muses of the moment

July 26, 2012

Jim Sinclair’s Warning

Filed under: ETF, Gold and Silver Investing, MF Global bankruptcy, Precious metals, The Banking Crisis — totallygroovygirlfriday @ 1:14 am

Click here for a very clear and important warning from Jim Sinclair to the investment community.

How anyone can put any money in a securities/commodities clearinghouse is beyond me. You risk your financial life to win trading then end up with practically nothing whatsoever.

The system is totally broken. Governments are busted. The securities insurance programs are wildly over extended by the fact that their capitalization cannot guarantee what they are supposed to be guaranteeing.

The system is broken.

June 13, 2012

Paper gold is paper money

Filed under: ETF, Gold and Silver Investing, Precious metals — totallygroovygirlfriday @ 1:40 am

All muses of the moment readers should know by now that paper gold is not physical gold, but just as a reminder to any newcomers.

Do you know where your gold is?

Click here.

It is estimated (actually admitted at one point) that physical gold is leased out to multiple parties at 100:1. This is on the low side. Just as investors lose confidence in fiat currencies, so they will lose confidence in paper gold.

You can hold part in paper gold, but understand the limits of the investment.

Just like your brokerage account, if it is not in your physical possession, it is not necessarily yours 24 hours a day 7 days a week.

May 5, 2012


Filed under: Credit Derivatives, Economic Crisis, ETF, Odds 'n ends, The Banking Crisis, The Financial Crisis — totallygroovygirlfriday @ 7:34 am

Golem XIV has two posts out on ETFs and his argument that exchange-traded funds will be the next crisis point. These are EXCELLENT descriptions of the ETF, how they work for the issuer funds and banks and work against the investors. And, more importantly, how banks have pumped them up even more in the last years and act as their own counter-party.

One excellent tidbit here, but read the both links:

In essence  it costs the banks money to have illiquid assets on their books. The repo markets won’t accept them as collateral unless they come with a deep haircut.   So the banks can do little with them except sit on them. Basically it costs the bank to have the illiquid, hard to sell or Repo, stocks on its books. But.. .if they happen to have created a handy synthetic ETF, then everything changes because,

For example, there could be incentives to post illiquid securities as collateral assets [in the ETF Swap]…. By posting them as collateral assets to the ETF sponsor in a swap transaction, the investment bank division can effectively fund these assets at zero cost….

Click here for part 1.

Click here for part 2.

April 21, 2011

The Danger of ETFs

Filed under: 401K and IRAs, ETF, Gold and Silver Investing, Precious metals — totallygroovygirlfriday @ 1:37 am

Click here for an article about the systemic risks of the exchange-traded fund industry to the global financial markets.

Make no mistake: the authorities are worried. The BIS report, for instance, has an unflattering comparison on its first page, noting that now ETFs seem to be serving the same function for institutional investors now as structured credit products did in 2002-2003, with dealers pushing the envelope as far as “innovation” is concerned. The Financial Stability Board was more straightforward, flagging its concerns that ETFs could pose a threat to stability in its report title.

And we all remember how well structured credit products held up in a debt crisis.

groovygirl has long issued warnings to investors: understand the exchange traded fund industry and read the prospectus.

Exchange traded funds were designed to be a short-term exposure or short of a particular index or natural resource market. They are not designed to be held long-term. Most of them close out and reissue every month, you can lose profits when that happens long-term.

Groovygirl suggests only holding exchange traded funds for gold, silver, and oil if that is the only investment vehicle available, such as with in a 401k investment where you are prohibited to hold physical gold and silver. Even in that situation, hold no more than 10-20%.

If there is a run on the precious metals exchange traded funds, you may not get your cash back in a timely manner, for the sell price you asked for, or at all. This is not as safe or as liquid an investment as physical gold and silver held in a private vault.

January 9, 2010

Warren Pollock on Real Fund Value

Filed under: 401K and IRAs, DOW and S&P500, Economic Confidence Model Cycle, ETF, Stock Market — totallygroovygirlfriday @ 6:50 am

William Pollock posted a very good video about the US Stock Market and investing in stocks and funds.

