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

It never ceases to amaze me that so many people are anxious to invest their hard earned capital, after being turned on to bogus information and rumors that are intentionally started by those who would profit from the anticipated reaction. What is equally strange is the fact that making investment decisions, based on prevarications and false foundations, has become business as usual. Savvy institutional investors currently base many of their decisions, not on production, sales and distribution numbers, or earnings multiples, or anything that makes real fiscal sense, but choose, instead, to base their decisions on the emotional state of the market participants. It has been said that the two motivating factors that drive the markets are fear and greed. These states are, admittedly, conditions that result from emotional swings, but banking on someone's emotional condition seems like a very unscientific approach to investing. However, it seems to work.

As an example of this phenomena, last week the spin masters were busy trying to take advantage of the mixed signals coming out of China. It is so easy to blame the Chinese government for making decisions that are contrary to logic or reality. After all, they are just a bunch of Godless communists, aren't they? If they mandate a slowdown in industrial output, won't that have a profound effect on the price of copper and silver? Never mind that, in a well adjusted (read in: sane) market place, supply and demand considerations would provide all the information necessary to make accurate projections and therefore allow investment decisions to be based on reality. I'm not even sure that such a slowdown was even proposed by the Chinese government to begin with but was, rather, just another example of "wagging the dog".

In the following missive, Trader Dan Norcini gives us his take on the convoluted nature of the Asian markets and how those markets are exploited, by financial predators for the purpose of garnering illicit profits.

From Dan Norcini:

Is Gold the Bull in the China Closet? I ask that silly question merely because it sounded catchy. Seriously, the big news today was the ENORMOUS SUPRISE coming out of the Chinese Export/Import Data. It caught everyone by complete surprise especially with all the recent talk about the Chinese authorities mandating production cutbacks to deal with what they regard as an oversupply and excessive product output.

When was that - a week ago? - then it had everyone in a panic and totally pulled the rug out from beneath the base/industrial metals. Today, it is the exact opposite. Now the base/industrial metals are flying higher, along with gold. Tomorrow - who the hell knows what to expect out of that nation?

Either way, for today, the news of the gigantic surge in imports sent silver and copper higher with gold getting pulled alongside them both. Also helping gold was the rise in jobless claims fanning talk that the TAPERING is back off. Yesterday it was back on thanks to Plosser. Today it is dead.

"Long live the Tapering!".  "Death to the Tapering!" "Long live the Tapering!". " Death to the Tapering!". and on and on and on and on and on it goes.

As if we did not have enough confusion already in these markets with the contradictory statements coming out of the various Fed governors and the bizarre, often polar opposite pieces of economic data coming out of the US, now we have to deal with a BI-POLAR China. So which is it sirs - are you ordering your mandatory production cutbacks or not?

My suspicions on that big import number from China is that the Chinese are stockpiling and picking up materials at these lower costs. The Chinese are masters are acquiring replacements for their national stockpiles when prices are cheap. That does not mean they intend to use them anytime soon. It merely means that they have the storage capability to hold these in reserve and release them in the event of any shortage as they can then alleviate rising prices. My own view therefore is that the import numbers are due to strategic acquisitions and not for immediate consumption. We'll see if this is another one of those ONE DAY wonders or something more lasting.

Chatter in the gold pit was that the Chinese data means more gold buying from China which by the way is on course to supplant India as the world's largest buyer of gold. Again, we'll see if we get the kind of sustained physical offtake out of Asia to counter the continued investment-related selling of gold over here in the West.

 

On the Economic War Front

The roots of IRS go back to the Civil War when President Lincoln and Congress, in 1862, created the position of commissioner of Internal Revenue and enacted an income tax to pay war expenses. It was repealed 10 years later. Congress, hungry for more pounds of flesh, revived the income tax in 1894, but the Supreme Court ruled it unconstitutional the following year. It is, by the way, still unconstitutional.

The IRS was, unconstitutionally reanimated (like the Frankenstein monster) in 1913 as a collection agency for the evil incarnate known as the Federal Reserve. The Fed would again, unconstitutionally, loan money to the government at interest, and collect that interest from the taxpayer.

Recently the IRS has been caught, red handed, criminally targeting Tea Party members and other groups that oppose the tyrannical escapades of the administration, and have been exposed as the enemies of the people that they are. Last week, Obama exempted the IRS from participating in the abomination known as Obamacare.

