Wednesday, June 1, 2011

All US Gold Gone? Russia says IMF Chief Jailed for Discovery.

A new report prepared for Prime Minister Putin by the Federal Security Service (FSB) says that former International Monetary Fund (IMF) Chief Dominique Strauss-Kahn [photo with Putin top left] was charged and jailed in the US for sex crimes on May 14th after his discovery that all of the gold held in the United States Bullion Depository located at Fort Knox [photo 2nd left] was ‘missing and/or unaccounted’ for.
According to this FSB secret report, Strauss-Kahn had become “increasingly concerned” earlier this month after the United States began “stalling” its pledged delivery to the IMF of 191.3 tons of goldagreed to under the Second Amendment of the Articles of Agreement signed by the Executive Board in April 1978 that were to be sold to fund what are called Special Drawing Rights (SDRs) as an alternative to what are called reserve currencies.
This FSB report further states that upon Strauss-Kahn raising his concerns with American government officials close to President Obama he was ‘contacted’ by ‘rogue elements’ within the Central Intelligence Agency (CIA) who provided him ‘firm evidence’ that all of the gold reported to be held by the US ‘was gone’.
Upon Strauss-Kahn receiving the CIA evidence, this report continues, he made immediate arrangements to leave the US for Paris, but when contacted by agents working for France’s General Directorate for External Security (DGSE) that American authorities were seeking his capture he fled to New York City’s JFK airport following these agents directive not to take his cell-phone because US police could track his exact location.
Once Strauss-Kahn was safely boarded on an Air France flight to Paris, however, this FSB report says he made a ‘fatal mistake’ by calling the hotel from a phone on the plane and asking them to forwarded the cell-phone he had been told to leave behind to his French residence, after which US agents were able to track and apprehend him.  
Within the past fortnight, this report continues, Strauss-Kahn reached out to his close friend and top Egyptian banker Mahmoud Abdel Salam Omar to retrieve from the US the evidence given to him by the CIA. Omar, however, and exactly like Strauss-Kahn before him, was charged yesterday by the US with a sex crime against a luxury hotel maid, a charge the FSB labels as ‘beyond belief’ due to Omar being 74-years-old and a devout Muslim.
In an astounding move puzzling many in Moscow, Putin after reading this secret FSB report today ordered posted to the Kremlin’s official website a defense of Strauss-Khan becoming the first world leader to state that the former IMF chief was a victim of a US conspiracy. Putin further stated, “It’s hard for me to evaluate the hidden political motives but I cannot believe that it looks the way it was initially introduced. It doesn’t sit right in my head.”
Interesting to note about all of these events is that one of the United States top Congressman, and 2012 Presidential candidate, Ron Paul [photo bottom left] has long stated his belief that the US government has lied about its gold reserves held at Fort Knox.  So concerned had Congressman Paul become about the US government and the Federal Reserve hiding the truth about American gold reserves he put forward a bill in late 2010 to force an audit of them, but which was subsequently defeated by Obama regime forces.  
When directly asked by reporters if he believed there was no gold in Fort Knox or the Federal Reserve, Congressman Paul gave the incredible reply, “I think it is a possibility.”
Also interesting to note is that barely 3 days after the arrest of Strauss-Kahn, Congressman Paul made a new call for the US to sell its gold reserves by stating, “Given the high price it is now, and the tremendous debt problem we now have, by all means, sell at the peak.”
Bizarre reports emanating from the US for years, however, suggest there is no gold to sell, and as we can read as posted in 2009 on the ViewZone.Com news site:
To the final fate of Strauss-Kahn it is not in our knowing, but new reports coming from the United States show his determination not to go down without a fight as he has hired what is described as a‘crack team’ of former CIA spies, private investigators and media advisers to defend him.
To the practical effects on the global economy should it be proved that the US, indeed, has been lying about its gold reserves, Russia’s Central Bank yesterday ordered the interest rate raised from 0.25 to 3.5 percent and Putin ordered the export ban on wheat and grain crops lifted by July 1st in a move designed to fill the Motherlands coffers with money that normally would have flowed to the US.
The American peoples ability to know the truth of these things, and as always, has been shouted out by their propaganda media organs leaving them in danger of not being prepared for the horrific economic collapse of their nation now believed will much sooner than later.  

