Short-term strength in the U.S. conventional stock markets

November 5, 2011

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In this show Al talks to:

  • Segment 1 – Big Al and Peter Grandich discuss the possibility of short-term strength in the U.S. conventional stock markets.
  • Segment 2 – Al and Steve Taylor continue the earlier discussion regarding the U.S. financial markets.
  • Segment 3 – Big Al feels there is great potential for investors in the energy sector. What does Steve Taylor think?
  • Segment 4 – Al and Trader Rog answer listener questions.
  • Segment 5 – James Komadina discusses the future direction of International Tower Hill Mines.
  • Segment 6 – Craig Lindsay provides an update on Otis Gold Corp.
  • Segment 7 – Greg Myers provides an update on Caza Gold.
  • Segment 8 – Big Al wraps up the show with Bob Moriarty who shares his views on economic and investment issues.

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Click download link to listen on this device: Download Show

Click download link to listen on this device: Download Show

Click download link to listen on this device: Download Show

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    Nov 05, 2011 05:27 AM

    It appears both Italy and Greece will have crises in February.

    Greece it appears will have elections.

    Italy, whose 10-year bond temporarily hit 6.7% before falling back to 6.4%, will run out of cash flow in February.
    (&% is reckoned to be the point of no return on interest rates.)

    And while the failure in Cannes was grabbing media attention, back in Brussels the MEPs were discussing extending welfare benefits to new immigrants (Even illegals) from non-EU countries. What part of BROKE don’t they understand? Les Idiots!

      Nov 05, 2011 05:25 AM

      We need to remember those EU droids, Barrolo and vanRumboy, who stressed that Italy is sooo different from Greece. True, it’s much larger, and they build Chrysler-Fiats.
      Just saw a report on Swiss TV. With the regular housing for poverty immigration overflowing with people who just can’t find anything to grow, service or reconstruct in Libya or Tunesia, “refugees” are now complaining about being accomodated in sparkingly well-kept civil defense bunkers in the Zurich area, one guy was “expecting rooms with maybe four or five beds.” Yeah, right, how about four or five stars, all-inclusive, dude?!

        Nov 05, 2011 05:40 AM

        Mr. Gundhi,

        The “something for nothing” mentality is the worst thing that is currently happening to the society of the world with the unfortunate exception of the Far East.

        Big Al

      Nov 05, 2011 05:38 AM

      Common cfs, extending welfare benefits to new immigrants?

      That is more than just crazy!

      Let us know how this particular discussion turns out.

      Regarding Cloudy Costa del Sol, I played nine at the end of the day yesterday in the rainy Northwest. And, guess what, three days with no clouds and sun! (It was however about 41 degrees F.

      Continue to have a great trip,

      Big Al

    Nov 05, 2011 05:29 AM

    You bought shares in one of your companies, Big AL. Which one? Did I miss the 3-day announcement?

      Nov 05, 2011 05:46 AM

      I bought shares in International Tower Hill Mines. Not a large amount (full disclosure, it was $10K worth. I paid in the open market about $5.25 per share.)

      You are right, I broke my word. I should have waited until next Tuesday. No excuse on my part.

      My rational was that I did announce prior to the purchase (although not three days) and I was convinced that $5.25 is an absolute give away price. I actually think that even a couple of bucks higher is still absolute give-a-way. (Please, not investment advice on my part.)

      I listened to what some of you said regard the folly of my three day notice and I spoke with others in the business and they all agreed that it was folly.

      Since this is of concern, I will go back to the three day notice unless enough of you state in this forum that you don’t think that it is necessary.

      My apologies,

      Big Al

        Nov 05, 2011 05:36 AM

        Hey Big Al,

        I sure appreciate all the time and effort you put into this website; and I have to say, your patience with some of the comments goes way beyond what I could muster.

        On the topic of “three days notice”. It may not be necessary, but it sure puts you way up about ten notches above others in the business.

        I used to listen daily to another precious metals program, and even subscribed to their $50 per month reco sheet. Until I discovered that not only did they buy and sell before the recommendations came out, but after they issued a “buy” they would start shorting. That kinda turned me off.

        Sunday’s coming … have a good one!


          Nov 05, 2011 05:03 AM

          HI Irwin,

          I agree with you.

          The writers who you referred to really make me angry.

          I will say that at least I announced that I was buying the stock before the market opens on Monday so my little purchase will not hurt anyone. The stock closed Friday at $5.37.

          Never will happen again.

          Big Al

        Nov 06, 2011 06:09 AM

        I’ll just wear my heart on the sleeve a bit and say that I greatly appreciate someone offering a higher level of integrity than average. I strive for doing such (maybe not always achieving it).

        However, Al, you cannot compensate for the lack of integrity of others, and certainly not by going beyond any customary and normal practice by imposing what could be a serious material constraint upon yourself. Like any of us, you can check a balance sheet and income statement in minutes and determine if it’s time to buy (or buy more) of a stock….yet you then have to wait 3 days, when I hear it all here and use the info right away?? That’s not fair to you or your family. Another example: It’s prudent to put stop limits or conditional buys in, based on a price or time. Theoretically, you could not use these common techniques based upon your current 3 day policy. Even if you don’t trade fast on the technicals, you need the flexibility to execute an order quickly, just like the rest of the world.

