of monetization and devaluation?

The Zimbabwe dollar looks like a piece of crap these days but if you compared it to the Hungarian pengő of 1946 you’d consider yourself lucky to be holding it. If all currencies monetize debt and print money the only firm measure of value has to be something you cannot forge or create more of at reckless rates such as gold, silver , less liquid assets like land, art, machines, or very hard to store assets like tons of grain or a million barrels of oil.

There is a lot of shit coming down the pipe these days and despite our financial preparations we cannot know exactly how things will unfurl or whether they will spurn civil unrest, revolution or wars.

When it comes down to it the things that are most important are shelter, food and personal safety of you and your family and in case you wish to broaden your horizons to another issue that may leave you hurting, have a look here
and if that tweaks your interest, there is also my take on personal food security.

I know I've been slow posting of late I seem to be having a crisis of faith. Its not that I don't believe what I'm saying but I am starting to believe that most people are not worthy of the warning or it's simply too late to save them. The Crisis is no longer off in the distance but right at our feet. I don't know exactly when the financial crisis,the food crisis or the energy crisis crests over us washing away the status quo but the time to warn and prepare people is surely fading.

I thank you for staying tuned and I hope you will make one last attempt to convince those around you to prepare, even if its just getting them to buy a little extra food for an "emergency". You don't need to frame it like the end of the world, rather simply remind them that Governments and FEMA suggest you do these things and considering what a crappy job FEMA does you should really take responsibility for your own security, food and otherwise.

Canadian Silver Bug 2009 Predictions

I guess I’ve stalled enough and should record my predictions for this year and get it over with. My predictions this year will be two fold, first I will give prediction 1 which is the bare minimum of what I expect to happen this year and prediction 2 the, “oh shit, that’s not good,” all hell breaks loose kind of prediction. Since the crystal ball was a little foggy last year I'll try Tarots, next year I'm going straight to goat entrails.


U.S. dollar:

Last years strength made absolutely no sense and with the current predictions of a $1.5-2 trillion 2009 deficit it should scare the hell out of anyone who’s holding large quantities of U.S. dollars or debt. The recent 83-86 range on the US dollar index seems way too high but how can you judge a currency compared to its peers when they are all hell bent for fiat currency suicide, racing to zero with the pitiful greenback. While I believe the danger of a serious crisis is more likely than last year, there is no way of knowing which market or political event will pull the trigger, or when. Today’s dollar strength may just be enthusiasm created by the end of the Bush era and Obama’s promise of change but in reality Obama has no hope in of fixing America’s problems, they are too big, he’s only a man and Americans are too selfish to limit their expectations. You cannot fix debt and overspending by creating more debt and overspending. Pain, sacrifice, frugality and loss of empire are the only possible ways to save the system, all other courses will result in far worse outcomes.



Predictions

I still strongly believe the Gulf States will drop or weaken their dollar peg and that some countries that use the U.S. Dollar as their own currency will start to look towards independent or regional currencies. Top on my list would be Ecuador, but others may also go this route.

Russia may demand payment in Rubbles by year end refusing to settle for dollars.


1. USD index will start heading down in a noticeable manner by second quarter and will drop to 73.00

2. The dollar could could fall under 64 should panicked foreigners start dumping treasuries.


Energy:

I do not believe that "demand destruction" will be drastic enough to compensate for both oil field depletion and the promised production cut backs by OPEC. Today’s low prices for oil and N.G. say to energy companies, “turn off that drill, we are losing money” Oil shale, tar sands, and coal bed methane are all well below a profitable price eventually resulting in new developments and even marginal old developments being shut down. A shut in oil or gas well represents lost capacity we will need when demand goes up again or when shortages arise. A shut in wells also represent a total loss for oil companies who get nothing for their expenditures.

1. We will reach $100 oil again this year and N.G. will rise back over $10. While we are not heading sharply down the backside of the Hubbert's oil depletion curve YET, the loss in new developments and proposed cut backs will cause regional shortages this year. With Mexico depleting fast and destined to become a net importer within 18 months added to Venezuela's hostile attitude towards the the U.S., America could face regional shortages.

