Wednesday, April 21, 2010


Talk about an incredible stroke of public genius....this one is certainly one that ranks up there with some of the all time great screw-ups. I'll get to it in a minute. Before I go there I just want to speak on a related point that is essentially a reminder for those of you that follow this blog or invest in PMs. We are going through a very typical consolidation in gold and the miners. This is for a purpose. The real money is accumulating these stocks and the age old process that robs the average retail schmuck of their shares. Push them out of their investment by stagnating the price and making them unsure of the weak hand investment. I hope they give us another leg down but I have no way of being certain therefore I have a comfortable core. Time is on my side and I have great patience and may get my "buy chance". I love this article off of Goldseek regardin a historical blunder by now Prime minister Gordon Brown of Great Britain.

Brown, who took over from Tony Blair in 2007, acquired the ironic nicknames about 11 years ago when, against the advice of leading bankers, he sold off about 60% of Britain's centuries-old gold reserves. The timing of the sales, from 1999-2002, was “impeccable.” In his role as Chancellor of the Exchequer he sold 400 tons at rock-bottom prices. He got an average price of $275 an ounce, raising $3.496 billion. (British gold traders have dubbed the 20-year-low the “Brown Bottom.”) Since the unfortunate sale, gold prices have more than quadrupled to $1,159 an ounce.

There is a lesson to be learned here both for nations and for individual investors--hold on to your physical gold and don't worry too much about governments selling or "dumping" gold when its price gets very high - history suggests that governments are not the best traders and not necessarily sell at the top.

With only 310.3 tons of gold left in its Central Bank holdings, Great Britain, once an empire that ruled half the world, ranks number 16 on the list of gold-holding nations, just below Venezuela and just above Lebanon.

There is further irony in the fact that it was Britain that had led the way in establishing a gold standard when Sir Isaac Newton, as warden of the Royal Mint, linked the value of raw gold to the value of money back in 1717. The 1844 Bank Charter Act formalized the gold standard, the Bank of England’s promise that every note could be redeemed for its value in gold. The gold standard lasted until Britain was forced to abandon it during World War I. Churchill returned to the standard in 1925 but it was again abandoned in 1931.

Newspaper accounts in the British press estimate that Brown’s gold sale cost the British taxpayer about 6 billion pounds.

The gold sale has become a campaign issue and already posters have appeared of a smiling Brown with the accompanying text: “I lost 6 billion pounds selling off Britain’s gold. Vote for Me.”

According to British newspaper reports, the proceeds from the gold sale were invested in dollars (40%), in euros (40%) and in the yen (20%). It is safe to say that the revenues generated from the fiat currencies don’t come close to the spectacular four-fold increase in the value of gold since the sale.

In May of 1999, when Brown announced his plans to sell the gold, the price had stagnated for much of the decade in a secular bear market. British gold simply sat in the vaults gleaming prettily but earning no interest. Some had perceived it as a capital wasteland, an anachronistic relic. Apparently, Brown wanted assets that would generate interest payments. He ignored gold’s habit of retaining its intrinsic value over the long term.

“Golden Brown” was wrong to dump gold in favor of paper currencies. Gold’s breakout against the world’s primary paper currencies underscores gold’s growing allure as a store of value against further currency debasement caused by profligate government spending. It appears that gold is reassuming its role as an alternative currency unencumbered by the political liabilities of fiat money.

gl gang

update I ..... Dead as a doornail today. Precious metals are setting up in a secondary bullish channel that appears to be confirmed today .....But volume remains non confirmatory and the Ponzi overall market is in horrible need of a beatdown so the "all in" here remains a fool's game. Shorting here is also borderline insane. Continued accumulation of physical gold and silver is reasonable. Do not forget to include alpo in case Katla decides to join the party. I am pessimistic on all fronts but I think the ponzi has no choice but to continue to climb the proverbial "wall of worry". Warning...if you think I am kidding about Katla ....think again....It has always erupted WITH its "little sister". Scary times but no reason to get your panties in a wad. I am partying like its 1999. After all there really isn't Jack that any of us can do except enjoy the game...(thats my report tonight and I am sticking to it). OBTW the PPT has a contingency in place in case Katla goes and that is bend over and kiss all their axxes good nite. These are NOT manipulateable.

update II Just in case you missed it


  1. Just looking at some one year and shorter term charts on SSRI GDX.....looking very bulllish.

  2. CBS....look at CNAM dilution announced.....should fill the gap now....5.31

  3. Ouch - was just about to dip into CNAM. Selling some winners in GOLD and Palladium. Keeping some others maybe add to AUY (been a snoozer) and get some SSRI.

