Fannie, Freddie, The Treasury Lifts the Limits. What It Means and What to Do

The treasury came out on December 28th and lifted the limits on how much the two companies would be getting from the treasury to stay alive. The two highly bankrupt companies had a limit of $200 billion each from the treasury. This signals 2 things: The first is that the housing market is still horrendous and it will get much worse. The second is that the government is not going to let these two companies not go under just as they did not let the banks go under. We have seen how the still so bankrupt bank stocks did even though they are still largely bankrupt. My call -despite morally and intellectually disagreeing with what is going on with keeping these bankrupt companies alive- is to buy the stocks of Fannie and Freddie. When I say buy I do not mean go and buy a truck load of stock, but rather a tiny portion of your portfolio. Personally I am keeping it at approximately 3% of the money set aside for possibly buying stocks. I remind you that my main investments are gold and palladium and I recommend putting a bulk of your investments into hard assets for the long term. The fact that Treasury is willing to save these firms at any cost is yet another sign that the dollar is going to be under a lot more pressure going forward as the housing market and the economy continue to be in shambles and will get much worse and the government does not care about the dollar aparently. SO go ahead and buy a few more gold coins. You should get your hands on physical gold before it is too late. When this thing folds out, it will happen very quickly even if it takes 10 years to fold. My personal guess would be 2 to 5 years, but I can see it lasting longer. It definitely will happen though. History is on the side of it definitely happening again.

Also, do not be bothered by the recent fall in the price of the gold. It is complete illegal manipulation by the Federal Reserve and most likely NY Fed and a few big banks such as JPM and GS. They can only do it so much and for so long. If you follow the intraday trading or even the daily trading and how the paper gold market trades, you'd have to be blind not to see that there is heavy manipulation and in the longer run that is amazingly awesome for where the gold price will end once the ploy runs its course.

Federal Reserve is Short More than $1 Trillion in Paper Gold!!!!

This is the first version. More to come on this topic soon. Get your gold in physical form before it is too late.

Euro is going down = USD is not going up,and Gold should go up

Don't mix the two up folks. USD is not improving. USD is dead! Euro is going down due to the troubles in Greece and Austria. There is a huge difference. So gold going down just because USD seems to be going up relative to euro is ludicrous. Gold should be going up huge due to the problems in the eurozone. Gold is real money as is anything tangible compared to the pieces of paper that is called fiat money. Get your gold in physical form before it's too late. GOT GOLD?

NY State Joins California in Bankruptcy

Governor Paterson came out on bubble TV (CNBC) and said that NY state is practically bankrupt. In any other country with free and good media this would have been big news and the stockmarket would be down 6-7% right this moment, but not here because media does not want you to know the reality since they are owned by the same rich people who would be hurt most by these news, so they try instead to hide it so that they can pass all the hurt and pain on regular people like us eventually using the government. But don't worry the current fiat money system that is the base of all this crony capitalism is running on borrowed time and the markets will make up for not going down during the upcoming crash.

How Foreclosure Data is Manipulated

Citi decided to suspend foreclosures for 30 days. Remember this when next month we look at the data. I do agree with suspending foreclosures during the holiday season, but this trick in nature has been used over and over during this crisis to make the data look more tame. They have changed the definition of delinquency so many times (for eg. from being back in payments from 2 months to 6 months etc.) that the ulterior motive is so obvious. Housing market is terrible and only will get much worse. So enjoy.

Bubbleworld: Dubai News

So Abu Dhabi gets $10 billion bailout to cover part of the initial $26 billion that was failing out of the $60 billion that it will/might eventually fail on unless things drastically change -which they will not- or the US (most likely the Fed or Treasury's oil rich nation money management group) through printing money and illegally transferring it to Dubai saves it. By the way, the Treasury's money management group does not report to the congress on how it manages the oil rich nation money that comes from the oil rich nations buying US treasury bonds and keeping them at the US and the US Treasury managing the interest income on these bonds to cover project costs in the oil rich nations that are only given to US companies that are 'tight' with certain families such as the Bush family. Please refer to "The Confessions of an Economic Hitman" for the details on this arrangement.

The real point I want to raise here is the bubbly nature of all of this. The fall of Dubai was not a big deal according to mainstream media and a bunch of idiotic so called "economists" that are on the payroll of certain interests (so their calls are useless AND WRONG), but somehow Dubai being partially bailed out is great news. Ludicrously stupid. This is the nature of the bubble in the stocks we have currently. This is a huge bubble that will fail. Get ready to short in a big time because we will take out the lows on the S&P. US is in the worst shape of any major economy or main emerging markets. Short short short!!!!

Great Gold Piece on Zerohedge

Here is to idiots who keep saying you cannot eat gold and gold has no intrinsic value. What is the intrinsic value of a dollar I ask you. Yeah, I thought so: You've got no clues!!!! Also, can you eat dollars? Would you like some ketchup with that????

Goldman's Evil Agricultural Twin, Monsanto

Besides poisoning us with their cancerous modified gene products and other chemicals, this company uses horrendous tactics both with small farmers that go a far as threatening illegally (topics that can be seen in the famous movie Michael Clayton) and also trying to keep competition out as was recently pointed out by the article that can be reached through the link.

