by Addison Wiggin – December 9, 2010
WikiLeaks hits close to home: State Department sells a friend “down the river”
New catalyst for gold: Chinese can finally buy gold-backed ETF
Something to think about next time you hear “the taxpayer made money” on a bailout
Frightful housing figure: After leveling off, price decline accelerating again
Reader mail onslaught about Julian Assange in Vancouver. Day 2… plus the little-known link between Assange and our in-house techie…
As we trundled off to bed last night, we had no way of knowing just how close to home the WikiLeaks “cables” were going to hit.
But as we do on occasion, we checked e-mail one last time… and found a startling development in the history of Odyssey Marine, the company whose plight we’ve been documenting in our latest film project.
You’ll recall we’re exploring the ways in which Odyssey is getting thwarted in their efforts “claim” $500 million in Spanish gold and silver coins they discovered off the coast of Gibraltar.
Now, via WikiLeaks, we’ve learned that Condoleezza Rice’s State Department was double-dealing on this matter in 2008.
A cable dated July 2 of that year tells of a proposal made by the U.S. ambassador to Spain: State offers to hand the Black Swan treasure to Spain… and in exchange Spain gives up a painting looted by the Nazis.
The painting hangs in a Madrid museum, an 1897 work by the French Impressionist Camille Pissarro. Back in the 1930s, it was owned by a German Jew who was forced by the Nazis to sell it before they allowed her to flee Germany.
Her descendants, living in Southern California, claim the painting as their own. The museum, owned by the Spanish government, says it bought the painting fair and square in 1993 and won’t give it up.
The U.S. ambassador floated the idea to swap Odyssey’s discovery for the painting to Spain’s culture minister. “The minister listened carefully to the ambassador’s message,” the leaked cable says, “but he put an accent on the separateness of the issues. [He] said that no Spanish government could return the painting” without a judicial decision.
And that’s more or less where the matter was left… until last night.
Naturally, the State Department didn’t consult with Odyssey Marine on the matter. Never mind it was Odyssey — with its innovative equipment, immense effort and huge capital expense — that found the treasure. Never mind Odyssey had turned over documents in an effort to win their own government’s support in U.S. federal court.
The cables reveal that “confidential information that we were giving to the U.S. State Department to seek help from them,” says Greg Stemm, “was being used to sell us down the river.”
“Uggh…” Greg wrote in his e-mail, “this makes me ill.”
Until last night, we hadn’t quite figured out how the “international intrigue” angle was going to fit into the story. Now, courtesy of Julian Assange, we’ve got a timely “smoking gun” that makes this “reveal” a little too hard to ignore.
Likewise, we were on track to have our festival cut done by the Jan. 11, 2011 Tribeca submission deadline. Now looks like we got some ’splainin’ to do. If you happen to know anyone at Tribeca who can grant us an extension… let us know. Heh.
Stocks are meandering this morning, as they did yesterday and the day before. The dollar index is up, just barely, a couple decimal points above the 80 mark.
Gold is holding steady after the big sell-off yesterday at $1,388, handing buyers another opportunity to build positions.
“The gold market currently offers a substantial potential upside with a limited downside risk,” says a fresh report from the Swedish bank SEB. “When trust in both the dollar and the euro is low, there are few places to go.” As the Chinese know well.
“Chinese investors are now permitted to buy shares in overseas exchange-traded funds (ETFs) backed by gold,” reports Byron King. “This is quite a significant development that strengthens current and future demand, and it deserves some discussion.”
Here’s the background: Last week, Chinese regulators gave the go-ahead for an outfit called Lion Fund Management to raise up to $500 million… and start investing it in overseas gold ETFs.
“Previously — strange as it may seem — there was no Chinese equivalent of a gold-backed ETF. If Chinese investors wanted to own gold, they would customarily buy gold jewelry, bars or coins at gold shops,” Byron explains. Or they’d go into the futures market.
“Considering how many other Western ideas have been imported into the Chinese economy, it would not be surprising to see Chinese banks, and/or even the government itself, come up with a purely Chinese version of a gold- or silver-backed ETF.
“Chinese investors have the same motivations as everyone else, everywhere else. They all want to preserve their wealth in these troubled times. Thus there's great enthusiasm in China for gold investments. And this news is good for the future prospects for gold prices.”
For the first time in several years, “junior” gold stocks are starting to outperform the big ones like Barrick Gold and Newmont Mining.
