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volkmarguidohable · 7 years

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Australian miners buck trend by piling back into gold

Weak currency and low debt push groups to make big bets on prospecting

Please use the sharing tools found via the email icon at the top of articles. Copying articles to share with others is a breach of FT.com T&Cs and Copyright Policy. Email [email protected] to buy additional rights. Subscribers may share up to 10 or 20 articles per month using the gift article service. More information can be found here. https://www.ft.com/content/3ee70862-8169-11e7-94e2-c5b903247afd Lower prices charged by mining contractors due to the wider downturn across the sector have also helped. And while most of the big global gold producers have focused recently on repairing their balance sheets, Australian miners have stepped up exploration. Gold Road, which is spending A$30m this year on greenfield exploration — drilling aimed at discovering new gold deposits — has experienced some success. In 2013 the company discovered the Gruyere resource in Western Australia, which is a 3.5m-ounce gold deposit with a mine life of 13 years. Gold Road sold a 50 per cent stake in the site to Gold Fields, the South African miner, in November for $350m. “We discovered Gruyere at less than $10 per ounce, which is world-leading,” says Mr Osborne, with reference to the cost per ounce of finding this gold. Northern Star Resources, another miner in Perth, has spent heavily on brownfield exploration, which is aimed at finding deposits near existing mines. It spent A$60m in 2017 on a targeted drilling programme that enabled the company to increase its total reserves last week by 2.3m ounces to 3.5m ounces. Australia is a God’s gift to miners JAKE KLEIN, EXECUTIVE CHAIRMAN OF EVOLUTION MINING “There is more optimism in Australia and that is on the back of new discoveries and development projects but that is different to the global trend of declining reserves,” says Stuart Tonkin, Northern Star chief executive. He says Northern Star has managed to add to its gold resource at a cost of $21 per ounce, which compares to a global norms of up to $200 per ounce. “Gold is getting harder to find and more expensive to extract,” says Mr Tomkin. Last week the Diggers & Dealers mining conference in Kalgoorlie attracted its highest number of participants since 2012. “The atmosphere felt very upbeat, and rightly so, given the state of the sector,” says Paul Hissey, analyst at Royal Bank of Canada. “Australian gold miners are largely debt-free, there is capital available and some larger gold producers are forming joint ventures with smaller explorers.” In March Newcrest teamed up with Alice Queen Limited, an ASX-listed miner, to explore in New South Wales. Last month Evolution Mining signed a joint venture deal with Menninnie Metals to explore in South Australia. Jake Klein, executive chairman of Evolution Mining, says Australia remains one of the most friendly locations in the world for explorers. “Australia is a God’s gift to miners,” he says. “It’s a vast underpopulated mining-friendly, resource-rich region where the rule of law can be relied on — and you can’t say that about too many other countries in the world,” says Jake Klein, executive chairman of Evolution Mining.

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volkmarguidohable · 7 years

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Glencore turns bigger copper, zinc price bull

Miner and commodities trader Glencore (LON:GLEN) raised its revenue and profit outlook for the year on Thursday with the Swiss company citing the fast-growing electric vehicle market as a key driver.

"Most automotive players are now accelerating investment in/adoption of electric vehicle technologies, reflecting, in part, increasingly aggressive Government mandates around emission targets. Growth in electric vehicle/energy storage systems requires changes in material flows, including the installation, rebuild and replacement of supporting infrastructure. Based on current and emerging technologies, these changes should benefit enabling commodities such as copper, cobalt and nickel," Glencore said in a statement accompanying its half-year results.

Vehicles with conventional internal combustion engines typically contain about 20 kilograms of copper. For electric vehicles the copper load is up to 80 kilograms (and increased quantities of cobalt, nickel, manganese). Ivan Glasenberg, CEO of Glencore told investors at an industry meeting in Barcelona in May “the electric vehicle revolution is happening and its impact is likely to be felt faster than expected.”

Glencore is the world's number four copper producer, top three zinc supplier and has a tight grip on cobalt mining. Tts clout on base metals markets is only amplified by its trading arm. During the first six months of 2017 Glencore's metals and minerals division recorded revenues of $37.4 billion, up 20% compared to the same period last year. The company's marketing activities make up just shy of two-thirds of total revenues.

Here are some highlights from Glencore's outlook for its base metals business:

Copper and cobalt

Predictably, after several years of depressed prices, copper’s rapid recovery in November 2016 resulted in a significant amount of long-held scrap flowing into the market. Such availability widened the price discount between cathodes and scrap, encouraging fabricators to switch to scrap and giving the illusion of deteriorating fundamentals via falling cathode premiums, when in fact demand growth appears solid across all the major consuming regions.

Chinese macro and demand data remains supportive with similar trends seen in Europe and North America, as global PMI data recorded a six year high in June. The flood of scrap into the market, along with drawdowns of concentrates and blister stocks from the raw materials chain, tempered the impact of significant mine disruptions on cathode production.

Favourable demand conditions across key consuming regions, combined with elevated risk of mine disruptions, should lend support over the balance of the year, particularly given that scrap supply has now normalised and copper units have been drawn from the supply chain. Longer term, a lack of sector reinvestment, significant potential new demand from battery growth and technology, aging assets and a diminished realistic project pipeline, are likely to underpin significant deficits in the coming years.

Zinc and lead

China's end user demand for zinc-bearing finished products remained healthy, as the infrastructure, real estate and white goods sectors continued to show resilience over the half, following a strong 2016. As a result, SHFE metal stocks dropped by more than 50% since December 2016 to 65,000 tonnes, the lowest since Q1 2009.

As the metal market is currently in deficit, any disruption of supply such as the one experienced in North America, is difficult and costly to replace, driving up regional premiums. Metal stocks have started to flow out of LME warehouses at an increasing pace; 137,000 tonnes since December 2016 to some 291,000 tonnes, a trend we expect to continue in H2 2017.

The lead market is challenged with similar factors. The lack of supply translated into the lead benchmark TC dropping from $170/dmt over H1 2016 to $125/dmt over H1 2017. Spot TCs of imports into China also fell sharply from $151/dmt in H1 2016 to $36/dmt in H1 2017.

Nickel

Although positive demand momentum continued in Europe and the US, the buoyancy of Chinese demand growth faltered somewhat in Q2 when tightened liquidity led to heavy destocking through to the first week of June, impacting both stainless production and nickel procurement. While this destocking appears to have run its course and demand growth has returned, developments on the supply side, specifically Indonesia’s reversal of a ban on ore exports, have tilted risks towards increased supply and reduced the scale of forecast deficits, albeit non-Chinese production continues to underperform.

While our estimates indicate that the market was in deficit over H1 2017 and will continue to be through the year, the high absolute level of LME and SHFE stocks, together with concerns about additional supply from Indonesia, continue to weigh on sentiment and prices, albeit premiums are expected to remain strong.

The Baar-HQed company increased copper sales by 6% to 1.9m tonnes, but production from its own mines fell by 9% to 643kt. Zinc and lead sales were flat, but Glencore's own output of zinc jumped 13% to 570kt while lead output fell 4% to 139kt. Nickel production during the six months fell by 10% to 51.2kt. Cobalt production, a byproduct of copper and nickel mining, was flat at 12.7kt giving Glencore a roughly 25% share of global supply.

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volkmarguidohable · 7 years

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McEwen Mining buys Primero’s Black Fox mine

McEwen Mining (TSX: MUX; NYSE: MUX) is expanding its footprint in the Timmins camp of Ontario with the purchase of Primero Mining Corp.’s (TSX: P; NYSE: PPP) Black Fox mine complex for US$35 million in cash.

“We believe the assets are very complimentary to our recently acquired Lexam VG properties,” Rob McEwen, the company’s chairman and founder, wrote in an email to The Northern Miner.

In February, McEwen Mining acquired Lexam VG Gold, whose primary projects in the Timmins Camp are past producers with defined resources and infrastructure that will provide “fantastic synergies” with Primero’s Black Fox mine, McEwen says.

“Our objective is to build a long-term production platform with a robust pipeline of production, development and exploration assets, all feeding into a single processing facility,” McEwen explained in a press release. “This acquisition will add immediately to our gold production, but is just the beginning of a new chapter of growth for McEwen Mining.”

Black Fox is expected to produce between 50,000 and 60,000 ounces of gold this year at total cash costs of between $850 and $950 per oz. and all-in sustaining costs of between US$1,150 and US$1,250 per oz.

In the second quarter, Black Fox produced 20,731 oz. gold (up from 15,172 oz. in the same quarter of last year) and at total cash costs of $637 per oz., down 27% from the $870 per oz. achieved in the same quarter a year ago.

Underground mining in the quarter was focused on Black Fox’s Deep Central Zone, with grades averaging 7.09 grams gold per tonne, a 59% increase in grade from the year earlier quarter.

Black Fox “has a processing facility with excess capacity, two future development opportunities and excellent exploration potential,” McEwen says. “I believe this is a logical and potent combination.”

The Lexam properties add measured and indicated resources of 1.47 million ounces of gold and 954,000 inferred ounces of gold to the company’s resource base in Canada.

Jeff Killeen of CIBC calculates that the $35 million deal for Black Fox implies a purchase price of about 0.8 times his prior net present value (5%) for the asset.

As for the Lexam deal earlier this year, McEwen Mining’s management team believes the properties will “enhance” the company’s development and production pipeline “with the potential to commence production of the Timmins properties within 24 months.”

The Lexam cluster of four past-producing gold properties on the Abitibi greenstone belt have open pit and underground potential and consist of Buffalo Ankerite, Fuller, Davidson Tisdale and Paymaster.

