Captain Switcheroo

Cash out of gold!!! - Financial Times

Cash out of gold and send kids to college

By Peter Tasker

Just like the non-barking dog in the Sherlock Holmes story, the gold price has become strangely insensitive to the usual stimuli.

The eurozone remains locked in an existential crisis. Growth is fading in the US and China, and policy makers appear conflicted or just plain clueless about how to respond. Meanwhile, losses and scandals at large banks are coming to light weekly.

Unsurprisingly, investors are running scared. The global flight to safety has seen capital flood into “core” sovereign bond markets, driving yields down almost to vanishing point.

Yet, despite this perfect storm of financial instability, the gold price remains becalmed. In fact, over the past year gold bullion has behaved like a “risk on” asset, rising and falling in sync with stock markets.

This makes sense. For most of human history, gold existed as an alternative to conventional finance, a “store of value” that could be relied on in times of distress and crisis. Gold bugs may hate to admit it, but those days are long gone. Gold has become just another financial asset, as vulnerable to the shifts of investor sentiment as an emerging market. It is symbolic of today’s world that one of the largest exchange traded funds is invested in gold bullion, not equities.

So why has the golden dog suddenly gone silent? One likely reason is that the price has simply become too rich.

Read the full article @ http://www.ft.com/cms/s/0/312bf416-d1a7-11e1-bb82-00144feabdc0.html#ixzz237sWWVwx

Crisis Armour...

An Old Farmer's Advice

Keep skunks and bankers at a distance.

Life is simpler when you plow around the stump.

A bumble bee is considerably faster than a John Deere tractor.

Words that soak into your ears are whispered...not yelled.

Meanness don't just happen overnight.

Forgive your enemies; it messes up their heads.

Do not corner something that you know is meaner than you.

It don't take a very big person to carry a grudge.

You cannot unsay a cruel word.

Every path has a few puddles.

When you wallow with pigs, expect to get dirty.

The best sermons are lived, not preached.

Most of the stuff people worry about, ain't never gonna happen anyway.

Don 't judge folks by their relatives.

Remember that silence is sometimes the best answer.

Live a good and honorable life, then when you get older and think back, you'll enjoy it a second time.

Don 't interfere with somethin' that ain't bothering you none.

Timing has a lot to do with the outcome of a rain dance.

If you find yourself in a hole, the first thing to do is stop diggin'.

Sometimes you get, and sometimes you get got.

The biggest troublemaker you'll probably ever have to deal with, watches you from the mirror every mornin'.

Always drink upstream from the herd.

Good judgment comes from experience, and a lotta that comes from bad judgment.

Lettin' the cat outta the bag is a whole lot easier than puttin' it back in.

If you get to thinkin' you're a person of some influence, try orderin' somebody else's dog around.

Live simply, love generously, care deeply, speak kindly, and leave the rest to God.

Don't pick a fight with an old man. If he is too old to fight, he'll just kill you.

Chinese Yuan the next reserve currency?

Gold and why you might want to hold some

What is LIBOR

Most of you would have heard about the ongoing LIBOR saga that has engulfed the financial landscape recently? Here is a brief explanation for those who are unsure as to what it stands for and the significance of it (cut and pasted from www.tfmetalsreport.com):

What Is LIBOR?

Submitted by OutLookingIn on July 5, 2012 - 4:04pm.

Some Know. Many do not.

LIBOR = London Inter Bank Offered Rate.

The LIBOR is the interest rate guide at which banks lend to each other. Many other interest rates are calculated using the LIBOR, such as mortgage rates, forward rate agreements, futures contracts, interest rate swaps, floating rate notes, syndicated loans, currencies, (especially the US dollar) and over-the-counter derivatives.

Every day, the British Bankers Association (BBA) surveys a panel of internationally active banks, asking them to provide the rates at which they could borrow "reasonable amounts" in a particular currency and maturity at 11:00 GMT. The BBA then eliminates the highest and lowest quartiles of the distribution and averaging the remaining quotes, to arrive at the LIBOR fix rate.

Around $350 trillion of lending and derivatives is priced of LIBOR. If misconduct by banks caused LIBOR to increase by a mere one tenth of one basis point (0.001%), this amounts to $35 billion a year in extra interest.