        Al tells everyone regularly that he’s not giving advice, and that ‘this is what I’m doing’. That’s all the disclaimer anyone should need. He’s not on the board of a mining company. About the only reason I could ponder for the 3 day policy is his close relationship with many in the industry, might give him potential inside information. Al, if you’re acting on publicly available information, trade! And if you have learned something that is inside-information, fine…there are rules to proceed with that already. Gosh knows…we usually hear about something 5 minutes after you do from your daily updates anyway (all of which are completely free).

        You don’t need to give a 3 day notice for my sake. I’d respectfully suggest that if anyone thinks you do, ask them what they are getting from this website, and what they give up to obtain it. (a lot, and nothing, in that order)

          Nov 07, 2011 07:40 AM

          Thanks JW,

          I appreciate what you said.

          I have a real problem with front-runners. Without naming names I will say that there are a few pretty well known folks who are masters of this. (All I will say is that none of them are ever on this show.)

          I feel really badly about buying ITH last Friday instead of waiting because I had told people that I would wait.

          In the future, I will always disclose what I am doing up front. Maybe I don’t need to give three days, but at least one day so that others can also act seem appropriate to me.

          By the way, we are going to be in Scottsdale either just before or just after the Cambridge Show in Palm Springs. Our neighbors live there 8 months a year and we are planning on visiting them for a few days.

          How about a beer?

          Big Al

    Nov 05, 2011 05:30 AM

    For &% above read 7%.

    Nov 05, 2011 05:01 AM

    Does BIG AL or the Sage TraderRog have anything to say about the apparent change in margin requirements by the CME announced late on Friday?

    Performance Bond Requirements
    All Products
    Initial / Maintenance Ratio: Current= Various New=1.0


      Nov 05, 2011 05:47 AM

      HI Tex,

      I will ask Trader Rog to comment on this.

      Big Al

    Nov 05, 2011 05:19 AM

    Like your site but unfortunately, iy’s not iPad compatible and consequently have not listened to any of your interviews since I got my iPad. Any chance this will change in the future?

      Nov 05, 2011 05:13 AM

      There are two ways to listen to KER on your iPhone/ iPad:
      1 – Go to any article on the site, and click the “Download Show” link that appears right after the large gray box that tells you the iPad doesn’t support Flash. This will open the show directly on your iPad.
      2 – Subscribe to our podcast via iTunes by using the link in the right column. This will download all the latest shows to your iPhone automatically when you sync with iTunes. Thanks for listening!

    Nov 05, 2011 05:26 AM

    there is enough ” GAS and WIND” in WASH run the country for the next 1000 years.

    AL…..Don’t worry about the coal miners….china will take all the coal we have…
    do some heads up reading, they have been trying to get nat. gas going since 1970….as long as there is Big Oil…it IS NOT GOING TO HAPPEN. It IS ALL POLITICAL , BIG OIL PUTS
    THE PRESIDENT IN OFFICE…and has since NIXON..that is HISTORY…
    Steve,SEC 3, needs to do some more reading…on the background of big oil , coal,and.nat. gas..
    I under stand OBAMA is looking at condos…in DOWN TOWN ATHENS.,.IN EXCHANGE FOR

      Nov 05, 2011 05:32 AM

      check with irish tony on the condo..for Obama…I understand irsih has boots on the ground in that region , and he is also looking for a unit next door to Obama..just so he can keep us informed..

        Nov 05, 2011 05:58 AM

        Hi Jerry,

        Mr. Irish is a very valuable contributor to this great forum.

        I am pretty interested in energy specifically natural gas. I will do more research on this topic.

        “Condos in downtown Athens”?

        I don’t know, today nothing surprises me.

        Big Al

          Nov 08, 2011 08:41 AM

          the condo was a joke,,,(for all those serious people out there)

    Nov 05, 2011 05:31 AM

    Joe, I listen to the interviews and daily insights here on my iPad all the time. You should be able to, as well. Just click where it says “Download show,” next to where the Flash audio streaming box is. A player will come up. If it doesn’t start playing, just click the play button.

    On a side note, but I’d guess quite urgent, what are we all going to do before Sunday night/Monday morning, to protect ourselves before the margin hikes bring about maybe another crash in silver and related investments (ie., shares and ETF’s, like AGQ)?

    This CME hike seems very scary to me. Dan Norcini has a lot to say about it:

      Nov 05, 2011 05:59 AM

      Hi Ryan,

      I will ask Trader Rog to comment on this one also.

      Big Al

    Nov 05, 2011 05:50 AM

    bob seg8…
    …AL….”is a man ahead of his time….”,,,(better early than late)

    ….BOB….”is a man for all times…..”,,, (even when you don’t like what he says).

    Great show…thanks…ootb…jerry

      Nov 05, 2011 05:00 AM

      Hi Jerry,

      Yep, I was pretty happy with this one too.