Paying back TARP? What About All the Guarantees, AIG Money and Other Money Received

I don't get why everyone is so obsessed with TARP which is the smallest of the money all these financial institutions such as Goldman, Bank of America, Morgan Stanley, and Citibank received. What about all the guarantees by government of all the debt these institutions issued (FDIC guarantee on their debt). What about the other hundreds of billions of dollars of guarantees especially for Citibank and Bank of America? When and how will they pay for those???? They cannot. They are still vastly insolvent. How about Goldman paying back all the money they received for the AIG failure when in fact AIG did not fail??? When will they pay any of that back?? I guess the answer is never. This is mainly because we have Timothy Geithner as the treasury secretary and we have Bernanke and his illegal Fed that should be abolished ASAP as well as a president who talked about change, but that was all BS. Nothing has changed, not even Bernanke or Geithner nor the way the corruption continues.

Jim Rogers: "The only institution in the world that doesn't expect to be audited. They must have done something wrong, must have something to hide."

Jim Rogers is amazingly speaking words of wisdom saying that the Fed should be audited and then abolished supporting Ron Paul's suggestion. He gives examples from the past when 2 other US central banks due to their similar illegal activities of the current one have been abolished and the economy has done better after they disappeared. He says "We don't need the Fed. The Fed is making our lives miserable." He points to the obvious that they must have done something wrong and that they must have something to hide that they are insisting so hard not to be audited. He points to the very simple fact that nobody has a good explanation of how auditing and getting information is a wrong thing. He says he does not see how it would affect the independence at all. He reminds us of how central bankers have not done anything successful in real life that is the practical world of investments and finance and he does not understand why people all of a sudden think these people are smart. I could not agree more with Jim Rogers. Here is the link to the Aaron Task interview.

Jim Rogers: "What Recovery? It's Getting Worse, Not Better"

We are in good company. Rogers says people who get the money from the Fed's illegal operations -he does not exactly put it that way, but that what he means- are in better shape so they think everyone is, whereas people who are not getting the money are in worse shape both because of deterioration of the economy and also are diluted as shareholders and the death of the dollar. Here is the Tech Ticker interview with Aaron Task.
Another highlight of the interview is Rogers calling Bernanke and Greenspan worst central bankers in history.

Dec 10 Jobless Claims - Things getting Worse and Worse

Initial jobless claims for week ending Dec 5 were 474,000. That is a huge number of people initially, that is for the first time, applying for help from the government. Most mainstream media is trying to spin this as a good thing that the four-week average is lower than before or that the 474,000 number has "decreased" compared to a year ago or other stupid stuff like that. Check this link for an example. This is ludicrous. It is meaningless to say this number is decreasing because that would be saying the second derivative of total joblessness is decreasing. That means joblessness is increasing at a decreasing rate. Guess what: JOBLESSNESS IS STILL INCREASING!!!!! And not at that slow a rate. There is not that much positive to be found in that. Obviously eventually it will increase at a slower rate. There are only a finite number of jobs on the world and you can't continue losing more and more jobs every week. The fact that we are still losing hundreds of thousands of jobs is a horrendous situation and a time bomb on the stock market. I am not saying the economy because the economy had no recovery whatsoever. Without jobs coming back, the stupid Wall Street bubble will end in tears again. It is unavoidable.

SOme people are trying to spin the fact that total claims have decreased. To those brainiacs I would like to point out that a lot of people's claims from the government have ran out despite the extensions to benefits. That is not a good thing and in good time it points to possible social unrest. Think before you look at the numbers and try to give it a positive spin mainstream media and CNBC especially. ALso, why on earth is Christina Romer always smiling like a pumpkin??? What's so amusing about people losing their jobs and economy being in shambles and the Fed and Treasury killing the dollar??? I don't see anything to smile about. This is the biggest circus I have ever seen.

Fed's Blatant Attack On Gold

The Federal Reserve's illegal crusade against real, legal money and honesty continues. Gold is real money and it is being looked at as a barometer for the dollar and validity of the Federal Reserve and its policies by some. This is why The Federal Reserve as has been proven by many time and time again -of course mainstream media tries to hide this fact from the people of this country- tries to manipulate gold price from showing that the dollar has been murdered by the Fed and banks like Goldman and JPM that rule it. Talking about the independence of Fed!!! It should be independent from those banks first of all rather than the people of this country and their choices and votes or democracy for that matter.

The good thing is the blatant nature of the attack of the last several days is so apparent and full of fear that you do realize it is one of the last that the Federal Reserve and the banks that rule it can muster. Soon enough all of this fail: banks will be known for what they are, insolvent, and Fed will have to be dissolved after it is shown that it is illegal or at least a lot of changes to its current structure will be made and hopefully will not be allowed to participate in illegal manipulations of gold and stock markets or bailing out of their friends at the expense of the people of this country.

Try they will to stop gold, but fail they will more successfully.

Have a nice day!

