Tenth Place: Jonn Nadler, Senior Analyst, Kitco

Eighth Place: Robert Prechter, The Elliott Wave

Seventh Place: Nico Isaacs, Elliott Wave Financial Forecast

http://www.washingtonsblog.com/2009/10/congress-removes-authority-to-ban-abuse.html

Congress Removes Authority to Ban Riskiest Derivatives Trades Because "There Was Concern that a Broad Grant to Ban Abusive Swaps Would Be Unsettling"

According to Bloomberg, the original draft of Barney Frank's derivatives legislation:

would have given the Securities and Exchange Commission and Commodity Futures Trading Commission joint authority to "prohibit transactions in any swap" that they determine "would be detrimental to the stability of a financial market or of participants in a financial market."

Frank has now stripped that provision because it would be "unsettling":

"There was concern that a broad grant to ban abusive swaps would be unsettling," Frank, chairman of the House Financial Services Committee, said today as the panel began action on his measure.

END

I fully agree with Barney Frank. I would be totally unsettled and disoriented if I did not get my daily abuse in my portfolio from the Gold Cartel. They need to stop the abusive trades slowly so that we don’t go cold turkey on abuse and go into some sort of seizure as we could probably not take the adrenaline rush of investing in a free market because it’s been so long since we had one!

Barney Frank just earned a nomination for a 2009 MOTY award for that moronic drivel that serves only to protect the banking elite and not the people who elected him.

This one will have you falling off your chair holding your ribs it’s so funny. You can’t make this stuff up.

QUOTE

http://www.bloomberg.com/apps/news?pid=20601087&sid=aqe8koHXjMrU&pos=5

U.S. Representative Ron Paul’s proposal to allow audits of the Federal Reserve’s monetary policy is "incredibly dangerous" and could stoke inflation, said Frederic Mishkin, a former Fed governor. ….

Paul’s bill "would be very dangerous in terms of promoting inflation," Mishkin said. "If you make the central bank beholden to politicians on a short-run basis, you get very bad outcomes: high inflation and less of the ability to deal with shocks like the ones we had recently." ……

Mishkin called surging gold a "sideshow" and said prices of the metal "move all over the map for many, many different reasons and have very little impact on the economy."

"If gold price movements are reflecting other factors that could be important, you might worry," he said. "For example, if gold is going up because people are worried the Federal Reserve won’t be able to contain inflation, that is serious."

END

What can I say? The chairman of the Federal Reserve has been nominated by TIME magazine as Man of the Year, while Frederic Mishkin, a former FED Governor has been nominated as Moron of the Year. May be TIME magazine should call me and we can compare notes to see if they really meant "Man of the Year"; after all, it is also a MOTY; they could easily have made an honest mistake!

With only three days left for anyone to excel in the production of moronic drivel to qualify for a nomination for the coveted 2009 Moron of the Year (MOTY) award there was a late entry from David Olive of thestar.com

http://www.thestar.com/business/article/742619--olive-don-t-believe-hype-over-gold

He assures us in this piece that gold is in a bubble

For example

QUOTE

U.S. talk-radio yakkers Glenn Beck and Watergate ex-convict Gordon Liddy have become paid shills for gold vendors. On behalf of an outfit called Rosland Capital, Liddy in TV spots describes gold as "an intrinsically valuable liquid preserver of purchasing power."

Bank of Nova Scotia, one of the world's largest precious metals dealers, has launched an online store for sales of Scotia Gold Bars and other gold items. Such is gold's demand among everyday folks, as the Star's Rita Trichur reported last week, that the U.S. Mint has suspended sales of its popular American Eagle one-ounce gold coin for lack of supply. The Royal Canadian Mint has some of its most popular gold coins on back order.

These are all classic "sell" signs.

END

That is complete drivel; but what IS a "classic sign" however is the classic sign of a so called journalist displaying the IQ of a grapefruit by referring to Jon Nadler as a sage!!!

QUOTE

And a few sages finally are beginning to say as much.

Jon Nadler, senior analyst at Kitco Metals Inc., says gold has been riding a "bubble" of "hot air." The Montreal gold expert, noting gold's historic role as a hedge against the world going to hell in a hand basket, warns: "Don't get carried away with scenarios of Mad Max," referring to the film set in an apocalyptic future.

END

But it gets worse:

QUOTE

Gold, truth to tell, is a lousy investment. It pays no dividends and incurs high storage costs. It is illiquid (try paying for groceries with a gold bar). And it's in almost infinite supply.

