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Friday, July 16, 2010

Gold World News Flash

Gold World News Flash

A “Slightly Exaggerated” $15.8 Billion Accounting Error

Posted: 15 Jul 2010 06:02 PM PDT

Alan Abelson, in his column in Barron's, notes that the $9.1 billion drop in Consumer Installment Debt in May makes it four months in-a-row that this debt balance went down, and that "Credit card use (so-called revolving debt) shrank by $7.4 billion, extending its string of monthly declines to 20." Yikes!


GoldCore Update: Gold in Euros in Correction - New Record Highs in Euros Likely

Posted: 15 Jul 2010 06:00 PM PDT

Could Silver Parabolic Top at $714 per Ounce?

Posted: 15 Jul 2010 05:56 PM PDT

Britains Debt 4 Times Higher Than Stated: Did All Countries Lie About Their Debt?

Posted: 15 Jul 2010 05:50 PM PDT

The true scale of Britain's national indebtedness was laid bare by the Office for National Statistics yesterday: almost £4 trillion, or £4,000bn, about four times higher than previously acknowledged.
It quantifies the burden that will be placed on future generations, and it is the ONS's first attempt to draw together the "off-balance-sheet" liabilities that have been accumulated by the state. The figures imply a huge "intergenerational transfer" – broadly in favour of today's "baby boomer" generation at the expense of younger people and future generations.
The debt primarily consists of the cost of public sector and state pensions, and of payments promised to private contractors under private finance initiatives. It far exceeds any of the figures so far published for the national debt, the largest current estimate for which is £903bn. That is projected to rise to £1.3trn by 2015.
More Here..


China Has Been Covertly Funding A Housing Bubble Five Times Larger Than That Of The US: 65 Million Vacant Homes Uncovered.
More Here..

The Nightmare German Inflation

Posted: 15 Jul 2010 05:45 PM PDT

Obama Says "Recovery Summer" But The Fed Says Recovery Will Take 5 or 6 Years

Posted: 15 Jul 2010 05:29 PM PDT


From The Daily Capitalist

President Obama is off pitching his stimulus plan today in Michigan:

The trip, part of a campaign dubbed "Recovery Summer" by the White House, is intended to reassure Americans the U.S. economy is returning to a sound footing in advance of the fall elections. ...

 

On Wednesday, the White House released new data saying a surge in Recovery Act funding had raised economic growth in the second quarter of 2010 by as much as 3.2% and boosted employment by as many as 3.6 million jobs, compared to estimated levels in the absence of the stimulus. 

I wonder if President Obama reads the same data as I do? Aside from the fact that the numbers the White House presented are false, the data are revealing the beginning of an economic slowdown which are clearly contra to the Administration's claims that the economy is growing. The Fed is clearly worried as shown below in the minutes of its June meeting. In fact they expect years of slow growth. I wonder if Mrs. Romer talked to Chairman Bernanke before she boasted about her fake numbers?

Here is an overview of data that came in just this week that reveals a slowing economy:

Industrial Production

After almost a year of strong gains, industrial production slowed in June. And it would have been negative without a surge in utilities output-likely weather related. Overall industrial production in June edged up 0.1 percent, following a 1.3 percent gain the prior month. The June increase was above the market forecast for a 0.2 percent drop. ...

 

Overall, the industrial sector slowed in June, indicating that the recovery has lost a little momentum. The question is whether June's easing is temporary.

 

However, manufacturing fell 0.4 percent in June, following a 1.0 percent jump in May. For other sectors in June, utilities output was up 2.7 percent while mining gained 0.4 percent.

 

By industry, motor vehicles and parts weighed on overall production, dropping 1.9 percent. Manufacturing excluding motor vehicles declined 0.3 percent, following a 0.8 percent boost in May. Market group data suggest at least a temporary shift in production. While production of consumer goods fell 0.6 percent in June, output for business equipment gained 0.9 percent. Apparently, businesses are boosting investment in equipment as consumer spending is wavering.

 

Business Inventories

Just when inventories are beginning to gain steam, sales go down the tubes. Business inventories rose 0.1 percent in May, not much but a lot for business managers who are being hit by a 0.9 percent decline in sales. ... Data previously released show a 0.4 percent draw in manufacturing inventories, also well short of the 1.3 percent fall in manufacturing sales. Wholesalers will also feel the need to correct their inventories, which rose 0.5 percent in May at the same time that sales fell 0.3 percent.

Retail Sales

Retail sales declined in June while more goods piled up on business shelves in May, underscoring a dilemma facing the U.S. economy. Up to now, the recovery was fueled in large part by businesses rebuilding inventories depleted during the recession. But that process can't continue if consumers cut back on spending, as now appears to be happening.

 

Retail inventories rose 0.3 percent and show gains across nearly all components. In alarming contrast, retail sales for May fell more than 1 percent and today's earlier report for June shows a 0.5 percent fall. Retailers have been warning their shareholders that a round of heavy discounting is in the cards given the necessity to move out inventory. Overall retail sales on a year-ago basis in June slowed to 4.8 percent from 6.9 percent the month before.

 

The June decline was led by a 2.3 percent fall in motor vehicle sales. A decline in gasoline prices also pulled down gasoline station sales which eased 2.0 percent. Also showing decreases were furniture & home furnishings, building materials & garden equipment, food & beverage stores, and sporting goods & hobby stores.

 

But it was not all negative. There were a number of clear winners. Consumers are still plopping money down for HD TVs, and new cell phones, and other electronic goodies as electronics & appliance store sales jumped 1.3 percent. Miscellaneous store retails saw a 1.1 percent boost while nonstore retailers gained 1.0 percent. Also seeing increases were health & personal care, clothing, food services & drinking places, and general merchandise. Within general merchandise, department store sales jumped 1.1 percent

New York/Philadelphia Fed Manufacturing Reports

The New York manufacturing region reports an abrupt slowdown in growth. The Empire State general business conditions index fell nearly 15 points to 5.08. Growth in new orders slowed to 10.13 from 17.53 suggesting the upward slope of the nation's factory recovery may already be tapering off significantly. Growth in shipments eased to 6.31 from June's 19.67 while employment eased to 7.94 from 12.35. Of concern, inventories backed up, to 6.35 from minus 1.23 in a build, given the easing in new orders, that will be of concern to the region's manufacturers.

 

Negative readings, that is readings which show month-to-month contraction, are headed by unfilled orders which fell nearly 15 points to minus 15.87. Importantly, the decline in unfilled orders will not help employment. The workweek contracted to minus 9.52 from June's 8.64. Delivery times round out the negative readings at minus 7.94, down 18 points to indicate an abrupt easing in shipping delays.

 

* * * * *

 

The Philadelphia Fed's general business conditions index came in at 5.1 in July indicating a slower rate of growth than June's 8.0 reading. In an unpleasant warning, new orders fell to minus 4.3 to mark an end to a full year of growth. If new orders extend their contraction in next month's report, the health of the region's manufacturing sector will be in question. If the ISM report for July also shows contraction for new orders, the health of the nation's manufacturing sector will suddenly become a big issue.

 

Unfilled orders, at minus 8.6, show significant contraction as they did in this morning's Empire State report. Delivery times, like the Empire State report, improved sharply in what is a negative sign for business activity. Shipments slowed to plus 4.0 from 14.2 though employment did show a modest gain at 4.0 vs. June's minus 1.5.

 

This morning's industrial production report showed a decline in its manufacturing component and this report won't raise expectations for improvement in the next industrial production report. The manufacturing sector, which is leading the economic recovery, has lost steam far short of full recovery from its 2007 peak.

 

Jobless Claims

The number of people filing for unemployment insurance fell last week, but weak industrial output and a drop in wholesale prices point to a slowing in the economic recovery. ... Initial claims for jobless benefits fell a seasonally adjusted 29,000 to 429,000 in the week ended July 10, the Labor Department said Thursday. The four-week moving average, which smooths out weekly gyrations, fell 11,750 to 455,250.

 

Manufacturing retooling centered in the auto sector, for this year delayed retooling, makes the report very difficult to read. The four-week average is the best handle and it's down 11,750 to 455,250 for the lowest reading since mid May. ...

 

Whatever improvement there is on the initial side is offset by a big 247,000 jump in continuing claims to 4.681 million in data for the July 3 week. The four-week average for this reading is up 22,000 to 4.581 million for the highest reading since mid June. The unemployment rate for insured workers rose two tenths to 3.7 percent.

 

Unemployment

The jobs picture in June was quite mixed as temporary Census workers were laid off and private hiring was positive but moderate. Also, the unemployment rate continued to dip even as the workweek slipped. Overall payroll jobs in June fell back 125,000 after spiking a revised 433,000 in May and after a 313,000 jump in April. The June decrease matched the market forecast for a 125,000 decline.

 

Looking beyond the temporary effects of Census hiring and firing, private nonfarm employment increased 83,000, following a 33,000 rise in May. The latest figure fell short of analysts' projection for a 105,000 advance in private payrolls.


There other signs of a slowing in the labor market. Growth in average hourly earnings eased to a 0.1 percent decline, following a 0.2 percent boost in May. The average workweek for all workers edged down to 34.1 hours compared to 34.2 hours in May. The market forecast was for 34.2 hours.

 

The good news at face value in the June report was that the unemployment rate to 9.5 percent in June from 9.7 percent in May. However, the decrease was due to a sharp drop in the labor force.

 

Overall, the June jobs reports points to a softening in the labor market. Private employment continues to grow, but at a more moderate pace. On the news, markets were uncertain of how to react as equity futures moved back and forth.

