Gold World News Flash |
- Crude Oil Down in Holiday Trade, Gold Attempts to Resume its Rally
- Today’s Most Important Price Points in Gold – Part II
- Bear Market Race Week 151: Earnings: The World’s Worst Stock Market Indicator
- GLD Sham....WOW!
- Unhappy Labor Day
- Dangerous Defeatism is taking hold among America's economic elites
- Jim?s Mailbox
- China's Big Plans
- US Fed Gains Power, Loses Credibility?
- Gold Resource Corp: The Power of Dividends
- US Students - Drowning in Debt
- Evans-Pritchard: A Call for Aggressive QE
- Fannie Re-Embraces Subprime Mortgages
- Is the U.S. Headed the Way of Japan?
- As Americans Celebrate Labor Day 2010, U.S. Factories Are Closing In Droves
- Lunch With Robert Reich
- Millionaire Factory Misfires
- Print Money and Be Damned!
- Fed Vows to Maintain Public Financial Health
- Exclusive: The Paulson Portfolio Post-Mortem (In Which We Learn That The Maestro Himself Is Advising J.P. On Future Gold Prices)
- Some Weekend Scenery
- Student Loan Debt Destroying Relationships
- inspiring video from malaysia - return to gold and silver legal tender
- Video: Silver being used as collateral for loans
- Video: Bill Murphy (GATA) "Silver is in play"
- Will Steve Forbes be the Tea Party Presidential Candidate in 2012?
- High Roads to China
- In September Europe Must Issue Double The August Government Debt
- Summary Of Global Events In The Week Ahead
- Can Gold Go Higher?
- Silver Soars to $19.95, Hits Highest Price Since 2008
| Crude Oil Down in Holiday Trade, Gold Attempts to Resume its Rally Posted: 05 Sep 2010 06:57 PM PDT courtesy of DailyFX.com September 05, 2010 10:51 PM Will economic optimism from last week carry over into the coming holiday-shortened week? Regardless, the direction of markets will be extremely telling with regard to whether the latest move was merely an oversold bounce or the start of a new trend. Commodities – Energy Crude Oil Down in Holiday Trade Crude Oil (WTI) - $74.27 // $0.33 // 0.44% Commentary: Crude oil is currently down after falling on Friday despite a better-than-expected U.S. nonfarm payrolls report and rallying equity markets. Surging U.S. inventories continue to put pressure on the commodity, which typically rallies strongly on global growth optimism. It is worth repeating that inventories in the U.S. are at multi-decade highs and that U.S. crude oil production is at 6-year highs. In such an environment, the DOE inventory report becomes much more important, thus that is a key event in the coming week. The report will be released on Thursday at 10:3...
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| Today’s Most Important Price Points in Gold – Part II Posted: 05 Sep 2010 06:57 PM PDT By Bill Downey, Sept 3 2010 On April 30th of this year I wrote an article entitled "Today's Most Important Price Points in Gold." This is a follow up to that article. Before presenting an updated version, there are a few key points worth review. Feel free to Google the report or check this websites archives: (At some sites it was called "The most important price point in gold." In the April article we wrote: [LIST] [*] [*]Gold has arrived at what is most likely its most important turning point of not only this year, but perhaps of its entire bull market. We can see now just how important the 1175-1225 area is for gold bullion. We can infer that gold is at the greatest risk/reward price zone of the entire bull market. The resistance lines meeting our current price point (or just above it) is where every major price high for gold has appeared in the past 10 years. (The high since then has been 1265 and the trend lines are still valid) [*]If the pa...
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| Bear Market Race Week 151: Earnings: The World’s Worst Stock Market Indicator Posted: 05 Sep 2010 06:57 PM PDT The 1929 & 2007 Bear Market Race to The Bottom Week 151 of 149 Earnings: The World’s Worst Stock Market Indicator J.P. Morgan, The Silver Market, And so Much More Mark J. Lundeen [EMAIL="mlundeen2@Comcast.net"]mlundeen2@Comcast.net[/EMAIL] 03 September 2010 Color Key to text below Boiler Plate in Blue Grey New Weekly Commentary in Black Below is my BEV chart for the Bear Race. It’s been suggested that I change the name of my report from: The Bear Race to the Bottom Wk X of 149, to something else. I can see the point. As our current Bear Market is lasting longer than the Great Depression’s Bear, every week the name becomes less appropriate. And as some day I may start a subscription letter that hopefully will be written in a Bull Market. I should choose a name which will serve my reports come Bull or Bear Market. I need to give this some thought. The DJIA is Down one Week, and then is up the Next. But month by month, nice ...
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| Posted: 05 Sep 2010 06:57 PM PDT www.preciousmetalstockreview.com September 4, 2010 Ahhh, the curves life throws at you sometimes still amaze me! I’d worked all summer in anticipation of taking a two week vacation...now. I was set to sail through the fabled Northwest Passage on a luxury icebreaker but six hours to the northern “port, if you can call it that, of Kugluktuk the ship ran aground on a large uncharted rock. We toured around Edmonton awaiting news for a day, visiting the museum and art gallery. Alas, the news came in later that day and was bad. The ship could not free itself and the 16 day voyage was off. Now it’s apparent that all 2010 expeditions on that particular ship are canceled since it must undergo a rigorous inspection and possibly a repair process. There are no ports equipped to handle a ship of that size anywhere near it’s current location. It’s going to be a long journey, hopefully not tow, to a port w...
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| Posted: 05 Sep 2010 06:57 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! September 05, 2010 05:09 PM In 2007, I spoke about how I was waiting for one last "silver bullet"' from the Fed before issuing my most dire economic forecast ever. Most people didn't want to hear such negativity then and sadly, most still don't today. In March 2009, just one day from the actual bottom in the stock market, I suggested an eye to this horrific storm was upon us and the stock market could witness one of its best "bear market rallies. From that point, I continue to suggest an economic and market peak in the June/July 2010 time frame with DJIA 10,500 and 11,000 to be tested. I stated this window would then start to close and we would begin to live through a Japanese style 1989 to today,economic and market scene. Back in 2007/2008, I pleaded with readers to watch this 60 minutes interview as I believed it hammered home the concerns I...
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| Dangerous Defeatism is taking hold among America's economic elites Posted: 05 Sep 2010 06:57 PM PDT September 05, 2010 09:24 AM - Goldilocks has played a trick on America. Growth is not warm enough to prevent hard-core unemployment climbing to post-war highs and sticking at levels that corrode the body politic, but not yet cold enough to overcome the fierce resistance of the Fed's regional hawks for a fresh blast of stimulus. Read the full article at the Telegraph......
