Gold World News Flash |
- Carpe Aurum
- The Sweet Smell of Investing in Silver and Gold
- Stocks, Gold Diverge, but with Little Zeal
- Has Gold Had Its Day?
- Leading Chinese Economists Urge Government To Dump U.S. Treasuries, Buy Gold
- Consumer Stocks Imploding as Common Sense and Simple Mathematics Start to Take Hold
- Interview with Dave Skarica
- BOJ Intervention Picks Pockets Of Speculative Trend Chasers Everywhere As Yen Plunges, Futures Rip Higher
- 72 Analysts Believe Gold Will Go Parabolic To Between $2,500 and $15,000!
- Guest Post: Carpe Aurum (Seize the Gold)
- Gold Seeker Closing Report: Gold and Silver Fall Slightly
- Gold Daily and Weekly Charts; Silver Weekly Chart; Bernanke's Bluff
- By a continuous process of inflation, governments can confiscate...
- Onex, CPPIB Unite in Bid to Buy U.K. Firm
- Comparisons To The Great Depression Keep Popping Up
- Tonight's 3-D Midnight Special: The Decoupling From The Blue Lagoon
- Intrigue Builds In The Comex Silver Pits
- Explained Time and Time Again: Currency Induced Cost Push Hyperinflation
- What is Freedom?
- The Role of Consumer Spending in Phony Economic Growth
- 37 Year Old Greek Investigative Journalist And Blogger Murdered
- Jim?s Mailbox
- Rick Rule's Rubrics: Riding the High Volatility Waves without Wipeouts
- Rent Seeking and the Flight of Capital
- Got Gold Report – Gold “Rumored” Lower, Euro Pops
- Gold, Oil and SP500 Trading Patterns
- The Genius of Bernanke... Afghanistan - Better or Worse?
- Waiting for Silver’s Upside Breakout
- LGMR: Gold "Entrenched in Tight Range" as "Lazy Summer Trading" Wears On
- Client Update – Formation Metals
- Crude Oil to Look Toward Earnings, Housing Data, Risk Appetite; Gold Tests Bottom of
- BP Near-Term Quandary
- MONDAY Market Excerpts
- Hugh Hendry: "If There Was A Way To Short Obama, I Would"
- Manufactured in the Middle Kingdom
- What the U.S. Deficiency in Rare Metals Means for Markets... and What You Need to Know
- ECB Announces It Bought Just €302 Million In Sovereign Debt Last Week
- McKinsey Study Confirms Sellside Analysts Are Conflicted, Slow, Biased And Generally Stupid
- Top junior resource analyst: "Summer slump" is great for gold stocks
- Gold Is on Holiday, Thankyewverymuch
- Rick Rule’s Rubrics: Riding the High Volatility Waves without Wipeouts
- Jim's Mailbox
- Well That Ramp Was Brief - Futures Give Up All Gains And Trade Near Lows Of Day
- In The News Today
- Telegraph talks precious metals…
- Telegraph talks precious metals…
- Gold Permabull is now Short Gold Stocks
| Posted: 19 Jul 2010 06:05 PM PDT For the purposes of this discussion we will concentrate on the intermediate and daily cycle, after a quick explanation of the two larger degree cycles.
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| The Sweet Smell of Investing in Silver and Gold Posted: 19 Jul 2010 06:02 PM PDT Those of us who are now called "gold bugs" will soon be referred to as "genius rich persons who must be obeyed" because we bought gold, silver and oil while the rest of the world got laughably infatuated with paper assets, which top scholars will tell you shows why the word "infatuated" sounds sort of like "flatulence" in a secret-code kind of way...
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| Stocks, Gold Diverge, but with Little Zeal Posted: 19 Jul 2010 06:00 PM PDT The weather could become Topic A around here if the markets get any more boring than they have been. Yesterday's snooze fest was impressive in one respect, though: It demonstrated that the Dow can fall 265 points, as it did on Friday, and wake up Monday morning with no trace of a hangover.
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| Posted: 19 Jul 2010 05:27 PM PDT
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| Leading Chinese Economists Urge Government To Dump U.S. Treasuries, Buy Gold Posted: 19 Jul 2010 05:18 PM PDT
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| Consumer Stocks Imploding as Common Sense and Simple Mathematics Start to Take Hold Posted: 19 Jul 2010 05:09 PM PDT
A BoomBustBlog reader sent me this in the mail last night and I thought I would share it with the community. I feel it is also worth taking a refresh of the consumer sector research that we released a few months ago… Reggie: I took a screen shot of my play money account and the shorts from the four part series on why the consumer isn’t coming back. Consumer retail has been nailed since May and from the 4 stocks you picked, here are two I chose to follow.
This is an example of exactly what we were talking about in our subscription documents regarding the ridiculous run up in consumer discretionary shares when taken in context of the American consumer and the stress born from the Pan-European Sovereign Debt Crisis (click the link for our detailed analysis). You can find the earlier articles in this consumer mini-series as follows:
Those looking to subscribe should click here. Next up, Reggie Middleton takes a Big Byte out of Apple!
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| Posted: 19 Jul 2010 04:47 PM PDT It has been a while since we interviewed Dave- and anyone, so we might sound a bit rusty. The sound gets better after the start. Dave gives his views and outlook on stocks, inflation, currencies, US policy and the potential transition from deflation to inflation.
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| Posted: 19 Jul 2010 04:43 PM PDT
Insomniac market observers everywhere are watching with stunned horror at what is going on in Yen crosses, and thus futures markets. Per preliminary market rumors, the JPY is plunging following BOJ FX intervention, and picking the pockets clean of trend speculators everywhere. Unlike the SNB, which specs have grown to love and ridicule, as every €10 billion CHF intervention attempt is neutralized in the span of hours if not minutes, the BOJ is a far more reputable, and deadly opponent. And with implied cross-asset correlation at 1.000, and the only driver of all risk on or off being the YENXXX carry cross, the plunge in the Japanese currency is forcing a massive squeeze in futures, which were halfway to the moon at last check. This will prove especially painful for those who shorted the market on IBM's and TXN's misses after hours, and went to bed, only to wake up and find themselves with a several million dollar hole to fill, a barrel-sized vat of vaseline to make the pain a little more bearable, and an IOU to the BOJ. Bloomberg was kind enough to share some insight: "The yen declined for a second day against the dollar on speculation Japanese authorities may intervene to weaken the nation’s currency after it climbed to a seven-month high last week. “The strengthening of the yen has added to pressure on the BOJ to implement more reflationary policy,” said Mitul Kotecha, Hong Kong-based global head of foreign-exchange strategy at Credit Agricole CIB. “The risk is for a shift higher in dollar- yen in coming sessions from oversold levels.” Readers will recall, that as we pointed out on Friday, the CFTC's COT report indicated that net long positions in the JPY are currently at all time highs. They will also recall our warning that the USD is poised to jump against all such overbought currencies, as Central Banks are just waiting to launch an FX-themes Kristalnacht against the speculators, especially with stress farce results imminent. Spoos:
and the culprit himself:
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| 72 Analysts Believe Gold Will Go Parabolic To Between $2,500 and $15,000! Posted: 19 Jul 2010 04:18 PM PDT
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| Guest Post: Carpe Aurum (Seize the Gold) Posted: 19 Jul 2010 04:00 PM PDT
Submitted by Toby Connor of GoldScents Carpe Aurum (Seize the Gold) Just like the stock market, gold runs in cycles (all markets do because the humans that trade these markets go through periods of optimism and periods of pessimism). For the purposes of this discussion we will concentrate on the intermediate and daily cycle, after a quick explanation of the two larger degree cycles. At this point all one needs to know is that gold's 8 year cycle bottomed in `08 and isn't due to bottom again until 2016.
The yearly cycle bottomed in February, and no yearly cycle except the one at the 8 year cycle low has ever moved below a prior yearly cycle low since the secular bull started in 2001.
That means in order for gold to move below $1044 we would have to entertain the fact that the current 8 year cycle has already topped in only two years. That would also mean the secular bull has likely topped. I just don't buy that, as no secular bull in history has ever topped before reaching the bubble stage and gold is clearly a long way from that. So all this nonsense about gold falling back below $1000 is just that - nonsense. The odds of a move back to $1000 anytime during the remainder of this bull market are probably less than 1%. I don't know about you, but I make it a rule to never bet on something with odds of success at only 1%. Now let's move in and take a look at the next larger cycle, the intermediate cycle. This cycle has averaged 18 weeks since the secular bull began in 2001, but has lengthened to 23 weeks after the global debt problems began in `07.
My guess is that the Fed's extreme monetary policy is acting to stretch golds intermediate cycle slightly. As you can see from the chart, gold is now about to enter the 24th week of the current intermediate cycle. This of course means it's becoming extremely dangerous to sell gold. On the contrary, this is the time where savvy investors want to be looking to add to positions. Remember, this is a secular bull market after all, and you only get this kind of opportunity about every 5 to 6 months. You certainly don't want to blow it now as you will have to wait another half year before it comes again, and since this is a bull market the next opportunity is going to come at higher prices. For all you traders who claim that you are going to back up the truck when gold experiences a pullback, well you are getting your pullback right now. The question is, will you follow your own advice? Now let's look at the smaller daily cycle and see if we can pinpoint a closer time frame for when we should be looking for the final bottom of this intermediate cycle.