 

Federal Reserve June Minutes

Federal Reserve officials downgraded their expectations for the economy and said further central-bank action might be necessary if the economic outlook "were to worsen appreciably," according to minutes of their latest policy meeting. ... Quarterly projections released with the minutes showed that central bank officials expected growth to be slower this year than previously estimated and inflation through 2012 to remain even lower than forecast earlier. Their outlook for the job market also dipped, with expectations for the unemployment rate slightly worse through 2012. ... 

 

They expected the pace of the recovery to be held back by uncertainty among businesses and households, persistent weakness in real estate, only gradual improvement in the labor market, waning fiscal stimulus and slow easing of credit conditions.

[They must be reading The Daily Capitalist.]

But here is the shocker--not to my readers--in which they believe that the economy won't get back to normal ("converge") for 5 or 6 years:

Participants generally anticipated that, in light of the severity of the economic downturn, it would take some time for the economy to converge fully to its longer-run path as characterized by sustainable rates of output growth, unemployment, and inflation consistent with participants' interpretation of the Federal Reserve's dual objectives; most expected the convergence process to take no more than five to six years.

I've been noticing that a lot of economists are now jumping on the slow growth bandwagon. As usual they look at yesterday's data and guess what's going to happen tomorrow. As most economists are either Keynesian, Monetarists, or Ne0-Classicists, I don't believe they have yet to grasp the negative implications of the inefficacy of government stimulus and the Fed's attempt at quantitative easing.

I have been writing about the potential of a second half decline since last year and I believe the numbers are bearing me out and for the exact reasons I have been predicting. I don't claim omniscience, I may be just confirming my own biases, or perhaps it is just luck, as Nassim Taleb would say, but it certainly fits into the framework of Austrian theory.

All charts courtesy of the Wall Street Journal

Participants generally anticipated that, in light of the severity of the economic downturn, it would take some time for the economy to converge fully to its longer-run path as characterized by sustainable rates of output growth, unemployment, and inflation consistent with participants' interpretation of the Federal Reserve's dual objectives; most expected the convergence process to take no more than five to six years.


No V-Shaped Recovery in State Tax Revenues

Posted: 15 Jul 2010 05:17 PM PDT

The Pragmatic Capitalist submits:

Despite the constant chatter of v-shaped recoveries and “green shoots” states have experienced anything but a v-shaped recovery. Budgets remain a disaster and state tax revenues are far from recovering. Many view state tax revenues as one of the purest indicators of economic health. Although lagging, it’s clear that this recovery is anything but v-shaped (via Rockefeller Institute):

Figure 1 shows the four-quarter moving average of year-overyear growth in state tax collections and local tax collections, after adjusting for inflation. The year-over-year change in state taxes, adjusted for inflation, has averaged negative 9.2 percent over the last four quarters, down from the 3.3 percent average decline of a year ago and 1.1 percent average growth of two years ago. Real, year-over-year growth in local taxes was an average of 0.3 percent over the last four quarters, much lower compared to 1.8 percent for the preceding year and 3.1 percent average growth of two years ago. Inflation for the period, as measured by the gross domestic product deflator, was 0.5 percent.


Complete Story »


An Overseas Asset Buying Spree?

Posted: 15 Jul 2010 05:05 PM PDT



Via Pension Pulse.

Stefania Moretti of QMI Agency reports in the Toronto Sun, Canada's pension funds on overseas asset buying spree:

Canadian pension funds are crisscrossing the globe with cash in hand in search of assets for revenue to support this country’s aging population.

 

One place they’re looking is foreign infrastructure assets, according to the Canada Pension Plan Investment Board’s senior vice president of private investments Andre Bourbonnais.

 

Infrastructure assets - such as electricity generation, water distribution and airports - are easy to operate and maintain, generate predictable cash flows, offer protection against inflation and can be owned for a very long time, Bourbonnais told QMI Agency Thursday.

 

“There’s not a lot of complexity in operating a toll road for instance,” he said.

Late Wednesday, the CPPIB revived its bid for Australian toll road operator Intoll Group with a $3.5-billion offer. The Sydney-based company also owns a minority stake in Toronto’s 407 electronic toll highway.

 

In May, the CPPIB snapped up a minority share in two prime Manhattan buildings for $663 million.

 

And last year it was part of the largest leveraged buyout of 2009 — the $4-billion acquisition of IMS Health Inc, a prescription drug sales data provider.

 

The Ontario Teachers Pension Plan has also been on a foreign buying spree after recently picking up U.K. state lottery Camelot for $536 million.

 

The teachers' fund has also tried to up its share of Australian toll road companies Intoll and Transurban in recent months.

 

And there have been reports the teachers, along with Ontario MunicipalEmployees Retirement System, could be involved in a multi-billion dollar bid for a U.K. high-speed rail franchise.

 

The CPPIB launched its aggressive infrastructure investment plan roughly five years ago.

 

“We’ve been looking globally at infrastructure assets,” Bourbonnais said, adding policy conditions in Australia and the U.K. are quite favourable right now.

 

Bourbonnais said the fund will likely pursue other deals with similar characteristics as Intoll.

 

“The predictability of the return and long-term ownership of those assets fit well with our mandate,” Bourbonnais said.

 

The CPPIB has assets totalling $127.6 billion after funds returned to pre-recession levels earlier this year.

 

Today, the CPPIB receives more contributions from working Canadians than it pays out in benefits. But that is expected to reverse by 2021, when Canada’s workforce is expected to shrink to new lows and the elderly population explodes.

 

In the 1990s, the CPPIB began to diversify its holdings, moving into equities, public properties then private spaces. Before then, the fund only invested in government bonds.

 

Today, the CPPIB generally operates with the rationale that the right mix of private assets can perform better than public ones in the long run.


The Canada Pension Plan is a partially funded plan. Contributions are expected to exceed annual benefits paid through to 2021 and there is no need to use current income to pay benefits for another 11 years.

Why is this important? Because unlike fully funded plans, it's investment process doesn't center around matching assets with liabilities. CPPIB can take on more long-term risk in illiquid assets if it feels there are compelling reasons to be investing in these assets.

Go back to read David Denison's speech on what it means to be a Long-Term Investor. I quote:

My last precondition for acting as a long-term investor perhaps states the obvious, and that is that your investment process actually has to incorporate long horizon valuation factors.

As obvious as this may sound, relatively few investment processes actually operate this way. In addition to the points already noted, another simple reason is that investment managers who are measured, rewarded, and can be hired/fired over increasingly short periods are not likely to build investment processes that identify valuation anomalies that may take 5 years to materialize.

In practice it means that those managers aren’t likely to buy real estate in a falling market with the expectation that they will have to mark it down in the near term even though its risk adjusted returns over a ten-year timeframe may be compelling – it’s also worth pointing out of course that those real estate assets are not necessarily for sale when times are good.

It means investors won’t likely defer receipt of current dividends from an infrastructure asset for example in order to instead re-invest to improve the efficiency or capacity of the asset to generate future returns. And it means that such managers are not likely to invest resources into researching and identifying long horizon factor models that are different from most standard investment programs.


Another reason why CPPIB and other Canadian pension funds are snapping up real estate and infrastructure assets? Look at the appreciation of the Canadian dollar over the last year (chart above versus USD but CAD has also appreciated versus the Euro). The strong CAD makes these foreign assets a lot cheaper, allowing these mega funds to snap up assets on the cheap using a strong commodity currency.

But there are other reasons why large Canadian funds are investing in infrastructure. In the last six years, infrastructure has become a hot asset class, appealing to long-term investors looking to match duration of their long-term liabilities with high quality assets providing steady cash flows. Also, the effects of the liquidity crisis have been minimal on infrastructure assets.

Finally, despite its attraction, infrastructure does carry risks. But it can also serve to mitigate portfolio risk. In late May, Samuel Sender, senior researcher at Edhec-Risk Institute, wrote an excellent op-ed in the FT, Pensions falling short on risk management:

News of huge pension deficits and closures of defined benefit pension funds suggest that risk management by pension funds may not be entirely up to scratch. To examine the issue of risk management practices, Edhec-Risk Institute recently surveyed pension funds, their advisers, regulators and fund managers.

 

An initial finding of the survey, conducted as part of the Axa Investment Managers research chair at Edhec-Risk Institute, is that most of the 129 respondents have a restrictive view of the risks they face. Prudential risk (the risk of underfunding) is managed by only 40 per cent of respondents; accounting risk (the volatility from the pension fund in the accounts of the sponsor) by 31 per cent; and sponsor risk (the risk of a bankrupt sponsor leaving a pension fund with deficits) by less than 50 per cent.

 

A primary challenge for a pension fund is to meet its liabilities by hedging the liability risk away, usually with what is known as a liability-hedging portfolio, the portfolio that best replicates liabilities. Pension funds generally hedge their interest rate and inflation risks. Since it is mandatory in the UK to index pension payments to inflation, British pension funds are more likely to use inflation-linked bonds (64 per cent of respondents from the UK have more than 20 per cent of their liability-hedging portfolio in inflation-linked securities).

 

However, the excessive demand for inflation-linked securities may lead to poor returns on inflation-linked bonds, making the liability-hedging portfolio expensive. For that reason, pension funds may seek to replicate liabilities with assets that can provide better returns, such as real assets. On the other hand, our survey suggests 45 per cent of pension funds do not fully model the liability-hedging portfolio at all. This turns out to be logical in that 46 per cent of respondents use optimisation techniques to achieve the best risk/return trade-off.

 

A second challenge for pension funds is to achieve positive returns.

 

This can be done through a performance-seeking portfolio that diversifies market risk in an optimal manner by using a mix of asset classes and an appropriate benchmark for each asset class (we find that 81 per cent of pension stakeholders use sub-optimal market indices as benchmarks for their investment funds).

