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CHANGING TRENDS

The precious metals mining stocks have vastly outperformed in the last two months time. Since June, the HUI has risen much more than the XOI, the energy stock index. Energy had its big run, and now it is the turn for gold & silver miners. Much crude oil money will flow into gold. The green circle highlights the recent rise in mining stocks over energy stocks.

Since the springtime, a pronounced negative correlation is vividly clear between the HUI and the mainstream S&P500 stock index. As the banks and most every other sector drags down the stock market, during that time the precious metal mining stocks have benefited. This rare negative alignment is ridiculously favorable for mining stocks, and very welcome news. Por fin! (finally!) The mining sector is receiving positive press, more respect, and some recognition as a viable hedge from the prevalent deep price inflation witnessed on a global basis. Wait until the bank runs come in force! The flight into gold will be profound. The green circle highlights the recent rise in mining stocks over mainstream S&P500 stocks.

THE KEY TO GOLD

In my view, that key is the bank system bailouts, including most importantly Fannie Mae. Since last August, when the bank crisis began, gold launched into record territory, only to continue soon into higher record territory. Their USGovt federal guarantee will open the door to other bailouts and nationalization movements. The most profound of the upcoming socialist actions will be the assumption of the Detroit carmakers. This event will be promoted in order to save jobs, to prevent enormous supply chain damage, even to assist in some military supply contracts. An argument will be made that its assumption under the national umbrella will offer stronger support for the steel industry. One by one, the sectors listed will see nationalization, pressed by urgent need as the system continues to break. The seminal event was the bust of subprime mortgages that led to gigantic bank losses. The bank & bond contagion, unlike what Bernanke has said, is total, absolute, and deep. In fact, USFed Chairman Bernanke has not made a single correct economic or banking forecast, par for the course on a university Economics Dept chairman. Back to the gold issue. The nationalization movement, especially its first step with a Fannie Mae and continued big bank bailout, will heighten the risk for the USDollar. Get the printing press ready. Everything is going the wrong way for these conmen control freaks!

My conjecture is that recent Wall Street stress tests revealed that the most important piece was Fannie Mae. The FDIC list of troubled banks, which incidentally did not list Indymac, might have included some investigation to reveal that 20 to 40 banks might be ready to dump a bunch of Fannie Mae bonds in order to improve their cash balance sheets. Perhaps China has been dumping some of their reported $400 billion in Fannie & Freddie bonds, and JPMorgan is under strain to buy them all up quietly, before news breaks beyond their hardened corrupted walls. Regardless, the big risk with bailouts is the USDollar breakdown. No way in Hades can the USGovt sell a new mountain of USTreasurys to finance such bailouts. No way in Shangrila can the USGovt appeal to altruistic multi-billionaires in the Arab world to foot the bill. The answer is the printing press finally, which to date has not been used too much. Oil it up! This has been boasted to be the great American advantage. Hardly!

Gone is the positive sentiment that the USFed would indeed follow though on inflation vigilance. Gone in fact are all the USFed and US banking system options. Options are gone. The euro stands as the primary beneficiary of US$ extreme duress. The Euro Central Bank has wrested leadership from the inept destructive bubble engineers in the Untied States. The euro managed to give back roughly half of its gain from the previous breakout above 149 to 159. Next it should make a move to 164, my target. This is analyzed more fully in the July Hat Trick Letter. Gold will follow the euro lead, as the gold price, the silver price, and the euro exchange rate might all march to new record highs together.

HAS ANYONE NOTICED THAT THE DOW IS UP, BANK STOCKS ARE UP BIG TODAY (THURSDAY), OIL IS DOWN, THE 10-YEAR TREASURY IS BEING SOLD OFF SOME, BUT GOLD IS UP $13 WHILE SILVER IS UP 20 CENTS!!! Gold & silver are up despite the flagship Dow rebound, despite the bank sector rebound, which is 90% short covering and vaporous.

Gold has distinctly different markets in the different continents. Gold has broken out into record territory in Japanese yen terms. This is a very significant event. The Asian continent is where the big savings are accumulated, outside the oil trade from the Middle East. Among the North Americans, Europeans, and Asians, the Japanese gold price is first to register an all-time high this summer. As Japan exits its seemingly endless period of price deflation that began back in 1990, times have changed for its citizens. Prices are rising, and investors have turned clearly to hedge that inflation. The same Cup & Handle reversal pattern is clear, evident with the euro currency. It indicates a price target of 11.50 to pursue. The yen gold price is negotiating the right side handle, where hesitation, doubt, change of hands, and debate occur. Its momentum will move gold higher in Asia. Never under-estimate the power of quiet hidden Chinese gold buying.

