Conveniently announced after market close on a Friday, frankly I’m surprised they didn’t do it last Friday with a 3 day weekend to help mute the response, the U.S. Government is going to take over Fannie Mae and Freddie Mac in a bailout that will cost taxpayers tens of billions of dollars and effectively wipe out common shareholders.

But it’s Ok, everything is fine, or so they’d like you to believe. The U.S. Dollar is up, gold, silver, oil and anything that resembles a commodity or commodity common stock is getting chewed up and spit out.

I was in the brokerage business briefly in the 1980’s, right around the time of the big crash of ‘87. My thought was that it was a fairly slimy business to be in, so I got out. But to see the names that were so larger than life - Bear Stearns, Lehman Brothers, Merrill Lynch - go down the toilet today is really hard to fathom.

In fact, the only firm that seems to consistently come out smelling like a rose is Goldman Sachs, that shining Wall Street example that some have accused of being joined at the hip with the U.S. Treasury and Federal Reserve. Maybe it’s who you know after all.

But don’t buy gold or silver, don’t buy precious metals stocks, and stay away from oil, gas and uranium while you are at it. The government and media seem consigned to agree to sell you the story that only the U.S. Dollar need be bought and with those dollars you can safely buy the Dow, S&P, bonds or whatever else some Wall Street firm trying to shore up its balance sheet wants to sell you.

I admit, for the last few weeks they have put on quite a convincing show. They even have Jon Nadler and Dennis Gartman signed on to the program it seems.

Shoot, one would expect China is heading back into the 14th century, experiment over and failed, everybody in China will return to their farm. At least if you believe what you hear.

But I suspect that won’t be the case. For one, Asians and Indians (dot, not feather) seem to be much more open to the idea of long hours and hard work than your average American. And I say that with confidence knowing that over 50% of Americans are net recipients of funds vis a vis Uncle Sam’s Treasury.

Yes, Korea definitely has an issue going on again as does Thailand. But I don’t think they are going to wait for a U.S. economic miracle before they decide to create their own.

Unemployment just turned in a nasty 6.1% number yesterday. I am here to tell you that my impression of the labor pool here in the Midwest is nothing to be particularly proud of.

Our radio stations blare commercials boasting jobs for trained CNC (computer numerically controlled machines) operators with starting wages of $15 per hour. Folks, $15 per hour is less than the untrained factory worker received in the early 1980’s (when those jobs still existed) and let’s not even go there with regard to the benefits package comparison.

You should see the demoralized, unenthusiastic applicants who slog up to the counter and apply for jobs with the companies I do work for. It is NOT a pretty site.

Bottom line is that I don’t believe the talking heads on the tube or our beloved Government. And NO, I don’t believe there is HOPE in the name of Barack Hussein Obama. Things are not getting better soon here and NO the rest of the world is NOT going to wait for us to fix it (Europe might, though).

Successful investing (not trading) relies on identifying long term trends, buying right, then sitting tight. VERY hard to do in times like this, I know.

But to succeed you need good, reliable information. I recommend these:
Casey Research
the TREND letter

The World as We See It

4 reasons why this may be the worst crisis since the 1930s - and 4 projections for what’s going to happen

by Bud Conrad

The Casey Report Webinar- Casey Research

I identify the foundational forces now driving our economy to establish a basis for the investment recommendations you’ll read in this advisory in the months to come.

The role of the U.S. as the world’s dominant economic superpower is now challenged by an out-of-control growth in debt and a deterioration in its reputation as a financial haven. The dollar is losing its special status as the global “reserve currency,” is leading, in turn, to higher inflation, higher interest rates, weakening financial assets (stocks and bonds) and runaway prices for commodities.

Let the data and let them speak for themselves, with some interpretation along the way:

1. U.S. Government Deficits: From Bad to Worse
Government deficits are the root source of the creation of money… and its eventual debasement. Simply, when the federal government spends more than it raises in taxes, it eventually has to create more money (in complicity with the Fed) in order to pay the bills.

