Monday, November 25, 2013

BITCOIN – IS MAX KEISER LIVING IN TULIPOMANIALAND? JUDGE FOR YOURSELF


WAKE UP!!! Can somebody tell me what the date is? What year are we living in? Why does it feel like we are living in the 1630’s and not the 21st Century? Are we headed for a revolution? Ushering in a new Era , zeitgeist?

Max Keiser, a world famous shock jock economist would have you think so. His obsession with Bitcoin so strong he refers to it as BITCHRIST along with making other references to the old book, the BIBLE.

After my last post here regarding Bitcoin, Max acknowledged in a tweeted reply that it was an “interesting read…but obviously I disagree”. My blog entry attracted commentary from supporters of bitcoin. It is amazing how the trolls come out when someone questions the reality of something they are so deeply attached to.

Bitcoin has had that effect on people, I mean, Max Keiser is the prime example. For those that follow Max on twitter, you know what I am talking about. It is a tireless promotion, Max is attached to Bitcoin like a two year old is attached to their security blanket.

Max has a huge following, his twitter page littered with pro Bitcoin rants, heck Max even retweeted and heralded the return of Silk Road after it was shut down by federal law enforcement for illicit drug supply.
I have tried to engage Max Keiser in a debate on Twitter post my blog. After reading a post where Keiser referred to bitcoin as having intrinsic value, like gold does, I was fed up and demanded an explanation.

It seems to me that asking for an explanation along with questioning Max on a number of key issues was enough for him to block me on twitter. All I wanted was an explanation Max. I felt this was a misrepresentation and sought some clarification.

As it turns out my tweets attracted staunch supporters justifying Max’s assertions. Some supported my position, some didn’t. One of my followers that also follows Keiser tweeted “Come on Max, grow a pair. Do you believe in BTC or no? Back It up man!


At the risk of sounding bitter, I assure you I am not. I enjoy watching Max Keisers other economic commentary, that can be sourced through youtube. Max probably did me a favour, rid me of the angst and aggravation of the endless Bitcoin tweet dump. The fact is all  I wanted was an open forum debate with Max Keiser. In the end I got one from others that live in twittersphere. To those that got involved, thank you, it was a great debate. As one of the onlookers put it “Good show fellas” 


The title of this blog expresses how I feel. It seems Max did not want to address my concerns. It is not just my concerns over Bitcoin that he has chosen to ignore or block out. It seems when it comes to the topic of Bitcoin, if Max wants YOUR opinion on the topic He Will give it to YOU!


Recently Max Keiser hosted a show with one of my favourite economics commentator, Jim Rickards. I enjoy Jim’s commentary because he remains on point, explains his position and is not one to shut down or block someone simply for disagreeing or debating his comments.
Jim Rickards has a huge Twitter following, a promotional tool I thought Max Keiser would pounce on and exploit in his recent Keiser Report with Jim. After an endless tirade of bitcoin promotion on his twitter page, surely he was going to use Rickards’ popularity to push Bitcoin knowing the clip would be watched by Rickards supporters?


In his opening segment Max talks about Bitcoin with Stacy Herbert but when Jim took the seat, Max missed his opportunity. Gold was talked about, Currency wars were mentioned, so was inflation and a potential dollar crisis. Max had nearly 13 minutes with Rickards and no mention of Bitcoin.
Below is the Keiser report relating to this. Jim Rickards Joins Keiser at aroun the 12min mark.



http://www.bloomberg.com/video/malka-rickards-debate-bitcoin-utility-longevity-662IxXXTQl2e~49s0UZNhw.html



I wonder what Rickards  would have said if propositioned on the topic of Bitcoin? Judging by some of Jim’s commentary on Bitcoin I am guessing it would not have been a Bitcoin backslapping party.
Below is a debate Jim Rickard’s engaged in. For those interested in Bitcoin, this is a robust debate, informative and enlightening.


http://www.bloomberg.com/video/malka-rickards-debate-bitcoin-utility-longevity-662IxXXTQl2e~49s0UZNhw.html


After watching it you will see Rickard’s has highlighted the weaknesses that lie within the Bitcoin protocol. Perhaps that is why Max Keiser chose to no broach the topic, perhaps Max could address that question if enough of his followers tweet him. I have started a HASHTAG on twitter #askmaxkeiser for those who that feel there are some questions they want Max to answer. Perhaps he could start with how Bitcoin has intrinsic value like gold does?

