J.S.

http://www.smartknowledgeu.com

• The Undisclosed Costs of the U.S. Government Bailouts [view article]

  One last comment! Some people have noted that my prediction of a "positive spin" regarding this massive bailout has so far not come to fruition. I thought about why the spin doctors haven't come out of the woodwork yet, and then bingo, it hit me.
  
  The anger among Americans being burdened with the losses from all these banking and Wall Street CEOs is palpable now, certainly to the point, where our Congressmen KNOW the people are angry. They fear that if they passed this legislation right away, without faking some kind of righteous indignation, that their constituents will vote them hastily out of office come November. So at the very least, they must appear to be on the same side of their constituents even if they are not. If this bailout plan was brought up one year ago, when the discussion was not so close to election time, I don't believe we would be seeing the same level of indignation.
  
  I know that this may seem overly sarcastic, but there is a reason for my sarcasm. All Congressmen have been informed for decades through Congressional Finance Committee Hearings of the great risk and greed that was being perpetuated and did nothing about if for years (though this is monumentally boring, you can read through the archived hearings of the Congressional Finance Committees both for the House and the Senate here financialservices.hous... and here www.senate.gov/~finance/sitepages/he... I know that some of our Congressmen and women have not been in office that long, but even within the past several years, they had been warned time and time again of the dangerous assumption of risk in our financial sector in the quest for easy profits. Thus, they had multiple opportunities to stand in our defense, and every single time prior to this week, they failed miserably to do so.
  
  The time for indignation is not now when it is far too late to prevent serious damage to the American taxpayer. Any way you spin this bailout, all American taxpayers are in for a world of hurt now. For this reason, though some may be encouraged that Congressmen are fighting for our rights now, this indignation rings false. If they were truly indignant about this situation, the time for action was years ago when they could have prevented this situation, not now when it truly is too late. Sep 24 06:46 AM

• The Undisclosed Costs of the U.S. Government Bailouts [view article]

  One last comment from the author. I know there are people that will say that our gov't had not choice but to socialize these losses because we were on the verge of a massive financial meltdown and capital markets were illiquid causing even some money market funds to fail this month. They will present some far-fetched, illogical argument like "Would you rather have America fail?" to try to paint this solution as a necessary solution that had zero alternatives. This argument, of course, will be propaganda instead of truth. If you check my blog, you will see that since two years ago, September of 2006, I have been stating that the worst financial crisis of our lifetimes was coming. It was plain to see even two years ago that the enormous risk assumed by bankers and Wall Street driven that was driven by their equally large appetite for greed would bring our great country down. Again, I didn't say that something bad would happen, but I stated that the worst crisis of our lifetime was coming because I dug well below the surface of media reports that painted a healthy, rosy economy to understand how our financial infrastructure was being severely undermined back then all in the quest for billions of quick profits.
  
  If I knew this more than two years ago, certainly the CEOs of every firm that has collapsed this year knew this as well. Their understanding of these complex derivatives that introduced so much risk into the global financial system almost undoubtedly exceeded mine. So they knew. Not only that, if you look up the legislative history of the SEC and the CFTC for the past 10 years you will see that they acted not as regulatory agencies one single time, but more like Wall Street lobbyists, as they systematically dismantled a lot of the legislation that had originally been enacted to prevent what is happening today. The people heading these agencies all need to go as well and we need to get REAL regulators back in these crucial positions instead of paid lobbyists for Wall Street and big banking.
  
  So even had the regulators started to do their job as recently as two years ago, this would have forced big banks and Wall Street firms to stop their destructive behavior. Instead, the SEC and CFTC stood by silently and did nothing, knowing full well what would happen today (again, how could these so-called regulators not know, given that I've known for two years running now)?
  