 

Equities account on average for 32 per cent of the performance-seeking portfolio, a share that is much larger than that of potentially illiquid assets (hedge funds, private equity, and infrastructure), even though pension funds, as long-term investors with no need to worry about short-term liquidity, are in a good position to invest in these assets and take on liquidity risk.

 

Pension funds should manage their minimum funding requirements by insuring risks away.

 

Risk-controlled strategies, which insure against a fall in funding ratios below the required minimum, make it possible to forgo some of the upside potential of the performance-seeking portfolio in exchange for downside protection.

Curiously, 50 per cent of pension funds are fully aware of these strategies, but only 30 per cent use them.

 

Economic capital management (seeking to ensure funding ratios always remain above a minimum level) relies on a risk budget and a surplus, but it involves a discretionary investment strategy and possible delays in implementation. Since the use of economic capital means a liability-hedging portfolio (the risk-free portfolio in an asset-liability management setting) does not need to be set up, pension funds may find themselves unable to switch their investments quickly to this risk-free portfolio.

 

Unlike this discretionary approach, applying risk-controlled strategies to economic capital creates what might be called rule-based economic capital, a strategy that would compel pension funds to manage economic capital with less discretion and greater adherence to pre-defined rules. After all, simple rules similar to those of constant proportion portfolio insurance ensure that risks are covered.

 

Finally, pension funds generally do not assess the adequacy of their asset-liability management strategies or fail to do so with appropriate metrics: 30 per cent of respondents do not assess the design of the performance-seeking portfolio, and more than 50 per cent use relatively crude outperformance measures.

 

These shortcomings may mean that less than optimal decisions are made on an ongoing basis.

Less optimal decisions are made on an ongoing basis, but Canadian pension funds are taking a more global approach to mitigating risk. The recent overseas buying spree by Canada's largest pension funds may indeed prove to be a wise decision, but infrastructure assets aren't a panacea, and they do carry important risks. We shall see if these long-term investments deliver on what investors expect from them.

Crude Oil Fluctuates With Equities, Gold Volatility Continues To Fall

Posted: 15 Jul 2010 05:05 PM PDT

courtesy of DailyFX.com July 15, 2010 06:52 PM This week has seen crude oil take its cues from equity markets, which are in turn taking their cues from U.S. corporate earnings announcements. Our petroleum inventory, supply, and demand charts now include data for the week ending July 9, 2010. Commodities - Energy Crude Oil Fluctuates With Equities Crude Oil (WTI) $76.63 +$0.01 +0.01% Commentary: Crude is close to unchanged after falling for the second day in a row on Thursday. That said, prices are only down about $1.50 from the $78.15 high put in on Wednesday. It looks as if crude oil has reestablished a tight coupling with equity markets after outperforming equities for a period. Movements this week have been influenced heavily by the release of U.S. corporate earnings, which have generally been supportive of risk assets. Look for this pattern to continue on Friday. The International Energy Agency (IEA) released its forecast for 2011 world oil demand. ...


Asian Metals Market Update

Posted: 15 Jul 2010 05:04 PM PDT

The big question for next week will be whether the euro/usd is able to maintain its current uptrend or not and whether it is able to break past 1.3100 in July or not. At the moment gains in the euro/usd are due to massive short covering and nothing else and the euro/usd needs to trade over 1.2750 for the whole of July to maintain the current uptrend. Euro and stock markets will affect gold in the short term to medium term.


Government Policies Pushing Towards Depression

Posted: 15 Jul 2010 04:47 PM PDT

[FONT=Arial,Helvetica,sans-serif][COLOR=#000000][FONT=Arial][COLOR=#000000]John Browne - Senior Market Strategist, Euro Pacific Capital. [/COLOR][/COLOR][/FONT] Despite several quarters of rising GDP, and the upbeat exertions of Administration spokespeople, the National Bureau of Economic Research (NBER) has yet to announce the recession is over. Their reluctance is well-founded. It is beginning to dawn on even the more optimistic analysts that the tepid growth we have seen over the past three quarters is only an interlude in an otherwise grave and prolonged recession. Moreover, the respite will cost dearly as the United States has racked up a generation worth of debt for dubious benefit. The paltry number of new jobs currently being created still fall far short of the 375,000 per month needed to offset the 125,000 new entrants to the job market due to population growth and to erode the 8 million people laid off in the past year alone. Meanwhile, house prices conti...


Porter Stansberry: "We Can't Live without Gulf Oil"

Posted: 15 Jul 2010 04:47 PM PDT

Source: Karen Roche of The Energy Report 07/15/2010 Tragic as the situation is, "everything is going to be okay" in the Gulf of Mexico, according to Stansberry & Associates Investment Research Founder Porter Stansberry. Porter, who built his reputation on finding safe-value investments poised to give his followers years of exceptional returns, also has a reputation as an independent thinker with a penchant for "out-of-consensus" viewpoints. He shares some of his contrarian opinions in this exclusive interview with The Energy Report. Porter sees no risk of bankruptcy or default with BP, the Macondo emerging as an enormously beneficial well, and more drilling there in the future because 1) there are no good replacements for oil and 2) "we can't live without oil from the Gulf." The Energy Report: The major discussions on the energy front in the United States seem to lead to a single conclusion, that we have to start using domestically generated alternative sources of energ...


Gold Technicals for July 15th

Posted: 15 Jul 2010 04:47 PM PDT

courtesy of DailyFX.com July 15, 2010 07:44 AM Gold has topped. Please see the latest special report for details. Near term, gold is making its way lower and most likely in an impulsive fashion. From a trading standpoint, the next opportunity will come from the short side on completion of wave iv of 3 (possibly complete at 1219). Jamie Saettele publishes Daily Technicals every weekday morning, COT analysis (published Friday evenings), technical analysis of currency crosses on Monday, Wednesday, and Friday (Euro and Yen crosses), and intraday trading strategy as market action dictates at the DailyFX Forum. He is the author of Sentiment in the Forex Market. Follow his intraday market commentary and trades at DailyFX Forex Stream. Send requests to receive his reports via email to [EMAIL="jsaettele@dailyfx.com"]jsaettele@dailyfx.com[/EMAIL]....


Fed's volte face sends the dollar tumbling

Posted: 15 Jul 2010 04:46 PM PDT

July 15, 2010 11:52 AM - Rarely before have a few coded words in the minutes of the US Federal Reserve caused such an upheaval in the global currency system. Read the full article at the Telegraph......


Jim?s Mailbox

Posted: 15 Jul 2010 04:46 PM PDT

View the original post at jsmineset.com... July 15, 2010 07:32 AM Positive Divergence in Trend Energy in Junior Gold Miners Index CIGA Eric A positive divergence in trend energy in the Junior Gold Miners Index suggests quiet accumulation prior to the paper takedown. Quiet accumulation often precedes explosive jumps – better known as bandwagon rallies. Though, in the case of gold and gold stocks, I seriously doubt it will get much coverage. Junior Gold Miners Index ETF (GDXJ): More…...


In The News Today

Posted: 15 Jul 2010 04:46 PM PDT

View the original post at jsmineset.com... July 15, 2010 07:46 AM Jim Sinclair's Commentary QE to infinity is in the cards. Fed eyes steps to bolster sputtering recovery Jul 14, 7:00 PM (ET) By JEANNINE AVERSA WASHINGTON (AP) – Federal Reserve officials cut their forecasts for growth this year and signaled they stood ready to take new steps to keep the recovery alive if the economy worsens. A new document, released Wednesday, revealed a more cautious mood among the Fed policymakers in light of Europe’s debt crisis, a volatile Wall Street, a stalled housing market and high unemployment. With risks growing, Fed officials at their June 22-23 meeting saw the need to explore new options for bolstering the economy. That’s a turnaround from earlier this year when they were moving to wind down crisis-era supports. No new specific steps were disclosed or agreed upon at that time. However, if the recovery were to deteriorate, Fed policymakers have options. T...


Hourly Action In Gold From Trader Dan

Posted: 15 Jul 2010 04:46 PM PDT

View the original post at jsmineset.com... July 15, 2010 09:51 AM Dear CIGAs, Click chart to enlarge today's hourly action in Gold in PDF format with commentary from Trader Dan Norcini ...


Don't You Try and Save!.. Building the Long War

Posted: 15 Jul 2010 04:46 PM PDT

Don't You Try and Save! Thursday, July 15, 2010 – by Staff Report Saving may cause double-dip recession ... Prudent households trying to save are in danger of pushing the economy back into recession, economists have warned. Official figures suggest that last year's recession was deeper than originally thought and that families had stopped spending – a move that could lead to a double-dip recession. The data came as Standard & Poor's, the credit rating agency, kept Britain's debt rating on negative watch. S&P said it had concerns about the forecasts laid out by George Osborne, the Chancellor. – UK Telegraph Dominant Social Theme: Don't you dare save! Free-Market Analysis: Every now and then we come across an article that is, in pop radio parlance, a "blast from the past." The above article appearing in the esteemed UK Telegraph is one such blast, a screed dedicated to explaining to readers that the idea of saving (and thus controlling ...