      Have a great weekend,

      Big Al

    Nov 05, 2011 05:12 AM

    re: segment 2. Very interesting comments concerning Obama’s 12 months left & it taking longer for that for policy change to kick-in.

    Sure, he wants 2 terms. Wouldn’t be surprised if with all this domestic havoc in the US & ‘occupies’ gaining momentum & the ensuing uptick in protests, civil unrest etc, that closer to Nov 2012, Obama calls marshall law & ‘postpones’ the elections.

    Am I just being a wee bit too conspiratorial?

    Mind you, Cameron & his clowns aren’t too bright over here either!

      Nov 05, 2011 05:02 AM

      Morning Naomal,

      I think that perhaps you are being a little too conspiratorial.

      The President will get re-elected because the Republicans so far have not gotten their act together.

      Big Al

        Nov 05, 2011 05:20 PM

        Hi Al,
        I do believe that any Republican candidate will be far better than Obama and I also think that most people are wise to his blame game, class warfare which is fueling the flames at the occupied everywhere. Also more awareness to his communist ties and the fact that all his policies have failed. Also, the house has passed about 20 bills which would help create jobs and the senate will not even look at them. Thanks to Harry.

          Nov 06, 2011 06:20 AM

          “….Any Republican….” I don’t think so. When the Republicans were in complete control, they destroyed our domestic economy; Obama just made it worse (especially with Obama care).

          I’d vote for Ron Paul and maybe Michelle Bachmann. After that, it’s just more of the same big government Republicans trying to bamboozle the public so they can yet again out spend the Democrats and grow the police state. The only difference between the two major parties is which set of cronies get to enrich themselves at the taxpayers’ expense. Even that distinction is becoming blurred.

          Our world (and America) is way beyond the Communist Fascists ping pong game. It’s the plebes vs the totalitarians–one has the numbers while the other the money and power–and are trying like crazy to hang on to both….

          Take the Greek Prime Minister, for example. He was summoned by the Totalitarians and offered a deal he couldn’t refuse. Meanwhile back at home, a rising tide of angry mobs celebrated his return after receiving his ‘sermon on the mount’ –so to speak.

          At least give Obama credit for not ponying up more US taxpayer dollars to fund European sovereign debt bailouts–and he did look lonely during the G-20 photo op. news clip run by the corporate media (aka mainstream media). I’m sure the temptation was there–giving all those taxpayer subsidized high speed rails zooming around Euro-Land–and all Obama gets is AMTRAC!

          However, not to worry, Helicopter Ben is more than ready to wing it again. So, the sky is the limit, and the backdoor is always open no matter who sits in the White House.

            Nov 07, 2011 07:43 AM

            Hi BJ,

            Not a big supporter of the current administration, I will agree with you that the President not willing to pony up more for Europe was a positive action.


            Big Al

            Nov 07, 2011 07:07 AM

            Big Al,

            I have to reply to your reply. I’m not a big fan of Obama either, period. I”d never vote for him, and I never believed he would keep any of his promises for “change I could believe in” Remember that snazzy come on? Well, first he said it, and then he didn’t do it! Instead, it was runaway Marxism. His carbon tax was way over the top, and too bad Obama-Care wasn’t defeated in Congress as well; and that’s just for starters.

            I’m just not a partisan, and I give credit where credit is due–both the good and the bad on both sides, where most of the blame goes to those who’ve been in power the longest in the build up to this fiasco–the Republicans. They took us to this place in history and now want to play “who done it” games. In my perfect world, we’d send our all August leaders down the same river they sold us down. Maybe term limits would be a good first step. But wasn’t the part of the original Republic contract with America? That was some of that ‘Republican change we were supposed to believe in’.

            Funny how fast Republicans changed their tune was they got the power and access to other peoples’ money. Promises, promises: Lie like hell, spend like crazy, and sell their votes to the highest bidder. Now there’s the true credo for both major political parties here in the US.

    Nov 05, 2011 05:12 AM

    Big Al,
    I want to comment on JOBS today. Lets face it, the govenment numbers are nowhere near John Williams’ at shadowstats. The added jobs, IMO, are seasonal retail jobs, minimun wage, part time, short term no benefit jobs.
    I spend some time volunteering at food banks, i recommend that you and your readers stop by one (in your neighborhood) and talk to the people. The first thing that you will notice it that they look just like you and me. Two stories from yesterday:

    Real estate agent (wife) Painter (husband), Husband has not had a job in 3 weeks. Stated that everyone is a painter now. (licensed or not) We all know that real estate is hard due to lack of funding, for many reasons. They are living on credit cards (obtained during the good times). Are able to make their house payments and car payments and truck payments. However they have had to cancel all medical insurance, medications for her MS and heart issues and cut back on everything else. She was happy to recieve a package of meat for their dinner.
    Another quick story was about a working lady, low wage, received a raise of .25 ah hour for doing a good job. This raise put her over the limits for food stamps and therefore had to see if the Christian food bank could help.
    I would urge all readers to Open their eyes and count their blessings if they can still place a meal on their table for their family.


