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- Gold: Will It Be “déjà vu- all over again” In The Near Future?
- World's Silver Production By Country – And Much More!
- Storing PMs in a Public Storage unit...
- 9 ETFs to Play Currency Debasement
- November Budget Deficit Highest on Record
- 6 Investment Themes for 2011
- Will Commodities Protect Investors in a Major Crisis?
- China And Russia Resort To Trading In Yuan And Rubles-Not USA Dollars
- Gold is Money
- The SilverGoldBull Miners Challenge
- GATA Honcho Bill Murphy interview
- CFTC to discuss position limits Dec 16.2010/Kirby's paper--massive silver derivatives/bonds continue to decline
- Stephen Taylor: Grassroots Investor
- Is The Chinese Bubble About to Burst Gold?
- Two Great (Quick) Reads For Your Weekend Pleasure
- CFTC to Announce Silver Postion Limits Next Thursday
- Dialing 911
- Dow vs. Gold
- These Charts Suggest Gold and Equities Going Higher into 2011
- Euro Gold Consolidates and Targets EUR1,100/oz on Euro Survival Risk
- Bernanke Meddles as Bondholders Exit the Market
- How Far Will The Gold Correction Go?
| Gold: Will It Be “déjà vu- all over again” In The Near Future? Posted: 12 Dec 2010 03:53 AM PST We appear to be at a very interesting juncture in the precious metals sector at this time. As I noted in the last editorial, at this juncture in the 70's fractal gold made a vertical move that would suggest a rise up into the $1,600s over the coming 4 or 5 weeks. Furthermore, I have a potential target for gold to rise up to $1,800 to $2,100 into May/ June of 2011 with a median target of around $1,950. Words: 610 | ||
| World's Silver Production By Country – And Much More! Posted: 12 Dec 2010 03:53 AM PST Silver is one of the most important of all precious metals. Today owning silver as part of your portfolio seems to be a smart choice as prices have risen substantially over the past year or two and show little signs of topping out any time soon. [If your focus has been on gold to date then it is time to learn more about "that other shiny metal" and I will endeavour to do just that in this article.] Words: 687 | ||
| Storing PMs in a Public Storage unit... Posted: 12 Dec 2010 02:01 AM PST Basic poll. Do you think storing your PMs in a public storage unit is the smart storage solution? | ||
| 9 ETFs to Play Currency Debasement Posted: 12 Dec 2010 01:42 AM PST Kevin Grewal submits: As developing nations continue to implement loose monetary policies, keep interest rates low and boost money supply, a nation’s debt and currency debasement should be of much concern. Most recently, a study indicated that the U.S. national debt has ballooned nearly 12 fold over the last 30 years. Additionally, over this same time span the ratio of debt to GDP has gone from nearly one-third to 85%. During this time of exploded debt, GDP has only expanded 5.3 times, indicating that debt is growing at twice as fast as the U.S. economy. Similar trends have been seen in Europe, in particularly Greece, Spain and Portugal. Complete Story » | ||
| November Budget Deficit Highest on Record Posted: 12 Dec 2010 12:37 AM PST The federal budget deficit rose to $150.4 billion last month, the largest November gap on record. And the government's deficits are set to climb higher if Congress passes a tax-cut plan that's estimated to cost $855 billion over two years. The Treasury Department says November's budget gap was 25 percent more than the deficit in November 2009. For the first two months of the current budget year, which began Oct. 1, the deficit totals $290.8 billion. That's 2 percent less than for the same period a year ago. And economists had been estimating that the full-year deficit would decline after two years of record highs. But analysts say the tax deal President Barack Obama reached with Republicans this week will give the 2011 budget year the largest deficit in history — $1.5 trillion, according to economists at JPMorgan Chase. It would mark the third straight year of trillion-dollar-plus deficits.
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| Posted: 12 Dec 2010 12:27 AM PST Preet Chawla submits: Am I a 100% sure on any opinion relating to the economy or anything in general? No. But I am glad that Ben Bernanke is and it makes me feel safe that the US economy is in the hands of the person who was sure that the subprime crisis would be contained. As we head into 2011, the S&P is up about 15% and gold is up about 30%. In my book, the S&P is down 15%, using gold as a reference point. The dollar which is priced in gold is declining at a rapid pace as Ben Bernanke prints more and more money. It’s a sad time for anyone with dollars in their bank account."Cash is King" will no longer hold true as King Gold and Prince Silver will be in charge going forward. Complete Story » | ||
| Will Commodities Protect Investors in a Major Crisis? Posted: 11 Dec 2010 10:23 PM PST Rolf Norfolk submits: John Butler fears that we will be overwhelmed by debt and governments must - perhaps should - default. In his Financial Sense article, "A Century of Money Mischief and the Rising Sea of Debt", he looks to commodities as the Ark that will save us from the flood:
Complete Story » | ||
| China And Russia Resort To Trading In Yuan And Rubles-Not USA Dollars Posted: 11 Dec 2010 09:37 PM PST "St. Petersburg, Russia – China and Russia have decided to renounce the US dollar and resort to using their own currencies for bilateral trade, Premier Wen Jiabao and his Russian counterpart Vladimir Putin announced late on Tuesday. Chinese experts said the move reflected closer relations between Beijing and Moscow and is not aimed at challenging the dollar, but to protect their domestic economies." "About trade settlement, we have decided to use our own currencies,' Putin said at a joint news conference with Wen in St. Petersburg, Russia." "The two countries were accustomed to using other currencies, especially the dollar, for bilateral trade. Since the financial crisis, however, high-ranking officials on both sides began to explore other possibilities. The Yuan has now started trading against the Russian Ruble in the Chinese Interbank market, while the Renminbi will soon be allowed to trade against the Ruble in Russia, Putin said. 'That has forged an important step in bilateral trade and it is a result of the consolidated financial systems of world countries," he said. Putin made his remarks after a meeting with Wen. They also officiated at a signing ceremony for 12 documents, including energy cooperation.' (Editor: Trading energy not using dollars is the game changer when that one starts). "The documents covered cooperation on aviation, railroad construction, customs, protecting intellectual property, culture and a joint communique. Details of the documents have yet to be released. Putin said one of the pacts between the two countries is about the purchase of two nuclear reactors from Russia by China's Taiwan nuclear power plant, the most advanced nuclear power complex in China. Putin has called for boosting sales of natural resources – Russia's main export – to China, but price has proven to be a sticking point." "Russian Deputy Prime Minister Igor Sechin, who holds sway over Russia's energy sector, said following a meeting with Chinese representatives that Moscow and Beijing are unlikely to agree on the price of Russian gas supplies to China before the middle of next year. Russia is looking for China to pay prices similar to those Russian gas giant Gazprom charges its European customers, but Beijing wants a discount. The two sides were about $100 per 1,000 cubic meters apart, according to Chinese officials last week." "Wen's trip follows Russian President Dmitry Medvedev's three-day visit to China in September, during which he and President Hu Jintao launched a cross-border pipeline linking the world's biggest energy producer with the largest energy consumer. Wen said at the press conference that the partnership between Beijing and Moscow has 'reached an unprecedented level' and pledged the two countries will "never become each other's enemy." "Over the past year, "our strategic cooperative partnership endured strenuous tests and reached an unprecedented level," Wen said, adding the two nations are now more confident and determined to defend their mutual interests. 