2. If $100 dollar oil combines with a crisis or a natural disaster it could cause last years highs to be matched. Knock out a pipe line or close all the rigs in the gulf for a weak plus repair time and $140 oil might be back far sooner than many could believe. We could even expect U.S. offers of military aid or advisers to places like Nigeria in order to stave off the repeated disruptions by rebels. Should the dollar tank as well, $200 could be investors home run for the year. Me, I’m thinking energy could be a better play the metals this year and some of the new money I’ve putting in the market has been building a position in the Horizon Beta Pro Bull ETFs for Oil and N.G.


Gold:

World gold production is dropping for a number of reasons. Gold mines are closing or slowing development due to the credit crunch, South African mines still have power issues that are lowering output, older mines are becoming depleted just when the funding for new developments has become hard to obtain. All this equals less gold than projected keeping pressure on the price. Demand for small gold will continue to stay strong and with world mints not being able (or willing) to meet demand, premiums on bullion coins will stay high. Despite false concerns over deflation the drastic and purposeful devaluation of the U.S. dollar will continue to the drive smart private money and sovereign funds towards bullion.

1. Gold will reach at least $1100 and close over $950 by years end
Nov 9 , we hit my mimimum $1100. now we just need to close the year strong

2. If the U.S dollar tanks or inflation from the massive stimulus packages gets away from central bankers in 2009, we could get a price spike as high as $2000 for 2009

Silver:

Silver will suffer both demand destruction from lower industrial use and supply destruction from the closing of base metal mines that turn out 75% of the worlds new silver supply. If we can maintain silver investment demand through this downturn stockpiles will shrink and the silver/gold ratio will tighten.

Obama with his infrastructure spending, stimulus and printing of money will be extra good for silver. Inflation from stimulus will force metals go up, while the electrical grid upgrades may include the use of super conducting cables which use silver in their manufacturing.

Other silver stories to watch for would include one or more major laptop manufactures offering high performance silver/zinc batteries instead of lithium or the commercial release of a cheaper silver catalytic converter in Japan. There also seems to be some substitution effect happening in the jewellery market with a lot of sterling being offered this past holiday season. Women still like their sparkles and will suffer with mere silver when gold gets too pricey, or at least their cheap husbands hope they will suffer with it.

1. Silver will hit $20 dollars and pressure to suck the COMEX warehouse stocks dry will continue, I would think bringing Comex silver inventories down to 115 million oz is a modest goal for the year and should be attainable. With the recession/depression leading to less base metals mining we could break the manipulators as long as investors can continue to take silver off the market and convince more of our friends and family to do the same.

While the price point still alludes me Nov has seen huge withdrawls from the comex lowering stock levels to below 112 million ounces as of Nov 17, I think we've already seen 4 mill withdrawn this month and it looks like we will hit the 7.5 million ounce limit

2. Dollar weakness or a concerted effort to draw down the silver inventories could do wonders for silver putting it north of $40. There has to be a magic level in silver inventories where industrial users panic and start to hoard. I don’t think this means we have to empty the Comex vaults we just need to draw them down to that point where the first industry panics like Ford did with palladium early in the decade.

All it will take would be 5000 futures contracts demanding delivery or 30,000 individual investors taking one 1000 oz bar off the market to drop stocks below 100 million oz and surely start a panic. Remember that almost half of the 125 million oz of silver stored are marked as eligible and therefore not offered for sale and delivery. This deliverable 65 Million ounces is the number we need to see fall either by changing status to eligible, or even better getting the physical metal taken out of the warehouses and the reach of the manipulators.

Other stuff

Inflation will continue to fall for a while but will rear its head late in the year as the crazed government spending has effect

Unemployment will continue to rise in the U.S. and Canada but only Canada’s figures will marginally reflect the truth, U.S. numbers are understated by at least 5%

China will have a crisis if not in currency then at least a wave of increased social turmoil as unemployed factory workers can neither find new jobs nor return to family farms that are either incapable of supporting them or which have been bulldozed or poisoned by industry.
A very interesting article that claims hyperinflation in China will be the straw that kills the U.S. dollar. I don’t know if I buy it the whole theory but it’s certainly plausible

Despite Government handouts and bailouts many more banks will fail this year, mainly smaller banks because they can't afford the political friends needed to save them. Just a week or two out from here I quantified my prediction to at least 80 which we know now was a gross understatement, but I still hit my target.

