Daily Digest

Daily Digest 8/8 - Dungeons And Downgrades, James Turk Interviews Jim Sinclair, Change We Can Believe In

Monday, August 8, 2011, 10:53 AM
  • A Second Recession Could Be Much Worse Than The First
  • Jim Sinclair interviewed by James Turk
  • As Market Tension Builds, World Leaders Ponder Response
  • America “Makes The Cut” – So What Happens Next?
  • 5 Gold ETFs That Will Turbocharge Your ISA
  • How ECB Failed To Reassure Investors
  • QBAMCO - Change We Can Believe In
  • Is America Doomed?
  • Dungeons And Downgrades
  • Former PBOC Member: "The Situation Is Unsustainable. The Longer It Continues, The More Violent And Destructive The Final Adjustment Will Be."
  • Bill Gross Tells The Truth: "S&P Finally Got It Right. They Are Enforcing Some Discipline. My Hat Is Off To Them"
  • G-7 Vows to Take ‘All Necessary Measures’ to Stabilize Economies
  • The Stock Market and the Dollar: There Are Only Three Possibilities
  • The Bull Case For Gold
  • Niger Delta Villagers Go To The Hague To Fight Against Oil Giant Shell

Learn how to protect your wealth against the Three E forces using our 'What Should I Do?' guide

Economy

A Second Recession Could Be Much Worse Than The First (JLA)

There is no approachable precedent, at least in the postwar era, for what happens when an economy with 9 percent unemployment falls back into recession,” said Nigel Gault, chief United States economist at IHS Global Insight. “The one precedent you might consider is 1937, when there was also a premature withdrawal of fiscal stimulus, and the economy fell into another recession more painful than the first.

Jim Sinclair interviewed by James Turk (adam)

http://www.youtube.com/watch?feature=player_embedded&v=IF24atvNkSo

James Turk, Director of The GoldMoney Foundation, talks to Jim Sinclair, host of www.jsmineset.com/, about his successful gold price predictions, US debt problems, how to ride the trend and the second phase of the gold bull. It's a gear change from arithmetic to exponential growth as public perceptions about the safety of the US dollar changes. The debt ceiling debate is a wake up call for people all over the world. The video was recorded on August 5 2011 at the GATA conference in London.

As Market Tension Builds, World Leaders Ponder Response (Johnny Oxygen)

European governments have agreed to use the European Financial Stability Facility, their joint bailout fund, to buy government bonds on the secondary market. But Germany will be reluctant to risk its own credit rating by committing massive funds to Spain and Italy, a move that would be politically unpopular as well.

It is doubtful whether the U.S. Federal Reserve or the central banks of other nations would be willing or able to help the E.C.B. intervene in bond markets, Mr. Weinberg said. “Will the Fed help out the E.C.B.? I don’t see how that works,” he said. “The Fed has its balance sheet pumped up already.”

America “Makes The Cut” – So What Happens Next? (June C.)

This has already begun. Italian authorities have raided the offices of S&P and Moody’s, apparently perturbed that their credit rating is not under their control. The U.S. is accusing S&P of making "accounting mistakes” and jumping the gun on the American downgrade. The battle between insolvent governments and the ratings agencies from here on will escalate quickly. More offices will be investigated and raided. The mainstream media will try to assert that the downgrades are “not that important”, and that the U.S. will recover quite nicely without a perfect score. Eventually, as the collapse becomes more evident, ratings agencies will fill the role as the go to scapegoat / economic hitman at which all governments will point accusing fingers.

“S&P is gonna’ cut you man! S&P’s a blade-man, man!”

5 Gold ETFs That Will Turbocharge Your ISA (Michael S.)

There are now a number of Exchange Traded Funds (ETFs) that allow you to invest in gold. These ETFs can be held in a share dealing account, a pension such as a Self Invested Personal Pension (SIPP), or a stocks & shares Individual Savings Account (ISA).

Here are some interesting gold ETFs. As always, do your own research before investing. Be particularly careful with the gold ETFs as there are a number of them with similar stock ticker symbols.

