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Tuesday, January 4, 2011

Gold World News Flash

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Gold World News Flash

COMEX Daily Report

Posted: 03 Jan 2011 06:00 PM PST

Economic numbers from the US are very positive which suggests more gains in store for commodities. If the global economy continues to grow at a sustained pace then (A) Expectations of higher interest rates will rise (B) Treasury yields will all also rise. This combination will reduce the pace of the rise of gold and other commodities. Higher interest rates will imply lower speculative flows into commodities which has been the key driver in 2010.


The Outlook for 2011

Posted: 03 Jan 2011 05:22 PM PST

FGMR - Free Gold Money Report January 3, 2011 – It is that time of the year again to record my expectations and outlook for the year ahead. But before looking at 2011, as always I first re-visit what I was expecting for this past year in order to evaluate whether my forecasts were close to the mark. My forecasts for 2010 were driven by my expectation that paper assets would continue the well-established trend that began with the outbreak of financial trouble in 2007. It has been my ongoing expectation that paper assets in general and currencies in particular will become increasingly suspect, and therefore decline in value. We remain in a financial and monetary bust, and I had already noted in my forecast for the year before that “the bust will not end in 2009”. My point was that financial assets would continue to fall out of favor. So I recommended to “avoid the dollar and other national currencies as well as the paper issued by governmen...


Just Another Panic Monday for Shorts, Will Tomorrow be Their Funday?

Posted: 03 Jan 2011 04:58 PM PST


The market ran today like Ben Bernanke was giving out free money (which um, he kind of is, as long as you have already proven that you are untrustworthy and have bad judgment), or giving out free shares of Facebook (which at this rate will be valued higher than an original copy of Birds of America, a dozen Faberge eggs, or Jessica Hall's vulva, when they go public) as investors rejoice in the new year as if the new year were 1997.  So we've now gone from "rally" to "FUCKING RALLY" because what goes up, doesn't come down (except for some birds in Arkansas, an erection after seeing Kathy Griffin in a bikini, and well, everything fucking else in the world).

 

But who cares because with a spree of relatively positive macro data, investors are willing to ignore that the unemployment rate is 10% (~18% including the discouraged, the beaten down, and the people who green lighted the Tron sequel), that the average stock ownership lasts just 22 seconds (or twice the time Money McBags would last with Kelly Brook), and that the dollar doesn't buy what it used to anymore (except for dong, because one can currently buy a fuckload of dong for a dollar, which explains why Tom Cruise doesn't work as much).  Investors are willing to throw money in to the market because their memories are shorter than the line for handshakes will be at Thomas Hoenig's upcoming retirement party.  But great, really, with common sense now about as useful as Zsa Zsa Gabor's leg (or her uterus), let the capitulation begin, just remember that capitulation isn't just an anagram for "Anal pic I tout."  If the market can get back to 1500 with 10% unemployment, then Money McBags says we need to lay a fuckload more people off because clearly there is some strange inverse correlation here.

 

In macro news today, the ISM's manufacturing index for December rose to 57, which was slightly better than the 56.9 guessed by witch doctors and was the 17th consecutive month the index rose.  Wow.  Money McBags hasn't seen something rise that consistently since the market for MBS CDOs right before the meltdown or Jessica Alba's popularity before she got married.   Leading the way were faster rates of new orders, though unfortunately those new orders weren't for jobs as factory sector employment dropped to a nine month low.

 

In other US macro news, construction spending rose .4%, up from a .7% gain in October, and better than the .2% gain guessed at by analysts, as stimulus spending seeks to make sure every state has at least one bridge to nowhere.  Federal spending rose 8.2% with the government investing in such things as schools, office buildings, and even water supply plants (and with $35B to spend, the government no doubt went all out and installed gold-plated pipes in to these facilities to make sure all showers will be golden).  Absent government spend, which is a bit like reading Dickens (or Money McBags) absent run-on sentences, judging Alan Greenspan absent his interest rate policy, or giving a critical assessment of the work of Janine Lindemulder absent Where the Boys Aren't 10, private construction was up only .3% and local government spend was down .1%.  So as long as Uncle Barack and Aunt Timmy keep getting their spending on, everything should be ok (except for the dollar and the long-term economy, but those are just minor fucking details).

 

Internationally, China's manufacturing slipped a bit as the country has already produced an oversupply of pee-pee flavored Coke (and yes Money McBags is aware that he goes to that line way to often, but if you got anything better, let him know).  The index fell from 55.2 to 53.9 as Premier Wen Jiabao seeks to tighten monetary policy to curb inflation and to not be such a dick.

 

The big news of the day was the market though as stocks shot the fuck up like they were Heath Ledger on a bender.  If you owned anything, you made money today so congratulations for playing, but unfortunately with success like that, none of you win the booby prize.  Financials led the way today as all of a sudden investors believe whatever banks say they put on their balance sheet (and Money McBags trusts bank balance sheets about as much as Maria Menounos trusts bikinis).  Bank of America  pushed financials higher after they agreed to pay a $3B settlement to FNM and FRE for selling them some bad mortgages (or what is known at Goldman Sachs as "Tuesday").  That said, there are still likely to be $8B to $35B of claims against BAC from insurers and private investors who bought tainted loans from the bank after being misled by BAC's shitacular credit approvals on mortgages, so buyer beware.

 

The other big news was that Goldman invested ~$500MM in the Facebook, giving the Facebook a ~$50B valuation which is roughly equivalent to the GDP of Belarus, the personal fortune of Warren Buffett, or a week of trades by Brian Sack.  The Facebook now promises to be the most overvalued thing on the internet since AOL or that fucking dancing baby shit.  More importantly, with the Facebook's cockposterous valuation, Money McBags is once again bringing to your attention that he has put the award winning When Genius Prevailed up for sale with a starting price of only $10MM.  While a $10MM valuation may seem high, Money McBags can assure you it is actually quite low as it is only .02% of the value of the Facebook and if you all don't get .02% of the enjoyment from the award winning When Genius Prevailed that you get out of the Facebook, then Money McBags is not this author's real name.  The point is, for $10MM you can have one of the hottest internet properties (though not as hot as this very very NSFW property) and not only that, but Money McBags will promise to keep running the place for the next 5ish years and will devote 100% of his time to it (and right now, Money McBags does this with only 50% of his time, so imagine how titriffic it would be with 2x the McBags).  If you want to talk turkey, Money McBags is reachable at moneymcbags@gmail.com, serious offers only.

 

Elsewhere in the market, ODP and SPLS rose strongly on upgrades from Janney which shows the preposterousness of the market since it marks the first time any stock has moved because of a Janney analyst's recommendation.  Also, BKS jumped 10% after reporting same store sales were up ~10% in the holiday season thanks to their e-reader (the awfully named Nook) and strong sales of Economics for Dummies in their South Side of Chicago book store.

 

As always, Money McBags has plenty more material on the award winning When Genius Prevailed.  So if you're bored (and certainly you must be if you made it this far), feel free to check it out.

COT Update to Graphs

Posted: 03 Jan 2011 04:41 PM PST

HOUSTON – The first thing we need to remember when looking at the COT data which was just released by the Commodities Futures Trading Commission Monday, January 3, is that it is the last report for 2010, not the first report for 2011. This COT data is for the second trading day after Christmas, and it includes the three trading days prior to Christmas, a lighter than normal liquidity period when some large fraction of the "normal" traders were taking a holiday. ...


Gold Seeker Closing Report: Gold and Silver Close At New Highs

Posted: 03 Jan 2011 04:00 PM PST

Gold rose to see a $3.34 gain at $1423.94 at the open of trade in New York before it chopped its way back lower to see a $4.80 loss at $1415.80 by a little before 11AM EST, but it then rallied back higher in the last few hours of trade and ended with a gain of 0.1% at a new all-time closing high. Silver climbed over 1% to $31.228 before it fell to see a slight loss at $30.824, but it also rallied back higher in late trade and ended with a gain of 0.68% at a new 30-year closing high.


Crude Oil Rises but Underperforms Equities, Gold Carves out an Ascending Triangle

Posted: 03 Jan 2011 03:53 PM PST

courtesy of DailyFX.com January 03, 2011 07:51 PM Most crude oil benchmarks are now approaching the psychologically-significant $100 level, but fundamentals suggest that a sustainable break is not yet in the cards. Commodities – Energy Crude Oil Rises but Underperforms Equities Crude Oil (WTI) - $91.71 // $0.33 // 0.36% Commentary: Crude oil hit a fresh 26-month high on Monday before falling back to settle up only $0.17, or 0.19%, to $91.55. Oil’s price action is best characterized as a grind higher, though we did see a noticeable underperformance relative to equities in the latest session. The S&P 500 rose by 1.1% to reach a 27-month high of its own. With sentiment so bullish, risk assets have a tendency to gravitate to the upside with little resistance. That will change, of course. Once news flow turns negative, risk aversion will sweep the financial markets and that will be the time to initiate long positions. With regard to crude specifically, we believe t...


Social Network: Tech Bubble 2.0?

Posted: 03 Jan 2011 02:54 PM PST


By Dian L. Chu, EconForecast

Talk about another internet bubble.

New York Times broke the news on Jan. 2 that Facebook, the social network website, was able to get $500 million in funding--$450 million from Goldman Sachs and $50 million from Digital Sky Technologies, a Russian investment firm that has already pumped about half a billion dollars into Facebook.

But the real eye popping fact is that this latest deal values Facebook at $50 billion. That’s right, $50 billion, which is more than the current market cap of Time Warner, Baidu, Yaho, and almost twice that of Dell, Inc.

Facebook P/E Multiple = 100+

Even though Facebook is not publicly traded, the company has raise about $850 million to date in total through a secondary market. Facebook’s value reportedly has roughly tripled over the last year--not bad for a company that’s only been in business for six years.

Facebook does not disclose its financials, but its 2009 revenue is estimated to be around $800 million. Most recently, analysts figure the company could bring in as much as $2 billion in revenue annually.

So, if we take the $2 billion in revenue, the $50 billion new valuation, and assuming a 25% net margin (which is very generous), Facebook’s P/E multiple is an astonishing 100x..or even more, dwarfing even the high flyer Baidu’s PE ratio of 83 (one of the reasons I see Baidu facing some downside risks in 2011.)  For comparison purpose, Google’s PE is around 24, close to that of Apple's 22.

Goldman Sachs = Froth

Then, whenever there’s an institution player as big as Goldman Sachs wheeling and dealing, you know most likely something frothy is brewing (Well, the same thing could be said about gold ATM machines popping up everywherer.)

NYT noted Goldman Sachs has taken a 1% stake in Facebook, and most likely is aiming to get the lucrative underwriting and advisory fees in a future IPO. In addition, Goldman also devised an elaborate plan to create a “special purpose vehicle” for its rich clients to invest in Facebook.

The grand purpose is that this vehicle, no matter how many investors are in the “pool”, is to be considered as one investor, so to stay below the threshold of an SEC financial disclosure rule. Although there’s no indication this would go as planned, but if anyone could make this work, it would have to be Goldman Sachs.

Suddenly, Coupon Clipping Is In!

Another sign of a bubble is that Groupon, a two-year old "social coupon" site that’s yet to hit $500 million dollars in revenue, had recently rejected a $6 billion takeover bid from Google.

However, you can’t fault Groupon for turning Google down. MarketWatch reported that bids for Groupon have risen 254% from $36 a share in August, to as much as $127.50 a share on Dec. 30. And according to TechCrunch, Groupon is in the process of raising as much as $950 million, at a valuation that could be as high as $7.8 billion.

Separately, LivingSocial, a website similar to Groupon, just closed a massive round of financing totaling $183 million, including $175 million from the Amazon.  Both Facebook and Groupon are expected to issue IPOs in 2012, while Twitter, Zynga and LinkedIn are three other social sites that investors are anxiously waiting for their IPOs.

China’s Social IPO Rush

The social network technology enthusiasm has not gone unnoticed. Reuters noted that China's largest social networking company--Oak Pacific Interactive-- hired Credit Suisse Group AG and Deutsche Bank AG to underwrite its IPO in the United States slated for the first half of 2011....among a few other Chinese Facebook clones looking to list in the U.S.

Oak Pacific owns China's largest online social networking site Renren, that's similar to Facebook, and Nuomi, which is like Groupon.

Cash Out Ahead of The Herd

Meanwhile, companies in the U.S. and Europe have more than $1.5 trillion sitting on their respective balance sheets, and there’s also an improvement in the market for venture-backed IPOs. For now, it seems many of these companies are willing to throw money at anything related to social networking.

From that perspective, Facebook probably would be wise go to IPO sooner rather than later before the mood turns sour, and ahead of the social IPO herd diverting available capital.  Zuckerburg probably could gain some insight regarding the art of cashing out from Mark Cuban’s broadcast.com / Yahoo deal.  

A Social Tech Bubble?

If history is any indication, it seems most of the elements that shaped the 2000 dot com bubble are present and accounted for in the current environment, including but not limited to, rapidly increasing valuation, market over-confidence and speculation, and excess liquidity.

So, could Facebook et al end up being a fad like Delicious? Only time will tell. Nonetheless, Microsoft probably won't worry that much, since the latest Goldman deal just more than tripled the value of its holdings in Facebook when the company paid $240 million for a 1.6% stake in 2007.  