The Ultimate Sucker’s Rally

Posted: 15 Jul 2010 04:46 PM PDT

The 5 min. Forecast July 15, 2010 11:01 AM by Addison Wiggin & Ian Mathias [LIST] [*] A 24% probability of default, and buyers can’t get enough… The ultimate sucker’s rally [*] Fed’s talk of “policy stimulus” drives down dollar, stocks [*] Pairing up… How “binary options” can goose your currency gains [*] BP prepares to cap well; offshore drillers flee the Gulf to places their business is wanted [*] Readers take us to task for our “effrontery” on estate taxes [/LIST] Could this be the mother of all sucker’s rallies? We invite you to approach today’s 5 at your own risk. Demand was so intense for $900 million of bonds issued yesterday by the state of Illinois, it drove yields 15 basis points below expectations. Yes, we know. This is the same state that’s about $5 billion behind on its bills and whose pension system is in the worst shape of any state in the union. It’s th...


Turn $10,000 into $2 Million with My Simple Gold Strategy

Posted: 15 Jul 2010 04:46 PM PDT

By Dr. Steve Sjuggerud Thursday, July 15, 2010 I came up with a Simple Strategy to tell you when to own gold… and when not to. It's so simple, you could teach a monkey to follow it. Best of all, $10,000 invested in this Simple Strategy would have turned into nearly $2 million. Just buying and holding gold over the same time period would have turned $10,000 into just $300,000. The chart here tells the story… The blue line is the Simple Strategy. The gold line is the price of gold: Not only did this Simple Strategy dramatically outperform the price of gold, it did so with substantially less volatility… My Simple Strategy managed to steadily rise from the lower left of the chart to upper right. It almost entirely avoided gold's big fall in 1975-1977. And it generally avoided gold's two-decade fall from 1980 to 2000. The Simple Strategy is so simple, it's almost embarrassing. But it is based on an important point. Let me explain it… Ho...


New Banking Crisis, No Double Dip and Flattening the Yield Curve for Growth

Posted: 15 Jul 2010 04:46 PM PDT

Jack Ewing, in The New York Times, writes about an impending banking crisis arising from the need for banks around the world to roll over more than $5 trillion in short term debt by 2012. The problem is probably biggest for European banks, but about $1.3 trillion is in the U.S. Dave Kansas, in the Wall Street Journal, writes about why the double dippers are wrong. While I won't dispute much of what Kansas cites as his reasons for optimism, I can't help but notice that some of the things are what he expects will happen. Ewing, on the other hand, discusses some facts that are pretty cut and dried. The consequences of the facts cited are where the debate would lie. Take a look at both articles. If you had to vote for one or the other as being a more significant discussion of what lies ahead, which would it be? Now, take a look at what Caroline Baum has to say at Bloomberg.com. She says that a recession is virtually impossible with zero interest rates at the short end...


Retail-ity Bites

Posted: 15 Jul 2010 04:46 PM PDT

If we aren’t creating jobs, housing is collapsing even with mortgage rates at all-time lows, and consumers are spending less, how exactly is the economy recovering? As usual, you will never get the true story from CNBC or the other talking heads on the MSM. If you dig into the data, you can come up with these juicy tidbits: [LIST] [*]Retail sales in June 2010 were at June 2006 levels, without taking into account inflation. [*]Motor vehicle sales were below levels achieved in 1998 and were 25% below the peak sales in 2005. [*]Furniture and home furnishings sales were below levels reached in 2000 and were 21% below the peak sales in 2006. [*]Building materials sales were at 2004 levels and are running 15% below the 2006 peak sales. [*]Electronics sales are still 7% below the 2008 peak. [*]The good news is that people are so depressed they are drinking a lot more. Sales at drinking establishments reached an all-time high and are 19% above 2005 levels. [*]More good ne...


"Will Sprott's Brand New Physical Silver Trust Become JPMorgan's Biggest Nightmare?"

Posted: 15 Jul 2010 04:46 PM PDT

Gold did nothing in Far East trading on Wednesday... but was up a few bucks going into the London open. However, about an hour before New York opened, gold got sold off... and it was down about five bucks when Comex trading began. From that point it did nothing until the very second that London closed at 11:00 a.m. Eastern time. Then, within fifteen minutes, gold blasted up to its high of the day of $1,219.20 spot. At that point, the usual suspects showed up and capped the price... and, within two hours, had sold enough paper gold to drive it all the way back down to its absolute low of the day... which was $1,201.80 spot. Another day where closing above gold's 50-day moving average was not allowed by JPMorgan et al. Volume wasn't overly heavy. The silver price was as quiet as a church mouse during Far East and early London trading on Wednesday. But that all changed at the London silver fix... which was high noon local time... 7:00 a.m. Eastern....


LGMR: Gold & Silver Rise vs. Falling Dollar as Chinese "Take Refuge"

Posted: 15 Jul 2010 04:46 PM PDT

London Gold Market Report from Adrian Ash BullionVault 09:05 ET, Thurs 15 July Gold & Silver Rise vs. Falling Dollar as Chinese "Take Refuge" in Precious Metals, World Faces "Shortage of Safe Assets" THE PRICE OF wholesale gold bullion and silver rose against the US Dollar on Thursday, nearing new highs for July at $12.15 and $18.50 an ounce respectively, but slipping in terms of other currencies as government bonds fell and commodities gained. Asian stock markets closed lower – and Eurozone equities held flat – despite investment-bank J.P.Morgan following chip-maker Intel and metals giant Alcoa with stronger than expected quarterly results amid the current US earnings season. Sterling hit a new 11-week high against the falling Dollar, squashing the gold price in British Pounds back below £790 an ounce. The Euro rose to $1.28, its best level since early May. That offered Eurozone investors wanting to buy gold today a retreat towards €30,400 per kilo...


Grandich Client Update – Silver Quest Resources, Lastest Release Suggests SQI Needs T

Posted: 15 Jul 2010 04:46 PM PDT

The following is automatically syndicated from Grandich's blog. You can view the original post here. Stay up to date on his model portfolio! July 15, 2010 04:17 AM Silver Quest released an update to the market this morning on the drill progress at their Capoose Project in central British Columbia.* Previous drilling by the Company and previous explorers have outlined a 43-101 inferred resource of 699,000 oz contained gold and 41 million oz contained in 53, 500,000 tonnes at* goldequivlaent cut-off of 0.4g/t. Since mid June the company has completed over 6000 metres of a 10,000 metre drill program expanding the infilling the resource.* With 22 holes completed todate, there will be a wealth of news flow starting real soon.* Geologically the drill core from this current* program is similar to that recovered from the 2008 and 2009 program with the exception of sulphide stringer lenses (copper, zinc, lead) which could add a whole new dimension to this type of deposit. Expect to see a sig...


CWC - Interview with Terry Coxon: Inflation vs. Deflation - July 14, 2010

Posted: 15 Jul 2010 04:46 PM PDT

Conversations With Casey July 14, 2010 | Visit Online Version | www.CaseyResearch.com • About Casey • Forward this email • New? Free sign up for Conversations With Casey • CaseyResearch.com Casey Research economist Terry Coxon, Interviewed by Louis James, Editor,...


The Day the Oil Stopped Flowing

Posted: 15 Jul 2010 04:43 PM PDT

And on the 85th day, after vomiting 184 million gallons of oil into the Gulf of Mexico, British Petroleum finally capped the oil well drilled by the Deepwater Horizon drilling rig under one mile of water. Thank goodness.

You can see from the chart below that uber contrarians and bottom fishers already began taking a punt on BP in late June. They must have reckoned the capping of the well was the beginning of the end of BP's tribulations. And it IS a big company with a worldwide portfolio of upstream and downstream assets, presumably with the backing of the British government (with nearly 18 million Britons owning BP stock in their pensions).


Click here to enlarge

It is also true that, in the words of our friend and resource guru, you're either a victim or a contrarian as a resource investor. Victims buy resource stocks when it's safe to do so because they're on the front page of the paper. Contrarians do so when no one wants to touch them.

That said, BP would have to be viewed as short-term speculation right now. For one, it's not certain the leaking oil has actually been stopped. It's just been stopped from the top of the well. If the well is ruptured in other places, more leaks will emerge. This could be just the end of the beginning (rather than the end of the end).

The larger question, in our mind, is how long it might take be BP to be litigated out of existence. A complete speculation on our part is that the British government will be forced to take over the company to protect from legal threats. But that's just wild speculation.

For energy investors, the other issue is how much the ecological catastrophe in the Gulf will affect the willingness of publicly listed companies to drill for oil off shore. It's a difficult dilemma. If you're a major oil produce and you're not adding to your reserves, you're not going to be punished by shareholders. You're also going to produce more oil than you find and replace, which is not a long-term survival strategy for a going concern.

But you have to balance the imperative for finding new reserves with the legal risk of another deep water drilling accident. If that kind of accident, no matter how low the probability, represents an existential threat to your business, and you're the director of a publicly held oil company, can you permit more off-shore drilling?

We wrote about this in the last monthly report of the Australian Wealth Gameplan . Our tentative conclusion - to be followed up with recommendations - is that the BP spill favours National Oil Companies (NOCs). The NOCs are the only institutions that aren't going to be sued out of existence if they run into drilling accident.

Is it hard to be a contrarian here in Australia, though? After all, commodities are on the front page of the paper every day. It's the bread and butter of the export economy. Or the iron and coal if you prefer. Does the fact that these things are on front pages of the paper mean you're already a victim?

Well, not necessarily. In our five years here, we've come to be wary of news that celebrates high prices. Anytime those high prices are figured into government revenue projections and make nice pretty graphs on the front page of the paper, you should be cautious.

On the other hand, we find ourselves more and more attracted to picking over share market road kill. You want firms with decent assets, but perhaps hitting a finance hick up. The other real allure for us is finding a commodity that's fallen so much the momentum chasers can't be bothered. That's when you find things very cheap.

