saveyourassetsfirst3 |
- The Myth of the ‘Primary Silver Mine’
- Silver Shortage Blamed on "Miner Hedging" as Price Rises with Gold, Global Inflation Data Eyed
- $2100 ‘Sounds Right’ For an Ounce of Gold
- Seven Steps the U.S. Can Take to Rebuild Its Nuclear Legacy
- Silver: Investment of the Decade, Or Conservative Bubble?
- Gold May Not Be a Bubble, But It's Also Not a Good Hedge Against Inflation
- Silver Bullion COMEX Stocks at 4-Year Low as Backwardation Deepens
- Everything you've heard about investing for inflation could be wrong
- AGFLATION: The news on soaring food prices is about to get much worse
- Silver Catches Bid, Test of $30.50 Immanant
- Why silver will beat gold now
- Current Silver Definition Move Not Like the Others
- View From the Turret: Egypt, Airlines and Gold
- The Winds of Change
- Silver in Backwardation and the Emperor, Once Again, Nearly Naked
- Distractions
- Gold & The Dollar Current Signals
- More Cash for Iron
- When Bonds Go Down: Speculating on the Economic Recovery
- Housing Is a Buy
- Gold Testing $1,353 Support after Sell Off
- Fat Planet
- Silver Bullion Comex Stocks at 4-Year Low
- Silver Long Term Update
- Got Gold Report – Gold, Silver Correction Ahead?
- Ron Paul Speech-Bullish for Silver and Gold
- Feb 12, 1965 : De Gaulle v. the Dollar
- Feb 12, 1851 : Edward Hargraves discovers Gold at Bathurst
| The Myth of the ‘Primary Silver Mine’ Posted: 14 Feb 2011 05:17 AM PST One of the problems with soaking-up the "conventional wisdom" on any particular subject is the risk of mistakenly being misled by a widely-held misconception, instead. Such is the case when the subject of "primary silver mines" comes up for discussion. Any investor even modestly familiar with the red-hot silver sector will know that the majority of silver currently mined each year is produced as a "byproduct" of other mines (roughly 2/3 of all silver production). In other words, contrary to the vast majority of other metals, silver is unique in relying upon this "incidental" production to satisfy the massive and growing demand for silver both as an "industrial metal", and as an investment/insurance/"good money". There are many supply/demand dynamics which flow from this current paradigm of production, but even before we get to those factors, we need to analyze how we ever reached this current scenario. Certainly, throughout thousands of years of history, "silver mines" (i.e. mines which primarily produce silver) have been just as prevalent as "gold mines" – subject to the qualification that local geology will make one or the other more predominant in any particular region. The obvious question then becomes: how did the precious metals sector evolve into the current state where (on the one hand) we have most gold still produced from "gold mines" (i.e. primary gold producers) while with silver we are dependent upon mainly "byproduct" production for most of our silver? The answer can be reduced to one, very simple equation: the gold/silver price ratio. While most informed, precious metals analysts (including myself) will state unequivocally that gold is under-valued today, the price-ratio of silver to gold (which has averaged roughly 15:1 over 5,000 years) is currently at the still-extreme level of more than 40:1, despite the explosion in the price of silver in 2010. Thus if gold is "cheap", then silver is "dirt-cheap". Part of the reason why the general public has been inadequately informed (or arguably misinformed) by experts within this sector is because of the failure to engage in the most preliminary step of all analysis: definition of terms. When we define a particular mine as a "primary gold producer" or "primary silver producer" (or "primary lead producer"), we do so on the basis of the revenues produced from each metal, and not the quantity of metal produced. The reason for doing so is obvious: because each of these metals have vastly divergent prices, classifying mines based upon the ounces/pounds/tons produced of the particular metals contained in various ores would produce grossly misleading labels. Any/every mine which produced (for example) both precious metals and copper would inevitably be labeled as a "copper mine" since even if 90% of revenues came from gold and/or silver, most of the tonnage would certainly come from the copper production – given that copper is so much more plentiful and so much cheaper than gold or silver. Thus it is obviously necessary to classify mines according to revenues rather than tonnages. However, the fact that analysts in this sector never take the time to make their own reasoning explicit in this regard has caused them to misinterpret this data. Without exception, the current scenario where most silver is produced as a "byproduct" is treated as a "normal state of affairs" by these analysts, when (in fact) it must be nothing but a temporary aberration. Specifically, the only reason why there are so few "primary silver mines" in the world today is 100% due to the fact that silver is grossly under-priced versus any and every other metal on the planet. |
| Silver Shortage Blamed on "Miner Hedging" as Price Rises with Gold, Global Inflation Data Eyed Posted: 14 Feb 2011 04:48 AM PST
|
| $2100 ‘Sounds Right’ For an Ounce of Gold Posted: 14 Feb 2011 04:44 AM PST
|