  4. Nice read on Mish's blog regarding Bill Black testimony. I think you posted an article or two here on Black.

  5. Homer,

    You do not post enough buddy, your posts are requested.


  6. Temo,

    Nice trading day for ANDS today, do not know whether you saw the turn at 2.40 or not, at least for today ANDS made a turn.


  7. What ever became of the CAEI trade? Did anyone dip their toes in?

  8. Brent bot small hold and will watch for evidence of any buying so far nuttin there.....

  9. "Completely Wicked": Martin Wolf and Simon Johnson on Goldman Fraud Case
    Posted Apr 21, 2010 12:11pm EDT by Aaron Task in Newsmakers, Banking
    Related: GS, XLF, JPM, BAC, C, MS, FAZ
    John Paulson and top associate Paolo Pellegrini have broken their silence on the hedge fund's role in the Goldman fraud case. In a letter to investors, Paulson told clients the firm's role in the Abacus deal was "appropriate and conducted in good faith," The FT reports.
    Meanwhile, CNBC reports Pellegrini told the government he informed ACA Management that Paulson intended to short the Abacus portfolio at the heart of the SEC's fraud charge. If true, the testimony would undercut the SEC's claim that ACA was kept in the dark about Paulson's intentions.

    It's important to remember that neither John Paulson nor his firm have been charged with any wrongdoing. But the jury of public opinion remains very much open.

    Earlier this week, MIT professor Simon Johnson called Paulson the "trigger man" for the alleged fraud and argued the fund manager "should be banned from securities markets for life."

    In the accompanying video, taped yesterday, the 13 Bankers author stressed there should (of course) be "due process" and a "full investigation" before any decisions are made. But, to Johnson, it appears as if Paulson and Goldman were running a "crooked roulette table," something that would get you banned for life from Las Vegas. "The same should be true for financial markets."

    Martin Wolf, chief economics commentator for The Financial Times, conceded to not knowing enough about the specifics to cast judgment, although he dubbed the SEC's charges against Goldman "look very potent." (Goldman has denied wrongdoing and vowed to "vigorously" defend itself.)

    "Far more than the fraud element - what worries me is what was legal," Wolf says, describing synthetic CDOs as "useless financial activity [which] adds nothing to anything useful in the world. There was absolutely no rational justification for the bet anyway."

    Furthermore, the ultimate losers of this "pure bet" were taxpayers in the U.S., U.K. and Germany, he notes. "I'm very sore about strikes me as completely wicked."

    Vigorously agreeing, Johnson says the Abacus case gets to the heart of the problem with "too big to fail" banks: They took huge risks under the assumption that big gains would be kept private, and big losses would be socialized.

    Essentially, that's the story of the credit boom and bust, something to keep in mind as the regulatory debate continues in Washington; as long as that structure remains intact, we'll have resolved nothing.

  10. Hi Joe - I hear you. Vacation last week now work is piled up. All I can do to keep up at night and get 4 hours sleep or so.

    PAL knocked down on deal I guess?

  11. Watch for a EU ban followed by the boot out of UK

    No matter how Sound Goldman is this is turning into a run on the bank created by EU TXB...another reason to consider shorting GS...

  12. CNAM private placement, so the the AMEX specialist games on the current float will continue. Don't forget the warrants at $7.50.

    Overall market might be basing instead of falling for a while until the damage from the mini Iceland volcano is cleaned up, also the damage from ramping prematurely needs to be worked out and more shorts drawn in for the next round. Propaganda has been hard and heavy in the past couple days how volcanoes don't impact anything from engines to carbon dioxide.

