Colonials-Fragments 12 pieces

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Incredibly interesting grouping of colonial currency fragments from the 1750s-1780s. Delaware,  Maryland, Rhode Island, elephant, horse, lion  and egret vignettes, shillings,ten shillings, 2/3 thirds of a dollar, a dollar, 4 dollars, all represented in this fascinating assortment. “To counterfeit is Death” featured prominently on several.

Washington, Franklin, Jefferson? Me. You?

 

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Large Size Federal Reserve Notes

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Game ON

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It is interesting to watch people watch a world-wide financial crisis unfold and take no action whatsoever to protect themselves from what they know is coming and the outcome which is so crystal clear. I am always surprised at how much people are aware of the crises and the issues, yet hope someone else will fix it.

Whenever a discussion arises about the economic malaise arises it quickly evolves into blaming the Republicans and Bush or the Democrats and Obama or the repeal of Glass-Steagall and the political push to expand home ownership under Clinton or Greenspan or Bernanke or Trichet or Hu or (I would name the leader of Japan but it would fill 8 pages to list them all for the last decade). No one takes responsibility themselves or wonders about where the legendary can kicked down the road winds up or what it means for them.

We all know that Greece cannot pay the debts that have been accumulated. Nor can Portugal. Nor can Ireland. Nor can Hungary (which along with Argentina are at the forefront of governments who have seized their citizens pension funds setting a precedent for predatory bureaucrats world-wide). Nor can Spain. Nor can France. Nor can the United States. Nor can Japan.  The reason the debts in Greek have not been restructured is because no one can agree on the percentage that the holders of the debt will accept “voluntarily”. The 50% default agreed upon only drops Greek debt to 120% of GDP from 180%, both levels of which are unsustainable, so the write-down must be much larger to drop to a level where the debt can be paid and the interest as well. A number as high as 70% has been suggested. The catch is that the debt-holders won’t accept it and if the default then becomes involuntary it triggers Credit Default Swaps and other derivatives which then become the responsibility of the parties that underwrote the debt instruments to begin with.

No one will advance Greece any more money (sic!) until this issue has been settled. With huge numbers of Euro coming due in the near future, the cradle of democracy must receive this funding to roll-over the debt and negate the deflationary contractions to the balance sheets of the holders. If you hold the debt, your gamble is that if the “insurance, the hedge, the safety-net” is triggered that the party who sold you the coverage (and collect the premiums for that protection and took it as income) can pay. The reason you would not trigger this clause is because if they cannot your write-off goes to 100%, not limited to whatever number is agreed upon. You have figured out how to live with 50%, more becomes a problem for your balance sheet. You also know the CDS are worthless-the major banks of Germany, France and the UK are holding this debt and HFT hedge funds  bursting in and out trying to make a short-term, highly-leveraged .1% are all players-and add the major US gamblers with customer deposits who hold the vast majority of the $707 trillion in nominal derivatives all trying to squeeze fees and trading profits out of the circumstances on the premise that the US Government, the Fed , the ECB, the Water district of Poughkeepsie will absorb the paper and make them whole (logical, because this is how it has worked so far).

This story will play-out in each of the crises mentioned and more besides which are awaiting their 15 minutes of fame. Each of these stories have their  happy-endings predicated on their economies growing at a faster rate than their interest costs are rising, without adding any new debt or growing the principle amount owed on which the interest can be paid, so that tax revenues (and collections) can increase to reverse the spiral.  Reinhardt and Rogoff have chronicled how this turns out in This Time It’s Different and have shown that the serial defaulters seem to be able to repeat this performance every 30-60 years. The debt  is always “paid” by default.

In Currency Wars, James Rickards has detailed how every government seeks to find growth through exports and how each government than seeks to protect their own markets while seeking access to others. Neither of these brief synopses do justice to the depth, breadth and insights of these two books, which are really essential reading for investors hoping to survive.  An insight repeated frequently in Currency Wars is that when your currency becomes worthless, the assets held in that currency become valueless as well.

Let’s now make you a citizen in Athens, deposits in a Greek bank-the rising tide of sentiment now seems to be that Greece will default, withdraw from the Euro, and reinstitute the drachma-immediately converting all the Euro debts to drachma and “pay off” the debts with the new currency. Your Euros when converted to drachma will have a small fraction of their current purchasing power. Do you just sit there and wait for this to happen? Multiply this by the number of crises and the number of people who will be seeking safe-haven and think about what a safe-haven is in the context of devaluing currencies.