'China will firmly follow the path of peaceful development and support the renaissance of Russia as a great power," he said. "The modernization of China will not affect other countries' interests, while a solid and strong Sino-Russian relationship is in line with the fundamental interests of both countries." "Wen said Beijing is willing to boost cooperation with Moscow in Northeast Asia, Central Asia and the Asia-Pacific region, as well as in major international organizations and on mechanisms in pursuit of a "fair and reasonable new order" in international politics and the economy. Sun Zhuangzhi, a senior researcher in Central Asian studies at the Chinese Academy of Social Sciences, said the new mode of trade settlement between China and Russia follows a global trend after the financial crisis exposed the faults of a dollar-dominated world…" "Pang Zhongying, who specializes in international politics at Renmin University of China, said the proposal is not challenging the dollar, but aimed at avoiding the risks the dollar represents. Wen arrived in the northern Russian city on Monday evening for a regular meeting between Chinese and Russian heads of government. He left St. Petersburg for Moscow late Tuesday and is to meet with Russian President Dmitry Medvedev Wednesday." -China Daily Agencies and Zhou Wa         This posting includes an audio/video/photo media file: Download Now | ||
| Posted: 11 Dec 2010 04:00 PM PST Mises | ||
| The SilverGoldBull Miners Challenge Posted: 11 Dec 2010 02:38 PM PST When we first came up with our plans for our Miners Challenge, we thought it would be a good opportunity for a sponsor to step forward and make a "name" for themselves with our members – by being the ones who actually hand out the bullion prizes which we are awarding our winners. We approached different companies with the concept, but when the time came for actually putting up the bullion (which will make a few lucky members very happy), it turns out that we really didn't have to look very far, after all. Having already spread some of their silver coins among our members in our other reader promotions (including being the sponsor for our new "Question of the Month" contest), SilverGoldBull.com decided that it was time to add some gold to that bounty. As a reminder (and for those not yet familiar with the concept), our Miners Challenge runs from October 1 – March 31, with each entrant being required to pick the precious metals miner they believe will achieve the highest percentage gain in its share price over the contest period. 1st prize: one 1-oz gold coin 2nd prize: one ½-oz gold coin 3rd prize: one ¼-oz gold coin Halfway leader: one ¼-oz gold coin Currently, our leader Clint009 has a significant lead over the runner-up Marcocruces, who in turn has quite a large lead on the nearest other contestants. However, because no contestant is eligible to win more than one prize, we're not going to know who to award our "halfway" prize to until the end. Should the halfway leader finish in first or second place, obviously they will choose the even larger prize they have won, allowing someone farther down the list to scoop-up the halfway prize. This means that virtually all of our contestants are still in the running for a possible prize, as we near the halfway point. On behalf of our future winners, we would like to thank SilverGoldBull.com for their generosity – and remind them that if they still have more of those shiny, gold coins to give away that Chad, Brian, and I wouldn't mind a few as "stocking stuffers"…
A complete list of our contestants appears below: | ||
| GATA Honcho Bill Murphy interview Posted: 11 Dec 2010 04:16 AM PST Good info, especially for noooooobs.... | ||
| Posted: 11 Dec 2010 02:07 AM PST | ||
| Stephen Taylor: Grassroots Investor Posted: 11 Dec 2010 12:40 AM PST Source: Brian Sylvester of The Gold Report 12/10/2010 The Gold Report: Stephen, could you please give us an overview of your fund and how you manage it? Stephen Taylor: This fund is designed to focus on profitable niches wherever they may exist. Currently, we favor small-cap companies and emerging markets. We have a very broad investor mandate: our goal is to deliver absolute performance. Our investor base is a pretty sophisticated group that I met in the Chicago trading community when I worked as a floor trader in the late '80s and early '90s. Many of our investors have been sounding boards that we share ideas with and they understand our style. They're patient and tolerant of extra volatility. The fund is an exclusive, closed fund, but may reopen to new investors in early 2011. We try to find those niches that are undiscovered at any given time. We can trade anything that moves, so to speak. Recently, we've been finding opportunities in the emerging markets and natural resource spaces. I work as the portfolio manager of the fund and spend my time between Chicago, Los Angeles and on the road visiting companies. Bob Kirkland, who I brought in to be president of the firm, handles the back office and the administrative side of the company. We've known each other for over 20 years and he has held top jobs at several trading firms. Research Analyst Christopher Kliner joined us from Deutsche Bank in the spring and is also based in our Chicago office. Steve Digilio heads up our research effort in the New York office, focusing mainly on financial firms. Jeff Maher, our chief operating officer, worked with me on the fund's launch; he now works directly with me on a variety of projects for the firm. Recently, we have been spending a lot of time in California on one of our large positions, Meruelo Maddux Properties (OTCBB:MMPIQ), which is the largest private landowner in downtown Los Angeles and is also in Chapter 11. We bought this stock because we believed it had significant equity value even though the company filed for Chapter 11. We began aggressively buying it and became the second-largest shareholder in the company. Management's initial restructuring plan treated the minority shareholders terribly. We asked the court for an equity-holder committee, which was granted. I'm told that occurs in only 2% of bankruptcy cases, but we were successful in persuading the court. I'm chairing that committee now. We have been able to negotiate substantially more for the minority shareholders, but it's taken a lot of our time. TGR: Let's talk about your