Gold hits record highs, why I recommend Palladium now

Gold is a new bubble waiting to burst, but not for a while. If, like me, you bought low years ago, congrats! This is not really the time to buy gold. This is the time to buy things that are currently low in cost but will go up in the future.

I posted a tip several months ago about Palladium. Palladium has many uses and the price is good right now. The value, like gold, is still climbing and at $371/oz Palladium is well below its 5 year high of $579/oz.  The US just agreed to curb greenhouse emissions. How does this relate to the price of Palladium? Here’s how:

Palladium is the active component in several catalytic formulations for environmental technologies, due to its superior performances in the conversion of some hydrocarbons (for example, methane) and halocarbons, and the thermal stability and low volatility of Pd species. The properties and reactivity of Pd-based catalysts in the conversion of methane catalytic combustion for gas turbine applications, reduction of greenhouse gas (methane, N₂O) emissions, hydrodehalogenation and oxidative destruction of halocarbons and their applications in the elimination of other pollutants from gaseous emissions are reviewed, with emphasis on the structure-activity relationships, reaction mechanism and sensitivity to poisoning. – sciencedirect

Here’s the scoop on gold:

Gold climbed to the highest price ever, capping the longest rally in 27 years, as the dollar’s slump deepened and on a report that India’s central bank may add to last month’s 200 metric-ton purchase.

Gold reached a record $1,189 an ounce and has rallied 13 percent since Nov. 2, after India said it bought bullion from the International Monetary Fund. The country, the world’s largest gold consumer, may buy more from the IMF, the Financial Chronicle reported. U.S. Dollar Index, a six-currency gauge of the greenback’s strength, fell to a 15-month low.

“There is a lot of central-bank buying, hedge-fund buying and gold is obviously getting to $1,200 an ounce before the end of the year,” David Lee, a trader at Heraeus Precious Metals Management in New York, said in a telephone interview. The metal has climbed 34 percent this year, heading for the sharpest annual increase since 1979.

Gold futures for February delivery climbed $21.20, or 1.8 percent, to $1,188.60 on the New York Mercantile Exchange’s Comex division. Up for a ninth straight session, the most-active contract’s rally is the longest since August 1982. The metal has climbed 14.1 percent this month, heading for the biggest monthly gain since September 1999.

“Funds and central banks around the world are nervous about the future of the U.S. dollar and the world economy, and that’s why they are buying gold,” Lee said by e-mail. “We’ve reached ‘irrational-exuberance’ levels on many commodities,” including gold and copper, he said.

One-Way Trade

“The gold trade is as crowded as a Tokyo subway car at rush hour,” Jon Nadler, a Kitco Inc. senior analyst in Montreal, said by e-mail. “This has been a one-way, dollar- carry-fueled street since Sept. 1, and it has seen the market become decoupled from anything resembling its fundamentals — kind of like oil became last year.”

Bullion typically moves inversely to the U.S. currency. The dollar index slid as much as 0.9 percent today after Federal Reserve officials described this year’s decline as “orderly.”

“We expect gold to continue to break through new highs” through this year, Scott Licamele, the director of emerging- markets research at Red Star Asset Management, said by e-mail. “The weak-dollar trend will continue as dollar-debasement fears persist.”

In London, gold for immediate delivery rose $17.42, or 1.5 percent, to $1,186.82 an ounce at 7:17 p.m. local time after touching a record of $1,187.38.

‘Going Ballistic’

“Gold is in uncharted territory as it continues to go ballistic,” Ralph Preston, a Heritage West Futures Inc. analyst in San Diego, said by e-mail.

“With today’s push over Monday’s high, look for residual momentum to carry prices to $1,200 an ounce before month’s end, which represents the next psychological stop on this runaway bull train,” Preston said. “I don’t see a bubble. I see a changing world order, and gold is a reflection of that change.”

The central banks of Russia and Sri Lanka have acquired gold recently, prompting analysts at Bank of America Merrill Lynch, Societe Generale and Barclays Capital to forecast more such purchases. Governments are the biggest bullion holders.

“Actions from central banks are very important at the moment,” said Eugen Weinberg, an analyst at Commerzbank AG. “The purchase from India was like a seal of prices above $1,000 an ounce. Also, other central banks are buying gold.” – bloomberg

The FDIC Reserve is gone. Blame our maniacal optimism.