On average the daily cycle tends to run about 20 days. However, it's not completely out of the question to see a cycle run as long as 30 days occasionally.
It appears we are now on day 16 of this cycle. Since we know that the average duration trough to trough for a daily cycle is 20-30 days, we can extrapolate a reasonable timing band for a final bottom somewhere in the next one to two weeks.
About this time we will see the conspiracy theorists start blaming a mysterious gold cartel for what in reality is just a normal correction within an ongoing bull market, and one that happens like clockwork about every 20 weeks. So the bottom line is we are on the verge of getting one of the best buying opportunities we ever get in a bull market sometime in the next week or two. The question you have to ask yourself is, will you take it or will you let the "technicals" talk you into missing another fleeting chance to accumulate at bargain prices in the only secular bull market left? Let's face it, at intermediate cycle bottoms the technicals are not going to look like a bottom. Instead, they are going to look like the bull is broken. Only those people who can think like a value investor and keep the big picture firmly in mind are able to buy into an intermediate cycle bottom. You have to make a decision. Are you going to seize the opportunity or are you going to let the bull trick you into losing your position?
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| Gold Seeker Closing Report: Gold and Silver Fall Slightly Posted: 19 Jul 2010 04:00 PM PDT Gold traded modestly higher in Asia before it fell back off in London and early New York trade to as low as $1177.68 by about 11AM EST and then bounced back higher in afternoon trade, but it still ended with a loss of 0.56%. Silver fell to as low as $17.46 before it also rebounded in late trade, but it still ended with a loss of 1.24%.
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| Gold Daily and Weekly Charts; Silver Weekly Chart; Bernanke's Bluff Posted: 19 Jul 2010 03:08 PM PDT | |
| By a continuous process of inflation, governments can confiscate... Posted: 19 Jul 2010 03:00 PM PDT
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| Onex, CPPIB Unite in Bid to Buy U.K. Firm Posted: 19 Jul 2010 02:58 PM PDT
Tara Perkins of the Globe & Mail reports, Onex, CPPIB unite in bid to buy U.K. firm:
Interestingly, Philip Inman of the Guardian reports, Canadian pension funds move in as UK counterparts sell up:
It's true that UK funds have adopted a liability-driven investment approach, moving more towards fixed income and allocating less to public shares. Some UK funds have shifted more assets into alternatives, but most funds have cut risk across the board. So what's the right thing to do? It depends. The Canada Pension Plan (CPP) is a partially funded plan and the CPP Fund (CPPIB) is in an enviable position because 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. Moreover, despite the setback in 2008, CPP assets have grown over the last ten years, a point made by Jean-Claude Ménard, Canada's Chief Actuary in his testimony at the House of Commons Standing Committee on Finance last April:
As I've stated it before, a handful of funds like CPPIB, are able to take on more liquidity risk than more mature pension plans that are managing assets and liabilities more closely. Those funds are not able to tie up a big portion of their assets in private markets because they need the liquidity to pay out benefits. And what can go horribly wrong for CPPIB? One word: Deflation. If a protracted period of debt deflation engulfs the developed world, then CPPIB will be sitting on a ton of public and private equities that will be losing value. Who will be in a better position if a long deflationary era awaits us? Funds that allocated to high quality fixed income assets, because the only thing that will protect your downside if deflation develops is long-term government bonds. Are CPPIB and other Canadian pension funds going on an overseas buying spree doing the right thing? I think so. Given the strong Canadian dollar, and the expertise to co-invest in private markets, they should be putting some of the long-term capital to good use. Let's just hope that deflation doesn't rear its ugly head.
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| Comparisons To The Great Depression Keep Popping Up Posted: 19 Jul 2010 02:23 PM PDT NEW YORK — The images of bread lines, dust storms and squatters' camps are missing in the aftermath of the worst financial crisis since the Great Depression. Stocks have rebounded sharply from the 12-year low hit in March 2009 during the Great Recession. The U.S. economy, while still sluggish, is growing again. And fears of financial Armageddon have mostly faded. Yet comparisons to the woeful 1930s continue to pop up in Wall Street research reports, newspaper op-ed pieces, doomsday books and the financial blogosphere. There is a nagging sense that the roller coaster ride investors have been on since the 2008-09 financial meltdown may not be over — and that a '30s-style boom-bust, boom-bust cycle can't yet be ruled out — as the economy and markets muddle through the difficult post-bubble workout period. VOICES: What is the American dream? The Dow Jones industrials' 261-point plunge Friday sparked by a sharp drop in consumer sentiment in July highlights that gloominess persists. Fueling the angst is fear that the still-fragile, jobs-starved economy will suffer a relapse, or double dip, as government stimulus is phased out. Consider: •In a recent note to clients, David Rosenberg, chief strategist at Gluskin Sheff, ticks off a slew of similarities between then and now under the heading, "Daring to Compare Today to the '30s." 
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| Tonight's 3-D Midnight Special: The Decoupling From The Blue Lagoon Posted: 19 Jul 2010 02:15 PM PDT
And some thought FX-Risk decoupling only occurred during the non-vampire hours. After tracking stocks tick for tick all day, the AUDJPY has developed some late night schizophrenic tendencies. So for any insomniac traders with a taste for virtually risk free arbitrage, here is your opportunity to take advantage of one of those ultra rare occasions where the ES is actually cheap to the AUDJPY - buy spoos, and sell carry, for a roughly 6 point indexed spread convergence. If discount window access is available, lever to infinity and retire or threaten systemic implosion if and when trade goes awry.
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| Intrigue Builds In The Comex Silver Pits Posted: 19 Jul 2010 01:24 PM PDT | |
| Explained Time and Time Again: Currency Induced Cost Push Hyperinflation Posted: 19 Jul 2010 12:41 PM PDT Dear CIGAs, If gold market participants were all tank drivers their machine would have but one gear – reverse. The smallest book in the world is the book of confirmed gold price visionaries. Someone says deflation and the long gold positions hit the fan. Gold banks make their short covers even though the fuel in Bernanke's Helicopter Money Drop is founded in the dreaded use of the "D" word. People are so fixed in present time that they cannot picture a euro back towards its high and the dollar back towards its low because the financial condition of the USA dwarfs the problems of Europe. Hyperinflation is always the product of a loss of confidence in currency resulting in a "Currency Produced Cost-Push Hyperinflation." No one with a synapse talking to another synapse expects a "Demand-Pull Inflation." All hyperinflation in modern history has occurred for one reason, and one reason only. That is loss of confidence in currency. Loss of confidence in a currency can be brought about by many reasons, but there is one constant factor. When hyperinflation has occurred in modern history EVERY economy involved was decimated as and when it occurred. It has never been caused by "Demand-Pull," but always and without exception caused by "Currency Induced Cost Push Hyperinflation." The nonsense being spread by the F-TV taking heads is that the Fed is out of ammunition to fight deflation. That is raving BS. The Fed can and will do QE to infinity which is restricted as a tool by nothing whatsoever. The ECB will not be far behind the Fed. Argue all you want, but this is exactly what is going to happen starting now. Stop being glib. Study hyperinflation in modern times listed below before you ask me to explain it one more time. What is out there today QE wise is enough to result in hyperinflation as confidence falls in currencies due to two characteristics, QE and volatility. Try meditating on the concept of "Currency Induced Cost Push Hyperinflation," rather than loading your pants over gold banks manipulation full of sound and fury, but meaningless in the great scheme of things. Examples of hyperinflation in modern times: Angola, Argentina, Belarus, Bolivia, Bosnia-Herzegovina, Brazil, Bulgaria, Chile, China, Congo, Free City of Danzig, Georgia, Germany, Greece, Hungary, Israel, Japan, Madagascar, Mozambique, Nicaragua, Peru, Philippines, Poland, Russia, Taiwan, Turkey, Ukraine, United States, Yugoslavia and
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| Posted: 19 Jul 2010 12:17 PM PDT (What is the Source of Freedom?!) Silver Stock Report by Jason Hommel, July 19th, 2010 I would like to share with you the hundred or so responses I had to my last article, these are the 100 Comments on "Proof that God Exists" http://silverstockreport.com/2010/god-comments.html The most interesting comments were two references to Barry Setterfield. www.setterfield.org. Barry has proved that the speed of light is slowing down. I note: Barry might have a proof based on the concept that the speed of light is slowing down, showing that the universe was created 6000 years ago. This, of course, would nullify and refute and explain the long ages as shown by radioactive decay rates. Jason notes: specifically see: A Basic Summary Helen Setterfield (with constant help from Barry), November 2008 http://www.setterfield.org/000docs/basic%20summary.html There is much more on this topic at google. http://www.google.com/search?q=speed%20of%20light%20slowing%20down&hl=en&ned=u...
