As the editor of the Silver Bear Cafe, I spend most of my time researching current events. I explore the markets, the economic war that is being waged on the middle class, precious metals, the Federal Reserve, energy, and how to go about surviving financially. In this weekly column I will attempt to condense the week's events and examine how the news might affect your pocketbook. JSB

Financial Markets

The Stock Market is teetering and on the verge of a catastrophic collapse. According to a CNN article, corporate insiders are now selling nine times more of their own shares than they are buying. Mindless greed is currently the sole driver of the market. A euphoria has seemingly caught on. From a contrarian stand point, the current situation exhibits all the signs of impending doom. All it will take is a little push, and then the dominos will begin to fall in earnest.

From CNN

Corporate insiders have one word for investors: sell.

Insiders were nine times more likely to sell shares of their companies than buy new ones last week, according to the Vickers Weekly Insider report by Argus Research.

From John Rubino

Why is cyberwar a topic for a site like DollarCollapse? Because assuming – as we should – that the global financial system is now so complex, leveraged, interdependent and fragile that a disruption in one part can easily spread to the rest, the only remaining question is which catalyst will be first to set off the avalanche. A major cyber-attack is a pretty good candidate.

How likely is such an event? Well, based on what the world's governments and corporations are willing to admit (almost certainly the least serious tip of the iceberg), big things are already happening, and the threat of massive retaliation and/or preemptive strike looks both real and imminent. The Japan/China conflict in the China Sea, for instance, could easily pull the US into a cyber-battle, if not war. Because this is uncharted territory, there's no way to predict the impact on the financial markets.

Meanwhile, the cyber-powers now being granted to governments to fight the next war are eviscerating Constitutional protections of personal privacy and liberty. So the ability to fight a cyberwar is also the ability to create a high-tech police state.

Seen this way, cyberwar is yet another reason to avoid keeping a lot of capital tied up in financial assets. If the banks, brokers and insurance companies holding those assets are hacked and maybe disrupted, what happens to your stocks and bonds? Again, this is uncharted territory, which adds to the appeal of real assets held out of the mainstream financial system. The only thing that can be said with certainty is that in a cyberwar your gold coins and farmland will still be there when the virtual dust clears.

On the Economic War Front

The motive of the Economic War, and all wars for that matter, is money. There has never been a war fought anywhere that was not waged over money. In the case of the Economic War, which is, essintially, the fleecing of the middle class, the money is needed to continue to buy weapons and oil to continue the hedgemonic assault of the remaining natural resources of the world. The putzes, in positions of power in this country, lack the vision and the intellect to deal with the future altruistcally. They would, prefer to follow the path of of the most resistance and maim and kill everything that might be imagined to stand in their way. Meanwhile, the plan is to reduce the American middle class to a group of impotent debt slaves so we might be more easily controlled. The elites will always need someone to mow the lawn, don't-cha-know.

From John Kozy:

Americans are hard learners and they learned nothing from Korea and Vietnam, so after two misadventures that appeared to be successful (Grenada and the 1^st Gulf War), the US led another multinational force into Iraq and Afghanistan. After eight years in Iraq and the installation of a new government, the US withdrew without achieving its goals, leaving Iraq in disarray. And after more than a decade in Afghanistan a similar outcome seems to be imminent. Like Vietnam, these wars too are not two-state wars.

They amount to invading armies battling indigenous peoples who themselves are not united and not under the control of any government, group, or commander. No surrendering army in either country will ever be found. But now there’s a new twist. The forces facing the invaders do not merely consist of local peoples. Those peoples are assisted by non-state but similarly minded multi-state actors. The people opposing the West in Afghanistan are the same groups opposing the West in Libya, Algeria, Syria, Yemen, Mali, Somalia, the Sudan, and elsewhere. People who have been subjugated and exploited by the West have begun an undeclared war on the West and westerners everywhere, and winning this war will require not their defeat but their annihilation. The West cannot do that without annihilating itself in the process.

The real new world order has emerged–the world’s downtrodden against the West and its puppet, surrogate colonial governments. These non-state but similarly minded actors will determine the course of future world history. There is now a new world order that the West cannot control, that military force cannot subdue, and that concessions cannot placate. Ancien régimes relied on military power to influence events. The true new world order renders military power effete. All it can now accomplish is kill for killing’s sake. Pure barbarity is what the promise of Western Civilization has been reduced to. What a wonderful world we have made!

Precious Metals

For 3,000 years precious metals have maintained their purchasing power and have been the most liquid, universal form of money throughout the world. Since 1971, both the Canadian and US dollar have lost approximately 80 percent of their purchasing power while gold has enjoyed an increase. In 1971, for example, a new car could be purchased for $3,500 ( 100 ounces of gold ) and a starter house in the suburbs for $35,000 ( 1,000 ounces of gold ) . Today, 100 ounces would buy two new cars and 1,000 ounces would buy two houses or an estate in the country.