The cash reserves needed for the FDIC to keep paying depositors at failed banks has all been used up. Don’t panic (yet anyways), the FDIC has an open credit line to the Treasury Department (uh, that means us tax payers) that will keep the FDIC floating in cash to keep paying out money to Grandma and Grandpa at the failed banks.

You see, the FDIC is supposed to be self maintaining, it charges banks a fee to have their deposits insured. Think of it as the banks paying an insurance premium. That money goes into the FDIC kitty and is used to pay depositors when a bank fails. That is all well and good except when the financial system blows up like it has over the past 2 years.

As of today’s quarterly report issued by the FDIC they are now broke, and I mean that in the literal sense.

FDIC deposit insurance fund now -$8.2B v $10.4B last quarter

Yep, they are broke, no money left in the cash drawer. So what now? As long as the FDIC has an open credit line with the Treasury then any bank that fails it will be the taxpayers who reimburse Grandma and Grandpa.

Think of it this way: you have a checking account at (let’s pick a name out of the air) #tyBank and they get closed by the FDIC. Your very own money will be reimbursed to you via the FDIC insurance fund, but you will actually be paying yourself back in part because taxpayers will be on the hook to keep the FDIC floating in funds. So in the end you still lose some money. – ats

Verified the Deposit Insurance Fund figures here, page 15: http://www2.fdic.gov/qbp/2009sep/qbp.pdf

This happened in 1992 after the SNL bailout as well. How did this happen? It happened because we as a species are a bunch of damn fools. I tend to agree with Barbara Ehrenreich’s main point:

November 24, 2009 “In These Times.” — In her new book Bright-Sided: How the Relentless Promotion of Positive Thinking Has Undermined America (Metropolitan/Holt, October 2009), Barbara Ehrenreich traces the origins of contemporary optimism from nineteenth-century healers to twentieth-century pushers of consumerism. She explores how that culture of optimism prevents us from holding to account both corporate heads and elected officials.Manufactured optimism has become a method to make the poor feel guilty for their poverty, the ill for their lack of health and the victims of corporate layoffs for their inability to find worthwhile jobs. Megachurches preach the “gospel of prosperity,” exhorting poor people to visualize financial success. Corporations have abandoned rational decision-making in favor of charismatic leadership.

This mania for looking on the bright side has given us the present financial collapse; optimistic business leaders — assisted by rosy-eyed policymakers — made very bad decisions. – infoclearinghouse

The solution is not pessimism, it is rational, incremental determination. Step by step we can recover. 

The curious economic effects of religion

What makes economies grow? It’s a question that has occupied thinkers for centuries. Most of us would tick off things like education levels, openness to trade, natural resources, and political systems.

Here’s one you might not have considered: hell.

A pair of Harvard researchers recently examined 40 years of data from dozens of countries, trying to sort out the economic impact of religious beliefs or practices. They found that religion has a measurable effect on developing economies – and the most powerful influence relates to how strongly people believe in hell.

That hell could matter to economic growth might seem surprising, since you can’t prove it exists, let alone quantify it. It stands as one of the more intriguing findings in a growing body of recent research exploring how religion might influence the wealth and prosperity of societies. In recent years, Italian economists have presented findings that religion can boost GDP by increasing trust within a society; researchers in the United States showed that religion reduces corruption and increases respect for law in ways that boost overall economic growth. A number of researchers have documented how merchants used religious backgrounds to establish one another’s reliability.

The notion that religion influences economies has a long history, but the specifics have been vexingly difficult to pin down. Today, as researchers start to answer the question more definitively with the tools of modern economics, what’s emerging is a clearer picture of how nations’ prosperity can depend, in part, on seemingly abstract concerns like theology – and sometimes on quite nuanced points of belief or religious fervor.

The work is preliminary, but offers the hope of useful findings. Knowing exactly how and when God influences mammon could lead to smarter forms of economic development in emerging nations, and could add to our understanding of how culture shapes wealth and poverty. And it stands as part of a larger movement in economics, in which the field is looking beyond purely material explanations to a broader engagement with human culture, psychology, and even our angels and demons.

via The curious economic effects of religion – The Boston Globe.

Leave your money to your cryonically perserved self?

