saveyourassetsfirst3 |
- An Inside Look at the ‘Secret' World of Gold & Silver Company Warrants
- Why I Think the U.S Is Smoking Crack – & China Is Smoking Opium!
- Are Gold and Silver Still a Buy? Absolutely – & Here's Why
- Best Buy: Weak Earnings Quality but Still a 'Best Buy' on Further Pullbacks
- Investments Recalibrated: Hedging Emerging Market Bets
- Gold and Silver rally/Huge Problems in Egypt/Oil rises
- With U.S. GDP Riding High, What's Next?
- Funny business in GLD
- Money's Not Worth The Paper It's Printed On
- The Irresponsibility of Ben Bernanke and How He Will Destroy the Dollar
- Silver Supply Shortage?
- Great Gold, Silver & Green Opportunities Arise
- Kondratiev & Gold
- little history lesson: Rome and US-long read
- Spread Trades – Open Interest Evaporate on COMEX Gold
- David Freedom – 2011 and Beyond
- KWN:Eric Sprott: Expect $50 Silver, Gold Possibly $2,150 by Spring
- Friday ETF Roundup: VWO Tanks, VXX Soars
- Elite Desperation Over Failing Middle East Psyops
- Boiling Over
- If Metals Decline After a Rise in Stocks, What Would Happen If Stocks Declined?
- What Will Gold Do Next? Predictions for 2011
- The Mortgage Meltdown Is Not Just Deja Vu
- Is Egypt the Next Big Problem for the Markets?
- Investing in Gold and Silver for the Long Haul
- China Allows Renminbi Trading in the US
- Today in Commodities: Spotlit by Turmoil
- Gold Seeker Weekly Wrap-Up: Gold and Silver End Mixed on the Week
- Egypt in CRISIS: Global stocks SLAMMED by growing violence and unrest
- The story on the financial crisis you won't read in the mainstream media
- How NOT to Manage Your Risk
- Short-Term Rally?
- COT Silver Report - January 28, 2011
- Why is the gold price going down?
- The Anti-Gold Gospel according to Kaletzky
| An Inside Look at the ‘Secret' World of Gold & Silver Company Warrants Posted: 29 Jan 2011 04:59 AM PST The world of warrants is the undiscovered constellation in the universe of securities. Long term warrants shone brightly in 2009 - up 242% - and were up a further 74% as of the end of October, 2010. Such performance The warrants world consists of only 150 stars (i.e. constituents) of which only 31 are associated with commodity-related stocks that have sufficient brightness (i.e. 24+ months duration) to warrant (the pun is intended!) the attention of earthly investors. Words: 1472 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Why I Think the U.S Is Smoking Crack – & China Is Smoking Opium! Posted: 29 Jan 2011 04:59 AM PST Despite the best efforts by the American mainstream financial media, the eager PR division of the United States Dollar Ponzi Scheme, to paint the rosiest of rosy pictures for blindly optimistic readers, the stubborn image of a debt-swollen jobless behemoth economy slowly toppling persists. No matter how much U.S. departmental data is primped, polished, and primed, no amount of lipstick is going to transform this fat pig into a princess! [Let me explain.] Words: 1227 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Are Gold and Silver Still a Buy? Absolutely – & Here's Why Posted: 29 Jan 2011 04:59 AM PST After the impressive run in precious metals last year that saw gold rise 29.6% and silver rise 83%, the question on many investors' minds is whether there is still any run left in these commodities. [Read on for a clear understanding of what we can expect for gold and silver - and why.] Words: 1027 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Best Buy: Weak Earnings Quality but Still a 'Best Buy' on Further Pullbacks Posted: 29 Jan 2011 03:16 AM PST Jason Merriam submits: Electronics retailer Best Buy (BBY) experienced a significant decline in earnings quality for Q3 2011. Financial Statements: The most striking observation of our analysis is the deterioration in Q-to-Q line-item changes and weak quarterly comparison to median average changes over our seven period study. Below we have listed some of relationships which caught our attention. Note: numbers in paranthes are references to data in our report which can be viewed here. Accounts Receivable: Q3 receivables spiked 64% versus a 4.9% rise in sales. During the similar period last year, receivables grew 48% compared to a 9.1% rise in sales. Considering the competitive nature of consumer retail electronics, seasonal spikes in receivables are not unusual. However, retailers are getting savvier to collection cycles as it is the final step to cash. Thus, we were surprised to see days-sales-outstanding (number of days to collect on a receivable) get stretched by 30% (approx. 2 days) in the latest period as compared to last year. Two days might seem trifle, but for every day not paid, earnings yield suffers. Inventory: BBY Q3 ended Nov. 27. Inventory builds heading into holiday sales are typical. In the latest quarter, inventory levels grew 58.6%, almost identical to last year. But, as a % of sales, recent Q3 levels were a lofty 84.6%, compared to 74.7% the prior year. Accounts Payable: This is what concerns us the most. Recent quarter payables grew 60.5% versus 54.8% the prior year. But, sales last year were 1% higher than sales in the recent period. Cash-flow: Our dual cash-flow indicators suggest that BBY's operating cash levels are settling into a bearish trend. Although the overall confirmed trend remains modestly bullish, recent downtrend is most severe of the seven periods reviewed. Negative dual cash-flow ratios are the first sign of weakening earnings quality. More importantly, it indicates a diminished contribution from actual operating cash flow to support an earnings report. Accruals: Surprisingly, BBY's accrual picture is the most positive aspect in this report. Despite the weak operating environment, we give BBY good marks for not pulling a lot of non-cash levers to make their numbers. For example: Excessive reliance on non-cash adjustments combined with deteriorating operating cash flows...would have us eyeing the exit signs. Revenue Metrics & Capital Productivity: On the margin side of the equation, operating expenses were the biggest headwind in the recent period. As for capital productivity per-dollar-of-sales, inventory and receivables put a 45% dent in asset returns, approximately 34 cents of each dollar in sales. Conclusion: We encourage investors to avoid building a case for or against a stock based solely on one or two peculiar aspects of a financial statement. Rather, view the "picture" in its entirety and evaluate the sum of its parts. To be sure, a little smoke can become a big fire. However, knowing where the dots are connected and the strength of their relationships to each other, investors will have plenty of solid clues to make profitable investment decisions. BBY is a well managed company competing in a challenging retail environment. They face price competition from WalMart (WMT) and a consumer who would love to buy a big screen TV, but either can't afford it or bought it at WMT. The point here is when you connect all the dots to the BBY story, it tells you this:
Shares are currently trading about 18% above our fair value estimate of $30. Any pullback to this area or below would likely provide a good entry point for value buyers. Traders may find opportunities in the low to mid-30's. With Circuit City out of the picture, Wal-Mart (WMT) is the main threat to BBY profits and margins. Consumers are definitely focused on value, but they also realize convenience and access to decent customer service can sometimes be a reasonable alternative to traveling further just to save a few bucks. Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. Complete Story » | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investments Recalibrated: Hedging Emerging Market Bets Posted: 29 Jan 2011 02:56 AM PST Elliott R. Morss submits: Introduction For almost two years, I have invested in emerging market countries, both as a bet against the U.S. dollar and because their growth rates are higher and debt levels lower than the U.S., Europe, and Japan. I am a long term investor. I don’t have either the computer power or data to compete with short term traders. And for long term investors, important things don’t change quickly. But every so often, it is worth reassessing any strategy. I also believe there is considerable merit in the random walk theory that says all information is immediately reflected in stock market prices so the results of stock market picks are pretty random[1]. But as a global economist, I derive undeserved satisfaction from infrequently reviewing the global economic situation and recalibrating my investments based on what I find. The Global Economic Situation According to the IMF, nothing much has changed since2009. As Table 1 shows, advanced are nations still struggling with recession, government deficits and debt while emerging nations have moved on. Ceteris paribus, this would suggest investments in emerging markets. Table 1. – Growth, Deficit, and Debt Problems
Source: IMF – World Economic Outlook and Fiscal Monitor Update In my last article, I looked at prospects for the U.S. dollar. With an unemployment rate just below 10%, there is no threat of inflation (and a consequent dollar weakening) from excessive domestic demand. Internationally, it depends on whether there will be offsets to the US trade deficit projected to grow back to $600-$700 billion as the US emerges from a recession. There are two possible offsets: governments buying more U.S. government debt and private portfolio purchases of U.S. securities.
Table 2. – Private Investors’ International Transactions (in bil. US$)
Note that even in 2007, U.S. investors were investing heavily offshore. And after the bank panic, Americans are investing heavily offshore again. Because of this, the private sector offset will get smaller: Americans will continue to invest offshore and foreigners will probably not buy private US securities at the rates they have in the past. In sum, with both offsets to the U.S. trade deficit falling, I conclude the dollar will continue to lose value and so “bets against it” are warranted. Overall, I conclude that emerging market investments still make sense, both because their economies are growing rapidly and because they are “bets against the dollar”. But I also want to offer a couple of hedges. Hedge #1 - Real Estate Real estate prices are falling; sales are up. I believe this the beginning of the final real estate sell-off. How can real estate be a hedge? I don’t know much about real estate, so I asked someone who does. Brad Case, Ph.D., CAIA is vice president, Research & Industry Information for NAREIT, the National Association of Real Estate Investment Trusts.
Hedge #2 – Sin/Entertainment I have written extensively about the economics of global entertainment. My findings are that we spend more on drinking, entertainment drugs, sex (prostitution/pornography), and smoking than any other entertainment categories. What is most interesting from an investment perspective is that some of these activities are highly addictive and consequently are recession resistant – cigarette smoking is the best example. Drinkers will keep drinking but can choose cheaper beverages in a recession. But there are other entertainment categories that are highly cyclical: consider gambling: in good times, gamblers take their families to gambling “resorts”; in bad times, gamblers stay home and gamble online. Consequently, Las Vegas is in dire straits while Macau, where the global recession is a faint memory, is booming. So what do we know: sin/entertainment is not going away, and with such a mix of cyclical and non-cyclical activities, it should be a good hedge against just about anything. Investments
My emerging market holdings are set forth in Table 3, along with their one and three-year performance. Only Korea (still down 5%) has not yet recovered all its losses from the financial meltdown. Looking over these investments, India has had a very large run-up. I am considering liquidating this position. Table 3. – Emerging Market Investments
Brazil’s stock market has not performed well. But I view it as the strongest country in the world so I will stick with it.
Table 4 presents real estate options. I am not taken by the last three because of their high price/earnings ratios. FRIFX makes sense to me. With a dividend yield of 5.1% and real estate earnings expected to grow in future years, I see it as an excellent investment. Table 4. – Real Estate Investments
Brookfield is not your typical real estate development company. It invests in:
It also develops commercial and residential properties and engages in real estate finance. Over the last two years, it has been active buying up discounted properties. It has investments in the U.S., Canada, Brazil, Australia and Europe. I like the company, its mix of investments and its global reach.