Of course, it can borrow the money, but that often includes borrowing newly created money from the Fed. The deficits remain and they accumulate and in time. They must be resolved, either by payment or default, either overtly or covertly through the mechanism of inflation.

While some level of government deficits may be acceptable over modest periods of time, the U.S. deficit is now well past the point of being acceptable. The deficit will soon grow to monster proportions as the baby boomer retirement obligations exceed the ability to tax the declining number of workers contributing to the Social Security and Medicare funds.

Projections of the likely deficit compared to GDP growth make it clear that the government is faced with hard choices. The easy path of just letting the dollar fall is the most likely.

2. The Expanding U.S. Trade Deficit
It is consumers who primarily receive the money provided by U.S. government deficits. In this globally interconnected world, they then spend a portion of that money on foreign goods. An unintended consequence of the ballooning government deficits, therefore, is a large and growing trade deficit.

The foreign recipients of those dollars - whether Chinese manufacturers or Middle Eastern oil sheiks - have, in recent years, turned around and reinvested those dollars in U.S. Treasuries. They have done so because of the perceived safety of those instruments, and because of the sheer volume of the dollars they have to invest. In addition, it has been in their commercial interest to help finance the U.S. deficit.

With the trade deficit now running at $750 billion per year, and much of that money coming back into U.S. Treasuries, the U.S. government has grown dependent on foreigners to sustain the continuing deficits.

That level of debt would normally cause extreme weakness in a currency - just as it would in the value of debt owed by a deeply indebted individual. However, the sheer magnitude of the foreign holdings provides something of a bastion against a total collapse in the dollar.

Even so, some foreign holders are easing toward the exits… through the purchase of an operating company or resource deposit here, or a landmark New York building there. They might make a billion-dollar equity investment in a brand name company, or exchange some dollars for a basket of currencies or a ton or two of gold. It’s a delicate balancing act, because if they get too aggressive, they risk triggering a mad dash for the exits, a nightmare scenario where the value of their trillions of dollars in holdings would be devastated almost overnight.

3. Rising Oil Prices Affect… Everything
The growing global demand for oil, coming as it is against a backdrop of limits being hit in production growth, is a major contributor to today’s big price rises.

The clear and present danger is that we are now using several times more oil than we are discovering. The world currently produces about 310 billion barrels of oil per decade. That amounts to about three times the current discovery rate of 100 billion barrels per decade.

According to the Peak Oil calculations, we have already used about half of the energy stored over the last 100 million years. Against that, we have a steady increase in demand emanating from population growth and economic development, especially in Asia. This, coupled with the dearth of major new discoveries, assures that energy markets will remain at high prices, for the foreseeable future. The current big drop from almost $150 to $110 has happened from a slowing economy and from some conservation at the extreme high gas pump prices, but the long term view is that the lack of reasonable alternative to petroleum argues for continued higher prices returning to the previous peak in the year ahead.

As energy is a component in the manufacture of all goods and services, this is of no small consequence. Energy has been the basis of the abundance of our current existence and has allowed human population to grow from 1.5 billion to 6 billion over the last century.

4. War Affects the Deficits and Hurts the Dollar
The war in the Middle East adds unwanted pressure on oil and ratchets up government spending. Less obvious is the damage to U.S. prestige that is important in the ability of the U.S. to attract much-needed foreign investment.

The Congressional Budget Office estimates the war will cost 3 to 4 trillion dollars, an amount of sufficient size that it will affect the U.S. financial system.
Regardless of the short term political ups and downs or even a new administration, the pressures from war for big deficits and for dollar depreciation are inescapable.

Where Is the Economy Going in the Next Six Months?
Projections

1. The housing decline is not yet done, because we will need another year to unwind foreclosures in the pipeline. The housing bubble still has another 10% to 20% to go to fully deflate.

2. Consumers in the U.S. are not able to expand credit and are increasingly concerned about the outlook for the economy, so they will slow spending both at home and on imports, which means we are in a recession or about to confirm one.

3. The financial/banking system is weaker than understood. The global system and literally trillions of dollars in derivatives has left the world’s banks teetering on the edge. Don’t jump back into financials.

