Sunday, December 12, 2010


By Michael Checkan
9 December 2010
As we gathered around the table on Thanksgiving Day, we reflected on the many people and events in the past year for which we are grateful. In spite of the ongoing global economic meltdown, there is much for which we can give thanks.

Over the past month, from a business standpoint, one individual stands head and shoulders above the rest as deserving of my gratitude - Federal Reserve chairman Ben Bernanke. When "Helicopter Ben" announced the Fed's plan for a second round of Quantitative Easing (QE2), he triggered a spike in precious metals' prices and a subsequent explosion in telephone calls and emails to us at Asset Strategies.

The reaction by investors to his plan was so sudden and resolute that we need to give serious thought to awarding him a plaque as our Salesman of the Month. And after what happened in November, he is definitely in contention for Salesman of the Year honors as well.

All precious metals have been soaring. But none prospered as handsomely as silver, the poor man's gold. Since Mr. Bernanke's announcement, silver has appreciated nearly 18% ... in less than a month!

Basically, investors saw the Fed's action for what it is -- a desperate measure in a crisis situation, using the only monetary tool left in Mr. Bernanke's arsenal. Simply put, he has guaranteed the further debasement of our currency. He has set in motion a plan that can have no other outcome than the accelerated loss of purchasing power.

The defensive action investors should take is simple: shift to things of real value. At the top of that list should be what the world has always recognized as real money - gold and silver.

I'm sure you already understand that. That's simply the backdrop for what I really want to talk about today. Namely, silver's 18% appreciation in 30 days. After all, gold only spiked 3% during the same period of time.

In our July 6th alert, which was entitled, Silver - Lagging Gold, But Ready to Soar, I talked about the relationship between gold and silver. Click here to revisit that message. In it we spoke of the gains both gold and silver have made in the nine and a half year bull market we have been enjoying. During that period, gold posted gains of 374%, while silver lagged a bit at a mere 317%.

Our recommendation at the time? Buy silver.

In just five short months, with a little help from our Salesman of the Year nominee, gold's 10-year appreciation now stands at 428%. That's certainly good news to everyone who owns some of the Midas metal.

But in the same period, silver has gained 548%. If gold has soared, silver has exploded.

Remember, gold is the undisputed leader of precious metals. Gold moves (up or down) first. Only when the trend is established do the rest of the precious metals follow their leader. However, once that trend is established, silver often outpaces gold upward (and downward, too, keep in mind).

The value of the total gold supply for 2010 (as estimated by Gold Fields Mineral Services, basis data received through the first week of November) is $170 billion. Compare that to the value the same group places on all above-ground silver: just $19 billion, or roughly 11.1% as much. This will help you appreciate the relatively tiny nature of the silver market.

The gold market is nine times the size of the silver market. If you throw a rock into a puddle, you'll make a bigger splash than if you threw one into a pond. Just so in the silver market. Each dollar invested there has a larger impact on price appreciation than a similar amount spent on gold.

But that's not all. As gold moves higher, some "sticker shock" is inevitable. Now more than ever, people know they should own precious metals. Yet at $1,400 an ounce, gold seems expensive. Is it too expensive? I'd like to suggest that, even at these levels, not owning gold will turn out to be far more costly to your purchasing power than buying some now.

Price is an important reason why silver, the poor man's gold, is somewhat more palatable to investors at these lofty levels. As a result, we see purchases of precious metals start to skew in favor of silver versus gold. Each dollar spent purchases many more ounces of metal.

Let me take off my cheerleader outfit for a moment. There is a flip side to this phenomenon. When we see corrections, silver tends to overshoot to the downside, just as it tends to overshoot to the upside.

When gold starts to correct (and at some point, a correction is inevitable), and it begins a short-term downtrend, silver will follow. And its downward correction will typically be more pronounced than gold's.

If you're going to own silver, it's important that you stay focused on the fundamentals. Price movements can be as unnerving on the descent as they are euphoric on the ascent.

When you see a dip in prices, consider loading up on silver. This is precisely the situation in which we found ourselves last July. It is what compelled us to write that particular alert.

Let's face it. We are in an economic mess that will take a long time to clean up. For the foreseeable future, gold and silver are the best antidotes available to the venom known as QE2. They are our solution to the results of Mr. Bernanke's plans to "fix" our economy.

