Saturday, August 27, 2011

Chen Lin: Betting On Gold And Silver Stocks : YRI, AUY, FNV.TO, PVG.TO, BGM.V, MJX.V, NKL.V, PCY.V, RG.V, NG, HTC.V, MERC

The Gold Report: With gold trading around $1,800+/ounce (oz.), famous precious metals investor Eric Sprott announced that he is selling 2 million units, or $30 million (M), of the Sprott Physical Gold Trust. Sprott then said he would take that cash and put it into silver, which he called "the investment of the next decade." What do you think of his long-term silver strategy?

Chen Lin: Silver and gold are both precious metals, but they move at different times. Right now, the gold:silver ratio is a little bit over 40. Obviously, Sprott is more bullish on silver versus gold. I take a pretty even point of view. I like gold. I like silver. I know that historically the gold:silver ratio is much lower than it is right now. I checked Chinese history and it's about 10:1. Even China has much less gold than the rest of the world and is richer in silver. We could have a much lower ratio, which means silver would outperform gold going forward, but personally I'm betting evenly on gold and silver.

TGR: Another interesting development is that Venezuelan President Hugo Chavez has announced that he will nationalize all of the remaining non-state-owned gold mining operations in the country. Is this announcement likely to affect the share prices of small-cap companies operating in other countries with leftist leaders, like Bolivia or Peru?

CL: I think it's possible. What Chavez is doing will probably destroy the country's gold mining industry because it needs the juniors to lay the groundwork so the majors can dig out the gold. If Chavez nationalizes, it will probably lower the gold production. I think one day he will regret that. It will increase concerns about the political risk in countries that have those close ties to Chavez.

TGR: Recently, we saw the Dow Jones Industrial Average drop a little over 400 points in a day. What's your outlook for gold? Are we going to see $2,000/oz. gold before the end of 2011?

CL: It's very possible. I personally do not want to see the parabolic move of gold. I hope gold doesn't rise as fast as silver did in the second half of last year. But in the back of my mind, I think gold could do that. There is a dramatic difference between this year and 2008, however. In 2008, gold initially went down along with the stock market. This year gold went up as the market went down, which means investors believe gold is the place to put money. I read a report that some banks in China have low gold inventories because individual investors are buying gold like crazy. It's very possible gold goes to $2,000/oz., but I hope it goes slower. I invest in gold. I have gold exchange-traded funds, gold futures, silver ETFs and silver futures on my recommendation list. But I hope they go up gradually.

TGR: Do you fear a correction?

CL: I hope we have some correction. I expect that the margin will increase another six times before gold has a real correction. That probably will push into early next year. Usually the gold season is strong from September into Chinese New Year. A severe correction could come in February.

TGR: You've said that you are seeing a decoupling of gold stocks versus stocks in the broader market. Can you explain that?

CL: Now, when the market takes a huge dive, gold goes up. Quite a few stocks, including Yamana Gold Inc. (TSX:YRI; NYSE:AUY; LSE:YAU) and Franco-Nevada Corp. (TSX:FNV) actually went up into the green. Many others, such as Pretium Resources Inc. (TSX:PVG), are up as well. Majors will start to stabilize and move up despite the stock market going down. As things stabilize, the juniors will likely catch up. As gold moves up, gold stocks are likely to outperform gold for the rest of the year.

TGR: Your investment success is somewhat legendary. You took about $5,000 in 2002 and turned it into about $1.56M by the end of 2010. Even as your portfolio regressed this year, it's only by 10%. What's changed in 2011 that is making it more difficult to find small-cap companies poised for big gains?

CL: This year has been difficult. The resource stocks got hit as investors took profits and ran. Fortunately, I have a pretty diverse portfolio. I have stocks, ETFs and futures. It is a very difficult year for small-cap companies, but I see some great opportunities. I'm ready to buy because investors are selling gold stocks indiscriminately. This is the time to buy. There are some great opportunities for investors that have a relatively long-term vision.

TGR: So then, what is Chen buying?

CL: Pretium, which I mentioned earlier, is run by Bob Quartermain, the founder of Silver Standard Resources Inc. (TSX:SSO; NASDAQ:SSRI). Management is really key at gold and silver companies. There are tons of companies that just go nowhere. The management raises money to pay themselves. With great management, like Bob Quartermain, there is a proven track record. He doesn't just grant options to management. He buys them. He bought shares on the market like every other shareholder. He has a couple of projects that are becoming very promising in British Columbia, which I am visiting next week.

TGR: Is that the Snowfield Project?

CL: Yes. Pretium is in low-grade Snowfield and high-grade Brucejack. I think the Snowfield Project will likely do a deal with Seabridge Gold Inc. (TSX:SEA; NYSE.A:SA). Quartermain is more focused on the high-grade area with about 15 kilograms/ton of gold. Some people don't believe it. They say it must be silver. It's gold. That is what he is focused on. He is looking to do a very high-grade underground operation, which was permitted before. He just needs to reapply for a permit and get into production.

TGR: The company has a positive preliminary economic assessment, but it really hasn't produced a dramatic rise in the stock price.