Click here for the link to the video (about 5 min).

There is a lot of information in this video, maybe too much for some. But there are some very important issues that effect your 401k and retirement funds. If you are going to have money in a 401k, you need to understand the basics of market investing. If you don’t, the financial industry will take your money.

Warren uses an example of GUT to show that the fund believes that the mire fact that they bundled some utility stocks together added 42% to the value. This is ridiculous. That 42% can and probably will evaporate at any time. If you are going to invest in funds, at the very least, value the individual stocks and add them up to see if they match the price of the fund. This is a simple way to figure out of a fund is overpriced.

Warren explains how to short (or hedge) a stock or fund. You will notice that it is hard for a regular investor to do this and not worth it because of the borrowing costs. If the market starts to implode again, you have no way to hedge against that scenario. You can only sell on the way down, guaranteeing some sort of loss.

Very soon “paper” investments will become unpopular in this winter K-wave cycle (once the herd finally understands that they are set up to fail). Foreign money is already out of the US market, because they understand this. Let Goldman Sachs trade with itself, do not risk your savings.

What Warren refers to as “starving the beast”, groovygirl refers to “taking your ball and going home”. If today’s systems and organizations are not playing fair, go find someone/somewhere who is.

Side musing: grooovygirl is really ill from listening to Big Media saying that the recession is over, jobs are a “lagging indicator”, and the jobs number is good this week. Please do not be taken in. As John Williams says, by mid 2010, the truth will be clear to all. We will move from a recession to a depression.

December 13, 2009

Another great Jim Rogers interview

Listen to what Jim Rogers is saying about long-term investing. Click here. Listen twice.

CNBC now loves Jim Rogers and actually lets him speak instead of cutting him off.

Jim Rogers says couple of very important things. Silver is a better buy than gold right now, if you are planning on buying. He is not selling gold, just not buying right now. At a conference in Prague of global investment managers, 76% of them have never owned gold. Gold is not in a bubble. Inventory of food is lowest in decades, shortage of farmers, and when CNBC is broadcasting live from the Chicago commodity pit every morning, sell agriculture. Avoid long-term US bond market. The US government is the largest debtor in the history of the world.

July 29, 2009


Filed under: 401K and IRAs, ETF, Gold and Silver Investing, Precious metals — totallygroovygirlfriday @ 2:18 pm

Project Mayhem has a new report out suggesting that there are inconsistencies in the exchange-traded fund for silver (SLV).

Here is the link.

A snippet from the author:

In our opinions, the only way for all of these anomalies to occur together as noted in this paper, is via systemic fraud or gross accounting error bordering on jaw-dropping incompetence.

In groovygirl’s opinion, GLD is probably a similar situation. It is my suggestion that investors hold little or no precious metals in these types of investments. If your 401k will not allow anything else, only hold a percentage of your overall portfolio that you are comfortable with.

Many intelligent people on the web that have been in the precious metals industry for 40 or 50 years believe these investment vehicles (GLD and SLV) are suspect.

However, physical gold and silver in your name with correct certificates and numbers are good alternatives. Bullion stored at the Bank of You is best.

July 27, 2009

Tyler Durden with Zerohedge (.) com

Filed under: 401K and IRAs, DOW and S&P500, Economic Crisis, ETF, Stock Market — totallygroovygirlfriday @ 8:49 am

OK, Guys, if you are not reading Tyler Durden and his blog at zerohedge (.) com. Please do. There is very valuable information there.

Today he released a very good report, it’s quite long, on the real state of the “recovery”. If you can’t read it all, then check out the table of contents and skip to what is important to your business. Don’t forget the conclusion chapter.

Click here for full article.

I disagree with Tyler that there is no threat of inflation in the future. I believe the coming hyperinflation is a currency event with nothing to do with supply-demand pricing. It is possible that hyperinflation will not be upon us for another 24 months. Deflation, then severe inflation.

