Wednesday, November 30, 2011

Exponential Money Growth vs Peak Oil/Resources

The below embedded video was definitely worth watching and sharing. This is the sort of video that should connect even with those who know nothing about money or energy. It's impeccably presented as those of you have already seen Chris Martenson's crash course have probably come to expect this.

Chris Martenson's initial presentation is 40 minutes and then he spends a further 30 minutes answering questions from the crowd (worth watching all).

In his presentation he focuses on the so-called three “Es”: Economy, Energy and Environment. He argues that at this point in time it is no longer possible to view either one of those topics separately from one another.

Since all our money is loaned onto existence, our economy has to grow exponentially. Martenson proves this point empirically by showing a 99.9% fit of the actual growth curve of the last 40 years to an exponential curve. If we wanted to continue on this path, our debt load would have to double again over the next 10 years. By continually increasing our debt relative to GDP we are making the assumption that our future will always be wealthier than our past. He believes that this assumption is flawed and that the debt loads are already unmanageable.

Martenson explains how exponential growth works and why it is so scary that our economy is based on it. In an example he illustrates how unimaginably fast things speed up towards the end of an exponential curve. He shows that an exponential chart can be found in every one of the three “E’s” for instance in GDP growth, oil production, water use or species extinction. Due to the natural limitations on resources, Martenson comes to the conclusion that we are facing a serious energy crisis.


What Martenson discusses in the presentation is not particularly new, he has covered most of it before and of course there are others across the theme as well.

I recently finished reading 'Confronting Collapse' by Michael Ruppert. In the book Ruppert provides a huge array of facts and figures (and finally an action plan) that deal with the impending crisis we face having passed peak oil. He goes on to write about our monetary system which is reliant on infinite growth (similarly explained by Martenson in the above video), but is used for purchasing finite resources. This is not a sustainable situation.

Ruppert povides a compelling case, but I think the most convincing aspect that we will face an energy/oil crisis in coming years is not all the reserve, production & consumption data that he provides in the book, but the actions of the Unites States government.

Over the last decade the US has invaded country after country, all of whom have had an abundance of oil & energy resources or have been located in a strategically important position for the sake of securing/transporting it. Chris Martenson says in the video above that his country is not talking about oil, but I would suggest discussions and action are already taking place, they are just not doing so in the public eye. It's a case of watch what they do, not what they say.

The speed at which peak oil should play a larger part in our investment themes could vary greatly based on the financial crisis that we face today. If we see another debt/monetary based collapse (continuation of the one that started in 2008) which resulted in return to a Gold standard we could see economic growth collapse and then crawl to a much slower growth rate as participating countries are restrained by their Gold reserves. 

Even if we don't see return to a money system backed by tangible resources, the deflationary debt collapse we face in Europe, Japan, the United States and elsewhere is likely to be the precursor to a global depression (which in my opinion we are already in, but may take 10 years to look back and realise). Such events could see the use of oil/energy drop off dramatically and prolong the need for immediate action.

Chris Martenson certainly calls it well at the start of the above clip, "We live in some of the most extraodinarily interesting times and it's my view they are going to become more interesting". I agree wholeheartedly.


BB.

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Wednesday, November 23, 2011

Domain Name Speculation, Think Outside The Box

Over the past few months I have been trying to think outside the box, coming up with non conventional ideas to capitalise from the precious metals bull market.

They say that you have to spend money to make money and a couple of the ideas I have would take a large amount of capital, they will require some careful planning and research before implementation. Then there are other ideas which aren’t expensive and are very accessible even to those with a small budget.

Speculating or squatting on domain names (Wikipedia Entry) is not a new activity, but it’s not something I’ve seen talked about specifically relating to the precious metals market. I think this bull market (and potential shift to hard assets by mainstream investors) has the potential to provide some unique opportunities and flipping snappy, relevant domain names could be one way of profiting.

What's the cost? The domains I’ve registered (.com names) cost me only $7.50 each for 1 years registration.

What's the potential gain? A sought after domain name can easily fetch $1000-2000 and there have been examples where prices fetched have been astronomical, for example this recent sale which netted the highest ever for a .com.au address:
The record for the most expensive .com.au domain name was broken today after the owner of investmentproperty.com.au let the name expire and it was snapped up at auction for $125,000. SMH
And there are examples of single word .com domains selling for millions.

If you were to buy 130 domains for $7.50 each (1 year registration) you would potentially only have to land one good sale to make back your original capital ($1000).

What's the potential loss? You may find that the domain names you pick are not sought after over the time you hold them which would result in total loss of spent dollars (assuming you don't develop the domains yourself).

Let's face it, you (or I) probably aren't going to make big dollars with flipping domains, but the potential is there and with plenty of relevant word combinations available I'm still going to give it a solid go. 