CL: That was based on previous results. In the new drilling tests, the company intersected a lot more gold. That will help them when people realize the valuation of the deposit. Another catalyst would be the deal with Seabridge and a major investing in the lower-grade area. The feasibility study is not very high, but the company used a conservative gold price. Eventually, people will catch up with it.

TGR: What are some other names on Chen's radar screen?

CL: Barkerville Gold Mines Ltd. (TSX.V:BGM) has been on my list for a pretty long time. I like the company. I met the management. The stock has already gone up pretty significantly since my recommendation. However, it recently has been in consolidation, which could be an entry point. The company keeps making progress. It keeps producing gold, which means it can generate a lot of cash flow at the current gold price. That will fund its next move versus going into the market begging for money.

TGR: Barkerville is planning to mine about 50 thousand ounces (Koz.) from the QR Mine this year. Is it on target?

CL: I will be following that very closely. As long as the company is producing gold, it should be doing fairly well. As long as it can produce, even if it's not 100% as planned, the higher gold price will compensate. If the company can make its target, that will be a great bonus.

TGR: Has Barkerville forward-sold any of its gold or is it fully exposed to the gold price?

CL: No, it is fully exposed to the gold price. You don't want to invest in any company that has hedges in place. Then it would be selling gold at maybe $1,000/oz. when it could be getting $1,800/oz. or more.

TGR: Barkerville has about 937 Koz. outlined in all categories. That is still a pretty small operation. Do you believe that as the company produces gold and takes some of that money to further exploration, it will continue to discover more resources?

CL: The company is getting good drilling results. I'm sure when it updates its new resource, it will be much higher. Once the company starts to get into a good financial situation, it will do more exploration. Gold is prolific in that area—there is a lot to find.

TGR: What else is Chen buying?

CL: There is a very small company called Majescor Resources Inc. (TSX.V:MJX) that just announced fantastic drilling results. The stock is actually up about 89% right now. It's a very tiny company with about a $20M market cap. It's drilling next to Newmont Mining Corp.'s (NYSE:NEM) latest project in Haiti. Newmont's chief executive said it is one of his most important projects. It's had fantastic drilling results of 77 grams over 10 meters (m). It's very shallow at about 100m deep. Plus, it has many other intersections with very high-grade gold and copper. For this market cap, it looks very promising.

TGR: It's trading between $0.25 and $0.30. Is that a good entry point?

CL: I think the current price still looks very good.

TGR: How high could it go and still be a good entry point?

CL: There are heavy insider purchases at $0.20. I think anything between $0.20 and $0.30 is a great buy.

TGR: Majescor is effectively almost like an exploration arm for Newmont at this point. Does Newmont have a position in it?

CL: No, but Majescor has a mining license while Newmont is still applying for a mining license. That makes them a very good target for Newmont.

Haiti is on the same island as the Dominican Republic, which hosts one of the largest gold mines in the world. Since the earthquake, the U.N. is trying to help the country create jobs. One of the key areas it is looking at is mining. Haiti could be opening up and this could be a hot new mining area in the world.

TGR: What's another name, Chen?

CL: I just visited Prophecy Platinum Corp. (TSX.V:NKL; OTCPink:PNIKD; Fkft:P94P). It's in the Yukon, very close to the Alaska border and only about 10 miles from the Alaskan highway. It just announced a NI 43-101 for about 12 million ounces (Moz.) of platinum, gold and palladium. The key for the company is to have very high grades. Right now, it has consolidated a little bit as the company is probably going to raise money. Sprott just announced it bought about 10% in the open market. I would assume Sprott would probably participate in one of many raisings. Then we can potentially consolidate the stock and it could go higher.

TGR: It also has a producing coal mine in Mongolia, correct?

CL: That's actually its parent company, Prophecy Resource Corp. (TSX.V:PCY). Prophecy Resource owns 45% of Prophecy Platinum, which is a spin-off. Prophecy Resource is also a very interesting story because Prophecy Platinum's price almost covers the entire market cap. You've got a producing coal mine almost for free.

TGR: It just discovered a substantial coal seam in Mongolia about 20 kilometers away from its existing coal mine, which actually hasn't had any effect on the stock to date. It certainly could be a promising find in the future.

CL: Exactly. There are bargains almost everywhere. Investors are just selling by emotions. There are a lot of opportunities and Prophecy is a perfect example. It owns 45% of Prophecy Platinum. You can calculate the market cap. It doesn't make sense, but the market still treats it like this. I bet the market probably won't treat it this way for too much longer.

Another is Romios Gold Resources Inc. (TSX.V:RG; NASDAQ:RMIOF; Fkft:D4R), which I am going to visit next week as well. It is drilling the Trek Property in northwestern British Columbia, right next to NovaGold Resources Inc. (TSX:NG; NYSE.A:NG) Galore Creek Project. It's actually drilling on top of the company's proposed mill site, so drilling results are pending. This stock could have a very explosive movement because its market cap is very small at about $70M.

NovaGold and Teck Resources Ltd. (NYSE:TCK; TSX:TCK.A, TSX:TCK.B) need to build a $1B tunnel to get ore from the other side of the mountain. But if the pair can find ore on the Romios side of the mountain, right on top of the mill, they could save $1B and take the company over. If there are good drill results, Romios will be an easy takeover target for NovaGold and Teck.

