Month: Dec 2013

2013 Final Round up

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As the year draws to a close, my wishes extend to everyone, but especially to those who have taken the trouble to follow me, or post links to the content elsewhere. Feel free to do so by the way.

Thanks to everyone, and I hope you all have a wonderful New Year, and that 2014, brings you everything you hope for and work towards.

Time permitting, I’ll have some interesting information regarding investments for those with a little spare cash to invest, in the New Year.

At the moment, family commitments, shopping, visiting relatives, or preparing for relatives to visit us, seems to be the number one priority.

As a final thought, I have been following commodities companies these last ten years, and those companies I follow seem to have had a minor upturn for the most part.

Given the price action of the commodity space these last few months, it would appear that the downturn that began in late 2011, is drawing to a close, and a fresh bull-market is beginning. The smart money seems to be already positioning itself.

These murmurings are what in a former time, Norman Lamont (the ex Chancellor of the British Exchequer) would have called the ‘green shoots of recovery’.

For those with a medium term investment horizon, this could now turn out to be one of the most lucrative of the last 40 years.

Junior Mining outfits, with good reserves, but whose price has been beaten down because of a lack of access to capital to bring their reserves/resources to production, will be hopefully in a position to take advantage of the better investment horizon.

Some, who raised finance at higher price levels, but who have watched their outflows of cash very carefully, will be well placed to take advantage of this upturn.

I will make it my new year’s resolution to bring to your attention some of these Exploration and Production Companies.

In the meantime, have a wonderful New Year.

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Happy Birthday Federal Reserve – 100 years and counting!

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“Commerce is larger than governments and will certainly prevail over them all. When once this conviction prevails, we shall all be surprised to see how easily natural laws will conquer local prejudice and legislation.”

George S. Coe, President of the American Exchange National Bank – April 10, 1893, in a letter to José F. De Navarro

As I mentioned yesterday, the Federal Reserve – that erstwhile U.S. Central Bank, of Federal United States reaches the grand old age of 100 today.

Back  in 1913, on this day, the Federal Reserve was born, but it had an ignominious birth.

The beginnings of the Fed, though, go back even further to several attempts by senior Bankers to fasten a Central Banking organisation on the Americans.  An organisation that would give power, to those born to these Banking families, and to wield it by the politicians they bought with their power and wealth.

The Banking Crisis of 1908, was the pretext for its instigation.

The Banking Crisis of 1908

The crisis began like all crises do, by large organisations getting into difficulties.

A stock market fall which engulfed the banking sector, as hundreds of organisations using their stocks as collateral against loans and the Banks calling in their loans, when they too got into financial difficulties.

The birth of the Fed

Their journey began on the night of November 22, 1910, as a railroad car with blinds drawn, on a little used platform filled with bankers left for an unknown destination from a station in Hoboken, New Jersey. Newspapermen stood dejected and frustrated as these bankers got away. It would be years later before the world would know what happened over the ensuing days.

Senator Nelson Aldrich had been appointed head of the National Monetary Commission in 1908, which was charged with finding a solution to the recent Banking Crisis, and his answer apparently was to give power and control to a secret cabal of Bankers, who devised the current Banking system – ostensibly to prevent further crises, but in reality to control the money, of the U.S. and ultimately the world.

They have almost succeeded. But we can fight back, by using coins of only Gold and Silver which the U.S. constitution required, but has since 15th August 1971, been abrogated.

This gives the politicians under the banker’s control a headache, as they are unable to inflate away the value of the precious metals.

The full story can be read in:  The Coming Battle

99 Years and counting down…

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So, tomorrow is a VERY special birthday. The Fed set up by a cartel of banking families, in total secrecy is 100 years old tomorrow.

The Fed grew out of a crisis that occurred in 1908. The whole story would take far too long to describe fully here, but suffice to say, the financial crisis we’ve just experienced, is widely accepted to have been as a direct result of excessive lending on property which in a market that was growing due largely due to demographics, but also because spurts in population growth occur at regular intervals.

If you have access to that data, you can time your entry to the market with precision, or even take advantage of the panic when it occurs.