Speaking of not cheap, the July 10th edition of The Economist has again called out Australian housing as being the most over-priced in the world. The magazine reports that, "House prices in Australia rose by 20% in the year to the end of the first quarter, faster than the 13.5% recorded in the 12 months to late 2009." That's not so bad if you already owned a house and bought for the purpose of making a quick capital gain.

But not so fast!

"More concerning," the magazine continues, "is our analysis of 'fair-value' in housing, which is based on comparing the current ratio of house prices to rents with its long-term average. By this measure Australian property is the most overvalued of any of the 20 countries we track." How overvalued? By 61.1% to be exact.

As far as we can tell, the usual suspects spruiking property in Australia were not as quick to rubbish the article as you might expect. Hmm.

To be fair, the same issue of the The Economist had a dreadful article about gold. It goes to show you that credibility does not come from authority but from a well-made argument. This is a variation on the conclusion Boethius made in The Consolation of Philosophy that reputation doesn't matter. What other people think of you will be fair or unfair by turns. And it is beyond your control. All you can control is the integrity of your own actions.

But back to the Economist. In its article on gold it concluded, "As the world economy returns to business as usual, the gold market may also return so some semblance of normality...As long as the world economy remains uncertain and investors fear inflation and sovereign default, gold will keep its allure. Eventually, however, the price will weaken: it is even possible that the recent slide to below $1,200 marks the turn. And investors may look back on the bull run of 2009-10 or 2009-2011 with the sort of wonder that humanity has too often reserved for the yellow metal itself."

As pithy and superficial as that analysis is, it hardly compares to the comment of Citigroup chief economist Willem Buiter. He says that gold is, "the longest lasting bubble in human history" and that he would not put any of his wealth into "something without intrinsic value, something whose positive value is based on nothing more than a set of self-confirming beliefs."

Sigh. How snarky can you get? It is quite possible that investors are going to make a lot of money speculating on gold shares leveraged to the gold price in the coming years. Gold is not anyone else's liability. That alone gives it intrinsic value as money, not to mention the physical qualities it possesses which make it a very stable medium of exchange.

But we view gold, fundamentally, as catastrophe insurance against the crash in asset values from a highly leveraged economy. It's not gold moving up or down versus the dollar. It's the dollar moving up or down versus the gold, depending on the relative degree of currency mismanagement and money printing by the Fed.

Besides, after the last three years, if you don't think financial catastrophes are made more frequent and more probable due to the intervention of the banksters and the State in the free market, then you aren't living on the same planet. Since 2008, we've been in a reflationary period in which the most inflationist policies of the world's central banks have barely managed to keep asset prices moving higher.

Without those policies, asset prices would already be much lower. Recovery to a new production possibilities frontier would also be a lot closer. Bad investments would have been liquidated and the people who wasted capital would have had that money removed from their mismanaging hands.

Instead, we have governments perpetuation the money, power, and mistakes of bankers. To the extent it keeps households happy because it keeps asset prices high, it's perceived as having a bad odour about it, but somehow necessarily.

Well, that odour is the rotting carcass of a corporatist alliance between big finance and big government. It's not doing anyone any favours. And it's smelling up the joint. And it's certainly not alive, despite the attempt to pump new credit into it. Credit is the lifeblood of an economy addicted leverage and asset growth.

Our view? Phase one of the great credit depression is over. It caused a massive transfer of liabilities from the private sector to the public sector and concentrated those liabilities in a handful of firms that are now considered too big to fail. But if the whole system is a failure, what then?

In PhaseTwo, the Welfare State's 300-year old model of funding deficits will be stress tested. And what happens when the stress is too much...when a mountain of debt is supported by an anthill of real tangible equity? You'll read about that in the Economist too, but only after it has happened, and it's too late for you to have protected yourself from it.

Dan Denning
for The Daily Reckoning Australia

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Bad Numbers from Bernanke and the Congressional Budget Office

Posted: 15 Jul 2010 04:38 PM PDT

Bruce Krasting submits:

The numbers of late have been horrendous. Yesterday a pile of more bad news. Wednesday we got this from the Fed Minutes:

Participants generally anticipated that it would take some time for the economy to converge fully to its longerrun path; most expected the convergence process to take no more than five to six years.


Complete Story »


Gold Seeker Closing Report: Gold and Silver End Slightly Higher

Posted: 15 Jul 2010 04:30 PM PDT

Gold saw decent gains in Asia and London and rose to as high as $1216.90 by about 9AM EST before it dropped all the way to $1203.70 a little after 10AM EST, but it then chopped its way back higher into the close and ended with a gain of 0.1%. Silver rose to $18.507 and fell to $18.157 before it also climbed back higher in the last few hours of trade and ended with a gain of 0.11%.


The Last Bubble: The Problem of Unresolved Debt in the US Financial System

Posted: 15 Jul 2010 02:44 PM PDT


This posting includes an audio/video/photo media file: Download Now

Goldman: "As In Mid-June The S&P Looks Very Overvalued Relative To Yields"

Posted: 15 Jul 2010 01:05 PM PDT


Even as stocks continue to ignore the broader economic decline, and trade exclusively to kneejerks on one-time items such as Goldman's settlement and BPs pressure tests, the far more liquid and rational bond market is hunkering down. Today, the 2 Year hit an all time low yield, even as the 2s10s tightened by yet another 6 bps to 240 bps. The impact of today's curve flattening alone will have a far more profound impact on Goldman EPS than the latest SEC wristslap farce. And as we pointed out previously, the spread between the S&P and the 10 Year yield continues to diverge. In fact, it is now so wide, that in the latest John Noyce piece, the Goldman Strategist says: "As in mid-June, the S&P looks very overvalued relative to yields. Yields are also beginning to decline again as equities stall." Sure enough the reverse is also true, and bonds may be rich to stocks, but either way, we reiterate our observation that the short stocks-short bonds trade will eventually converge (luckily with the yield on the 10 Y so low, the carry is marginal and the repo rate will likely be a greater burden until the spread recouples).

Here are some additional observations from Noyce.

  • This is an update on a correlation chart we’ve looked at a number of times over the last few weeks.
  • It shows U.S. 10-year yields in green overlaid with the S&P in blue.
  • The correlation between the two has turned increasingly positive over the last couple of months.
  • At this point a similar setup appears to be developing to that which came together during the second half of June (the numbering below refers to the stages highlighted on the chart opposite):
  1. The rise in equities stalls and yields again begin to turn lower
  2. Yields continue to drop, and eventually equities also turn down, re-coupling with yields
  • Overall, the S&P now sits just below significant resistance centred on 1,093-1,112, and a similar yield/equity divergence is developing to that seen during mid-June. We should begin to watch very closely for signs of equities peaking and again turning lower.

Noyce also has some bearish non-correlated technical observations on the S&P. Specifically, he sees the 1,093-1,112 level as a major resistance in a Right Shoulder formation. Also, a comparable bounce off lows into the 55/200 DMA was last seen in November 2000, when the market proceeded to subsequently drop notably as the tech bubble burst.

  • There are two main points to make with regard to the price action seen on the S&P over the last week;

    1. The market has recovered sharply from the lows of early-July close to 1,000. The bounce has been similar to that seen following the comparable negative 55-/200-dma cross-over in November ’00, as a structural top was in the process of forming. 1,093-1,112 should now act as strong resistance and the easy part of the bounce could well have run its course. An update on the historic comparison chart is shown on the following slide
    2. Assuming the market is currently forming the right shoulder of an H&S topping pattern and that the time period taken to form  the two shoulders should be similar, the current consolidation could run until mid-August, and likely remain within an approximate 1,100-1,000 range.
  • In conclusion, a deep and sharp recovery over the last couple of weeks, but one which is currently within the constraints of what can be considered as part of a larger structural top forming. The topping process could be considered to have another 1  to 1.5 months to run given how long the left-shoulder took to form. The historic comparison with November ‘00 does however argue we should be near the top of the range, with 1,093-1,112 good resistance.

  • The last time a –ve 55/200-dma cross over took place (55-dma falling through an already declining 200-dma) was in November ‘00.
  • It was an important signal from a LT (multi-month) perspective, however, the averages were re-tested as resistance before the market again fell away.
  • So far things are playing out similarly this time around. The negative 55-/200-dma cross over is in place and the market has come back to test the moving averages as resistance (the downtrend from the April highs and 55-/200-dmas being converged 1,093-1,112). While the market need not fall away again immediately, the similarity of the current setup to November ‘00 is quite striking. Another eventual down move does still appear the most likely outcome.

Then again, in a market in which Hurst Coefficients are approaching one, precisely the opposite of what one expects to happen, happens. Although for those who wish to gamble, a safe decoupling has just occurred between S&P futures and the AUDJPY. After tracking each other perfectly all day, the two have diverged notably after hours. Buy the AUDJPY, sell the ES, wait for convergence number 18 in a row to occur, and pick some free non-taxpayer subsidized points from your broker.


Uranium is Heating Up

Posted: 15 Jul 2010 12:09 PM PDT

Uranium prices appear to be bottoming, as China buys major supplies from Cameco (NYSE:CCJ). On June 24, China agreed to buy more than 10,000 tons of uranium oxide - yellowcake - over 10 years from Cameco.

According to Thomas Neff, a physicist and uranium industry analyst at the Massachusetts Institute of Technology, China is buying unprecedented amounts of uranium. Based on public information, China may purchase about 5,000 metric tonnes of yellowcake this year. That's more than twice as much as China consumes.

Clearly, China is building up stockpiles for its long list of new reactors. According to the China Nuclear Energy Association, China plans to build at least 60 new reactors by 2020. The average 1,000- megawatt reactor costs about $3 billion. Loading a new reactor requires about 400 tonnes of uranium to start. Take 60 reactors, times 400 tonnes each. That's 24,000 tonnes of uranium (over 52 million pounds) - about all of the world's current output for one year.

