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The Federal Reserve continues to succeed in its unstated goals of bailing out its shareholder banks and pick the pockets of average Americans. Asset prices are breaking out above the pennant formation in my IDW as noted above.  But the Fed is engaging in a systemic theft that is serving its shareholders by removing wealth from average Americans to provide cheap funding for the banks. As David Stockman pointed out, by keeping interest rates at zero compared to more normal market rates, the Fed is reallocating upwards to $500 billion per year from the pockets of average Americans to the banks by reducing bank funding costs. Of course, for now, the opposite is true for gold and gold mining shares. But there is no doubt in my mind that much of the downturn in gold and silver is orchestrated by the Fed. I would encourage you to read an article from King World News that quotes famous trader Dan Norcini (see below). Because so much of our markets are based on “animal spirits” and not reality, the markets can swing by billions of dollars in minutes by a few key words from Chairman Bernanke. The power of this man to move wealth from one group of people to another would impress all of the most powerful dictators in history. Meanwhile, reports I am hearing even from the mainstream is that record amounts of gold are being purchased by China and India and that physical demand for coins remains extremely strong. There is by all reports a huge disconnect between the paper markets and the physical markets. But as Ted Butler said on my radio show, the turn in gold and especially silver looks like it is very near. Ted makes that statement on the basis that the bullion banks have the smallest short position he has seen in a long time. When the major bullion banks headed by J.P. Morgan take a large short position in gold and silver, the price of gold and silver decline big time. When they have small short positions, that is almost always a very bullish sign. Ted’s view of the markets is in sync with Charles Nenner who is still calling for a bottom and a bull run for both gold and silver by mid to end of June. So we should be only a couple weeks away from happier days.  

Jay Taylor

jaytaylormedia.com

Host of Turning Hard Times Into Good Times  

Jay Taylor is the host of Turning Hard Times Into Good Times on the VoiceAmerica Business Channel  and has been able to more than double his newsletter’s model portfolio from 2000 to the present even as the S&P 500 was in the process of losing 50% of its value!  The insights provided to Jay came from a history professor in 1967 who advised Jay that when countries go off a gold or silver standard, hard economic times are sure to follow because nations begin to think they do not need to work hard and save to enjoy a better life. Indeed there is no free lunch and a gold standard reminds people of that every day.  Jay watched his professor’s prophetic words come true when in 1971, President Nixon completely detached the dollar from gold. Not surprising to Jay, the price of gold skyrocketed in the late 1970s as inflation wiped out vast amounts of wealth from average Americans. To protect his own wealth Jay began to invest in gold and gold mining shares and in 1981 he began sharing his success and insights in his newsletter. In 1981 Jay began writing a subscription newsletter that has earned his subscribers countless thousands of dollars over the years.  Jay’s insights as to the real cause of our problems has enabled him to find investment strategies that work. Diagnose a problem correctly and you have a chance for success. Diagnose a problem incorrectly as the establishment does and you are surail.