While prices of gold don’t necessarily affect silver prices or vice versa, history has demonstrated that when gold rises or falls, silver usually follows suit.

This time around, silver has failed to match the gains that gold posted in recent months, spawning a widespread believe that silver is poised for a bull run. Such factors as a decline in supply and a weakening U.S. dollar have buttressed that bullish belief. And so has the fact that China’s government is strongly encouraging that country’s residents to buy the white metal.

With Beijing’s plan to inject $587 billion (4 trillion yuan) into China’s economy, and a growing desire to diversify away from the U.S. dollar as its key reserve currency, the Asian giant could increase its reliance on such precious metals as gold and silver – especially if global inflation takes hold.

China’s central bank “could use gold, silver or even a basket of

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It’s official: You can reduce your investment risk simply by chucking darts at a list of stocks, then buying them.

That’s if you believe a Nobel economist, of course. His crude “experiment” was the start of “modern portfolio theory” decades ago. The downside, however, was that with a reduction of risk came a dampening of profits. So scratch that idea.

How about this? A startling study in the late 1970s showed that owning a portfolio of large U.S. companies with international divisions drops your risk 10% below a domestic stock portfolio. Much better. But that wasn’t the eye-popper…

The study also found that owning stocks in international companies cuts your risk in half…

Take that, “efficiency” theorists! Yet the stuffy professors still tried to refute these results. It was a losing battle, though, as more studies emerged, laden with more evidence that international stocks reduce risk.

But the

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The following appeared in the August edition of Business Diary Botswana. Right now I find myself fascinated by the role that securitization and a mature credit derivatives market will ultimately play in frontier economies; as J.P. Morgan once penned, “credit derivatives allow even the most illiquid credit exposures to be transferred to the most efficient holders of that risk.” Despite its perils (notably the lack of respect issuers had for the potential correlation on mortgage defaults), it is my belief that the underlying concept supporting derivatives is a sound one if handled correctly. As wealth continues to flow to developing markets in the coming decades, so too will the management of risk continue to mature.

Back in late March, not long after the S&P registered its ominous 666 low, an understandably seething writer in The New York Times charged that above all, the “key promise” of

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The Treasury Department has proposed regulating derivatives like CDS by forcing the bulk of them on to centralized exchanges (see http://www.treas.gov/press/releases/tg261.htm for the summary, or if you are really ambitious, here is the link to the actual proposed legislation http://www.financialstability.gov/docs/regulatoryreform/titleVII.pdf). Thus all standardized derivatives would start to resemble the market for equity options.

The move would greatly reduce the possibility of a cascading wave of cross defaults if one major player were to fail. This is precisely the situation that was faced last fall with the collapse of American International Group (AIG).

It was the fear of that domino effect that caused the Federal Government to throw $180 billion at AIG. Most of that money went straight out the back door to fulfill AIG's CDS swap obligations. Over $12 billion of that went to Goldman Sachs (GS), who's chairman was the only private sector person at the

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Madrid, Spain

Two important headlines this morning, both of them fraudulent:

“Chinese economy bounces back,” says one headline in theInternational Herald Tribune.

“JPMorgan profit soars despite downturn,” says another.

The average reader or TV viewer will go no further. “Ah,” he says to himself, “good news; the worst is over. China is a green shoot as big as the Amazon. And JPMorgan is a leader in the financial sector. If the financial sector is doing well, the whole world economy must be doing well.”

But here at The Daily Reckoning, we can’t help ourselves. If we see a silver lining, we look for the cloud. We see garbage…we look for the rat…

We begin with the JPMorgan profit announcement, because it is the most intriguing. Let us set the stage:

In the last half century, credit has expanded faster even than dress sizes. Naturally, this has made the business of hawking credit

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NEAH Power Systems’s President and CEO Dr. Chris D’Couto told the investment community today that the company is working with Ed Cabrera, an investment banker and board member of NEAH Power Systems, Inc., to move up to the AMEX trading platform.

“In the last month, NEAH Power has seen significant growth and completion of deliverables. During this time, the company has made two technological breakthroughs in one of the most relevant industries of the future, namely alternate energy,” Dr. D’Couto stated.

He continued, “As part of our growth, we anticipate orders and contracts not only in the USA but around the world, and those contracts will lead to a need to finance production. As part of the overall growth and positioning of the company, NEAH will work with Jesup & Lamont to be listed on the American Exchange.”

Mr. Cabrera is the Executive Managing Director of New York-based Jesup & Lamont, one

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