March 22, 2013
- Insurance against gold confiscation? Texas moves to “repatriate” its metal from New York
- “This hardly is a bullish development”: Latest harebrained scheme to “rescue” Cyprus
- Bitcoin of the realm: Edgy Europeans adopt alternative currency… while a Canadian will gladly take it in exchange for his home
- The financial system as a football game gone haywire… What about America’s Fort Knox?… a precious metals IRA we can finally get behind… and more!
It’s not only the Germans who want to repatriate their gold — so do the Texans.
In 2011, the University of Texas endowment — the second-largest in the country after Harvard — disclosed it took delivery of $1 billion in bullion, comprising 5% of its portfolio. That was largely at the behest of board member — and hedge fund genius — Kyle Bass.
The bullion is held in bar form at a New York vault owned by HSBC. Texas Gov. Rick Perry now wants to bring it home. On Tuesday, he said the state is “in the process” of “bringing gold that belongs to the state of Texas back into the state.”
“If we own it,” he told radio host Glenn Beck, “I will suggest to you that that’s not someone else’s determination whether we can take possession of it back or not.”
Perry has found an ally in the state legislature to get the ball rolling and establish the Texas Bullion Depository. “We don’t want just the certificates,” Rep. Giovanni Capriglione tells the Fort Worth Star-Telegram. “We want our gold. And if you’re the state of Texas, you should be able to get your gold.”
“I think this is a game changer in terms of the way institutional investors are going to look at gold,” says Currency Wars author James Rickards.
For one thing, he explained to our friend Lauren Lyster at Yahoo Finance, the bill would open the way for large pension funds to accumulate bullion. Already, the Teacher Retirement System of Texas (TRST) invests in a gold fund with exposure to both metal and mining stocks; if the bill becomes law, TRST could acquire bullion outright.
And there’s more: “You’ve got the state of Texas standing up for you,” says Rickards, “if the federal government tries to do what they tried to do in 1933, which is take the people’s gold.”
Then there’s the old saying that we cited in a recent issue of Apogee Advisory: “Possession is nine-tenths of the law.”
Texan Ron Paul approves of the move: “If you think gold is a hedge, or a protection, you always want it as close to the individual and the entity as possible,” Paul tells The Texas Tribune website. “Texas is better served if it knows exactly where the gold is, rather than depending on the security of the Federal Reserve.”
Which is exactly why Germany’s Bundesbank is moving its gold back from vaults in New York and Paris. Well, as soon as the New York Fed can arrange delivery. The process is supposed to be all done.. by 2020.
The same suspicions in Texas are behind a referendum in Switzerland.
The Swiss People’s Party has gathered the requisite 100,000 signatures to put a measure on the ballot forbidding the Swiss National Bank from selling its gold reserves.
“The initiative also states the SNB’s gold would have to be stored within Switzerland,” says a Reuters story. “At present, where exactly the gold reserves are stored is a closely guarded secret of the SNB.”
[Ed. note: As we’ve mentioned much of this week, China’s government is making big moves to keep Chinese gold in China. Exports are forbidden. And that’s only one small element in a vast program of gold accumulation in the Middle Kingdom.
If you haven’t had a chance to review Byron King’s expose on “China’s Fort Knox,” it’s worth making the time to do so now. Byron has developed eight recommendations poised to profit from China’s growing stash. Don’t wait for the easy money to be made before you act.]
Gold is yet again bumping up against resistance at $1,615. At last check, the bid was $1,608. Silver has slumped below $29 again, down to $28.76.
Dollar weakness usually helps, but not today: The dollar index has slipped big-time to 82.4.
Stocks are making up for most of yesterday’s losses as the week winds down. At last check, the Dow was back within three points of 14,500.
There are no economic numbers or major earnings reports in view today — just a mellow feeling amid March Madness and a hefty Powerball jackpot…
“This brewing Cyprus issue is far bigger than the market believes,” interjects our Dan Amoss, forever reminding us of uncomfortable realities. Buzzkill…
“It will be interesting to see how, exactly, the Cypriot government plans on ever reopening its banks. A devastating bank run is exactly what to expect immediately after banks reopen. Permanent psychological damage was done the moment the deposit tax (theft) was proposed. Cyprus’ role as an international banking hub is finished. So to mitigate a run of depositors out of Cyprus, government authorities will feel they have to impose capital controls.
“As I write, another plan is getting leaked: Uninsured depositors of Cyprus Popular Bank could lose up to 40% of their savings. International depositors won’t know when (or if) they will regain access to their accounts. Liquid demand deposits may be forcibly converted into term deposits. If depositors need liquidity to compensate for getting locked out of Cyprus accounts, they’ll sell assets elsewhere. This hardly is a bullish development.”