  So had they stepped in to do their jobs instead of aiding and abetting the greed of Wall Street and big banks, this situation could easily have been avoided. Instead of problems of liquidity today and capital markets freezing up, perhaps we would have had one or two firms fail instead of many. Then the solution easily could have been to let those firms go bankrupt (the economy could have easily rebounded from the bankruptcy of one or two big firms) and there would have been NO need to socialize any of the losses of any financial institutions and burden Americans for generations to come. Sep 22 08:42 PM

• Law of Supply & Demand Is Dead for Gold & Silver [view article]

  Hello iyamwutiam,
  
  Regarding your comment above about European central banks, in particular, of Spain selling off gold. I've been aware for a long time now that the economy of Spain is in serious trouble. In fact, I shorted the Spain ETF (EWP) over this past year and this turned out very well for me. In any event, Spain has been suffering for a while now from an imploding housing market and soaring inflation. I think that their Central Bank sold gold a while back not to flood the market with supply but because gold was one of the few things left that they possessed that had any value. Thus, I believe their selling was an act of desperation on behalf of their government to raise some immediate cash to address the problems that were facing their country. The actions of the U.S. government this past week (and the subsequent announcements to come this Monday) near guarantee massive amounts of massive future inflation. So buy physical gold and physical silver. It will serve you well.
  
  In response to Wefwef, why would I be mad that the gold coins I bought a couple of years ago have appreciated now in the range of 45% to 100% (with the bump up in gold prices over the past couple of days)? If you read the article carefully, you will discover that the prices I quoted of gold coins when the spot price of gold had been driven down to $750 were the BUY BACK prices that dealers were quoting to me were I to sell my coins that I purchased two years ago back to them. I did not sell these coins and am still holding on, probably at least for a couple more years if not longer. Please re-read that portion of my article and you will discover that I did not fall victim to coin dealers as you claimed. Somehow you seem to be confusing the meaning of "buy" and "sell". Sep 20 09:33 PM

• Law of Supply & Demand Is Dead for Gold & Silver [view article]

  Quicks,
  
  Just as you have stated, I have told my clients when they ask me if the dollar is really doomed that one way the Feds could potentially save it would be to raise the Fed Funds rate to 12% or higher like the Paul Volcker/Jimmy Carter days. However, where I respectively differ somewhat from you is in the possibility that they actually do this.
  
  I actually think that extremely high interest rates is a possibility. Since the Feds have never taken into consideration the welfare of Americans, including mine and yours, I think that they would consider raising interest rates strongly, but just how high is the question. Paulson will be gone as he has already stated that he is fleeing this sinking ship and won't stay on board after the elections.
  
  How can banks continue to earn negative rates of return on mortgages and other loans at these current interest rates? With a 30-year mortgage at 5.78% (or is it 5.87%) and inflation at 10%-13% in the U.S., a bank is currently losing 4% to 7% on all mortgage interest payments as the interest rate does not even match current inflation rates.
  
  With all this massive intervention taking place now, if the Feds really were concerned with the welfare of Americans, they could have taken 1/100 of the intervention measures that they are taking now starting 15-20 years ago and prevented this entire mess today. It truly would have been that easy. But if they were responsible for the past 20 years, the richest 0.1% in this world would not have built the enormous amounts of wealth that they just did over the past 2 decades.
  
  But if that doesn't happen Quicks, and you are right, then all the arguments about deflation and inflation punching each other into a draw and resulting in stagflation should now be over given the latest bailout decisions. The gov't and the PPT declared inflation the winner last week and the true rates of inflation are going to get downright nasty next year (actually they should get downright nasty whether or not the gov't raises interest rates significantly because at this point, it seems impossible that the Feds could ever raise interest rates high enough to combat inflation).
  
  Here's an experiment you can do just so you'll know the official rates of inflation the gov't will report next year will be 100% bogus.
  
