Dave Gonigam – June 8, 2012
- A precious metals record set this week… an “official leak” from China’s central bank… and other gold nuggets from around the globe
- Gold and the dollar suddenly moving in tandem: Abe Cofnas spies a trading opportunity
- A Bernanke bummer for the market? How “tough new rules” will play to the advantage of too-big-to-fails
- Readers weigh in on decelerating “progress”… A warning that your house might be up for auction even if you own it free and clear… and more!
Gold hit a record this week… priced in Indian rupees, that is.
And demand is still off the charts, as we begin some virtual globe-trotting this morning. “Despite higher prices in the last four days,” writes Shivom Seth at Mineweb, “gold counters especially in south India reported an estimated 20-25% jump in sales.”
People in the world’s largest gold-buying nation have become skittish about stocks; the benchmark Sensex index is down 20% in the last 18 months — with plenty of volatility.
In contrast, “investing in gold is among the best ways to secure one’s investment because gold investments are incredibly safe,” says bullion dealer Mohana Pillai. “Many people in the south don’t look at the price and buy instead when the occasion demands it.”
From the world’s second-largest gold buyer comes this eyebrow-raiser: Official speculation that the Chinese central bank is contributing to the nation’s staggering gold import numbers.
“We can’t rule out the possibility that the central bank is buying gold,” said Wang Xinyou, senior gold analyst at Agricultural Bank of China, one of the four largest banks in the country.
Mr. Wang surely made this declaration with some assurance he would not run afoul of the authorities. We’re talking about a country, after all, where the government suppresses web searches based on odd numerological coincidences in the stock market.
Consider it another shot across the bow in China’s war against the dollar. A subtle one, but that’s how China’s playing it now. There was nothing said about the dollar this week at the annual meeting of the Shanghai Cooperation Organization — the no-Westerners-allowed club of China, Russia, and most of the “Stan” countries.
They didn’t have to say anything. The went on record in 2009 when they declared, “The current set of reserve currencies and the main reserve currency – the U.S. dollar – have failed to function as they should.”
China keeps putting the world on notice. Are you paying attention? You’d do well to ponder the consequences in the presentation below…
Turkey crossed an important golden threshold last year, according to U.S. Global Funds chief and Vancouver stalwart Frank Holmes.
“Similar to India and China,” says Frank, “Turks view the precious metal as both an adornment and a traditional form of saving. From a very young age, girls learn that gold is a wealth-preservation asset.”
Last year for the first time, investment demand for gold in Turkey equaled jewelry demand — thanks to new incentives to store gold at the bank instead of at home.
“Retail investors,” Frank goes on, “can not only hold their gold jewelry, bars and coins in an account at a bank, but can also accumulate gold in accounts, with tax-free 24-carat gold transactions.”
“The World Gold Council says people can choose among gold deposit accounts, gold checks, gold credits, gold transfers, gold gram accounts and protected capital gold-backed gold funds. Now total gold deposits in the banking sector have reached an estimated $7.69 billion, according to the WGC.”
“Not only are central banks in these nations ready to gobble gold,” Addison writes of the emerging markets, “the citizens are very hip to gold acquisition.”
That came from The Little Book of the Shrinking Dollar. It’s been off the presses for about a month now… and its prophecies are being fulfilled in real-time. For Addison’s best gold investing ideas, and a few dozen other ways to preserve your purchasing power, get your best value on the book right here.
The dollar price of gold, you ask? That’s bumping around where it was 24 hours ago. At last check, the spot price was $1,587.
The feds are going after a company in South Carolina for what they’re describing as a silver bullion “Ponzi scheme.”
The Commodity Futures Trading Commission accuses Atlantic Bullion & Coin of fraudulently offering contracts on silver sales but never buying any metal.
According to the CFTC, the firm collected $90.1 million from at least 945 investors in a scheme dating back to 2001.
[Ed. Note: We’ll include the caveat here about innocent until proven guilty. But a case like this reminds us you can never be too careful when it comes to investing in precious metals.
That’s why we’re stoked about a new method for safely buying, storing and selling gold. Truly, we haven’t run across anything this fuss-free. And the fees are super-reasonable. We’re not in a position to say more than that right now... but you’ll want to make sure you keep up with The 5 as we get closer to lifting the veil.]
