Our suspicions were confirmed in Davos, when George Soros told the world that Gold was “the ultimate bubble,” only to find out weeks later that Soros had been buying gold hand over fist…
Billionaire investor George Soros’ hedge fund more than doubled its bet on the price of gold during the fourth quarter, a portion of the firm’s total U.S.-listed equity holdings of $8.8 billion at the end of 2009.
And not only did Soros double his bet on the GLD ETF, it’s now his fund’s largest holding, at nearly 10% of his entire portfolio.
George Soros’ Top 5 Holdings:
1.Spider Gold Shares (GLD) - 6,178,342 shares, 9.54% of the total portfolio
2.Petroleo Brasileiro S.A.Petrobras (PBR) - 7,732,197 shares, 5.3% of the total portfolio
3.Hess Corp. (HES) - 5,763,463 shares, 5.02% of the total portfolio
4.Monsanto Company (MON) - 3,879,900 shares, 4.56% of the total portfolio
5.Citigroup Inc. (C) - 94,697,095 shares, 4.51% of the total portfolio
Soros was also substantially adding positons in gold shares during the 4th quarter…
New Purchase: Kinross Gold Corp. (KGC)
George Soros initiated holdings in Kinross Gold Corp.. His purchase prices were between $17.92 and $23.32, with an estimated average price of $19.77. The impact to his portfolio due to this purchase was 0.74%. His holdings were 2,777,000 shares as of 12/31/2009.
New Purchase: Barrick Gold Corp. (ABX)
George Soros initiated holdings in Barrick Gold Corp.. His purchase prices were between $34.58 and $47.93, with an estimated average price of $40.59. The impact to his portfolio due to this purchase was 0.01%. His holdings were 18,300 shares as of 12/31/2009.
New Purchase: Golden Star Resources Ltd (GSS)
George Soros initiated holdings in Golden Star Resources Ltd. His purchase prices were between $3.04 and $4.23, with an estimated average price of $3.48. The impact to his portfolio due to this purchase was 0.07%. His holdings were 1,550,000 shares as of 12/31/2009.
Added: Yamana Gold Inc. (AUY)
George Soros added to his holdings in Yamana Gold Inc. by 243.52%. His purchase prices were between $10.05 and $14.07, with an estimated average price of $12.17. The impact to his portfolio due to this purchase was 0.01%. His holdings were 85,880 shares as of 12/31/2009.
Added: Novagold Resources Inc (NG)
George Soros added to his holdings in Novagold Resources Inc by 33.02%. His purchase prices were between $4.13 and $6.58, with an estimated average price of $5.39. The impact to his portfolio due to this purchase was 0.08%. His holdings were 3,489,988 shares as of 12/31/2009.
Added: Great Basin Gold Ltd. (GBG)
George Soros added to his holdings in Great Basin Gold Ltd. by 70%. His purchase prices were between $1.42 and $1.78, with an estimated average price of $1.62. The impact to his portfolio due to this purchase was 0.05%. His holdings were 5,100,000 shares as of 12/31/2009.
Now why would George Soros suddenly talk down the price of gold, after just having added nearly half a billion dollars to his gold positions?
I think we all know the answer to that. And so does Nobel Prize winning economist Paul Krugman who calls these blatant market manipulations “Soroi,” coining the term in honor of George Soros & Co’s well known market manipulations in a paper he wrote in 1996 while at MIT.
“Scenarios in which crises are generated either by self-fulfilling rational expectations or by irrational herding behavior imply at least the possibility of profitable market manipulation by large speculators.”
(Krugman proposes that such hypothetical agents be referred to as “Soroi”).”
Here’s legendary trader Vic Sperandeo with a more politically correct explanation for Soros’s “Davos diss” of gold…
And now Rick Bookstaber, a senior policy adviser for the SEC, is trying to publicly silence the canary in the coal mine…
From his personal blog (where he makes it clear his opinion is personal, and not the position of the SEC):
I am not going to spend time here talking about how the price of gold is off-the-wall, that it is not just a bubble in the making, but a bubble waiting to burst. I don’t want to waste your time on that point.We all know it is a bubble.
George Soros has said “The ultimate asset bubble is gold”. Many of the top asset managers, such as Tudor and Paulson, are piling on; Paul Tudor Jones recently said gold “has its time and place, and now is that time.” The banks are echoing this view with their research. Goldman has a research piece that looks for gold to approach $1,400 in the next year. The more ebullient Charles Morris of HSBC has said, “I absolutely believe it’s heading into a bubble, but that’s why you buy it. ” He, along with a number of other professional and otherwise rational managers, looks for gold to move as high as $5,000 an ounce.