Barkleys, RBS and the Bof E are just the tip of the iceberg. More revelations to come.

Watch the LIBOR over this next month as it is now under the global financial microscope, as rates will invariably  rise, which is not good for the fragile global economy that is showing concrete signs of slowing down.

Human happiness and the environment – Address by Uruguayan president Jose Mujica at Rio +20 Summit

This is cut and pasted from the the wanderlife.com. Please have a read and consider what the Uruguayan president is espousing. It would be great if you could comment on what your thoughts are.  The author has translated the speech that was made in Spanish. 

20/06/12 Speech by José Mujica in the Rio +20 summit

 

Image from pericopalotes

To all of the authorities present here, from every latitude and organization, thank you very much. I want to thank the people of Brazil and Mrs. President, Dilma Rousseff. Thank you all for the good faith undoubtedly expressed by all of the speakers that preceded me.

We hereby express our innermost will as rulers, to adhere to all the agreements our wretched humanity, may chance to subscribe.

Notwithstanding, let us take this opportunity to ask some questions out loud. All afternoon long, we have been talking about sustainable development, about rescuing the masses from the claws of poverty.

What is it that flutters within our minds? Is it the model of development and consumption, which is shaped after that of affluent societies? I ask this question: what would happen to this planet if the people of India had the same number of cars per family as the Germans? How much oxygen would there be left for us to breathe? More clearly: Does the world today have the material elements to enable 7 or 8 billion people to enjoy the same level of consumption and squandering as the most affluent Western societies? WIll that ever be possible? Or will we have to start a different type of discussion one day? Because we have created this civilization in which we live: the progeny of the market, of the competition, which has begotten prodigious and explosive material progress. But the market economy has created market societies. And it has given us this globalization, which means being aware of the whole planet.

Are we ruling over globalization or is globalization ruling over us? Is it possible to speak of solidarity and of “being all together” in an economy based on ruthless competition? How far does our fraternity go?

I am not saying any of to undermine the importance of this event. On the contrary, the challenge ahead of us is of a colossal magnitude and the great crisis is not an ecological crisis, but rather a political one.

Today, man does not govern the forces he has unleashed, but rather, it is these forces that govern man;and life. Because we do not come into this planet simply to develop, just like that, indiscriminately. We come into this planet to be happy. Because life is short and it slips away from us. And no material belonging is worth as much as life, and this is fundamental.But if life is going to slip through my fingers, working and over-working in order to be able to consume more, and the consumer society is the engine-because ultimately, if consumption is paralyzed, the economy stops, and if you stop economy, the ghost of stagnation appears for each one of us, but it is this hyper-consumption that is harming the planet. And this hyper-consumption needs to be generated, making things that have a short useful life, in order to sell a lot. Thus, a light bulb cannot last longer than 1000 hours. But there are light bulbs that last 100,000 hours! But these cannot be manufactured, because the problem is the market, because we have to work and we have to sustain a civilization of “use and discard”, and so, we are trapped in a vicious cycle. These are problems of a political nature, which are showing us that it’s time to start fighting for a different culture.

I’m not talking about returning to the days of the caveman, or erecting a “monument to backwardness.” But we cannot continue like this, indefinitely, being ruled by the market, on the contrary, we have to rule over the market.

This is why I say, in my humble way of thinking, that the problem we are facing is political. The old thinkers. Epicurus, Seneca and even the Aymara put it this way, a poor person is not someone who has little but one who needs infinitely more, and more and more.” This is a cultural issue.

So I salute the efforts and agreements being made. And I will adhere to them, as a ruler. I know some things I’m saying are not easy to digest. But we must realize that the water crisis and the aggression to the environment is not the cause. The cause is the model of civilization that we have created. And the thing we have to re-examine is our way of life.

I belong to a small country well endowed with natural resources for life. In my country, there are a bit more than 3 million people. But there are about 13 million cows, some of the best in the world. And about 8 or 10 million excellent sheep. My country is an exporter of food, dairy, meat. It is a low-relief plain and almost 90% of the land is fertile.

My fellow workers, fought hard for the 8 hour workday. And now they are making that 6 hours. But the person who works 6 hours, gets two jobs, therefore, he works longer than before. But why? Because he needs to make monthly payments for: the motorcycle, the car, more and more payments, and when he’s done with that, he realizes he is a rheumatic old man, like me, and his life is already over.

