Thursday, August 16, 2012

Business Insider

Here are enough charts to paralyze your trading, or to let you reinforce your bias, you can see what you want.   I will pull 2 or 4 of these for occasional consumption.   The nuggets in alot of interesting chaff.

Precious Metals, Gold, Silver, Platinum -- How I Buy

I am going to add links here for my 2 favorite gold/PM dealers, however, in the mean time, if you want these links just email me at stock

POST POST -- Chart believe is from 8-22-2012, after I posted the treatisse below on how I buy PM's. Funny that was the exact moment the PMs started to rocket upward.  Usually, when one takes a strong view on something, Murphy would say the opposite happens.   I'll take luck whenever I can get it!     


I have done business with both and they are reliable.   They both have people knowledgeable in Precious Metals (PM) who can also advise and strategize with you at no cost.

One has a special deal right now, which is a PM starter kit.  Around $400 with exceptionally low premium.

Here it is in a nutshell:  Buy 1 ounce Gold Bars, and buy "Junk Silver".    25% Junk silver up to $15,000 and the rest in Gold Bars and then some Canadian Maple Coins or Krugerrand Coins.

Stay away from numismatic collector coins, they all have “good stories”, just stay away unless you are a real coin collector.

For starters, get $5,000 to $15,000 in pre-1964 silver dimes and quarters, this is called JUNK SILVER and there is nothing junky about it.  A quarter is roughly worth $6, a dime is 2/5 of that, around $2.50 for notional thinking.    You need this for barter in the coming New World Disorder. (NWDTM)

Junk silver is sold by “Face Dollar”, so a Face Dollar of Quarters would be 4 quarters, or 10 dimes.   The weight of silver in dimes and quarters is exactly proportional to the USD face value of the coin.    10 dimes has exactly as much silver as 4 quarters. 

A face dollar of either quarters or dimes will be around .715 ounces of Silver.     

Silver is heavier than you would think.   You can’t put $20,000 in a backpack, grab your bug-out bag, and just hit the road.    For notional thinking, Gold is about $25,000 per pound, so you could easily transport $100k of wealth. 

Silver also comes in
1)      Nationally minted coins (credible but higher markup)
2)      “Rounds” which are round coin like objects but that aren’t minted by a Government, these are sold at lower premium, but in a Mad Max world you might have issues “proving” them to be real.   I like Rounds.
3)      10 ounce bars, very cool, roughly $300 notional, stack well.   You can also get 100 ounce and even 1000 ounce bars, but why?

Many people are recommending a higher percentage of silver in your portfolio than gold in dollar value.    They think that because the long term ratio of gold to silver pricing is high, that silver can appreciate more than gold.   But silver is also “poor man’s gold” and the poor man is “retail” and retail panics when things get a little sketchy.    Also silver does not make it easy to transport serious wealth, whereas gold does.  

Whatever PM you buy, always look at markup over spot price of the metal (use futures for spot price).  Get the most metal you can!

Finviz is OK place for futures spot price.

Always try to get the most metal for your money.    Don’t be impressed with coins that come with a high markup (aka premium) over spot like the American Eagle gold coins.   Sell price $1688 when spot is at $1614, that’s a big premium.  Also watch out for shipping and insurance costs, the good dealers I recommend are always reasonable on this, unscrupulous ones may hit you with a big cost that effectively raises your premiums.

Gold: Your main choices are coins and little 1 Ounce bars.   Why get a large bar?   For ego?  There is no real benefit in getting large bars. 

The bars have a lower premium than the coins in general, as low as $29 over spot.   Also the bars have one benefit that you may not think important at this time, but it may be very important in the future.   Gold in the form of a “monetary instrument” has different reporting requirements when transporting out of country.  

Many experts say that you should diversify the country in which you hold assets, indeed, why put all your eggs in one basket?   For sure, all countries will competitively devaluate their currency until some event causes them to stop printing money and devaluating their currency, AND they will also try to prevent wealth from leaving their country, AND the US will beat all other countries over the head with financial and military might.  

On the other hand it is also good to have a bunch of gold close to you.    Gold storage is a complex matter, and not part of this treatise.

Some gold coins are .9999 pure gold.   The only problem with this is that pure gold is soft and it may get scratched in “use”, but how much use are you really going to do?   How often are you going to have a $1600 coin kicking around in your pocket. 