Mish Thinks Latest Job Report "Looks Fabricated"

Michael Shedlock known as Mish thinks the latest job report looks fabricated.

B of A is a Short

Bank of America is issuing $19bn of new stock and the stock is up more than 2% on the day. What on earth????? This is so crazy that puts a smile on one's face. A $139 billion market cap insolvent company issues more stock and the market-idiots or manipulators celebrate by increasing the stock price by 2%. This is like a party where blind people are serving the deaf.

This insolvent company no matter what John Paulson says (he lost his main man Pellegrini) will have to fail eventually. Just like people thought there was recovery during the great depression in 1930-1931, people are trying to portray an illusion of recovery. There isn't one. All the data point out to things getting worse and worse. This time though, dollar is losing its supremacy. Plus the system is cracking. This will end up being worse than the Great Depression. Enjoy the ride and buy gold to prepare.

Get the F*** Out!!!!!

So the number of jobless increased by "only" 11k people, huh? And the prior two months jobless numbers are revised to show a little less than reported, huh? And so stock markets should continue bubbling and gold shold be brought down by brute force, huh? GET THE F*** OUT!

First thing, jobless numbers is a sham. It is an easily manipulated model including the very famous seasonal adjustments and the birth-death adjustments. The number is derived after talking to a what is supposed to be a random selection of households. RANDOM MY A**!

Besides, nobody is talking about 824,000 negative adjustment to the total number of employed by the government that was very quietly done. That is not even mentioning how horrendous the real unemployement rate is when you considered all the problems with the way the government calculates unemployment. Just one simple example is today. The government said that joblessness increased by 11k people, but somehow unemployment rate fell from 10.2% to 10.0%. What????? Do they think we can't even do math???? What is going on is they are taking down some of the discouraged workers or workers whose benefits are finished as well out of the unemployed people number and saying they are unemployable, so they should not be included. That is just one of the gimmicks. There are many more.

Then there is the gold manipulation disgrace. Look at the chart above from goldprice.org. Gold does not/ should not trade like that. The February 2010 contract traded above 210k so far half way through the day and most of in a matter of minutes shorting gold trying to bring the price down. 210k contracts is 21 million ounces which is $25.2 billion dollars. That is nuts. That is 656 metric tones. That is 26% of the global annual production. Saying roughly 50k contracts traded in less than a minute, that would be almost 7% of global annual production of gold being shorted in less than a minute without regard for price. DOes that look normal to you on no news? What do you think is going on? Let me tell you what is going on:

Bernanke hearings are going on and he is being crushed by Senators such as Bunning, so they are trying to lie about unemployment to pump up the market, buy futures to push the stock market and short paper gold to pressure the price down, to create an illusion since Bernanke has been called on the price of gold as a lack of confidence. Since they cannot create confidence itself and since they do not even want to try to, they are trying to create the illusion of confidence. YOU ARE NOT FOOLING ANYBODY!! ALL OF THIS BS WILL FAIL AND STOCK MARKETS WILL CRASH. And crash badly they will ad gold will get to several thousand dollars.

I highly hope Bernanke goes where he deserves which is jail. Senator Bunning instead of sending him back to Princeton to ruin and brainwahs youg brains, should try to send him to ajil for the biggest heist in the history of humanity. Since we know that will not happen, I hope Bernanke gets appointed again so that when the markets crash in the next few months to two years, he is there to blame and not able to blame the newcomer. I just cannot wait!!! This will be so bloody and so bad a crash that all of the ploys and scams will be exposed as all the banks will show that they are way past bankrupt!

Senator Bunning Grills The Creature's President Bernanke

The following is a must watch for everyone. Bernanke finally gets what he deserves in words. Instead of getting a second term at the office he should be getting a second life sentence in jail.

If anybody wonders what "The Creature" is, read Eddie Griffin's "The Creature from Jekyll Island" that talks about how the Fed was created by a bunch of private bankers and how it serves its masters by creating boom-bust cycles or World Wars. It is a must read. The creation of money is in the hands of a bunch of private bankers and their friends in other industries. This is the ultimate power. This should be taken away from these people with the closure of the Fed as it is and given back to the people. The best way of doing that is a return back to the gold standard. That will prevent a lot of wars and corruption along with it.

Click here for the link to the Bunning grilling Bernanke video.

Businessweek's James Cooper and His Ridiculous Empty Articles

James C. Cooper, yet another senior economist similar to the likes of Geithner and Steve Liesmann that is one without a PhD at such a high level (actually Liesman and Geithner have no economic background whatsoever), has always written positively biased articles that either contradict itself in terms of economic knowledge -much like Hank Paulson- or just plain terrible and so obviously writing what he is told to write by ... someone, god knows who. He however outdid himself with his latest piece. Fed's independence has nothing to do with disclosing more information. How could transparency be a bad thing that would tie the Fed's hands. If the worry is the timing of the disclosure, that is an easy problem to solve. They can just disclose it a couple weeks or months later. The idea here is to check that the privately owned Fed with fat bankers on its board do not do illegal things and do not have secretive conversations (such as only Blankfein joining the AIG talks) or do other illegal manipulative activities such as bailing out Bear Stearns or any other bank, or manipulating the gold markets or stock markets. I ask you James Cooper. What is wrong with transparency. It is for free markets and anything hidden is a bad thing. Why are you all trying so hard to keep things hidden??? What are you hiding, guys????

