Follow Me on Twitter

I was asked if there was an easy way to know when I post something. The answer is yes. I have a twitter account that when something gets posted a tweet is sent. You can find me directly on the twitter website or can go to my section on gold shark and click on follow me.

Hope that helps.

From someone who is more tech savvy than I am:

For everyone else's quick access, the Twitter page is: http://twitter.com/kasparscomments

OR as they say on Twitter:

@kasparscomments

Blog Posts - Where You Can Find Me

Hey all. There are some major changes occurring as far as blog posts go. I have started writing for various websites. Instead of random blog posts (which I still may do occasionally), I will be publishing more regular content that will be picked up by these websites:

Goldshark

Ark Fund Capital Management

Dollar Collapse

321 Gold

Business Insider

Seeking Alpha

Goldshark, Business Insider, and Ark Fund Capital will have everything I publish. The other websites will publish off and on. There are also five other websites pending that may pick up some of my content.

Also - the goal is to become much more regular with writeups once a day Monday through Friday.

I may still post something from here from time to time but it will be inconsistent. Hope to see you on one of the other websites.

Utah Law - Pay your tax in gold or silver??

This is incredible. The Utah house is going to vote next week on allowing US federal government issued gold and silver coins. This is monumental!!!

From foxnews.

The Utah House was to vote as early as Thursday on legislation that would recognize gold and silver coins issued by the federal government as legal currency in the state. The coins would not replace the current paper currency but would be used and accepted voluntarily as an alternative.

The legislation, which has 12 co-sponsors, would let Utahans pay their taxes with gold and also calls for a committee to study alternative currencies for the state. It would also exempt the sale of gold from the state capital gains tax.

So if you had an American silver eagle or American gold eagle it would be considered legal tender in Utah. This would open up all sorts of opportunities for businesses to transact in gold also. This is truly amazing and I am speechless.

In this same article it mentions one of the stupdiest comments Bernanke has ever utterred (and he has said some stupid stupid things over the years).

Bernanke also said that gold couldn't return as the world standard because there's not enough gold in the world to effectively support the U.S. money supply.

Think about that for a moment. Idiotic. It isn't based on amount. It is a function of price. So you adjust the price of gold to make the value of gold to equal the money supply.

Utah apparently isn't the only state to be considering such a move.

Twelve other states have offered similar proposals: Georgia, Montana, Missouri, Colorado, Indiana, Iowa, New Hampshire, South Carolina, Tennessee, Washington, Vermont and Oklahoma.

Gold and silver are quickly moving back to currency status.

Marc Faber - We are Doomed - Buy Gold

Marc Faber recently did an interview with McAlvany Financial Group touching on familiar topics to many of you. Over the weekend I was looking at the world and feeling especially gloomy. However bad it could have been in 2008 and 2009 the government has been able to successfully buy a couple of years and make the inevitable that much worse. Faber touches on some of the investment themes that I have talked about in the past. You can read the entire transcript here. A few highlights.

No surprise here. I think it is obvious. It will happen over multiple years but I think the comparison to a computer rebooting is very accurate. The government, Fed, and Wall St have run the system into the ground and it will have to be completely scraped and reboot will have to occur. And as Faber correctly points out it always ends in war.

I think we are all doomed. I think what will happen is that we are in the midst of a kind of a crack-up boom that is not sustainable, that eventually the economy will deteriorate, that there will be more money-printing, and then you have inflation, and a poor economy, an extreme form of stagflation, and, eventually, in that situation, countries go to war, and, as a whole, derivatives, the market, and everything will collapse, and like a computer when it crashes, you will have to reboot it.

One thing Faber did not mention in this interview that I have heard him say recently is that regardless if your bullish or bearish or a deflationist or inflationist, you should be long term bullish on oil. Because at this point all roads lead to war and oil will move strongly when that happens. Of course he is talking over years and so oil could go down 70% just like in 2008 before rallying again.

And than on gold.

That is why I am advising people to accumulate gold. Can gold have a correction? Yes, there has been a little bit too much euphoria about gold, and we may have a correction, but I do not think we are in a bubble in the price of gold. In fact, I could make a case that gold, at this level of $1400 an ounce, is cheaper than in 1999, when I look at the unfunded liability growth of the U.S., at the credit growth of the U.S., and at the household growth, and at the money printing, and at all the wealth creation that happens in China and Russia.