I started the thread because I am sure many have questions they want answered but cannot get through amongst all of Keisers Twitter noise. He does have 76,000 followers. If the HASHTAG gets enough questions perhaps Max could select some to answer.
It appears to me that Max also missed an opportunity to debate the Bitcoin phenomenon with Peter Schiff. Peter is a well respected economic mind and was one of the few outspoken voices predicting the Global Financial Crisis.

One of Schiffs clips on youtube dubbed “Peter Schiff was right” the early edition went viral and had over 1 million views. Another worthwhile  Youtube clip to watch was Peter Schiff and another economics commentator Professor Steve Keen discuss the economy at the beginning of the '08 Crisis.

Max had Peter Schiff on his show a couple of weeks ago. Again, no mention of Bitcoin. Was this an opportunity missed given Peter Schiff’s profile? Imagine the marketing opportunity, Peter Schiff endorsing Bitcoin!
Why did Max Keiser not ask Peter Schiff about Bitcoin on his show? He posted a piece from a pro bitcoin blogger which insinuated that Schiff did not understand Bitcoin, but when Peter was on his show he did not debate it.  As the tweet said “Come on Max, grow a pair. Do you believe in BTC or no? Back It up man!
Below is Peter Schiff explaining his view on Bitcoin.



http://www.youtube.com/watch?v=0L7SOPDOvvI



Again after watching the clip Peter Schiff’s position is clear. Schiff debunks Max Keisers’ assertion that Bitcoin has intrinsic value like gold does.
With all of this in mind I return to the title of this blog.
Is Max Keiser living in a Bitcoin induced Tulip Mania? Is he so immersed in the Bitcoin concept he has lost touch with reality?
Wikipedia defines Tulip Mania as the following -  “Tulip mania or tulipomania (Dutch names include: tulpenmanie, tulpomanie, tulpenwoede, tulpengekte and bollengekte) was a period in the Dutch Golden Age during which contract prices for bulbs of the recently introduced tulip reached extraordinarily high levels and then suddenly collapsed.”



“At the peak of tulip mania, in March 1637, some single tulip bulbs sold for more than 10 times the annual income of a skilled craftsman. It is generally considered the first recorded speculative bubble (or economic bubble),[3] although some researchers have noted that the Kipper- und Wipperzeit episode in 1619–22, a Europe-wide chain of debasement of the metal content of coins to fund warfare, featured mania-like similarities to a bubble.[4] The term "tulip mania" is now often used metaphorically to refer to any large economic bubble (when asset prices deviate from intrinsic values).[5]”


The tulip mania took over the economy for a period, its effects so profound that a book was penned by Charles Mackay entitled “Extraordinary Popular Delusions And The Madness Of Crowds”. It highlighted, amongst other things, the ability for crowds to act irrationally in a setting of a popular delusion. Back then it was Tulips, right now is it Bitcoin?

I am not questioning Max Keiser’s belief in the concept of Bitcoin, his genuine feeling that it is revolutionary. I am not asserting he does not believe what he is preaching to his followers. I am a fan of what Bitcoin tries to achieve and also the competition it creates within both the banking and forex sectors of the economy.

The aim of this blog is not to be the Devil in Keiser’s Bitchrist story. The purpose is more to ask the readers how they see it, present a balanced debate for Max Keisers followers and readership. So…
If I am missing something, If I am lost on a point and confused, I would appreciate an explanation. Right now it feels like the 1630’s. Tulip Mania was a part of history and as the old Santayana saying goes “those who cannot remember the past, are doomed to repeat it”


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IF YOU ARE A SUPPORTER OF BITCOIN TWEET PLEASE TWEET ME A TULIP

Tuesday, November 19, 2013

DEBUNKING BITCOIN - IT'S JUST A CRYPTO FIAT CURRENCY WITH NO INTRINSIC VALUE OR STORE OF WEALTH

The Bitcoin bug is biting… And HOW.. The bug is infecting the globe with this clouded and misrepresented notion that it is a currency that can be trusted. The Bitcoin currency is decentralised therefore not controlled by any one person and so offers protection from the endless rounds of Central Bank money printing. This assists the promoters of Bitcoin in peddling the fallacy that it offers a safe haven away from invasive government spying, and of course, those evil parasites they refer to as the "banksters" (banker/gangsters).

