Friday, December 31, 2010

Happy New Year Everyone (Felice Anno Nuovo A Tutti)

And here's to an even better year in 2011 for gold and silver - ENJOY:

Thursday, December 30, 2010

Was The Jobless Claims Number Good? Don't Get Too Excited...

Of course, the seasonally adjusted headline number over which every talking moron in the financial media is doing an end zone dance over looks great.  But here's the golden truth, direct from the Dept of Labor press release:  The advance number of actual initial claims under state programs, unadjusted, totaled 521,834 in the week ending Dec. 25, an increase of 24,879 from the previous week.

Here's the press release if you want to peruse the report:  LINK

So there you have it.  Just more Government and financial media Orwellian/Randian garbage.  The fact of the matter is that our economy is starting to fall of a cliff again.  Expect more QE and higher precious metals prices in 2011.  That will be my only 2011 prediction.

Wednesday, December 29, 2010

The U.S. Mint Has Suspended Production Of Silver Eagles - Again

I was not aware of this until today, but the press release reads like silver eagle production has been suspended for awhile.  Here's the press release:  LINK

I was told a while ago by someone who is in a position to know that the Mint was under instructions to produce as many gold and silver eagles as possible this year in order to avoid the perception that silver supplies are tight.  This is why big coin dealers like Tulving seem to have an endless supply of silver eagles.

However, this same source also said that he expected, based on thorough knowledge of the entire industry, that there would be a severe silver shortage starting sometime in 2011.

I guess that shortage may have started a bit early...

Monday, December 27, 2010

Is The U.S. Dollar About Ready To Take Another Spill?

Despite a determined, concerted effort by the bullion banks to push the price of gold/silver lower, the precious metals have managed to maintain a surprising degree of buoyancy.  In fact, many of us have been discussing this departure from the usual pattern in which the price of the metals historically during this bull market have typically succumbed to to a painful beating when the cartel decides to work on liquidating the COT open interest. 

As such, i'm wondering if the dollar is getting ready to roll over start heading south again.  Here's a chart (daily, spot basis):

Certainly the fundamentals which underpin the dollar continue to deteriorate pretty quickly. In today's 2-yr Treasury note auction, the primary dealers had to swallow 57% of the deal. That's an unusually large amount for a shorter-duration note auction. The economic data, despite the colorful lipstick being slapped on the pig by the media, is showing some deterioration. And of course the dollar is responding today to the China's interest rate hike.

Having said all that, it is clear to anyone who puts a little thought into it that the only hope the U.S. Government has of financing its deficit spending and possibly stimulating economic activity is to print a lot of money and take the dollar a lot lower.

Thursday, December 23, 2010

Gold Has Been A Terrible Investment?

How many of you hear these financial advisor morons get on CNBC and discuss what a lousy investment has been over the years?  What?  Oh, it doesn't pay interest?  Junk bonds paid tremendous interest all thru the 1980's and then the market crashed hard.  99% of the world lost substantially more in capital loss than they earned from the coupon payments.  If you chart U.S. Treasury Bills since 1991, adjusted for inflation, that interest-bearing investment is actually negative.  How many your genius registered reps have you sitting in T-Bills?  Well, here's how this "lousy" investment has done since 1970 - I borrowed this chart from Casey's Reasearch, the edit in red is mine:

The next time your ignorant, idiotic "financial advisor" calls you up to tell you what a lousy investment gold is and what a great opportunity is being presented in the muni bond and mortgage-backed bond market, YOU are the idiot if you don't hang up the phone and find an advisor who knows the facts/truth.

If I find more inspiring material to post I will do so, otherwise I'm off to do some back-country sno-cat skiing tomorrow.  Have a great Christmas/Boxing Day/Holiday weekend!   BUON NATALE A TUTTI!

Wednesday, December 22, 2010

IMF Done Selling Gold - Look Out Above?

Here's the press release LINK.  The IMF has been unloading an average of 20 tonnes of gold per month into the market since September 2009.  And a lot more than that over the past few months.  If the powers-that-be do not come up with another source of gold to replace the IMF sales, gold will potentially move a lot higher in the near future.