There is no perfect investment for this, but the Vice Fund is not bad. Table 5. – Sin/Entertainment Investments
Its investments include tobacco, alcohol, defense and gambling. As can be seen from Table 5, its performance is not correlated with the market. I view it as a good secondary hedge. I am not an investment adviser and nothing I say should be taken as a recommendation to buy or sell an asset. [1] Burton G. Malkiel, “A Random Walk Down Main Street”: W.W. Norton. Disclosure: I am long EWY, EWZ, EZA. Complete Story » | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gold and Silver rally/Huge Problems in Egypt/Oil rises Posted: 29 Jan 2011 01:39 AM PST | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| With U.S. GDP Riding High, What's Next? Posted: 29 Jan 2011 12:38 AM PST Carlos X. Alexandre submits:c As I pointed in the article "Dow Jones Industrials Running on Empty," the equities market caved in to simple built-in and predictable snap backs that bring the markets closer to reality every now and then. And I’m not a wizard! Having said that, my opinion that the U.S. equity markets and the dollar will end 2011 higher has not changed, but we will endure these somewhat chaotic days because the various players take away differing interpretations from the data presented. With GDP at 3.2%, although a little lower than the consensus forecast of 3.5% (the economists should have adjusted it a while back), the market reacted in an unpredictable fashion and the drop was completely unwarranted, some will say. Fair enough, but I don’t fight waves — I ride them! The other point to make is that the annualized change in the price of all goods and services included in GDP increased by a very small 0.3% (forecast was 1.7% and the prior reading was 2.1%, revised down from 2.3%). Inflation, deflation — I report, you decide, and I hope that I am not infringing on someone’s copyright! Much can be derived from the BEA report, and I chose my favorite, and most telling paragraph, because it paints a much broader picture, especially as it applies to the global community, considering that the dollar index was somewhat stable throughout the 4th quarter (+/- 3%). Complete Story » | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Posted: 29 Jan 2011 12:21 AM PST FOFOA has an interesting speculation on the movements in GLD: So now I offer up a scenario, not as a statement of fact, but as fodder for thought and discussion. In this scenario I am not assuming that the drain on GLD to date has been the direct redemption of ETF shares by Giants. I presume it is simply redemptions by Bullion Banks in order to meet the delivery demands of "important clients," real Giants, perhaps from Asia and the Middle East. And because the BBs would normally have better options than plundering GLD, I am assuming those options are either gone or far more problematic than legalized looting. Also, following Lance Lewis' "puke indicator," one could be forgiven for suspecting that the Bullion Banks have some way to temporarily "pound" the price of gold down on the COMEX in order to buy back ETF shares during a "good price window" with the intention of redeeming those shares into deliverable gold for clients that purchased it at a higher price. I left a comment, which I post below FYI: The reason one cannot correlate gold price and GLD holdings is because authorized participants (AP) don't have to create and redeem GLD shares on a daily basis in response to investor activity in GLD. For example, if you're an AP and have a view that the market is bullish, then you expect over time to see net buying of GLD. Therefore, if on one day there is net selling of GLD, then you can: 1. Buy GLD shares 2. Immediately lease gold and sell it (or just short futures). 3. AP is now long GLD and short unallocated gold or futures. Important to note they have no exposure to gold price movements. 4. Sit on the GLD shares and when investor bullish sentiment returns 5. Sell your GLD shares 6. Buy unallocated gold and repay your lease (or close out your short future). The above process means that the AP avoids GLD share redemption and creation costs. Same thing happens in the face of net buying - an AP borrows gold and delivers it to GLD for shares, which they sit on an over a period of time sell into demand for GLD. This is a way of minimising transaction costs when making a market in GLD or SLV or any other ETF. The end result is that we see lumpy creation and redemptions, reflecting accumulated buying or selling activity over a number of days. In the case of large lumpy redemptions, that can reflect an AP who held on to GLD shares in the expectation they would be able to offload them later into expected buying. If that buying does not eventuate, then the AP offloads the lump of GLD share they have as they are incurring ongoing funding costs. You are correct in that redemptions of GLD cannot really be used to infer too much about what is going on re investor sentiment. The GLD bought back by an AP and gold redeemed is just sold by the AP to someone else, ultimately. All GLD holding movements tell us is the sentiment of GLD holders. All that futures tell us is the sentiment of futures traders. Are these markets representative of the all private investors in gold. Maybe, maybe not. What commentators miss is the OTC "dark pool". Consider that ETFs + Futures only represent less than 10% of estimate privately held gold (see this post). In that case, we should not get too excited by the activity we see with ETFs and futures as it is not where the real giants are. Consider also that bullion banks know their activities in ETFs and futures can be seen/deduced in some way. Therefore you must assume they let you see what they want you to see, with their real position and activities hidden in the "dark" OTC market.  | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Money's Not Worth The Paper It's Printed On Posted: 28 Jan 2011 11:27 PM PST Bet on Gold Nets Paulson $5 Billion.Peru Mines Ministry reports declines in gold, silver production. The Fed Is Now In The Business Of Manipulating The Stock Market: James Grant...and much more. ¤ Yesterday in Gold and SilverAll in all, it was pretty quiet in Far East and London trading on Friday...and the gold price was basically unchanged when trading in New York began at 8:20 a.m. Eastern time. Gold got sold off about seven bucks from that point...but minutes before 9:30 a.m...a fairly impressive rally began that lasted until a few minutes after noon. During that time period, the gold price tacked on a bit over $35 before the buyer disappeared. From Friday's high of $1,348.30 spot, the gold price gave up a bit going into the close of trading at 5:15 p.m. Eastern time. After expecting the worst, I was delighted with yesterday's pleasant turn of events. Who the buyer might have been when the gold price is below the 50-day moving average, is open to debate...but Ted Butler didn't think it would be tech funds. They don't normally become buyers until after that moving average has been broken to the upside. I suspect that it was the New York bullion banks covering short positions...causing the price to rise. More on that in the discussion around the Commitment of Traders report.
After getting the hell kicked out of it in early Far East trading on Friday morning...silver recovered most of its losses by the New York open. And, just like gold, silver got sold off a bit, before blasting skywards minutes before 9:30 a.m. Eastern. Over 95% of silver's gains were in by lunchtime...and silver basically traded sideways for the rest of the day. The high tick of the day was $28.07 spot. Once again, I suspect bullion bank short covering as the cause of that price rally.
On the day, gold was up 1.79%...silver was up 4.05%...platinum 0.45%...and palladium 1.24% Like the gold and silver prices...the world's reserve currency didn't do a whole heck of a lot between the Far East open and its 7:30 a.m. low in New York. From that low, the dollar began to rally...and by 1:40 p.m. the buck was up a bit over 60 basis points...before sliding slightly into the close of trading. It's been a while since we've seen the dollar and the precious metals rally together. Of course the dollar spent most of January falling, while gold and silver prices were crashing...so why should we be surprised when the opposite sort of counterintuitive dollar/gold price action occurs?
With gold down five bucks when the equity markets opened in New York at 9:30 a.m. yesterday morning, it was no surprise to see the gold stocks open slightly in the red. But once the gold and silver rally developed some legs...the precious metal shares were only too happy to join in. The HUI was up over 3% at one point...but could not hold those gains...and closed up only 1.17% when all was said and done. Here's the 5-day chart for the week that was. It's possible that we saw the bottom [for this move down] on Tuesday? We should find out that answer to that next week. And with silver up over a buck...most of the silver stocks were up many multiples of the HUI's gain on the day.
The last CME Delivery report for January was posted at their website early yesterday evening...and showed that 11 gold and 48 silver contracts were posted for delivery on Monday, January 31st. For January, not a traditional delivery month for either metal...717 gold and 819 silver contracts were delivered. The gold number isn't a lot, but the silver number is pretty chunky. Five years ago, a non-delivery month for silver might have shown a handful of contracts delivered...now they're significant amounts. In January...4.1 million ounces were delivered. Shortly after they posted the last day of delivery for January, they posted the First Day Notice for February. With February being a big delivery month for gold, the numbers are impressive, as 6,895 gold and 111 silver contracts were posted for delivery on Tuesday, February 1st. The big issuer in gold was the proprietary trading [house] account at Deutsche Bank...with 6,459 contracts delivered. The Bank of Nova Scotia was a very distant second at 432 contracts. There was an impressive list of stoppers [receivers]...with the biggest being HSBC, Bank of Nova Scotia...and JPMorgan, in that order. The big issuer in silver was the Bank of Nova Scotia, with the biggest stopper being Triland USA. The First Day delivery report is well worth spending some time on...and the link is here. The GLD ETF showed another decline yesterday. This time it was 78,063 ounces. There were no reported changes over at SLV. For whatever reason, Switzerland's Zürcher Kantonalbank did not update their website for the week ending January 21st until yesterday. For the prior week, their gold ETF was up a smallish 3,244 troy ounces...and their silver ETF showed a decline of 38,163 ounces. I thank Carl Loeb for these numbers. And, for the fifth day in a row, there was no report from the U.S. Mint. There was almost no movement at any of the Comex-approved depositories, either...and if you want to see what I mean by that...click here. The Commitment of Traders report was very positive, but not as impressive as either Ted Butler or I were expecting/hoping. In silver, the Commercial net short position decreased by a smallish 2,222 contracts...11.1 million ounces. This is not a lot, considering the price action during the reporting period. The Commercial net short position is now down to 215.7 million ounces. The '4 or less' bullion banks are short 201.0 million ounces...and the '8 or less' bullion banks are short 253.0 million ounces. In gold, the bullion banks decreased their net short position by 8,988 contracts...or 898,800 ounces of gold. The Commercial net short position is now below 20 million ounces for the first time in years...at 19.7 million ounces. The '4 or less' bullion banks are short 16.8 million ounces of gold...and the '8 or less' bullion banks are short 22.6 million ounces of the stuff. Ted made the comment on the phone yesterday that maybe one of the reason why the COT was such a disappointment, was because the continued price bashing by the bullion banks is not having the same desired effect...as most of the technical fund longs have already bailed out...and further pounding gets less liquidation, as the law of diminishing returns sets in. Ted Butler's "Days of World Production to Cover Short Positions" graph is updated with the latest COT data...all of which is courtesy of Nick Laird over at sharelynx.com.