It has also been reported that all of Congress has been exempted as well as many corporations who have provided campaign donations to the administration. People request exemption so that the might escape the fleecing that the program is designed to enable. Obama care is just another slimy ploy to steal from the middle class. The accompanying picture (above right) pretty much, sums it up. One picture is worth a thousand words.

From Simon Black:

The United States government is in debt to the tune of nearly $17 trillion. What's more, Uncle Sam has to borrow money just to pay interest on the money they've already borrowed… and they're still posting trillion-dollar annual deficits.

The only reason that the US government is still in business is because the Federal Reserve has been buying the vast majority of newly issued US Treasury bonds… in some cases as much as 90%.

The problem with this method, aside from being a completely fraudulent system, is that the Federal Reserve is quickly reaching the point of insolvency itself.

As we've explored in recent letters, the Fed's capital ratio (a significant measure of it's financial health) is at a laughably small 1.53%. And as the Fed continues to expand its balance sheet buying even more of the Treasury's debt, its capital ratio gets smaller and smaller.

The government is soon going to be in a position to seek 'other' sources of funding, just as we saw in Cyprus earlier this year. And as we've been saying for years, one of the most likely targets is retirement savings.

 

Precious Metals

There are two schools of thought when it comes to defining a valid motive for acquiring precious metals. The first is mainstream and irrefutable. And that is the fact that holding precious metals, rather than being an investment, is instead, a formidable hedge against inflation. Given the scatterbrained rate that the Federal Reserve is creating debt (issuing dollars) some kind of hedge would seem mandatory and a first line of economic self defence.

There is, however, a second reason, or consideration, that is a little more conspiratorial in nature, and that is one of an investment nature, rather than simply a hedge. If it is true that there are those that would, illegally, manipulate or otherwise suppress the price of bullion for nefarious reasons, then there might be money to be made by betting on the eventual demise of such price pressure.

We have recently been apprised of the probability that several large bullion banks, led by J.P. Morgan Chase, have exited their short positions, at least those that relate to their precious metals holdings. If Asian (and Indian) buying activities have finally reached a level that has overwhelmed the banksters, then the consideration that the prices may soon start to rise precipitously may prove to be accurate.

The U.S. Dollar is under unprecedented pressure. The whole world is beginning to wake up and balk at the hegemonic nature of bullion price manipulation and the intentional theft that is availed by dollar inflation. The combination of dollar devaluation and the cessation of downward pressure on bullion prices may provide a recipe for an outstandingly successful investment.

From Peter Degraaf:

The two most important charts you're likely to see all day.

Featured on the left below is the weekly gold chart, with the US dollar at the top. The rising dotted lines in the gold chart coincide with falling dotted lines in the US dollar index chart. The long up trend line supporting the dollar coincides with the latest correction in the gold price.

The arrow in the dollar chart points to a possible breakdown below the rising trend-line in the dollar (once price drops below the arrow). In the event that this occurs, it is very likely to coincide with the gold price rising above the arrow in the gold chart. The supporting indicators at the bottom of the chart are turning positive.

Energy

I have been warning our readership of the ongoing calamity taking place in Japan, and the ongoing poisoning of the Gulf, since the two events occurred. The oceans, and consequently the fisheries of the world are being decimated through the contamination by the radioactive materials being introduced in Fukushima through ground water, and the oil, benzene and corexit that continues to be introduced in the gulf through spraying.

Both catastrophes were a result of criminal neglect. The difference is the catastrophic nature of the Tepko incident stems from the uncontrollable nature of the meltdown and the secondary crime is the cover up.

In the case of the Deepwater Horizon incident, the initial crime was caused by operational fraud on the part of Haliburton, and the ensuing cover up by BP. The introduction of the extremely toxic chemicals which are only being applied to make the continuing leaking oil to sink so we can't see it, is a result of the reprehensible criminals in the White House under whose direction the National Guard continues to spray.

What happens to the world's population of humans when there are no more unirradiated or non tainted (with corexit and benzene) fish to eat? What happens when we run out of lamp posts on which to hang the perps?

From Michael "Mish" Shedlock:

Officials in Japan hid the fact that the Fukushima nuclear plant has been pouring hundreds of tons of nuclear waste water into the ocean every day and that a containment barrier has been breached.