More interesting than this almost universal agreement is what that agreement tells us about the dynamics of the market.
The Naked Bubble
Usually the markets have the courtesy of giving cover for bubbles. We adorn the bubbles with some justification. Even if a guy is just after sex, he at least has the decency to act like there is some substance behind his interest. For the Internet bubble, it was that fundamental analysis based on the brick and mortar world did not bear relevance in the New Paradigm. For the Nikkei bubble, it was that the crazy P/E ratios were not considering one subtlety or another in the Japanese accounting system.
But with gold, no one seems even to care about giving a justification, other than “gold has been a store of value throughout 5,000 years of monetary history”. Which is fine as far as it goes, but that doesn’t say anything about what the price of that store of value should be.
Pump and Dump
Given that “hedge fund” and “highly secretive” are usually said in the same breath, don’t you get suspicious when so many of the top managers are so vocally out there about their gold investments? And when their positions are structured in a way that make them open to view? Paulson and Soros have huge positions in gold ETFs. We know that, because if you buy ETFs, they show up in your 13-F filing. Granted, with an equity investment you can’t help putting that information out into the market, but with an asset there are plenty of ways to take the position without signaling it.
That they are taking a highly visible route to their positions suggests the game that is being played is one of leading the herd. The 13-F reports positions with a big lag, so no one will notice if they quietly slip out the side door while the party is still hopping. And how about when the view is backed up by none other than Goldman Sachs? Will they let everyone know when they think it has gone too far before they get out. Or before they go short? Maybe they already have.
Herds, crowds, mobs, and the Top Ten
And yet, we follow the herd, as we have countless times in the past. Herding is a timeless and universal market behavior, but one that seems less than rational. It is broader than markets; think of the Top Ten phenomenon. We feel better if a lot of other people think that our favorite artist or actor is The Best. We like a song better if we know a lot of other people are liking it as well. Thus our love affair with lists. Magazines featuring the Ten Sexiest, the Five Best, the 100 Whatever are all best sellers, even if the list is the product of a story meeting between an editor and five reporters.
Herding can be explained as an artifact of what was rational behavior in earlier times, when we were running around as hunter gatherers. Back then, mob and herding behavior made sense. Mob behavior if attacking a competitive group or killing a large animal; herding behavior if protecting against predators or uprooting to a new location. Whatever it was that got started, you could be pretty sure there was safety in having a crowd on hand to finish it.
The very notion of mobs and herds evokes a certain spontaneity. But with the gold bubble, we are moving on to a concept of herding by appointment. Everyone seems to be happy in agreeing that this is a bubble, and we are all going to participate in this bubble in a rational, genteel way. We have all decided that this is going to be a number one hit, a Top Ten. Though we might want to ask who is leading this herd, because my bet is they will be stepping aside and cheering us over the cliff.
I think Rick Bookstaber needs to read Mr. Krugman’s MIT paper on “Soroi” and then listen to “Trader Vic’s” thoughts in the video below, on why Mr. Soros is talking down the price of gold while buying it hand over fist…
Here’s a free preview of Peter Bernholz’s book “Monetary Regimes And Inflation” mentioned by Sperandeo. It’s known as “the bible” on hyperinflation and includes detailed analysis on 29 hyperinflations dating back to 4th century Rome.
So what happened in Nashville, Tennessee? Has the Tea Party movement founded by Ron Paul been hijacked by Sarah Palin? Or, was the so-called National Tea Party convention, just much ado about nothing?
As opposed to the 15,000 faithful who converged in Atlanta, the 18,000 who flocked to Cincinnati, and the tens of thousands who marched on Washington D.C.
National polls reflect that between 23% and 35% of Americans now identify themselves with the Tea Party movement. That means between 50 and 75 million voters have revolted against the political charade known as “the two party system.”
Bottom line: I wouldn’t worry too much about a convention with 600 attendees, with a potential Tea Party support base of between 50 and 75 million voters.
Principles vs. Party
However, the issue of the Tea Party movement being co-opted and hijacked by the Republican Party is a very real one. As I see it, it’s going to be a battle of principles vs. party.
It’s going to be a battle between the founder of the Tea Party movement, Ron Paul, and the front runner for the 2012 Republican Party nomination, Sarah Palin.