We remain buyers of both gold and silver on dips large or small. When the dip occurs, consider putting more of those steadily worth-less dollars into silver than you do into gold. When silver explodes, it is a beautiful thing.

Gold to remain strong in 2011 - Tom Kendall, Credit Suisse

Mineweb's weekly gold report......listen here

Goes the Dark Leader?

The Daily Bell

A follow-up to a previous a story entitled "Comes a Blond Stranger ..."

Years later (present day) ...

The two sat at a table in the large basement cafeteria of the Agency's Washington DC headquarters. It was late afternoon, and they were drinking lattes instead of coffee, as in years past. The basement had been remodeled: soft lighting; beige carpeting. Even the chairs had gone upscale, expensive and over-stuffed. A lot of money sloshing around Capitol Hill these days.

The worse it got outside, the better the Agency seemed to do.

The senior man missed the look and feel of the place where he'd spent much of his spare time. He felt his age; the junior man, opposite him, looked as young and dynamic as ever.

"Remember right here we talked about finding a guy and turning him into a star years ago," the junior man said, adding too much sugar. "He's sure blown up since then. Makes me nostalgic."

"He's the biggest thing in the world right," the senior man said, ladling a little honey. "That was one sweet concept."

"Lucky I had a brainstorm," the junior man needled.

"Sure, you were on the verge of washing out," the senior man teased back. "I gave you the credit because you needed a boost and you ended up with a real humdinger, my son." His smile ended up as a grimace. Out of practice.

The junior man took a cautious sip. "And now he's everywhere. He's all over the news just about twenty-four-seven."

"Well, we own the goddamn mainstream media," the senior man said, trying his own latte. "Are you surprised?"

"It's strange to watch," the junior man said. "I know it's all an act, but the left wing wants him deified and the right wants him shot."

"That's part of the dialectic. We need to control both sides of the argument. Our guys need to capture the most radical sentiments in order to control them. Has to do with credibility."

"But our own presenters are sounding like anarchists. It's almost counterproductive."

"Don't think the higher-ups aren't aware," the senior man said, wondering if his drink had cooled. "But nobody expected the Internet to be so uncontrollable."

"We ought to just shut it down," the junior man said. "If it were up to me." He drew his finger across his throat.

"That's easy for you to say." the senior man said. He took a sip. Better.

"But how are you going to do it practically?" the older man continued. "It's a balancing act."

"Give me three or four days," the junior man muttered. "I'd take care of it."

"I bet you would," the senior man said. "You and DARPA. They invented the Internet but they didn't count on two fellows in a garage coming up with a personal computer. Once everyone plugged in ... game over."

"Idiots," the junior man said heatedly. "They should have used better judgment."

The senior man took another sip. "You can't fight the market. Nobody can anticipate everything."

"What're you kidding me?" The junior man was startled. "It's OUR narrative, man! Everybody else just keeps score."

"I used to think that too," the senior man said. He felt suddenly weary. "But we can only go so far and then there's a setback. Now they're building a decentralized Internet. It's going to make things even harder to control. The pirates - the Pirate Bay folks. It's on the news."

The younger man looked surprised.

"What's that?" he asked finally, after collecting his thoughts. "I doubt it will work."

"I'm afraid you're wrong. You can't control this technology, not in its beginning stages. They couldn't control the Gutenberg press, either."

"The Gut ... what?"

The older man sighed and drank more latte.

"Look," the junior man said, settling back in his comfortable chair. "When it comes right down to it, we work for the people with the money. We're just ... enforcers."

"Sure," the senior man agreed, settling back too. "But people with money tend to be arrogant. You can't beat the market. Not in the long run. The Invisible Hand gets you every time."

He put his own somewhat mottled hand up to his throat and made a choking noise.

"I'll play for the side with the money," the junior man said. "Wealth always wins." He leaned forward and slurped.

"Does it?" the senior man asked. "New technologies can even-out the playing field for a while."

"All I know is our guy is blowing up big," the junior man said, looking up. "We want a war, well, these leaks provide plenty of reasons. He's giving us an excuse to crack down hard on the 'Net. License every user, track every domain ... And we got good partners. The Brits. Mossad. Tavistock doesn't fool around," he added with a final slurp, like a coda.