Tuesday, December 21, 2010

The U.S. Dollar: Backed By The FULL FAITH AND CREDIT Of The Federal Reserve Printing Press

And print money is what the Fed has been doing best - really since 1971 after Nixon closed the gold window:

(click on chart to enlarge)

And really this chart just shows M2, since the Fed has removed its reporting of M3 since March 2006.  The missing component is large eurodollar deposits.  My friend and colleague "Jessie" wrote an excellent summary of how the Fed is exploiting this category to really ramp up the money supply off the books.  His essay can be found HERE

As a follow-up to my commentary yesterday on the looming State/municipal catastrophe, check out this post on Clusterstock today - LINK.  Not only are most large cities strapped with massive budget deficits, but as the analysis in the Clusterstock piece demonstrates, municipal property tax receipts are going to take a big dive.  This will just add gasoline to the fire.  Expect the Federal Government to bail out this situation via even more Fed printing.

Finally, check out this King World News interview with James Turk, who explains why we are in the incipient stages of hyperinflation: 
Rising interest rates along with the surge in commodity prices that we have been seeing in the back half of this year is writing on the wall that hyperinflation is very near.  If anyone needs further proof just look at what QE2 is already doing.  The Fed is turning government debt that the market doesn’t want into currency which is the cause of all hyperinflation.
The link to this quickie is HERE.  Essentially, if you are not accumulating precious metals right now, expect that your financial well-being eventually will be tragically compromised.  I'm thinking the new slogan on U.S. currency should be:  "In the printing press we trust."

Monday, December 20, 2010

Will The U.S. Hit The Wall In 2011?

I have been pointing out for quite some time now that the real systemic problems in the U.S. completely dwarf the financial/economic problems confronting the EU.  It could even be argued that the media and Wall Street are incessantly shoving the news on Europe in front of us everyday in order to deflect the hoi polloi's attention from domestic realities. 

But the truth of the matter is that the budgetary and financial disaster swirling around California or Illinois individually is bigger than that of the PIIGS collectively.  In fact, without Government help, there are several States that would likely be bankrupt.

Here's a quote from John Williams' which I sourced from Jim Sinclair ( 
Economist John Williams has been warning of an economic collapse for a few years. In his latest report, he says, “. . . the U.S. remains the proverbial elephant in the bathtub in terms of pending effective sovereign bankruptcies.” Williams thinks it will all hit the fan within 6 months and is predicting a dollar catastrophe. Europe is a sideshow to the coming main event. Williams says, “The various European crises remain an intermittent foil for the U.S. dollar, pulling market attention away from the unfolding solvency crisis in the United States and a likely move to massive selling against the U.S. currency. Accordingly, high risk of the early stages of a hyperinflation (see Hyperinflation Special Report) beginning to unfold by mid-2011 continues.”

I'm sure most of you have seen the segment on 60 Minutes this past Sunday which focused on the financial catastrophe facing several States.Meredith Whitney stated that she believes there will be several State bankruptcies and municipal bond defaults in 2011.

I personally think the Fed will accelerate the printing press and the Government will implement another stimulus plan in order to avert the collapse of several States. This will feed into the John Williams scenario of a massive sell-off in the dollar and precipitate the early stages of hyperinflation. 

And with that holiday cheer, I thought I would leave you with a good chuckle from "Family Guy," in honor of my completing the first unit (11 weeks) of Italian at the Italian Institute in Denver:

Wednesday, December 15, 2010

The Most Important Commentary You Will Read All Year

Now that the Asians have begun to convert their dollar-based reserves and assets into physical gold and silver, the world will soon understand the degree to which U.S. and European banking systems have issued to investors an absurd amount of paper claims on gold/silver which does not exist to be delivered.  This imbalance - of which the paper amount outstanding is several 100 multiples (including OTC derivatives per the BIS quarterly bank reports) the amount of actual supply of gold/silver - will be resolved such that price of gold/silver in all currencies will soar to levels that take even the most ardent goldbugs by surprise...

"[T]he basic problem is that government and banking debt around the world are both rapidly moving towards default, and since governments are guaranteeing the lot, the pace of monetary creation is accelerating The consequence is that the gold suppression schemes, which have existed for the last one hundred years in one form or another, are finally coming to an end. We are trying to guess how dramatic that end will be. It will be difficult enough to stop a run by unallocated account holders on the bullion banks, without forcing a cash-payout amnesty. But if the central banks themselves cannot supply the necessary bullion to prevent this, the prospect of a total collapse of paper money will be staring us all in the face."