The projects are situated within two claim blocks, one in the northern part of Tisdale Township (the Davidson Tisdale block, about 5 km southeast of Timmins’ city centre) and a second block of contiguous claims comprising the Buffalo Ankerite, Fuller, and Paymaster properties in Tisdale and Deloro Townships, roughly 9 km to the east-northeast of downtown Timmins.

Outside Canada, McEwen Mining’s other assets are the San Jose mine and the Los Azules copper project in Argentina; the El Gallo gold mine and El Gallo silver project in Mexico; and the Gold Bar project in Nevada.

Joseph Conway, Primero Mining’s interim president and CEO, said the sale of Black Fox will reduce the company’s outstanding debt, but noted that the company will still have outstanding debt that matures in November 2017, which will require additional funding or refinancing to repay in full.

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volkmarguidohable · 7 years

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US Short Term Interest rates and Nominal GDP Growth

It is with utmost interest that I watch the usually very upbeat news on CNBC, one of the reasons being to be able to answer anxious questions from nervous investors, who call in the next morning in order to inquire about the latest CNBC broadcast. So at the same time I also have the pleasure to regularly watch two fast-talking and squeaky clowns in the CNBC circus (Vieira da Cunha, 2001) who, for the last few years, have given their upbeat views on any economic, financial, and political issues. The "know it all" duo's advice has not been particularly rewarding for investors, and had you invested your money according to their "never in doubt" bullish mantra, your assets would be worth today at least 60% less than in 2000 (in terms of Euro or in a hard currency such as gold, they would be down in value by another 25%), (Hable, 2004, and Lefevre, 1994). But since poor advice is not only endemic to the two relentlessly irritating CNBC financial commentators but is almost a prerequisite for success in the financial service industry, I shall not hold it against them (Hable, 2004, and Lefevre, 1994). Still I have a question relating to a recent statement by Mr. Kudlow, which somewhat surprised me and others, since Mr. Kudlow is not exactly born yesterday although some of his views could lead one to believe so. In a recent article he explained why "this Bush Boom is a lot like the Reagan Boom 20 Years Ago".

Now, I have some reservations about this comparison for the following reasons. If you look at interest rates over the last 40 years or so, you will see that when, in 1980, Mr. Reagan became President of the US, rates were near their highs and since Mr. Volcker (then the Fed chairman) pursued at the time very tight monetary policies he managed to bring down the rate of inflation, and subsequently also interest rates, which then fell for the next 22 years (see figure below). Needless to say that whereas interest rates were sky high in 1980 and significantly above the rate of growth of nominal GDP, today the Fed Fund rate is significantly below the rate of nominal GDP, which suggests that short term interest rates can only rise if nominal GDP continues to expand, as Mr. Kudlow suggests with his "Bush Boom" fantasy.

Table 2:

US Short Term Interest rates and Nominal GDP Growth

Source: Bridgewater Associates (Hable 2004)

The tight monetary policies of Mr. Volcker in the late 1970s and early 1980s were evident from the fact that short-term interest rates were pushed above nominal GDP growth and above long term interest rates (see figure below), (Murphy, 1997). This very tight monetary policy implemented by Paul Volcker is usually credited for having brought down the rate of inflation after 1980. However, it is my view that the rate of inflation would have come down regardless of monetary policies because strong price increases for all commodities between 1965 and 1980 had led to additional supplies, which after 1980 began to flood the market and depress prices. This was particularly true for oil, which had risen in price from $ 1.70 per barrel in 1970 to close to $ 50 per barrel in 1980. In addition, conservation efforts all over the world had curtailed demand. Finally, the fourth Kondratieff price wave, which had turned up in the 1940s was due to reach its plateau between 1975 and 1985, and then to turn down, since each phase of the long wave lasts between 22 and 30 years (according to Nikolai Kondratieff the ideal length of the long wave cycle, which consists of a rising and falling wave is between 45 and 60 years). Therefore, the combination of rising supplies, energy conservation, and diminishing purchasing power on the side of households (because of inflation exceeding nominal income gains) would have in the early 1980s - regardless of monetary policies - brought down the rate of inflation sooner or later (Murphy, 1997). Nevertheless, it is clear that whereas monetary policies were very tight in the early 1980s (short term rates significantly above long term rates - see figure 3) today monetary policies are ultra expansionary and inflationary since short-term rates are not only below the rate of nominal GDP growth (see figure 2) but also significantly below long term interest rates (see figure 3).

Figure 3: Yield Spread between Short and Long Term Interest Rates

Source: Hable 2004

In addition, while we may argue about the severity and ultimate duration of the ongoing slowdown in the Chinese economy, it is clear that the incremental demand for commodities from China will at least support commodity prices above their level reached in 2001, when the price of most industrial commodities were 50% lower than they are today. I may add that by 2001, commodity prices had been in a bear market for the last 25 years, and had reached in real terms (adjusted for inflation) the lowest level in the history of capitalism (see figure below). In other words, even taking a negative view of the world's economic outlook, it would seem that the secular bear market in commodities, which began in 1980, has come to an end and that from here on we shall rather see higher than lower commodity prices. So, even a third rate economist should see the difference between today's situation and that of the early 1980s - this especially if he were optimistic about the global economy, which would sustain demand for raw materials. So, whereas in the early 1980s commodity prices and interest rates began to decline from a secular point of view, in the period 2001 to 2003, it would appear that commodities and interest rates have begun to rise (Mauldin, 2004, and Murphy, 1997).

Figure 4: Commodities in Real Terms

Source: with permission of Di Tomaso Group, Hable 2004

There are several more fundamental differences between the early 1980s, which led to the Reagan boom and today's economic conditions. When in 1980, Mr. Reagan became President of the US, the debt to GDP ratio stood at around 130% and was not meaningfully higher than in the 1950s. In fact, from the figure below, we can see that until the 1980s, one dollar of additional debt boosted GDP by about $ 0.70. But now, with debt at close to 330% of GDP, one dollar in additional debt only leads to an increase in GDP of about $ 0.25!

Figure 5: Total Credit Market Debt and GDP

Source: Hable 2004 by courtesy of Barry Bannister of Legg Mason in Baltimore

We can, therefore, say that today, because of excessive debts in the system, debt growth and fiscal deficits are far less effective at stimulating the economy than they were at the time of President Reagan. In fact, I would argue that for monetary policies the "Mother of all Monetary Tests" is unfolding right now, as it may be that monetary stimulus is no longer going to boost the economy, but inflation alone, which would lead in a benign scenario to stagflation and in a worst case scenario to a inflationary depression a la 1980s in Latin America. I should add that a deflationary recession/depression remains a possibility, although not a very likely one given the Fed's monetary policies, Mr. Greenspan's track record at tackling every economic discomfort with an additional injection of liquidity, and Mr. Bernanke's recent statements about the Fed's ability to print money.

Another difference between the early 1980s and today's conditions relates to the US dollar. In the early 1980s the US dollar had become significantly undervalued following its steep decline against hard currencies after President Nixon had closed the gold window in August 1971 (see figure below). Today, however, the situation is fundamentally different (Groenfeldt, 2001). Whereas one could argue that the US dollar is about where it should be against the Euro, the dollar is certainly grossly over- valued against the Asian currencies. A sustained dollar rally such as occurred in the period 1980 to 1985 is, therefore, given also the large external deficits of the US, almost out of the question (see figure below). More to the point, whereas in the early 1980s a dollar rally unfolded at the same time the US had growing trade and fiscal deficits, today even larger trade and fiscal deficits are more likely to lead to additional dollar weakness - not strength. I may add that I feel that the dollar has about the same downside risk against the Asian currencies as it had in 1971 against the European currencies, against which it then declined by 70% in the course of the 1970s and led to its early 1980 under- valuation.

Figure 6: Trade Weighted Dollar 1980-2004

Source: Hable 2004 by courtesy of Yardeni of Yardeni Asset Management

Needless to say that additional dollar weakness would add to inflationary pressures and intensify the trend toward higher interest rates.

The last fundamental difference between the early 1980s and today concerns not only the stock market and housing market in the US, but also most stock and property markets around the world. In 1982, the Dow Jones Industrial Average was no higher than it had been in 1954, and adjusted for inflation it was down by 70%. How inexpensive equities were relative to the overall price level and especially against commodities is evident from the gold to Dow Jones Ratio. In 1980, with one ounce of gold you could have bought one Dow Jones Industrial Average. Today, however, it takes about 25 ounces of gold to buy one Dow Jones Industrial Average, suggesting that US equities are not particularly cheap (or very expensive, as I believe, compared to gold). Moreover, in 1982, stocks sold below their book value and had a dividend yield of 7%! Compare that with today! Equally property markets around the world were depressed in the early 1980s, due to sky-high interest rates. Today, property markets, especially in the Anglo-Saxon countries all exhibit symptoms of bubbles (Lashinsky, 2001).

consumer may actually, as some recent economic indicators seem to indicate lead - if not to a

consumption slump - then at least to a slowdown in the growth of consumer expenditures (Roach, 2004).

1.70 versus the Euro) would balance conditions. And that exactly seems to be part of a not yet publicly known master plan of the Bush administration. It looks like the US strategy in the transcontinental currency battle is to give the Euro's masters what they want - except way too much of it, way too quickly, in order to overload the euro system and make it collapse (Medley Global Advisors, 2003).