How ECB Failed To Reassure Investors (Michael S.)

On the face of it, the main source of stress in markets may not be the downgrade of US government debt by the ratings agency Standard & Poors, because the price of 10 year government bonds actually rose a bit overnight - which is the reverse of what should happen if investors agreed with S&P that the prospects for the US repaying all its debts have worsened.

QBAMCO - Change We Can Believe In (Dave R.)

While we would be foolish to invest under the assumption that we know exactly when the long-term becomes the short term, (or even when it becomes the now), we are confident the global economy is much further down the timeline than just a year ago to rampant hyperinflation and/or a formally-structured monetary devaluation. The Greek bailout and the US debt ceiling impasse are merely different publicly visible manifestations of the same problem: there can be no political solution for extinguishing debt other than formal currency devaluation via asset monetization that would collateralize systemic debt.

Learn how to protect your wealth against the Three E forces using our 'What Should I Do?' guide

Is America Doomed? (Michael S.)

Justin Webb asks whether the United States is capable of averting economic meltdown. / mp3 podcast

Dungeons And Downgrades (Ilene)

In a stinging rebuke of the current dysfunctional political climate, S&P wrote “We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process. We also believe that the fiscal consolidation plan that Congress and the Administration agreed to this week falls short of the amount that we believe is necessary to stabilize the general government debt burden by the middle of the decade.”

Former PBOC Member: "The Situation Is Unsustainable. The Longer It Continues, The More Violent And Destructive The Final Adjustment Will Be." (pinecarr)

Yesterday it was an editorial piece in the main Chinese media outlet Xinhua. Today, China brings its message of helpless (for now) fury to the FT, where Yu Yongding, a former member of the Monetary Policy committee of the Chinese Central Bank has just said what everyone who realizes that mean reversions after 30 years worth of a "great moderation" can and will be a nasty, nasty thing, thinks. Namely: "the situation is ultimately unsustainable. The longer it continues, the more violent and destructive the final adjustment will be. " He is referring to the relentless recycling of Chinese trade surplus in the form of US paper which is increasingly looking like it will never get repaid. His chief rhetorical question is key: "The question is: what losses is China willing to bear in its foreign exchange reserves in order to slow the pace of the renminbi appreciation?" And that's the ballgame.

Bill Gross Tells The Truth: "S&P Finally Got It Right. They Are Enforcing Some Discipline. My Hat Is Off To Them" (pinecarr)

After all the hollow rhetoric and scapegoating over the past few days about S&Ps "treasonous act" from Friday, we were delighted to finally hear one person say the truth. "I have been criticizing them and Moody's and Fitch for a long time. Moody's and Fitch are on the "S" list. I think S&P finally demonstrated some spin. S&P finally got it right. They spoke to a dysfunctional political system and deficits as far as the eye can see. They are enforcing some discipline. My hat is off to them." The person in question: PIMCO's Bill Gross…

G-7 Vows to Take ‘All Necessary Measures’ to Stabilize Economies (pinecarr)

Group of Seven nations sought to head off a collapse in investor confidence after the U.S. sovereign- rating cut and a slump in Italian and Spanish debt intensified threats to the global economy.

The Stock Market and the Dollar: There Are Only Three Possibilities (pinecarr)

With stocks and the dollar on a see-saw, there are only three possibilities to choose from.

The Bull Case For Gold (pinecarr)

Gold is rising because the world’s monetary system is being debased – and there is no sign of this stopping.

Energy

Niger Delta Villagers Go To The Hague To Fight Against Oil Giant Shell (pinecarr)

This once self-sufficient community suffered from the excesses of oil firms and corrupt officials. Now, the villagers are blamed for everything and the arms dealers are having a field day.

Article suggestions for the Daily Digest can be sent to [email protected]. All suggestions are filtered by the Daily Digest team and preference is given to those that are in alignment with the message of the Crash Course and the "3 Es."