And this battle brings up what I feel is the single most important issue for those in the Tea Party movement — “political reality.” And that reality is how our election process works.
What’s accomplished if Tea Party candidates run as independents, split the vote with Republicans, and hand elections to progressive Democrats?
What’s accomplished by independent Tea Party candidates being barred from the major political debates, and punished by campaign finance laws?
A New Independent 3rd Party vs. Taking Over The Republican Party
From Within
I believe the Tea Party movement needs to steal the tactics used by the Alinskyites in the progressive wing of the Democrat party, and take over the Republican party from within.
And that means replacing party driven incumbents and candidates, with principle driven candidates. And that means Tea Party supporters need to rally behind Ron Paul and stop the Tea Party movement from being hijacked by Sarah Palin.
Why not run against and beat party driven Republicans in the primaries, with principle driven Tea Party candidates in the first place?
Why should supporters of the Tea Party movement run independent candidates and end up splitting the vote with Sarah Palin in 2012, or other Republican candidates in 2010?
That’s why the godfather of the Tea Party movement - Ron Paul, now runs as a Republican instead of a Libertarian, or an Independent.
In order for the supporters of the Tea Party movement to take back their country, first they must win elections. And they’re going to have to win elections within a political framework that is unfriendly, if not unforgiving, to third party candidates.
I believe the path to victory for principle driven Tea Party supporters is behind Ron Paul and within the Republican Party. And if the first battle is to push aside Sarah Palin and take back the Tea Party movement with principle, not party driven politics, so be it.
What do you think?
Should those who support the principles behind the Tea Party movement push candidates they support to run as independents, under a new 3rd party, or as Republicans, while taking over the party from within?
A short, sweet, and simple version of a State Of The Union address that was delivered over 2,000 years ago, that is as appropriate for America today, as it was for Rome then.
“The budget should be balanced. Public spending should be reduced. The arrogance of officialdom should be tempered, and assistance to foreign lands should be curtailed, lest Rome become bankrupt.”
– Marcus Tullius Cicero,
Address to the Roman Senate, Approx. 45 B.C.
While the names of empires may change, the errors of their ways never do.
It appears the Climategate scandal is just the beginning of the unraveling of the international banker’s cap & tax, carbon trading, Ponzi scheme.
One day before new carbon emission tax laws were to go into effect, France’s Constitutional Court (the Conseil Constitutionnel) struck down the law because it exempted too many private corporations, and major industrial polluters.
It estimated that 93 per cent of industrial emissions outside of fuel use, including those of more than 1000 of the country’s most polluting industrial sites, would be exempt from the tax of €17 ($27) a tonne of emitted carbon dioxide.
The ruling is a blow for the President, Nicolas Sarkozy, as the measure was one of his flagship initiatives to cut emissions. It also leaves the Government with a €4.1 billion hole in its 2010 budget.”
Congratulations to the French for discovering the obvious…
Giving exemptions and free carbon credits to the major industrial polluters while taxing the people on their energy use and individual carbon footprint - violates the principal of tax equality.
But it’s not just about “tax equality.”
I wrote earlier about how U.S. taxpayers are not only going to lose millions of jobs (the U.S. will lose 2.2 existing jobs for each 1 new Green job created), but will also foot the bill under Obama’s “Recovery and Reinvestment Act” to pay for U.S. corporations to close down their American manufacturing plants and to ship their jobs abroad, where labor costs are lower, and where multi-national corporations will not be subject to carbon taxes and the same environmental laws, that they are in the U.S.
It’s also about creating a monopoly profiteering machine for select international bankers like Goldman Sachs, UN insiders like Maurice Strong, and politician’s like Al Gore and Obama’s cronies in Chicago from the Joyce Foundation…
“The Usual Suspects…Goldman, Gore, And UN Gangsters”
“For any non-scientist interested in the climate debate, there is nothing better than a ready primer to guide you through the complexities of atmospheric physics – the “hardest” science of climatology. Here we outline the essential points made by Dr. Gerhard Gerlich, a respected German physicist, that counter the bogus theory of Anthropogenic Global Warming (AGW).
Before going further, it’s worth bearing in mind that no climatologist ever completed any university course in climatology–that’s how new this branch of science really is. Like any new science the fall-back position of a cornered AGW proponent is the dreaded “appeal to authority” where the flustered debater, out of his or her depth, will say, “Well, professor so-and-so says it’s true – so it must be true.” Don’t fall for that proxy tree-ring counter’s gambit any longer. Here is the finest shredding of junk science you will ever read.