The laws are complicated, and not stacked in your favor, but if done carefully it’s possible to leave a huge death benefit payoff from your life insurance policy to your cryonically-preserved self. And since life insurance can also be used to finance your cryopreservation, you need not wait until you are rich to sign up. Most in the middle class, if they seriously want it, can afford it now. So by taking the right steps, you can look forward to waking up one bright future morning from cryopreservation the proud owner of a bank account brimming with money.

Don’t get me wrong. Leaving money to your future self is complicated. The courts have decided that cryopreserved people are not suspended or preserved. Rather, they are irrevocably dead, and by being dead have no legal right of ownership or inheritance. These laws may change if the first cryopreserved people are resuscitated and sue for some new kind of civil rights, but that could be decades away. In the meantime, those who are not yet being preserved have spent years pondering and discussing possible methods of self-inheritance. They call it Cryonics Estate Planning and there are now at least three ways to achieve the goal.

One method requires individuals to join a foundation based in Europe that has no website and generally avoids publicity (like the piece you are reading now). It was created by wealthy cryonicists for the purpose of wealth preservation, as well as to fund both their cryopreservation and their eventual resuscitation. Meanwhile, Alcor — a more inclusive organization and one of the two main cryopreservation facilities in the United States — is in the process of developing a trust. And finally — for the use of his clients — Rudi Hoffman has created a trust.

Having written cryopreservation insurance policies for nearly a thousand people, Rudi Hoffman is well established as the world’s leading cryonics insurance provider. As a certified financial planner, he also has a longstanding record of helping people leave money to their future selves, and thus avoid the worry of being revived from cryopreservation to discover that they are penniless in wonderland.

A cryonics activist, volunteer, speaker and writer, Rudi teaches cryonic preservation to the uninitiated. “I signed up for cryopreservation back in 1994,” he said, “But being a transhumanist, it’s my hope that medical science will advance fast enough and soon enough that I never need to be cryopreserved. I look at cryonics itself as a form of insurance. If I need it, I’ve got it. It’s always good to have a backup plan.”

via Wake from Cryonics | h+ Magazine.

Bad Decisions May Be Contagious

Money Pit. Throwing good money after bad in decisions like real estate investments could be contagious.Like the flu, a person’s emotional state can be contagious. Watch someone cry, and you’ll likely feel sad; think about the elderly, and you’ll tend to walk slower. Now a study suggests that we can also catch someone else’s irrational thought processes.

Anyone who’s lost money on a fixer-upper may have succumbed to a classic economic fallacy known as “sunk costs.” You make a bad investment in a home that’s never going to sell for more than you put in to it, yet you want to justify your investment by continuing to throw money into renovations. One way to avoid this hole is to get advice from someone who has no self-interest in the project. But is the outsider still somehow susceptible to your mindset?

To find out, social psychologist Adam Galinsky of Northwestern University in Evanston, Illinois, and colleagues asked college students to take over decision-making for a person they had never met–and who they didn’t know was fictitious. The volunteers were split into two groups: one that felt some connection with the decision-maker and another that didn’t.

In one experiment, the volunteers watched the following scenario play out via text on a computer screen: the fictitious decision-maker tried to outbid another person for a prize of 356 points, which equaled $4.45 in real money. The decision-maker started out with 360 points, and every time the other bidder upped the ante by 40 points, the decision-maker followed suit. Volunteers were told that once the decision-maker bid over 356 points, he or she would begin to lose some of the $12 payment for participating in the study.

When the fictitious decision-maker neared this threshold, the volunteers were asked to take over bidding. Objectively, the volunteers should have realized that–like the person who makes a bad investment in a fixer-upper–the decision-maker would keep throwing good money after bad. But the volunteers who felt an identification with the fictitious player (i.e., those told by the researchers that they shared the same month of birth or year in school) made almost 60% more bids and were more likely to lose money than those who didn’t feel a connection. The team reports the findings of this experiment–and three similar experiments–in this month’s issue of the Journal of Experimental Social Psychology.

via Bad Decisions May Be Contagious — Torrice 2009 (1110): 2 — ScienceNOW.

Gold Spells Trouble for the Dollar

The value of gold and silver are on the rise, but this spells trouble for the declining dollar index which could push as low as 66 points, according to Chris Zwermann, strategist from Zwermann Financial.