The pitch is a good one, aimed at ushering in the new "zeitgeist" in exploring a world on the edge of a revolution. Bitcoin is marketed as a way to liberate oneself from the shackles of government and central bank policy, a revolutionary new currency that erodes the power of the government and banking sector oppressors.

For those of you that are new to my blog, I wrote a piece on the 28th of October titled "Bitcoin , The Canary in the Gold mine". Within it I explored where I felt the world was headed with regards to the perception of money. I asked my readers to assist me in answering the question, what is money? The aim of the blog was to establish or determine whether the world stood ready to perhaps embrace a new monetary paradigm.

The money question I posed to my readers was aimed at stirring up analysis, thought and evaluation, heck I wanted to try and guage if the world was transforming. Was it evolving and unearthing a new spirit of the age, a revolutionary spirit much like the "free love" Woodstock era of peace and harmony. Was the growth of Bitcoin just the start of the revolution?

Not long after my blog Russell Brand confirmed my thesis about a new revolutionary spirit and uprising. It got huge media coverage due to Brand’s impassioned debate and call for change. According to Brand “profit is a filthy word” and he appears clearly agitated at the current system which is promoting an ever increasing disparity between the wealthy and the poor.

For those that missed the interview I have added the YouTube clip below.

http://www.youtube.com/watch?v=BHDcOBgWZqc

This interview was pounced upon by one of my favourite economic commentators Mad Max Keiser. I really enjoy the way he thinks, bright, insightful, with entertainment value. For those of you that do not follow him, Max heads up the "Keiser Report", a brutal, honest and factual program that educates you at the same time as entertaining you.

Setting the big plug for Max Keiser and his partner in crime Stacy Herbert aside I want to point out the fact that both are huge supporters of this "Bitcoin Revolution". In response to Russell Brands interview Max and Stacy linked Bitcoin to the upcoming revolution, mocking Russell Brand for not seeing it as an opportunity to "stick it to the establishment".

With typical Keiser flair, Max states that there is a revolution in motion, there is a solution to take the power away from the banks and put it in the hands of the people. The answer is "bitcoin mate" as Keiser puts it.

Below is the introductory clip of the Keiser report I refer to above.

http://www.youtube.com/watch?v=GZNW3LUszjg

Max is a huge supporter of Bitcoin and has been calling it a great investment from the outset. He called it at $5 a coin, from my memory, again at $30 a coin, and they are now trading in the range of $650 and $850 a coin, up from around $250 a coin when the "canary in the gold mine" blog was posted.

Before anyone thinks that I am going all the way with Maxy K, I am not. Do I see more potential in Bitcoin? Yes, Is it possible it could go much higher? You bet it could. Where is the limit? Who knows, I don’t know, no one knows.

The title of this blog expresses how I feel about Bitcoin, perhaps not in the short term, but definitely long term. Bitcoin IS another form of a fiat currency, albeit a digital one that is decentralized.

A bitcoin has no store of wealth, no intrinsic value, just like the paper dollars printed by Central Banks around the world. Many of the Bitcoin Illuminati are peddling the fallacy that it does have a store of wealth as physical gold does. That is FALSE and MISLEADING in my opinion.

Gold has a store of value because it can be used as a method for payment, it can be used to make jewelry and in the manufacturing of consumer products like electronics. Gold has a precious nature, a finite supply that will eventually run out along with an increasing difficulty to mine.

Many supporters of Bitcoin have been sold the story of Bitcoin having a "finite" number of coins. The idea is that the bitcoin is like gold in the sense that one day all the coins will be mined and there will be none left. Whilst this has some substance on face value when you delve deeper into bitcoin you will see the truth.

Yes there are only ever 21 million coins that can be mined. Yes each time a new block of coins are mined, the next block are more difficult to unlock, much the same as depleting the gold supply.

Still you cannot melt a Bitcoin down to make Jewelry, use it in commercial products, and so it has no intrinsic value. This means it carries the same flaws the current Fiat Monetary system has.