On Tuesday the BBC reported Fukushima Radioactive Leak a New Emergency

Japan's nuclear watchdog has said the crippled Fukushima nuclear plant is facing a new "emergency" caused by a build-up of radioactive groundwater.

A barrier built to contain the water has already been breached, the Nuclear Regulatory Authority warned.

This means the amount of contaminated water seeping into the Pacific Ocean could accelerate rapidly, it said.

The Fed

For most of you, my posting of articles demonizing the Federal Reserve are akin to my "singing to the choir". I continually strive to post an ever clearer explanation of the most insidious organization ever conceived, in the hope that one new reader will open his eyes and realize that the Federal Reserve is the single most responsible component of all the economic ills that plague our planet. Until these miscreants are jailed, and this abomination, and all like institutions, abolished, our problems will only intensify. Interestingly, today, about three percent of Americans are aware of the problem. By New Years Day (just 4 1/2 short months away) the problems will be so much more apparent that, I predict, fully ten percent of Americans will be ready to take action. Hopefully, it will not be too late.

From Tyler Durden:

Presented without comment…

Financial Survival

The theme of "The Bear" has always been to provide information that will "wake you up" and incite you to consider how current events will effect your pocketbook. Over the years our message has evolved to become one concerned with, not only your pocketbook, but also your personal survival as well as the survival of your family and friends. I have, from the beginning, believed that there are very evil people in our country (and all over the world for that matter) who have managed (due to a pandemic national apathy) to ascend to positions of power in government and on Wall Street that have allowed them to put forth and carry out an agenda, so pernicious, it was beyond the means of most Americans to even contemplate.

Take for instance, eleven years after the tragedy, 90% of Canadians surveyed believe that 911 was an inside job. We already know that the U.S. State Department, at the behest of then Secretary of State, Hillary Clinton, had our Ambassador to Libya, John Christopher Stevens, taken out. Our current administration is currently embroiled in no less that eight scandals, any one of which would warrant the impeachment of the President. Some might even warrant bringing him up of charges of treason. He and his family recently spent $100,000,000.00 on a vacation which I consider grand theft. Where is the outrage? The number of Americans that are finally "waking up" is continuously growing. The point I have been trying to make is that the cancerous rot that is killing our country continues to eat away at it. Until the crimes are recognized and the perpetrators are brought to justice, the state of our economy and the overt drive to rob us of personal liberty and freedoms will only continue and worsen. There will finally come a time that chaos will reign and everyone will lose. These tyrants aren't smart, just greedy, evil bastards.

The following contribution from Dennis Miller is an explanation as well as a warning. There are some very evil people in the world. Some are in positions of great power in our country and some are in positions of great power in other countries. Wars have never had much to do with populations. The citizens just provide the fodder for the war machines. It's the regimes that hate each other, and those are the ones we need worry about. Their motives are borne out of greed and power. Ours (for the most part) out of survival. The following missive deals with the imminent threat of theft and confiscation of your future. Please consider it carefully.

From Dennis Miller:

I have quizzed many investors who have internationalized a portion of their financial assets, and there is one common line of thought among them. As a government grows, it needs to confiscate a larger portion of private wealth to support its bureaucracies. It also needs to reallocate private wealth to bribe voters and stay in power. It finds ways to "enhance revenue," as opposed to shrinking its bloated bureaucracy. Hell, our government probably spends a few million tax dollars on a politically connected public relations firm to come up with euphemistic terms like that. Governments are parasites; they must siphon wealth from the producers to survive.

For a government to siphon off wealth efficiently, it must know where the wealth is, set up ways to take it, and have a strong enough police force to make sure citizens comply. The intention is to make it easier to pay up than go to jail. Even people with modest nest eggs are constantly looking for ways to legally protect their wealth. Lawyers love it, since it means citizens need a variety of trusts and complicated legal avenues for minimizing taxes. That's part of the game. As governments press on, the stakes escalate, taxes increase, and we have to escalate our efforts to protect ourselves.

Look to New Jersey or France—which recently passed "millionaire taxes" to facilitate going after the super-wealthy. A year later both governments found that the tax revenue they received from the ultra-wealthy had dropped even though they taxed at a much higher percentage of their earnings. What happened? The wealthy moved and took their money with them. Frankly, I'm amazed that the political class seemed so surprised. Instead of more tax dollars coming in, they ended up with fewer. The next move—look for additional ways to "enhance revenue."

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 think 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.