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| The Role of Consumer Spending in Phony Economic Growth Posted: 19 Jul 2010 11:49 AM PDT Good mornin' captain... Good mornin' shine. - Jimmie Rodgers Bet you don't know what a "shine" is. See below... On Friday, everything went down. Well, almost everything. The Dow fell 261 points. Gold dropped $22. Copper. Oil. The dollar. You name it; it went down. Unless you name US Treasury bonds - which were up! What does this mean? Maybe nothing. But since it accords with the direction we think the markets ought to be taking, we'll say it's a trend. It's a Great Correction. Asset prices go down. Cash goes up. Let's go back and see where we've come from. Then, maybe we'll see more clearly where we're going. In 1999, the US stock market - led by the NASDAQ - clearly topped out. The bubble in the tech sector blew up. Equities started down. This happened after 50 years of credit expansion. And after much of the "growth" in the economy had begun to look suspiciously like borrowing from the future rather than real growth, debt in the private sector had reached record levels. It was time for a bear market/credit contraction. That is, it was time for a correction. The correction began in January 2000. The NASDAQ collapsed. And in 2001, the economy entered a recession. But this recession was phony. Consumer spending didn't go down; it went up. Consumers kept borrowing money. It wasn't correcting the debt problem, in other words, it was making it worse. Why? Who knows? Maybe the consumer wasn't ready for a correction. Or, perhaps it was because the feds began the biggest countercyclical stimulus program in history. The prime interest rate was dropped to below the rate of consumer price inflation. The federal budget went from about $300 billion in surplus to $500 billion in deficit (from memory). For the rest of the decade, the big banks could borrow at less than the inflation rate. And the deficits averaged about $1 trillion every two years. The correction of 2001 had been held up and made much worse by the feds' efforts to stop it. At least $10 trillion of additional debt was added to the system in the decade of the '00s. And guess what? It was soon the Bubble Époque! Stocks boomed. Spending boomed. Real estate boomed. Finance in all its formed boomed. Growth was positive. But it was phony. Because it was almost all based on debt. It was a debt-fueled bubble - particularly in real estate. If you take on debt in order to expand production, the extra output can make it possible to pay off the debt later, and you come out ahead. But when you borrow to increase consumption, all you're doing is taking output from the future and consuming it now. You'll have to settle up later - by taking your future output and using it to pay off your debt. Then, you're no longer borrowing from the future; you're paying off the past. And nobody likes it very much. Because it means living below your means rather than above them. The bill came due in 2007. Subprime crashed. Then, the whole financial sector crashed, followed by the economy itself. There are a number of ways to look at it, but we think it is most accurate to look at 2000 as the beginning of the present correction. That's when stocks hit their peak in real terms. Since then, stocks have gone nowhere. And probably 90% of the "growth" since then was phony. Certainly, the average person did not get richer; he got poorer. But having learned nothing in the '00s, the feds set to work in '08-'09 repeating and magnifying their mistakes. Instead of running $500 billion deficits, they ran deficits of $1.5 trillion. Instead of dropping rates below inflation, they took them down as far as they could go - to effectively zero. In addition, they nationalized whole industries, bailed out big businesses, and proceeded to add immense new financial obligations that nobody really understood. You have to hand it to the Obama administration. We didn't think anyone could be worse than Bill Clinton's bunch...but then along came George W. Bush. In comparison, Clinton seemed like a great president. And then, just when we thought we'd seen the worst administration ever, here comes Barack Obama and his team. Obama has continued all of Bush's programs (save torturing people). The war in Iraq continues. The war in Afghanistan continues. And the war on the correction continues. And Obama even added a new front - a health care initiative that is almost sure to be a financial and administrative disaster. Not that we're complaining. To the contrary, we find it all very entertaining. But we don't think people are going to like the consequences. The economy has been trying to correct since 1999. Every effort to stop it merely increases the size of the eventual correction. In round numbers, the US economy currently has debt equal to 350% of GDP. It averaged about half that much in the '50-'80 period. If it were to go back to that level, it would have to eliminate about $25 trillion in debt. According to the last number we saw, the private sector was currently writing off, defaulting on, or paying down about $2 trillion per year. Not bad. But that would mean another 12 years of correction. It would go a lot faster. But, remember, the government is helping. And more thoughts... "Good mornin' captain, good mornin' shine..." is how "Mule Skinner Blues" begins. A "shine" is what we call today an "African American." We don't know whether it is on the list of forbidden words or not. Rodgers uses it affectionately. It's a song about a fellow who just shows up on the job site and asks for work. Those were the days! Now, it's practically against the law to hire someone unless you have his birth certificate and social security number. We have to be a lot more careful now than we used to be. It's not a good idea to drive past a police station without your seat belt fastened. And it's probably not a good idea to refer to Barack Obama as a "shine." It may even be against the law! But heck, everything is against the law now. There are so many laws on the books it's inevitable that you break them from time to time. We had a couple of Henry's friends out for the weekend, helping with the work. We paid them 10 euros an hour. That is surely illegal. (If the gendarmes show up at our door, we'll know you ratted us out, dear reader. And we'll deny everything.) We must have broken a few dozen traffic laws driving out here. We gave Henry wine with dinner. We dodged the census takers...we burnt our tree-limbs and branches in an open blaze...we installed a bathroom without a permit...and who knows what! There are so many laws it makes us want to break them. We never felt like smoking until they made it illegal. We look for a "No Parking Zone" where we can put the car. And when Baltimore proclaimed a "No Killing Day," we didn't pop anyone that day. But we bought a handgun so we'll be ready for the next time. *** It's a bright morning here in Normandy. We spent the weekend painting doors and windows. What a pleasure it is to work...at least when you're not getting paid for it. The nice thing about having money is that you can afford to do honest work. You don't have to get a job and pretend. You can buy a piece of property and fix it up. Then, when the work is finished, you can buy another one. Or, you can start a business. You never run out of work! The boys don't feel that way, though. They're redoing the joints in stone walls...and painting a fence...for money! Well, they won't actually get any cash. Instead, they're paying back their dad for expensive tickets. Henry (19) and Edward (16) said they wanted to go with us to Vancouver this week. "Are you interested in investing?" we asked. "Yeah...I want to make money. And I want to make money without working," Edward replied. "That's not the way it works," we told them. Bill Bonner
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| 37 Year Old Greek Investigative Journalist And Blogger Murdered Posted: 19 Jul 2010 11:31 AM PDT
The Guardian reports that the prominent Greek reporter and blogger Socratis Giolas was allegedly murdered by the Sect of Revolutionaries terror group, after being shot 16 times in front of his pregnant wife. "The 37-year-old radio chief is the first journalist to be killed in the country since newspaper publisher Nikos Monferatos was gunned down by the infamous 17 November terror group in 1985. Giolas, who was also a frequent blogger, posting reports on popular online newsblog Troktiko, sought to illuminate Greece's seamier underside. The shooting came days before he was due to release an investigative series on corruption, colleagues said." It is always unfortunate when the investigative media loses inquisitive and intelligent minds, either outright violently (Giolas) or otherwise (Mark Pittman). Yet for every voice silenced, ten new ones appear. And even recent attempts in the US for a wholesale quieting of wide swath of the blogosphere will likely succeed in nothing more than merely roiling the hornets' nest of discontent. Luckily, no violent interventions have occurred in America (to date) - with the establishment fully aware it can simply throw a few dollars bills at and "capture" the better journalists out there, in exchange for 30 pieces of silver and "guaranteed" book sales, there is no need for bloodied hands. However, if this lack of inquiry results in merely more and more dirt being buried under the surface, when someone finally does hit the paydirt, the unfortunate events from Greece may be transplanted to a newsroom much closer to home. More from the Guardian:
Our condolences to his wife and unborn child.
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| Posted: 19 Jul 2010 11:16 AM PDT View the original post at jsmineset.com... July 19, 2010 12:52 PM Reality is up for grabs CIGA Eric A major break in the dollar's counter trend rally goes by without a headline whimper. U.S. dollar ETF (UUP): Meanwhile, gold and the gold shares decline during a paper operation that is clearly supported by strategically generated headlines. No cares to notice that the retest of May lows is occurring on a fraction of the volume created during their initial formation. This lack of participation suggests waning downside energy. Gold Miners Index ETF (GDX): The whole setup reminds of the dialog between Trapper and Hawkeye during Season III episode Iron Guts Kelly in which Trapper suggests that reality is up for grabs. Trapper: I got a bad taste in my mouth. I’m gonna go gargle with a martini. Hawkeye: There you go, hiding behind booze again, afraid to face reality. Trapper: Reality is up for grabs. One man’s reality is another man’s fantas...
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| Rick Rule's Rubrics: Riding the High Volatility Waves without Wipeouts Posted: 19 Jul 2010 11:16 AM PDT Source: Barbara Templeton of The Gold Report 07/19/2010 With the inviting California surf a stone's throw from his office, Global Resource Investments Founder and CEO Rick Rule is always generous in sharing his wit and wisdom. In this Gold Report exclusive based on his Friday webcast, he covers a lot of territory and provides plenty of tips for investors. That the markets will deliver huge waves of volatility as the secular commodities bull market continues its charge is a foregone conclusion, as Rick sees it. Read on to find out what he says you need to ride the high curls and stay out of the soup. Who Gets Stiffed? Critiquing the Greek drama that's been playing out since early this year, Rick Rule finds it curious for the European community to make additional loans to Greece, thinking it helpful to push the Grecian debt from the 120% of GDP (which it couldn't pay) up to 150%. In the Daily Reckoning, Rick says, Bill Bonner observed that Greece as a society made pr...
