Gold World News Flash |
- Richard Russell - Gold is the Ultimate Survival Mechanism
- Crude Oil Reaches New 26-Month High on Supply Issues, Gold Continues to Rebound off T
- Gold Seeker Closing Report: Gold and Silver Gain Again
- The Falling Dollar And Debt Drives Gold And Silver
- Former S.A.C. "Portfolio Manager" Ron Insana Is Back... And He Appears To Be Pissed
- In The News Today
- Is The Gold Price Rise to $1,380.70 Something to Get Excited About?
- Perth Mint reports 'unrelenting' demand for gold on dip below $1,400
- Guest Post: Gold, The Improbable Answer To Life, The Universe, And Everything
- Jim?s Mailbox
- Hourly Action In Gold From Trader Dan
- Physical Market Continues To Show True Value Of Gold
- ‘India to be 3rd largest economy by 2050′
- Gold and Silver Enter a Higher Risk, Higher Return Potential Zone
- Could the U.S. central bank go broke?
- Floods and Shortages - January 11, 2011
- TUESDAY Market Excerpts
- At Least 10 States Have Introduced Gold Coins-As-Currency Bills
- The Benefits of Gold and Silver Not Lost on the Chinese
- GoldCore Review of 2010 And Outlook For 2011
- Gold: … With apologies to Mr. Adams
- Happy Little Mushrooms 2011
- Gold and honey*
- With a Printing Press, the Debt Ceiling’s No Problem at All
- The Increasingly Complex Relationship Between Man and State
- This Will Be the Biggest Bull Trend in Commodities for the Next Decade
- Precious Metals Enter a Higher Risk, Higher Return Potential Zone
- US Road to Bankruptcy Runs Parallel to France
- The Dollar: Dominant no more?
- Mainstream Haters Deny Gold its Fundamentals
- But only if I can be Mr. Sulu
- The Biggest Resource Stories for 2011…and Beyond!
- Gold and Honey*
- Gold Daily and Silver Weekly Charts
- Gold Flat Correction Possibly Complete
- Forex and Fighter Jets
- Gold: The Improbable Answer to Life, The Universe, And Everything
- Jim's Mailbox
- Jackie O rocking the Silver vibe!!!!! (**)
- Demand for food has not increased, but the demand for derivatives tied to food (agricultural futures) has – spurred by an increase in supply of credit, in the form of Bernanke’s credit explosion (QE2) – and the artificial ‘paper price’ of food �
- Cazenove's Griffiths: "Not Owning Gold Is A Form Of Insanity And May Even Show Unhealthy Masochistic Tendencies"
- China, the world’s biggest gold producer, is catching up with India, with demand this year expected to surpass 600 tonnes.
- Goldman Prop: A Veritable (Physical) Gold Mine... As Suspected
- Gold & USD: Tactics To Get Richer
- Gold Market Update - Jan 11, 2011
- Silver Market Update - Jan 11, 2011
- You’re insane if you don’t own gold, investors told
- More Evidence Commercial Silver Supply Tight
- Take-Off Tuesday - Playing the One-Way Market
- China’s View From Across the Pacific
| Richard Russell - Gold is the Ultimate Survival Mechanism Posted: 11 Jan 2011 04:55 PM PST  With gold still consolidating gains, the Godfather of newsletter writers Richard Russell in his latest commentary stated, "The double-dip is almost here, as six cities set new lows for the period since the 2006 peaks. There is no good news in October's report." David Blitzer, managing director at S&P Case-Shiller. I've said before that as I see it, our task in the years ahead will not be building potential profits, rather it will be how to avoid losing purchasing power."
This posting includes an audio/video/photo media file: Download Now | |
| Crude Oil Reaches New 26-Month High on Supply Issues, Gold Continues to Rebound off T Posted: 11 Jan 2011 04:00 PM PST courtesy of DailyFX.com January 11, 2011 08:51 PM Oil moved closer to $100 amid continued supply issues in Alaska. Meanwhile, gold traders cautiously reentered long positions. Commodities – Energy Crude Oil Reaches New 26-Month High on Supply Issues Crude Oil (WTI) - $91.14 // $0.03 // 0.03% Commentary: Crude oil rallied strongly for a second day on Tuesday due to the same factors that influenced trading in the day before. WTI added $1.86, or 2.08%, to settle at $91.11, while Brent advanced $1.91, or 2%, to settle at $97.61, a new 26-month high. Production in Alaska still remains shut-in due to a pipeline leak, but the latest news is that flows may be soon restarted (at least temporarily) to prevent freezing in the line. In any event, this whole event will may lead to several million barrels of lost production, but will likely have no major, lasting impact. There is always the risk that production stays offline longer than expected though, so until the situation is comp...
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| Gold Seeker Closing Report: Gold and Silver Gain Again Posted: 11 Jan 2011 04:00 PM PST Gold climbed steadily higher in Asia and London and saw a gain of $12.15 at $1386.55 in early New York trade before it fell rather markedly to see a $1.10 loss at $1373.30 by about 10AM EST, but it then rallied back higher in the last three and a half hours of trade and ended near its earlier high with a gain of 0.73%. Silver rose $0.72 to $29.66 before it also pared its gains a bit in early New York trade, but it still ended with a gain of 2.07%.
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| The Falling Dollar And Debt Drives Gold And Silver Posted: 11 Jan 2011 03:15 PM PST TellGold
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| Former S.A.C. "Portfolio Manager" Ron Insana Is Back... And He Appears To Be Pissed Posted: 11 Jan 2011 01:30 PM PST
This one was just too hilarious to pass by without presenting. It was in fact hilarious enough that it could be presented a la carte without spoiling it by actually commenting on what the CNBC "contributor" had to say...Which means: open season for ZH readers. Take it away. What the Doomsayers Don't Say to You, posted originally on HuffPo where Ronnie is baaaack. Friday's report on the nation's unemployment situation had a little for the bulls and a little for the bears, when it comes to this nation's economic outlook for 2011. While the unemployment rate plunged in December to 9.4 percent from 9.8 percent, only half of the improvement came from Americans finding new jobs. The other half of the improvement came from discouraged workers exiting the labor force, which has the perverse impact of reducing the unemployment rate. (It's a quirk of the strange calculus that goes into divining the nation's unemployment statistics.) Only 103,000 new jobs were added to payrolls last month, well below market expectations and below the 150-200,000 jobs needed to keep up with population growth and growth in the labor force. Indeed, Federal Reserve Chairman, Ben Bernanke, in testimony before a Senate committee, acknowledged that it could be four to five years before the labor markets return to "normal." "Normal," as measured in historic terms, implies a 5-6 percent unemployment rate. There are some who suggest that our labor force never will return to "normal." But that view is unnecessarily pessimistic and belies the improvements being seen in the economy, each and every day. By the way, a quick return to "normal" would imply that the economy would add about 600,000 jobs a month for over a year, which it rarely, if ever, has done. Absent such an immediate and stunning improvement in job creation, there is virtually no way the unemployment rate could get back to "normal" in less than a few years, under even the most optimistic scenario. That does not mean we can't, or won't, see meaningful improvement in the labor market in the months, and years, to come, that will be felt by all. Many on Wall Street and many, many more on Main Street, were understandably discouraged by the December report and the Fed chief's comments, as one might expect, given the grudging improvement in the jobs picture, even as enormous piles of cash build up on bank balance sheets and in corporate coffers. But this worry about the economy is beyond misplaced, in my view. After a serious recession like the one we have just experienced, borne of an economy gone wild, it is a miracle that we have recovered as much lost ground as we have, compared to the alternative scenario many of us were contemplating only two short years ago. Yet, there remain countless doomsayers who suggest that another, even more serious crisis, is just around the corner. Citing the possibility of a renewed credit collapse in Europe, a series of municipal bankruptcies here in the U.S., or another leg down in the housing market, they say we are just days, weeks, or months away from that dreaded "double-dip," or another downturn that will make the first phase of the "Great Recession" feel like a walk in the park. My good friends, economist, Nouriel Roubini; author and investor, Nassim Taleb; hedge fund manager, Doug Kass; and banking analyst, Meredith Whitney, all repeat a mantra that remains in vogue among the gloom and doom jet-setters. They claim that we are being falsely encouraged by recent economic statistics that create an illusion of recovery that is either being borrowed from future prosperity, or is the very temporary result of "recession fatigue," a condition that I never before have encountered. In short, and for a variety of under-discussed reasons, they are flat-out wrong. Few of the naysayers have bothered to incorporate into their overly pessimistic assumptions some truly miraculous developments that have taken place since Ben Bernanke's "great intervention," which prevented us from experiencing a catastrophic 1930s-style depression, or a protracted, Japanese-style stagnation. Unlike those prior periods, the U.S. economy already has recovered ALL of the lost output since the start of the Great Recession.
While many remain deeply concerned about the fragility of what might be the start of a self-sustaining economic recovery, there is real reason for optimism that, indeed, a true and lasting recovery is underway. As I return to blogging for The Huffington Post, I despair over a political environment which has led us down a path that now goes beyond partisan politics, as of this past weekend, to one of a clear and present danger. I also worry that far too many voices continue to prey on the financial fears of a society that has seen more than its share of problems and pain. And, while I often have been described as a Cassandra, and rarely a Pollyanna, for the first time in many years, I see reason to rejoice in an economic recovery that, while uneven, appears to be gaining strength and durability every day. If only our political situation would improve as much as our economic condition, I would hold even greater hope that happy days are, indeed, here again.
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| Posted: 11 Jan 2011 12:12 PM PST
Jim Sinclair's Commentary My dear friend Harry Schultz who I have known for more than 40 years has written his last Harry Schultz Letter. His final word on gold is: About gold, Schultz retains his long-term bullishness. He quotes the respected Seeking Alpha service: "For gold to match the growth in US M1, M2, public debt & budget deficit, gold will have to reach $1,800, $2,400, $7,800 & $13,200, respectively. While I can't imagine gold going to $13k, these numbers tell me that calling gold a bubble is a bit premature. In my view, money supply, public debt & the budget deficit are in a bubble, not gold, not yet." Schultz's comment: "Wake me up at $2,400 gold."
Jim Sinclair's Commentary A must watch. Massachusetts Foreclosure Ruling: 'Landmark'
Jim Sinclair's Commentary Maybe the Sheeple are waking up? Illinois Governor Flees Capitol Through The Basement After Disastrous Meeting On State Budget Illinois Governor Pat Quinn fled the state's Capitol building through the basement after a lengthy day of debating a rescue plan for the troubled state, according to CBS Chicago. Illinois is considering raising the state's income tax by 75% as part of its financial reform package. The reform is key to Illinois balancing its budget and avoiding further debt market stress. The state's current government is attempting to rush through income tax reforms prior to the new assembly being sworn in later this week. The proposed tax increases from the Democrats from CBS Chicago: An increase in the income tax from 3% to 5.25%, to decline in four years time A dollar increase in the cigarette tax, doubling the current tax
Jim Sinclair's Commentary Gold will eventually rally exponentially and investors who don't own the precious metal are "insane," and may be showing "masochistic tendencies," 'Not Owning Gold is a Form of Insanity': Chartist Gold will eventually rally exponentially and investors who don't own the precious metal are "insane," and may be showing "masochistic tendencies," Robin Griffiths, technical strategist at Cazenove Capital, told CNBC. "I think not owning gold is a form of insanity, it may even show unhealthy masochistic tendencies, which might need medical attention," Griffiths said. Gold, along with other metals such as copper, has been making new all time highs, which is a strong buying signal, according to Griffiths. "Although it's been a top performer for each of the last ten years, it's still in a linear trend. Eventually it will go exponential and make more in the last little bit than the whole of the ten year trend," he said. Griffiths said that any short-term declines in the price of gold represent a buying opportunity and the asset is still not an "over-owned trade".
Jim Sinclair's Commentary Screw the guy who thought he was going to retire. Gingrich Proposes Allowing State Bankruptcies, To Escape Pension Obligations As a way to let state governments, and taxpayers, off the hook for paying the trillions in pension benefits they have promised to their workers, presidential hopeful and former House Speaker Newt Gingrich has proposed changing federal laws, so that states can go bankrupt. True, state pension plans don't currently have enough to pay their pension benefits over time, not to mention all the other stuff that is due more immediately. But we have to remember that states agreed to pay these benefits in negotiations with workers. Legislators should be held accountable, and show the fortitude, to negotiate a solution to reduce them, rather than just walk away. It's the lead story in Pensions & Investments, a trade publication I happen to subscribe to, and on Newt Gingrich's web site there is a transcript of a speech he made to the Institute for Policy Innovation, a group based in Lewisville, Texas, back in November. I've written on it too, as has my MoneyWatch colleague Carla Fried. Says the Gringrich site:
Jim Sinclair's Commentary Good going Bill and Chris. Since the Swap was the means to holding up European Banks by the Fed, this is not a SMALL achievement. U.S. District Court judge orders in camera review of secret Fed gold swap records RENO, NV – The Gold Anti-Trust Action Committee (GATA) announced Monday that it has "scored a small but perhaps auspicious victory" in its fight to force the Federal Reserve to open up what GATA believes are secret records that reveal the bank's "surreptitious market invention." The Fed claims its gold swap agreement records involve "trade secrets" exempt from disclosure under the U.S. Freedom of Information Act (FOIA). GATA is seeking records of gold swaps dating back to 1990. U.S. District Court Judge Ellen Segal Huvelle Monday ordered the Fed to produce the 20 gold-related documents the central bank has sought to keep secret by Friday for her own private review. "While Judge Huvelle still could grant at any time the Fed's motion to dismiss GATA's lawsuit, her ruling today at least implies a little skepticism about the Fed and its tactics," GATA Secretary/Treasurer Chris Powell wrote on the organization's website Monday. In a statement issued Monday, U.S. Rep. Ron Paul announced he would be chairing the Monetary Subcommittee of the Financial Services Committee, which has oversight of the Federal Reserve. "Not surprisingly, since my chairmanship was announced, apologists for the Fed have been recycling the old canard about how increased transparency threatens the Fed's so-called political independence," Paul noted.