Finally this is what I think is one of the surest bets in finance over the next decade. How it happens I have no idea. Maybe it is 10k like Faber mentions or maybe the Dow goes to 5,000 or something lower or higher. Either way it makes perfect sense.

In a money-printing environment, it is very difficult to know what is actually cheap and what is expensive. Is the price of wheat high, or is it low? Inflation-adjusted, it is extremely low. In nominal terms, it is relatively high. I believe that, in March 2009 when the S&P was at 666, the market was actually much cheaper than is generally perceived, because of the money-printing, and I do not anticipate that we will see 666 on the S&P again, in nominal terms.

In other words, they are going to print so much money that the S&P could be at, perhaps, 2000, but in real terms, it could be down below the lows of March 6, 2009. Maybe in gold terms, we could one day reach a ratio of Dow Jones to gold of 1-to-1, as we were in 1980. In other words, the Dow could be perhaps at 10,000 or 12,000, and gold could be at the same level.

JP Morgan Makes Big Move in Gold Market - Someday a Financial Trap?

One of the biggest problems in the last few decades with gold is that you couldn't use it as collateral in normal every day finance transactions. So besides the fact it doesn't earn an income stream or pay dividends, it was also a dead asset in that it couldn't be used to leverage other assets. Well all that is changing.

From JP Morgan Press Release:

J.P. Morgan Collateral Management Offers Automated Use of Gold
First tri-party agent to accept gold

London, 7 February 2011 - J.P. Morgan today announced it is the only tri-party collateral manager to accept physical gold as collateral to satisfy securities lending and repo obligations with counterparties. This comes as more clients look to use gold as a hedge against inflation and to post as collateral.

"The ability to finance and leverage the broadest range of asset classes is important to our clients. Many clients are holding gold on their balance sheets as an inflation hedge and are looking to make these assets work for them as collateral," said John Rivett, Collateral Management Executive, J.P. Morgan Worldwide Securities Services. "By combining our collateral management and vaulting capabilities, we provide clients with greater flexibility in how they mobilise collateral."

The automated use of gold in collateral management is introduced under J.P. Morgan's Worldwide Securities Services global collateral engine initiative. This initiative enables clients to mobilize collateral inventories across multiple geographies and trading activities, regardless of the underlying obligation, to extract maximum value and manage risk.

The firm expects to accept additional precious metals and commodities as collateral later in the year.

This is a huge move by JP Morgan. They announced they will accept as collateral physical gold to satisfy securities lending and repo obligations with counterparties. Over time this seems to be a game changer for the gold market and will allow for a potential large gold bubble down the road. It is also interesting because if we do someday have a massive debt implosion and the system collapses this gives the government (i.e. JP Morgan) a way to repo the US gold holdings held by private investors. It has the potential to be a very keen laid trap. I don't want to imply there is a conscious effort of a keen trap being laid. Just that the trap is being created consciously or unconsciously. Used correctly this is very important for money management and opens up all sorts of possible avenues, but what at the beginning wise men do fools will do at the end. As we have learned rules can change overnight. Someday down the road if the system were to collapse and most of the gold is leveraged and used in various derivatives and swaps etc etc it could very easily end up where the banks and hence the government will end up with most of the gold in the world by taking possession of the collateral. They don't have to consciously scheme at all. It just falls into place. The government doesn't have to look bad confiscating anything because it was part of the collateral arrangement.

Who knows what gold does in the short term. It looks sort of weak technically currently but who knows. Long term this creates the dynamics needed for a big gold bubble. It makes gold alot less useless. I can still own gold and leverage it to own income producing assets.

Tomorrow - An Important Day for the Markets

I haven't talked about the markets in a long time. We are on a runaway train. It doesn't matter much what any data says. I think the next two market days determine whether the trains shifts into a higher gear or gets derailed. Right now nothing is able to stop this market. It seems we are about to break upside resistance where the market would quickly progress higher towards the 1400 range in S&P 500. We have already broek 1300 which is important but we cant get beyond 1310 to 1315 without really leaving 1300 far behind.