Food is getting cheaper

Food is getting more and more expensive. Everybody knows that.  Figure 1 illustrates the evolution of the price index of food since 1913. At the same time, the US economy also grows including the growth in real GDP per capita which is shown in Figure since 1929 (chained, in 2005$).  One can easily estimate which of these two variables grows faster. Figure 3 depicts the ratio of CPI and GDP per capita relative to that in 1929. Overall, the food price falls relative to the GDP per capita, i.e. one has to pay a lower share of income (a fixed portion of GDP per capita)  for the same amount of food (we do not consider nomenclature and quality of food here).  Food is getting cheaper with time. It is interesting that the ratio in Figure 3 has not been falling much since 1975.

Figure 1.

Figure 2.

Figure 3.

Jay Taylor: Turning Hard Times Into Good Times

Does Divinity Matter in Our Materialistic World?

click for audio    HOUR #1       HOUR #2

Is the Bond Rally Over?

Technical analyst Chris Kimble offers some thoughts on the recent rally in Treasuries with a focus on a pair of ETFs: iShares Barclays 20+ Year Treasury (TLT) and the 7-10 Year Treasury (IEF).
Chris comments: Six weeks ago, TLT and IEF created the right shoulder of a bullish inverse head-and-shoulders pattern. Both have had a good six-week rally since the right shoulder was put into place.

Now both of these ETFs are facing some key resistance levels, as the majority of major stock indexes are on support dating back to the lows of March of 2009.

How bonds handle this resistance should say much about what stocks do in the near future.

An Introduction To Real Estate Futures

With the near future of real estate still in question, investors have been hungry for a fast way to play the market or to hedge against their volatile portfolios. Futures contracts have been an extremely popular method of balancing a portfolio in other markets, and real estate is, with a little knowledge, now in the same boat.
In 2006, the Chicago Mercantile Exchange (CME) started trading futures contracts for the S&P/Case-Schiller Home Price Index, which covered both U.S. residential and commercial properties. The Case-Shiller index, originated in the 1980s by Karl Caser and Robert Shiller, is widely considered to be the most reliable gauge to measure housing price movements.
Advantages of Futures Contracts Futures contracts that trade at a centralized exchange allow market participants more financial leverage, flexibility and are guaranteed by the exchange so there is no risk of counterparty default. They are also in and of themselves leveraged investments, which allow investors a way to benefit on movements in housing prices as well as provide them with the opportunity for a liquid short-term real estate investment. These futures also allow investors a way to speculate on housing prices with much lower capital requirements.
Contract SpecificationsThe CSI index futures and options are cash settled to a weighted composite index of U.S. housing prices. Contracts are available for 10 major U.S. cities, including Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco and Washington DC.
Each contract will be valued at $250-times the CSI index for that city. For example, if the value of the index for Los Angeles was reported at 270, the contract value would be $67,500 ($250 x 270 = $67,500). The minimum price fluctuation or tick will be 0.20 index points, or $50. The contract will trade only on the CME Globex platform Mondays through Thursdays, from 5pm to 2pm the next day.
The composite weight of the CSI index is as follows:
  • Boston 7.4%
  • Chicago 8.9%
  • Denver 3.6%
  • Las Vegas 1.5%
  • Los Angeles 21.2%
  • Miami 5%
  • New York 27.2%
  • San Diego 5.5%
  • San Francisco 11.8%
  • Washington DC 7.9%
Options do trade via open outcry in the Goldman Sachs Commodity Index (GSCI) pit Monday through Friday, 8 am to 2 pm. The options trade European style, and are exercised into futures contracts. The strike prices are in intervals of five index points above and below the underlying futures. Position limits for futures and options is set at 5,000 contracts, as set by the exchange.
The CSI futures will trade for the next 18 months, and will be listed on a quarterly cycle. Months include February, May, August and November. Futures will also trade 19 to 36 months out, but only for May and November. Futures for three to five years out will only trade for November. All contracts will be cash settled on the day the indices are released.
Seven investment banks (Credit Suisse, Goldman Sachs, Merrill Lynch and four others) have licensed the National Council of Real Estate Investment Fiduciaries to come up with an index to get into the over-the-counter market. Many people think that a liquid and specific property derivative could help smooth out pricing bubbles. A healthy derivatives market could allow investors the ability to short with relatively low transaction cost versus actually playing the market. The ability to trade real estate futures started in London a couple years before the CME.
Comparison to Other Housing IndicesAlong with the CSI, there are a couple other real estate indices like the National Association of Realtors (NAR) - which is quoted in terms of median home value - and the Office of Federal Housing Enterprise Oversight (OFHEO). Median home value can be skewed by remodeled homes or the addition/subtraction of luxury/low-cost housing in the area. The OFHEO utilizes a repeat sales methodology, similar to the CSI, but the OFHEO is confined to the mortgages of Freddie and Fannie, and is therefore biased to the low end of housing.
Market ParticipantsThere are two types of market participants for futures markets: speculators and hedgers. Speculators are investors who looking to speculate on price movements. Speculators include hedge funds, CTAs, individual investors, pension funds, etc. Hedgers are either consumers or producers of a certain commodity. In this case, hedgers would be property and real estate developers, banks, mortgage lenders and home suppliers.
Investors have been using CSI futures to speculate by investing directly for a while, but home owners looking to sell within a year or two can also go short home prices, looking to recoup losses on their homes.