I have registered around 80 .com domains over the past couple of months and I’m on the lookout for more. A couple of examples I've recently registered are:

BULLIONRETAIL.COM
BULLIONWHOLESALE.COM
GOLDSOV.COM
PHYSGOLD.COM

You do have to be careful about the names you choose, there are regulations in place that specify you can't infringe on the trademark of another company. For example I wouldn’t like your chances of registering and using APMEXBULLION.COM. Even though the domain is available, it would likely be considered too closely tied to the dealer: APMEX.COM.

If you're after a kick start on names to search you could grab some relevant terms from here (CMI Glossary) and run them through this site: Bust A Name, entering in several key words and then see what combinations are still available.

Goodluck!

BB.

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Monday, November 21, 2011

2012 Perth Mint Kookaburra has sold out!

Back on November 1st I pointed out that the 2012 Perth Mint 1oz Silver Kookaburra would be a sell out:


Well it didn't take long at all.

This news is already a week old, but Perth Mint has confirmed the full 500,000 coin mintage has been ordered:
No more orders for the 2012 Australian Kookaburra 1oz silver bullion coin will be taken by The Perth Mint.
We have received orders for the full mintage of 500,000 coins and once they are shipped we will be in a position to declare it a sell out. Perth Mint Blog
This is an impressive result given that the 2011 Kookaburra didn't sell out until May this year (e.g. the 2012 has sold out in around 2.5 months, the 2011 with the same mintage took around 8.5 months):
The Perth Mint has reported two more sell-outs from the Australian Silver Bullion Coin Program.
The 2011 1oz Australian Kookaburra has sold its total mintage of 500,000, while the 2008 1oz Australian Lunar Mouse has reached its 300,000 mintage limit.
Introduced in 1990, the 1oz Kookaburra was traditionally restricted to 300,000 coins annually. But the Mint’s decision to increase the mintage for the first time in 20 years has been vindicated with the full half-million coins sold in eight months. Perth Mint Blog
There are still a few dealers selling these for reasonable prices, so if you want a slice of this low mintage coin (for a decent price) I would suggest you don't waste time getting in an order ([EDIT 23/11 NOW SOLD OUT AT THESE TWO ALSO] Gold Stackers and Bullion Club are a couple who still have the coin listed). I have seen several other dealers sell out over the past week including Bullion Baron site sponsor Bullion Money.

Compare the mintage of the Kookaburra Silver 1oz coin (500,000) with that of other well known offerings:

2012 Chinese Silver Panda 1oz - 8,000,000 (33% increase on 2011 mintage)
2012 Canadian Silver Cougar 1oz - 1,000,000
2012 Canadian Maple Leaf 1oz - 20,000,000+ (prediction, 2010 mintage 17.8m)
2012 American Silver Eagle 1oz - 35,000,000+ (prediction, 2010 mintage 34.8m)

There are other Silver bullion coins which might end up with a lower mintage than 500,000, for example the Silver Britannia (which has in the past only had a 100,000 mintage), New Zealand Mint Fiji Taku & Fern (both mintage unlimited, but suspect will come in under 500,000), the Somalia Elephant and of course the 2012 Perth Mint Lunar Dragon (with 300,000 mintage for the bullion coin, which is now selling for a hefty premium at around double spot price).

It's not all about mintage though. The Kookaburra coins feature an iconic Australian animal, they have tasteful designs which don't seem to date and are sought after by Australian and global collectors and Silver investors.

In my opinion after selling out so quickly (before we even get to the issue year!) the Perth Mint is likely to consider increasing the size of the Kookaburra mintage, assuming they have the capacity to do so. Could we see a mintage of 750,000 or even 1,000,000 in 2013? I would not be surprised.

BB.

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Friday, November 18, 2011

2012 Chinese Panda Coin Design - Silver/Gold

UPDATE: You can now buy 2012 Chinese Pandas from Bullion Money as discussed in this post. Click here to buy Silver Pandas, click here to buy Gold Pandas.

I have briefly talked about the Chinese Panda coin series in the past. Mainly reflecting on why I believe Australian Lunar and Kookaburra coins to be the better choice (lower mintage, higher local demand and more, read here & here), however the Panda is still a popular coin collected by many so thought the new design & mintage details might be of interest to readers (h/t to Silver Stackers members for posting the info).

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The Silver 1 ounce coin is going to have a mintage of 8 million coins, which well exceeds last years mintage of 6 million coins and dwarfs the 1.5 million minted in 2010. Furthermore the Chinese Mint has been known to increase the size of the mintage part way through the year.