19 Comments

saxplayer00o1's picture
saxplayer00o1
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Posts: 4149
S&P: U.S. unlikely to quickly reclaim AAA rating

 

"The European Central Bank bought Italian and Spanish government bonds amid concern their rising bond yields may force the two countries to seek bailouts, according to six people with knowledge of the transactions.

The ECB isn’t buying Irish or Portuguese bonds, said one of the people, who asked not to be identified because the deals are confidential. The ECB said last night it will “actively implement” its bond-purchase program, signaling it is ready to start buying Italian and Spanish securities to counter the sovereign-debt crisis. A spokeswoman for the central bank declined to comment today."

"The yield on 10-year Italian bonds fell 74 basis points to 5.36 percent as of 10:16 a.m. in London. That narrowed the difference in yield, or spread, to similar-maturity German debt by 80 basis points to 294 basis points. Spanish 10-year yields slid 79 basis points to 5.26 percent."

..................1A) ECB Bond Buying May Reach $1.2 Trillion
"The European Central Bank’s move to buy Italian and Spanish bonds to tame the region’s debt crisis marks a step toward the kind of fiscal union that Germany has opposed since the founding of the single currency.

While investors and economists say tighter fiscal ties and increased transfers to the financially weak euro states will be needed to end the financial contagion, purchases of Italian and Spanish debt that Royal Bank of Scotland Group Plc estimates may reach 850 billion euros ($1.2 trillion) threaten fresh political fault lines.

“This huge-risk pooling exercise will not come easily and the risk of political fallout will be large,” Jacques Cailloux, chief European economist at RBS, wrote in a note."
 

"The $2.9 trillion municipal bond market is preparing for “hundreds and hundreds” of downgrades after Standard & Poor’s lowered the U.S. one level to AA+, the first-ever reduction for the country.

S&P is likely to cut its ratings on municipal debt secured by the federal government, such as pre-refunded bonds, tax- exempts backed by U.S. agencies, and credits that are most dependent on federal spending, Peter DeGroot, head of municipal research at JPMorgan Chase & Co. (JPM), wrote in an Aug. 5 report distributed after the federal downgrade. The New York-based ratings company said it would release a statement on state and local issuers today.

“There will be hundreds and hundreds of municipal downgrades, which will not do well to bolster investor confidence,” Matt Fabian, a managing director of Concord, Massachusetts-based Municipal Market Advisors, said in a telephone interview. “Treasuries may be able to shake off a real impact from the downgrade. Munis I’m less sure about.” "

"The U.S. is unlikely to quickly return to the top-tier triple rating of AAA, said David Beers, head of Standard & Poor's global sovereign ratings, on Monday. "Given the nature of the debate currently in the country and the polarization of views around fiscal policies right now, we don't see anything immediately on the horizon that would make an upgrade back to AAA again the most likely scenario," Beers said. The earliest a sovereign has ever returned to a AAA rating was nine years, S&P officials said. "

"In connection with its downgrading of the U.S. government, ratings service Standard & Poor's early Monday likewise downgraded the senior issue ratings on Fannie Mae /quotes/zigman/226360 FNMA -14.75% and Freddie Mac /quotes/zigman/226335 FMCC -14.89% to 'AA+' from 'AAA'. S&P added it was maintaining its 'A' subordinated debt rating and 'C' rating on the preferred stock for the government-backed entities, and affirmed their short-term issue ratings at 'A-1+'. "The downgrades of Fannie Mae and Freddie Mac reflect their direct reliance on the U.S. government."

  • Other news, headlines and opinion: 

Europe’s Crisis May Stuff U.S. Banks With Undeployable ‘Hot Potato’ Cash

Russia plans to triple state debt by 2014: Report

Obama aide: Credit downgrade requires 'balanced' response

Italian Bank Borrowing From ECB Nearly Doubled In July

Medicare costs for hospice up 70%

Moody's says US still needs to find further cuts

UK, France Could Face Downgrade Speculation - UBS Economist Lueck .

AAA Rated France May Be Vulnerable to Downgrade Following Cut to the U.S.