While I was at the resource conference in Vancouver, I received an e-mail from reader Lou Horner. In it, he said..."Hi Ed, please show the chart with the largest short COT positions from one of your old columns, so we can see the progress as compared to the current one. Thanks, Lou." I thought that was a hell of an idea, as the weekly changes don't show a lot...and now that I'm back on my own computer...here's the "Days of World Production to Cover Short Positions" chart from back on September 28, 2010. Even a cursory glance at them reveals just how much the '4 or less' and '8 or less' bullion banks have covered in all four metals...especially in silver. As a 'for instance'...in silver, the '8 or less' bullion banks were short 177 days of world silver production in the COT for positions held at the close of trading on September 28th. The latest COT report above [for positions held as of January 25, 2011...shows that the '8 or less' traders are down to only 130 days of world silver production held short. This is still a grotesque and obscene number...as they are now only about four months of world silver production held short, instead of six months! I'm underwhelmed. But the other thing it highlights, is just how much short covering is left to go. And every time they go into the open market to buy longs to cover their short positions, they leave their calling card...much like they did on Wednesday...and again on Friday, when their buying drove up the prices of both metals.
So, the bullion banks are covering shorts when they manufactured this January price decline...and then drive up the price when they cover shorts to the upside...and it's right on the gold and silver charts for all to see. But you have to know what they're doing, how they're doing it...and where to look. This isn't rocket science.
¤ Critical ReadsSubscribeJim Grant: "The Fed Is Now In The Business Of Manipulating The Stock Market...Should Confess It Has Sinned Grievously"I have a fair number of stories for you today...and the first is courtesy of reader Phil Barlett. It's a item posted over at zerohedge.com that's headlined "Jim Grant: "The Fed Is Now In The Business Of Manipulating The Stock Market...Should Confess It Has Sinned Grievously". The fact that the Fed, through Wall Street, is managing the Dow and S&P is no surprise to any of us at GATA. We've known about his for years...and even the Fed now admits they're doing it. As Chris Powell's famous quote goes..."There are no markets anymore, only interventions". The link to the article...and the James Grant interview...is here.  David Rosenberg: Herbert Hoover ObamaReader 'David in California' provides our next reading material. It's a short piece that's posted over at Jesse's Café Américain...and the headline reads "David Rosenberg: Herbert Hoover Obama". The link is here.  China to create largest mega city in the world with 42 million peopleThe next article is courtesy of reader Michael Baybak. It's an article from yesterday's edition of The Telegraph that's headlined "China to create largest mega city in the world with 42 million people". China is planning to create the world's biggest mega city by merging nine cities to create a metropolis twice the size of Wales with a population of 42 million. Not only is it going to be twice the size of Wales...it will have a population that's 20% larger than we have here in Canada. It's a fascinating read...and the link is here.  Davos diss: JP Morgan head Jamie Dimon gets public smackdown from French President Nicolas SarkozyYour next reading material is a story from the New York Daily News that I stole from yesterday's King Report. The headline reads "Davos diss: JP Morgan head Jamie Dimon gets public smackdown from French President Nicolas Sarkozy". Apparently Jamie was whining about the fact that banks were bashed unfairly for the Great Recession...and Nicolas gave him a smack across the side of the head for that. The link to the story is here. The Telegraph also ran a story on this incident...and the link to that is here. Both versions are worth your time...but the story in The Telegraph has more depth to it.  China rating agency blames U.S. for "credit war"The next two stories are ones I ripped from GATA releases yesterday. The first is a Reuters piece that's headlined China rating agency blames U.S. for "credit war". The ultra-loose monetary policy of the United S | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| The Irresponsibility of Ben Bernanke and How He Will Destroy the Dollar Posted: 28 Jan 2011 10:39 PM PST The games played by government to keep the economy afloat are dangerous and futile. Prior policies, not dissimilar to current ones, brought the economy to where it is — ruined! More of the same only exacerbate matters. They will not avoid the catastrophe, merely delay and worsen it. Federal Reserve Chairman Ben Bernanke's Quantitative Easing [...] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Posted: 28 Jan 2011 09:42 PM PST Silver Supply Shortage? By Jason Hamlin Jan 28 2011 3:26PM www.goldstockbull.com There are some bizarre things going on in the silver market at the moment, reminiscent of the supply shortages and high premiums witnessed in 2008. For starters, silver is currently in both short-term and long-term backwardation, suggesting there is higher demand for silver NOW than in the future. This is backed up by the U.S. mint reporting all-time record sales for silver eagles during the month of January, with three days still left to go. Sales are on pace to breach 5 million coins sold, shattering the November 2010 record of 4.6 million. It is worth noting that all of the 2010 American eagle gold proof coins also sold out, but the focus of this article will be on the increasing signs of a shortage in silver. Just yesterday, King World News interviewed one of the top gold and silver dealers in the United States about tightness in the silver market. Bill Haynes is President and owner of CMI Gold & Silver and when asked about a shortage in silver he stated: "All of the major suppliers of 100 ounce silver bars are either weeks or months out, some will not even take orders. I had some conversations with a number of people who buy from them, had to dig through the information and some of them revealed that they thought the refineries were having trouble and the manufacturers were having trouble getting the physical product which falls right into the silver shortage. It does surprise me because we did not see the buying that we saw in 2008, 2009 when our safes were absolutely emptied of 100 ounce silver bars, and that's the type of buying I thought we would have to see in order for there to be a shortage of 100 ounce silver bars. I was able to get 100 ounce silver bars (recently) and then all of the sudden these guys I call them and say ok, we are talking 100 ounce silver bars, they'll say well, it's a month out on any order you place today. And then I have people telling me they will not take any orders on 100 ounce silver bars until May. There's a couple of things that are going to happen that is going to shut a lot of people out of this market. All of the 100 ounce bars are going to be gone in a matter of days, not weeks, days. Then people are going to have to put up their money and they are going to have to wait weeks or months before they get their bars. They are also going to have to pay higher premiums for that product because the marketplace will put a higher premium on the bars on a price drop that depletes all of the vaults around the country." Zerohedge also reported that the UK was the latest region affected by growing silver shortages after a British bullion dealer notified clients that the company had no remaining silver bars in stock and BullionVault posted a page on their site saying they were not accepting orders for silver in London. In addition, Eric Sprott had to wait over two months to finally take delivery of the 22 million ounces needed for his new silver fund. He was recently quoted as saying: "Frankly, we are concerned about the illiquidity in the physical silver market," said Eric Sprott, Chief Investment Officer of Sprott Asset Management. "We believe the delays involved in the delivery of physical silver to the Trust highlight the disconnect that exists between the paper and physical markets for silver." Another example of the growing disconnect between the paper spot price and free market pricing is the fact that silver coins such as Silver Eagles or Canadian Maple Leafs are selling for $4 - $6 over spot on Ebay. This is a fairly liquid worldwide market for exchange and the premiums have been increasing in the past few months to as high as 20%! Even one of the largest online dealers of silver bullion is now offering to BUY BACK silver coins such as American Eagles for $1.75 or more over spot price. That is right, while the official spot price was $26.75 this morning, APMEX was offering to buy Silver Eagle coins for $28.50. Reasonable estimates suggest that if only 15% of those long silver futures decide to take delivery of physical silver, the COMEX will not have enough silver to deliver and a serious short squeeze will result in the silver price shooting dramatically higher. There has been a growing movement led my Max Keiser, Jim Sinclair and various newsletter writers encouraging investors to shun paper forms of ownership, buy only physical and stand for delivery on paper contracts. If this catches on, reaching the 15% threshold could happen rather quickly. What is extraordinary about this apparent supply shortage is that it is occurring in the face of a declining spot price for silver. Economics 101 would teach that record demand and widespread shortages would create a spike in prices, but this is not occurring in the silver market and further highlights the growing disconnect between the phony paper market and true physical market. To be fair, many are claiming that the buzz about a silver shortage is overblown, that Bullionvault is now selling silver again and that dealers may be exaggerating the case in order to create fear and drive sales. One dealer that I spoke to yesterday, Hannes at Tulving, told me that he has not seen any shortage in silver and has over 400,000 ounces in various forms, ready to be shipped. Perhaps the shortage story is getting overly dramatized or perhaps it has not hit all dealers yet. Time will sort this out, but either way, there are various fundamental conditions that are out of equilibrium and suggesting some underlying cause for concern. Fundamentals Out of Balance The fundamentals remain severely out of whack. Consider that since 1980 the above ground available gold is estimated to have increased by 600%, yet the price has still nearly doubled. During the same time period, the above ground available silver has declined by an estimated 90%, yet silver is still nearly 50% below its high from 1980. Even if we assumed that above ground supplies were stable for both metals, silver would have some serious catching up to do. But considering that the above ground silver supply has DECREASED significantly while the above ground gold supply has INCREASED significantly since 1980, supply and demand fundamentals would dictate that silver would be the metal making new highs and the gold/silver ratio would be reverting back toward the 15:1 ratio. With gold currently around $1,350, we should be seeing silver around $90 or higher. The other thing to remember is that the fundamental divergence is only getting worse as gold is hoarded, while a significant percentage of the silver mined is used up in industrial applications such as batteries, converters, cell phones, computers, satellites, circuit boards, high tech weaponry, clean tech, water purification, etc. Demand continues to outpace supply each year and with stimulus-fueled economic growth continuing, the fundamentals are sure to drive silver prices much higher, despite the paper shorting schemes of the banksters. So, to what extent there is a shortage in the silver market remains to be seen, but I would venture to guess that with a 80% gain in 2010, investor interest must be increasing in a relatively tight market. It will only take a small percentage of the money invested in stocks to switch over to physical silver to create the shortages that many are claiming. Either by a growing number of small investors waking up to silver's potential or just a few ultra-wealthy individuals deciding to take a stake, the potential for a massive short squeeze is very real. CBO Projects U.S. Budget Deficit to Reach $1.5 trillion in 2011 - Highest EVER! Adding to the fundamental conditions driving precious metals higher, the Congressional Budget Office is now forecasting that, with the current spending trajectory and the new tax compromise, total debt will reach $23 trillion by 2020. That is equal to 160% of today's GDP and 1.6 times the peak from World War II. This number does not count unfunded liabilities such as Social Security and Medicare, or the debt the government assumed from Freddie Mac and Fannie Mae, which puts the total debt over $100 Trillion by many estimates. With S&P downgrading Japan's debt and others warning that the U.S. could be next, there is certainly trouble brewing in the financial system. Some believe the United States is already past the point of no return and that it will be impossible to ever repay the mounting debt. It is all destined to end badly, either in default or hyperinflation. The fundamental conditions for the dollar are deteriorating while the fundamental conditions for silver are improving. In yet another sign of the disconnect between the paper silver price and the fundamentals, silver has been declining at the same time that the dollar has been sliding. Such abnormalities can not persist and are sure to rebalance sooner rather than later. Conclusion Even after the 80% gain in 2010, silver remains one of the best investment opportunities available today. Supply shortage or not, investors would be wise to ignore the mainstream media claiming a top and instead use this dip as a buying opportunity. I expect silver to reach towards $45 during 2011 and surpass $100 within the next few years. The train is truly about to leave the station. Are you on board? Realizing the disconnect between the gold and silver prices, I have been focusing my newsletter on junior silver miners that appear undervalued relative to their peers. If you would like to receive my newsletter, view the model portfolio and get email alerts when I am buying or selling, click here to sign up. Jason Hamlin Gold Stock Bull | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Great Gold, Silver & Green Opportunities Arise Posted: 28 Jan 2011 05:59 PM PST | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Posted: 28 Jan 2011 04:00 PM PST