And one asks this question: is this the fate of human life? These things I say are very basic: development cannot go against happiness. It has to work in favor of human happiness, of love on Earth, human relationships, caring for children, having friends, having our basic needs covered. Precisely because this is the most precious treasure we have; happiness. When we fight for the environment, we must remember that the first element of the environment is called human happiness.

The article was taken from:

http://thewanderlife.com/human-happiness-and-the-environment-address-by-uruguayan-president-jose-mujica-at-rio-20-summit/

Please check it out for other great posts from south america.

How gold could save the economic day..

"...Hedge fund managers Lee Quaintance and Paul Brodsky from QB Asset Management wrote a fascinating outline on the potential reintroduction of gold into the monetary system, while simultaneously implementing what one might consider a debt jubilee. I recommend reading the entire outline. Zero Hedge posted it at this link. QB explains the mechanics of how it could work in the US:

Using the US as an example, the Fed would purchase Treasury's gold at a large and specified premium to its current spot valuation. The higher the price, the more base money would be created and the more public debt would be extinguished. An eight-to-10-fold increase in the gold price via this mechanism would fully reserve all existing US dollar-denominated bank deposits (a full deleveraging of the banking system)."

Below is what the remonetization of gold would look like in chart form. The yellow line would rapidly approach the blue line. And the blue line will keep rising as we see further growth in the money supply. QB's "Shadow Gold Price" divides the US monetary base by official US gold holdings. Policymakers, who always feel the need to manage something, would appreciate that this is the same formula used during the Bretton Woods regime to peg the dollar at $35 per ounce. In other words, the Shadow Gold Price is the theoretical price of gold after the Fed inflated the supply of dollars to a level that would cover systemic bank liabilities and then re-pegged the dollar to gold. Behold the path to $10,000 gold:

This path would weaken the economy-sapping effects of debt created since President Nixon closed the gold window. It would transform a debt-based currency into an asset-backed currency. No longer would one ask the unpleasant question "What backs the dollar?" and come away with even more questions (and a headache)...."

Read the whole article here:

http://www.dailyreckoning.com.au/using-the-gold-standard-to-pave-the-way-to-10000-an-ounce-gold/2012/07/03/

Also, please take the time to listen to this interesting and fairly balanced discussion on a return to the gold standard. It is rare (but becoming more commonplace) for the mainstream media to entertain this economic train of thought.

http://www.bbc.co.uk/programmes/b01k9qd8

Hoping that you are having a good wednesday!

Reply to Tommy Koh's: "What Singaporeans can learn from Europe"

My friend asked me to have a read of Tommy Koh's recent Straits Times article. It brings up some interesting points, and it can be read here:

http://sghardtruth.com/2012/05/19/what-singapore-can-learn-from-europe-by-tommy-koh/

I agree with much that he says is 'improvable' with Singapore, however I disagree with his solutions.

Firstly, I think he is a little misleading mentioning how we shouldn’t chastise Europe for their financial worries (Greece, Italy, Ireland, Spain, Portugal & france etc etc) and then goes on to compare Singapore with the Nordic countries? Just to point out: Finland is the only one using the euro. Norway is not in the EU. Sweden and Denmark are in the EU but still use the krone. They do not have a sovereign debt crisis. Actually Denmark just had an oversubscribed bond auction lately, pointing to the fact that they are actually on the opposite side of the ship from the PIIGS mentioned above (where no one wants to buy their bonds, hence the soaring bond rates). So yes we should criticise Europe (PIIGS) for their debt binge, and no, no one is actually talking bad about the Scandinavians (not yet anyway).

Back on point, everyone agrees that equality is great. That high wages for all is great. Free education and healthcare is great. That the ability to have a lot of kids and afford for them to have childcare is great. What Tommy doesn’t mention is that these things cannot and will not be made possible just by the government or its people wishing for it to come to pass. Nothing is free. Everything has to be paid for with taxes, or by deficit spending (PIIGS/US/Weimar Republic/Zimbabwe anyone?) 

