The End of Shangri-La

Eventually all paper money returns to its intrinsic value - worthless. -- Voltaire

The history of government management of money has, except for a few very short happy periods, been one of incessant fraud and deception. -- Friedrich Hayek

If the people will choose to defend themselves against their adversaries, it would be prudent to understand what and who their adversaries are. The challenge is not just pitting Democrat against Republican, but in the differences of economic philosophies regardless of how sweetly each are stated. But more importantly in truth then again, freedom rests with the willingness of a sovereign people to take the time to learn knowledge that has been denied them for so long... and to understand it, and how it relates to the current situations of our times. I have tried to interject what I consider to be important lessons in how economics works; to try to explain what is going on in our economy and the world. Empirical evidence tells us that cutting taxes raises more (not less) revenue. Please call me if you would like further clarification.


From the stock bubble of the late 1990s to the even bigger and more devastating housing bubbles, culminating in the 2008/09 crash cum Recession, to the recent policy of guaranteeing inflation and offering little or NO reward to savers, the present government, by way of the FED, have eviscerated the middle class and made poor people poorer. The only beneficiaries have been the Big Banks, Wall Street and the friends of Obama. If all that weren't enough, the CRISIS has spread throughout the world and is now threatening to turn into a worldwide Depression beginning with the dismemberment of Europe. Even mighty China has fallen into Recession and the problems that China is now facing can best be described as Chinese in proportion but exactly the same in nature as the rest of the world's. After all, there is only one set of economic laws. We are about to discover that the root causes of their problems are exactly the same as ours and the rest of the worlds: Central Planning (Socialism) in the long run doesn't work and that is not just my opinion. Empirical evidence over the centuries clearly demonstrates this truth.

Margret Thatcher (Prime Minister of England) said it best, "The trouble with Socialism, simply and concisely, is eventually you run out of other people's money."


Unlimited money-printing from the Federal Reserve, the European Central Bank as well as from Japan's and China's Central Banks will accomplish what? Oh let's not leave out the Bank of England and a host of others, that are also on the same band wagon, announcing even more money-printing. And yet, the price of gold has not even bettered this year's March high of $1,802, let alone last year's November high of $1,923. We and the world faced the single most important ELECTION of our countries history going back to our founding. Unfortunately the results have been disastrous. Our newly re-elected President continues to dictate his philosophy while Congress and the Republicans remain deadlocked in diametrically opposing policies. Unfortunately, Obama is much stronger willed than the spineless GOP and therefore his wrongheaded policies are destined to win out. Since we will not be able to rectify our situation and pull ourselves and the rest of the world out of this dilemma we got ourselves into, we will fall into an inevitable worldwide Depression which history teaches always leads to world war. (Since when has any government been able to learn from history?)

Is there a leader out there who can lead us back to prosperity and away from the brink? Unfortunately I do not see one that has any ideas as to what must be done, let alone the courage to even attempt to do so.


Why with all this money printing has inflation not moved substantially higher along with the price of gold? And of even a greater mystery, why has all this money not created a tremendous amount of stimulus and inflation all over the world? Without getting into the Nitti Gritty, the simple answer is because most of this Government stated inflation rate greatly understated what the true inflation is and is without any justification to reality; while most of the FIAT Money has been locked up in either the vaults of the Central Banks as they continue to monetize any and all new debt or the balance sheets of their member banks in order to strengthen their balance sheets and make up for all the tremendous losses they sustained during the Real Estate crisis. In a nutshell, whoever got all this money it was certainly NOT the Public or Small Business or even the majority of large businesses.

Again, the question is: Are gold and gold shares going higher? But, the real question is not if gold shares will go higher, but when and how high?


After almost a year of Jon Corzine (past Governor of NJ) stonewalling congress on the MF Global infamy, he is getting off without even a slap on the wrist and what is worse, not returning 1 cent of the $1.5 billion his firm stole from clients money. The New York Times says "criminal investigators are concluding that chaos and porous risk controls at the firm (where was Dodd Frank) rather than fraud, allowed the money to disappear." Ok, so there was no criminal intent, but the public (the only innocent players) still take 100% of the loss. Gee, but it's great to be a Democrat politician even if only an ex one.

