Sunday, 30 August 2015

Why Now Is A Great Time To Buy Gold

By Henry To, Contributor

After Being Bearish On Gold Prices During 2013 And 2014, I became mildly bullish on the precious metal in February of this year. With gold at $1,200 an ounce, I Wrote An Article Discussing Three Reasons why I believed gold prices would bottom in 2015, and thus why I believe gold was an attractive long-term investment.

With gold’s recent decline to below $1,100 an ounce, I believe today is one of the best times to own gold. My three reasons for buying gold that I discussed in February have remained valid. I now want to reiterate and refresh my three reasons for owning gold at today’s prices.

1. Global gold mining production to decline over the next several years

According to the just-released, World Gold Council’s Q2 2015 Gold Demand Trends Report, global mine supply during the 2nd quarter of this year totaled 781.6 tonnes, declining by 4% on a year-over-year basis. Not surprisingly, gold mining executives have continued to shift their focus away from exploration & development, to costs reduction and balance sheet deleveraging. A Recent PricewaterhouseCoopers Survey of global gold mining executives shows that 60% of them expect gold prices to continue to decrease (gold miners who are bearish on the precious metal tend not to invest in new exploration & development projects); moreover, 87% of the global mining executives surveyed expects costs to fall further or stay the same relative to that of 2014.

According to the World Gold Council’s Q2 2015 Gold Demand Trends Report, global gold exploration & development activity fell to a new, record low last quarter, declining by over 60% since the late 2011 peak (when gold prices peaked at over $1,900 an ounce). Because of this decline in gold mining capital expenditures over the last several years, I expect annual global mining production to decline by 7%-10% over the next several years, which in turn will support gold prices.

2. Global monetary policy outlook is still highly uncertain, despite a stronger U.S. dollar

The 1970s bull market in gold (when the price of gold rose from $35 to $850 an ounce in just a decade) was driven by the 1971 severing of the U.S. dollar link with gold, along with a rise in inflation fueled by Vietnam War spending, increased social welfare spending, lackluster U.S. productivity growth, and a highly accommodative Federal Reserve. While the year-over-year increase in U.S. inflation (as measured by the Consumer Price Index) Remains Tame At 0.1%, this is primarily due to the recent decline in energy prices. Leading Indicators Of U.S. Inflation–such as the tightening job market, increased bank/credit lending, and higher minimum wages–are all pointing to higher inflation in 2016.

I also believe that The Inclusion Of The Chinese Currency, The Yuan, Into The IMF’s Special Drawing Rights Basket over the next several years is a foregone conclusion. Over the next 5-10 years, I expect global foreign currency reserve managers to begin buying the yuan as of part of global central bank reserves–over time, I expect the Chinese yuan to make up as much as 10% of all global central bank reserves, replacing the Japanese Yen as the world’s third most popular reserve currency. While the U.S. dollar is strong today, I believe a diversification of the world’s central bank reserves into the yuan (even just a 10% allocation) will in all likelihood result in a weakening of the U.S. dollar, which will in turn increase the attractiveness of gold as an investment or diversification tool for U.S. investors.

3. Chinese and Indian gold demand will rebound

According to the World Gold Council’s Q2 2015 Gold Demand Trends Report, global jewelry demand experienced a year-over-year decline of 81 tonnes (14%) during the 2nd quarter, mainly due to weak demand in India. The decline in Indian jewelry remand is temporary, as it was due to poor weather that had an adverse impact on crops and the incomes of the Indian rural population–an important source of gold jewelry demand. Moreover, Indian wedding-related demand for gold also declined last quarter, as there are no auspicious days for marriage on the Hindu calendar between June 11 and November 1 of this year.

I see the second-quarter decline in Indian gold demand as temporary. With gold prices now solidly below $1,200 an ounce, I expect Indian gold demand to pick up substantially over the next several quarters.