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| Posted: 05 Sep 2010 06:56 PM PDT View the original post at jsmineset.com... September 05, 2010 11:06 AM Eric, It looks like what I had anticipated many years ago is occurring NOW! The gold industry itself, the least knowledgeable of the gold price mechanism, has woken up to the fact that for every million ounces a junior has there is more than $1 billion in value less cost of production. The guys who dig gold out of the ground are nitwits when it comes to the price of their product. Did they not lose billions betting against themselves on short of gold OTC derivatives? Regards, Jim Goldcorp to buy Andean Resources for $3.42B CIGA Eric Competition to acquire ounces in the ground will drive up the price of junior resource companies with good managements, properties, and locations. Fear of ownership will transition into fear of missing the next big move as merger and acquisitions, driven by lots a money chasing dwindling solid opportunities, will drive gold stocks higher in the coming months and years. Can...
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| Posted: 05 Sep 2010 06:56 PM PDT China's Big Plans By Frank Holmes CEO and Chief Investment Officer "Global" is part of our company name, and we take it seriously. This week two members of our investment team are in Hong Kong for a CLSA conference, another is just back from China, a fourth will be there later this month and I've spent a fair bit of time in Colombia in recent months. This is not leisure travel, but rather a key part of our investment approach – combining the tacit knowledge acquired from breathing the air, eating the food, seeing projects and meeting with companies with the explicit knowledge gained from the research done at our desks in San Antonio. Much has been said and written about China as a property bubble on the verge of a messy bursting, but there's another story out there that makes more sense to us based on our own observations and those of others. For example, a research note from the highly respected ISI Group today: "Soft landing. Inflation is OK. 3Q2010 might be an upside surp...
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| US Fed Gains Power, Loses Credibility? Posted: 05 Sep 2010 06:56 PM PDT Saturday, September 04, 2010 – by Staff Report Ben Bernanke Federal Reserve Chairman Ben Bernanke (left) defended the Fed's handling of the financial crisis in 2008 before a federal commission, saying the bailout averted a much greater crisis for the U.S. economy. Speaking before the Financial Crisis Inquiry Commission, Bernanke also explained the Fed's involvement in the collapse of Lehman Brothers in September 2008, saying the federal government did everything it could to avoid the company's death. He repeated earlier statements that the Fed did everything within its legal authority to avoid the company's death. "The only way we could have saved Lehman would have been by breaking the law," he said. "And I'm not sure I was willing to accept those consequences." – Politico Dominant Social Theme: Ben Bernanke, apologetic, intends to do great things. Free-Market Analysis: Despite such statements from Ben Bernanke, we would venture the observation that there is an ever-g...
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| Gold Resource Corp: The Power of Dividends Posted: 05 Sep 2010 06:50 PM PDT I’ve been an investor in Gold Resource Corporation (GORO) since October 2006. I advised them for just under two years, bought shares in the open market, and have since watched their dream become a reality. The stock itself is arguably the best performing gold stock during the 2006-2010 timeframe. The GORO story has everything you look for as a gold stock investor: 1.) A new low cost gold producer 2.) High grade deposit that is still 98% unexplored 3.) Low cost production (sub $200/oz cash cost) 4.) Management owns 20-25% of the company 5.) 1/3 of cash flow going to a dividend [already paid two special dividends since 7/1/10] 6.) Fantastic share structure 7.) 9 year mine life which will be expanded. First years production is anticipated to be 70,000 oz at a $200/cash cost increasing to 200,000 ounces at a 0 cash cost by year 3. At $1,000 gold, with just over 52 million shares fully diluted, GORO will have $1.07/share in operating cash flow in year one, growing to over $3.81 OCF/share by year 3. Management’s goal is to pay 1/3 of operating cash flow out as a dividend so one could expect dividends to grow from $0.36 - $1.27 per share during this 3 year timeframe. The company has already announced $0.06 in dividends since the start of commercial production on July 1, 2010 which tells investors management is serious about paying them. Complete Story »
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| US Students - Drowning in Debt Posted: 05 Sep 2010 06:34 PM PDT YouTube A ticking time bomb of American debt. Over $830 billion are owed by college students in the US with $3 thousand more added on every second. This is debt that is NOT extinguished in bankruptcy. Continue reading the article . . .
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| Evans-Pritchard: A Call for Aggressive QE Posted: 05 Sep 2010 06:32 PM PDT Tom Lindmark submits: Ambrose Evans-Pritchard is out with a new post suggesting that the US is perilously close to political gridlock which is preventing the Fed from engaging in more QE and putting the country at risk of sliding into a “Japanese trap.” His prescription calls for the Fed to make massive bond purchases but with a twist: Complete Story »
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| Fannie Re-Embraces Subprime Mortgages Posted: 05 Sep 2010 06:30 PM PDT Tom Lindmark submits: What we’ve learned over the past three years, courtesy of the NYT:
Complete Story »
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| Is the U.S. Headed the Way of Japan? Posted: 05 Sep 2010 06:27 PM PDT Econ Base submits: The Fed has the powers to alter short term rates. Long term rates such as those of the 10 year treasuries, are set by the market. Therefore, these rates are believable since they are not manipulated by the Fed or politicians. Japan has been in a deflationary environment now for over a decade. The Nikkei Index peaked at nearly 39000 in Dec. 1989. The Japanese have been creating liquidity by lowering interest rates. Their 10 year bond yielded 8.43% at approximately the time Nikkei peaked. These days the Japanese 10 year bond yields a paltry 1% approximately. So much for the liquidity intervention by the Bank of Japan; today the Nikkei stands at around 9000 with deflation showing no sign of easing its grip. Complete Story »
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| As Americans Celebrate Labor Day 2010, U.S. Factories Are Closing In Droves Posted: 05 Sep 2010 05:38 PM PDT 