4. A slowing economy - recession - coupled with inflation, creates a condition referred to as stagflation, as the simulative bailouts compete with the debt implosion of overleveraged financial institutions and real estate, to leave us with stagnation and still high costs.

The result of this is that the inflation rate, interest rate, food, energy and precious metals are heading higher as the dollar is debased.

Higher rates are not good for housing and stocks.
Finally, it is important to recognize that the world remains in the throes of a deep and serious crisis. While many analysts will express the view that the worst is over or that, after a modest downturn, things will bounce back just like they always have, our view is that what we will actually witness going forward is a fairly steady erosion of paper currency purchasing power and sluggish economic growth. The crisis will accelerate, moving faster, even, than in previous major shifts such as that witnessed in the 1970s.

While history may find we are too pessimistic at this point in time, in our view it is far better to prepare for a worsening crisis and hope that it does not materialize, than to expect business as usual.

Bud Conrad is Chief Economist with Casey Research, specialists in natural resource and precious metals investing. And now, you can have the opportunity to sit in on a round-table discussion of the economy, the market, and the best ways to profit from this crisis - free and online. The Crisis and Opportunity Summit is the first-of-its-kind event by Casey Research.. giving investors exceptional information and analysis for over a quarter century. Simply click here now to sign up for this free event.

Jon Nadler of Kitco can crow all he wants about there not really being a shorting of that shiny, antiquated, not much good for anything - even though his firm sells it - metal known as silver. It’s just a shortage of silver rounds.

Yaa-ahh. Hello, Jon. Try buying some silver Eagles and paying $3 per coin over spot. That’s a 23% premium with silver at $13. When was the last time you saw that? Or maybe the premium is down to 18% on a good day - but, oh, you’re out of stock, so the price really doesn’t matter much, then, does it?

Just because you don’t want the stuff and don’t think anyone else should, people are buying anyway! Are you just mad because these imbeciles won’t take your advice?

Take my advice, you can get a Risk Free Trial subscription to:

• International Speculator
• Big Gold
• Casey Report

I am thrilled to report that Peter Grandich, while not completely over his illness, has returned to work part time for now.

Maybe if we could get a boost in the Junior Mining sector Peter would recover a bit more quickly!

Glad to have you back Peter, I pray your recovery continue, accelerate and be complete!

Dennis Gartman, who has been stating that for gold bulls what has been tough continues to get tougher, apparently feels that the commodity bull market has come to an end.

Is he right? Only time will tell, but just because a lot of people were on one side of a bet at one time and came crashing down - in part thanks to some bank and central bank activity (to shore up some impoverished banks perhaps?) - doesn’t mean that it’s over.

Gartman termed the collapse of hedge fund Ospraie as a sign of the times and stated “I’m sorry, but, all bull markets come to an end”.

Maybe, and maybe not. Just because some momentum players get violently shaken out of the market doesn’t mean that the same fundamentals have all evaporated.

Short term traders may want to stay away from gold and silver. But those who buy it because of what it is and not just as a currency trade may find today’s prices better than those down the road.

If you want to follow long term trends and not be confused by short term market noise, then perhaps you would do well to take advantage of my $50 discount link to the TREND letter

Barack Hussein Obama has just given us yet another reason to not buy Exxon Mobil stock (see Don’t Buy Exxon Mobil).

In Obama’s visit to the Quad Cities (Davenport, Iowa) prior to the Democratic National Convention, Barack was really buddy’n-it-up with the locals. He specifically stated that there was no reason to tax the humble families before him when he could instead tax Exxon which makes Gazillions of dollars (his word, not mine) in [read - undeserved] profits.

I’ll bet Barack doesn’t even know how much or how little Exxon earned in the 2 decades of low oil prices prior to a couple of great years that made the news. I’ll bet Barack doesn’t know the ROI (return on investment) for Exxon Mobil, or whether it’s good or only mediocre. I’m willing to make that bet because I’ll be he has no idea how many Gazillions of dollars Exxon has invested in plant, equipment, research and development necessary to earn those Gazillions in profits. I will also bet he’s hoping those humble families don’t check their 401(k) fund to see if they are actually Exxon shareholders without realizing it.