Here's the link:  MUST READ MATERIAL

That essay should be read in conjunction with this:
It’s [meaning the paper manipulation vs. physical bullion supply] eventually going to blow because at some point these buyers will say, ‘I’m indexed, but I actually want to get all of this physical gold and silver now.’  When that happens, the game is over.
Here's the LINK

...for anyone long gold and silver that is actually in their possession - or appropriately safekept at a safe distance from all Governments - the shock and awe of the upward price revaluation will be breathtaking.

Tuesday, December 14, 2010

Muni Update: If You Are Still In Them, You Can Still Get Out Alive...

(click on chart to enlarge)

We've seen this chart pattern many times over the last 9 years, starting with Enron.  The last time I posted on November 16, I thought that ultimately Congress would force an extension of the Build America Bond program into the Bill which will extend the Bush tax cuts, jobless bennies and other welfare state entitlement goodies.  For some reason Congress is drawing the line on the BAB program. 

It will start with California and Illinois and then set off a daisy-chain of muni bond defaults.  I know that Califiornia has been using the BAB tag in order to issue new bonds which refinance maturing paper.  What happens now?  I'd love to hear some opinions/solutions.  My guess is that this rout in the muni market will soon turn into a bloodbath. If you decide to ride this out, good luck!  I'd say you are flirting with missing the last transport plane out of Viet Nam...

Inflation And The Retail Sales Fantasy...

Once again this morning the markets were greeted by the bubblehead's in the media victoriously announcing that November's retail sales were better than expected and October's were revised higher.

And once again, we have to look behind the Government wizard's curtain to see the golden truth about what is really going on with the numbers.  If you dissect the numbers today, you'll find the biggest boost came from gasoline sales.  Within a certain range of tolerance, I consider gasoline to be of inelastic demand, which means people will consume at least a constant amount until the price goes over a certain price level, of which we are not there yet.  We know the price of gasoline rose in November, which means that a big portion of the retail sales increase from October to November was from gasoline inflation.

The first chart below shows the dollar level of monthly retail sales as tracked by the Fed.  The second chart below show the CRB Index, which is an index that consists of a basket of diversified commodities.  As you can see from comparing the two charts, the level of retail sales is HIGHLY correlated with the level of prices in the system (click on the charts to enlarge):

My point is that most of the gleefully reported retail sales increase in November was derived from price increases - retail sales includes food and Walmart is a big componenent as it sells food and gas but does not break out gas sales on a monthly basis.  Specifically, in November, gasoline prices were the primary stimulant for the better sales reported. 

Make no mistake, there's no question that the Black Friday weekend sales were much better than expected. However, I have been of the view that the extreme discounting, especially at places like Macy's, essentially "pulled forward" a substantial amount of future retail sales, as polls indicated that shoppers took advantage of pricing deals to purchase both discretionary holiday items PLUS necessities.

If you think I'm off base, you can read about Best Buy's earnings report for its quarter ending Nov 30, which was released, ironically, just before the retail sales report.  Best Buy stock is down 15% right now because its sales came in well below expectations and the company reduced its full-year forecast for sales and profits.  Even more stunning, its U.S. same-store-sales fell 5% in the quarter.  In retail that kind of number is an unequivocal disaster.  Here's a summary:  Best Buy Link

The moral of the story is that the economy is much weaker than the highly manipulated Government reported numbers would have you believe.  With true unemployment continuing to increase and price inflation starting to rear its ugly head, we can expect a further deterioration in the condition of the real economy.

The good news is that gold and silver are still inexpensive relative to the dollar-price levels to which they are headed.

Monday, December 13, 2010

That Rush Into Gold/Silver You Hear Is Not Coming From The U.S.

The gold rush mania that drives the price of gold to unbelievable price levels may well come from a global stampede into the world's oldest currency that leaves the American hoi polloi left holding worthless U.S. monopoly paper and little else.

The best part about the action the in metals is that CNBC/Wall St. Journal/et al have the average American convinced that gold is in a bubble. Ironically, the classic signs of an investment bubble are nowhere to be found - the biggest signal being that gold/silver is only held/being purchased by easily less than 5% of the mass investment community. Contrast this with the internet/tech bubble when large mutual funds were heavily overweighted in the sector, Americans were stampeding like cattle into these funds and every day CNBC was promoting the whole sector. In fact, I recall vividly in 1999 that all Maria Bartiromo had to do was mention the name of an internet stock and it would spike heavily in volumn and rapidly in price. That phenomenon will eventually occur in the mining stock sector, but certainly not any time soon.

