In Search of the Perfect Investment

The CME  manipulates the price of silver, gold and other commodities by messing with margin requirements. The dumb thing is that so many hedge funds borrow to gamble in silver, gold and other commodities. For more on banker manipulation of gold and silver markets,  read here.

I remain positive on gold, but not on silver.

I remain positive on great American companies with a big exposure to the booming overseas markets — China, Brazil, Australia and Canada, which escaped the prime-rate mortgage disaster and is booming. My son just visited Toronto. He can’t stop waxing on all the boom that’s evident there.

Wow. The government got Raj. None of my Wall Street friends (I still have three) was surprised that they got him on all 14 counts. Bye, bye Raj for 20+ years. They got him because of extensive and long-time wiretaps. It’s amazing he never knew about the wiretaps. It’s even more amazing he used the phone so egregiously. I’ve always assumed every conversation with anyone was recorded and archived. The Raj story is one of greed and stupidity. Money, it seems, doesn’t always buy happiness. From today’s New York Times:

Galleon Chief’s Web of Friends Proved Crucial to Scheme

Anil Kumar, a former director at McKinsey & Company, was a prominent part of Raj Rajaratnam’s network of information.

As Raj Rajaratnam and Anil Kumar, a McKinsey consultant, walked out of a fund-raiser in Manhattan, Mr. Rajaratnam pulled his old friend aside and made him an offer: would Mr. Kumar provide him with insights for $500,000 a year?

“You have such good knowledge that is worth a lot of money to me,” he said, according to Mr. Kumar.

Mr. Kumar faced an agonizing choice. His employer barred its executives from outside consulting, but an extra half-million dollars a year — and the chance to do business with a powerful hedge fund manager — was tantalizing.

Weeks later, Mr. Kumar accepted.

That deal, struck on an autumn evening in 2003, was one of the many connections made by Mr. Rajaratnam over the years that gave him access to the inner secrets of dozens of publicly traded companies. His vast Rolodex of tipsters included former business school classmates, fellow hedge fund traders and technology industry executives whose origins, like his, were from the Indian subcontinent.

You can read the rest of the story here.

More loving on Goldman Sachs

The People vs. Goldman Sachs.
A Senate committee has laid out the evidence. Now the Justice Department should bring criminal charges, according to Matt Taibbi’s latest piece in Rolling Stone. Writes Taibbi,

They weren’t murderers or anything; they had merely stolen more money than most people can rationally conceive of, from their own customers, in a few blinks of an eye. But then they went one step further. They came to Washington, took an oath before Congress, and lied about it.

Thanks to an extraordinary investigative effort by a Senate subcommittee that unilaterally decided to take up the burden the criminal justice system has repeatedly refused to shoulder, we now know exactly what Goldman Sachs executives like Lloyd Blankfein and Daniel Sparks lied about. We know exactly how they and other top Goldman executives, including David Viniar and Thomas Montag, defrauded their clients. America has been waiting for a case to bring against Wall Street. Here it is, and the evidence has been gift-wrapped and left at the doorstep of federal prosecutors, evidence that doesn’t leave much doubt: Goldman Sachs should stand trial.

You can read Taibbi’s  the entire piece in the latest issue of Rolling Stone, or here.

Gossip and delicious irrelevant facts

+ Newt Gingrich and his wife Callisa began dating while he was still married, but associates now believe she could be helpful in a presidential campaign. Last time he left politics was over a sex scandal.

+ Gadhaffi of Libya hit on Sarkozy’s attractive ex-wife, enraging Sarkozy (France’s president) and causing what many observers believe to be France’s obsession with bombing Libya.

+ Opray’s new TV network — called OWN — hasn’t been doing that well. Oprah sacked the network’s boss recently. One underperforming show she ran was called “Addicted to Food,” which chronicled people’s treatment for eating disorders. “With all its good intentions, it was just hard for the audience to watch,” says the new boss. Apparently the new idea is that straightforward how-to shows and darker subject matter don’t work as well as shows that are entertaining.

Harry Newton who eyes those incoming dividends with some satisfaction. They’re a great offset against yesterday’s contagion. Richard Russell writes yesterday:

Enuff, enuff, let’s talk about the markets. Today’s market is starting out in deflationary fashion. What do I mean by that? Well, stocks down, commodities down, copper down, oil down, gold and silver down, XLE (energy) down, home-builders index down. I’d call that deflationary, wouldn’t you? And oh yes, dollar up and Treasuries up, which adds to the deflationary flavor.

Let’s go back to the very BIG, fundamental picture. With China and Asia entering the commercial world, the net result is that too much merchandise is being produced. The world, particularly the Western world, can’t buy and digest all this mountain of goods. The result is a case of consumer indigestion and chronic deflation. The Fed (which supposedly is worrying about inflation) has been fighting the worldwide forces of deflation by printing money, tens of billions of Federal Reserve notes. At the slightest indication or rumor of a cessation in printing, the forces of deflation burst out again.

As I see it, this means that the Fed and the central banks of the world must continue to devalue their currencies and continue to print money — in other words, inflate.

Thus, the markets are having a devil of a time dealing with the situation — currency devaluations (inflation) and the production of too much merchandise (deflation). No wonder gold keeps whipping back and forth above 1500 and then just below 1500. No wonder the Dow Averages surge above their April highs and then correct — as they are doing today. No wonder nobody really knows what’s going on. And no wonder Russell continues to recommend the Permanent Portfolio (PRPFX), which is hedged for both inflation and deflation.

I want to put one chart on today’s site. It’s a chart of the so-called “Dr. Copper,” the commodity that many analysts use as a barometer of the world economy (because copper is used in almost everything).

Copper got whacked back in the May-June period but then it rallied to new highs (there was a copper-shortage scare). Now Dr. Copper has broken below its 50-day MA and is resting on its 200-day MA. Food for thought, at least on my part?