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Old 07-26-2011, 12:58 PM   #281

Join Date: Sep 2002
Posts: 17,705

A newsletter I get from my boys at Blanchard and Company.

From Rick Santelli: "Ron Paul last week asked Chairman Bernanke during the Humphrey Hawkins-type hearings if he thought gold was money and he (Bernanke) said, 'no.' My answer would have been, it's better than money. Yes, $1,600 gold is insulting central bankers in the following fashion, it's saying gold is going up because what you are doing to the fiat currencies of the world is not tolerable to smart investors."

Over the long term gold remains undervalued or at worst fairly valued. Admittedly, gold has risen by nearly 6.5 times in the last 11 years. However, in the last bull market in the 1970’s, gold rose 24 times from $35/oz to over $850/oz in 9 years. Gold remains well below its 1980 record high of $2,400/oz when adjusted for inflation. The macroeconomic conditions today are even more conducive to gold than they were in the 1970’s.

What happens after August 2?

Goldman is out with a note this morning on the debt ceiling, and unfortunately, even though the firm secretly controls the world, it really doesn't know any more on what's going to happen than anyone else.

This is interesting though. Some dates on August 2 and after. It presumes that the ceiling isn't raised, but that the Treasury prioritizes payments in some way.

• August 2: Treasury exhausts financing options. August 2 is the last day that the Treasury seems likely to be able to make all of its scheduled payments under the current borrowing limit.

• August 3: Social security payments. Roughly $23 billion in Social Security payments are scheduled to be made on August 3, as they are made on the first Wednesday of every month. This, along with other spending that might be delayed, could provide political motivation to reach an agreement on at least a short-term extension.

• August 3: Treasury quarterly refunding announcement. The Treasury is expected to announce its financing plans, as it does each quarter.

• August 9-11: 3-year note, 10-year note, and 30-year bond auctions. These auctions settle the same day as the Treasury coupon payment, on August 15.

• August 15: Treasury coupon payment. Treasury must make around $30 billion in payments to holders of securities. The scheduled payments are expected to exceed revenues that day, but in the very unlikely event that the debt limit hasn't been increased by this point, it is likely that the Treasury would have conserved cash in order to make the payment

The Wisconsin Governor Was Right - expect more of this in other states.

Remember the violent and disgusting demonstrations over Wisconsin Gov. Scott Walker doing away with the collective bargaining for teacher's unions?

The results are in. Some school districts went from a $400,000 deficit to a $1,500,000 surplus as a result.

Why? It seems that the insurance company that provided all the "so-called" benefits to the teachers, was an insurance company owned and operated by the teacher's union. Since they were guaranteed to get the insurance business from the teachers and the State had to pay for it, and not the teachers, they were increasing the annual costs every single year to become the most expensive insurance company in the state. Then the insurance company was donating millions and millions of dollars to their favorite politicians, who when they got elected, guaranteed to keep funding the unions outrageous costs.

Now that the State of Wisconsin is free to put the insurance contract out for bid, and lo and behold, they have saved so much money it has turned deficits into surplus amounts. As a result, none of the teachers had to be laid off, everyone got a raise, etc., etc., and the taxpayers of Wisconsin don't have to pay more taxes to fund the union's political ambitions.

• The problem with bloated central planning is that when austerity hits, the bloat goes away, and millions of government employees suddenly find themselves trying to enter the private sector, realizing they have absolutely no real competitive and marketable skills.

• And while America has yet to even remotely sniff austerity, the unemployment rate is already set to spike, after the USPS just announced it was preparing to close 3,653 out of its 32,000 total post office sites.

• Per UPI: "The U.S. Postal Service is expected to announce a plan to close 3,653 post offices, mostly in small communities, in a cost-cutting measure, officials said. A USPS spokeswoman said the post offices were chosen because they get the "least amount of foot traffic and retail sales," The Wall Street Journal reported Monday."

• So between corporate and now public sector layoffs, expect the unemployment rate to resume climbing steadily to double digits, hitting it sometime in Q4, at which point QE3 will be inevitable.

GOLD NEWS: The debt of the nation looms large this week. I feel we are probably going to see a “short term” solution and raise of the debt ceiling. This will get us through 6 months or so before the vote comes due again. I find it funny that we have to do this at all but we are willing to play politics and see what happens. I wonder if Washington thinks things will be different? Oh wait there is an election around that time so it has nothing to do with the public only politics. The million dollar question is how will this affect the metals? Well I think we could see a short term correction (as crazy as that sounds) followed by continued upward movement in the price (please reference the enclosed chart). However, if I’m wrong and we default the price will skyrocket overnight…… all we can due is stay tuned.

COIN NEWS: The Certified Acceptance Corp. (CAC) is offering to pay the U.S. government $20 million for the 10 highly publicized 1933 Saint-Gaudens double eagles recently found to be government property. Many of you know John is our coin buyer and this would be a huge purchase and we can only hope he is able to get the coins from the government.

Premium quality Type, better dates, and Gold continue to be in strong demand. CAC verified slabs continues to grow in demand and are getting more notice, much more so than the plus graded slabs. Even generic material, such as common date MS65 $20 Saints stickered by CAC are becoming very difficult to acquire. There is at least one very large order out there for these coins that’s not getting filled.

Prices for these very common coins, but somewhat uncommon with CAC stickers, have been edging up as a result of a lack of this material on the market. Some market participants still haven’t caught on that they can receive quite a premium for their wares when participants still haven’t caught on that can receive quite a premium for their wares when they bear the green bean of approval. The rare coin market is in a growth phase at this time, and consequently, it may take a long time before inventories of these coins catch up with demand. Action to take= buy as many high grade $20 pieces as you can get.
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