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Democracy in Decline, Controlled Markets, Neo-cons Rising and (of course) Gold

Politics / US Politics Jan 25, 2010 - 07:02 AM GMT

By: Midas_Letter


Best Financial Markets Analysis ArticleIts difficult to divert one’s thoughts from the ordeal being suffered by the Haitian people at this point – especially after the stupendous news of another 5.9 magnitude aftershock.

But the decision by the Supreme Court of the United States to abolish limits on corporate contributions to election campaigns must not pass without comment, as it will have consequences everlasting for democracy as a system of thought and governance. In my view, we have just sold democracy to the highest bidder, and it is for all intents and purposes now dead. The world of the future will be determined solely by the very rich, and it should be plain for all to see that their interests are diametrically opposed to the other 95% of The People.

The decision document fills 175 pages, which if I’m not mistaken, precludes the possibility of it ever being read by the same 95% of the population, one of whom can afford to take a week off to read what is guaranteed to be dry and convoluted legalese. But it is precisely this fact that inspires such verbosity among our so-called justices. Hide the plain fact that the justice system has been purchased by Wall Street in language so arduous and esoteric that The People will accept the interpretation of the daily news and proceed to the daily taking care of business. The big brother has no need for doublespeak when mumbo jumbo trumps it so soundly.

After an hour trying to locate the actual text of the decision online, I finally found it on the Cornell University web site .

What is interesting is that the whole challenge to the statute that curbed corporate contributions arose from a challenge by a group that wanted to air a “movie” called Hillary on a video-on-demand cable channel prior to Ms. Clinton’s election. The film, as the Supreme Court Justice’s said, was “to inform the electorate that Senator Clinton is unfit for office, that the United States would be a dangerous place in a President Hillary Clinton world, and that viewers should vote against her.”

The broadcast was prohibited by the so-called Bipartisan Campaign Reform Act of 2002, because Citizens United was organized as a corporation and had accepted a small amount of contributions from corporations to finance the film.

Thus the challenge by Citizens United, and thus last week’s landmark ruling.

The upshot of the reasoning behind the prevailing Justices is that campaign contribution limitations amounts to a suppression of freedom of speech.

Wow. Talk about a broad interpretation.

The dissenting judges all wagged their fingers warning of the encumbrance of democracy that this decision will certainly nurture. Elections are, in fact, a popularity contest, and building popularity, as any statistical marketing analyst can attest, is strictly a numbers game. The more exposure you can afford for your candidate, the more popular that candidate will become. This means Hitler can now safely be re-elected.

If this Supreme Court can defy legal case precedent, logic, and common sense, then the puppeteers behind the scenes must have dastardly plans indeed. The agenda of Bush-esque neo conservatives would appear to be in front of this court.

That’s an agenda that will see the escalation of geo-political tensions and conflicts (these guys are the big shareholders or all the weapons manufacturing firms, don’t forget). Consumption of the remaining resources of the world will now replace what flimsy concern and regulation of environment has been eked through on Obama’s feeble watch.

The noises we now hear about the regulation of futures markets alongside limitations on bank activity scale and scope amounts to so much saber-rattling to appease the masses. Keep your eyes peeled for quiet scuttling of said efforts or the passage of extremely watery statutes absent the teeth required for even perfunctory enforcement. We now enter the era where emboldened lawmakers become law breakers with impunity, markets become controlled by the ebb and flow of the world’s dominant capital players, and the line between corrupt dictatorships and democratic societies is redefined as terrorist nations versus the Morally Unassailable.

Asset bubbles, the product of the wildly popular Bubbleomic policy implemented by so-called governments will increase, as these elite financial manipulators now enjoy carte blanche and cooperation from the G7. Its now the U.S. dollar carry trade that will inflate the prices of assets from soybeans to real estate. Having reaped oodles of knowledge on how to initiate a controlled free-fall in the macro-economy using news and innuendo (I refer to the leakage to the press of Bear Stearns precipitating insolvency, which, but for the incredibly visionary short position buildup and well timed phone calls would have been solved through normal borrowing practices), we will see increasing numbers of crises, of more profound depth. After all, while money is certainly made in healthy growing markets, its nothing compared to the behemoth windfalls captured during effusive volatility.

The idea behind this institutionalized ponzi scam is to get as many retail investors into the financial product flavour of the month before yanking the rug out from the commodity upon which said products are built, precipitating huge losses for those long and equivalent gains for those short. Witness Asset Backed Commercial Paper, which has returned to portfolios everywhere. Midas Pattern Recognition Tool #1: If an “agency” rates it AAA, it has the same risk profile as lending to junkies.

Which brings us to Midas Pattern Recognition Tool #2: Short Position Monitoring.

Just as a bluff can be deployed with outstanding effect in poker, short position builds can be indicative of somebody trying to spook longs into selling. But, as the Bear Stearns lesson teaches us, on a grand scale short position builds can serve as the assistance dog who barks prior to the onset of a heart attack.

The main point here is forget everything you’ve ever learned about value-based buy and hold investing. There are sure to be a million exceptions to this caution, but identifying which assets those will comprise is difficult if not impossible to discern.

For example, I remember the first days after Google went public, and as the stock price soared past first $100 and then $200, I was increasingly surprised at the apparent unbridled demand. I remember think what a great short it would make, but am now obviously immensely relieved that I didn’t act on that ill conceived notion. Who called the lofty heights its price did finally reach? Absolutely nobody that I could find, with any shred of credibility. Of course there were legions claiming to be the original Google prophet after the fact.