Outside of the type of investors who read blogs like my mine, why don't you go out and ask randomly if any of your friends know the name of more than maybe 1 or 2 junior mining companies.

The real gold rush is occurring in Europe - mostly Germany - and in the eastern hemispere countries. China in that last year changed its laws to allow its citizens to buy silver and has put in programs which encourage the growing middle class to invest in and accumulate gold/silver. India has historically been the largest buyer of gold. Now they are not only continuing aggressively to accumulate gold at these price levels but they are also now voraciously accumulating silver. That is the "poor man's gold" income and substitution law of economics.

The inflation that the U.S. has been "exporting" to China is now starting to show up in food prices over there. posted this chart this morning:

Food inflation is ramping up quickly in China.  Same with India.  This will trigger an even more aggressive push into gold/silver by the Chinese and Indians.  We're seeing evidence of that every day.  Eventually that food inflation is going to hit the U.S.  I don't know if anyone noticed, but the Governor of Florida has declared a state of emergency with the orange crop because of the weather:  LINK.  This situation will affect all of Florida's crop production.  Prices are going higher.  Eventually this reality will sink in and more investors in this country will start to look at gold and silver, only at higher prices.  My view is that silver will continue to outperform gold because of the "poor man's gold"/income and substitution effect as people here eventually scramble to move into precious metals.

And finally, I believe recent action in the metals is highly related to the situation with the Swiss banks, in which several anectdotes have surfaced about investors having problems getting their Swiss bank to deliver gold and silver that they were safekeeping there.  One particular individual had $40 million in gold bars he wanted and it took him a month plus the threat of legal action before he received his bars.  Another investor with $500k of silver bars is still trying to get his metal delivered and the Swiss bank involved is lobbying hard to convince him to take cash instead.  If these banks were actually keeping the metal on hand like they are paid to do, they should be able to have the bars delivered within a week. 

Not in this country of course, but globally precious metals investors are looking at these stories and deciding to get their metal out of the banking system. The knowledge that paper claims on gold/silver outnumber the actual amount of physical gold and silver available to be delivered by insane multiples is finally being widely circulated and those who understand this situation are going to ask for the delivery of their metal.  In other words, in my view, there is a scramble going on internationally for investors to take delivery of gold/silver and this is part of why we are seeing the metals trade inexorably higher.  This could get very interesting...

Friday, December 10, 2010


November federal budget deficit highest on record


Got gold?  Silver?  If not, good luck!

Two Great (Quick) Reads For Your Weekend Pleasure

The first one is sourced from the King World News Blog.  The author makes the argument that, on a relative basis, Europe will begin to appear "stable" relative to the U.S.  What's interesting about this that I was meeting with prospective client who was relating a presentation he heard from some fancy economist who talked about a stronger dollar vs. all the problems in Europe.  My response was, "huh?"  California alone is a bigger problem for the U.S. than Greece, Ireland, Spain, Italy and Portugal combined.  Then layer in Califorinia, New York, New Jersery, The Rust Belt..." 

Anyway, this commentary alludes to all of that:
In no way do we see the Build America Bonds program as a panacea for what ills Municipals, rather we see it as the duct tape holding states together until growth in whatever guise comes its way. With no growth and no duct tape, we see the problems of state and local governments coming to the fore. Given California, New York, and Illinois comprise 25 percent of the US GDP, we believe headlines regarding their budget deficits will soon overtake those regarding Ireland, a country that makes up only 1.8 percent of Euro-Zone GDP.
More interestingly, he makes the argument that the best way for China to revalue its yuan vs. the U.S. dollar is to continue buying a lot more euros, which they are doing anyway in order to diversify out its increasingly worthless dollar position.  It's the first time I had thought of this issue this way and I believe he's dead right.  Here's the link and it's definitely worth reading:  Buy Euros On Dips

The second article is about silver from Sprott.  Like most of us who understand the how/what/why of the precious metals market, Sprott as an institution - and the principals of the firm individually - have overweighted silver in their investment portfolio.  I know both Eric Sprott and John Embry have 90% of their net worth in the precious metals sector because they have stated that on several occassions.  It made me feel a lot better about having 90% of my net worth in the sector as well.  At any rate, if you want to read an excellent summary on why silver is poised to provide breathtaking investment returns just click HERE.

