Monday, December 3, 2012
The eurozone was dealt a fresh blow as Moody’s Investors Service downgraded the region’s rescue funds and unemployment hit a new record high.
The ratings agency cut its rating on the European Stability Mechanism to AA1 from AAA and maintained a negative outlook. It also lowered the European Financial Stability Facility’s provisional rating to (P)AA1 from (P)AAA.
Moody’s said its decision was driven by its recent downgrade of France, because the credit risk and ratings of the rescue funds were “closely aligned to those of its strongest supporters”.
Klaus Regling, managing director of the ESM and chief executive of EFSF, said Moody’s decision was “difficult to understand.” He added: “We disagree with the rating agency’s approach which does not sufficiently acknowledge ESM’s exceptionally strong institutional framework, political commitment and capital structure.”
It came as the EU’s statistics office said eurozone unemployment rose to 11.7pc in October from 11.6pc in September.
On the Big Island of Hawaii, Kilauea Volcano, which has been continuously erupting since 1983, started spewing lava from the Pu'u O'o vent on Saturday, then flowing into the ocean 7 miles away. During the day plumes of volcanic gas can be seen rising above the crater a reminder that just 100 feet below there is molten lava churning in a lava lake. While visitors will no doubt find this a beautiful explosive show it can also hold potential risks. Everyone is urged to stay a safe distance away and not cross the barriers that have been placed around the lava flow.
At the site where the lava enters the ocean, it is best not to get too close, as the cooled and hardened lava creates land that is too new and unstable to be trod upon, it can collapse without warning hurling chunks and hot water into the air and travel up to 100 feet away.
The Hawaii Volcano National Park is home to Kilauea Volcano which got about 1.3 million visitors last year, with this new eruption it is hard to estimate how many people will be visiting this latest occurrence of the 'lava flow'. In the interest of 'safety' visitors are being advised by the Hawaii County Civil Defense Agency to use a lot of care, stay beyond the barriers, and check for the approved viewing hours, before rushing to the area.
The joint chiefs of staff of Iran’s armed forces have established a new ‘soft war’ headquarters to counter threats from Israel and the US, particularly in cyberspace, the Iranian media reported on Saturday.
The Deputy Chief of Staff of Iran’s Armed Forces for Cultural Affairs and Defense, Brig.-Gen. Massoud Jazayeri said that Iran’s enemies were ‘very serious’ in their ‘soft war’ efforts against the Islamic Republic, according to Sepah News, the official public relations site of Iran’s Revolutionary Guard Corps (IRGC). “Therefore, we too must develop an organized means to address the fight with the enemy in this arena,” Jazayeri said.
The military leader claimed that “hundreds of think tanks” in the US are monitoring Iran.
“The enemy is trying to dominate Iran in cyberspace. They are doing their utmost to create roadblocks to prevent Iran’s progress and success in cyber warfare,” Jazayeri warned.
The brigadier-general made his comments to a gathering of military personnel at a conference organized by the Islamic Republic of Iran Broadcasting (IRIB) Basij Cyber Battalions in Tehran, the aim of which was to equip and mobilize Iran’s national media to combat what Tehran sees as the “soft war” threat, according to a report by IRIB itself.
Attending the conference were IRIB cyber space experts and members of Iran’s Cyber Council Committee and the Basij voluntary militia, IRIB reported. The Cyber Council Committee comprises seven “battalions” – politics, culture, social concerns, media, economics, women’s issues and Islamic jurisprudence – each of which deals with issues “targeted by the West in its soft-war against Iran,” IRIB said.
The development comes amid evidence that a shadowy cyber war between Iran, the US and Israel has intensified.
Over the past year, Israel and Israeli-linked targets have been hit by a wave of cyber attacks originating in Iran.
Last week, a group of pro- Iranian hackers nicknamed “Parastoo” – the Persian word for the bird “swallow” –claimed to have seized personal data from 200 scientists and officials linked to the International Atomic Energy Authority (IAEA). In a message that has been widely disseminated among pro-hacking websites in Iran, the group threatened to make its information public if “a Western-favored element entertains another sip of motorbike and magnet bomb cocktail,” alluding to allegations that Israel was responsible for assassinating Iranian nuclear scientists.
