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Why is it that we keep reading things like this months later in the so-called “mainstream media”?

There is no certain bet in nuclear physics but work by Nobel laureate Carlo Rubbia at CERN (European Organization for Nuclear Research) on the use of thorium as a cheap, clean and safe alternative to uranium in reactors may be the magic bullet we have all been hoping for, though we have barely begun to crack the potential of solar power.

Gee, where did I read that before?

Each ton of coal we burn up contains 13 times as much energy as that liberated by combustion of the carbon in said Thorium.  We could thus receive the same electrical energy we gain by burning the coal through extracting the Thorium and using the nuclear energy to produce power.  With the rest of the energy, the other 12/13ths, we could then extract hydrogen from seawater (which we have lots of) and convert the remaining coal to either diesel fuel or gasoline.  To put a not-fine-point on this, we throw away more than 100 billion gallons of gasoline (after conversion losses) in thorium tailings alone.  That is damn close to all of our existing gasoline consumption – with ZERO oil being drilled.  (PS: Those are conservative estimates – mathematically, it’s 200 billion gallons!)

Funny, that.

Even funnier that this isn’t exactly rocket science.  Oh yeah, we had one running at Oak Ridge for quite some time.  The operators intentionally left it both unattended and without power twice in an attempt to make it melt down.  It drained itself and shut down exactly as designed.  No boom, no china syndrome, no radioactive waste release.  In the morning they came and restarted it without incident by simply re-heating the material and pumping it back into the core.  No muss, no fuss, no cloud over Oak Ridge.

Even better is that these things burn nuclear waste, turning long-life isotopes into short-life ones.  The sort that decay into non-harmful isotopes within a few years, at which point they can be processed into their useful rare-earth elements (which are not radioactive.)

We have solutions to our energy problems folks.  We just simply refuse to use them – and whether your political persuasion is of the left or right variety, you might want to ask your favorite politician why?

Wouldn’t it be nice to create some high-paying jobs putting Throium-cycle nuclear power infrastructure into place in this country?  Yes, you’d have to put a cork into the “NIMBY” folks with Federal Laws that would preempt the nonsense that is typically run with these sorts of projects.

But the question is this: Do we want to live in a petroleum-constrained nation forever, with an increasing amount of dependence on nations that hate us, or would we like to break their backs and become independent from them?

Flat week with strong finish, where does that take us?

Last week was a relatively strong week for stocks and commodities. Although the SP500 closed slightly lower on the week the price action Friday was strong. The recent pop in commodities has everyone feeling good and bullish again and we all know how the market works… When everyone is feeling good the market has a way of shaking things up.

Below are a few charts showing heavy volume resistance levels that will most likely cause the broad market & commodities to pullback or trade sideways for a few days as buyers and sellers play tug-o-war.

SLV – Silver Bullion ETF Trading

Silver had a very nice pop last week but if you step back and look the recent price action you can see that it’s still trading below the previous major bounce from back in June. It looks as though silver is a little over extended as large percentage moves tend to give back 25-50% of the mover shortly after.

Take a look at the price by volume bar. It shows there has been heavy volume traded at that $19.00 level and the previous time it was reached sellers stepped back in pulling silver down.

GLD – Gold Bullion ETF Trading

Gold is trading deep into the resistance level and struggling to hold up. Last week we went long GLD after the bullish engulfing candle and took profits near the high two days later on Thursday’s price. Although gold is trading at resistance the intraday price action remains somewhat bullish/neutral for the time being.

USO – Oil ETF Trading

The oil ETF broke down from its large multi-month bear flag and is now bouncing up to test that breakdown/resistance level. This could be a possible kiss good bye. I will keep my eye on this commodity as it could provide us with a great shorting opportunity in the coming days.

SPY – SP500 ETF Trading

The equities market has been tried to bottom all week and Friday’s price action looks strong. While the chart looks strong the market internals are telling me the opposite. Last week we saw a gap down and Friday that gap window was filled. With heavy volume resistance just above the current price the odds are pointing to lower prices.

