Monday, May 30, 2011

Singapore Sling

On a recent podcast (and I cannot recall which), the person interviewed was discussing the reasons why the Western Anglosphere (those countries originally influenced by England) would always be pre-eminent, in the world of politics and business, to the Eastern sphere of influence in regard to societal and business dealings.

Now, the observation is open to debate, but also open to be abused.

The basic premise is that 'law and contract', in the Anglo-sphere, is superior to that of cultural 'kinship and custom' in the East.

This is to say, that when doing business between parties, the West will look first to honouring a contract under law before being influenced by cultural norms of kinship (familial ties) and custom (cultural norms).

Contract and Law, as a way of ordering society and business, is thus said to be able to provide the best environment with which to prosper.

There's definitely some credibility in the view. Look at the history of the Anglosphere. The Western Anglosphere, in a few hundred years, has become the most properous group of nations in history. The East has not progressed as far.

In small city states like Singapore (and also Hong Kong) in the East, business is fair booming.

The state of the economy here in Singapore is positive. The trappings of wealth are everywhere, even down to the curse of prosperity; high prices. I just paid twice the amount for chocolate here than in New Zealand. Gas is the same price, but housing is in a boom. Rental apartments are nearby impossible to come by.

So the question I pose, is this sort of prosperity created and sustained because of good stable laws which exist above the attitudes of kinship and custom, or is it some fluke of history?

Gold in New Zealand dollars: $1880.97 per oz
Previous all time high: $1955.10 per oz

Silver in New Zealand dollars: $46.53 per oz
Previous all time high: $48.58
per oz
______________________________________________________________________

The Anglo-Far East Company
The Original Private Bullion Custodian
Your reference: an-001
______________________________________________________________________

Friday, May 27, 2011

The Re-monetization of Gold and Silver and Precious Metals

There is a news article today about gold being allowed to be used as collateral, or a trading security, in Europe.

"The European Parliament's Committee on Economic and Monetary Affairs Tuesday agreed unanimously to allow clearing houses to accept gold." World Gold Council

So the re-monetization of precious metals begins in earnest for Investors. Not that the private citizens who own gold didn't know that precious metals are already the ultimate form of money. Indians own it as a preference to the rupee. The Chinese are out to swap as many dollars and renminbi they can for gold. Furthermore, ask the Eastern Europeans, in or out of the Euro system, what they would rather hold. Perhaps Belarusian rubles?

You see, the world is slowly getting it. Paper money is not capital. Where is the hard work and toil in producing zeros created on a keyboard at your local friendly Central Bank? The computer operator gets paid, yes, but will probably get RSI in his or her fingers.

Real capital is produced by people working hard, producing something and saving. The savings are then turned into investments in new capital producing ventures.

You simply cannot print capital and wealth. If you do it finds its way into bad investments (to make a quick speculative buck) or into excessive debt.

Sound familiar?

But what would really happen if we had to use precious metals as the measure of our labour and as money?

For one, we would need to give up some of our lifestyle now. We would need to decide to forgo those entitlements that we think we have paid for with our taxes. Retirement and other social welfare programs. If we don't do this now we may be forced to give up the lot, under duress, later.

Because this system cannot be maintained. We cannot print our way to wealth, all we do is create more debt, and debt is the money of slaves. Just read the story of Joseph in the Bible. Once the Hebrews had given up their gold and silver for food, they gave up themselves to slavery.

Our money is already gone, it's debt. What's next for New Zealand? Debt slavery. What form will that take? I don't know, but I, and my family, are attempting to put in place our finances to mitigate against that scenario.

These are interesting times. Have you protected yourself?

I am in Singapore for the next two weeks and will try to bring you some observations from that part of the world.

Gold in New Zealand dollars: $1875.11 per oz
Previous all time high: $1955.10 per oz

Silver in New Zealand dollars: $45.90 per oz
Previous all time high: $48.58
per oz

Articles of interest:


Gold to be used as collateral confirming its status as a high-quality liquid asset

See article here
World Gold Council


Gold Revaluation & Seasonals

See article here
goldseek.com
______________________________________________________________________

The Anglo-Far East Company
The Original Private Bullion Custodian
Your reference: an-001
______________________________________________________________________

Thursday, May 26, 2011

Bank Funding Strife and Housing Debt

Recently, Moody's downgraded the long-term rating of the four big Australian Banks from AA1 to AA2. The main reason being their heavy eliance on overseas funds rather than local savings.

New Zealand Banks also have an unhealthy habit of borrowing overseas to fund the local mortgage market here. With their parent banks being downgraded, the cost of that borrowing has just gone up slightly.

This may in fact be a good turn. Perhaps the NZ Banks will be more careful in the way they lend money. After all, if the NZ Banks fail, then the Aussie Banks will need to bail us out. But the costs of that scenario for them just got higher also.

Moreover, the property spruikers in Auckland were at it again yesterday. Talking up the huge increase in prices they are getting for properties in the Auckland Grammar zone. This is not indicative of a Nation-wide trend and they know it. But a little sales-talk and panic amongst propective buyers never goes amiss to drag them into the market.

It makes you wonder just who these Grammar buyers are. Perhaps they are Asians, particularly the Chinese, willing at any price to get into the zone and into the country. Market forces truly at work.

And this leads us back to the Banks. Banks are very secretive on where they source their funds overseas.  However, it wouldn't take rocket science to realize that a majority of those funds are sourced in Hong Kong, China and Chinese interests in Singapore. Just this week, the NZ Finance Minister is in Asia seeking buyers of Government Bonds.

If Banks continue down this easy money road (and Moody's is warning against that) then New Zealanders will continue to borrow to fuel their obsession with owning property for investment purposes. Our savings rates will continue to fall and we will have less use of our own capital to fund innovation and existing business expansion.

What will it take for us to change our debt-laden ways?

Perhaps more foreign ownership of our assets?