Central banks and the International Monetary Fund can and do regularly sell off gold from their reserves, flooding the market. Gold producers bring uneconomic mines back into production when a rise in gold prices makes them viable again.

END

That really takes the cake for moronic drivel! I wonder if he has tried paying for groceries with US Treasury Bonds, or Fannie Mae shares! As for the theory of infinite supply that is so moronic it doesn’t deserve any response except to say that he must be referring to "paper gold" and not the real metal!

He did however save the best for last:

QUOTE

Taking inflation into account, gold should now be trading at $2,163.62 to match its previous high. Anyone who bought gold at its historic peak in 1980 is suffering a $1,313.62 loss three decades later on every ounce of gold purchased at that time.

END

This moron claims that gold is in a bubble at the beginning of the article and bemoans its lousy performance by the end! Mr. Olive you have displayed the analytical skills of your namesake and earned a nomination for a 2009 MOTY!

Nouriel Roubini came very close to winning this year’s MOTY Award when on December 15, 2009 he published moronic drivel about gold being in a bubble! Considering he is Professor of Economics at NYU he should know better, but then again, Ben Bernanke was Professor of Economics at Princeton! Being a professor of economics clearly doesn’t preclude spouting drivel when it comes to monetary matters.

http://www.project-syndicate.org/commentary/roubini20/English

QUOTE

Gold prices have been rising sharply, breaching the $1,000 barrier and in recent weeks rising towards $1,200 an ounce and above. Today’s "gold bugs" argue that the price could top $2,000. But the recent price surge looks suspiciously like a bubble, with the increase only partly justified by economic fundamentals.

END

Mr. Roubini clearly hasn’t contemplated how the gold price has not kept up with the price it should command based on the inflation of the money supply. As that is gold’s primary function it can not be in a bubble. In fact it is quite the reverse, gold is undervalued.

He further states

QUOTE

Gold prices rise sharply only in two situations: when inflation is high and rising, gold becomes a hedge against inflation; and when there is a risk of a near depression and investors fear for the security of their bank deposits, gold becomes a safe haven.

END

He clearly is unaware of a third situation. That is when an ever increasing demand for gold is met fraudulently with "paper gold" and not real physical gold. This is achieved through ETF’s, futures, derivatives but most extensively on the London OTC market by way of unallocated accounts that are run on a fractional reserve basis. The amount of gold that has been sold that does not exist I have estimated to be between 30,000-50,000 tonnes. That is about equal to all the gold reserves that remain in the world to be mined! This third reason is the biggest and most important reason why gold prices are rising and will continue to rise to unimaginable levels. As more and more people seek to own physical gold the fraud of selling paper as a substitute for the real metal will be revealed causing a short squeeze like the world has never seen. Roubini’s mocking of a $2,000 price expectation will make him look very stupid when the price exceeds multiples of that price target.

But the most moronic statement of Roubini’s was this:

QUOTE

But since gold has no intrinsic value, there are significant risks of downward correction in gold prices.

END

The intrinsic value of anything real is how much it costs to produce it. Gold has intrinsic value because currently at a price of $1100/oz it costs approximately $900-$1100/oz to mine it (mining companies are making somewhere between 0-20% net profit). When the price of a tangible good drops below the cost of production the supply reduces and the price rises to a profitable level again.

The cost of producing trillions of dollars is next to nothing. The dollar has no intrinsic value because it costs nothing to produce it. As its purchasing power drops there is no self-regulating mechanism that reduces its production. In fact as its purchasing power reduces the government will produce more because it will need more as the costs of its spending programs increase.

Roubini is part of the 99.9% of economists who give the other 0.1% a bad name!

Paul Walker came close to taking this year’s prize but was narrowly beaten despite making a sterling effort:

QUOTE

http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=88713&sn=Detail

"This may not be the gold rally you have been waiting for" - Paul Walker, the GFMS CEO, does not believe this is the rally that will sustain gold above $1000 an ounce

END

Paul Walker made this speech when gold was trading at $996/oz and silver at $16.28/oz. While he was denigrating the precious metals he let slip something of monumental importance:

QUOTE

The recent spike in the gold price to around the $990 an ounce range is unlikely to lead to a sustained rally above the psychologically significant $1000 an ounce level. This is the view of GFMS CEO, Paul Walker. Rather, he believes the jump is the result of "a few fairly significant lumpy transactions" that have gone through the market at a time when he, and his colleagues at GFMS maintain, there has been a degree of illiquidity.