Weekend Equities and Commodities ETF Trading Report:

In short, it looks as though everything is trading just under or at resistance levels. That means sellers will start to enter the market and cause prices to stall (trade sideways/choppy) and or reverse lower.

That being said, with Friday’s strong close for oil and the sp500 I am expecting a gap higher in the morning because traders will review those charts this weekend and enter the market Monday feeling bullish.

If you would like to get my ETF Trade Alerts for Low Risk Setups checkout my service at: www.TheGoldAndOilGuy.com/specialoffer/signup.html

Chris Vermeulen

From Michael Krieger of KAM LP

War is the growth hormone of the cancer that is big government.

- Alex Jones
A government always finds itself obliged to resort to inflationary measures when it cannot negotiate loans and dare not levy taxes, because it has reason to fear that it will forfeit approval of the policy it is following if it reveals too soon the financial and general economic consequences of that policy. Thus inflation becomes the most important psychological resource of any economic policy whose consequences have to be concealed; and so in this sense it can be called an instrument of unpopular, that is, of antidemocratic policy, since by misleading public opinion it makes possible the continued existence of a system of government that would have no hope of the consent of the people if the circumstances were clearly laid before them. That is the political function of inflation. When governments do not think it necessary to accommodate their expenditure and arrogate to themselves the right of making up the deficit by issuing notes, their ideology is merely a disguised absolutism.

- Ludwig von Mises

How Wall Street Died

Let me take you back to the fall of 1999.  I was a senior in college without a clue what I wanted to do with my life.  Wall Street was in a boom and seemed exciting.  I had always loved the financial markets since I had first discovered them years earlier; however, I wasn’t convinced this was the profession I wanted.  I had majored in Economics at school for practical purposes but I found almost all of the courses to be extraordinarily uninspiring with the exception of a few like Corporate Finance and the Economic History of China.  It was the general micro and macro economics courses that I found the most painful to sit through.  I wasn’t alone in this assessment.  Many of my close friends were Economics majors as well and we all felt the same way (I later found out this was because we were being indoctrinated in voodoo Keynesian economics) .  So even with the Economics degree I wasn’t sure that I wanted to pursue a career in finance given the fact that I found myself more interested in subjects such as English , History and Philosophy.  Nevertheless, the firms were hiring, I had the degree and it would allow me to move back to New York City without living at home.

What I discovered as I interviewed for jobs disturbed me right away.  Every single firm with the exception of one was completely obsessed with math.  Entire interviews revolved around “how quantitative are you” and the like.  Although I hadn’t had much experience with investing I had enough to know this line of thinking seemed preposterous.  It seemed to me only basic math skills are necessary to be a successful equity investor.  Besides that, it seemed that the key is understanding that the world is always changing rapidly under the surface and therefore what is a good business today might be bankrupt tomorrow and what is a start up today could be the next Microsoft.  This seems obvious but the skill set to figuring all this out is more geared to an appreciation of human psychology, historical cycles and cultural shifts (both fads and structural changes) than math.  What I realized later is the reason they were so focused on mathematicians and Phd’s is that Wall Street was moving away from what it was always meant to be – a conduit between the holders of capital and those that wish to deploy that capital in productive economic activity.  Rather than trying to hire a well rounded workforce of intelligent college graduates the firms were hiring a cadre of quantitative robots that would play an instrumental roll in blowing up the world’s financial system.

When you get too many people of a particular mindset (in this case highly quantitative and academic) to aggregate in a field that is very much a people business and one where “street smart” common sense is of extreme importance you are asking for serious trouble.  When you couple that with a Federal Reserve that keeps interest rates too low what you get is a bunch of quants inventing products that provide a yield sufficient for pensions and others struggling to earn a return.  Products that are completely mispriced for the risk inherent in them.  I am not placing all of the blame on the Wall Street firms (although they deserve a lot and the fact people haven’t been punished severely is a huge reason why there is no confidence on main street), rather I believe the Federal Reserve deserves 95% of it.  If it wasn’t for them manipulating the price of money to absurdly low levels you wouldn’t have had the rush into toxic products in a search for yield.  While the newly enthroned Wall Street quant army would surely have done their damage nonetheless it wouldn’t have resulted in the complete destruction of the financial and monetary system that we face today.  In a nutshell, this is how I think Wall Street died and until it gets its act together will remain a corpse.