Over the last decade, gold demand from China and India have risen by over 60%; collectively, the two countries now account for around 50% of global gold demand, up from just 33% a decade ago. By far the most important drivers of gold demand in China and India are income levels and urbanization, as both Chinese and Indian consumers have a strong affinity for gold jewelry. With the recent devaluation in the Chinese yuan, I also expect Chinese investment demand for gold to pick up over the next several years as Chinese citizens strive to protect themselves from a more volatile currency.


I thus believe gold is now a solid, long-term investment.


Monday, 17 August 2015

Why Your Brokerage Account Isn’t as Safe as You Think It Is

By E.B. Tucker

Imagine logging into your brokerage account tomorrow and finding out that it’s frozen.

Not just your account… every customer account at your brokerage is frozen.

You can’t buy stocks. You can’t sell stocks. You can’t move money out of the account.

Your account rep insists the money is still there. It’s just not available now. He doesn’t know when it will be.

When you demand to transfer $25,000 cash out of the account, he says, “I’m sorry… the system won’t let me.”

You ask to speak to his boss. She can’t help, either.

This situation sounds absurd to most Americans. There’s no way a major broker could freeze your accounts, right?

Wrong. It happened in 2011 to 38,000 people...

And this wasn’t some no-name broker. It was a highly respected, 228-year-old firm. And Jon Corzine ran it. At one point or another, Corzine was a US senator, the governor of New Jersey, and the CEO of Goldman Sachs. Then he became the CEO of MF Global.

MF Global handled stock and bond trading for some of Wall Street’s wealthiest clients.

It was also one of only 18 “primary dealers” at the time. Primary dealers are a select group of brokers allowed to participate in the US Treasury auction. Citigroup, Morgan Stanley, and Goldman Sachs are also primary dealers.

Like all US brokers, MF Global was required to keep customer cash and stock separate from its own corporate accounts. This rule is supposed to keep brokers from playing with customers’ money. But the rule only works if brokers follow it.

In October 2011, account holders at MF Global started having problems withdrawing cash and transferring stocks. Turns out that their money wasn’t there. MF Global had made a series of bad bets in European bonds and illegally transferred $891 million in customer funds to cover its trading losses.

Their cash was gone…

Customers had to hire and pay for their own attorneys. For a while, it looked like they’d never get their money back. But in December 2014, MF Global finally agreed to return $1.212 billion to its former clients. It also paid a $100 million fine.

You might be wondering how this sort of thing could happen...

First off, you are not the legal or registered owner of the stocks in your brokerage account. You’re just the “beneficial owner.”

Sure, you put the cash in your account. You logged in and “bought” Apple, GE, Verizon, and other stocks issued by sound companies. You did your homework because you worked hard for your money. Those investments are a key part of your retirement plans. You don’t make risky moves.

And you work with a reputable broker. But your broker or a clearinghouse called Cede & Co. is likely the registered owner of “your” stocks.

Here’s how it works…

There are three basic ways to hold stocks: street name registration, direct registration, or physical certificate. Street name is the default. Unless you make special arrangements, this is how stocks are registered.

Cede & Co., a subsidiary of The Depository Trust Company (DTC), is likely the registered owner of your stocks. You are not the registered owner. When you buy a stock, DTC holds those shares for your broker. Your broker, in turn, holds those shares for you.

That means Apple, GE, Verizon, and the other companies whose stocks you hold have no record of you.

If your broker mishandles your account, you can sue to get your money back. But, as MF Global customers discovered, it’s not easy. And there’s no guarantee you’ll win...

If your broker makes a bad bet on Greece and uses your cash to settle the bill, you’re out of luck. Sure, it’s illegal… but laws didn’t stop MF Global. Customers had to take action, hire lawyers, and sue to get their cash back.

Stable markets hide problems. In 2008, we saw how big problems can go unnoticed for years. A crisis reveals who’s stable and who’s just pretending to be. Some brokers and financial institutions are heavily leveraged. They’re especially vulnerable in a crisis. Some will not survive the next one.

The MF Global fiasco is one of the most important financial stories of the past decade. It showed that the financial system isn’t as safe as you think it is. Even big, brand-name banks and brokerages with years of success can instantly go broke.