research methodology. ST: We use a variety of sources and combine a top-down macro view with bottom-up company analysis. We use a grassroots network. A lot of our best ideas come from people and companies that have worked well for us in the past. We also run a number of stock screens on a regular basis; for example, we look at big movers, new highs and lows, Chapter 11 filings and spinoffs. We also pick up ideas from trade publications, trade shows and the management teams of our existing portfolio companies. All of these things can bring a stock in the front door. TGR: I know you have a wide network from your days at the Chicago Board Options Exchange, but you launched the fund in the fall of 2008—no more than six weeks after Lehman Brothers collapsed. Was it difficult to find people willing to put money into the market at that point? ST: It was quite an experience. I announced that I would be launching the fund in an April-2008 email and indicated to my potential investors that we would be looking at a fourth-quarter launch. The following six months produced some of the most incredible headlines—Lehman went under, and there was AIG and Bear Stearns, and GM and Chrysler were in trouble. These were the types of headlines that hadn't been seen since the Great Depression. I was concerned because we had a $10 million minimum launch target, which I believed was the minimum starting point to be considered credible and to position the fund to attract institutional money down the road. However, following my email, I received an indication of interest from many of my investors. We launched with 23 investors. I'm happy to say that every investor who made a commitment in April followed through on it in November. That really meant a lot to me and it says a great deal about our investors. One thing that is a little unusual about our fund is that we require a three-year lockup. Lawyers and accountants were telling me I was crazy when I launched the fund, saying: "You have to promise people weekly or monthly liquidity!" I disagreed. That's part of what went wrong on Wall Street. People would promise their investors weekly or daily liquidity and then invest in things that couldn't be sold for three years. I believe that the better thing is to under-promise and over-deliver. Having a three-year lockup may mean that we don't attract as much capital in the beginning, that's fine. It's just the right way to do business. The fund will grow fast enough, if we do our job right. TGR: What's the net asset value (NAV) of your fund right now? ST: We are currently at about $45 million. Following the initial round of about $10 million, we had a gain of just over 120% in the first year of the fund. During that period, we received additional follow-on investment from existing investors of about $8 million. In January, we brought in five new investors with about $7 million. Most of my incentive fees have been reinvested in the fund. We haven't aggressively marketed the fund; we really haven't marketed at all. We prefer to grow in a measured, thoughtful way at a pace that allows us to put capital to work prudently and by building on our existing investor base. It's not all about trying to grab as much money under management as possible—it's about doing well with the money that you have and generating a good return for your investors. TGR: You mentioned that your investors are tolerant of a little volatility. You certainly have had that in the last year: In May 2010, the fund was down almost 15%. There was another loss in June, a slight spike up in July, and then down again in September. It's been quite a ride. Does the three-year lockup allow you to ride out that kind of volatility? ST: Yes. We're not the fund for everyone. We have found these niches to be profitable over the years. One of the downsides is increased volatility. It's both sides of the same coin: Volatility scares away a lot of investors, but it may allow for some of the inefficiency in pricing that helps us to outperform. TGR: Last year, the fund was up almost 96%. This year, it's up about 11%. What's accounting for the drop? ST: Really, an 11% return isn't bad. In all honesty, we had three large private-equity positions in China that we hoped would have liquidity events already. That took a little wind out of our sails. Another big reason is that I made bets throughout the year against large U.S. and European financial institutions—negative bets on the financial sector—because I was concerned with banking systems in Europe. I got a bit too pessimistic and underestimated the size and vigor of the government bailout. That cost us several percentage points. TGR: In a January 2009 press release, you said, "I don't like our fund to be categorized." Despite tremendous pressure in the fund business to commit to a narrow niche, you believe that is counterproductive. You believe that it's important for a manager to have a broad range of strategies. ST: Absolutely. TGR: That bears out in the outline of your fund. It says in the prospectus that you can pretty much invest in anything. ST: The trend in the hedge fund business over the last 10 years to increasingly narrow a fund's focus to a very tight category has been driven by tremendous pressure from fund of funds, institutional investors and marketers. I co-managed the Chinamerica Fund, a China-focused fund, for more than four years; but to limit my choices to only Chinese investments today would be a problem. Yet, there are funds out there that are in very tight niches. It's difficult to generate absolute returns and performance if a fund is prevented from going where the opportunities are and is restricted to an area where there aren't opportunities. That's really going to impact performance. That's not what we're in business to do. We're in business to find opportunities, not wait for them to come to some narrowly defined niche. TGR: Currently, about half of the assets of the Taylor Fund are in Chinese-related assets. I'm assuming that's due, in part, to your experience with this other fund. ST: Yes, it is. TGR: What sort of assets are these? ST: They consist of some private-equity positions, but the bulk of them are in U.S.-listed Chinese companies. Some of them are companies that I worked with and took public at the Chinamerica Fund, others are companies that were brought to my attention by the network of contacts I established during my time with Chinamerica. When doing business and investing in China, it's extremely important to have the right partners. I think one of the biggest mistakes that international investors can make is going into China and not respecting that need. What's going on in China right now is tremendous. A lot of wealth is being created. We think valuations are still very low for quality companies; but there's a lot of suspect stuff out there, as well. One has to be careful. There are a lot of quality companies selling at very cheap prices; for example, we like Liandi Clean Technology Inc. (OTC:LNDT), which provides software and control components that help clean up oil refineries and chemical plants. We also like Longwei Petroleum Investment Holding Ltd. (NYSE.A:LPH) and Keyuan Petrochemicals Inc. (NASDAQ:KEYP), which is in the petrochemical and asphalt markets. Another is China Redstone Group Inc. (OTCBB:CGPI), which is the only public operator