Gold in New Zealand dollars: $1913.31 per oz
Previous all time high: $1955.10 per oz

Silver in New Zealand dollars: $47.45 per oz
Previous all time high: $48.58
per oz

Articles of interest:


Silver's tightness could take it to $125, Embry tells King World News

See article here
King World News


Gold Revaluation & Seasonals

See article here
Goldseek.com
______________________________________________________________________

The Anglo-Far East Company
The Original Private Bullion Custodian
Your reference: an-001
______________________________________________________________________

Wednesday, May 25, 2011

Fiat Money is a Debt Instrument; Gold and Silver are not.


"The world will soon wake up to the reality that everyone is broke and can collect nothing from the bankrupt, who are owed unlimited amounts by the insolvent, who are attempting to make late payments on a bank holiday in the wrong country, with an unacceptable currency, against defaulted collateral, of which nobody is sure who holds title." - Anonymous 

How does all this debt thing work? Is it so complex, as to confuse, that we all just give up? Head in the sand type thing.

Here is how I see it working.

When money (credit) is issued, there is a corresponding debt (debit) on the other side. It is the law of physics really. Positives have a negative. Energy emitted in one form gets translated to another, which has an equalling effect.

So if a Bank issues new money (and they can legally issue about 90% of new money based on your deposit), then this is credit. The loan they issue on the other side is debt for you.

Look at it this way. The paper in your hand, that says $1 or 1 rupee or 5 euros, is a debt instrument which is owed to someone else. When that person on the 'other side' of your paper money wants their money back, you have to pay up or default.

On a default, the holder or lender now owns your asset outright.

So what if a country defaults. Well, that's where it could get sticky. This is the stuff of wars. Often you might find that Dictators (a Hitler or a Napolean) suddenly appear and promise all sorts of things because the citizens are desperate to get out of the situations they are in. They don't want to hand over their assets.

Gold however, is out there in a box on it's own. Once you own it in physical form, you are the owner and there is no creditor on the 'other side'. What makes gold perfect in this sense, is that it is also money. It is the ultimate medium of exchange.


Gold in New Zealand dollars: $1914.29 per oz
Previous all time high: $1955.10 per oz

Silver in New Zealand dollars: $45.90 per oz
Previous all time high: $48.58
per oz

Articles of interest:


What Happens when Greece Defaults?

See article here
The Telegraph


______________________________________________________________________

The Anglo-Far East Company
The Original Private Bullion Custodian
Your reference: an-001
______________________________________________________________________

Tuesday, May 24, 2011

Currency Debasement and Gold

What does a 'race to the bottom' look like?

When it comes to currencies it looks like a chart of ounces of gold verses a particular currency in a steady upward trend.

Note the graphs below indicating how gold has performed in the some of the major currencies worldwide and the New Zealand dollar.

2 year Gold in EUROS
2 year Gold in British Pounds
2 year Gold in US Dollars
2 year Gold in New Zealand Dollars

Often times, you will see the USD and the EUR seesawing. One goes up, then the currency gurus get a bit nervous and there's a bit of bad news and then that currency goes down and the other currency goes up.

It's a bit like sloshing water in a bath tub. It sloshes to one side and a bit drips out, and then it sloshes to the other side and more drips out. Eventually if you do enough violent sloshes it all disappears.

So it is with this paper money game. The 'race to debase' is in full swing.

You see, countries need to remain competitive with their exports and so they devalue their currencies to increase the amount of money they receive for these exports. Devaluation by any number of methods is used to achieve this.

One being the printing press. Central Banks can buy Government Bonds for example. But this game is a dangerous one, especially if you do not have world reserve currency status like the USA. Your money can become toilet paper overnight. Not to say that the USD couldn't either, but it takes a bit longer. It appears many still consider it the ultimate safe haven currency. Good luck with that!

And what about the poor Belarusians (from Belarus) whose currency was devalued by 56% just last night.

As you can read in this article;

"Luckily for those who held their "money" in the form of gold and silver, they just got an instantaneous 56% value preservation and a relative boost in their purchasing power with just one central bank announcement."

But for those who had no chance of protecting their savings (because they trusted the system or they just didn't know), they have literally been robbed of 56% of their wealth; overnight.

It is recommended by many who understand gold, that you have a percentage of your wealth stored in this precious metal. As you can see buy the graphs above, it is tantamount to preserving your purchasing power.

Belarusians now understand. They are well in front in the 'race to the bottom'.

Gold in New Zealand dollars: $1916.62 per oz
Previous all time high: $1955.10 per oz

Silver in New Zealand dollars: $44.45 per oz
Previous all time high: $48.58
per oz

Articles of interest:


Belarus Just Devalued Its Currency By 56%

See article here
zero hedge


Global stock markets fall as Spain default fears grow

See article here
The Telegraph
______________________________________________________________________

The Anglo-Far East Company
The Original Private Bullion Custodian
Your reference: an-001
______________________________________________________________________

Monday, May 23, 2011

Central Banks are Buyers of Gold

According to the statistics for the World Gold Council, New Zealand owns no gold in their Central Bank vaults.

There's plenty in the ground, but that's a contentious issue with our '100% pure' profile worldwide.

That's a shame, as there are plenty of ways of digging up this wealth without ruining the environment. But perception is everything in advertising.

Worldwide, though, the Central Banks, that can see the writing on the wall with fiat currencies, are buying gold by the truckload. Mexico bought 93 tons last month. The Chinese also know they have to have gold . They are not only keeping their own mined supply but buying on the open market. The Chinese are also snapping up junior mining shares. Those small startup mining companies that risk capital to search for gold and silver.

Since the debacle of Gordon Brown's sale of 395 tons of gold from the Bank of England 10 years ago (known as Gordon Brown's Blunder as he sold at the very bottom of the gold market), to now when Central Banks have been buyers and not sellers, the currency situation has worsened.

According to the WGC, China and India accounted for 56% of the 2011 first-quarter's 981.3 tonnes of Gold Bullion demand. US demand fell from the end of 2010. This is telling.

"Chinese appetite for gold has increased rapidly over the past few years," says Albert Cheng, managing director for the Far East at the WGC.

Inflation in China and India is rampant and citizens there can see the writing on the wall for their paper currencies. They are rapidly swapping those notes with real money. Demand for gold and silver coins and bars are also at an all time high in many western countries. In fact it has been reported that there are shortages occurring in the silver market.

If you had financial interest in a country that was about to default, and that country had gold reserves what would you accept as payment? Paper of gold?