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| little history lesson: Rome and US-long read Posted: 28 Jan 2011 03:45 PM PST "The decline of Rome was the natural and inevitable effect of immoderate greatness. Prosperity ripened the principle of decay; the causes of destruction multiplied with the extent of conquest; and as soon as time or accident had removed the artificial supports, the stupendous fabric yielded to the pressure of its own weight." Edward Gibbon – The Decline and Fall of the Roman Empire After ruling much of the known world for centuries, Rome fell due to a number of factors that, historians believe, would not have been fatal in isolation, but that proved terminal in combination. Military overspending and overreach, an untenable economic system, and currency debasement all played a role. As has been well documented, the Roman emperors attempted to distract the populace from the increasingly dire reality of their situation by providing bread and circuses. But entertainments could not stop the nation-state from yielding to the pressure of its own weight. There are numerous parallels between the end of the Roman Empire and the path the 226-year-old American republic is now on. One difference in these fast-moving times is that empires can rise more rapidly, but are also likely to decline more rapidly. Conquest & Overreach "The decay of trade and industry was not a cause of Rome's fall. There was a decline in agriculture and land was withdrawn from cultivation, in some cases on a very large scale, sometimes as a direct result of barbarian invasions. However, the chief cause of the agricultural decline was high taxation on the marginal land, driving it out of cultivation. Taxation was spurred by the huge military budget and was thus 'indirectly' the result of the barbarian invasion." Arthur Ferrill – The Fall of the Roman Empire: The Military Explanation The Roman Empire's economy was based on the plunder of conquered territories. As the empire expanded, it installed remote military garrisons to maintain control and increasingly relied on Germanic mercenaries to man those garrisons. Ultimately, as its territorial expansion waned and began to contract, less and less booty became available to support the empire's widespread ambitions and domestic economy. The outsourcing of the military and the cultural dilution from the bloated empire led to lethargy, complacency, and decadence amongst the formerly self-reliant and hard-working Roman citizenry. In the modern context, as the only major power whose productive capacity was not destroyed during World War II, the American Empire emerged from the ashes of that conflict. The parallels with Rome do not repeat, but they do rhyme. Rather than plunder, the U.S. used its unique status to dictate terms that made the U.S. dollar the world's de facto reserve currency and positioned its robust new manufacturing sector to supply the world with the cars, machinery, appliances, and electronics it so desperately needed. The U.S. trade surplus with the nations of the world led to escalating U.S. wealth and prosperity. Meanwhile, the U.S. military, about which I'll have more to say in a moment, was increasingly asked by the nation's politicians to take on the role of the world's policeman, leading to action in dozens of conflicts. And even where no direct military role was taken, the U.S. has shown a keen willingness to exert coercive power – including threats, sanctions, and even assassinations – if it was seen to advance American interests. Simply, in the 20th century, the U.S. became an empire in all but name. Bread and Circuses "Already long ago, from when we sold our vote to no man, the People have abdicated our duties; for the People who once upon a time handed out military command, high civil office, legions — everything, now restrains itself and anxiously hopes for just two things: bread and circuses." Roman Poet Juvenal – 77 AD British historian Andrew J. Toynbee convincingly argues that the Roman Empire had a rotten economic system from its inception and its institutions steadily decayed over time. The government didn't have proper budgetary systems, and so it squandered resources maintaining the empire while producing little of value. When the spoils from conquered territories were no longer sufficient to cover its many expenses, it turned to higher taxes, in effect shifting the burden of the immense military structure onto the back of the citizenry. The higher taxes forced many small farmers to let their land go barren. To distract its citizens from the worsening conditions, Roman politicians played the populist card by providing free wheat to the poor and entertaining them with circuses, chariot races, and other entertainments. The American Empire has reached the point where it now faces similar structural imbalances, but to pay its bills, it has largely chosen to borrow from foreign countries in recent years. And the bills are large. The $765 billion of annual military expenditures by the United States equals the military expenditures of the rest of the world combined. The social safety net put in place over the decades by politicians attempting to get reelected has resulted in a large number of Americans now almost totally dependent upon the almighty state for their well-being. Threatening to rip apart the country's social fabric, the "new American" will vote for anyone who promises to sustain his dependency even as the nation increasingly struggles under the weight of $56 trillion of unfunded liabilities. The non-farm workforce in the United States totals 133 million people. Of that number, the government directly employs 22.5 million. Millions more are employed by industries heavily dependent on government spending, such as defense, construction, and healthcare. The annual maintenance cost of the country's safety net now costs American taxpayers hundreds of billions. Medicare and Medicaid annual spending $682 billion Social Security annual spending $612 billion Food stamps & other food programs $ 60 billion Federal unemployment payments $ 45 billion America has evolved from a nation of savers to a nation of consumers with a throw-away mentality and driven by little more than the desire for instant gratification. Worse, large segments of our society are convinced that they are owed something. To most, civic duty has become a quaint, outmoded concept. Happy to accommodate – in exchange for a reliable vote come election time – the government keeps the public satiated and sedated by providing them with an ever-increasing list of "public services." Roman poet Juvenal described how the Roman citizens abdicated their duties to the state and turned to bread and circuses. The programs listed above represent just some of the bread that American citizens now feel entitled to. Here in America, we know how to provide circuses on a grand scale. Roman citizens were satisfied with a good chariot race. In these modern times, Americans can find entertainment and distraction with 24-hour-a-day cable TV, the Internet, iPhones, iPods, Blackberries, 1.1 million retail stores, 1,100 malls, 17,000 golf courses, Britney Spears, Kim Kardashian, Housewives of Orange County, New York, Atlanta, and New Jersey, American Idol, Survivor, Rock of Love, Flip That House, 660 stations with nothing on, Las Vegas, Disney World, MLB, NFL, NBA, NHL, WWF, porn, and mega-churches all competing to fill the void in people's lives. There isn't enough time in the day to take in all of the circuses, but with what little spare time we have available, we are now able to check our email anywhere on Earth and stay in constant contact with the office even in the middle of the night or, more typically these days, in the middle of dinner. And we can text and twitter our every thought to our circle of friends and followers, providing next to no lasting purpose or benefit to anyone. Approximately 12% of the U.S. population (36 million people) is considered poor, and many of them are totally dependent upon the state. Yet that term seems out of sync with the fact that many of those individuals have cell phones ($500/yr.), cable TV ($900/yr.), Internet access ($500/yr.), cars ($5,000/yr. lease), houses ($6,000/yr.), eat fast food ($1,000/yr.), and can smoke a pack a day ($1,500/yr.). How can this be? For the answer, look no further than Alan Greenspan, Ben Bernanke, and the Federal Reserve, in cahoots with the financial geniuses on Wall Street, who made it standard practice to create money out of thin air and encourage anyone with a heartbeat to avail themselves of it in the form of low-cost loans – no proof of income or assets required. The arrangement worked just fine until the banks could no longer hide the bad debt or sell it to the greater fool. Now it has collapsed onto the backs of American taxpayers. Debasement The supply of foodstuffs in the cities declined. The people in the cities were forced to go back to the country and to return to agricultural life. Consequently, the emperors made laws against this movement. There were laws preventing the city dweller from moving to the country, but such laws were ineffective. As the people did not have anything to eat in the city, as they were starving, no law could keep them from leaving the city and going back into agriculture. The city dweller could no longer work in the processing industries of the cities as an artisan. And, with the loss of the markets in the cities, no one could buy anything there anymore. Ludwig von Mises – Human Action Economist Ludwig von Mises argued that flawed economic policies played a key role in the impoverishment and decay of the Roman Empire. He contended that interventionist economic policies, including price controls that resulted in prices substantially below their free-market equilibrium levels, ultimately led to inflation. Further, Rome was spending more than it could afford. The free food rations for the poor of Rome and Constantinople – as well as the many entertainments – were costing a fortune. The purchasing of exotic spices, silks, and other luxuries from the Orient bled Rome of its gold… gold that didn't return. Soon Rome didn't have enough gold to produce coins. And so it debased its coins with lesser metals until there was no gold left. To cover the trillions it is spending each year propping up its empire, the U.S. government is now increasingly forced to rely on printing and borrowing the funds to do so, steadily debasing the currency in the process. But the nation's currency debasement is nothing new. Rather, it began in 1913 with the creation of the Federal Reserve. It accelerated when FDR confiscated all the gold in the country in the 1930s. When Richard Nixon took the U.S. off the gold standard in 1971, the show really got on the road, as that freed the Federal Reserve to print unlimited amounts of dollars. As a result, the dollar has lost 93% of its value versus gold since 1970. The Military Complex Lessons from ancient Rome regarding the cost of maintaining a far-flung empire have been ignored. Today, U.S. boots stomp on the ground of over 117 countries. Even the use of mercenaries, in the form of thousands of Blackwater guards and other private contractors filling roles formerly left to the military, has become commonplace. Using military assets to pursue political goals, as is the norm in empire building, has led to unintended consequences and wasted opportunities. One of the most egregious of those lost opportunities came following the bankruptcy and collapse of the Soviet Union. The United States had won the Cold War, but failed to recognize the cautionary signs on the path ahead. As the only remaining superpower on earth, America fell into the same trap that has befallen previous empires. Instead of concentrating on proactively confronting domestic challenges, such as unfunded Social Security and Medicare liabilities, and developing a comprehensive energy plan to wean ourselves off Middle East oil, we continued to intervene in costly foreign adventures. Including, among many others, supplying both Osama bin Laden and Saddam Hussein with weapons and money during their fights against our enemies, leading to unintended consequences we live with to this day. Seeking to maintain its widespread interests and to defend itself from the many enemies created by building and protecting those interests, the American military complex has grown to the point where it now spends an amount equal to 44% of all taxes collected from its citizens. Since 1991 alone, the U.S. has interceded in Kuwait, Somalia, Bosnia, Sudan, Afghanistan, and Iraq, among others. In no case has Congress fulfilled its obligation of declaring war. Instead, it has delegated sole responsibility for waging war to the president, weakening the structure of our three-branch government. Over that period of time, the U.S. has spent $7 trillion on defense. The National Debt in 1991 was $3.2 trillion. Today, it is $11.6 trillion, a 360% increase in eighteen years. In 2001, spending on defense was 17% of the government budget. In 2008, defense, Homeland Security, and war spending accounted for 26% of government spending. Collapse Economic history books will likely mark 1980 as the year that the rapid phase of the decline of the American Empire began. That's when the first wave of the Baby Boomer generation reached the age of 35 and turned its attention to living the American dream – on borrowed money. Since that year, household debt has surged from $1 trillion to $14 trillion, while the savings rate has plunged from 12% to below 0%. There are many ways to use credit, some quite intelligent and practical. Rotating credit card