And if oil prices and/or Exxon profits go in the tank do you think Barack will hand back those taxes and say - “oops, sorry, I thought those profits were guaranteed to you, my bad.” No. Never. Ain’t gonna happen.

Despite the Gazillions in profits that Exxon has reported in the last couple of years, Exxon stock has UNDER performed when compared to other oil giants, or ETF’s of oil companies.

If you get Target stores and Exxon Mobil mixed up, I understand. One has the logo of a target, the other has a huge target painted on it by the President of the United States-in-waiting, Barack Hussein Obama.

So if you want my 2 cents, avoid Exxon Mobil; and avoid Barack Hussein Obama as well.

Note: If you are voting for Obama just to get higher taxes don’t forget you can always send in a check for any amount to the U.S. Treasury and mark “debt reduction” in the memo field; you don’t have to vote for someone who promises little more than hope for a better future and a guarantee of higher taxes.

For more details on what the future might hold no matter who gets elected in November, check out Casey Report.

What I Tell Myself When Gold Sells Off

By Jeff Clark

BIG GOLD - Casey Research

Psychologists say decisions aren’t made simply on what you hear from others but also on what you hear in your own inner dialog. With investing, that can be the kiss of death if you let either fear or euphoria dominate the conversation.

So what did you tell yourself this summer when gold plummeted 20% in 5 weeks and most gold stocks lost a third or more of their value? Did the dialog help you make a wise decision?

I’ll tell you what I told myself. When I saw a chart of gold’s mid-summer drop, it looked scary…

…then I told myself to take a longer look at gold’s history.

What I saw is that gold’s recent drop is a blip in the big picture. So I told myself, “Maybe you should relax a little.”

Then I thought about corrections in past gold bull markets. Compared to the historical record, does the recent sell-off look normal? Or is there something about it that suggests our gold bull market is over? Here’s what I found: past bull markets were interrupted by similar drops - and then they came roaring back.

And even within the current bull market, there have been other pullbacks similar to what we’ve just gone through. Gold dropped 21% in the summer of 2006 - but gained 45% by the end of 2007.

So I told myself, “Corrections, including large ones, are normal in bull markets. The sweet stuff is still ahead.”

But enough of charts. What we really want to know is, is the case for gold still intact, or have the fundamentals changed? And the answer, I believe, will give you some compelling things to say if the recent correction has left you arguing with yourself about buying gold.

Think back to mid-July, when gold was pushing higher and was again within spitting distance of $1,000. How did you feel? Were you optimistic? Excited? Of course, and so was I. But what did that optimism have to do with the reasons for gold’s rise? Nothing! You were happy and tingling because gold was moving your way - yet it was rising because inflation was climbing, the dollar had a long-term illness, the government was printing money, banks were failing, falling house prices were threatening the solvency of more lenders, long-term oil supply was dwindling, and the economy was faltering.

Don’t wait for me to ask. Ask yourself: which of those factors have changed in the last 30 days?

If the bull market in gold were over, it would mean that inflation was under control, the dollar’s long-term problems had been solved, the government had become restrained in printing new money, banks were healthy, house prices had stabilized, a surprising new source of energy had been discovered, unemployment was diminishing, and everyone was smiling. That’s not what I see.

So what do I tell myself? “Every fundamental reason that gold is sought as a safe haven is still growing in importance.”

What about gold’s behavior during the economic problems of the 1970s? From December 1974 to August 1976, gold dropped a whopping 48%, even as inflation and the economy’s condition were worsening. We all know what happened next: by the end of 1976, gold climbed 32%. And by January 1980, gold had risen more than 700%.

Today the U.S. inflation rate is 13.4%, almost as high as the worst of the 1970s. Wait, you say, I thought the CPI was 5.6%? According to John Williams of Shadow Stats, measuring inflation by exactly the same methodology the Department of Commerce used in 1980, shows that the true rate is more than double the bogus figures the government is currently publishing. That’s why gas pump and grocery aisle prices are making a mockery of the government’s numbers.