TGR: Romios recently found some massive sulfide mineralization at the Trek Property, which is known to host large gold and copper deposits. Can you tell us about those results?

CL: It has a lot more results coming. The assay is pending, but it looks very promising. If it has a grade similar to Tech and NovaGold's Galore Creek, this is a very easy takeover target.

I want to mention another stock that is under the radar, Helio Resource Corp. (TSX.V:HRC), which is drilling in Africa and already has 1 Moz. of gold. Its market cap is very tiny, but it has some very important, pending results coming in the next few weeks. It is drilling to a mere 200m for open-pit gold. If it can upgrade its resource to a few Moz., that could make the company very cheap versus its market cap. It could see some major movement in the second half of the year.

TGR: That is the SMP Gold Project in Tanzania that has multiple zones of gold mineralization at shallow depths. Could that be a target for a company like African Barrick Gold plc (LSE:ABG)?

CL: It's possible. Helio is an exploration company run by geologists. Its goal is to find a deposit and then sell it to the majors. If we use $100/oz. in its existing gold inventory that is already worth $100M and it is looking at a much higher stock price. It could expand dramatically with its recent drilling results. The company is well funded with $8M in the bank. It doesn't have to raise money for a long time.

TGR: Helio is trading at just below $0.30 right now. At what point would you not get into Helio?

CL: I think it is dependent on its drill results and those are unknown. When the stock moves, it can move very fast. With its existing resource, around $0.30 is pretty good. But I don't know what the drill results look like, so that will decide what the new valuation will be.

TGR: On the other side of the ledger, what are you divesting yourself of right now?

CL: I have been gradually selling some gold and silver ETFs. They have appreciated a lot, so I use them as buying power on the dip on the miners. Instead of following Sprott by selling gold and buying silver, I'm reducing a little bit to use that as capital to buy undervalued small-cap gold and silver miners.

TGR: You have had success in pulp, paper and oil and gas. What other sectors do you believe are poised for growth?

CL: I like the pulp sector, including the company Mercer International Inc. (NASDAQ:MERC). There are a lot of very undervalued energy stocks, as long as oil finds a floor somewhere in the $60–$70/barrel range. China does not have enough strategic oil reserves. If oil really dips, China would probably use the opportunity to build up more oil reserves. India has no strategic oil reserve. The pressure is on both countries to stock up if oil dips. In 2008, the worldwide oil demand only dipped like 1–2%. As long as investors stay with low-cost producers with good balance sheets, they will ride out the storm.

TGR: Any parting thoughts for us?

CL: I think this market correction will create a lot of opportunity for us. The market is putting a lot of pressure on the European leaders to get their acts together. There is a lot of pressure on Federal Reserve Chairman Ben Bernanke to do another round of quantitative easing. I hope the outcome will have some stabilizing effect on the market. In the meantime, when investors are selling everything, that's a very good buying opportunity.

TGR: Excellent. Thanks, Chen.

A Huge Housing Bargain -- but Not for You

The largest transfer of wealth from the public to private sector is about to begin. The federal government will be bulk-selling the massive portfolio of foreclosed homes now owned by HUD, Fannie Mae and Freddie Mac to private investors -- vulture funds.

These homes, which are now the property of the U.S. government, the U.S. taxpayer, U.S. citizens collectively, are going to be sold to private investor conglomerates at extraordinarily large discounts to real value.

You and I will not be allowed to participate. These investors will come from the private-equity and hedge-fund community, Goldman Sachs(GS_) and its derivatives, as well as foreign sovereign wealth funds that can bring a billion dollars or more to each transaction.

In the process, these investors will instantaneously become the largest improved real estate owners and landlords in the world. The U.S. taxpayer will get pennies on the dollar for these homes and then be allowed to rent them back at market rates.

On Wednesday, the Federal Housing Finance Agency (FHFA), the Department of Housing and Urban Development (HUD) and the U.S. Treasury Department issued a Request for Information (RFI) concerning the disposition of the inventory of foreclosed homes owned by the federal government.

An RFI is ostensibly a way for the federal government to get input from the private sector on how to accomplish the goals laid out in the request. But that's really just a facade, as the RFI was structured by the investors to begin with.

In reality, the RFI is a way for the members of Congress to find out if they can get away with bulk-selling these homes to private companies without incurring the wrath of their constituents, taxpayers and former owners of the properties.

Assuming taxpayers don't push back, the next step will be to issue a Request for Proposals (RFP). The RFP will be the bid and plan for these homes by investors.

The way to keep taxpayers from pushing back is to structure the RFI so that the real intention, the bulk sales, is masked by feel-good goals, such as stabilizing neighborhoods and increasing the supply of rental properties.

As intended, the mass media are playing their part in classic style. Every major newspaper in the U.S. has run articles discussing the plan as a rental conversion, allowing readers to assume that Fannie, Freddie and HUD will be renting the properties directly to families who need housing. And although there is an allowance for these kinds of rentals, it is a minor political facade to the obvious true goal of bulk-sale privatization of these homes.

The investors in this program have been waiting for this opportunity since the portfolio of homes owned by HUD began to spike in 2007, when foreclosures surged first in the "Rust Belt," principally Ohio and Michigan.