As an aside, I was out to dinner last night with a good friend going back to 1st grade.  At one point in his career he was a Federal prosecutor at the Justice Dept who prosecuted RICO cases.  I told him about the RICO lawsuit filed against JP Morgan for manipulating the silver market.  His only response is that JPM is likely in a lot of trouble at this point...

Thursday, December 9, 2010

Che Cosa Ora? What Now?

The bond market and the precious metals market over the past few days have experienced a pretty big price correction.  In fact, the tone of financial media reporting about the action in the bond market has reflected a high degree of shock and fear.  Interestingly, the free-fall in the bond market was triggered after Bernanke was on 60 Minutes stating that he had mo problem expanding the size of the recent $600 billion QE2 program.

Rather than analyze the technicals in the Treasury market ad nauseum, on top of every other market Einstein who has offered their 2 cents, I'd first like to serve up one of the primary and basic reasons the Treasury market is selling off. Reuters released this report yesterday in which an academic member of China's central bank monetary policy committee stated that "America's fiscal health is worse than Europe's...[and] that U.S. bond prices and the dollar would fall when the European economic situation stabilized."  Here's the LINK

Well, there you have it.  China, after the Fed, is the largest holder of Treasury bonds. I don't care what anyone out there in the land of financial analysis has to say, the Chinese are either directly selling, or indirectly hedging, their massive position in the U.S. dollar/Treasury bonds.  That statment confirms this.  Let's see, he says the dollar and T-bonds will be stable/rally for a year. ROFLMAO. This guy clearly has borrowed a page from Bill Gross' script in which he expresses a view via CNBC to the world on the bond market while at the same time selling into the bid his comments create.  I've witnessed this first-hand as a bond trader in the 1990's. The indirect hedging would be via China's well-known aggressive purchasing of basic commodities, especially industrial metals, and its now well-understood aggressive accumulation of gold and silver.

I'd like to end this segment with a quote from a well-informed trader in London about the game going on in the Treasury bond market with the Fed and JP Morgan:
“It’s all about the bond auctions, the bond fell off a cliff. In the derivatives market you’ve got JP Morgan playing the bond market at the behest of the Fed, going long 30 years versus selling short-term paper. They buy 30 year paper and then immediately hedge themselves by selling the 30, 60 and 90 day paper. It’s how they keep interest rates down, it’s how you do it. The only reason interest rates are not in double digits in the US is because of this game. These guys are short front month paper. If this (the bond market) actually fell much longer, JP Morgan could be wiped out, I mean they would be liquidated. The Fed cannot allow them to do that. We’re witnessing history here.
Here's the link to this from the King World News daily blog:  Buy Gold, Dump Bonds

This reinforces my view that nominal interest rates in the U.S. are completely under the manipulation of the Fed/Wall Street in order to try and stimulate an economic recovery.  Unfortunately this will fail badly. Real interest rates (nominal rates minus true inflation) are extraordinarily negative.  That fact is the fuel powering the precious metals inexorably higher.  As the rate of real price inflation accelerates (NOTE: true inflation vs. Government reported/manipulated CPI price measures), this rally in precious metals will also accelerate and leave many behind.

Update on Munis

In brief, if you respect the value of your investment portfolio, get the hell out of your muni bonds.  The only munis I would even think about owning are defeased munis (munis which have their call-date or maturity pre-funded with cash in trust).  Here's the latest chart as of yesterday's close:

(click on chart to enlarge)

I have to be honest - just between us girls - I don't know too many traders who would look at that chart and declare it to be a table-pounding buy.  We may get a bounce in the muni market once the Democrats strong-arm an extension of the Build America Bond program.  In fact, I have to believe that there are many wealthy investors loaded up on munis who are on the phone with their Republican reps aggressively lobbying for that extension as well.  If I am correct and the BAB program is extended, I urge you to sell into the ensuing rally.  If it is not extended, then may that portion of your muni portfolio R.I.P...

Housing Market Update

I actually want to do an somewhat in-depth analysis of the housing market.  I will get to that this week if I can find the time.  However, I want to quickly refute comments made by the CEO of Toll Brothers this week that the housing market would stabilize and rebound over the next year and into 2012.  No way.  He first needs to explain two things before I will even think about his logic: 1) where is the job growth and credit going to come from in order to create real housing demand?  2) why has he been one of the most aggressive homebuilding CEO's in terms of dumping his stock holdings in TOL?

