By Julian D.W. Phillips

This is a snippet from a recent issue of the Gold Forecaster with Subscriber-only parts excluded.

As the fourth part of this series we now look at this question: “What circumstances will the world monetary system be in, in the event of the Confiscation of Gold by Central Banks?”  

Then...

The circumstances that led to the confiscation of gold in 1933 were dire.   Firstly, the time was Post-Depression and the States had a huge need for the expansion of the money supply.   Secondly, the dark clouds of war had started to gather, as Hitler took power.   So the money supply had to be expanded, yet be capable of holding its value, when the global scene would have lead to simple un-backed paper money not being accepted.  Gold however, was even accepted between enemies, as it would be today.   What pushed government to take gold away from its citizens?   It was seen as a time of national need.    It was the need to reinforce the basic credibility of paper money!   This was sufficient justification to government necessitating the imposition of patriotic duty on its citizens with regard to gold.   Where patriotism was not as strong as the personal need to preserve one’s wealth, a threatened term in prison fortified those individual’s patriotism.  

And now!

And have no doubt that the same would be true today, were gold confiscation to take place.  

Today, most of individual wealth is held in Corporations, Funds, banking institutions and other legal entities and not by the individuals themselves as was the case in 1933.   Today, corporations and Funds would be threatened in the same way as they were then and with potential imprisonment for the Officers of those legal entities.   Few of these Officers would be prepared to go to prison on client’s behalf!   Experience in other parts of the world shows us that these Officers would hand over the gold in their charge, immediately, if such a law were passed, with little to no regard for the beneficial owner.  

Let’s stress that point; when it comes to money, a nation’s interests sit heavily above those of its citizens.   Holding gold is therefore a privilege, not a right, in the eyes of government.   

For U.S. Citizens:

Today we live in a global market where U.S. citizens are able to move their funds overseas without restraint.   In 1933 only the wealthiest of individuals could even contemplate moving funds out of the States.   Now they can invest in any Stock Exchange or other Financial Market in the world, without being held back by the U.S. Government.   The concept of restraining U.S. citizen’s foreign investments has not been on the page until now.   Recently President Obama indicated that U.S. Corporations operating overseas would have to pay U.S. Tax on their overseas income.   The days of reinvesting profits in Capital Expenditure before suffering U.S. Tax [payable on repatriated profits only] appear to be numbered.  President Obama made it clear that his Administration sees a need for the U.S. to benefit directly from overseas investments annually.   He further feels that U.S. citizens overall should benefit from these profits and not just the corporation and those it employs overseas.   No doubt, the concept of U.S. Tax on overseas corporation profits will take a firmer hold irrespective of the benefits of keeping profits as capital for development overseas.   President Obama is certainly of the opinion that U.S. owned overseas assets should directly benefit U.S. citizens at home, first!

This lays the ground for Capital / Exchange Controls if the $ declines precipitously, or the U.S. financial empire worldwide, declines, as it seems set to do so.  

At worst, the U.S. will see what the U.K. saw, the splitting of the $ into two types, one for Trade transactions and the other for Capital movements [at a discount to the Trade $].   In the U.K. it was titled the “Dollar Premium”.   Such a situation would see the U.S. $ in retreat in terms of other currencies too.   The role of gold in adding to the credibility of the $ internationally at that point would be crucial.   As the U.S. dollars returned home from $ surplus holders [such as China] there would be a dire need for local credibility to the currency to be enhanced.   This could precipitate gold confiscation, again.

As it is, even U.S. citizens living overseas have to declare to the U.S. Tax Authorities their worldwide income.   Even where the individual U.S. citizens held all their assets overseas, we would expect the Administration of that day to attempt to coerce the repatriation of their gold home to the States.   If these individuals had assets at home, these could be seized if they failed to comply with the repatriation and confiscation of their gold.   Where U.S. based citizens held assets abroad they too could face home confiscation of assets if they did not repatriate their gold.

As it is, through the I.R.S., foreign held assets are already reported by U.S. citizen’s world wide.   Hence, the reporting and control mechanisms to attack non-governmental ownership of gold are fundamentally in place and can be extended without too much difficulty, to control all who wish to remain U.S. citizens.   What price Patriotism?

That is why the gold Exchange Traded Fund, The Ultimate Gold Fund has been designed to accommodate U.S. gold owners, holding their gold in Switzerland, to ensure that their gold cannot be confiscated!

More to come next week – “For citizens of other countries” – “Does the U.S. have rights in other countries, over their citizen’s wealth?”

Make sure you follow this series and other fundamental gold matters in the: - Gold Forecaster

This regularly covers all fundamental and Technical aspects of the gold price in the weekly newsletter. 

To Subscribe, go to www.GoldForecaster.com

 

Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.  Gold Forecaster - Global Watch / Julian D. W. Phillips / Peter Spina, have based this document on information obtained from sources it believes to be reliable but which it has not independently verified; Gold Forecaster - Global Watch / Julian D. W. Phillips / Peter Spina make no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Gold Forecaster - Global Watch / Julian D. W. Phillips / Peter Spina only and are subject to change without notice. Gold Forecaster - Global Watch / Julian D. W. Phillips / Peter Spina assume no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, we assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information, provided within this Report.