| Seven Steps the U.S. Can Take to Rebuild Its Nuclear Legacy Posted: 14 Feb 2011 04:39 AM PST Jeb Handwerger submits: Once there was a time when the U.S. bestrode the nuclear world as a colossus. Names such as Einstein, Oppenheimer, and the Manhattan Project helped to win World War II and contributed to many peacetime applications as well. Over the ensuing decades, the United States allowed other nations to take the lead in the development of nuclear power. Recently I wrote an article depicting the French Leader Sarkozy celebrating the multi-billion-dollar agreement with India to build a new generation of safe nuclear reactors for the next 25 years. We have become a nation asleep at the switch while the world is developing cheap, non-carbon electricity. Many countries, especially Asian nations, are building reactors with many proposed to come online in the future. France is the world leader, building facilities in England, Finland, China, Italy, and India among others. Even countries rich with oil such as Saudi Arabia and Iran have Complete Story » |
| Silver: Investment of the Decade, Or Conservative Bubble? Posted: 14 Feb 2011 03:20 AM PST Think Yield submits: With headlines calling for $8,000 gold by 2015 and $50 silver by 2011, the word "bubble" may very well soon be tip of the tongue. Are silver and the precious metals market overvalued, or are we merely witnessing the start of what will be a hyperbolic rise in silver prices in the coming years? While no outcome is certain -- taking into account surging fears of dollar debasement, hyperinflation from emerging economies, and the removal of certain key price-depressing mechanisms -- silver is poised to be a remarkably unique investment opportunity for the coming decade. While silver may be colloquially referred to as "poor man's gold," the metal is in many ways rarer than gold itself. Silver has the highest electrical conductivity of any metal, and the highest thermal conductivity of any element. Ideally, wires would be made out of silver and not copper, but obviously the high price ($30/oz Complete Story » |
| Gold May Not Be a Bubble, But It's Also Not a Good Hedge Against Inflation Posted: 14 Feb 2011 03:08 AM PST Jeffrey Dow Jones submits: One of our predictions for 2011 was that gold was in a bubble. After stirring the peak oil pot here on Seeking Alpha, I'm not sure I want to kick another hornet's next. But, whatever: gold is in a bubble right now. I can hear all you gold bulls getting ready to fire off an angry e-mail right now, but hold on a second before you do. Today, we're going to assume that you are right. Let's assume that the classic gold thesis - that gold is a hedge against inflation - is correct. We're going to assume that I am wrong, and let's face it, I really can't see the future any better than any other hedge fund manager with a blog. So let's assume it's NOT a bubble. Let's assume that the money-printing is out of control and our future is a heavily inflationary one. Let's assume that Complete Story » |
| Silver Bullion COMEX Stocks at 4-Year Low as Backwardation Deepens Posted: 14 Feb 2011 01:20 AM PST |
| Everything you've heard about investing for inflation could be wrong Posted: 14 Feb 2011 12:17 AM PST From Gonazo Lira: “Hyperinflation accompanied by a housing collapse is simply impossible – by definition.” – None-too-clever financial blogger. Most people in the advanced economies – including most economists – really don't have any idea what inflation and hyperinflation is. They don't have a clue because they haven't lived through it, or were children when it happened in the States and in Europe during the Seventies. They think it's nothing more complicated than a rise in prices that ripples through the economy – like a spectator in a football stadium who stands up, obliging the people sitting behind him to also stand up, so that they too can see the action on the pitch, which in turn forces the people behind them to stand up too, until finally, the whole stadium is up on its feet. That’s what these people seem to think: Inflation – and the more severe hyperinflation – affects all goods and services and asset classes equally, in a rippling effect. Sort of like a rising tide. Because of this very foolish fallacy, many economists and interested observers think that real assets – commodities, land, buildings, factories & machinery – all rise in price equally during an inflationary spell, whereas financial assets – bonds, stocks – uniformly fall. But this is wrong: It is at best sloppy thinking, at worst dangerously stupid... Read full article... More on inflation: Jim Rogers: Inflation is raging worldwide How hyperinflation could come to America Forget government data, this is the world's best way to track inflation |