The end game of this current way we account for our goods and services wordwide may be about to change. Perhaps a return to a gold standard, that arguable kept prices stable when it has been in play historically (and when Governments didn't meddle with it)

It has been said that the 'smart money' people are always the first to see trends and to shift their capital base from one 'failing' asset class to the next that will out perform the old. Central Banks created this fiat money system. They were very smart. It worked well for them. Now they are shifting sovereign wealth away from fiat money to monetary assets.

What does this say to you? Follow the smart money?

NB Interesting times in Greece. Will this be the week tat Greece falls under the weight of it's own debt and defaults?

Gold in New Zealand dollars: $1905.45 per oz
Previous all time high: $1955.10 per oz

Silver in New Zealand dollars: $44.14 per oz
Previous all time high: $48.58
per oz

Articles of interest:


John Rubino: Get Ready For Accelerating Devaluation of All Fiat Currencies

See article here www.chrismartenson.com 

China Becomes World’s Largest Gold Buyer

See article here
www.resourceinvestor.com
______________________________________________________________________

The Anglo-Far East Company
The Original Private Bullion Custodian
Your reference: an-001
______________________________________________________________________

Saturday, May 21, 2011

Silver Conference Call

I urge you to listen to this conference call featuring some of the best minds on silver in the business

Gold in New Zealand dollars: $1902.10 per oz
Previous all time high: $1955.10 per oz

Silver in New Zealand dollars: $44.06 per oz
Previous all time high: $48.58
per oz
______________________________________________________________________

The Anglo-Far East Company
The Original Private Bullion Custodian
Your reference: an-001
______________________________________________________________________

Friday, May 20, 2011

Belief in Miracles at the Heart of the Budget

The NZ Government delivered their Budget for 2011-12 yesterday.

Nothing to see here folks, move right along.

The Budget showed us again that we are succumbing to a slow debt-laden death spiral that the Government has no answer for.

The major points were cuts to Government contributions to our KiwiSaver programme, changes to a welfare scheme called Working for Families, and cuts to the Student Loan Scheme. All slicing small pieces off the debt elephant in order to get us to continue be part of the game. Let alone trying to pull the wool over the eyes of Standard and Poors. Good luck with that.

However, it has been fascinating to note the commentators on this Budget. Almost to a person, they sound frustrated that more has not been done or signaled.

But what really can a Government do to quell a ballooning debt problem that, let's face it, is all our problem.

Remember, a large majority of us borrowed cheap money in the 'naughties' expecting future income to cover the repayments. We literally brought forward our consumption of goods we didn't need. Now our Public and Private debt is humongous and soon the Creditors will be knocking on the door with their 200 pound Minders.

The growth forecast to cover the minimum we need, without regressing, is a 4% GDP target next year. This is a forecast from a bunch of Treasury officials that have been dealing us pie-in -the-sky figures for goodness knows how long. We can't trust these guys now. It's all a confidence game and time has been called.

I don't believe in these miracle workers and their nonsense forecasts. The only way we are going to get out of this is by sheer hard work and innovation or we default on our debt. Maybe a combination of the two. It cannot be repaid, we owe too much and the sooner we realize this the better.

Iceland recently defaulted on their obligations to Banks in Britain and France. It could be argued that Iceland is now coming out the other side looking quite sound. Is this an option for New Zealand?

Or should we ask the NZ Reserve Bank to buy some of the new Long Bonds on issue from the NZ Debt Management Office or Bonds from the new Local Body Funding agency. This would be tantamount to printing money, but at least it would deflate our debt away somewhat. Too bad about our reputation!

If I sound a little 'down in the mouth' then OK. But, as I said earlier, we are a great wee country with considerable natural resources. We can pull ourselves out of this.

Hopefully before the 200 pound Gorilla pushes our door down.

Gold in New Zealand dollars: $1888.26 per oz
Previous all time high: $1955.10 per oz

Silver in New Zealand dollars: $44.17 per oz
Previous all time high: $48.58
per oz

Articles of interest:


Could Greece be the next Lehman Brothers? Yes and potentially even worse.

See article here
The Telegraph

Budget betting on flawed assumption

See article here
The NZ Herald
______________________________________________________________________

The Anglo-Far East Company
The Original Private Bullion Custodian
Your reference: an-001
______________________________________________________________________

Thursday, May 19, 2011

Saving in 'Things' including Gold and Silver

Inflation is a killer for those fiat dollars stashed away in your bank deposit account.

It's not uncommon these days to find that the value of your money is decreasing in purchasing power.

The interest rate you get at the bank is less than the inflation rate. And by inflation rate, I don't mean the official one where, in the calculations,  they take out thoses goods and services which distort the real figures.

Recently we have been looking for bargains in bulk. We think, that beyond saving in sound, honest money, like gold and silver, the next best asset class is those commodities which we consume every day.

Food stuffs like butter, wheat, flour and sugar. You see, right now, it makes better sense to us to have our cash in the food bank at home. Take for example wheat. We have a wheat grinder and an bread maker and we make our own bread. We purchased some 25kg bags of wheat which should last us around 18 months of bread making. With prices of wheat about to rise dramatically (or even just a little), the 'cash' sitting around in our store room has a greater store of value than at the bank for the next 18 months.

What's more, we also feel a bit more secure should there there be shortages in the future.

Of course, the ultimate store of value are the precious metals. The best way of seeing how gold performs is by looking at oil in relation to gold. Oil is the best indicator of the value of gold as oil is the energy that drives our whole economic system. When energy prices rise (predominantly because of inflation - money supply increases) then most other assets and commodities rise also.

In countries like India, where inflation is rampant, the demand for gold and silver is high. They know through history about the ravages of fiat money.

You can see by this graph below that gold (red line) maintains it's purchasing power in relation to oil (black line) over time.

Gold v Oil adjusted for inflation

Today is Budget Day here in New Zealand. I plain to make some observations on this in tomorrows blog.