Bill Murphy and the crew at GATA monitor short positions religiously to detect the activities of Dark Stars like Goldman Sachs, HSBC, and JP Morgan in the precious metals futures markets.

You can too, if you want to increase your sensitivity to macro market movements. While short positions in futures and commodities are good harbingers of things to come in those markets, the same applies for public company shares. Uniformly, build-ups in short positions always precede price volatility. Unless you know for sure which way that foul wind is blowing, you don’t want to be a starry-eyed bag holder for someone else’s leveraged exit strategy.

Gold Standard
I can’t advocate strongly enough for gold as the only reliable long-term value store for capital preservation strategies. As the morons on Wall Street rightly point out, gold yields no dividend and produces no cash flow. It merely grows in value at the annualized and reliable rate of $87 per year. Perrrrrrrrrrfect store of value. But they can’t make any money off you if you buy gold, so that tune will never issue from those lips.

As the value of the U.S. dollar and other gang-banged currencies diminishes through continued and enthusiastic whoring, sovereign wealth and ultra high net worth capital pools that are holding very very large and fragrant bags of such currency are nervously eyeballing each other and the precious metals prices. How do they convert their poo into bullion without juicing the market into the stratosphere? More to the point, how do they dump their U.S. dollar holdings without inciting an absolute stampede for the exits, thereby further undermining their net worth? The price of gold will continue to go nowhere but up, seesaw corrections and atmospheric turbulence notwithstanding.

People always ask me how much gold I own. Except for the ring on my finger and a 1/10th of an ounce Eagle a supporter sent me, the answer is none. That’s because I’ve moved to Peru and am now acquiring gold directly from the source. That’s right…I’m in the mining business now in the most profound way, working with informal miners (or Small Scale Artisinal Miners as the World Bank refers to them) to process their ores without the use of mercury, which is now menacing Peru’s export food market.

Unbeknownst to most, this global army of subsistence miners is the largest un-organized labour force in the world, producing billions of dollars in metals each year. Most of them get ripped off by unscrupulous buyers, and governments have been frustrated in their efforts to capture a tax stream from this revenue flow. While I’m not much interested in helping governments empty the pockets of their citizens, I do understand the idea of a compromise when it comes to sabotaging the ecological systems that keep the planet inhabitable. If you could see the sheer scale of the destruction in Madre de Dios in the jungles of Peru, you’d start to comprehend the idea of a finite planet.

Fortunately, Peru is awake to both the opportunity and the risk, and we have the ear of the government, thanks to this newsletter.

My plan is to create the biggest gold mining company in the world by uniting this network of miners under a corporate umbrella they cooperatively own a piece of. Sound grandiose? You bet.

Wish me luck. But with network of processing plants and purchasing stations under development, we’re well on the way. Plus we have an ace up our sleeve which will see all these miners prefer to sell their ore to us. Imagine a gold mining company with a life-of-mine that never ends, ounces in inventory consisting of half the gold contained in South America, and zero exploration risk.

Which brings us to the other side of the business of mining – exploration. The new floor price for gold at $1,000 an ounce changes the economic landscape of many heretofore shelved deposits. Bulk-tonnage low grade deposits are now economic, in many cases, under .5 grams per tonne.

We’re on the verge of a new bull market for junior explorers are able to acquire and drill such projects rapidly. There’s no need to hang onto the myriad junior companies that seem to take forever to get around to drilling, then drill 1,000 meters across 20 holes, then take another year to announce results while they scramble to find a replacement project. Watch out also for “closeology” plays. Except in gold-prolific districts like Red Lake, Nevada and South Africa, they seldom pan out. (pun not intended…I SWEAR!!!)

Colombia, Peru, Chile and Argentina are going to be hot for exploration, as they still remain under-explored, as are certain African nations. I still think Bolivia and Venezuela are salvageable politically, even though that buffoon Morales just congratulated himself on another stolen election. The economies of these mineral rich yet leaderless backwaters of the Latin American economy will rebound once these Commie crime-lords are ousted and/or offed by some mysterious drone or stray American bullet.

In Peru, especially, (the only South American nation to add jobs in the last year, and one of only two in the world) the enthusiasm with which the country is building businesses, homes, and infrastructure is heart-warming to see. Its just a matter of time until the populist and shiftless impoverished of Latin America wake up to the fact that they live in the land of opportunity, and its time to pick up a glove and get in the game, Morales and Chavez notwithstanding.

Oh yeah….for those requesting my public appearance schedule, here it is:

  • February 4th : BNN, Canada’s National Business Network, Commodities Report, 11:45 a.m.
  • March 5th: BNN, Canada’s National Business Network, Commodities Report, 11:45 a.m.
  • March 7th: Prospectors and Developers Convention (PDAC), Toronto Convention Center
  • June 6,7: Cambridge House Conference, Vancouver Convention Center

And yes, the film Crime of the Century is still in development…just need to allow some time for people to forget about the most recent crop of point-missing, surface –scratching (Niall Ferguson’s “Ascent of Money” ) and self-aggrandizing (Michael Moore’s flop, whatever it was called) films.

By James West


© 2010 Copyright Midas Letter - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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