Since then, of course, the systemic collapse of housing has engulfed all of the major urban coastal regions of the U.S., as well as Phoenix and Las Vegas, and caused the homes owned by Fannie Mae and Freddie Mac, which are now under the direct control of the U.S. Treasury Department, to spike as well.

Even before this crisis occurred, HUD, i.e. the U.S. government, was the largest improved real estate owner in the world, because of its portfolio of foreclosed homes, which is classified as "real estate owned" (REO). The entire massive HUD REO Portfolio is quietly managed by a handful of private firms already, a group listed as Management and Marketing Contractors.

These M&M companies are principally owned by and employ former high-ranking government officials from the various germane agencies -- the Treasury, HUD, FHA and others. And they will provide the necessary access to the current government employees who are tasked with bringing this program to fruition. Once the privatization is complete, those government employees will move from their positions, and many will take up new employment at one of the M&Ms or the new vulture funds.

I am not currently aware of any way for retail investors to participate in this process.

It is probable, however, that once the privatization has occurred and the properties are generating rental income for the investors, the initial investors will cash out by forming real estate investment trusts (REITs), real estate operating companies (REOCs) or limited partnerships (LPs) that will be made available to retail investors.

How To Build A Stockpile To Save Money

A stockpile is a collection of nonperishable goods beyond what you need for day-to-day use. People rely on stockpiles to sustain themselves during tough economic times and natural disasters. They also incorporate them into their daily usage to lower their monthly expenses and eliminate last-minute trips to the store.

Anyone can benefit from building a stockpile. Even if you live in an apartment and have a limited amount of space, by changing the way you think about food shopping, you can use your regular pantry space for stockpiling.

The key to using stockpiling as a money-saving method is to acquire the goods at the lowest prices possible.

What Should You Stockpile?
A stockpile should consist of food, household items and toiletry items that you use on a regular basis and that have a long shelf life. You might want food items like bottled water, protein bars, canned goods, dry goods and pet food; household items like paper towels, cleaning products, batteries, light bulbs and trash bags; and toiletries like shampoo, toilet paper, contact solution, medicine and first aid supplies.

Your stockpile might also include items that you don't use regularly, but that would be helpful in an emergency. Make sure to have items in your stockpile that don't require cooking for just such an emergency.

How Much Do You Need?
The size of your stockpile should be based on the number of people who will rely on it, how quickly you will go through the items and how much space you have to store it. Any stockpile is better than no stockpile if you have exactly one cabinet shelf to spare, create a mini stockpile that's focused on the most essential items. If you have an entire spare room for your stockpile, you can include non-essential items like mustard and barbecue sauce.

There is such a thing as a stockpile that's too big. You don't want a stockpile that's larger than the space you have to store it, and you don't want a stockpile that will spoil before you can rotate your way through it (many "nonperishable" items still need to be consumed by a certain date).

Storing Your Stockpile
Being organized is key to keeping your stockpile fresh. Each time you buy something new, put it in the back so you're always eating the oldest items first. Items have expiration dates on them, but they're often hard to see. You may want to use a permanent marker to write the expiration date prominently on the front of the package.

Store your stockpile in a cool, dry, dark place to prevent spoilage. The basement or the garage might work (depending on your climate). If not, you can designate a portion of your pantry, a couple of cabinets or a portion of a closet. For items that will never go bad, like paper towels, under the bed will do nicely.

Amassing Your Stockpile
Unless a hurricane is imminent, you don't need to go to the store one Saturday and spend hundreds of dollars to buy your stockpile. Not only would it put a significant dent in your monthly budget, but you'd be overpaying for most items.

Strategic shopping is the best way to acquire your stockpile. By combining coupons with sales, you can purchase items at extra-low prices. Since it will take several months for sales and coupons to pop up for everything you want to buy, you'll be able to spread out the cost of creating your stockpile.

Maintaining Your Stockpile
Stockpiling is an ongoing process it's not something you do once and forget about. To avoid spoilage, occasionally use items from your stockpile and replace them. That's why it's important to stockpile things that you use regularly. Keep an eye on coupons and sales to replenish your supplies.

Stockpiling Pitfalls To Avoid

  • Don't buy items that will spoil quickly. Loaves of bread don't belong in a stockpile.
  • Don't assume that nonperishable items will never go bad. Rotate through them on a regular basis so that everything gets used before its expiration date.
  • Don't buy things you don't like. Unless you end up in an emergency situation, they're likely to go to waste.
  • Don't neglect nutrition. Many packaged foods are lacking in nutrition at best and outright bad for you at worst. Just because something is cheap or for an emergency doesn't mean you should buy it.
  • Don't pay full price. Stockpiling isn't supposed to be expensive.
  • Don't buy more than you can store. It's okay to get creative about where you store your stockpile goods, but you shouldn't have to look at a collection of soup cans when you're relaxing in the living room.
  • Don't be afraid to go through your stockpile when times are tough. That's what it's there for. You'll replenish it when your situation improves.

The Bottom Line
Stockpiling is a great way to provide for yourself and your family. When times are good, it's convenient; you'll always have what you need on hand, and you'll never have to make a last-minute trip to the store. You'll also cut costs on an ongoing basis by purchasing items on sale and with coupons. And when times are bad, your stockpile means one less thing to worry about.

