July 17, 2013
- “Oh, now we get it”: Why Bernanke’s chatter today is no different than it was in May but the market’s reaction is…
- “They’re really going to create a disaster”: Doug Casey unloads on the Fed and describes what he’s doing with his money now
- California 1849… Klondike 1898… Ghana 2013: Tales from a modern-day Chinese-fueled gold rush
- An excuse for us to trot out the line, “Suck it, fishies and birdies”… readers rant about the AMA… staying mobile when the crotte hits the fan… and more!
Ugh… It’s back. Not that it ever really went away…
“Who’s afraid of a tapir?” continued…
“Bernanke: Fed to begin tapering bond purchases later this year,” declared CNBC this morning shortly after the Fed chief’s prepared remarks to Congress were released.
The headline conveniently overlooked the “if” part, buried in the body of the story: “if the incoming economic data confirm a strengthening labor market and inflation moving back toward the central bank’s 2% target.”
In other words, nothing has changed.
Which traders figured out right away. Futures barely missed a beat when the transcript was released at 8:30 a.m. EDT.
And while traders are hanging on every word of the Q-and-A with Congresscritters, the major indexes are essentially unchanged from yesterday’s close — the S&P up four points, to 1,680.
At least now traders understand this “if” thing — which they didn’t the last time Bernanke testified to Congress on May 22, sending the major stock indexes on the way to a 5% correction.
“What happened in May,” Currency Wars author Jim Rickards told us two weeks ago, “is that Bernanke thought he was giving a lecture to a graduate-level course in economics, talking about conditionality.
“He used the word ‘if’ repeatedly: We’re going to reduce asset purchases if the growth forecast pans out, if the employment forecast pans out, if inflation’s not too hot, etc. But it presupposes these things are happening, and they are in the Fed forecast to some extent, but the Fed has one of the worst forecasting records out there.
“You go back over the last four years,” Mr. Rickards went on, “and look at the Fed’s forecasts for the last four years: They were wrong every time, and they were wrong by a lot — meaning, why should we believe the forecast now? In fact, we shouldn’t.
“My expectation between now and [the Fed’s Sept. 11-12 meeting] is that as the data come in, it’ll be very clear their forecast is wrong, again. They’re not going to taper.” And if they do, he told CNBC on Monday, they will reverse course in short order as every asset class promptly tanks.
[Ed. note: We’re eagerly awaiting Mr. Rickards’ talk one week from today at the Agora Financial Investment Symposium in Vancouver. If you’re unable to join us for our final blowout swan-song event as we reinvent our conference schedule, there’s always the next-best thing: high-quality audio and high-definition video of the event.
If our hardworking production team stays true to form, the MP3 audio files from every session in the main hall can be in your inbox around Friday, Aug. 2. And if you act this week, you get the best possible price. Act early and save at this link.]
Also moving little this morning: Treasury rates. The yield on a 10-year note remains stuck a hair below 2.5%.
While stocks have recovered everything they lost after Bernanke opened his yap on May 22, Treasury prices remain stubbornly lower than their levels of two months ago… and rates remain stubbornly higher.
“Despite Fed reassurances, long-term interest rates remain in an uptrend,” says our macro strategist Dan Amoss.
“If the Fed wants to keep long-term interest rates from continuing to run higher, it will have to redouble its commitment to QE. Treasury bond yields have surged at just a hint — not an actual — slowdown of the printing presses.”
“Bernanke and all these central bankers, they are all the same,” Doug Casey tells Forbes in a recent interview at FreedomFest in Las Vegas, “they are all going to destroy all these currencies. They are really going to create a disaster.
“The stock market is grossly overpriced,” Casey goes on. “If the value of the stock market falls in half, that’s trillions of dollars of potential purchasing media that’s vanished.
“We are on the ragged edge between hyperinflation and catastrophic deflation. Bernanke should be very scared.”
Casey expects to see inflation explode in the U.S. in within the next year or so. But, he added, the central banks are creating asset bubbles of such massive proportion that if they pop, we could have a hulking deflationary situation on our hands.
Where is Casey putting his money these days?