Gold made new highs Wednesday and “looks like it’s going further up,” he told CNBC.

“The question is what really does gold tell us,” he said, adding that gold’s strength is “a sign that the dollar is going to weaken earlier or later in the next few days already, and the stock markets turn around again.”

The dollar is on a downward trend, currently resting at about 76 points, but “the dollar so far didn’t manage to come out of this downtrend,” Zwermann said, adding that the dollar doesn’t have the strength to turn around at the moment, pushing the index target as low as 66 points.

While gold strength spells trouble for the US dollar, the silver market is likely to rise with gold pushing the spot silver value to more than $20 per ounce, he said.

Gold made new highs Wednesday and “looks like it’s going further up,” he told CNBC. …

via Gold Spells Trouble for Greenback: Charts – Economy * Europe * News * Story – CNBC.com.

Here’s another tip:

“You don’t want to chase the railroads or transportation stocks at this point—rather, we want to run where Buffett’s going than where he’s been,” Altucher told CNBC. Altucher said Buffett’s latest new position is Becton Dickinson and he also added to Johnson & Johnson. “Buffett is making a good long-term bet on the health care industry with the aging baby boomers – cnbc

All precious metals are increasing in value. The gold I bought years ago when it was low has turned out to be a fantastic investment. I’m not selling yet. Gold is still going up. At this time, I recommend buying some palladium. It is cheaper than gold and has great potential based on its uses in alternative energy technologies.  You want to buy low and sell high, and the price of palladium is currently low, but it has been much higher in the past. The 5 year high is $579/oz. Palladium is currently around $329 and has been climbing all year.

BP fined $87m for Texas explosion

BP has been fined a record $87m (£53m) for failing to correct safety hazards at its Texas City refinery in the US.

An explosion in 2005 at the Texas plant killed 15 people and injured 180 more.

The Occupational Safety and Health Administration (OSHA) cited 270 violations at the oil refinery, a US Labor Department official said.

BP said it believed it was in “full compliance” with a 2005 settlement agreement with OSHA and would work with the agency to resolve the issue.

The $87m fine is the largest in OSHA’s history.

In 2005, BP paid a $21.3m fine to OSHA and entered into a four-year agreement to repair hazards at the Texas City refinery, which is the third largest in the US.

The latest fine follows a six-month inspection into whether BP had complied with that agreement. …

The safety violations found “could lead to another catastrophe”, US Labor Secretary Hilda Solis said.

“An $87m fine won’t restore those lives [lost in the 2005 explosion], but we can’t let this happen again. Workplace safety is more than a slogan. It’s the law,” Ms Solis said.

BP said in a statement: “While we strongly disagree with [OSHA's] conclusions, we will continue to work with the agency to resolve our differences.”

The firm will now have 15 days to either agree to pay the fine and take corrective action, or to contest the penalty through a hearing process.

BP was fined $50m by the Department of Justice in 2007 to settle criminal charges stemming from the Texas explosion.

Lawyers for the victims’ families said this was not enough.

The company has also paid more than $2bn to settle civil lawsuits and says it has invested more than $1 billion to repair safety problems at Texas City. …

via BBC NEWS | Business | BP fined $87m for Texas explosion.

Rich Germans demand higher taxes

A group of rich Germans has launched a petition calling for the government to make wealthy people pay higher taxes.

The group say they have more money than they need, and the extra revenue could fund economic and social programmes to aid Germany’s economic recovery.

Germany could raise 100bn euros (£91bn) if the richest people paid a 5% wealth tax for two years, they say.

The petition has 44 signatories so far, and will be presented to newly re-elected Chancellor Angela Merkel.

The group say the financial crisis is leading to an increase in unemployment, poverty and social inequality.

Simply donating money to deal with the problems is not enough, they want a change in the whole approach.

“The path out of the crisis must be paved with massive investment in ecology, education and social justice,” they say in the petition.

Those who had “made a fortune through inheritance, hard work, hard-working, successful entrepreneurship, or investment” should contribute by paying more to alleviate the crisis.

The man behind the petition, Dieter Lehmkuhl, told Berlin’s Tagesspiegel that there were 2.2 million people in Germany with a fortune of more than 500,000 euros.