John Williams: No Way Out! Hyperinflation is all but guaranteed

John Williams, Executive Editor of Shadow Government Statistics, received an A.B. in Economics, cum laude, from Dartmouth College in 1971, and was awarded a M.B.A. from Dartmouth's Amos Tuck School of Business Administration in 1972, where he was named an Edward Tuck Scholar. During his career as a consulting economist, John has worked with individuals as well as Fortune 500 companies. Formally known as Walter J. Williams, his friends call him John. For nearly 30 years, John has been a private consulting economist and, out of necessity, had to become a specialist in government economic reporting.
Today on Financial Sense Newshour, John Williams discusses with Jim Puplava America's day of reckoning and hyperinflation.  CLICK HERE FOR AUDIO (WINDOWS MEDIA)

Good as Gold? George Soros Sells the Metal, Buys the Miner

Hardcore gold investors made a grand killing over the past few years as spot prices more than doubled. But since the beginning of 2011, hanging on to gold has meant stomaching some disturbing downs. Here's this year's price chart of an exchange traded fund designed to track the price of gold.
Mixed signals from currency markets and inflation indices are making it harder than usual to predict the direction of gold prices. Tentative dollar strengthening has sent gold prices down. But higher interest rates, which appear to be inevitable soon, usually send gold prices higher.
Even the most successful investors in the world can't agree on how to interpret this. John Paulson is buying gold. George Soros, selling. Those who prefer fewer Rolaids with their investment portfolios are shying away from buying gold bars at today's prices, or even exchange-traded funds for gold. But there is a better way to invest in gold now. Just watch Soros. Soros is selling his gold but buying miners. The trade gives him exposure to rising gold prices but some protections from losses if the price of gold declines.
Unlike the commodity or gold index funds, miners offer investors cash and assets that make their shares more valuable than the price of their product alone. They can raise profits by cutting costs, finding ways to get more gold out of their mines or buying competitors. They can offset gold price declines by mining other ores, investing in other products, or hedging fuel and currency. YCharts Pro finds the shares of two gold mining companies attractive now:Barrick Gold Corp. (NYSE: ABX  ) and Newmont Mining Corp. (NYSE: NEM  ) .
Toronto-based Barrick is the largest gold mining company in the world. It has gold mines in North and South America, Africa and Australia, and it also mines silver and copper. Newmont also is one of the world's biggest gold miners. Based in Denver, the company has mines mainly in the U.S., Peru, Indonesia, Ghana and Canada. North and South America, Southeast Asia and West Africa. It also is involved in several mining joint ventures. Both companies have seen big sales gains as the price of gold went higher. But Barrick's gains have been much bigger because of acquisitions.
It's surely one of the reasons Soros picked Barrick over Newmont when he went looking for miners. Barrick management plans substantial growth through acquisitions, and in April, the company announced plans to purchase copper producer Equinox Mineral's Ltd.
But Newmont does at least as well as Barrick in turning its revenue gains into profits. (For purposes here, we can ignore the big dip for each company; they reflect changes in hedging strategies that both companies adopted at different times.)
Fundamentally, the companies look remarkably similar. They both have very low debt, plenty of cash, and roughly equal gross profit margins. They both offer a modest dividend. The shares of both companies are cheaper today than they have been in 10 years. But Barrick's investments in silver and copper are a comforting diversification at a time of gold price uncertainty. And unlike Newmont, Barrick has managed to turn its strong sales and earnings growth into impressive gains for its shareholders.
A drop in gold prices certainly would be a hard hit to Barrick. But with diversification and an acquisitive nature, the company can still offer investors growth. That's something you can't get from a rock.