Jim Sinclair's Commentary Correct! However, the deepening crisis is creating have-nots. Deepening crisis traps America's have-nots There is a telling detail in the US retail chain store data for December. Stephen Lewis from Monument Securities points out that luxury outlets saw an 8.1pc rise from a year ago, but discount stores catering to America's poorer half rose just 1.2pc. Tiffany's, Nordstrom, and Saks Fifth Avenue are booming. Sales of Cadillac cars have jumped 35pc, while Porsche's US sales are up 29pc. Cartier and Louis Vuitton have helped boost the luxury goods stock index by almost 50pc since October. Yet Best Buy, Target, and Walmart have languished. Such is the blighted fruit of Federal Reserve policy. The Fed no longer even denies that the purpose of its latest blast of bond purchases, or QE2, is to drive up Wall Street, perhaps because it has so signally failed to achieve its other purpose of driving down borrowing costs. Yet surely Ben Bernanke's `trickle down' strategy risks corroding America's ethic of solidarity long before it does much to help America's poor.
Jim Sinclair's Commentary In China such a public statement has the blessings upon high. C.banker urges China to cut U.S. debt holdings BEIJING Jan 10 (Reuters) – China should further diversify its huge foreign exchange reserves away from U.S. government debt to reduce its risk exposure, a central bank official said in comments published on Monday. "We should change the single-currency focus on buying U.S. Treasuries and adopt a more diversified structure for foreign exchange reserves to reduce risk," Xu Nuojin, deputy-director of the People's Bank of China in Guangzhou, was quoted as saying by the Securities Times. China should channel more of its foreign exchange reserves into resources and equities, Xu said. Analysts estimate that about two-thirds of the reserves, which hit a record $2.65 trillion at the end of September, are parked in dollar assets, although the currency composition is a state secret. Xu also urged the government to relax capital controls to enable companies to hold more foreign exchange earnings, which he said would help slow the rapid build-up in official currency reserves.
Jim Sinclair's Commentary Now we have the Massachusetts Supreme Court ruling upholding the lower court ruling reported to you recently. This confirms the label of illegal what was in the first place fraud. That means big trouble for the banks. The only way the banks can be saved another huge amount of losses is if the new conservative representatives in the hands of the Banksters pass a law making fraud of this kind legal. Don't put it past the conniving Banksters. Implications of the Ibanez Case Ruling The Too Big To Fail banks have been waiting with trepidation for a ruling from the Supreme Judicial Court of the State of Massachusetts on the case titled US Bank National Association (as trustee) vs. Antonio Ibanez. They were right to be fearful. The state supreme court has ruled against the banks and upheld a lower court order that nullified foreclosures by US Bancorp and Wells Fargo, on the grounds that neither bank had the legal right under Massachusetts law to foreclose. Today's ruling has far-reaching consequences for the banks and the housing market in general, as it throws into serious question the legal soundness of millions of mortgages in the US if, as expected, courts in other states come to similar conclusions as the Supreme Judicial Court of Massachusetts. The Ibanez case tied together two separate but similar foreclosure actions in Massachusetts, the second case being that of Wells Fargo vs. Mark and Tammy LaRace. Both foreclosures took place on the same day, the banks having previously published their intention to foreclose in a local newspaper as required by law. The banks then purchased the properties at prices described by the court as significantly below market value. About a year after the foreclosures (in autumn of 2008) the banks then applied to the local Land Court for a ruling that in each foreclosure, the bank had full legal right to foreclose as mortgagee, that the bank title to the property was "unclouded" by any other contesting right, and that the bank therefore owned the property in what is legally known as "fee simple" status. These claims were contested by the property owners who had lost their homes in the foreclosure, and the Land Court agreed with the homeowners that the foreclosures had been invalid. Critical to the decision of the Land Court was the fact that both banks admitted that they did not receive assignment of the mortgage to the property until after the foreclosure. The State Supreme Judicial Court Upholds the Ruling of the Lower Court The Supreme Judicial Court found that the Land Court made no errors in its judgment for the defendants. Citing the Ibanez case as an example, the justices noted that Antonio Ibanez executed a mortgage in 2005 with Rose Mortgage Inc., which allegedly assigned this mortgage (which gives the proper holder the legal right to foreclose) to Option One Mortgage Co. They in turn assigned it to Lehman Bros. Lehman Bros. supposedly assigned the mortgage to Lehman Bros. Holdings Inc., which packaged it with about 1,000 other mortgages to be sold as a security. These mortgages were supposed to be placed with Structured Asset Securities Corp, set up explicitly for the purpose of protecting the bondholders who bought the securities. This company was supposed to assign the mortgages to US Bancorp N.A., as trustee. In the event there was need to foreclose on any of the properties, it was the job of US Bancorp to do so, on behalf of the trust and the interest of the bondholders. This is why US Bancorp entered into a foreclosure action against Antonio Ibanez, who clearly had defaulted on his mortgage, and it is why US Bancorp became a plaintiff in front of the Land Court and the Supreme Judicial Court of Massachusetts.
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| Is The Gold Price Rise to $1,380.70 Something to Get Excited About? Posted: 11 Jan 2011 12:11 PM PST Gold Price Close Today : 1380.70 Change : 7.00 or 0.5% Silver Price Close Today : 29.560 Change : 0.709 cents or 2.5% Gold Silver Ratio Today : 46.71 Change : -0.905 or -1.9% Silver Gold Ratio Today : 0.02141 Change : 0.000407 or 1.9% Platinum Price Close Today : 1767.20 Change : 22.20 or 1.3% Palladium Price Close Today : 787.00 Change : 38.50 or 5.1% S&P 500 : 1,271.50 Change : 4.73 or 0.4% Dow In GOLD$ : $174.75 Change : $ (0.35) or -0.2% Dow in GOLD oz : 8.454 Change : -0.017 or -0.2% Dow in SILVER oz : 394.85 Change : 1.07 or 0.3% Dow Industrial : 11,671.88 Change : 34.43 or 0.3% US Dollar Index : 80.79 Change : -0.089 or -0.1% Should we get excited about the GOLD PRICE $7.00 rise to $1,380.70 today? Well . . . Maybe, if it can clear $1,385 and climb again over $1,405. Last Friday's down spike to $1,353 has contributed a bottom, but will it last? Can it hold? On a longer term chart the dollar has merely rallied to its 20 dma ($1,387.47) today and backed off to close below its 50 day moving average. High today was $1,386.25, low $1,364.45. Right now we still have to characterize this as merely sideways churning. Now if gold can close above that 20 dma tomorrow, that would raise better prospects. For right now, gold has a series of lower lows and higher highs, and that spells "downtrend." Trend in force remains in force until broken. The SILVER PRICE looks perkier than gold, with the same V-bottom on Friday. Low today came at 2904c and high at 2966c. Resistance to beat is now become 2960c. Silver's 50 day moving average stands at 2820c and low came Friday at 2832c. Today it barely closed above its 20 DMA (2953) when it rose 70.9c to a Comex close at 2956c. GOLD/SILVER RATIO today fell to 46.71, and below its 20 DMA (47), but that piercing of the 20 dma (from experience) is sort of like having your ears pierced: they don't grow back together too well. Generally once the ratio rises above the 20dma, the ride has ended. Of course, maybe "this time it's different." We need to get something straight. No matter what my expectations from the market -- and I always attempt to tell y'all as truthfully as possible -- I NEVER tell anyone NOT to buy SILVER or GOLD, whether I think they're at a peak or not. Here is why: I don't know everything. On any given day there is a 50% chance I am right, and a 50% chance that somebody with the opposite outlook is right. Markets are simply that unpredictable. So if a customer asks me what I think, I will tell him, but my worst nightmare is that I tell someone to hold off and instead of dropping, the market rises, runs away, and they never get in. So trying to save them a few bucks, I cost them their entire investment. I found some work papers not long ago where back in 2002 or 2003 I was trying to decide whether gold, which had reached the atmospheric height of $340, would correct to $320 or $300. Do y'all have any idea how ridiculous that $20 - $40 looks today with gold at $1,380? I have also watched the really successful investors I have served. They take my breath away, buying big chunks whenever they get ready. What do they know most folks don't? They are buying the primary trend, and if they are right about the trend, whether they buy higher or lower, the trend will carry all purchases up skyward. US DOLLAR INDEX today slowed its rate of descent, losing only 8.9 basis points (0.11%) to 80.792. Hanging around here at 80.80 - 80.70 works just fine for a correction, although the Dollar must not drop below 80.40 if it wants to sustain a rally. Expect higher dollar prices. STOCKS today rose , wobbling back and forth without much enthusiasm. Dow gained 34.43 to 11,671.88, S&P rose 4.73 to 1,274.48. Stocks remain the green-tinged baloney in the investment refrigerator. Eat at your own peril. 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. 
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| Perth Mint reports 'unrelenting' demand for gold on dip below $1,400 Posted: 11 Jan 2011 11:41 AM PST By James Campbell SINGAPORE -- Demand for gold bullion from Australia's Perth Mint has been unrelenting since gold's price dropped below $1,400 an ounce, a senior Mint official said Tuesday. "At the moment demand is such that we cannot meet all the enquiries that we are getting," said Nigel Moffatt, treasurer of the Perth Mint, one of the world's largest gold refiners and distributors. "Demand for our coins and medallions is strong, but the biggest demand is coming from banks and traders looking for kilo bars," he told Dow Jones Newswires. One-kilogram bars are the most popular trading instrument in Asia's physical market. Demand doesn't appear to be directly related to the upcoming Chinese Lunar New Year, with buying also coming from in from India, Moffatt said. "The way I see it at this point, it is because of the current correction in the price rather than anything else," he said. Spot gold has declined 3.1% since the start of 2011 to $1,376/oz during Asian trade Tuesday after hitting a low of $1,353/oz Friday. Moffatt said premiums for physical gold had "doubled" in the past week, but declined to provide any figures. Mitsui Global Precious Metals said in a report that gold was trading at premiums of up to $3 an ounce over the spot price in Hong Kong Monday. ADVERTISEMENT 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 Join GATA here: Yukon Mining Investment e-Conference http://theyukonroom.com/yukon-eblast-static.html Vancouver Resource Investment Conference http://cambridgehouse3.com/conference-details/vancouver-resource-investment-conference-2011/15 Cheviot Asset Management Sound Money Conference Phoenix Investment Conference and Silver Summit 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: 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: To contribute to GATA, please visit: http://www.gata.org/node/16 ADVERTISEMENT Sona Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit, 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
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| Guest Post: Gold, The Improbable Answer To Life, The Universe, And Everything Posted: 11 Jan 2011 11:11 AM PST
Submitted by Bo Peng Gold, The Improbable Answer To Life, The Universe, And Everything
(With apologies to Mr. Adams, may he rest in peace, I never get tired of quoting H2G2.)
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| Posted: 11 Jan 2011 11:11 AM PST View the original post at jsmineset.com... January 11, 2011 12:37 PM Jim Sinclair's Commentary Courtesy of CIGA Stefaan. Quiet Accumulation in Loonie CIGA Eric While parity or better with the dollar surprises the ‘experts’, it does not surprise capital. The new highs in REV(E), also known as trend energy, and positive divergence with price imply quiet accumulation since October 2010. Canadian Dollar ETF (FXC): Headline: Dollar holds parity as currency wars heat up Canada’s dollar is being pressed higher by a "beggar-thy-neighbour" policy of competitive currency devaluation, a situation Brazil warned over the weekend threatens to expand into a global "trade war." The loonie, now into its eighth straight session of trading above the U.S. currency, appears to be gaining its strength from Canada’s non-interventionist approach, said BMO Capital Markets economist Benjamin Reitzes. Brazil has complained loudly that policies in th...
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| Hourly Action In Gold From Trader Dan Posted: 11 Jan 2011 11:11 AM PST View the original post at jsmineset.com... January 11, 2011 11:34 AM Dear CIGAs, Sovereign debt woes out of Europe, particularly Portugal, continue to bring a strong bid into gold. During the early part of the European trading session gold had pushed within a mere 4 euros of its all time high before it was taken down as the clock moved into New York trading (gee – what a surprise). These problems are not going to go away any time soon and as they come to the forefront of the headlines will serve to remind traders of the problems with the Euro and facilitate a drive to gold as a safe haven. They will also be there to serve as a supportive feature for the metal during bouts of price weakness should further fund long side liquidation take place. If Portugal, or any other of these financially troubled Euro nations, cannot sell their bonds, the ECB is going to have to come in and become the buyer of last resort or else risk a spreading of a debt contagion on their watch. Chatter was t...