Of course when you are a Bank, and you have personal data on birth-dates on hundreds of millions of accounts, that data can prove invaluable. You can agree to lend, driving up house prices, then when they begin to rise, you can relax your lending, giving 4, 6, 8 or 10 times current incomes, driving prices up even more. Then as house price inflation rears its head (as it inevitably must) you can raise interest rates driving hundreds of thousands into negative equity, as property prices become depressed.  Of course only a conspiracy theorist, would think they would do that… Wouldn’t they?

The 1908 Banking Crisis

The crisis of 2008 had several outcomes. Property prices would crash, many would lose their jobs, and politicians would agree to more spending. All (they say) to overcome the further progression into recession – depression even. 

Exactly a hundred years ago, a similar crisis occurred. Are we to believe we have learned nothing? Are we to believe that our leaders have not read anything on Political economy, have not read any Economic History, have no advisers who have? Or are they only concerned with their own political futures?

To see, we need to go back a hundred years, perhaps even a little further. to find the cause of the crisis.

The turn of the century ushered in the era of the Oil revolution. A second wave of the industrial revolution, that was originally brought about by the use of coal in steam engines. OIl would enable greater productivity, and usher in the era of the motor-car. Yes, oil had been found before, and was in widespread use since 1859, oil had been used in oil lamps for lighting, given away by Standard Oil – the baby of the Rockefellers.

But in 1901, a new well in Texas spudded. On January 10th, 1901, Spindletop oil well in Texas gushed forth, reaching peak production of over 100,000 barrels of oil per day. It took over a week to bring it under control. Over the next few years over a hundred oil companies would be formed, and thousands of new wells drilled. The wealth created spread out into the wider economy, and the Bankers who had loaned these new corporations the capital made hundreds of millions in new profits. Then, just as now, people speculated on these corporations, and bankers pay became the stuff of legend.

F. Scott Fitzgerald, who would later write the great novel – “The Great Gatsby” would bring this world to a wider audience, but in 1906, a crack in the world – along the San Andreas fault would usher in a period of tumult. 

An earthquake at just after 5:10 am on April 18th, measured by various estimates as between 7.7 and 8.25 on the Richter scale shook San-Francisco and the state. The Newspapers all wrote a collective piece the following day headlined: “The City that was”, as almost 300,000 of the 400,000 inhabitants were left homeless. Barely a building was left untouched.

The epicenter of the quake was reportedly two miles off-shore, but it radiated up to almost 300 miles away, as its effects were felt as far north as Oregon, and as far east as Nevada. The loss of output from San-Francisco, and the disbursements laid out by insurance companies, who had to collect on their own insurance through the re-insurance markets led ultimately to a shortage of capital which helped precipitate the shortage of funds in the markets for speculative purposes.

And that caused the crisis. but its what happened next that matters.

To be continued…

 

TAPER TANTRUMS AT THE FED? (Dec 19th, 2013)

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“You can resist an invading army; BUT you cannot resist an idea whose time has come.” 

 VICTOR HUGO

Outgoing Fed Chairman Ben Bernanke yesterday informed us that the Fed would begin tapering its Bond purchasing programme and would reduce its next round of bond buying by some $10 Billion, to $75 Billion.
This was interpreted by the markets as good news – because the good chairman, had previously told the markets, that they would begin tapering “when the numbers supported it”. Stock markets rose instantly by 1% or over.

This means the markets now believe that the economy is growing sustainibly, and that we are on the road out of the financial turmoil we have experienced over the last 5 years. One further outcome is that the Gold and Silver precious metals markets sold off.  Gold dipped below $1200, with Silver dipping below $20 per ounce.

However, I am not so sure. Although the tapering is likely to be spread over a year, as the commentators on Bloomberg suggested, it is not outside the bounds of possibility that weak numbers from the Xmas retail sales, will show up in January and February and suggest that the economy is not growing, but it was merely a splurge as eviscerated consumers fight back at the gloom and doom they see all around them, particularly as house prices are reported as having risen to bubble levels again. Pull backs in precious metals were to be expected, though there were many who have suggested that the current price news means that the boom in precious metals is over, and that the price will likely fall further to perhaps the $870 region.

There are a number of reasons why I think this premise is false.

Reasons to be Cheerful – Part 2

A fall to the $1,000 level for Gold, I once thought possible, as it might follow the pattern set in 1974-76, when it halved from almost $200/oz to $100/oz in a little over an eighteen month period. However, I now feel the Chinese, Middle-Eastern and Indian Gold and silver buying this time around has raised the floor to the level reached back during the summer. Silver too had a major pull-back during the 1970’s.