If investors take the time to examine why they have a negative bias towards gold, and can accept that what they believe to be true may be myth or misconception, even the naysayers may realize the important contribution precious metals can make to a portfolio and how they can both increase and preserve their wealth in the coming decade.

China has one of the highest savings rate in the world, and in recognition has liberalized the ownership of gold. China's central bank governor estimated that Chinese citizens currently have 1.2 trillion yuan or $145 billion of savings, which contrasts sharply with the spent savings of the Americans. Historically, the Chinese have an affinity to gold and the government's recent move to allow individual ownership has prompted the World Gold Council to predict "the rise in demand for gold in China from the current 200 tonnes to an annual 600 tonnes over the next few years."

I believe Chinese demand will surprise even the World Gold Council. Already five banks jumped the gun and queues were formed, similar to the long lineups outside the Bank of Nova Scotia in the late 1970s. The Chinese have one of the lowest grams per capita usage, at 0.1 grams per capita in contrast to 0.73 in India and 1.41 in the United States. China's official gold reserves are less than 2 percent at only 600 tonnes. The central bank is expected to boost its holdings in line with the more industrialized nations. To achieve a level of the Europeans at 15 percent of reserves, China would need to consume all of the gold produced in the next three years.

Darryl Robert Schoon

Money and power are two sides of the same coin and both are at the center of today's gold market. With growing demand for gold from both China and Russia, it would be assumed that prices should be rising as supplies of gold are becoming increasingly tight.

Sandeep Jaitly is the author of the Gold Basis Service, a subscription-only commentary on developments in the gold and silver bases and the 'implications about future movements for prices'. In his February newsletter, Jaitly referred to an earlier statement from January 25th:

The bases/co-bases across all maturities for both gold and silver are falling/rising indicating substantial demand for physical bullion that is not being adequately accommodated. February gold has entered backwardation as of last week. As a consequence of the fall/rise in the bases/co-bases, volatility of bullion against fiat is likely to increase. The opportunity to exchange gold for silver should be taken if the gold/silver ratio rises substantially (above 55.)

Sandeep Jaitly's observations about gold and silver have been remarkably consistent over the past year. Demand for both gold and silver have been constant while supplies of both metals have been pressured leading to indications that an upswing movement in prices can be expected and the accumulation of both metals is encouraged.

In the past year, however, gold and silver have not performed in accordance with such expectations. I believe this temporary anomaly is attributable to two factors: (1) the increasing determination of Western central and bullion banks to prevent another almost-vertical price movement in gold as happened in July/August of 2011 when gold rose 27% in only 60 days; and (2) the current Chinese strategy to purchase gold at the lowest price points possible.

Energy

The world's increasing appetite for crude oil currently provides a sector that has almost as much potential as silver. The price is headed right back to $110 per barrel and beyond. Exploration companies offer the greatest leverage, and there are many very well managed and well funded companies whose stocks are undervalued.

I am not, and never will be, a day trader, but in the long run, any issue involved in the energy sector warrants consideration. Canadian companies can provide double duty as their shares are valued in Canadian dollars and, as such, can provide an additional hedge against the tanking dollar.

The National Petroleum Council's new Report estimates that, by 2015, North American production from "traditional U.S. and Canadian sources of supply" (defined by the Council to include every basin south of the Arctic Circle) will fall an almost unfathomable 21 BCf/day short of the levels the Council had concluded would be necessary to meet the needs of the U.S. market when it issued its earlier Study less than five years ago.

Even if the proposed Alaskan natural gas pipeline ultimately goes forward, and the Keystone project is allowed to continue, it will not be completed for at least a decade; further, as much as the additional supplies it brings are needed, if and when it goes into service, it still will offset less than 21.5% of the shortfall in production identified in the Council's Report. All the hoopla about our sensational natural gas discoveries are grossly overstated.

From Robert Jensen:

Rather than claiming divine inspiration, we can come to greater clarity about the desperate state of the ecosphere and its human inhabitants through evidence and reason. It is time for a calm, measured apocalypticism that recognizes that the ecosphere sets norms, which we have ignored for too long, and that we need to develop a new sense of solidarity among humans and with the larger living world.

So, speaking apocalyptically need not leave us stuck in a corner with the folks predicting lakes of fire, rivers of blood or bodies lifted up to the heavens. Instead, it can focus our attention on ecological realities and on the unjust and unsustainable human systems that have brought us to this point.

This "revelation" is simple: We've built a world based on the assumption that we will have endless energy to subsidize endless economic expansion, which was supposed to magically produce justice. That world is over, both in reality and in dreams. Either we begin to build a different world, or there will be no world capable of sustaining a large-scale human presence.