      Nov 05, 2011 05:08 AM

      Morning Bobby,

      Good for you. More folks need to do just that.

      I volunteer also. The reason I do that is because I firmly believe that we all have to give back to our community.

      Kathy is involved with the Ladies Club up here and it is now emphasizing philanthropy. Here is a heart warming story. The first big event was a few months back and the Club raised a fair amount of money due in part to a local restaurant owner who donated the entire evening at his “hard” cost. The even sold out by the way.

      The Boy’s and Girl’s Club that I referenced earlier at the Fundraiser late last summer brought in $90K which was an all time record.

      We gotta keep working my friend,

      Big Al

      Nov 06, 2011 06:22 AM

      Great points Bobby. I’ve taken several special trips down to a local food bank, with food of course but also the razors, plastic bags, work boots, etc. I also know someone on food stamps and the crazy donut-hole situation that can occur (someone who genuinely is on Social Security).

      Unfortunately, of the 535 people milling around in the Congress and Senate, I honestly mean it when I say that perhaps 2 or 3 have actually run a business and created jobs. These people just have no clue what it takes to make a job out of thin air. I haven’t had the luck doing so that I would have like, but after 4 small biz’s and counsel to several small others, I have a pretty good idea of what works, and what certainly doesn’t.

      Sorry to turn it a bit cynical and political, but you are absolutely correct in the points you make.

        Nov 07, 2011 07:45 AM

        Hi JW,

        Anyone who has never been self-employed does not have a clue as to what life is really all about!

        Big Al

    Nov 05, 2011 05:31 AM


      Nov 05, 2011 05:09 AM

      Morning Roger H,

      Great point regarding the Dow!

      Big Al

        Nov 07, 2011 07:23 AM

        The same thing applies to Social Security. They claim SS costs are sky rocketing; but when I paid my dollar into SS, I could buy a candy bar for a nickle, now it costs north of a dollar, and sometimes just south of two bucks depending upon where I buy it. But we don’t have inflation, oh no….

          Nov 07, 2011 07:38 AM

          But of course BJ, food (a term I might use loosely here) is not included in the CPI. Neither is oil. Or government taxes.

            Nov 08, 2011 08:02 AM

            I know, I know, and you can add domestic use water to the list of tangibles that don’t fit their virtual models.

            And yes, one of the greatest costs of living during my lifetime have been the costs of government at all levels–not just in taxes, but fees, fines, surcharges and other revenue enhance schemes Republicans like to use because as we all know: “Republicans don’t raise taxes”. They prefer to rewrite the dictionary, and when all else fails, they just raise debt ceilings and sell bonds.

    Nov 05, 2011 05:43 AM

    Al: As per second segment with Steve Taylor, I tend to side with Steve on your discussion. My opinion from a political economic point is, the market is doing well because it anticipates the US removing Obama from Washington next year. This in part is similar to what happen when Reagan was running against Carter, only much sooner because during 1980 before nomination the market was unsure about who would run against Carter and what the outcome to the economy would be. This time the political economics is telling us that to the Nation it does not matter who runs against Obama, because anyone is better. So in effect the markets are reacting positive to Obama’s negatives in the electorate.

      Nov 05, 2011 05:43 AM

      Al: Do you agree or disagree?

        Nov 05, 2011 05:24 AM

        HI Clay,

        I am going to do a quick Daily on this. Short answer, is I don’t think so. I will elaborate.

        Big Al

    Nov 05, 2011 05:12 AM

    Bob Moriarty is an idiot. Last on your show, he said Ag was a bad investment. Now he says Au may go down to 500$ but would buy more because of deflation. What garbage!! Stay away from his site. He is wrong 90% of the time. Yeah the mining shares may be a good buy now, but that is pretty much a general concensus.

      Nov 05, 2011 05:27 AM

      Morning Mr. Martin,

      I think you might have taken what Bob said wrong.

      I interpreted what he said as follows: “Even if gold goes down to $500 it will continue to have more value than anything else.”

      Regarding silver, yep he did say it would go down in value. And it did. It went from the high forties to the low thirties. It is doing quite nicely now however. I did not agree with Bob when he said that he was looking for silver to go to the low twenties and, in fact, to date it has not.


      Big Al

        Nov 05, 2011 05:51 AM

        If gold goes to $500, it would obviously not have outperformed the dollar. On Nov. 2, Bob said “For months I have been suggesting that cash was the best investment…” and “…cash was the best investment since May…” Wrong Bob. Gold was the best investment since May.
        Could gold go to $500? Possibly. Will it? No.

          Nov 05, 2011 05:07 AM

          HI Matthew,

          Thanks for your input.

          You know, I like Bob but this is simply another example of people are not correct all the time.

          Big Al

      Nov 05, 2011 05:34 AM

      George: Everyone has their own idiosyncrasies especially and idiot like myself. But whether a person says one thing or another, right or wrong, might be material and important in context, it is their intentions and motives that are most important. Bob is a good man, his intentions are good. Sure gold may drop $500, but the most important things to keep in mind is what is likely to happen in the US in next 5 years. If fiat currencies all fall hard, gold will either go to $10,000 or be illegal. If the US enters a corrective phase in order to last another century where corruption and crimes in finance and government are removed, then the US will be on some kind of gold standard. If the country goes into tyranny, then it won’t last a decade.