Here is a great video from MSNBC (link from Dailybail). It si only part of the story, but good points regardless.

The Comex Scam - Short GLD and Long Physical

The following is from a good blog. It is about the delivery difficulties of Comex which we have been hearing more and more about. This is the same Comex that has been saved from failing on deliveries by the Fed and a handful other central banks before the fact that Comex does not have enough gold to back all the short contracts and the fact that it is used in the scam to manipulate the gold price down by the Fed comes out. According to the article Comex is now trying to settle in cash or deliver shares of GLD instead of the physical. If you recall my earlier article about physical gold and GLD GLD is quite questionable itself and seem to be involved in the whole gold manipulation scam that Ron Paul's bill -if successful- should bring out. An obvious trade comes to find for investors who have the patience and pockets. It is to short GLD shares and buy physical gold. As the demand for physical becomes stronger and is joined by central banks around the world that are sick of the abuse of the US dollar by a small number of corrupt corporations and politicians, the scam will come out and it will be shown that GLD does not have the gold and that should tank the price of it to zero while physical gold will go through the roof as either the scam comes out about the overall manipulation scheme or about GLD as people who are holding GLD shares rush to buy gold as will other investors when they realize how dire the situation is.

GLD is supposed to be the 6th biggest holder of physical gold. Imagine the splash it will cause when the truth comes out.

History Repeats: Dubai Is Contained -Yeah Right!

History keeps repeating itself. Just like in 2007 when the warning signs of the huge crisis that we are in and will be in for a long time was becoming apparent with the so obvious and gigantic and unmistakeably impossible to miss (but somehow they were "missed") signs of the debt crisis that will ignite the whole issue, people that should be doing things about these chose to ignore them and say "everything is fine and subprime problems are contained". I am referring to Bernanke and Paulson and Geithner of course along with the so called "economists". The same "economists" are now talking about how Dubai is a one of thing and is contained within itself. Sound familiar? Similar to 2007 the signs are ignored and markets continue to bubble and any dip as was the case with the Dubai news coming out are quickly recovered. We all saw how that ended in 2008. The system is crashing people. There is only so much more time left. The Fed and its undisclosed operation can only keep the markets up for so long. Eventually stocks will crater and go to levels where they should be. S&P 500 is going to have a whole new meaning below 500. The only way that will not happen is if the dollar is completely valueless and in a nominal way market is above that level. But do not mix nominal with real and do not think that owning stocks will protect you in such a scenario. That is far from the truth and what will happen. Dollar going down is bad for US companies and US stocks. US assets are generally overvalued compared to the rest of the world. When the dollar keeps sinking part of this imbalance will disappear and US stocks will continue sinking. Part of the reason US stocks have done so well is due to the US Dollar's place as the reserve and global trade currency. That is undeniably changing and at this point can not be reversed. Too late thanks to the Fed's undisclosed operations as well as irresponsible other operations we all know off.

One last thing I want to point to is that it was quite a coincidence that Dubai came out on Thanksgiving Day to give out the new. They told the news on a day when the US markets were closed.One can not help wonder if some powerful people from this side of the Atlantic told the Dubai people not to burst the US market bubble because they knew US market would have been crushed had it not been closed. Since the rally in the US markets is totally speculative and against any piece of fundamental news we see, they must have mortally been afraid of this. Like Bear Stearns and subprime, this can only end bad. With a lot of counties and cities bankrupt in the US as well as states such as California, which is the 8th biggest economy of the world, there is a lot to fear in terms of more trouble that will come along the way. Not to even mention a lot of other indebted countries that will not be able to pay their debts. For some more interesting views on this countries not being able to pay their debts please read "Confessions of an Economic Hit Man" by John Perkins. It is a great book. You will realize that these debts were never meant to be paid back to start with, but the timing is going to be very bad. It is ironic that these debt failures could be the reasons why the "global empire" effort might crumble as defined in the aforementioned book.

Jobless Recovery??? What Recovery???

Two things:

ONE - things getting worse at a slower rate is not a recovery.

TWO - things are not even getting worse at a lower rate. These so called "economists" on the payrolls of the banks who are praying people think economy is recovering and the others on the Fed's and other financial institutions payroll indirectly through their universities being sponsored by them or through doing consulting work for the Fed are doing whatever told by these corrupt lying institutions that are the cause of the problems we are experiencing now and have experienced in the past. These "economists" either make their projections too high so when the number looks better than "expected" -as if their expectations means jack- or they go and revise the past numbers and people just swallow the lies since they only look at the most recent numbers.

Don't be fooled by these scams.