If that's not clear: When we take seriously what physics, chemistry and biology tell us about the health of the living world on which we depend, we all should be thinking apocalyptically. Look at any crucial measure of the ecosphere - groundwater depletion; topsoil loss; chemical contamination; increased toxicity in our own bodies; the number and size of "dead zones" in the oceans, accelerating extinction of species and reduction of biodiversity; and the ultimate game-changer of climate disruption - and ask a simple question: Where we are heading? Scientists these days are talking about tipping points and planetary boundaries, about how human activity is pushing the planet beyond its limits.

If we look honestly at the state of the world, it is difficult not to conclude that we are in end times of sorts - not the end of the physical world, but the end of the First-World way of living and the end of the systems on which that life is based.

The Fed

This weekend, I went to the hardware store and bought one gallon of chain lube and a quart of two-cycle oil (for chainsaws). The $3.00 dollar gallon of chain lube and the $1.00 quart of two-cycle oil cost me $22.00. The $18.00 difference was stolen from me by the Federal Reserve through the insidious application of inflation.

The Federal Reserve is successfully overseeing the demise of the U.S. Dollar. If you have accumulated any wealth in your life, and you currently have it stored in Federal Reserve Notes, you must, for your sake and that of your family, convert it into some alternative form. The Fed is out of control. Bernanke is a puppet and his puppet masters are enemies of the people.

Now they are ardently after your retirement savings. There are $18.2 trillion in total retirement assets, as of end of 2Q 2011 (according to the Investment Company Institute numbers):

$4.9 trillion in IRA's - $265 billion in Roths, the rest traditional, SEP, SAR-SEP and SIMPLE ;

$3.16 trillion in 401(k)

So, just for fun, how much would a trillion dollars in $100 bills weigh? Well:

$1 trillion = 10 billion $100 bills = 22,046,226.22 pounds

1 $100 bill weighs a gram x 10 billion = 10 billion grams = 10 million kilograms equals…22,046,226.22 pounds.

That's an awfully big carrot to hang in front of an insatiable donkey/elephant. If you don't believe that your Federal Government, at the behest of the Federal Reserve, would ever consider the confiscation, err no, I meant conversion, of your savings, into something they could spend, well, you haven't been reading "the Bear" for very long.

From Michael Ross:

As early as August 2010, some American retirees learned of disturbing proposals in Washington DC that many sources characterize as eventual confiscation of private retirement assets. This would be accomplished by forcing Americans to invest their tax-deferred monies in government bonds, which is effectively confiscation through monetary inflation, as the real value of those funds are depreciated through currency debasement. Specifically, the US Departments of Labor and the Treasury held joint hearings, during which was discussed government plans to eventually take control of all assets in IRAs and 401K accounts and replace them with US government "Treasury Retirement Bonds", whose 3% rate of return would be less than the actual increases in the cost of living [Coin Update].

That article also notes that, at the end of 2008, there were an estimated $3.613 trillion of assets in IRAs and $2.350 trillion of assets in 401K plans. Those tax-deferred accounts represent a juicy target for a bankrupt federal government, and arguably could have their rules changed at any time, since the monies have not yet been taxed. Economist Teresa Ghilarducci is one of many who testified in Washington DC and called for a federal government takeover of private retirement plans, in a plan so radical that even a mainstream media source termed her the most dangerous woman in America [U.S. News & World Report].

Could something like that happen in the "land of the free"? In a sense, it is already beginning. The US government started with a more compliant target, namely, their own federal workers. In May of 2011, Treasury Secretary Timothy F. Geithner, in response to the federal debt approaching the debt ceiling, began borrowing from the retirement funds of federal employees [Washington Post]. in January of the next year, this act of desperation was repeated [Reuters]. Even the U.S. Consumer Financial Protection Bureau is thinking of "helping" Americans manage their $19.4 trillion in retirement savings [Bloomberg]. The feds appear to be implementing this step-by-step, to see at what point Americans start pushing back.

The government is already contemplating another mandatory retirement system, called the "Automatic IRA", which would force businesses that do not have retirement plans, to fund accounts that would be forced into investing in Treasury bonds – thereby taking even more money from an estimated 40 percent of American workers and "investing" it into US debt [Money and Markets].

Simon Black commented, "The US government is $16.4 trillion in debt, and will be running $1+ trillion deficits for five years in a row. And the pool of retirement savings is irresistible. [...] they'll launch new regulations funneling a substantial portion of US retirement savings to 'the safety and security of government bonds'" [Sovereign Man].