  Take an inventory this week of all your costs. What you spend on fuel, what you spend on food (prices and sizes, because food companies have become clever and instead of jacking up prices, they have shrunk packages and are charging you the same price for less), clothes you may buy this week, office supplies, tuition for your children business hotel stays, whatever. Then six to nine months from now, take out that list, buy the same stuff, and come back here and let me know what the price of those same items are. I'd be shocked if that list hasn't gone up by at least another 15%-20% in total price just 6-9 months out from today. Sep 20 04:54 AM

• Law of Supply & Demand Is Dead for Gold & Silver [view article]

  Oh btw, just to clarify my comments above, that was for the coin prices last week, not this week as obviously gold prices are considerably higher now. - J.S. Sep 19 12:00 PM

• Law of Supply & Demand Is Dead for Gold & Silver [view article]

  Chris B,
  
  I have to respectfully say that you have 100% missed the point of my article. Those of us, including me, that bought gold coins 2 or more years ago, are still sitting on 37% to 90% gains on all of our coins when the spot prices established in the futures markets tells us that we should only have 8% to 12% gains on these coins. We are not upset at all and in fact are ecstatic that our gold investments from years ago have held their value so well (this is based on calls to gold dealers and asking their buyback prices for the coins i own). I'm sure that any gold coin owner on this site that bought gold coins (not bullion, but rare coins) 2 or more years ago will confirm this statement. This is an indisputable fact Chris B. No emotional attachments to an investment that we believe is sacred - just a cold hard fact.
  
  This discussion should remind you nothing about tech stocks that were selling at impossible P/E valuations because they were $130 a share while the underlying company had zero profits. You are comparing apples to oranges in trying to compare hard tangible assets such as gold that has also been viewed as a form of money throughout history with paper tech stocks for companies that never declared a single penny of earnings. Hope that clarifies the point I made in my article for you. Sep 19 11:49 AM

• Law of Supply & Demand Is Dead for Gold & Silver [view article]

  By the way, and this is not a plug at all for my services but just an observation, I told my subscribers just a few weeks ago that I was convinced that gold and silver markets had been manipulated (nothing new here given my article above). Again this is very different than a conspiracy. When the Working Group on Financial Markets had intervened numerous times in the U.S. stock markets to prop it up over the past six months, this is free market intervention, not a conspiracy. People that don't believe in manipulation, even when provided with overwhelming supportive circumstantial evidence, tend to try to discredit talk of manipulation by automatically yelling "conspiracy!"... rather than just criticizing the logical arguments we present.
  
  In any event, I said to my subscribers, if I am right about this manipulation, we will know because we will see some explosive days to the upside during the rebound, days where gold explodes by $100 an ounce higher in a single day. Well within the past 24 hours, gold has risen more than $97.50 an ounce (including action in Asia this morning). While of course this is not proof I am right about the manipulation schemes, I base my short-term and long-term predictions based upon common sense and logic from things I uncover that are not reported in the mainstream media. The price of gold and silver set in the paper futures market that were so OUT OF SYNC with not only behavior in the physical market but also the fundamentals of the gold and silver market is what led me to state in my above article "make NO mistake that we have just experienced a steep correction and not an end to the gold and silver bull".
  
  Now today, I see the same analysts that said there is still integrity in our gold and silver futures markets, that no manipulation exists, and that stated as recently as just a few weeks ago that gold was going to head to $560 to $600 very shortly are now incredulously stating that gold's meteoric one day rise yesterday was long overdue. What happened to the proclamations of $560 gold and get out from the gold and silver markets while you can?
  
  If you really want to compare those of us that point out such anomalies with those that ridicule the anomalies I've pointed out, you will find for the most part that those of us that find such anomalies have always remained firm in our opinion that the gold and silver bull were not dead, while those that ridicule these anomalies flip flop their views on gold and silver given the slightest change in trend. From being familiar with the views of those analysts, I can almost guarantee you that even though they just stated that gold was headed to $600 or $560 a mere few weeks ago, that most will now not only jump back on the bandwagon but fabricate claims that they previously called for a large leap higher in gold and silver prices.
  