By Andrew Mickey, Q1 Publishing

The U.S. Securities and Exchange Commission (SEC) is charged with protecting investors.

The SEC is funded by a tiny transaction on every trade made. This was as high as four cents on every $1,000 trade, or 0.00004% “stock tax.”

Amid the recent market meltdown and the ensuing investigations, the headlines haven’t been too favorable to the regulators at the SEC. Don’t worry though, Congress is here to “help.”

Schumer: Change SEC Funding After Madoff Failure:

Sen. Charles Schumer, D-N.Y., a member of the Senate Banking Committee, plans to propose legislation next week that would dedicate all the annual revenue collected by the SEC to its budget. Now a large portion of the fees paid by public companies and other entities that register stock with the agency go to the Treasury Department for the government's coffers.

Schumer's proposal would give the SEC a similar funding structure to the Federal Reserve and the Federal Deposit Insurance Corp., which are able to use all the revenue they collect from banks to fund their operations.

The Obama administration has proposed $1.03 billion for the agency for the fiscal year starting Oct. 1, the first time it would top $1 billion, up from $960 million in the current year. The House approved a $1.04 billion budget and a Senate panel approved $1.1 billion; the full Senate hasn't yet voted on it.

What else did you expect?

When a private company fails, it goes bankrupt (at least, not a politically favored one). Owners and investors lose their capital, management and employees lose their jobs, and lenders get what’s left.

That’s not true when a government agency fails. When they fail, they get more money.

I saw this firsthand when I was in the military. There are two solutions to every problem: more troops and more money. If those two couldn’t solve the problem, they’d throw more troops and more money at the problem.

This is not a new concept, but as investors we can certainly see how this rationale will lead to another stimulus bill likely to be signed after the 2010 mid-term elections.

The end result will be more debt, greater inflation, and an economy that still feels like a recession to the majority.

As we’ve been recommending in our free investment newsletter, buy gold and silver now, buy gold and silver a few months from now, and buy gold and silver year from now…it’s going to get very ugly.

By Andrew Mickey, Q1 Publishing

The market rally has been strong and the bears continue to look for anything that could signal the downturn they’ve been waiting for months on to come.

The latest “it makes sense on paper” market myth the bears have clung onto has been insider trading activity.

Insider trading is when corporate insiders like directors and executives buy or sell their own companies stock. It’s legal, regulated, and the insiders must disclose within four days of when they buy or sell their companies shares.

The basic rationale is: Insiders know their company best. They see the day-to-day operations, the sales rates, expenses, and everything else. They know their business better than anyone else because that’s what they do. So it’s a bullish sign when they buy their own company’s stock and a bearish sign when they sell out.

It makes sense and it has been attracting a lot of attention lately – not very good attention though.

Insiders Rush for Exit

The recent rally has presented many investors with the opportunity to reallocate their portfolios. Insiders have jumped at the opportunity.

TrimTabs research has found that insiders unloaded $6.1 billion worth of stock in August. That’s the highest rate of insider selling in 16 months.

More importantly, insiders haven’t been buying much either. Trimbabs also found the ratio of insider selling relative to insider buying has surged to 30-to-1. That’s the highest the ratio has hit in five years.

Charles Biderman, the CEO of Trimtabs, pointed out in the New York Times in Some Analysts See an End to Market Rally that, “You have a classic case of greed stampeding investors into believing that nirvana is at hand. We just don’t see how the market’s going to last.”

But what does massive insider selling really tell us?

The Truth About Insider Buying and Selling

We know there are plenty of stock market myths which are perpetuated over time to match whatever the market sentiment is. Insider selling might be the myth du jour.

Thankfully, insider selling has had a long track record to which we can see whether it’s something to be concerned about now.

For instance, I recently came across this Associated Press report:

Rampant Insider Selling Raises Red Flags

Major Corporate Execs, Including Some from the Homebuilding Industry Are Dumping Stocks - Serious Predictor of a Coming Crash

You’d think it was a recent headline. There’s been a recent wave of insider selling, homebuilders have been big winners, and fears of another crash are still high.

It is, however, from December 2004. That was over a year before the peak in housing. And it came at a time when the S&P 500 was at 1200 and almost three years before its recent peak at well over 1500.

In more current times, insiders haven’t been very trigger shy about pushing the selling button either. Back in June Bloomberg reported: Insiders exit at the fastest pace in two years.

Here we are two months later and the market has held up exceptionally well.

On the other side, insider buying isn’t always bullish either. For instance, corporate insiders in the retail sector recently saw a big “opportunity” to load up on company shares.

Bloomberg reported: Insider Buying of Retailers, Led by Dillard's, Climbs:

Consumer confidence is falling, the odds of a recession have risen, analysts predict the worst holiday shopping since 2002 -- and retail-industry executives are buying their companies' shares like never before.

