My Inaugural Podcast: Jackson Hole and Gold

So I finally decided to record a podcast.  It is something I have contemplated for a while and I finally got around to it.  The reason why I did it today is probably a combination of the boredom in the markets but also tomorrow’s Jackson Hole spectacle.  Viewer feedback would be really helpful as I would want to know if people find the podcast format useful and enjoyable.

Thanks!
Mike

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South Africa: Striking Miners Charged with Colleagues’ Murder Rather than the Police

This is pretty unbelievable.  So as most of you are probably aware, about two weeks ago there was a confrontation between striking platinum mine workers and the police in South Africa.  The incident ended when police opened fire on the workers, killing 34 and injuring 78.  Now here is where it gets interesting.  South African prosecutors are apparently charging 270 of the striking workers with murder!  Meanwhile, the police who actually killed them have yet to be charged.  The Telegraph informs us that:

In a situation where there are suspects that confront members of the South African Police Service (SAPS) and a shooting takes place resulting in the fatalities of either SAPS or the suspects, those who get arrested, irrespective of whether they shot police members or the police shot them, are charged with murder.

This sort of thing will be coming to America soon unless we stop being little pathetic sheeple and start being strong, proud and brave men and women.

Here is the article from USA Today on this topic.

In Liberty,
Mike

CNBC Poll: 69% of Americans Support the Gold Standard

Do I really think that any mainstream politician would ever actually move us toward the gold standard?  Not a chance.  It doesn’t matter.  As I mentioned the other day, the mere fact that Romney was forced to consider creating a commission to examine the return to gold tells us all we need to know.  The populace is becoming increasingly informed of the total scam that the current monetary system is and they are looking for answers.  My personal belief is that a gold standard isn’t ideal either.  I think we need to move away from centralized control of money completely.  There is absolutely no reason why a small group of men should have the monopoly power to create money and distribute it with the defense of an army. That is feudalism.  Monetary “evolution” in my mind is directly related to a movement toward human beings and businesses using whatever currency they want.  It can be gold, it can be silver, it can be bitcoins, or it can be something else.  That is not for me to decide.  It is for the market to choose.  That is freedom.

My guess is that when the current system dies, gold and silver will soar to unimaginable heights in government issued fiat currencies terms, and out of the ashes countless competing currencies will arise.  This will be a good thing.  Out of chaos let’s get our freedom back and never allow the criminal elite to use the chaos for dictatorship.  The choice is ours so we need to start working on these concepts now and moving more toward alternative currencies sooner rather than later.

That is why I think the CNBC poll is so important.  People know something is wrong.  This presents a great opportunity.

Read the Benzinga article on the poll here.

In Liberty,
Mike

28,000 “Cash For Gold” Outlets in Italy as Serfs are Forced to Sell

A couple of weeks ago I wrote about how the Portuguese citizenry was being forced to sell its gold in order to eat.  It seems that the Italians have now joined this illustrious club.  I mean what do you expect when you allow Goldman Sachs to impose technocrat dictator Mario “Three Card” Monti as your political leader?  Here are some excerpts from an article in The Globe and Mail:

Times are now so tough that Valerio Novelli, a ticket inspector on Rome’s buses, is planning to sell his old gold teeth.

“I can’t get to the end of the month without running up debts,” said Mr. Novelli, 56, who has to support an ex-wife and daughter. “I know I won’t get much, but I need the money.”

In a country suffering from economic crisis, buying gold off desperate people has become one of the few boom industries.

“Since I was a child I remember that gold was given as a gift on various occasions and people used to say: ‘Put it aside’,” said Ivana Ciabatti, who represents gold– and silversmiths at employers’ lobby Confindustria.

“We used to laugh at it, but they turned out to be right. Many families are surviving thanks to this gold.”

So people are barely surviving based on the gold passed down from generation to generation, yet the mainstream media here in the U.S. continues to mock gold constantly.  Got it.  How about this last line from the article:

The pawnbrokers, by contrast, can hardly keep up with business. They normally have the gold quickly melted down and sent abroad, making it one of Italy’s fastest growing exports. Official gold sales to Switzerland leaped 65 per cent last year to 120 tonnes, up from 73 tonnes in 2010 and 64 tonnes in 2009.