Let’s bring this closer to home-foreign holdings (read primarily China and Japan) of US Treasuries are dropping every month. The supposed safest entity in the world, and an increasingly risky world, and fewer are being held by those who own the most. The debt is being financed by the Federal Reserve and computer blips. China has just worked out deals with Japan so that the trade will be done in yen and renmimbi instead of the Reserve Currency of World, the US Dollar. China has eliminated the dollar in trade with Iran (one of their key oil suppliers). Iran and Russia have eliminated the dollar. The drop in usage for the dollar drops the demand which lowers the value which increases your cost at the gas pump. It also puts and keeps those dollars in circulation.

Other countries that have positive balances of trade, and , consequently, pile up dollars are finding means to protect themselves against the policies, regardless of administration, which lead to a cheaper dollar to get that doubling of exports in 5 years that President Obama is striving for, and diminish the value of their holdings.

Central banks are buying gold..this is all easily documented by country and trends plotted..and buying with increasing frequency and in increasing amounts and buying them with dollars..which puts the dollars back into circulation.

The expansion of the money supply has been astronomical-when the velocity of turnover begins to grow-and it will-because the longer you hold the more you lose in purchasing power, the falsified low-inflation numbers, will explode-and the velocity will increase as people convert to real assets. This will have the effect of doubling, tripling, quadrupling the supply and the rapid loss of its value to the extent that growth exceeds the growth of production. This will seem like it happened overnight.

Rickards has a really interesting matrix showing how when a certain number of people do a certain things, it triggers another group doing the same, which triggers another group, each exponentially larger-think of the housing bubble, the tech stocks in 1999-2000 for real-world experiences. In essence, every one wakes up on the same day with the same conclusion.

Dollars are being dumped for hard assets by central banks and government. All governments have a policy of debasing their currencies for competitive reasons. The velocity of expanding money supplies is going to increase. Everyone will wake up on the same day and want to own precious metals to protect their personal assets. Everyone knows in their heart that this is true.

I can help you own metals…call or email me. I am backed by one of the largest dealers in the country.

John Cox

651-353-7972

johnr@coindealsforyou.com

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Gold Price Range Predictions: $1100 to $10,000-Pretty Helpful?

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I am always amazed at the extreme ranges predicted for precious metals and the prevalence of articles and interviews supporting positions in the direction of the most recent market action. As gold soared to most recent peaks in April and September of this year, everything was hyperinflation-gold to $3000, $5000, $8000, $12,000. During the recent sell-off which saw gold drop to the low $1500s from $1900, the theme was that the gold bull market was over, deflation was going to rule the day and that $100 was near at hand. 

 

Hello? State Farm, Progressive, AllState-I’d like to buy some homeowner’s insurance.

Hurry, Please!

The odds of your house burning down are pretty small. It happens to just .08 percent of U.S. citizens
Read more: http://wiki.answers.com/Q/What_is_the_average_chance_of_a_house_fire#ixzz1j91UZ7uB

 

 Realistically, your odds of your house burning down really make the choice to carry fire insurance pretty silly. You don’t need it-oh sure, the mortgage company makes you carry it to protect their investment-but really, you just buy it when you need it-save yourself tons of premium expense-still covered for next to nothing. What? You don’t know when the fire might happen and when it does you won’t be able to get coverage? Rats-there’s always a catch! No insurance-no protection.

 

We’ll talk about the case for $10, 000 gold in future writings but right now let’s see how we make a case for $1100 gold. The simplest explanation is illustrated by means of some simple ratios-We had a bottom in gold in 2001 thanks to the financial wizardry of then Chancellor of the Exchequer, Gordon Brown, who sold half of Britain’s stash, pre-announced, into the market, of $252 which ran upward for 10 straight years to the high $1900s in 2011.

 

A range from the bottom to $1973 is just north of $1700 so a 50% pullback would be the high minus half the increase of $1752 ($876) or $1097. Granted, this would take place over about the same time frame as the gain so it would take a few years.

 

The GLD was initiated in late 2004 and a chart with Fibonacci ratios confirms this hypothesis if we do indeed get this long-term pullback.

 

 

 

The GLD is generally 2% or so below the spot price due to fees, etc. for “managing” the ETF and represent one-tenth of an ounce of gold.