In July, researchers at computer security companies Kaspersky Lab and Seculert reported the discovery of a sophisticated malware attack, nicknamed Mahdi after the Shi’ite messiah, that mostly targeted critical infrastructure companies, financial services and government embassies in Israel as well as Saudi Arabia, the US and the United Arab Emirates. The malware was spread via an email containing a fake word document attachment that when opened executed a malware dropper. The malware is designed to spy on computers, including by sending screen shots and recordings back to the attackers. An analysis by Seculert revealed that Mahdi, likely originated in Iran.
Japan is threatening to shoot down a North Korean rocket that Pyongyang says it could launch next week.
Kim Jong-un's regime insists the rocket, which it says will fly south over the Philippines and Australia and into orbit, is carrying a communications satellite.
But the United States, South Korea and Japan all say that the launch is really a ballistic missile test, with North Korea trying to master the technology to fire long-range missiles capable of one day carrying a nuclear warhead.
The last North Korean rocket launch ended in ignominy in April, when the rocket broke up and splashed into the Yellow Sea just a minute or so after take-off.
After that debacle, there were rumours throughout Pyongyang that a couple of rocket scientists had disappeared.
Japan's prime minister Yoshihiko Noda is threatening to shoot down the next rocket if it manages to stay airborne and threaten Japanese territory.
"The defence minister has today issued orders to prepare for the interception and defence against ballistic missiles," he said.
"If they do indeed go ahead with the launch, then it is indeed very regrettable.
"Not only our country, but the entire international community must take strong measures to deal with this."
ISRAEL is close to completing a missile defence shield that will destroy Iranian ballistic missiles in space or on their launchpads, a development that has sharply increased the odds of an attack on Iran's nuclear sites.
Israel's Iron Dome rocket defence system successfully knocked out 421 rockets - an 84 per cent success rate - in a stunning demonstration of its capabilities during the conflict with Gaza last month.
This week, Chris talks with Jeff Clark, Senior Precious Metals Analyst at Casey Research, where he serves as editor of their Big Gold newsletter.
They tackle head-on many of the questions weary precious metals investors are wondering after enduing the volatile yet range-bound price action of gold and silver over the past year:
Have the fundamentals for owning gold & silver changed over the past year? No
What are they? currency devaluation/crisis, supply-chain risk, ore grade depletion
How should retail investors own gold? Mostly physical metal, some quality mining majors (avoid the indices), and ETFs only for trading
Is gold in a bubble? No
Could gold get re-monetized? Quite possibly
Where is gold flowing? From the West to the East. At some point, capital controls will be put in place
What the politicians are doing is the exact opposite of what they need to be doing. We continue adding to our debt, we continue raising the debt ceiling, we continue deficit spending, we continue borrowing money, and, of course, we continue printing money. We are doing the exact opposite of all the things that would lead us away from inflation. So yes, I think that is an important point.I will add that inflation has occurred very quickly, very rapidly, very suddenly many times in the past, just in recent history. If you look back at the high inflationary times, just in the past 100 years here in the U.S., many of those that hit 12%, 14%, 15% -- two years prior to then, the CPI was completely benign. It was 1%, 2% – I think at one point it was 4% – and then all of a sudden within 24 months, it was 12%, 14%. So it can happen very suddenly, and my fear is that is what is going to happen this time. People are in a lull; no one is expecting it: the CPI is low; nothing is really happening with all this money printing; there has been no fallout. But I think that is the critical point. You cannot do these kinds of things we are doing forever and not experience any consequences. Sooner or later there are going to be consequences to what we are doing, and my fear is that it is going to be nasty, catch a lot of people off guard, and really hurt our society. The bottom line for me is, that is why I am buying gold and silver, still, to this day.
For these reasons and others, Jeff strongly believes everyone should have exposure to gold and silver as a defense for preserving the purchasing power of their weath. The key question is: how much exposure?
