Kong Sez:

    Folks! Many are scrambling to save their investments. Many are taking their money out of one pitfall to place their funds in another, such as Gold Exchange Traded Funds.

    This could be the biggest Ponzi scheme of them all, as there is no more gold, to speak of, coming in large amounts from the mines.

    Let The Buyer Beware at this time. If you buy Gold — take possession of it. Otherwise, stay away from it.

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December 2009

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REAL GOLD, OR AN ETF FIASCO?

by MIA Associate Editor Jim Deeds

ETFs, or “exchange traded funds,” are all the rage on Wall Street. They make investing easy for all kinds of investors. (Have you ever heard of a new product from Wall Street that wasn’t easy to invest in upon its introduction?)

An ETF is a group of individual investments such as gold, interest rates, a short sale on the banking sector (using a portfolio of many individual bank stocks), or a long-term bet with triple leverage on higher oil prices. The ETF focuses on a given type of investment, and is prefabricated (a prefabrication is not too different from pre-packaged sub-prime debt and derivatives).

For both pros and individuals, it’s now “old fashioned” to do in-depth personal research on your next favorite stock or commodity. Instead, you can just buy or “sell short” the ETF “package” for anticipated swings in the market.

In a sentence, ETFs allow both longer-term “industry” investment and short-term impulse or momentum buying for a quick profit. But, as a participant, you need to know that ETFs are supposedly “rebalanced” each day by the ETF sponsor to reflect the day’s specific price swings in the applicable group of stocks or commodities. The ETF sponsors (originating banks, etc.) all have their own unique ways of “rebalancing,” which is usually well-hidden in the fine print of their prospectus. So every speculator or investor must once again trust a fourth party (beyond yourself, the investment, and the market) – just as you do your own government with the longterm value of your saving or speculative dollars.

A. THE GOLD ETF (GLD) – A MIRACULOUS, NEW, EASY WAY TO OWN GOLD?

Fred Hickey, editor of the long respected and highly profitable market letter, The High Tech Strategist, is an acknowledged expert on high-tech stocks, and is no slouch on monetary theory and understanding the mismanagement of America’s balance sheet. His letter, though devoted to “high-tech” stocks, was completely “out” of tech stocks in late 1999, and actually held large “put positions” during the dot-com crash in early 2000. After 9/11, he did “go long” leading survivor tech stocks, which he was again out of and short by mid 2007. However, he started building in 2001 what he says is his largest investment position ever – in precious metals (gold and silver).

[ED. NOTE: I’ve been in the investment business for over 50 years now, and it’s very, very rare to see a leading industry expert or analyst go 100% negative on his own specialty early, and remain so for several years. And it’s almost unheard of to see a recognized high-tech super analyst reverse course and place most of his personal funds and his new highest recommendation on gold and silver. Change, for nearly all of us, is next to impossible! This easily explains why Fred Hickey has been included on the Barron’s year-end “round table” as one of the most outspoken, and accurate participants.]

So, what did Fred say about gold ETFs in his June 2, 2009, letter to clients?

“These tech positions are relatively minor compared to my huge precious metals positions, primarily gold, but also some silver. My biggest gold position is the SPDR Gold Shares ETF (GLD). I have a smaller position in the silver ETF (SLV). I also hold physical gold and I try to buy more on any significant dips. I currently hold large positions in Newmont Mining (NEM), Agnico-Eagle Mines (AEM), Goldcorp (GC) and Yamana Gold (AUY).

“With gold in a long-term secular bull market (since 2001), I’ve been thinking that the next central bank-generated bubble could be in precious metals. A final parabolic move up in gold would be the classic climax that most secular bull markets experience in their final phases. Clearly, the economic environment is ripe, with the dollar under pressure, central banks wildly printing money and the building concerns about severe inflation. The one ingredient seemingly missing was the financial or technological innovtion that typically captures the imagination of investors during bubbles. Examples would be the Internet in the late 19902 tech bubble and new exotic mortgages and securitization disbursement techniques during the latest housing bubble.

“Then it hit me – the innovation in the precious metals market is the World Gold Council’s establishment of gold ETFs. These ETF’s removed the past barriers to buying gold. One doesn’t have to mess with futures contracts anymore, nor do they have to worry about buying, storing and securing large amounts of physical gold. With one click of a computer key, one can now own as much gold one wants. It’s stored and secured for you, for a relatively minor annual fee. No hassles! This opportunity has been opened to investors all over the world.”

It’s all right there, when you read it!

There are currently six different gold ETFs, the largest being the SPDR Gold Trust (GLD on the NYSE). These funds, with American, English, and Swiss origins, currently hold a little over 50 million ounces of gold through their respective ETF shares. The physical gold they say they hold and rebalance daily in response to the ever-changing open-end fund shares they sell and manage, is growing and is nearly equal to the entire world’s gold production last year. With current gold prices, the gold ETFs represent $50 billion of supposedly real physical gold held in reserve for ETF shareholders – a quick “click of the computer key, where one can now own as much gold as one wants. It’s stored and secured for you, for a relatively minor annual fee.... The opportunity has been opened to investors all over the world.”