1)      The US Eagle is 22 carat, it has 91.67% gold, 3% silver, 5.33% copper
2)      The US Buffalo is 24 carat, or 99.99% pure gold, it will scratch more if that is a concern, and premiums vary quite a bit.  For a pure gold coin, I am going to go with a Canadian maple, which sells with a lot less premium.
3)      Canadian Maple – 99.99% gold, great coin, great credibility, reasonable premium over spot
4)      The “Krug”, or classic Krugerrand from South Africa.   A great coin with some of the lowest premium on well regarded gold coins.   The Krug is 22 carat,  91.76% gold the rest is copper, an alloy known as “Crown Gold”.   It does contain a full ounce of Gold though.
5)      There are others, the Austrian Philharmonic, and the Chinese Panda.   I think the Panda looks silly and have no interest in supporting China’s PM market.

Gold Bars
These are the lowest premium of all gold products ($29 over spot is the best I have seen this decade).   Always in 1 Oz, larger bars are for ego or seriously large portfolios (over $10M).    The Perth Mint, the Austrian Credit Suisse, and the Pamp Suisse are all you need to know.

Confidentiality—there are certain types of transactions that require the PM dealer to report to the government in PM transactions.   The reportable transactions are very rare.   Some dealers will report only the essential reports, and other dealers will come right out and state that they WILL be reporting your transaction almost all the time.    Which do you prefer?   You should read the dealers policy and question them when you call in to buy.    There will be tax consequences when you sell, if you ever sell.

Platinum Coins: Why not?  Diversify a bit, I bought platinum last week when one of my recommended dealers had a good bull session with me and stated “I like being diversified into a metal that is produced in a volatile country like South Africa”.   Indeed, just 7 hours ago, a violent strike hit a major producer in South Africa and the metal surged.    The Canadian Maple Platinum has a reasonably low premium, it is a $50 “face value” as a real Government coin, worth around $1500 in minted cost.

Some have suggested that jewelry is a good investment, although the “minting” value of jewelry often takes the price far beyond the “melt value”.    I don’t buy into this jewelry thing, as proving the purity could be quite troublesome in the future.   There are methods of testing purity, which involves putting acids on your gold, and there seems to be no need to cross this bridge.   There are also electronic testers, which are brutally expensive, and just silly to even consider unless you were a large dealer.

24 karat (millesimal fineness 999) – almost pure gold- These carat weighting apply to coins also
22 karat (millesimal fineness 916)
20 karat (millesimal fineness 833)
18 karat (millesimal fineness 750) – 75% pure gold
15 karat (millesimal fineness 625)
14 karat (millesimal fineness 585)
10 karat (millesimal fineness 417) – 41.7% pure gold
9 karat (millesimal fineness 375)

There are companies selling copper bars, with insane large markups over spot.  Personally I think this is a silly form of speculation, especially given the insane markups.   The bursting of the Chinese housing bubble will pressure copper for a long time to come.  Housing is 40% of all copper use.   At $3 per pound, compared to silver at $480 per pound, and gold at $25,000 per pound, those PM’s are much more practical.    Although I did scrap some 16 solar panels, and turned the copper into 2 nice shiny gold coins!

Copper pennies---I don’t roll up my pennies, I put them into vases that get really heavy.   I did a representative sort for kicks, the 1909 to 1982 pennies actually are worth 2.23 cents in melt value, the 1983 to current pennies are actually 95% zinc, 5% copper and have a melt value of  0.48 cents.

I got 819 grams of pennies in my sample
1983 and later was 615 grams, 198 pennies or 75.1%
1982 and earlier was 204 grams, 65 pennies or 24.9% and one of these was a “wheaty” believe it or not.

At 3.11 grams per penny, my sample size was 263 pennies.  1 Wheaty.
198*.48=95 cents
65*.223=145 cents

Total value of 263 pennies in 240 cents face value, sheesh!   I don’t think sorting pennies is a real business model, however, why not keep them?   It cost more money to get rid of them in time and gas!

Print Until Pitchforked, Epiphany

Epiphany today, in the shower, my best thinking
They will print until they are pitchforked.

Wednesday, August 15, 2012

2008 Bear Sterns "recovery" / 2012 Euro Pig Lipstick

The comparison is amazing. A blogger at Breakpoint trades posted this separately
and I put them together with annotation.

Monday, August 13, 2012

Summary of all the "money" in the world

Took some time to tally up all the assets in the world.    Hope you enjoy it.   All of these figures have a real basis, except for the value of unlisted companies, I made up a number of 10,000,000 companies average value of $425,000.   I could not find anything on the net.    Funny about that....well you know entrepreneurs didn't build that anyway now did they?

196 Trillion in World Assets.   Now keep in mind that derivative bets are around 700 trillion. 

What part of these assets shown below represent actual "Wealth" --- well start stacking up on those, know what I mean?