of cemeteries and funeral homes in China. We like China Golf, a private company that is the third-largest operator and developer of golf courses in China, Oumei Real Estate, which is also private and China-Biotics Inc. (NASDAQ:CHBT), the largest manufacturer of probiotics in China. The common thread between all these Chinese investments is that they have easy-to-understand businesses focused on the domestic Chinese market. We try to avoid companies in fields where there are intellectual property issues in China. We try to focus on companies that are not export-oriented. We think that's important because we don't believe the export market for China will be as robust as it has been in the past. TGR: Will Chinese investments continue to dominate the fund going forward? ST: I suspect that you'll see the percentage of our fund dedicated to Chinese investments dropping over the next few quarters. TGR: Is that due to the economic slowdown there? ST: Some imbalances are building in China that are not appropriately priced by the market. Corriente Advisors recently put out a 27-page report that is one of the most thoughtful pieces on the Chinese economy and market that I've seen in a while. I'm a China bull, but it raised some issues that had me rethinking some of my positions. The report said that the Chinese money supply is a lot bigger than many people think. Relative to the size of their economy, it's a lot bigger than the U.S. money supply. The report questions whether the Chinese currency, the renminbi, will go up in value. And then there are the banking issues the rest of the world is wrestling with—it's the same thing in China. The one-child policy is also doing a number on their demographics. No one is talking about what a nation of only-children will be like. I think that's a long-term question that is going be interesting. TGR: It's something the world certainly hasn't seen before on that scale. ST: Absolutely. TGR: Do you have any Chinese mining companies? ST: We think there are better mining jurisdictions around the world. That's led us to companies involved in Central and South America, Canada and the U.S., but nothing in China. TGR: So, you own positions in quite a range of commodities: Nickel, vanadium, gold and silver. How do you choose which junior mining companies you take positions in? ST: The first thing is always management. What many of our positions have in common is that they have management teams that we've known for a long time, that we've watched succeed in the past and that have previously generated wealth for shareholders. Investors should ask: Have the people making the promises, the managers of this company, actually done this before? That really counts for a lot with us and it's very important in the mining space. I would point to Anfield Nickel Corporation (TSX-V:ANF) and Lumina Copper Corp. (TSX:LCC). Both of those companies, for example, have a connection to executives Ross Beaty and David Strang. David has worked with Ross for a number of years and frequently serves as a top executive or president for some of the entities in which Ross invests. The fund has participated in a number of companies in the copper space that Ross and his group have built up and then sold to other buyers. He seems very focused on creating shareholder value. He treats all the shareholders the same. He has a sense of business and ethics that seems to be very close to our own. He puts his own money on the line. Ken Cunningham, the chief executive of Miranda Gold Corp. (TSX.V:MAD), has been a friend of mine for probably 15 years. I was an investor in the first round, after Ken and his friends and family. It also was coincidentally the first stock that I bought in this fund. I had run into Ken at the New Orleans Conference just after the launch of the fund. I said, "Ken, do you have any funds that are blowing out of your stock?" A lot of hedge funds were faced with redemptions at the time and they were being forced to sell. About a week later, Ken called and said there was a Swiss fund that had been hit with redemptions and was closing; it needed to sell a half-million shares of Miranda. We like Miranda. It's got a terrific operating model. I love the project-generator model. The company's got a great land position and great joint venture (JV) partners. We also participated in the most recent financing last spring—conducted above market! Only Ken could place stock above the market. Rick Rule, the Lundin family and our fund were buyers. I really like what it's got going down in Colombia. We're also participating in Red Eagle Mining Corp., which Ian Slater is behind. Ian is on the board over at Miranda. He is setting Red Eagle up to pursue projects in Colombia, some of which are JVs with Miranda. TGR: What's your outlook for gold and silver? Are you vested in bullion at all? ST: Yes, I am personally but the fund is not. I would urge most investors to consider having at least a little physical gold. As long as central banks continue to print money at this rate, gold and silver prices are going to go higher. Gold and silver can't be printed. There's actually an increasing chance that we may see gold and silver play a role in the monetary systems of some countries going forward; but we'll see. TGR: How are you leveraging yourself to silver? ST: I like silver because it's the poor man's gold. It tends to have rallies at a much greater percentage. We were able to participate heavily in a recent offering for Silvermex Resources Ltd. (TSX.V:SMR) and to get a pretty significant position established quickly and easily. We also like the fact that it has some very experienced management—the ex-chairman of Hecla Mining Co. (NYSE:HL), for example. Silver Standard Resources Inc. (TSX:SSO; NASDAQ:SSRI) is involved as a "big brother" or "rich uncle," so to speak. The price of silver over the last several months has certainly made it a good investment for us. We invested in Silvermex through a private placement in public equity (PIPE) transaction several months ago. We participate in a lot of PIPEs; we like them because a PIPE typically contains a warrant package. Due to our history with the options trading business, our fund and our investors are very familiar with warrants. They're sort of like options. We really like those instruments. TGR: Did you get full warrants or half? ST: On Silvermex, I believe it was half. We have warrants in many of our Chinese investments. Many funds get these warrants, assign them zero basis and decide they want to sell them—but they're not publicly traded. We can make a market in those and trade them privately; that's a little niche we've found. TGR: Vanadium is a metal that's really hot right now due to its potential for use in batteries in place of lithium. You have a position in the vanadium play Largo Resources Ltd. (TSX.V:LGO). How did you get involved there? ST: Largo is a company I had traded several years ago. When we were launching the fund, Largo needed to raise capital to exercise an option on a vanadium project in Brazil. Mark Brennan, who runs Largo, was a friend and I knew the company had this capital need coming up and felt it would be doing an offering. We thought the market was not giving them credit for the potential value of those deposits. We made our initial investment in December 2008 and we did a follow-up round