There is no jobless recovery and things are only getting worse and will continue to get worse as the reality keeps sinking in. Without jobless recovery in an economy of 70% consumer spending there can be no real recovery. Economy growing through inflation, debasing of currency, and government creating money out of thin air and spending it and spending it for the wrong people -the fat corrupt banks- and then counting their activities in the "growth" of economy does nothing for you nor for me. What do these crooks think - that hungry jobless people will watch TV and see the made up news of recovery and forget they are starving and that even the tape warm in their stomach is divorcing them after the wife already took the kids and went to her farmer parents' and that starving guys will cheer that the economy is growing????!!!!! GET REAL!!!! You're not fooling anybody!

Bubble in the Amazon

Amazon is a great company that I personally love using, but similar to a lot of Wall Street love stories, this one makes no sense in terms of valuation either. Its earnings and expected earnings growth are very unrealistic as they have been in 2007 and many times before, but times seemed to be good for the stockmarkets and Wall Street and this is one of the loved names. Similar to other retail names it is hard to short a momentum stock especially one touted repeatedly. Times are similar now to 2007. Market is in bubble territory and bad news are ignored or are spinned to be good news in the most ridiculous way imaginable. It can only end one way. It could start any time or last another year or two, but how much more this stock can go is probably not more than up another 20% or so, but the downside is much bigger. All the same is true for Priceline, too. Wall Street Love Stories always end bad, and so will these. The fundamentals make no sense. You just have to give yourself enough time and not get run over by the continuation of the frenzy. Out of the money put options is a good way to go with these names. Just give yourself enough time and you will see these stocks down more than 50%.

Jacksonian Democracy and His Fight Against The Second Bank of United States

We need a new president similar to Jackson, a common virtuous strong man who is honest and does not bend in the face of personal gain or any other form of corruption. His love of sound money and hatred of paper money as well as the corrupt private central bank of the time (similar to current central bank operations) led by a greedy banker (similar to Goldman) named Nicholas Biddle. I highly recommend everyone to read more about Jackson and his fight against the private central much like the fight between the private Fed and Ron Paul. I highly hope for the sake of our children's future that Ron Paul wins this fight starting with more transparency into the Fed's operations showing how illegal a lot of the activities they are engaged in are and are meant to profit its owners, Wall Street banks. And that hopefully leads to the end of the freak of nature in what is supposed to be the land of the free.

Goldman’s Laughable Publicity Stunt:

Recently Goldman teamed up with its new partner in crime Warren Buffett and launched a new publicity campaign in the face of criticism about its ridiculous bonus levels. A company who was saved by the taxpayer’s dime by corrupt unelected officials should not be giving outrageous bonuses. It is a slap in the face to the taxpayers whose votes obviously do not mean anything as evidenced by the arrogance and obnoxiousness of the bonuses these people hand themselves. Another obvious fact is that these people do not care about shareholders. The employees of the firm are not there for the shareholders, but vice versa. What ridiculousness this is. These people have no shame. They were and still are bankrupt. They have been funneled tens of billions through the alphabet soup including the scapegoat AIG where Goldman was the only reason anything was done and where they received majority of the money even in cases such as being made whole on contracts (CDS and other) where Goldman would have been paid if AIG went under – which technically it didn’t. What kind of a circus is this and how on earth does Bernanke get a second term and how on earth does Geithner with no credentials (he is not even an economist) was at the helm of NY Fed and now the treasury. People of America, WAKE UP!!! This is outrageous and is done at your and your kids’ expense.

Buffett of course is just playing his book as he has a lot invested in Goldman and a lot in the US stockmarkets that Goldman seems to be heavily manipulating – even if in a legal manner. Besides Buffett was hurting badly and facing very dire consequences due to his short puts on the markets, yet another reason for Buffett to team up with the shameless Goldman Sachs. Buffett as respectful an investor he has been up to a few years ago is completely losing this by being part of corruption schemes. He did not exit American Express which was thought to be bankrupt by a lot of people –rightfully so- possibly because he knew that it would be saved by the Fed. One wonders what kind of deals these people high up managing our kids’ futures are in. I have one thing to say about it all. It is disgusting.

Goldman – Stop Saying You Were Fine Even If AIG Collapsed

Goldman was recently exposed in a government report –let’s hope the people preparing the report do not lose their jobs because of Government Sachs- about how they would have suffered badly if not gone under had it not been for the government bailing Goldman out. Did I say Goldman? I think it is officially AIG being bailed out. At least that is what we are supposed to think.

Here is the link to the news on the report.

Gold Suppression on CNBC!!! How Unexpected!!!

Of course it is by the only respectable speaker on CNBC, Rick Santelli who does not fear yelling “the king has no clothes!” It is very refreshing to see someone smart and honest like Santelli on bubble-TV considering the others include the likes of the corrupt bubble-maniac trend-monkey Jim Cramer, pretend economist with no real economic background (similar to the current treasury secretary) Steve Liesman, the alleged adulterer Maria Bartiromo, and the not-a-sign-of-brilliance defendant of the establishment Larry Kudlow.

On November 23rd, Santelli mentioned how the current economic-advisor to Obama had a paper on how gold price should be manipulated –remind you that is illegal and against the nature of free-markets and democracy.