The ECB was instituted by the Euro's creators to preside over an orderly transition away from a dollar- dependent world to a more versatile arrangement wherein the Euro fulfills a quasi-reserve function that will eventually give way to gold being the ultimate international currency reserve, with all the fiats freely floating against gold instead of against each other.

But the road there is a long and winding one, and not even all of those currently "in charge" (international central bankers) are fully aware that this is the ultimate goal (to understand that remark I recommend reading a summary of the confusing public statements by the Austrian Nationalbank from 2001 to 2004). Rather, that unstated goal was wrapped up implicitly in the ECB's role of guaranteeing price-stability, rather than using interest rates to jump-start an otherwise faltering economy like the Fed does in the USA.

"Price-stability" mans that the currency is intentionally not used as a means for gunning Euroland's economic engines. This goal is designed as a precaution to avoid the excesses caused by overprinting, which has been the US' main tool for papering-over any possible recessions, or even looming depressions - so far. So far, the US model has "worked" - but only to the point where the resulting trade and investment imbalances are about to do the dollar in altogether.

(a) lowering the monstrous current account deficit (reflecting trade plus investment-flow imbalances), and (b) propping up the competitiveness of US exporters, hopefully leading to more investment by these firms, and eventually to increased employment.

The US-Fed and Bush administration know that the Euro's ultimate aim is by necessity to slowly attract foreign investors and central banks to the euro and away from the dollar. But they also know that any strong upward move of the Euro will have major negative consequences on the Europeans' economies. As a result, it looks like the US game is to allow the dollar to drop lower - and faster than the Europeans' fragile economies can absorb.

What the newspapers and financial commentators call a policy of "benign neglect" turns out not to be so benign at all: by pursuing its current strategy, the dollar-establishment is killing three birds with one stone: they get the benefit of (1) higher US export-competitiveness and better economic performance, (2) simultaneously lower EU export competitiveness resulting in European economic stagnation, and (3) shifting the entire burden of smoothing out the dollar's Forex movements onto the Europeans' backs. In essence, the dollar faction is playing a game of "chicken" with the Europeans.

So far, the ECB hasn't blinked and European policy makers seem unconcerned. They were able to get away with purely verbal intervention earlier in 2004. It will be very interesting to watch what happens in 2005 that the purely verbal attempts have proven to be of very little effect during 2004.

So, who is winning? Is the US winning by figuratively letting go of the rope the ECB is pulling on in order to make them fall on their collective behinds? Or is it the ECB and the rest of the world, by having the last laugh because they hold in their hands the key to blowing the US economy sky-high?

Remember that the Asians, particularly China and Japan, hold huge amounts of dollar-claims in the form of Treasury debt. If they decide to accelerate their selling, US debt prices will collapse and long term rates will explode past the US' point of tolerance. The certain consequences will be a significant reduction of US purchases of Asian products.

The lower the US lets its currency fall, the more temptation the Asians feel to dump their US debt holdings, as they see their US "assets" depreciate with every tick lower by the dollar on its journey into Forex "Hades." At some point, this temptation will become overwhelming. The US is currently betting that the Asians' point of no return comes after that of the Europeans. I personally don't think that's a safe bet to make.

No matter which way this battle turns out, if you put a good portion of your assets in gold, you can afford to sit on the sidelines and simply "watch the game." Whoever wins or loses, you will be (economically, at least) safe from the carnage on the playing field, that will most certainly unfold on either side of the Atlantic.

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volkmarguidohable · 7 years

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Let me explain that view by having first a look at the current situation:

Table 2: US Short Term Interest rates and Nominal GDP Growth

Source: Bridgewater Associates (Hable 2004)

Figure 3: Yield Spread between Short and Long Term Interest Rates

Source: Hable 2004

Figure 4: Commodities in Real Terms

Source: with permission of Di Tomaso Group, Hable 2004

Figure 5: Total Credit Market Debt and GDP

Source: Hable 2004 by courtesy of Barry Bannister of Legg Mason in Baltimore

Another difference between the early 1980s and today's conditions relates to the US dollar. In the early 1980s the US dollar had become significantly undervalued following its steep decline against hard currencies after President Nixon had closed the gold window in August 1971 (see figure below). Today, however, the situation is fundamentally different (Groenfeldt, 2001). Whereas one could argue that the US dollar is about where it should be against the Euro, the dollar is certainly grossly over-valued against the Asian currencies. A sustained dollar rally such as occurred in the period 1980 to 1985 is, therefore, given also the large external deficits of the US, almost out of the question (see figure below). More to the point, whereas in the early 1980s a dollar rally unfolded at the same time the US had growing trade and fiscal deficits, today even larger trade and fiscal deficits are more likely to lead to additional dollar weakness - not strength. I may add that I feel that the dollar has about the same downside risk against the Asian currencies as it had in 1971 against the European currencies, against which it then declined by 70% in the course of the 1970s and led to its early 1980 under-valuation.

Figure 6: Trade Weighted Dollar 1980-2004

Source: Hable 2004 by courtesy of Yardeni of Yardeni Asset Management

Needless to say that additional dollar weakness would add to inflationary pressures and intensify the trend toward higher interest rates.

Finally, in the early 1980s, consumers had a pent-up demand for goods and services following the 1980/81 and 1982 recession. Their saving rate was above 9%, whereas today, we have no pent-up demand whatsoever, and there are on the household level practically no savings. So, whereas in 1982, the then existing pent up demand led to a strong consumption led recovery, today, the over-leveraged consumer may actually, as some recent economic indicators seem to indicate lead - if not to a consumption slump - then at least to a slowdown in the growth of consumer expenditures (Roach, 2004).

We can see that today's economic conditions in the USA are widely different than what we had in the early 1980s. In particular, today's debt load, the vulnerable position of the US dollar against the Asian currencies, the long-term price cycle in terms of commodities and interest rates likely to have bottomed out and having embarked on a rising trend, the consumer's debt load, and stock valuations are such that a sustainable healthy recovery is unlikely to shape our future. In fact, I would argue that conditions are now so blatantly different that only a significantly lower US-Dollar (at around 1.60 to 1.70 versus the Euro) would balance conditions. And that exactly seems to be part of a not yet publicly known master plan of the Bush administration. It looks like the US strategy in the transcontinental currency battle is to give the Euro's masters what they want - except way too much of it, way too quickly, in order to overload the euro system and make it collapse (Medley Global Advisors, 2003).

The ECB was instituted by the Euro's creators to preside over an orderly transition away from a dollar-dependent world to a more versatile arrangement wherein the Euro fulfills a quasi-reserve function that will eventually give way to gold being the ultimate international currency reserve, with all the fiats freely floating against gold instead of against each other.

We now find ourselves at a juncture where the US (in its efforts to continue to paper-over its excesses and their consequences) absolutely MUST have a lower dollar. A lower dollar has the twin benefits of (a) lowering the monstrous current account deficit (reflecting trade plus investment-flow imbalances), and (b) propping up the competitiveness of US exporters, hopefully leading to more investment by these firms, and eventually to increased employment.

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Extension of the Equivalence Principle

An earlier version of the equivalence principle, attributed to Newton, noted only the unexplained correspondence between inertial mass and gravitational weight. It is readily seen that Einstein's equivalence principle includes and explains its predecessor.

Extension of the Equivalence Principle:

The extension of the equivalence principle does not directly involve gravitation, but the energetic equivalence of free and bound energy, also discovered by Einstein. This equivalence allows us to conceive of matter as an (asymmetric) form of light's energy transformed to rest, a notion which triggers Noether's theorem regarding the conservation of the symmetry attributes of free energy. The charges of matter are therefore seen as various conserved symmetry and entropy debts of light. Reversing the transformation by converting bound to free energy (as in the stars and Hawking's "quantum radiance" of black holes) pays (vanishes) all the symmetry (and entropy) debts of matter.

The Three Levels of the Equivalence Principle:

1) Newtonian / Mechanical - The equivalence of inertial mass and gravitational weight

Inertial mass and gravitational weight are equivalent, so inertial mass can be measured by weighing objects against a standard in a gravitational field. The cause of this equivalence is unknown. The equivalence is invoked to explain why all things fall with the same acceleration in a gravitational field. (The inertial resistance to motion offered by any object's "mass" exactly counterbalances the attractive force of gravitation due to that object's "weight" - rendering all differences in weight irrelevant to the action of gravity.)

2) Einsteinian Geometric - The equivalence of the forces of gravitation and acceleration

The forces of gravitation and acceleration are equivalent, and "free fall", orbital motion, and "coasting" cause both to vanish: we deduce from this: a) the force of gravity is actually the convergent, accelerated motion of spaceentropy, explaining the equivalence of gravitational weight and inertial mass; b) Free fall, orbit, (or "coasting") is the condition of co-moving with the metric field, whether accelerated or not; c) Since all falling, orbiting, (or "coasting") objects are co-movers with the metric field of spacetime, the fact that all objects fall with the same acceleration in a gravitational field becomes obvious. However, the reason why gravity accelerates spacetime (what is the conservation role of this force? - or equivalently: why must this force exist?) remains unknown.