at higher valuations. We are big believers in vanadium. Mark and his team have really been scrappy underdogs at several points in this story. In the end, it's going to work out very well for Largo and its shareholders. TGR: Does the fact that there are almost 300 million shares outstanding reduce the upside potential? ST: Yes and no. A simplified capital structure would attract more institutional interest, but on the other hand, a lot of people might stay away. That may have led to some inefficient pricing and could present an opportunity. Large share counts are becoming less of an issue because it's increasingly common to have these nine-digit share counts in Australia, Canada and Singapore. I think there's less of a stigma associated with that. TGR: Is the amount of liquidity in that stock to your liking? ST: It trades 1.5 million shares a day. That's fine. Having a three-year lockup lets us ease in and out. Sometimes it can take a while to build a position or to exit a position. TGR: Do you have some parting thoughts for us on what's going on in the market and where you see it heading in the next 6–12 months? ST: It really continues to be a stock-pickers market, just like the period of 1966 to 1982 when the broad averages essentially went nowhere to down. I think we've been in a similar period since 2001. The indexes may remain flat for several more years. Beneath the surface, there are tremendous opportunities to find companies that have terrific stories and are making things happen. As a portfolio manager, when I look at the situation in a macro sense, it's easy to get depressed. But when I look at the portfolio from a bottom-up perspective, company by company, individual story by individual story, I see a lot of reasons for optimism. I see companies doing great things and applying new technology. Looking ahead, I think that's what may surprise people. Technology will play a huge role in the resurgence of the U.S. and Canadian markets. There are too many people wringing their hands, saying the sky is falling and the U.S. is falling apart. I respectfully disagree. TGR: Thanks, Stephen. Steve Taylor is chairman and CEO of Taylor Asset Management, a Chicago-based investment management firm focusing on small-cap domestic equities and emerging markets. He also serves as a portfolio manager for the Taylor International Fund, Ltd., a small-cap equity fund. In addition to emerging markets, Steve's area of expertise includes private equity, restructuring and turnaround situations and both small- and mid-cap companies. He has considerable experience in the natural resources and finance industries in Canada and China. Want to read more exclusive Gold Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Expert Insights page. DISCLOSURE:
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| Is The Chinese Bubble About to Burst Gold? Posted: 11 Dec 2010 12:21 AM PST Get a FREE 30-Day Trial of my Members-Only Premium Stock Analysis Service NOW! After QE2, analysts were looking for possible consequences of the Federal Reserve Bank's actions. What has become apparent is that the Fed has created another bubble in China. Investors globally have transferred devalued US dollars and euros to buy Chinese property and equities. China has had to combat imported inflation with rapidly rising asset prices. An influx of capital has caused a real estate bubble, a rise in costs of basic goods, and excessive speculation in the commodity markets. The Chinese central banks will be observing the inflation data which should be coming out this weekend and will be compelled to act aggressively to prevent China from a bust similar to the housing crisis which occurred in the United States in 2007. Yesterday's IPOs showed that irrational exuberance is here once again, none since I have witnessed since the late '90s. I never grew so fearful of the Chinese market until I began hearing the fanfare around yesterday's IPOs. I began to read the marketing language and began to have strong feelings of déjà vu. I felt like I was reading something that I read almost 10 years earlier with a company called boo.com, which was labeled the next Amazon (AMZN). They were also underwritten by Goldman Sachs (GS). Boo.com burned through $185 million in 18 months and did not make any profits. Investors were wiped out. {FLIKE}IPOs are a measure of market sentiment. Companies come to the market as the future looks bright and they're expected to expand. A pattern of IPOs begins to show over-enthusiasm and possible peaks in the market. The number of IPOs is a useful tool for technicians to confirm tops and troughs in the market. Investors are obsessed with China, just like the IPOs in the late '90s right before the tech bubble burst. They piled into two new IPOs, Youku and Dangdang, which are not showing much of any profit and only offering panaceas. This year approximately one in four IPOs are Chinese companies. Investors are expecting exponential growth, and even though these have been marketed as the next YouTube (GOOG) and Amazon, both companies have a long way to go; they are currently not making much profit at all. Lessons should be learned from the tech bubble: Highly marketed IPOs should be viewed as a contrarian signal. Ironically, these latest IPOs come at a time when the Chinese central banks are committed to fighting excessive speculation. International markets are going to carefully examine China's inflation data (to be released this weekend). This information should evoke central bank response by early next week.
The chart above shows the rapidly accelerating price appreciation of housing markets in China's major metropolitan areas. China has already implemented regulations to curb rampant speculation in their housing market. Many investors are unaware of the rising dangers of externally generated inflation. Month after month applications to start real estate operations from foreign entities are doubling. The carry trade has become apparent. Investors are exchanging easy, electronically printed money for Chinese assets.
The chart above illustrates the China 25 Index (FXI) and shows a possible "V" reversal top and negative divergence. This is when price breaks into new highs, then with no warning, the price breaks the uptrend and support levels. The FXI broke through the 50-day moving average and has already failed to regain the 50-day on the upside once. Until it regains that 50-day, I am cautious on commodities and equities. Ideally a break into new highs should show some follow-through strength, and this has not occurred. The Chinese markets are showing weakness, and this effect has morphed over to the precious metals and commodity markets. It would be naive to think that a surprise hike in rates and a downturn in China would not put pressure on gold and silver. Gold (GLD) and Silver (SLV) are beginning to show signs of bearish reversals after a powerful move. Open interest in gold futures peaked on November 9, a major reversal day. A tightening policy in China could keep buyers away for a significant amount of time or until prices come down to a more reasonable level. The demand and consumption of raw materials in China has a major impact on commodities. It used to be that one had to watch a sneeze from the US, but precious metals investors need to also be aware of a sniffle from China.