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| Rent Seeking and the Flight of Capital Posted: 19 Jul 2010 11:16 AM PDT By Ron Hera July 19, 2010 ©2010 Hera Research, LLC The productive elements of the US economy are caught between powerful financial interests, e.g., banks seeking speculative gains, political constituencies seeking entitlements and government entities at all levels whose budgets and deficits are too large compared to their revenues. All three factions are competing for the same economic resources and all three are net consumers of wealth. The triumph of any one faction or of any combination thereof, promises to erode capital and to encumber production and economic growth in the future. As a consequence, capital can be expected to flow away from the United States to other parts of the world. If banks dominate over government, for example, ever larger shares of tax revenues will likely flow to banks as a consequence of interest payments and taxes will certainly rise despite inevitable austerity measures. If government triumphs at the expense of banks, setting a...
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| Got Gold Report – Gold “Rumored” Lower, Euro Pops Posted: 19 Jul 2010 11:16 AM PDT By Gene Arensberg Esse quam videri – To be rather than to seem. Gold and silver nearing our expected support zones. ATLANTA – It seems like we have been on the sidelines for an awfully long time now waiting for gold and silver to correct as it sometimes does this time of year. We thought gold was beginning to correct in our last full report two weeks ago and it has corrected a goodly amount in euro terms, but in U.S. dollar terms gold seems to be range bound. It has been knocked around a bit by rumors and rumors of rumors, but since our last full Got Gold Report offering two weeks ago gold has been confined in a range bounded by about $1,217 on the upside and the $1,180s on the downside. Silver has seen a similar range for the period, but we sense the trading for silver has been a teeny bit stronger than gold. Silver saw good resistance in the $18.50s, but saw aggressive bidding in the $17.50s since our last full report. It may not seem like ...
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| Gold, Oil and SP500 Trading Patterns Posted: 19 Jul 2010 11:16 AM PDT It was an interesting options expiration week for equities that’s for sure. We saw some very choppy price action with large waves of buying and selling as the bulls and bears fought for control. Both Gold and Oil closed lower for the week which is not a good sign considering the US Dollar dropped like a rock along with them. Below are a few of my charts GLD – Gold ETF Price Action Gold continues to pull back from the June highs. It looks as though it could form an ABC retrace pattern if the July 7th low is broken. If $1085 is broken we should see gold drop to $1165-75 level. On the GLD etf that would be around the $112.50 – $113.50 level. That should shake out the majority of weak positions and start to rally towards the $1250/60 level. Crude Oil – USO Oil Fund This is a weekly chart of oil which clearly shows how selling volume has risen and the trend since 2009 has gone up, sideways and is now heading back down. The bear flag forming on...
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| The Genius of Bernanke... Afghanistan - Better or Worse? Posted: 19 Jul 2010 11:16 AM PDT The Genius of Bernanke Monday, July 19, 2010 – by Staff Report Ben Bernanke Ben Bernanke: The New Maestro? ... Ben Bernanke is now positioned to outshine his long-serving predecessor among those making the greatest impact as leaders of the U.S. Federal Reserve. It's not just that the 18-year reign of Alan Greenspan – the once universally admired Maestro – is now perceived as severely tarnished from the vantage point of our post-2008 woes. Greenspan, who once could do no wrong with the denizens of Capitol Hill and the inhabitants of bank trading rooms, now stands accused of being so allergic to economic downturns as to prime the system for asset price bubbles. His utter faith in the self-correcting mechanisms of the market also proved misplaced. But back to Bernanke. He's had to steer Fed policy through a thornier economic patch than Greenspan, despite the latter's long service and good work during the 1987 stock market crash, the Russian...
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| Waiting for Silver’s Upside Breakout Posted: 19 Jul 2010 11:16 AM PDT FGMR - Free Gold Money Report July 18, 2010 – Two months ago I stated that silver is inching closer to an upside breakout. It turns out that “inching” was the right word because since then silver has been moving at a snail’s pace. Nevertheless, the huge accumulation pattern that silver has been building over the past three years remains intact, as can be seen on the following chart. The accumulation pattern on the above chart is nearly complete. All silver needs now is one last push above the neckline around $20. As I noted back on April 1st, silver looks ready to soar once that key level is hurdled. In presenting my outlook for 2010 I said: “We need to start thinking about silver hurdling above $50.” Noting that this event was only a 20% probability in my view for 2010, I went on to add that “this important event – which is unimaginable to many – will I expect happen in 2011.” That forecast remains...
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| LGMR: Gold "Entrenched in Tight Range" as "Lazy Summer Trading" Wears On Posted: 19 Jul 2010 11:16 AM PDT London Gold Market Report from Adrian Ash BullionVault DATE LINE Gold "Entrenched in Tight Range" as "Lazy Summer Trading" Wears On THE PRICE OF GOLD ticked lower in London on Monday morning, slipping towards new 8-week lows at $1185 an ounce in what one dealer called "very quiet" trade. Gold trading in Asia was also "lazy" according to one local dealer, as the US Dollar reversed last week's late gain against the Euro on the FX market and silver dropped 10¢ to $17.80 an ounce. Asian stocks outside China's 2.6% gain all finished lower, but Eurozone equities then rose as crude oil crept back above $76 per barrel and major-economy government bonds slipped back. "Despite its sharp declines [on Friday] the gold price managed to hold its recent low and thus remains entrenched in its $1218/$1185 range for the time being," says one London trader in a note. "Traditionally July and August have been quiet months for gold, but we do not think any pull back in t...
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| Client Update – Formation Metals Posted: 19 Jul 2010 11:16 AM 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 19, 2010 03:25 AM I've been getting a lot of emails from FCO shareholders (the disgruntled ones) asking me to explain why their share price is so depressed. According to FCO management there is no material reason for the decline in share price, outside of the fact they have yet to announce anything concrete on the progress of their Idaho Cobalt Project mine financing efforts to construct their mine, mill and refinery.* Due to non-disclosure and confidentiality agreements, management has advised me they cannot discuss any details regarding potential financiers.* They have told me and everyone else it seems, that the financing is progressing and they are involved in talks with potential off-takers in addition to some commercial banks regarding debt financing.* But this is no secret – this has been their plan for months now. Management's plan...
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| Crude Oil to Look Toward Earnings, Housing Data, Risk Appetite; Gold Tests Bottom of Posted: 19 Jul 2010 11:16 AM PDT courtesy of DailyFX.com July 18, 2010 08:30 PM Crude oil will look to U.S. earnings announcements and housing data to gauge the health of the world's largest energy consumer, while gold is getting uncomfortably close to the bottom of the recent range. Commodities - Energy Crude Oil to Look Toward Earnings, Housing Data, Risk Appetite Crude Oil (WTI) $75.75 -$0.25 -0.33% Commentary: Crude oil is down slightly after finishing last week essentially flat. The commodity initially got a boost from encouraging corporate earnings announcements, but by the end of the week, as stocks fell on renewed global economic concerns, oil followed. This week prices will again take their cues from U.S. corporate earnings announcements, as well as fluctuations in the risk appetite of traders and investors. Key economic reports in the coming week are related to housing, with data on U.S. building permits out on Tuesday and existing home sales out on Thursday. Technical Outlook...
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| Posted: 19 Jul 2010 11:00 AM PDT BP has successfully capped their leaking oil well… mostly… for now… probably. Though the hole is capped, seeps are already emerging, the Coast Guard said this morning. Plus, the cap is just a temporary solution until a relief well can be completed… then there's that whole issue of the ? million gallons of oil in the Gulf. For the near term, BP faces a quandary. The key question is what will the pressure do as it builds up to a shut-in level? From what I've been told, BP engineers want to see 8,000-10,000 psi, based on the original well data from pre-blowout. How much is, say, 10,000 psi? By way of comparison, the hydraulic system that controls the ailerons, flaps and landing gear on a Boeing 767 is 3,000 psi, according to an airline pilot buddy. So 10,000 psi is a LOT of pressure. If the well pressure is less than the expected 8,000-10,000 psi, then we have to worry that there's a leak somewhere down hole. That is, oil and gas may be seeping out somewhere. Is it seeping up the outside of the drill casing? Is it seeping into another rock formation, somewhere between the seafloor and the bottom of the well? Could it worm its way up some fault line and exit from the seafloor at some other spot? Ugh! That's the big issue right now. What's the pressure doing? From what I hear, the psi is up around 7,000, which makes me wonder. Where's that other 2,000-3,000 psi? A Boeing 767 worth of hydraulic pressure is missing in action. Does that mean that there's a Boeing 767-sized leak? Or is this pressure drop a natural phenomenon, indicating that the well has depleted a couple thousand psi worth over the past 85 days? That's more than possible. One way or the other, BP had better finish getting one of those relief wells drilled and kill that reservoir at the bottom. ASAP. Byron King BP Near-Term Quandary 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."
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| Posted: 19 Jul 2010 10:21 AM PDT Subsiding inflation, eurozone fears weigh on gold price The COMEX August gold futures contract closed down $6.30 Monday at $1181.90, trading between $1176.90 and $1194.70 July 19, p.m. excerpts: see full news, 24-hr newswire… July 19th's audio MarketMinute
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| Hugh Hendry: "If There Was A Way To Short Obama, I Would" Posted: 19 Jul 2010 10:08 AM PDT
In his traditionally curt and to the point way, Hugh Hendry proclaims his "love" for the president, in this rare profile piece on the Scottish fund manager by the NYT. While none of his opinions will come as a surprise to Zero Hedge regulars ("The euro? It’s finished, Mr. Hendry proclaims. China? Headed for a fall."), we do recommend the article to those still unfamiliar with one of the truly iconoclastic fund manager still left in the open. While Hendry does not run a fund nearly as large as some behemoths out there (his Ecletica is less than $1 billion, John Paulson is $30), it does afford him a nimbleness that JP (whose recent rumored liquidations in the gold market are destined to create feedback loops that further accelerate liquidations) or, much more blatantly, Pimco (with its $1 trillion + in Treasuries, Corporates, Sovereigns and Mortgages) which is the market in all its verticals, can only dream about. It also affords him the opportunity to say what is on his mind, and on those of many others, who however dread the political consequences for being a little too honest. It is this forthrightness and honesty that has reserved Hendry a sterling place within the Zero Hedge community, his candor regularly scoring posts receiving well over 20k reads (and at 60k hits, his "I recommend you panic" is among the Top 20 most popular Zero Hedge posts of all time). Some snippets from Julia Werdigier's profile of Hendry:
And speaking of "I recommend you panic" which is must watch for everyone...