debt to buy the latest non-necessity does not fall into that category. Today in America, there are $956 billion of credit card debt outstanding, or $9,000 per household. The average American has nine credit cards. A credit card allows every person to live above their means for awhile… just as did the home equity loans taken against artificially elevated house prices anchored on mortgages people couldn't afford. This is where reality and fantasy meet. People can only borrow and spend if the Federal Reserve and bankers provide the funds to do so, and without asking a lot of questions about suitability. By creating money out of thin air and handing it out to people with no legitimate means of repaying it, the financial elite and their friends in Washington have played an essential role in bringing the U.S. and even the global economy to its knees. Yet, for all the evidence, a large swath of Americans still believes the nation hasn't gone off course. These people consider borrowing in order to live beyond their means a rational choice. They expect the government to save them when they get into trouble and think that taxing the rich to pay for a bigger and bigger safety net is a reasonable idea. In a truly free-market society, this sizable segment of the public would have already learned a brutal lesson they'd remember for the rest of their lives. Instead, the brutal lesson is being learned by people who played by the rules and didn't take ridiculous risks, but who are now being coerced by the government to pay for the misdeeds of the over-indebted fools who did. The crushing levels of debt resulting from decades of excess; the far-reaching military presence; the politically motivated social safety net and other popular but unaffordable programs have now reached the point that the economic decline of the American Empire is a foregone conclusion. The current downturn is not going to be like previous recessions that lasted on average 16 months. Even as the government responds by trying to borrow and spend the country back to prosperity, there is no ignoring that the economic base has been gutted and the future social program liabilities have essentially bankrupted the country. As was the case in the final stages of the Roman Empire, the unsustainable military, social, and political excesses have reached the point that, in combination, they are now likely to prove catastrophic. A Final Thought For over a thousand years, Roman conquerors returning from the wars enjoyed the honor of a triumph – a tumultuous parade. In the procession came trumpeters and musicians and strange animals from the conquered territories, together with carts laden with treasure and captured armaments. The conqueror rode in a triumphal chariot, the dazed prisoners walking in chains before him. Sometimes his children, robed in white, stood with him in the chariot, or rode the trace horses. A slave stood behind the conqueror, holding a golden crown, and whispering in his ear a warning: that all glory is fleeting. George C. Scott as Patton Which begs the question, who is now standing behind the current political leadership, reminding them that their elevated positions are temporal? Unfortunately, the excesses they have created, and the dislocations caused by those excesses, will be with this country for generations I didn't write the article I cut and pasted it into word some time ago. I will try and find the source if I can. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Spread Trades – Open Interest Evaporate on COMEX Gold Posted: 28 Jan 2011 03:30 PM PST Quick notes as we are looking over the data in preparation to begin this week's full Got Gold Report, which we are planning for late Sunday, early Monday at the latest. The second most interesting chart that jumps out from the disaggregated trader data published by the CFTC this week has to be the evaporation of the Managed Money spread trades for gold. Here's the chart. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| David Freedom – 2011 and Beyond Posted: 28 Jan 2011 11:40 AM PST
Who's Holding the Bag? What Ignites the Next Blaze? The US Market Through the next month or two (through Feb) we'll likely see a continued rise in commodities and US equities. Picking a line in the sand is tricky business though, so making preparations now is prudent. As food and energy prices rise, nations will feel the sting of money printing (already happening). This will only increase the number of civil protests (RIOTS). Developing nations will feel the brunt of higher inflation, which will lead to various measures to control price increases (e.g., Russia's recent announcement of food controls or COMEX margin hikes). The increased costs of commodities will be a drag on the world's economy as well as the attempted policies to control the rise. As a result, I expect significant volatility throughout 2011. The global slowdown will lead to a drop in US markets by the middle of the year, giving the Fed impetus for more money printing. For anyone still expecting a return to 'normal', 2011 will be a wake-up call. Beyond 2011 As we work through this crisis, there will be a combination of defaults and austerity. Pensions will be slashed, state assets will be sold to the highest bidder (at massively undervalued prices), while new and existing taxes are imposed on the citizenry. Government services will be slashed and newly privatized assets will increase all types of expenses – things like water, energy and transportation. See the IMF blueprint for how this works, or ask an Argentine. Civil unrest will increase dramatically, in places never before expected. Tensions between nations will rise and war will inevitably breakout throughout the globe. Sound gloomy? This too shall pass. What to do? Non-Financial: You should have water and food stocks along with necessary supplies, such as water filters, alternative heat sources, community networks and other essentials for surviving disasters. In all likelihood, systems will continue to function, but on a temporary basis, these items will keep you comfortable (relatively). Learn who you are and what's important to you. Find the meaning of your existence and strive to fulfill your purpose. Live in harmony with your surroundings and community. Love God and men. Don't follow any institution and think for yourself. When making charitable donations, give them personally. I advise reading the bible (KJV), starting with the New Testament. Most importantly promote and vigorously protect freewill. If the Euro crashes, reduce USD positions! ~david freedom | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| KWN:Eric Sprott: Expect $50 Silver, Gold Possibly $2,150 by Spring Posted: 28 Jan 2011 11:32 AM PST From the blog With gold and silver rallying off the lows today, King World News interviewed Eric Sprott, Chairman of Sprott Asset Management which has $8 billion under management. When asked about the Sprott physical silver trust acquiring silver Eric stated, "We had to go into the market and buy about 15 million net ounces from third parties and it took us about ten weeks. It was a very, very long process and the one thing we can read out of it is obviously there weren't 15 million ounces sitting around somewhere." Sprott continues: "I haven't had time to study where the bars came from, but I can tell you by looking at the pictures of the bars they look like they came right out of the refineries. So I suspect it's a hand to mouth situation in silver. I think if we went in to by twenty million ounces of silver it would take a long time. I know we had an order to buy a million ounces about five weeks ago for a different account and the delivery was going to be two months. So I think silver is as tight as a drum. When asked about price targets for both gold and silver Eric responded, "Our best technical advisor, he thinks (gold) it's going to $2,150, and he thinks it is going to $2,150 this spring. I think silver is a little easier to predict because I think it's going to change relative to gold which is a more predictable event and more timely. I've always thought that silver should touch $50, and I'm not going to be surprised if it touches it by the middle of this year as people realize there is an absolute shortage." Eric Sprott discussed the gold and silver markets in great detail as well as other critical monetary events. The complete in-depth King World News interview with Sprott will be available later today. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Friday ETF Roundup: VWO Tanks, VXX Soars Posted: 28 Jan 2011 10:28 AM PST Jarred Cummans submits: Friday closed the week out on a low note, as markets fell from their 29 month highs. The Dow Jones Industrial Average lost over 150 points (1.4%) on the day, with the Nasdaq and the S&P taking a harder hit, losing 2.5% and 1.8%, respectively. Markets were pushed into the red as tensions in Egypt continue to mount on what many have dubbed the “Friday of Wrath." But the problems did not end there. Ford (F) reported disappointing earnings, casting a shadow of doubt over the upcoming report from General Motors (GM) and creating further gloom in the consumer sector. Though the majority of the market saw a rough day, oil rebounded, shooting up nearly $3.75/barrel, regaining much of the ground that it had lost over the past week. Gold also had a slight rebound today, gaining over 1% despite worries that the shiny commodity would lose its hold on the $1,300/ounce mark as investors scooped up precious metals as a safe haven play. One of the biggest losers on the day was the Vanguard Emerging Markets ETF (VWO). The fund was down over 3% likely due to the issues surrounding Egypt. With violent protests getting worse by the day, many investors have made for the hills and pulled out of this fund, with its daily volume nearly double its average. Egypt stole headlines today, with pictures and even live feeds of the violent demonstrations unsettling emerging market investors, as citizens rebel due to unsatisfactory conditions within the nation. On Egypt, CNN’s Ben Wedeman reported that “there is no government, there is no authority, there’s nobody to protest against. State authority in much of downtown Cairo has disappeared.” Though VWO does not have direct ties to Egypt, many emerging markets saw rough trading days as investors quickly lost confidence in a variety of shaky markets due to the ongoing protests. Complete Story » | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Elite Desperation Over Failing Middle East Psyops Posted: 28 Jan 2011 10:00 AM PST Once again, the power elite manipulates the Middle East for its own gain. It is a dangerous game, especially in Egypt, which controls the Suez Canal. Because of the violence, gold is up and oil, too. And just as I finish writing this article, the UK Telegraph has released an extraordinary story. It claims that the United States leadership not only secretly backed the current uprisings in Egypt and Tunisia, it was actively aiding and abetting the protestors. Hello rewrite! | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Posted: 28 Jan 2011 09:53 AM PST
Mercenary Links Roundup for Friday, Jan 28th (below the jump).
01-28 Friday
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| If Metals Decline After a Rise in Stocks, What Would Happen If Stocks Declined? Posted: 28 Jan 2011 09:49 AM PST Przemyslaw Radomski submits: With gold prices showing no signs of a breakout in 2011, so far, many investors have started unwinding long positions in anticipation of no further upside. The situation warrants a close scrutiny of the state of affairs. In the following part of this essay we analyze indications from the correlation matrix and technical indicators from silver and mining stocks to gauge the extent of this concern. However, first, we would like to draw your attention to the fact that the London Bullion Market Association conducted its annual survey of leading analysts to ask them where the price for gold will go in 2011. A total of 24 contributors gave their estimates for the high, low and average price for 2011 for gold, silver, platinum and palladium. In 2011, forecast contributors predict rises for all precious metals. Their average gold forecast is U.S. $1,457, a 19.0% increase on the 2010 average price, similar to the forecast of $1,450 made by delegates at the 2010 LBMA Precious Metals Conference in Berlin last September. Analysts predict that the average silver price will be $29.88, a 48% rise on the 2010 average price. The average 2011 platinum price is forecast to rise 12.6% from the average 2010 price, to $1,813 and palladium shows no sign of slowing down with an average 2011 price prediction of $814.65, a 54.8% increase on last year’s bumper average price. Complete Story » | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| What Will Gold Do Next? Predictions for 2011 Posted: 28 Jan 2011 09:29 AM PST Doug Eberhardt submits: When it comes to making predictions in the gold and silver market, there are many variables to consider. Sometimes I'll got out on a limb and publicly make a statement on what I believe will occur with gold and silver prices based on the information I've compiled. I come to my conclusions by weighing the pros and cons of the data. These predictions are only for short-term analysis as my long-term philosophy is to hold physical gold and silver to counter that portion of your portfolio that is subject to U.S. dollar risk. On September 29th, I called a top for "traders" of gold and silver. Traders mean those who own gold and silver mutual funds, ETFs or mining stocks as well as those who have purchased physical gold and silver on leverage. For holders of physical gold and silver, I recommended dollar cost averaging in or holding on to their metal. The HUI was trading at 512.56 back in September, and is presently at 503.81. Gold was trading at $1,314.10 then and is presently trading at $1,313.70. Complete Story » | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| The Mortgage Meltdown Is Not Just Deja Vu Posted: 28 Jan 2011 09:28 AM PST [Editor's note: You are receiving this version of The Daily Reckoning Weekend Edition as part of your subscription to The Daily Reckoning Australia.]