You want to focus on how many ounces you own, not necessarily looking at whether the price is $5 higher today than it was yesterday. How many ounces do you own? That is really the question you want to ask yourself, so you can focus on how much you are really going to need, and the amount really comes down to this.For me, I am probably going to use some of this gold if we get high inflation. How are you going to protect your standard of living if we get some kind of runaway inflation? And let’s say it's not runaway hyperinflation; let’s just say it's high inflation, 10%, 15%. Remember it was 14% in 1980, so the odds of us getting high inflation are realistic. So if I am going to use that gold to cover my standard of living, you are going to need about two thirds of an ounce of gold for every thousand dollars of monthly expenses. If you want to protect your standard of living and not have your house be ravaged by inflation, so to speak, so that is a good guideline to follow.So if inflation lasts a couple years, well, you are going to need 15 ounces of gold for every thousand dollars of monthly expenses. That is a good guideline to think about. And if your expenses are more per month, you are going to need more gold than that. If inflation lasts longer than two years, you are going to need more than that, but you can actually use the sales of gold and silver to protect your standard of living. You sell some gold and silver, you are going to get U.S. dollars or Canadian dollars with it and you can use the increase in the gold and silver price to offset the increase in the goods and services you are buying.So I think that is the way to view it, to look at how you are going to use it. And so the focus again comes back to how many ounces do you own? So if you do not have any, you need to obviously start buying.
Here are two tables -- one for gold and the other for silver -- Jeff offers in his newsletter to help investors calculate the requisite ounces needed to protect against rising inflation over time:
The point here is that you're probably going to need more ounces than you think. Look at your bank statement and assess how much you spend each month – and do it honestly.The other part of the equation is how long we'll need to use gold and silver to cover those expenses. The potential duration of high inflation will dictate how much physical bullion we need stashed away. This is also probably longer than you think; in Weimar Germany, high inflation lasted two years – and then hyperinflation hit and lasted another two. Four years of high inflation. That's not kindling – that's a wildfire roaring through your back yard.So here's how much gold you'll need, depending on your monthly expenses and how long high inflation lasts.
Ounces of Gold Needed to Meet Expenses During High Inflation Monthly expenses in US dollars Monthly expenses in gold, oz* Inflation Duration 6 months 1 year 18 months 2 years 3 years 4 years 5 years $500 0.31 1.9 3.7 5.6 7.5 11.2 15.0 18.7 $1,000 0.63 3.8 7.5 11.3 15.0 22.5 30.0 37.5 $2,000 1.25 7.5 15.0 22.5 30.0 45.0 60.0 75.0 $3,000 1.88 11.3 22.5 33.8 45.0 67.5 90.0 112.5 $4,000 2.50 15.0 30.0 45.0 60.0 90.0 120.0 150.0 $5,000 3.13 18.8 37.5 56.3 75.0 112.5 150.0 187.5 $10,000 6.25 37.5 75.0 112.5 150.0 225.0 300.0 375.0 $20,000 12.50 75.0 150.0 225.0 300.0 450.0 600.0 750.0 *Based on $1,600 gold priceIf my monthly expenses are about $3,000/month, I need 45 ounces to cover two years of high inflation, and 90 if it lasts four years. Those already well off should use the bottom rows of the table. How much will you need?Of course many of us own silver, too. Here's how many ounces we'd need, if we saved in silver.
Ounces of Silver Needed to Meet Expenses During High Inflation Monthly expenses in US dollars Monthly expenses in silver, oz* Inflation Duration 6 months 1 year 18 months 2 years 3 years 4 years 5 years $500 17.9 107.1 214.2 321.3 428.4 642.6 856.8 1,071.0 $1,000 35.7 214.3 428.5 642.8 857.0 1,285.6 1,714.1 2,142.6 $2,000 71.4 428.5 857.0 1,285.6 1,714.1 2,571.1 3,428.2 4,285.2 $3,000 107.1 642.8 1,285.7 1,928.5 2,571.4 3,857.0 5,142.7 6,428.4 $4,000 142.9 857.1 1,714.2 2,571.3 3,428.4 5,142.6 6,856.8 8,571.0 $5,000 178.6 1,071.4 2,142.8 3,214.3 4,285.7 6,428.5 8,571.4 10,714.2 $10,000 357.1 2,142.6 4,285.0 6,427.8 8,570.4 1,2855.6 17,140.8 21,426.0 $20,000 714.3 4,285.7 8,571.4 12,857.0 17,142.7 25,714.1 34,285.4 42,856.8 *Based on $28 silver priceA $3,000 monthly budget needs 1,285 ounces to get through one year, or 3,857 ounces for three years.I know these amounts probably sound like a lot. But here's the thing: if you don't save now in gold and silver, you're going to spend a whole lot more later. What I've outlined here is exactly what gold and silver are for: to protect your purchasing power, your standard of living.