“I’ve been buying gold for years,” Casey says, “and I continue to buy it because it is the way you save. The way you put capital aside for further use. I’m very happy to be able to buy gold at this price.”
Casey also recommends investors seek out “good quality” junior mining stocks. Depressed as they have been, he explains, they offer potential long-term value. “I see them being a 1,000% shot over the next few years,” he told Forbes.
Also on his list is international diversification, which he says almost no Americans or Canadians are doing.
Greece, whose stock market is down almost 98%, is next on his agenda of places to scour for deals.
“Looking at strictly growth prospects,” Forbes writes, “Casey said that Asia will dominate and this century will belong to the Chinese, despite the hurdles recent economic hurdles the country has faced.
“Casey added that he also likes Africa as an investment opportunity as well as South America, in particularly Argentina and Uruguay.”
[Ed. Note: As you’re probably aware, Mr. Casey will also be in attendance at our Symposium next week. His talk will be one not to be missed. Again, if you’re unable to attend, you can get today’s best possible price on the MP3 audio files right here at this link.]
Gold took another failed run at $1,300 early this morning. At last check, the bid was back to $1,282.
A Chinese gold miner exodus is underway in Ghana…
“More than 4,500 Chinese,” an official told Agence France Presse, “have left Ghana since a crackdown on illegal mining began in June, with the illicit industry having drawn scores of Chinese to the West African nation.”
Early June, Ghanaian police arrested 124 illegal Chinese gold miners in the capital of Accra. The number arrested between June 1 and July 3, according to a Ghana Immigration Services spokesman, has now risen to 571.
The task force responsible for tracking down the illegal miners, AFP explains, “is aimed at rooting out illegal small-scale miners blamed for ruining the environment.”
The latest update tells us a total of 4,592 Chinese, including those arrested, have either fled or were sent out of the country since the first arrests were made.
“It’s estimated,” Anthony Halley of Mining.com wrote during the first series of crackdowns, “that 50,000 illegal Chinese gold prospectors are currently operating in Ghana.”
Many of the Chinese who traveled to Ghana — Africa’s second-largest gold producer — reportedly came from Shanglin county in China’s Guangxi province, which has a long tradition of gold mining.
We hasten to point out our own Byron King discovered this story long before the mainstream caught wind. At the time, he took it to only confirm his biggest gold prediction yet: “China’s leaders,” Byron wrote, “appear to have devised a plan for their gold that is so bold and audacious, it could quite literally trigger a financial quake felt round the world.”
This plan, Byron explains in one free report, involves China’s miners, banks and even its citizens. To see how high Byron thinks gold could jump — virtually overnight — click here to see the full story.]
The “Fabulous Fab” trial is underway.
Fabrice Tourre is the guy Addison accurately described as the patsy for Goldman Sachs’ practice back in 2007 of selling mortgage securities to clients without disclosing the only reason those securities existed was that hedge fund king John Paulson wanted to short the hell out of them.
Goldman clients ended up losing about $1 billion. In July 2010, Goldman settled a civil suit filed by the SEC for $550 million — about 14 days worth of the firm’s first-quarter profits that year. Tourre found himself the subject of his own SEC suit, which finally went to trial this week in a federal courthouse in Lower Manhattan.
It will be interesting to see whether some of Tourre’s most-damning emails will be admitted as evidence. To wit: “The whole building is about to collapse anytime now … Only potential survivor, the fabulous Fab … standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstruosities [sic]!!!”
For real.
Fabulous Fab: Goldman is paying for his defense…
We recall when all this started coming out in 2010 the satirist Andy Borowitz published an article at Huffington Post claiming Goldman had come clean about making “a substantial financial bet against the Gulf of Mexico” one day before the blowout at BP’s Deepwater Horizon rig.
The “admission” came after government investigators unearthed “emails” from Fabulous Fab:
“One oil rig goes down and we’re going to be rolling in dough,” he supposedly wrote. “Suck it, fishies and birdies!”
A lot of people who should have known better started passing it around the Internet as if it were real. In light of what the real emails said, we can almost understand it.
