Dear Reader,

Today, I wanted to touch on a few housekeeping points. Most importantly, Doug Casey will make a speaking appearance on May 14 at the Global Currency Expo in La Jolla, CA. Olivier Garret and Jeff Clark will also be in attendance. Of course, Doug’s fundamental analysis on the dollar is something you don’t want to miss. So, if you’re in the area, grab a reservation. The organizers have said that there are few seats left.

While forex isn’t our primary concern at Casey Research, we’re always keeping a close eye on the dollar and other currencies around the world. Well, actually, I take that back. We are currency investors – except unlike most, we see gold and silver as money. I’ll have to use that line the next time someone asks what our newsletters invests in. “We’re currency investors. We invest in gold and silver.”

In our opinion, all fiat currencies are in a race to the bottom. However, even with this view, a few currencies differentiate themselves. Some will cross the finish line much more quickly than others. As a result, our portfolio in The Casey Report holds two currencies other than the dollar for diversification purposes.

Before we get into the issue, I wanted to mention our new additional links and reads section. I hope that you’re enjoying it thus far. Let me know what you think, and please send in links other readers might enjoy. I can’t read every website myself. Any help would be much appreciated.

First, Alena Mikhan and Andrey Dashkov take a different view on UTIMCO’s recent gold delivery than yesterday’s article by Kevin Brekke. Then, Alex Daley informs us of technology’s new threat for your rights. Finally, I’ll share some more philosophical thoughts on propaganda.

Physical Delivery Gets Popular

by Alena Mikhan and Andrey Dashkov

Last Friday, the University of Texas Investment Management Co (UTIMCO) took delivery of 6,643 gold bars, worth slightly under one billion U.S. dollars, sending shockwaves across the gold community. We don’t disagree with Casey editor Kevin Brekke’s cautionary note yesterday, but we have to point out that this action is particularly significant because UTIMCO is the nation’s second largest university fund behind Harvard’s.

Amidst the current uncertainty surrounding U.S. sovereign debt and inflation fears, this decision looks like a good solution to lock the institution’s ownership of gold under management. But the major risk UTIMCO was trying to do away with was the possibility of surging demand for physical gold at the COMEX.

As per the Bloomberg article mentioned above, “Right now few investors take physical delivery of bullion. As of April 14, 2,860 contracts this month, about 0.5 percent of total open interest, had been converted to metal, exchange data show.”

According to hedge-fund manager J. Kyle Bass, who advised UTIMCO to take physical possession of the gold: “Open interest in gold futures and options traded on the COMEX typically exceeds supplies held in its warehouses. If the holders of just 5 percent of those contracts opted to take delivery of the metal, there wouldn’t be enough to cover the demand.

The situation, as quoted, looks quite shaky. The five percent of deliverable metal Bass mentions could disappear rather quickly if debt and inflation-induced fears manage to build enough demand momentum and subsequent physical delivery requests. Or, more specifically, if perception of counterparty risk among once-venerable institutions (no one is going to forget Lehman Brothers anytime soon) shifts the thinking towards taking delivery.

UTIMCO’s choice may not be a shift in the cosmic firmament, but increases in demand for physical gold would definitely be a significant bullish factor for gold, which has been on a steady rise and this week surpassed US$1,500 per ounce.

But is this really happening? Let’s have a look at Asia. World Gold Council figures show that among the generally robust investment demand in 2010, there were growing volumes of physical delivery in that part of the world.

Investment activity in China remained high. Physical delivery at the Shanghai Gold Exchange totaled 836.7 tonnes in 2010, with 236.6 tonnes delivered during Q4. Moreover, physical delivery as a percentage of trading volume had increased to 33% by the fourth quarter, as Chinese investors sought to get hold of gold bullion.

Source: Gold Investment Digest Fourth quarter and full year 2010

The reasoning behind the behavior of UTIMCO and some of the Asian gold traders is rather obvious: to secure ownership of a safe-haven investment tool (physical gold) in times of uncertainty while it is still possible.

As the pace of global economic growth remains a major concern and the risk of another collapse possible, the inclination to take physical delivery should gain popularity in other parts of the world, with significant consequences to the price of gold. In the U.S., UTIMCO set a precedent; the question now may be, “Who’s next?”

Technology and Your Fourth-Amendment Rights

By Alex Daley

Officer: “Do you know why I pulled you over?”

Driver: “I think I was going a little fast coming down that hill. I was just slowing down. Sorry, but…”

Officer: “License, registration and cell phone, please.”

Next time you are pulled over, don’t be surprised if a police officer asks for your cell phone. That’s apparently what’s started in Michigan, where police are employing a new piece of technology in their war against lead-footed menaces.

According to a complaint aired by the ACLU, Michigan State Police have launched a pilot program, having traffic cops search mobile phone data from speeders using this fancy gadget:

Sold by a company called Cellebrite, the “UFED” can download pretty much anything and everything from most models of phones: texts, photos, videos, even GPS data. The devices are equipped with adapters for connecting to most major brands of phones, and can even uncover information like the physical keypad lock code and internal diagnostics that track past SIM cards in use.

The device takes a dump of any phone memory it can access (on some phones, that’s a complete dump of everything) and stores it for offline analysis using the company’s desktop software back at the police station. There, police can read your call history, play your videos, or even recover previously deleted files in some cases.