 

The $Gold (the spot price) weekly chart shows that our 200 week average price is $1180. See red average on the left portion of the chart and the red trendline. This from Stockcharts.com

 

 

 

 

 

Anything can happen in the Market-Mark Douglass 

 

Could this happen to gold? In this market environment? Well, yes it could.

 

The GLD on weekly chart…extreme up and downs-last drop from $1970 area to touching the low $1500s was almost 25%. Even after a bounce, another 25% drop from here puts in the $1200. Again, note the 200 week MA supporting $1100 thesis. 

 

 The Gold Volatility Index doesn’t provide a lot of comfort. Clearly, lots of action. 

 

 Robert Prechter and many of the people predicting that these events are going to happen, that deflation is the biggest risk and the most likely event, are telling us to be out of all markets and in cash, especially Treasury Bills. There are as many forecasts showing test of the 2009 stock markets bottoms, and if broken, projections of 450 S&P levels.

 

Supporting evidence: All the governments around the world are insolvent. All the banking and financial institutions have their solvency based on the value of the assets they own holding their value, the major banks of Europe and the US are owners of the sovereign debt that cannot be repaid, that cannot have the rising interest costs on the rising debt levels payable on a sustained basis.

 

If we get a major contraction, cash will indeed be king. Liquidity will be the most valuable characteristic of any asset.

 

Scared to own precious metals at these levels because of these potential events? Well, sure. But if your assets were held at Lehman Brothers, or in recent months, MF Global even if you were right, you still had/have nothing.

 

So you might buy gold, have it drop to $1100 but if it is the real thing and you have it in your possession, you still have your purchasing power and every other desirable asset will be cheaper as well. The financial house of the entire world is at risk at bursting into flames and very, very few have any coverage. AIG, Countrywide, Merrill Lynch, Bear Stearns, General Motors, Wachovia

 

The SEC, Goldman, JP Morgan, Soros ,hedge funds Congressional inside traders, Jon Corzine all shown below protecting your financial future. They take turns. 

 

Or you could protect yourself by owning precious metals. Safety in inflation or deflation. Oh by the way, the weekly chart shows a gigantic flag with probability of a breakout to the upside, which will be the theme of the next letter. 

 

JohnR

johnr@coindealsforyou.com

 

651-353-7972

 

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Draw Your Own Conclusions

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The ETF for the S&P 50 index, SPY, closed the year 2001 at 113.70. This core index closed 2011 at 125.50 essentially flat with the 2010 ending price 125.75 and just about even with the 1998 high of 124.10.

There has been essentially no progress for 13 years yet the Bureau of Labor Statistics’ Consumer Price Index tells us that it takes $1.39 today to buy what $1 did in 1998. The gain over last 10 years from 113.70 to 125.50 of 11.8 points or 10.37% pales in comparison to the $1.28 needed today to buy what a buck bought in 2001.

Yet, from 1998 or 2001, the professionals in the investment community have managed to extract tens of billions of pensioners, 401k, IRA, mutual fund holders dollars in performance bonuses. The number is probably hundreds of billions..hundreds of billions…from the supplier of the basis who have lost substantial purchasing power over that time frame. The 1998 close at 124.10 would need to be 172.499 to be break-even for those investors. From the 2001 close the break-even number is 145.436 which is in the neighborhood of the all-time high.

The SPY yearly chart:

 

 The 2011 doji  indicates indecision going into 2012. After a huge run-up in the 1990s, the most recent decade has been a wide-channel with net, net, net not much to show for it unless you played the swings and timed the markets which the pros say you can’t and shouldn’t do. Pretty much like taking a daily nap on the railroad tracks which you shouldn’t do either.

The wake up call will come when all the boomers who hope to be retiring have the lost purchasing power really hit home, the hammering of their net worth   from the loss of home valuation and the realization that they owe tax on ever y nickel withdrawn from an IRA or 401K from here on out.

Has anything worked over that time period? 

 This chart compares the ETF for Gold (gold line) and the ETF for Silver (Blue Line) with the S&P 500. Gold was up about 9% in 2011 even after a large sell-off from the April high and the September rebound. This was the 10th year in a row for superior performance for gold. You do not need to a CFA or Master Technician to know that gold has been a very, very good place to be. 

GLD simple yearly chart (this thing has only been in place since 2004)..Gold had bottomed in 2001 in the mid$200s and had crept to the low 4s where it based before exploding..correcting..made 3 or 4 attempts with sharp pullbacks before cracking $1000..same at $1500..now two approaches at $2000.