Here is the full list of mintage numbers (courtesy of this site):

1/20 Gold, 20 Yuan, mintage 800,000
1/10 Gold, 50 Yuan, mintage 800,000
1/4 Gold, 100 Yuan, mintage 600,000
1/2 Gold, 200 Yuan, mintage 600,000
1 oz Gold, 500 Yuan, mintage 600,000
5 oz Gold, 2000 Yuan, mintage 5,000
1kg Gold, 10000 Yuan, mintage 500
1 oz Silver, 10 Yuan, mintage 8,000,000
5 oz Silver, 50 Yuan, mintage 50,000
1kg Silver, 300 Yuan, mintage 20,000

And here are some pictures of the Gold and Silver design:

CLICK IMAGE TO ENLARGE
 
In my opinion the design is as uninspired as the Perth Mint 2012 Lunar Dragon (which simply reversed the Dragon from the 2000 design), using what looks like the same Pandas from the 2011 coin, simply in a different position.

No doubt it will still be a popular coin when it is released for public purchase in the near future.

BB.

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Wednesday, November 16, 2011

Gold priced in AUD about to soar? Take Two!

Back in May this year I wrote a post suggesting that we would see the price of Gold in AUD soar before the year was out to over $1700 (Gold was priced around $1400 at the time, so a 20%+ move was required for this prediction to be filled). Here's a snippet from what I wrote:
...this would result in a local Gold price of over AUD$1700. Such a scenario is not beyond the realms of possibility and in my opinion pricing around these levels is somewhat likely later this year. Bullion Baron
Here is a chart showing where the above was posted:


Wow! An almost perfect call, right?

Well... not really. As much as I would love to take credit and although the suggested price target was met within the time frame I suggested, it wasn't for the reasons I'd outlined.

This crisis and the effects I thought it would have on our Dollar (the AUD) have played out a lot slower than I expected. The AUD has shown more strength than I thought it would throughout the year, however that could soon change.

I pointed out in a recent post that the November RBA rate cut could lead to a cycle of cuts. Such action if it occurs is likely to further weaken the Australian dollar.

In a recent post by The Prince on MacroBusiness it was shown that Gold (USD price) hasn't always performed well during a credit crunch, a large correction played out during the GFC (2008). However, since 2008 Gold has shown mixed price action during periods of heightened systematic risk and tension in the credit markets, at times it has plunged like a stone, other times it has risen with the USD. While a repeat of 2008 where basically all assets (including the precious metals) are smashed can't be ruled out, it also can't be counted on that Gold will react in the same way.

The increasingly dangerous situation that is threatening to spiral out of control in Europe suggests that we may soon test whether Gold can hold it's ground in the face of another major crisis (or GFC2 if you will, even though most of us understand it's just the same underlying problems resurfacing).

I would suggest even if we see Gold correct (priced in USD) it's likely only to fall to $1600 (as suggested by The Prince on MB) and in the event of systematic risk and RBA rate cuts we could see  the AUD fall to 80c against the USD or maybe even lower. US$1600 Gold and 80c AUD gives us a local Gold price of $2000. There is of course the possibility that Gold acts more like a safe haven during the next crisis and rises at the same time as the AUD falls, the last few months show that either could happen during a period of volatility (Gold could rise when AUD falls or they could both fall together):

Shows US$ Gold can rise while AUD falls or fall with it. CLICK CHART TO ENLARGE.

If we saw Gold rise back to $1800-1900 in USD and the AUD returned to 80c then we could be faced with an AUD Gold price of $2250 - $2375.

However it plays out I would suggest AUD $2000+ Gold is likely in the short term, with the possibility it shoots even higher.

The final comment from The Prince on the post I mentioned above (Link):
At the moment, it does not pay to have a very large short position in gold, but as the left handside of the weekly chart clearly shows, during a credit crisis, gold is not a good short term hedge. The USD still remains supreme in that case. For now.
I agree with most of his post, however on this last comment that the USD remains the supreme short term hedge in a credit crisis... I would suggest the supreme short term hedge has in fact been Gold priced in AUD:

CLICK CHART TO ENLARGE

Will history repeat?

BB.

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Gold Symposium, Sydney - Event Review

I spent Monday and Tuesday at the Gold Symposium in Sydney and would like to share my thoughts on the event. Only limited time at the moment to do so, hence the writeup I have posted below is the same as the copy I submitted to AHA Investor magazine (which results in a couple of the references to this effect). Hopefully this is of interest to those who could not attend.

The Gold Symposium, some closing thoughts…

I’m writing this on the flight back to Adelaide having spent the last few days in Sydney for the second annual ‘Gold Symposium’. Unfortunately I’ve not even had the opportunity to let the presentations sink in before writing this follow up to the event. No doubt the abundance of information, ideas and views presented at this event will form the basis for a few blog posts which you are able to read for free at my website: www.bullionbaron.com. For now I would like to leave you with some highlights from the event.

Hosted on the beautiful Sydney Harbour in Luna Park, the event bought together some fantastic (world class) speakers as well as a swagger of gold mining companies for the benefit of investors. I’ve been to a few short investment seminars, talks and so forth, but never something of this magnitude, so I was looking forward to seeing how it would be bought together.