Another Hendry spectacle was his undressing of the naked Joseph Stiglitz emperor (full clip here):
By all accounts, Eclectica is not your typical 2 and 20 FoF-leeching dream corpse. Unlike most places, here you will likely know if you are en route to getting blown up well before the PMs shut down the place, and suspend redemptions, as was the case for 99% of all US hedge funds in late 2008:
And just like subprime was John Paulson's ticket to riches (with a little now settled help from Goldman Sachs), so China has all the makings of pushing Eclectica from a modest fund by modern zero cost of money standards, to the next big thing should Hendry be proven right (which he will be)... within a reasonable time frame:
As for Hugh Hendry's book club, those who wish to follow in his footsteps, here is the recommended reading:
We certainly wish Mr. Hendry all the best, as his post-activist ways inspire a certain jouissance within his fans that none of the other deeply institutionalized hedge fund managers can recreate. And obviously we are excited by his eagerness to participate in open media discourse of his views: should a domestic TV station be able to tap into his raw id and spark highly-intellectual round table debates, the long-forgotten art of watching TV for intelligent content (and certainly commercial free) may actually one day come back to the US.
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| Manufactured in the Middle Kingdom Posted: 19 Jul 2010 09:55 AM PDT Stocks were up some on Monday…after falling some more last Friday. All in, major indexes in the US are still sitting a few percentage points below where they began the year. That's not too bad…until one considers that the modest move south comes after the largest, collective global stimulus program ever implemented. Fellow reckoners are invited to make of that what they will. Aside from the intra-day blips, month-to-month moves and year-to-date noise, there are larger, stronger undercurrents in these waters. Right now, for example, the weary old world is witnessing the largest human migration in the species' relatively short history. People are literally marching out of the provinces all around Asia in the hope of finding a better life for themselves in the continent's swelling mega-cities. According to People's Daily, China's official English language publication, the Middle Kingdom's urbanization level is expected to exceed 50% during the next (12th) "5-year plan." "By 2009, China's urban population has reached 622 million people," the Daily reports, "and urbanization rate has been increased to over 46 percent by statistical counting." Statistics can read more or less whatever you want them to, of course, so they are to be taken with a grain of salt. Still, even "ballparking" the figures inspires some awe. "For the next 10-15 years," the paper continues, "China will still be in a rapid urbanization development stage, and the level of urbanization will increase average 0.8-1 percent every year." The effects of this massive urbanization, as with almost any trend of such magnitude, are mixed. On the one hand, the world's most populous nation has managed to graduate some 350 million poverty-stricken people to the ranks of the middle class during the past decade. Not bad. On the other hand, she now hosts 15 of the 20-most polluted cities in the world. Not good. Water flows downhill…birds fly south for the winter…and, whether by force of gravity of desire for a better environment, humans move to cities. For better and for worse, that seems to be the general trend of things. What is it all these people are seeking? Throngs of hard working peasants, fighting and scrapping their way out of abject poverty, are pushing hard for a better quality of life. In short, they want to be part of the "Made in China" success story. Next year, the United States' 110-year reign as the worlds leading manufacturer will come to an end. China's manufacturing juggernaut, which exported around $1.7 trillion of factory-made gadgets and gee-gaws last year, will be the new number one. Of course, all trends have surges and lulls, peaks and troughs. Already, the Middle Kingdom's ubiquitous "made in" branding is beginning to be replaced by cheaper competition from her Asian neighbors. Manufacturing wages across China rose an average of 14% over the past year. This relatively nascent trend has led some, including Alistair Thornton, an analyst with IHS Global Insight, to declare that China may have reached the "Lewis Turning Point." Named after the British economist, Arthur Lewis, this is a kind of epochal moment in a developing nation's pubescent stage, when it exhausts its supply of low-cost rural workers, which, in turn, puts upward pressure on wages. The recent, high-profile case of Foxconn Technology Group – where strikes over working conditions after a spate of suicides led to a 70% increase in wages at the company's South China plants – certainly supports the loose thesis that "Made in China" may already be under threat from the likes of Bangladesh, Sri Lanka, Viet Nam and other low cost producers. "Tools down" protests at Honda factories echo a similar sentiment, and already some high-end brands are actively seeking cheaper labor abroad. This, from today's China Daily: Two large US companies, Ann Taylor Stores, the women's clothing retailer, and Coach, the luxury handbag maker, are poised to relocate production to countries where labor rates are cheaper. Whether this is a turning point, as some suggest, remains to be seen. To be sure, China's cheap labor pool is far from shallow. When Foxconn decided to relocate its controversial South China plants, the news sparked a bidding war among emerging "tier-2 and -3" cities around the country. Zhengzhou, in Henan province, Chengdu in Sichuan and Wuhan and Langfang in Hubei are all in contention to host the world's largest contract for the electronic maker's relocated factory. China Daily continues: A company document acquired by China Daily shows that the Taiwan-headquartered firm, whose clients include Apple and Sony, will hire 100,000 workers from 18 cities by Sept 20. As of June, about 38,000 people had already joined. As China's manufacturing margins "thicken" due to the gradual increase in the cost of labor, jobs will indeed head overseas. But nobody in the countries buying those gadgets and gee-gaws is prepared to work for less than a Chinese factory worker. The Middle Kingdom may yet share some of its world-beating manufacturing windfall, in other words, but it won't be with the west. Joel Bowman Manufactured in the Middle Kingdom 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."
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| What the U.S. Deficiency in Rare Metals Means for Markets... and What You Need to Know Posted: 19 Jul 2010 09:27 AM PDT Hard Assets Investor submits: By Tom Vulcan In mid-June this year, a report titled "Critical raw materials for the EU" was submitted to the European Commission. Produced by the ad hoc working group of the Raw Materials Supply Group, the report concluded that 14 raw materials can now be considered "critical," meaning their availability has come increasingly under pressure. Complete Story »
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| ECB Announces It Bought Just €302 Million In Sovereign Debt Last Week Posted: 19 Jul 2010 09:12 AM PDT With total cumulative purchases at just over €60 billion since the beginning of its sovereign debt monetization program in May, the ECB purchased just €302 million in (Greek 6 Month) debt last week. As always, tomorrow will see the pyramid scheme of taking the purchases and reliquifying the market in yet another weekly term deposit auction to the tune of €60 billion. If indeed European liquidity is as bad as feared, especially with less than the total upcoming auction size on deposit with the ECB, the bid to cover on tomorrow's latest auction should be another informative data point as to just how bad the EUR scarcity in the eurozone currently is. On the other hand, with the ECB signalling a slow down in monetization, should the ramp in Libor/OIS rates continue, very soon it will be forced to step right back into the sovereign bond purchasing market, confirming the recent solvency lull is only temporary. Source: http://www.zerohedge.com
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| McKinsey Study Confirms Sellside Analysts Are Conflicted, Slow, Biased And Generally Stupid Posted: 19 Jul 2010 09:09 AM PDT
In what will come as a surprise to precisely nobody, a new study by McKinsey has confirmed that sellside analysts were "typically overoptimistic, slow to revise their forecasts to reflect new economic conditions, and prone to making increasingly inaccurate forecasts when economic growth declined." In other words, as V.I. Ulyanov may wall have said, useless idiots, had he lived in a time when Tesla was being pitched to him at a N/M PE multiple. One only needs to recall AJ Cohen's bold (and slightly more than idiotic) 2007 prediction for an S&P at 1,675 (dot 11235813*) in 2008, when the market closed at least than half that number, to see just how utterly worthless these people and their garbage predictions truly are. Yet day after day they serve as content filler inbetween ads on CNBC, as they sucker whatever remaining viewers the propaganda organization has left into one failed investment idea after another. Yet for those who still don't realize that the only thing sellsiders are useful for is datamining and creating pretty charts, here is some more data from McKinsey, confirming the uselessness of the sell side, and validating that sellsiders tend to be consistently off the mark...
they are Overoptimistic...
And completely dislocated from the actual market...
In other words, if you need a lemming to type up an unoriginal, groupthink report, most certainly call up the highest rated II analyst one can find. For any other actually productive and valuable work, please avoid sell side analysts like the plague (airborne and highly virulent edition).