Japanese investors moving from gold to platinum

Japanese investors have been steadily boosting their platinum investments over the last month, tempted by the precious metal's stability relative to gold as they look to diversify their commodity holdings with global markets in turmoil.

"The amount of gold holdings customers want to sell has grown by the day this month, but purchases of platinum have actually doubled," said Osamu Ikeda, a general manager at Japan's largest bullion house, Tanaka Kikinzoku Kogyo.

Japanese investors have been bucking the global trend for buying gold, cashing in their holdings as bullion smashed through successive record levels.

"I think platinum is ... being bought as price moves are much milder than gold," said Osamu Hoshi, deputy general manager at Mitsubishi UFJ Trust.

The assets of Mitsubishi's physical platinum exchange traded fund (ETF), Japan's first backed by metal stored in the country, had grown by 38 percent since the end of July to 1.62 billion yen ($21 million) as of Aug. 24.

"Buying momentum began early in July but there has been constant buying since late that month, accompanied by rising trading volumes," said Mitsubishi's Hoshi.

The daily average trading volume for Mitsubishi's platinum ETFs exceeded 100 million lots on Aug. 5, and has generally hovered above the average of around 50 million lots for most of this month, Hoshi said.

"While platinum prices are prone to downside risks as they are tied to industrial demand, the metal is more precious in nature than gold and its value is more stable. The fact our ETFs are growing may indicate more Japanese investors are shifting away from physical investment in precious metals."

Tanaka Kikinzoku said it had sold 1,185 kg of platinum for investment purposes as of Aug. 22, up from 666 kg in July, and a nearly three-fold increase from 408 kg in August 2010.


A downgrade in the U.S. sovereign debt rating and growing worries about its economy, as well as the spreading European debt crisis triggered a rush to buy gold globally, pushing prices to a record high above $1,900 an ounce this week.

But spot gold plunged about 9 percent in just two days after hitting its historic peak.

On the Tokyo Commodity Exchange, the lead platinum futures contract for June 2012 delivery JPLc6 has risen as much as 6 percent this month, much milder than a 17 percent jump for the lead gold futures contract for June 2012 delivery JAUc6.

The spread on TOCOM between gold and platinum, which is usually priced higher than gold, narrowed this month and fell into negative territory for one day in early August.

Other market participants noted there would probably be a flurry of transactions ahead of a revision to tax laws due to take effect from the start of next year.

After the change, those handling the sale of gold and platinum ingots and coins exceeding 2 million yen in value must submit a record of the transaction to tax authorities.

Pierre Lassonde: Mining Shares To Outperform Gold Going Forward

With gold rallying strongly off of the lows yesterday along with mining shares, King World News interviewed legendary Pierre Lassonde to get his thoughts on what to look for going forward. When asked about the mining shares specifically Lassonde responded, “Well, I’m encouraged by the action that we’ve seen in the last month. What I see is when the general market really tanked a couple of weeks ago, the only shares that did not go south, in fact they increased in value (over time), were the gold stocks. So finally we are seeing the gold stocks perform as they should.”

Pierre Lassonde continues: Read More @

Silver Shield’s Final Warning

One year ago marked the beginning of silver returning to it’s rightful role as money in the world. One year ago silver was at $17.76 an ounce after a very long and drawn out consolidation that went all the way back to St. Patrick’s Day 2008. One year ago was the beginning of silver’s breathtaking run to almost $50 an ounce, a 178% return. Even today, despite the massive paper attack in May and the last two days, we are still up 104% year over year.

When I published the ground breaking Silver Bullet and the Silver Shield article February 25th silver was at $32. On June 27th I said to buy physical silver at $33 silver. Both date’s were very good days to buy and never went below those numbers. Now I am telling you all, for the last time, buy physical silver. I will be taking this weekend to make every effort I can to make those that have been wavering in their purchase of physical silver, to make the commitment and to do it before the end of this month. I believe that we are on the knife’s edge of a major shift that will make silver untouchable if you do not secure your metal right now.

The end of this month marks a seasonal shift for silver investors and the end of the “sell in May and go way.” With the expiration of the CRIMEX contract today and with Bernanke’s possible announcement of QE3 tomorrow, this could be that last, best time in your life to buy physical silver. If you look at this 37 year seasonal chart for silver you can see that the last week of September is the beginning of a very strong seasonal move in silver that should take us into another strong run all the way into February. If we get something similar like we did last year and it runs until May, we could see $100 silver early next year.

I do not believe we will see $100 silver, because of the massive fraud in the metal suppression business will make silver unattainable. Silver and gold are direct competitors to the Dollar. The folks at the Fed, the Treasury and JP Morgan do not want to see silver rise in price. They suppress the price, because if silver rose that would mean that the basis for all of their power, the dollar, would become worth less and eventually worthless. Andrew MacGuire exposed this fraud and nearly paid with his life in a very suspicious hit and run. His claim is that there is 50 to 100 times the amount of paper traded for every physical ounce of real silver and gold. Just look at all of the manipulation in the May silver drive by shooting I reported on. The Elite use a myriad of paper schemes to suppress the price of the physical metal. They all work rather effectively, until the day comes that they cannot deliver on what they promised.