| AGFLATION: The news on soaring food prices is about to get much worse Posted: 14 Feb 2011 12:11 AM PST From SHTF Plan: Adding to already rising food prices due to monetary inflation and weather related supply problems around the globe, one of the world's leading food distribution companies, Sysco Corporation, is advising clients and their customers that the recent freeze across North America has significantly impacted growing operations in Mexico (as well as parts of the U.S.) leading to 80%-100% crop damage: ALL OF OUR GROWERS HAVE INVOKED THE ACT OF GOD CLAUSE ON OUR CONTRACTS DUE TO THE FOLLOWING RELEASE. WE WILL BE CONTACTING YOU PERSONALLY TO REVIEW HOW THIS WILL AFFECT OUR CONTRACTED ITEMS WITH YOU GOING FORWARD. THE DEVASTATING FREEZE IN MEXICO IS WORST FREEZE IN OVER 50 YEARS… THE EXTREME FREEZING TEMPERATURES HIT A VERY BROAD SECTION OF MAJOR GROWING REGIONS IN MEXICO, FROM HERMOSILLO IN THE NORTH ALL THE WAY SOUTH TO LOS MOCHIS AND EVEN SOUTH OF CULIACAN. THE EARLY REPORTS ARE STILL COMING IN BUT MOST ARE SHOWING LOSSES OF CROPS IN THE RANGE OF 80 TO 100%... Read full article... More on agflation: Seven reasons food shortages will become a global crisis Porter Stansberry: Food crisis looming... prices set to skyrocket... Forget gold... One of America's favorite commodities is headed to all-time highs |
| Silver Catches Bid, Test of $30.50 Immanant Posted: 14 Feb 2011 12:08 AM PST Silver fiat spot price, which I no longer care about, is ticking up this morning, which is a rarity, considering Blythe's favorite time to short it is, let me look at my watch, oh, right now. Breaking through and holding $30.50 this week will be a key psychological mindfuck for everyone in the metals. After Tyler's article over at www.Zerohedge.com on COMEX inventories has explained, as well as |
| Posted: 13 Feb 2011 11:57 PM PST From Gold Scents: I've pointed out in the past how consolidation size is usually predictive of how large a move will be once a breakout occurs. I thought I would take a quick look at the silver bull today using that criteria. As most people know, I'm mostly interested in silver during this bull market. I really doubt that I will ever buy another oz. of gold again. So let's start by taking a look at the long-term chart of silver. As you can see, the consolidation principle works perfectly in the silver market. So far, we've had three major consolidations and each one as been followed by a powerful rally driven by the size of the preceding consolidation. The relevant fact is that the longest consolidation has also produced the biggest breakout. If that continues to hold (and I think it will) then the current rally is probably only half over. A meager 46% breakout is way too small for a 30-month consolidation. If I had to guess, I would say silver might be in the process of forming... Read full article... More on silver: The No. 1 reason you must own gold and silver now Resource guru Sprott: Silver will be this decade's gold Why every hard-working American should be loading up on silver |
| Current Silver Definition Move Not Like the Others Posted: 13 Feb 2011 11:07 PM PST For those who may be wondering what they might have missed in Sunday's full Got Gold Report, posted on the password-protected subscriber pages and emailed to subscribers this past weekend, below is a short excerpt from the report. It is two pages of a 23-page update for Vultures, our valued subscribers. |
| View From the Turret: Egypt, Airlines and Gold Posted: 13 Feb 2011 10:54 PM PST
There's nothing like a successful revolution to juice the bullish sentiment on Wall Street. While Egyptians celebrated Mubarak's resignation by dancing in the streets, traders marked the occasion by sending US equity indices to yet another recovery high. Last week ended in decidedly bullish form as risk was once again embraced, and recovery expectations continued to propel stocks higher. Despite our long-term reservations, the Mercenary trading book enters the week net long, with the intention of taking advantage of the sustained "risk-on" mentality. Our gross exposure, however, is still very light as cross currents and macro risks continue to make for a difficult and somewhat unpredictable trading environment. As Jack noted on Friday, oil and gold prices are following the way of Mubarak. The regime change has traders breathing a sigh of relief (at least temporarily) as the perception is that a peaceful transfer of power will keep oil flowing from the Middle East to developed nations. Gold is obviously seen as an attractive hedge for politically and economically challenging environments. But with the Egypt crisis now accepted as resolved event, and the US and European economies showing signs of recovery, gold's attraction is fading. Considering the incredible rise for precious metals over the last several quarters, a shift in sentiment here could touch off a significant move for the yellow metal. So as we boot up the systems for this week, we're balancing big-picture risks with near-term optimism. It's time to roll with the bull camp while keeping close tabs on our risk. A Breakout With Room to Run The trading game usually requires patience as well as a willingness to act aggressively when the opportunity is right… Late last year, we identified Neutral Tandem Inc. (TNDM) as a strong telecom opportunity with a stable domestic business and strong potential in emerging markets. It took a bit of time for the stock to begin its move, but this past Thursday, TNDM broke sharply higher – contributing to our profitable week. On Tuesday, the Mercenary Live Feed recommended a long position for TNDM, using a stop/limit order to be filled if the stock broke above its recent consolidation. TNDM didn't actually trigger the buy order until Thursday, but when it broke out, the move was quite impressive. Mercenary Trader portfolios entered the trade at $16.26 – a bit above our buy stop level as the stock was very active – and watched the position rally more than 10% in just two trading days.