Here is the link to the talk. It starts at around 7:30 mark in the 10 minute piece.

Here is a link to the same topic at GATA.

Holes in the Apparels:

There is an obvious logic-defying bubble in financial stocks. It is very hard to short these stocks with the Fed (ruled by the banks themselves) doing anything possible at the expense of the taxpayer including borderline illegal operations (reminder: Marc Faber, among others, called Bernanke a “criminal” on Bloomberg TV). Even though these large banks are all insolvent, if you had to go through every item in their books and not just book to model or “comparables” (I have heard instances where CMOs were considered in the same league as treasury bonds or were hedged using treasury bonds), they are being kept alive through liquidity provided by the Fed as well as outright transfer of wealth from taxpayers through funnels such as AIG (read Goldman receiving tens of billions) along with the usual fiat money trick of dollar devaluation and erosion of the purchasing power. It is hard to go against the almighty Fed or the almighty God’s representative on earth Blankfein’s Goldman. So one is left with trying to find some other place where there isn’t as much manipulation/corruption and a place where there is less direct government aid outside of a fiscal stimulus package targeting the consumer directly.

The obvious place is retail and especially apparel stocks, many of which are trading at 52 week, if not close to all time highs. These include names such as J-Crew, Urban Outfitters, Abercrombie and Fitch, and Lululemon as well as department stores such as Macy’s. Despite increasing unemployment, which is already at high levels (and we all know that the real unemployment is a lot higher than the 10.2% government number), decreasing income and wealth, an eroding dollar, and a huge recession that is still going on where home prices are still under huge pressure with more to come as foreclosures and delinquencies are properly handled over time (rather than being swept under the rug as they are now trying to give the impression things are getting better) and the resetting mortgages in 2010 and 2011, these stocks are at incredible levels. It is almost as if nothing happened in the last couple years and the go-go momentum years were continuing. Some of these stocks (there are a few others not mentioned here) have P/E values ranging from low 30s to high 70s. These are obvious shorts. Of course it is hard to go against the go-go nature and the optimism that authorities and bubble-TV tries to present to people (such as when 520k people lose their jobs in a week and bubble-TV spins it as a positive that it was less than the 530k that was expected without talking about revisions to prior weeks that transfer some of the losses to prior weeks). So shorting prematurely could be painful. Besides with retail stocks it seems as if the momentum in a certain name lasts for a while as we have witnessed with Lululemon and Under Armor in the past. Similar trends were visible with Urban Outfitters and J-Crew, too. So one would need know how bad the economy will become before pulling trigger. Or you would have to wait to see (as if it already isn’t for someone with half a brain or for someone who is not a liar) the markets go into a downturn again or the company specific bubble to burst as a result of a bad quarter or bad same store sales number, which we have seen with these names being ignored. Considering all this might take a while one can think of utilizing options to participate without tying up too much capital in a couple of different ways.

One would be to buy some close to the money the put options over a period of 6 months to a year (which hopefully should be enough time for the current bubble to burst, as 2010 will be a horrendous economic year) every month or every two months and making a budget for this period, continuing to spend that amount of money with discipline – we know this is tough. The best way might be buying two front months and continuing to roll as the front month options expire or when there is an opportunity to capture a drop in vol. God knows there have been plenty of chances where the market rallies on bad news.

The second way would be being buying a long-dated out of the money put option. The advantage of the first method is that if you get a signal that the markets are starting to go in the direction they should and the it becomes apparent that crisis is not over, you end up having more leverage and you can add on to your position more aggressively. The reason you would be doing two month rolling options is that if the crisis resurfaces and things start moving too fast, volatility and options prices will increase rapidly – you may not be able to buy at the level you want at the price you want. Besides the intrinsic value of the options could fly very quickly all of which would make the puts very expensive and if the front month is close to expiration you might only participate on part of the drop in prices. Whereas if you have the two front month puts, even after the initial month expires, you continue to participate in the drop in prices which is very likely to happen in rapid fashion.

A third way might be to buy the front month option and sell the second month 1x2 or 1x3 ratios fairly wide if you’re concerned about watching all that premium expire. This will lower the cost (somewhat) and as long as you roll every month before expiration and are wide enough in your spread, you are likely not to get trapped on the naked leg. Moreover, unless you’re really unlucky, the second month vol is not likely to spike as much as the first month providing you with ample opportunity to protect yourself.