Gold in New Zealand dollars: $1897.81 per oz
Previous all time high: $1955.10 per oz

Silver in New Zealand dollars: $44.57 per oz
Previous all time high: $48.58
per oz

Articles of interest:


Video: Taibbi vs. McArdle on Goldman

See article and video here
www.rollingstone.com
 

World on course for next crisis, warns Gordon Brown

See article here
The Telegraph
______________________________________________________________________

The Anglo-Far East Company
The Original Private Bullion Custodian
Your reference: an-001
______________________________________________________________________

Wednesday, May 18, 2011

Raiding Party Coming to Your House


Gold
in New Zealand dollars: $1896.72 per oz
Previous all time high: $1955.10 per oz

Silver in New Zealand dollars: $43.31 per oz
Previous all time high: $48.58
per oz

It's becoming increasingly obvious, worldwide, that your retirement savings are doomed.

Retirement is a modern phenomenon anyway. Pre World War 2, older folk needed to contribute, how and when they could, to the finances of the family. I recall stories of my Irish Great-Grandfather, in the 1930s, working till he couldn't stand no more.

We could be on our way back to those times. Especially with debt levels the way they are, and with Governments sniffing an easy pot of dough for them to steal. Yes, your retirement savings.

Let's look at a number of stories, that confirm this, over the past week or two:

Last night I watched the first reading of a Bill in our Parliament that will allow Local Authorities to set up a Bond market for their borrowing needs. This to finance infrastructure in New Zealand. So Mum and Dad investors will be able to buy these bonds and 'invest' in these projects.

"Oh, quick, where do I sign!!"

Yep, you guessed it. Not many in their right minds would sign up. But wait, there is another lurking pool of funds that Government would like to get their wringing hands on. Yes, the National Superannuation Fund and your dear KiwiSaver Fund. These Funds may even be mandated to buy the bonds. Look out!

A second story came out of Ireland. The Government there are proposing to tax retirement schemes.

"Without the ability sell debt due to soaring interest rates, and with severe spending rules in place due to its EU-IMF bailout, Ireland has few ways of spending to stimulate the economy. Today's jobs program includes specific tax increases, including the tax on pensions, aimed at keeping government jobs spending from adding to the national debt."
Irish Prime Minister Enda Kelly
"Trust me"
The third story comes out of the US. There is huge interest as the debt ceiling of $14.3 trillion is about to be breached. This is an idea from Tim Geithner. It could be scare-mongering, but watch this space.

"The government could temporarily tap tens of billions of dollars from two federal employee retirement programs if Congress fails to raise the federal debt ceiling next month, Treasury Secretary Timothy Geithner told lawmakers."

Governments everywhere are broke, they have no money. They want yours and will go to extraordinary lengths to grab it. In the 1970s, the National Government in New Zealand spent the then Super Fund, citing extraordinary negative economic factors at the time. They changed the rules and stole it.

Don't let them do it to you again. Protect yourself.
_____________________________________________________________________

Articles of interest:


Italy Next to Seek EU Bailout: Wealth Manager

See article here
cnbc.com


Gold Coins Show Bull Market Unbowed in Commodities Decline

See article here
bloomberg.com
______________________________________________________________________

The Anglo-Far East Company
The Original Private Bullion Custodian
Your reference: an-001
______________________________________________________________________

Tuesday, May 17, 2011

The Reality Sinks In


Gold
in New Zealand dollars: $1915.28 per oz
Previous all time high: $1955.10 per oz

Silver in New Zealand dollars: $43.55 per oz
Previous all time high: $48.58
per oz

Special Guest Post from Christine Smith today:

Bit by bit the reality of New Zealand’s financial position is moving out of the Opinion columns and into the Business section of the NZ Herald. How long until articles such as this are upgraded to the main section and in greater number? When it’s almost too late is my guess.

My reaction upon reading this was a silent groan; planning for the worst but hoping for the best has been our plan for a couple of years but I guess I’m always hoping that it would all blow over and it’s “back to normal now folks.”

Most of our peers are behaving and believe that it is, in fact, back to normal. After all, we’ve been told for some time now that the recession is over and recovery is happening. Pretty soon it will be just like it always was – life on credit and investments in property to pay for our retirements and the holiday we take before that.


Apparently you can’t loose with property, the values always go up. Well, what if you can loose and values do go down? What if the recession we’ve experienced so far is the curtain raiser for the real thing?

New Zealanders are well known for their somewhat laid back, “she’ll be right mate” approach to life but we can no longer be complacent. Our level of foreign liabilities is in the company of Portugal, Ireland, Greece and Spain. You would’ve had to been hiding under a rock to not know what‘s been going in those countries, so ungraciously known as the Pigs. NZ looks to be heading to the same sty.

According to Brian Fallow, we will quite likely not be in a good place at all. All it will take he says, is another financial crisis such as Lehman Brothers collapse to see our banks unable to refinance and the flow on effects especially to our house values. Look at the US, UK and all of the previously mentioned Pigs. Why should it be any different here? I suspect it won’t.

The confidence talked by politicians, financial experts for the last three years have convinced people that all is well. I understand that (but don’t agree) because to have the people lose confidence in the market and banking system would have unpleasant consequences. Better to not tell the whole truth and hope like mad all will be well. What will happen when folk realise they’ve been duped with not much time left to prepare for genuine hard times?

I have not believed that we were out of the recession at all. Voicing this has not made me good company. I could not be right because the experts said differently. So I learnt to keep quiet(er).  Most folk don’t want to talk about it because not only could it not happen, they were also scared. Who wants to live like the Walton’s again? The government will protect us etc, etc.  Hence my earlier stated ‘silent groan’.

I didn’t believe it because the debt problem has not been fixed, there is even more. The old system we had for the last 50 years or so do not work anymore but it has not been changed, upgraded, or returned to one that did.

This article is filled with facts which cannot be ignored. Amongst all the facts is one sentence that bothers me more than the rest: “…cause serious economic hardship to many New Zealanders.” It could be because most finance pieces are written by men but the consequences of economic hardship are what hit me as a woman.

People are going to hurt. There will be anguish, fear, depression… I already ache for those I love and care for that have not seen the writing on the wall, would not listen or read or just simply didn’t know. The emotional costs of the financial future will be truly expensive – with no Social Welfare to pay for counseling.