ONLY IN AMERICA is a firm is allowed to rob its customers of $1.2 billion in the midst of the worst financial crisis since the Great Depression, and our elected officials let him off with nothing but some finger-wagging. If you had any doubt that Washington and the banking industry are completely corrupt, you sure don't anymore. And this isn't the only case. A recent ruling against Sentinel Capital Management - a brokerage firm that defrauded its customers out of $500 million by using client funds as collateral in speculative plays - dismissed the charges and let the company walk away virtually Scott-free. In fact, Fred Grede, a trustee of Sentinel, commented that the court's ruling "suggests that brokerages can use customer funds to pay off other creditors."

And then there's the recent scandal regarding JP Morgan, Citigroup, Bank of America, the Royal Bank of Canada and Barclays, in which the banks manipulated the interbank borrowing rates and caused an estimated $3.5 TRILLION in client overpayment. What did the bankers get as their just rewards? Barclay's was fined $400 billion and it's estimated that the American banks combined will only have to pay a paltry $35 billion fine, about 10% of the total over charges.


Trusting our elected officials and the banking system to guard our wealth and our freedoms is a JOKE. It's time to throw them all out. If you're like me, you understand the easiest solution in protecting our savings is to buy up gold and keep it outside the banking and brokerage system.

Over the last decade, gold has proven itself to be the greatest store of value for protecting your money.

That is also why countries like Russia, China, and India are buying up massive amounts of gold as well as encouraging their citizens to do as well; cushioning their economies against the eventual collapse of the dollar. However, as the need for gold grows, so too do the risks of buying it and owning it. Beware of Counterfeiters.

Believe it or not, we might even run out of silver in our lifetimes. At the current rate of usage, all known silver reserves will be mined out in 27 years. And if new technologies now on the drawing board come to pass, we will run out in about 15 years. Scarier yet, if the rest of the world starts using silver at just half the rate we do in the US, it will be gone in seven years. That puts silver's huge run up of the past few years into perspective.

There's a lot more to the silver story than old coins and jewelry. Because of its strength, conductivity and reflectivity, silver is absolutely critical in electronics. It is also important in batteries, bearings, catalysts, solar energy, water purification and in health care. Silver is just as vital to the world economy as copper or zinc, but relative to its rate of consumption, silver has the lowest in-ground reserves of any major metal.

Few people realize that we have about five times more gold than silver in above-ground inventories. That's because 80%-90% of all the silver ever mined has been used up for industrial purposes. But 80%-90% of the gold is still around.

DIVIRSIFACATION: The cardinal rule of prudent portfolio management has always the number one rule that I sadly neglected in my letters, but as I hope you have recently noticed, I have begun to correct my oversight.

I Shares Singapore Index ETF (EWS)

This Singapore exchange-traded fund corrected recently and then managed a good bounce from its 50-day moving average - a positive sign. Mobile operator StarHub, one of Singapore's largest telecommunication companies, is working with Microsoft to create a "super Wi-Fi" network. This technology will utilize a slice of television bandwidth to transmit network wireless signals faster and farther, keeping Singapore at the forefront of developing mobile communication technology. EWS is a BUY.



Stocks have been gyrating in reaction to every stupid statement of our esteemed politicians, both here and in Europe, without even ONE constructive proposal ever being made, and is finishing the sideways triangle which is the stock market's reactions to the news coming out of Washington and Europe. Next should be a rise out of this pattern. I believe stocks are inside the beginnings of a strong wave e-up rally leg that will finish the multi-decade Jaws of Death pattern. There is also a Phi Mate turn date at the end of December, perhaps that will be the top; however it might end up being a turn within the wave e-up move - hard to tell at this point. If it will be the end of the Jaws of Death pattern, stocks will need to rally sharply over the next four weeks.

The infamous December 21st, 2012 astrological event is only 3 weeks away, where the earth and sun align with the center of the Milky Way, and when the Mayan calendar mysteriously ends. There is a Bradley model turn date scheduled for that date as well. Not sure what this means, but it is interesting if nothing else. Most of the indicators I watch remain on a buy signal, still supporting my expectation of a large rally into year end. There was a small change in the McClellan Oscillator Friday, suggesting a large price move is possible early next week. The internals for Friday were mixed and uninspiring.