Coalition warns of 34% tax hike unless city cuts costs (Toronto)

Global Banks Eliminate Jobs at Fastest Pace Since 2008 as Revenue Squeezed

Mortgages Tanked in Q2

S&P downgrades FHLBs, FDIC debt issues

Ruhh's picture
Ruhh
Status: Gold Member (Offline)
Joined: Nov 12 2008
Posts: 259
Global Banks Poised to Cut 101,000 Jobs

Global Banks Poised to Cut 101,000 Jobs
http://www.bloomberg.com/news/2011-08-08/global-banks-poised-to-slash-10...

 

rjs's picture
rjs
Status: Gold Member (Offline)
Joined: Aug 8 2009
Posts: 445
On S&P, Downgrades, and

On S&P, Downgrades, and Idiots - This is not going to be one of those posts that laments S&P’s decision to downgrade the US, but then says that S&P was probably right about our oh-so-dysfunctional political system.  
 No, S&P was flat-out wrong — no caveats. They are, to put it very bluntly, idiots, and they deserve every bit of opprobrium coming their way. They were embarrassingly wrong on the basic budget numbers, as everyone knows now, so they were forced to remove that section from their report, and change their rationale for the downgrade. (Always a sign that you’re dealing with hacks.) Look, I know these S&P guys.  Back when I was an in-house lawyer for an investment bank, I had extensive interactions with all three rating agencies. We needed to get a lot of deals rated, and I was almost always involved in that process in the deals I worked on. To say that S&P analysts aren’t the sharpest tools in the drawer is a massive understatement. With S&P, it got to the point where we were constantly saying, “that’s a good point, but is S&P smart enough to understand that argument?” I kid you not, that was a hard-limit on our game-plan. With Moody’s and Fitch, we at least were able to assume that the analysts on our deals would have a minimum level of financial competence.  

badScooter's picture
badScooter
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Posts: 152
s&p vs reality?

 Hi RJS, sounds like you have some experience with these folks...do they even take into consideration unfunded liability estimates and properly delfated GDP, CPI machinations and the like, or do they all merrily assume the gov't numbers are good numbers...in other words, in your experience, do they "dyodd"?

I think they're a pack of idiots as well, but to the upside.

Do you have an educated opinion on Weiss Research?

Thanks,
Mike

 

osb272646's picture
osb272646
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Posts: 120
S&P

I had a few opportunities to work with investment bankers while involved in taking companies public.  My observation was that their penchant for playing "House" with the numbers is surpassed only by politicians.  I can understand why the analysts at S&P would view their figures with a jaded eye.

rjs's picture
rjs
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Posts: 445
badScooter wrote:  Hi RJS,
badScooter wrote:

 Hi RJS, sounds like you have some experience with these folks...

 

Do you have an educated opinion on Weiss Research?

Thanks,
Mike

 

mike, sorry to mislead, but it wasnt me; that's a post by a finance lawyer who goes by "Economics of Contempt" who ive followed for a few years...dont know much about him except that he's a friend of   "The Epicurean Dealmaker " who's in management at an investment bank...both anonymous for obvious reasons...

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locodoc
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Posts: 2
The FairTax

Politicians in washington are once again doing things their way. They have managed to kick the can down the road to be solved by a future Congress and Administration. This instead of seeking actual solutions for the problems we face. The one thing everyone in Washington can agree on is that the U.S. tax code is irrevocably broken. The chance is here now to fix it, but as usual there is no political will to do so. On July 26th, a hearing was held by the House Ways and Means Committee regarding HR-25, the FairTax bill. The FairTax would end all Federal taxes on incomes of individuals and corporations. They would be replaced by a single rate tax on retail consumption with a rebate payed to all qualified U.S. households based on family size to ensure that no one pays tax on consumption up to the poverty level. The FairTax would be collected by States sales tax agencies. April 15th would become just another spring day. The reception was most telling. Most members hadn't even read up on the material being presented. In a high school debate, or corporate board presentation this would be totally unacceptable. Yet these are the people writing our laws, and this proves how out of touch they believe they can be without consequence. I must praise Chairman Dave Camp for holding this first hearing on true tax reform, but most of the Committee members get an F. The U.S. is the only member of the OECD that still relies on taxing incomes for most of it's revenue needs, and these elected representatives can't understand why jobs and investment are being hemorhaged from our shores. Inform yourself about the FairTax at; www.FairTax.org. And if you like the solution join us at; www.FairTaxNation.com.