Before the Bitcoin maniacs start screaming to loudly at me about me missing the fact that there will only ever be 21 million coins I wish to dull that noise before it becomes to loud.

FACT

YES there will only ever be 21 million "Bitcoins" BUT these 21 million coins can be broken down in "bits" through 8 decimal points. One "Satoshi" named after the Bitcoin mastermind is the smallest denomination of a Bitcoin that can be traded. This denomination is 0.00000001 of 1 Bitcoin.

Dragging this through a simple multiplication process, though there may be 21,000,000 total Bitcoins, there are, however, a massive 2,100,000,000,000,000 or 2.1 quintillion tradable bits that will be available when all the coins are mined. This figure also needs to be multiplied by the dollar value assigned to each 0.00000001 or "satoshi" highlighting the fact that its finite status is at best one hell of a stretch.

In addition to the above point of limited supply I wish to point out that "Bitcoin" does not own the monopoly on digital currency. In fact Bitcoin was not even the first digital currency developed and used. A digital currency called "QQ" was developed in China and gained a big following in much the same way Bitcoin has captured the minds of many a speculator.

Below is an article I found on China's fascination with Bitcoin. Within it the virtual currency "QQ" is discussed, how it grew, and how it was eventually controlled.

http://money.cnn.com/2013/11/18/investing/bitcoin-china/

The undeniable fact is, that although Bitcoin has a finite supply of 2.1 quintillion bits, it is not alone in trying to capture the markets attention and exploring the virtual crypto currency space. There is a new crypto currency entering the fray now to offer investors in this phenomenon another option. This new crypto is called "litecoin".

Below is a website dedicated to informing potential investors about its platform.

https://litecoin.org/

Right now, with limited competition in the virtual currency space, the answer to the Bitcoin success maybe as simple as answering a question I was asked on twitter by one of my economics Idols, Jim Rickards.

Upon posing the question is Bitcoin the canary in the goldmine? And posting my blog. Rickards responded by tweeting, is it about Bitcoin? Or about the dollar?

Jim Rickards had answered the question, and in doing so highlighted the issue of the Crypto Currency phenomenon going forward.

Rickards' answer highlights the endemic problems the Virtual Crypto currencies have. They are identical to the problems being faced in the current monetary system. Put simply, as time evolves, as more crypto currencies enter the virtual currency space, the Bitcoin phenomenon and hysteria may be eroded. Whilst it has dominated the virtual currency space, Bitcoins 2.1 quintillion bit supply may be finite to Bitcoin itself, the space for new virtual crypto currencies is growing.

I would argue, just like central banks printed dollars, the virtual crypto currencies are doomed for the same extinction. As Litecoin along with the other new Crypto currencies are developed and marketed it will become abundantly obvious that Bitcoin is not special or unique. Bitcoin will be to the virtual Crypto world what the Euro, the Yen or The US Dollar are to the central bank world… FIAT MONEY WITH NO STORE OF WEALTH.

Tuesday, November 12, 2013

GLOBAL DEBT BUBBLE SET TO BURST – THE NEXT “MINSKY MOMENT”

As the sun rises each morning and sets each night, the global population meanders through their daily routine with a great majority totally oblivious to the dark economic clouds that are gathering in the horizon.
Human Beings , are, for the most part, an optimistic bunch. They are resilient and resourceful and have a natural instinct for survival. These are going to be important tools when the next economic crisis hits.
I know by now many that read my blog feel all I preach is doom and gloom. That I write a blog that tries to direct my followers in how to prepare for the next “black swan” event with an ad nauseam Henny Penny like
droning and repetitious message of how the “sky is falling” This blog entry will be no different when it comes to the message, but will be a more detailed and succinct explanation for why I feel the time is getting near.

The global economy is in the worst state it has ever been in. It has created a global set of asset bubbles that the entire world economy now trapped in one GIANT DEBT bubble. The Global Financial Crisis of 2007/08 was triggered by the bursting of the real estate bubble in the USA. A debt  driven, leverage driven bubble that brought down Lehman Brothers and would have seen the collapse of many more banks in the USA had the government not determined them “Too Big To Fail”.