The next financial crisis will bring many more shams like MF Global’s to light.
You can protect yourself by keeping plenty of cash and gold in a safe place… but not in a safety deposit box.

And make sure to diversify across financial institutions. You don’t want to get stuck in a situation like MF Global customers did… waiting years for your money because some executive gambled away the company.

P.S. Because this risk and others have made our financial system a house of cards, we’ve published a groundbreaking step-by-step manual on how to survive - and even prosper - during the next financial crisis. In this book, New York Times best-selling author Doug Casey and his team describe the three ESSENTIAL steps every American should take right now to protect themselves and their family.

These steps are easy and straightforward to implement. You can do all of these from home, with very little effort. Normally, this book retails for $99. But I believe this book is so important, especially right now, that I’ve arranged a way for US residents to get a free copy. Click here to secure your copy.

Wednesday, 12 August 2015

There’s a Good Chance Your Bank Is Committing a Major Crime Right Now

By Dan Steinhart


On April 10, 2006, Mexican authorities searched through a DC-9 jet at the airport in Ciudad del Carmen. They found more than five tons of cocaine… valued at more than $100 million.

If you’re like many Americans, you’re not surprised by a story like this. Not a year goes by without a few big media stories about Mexican drug cartels.

However, you probably will be very surprised to learn who aided and abetted the drug operation: it was US banking giant Wachovia.

After an investigation that took years, Wells Fargo, which now owns Wachovia, paid a $160 million fine to settle the case. “Wachovia’s blatant disregard for our banking laws gave international cocaine cartels a virtual carte blanche to finance their operations,” said federal prosecutor Jeffrey Sloman.

You might also be surprised to hear that Wachovia’s fine wasn’t an isolated case.

Citibank was caught laundering money for a Mexican drug kingpin in 2001.

American Express Bank admitted to laundering $55 million in drug money in 2007.

And the FBI accused Bank of America of helping a Mexican drug cartel hide money in 2012.

You’ve probably never heard these stories before. The big banks pay a lot of money to keep it that way.

Every year, America’s biggest banks spend hundreds of millions of dollars to create a simple, wholesome image: They’re here to help out families and small businesses. They’re the conservative stewards of our capital, and they always play by the rules.

The big banks employ some of the world’s best marketers. They buy politicians with large campaign contributions. They’re also huge advertisers, which lets them wield enormous influence with the mainstream media.

But if you look past the brochures that feature all-American families, golden retrievers, and small business owners, you’ll get a much different idea of what banks are all about.

You’ll see that our nation’s biggest banks are among the most flagrant lawbreakers in the world. They’re routinely fined hundreds of millions - even billions - of dollars for screwing customers and rigging financial markets.

For example…

In 2011, Bank of America paid a $335 million fine for discriminating against black and Hispanic borrowers.

In 2013, J.P. Morgan paid $410 million for manipulating the electricity market. Later that year, it paid $13 billion to settle claims that it knowingly sold toxic loans.

In 2014, Bank of America paid a $6.3 billion fine for selling faulty mortgages.

And in 2015, five big banks paid $5.8 billion for rigging the currency markets.

This is just a short list of banks breaking the law and getting fined. Boston Consulting Group reports that banks have paid more than $178 billion in legal claims since the financial crisis.

These are the nation’s largest banks. Millions of Americans rely on them. We trust them to be conservative with our cash and keep it safe. We trust that our credit cards will work when we buy groceries.

Above all, we trust them to keep the financial system working… a trust they broke in 2008 when the biggest banks failed and needed bailouts.

These banks have no problem breaking the law if it benefits them. They’re caught screwing over customers all the time. And they’re caught helping criminals all the time. Paying the fines is just a small cost of doing business.

And it’s well worth it… the banks make far more money from their illegal activities than they pay in fines.

With the nation’s largest banks operating this way, do you trust our financial system to hold up during the next crisis?