The major gold producers, represented by the ETF GDX, have merely kept pace with the price of gold through most of 2010. But the junior explorers and developers, represented by the ETF GDXJ, have nearly doubled the performance of the majors.
Byron King recommended a basket of juniors about 18 months ago in his premium advisory Energy & Scarcity Investor. One of them is up 81%… another is up 83%… and yet another is up 147%.
But the latest opportunity he’s eyeing has him even more excited than any of those others. It’s “an $884 million gold discovery that could be about to make a select few very rich.”
He’s seen it up close… and walked through miles of muck to do so, despite seeing this sign:
And since Byron’s something of an armchair historian, he found a fascinating back story too: The assassination of a European monarch in the 1930s kept this incredible find under wraps for the last 75 years.
Now the immense potential of this discovery is about to turn to reality — maybe in is little as a couple of weeks. Byron reveals much more here.
The sell-off in U.S. Treasuries is taking a breather today. Yesterday, an auction of $21 billion in 10-year notes came off fairly smoothly, all things considered. Still, at 3.34% the yield is the highest since last May, and demand was on the weak side by recent standards.
Today, Treasury will auction $13 billion in 30-year bonds.
[Ed. Note: Readers of Options Hotline were sitting pretty yesterday during the bond sell-off. One bond-oriented play jumped up 37% in just two days. The other’s up 93% in a little under three months. For more plays like these, look here.]
Uncle Sam has unloaded his last shares of Citigroup. The U.S. Treasury owned 36% of the mega-bank at the height of the 2008-09 crisis.
Treasury claims it made a $12 billion profit off its Citi bailout. That should be good to cover, what, three months of losses at Fannie Mae?
Seriously, whenever you hear about how “taxpayers made a profit” on one bailout or another, keep an eye on the big picture: Uncle Sam has spent, invested or loaned $546 billion to the banks, insurance companies, automakers, etc.
So far, less than half of it — only $264 billion — has been returned, according to ProPublica, an investigative journalism nonprofit.
More American homeowners are sinking underwater. The percentage of mortgage holders with negative equity rose during the third quarter to 23.2%, according to Zillow. That’s up from 21.8% a year ago.
The website reckons that since the start of the housing bust in 2006, homeowners have seen $9 trillion in imaginary wealth vaporize.
In fact, the pace of vaporization is picking up again. Last year, home values dropped by $1.05 trillion. But 2010 is on pace for $1.7 trillion, more than $1 million of that total coming during the second half of the year.
Finally! The federal government is going to do something about those sordid school bake sales.
Last week, Congress passed a bill aimed at making school lunches healthier. Buried within the bill is a provision asserting federal power to regulate fundraisers and bake sales.
No word yet how the Agriculture Department plans to enforce the new provision. The details are always left to the bureaucrats. But thank God somebody is finally going to clean up those pernicious double-dealing chess clubs. Not a moment too soon if you ask us. We’re not even going to mention the Girl Scouts. Terrorists!
“Invite him!” a reader says in reply to our query about whether to invite WikiLeaks founder Julian Assange to our annual symposium in Vancouver.
“How many lives are in jeopardy courtesy of America's perpetual imperialist warring? Not just our soldiers’, but also innocents’ in foreign lands… Why are we so bent on force-feeding "democracy" globally when it is clearly broken here?
“And to those who have passed judgment on Assange: What happened to the presumption of innocence? Guess that's broken, too. Question everything (including your beloved government) and study the big picture!”
“I have not heard a peep,” writes another, “about the folks who are supposed to protect this information. I am certain they get paid a lot of money for protecting this info. How come we are not hearing a word about someone losing their job over this matter?
“Now this poor sap is going to get it in Sweden and you can be sure he will be shipped to the U.S. and placed in prison here, but shouldn't he be placed in charge of security? He seems to be a whole lot smarter then the feds.”
The 5: How indeed? “Three million people had access to the data Assange has publicized,” says Breakthrough Technology Alert editor Patrick Cox. The cables are transmitted via SIPRNet, a network that’s walled off from the rest of the Internet and maintained by the Pentagon.
Thus, the cables “can be accessed not only by anyone in the State Department, but also by anyone in the U.S. military who has a computer connected to SIPRNet,” reports the U.K. Guardian. “Millions of U.S. soldiers and officials have ‘secret’ security clearance.”