Funnily enough on my way through the entrance on the first morning I found I was having my photo taken by none other than the ‘AHA Investor’ Editor Mike Woodcock (neither of us knew it at the time having not met face to face until this event and not formally meeting each other until later that morning) who was simply taking some photos of delegates checking into the event. I wandered around downstairs for a while with plenty of booths to check out before everyone was called to the conference room for the start of the presentations.

Kerry Stevenson (Managing Director, Symposium) kicked off proceedings with a video introduction, backed by a very suitable track “Gold” by Spandau Ballet.

Unfortunately some technical difficulties plagued the first presenters, a presentation remote which refused to click through PowerPoint slides made things difficult, however David Evans (from Gold Nerds) made light of the situation and presented a fascinating look at our monetary and debt situation. David suggested we will see a return to the mean GDP/debt ratio of 150% from the 375% we sit at now (US/global basis). He predicts this will come from a more intense version of a 1970s scenario where we see high inflation (12% over 14 years, 2014 to 2028). While I don’t agree with the scenario and suggest a more destructive short term path is likely I commend him for being one of the few speakers to put some specific dates and figures to the audience. 

Short term David Evans sees Gold at $3800 in 2015 and much higher targets long term (although the high inflation will mean these higher nominal prices won’t necessarily be as spectacular as they sounded on paper today). David shared some insight on the global warming debate and then related it back to the precious metals market in that they are both a battle of the establishment versus the sceptics. He highlighted the importance of the internet in this battle, a tool which will be invaluable in the fight for sound money, bringing a theme (importance of technology in this precious metals bull market) which was continued by several other speakers during the event. David Evan’s talk was my favourite highlight from the event.

Second off the ranks on the first morning was Eric Sprott (founder of Sprott Asset Management and rock star of the precious metals industry). He bought some interesting quotes from historical newsletters highlighting just how accurate his predictions have been and how this has benefited the firm. He used the cost of FDIC bailouts on failed US banks to show just how insolvent the whole US banking system is. Sprott suggested that central banks are leasing their Gold to meet the extra demand being seen in the Gold market today. Anyone who has followed Sprott will know that he is even more bullish on Silver and is expecting a return to a 10:1 ratio with Gold (currently sitting around 50:1). He provided some compelling historical and current reasons this ratio will come back into play. A classic comment from Sprott on fiat currencies during the speech, “The dollar versus the euro, the yen versus the dollar… they’re all crap. It’s like, who’s the prettiest horse in the glue factory!”.

Louis Boulanger (LB Now Limited) followed a short break, with a grim look at the US Dollar situation, pointing out that it no longer has an absolute measure as it did when it was tied to Gold. We can’t solve a debt crisis with more debt and Boulanger suggested the situation might result in a global scenario where countries settle their trade deficits in Gold. Some interesting charts were presented showing just how orderly the current devaluation of the dollar to Gold is compared with times past where the price of Gold (relative to other countries such as the USD) was changed overnight (when the price was fixed). Also pointed out was that Australia is the lucky country being one of the few who are allowed to invest in Gold via their retirement accounts.

The day continued with presentations from many gold mining companies. First up was Les Davis from Silver Lake Resources (ASX:SLR) who advised the company was in fact celebrating its 4th birthday (from listing on the ASX). SLR’s plans for growth and expansion look impressive and if they can meet future targets then they will be one of the midcaps to keep an eye on. Other companies presenting over the course of the event ranged in size and scope, from the microcaps (such as Invictus Gold with a market cap of $3.6m and holding $2.1m cash) to some of the largest on the ASX such as Kingsgate Consolidated (ASX: KCN) who have a market cap over $1b and Alacer Gold (ASX: AQG) who have a market cap of around $3.3b.

Several of the companies who presented at the event were those which I have covered in AHA Investor in the past. Cobar Consolidated Resources (ASX: CCU) and Argent Minerals (ASX: ARD) both provided updates on their respective Silver projects. CCU is expecting to commission their plant at the Wonawinta Silver Project early next year (2012). It was disappointing to see Castlemaine Goldfields (ASX: CGT), another company I’ve previously covered in these pages, pull out from the event. Somewhat understandable given the trouble (grades not up to expectations) they’ve experienced with recent mining at the Ballarat Gold Project, however the opportunity could have been used as a platform to update shareholders with news on the situation.

Egon von Greyerz (Matterhorn Asset Management) bought a dire view of global economies (although in fairness similar underlying themes ran through most talks), showing how countries that can print their own currency (such as the US) can create an illusion that they are ok, when in reality they are in as poor a position as those countries currently falling off a cliff (Greece, Italy, Spain, etc). Egon suggested that the “Soup of Debt” can is getting too big to be kicked down the road and this will lead to the failure of all currencies.