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| Two Great (Quick) Reads For Your Weekend Pleasure Posted: 11 Dec 2010 12:17 AM PST The first one is sourced from the King World News Blog. The author makes the argument that, on a relative basis, Europe will begin to appear "stable" relative to the U.S. What's interesting about this that I was meeting with prospective client who was relating a presentation he heard from some fancy economist who talked about a stronger dollar vs. all the problems in Europe. My response was, "huh?" California alone is a bigger problem for the U.S. than Greece, Ireland, Spain, Italy and Portugal combined. Then layer in Califorinia, New York, New Jersery, The Rust Belt…" Anyway, this commentary alludes to all of that:
More interestingly, he makes the argument that the best way for China to revalue its yuan vs. the U.S. dollar is to continue buying a lot more euros, which they are doing anyway in order to diversify out its increasingly worthless dollar position. It's the first time I had thought of this issue this way and I believe he's dead right. Here's the link and it's definitely worth reading: Buy Euros On Dips The second article is about silver from Sprott. Like most of us who understand the how/what/why of the precious metals market, Sprott as an institution – and the principals of the firm individually – have overweighted silver in their investment portfolio. I know both Eric Sprott and John Embry have 90% of their net worth in the precious metals sector because they have stated that on several occassions. It made me feel a lot better about having 90% of my net worth in the sector as well. At any rate, if you want to read an excellent summary on why silver is poised to provide breathtaking investment returns just click HERE. As an aside, I was out to dinner last night with a good friend going back to 1st grade. At one point in his career he was a Federal prosecutor at the Justice Dept who prosecuted RICO cases. I told him about the RICO lawsuit filed against JP Morgan for manipulating the silver market. His only response is that JPM is likely in a lot of trouble at this point… Source: Two Great (Quick) Reads For Your Weekend Pleasure
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| CFTC to Announce Silver Postion Limits Next Thursday Posted: 11 Dec 2010 12:07 AM PST JPMorgan heading for the silver exit door, Bank Participation Report shows. Silver analyst Ted Butler has a few things to say. Important interview with James Turk... and much more. ¤ Yesterday in Gold and SilverNothing much exciting happened to the gold price on Friday until lunchtime in London... which is 7:00 a.m. in New York. Then the price began to roll over... and got even more help once Comex trading began at 8:20 a.m. Eastern time. The low price of the day [$1,371.30 spot] came around 10:15 a.m. in New York. From that low, the gold price rallied for a couple of hours before trading sideways into the close at 5:15 p.m. The high of the day [such as it was] came at the London a.m. gold fix at 10:30 a.m. local time... 5:30 a.m. Eastern.
The silver price began to slide much earlier in the day... around 2:30 p.m. Hong Kong time. The low [$28.01 spot] was, of course, at the same time as gold's low in New York, with silver's subsequent rally lasting until 12:30 p.m. before it, too, traded sideways into the close of electronic trading.
For the third day in a row, the world's reserve currency oscillated in a very tight trading range around 80 cents. The big sell off in gold and silver in Comex trading in New York, that ended at 10:15 a.m. Eastern time, was aided and abetted by a 40 basis point rally in the dollar that occurred simultaneously.
Despite the fact that both silver and gold finished in slightly negative territory, the gold stocks ended the day in slightly positive territory... with the HUI up 0.38%. Not surprisingly, Friday's low for the precious metals stocks came at 10:15 a.m. Eastern time. For the second day running, it was the large cap gold stocks that held the HUI index back... as the junior companies, by and large, put on a much better showing than the index as a whole. The shares of most silver companies did way better than the HUI... and, in case you've missed the point I'm making, this is phenomenon that has been going on for quite some time. Here's the 5-day HUI to put it in perspective. Despite the "Day of Infamy" on December 7th... we survived this pounding pretty much unscathed.
It was obvious that the bullion banks pressed their advantage on Friday... selling down both metals. There certainly were more leveraged gold and silver longs that were forced to cover... but not a lot, as we didn't hit new lows for this move down... and we won't know how much improvement there was in open interest until Monday morning's CME report. All this action will certainly be in next Friday's Commitment of Traders report. The CME's Delivery Report on Friday showed that 284 gold and 29 silver contracts were posted for delivery on Tuesday. And, for the second day running, JPMorgan was the big issuer [280 contracts] from their client account... and Deutsche Bank [206 contracts] was the stopper [receiver] in their proprietary [house] account. The link to all this action is here. The GLD ETF reported another withdrawal yesterday. This time it was a more substantial 175,739 ounces. There was no reported change over at the SLV ETF. And, for the second day in a row, there was no sales report from the U.S. Mint. After a big addition on Wednesday, the Comex-approved depository reported a big draw-down in silver stocks on Thursday. This time it was a net 1,008,662 troy ounces... with the lion's share coming out of HSBC USA. There was activity in all four warehouses... and the link to all that action is here. Yesterday's Commitment of Traders report [for positions held at the end of trading on December 7th] did not contain any hint of the smash-down in prices that occurred on that day. As I've been mentioning every day this week, 'da boyz' made sure that all the pertinent data from the 'day of infamy' was reported late enough so that it would not make it into this COT report. Mission accomplished! Anyway, here's what the report actually did say. The Commercial net short position in silver declined 945 contracts. The Commercial net short position in silver is now down to 244.1 million ounces. The '4 or less' bullion banks are still short 220.3 million ounces... and the '8 or less' bullion banks are short 293.9 million ounces. At least they're under the 300 million ounce mark for the first time in quite a while. For the second week in a row, the bullion banks increased their short position in gold... this time by 820,040 ounces. The Commercial net short position in gold is now up to 27.9 million ounces. The '4 or less' bullion banks are short 22.3 million ounces of gold... and the '8 or less' bullion banks are short 28.7 million ounces. Unless both gold and silver prices explode on Monday... and the increase in open interest on that day negates December 7th's 'day of infamy'... next Friday's Commitment of Traders report will be an education. Here's Ted Butler's "Days to Cover Short Position" graph courtesy of Nick Laird over at sharelynx.com.