It seems shocking (I guess it really shouldn't be) how the market has ignored this Egypt thing. Tomorrow into Monday I think is really important on whether that becomes a stock market issue or not in the short term. Muslim Friday's prayers are tomorrow and I would expect that to get things heated again. Mubarak is picking up his rhetoric that he wont quit before September despite world leaders saying he needs to quit now. We are in the sweet spot for this to become an issue or prove it is a non issue.

Jobs number comes out tomorrow also. I think the only way it is an issue is if it is really strong. In that case the market probably falls in this warped world since Wall St needs liquidity, not positive economic results for Americans.

Republicans - Already a Failure

That didn't take long. From Bloomberg

House Budget Committee Chairman Paul Ryan announced plans today to cut government spending by $35 billion from last year’s levels as Republicans backed away from campaign promises to slash expenditures more deeply.

and

The government’s deficit is projected to reach $1.5 trillion this year.

and

Republicans promised in their “Pledge to America” issued during the 2010 midterm campaign to roll back non-security discretionary spending to pre-Obama 2008 levels, which would have saved $100 billion compared to what the administration proposed last year in its budget request. Republicans scaled back their plans largely because the government’s fiscal year is almost half over.

The plan amounts to a rejection of calls by the Republican Study Committee, a bloc of self-described fiscal conservatives who had demanded party leaders stick to plans to cut $100 billion this fiscal year. Democrats said the scaled-back cuts still went too far.

$35 billion cut? We are running a 1.5 trillion deficit, total appropriations budget is 1.055 trillion, the total government budget is 3.7 trillion and the Republicans are declaring a victory on 35 billion cut? That is a freaking rounding error!!!

The tea partiers have already been marginalized by the establishment. They are great freinds of the Republicans when it is popular to be so and put in the corner when what they stand for actually becomes an issue. While we don't need Egypt it will take some massive protests to really get things changing.

Billy Walters - Gambling or Maybe Investing Legend?

CBS had a great 60 minutes piece on Billy Walters - the legendary sports betting individual in Vegas. While watching the piece, it struck me how Vegas has turned into a better "game" than Wall St. I hate to "gamble" but the word gamble needs to be better defined. Gamble in my mind means pure chance where a player is guaranteed over the long term to lose. The probabilities are guaranteed over the long term to work against the player. Playing blackjack is a gamble. Craps, lottery tickets, slot machines is gambling. Sports betting and Texas hold em may or may not be gambling. Gambling one does because one has to much money, one has gambling issues, or the pleasure one receives over the long term from the fun involved is valued higher than the money lost so it makes sense on an individual economical basis.

Unfortunately, Wall St. is turning more and more into a gamble. The reason? Because Wall St. sets the rules. If Wall St. still jacks up, they than change the rules. They also have a "mob boss" - the U.S. government, helping enforce these changes. Billy Walters has found a system and has worked within the rules of the system to win and make money. The rules are not being changed on him mid bets.

One other interesting note. Walters admits there are shady characters in Vegas but per person he has met many more shady individuals connected to Wall Street than Vegas.

Anyway - very interesting video below. There are actually several bonus videos at the CBS website.

Hussman - Best December Read Award

I thought the piece below was the best thing I read this month. It isn't based on technicals or speculation. Just long term valuation standards and facts. One thing that should have become apparent in 2010 is that there may be absolute truth, but at least in the financial world in the short term, truth is relative.

I encourage you read the entire Hussman piece.

Hope every has a great New Year!!

Why are Treasury yields rising despite hundreds of billions of Treasury purchases by the Federal Reserve? There are two possibilities in the current debate. One is that the Fed's policy of purchasing Treasuries has scared the willies out of the bond market on fears of higher inflation, and that the policy is a failure. The other is that the policy has been such a success at boosting the prospects for economic growth that interest rates are rising on anticipation of a better economy.

From our standpoint, neither of these explanations hold much water. On the inflation front, the recent bond selloff has hit TIPS prices as well as straight Treasuries, which isn't something you'd expect to see if inflation expectations were being destabilized. And although precious metals and other commodity prices have been pressed higher, the commodity run can be more accurately traced to negative real interest rates at the short-end of the maturity curve, coupled with a downward trend in long-term yields that has now reversed dramatically (more on that below). I've long argued that unproductive government spending and profligate fiscal policy are ultimately inflationary (regardless of how the spending is financed, and particularly if it is monetized), but I continue to view persistent inflation as a long-term, not near-term concern. A rise in T-bill yields of more than 15-25 basis points would change that assessment. Until then, velocity can be expected to collapse in direct proportion to changes in the monetary base, with little impact on prices.