        Nov 05, 2011 05:08 AM

        Thanks too Clay for this input.

        Big Al

      Nov 05, 2011 05:38 AM

      On August 1, 2011, Moriarty said: “…silver has had its bull market top.”
      Does anyone agree with Bob? I don’t.

        Nov 05, 2011 05:27 PM

        Don’t know if right now, silver isn’t just being dragged along by gold. But I really missed Bob taking some side on the recent Silvercorp issues. He was there in 2006, and when I looked up his old report,
        read his story about that steep mine entry and saw the photographs of the small boats, I was expecting him to give us his take on the company’s development since. Might his crawling at that mine have persuaded him that it’s just too hard for him to publicly interpret what the Chinese are really up to?

    Nov 05, 2011 05:15 AM

    A must read by everyone. Why the existing financial system is collapsing. A very good and short synopsis.

    Nov 05, 2011 05:00 PM

    Hi Al,
    The most important fact in all this is that the global policy makers, (G20), will dictate what the countries will do to resolve the existing mess. I cannot agree with Bob because the G20 will not allow any country to break away form the EU. They will do whatever is needed to prop everyone up which is money printing. We will have inflation around the world.

      Nov 07, 2011 07:05 AM

      Morning Karen220,

      You could very well be correct, but at this point I don’t think that is the case.

      Time will tell,

      Big Al

    Nov 05, 2011 05:44 PM

    Al and Steve,
    You did not cover one of the best new applications for natural gas–a fleet of trucks operating on LNG. Westport Innovations already has demonstration trucks on the road and West;port holds over 100 patents defining their technology. The concern here is safety as you can imagine but considerable progress is being made.

      Nov 07, 2011 07:06 AM

      Morning Dale,

      I will definitely look into Westport Innovations.

      Thanks for the tip,

      Big Al

    Nov 05, 2011 05:31 PM

    The US is the “cash cow” for the world. National distinctives, ie. (borders, language, and culture) are insignificant. We are all citizens of the “World” now. America, the wealthiest nation, is being used to even out the economic and social disparities around the globe. After all, it’s completely immoral and unjust that one nation should be so rich and others so poor, right?(tongue in cheek) We are witnessing the greatest transfer of wealth that the world has ever seen. And we’re supposed to just shut up and go along with this wholesale robbery of a nation, and accept our place as “serfs” for the greater good of the central banksters, robbers, and barons. Right! Not me! Au/Ag all the way!! Look for runs on banks and bank holidays, coming to a city near you.

      Nov 07, 2011 07:08 AM

      Morning Mr C,

      Don’t you think that maybe the “cash cow” prize might be shifting to China?

      I completely agree with everything else you said,

      Big Al

    Nov 05, 2011 05:28 PM

    Al do you think we’ll get a QE3 when the economy seems to be doing better than expected?

      Nov 07, 2011 07:09 AM

      Morning TiKi,

      After Dr. Bernanke’s press conference, I am not so sure that the economy is really doing better than expected.

      I put a little more credence in what John Williams says.

      QE3? My guess is yes!

      Big Al

    Nov 06, 2011 06:58 AM

    Big Al:
    You can put me on the list of people who think you do NOT have to give 3 days notice before buying stock. I think it is nice and honourable that you have done that on many occasions in the past, but I just think that more often than not, you’d probably be hurting yourself because the price could easily be higher by giving that 3 days notice. As far as I’m concerned, just buy the stock when YOU want, period.

      Nov 07, 2011 07:11 AM

      Morning Bruce S,

      Thanks for the vote of confidence.

      Big Al

    Nov 06, 2011 06:06 AM

    It looks like the CME news was misinterpreted in the blogosphere, and is nothing to worry about, after all:

    Nov 06, 2011 06:25 AM

    Hi Al; On the issue of giving 3 days notice, I am in the same position with my newly launched website and my conclusion is that since I rarely put more than $1000. into any one position I am not likely to move the market. Since the market itself has very high volatility the chances are just as good that prices will DROP over a 3 day period as that they will rise, and I have verified that with recent purchases. Since you can’y please everybody no matter what you do I would be inclined to go with the majority responses.

      Nov 07, 2011 07:17 AM

      HI Myron,

      Many thanks for the advice.

      Big Al

    Nov 06, 2011 06:33 AM

    AL: Since you regularly discuss economics from an Austrian point of view and most people are so brainwashed they are unable to objectively look at things from a mathematically sound perspective, you might just learn something from the following essay that pulls no punches and discloses things rarely discussed by economists in general. ENJOY!