Housing will not recover in the U.S. and will continue to slump in Canada

Commercial real estate will get nuked as retail bankruptcies make it impossible for malls to stay fully leased.

With the minuscule returns offered on treasuries investors will start to turn back to QUALITY corporate paper. U.S. debt is a precarious investment at best and those who think low returns from a near bankrupt is a flight to quality are nuts and deserve what they get.

Obama will be unable or unwilling to do most of those things he promised in the campaign, while smarter and less tainted than the old regime his glut of ex Clinton advisers shows change is not really that far up on his agenda.

The best Obama can do is keeping the country together and continue the charade that the U.S. is solvent. Huge predictions for the deficit will lead to inevitable default or watering down of U.S. pension obligations starting towards the end of his first term, Obama will have to pull one huge rabbit out of his ass to survive an election.

The worst he can do is preside over the crisis that shatters an empire: debt default, hyperinflation and insurrection.

The on going Silver Certificate default story

I’ve had a number of requests to revisit the plight of our fellow investor who has an unredeemable Silver Certificate from the TD bank. I’ve received two updates and it would appear the stupidity continues.

The OSC says it’s not their problem, but did provide other contacts

RCMP says the same thing, apparently investigating allegations of bank fraud is someone else’s jurisdiction or just not worth their effort. Perhaps contacting the OPP instead?

Papers and news services are not interested in picking up the story; I have contacted various new organizations as has the holder of this worthless certificate and no one seems to care. If you are in Canada perhaps you could relate the issue to your local papers or help out by nagging the larger outlets to investigate the issue. If you have certificates raise the concerns about them being legitimacy with your local MP/MPP and nag your bank Manager, we need to turn up the heat on this issue.

TD securities got involved and were no more responsive than TD was. You’d think they’d just order some 100 oz bars from NWT mint and settle the certificate, but no they don’t have to, the certificate says so and they are not accountable to anyone.

A complain to IIROC (Investment Industry Regulatory Organization of Canada) is being written but once again I don’t know if this is their responsibility and since this is a SELF regulatory body for investment dealers and they just formed in 2008 I can’t see them shitting on one of their members. Organizations that self regulate are often just fronts to make industry appear to be responsible but do little.

Our friend is still trying to get satisfaction from TD and suing has not been taken off the table. In fact I think the longer this drags out the more it becomes a point of honour over money.

I should look into one of those online petition generators, I’ll get back to you once I get something set up.

End of year business, Post Mortem on Predictions

So I held out till the very last hopping a final run would sort out the rancid state of my yearly predictions for 2008, alas it did not happen.

My gold and silver predictions were abysmal well off the 1200/25 mark I had envisioned. The instability of the financial markets should have driven people to real assets but too many hedge funds and personal investors had to cover margins and the sorry legitimacy of the Comex both crushed metals. On the good side private investors are still accumulating and no glut of product is flooding the market, this bodes well that the bull is resting not dead. I wonder how much supply small investors would absorb if the mints could supply the small products people are demanding?

In the currency pit I was pitiful. While I called the Canadian dollar high I did not call it’s subsequent slump as I did not expect commodities to get nuked the way they did, neither can I rationalize the U.S. dollar strength, WTF?
A country that is borrowing, printing and defrauding the way the U.S. has been doing should have zero credibility, this mock strength will be shown as a blip and a great opportunity to short the dollar for the next collapse, but how long before the wake up is obviously hidden to my apparently blurry vision.

I also did not see the wide spread dropping of the dollar peg I expected but with its recent strength that is simply postponed not cancelled. The talk of a Arab common currency (possibly linked to gold) is a plus as well there has been some movement towards a basket of currencies vs just the U.S. dollar in the Gulf.

In the correct column I did call the massive slide in interest rates yet even I (one of the most bearish people I know) did not see nil rates in 2008. I was calling for a reduction of to at least 2% which when I made it was considered ludicrous.

I did call the bank failures but expected many more small failures before now.

No war in Iran

$140 oil was a good pick yet the subsequent slump makes no sense with my low being $90 yikes, was not seen and has more to due with deleveraging of funds than the bogus “demand destruction” argument. World demand is not going to shrink massively, new wells will not be brought on at today’s price, depletion is accelerating and this is going to blow up in our faces making this years highs pale in comparison. At today’s prices Oil and NG may well have more upside than metals in 2009.