It seems such a long time ago but the effects of that crisis are still dominating economic policy and in particular monetary policy settings by all the Central Banks around the world. The ’08 Crisis that hit was a sign that the economy was in poor shape, that it needed to restructure, redirect finance from debt to savings, consumption to production. In short the economy needed a recession.

Rather than allowing this to happen Central banks around the world have embarked on one of the greatest economic gambles in recorded history. Quantitative Easing and easy monetary policy including the lowest set of global interest rates ever seen have been implemented in an attempt to import inflation, target economic growth and boost economic growth. In the USA this aggressive QE program and low interest rate policy has done very little to curb the unemployment problem, in fact the unemployment rate ticked up 0.1% on the latest figures. The latest jobs report had many media spin merchants heralding the economy was strengthening on a better than expected jobs report which indicated that 204,000 new jobs had been created beating the miserly expectations of 130,000.

It seems that the media was in such a delirious state that they spun themselves into a dizzy haze of confusion. Sure 204,000 jobs were created but as I stated earlier, the unemployment rate went up. Once again, the
devil is in the detail with this jobs report. The jobs created are predominately in the service sector and the retail sector, the boost coming as businesses prepare for the holiday season rush. The jobs created
are temporary “anticipation” jobs that will disappear as soon as the Christmas sales are over. Within the 204,000 jobs created, and judging by the fact that the overall unemployment number went up, it can be assumed that many of these part time jobs are being filled as second or even third jobs by people that are currently part of the existing work force. My assumption above comes from the following data released by the BLS which stated “The civilian labor force was down by 720,000 in October. The labor force participation rate fell by 0.4 percentage point to 62.8 percent over the month”.

The above figures show that while 204,000 new jobs were created, the labor participation rate fell by 720,000. With all this being said I am absolutely flabbergasted that this jobs report is being heralded as a strong one and a sign the USA economy is in recovery. Just for a start this participation rate of 62.8% is the lowest labor participation rate recorded since August 1978. In considering this date one must understand that it was around this time that women were beginning to enter the workforce and so there was an increasing rate of people searching for a job. This is a natural part of the explanation of why the participation rate was so low during this period. Put simply the labor force demographic was changing at a faster rate than jobs could be created.

Below is a historical chart that illustrates the sharp decline. Note the shaded areas are recorded periods of recession.



The adverse effects of a declining workforce participation rate are numerous. The effects impact on a broad range of economic, socioeconomic, social and political conditions. To begin with, the economy is adversely
affected simply by the fact that the tax base will be reduced. The 700,000 people now not actively seeking work diminishes the amount of potential people that will be earning an income and in turn paying taxes
on that income. Furthermore those not working may also require Government subsidies such as food stamps or welfare just to survive. Social impacts for the hard core or long term unemployed may include
depression, a loss of self worth. It will also see a drain on skilled workers as long term unemployed are not in a position to keep pace with the dynamic global economy and technological advances. This makes
retraining necessary when the economic conditions improve. Political climate can be impacted as the unemployed or underemployed join in protests and movements driven by a feeling of inequality and
exploitation. Occupy Wall St was a prime example of what I feel will be an ever increasing global trend as the gap between the “haves and have nots” is widened.

With a deteriorating participation rate and employment outlook the psychological and emotional drivers of the economy turn negative. The velocity of money which is a behaviorally driven phenomenon declines
driven by the negative feeling that engulfs the market. Central banks right now are attempting to fight this negativity off with endless rounds of QE and easy monetary policy designed to create a “wealth
effect” by inflating asset prices. The boom in the property market in Australia right now is an interest rate inflated property market bubble that will soon burst.

Australia is set to follow in the footsteps of the USA. There is no doubt in my mind that the property market in Australia could fall between 15 and 35% in the medium term. This property market surge has been driven by the lowest interest rates in Australian recorded history. The fact is people do not care about HOW MUCH they are paying for the home they buy, they care more about HOW MUCH the repayments are. Speculators have rushed into the property market as the Reserve Bank lowered interest rates. The Federal Governments first home buyers grant has fueled the property market fire driving it to unsustainable levels.
As the property market goes up the Keynesian “wealth effect” kicks into action. People that see their homes go from their purchase price of $500,000 one year to $600,000 the next feel they are $100,000 better off
because the value of their home has increased. This triggers more debt as some borrow against their increasing home value to go on a vacation, buy a car or remodel the home.