I said earlier what New Zealanders are known for. We are also known for our #8 wire mentality and our resilience. It also helps that we have a lot of land, a good water supply and a terrific climate for growing our food. Nobody will be too far away from someone who can show them what to do.

Unfortunately, it’s all a matter of time. I hope I’m wrong but I might not be.
_____________________________________________________________________

Articles of interest:

The Good, The Bad and The Ugly


See article here
theburningplatform.com

______________________________________________________________________

The Anglo-Far East Company
The Original Private Bullion Custodian
Your reference: an-001
______________________________________________________________________

Monday, May 16, 2011

The Long Term for Gold and Silver - The Fundamentals


Gold
in New Zealand dollars: $1902.77 per oz
Previous all time high: $1955.10 per oz

Silver in New Zealand dollars: $44.92 per oz
Previous all time high: $48.58
per oz

We humans are a strange bunch when it comes to money. It can engender anxiety (no matter how much you have), or peace and calm (probably if we don't need it). The more you have though, the more life seems to revolve around it.

Perhaps this is why gold and silver bugs get unusually precious about what happens to their 'precious' (as Gollum would say).

So it's time again to reiterate the fundamentals as to why holding physical gold and silver is crucial and perhaps put you all at ease. This is by no means a comprehensive list. Here's two of the main ones.

1. We have high debt levels in the private and public sectors worldwide.

This is the main driver of the reason to own gold and silver.

Governments continue to print money to pay off their debt. As long as we have Central Banks and a fiat money system, we will have debt creation at a high level. Even now, the Federal Reserve in the US has been 'monetizing' 40% the US Governments budget deficit needs.

In New Zealand, we are now borrowing $380 million a week. Our Reserve Bank is also monetizing some debt, although that is difficult to prove, especially with all the jargon they use to confuse.

These debt levels are too high to manage. Debt cannot be repaid. In NZ, we owe around $40K each. We are in the same space as Portugal, Ireland, Spain and Greece; and we know where they are headed.

There will not be enough economic growth to repay this debt. Any Government that tells you so is lying. Here is an article today about NZ's debt levels. (More on this article in a future posting. It deserves analysis).

It is the same worldwide though. The US is printing money to devalue the dollar which devalues their debt. Default by stealth. Their debt ceiling of over $14 trillion is about to be hit.

Just as an aside, here is what a trillion dollars looks like:


$1 miillion dollar pile of $100 notes

$100 million dollar pile of $100 notes

$1 trillion dollar pile of $100 dollar notes (NB the pallets are double stacked)
See the man on the far left!

If we didn't have electronic money, there wouldn't be enough trees.

2. Gold especially, is money. It is best suited as a store of value (wealth preserver) and a medium of exchange.

Over 2,500 years ago, Aristotle first described the properties on money
  • - It is durable. It won't evaporate, mildew, rust, crumble, break, or rot.
  • - It is divisible. It doesn't lose it's integrity
  • - It is convenient. Gold allows its owner to physically carry his wealth. You cannot carry a parcel of land in your pocket.
  • - It is consistent. Only one grade exists for 24-carat gold. It is scarce and cannot be 'printed' into existence.
  • - It has intrinsic value. It is used for many industrial applications.

Silver, of course, is known as the 'poor man's' gold. It has most of the attributes of gold, but has one other important aspect from an investing standpoint. It is used in many everyday applications as a commodity. Electronics especially. Silver has been used as money throughout the ages.

To sum up then, if you own gold and silver in physical, allocated form with a reputable Custodian (no ETFs, no paper promises), then you have the best protection in existence for your wealth.

Look at it like this. Just last year one NZ dollar would buy 1/1630th of an ounce of gold. Today, that same dollar would only buy 1/1896th of and ounce.

So what changed? Not the gold.
_____________________________________________________________________

Articles of interest:


The People vs. Goldman Sachs

One of the best articles of the year so far.
See article here
www.rollingstone.com


The Fall of the U.S. Empire and the Breakup of the Geopolitical Matrix

See article here
Casey Research
______________________________________________________________________

The Anglo-Far East Company
The Original Private Bullion Custodian
Your reference: an-001
______________________________________________________________________

Sunday, May 15, 2011

Money Supply: A Primer

Jesse's Café Américain: Money Supply: A Primer:

"You walk into a Merchant and a sign says, 'All Items on Sale Today for Cash Only No Credit.' You are interested in purchasing an item. The..."

This is a most useful article about how money flows around the system, hence the special post today
_____________________________________________________________________

The Anglo-Far East Company
The Original Private Bullion Custodian
Your reference: an-001
______________________________________________________________________

Saturday, May 14, 2011

Gold and Silver Prices Remain Steady


Gold
in New Zealand dollars: $1899.24 per oz
Previous all time high: $1955.10 per oz

Silver in New Zealand dollars: $44.89 per oz
Previous all time high: $48.58
per oz

Just a quick post today. The blog site (blogger.com) was down yesterday, hence no post. I will be back Monday.

Suffice to say, that gold and silver in New Zealand dollars ended the week exactly the same as last week.

This is a good sign of a bottom being found and the market licking it's wounds.

See you Monday!
_____________________________________________________________________

Articles of interest:


Hourly Action from Dan the Trader

See article here
jsmineset.com
 

US is the Largest Debtor Nation in the History of the World

See article here
www.anglofareast.com
______________________________________________________________________

The Anglo-Far East Company
The Original Private Bullion Custodian
Your reference: an-001
______________________________________________________________________

Thursday, May 12, 2011

The Heavy Weights Stare. Who will Blink First?


Gold
in New Zealand dollars: $1901.80 per oz
Previous all time high: $1955.10 per oz

Silver in New Zealand dollars: $44.44 per oz
Previous all time high: $48.58
per oz


In New Zealand and Australia, it appears that the housing market is undergoing a 'stare-out'. You know, like the heavy weight fighters stand and stare at each other before a boxing match to see who blinks first.

New Zealand house prices are at a point of decision. Now more than ever.

Will we follow the US and UK where the corrections are significant? And still continuing.
Average house prices slumped 3pc in the first three months of this year, a decline that pushed the number of homeowners in negative equity – where a mortgage is higher than the value of a property – to 28pc from 22pc a year earlier, according to new research from Zillow, a major US property website. (Telegraph online)
That's nearly one-third of all homeowners that owe more than their house is worth. This is why foreclosures are at an all-time high in the US.