In a recently revised and re-published paper, Dr Gerlich debunks AGW and shows that the IPCC “consensus” atmospheric physics model tying CO2 to global warming is not only unverifiable, but actually violates basic laws of physics, i.e. the First and Second Law of Thermodynamics. The latest version of this momentous scientific paper appears in the March 2009 edition of the International Journal of Modern Physics.
The central claims of Dr. Gerlich and his colleague, Dr. Ralf Tscheuschner, include, but are not limited to:
1) The mechanism of warming in an actual greenhouse is different than the mechanism of warming in the atmosphere, therefore it is not a “greenhouse” effect and should be called something else.
2) The climate models that predict catastrophic global warming also result in a net heat flow from atmospheric greenhouse gasses to the warmer ground, which is in violation of the second law of thermodynamics.
Essentially, any machine which transfers heat from a low temperature reservoir to a high temperature reservoir without external work applied cannot exist. If it did it would be a “perpetual motion machine” – the realm of pure sci-fi.”
In addition to the German physicists, one of America’s top climatologist’s, Professor Richard Lindzen, who is the Alfred P. Sloan Professor of Meteorology, Department of Earth, Atmospheric and Planetary Sciences at MIT, has also debunked the theory of AGW global warming.
Professor Lindzen’s peer reviewed work states “we now know that the effect of CO2 on temperature is small, we know why it is small, and we know that it is having very little effect on the climate.”
Lindzen’s work provides irrefutable proof that the theory of Anthropogenic Global Warming is completely false.
“The Flip-Flop From Global Cooling - To Global Warming”
Thirty years ago, many of the very same scientists who are now selling us global warming, were pushing global cooling, threatening us with promises of a coming ice age that was supposed to arrive by the year 2000.
And not only did they do a complete flip-flop from global cooling to global warming, they got caught fudging the data and repressing any dissent from their peers, including re-writing Wikipedia pages that published any contradictory data.
And not only have they done a complete flip flop from global cooling to global warming…
And not only have they been caught threatening fellow scientists and stifling dissent…
And not only have they been caught fudging data…
Many of them are on public record for admitting that global warming is fraud science and is about selling the people a pre-determined agenda from the United Nations, the private international bankers, and the political insiders who funded them. And those insiders stand to pocket hundreds of billions of dollars of windfall, monopoly profits if global governments go forward with their cap & tax, carbon trading, Ponzi scheme.
Send copies of the articles and reports linked above to your Senators and Congressmen, and send them a copy of these quotes below from the very scientists from the UN’s IPCC (Intergovernmental Panel on Climate Change) who are trying to sell the hoax known as Anthropogenic Global Warming…
“No matter if the science of global warming is all phony…”
“We need to get some broad based support, to capture the public’s imagination… So we have to offer up scary scenarios, make simplified, dramatic statements and make little mention of any doubts… Each of us has to decide what the right balance is between being effective and being honest.” - Stephen Schneider, Stanford Professor of Climatology, lead author of many IPCC reports
“Unless we announce disasters no one will listen.” - Sir John Houghton, first chairman of IPCC
“It doesn’t matter what is true, it only matters what people believe is true.” - Paul Watson, co-founder of Greenpeace
“We’ve got to ride this global warming issue. Even if the theory of global warming is wrong, we will be doing the right thing in terms of economic and environmental policy.” - Timothy Wirth, Former U.S. Senator from Colorado, Under Secretary of State for Global Affairs in the Clinton Administration, and President of the United Nations Foundation (Kyoto Treaty & AGW activist).
“No matter if the science of global warming is all phony, climate change provides the greatest opportunity to bring about justice and equality in the world.” -Christine Stewart, former Canadian Minister of the Environment And UN Kyoto Delegate.
If the global warming, carbon tax scheme is not stopped…
America will lose millions of jobs (2.2 existing jobs lost for every 1 new green job created).
You will see scores of new taxes emerge that will confiscate your existing wealth, steal your children’s future, and create new bureaucracies that will invade, control, and tax every aspect of your life.
This morning on CNBC, Joe Kernen interviewed the man known as “Mr. Yen.” His real name is Eisuke Sakakibara. And for those not familiar with Sakakibara, he is Japan’s former deputy finance minister for international affairs.