END

I have recently described what is going on in the physical market to be the equivalent of a "Run on the Bank of the Gold Cartel". Here we have Paul Walker talk of "significant lumpy transactions". What does that mean? My guess is that can ONLY be referring to the physical market and it means some big players have asked for delivery of gold in LARGE quantities. And Walker says this has come at a time when "there has been a degree of illiquidity". What does that mean? The Cartel doesn’t have the gold to meet these large deliveries!

GFMS published their Q2 Report on the Gold Market. I wrote a critical analysis of this report

http://www.gata.org/node/7699

I pointed out that GFMS, with a blatant manipulation of the statistics, had turned a 2% growth in gold demand to an 8.6% decline! This was because Central Banks had turned net buyers of gold in the quarter and GFMS excluded their purchases from the demand because, in their words, the Central Banks are a traditional source of supply!!!

But from the CEO himself we learn that the gold market is illiquid. Isn’t it disingenuous at best or fraudulent at the worst to turn a 2% demand surge into an 8.6% plunge just when the market is drying up knowing full well their report is widely followed? It also brings into question the motivations of the World Gold Council (WGC) who commissions the GFMS Gold Market reports.

Proving fraudulent intent is difficult, so we will settle for the lesser crime of being a complete moron.

http://www.mineweb.co.za/mineweb/view/mineweb/en/page33?oid=83114&sn=Detail

The keynote speaker, Philip Klapwijk, Executive Chairman of GFMS, offered a highly analytical presentation covering gold and silver that almost grudgingly conceded that despite highly adverse fundamentals, gold could still rise a little over the remainder of the year, but not by as much as many analysts believe because fundamentals are currently so adverse.

Silver's fundamentals were also seen as sufficiently poor to keep prices back, despite its traditional volatility which has tended to see it outperforming gold on the way up, and underperforming on the way down.

Klapwijk's address was titled 'Is it game over for gold and silver, or has the bull market in these metals still got legs?' As noted above his feelings on gold were mixed, but purely on fundamental grounds, which have put supply into a substantial surplus, largely through a plunge in jewelry fabrication demand coupled with an inordinate amount of scrap coming on to the market.

He suggested the current supply/demand balance should not support even the current gold price. The fact that the gold price is as high as it is thus down to investment demand, but if the stock market in general continues to climb, making people less risk averse, then money could start flowing out of investment gold (where the appetite seems already to be waning) back into general equities.

Klapwijk painted an even gloomier picture on silver with rising mine supply and falling industrial demand moving the market to a substantial surplus. But, he pointed out--while investment demand for gold has reached nearly one-third of the offtake as much of the world sees gold as money-- investment demand for silver lags far behind with only the diehards seeing silver as a monetary metal nowadays.

Perhaps in favor of price rises, though, short term interest rates are at or near zero, government budget deficits are exploding and monetary supply growth is extremely rapid and inflation is likely to pick up strongly at some stage.

Under normal circumstances, Klapwijk averred, we might have already seen peaks in price for both gold and silver, but central bank and governmental policies could prolong the bull market a little longer, but the adverse fundamentals will bring prices down eventually.

Other points in favor of precious metals price rises could be that Central Banks are moving back to a stage where they seem to have less appetite for the selling off gold reserves; some are even beginning to buy which could continue to support gold, despite the adverse basic fundamentals. Even so, he would not predict more than an $1100 peak for gold and a return to $20 silver as possible medium term high points for the metals.

In a Q and A session, in response to a question as to whether he would debate Bill Murphy of GATA on the latter's view that there is a global banking conspiracy to keep the gold price down, Klapwijk replied with a very definite "NO!" He quoted Margaret Thatcher on the IRA in that he would not wish to give the GATA views the publicity that such a debate might generate.

END

On the day that Philip Klapwijk made his speech gold was trading at $923/oz and silver at $14.21. This highlights what stellar analysts GFMS really are! But the real reason for winning the 2009 MOTY is his likening GATA to IRA terrorists and implying that what GATA has to say has no merit.

GATA’s allegations were made in Federal Court by the landmark lawsuit brought by Reg Howe. The eventual Federal Court ruling in April 2002 did not in any challenge the veracity of GATA’s allegations. Judge Lindsay ruled

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Adrian is the proprietor of Market Force Analysis, a website service offering a unique analysis method which provides reliable indications of market turning points and when is a good time to enter, take some profits or exit a market. Subscribers receive bi-weekly bulletins on the markets to which they subscribe. Adrian is also a member of the Board of Directors of GATA.