When will this housing correction hit New Zealand and Australia?

The IMF states that house values in NZ are 15 - 25 per cent overvalued. Already many here are in the unfortunate position of having negative equity, but if this report is true, many more will follow. And with the economy struggling and businesses on the brink, the ability to repay even the smallest mortgage is called into question.

Before the global financial crisis, rising household debt created a bubble in housing. People bought houses, with cheap money, thinking they would always go up. Well nothing goes up forever. Just note the recent commodities shakeout.

Now there are property investors (Sellers) who are in trouble financially and need to sell. So we have the Sellers on one side, wanting high prices, and the Buyers, with more realistic expectations, on the other?

Selling times are getting longer, with Sellers not willing to budge. Although there are signs this may be changing in the last few months. Average house prices are definitely falling. House prices are down 15 per cent already from the peak in 2007.
"However, given that prices appear elevated relative to historical relationships with incomes and rents, prices may yet drift lower, particularly in real terms, for example if enough buyers are unwilling to pay current prices and prefer to rent while sellers' expectations adjust," the RBNZ said.
This is not going to be an easy ride for those still invested in real estate in New Zealand and Australia.

_____________________________________________________________________

Articles of interest:


Silver Update

See article here
Trader Dan Norcini


The next twenty years will be completely unlike the last twenty years.

See podcast with Chris Martenson here
The Financial Sense Newshour
______________________________________________________________________

The Anglo-Far East Company
The Original Private Bullion Custodian
Your reference: an-001
______________________________________________________________________

Wednesday, May 11, 2011

KiwiSaver Redefining Savings


Gold
in New Zealand dollars: $1908.03 per oz
Previous all time high: $1955.10 per oz

Silver in New Zealand dollars: $48.40 per oz
Previous all time high: $48.58
per oz

Today, in New Zealand, our Government announces some major spending cuts in their budget next week.

The NZ Dollar hovers in uneasy anticipation.

However, the news is all about the KiwiSaver scheme. For you non-kiwis, this is a voluntary (perhaps for not much longer) savings scheme. The official website says:

"KiwiSaver is a savings initiative to help set you up for your retirement. Most members will build up their savings through regular contributions from their pay."

Our Government gives a number of incentives to savers. A one time $1000 and a $20 per week tax refund. The Saver puts in 2% of their income and the Employer matches that.

I have been saying, since KiwiSavers inception, that the scheme is flawed in many ways. Anyway, we decided to take control of our own finances and opt out. Glad we did.

One of the flaws was the level of Government involvement to get people to join. Most NZers did (1.7 million) and most said loudly that it was a 'no-brainer' (inferring; unwittingly, that my brain was non-existent...Oh well).

Why the mistrust of Government involvement you say? Why not. In the 1980s our leaders stole the then superannuation fund and used it in the general fund. They were broke. But the Government is broke now, you say. Correct, and it' is 'Back to the Past'.

In fact, the Government is borrowing to put money into this savings scheme. Now how can that be classed as savings in the first place? Hmm, borrowing to save. Sounds like a recipe for disaster. Kind of redefines the meaning of savings? Remember, this debt comes from future production that may not occur. But it does have to be repaid.

But at least the Government recognizes this now. The announcement today is likely to cancel most of the Government involvement in the scheme. The carrots that induced people to join will be gone. But people are locked into the scheme now, with no help and with the prospect of their savings disappearing because of economic conditions.

You see, these schemes have been designed solely to remove your money from you. Sold as a way of protecting your income for retirement years. It's a money spinner for Banks and Fund Managers, but for you, the jury is still out.
_____________________________________________________________________

Articles of interest:


Key: We cannot afford KiwiSaver

See article here
NZ Herald


KiwiSaver changes won't break promises - Key

See article here
The National Business Review
______________________________________________________________________

The Anglo-Far East Company
The Original Private Bullion Custodian
Your reference: an-001
______________________________________________________________________

Tuesday, May 10, 2011

Silver and Gold and the Human Need for Predictability


Gold
in New Zealand dollars: $1905.34 per oz
Previous all time high: $1955.10 per oz

Silver in New Zealand dollars: $47.47 per oz
Previous all time high: $48.58
per oz


So the Great Correction appears to be over and now is the time to buy the precious metals again.

So say the soothsayers of charts and trends.

It has been somewhat fascinating to read and listen to the commentary, from my usual sources, about the latest upside move and last weeks big correction, followed by this weeks early signs of a reversal.

To be fair, most commentators will never give a solid predication on what price a metal will go to at a certain time. But I can't help but get the feeling that more than a few I have listened to this week are calling loudly from the rooftops that they nailed the Great Correction in commodities last week.

From my reading of the comments before the crash, only two of the people I read and listen to were confident that the parabolic rally was going to correct within a few days. One was Ben Davis of Hinde Capital, a regular on King World News.

Does this mean I listen to or act on everything Ben says about precious metals from now on? Probably not, but when I require advice from a pool of sources, I am more likely to seek him out.

Because there are so many voices out there, I have begun to write down in my diary the names of anyone who makes predictions in the short term and the prices they call for. I will try to keep a track on how they perform.

After all, don't various sacred texts tell us to "stone false prophets"? Nowadays this means to filter them from your list of wise Commentators.

I have said before that I am not in this to trade precious metals like the Big Boys. I know when I'm out of my depth. However, I don't like people who try to 'talk their book' and attempt to deceive (willingly or not) those who are naive in the precious metals arena.

I have a few people I can trust and that trust takes years to cement.

My only recommendation to you is to obtain those same wise heads around you and be prepared to listen when the time comes. Own your decisions and don't blame the spruikers if you get it wrong.

We all like safe and secure predictability, especially if it means we can make money and that our wealth is at least preserved.
_____________________________________________________________________

Articles of interest:


Havens for rich tax avoiders will cripple New Zealand
See article
here

NZ Herald


Anatomy of Silver Manipulation - How Low Can It Go?