Gold Crash: What Could Trigger the Inevitable

John F. Wasik is a columnist for and author of The Audacity of Help: Obama's Economic Plan and the Remaking of America. The opinions expressed are his own.

Before you sell that last piece of jewelry, keep in mind that the gold price will not go up indefinitely. There are number of reasons why it might crash.

If you’re overweighted in gold or commodities, the warning is the same: A stronger dollar, strengthening U.S. economy or rising interest rates could derail the epic yellow metal mania. Who knows? Congress could even reach an agreement to clear up its balance sheet and pay down its debt.

What are the chances of any of this happening? It’s beyond the limits of my minuscule, clouded crystal ball, which is about the size of a pinhead. Nevertheless, you should prepare your portfolio for any number of eventualities, which can be easily accomplished with exchange-traded funds.

Gold is troublesome in my book because it really isn’t an investment. It’s a reserve currency of sorts that’s heavily traded by institutional investors. It doesn’t pay any dividends or interest and is bought in times of widespread fear.

The savviest traders buy gold as a hedge against the dollar. In the past few years, it’s also been a bulwark against the Euro as well, which has been bruised by sovereign debt woes in Greece, Ireland and Portugal.

Is the Euro financial fizzle over? I don’t think so, but it’s still not a reason to load up on gold.

The clearest threat to gold’s reign as the reserve currency of nervous Nellies is a possible rebound of the dollar. Given the congressional wrangling over the debt limit, budget and growing inflation, betting on the buck is like trying to figure out whether a racehorse will finish. They often pull up lame.

What’s interesting is the relationship between gold, mining stocks, the dollar and the S&P 500 Industrial Index, the broad basket of the largest U.S. companies.

When the dollar shows signs of reviving, gold drops. Shares in ETFs like SPDR Gold Shares will reflect that decline. The fund holds bullion and tracks spot prices fairly closely.

If you wanted to hold gold mining shares that reflect earnings from precious metals companies, it’s like a leveraged play on the price of gold. In one monthly period (from April 23 to May 23), the price of the Market Vectors Etf Gold Miners Trust fell about 10 times as much as the SPDR fund. Market Vectors reflects an index of gold mining companies. Similar funds showed the same kind of decline.

During the period I chose — in which the dollar showed a minor rebound — the Powershares DB US Dollar Index Bullish Fund was up almost three percent. The fund basically makes money when the dollar gains against other currencies.

By now, you can see a pretty simple pattern. Gold and the dollar generally move inversely to one another. It gets more complicated when you add stocks in the mix, which are based on expected earnings. They are often hurt by predictions of higher inflation or lower economic growth, both of which are uncertain now.

In a speculative portfolio, you can go long on worldwide stocks through a fund like the Vanguard Total World Stock Index ETF, own gold through the SPDR fund and go either way on the dollar. Powershares has a bearish version of its dollar index fund. And, last but not least, you can also bet against gold through the Proshares Ultrashort Gold ETF.

That brings up a key question that most individual investors struggle with when they start worrying: What should I be most concerned about?

Stick to your long-term goals. Only professional traders who have the discipline to make quick trades will get out and make a profit. If you try to time or short any vehicle, you’ll be stuck holding the bag.

If you need income, forget about the rest of the world and find the safest investments at the lowest possible cost. Your second goal would be to protect yourself against loss of purchasing power through a fund like the Vanguard Inflation-protected securities fund.

Still stuck on the need to own gold? What about the imminent collapse of the American and European economies?

Before you pawn your wedding ring, keep in mind that in real times of crisis the metal won’t replace food or water. As Voltaire reminded us in Candide, it would be better to tend to our gardens.

5 Hot Semiconductor Stocks: AMCC, CCMP, ISSI, MOSY, STP

One of the most commonly used tools in active trading is known as the moving average convergence divergence (MACD) indicator. Although the name of this indicator seems intimidating, it is actually quite simple to use and it can often generate profitable trading ideas.
IN PICTURES: 7 Tools Of The Trade
As you can see from the chart below, the indicator consists of two parts: the MACD line and the signal line. The MACD line is simply the difference between two exponential moving averages, typically the 12-day and 26-day averages. The reason that traders pay attention to varying lengths of moving averages is because they want to figure out how the short-term momentum is changing relative to the longer-term momentum. If the short-term average rises faster than the long-term average, the MACD moves upward. Traders use this to suggest that the buying pressure is increasing.
The signal line, shown as the dotted blue line on the chart, is also known as a trigger line and is created by taking a nine-period moving average of the MACD line. The signal line is plotted alongside the MACD line and is used to predict changes in a stock's direction.