He drummed his fingers on the table. "Just like with the Beatles when they blew up. Or Operation Gladio."

"That was pre-Internet," the senior man pointed out.

"Come on! It's been set up brilliantly," the junior man said. "Everything that's come out has basically reinforced our policies. And we're getting publicity that we could never have paid for in a thousand years. "

"So far so good," the senior man said, playing with his cup. "You can't count on the success of an operation until it's over," he cautioned. "Too many things can go wrong."

"But look what we've ended up with!" the junior man said, leaning forward. "We got a sex addict charged with rape running an Internet leak program that is putting international secrets at risk - and jeopardizing the lives of soldiers and diplomats around the world. We want to crack down on the Internet now, there's every reason to."

"Perhaps so," the senior man said quietly. He didn't sound convinced.

"He's even changed the color of his hair," the junior man pointed out. "Now it's black. Looks a lot more dangerous. I don't know what you're so worried about."

"What am I worried about?" The senior man considered. "Well ... look around you. Not here! I mean look at the big picture. The economy is a mess. The world is a mess. Europe's in flames. America's getting there. We got employment numbers last put up during the Great Depression."

"Of course things are chaotic. That's part of their plan. You can't build a world government without breaking a few eggs."

"But China is going to go down. Inflation's out of control in that big country and sooner or later China's problems will bring down all of Asia. Now the entire world's in a slump."

"Game on!" the junior man cried. When the older man winced, he added, "Oh, I understand the causes - central banking and delinking from gold. You've taught me that. There couldn't be any other outcome."

"That's true," his mentor confirmed. "This was the strategy. Out of chaos, order. Central banking made the global meltdown inevitable, just as planned. But the higher-ups, they didn't understand about the Internet. That's exposed us. Our ideas are regularly discussed now and even anticipated ..."

"... But I don't see anyone backing down," the junior man interrupted. "I think you're worried about nothing. That's your personality. You've always got find the fly in the ointment."

"I disagree. We're approaching an inflection point. When China goes down - either through inflation or interest rate hikes - the world is going to be a terrible mess. And even without China, we've already got riots ... civil disobedience. Some think Western capitalism has failed, it's true. But people are not so uneducated anymore, thanks to the 'Net. And some may understand that 20th century economics was closer to communism than capitalism. They may riot for freedom this time, for a real marketplace with real money, not for bigger government."

"Look," the junior man said, ready to drop a name. "The Red Shield is pretty good with this sort of thing. I personally leave it up to them. They've managed the conspiracy rather well. And our guy is certainly helping. That was the whole idea wasn't it? We came up with it, and now I've even heard his role may be expanded."

"Yes ... I've heard the same thing," the senior man admitted.

"He's the focus of worldwide attention," the junior man pressed. "Before they're finished, he could be the most famous and heroic person in the world. Nothing will stick, or nothing big, even if he does go to jail for a while. And before he does, he'll release that insurance package of his. So who cares if he wanted to get laid? He's just going to look persecuted, like he's stood up to the most powerful bullies on earth. When the nation-states implode he'll be the most important person left standing. A war or two later, and people will look for leadership ... They'll virtually be begging for someone like him. He could lead the way to ... to ... "

"Yes, yes, of course" the senior man said. "A kind of new world order."

"His goal is to make closed societies more open," the younger man said emphatically. "People misunderstand his message. He doesn't want to do away with government, even big government. He just wants to make it better. He's playing a part, and we've got everyone watching. It's incredible. All over the world. Same techniques they used with the Beatles, and Lady Gaga. Mainstream media coverage 24-hours a day."

"Hm-mm. Hope he can be counted on."

"He's staying on the reservation," the junior man replied, feeling inexplicably a little defensive. "No question about that. He's sticking to the script, saying all the right things. He's even explained that he doesn't want to disseminate through the 'Net because he needs 'professional journalists' to work with him, like those at the Guardian and the New York Times. He's singlehandedly resuscitating the reputation of mainstream journalism. Plus he doesn't have any problems with the official story about 9/11 - so that's off the table."

"Well, I hope you're right," the senior man said, feeling suddenly gloomy. "Say, did you buy liability insurance?"