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| Physical Market Continues To Show True Value Of Gold Posted: 11 Jan 2011 11:11 AM PST View the original post at jsmineset.com... January 11, 2011 06:27 AM Dear Friends, Throughout the entirety of the now decade-long bull market in gold, it has been the physical market where the real deal is bought and sold, that has been the arena in which the true level of "value" has been found and not the phony paper market in New York known as the Comex. Time after time we have seen the speculative trading funds get loaded on the long side of the gold market taking it up another leg higher but then their buying has met up with selling resistance which they have been unable to breach. The result has been a temporary stalling in price which has then moved lower as these same funds liquidated longs and began reducing their long side exposure. The big buyers from the East have awaited these bouts of speculative selling as an opportunity to secure the metal at a lower price which has then served to put in a floor of chart support allowing a period of base building to commence whic...
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| ‘India to be 3rd largest economy by 2050′ Posted: 11 Jan 2011 10:47 AM PST by Sudeshna Sen India could overtake Japan as early as 2011, and the US by 2050 and China will be bigger than the US by 2020, PwC calculates, using purchasing power parity (PPP), which adjusts for price differences across economies to forecast GDP growth. … "In many ways, this renewed dominance of China and India, with their much larger populations, is a return to the historical norm prior to the industrial revolution of the late 18th and 19th centuries that caused a shift in global economic power to Western Europe and the US. This temporary shift in power is now going into reverse," says the PwC report on the World in 2050. [source] RS View: Given the cultural significance of gold in these two ascending economic giants, one would do well to also anticipate "a return to the historical norm" insofar as gold having the prominent role in the architecture/foundation of the international monetary system.
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| Gold and Silver Enter a Higher Risk, Higher Return Potential Zone Posted: 11 Jan 2011 10:34 AM PST 2011 is sure to be a critical year for gold with several analysts predicting an end of the bull market. It may sound very strange, but it appears that the USD Index has been leading the way for precious metals and suggests higher prices are likely to be seen soon. The general stock market may enter a consolidation phase in the near-term but has had little influence on gold, silver and mining stocks recently.
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| Could the U.S. central bank go broke? Posted: 11 Jan 2011 10:31 AM PST By Pedro da Costa and Ann Saphir … The Fed's unorthodox steps helped it generate record profits in 2010, allowing it to send $78.4 billion to the U.S. Treasury Department. But its swollen balance sheet leaves the central bank unusually exposed to possible credit losses that could create a major headache at a time of increasing political encroachment on the Fed's independence. … Varadarajan Chari, an economics professor at the University of Minnesota and a consultant to the Minneapolis Fed, says that at some point during its exit from easy monetary policies, the Fed actually may go broke — at least on paper. "The most obvious exit strategy is, when inflation starts to pick up, to stop and reverse asset purchases," he said. "That's likely to include requiring the Fed in an accounting sense to see a significant accounting loss."
The Fed now holds just over $1 trillion in Treasuries, Chari noted, and if inflation rose by a couple of percentage points, it would dent the value of those holdings by about 10 percent, leaving the Fed with a $100 billion loss. [The Fed is sitting on paper losses of about $2.3 billion on the purchases of U.S. Treasuries it made from Nov. 12 until late last week, according to an analysis by Reuters Insider.] … "Under a scenario in which short-term interest rates rise very significantly, it's possible that there might come a period where we don't remit anything to the Treasury for a couple of years. That would be I think a worst-case scenario," [Fed Chairman Ben] Bernanke said. Customarily, the Fed submits surplus profits from its operations back to the Treasury's coffers. But the Fed's newfangled policy steps and the potential for credit losses raises, for some experts, the prospect that the Treasury may actually be forced to "recapitalize" the Fed — economist-speak for what others might call a bail-out. That would be a strange role reversal given the Fed's efforts to ease monetary policy by buying the Treasury's debt…. Last November, as the economic recovery appeared to falter, the Fed said it would buy a new round of $600 billion in Treasury securities through June of this year. That's on top of the $1.7 trillion in Treasuries and mortgage-backed securities it had purchased in response to the financial crisis. Still, the pitfalls of the Fed's approach are almost as numerous as the lending facilities it undertook to stem the crisis. Perhaps most daunting, the Fed's purchases of Treasury debt and mortgage-backed securities have effectively turned it into a mammoth investor — a thoroughly undiversified one. … The problem lies in the basic workings of fixed income. By definition, bond prices decline when their yields or interest rates go up. That means that as the economy recovers and pushes inflation higher, the Fed will move to increase interest rates, pushing down the value of its giant bond portfolio. "What would the international reaction be if the Fed suddenly had to go and be recapitalized?" said Bob Eisenbeis, chief monetary economist at Cumberland Advisors and a former head of research at the Atlanta Fed. "I don't think that would bode well for Treasuries, or for the dollar, or anything else. It would be embarrassing." [source] RS View: Think about it… if the Treasury had to recapitalize the Fed, how exactly would it do the job? Certainly not with bonds — that would just be more of the same medicine that's currently poisoning the patient. Perhaps the Treasury would have to ask Congress to relax its stodgy grip on the gold reserves and pass legislation that will allow for a recognition of their fair market value rather than the $42 price frozen in time at 1973. With gold headed appropriately north of $1,400 the eight thousand tonnes of U.S. gold reserves, if recognized at fair market valuation, could provide the vital headroom needed to recapitalize the Fed should it come to that. But more likely, there will simply be NO attempt to draw down the current size of Fed's balance sheet, and thus the bond portfolio in question will not incur any realization of market losses because there will be no selling prior to maturity. Still, all the more reason for citizens to accumulate gold as means to have a form of savings secure against the permanent inflation of the domestic money supply.
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| Floods and Shortages - January 11, 2011 Posted: 11 Jan 2011 10:30 AM PST Floods and Shortages - Casey's Daily Dispatch [LIST] [*]Sign Up Now! [*]| [*]RSS Feed [*]| [*]Print this [*]| [*]Visit the Archives [*]| [*]Email to a Friend [*]| [*]Back to All Publications [/LIST] January 11, 2011 | [url]www.CaseyResearch.com[/url] Dear Reader, Whenever the market gets too quiet, I naturally think, "What's next?" While I could ponder about the next euro crisis, runaway inflation in emerging markets, and a collapse in China, I can't exactly time any of these events. However, interest rates will be important in the next three months regardless of what happens. Are they sta...
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| Posted: 11 Jan 2011 10:10 AM PST Gold extends rally on sovereign debt concerns The COMEX February gold futures contract closed up $10.20 Tuesday at $1384.30, trading between $1372.40 and $1386.80 January 11, p.m. excerpts: see full news, 24-hr newswire…
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| At Least 10 States Have Introduced Gold Coins-As-Currency Bills Posted: 11 Jan 2011 10:08 AM PST  As we reported, Georgia state Rep. Bobby Franklin (R) recently reintroduced legislation to force his state to conduct all monetary transactions with U.S. gold or silver coins -- including the payment of taxes. The Georgia bill has a long way to go before become law -- but it's by no means the only state that's considering a future in gold. Lawmakers in Montana, Missouri, Colorado, Idaho, Indiana, New Hampshire, South Carolina, Utah, and Washington have proposed legislation, mostly in 2009, to include gold and silver in its accepted currency forms. Constitutionaltender.com, a site dedicated to tracking and promoting these bills, explains: The United States Constitution declares, in Article I, Section 10, "No State shall... make any Thing but gold and silver Coin a Tender in Payment of Debts". But, in fact, EVERY state in the United States of America DOES make some other "Thing" besides gold and silver coin a "Tender in Payment of Debts" -- some "Thing" called "Federal Reserve Notes." Thus the need for the "Constitutional Tender Act" -- a bill template that can be introduced in every state legislature in the nation, returning each of them to adherence to the United States Constitution's actual legal tender provisions. 
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| The Benefits of Gold and Silver Not Lost on the Chinese Posted: 11 Jan 2011 10:00 AM PST Junior Mogambo Ranger (JMR) Charles C. sent me a YouTube video of DrinkingWithBob talking about how New York is full of corrupt government crap that is eating New York – and this nation – alive, all of it paid for by bleeding the poor, who yesterday did not have enough money to get by, and today are worse off because they cannot pay the higher prices resulting from more government taxation and regulation to try to satisfy the idiotic leftist trash that has infested government and the schools, and who have made such a Gigantic Freaking Mess (GFM) of it all with their towering stupidity. Okay, he did not actually say that, but you get that impression when you hear the anger in his voice, highly reminiscent of a Mogambo Tirade Of Outrage (MTOO), in that he is yelling, "The truth is, we're freaking finished! The government has bankrupted this city, this state and this freaking country! Meanwhile, they keep freaking taxing us! "New York City is charging us for services they can no longer provide! It's like charging you to see a movie that they're not going to make! Or charging you to pay a toll to go over a bridge that doesn't freaking exist! It's ridiculous! It's freaking ridiculous!" he screams in his outrage. With a final exasperation, he looks into the camera and mockingly asks, "What's next? What's next? What's next?" Oddly enough, he answered his own question earlier in the video when he said, "Things are going to get a lot worse before they get a little bit better"! Apparently, Bob here doesn't know about how he ought to be getting gold, which means he is not reading Tyler Durden's work at zerohedge.com, who reports that "global assets barely generate enough cash to service global debt, let alone retire it," which means that "the only long-term outcome will be one of continued fiat devaluation and appreciation in hard currencies such as gold and silver." Apparently, this is not lost on the Chinese, as Bloomberg reports that "With 4 percent of the world's known gold reserves, China's mines may be exhausted within six years, the World Gold Council says." Part of the reason for this surprising playing-out of the mines may be the incredible increase in trade volume on the Shanghai Gold Exchange, which "surged 43 percent in the year to Oct. 31 from the same period in 2009." Looking ahead, the World Gold Council forecasts that China's "gold consumption may double in the next decade," which is an astonishing thing to say! The WGC is talking about doubling annual gold consumption in only ten years, which means a gigantic demand being satisfied by a relatively static supply, an astonishing mismatch that only "clear the market" if the price shoots up. And if the Chinese were really a smart bunch of dudes, they would be accumulating silver, too! Hell, in 1989, Ted Butler wrote to Dick Thornburgh, the Attorney General of the United States, that "In all of financial history, we have never witnessed, except in COMEX silver, a total short position that is greater than either total world stocks, total world annual production, or total world annual consumption." That was 21 years ago, and the situation is even more lopsidedly absurd today! Far, far more silver has been sold than even exists! How about THEM supply/demand mismatch apples? It is no wonder that I am known far and wide as a guy who disdains anyone NOT buying gold and silver, and who actually asks total strangers, "Are you buying gold and silver in response to the damnable Federal Reserve creating so much excess money that ruinous, catastrophic inflation in prices is guaranteed?" and if they answer, "No" then I yell at them and call them idiots, as in, "You are an idiot if you are not buying gold and silver because of the abominations of the Federal Reserve creating so much excess money, and that probably explains why you look so stupid!" So when I ask you if you have gold and silver, you better say, "Yes" or you know what I am going to say. And when you say, "yes, I have bought gold and silver" I will ask, "How was it?" Then you will say, "It was easy! Whee!" The Mogambo Guru The Benefits of Gold and Silver Not Lost on the Chinese originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."
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| GoldCore Review of 2010 And Outlook For 2011 Posted: 11 Jan 2011 10:00 AM PST
Zero Hedge is happy to announce a new collaboration with the precious metals experts at Gold Core. We look forward to posting periodic industry updates, notes, analysis and commentary in conjunction with GC on all matters of topical significance in the PM space. As an introduction, we would like to present GoldCore's review of 2010 and Outlook for 2011. GoldCore Review of 2010 and Outlook for 2011, via GoldCore Review of 2010 Summary 2010 was a year that many will be glad to see the back of due to the deepening of the global economic crisis and the ensuing financial and economic hardship visited upon many. Worst hit were the unfortunately named PIGS with Portugal, Spain and particularly Greece and Ireland suffering the wrath of the bond vigilantes, austerity measures and deepening economic crises.
Currency Performance in US Dollars Gold was again one of the top performing assets and currencies as seen in our currency tables in US dollars and euros.
Currency Performance in Euros Bond, Stock and Commodity Markets The belief that central banks controlled interest rates is increasingly doubted and there is a realisation that bond markets are the ultimate arbiter of interest rates globally. Concerns of sovereign defaults in Spain, Portugal, Ireland and Greece saw interest rates surge in these countries. This trend has not abated and recent days have seen interest rates in Greece rise above 12.5% and Ireland above 9%.