Sunday, August 12, 2012

MISH complete repost

These are the fundamentals that are ubiquitous in my head.   Mike Shedlock aka MISH has presented them nicely, along my same line of thoughts.

 One big variation, the Elliot Wave, aka Pretcher disciples have been indoctrinated into the deflation thing in which prices go down over time.    

 I don't see it that way.   "They" all will print until they can't print at the same rate.   Nothing could be more clear cut.   So MISH is strongly in the deflation camp (yep in Japan that happened, is happening),  but competititive devaluation of currencies is also the game I have been promoting since around 2007.

 Savers will get killed, those on fixed income will literally get killed by the inability to to live correctly.

 ------------------------------------------ Enjoy the MISH --except for the deflation part, he nails it nicely.


Percentage Growth in Government Jobs vs. Private Jobs vs. Population Growth; Facts and Consequences

Keynesian clowns are concerned about the decline in government jobs in the past few years. They want the government to step up spending and hire more workers to make up for the loss of jobs in the private sector.

Here is a chart from reader Tim Wallace that will help put the recent loss of government jobs in a better perspective.

Percentage Job Growth vs. Population Growth

click on any chart for sharper image

The growth in government jobs is not sustainable nor is there any genuine excuse for it other than political pandering and vote-buying operations.

The deviance between private bobs and population growth is easily explained by the entry of women in the workforce.

Percentage Male and Female Job Growth vs. Population Growth

Note how the percentage growth of men in the labor force closely tracks population growth the percentage growth of women in the workforce has skyrocketed.

Employment in Millions

Entry of women in the workforce allowed much higher household debt levels than ever before.

Now what?

I'll tell you what. Ability of households to take on more debt has peaked. There are no more female workers to add to the pool. Everyone male or female is working (or is looking for work) whether they really want to or not.

Women actually overtook men in the work force way back in 1990.

Percentage of Total Workforce That is Female

Unfortunate Facts

  1. The unfortunate fact of the matter is everyone need to work to pay off accumulated debts and meet living expenses, but the jobs are not there.  
  2. The second unfortunate fact is we cannot afford and do not need all of the existing government jobs.
  3. The third unfortunate fact is demographics are no longer favorable. Indeed, there are too few jobs, too much student debt, and too few workers supporting too many retirees on Social Security.

Those unfortunate facts happen to be highly deflationary.

Demographic Time Bomb

For a graphical representation of point number three above, please see Demographic Time Bomb in Pictures and Dollar Amounts; Ratio of Social Security Beneficiaries to Private Employment Now Exceeds 50%
  1. Much pain awaits the US. 
  2. Public worker pension promises have been made that cannot possibly be delivered.
  3. The US simply cannot afford to be world's policeman. Military spending must come down or it will destroy us.
  4. Medicare and Social Security problems must be addressed as well.
  5. Upcoming generations are highly likely to see a drop in standard of living vs. the baby boomers. This has never happened in US history.

Heartaches by the Number

Please consider Heartaches by the Number
  • Just 14% expect today’s children to be better off than their parents
  • Just 31% believe the U.S. economy will be stronger in one year
  • Just 27% think the country is heading in the right direction. 
  • Just 24% of American Adults believe the job market is better than a year ago
  • 44% think the job market is worse, up 15 points from June

Demographics Suggest Majority is Right

I happen to agree with the majority who think those now graduating from high school will not be better off than their parents.

There are too few jobs, too much student debt, and too few workers supporting too many retirees on Social Security.

Who Will Address the Problems?

As I look out on the political landscape, I see little hope that either Republicans or Democrats will address these problems.

Republicans refuse to address the income side of the balance sheet, and Democrats refuse to address the spending side.

Neither party is willing to tackle military spending.

How long the market lets these can-kicking exercises continue is anyone's guess, but the longer this goes on, the more pain there will be.

The culmination will be a currency crisis at some point down the road. Timing is very problematic. Japan proves debt-to-GDP ratios may go on much further than anyone thinks possible.

Mike "Mish" Shedlock

Hussman Comment

This is almost hilarious, if it weren't true.
Investors remain so addicted to the temporary high of monetary intervention that they are practically begging to be shot, mauled by dogs, and diced by a Veg-O-Matic so they can get their next fix of pain-killers.

From John Hussman, who runs alot of money.  Been full on bear since 2008.

We don't know when things will unravel.    But "they" can just print money, in fact their seems no alternative that is likely to happen given that human beings are involved in this process.

Rather than "twist" bonds, when the customer shows up with a matured bond, they can hand them 10,000 fresh $100 bills for their million dollar bond.  

Hussman link