Damnthematrix's picture
Damnthematrix
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Posts: 3998
Standard & Poor's may downgrade again

Standard & Poor's may downgrade the long-term credit rating of the U.S. once again in less than three months after sending shockwaves through the bond and stock markets by stripping the nation of its top notch triple-A rating last week, according to an emergency Sunday night conference call for clients of Bank of America Merrill Lynch.

"We do expect further downgrades," said Ethan Harris, North American economist, on the call. "We doubt the newly appointed bipartisan commission will come up with a credible long-term deficit reduction plan. Hence by November or December we would not be surprised to see S&P downgrade the debt again from AA-plus to AA."..

http://www.leap2020.eu/notes/Bank-of-America-S-P-May-Downgrade-US-Again-in-Novem\
ber_b3185038.html

SailAway's picture
SailAway
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Posts: 404
Greenspan: We can always print money!

 

"Q: Are US T-Bonds safe for investing?"

"Greenspan: Very much so...This is not an issue of credit rating. The United States can pay any debt it has because we can always print money to do that"

Well we knew that but when it comes from the mouth of former FED chairman Greenspan, it's amazing!

Ar 45 seconds in this clip:

http://www.msnbc.msn.com/id/3032608/vp/18424745#44050320

 

jturbo68's picture
jturbo68
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Posts: 207
SailAway wrote:   "Q: Are
SailAway wrote:

 

"Q: Are US T-Bonds safe for investing?"

"Greenspan: Very much so...This is not an issue of credit rating. The United States can pay any debt it has because we can always print money to do that"

Well we knew that but when it comes from the mouth of former FED chairman Greenspan, it's amazing!

Ar 45 seconds in this clip:

http://www.msnbc.msn.com/id/3032608/vp/18424745#44050320

 

 

I wonder how many people who heard that understood how readily we admit to debasing our own currency thru inflation.  I guess we dont even try to hide that fact anymore.

 

 

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Travlin
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Posts: 1322
Gold near critical price

In the James Turk interview with Jim Sinclair, at minute 2:00 Sinclair said $1,764 was a critical inflection point, after which the price could skyrocket.  As I type this gold is at $1,748.  That's within one normal day's trading range.  James Sinclair is not a man to dismiss.  Watch the whole video

http://www.goldmoney.com/video/sinclair-turk-interview.html

Travlin 

 

jturbo68's picture
jturbo68
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Posts: 207
Travlin wrote: In the James
Travlin wrote:

In the James Turk interview with Jim Sinclair, at minute 2:00 Sinclair said $1,764 was a critical inflection point, after which the price could skyrocket.  As I type this gold is at $1,748.  That's within one normal day's trading range.  James Sinclair is not a man to dismiss.  Watch the whole video

http://www.goldmoney.com/video/sinclair-turk-interview.html

Travlin 

 

 

Gold up $51 dollars to  $1768 during the overnight....

 

Travlin's picture
Travlin
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Posts: 1322
No surprise
jturbo68 wrote:
Travlin wrote:

In the James Turk interview with Jim Sinclair, at minute 2:00 Sinclair said $1,764 was a critical inflection point, after which the price could skyrocket.  As I type this gold is at $1,748.  That's within one normal day's trading range.  James Sinclair is not a man to dismiss.  Watch the whole video

http://www.goldmoney.com/video/sinclair-turk-interview.html

Travlin 

 Gold up $51 dollars to  $1768 during the overnight....

 

I'm not surprised.  It is up over $100 per ounce since trading resumed 6:00 PM Sunday.  You think people are finally catching on?