So, the world has survived the mortgage debacle and the stock market free fall. At least according to Obama's State of the Union address: "Two years after the worst recession most of us have ever known, the stock market has come roaring back. Corporate profits are up. The economy is growing again." What a relief. But wait: "While the crash only took place six months ago, I am convinced we have now passed the worst and with continued unity of effort we shall rapidly recover." That was Herbert Hoover's comment before the Great Depression really began to hot up. In fact, there are many similarities between the early 1930s and today. And they indicate we are far from through the worst. The third cause of the Great Depression has yet to strike us this time around. First, let's recap the other two. This from the excellent book your editor is currently reading on the financial crisis:
Yes, you read that date correctly. And all the thoughts racing through your mind right now are most likely on track. The mortgage mess of the last decade has been perpetrated before. By the same antagonists, using the same methods, the same terminology, the same victims, and ending with the same results. "The price declines in the mortgage-backed securities market in the late 1920s preceded the crash of the equity markets and the start of the Great Depression," reports Frank Byrt from the National Bureau of Economic Research. This may not seem like a revelation to some of you, but the extent of the similarities is remarkable. Repackaging loans, structured assets, special purpose entities - it's all there. And it get's spookier. Aside from mortgage securitisation, and a stock market crash, guess what other asset caused trouble? Sovereign bonds! Although it was mainly Latin American bonds that got the limelight back then, the conditions were similar to today. But the sovereign issues are yet to truly strike this time around. And the nations in question are much larger. So when you go back and review history to discover what happened next, remember to keep that in mind. Things are yet to really get bad in the financial markets. And with the Australian dollar at highs, along with the resources we export, who do you think stands to lose a lot? Of course, you shouldn't actually worry because this time is different. We have a money printer at the Federal Reserve who is willing to print us all out of trouble. And we have wise regulators overseeing our affairs. But why on Earth did nobody spot the similarities between the 1920s and 2000s before things got so bad? Surely people learn from catastrophes like the Great Depression? Intriguingly, the Glass-Steagall law in the United States was introduced after Wall Street practices during the 1920s were exposed. Banking and securities dealing were to be kept separate to avoid the kinds of conflicts of interest that could lead to systemic trouble. It looks like repealing the law was a mistake. And the same lessons learned the hard way then were learned again. So perhaps Glass-Steagall will make a comeback, as Senator John McCain has proposed, and the investment banks will have to choose between investment and bank. But why trust politicians to do the regulating? If they were treated like CEO's running a company, their own balance sheets would be called into question. Government income statements, such as they are, are expected to post record losses this year. The donations lists to prominent politicians are blotted with banks. It was their laws that encouraged sub-prime lending. It was their backing and oversight of mortgage giants that allowed securitisation to grow like it did. And don't forget the Federal Reserve... it financed the whole venture with low interest rates. You can't expect that bunch to solve the problems with harsh regulation (which is actually enforced). Banks, central banks and politicians are too busy bailing each other out. If the public sector decides to continue supporting the collapsing parts of the private sector, it will merely make the crash more mighty. The question is who will drag the other down first? Each failed stimulus made Keynesian true believers look either stupid or excessively optimistic. "With so much work done by do-gooders to little avail, things must have been really bad to begin with," they think, as an excuse for miserable stimulus results. "Better do some more stimulating, until things get better." It's a self-reinforcing delusional state of mind that leads straight to bankruptcy. But as a free-marketeer, can we really criticise fiscal irrationality in the face of pathetic management of private companies leading up to 2008? Shouldn't the private sector have known better? Maybe it's those animal spirits again. Or the private sector did know better. It knew that Fannie, Freddie, GM, AIG, etc. would get bailed out. It knew that government would foot the bill. It knew that the losses were limited, so it was time to go wild. And that's what it did. With some help from the central bank each time the party slowed. This is what's called, "moral hazard", when central bank policies actually encourage dangerous financial activity. Like drug dealers, first Greenspan and then Bernanke spiked the punch bowl they were supposed to be taking away from the Wall Street bonanza. Eventually, everyone at the party became hooked and needed more and stronger drugs just to stay sane. First lower interest rates. Then more money. Then security purchases. Then outright quantitative easing with brand new money whisked into existence. Now that Washington has crashed the borrowing party, it too is on the same stuff - debt. And it's looking to the same place as Wall Street did for a bailout - the Fed. As we wrote last week, the demand for US dollars is waning. And could disappear overnight if the rules of the game are changed. Then the great reflation will begin. The dollars will come home to roost and Americans will learn once again what printing money gives you. One already noticeable side effect is that Chinatown is New York's new financial district. Apparently Americans are flooding into are place to save in Yuan. And it doesn't surprise the average street goer one bit. Of course, there are better safe havens than the Yuan. It is, after all, just paper. And, as former Federal Reserve Chairman Alan Greenspan pointed out on Fox News, fiat currency has a habit of losing value:
The solution? Greenspan continues: "There are numbers of us, myself included, who strongly believe that we did very well in the 1870 to 1914 period with an international gold standard. " Yes, even a central banker knows a gold standard favours nations that are economically sound, like the US once was. As banking baron JP Morgan once said "Gold is Money. Everything else is credit." So which is it for your portfolio? Gold or credit? Emerging market consumers (and even central banks) are increasingly choosing gold. But how did gold do in the 1930s? Well, in the US it got confiscated. And we often receive emails asking whether that could happen again. The reason President Franklin Delano Roosevelt decided to confiscate gold was because of its role as the world's reserve currency. To the man on the street, gold was a barometer of trust in the government. Any increase in demand for gold indicated mistrust of economic policies. And FDR's activities certainly didn't inspire trust. So, to avoid gold ringing alarm bells for US citizens, it was taken out of the economy. It's similar to Cortes burning his ships upon landfall in the New World to avoid mutiny by his troops. With gold in the hands of the government, the stage was set for a massive dollar devaluation relative to those countries that remained on the gold standard. And you couldn't convert your chips into real money to sit the experiment out. These days, politicians don't have to go through much hassle to achieve what FDR did. They just print money (to devalue their currency) and rely on banks to maintain speculative short positions in precious metals (to prevent a price spike that causes a loss of faith in the currency). So hopefully you don't have to worry about gold being confiscated. Instead, worry about the effects of inflation. U.S. analyst and fund manager Peter Schiff has been harping on about this for quite some time on various TV finance shows, not to mention at his brokerage firm. (He also predicted the mortgage meltdown.) In this video he pretty much echoes last weekend's Daily Reckoning. But it was a comment he made on the side that is fascinating. The media and policy makers point to inflation as a sign of economic activity. We previously reported on how they had given up generating economic activity via stimulus and skipped straight to generating inflation in some absurd horse-before-the-cart solution. Incidentally, this is what FDR was trying to achieve with his economic policies too. But the mainstream has it wildly wrong within their own disastrous logic as well as common sense. Deflation is a sign of economic activity, not inflation. Competition, innovation, productivity gains, capital expenditure, savings ... all the things associated with economic progress and wealth are deflationary. Lower prices are a sign of a competitive economy that's delivering more of what people want. Inflation is a sign of trouble. It's when the purchasing power of your money declines... you get less and less while paying more and more. That's why countries like Russia are implementing price controls to keep prices lower. If inflation were good, they'd be decreeing higher prices. Anarchy in the DR Inbox Joel Bowman's article in the Daily Reckoning certainly stirred the hornet's nest. Anarchy is something that makes people think of burnt cars and dead bodies, readers told us. Chaos would ensue and commercial relationships would not be possible without law enforcement. The country would be invaded and the infrastructure would crumble. So why are we advocating it? This criticism is our favourite: "Who will pay for the roads?" the sceptical readers wailed. Well, who pays for them now? Just because government pays for things, doesn't mean you don't end up footing the bill. Channel 10's 7 PM Project doesn't seem to realise this, as it was advocating that the government foot the flood bill instead of taxing us... And as for corporate law, what do you think is the source of those rules? Private individuals created, abided by and enforced them - all across many borders - long before government got involved. In the end, governments had to accept them into codified law. (From that point things deteriorated as commercial law became a policy tool for use by government.) And defence was privately contracted in many places throughout the world. The Renaissance took place under the protection of mercenaries. (We won't mention the US's involvement in Iraq.) Language, money and food were all creations absent of government. Although it hath been ruining them ever since. The big difference between an anarchist system and a government one is that of monopoly. The government will set up one system of laws, one defence organisation and one set of infrastructure. A majority vote can change these, but none will go away and your peers subject you to them by threat of violence (jail). If you refuse to pay for them, you also go to jail. Under anarchy, you choose what you get and what you pay for. There is nothing stopping you from competing with existing systems if you can do better and nothing stopping you from opting out. In other words, there is choice instead of compulsion. Government is not the source of civilisation or a necessity of it. It is the means to implement conformity or compulsion. The opposite of being civilised. Global Warming believers are just being sarcastic We got an overwhelming response on the nature of Imre Salusinszky's article on Global Warming. Thanks for the feedback and comments. Most people informed us the article was in fact satirical, or at least trying to be. Still, the whole thing seems a bit weak for satire. Writers who do this leave themselves open for critique. But let's not go there, in fear of filling up the DR inbox with things we won't read. Instead, ponder this thought. Imre mocks that 2010 was the coldest year since 2001 for Australia and that global warming has thus been beaten. But 2010 was also the equal hottest for the globe, a fact that readers of The Australian would have known. Imre's sarcasm is meant to display pretend small mindedness - to only focus on Australia while the world is growing hotter is dumb. But apply the same reasoning to Imre's point. Who measured temperatures far above the Earth's surface, somewhere between us and the source of the Earth's warmth? Think of it this way: When the temperature inside your house falls, do you blame it on the insulation disappearing, or the sunset? Similar Posts: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Is Egypt the Next Big Problem for the Markets? Posted: 28 Jan 2011 09:20 AM PST David Moenning submits: The protests over authoritarian rule in Egypt, which have turned violent in recent days, were blamed for the steep declines in stock prices on Friday. Although there may have been other factors at work, it was concern that the government instability in Egypt would spread throughout the region that was primarily responsible for the drop in stock prices as well as the increase in bond and gold prices. The protests have grown significantly in numbers over the past four days as reports now put the number of people in the streets in the tens of thousands. The throng is vehemently voicing their objections