Dian L. Chu, Jan. 3, 2010 | Mobile Reader, Website | Facebook Page  |  Google Profile |  My Outlook 2011 Series

This Is Bad News For Dollar Bulls: India To Stop Using The Dollar In Oil Trading With Iran

Posted: 03 Jan 2011 02:26 PM PST

Here's the new report:  LINK

Sovereign Man's 2010 Look Back And 2011 Predictions

Posted: 03 Jan 2011 01:59 PM PST


Simon Black currently in Santiago, Chile, presents a quick introspective on the key events of 2010, before moving on to a few broad forecasts for 2011. We hope his predictive ability is better than that of one Byron Wien. The key among Simon's predictions is that very soon we may see the same kind of power vacuum that brought about the Thermidorian Reaction in that last major systemic overhaul. Of course, the fact that we still have to experience a an actual storming of the Bastille is a little perturbing. But everything in due course...

From Sovereign Man Simon Black

A look back, and some 2011 predictions

After a wonderful, relaxing weekend here in beautiful Santiago that involved meeting up with a couple of subscribers, I'm buckling down to the business at hand that will include finalizing preparations for our upcoming workshop, as well as exploring initial plans for the community.

To be honest, I'm not much for New Year's; it's just an arbitrary day that has no more or less significance than any other day of the year, but I suppose all the time off over the holidays does give one plenty of time to pause, reflect on the previous year's events, and ponder the upcoming ones.

I spent a lot of time over the last weeks reviewing our conversations from the past year, and I was actually a bit surprised at how much had unfolded. If you recall the analogy of the boiling frog, each of these events represents yet another degree in the march towards 100 centigrade.
 

Think about it-- in 2010 we saw:

- The TSA 'tip of the spear' enforcing subordination to government authority
- Canada's government authorizing its agents to search homes without a warrant
- Gold hitting all-time nominal highs due to unprecedented monetary inflation
- Governments around the world raising taxes with immediate effect
- Homeland Security began seizing domains without due process
- The beginning of the end of the Eurozone
- World governments engaging in mutually assured destruction currency wars
- FBI raiding the homes of war protestors
- Passage of the HIRE Act in the United States, a precursor to capital controls
- Political heavyweights openly calling for the assassination of Julian Assange
- Switzerland settling with the US government
- Panama caving to pressure and signing a Tax Information Exchange Agreement
- Homeland Security encouraging US citizens to spy on each other at Wal Mart
- North Korea engaging in acts of war against the south

et cetera, et cetera....

When you spend a lot of time around a child, it's difficult to really notice his/her day-to-day growth. It takes an outsider who hasn't seen the kid in 3-years to point out "Look at how big you've grown!"

Similarly, it takes a brief pause to look back over recent events and realize how rapidly things are changing. Seemingly the one constant has been an almost uninterrupted rise in global equity markets.

It's truly amazing how markets have remained unfazed by so much change; this is evidenced not only by rising equities, but also by the lackluster level of the VIX 'fear index', which was recently as low as 15.45 before the holiday trading sessions.

As the ball dropped and the champagne flowed, I started thinking about what might shake markets from their apathy this year... and perhaps more importantly, what further events will unfold in the war on liberty.

A few ideas crossed my mind:

1) Many of the old monarchs and dictators still clinging to power will finally croak, creating massive opportunity and instability.

Just look at how many octogenarians are still in positions of tremendous power and influence, either de facto or de jure:

King Abdullah- Saudi Arabia (86)
Crown Prince Sultan- Saudi Arabia (82)
King Bhumipol- Thailand (83)
Robert Mugabe- Zimbabwe (86)
Fidel Castro- Cuba (84)
Raul Castro- Cuba (79)
Emir Jaber- Kuwait (81)
Pope Benedict XVI (83)
Hosni Mubarak- Egypt (82)
Sultan Abdul Halim Mu'adzam Shah- Malaysia (83)
Manmohan Singh- India (78)
Than Shwe- Burma (77)
Mahmoud Abbas- Palestine (75)

2) Massive property bubble bursts in Thailand.

Because of the relative size of its economy, low prices, significant population, agricultural wealth, and manufacturing base, a lot of western funny money that's been printed has ended up looking for a home in Thailand.

In its efforts to thwart rapid currency appreciation, the Thai central bank has matched its western counterparts in polluting the money supply. It's no wonder that Thailand's stock exchange rang up a 40.6% return in 2010, the 4th best performing index in the world after Peru, Argentina, and Indonesia.

The other place where the money ended up is in the Thai housing market, which is just bursting at the seams with new supply and rising prices fueled by speculators as opposed to demographic fundamentals.
 
3) Chinese street inflation exceeds real GDP growth

How can you tell when a politician's lying? Watch for his lips moving. This goes doubly in China where inflation and growth statistics in China are massaged vigorously.

The government's efforts to maintain a currency peg have created troubling inflation in the country, and 2011 may be the year when the economic engine runs out of steam.
 
4) Several major American cities go bankrupt. This has been a long time coming, but it may prove to be the powder keg that sparks the financial mushroom cloud.
 
5) Julian Assange has an 'accident'. I sincerely hope it won't happen, but I won't be surprised.
 
6) It becomes illegal to record the police in several US states, Canada, or the UK. You know, we used to be able to rely on the mainstream media to keep governments in check... but these days they're just petty hacks and cheerleaders.

Fortunately, the Internet is a great equalizer, and videos abound of Officer Bubbles and the like which show the absurd lengths that police forces and government agents will go to intimidate and subordinate the masses.

There have already been arrests, charges filed, and lawsuits pending against citizens who have recorded the police and posted it online... and I fear that governments will pass laws which legally prohibit such action.

Look, I could really go on here, there's no end to the insanity we may see in 2011, and the pace at which it could happen. Politicians can literally make these changes overnight, and you won't want your money around when they decide to impose capital controls.

These aren't things to panic about, but merely to prepare for. When you take action that diversifies your sovereign risk, you sleep a lot better knowing that your assets, interests, and livelihood are not all inextricably linked to an empire in decline.

 

The Housing Market Could Get Annihilated In 2011...

Posted: 03 Jan 2011 01:43 PM PST

Happy New Year everyone! Back in 2002 I made the prediction that housing values would eventually drop 70-80% from peak bubble valuations. Of course, back then I would have been horrified to know just how high prices were to get by 2007. At this point, in a lot of markets prices have dropped 10-20% on average so far, with 40-50% declines (or more at the high end) in the worst bubble States (Cali, FLA, Nevada, Arizona). The late and great Sir John Templeton, who was one of the pioneers of the modern mutual fund industry and a highly regarded investor, said in an interview sometime in 2002 that he would not touch U.S. real estate until it had fallen by 90% in value. I'm sticking with my call.

As to be expected, the mass financial media and most real estate market professionals (and of course a lot folks who have been well-trained by the Fed to "buy the dip" over the last 30 years) expect that the worst is over for the sector. Au contraire, mon frére (I guess I should say "al contrario, il mio amico - lol), there are several key forces at play, most of which go underreported, not reported, or are based on industry/Govt data which is highly manipulated.

Inventory - The biggest problem facing the housing market is the massive inventory sitting out there. Of course, the Nat'l Assoc. of Realtors reports the inventory of homes for sale to be around 3.7 million, or 9.5 month supply based on the existing rate of sales. Remember that rate of homes sales is still declining - existing home sales were down 28% for Nov '10 vs. '09 and new home sales were down 21% - so as we go forward, unless this rate picks up, the number of months it would take to clear the existing "for sale" inventory increases.

But there is a "shadow" inventory out there defined as pending REO (bank owned), pending foreclosed inventory and homes with mortgages in serious delinquency. Corelogic has defined this number to be around 2 million homes. Here's a great chart I borrowed from calculatedriskblog.com:

(click on chart to enlarge)

As you can see, if you include the homes that are likely to be foreclosed and assumed by the banks, a more realistic estimate of the housing inventor is close to 6 million.  And there are also a lot of people who are not in danger of defaulting on their mortgage, but who would sell if the market "bounces."  If you are skeptical of the forces of foreclosure, here's a news report from Reuters that came out last week describing the big jump in foreclosures during Q3:  LINK

So just based on the pure, good old fashioned law of supply/demand, there is going to have to be a major downward adjustment in the price of housing in order to clear this massive inventory overhanging the market.

Credit Markets - The biggest factor here is interest rates.  For several reasons, not the least of which is the rapidly expanding Government spending deficit and Treasury bond supply, interest rates will continue moving higher during 2011.  This factor alone, unless you have cash to buy a house, will make the current price level of housing unsustainable as the higher cost of a mortgage will reduce the overall amount someone can pay for a home by reducing the size of an affordable mortgage.  This is going to hammer the mid-priced housing segment. 

The other obvious factor here is the much tighter standards being enforced on mortgage lenders.  No more "liar" loans, pay-option ARMS and "sub-primers" qualifying for conventional GSE mortgages.  This factor not only eliminates a chunk of the population that had been buying homes during the bubble, but it too reduces that size of mortgage most people can assume. 

And finally, there is another tsunami of adjustable rate mortgage resets and refi's coming in 2011. Here's a chart to illustrate that is from Credit Suisse (edit in red is mine):

(click on chart to enlarge)

As you can see, the housing market price collapse that started in 2007 is highly correlated with the first wave of resets.  It took a few trillion of printed dollars from the Fed and the Treasury in order to stabilize the banking system and slow down the collapse in housing from this first wave.  Take a look at the size and composition of the second wave.  The beige bars are the nefarious pay-option ARMS, which were designed to let people opt not to pay most of their mortgage, with the unpaid portion added to outstanding mortgage balance.  It was this garbage that took down Countrywide, Washington Mutual and Wachovia.  The credit obligation from that abortion was largely transferred to the Treasury (i.e. the taxpayer).  Rest assured, the pay-option reset factor alone will make this next default wave even more nuclear than the last one.  (Also, I am skipping over all of the related collateral destruction the first time around, which includes the implosion of the big mortgage reinsurance companies, including AIG - who's garbage found a home with the U.S. Treasury).   This will devastate housing/real estate values.

There are several other factors which will further influence the declining value of housing and real estate.  The most prevalent being the general weak condition of the economy in the U.S.  And I am of the view that the economy will double dip this year (although massive QE/money printing may prevent this).   The reality is that the two major factors discussed above will be sufficient to cause what I believe will be a much larger than expected (by the media/Wall Street in general) decline in housing values during 2011.  I would not be surprised to see at least 10% in most markets.  While I have stopped putting a definitive timeframe on my economic/market predictions, I still believe that average prices in the housing market will get cut in half from here before this over.




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

The Reweighting of Commodity Indices

Posted: 03 Jan 2011 01:27 PM PST

Dear Friends,

Every year around this time some of the big commodity indices that are used as benchmarks by various fund managers are reweighted with the percentage of the commodities making up the basket tracked by each particular index varying depending on the methodology employed by the owners of the index.

Two of the larger commodity indexes are the Goldman Sachs Commodity Index (now called the S&P GSCI) and the Dow Jones – AIG Commodity Index).

My preliminary read of the GSCI index shows a heavier weighting in both silver and copper over the weighting given to each last year (2010) and a bit of a lighter weighting given to gold than last year.

Copper and silver are both being increased  2.7% over last year while gold is being reduced 2.5% compared to last year. Disclaimer – I hate reading through these reports issued about the various indices as my head goes numb from looking at the all the calculations so these numbers should not be taken as gospel until I can confirm the exact change. For now – this is my preliminary read.

Generally what this translates to in terms of the average market watcher is that the commodity style funds that commit investment funds into the commodity complex, must match the percentage of their holdings to these various indices. Depending on which index they choose to benchmark against and what changes may or may not be made for the new calendar year, such changes may result in an increase in buying for some commodities and an increase in selling for others. The reason is that the fund managers must rebalance their holdings to bring them into line with the new weightings in the index.

Since the largest portion of the money driving our commodity markets these days is the result of these commodity funds, the changes can sometimes explain some of the price action that the various commodity markets will experience during the rebalancing phase. This phase tends to last a few weeks as the index re-weightings become published and disseminated through the investment community and are then implemented by fund managers.

Keep this in mind as we watch the price action over this month.

Also keep in mind that any fresh money coming into the markets for investment for the new year is going to find itself being spread across all of the various commodities making up each commodity index. Sometimes that new money is more than enough to offset the selling of the older positions from the previous year as the fund managers rebalance. For those markets where the percentage weighting has been increased from the previous year, the combination of fresh, new investment money for the new year in combination with the increased need by the funds to buy extra positions in those commodities, can be quite a powerful combination for any market already in a bullish uptrend.

I have yet to examine the DOW JONES AIG index. When I do, I will report back to our readers.

Is The World's Richest Man, Carlos Slim, Entering The Silver Fray?

Posted: 03 Jan 2011 01:12 PM PST


From King World News

A source in mergers and acquisitions out of Europe has alerted King World News that Carlos Slim may be looking to enter the silver market in a big way.  Gold and silver are in big bull markets and this is attracting the attention of some of the smartest money around the globe.  James Turk commented, “If this deal does happen Eric, this is going to make the silver shorts choke.”  Fresnillo has a current market cap of roughly $19 billion.

The European source commented, “This deal has been floating around for a while, but I think this time it is going to happen.  It’s in his backyard.  This is the world’s richest man wanting to get into silver.”

I view this as the only way for the richest man in the world to enter the silver market at this point in terms of any scale, is that your take as well?