That’s not just gold being exported, that it wealth being exported.  China says thanks.  At least you protected your bankster class from taking a hit on their bond portfolios.

Meanwhile, this whole theme fits in perfectly with an article from The Telegraph yesterday with the fitting title “Unilever Sees ‘Return to Poverty’ in Europe.”  That article begins with:

Aug. 27 (Telegraph) — Unilever will adopt marketing strategies used in developing countries in order to drive future growth in Europe.

Then we find out that Unilever will market to Europeans like they do to Indonesians:

“In Indonesia, we sell individual packs of shampoo 2 to 3 cents and still make decent money,” said Mr Zijderveld. “We know how to do that, but in Europe we have forgotten in the years before the crisis.”

Once again, at least the banksters got bailed out at 100 cents on the dollar.  No wonder the elites laugh at the sheeple.

Read The Globe and Mail article here.

Read The Telegraph article here.

In Liberty,
Mike

NPR Reporter Quits to Focus on Actual Journalism

Great short story here from Politico about Andrea Seabrook and her decision to leave NPR after 14 years in order to actually do some real journalism.  Most recently, Andrea was covering Washington D.C. and as she puts it:

“I realized that there is a part of covering Congress, if you’re doing daily coverage, that is actually sort of colluding with the politicians themselves because so much of what I was doing was actually recording and playing what they say or repeating what they say,” Seabrook told POLITICO. “And I feel like the real story of Congress right now is very much removed from any of that, from the sort of theater of the policy debate in Congress, and it has become such a complete theater that none of it is real. … I feel like I am, as a reporter in the Capitol, lied to every day, all day. There is so little genuine discussion going on with the reporters. … To me, as a reporter, everything is spin.”

People are waking up.  There is no doubt about it.  The media world is changing fast.  We are rapidly approaching the tipping point where alternative media completely takes over from the mainstream dinosaur propaganda media that nobody uses any longer except out of sheer laziness or confounding ignorance.  This story is a great follow up to the NY Times article where they basically admit mainstream journalism has devolved into nothing more than censored propaganda.
I think there is no better way to end this post than one last quote from Andrea:

“There’s a lot of great work being done,” said Seabrook. “I think the problem is the Congress itself. And we’re all in the same positions, scrambling to figure out how the hell to cover these a*sholes.”Full article from Politico here.

In Liberty,
Mike

Back to 19th Century Living in NYC: Bloomberg Proposes “Tenement Sized” Apartments for $2K a Month

This story is a bit old so I apologize if you have already seen it.  I somehow missed this when it came out, but it came across my radar in the last couple of days and I think it is significant enough to highlight.  Back in February, 2011 I wrote a piece called “Serf Size Me” and in it I predicted:

Sizes are about to shrink dramatically and prices will go up at the same time.  Food quality will probably decrease as well, which is hard to imagine considering the crap that is sold as food every day.  In any event, I have a suggestion for McDonald’s.  They should just teach us Americans to accept our indentured servitude to the financial oligarchs and roll out a “Serf Size” menu.  People will get to the acceptance stage that much faster as they say, “serf size me!” and then walk away with three fries and a five ounce soda.

Well anyone with a pulse and a budget understands all too well how accurate this prediction has been.  What I find incredibly interesting is Mayor Michael Bloomberg’s latest proposal to construct “micro units,” which are basically tenement sized apartments between 275-300 square feet that will rent for $2,000 a month!  Think I am exaggerating about these being tenement sized?  Well just take these quotes from a CNN article on it:

The pilot units will be required to fill at least 75% of the building. They’ll have kitchens and bathrooms, but are far smaller than current city minimums of 450 square feet.

“New York City’s housing codes have not kept up with its changing population,” the mayor’s press release said.

What a joke.  How about this from a Huffington Post article on the topic:

A typical mid-19th century tenement apartment on Manhattan’s Lower East Side might have been larger than one of the micro-units, measuring 325 square feet, but would have typically housed families with multiple children. The micro-units are to be leased only to one- or two-person households.