US Government 10 Year - 1 Year (Daily). Performance in 2010: -11.9% Indeed, informed speculation that the AAA rating of the US may come under pressure due to their massive nearly $14 trillion national debt and massive trillion-plus annual budget deficits saw US interest rates rise sharply in the final three months of the year (see chart above). Long term government debt has become far riskier which has important ramifications for prudent asset allocation.
MSCI World Index - 1 Year (Daily). Performance in 2010: +9.47% Markets saw considerable volatility, particularly currency markets due to concerns about the dollar, the euro, sterling and the debasement of currencies internationally. The fragile economic recovery and continuing cheap money policies - near 0% interest rates and the latest quantitative easing initiative (QE2) - led to continuing risk appetite but also to growing concerns that inflation is beginning to get a foothold in the global economy. This led to stock markets and commodity markets internationally having positive performances (see chart above and below). Commodity prices rose gradually in the second half of the year and the Thomson Reuters/ Jeffries CRB rose by 15.4%. Copper was particularly strong – up 28% and oil rose by 6% (NYMEX +6%; BRENT +10%).
Thomson Reuters/ Jeffries CRB - 1 Year (Daily). Performance in 2010: +15.4% Soft commodities and the price of basic foodstuffs such as wheat, corn, and sugar all rose as markets reacted to extreme weather events such as fires in Russia and floods in the US and Pakistan. Wheat prices rose 49pc over the year, corn was up 50pc, soya beans rose 35pc and sugar added 28pc. Cotton prices nearly doubled in the year due to high demand and restricted supply. While nearly all commodities rose strongly in 2010 and are near record nominal highs – it is very important to realize that these are record nominal highs from more than 30 years ago. This means that the gains may well be sustainable as most commodities remain a fraction of their inflation adjusted price of more than 30 years ago.
The platinum group metals of platinum and palladium were strong. Platinum rose 19.4% to $1746/oz and palladium surged 94.2% to $790/oz. Both remain below their record highs of 2008 and 2001 respectively at $2166.50 and $1110.50/oz.
Gold in US Dollars - 1 Year (Daily) Gold and Currencies Sovereign debt, currency debasement and inflation concerns led to continued safe haven demand for gold internationally and to gold recording its 10th consecutive year of rising prices. Gold rose some 28% in US dollar terms, 34.5% in sterling terms and 38% in euro terms and by similar amounts in other major currencies. The strongest currencies in the world in the year were the Japanese yen, Australian dollar and Swiss franc. This shows how the price of gold is not rising per se rather fiat currencies are losing purchasing power and being devalued internationally. This increases the attraction of precious metals and hard assets that are finite and cannot be debased as inflation hedges – especially gold and more volatile silver. Silver As we suggested would happen, silver surged in 2010 and rose 81%. However, it remains more than 35% below its nominal high of 1980 at $50/oz (weekly close $49.45/oz – see chart below). The nominal high of 1980 remains a very viable long term price target and should 2011 see a repeat of 2010 then silver will surge past the 1980 high as gold has already done to its 1980 nominal high.
Silver in US Dollars – 40 Years (Weekly) Outlook for 2011 Last year we correctly indentified sovereign debt risk particularly in the Eurozone and a real risk to the euro as a reserve currency and to the euro itself as key themes to watch out for in 2010. These risks remain and have actually deepened in the final weeks of 2010. The outlook for asset class performance in 2011, as ever, depends on what global macroeconomic conditions the world experiences. 2011 will be guided by the fundamental US macroeconomic situation, the outlook for the US dollar, the euro and the international monetary system and the health of China's economy will also be important. As ever, whether deflation or inflation prevails will be of primary importance. Other big picture global macroeconomic factors that could become important in 2011 are: Global Macro – Inflation or Deflation Crystal ball gazing based on future conditions remains foolish - particularly given the degree of uncertainty with regard to possible deflationary or inflationary global risks.
Gold in EUR - 1 Year (Daily) As ever, the titanic battle between deflationary pressures and inflationary pressures continue. The extent of deflation experienced in most economies has been exaggerated. It is often used by uber- Keynesian economists and governments as an excuse to print and spend money profligately. Deflation in most western economies has been confined to property markets and consumer purchases such as cars and other expensive consumer items such as electrical appliances etc. Deflation has largely been seen in goods and assets that are debt based or have been purchased using credit. The lack of credit or tightening of credit has led to falling prices. These are healthy and necessary adjustments – as many property markets remain well above their long term average and average house prices remain unaffordable to those on average industrial wages. The price of essentials such as food and energy have not fallen in recent years and many have risen this year and there are growing inflationary pressures being seen to different degrees in economies internationally. Should the US and the global economy experience a double dip recession there could come another bout of deflationary pressure particularly in vulnerable property markets. This could lead to weakness in equity and commodity markets which would again contain inflation for a period. However, dollar debasement and international competitive currency devaluations should see commodities remain robust especially given the increasing strong supply demand fundamentals of many commodities.
World Bank President Robert Zoellick Global Currency Wars The initial skirmishes of what is being called a ‘global currency war' have been seen in 2010. These currency wars involve competitive currency devaluation and currency debasement as governments and central banks internationally devalue their currencies in order to maintain job sustaining export growth and maintain fragile economic recoveries. The importance of the currency crisis is not realized by much of the media and the man in the street yet. But it is clearly seen in the fact that World Bank President Robert Zoellick reaffirmed his proposal to use gold as a "reference point" to reform the current international monetary system. Senior policy makers are worried about the dollar's ability to remain a stable reserve currency. Zoellick said a return to some sort of currency link to gold would be “practical and feasible, not radical.” Zoellick's article in FT came three days after Ben Bernanke's announcement of QE2. U.S. Chinese Tensions Besides the risk of currency wars, there are also geopolitical risks as the relative power of the US and China, lessen and increase respectively. Yesterday, China's defense minister says his armed forces are preparing for conflict "in every direction," and that times of peace should not dissuade the military from readiness. Chinese defense chief Liang Guanglie told state media that over the next five years, "our military will push forward preparations for military conflict in every strategic direction. "We may be living in peaceful times, but we can never forget war, never send the horses south or put the bayonets and guns away," he said. His comments come ahead of a visit to China by U.S. Defense Secretary Robert Gates, who is expected to address U.S.-China military relations as tensions flare on the Korean peninsula and Taiwan, a U.S. ally, remains on Beijing's radar. There is also the delicate issue of Tibet. While there is little risk of a direct military confrontation between the superpower and emerging superpower, there is a risk of war being waged through proxies and of economic war involving economic protectionism and currency wars. China's Increasing Importance to Gold 2010 will be remembered as an important year in the process of China becoming a dominant economic power and it was also the year that China's growing importance to the gold market was realized. Gold is deeply rooted in the psyche of the Chinese people. Gold is considered a symbol of prosperity and good fortune in China and a means to increase and preserve one's family's wealth through the generations. This comes from a powerful mix of cultural, social and economic associations. Gold's importance has been augmented by the country's experience of totalitarian government. Just this month came news that China should consider adding to its gold reserves as a long-term strategy to pave the way for the yuan's internationalization. So wrote central bank adviser Xia Bin in the influential China Business News. Premier Wen Jiabao said in March he is "worried" about holdings of assets denominated in the greenback. The country must revise its foreign-reserves management principle, Xia wrote. Building gold as the basis of solvency has been used through history, PBOC adviser Xia wrote. Having a corresponding amount of solvency is a necessary precondition and indispensible safeguard in the long-term strategy for the internationalization of the yuan, Xia wrote. China should raise its gold holdings and the 1,054 tons of reserves are inadequate compared with the 8,133 tons held by the U.S. and 3,408 tons by Germany, Meng Qingfa, a researcher at the China Chamber of International Commerce said in October. China is the world's largest producer and second-biggest user of gold and has a world-record $2.65 trillion in foreign-exchange reserves. Gold accounts for only 1.6 percent of the nation's reserves held by the People's Bank of China, according to the World Gold Council. The country increased gold reserves by 454 tons to 1,054 tons since 2003, the State Administration of Foreign Exchange said last April. Thirty years ago China held 95% of its foreign reserves in gold. China's gold reserve of only 1.6% of total reserves is a figure well below the average minimum 3%-5% adopted in many other countries. China with an estimated gold reserve of 1,054 tonnes has a fraction of that believed held in the U.S. and many analysts believe that China will gradually try to increase its reserves to the levels held by the U.S. It is often forgotten that the Chinese gold market was only reopened in 2002. That was the first time in over 50 years (since 1949) that Chinese individuals could buy gold in either jewellery or bullion format. According to the World Gold Council China's per capita consumption of gold remains the lowest amongst the emerging Asian economies. For China to consume as much gold as say India, which many observers believe likely over the long term, consumption would need to rise by some 250%. In China, consumer price inflation is now running at 5.5% (according to official statistics) and yet deposits only yield some 2.5%. Until real interest rates offer Chinese savers a real yield and are not negative, Chinese demand will remain strong. Increasing Sovereign Risk Jitters abound in government debt markets about the massive issuance of government debt in 2011 – starting in January 2011. Dubai, Greece and more recently Ireland have been the first sovereign casualties and there is a growing risk of contagion particularly in the Eurozone. Besides Greece and Ireland there are many other countries in the EU facing possible sovereign debt crisis – including Portugal, Spain, Italy and Belgium. Contagion remains the real concern and there is a real risk that these periphery economies are canaries in the coalmines and herald coming problems for larger industrial nations such as Germany, Japan, China, the UK and the U.S. So far their markets and economies have maintained fragile economic growth and their bond markets have not suffered the sell offs seen in the weaker Eurozone nations. Unfortunately, there are many more countries with poor and deteriorating public finances – including some of the leading AAA rated industrialized nations – with even the possibility of downgrading of the sovereign debt of Japan, France, the UK and the U.S.
Gold in GBP - 1 Year (Daily) Should this happen long term interest rates would likely rise from the unsustainable record low levels seen today. Rising Interest Rates The prospect of a possible rise in interest rates in the second half of 2011 is quite real. This may be necessary to protect the value of the dollar and other fiat currencies and contain inflationary pressures that are emerging. The markets have become addicted to cheap money and eliminating this dangerous narcotic may cause serious withdrawal symptoms with obvious ramifications for already vulnerable residential and commercial property markets. European Economies and the Euro The Euro looks set to experience its first major challenge as increasing Eurozone debt and sovereign default risk (Greece etc.) could see the single currency come under pressure. There are some who would welcome a fall in the value of the euro so that European economies can compete for exports with the UK, the US, Asian and economies internationally. However, there is a risk of a disorderly adjustment and a currency crisis. Hopes that the Euro would supplant the dollar as the global reserve currency are gone. Commercial Property Falling commercial property prices and yields and the huge liabilities in this sector (particularly in the UK and US) continue to pose real risks. This could easily lead to the next phase 0f the global financial crisis and could pose a risk as great, if not greater, than that of the subprime meltdown, and poses real risks to many banks solvency which could lead to further credit and systemic risk. US Economy and US Consumer As ever the strength of the US economy will be important to the global economy and the performance of asset classes. The US economy remains highly dependent on the buying habits of the pressured US consumer who remains heavily indebted. Chinese Economy 2011 could be the year when the Chinese economic miracle comes into question. Is the massive economic growth in China real and sustainable or based on bogus and adjusted economic statistics and cheap money and stimulus? Some question the ability of the Chinese authorities to manage an economic contraction similar to those faced by many western economies. Geopolitical Risks Geopolitical risk from terrorism and war remains high with Taiwan, Venezuela, Afghanistan, Pakistan, Israel and Iran and the Koreas some of the potential flashpoints.
Gold Inflation Adjusted Index - 40 Year (Quarterly). The 'Bloomberg Composite Gold Inflation Adjusted Spot Price' is derived from the monthly US Urban consumers price index Black Swans in 2011 and 2012 War in Middle East - Global Flu Pandemic - Large Volcanic Eruption - European Sovereign Default - Crack Up Boom and Hyperinflation War in the Middle East Tensions between Iran and Israel and the U.S. could lead to a military incident (akin to the recent flare up on the Korean peninsula) that degenerates into a regional conflict in the Middle East. Just this week the US imposed new sanctions against Iran, in a move that highlights Washington's drive to keep pressure on the Islamic Republic ahead of a new round of negotiations with Tehran in January 2011. The recent announcement by the Treasury department shows how the US is now using sanctions to affect Iran's overall economy. Yesterday, the FT reported that US officials are worried Iran could use new technology in coming months that would shorten the time needed to reach nuclear weapon status and reduce the scope for diplomacy. Washington says it is concerned that Tehran might deploy a new generation of centrifuges to enrich uranium, a process that can yield nuclear fuel and weapons-grade material. Conflict with Iran would likely involve both Israel and the US and could lead to a wider conflagration in the Middle East that involves Lebanon, Syria and other countries. Oil prices would rise very sharply due to the closure of the vital Straits of Hormuz which could lead to a new oil crisis akin to the one seen in the 1970s. Global Flu Pandemic Much of the public and many investment professionals have become somewhat cynical regarding the threat posed by a flu pandemic. After much somewhat hysterical reporting there is an element of the "boy who cried wolf". The risk is that at some stage a flu virus will actually mutate and governments and pharmaceutical companies may not be able to respond in time to a real pandemic. Just this last week, Northern hemisphere countries were told by health experts to brace themselves for flu outbreaks. There has been a surge of cases in the UK during December with swine flu appearing to be the dominant of the three strains circulating. The European Centre for Disease Prevention and Control warned much of the rest of Europe was also beginning to see increases too. Meanwhile, parts of the
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| Gold: … With apologies to Mr. Adams Posted: 11 Jan 2011 09:50 AM PST by Bo Peng … the nature of human society dictates that every system will be corrupted, and every good idea turned bad, over time. As such, the central-bank experiment, while brilliant and noble, has come to an abrupt end in failure since the '08 crisis. The global fiat currency system was an ingenious and bold experiment except for its reliance on an optimistic view of humans' ability to overcome greed and fear. Soft inhibition/prohibition against the creation of money, be it moral, legal, or political, is not enough to prevent us from caving in to greed and fear when the time is right (or wrong). We need something stronger to save us from ourselves. Back to gold. [source] RS View: I especially liked this comment, with context: "Since 2002, gold has used every pathetic excuse to go up. When the dollar is weak, it's a dollar hedge; when the dollar is strong, it's the euro hedge; when crisis hits, it's the safe harbor; when the economy is good, it's the inflation hedge. Now central banks are no longer ashamed of hoarding gold. … When you're on the right side of a macro trend, supposedly random events inexplicably go right with improbably high probability. I can live with such blatant disregard of nice mathematical properties."