The following are just some examples of the recent factory closings that have been sweeping the nation.... *Chrysler has announced that its plans to close an engine plant in Kenosha, Wisconisn are official. The factory will be shut down for good on approximately October 8th and about 575 jobs will be lost. *The largest milk producer in the United States, Dean Foods, says that it will close a South Carolina dairy plant in October. That factory closing will eliminate 151 jobs. This is just the latest in a string of factory closings for Dean Foods. Over the past several years Dean Foods has closed factories in Michigan, Nebraska, Pennsylvania, Tennessee and Wisconsin. *Continental Structural Plastics, a major producer of body panels for cars, is shutting down its plant in North Baltimore, Ohio in October and as a result 214 people will lose their jobs. *Perfect Fit Industries (a prominent manufacturer of bedding accessories, pillows and comforters) has announced that it plans to close a factory in Loogootee, Indiana by the end of the year. As a result, 95 jobs will be lost. *Ford Motor Company recently announced the closure of a factory that produces the Ford Ranger in St. Paul, Minnesota. Approximately 750 good paying jobs are going to be lost. Minnesota Governor Tim Pawlenty was so desperate to keep the plant open that he offered Ford a multi-million dollar incentive package full of tax cuts and job creation incentives to keep it open, but Ford rejected the offer, saying that the St. Paul plant just does not fit with Ford's new "global" manufacturing strategy. *The city of Breckenridge, Texas has been shaken by news that Karsten Homes notified nearly 130 employees that their local factory will be closing in two months. *It has been announced that there will be a new round of layoffs at the Whirlpool factory in Fort Smith, Arkansas, but at this point the company is not saying how many jobs will be lost. Whirlpool has been laying off workers at the plant steadily over the past few years as much of the work that was once done at the factory has been moved to a facility down in Mexico. *Midcoast Aviation is closing its Savannah, Georgia factory by the end of the year. This move will affect approximately 362 jobs. *Federal-Mogul has been making headlamps for automobiles and for industrial use since 1954 in Boyertown, Pennsylvania, but now that era is coming to an end. Federal-Mogual has announced that the Boyertown plant will close by the end of the year and 70 jobs will be lost. *Duro Bag Manufacturing Co. plans to close its factory in Hudson, Wisconsin by October 22nd. As a result, 63 workers will be without jobs. *Quad/Graphics is the second-largest commercial printer in the United States. It prints Newsweek, Rolling Stone, Sports Illustrated, Time and Wired magazines. Unfortunately, times are tough for Quad/Graphics and they have announced the closing of five plants. The facilities to be closed are located in Mississippi, Ohio, Nevada and Tennessee. As a result of the closings, 2,200 workers will lose their jobs. Scenes such as these are being repeated over and over and over across the United States. What we are witnessing is the slow-motion deindustrialization of the United States. This is very bad news for American workers, and indeed it is very bad news for all Americans, because the truth is that any economy that consumes far more than it produces does not have a bright future. So what do you think about the deindustrialization of America? Feel free to express your opinion by leaving a comment below....
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| Posted: 05 Sep 2010 05:28 PM PDT
The other day had me sharing a cold, congealed chicken salad for lunch with Bill Clinton’s Secretary of Labor, Robert Reich, at San Francisco’s posh Fairmont Hotel. We covered a wide range of market impacting topics, which I have summarized below. A Rhodes Scholar who dated Hillary Clinton at Yale, ran for governor of Massachusetts, and authored 12 books, Bob is never without an original thought, nor a stranger to controversy. Today he didn’t disappoint. Bob says that easy money is creating new bubbles around the world, especially in China (FXI) and commodities, that will only end in tears. The Middle Kingdom is the first country where inflation may break out to the upside. There is also a new form of protectionism that has emerged under the guise of competitive currency devaluations, where counties printing paper money are racing to the bottom. This will eventually force a revaluation of the Chinese Yuan (CYB), and there’s nothing the Chinese can do to stop it. A US GDP that is 71% dependent on consumer spending is unsustainable, since they can no longer afford it, can’t get credit, no longer have a personal ATM in the form of home equity loans, are worried about losing their jobs, suffer under a huge debt burden, and are now unexpectedly having to save more for their retirement since their houses have dropped in value by half. Scott Brown’s surprise win for the Massachusetts senate seat will only cause uncertainty in Washington to explode, not exactly a stock market friendly development. Brown is really “a sheep in wolves’ clothing,” as he is ideologically distant from the right wing that is currently running the Republican party, voted for Massachusetts’s state health care plan, and didn’t dare to use the word “Republican” in his campaign. The Obama administration committed a major error by devoting one third of its massive $870 billion stimulus program to tax cuts, which in this environment, will get saved, not spent. You might as well have buried the money in your back yard. The TARP money, while succeeding in rescuing the financial system, only ended up in Treasury bills, and never made it to Main Street. This is what the public is irate about. The loopholes in the proposed financial regulations are big enough for bankers to drive their Ferraris through. The best way to revive the economy is to give money to the states directly, which, unable to run deficits, and can only cut spending and raise taxes. This will create a $350 billion drag on the economy during 2010-2011, in effect an “anti stimulus” that cancels out a third of the federal government’s reflationary efforts. I took two of Bob’s economics classes at UC Berkeley, and know too well his wry humor, acid wit, and preference for backing up arguments with mountains of empirical data. Entering students are obliged to buy 400 pages of photocopied charts, tables, and other raw data about the labor market which they are expected to commit to memory by the end of the semester. These are not basket weaving classes. Bob warned me not to take his investment advice, as he bought his home in Berkeley at the 2006 market top, just before it dropped in value by half. On top of that he has had to eat a 10% cut in his Berkeley professor’s salary forced on him by drastic state budget cutbacks. UC Berkeley is the crown jewel of public education, but the state has little choice but to starve it to death. This is not good for the long term future of the Golden State, which has to create the educated class to earn the wealth to pay the taxes. The real kicker of the lunch was Bob’s forecast that unemployment will remain stubbornly high at 9% a year from now. This is going to be a big problem for Obama in November. The jobs that have been exported to China or replaced by machines aren’t coming back. Because of the arcane way in which the surveys are conducted, someone who isn’t looking for work isn’t counted. But when the economy starts to improve, when they do start to look they are newly counted as jobless, causing the politically sensitive figure to shoot up. To avoid this trap, it is better to look at the Payroll Survey released on the first Friday of each month, which gives a much more accurate read on the economy. Even still, with the average work week at a record low of 33 hours, employers will make their existing staff work longer hours before they hire anyone new. As we parted company, Bob left me on an upbeat note. “The good news is that the Great Recession of 2008-2009 is over. That’s because it’s now 2010.” To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.