There are certainly some uses for such a device, say, in analyzing the cell phone of a suspected drug dealer after his lawful arrest. But in Michigan the police have allegedly been using the device to download information from the cell phones of drivers pulled over for speeding, even when not suspected of any other crime.

The ACLU contends (and your author for one agrees completely) that downloading the contents of a person’s cell phone without probable cause or a search warrant is a clear violation of 4th Amendment rights. The organization has requested access to the logs from devices in use by the MSP, so they can determine what if anything has been downloaded, and what rights may have been trampled on, through the Freedom of Information Act.

And Michigan police are happy to comply. For a small administrative fee, of course. Just $544,680. For five devices.

The ACLU, understandably perturbed “that Michigan State Police would rather play this stalling game than respect the public’s right to know,” have tried to narrow their requests to reduce the costs of fulfilling it, only to be given the runaround on when and where the devices have been used. After years of haggling back and forth behind the scenes, the ACLU is now bringing its case to the court of public opinion in an attempt to clear these roadblocks and continue its investigation.

We can only hope that they have some success curbing any abuses that might be occurring before these devices start winding up in the patrol cars of police around the nation.  

Like a Fine Wine – Propaganda Gets Better with Age

By Vedran Vuk

Today, I wanted to step way back in time to the Civil War. In April, depending on your geographic location, this time of year brings the American Civil War back into the press with some article recounting the events. In this spirit, CNN had a very interesting poll on current perceptions of the Civil War. The original intent of this poll was rather easy to see through. Hmm… I wonder why the poll asked Tea Party supporters whether their sympathies lie more with the Confederacy or the Northern states?

Unfortunately for CNN, they didn’t get their juicy story labeling the Tea Party as a bunch of pro-Confederacy racists. In fact, the poll shows the greatest numbers of Confederate sympathizers are found among political moderates with 29%. You know those moderates and their crazy pro-Confederate ways. Nonetheless, CNN found something really interesting: 42% of the polled do not believe slavery was the main reason for the war, while 54% believe that slavery was the primary reason.

Now, I’m not here to change your mind on the subject. That’s the role of a history publication and certainly not Casey’s Daily Dispatch. But I did want to discuss these numbers. In my opinion, they do not measure sentiments toward the Civil War. Instead, this poll gauges the power of propaganda. Regardless of your opinion, the poll shows that about half the country disagrees. We’re not talking about a debate on the merits of Obama’s new healthcare. In that debate, one would expect various opinions. We’re talking about an event where 600,000 were killed, entire cities were leveled, and the country was temporarily torn apart. Yet, 146 years later, Americans can’t agree on the primary reason for the war.

I find this frightening. With enough time and propaganda, a large portion of the population can be led astray. And not only will they believe the bending of the truth, they will fiercely and angrily defend it. Where do the untruths come from? Well, largely from governments. But you can see possible propaganda angles from both sides in the Civil War. After the war, the North needed to put its actions including war crimes in a better light. Hence, ending slavery suddenly became the primary reason for the war.

But you could look at the non-slavery reasons in the same light. How many Confederate veterans do you think told their kids and grandkids that they fought for slavery? Probably not many. Furthermore, on a personal level, most clearly didn’t fight the war for this reason. And that seems self-evident. Simply put, poor white Southern farmers didn’t charge a mile of open field at Gettysburg so that rich plantation owners could outcompete them with slaves. But then again, what the individual soldier thinks rarely has much to do with the cause of a war.

In wars today, the same sort of business goes on. Is the U.S. fighting in the Middle East for security, freedom and democracy? Or is the fight a part of a long-held foreign policy mentality designed to enrich the military-industrial complex? The truth is somewhere in the middle. And just like the average Confederate soldier during the war likely didn’t see his struggle as one for the slave plantations, most average guys in Iraq don’t see themselves as pawns for Halliburton’s net income.

Propaganda goes far beyond just wars. If our country can’t agree on the reason why 600,000 were killed in the Civil War, then what other common wisdom has been propagandized? Did FDR really save us from the Great Depression? Is the Federal Reserve an agent of price stability or value destruction? Is democracy the path to prosperity? Many of these issues are simply taken for granted. However, once one starts to look at the details, the clear and unquestionable “facts” become highly debatable.

Propaganda is an extremely powerful tool. With enough effort and time, the public can be convinced of practically anything. And should we be surprised? The Democratic Party has been praising FDR for 80 years, the administrations in power always back the Fed, and democracy has been the justification for numerous U.S. conflicts. These ideas have been around so long that a large part of the population sees them as undisputed facts. The same will be true with our times today. I wouldn’t be surprised one bit to find my grandkids coming back from school one day in the distant future telling me how Obama’s Recovery Act saved the country from the Great Recession and Bush fought for freedom in Iraq.

Additional Links and Reads

Student Loan Debt Likely to Top One Trillion Dollars (

Irish Housing Market Report (Bloomberg video)

Ron Paul’s House for Sale (AOL Real Estate)

That’s it for today. Thanks for reading and subscribing to Casey’s Daily Dispatch.

Vedran Vuk
Casey’s Daily Dispatch Editor