May 23, 2009

Hyperinflation and the Dollar Crisis

If you read my blog regularly, you already know my view…..the US is headed for a hyper-inflationary depression spurred on by the continued loss of purchasing power of the US Dollar. The government will continue to print more and more money.

Beware, at first glance, a losing dollar will make the trade deficit and other stats look good for the economy. Main Street will quickly figure out that their cost of living is rising and their dollar doesn’t go as far as it used to. Everyone knows this and has seen this happen, especially in the last 7 years, but it is going to get worse, very quickly.

Here is a link to an excellent article at on hyperinflation and what to do with your savings during this time.

Although I do not agree with the author’s suggested allotment of savings to precious metal ETFs, his suggestions are sound. (I prefer to hold the physical metal, or at least a larger portion than suggested.)

Protecting your retirement savings, 401K, or IRA from the losing dollar over the next 3-6 years.

Solutions will hold CDs in different currencies, but it requires a $10,000 minimum at the moment.

Pay-pal will let you fund your account and hold your money in different currencies for a small fee. (The fee will pay for itself when the dollar tanks.)

This is about preserving your capital, not making a return. You will be unable to make any return on capital in the future, if you don’t have any.

You can set-up an offshore account and have a number of currencies to chose from. (Remember always keep it legal and declare it on your tax return 🙂 

Buy gold coins or buillon. You can buy the physical stuff and take possession. My favorite option. You can have a bank or company store it for you in their vaults and assign the gold to you. You may purchase an ETF in gold or silver (GLD or SLV) through your brokerage or maybe 401K account. This is my least favorite option, as the ETFs will never have enough metal to back the paper they are issuing. Use this option if it is the only way you can invest in metals.

Purchase gold and silver mining stocks or index funds of those stocks.

Purchase oil and gas ETFs and /or mining/processing stocks.

For long term, all food commodities are a good place to park money (through index funds, individual stocks, actual commodities or processing stocks).

Reverse index funds having to do with real estate or bank funds that rise when those indexes fall. This is risky and short term, use money you can lose. We have not reached a bottom yet, more decline to come in these stocks.

Two final thoughts

The stock market will be apt to high volatility during this time. So any investing associated with stocks and funds, beware of ups and downs. The long term trend will be up for these types of stocks, but with the uncertain economy, they may take the rocky scenic route to get there.

Never put more than 10% of your net worth in one investment with one broker/bank. Spread it out. If you want to invest 30% of your savings in gold related investments, do 10% coin in your possession, 10% in another vault (outside your home country), and 10% in stocks or ETFs with another brokerage house. Another example, if you want to invest 30% of your net worth in stocks, use 3 different brokerage/banks houses (with at least one outside the US banking system).

As always, these suggestions are only my opinion, do your due diligence on any investment and consult your tax adviser.

April 26, 2009

Markets Are Headed Down Again

S&P 500 Trend

S&P 500 Trend

This chart doesn’t look good. The market is going to go down more before hitting bottom. Although the media spin is, “things are looking better”, it is just spin. Don’t listen.

It looks like Martin Armstrong is correct…market move down and gold up in June. The only question now is next leg-down (to 600 range) or waterfall-effect off the edge. The waterfall looks something like the middle of the chart, but it just falls off the page. We shall see. Let’s take a look at some of the details.

This chart from Chart of the Day says it all. The S&P 500 is testing the trend, but with what?

The credit market is still frozen. Two of the Big 3 will be in bankruptcy before summer. The dollar took a huge hit this week. The “good news” of solid balance sheets and 1st quarter profits of the banks is beyond comical. The bank stress tests are clearly a complete government spin. The IMF has nothing but negative news for the global economy and harsh words for US handling of the the crisis. Unemployment is still rising. Global attacks on the USDollar as a global reserve currency. Another 4 banks closed on Friday, right in line with the FDIC controlled implode of the banking system.

I have taken some small bets on inverse funds against banks and real estate for the next few months.

We have not hit bottom, continue to prepare for more of the same. If you have not protected your 401K or retirement funds for downturn, do so now before the next leg down in the economy.

On the positive side, gold is headed up amidst the chaos.

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