  As professionals, we should always have such discussions regarding the material I presented above in a respectful and courteous manner. There is never any need for those with a brain to resort to insults as a matter of reply. However, my warning here, is not to listen to those analysts that claimed this was a "natural" correction in a bull run and that gold was primed to sink to the $560 to $600 range because they were numerous. The majority of these same analysts are now reversing their positions overnight based one ONE DAY of positive gold and silver activity and now claiming that gold is a "safe haven" when four days ago they were claiming that gold was a barbarous relic and a terrible investments. Such explosive movements such as yesterdays one day leap in gold and silver prices in the futures market is impossible to understand if you don't understand the manipulation game and continue to downplay the significance of manipulation in the futures markets. It is very easy to understand, and even predictable (as I predicted single day $100 an ounce movements higher which people thought was crazy at the time) when one understands the manipulation game.
  
  Going heavy into physical gold and silver will still serve an investor extremely well. Good investing.
  
  J.S. Sep 17 09:59 PM

• Law of Supply & Demand Is Dead for Gold & Silver [view article]

  Bron,
  
  Sure of course I understand that you can buy silver and gold bars at spot prices. I only used the coin example to illustrate the discrepancies between the paper and physical markets. But yes buy gold/silver bars and coins, avoid the ETFs and paper representations of gold bars such as Perth mint certificates. Yes, I am 100% in agreement with you there.
  
  JK Sep 16 02:57 AM

• The Inconvenient Truth of the Slowing U.S. Economy [view article]

  Hi John, This is J.S.
  
  In response to your question, inflation is a problem all over the world now. Inflation is raging in the UK, Spain and other EU countries as well. This means the BOE and the ECB are massively inflating the Euro and Pound as well. In some ways, although the Euro is stronger that the dollar, the Euro in theory is even worse than the dollar because the EU is still a conglomeration of sovereign states all with separate agendas to protect their own sovereign economies. So I really do not like any paper currencies at this point until I see central banks take appropriate action to address the problem, not just "talk" about hawkish policies.
  
  Furthermore, this a serious disconnect between the prices of gold and silver established in the futures markets where it is extremely rare for any physical gold or silver to ever change hands versus the physical silver and gold market where real coins and bars change hands. This points to the fact that the prices established in early August in the futures markets for silver and gold were fantasyland prices not reflective of macroeconomic conditions (too much to go into here, but there was a reason Wall Street wanted to push down prices in the futures markets so much and why an unprecedented severe disconnect formed between futures markets that trade "paper" gold and silver and physical markets that trade REAL gold and silver. Nonetheless, it has given rise to great opportunity. By the way I posted that article on August 12th on my blog though it didn't make it to the Seeking Alpha site until yesterday. All the best JW and hope that helps. Aug 22 12:05 AM

• The Fed's Rate Cut: A Recipe for Future Disaster [view article]

  Don,
  
  Been traveling lots. Haven't had much time to look at many comments on my articles here but obviously you understand exactly what is going on in the global financial system. I know that you're likely invested in all the proper assets and this summer should be a very kind one to us with large profits, started by a sound kickoff yesterday!
  
  Best,
  
  JS Jun 26 08:18 PM

• Did Reagan End the Era of Free Markets? [view article]

  Just a very quick reply as I have enjoyed the comments posted here. I consider myself neither Democrat or Republican but Independent as I subscribe to some beliefs of both parties and dislike beliefs of both parties as well. But this is irrelevant, because this article was not meant to be of a political nature. For example, a central belief of Republicans has always been that less government is better and I too agree with this. I'm not attacking Reagan just as I wouldn't be attacking Clinton if I criticized Alan Greenspan for undoubtedly creating much of the mess that Ben Bernanke has now inherited. I would, though advocate the dismantling of the Federal Reserve as well as the Working Group.
  
  If individuals such as George Soros, through their speculative bets, are believed to have disrupted financial markets at times, then how much more power does the Federal Reserve and the CFTC have to do so? I believe that any time an entity states that it will disrupt free markets any time it sees fit, even if this does happen rarely, that such an entity is exercising power it should not have, and that power must be removed if our desire is to have a financial system that is not constantly manipulated for the benefit of a few to the detriment of many.
  