“Yes, I agree with that.  Let me just add that when he buys into it (Fresnillo) he will have the leverage to silver he is looking for.  There are very few ways to get into silver with the amount of money he has, this is the most likely option at this point.  He has to pay a hefty price or otherwise the deal will not happen.  It is beginning to look like the longer he waits, the more he will have to pay.  It is a bull market and things to tend to get more expensive, not less.”

King World News reached out to James Turk to get his comments.  When asked about the potential buyout Turk stated, “If this is true he is following in the footsteps of John Paulson and his exposure to gold through Anglo Ashanti.  In Carlos’s case, when you have billions of dollars to invest, it is impossible to buy physical silver in any significant quantity with the market so tight.  The point I am making is that Paulson ended up buying 30% of Anglo-Ashanti for a few billion dollars giving him exposure to the gold price.

Continue reading at King World News

Likely new White House chief of staff has bided time at Morgan Chase

Posted: 03 Jan 2011 12:08 PM PST

It's like he never left the government. ...

* * *

Obama Said to Consider William Daley for Top White House Post

By Julianna Goldman and John McCormick
Bloomberg News
Monday, January 3, 2010

http://www.bloomberg.com/news/2011-01-03/obama-said-to-consider-william-...

President Barack Obama is considering naming William Daley, a JPMorgan Chase & Co. executive and former U.S. commerce secretary, to a high-level White House post, possibly as his chief of staff, people familiar with the matter said.

Such a move, which is still under discussion and which White House officials wouldn't confirm, would bring a Washington veteran -- and someone with strong business ties -- into the administration as Obama enters the second half of his term. The president is faced with a Republican majority in the House of Representatives and is trying to accelerate the U.S. economic recovery while addressing the budget deficit.

Daley, 62, who typically responds to questions, didn't return two messages seeking comment left on his cell phone yesterday or a phone call to his office and an e-mail sent to him today. White House officials declined to discuss the matter.

"I'm not going to comment on personnel speculation," White House spokesman Robert Gibbs said in an e-mail.

... Dispatch continues below ...


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Sona Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit, Extending the Mineralization of the Southwest Vein on the Property

Company Press Release, October 27, 2010

VANCOUVER, British Columbia -- Sona Resources Corp. reports on five drillling holes in the third round of assay results from the recently completed drill program at its 100 percent-owned Elizabeth Gold Deposit Property in the Lillooet Mining District of southern British Columbia. Highlights from the diamond drilling include:

-- Hole E10-66 intersected 17.4g gold/ton over 1.54 metres.

-- Hole E10-67 intersected 96.4g gold/ton over 2.5 metres, including one assay interval of 383g of gold/ton over 0.5 metres.

-- Hole E10-69 intersected 85.4g gold/ton over 4.03 metres, including one assay interval of 230g gold/ton over 1 metre.

Four drill holes, E10-66 to E10-69, targeted the southwestern end of the Southwest Vein, and three of the holes have expanded the mineralized zone in that direction. The Southwest Vein gold mineralization has now been intersected over a strike length of 325 metres, with the deepest hole drilled less than 200 metres from surface.

"The assay results from the Southwest Zone quartz vein continue to be extremely positive," says John P. Thompson, Sona's president and CEO. "We are expanding the Southwest Vein, and this high-grade gold mineralization remains wide open down dip and along strike to the southwest."

For the company's full press release, please visit:

http://sonaresources.com/_resources/news/SONA_NR19_2010.pdf


As he remakes his staff at the midway point of his presidency, Obama also is seeking to address complaints from some executives that the Democratic administration is anti- business. Daley is JPMorgan's Midwest chairman and the bank's head of corporate responsibility.

Among the pressing personnel decisions Obama must make is naming a successor to Lawrence Summers as head of the National Economic Council, which could come as early as this week. Gene Sperling, a counselor to Treasury Secretary Timothy Geithner, has emerged as the leading candidate for the post.

If selected, Sperling would be returning to the position he held for four years under President Bill Clinton, making him the longest-serving NEC director. While he doesn't have strong ties to the business community or Summers' standing as an economist, Sperling has played key roles crafting the administration's economic policies, most recently in forging Obama's compromise with Republican leaders to extend Bush-era income tax cuts.

Yale University President Richard Levin and Roger Altman, the founder of Evercore Partners Inc., are under consideration for the NEC post as well.

If named as chief of staff, Daley would replace Pete Rouse, whom Obama selected to fill the role on an interim basis after Rahm Emanuel resigned Oct. 1 to pursue a bid for mayor of Chicago.

Rouse has indicated to administration officials that he is reluctant to serve in that job for the remainder of Obama's presidency, according to a person familiar with the matter. Rouse also has signaled that he would stay as chief of staff if asked by the president, the person said, speaking on condition of anonymity because the discussions are private.

Rouse, who has worked for Obama since his days in the Senate, is conducting an internal review that covers personnel, policy and political strategy as the president contends with a new political landscape and gears up for his re-election bid less than two years from now. Obama is considering a number of staff changes. Senior adviser David Axelrod has said that he plans to leave in the coming months, and former campaign manager David Plouffe will join the administration.

During the 2008 presidential campaign, Daley served as an Obama economic adviser. After the election, he was a co-chairman of Obama's transition team.

Daley, the younger brother of Chicago Mayor Richard M. Daley, was commerce secretary during the second term of the Clinton administration, serving from January 1997 to June 2000. He was chairman of Vice President Al Gore's unsuccessful presidential campaign in 2000.

After serving as president of SBC Communications for more than two years, he joined JPMorgan Chase in 2004.

While there, Daley has worked on some of the Midwest's biggest takeovers. He advised Chicago's Exelon Corp. on its unsuccessful 2004 proposal to buy Public Service Enterprise Group Inc. for $17.8 billion, and CBOT Holdings Inc., also based in Chicago, on its 2007 sale to CME Group Inc. for $11 billion, according to Corporate Control Alert, an industry newsletter.

Daley was a political mentor to Emanuel. The two worked together to get the union-opposed North American Free Trade Agreement passed in 1993. Emanuel was then a senior aide to Clinton and Daley was a special counsel to the president.

The youngest of seven children born to longtime Chicago Mayor Richard J. Daley and Eleanor "Sis" Daley, William Daley is a member of Illinois' most powerful political dynasty.

Besides his work as a banker, he serves on several corporate boards, including Boeing Co. and Abbott Laboratories.

The administration has come under fire from the business community, including the U.S. Chamber of Commerce. The nation's biggest business lobbying group opposed Obama's health-care and financial-regulatory overhauls and committed $75 million to political ads in the midterm congressional elections, mainly directed against Democrats.

Still, Obama is generating more optimism among corporate executives after a series of actions and overtures, including a deal to extend tax cuts enacted in 2001 and 2003, efforts to boost exports such as a U.S.-South Korea free-trade agreement, and a loosening of controls on some technology sales.

Obama met with 20 company executives on Dec. 15 in Washington and said afterward that he made "good progress" toward establishing closer cooperation between government and business to accelerate the economic recovery. The president has said private companies are crucial to the U.S. climbing out of the worst recession since the Great Depression.

* * *

Join GATA here:

Yukon Mining Investment e-Conference
Wednesday-Thursday, January 19-20, 2011

http://theyukonroom.com/yukon-eblast-static.html

Vancouver Resource Investment Conference
Vancouver Convention Centre West
Vancouver, British Columbia, Canada
Sunday-Monday, January 23-24, 2011

http://cambridgehouse3.com/conference-details/vancouver-resource-investment-conference-2011/15

Cheviot Asset Management Sound Money Conference
Guildhall, London
Thursday, January 27, 2011

http://www.gata.org/files/CheviotSoundMoneyConferenceInvite.pdf

Phoenix Investment Conference and Silver Summit
Renaissance Glendale Hotel and Spa
Friday-Saturday, February 18-19, 2011
Glendale, Arizona

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Support GATA by purchasing a colorful GATA T-shirt:

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Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009:

http://gata.org/node/wallstreetjournal

Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon:

http://www.goldrush21.com/

Help keep GATA going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

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To contribute to GATA, please visit:

http://www.gata.org/node/16


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Prophecy Drills 71.17 Metres of 0.52% NiEq
(0.310 % Nickel 0.466 g/t PGMs +Au and 0.223% Copper)
from surface at Wellgreen Project in the Yukon

Prophecy Resource Corp. (TSX-V: PCY) reports that it has received additional assays results from its 100-percent-owned Wellgreen PGM Ni-Cu property in the Yukon, Canada. Diamond drill holes WS10-179 to WS10-182 were drilled during the summer of 2010 by Northern Platinum (which merged with Prophecy on September 23, 2010). WS10-183 was drilled by Prophecy in October 2010. Highlights from the newly received assays include 71.17 metres from surface of 0.52 percent NiEq (0.310 percent nickel, 0.466 g/t PGMs + Au, and 0.233 percent copper) and ended in mineralization. For more drill highlights, please visit:

http://prophecyresource.com/news_2010_nov29.php

Competitive devaluations continue as Chile weakens peso against dollar

Posted: 03 Jan 2011 11:59 AM PST

Chile Central Bank to Buy $12 Billion to Stem Peso's Region-Beating Rally

By Sebastian Boyd
Bloomberg News
Monday, January 3, 2011

http://www.bloomberg.com/news/2011-01-03/chile-central-bank-to-buy-12-bi...

SANTIAGO, Chile -- Chile's central bank plans to buy $12 billion of U.S. dollars to help exporters by weakening the peso, Latin America's best-performing currency last year.

The bank will buy $50 million a day from Jan. 5 to Feb. 9 and will announce further plans later. The move will boost international reserves to the equivalent of 17 percent of gross domestic product, the bank said today in a statement. The bank will sell bonds to drain the equivalent amount of cash from the economy.

Policy makers are intervening to weaken the peso after the currency gained 8.4 percent last year and climbed 0.5 percent today to 465.75 per U.S. dollar, the highest since May 2008. The bank warned last month that the country's real exchange rate had gained to the strongest level coherent with fundamentals.

... Dispatch continues below ...


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Prophecy Receives Permit To Mine at Ulaan Ovoo in Mongolia

VANCOUVER, British Columbia -- Prophecy Resource Corp. (TSX-V:PCY, OTCQX: PRPCF, Frankfurt: 1P2) announces that on November 9, 2010, it received the final permit to commence mining operations at its Ulaan Ovoo coal project in Mongolia. Prophecy is one of few international mining companies to achieve such a milestone. The mine is production-ready, with a mine opening ceremony scheduled for November 20.

Prophecy CEO John Lee said: "I thank the government of Mongolia for the expeditious way this permit was issued. The opening of Ulaan Ovoo is a testament to the industrious and skilled workforce in Mongolia. Prophecy directly and indirectly (through Leighton Asia) employs more than 65 competent Mongolian nationals and four expatriots. The company also reaffirms its commitment to deliver coal to the local Edernet and Darkhan power plants in Mongolia."

The Ulaan Ovoo open pit mine is 10 kilometers from the Russian border and within 120km of the Nauski TransSiberian railway station, enabling transportation of coal to Russia and its eastern seaports. Thermal coal prices are trading at two-year highs at Russian seaports due to strong demand from Asian economies.

For the complete press release, please visit:

http://prophecyresource.com/news_2010_nov11.php


"This intervention should smooth the effects of the exchange-rate adjustment to which our economy has been subjected," the bank said in the statement.

Policy makers will publish their 2011 bond-sale calendar tomorrow.

The bank last intervened in the currency in April 2008, when it announced a $8 billion program of buying dollars, also in $50 million-a-day clips. It abandoned the program after Lehman Brothers Holdings Inc. collapsed, having bought $5.75 billion.

The currency may weaken by 48 pesos per dollar because of the intervention, according to Jorge Selaive, chief economist at Banco de Credito e Inversiones in Santiago, "the greater part of that tomorrow."

* * *

Join GATA here:

Yukon Mining Investment e-Conference
Wednesday-Thursday, January 19-20, 2011

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Vancouver Resource Investment Conference
Vancouver Convention Centre West
Vancouver, British Columbia, Canada
Sunday-Monday, January 23-24, 2011

http://cambridgehouse3.com/conference-details/vancouver-resource-investment-conference-2011/15

Cheviot Asset Management Sound Money Conference
Guildhall, London
Thursday, January 27, 2011

http://www.gata.org/files/CheviotSoundMoneyConferenceInvite.pdf

Phoenix Investment Conference and Silver Summit
Renaissance Glendale Hotel and Spa
Friday-Saturday, February 18-19, 2011
Glendale, Arizona

http://cambridgehouse3.com/conference-details/phoenix-investment-confere...

Support GATA by purchasing a colorful GATA T-shirt:

http://gata.org/tshirts

Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009:

http://gata.org/node/wallstreetjournal

Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon:

http://www.goldrush21.com/

Help keep GATA going:

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

http://www.gata.org

To contribute to GATA, please visit:

http://www.gata.org/node/16


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Sona Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit,
Extending the Mineralization of the Southwest Vein on the Property

Company Press Release, October 27, 2010

VANCOUVER, British Columbia -- Sona Resources Corp. reports on five drillling holes in the third round of assay results from the recently completed drill program at its 100 percent-owned Elizabeth Gold Deposit Property in the Lillooet Mining District of southern British Columbia. Highlights from the diamond drilling include:

-- Hole E10-66 intersected 17.4g gold/ton over 1.54 metres.