"Huh?" the junior man asked. "Oh, yeah - the new program. I looked into it."

"Do yourself a favor," the senior man said. "Revisit it."

"You serious?" asked the junior man.

"What if he's playing a double game?" the senior man probed, looking right in the eyes of his protege. "We've seen it before. What if he's going along with it now but when he's decided he's got enough clout to make a difference, he leaves the reservation - does things his own way? Maybe he forgets who his friends are and starts taking it all too seriously ... "

The young man looked pale. "Like a double agent? That wouldn't be very good for my career."

"No, you'd be blamed."

"You, too," the younger man said hurriedly, looking downcast. "It was YOUR idea."

"It wasn't," the older man said. "Anyway, I'm retiring."

"That's true," the junior man muttered. "How can we be sure?"

"We can't be sure of anything," the senior man said. "The balls are in the air. Where do they land?"

The above is a work of fiction. Any resemblance to persons living or dead is entirely coincidental. If it were not fictional, it would represent an alternative view of recent events that increasingly (and unfortunately) seem suspect to some, including us.

The Wall Street Pentagon Papers: Biggest Scam In World History Exposed - Are The Federal Reserve's Crimes Too Big To Comprehend?

By David DeGraw:

What if the greatest scam ever perpetrated was blatantly exposed, and the US media didn't cover it? Does that mean the scam could keep going? That's what we are about to find out.

I understand the importance of the new WikiLeaks documents. However, we must not let them distract us from the new information the Federal Reserve was forced to release. Even if WikiLeaks reveals documents from inside a large American bank, as huge as that could be, it will most likely pale in comparison to what we just found out from the one-time peek we got into the inner-workings of the Federal Reserve. This is the Wall Street equivalent of the Pentagon Papers.

I've written many reports detailing the crimes of Wall Street during this crisis. The level of fraud, from top to bottom, has been staggering. The lack of accountability and the complete disregard for the rule of law have made me and many of my colleagues extremely cynical and jaded when it comes to new evidence to pile on top of the mountain that we have already gathered. But we must not let our cynicism cloud our vision on the details within this new information.

Just when I thought the banksters couldn't possibly shock me anymore... they on

Marc Faber on Bloomberg - Deficit to Remain High As Far As the Eye Can See!

Your ABC Bullion blogger is currently in Chiang Mai, Thailand. So it seems is Marc Faber. I can understand why as Chiang Mai combines the best of city facilities, an international airport and easy access to wonderful National Parks, not to mention an excellent position to view the West from afar.

Ron Paul Defends WikiLeaks

Something’s Wrong in the Silver Pit: But It’s Much Bigger than J.P. Morgan

By Rob Kirby

When researching the precious metals, often times things are seldom as they appear on the surface. GATA Secretary and Treasurer – Chris Powell – has said that the true picture of a nations’ gold holdings are, “more closely guarded than their nuclear secrets”.

This has been more-or-less proven true based on the Federal Reserve’s reaction to GATA’s 2009 FOIA request for information concerning GOLD SWAPS. The Fed is ON RECORD admitting they’ve done gold swaps – which, by definition, necessarily utilize sovereign American gold stocks.

To date, the Federal Reserve has stonewalled GATA’s FOIA request citing their ‘privileged status’ and reluctance to divulge ‘trade secrets’.

GATA has maintained that the Federal Reserve / U.S. Treasury in conjunction with other Central Banks have for years been suppressing the price of gold [and silver too] – in efforts to mitigate and to cover up their own debasement of fiat currencies.

Historically, when Central Banks or governments print more and more fiat money, precious metals prices RISE. The money printing is not only inflationary but when done to excess it can undermine confidence in faith based fiat currency regimes. Precious metal has no counterparty risk and cannot be printed – which is why it “is” and always will be money. Remember folks, gold is money, as evidenced by EVERY Central Bank in the world listing gold bullion on their balance sheet as an official reserve asset.

GATA has identified and documented that Central Banks utilize precious metals derivatives, and in particular swaps, as a primary method by with Central Banks rig metal prices.

In the presence of EXTREME money printing, it’s understandable why Central Banks and governments would want to suppress the price of gold [and silver] and be less than transparent about their nefarious activity in this regard. Knowledge and detail regarding these activities could undermine a nations’ currency, their credit rating and thus their ability to service their sovereign debt.