This past week's market reinforces the latest for my Primary Trend, long-term indicator and remains on a buy signal anticipating the final wave e-up. It has strengthened over the past several months. I anticipate the completion of the expected Jaws of Death Indicator signifying a multi decade top leading to the completion of the Multi Century Bull Market that we are now in and setting the stage for a multi decade Bear Market, which will be wave 1 of the eventual long multi century BEAR MARKET. Precious metals remain in a corrective decline, which has been relatively mild so far, probably wave ii down inside wave 3-up.


The S&P 500 is just off its 52-week high, yet nearly every bit of recent economic data shows we're in the middle of a global economic slowdown. In China, new export orders fell at the fastest pace in 42 months. The unemployment rate in the euro zone hit a record high this month. And in the US, second-quarter GDP was revised down from an already anemic 1.7% growth rate to a pathetic1.3%.

Still, investors ignore the bad economic news and bid up stocks. Why? The simple reason is they are not. It is the massive injections by the world's central bankers in their all out attempt to juice up the stock markets in their desperate hope that rising stock markets will generate demand and thus rally the economy. In short market - manipulation. (Manipulation cannot be a long term solution.)


Probably the most frequently asked question I get is, "How will Gold and Mining Stocks do during the coming stock market plunge after the Jaws of Death Pattern finishes?" While I can tell you that during the stock market crash of July 2011 into August 2011, gold rose 15% while stocks fell 17%. This and the price pattern for gold suggests it will be an excellent hedge against a coming stock market crash, and will either outperform or at least hold its own.

Back in 1970, China didn't even register as one of the top gold producers. The top five producers at the time were South Africa (67%), the former Soviet Union (13.7%), Canada (5.75%), the United States (3.7%) and Australia (1.3%). Then, in 1995, China made its debut on the Top 10 list at No. 6, with 6.2%. South Africa was still No. 1, but produced only 16.6% of the world's gold -- a sharp decline from 1970. The US jumped to 13.7%, followed by Australia and Canada. Fast-forward to 2012, and the numbers are quite eye-opening... China's now the No. 1 producer at 13.1%, followed by Australia at 10%, the United States at 8.8%, Russia at 7.4%, and South Africa at only 7%. (If you add the former USSR nations together, they would top the list.)

China's buying and hoarding of gold only bodes well for the price of the metal going forward. And since China has shown consistently that it's a patient investor that buys into selloffs, with an eye for the future, we're looking at decades of support for gold prices.


But what is the Future? China, apart from trying to get rid of their currency reserves of ever depreciating US dollars, intends to challenge the US dollar's sole Reserve Currency status by backing their own currency with gold (if not completely by at least a large portion). And they are not alone. They have enlisted the aid of Russia, Brazil and Saudi Arabia with their Gold Dinar, and are soliciting the rest of the world's emerging Nations that have large surpluses in their balance of trade that are also accumulating depreciating US dollars that they are losing money on every day. Even our so called NATO ally, France, has jumped on the new Reserves Basket of currencies band wagon.

The bottom line: The FED, Bullion Banks and their allies have been manipulating the price of gold and silver DOWN ever since 1971 in their attempt to maintain the value of the US dollar. There is no better proof of manipulation than examining Thursday's trading, $35 million of gold dumped at the market opening, down $30. Is that the way for a seller to maximize his returns? Or is it the best way to drive down the price of gold and perhaps scare away new buyers? Nevertheless, these manipulators are now suffering trillions of dollars in losses without any collateral backing up their positions. They have gotten away with it thus far only because the exchanges under government pressure have not enforced their own position limits or enforced their own Mark to Market Collateral Rules. And the Governments of both England and the US have continued to supply their country's gold to the point that I do not believe that either country has any Gold Reserves left. It is my belief that they will not be able to continue this charade much longer.