See article here
Seeking Alpha
______________________________________________________________________

The Anglo-Far East Company
The Original Private Bullion Custodian
Your reference: an-001
______________________________________________________________________

Monday, May 9, 2011

Gold and Silver and Counter Party Risk


Gold
in New Zealand dollars: $1888.00 per oz
Previous all time high: $1955.10 per oz

Silver in New Zealand dollars: $45.26 per oz
Previous all time high: $48.58
per oz

You often here that gold has no 'counter party risk. What is this?
The risk to each party of a contract that the counterparty will not live up to its contractual obligations. Counterparty risk as a risk to both parties and should be considered when evaluating a contract. - Investopedia

When I work, I expect to be paid with something that I can exchange for the time that work took. I get paid in NZ dollars. Time is money in foldable form.

Unfortunately, this money is a paper debt instrument. In other words, it has counter party risk attached to it. If someone down the line defaults on the other side of my debt instrument, it could actually disappear. Again, an example from Investopedia:

"If Joe agrees to lends funds to Mike up to a certain amount, there is an expectation that Joe will provide the cash, and Mike will pay those funds back. There is still the counterparty risk assumed by them both. Mike might default on the loan and not pay Joe back or Joe might stop providing the agreed upon funds."

The world banking system is fraught with counter party risk. When the crisis of 2008 hit, trillions of dollars were being lost from banks by the hour. Confidence that money existed in accounts was being eroded and the system was hours from shutdown. Suddenly counter party risk is in action.

If Ireland or Greece decide they have had enough of being bossed around by the ECB, they might just decide not to pay their debt anymore and default. English and German Banks will suffer, and then, perhaps, the house of cards will fall.

The idea that the money you hold in your hand is actually yours, is false. It is a debt instrument with counter party risk. Have a look at it, it probably says that it is a Central bank Note, or some like description. It used to say 'Gold or Silver certificate.. redeemable in physical gold or silver.

If you own physical gold or silver, and I stress physical and allocated, then you have money with no counter party risk. No one down the line can default on your gold bar and it suddenly disappear.

What's more it always holds it true value and preserves it's wealth.

And for those still concerned about the latest drop in the silver price:
And LO! A Reminder: a seasoned investor NEVER sells his bull market position during a correction. He knows that he can never make as much money trading as he can make WAITING. - Franklin sanders

______________________________________________________________________

The Anglo-Far East Company
The Original Private Bullion Custodian
Your reference: an-001
______________________________________________________________________

Friday, May 6, 2011

Drowning in Silver Fear

Gold in New Zealand dollars: $1877.28 per oz
Previous all time high: $1955.10 per oz

Silver in New Zealand dollars: $44.17 per oz
Previous all time high: $48.58
per oz


It's disturbing what a large retracement in the commodity sector does to people.

Silver has lost around 30% from it's high of $48.50 to be around $34.50 now. It could sink lower still.

I read the blogs with comments from people who have just entered the silver market and some feel like they are drowning as they see their life savings vanish.

But are they really vanishing? Sure, on paper the amount you would get for those ETFs or troy ounces of gold or silver are now less than on Friday night last week, but if you still have those physical troy ounces (and I mean actually have them), then what's to worry about?

Unless you are one of the unfortunate ones who has your money in someone elses fund, and that fund has one of those stupid computer stop-loss breaks. This means you had no control over the big-boys picking your pocket. In this half of the playing field, the rules aren't fair.

Sure, it's not an easy ride, I'll admit to the odd weird doubt, after all we are all human. But the troy ounces are still with me. I know where they are, I can touch and smell them if I travelled there.

Anyway, it seems to me that if I sold now I'd be just gifting those large rat-bag banks a slice of my wealth. Sorry, not into helping them...not even a little bit. It is people like me, not willing to sell now at any price, that they don't like.

Hold onto those precious troy ounces and go out into the bright sun and rest easy. Remember this is a secular bull market and the trends have not changed overnight because some panic sets in.

Remember too that the time to buy may be coming closer. I wish I had some spare cash...

Don't be a trader in this market. You may actually drown.
_____________________________________________________________________
Quote from
silver analyst Ted Butler, 04 May 2011
Long-time readers may remember a pet theory of mine that I had kind of forgotten about until this week. My theory was that before we get the real blast to the upside, amid the termination of the manipulation or a physical shortage, we would get an unbelievable shakeout to the downside. After that downside shock...and after the last speculator that could be tricked and frightened into selling did sell, the commercial would just put their hands in their pockets and not sell on the upturn. That selling void would create the conditions for the final blast-off. This sell-off sure feels like the big one to me.
_____________________________________________________________________

Articles of interest:


Commentary from Dan Norcini. 

Well worth the read. See articles here
www.traderdannorcini.blogspot.com


What's gold really worth? Central banks sure don't want you to find out

See article here
www.gata.org
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Thursday, May 5, 2011

Silver and Risk

Gold in New Zealand dollars: $1920.48 per oz
Previous all time high: $1955.10 per oz

Silver in New Zealand dollars: $49.87 per oz
Previous all time high: $48.58
per oz


It appears that as people feel a bit 'braver' they put more money on trades that are riskier.

They move out of cash or bonds and into commodities or currencies and others.

Silver is lumped into these risk trades as are the rest of the commodities. Even though silver is partly a monetary metal as well. We also see currencies like the NZ dollar dropping as risk comes off. It is down by nearly 2 cents in two days.

People are feeling a bit nervous lately, perhaps because Bin Laden is dead and the worry over what happens next makes them rush back into the US dollar and bonds. Perhaps because the Portugal situation is still a bit uncertain, even though a bailout from the EU is done and dusted.

Whatever the risk or lack of it, analyzing it all can be fun, but fraught with dangers if you try and make a decision on too little information.

As I said previously this week, trading this market is for the 'old-hands' who can intelligently analyze trends and who are commissioned to be advisers. And an Advisor I am not.

Silver is now down about $10 from it's high a few weeks ago. After the increase in margin requirements on silver contracts, apparently those in the speculative community are suffering losses and selling out.

So silver is searching for a bottom. What this could be, who knows. But with all this paper making the market so volatile, many pundets highly recommend that those with physical silver don't sell. The paper market has many large issues at present and some are even pointing to a default on the COMEX (ie they won't have enough physical silver to honour their contracts).