    Subject: Myron’s Musings – Compounding in Reverse

    The essence of capitalism is embodied in the well known phrase, “the magic of compounding” and any economist worth his salt has used it to promote various and sundry financial instruments that have proliferated over the decades. I could give myriad examples of the difference in results over 20 yrs. or 40 yrs. of simple things likes cutting mutual fund fees by a quarter percent, or a mortgage rate by 2 or 3/10th percent for example. For many people that may seem insignificant, but can make a dramatic difference over a long enough period of time. This premise was the foundation of the popular, but now severely flawed mantra to “Buy & Hold” put out by Wall St. & Bay St. to keep people invested in their products, like mutual funds for example. As we will learn, there is a darker side that is only now being exposed.

    Suffice it to say that in past decades, under the capitalist system, it indeed made sense to SAVE and put aside money regularly as soon as possible in your working or business career. The more you saved, the sooner you saved, the greater the compounded result. This was in preparation for a secure retirement, and it worked for many people for the past few decades. The truth today is it is almost impossible to find a debt instrument that will pay a true return in excess of actual non manipulated government statistics on inflation, but who understands and has explained WHY?

    Today we face a totally new paradigm most investors and average income earners have not yet grasped or adjusted too. Given current economic conditions in the world I think it is time we took a long hard look at the opposite side of the equation of the popular mantra referred to as, “the magic of compounding” through investment in debt instruments.

    With interest rates at basically ZERO, even below the rate of inflation, the incentive to save has largely been removed, to say nothing of people being enticed to borrow at “teaser interest rates” making instant gratification almost ir-resistable for people wanting all the new toys, big screen televisions, I Pods, I Pads ad infinitum. It is so painless until you over extend yourself as we now see even governments have done. Politicians tend to promise the world to get elected and then run deficits to keep at least enough of their promises to get re-elected.

    This train of thought was triggered while reading an excellent essay by John Mauldin on the potential for hyper inflation, and while he concludes it will not happen here, I am not as certain as he is. The subject is much in the news these days with the sovereign debt problems in Europe engulfing half a dozen nations, to say nothing of the profligate uncontrolled spending creating a fiscal dilemma for the United States that can also have world wide implications. I highly recommend you read Mr Mauldin’s article for balance, which you can access at the following URL: from which I quote: “to understand the incomprehensible scope of the German inflation, maybe it is best to start with something basic — like a loaf of bread. (To keep things simple we will substitute dollars and cents for marks and pfennings. You’ll get the picture.) In the middle of 1914, just before the war, a one pound loaf of bread cost 13 cents and 2 years later it was 19 cents.
    Two years more and it sold for 22 cents. By 1919 it was 26 cents. (Double in value on a mere 12% compound inflation – JM). Now the fun begins.

    In 1920, a loaf of bread soared to $1.20, and then in 1921 it hit $1.35. By the middle of 1922 it was $3.50. At the start of 1923 it rocketed to $700 a loaf. Five months later a loaf went for $1200. By September it was $2 million. A month later it was $670 million (wide spread rioting broke out). The next month it hit $3 billion. By mid month it was $100 billion. Then it all collapsed [as if a roughly 8 billion times rise in cost wasn’t already collapse! Hint of irony here. – JM] ” COMMENT: Indeed, talk about a snowball rolling down hill, note the rapid escalation once inflation took over the market!

    These statistics are readily available, and have been quoted by many writers, but the interesting thing is that in all the reams of words and debate over the weeks and months about how to SOLVE our current financial problems it all seems to revolve around creating even MORE DEBT, when excessive DEBT is already the problem.
    I have not heard of anyone in positions of power and ability to make constructive changes ask questions about whether “excessive debt” is an indication of a STRUCTURAL PROBLEM with our monetary system? All solutions proposed it seems to me, are attempts to “save the system” while using demonstrably FAILED tactics that do not deal with fundamental flaws in the system. Brings to mind one definition of insanity; “doing the same things and expecting different results” and I could elaborate extensively on that, but wish to stay focussed on my titled thesis.
    I submit that the German experience in the 20’s is a classic example of “compounding in reverse” the dark side of the fractional reserve, fiat, debt financing system, that lacks “checks and balances” since we went off the gold standard in 1971. WHY are economists not thinking outside the box and asking whether growth has to be financed by debt instead of savings? Has anybody ever suggested government on behalf of the people extend credit for needed infrastructure using our natural resources and available labour, taxing it back interest free over the life of what is created, instead of in-debting people to private bankers to finance it with DEBT, and ending up paying DOUBLE?
    They might also ask, WHY do a certain class of people have a monopoly on essentially counterfeiting actual money (gold and silver) with what are in effect debt based I.O.U.’s created out of thin air? There are better ways of structuring our financial system that are simply not being explored because of powerful financial interests that benefit from our debt enslavement.
    Now comes the controversial statement establishment trained and educated thinkers will at first have trouble comprehending, and will probably vehemently protest it as preposterous and disparage it as nonsense, but simple mathematics says otherwise.
    WHY you ask, very simple, because under the fractional reserve system “every bank loan is a new creation of money, and when it is paid back it ceases to exist” testimony of Graham Towers then Governor of the Bank of Canada in 1939 before a Parliamentary Committee under oath. What this means in practical terms, is that since ONLY the principal is created when the loan is made, but over the course of a 25 year mortgage at average rates, an EQUAL amount is paid back in interest, as well as the original amount of the loan being cancelled out.
    “Net result, on average over 25 years, TWICE as much currency is taken out of circulation as was originally created out of thin air as DEBT that must be repaid with interest. This is only possible through continual and growing indebtedness on a collective (societal) basis. The bankers get a free ride, while we the taxpayers (through bailouts) pick up the tab for their profligate unsound loans and generally risky behaviour, if not criminal attempts to keep us enslaved to a monopolistic and corrupt system of perpetual debt, cleverly disguised and deliberately mislabelled as CREDIT! ”