We see that Ben Bernanke, pressed this week on whether such a scenario could unfold in the United States, was studiously noncommittal. He would only characterize such a step as “extremely unlikely.”
From this we can deduce Bernanke has what you might call a “likelihood scale.” Recall his infamous July 2005 interview with Maria Bartiromo in which he characterized a nationwide drop in housing prices as “pretty unlikely.”
Heh…
Congress sold you out yesterday — just as we warned early this month.
The House passed the Senate’s version of a “continuing resolution” — a legislative charade Congress performs in lieu of passing an honest-to-God budget. Widely touted in the media as “averting a government shutdown” come next Wednesday, it assures Uncle Sam will spend another $1.27 trillion between now and Sept. 30. At least.
And yet another sellout is on the way — one that could put your whole retirement at risk. Make the right move, though, and it could triple your money between now and July. The outrageous — and potentially lucrative — details are at this link.
In Europe’s crisis-ridden PIIGS countries, Bitcoin is no longer a fringe idea. And who can blame people after the cash grab in Cyprus this week?
Folks in Spain have been busy downloading three Bitcoin-related iPhone apps. One of them, “Bitcoin Ticker” jumped up in the ranks of the Spanish app marketplace from No. 526 to No. 52 in just 24 hours. Two similar apps “Bitcoin Gold ” and “Bitcoin App” are also leaping up the charts.
Right now, holding Bitcoin seems less risky in light of Europe’s political environment… not to mention a 1,360% appreciation over the past year and 55% just in the past five days alone.
Still, it isn’t just the refuge of scared Europeans who don’t want their deposits taken — it’s on the central bankers’ radar too. The ECB published a report back in October 2012 on what it called “Virtual Currency Schemes.”
The report says growing demand for something like Bitcoin “could have a negative impact on the reputation of central banks” because the public will interpret that demand as the central bank not doing its job properly.
Bring it on!
Meanwhile, a Canadian homeowner is selling his property for Bitcoin.
Taylor More self-listed his Alberta bungalow online on Monday as “Bitcoin Home!” After detailing the home’s spacious 2.9 acres, beautiful scenery, the amenities, and 2,800-square-foot workshop came the Bitcoin part: “If you had $405k I wouldn’t turn you down,” he posted.
Sweet property for the winter-minded… Frontage on the Crowsnest River, the listing says
As we write this, Bitcoin is trading for a little less than $75… so it would take you roughly 5,400 Bitcoins to buy the home. Though he qualified it: “if a partial or whole transaction is done using Bitcoins the price can be reduced depending on how many Bitcoins you have to trade.”
That’s a far cry from what Bitcoin bought just three years ago when it took 10,000 to buy a pizza.
Brings to mind the time-honored definition of money — a medium of exchange, unit of account and store of value. Bitcoin is rapidly taking on all three.
Take that, central bankers!
“Speaking of the NFL tuck rule,” a reader writes, “it’s about time for a market outcome.”
This might be a 5 first — a reader remarking on our periodic penchant to attribute daily random market moves to something utterly nonsensical.
“If only we could get rid of the banking tuck rule,” the reader goes on. “I mean they wave the ball all around, see danger when it is too late to avoid it, try to pull the ball back in and then fumble it.
“The feds run in, stop the play, put the ball back without regard for a legitimate spot and let the quarterback (banks) go do it again. I don’t think integrity of the game or fan revulsion can alter this farce, either. Bastiat! Bastiat! Wherefore art thou?”
“As a long-time subscriber,” writes a Reserve member, “you can only come to one conclusion: We need gold to back up our currency or else.
“A question purely of ignorance. Our idiot government has backed us into a historical corner. Do our government lands contain enough gold to bolster our currency enough to stave off the coming economic crash? I realize that there is not enough time to mine it, but if the world knew that we were going to mine our public lands of every ounce of gold available, it could back them down to a point that we might keep our world currency status. And let’s face it, it’s the only thing keeping us from a total catastrophe right now.
“Have our public lands been assayed to a point of knowing what our actual unmined gold reserves hold? Just asking…”
“What was your basis for the estimate of the gold reserves of the U.S.?” a reader writes after the chart we shared yesterday. “Did you audit?
“There are still rumors out there that most of the gold is gold-plated tungsten. Har.”
The 5: Well, sometimes you have to go by the official figures just to make a point — in this case about China’s accumulation. As Byron King shows in his new presentation, it’s staggering.
But you make a good point: For all we know, they’ve already surpassed the Treasury’s holdings!
Have a good weekend,
Dave Gonigam
The 5 Min. Forecast
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