As for the notion that the Fed's targeted Treasury purchases have directly aided the economy, the argument requires bizarre logical gymnastics. It demands one to believe that although the purchases were intended to stimulate the economy by lowering rates, they have been successful without lowering them, and in fact by raising them, because the expectation of lower rates was so stimulative that it caused rates to rise, so that the higher rates can be taken as evidence that lowering rates without lowering them was a success. Oh, brother.

And this is the hard part - basically if you have managed money avoiding the ugly you have gotten killed. You needed to to own trash.

The performance of these 133 factor portfolios over the past 13 weeks offers tremendous insight into the extent to which the Federal Reserve has encouraged speculative risk. Investors are chasing stocks with the greatest exposure to market fluctuations, commodities, credit risk, small-cap risk and volatility. Conversely, securities demonstrating reasonable valuation, stability, quality, or payout have been virtually abandoned by investors. Here is a sampling:

FACTOR
FACTOR GROUPING
13-WEEK RETURN

Market Beta
Risk
17.80%

Raw Materials Beta
Commodity Sensitivity
17.47%

Credit Spread Beta
Macro Economic Sensitivity
14.66%

Small vs. Large Beta
Style Sensitivity
12.54%

Silver Beta
Commodity Sensitivity
10.87%

Sigma Risk (Volatility)
Risk
10.73%

Operating Cash Flow Yield
Valuation
-4.02%

EPS Stability
Quality
-5.56%

Value vs. Growth Beta
Style Sensitivity
-5.87%

Return on Invested Capital
Profitability
-6.61%

Dividend Yield
Valuation
-9.34%

10-Year T-Note Beta
Macro Economic Sensitivity
-9.55%

High vs. Low Quality Beta
Style Sensitivity
-15.70%

He writes at length on valuation of the market.

Even if we assume a future dividend growth rate of 6.7%, which is the fastest growth rate observed over any 25-year span during the past century (and again, includes the impact of share repurchases), the S&P 500 would currently have to stand at 748 in order to be priced to achieve long-term total returns of 10% annually. Of course, with the S&P 500 at about 1256 despite a contraction in dividends over the past few years, this analysis would imply that fair value is again about 40% below present levels. It would be nice to be able to rule that conclusion out.

United Kingdom Prepares for Massive Job Cuts

As riots and protests were occurring across Europe today (incredible the lack of coverage by the U.S. media) the Guardian is reporting that Brits are preparing for massive job cuts.

From the Guardian:

At least 100,000 public servants will receive grim news over the Christmas holidays or soon after as councils, police forces and other public services race to meet a deadline of 1 January to formally announce job cuts.

An analysis of local authority documents reveals that the number of council redundancies directly resulting from the coalition's austerity measures is expected to break the 100,000 mark by early in the new year, fuelled by the swingeing cuts announced this week to councils' budgets and the pressure to start cutting before the new financial year in April.

This comes on top of the 33,000 drop in public sector jobs over the three months to October that was detailed yesterday in official unemployment data and is likely to lead to a torrent of "at risk" warning letters hitting doormats across the country in the next few weeks.

100,000 may not sound like a huge number (or maybe it does) when you first hear it but lets compare apples to applies. The population of the United Kingdom is 61.8 million. The population of the United States is 307 million or 4.96x bigger. So that is the equivalent to the United States government announcing 496,000 job losses in basically one day. Throw in the 33,000 government jobs already lost in the last couple of months which is the equivalent of 164,000 U.S. jobs and the United Kingdom is announcing the equivalent of 660,000 United States jobs losses in just a couple of months. That is a massive number and is akin to the United States losing 600k jobs a month at the depth of the Great Recession.

No wonder there were riots all over Europe today. If you did not see this video it is worth the watch. It is from Greece today.



This is the beginning, not the end. Why? Simply nothing at the foundational level has yet to be fixed in the United States or in Europe.