to thirty years of Hosni Mubarak’s rule as well as the government’s inability to stave off massive increases in food and energy prices. Complete Story » | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investing in Gold and Silver for the Long Haul Posted: 28 Jan 2011 09:00 AM PST Chris Mayer was quoted in the 5 Minute Forecast newsletter as having noted that "If history is any guide, inflation will likely get much worse." Being the kind of guy who goes absolutely insane about inflation in prices, you can imagine the effect this had on me, although with a modest touch of understatement, he does not take things to the logical conclusion, namely that "We're Freaking Doomed (WFD), you morons! And now everyone is going to see what happens after an excessive creation of money has distorted the economy, little by little over the decades, into a grotesque, corrupt, cancerous, incestuous economy feeding on government spending that, in the local, state and federal aggregate, now comprises an outrageous 50 percent of all spending in The Whole Freaking County (TWFC), and yet the Federal Reserve keeps creating more and more so that the federal government can borrow more and more and thus spend more and more!" I would suggest, of course, that he would finish up with, "And now I, Chris Mayer, speaking both for myself and The 5-minute Forecast, and everyone on the planet who has not lost his or her freaking mind, the only logical thing to do is to follow the sage advice of The Mighty Mogambo (TMM) to buy gold and silver, gold and silver, gold and silver, more and more and more until they are stashed in huge piles all over the house and you are stubbing your toes on them all the damned time, costing you as much in doctor bills as the silver goes up in price, which means (with certain simplifying assumptions yet yielding 3-decimal place precision) you have reached maximum utility!" This is Very, Very Good (VVG) advice, and provides a good place to finally stop buying gold and silver, as taking the next step is the path to insanity, which starts when you find yourself getting peevish about your inability to get a permit to construct a lousy combination precious-metals vault and oil storage facility in your backyard, using land acquired all around my house by buying out the neighbors who thought they were so smart not to buy gold and silver when I told them, "Buy gold and silver, you morons, when the evil Federal Reserve is creating So Freaking Much Money (SFMM), or one day you will regret it, and I one day I will buy your stupid houses for pennies on the dollar and kick you out, just before bulldozing your homes to rubble and having it hauled away so that every trace of you and your 'no gold or silver for me' stupidity is gone forever! Wiped out! Hahahaha! Morons!" Well, apparently everyone has heard of my Strident Mogambo Advice (SMA) to buy gold, silver and oil equities, and it doesn't even rate a raised eyebrow anymore, as proved when Mr. Mayer went blithely on "Everyone seems to know the US inflationary story of the 1970s. The official inflation rate hit nearly 14% by 1980." I am stopped from going ballistic about such horrors of inflation only because the rate of inflation is worse in other countries, where, Mr. Mayer goes on, "it was worse. In the UK, inflation topped out at 27%; in Japan, 30%." Yikes! I used the word "Yikes!" in the sense of "ancient history" since, as far as most people are concerned, 1980 was 31 years ago, which was before most people were born, and which is all a sorry result of the aftermath of 1971, which is 9 years earlier, when the dollar's last tenuous tether to gold was severed by Nixon, allowing dollars to be created "at will" by a whore Federal Reserve, which they were, which is why debt soared and there has been constant inflation in prices and now we are all ruined. Here is where I forsake the use of, "Yikes!" to use the words, "We're Freaking Doomed!" in the sense of "current events," because if inflation in 1980 was 14%, what is the inflation rate when a reader of Chris Mayer's commented, "He may have cited the Wells Fargo forecast of 4% increase in food prices, but between packaging size reductions and slight price increases, we're currently running between a 10-15% increase on core grocery items." And it gets worse than that, as the reader goes on, "Add that with the upward trend in energy prices, you're slowly barking up a tree that's 15-20% higher than what we started with a year ago"!! Perhaps the link between the creation of money and inflation does not impress you, the casual reader who has wandered across the MoGu newsletter by accident, and who wonders if there is something of any significance or interest beneath the dull veneer of my poor writing and weirdly recurring thinly-disguised threats against the Federal Reserve as revenge for creating their so much excess money that it creates inflation in prices which makes life Very, Very Tough (VVT) for the poor. If so, let me bring you up to speed: 15-20% inflation is enough to destroy you and everything, and everybody, you love, and your best bets are to get a lot of gold and a lot of silver, which is automatically proved, in a metaphysical, mystical way, in that "best bets" are anagrams, and "silver and livers" are anagrams, and if there is one thing you can't live without, it's a liver! Okay, I admit that I am stretching it with this "silver and livers" thing, but after all the other thousands of reasons to buy gold and silver that I have used over the years to convince people to get up off of their fat, stupid butts to go out and buy gold and silver, I am simply out of ideas. I am desperate for some new reason to buy gold and silver beyond the first 3,000 reasons, although, fortunately, as far as buying them is concerned, easy is easy is easy, and no more need be said of its ease, expect for, perhaps, "Whee! This investing stuff is easy!" The Mogambo Guru Investing in Gold and Silver for the Long Haul 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." | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| China Allows Renminbi Trading in the US Posted: 28 Jan 2011 08:50 AM PST
In a move that provides a glimpse of the future of US dollar and gold, China has allowed its currency to be traded for the first time in the United States. This is a bullish sign for gold investors. It is an important step in the country's plan to make the renminbi an international currency. The explicit move is an endorsement by Beijing since the state-controlled Bank of China Ltd is at the forefront of this development. Although a floating currency allows price moves in both directions, it is general consensus that the renminbi will strengthen against the US dollar due to trade imbalances between the two countries. The impact on commodity markets, including gold, will depend on the extent and speed to which China allows its currency to rise. The impact of a free floating yuan will affect commodities in three angles: economic strength and prospects of global recovery, direct impact on trade of commodities to and fro China, and the broader knock-on effect on commodity demand. Bank of China Expectations The move by Bank of China comes at a time when the United States is pressuring to country to let its currency appreciate, blaming it for making US trade deficit worse. It should be noted, however, that Beijing's preparation for convertibility also hints at the strength of China's economy. It is the second-largest national economy in the world. To be recognized as a global power, it should also have a global currency. Although individuals and businesses in the United States can trade yuan in Western banks like HSBC Holdings, this is the first time that China has allowed a Chinese-controlled bank to engage in similar activities. This is a stamp of approval on renminbi trading. However, the Bank of China puts a limit of $4,000 per day (and $20,000 per year) on the amount that a US-based person can convert. This restriction is basically in place to minimize currency speculation. There is no limit on the amount that businesses can convert as long as they are engaged in international trading. In addition, the Bank of China places no restriction on the amount of yuan that can be converted back to dollars. Growing Openness in Beijing Some analysts expect that in a few years, 20-30% of the country's transaction will be conducted in yuan instead of dollars (the figure is less than 1% today). Take note that as China becomes more proactive in pushing its currency, every one US dollar worth of contracts may be replaced by yuan. In addition, for every seven yuan that is purchased on the international foreign exchange, it is replacement one US dollar. There is also a perception that the renminbi is stronger than the dollar is growing. If you look further down, the impact of using the yuan as an international currency won't be positive for the US dollar since it will no longer be used as widely for international trade. The money will add to the home money supply. This will have a lot of ramifications in the global economy. There are skeptics who doubt its growth potential, however. For example, some say that growth will be checked due to new regulations. Last month, the Hong Kong Monetary Authority placed restrictions on banks' ability to provide yuan-related products in the territory. Analysts believe the regulations are designed to keep speculators from betting on the currency's movement, which can potentially cause massive disruptions to the economy. A more immediate obstacle to growth is lack of demand among American businesses, majority of which still use the dollar for cross-border transactions. Some people also believe that China may back track if this proves to be the wrong move. What Beijing is interested in, at this point, is measured growth in yuan trading. A lot of investors are looking into buying yuan as a form of investment, seeing it as a sure bet. Chinese officials have stated that they will allow the currency to appreciate. The only question here is the pace of appreciation. Another aspect to look into is bank fees as these tend to be high for yuan accounts. The Chinese renminbi has appreciated by 3.3% against the US dollar last year. Beijing loosened the currency's peg to the dollar during summer. But the gains stalled after the world's major economies met in November for the Group of 20 summit. Chinese Demand for Gold While inflation may play some part in rising demand for gold in China, it is not the driving force behind it. As the country's capacity continue to increase, its middle class investors are growing – many of them are turning to bank deposits and gold because it is perceived to be "safe". The government itself also has a massive demand for the bullion. Since we were just explaining how can events outside of the US impact the price of gold, let's take a look at the long-term gold chart from the non-USD perspective (courtesy of http://stockcharts.com): From a non-USD perspective, the support is provided by the 200-day moving average, which has been important in the past. Please note that even if this is a beginning of a bigger downswing, we are still likely to retrace about 50% of the decline first, as it was the case previously. Future of the Fed As the United State's monetary authority, it can print money at will. It has already bought $2 trillion worth of mortgage-backed securities and the unorthodox steps it engaged in enabled it to generate record profits in 2010. It sent $78.4 billion to the Treasury Department. However, its swollen balance sheet leaves it exposed to credit losses at the time of political encroachment on its independence. But some experts worry that this exposure may force it to "recapitalize" or basically ask for a bail-out. According to Varadarajan Chari, an economics professor from the University of Minnesota as well as a consultant to the Fed in Minneapolis, the Fed may go broke at some point during its exit from current monetary positions – but just on paper. He said that, "the most obvious exit strategy is, when the inflation starts to pick up, to stop and reverse asset purchases." This might require to Fed to incur significant accounting loss. If you are interested in knowing more on the market signals we analyze, we encourage you to subscribe to our Premium Updates to read the latest trading suggestions. We also have a free mailing list – if you sign up today, you'll get 7 days of full access (+unique Charts and Interactive Investment Tools) to our website absolutely free. In other words, there's no risk, and you can unsubscribe anytime. Rosanne Lim Sunshine Profits provides professional support for Precious Metals Investors and Traders. All essays, research and information found above represent analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments. By reading Mr. Radomski's or his associates' essays or reports you fully agree that they will not be held responsible or liable for any decisions you may make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Radomski, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Today in Commodities: Spotlit by Turmoil Posted: 28 Jan 2011 07:41 AM PST Matthew Bradbard submits: Turmoil gets energies, metals, and currencies back in the spotlight. The commotion overseas contributed to Crude oil racing higher today, gaining 3-4% depending on the month. March closed back over the 50 day MA. From here buys dips in April and May as we should be back at the highs in coming weeks. The strength in Crude should spillover into the distillates as well, so hedgers, make sure you start gaining exposure for next year’s deliveries. The Nasdaq and S&P closed below the 20 day MA today and the Dow just above that pivot point. Aggressive traders could re-establish bearish plays. Our favored play is the March ES bear put spreads with a target of 1240. A doji star followed by a bullish engulfing candle in the dollar should get traders long the greenback. We suggest remaining short the Pound and Euro looking for lower ground. Complete Story » | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gold Seeker Weekly Wrap-Up: Gold and Silver End Mixed on the Week Posted: 28 Jan 2011 07:24 AM PST Gold fell as much as $11.10 to $1307.80 in Asia before it rebounded back to almost unchanged at $1318.19 in early New York trade and next fell back to $1310.70 by about 9:30AM EST, but then surged back higher for the rest of the morning and ended near its midday high of $1346.74 with a gain of 1.66%. Silver fell as much as $0.63 to $26.38 in early Asian trade before it also rallied back higher in New York and ended near its late session high of $28.013 with a gain of 3.3%. