IRCBS
908 Audelia Road Suite 200-150 Richardson, TX 75081 972-644-6117 www.ircbs.com
Investors Rare Coin and Bullion Service
Burnett Marus, RFC Editor
The 5 Minute and a Cup Of Coffee Report on Rare Coins, Precious Metals and The Economy
June 4 2012 Page 1
By the Numbers....
How does the world and US ecomony measure up so far. 2 -
the inflation rate according to U.S. government statistics
9 -
percentage increase for health care cost in 2012
30 -
percent increase in energy cost from 2005 to 2011
45 - million recipients, one out of every seven U.S. residents were on the Supplemental Nutrition Assistance Program (the SNAP program, informally known as the food stamp program) 8.2 - the unemployment percentage rate as given by the U.S. government rising from 8.1% 12 - the percentage rate of unemployment in the U.S. based on those who have actually quit looking for work 25 - the percentage rate of unemployment in Spain 24 - the percentage rate of unemployed in The United States during the Great Depression 32 - U.S. states that are official bankrupt. The top three: California $6.9 billion borrowed from the Federal government; Michigan $3.9 billion borrowed; New York $3.2 billion borrowed. Total for all 32 states $37.8 billion borrowed from Treasury to fund unemployment
1.37 - million bankruptcy filings were recorded in 2011 for the 50 states and District of Columbia 1.375 - trillion dollars, Bank of New York Mellon derivative exposure 1.390 - trillion dollars, State Street Financial derivative exposure 1.722 - trillion dollars, Morgan Stanley derivative exposure 3.332 - trillion dollars, Wells Fargo derivative exposure 4.321 - trillion dollars, HSBC derivative exposure 44.192 - trillion dollars, Goldman Sachs derivative exposure
47.5- billion dollars that French banks are exposed to Greek government bonds as the largest holder of Greek debt
50.135 - trillion dollars, Bank of America derivative exposure
90 - billion dollars in derivative contracts involved in the Greek economy
52.102 - trillion dollars, Citibank derivative exposure
90 - the national debt/GDP ratio of France
70.151 - trillion dollars, JP Morgan Chase derivative exposure
100 - the national debt/GDP ratio of the United States
228.72 - trillion dollars, total of 9 Biggest Banks' (above) Derivative Exposure
1.3 - trillion euros is the outstanding debt of France
450 -
tons of reported Central Bank gold purchases last year
1 - trillion dollars, the U.S. National Debt during the Carter administration
400 -
tons of estimated Central Bank gold purchases this year
3 - trillion dollars increase in the U.S. National Debt during the Obama administration
214,500 - ounces of gold sold by the U.S. Mint to investors in 2012
15.1 - trillion dollars is the current U.S. National Debt (and rising) 23 - trillion dollars, the Treasury Department s own projections for U.S. debt by year 2015 a 64% increase to the current debt limit 798.3 - billion dollars in consumer credit card debt, a 9% iincrease by November 2011 845 - billion dollars in student loan debt at the end of the 2nd quarter of 2011
10,459,000 - ounces of silver sold by the U.S. Mint to investors in 2012 2,358.2 - tons of bullion held by investors through ETPs. (The combined tonnage is greater than the reserves of all but four of the world's central banks and equal to more than 10 months of global mine supply. So begs the question, if demand is made for gold bullion...where is it?) A fast painless recovery? It just doesn t add up!
IRCBS
908 Audelia Road Suite 200-150 Richardson, TX 75081 972-644-6117 www.ircbs.com
Investors Rare Coin and Bullion Service
Burnett Marus, RFC Editor
The 5 Minute and a Cup Of Coffee Report on Rare Coins, Precious Metals and The Economy
June 4, 2012 Page 2
That means of course that the time for gold and silver prices to hit the roof is also very close, and much closer than anybody else is currently forecasting. Mr Sinclair is laughing at George Soros for saying that the euro has three months to sort itself out. He thinks it will be lucky to have three weeks. Mr. Sinclair could therefore well be right. He s the guy who predicted back in the early 2000s with gold around $300 an ounce that gold would reach $1,650 within a decade. Now he is talking about quantitative easing to the moon and a similar trajectory for gold and silver prices. More funds and fund managers are now stating that allocations between 5% and 10% percent to bullion are prudent. Kevin O Leary, chairman of O Leary Funds and star of ABC s Shark Tank and CBC s Dragon s Den has owned gold for decades and maintains a 5% weighting. When the price dips and his weighting drops, he says he buys into weakness.
So What s Going On in The Gold and Silver Bullion Markets?
The traditional view is that three asset classes (stocks, bonds and cash) are sufficient to achieve diversification. The chart below shows that only precious metals offer negative correlation to stocks, bonds and cash; a portfolio that consists of only positively correlated asset classes is not balanced or diversified.
Euro-zone finance ministers panicked this weekend and agreed to a preemptive announcement of a $125 billion bailout for the Spanish banks, bringing the grand total for bank bailouts to $600 billion when Ireland, Portugal and Greece are added. Money printing on this scale has only ever been good for precious metal prices by historical precedent. The bank bailouts are an example of money creation at the source with banks able to lend more against this new capital injection and sterilizing bad debts. It sets gold up to power above the $1,923 all-time high of last September and hit $2,000 an ounce this fall, while silver will as usual outperform to the upside and cross the 1980 all-time high of $50 and go to $60. According to SEC filings George Soros has been back buying gold - and this on its own has probably given a lift to the gold price, with many big money investors likely to see that as a lead to follow. Soros famously described gold as being the 'ultimate bubble' a year or so ago, although the quote was largely taken out of context. He was also said to have sold a large proportion of his gold holdings last year, but is now seen as climbing back in with substantial purchases in the SPDR Gold ETF in the first quarter. Veteran gold trader and a former adviser to the Hunt Brothers in the silver spike of 1980, Jim Sinclair is now saying boldly on his website that The end is not near, it is here and now in reference to the global economy. .
US-based Wainwright & Co. Economics Inc. studied the allocation of gold required to protect against inflation and found that a US-equities portfolio in which 15% of the assets are diverted to gold bullion would be effectively immune from damage due to a rising gold price and that is, we believe, equivalent to immunity from inflation. Emerging market demand for gold continues to grow, with China asserting a dominant role. The World Gold Council reported that, for Q1 2012, China s gold demand was up 10% year-over-year, despite a 22% increase in average prices. Inflation concerns and government attempts to cool off the housing market continue to drive Chinese gold demand and, before long, China will overtake India as the top global gold consumer. Chinese demand for goods, services and, yes, gold, will shape the global economic and investment environment for the balance of the 21st century.