Now for the December Bank Participation [Futures] Report... as of the close of trading on December 7th. The BPR and COT reports are generated from the same data set... so the numbers between them are directly interchangeable. In gold, it shows that 4 U.S. bullion banks are long 32,444 Comex contracts and short 135,602 contracts... for a net short position of 103,158 contracts. This represents 10.3 million ounces of gold. The lion's share of this position would be held by JPMorgan...followed at a great distance by HSBC USA. Also in gold, it shows that 15 Non-U.S. bullion banks are long 7,388 contracts and short 53,120 contracts... for a net short position of 45,732 contracts. This represents 4.6 million ounces of gold. I'd be prepared to be a few dollars that a huge chunk of these short positions held by foreign banks are held by either the Bank of Nova Scotia or Deutsche Bank... with UBS maybe a minor player as well. In silver, the report doesn't show the number of U.S. banks because there are so few of them. The CME changed the rules a couple of years back to benefit JPMorgan and HSBC. When Ted Butler found this report years back, he called them out on it... because they stood out like sore thumbs in this category, because there were only the two of them. So the CME changed the rules [probably by request from JPMorgan] to hide their tracks. Ted doesn't call the CME and JPMorgan crooks for no reason!!! Anyway, having said all that, JPMorgan and HSBC are long 376 contracts... and short a whopping 26,332 Comex contracts. This makes them net short 25,956 contracts... with [and I'm guessing here] well over 90% of that net short position held by JPMorgan. That's 130 million ounces held short by these two U.S. banks... 68 days of world silver production! The report shows that a total of 11 banks [both U.S. and Non-U.S. banks] hold all the silver short positions, by the process of subtraction [11-2]... there are 9 Non-U.S. banks that are long 2,335 Comex silver contracts... and short 6,329 Comex silver contracts. This leaves these 9 foreign banks net short 3,994 Comex contracts. This represents one sixth of the short position held by JPMorgan and HSBC combined... and since it's spread out over 9 banks vs. 2 banks... the concentration drops even more. I'd also bet a fair amount of money that the major portion of this short position held by foreign banks is held by Canada's Bank of Nova Scotia and Germany's Deutsche Bank. These numbers are all wonderful, of course... but in order for them to mean something, they have to be compared against what happened in November. Since the November report, JPMorgan and HSBC have reduced their net short position in silver by 3,500 Comex contracts. The Non-U.S. banks increased their net short position in silver by 1,200 Comex contracts. In gold, the U.S. bullion banks [read JPMorgan] only decreased their net short position by about 10,000 Comex contracts, while the Non-U.S. bullion banks increased their net short position by around 7,900 Comex contracts... so not much change month-to-month for gold Of course, December 7th's 'day of infamy' numbers, which should have been included in both the COT and BPR , weren't... so, without doubt, JPMorgan et al have decreased their net short positions even more since the Tuesday cut-off... and we really won't know how much for sure until next Friday's COT report. The Bank Participation Reports for all futures contracts, not just gold and silver, is linked here. Silver and gold are about two thirds of the way down the page in both months. One thing does stand out, however... and that is that JPMorgan is heading for the exits in silver. In his note to private clients yesterday, silver analyst Ted Butler had this to say... "What has come to be my central theme over the past year or so, is the inexorable march towards the resolution of the silver manipulation. My premise has been that one way or another, the 25-year downward manipulation of the silver price, via excessive and concentrated commercial short-selling on the Comex, would be terminated in the relative near future. There have been many milestones indicating the end is near for the manipulation, not the least of which has been price behavior, as silver has moved to a series of new 30-year highs." "The two leading contenders for causing the end of the silver manipulation have been a silver physical shortage which will bring a certain end to the scam... and potential regulatory actions which would end it sooner by enforcing the spirit of commodity law. Based on recent developments, it's starting to appear that it has turned into a real horse race as to which contender passes the finish line first."
¤ Critical ReadsSubscribeM2 Rises To Fresh All Time Record, 19 of 21 Consecutive Weekly IncreasesToday's first story is courtesy of Australian reader Wesley Legrand. It's a zerohedge.com post that's headlined "M2 Rises To Fresh All Time Record, 19 of 21 Consecutive Weekly Increases". There are two very interesting graphs included in this very short read... and the link is here.  U.S. November budget deficit $150.4 billion: TreasuryThe next item is from reader 'David in California'. It's an item that was posted over at marketwatch.com yesterday... and the headline reads "U.S. November budget deficit $150.4 billion: Treasury". The whole story is as follows... and their is no link. "The U.S. government ran a $150.39 billion budget deficit in November, the Treasury Department reported Friday. A year ago in November the deficit was $120.29 billion. Income was $148.96 billion in November, the Treasury said, about $15 billion higher than receipts in November 2009. Spending was $299.35 billion. This is $45 billion higher compared with outlays a year earlier. The November deficit was $8 billion above a congressional estimate."  A&P Supermarket Chain Expected To File For Bankruptcy, Another Harbinger Wipe Out?Here's David's second offering of the day. It's another zerohedge.com piece. This one is headlined "A&P Supermarket Chain Expected To File For Bankruptcy, Another Harbinger Wipe Out?". The link to the story is here.  We Understand Bank of America's Problem - They are Completely INSOLVENTHere's another item from Wesley Legrand. This time it's a video interview with Chris Whalen, co-founder of Institutional Risk Analytics". Jim Rickards calls Whalen the best bank analyst around. The headline of this interview reads "We Understand Bank of America's Problem - They are Completely INSOLVENT". This is true of almost all banks in the western world these days. The video runs about 14 minutes... and Chris really gets into the nuts and bolts of the whole thing... and the link is here.  Companies Cling to CashThe next story is one that I ripped from Friday's King Report. It's a story from yesterday's edition of The Wall Street Journal that's headlined "Companies Cling to Cash". Rather than pouring their money into building plants or hiring workers, nonfinancial companies in the U.S. were sitting on $1.93 trillion in cash and other liquid assets at the end of September, up from $1.8 trillion at the end of June, the Federal Reserve said Thursday. Cash accounted for 7.4% of the companies' tota | ||
| Posted: 11 Dec 2010 12:07 AM PST Link: Image:  The other precious metals-related story concerns silver... and it's another trip down memory lane from silver analyst Ted Butler's archives. This one is from June 20, 2006... and is headlined "Dialing 911". The imbedded letter to the CFTC by Carl Loeb is of particular interest... and the link is here. | ||
| Posted: 11 Dec 2010 12:07 AM PST Image:  I'm going to preface my handful of gold-related stories with this chart that was sent to me by Washington state reader S.A. It's a "Dow vs. Gold" graph that goes back to January of 2000. No further comment is necessary, as the graph tells all. If there was a "Dow vs. Silver" graph... it would be even more impressive than this.