New nuclear plants represent a game-changing aspect for future uranium demand and pricing. Even though the reactors may not come online for several years, the knowledge of hard future demand creates a solid floor for the uranium mining industry. Increased demand, just from China, could cause uranium prices to jump by about 32% next year, to about $55 per pound, according to RBC Capital Markets. And future speculative interest could drive prices to the $60-80 range - almost double the current price level.

Higher prices would be a relief for suffering uranium investors. Uranium prices have tumbled about 70% since peaking at $136 a pound in July 2007. Part of the tumble was due to increased output. According to data from Cameco, there were at least 27 new mines, in nine countries, coming on line in the past 10 years. This has added nearly 65 million pounds a year to global output.

The strong uranium market of 2006 and 2007 stimulated the development of new supply. But with current pricing in the $40 per pound range, the economics don't support new mines. It's certainly not enough to ensure adequate supply for future requirements.

According to the World Nuclear Association, China's demand for uranium may rise to 20,000 tons a year by 2020. That translates into more than a third of the 50,500 tons mined globally last year. The thing is, all of the world's current uranium output currently has a market, supplying the existing global demand for nuclear power.

Now we're going to see an explosion (no pun intended) of uranium demand from China, on top of the existing user base (plus other new demand from India and numerous other locales in the world).

Where will China obtain its future uranium? According to China National Nuclear Corp., it's exploring for the fuel in Niger, Namibia, Zimbabwe and Mongolia. Indeed, we're just beginning to see the initial stages of China going abroad to buy stakes in uranium mines, similar to what we're already seeing with China and oil.

Thus, don't be surprised to see uranium in shortage by the second half of this decade. Looking ahead, there's just not enough new production in the planning stages. The world needs new mines, but startup costs are much more expensive than 10 or 20 years ago.

Meanwhile, much of the world's uranium comes from mines that have been in operation for a long time. That, and decommissioned nuclear warheads from the Cold War days. But this latter source is nearing exhaustion.

Bottom line in all of this is that we're right at the bottom of the curve for uranium pricing. Going forward, we're watching as the new demand unfolds, to make uranium investments all that much more valuable.

Regards,

Byron King
for The Daily Reckoning Australia

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Stagnant Stock Prices Still Have Lower to Go

Posted: 15 Jul 2010 11:52 AM PDT

Not much action in the markets yesterday. The Dow barely budged, but still ended the day in positive territory - the 7th day in a row of gains. Gold fell $6.

Investors beware!

Why? Because they are trapped. After 12 years without a real gain, they can't afford to miss a major rally. So, they're inclined to take chances. But is this rally worth betting on?

Nope. Not in our view.

Stocks have gone nowhere in 12 years. But it's not 'nowhere' that they need to go. They need to go down. They need to complete their historic rendezvous with the bottom.

Currently, the S&P trades at about 17 times earnings. You buy a share for a dollar. You get a company earning about 5 cents a year per share. But at a real bottom, a dollar's worth of stock ought to buy you 20 cents worth of earnings. At one point in the '30s, there were major companies selling at barely 3 times earnings...that is, a dollar's worth of stock earned 33 cents.

We have a long way to go. And it's not going to be much fun for those who are holding shares and hoping they will go up. Most likely the bottom won't come for a few years. And when it comes, people will be shocked, broke and disappointed.

Most likely, too, US incomes are going down. Much of the economic gains made over the last 20 years were phony. They were based on buying things with money that hadn't been earned yet. There were not many people who could afford Americans' standard of living in 2007...not even the Americans themselves.

And of course, businesses and investors made their projections for future earnings based on the same delusions. They built houses counting on rising incomes. They built malls counting on rising spending. They made their own retirement plans based on bubble-era estimates.

"Poor Johnny," a friend reported the news on another friend. "He's broke. You know, Johnny... He's a developer in Florida. But what is it with those guys? They never take their money off the table. He had made a fortune. But he just kept leveraging up. You know, he'd use his apartment buildings as collateral to buy more apartment buildings. And towards the end he was buying some pretty expensive property near Miami, secured by his other property, which was valued according to some very optimistic appraisals.

"I told him he should retire. He was 62. He was on top of the world. What more did he want? Why take chances?

"Then, when the bottom fell out, the whole thing collapsed. The last thing I heard, he was looking for a job."

We've already seen the peak. What's ahead is the valley. For the next few years - maybe 5...maybe 15 - we can expect falling standards of living in the US...along with falling stock and real estate prices. Yesterday's news, for example, told us that 1 million people are expected to lose their homes to foreclosure this year.

If you wanted more proof that the economy is not recovering, here you are:

"Retail sales fall for second month," says Bloomberg.

Households are getting rid of debt. They're sprucing up their balance sheets by increasing their savings rates. More savings, less debt. We have no quarrel with this process. It's the market's way of correcting mistakes and putting things back in order.

But it's not without its little aches and pains. You'd expect retail sales to go down, for example.

If this were a recovery, on the other hand, you'd expect sales to be going up...to be recovering, that is. If the economy were retracing its bubble path, sales would go up and up. Instead, they're going down and down - which is why it's not a recovery. It's a Great Contraction.

How long will it last?

Until it is over.

And more thoughts...

"The whole thing is a sham," we said to Elizabeth yesterday. It was a holiday in France. So we walked up the street to the only café that was open and sat down at a sidewalk table.

"The entire economics profession turned into a bunch of scalawags almost a hundred years ago," we continued. "They created a phony image of an economy. It was a bit like taking a jungle and turning it into a zoo. Once they had the animals in cages, they could make them do what they wanted. They could pretend that they controlled the economy. They were really just zookeepers."

"What do you mean by that?" Elizabeth asked. "A jungle is a natural thing. But so is an economist. They were just doing what came naturally to them. So, what they produce...what they create...is still a product of 'nature,' no?"

"Well, yes, that's what makes it hard to understand. Everything is in some sense 'natural,' since everything is the product of natural forces. But some things are more natural than others. And some actions - although natural - produce outcomes that are undesirable. You can round up people and put them in concentration camps...and you can say that this is a 'natural' thing for people to do...since they demonstrably do it from time to time. But it's not very nice for the people who get rounded up.

"Likewise, it's not very nice when the economists put you in a cage.

"The people doing the rounding up say they are making a better world. In yesterday's paper, for example, Paul Krugman says the Fed should set higher inflation targets in order to keep people from saving money. He doesn't seem a bit concerned that higher inflation rates will steal peoples' savings. He says the threat of higher inflation will force them to borrow, invest and spend. At least, that's the idea. But you can only have an idea like that if you've already become a zookeeper.

"You say... 'I'm a great economist. I can make the animals eat ice cream. How? I'll take away their meat.' So you take away the meat. The animals begin eating ice cream. And then you say, 'See, I told you I was a great economist.'

"But the animals don't really want to eat ice cream. And it's probably not good for them. They get sick and their teeth rot.

"And now - in the real economy - people don't want to eat ice cream. I mean, they don't want to borrow and spend. They want to save. But Krugman wants the feds to force them to borrow and spend - just like they were animals in a cage - by threatening to debase their savings. Maybe the feds can do that. And then Krugman will think he's a genius. The effects on the phony, zoo-economy might appear to be good. People might try to get rid of their money. They might spend and invest. The GDP figures might move upward.

"But that doesn't mean people would be better off. They'd be worse off..."

*** "China can teach Argentina a lesson..." says a news report. China is about to invest $10 billion in Argentina's railroads. Obviously, if Argentina wanted railroads it could finance them itself. If it had any money, which it doesn't. So, the Chinese have come to the rescue. Argentina is a good source of raw materials and food. The railroads will make it easier for Argentina to bring its produce to market, and make it easier for the Chinese to haul it away.

According to the report on Breakingviews, Argentina will learn the value of long-term investment in its infrastructure.

But the gauchos weren't born yesterday. They know how to play investors. They bring them to Buenos Aires. They are fed fat Argentine beef. They are watered with rich malbec wine. They watch a tango show and a polo match. After a few days they are ready to open their checkbooks.

Then, the Argentines take the money...and later default on their obligations. China is probably going to learn a lesson, too.

Regards,

Bill Bonner
for The Daily Reckoning Australia

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End Of Quarter Primary Dealer Asset Window Dressing Games Continue

Posted: 15 Jul 2010 11:45 AM PDT


It is time for the SEC to slap another token wrist. Now the the "regulator" has made it official that the punishment for fraud is roughly 3% of a firm's annual bonus pool for all godlike corporations, and millions of dollars, bars and jailtime for everyone else, it is time to tickle, pardon, we mean tackle, that other major fraud: Repo 105-type end of quarter window dressing, which we now know has been practiced not only by Lehman but by Bank of America. Because according to the just released primary dealer holdings data by the New York Fed, the end of quarter window dressing continues across all PD asset classes to this day. As the chart below shows, the week following the EOQ asset balance hit a total of $270 billion, which was a $15 drop from the week prior, the subsequent week has surged by $19 billion, and is now back to $289.5 billion. This is a two week swing only matched by... the prior quarter window dressing farce, when the roundtrip amount was $81 billion.

The chart below highlights the EOQ total assets held by PDs as disclosed by the FRBNY:

Since December 2008, the average asset reduction going into the End of Quarter week is $23 billion, and the subsequent asset increase on the other side of the quarter, is $28 billion, for a round trip asset change of over $50 billion each quarter end. So let's go SEC: please fine all the PDs $250,000 each, make them take a behavioural adjustment course, have them sign a piece of paper promising never to do anything naughty again, and allow us to get on with watching American Idol, and ignoring that each day total US debt increases by $10 billion.