Recession, uneployment up, housing defaults up, credit lines/ credit cards being called, reduced or cancelled were all good general calls for the year.

I will attempt a new set of predictions within the next 2 weeks

Silver Certificates and failure to redeem.

One of our fellow Silver Bugs has come to me with a problem about the redemption of silver certificates in bullion (not money), and he and I would like your input.

I'll let him tell the story in his own words then we will look at the text of the certificates and discuss what is happening here.

Nov 29

Good day "lord of wealth"
I purchased a 100oz silver certificate from TD Canada Trust a couple of months ago. Ever since, I have been having a heck of a time getting it "redeemed" - not cashed. After a lot of BS, and finally making the trip to T.O. I was told that they do not have to provide me the silver because the circumstances preventing them from giving it to me, are "beyond their control" (As per term 1 on the certificate) This despite the fact that I pointed out a number of sources for 100oz of silver, albeit above spot price.
Who would you think would be a better contact for me, The RCMP fraud unit, or my lawyer? Is there any interest for a class-action suit in the silver certificate holding community?


Dec 2

I contacted TD, and they informed me that they are making the calls now.
Never the less - I have attached copies of my certificate. I am interested in what others have to say about the bank's obligation to procure the silver, based on the conditions listed


Dec 4
Well, LoW. I went back to TD Canada Trust to surrender my silver certificate, and they said didn't have any silver. I then explained to them that rumour had it that Scotia Bank received 30,000 ounces of silver that morning. The securities dept told them that ScotiaBank wouldn't sell them any silver.
Once again, I explained my position, and told them threat they were in "breach of contract" and that it was not acceptable. I was asked if I would like an explanation from TD's legal dept, to which I said yes.

Within the hour I received a call from the branch with a proposed compromise. I would purchase 100oz of silver from ScotiaBank, and TD would buy my certificate for the cost of the silver.
I agreed, and the next morning I purchased 100oz of silver, and brought the receipt to TD. Which they said that they would deal with during trading hours the next day. Everyone's happy right???
TD calls me this morning, and tells me that they won't refund me for the silver - They claim that they will not buy coins - only bars. (I wish they would have told me this earlier)

Long story short... I now have 100oz of physical silver being delivered by ScotiaBank next week, and a contract with TD that they refuse to honour....

(does) Anyone else hold worthless silver certificates from TD that they want redeemed for silver?

Any interest in a class action against TD?

I contacted the OSC today, and they don't know too much about these certificates, but they did give me some more leads. I contacted TD's ombudsman this afternoon.

click on certificates to enlarge





The clause used to justify non delivery from paragraph 1 under the conditions on the back of the certificate states

“The holder of this certificate accepts the risk of non-delivery for any reason beyond the control of the bank”

While not explicitly stated I believe they could be baulking on delivery for one or more of the reasons below.

1. They may not actually have any silver to back up these certificates, in any size, shape or brand let alone highly desirable 100 oz bars.

2. If they do have bars they can't find any to fulfill redemption in the size requested.

3. If they do have bars they do not have the means or want the added cost of reminting 1000 oz bars into the desired size

4. While they can find 100 oz bars on the market they don't want to pay the difference between the questionably low spot price they sold the certificate for and the real price reflected in the physical metals market.

5. The certificates are issued with enough conditions that the banks don't feel the need to honour redemption.

6. The banks know they can create enough road blocks and stall the process until "most" people settle in paper.

7. Add your own theory, because I may have missed something totally logical and innocuous

So does

"for any reason beyond the control of the bank"

under these circumstances justify a lack of redemption?

I would think not because there is silver on the market if you are willing to pay the price.

If the TD chose not to back their certificates with real silver, should investors be penalized for TDs poor business decision?

If they did back all of the certificates or at least backed some portion of them on a factional basis, should they not have made reasonable accommodations to maintain a supply of common sized bars to meet redemption requests?

If supply is so tight that TD knows it cannot redeem the certificates they previously sold should they be selling more of them?

This certificate was only sold a few months ago and considering the inability of getting bullion in many sizes this year should the bank not have know it was not redeemable then?

Was our friend told redemption was next to impossible when he bought it?