The dollar index has retreated this week much the same way gold has in recent days. From a high of 83 on May 31, it’s back to 82.7 as we write.
“While it’s true the movements of gold and the U.S. dollar are often negatively correlated,” says Abe Cofnas, “there are times when that impression gets turned on its head.”
Like now. Abe directs your attention to a one-year chart of the dollar index and gold.
“Notice,” says Abe, “that at the hard right edge of the present moment, there is a wide spread. This spread is the result of the U.S. dollar going up and gold coming down. But that spread is narrowing.”
“That narrowing is interesting and actionable,” he concludes, almost smacking his lips in anticipation.
The short-term trading possibilities are nearly endless — especially in the run-up to the November election. Abe reveals more about his strategy and why it could prove especially profitable now in this new presentation.
U.S. stocks are adding to yesterday’s gains — which turned out to be pretty meager when all was said and done. For the moment, the Dow has crested 12,500 — as it did yesterday, only to retreat.
“Worse than a down day is a strong open that fades,” wrote Fusion IQ chief and Vancouver favorite Barry Ritholtz before the open.
“Yesterday saw the Dow up 140 points, the Nasdaq up nearly 30 points. The Dow gave up 100 points, the S&P 500 flipped negative and the Nasdaq got clocked. As markets got closer to [their] May 29 highs, the buying interest collapsed. That is a classic failed test of prior highs.”
As noted yesterday, the selling got under way as Fed chairman Ben Bernanke testified on Capitol Hill. Not only did he fail to deliver as much easy-money crack as addict traders wanted… he also revealed plans to require banks to hold more capital in reserve.
What? The Fed encouraging banks to be more responsible?
Well, yes and no. We see the requirements will apply to even the smallest neighborhood banks — which will prove onerous for them, while the too-big-to-fails can meet the test handily, once all the rules are in place by 2019.
Another instance of big companies throttling smaller competition through regulation. And so it goes.
“Aviation and high-speed air travel would be far more advanced if not for the heavy-handed political pressure of American aircraft manufacturers,” writes a Canadian reader weighing in on yesterday’s “is progress decelerating” episode of The 5.
“The Concorde never really got off the ground, due to American politicians bending to the will of Boeing. Unable to build a supersonic aircraft themselves, they used their clout to block the Concorde from American skies, killing the main market for the aircraft.”
“They did the same to the Canadian Avro Arrow fighter, which was 20 years ahead of anything American at the time. Likewise, the British TSR-2 bomber, killed by the good old free trade-loving U.S.”
“By the way, Britain gave you the jet engine and asked nothing in return. Truly, gratitude is a disease of dogs.”
“But I love The 5.”
The 5: “‘Progress’” is no sure thing,” Addison wrote with Bill Bonner in Financial Reckoning Day.
“Following the collapse of the Roman Empire in AD 476, people in Europe did not wish to become poorer… Yet technological innovation and material progress went into a slump for nearly 1,000 years.”
Not that such an event is baked into the cake now: The point is that progress is not a constantly ascending slope. And at a delicate moment in the global economy like now, our Symposium theme this year — “Innovate or Die: Empire at a Turning Point” — becomes extremely relevant. [Reminder: The registration fee for this year’s Vancouver event, July 24-27, goes up at midnight tonight.]
“I admire Patrick Cox,” writes a reader after Patrick’s contributions to yesterday’s issue. “He is aggressive, writes very well, and he is where big money is being made.
“Yet he brings a smile to my face when he enthusiastically explains how a drug will do something the immune system. I always wonder what will be the cost of the drug? And why not optimize the immune system, because it can take care of about 90% of health problems and it is free?”
“Look at statins — millions of people take them daily — because the Big Pharma/FDA monopoly says so, and doctors dutifully prescribe it. But as the objective studies show, statins do more damage than good.”
“As the people at Agora know better than anybody, monopolies usually deliver poor products and poor customer outcomes at high prices. The lack of innovation over the last 40 years in food production, agritech and health care: In a free market, prevention of disease and protection of health would come out ahead in extending longevity, and as a second benefit would devastate health care costs.”
The 5: That’s why Patrick doesn’t limit his quest for biotech breakthroughs to FDA-regulated drugs.