My thoughts on his solutions:

1.       Limit the number of cheap foreign workers in Singapore

a.       Prices of everything starts to increase. Bus fares go up since we need to pay more for drivers. Houses go up since we need to pay more for construction labourers. Food prices go up (bye bye $3 chicken rice) since we need to pay for cooks. Yada yada yada. You get the drift

b.      Sweden and the rest of the Nordic areas would KILL to have cheap labour like we do. Why is it a bad thing that we get something cheaply? Nordic countries tap into cheap energy (wind, oil, coal) to fuel their economy, we tap into cheap labour. There are people willing to work and there are people willing to pay for that work. Why should the government come into the situation to stop what would make 2 parties happy?

c.       He talks about us not having enough childcare services. Then asks us to decrease foreign labour. Who then will agree to be our maids for $500/month (not entirely sure on the price)?

2.       Set a minimum wage

a.       Minimum wages always affect the economy adversely. Worst of all, they affect the people that they are trying to protect. When you increase the minimum wage, cost of setting up business goes up, the flow on effect is everything else goes up. Businesses don’t get set up (imagine setting up a hostel, and needing to pay $25/hour for a person to clean tables and man the reception), so unemployment goes up, with the people that would be earning minimum wage being the ones now not having the jobs (because the businesses dont get set up). Even if these jobs are somehow kept, their high wages mean everything else has to go up in price, so they end up losing that increase in salary since they have to pay more for goods.

3.       Better education

a.       I think our children suffer from the mentality of their parents more than from the education system. People in Europe want their kids to chase their dreams, and enjoy school, and to get a pass from exams. Singaporean parents want their kids to chase condos and cars, and to get straight A’s. Who is the pressure really coming from? 

Lastly, he stated: THE citizens of the world aspire to live in fair societies. One important aspect of fairness is the equitable distribution of income and wealth. This is the moral force behind the economic doctrine of inclusive growth.

I would ask everyone to be careful of what he means ‘equitable distribution’. Does that mean taking from the poor to give to the rich? From the productive to the unproductive? Would this constitute stealing? Should stealing be considered a moral force? Please do not get me wrong. I believe that as a member of the human race, we ultimate aim should be to strive towards helping the poor, towards serving the needy. However,this should be done through free will, and not through government mandate.

I think that the role of government is to protect their citizens through a fair and just judicial system, and by protecting us from outside threats (armed forces). Besides that, the government should allow us to chase our dreams, and to keep what we earn based on our skills in the market place. Give the market place what they want, and you will be rewarded richly. Don’t offer the market place something useful, then you don’t get rewarded. It is no surprise that Singapore has been able to attract the best talent globally by following this mantra. If you can do something that everyone can do, you are not offering anything ‘rare’. If you want to get rich, go better yourself and make yourself unique and valuable. Simple, though unfortunately not easy.

Lastly, he fails to mention that those countries have a wealth of natural resources which fuels(Norwegian oil, Danish wind) and supports their welfare state. He also fails to mention that the Nordic people are very generous (free education for foreigners, huge aid donations etc) and content people, being happy with the basics in life, and striving to share and give to the needy. Singaporeans on a whole (there will always be exceptions) are not happy with taking the bus (most Scandinavians are more than happy to rely on trams and trains), with earning as much as the next guy etc etc. So instead of blaming our government/ the system, maybe we should look inwards at ourselves. We cant have our cake (wanting to have all the riches of the world) and eat it too (not work for it, and ask that we be given it based on ‘equality’). 

Singapore is a country built on meritocracy principles, and I am proud at how it is like that. I personally do not think the system has much to learn from the European model. I believe ours is actually superior.  There are however plenty more we can learn from the Scandinavians when it comes to being content, and generous, and hard efficient workers. We need to change from the inside out (if we want to be like them), and not vice versa. 

Ranting Andy on India's falling Rupee and Gold

In India, the Rupee is down to yet another ALL-TIME LOW, memorializing the results of perhaps the WORLD'S WORST FINANCIAL MANAGEMENT - quite the distinction in today's environment of abject incompetence...

  

  

I mean, centuries of Indian culture have ingrained the concept of REAL MONEY into its citizens' DNA, which is why it has been the world's largest gold consumer for as long as data has been recorded.  However, despite having one of the world's most vibrant economies - albeit, a statement doesn't mean what it used to - its moronic government has printed the Rupee into oblivion, going to great lengths to discourage citizens from taking steps to not only PROTECT their wealth, but GROW India's stature.