3) Einstein-Noether Symmetric - The equivalence of free and bound energy: E = hv

(Planck); E = mc2 (Einstein); hv = mc2 (DeBroglie).The conservation of the symmetry of free energy: the symmetry as well as the raw energy of light must be conserved (Noether). Charge conservation, gravitation, and inertial force = symmetry conservation (in particles and the spacetime metric).

a) Free and bound energy are energetically equivalent: matter is created from light in the Big Bang; conversely, light is created from matter in stars and via Hawking's "quantum radiance" of black holes. Matter is an (asymmetric) form of light's energy transformed to rest. b)The charges of matter are the symmetry/entropy debts of the light (free energy) which created matter. Converting matter back to light pays all symmetry/entropy debts. c) Noether's theorem - the conservation of symmetry - is exampled by the forces of charge conservation, inertia, and the primordial form of entropy (the intrinsic dimensional motion of light as gauged by "velocity c"). The charges of matter are the symmetry debts of light. The entropy drive (intrinsic dimensional motion) and symmetry gauge of light are linked, common attributes of "velocity c", and therefore both are conserved by Noether's symmetry theorem. Charges produce forces which pay the symmetry/entropy debts they hold by returning the asymmetric bound energy system to its original symmetric free energy state (light). Time is an entropy and symmetry debt (charge) of light's broken non-local symmetric energy state which produces gravitation as a restorative or conservation force. All forms of energy originate as, and eventually return to, light, under the driving influence of entropy.

Explaining the Extension of the Equivalence Principle

We extend the "Equivalence Principle" in a new way (only indirectly involving gravitation) which embraces both free and bound energy, a necessity for any unification theory. The basis for this extension is again due to Einstein, through his most famous equation, E = mc2, establishing the energetic equivalence between free and bound energy. DeBroglie used Planck's equation for the energy content of light to make the equivalence of free and bound energy even more explicit: hv = mc2 (where h = Planck's constant and v = the frequency of light). The next crucial step in this logical progression is provided by Noether's theorem, which states that not only the raw energy, but also the symmetry of light must be conserved if free energy is converted to bound form (mass-matter-momentum). To this, we add our own observation: the entropy drive of light (light's intrinsic motion) must also be conserved - but because both the symmetry gauge and the entropy drive of light are linked through "velocity c", the conservation of light's entropy (in transformations between free and bound energy forms) becomes an extension of Noether's symmetry conservation theorem. The entropy drive of free energy, the intrinsic motion of light as gauged by "velocity c", is transformed/conserved as the entropy drive of bound energy, the intrinsic motion of time, as gauged by "velocity T". The transformation is accomplished either quantum mechanically as a simple switch from implicit to explicit time, or gravitationally by the annihilation of space and the extraction of a temporal residue.

Einstein realized that the gravitational field could be "transformed to rest" in free fall - the basis of his principle of the equivalence of gravity and acceleration. Such a transformation naturally is impossible, However, for the intrinsic motion of light - light cannot be transformed to rest because matter cannot travel at light speed. Leaving aside the possible exception of the black hole and the painful discussions about the true speed of light, we recognize two other exceptions to this rule: the creation of matter from light in the "Big Bang", and the absorption of light by the electron shell of an atom.

It is possible to think of matter itself as light transformed to rest in an asymmetric particle form, since matter is simply one-half of a particle-antiparticle pair, and such pairs are a normal material expression of light's energy (similarly, matter's entropy drive, one-way time, is 1/2 of a normal two-way spatial dimension). However, because the creation process is necessarily asymmetric (to escape an otherwise inevitable matter-antimatter annihilation), Noether's theorem comes into play requiring the lost symmetry of light to be conserved. The raw energy of light is conserved as the mass and momentum of particles. The conserved symmetries appear as the charges (and spin) of matter and as the inertial and gravitational forces of the metric. Noether's theorem is enforced through the well-known principles of charge (and spin) conservation, inertia and gravity. The spatial entropy or intrinsic motion of light is conserved by the gravitational conversion of space to time, producing matter's temporal entropy drive, the intrinsic motion of matter's time dimension. Entropy and gravitation therefore represent light's time drive (the intrinsic motion of light, gauged by "velocity c") conserved as matter's entropy drive (the intrinsic motion of time, gauged by "velocity T").

The charges of matter are the symmetry debts of light. The case of the absorption of a photon by the electron shell of an atom is also instructive. Here the whole photon is transformed to rest, not just half of it (as in the creation of matter during the "Big Bang"), so there is less symmetry loss, and no conserved charges result in consequence of light's absorption - except for gravitation. (The probable role of electric charge in this process is moot, since light will only interact with a preexisting electrically charged particle or atomic system in any case). The rest mass of the absorbing atom increases as it conserves the energy of the absorbed photon through the increased angular momentum of an enlarged electron shell. The increased rest mass of the atom is of course reflected by an increase in the atom's gravitational field. Although light does not produce a gravitational field in free flight, once light's intrinsic motion ceases and it acquires a specifiable space entropy location (the atom's center of mass), its energy acquires "rest mass", a gravitational field, and am entropy dimension to provide its time requirement.

In this case we still have the conservation of entropy entangled with the conservation of symmetry, for even though the whole (symmetric) photon is absorbed, it still loses its intrinsic motion c, and as a consequence also loses: 1) its entropy drive, which created light's dimensional conservation domain (space); 2) the associated "non-local" symmetry of the spatial distribution of its energy - everywhere, simultaneously; 3) its two-dimensional energy state; 4) its massless, chargeless, atemporal, acausal, and gravity-free symmetric spatial energy state.

Since both the entropy and the symmetry of light are characterized by velocity c, it is not possible to separate the conservation of light's entropy from light's symmetry except theoretically. Light's entropy must be conserved because entropy (in its primordial, pure form as intrinsic dimensional motion) is what provides a dimensional conservation domain for energy, allowing the simultaneous transformation, use, and conservation of energy (this is the connection between the first and second laws of thermodynamics). When light transforms to a bound state, that new state will require a new entropy drive/gauge appropriate to that state: time as entropy equivalent - creating a new (historic) conservation domain - as provided by the quantum mechanical and gravitational transformation of space and spatial entropy (light's intrinsic motion) to time and temporal entropy (the time equivalent). Because velocity c is also the gauge of metric symmetry, we can bring the gravitational conversion of space to entropy and vice versa under the conservation umbrella of Noether's symmetry theorem.

The universal character of all symmetry debts is seen in the fact that all charges produce forces which act to return the material system to its original symmetric state by converting bound to free energy - not only through chemical reactions, matter-antimatter annihilations, particle and proton decays, but also through gravitational processes exampled by our Sun and the stars, quasars, and the complete conversion of bound to free energy in Hawking's "quantum radiance" of black holes.

The enlarged framework of the extended equivalence principle allows gravity to join the other forces as a symmetry/entropy debt of free energy (by Noether's theorem, all charges of matter are the symmetry debts of light). The "entropic charge" of time, the active principle of gravity's "location" charge, contains in itself the essential joining of the dimensional aspects of General Relativity with the charge aspects of quantum mechanics: 1) the intrinsic dimensional motion of time, acting as matter's entropy drive, producing by its own motion the collapsing, accelerated spatial flow we commonly recognize as a gravitational field; 2) time as the "locating" charge of the four dimensions, the symmetry debt of light's "non-local" character, providing mass with a specifiable location in spaceentropy, a nonzero "Interval", resulting (eventually) in the gravitational conversion of mass to light in stars. Charges produce forces whose conservation purpose is to pay the symmetry debts they hold; payment of the temporal symmetry and entropy debt drives the gravitational conversion of bound to free energy - in stars, quasars, and in Hawking's "quantum radiance" of black holes.

The Bekenstein-Hawking theorem relates the surface area of��the "event horizon" of a black hole to the entropy content of the hole. Black holes are the physical demonstration of the gravitational conversion of space and spatial entropy to time and temporal entropy. The "surface" of a black hole (the area of its "event horizon") is a time "surface" where time effectively stands still because time is being replaced by the intense local gravitational field (g = c) as fast as time moves away into the historic domain. Hence while we can think of the ordinary rock as an asymmetric form of light's energy brought to rest, we can likewise think of the event horizon or surface area of a black hole as an asymmetric form of light's entropy (intrinsic motion) brought to rest.

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Is this the death of the bull market?

· Are the bad times over for markets?

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This genius investor does dizzying levels of research to uncover...Half Price Shares!

The bull market that has seen shares rise in value by a third over the last two years is finished, according to leading equity strategists and economists, say Edward Simpkins and Robert Watts in The Sunday Telegraph. Last week saw the largest one-day fall in the FTSE 100 for more than three years as world markets were hurt by the falling value of the dollar – which hit its lowest level for a year against the pound and the euro. This worried investors, as it implied inflation – and high interest rates could well follow.

The dollar led the Dow to suffer its worst fall in five months, which dominoed around the world markets, including the FTSE’s slide of 2.15% in one day on Friday. Tokyo and Hong Kong also suffered, before the European markets followed suit. The emerging markets led the sell offs “as investors recoil from risky assets, pummelling stocks and bonds in Turkey, Hungary, Iceland and much of Latin America”, says Ambrose Evans-Pritchard in The Daily Telegraph. Indeed, before the markets crashed, the Chicago Board Options Exchange’s Volatility Index (VIX) – otherwise known as the ‘fear gauge’ – showed an “abnormally low level of anxiety amongst investors”, says The Economist. But that is a “warning sign”.Low volatility is the calm before the storm. That means we are heading for a “riskier phase of economic growth”. Nabokov put it best, says The Economist. “Complacency is a state of mind that exists only in retrospective: it has to be shattered before being ascertained.” It seem the VIX was proved right almost immediately.

And the shattering could come soon. Stockmarkets in the middle of 2006 are “confronting a tight Federal Reserve and European Central Bank, sharply higher bond yields and a downswing in potential profits”, says a report by Lombard Street Research. That has raised the risk of “an impending financial crisis” in reaction to the recent excess of easy money and leverage available, thanks to low interest rates. Those are now on the rise, cutting off the supply of cheap money that has been keeping growth alive.