At some point, in the not too distant future, both gold and silver will benefit from all of this buying. They will also benefit GREATLY once the Manipulation Cabal are forced to capitulate. Right now, gold and silver stocks trade at levels that are similar to when gold was under $1,000 per ounce. The ratio of the XAU Gold Index to the price of the metal is also signaling that it's time to buy gold stocks on any further weakness or on any new breakouts to new highs.

My two favorite stocks are FRANCO NEVADA (FNV) and SILVER WHEATON (SLW)


Meanwhile, the fundamentals for gold and silver continue to push relentlessly higher.

In South South Africa's gold mine strikes have halted nearly 90% of all production. In addition to the mining strikes, there is also a transport strike. More than 20,000 freight transport workers are also on strike. Due to the settlement on Sept. 20th with Lonmin platinum workers, gold miners then decided on wildcat strikes instead of using the National Union of Mineworkers representative's to negotiate with employers.

Certainly this disruption in production will cause a contraction in supply, while consumer and central bank demand in the yellow and white metals are on the rise, combined with the central banks printing money as fast as they can to bolster their respective economies - all signal a very bullish environment for silver, gold and platinum while shifting your investment dollars to more friendly locations.


The Basel Committee for Bank Supervision (BCBS), which is responsible for forging global capital requirements just made gold as of January 1st a Tier 1 capital asset which will serve as a key indicator of a bank's fiscal health for regulatory purposes, and thus plays a crucial role in determining how much banks are permitted to lend to borrowers. Gold was traditionally categorized as a Tier 3 asset and their market value slashed in half when determining a bank's permitted lending volume. The inclusion of gold as a Tier 1 Capital asset by BCBS would enable banks to double their lending ability based on their holdings of gold and it will become "the new backstop for debt, currencies and bank equity capital."

This will serve as a strong and immediate spur for banks around the world to raise their holdings of gold bullion as against all other forms of Risk Free Assets, further adding to the upward momentum of gold prices to counteract the mass printing of fiat currency by monetary authorities and rampant stimulus spending by governments. What would you rather own - Gold or Treasuries?


Thankfully, there's a product that has come to market recently that offers investors full semblance of sector-level performance for silver stocks - the Global X Silver Miners ETF (SIL). Global X Funds has been a huge innovator in the ETF realm in recent years, especially when it comes to commodities stocks. Its unique approach gives investors easy access to small commodities sectors and subsectors. And the first-of-its-kind Silver Miners ETF is a godsend especially to the tiny silver-stock sector and their investors.

SIL was conceived in April 2010 and like all ETFs, its goal is to closely mirror the performance of an underlying index. This index is the Selective Global Silver Miners Index and it is designed to generally reflect the performance of the silver-mining industry. SIL is ultimately comprised of stocks that are actively engaged in some aspect of this industry whether it be mining, refining, or exploration.

I see two major benefits to this ETF and the first is the overall benefit offered to investors. As with most ETFs, SIL is easy to buy, easy to sell and it even has an options market which at the moment is still relatively illiquid but hopefully not for too much longer. SIL's basket of silver stocks also greatly reduces individual-company risk. And it even offers geographical diversification, which is a big deal in the mining industry. SIL also opens up the opportunity for institutional investment. Since most individual silver stocks rank too small and/or illiquid for institutional guidelines, most institutions couldn't or wouldn't touch them. With the advent of SIL, many can and hopefully will as this ETF grows in popularity (SIL's total assets are currently about $366 million). There are also options on SIL but a HUGE NEGATIVE for the time being is that there is very little volume right now. It will probably take a resumption of the Precious Metals BULL MARKET before volume increases significantly.

Returns like this over only about two months are certainly attractive. And this will no doubt draw increased attention to silver stocks.




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Aubie Baltin CFA, CTA, CFP, PhD.

2078 Bonisle Circle

Palm Beach Gardens FL 33418

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Please Note: This article is for education purposes only and is designed to help you make up your own mind, not for me to make it up for you. Only you know your own personal circumstances so only you can decide the best places to invest your money and the degree of risk that you are prepared to take. The Information and data included here has been gleaned from sources deemed to be reliable, but is not guaranteed by me. Nothing stated in here should be taken as a recommendation for you to buy or sell securities.

A sheet of gold can be made thin enough to be transparent

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