The Elites Have Lost Their Right to Rule

One of my favorite quotes is from Joseph Schumpeter who said “everyone has elites the important thing is to change them from time to time.”  Of course, this is what happens in a well functioning democracy.  The problem today and the reason why the United States is on the verge of some sort of revolution (I believe it will manifest as a revolution of ideas and not an armed one) is that the election of Obama has proven to everyone watching with an unbiased eye that no matter who the President is they continue to prop up an elite at the top that has been running things into the ground for years.  The appointment of Larry Summers and Tiny Turbo-Tax Timmy Geithner provided the most obvious sign that something was seriously not kosher.  Then there was the reappointment of Ben Bernanke.  While the Republicans like to simplify him as merely a socialist he represents something far worse.

Of course it is not just Obama.  He is at the end of a long line of Presidents that think they have some sort of divine right of kings to rule.  Think about the Presidency of the United States since 1988.  Bush, Clinton, Bush…If Obama had not won the Democratic primary we would have ended up with President Hilary Clinton.  Catch my drift?  Something is not right here.  This is the United States not some sort of petty monarchy.  There is no divine right of any family or group of families to rule.  When this starts to happen you get the disaster we are now faced with.  That said, the bigger point is this.  What Obama has attempted to do is to wipe a complete economic collapse under the rug and maintain the status quo so that the current elite class in the United States remains in control.  The “people” see this ploy and are furious.  Those that screwed up the United States economy should never make another important decision about it yet they remain firmly in control of policy.  The important thing in any functioning democracy is the turnover of the elite class every now and again.  Yet, EVERY single government policy has been geared to keeping that class in power and to pass legislation that gives the Federal government more power to then buttresses this power structure down the road.  This is why Obama is so unpopular.  Everything else is just noise to keep people divided and distracted.

Getting Into the Mind of Ben Bernanke

I do not have a clear window into the highest levels of power in many areas such as the military or the intelligence community but I do have a very good understanding of it when it comes to the financial system and the economy.  At the end of the day everyone knows that those who can create the money and credit have the ultimate power over any political system.  Therefore, at the top of the economic power of the world is the Federal Reserve and at the top of that is Ben Bernanke.  This is why I took a great deal of interest in reading the full text of his speech today.  Much will be written about it but I want to tackle it from two points.  First, who is Ben Bernanke?

You can really see into his head from reading this speech.  He is an academic who thinks he is smarter than everyone else which is why he is in the position he is in.  He thinks the key to monetary policy is to trick people into doing things that will hurt them in the end.  He believes the mal-investments he intends to push people and institutions into equals economic growth.  What surprises me so much about the investment community and the American public in general is that so many fail to understand that we live in a top down centralized economic system much more similar to China in more ways than people want to admit.  We look at how the government steers the economy in China and sneer.  How are we so different right now?

As far as the speech itself, it confirms something I mentioned several weeks ago.  Banana Ben absolutely wants to do a massive QE2 program. The only thing holding him back is gold is near an all time high.  What he wants is gold much lower and stocks much lower to give him cover.  Gold has not cooperated so he is in a bind.  He cannot print a massive amount of money with gold here and stocks at 1055 because what happens if gold soars and stocks sell-off in the days that follow such an announcement?  What if the response in the treasury market is not as desired?  He is scared to do it here and he is right to be scared because such a reaction would be the end of the Fed right then and there.  The Fed will be gone anyway within a few years in my opinion but it’s going to fight hard to survive and if you want to make money in this market you need to understand that.  The most powerful institution in the world is fighting for its survival.  Never forget that.