In one of the most pathetic speeches EVER - from a high ranking official that has not yet mastered the English language - here is India's "Finance Minister" begging citizens to avoid the "dead asset" - GOLD - which has appreciated against the Rupee eightfold over the past decade!

India's Finance Minister Wants The World's Largest Gold Investors To Invest In Anything But Gold  http://www.businessinsider.com/india-finance-minister-investing-gold-2012-6

Desiderata - by max ehrmann

Go placidly amid the noise and haste, and remember what peace there may be in silence.

As far as possible, without surrender, be on good terms with all persons. Speak your truth quietly and clearly; and listen to others, even to the dull and the ignorant, they too have their story. Avoid loud and aggressive persons, they are vexations to the spirit.

If you compare yourself with others, you may become vain and bitter; for always there will be greater and lesser persons than yourself. Enjoy your achievements as well as your plans. Keep interested in your own career, however humble; it is a real possession in the changing fortunes of time.

Exercise caution in your business affairs, for the world is full of trickery. But let this not blind you to what virtue there is; many persons strive for high ideals, and everywhere life is full of heroism. Be yourself. Especially, do not feign affection. Neither be cynical about love, for in the face of all aridity and disenchantment it is perennial as the grass.

Take kindly to the counsel of the years, gracefully surrendering the things of youth. Nurture strength of spirit to shield you in sudden misfortune. But do not distress yourself with imaginings. Many fears are born of fatigue and loneliness.

Beyond a wholesome discipline, be gentle with yourself. You are a child of the universe, no less than the trees and the stars; you have a right to be here. And whether or not it is clear to you, no doubt the universe is unfolding as it should.

Therefore be at peace with God, whatever you conceive Him to be, and whatever your labors and aspirations, in the noisy confusion of life, keep peace in your soul.

With all its sham, drudgery and broken dreams, it is still a beautiful world.

Be cheerful. Strive to be happy.

Quotes of interest

Anyone who has asked me about QE - whether it be QE2 or the likelihood of QE3 - my stock answer is I never noticed QE1 stop.  Two and a half years ago, my expectation was the US money supply would be required to grow almost vertically.  Today, that view seems exactly right.

-Rob Kirby

Unless the Fed is actively engaging in monetization at every given moment, the impact from easing diminishes progressively, ultimately approaching zero and subsequently becoming negative.

-Zero Hedge

The whole point of the European bailout fund (ESM/EFSF) is to BUY BONDS.  Basically Merkel just confirmed that the whole point of the ESM, which by the way still does not exist, and whose sole purpose is to buy bonds... is to buy bonds. You can't make this up.

-Zero Hedge

Ironic, isn't it, that the United States, the home of the indispensable people, stands before us as the likely candidate whose government will be responsible for the collapse of the West.

-Paul Craig Roberts

In my opinion, today's Fed inaction guarantees a systemic Western world financial crisis this year that will make Société Générale's ($1,900-$8,500 gold forecast) 100 percent correct.

-Jim Sinclair

To savvy investors, gold looks good when everything else looks bad.

-David Schectman

From Andy's Rant today

What is a dollar worth? An oz is always an oz. :)

Back to gold, here's a chart of the CPI-adjusted gold price - depicting gold nearly 40% below its ALL-TIME high...

  

  

However, if the TRUE CPI was utilized - care of John Williams of Shadow Stats - the "adjusted" gold price would be closer to 75% below its 1980 highs, as is the case with the current Dow.  Of course, if the "apples-to-apples" Dow was utilized - including stocks deleted due to bankruptcy or nationalization (Eastman Kodak, General Motors, Citibank, and AIG) - the Dow's "adjusted decline" would be closer to 85%...

  

  

In conclusion, you can see why the Fed is TERRIFIED of announcing a "new QE" initiative (which is probably why they'll couch it in "Fedspeak")...