The fact of the matter is that housing inventories are rapidly rising again, especially actual bank-owned REO and the "shadow" inventory of potential foreclosures and people who would like to sell but want to wait until the mythical "spring/summer" bounce.  Inventory alone will smother any possibility of price stabilization.  I expect housing prices to drop another 5% at least this year.  Mortgage rates are rapidly climbing and, despite the ridiculously manipulated Government employment reports, the real unemployment rate continues to rise.

With that I would like to link a news item from today's Denver Post which reports that existing home sales for November in Denver fell 26% vs. last year and 6.2% from October.  Here's the LINK.  Denver has one of the healthier regional economies and lower unemployment rates.  In fact, the decline in home values in Denver has substantially lagged that of several other large cities.  This is not good news for the overall demographic trend for housing for the whole country...

Note:  ex post facto this post, the Dems rejected the tax extension bill.  As expected, the rumor is that they are going to fight to have the BAB program included and the muni market spiked:  LINK.  I would be selling into this.

Monday, December 6, 2010

You Have To Be Kidding Me...

The Washington Post reported this evening that Obama and congressional Republicans have reached an agreement for the extension of all tax breaks set to expire on Dec. 31, AND a 13 month extension of jobless benefits.

I believe now that those who qualify for jobless bennies can now get them for 3 years and 7 months.  What the heck is the difference between welfare and unemployment insurance?  Seriously.  And how do our policy-makers propose to pay for this?  Oh wait, Bernanke was on 60 Minutes last night explaining how our Government's excessive spending will be funded:  MORE MONEY PRINTING.

It just amazes me when I still get comments like "isn't gold too high to buy now?" LOL.  Let's see, would I rather hold something that has been used as honest currency for the better part of 5,000 years or a piece of paper that loses value everyday because its supply increases everyday.  As long all global fiat currencies continue to increase rapidly in supply, it will take more of each of those currencies to buy an ounce of gold.  It's really that simple. 

The bull market in gold/silver will be over when both metals are reinstated as the global reserve currency.  This will likely entail a significant upward revaluation of the price of gold/silver to a level which is representative of the marginal level of global wealth.  I've seen estimates from well-respected analysts of what this price level could be that range from $8,000-$38,000/oz. 

Here are some great quotes I wanted to share.  The first one was sent to me by a reader of this blog:

"...silver and gold have their value from the matter itself, they have first this privilege; that the value of them cannot be altered by the power of one nor of a few Commonwealths; as being a common measure of the commodities of all places. But base money may easily be enhanced or abased." - Thomas Hobbes

"Building gold as the basis of solvency has been used through history...Having a corresponding amount of solvency is a necessary precondition and indispensible safeguard in the long-term strategy for the internationalization of the yuan,"  -Xia Bin, advisor to the Peoples Bank of China

"The printing of money makes gold more valuable. You don’t have to be a genius to figure this out...I think gold is the reserve currency today. There is not a currency in the world that it hasn’t appreciated against by at least 300 per cent. And it has beaten every stock market. You can’t even rent a safety deposit box in Germany because they are all full of gold and silver."  Eric Sprott, Srott Asset Management.

Friday, December 3, 2010

OOPS: Employment Report vs. Expected Number

Much worse than expected...Even the prozac-overdosed idiots on CNBC are saying "nothing positive in this number."  Anyone want to put an over/under date on QE3?

Some Random Musings/Thoughts Late Thursday Night...

I have been busy during the day trading the crap out of the intra-day market volatility for both my fund and my own account.  As such, I've been a bit too preoccupied to post during the day.  In addition, as I was discussing with a friend tonight, I'm a bit burned out from spending the last three years researching/reading/analyzing etc in order to set up the fund I co-manage to be positioned to take advantage of what I believe will unfold financially/economically/politically in this country. I think we are entering the early stages of what will be a monster run in the metals/miners.  This is great for anyone positioned for what is happening - but really bad news for the well-being of the hoi polloi.