So what is he going to do?  I believe that the Fed and government are doing a lot more than people think to manipulate all markets behind the scenes.  After all, they have publicly announced their manipulation in many other ways so does it make any sense whatsoever to assume they aren’t doing a plethora of other things behind the scenes?  Of course not.  I think that with the Fed in a bind they will accelerate and become ever more aggressive in behind the scenes games.  This will make markets even more volatile and extraordinarily challenging.  This is financial war make no mistake about it. The only way in my opinion to survive this is to buy all dips in precious metals, agriculture and oil.  It is in these three areas that I expect to see the most price inflation as money eventually figures out the end game.  The end game is more and more people will eventually wake up to the fact that the markets are a hologram put in front of you by the magicians at the Fed.  That what constitutes real wealth in the years ahead will be owning food, energy and a means of exchange that will be accepted should a black market economy arise as it has in virtually all nations at one time or another throughout history.

In the end, the elites will be overthrown and a power vacuum will form.  The transition period will be extremely difficult as the elites will fight their demise to the end.  For you see, they care nothing for you they care about their power and control.  Nevertheless, rulers have always only ruled by the will (or apathy) of the people and when the people become overly taxed and abused they always rebel.  The main thing to think about is what kind of society do we want to rebuild from the ashes.  I am of the view that it must be a return to the Constitution and an elimination of central banking power and secrecy.  Let’s not fall for a demagogue or be pushed into a war when things are at their worst.