-- Hole E10-67 intersected 96.4g gold/ton over 2.5 metres, including one assay interval of 383g of gold/ton over 0.5 metres.

-- Hole E10-69 intersected 85.4g gold/ton over 4.03 metres, including one assay interval of 230g gold/ton over 1 metre.

Four drill holes, E10-66 to E10-69, targeted the southwestern end of the Southwest Vein, and three of the holes have expanded the mineralized zone in that direction. The Southwest Vein gold mineralization has now been intersected over a strike length of 325 metres, with the deepest hole drilled less than 200 metres from surface. "The assay results from the Southwest Zone quartz vein continue to be extremely positive," says John P. Thompson, Sona's president and CEO. "We are expanding the Southwest Vein, and this high-grade gold mineralization remains wide open down dip and along strike to the southwest."

For the company's full press release, please visit:

http://sonaresources.com/_resources/news/SONA_NR19_2010.pdf

James Turk: Gold rises in 2010 to end a stellar decade

Posted: 03 Jan 2011 11:52 AM PST

7:50p ET Monday, January 3, 2010

Dear Friend of GATA and Gold (and Silver):

GoldMoney founder, Free Gold Money Report editor, and GATA consultant James Turk tonight summarizes the performance of gold and silver in 2010, reporting that gold did spectacularly, rising substantially in all currencies except the Australian dollar, and silver did even better. As he expects monetary debasement to remain central bank policy around the world, Turk expects 2011 to be another great year for the metals. His commentary is headlined "Gold Rises in 2010 to End a Stellar Decade" and you can find it at GoldMoney's Internet site here:

http://goldmoney.com/gold-research/gold-rises-in-2010-to-end-a-stellar-d...

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


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Opportunity in the gold coin market

Swiss America Trading Corp. alerts GATA supporters to an opportunistic area of the gold coin market. While the gold bullion market has been quite volatile lately and as of November 29 gold has risen only $7 per ounce over the last month, the MS64 $20 gold St. Gaudens coin has risen about 10 percent in the same time. The ratio between the price of these coins and the price of gold is rising. If you'd like to learn more about the ratio and $20 gold coins, Swiss America can e-mail you a three-year study of it as well as other information.

Swiss America also can provide a limited number of free copies of "Crashing the Dollar," a book written by Swiss America's president, Craig Smith.

For information about the ratio between the $20 gold pieces and the gold price and for a free copy of "Crashing The Dollar," please call Swiss America's Tim Murphy at 1-800-289-2646 X1041 or Fred Goldstein at X1033. Or e-mail them at trmurphy@swissamerica.com and figoldstein@swissamerica.com.


Join GATA here:

Yukon Mining Investment e-Conference
Wednesday-Thursday, January 19-20, 2011

http://theyukonroom.com/yukon-eblast-static.html

Vancouver Resource Investment Conference
Vancouver Convention Centre West
Vancouver, British Columbia, Canada
Sunday-Monday, January 23-24, 2011

http://cambridgehouse3.com/conference-details/vancouver-resource-investment-conference-2011/15

Cheviot Asset Management Sound Money Conference
Guildhall, London
Thursday, January 27, 2011

http://www.gata.org/files/CheviotSoundMoneyConferenceInvite.pdf

Phoenix Investment Conference and Silver Summit
Renaissance Glendale Hotel and Spa
Glendale, Arizona
Friday-Saturday, February 18-19, 2011

http://cambridgehouse3.com/conference-details/phoenix-investment-confere...

Support GATA by purchasing a colorful GATA T-shirt:

http://gata.org/tshirts

Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009:

http://gata.org/node/wallstreetjournal

Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon:

http://www.goldrush21.com/

Help keep GATA going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

http://www.gata.org

To contribute to GATA, please visit:

http://www.gata.org/node/16


ADVERTISEMENT

Prophecy Drills 71.17 Metres of 0.52 percent NiEq
(0.310 percent Nickel 0.466 g/t PGMs +Au and 0.223 percent copper)
from surface at Wellgreen Project in the Yukon

Prophecy Resource Corp. (TSX-V: PCY) reports that it has received additional assays results from its 100-percent-owned Wellgreen PGM Ni-Cu property in the Yukon, Canada. Diamond drill holes WS10-179 to WS10-182 were drilled during the summer of 2010 by Northern Platinum (which merged with Prophecy on September 23, 2010). WS10-183 was drilled by Prophecy in October 2010. Highlights from the newly received assays include 71.17 metres from surface of 0.52 percent NiEq (0.310 percent nickel, 0.466 g/t PGMs + Au, and 0.233 percent copper) and ended in mineralization. For more drill highlights, please visit:

http://prophecyresource.com/news_2010_nov29.php

Gold Price Gained Only $1.50, Was it a Good Idea to Prefer Silver to Gold Over the Last Year?

Posted: 03 Jan 2011 11:10 AM PST

Gold Price Close Today : 1422.60
Change : 1.50 or 0.1%

Silver Price Close Today : 31.096
Change : 0.186 cents or 0.6%

Gold Silver Ratio Today : 45.75
Change : -0.227 or -0.5%

Silver Gold Ratio Today : 0.02186
Change : 0.000108 or 0.5%

Platinum Price Close Today : 1767.10
Change : -1.50 or -0.1%

Palladium Price Close Today : 795.00
Change : -7.00 or -0.9%

S&P 500 : 1,271.87
Change : 14.23 or 1.1%

Dow In GOLD$ : $169.59
Change : $ 1.19 or 0.7%

Dow in GOLD oz : 8.204
Change : 0.058 or 0.7%

Dow in SILVER oz : 375.31
Change : 2.98 or 0.8%

Dow Industrial : 11,670.75
Change : 93.24 or 0.8%

US Dollar Index : 79.19
Change : 0.008 or 0.0%


I consider it very bad manners and even worse taste ever to say "I told you so." Therefore I will offer y'all the following statistics without comment, as res ipsa loquitur. These are the percentage changes from 31 December 2009 to 31 December 2010.

Dow in gold Dollars, -14.5%

Dow in silver Ounces, -45.9%

Gold, + 29.8%

Silver, +83.7%

Gold/Silver Ratio, -29.4%

Dow Jones Industrial Avg., +11.0%

S&P500, +12.8%

Nasdaq Comp, +12.8%

Platinum, +20.5%

Palladium, +95.6%.

But one leetle question does pop up! Was it a good idea to prefer silver to gold over the last year?

The SILVER PRICE managed to close above 3100c for the first time in this bull market. Added 18.6c to close 3109.6c on Comex. The GOLD PRICE stalled at Friday's ending prices, gaining only $1.50 to $1,422.60. I liken this to wading through the deep mud in the lake as you walk up the shore out of the water. Once gold breaches $1425 'twill pick up speed. Silver's meeting resistance at 3100c, but hasn't given up yet. The five day chart shows a clear 5-wave up move from last Thursday and a three wave correction from today's high in the forenoon. Ditto Gold, but not as clear. I expect tomorrow to see higher prices, maybe even JUMPING higher.

The GOLD/SILVER RATIO today hit 45.6. We are still swapping silver for gold, and now the ratio has dropped a bit more and we've found someone to buy large amounts of US 90% silver coin so that we can do the swaps a little closer to the spot ratio than the earlier ones. I have been pouring over past price action on earlier swaps, and that leads me to believe all the more strongly that a price peak, which coincides with a ratio low, does not lie far in the future.

Remember one of the characteristics of the ratio is that once it hits its low, it VERY rapidly rises. That reflects silver's volatility and the speed of its collapse after a peak. That collapse occurs over a fairly uniform time, then hits a low, which coincides with the ratio high. That's when we swap gold back into silver.

From here the ratio might hit -- possibly -- 43.3. Might go lower. But 45.5 really was my lowest target, and I am happy as a mouse in a pie factory to get these trades off where we have, and thankful for whatever other ones we might do. Remember the market proverb when you are tempted to wait for "just a little more movement in your favour." "Bears get rich, and bulls get rich, but pigs get slaughtered."

The US DOLLAR INDEX today lost 8/10 of a basis point to close at 79.193. This no more than confirms the dollar intends to move lower, at least to 78.50. At 78.50 it will have to decide whether it will bounce and rally, or fade away.

STOCKS today benefitted from something. Dow rose 93.24 to close at a scandalous 11,670.75. Here's an assignment for you number-crunchers. The 2000 Dow high was 11,722.45. Find yourself an inflation calculator on the Internet and throw in that 11,722.45 number to see where the Dow would have to be today just to equal January 2000.

S&P 500 rose 14.23 points to 1,271.87. Y'all buy stocks with your money, and let me know next year how that works out for you. My guess is that the economy will hit a brick wall again this year -- banks forced to do something about all those rotten mortgages on their balance sheets, municipal bond defaults, or, if not that, then stray dogs -- and that will trim stocks' sails considerably. But what do I know? I'm just a natural born fool from Tennessee, not one of them Wall Street smart boys that's been to Haahvaahd.

During the Twelve Days of Christmas (Christmas thru Epiphany, 6 Jan) our office will be working only four hours a day. Please be patient, leave a voice mail or send us an email at helpdesk@the-moneychanger.com.

Thanks for your understanding.

Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.

- Franklin Sanders, The Moneychanger
The-MoneyChanger.com
Phone: (888) 218-9226 or (931) 766-6066

© 2010, The Moneychanger. May not be republished in any form, including electronically, without our express permission.

To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate in a bubble, primary trend way down. Whenever I write "Stay out of stocks" readers inevitably ask, "Do you mean precious metals mining stocks, too?" No, I don't.

MONDAY Market Excerpts

Posted: 03 Jan 2011 10:13 AM PST

Gold chops sideways, ends at fresh closing high

The COMEX February gold futures contract closed up $1.50 Monday at $1422.90, trading between $1414.50 and $1424.40

January 3, p.m. excerpts:
(from TheStreet)
Gold prices churned slightly higher as profit takers and buyers battled it out following the yellow metal's record-breaking 2010. After reaching a record settle on the last trading day of the year of $1,421.40 an ounce, investors seemed to be catching their breath, but mild profit-taking Monday was met with buying and the upward trend for metal prices appears intact…more
(from Dow Jones)
Although the metal inched to a fresh record high, gains were subdued after gold struggled in slightly negative territory most of the day. Participants were feeling less of a need for a haven investment amid gains in U.S. manufacturing and construction. The Institute for Supply Management reported its December index of manufacturing activity showed modest gains in December, and a separate report said U.S. construction spending rose a third consecutive time during November…more
(from Marketwatch)
The dollar index, which measures the currency against a basket of six rivals, rose to 79.152, up from 79.02 on Friday. In the last session of 2010, the dollar index slid, though it posted a 1.5% gain for the year. That was mostly on the back of a weak euro, with sovereign-debt worries weighing on the single currency. The euro lost 6.5% against the greenback last year. However, the dollar lost 12.9% against the yen and touched the lowest level since 1995…more
(from Bloomberg)
Gold futures for February delivery rose 0.1% to close at $1,422.90 an ounce on the Comex in New York, a record settlement. The intraday all-time high was $1,432.50 on Dec. 7. "I'm bullish on gold this year because it is still mainly a haven play," said Park Jong Beom, a trader at Tong Yang Futures Trading Co. "The European-debt crisis remains unresolved, and investors continue to favor it as a safe-haven asset." Gold priced in U.K. pounds climbed to a record today…more

see full news, 24-hr newswire…

The Nomadic Nature of Money

Posted: 03 Jan 2011 10:00 AM PST

I was intrigued that a guy named David Thurtell, of Citigroup, surprisingly said, "The liquidity pumped out by central banks means that there is a lot of money sloshing around that needs to find a home."

I was so intrigued that I was tempted to use it as the basis for my first report to the new supervisor for this quadrant of the galaxy, Karpus Klegg the Implacable, at his new office at Intergalactic Headquarters after the "palace coup" and interstellar personnel shake-up that I just found out about.

However, I did not want to start off a relationship with some guy I never met named Karpus Klegg the Implacable by saying that people on this planet believe that money can find a home, as it sounds so stupid.

After a little checking, I learned that I just needed to say that the people on this planet had evolved to the point where they seek pleasure all the time, and just send him some porno films of earthlings, which he will like better than anything else I could send him.

So, with that feather in my cap, I turn my attention to denizens of this planet, singling out for Mr. Thurtell of Citigroup to receive the Hot Mogambo News (HMN) that money never finds a home! Never!

Money never "finds a home" because money, once created, is always being exchanged for an asset, and then the asset seller has to exchange the newly-acquired money for another asset, and then that asset seller has to exchange the newly-acquired money for another asset, and then that asset seller, and then another, and another, around and around, up and down, back and forth, with all the new money constantly being used to add to the money already bidding on goods and services, causing higher prices, higher and higher prices, even as the money is being nibbled away, bit by bit and piece by piece, by relentless and total government taxation at each exchange.

And yet, even then, as soon as any of the money is taxed away out of the private economy, it immediately reappears! It is reborn as higher government spending, and becoming "new money" that needs to "find a home," too!

So the idea of money ever "finding a home" makes me laugh the cruel Mogambo Laugh Of Scorn (MLOS) at such a benign-sounding phrase, as all this new money does is to increase prices!

And, if you want to know my opinion, deliberately increasing prices is a cruel, mean-spirited, despotic and despicable thing to do to people.