Looking at the individual years, in any of the years you could have bought gold and had it decline in price by a significant percentage, yet by the close of the following year, even if you bought at the worst possible time, you were in the black on the transaction. Holding more than 1 year, significantly so. If the pattern holds next year after the WIDE bar for 2011 with a $500+ top to bottom range, you will have some serious appreciation. 

The candlestick for 2011 shows the open at the bottom of the box, the close at the top and the upper and lower lines (wicks) show how high and how low the metal traded in the last twelve months. The upper shadow means sellers came in and that is resistance that must be overcome before the price can advance further. The upper shadow/wick on gold is now about a $400 range or 20% plus from the current close.

Interestingly, during the bear market in gold from 1981-2000, central banks were strong sellers and killed every rally. This year and despite the volatility, Central Banks and Governments have been strong, strong, strong accumulators and the breadth  and diversity of those countries is startling.

The daily noise from the paper gold markets keeps cages rattled and potential investors rattled and fearful. The physical market, real gold that you own and possess is increasingly diverging from the paper, high-leveraged, computer-driven, MF Global world of unreality and dice-rolling.

Here is some startling reality: The amount of gold that can be created by derivatives is unlimited.  The amount of physical gold in existence is probably about 5.2 billion ounces or so, according to a number of sources. Gold does not rust, tarnish, evaporate, rot, so all that has ever been produced is still here. That sounds like a big, big number but there are 7 billion human beings on the planet so there is less than ¾ of an ounce per person. When you take the gold held by central banks, who are buying, buying primarily because the realized you cannot trust the future of their dollar holdings, or Euro holdings, or yen holdings, the amount available to own is a small fraction of the 5.2B.

The day will come when everyone will wake up on the same and realize they own no gold and want some..now…and it won’t be there…this hyperinflation chart tells you that…once it starts, no one parts with real assets for paper ones…bad money drives good money out of circulation (Sir Thomas Gresham 1718). This chart has been repeated over and over in history..by the same entities and the same processes (This Time It’s Different-Reinhardt and Rogoff 2010).

 

 

The holders of paper, financial assets lost ALL of the purchasing power of everything they had worked for and saved and in the blink of an eye-look at the timeline on this chart-the blink of eye and years of effort and prudence was gone. We have all seen the pictures of the wheelbarrows full  of money to buy a dozen eggs and the girl throwing bundles of bills into the furnace for heat but no believes it can happen here of to them. History says it can and it will.

The Argentinian nationalization of pension funds is a warning, the MF Global theft of customer funds for a failed speculation and no criminal charges is a warning, no repercussion, the legality of Insider Trading by Congress people, the lack of performance and enforcement by the SEC all flashing neon signs and trumpets sounding that everything you have is at risk.  Added to the mendacity of our government “protectors” is the explosion of derivatives from $600 Trillion (600 thousand billion) to $703 trillion in 6 months at a time when the economy is slowing and should be declining not escalating at an annual 40%+ rate, all based on the premise that every party to the chain can and will meet their obligations when called upon even though they are levered 12-15-40-80 to one and small declines can wipe out their entire capital. Small potatoes MF Global couldn’t do it…but neither could the largest insurance company ever in existence AIG do it when the day of reckoning arrived and demanded to made whole. If you think there are no more weak sisters in the financial world please leave orbit and return to earth immediately.

EVERYBODY KNOWS the debt levels around the world both public and private cannot be repaid. Which means that governments quit buying worthless debt and let the contraction take place or create the money to “pay” the things off. Everybody knows about the value of the promises of politicians.

In the last month, out of the blue, I have had a number customers who are beginning to take action to preserve their own assets and be their own central bank. It is amazing how owing gold and silver is considered risky UNTIL you own some-then the realization and awareness switches to the risk of not owning any.

I can help you if you wish. I am a Precious Metals Specialist with one of America’s leading bullion houses and known for their integrity and fair-dealing.

John Cox

651-353-7972

johnr@coindealsforyou.com

 

PS..the coindealsforyou.com website is under construction…after moving, rapidly and widely expanding duties and two computer wipeouts, I am  finally getting there.

 

 

 

Posted in Collectibles, Currency, Dollar, Euro, Gold, Investing, Newsletter, Precious Metals, Silver | Tagged , , , , , | 4 Comments

Political Risk

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Years of research consolidated for you
Friday, April 15th
Heres an example of Political Risk

Coeur D’alene Silver (CDE) above and PanAmerican (PAAS) below on the news of the nationalization of silver mines in Bolivia by Chavista Evo Morales. Yesterday, I mentioned that I had sold BVN on the news that Ollanta Humala was one of two run-off Presidential candidates in Peru. Reasoning is show clearly in the charts above.