If they all paid the tax for two years, Germany could raise 100bn euros to fund ecological programmes, education and social projects, said the retired doctor and heir to a brewery.

Signatory Peter Vollmer told AFP news agency he was supporting the proposal because he had inherited “a lot of money I do not need”.

He said the tax would be “a viable and socially acceptable way out of the flagrant budget crisis”.

via BBC NEWS | Europe | Rich Germans demand higher taxes.

Think this could happen in America? What if there was a cap where the most any one person could have would be 250 million dollars and anything you owned beyond that would go to the needy? I’d vote for something like that.

That might help people who are obsessed with making money. Slogan idea: “You made the max, now you can relax.”

32-carat diamond sells for $7.7M at NYC auction

A square, 32.01-carat emerald-cut diamond that billionaire philanthropist Leonore Annenberg bought for her 90th birthday sold for $7.7 million at auction on Wednesday.

About the size of a walnut, the flawless, colorless diamond sits on a ring designed by Manhattan jeweler David Webb. It is flanked by two pear-shaped diamonds, one of them 1.61 carats and the other 1.51 carats.

The ring was offered for sale by Annenberg’s estate. Christie’s auction house did not identify the buyer, who bid by phone.

Annenberg died in March at the age of 91. She served as U.S. chief of protocol during President Ronald Reagan’s first term — a position that carried the rank of ambassador. Her husband, Walter Annenberg, a billionaire publisher and ambassador to Britain under President Richard Nixon, died in 2002.

The big diamond “combines the best of the four C’s: top color, perfect clarity, ideal cut and excellent weight,” said Francois Curiel, international head of Christie’s jewels.

With the “impeccable provenance of the Annenberg name, you have one of the finest gems to appear on the market for many years,” he said.

Annenberg purchased the ring for herself to mark her 90th birthday, Christie’s said. It was delivered by armed guards to her Rancho Mirage, Calif., home from the Beverly Hills jeweler’s store, it said. She was thrilled whenever someone came by to admire it, the auction house said.

The ring’s pre-sale estimate was $3 million to $5 million. The previous auction record for a 30-carat square cut flawless, colorless diamond was $3.1 million, set at Christie’s in Geneva in May.

The record for any diamond or jewel at auction is $24.3 million for the 17th century cushion-shaped grayish-blue 35.56 carat Wittelsbach Diamond. It was sold at Christie’s in December 2008, topping the previous record of $16.5 million for a 100-carat diamond sold in 1995 in Geneva.

via 32-carat diamond sells for $7.7M at NYC auction – Yahoo! News.

Bank of America loses $2.24B as loan losses rise

Bank of America Corp. said Friday it lost more than $2.2 billion in the third quarter as loan losses kept rising, providing more evidence that consumers are still struggling to pay their bills.

The nation’s second-largest bank said it wrote down loans on its books by almost $10 billion during the July-September period, up almost $1 billion from the second quarter. The bank also added $2.1 billion to its reserves to cover bad loans, bringing its provision for credit losses to $11.7 billion. The bank’s total allowance for loan and lease losses now totals $35.83 billion.

Bank of America’s results were aided by profit from its wealth management business, which includes the bank’s Merrill Lynch division. While theJan. 1 acquisition of Merrill Lynch has brought widespread criticism and legal problems for Bank of America, the deal was paying off during the third quarter, when Merrill Lynch’s revenue and profit more than doubled from a year ago.

The bank’s earnings follow the pattern set earlier this week by Citigroup Inc. and JPMorgan Chase & Co., which also reported more loan losses during the third quarter as consumers struggled to keep up with their credit card and mortgage payments. And on Friday, General Electric Co. reported that its GE Capital business, which includes credit cards, saw an 87 percent drop in profits, although it was also weighed down by commercial real estate losses.

Together, the reports depict a financial industry that is still deeply troubled, although the trading operations at companies like Bank of America, JPMorgan and Goldman Sachs Group Inc. mitigated some of the bad news.

Banks have predicted for some time that their loan losses would keep rising. And Bank of America’s CEO Ken Lewis, joining his counterparts at JPMorgan and Chase, confirmed that this trend will continue into the near future as unemployment rises and consumers keep struggling.

via Bank of America loses $2.24B as loan losses rise – Yahoo! News.