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| Top junior resource analyst: "Summer slump" is great for gold stocks Posted: 19 Jul 2010 08:57 AM PDT From Mineweb: A professional investor with Boy Scout genes in his DNA, Mercenary Geologist Mickey Fulp picks winners in the junior resource sector based on three criteria: share structure, people and projects. In this exclusive Gold Report interview, Mickey touches on how he studies up on such key factors as insider holdings that indicate management's skin in the game and the public float necessary for liquidity. He also suggests that the summer slump—with low volumes and low prices—is a good time for some homework on equities that could double within 12 months. The Gold Report: So far in 2010, there's been both positive and negative economic news. We now have health reform, about to have financial reform, and stimulus money is still working its way through the system. The markets are bumpy. What's your view for... Read full article... More on gold stocks: The best junior gold stocks to buy today These tiny gold stocks could go to the moon How to trade junior gold stocks with much less risk
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| Gold Is on Holiday, Thankyewverymuch Posted: 19 Jul 2010 08:57 AM PDT Hard Assets Investor submits: Everybody, it seems, needs a summer holiday, a time to clear out of town, a time to recharge one's batteries. That includes gold traders, who've been exiting the COMEX in droves lately. Complete Story »
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| Rick Rule’s Rubrics: Riding the High Volatility Waves without Wipeouts Posted: 19 Jul 2010 08:52 AM PDT
Source: Barbara Templeton of The Gold Report 07/19/2010 Who Gets Stiffed? Critiquing the Greek drama that's been playing out since early this year, Rick Rule finds it curious for the European community to make additional loans to Greece, thinking it helpful to push the Grecian debt from the 120% of GDP (which it couldn't pay) up to 150%. In the Daily Reckoning, Rick says, Bill Bonner observed that Greece as a society made promises—to workers who were paid more than they produced, to pensioners and others in the entitlements class who were promised more than they could deliver, to savers who loaned Greece more money than it could pay back. Who should get stiffed? Bill's answer was all of them. Rick recites these facts because "we face the same conundrum in the United States"—and the same dismal prospects. "We have lived beyond our means for many, many years. People who don't produce as much utility as they take out by way of wages and salaries need to adjust their living standards. We have made promises that we cannot keep with regard to Medicare, Medicaid and Social Security. It's as simple as that. Those who loaned money to various entities, individuals, corporations, governments are going to be stiffed either via a default or by inflation." U.S. Balance Sheet Blues Rick sees one bright spot when he scans the country's balance sheet picture: "Corporations have taken advantage of the last two years to shore up their balance sheets greatly." In contrast to government balance sheets, which are in "horrible shape," he considers corporate balance sheets to be in "very good shape," by and large. But the U.S. federal balance sheet? "Bad shape." State balance sheets? "Bad shape, particularly in the People's Republic of California." And municipal balance sheets, the "great unsung tragedy" are in "very, very bad shape." His list goes on. "Individual balance sheets, consumer balance sheets, worker balance sheets, voter balance sheets are in very bad condition." According to Rick, extraordinary short-term liquidity, particularly on bank balance sheets, fools us into believing that the economy is in better shape than it is. "Extraordinary amounts of capital have been added to bank balance sheets." While the banks are extremely liquid, however, the underlying asset quality, "their so-called assets—loans to the zombie borrowers—remain problematic." And despite the liquidity, the banks aren't lending. There isn't much demand for credit in the still-weak economy, particularly among credit-worthy borrowers. "The banks learned a lesson three years ago, and now prefer to lend money to people who will pay it back. The deterioration of credit quality around the country constrains the banks' ability to make real loans." Wolves in Sheep's Clothing It's not hard to see why people have been fooled. Some observers talk about shadow statistics. Rick cites bank earnings reports as one reason that the economic reality is so poorly understood. In the last quarter, he indicates, JPMorgan Chase showed earnings increased—but on what basis? Two things:
Bank of America exhibited similar performance. "So while the economy is allegedly improving as a consequence of the 'stimulus,'" Rick comments, "the best indicators of the private economy—the operating earnings of the banks—continue to deteriorate." The Lesser Evil When people ask Rick about the U.S. dollar relative to other currencies, he falls back on what he calls an old truism: "It's probably the worst currency in the world with the exception of all the others." He sees the USD as a "deeply troubled but deeply liquid market" that "may fare less badly than the rest," with its purchasing power falling 5% or 6% per annum against deeper declines in other currencies. The bad news about that dwindling purchasing power, though, is that people will have to maintain high cash balances to survive ongoing "turbulence and incredible volatility in global debt and equity markets." Cash on Hand Rick figures that we can probably count on major equity markets to rise and/or fall by 25% in any given year going forward, "and the speculative markets will exaggerate those moves." With volatility a given, "you absolutely, positively have to use it." Naturally, no one knows when these periods of volatility will occur, so we have to be prepared. Investors who are fortunate and are prudent enough to set aside significant cash savings in anticipation of volatility earn next to nothing on cash on deposit. Still, Rick recommends maintaining larger cash balances than you otherwise would despite the fact that your savings are losing purchasing power at the same time as they're collecting scant interest. As he sees it, holding big wads of cash and exposing yourself to 5% declines in real purchasing power beats losing 20%, 30% or 40% in conventional debt and equity markets. "Painful but true," he quips. "But when very aggressive down moves and market crashes take place, remember to step in and buy. It's not because the cash is valuable relative to the equities in your portfolio," Rick says, "but because the cash will give you the opportunity to take advantage of periodic sales as they occur." Capital and Courage As a case in point, Rick looks back to what happened, particularly in small-cap equity markets, in late '07 and '08. He hunted for and found about 20 stocks selling at less than 50% of working capital, "where you got the management teams and the assets for free." With its Exploration Capital Partners 2008 portfolio, Global Resource Investments stepped into those stocks "very aggressively in a down market and profited mightily when the stocks responded upwards." Maybe there was more money to be made "had we been less cautious about the nature of stocks we chose," he adds, "but we speculated only in stocks selling at substantial discounts to free working capital." In any case, "having the courage to step into the markets and having the capital available to do so—when our competitors had neither courage nor capital—stood us in extremely good stead." So Rick's core rule for individual investors, too, would be to have capacity available: capacity in capital and courage alike. Sensible Speculations And when you buy, what do you buy? Rick has a number of suggestions, which include:
But where to speculate? Commodities in Context Despite the condition of the broad economy, we are in an important secular bull market in resources. This bull market came at the heels of the secular bear market, as they always do. The 18-year bear market from 1982 through 2000 "took out all kinds of investor interest and all kinds of productive capacity," Rick explains, and the constricted investment in natural resources eroded the supply side of the equation. As Rick points out, the large deposits that we as a society depend on—uranium, petroleum, copper and so on—were discovered and developed from the 1950s through the 1970s. But deposits are finite; every barrel you draw from an oil well or pound of ore you dig from a mine takes the resource closer to depletion. Because "you don't stand at the top of a mine pouring in fertilizer and water and expect the mine to grow more copper," those old deposits have grown old and passed their prime. Though the bull market has brought in new investment, from his vantage point we've not yet done a good enough job of replacing or replenishing the deposits that we've been busy exhausting. Even as supply stagnated or even shrank, demand continued and continues to grow. Every year, more of us occupy the planet. In fits and starts over the last 20 years, populations in Communist countries, emerging markets and developing nations have begun enjoying measures of economic and political freedom that is expanding the middle class and elevating living standards. That phenomenon, in turn, fuels ever-increasing demand for commodities. Rick cites the BRIC countries—Brazil, Russia, India, China—as good, classic examples. "At the bottom of the demographic and economic pyramid, as the poorest people get more money, they buy more stuff. Most of us here have too much stuff already. We may want more, but we tend to spend a lot on services. There isn't much stuff in an iPod; the value-add is service. You pay $1 for songs for your iPod; none of those songs contains copper or oil. But if you're on the bottom of the economic ladder in Nigeria or Sri Lanka or India or Indonesia and start making more money, instead of walking you might buy a motor scooter that's made of stuff and consumes oil. You may build a cinder block home to replace your Visqueen and patch shanty. You may buy a refrigerator and an air conditioner. What adds utility to poor people as they get more money are things that are made of stuff. There is a boom in stuff in the emerging markets." Past Is Prologue A decade into the new millennium, we find ourselves in a situation where constrained supply as a function of nearly 20 years of sparse investment meets unconstrained demand. "That means real raw material prices are going to go higher," Rick says. And again turning to historical experience, he says, "The past is prologue. In the last great market in commodities, the market of the 1970s, the gold price escalated from $35 per ounce—admittedly, a price-controlled level—to $850 an ounce. But it's instructive to remember that in 1975, in the midst of that great secular bull market, there was a 50% cyclical decline." When the gold price slid from $200-plus per ounce to just over $100, Rick recalls, "people who understood that the gold price would rise but were over-leveraged or psychologically unprepared for the decline still could go broke having made the right decision in the midst of a spectacular bull market." He raises that point because he thinks another decade remains in this secular bull market in resources. "If you aren't prepared for the volatility that you're going to experience—financially in terms of your liquidity and psychologically in terms of your ability to deal with 30% or 40% price declines in your portfolio in one quarter—you'll get shaken out of the best market you'll ever experience." From where he stands, Rick says there's no doubt that "we will see some ugly cyclical declines." Nor is there any question that "absolutely incredible opportunities are ahead of us." He reiterates his guidance: "Use this situation to your benefit by having the courage and the capital available to take advantage of the situation when the people competing with you in the markets have neither." Volatility ≠ Risk "Understand that volatility is not the same as risk," Rick says. "It isn't a catastrophe if a company with $100 million in market cap that's in reality worth $150 million experiences a drop to $50 million in market cap. It's an opportunity. Pay attention to the underlying value of the assets, and use that underlying value to put the price of the stock into context. It's absolutely critical if you're going to maintain yourself in these markets that you pay