P.S. Because this risk and others have made our financial system a house of cards, we’ve published a groundbreaking step-by-step manual on how to survive - and even prosper - during the next financial crisis. In this book, New York Times best-selling author Doug Casey and his team describe the three ESSENTIAL steps every American should take right now to protect themselves and their family.

These steps are easy and straightforward to implement. You can do all of these from home, with very little effort. Normally, this book retails for $99. But I believe this book is so important, especially right now, that I’ve arranged a way for US residents to get a free copy. Click here to secure your copy.

Friday, 7 August 2015

Doug Casey on the Real FIFA Scandal

By Doug Casey


Recently, high-ranking officials at FIFA, the world’s governing soccer (aka “football”) body, were charged with corruption and fraud. The US’s Federal Bureau of Investigation (FBI) is deeply involved in the case. Doug Casey weighs in on the real scandal… the one you’re not reading in mass media.

The truth be known, I really don’t give a damn about soccer. Nor do most Americans.

Indeed, until recently, all that most Americans knew about “football” was that Brandi Chastain ripped off her jersey, to display a great physique, after she scored the winning goal for the US in the 1999 FIFA Women’s World Cup playoff against China.

However, “football”, as it’s known to the 6.7 billion non-Americans on the planet, is revered by the rest of the world as a secular religion.

But now football, and FIFA, the sport’s governing body, is in the news because of an alleged corruption scandal. Let’s not discuss the details of who was bribing whom, and where all the money went, for two reasons.

First, that’s all over the Internet, and you don’t need me to repeat it here.

Second, and much more important, it’s really none of our business. Despite the fact that the FBI has taken it upon itself to prosecute at least 14 FIFA officials for corruption.

Why is it none of our business? Because FIFA is a Swiss association that’s been around over 100 years. All of its officers and directors are non-US persons. And about 99% of its players, officials, and spectators are non-American.

But that doesn’t matter. The FBI has decided to prosecute FIFA’s officials for corruption, and is successfully moving to have them all extradited to the US for trial.

Were FIFA officials treating themselves to huge salaries and expense accounts, and paying and receiving millions to decide where the World Cup should be played? Of course. Is that corrupt? We have to first define “corruption.” I devote a lot of thought to the subject here, and suspect you’ll find it of interest. But, essentially, corruption is about a betrayal of a fiduciary trust. In simple terms, it’s sticking your hand in a till that you’re supposed to guard for the interest of someone else.

Based on that, are FIFA officials corrupt? Their behavior is certainly unsavory and unseemly. Nobody likes people who take advantage of their positions to line their pockets. But they are actually less morally culpable than the directors and officers of many US public corporations who pay themselves scores of millions of shareholder dollars, often while running the companies into the ground.

And less morally culpable than politicians who dispense favors and contracts with public funds. Corporate directors and politicians have fiduciary responsibilities. FIFA, however, doesn’t have shareholders. FIFA is really only responsible to the 200-something countries that vote to elect its officials; it’s essentially a political body.

Its “stakeholders” (a morally loaded and highly problematical term that’s gained currency in recent years) are the fans who watch football. They’re happy as long as someone, anyone really, makes sure the games are played.

In other words, FIFA and the people who run it are at liberty to do as they wish with funds and favors. It may seem sleazy, that they allocate venues for the World Cup according to who pays the most (even under the table). But since the association doesn’t have a fiduciary responsibility, it’s not corrupt.

If corruption charges are warranted, it’s against the presidents of the countries that are members of FIFA. Any self-respecting president today leaves office as at least a billionaire. If anything, FIFA is a more of a co-conspirator, or even a victim, rather than a perpetrator. If even Mother Teresa was in charge of FIFA, I would expect her to do the same as the indicted officials, actually. She’d just spend the proceeds on bandages instead of parties.

The real problem is that the whole system is politicized, much like the Olympic Games. FIFA, and the Olympic Committee too, have turned sports into showcases for nationalism. Corruption is a necessary and inseparable part of politics.