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Egypt in CRISIS: Global stocks SLAMMED by growing violence and unrest Posted: 28 Jan 2011 07:21 AM PST From Bloomberg: Stocks worldwide plunged the most since November, crude oil jumped and the dollar gained against the euro after protests in Egypt intensified and President Hosni Mubarak imposed a nationwide curfew. Egypt’s dollar bonds sank, pushing yields to a record high. The MSCI World All-Country World Index of stocks in 45 countries lost 1.3 percent at 2:26 p.m. New York time. The Dow Jones Industrial Average fell 1.2 percent to 11,840.58, putting its longest weekly winning streak since 1995 in jeopardy. Oil futures increased 4.2 percent to $89.24. The dollar appreciated 0.9 percent to $1.3617. Yields on Egypt bonds due in 2020 surged 22 basis points to 6.51 percent and rose 86 points this week, the most since they were sold in April. Mubarak imposed the curfew after a day of clashes between police and protesters demanding the end of his presidency. Tens of thousands of marchers chanted “liberty” and “change” as rallies began today at points across Cairo. Officers fired tear gas to try to prevent them from reaching Tahrir Square and police trucks were hit with rocks. The demonstrations offset data showing that growth in U.S. gross domestic product accelerated in the fourth quarter. “The unrest in Egypt has people concerned,” said Mark Bronzo, who helps manage over $25 billion at Irvington, New York-based Security Global Investors. “When it comes to the Middle East, there’s worries the unrest is going to spread. It has negative implications for the world.” Beating Estimates The Dow, which must close above 11,871.84 to post a ninth straight weekly gain, had risen 1 percent this week, supported by higher-than-estimated earnings. More than 74 percent of the 183 companies in the Standard & Poor’s 500 Index that reported quarterly earnings since Jan. 10 beat the average analyst projection, according to data compiled by Bloomberg. Investors who pushed the Dow above 12,000 for the first time since 2008 this week may be getting ahead of themselves. It surpassed that level the past two days. More U.S. stocks are trading above their 200-day average price than any time since April, when the Dow began a 14 percent slump. The cost to insure against S&P 500 losses with options has fallen to an almost three-year low. The Dow may have surged too fast following its more than 2,000-point jump since August even as analysts forecast a third straight year of profit growth for the S&P 500, said James Investment Research Inc.’s Tom Mangan and BB&T Wealth Management’s Walter “Bucky” Hellwig. Mangan and BGC Partners LP’s Michael Purves see signs investors are too optimistic about the next few months. GDP Report The biggest challenge to Mubarak’s 30-year rule overshadowed evidence the U.S. economy, the world’s biggest, is improving. GDP expanded at a 3.2 percent annual pace in the fourth quarter, up from 2.6 percent during the prior three months, as consumer spending climbed by the most in more than four years. The Chicago Board Options Exchange Volatility Index, which measures the cost of insurance against losses in U.S. stocks, jumped 20 percent. Shares of Ford Motor Co. plunged 11 percent as the automaker said profit slid 79 percent. Amazon.com Inc. declined 7.8 percent after saying earnings may miss analysts’ projections. The NYSE Arca Airline Index lost 4.2 percent after oil jumped. The Suez Canal, which connects the Mediterranean and Red Seas, moved 1 million to 1.6 million barrels a day of oil and refined products north to Europe and other developed economies in 2008 and 2009, according to the Energy Information Administration, the statistical arm of the U.S. Energy Department. The EIA identified the canal as one of seven “world oil transit chokepoints” in a report earlier this month. Microsoft Corp. had the biggest drop in the Dow, retreating 4.1 percent, after a shortfall in Windows revenue raised concerns about future demand. The slump helped drive the Nasdaq Composite Index to a 2.2 percent decline. To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net; Inyoung Hwang in New York at ihwang7@bloomberg.net. To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net. More on the Middle East: Why America is losing the war on terrorism Doug Casey: The best way to win the war in the Middle East America's Middle Eastern puppet regimes are falling like dominoes | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| The story on the financial crisis you won't read in the mainstream media Posted: 28 Jan 2011 07:21 AM PST From Gonzalo Lira: The Financial Crisis Inquiry Commission came out with its report—and two dissents! Lots to read! Lots of bullshit to wade through! Lots of finger pointing! Lots of skewed analysis that justify a political agenda! Whoo-hoo! Actually, cynical glee is the only emotion that keeps major depression at bay: The FCIC was set up in May of 2009, with the goal of getting to the root causes of the Global Financial Crisis, and find what policies and which actors were responsible for the melt-down. In a very real sense, the FCIC was supposed to be the modern day version of the Pecora Commission... But it wasn’t. Not by a country mile. Read full article... More government stupidity: Porter Stansberry: Our government is in imminent danger Shocking admission from Tim Geithner: U.S. on the brink of catastrophic collapse The U.S. gov't is dumping money into some of the craziest and most frivolous things imaginable | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Posted: 28 Jan 2011 07:11 AM PST So a $10 million hedge fund picks up $850 million worth of gold contracts, the notional equivalent of South Africa's annual production, and then blows out on the liquidation. What I want to know is:
Maybe he wanted to be the next JP… John Paulson, that is.
More from the WSJ here. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Posted: 28 Jan 2011 06:35 AM PST
This essay is based on the Premium Update posted on January 28th, 2011 January has been a tough month for gold. From its year-end 2010 price of $1,420 an ounce to its recent low just over $1,320, gold has lost some $100 – about seven percent. In percentage terms, this doesn't amount to much of a correction in the metal's 10-year- old bull market. Gold has corrected in price in excess of 20% no less than 46 times since the onset of the bull market in 2001. Each time, the market mavens heralded the bull market's demise. On Wednesday, the World Gold Council published its annual Gold Investment Digest for the fourth quarter and full-year 2010 with some interesting insights. According to the World Gold Council last year's price performance was driven by developments in key gold markets:
We find the last point particularly interesting, as the USD Index finished the year slightly higher than was the case in 2009. As mentioned many times in our updates, after 2006 things are much more complicated than simply USD up = gold down and vice-versa. After Tunisia's revolution and the ouster of its president after 23 years of rule, Egypt seems to be next on the North African crisis list. One of the main grievances of the protesters in Egypt, just as it has been in Tunisia, has been the soaring price of food in the shops. The crisis and food shortages may spread to other Arab countries and no one knows where that can lead. We only know one thing—in times of crisis and uncertainty, people turn to gold for a safe haven. To see what the near future has in store for precious metals let's begin this week's technical part with the analysis of the USD Index. We will start with the short-term chart (charts courtesy by http://stockcharts.com.) In this week's USD Index chart, a cyclical turning point is close at hand and should put an end to the recent declines seen in this index. It is important to note that the actual timing of the turning points here are somewhat delayed when compared to those of silver. Please note that silver did move higher on Wednesday – at its turning point, while the USD Index might have. The sentiment for the USD Index is short-term bullish which also has bullish implications for gold, silver and mining stocks. Recall that during the past few months, the USD has been leading the precious metals and here could very well ignite a turnaround for the metals and the mining stocks. Perhaps we are already seeing this today. Speaking of turning points, let's take a look at the silver market. In this week's short-term chart, we see that once again a cyclical turning point has come into play. The small rally seen on Wednesday, though it only lasted for one day, could perhaps signal a new beginning and a subsequent rally. This would be very much in tune with price action seen around prior cyclical turning points. That would be short-term bullish not only for silver but also for other parts of the precious metals market – including mining stocks. The XAU Index of gold and silver mining stocks has moved to levels below highs seen in 2008. Verification of the recent breakdown has not yet been seen. There seems to be a strong possibility that the trend could reverse and index levels again move to or above these previous highs. Much depends on the verification of breakdowns and strength of support and resistance levels in other markets. However, mining stock investments might be at risk in the medium-term. At this time, however, prices are below highs seen in 2008 and with an oversold situation prevailing today, a short-term uptrend appears probable. Much appears to depend on how the situation develops in USD Index and the general stock market. The correlation matrix below provides us with details. The correlation matrix shows that the medium-term coefficients are highest between gold and the S&P 500, as well as for silver and the S&P 500. In the short-term the metals – USD link appears valid and positive. With the dollar approaching a cyclical turning point and likely to rally, gold, silver and mining stocks will likely follow. This week, this indirect relationship is visible also through our traditional measures above. Silver, of course, is also approaching its own turning point. The implications here are bullish for precious metals in the short-term, that is one to two weeks and bearish for the medium four to six week term. Summing up, gold appears bullish in the short-term, however the sentiment for the medium-term is mixed. Much depends on how the resistance levels hold the next short-term rally. If they hold and stop the uptrend, then it may very well be prudent to exit a portion of one's long-term positions. That is not the case today. The full version of today's analysis includes detailed targets for gold and mining stocks – we encourage you to read it right away. To make sure that you are notified once the new features are implemented, and get immediate access to my free thoughts on the market, including information not available publicly, I urge you to sign up for my free e-mail list. Sign up today and you'll also get free, 7-day access to the Premium Sections on my website, including valuable tools and charts dedicated to serious PM Investors and Speculators. It's free and you may unsubscribe at any time. Thank you for reading. Have a great and profitable week! P. Radomski Sunshine Profits provides professional support for precious metals Investors and Traders. All essays, research and information found above represent analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments. By reading Mr. Radomski's essays or reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Radomski, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| COT Silver Report - January 28, 2011 Posted: 28 Jan 2011 06:34 AM PST | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Why is the gold price going down? Posted: 28 Jan 2011 04:41 AM PST | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| The Anti-Gold Gospel according to Kaletzky Posted: 27 Jan 2011 04:00 PM PST
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
That Mr. Shak and his firm, SHK Asset Management, could control one of the largest positions in the gold market underscores how leverage can enable investors to control huge positions in many commodity markets.
| You are subscribed to email updates from Gold World News Flash 2 To stop receiving these emails, you may unsubscribe now. | Email delivery powered by Google |
| Google Inc., 20 West Kinzie, Chicago IL USA 60610 | |
No comments:
Post a Comment