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Reading on a Saturday Morning

To quote John Hathaway

Submitted by Roanman on Sat, 05/15/2010 - 14:00

The US Mint is suspended its production of 1 oz. gold eagle and gold buffalo coins three times in 2009

 Over the last decade the DJIA is down about 80% against gold.


  The following is from John Hathaway at Tocqueville Asset Management 11/30/2009

Click anywhere below to link up to the entire piece.


“The supply of gold increases at a far slower rate than that of paper money. Each year, the gold mining industry produces around 2500 metric tonnes of the metal.

This quantity adds a puny 1% or 2% to the above ground supply of 163,000 or so metric tonnes.

Unlike economically sensitive commodities, to which it is frequently and incorrectly linked, gold does not get used up.

Therefore, traditional supply and demand analysis does little to explain price movement.

It is better to think of gold as a multi trillion dollar capital market asset.

In theory, all of it  is potentially for sale at any given time.

Price behavior is best explained by macroeconomic considerations and the greater investment climate rather than micro economic considerations such as mine expansions or jewelry consumption.

To speak of a rising gold price is technically incorrect.

What appears to be a rising metal price is an illusion that signifies the declining value of paper currency and, more
important, the wealth that it measures.

Gold per se does not excite the investment world. It has not suddenly changed its stripes.

What has changed is the world around it.

What has come into view is the seemingly real prospect for the dollar and other paper currency to lose future value…

“In our opinion, the investment rationale for gold, in today’s circumstances, is deflation.

The post World War II economic model of economic growth based on secular credit expansion is broken.

We believe the applicable model is a 1930’s style credit deflation.

Asset prices are pressured by deleveraging.

Uncertainty as to collateral values restricts credit despite available liquidity.

The contraction of credit hurts economic activity, causing incomes to fall and asset values to fall further.

A negative shift in expectations rapidly overtakes behavior.

There is little government policy can do about this other than to devalue currency to lessen debt burdens.

The Fed understands this and is acting accordingly.

Keynesian stimulus packages at best mean that government spending replaces lost private sector activity to stabilize the economy.

This is pretty much where things stand at the moment.

It remains to be seen whether massive stimulus can offset the headwinds of a negative credit cycle.

Since there is no way to know how these wild experiments in monetary and fiscal stimulus will turn out, investors are gravitating to gold, knowing that the integrity of the currency is the last thing on the minds of policy makers.

Gold is a wager that these measures will not restore economic health over the longer term and that further currency debasement will be deemed necessary…

“Zero interest rates are designed to encourage a new carry trade.

Free money is intended to inflate asset values in hopes of restarting the credit cycle.

In other words, our ‘leaders’ in Washington will solve the problem of too much debt with more debt.

Decades of credit excesses have brought us to the brink of a credit collapse.

Unfortunately, there is little to suggest introspection. Most expect and assume that government intervention will continue to work miracles.

Things should get really interesting for gold when government actions are seen to be impotent.

“As long as deflationary forces prevail, world governments will remain addicted to currency debasement.

If currencies are successfully debased through inflation, gold will retain its value.

The middle ground between deflation and inflation exists only in the imagination of policy makers and analysts who still believe governments can create wealth.

Gold is a hedge against a world monetary order on its death bed.”

John Hathaway, Tocqueville Asset Management L.P., 11-30-09


Reading on a Saturday Morning

Submitted by Roanman on Sat, 05/08/2010 - 09:38


To quote Richard Russell one more time,








He goes on to say something about denial, the NYSE, the administration, the Fed and clueless newspapers.

It all seemed redundant.

But then ...

He hits his stride.





And since we're on the subject of jokes .....


Reading on a Saturday Morning, Continues

Submitted by Roanman on Sat, 05/08/2010 - 09:38


To quote Bill Gross on ratings agencies,


"Their warnings were more than tardy when it came to the Enrons and the Worldcoms of ten years past, and most recently their blind faith in sovereign solvency has led to egregious excess in Greece and their southern neighbors.

The result has been the foisting of AAA ratings on an unsuspecting (and ignorant) investment public who bought the rating service Kool-Aid that housing prices could never really go down or that countries don’t go bankrupt.

Their quantitative models appeared to have a Mensa-like IQ of at least 160, but their common sense rating was closer to 60, resembling an idiot savant with a full command of the mathematics, but no idea of how to apply them."


And since we're on the subject of savants ...