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| Posted: 05 Sep 2010 05:09 PM PDT --The Aussie market is up 2.77% since the Federal election on August 2nd, if you're using the ASX/200 as your proxy. This whole "not having a government thing" is working out well for investors. It turns on the uncertainty of having no-one in charge is better than the certainty of having someone in charge. Maybe that will all change this week, though. --To begin with, the jobs data from the U.S. gave the market a positive lead. We're not sure this matters one little bit. True, the private sector in the U.S. added 67,000 new jobs. But that doesn't have a lot to do with Macquarie Group's earnings, does it? It just goes to show you how vapid most headlines. --By the way, those Macquarie Group earnings were a bit of a revelation. The Group told the ASX that it expects first half profit to be 25% down on previous expectations. The new number for the half-year set to end September 30th - $360 million - is not small. But it's smaller than expected. Why? --Well the obvious answer is that in a deleveraging world with more risk and uncertainty, it's hard to be a profitable investment bank and securities dealer. Mind you, Macquarie is still profitable. But corporations seem less eager to take on debt, so they don't need Macquarie to arrange the offerings. And individual investors are scaling back the volume and frequency of their share trading. --Mac Group's little peek behind the scenes led to an 8% fall in its shares earlier this morning. That took the steam out of a strong start. And for what it's worth, we're wondering when affairs in Europe and America are going to begin weighing on the Australian mind again. --For example, the Financial Times is reporting that Eurozone governments will try to raise about double the amount of cash in September that they did in August. Last month, Eurozone borrowing was only about €43 billion. This month, about €83 billion in new bonds on offer to anyone who will take them. --How will you know if the Eurozone debt problems are hotting up again? What the spread between Germany bonds and Irish, Spanish, and Portuguese bonds. In Ireland, the spread between Irish and German bonds of similar durations reached its highest level ever at 356 basis points. There is also a 24-hour strike in France to watch out for. --The French are always good for an entertaining strike. It can be mildly inconvenient if you have to take a taxi, a bus, a train, or have garbage that needs collecting. But it is a French tradition of standing in solidarity with your fellow workers, even if you don't collect garbage, drive a taxi, drive a bus, or engineer a train. --Is it serious, though? Well, it will start to be more serious when people in France, and the U.K., and Italy, and Greece, and America realise that austerity measures and reduced government spending and higher taxes all add up to one simple fact: a lower standard of living. When you have to pay lots of big bills out of current and future cash flow, there's less money to save and spend. --This is why we reckon the next stage of the Sovereign Debt Crisis (originally the Global Financial Crisis) will be political and sociological as much as it is economic. But then, economics is really the study of choices people make with money. So all economics is political. It's just going to get political in an angry way in the coming months. --To the extent that angry people are nervous investors, this is probably a good world for traders and a horrible world for pensioners. --For traders in Australia, there is the added element of the new quarterly pricing system for iron ore and coking coal. There's a nifty little article on the back page of today's Financial Review about the subject. The article points out that the increased variability in underlying prices for steel-making materials introduces a new level of variability to the quarterly earnings of iron ore and coal producers. --Does it change the way you value them? We'll ask the stock Doc when he gets back from London on Wednesday. But our view is that the variability in underlying steel-making materials prices is essentially a derivative of fixed asset investment in China (residential and commercial real estate investment in China). If THAT turns out to be a bubble (like we think it is) the volatility in iron ore and coal prices is just a prelude to a 2008-like reversion to the mean. Dan Denning
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| Posted: 05 Sep 2010 04:58 PM PDT Japan was the world's most admired economy in the '80s. Then it was the world's most despised economy in the '90s. By 1995, economists pointed their fingers and laughed - the world's most admired businessman had lost his left shoe. But now, much of the world is barefoot. The US inflation rate has been going down since the early '80s and was cut in half since last year. It now hovers barely above zero. Surely Japan - where prices have been falling for two decades - has something to tell us. As we pointed out last week, the Nipponese have been in decline for the last 20 years - with lower stock prices, falling real estate prices, and a falling GDP. Even the population has been sliding for the last five years This week the Japanese decided to throw some more grit on the slope. Japan's central bank governor, Masaaki Shirakawa, said he was boosting his "special loan facility" by 10 trillion yen, about $120 billion. And Mr. Naoto Kan, Japan's Premier, said he would support the central bank, adding a "second pillar of stimulus' of some 920 billion yen. The numbers always sound impressive in yen. But they are unlikely to give the economy much traction. Professors Ken Rogoff and Carmen Reinhart studied 15 economic crises over the last 75 years. What they found was what you'd expect: real recoveries in the post-Keynes era are rare. Instead, in the 10 years following a crisis, economic growth rates are lower and unemployment is higher than in the years preceding the crisis. In two thirds of the episodes, jobless rates never recovered to pre-crisis levels, ever. And in 9 out of 10 of them, housing prices were still lower 10 years after the crisis ended. "Our review of the historical record, therefore, strongly supports the view that large, destabilizing economic events produce big changes in the long-term indicators, well after the upheaval of the crisis. [Up to now," the authors warn, "we have been traversing the tracks of prior crises. But if we continue as others have before, the need to de- leverage will dampen employment and growth for some time to come."] It was perhaps this scholarly warning that roused Shirakawa to action, with Ben Bernanke right behind. Neither wants to be known as the central banker who followed in the footsteps of losers. Urged on by sages and simpletons, they will print money. "It falls to the Fed to fuel recovery," writes Clive Crook, one or the other, in The Financial Times. "Under the circumstances," he writes, "better to print money and be damned." At last week's conference in Jackson Hole, Wyoming, the Americans promised to print more money, if needed. Shirakawa rushed home early so he could turn on the presses right away. We would have more faith in central bankers if they had not been responsible for causing the crisis in the first place. Shirakawa joined the Bank of Japan more than 30 years ago. Ben Bernanke, an expert on the Great Depression, joined the Fed in 2002; he was standing at Alan Greenspan's right side, with a pin in his hand, years before the bubble reached a crisis level. "In a sense," said Professor John Taylor, also at Jackson Hole, "the Fed caused the bubble." That is, in the only sense that matters - they kept the key lending rate too low for too long. Now they are about to make another monumental mistake. No, two of them. The first is already in progress. By promising the world extremely low rates for an "extended period" of time, they have created the exact conditions they wanted to avoid. President of the St. Louis branch of the Federal Reserve, James Bullard, explained that the Fed had unwittingly put the economy into an "unintended steady state." The key rate cannot go any lower as prices sink; it is already at zero. It cannot go higher, either, not as long as inflation remains below the target. So, it does not move. The private sector has come to expect no policy response, Bullard concludes, "so nothing changes with respect to nominal interest rates or inflation." As in Japan, the US economy remains in a coma. The second major mistake is still ahead. Quantitative easing is a new weapon. It is not meant to kill dollar holders or bond buyers. It is intended merely to scare them with a little bit of inflation. But with the Fed's QE shotgun staring him in the face, an investor may doubt the Fed's promise to pull the trigger "just a little." He will drop the dollar and US bonds and run. Inflation will soar. Here at The Daily Reckoning, we have argued that it is coming...but not soon. Our opinion hasn't changed. We're just getting tired of waiting. Regards, Bill Bonner