The Beginning of the Current Bubble and Scams:

The world markets are in a huge frenzy over a phantom “recovery” that defies all logic. The current rally started in March from the 666 level in the S&P after Citigroup CEO Vikram Pandit and Bank of America CEO Ken Lewis said ‘if you don’t count our loses, we are making money’. They might not have worded it exactly that way, but that was essentially what they said. Anybody that works in a fee-based industry makes money if you don’t count their losses. The losses were all the writedowns on their ridiculous balance sheets that are still – even after the Fed hosed them on to the taxpayer – on their books. There is no way to clean those balance sheets when they have multi-trillion dollar notional derivative exposures (see table below for data from the Office of the Comptroller of the Currency) on relatively very little assets. I realize these products are not delta one, but anyone who works in derivatives knows that these banks were never really hedged, especially not against the gap risk, which was realized at immense levels the last few years. And when was the last time you hear a bank talk about the costs to stay hedged? Basically, there is no way all of these banks are not completely insolvent to the tune of multiple trillion dollars. Of course, the Fed is keeping them alive –as the Fed is a private institution owned by the very same banks it is regulating. The board members of the Federal Reserve banks are all from the major banks. Everyone will remember Mr. Friedman from Goldman Sachs who, despite being on the board of the NY Fed, was allowed by the current Secretary of Treasury Timothy Geithner (henceforth called little Timmy) to buy GS stock right before the Fed bailed them out and used AIG as a scapegoat (after god’s representative on earth Blankfein being the only private person present at a Fed and Treasury meting on the AIG meeting) to funnel tens of billions of dollars to mainly Goldman and a small portion to a few others. (Those few others got whatever they got after Goldman got the bulk because it was impossible to just give it to Goldman without complete scrutiny by the public or possibly one of the other banks blowing the whistle on that scam.)

The market celebrated in the overly volatile days around the March bottom the comments by the CEOs of bankrupt banks who many times stated that there was nothing wrong with them. Mr. Market seems to have a short memory about all the things these guys said over the last few years and how a lot of them were just plain wrong. After there was a little ignition, there was a futures led jump in the markets for the next few weeks where we saw some entity support the markets through futures transactions – which became ever more evident at any possible weakness in the market – and the markets kept rallying. It felt as if the plunge protection team was at work heavily manipulating the stock markets in addition to their usual work of manipulating the gold market. Goldman in the same period increased their principal to ridiculously high levels becoming a big portion of the trading in the US markets and in the meantime making a bunch of money on the taxpayers’ dollar. One wonders maybe they knew of the ploy, so went with it without fear and even if in a legal way, they manipulated the market as they knew the big guy was there to help them if need be.

This is the story of how the current bubble started.

How To Buy Physical Gold

There are several forms of physical gold you can buy. You could buy big bars if you have a lot of gold to buy and you want to do it in bulk. The better way to buy physical gold is to buy coins for a variety of reasons. For one if you wanted to sell only a small amount of gold at some point, it is easier to sell coins and that way you don’t have to sell more than you have to. However, the more important reason is the cheap call option on the collectibility/numismatic value of the coin. That is assuming you do not pay a huge premium on the coin you are buying.

The premium on the coin depends on several factors such as what country and date the coin is from, what mint it was minted in, the condition of the coin, and how many of them exist to count a few. It, also, depends on where you buy them. Coin dealers will most likely charge you a high premium. Jewelers that don’t concentrate on the numismatic value of the coin, but only on the gold value can provide a better place to buy as long as you know your coins.

My suggestion would be to buy older coins from the US or other countries that have been used as money at some point in the past. Most of these coins go for the price of gold both on online auction sites and at jewelers. If you decide to buy online, however, you should pay attention to a lot of factors such as what platform you use (such as eBay), who the other party is. Platforms such as eBay provide a lot of data on the sellers such as the feedbacks of other buyers. Before you buy a thousand dollar coin from some random person on eBay, you should confirm a lot of positive feedback and check to see that they have sold similar items to others with a lot of feedback – hopefully proving that these people know what they are doing.

Another way to buy online is to use reputed online dealers that are either approved by the US Mint – there is a list of approved dealers on the mint website – or on the numismatic agency websites (such as PCGS and NGC). Bullion dealers such as Northwest Territorial Mint. One of my personal favorites (including the low level of premium on coins and bars as well as the availability of other bullion products such as palladium, platinum, and silver) is Gainesville Coins. There are a lot of other places to buy from online, so do not feel the need to use any one place. You are probably better of to buy from several different sources anyways. Diversification is a good thing in any type of portfolio construction in terms of risk reduction.