  13. Bought the GS May 145/150 puts...wish me luck...TXB

  14. I shorted GS this morning. I'm in the money!

  15. Thanx red - re volcano:

  16. CNAM got very good price and term for their $10 million private equity placement considering the type of business and the stage of maturity. The price was a short term smack to share prices close to lower daily Bollinger Band. High volume puking is also good to see. Private equity shares will likely stay off the market in the near term, no immediate interest payments on long term debt, and cash in hand means expansion can proceed. It will be a volatile trade regardless, with brutal squeezes then dumps. Trade at your own discretion.

  17. Newspaper accounts in the British press estimate that Brown’s gold sale cost the British taxpayer about 6 billion pounds.

    6 billion pounds? That's chump change. Obama farts 6 billion pounds before breakfast. That's not even rounding error on the 2009 stimulus package.

  18. Congrats Jay!!!!! TXB

  19. Joe,

    I missed all the action today. I had to make the trek to Bangkok to pick up my wife who just returned from the US.

    I will be back in action tomorrow

  20. I actually went long GS. I think the stock will eventually trade at $200 plus before the end of the year. If it goes any lower, I'll look to add some more.

    It makes no sense to bet against Government Sachs.

  21. W.C. that was "real" at this fiat rate it will be worth 600billion in another 5 number can change...hehehe

  22. I have a different take on the Goldman situation. I'm not so sure that they remain Government Sachs much longer. Obama may be looking to fix his image and hanging them out to dry may be on his agenda. The SEC fraud charges are significant, not the charges themselves but the fact that they were leveled in the first place. GS is not a bank holding company and their books are surely loaded with toxic debt that if marked to market, they might be insolvent. They've been given free money from the taxpayers and have manipulated the markets, earned boatloads of money, and have done little to repair their balance sheet. Instead, they paid themselves really big bonuses. This can't go on forever and I see the signs that maybe Obama's plan is to end it.

    Also, the investment banks are fragile entities and rely heavily on their capital base. If clients start to withdraw money, they won't be able to survive. That , combined with a White House loaded for bear, other governments and companies seeking retribution, I can see a scenario whereby they don't make it.

    I called BSC and LEH right and I'm calling GS to $0 at some point within the next year.


  23. Hm throw GS under the bus, not a bad theory C. A lot of lesser cynics might question themselves if GS was shut down.. Witnessing the death of a scapegoat can shake the ol' paradigm.

  24. Sorry to burst your bubble ......aint gonna happen. This entire show is only a show.
    GS and JPM are a tandem that are the backbone of our financial system....for better or worse. Make no mistake they call all the shots. You take them down and you will have NO wall street least not at an SnP of 1200

  25. Faber said the SEC's charges against Goldman Sachs [GS 158.93 -1.05 (-0.66%) ] were merely an excuse to print more money.

    Axel Griesch | ASFM | Getty Images
    Dr. Marc Faber

    "I think Goldman Sachs is a very honest firm. They have a very strict compliance department compared to the others — they're like an angel. But they targeted Goldman as it stands as a symbol of Wall Street," Faber said.

    With U.S. President Obama's ratings sliding due to the health care reforms, the government was going after the investment bank to distract the attention of the people, he claimed.

    "Maybe the intention is not to hurt Goldman Sachs, but just to gain popularity with the middle class and the lower class of America, so they will perceive Mr. Obama to have done something against the evil of Wall Street."
    I'm not sure I would agree with GS being honest...but his take on Obama...yes...TXB

  26. TBX - ditto... GS=angel? hahaha... but I'm glad Faber said what he said about Obama, my thoughts exactly... I'm also anxious to see the outcome from Europe on this GS mess...

    oh, BTW, Obama said on CNBC interview that he found out about this SEC/GS thingy via CNBC!!! WOW, WOW and WOW!!! I'm speechless... let the game continues...

    Immred - thx again for your input on CNAM, appreciate very much as usual...


  27. TXB - sorry, I type too fast, I meant to address you as TXB... bcbk