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| These Charts Suggest Gold and Equities Going Higher into 2011 Posted: 10 Dec 2010 05:57 AM PST
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| Euro Gold Consolidates and Targets EUR1,100/oz on Euro Survival Risk Posted: 10 Dec 2010 01:24 AM PST | ||
| Bernanke Meddles as Bondholders Exit the Market Posted: 10 Dec 2010 12:50 AM PST By Bill Bonner  12/10/10 Baltimore, Maryland – As were the days of Noah, so will be the coming of the Great Correction (38) For as in those days before the flood they were eating and drinking, marrying and giving in marriage, until the day when Noah entered the ark, (39) and they did not know until the flood came and swept them all away, so will be the coming of the Great Correction… – Apologies to Matthew 37, (Sent to us by a Dear Reader) Gold +$9. Dow -2. What more do you need to know? Well, what you OUGHT to know is that the bond market may finally be cracking up. "People are getting out…shell-shocked at the speed of the rise in yield," says a "strategist" quoted by The Financial Times. Bond buyers are leaving the scene of Bernanke's crime. They are packing up and moving out. The yield on the 10-year note hit 3.33% on Wednesday…a full percentage point over its October low. Whoa. The bond market is the biggest, most important market in the world. What would cause a 25% move in so little time? Bernanke pledged to lower bond yields (raise bond prices) back in August. He said he would buy $600 billion worth of US government bonds with money he was going to print especially for that purpose. And another $250 billion more with money he got from selling those mortgage backed monsters he acquired in the Panic of '08-'09. You'd think that a guy with $850 billion in his pocket could pretty much name his own price. But central planners always seem to run into a ditch. Even with their eyes wide open and GPS on the dashboard. Here we are almost at the end of the year and what have bonds done? They've gone down! They defied Ben Bernanke and all his ilk. They thumbed their noses. They turned their backs and dropped their pants! We're beginning to feel a little sorry for Ben. He's like a rich kid in school with a flashy car who still can't get a date. Oh, the humiliation! Oh, the shame of it! Wait a minute. We're not going to waste a minute of sympathy on the little creep. He got himself into this mess – against our advice. He should be grateful they don't castrate him. Or run him out of town on a rail. Lucky for him they don't do that any more. The Great Correction, mentioned above, is still on-going. Unemployment numbers actually got worse in the latest reading. So did home pricing. As for retail, holiday-inspired spending, the figures are mixed. As near as we can tell, de-leveraging has a ways to go. A long ways. Say, 7 years? Maybe longer. That's how long it OUGHT to take to squeeze the debt out of the system. But Mr. Bernanke, the aforementioned little creep, is making it a lot harder. As the private sector squeezes debt out, Mr. Bernanke pumps it in. That's why we're seeing such crazy anomalies. It's a correction – yet commodities, emerging market stocks, collectibles, oil, gold…all are flying off the shelves and out of the wells. Did you see what happened to Audubon's bird pictures? A book of them sold for $14 million at Christies. Okay… He could draw some cool fowl. But $14 million worth? Our guess is that the price tells us more about Mr. Bernanke's cuckoo money machine than it does about the bird man. And the strangest anomaly has got to be the rise in interest rates. Whatever good Mr. Bernanke thinks he is doing is surely undone by rising rates. Now, he can print all he wants. He may make an even bigger mess of the economy, but he won't be able to get interest rates down that way. He prints…the feds spend…and rates rise, squeezing the real economy even harder. Rates rise like Noah's floodwaters. Make sure you've got an ark. Read more: Bernanke Meddles as Bondholders Exit the Market http://dailyreckoning.com/bernanke-meddles-as-bondholders-exit-the-market/#ixzz17uQkPOzG
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| How Far Will The Gold Correction Go? Posted: 10 Dec 2010 12:14 AM PST Gold is taking us on a roller coaster ride that I'm sure has many people concerned. However, long-term gold bulls can rest assured that this is not the type of price action typical of bubbles; when bubbles pop, they don't retest highs for many, many years. Gold on the other hand is making new highs, correcting, then making new highs. If anything, the price action suggests a big thrust upward once we get this correction behind us.
I sold some of the positions I opened up at $1330 on the break below $1400. As most of you know, I have a big core position that I never trade. Then I have a position I trade to try and capture as large a portion of intermediate term moves as possible. Although my strategy has outperformed a pure "buy and hold" approach, I am the first person to admit that you must be disciplined to trade these market vacillations. I will not chase moves to record highs or rush to buy on corrections. Patience is a golden virtue to have as an investor. I'm waiting for some more bearish sentiment to appear before stepping back in. I am still not seeing much buying on weakness in the miners, so it would be prudent to sit this out for now. I will most likely be buying between $1320 and$1350.
One of the hardest things to learn is the ability to successfully trade unexpected scenarios. While I am supremely bullish on gold, I am confident I can keep my head if we have a dramatic move to, say, $1000. No matter how good you are trading in the short to intermediate term, you will always be met by scenarios that take you by surprise. Take them in stride and adapt; that's what the best investors always do. In the long run, everything is falling into place for a monster push in gold. I've talked about the relationship between Federal bonds and gold. What we are seeing now is the beginning of an absolute implosion at the state level. Federal subsidies of municipal bond purchases are set to expire, and we are getting a glimpse of the real fundamental economic conditions of states. President Obama has already proposed a 2 year freeze for Federal salaries- expect this trend to continue. The whole Socialist model is crumbling before our eyes. This model has literally never worked in history. When U.S. states begin defaulting on their debt, you will all understand that gold is not primarily a hedge against inflation. Gold is an asset that does nothing for years and years, only to rise in dramatic fashion in the shortest period of time. Gold rose over 20 times in the 1970′s, which given a similar rise from the 1999 lows would amount to a price of over $5000 today. But I would submit that even a comparison to the 1970′s is not enough because we are talking about sovereign defaults on a global level now. I personally am targeting $2500-$3000 for a number of reasons, but understand that by many objective metrics, $5000 gold is a conservative estimate. I will continue pounding my fist on the table on gold until we see the amazing rocket launches. Only then we you all know who really had their heads in the sand this entire time. Source: How Far Will The Gold Correction Go?
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It's all about who you know. Stephen Taylor, fund manager of Chicago-based Taylor International Fund, Ltd., has cultivated a grassroots network of contacts from Canada to China since working as a trader in the '80s. It's that network that has produced some of his fund's biggest winners. In this exclusive interview with The Gold Report, Taylor talks about his fund's bet on vanadium and why he doesn't own any Chinese mining companies. 
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