Within 24 hours of entry, the stock had already reached the level where our risk point is automatically adjusted to breakeven. So at this point, Live Feed subscribers are sitting on an attractive gain with the initial risk now minimized. TNDM should have plenty of room to run, both from a fundamental and a technical perspective. Fundamentally, the company has no debt, plenty of growth opportunity, and a forward PE of about 15. A recent acquisition should put TNDM in a great place to capture new business in developing countries, and a stable customer base in the US gives the company plenty of cashflow to work with. Looking at a longer-term weekly chart, I'm impressed by how much overhead room TNDM has before running into resistance. Several disappointments in 2010 have shaken out all but the strongest of investors, and yet the business remains healthy with stable earnings.
Depending on the environment an how the pattern sets up, we may have the opportunity to add pyramid positions along the way – while simultaneously tightening risk points to protect our gains. Stay tuned as this name has a lot of potential for the weeks and months ahead. Airlines Set for Takeoff Few industries will benefit more from falling oil prices than airlines. Lower fuel costs should help boost profit margins, and more importantly, give the companies a better environment for hedging their long-term fuel arrangements. At the same time, signs of economic recovery (whether perceived or actual) continue to drive air travel. Business travel has been picking up over the last few quarters and there are expectations that leisure travel should follow suit this year. In an environment where perception is reality, airline stocks have begun trading more constructively over the last two weeks – with the Egypt crisis resolution as a likely catalyst for new trends higher. Delta Air Lines Inc. (DAL) has seen revenue climb between 14% and 18% the last three quarters, and positive earnings have given investors new optimism. This year the company is expected to earn more than $2.00 per share and yet the stock is trading near $12.00 – a significant discount even to its airline peers. DAL has established a key support area between $11.00 and $11.50 and with Friday's action the stock is now above the short-term 20 EMA. A break higher would take out the more important 50 and 200 day averages, and also break the bearish trendline established in December. This looks like a key inflection point for the stock, and a great opportunity to capture profits on a shifting trend.
United Continental Holdings (UAL) has been a relative strength leader for the airline group – with less significant declines and a bullish overall trend. Friday's decline in oil prices sent the stock higher, testing the 1/27 high print. A move above this level could offer a key inflection point, while still allowing for tight risk management if the breakout is called into question. UAL is expected to earn $5.00 per share this year and tack on another 10% in 2012. Obviously, we don't put a lot of faith in such long-term predictions (there are too many variables to be able to accurately predict these earnings levels). But knowing Wall Street's projections, it's easy to understand why traders could pile into UAL sending the stock price significantly higher in the coming weeks and months.
 Gold Loses its Luster In a world of uncertainty and fear, gold offers stability and preservation of value. But when danger clouds blow over, precious metals can turn into a heavy portfolio weight – dragging down performance. The last few months have offered numerous opportunities to trade precious metals (and metal producers) from both the long and the short side. In order to successfully trade today's fluid environment, traders need to be willing to play either side of the market – capturing opportunity as perceptions shift. On Friday, we closed out our remaining bullish precious metal positions as Mubarak's exit sucked the majority of fear out of the trading world. A stable US dollar and relative calm in Europe also serve as bearish influences on gold prices. This week, we're likely to flip our hat around and trade gold from the short side – capturing profits as goldbugs begin to feel their own set of fear for the first time in nearly two years now.