This coming seasonal silver bull run will coincide with a collapse in the dollar and the world’s paper markets. There will be a rush of humanity into anything of real tangible value. Unfortunately, there is going to be a lot of upset people who think they have gold and silver, only find out that they only have nothing. If you don’t hold it, you don’t own it. When this new reality becomes evident to those that do have the metal, they will not part with it for some paper money that they did not want years before. (Read: The 11 Mentality Shifts of Silver Investors.) That shift can happen in the span of a few days. With the length of time I know it takes to move money around, if you wait until “it” happens, it is too late. (more)

The Slow Disappearance of the American Working Man

A smaller share of men have jobs today than at any time since World War II

As President Barack Obama puts together a new jobs plan to be revealed shortly after Labor Day, he is up against a powerful force, long in the making, that has gone virtually unnoticed in the debate over how to put people back to work: Employers are increasingly giving up on the American man.

If that sounds bleak, it's because it is. The portion of men who work and their median wages have been eroding since the early 1970s. For decades the impact of this fact was softened in many families by the increasing number of women who went to work and took up the slack. More recently, the housing bubble helped to mask it by boosting the male-dominated construction trades, which employed millions. When real estate ultimately crashed, so did the prospects for many men. The portion of men holding a job—any job, full- or part-time—fell to 63.5 percent in July—hovering stubbornly near the low point of 63.3 percent it reached in December 2009. These are the lowest numbers in statistics going back to 1948. Among the critical category of prime working-age men between 25 and 54, only 81.2 percent held jobs, a barely noticeable improvement from its low point last year—and still well below the depths of the 1982-83 recession, when employment among prime-age men never dropped below 85 percent. To put those numbers in perspective, consider that in 1969, 95 percent of men in their prime working years had a job.

Men who do have jobs are getting paid less. After accounting for inflation, median wages for men between 30 and 50 dropped 27 percent—to $33,000 a year— from 1969 to 2009, according to an analysis by Michael Greenstone, a Massachusetts Institute of Technology economics professor who was chief economist for Obama's Council of Economic Advisers. "That takes men and puts them back at their earnings capacity of the 1950s," Greenstone says. "That has staggering implications."

What is going on here? For one thing, women, who have made up a majority of college students for three decades and now account for 57 percent, are adapting better to a data-driven economy that values education and collaborative skills more than muscle. That isn't to say women have yet eclipsed men in the workplace. They continue to earn about 16 percent less than men and struggle against gender discrimination and career interruptions as they disproportionately take time away from the job to raise children. And both men and women have confronted job losses in the weak economy. In July, 68.9 percent of women aged 25-54 had jobs, vs. 72.8 percent in January 2008. (In 1969, however, fewer than half did.) After a long decline in men's work opportunities, the recession worsened things with a sharp drop in male employment. Unemployed men are now more likely than women to be among the long-term jobless.

The economic downturn exacerbated forces that have long been undermining men in the workplace, says Lawrence Katz, a Harvard professor of labor economics. Corporations have cut costs by moving manufacturing jobs, routine computer programming, and even simple legal work out of the country. The production jobs that remain are increasingly mechanized and demand higher skills. Technology and efforts to reduce the number of layers within corporations are leaving fewer middle-management jobs.

The impact has been greatest on moderately skilled men, especially those without a college education, though even men with bachelor's degrees from less selective schools are beginning to see their position erode. "There's really been this polarization in the middle," Katz says, as men at the top of the education and income scale see their earnings rise while those in the middle gravitate downward.

For generations, American workers kept up with technological change by achieving higher levels of education than their parents. High school education became the norm as the country progressed from an agrarian society to an industrial one. After World War II, increasing numbers of Americans went to college as the economy became more complex. But for reasons not fully understood, college graduation rates essentially stopped growing for men in the late 1970s, shortly after the Vietnam War ended, perhaps in part because draft deferments were no longer an inducement. Women, on the other hand, continued to pursue college degrees in greater numbers and have been more responsive to the changing economy in other ways, taking many of the nursing and technician positions in the expanding health-care industry and making greater headway in service jobs.

While unemployment is an ordeal for anyone, it still appears to be more traumatic for men. Men without jobs are more likely to commit crimes and go to prison. They are less likely to wed, more likely to divorce, and more likely to father a child out of wedlock. Ironically, unemployed men tend to do even less housework than men with jobs and often retreat from family life, says W. Bradford Wilcox, director of the National Marriage Project at the University of Virginia.

The long-term fix is simple to spell out and tough to achieve: getting more men to attend college and improving the skills of those who don't. Reducing financial barriers to higher education would be a start. But there isn't much political appetite for spending the billions it would take to make that happen. Even once-sacred Pell Grants are on the block as Washington looks for budget cuts. A strapped public education system that leaves many young men unprepared for the workplace, let alone college, doesn't help. It's noteworthy but not especially comforting to know that this is not just an American problem. The same gender differences in college attendance and employment are emerging in rich societies around the world.