Why You Should Buy Physical Gold

The best way to go long gold is to buy the real thing itself. If anything, you are helping your investment by taking more physical gold out of the market and helping break the back of the gold-suppression scheme employed by several central banks led by the Fed. Unless you know a good Alchemist, physical gold cannot be created out of thin air or lead unlike paper gold that the Fed can create through the exchanges such as Nymex. The only good Alchemist I knew was the novel by Paulo Coelho and to a lot of people’s disappointment it did not give you any secrets about alchemy and ways to become rich. It sure is not through paper gold, however. If any of you have been watching how paper gold is traded in these exchanges, you would see some very interesting patterns. “Someone” comes in at certain points when liquidity seems to be drying or there is an upward pressure in the price of gold and sells roughly 2-5% of annual global gold production in less than one minute and BOOM, the price of gold drops 10 bucks or 20 bucks if this “someone” is lucky. If you do the math, the financial institution or person that is selling this gold is selling anywhere between $1-10 billion of gold. Assuming 20% margin being put up, that is $200-2,000 million dollars being sold in less than a minute with no regard for the price. Now who has that much gold or would not care about the price assuming this is not their full position? I am not aware of any financial institution that can do that besides the Fed or a very big financial institution other than JPM, which, along with Goldman Sachs, is doing “god’s work” for the Fed. Arguably, the Fed is managed by these institutions anyway. And this is in addition to all the other evidence of manipulation, such as no one ever seeing the gold that Fort Knox or the NY Fed claims to hold, rhetoric by Greenspan and Volcker about controlling the price of gold and how it should be done – talking about democracy and a free market economy (yeah right) –, the anti-gold propaganda we see everywhere, and the information from the Bank of International Settlements showing that there is over 20k metric tons of gold short. It is common knowledge that it is mostly the NY Fed that leases out or shorts gold –which happens to be more than the approximately 8k metric tones of gold the US claims to have in supply. GATA (gata.org) has a lot of good links and information on this if you would like to do further research on the topic. The most accessible forms of paper gold available are gold futures – which you can buy in the Nymex or the other exchanges that offer them – ETFs (the most popular being GLD for all the wrong reasons – more later on why you should steer away from GLD soon), and other derivatives such as swaps or notes. It is heard time and time again that the futures exchanges give you a lot of trouble when you ask for delivery of your gold and a lot of times almost fail on delivery and get bailed out by central banks that support this scheme. The problem is that the paper gold market is a Ponzi scheme. There are more claims than there is physical gold in the warehouses. That is an unsustainable situation and one that is exploited by the gold-suppression scheme to hold the price of gold down –which is the reason gold is not in the $2-5k range right now after the financial system blow-out. You never see the price of gold being brought down by the sale of physical gold. It is always through the paper/futures market. The IMF bluffs and threatens to sell gold over and over again to bring the price down and never really sells the gold. It was very amusing to watch the BRIC countries, and surprisingly India rather than the expected China, call that bluff and say that they want to buy any physical gold the IMF has to sell; the IMF was forced to sell it to save face and not make it common knowledge that they backed out of their bluff. And what happened to the price? The price went from slightly over $1k to around $1140 so far and it is still rising and will rise more. Just a couple days ago Blackrock commodities fund manager Evy Hambro came out and acknowledged that central banks around the world will be net buyers of gold. That is good news for gold holders because the overhang for the gold price is being removed on top of the extra demand from such strong institutions. As a gold holder you should do your part to help your own portfolio and buy physical gold and help end the scheme that is keeping the price of gold down. Another reason to buy physical gold is the confiscation risk. It could be a remote risk but it did happen in 1933. FDR confiscated all gold from people of this country and the next day devalued the dollar (revalued gold) by almost 70%. In a free country people were not allow to own gold. Free market and democracy, right???? Still to this day, the anti-gold propaganda exists in this society from the media (owned by the same interest groups that want fiat money to be the form or just plain stupid) to our textbook and professors sponsored by the same financial institutions. US is the only country where it is hard to buy physical gold. In any other country, you can go to a bank or post office or some other location and buy gold bars or coins. The Fed and the Treasury do not want you to buy physical gold because that will stop the supremacy of paper money which they easily print and distribute to their friends as they did to the banks (Goldman – god’s hand – hear me!) and dilute you similar to diluting shareholders by printing more shares. They decrease our buying power and would rather help insolvent banks than the people they should be giving the trillions to and shutting down those banks that are ruining this country and our children’s future. Moral hazard be damned. That’s why you should buy physical gold! Now, let’s mention a few things about GLD, which claims to be backed 100% by physical gold, but most likely is not. For one thing, they do not even audit the gold properly, rely on third parties, and spend too much time stating that if the auditors and the custodians do something wrong they are not liable. They must know something is wrong if they spend so much time covering their “donkeys (click here for the prospectus)”. The funniest coincidence of all is that their custodian HSBC’s gold derivatives book is very close in size to what GLD claims to own in physical gold (click here for the derivatives position of HSBC reported by the OCC as of March 31st then go to page 30). That’s too big a coincidence if you ask me. I was once at a meeting with some executives from the commodities exchange and GLD managers. They say that they hold the gold in a vault in London, but they trade in the paper market in New York. When I ask them if they take physical delivery, they said yes. When I asked them how they transfered it to the vault in London if they were taking delivery in New York [??], they were puzzled. I had to clarify myself by asking if they flew it, shipped it with transatlantic ships, or trucked it over the ocean or had Olympic swimmers tie bars on their backs and swim across the Atlantic with them. They had no answer. Other people in the room were starting to get very curious, so the exchange managers felt like they had to step in to save the GLD mangers by saying that they keep the gold in the exchange’s warehouse. But wait a minute, I thought they kept all the gold in the London vault, no???? Apparently Einhorn of Greenlight Capital had enough issues with GLD that he sold his whole position and bought physical gold . There are several other ETFs that claim to hold physical gold. Some of these say they store the gold in the Swiss Kantonal region. Another less known US exchange traded ETF is SGOL managed by ETFSecurities which claims to hold its physical gold in a vault in Switzerland. If you are determined to go paper you are better off buying the Kantonal ETFs or SGOL before you buy futures or GLD.