Have a great weekend,
Mike

by David Galland, Partner, Casey Research

The latest data on global gold trends, Q2 2010, just popped into my email box from the World Gold Council.
The bad news is that the higher nominal price of gold has caused a 5% decrease in jewelry sales over the prior year.
If you’re thinking “Hey, that’s not that bad!”, you’d be right. On this date last year, gold closed at $950… which is $286 below where it trades as I write. In other words, a 30% rise in price has resulted in a decrease of just 5% in jewelry sales.
And even that number is skewed, because the currency value of the gold purchased is up – way up. For example, India – the 800-pound gorilla in the global gold jewelry market – saw total gold jewelry sales fall only by 2%, but in local currency terms, there was a 20% increase in the nominal value of the gold trading hands. China, which only relatively recently reauthorized private gold purchases, saw a 5% increase in jewelry demand, but that translated into a 35% increase in local currency terms.
So, that’s the bad news.
The good news – at least for fiat money skeptics – is that total physical gold demand in Q2 rose by a whopping 36%. More tellingly, the increase was 77% when you take into account the dollar value of the ounces purchased.
As you’ve already figured out, the bulk of the physical demand is coming from investment – with the amount of gold held by ETFs growing 414% over the previous year.
Too far, too fast? I don’t think so.
In my opinion, as the fiat money monsters are brought to bay, the price of gold can really only go higher. Overly confident? I don’t think so.
That’s because when people lose faith in a currency, as they will before this crisis is over, they unfailingly rush to exchange the unbacked paper money for something more tangible. While pretty much anything with an intrinsic value will do – real estate, antique cars, old masters – for all the reasons that Aristotle enunciated, gold is viewed in a class of its own, and so has an unblemished history as a universally accepted store of value. And, thanks to its portability, divisibility, durability, and consistency, it has also always been looked upon as a convenient form of money.
The most pressing macro-observation I’d like to make – an observation that’s critical for investors to understand (though most don’t or won’t) – is that the tectonic monetary shift now underway is truly global in nature. And it’s not going to be over until a new and markedly different monetary regime has been implemented.
It’s like this: Throughout history governments have experimented with fiat money. They have done so because the benefits to the government and the insiders that invariably latch on to power are just so damn attractive. The Romans did it by debasing their coinage, but the modern version goes one better by completely disconnecting a currency from any value whatsoever, and then wantonly printing as politically motivated needs or wants arise.
The latest fiat system kicked off in earnest in 1944 when Uncle Scam, in Bretton Woods, NH, got the leaders of the world’s war-weary countries to agree to accept the U.S. dollar as their reserve currency. In return, the U.S. agreed that the currency notes it would subsequently issue would be convertible into a corresponding amount of gold. Then Tricky Nixon came along in 1971 and canceled the right of the bearer to swap the notes for gold. Overnight, the link between the currency and anything tangible was lost.
That, of course, opened the door to all subsequent politicians to engage in the whole print, print, print thing. The keystone asset of the former system – gold – soon became a distant memory for the new crop of central bankers and, remarkably, to the bearers of the notes.
For any number of reasons, most of which related to the illusion of increasing prosperity, people simply stopped paying attention to what Uncle Scam was up to. Of course, that illusion was largely based on the increase in nominal wealth: if one year you’re worth $100,000 and three years later you are worth $150,000, the tendency is to feel richer even if your actual purchasing power has gone up by far less or even has declined due to a debasement of the currency.
Today’s dollar is worth just 18 cents in 1971 terms.
But all scams must, in time, come to an end. And that’s what’s going on now. It ends here. Before this is over, the current iteration of the U.S. dollar – the vaporous construct with no actual value – will lose its value as money.
Which brings me to an important nuance in this discussion.
Most failed fiat money experiments involve a single currency. The most convenient recent example is provided by Mugabe’s Zimbabwe. Rather than actually supporting the creation of marketable goods and services in what he sees as his private fiefdom, he took the low road of energetically abusing his fiat currency to the vanishing point.
In a situation such as that, the local citizenry suffers – as well as anyone foolish enough to be holding bonds denominated in the debased currency. But that’s about it.
In the current scenario, the keystone of the entire global monetary system is the U.S. dollar. Which means that the primary reserve holdings of virtually all the world’s significant central banks are at risk of going up in smoke.
And it’s even worse than that, because the dollar is also the number one trade currency – which means corporations around the world are sitting on huge holdings or are dependent on commercial contracts denominated in dollars.
And even that’s not the end of it. Because Uncle Scam has long served as a role model to other world leaders, those leaders have enthusiastically followed suit and universally launched fiat monetary systems of their own. It’s bad enough that the world’s reserve currency is a fiction – but the situation becomes really dire when you accept as fact that all the world’s currencies are a fiction.
Man, we’re in a lot of trouble.
If you have so far resisted our constant urgings to make gold – which is to say, real money – a core portfolio holding, it’s not too late. Just start buying on the inevitable dips. I can assure you that as the fiat monetary structures continue to crumble – and they will – more and more people will be turning to gold. The latest World Gold Council data is just a straw in the wind.
In fact, thanks to the convenience of the gold ETFs (which you should make an effort to understand before blindly investing in them – there are important differences between them), once the show really gets underway, the relative trickle of investment funds moving into gold today will quickly become a torrent, completely outrunning available gold supplies and sending prices much, much higher – and in a hurry.
While no one can say when the big spike in gold will occur, one can say accurately that, given the systematic frailty, it could literally happen on any given day. That’s what happens when scams are unveiled. Remember Bernie Madoff? How many people do you think tried to give him money the day after he was arrested, versus desperately scrambled to get their money out of his sticky web? The answers are “No one” and “Everyone” – that’s what happens when people lose faith in a currency.
Of course, gold bullion, and gold bullion proxies, aren’t the only asset classes that will do well in the coming currency collapse. The chart below shows what looks to be a trend change in the gold stocks. In previous recent stock market corrections, people thought of gold stocks more in terms of being stocks and overlooked their direct connection to gold. That appears to be changing, with a divergence between gold stocks and the broader markets. The leverage in gold stocks to gold bullion could make them especially attractive.

Regardless of what you do, do something – because to stumble on as if this crisis will end with a whimper would be a dire mistake.
Gold and large-cap gold stocks can save your wealth when most other assets decline in value. Even in the Great Depression, investors who held both ended up with gains, while others lost everything they had. Read more about how gold and gold producers can shield you from the worst – click here.