One company he follows is already on the market, having legally bypassed the FDA with a product that already shows more promise than statins in limiting the inflammation that accompanies heart disease.
And that’s just the beginning of its potential uses. As more are discovered, the profit potential keeps growing.
“I have five houses in east Phoenix (all paid for and all registered with the county assessor as rentals),” a reader writes.
Strap in, dear reader, for an intriguing tale of what this gentleman describes as a “‘let me jump on the TBTF bandwagon and see how many people I can rob blind before packing up and getting the hell out of Dodge!’ deal that is happening all across the USA.”
“I paid cash, went through a title company, received clear title, promptly assigned an LLC to each property using a very good lawyer and finally assigned the titles to each of the LLCs. For the past couple of months, my partner and I have been restoring/remodeling one of these properties to put on the market for sale.”
“A man parked his car across the street, got out of his car, camera in hand, walked up to my house we were working in and said he was there to take pictures of this house to put it on an online auction.”
“I hurried out to the street to meet this ‘photographer’ before he stepped back onto the property, assuring him that if he did he would regret it, giving him an indication I was exercising my right to conceal a weapon without a permit, as this is still the Old West.”
“Before speeding off in his car, I was able to get his employer’s name. My partner jumped in his truck and chased him down about a block away, where he started to take pictures of another house, and was able to find out that my house was actually the second house that was not an REO that [the company] sent him to shoot.”
[Ed. Note: We’re withholding the name of the company for now. We haven’t had a chance to get their side of the story.]
“Meanwhile I jumped online to Google [Company X] and sure enough there were hundreds of houses all across the nation it is auctioning. I emailed the outfit, CC-ing my LLC lawyer. I have yet to get a response. My house is not on the auction list yet.”
“Makes you wonder if anybody even knows his paid-for house is being sold on an online auction. My wife Googled [‘Company X scams’] and found several bidder/buyers of these auctioned houses paying upward of $6,000 earnest-money deposits on houses whose rightful owners live in them being told by [the company] that it will close as scheduled.”
“How long can a ‘bank/holding company’ steal people’s money/houses? Well I know this; the motherf***ers ain’t getting any of mine without at least me attempting (hopefully successfully) at defending what’s mine in this Godforsaken hellhole we call the US of A.”
“Anyway, you may want to check to see if your house is for sale. I’m sure this isn’t the only bank/holding company doing this. (Big Brother and the Holding Co.? Now that’s got a ring to it! Janis had no idea how accurate she was almost 50 years ago).”
“OK, I’m done. Keep us thinking. It’s good for the soul. Peace.”
The 5: Hmmm… The name of the firm furnished by the reader is similar, but not identical, to a publicly traded company with a market cap north of $2 billion. And it didn’t take long to find complaints about it from home buyers.
“We bid on a home,” says one account at the site Pissed Consumer, “won the bid and after paying for a home inspection we were told the house was not sellable due to title issues. We are out over $600 dollars. Yet on the website we are still under contract as the winning bid.”
So… Does any of this ring true from your own selling/buying experiences? Drop us a line. Consider it a collaborative project in investigative reporting! More next week.
Have a good weekend,
The 5 Min. Forecast
P.S. Final reminder: The registration fee for the 2012 Agora Financial Investment Symposium rises at midnight tonight.
We have fewer than 200 seats remaining for this event July 24-27. Space at our host hotel, the Fairmont Hotel Vancouver, is filling up fast too. A speaker lineup and registration details are at this link.
P.P.S. Last week’s e-book selection at the Laissez Faire Club, The Lily, got a lot of buzz, said Jeffrey Tucker during our morning conference call.
Unlike The Lily, which came out only a few months ago, this week’s selection is an underground classic of sorts, some 40 years old. But we suspect it will generate at least as much buzz.
The Market for Liberty was, as Jeffrey explains, “written in a white heat during the moment of discovery, with prose that shines forth like the sun pouring into the window of a a time when a new understanding brings the world into focus for the first time.”
We offer this e-book edition, complete with a new introduction and other material setting a contemporary context, at Laissez Faire Books for $9.00. But for only a dollar more, you can join the Laissez Faire Club, get The Market for Liberty… get access to a new e-book every week… and get bound copies of our Economics in One Library set delivered to your doorstep.
For a full list of members-only benefits… check this out.