    Practically then, the only way that uncreated interest can be paid, is by an exponential increase in the number and size of loans. In other words, the uncreated interest simply accumulates into an ever growing pyramid of debt that ultimately becomes un-payable because eventually banks run out of viable collateral against which to make new loans. Equally relevant, it says nothing about a lack of bank reserves to do so, because people are unable to save under this very oppressive system. It is not only unconstitutional as Ron Paul consistently points out, but I contend should be outlawed for the Ponzi scheme that it so obviously is, and the perpetrators charged with FRAUD!
    I submit based on the evidence of our economic situation today that we have reached, if not surpassed, that point of no return where the system is no longer viable in its present form. In other words, the “magic of compounding” has now turned against us, and what we are compounding is now “DEBT” constantly adding new layers stacked upon previous layers that can not be paid, and at best keep getting rolled over into a growing debt pyramid.
    That can not continue much longer since we have progressed (sic) from a family living comfortably on one salary, to barely being able to make ends meet at near zero interest rates, when BOTH parents are working. With rising taxes (as high as 50% disguised interest) maybe even adult children are living at home to make ends meet while they pay off student loans, a recent layer of new debt that can not be discharged in a bankruptcy, so they are stuck for life as a debt slave, and some may not even be able to find a job and end up recruited as cannon fodder in some new war contrived as a pretext to revive the economy.
    SCARY when the only solution being offered is additional new layers of debt the politicians and bankers want to saddle the taxpayer with for endless generations. All to try and save a system that has made them rich and turned 95% of the population into debt slaves with an increasing number of people impoverished, if not outright destitute as they lose jobs and homes, to say nothing of the plight of retiree’s on fixed incomes.
    The architects of this pyramid scheme are running scared because they are beginning to grasp that once the dominoes begin to fall it could quickly be curtains for their nefarious scheme and it could well be triggered by derivatives which famous investor Warren Buffet correctly labels as “financial weapons of mass destruction”!
    My conclusion is that: “the magic of compounding ” is quickly turning into the nightmare of fiscal collapse.

      Nov 06, 2011 06:15 PM

      Myron….great post…hope people read this

    Nov 06, 2011 06:34 AM

    AL, do you still like Exeter Resource T.XRC ?

      Nov 07, 2011 07:19 AM

      Hi Art35,

      I have spoken numerous time with Yale and Rob. At this point I personally still do like Exeter.

      As a point of interest, we will be doing a Daily Editorial on Exeter either today or shortly thereafter.

      Please do not construe this as being investment advice because it is not.

      Big Al

    Nov 06, 2011 06:19 PM

    I was actually paraphrasing from a ? to Bob Chapman re: My Moriarty
    The ? was Subject: Bob Moriarty
    Do you know this guy? On the Korelin report, he said that we shouldn\’t be surprised if silver went back down to 20 before going back up again. What do you think? Thanx, George

    Bob Chapman’s answer was:

    That tells you that Moriarty is short silver and is getting his head handed to him. This guy is a first class skunk.
    Over the years I only know of twice that Moriarty was right and to think I helped him get his site underway 15 years ago.

      Nov 06, 2011 06:30 PM

      I would agree with Chapman. Moriarty and his hero Hoye both got everything wrong last fall — especially silver. Imagine being short First Majestic @ $4 just before it’s launch to $27! No wonder he’s pissed off! He also has a history of pretending his predictions were more accurate than they actually were. For instance, in March, with silver at $34 (before it went to $50), he said with certainty that the next $15 move would be DOWN. He was wrong, but that’s not how he sees it today. He is not a humble person.
      Those derivatives that have Bob so scared will do what they were intended to do: transfer wealth to the elite banking interests (via bailouts) and simultaneously destroy their competition. Inflation is how the big banks get paid. Consider the “bailout” of Greece. It is really a bailout of the banks. All Greece gets in the deal is a new creditor (master) and lost sovereignty. Just as happened in the 1930’s, there will be a huge consolidation of power in Europe and the U.S., since the “solutions” all come with strings attached.

        Nov 07, 2011 07:23 AM

        HI Matthew,

        The world we live in is very interesting. What you think you see is not always what you get.

        That is why I stress, listen to everyone and then make up your own mind.


        Big Al

      Nov 07, 2011 07:21 AM

      HI George,

      Only comment I can make is that Mr. Chapman has not been on this program for something over six years.