Limited Brands Inc. Chief Executive Officer Leslie Wexner and eight other executives bought a record amount of stock last month after prices fell to a four-year low. Dillard's Inc. director Warren Stephens made the biggest insider purchase ever as shares of the Little Rock, Arkansas-based department store chain headed for the steepest decline since at least 1980.

A lot of retail executives saw opportunity, but this article is from December 2007. That was two months into the official recession. And the moves haven’t proven to be very wise since. Dillard’s (NYSE:DDS) went on to fall 75% and is still down 40 from then. The retail sector as a whole has been lagging well behind too.

Of course, these examples are just that – examples. They’re hardly enough to define a true trend.

The chart below from Sentimentrader.com shows a much better picture of the trend and the relative importance (using that terminology very loosely here) of insider buying and selling as an indicator for the overall market direction:

 Investing 101: Let History Be the Judge

As you can see, insider buying and selling trends have been very volatile over the past decade. There have been plenty of times when insider buying and selling is at the right time and at the worst possible time.

This time should be no different. The wave of insider selling and lack of insider buying may be a warning sign or may simply be what it always has been - something to be aware of.

In the 100% free Prosperity Dispatch we believe in letting history be our guide when it comes to whether popular market indicators are worthwhile in guiding our decisions.

Good investing,

 

Andrew Mickey
Chief Investment Strategist, Q1 Publishing

 

Sources:

AP: Rampant Insider Selling Raises Red Flags
FT: US Investors are used to Following Those Who Should Know
Bloomberg: Insider Buying of Retailers, Led by Dillard’s, Climbs
Bloomberg: Insiders Exit at the Fastest Pace in Two Years
FP: TrimTabs: Insider Buying is Nonexistent

As an investor, you should always try to seek out and take advantage of the almost endless lucrative opportunities offered in the stock market. A reputed investment advisor can help you stay current with relevant, crucial, and highly important investment information about the stock market. An advisor who provides well-researched and no-nonsense investment advice could be extremely useful to you before you jump into sometimes risky world of stock market investments.

A reliable and well known advisor investment with years of experience in giving stock trading advice will always provide you with useful tips and strategies to invest wisely. Before investing in the stock of a particular company, it is simply imperative to know as much about the company as possible, including the past records and current market trends of its stocks. With the help of a reputed investment advisor, you will be able to gain insight on the present status of the stocks of the company in question. A quality investment magazine and newsletter can offer reliable investment advice and information regarding stock market trends.

One of the well-known and reliable investment advisors that offers exceptional, authentic, and potentially profitable investment trading advice on the basis of comprehensive market research and analysis, is Q1 Publishing. For more information, visit q1publishing.com

By Andrew Mickey, Q1 Publishing

Earlier this week Bruce Williamson, CEO of Dynegy (NYSE:DYN), has made a shocking prediction about the future of energy prices.

Williamson says:

Accelerating economic growth in China will increase prices for oil, coal and electricity in the U.S.

You’re going to see rebound in the demand for oil, for coal. From there, with coal being higher, gas being higher, derivatively power will be higher.

Really going out on a limb there eh?

China’s surging growth, its insatiable thirst for energy, and a resulting rise in energy prices around the world. It’s 2005 all over again.

But what’s really going on with China?

A lot of pundits have pegged China’s economy to continue to deteriorate. Its role as manufacturer to the world was very successfully during the boom years. Since the boom turned to bust, however, China’s economy has been one of the hardest hit in the world.

Our investment research at Q1 Publishing has concluded China’s banks have issued $800 billion in new loans (about 30% of the economy – equivalent of U.S. banks loaning an additional $4 trillion). That’s a lot of new money and we’re sure it all went into good loans.

The end result is, in the short-term at least, a new bubble has been created. Handing out money to anyone asking for it is only a short-term solution. It will end. And it will end quickly.

The medium- and long-term are a bit different though. Most say it’s going to get worse before it gets better in China.

It may – and you can certainly make a case for that - but there’s one thing most of them fail to realize: China has the money to command $6%+ GDP growth. China has a massive savings and it can buy whatever it wants whenever it wants. China is a command economy that can command growth for years to come.

That’s why I wouldn’t bet on a big decline in energy commodities right now. There will be swings, but China will be forced to grow. There will be a high long-term cost, but that cost won’t have to be paid for another year or two, at least.

For now, it’s onward and upward. Buy the dips. A new bull market…whatever you want to call it, some stock market sectors have a very bright future ahead. And it will be very profitable for those investors who can look past the day-to-day stock market volatility and focus on the long-term investment opportunity.

Bruce Williamson’s “shocking” prediction provides the perfect example of the solid long-term opportunities that most investors will simply run away from when the market starts to dip.

Successful contrarian investing involves buying when no one else wants it then selling it when someone really wants it. It’s the epitome of buying low and selling high. And that’s why we’ll be looking at China soon and waiting for a pullback in energy prices for readers of Q1 Publishing’s investment newsletter, the Prosperity Dispatch.