What do I tell myself? “Inflation is out of control and getting worse.”

Even so, gold’s recent reversal was matched by a recovery for the dollar, which the mainstream media attributed to weakness in European economies. With Europe headed for a recession, the dollar’s fall against the euro was over. But are the happy TV faces correct?

First, fundamentals in the U.S. remain weak, especially in the housing and finance industries. In addition, we still depend on borrowing overseas to finance our spending. This will cap the dollar’s gains. Meanwhile, MZM, the broadest measure of the money supply, has grown 16% in the last twelve months. Due to the bloating federal deficit and the big-dollar promises the politicians have made but that the U.S. can’t possibly pay, further rapid growth in the money supply lies ahead. And that means more inflation, which means the dollar’s recovery will turn out to be temporary. And more debasement of the dollar equals higher gold.

What do I tell myself? “The dollar’s ills haven’t been cured. In fact, we haven’t seen the worst of the currency’s decline.”

I interviewed Doug Casey earlier this month and heard the textbook description of a contrarian investor. Doug was reminiscing about how hard it was to get clients to buy gold and gold stocks in the mid-‘70s, how a client even refused to pay for gold stocks he’d just bought, and how the prospects for gold looked bleak to nearly everyone. What did one of the greatest speculators of all time advise?

“You don’t make money buying when you’re optimistic. You have to actually run completely counter to your own emotional psychology. It’s easy to talk about being smart in theory, but extremely tough to apply in practice when it’s real money and you’re scared. But what am I doing now? I’m buying.”

What do I tell myself? “$800 gold is nothing but a buying opportunity. Grab some cash, Jeff, and head to the local coin dealer while it’s still on the SALE! rack.”

Jeff Clark is the editor of BIG GOLD, a newsletter focused on the safest ways to profit from the gold bull market. You can read his 8-page interview with Doug Casey in the August issue, where Doug has much more to say about gold. To position yourself to benefit from what will be the greatest gold bull market in history, try a 3-month risk-free trial to BIG GOLD. Learn more here.

Jon Nadler of Kitco seeks out the stories he wants to report (IMHO). He sought out that Dennis Gartman was bearish on gold, ignoring that the Aden Sisters were still bullish - after he himself referenced their work to conclude they would be bearish. When they disappointed him, he quoted Dennis instead.

Now Jon has quoted and commended the work of Mike “Mish” Shedlock who insists that there is simply no conspiracy among gold and silver trading.

I won’t go into here, why not reference the great work of GATA.org who did a better job of exposing the flaws in Shedlock’s analysis than I ever could.

Read GATA’s story on Shedlock.

Dennis Gartman is calling for strength to be sold in the gold market as he feels that gold is in bear mode.

Don’t get me wrong, I have great respect for Dennis if for no other reason than his ability to get up so early EACH and EVERY morning! But Dennis, would you like to make public for everyone your track record on gold trades over the last couple of years?

Dennis made a great call, I think it was December of 2006, saying to get out. But since then, most of the trades I have followed of his seemed to go the wrong direction - some VERY quickly.

Maybe gold isn’t ready to take off yet; just as soon as you count (and invest heavily) on the “sell in May and go away” strategy it will go against you. Equally as noteworthy is to buy in August and bet for a fall rocket ride will go against you.

But gold is a currency, among other things - which the bears discount, and with a financial crisis of epic proportions upon us you can be sure that many a government will manipulate currencies for all they are worth.

The question is: are you a short term trader or a long term investor? Long term investors need to look at fundamentals and decide if the current price will look good a year or more from now looking back.

I think some buying is in order.

If you want some specific suggestions look no further than:

Casey Big Gold

Since Peter Grandich is unfortunately inactive due to illness, I thought I would post this update on Northern Dynasty Minerals, one of Peter’s favorite stocks:

A state clean water initiative aimed to stop development of the huge Pebble copper-gold project in Alaska has gone down to defeat. This is good news for all Alaskan explorers and especially for shares of Northern Dynasty Minerals, which rallied C$1.14 to close at C$6.67

For information on stocks like Northern Dynasty Minerals, I suggest International Speculator.