For years Sakakibara’s comments moved global currency markets. And this morning on CNBC, “Mr. Yen” did something international bankers and former finance ministers rarely do, he told the truth…
Sakakibara said that U.S. Treasury Secretary Tim Geithner really wants a weaker U.S. Dollar.
The only question that remains, is how weak?
Today Sakakibara said he expected the dollar to continue weakening down to 85 yen, and reiterated remarks he made in September, that the market should expect intervention to defend the dollar should it fail to hold 80 yen.
And even with Sakakibara’s candor about Geithner’s overt weak dollar policy, his target for the dollar may still be optimistic.
In October, Daisuke Uno of Sumitomo Mitsui (Japan’s third largest bank), called for the dollar to drop to 50 yen by next year, and “eventually lose its role as the global reserve currency.”
Uno’s price target for the dollar may be more in step with the expectations of China, Russia, Brazil, and India, all who called for the replacement of the U.S. Dollar as the global reserve currency at the recent G-20 meetings.
And India didn’t wait long to walk it’s talk, purchasing 200 tons of IMF gold, which would certainly seem to signal that they do not sense the dollar being near a bottom. And this morning, new reports surfaced indicating the Indian Central Bank may buy the remaining IMF gold as well.
While Sakakibara and Uno have given us a wide range in which the dollar may fall against the yen, what actual fundamental metrics should gold traders be looking at in which to gauge fair value for the dollar?
For months I’ve been pounding the table on the CBO numbers, as I firmly believe that America’s debt, deficits, and unfunded liabilities are now so large, that they can never be met by ANY combination of growth and taxes, which leaves America with only two choices…
Default on the debt, or devalue the dollar.
And for central bankers, the choice is obvious - devalue the dollar.
So how far do we need to devalue the dollar?
I believe the best answer to that question comes from James Rickards of Omins Research & Analysis.
I posted this video Monday, and if you didn’t take the time watch it in it’s entirety, do yourself a favor and do so now, it’s only a little over six minutes…
Rickards’ thesis is that the U.S. will only be able to meet about half of it’s contingent liabilities and will need to devalue the dollar by 50% to meet the other half. His model has the Fed inflating away the value of the dollar at a rate of 4% per year for 17 years.
He also believes the unspoken agenda that emerged from the G-20 meeting, is the IMF is now running Fed policy and the Fed has been ordered to take the US Dollar off into the corner and to slowly kill it, ultimately allowing for the emergence of SDR’s as the new global reserve currency.
Rickards sees the IMF and the Fed desirous of gold rising at a rate of 7-8% per year against a slow and managed devaluation of the dollar. However, if the market begins to front run the Fed and begins to dump dollars, a collapse is possible and gold would of course skyrocket.
And here’s the bet…
Will the IMF and the G-20 be able to negotiate and coordinate a slow and managed devaluation of the dollar against other global currencies, without it’s members front running that policy and dumping dollars en masse?
China isn’t waiting… they’re offloading dollar reserves for natural resources and establishing non-dollar denominated trade agreements for oil.
And India isn’t waiting… they’re directly buying IMF gold.
How fast the rest of the world wakes up to the planned death of the dollar will determine how high, and how fast, gold continues to rise. At some point in time the price of gold will surely get ahead of the story, but I don’t feel we’re quite there yet.
Technically, while gold has soared to new highs, gold shares are still about 6% off their March, 2008 all time highs. If gold continues to hold this rally, the HUI Gold Bugs Index may be only days away from setting new highs. And once gold shares begin to dominate that IBD list of new 52 week highs, a new herd of technical and momentum oriented traders will enter the gold trade.
With rumors hitting the news wires today that India may buy another tranche of IMF gold, and with talks of an early 2010 Stimulus II being planned, there are still major catalysts on the horizon to send gold and gold shares significantly higher.
Here’s a chart of how I see the present trading channel for the HUI Gold Bugs Index.
While we’re starting to approach the upper band of the trading channel (which is also pointing us toward a direct re-test of the old HUI 518 high), you have to give this rally in gold a chance to pull the HUI Index right through resistance and to new all time highs.
I’ve moved up tight trailing stops to the HUI 460 level which was resistance in October, but became support here in November on this big breakout move for gold. Any penetration of 460 could see the HUI re-test major trend support at 400, and I’m not willing to give back that much ground. HUI 400 would be my target for a re-entry trade on any break of 460.
Move those stops up, but keep a loose leash, and let’s see if gold can pull the HUI through resistance.
SliderOnTheBlack