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| Fed Vows to Maintain Public Financial Health Posted: 05 Sep 2010 04:44 PM PDT Extend and pretend... That's the government's way of handling the crisis. Extend credit and cash to those who don't deserve it. Then, pretend that everything is okay... But the problems don't go away. They just get stretched into the future... What did the feds do for GM? They took over the company. They extended cash and credit. They put in place a "Cash for Clunkers" program to encourage people to buy cars. Then, they pretended that the problems were solved. But yesterday's news tells us that "August car sales plunged." They hadn't really solved the problems at all. General Motors still needed to be restructured. And there weren't really anymore qualified auto buyers than there had been before. They had merely been encouraged to buy sooner...rather than wait until their cars were really worn out. And look at what happened in the housing market. July sales set a new record low. Why? Because the feds had encouraged people to buy earlier - by giving them cash incentives, via tax credits. For a while, it looked like the housing industry was picking up. But had any of the real problems been solved? Nope. Nearly 15% of all mortgage loans are either overdue or in foreclosure. And nearly one in four houses with mortgages is underwater. Another 5% barely have their heads above water, with equity of 5% or less. When a house sinks under the waterline - that is, when its market value is less than its mortgage - the owner goes through the usual pattern of disbelief, denial, defeat and eventual desperation. If he loses his job or gets divorced the timeline is shortened. Either way, he ends up in the same place - desperate to get back on the surface where he can breathe again. It takes time. It's painful. But the longer the housing market takes to recover, the more these people give up and default on their mortgages. The US financial system is still holding hundreds of billions worth of mortgage debt that isn't going to be repaid. Who's going to take those losses? The feds have already made it clear - it won't be the big banks. They extended cash and credit to the banks and pretended everything was okay. The Fed itself bought up much of the big banks' bad mortgage debt already; it holds it in its vault and calls it an "asset." And the US government nationalized the biggest, most reckless and irresponsible lenders - Fannie Mae and Freddie Mac. So now the taxpayer takes the losses - even if he never bought a house...and never invested a penny in the housing industry. And we're only talking about the domestic housing market - not about commercial loans. All together, the problem is still huge...and still there... ..and if housing prices fall - almost certain to happen as this "shadow inventory" hits the market - one out of every three mortgaged houses is likely to sink underwater, with millions of new defaults, foreclosures and distressed sales. Extend...and pretend...and maybe the problem will go away. Or maybe the situation will become so confused that nobody knows whom to blame or what to think! Ben Bernanke is hoping for the former and counting on the latter. He answered questions in Congress yesterday. At least one of the politicians wanted to know: "If you're so smart how come you told us that the subprime crisis would be 'contained.' How come you didn't seem to have any idea what was happening or what to do about it?" "Okay...well... We were wrong about subprime...and we missed some signals," said the former Princeton professor of Finance, in so many words, "but you can count on the Fed to regulate the financial industry from here on. No problem." Bernanke went on to describe how he thought financial problems got into the system and how they became hard to control. "They are like bacteria...like e-coli..." he said (or words to that effect...we don't have the transcript in front of us, just the press report). "It is always dangerous. But you can control it if you use the proper procedures. Once it is out in the bloodstream there's not much you can do. It can be fatal." Once again we see the same delusion...that corrections are alien invaders that can be fought and beaten...diseases that can be controlled and cured...problems that can be corrected. Bernanke misunderstands the most basic and simple nature of an economy. With its new regulatory powers, he imagines the Fed as the Bureau of Public Financial Health, carefully inspecting the meat and making sure the kitchens are clean. If he does his job well, he implied, we won't have to worry about financial crises ever again. All we have to do is to get the bankers to wash their hands after making a loan! Uh uh... That's not how it works. The problem was the bubble economy. It was caused by miscues and phony signals coming from the Fed (along with some other circumstances over which the Fed had no control). The solution is the correction... In other words, the correction is the good part of the cycle. The bad part of the cycle was what created the need for it. Once the mistakes have been made, they need to be corrected. A correction is not a disease - it's the treatment. Mistakes are inevitable...especially when you have Greenspan, Bernanke et al misleading investors and business with their phony money, artificial lending rates and crackpot theories. Thank God there are corrections to fix them. The correction will set things right...if it is allowed to do its work. Unfortunately, the apparatus of the feds is at work trying to block it... Extend and pretend... The idea now is to finance more errors - while supporting the old ones - with money from the federal government. If the feds can pretend that everything is okay...by extending enough cash and credit...then everything will BE all right... ..until the federal government itself runs out of money. Then, the whole thing blows up. In the meantime, who can say he's not having fun? *** Here's a thought from Bloomberg. The news couldn't get much worse, the analyst reasons; so it must get better. How? No double dip recession:
We're not so sure. So far, this correction only took 4% off the economy at its worst point. Not very much, really. Stock prices are down. But stocks still aren't cheap. Unemployment is at 9%; it could be worse. We ain't seen nothing yet. So far, it looks like we are following in Japan's footsteps. If so, the bottom won't come before 2018 or so... Which is why you'd better enjoy this correction. It will be with us for a long time. Regards, Bill Bonner
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| Posted: 05 Sep 2010 03:44 PM PDT
One of the most fabled funds of recent years, John Paulson's Paulson and Co., has not had a good first half to 2010: not only was Paulson implicated in the biggest Goldman Sachs scandal in recent history (which took the 200 West firm a few hours worth of operating profits to settle with the SEC), but the firm has seen substantial outflows after a subpar performance in the first half of 2010, a time which has seen the firm's flagship Event Arbitrage ($16.6 Billion in AUM) fund lose just under 6% YTD and 6.6% in H2. Yet among the other Q2 losers, which have also included the firm's Merger Arb fund ($4.0 Billion, down 5.21% in Q2), and Credit Fund ($7.7 Billion, down 1.75% in Q2), nowhere was the pain as acute as for investors in the firm's reflation bet, better known as the $2 Billion Recovery Fund, which was down 12.6% in Q2. For the man who had rarely if ever tasted loss before, many are asking if the recent disappointing performance a sign that the multi-billionaire has peaked? And surely with a personal net wealth well in the billions, just how big is Paulson's motivation any more? If the fund is now nothing more than a levered bet on the broader market, surely there are other levered ETFs available that do not charge 2 and 20%, and may be better suited for the needs of the firm's LPs? Or is Paulson right, and once the market realizes the folly of its ways he will make his investors (in addition to himself) truly rich? Just what is the logic behind the investment choices? Read on to find out. But first, here is a snapshot summary of the firm's various investment strategies, funds, along with strategy AUM and performance.