To quote Wayne Allyn Root

Submitted by Roanman on Thu, 04/29/2010 - 06:32

Northern Lights

Submitted by Roanman on Sat, 04/24/2010 - 10:45


This photo was taken in Saluit, Nunavik, Canada on April 14, 2010.

To get to Saluit, you drive north from the Mackinac Bridge until the road ends.

Then you find an airport and fly north 'til Canada just about ends.

The photo links to page after page of photos in the Aurora Gallery at

Very cool.

I've been studying sunspots.

Sunspots have something to do with the Northern Lights.

Business is slow.


Reading at 3:15 Thursday Morning

Submitted by Roanman on Fri, 04/16/2010 - 07:08


Stratfor Global Intelligence is in my opinion among the better international news sites.

At about $30 a month, it's probably not worth it to most folks.

They have a one week trial deal.

I like it.

From an article titled,

"Mexico a Struggle for Balance"


“…Mexico was nearing the status of a failed state.

A failed state is one in which the central government has lost control over significant areas of the country and the state is unable to function.

In revisiting this issue, it seems to us that the Mexican government has lost control of the northern tier of Mexico to drug-smuggling organizations, which have significantly greater power in that region than government forces.

Moreover, the ability of the central government to assert its will against these organizations has weakened to the point that decisions made by the state against the cartels are not being implemented or are being implemented in a way that would guarantee failure…

“…The United States consumes vast amounts of narcotics, which, while illegal there, make their way in abundance.

Narcotics derive from low-cost agricultural products that become consumable with minimal processing.

With its long, shared border with the United States, Mexico has become a major grower, processor and exporter of narcotics.

Because the drugs are illegal and thus outside normal market processes, their price is determined by their illegality rather than by the cost of production.

This means extraordinary profits can be made by moving narcotics from the Mexican side of the border to markets on the other side…

“…each smuggling organization has an attached paramilitary organization designed to protect its own supply chain and to seize its competitors' supply chains.

The result is ongoing warfare between competing organizations…

Membership in such paramilitary groups offers impoverished young men extraordinary opportunities for making money, far greater than would be available to them in legitimate activities…

“Indeed, what the wars are being fought over in some ways benefits Mexico.

The amount of money pouring into Mexico annually is stunning. It is estimated to be about $35 billion to $40 billion each year…

From Mexico's point of view, interrupting the flow of drugs to the United States is not clearly in the national interest or in that of the economic elite…


Reading on a Sunday Morning

Submitted by Roanman on Tue, 04/13/2010 - 06:42


I have no idea if the following is true, as I have been unable to find any corroboration.

China Daily makes the following claim in an article titled,

"Life Span of Buildings Creates Huge Waste"

Compared to the less than 30-year average life expectancy of China’s buildings, the average life span of a building in Britain is 132 years and in the United States it is 74 years.


$200 Million per

Submitted by Roanman on Sat, 04/10/2010 - 12:05

Reading on a Saturday Morning

Submitted by Roanman on Sat, 04/10/2010 - 11:22


As far as I'm concerned, Peggy Noonan is one of the finest writers in America.

I make my son read her editorials in the Wall Street Journal (he hates it) ... (I don't care).

Here's her analysis of what went wrong with the mortgage market.

Click anywhere below to get the entire piece.


You, for political reasons, both Republicans and Democrats, finagled the mortgage system so that people who make, like, zero dollars a year were given mortgages for $600,000 houses.

You got to run around and crow about how under your watch everyone became a homeowner.

You shook down the taxpayer and hoped for the best. 

"Democrats did it because they thought it would make everyone Democrats:

'Look what I give you!'

Republicans did it because they thought it would make everyone Republicans:

'I'm a homeowner, I've got a stake, don't raise my property taxes, get off my lawn!'

And Wall Street?

We went to town, baby.

We bundled the mortgages and sold them to fools, or we held them, called them assets, and made believe everyone would pay their mortgage.

As if we cared.

We invented financial instruments so complicated no one, even the people who sold them, understood what they were.

"You're finaglers and we're finaglers.

I play for dollars, you play for votes.

In our own ways we're all thieves.

We would be called desperadoes if we weren't so boring, so utterly banal in our soft-jawed, full-jowled selfishness.

If there were any justice, we'd be forced to duel, with the peasants of America holding our cloaks.

Only we'd both make sure we missed, wouldn't we?"


I think that just about covers it.



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