I’m sorry, but poor immigrants didn’t want to shove their entire families into these tiny spaces back then, they did it out of necessity.  How long will it really be before single people can’t afford $2,000 a month for these rat holes and are forced to pile in more people?  Not long would be my guess.  The key point I am making here is that this is just further evidence of the tremendous standard of living collapse occurring in the United States today, which is being intentionally covered up by the political and financial oligarchy via manipulated statistics and sophisticated propaganda.  These apartments are merely evidence to me that this trend is only going to accelerate in the months and years ahead.  The Sequel to Gangs of New York will be filmed in 2015, staring Michael Bloomberg as Boss Tweed.

Meanwhile, still not a single bankster in jail and the big banks are bigger that before the crisis. Mission Accomplished!

Read the CNN article here.

Read the Huffington Post article here.

In Liberty,
Mike

The NSA is Completely and Totally Out of Control…Very Important Video

“They wanted to highly classify the extremely impeachable crimes they were committing.”
– William Binney (NSA Whistleblower; worked there 32 years before resigning in disgust)

What the NSA has become since 9/11 is a sprawling Big Brother spy network aimed directly at the American people.  In this powerful interview, documentary filmmaker Laura Poitras talks with William Binney about the emerging police state in America.  Binney discusses how programs he had helped develop to gather intelligence on foreign enemies was suddenly, and to his shock, turned around on the American public without their knowledge or consent.  He resigned from the NSA due to the unconstitutionality and immorality of this turn of events.  Mr. William Binney is an American hero of the highest order.  He could have just resigned and kept quiet like so many cowards out there most certainly have done.  Please watch this video and pass it along to everyone you know.  The key thing here is that this is being done TO us, behind the scenes, with ZERO public debate.

Watch it here.

In Liberty,
Mike

The Most Important Chart in the World

Fill your bowl to the brim and it will spill.  Keep sharpening your knife and it will blunt.  Chase after money and security and your heart will never unclench.  Care about people’s approval and you will be their prisoner.  Do your work, then step back.  The only path to serenity.
– Tao Te Ching

It is not the consciousness of men that determines their being, but, on the contrary, their social being that determines their consciousness.
–  Karl Marx

Keep away from people who try to belittle your ambitions. Small people always do that, the really great make you feel great too
–  Mark Twain

The Most Important Chart in the World
Back in my Bernstein days, I never really took a large amount of presentation materials to most of my meetings.  However, there was one chart that I always printed out and brought with me and I called it “The Most Important Chart in the World.”  It still is.  The chart I am referring to is the ratio of the Dow Jones Industrial Average: The Gold Price.  In a nutshell, charting this ratio demonstrates the “real” return on stocks adjusted for inflation or currency debasement.  As we all know, the Zimbabwe stock market essentially went up to infinity during their hyperinflation but did anyone get rich from that?  Of course not, the shares were denominated in a currency that was on its way to worthlessness.  At the moment, with many U.S. stock indices hitting new post-2008 highs there seems to be a general view that stocks as an asset class will do well in an inflationary environment.  As a result, whenever there is actually QE or even the mention of the potential resumption of Fed balance sheet expansion there is a rally in equity prices.  In fact, I think the entire investor class in the U.S. has been lulled into a sense of sleep and complacency at the moment.  There are two things I want to point out to people when they are considering whether to increase exposure to equities broadly or not.

1.  Allocation of Portfolios from the BRICS and Europe:  When you look at how well U.S. Treasuries and German Bunds have done this year, it becomes pretty clear that investors have shifted massive amounts of bond capital away from the formerly high growing areas of the world (that are now in serious collapse) into those nations perceived as “safe havens.”  While Germany doesn’t have its own currency, the U.S. obviously does and given concerns surrounding a Euro breakup and the extreme difficulties in the Chinese and Indian economies, many investors have decided the dollar is the best house in a bad neighborhood, at least temporarily.  This has led to a flight to U.S. equities generally, but also specifically into large cap U.S. centric names with dividends.  This is THE crowded trade of 2012 and three prime examples are Wal-Mart (WMT, +22% YTD), Target (TGT, +26% YTD), and Home Depot (HD, +36% YTD).  If you ask me, this trade is extremely long in the tooth.