What is curious is that while the firm has recorded disappointing returns in dollar-denominated terms, its gold-share performance (which is basically the return for those investors who have invested in the fund in a gold-equivalent form - once again gold shows a better relative performance expressed against an infinitely dilutable currency). Looking at the overarching strategy of the fund, it is in a nutshell: hook, line and sinker uber-bullish. All those who had hoped against hope that the fund manager may have a contrarian bet hidden somewhere deep down, in the form of undisclosed credit and equity shorts, or some humongous CDS book, we are sorry to disappoint you. In fact, recently, the firm's net equity exposure in its reflation and banking megabet, the Recovery Fund, was a whopping 139.7%. In other words, not only was Paulson not hedged at all, but his gross and net leverage were well above normal levels for what is usually considered a hedge fund. Only following the massive drubbing in the Recovery Fund in Q2, did Paulson reduce his exposure from 139.7% to 107.6%. This means that for all those hoping to see an expansion in the firm's financial holdings in Q3 when Paulson files its next 13-F in November, will be in for a big disappointment, as the firm has actually reduced exposure notably (whether by selling off positions or by pressing shorts). As for where Paulson believes the economy is in the cycle, no surprise there. The graph below summarizes it best:
To be sure, Paulson's market timing track record so far has been nearly impeccable: he top ticked the market perfectly, and subsequently was buying up every form of credit when the market was dumping at the very trough. Here is how the fund summarizes its historical activities:
Indeed, there is nothing one can say about Paulson's past. He has certainly been impeccable in picking the two most crucial market inflection points over the past 5 years. The result is that Paulson & Co. is now the single largest (non quant) hedge fund in America, and has made Paulson a billionaire. The only question that remains now is whether Paulson is correct about the future. And according to the firm's economic outlook, the future is truly very bright (even if a few dark clouds may be appearing on the horizon). There is nothing in the fund's general outlook that one would not find in a typical letter on any given Sunday from Goldman's Jim O'Neill, as it is merely the prevailing Wall Street consensus. Here it is in a nutshell:
Yet not all is rainbows and unicorns:
Sorry Citi and Bank of America stockholders: soon there will be an announcement that Paulson has offloaded substantial portions of his C/BAC shares. In terms of immediate products that the fund is currently focusing on, it appears that Paulson's sweet spot is in post-reorg equities. The thesis is that once previously impaired debt reaches par, the only continued upside is in the form of the post-emergency equity tranche. As these firms tend to have a (unfounded) bias against them due to their recent bankruptcy (the bankruptcy completely redoes the balance sheet), the prevailing opinion should provide an attractive entry point for those who are not worried about following a clean cash flow story. Of course, this was the premise behind ESL's investment in K-Mart, which Paulson highlights prominently as a case study, showing that the stock price surged by 13x from its emergence out of bankruptcy, all the way to its all time high in 2007 (that this exit valuation was predicated upon a horribly mangled post-reorg valuation model created by assorted permabullish bankruptcy advisors while the firm was in court apparently is irrelevant... as is the fact that post the peak K-Mart dropped to almost its all time lows at the end of 2008, nearly costing ESL his fund). Yet the point is, that as Paulson notes: "we are now at the point in the economic cycle where further upside in the enterprise is less in the credit but rather in the equities of companies which have or will undergo restructuring, recapitalization abd bankruptcy reorganization." More on the fund's focus on its preferred investment class for 2010-2012:
Paulson summarizes his post-reorg equity theme with the following chart:
How will this investment theme play out for Paulson's various strategies, and which companies will benefit the most? The following chart summarizes the initial assumptions:
Yet when it comes to his extremely bullish outlook, what happens if Paulson and his echo chamber of sycophant Ph.D.'s (even Bill Gross prefers to surround himself with people who disagree with him) are wrong about the housing double dip? As Paulson admits "Banking represents our largest sector exposure." He continues: "Banks' earnings recovery continues to be driven by a decline in provisioning for bad loans as old loans are written off and new higher quality loans are made... As provision expense falls, we expect a corresponding rebound in earnings." Oddly enough, people seem to have seen right through this, and even Jamie Dimon recently argued that earning boosts based on provision reductions are not real earnings. Well, apparently they are good enough for Paulson. Yet what happens if the double dip (or Great Depression V2.1) is now here, and home prices plunge another 20-30% as many, among them Robert Shiller himself, have argued could happen? Well, kiss the beneficial provisioning trend goodbye for one, as banks will once again be forced to start increasing loan-loss assumptions (as Meredith Whitney has been warning recently), causing major EPS losses and earnings misses, resulting in a step down in stock prices. As we currently stand on the edge between the realization that the double dip has arrived, and the tenuous hope that the lack of any stimulus for at least another 3 months will prevent an economic collapse, the Recovery Fund PM must be chewing his nails, knowing full well that unless the investing public buys into this latest round of reponzification, the fund's $2 Bn in AUM are very much at risk. On the other hand, if he is proven correct, the fund stands to make huge gains, as will the key stocks that make up the fund's main holdings. As the chart below shows, Paulson has the following massive upside targets for the key banks as of FYE 2011: Citi - $6.10 (~25% upside), Bank of America - $26.59 (~50% upside), JPM - $71.18 (40% upside), and Wells Fargo - $40.52 (~25% upside). The chart below summarizes the Fund's view on these top 4 bank positions (yet the footnoted Risk factors tell a probably even bigger story...)