While this so called “wealth effect” is aimed at creating economic growth and inflation through consumption and spending, what it really creates is a prolonged course of debt driven deflation. The “wealth effect” is based on flawed logic. Sure you get a period of asset price inflation like the Australian property market and the USA’s equity market, but those increases in asset prices are driven by an increase in leverage and debt.
One must be aware that if you buy a home for $500,000 and sell it for $600,000, there is still an increase in debt lumped on the economy of $100,000 for the person that has purchased the asset for the inflated price.

This misdirected increase in debt does nothing to grow an economy. What it really does is creates a bigger problem for those that get caught in the downward debt spiral when the economy needs to deleverage and reduce debt. Below is an article which highlights the point that even with the Federal Reserves $4 trillion worth of asset purchases so far, the trickle down contribution to GDP is a miserly 0.25%.

http://rt.com/usa/quantitative-easing-fed-official-610/

In many ways I feel we are heading for a “Minsky Moment” for the global economy. Investopedias definition of a 'Minsky Moment' is summarized below.

“When a market fails or falls into crisis after an extended period of
market speculation or unsustainable growth. A Minsky moment is based on
the idea that periods of speculation, if they last long enough, will
eventually lead to crises; the longer speculation occurs the worse the
crisis will be”

I believe the next global economic “Minsky Moment” will soon be upon us. It is a Federal Reserve and Central Bank policy induced crisis which will be almost impossible to escape. Each individual country has it’s own individual bubble or bubbles that are being inflated. Australia has a property bubble, the USA has a property bubble and an equities bubble. Canada and the UK both have property bubbles. The list goes on and on. The asset bubbles once popped will expose the underbelly of debt that lies beneath the surface. It will unravel with greater speed than in the last economic crisis and will expose the systemic problems associated with a debt driven global economy. With so much debt weighing the global economy down, most of which borrowed during this low interest rate environment, the global economy and the people it supports stay waiting. Some are aware of the dark clouds that are forming but sadly many are not. In my opinion the “Minsky Moment” is upon us, and when it hits it will be seen as the moment that brought about the Keynesian theory demise.

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Monday, November 4, 2013

Gold wars - Miners versus the Manipulators of Wall Street

It has been a well reported FACT that the central banks around the world have been in a competitive drive to debase their respective currencies. The currency wars that are rolling through the economy are obvious and clear for all to see as central banks engage in the direct manipulation of both the foreign exchange and the bond  markets through Quantitative Easing (QE). The evidence of the QE trickle down can be seen in other asset classes such as the property market rebound and in the huge equity/stock market rally to record highs.

The GOLD WAR is the hidden war. It is being waged behind the scenes and is getting less coverage in mainstream media. Central banks, The Department of Justice along with the big players in the banking sector and the government want to try and cover this up. Below is an article published in the Wall St Journal which highlights governmental resistance to funding the in depth investigations needed to bring the market manipulators to justice.

http://stream.wsj.com/story/markets/SS-2-5/SS-2-370323/

There is no doubt that there are valid cases amongst some of the ongoing investigations. As the article above reported:
“J.P. Morgan agreed in October to pay $100 million to settle CFTC allegations its aggressive trading bets recklessly manipulated derivatives markets. The firm admitted the agency’s factual findings, that its traders acted recklessly and dumped huge amounts of swaps in trying to defend their positions”. 

This settlement agreement along with JP Morgans admission to the agency’s factual findings shows the need for a more stringent set of rules and punishments for market manipulation. The huge increase in banking sector fines being dished out show that current measures and penalties are more a joke than a deterrent.