Looking at a longer-term chart, we can see a long-term bullish trend for the yellow metal. Bullish traders are likely to defend this trendline because so much is at stake. Initially, a short gold trade could lock in profits even if GLD only traded down a few dollars. But considering this long-term trend and the shifting dynamics, a break of the $125 to $128 level could turn into a watershed event. If this trend truly breaks, we could see a massive move lower as the commodity retraces its heady gain, and huge long positions are reversed.
The big picture will likely take more time to develop – and that's good news for us as a reversal could offer us several chances to add horizontal and vertical exposure to the theme. We're not in the business of "predicting" a collapse for precious metals. Rather, we take an objective view of the situation with a major decline being one of many plausible scenarios. As nimble traders, we will take the signals as they come, and manage our exposure and risk accordingly. This week should give us some great information on how global markets will fare following the Egyptian revolution – along with plenty of other political and economic developments across the globe. Stay nimble and trade 'em well! |
| Posted: 13 Feb 2011 07:04 PM PST
Mercenary Links Roundup for Sunday, Feb 13 (below the jump).
02-13 Sunday
|
| Silver in Backwardation and the Emperor, Once Again, Nearly Naked Posted: 13 Feb 2011 03:36 PM PST |
| Posted: 13 Feb 2011 03:24 PM PST I have arrived in my humble abode after a lovely dinner with family. Oh no we didn't discuss politics, inflation, nor did we postulate the future price of Silver. The main concern, or topic of greater importace, if you will, was that Lady Gaga showed up to the grammy's in a fucking giant egg. Yup, an egg. Prices are soaring, gas prices (in Canada) are a joke, and we need to swallow the fact |
| Gold & The Dollar Current Signals Posted: 13 Feb 2011 11:20 AM PST US Dollar Analysis:
Gold and Precious Metals
Gold Juniors GDXJ Chart
SIVR (Silver Proxy) 6 Mth Chart
that even well-prepared thieves would find themselves stone-walled in any attempt to get mine. All I do at Super Force Signals is designed to prevent you from becoming a victim of our own government's madness. The madness isn't ending. It's growing!
Unique Introduction for Web Readers: Since mid October I have booked almost 90 wins and zero losses for subscribers and I've taken almost every single trade myself. Send me an email to alerts@superforcesignals.com and I'll send you 3 of my Super Force Surge Signals, as I send them to paid subscribers, to you for free! Thank-you! Morris Hubbartt 25 SuperForce Buy or 25 SuperForce Sell: Solid Power. Stay alert for our SuperForce, sent by email to subscribers, for both the daily charts on Super Force Signals at www.superforcesignals.com and for the 60 minute charts at www.superforce60.com About Super Force Signals: Frank Johnson: Executive Editor, Macro Risk Manager. Email:
|
| Posted: 13 Feb 2011 11:14 AM PST --How good is the commodity boom in Australia? It's so good that traditionally cyclical stocks are becoming income stocks! You don't have to invest in a reckless, risk-taking, mortgage-happy bank to earn a respectable dividend any more. You just have to buy Rio Tinto! --Granted, Rio's current dividend yield is barely over 1%. But the company is spinning out so much money that shareholders are beginning to wonder what it's going to do with it. Cash from operations for the last full year was up 70% to $23.5 billion. That allowed Rio to clock in a $14.22 billion profit. --Gee, if BHP's profit results come in at around $30 billion like analysts are expecting (the half-year profit alone would be the biggest ever in Australian corporate history), the two could chip in and pay for the National Broadband Network all by themselves. It wouldn't be the best use of shareholder cash. But whatever...the government can do what it wants (warning, contents of video likely to offend, much like coercive public policy). --Rio's tripling of its profits and BHP's record results sure do bring back memories—memories of 2008 before the whole market cratered. Rio is the consummate big-cap iron ore player, with a solid left-jab coming from copper. It's a great one-two punch. --Copper prices were up 30% last year (just as the stock Doc predicted). Chinese iron ore prices were up 43% to $188 a metric tonne. It's that kind of bullish price action in base metals that has Rio committing nearly $8billion to expand its operations in the Pilbara by 50% in the coming years. --Iron ore makes up two-thirds of Rio's profits. Expanding Pilbara production from 185 million tonnes to 333 million tonnes is how Rio CEO Tom Albanese plans to capitalise. Albanese has also said the declining ore grades at the world's largest copper mines, combined with the gap between supply and demand, mean that 2011 should be another bumper year. --Things are going so well for Rio that it increased its dividend by 40% to just to $1.08 for the full year. And last week it said it would buy back $5 billion in shares with its cash war-chest. This was designed to make shareholders happy by giving them a bigger piece of