However, cruelty of an elitist government towards the population is nothing new, and it is a little known fact that the Elvis Presley hit, "Don't Be Cruel", originally had the lyrics:

"Don't be cruel,

"To the currency of a guy who trusted you Fed bastards to maintain the purchasing power of the dollar.

"Don't be cruel,

"To the currency of a guy who trusted you Fed bastards to maintain the purchasing power of the dollar.

"I don't want no other cash!

"But the dollar's turned to trash!

"Don't be cruel!"

Firstly, thank you, thank you, thank you for your kind applause of appreciation for my fabulous impersonation of Elvis Presley! Thank you! Thank you!

Secondly, there is a moral about the purchasing power of money in there, probably in the second verse where he had a leash around his neck and being led around, which is now unfortunately lost, so you have to take my word for it, where Elvis himself – The King! – was advising you to buy gold and silver when the Federal Reserve was creating so much money, which it was doing at the time of his death in 1977, all because Nixon severed the dollar's convertibility to gold in 1971.

If you don't believe that Elvis was a gold-bug and Austrian-school of economics kind of "cool guy," and/or that these are the original lyrics, then perhaps you will start to believe me when I say that the Federal Reserve creating trillions of dollars per year is going to make Elvis look more visionary than ever when gold soars to the moon in the terrifying inflation in consumer prices and the destruction of the economy!

And to think you can prevent all that by just buying, as suggested by Elvis Presley himself, gold and silver! Don't be cruel, indeed! Whee! This investing stuff is easy!

The Mogambo Guru
for The Daily Reckoning

The Nomadic Nature of Money 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."


While the entire world looks on at the despair being seen in places such as Greece and Ireland, many are failing to see what is fast becoming the worst economy in the developed world, America.

Posted: 03 Jan 2011 09:57 AM PST

China must Kill the Dollar Share this:


Crash JP Morgan Buy Silver – Stop the Ebola Virus of Wall St. from spreading any further

Posted: 03 Jan 2011 09:44 AM PST

Is Obama About To Hire A JPMorgan Exec To Be His Chief Of Staff? Share this:


Our 2011 Forecasts

Posted: 03 Jan 2011 09:22 AM PST

The 5 min. Forecast January 03, 2011 01:20 PM by Addison Wiggin - January 3, 2011 [LIST] [*] The 5’s 2011 forecast issue... Facebook at $50 billion? Ha! [*] Why Chris Mayer sees gold stocks as the top-performing sector [*] Alan Knuckman’s audacious silver outlook... After $30, where next? [*] Amoss on “margin squeeze,” Cofnas on the return of dollar bulls and more [*] Devil in the details... The 5 dives inside upbeat manufacturing numbers [*] If consumers are roaring back, why are fewer buying movie and concert tickets? [/LIST] Welcome to 2011... early this morning, we learned Goldman Sachs and a Russian firm called Digital Sky Technologies have pumped $500 million into Facebook. The deal values the “popular social networking site” at $50 billion... more than eBay, Yahoo! or Time Warner. Ha. Ha. Ha! This first nugget of fresh news makes our first official forecast of 2011 a slam-dunk: Facebook and Goldman will fleece million...


Graham Summers’ Free Weekly Market Forecast (Hold the Line Edition)

Posted: 03 Jan 2011 09:11 AM PST


The first item to note is that the Euro bounced off of support to end 2010. It’s difficult to tell if this was a REAL development or just a kind of end of the year “window dressing.” I say this because the blizzard in New York made holiday trading even lower than usual, allowing for even more gaming.

 

 

This week will determine the deal. As the below chart shows, the Euro is now coming up against resistance at 134.2. If we break above here, then the Euro is starting another leg up which could take it to 136. This move would be accompanied by additional gains in stocks and Gold and Silver.

 

 

The US Dollar is giving us a hint that this may in fact prove to be the case. Indeed, while the Euro has yet to break out above resistance, the US Dollar has taken out support establishing a series of lower lows as it builds a clear downward trading channel.

 

 

Of course, we could see a bounce here which would correlate with the Euro dropping. However, if this is going to happen it needs to start in the next few days.

 

Elsewhere in the financial markets, Treasuries have staged a bounce. It’s truly staggering to think that Bernanke and pals can claim with a straight face that Quantitative Easing will lower interest rates when long-term Treasuries have dropped 10% in just four months since the Fed’s QE lite and QE 2 programs were announced.

 

 

Indeed, the technical picture for Treasuries going forward is decidedly ugly as we’re getting darn close to breaking the 28-year old bull market in bonds.

 

 

The above chart is a MAJOR warning of what’s to come to the US when this latest bounce in Treasuries ends. Once we take out this trendline we’re going to see interest rates spike in a BIG way. This in turn will push the US economy into an even deeper Depression and renew the debt deleveraging the financial system began in 2008 (which the Fed has done everything in its power to try and stop).

 

In plain terms, the markets are officially on “borrowed time.” The three key charts for determining when things get ugly again are the Euro, US Dollar, and long-term US Treasuries.  At some point one of these is going to breakdown in MAJOR way. When it does, it’s going to drag us back into Crisis mode.

 

Thus, the question is, what Crisis will it be?

 

1)   A Euro banking system Crisis?

2)   A US Dollar collapse Crisis?

3)   A US debt collapse Crisis?

4)   Some combination of the above?

 

Personally, I believe we’ll be entering an inflationary death spiral for the US Dollar at some point in the next year or so. When this happens inflation hedges across the board will explode higher.

 

Some, like the most popular picks (Gold an Silver bullion) will records strong gains.
However, others, (the ones that 99.9% of the investment world are currently clueless about), will go absolutely parabolic.

Good Investing!

 

Graham Summers

 

PS. If you’re getting worried about the future of the stock market and have yet to take steps to prepare for the Second Round of the Financial Crisis… I highly suggest you download my FREE Special Report specifying exactly how to prepare for what’s to come.

 

I call it The Financial Crisis “Round Two” Survival Kit. And its 17 pages contain a wealth of information about portfolio protection, which investments to own and how to take out Catastrophe Insurance on the stock market (this “insurance” paid out triple digit gains in the Autumn of 2008).

 

Again, this is all 100% FREE. To pick up your copy today, got to http://www.gainspainscapital.com and click on FREE REPORTS.

 

PPS. We ALSO publish a FREE Special Report on Inflation detailing three investments that have all already SOARED as a result of the Fed’s monetary policy.

You can access this Report at the link above.

 

 

 

How Much is Facebook Really Worth?

Posted: 03 Jan 2011 09:09 AM PST

Welcome to 2011… Early this morning, we learned Goldman Sachs and a Russian firm called Digital Sky Technologies have pumped $500 million into Facebook. The deal values the "popular social networking site" at $50 billion… more than eBay, Yahoo! or Time Warner.

Ha. Ha. Ha!

This first nugget of fresh news makes our first official forecast of 2011 a slam-dunk: Facebook and Goldman will fleece millions of Americans of their retirement funds… maybe not this year, maybe not next, but before they are done with the whole charade.

Sure, we know the story. Social media exploded in 2010. Facebook passed Google as the most visited site on the planet, with one out of every four webpages viewed in the U.S. belonging to Facebook. Yeah, yeah, it's a good story.

But we've also seen this movie before.

You have 500 million people playing Farmville and Mafia Wars and telling the world how wasted they got last night… but what makes them worth an average $100 in market value?

Our own social media maven suggests "the real value" of the company is in "leveraging all the user data they've collected on their members. The ability to develop tools, apps and targeted advertising will allow you to monetize. As they open up their API, it will allow developers to access this info and use this community to create more and more interaction."

That's possible.

But we think the real value is in the story itself, reflected in the company's shares… which you can't buy right now.

Barely a month ago, TechCrunch.com reported Accel Partners, an early-round investor in Facebook, sold off a big portion of their stock in the company at a $35 billion valuation — a return of "something like 247 times" on that sale.

Now Goldman intends to set up a special purpose vehicle (SPV) so its high-net-worth clients can skirt IPO laws and get their money in before Facebook goes public.

"While the SEC requires companies with more than 499 investors to disclose their financial results to the public," says Andrew Ross Sorkin on his site DealB%k, "Goldman's proposed special purpose vehicle may be able get around such a rule because it would be managed by Goldman and considered just one investor, even though it could conceivably be pooling investments from thousands of clients."

Whether Facebook is profitable now – we don't know because the books are still private – or whether they can figure out how to be profitable in the future is largely irrelevant. The big money is going to be made early in the "secondary market" for private shares.

If and when the IPO happens – like any good Ponzi scheme – retail investors, those last in the door, will get stuck holding very expensive paper.

Our advice: Steer clear.

Addison Wiggin
for The Daily Reckoning

How Much is Facebook Really Worth? 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."


Byron Wien's Prediction Track Record: Zero Out Of Ten

Posted: 03 Jan 2011 09:06 AM PST


Instead of wasting time with Byron Wien's Top 10 "predictions for 2011" we have decided to skip this latest and greatest worthless charade in prognostication, and instead we believe that presenting the list of what the man whose retirement age has come and gone, thought would happen in the past year, is a great example of why all these so called institutional Wall Street experts are nothing but two bit hacks. As may be expected, somehow Wien got exactly zero out of ten correct! The man is the contrarian indicator on Wall Street. Also keep in mind: it takes a lot of skill to be this bad.

Byron Wien Announces Top Ten Surprises for 2010

New York, January 4, 2010 – Byron R. Wien, Vice Chairman, Blackstone Advisory Services, today issued his list of the Ten Surprises for 2010. This is the 25th year Byron has given his predictions of a number of economic, financial market and political surprises for the coming year. He started the tradition in 1986 when he was the Chief U.S Investment Strategist at Morgan Stanley. Byron joined The Blackstone Group in September 2009 as a senior advisor to both the Firm and its clients in analyzing economic, political, market and social trends.

The Surprises of 2010

  1. The United States economy grows at a stronger than expected 5% real rate during the year and the unemployment level drops below 9%.  Exports, inventory building and technology spending lead the way.  Standard and Poor’s 500 operating earnings come in above $80
  2. The Federal Reserve decides the economy is strong enough for them to move away from zero interest rate policy.  In a series of successive hikes beginning in the second quarter the Federal funds rate reaches 2% by year-end
  3. Heavy borrowing by the U.S. Treasury and some reluctance by foreign central banks to keep buying notes and bonds drives the yield on the 10-year Treasury above 5.5%.  Banks loan more to corporations and individuals and pull away from the carry trade, thereby reducing demand for Treasuries.  Obama says, “The suits are finally listening”
  4. In a roller coaster year the Standard and Poor’s 500 rallies to 1300 in the first half and then runs out of steam and declines to 1000, ending where it started at 1115.10.  Even though the economy is strong and earnings exceed expectations, rising interest rates and full valuations present a problem.  Concern about longer term growth and obligations to reduce leverage at both the public and private level unsettle investors
  5. Because it is significantly undervalued on a purchasing power parity basis, the dollar rallies against the yen and the euro.  It exceeds 100 on the yen and the euro drops below $1.30 as the long slide of the greenback is interrupted.  Longer term prospects remain uncertain
  6. Japan stands out as the best performing major industrialized market in the world as its currency weakens and its exports improve.  Investors focus on the attractive valuations of dozens of medium sized companies in a market selling at one quarter of its 1989 high.  The Nikkei 225 rises above 12,000
  7. Believing he must be a leader in climate control initiatives, President Obama endorses legislation favorable for nuclear power development.  Arguing that going nuclear is essential for the environment, will create jobs and reduce costs, Congress passes bills providing loans and subsidies for new plants, the first since 1979.  Coal accounts for about 50% of electrical power generation, and Obama wants to reduce that to 25% by 2020
  8. The improvement in the U.S. economy energizes the Obama administration.  The White House undergoes some reorganization and regains its momentum.  In the November Congressional election the Democrats only lose 20 seats, much less than expected
  9. When it finally passes, financial service legislation, like the health care bill, proves to be softer on the industry than originally feared.  There is greater consumer protection, more transparency, tighter restriction of leverage and increased scrutiny of derivatives, but the regulatory changes for investment bankers and hedge funds are not onerous.  Trading volume and merger activity increases; financial service stocks become exceptional performers in the U.S. market
  10. Civil unrest in Iran reaches a crescendo.  Ayatollah Khameini pushes out Mahmoud Ahmadinejad in favor of a more public relations adept leader.  Economic improvement becomes the key issue and anti-Israel rhetoric subsides.  Talks with the U.S. and Europe begin but the country remains a nuclear threat.  Pakistan becomes the hotspot in the region because of the weak government there, anti-American sentiment, active terrorist groups and concerns about the security of the country’s nuclear arsenal

h/t Atierny1 and nolsgrad

Dollar Index: One Way Or Another, It's Going To Hurt

Posted: 03 Jan 2011 08:53 AM PST


From Nic Lenoir of ICAP

I have been constructive on the dollar index for a little while. I had drawn attention a few weeks back when we broke the 60-dma as it has been an excellent envelope since 2008 for the price action bullish or bearish. My thinking was that one should try buying on a retest. Sure enough we almost saw tick-for-tick the moving average on Friday (at a time when most certainly very few bought).