attention to that liquidity." As he sees it, whether cyclical downturns affect investors unduly is not a function of the market but of the investor. "Cyclical downturns are periodic sales; that's not a bad thing." If you understand the companies you're investing in and confine yourself to viable companies, downturns will be opportunities. "They will certainly test your character," he quips, "but you are going to experience them so get ready for them and in fact welcome them." If you are the type of investor who considers volatility itself a risk, Rick has three words of advice: "Get out now." But if you appreciate sales, understand that you have to buy companies based on value, not on price. And he thinks this is a pretty good time to be able to find those $100 million market cap companies that should be worth $150 million. "As a consequence of the deterioration in markets that we've already seen, some values are starting to appear," he says. "If you own one of these companies and expect its prospects to improve over time, don't worry that the market marks it down in a period of volatility." If you have the psychological fortitude and financial wherewithal to take advantage of it, and if you like the idea of periodic half-off sales in a secular bull market, the volatility on the horizon will bring "unparalleled opportunities." And, he says, "I think you're going to see opportunities across the board in resources." Liquidity, Liquidity, Liquidity In real estate, they say it's location, location, location. In resources, Rick also has three words of advice to remember: liquidity, liquidity and liquidity. "These are capital-intensive cyclical businesses. Without capital they have no businesses. The companies that you invest in relative to their needs have to have liquidity." He reiterates his earlier point that investors themselves need ample liquidity, because "absolutely without a doubt you will experience volatility in your portfolios of up to 30% or 40% a year." Without liquidity, you won't be able to take advantage of the "unforeseen black swans" that swoop in—"brutal cyclical declines in the context of that secular bull market (that) knock markets off precipices." Ground-Floor Opportunities Investors always want to know how to get in at the ground floor. Those who speculate in juniors need to pay particular attention to cash-rich shells, Rick advises. In these cases, the company's market cap may be at a substantial discount to the free working capital and treasury. "These are ground-floor opportunities," he states. "Cash at a discount always attracts management, always attracts assets. This is not to say that all of these situations work out, but the risk-reward parameter associated with this type of speculation is unparalleled in any other form of exploration." It's not as if the bargains are everywhere at the moment. For instance, Rick finds the micro-cap precious metals stocks overpriced at this time "because the market has driven up the bad ones with the good ones." However, the picture will start to change when one of those cyclical downturns hits. "It will flush down the good ones with the bad ones," Rick says. "Be ready to take advantage and you will be able to snap up spectacular bargains." Cash Includes Bullion, ETFs Rick will be the first to say that portfolio diversification for the average investor—if there is such a creature—is not exactly up his alley. "My whole portfolio is in my business and in things I understand," he says. Besides, he doesn't believe in a one-size-fits-all approach to investing. But with the caveat that he claims no expertise in what you might call "traditional asset allocation," if pressed he'll go out on a limb to say, "I would suspect that an intelligent passive investor at present needs to overweight cash—35% or 40% in cash and as much as 25% of the cash part in either physical gold or silver bullion or ETFs." Beyond that, "I do suggest investors overweight the raw materials portion of their portfolios to the rest of the portfolio because I think we're probably into a multi-year bull market in raw materials." Stock Picking If you think the gold price is going to go up, Rick says, buy gold. That's "the best way to participate." As for equities, if you think a company has some competitive advantage, some facet that will cause the company to do well, buy stock in that company, irrespective of what it produces. Most of the time Global buys and recommends a stock, he says that the decision is based on organic growth or "some type of internal event, something that would make the share price respond even in a bad market." The decision is not based on "any sense of what the market may or may not do to that stock in the next 12 months." Because most gold stocks are priced at substantial premiums to their net present value of their cash flow at today's gold prices, Rick says that they're inefficient stores of value in the context of rising gold prices. For those who want equities in their portfolios, though, he sees room for explorers as well as producers. In fact, he notes, because the explorers are only looking for gold, whether the price of gold goes up would probably have only a marginal impact on the company. Resource Stocks vis-à-vis Stocks Overall Rick says that he expects the resource stocks to correlate very well with the overall market in the very near term but will diverge in the longer term. He quotes Warren Buffett as "famously saying that markets are 'voting machines' in the very short term and 'weighing machines' in the long term." In other words, emotions move the markets in the short term; in the long term, value becomes the driver. When stocks fall, all stocks fall but recoveries are uneven. In Rick's view, the recoveries inevitably occur where value is present; where value is absent, so is recovery. But in a dramatic selloff, he adds, the selling decision is not always the investor's to make. "Margin clerks don't care about an investor's asset allocation style. When they are selling stocks to meet margin calls, they sell the things that have bids." He says that the same thing happens in opened-ended mutual funds, when fund managers with $1 billion in assets get calls for redemptions, they sell what they can, not necessarily what the client wants to sell. In fact, "your best stuff, your more liquid stuff, has to be sold at the same time or even before the junk gets sold because there are bids." For these reasons, he expects resource stocks to correlate very well to the overall market in a cyclical decline. "I would also expect the better resource stocks to recover," he reiterates, adding, "That's not something I can say for all stocks." A Lesson on Steroids Rick is quick to remind investors that in the vehicles his company really made a reputation with—such as the Exploration Capital Partners 2000 series—most of the big returns came from less than 10% of the positions. "The portfolio performance occurs in a fairly small number of names," he explains. It's the "nature of speculation, sadly, that most positions make only a little bit of money or lose some." Almost without fail, he recalls clearly, the Exploration Capital Partners portfolio stocks that made 20- or 30-fold gains had handed in 30% or 40% losses before they went higher. In an "extravagant example" to illustrate the point, he talks about a stock Global bought in intervals at $0.10, $0.12 and then $0.015. "An 85% decline before the stock ran up to $10;" Rick says, "a really instructive lesson—a lesson on steroids." But, he adds, "It's important that people understand that value is more important than price and that volatility is an opportunity rather than a risk." Long or Short? A Matter of Math As a rule, Rick doesn't short stocks. His reasoning is a simple matter of math. "If I short a stock, the most I can make is 100% while my losses are theoretically incalculable," he says. "In a long portfolio the odds are completely reversed. The most I can lose is 100% (which unfortunately I've done on a couple of occasions) but the amount of money I can make is almost unlimited (and mercifully I've enjoyed a couple of those too). I like the math on the long side way better than the math on the short side." The Taxman Cometh Rick also has a take on tax matters that investors might find helpful. The Bush administration's tax cuts will be allowed to expire, he says, but he anticipates that the Obama administration will probably find other ways to "raise revenue." With that in mind, he says, "Investors who have very large embedded gains in some historic positions may want to take those gains this year. If you really like the company, you may want to sell and re-buy after 31 days—the opposite of taking tax losses." In addition, as a consequence of less favorable capital gains legislation, Rick says, "Equities markets, at least in the U.S., will become somewhat less buoyant than they have been. I think these tax changes will have a profound effect on the venture capital industry and a lot of equity trading." Furthermore, he sees the U.S. tax structure becoming more "progressive" as time goes on. The "more productive" taxpayers—the rich, as Washington might call them—"will be increasingly victimized." Recalling Willie Su
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| Posted: 19 Jul 2010 08:52 AM PDT Reality is up for grabs A major break in the dollar's counter trend rally goes by without a headline whimper. U.S. dollar ETF (UUP): Meanwhile, gold and the gold shares decline during a paper operation that is clearly supported by strategically generated headlines. No cares to notice that the retest of May lows is occurring on a fraction of the volume created during their initial formation. This lack of participation suggests waning downside energy. Gold Miners Index ETF (GDX): The whole setup reminds of the dialog between Trapper and Hawkeye during Season III episode Iron Guts Kelly in which Trapper suggests that reality is up for grabs. Trapper: I got a bad taste in my mouth. I'm gonna go gargle with a martini. Reality is up for grabs. Today's casino-style markets profit from confusion, misdirection, and degree of difficulty in reading the message of the markets.
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| Well That Ramp Was Brief - Futures Give Up All Gains And Trade Near Lows Of Day Posted: 19 Jul 2010 08:48 AM PDT
There. Is. No. Double. Dip. And with the weakness in macro is finally spilling over into micro, and especially in the formerly fortress tech space (now the TXN plunge keeping IBM company) please repeat this mantra a few hundred thousand more times each day, to use up all available brain cycles, and to prevent any independent thought as well as the realization of just how broken things truly are.
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| Posted: 19 Jul 2010 08:41 AM PDT Jim Sinclair's Commentary It appears Europe knows who the enemy is. Europe freezes out Goldman Sachs European governments are turning their backs on Goldman Sachs, the all-conquering investment bank that has suffered a series of blows to its reputation, capped by the biggest ever fine imposed on a Wall Street firm. According to data from Dealogic, Greece, Spain, France and Italy have all denied the bank a lead role in their recent sovereign bond sales. Last Thursday, Goldman agreed to pay a $550m fine to settle US regulators' claims that the bank misled investors in a mortgage-backed security. Goldman admitted that its marketing materials were incomplete, because they failed to state that the same third party that helped choose the assets had taken a bet against them. But governments have also been shocked at the emergence of past transactions between Goldman and Greece and Italy, where products the bank helped to sell aided both in hiding government debt. Greece, which used Goldman in a bond sale this year, is practically at war with the bank. A sharp contrast with the situation months before, when Goldman bankers dined with the prime minister in a private meeting overlooking the Acropolis. The relationship broke down, though, after news leaked earlier this year that Goldman was about to strike a bond sale deal with China's sovereign fund – which never materialised. Spain, which used Goldman among its top 10 bookrunners last year, has not done so in 2010, while Italy has not given the bank a leading role since 2007. France has not used Goldman in any lead position over the past three years, and it seems doubtful that it will do so in the near future. "French people would riot in the streets if we chose Goldman," said a person familiar with the French treasury.