Dan Denning (Daily Reckoning) presented an interesting view on how he believes social media (such as Twitter) accelerates instability by breaking news in a way that involves and immerses the reader in a much more personalised way than news reports of the same event.

Gavin Thomas (CEO of KCN) was last of the keynote speakers on the first day and presented a compelling case for investing in Gold miners or explorers who are in the ‘Rim of Fire’, a prospective geological structure in the earth’s crust where many of the world’s largest Gold deposits have been found.

The second day was just as packed and consisted of several more keynote speakers the first of which was Richard Karn (of The Emerging Trends Report) who suggested that to grow your wealth you would need to speculate. He looked at the opportunities available in specialty metals, those whose use is discovery driven (of new technologies using the metals) rather than GDP driven.

Alf Field came out of retirement for a once only speech to update his view on the Gold market and provide some price targets based on his Elliott Wave chart theory. A target of $4500oz for Gold in the next wave sounds very enticing. Although I don’t personally subscribe to such charting methods (EW), his previous predictions have proven relatively accurate and he provided some interesting background to his reasoning for using this charting method to predict how high Gold could go.

A high level speech from Ben Davies in the afternoon provided some insight into how Gold might be integrated with advanced payment systems, merging Gold and technology to once again return to a sound monetary system.

John Embry (a colleague of Eric Sprott) provided some interesting background on where he’s come from. He provided a riveting talk on manipulation of the metals. Not a topic we see eye to eye on, but interesting nonetheless and certainly a crowd pleaser.

The event was great overall, but there was certainly room for improvement next year. At a minimum I would like to see a better AV setup (some technical issues such as PowerPoint remote not working, no red showing on presentations and crackly microphones did detract somewhat), an increase in the amount of Australian based content and economic keynote speakers would provide a better local perspective and perhaps even a precious metals bear thrown into the mix of speakers would provide some much needed balance to the ‘buy buy buy’ view that was presented.

I enjoyed the event and will certainly consider another visit to Sydney for the event next year which is expected to be held during September (2012).

Bullion Baron
www.bullionbaron.com


Here is a quick snapshot from my phone during the final panel discussion where Sprott, Embry, Davies and von Greyerz took some questions from the crowd:



BB.

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Alf Field - The Moses Principle - Gold Symposium

Alf Field came out of retirement yesterday for a one off speech to provide his views on the Gold market and update his Elliott Wave predictions (last updated in 2008). I was at the Gold Symposium to see the speech live. Although I don't particularly follow specific charting methods such as EW (which seems more useful as a tool to map the past than to accurately predict the future), some of Alf Field's comments on the reasoning for EW working in the Gold market did make sense. Although not perfect, some of his early predictions have proven quite accurate and the speech itself was great. Here is part of it, explaining why/how he came to use EW for Gold price predictions:
How do you value something that has no utility value, no earnings or net asset value, does not spoil or corrode and is not used up?

Other commodities such as copper, soya beans and corn etc., are priced using a combination of demand, supply and stocks. If demand exceeds supply, stocks diminish, shortages develop, prices rise and new production comes on stream. Eventually supply exceeds demand, stocks build up, prices decline and marginal producers go out of business. The cycle then repeats itself. Other commodities are produced for consumption while gold is accumulated.

Consequently large stocks of gold exist in official hands as central bank reserves. There are also large stocks of gold in private ownership, in vaults around the world, in homes, buried in gardens, in coins and gold jewelry. New mine production of gold is tiny compared to available stocks. In 1971 official holdings of gold were about 37,000t. Cumulative world gold production throughout history up to 1971 was estimated to be about 90,000t, so investors/hoarders must have owned at least as much as the official holdings. In 1971 world gold production was a mere 1,450t, or less than 2% of the estimated amount of gold held in the world at that time.

The fundamental conclusion was that the owners of the large stocks of gold would determine the future of the gold price. If they became net sellers, the gold price would decline. If they became net buyers, the gold price would rise. There were reasons to believe that they would be net buyers. The world had been launched into an untried experiment where all countries were subject to Government fiat currencies and, in addition, there was a latent group of buyers in the wings. Americans had been prevented by law from holding gold since 1933. With the collapse of the gold exchange standard on 15 August 1971, there was no reason for this prohibition to continue. On 31 December 1974 (another Moses generation period from 1933) the largest and wealthiest nation on Earth allowed its citizens to buy and own gold.

The obvious conclusion was that it was necessary to resort to technical analysis to find a way to predict movements in the gold price. I experimented with a variety of technical systems and then got lucky. I discovered that the Elliott Wave Theory (EW) gave superb results in predicting the gold price. I couldn’t get the same great results using EW in other commodities or markets. EW is a complicated system with many difficult rules, but I will try and explain it in simple terms.