What now? Well one cannot ignore that from the lows of early November to the local highs of November 30 the wave pattern looks like a corrective a-b-c in a generally bearish trend. However as you know looking at the chart bigger picture I believe 2008 marked the lows and we are about to embark on a major bullish move. If that were the case one could view the USD strength of November as bullish waves piling ahead of a larger wave 3) up. To support that argument it is interesting to note that the low of Friday also corresponded to the 76.4% retracement of the November move. From here if 80.85 is bypassed the bullish trend will be confirmed and we will go through the 200-dma towards 95 at the minimum. Conversely, you now have the luxury to set a stop at entry level, and people who hate the USD or want to get short tactically can sell if we take out Friday's lows as the market should go down to at least 77.80.

A strong DXY would be in contradiction with equity strength according to historical correlations, but let's not forget despite today's euphoria that strength at the start of the year following a year-end rally has proven to be a major headfake in the past few years... food for thought!



Good luck trading,

Nic

Ian Gordon: Bundle Up for Bitter Kondratieff Winter

Posted: 03 Jan 2011 08:46 AM PST

Source: Source: Karen Roche of The Gold Report 01/03/2011 Bundle up. The bitter Kondratieff Winter looks as though it will worsen in 2011. Longwave Group Founder Ian Gordon sees strong signs that point to impending catastrophe, citing historic precedents in this exclusive interview with The Gold Report. But despite his chilling forecast, which includes the Dow dropping to about 1,000, Ian expects investments in high-quality junior gold miners to pay off royally. . .because the capital that flees the markets will flow in their direction. The Gold Report: In the 11 years that you've been investing in gold juniors, you've recorded an annual rate of return of approximately 70%. Going back to 2000, most brokers and money managers likely would've categorized your investment strategy as very risky. However, you've stated that you always felt it's been very safe because you understand the Kondratieff Cycle. What about the Cycle gave you the confidence to go long on gold and go...


In The News Today

Posted: 03 Jan 2011 08:41 AM PST

View the original post at jsmineset.com... January 03, 2011 09:25 AM Dear CIGAs, The Penguin represents earnings. The Bear is of course the Bear of Junior Gold shares that have production now, or in the very near future. Gold likely to surpass $1,650 this year Posted: 03 Jan 2011 01:13 AM PST   Jim Sinclair's Commentary And how much did the US goodwill trip to India cost per day? India to drop US buck in Iran oil dealing India may drop the US dollar as payment for oil from Iran. The replacement would be the Japanese yen and the Emirates dirham. According to London's Asharq Al-Awsat, the switch could help India avoid American retaliation for dealing with the Iranians. Iran is under international sanctions for refusing to come clean on the nature of its nuclear energy programme. The United States has unilaterally imposed some extra sanctions. More…...


Gold Price Rising Faster in Euros Than in Dollars

Posted: 03 Jan 2011 08:38 AM PST

Zecco submits:

By Richard Bloch

Over the past few months I’ve seen a variety of interviews where investor and commentator Dennis Gartman mentions his preference for being long gold “in euro terms.”


Complete Story »


Gold Daily and Silver Weekly Charts

Posted: 03 Jan 2011 08:17 AM PST


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

COT Gold, Silver and US Dollar Index Report - January 3, 2011

Posted: 03 Jan 2011 07:56 AM PST

COT Gold, Silver and US Dollar Index Report - January 3, 2011


Manipulated Monday – New Year Starts with a Bang

Posted: 03 Jan 2011 07:36 AM PST


Manipulated Monday – New Year Starts with a Bang

By Phil of Phil's Stock World

The futures are so bright, we have to wear shades this morning.

Those shades would be blinders, like we put on horses to keep them from being distracted by reality while they race forward as we left 3 of our jockeys - Japan, China and the UK back at the paddock as they are all closed today, making this a very thinly traded open to 2011 and causing us to take all the early-morning exuberance with a Lot's wife-sized grain of salt.  

Oh we're ready to get bullish!  Ready in much the same way a fraternity pledge is ready to eat the worm at the bottom of the tequila bottle - it's disgusting and we'll probably be sick tomorrow but, for tonight - we get to hang out with the party boys and, if nothing else - we'll always have our memories to look back on.

The Republicans have already put Obama on Double Secret Probation, threatening to "go nuclear" and shut down government by refusing to raise the debt ceiling unless Obama agrees to "a range of painful cuts."  According to White House Economic Adviser, Austan Goolsbee, the Republicans are "playing chicken with the Nation's financial credibility."

This is not a game. You know, the debt ceiling ... is not something to toy with.  If we hit the debt ceiling, that's ... essentially defaulting on our obligations, which is totally unprecedented in American history.  The impact on the economy would be catastrophic. I mean, that would be a worse financial economic crisis than anything we saw in 2008.

"To not raise the debt ceiling could be a default of the United States on bond and Treasury obligations," said Republican Senator Lindsey Graham of South Carolina. "That would be very bad for the position of the United States in the world at large," Graham said. "But this is an opportunity to make sure the government is changing its spending ways."  Graham, speaking on NBC's "Meet the Press," said he would not vote to raise the debt ceiling unless spending is cut back to 2008 levels.

So happy 2011 to you, we're really starting the year off with a bang!   

Investors should, of course, thank the Republicans for their convoluted stance as this latest round of idiocy is already undermining faith in the dollar and that has already sent oil prices up $3.20 off Friday's close - all the way to $92.20 in pre-market trading and that's worth an extra $300M a day for the various oil cartels that will be removed from consumers pockets (and put into the pockets of friendly politicians, of course).  

The good news is though, that that will also make Billions of more dollars available to terrorist and that will give us a great justifications to keep spending $1,000,000,000,000 per year on the military without any cutbacks at all while we strip-mine all those horrible social safety-net programs that dare to give downtrodden Americans hope.  Of course the stock market futures are loving this and the Dow, at 7:45, looks like it will open up 100 points as the combination of a weak dollar and a weak President is the investing class's fondest wish for the New Year.   

It's not entirely too late to go back and read Christmas Weekend's "Secret Santa Inflation Hedges for 2011" or even some of our Breakout Defense plays from earlier in the month. As I pointed out in this weekend's "Reviewing the Reviews" article, our GE play from the Dec 11th breakout set is "only" up .35 out of $2.65 of potential gains so far as these hedges are designed to return that steady 10-20% per month while we're on target.  My review of the 2010 reviews is mainly backwards looking as I have little different to add to my "2010 Outlook - A Tale of Two Economies," which is an ongoing story and was very nicely updated by our friend Robert Reich just last week, which Washington's Blog did a nice job of coloring in as well.

If you can't say something niceWhen I have something new to say about 2011, I'll write it up but, for now, I defer to Republican Abraham Lincoln who warned: "A house divided against itself cannot stand. I believe this government cannot endure, permanently half slave and half free.  I do not expect the Union to be dissolved -- I do not expect the house to fall -- but I do expect it will cease to be divided.  It will become all one thing or all the other."  Something to look forward to in the 2012 elections, I guess.

Although he was talking about slavery, Lincoln could just as well have been talking about the gap between the rich and the poor which is now wider than the records set in the roaring 20's, the year before the great collapse of 1929.  Even a 1920's sharecropper was closer economically to his plantation owner than a secretary at Goldman Sachs is to Lloyd Blankfein today.  How long will modern Americans keep accepting the premise that the rich are just better and more deserving than they are - even as the standard of living for that other 99% sinks lower and lower with each celebratory tick of the indexes for the investing class?  

As I pointed out to Members in this morning's Alert, we had a very nice up day last Jan 4th - the first day of the new year, when the Dow popped 200 points early on and settled in for the day up 155 points at 10,583.  We topped out on Jan19th (options expiration day) at 10,725 before beginning a pretty relentless pullback that took us back to 9,900 (down 7.5%).  

7.5% would bring us back to S&P 1,165 and Dow 10,700 but let's assume we get that extra 2.5% between Friday's close and expiration day - that's going to take us to Dow 11,850 and S&P 1,285 and then pullbacks to 10,900 and 1,188 both of which should be rising 200-day moving averages by the time we pull back to them so I guess that means we'll be looking for failed tests of the Dow's 50 dma at 11,350 and the S&Ps 1,225 line this week.  To round our the rest of our index family - it's Nasdaq 2,600, NYSE 7,750 and Russell 750 that will need to hold between now and the month's end to crush our crash premise.  As long as those levels hold - we can ride our bull plays along and even pick up a few new ones along the way.  

I like JWT Intelligene's "100 Things to Watch in 2011," it's good to exercise your brain by thinking of things you don't normally look at:  

JWT: 100 Things to Watch in 2011

Presentations like this do remind me why its OK to be optimistic about our future. We still live in a World that is filled with millions of bright, innovative people and you can't stop them all from innovating and creating.  Real solutions to our problems may never come from Corporate America but, clearly from the above presentation, they haven't quite strangled the life out of small business innovators, despite the 2-year cut-off of funding as Big Business and Banksters alike hoard their cash and send more and more jobs overseas in the hopes of eliminating all possible competition on their home turf.

It doesn't work that way.  Ideas are like weeds, they will grow up around you unless you are constantly vigilant in trying to stomp them out. Big Business in America does it's very best to kill new ideas and, when they have to, they buy them and change them until they look just like all the tired, old ideas people are used to.  Facebook seems to have raised $500M from GS and some Russian investor at a valuation that puts Facebook at $50Bn - not bad for a company that's still private!  AMZN is in talks to buy out UK's LoveFilm, looking to go up against NFLX with the British DVD by mail leader because, it seems, Amazon couldn't figure out how to do this from scratch???

Also boosting the Dow this morning is JPM's timely upgrade of BA with a $83 target.  Fellow Gang of 12 Member DB upgraded fellow Dow component AA with a $22 target (maybe they read my picks this weekend!) while Bloomberg helps out by citing INTC, HPQ, IBM and CSCO's huge piles of cash as very bullish signs for 2011. 

So we will join the market for today and accentuate the positive as we try to eliminate the negatives like the Euro bond nightmare, Howard Davidowitz's take on the retail sector, worrying about our CINNs catching up to us (California, Illinois, New York and New Jersey) or Steve Harney's Doomsday prediction for housing. If we ignore all that, everything will be fine because the best thing to do about a problem is to ignore it until the next Administration takes over - who says politicians have nothing to teach us?  

2011 is off to an amazing market start, at this pace we'll be at Dow 30,000 by the end of the year so let's sit back and enjoy the ride while it lasts!  

- Phil

Blackstone sees gold at US$1,600, Treasury yields to rise 5%

Posted: 03 Jan 2011 06:41 AM PST

by Nikolaj Gammeltoft
Monday, Jan. 3, 2011 (Bloomberg) — Blackstone Group LP's Byron Wien, who called the bottom for U.S. stocks in 2010 while failing to predict the ensuing rally, said economic growth and 10-year Treasury yields will approach 5% this year and gold will surge above US$1,600 an ounce.

grain

The price of corn will surpass US$8 a bushel, wheat will top US$10 and soybeans will exceed US$16, while housing starts climb past 600,000, said Wien, chairman of Blackstone's advisory services unit, in his annual "Ten Surprises" list published since 1986.

… Commodity prices beat stocks, bonds and the dollar last year as China, the biggest user of everything from cotton to copper to soybeans, led the recovery from the first global recession since World War II. At the same time, crops were ruined by Russia's worst drought in at least a half century, flooding in Canada and parched fields in Kazakhstan, Europe and South America.

The Thomson Reuters/Jefferies CRB index of 19 raw materials gained 17% in 2010. Global bonds returned 4.88%, based on Bank of America Merrill Lynch's Global Broad Market Index. The U.S. Dollar Index, a gauge against six counterparts, added 1.5%. The CRB outpaced the other measures for the first time since 2007.

In 2009, Wien, who was chief investment strategist for the Pequot Capital Management Inc. hedge fund, correctly predicted rallies in equities, gold and oil.

[source]

Correlation Desks Gone Apeshit: Announcement Gov't To Allow 13 Oil Firms To Restart GOM Drilling Whacks... Silver??!!

Posted: 03 Jan 2011 06:27 AM PST


And then there was one... correlation desk. Following Reuters news that the US government would allow 13 oil firms to restart deep-water Gulf of Mexico drilling without the new environmental review (under certain conditions), oil drops, drillers spike... and precious metals plunge. Obviously, this is just because silver extraction is so very closely tied to how deep underwater a given jack up can reach. Record correlations may have declined, but only to be replaced with correlations that no longer make absolutely any sense. This is just how ridiculous the power of Wall Street's correlation desks is now that almost nobody is trading.

Crude and...

Silver...?

 

Gold Ending Diagonal?

Posted: 03 Jan 2011 06:21 AM PST

courtesy of DailyFX.com January 03, 2011 08:05 AM Daily Bars Prepared by Jamie Saettele Gold is threatening its high and one more high could complete a diagonal from 1317. This is the structure I am working with for now....


Gold buying in India continues unabated

Posted: 03 Jan 2011 06:19 AM PST

by Shivom Seth
Monday, 03 Jan 2011 (Mineweb) — It is time to bet on the yellow metal. With India's central bank, the Reserve Bank of India allowing seven more banks to import gold and silver into the country, the move is set to provide a major fillip to the country's gold starved citizens.

Gold continues to be one of the regulated sectors in India. The Indian government allows only state-run and private banks to trade in bullion at the wholesale and the retail level.

Though jewellers are also permitted to sell coins and bars through retail outlets, consumers throng to banks to get a purer variety of the precious metal.

… "The total number of banks that can ship precious metals in the country has risen to 30. This will now induce more customers to buy directly from banks. The year 2010 also provided the perfect setting for gold, especially in India, where the metal has given a return of over 19%, while the stock market (and Nifty Index in particular) gave only 15% return for the similar period," said Nagesh Zaveri, a bullion dealer with a nationalised bank in Mumbai.