Almost…
“Cheers to the person who brought up the subject of the AMA union,” a reader writes after yesterday’s mailbag. “I am sure a lot of MDs read this.
“The bigger problem is state-level AMA unions. They routinely destroy MDs who do not toe
the line as far as treatment modalities not approved by a hierarchy of octogenarians and surgeons. Many very successful, yet harmless IV treatments are forbidden because they reduce the need for surgery or because Big Pharma wants its patented product to be the sole solution for a condition.
“Sure, I know if I break a leg or get a ruptured appendix, I will pray for a surgeon and praise him or her for saving me. If these people are so gifted, why can’t they constrain their egos enough to permit good doctors to do the right thing?”
“I grew up in the ’50s and ’60s constantly hearing the AMA referred to as the ‘doctor’s union,'” another writes. “This DESPITE the fact that my grandfather was a founding member of the Academy of Orthopedic Surgeons and chief of surgery at Boston City for six years!”
“Please don’t paint physicians with the same contaminated purulent brush as the AMA,” cautions a third. “In any given year, only 14-17% of physicians and med students are AMA members, with membership declining.
“The majority of physicians see the AMA for what it is, a self-serving political action committee. Also understand the nonsensical CMS (Medicare/Medicaid) payment code system is OWNED by the AMA. Every caregiver/clinic/hospital must purchase the codes for CMS compliance, making the AMA tens of millions annually, the majority of their earnings. Cartel is one definition, like mobsters, monopoly, slime…”
“I am a retired CPA who did mostly income tax work,” writes a reader after yesterday’s IRS musings. “The IRS is terrible. I retired early four years ago because of them. The stories I could tell.
“When I retired, the auditors were idiots. I had to take everything to appeals, where there were senior people who knew something. I retired when the appeals personnel were retiring and being replaced by the idiots. Had lunch with co-workers today. They told me it is even worse than when I retired. They are overwhelmed with notices of people owing penalties on nontaxable retirement withdrawals. When they call IRS, they are told, yes, the notice is wrong, but you need to talk to someone else. No, we don’t know who you need to talk to.”
“The writer yesterday who claims that gold is worthless since you cannot eat it is sounding the typical unthinking survivalist mantra,” writes one of our regulars. “But perhaps he should study history a bit more closely. There have always been some who will rise to the top of the pack, and they have bought, bartered or stolen the gold in the past and will in the future.
“There was an article recently by a survivor of the Chechnyan revolution. He points out that you can be well armed and have adequate resources, etc. BUT there will always be somebody better armed with more personnel to take you down if you stay in one identifiable location. It is simply a matter of time before you are conquered unless you unite or move constantly. They only went out at night from modern burrows. A large obvious location with resources like solar panels is going to be a magnet for the top dogs.
“People with wide-ranging knowledge of self-sufficiency and experience will be necessary to keep the top dogs in power, and working for one of them just might be better than running basically alone and naked, especially for us older people. And a few gold coins might get you into a compound where you could prove your worth.
“You can ONLY carry so much and remain mobile. A few weapons, ammo and rations along with water and you have a heavy load for most. I mean how many manual breast drills, hammers, AKs and 7.62×39 ammo, etc., can you carry? You can carry several gold coins.”
The 5: Hmmm…
Cheers,
Dave Gonigam
The 5 Min. Forecast
P.S. “The battlefields are merging,” says Martin Kobler. He’s the United Nations envoy to Iraq. He’s speaking about the conflicts in Iraq, and next door in Syria.
From The Associated Press: “Kobler told the U.N. Security Council that Iraqi armed groups have an increasingly active presence in Syria. As a result, he said, the Syrian conflict is no longer just spilling over into Iraq, but Iraqis are reportedly taking arms against each other inside Syria.”
“Iraq is the fault line between the Shia and the Sunni worlds,” Kobler said, “and everything which happens in Syria, of course, has repercussions on the political landscape in Iraq.”
If you’re a longtime 5 reader, you recognize that Kobler’s talking about Byron King’s Oil War scenario — the one that could drive crude to $220 in a heartbeat.
If you haven’t acquainted yourself with this scenario — and the protective steps you can take in your portfolio — here’s your chance to do so.