  Again, I have acknowledged in this article that it is impossible to "prove" that markets are being manipulated because we, as public citizens, are not allowed to peer behind the scenes to evaluate the measures that might be executed out of the public eye. However, I merely wrote the article to generate public discussion about the moral and ethical implications of such manipulations when circumstantial evidence (which I described in part II of the article) seems to point to such manipulations taking place. May 13 09:54 PM

• Warren Buffett Is Wrong on Fed Intervention in Bear Stearns [view article]

  MetroInvestment, I love your medical analogy of the scab. Very nicely put. The only area in which I respectfully disagree is the extent of bad apples that still exist in the global financial system. I still think that financial institutions are being less than aboveboard about the level of "junk" that they currently still hold on their books and what worries me is that nothing is being done to remove the "bad apples" from the system. For example, the Feds only guaranteed $29 billion to JP Morgan if Bear Stearns's assets go belly up. But what about taking constructive measures to fix the system and to permanently extract the bad apples from the system? I'd feel a lot better about things if long-term sustainable solutions were being implemented. May 06 07:38 AM

• Will U.S. Markets Crash Now - Or Later? [view article]

  Nice comment Kerr. I understand your point about stocks. However, hard assets have really outpaced inflation while you can't say the same with returns of U.S. stocks in the past six to eight months. Some hard assets have increased by 50% to 60% during this time, so even with great inflation, your real wealth is increasing by holding hard assets. Right now, gold is rising against all currencies in the world. You can't say the same about U.S. stocks. In addition, your point about commodities being inflated because of inflation is well taken. Do this quick exercise. Go to stockcharts.com and chart the United States Oil Fund (AMEX:USO) for a 2 year period. You will discover that it has risen quite a bit. Now chart it in terms of Euros (USO:$XEU). You will find that in 2 years, even at today's prices of more than $117 a barrel, that the USO is now at the same price it was 2 years ago when charted in terms of Euros. This used to be the argument against gold. That gold may be great for holders of American dollars only but not for Europeans because U.S. dollar devaluation was causing gold to soar only in dollar terms but not in Euros. Today this is no longer true as gold is showing considerable appreciation in terms of all major global currencies.
  
  P.S. to billb, I actually provide very specific guidelines about the fluctuations in global markets to my subscription members about exactly how high and long I believe rallies will last and when corrections will happen. As well, I provide very precise price points for my predictions of hard asset appreciation as well based upon my proprietary strategies. My members know that in September of 2007 when gold was trading at $680 an ounce, I very specifically predicted $850 an ounce gold by January 1, 2008. Gold reached $850 an ounce on January 3, 2008. I told my members to go long in gold stocks on exactly August 17, 2007 if they weren't already long (can't get more specific than that). I also have provided very specific price points for other hard assets as well. In addition, in June, 2006 these were my exact words to my members "If you are in a highly leveraged hedge fund, I recommend immediately divesting of it before you potentially lose everything you have in that fund." So here, I was about 9 months too early. But still, those that remained in select highly leveraged Bear Stearns hedge funds were blindsided and lost everything they invested. My point, billb, is that risk can remain hidden for a long time, but if you uncover it, I believe it is far better to position yourself to benefit from that risk instead of trying to bet against it. So yes, I apologize for my vagueness at times and realize that sometimes my predictions will not have jaw dropping accuracy. But I do believe in playing the odds. If the odds, given the information I cull from non-traditional sources, overwhelmingly favor a market run higher, then I go long in traditional stocks. If the odds overwhelmingly favor a decline, then I go long hard assets and at certain times, short traditional assets. With the U.S. Federal Reserve constantly intervening in free markets and with the finance ministers of G7 nations pledging to manipulate markets from behind the scenes to "calm irrational market moves", yes, it is nearly impossible to predict short-term fluctuations with pinpoint accuracy. However, long-term trends are relatively easier to spot and I have always believed that planning needs to be proactive rather than reactionary. Good investing! Apr 23 08:56 AM