[source]

ALSO…

RBI allows 7 [more] banks to import gold…
Mumbai, Jan 3 (Deccan Herald) — … With this, the total number of banks that can ship precious metals in the country rose to 30. Banks contribute over 80 per cent of the 700 tonnes that India annually imports to trade in bullion at the wholesale and retail level.

The bullion industry is gung ho over RBI's latest move, which would help the network of gold supply to widen and thereby add to some fair competition. Jewellers also sell both gold and silver coins and bars through retail outlets. The mandate for additional banks to import precious metals are likely to increase purchases and also help banks in boosting their gold lease facility for manufacturers.

… Observers in the bullion market maintain that demand for gold investment may have risen in the second half of 2010 as a result of perceptible shift in preferences from jewellery to exchange-traded funds (ETF), bars and coins gathers pace.

At the same time, traditional jewellery buyers in India are shifting their preferences to coins as they see great potential for a huge growth this calendar and a bullish price outlook.

Experts view that sales of investment products could outpace jewellery demand in the next one to two years.

[source]

Video: Why Gold Should Surpass $1650 This Year

Posted: 03 Jan 2011 06:11 AM PST

prieur du plessis Prieur du Plessis submits:

Spot gold prices will rise to at least $1,650 in 2011, believes Juerg Kiener, CEO at Swiss Asia Capital. He explains his bullish outlook to guest host Tai Hui of Standard Chartered Bank and CNBC’s Martin Soong and Sri Jegarajah.


Complete Story »


Guest Post: “I argue that North has set the stage for a face-saving retreat of support for the gold standard that has gained so much support and sway among many alternative economics circles and individuals in the past few years.”

Posted: 03 Jan 2011 06:08 AM PST

Gary North's "free market gold standard" is also a fool's gold standard MK: Here's a another Gary North gem. He 'loves' malls, which I guess is meant to be a pro free market rant – ignoring that the free market has moved online – causing commercial real estate to drop – and sales at Wal-Mart [...]


Is zillionaire Slim taking a position in silver?

Posted: 03 Jan 2011 05:47 AM PST

1:45p ET Monday, January 3, 2011

Dear Friend of GATA and Gold (and Silver):

Eric King of King World News and GoldMoney's James Turk today discuss speculation that Mexican zillionaire Carlos Slim is considering getting into the precious metals market by purchasing a large position in silver miner Fresnillo. Excerpts from their discussion have been posted at the King World News blog under the headline "Is the World's Richest Man Getting into Silver?" and you can find them here:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/1/3_Is_...

Or try this abbreviated link:

http://tinyurl.com/25uwdp4

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


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Sona Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit, Extending the Mineralization of the Southwest Vein on the Property

Company Press Release, October 27, 2010

VANCOUVER, British Columbia -- Sona Resources Corp. reports on five drillling holes in the third round of assay results from the recently completed drill program at its 100 percent-owned Elizabeth Gold Deposit Property in the Lillooet Mining District of southern British Columbia. Highlights from the diamond drilling include:

-- Hole E10-66 intersected 17.4g gold/ton over 1.54 metres.

-- Hole E10-67 intersected 96.4g gold/ton over 2.5 metres, including one assay interval of 383g of gold/ton over 0.5 metres.

-- Hole E10-69 intersected 85.4g gold/ton over 4.03 metres, including one assay interval of 230g gold/ton over 1 metre.

Four drill holes, E10-66 to E10-69, targeted the southwestern end of the Southwest Vein, and three of the holes have expanded the mineralized zone in that direction. The Southwest Vein gold mineralization has now been intersected over a strike length of 325 metres, with the deepest hole drilled less than 200 metres from surface.

"The assay results from the Southwest Zone quartz vein continue to be extremely positive," says John P. Thompson, Sona's president and CEO. "We are expanding the Southwest Vein, and this high-grade gold mineralization remains wide open down dip and along strike to the southwest."

For the company's full press release, please visit:

http://sonaresources.com/_resources/news/SONA_NR19_2010.pdf

Join GATA here:

Yukon Mining Investment e-Conference
Wednesday-Thursday, January 19-20, 2011

http://theyukonroom.com/yukon-eblast-static.html

Vancouver Resource Investment Conference
Vancouver Convention Centre West
Vancouver, British Columbia, Canada
Sunday-Monday, January 23-24, 2011

http://cambridgehouse3.com/conference-details/vancouver-resource-investment-conference-2011/15

Cheviot Asset Management Sound Money Conference
Guildhall, London
Thursday, January 27, 2011

http://www.cheviot.co.uk/news/video/2010/12/the-cheviot-sound-money-conf...

Phoenix Investment Conference and Silver Summit
Renaissance Glendale Hotel and Spa
Friday-Saturday, February 18-19, 2011
Glendale, Arizona

http://cambridgehouse3.com/conference-details/phoenix-investment-confere...

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update 03/01/2011

Posted: 03 Jan 2011 05:42 AM PST

I didn't achieve my goal of 1000 USD donations before the end of the year.  Philippe from Switserland was   the last one.  There still remains 750 USD.  Thank you Philippe!  Come on friends, gold's up! :-)

George Soros: The United States Must Stop Resisting The Orderly Decline Of The Dollar, The Coming Global Currency And The New World Order

Posted: 03 Jan 2011 05:29 AM PST

In the video you are about to see, George Soros talks about "the creation of a New World Order", he discusses the need for a "managed decline" of the U.S. dollar and he talks at length of the global need for a true world currency. So just who is George Soros? Well, he is a billionaire "philanthropist" who came to be known as "the Man Who Broke the Bank of England" when he raked in a staggering one billion dollars during the 1992 "Black Wednesday" currency crisis. These days Soros is most famous for being perhaps the most "politically active" (at least openly) billionaire in the world. His Open Society Institute is in more than 60 countries and it spends approximately $600 million a year promoting the ideals that Soros wants promoted. Soros and his pet organizations have played a key role in quite a few "revolutions" around the globe over the last several decades, but these days the main goal of George Soros is to bring political change to the United States.


So exactly what is it that George Soros is trying to accomplish? Well, in a nutshell, what he wants is a Big Brother-style one world government based on extreme European-style socialism, strict population control and the radical green agenda. It would be a world where the state tightly regulates everything that we do for the greater benefit of the environment and of society as a whole...

More Here..

On Future Oil Prices And The Economic Deterioration Should Crude Follow Gold's Surge 


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

The Plight of the Baby Boomers

Posted: 03 Jan 2011 05:20 AM PST

Okay, so what will 2011 bring?

Most likely, it will bring more of 2010. That is, the confusing and contradictory trends of the past year are likely to keep going.

On the one hand, the deflationary contraction that began in 2007 will continue shrinking prices and economic growth. The savings rate has climbed to over 5%. Unemployment is still near 10%. And the CPI – if you believe the official numbers – is nearly flat. We may be living through the biggest rush in monetary inflation in US history, but the core inflation numbers haven't moved so little in more than 50 years.

On the other hand, the inflationary expansion of the money supply that began in 2009 will go on too. It will bring more bubbles and more speculative pressure on oil and gold. It might also bring a collapse of the US Treasury bond market – if not in 2011, then soon after!

Which hand will have the upper hand?

Neither.

Instead, they will continue jerking the economy this way and that…rewarding some speculators, punishing others…smacking economists…and giving central bankers the middle finger.

That's our prediction.

Gold will rise. Oil will rise. Emerging markets will rise.

The US economy will NOT rise.

What? Weren't there encouraging signs of life at the very end of the year?

Yes. But there are always signs of life in an economy. The US economy isn't dead. It's just going through a bad patch…like a man whose wife has left him…or a woman who has gained 20 lbs…or a 60-year-old couple that has to downsize. These things take time.

"Baby boomers unprepared for retirement," says a headline in the local paper.

According to the article, 10,000 boomers will reach age 65 every day for the next 19 years. And few of them have saved enough money. Some were counting on 401(k) plans. But stocks haven't made any progress in the last 10 years. Others were looking to their houses as a source of retirement financing. They were doing fine until 2007. Since then, the value of their houses has been cut by a third.

The poor boomers! What are they going to do?

We talked to one of these boomers on the way from the airport.

"I'm going to work until I drop," he said. (Good plan. If you have a job…)

"I bought a little apartment over in Boca Raton," our driver explained after picking us up on Miami. "You know, like everyone else, I've been hurt by this recession. They say it's over. But it doesn't seem over to me.

"A couple years ago, people would rent my limo service for a big night out…maybe, twice a week. I'd take them down to Miami. They'd go to a big party…or to a Heat game…and then to a nightclub. They'd pay me for a whole night. It was good money.

"But now, I'm lucky if I get one a month. Either people don't have money or they're not spending it.

"My wife and I had a big house with a swimming pool…everything. But we also had a big mortgage, $4,500 a month. She didn't want to do it. But we had no choice. I needed to make sure that at least I'd have a roof over my head. So, I bought an apartment in Boca for $27,000. It was $90,000 three years ago.

"And I told my wife that we had to cut back. This way, I'll be able to save some money. Then, if we want to, we can always buy a big house again. But right now, I just don't want that burden on my back. I can't afford it."

Bill Bonner
for The Daily Reckoning

The Plight of the Baby Boomers 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."


A Decade of Gains for Gold and Silver

Posted: 03 Jan 2011 05:10 AM PST

Tim Iacono submits:

There’s not much that needs to be added to the chart below, so I won’t even try.


Complete Story »


How You Trade the Big Trends in 2011

Posted: 03 Jan 2011 04:38 AM PST

By Chris Vermeulen, TheGoldAndOilGuy

I hope everyone had a great holiday and new years!

It's time to reset our profit counter to zero and start looking for new profitable trades along with managing our current open positions on our small cap stocks which we continue to hold with gains of 66%, 35% and 10%.

Last year was a tough one as the stock market chopped around in a very large range giving off buy and sell signals every week and some times every other day… If you understand how to trade options then these conditions can make you a boat load of money.

Those who follow me or trade with me through my trading newsletter know how conservative I am when looking for low risk setups in both ETFs and stocks. And no doubt agree there were some extended periods of time when we did not have any trades because the volatility on a daily basis was making it the risk higher than what I wanted us to take, thus we waited for setups instead of chasing prices. We still locking in some solid gains with 8 winning trades, but feel we can better this year especially if we get less chop and more of a trending market.

It's safe to say some people just do not like being in cash, hence the reason so many want stock picks and trades all the time. But to be flat out honest, I love being in cash or at least holding a good chunk in cash waiting for a high probability opportunity to pop up on my charts before committing my hard earned cash. It's better to be wishing you were in a trade than to have all your money tied up in losing positions just because you wanted to be active… Because I give you only the trades I am making with my own money, I think that is the reason things are slower paced, unlike some other newsletters in this industry which fire off new trades each day or week just to keep those addicted (wanting stocks picks all the time) happy.

Anyways, 2011 should be a great year for trading, investing and education. Last years fast paced market I know either took your money and got you really frustrated, or you made money and was able to use the difficult conditions to fine tune your trading and money management stills like I did. 2011 feels like it's going to start out similar to 2010 where we get a move up into mid January, but once earning season starts the market sells off on the good news for an 8-10% correction.

The good news is that after last years fast paced market and my constant refining of my strategy and money management rules, we should be able to catch the majority of the trends this year both up and down using stocks, regular ETFs and Inverse ETFs.

As much as I would like to forecast what I think will happen this year, I have decided to take the market one quarter at a time to keep everyone more in tune with what's happening now and a glance forward up to 2-3 months.

Take a look my SP500 charts for the next 3-8 weeks below.

SP500 Index – Daily Chart
On this chart you can see that the overall trend right now is still clearly up. But with this current situation I feel one should be on the sidelines waiting for the market tip its hand telling us its headed higher or lower. If it prices start to fall we will look to short the market in order to profit from the correction as long as the market provides an optimal opportunity.

Currently the market sentiment levels are at extreme highs, which is the same as last January and April's highs. With extreme sentiment, light volume (lack of buyers) and earning season just about to start I cant help but think a nice correction is about to take place which will cleanse the market before the next big leg higher.

If all goes according to plan we should see an 8-10% correction. A pierce of the November low is what I am looking for as that would trigger a lot of protective stop orders and create panic selling in the market. It is panic selling which creates a market bottom. That being said we may not get that large of a correction which is why we must continue to monitor the market closely as my analysis will change with the market.

Jan 2010 SP500 Correction
This time last year the market was in a very similar situation with market sentiment, light volume, and earning season just around the corner…

Its difficult to pick tops because they can stay overbought for an extended period of time, bottoms are a little different simply because fear is more powerful than greed and shows it's self on the charts once you know what to look for and how to trade it. My point here that you should not jump the gun and start shorting just because you think one is around the corner. I prefer to wait for more of a clear signal that sellers are in control then ride the short term down trend and hope it blows up into the correction I think we are about to see.

During bottoms there are new low washouts, and the same goes for tops, we get several small new highs just before the price rolls over, and that has yet to happen.