When the States Go Bankrupt

Posted: 15 Jul 2010 11:00 AM PDT

While the private economy has done a good job adjusting during the recession and paving the way for the growth we see now, we can't say the same holds true for the government. In fact, as fiscally irresponsible as the US government has been, the next big shoe to drop for the US may be the revealed insolvency of some of its big states.

Already, we hear the "B" word being tossed around. A San Diego County panel – faced with $2.2 billion in unfunded pension liabilities and $1.3 billion in unfunded health care liabilities – recommended, among a number of other possible actions, filing for bankruptcy. According to Grant's Interest Rate Observer, four major American cities (Miami, Detroit, Los Angeles and Harrisburg) have all hinted at the same this year.

The big states are even worse. The Economist reports on Illinois: "By 2018, Illinois will be paying $14 billion a year in benefits, equal to more than a third of the state's revenue, compared with $6.5 billion now."

Plugging those kinds of gaps means getting creative with new forms of skullduggery. For instance, the State of New York, with its $9 billion budget deficit, is looking at a proposal to borrow $6 billion from its state pension fund in order to make a $6 billion payment due to that same pension fund. Yeah, you read that right.

The trials of Illinois and New York are not isolated incidences, either. Grant's quotes from the Center on Budget and Policy Priorities: "At least 46 states face or have faced shortfalls for the upcoming fiscal year (FY 2011, which will begin on July 1 in most states). These come on top of the large shortfalls that 48 states faced in their current budgets (FY 2010)."

Yet incredibly – or maybe not – Moody's maintains that "the credit profile of the US state and local government is very strong." Huh? What are they looking at? That's ridiculous. Why anyone should take what these ratings agencies say seriously is beyond me.

In any event, what I see happening is a great big bailout from Uncle Sam, which itself is broke – bleeding astronomical deficits and in hock for record amounts.

In order to do that, the government will simply print what money it needs. We all know what happens then. The value of the dollar goes south.

To protect your wealth, stay with things, as opposed to paper, like bonds. Own hard assets, things like gold and oil. Own the stocks of companies growing fast enough to beat inflation. And don't be afraid to put your money outside of the US.

Regards,

Chris Mayer
for The Daily Reckoning

When the States Go Bankrupt originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."


Honest Money Gold and Silver Report: Market Wrap Week Ending 7/09/10

Posted: 15 Jul 2010 10:45 AM PDT

There are four types of divergences, but I will only describe the one presently occurring. The other types will be explained in future reports. Positive divergences that take place in a bull market can lead to powerful moves up. Read More...



Guest Post: Government Mules

Posted: 15 Jul 2010 10:33 AM PDT


Submitted by Doug Galland of Casey Research

Government Mules

Watching my children grow older, now heading into the treacherous shoals of the teenage years, has been a visceral reminder of how the human mind develops. As young children, we see the world with fresh eyes and wonderment, and then quickly begin testing the physical and societal bounds as part of morphing into our more mature selves.

As we age into our teens and beyond, the testing of boundaries evolves into a series of calculations. If I do “A,” we wonder, will it lead to “B” or maybe “Z”? 

From a young age, most of us are told to advance our education and otherwise better ourselves so that we will be able to find a good job, or a succession of good jobs, that will provide sustenance and security lasting most of a lifetime before retiring to dawdle about in our golden years.

At least that is the modern view of life pursued by the vast majority of the citizenry in the developed world.

But having spent some time in rural Argentina recently – where it seems to me that most people spend more time living and less time planning to live – I have had some time to ponder the assumptions embedded in this view.

What if, I wonder, the whole modern construct of what passes for making the right moves in an advanced society is plain wrong?

Is the goal of working hard to get a good job and then moving up the corporate ladder really so desirable? Is marrying and having 2.5 kids and growing old in a glorified box in the burbs really so wonderful?

I asked someone who knows what percentage of their income – which is to say the income of a reasonably successful person – now goes to taxes, and the answer was, “Over 60%.”

What if the modern version of society is really nothing more than a sleight of hand designed to fool the masses into becoming little more than government mules, allowed their simple pleasures in exchange for providing the muscle and the money needed to feed the beast?

An increasing number of the mules seem to me to have become disheartened at the difficulty of creating and keeping enough wealth to live the life envisioned in youthful dreams. And correctly so: building lasting wealth is relatively easy when you keep 90%, but nearly impossible when you keep just 40%. And, if the trend now in motion continues in motion, the productive elements will soon be lucky to keep 30%.

While even I can’t foresee things getting as bad as they did in Britain in 1974, when the top 750,000 wage earners were slapped with a tax rate of 98%, the steady build toward more regulations, more government, more tariffs, and more taxes in more sectors of the economy will affect a broader swath of the public and, in so doing, weigh even more heavily on the nation.

And it will result in much the same thing experienced by the British at the time – a mass expatriation by the more independent-minded and entrepreneurial types.

(While the audience obviously skews toward the idea of expatriation, it is interesting that a just concluded International Living survey found that some 96% of respondents were now actively considering expatriation.)

But I drift like a pick-up truck going too fast around a rain-slicked corner.

The modern version of the world, at least to my eyes, appears to be losing credence with an increasing number of Americans. Simply, the material well-being and little extras that we the people have previously dreamed of are now unaffordable for most – especially now that a willingness to take on an excess of debt is no longer being readily confused with net worth.

For the government, with its switch long rusted on expansion mode, the promises of a better tomorrow must be preserved, if only as an inspirational illusion. Yet, with the hard reality of a collapsing Camelot obvious for all to see, the administration and Congress are now discomforted by the loud chorus of mules braying for more and better fodder. And increasingly by the voices of others, the workers in this economy, who are beginning to chafe in the traces.

Attempting to maintain societal status quo, the government is pursuing fiscal and monetary policies that are anything but status quo, including running trillion-dollar deficits as far as the eye can see. But maintaining the status quo is only going to get harder. Social Security, a time bomb planted by FDR, will run a deficit this year, as opposed to 2017 as recently believed. The deficit is no surprise to anyone, but the accelerating pace of the nation’s fiscal ruin very much should be.

I was in grade school when John F. Kennedy delivered his signature line, “Ask not what your country can do for you, but rather what you can do for your country.”

In today’s paradigm, millions of Americans demand that the country do more for them than they are willing or able to do for themselves, for many in no small part because they have already been asked to give up so much. At the same time, the government is making increasingly muscular demands that those still able to give, give more.

On both sides of the equation, the government looms large – as you would expect it to in a world where public institutions have become the controlling force in virtually all aspects of life.

But the paradigm is broken, in no small part because a long succession of U.S. governments have habitually made politically easy or expedient choices – in the process squandering the wealth of generations and setting the stage for a serious confrontation between the government mules that have and those that have naught. 

Of course, I hope for the best as the country goes through the paradigm shift to whatever’s coming next. Yet, because no one can say what the new paradigm will look like – and a lot less or a lot more government are both equally likely – I am simultaneously planning for the worst, including buying hard assets and diversifying internationally. 

To fail to do so would be to passively accept the life of a government mule.

Lower Silver and Gold Prices are Expected

Posted: 15 Jul 2010 10:28 AM PDT

Gold Price Close Today : 1206.80Change : -6.50 or -0.5%Silver Price Close Today : 18.274Change : 3.7 cents or 0.2%Platinum Price Close Today : 1529.50Change : 5.70 or 0.4%Palladium Price Close...

This is a summary only. Visit GOLDPRICE.ORG for the full article, gold price charts in ounces grams and kilos in 23 national currencies, and more!


THURSDAY Market Excerpts

Posted: 15 Jul 2010 10:09 AM PDT

Gold edges higher in range-bound trade

The COMEX August gold futures contract closed up $1.30 Thursday at $1208.30, trading between $1203.70 and $1217.30

July 15, p.m. excerpts:
(from Dow Jones)
Gold futures ended with small gains, but were largely unchanged as a set of mixed U.S. and Chinese indicators clouded an already hazy economic picture. Gold closed within $15 of the $1,200 an ounce mark for the tenth consecutive day as the uncertain economic outlook has provided little direction for precious metals prices. Futures were supported by a falling dollar…more
(from Bloomberg)
The dollar slid as much as 1.1% against a basket of six major currencies and touched a two-month low against the euro, which rose above $1.29 for the first time since May as demand for Spanish government bonds eased concerns that the nation wouldn't be able to fund its deficit. Gold reached a record $1,266.50 an ounce as investors sought a haven during Europe's fiscal crisis…more
(from Marketwatch)
Goldman Sachs lifted its 12-month target for gold by 1.5% to $1,355 an ounce, citing a low-interest rates environment and concerns over European debt. On Wednesday, the Federal Reserve lowered its forecast of U.S. economic growth, and signaled it was examining additional stimulus measures. Additional liquidity should be bullish for gold, which tends to act as a hedge against currencies…more
(from AP)
A day after the Federal Reserve issued a slightly more bleak outlook on the economy, two regional reports pointed to a slowing in manufacturing activity in the Northeast. The pace of the recovery slowed down beginning in May as most of the major government stimulus programs expired. There have been few signs beyond hopeful corporate outlooks that the economy is not headed for a prolonged period of minuscule growth…more
(from TheStreet)
One long-term implication is that if the Fed is forced to pump more money into the system to battle this slowing growth, inflation fears could take center stage again. If the amount of money in circulation outpaces the amount of gold above ground, paper currencies will fall in value, and gold will retain its purchasing power. If these inflation fears are reignited, gold prices could see another bounce…more
(from Reuters)
Skepticism about economic recovery among wealthy institutional investors should push gold prices higher in the long term on safe-haven demand. Robert Lutts, president of Cabot Money Management, said that "In the end, profit-sharing plans, 401(k) (retirement plans) and larger institutions like Calpers would be allocating a larger amount to gold than they are today."…more

see full news, 24-hr newswire…

Gated, Locked Migrant Areas Impact Chinese Economy

Posted: 15 Jul 2010 10:07 AM PDT

Rising crime rates in China have led to a new and relatively draconian security measure, the installation of locked gates around migrant worker living areas near major cities like Beijing.