the cash flow action. In terms of capital gains, the stock is up 176% from its December 2008 low at $32. --Rio's investing money in new projects, giving cash back to shareholders, and buying back shares. To decide if all these measures made the stock more or less valuable...well to do that we'd normally turn to our value protagonist Greg Canavan. We'd want to know if Rio is buying its shares at a good price, or whether it's better of sitting on the cash, giving it to shareholders, or finding projects with a high return. --Of course the last bit could be the most worrying bit. What if a company's managers can't find suitable projects with high rates of return to invest in? What does that tell you about where we're at in the commodity cycle? Hmm. --The glass-overflowing view is that regular cash blowouts are the "new normal" for the big miners. This would mean you could expect share-price growth to be driven by organic growth and higher commodity prices (although maybe coming off the boil a bit as new supply comes on line in the next few years). Profits might be diminished by any number of factors (rising labour costs, a strong Aussie dollar, higher energy prices, and a carbon dioxide tax). But there'd still be profits. --The lazy man's way to mining riches, then, is to passively own the big boys as they play a historic role in the industrialisation of the world's ancient civilisations (India and China). From a thinking point of view, this strategy is attractive because it requires no thinking. You don't really have to do anything at all. --Tomorrow, we'll discuss why the lazy way to mining riches might be too lazy. Obviously the biggest risk of all is that mining companies haven't suddenly become safe, boring, predictable utilities, but they've being valued that way now. Last time that kind of thinking took hold, the whole market got sideswiped by a giant demand-destroying financial freight train. --And this just in from the Wall Street Journal! With Japan's fourth-quarter GDP contraction, China is now the second-largest economy in the world. That leaves only the US to overtake. Japan's 42-year run as number two is over. For good? Or just for now? --Finally, there was a lot of outrage AND thoughtful feedback from our note last week about the enemies of nuclear power (and humanity). We can't print them all. But keep 'em coming. Here are a few examples. Excuse the (lack of punctuations and capitals)..... Dear dan ( do you really have time or interest to read all your emails? )..oh well.. i usually like all the stuff you and others write about the stupidity of bernanke and how his flooding the world with money is gonna just blow up one day. ok, so i believe you, even though as you often point out.."it hasn't happenned yet". of course you like to say that inflation, however, IS certainly happenning. but then the stock mkt and everyones 401 accts are also going up so..what's the problem? ah,you say...we'll see !!! and so then you do a very funny thing ( am i the only one that sees this?) you make bold assertions about population and heartily put down anyone that thinks limiting population should be a priority. bah humbug ! you say . the world population has multiplied into the billions. so what ? keep pumping out those kids !! don't think of it as millions of people starving. or rioting in the streets. or losing their houses. or any of the other "problems" you like to blame on the crazy ways of big ben. because, as you so resolutely reassure us.... its more brains to solve the problems. hahahaa ok ben...i mean dan. are you SURE about not being wrong yet ? maybe you should slow down a bit....and give it a good thought. i think you owe me a beer too --This is the first, and hopefully last, time we'e ever been compared to Ben Bernanke. Of course we could be wrong about the limits of growth. But human beings are not like dollar bills. Each new person does not diminish the value of all the rest. Dear Editors at PPP, I agree with readers that think way you guys are writing these days seems childish. I'm losing interest and can rarely plough the DR and MM. There is nothing wrong with the simple life, don't you know it's what you all yearn for. That Nuclear energy / waste is a high risk has been taught even to children for many decades, even before Chernobyl, even before China or Iran and even before Julia G was crying ... of course its emotional. Malthus was wrong and still wrong. Human genius has always had limits and if you begin to think we can solve everything even by adaptation or evolution then you will be like those who watched on as Noah built the ark or those who built the tower of Babel, like the investor who believes Sydney property prices forever go up, or those who believe that RIO will forever leap forward. Watch out, the crash is coming and on that day a piece of bread will buy a bag of gold. See even I can turn out better text than what you guys are writing Stick to researching stocks that's what we pay you for! Kind regards Jona Gray --Hmm. How do you know what we yearn for? And by the way, you don't pay for the DR. It's free. Dan: I have been following your writings since you were editor of Outstanding Investments. I