“Only a buffoon,” says Patrick, “would believe that the foreign spooks that target U.S. intel hadn't long ago got this info.
”So who, pray tell, were they keeping this stuff secret from, other than us, their lowlysubjects?”
Turns out long ago, both Patrick and Julian Assange were members of a LISTSERV called “cypherpunks” — people “advocating widespread use of strong cryptography as a route to social and political change,” as Wikipedia describes them.
“Ah, you people who think he is doing the right thing,” writes a dissenter. “What about the people whose lives could now be in danger due to his releases? It always makes me wonder how easy it is when it is not your relative or friend who may be at risk. I assume it would be different if he was to put one of your family at risk.
“Also how do police and governments go about finding wrongdoers now, as surely no one is going to help them if they feel they are not safe. I would certainly rather feel safe in my home than have every secret released like this and not know who might be around.
“It might sound paranoid, and so be it.”
“How many cretins are there in the United States?” writes a New Zealand reader aghast at the vitriol unleashed on Assange. “Legion, as the Bible says.
“This series of leaked docs is not critical to national security … it is critical to transparency and moral rectitude in government (or authority) actions. Assange is just the publicity face for WikiLeaks… and the actual leaker was a U.S. citizen.
“So all you mouthy morons who focus on exactly what the U.S. government wants you to focus on (bogus rape charges, weird looks, ‘national security,’ etc.), all I can say is grow up, educate yourselves, try to collect some intellectual rigor.
“And stop being your government’s bitches.”
On the subject of misprinted $100 bills, a Reserve member inquires: “Why don't you get the First Federal guys to contact the Feds to pull out a couple hundred ' bad ' notes with collectible serial numbers (radar notes, all 5s or 7s, etc.) and turn them into collectible currency.
“The Feds would get some of their printing costs back and the collector’s market would get a new 'toy' to play with. And… Agora would win again. Maybe you could give one or two of those ' bad ' notes away in Vancouver this July.”
The 5: Darn good idea.
“Could you clarify your point about food stamps further?” another Reserve member writes. “If 42.9 million Americans receive food stamps and the average family size is 2.8, does this mean that 120 million Americans rely on food stamps for a portion of their daily sustenance?
“As the recently departed Don Meredith would say, ‘Turn out the lights, the party's over!’”
The 5: No, that’s 42.9 million individuals. The Agriculture Department reckons the number of households on food stamps is just shy of 20 million. Party on.
“I am all for food stamps, since I pay for them anyway. I make $600,000 per year, and my common-law wife is unemployed. And I had her apply, and she receives food stamps now, and I enjoy my free milk and bread.”
The 5: Great. You’ll be nice and plump when the zombies come to feed on your carcass.
The 5 Min. Forecast
P.S.: As we were going to press this morning, we learned our friend Ron Paul, author of End the Fed, will take control of the House subcommittee that oversees the Federal Reserve.
Heh. When we visited him last week, he told the assembled in his office there was a snowball’s chance in hell he’d get appointed, more or less. Ranking Republicans had maneuvered twice before to keep him out of that seat, and he was fully expecting to get snubbed again.
Now, at the very least, Dr. Paul’s exchanges with Ben Bernanke during the annual Humphrey-Hawkins testimony will lead to some entertaining highlight reels.
P.P.S.: If you clicked on the link to Ron Paul’s book, you might have noticed it took you to the website of Laissez Faire Books. We haven’t trumpeted the news yet but… Agora Financial just acquired this venerable bookseller.
We have ambitious plans to give the franchise new life… and to get you browsing, we’re offering a FREE copy of a classic — Henry Hazlitt’s Economics in One Lesson.
“Hazlitt clearly states the lessons most politicians and media pundits would like to ignore, forget or throw in a ditch,” says our founder, Bill Bonner. “That alone makes it worth reading.
“It also helps you understand how an economy actually works, which is no bad thing from an investment point of view… unless you want to lose money. I recommend every investor read this book.”
For a very limited time, you can get this book FREE… plus a substantial discount on ALL our other titles. Here’s where you can get started.
P.P.P.S.: We’ve put a strict limit on the number of Byron King special reports identifying the Canadian penny stock sitting on an $883 million gold deposit.
After we issued Byron’s audio presentation on the subject last night, readers immediately snapped up 10% of the available reports. We don’t know how much longer they’ll last at this pace, so we urge you to give Byron a listen right now.