Ominously, bonds are “no longer viewed as a safe haven”, says Evans-Pritchard, which is a sign that inflation is gaining a foothold in the major economies. “The crash of 1987 started with a massive dollar and bond decline in the spring,” according to Volkmar Hable, chairman of Samarium Technology, in The Daily Telegraph. Indeed, says Teun Draaisma, the head of European equity strategy at Morgan Stanley. “We are in for a very troubled summer,” he warns.

Inflation may be rearing its head again, but that is less worrying than the other option – stagflation. Stagflation is inflation coupled with low growth.This could be a “less innocent explanation” of what has happened in the markets, says John Authers in the FT. Indeed, the world’s largest economy – the US – does not look to be in rude health. The threat of higher inflation pushed yields on US treasuries to their highest since May 2002 (which is likely to cause a housing and spending slowdown as borrowing costs rise) and US consumer sentiment is at its lowest since October 2005 (that may not sound dramatic, but remember that September and October saw the aftermath of hurricanes Katrina and Rita, points out John Stepek in MoneyWeek’s MoneyMorning.com). Bar those two months, US consumers “are now the most pessimistic they’ve been since 1993”.

And the fact remains that there are “some unsettling global factors causing concern”, says Joanne Wallen on Citywire.co.uk. For the private investor, anyone with a short-term view should at the very least be asking themselves whether they are sitting on some healthy profits, “and whether they might just want to realise some of their gains”.

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FTSE 100 - 06 Oct 07 FTSE Indices

Name

Value

Change

100

6,595.8

35.2

250

11,390.4

17.9

techMk

1,596.9

6.0

All Sh

3,387.1

7.8

Sm Cap

3,802.1

1.9

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The Purchasing Power of Pizza

""With oil at $75 a barrel, that works out to about 10 pizzas. It makes no difference to sellers what kind of money you use to pay for the oil, as long as they can exchange it for 10 pizzas."

By Volkmar Guido Hable

- I am really, really getting scared here. I don't know what scares me most: the Federal Reserve increasing Total Fed Credit (which is the legendary "money from thin air" that banks use to make credit, which gets borrowed, which turns it into money, which increases the money supply, which makes prices go up) by another $5.9 billion, or that the national debt has suddenly, inexplicably, declined by a lot. Weird! In fact, the national debt has literally collapsed $58 billion in less than two weeks! Unprecedented!

I have decided that I don't care which one scares me the most, as either of them is enough to give me the Screaming Mogambo Willies (SMW), and now all I care about is getting my fat, frantic fanny out to the Mogambo Bunker Of Safety (MBOS) in hopes of saving myself. And yes, it is too bad about the wife and kids, but they can't say I never warned them about dawdling. Locked safely inside, I have time to ponder that the Fed increasing Total Fed Credit is easily explainable: the Federal Reserve wants to create more money, which drives down interest rates. That's all those buttheads ever do.

But, it is the drop in the national debt, on the other hand, that has turned my eyes into mere slits of suspicion and panic. My brain swirls as I ponder the Mogambo Question Of The Day (MQOTD): "If debt is going down while spending is going up, then where in the hell is all of the money coming from?" This is too, too, too, too weird for me!

This is about as weird as this week's installment of One Interesting Mogambo Statistic (OIMS), which is that savings and other deposits at the banks are on track to register what looks to be their biggest (by far) one-month gain in history: up $125 billion in the last three weeks! Wowee! One huge whopping percent of total United States Gross Domestic Product has appeared, like magic, as savings and "other deposits" in the banks! In one month! Like I said, weird!

- I got a real laugh out of the headline from the Associated Press that read: "The Battle Over the Blame for Gas Prices." Hahaha! The article figures that it is either greedy oil sellers or gluttonous buyers - or, as others say, Congress. And while all these people are all guilty to one huge degree or another, everybody entirely misses the point, which is that while Americans might enjoy getting dollars in exchange for goods and services, the people of the oil-exporting countries do not want dollars, euros, yuan, or any other money. They want their own money, doofus.

But what all these groups of people have is common is that they all want to be paid in their own units of purchasing power. With oil at $75 a barrel, that works out to about 10 pizzas. It makes no difference to sellers what kind of money you use to pay for the oil, as long as they can exchange it for 10 pizzas. Preferably, they would like to be paid in units of purchasing power that gain in purchasing power, so that tomorrow they can buy eleven pizzas for a barrel of oil. And if not gain, then at least not lose purchasing power, and tomorrow only be able to buy six pizzas!

Unfortunately, the dollar is not a currency that is going to gain in purchasing power. It is, on the other hand, one of those currencies that will be losing purchasing power. So, everybody, including foreign oil exporters, has to charge a higher price for oil just to make up the losses in purchasing power they will suffer until they can actually get around to spending the damned dollars on pizzas!

And, it is going to get worse, much worse, as you can readily conclude from Chuck Butler at his famous Daily Pfennig site, who reports that at the latest G-7 meeting (representatives of the seven or so biggest economies in the world), they announced that they all decided "it was 'critical' for the Asian currencies to let their currencies rise versus the dollar. I would not be surprised if China started spending its dollar reserves on all the crude oil supplies they can purchase - at any price. What will be more valuable to their economy next year, 75 U.S. dollars or a barrel of oil?" In short, will seven pizzas be more valuable than six pizzas, next year?

As we now see, class, there are other reasons for rising gasoline prices, and one important one was found on WorldNewsTrust.org. It read that the ministers of the Organization of Petroleum Exporting Countries said, "Soaring commodity and raw material prices are increasing the cost of oil and gas projects by up to three times. Qatari Oil Minister Abdullah al Attiyah said: 'Our costs have tripled from two years ago, due to high (commodity) prices. And it's not just that, it is also contractors who have tripled their prices.'" I laugh! Doubled costs and tripled prices? Hahahaha! They themselves must laugh uproariously when they hear that our government always says that there is no inflation! Hahahaha!

So, the next time you are watching in horror as that gasoline pump is sucking the money out of your wallet ("sluuuurrrrp!") and you wonder why gasoline costs so much, don't be like me and get mad, go running up to the clerk, calling him a cheating, thieving little over-charging bastard from hell. Experience has shown that it won't help.

And anyway, it usually turns out that the kid had nothing to do with the price of gas, but instead the price of gasoline is up because the purchasing power of the dollar fell! And, the dollar fell in purchasing power thanks to the horrid Federal Reserve, which has been creating excess money and credit with their every waking moment since the dreadful moment when that hideous creature of fraud and corruption was created in 1913, which was (as Mogambo musicologists know) the inspiration behind the classic Mogambo reggae tune: "The Fed'ral Reserve Be Killin' Me Money, Mon!" This song contains the immortal line: "Based on lies, and founded on the sly, based on lies and founded on the sly in 1913, mon, me money goin' down, mon, me money goin' down!"

- I confidently predict that the gross domestic product report, due to be released Wednesday, is going to show a nice big increase in GDP, and everyone will rejoice and celebrate by buying stocks, houses, bonds or something.

To this I say "Hahaha!" The way it works is this: suppose GDP of Mogambo Land last year was 100 widgets produced, and sold at a buck apiece. Total Mogambo Land GDP=$100.

Now this year, the economy consisted of 90 widgets produced, yet sold at $1.20 each. Nominal GDP would show an increase to $108, which sounds good to those who do not have Mogambo-Sharpened Economic Senses (MSES), and those who do laugh as one, "Hahaha!"

Normally (back when the government was not filled with loathsome liars and cheats because the newspapers didn't let them get away with it), total revenues ($108) would be properly discounted by the inflation in prices (20%), which is the loss of purchasing power of the dollar, and thus the real, inflation-adjusted change in prices (20%) exactly matched inflation. So, real GDP = 90, which is 90 widgets produced and sold for one dollar's worth of buying power each. So, GDP is actually down by 10% (only 90 widgets produced)!

If you can get away with lying about inflation, and fraudulently say that inflation was zero, then you can "prove" that GDP did, indeed, increase by eight percent, when in actuality it declined by 10%! Hahaha!

And, they can legally say that inflation is zero because of the fraud and fiction of hedonic statistical smoothing: if beef doubles in price, but chicken doesn't, the government figures that you will buy less beef (zero) and more chicken (100%), thus spending the same amount of money. Therefore, you suffered no inflation! Hahaha!

Welcome to the shabby underside of the banking system, which created its own rules to create the recent invention of hedonic statistics, of which this is only one - one! - of many despicable lies concocted by the horrid Michael Boskin, a smug big-shot university-professor consultant who, I guess, agreed to take the rap for creating the monster when the people finally revolted, and the despicable Alan Greenspan, former chairman of the Federal Reserve (1987-2006) who actually did it to us - and we never even got kissed.

- If you want to know why the future of gold promises much, much, much higher prices than is even justified by the low (and falling) worth of the ridiculous dollar, here is a little something to chew on. Sent to me by my buddy Phil, it is a very interesting article from the Globe and Mail, entitled "It's a Gold Rush." It is written by somebody named Tavia Grant, whom I assume is a female of the species.

In it, Tavia reports that gold and silver are suddenly very popular in Canada, especially Alberta. Why Alberta? I have no idea, although I once knew a girl named Alberta. She had these really huge boobies and was real popular, too, but I don't know if there is a connection.