How much longer until the top-level federal employees decide that it would be better to raid the much larger retirement funds of non-federal workers? Why should Americans presume that our government will behave any differently than those of other fiscally desperate countries? When, not if, US bondholders decide they have had enough IOUs and other empty promises, the feds may find our retirement savings to be too tempting a target.

 

Financial Survival

Not one of these taxes existed 100 years ago and our nation was the most prosperous in the world, had absolutely no national debt, had the largest middle class in the world, and Mom stayed home to raise the kids. What the #@*! happened?

Health-care costs are rising 300% faster than wages. Explaining away the impact upon the "Real Economy's" participants is quickly becoming far less palatable to America's Working Class. I use that term very loosely to include all Americans not feeding at the top tier of first abuser privilege granted to those with immediate access to "Bubble's" Liquidity Trough."

And now, to add insult to injury, the Darkside, once more, is pushing for a means to disarm us. Understandably, and as usual, their attempts have had the opposite effect of what they intended. They are all bozos on that bus.

From Mac Slavo:

President Barack Obama is, arguably, the best gun salesman ever. Over 65 million guns have been purchased since the President took office in 2009. FBI background check statistics indicate that, over the last twelve months, Americans purchased a new gun every 1.5 seconds, a figure which suggests there is much more to the recent panic buying than people just stocking up to go hunting or sports shooting.

The following guns and ammo industry report indicates that every major gun and ammunition manufacturer in the country is running at 100% capacity, with many so far behind that they’ve stopped taking new orders altogether.

Smith & Wesson-is running at Full capacity making 300+ guns/day-mainly M&P pistols. They are unable to produce any more guns to help with the shortages.

RUGER: Plans to increase from 75% to 100% in the next 90 days.

FNH: Moving from 50% production to 75% by Feb 1st and 100% by March 1. Remington-Maxed out!

Armalite: Maxed out.

DPMS: Can’t get enough parts to produce any more product.

COLT: Production runs increasing weekly…bottle necked by Bolt carrier’s.

LWRC:Making only black guns, running at full capacity…can’t get enough gun quality steel to make barrels.

Springfield Armory: Only company who can meet demand but are running 30-45 days behind.

AMMO: Every caliber is now Allocated! We are looking at a nation wide shortage of all calibers over the next 9 months. All plants are producing as much ammo as possible w/ of 1 BILLION rounds produced weekly. Most is military followed by L.E. and civilians are third in line.

MAGPUL is behind 1 MILLION mags, do not expect any large quantities of magpul anytime soon.

RELOADERS… ALL Remington, Winchester, CCI & Federal primers are going to ammo FIRST. There are no extra’s for reloading purposes… it could be 6-9 months before things get caught up. Sorry for the bleak news, but now we know what to expect in the coming months. Stay tuned, we’ll keep you posted…

Many who have exercised their Second Amendment protections are first time buyers concerned with Federal and State gun grabs being spearheaded by politicians who are using the Sandy Hook school shooting as a pretext to restrict access to personal defense rifles, larger capacity magazines, and even ammunition.

But this may only be a part of why there’s so much demand. There are millions of Americans who are genuinely concerned with not just the government taking their guns, but all of their other Constitutionally protected freedoms as well.

We understand what happens in regimes that disarm their people. We’ve seen the democide of the last century, which left hundreds of millions of people dead or displaced when their governments turned on them.

We are determined to prevent it from happening in the land of the free.

You must first realize that there are, present in our lives, enemies. You must then know who those enemies are and act accordingly.

Eliminate as much debt as possible, especially “variable rate” debt, such as credit cards and lines of credit. Interest rates will be rising, so the elimination of debt offers a “real return” of escaping rising rates by creditors.

Get some control over some fresh water.

If you are depending on Social Security, stop.

Follow the course opposite to custom and you will almost always do well...

Its not what you don't know that will screw you up, it's what you know that is wrong. The spin you hear from the mainstream media is intended to mislead you. Open your eyes and face the future. If you leave your head in the sand and ignore it, you are only leaving your butt exposed for the world to kick. This all may sound like gloom and doom, but when you get a handle on what is going to happen, you will have a future filled with opportunity. Fortune favors the Informed.

More next week...

May the Great Spirit be with you always,

Johnny Silver Bear
Chief cook and bottle washer, The Silver Bear Cafe

Disclaimer

All statements and expressions are the sole opinions of the editor and are subject to change without notice. A profile, description, or other mention of a company in the newsletter is neither an offer nor solicitation to buy or sell any securities mentioned. While we believe all sources of information to be factual and reliable, in no way do we represent or guarantee the accuracy thereof, nor the statements made herein. The staff of Silver Bear Cafe are not registered investment advisors and do not purport to offer personalized investment related advice. The publisher, editor, staff, or anyone associated with, or associated to the Silver Bear Cafe may own securities mentioned in this newsletter and may buy or sell securities without notice.