December 8, 2011

By Kevin Michael Grace

Gold was down (at press time) $35.90 (-2.1%) for the week to $1,712.40, and silver was down $0.66 (-2.1%) to $31.64. Gold’s declines was attributed by the Wall Street Journal to “investors seeking safety in the US dollar after the European Central Bank’s latest efforts to shore up the Eurozone financial system fell short of market hopes.”

To speak of “market hopes” would seem to be begging the question, as it has become obvious since 2008 that there are two markets. There is the market patronized by people that read this website, and then there is the market controlled by our betters—the bankers and their patrons, the politicians.

A prominent example of the latter class, Jon Corzine, testified before Congress today about the billion or so dollars that went missing during when he was at the head of MF Global. According to the Washington Post, “Though anything he said could be used against him, Corzine hedged his testimony by saying he had too little time to prepare for the hearing and only limited access to records ‘essential to my being able to testify accurately.’” And only a cynic would conclude that his hedging had anything to do with possible considerations of perjury.

Such a lot of cynicism these days about our betters. John Crudele writes in the New York Post, “So, now do you believe me? The stock market was rigged.” In 2009, the Post got hold of Hank Paulson‘s telephone records. On September 18, 2008, Treasury Secretary Paulson spoke six times with Lloyd Blankfein, CEO of Goldman Sachs. The man Blankfein succeeded as Goldman CEO is called Hank Paulson. Crudele reports, “That was a day of great market turmoil and—while there is no way of knowing what the two men spoke about—the calls did coincide with a major turnaround in stock prices.”

Crudele then draws our attention to July 21, 2008, “a time when both Fannie Mae and Freddie Mac, government-sponsored organizations that buy most of the nation’s residential mortgages, were in serious trouble.” According to a story in Bloomberg Market, Paulson told the New York Times that Fannie and Freddie looked fine—and then he told a bunch of hedge-fund traders that they were at risk of governmental seizure wiping out the value of their stocks.

Crudele writes, “By giving confidential information to a roomful of traders, Paulson had to understand he’d influence the price of Fannie and Freddie stock and, by extension, the whole market. He’d also be giving the people receiving that information a chance to cheat—to rob public investors who weren’t lucky enough to be invited to such meetings.”

Finally, Crudele notes a curious coincidence, the November 28 secret approval by the Federal Reserve (announced publicly two days later) of bailout funds for Europe and the strong market rally that day.

Over at Mish’s Global, Mike Shedlock describes how the Federal Reserve refuted the allegations made by Bloomberg Market that banks made $13 billion profit on $7.7 trillion of secret loans and pledges. Two small problems with this refutation: it doesn’t address any of Bloomberg’s specific charges, and it doesn’t even deign to mention the article in question.

On the other hand, Canadian Defence Minister Peter MacKay has deigned to notice the allegations that he lied about his use of an Armed Forces helicopter. He’s threatening to sue various MPs for libel. This is the same government that when caught out lying about Liberal MP Irwin Cotler, responded that the Conservatives were merely engaging in “free speech.”

According to the Victoria Times Colonist, “One can split hairs about whether MacKay lied. But emails released under freedom of information requests show he didn’t tell the truth.” Clearly, the Times Colonist is unaware of the Costanza Defence. As viewers of Seinfeld will know, Jerry’s best friend George possesses “one of the most deceitful, duplicitous, deceptive minds of our time.” Of course, lying is as natural to the human condition as smiling, and when Jerry wants to trick a polygraph in order to preserve the fiction that he is not a fan of Melrose Place he goes to George for advice. Which is: “Just remember, it’s not a lie if you believe it.”

The theological term for the Costanza Defence is antinomianism. Faith alone is sufficient for salvation, so the great have no need for what lesser mortals call “truth.” The Times Colonist declares, “Dishonesty is corrosive. When it becomes the norm, when morality is abandoned, we are entering dark and dangerous times.” No argument there, but more corrosive still is the dishonesty of those convinced their righteousness renders considerations of morality nugatory.

Would you place yourself at the mercy of financial instruments created and maintained by such men? This is the choice we face. At Equedia, Ivan Lo writes, “Money will be printed endlessly. It’s inevitable. Even as the US economy is struggling to deal with a housing crisis, inflation will eventually happen. It will take time and we may deflate before it happens, but it will happen. When it does it won’t be a slow and gradual rise—it will be explosive.” He declares that those who invest in “gold and gold-related investments” now will “look at our current situation as the opportunity of a lifetime five years from now.”

To educate investors in evaluating gold equities, Lo has prepared the second in his series of technical tutorials, “Cut-off Grade Theory and Practice.”

And now to cases. At the Gold Report, Bob Moriarity of 321Gold says, “Nobody quite knows where the price of gold and silver will go, but anybody in production now is literally minting money… You couldn’t possibly not be profitable.” He mentions in this regard Endeavour Silver TSX:EDR, First Majestic Silver TSX:FR, Fortuna Silver Mines TSX:FVI, Great Panther Silver TSX:GPR, Rio Alto Mining TSX:RIO and Timmins Gold TSX:TMM.

With regard to explorers, Moriarity is sweet on Colombia, calling it a “phenomenal play.” He mentions in this regard B2Gold TSX:BTO, Bellhaven Copper and Gold TSX:BHV, Columbia Crest Gold TSX:CLB, Continental Gold TSX:CNL, Red Eagle Mining TSX:RD and Solvista Gold TSX:SVV.

At Seeking Alpha, Simit Patel is sour on Argentina, arguing that the political risk there is now “too great for investors in non-diversified mining firms.” The only personal exception he has made is Minera Andes TSX:MAI. Another exception could be Extorre Gold Mines TSX:XG; even then, however, he wouldn’t buy until it drops below $6 (currently $9.18).

And at Happy Capitalism, Lou Schizas scrutinizes West African gold miner Semafo TSX:SMF, which went from $2.16 in May 2009 to $12.45 in November 2010 (currently $7.25). Schizas concludes, “The momentum indicators are not suggesting a shift towards the upside,” and so, “It will most likely retest $7.”

Finally, the US Transportation Security Administration Agency is again under fire after it was claimed that three feeble old women were strip-searched at JFK Airport last week. Don’t these critics know there’s a war on? As the great Thomas Jefferson said, the price of liberty is eternal viciousness.