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| Posted: 11 Jan 2011 09:30 AM PST By Neil Charnock goldoz.com.au Welcome to 2011 from GoldOz and we wish you a healthy & prosperous year. There is an old joke about being kept in the dark and fed manure – about people being treated like mushrooms. The joke refers to how mushrooms are grown, in moist dark conditions however they are not fed manure anymore …yet people still are. The knowledge that corporations and governments have been treating clients and their constituents in this manner is perhaps why the Wikkileaks blog is so popular. Wikkileaks is supported by some high profile people. It is causing embarrassment to people in high places and is of great interest to large numbers of people. It appears education and disclosure are well sought – there is big demand. People need and sometimes want to know the truth and they certainly need to learn financial intelligence. So it is with the broader gold community which is why GoldOz has been biased towards education & data rather than pure d...
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| Posted: 11 Jan 2011 09:23 AM PST position papers of professorfekete #1, January 11, 2011 Open letter to Thomas Hoenig, President, Federal Reserve Bank of Kansas City Dear President Hoenig, On January 5, 2011, you were quoted on abc NEWS as saying that “the gold standard is a very legitimate monetary system”. The quotation went on: “We are not going to have fewer crises necessarily. You will have a longer period of price stability or price level stability, but I don’t know that you will have lower unemployment, and I don’t know that you will have fewer bank failures.” As a student of the gold standard for the past 50 years I welcome your statement. I would be happy to open my files and archives if the Research Department of the Federal Reserve Bank of Kansas City (that, as far as one can tell, has so far not been interested in gold standard research) invited me. My files may have the answer to some of your queries. [*]You are right, the gold standard is ...
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| With a Printing Press, the Debt Ceiling’s No Problem at All Posted: 11 Jan 2011 09:22 AM PST Yesterday's Tom Sullivan Show on Fox Business featured an interview with Dr. Ron Paul (R-TX), on how the national debt ceiling is going to be raised despite the fact that promises to raise the limit just this once — because Congress will of course cut spending in the future — are just not true. Washington will continue to print money to cover its commitments until there is some "catastrophic event." The clip is below, but first, here are few choice comments:
This video interview came to our attention via The Daily Bail in a post on Ron Paul versus the Washington spending machine. With a Printing Press, the Debt Ceiling's No Problem at All originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."
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| The Increasingly Complex Relationship Between Man and State Posted: 11 Jan 2011 09:16 AM PST "Whatever is true in one form of words, is true in every other form of words, which conveys the same meaning." – John Stewart Mill Few and confused are the pundits lauding the vitality of the American economy. Worse still, many and confused are those who offer solutions. More often than not, situations brought about by the wasteful ineptitude of the state are met with calls for more state involvement, as if a double dose of poison will somehow dilute the effects of its initial involvement. We see this everywhere today, as central banks shackle their present and future citizens with more debt in order to treat a problem caused by just that: too much debt. We offered a broad-brush overview of the nation's general trajectory in the Weekend Edition: "According to the official figures, the national debt currently stands at $14.01 trillion dollars. That's more than $45,000 per citizen, or almost $127,000 per taxpaying American. If you add in debt held by households, state and local governments and financial institutions, that number (the total US debt) blows out to well over $55.5 trillion, or more than $680,000 per average family. How much in savings does the average family have to offset this amount? $7,918. "Letting these figures run for a few years," we continued, "based on their current trajectories, we see that, in 2015, the national debt explodes to over $22 trillion. Per citizen, we're now looking at close on $70,000, or $184,000 per taxpayer. Total debt, as measured above, has now grown to over $63 trillion and the average family's share of that stands at nearly three-quarters of a million dollars. Average savings per family, by the way, have now fallen to just $2,791." Remarkably, the general consensus on how best to overcome this catastrophic trend invariably involves, in some form or another, additional government intervention and, by extension, spending. The debate appears centered on how best to manage this agent of coercion, the state, rather than on whether we need it at all. Indeed, the mere mention of free-market principals invokes fear, uncertainty and, usually, an abrupt end of the discussion. But look at the facts: Back in 1903, government spending in the US, expressed as a percentage of total GDP (leaving aside for a moment the spurious nature of that measurement), weighed in at a paltry 6.8%, or $25.9 billion dollars. Although the state's "mission creep" tended steadily higher over the next couple of decades (with an conspicuous spike circa WWI), that percentage remained in or around the low teens until the Great Depression, when the combined efforts of President Hoover and FDR's New Deal effectively doubled state involvement. By 1940, government spending accounted for one-fifth (20.14%, or just over $100 billion) of the nation's GDP. Fast-forward to 2010 and spending by the state had rocketed to over 43% of the nation's total economic output. We'll leave it to the reader to decide whether the nation's star is today rising or setting, whether her future looked brighter at the beginning of the 20th or 21st century. Of course, arguments from effect tend to be cumbersome and problematic, due in part to the unreliability (not to mention the sheer volume) of statistics supporting this or that outcome. "Lies, damned lies and statistics," goes the old saw. For every honest, objective, impartial statistician, there are ten million idiots who believe his lies. It is perhaps more helpful, therefore, to return to basic, first principals. Such is the politico-doublespeak of our time that it seems fit to remind ourselves once in a while, if not constantly, of the true nature of things. If, as William Shakespeare assures us, "a rose by any other name would smell as sweet," then the law of identity to which he refers leaves us with more than just springtime aromas and romantic iambic pentameter. If, as that law states, A really is A (and A only), then we must not forget to apply this cornerstone of logic elsewhere – even, and especially, to those things which omit a decidedly less alluring scent. With this in mind, let's revisit the relationship between man and the state that governs him. The state, by its very nature, is an agent of force. Allen Thornton puts it thus is his essay, Laws of the Jungle: "What do you think 'govern' means? It doesn't mean 'suggest' or 'implore.' It doesn't mean two people sitting down, talking it over, and compromising. 'Govern' means 'force' and 'force' means 'violence.'" Concludes Thornton: "When you advocate any government action, you must first believe that violence is the best answer to the question at hand." While it is true that a great many individuals voluntarily enable it, that fact remains majority rule does not turn fallacy to truth. It does not morph debt into credit, liability into asset, nor wrong into right. A rose is a rose ("is a rose is a rose") whether the majority believes it to be so or not. Likewise, acts of force are exactly that, regardless of how many people vote for them and whatever name they are so given. The expropriation of private property – which in any other domain is punishable by the very institution that holds a monopoly on such an action; the state – is commonly known as theft. Of course, when the state commits such an act, on threat of imprisonment, fine or other use of force, we refer to it by a subtler label: tax. Let us not be confused here. There exist only two possible forms of wealth transfer – one voluntary, the other coercive. One can no more be "voluntarily taxed" as one can be "partially pregnant." A = A, no more, no less and no other. Might the problem, therefore, be the agent of force itself – the ever-expanding, increasingly costly, over-reaching arm of the state? And, if so, why are we debating how best to manage it instead of working to rid ourselves of its existence? To paraphrase that long dead poet: What's in a name? That which we call force, by any other name still robs us of our liberty. Joel Bowman The Increasingly Complex Relationship Between Man and State originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."
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| This Will Be the Biggest Bull Trend in Commodities for the Next Decade Posted: 11 Jan 2011 09:09 AM PST By Matt Badiali, editor, S&A Resource Report Tuesday, January 11, 2011 One of the smartest, loudest, richest oilmen in America is T. Boone Pickens. Since graduating college with a geology degree in 1951, Pickens has spent the last 60 years building a billion-dollar fortune by finding oil, putting together giant deals, and managing energy investment funds. He's the "rock star" of the U.S. hydrocarbon industry. Pickens is now 82 years old. He doesn't need to focus on money anymore. These days, he's focused on the "Pickens Plan"… a giant push to convert a portion of the American truck-and-car fleet to burning natural gas instead of oil. As I showed you yesterday, the government is going to crazy lengths to push the country in a "green" direction – including forcing every American taxpayer to pay for his neighbor's electric car. Part of the green movement will mean using more natural gas. But the government won't be the only driver for natty consumptio...
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| Precious Metals Enter a Higher Risk, Higher Return Potential Zone Posted: 11 Jan 2011 09:01 AM PST 2011 is sure to be a critical year for gold with several analysts predicting an end of the bull market. It may sound very strange, but it appears that the USD Index has been leading the way for precious metals and suggests higher prices ... Read More...
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| US Road to Bankruptcy Runs Parallel to France Posted: 11 Jan 2011 09:00 AM PST We met a friend for a drink last night. He's an American who has lived in Paris for twenty years. "I'm glad you're back here," he began. "There's no better place for an American to live than here in Paris. It's much better here than in the US. Almost everywhere in the US you have to get in your car and drive somewhere – to a mall – just to get a cup of coffee. That's no way to live. "It's much better here. Especially if you're an American. Because you can pretty much ignore all the nonsense that goes on here. If you're French, Paris isn't so much fun. French salaries, after all the social charges, are too low to enjoy it. Besides, the French have to know all the social codes and stick to them. But we can do what we want. They just dismiss us as crazy foreigners. And if you're French, you'll get all worked up about what goes on in the government or in your business. Running a business here is a nightmare. But I don't even read the local news. I've never paid any attention to what the government does. Why should I? I can't even vote here. "And if you're French you have to worry about the country going broke. There is no way they can continue to pay all those people who are retired. They seem to live forever…and they're very expensive. France is going broke. But it doesn't bother me… "Trouble is, America is going broke too." In terms of debt and deficits the country that most resembles France is the United States of America. Both are going broke. But so are many other "European" nations…and eventually, probably all of them. There are the nations of Europe. Then, there are the nations of Europeans – Argentina, Chile, Australia, New Zealand, Canada, and the US. The point is, most of them are going broke. Their model is exhausted. This was the social welfare model derived from Bismarck – take from workers; pay to non-workers. It was okay as long as the pool of workers was growing faster than the pool of non-workers. But that's no longer the case. Curiously, the nation furthest along on the road to bankruptcy is a non-European nation that picked up the model early, Japan. Already, there are more people retiring in Japan than there are people entering the workforce. Overall, the population is falling, while the number of people over 65 increases at 3% per year. In 1990, there were more than 4 people working for every retiree. Now there are barely two. Practically all the European nations, and all the nations lived in predominantly by people from Europe…as well as Japan…are headed down this dead-end road. Bill Bonner US Road to Bankruptcy Runs Parallel to France originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."
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| Posted: 11 Jan 2011 08:59 AM PST by Barry Eichengreen: "If you were worried by talk of currency war late last year, you ain't seen nothin' yet." There are of course a variety of smaller economies whose currencies are likely to be attractive to foreign investors, both public and private…. But these countries worry about what significant foreign purchases of their securities would mean for their export competitiveness. They worry about the implications of foreign capital inflows for inflation and asset bubbles.
… So the dollar is here to stay, more likely than not, if only for want of an alternative. The one thing that could jeopardise the dollar's dominance would be significant economic mismanagement in the US. And significant economic mismanagement is not something that can be ruled out. The Congress and Administration have shown no willingness to take the hard decisions needed to close the budget gap. The Republicans have made themselves the party of no new taxes and mythical spending cuts. The Democrats are unable to articulate an alternative. 2011 will see another $1 trillion deficit. It is hard to imagine that 2012, an election year, will be any different. And the situation only deteriorates after that as the baby boomers retire and health care and pension costs explode. … Previously sanguine investors wake up one morning to the fact that holding dollars is risky. They fear that the US government, unable to square the budgetary circle, will impose a withholding tax on treasury bond interest — on treasury bond interest to foreigners in particular. Bond spreads will shoot up. The dollar will tank with the rush out of the greenback. The impact on the international system would not be pretty. … With exorbitant privilege comes exorbitant responsibility. Responsibility for preventing the international monetary and financial system from descending into chaos rests with the US. How much time does it have? Currency crises generally occur right before or after elections. Can you say November 2012? [source] RS View: Eichengreen articulates several important issues, including a good reminder on timing. On the point of responsibility, however, no matter how strongly one might insist that the U.S. bears "exorbitant responsibility" given it's exorbitant privilege as the issuer of the world's primary reserve asset (i.e., the US Dollar/US Bond), the reality is that the rest of the world cannot afford the risk of doing nothing other than relying upon a hope that U.S. politicians can muster the political will to act with the world's best economic interest ahead of its own. (And even that situation presupposes that the necessary intelligence is present to figure out what that best interest is. Not likely!) Hence, for the constraints and conditions listed both here and previously, there will be an organic multilateral evolution of international policies gravitating toward gold as the dollar/bond's alternative in the role of primary reserve asset. And as for the international payments/invoicing function, bilateral trade will most naturally make use of the domestic currency of one or the other counterparties to the transaction.