INSTITUTIONAL CRIME & DISHONESTY

My claim has been for four years that the US financial system in its entirety represents institutionalized dishonesty, the latest example of a US-style Fascist Business Model, made easier by control and ownership of the world reserve currency, unbacked by gold. Anyone who denies it cannot be observing the developments too numerous to count. Listen to Bud Farrell at the Financial Sense Newshour, interviewed by Jim Puplava. Farrell shares his insider experience on vast pervasive naked shorting of stocks, which he claims is just the tip of the iceberg. The broadcast is a follow-up of a Bloomberg research piece several months ago, and is entitled “The Crime of the Century.” Unsound money invites pervasive corruption from those close to the printing press, a principle that traces back to Ludwig Von Mises from his fiat money teachings. My maintained list of crimes of the century is long, starting with the Greenspan monetary drug dealer actions to create the failed bank condition (while taking a second Swiss paycheck), the Clinton-Rubin raid of the US Treasury gold supply (near zero cost leasing), the ongoing suppression of key prices (gold & silver in the futures market), the price capping of long-term USTBond yields (in futures market and credit derivatives managed by JPMorgan), the continued Enron accounting in the hidden banking system (see off balance sheet charade in defiance of BIS & G7), then the export of fraudulent US-based mortgage bonds worldwide (Wall Street handiwork). Let’s not forget the purchase of FDA approval of certain lethal drugs, such as is rumored for Nutra-Sweet. Then there is the entire story of gold heist, bond obliteration, insurance fraud, interruption of Pentagon fraud investigation, rumored to have motivated certain events in a big financial center NorthEast city about seven years. Few seem to realize that a raft of 30-year USTreasury Bonds dated before autumn 1971 were to come due in late 2001, all redeemable in gold.

The recent action to prosecute naked short stock selling is more blatant corruption on its face. The US regulators are trying to halt short selling of 19 financial stocks, led by Fannie Mae, Freddie Mac, Lehman, Goldman Sachs, Citigroup, JPMorgan, Merrill Lynch, and Morgan Stanley. Near collapse of their stock prices is wrongly blamed largely on short sellers. Regulators do not care about non-financial stocks right now, curiously. They seem to deny that banks are insolvent, calling the diverse troubled bank cases isolated. The villains are trying to fend off panic in the bank stocks. They want to stop false rumors, when Goldman Sachs is guilty of similar tactics. GSax is under investigation for doing exactly that in London before the Bear Stearns death. Regulators want to extend the tight requirements on short selling between July 21 and July 29, through the month of August. Removal of the short rule on upticks has contributed to this mess, opening the gates of corruption. Fannie Mae might be the biggest lynchpin involved as an object of stock shorts. It has $500 billion in short-term rollover debt commitments, around $10 billion per day. The Federal Reserve Bank of New York has been given authority to aid Fannie & Freddie directly. Its $2.25 billion credit limit is inadequate. Fannie & Freddie own half the entire US home loan mortgage market. What we are witnessing is Wall Street in increasingly public demonstrations of desperation trying to rig the rules to favor themselves, and reduce the risk of a total death episode, and tremendous personal loss for the conmen bank executives. Their efforts have earned some criticism.

After the stress working through the entire system becomes even more acute, a big factor will favor gold & silver. The ability for the Powers to control USTreasury long-term yields, to control the USDollar, to bring the crude oil price to heel, to manage the interest rate swaps and other overgrown credit derivatives, that control will diminish. They will be forced, just like under the triage tents, to decide what they must let go. The agents to control prices, rig those prices, and distort those markets will be under huge strain themselves. They might be burdened by the mundane task of survival. My full expectation is that gold & silver will be released from control, by expedience. It will be too costly and unprofitable to attempt control anymore. JPMorgan will continue to manage its ‘Garbage Can’ free from the nuisance of accounting disclosure. But they too will become too distracted by the credit derivative mess that they contributed in building.

Jim Willie CB
Editor of the "HAT TRICK LETTER"
Hat Trick Letter

An interesting chart surfaced at the AGM comparing SAN with its contemporaries and Sr gold stocks. Since the "hinge " discovery was reported, SP for SAN equities has exceeded that of all other gold stocks offered for comparison!

This chart originates at Dundee. Dale "flashed" it on his overhead during his Presentation discussing it briefly!

As the "hinge" story unfolds, expect this performance to continue.

Today's close is no less than another buying opportunity.

As Jimmy outlines above, gold's continued rise will be aided and abetted by the "financial curse" upon the world today which in the short term shows no sign of letup!

RUF