Of particular note, it looks like sophisticated institutional money is rushing into the large-cap, liquid mining stocks like SLW and AEM.  More significantly, real money is starting to sniff at the better quality, more visible junior mining stocks.  Some of the holdings in our fund have more than doubled over the last 2 months.  As such, this is still the early stage of what could be a breath-taking move in this segment of the mining stock universe.  As an example, ECU has moved from the high .50's to a recent intra-day high of $1.41.  It has pulled back and is consolidating this move.  I think it is now "coiling" for an even bigger move.  The last time around, starting in mid-2005 when I bought into the name personally at .34, it ran from my entry point to a little over $3.30 before the whole sector was manipulated into a crash by Bernanke/Paulson. I'm not saying that magnitude of a move will occur this time around - but it sure as hell could.

Let's work out some conceptual math using rough numbers to demontrate the possibilities using ECU.  Back in 2005, ECU had around 40 million ounces of 43-101 silver.  As my colleague Andy pointed out today in an email to our group, right now the juniors are being cap'd by the market at $1-1.25 per silver equivalent ounce.  In early '07 at the last valuation peak for juniors, the average valuation was anywhere from $4-7 per silver equivalent ounce.  Currently, ECU's share base has doubled since early '07 but its 43-101 silver has increased more than 10-fold to over 400 million ounces.  I'll let anyone interested in calculating possible price targets using ECU's current share base, 43-101 silver ounces and potential market cap targets.  In other words, stocks like ECU have quite a move ahead if we get a run like the market had the last time around.  And remember, back then the small cap mining stocks were largely fueled by the individual investor.  Contrast that with now, when it looks like bigger, more sophisticated capital pools are starting to discover the junior segment of the mining share sector...

George Orwell is smiling

If you just read the headlines, you would be led to believe that the U.S. economy is well on the road to recovery.  Black Friday weekend sales showed ebullient gains over last year, housing bounced a bit in October and the employment picture is improving. 

Of course, as Shakespeare penned thru "Macbeth," "nothing is but what is not."  What is "not" is any real data to support the fantasy being painted by Wall Street and its well-oiled media machine. It is my view, based on consumer polling and my analysis of the sales trends last weekend that, at this point, it would appear that very aggressive price discounting and marketing by the retail industry has "pulled forward" a substantial amount of holiday sales into the Black Friday weekend. 

As an example of media manipulation with the housing data, let's look at Toll Brothers.  The headline earnings release for TOL, one of the largest homebuilders, reported an unexpectedly big jump in earnings for the latest quarter.  Of course, if you look behind the proverbial curtain, you will discover that this gain was "manufactured" using a one-time tax benefit and some generous assumptions about the value of Toll's inventory - on and off-balance sheet. 

The fact of the matter is that new home sales continue to plummet and, overall, housing prices and true market real estate valuations continue to tank.  Furthermore, despite today's glossy headline announcing a record gain in the pending sales index for October, the bounce was generated from September's unexpectedly low index level and the index itself is still trending substantially lower vs. last year.  In addition, the actual and "shadow" inventory of homes for sale is spiking significantly higher.  As I dig through the "footnotes" that get completely ignored by the media, I can't help but conclude that a lot more pain is ahead for the housing market. 

The employment data is similarly chimerical.  If you just go by recent Government-generated employment reports and jobless claim data, you would think that the job market is gaining strength.  But I think by now everyone who cares enough to dig for the truth knows that the real unemployment rate is substantially higher than is being reported by headlines.   By "real" I mean the "real" workforce number, which would include not just the Government defined "labor market" - those employed plus those actively looking for employment - but would also include the rather large pool of workers who have given up looking but would still love to find a job.  The most conservative estimate of this can actually be found buried in the BLS employment report, which shows a "real" unemployment rate of 17%.  Private services like John Williams' Shadow Statistics estimate the "real" real unemployment rate is now over 20%. Lets also not overlook the Government's magical "seasonal adjustments" and other feats of data massaging.  In other words, welcome to the "Animal Farm" and the Ministry of Truth...

I'll conclude by linking  Alisdair Macleod's latest brilliantly and methodical calculations for where the price of gold is headed. This is a brief and concise must-read:  Gold is headed MUCH higher.

And I'm too fatigued right now to elaborate on the rapidly escalating fiscal catastrophies at all levels of Government (local, State, federal).  Not to mention the impending 2 million+ who will fall off the jobless benefit entitlements if Congress does not implement another emergency extension by the end of December. Suffice it for me to say with complete confidence that the golden truth of the matter is that the economy continues its death spiral into a massive depression and the price of gold and silver are set up to move up to price levels that will stagger the minds of all but the most informed of the precious metals community.