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| Mainstream Haters Deny Gold its Fundamentals Posted: 11 Jan 2011 08:50 AM PST Yesterday I came across a clip from one of the business channels. The discussion was about “king dollar” and Gold (NYSE:GLD). (The king dollar probably gives it away). Anyway, one of the guests quipped, “I’m on record that Gold is a dumb trade. It is rising based on fear and confusion and when that subsides, the Gold trade ends.” First of all, Gold has been rising for ten years. It went down the twenty years prior. It is now in a structural bull market. This fact cannot be debated. There is no Gold “trade” unless you are trying to make a few points next week or month. It is a bull market. Repeatedly, the mainstream news makes this mistake. Moreover, find me a Gold bear that readily admits Gold is in a bull market. You can’t because every bear refers to Gold as a trade, as if its advance is an extended aberration that needs correcting or is unsustainable. Secondly, there are real reasons for the bull ma...
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| Posted: 11 Jan 2011 08:49 AM PST Request for interview on SubSpace-Radio DJ Grom to max Hi Max My name is Mark and I have been following you on AJ & RT for a few years now. I’ve fully embraced the Crash JP Morgan – Buy Silver campaign, and am quite happy with all the different bars and coins that I am [...]
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| The Biggest Resource Stories for 2011…and Beyond! Posted: 11 Jan 2011 08:34 AM PST I'm going to countdown three of 2010's biggest resource stories – not to reminisce about profitable investments from the year gone by, but to highlight what I believe will be very profitable investments in the year ahead… No. 3: The Continuing Gold Rush The gold price soared nearly 30% last year – punctuating a spectacular decade-long run that has seen the gold price quintuple! So has gold finally reach a "bubble phase?" Is the great gold bull market on its last legs? In a word, No! If gold is in a bubble, then it's one heck of a bubble. Not even the 2008, economy-wrecking market crash could pop it. Gold is not in a bubble; it's in a big bull market, plain and simple. As stories about quantitative easing and other forms of overt currency debasement crossed the newswires last year, investors became increasingly concerned about the value of the paper they call "wealth." Increasingly, these concerned investors have been shifting some of their wealth from paper to gold…and other hard assets. Plus, it's easier than ever to "own" gold (so to speak) via the rise of exchange-traded funds (ETFs) like SPDR Gold Trust (NYSE:GLD). With a click of your mouse, you can buy into the new gold rush – although in many respects it's better to buy real gold and take delivery, a point that I've made over and over. At the same time, the world's gold buyers are chasing declining mine output. That is, despite the rising price of gold, the world is likely past the point of Peak Gold output. All the output from new mines isn't replacing the decline in output from older mines. But demand is the main story in the gold market…demand for real money, not the paper kind. The monetary universe is changing in a fundamental way, with the price of gold serving as the barometer, thermometer and inclinometer. The cozy old economic order – post World War II, with the US dollar as the world's reserve currency – is passing away, and things won't ever go back to the long, lost "good old days." I've had endless discussions with skeptics about "why gold prices are rising." Of course, the skeptics can deny, up and down, the meaning of rising gold prices. But at the end of the day, investors and savers around the globe are becoming increasingly fearful of holding paper currencies. I won't even go into the monetary problems that national governments across the world are facing with fiat currencies. Just accept the fact that mankind's monetary default position is gold, and that's been the case for 5,000 years or more. Don't fight history. Here at Agora Financial, we've been recommending that readers buy gold since the late 1990s, when it was selling for under $300 per ounce. We still like it at $1,375 an ounce. When it comes to gold, there's one key idea to take into 2011: Gold is money. And gold makes better money than the government-issued kind. The big risk of owning currency and bonds is that any Tom, Dick & Harry – OK, the politicians and bankers – can create as much of it as they want. This year and next, your biggest risk is in not understanding that concept. No. 2: The Shale Gas Revolution Just a few years ago, the energy investment idea du jour was to build liquefied natural gas (LNG) terminals to handle future imports to the voracious US hydrocarbon market. Remember Cheniere Energy, once the darling of newsletter writers? Now there's talk of re-tooling some of America's LNG systems for the exportation of natural gas. Instead of bringing foreign gas to our shores, the newest idea is to liquefy natural gas in North America and export it to Europe and China. In terms of gas, the world has turned upside down. The world energy landscape has changed with new developments in extracting natural gas from shale beds and tight sands. Innovative extraction technologies have dramatically altered the economics of natural gas extraction in North America. South Africa's Sasol Corp., for example, is teaming up with Talisman (NYSE:TLM) to turn otherwise stranded gas into liquid fuel in northern British Columbia. It's a truly revolutionary process – a point that The New York Times made a few days after I mentioned this joint-venture to the subscribers of Outstanding Investments. Companies like Consol Energy (NYSE:CNX) and MarkWest Energy (NYSE:MWE) are also benefitting from US, Canadian and now global shale gas development. Even our friends the Chinese are coming to the US, to learn how we're cracking shale for gas, so they can duplicate the effort back in the Motherland. At the same time, the technology for freeing shale gas is finding its way into the oil patch, with companies like Venoco (NYSE:VQ) working to turn California's Monterey Shale into a vast new oil resource. There are a lot of hydrocarbon molecules out there. The trick is to harvest them. Forward-looking investors should not ignore the fact that shale gas development will provide enormous opportunities for the oil service guys, particularly Schlumberger (NYSE:SLB), Halliburton (NYSE:HAL) and Baker Hughes (NYSE:BHI). There's much more to come with the shale gas revolution. We're just in the early innings on this one. There's plenty of good investing ahead, and a lot of hydrocarbon molecules yet to be sucked out of the crust. No. 1: The Rare Earths Boom Rare earths are a group of exotic elements of the Periodic Table (Lanthanides, mostly), with unique electrical, magnetic, optical and other properties. Without them there's basically no clean tech, green tech, advanced electronics, electric cars, and much more. It's not that rare earths are geologically "rare." It's more that they're so darned hard to process in industrial quantities, and into high tolerance end products. That is, the end products are mostly in the nature of "designer molecules." Thus, doing the rare earths gig is far more than basic exploration, mining and crushing. Doing rare earths correctly involves being really good in chemistry and chemical engineering as well. There's nothing easy about it. The big rare earths story for 2010 was how an otherwise obscure sector of the mining and processing industry became a destination point for billions of dollars of new investment. As 2010 drew to a close, we were in a market mania, in some respects, with some rare earth stocks "melting up." The story was driven by China and its precipitous reductions in export quotas – front page news across the globe. You may have seen the statistic that China controls about 97% of the world's rare earths supply. Let's not quibble about the exact number – a few fractions one way or the other. And when China ratcheted down its rare earths quotas during 2010 – part of a long-range strategic industrial policy, I must add – it shook the Western world to its industrial foundations. It's all been a shock to the global trading system. This shock has produced some shockingly large gains in the shares of rare earth mining companies. A lot of these stocks have become very volatile and frothy. So caution is warranted. But the rare earth story is very real and very exciting. Don't miss this one! Regards, Byron King The Biggest Resource Stories for 2011…and Beyond! originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."
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| Posted: 11 Jan 2011 08:31 AM PST Open letter to Thomas Hoenig, President, Federal Reserve Bank of Kansas City Read More...
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| Gold Daily and Silver Weekly Charts Posted: 11 Jan 2011 08:25 AM PST | |
| Gold Flat Correction Possibly Complete Posted: 11 Jan 2011 07:52 AM PST courtesy of DailyFX.com January 11, 2011 07:34 AM 240 Minute Bars Prepared by Jamie Saettele “The gold decline from the high is an impulse (5 waves), therefore the odds are high that an important top is in place.” Waning downside momentum warns of a b wave low. The implications are for a rally in wave c that exceeds 1380 (if just barely) before the next leg lower.” After trading above 1380, gold tested Fibonacci resistance at 1387. The correction may be complete thus gold is vulnerable. Downside levels to watch are 1317 and 1270....
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| Posted: 11 Jan 2011 07:39 AM PST by Addison Wiggin - January 11, 2011
 All we can do this morning is pause to take a breath. In the last 48 hours, the Chinese have checked the following items off their national to-do list…
We discussed the last item yesterday. We’ll get to the other two shortly. But first, we pause to consider what it is the Chinese see when they look across the Pacific at the “sole superpower.”  “I saw Jared Loughner’s mugshot on The New York Times, The Washington Post, Time and Newsweek, etc.” writes a faithful 5 reader, a teacher in Beijing whom Addison hears from every few weeks.“I smell some reminiscence of political assassinations -- some really famous ones after which the course of history was changed. This guy could be a hero to many. He looks proud and victorious on Time. Many nationalist nutjobs would kill for that front cover. “From his motivation, we can smell his mind deep drenched in the alcohol of Tea Party propaganda. The popularization of political assassination is the pretext of many authoritarian regimes. Before National Socialists became Nazis, we thought it was just a populist movement. “The government can regulate the economy and Wall Street, but can’t regulate people’s anger. The Tea Party and the Tucson assassination is only the beginning of something big enough to start an ultra-nationalism movement on the path to a possible world war. What could we do to stop the history from repeating itself?” You don’t have to agree with all of this, or any of it. We just present it as a glimpse into what folks might be thinking over there, even as they accomplish new headline-grabbing feats.  China’s forex reserves grew a record $199 billion during the fourth quarter, far more than Western “experts” had figured. That brings the total to $2.85 trillion.According to an analysis by Standard Chartered, less than half the increase was due to trade and government-approved foreign investments into China. Most of it was hot money -- investors piling into real estate and other Chinese vehicles, searching for return in a world of zero interest rates. Of course, this is a double-edged sword, fueling the fires of inflation in China. But the Chinese have a plan for that, too.  At the start of 2011, China quietly eased capital controls on its exporters. Up till now, exporters who generated their revenue in dollars had to take those dollars to the Chinese treasury and exchange them for yuan… which usually could be spent only within China.This is one way the Federal Reserve has been able to “export inflation” to the developing world. But no more. Now those companies have a choice about what to do with the dollars they earn -- even keep them overseas to invest in ventures outside China.  Defense Secretary Robert Gates just got some interesting news during his visit to Beijing: Chinese leaders confirmed they carried out a test flight of the J-20 – a “stealth” fighter jet that can evade radar. It was wheels down the whole time. “Nothing fancy” says a brief email from our resource expert and Renaissance man Byron King, whose CV includes 128 carrier landings as a Navy pilot. “Idea is just to get the bird off the ground and make sure it flies.” Mission accomplished. It’s just a prototype, likely years away from deployment. But whenever the J-20 is ready, it’s a safe bet it won’t cost $350 million per plane, it won’t require 30 hours of maintenance for every hour of flight time and its stealth coating won’t fall victim to rain or blowing sand. All those things are true of the American F-22 stealth fighter. Of course, the Chinese don’t have to worry about building the J-20 in 44 states and God knows how many congressional districts just to keep everyone happy. No wonder we’re bumping up against a national debt ceiling of $14.3 trillion.  House freshmen face overwhelming pressure to raise the debt ceiling soon, according to Rep. Ron Paul. “The real test is going to be those 80-some new members and how they are going to vote,” he tells Fox Business.“And I [expect] they’re going to be talked into it -- the majority will be talked into it -- because they are going to get some promise” of future cutbacks. Yeah, right. Already the GOP’s campaign pledge to cut $100 billion in spending this year -- a measly 2.63% of total spending -- is being talked down to $50 or $60 billion. If you missed Addison’s letter to Congress weighing in on this issue, you can read it here.  Major U.S. stock indexes have recovered most of yesterday’s losses. Earnings season is off to a good start with a decent report from Alcoa, and whatever jitters traders had yesterday about Portugal have abated today. Portugal’s finance minister says he doesn’t expect his country will need a bailout from the European Union or the International Monetary fund. All we’ll point out here is that Ireland’s finance minister said the same thing of his own country less than two months ago.As we write, the euro is fetching $1.295. The dollar index has firmed to nearly 81 -- to be precise, 80.93.  Gold is holding its own yet again today, as it has since last week’s shakeout. The spot price is currently $1,378. Silver continues to perk up… It’s now $29.52. “Imagine it -- a piece of rock the size of a golf ball giving a person a lifetime supply of electricity,” says our tech and biotech maven Patrick Cox. “A piece the size of an SUV could give a lifetime supply of energy to a town of about 50,000 people.”Pie in the sky? Hardly. “One tiny company has figured out a way to use an existing form of power plant to make more power cleaner and cheaper,” Patrick continues. It’s carved out a niche in the clean-power sector that -- unlike solar, wind and the rest -- doesn’t need federal subsidies to be profitable. In fact, Patrick anticipates it will prove to be the source of “enormous unending profits.” And it’s putting that know-how to work right now. The firm began work just days ago under a contract with the governments of Saudi Arabia, Kuwait, Bahrain, Oman, Qatar, and the United Arab Emirates. The objective -- to get those countries a cheap and reliable source of power for both electricity and water desalination. (That way, they can sell more of their oil to other countries.) Coupled with a contract the firm signed in Russia, events are suddenly moving very quickly -- so fast Patrick just made a last-minute addition to his “wealth quake” predictions for 2011. You can hear about this one-of-a-kind power source… plus all five other predictions… right here. [Ed. Note: This presentation will remain available only through this Friday. After that, we’re taking it offline.]  “Excellent letter,” a reader writes of Addison’s letter to Congress, “but like the election and all the yelling from the rooftops, it will fall upon deaf ears.“An excellent point was made [by another reader] about whether or not this is intentional. If not, then we as a country have collectively elected the biggest group of idiots ever assembled under one circus tent. And may God have mercy on our souls.”  “It is something that has perplexed me as well,” writes another, about the reader yesterday who mused whether Washington might “be driving the USA off a financial cliff ON PURPOSE.”“What Addison Wiggin and Porter Stansberry have said in their letters is something that I am sure our president, his administration and Congress are well aware of. These are not uneducated people.” “Having said that, I am left wondering what they are planning. If they have a goal in mind, why would they not share it? Does the outcome depend on secrecy? Is it so outrageous that they know the only chance of it being accepted is when there is no alternative? I think we have to ask ourselves why they are pursuing this policy. “I don’t know the answer, but we have to think outside the box. Someone else is.”  “It is tempting to look at it that way,” writes, a third, “but no. The truth is, as these smarty-pants folks at Agora like to say, people come to believe what they need to believe when they need to believe it and from their beliefs flow their actions.“It is human nature, ebb and flow, rise and fall. The addiction to control grows and grows and begets a huge failing state. Those that support it are locked in like crackheads. They can’t see the forest for the trees. “It acts just like a conspiracy, but each person is just playing their part in the whole thing without ever really seeing what they are a part of. You could say it’s a blind conspiracy. It’s real, it looks like a conspiracy, it acts like a conspiracy, but people don’t know they’re a part of it. “Of course, it’s also like a progressive disease too, so it gets worse and worse and more and more obvious and at the end the denial is unbelievable -- you’re faced with all these impossible contradictions between the most basic moral ideas of right and wrong and how out-of-control our governments have become. This has forced us into political incoherence, as many people’s stated beliefs and their actions cannot be reconciled. “Since this is a mental thing, what happens is... people literally lose their minds in order to pretend that everything is normal.”  “How do they get away with doing these things?” asks a charter Reserve member also pondering the “on purpose” question.“After a moment’s thought, I realized it’s part of the general debasement of all things around us:
“So survival has become an intensely personal affair, with being personally aware the most important attribute.” “Who’d ever have thought that living through the lessons learned during Depression 101 would turn out to be basic to survival again in my lifetime! At least this time around we have the Internet... so far...” The 5: Survival… personal awareness… You clearly “get” our guiding philosophy: “Sauve qui peut.” Addison has offered that advice a number of times, but this editor was most amused to peruse The 5 archives and discover one of those times came just as the Dow approached its all-time high in October 2007. Cheers, Dave Gonigam The 5 Min. Forecast P.S.: China is just days away from issuing the 2011 Silver Pandas, and once again our friends at First Federal have secured exclusive access to the entire issue of MS70 government-certified first strikes. Last year, Agora Financial customers cleaned out First Federal’s entire inventory of the 2010 issue… so Nick Bruyer and the crew have asked us to pass along an unusual request. See, they’d like very much to pair the 2011 issue with the 2010 issue and sell them as a set. But that’s hard to do if the entire 2010 inventory sits in the hands of folks like you. So here’s the deal: First Federal is interested in buying back your coin for more than you paid. You could be looking at a $55-per-coin profit, depending on how many you bought. If you want to learn more about this buyback program, call First Federal toll free at (866) 630-7546… or drop them an email.
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| Gold: The Improbable Answer to Life, The Universe, And Everything Posted: 11 Jan 2011 07:37 AM PST
(With apologies to Mr. Adams, may he rest in peace, I never get tired of quoting that book.) Complete Story »
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| Posted: 11 Jan 2011 07:37 AM PST Jim Sinclair's Commentary Courtesy of CIGA Stefaan.
Quiet Accumulation in Loonie While parity or better with the dollar surprises the 'experts', it does not surprise capital. The new highs in REV(E), also known as trend energy, and positive divergence with price imply quiet accumulation since October 2010. Canadian Dollar ETF (FXC): Headline: Dollar holds parity as currency wars heat up Canada's dollar is being pressed higher by a "beggar-thy-neighbour" policy of competitive currency devaluation, a situation Brazil warned over the weekend threatens to expand into a global "trade war." The loonie, now into its eighth straight session of trading above the U.S. currency, appears to be gaining its strength from Canada's non-interventionist approach, said BMO Capital Markets economist Benjamin Reitzes. Brazil has complained loudly that policies in the United States and China are driving down the greenback and yuan, thus driving up the currencies in fast-growing emerging markets. Source: vancouversun.com
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| Jackie O rocking the Silver vibe!!!!! (**) Posted: 11 Jan 2011 07:35 AM PST Share this:
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| Posted: 11 Jan 2011 07:35 AM PST Surging Food Prices Are Sparking Riots All Around The World MK: When the paper price of Silver is manipulated – nobody dies from starvation (directly). Not so with food. Just manipulating Silver and Gold and various other markets, and the outsized profits that come with that are not enough to feed the sickness of pathological [...]
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| Posted: 11 Jan 2011 07:24 AM PST
Whoever said CNBC does not have good content - the biased station's European division actually has some very informed and interesting guests. Of particular note is yesterday's interview with Cazenove's technical strategist Robin Griffiths. And while the chartist tends to not be too happy with the recent stock market action (who is), the most notable item on the docket was Griffiths discussion of gold. And it was quite memorable: "I think not owning gold is a form of insanity, it may even show unhealthy masochistic tendencies, which might need medical attention. Real assets hedge paper money being printed into oblivion, so you've got to own gold and you've got to own other commodity-related investments still. Gold is far from being an overowned trade at the moment, far, far from it. Although it's been a top performer for each of the last ten years, it's still in a linear trend. Eventually it will go exponential and make more in the last little bit than the whole of the ten year trend." That pretty much covers it.
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| Posted: 11 Jan 2011 06:59 AM PST China’s first gold fund raises target $500 million Share this:
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| Goldman Prop: A Veritable (Physical) Gold Mine... As Suspected Posted: 11 Jan 2011 06:58 AM PST
Over a year ago we attempted to deconstruct Goldman's prop trading activity using scraps of data from the tax returns of the Goldman Sachs Foundation. The reason we did that, is that up until today, the firm had never disclosed the non-client aspect of its trading, instead dumping all related revenues and profits in the umbrella "Trading and Principal Investments." That is no longer the case, as starting today the firm will break down its client facing and prop ("Investing and Lending") revenue and profit streams. The reason for our long-term fascination with Goldman prop trading, which is nothing less than a glorified hedge fund, and has no client flow focus whatsoever (presuambly), is that we had always claimed it accounts for a substantial portion of the firm's if not top, then certainly bottom line. After all it was Lucan van Praag who told us directly, that prop trading contributions to Goldman were really de minimis, a response which we took extremely skeptically as the margins associated with a modest revenue amount may well be huge and thus result in a substantial pre tax net income benefit to the firm. Today Goldman also published an 8-K that did a pro forma breakdown of its earnings. To our great surprise, we were correct in assuming that Goldman prop has been the dynamo behind the firm's profitability in 2010. As a reminder, here is how our exchange with Goldman proceeded back in late 2009:
Here are the facts: below we present the breakdown, per Goldman, of its now 4 key divisions, with the "Investing and Lending" group singled out.
Two things should be immediately obvious: 1) while revenues for the prop group were indeed not material compared to the other groups in the company, its pre tax net income margin was astounding, and seems to gravitate around 50%. Compare this to the Flow group, whose margins fluctuate with order flow and market conditions anywhere between 43% and 16% in the past three quarters. Additionally, margins for the other two traditional groups: Investment Banking and Investment Management are so low, that the contribution from these groups to the bottom line combined is less than Prop alone! 2) The net income contribution from Prop to Goldman is massive: in Q1 it was 20.4% of total, in Q2 it was a whopping 41.2% and in Q3 it was 29.6%. Does Mr. van Praag still contend that Prop is a minimum contributor to Goldman's net income? In fact, YTD Prop has accounted for 27.2% of all pre tax earnings, and the group with the most stable top line and margin. Does anyone see now why Goldman was so modest in disclosing the details behind Prop? Of course, what this means is that Goldman will never end prop trading as such. It will merely rebrand it as it has now done to "Investing and Lending." And with Volcket now out of the picture, and all the crappy prop traders fired with the excuse that Goldman was ending its prop business, the firm can continue to generate massive top line revenue and bottom line profits in a group which is basically Prop trading in sheep's clothing. Which is as we had always expected. The only good thing to come out of this, is that Goldman will now be forced to break down its VaR for both the Flow and the Prop groups. And we can't wait to see just what the risk differential that the glorified and backstopped hedge fund takes, when it is trading on behalf of clients and on behalf of itself, knowing full well that it can never possibly blow up courtesy of the Bernanke Put. We are also looking forward to JP Morgan disclosing precisely the same detail, and we also hope that Jamie Dimon can find the time to disclose the alleged massive losses the firm has suffered in its commodity prop trading division in the past two quarters courtesy of the XY-sigma move in precious metals which the Fed's favorite bank was unfortunately not axed all that well in...
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| Gold & USD: Tactics To Get Richer Posted: 11 Jan 2011 06:57 AM PST Stewart Thomson email: [EMAIL="stewart@gracelandupdates.com"]stewart@gracelandupdates.com[/EMAIL] email: [EMAIL="stewart@gracelandjuniors.com"]stewart@gracelandjuniors.com[/EMAIL] Jan 11, 2011 1. Gold blasted through $1380 early this morning! Your gold bullion pile, marked to paper currency model, just rose by approx. 1.5% in value from the $1360 area lows! 2. Good news, and, perhaps, congratulations to you. 3. Before you break out your champagne, however, could I "bother you" from your calculations, to ask just one teeny question: Marked to market weight, did your gold bullion pile increase in number of ounces from $1360? That would require a yes or no answer. 4. US dollars are currency. Not money. There's a significant difference between currency and money, and understanding that difference is key to real wealth building. 5. Your wealth building. ...
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| Gold Market Update - Jan 11, 2011 Posted: 11 Jan 2011 06:54 AM PST Clive Maund The rally in gold in the final trading days of December was unable to make new highs, and now it is on the verge of going into correction mode. On the 6-month chart we can see how, after a sharp drop on Monday, gold just held key support at $1360 from Wednesday through Friday. If this support should fail soon, which looks increasingly likely, then gold can be expected to go into retreat. On its 3-year chart we can see that if gold breaches $1360 then a retreat towards the 200-day moving average now approaching $1270 is on the cards, with a lesser probability of it stabilizing at support in the $1320 area and bottoming there. Should we see such a retreat, any possibility to obtain physical gold (and silver) should be seized. ETFs should be avoided. On no account should physical gold and silver be sold - at times like this holdings should be hedged by means of options etc which can be liquidated for a profit to offset bullion losses when a bottom is tho...
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| Silver Market Update - Jan 11, 2011 Posted: 11 Jan 2011 06:52 AM PST Clive Maund Silver is now looking vulnerable as last week it clearly broke down from its steep uptrend in force from last August, after making new highs at the turn of the year. As we know from experience, when silver breaks down things can turn ugly fast, and technically the only thing that has preventing it from plunging thus far following the trendline failure has been the support level in the $28 area near to its rising 50-day moving average. Silver is now short-term oversold and one scenario we should take note of here is that it could enter a trading range bounded by this support and the resistance at the highs. However, there are 3 factors in play visible on longer-term charts which suggest that a breakdown and corrective drop is now more likely than a high trading range. On its 3-year chart we can see that silver's uptrend from last August has been steep and prolonged, which has resulted in a large gap opening up between its moving averages that increases t...
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| You’re insane if you don’t own gold, investors told Posted: 11 Jan 2011 06:45 AM PST Not owning gold during the current financial turmoil is “a form of insanity”, according to an investment analyst at a leading City firm. Share this:
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| More Evidence Commercial Silver Supply Tight Posted: 11 Jan 2011 06:42 AM PST More anecdotal evidence of the tightness in the commercial silver market surfaced yesterday in a piece picked up by our friends at the Gold Anti-Trust Action Committee (GATA), a press release issued by Sprott Asset Management on the delivery status of the roughly 22.3 million ounce (694-tonne) first buy for the new Sprott Physical Silver Trust (NYSE ARCA:PSLV).