Grappling with these intractable problems won't likely be Obama's top priority. He is under pressure to do something that will be felt now, not a generation from now. The longer people who are currently unemployed remain out of work, the more their skills will atrophy and the greater the risk of a cohort of men—and women—who become permanently detached from the workplace. Anything that raises employment overall would help. Obama is expected to propose tax incentives for employers to hire workers, a reduction in payroll taxes employers pay, and spending on infrastructure. Money for labor-intensive projects, such as retrofitting buildings for energy conservation or refurbishing aging schools, would be especially effective in putting men back to work in construction—though Washington is likely in no mood to pay for that either.

Other ideas that economists have proposed are geared toward keeping men with diminished opportunities from drifting out of the workforce altogether. They include reducing unemployment-benefits extensions for those who have been out of work for a year or more—to give those who are getting by on an unemployment check a stronger incentive to take a job, even if it's not the most desirable one. Others have proposed modifying the Social Security disability insurance system so that it is no longer an all-or-nothing proposition and instead subsidizes employers for hiring workers with partial disabilities. Since 1970, the fraction of 25- to 60-year-old men on disability has more than doubled, from 2.4 percent to 5 percent. Once they begin receiving disability payments, few return to work.

If there is any upside to recessions, it's that they tend to expose deep problems that go ignored or at least overlooked in better times. The short-term fixes the President proposes may provide much needed relief for the millions of people looking for a job. The danger is that the fixes will work just well enough to let us pretend—for a while longer—that the real problem is no longer there.

The bottom line: As women saw workplace gains in recent decades—68 percent of those 25 to 54 have jobs—men's prospects have diminished.

Recession ’100 percent chance’: Peter Schiff

A plunge in recent economic data puts the probability of a double-dip recession [cnbc explains] above 80 percent, according to modeling by Bank of America Merrill Lynch released Wednesday, reflecting the toll the U.S. debt downgrade, Europe’s woes and stock market volatility has taken on economic activity.

The Philly Fed puts a recession probability at 85.7 percent, while the consumer survey puts contraction chances at 80 percent, according to Bank of America’s probability model, which uses a so-called Bayesian technique that “tests if the economy is in a recession based on the interaction of variables that are associated with turns in the business cycle.”

“It’s a 100 percent chance,” said Peter Schiff, CEO & Chief Global Strategist of Euro Pacific Capital. “In fact the recession might have already started.”

“More timely consumer and business sentiment indicators dropped in August in response to a range of bad news,” said Michael Hanson, one of the firm’s economists, in the note. “While we concede the risks are rising, a recession is not baked in the cake. If the economy can avoid further shocks, we would expect a modest bounce in growth into the end of the year.” Source: (1) CNBC

The “financial system” has but one goal now — to prevent people, en masse, from withdrawing their funds from banks. A “run” on the banks would be the end of Depression Lite I and the beginning of Real Depression II. So get ready for more and more fairy tales from the banksters and their political and MSM slaves.

The way economists are trained today, in the Keynesian school, they believe that the economy will pick up if they convince people the economy will pick up. Bernanke is a fool, that is self-evident, but he is not a liar in the strictest sense, because he’s true to his training.

One day this will be completely discredited, and it will be seen that consumption on credit spurred by central banker comments does not produce recovery. It is savings, early-stage investment (that means non-inventory investment for you Keynesians, yes they are very different) and buidling up to production. If that lands when there are healthy savings, you get a healthy economy.

The solution? Less government involvement

It is quite simple really according to the Austrian School of Economics and would appear the Austrians are correct on this score!

The probem of too much debt cannot be corrected by assuming even more debt!

Recessions can be a good thing when wringing bad debt out of the economy in a process Austrians first deemed “creative destruction”.

Central Bankers may delude themselves by futile intervention in vain attempts to correct a liquidity problem when in fact the economy is suffering a solvency problem. Doing so guarantees inevitable and catastrophic depression in lieu of manageable recession as Central Bankers have that Wile E. Coyote moment of realization that the laws of economics inexorably apply no differently than the laws of gravity.

The Economist UK - 27th August-2nd September 2011

The Economist UK - 27th August-2nd September 2011
English | 84 pages | HQ PDF | 74.00 Mb

"We’re In Very Serious Danger." Says The Great Theorist Of Currency Unions And The Godfather Of The Euro.

Robert Mundell says: 'The world is in a depression in America, Europe and Japan'.

After all these years, I have finally been able to sit down for an hour with Robert Mundell, the great theorist of currency unions and the godfather of the euro.

“We’re in very serious danger. The world is in a depression in the Big Three of America, Europe and Japan, a mini-depression that we have not seen since the 1930s,” he said, speaking at the Lindau conference, where half the world’s Nobel economist are gathered on one tiny island with cobbled streets looking across Lake Constance to the Alps.

Few economists inspire such devotion and fury as Professor Mundell.

He is a hero to America’s free-market Right for sponsoring the Reagan tax cut agenda, and has not relented on that front. “Any country with public debt over 40pc of GDP needs its head examined,” he said.

His prescription for America’s ill today is to slash corporation tax to 20pc (from an effective rate of 52pc, he says), and kill the entitlement behemoth. By the way, he blames the Fed for triggering the Lehman crisis by keeping money too tight in mid to late 2008. There is very little inflation risk now from QE because M1 money velocity has collapsed “by half” and is likely to stay there.

