Dear Friends,

I have assured you there is absolutely no practical way to cure the credit and default derivatives problem.

Since this is a meltdown of $20 trillion in credit and default derivatives, do not for a moment think holders of the remaining $550 trillion plus in OTC derivatives are not shaking in their boots as they continue to try and value this worthless garbage via computer models.

As the article in the Wall Street Journal properly suggests, only a miracle tomorrow that takes home prices back to the high and makes all in-arrears mortgages pay up, there is no hope of a reversal of today’s critical problems.

As we discussed yesterday the Fed’s $200 billion plan (not new) of accepting collateral at full value that has no value is seen as useless unless you are a bank falling off a cliff. Even then it is nothing compared to the entire size of the problem.

The Formula is coming into its own and is the major means by which the US dollar will find .5200 on the USDX.

$1000itus does not have long legs. It will assuredly be taken out, after which $1024 to $1050 becomes another temporary challenge.

Gold is going to $1650.

Gold will not come down as it did in 1980 but this time trade around a fulcrum price because of the Federal Reserve Gold Certificate Ratio, modernized and revitalized.

This is not convertibility. This is not an automatic control of interest rates. This is not a gold backed dollar. It is connected to a measure of liquidity.

Precious metals shares of all kinds and varieties will perform in this generational bull market in excess of gold regardless of naked short sales, hedge funds and over trading by the gold community. The latter is the major reason why holders are frustrated.