      Bob M. is a very bright and interesting guy and Bob C. is a very successful newsletter writer living in Mexico.


      Big Al

    Nov 06, 2011 06:58 PM

    Well said Matthew and to Clay in his reply above- Moriarty may not be the “good” guy you think he is, including his intentions

      Nov 07, 2011 07:25 AM

      Hi George,

      Note my comment “What you think you see is not always what you get. Listen to everyone and then make up your own mind.”

      That is my philosophy and what I have done for quite some time now. This philosophy has treated my family and I really well.


      Big Al

    Nov 07, 2011 07:46 AM

    Regarding the CME margin discussion: This dust-up started because of the upsets at MF Gobal. The first remarks and reactions were quite dire and then the CME clarified the rules. Customers transferring out of MF GLobal to other clearing houses need some space and breathing room. The CME is setting the initial margin upcharge to zero. This charge is normally applied to customer accounts when they get a margin call. This is a fluid situation. Our broker has said nothing on this this morning so for now we see no changes. I think the CME is making it easier for customers to transfer and not have to install more capital to trade; especially on open trades. We will be monitoring the situation and will produce a response when more is learned and or changed on this Monday morning – Traderrog

    Nov 07, 2011 07:42 AM

    Hi Big Al and Trader Rog,
    Thanks for a great show, profitable format, and your selection of guests. Like many of your readers(apparently), I do not always agree with all your guests all the time, the most recent example being Bob Moriarty. One thing I’ve learned in my short 50 years of living is that there are as many opinions as people, and I will seldom if ever, completely agree with someone all the time. That being said, while I disagree with some of Bob’s forcasts and outlooks, he does have some worthwhile things to say(noone is always wrong all the time). I like being able to pick and choose, slice and dice, pick and poke, analyze and discern, and then take away what I believe is useful for me and fits into my plan and program. I like it that way. The alternative would be to be spoonfed just exactly and only what I need, which is unacceptable to me along with being practicably impossible to achieve. Those that criticize Bob M. so ardently, might want to consider what the alternative would be if you did not have people like him on. By the way, Bob is no “idiot”. That’s a rather harsh, knee-jerk, estimation. We may not agree with someone, but does that make them the idiot and me the genius? Only if we are myopic and only choose to see things from own little vantage point. Considering alternate and variant viewpoints is healthy, even if we choose to discard them in the end. It rounds out and fills in the blank spaces in our “big picture” view of life. Best to you both.

      Nov 07, 2011 07:31 AM

      Mr. C,

      You are ABSOLUTELY CORRECT. No one person is the “pretties baby in the nursery”!

      Big Al

      Nov 07, 2011 07:36 AM

      Moriarty has no problem starting his sentences like this: “But when all the cheerleader idiots…” Since Webster’s includes foolishness as a definition for idiot, I don’t believe Mr. Martin’s use of the word is out of line. Not only is Moriarty’s dedication to the service of his ego foolish, but so too will the following quotes prove to be: “How rational is $46 silver? Not very.” Now, I agree with Bob here, but from the opposite perspective. Bob obviously believes that the $ is in any way a measure of value. Does he not understand that relative to money supply growth, gold is as cheap today as it was 10 years ago? Of course, on a relative basis, short-term, $46 silver was a lofty price. However, the next time we see $46, it won’t be nearly so high relative to gold. Which is why this next quote from Bob will also prove foolish: “But if we see a rally up to $46-$47 which would be very typical of a countertrend rally, look out below. That’s when you will see a real silver crash.” Finally, let’s not forget this foolish gem, which I posted above: “…silver has had its bull market top.”
      As I’ve said here before, it’s his attitude that compels me to opine. Whether he’s right or he’s wrong, he’s full of himself 24/7.

        Nov 07, 2011 07:25 AM

        Matthew, you do not mix words ,,how about a cabinet post in my administration….as
        PRESS SECRETARY….I think you would make a great one…(gotta lighten thing up a little
        or Al and his friend might ban us from this website)(joke)

          Nov 07, 2011 07:45 AM

          How ’bout Fed chairman. Even I can operate a printing press!

            Nov 07, 2011 07:54 PM

            Sorry,,,I already promised that to Al..”.and a promise is a promise and must be kept..”

    Nov 07, 2011 07:28 AM

    Ok , I agree, Moriarty is not an idiot, that was a bit harsh. How ’bout a skunk who is wrong most of the time. Now, I did not call him a skunk initially. I took that term from Chapman who has had personal experience w/him.

      Nov 07, 2011 07:30 AM

      HI George,

      I have an personal experience with both of them!

      Big Al

        Nov 08, 2011 08:39 AM

        AL that is an open statement….we will not ask you to elaberate….
        I do like Bob…because he makes you think out of the box…

    Nov 07, 2011 07:35 AM

    Yes Al, I know but let’s not go there. It’s a beautiful day here in the NE

    Nov 07, 2011 07:16 PM

    AL . Dont feel guilty about ITH.. I for one, & i believe i speak for everyone else on this site, TRUST & RESPECT YOU. How you spend your money is your business. You dont push these company’s so what’s the problem.