Other notable bets for the fund include a massive legacy exposure in Distressed Debt, which accounts for $5.8 billion in AUM for the Advantage Fund ($9.2 billion in notional, which is also 30% of the AUM). "The distressed portfolio is comprised of a broad array of fixed0income securities, including high-yield bonds, levered loans, mortgage-backed securities and defaulted bonds." A comparable breakdown is also responsible for all of the AUM of the firm's Credit Funds, which had invested $7.7 billion, leveraged 126% into $8.982 billion of market value of bonds, equivalent to $12.3 billion in notional value. In other words, between Advantage and Credit, Paulson owned over $21 billion notional (almost $15 billion market, or roughly a 70 cents on the dollar blended price) in distressed names. To say that Paulson is to the distressed market as Pimco is to the UST/MBS market would certainly not be an overstatement.
(on the chart, Advantage credit exposure is on the left, while the Credit Fund's holdings are on the right) More details on the Credit Fund's holdings: The Current Pay portfolio is the largest portion of the firm's credit exposure, and amounts to roughly $7.7 billion in notional, or 68% of total. It has a duration of approximately three years.
Also notable is that Paulson bought $440 million of Hilton mezz debt at 73% (15% yield), and the hope is that the issues will be called. Good luck. Some other curious tidbits: we discover that Paulson's price target on MGM is $60 based on a 12x 2015 EBITDA target. The fund's cost basis is $11.50, so unfortunately for the time being instead of the 39% 5yr IRR, Paulson has to be content with a nearly 20% loss on his $400MM MGM stake (MGM closed at $9.84). Paulson, also anticipates a surge in Hartford, based on the simplistic catalyst that the P/B ratio should go up from the current 0.6x to the industry average of 1.0x and in line with its historical valuation of 1.5x. We truly hope there is more of a catalyst to this thesis. Abroad, Paulson has made a material investment in Renault, where he has a €68 price target, about 100% higher than recent closing levels. Also, Paulson has invested substantial capital in the stock of HeidelbergCement with a €37 cost basis, and the expectation that the stock will hit about €100 in the future, based on a 2012-2013 7X projected EBITDA. To be sure, Paulson's fund is not purely a levered play on the Fed's attempt to reflate the economy: about $4 billion is invested in straightforward merger arb situations. Of course, as we saw a few days ago, even these "spread closing" strats are not risk free, when Mariner's stock price tumbled after the firm announced its platform fire, despite the ongoing Apache M&A, which is supposed to generate a 5.7% annualized spread when closed. This merely confirms that upside/downside analyses in relatively risk-free M&A can and will easily blow up in one's face (perhaps explaining the fund's -1.07% performance YTD through June). Among the other merger arbs on Paulson's books are Smith/Schlumberger, Qwest/Centurylink, Hewitt Associates/Aon, SSL/Reckitt Benckiser, Allegheny/First, NBTY/Calryle, Americredit/GM, and Psychiatric Solutions/Universal Health. All in all, more pennies before a black swanish rollercoaster. An aggresive swoon in the market could easily blow up the bulk of these pending acquisitions, leading to massive pain for the fund's LPs. Yet focusing on Paulson's most curious bet, his Recovery Fund, yields the following observations: of the fund's $2 billion in AUM, "banks continue to be the leading long investment (75%), followed by hotels (15%), and insurance (9%). As noted previously, the key catalyst on the bank side is the expectation that a decline in provisioning will boost EPS. Perhaps the Recovery Fund's LP should have some talks with Jamie Dimon and coordinate stories on just how much of a viable upside catalyst this is rather unremarkable accounting phenomenon is truly supposed to be. In addition to the holdings mentioned above as making up the Advantage Fund, the Recovery Fund is also targetting such post-reorg situations as Delphi, Dex One, Education Media, Idearc, and Supermedia. In other words, pretty much everything in the space. The chart below summarizes the Recovery Fund's holdings by investment thesis:
So up to here the theme is pretty consistent: reflation at all costs. Deflation will promptly lead to an evisceration of the bulk of Paulson's holdings. Indeed, the fate of Paulson & Co., and the Federal Reserve are very, very closely tied... Which explains why Mr. Paulson has recently retained the services of a most prominent consultant: none other than former Fed Chairman Alan Greenspan. Huh? Fast forwarding to the only fund of Paulson's that is truly outperforming (and oddly enough has the smallest AUM of all), the firm's Gold Fund, which is up 12.5% YTD as of June 30. The investment thesis here should be very clear to our regular readers. Before we get into the abovementioned tidbit, here is how the Gold fund is positioned in terms of the current portfolio:
Some of the notable outperformers in the fund include Osisko and Detour, which have outperformed the price of gold by 142% and 96%, respectively. All in all, there is nothing negative one can say about the Gold Fund, which if the prevalent thesis about ongoing dislocation between gold as a commodity and as a currency is validated, Paulson should achieve material gains in this fund (which incidentally is open for further investment and currently have just $535 million in AUM: as Paulson observes, "we believe that liquidity in the gold market would allow the Funds to accommodate much higher levels of investment."). All in all, this is a good barbell hedge to some of the other funds in the Paulson group of investment, as should ongoing currency debasement continue (and it will), while the impact on financials will most definitely be negative due to the inevitable even more dramatic flattening of the Yield Curve following QE2, 3, ... etc., gold should continue to appreciate as the market prices in ever more proximal (hyper)inflation. Yet, in discussing the gold research expertise that backs up the fund, we read this most curious disclosure:
This is probably the single most important take home message in this entire post. Basically, Paulson confirms implicitly that the Fed itself (via the man who got us to this woeful economic state), is advocating the purchase of gold, as he is confident that the double whammy of the monetary base and supply will lead to a surge in gold. Whether this means inflation or hyperinflation, and the final playout of the "Gold to $36,000 scenario" is uncertain. But when the world's biggest hedge fund, and the world's greatest economic disaster have sat down, and decided that gold is a buy here, we will certainly not step in their way. Basically the Paulson-Greenspan JV have confirmed what everyone tacitly knows: the Fed has no option but to reflate. And it will stop at nothing, even if it means the forced conversion of gold from its legacy commodity status, to a full-accepted currency. Gold bears beware. Lastly, for all those who are curious as to what the fund has been doing lately (since the most recent 13-F), here is the spoiler:
Translation: despite all the bluster to the contrary, Paulson is shorting the market (and himself). Cause at the end of the day, the only thing better than a zero hedge is a perfect hedge.