The most common buy sign is triggered when the MACD line crosses above the signal line (illustrated by the right arrow in the chart above). A MACD cross above the signal line tends to predict that the bulls are gaining control of the direction and it generally leads to a short-term move higher. Interestingly, traders have been spotting bullish MACDcrossovers on the charts of many semiconductor stocks. The bullish movement in the semiconductor sector could be used by active traders to suggest that the economic recovery is on track and could be stronger than many of the pundits have been suggesting. (For more on this, check out Riding The Semiconductor Wave)
In the table below you will find a list of semiconductor stocks have recently experienced a MACD buy sign:

Company NameRecent Price
Applied Micro Circuits Corp. (Nasdaq:AMCC)$10.38
Cabot Microelectronics Corp. (Nasdaq:CCMP)$50.05
Integrated Silicon Solution Inc. (Nasdaq:ISSI)$9.18
MoSys Inc. (Nasdaq:MOSY)$6.14
SunTech Power Holdings (NYSE:STP)$8.36
Source: Yahoo! Finance as of 05/31/2011
Bottom Line
It is interesting from a technical perspective to see strong relative strength in the area of the small-cap semiconductor sector. The bullish MACD crossovers occurring on the charts of the above companies could suggest that the economic recovery is stronger than many traders may think it is. It is also important to note that the short-term nature of the MACD indicator can often lead to being whipsawed in and out of a position several times before being able to capture a strong price movement so be sure to use this tool in conjunction with other technical/fundamental indicators to ensure a more accurate idea about a stock or sectors direction. (For further reading, check out A Primer On The MACD)

Chart of the Week: XIV Celebrates Six-Month Birthday

Yesterday marked six months since the launch of the VelocityShares Daily Inverse VIX Short-Term ETN (XIV).

While XIV’s launch was received with little fanfare, I was a huge fan of this ETN right from the start. Less than one week after XIV was launched, I shared my thoughts about XIV in the Bespoke Investment Group’s second annual roundtable. When asked about some of my favorite picks for 2011 and beyond, I predicted:
“2011 will mark the rise of volatility as an asset class.  Part of the reason for this rise will be the runaway success of VIX-based ETNs and ETFs, notably the recently launched XIV, which will prove that volatility vehicles can be good buy-and-hold investments.”

During the course of its first six months of trading, XIV has managed to return 82% to anyone who was fortunate enough to buy some of this ETN when it launched. As shown in this week’s chart of the week below, XIV's ride has been a wild one and has included a pullback of about 33% in one month during all the turmoil associated with the Japanese earthquake + tsunami + nuclear meltdown.

Looking ahead, I am going to go out on another limb and say that 82% in six months was not a fluke. Sure XIV is an extremely volatile security that will experience sharp drawdowns on a regular basis, but for the patient investor who is able to steer clear of margin issues, XIV can be an excellent way to spice up one’s portfolio with stunning long-term returns.

That being said, just as shorting VXX is a strategy suited to only a small slice of the investment community, so is XIV not appropriate for everyone, in spite of the upside potential. For those who think they may be up to the task, I highly recommend a comprehensive risk management plan and a review of Managing Risk with a Short VXX Position.

CHART OF THE DAY: The Housing Double Dip Is "CONFIRMED" And There's No Relief In Sight

"Confirmed" is the word used in the latest announcement from Case-Shiller, which showed a surprise 3.61% year-over-year decline in home prices.
This line stands out from the announcement:
“This month’s report is marked by the confirmation of a double-dip in home prices across much of the nation. The National Index, the 20-City Composite and 12 MSAs all hit new lows with data reported through March 2011. The National Index fell 4.2% over the first quarter alone, and is down 5.1% compared to its year-ago level. Home prices continue on their downward spiral with no relief in sight.” says David M. Blitzer, Chairman of the Index Committee at S&P Indices.
See the dotted line here to see that markets have now fallen to fresh lows, below the previous dip.