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| Take-Off Tuesday - Playing the One-Way Market Posted: 11 Jan 2011 06:28 AM PST
Take-Off Tuesday - Playing the One-Way MarketCourtesy of Phil of Phil's Stock World
It's Super Market! Strange index from another reality, who ignores bad news and achieves p/e multiples far beyond those of rational markets. Super Market, which can break resistance on low volume, move higher without consolidation and which - disguised as a genuine Price Discovery Mechanism, an actual indicator of the true-value of listed companies - Instead fights a never-ending battle with rational thinking and negative data because, in America, the market is only allowed to go one way! OK, I got that sarcasm off my chest, now we can cheer-lead. Go Russell 800 go! Is today finally the day? After a rational-looking sell-off yesterday on very legitimate concerns over the fact that Portugal is now borrowing money at over 7% interest (a rate that would cost the US over $1Tn in interest annually), we had essentially a "Free Money Day," where the market goes up and up and now we have even better futures, where another 0.5% is being tacked on in early trading (7:30). Let's embrace the positives first and foremost. Both Japan and China have now stepped up to assist the 17-member EU to beat back high rates by pledging to actively participate in this week's bond auctions, the first of the new year. The IMF (mostly the US) has also pledged to backstop loans - all this is giving the Euro a nice 0.5% bounce that has knocked the dollar down to 81, which is down 0.6% from yesterday's open so of course our markets are up 0.6% - THAT'S WHAT ALWAYS HAPPENS!
The Wednesday before last, we made shorting the AAPL 2013 $175 puts at $8 the base for buying 2 SPY 2012 $125/135 bull call spread at $4.80 each for a net $1.60 in cash on $20 of potential upside (1,150% potential upside). That's a pretty bullish bet as SPY was just $125 at the time so we are playing for a 10% gain. This is a hedged offset as we are GUARDING against a SPY run of 10% by agreeing to buy AAPL at $175 if the market collapses. I think if people are ever going to understand hedging, this is the best example as the main premise here is: IF someone wants to sell us AAPL at $175 per share (now $340) in 2013, we will be happy to buy it. So now we say we're willing to buy 500 shares, which would cost us (at 50% margin) $43,750 and AAPL would then be a long-term investment for us at 50% off the current price. In exchange for promising to buy AAPL in 2013, the person who currently owns the stock at $340 pays us $8 per share now or $4,000. We take that $4,000, plus $800 more and buy ourselves 1,000 of the SPY 2012 $125 call options and sell 1,000 of the SPY 2012 $135 call options for net $4.80 each (10 contracts of 100) and now our WORST CASE is owing 500 shares of AAPL at $175 and our best case is getting back $10,000 at SPY $135 or higher (we always have a $10 advantage over the caller) against the $800 of cash we laid out. Even if we had to set aside the entire $43,750 in margin (it's actually just $1,755 with an ordinary margin account), the return is still and attractive 22% but, as I said, over 1,000% on the actual cash commitment and 500% on cash and ordinary margin). Trades like this can help you keep your portfolio mainly in cash while you wait PATIENTLY for the market to clearly show which way it is heading. That is our current game plan. It is BORING and we amuse ourselves with day trading but we are not, on the whole, day traders - merely active market participants who know better than to commit too much capital in uncertain markets. Warren Buffet has been known to wait a decade or longer before committing his capital - we've been waiting since November! This is how we trade uncertain markets. It can even be argued that I'd rather get assigned 500 shares of AAPL at $43,750 than get my "consolation prize" of $10,000 if the markets move up - that would be the Buffett way. Two Tuesday's ago I asked if we were "Topping or Popping?" and we discussed our many, many long-term bullish plays as well as a dozen other bullish trade ideas we were working on besides AAPL and, of course, we still have our "Secret Santa's Inflation Hedges for 2011" and XLE, XLF, DBA and even XHB are all still playable as the markets still haven't gotten away and these are long-term plays but they are long-term plays with the potential to make HUGE amounts of money so, no matter how cynical you are about the current market moves - it's worth considering at least some hedging to the upside - in case this thing really starts to pop. Now that we have discussed the bullish premise, which is A) Inflation B) An improving economy and C) The Psychotic Fear Global Governments Have of Letting the Markets Decline and we have discussed (in the links) dozens of long-term upside trades that will make HUGE money if the market go up - we can move on and discuss a few shorter-term downside hedges and why I think we still need them. Back to our AAPL example - I KNOW if the S&P rises 10%, I will make $10,000 and if AAPL justifies $300, I will not see much increase in my $1,755 margin requirement. Assuming my commitment was to make AAPL 10% of a $500,000 portfolio ("worst case") then I still have oodles of cash to play with in the short-term. Where is my risk? I don't really lose anything other than my $800 cash if the S&P doesn't hold 1,250 for the year. My danger is in AAPL selling off hard. Since AAPL is now close to 25% of the Nasdaq, it's very logical to use the Nasdaq as our short-term downside hedge. QID is the ultra-short on the Nasdaq and has been brutalized at this point down to $10.96 and even lower at the open. It's a 2x ETF so if the Nasdaq drops 5%, QID should go up 10% but be wary on ultra ETFs because they experience decay and tend not to give you the expected returns over time. Nonetheless, for AAPL to hit $175 we would expect a catastrophic drip in the Nasdaq of at least 25% and that should bump QID up to $15, right? We are mainly worried about the market between now and April. If we keep going higher through earnings and the Fed keeps dumping money on the markets then we should be well on our way to S&P 1,350 by April and less worried about a correction than are now.
We collect $1,500 and buy 15 of the QID April $10/13 bull spread and those will pay us $4,500, which is another 15% off the potential assigned price of 500 shares of DECK if the Nasdaq drops 10%. Is it possible for DECK to fall 25% to $60 without the Nasdaq dropping 10%? Sure it is - these hedges aren't perfect. We just look for logical combinations of stocks we don't mind owning and trades that give us good index protection. So we are in cash with very small margin commitments and we've decided we're willing to spend $43,750 on AAPL and $30,000 on DECK as potential long-term portfolio holdings if they go on a massive sale. If the market goes straight up, we won't own them but we will get $10,000 in cash from the S&P. If the market goes down, we'll get a bonus $4,500 in cash from the QIDs towards our possible purchase of AAPL and DECK and, if the market does neither - then we didn't miss anything and we continue to watch and wait for bargain opportunities using our "How to Buy Stocks for a 15-20% Discount" Buy/Write Strategy, that pays us whether the market goes up or not.
Ty Cobb was asked once how he thought he would hit against modern hitters and he thought about it for a moment and said "I think I would hit about .300." Why so much less than your lifetime average, asked the reporter. "Well," said Cobb, "you've got to remember, I'm seventy-three now." If you want to be a successful investor when you are 73, take the time to learn to hedge your portfolio now - it's a valuable skill that will serve you for the rest of your life. We don't need to look at the news today. Everyone is rescuing Europe and it's all about Russell 800 again. I think until we get past this week's bond auction in the EU we have no right to be as complacent as the markets are indicating and, of course, next week we finally begin to see some earnings so, again, why are we swinging so hard when we haven't even seen the pitch yet? The move up on low volume, especially in the thinly-traded futures, smacks of desperation on the part of the manipulators more so than a genuine rally. We will continue to favor the short-term short plays and oil finally hit our $90 target where we are thrilled to jump in on the short side there. WYNN ($119), NFLX ($190), AMZN ($185), FCX ($120) BIDU ($107) and PCLN ($440) are all overpriced and ripe for a fall, despite all of Cramer's button-pushing, so we'll be looking for short option plays on them as well as our QIDs (already in) and DIA (already in) short positions. It's fine to pick up long positions in good companies that you don't mind buying more of if the market falls 20-30% but try to stay out of momentum stocks - even AAPL as we are stretching the rationale of any kind of bullish positions until we have more solid evidence, not just speculation, that these companies deserve to have higher values now than they had in 2007, when earnings were higher and we thought there was no possibility of Bank Failures, Sovereign Defaults, Deflation, Inflation, a Housing Collapse, a Flash Crash and the World's 6Bn people were $18Tn less in debt ($3,000 each!) and 10% more of us had jobs! Click here for a 20% discount to try PSW.
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| China’s View From Across the Pacific Posted: 11 Jan 2011 06:19 AM PST All we can do this morning is pause to take a breath. In the last 48 hours, the Chinese have checked the following items off their national to-do list…
We discussed the last item yesterday. We'll get to the other two shortly. But first, we pause to consider what it is the Chinese see when they look across the Pacific at the "sole superpower." "I saw Jared Loughner's mugshot on The New York Times, The Washington Post, Time and Newsweek, etc." writes a faithful reader, a teacher in Beijing whom Addison hears from every few weeks. "I smell some reminiscence of political assassinations – some really famous ones after which the course of history was changed. This guy could be a hero to many. He looks proud and victorious on Time. Many nationalist nut jobs would kill for that front cover. "From his motivation, we can smell his mind deep drenched in the alcohol of Tea Party propaganda. The popularization of political assassination is the pretext of many authoritarian regimes. Before National Socialists became Nazis, we thought it was just a populist movement. "The government can regulate the economy and Wall Street, but can't regulate people's anger. The Tea Party and the Tucson assassination [are] only the beginning of something big enough to start an ultra-nationalism movement on the path to a possible world war. What could we do to stop history from repeating itself?" You don't have to agree with all of this, or any of it. We just present it as a glimpse into what folks might be thinking over there, even as they accomplish new headline-grabbing feats. China's forex reserves grew a record $199 billion during the fourth quarter, far more than Western "experts" had figured. That brings the total to $2.85 trillion. According to an analysis by Standard Chartered, less than half the increase was due to trade and government-approved foreign investments into China. Most of it was hot money – investors piling into real estate and other Chinese vehicles, searching for return in a world of zero interest rates. Of course, this is a double-edged sword, fueling the fires of inflation in China. But the Chinese have a plan for that, too. At the start of 2011, China quietly eased capital controls on its exporters. Up till now, exporters who generated their revenue in dollars had to take those dollars to the Chinese treasury and exchange them for yuan…which usually could be spent only within China. This is one way the Federal Reserve has been able to "export inflation" to the developing world. But no more. Now those companies have a choice about what to do with the dollars they earn – even keep them overseas to invest in ventures outside China. Defense Secretary Robert Gates just got some interesting news during his visit to Beijing: Chinese leaders confirmed they carried out a test flight of the J-20 – a "stealth" fighter jet that can evade radar.
It was wheels down the whole time. "Nothing fancy" says a brief email from our resource expert and Renaissance man Byron King, whose CV includes 128 carrier landings as a Navy pilot. "Idea is just to get the bird off the ground and make sure it flies." Mission accomplished. It's just a prototype, likely years away from deployment. But whenever the J-20 is ready, it's a safe bet it won't cost $350 million per plane, it won't require 30 hours of maintenance for every hour of flight time and its stealth coating won't fall victim to rain or blowing sand. All those things are true of the American F-22 stealth fighter. Of course, the Chinese don't have to worry about building the J-20 in 44 states and God knows how many congressional districts just to keep everyone happy. No wonder we're bumping up against a national debt ceiling of $14.3 trillion. Dave Gonigam China's View From Across the Pacific originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."
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Sovereign debt fears in Europe that have been bubbling for weeks seem to be coming to a head with Portugal's struggles. The country will come once again to the debt market Wednesday and will try to raise €750 million to €1.25 billion for the medium term. Reports are that the country is being pressured by its peers in the European Union and the IMF to take a bailout, similar to what transpired with Ireland. If Portugal is unable to raise enough money on Wednesday or if borrowing costs soar, the pressure will only mount…
January 11, 2011 (SeekingAlpha) — … Since human stupidity is hard to measure or divide into smaller chunks, gold will have to do.
Up, up and away! 
What doesn't always happen is the Nasdaq punching through the 2,700 mark on the back of AAPL's run to $345 as the expected announcement of the Verizon IPhone is pushing Apple's expected 2011 earnings past the $20 per share mark so $340 (p/e 17) sounds almost conservative compared to BIDU (p/e 87), AMZN (p/e 74) or NFLX (p/e 71) and, if you think about it, Apple has a search engine, sells things on-line and has Apple TV, which does Netflix's job so if Goldman Sachs can call Netflix 
QID's April $10/13 bull call spread is just .92 and is, of course .96 in the money. You can buy as much of it as you want for a straight 3:1 pay-off if QID goes up 20% (Nasdaq falls 10% back to about 2,400). Now, if the Nasdaq drops 10%, what would I like to buy? How about DECK? DECK is down a bit at $80 and they get pretty attractive at $70 and VERY attractive at $60 and did you know there is a guy who is willing to pay is $3 today in exchange for our promising to buy DECK from him for $60 in June (selling the June $60 puts for $3)? This is the "Wimpy Strategy" we discussed in 
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