Read the whole rant @ : http://campaign.r20.constantcontact.com/render?llr=n7vdaxbab&v=001cijNGvIyoo6by9-wrtuISpHN5b6phw09eOsAAKujnMruAv5mqA8EGlGQ1yZ-PHcNwWd7jWtkoIeHc0RDxOXDV-6ySBcBGHvFSi3P30nlLgIjuwTKyDJtKw%3D%3D

Real reason on Iran: "we need to blame people that don't look like us"

Very interesting listen. Pulls the curtains behind inflation and the need to keep things going till the election. 
Talks about:

• Monetary Easing
• Global Inflation
• Chinese Economy, and the need to curb inflation
• Politics behind Iran
• Australian Boom Times (47% of economy is made up of exporting Coal and Iron Ore to China and Japan)

Erik Townsend: Expect a US Price Shock as Black Swans Come Home to Roost

American investor (and longtime CM.com member) Erik Townsend has spent the past several years living internationally, with an eye to which countries may be good alternatives if economic crisis and/or Peak Oil start to materially impact life in the US.

His main observation as an expat? Through its misguided policies, the US has been exporting inflation to the rest of the world, raising prices all over the globe (as an example, Erik cites a $57 chicken pot pie from the menu at a 'working class' restaurant in Australia).

This inflation is affecting the rest of the world harshly, but is not yet being felt in the US due to our ability to export it as the issuer of the world's reserve currency. Our immunity will not last forever though, and when it ends, a massive upwards spike in prices is going to hit.

http://www.peakprosperity.com/blog/erik-townsend-expect-us-price-shock-black-swans-come-home-roost/72026

A few homemade charts

The Greatest Bull Market, A Gold Standard & Silver Shortages

from Silver For The People by brotherjon

kingworldnews.com / by Eric King / June 18, 2012

Today acclaimed money manager Stephen Leeb, told KWN, “the world is rapidly heading toward what you would call a ‘de facto’ gold standard,” and that we will see “shortages of silver over the next 5 to 10 years, massive shortages.”  Leeb, who is Chairman & Chief Investment Officer of Leeb Capital Management, also told King World News that investors are now “looking toward what I believe is going to be the greatest bull market of our lifetime — the one in junior miners.”  But first, here is what Leeb had to say about the situation in Europe:  “For a few hours after the Greek results were announced, investors were breathing a sigh of relief.  Initially we saw a big uptick in stocks, commodities, but gold was trading lower.  Then investors realized the elections didn’t mean a whole lot.”

Stephen Leeb continues:

“At that point you saw gold recover some, while stocks gave up the overnight enthusiasm they enjoyed in the futures markets.  At the end of the day, Europe is a mess, and it is still up to the Europeans to decide what to do to get out of this situation.

The strongest evidence of the continued chaos in Europe is a chart of the Spanish bond yields.  Spanish bond yields are now approaching 8%.  That’s a crazy number….
Read more here

"Today takes the cake for market madness..."

by Jim Sinclair, JS Mineset:

 My Dear Extended Family,

Of all the madness I have seen in markets over the last 50 years, today takes the cake.

My take on it is:

Mrs. Merkel can already taste the joy of being President of Euroland. Hollande is getting ready to set the stage for his growth solution to the euro mess. The entire western world economy is falling off a cliff. The West wants to bomb Syria into the dark ages but might meet Russia head on there.

Gold continues to overcome the bears.

The shorts of the euro are emboldened, but not necessarily as right as they think they are. Dollar strength has no fundamental backing, but benefits from the mirror image of the euro.

I recommend that you shut your ears to the multitude of experts, especially those on Financial TV that claim to have never been wrong.

Read More @ JSMineset.com

J.S. Kim on Physical Precious Metals' Importance

"I describe two important topics that the public-at-large still fails to grasp. One, I describe how the criminal banking cartel can counter-intuitively and periodically temporarily crush gold and silver prices in fraudulent paper markets even as global physical demand rises and physical supplies shrink and the importance of this sham to the banking cartel in seducing the retail investor to always make improper decisions about physical gold and physical silver (ie. not buying it). Two, I describe why retail investors should not fear this situation, how retail investors can use accumulation of physical gold and physical silver as an effective tool in fighting and defeating the criminal banking cartel and why purchasing physical gold and physical silver may be the only form of protection against the inevitable brutal collapse of our fraudulent monetary and banking system that is coming..."


Read whole article @ http://www.theundergroundinvestor.com/2012/06/a-blueprint-to-kill-jp-morgans-alleged-massive-manipulative-position-in-the-silver-futures-market/