But, if I can distract you from thinking about Alberta for a minute, I will direct your attention to the part where she says, "While Albertans may be the biggest buyers of gold and silver these days, interest is growing across the country." Further, she found that dealers in gold and silver say, "silver demand is particularly strong," which oddly corresponds with the recent rise in price, as you would expect, because for prices to go up, there have to be more buyers than sellers. And here they, as she reports, are!

And it is not just Canada, either! Kenneth Y. in Tokyo writes that he sometimes visits bullion/coin dealers in the area called Ginza, which he translates as meaning "Silver-Mint." Anyway, he reports that one of the biggest bullion shops, called Ginza Tanaka, "stopped selling silver (until further notice). They said they were out of stock! So, no silver in silver-town from the silver shop, since opening in 1892!" I shake my head in disbelief! The store is out of silver for the first time in 114 years? Yow!

And if you want to speak of gold (and who doesn't?), the Telegraph.co.uk reports that gold fever is spreading, and "even pension funds are buying." Wow! Talk about huge potential demand!

The article goes on to report, "GMFS, the precious metals consultancy, has suggested that gold could surpass $850 a Troy ounce this year." This year? Instantly, I try to check the calendar, but I don't seem to have one handy, so I yell out, "Hey, somebody! What is the date of today?" In unison, they yell back, "It's the day you ought to die, you horrible man, and set us all free to finally be happy!" I ignore them, as that is almost the same stupid answer they always give, although usually in response to my asking, "Hey! What time is it?"

But I don't need a calendar to see that gold rising from $630 to $850 in two-thirds of a year is a big, big juicy gain. Especially when added to the 20% gain we've already had in gold since January 1, 2006!

- We continually seek out responsible, authoritative sources of news and opinion, one after another, until we finally get to the bottom of the news barrel. Among the dregs, we find The Mogambo Daily Economic Rag, the nation's only authoritative news source for the Gold-Bug, Second-Amendment Gun-Nut, Paranoid And Scared Majority Of Real Americans. In this week's scary issue, we learn that the real reason gold and commodities will zoom, zoom, zoom is that we have got to have a bubble in something, and pretty damned soon, too, if we are to survive as an economy!

You are correctly thinking, "That Mogambo is a big idiot! Who 'needs' a bubble? They always end badly!" As correct as you are, I shake my head and figure that you are stoned out of your freaking brain, because you are obviously living in some happy dream world where Congress and the Federal Reserve are honest, decent people who would not even dream of creating bubbles in something and unleashing all that future suffering and misery.

But trust me, my Delightful Mogambo Darlings (DMD), when I say that creating a bubble in something is all they are dreaming about right now! And, it is what they are working to arrange this very minute! I laugh with the hysterical dementia of the damned and say, "Welcome to the hell of a fiat-money economy!"

So who "needs" a bubble? Well, for one, all the folks now six years closer to retirement than they were six years ago after all their retirement dreams went down in flames when the stock markets took a big dive. Their desperation swept them, and others, into trying to make up for lost time by getting deep into debt to get into this real estate thing, but - horror of horrors - now IT is starting to collapse, too, taking away people's retirement dreams, again! Damn!

Now all of those people are even further behind the eight ball! And since stocks are already still hovering near their highs in terms of overvaluation with an SP500 P/E of almost 20 and paying squat for dividends, there is not a whole lot of reason to expect a new bubble in stocks.

Also, since bonds are selling at prices far higher than they should be, too - causing bond yields to fall to (unbelievably) less than the rate of inflation (and a lot les than that, net of inflation and taxes!) - a new bubble in bonds is also pretty unlikely.

Houses? Well, obviously you just got here from Mars, or you are not paying attention. I just got through saying that the housing bubble is what is busting now! And so, to look for long-term higher-and-higher housing prices, in a sudden resumption of the massive housing bubble, seems to require a big stretch of credulity.

"And worse yet," I cry out, my voice piteously breaking from sorrow and anger, the cinematic tension crackling like static electricity in the air, "all the umpteen trillions of dollars in new debt that was used to finance all of that real estate bubble, the stock market bubble, and the bond bubble is still outstanding and payable! Now it is all reduced in value, thanks to the fall in the dollar and the attendant rise in interest rates, which is all now losing money for the lenders! Gaaaah!

Even more horrifying, most of that huge towering mountain of debt was securitized and sold to some sucker. "Who?" you ask? It's us! A lot of pension funds and investment funds and shares of Fannie Mae! Double gaaaaah!"

So, what are these sad-sack, desperate people going to do? What can they do to desperately try and finally rescue themselves, and all the other new people looking at their own retirements, at the same time as they are seeing all of this? Ergo, we have to have another bubble in something to keep us from collapsing under the debt! The question that springs ("boooiinnnnng!") immediately to mind is, "If the bubble is not commodities (like gold), then what? What else is so historically undervalued that it has lots and lots of room on the upside for a big ol' booming bubble, and is also so big that it can absorb all of that money escaping from stocks, bonds, and houses?" But, as usual, being the last one to know, I see that the inflation in commodities has already started! Looking at the Economist magazine and their "Commodity Price Index," the year-over-year gain in the category of "All-Items" is up 24.7%, while "Food" is up 6%, "All Industrials" is up 46.4%, "Non-Food Agriculturals" is up 14.9% and "Metals" is up a staggering 62.4%! In one year! If that ain't price inflation, then what in the hell is it?

Higher prices are already affecting spending, as I infer from Adrian VanEck, at the Money Forecast Letter, who reports, "American personal consumption expenditures on durable goods peaked early last August and at last report were down at an annual rate of $100 Billion." -The wild, recent sell-off in silver was probably caused by the announcement that margins were being raised on silver contracts for future delivery, effectively raising the cost of the silver future. Nobody wants to pay more money for something they already own, especially in response to a nasty phone call from the broker who demanded that I get my Nasty Mogambo Butt (NMB) down there pronto and deposit a lot more cash to meet the new margin requirement. He sounded real snotty when he pointedly reminded me that he said "cash," which meant that I had better not try to pass another of my Rubber Mogambo Checks (RMC), like I don't know what the word "cash" means or something. So, in response, everybody said, "Sell, you nasty, greedy bastard!" and the price of silver, of course, tumbled since demand tumbled.

But, everybody forgets that the price of silver has about doubled in the last year, but the margin requirement did not rise to meet the new, higher price of silver. And so, those old low margins were very low as a percentage of price, and were way overdue to be raised to normal levels. The old margin requirements were becoming, in essence, a free gift to the investor.

The lesson is not that the markets are full of crooked bastards, but that absolutely nothing has changed concerning the current Mogambo Certified Rating (MCR) of Uber-Bullish about silver, except for the justified increased cost to the people who want to borrow money to make bets on the coming meteoric rise in silver, using the futures market to leverage, leverage, leverage.

This makes the price of silver go up, which validates my point: buy silver bullion, and lots of it.

- Several readers have challenged me to explain how the gold lease rates can manipulate the price of gold up and down. I smile, as nothing could be easier, my precious Mogambo grasshoppers! And, there is nothing I like better than something that is "easy," unless it is something that is tasty. And so, pizza delivery gets very, very high marks for being both easy and tasty.

So, I smile beatifically and rub my fat little tummy in satisfaction, which is, even as we speak, growling for more pizza or fewer donuts.

Nevertheless, I say, "Hear me now, my quizzical ones! First, tell me all the ways - all the sleazy, slimy, slippery ways that you can manipulate markets when you control everything and have the Federal Reserve, a supplier of seemingly endless amounts of gold at very cheap rates, as a willing co-conspirator. There must be a zillion ways right there! Hahaha!"

My laughter ringing hollowly in their ears, I ruthlessly went on, "And on top of that, tell me more ways to make a profit by insiders manipulating the gold market if they are also free to use any combination of leased gold bullion, market-provided gold bullion, custodial gold, certificate gold, gold mining shares, mutual fund's gold shares, warrants, futures, options, private contracts, promissory notes, poker chips and side bets! Hahaha! That ought to be good for a few gazillion ways to profit right there! And then, tell me all the more ways you can profit from manipulating the gold market if you can also take a short position in any or all of those things, too! Hahaha! And then, as if that is not enough, tell me all the additional ways to make a profit manipulating a market when the money to finance all of this insanity is provided by Japan and their zero-interest-rate policy!"

I dramatically pause to let my words sink in - ruined by an inadvertent big, burping belch ("Burrrrrp!). Hurriedly, I exclaim a little too loudly, "Tell me these things, my Young Mogambo Larvae (YML), and I will tell you exactly how it is done!"

I look over the crowd assembled at my feet and glare purposefully at the ones nearest my feet who are harshing my buzz by loudly complaining about the smell. Then, I smile and say, "All you really need to know, my Greedy Little Ones (GLOs), to make a whole gigantic humongous ton of money with gold, is to buy it when you see that the price is held down by these manipulations! Huge multiples of the total existing global supply of gold is now mere paper, traded as if it were gold, which it ain't, and probably never was. By now, the only thing that flimsy promissory note has in connection to gold is some words on paper or a computer disk somewhere. It will end badly for them. And, it won't be long in coming."

Amid cries of "Prove it, mighty Mogambo!" and "Show us the proof, idiot Mogambo!" and "Stop trying to peek up my skirt, creepy pervert Mogambo," I calmly and graciously hold up my hand to silence the crowd. Standing up, and thus eliciting a crowd-wide sigh of relief that my zipper is, thankfully, up for a change, I grab the microphone and speak in my most Profound Mogambo Voice (PMV): "To prove it, my Precious Mogambo Grasshoppers (PMG), you would have to prove that all the millions of Wall Street hotshots, Nynex hotshots, Comex hotshots, bullion-bank hotshots, foreign-central-bank hotshots, trader hotshots - and all their secretaries and underlings and friends and insiders - are all just Too Damned Stupid (TDS) to come up with some damned way to make money out of a sure thing!"