B. GOLD ETFs – THE LARGEST MANIPULATED GOLD FRAUD EVER?

Could there be a few questions a prudent investor should ask about gold ETFs? 1. Adam Hamilton, Zeal Research, reports: “GLD, the world’s premier gold ETF was born in November 2004. It is now the largest ETF on the planet (and on the NYSE) behind only SPY S&P 500 ETFs. GLD holds 1134 tons of gold (backing up its paper ETF) in June 2009. This one ETF already holding gold equal to 47% of one year’s total world gold production.”

Question: Can it be this easy to buy, transport, and accumulate this much of the world’s gold reserve of physical gold? When both the Johannesburg mint and the U.S. Mint have periodically run out of gold reserves and had to discontinue minting one ounce gold coins, how did GLD meet its rapidly growing daily physical gold requirements? During March 2009, GLD ETFs outstanding grew 22%! Did the managers of GLD find real gold, or cover their promises with “fool’s gold” promised in futures markets? “Bullion bank” brokers (Goldman Sachs and J.P. Morgan) have for years promised future gold delivery on the COMEX market with ever-growing short sales of gold, backed by only their “hope” and contacts at the Fed, Treasury, and other G-7 central banks.

2. When hedge fund operators routinely sell thousands of shares of gold ETFs short to “play gold price swings” on the NYSE, (you have to borrow the stock certificate from a willing brokerage lender to sell short), does the new GLD buyer on the other side of the “short sale” trade really have the intended physical gold backing up his purchase of a paper (or computerized) ETF?

3. Do ETFs really purchase freely held physical gold bullion, or are they covering their daily short positions (versus newly printed ETFs) with futures contracts purchased from the world’s leading “bullion banks” on Wall Street? Do investors know that Goldman Sachs, J.P. Morgan, and other “bullion banks” – which are the largest gold traders on the COMEX – have been short huge gold positions on the futures market for the past 8 years – shorts that grow larger every year (from Mark J. Lundeen’s exceptional June 12, 2009 report: “Manipulation of Gold and Silver on the COMEX”). The “COMEX,” far from being the free futures market in gold and silver as advertised, is reported by many free market experts as being only an agent supporting the fraudulent and manipulative trading in futures markets as they continuously break their own regulatory market rules in favor of manipulative “bullion banks” (the eight largest position traders in gold and silver).

4. Does the World Gold Council truly represent the world’s gold mining producers and many people’s monetary belief in gold? Or is the World Gold Council only a group of “old men” recommending 5% gold as a portfolio diversification, who sold out to G-7 Central Bankers in creating a phony new Trojan Horse of paper gold called ETFs?

5. Were gold ETFs dreamed up by the “controllers” of Central Bank fiat paper and phony credit markets to once again distract investment dollars from direct investment in legitimate gold mining producers and to take pressure off the physical gold coin markets with another phony “paper gold”?

6. In 1930, every physical ounce of gold held in our nation’s treasury reserves could be exchanged for 20 paper dollars. By 1945, it took 39 paper dollars for a foreign nation to exchange unwanted paper dollars for an ounce of gold. In June 2009, each ounce of gold in our country’s reserves represented $3,475.39 in paper dollars then in circulation.

When do you expect the dollar delusion of gold ETFs to be announced? When ETF shares double, triple, and quadruple from the number of shares outstanding today, will ETF managers be able to keep up with real physical gold bullion (deliverable) on hand for gold ETF shareholders as promised?

CONCLUSION

If we had the resources and time to check out these and many other questions on gold ETFs (and silver ETFs as well), there’s a chance we’d find deception, fraud, and manipulation in the gold and silver markets as trading in future markets is rigged by bullion banks and our U. S. Treasury.

Paul Volker is quoted as saying: “If I had only kept the gold price down in the late 1970s … America’s inflationary episode would have been much easier to control. Larry Summers, currently Obama’s chief White House economic advisor, specifically has spoken and written of controlled and low manipulated gold prices as being the best reinforcer of low interest rates and loose monetary policy.”

ARE ETF’S THE NEXT TROJAN HORSE (like SDRs and paper gold), where managed manipulation of the “paper gold” price is used to control the otherwise rapidly escalating price of real physical gold? We’ll soon see.

Kong Sez:

    I would not be at all surprised. These folks want all your money.

    Remember! If you get Gold or Silver, do as Dr. "B" has recommended for years:

Take Physical Possession of It All.

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You Will Need This In The Future If You Own Gold—Save It! Don't Get Gypped.
People Do Not Know What Gold or Real Money Is Any More.

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Golden Rules

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Weight

1 oz. troy :	= 31.10 grams
32.15 oz. troy :	= 1 kilo
100 oz. troy :	= 3.11 kilos
(Comex Contract)
32,150 oz. troy :	= 1 metric ton
3.75 oz. troy :	= 10 tolas (Indian sub-continent)
1.2 oz. troy :	= 1 tael (Hong Kong)
0.47 oz. troy :	= 1 baht (Thailand)

Purity

The Purity of gold is described by its fineness (parts per 1,000) or by the karat (or carat in Europe) scale.

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