Over the past twenty years, China's economy has opened up, but, alongside the rush of country folk into the cities, violent offenses — including murder, theft, and rape — have increased about 10 percent. China has turned to a practice of "sealed management" for relief, where lower-income neighborhoods are locked overnight and police check IDs and guard potential entry and exit points.

According to the Associated Press:

"Gating has been an easy and effective way to control population throughout Chinese history, said Huang [Youqin, an associate professor of geography at the University at Albany in New York]. In past centuries, some walled cities would impose curfews and close their gates overnight. In the first decades of communist rule, the desire for top-down organization and control showed in work-unit compounds, usually guarded and enclosed.

"As the economy has grown, privately run gated communities with their own security have emerged in the biggest cities, catering to well-to-do Chinese and expatriates, offering upscale houses and facilities such as pools and gyms. The new gated villages in Beijing are different.

"'To put it crudely, gated communities in the city are a way for the upper middle-class and urban rich to keep out trespassers, whereas gated villages represent a way for the state to "keep in" or contain the problem of "migrant workers" who live in these villages,' Pow Choon-Pieu, an assistant professor of geography at the National University of Singapore who has studied the issue, said in an e-mail.

"Jiang Zhengqing, a supermarket owner in the gated compound of Laosanyu, told the China Daily newspaper in May that he doesn't even know if he'll be in business next year because of the drop in customers."

When push comes to shove China seems comfortable putting harsh restrictions on the low-wage workforce that has been central to its economic growth. The supermarket owner's personal take hints at at least one potential negative economic consequence and, combined with increasingly common factory worker strikes, China may be building a pressure cooker of underemployed in its rapidly growing cities.

You can read more details from the Associated Press in its coverage of Beijing gating and locking its migrant villages.

Best,

Rocky Vega,
The Daily Reckoning

Gated, Locked Migrant Areas Impact Chinese Economy originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."


Goldman Sachs pushes gold hedging…

Posted: 15 Jul 2010 09:56 AM PDT

by Lawrence Williams
Thursday, 15 Jul 2010 (Mineweb) — Goldman Sachs is suggesting that mining companies sell gold forward again. The logic behind this is that although the bank reckons the gold price will increase to $1,355 an ounce over the next 12 months … beyond that it is looking for prices to stabilise and fall as the U.S. Fed tightens monetary policy and the recession is seen to be ending.

Of course the big gold banks, of which Goldman is probably the most successful, can do very well out of its clients hedging their gold forward — whatever the fortunes of its clients in so doing.

It was notably the bank which reputedly advised Ashanti Goldfields to sell its gold forward at gold's low point back at the end of the 1990s — a policy which brought the gold miner to its knees leading to its takeover by AngloGold — another Goldman client. Indeed commentators have suggested that Goldman made profits on every angle of the Ashanti hedging debacle, and on the sale of one of its clients to another.

Goldman would probably counter that its primary responsibility was to its shareholders — perhaps even more so than its clients — and that the sudden turn-around in the gold price which caused Ashanti's effective bankruptcy, was completely unforeseen, but the whole episode left a bitter taste that lingers to this day, particularly in Ghana where Ashanti was seen as the country's major gold player on the world scene.

[source]

RS View: Goldman can peddle its array of hedging products (so as to accrue fees to itself) all it wants, but the real question is whether the miners have learned anything at all during the course of the past couple decades.

Goldman Sachs pushes gold hedging…

Posted: 15 Jul 2010 09:56 AM PDT

by Lawrence Williams
Thursday, 15 Jul 2010 (Mineweb) — Goldman Sachs is suggesting that mining companies sell gold forward again. The logic behind this is that although the bank reckons the gold price will increase to $1,355 an ounce over the next 12 months … beyond that it is looking for prices to stabilise and fall as the U.S. Fed tightens monetary policy and the recession is seen to be ending.

Of course the big gold banks, of which Goldman is probably the most successful, can do very well out of its clients hedging their gold forward — whatever the fortunes of its clients in so doing.

It was notably the bank which reputedly advised Ashanti Goldfields to sell its gold forward at gold's low point back at the end of the 1990s — a policy which brought the gold miner to its knees leading to its takeover by AngloGold — another Goldman client. Indeed commentators have suggested that Goldman made profits on every angle of the Ashanti hedging debacle, and on the sale of one of its clients to another.

Goldman would probably counter that its primary responsibility was to its shareholders — perhaps even more so than its clients — and that the sudden turn-around in the gold price which caused Ashanti's effective bankruptcy, was completely unforeseen, but the whole episode left a bitter taste that lingers to this day, particularly in Ghana where Ashanti was seen as the country's major gold player on the world scene.

[source]

RS View: Goldman can peddle its array of hedging products (so as to accrue fees to itself) all it wants, but the real question is whether the miners have learned anything at all during the course of the past couple decades.

Let's Ditch the Home Ownership Dream

Posted: 15 Jul 2010 09:49 AM PDT

Housing: America still has far too many underwater debtors labeled as "homeowners," but Washington can't bear to let them liquidate. Instead, it saddles taxpayers with ever-costlier bailouts.
The federal government has tried just about every trick in the book to revive the nation's housing market and forestall a feared tsunami of foreclosures. How well have they worked?
The answer depends on how you judge success. If the object is to keep "owners" - really, maxed-out debtors - in their homes, the results have been so-so. But there's another way of framing the issue.
What if it would have been better all along to let the chips fall where they may and not try to stop the liquidation of all that housing debt? Then the answer would be that the government has tried too hard, and has racked up far too much debt for the taxpayers, in a futile effort to delay the inevitable.


We lean toward the latter view. And who knows? Even Treasury Secretary Timothy Geithner, in his private moments, may be inclined to agree. Geithner made an interesting admission last month to a Congressional oversight panel examining the Obama administration's mortgage modification plan. The program's performance looks spotty at best.


More than a third of the 1.24 million people who initially signed up for it dropped out, many of them because they could not verify their income and ability to pay. That in itself is a revealing story.
More Here..

Why we could see a huge new uranium discovery soon

Posted: 15 Jul 2010 09:39 AM PDT

From OilPrice.com:

It's been an interesting few weeks since I last checked in on uranium.

The search for what's next in yellowcake projects has taken me to some out-of-the-way places. Dusty corners of libraries, with books that haven't been checked out since Reagan was president. Phone conversations with experts who've traveled to obscure uranium mines the industry has largely forgotten.

Here's what's most important. After all of this digging, I'm more convinced than ever that the uranium sector is ripe for new discoveries...

Read full article...

More on commodities:

Jim Rogers: The best precious metals to buy today

Legendary trader Gartman: Gold is about to go "parabolic"

How China is virtually guaranteeing uranium investments right now

The Nature of the Beast: A Look at the Ongoing Debt Crisis

Posted: 15 Jul 2010 09:39 AM PDT

Wall Street Cheat Sheet submits:

By Elliot Turner

Much of the rage these days has been about “how to get businesses to spend.” Watching CNBC, one would easily conclude that we are in the midst of a supply side slump, in which businesses curtailed production due to uncertainty in policies from Washington.


Complete Story »


Legendary advisor Jim Grant: Huge round of money-printing coming soon

Posted: 15 Jul 2010 09:37 AM PDT

From Zero Hedge:

Jim Grant, one of the most respected voices in the financial industry, joins Zero Hedge and others who see that the only choice the Federal Reserve has now that the temporary and shallow reprieve from the clutches of the deflationary depression is over, is to print more money in the form of another iteration of QE.

Whether this will be another $2.5 trillion, like last time, which was the price of an 18 month delay of the inevitable, or a...

Read full article...

More from Jim Grant:

Top investor rips legendary bear Jim Grant

Legendary advisor Jim Grant on the end of the dollar

Must watch video: Jim Grant says Fed would be shut down if audited

Five-Year S&P 1500 and Sector Forecast

Posted: 15 Jul 2010 09:34 AM PDT

Kendall J. Anderson submits:

We believe that predicting short-term swings in the market is an exercise in humility. Longer-term market predictions can have some value, but they should be based on a form of valuation methodology of the underlying securities which make up the market of choice. A consideration of the current mood of the market participants should also be included in that short term prices can be driven by emotions.

We don’t believe there are scientific factors which can be isolated and replicated to provide insight into short-term market predictions. However, we do know that over longer periods of time, the price of a security or the total market value of all the securities in a market will approximate the underlying capital retained and available for earning future income for its owners.


Complete Story »


Money & Markets Charts ~ 7.15.10

Posted: 15 Jul 2010 09:30 AM PDT

View this week's chart comparisons of gold against fiat currencies, oil and the Dow. Stay tuned for our next Money & Markets segment of The Solari Report tonight, Thursday, July 15, 2010. Click here to view all charts as a pdf file. See previous Money & Markets Charts blog posts here. Currency charts are from StockCharts.com. Gold vs Oil Gold [...]


Gold Daily Chart, Overhead Resistance, the 50 DMA, and GLD Option Expiry MaxPain

Posted: 15 Jul 2010 09:28 AM PDT


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