The technique is to concentrate on the corrections. In terms of EW, the sequence in a bull market is as follows. The market rises, has a 4% correction, rises, has a 4% correction and rises again. At this point the next correction jumps from 4% to a larger degree of magnitude, say 8%. The market then repeats the sequence. A rise, a 4% correction, a rise, 4% correction, a rise and another 8% correction. When the market is eventually due a third 8% correction, the magnitude of that correction jumps from 8% to 16%. This sequence is repeated until two 16% corrections have occurred when the size of the next big correction jumps to 32%.

The beauty of EW is that the corrections in gold are remarkably regular and consistent. Early in 2002 I picked up the 4%, 4%, 8% rhythm in the gold market which convinced me that a new bull market had started in gold. Another feature of EW is that once one is confident that these percentages have been established and one has some idea of the approximate size of the up moves, simple arithmetic allows one to calculate a forecast of the future price trend.
I won't quote the entire article here, as it's already made it's way onto the web (for example here at Silver Bear Cafe), but here is the final snippet that most would probably be interested in (I would still encourage a read of the entire speech!):
This was prepared on 27 September 2011, the day after spot silver reached a low price of $26.59. The start of the extension was at $26.50 on 28 January 2011. A mere 3 months later, at the end of April, silver topped at $49.50, a very obvious explosive advance. Silver then traced out an A-B-C correction where the A and C waves were declines of similar size at $17 each, a typical EW relationship. At that low point of $26.59 on 26 Sept 2011 - the silver price had exactly retraced the full gain achieved in the explosive extension. The conclusion was that there was at least an 80% probability that the silver correction had bottomed at $26.59.

If gold retraces the exact gain achieved during the explosive advance from $1478 to $1913, which occurred in just seven weeks, it will represent a decline of 22.8%. That is nicely within the above anticipated range of 21% to 26% for the current decline in gold. There is a possibility that the spike drop to $1531 on 26 September marked the low point of the correction in gold. The midpoint of the correction from $1576 to $1478 is $1527, close to $1531. If $1531 was the low, it was a decline of 20%. This is slightly below expectations, but it still qualifies as one degree larger than 13%. At the date of writing (7 Nov 2011), gold has recovered to $1767, which is a 61.8% retracement of the loss from $1913 to $1531 (-$382), a typical size for this type of recovery. That leaves open the possibility (40% probability?) that gold will have another dip to test the target areas mentioned. The higher the price goes above $1767, the greater the probability that the low was in at $1531.

Once this correction has been completed, Intermediate Wave III of Major THREE will be underway. This should be the largest and strongest wave in the entire gold bull market. The target for this wave should be around $4,500 with only two 13% corrections on the way.
Could Gold get to $4500? I don't see why not. As I've pointed out in the past the price of Gold rose by a multiple of 5 in the last 24 months of the last bull market and most of those gains were seen in the final few months as Gold launched into a spectacular spike. I would suggest that much the same as last, at the end of the bull market we will see a spike higher that surprises many... I also suspect that time could be drawing near. 

BB.

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Saturday, November 12, 2011

Gold Symposium in Sydney - Updates via Twitter

I mentioned on the blog a month ago that I would be heading over to Sydney for the Gold Symposium. That's this coming Monday and Tuesday. Not likely I'll have a chance to write up any posts until I get back, however I'll hopefully post a few snippets during the day on my twitter account. Which you can track below if you don't have an account.

You can view the event agenda on the official website (here).


----------------------- -----------------------

BB.

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Friday, November 11, 2011

Is Italy’s Sovereign Debt the Subprime of Europe?

The US has not been in the spotlight recently, but most who have followed the rolling crisis which started in 2007/2008 will remember this chart showing the hundreds of billions worth of subprime (US mortgage) resets that occurred over the period:

CLICK TO ENLARGE

These resets were considered one of the main triggers for the US house price crash (and subsequent GFC) as borrowers who had been provided too much housing debt were thrown from artificially low fixed interest rates to much higher floating/variable levels and many were unable to meet their repayments.

Following on from the above chart showing mortgage resets, this one caught my eye on Acting Man:

CLICK TO ENLARGE

It shows that Italy has a lot of debt rolling over in 2011 and 2012 or resetting if you will (like the subprime) taking on a higher rate depending on what the market is prepared to offer. That might not have been a problem except that recently interest rates on Italy’s debt have started to climb, much like they have in other troubled countries. This chart from TF Advisors (posted on Zero Hedge) shows that a 6% 10 year bond rate has been the inflection point for several of the other countries experiencing bond contagion:

CLICK TO ENLARGE

Will Italy be able to reissue all this debt in a manageable fashion if their rates are out of control? Germany has already pointed out that Italy is too large to bailout… could Italy be the trigger for the next large market rout/credit event that could end in complete collapse?