Below is an article highlighting a gold trade that took place where 500,000 ounces of gold were dumped on to the market in one hit for sale at market price. A market price order has no restrictions and means the sell order keeps driving the price down until all the gold is sold. Logic says that if you had 500,000 ounces of gold you wanted to sell, to maximize the price you could you would be better served sprinkling the gold on to the market in an orderly fashion. The market dump, therefore, had traders screaming MANIPULATION and the gold miners seeking revenge.

http://www.moneynews.com/StreetTalk/Traders-Gold-Price-Manipulation/2013/10/15/id/531238

I believe the largely unreported GOLD WAR that is ramping-up is one that investors need to be on top of and exploit over the upcoming months. With the lack of adequate punishments being dished up to the manipulators, it seems that Gold Mining companies are taking matters into their own hands. I feel the Miners are fed up with the manipulation game. They were played into mining expansion by the manipulators pushing gold prices past $1,900 an ounce back in 2011 only to see prices fall  approximately 50% once supply came on line. Before you say 'well an increase in supply vs demand will cause the price to fall naturally' I want you to read the article below.

http://www.bloomberg.com/news/2013-11-01/u-s-gold-coin-sales-this-year-top-2012-as-futures-slump.html

The fact is physical gold purchases are solid and on the rise. Gold miners are doing all of the hard work often producing less than 3 grams of gold to a tonne of dirt while Wall St. and the manipulators control the price they get through paper trade and derivatives.

It seems that all of the gold miners are rallying together now and are engaging in the war. They can see, what I have been pointing out for a while now, that they have been used and abused, chewed up and spat out. It seems like the memo has gone out to all the miners. The memo is their plan of attack, their war strategy. Physical gold demand is increasing yet the paper price is not reflecting this. Miners are questioning why they should sell at a discounted price to the all time high of $1,900 + an ounce just because the manipulators and Wall St. want them to. With all of this in mind it seems the gold miners have formulated a simple, effective and almost vindictive plan to choke the supply of physical gold to expose the manipulation of the paper and derivatives markets.

This choke down of supply is a retaliatory response designed to leave those that have shorted the metal in a vulnerable position. Covering the short positions may become increasingly difficult as I believe gold has moved from weak traders hands into strong investor hands. Below is an article published by Reuters that highlights the response by miners mentioned above.

http://www.reuters.com/article/2013/10/31/barrick-results-idUSL1N0IF1UF20131031

Barrick Gold is one of the stocks I have been signalling as a strong buy at the price range it is currently trading of $18 to $19. Refer to my previous blogs for more discussion. Many other gold miners are restructuring and moving towards only mining highly productive mines. Even Newcrest Mining - another of my strong buy recommendations - at the recent $10 to $10.50 trading range signaled profitability rather than production was key. Here is an article published in July this year indicating the direction Newcrest Mining was going to take in the face of falling gold prices.

http://www.theaustralian.com.au/archive/business/newcrest-cuts-production-costs-as-gold-fails-to-shine/story-e6frg9do-1226685262756

Newcrest Mining has implemented the changes and joined in the war against the market manipulators by beginning the supply choke-down. Gold mining and physical gold production has a very inelastic time frame. Closing a mine or shelving it takes time, reopening it and ramping up to full production even longer. This being said the effects of Newcrest Mining and Barrick Golds moving to reduce costs will impact supply as non productive mines face either a temporary pause or potential closure.
Make no mistake, this is trench warfare, miners vs manipulators. I say the miners will get what they want as demand for physical product will create an even bigger disconnect between the paper/derivatives market and the real physical market.

So just as the pillar of trust among central banks has been broken via currency wars, the trust between the miners and Wall St. has been shattered by the manipulators and lack of penalties or enforcement. The war is now ramping up. It is about to get ugly. Those that ignore the signs and do not buy the miners and physical gold NOW will more than likely end up a casualty in the upcoming stampede of the Gold Bulls.

GOLD is currently trading at $1,315 oz – recommend strong buy
Barrick Gold (ABX) – $18.31 – STRONGER BUY
Newcrest Mining (NCM) on Aussie Stock market – Currently trading $10.00 STRONG BUY
Silverlake Resources (SLR) on Aussie Stock Market – Trading under 70c – STRONG BUY

I hope blog followers bought some JC PENNY at $7.50 – they are up more than 10% since my recommendation about a week ago.

Please do not miss this opportunity on the Gold mining stocks mentioned above. They are an absolute gift as a long term investment with loads of upside in the next few months as the pendulum shifts the money out of equities and back into the precious metals.

If you like this article please forward it on to whoever you feel may be interested. For those of you on twitter you can add me @carneycapital