Then, I chortle, "And, it can work until the scam gets overwhelmed by sheer physical demand by millions of people, perhaps billions of people, who are all coming to their economic senses and are scrambling to buy silver and gold against the coming economic hard times, driving prices relentlessly up and up and up, as gold will be, just like it always has been, Pure Economic Salvation (PES) for people, as protection from the unstoppable depreciation in the purchasing power of the money caused by a huge government, which is massively deficit-spending a massively inflating stock of fiat currency based on debt, multiplied by an insanely low fractional-reserve ratio in the banks! Just like it has in all of history, and just like now! Hahaha! Now you know why I laugh!"

Then, dismissively, I point to the door and exclaim, "Go thee now! Go! Hie thee to thy places of gold and silver exchange, and buy, buy, buy!"

Soon, the place is deserted, and everybody has gone home, mostly muttering how they feel stupid even listening to an idiot like me. They whisper hateful things back and forth, like, "Did you get a whiff of those feet? Pee-yew!" Everybody laughs.

Whether or not you believe a raving lunatic like The Mogambo (and you would be an idiot if you did), the gold lease rates had again fallen (over the last 10 days) to a singularity (a strange situation where leasing gold short-term costs the same as leasing long-term!) in the last two days. Sure enough, right on schedule, the price of gold soon had a huge downdraft! You want more proof than flimsy, sheer coincidence? I shake my head in wonder, as you are not nearly as paranoid as you need to be, nor nearly as paranoid and angry as you are soon going to be.

- If you check your Mogambo Handy Handbook (MHH), you will notice that I advocate that you take physical possession of gold and silver bullion. One reason is that once you have it paid for and in hand, your annual costs go to zero, whereas brokerage accounts and mutual funds are always hitting you with fees and commissions, expenses, taxes and levies until one day you cry out: "They're stealing me blind!"

If you want another reason for taking possession of actual gold, then you might be interested to learn how a mutual fund could lose value even as gold and shares rise. If so, then check this out from a prospectus sent to me by a mutual fund I own: Under the section of risks in owning shares of the mutual fund, the last one is "Securities Lending Risk. Any loss in the market price of securities loaned by the fund that occurs during the term of the loan will be borne by the fund and would adversely affect the fund's performance."

And who are these guys borrowing my stocks and are causing me to suffer a loss in my mutual fund? The answer is: Guys who went short gold! Hahaha! In other words, guys who aren't very smart! I mean, and pardon me for laughing, but who is stupid enough to be short gold in a roaring bull market in gold? Switching on the Mogambo Risk Analyzer (MRA), I quickly discover that, unfortunately, the chances of getting the money back, thanks to the mutual fund loaning it to dimwit dirtbags, are, officially, Pretty Damned Slim (PDS). And this coincides exactly with how people who loaned money to a dimwit dirtbag named The Mogambo, never got it back, either. So, you see how this all fits a little too neatly together to suit me!

If those are not enough reasons to own bullion gold, from some of the gold mining stocks I own, I, as a shareholder, am getting always asked to vote for all kinds of weird proposals buried deep in the prospectus, like allowing them to issue a lot of free options so that the company can give them to "select" people. This lets them, at some time in the future, opt to buy shares of the company, but at today's price! Hahaha! Oddly enough, I think that this shameless scam signifies that they think gold is going to rise in price, if they are greedy enough to try and it off now! How bullish!

Of course, there are the gigantic salaries of the officers and boards and whatnot, and the constant share dilution from them giving themselves baskets of shares. I am sure they are all just a bunch of thieving, lying scumbags like you find in every publicly owned company.

- George Ure, of UrbanSurvival.com, took a look at the latest CPI release, and notes that the annualizing the latest monthly rise in prices equals 7.4% inflation! I will wait a minute until you have gobbled a few nitroglycerine pills and checked your pulse, before I hit you with the news that inflation is actually higher than that! First off, he begins with a little joke to, you know, sort of break the tension. He notes that in figuring inflation, "The Labor Department uses the Seasonally Adjusted Annual Rate" and then (pausing slightly for dramatic effect), he hits you with the punch line: "You don't have one of those in your checkbook." Hahahaha! I'm rolling on the floor laughing! And then, I am immediately sorry for rolling on the floor because it seems that I have rolled into something wet. I am ashamed of myself for laughing because there is nothing funny about inflation. If you think otherwise, then tell me how funny it is the next time you buy gasoline at these record-high prices to fill up your gas guzzler so that you can take your stupid daughter to her stupid soccer game, where she sits on the stupid bench the whole stupid game, whining and complaining about how much she hates me. I mean you. She hates you.

And, since we are talking about it, there is nothing funny about getting your pants wet, either, because now it looks like I have peed in my pants. Everyone is pointing and laughing, "Hahaha! The stupid Mogambo peed in his pants…again!" All the women are making faces and saying horrible things like, "Ewww! Now he disgusts me more than ever!" Although, I note for the record that they were slyly suggesting all kinds of forbidden things (wink, wink!) back when they were interviewing for the damned jobs!

This is not about my dampness problems with trousers, or teasing-then-traitorous female employees, but about inflation. I motion with my hand for Mr. Ure to please go on with the news about inflation. Thankfully, he goes on to say, "The headline number means 7.4% inflation, but buried in the report, the Labor Department says the benchmark has changed. Check the emphasis-added part: 'CPI (Old Weights) For the first six months of 2006, BLS also will calculate Old Weights CPI-U and Old Weights CPI-W based on the 2001-02 expenditure pattern used in the CPI from 2004 through 2005. These Old Weight data are contained in tables 1(OW)-4(OW). From February to March, the Old Weight CPI-U rose 0.7 percent and the Old Weight CPI-W rose 0.6 percent. Note these series are not seasonally adjusted.'"

Mr. Ure smiles, waves his hand dismissively, and says, "So there you have it: Inflation at an annualized old weight is 8.7%." Pandemonium filled the room at this horrific inflation news! Well, the truth is that the only thing filling the room was the sound of me howling like an angry, frightened banshee at the looming horror of 8.7% annual inflation, and the sound of everyone else yelling, "Oh, hell! It's that damned Mogambo idiot! Who's responsible for letting that creep in here?" The noise was so deafening, that I never even got a chance to point out that the footnote admitted: "these series are not seasonally adjusted."

- Greg Z. went to the British Museum to see a special exhibit on the History of Money. The best part, and you are going to love this, was Mr. Whitten, who is descried as "a small, elderly gentleman who has been hired by the Museum to man a table at the end of the exhibit hall." He was displaying, among other monetary oddities, "silver coins from Pericles' Athens and Victorian England (clipped by the way). He is very proud of all the precious metal coins and boasts of how beautiful (and valuable) they still are today."

Mr. Z then goes on to relate, "He also has base metal coins from today's modern world. During his presentation, he picked one up, stared at it ruefully and said, 'Today this is made from base metals. The metal itself isn't even worth the value of the coin.' He then sighed and said in that great British accent, 'Rubbish really.'"

Ahhh, the fabled British reserve and understatement! Mr. Z says, "Couldn't have said it better myself." Me either, Greg! Me either! Hahaha!

- The Economic Indicators came out, and the leading indicator was down - bad news. Paul Kasriel of Northern Trust writes, "The year-over-year growth in the LEI has done an excellent job of foreshadowing the onset of recessions. That is, a steady downtrend in the year-over-year growth in the LEI has been a warning of an imminent recession. Not surprisingly, the LEI is not only a good predictor of the cyclical behavior of economic growth, but also a good predictor of the directional behavior of the fed funds rate."

The coincident indicator (indicating current economic activity) was up slightly, as you would expect, and the lagging indicator (indicating future inflation) was also up - more bad news.

This Indicator stuff is apparently not impressive to Volkmar Hable, of Samarium Technology Group, who writes simply, "Historically, the combination of sharply rising bond yields, gold prices and oil prices has led to a stock market decline, and in 62% of the cases to a stock market crash." Ugh.

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volkmarguidohable · 7 years

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Work at the beginning of the Universe is the creation of matter

Work indeed, since this involves the creation of an asymmetric energy state, matter, from a symmetric one, light. Subsequently, the separation of the particles against their mutual gravitational attraction conforms to the more usual definition of "work" in thermodynamic terms.

The creation of matter requires an exceedingly hot and energy-dense environment, which is reason enough to believe that the Universe began in a state of extreme energy density and temperature. The Universe has expanded and cooled ever since the initial explosion, and because the galaxies continue to separate due to the entropic expansion of space, the Universe will never again be hot enough to create matter (unless it collapses gravitationally in the so-called Big Crunch.

This expansion and cooling is the primordial spatial entropy of the Universe, driven by the intrinsic motion of light. "Velocity c" is therefore the entropy drive/gauge of free electromagnetic energy, and this is the same gauge which regulates the creation of the spatial conservation domain of light. Therefore we could say that the function of entropy is evidently to provide a dimensional conservation domain for its energy type, in which energy can be simultaneously used and conserved.