The certificate clearly states you can get physical redemption. The banks failure to adequately back up the certificates with deliverable silver does not seem to be "Beyond their Control", in fact it was entirely in their control. They chose not to buy the physical silver they offer to redeem, or they chose not to have the sizes and shapes that represent the average client purchases.

Another issue is the yearly fee stated on the front of the certificates. GICs, term deposits, bonds etc do not have such fees so the reasonable assumption to make is this fee must be represent a storage fee for keeping your silver safe and dusted. Since silver and gold bullion are known to have storage costs, is this not it?

If not, what is the fee for?

Either way it looks bad, silver and gold take up space and it's practically universal for banks charge a fee to store bullion. If there is no fee there is probably no metal. If there is a fee, there should be metal. So naturally when there is a fee and no metal at the same time something would seem to be wrong.

TD itself is rather confusing on the whole issue at one point they say

Free Safekeeping
TD Waterhouse provides free safekeeping on all securities, except gold and silver certificates. For your convenience, we recommend your securities remain in our TD Waterhouse account at all times. That way, you will not have to monitor delivery deadlines and make repeated trips to a safety deposit box.

Notice they say safe keeping of securities not assets, so is the fee for storing their copy of the certificate, or the metals?

and

TD Waterhouse offers several investment alternatives for clients who want to take a position in precious metals, but don't want to worry about the storage costs and insurance against theft that are usually required when purchasing gold or silver bullion:

So here they are saying you can buy certificates to avoid fees, yet the certificates have fees stamped on their front.

I'm getting confused.

If a bank is charging you a fee, which (we believe) is for storage, should they not be storing something? If they are storing something for you should they not be able to identify that item or even better deliver it to you?

Is this the same issue I related to you last fall when Ted Bulter wrote about Morgan Stanely settling a class action lawsuit for not buying metals to back certificates and charging a fee to store nothing?

One thing I did notice, While the certificate mentions redemption and conditions on redemption at no place does it ever specifically mention being backed by silver. By calling it a silver certificate it's implied they are backing it with silver but nothing on the certificate actually supports that belief. I'd like to ask a bank's investment advisor if they are represented by real metal or not. Do they even know what they are selling?


Now it's unclear at this time if this particular certificate will get redeemed. TD has moved somewhat to placate a pissed off client but there is still no satisfaction and there are some bigger issues that this single 100 oz certificate.

What about all the others who have these certificates?

What if they also demanded bullion?

We need to know if TD, Scotia or any other bank that sells silver certificates have 100% bullion backing for their obligation?

If not how much backing is there?

If not why are people asked to pay a yearly fee?

If not what are they doing with money that should have purchased silver? Investing it elsewhere and hedging against the silver position in the futures market perhaps? Are they betting against your investment by going short silver?

Is there even enough silver on the market to cover all the obligations created by all the banks selling certificates?

Is their ability to redeem gold also suspect?

If they do not have the metal, how much money have metal investors lost because their purchases never impacted the demand side of the price equation?

It's quite possible given the revelations in the Morgan Stanley case that 100s of millions of dollars, industry wide, that should have been soaking up silver and gold ounces never did so, robbing investors of the appreciation the added demand would have caused.

In Morgan Stanley's case 22,000 investors believed they had bought silver and gold (not a promise) and then adding insult to injury they were charged to store it. Even $1000 for each client would have added $22 million to metals demand. Now consider many of these people had much more than $1000 dollars in certificates and there are many more banks than just Morgan Stanley offering these products.

Metal investors need to go to their banks and demand redemption or proof of backing for their metal certificates. Ask for your serial numbers. I know Scotia is annal about recording those numbers when you buy physical silver so why don't banks give you the serial numbers associated to certificates, or at least a list of all the bars they hold backing the certificates

Canadian metal investors need to group together and go to the government, the OSC, the RCMP and the Press asking the above questions and demanding a full accounting of banks metals obligations(certificates) vs. their backing (bullion).

If we get deficient answers, this should move to court.

Your opinions on the issue are welcome, Am I missing something?

If anyone is in a similar situation and wishes to organize with others, email me and I'll arrange contact with other concerned investors.

For anyone trying to redeem a certificate ask the right questions and argue that failure to back their certificates with the metal they promised was most assuredly under their control and you require satisfaction.