To understand the reasons for any outcome, we have to understand several things: We have to understand the drivers and the levers applied then and now to make a comparison.  Back in the late 1960s and 70s, those retiring were born at the turn of the century (1890 – 1910) Those born during the “Fin de Siècle” (The end of the 19th century) were the off-spring of those who had enjoyed the boom years of the 1880s. They grew up during the late-Victorian, and early Edwardian periods, and were the cannon-fodder of WW1, and the Flappers of the 1920s.

In the UK, that same generation led mostly gruelling working lives in factories, with the lucky ones who lived near the capital finding work in government and commerce – banking, finance, journalism, publishing, local and central politics et-al…

Their hard work and tenacity in the face of adversity led to the creation of the welfare state, we took advantage of after WWII. As they matured, when they saved, that capital built up on Pension companies and Bank balance sheets, and led to lower interest rates. As they began retiring in the late 60s they drew down their pensions and bought gilts (Bonds) which drove down interest rates further, and pushed up house prices, as mortgages got cheaper due to the lower rates, just as the baby-boomers were buying their first flats and homes.

When home prices got too high by the early 70s, as the baby-boomers married and had kids, their parents (our grand-parents) were retiring in an economy that was shrinking for several reasons. We were at the end of the technology cycle – the Railway had begun shrinking in usage as the car became cost-effective due in large part to cheaper oil, and Cheap Air Travel was only just beginning for the masses. But also because of demographics.

Those retirees began dying in droves during the 70s and early eighties, because at the time, they lived on average to late 60s.
The Politicians injected free money (QE) which because of lack of investment opportunities went into Gold and other hard assets at a time of rising oil demand, and the oil price had to rise. Of course, at the time, demand for middle-eastern oil was rising, partly due to greater usage, but also, for political reasons too, because they had rising populations back home… (Just as now) – Mubarak, Ghadaffi, Saddam Hussein and Khomeini, all came to power during that period.

The BIG change between the 1970’s and now is that people are living longer – on average to 81 for a white American woman, and slightly less for a white man. Black women and men live slightly less than both white men and women on the average.  So, the 75 million American baby-boomers (and a similar number of Europeans) will be dying off come the 2020-2030 period. THAT will probably mean MORE QE to counteract it, and so I expect to see the blow off phase in precious metals – sometime after 2018.

Reasons to be Cheerful – Part 3

The mainstream media announced the other day, that Bitcoin, which I have written about previously, had suffered a serious decline in price because the Chinese authorities, had attacked it and made its trading illegal. People can still use it to pay for goods and services, but it therefore becomes like any other digital currency. In some Western European states, Eg: Germany, taxation is payable at the VAT rate as for any other currency. Bitcoin therefore is losing a little of its lustre.

As I have written about elsewhere, this was inevitable as it is seen as a threat to the Central Bankers and the politician’s power, and in authoritarian states, it is likely that any threat to the power of the politicians and their power over the economy will be challenged, so we may see further attempts by central authorities elsewhere, to weaken its new found status. Bitcoin prices have fallen from over $900 to $500 as a result.

So, where does this leave us…

Anyone concerned at the deficiencies of crypto-currencies, especially in an inflationary environment will undoubtedly have to follow the sheeple into the stock-markets of the world to maintain or grow their savings. However, there will be many of those very same persons who will be tempted back into precious metals, works of art, and other collectibles, such as stamps, coins, rare vintage cars, fine wines and period furniture.
All these items will help preserve and increase wealth for those with the know how, or access to it.

We shall see when the price inflation will finally arrive, but it won’t be pretty when it does…

And, when it happens… GOD it will be scary – Weimar Republic territory I suspect… (See the book – “When Money Dies” by Adam Fergusson) or “The Coming Battle” by M. W. Walbert and Me – for the time being available for free.

There have been at least 6 countries that have suffered economic collapses – France during the 1760s, Germany and Austria in the post WW1 period.  Argentina during the 1980s and 90s, Yugoslavia in the early 1990s, Zimbabwe in the early 2000s and the whole of the Middle-East in the last few years. And we all know where that led.

Until next time…

Dinosaurs, Debt and Destruction

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I’ve been thinking about the World Debt problem for some days, and searching for a theme to make it lively. I couldn’t see how the citizens of the world can get out from under this pile of debt we’re leaving our children… (Mine’s 19 by the way and a Bio-Chemistry student at Manchester University and loving it. – Hi Rachel?)