The following data set is taken from the June, 2010 Bank for International Settlements [BIS], Semiannual OTC Derivatives Report and it is compared to other data from the U.S. Office of the Comptroller of the Currency’s, June, 2010 Quarterly Report on Bank Derivatives Activities.

Relative comparison along with analysis within the data sets sheds new light on the scope of the precious metals price management scheme. Additional analysis is presented regarding the number and identities of other possible [or likely] players. It also illustrates how paper derivatives have become tools to determine/rig price instead of the intended and stated purpose of price discovery of the underlying physical asset.


Question: There are a total of 417 Billion notional in Gold derivatives outstanding – AND THE GOLD / SILVER Price RATIO is 49:1 – then WHY are outstanding notional silver derivatives 127 Billion???? These BIS numbers suggest that the proper gold / silver ratio should be roughly 3.3:1 or silver priced TODAY at 1,400 / 3.3 = 424.00 per ounce.

Now, let’s take a peek at what the U.S. Office of the Comptroller of the Currency tells us about “other precious metals” held by U.S. Commercial Banks:

source: U.S. OCC

OCC data tells us that J.P. Morgan and HSBC constitute 13.5 billion worth of the BIS’s reported total of 127 billion of derivatives in “other precious metals”. That’s about ONE TENTH of the total. WHAT ABOUT THE OTHER 90 % ??????

Note: Even if we compare the OCC totals for silver versus gold derivatives from the table above – OCC data is supportive of a “proper” gold / silver ratio of 131.6 / 13.6 = 9.7 This implies a silver price of 1,400 / 9.7 = 144.00 per ounce of silver.

Coincidentally, or perhaps not, COMEX open interest in gold futures is roughly 600K contracts @ 100 oz. per contract that is roughly 60 million oz of gold open interest. COMEX open interest in silver futures happens to be about 135k contracts @ 5,000 oz per contract which is roughly 650 million oz of silver open interest [note that silver open interest is not quite 11 times the open interest of gold]. So, again I ask, why is the gold / silver ratio at 48: 1?????

***For those who are not aware, silver naturally occurs in the earth’s crust approximately 7 – 10 times more frequently than gold.

Now, let’s take a look at ALL Derivatives of U.S. Commercial Banks as reported by the OCC:

source: U.S. OCC

Take note and remember that the breakout provided – above - by the OCC was for Commercial Banks ONLY.

Finally, let’s now look at the ONLY OCC data table depicting ALL Derivatives held by U.S. Bank Holding Companies:

source: U.S. OCC


  • The BIS tells us that total global outstanding “other precious metals” derivatives are 127 billion.
  • General market wisdom [gleaned from OCC Commercial Bank data] suggest that J.P. Morgan and HSBC are the two dominant players in silver [other precious metals]
  • Yet, the U.S. OCC tells us that J.P. Morgan and HSBC combined – make up 13.577 billion of the 127 billion BIS total [roughly 10 %].
  • The U.S. OCC tells us that Morgan Stanley and B of A and Goldman have an additional combined 70 TRILLION in derivatives – at the Bank Holding Company level – but they give us NO HINT as to what portion of these totals consist of precious metals activity. We are left to assume that this is because the OCC is only mandated to regulate Commercial Banks – while Bank Holding Companies fall under the purview of the Federal Reserve.
  • Unless J.P. Morgan and HSBC are LYING to regulators as to the extent of their silver market activity – there are other MASSIVE players in the silver price suppression game. Who ever these ‘players’ are – metaphorically, they MUST BE BLEEDING FROM EVERY ORIFICE with silver’s parabolic run up in price over the past few months.
  • Most likely among American entities are MORGAN STANLEY, B of A and Goldman Sachs – since together they are operating a 70 Trillion derivative “BLACK BOX” about which we know LITTLE to NOTHING as it pertains to precious metals.
  • Any way you slice it – precious metals data reporting on the part of American regulators is atrocious. Simple MATHEMATICS tells us a gold / silver ratio at 48:1 is EXTREMELY contrived and REEKS of manipulation on the part of the Federal Reserve and the Banks they are charged with regulating.

Got any physical Gold and/or Silver yet?

Rob Kirby

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