Jim Sinclair's Commentary This anything but dollar positive. Homebuilder confidence at 15-month low (Reuters) – Home-builder sentiment fell more-than-expected in July to the lowest level in more than a year after a popular home-buyer tax credit expired in April, the National Association of Home Builders said on Monday. The NAHB/Wells Fargo Housing Market index fell two points to 14, the lowest level since April 2009, the group said in a prepared statement. It was the second straight decline in the index. Economists polled by Reuters had expected the index to fall to 16. June was revised lower to 16. A reading below 50 indicates more builders view sales conditions as poor than good. The index has not been above 50 since April 2006.
Jim Sinclair's Commentary How could Moody's self destruct? Simple – downgrade US debt. Ireland's credit rating downgraded by Moody's Credit agency Moody's has downgraded Ireland's government bond ratings to Aa2, blaming banking liabilities, weak growth prospects and a substantial increase in the debt to GDP ratio. However, Moody's lead analyst for Ireland Dietmar Hornung said it was a "gradual, significant deterioration, but not a sudden, dramatic shift", and the agency believed Ireland has "turned the corner". The general government debt-to-GDP ratio was at 64 per cent at the end of last year, up from 25 per cent before the financial crisis took hold, and is continuing to rise. "Today's downgrade is primarily driven by the Irish government's gradual but significant loss of financial strength, as reflected by its deteriorating debt affordability," said Mr Hornung. The support provided to the banking system, which includes the transfer of billions of euro worth of loans from banks to the National Asset Management Agency, was also cited as a key factor in the rating downgrade. Recapitalisation measures already announced may reach €25 billion, the agency said, but Anglo Irish Bank may require further support.
Jim Sinclair's Commentary QE to infinity will come from many sources. IMF seeks another $250B.
Jim Sinclair's Commentary Asia and Africa rise as the West has given it all away to political expediency and Wall Street. Hong Kong, China Central Banks Sign Pact to Spur Yuan Investment Products The central banks of Hong Kong and China signed agreements to ease restrictions on yuan transfers between banks and companies in the city, seeking to encourage use of the currency in the Asian finance hub. The People's Bank of China and the Hong Kong Monetary Authority also agreed that the city will have no restrictions on yuan deposit holders transferring cash to buy wealth-management products, HKMA Chief Executive Norman Chan said at the signing ceremony. "The real breakthrough lies in the creation of an offshore renminbi interbank market in Hong Kong," economists led by Joanne Yim at Hang Seng Bank Ltd. said in an e-mailed report today. "The renminbi spot foreign exchange and interest rates could deviate from those of the onshore market, reflecting the demand and supply conditions of renminbi funds in Hong Kong, providing important benchmarks for mainland policymakers." Yim expects total yuan trade settlement between Hong Kong and China will rise to 113 billion yuan ($14.5 billion) at the end of this year. HKMA said June 18 the latest agreement would encourage financial institutions to develop investment products denominated in yuan, helping to offer higher returns on yuan savings accounts in the city that currently pay interest rates of less than 0.5 percent. Deposits in China's currency in Hong Kong rose 4.7 percent in May to 84.7 billion yuan ($12.5 billion), HKMA figures show.
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| Telegraph talks precious metals… Posted: 19 Jul 2010 08:16 AM PDT By Garry White and Rowena Mason As is usual, gold bugs are likely to top up their holdings on the dips…. The platinum price has fallen by almost 15pc since it hit a 21-month high of $1,745 an ounce at the end of April. The metal now costs about $1,510 an ounce…. the price could fall by another $200 over the next couple of months, according to a study by Commerzbank. However, weak metals prices are not guaranteed over the next few months, so investors looking out for a buying opportunity need to keep their eye on the market. There is a distinct possibility these expected price falls may not materialise. A continually weakening dollar could provide stop the price slide in its tracks, as a falling US currency provides support for precious metals such as platinum. The dollar fell to a nine-week low against the euro last week, as poor US manufacturing data sapped confidence form the world's largest economy. Retail sales in the country also declines and corporate earnings from the likes of Google and JP Morgan disappointed Wall Street. The market is starting to catch on that US public debt is surging to 100pc of GDP – and the focus of sovereign debt concerns is shifting. "The Europeans have aired their dirty debt in public and taken some measures to address it, whilst the US has not," David Bloom, currency chief at HSBC said last week. A continuation of market worries about a double-dip recession in the US and its massive debt woes could lead to further falls in the world's reserve currency — and cause analysts to rip up their bearish expectations for precious metals prices over the next few months. [source]
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| Telegraph talks precious metals… Posted: 19 Jul 2010 08:16 AM PDT By Garry White and Rowena Mason As is usual, gold bugs are likely to top up their holdings on the dips…. The platinum price has fallen by almost 15pc since it hit a 21-month high of $1,745 an ounce at the end of April. The metal now costs about $1,510 an ounce…. the price could fall by another $200 over the next couple of months, according to a study by Commerzbank. However, weak metals prices are not guaranteed over the next few months, so investors looking out for a buying opportunity need to keep their eye on the market. There is a distinct possibility these expected price falls may not materialise. A continually weakening dollar could provide stop the price slide in its tracks, as a falling US currency provides support for precious metals such as platinum. The dollar fell to a nine-week low against the euro last week, as poor US manufacturing data sapped confidence form the world's largest economy. Retail sales in the country also declines and corporate earnings from the likes of Google and JP Morgan disappointed Wall Street. The market is starting to catch on that US public debt is surging to 100pc of GDP – and the focus of sovereign debt concerns is shifting. "The Europeans have aired their dirty debt in public and taken some measures to address it, whilst the US has not," David Bloom, currency chief at HSBC said last week. A continuation of market worries about a double-dip recession in the US and its massive debt woes could lead to further falls in the world's reserve currency — and cause analysts to rip up their bearish expectations for precious metals prices over the next few months. [source]
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| Gold Permabull is now Short Gold Stocks Posted: 19 Jul 2010 08:16 AM PDT Thanks to Monty for this scoop. Jim Puplava over at FinancialSense revealed on Newshour (his weekly broadcast) that he is short gold stocks. He may only be short the large-caps. Some of those charts do look bearish in the short-term. Puplava expects more deflation prior to inflation/hyperinflation. Oddly enough, before I read Monty's post, this weekend I listened to part of Puplava's discussion with Quint Tatro. I think Quint is a pretty good technician and analyst but he did say that the HUI had a huge reverse head and shoulders pattern. According to one of the bible's of technical analysis, the H&SH pattern is usually only relevant at major tops and bottoms. There has to be a long trend that precedes the actual formation of the reversal pattern. John Murphy notes that H&SH patterns can be continuation patterns. One example of that was the huge consolidation in Gold from 2008-2009. Now, the reality is that there just isn't a H&SH pattern on the HUI, nor in Silver. It would be a continuation pattern (like Murphy would say) but a market doesn't crash and then continue up for an upside breakout. Gold formed a real H&SH continuation pattern because it was able to hold above the last major low (summer 2007 low). It didn't crash through major support the way Silver, the gold stocks and everything else did. Puplava and Tatro were sounding the alarm and it is true that one can make a great case for a 10-15% fall in the HUI. However, this is highly normal for the super volatile gold-stock sector and its highly normal when you consider how weak the sector is during the summer. It should be noted that Puplava was one of the early bulls (2000) but did ride commodities down in 2008. I don't think hes calling for a major top here, more so a significant pullback. We sounded the bearish alarm Wednesday evening when the HUI closed near 460. In last night's update we talked about how this correction is forming a perfect C wave in a textbook A-B-C correction. With sentiment already very bearish, I will be interested to see what kind of readings we get as the gold stocks reach stronger support. Surely, if the HUI falls towards 400 sentiment will get much worse. We'll see CNBC and all these "traders" talk about how the gold stocks are broken. I remember Joe Terranova of Fast Money saying Gold had broken down. The next day was the bottom in February and of course Gold rallied $200/oz in the next few months. He also got out of Gold in October, prior to a near $200 run. Point being, this sector is a different animal and mainstream folks just don't get it. We didn't get it for a while. If you want to get our premium insights, stock recommendations, array of sentiment indicators/analysis, then consider a free, no risk, 14-day trial to our premium service. Questions? Contact: Jordan @ The DailyGold .com.
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With the inviting California surf a stone's throw from his office, Global Resource Investments Founder and CEO Rick Rule is always generous in sharing his wit and wisdom. In this Gold Report exclusive based on his Friday webcast, he covers a lot of territory and provides plenty of tips for investors. That the markets will deliver huge waves of volatility as the secular commodities bull market continues its charge is a foregone conclusion, as Rick sees it. Read on to find out what he says you need to ride the high curls and stay out of the soup.
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