• The Case Against Diversification and Holding Cash [view article]

  ah, one typo in my above response. Above, I stated "I am not saying every single belief I have will manifest itself perfectly in exactly the timeline I predict (not that would be foolishly arrogant)....". I meant to say "NOW that WOULD BE foolishly arrogant), NOT "not" that would be foolishly arrogant - J.S. Mar 16 09:50 PM

• The Case Against Diversification and Holding Cash [view article]

  In response to Mr. Dailey's comments, to say that my argument is a "testament to [my] youthful arrogance" is highly misguided. If Mr. Dailey wants to belittle my 18+ years of experience in finance where I worked to master my craft and my understanding of stock markets to allow me a level of confidence in my assessments, then perhaps he is prejudiced and biased against anyone that doesn't have silver hair as being capable. In my years with a Wall Street firm, I have discovered that those that have silver hair or no more or no less capable than those that are young, and to suggest that someone is more capable merely because of seniority in age is an argument that lacks merit.
  
  Here is a sampling of some of my predictions below:
  
  1) In 2006, I warned of multiple hedge fund collapses an the onset of a subprime mortgage blowout many months before either financial disaster materialized;
  
  (2) On September 6, 2007, when gold was still trading for less than $700 an ounce, I predicted that the price of gold would reach $850 an ounce by December 31, 2007. My call was off by only two trading days as gold reached $850 an ounce on January 3, 2008;
  
  (3) On November 16, 2007, as commercial investment firms all over the world were convincing their clients to buy into stock markets on dips, I stated, "Use rallies like the one last Wednesday where the Dow piled on 300+ points in one session to sell out if for some reason you are still heavily invested in U.S. stocks." I have continually urged people to divest of almost all U.S. stocks since last November and have utilized a strategy based upon these beliefs to outperform U.S. and U.K. markets by more than 30% and by more than 65% in my Model Portfolio and Currency Portfolio respectively through my investment newsletter.
  
  (4) On November 27, 2007, I said "Gold will go to a bare minimum of $1,000 an ounce by year-end next year, and most likely by the end of the first half of next year. (I was a little conservative here as gold is already above $1,020 an ounce today in intraday trading)
  
  The above are just a tiny sampling of predictions I have made that have come true. One can visit my blog at www.theUndergroundInve... and read about many other predictions I have made for more than 2 years that have come true. The members to my subscription services have received much more specific guidance than anything I publicly post.
  
  Mr. Dailey misinterprets the confidence I have in my assessment of market behavior, and where money needs to be allocated to make a fortune from this widening economic crisis, that I cull from my independent research and proprietary strategies that I have spent more than 5 years developing. As I stated above, for anyone remotely "willing to dig even slightly below the surface, the direction of the U.S. economy has been as clear as a two-ton boulder falling out of a clear blue sky." I have and thus I see no need to wait on the sidelines in cash for prolonged periods of time to make money in these current markets, and neither should anyone else that possesses a fundamental understanding of these markets.
  
  Mr. Dailey confuses my confidence for arrogance. Again, my track record is public and has been in writing for over 2 years through my investment blog. If he wants to challenge how "arrogant" I've been, perhaps he should spend some time reading every article on my blog before doing so. I am not saying every single belief I have will manifest itself perfectly in exactly the timeline I predict (not that would be foolishly arrogant), but simply that if one is open to understanding how the commercial investment industry often misleads and deceives investors, that it truly is simple to understand how your money should be invested to be very profitable even in such a difficult environment as the one we are currently experiencing. Often, because of my inside knowledge of how commercial investment firms operate, upon my revelations that commercial investment professionals utilize nothing but pure sales strategies and not profit maximization strategies for their clients, I am attacked and criticized by those that work for the industry, and I expect this pattern to continue.
  
  However, let those that attack me post their beliefs about market direction in writing and in detail for two years before calling me arrogant. Mar 16 09:46 PM

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