In the case of matter, or bound energy, the entropy drive is "velocity T", the intrinsic motion of matter's time dimension, regulating the creation of the historic conservation domain of information and matter's "causal matrix", the temporal analog of space. The historic domain gets older and its information is diluted and decays, space gets larger and colder and its capacity for work declines. Both intrinsic motion c and T are effectively "infinite" velocities; "infinite" velocities are necessary to seal the borders of their dimensional conservation domains, preventing any violations of causality or energy conservation via fast "space ship" or "time machine". The "infinite" velocity is the entropy gauge, guaranteeing the irretrievable loss of entropy-energy in space (radiant heat) and/or time (opportunity). Only an "infinite" velocity could make such an absolute guarantee, and only an absolute guarantee will satisfy the 1st law of thermodynamics. In its turn, gravity, which we may consider to be the entropy conversion gauge ("intrinsic motion G"), seals the borders of its spacetime domain (against "wormholes") through the "event horizon" (where g = c) and the "central singularity" of black holes.

There are several ways to view the role of gravity in this mix, which also presents itself as a dimensional force with intrinsic motion "G", creating spaceentropy:

a. Gravity is a conservation force converting either form of entropy drive and domain into the other (converting space to time and matter to light) in a "minimum-energy" role, creating spaceentropy, the joint dimensional conservation domain of free and bound energy. The entropy gauges/drives of light and matter (c and T) must be metric equivalents, an equilibration accomplished through the gravitational conversion of space to time;

b. Gravity is the passive consequence of the intrinsic motion of entropy, a orimordial force - therefore, the conservation role of gravity is actually attributable to time, especially in regard to the creation of matter's temporal/causal inertial status and historic spaceentropy, the latter functioning as the conservation domain of matter's "causal matrix";

c. Gravity is an active "primary" force pursuing a symmetry debt (the loss of the "non-local" distributional symmetry of light's energy throughout space), which gravity repays by converting bound energy to free energy in quasars, in the nucleosynthetic pathway of stars, and in Hawking's "quantum radiance" of black holes;

It is significant to note that in the absence of matter, a Universe composed only of light would rapidly become cold, dark, and boring, so swift is the intrinsic motion of light, and consequently so efficient is its entropic vitiation of free energy's potential for work. Storing the energy of light in matter allows the Universe to live for a very much longer time and to become quite an interesting place. The free energy stored in atoms is immense, as Einstein realized in his famous equation E = mc2 , and can be slowly released in stars which, if similar to our Sun, can burn quietly for many billion years. This stellar activity is all due to the negative entropy of gravity, entropy-energy obtained from the expansion of space, which decelerates accordingly. In the Sun, gravity converts space to time, conserving/transforming light's entropy drive and domain, and simultaneously converts mass to light, conserving/restoring light's "non-local" symmetric energy state. The gravitational restoration of light's symmetric energy state goes to completion in Hawking's "quantum radiance" of black holes.

The intrinsic motion of matter's time dimension does not destroy the capacity of matter's energy content to do work, since unlike light, matter does not participate in the entropic expansion of its own conservation domain, historic spacetime, and better called “spaceentropy”. Matter remains stationary in the course of entropy. It is matter's entropy dimension which moves and expands into historic spaceentropy and thus causing a time arrow, carrying with it matter's information content and "causal matrix", but leaving behind matter itself in the " Universal Present Moment" while forming history. It makes it possible that a past anyway exists.

The function of historic spaceentropy is to conserve matter's causal matrix, maintaining the temporal connectivity between past and present, and thus the reality of both. The energy content of atoms is not degraded by the expansion of history because atoms do not participate in the expansion; only fission, fusion, particle and proton decay, strong gravitational fields, and the "quantum radiance" of black holes have any significant effect upon the rest-mass energy of matter.

Thus proximally, the positive entropy of expanding space is providing the energy for gravity's negative entropy drive - but what gravity is really does is using that energy to produce matter's time dimension via the annihilation of space. Entropy, in turn, produces a dimension of positive time (history), so ultimately, gravity takes one form of positive entropy (the intrinsic motion of light and space), and converts it to an alternative form of positive entropy (the intrinsic motion of matter's time dimension and history). Gravity is just the "middleman" brokering the exchange from space's entropy account to history's entropy account, producing a metrically equilibrated spaceentropy into the bargain. Entropy is therefore conserved (in metrically equivalent terms) in transformations of free to bound energy, and vice versa.

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volkmarguidohable · 7 years

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Time and gravity induce each other endlessly

Examined at the microscopic level of quantum mechanics, the conversion of space to time involves the simple switch of implicit time to explicit time, of the "wavelength" or spatial component of the electromagnetic wave to the "frequency" or temporal component of the wave. The presence of both space and time are implied in the standard formulation of the velocity of light: wavelength multiplied by frequency = c. Even though light has no time dimension, the implicit presence of time in the wave is clearly indicated by "frequency". Time is the implicit driver of the intrinsic motion of light: the symmetric spatial or "wavelength" component of the wave "flees" the asymmetric temporal or "frequency" component of the wave, which is however an embedded element of the wave's own nature. Implicit time is thus the proverbial "bur under the saddle" which causes the eternal and intrinsic (self-motivated) motion of light, the expansion of spacetime, and the spatial entropy drive of free energy. This same temporal element becomes explicit when light loses its intrinsic motion and becomes bound energy in a stationary particle or similarly immobile energy form. (See: "Gravity Diagram No. 2".)

In bound energy, the roles of the spatial and temporal components of the wave are reversed, as space is pulled by time into the historic domain (at right angles to all three spatial dimensions), creating the gravitational collapse of spacetime. This temporal component becomes the active principle of the "location" charge of gravitation, comprising in a single charge the entropy, causality, and symmetry debts of light consequent upon the conversion of massless free energy's "non-local" symmetric energy state to the local, temporal, causal, and asymmetric energy state of massive bound energy. So long as light continues to move at velocity c, time remains suppressed to an implicit state, maintaining both metric symmetry plus the "non-local" distributional symmetry of light's energy content. The suppression of time is the major role of "velocity c" as the symmetry gauge of the spatial metric. The intrinsic motion of light is caused in principle by the conservation of energy, entropy, and symmetry, but time, whether in its implicit or explicit form, is the active agent or energy principle ("frequency") driving the entropy of the universe, whether spatial or historical.

Because one and the same temporal element causes (in its implicit state) the intrinsic motion of light (the entropy drive of free energy), and causes (in its explicit state) the intrinsic motion of time (the entropy drive of bound energy), the conservation circuit between the primordial drives of spatial and historical entropy as mediated by gravity is extremely simple and immediate (see: "Currents of Entropy and Symmetry".) The gravitational transfer of the expansive energy of the spatial Cosmos to the expansive energy of the historical Cosmos, with its consequent deceleration of the universal spatial expansion, occurs locally and instantly with the switch of the temporal element of an electromagnetic wave from an implicit to an explicit condition. This simple switch or "flip" of the electromagnetic "entropy coin" is the whole difference between the positive spatial expansion or entropy drive of the intrinsic motion of light, and the negative spatial contraction or entropy drive of the intrinsic motion of gravitation. The action of gravity reduces the spatial expansion of the Cosmos not just because its expansive energy is transformed, but because of the actual gravitational annihilation of space.

Asymmetric temporal entropy "costs" more in terms of energy to produce than symmetric spatial entropy, so when gravity creates time from space, it produces a metrically equivalent entropy which is nevertheless not the exact energetic equivalent of its spatial counterpart and source - that is, gravity must produce temporal entropy from spatial entropy at a slight energetic loss, going into debt to do so in the amount -Gm. It is to pay this temporal entropy-energy debt that more space must be imported (via the gravitational flow) - since space and spatial entropy-energy is the only source for time and temporal entropy-energy.

However, because time is a moving, entropic charge exiting space at right angles to all three spatial dimensions, carrying with it the imported energy that was supposed to pay the temporal entropy debt, gravity can never "catch up" and fully satisfy the debt. The energy that was intended to pay the temporal entropy-energy debt instead is used to create the historic conservation domain of spacetime, so the original temporal entropy-energy debt remains forever unsatisfied.

This is why gravity always seems to operate in an environment, characterized by "negative energy" or negative entropy-energy. The intrinsic, one-way, symmetric and accelerated spatial collapse of gravitation is a consequence of the fact that time can be created from space only by "deficit spending". Hence we get the magnitude of -G from the energetic difference between the drives of symmetric spatial and asymmetric temporal entropy (the intrinsic motion of light vs the intrinsic motion of time); the necessity to pull in more space is due to "deficit spending" during the gravitational conversion of space and spatial entropy to time and historical entropy, causing the negative sign of -G. The magnitude of -G determines the amount of space that must be imported to pay the temporal entropy-energy debt per unit mass. The negative sign of -G determines the physical location where this payment must be made (at the center of mass), and how (via the symmetric annihilation of space), and determines also the one-way character of both gravitation and time.

Put in the form of a symbolic "concept equation" representing the energetic "cost" of transforming one type of entropy to the other, we can say: implicit spatial entropy (the intrinsic motion of light) (S) minus explicit historical entropy (the intrinsic motion of of entropy which we know as “time”) (T) equals -G:

S - T = -G.

In other words, the magnitude of -G is just equivalent to the energy difference between implicit (S) and explicit (T) entropy. Using the same symbols, the gravitational conversion of space and the drive of spatial expansion to metrically equivalent entropy (S) and the drive of historical expansion and entropy (T) can be represented by another equation as:

-Gm(S) = (T) -Gm(S) - (T) = 0

It is ultimately the expansive energy of the spatial universe that funds the expansive energy of the historical Universe. The spatial expansion is gravitationally decelerated accordingly. Conversely, as matter is converted to light in stars, the universe resumes its former expansion, appearing to accelerate as it ages.

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