A couple of thoughts from Martin Armstrong's latest:
Today, there is no plan. There is no transition, only austerity. The politicians are doing NOTHING whatsoever for any reforms they reject because it would change the way they have been doing business since WWII. Italy’s debt is bigger than Spain, Portugal, and Greece combined. It is too big to be bailed out and there is no PLAN B to even address what happens if sitting on their hands blows up in everyone’s face? Stay away from ALL government debt! This is a wave of Creative Destruction. We are in a transition to a completely new world ahead. Armstrong Economics
The crisis has morphed over the past 3-4 years. Some readers might remember I have posted this chart before, but I think it is worth sharing again. It shows the progression of events as we have rolled around from consumer, to corporate and now to a sovereign debt crisis:

CLICK TO ENLARGE

I don’t pretend to have an answer to the excessive debt problems we face, but whatever outcome those in charge decide to roll with (Papandreou’s cancellation of the referendum for Greece’s ability to choose their own fate really shows what little choice the people have in these decisions) we are looking at turbulent times over the next few years or longer. There have been few assets which have been able to roll with the punches as this crisis has evolved. Gold and Silver have thrived in this uncertain environment (with setbacks along the way of course) and it's likely they continue to do so (with a medium term outlook, short term weakness always possible) until an end is in sight to this mess. I’ve got a strong pair of binoculars and I can’t see the finish line yet…


BB.

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Wednesday, November 9, 2011

TV Show 'Gold Rush Alaska' Season 2 Starts

There was a new series that premiered last year called 'Gold Rush Alaska', the second season has just started airing.

It's basically a reality TV show about a group of down on their luck men who band together with the last of their dollars in an all or nothing effort to get a Gold mining operation started at Porcupine Creek in Alaska.

The show is extremely cheesy. I imagine most of the action is staged. While a few snippets of interesting information hit watchers, it's not particularly education. It is however still a lot of fun to watch. I've just started watching the second series, here is the trailer:




One of the men who started with them in the first season, but who left part way through after friction between some of the guys was Jimmy Dorsey. Jimmy has his own blog which provides some interesting insight and a look at how things happened behind the scenes (The Glory Hole Blog).

You can find out more about the show and watch some clips on the official website here (Link).

It will be interesting to see just how well everything pans out for them this season given the bombshell about Porcupine Creek that we just got in the first episode of season 2...


BB.

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Tuesday, November 8, 2011

The Australian Property Forum trolls at work...

I really did not want to cover this topic again. I was just going to write a post and move on. However I found a great example of the way these trolls operate and can show a clear path of connections from the trolls to Australian Property Forum and thought I would share. For those that missed it, I have a page here covering some history and their main exploits:


Now here is an example of the trolls in action (click to enlarge):


It's a post made on property investment forum Somersoft.

Now you may be thinking that's innocent enough, right? Just someone posting a thread on Somersoft, in fact they are linking to this very blog posting a warning about the APF trolls. They are smart arses.

TKline is one of the troll club members. They plant many accounts on many forums for use at a later time. They login with the accounts on an irregular basis making a post or two here and there so the account has some history (the posts are always short and low content from my observations, they just need it to look like they were previously active). You will notice in this past post of TKline's that he links to an online article (click to enlarge):


This is the article -> Global House Price Crash

 
It is supposedly written by "Consa Greenwood". Consa was the owner of GHPC prior to it's demise. The writer of the article was the trolls (not Consa) and if you follow two of the links in the article it takes you back to the GHPC landing page on Australian Property Forum.

Also you can see in this profile on another site (Global Property Guide), Tom Kline more obviously links to the trolls forum:


Further to the above, the website which TKline hosts in his signature on Somersoft Property Forums is connected with APF and the trolls (australianpropertyportal.com). You will notice multiple links to Australian Property Forum on various pages at the portal site and on the top of Australian Property Forum if you click on gallery or blogs it takes you to the portal page (click to enlarge, shows address on mouse over):


These two websites are owned and operated by the same person or group. Further to the above clues linking the sites, they are both showing Adsense adverts from the same account which also links the two:


Why would TKline be linking to the property portal in his forum signature on Somersoft unless he was connected with the website? What other motivation would there be for someone to promote another persons website? This provides further evidence that APF is owned and operated by (or very heavily connected with) the troll club.

The account TKline is likely another hijacked identity in the same way that they have used 'Bullion Baron' online to link to the troll forum, Tom Kline is probably another unfortunate victim of their attacks.

TKline isn't the only sleeper account that belongs to the trolls on Somersoft. I am aware of others.

I know these posts probably make me sound like a conspiracist and paranoid, but if you are interested and read these posts with an open mind, drawing the dots you will see there is something to this research.