Travlin 

britinbe's picture
britinbe
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Posts: 381
James Turk
Travlin wrote:
jturbo68 wrote:
Travlin wrote:

In the James Turk interview with Jim Sinclair, at minute 2:00 Sinclair said $1,764 was a critical inflection point, after which the price could skyrocket.  As I type this gold is at $1,748.  That's within one normal day's trading range.  James Sinclair is not a man to dismiss.  Watch the whole video

http://www.goldmoney.com/video/sinclair-turk-interview.html

Travlin 

 Gold up $51 dollars to  $1768 during the overnight....

 

I'm not surprised.  It is up over $100 per ounce since trading resumed 6:00 PM Sunday.  You think people are finally catching on?

Travlin 

Another great quote "the adoption of sound policies will open Pandora's box".....  Great interview

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pinecarr
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Posts: 2246
re People catching on?

Hey Travlin-

   Switters posted a good article on the comments section of the Martenson Insider that speaks to "the crowd" catching on:

Switters wrote:
Lemonyellowschwin wrote:

 Here is something I find very interesting and I wonder if Chris or others would care to comment:

In 2008, when the market got slammed, gold got slammed too.  This was contrary to what many of us (certainly me) would have expected at that time, but that was what happened. 

Things are different now.  As stocks are getting hammered, gold is going up in inverse correlation.  I see at least two possible reasons for this totally different behavior of gold:

1.  A recognition by "flight to quality" people that gold is quality and that currencies and T bonds may not represent the quality that was perceived in 2008.  Has the perception of gold reached a tipping point, where it is no longer regarded as "weird to own" but "good to own?"

2.  In 2008 it was not entirely clear what the Fed would do.  Some of us predicted QE, and that was what happened.  But it was not universally recognized that this would be the Fed's response.  But now anyone with a frontal lobe has to know that QE 3 (and 4, and 5 and 6 . . .) is a given in response to a tanking market and a tanking economy.  Right?

Check out this article by Andrew Schiff, Peter Schiff's brother.

He votes for #1, and would probably agree with #2 as well.

ao's picture
ao
Status: Diamond Member (Offline)
Joined: Feb 4 2009
Posts: 2220
Travlin wrote: jturbo68
Travlin wrote:
jturbo68 wrote:
Travlin wrote:

In the James Turk interview with Jim Sinclair, at minute 2:00 Sinclair said $1,764 was a critical inflection point, after which the price could skyrocket.  As I type this gold is at $1,748.  That's within one normal day's trading range.  James Sinclair is not a man to dismiss.  Watch the whole video

http://www.goldmoney.com/video/sinclair-turk-interview.html

Travlin 

 Gold up $51 dollars to  $1768 during the overnight....

 

I'm not surprised.  It is up over $100 per ounce since trading resumed 6:00 PM Sunday.  You think people are finally catching on?

Travlin 

Overbought.  Too much, too soon, soon followed by kaboom.

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bob980
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Posts: 26
Gold ETFs

It appears that the 5 gold/precious metal ETFs listed in yesterday's digest are NOT available for U.S. investors.  Does anyone know if that is correct?  Are there physical gold ETFs that ARE available for U.S. investors?

 

 

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bob980
Status: Bronze Member (Offline)
Joined: May 27 2010
Posts: 26
Gold ETFs

It appears that the 5 gold/precious metal ETFs listed in yesterday's digest are NOT available for U.S. investors.  Does anyone know if that is correct?  Are there physical gold ETFs that ARE available for U.S. investors?

UPDATED:

 

PHAU, LBUL, AIGP, SGBS and SBUL ETFs are NOT available to U.s. investors.  However, below is a list of some physical metal ETFs that ARE available to US investors.  I simply make this list available WITHOUT any recommendation. 

AGOL

WITE

GLTR

SGOL

SIVR

PPLT

PALL

 

Caveat emptor!

 

 

Travlin's picture
Travlin
Status: Diamond Member (Offline)
Joined: Apr 15 2010
Posts: 1322
Thanks

Bob

Thanks for the leads.  I'll look into them.

Travlin 

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