Weekend Market Trend Conclusion:
In short, 2011 should have several great plays as I am looking at the SP500, Precious Metals, Oil, US Dollar, Bonds and Emerging Markets for some big moves. You can get my pre-market daily videos, intraday updates along with my stock and ETF trades by visiting my website and joining my newsletter: www.TheGoldAndOilGuy.com

Chris Vermeulen

Gold climbs above $1,420 as 2011 gets underway

Posted: 03 Jan 2011 04:36 AM PST

Monday, January 3, 2011 (IBTimes) — Gold rose above $1,420 an ounce in Europe on Monday, within 1 percent of its record high…. European trade is expected to remain quiet, with London still on holiday.

While a firm dollar is limiting gains, expectations for more bad news on euro zone debt, concerns over potential inflation in developing economies and an increased focus on the U.S. deficit are set to maintain surging demand for gold, analysts said.

Pradeep Unni, senior analyst at Richcomm Global Services in Dubai, said fresh highs in gold were "likely" this year: "Gold (steps) into the New Year with all its current fundamentals intact…. sovereign debt risk, macro uncertainty, concerns over currency stability, medium-term inflation fears as the U.S. Federal Reserve implements Quantitative Easing II, geopolitical tensions and low interest rates."

[source]

2-Year High for Oil Pushes the Loonie Higher

Posted: 03 Jan 2011 04:26 AM PST

The Daily Reckoning

Well… As I expected, the euro (EUR) really ran up on Friday's trading, as shorts were covered and trading books were squared for year-end. I truly believe that this euro-buying could be reversed as we go through the first month of 2011… The reason I say that is I truly believe that the euro will come under pressure, as the Eurozone gets probed to come up with better solutions to their periphery countries' problems. I expect Germany to balk at many things, and when they balk, the runners get to move up…the runners being the dollar, and gold…

Eventually Germany will come up with a solution that's agreeable by all parties (except Italy; they always whine), and that's when we'll see the euro come back… At least that's my thought for the first part of 2011…

Now… All that could change in a NY minute, if…the markets don't want to probe the Eurozone for better solutions, and instead take their fight to the US dollar… Which, in my opinion is the way it should be, with the Eurozone's debt problems taking third, behind Japan and the US.

The euro ran up to 1.34 and change on Friday, but has given back about 1-cent of the ground gained in the last two days of trading in 2010. The Aussie dollar (AUD) is off by about 1/4 of a cent this morning, and gold is flat… Not everyone around the world is back to work today, but I am…so, let's get going!

Let's see… Oil is trading at $92… I don't want to see this happen, but it sure looks like oil is going back to $100 again, doesn't it? The only thing good about $100 oil is the benefit the Canadian dollar/loonie (CAD) receives by the high priced oil. And that's exactly what we're seeing now, and most of the latter part of 2010 – oil's price moving higher, and dragging the loonie along for the ride… Oil is trading near a 2 1/2-year high, and so is the loonie! I saw some pundits' forecasts for the loonie, and they have the currency trading between $1.01 and parity in 2011… Hmmm, that seems awfully tight! Tupperware like! I'm just not buying that tight range, not with the way currencies as a whole have traded in the past two years, with wild swings, and lots of volatility. So… I'll go out on a limb and say that if oil goes to $100, the loonie will break higher than the $1.01 cap others have put on it for 2011.

Well… The euro may be off by about 1-cent this morning, but it's not because of fundamentals. Eurozone manufacturing rose more than forecast in December, with their manufacturing index (just like ours), rising to 57.1 from 55.3! WOW! That's a huge move for one month, and that's in the face of a strong euro throughout December. Now, of course, Germany is the star performer for manufacturing in the Eurozone, but most of the other countries of the Eurozone showed some improvement, except Greece…

On Friday, Germany's Chancellor, Angela Merkel, must have been making her New Year's Resolutions, because she was talking up the euro like I've never heard her talk it up before… She was actually sounding emotional about the single unit/euro… She even mentioned that "we have to strengthen it"… Hmm… I guess she finally realized that the common currency for the Eurozone is what's needed. Now… If only she would agree that a common bond issuance is also needed, we wouldn't have to worry about "strengthening the euro" as it would take of that in a heartbeat!

Gold is flat so far this morning, and begins 2011 trading at $1, 420.10… That's pretty incredible, folks… But, like I told the audience that tuned into my interview on WAAM radio 1600 AM, yesterday… "Gold is a rarity… It's not like miners can just make gold appear for them." I used to give this fact at my presentations (I'll have to have someone research it to see if it needs to be updated), but you could put all the gold that's ever been mined in two Olympic-sized swimming pools…

Silver is outperforming gold today, just as it did throughout 2010. Silver is trading above $31… WOW! I've already told you about what I think here with silver, so I won't go into that again, but… I do want to point out that NewsMax is going to be running an article this month where I discuss how I believe silver is the new gold…

And the Brazilian real (BRL) continues to be one of the better performing currencies, overall. When you include interest paid, the real is up 39% in the past two years versus the dollar…and then add in the interest…pretty impressive! And that's with the Brazilian government doing everything they can to stem the real's strength. I've said this before, but you have to make certain that you only use your "speculative" money that you allocate in your investment portfolio, when it comes to reals…

Then there was this… Well, you know how I've tried to point out the debt problems of the US… Well, there's a great story on the Bloomie this morning about Illinois, and how their budget deficit is at least $13 billion, and they have $4 billion in missed payments or underfunded state pensions… Illinois lawmakers meet this week and will attempt to come up with a solution to this mess… Good luck with that! You see, this deficit didn't happen to show up one day… It's been building to this crescendo for some time. Illinois shares the same credit rating (the lowest) as California, and Moody's has assigned Illinois a negative outlook… Look, if these lawmakers don't do something about their deficit spending, the total State's deficit will be $15 billion by this time next year! And the markets think Greece or Ireland is a larger problem? They had better think again…and soon!

To recap… The currencies and precious metals rallied strongly on Friday, as expected, with position squaring and the closing of books for 2010. The currencies are weaker though this morning, with gold flat and silver up slightly. Angela Merkel was talking up the euro on Friday (must be a New Year's Resolution for her!)… And oil is at a 2-year high, dragging the loonie along for the ride higher…

Chuck Butler
for The Daily Reckoning

2-Year High for Oil Pushes the Loonie 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….

Question of the Month Winners

Posted: 03 Jan 2011 04:25 AM PST

By Jeff Nielson, Bullion Bulls Canada

We are very pleased to announce the first three winners for Bullion Bulls Canada's "Question of the Month" contest. Our first batch of winners was picked by our resident mining guru, Brian Boutilier (Chad and I will get our turns later).

Without further ado:

1st prize: Hockmir

2nd prize: Earl

3rd prize: Mathnerd

As with our previous monthly contest, the first prize winner receives three 1-oz silver coins + a stylish Bullion Bulls shirt, second prize is one 1-oz coin + a shirt, and third prize is a 1-oz silver coin. And as always, the bullion prizes have been generously provided by our good friends at SilverGoldBull.com.

Part of the reason we came up with this new contest concept is because we hope that other readers will find the questions (and perhaps even the answers) intriguing – and so here are the winning entries.

1st prize:

Hockmir: As we follow the machinations of the metals market, especially silver, one is reminded of the prediction of price divergence between paper and physical metals as the wheels begin to come off the bus.

As I reported in another thread, I have now seen a local coin dealer who was cleaned out of three bags of junk silver coins in a single day, leaving him with about $3 face in US junk silver on hand. I have also observed lower value numismatic coins showing up as "junk", since the melt value is now greater than the "current" numismatic value.

These observed events suggest to me that we are not far from the predicted point where physical metal becomes impossible to obtain, even though the COMEX or LBMA prices are still held within reasonable bounds.

And so, the question is, what events and what machinations can we expect to see in the physical market as the divergence becomes complete. Will we require an actual default of the commodities exchanges before physical floats to a new value, and therefore becomes available, or, can we expect long periods in which physical is just plain unavailable at any price? Or, will there develop a "black market" in physical in some fashion, either locally, or internationally?

Jeff Nielson: This is another one of those areas where I'm going to use the cop-out of "insufficient data". We are already seeing some modest divergence, which is visible in the ETF's. The CEF fund, the Sprott funds, and those vehicles which provide a solid assurance of actually POSSESSING real bullion are trading at a premium.

Meanwhile, we look at the highly-suspect "paper" bullion-ETF's, GLD and SLV, and we see they are trading at a discount. Part of that discount is an inherent aspect of their business model: management fees dilute the funds over time. In the case of GLD, we also know about "D-Day": the 11th day of the 11th month of the 11th year (Nov.11/2011) when GLD ominously warns that management fees can be expected to rise.

This is obviously where the real "paper" vs. "physical" decoupling is going to take place, simply because they represent the largest pools of "paper bullion". So we have two dynamics taking place: the internal dilution which increases the discount of GLD and SLV, and the divergence in investor preference – where the thought of having the world's largest gold short and silver short (respectively) as "custodians" for one's "bullion" becomes more and more frightening to sophisticated investors.

More articles from Bullion Bulls Canada….

Predictions for 2011

Posted: 03 Jan 2011 04:25 AM PST

By Jeff Nielson, Bullion Bulls Canada

It's once again time for the obligatory "predictions" for the upcoming year. With the world being a crazier and more chaotic place than ever, such an exercise is inherently masochistic. However, being a good sport, I'll peek into my own crystal ball and attempt to decipher my vision for the future.

In keeping with tradition, I must first review my predictions for 2010 (here's where the masochism comes into play). As I attempt to "explain" how and why the world did not unfold as I predicted one year ago, two themes come into play: in one respect, I simply overestimated the speed at which events would progress in 2010; while in the other, I grossly underestimated the human capacity for stupidity.

I expected civil unrest in the U.S. in 2010 (as did the U.S. government when it illegally deployed a unit of the U.S. Army on American soil) due to the widespread recognition that the "U.S. economic recovery" was nothing but a propaganda hoax. Instead, placid American sheep went through all of this year still acquiescing to the delusion that the U.S. economy is "growing".

Part of the reason I expected the non-existent U.S. "recovery" to be acknowledged is that I considered this the only way that the U.S. government would be able to justify throwing "more than $1 trillion" at the U.S. economy, in attempting to reanimate this corpse. I was wrong here. While the Obama regime threw $800 billion at the U.S. economy (in extending tax-cuts for fat cats), and Bernanke threw another $600 billion at the economy (via more "QE"), these two colossal frauds did so while managing to avoid admitting that all of their rhetoric about a "U.S. economic recovery" was nothing but shameless lies.

I also expected clear acknowledgment of a "decoupling" between the U.S. economy (and a few other, weak Western economies) and the rest of the world. Here I was wrong as well. With the American people not even willing to acknowledge their economic fantasy, it was obviously less likely that people across an ocean would see through the façade.

I was correct that Western governments would have to make their "choice" between the expediency of more debt and money-printing or attempting to restore fiscal and monetary sanity to their economies. And I was correct that most would choose "expediency" (and future bankruptcy) ahead of attempted restraint. Indeed, the only Western economies which made any attempts at "austerity" were those who had it forced on them through the artificial Euro "debt crisis".

Turning to the precious metals market, I was ahead of myself in predicting gold prices: looking for $1500/oz by the spring of this year, and somewhere around $1800 by year end. With respect to silver however, my crystal ball was functioning much more effectively – where I stated that I "would not be surprised to see silver break $30/oz next year – if only briefly".

On that high note, let me turn now to 2011. I'll begin with a vow that is sure to disappoint many precious metals enthusiasts who read my work: I will not engage in any general predictions for gold and silver prices going forward – and likely never again. The reason? As is obvious, these markets are now so close to imploding/exploding that any attempt at "predicting" prices in the future is nothing more than facile guess-work.

Before disgruntled readers brand me a "cop out", let me attempt to justify that stand. I see a minimum of three dynamics, each of which is highly probable to occur next year, and each of which would cause an eruption in precious metals markets on a scale where "predictions" are impossible and/or useless.

More articles from Bullion Bulls Canada….

Inflation & Hyperinflation: One...or Both?

Posted: 03 Jan 2011 04:25 AM PST

"U.S. Mint uses 1.43 million ounces of gold and 34.66 million ounces of silver in its 2010 bullion production. 5-ounce 'America The Beautiful' silver bullion coin finally reaches the public... and good luck getting any. " Yesterday in Gold and Silver Friday's gold price action was very positive... but volume was very light. But, considering the fact that it was a holiday-shortened week... plus the last week of the month, quarter and year... it was an outstanding performance. I must admit that the strong price action was not entirely what I was expecting... but I wouldn't be at all surprised if JPMorgan et al were in the market covering short positions. Gold closed at another new record high price. Part of the blue trace [from 6:00 p.m. Thursday night in New York] plus all of the red trace, is Friday's price action. Pretty much the same thing can be said of the silver market price action. Friday's high price spike made it up to $30.98 spot... and silver...


US Mint Sales: 2010 Proof Silver Eagles Sell Out

Posted: 03 Jan 2011 04:24 AM PST

Fewer silver coin products sold during Christmas week, the latest US Mint sales figures show. Proof Silver Eagles and Bullion Silver Eagles did not advance at all, but the Proof Silver Eagles sold out this week. As reported earlier, the just released America the Beautiful Silver Bullion Coins sold out as well.
Proof Silver Eagles [...]

Silver Leads the Way

Posted: 03 Jan 2011 04:21 AM PST

2011 is starting off with a bang for the precious metals. Price action for gold and silver continues to confirm massive breakout moves to the upside. Above we have the 1 year chart of Silver showing two ascending triangles since the clear breakout in September 2010.

Read more….
at

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