Anyway, we have a US. economy, with a national debt of close to $17 trillion, a European one with €14 trillion, a British one with over £1trillion, and a Japanese debt to economy ratio of 270% of GDP by the end of next year… (And the Chinese?)

When will politicians realise you can’t steal from the future, you can only borrow it. And the day you start to pay it back you shrink the economy.

Every hundred years or so, we need to clear away this debt so that we can get out from under it, and that is usually done by a war…

The Central Bankers have for a hundred years been building this ship, and the ship is now getting so big the ocean won’t be big enough to sail it.

Banks – Too Big to Fail?

So, the “Too Big to Fail” Banks, who get their blood money, from the Fed… They remind me of Tyrannosaurus Rex, Gigantosaurus, and the great plant-eaters the Brontosaurus and Diplodocus… They must have felt quite secure in their bigger than you world, just days before the sky darkened, and flamed, and a meteor hit the boggy marshland that is now beneath the Gulf of Mexico, throwing up mud, plants, rock dust and huge plumes of water and spume. Over the days that followed, the dust encircled the globe, and the planet cooled.

The day that changed the world, and the world view.

The Tidal wave probably spread to the shores of Africa, Europe, and beyond. The entrance to the Mediterranean was opened and washed away sending the wave as far as present day Israel and Egypt, and perhaps even through the straits of the Bosphorus to the Black Sea. and even the Persian Gulf.

In the space of three days or less, the planet probably cooled by 5-10 degrees, and the world had changed irrevocably. Plants died from lack of sun, rain was acidic, and the mammals scurrying beneath their feet, who were warm blooded took their opportunity as ever larger dinosaurs succumbed to the devastation, providing a veritable feast of the carcasses now rotting in the moisture laden atmosphere.

Over the next decades the air cleared, and new plants and animals emerged to take the place of the great lizards.

Sometime in the next 10-30 years we are going to see a similar event, and the TBTF Banks, will be like T-Rex and the Brontosaurs.

Smaller, nimbler, perhaps warmer creatures will grow up and replace the cold-blooded dinosaurs of the Industrial Revolution. The Internet, and the Internet of things will replace them, and a new currency system will have emerged.

Is Bitcoin, Litecoin and the others the financial equivalent of the mammals of 65 million years ago. Will these crypto-currencies, and precious metals replace the Dollar, just as the guinea-pig replaced the Tyrannosaurs. And on that day, the true value of these 5,000 year old monies will be known once again?

What the Fed has done for us?

A hundred years ago, an ounce of Gold bought a Savile Row suit, and today, it still does. A Pound weight of Sterling silver the same. Now that British Pound Sterling, will not buy a loaf of bread, and a carton of milk. THAT’s what the Fed and the politicians have done for us…

But over the next 5-20 years, that pound weight of Sterling Silver will once again buy that suit, and the wardrobe to put a dozen others in. As we speak, the ratio of Silver to Gold coming out of the ground is 9:1… Historically it was 16:1, and yet if we check the current prices… Gold today, is circa $1213.22, and Silver is $19.04 – a 63:1 ratio.

50 years ago, the amount of above ground Silver was 5 times that of Gold, today the reverse is true. In my lifetime, Silver will be gone from metals warehouses, and the only silver will be available from mines and scrap. To encourage more mining, the price will need to go a LOT higher. Those who have even just a little will be the “Nouveau Riche”.

And miners with large reserves and resources will be probably FTSE 100 companies. Companies such as Arian Silver a British AIM registered company, but traded also on the Toronto Stock Exchange has that and will be tens, possibly 20 times their current price…

(Incidentally that is not a recommendation – but an invitation to do your due diligence – Arian Silver)

But with 50 million ounces proven, and another 80+ million probable, and who knows how many ounces still to discover, the prospects are at least positive, given the current price point of silver. No other substance on the planet apart from oil has so many uses- 10,000 and counting. And Silver is irreplaceable in so many of those applications. Silver is my number one long-term investment. Eric Sprott a multi-billionaire is reputedly 70% in on silver and silver miners, and he knows Arian Silver well, which is why he owns 14% of the company.

And if you’d like some Silver… Just in case… Liberty Silver

Until next time…

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