2.  Strong Performance Concentrated in a Few Stocks:  I have hit on this theme many times before, but the key point is that if you weren’t in the right names this year there is a good chance you have underperformed the market significantly.  While you can say that this is normally the case, this year has been far more extreme as is evidenced by reports of horrible hedge fund performance this year relative to the benchmarks.  Apple (AAPL), of course, is the prime example.  This giant now sports a market cap of $623 billion and is up 65% YTD.

An Inflation Hedge?
The point I am attempting to make above is that those are the two main reasons for U.S. stock outperformance this year.  More than anything else, it has been about reallocation of global portfolios away from former high flying regions into those regions that are deemed safer.  I believe this has been exacerbated by the fact that the relative performance of the U.S. economy versus the BRICs caught a lot of people off guard.  That being said, I also think that the complacency that exists today is partly a function of investors’ belief that stocks will provide a good hedge against rising inflation and so why sell.  After all, if the Bernank is going to print at the first sign of weakness I should be sitting pretty with my stocks.  However, is this a correct train of thought?

My view, and one that was borne out in the last big inflationary period in the 1970s, is that high inflation is not good for stocks.  Not even in nominal terms.  PE ratios shrink as there is little real investment, confidence is shattered and the outlook becomes cloudy.  Some companies have pricing power but many do not.

Here is the chart of the SPX from 1970-1980.

See that.  Nothing done.  That’s ten years of zero, but with some really nice tradable swings.  The reason I bring all this up now is because we are likely to see a significant upswing in inflation as we head into 4Q.  Gasoline prices have been on a tear as of late and are now showing +9% on a year-over-year basis.  Recall that prices at the pump only adjust with a lag, so this will be impacting people for weeks to come.  The bigger issue though will be food.  Largely as a result of the severe drought in the U.S., corn and wheat prices have jumped 50% in the past two months.  This will affect consumption one way or the other.  The reason I am really concerned with the food situation is that the lag on passing on that is even longer, so we really haven’t seen any of it yet.  Furthermore, consumer product and food companies have already utilized almost every trick in the book up until this point.  Shrinking package sizes, putting less in the same packages, etc.  So I envision a scenario coming where the food inflation will be much more overt and in your face and this will further depress psychology.  Particularly amongst the newest members of the food stamp club, who were formally part of the vanishing middle class.

So to me, stocks broadly will not provide the protection assumed by many at the end of the day.  The only way I could see it happening is if we totally destroy the value of the currency (very possible, but I do not see evidence of that trade being in effect yet).  There is one major component missing to the “dollar becoming worthless” event.  One way it could happen would be an outside force dumping dollars (treasuries) aggressively without regard for price.  The second, and more likely scenario, would be a further expansion of the Fed’s balance sheet (QE) but this time directed at the public at large.  The key thing so far has been that the Fed’s actions have really only benefitted speculators as they have borrowed cheaply and purchased assets (hence the rally in markets).  The real inflation will come once the money is handed out at the street level.  This may be coming and if it does, I don’t suspect the names that have benefited so far this year will be the stocks to be in.  Yield chasing will be shunned and inflation protection investing will be en vogue.  I would start to prepare for this eventuality.

Back to The Most Important Chart in the World
Sorry, got a little sidetracked there.  So, the key thing with the Dow/Gold chart is that it perfectly mimics the various social moods and massive secular trends that exist in the economy over very long periods of time.  It is just as effective in periods of deflation as in inflation in telling you the true story.  Let’s take a closer look and examine what it has looked like from 1920-Present.

Monthly Chart of DOW/Gold 1920-Present

What this chart shows you are secular swings in the economy.  You see how stocks ran up in real terms into the 1929 crash and then plunged versus gold.  You see how they ran up in the next great post- WW2 period into 1968 when they once again plunged versus gold.  Then you can see the great secular bull market in stocks from around 1982 to the bubble peak in 2000.  In both of the prior two periods (one deflationary and one inflationary) the DOW/GOLD ratio got down to about 1:1.  It has been my contention for many years that we will see that same ratio once again.  That would imply another roughly 80% drop in stocks to gold and I expect that this next leg is beginning now.