But equally he is a villain to the eurosceptic Right on this side of the Pond, having made it a life mission to sponsor the Europe’s fixed exchange experiment. Some say he has bent the theory of “Optimum Currency Areas” (OCA) to justify combining the vastly different economies of Europe in monetary union – whatever this implies for freedom and democratic legitimacy.

If you read his own pioneering work on OCAs – “A Theory of Optimum Currency Areas” in the American Economic Review of 1961- it is hard to see how the eurozone can possibly qualify. He argued then that even Canada and the US might have benefited from a break-up into East and West dollars to reflect regional economies.

Does one see hints of doubt now, as EMU disaster unfolds? Not really.

“We’re in the midst of a very big crisis because nothing has been done yet to convince the markets that there has been a fundamental change. To save Europe there has to be a move in the direction of shared government.”

He admits that will not be easy. Alexander Hamilton managed to create a US debt pool in 1792 (against fierce resistance), arguing that the debts of 13 states were modest and had mostly been accrued debts during the Revolutionary War. This was therefore a shared interest. Greek pensions are not. “You can’t do that in Europe,” he said.

“There is a tremendous problem in five or six countries of the eurozone. But the solution is not the end of the euro, because that creates more problems than it solves. There would be a tremendous run on the banking system, and countries that left would still have to deal with all their debts.”

Prof Mundell said it would help if the ECB ripped up its price stability mandate and took pro-active steps to force down the euro, and then peg it at $1.30 to the US dollar. This would also bring the euro down pari passu against the Chinese yuan, creating a three-way managed global system – or the DEI as he calls it.

“The euro is too strong. A weaker euro is the best news you could have for governments (in trouble).”

“The ECB should follow an easier policy. Of course they have a strict rule to safeguard against inflation but that is not correct. I have never believed that central banks should have rigid inflation targeting. That is not a good thing to stabilize. There is nothing in economic theory to back this.”

He added it is folly to tighten monetary policy into a “deflationary” oil spike, (as the ECB did in 2008 and has just done again). “That is exactly the wrong thing to do”.

Mundell says US and euroland should manage the Atlantic exchange rate in the mutual interest, setting outer bands of 5 cents on each side of the $1.30 target. If the euro reaches $1.35, the ECB intervenes to buy dollars: if it drops to $1.25, the Fed buys euros. Both sides have gravity on their side since they can print unlimited sums to defeat the market.

Interesting idea (he has discussed it with US Treasury Secretary Tim Geithner, who listened closely) if you like managed exchange rates. I don’t.

I certainly agree that a weaker euro would help to lift the EMU periphery off the reefs, but it comes very late in the day and ignores the core problem that currencies are massively misaligned within EMU. The gap in unit labour cost competitiveness between North and South has grown to 30pc. Prof Mundell seems to have no answer to this other than grinding deflation in the Club Med bloc and Ireland.

As his Nobel colleague Joe Stiglitz said at the same Lindau gathering, democracies won’t stand for this kind of “medieval leech cure”.

Prof Mundell is however unrelenting: “The euro hasn’t done anything bad. The problem is lack of fiscal discipline. Countries like Greece, Portugal, and Ireland have been on a spending spree on entitlements,” he said.

Uhhm! So there is nothing structurally wrong with combining Greece, Spain, Ireland, Germany and Holland in a monetary union? Nothing wrong in inflicting negative real interest rates for years on the fast-growing catch-up economies of Club Med and Ireland? Nothing wrong in mixing up vastly differing productivity growth rates?

Professor, if you strip out Greece, the euro crisis is not caused by lack of fiscal discipline in any meaningful sense. That is a Wagnerian myth, much promoted by Chancellor Angela Merkel.

Spain and Ireland never violated the Maastricht limits on deficits. Both ran a big budget surplus during the boom when monetary policy was kept loose to help nurse Germany through a mini-slump. Italy is running a primary budget surplus. Ireland came close to eliminating its public debt altogether.

The real problem is that EMU stoked a private sector credit bubble. That proved the killer.

As the ECB’s Jean-Claude Trichet constantly reminds us, the public debt to GDP ratios in Europe are lower than in the US, UK, or Japan. So why then is monetary union suffering an existential crisis? Why is the ECB having to intervene to stop Italy and Spain spiralling into default?

The Euroland whole is visibly less than the sum of the national parts. That surely invalidates the claim that euroland is an optimal currency area. It is a “Pessimal Currency Area”.

Joe Stiglitz says events are now charging ahead regardless of political pieties. Argentina’s 8pc growth rate after ditching the dollar peg in 2001 offers a tempting way out for countries running out of popular and democratic consent for Berlin-imposed austerity, if Germany does not get there first by pulling out. “There is life after default, and life after leaving a fixed exchange rate system,” said Stiglitz.

You might equally add that the break-up of the Gold Standard was the necessary pre-condition for recovery in the early 1930s, since it broke a self-reinforcing spiral that compelled contracting economies to contract further.

By the way, do visit Lindau. It is one the most enchanting spots on earth, a timeless Bavarian gem from the Wittelsbach era. Yet with roots in the late Middle Ages when Lake Constance was the intellectual heart of Europe.

There are hardly any cars.