They are subtle. They are clever. They are not a figment of my imagination ;) and they have been plaguing the Australian online property landscape for years now. I find the whole situation fascinating. Who are these trolls? What vested interest do they have? Are they real estate agents? Property developers? Do they simply run the forum and website for the ad revenue (I doubt this is the case given their other activities)?

The organised way in which they go about their business is impressive. They probably think no one notices their tricks, but I have been watching for sometime. It's only been since they started impersonating my blog that I decided to write about it.


BB.

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Monday, November 7, 2011

Martin Armstrong Predicts Financial Armageddon

Around 6 weeks ago I posted a pretty dire warning on the blog:
There may come an inflection point where the public has had enough and turns away from regulated markets and look to store their wealth where there is no counterparty risk. Such a change in perception could bring around many devastating consequences. A meltdown of the banking system. Collapse of currencies (hyperinflation). Failure of government (sovereign default). Breakup of political/economic unions (such as the European Union). Many of these monetary and political systems are intertwined, so their breakdown could occur in tandem or one could lead to the other.
Four years ago this would have all sounded like nonsense. Come another four years I suspect that some events like this could have played out. Of course the effects on you personally will likely vary hugely based on where you live, how you live and whether or not you are prepared for such events. Bullion Baron
Basically I was suggesting it would be prudent to prepare for collapse in the event that the current debt crisis cannot be overcome.

I thought I would share some exerpts from this Martin Armstrong article as it shares some similar themes and more succinctly explains the problem that I was trying to explore, that there may be NO SOLUTION:
While both sides yell at each other be it in politics or investment, they fail to comprehend that the problem cannot be solved by arguing about what is money, about deficit spending, or who is getting a free ride be it the rich or the poor. This is a SOVEREIGN DEBT CRISIS and that negates all the issues being thrown around. This is not a problem that can be solved with making money gold. It cannot be solved by confiscating ALL the wealth of the rich or raising taxes. It cannot be solved by shutting down ALL social spending. For no matter what we try to do, this has been allowed to go too far. We have crossed the point of no return. We are on the edge of complete collapse of the Western Financial System that threatens to destablize everything and obliterate our future. Pension funds depend upon SOVEREIGN DEBT. We are in a position where there MUST be a complete structural reform, or everything goes bust and civil unrest will destroy what is left.
Even a balanced budget will no longer work because the proportion of interest within total expenditure will continue to rise until it consumes 100% of the whole budget. Interest is like the Energizer Pink Bunny that keeps on going until you default or monetize the debt. If we eliminated all banking, credit, leverage, and could create a one-for-one gold standard with ABSOLUTELY no fiat money at all, what will that accomplish? The proponents will argue that this will create a discipline and stop inflation. Aside from creating the worst economic collapse in history eliminating credit, it would be no different than a balanced budget and the interest expenditires would eventually still consume everything. It is the unrelenting DEBT that keeps growting. If you only printed money to cover the spending, that would have been FAR LESS inflationary! As of 2010, the national debt stood at $13,561.60 billion while the total accumulative interest expenditures were $8,575.5 billion. In other words, had we just printed the money and spent it, the debt would be only $4,986 billion. Total interest is about 63% of the debt. So a gold standard will do nothing but collapse the economy and a balanced budget will probably create a civil war and ALL social spending would have to be cut to pay the interest on the debt. The ONLY resolution is MONETIZE the debt and STOP borrowing unless in time of war ONLY, or we DEFAULT and wipe out all pension funds, which would probably spark civil war. So let us stop the peripheral nonsense dancing around the real problem – it’s the DEBT, not what is MONEY or a BALANCED BUDGET!
...
We are headed straight for a Financial Armageddon because as Hoover points out from experience, once nations begin to default, capital will begin to look around and see who should be next. Once that takes place, the GLOBAL CONTAGION will then spread to Sovereign Debt on a global scale, federal, state, and local. No single nation will be able to do a damn thing. No committee could be formed fast enough to investigate no less solve the problem. They will typically turn to either domestic bankers or academics and neither will have a clue what to do lacking global trading experience.
The SUPER COMMITTEE we need now must NOT be composed of academics and politicians, but people with real live trading experience who have witnessed HOW capital moves and will see the cracks in the global economy that they themselves would trade. We are looking at the entire debt game coming to an end. We have to begin to look at a strategic revision of the World Monetary System – Bretton Woods II. In the process, there is likely to be great pain as people try to trade this game for it will all be about TIMING. Martin Armstrong
It paints a very grim picture for the world, but a scenario (complete debt/financial collapse) which is becoming more and more likely as time goes on as governments continue to flap about plugging holes rather than replacing a broken system.

Gold backed currencies are unlikely to be the answer as Armstrong explains, however that doesn't mean the price won't skyrocket in terms of dollars or versus other assets as people flock to safety.

As Armstrong points out, it's about timing. Collapse or a complete system reform may be inevitable but they may be able to keep it on life support for sometime yet...


BB.

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