The solution to the problem is to start a new sanctioning group, organized with new teams, players, and officials. Let them organize their own World Cup games wherever they wish, on whatever terms they wish. The fans can support whomever. It’s actually a non-problem. Maybe the new organization will change the rules so that they more closely resemble those of Rollerball. Maybe they’ll cultivate attendance by semi-pro football hooligans among the fan base. Who cares?

But wait. That’s where the US government, the world’s arbiter of morality, comes in.

What’s really scandalous about the FIFA affair isn’t the alleged corruption, but the US government’s reaction to it. Nobody, anywhere, seems to be asking how the US can not only unilaterally bring charges, but then extradite foreign citizens to stand trial in the US. And for things that aren’t even real crimes. Without a peep from anyone.

It’s part of an accelerating pattern that Pastor Martin Niemöller might have recognized in a different context. You’re likely familiar with his poem about the passive reaction to the Nazis and their aggressions:

First they came for the socialists, and I did not speak out --because I was not a socialist. Then, they came for the trade unionists, and I did not speak out -- because I was not a trade unionist. Then, they came for the Jews, and I did not speak out -- because I was not a Jew. Then, they came for me -- and there was no one left to speak for me.

How might that poem read today?

First they sent a SWAT team to New Zealand to capture Kim Dotcom, a German national, for something that’s legal in both New Zealand and Germany, and I did not speak out -- because I was not in the computer business. Then, they conducted drone strikes and assassinations and renditions around the world, and I did not speak out -- because I was not a swarthy foreigner. Then, they invaded countries, from Granada and Panama, to Afghanistan and Iraq, and I did not speak out -- because I believed we were always on the side of truth and justice. Then, they prosecuted the FIFA guys, and I did not speak out -- because I couldn’t care less about rich guys making money from soccer. Etc. Etc.

Specific charges (brought under the RICO Act, an abusive monstrosity) are wire fraud, racketeering, and money laundering. Passive and thoughtless Americans accept these charges as if they were part of the cosmic landscape. But none of them are common law crimes.

“Wire fraud” is simply the use of electronic media to assist in the commission of an alleged crime. But why does that constitute an extra crime?

“Racketeering” is generally just a pattern of extortion. But you can’t have extortion without a threat of violence. How was FIFA threatening violence?

“Money laundering” is a very recently manufactured crime, generally the disguising of the source of funds. Why is that even a crime?

All of these charges exist only to make the prosecutor’s life easier. The fact that these things are being alleged is the real crime.

You might ask why is the US government involved at all in international soccer. FBI Director James Comey gave an Orwellian answer shortly after the indictments. Get a load of this:

If you touch our shores with your corrupt enterprise, whether that is through meetings or through using our world-class financial system, you will be held accountable for that corruption.

In other words, the Department of Justice’s indictment alleges that since a part of the alleged corruption may have been planned in the US -- even if it was then carried out elsewhere -- they are in charge. And the use of US banks to transfer US dollars gives them additional jurisdiction.

It’s a sign of how degraded the world’s moral climate has become that nobody even comments on the absurdity of all this, much less is outraged.

That the US government can get away with all this is analogous to the Haitian government arresting an American baseball player for violating one of their laws because the game is played with balls manufactured in Haiti. It’s likely the charges were brought because Russia was awarded the venue for 2018, and Washington wants to punish its designated enemy.

Well, fear not. This is all just, in relative terms, a tempest in a toilet bowl. Much more serious things are brewing. Not just ISIS in what used to be Iraq and Syria. Or China in the Spratly Islands. Or the separatist provinces in the eastern Ukraine.

The next sideshow is the developing financial disaster in Europe, which you’ll hear more about in future issues of The Casey Report.

P.S. Because the bloated US government has helped make our financial system a house of cards, we've published a groundbreaking step-by-step manual on how to survive - and even prosper - during the next financial crisis. In this book, New York Times best-selling author Doug Casey and his team describe the three ESSENTIAL steps every American should take right now to protect themselves and their family.

These steps are easy and straightforward to implement. You can do all of these from home, with very little effort. Normally, this book retails for $99. But I believe this book is so important, especially right now, that I've arranged a way for US residents to get a free copy. Click here to secure your copy.