Who knows? But people like Eric Sprott still call for the gold/silver ratio to get down to 16:1 (40:1 now). The fundamentals still stand. Eric also says that the physical market in silver will ultimately determine the silver price.
_____________________________________________________________________

Articles of interest:


And Now For Today's Mini Silver Flash Crash: Same Time, Same Place

See article here
www.zerohedge.com


Silver Bull Market Likely to Zigzag to $100 and Beyond

See article here
www.minyanville.com
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Wednesday, May 4, 2011

Silver Correction Time

Gold in New Zealand dollars: $1923.373 per oz
Previous all time high: $1955.10 per oz

Silver in New Zealand dollars: $51.59 per oz
Previous all time high: $48.58
per oz


Silver is undergoing a bit of correction over the last two days. The percentages (10-11% down) are quite significant.

But silver is always the petulant teenager as compared to the adult gold. The swings will be more wild as leveraged longs get flushed out (and many other reasons)

I point today to a very good commentary on what is happening in silver.

As Jim Rickards recently said, it's never black and white in these markets. Some say it's all because of manipulation or Fed printing, but there are so many factors out there to keep in mind. One being this is hardly a normal market. To trade this thing needs far more experience than I have right now.

In my mind, having the physical has got to be a winner as these paper wars get played out.
_____________________________________________________________________

Articles of interest:


The dollar decline, gold price, phony stats and the wild ride ahead

See article here
Mineweb.com
 

Sticker Shock

See article here
newsweek.com
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Tuesday, May 3, 2011

Silver and Gold pumping iron

Gold in New Zealand dollars: $1919.08 per oz
Previous all time high: $1955.10 per oz

Silver in New Zealand dollars: $54.15 per oz
Previous all time high: $48.58
per oz


According to charts, history can repeat. But to completely base the future on chart trends can make one look like a fool.

Fortunately, yesterday I made mention of how events can scupper any chart bound trend. This is what I said,

"But remember charts only really give you an educated opportunity to see trends, they can never account for fear or weird circumstances, like wars in Libya and a sudden sovereign default on debt."

Well, 'chart-bound-trend-be-scuppered'. Osama Bin Laden was assassinated by Navy Seals and the gold an silver price pumps iron...up, down, up, down.

This morning NZDT, silver is hovering around $43.50 and gold $1545.00. You see, all was rosy when the big event happened. The US dollar rose on the good vibes and people sold some of the 'commodities' like gold, silver and also oil. The world was going to be a better place again.

Until they started to think a little and off went the prices upward again.

But what I find fascinating is not only the psychology of the market world, but the machines behind it as well. On the one hand we have human fear and happiness driving prices and on the other we have machines with computer code that decide when to sell and buy.

Yesterday morning I watched as the silver price fell 11% in a few minutes. Why? Probably because stops had been breached on some mindless computer program and some poor sod had their precious metals sold.

But I guess these idiot computers (GIGO), and fear and happiness, will always be a part of our market. This is why long-term trends are so very important to keep in our minds. Corrections WILL happen to gold and silver prices.

After all, parabolic rises are always a bit suspect. It's likely some investors took some profits off the table yesterday.

However, the only history I see repeating is based on a saying by Voltaire many years ago:
"Paper money eventually returns to its intrinsic value -- zero."
_____________________________________________________________________

Articles of interest:


China's Trillions in Reserves, Gold, Silver and more

See podcast here
King World News


Never Ending Money Printing

See article here
usawatchdog.com
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Monday, May 2, 2011

How High will Silver and Gold go?

Gold in New Zealand dollars: $1934.87 per oz
Previous all time high: $1955.10 per oz

Silver in New Zealand dollars: $59.24 per oz
Previous all time high: $48.58
per oz
With precious metals, we used to be concerned about how much gold the Indians were buying during wedding season, or worldwide jewellery demand, maybe even Central Bank selling. But this could all be moot in this current environment.

It's now all about wealth protection.

And the silver fundamentals remain strong.

There are troubles in Bolivia with the Government there threatening to nationalize the silver mining industry. And we all know what happens when Governments get involved in primary industry.

The US dollar is losing value via the Federal Reserve's policies. This is continuing as of Thursday last week when Mr Bernanke announced the interest rate will remain around zero. More dollars swamping the system equals higher prices for all commodities.

Concerns about Sovereign debt default, especially in Europe persist. Who in their right mind would want to buy currencies right now?

There are views out their in the blogosphere that there are shortages of silver and even a default on the COMEX likely soon. Rumours are good to keep a track of, but facts make better decisions.

There is also credible information that the large investment banks are now starting to cover their short positions. This means they need to go into the market to find physical silver in a hurry or cover these positions or cover with a cash settlement, probably at a high premium to the spot price.

When the oil rich Arabs get out of the US dollar, look-out! Commodities could benefit.

There are other views as well.

One respected commentator is saying now may be the time to swap out from silver to gold, as the gold to silver ratio at 32.66 is showing signs of increasing again. (Note, the traditional ratio is around 16 ozs of silver to 1 oz of gold. This is the naturally occurring ratio in the earth's crust. Recently the ratio has shot down from around 80 to the low 30s).

But remember charts only really give you an educated opportunity to see trends, they can never account for fear or weird circumstances, like wars in Libya and a sudden sovereign default on debt.

By all means watch the prices carefully, as I will be. After all, a parabolic run upwards in the silver price is unusual. Moreover, we wouldn't want to be caught out by the old saying, "But it's different this time!"

Parabolic rises always have a look of caution.

But ask yourself this question. How many of your friends or even your investment advisers own gold or silver. Mentioning the precious metals at a party of your peers still creates an awkward silence. My bet is most don't own anything. When the media mirrors what this fake future magazine cover is saying, then it will probably be time to sell.

Courtesy of Casey Research
How high will silver and gold prices go? Views range from $50 to $100 this year. But the real answer to that is, how low will the value of our currencies go? An ounce of gold or silver will always be an ounce of gold and silver. Currencies are paper and can be produced with a hit of computer's 'enter' key.