Those crashes of very good silver miners on a day silver soared are sobering. None of my sell stops were hit yesterday but they came close…silver is up over $42 this morning so I raised them all.

Old friend AG and a potential AB=CD projection to $34…we’ll have to wait and see but it should be long showing up. If AG breaks $26.68 on volume, it will likely have a run. Again, these are my opinions and what I am basing my actions on-you must make your own choices. Sorry that I couldn’t make the extension work and I think the angle of rise will be much steeper but this ascent is a real possibility.

Meantime, it will become increasing difficult and expensive to buy the real thing-but begin a small position just to get started-physical gold and silver is the safest thing-Evo Morales did not harm anyone who owned actual metal.

If you need some help call or email me.

JohnR

651-353-7972

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Meaningful Support?

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Years of research consolidated for you
Meaningful Support?
Monday, May 16, 2011

The Silver ETF SLV-daily chart-50,100,200 DMAs

Silver has had a historic downdraft after rising from 18 in August and the high 20s in February to test the $50 level. Crashing off the top in massive volume, silver has broken the 50DMA and remains about 10% above the 200 day. The pattern from the top has formed what Chapman Wave creator Basil Chapman calls a “dreaded h” and that, folks, ain’t cheerful news.

But Friday’s action formed a doji and tested and held the 100 day/20 week moving average. We will soon see which of these moving averages (and the 100 is the least followed) will provide a base. The doji is an indecision point and often signals a reveral after a trend in either direction. The upper and lower shadows indicate that sellers came in when the price rose during the day and buyers entered when it fell.

The market news is all negative..the dollar gaining strength…the Straus-Kahn arrest (what was he thinking?)..Greece etc..and although the fear-gauge vix does not indicate it, everyone I have communicated with seems scared.

The Daily VIX: 17 level does not indicate much concern.

I added some physical gold this week-end from a baseball card dealer raising cash. Went to pick the coins up and was amazed at the number of dealers and the number of active buyers at the show. This is a small monthly show that had about 20 dealers and I was surprised at the sophistication of the grading and displays.

Everything looks like a bummer week for markets-seen everything from S&P 1425 year end to retest of the March, 2009 lows. Everyone is predicting a catastrophe for the metals..but when opportunity presented itself I bought physical. The 50 retracement levels from August to May high are right around $33-34 and a .618 Fib is in that $30 range which is where a falling price will meet a rising 200DMA…if that proves to be a base, physical will trade in the $35 range on the most popular items…so we may be pretty close to a base right now.

JohnR
651-353-7972

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Not For the Faint of Heart

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Years of research consolidated for you
Not for the Faint of Heart
Tuesday May 3rd, 2011

The Gold Volatility Index/GLD the gold etf:

The yellow line shows gold on a steady, systematic progression as the outlook for world currencies of all kinds becomes more known.

I don’t have or know a volatility index for silver but I’m sure one will be developed soon but that would make the gvz look tame.

Shown below is the SLV silver ETF and in blue the trend for the SIL silver miners index. The SIL peaked when silver was around $37 and has declined to levels which reflect much lower silver prices.

Just after arriving home last evening and just prior to viewing these charts, the doorbell rang and a pleasant courier handed me a package from Mr. Market. In it was my fanny which appeared to have been run over by a riding lawn-mower and then chopped with a machete.

The chart above shows what happened to my portfolio of silver stocks- some down north of 10% on the day. . I bought them much, much lower but, nonetheless, drawdowns are unnerving. I read a lot of people who write newsletters and commentaries who never have this happen-or at least admit to it-but this may likely be the nature of the precious metals market for stocks and physical itself-presenting opportunities in both directions.

Silver blew through the 40s to within 18 cents of 50 so this is to be expected. The key will be where the support levels develop which appears to be in the $42s. If it holds in that range, I am expecting a big rally in silver stocks but as my favorite commentator is known to say “We’ll just have to wait and see”. You can’t win if you don’t play..of course, you can lose if you do. At the same time, if you don’t play inflation guarantees that you do lose.

For those with no or small physical positions, silver just went on sale with a 15% drop so beginning here with a starter holding could make sense.

JohnR

651-353-7972

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