Dow/Gold Two Year Chart
Of course for active investors and traders, timing is important and you can have massive counter trend rallies within a larger, secular trend.  I believe we have just completed one of those.  As you can see in the chart below, the Dow/Gold ratio has just had a massive 44% rally in past year or so, but it looks as if it may have formed a serious top.  Incredibly, it is one of the biggest counter-trend rallies of the entire secular bear period for stocks since 2000, registering at around 44%.  While very painful for those who didn’t see it coming, it is no coincidence that it happened in an election year.  My sense is this chart is currently in reversal mode and I think the ratio could hit between 4-5 from the current 7.8 over the next 12-18 months.  That is a huge opportunity if I am correct.  As always, decide for yourself.

Dow/Gold Two Year Chart    

Back in Colorado
In case you are only on this email list and haven’t seen anything from me in a while, it is because I was traveling and also focusing on my blog: http://libertyblitzkrieg.com/ where I have been posting daily.  If you haven’t signed up to get the blog updates via email, it is very easy to do so on the right sidebar.  Also, I have started using twitter actively and I find it extremely effective.  You can also follow me through twitter on the right sidebar or just find me @libertyblitz

Until next time.

In Peace and Wisdom,

Mike

Bitcoin: A Way to Fight Back Against the Financial Terrorists?

Although I have followed Bitcoin over the years a bit, I am admittedly pretty ignorant on the subject.  What really caught my eye in the last couple of days was an article in Forbes detailing the fact that when the big financial institutions initiated a blockade on Wikileaks, the whistleblowing organization was still able to accept donations via Bitcoin.

From Forbes:
It used to be that people had secrets and the government was transparent; now it’s the people that lack privacy and the government has secrets. Freedom of payments is an extension of financial privacy and digital cash-like transactions without financial intermediaries become a critical piece of that foundation. Money was never intended to act as a form of identity tracking or payments restriction and this is why the option for anonymous and untraceable transactions is so vital as society moves to a world of digital currency.

To those that don’t support freedom of payments, consider this financial blockade invoked in the name of political correctness before you dismiss the inherent value of a nonpolitical unit of account and of a decentralized medium of exchange. It should be offensive to most free-minded people that you are not the final arbiter of how and where you spend your money. Bitcoin restores the balance.

I don’t think Bitcoin is THE answer.  It could be part of a solution.  Gold could do it.  Silver could do it.  They key point; however, is that in a world in which payment is increasingly digital we need more options for a medium of exchange.  Governments themselves should arguably get out of the money businesses entirely and let people and business transact with each other however they deem appropriate.

One thing that each and every one of us needs to agree on is that the ability to buy and sell certainly shouldn’t be in the hands of these TBTF (too big to fail) financial terrorist institutions.  These institutions, which have raped and pillaged this country in the last several years, shouldn’t even exist let alone have this kind of power.  The mere existence of these institutions is an insult to every single American alive today and an embarrassment to the memory of our ancestors who aggressively guarded the liberty and freedom this current generation of leaders is so willing to give away.  As Neil Barofsky, the former Special Inspector General for TARP, so eloquently put it today:

As I saw first hand while providing oversight of the bank bailouts as the Special Inspector General of the Troubled Asset Relief Program and as I detail in my recently released book Bailout, this perception was embraced by both Bush and Obama Treasury officials, who repeatedly turned away my efforts to impose conditions, restrictions and transparency on the banks. They declared such measures unnecessary because the banks “would never risk their reputations” by putting profit over the public interest.

Two years after the passage of Dodd-Frank, and in the wake of the recent proliferation of scandals involving the largest banks, many are now embracing this cinematic truth, with even the banker’s Dr. Frankenstein himself, Sandy Weil (whose Citigroup was the founding model of the megabanks of today), picking up a pitchfork and joining the growing mob of academics, regulators, former bank executives, Occupiers and Tea Partiers in calling for the monster to be torn apart.

Read the Forbes article on Bitcoin here.

Read Barofsky’s piece on the bipartisan support for the financial terrorists here.