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| Posted: 05 Sep 2010 03:37 PM PDT | ||
| Student Loan Debt Destroying Relationships Posted: 05 Sep 2010 03:02 PM PDT Nobody likes unpleasant surprises, but when Allison Brooke Eastman's fiancé found out four months ago just how high her student loan debt was, he had a particularly strong reaction: he broke off the engagement within three days. Ms. Eastman said she had told him early on in their relationship that she had over $100,000 of debt. But, she said, even she didn't know what the true balance was; like a car buyer who focuses on only the monthly payment, she wrote 12 checks a year for about $1,100 each, the minimum possible. She didn't focus on the bottom line, she said, because it was so profoundly depressing. But as the couple got closer to their wedding day, she took out all the paperwork and it became clear that her total debt was actually about $170,000. "He accused me of lying," said Ms. Eastman, 31, a San Francisco X-ray technician and part-time photographer who had run up much of the balance studying for a bachelor's degree in photography. "But if I was lying, I was lying to myself, not to him. I didn't really want to know the full amount." At a time when even people with no graduate degrees, like Ms. Eastman, often end up six figures in the hole and people getting married for the second time have loads of debt from their earlier lives, it should come as no surprise that debt can bust up engagements. Even when couples disclose their debt in detail, it poses a series of challenges. More Here.. 
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| inspiring video from malaysia - return to gold and silver legal tender Posted: 05 Sep 2010 02:26 PM PDT
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| Video: Silver being used as collateral for loans Posted: 05 Sep 2010 01:35 PM PDT
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| Video: Bill Murphy (GATA) "Silver is in play" Posted: 05 Sep 2010 01:27 PM PDT Well worth the time to watch/listen to this webinar from yesterday. Silver is on the cusp of a major break out.
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| Will Steve Forbes be the Tea Party Presidential Candidate in 2012? Posted: 05 Sep 2010 01:10 PM PDT
I sat down with Forbes magazine publisher and perennial Republican presidential candidate, Steve Forbes, whose father, Malcolm, I knew from my journalism days in the seventies. He was there formally to promote his new book, Power Ambition Glory, but I couldn’t help but sense his loftier goals. He says that the crash was a failure of government. It was caused by the Fed, which pursued a weak dollar policy, kept interest rates too low for too long, and printed too much money. Our central bank should pursue a strong dollar policy which will bring a revival of the credit markets. We have the most hard left president and congress in history, and they are on the cusp of getting what they want. Lifting the rules on upticks and naked shorting threw gasoline on the fire. The rating agencies are a cartel we should get rid of. Let the free markets work. The stock market recovery last year came with the modification of mark-to-market rules which never should have been in force. George Bush betrayed the Republican party by abandoning its principles. Steve has always championed the libertarian wing of his party, and has been the leading proponent of the flat income tax. Did I just hear the first campaign speech of the 2012 presidential election? To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home
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| Posted: 05 Sep 2010 11:06 AM PDT
By Dian L. Chu, Economic Forecasts Opinions
Infrastructure Under-capacity 
The Great Auto Boom of China  And the latest data offers few contradictions to this great auto boom. China's car sales in August rose 55.7% on the year, as renewed subsidies for energy-efficient vehicles and a stronger yuan currency spurred demand. Jeffrey Shen, CEO of Ford Motor China this week told Reuters that he is projecting auto sales in China this year to grow by 15-25%, after a breakneck 45% rise in 2009.
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| In September Europe Must Issue Double The August Government Debt Posted: 05 Sep 2010 10:19 AM PDT
Summer vacation is over and things in Europe may soon start rocking and rolling all over again. Not only is France about to experience its first 24 hour general strike this Tuesday in a long time, which will likely remind everyone else in Europe (hint Greece and Ireland) that austerity is the new normal across the Atlantic and the 14th annual monthly salary is not going to come back just because nobody is talking about it, but as the FT reports Europe needs to issue double the amount of debt in September compared to August. From the FT: "Eurozone governments will try to raise €80bn ($103bn) in September compared with new bond issuance of €43bn in August. Spain is expected to attempt to borrow €7bn in September compared with €3.5bn in August, according to ING Financial Markets." The dramatic ramp up in issuance is forcing the FT to speculate that "some of the weaker economies could fail to raise the amount of money they need as eurozone governments attempt to issue double the amount of debt this month compared with August." For all those who have been waiting for the perfect storm in Europe to finally develop the time of waiting may be over.
Expect the stock market to begin acting even more deranged over the next three weeks, now that the Fed has to perform double duty to make sure that all the upcoming auctions don't clog the system to a halt, and the realization that Europe has been bankrupt all along in 2010 isn't comprehended by too many of the "naifs."
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| Summary Of Global Events In The Week Ahead Posted: 05 Sep 2010 09:11 AM PDT
Summer is over, and now the real scramble for performance begins with just 3 weeks left in the quarter. Here is a look at the key economic events in the upcoming week, from around the world. From Thomas Stolper and Mark Tan at Goldman Sachs Week Ahead
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| Posted: 05 Sep 2010 08:47 AM PDT I've done a number of interviews on gold recently and the number one question I get most from reporters is—can gold prices go higher? My answer is yes.
Short-term, "record gold prices" are a bit of a misnomer. On an inflation-adjusted basis, gold's real record price would be over $2,300 an ounce. Looking at our oscillators, gold appears to be far from overbought. The chart shows the 60-day oscillator for gold (yellow) and the U.S. dollar (green) for the past 10 years as of August 31. One standard deviation represents a 7.3 percent move in gold prices. Despite its recent run, gold was down 0.38 standard deviations as of the end of the month. More importantly, we're not seeing the huge price spikes that are typical when investments get overheated. Long-term, I think gold prices could double over the next five years. If this happens, the effect on gold stocks could be tremendous. If gold manages to double over the next five years we could see the values of some miners triple. This would not take place in a straight line. Investors must be aware of the volatility inherent with these investments. Assuming normal historical volatility, these stocks could up or down 40 percent over any 12-month period. Regards, Frank Holmes, Can Gold Go Higher? 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." More articles from The Daily Reckoning….
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| Silver Soars to $19.95, Hits Highest Price Since 2008 Posted: 05 Sep 2010 08:47 AM PDT U.S. silver prices on Friday closed at their highest level since March 2008, capping two straight weeks of gains. The metal soared 4.8% this week in New York after surging 5.8% last week.
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