don't always agree with the things you write, but I also don't get upset when our opinions differ. I have also actually read Thomas Malthus's 'Essay on the Principle of Population ...', more than once, and have delivered university lectures on the subject of environmental constraints on the growth of human populations and the circumstances that allow them to grow rapidly. So, permit me to point out a few errors you made in your counter-attack on the environmentalists who dislike the idea of an Australian nuclear energy plan. First, the growth of the human population for the past couple of millennia, not just since around 1800 when Malthus made his dire predictions, has NOT been arithmetic. It has been exponential. You should know the difference, and the ultimate physical limitations on exponential growth spikes with their decreasing doubling times. Second, what Malthus, a rural clergyman writing just as the industrial revolution was getting underway, failed to foresee was not fundamentally the contributions of human ingenuity to increasing food production, but the emergence of the 'Neo-Europes' in North America, southern South America, and Australasia. The amount of newly colonized arable land without already existing dense populations (excluding northeastern Asia but not Southeast Asia, but the latter places did not become 'Neo-Europes' for climatic and perhaps other reasons), provided greatly increased world production of staples of the European diet, alas at the expense of the indigenous populations in those regions. Of course, improvements in 19th century transport technology (railroads and steamships) and horse-drawn agricultural mechanization, mainly developed in the US, played a role as well, but without all that new land to bring under the European plow, world population simply could not have increased sixfold in the two centuries from 1800 to 2000, even if technological innovation had been the same. Third, you may also be wrong about the intractability of nuclear waste. Existing, and basically still first generation, nuclear power plants, especially those that that breed plutonium, do indeed produce long-lasting and dangerous by products (plutonium itself is fiercely toxic to all life, as well as being radioactive). However, new nuclear technologies are being developed, such as 'pebble bed' air cooled reactors and miniature reactors the size of a cargo container that can be buried for their useful life of a few decades, which produce much less nuclear waste, not to mention Thorium cycle reactors which are much more benign than those that use Uranium. So, both you and the other guy were factually wrong, at least in part. However, given new nuclear technologies, I would have taken him up on the deal. L. Crissman Similar Posts: |
| When Bonds Go Down: Speculating on the Economic Recovery Posted: 13 Feb 2011 10:57 AM PST US bonds fell yesterday. The feds borrowed more. The deficit for January was nearly $50 billion. The record for January was hit two years ago - $63 billion. This puts the US on track for a record deficit of $1.5 trillion. Wait a minute. This is the 5th year after the crisis began. You'd think federal finances would be getting back to normal. And normal means deficits of 2% or 3%, not 10%. What gives? They cut taxes! Associated Press has more of the details:
The feds are spending $1.50 for every dollar they collect in taxes. We have no comment on this kind of public finance program. Anything we could say, no matter how provocative or grotesque, is dwarfed by the facts. But what is really puzzling is how they get away with it. Where are the bond vigilantes? The funny thing is that if you believe the "recovery" story, you naturally think inflation will pick up and bonds will go down. You should be a vigilante. You should sell bonds. Bonds should go down. If you don't believe the recovery story, you can buy bonds without worrying. If the economy weakens, bonds should go up. Heck, the Fed will probably keep buying them, helping to keep prices high. At least for a while. There's the rub. There's the itch. There's the festering sore. If the economy "recovers," bonds go down. If the economy doesn't recover, the Feds buy bonds with dollars they created out of nowhere. Dollar holders everywhere - including those who own US Treasury bonds - should be alarmed. They should be vigilantes too. Either way, sooner or later, bonds should go down. The one thing that bothers us about this logic is the fact that so many people think it is true. Everyone now seems to expect stocks to rise and bonds to fall. What if it is the other way around? Wouldn't surprise us. But what if you don't like stocks or bonds? What if you think the whole damned capital structure is going to fall down? What if you think stocks will sink with the economy...and bonds will sink with the dollar? Not necessarily in that order. What do you do then? You buy gold. You wait. How long? A year? Two years? Five years? What's the hurry? And more thoughts... "Most people want to be rentiers," said Elizabeth. "I know I do." Rentiers are people who collect "rentes" - that is, they are people who live on their investments. If you have an investment in an apartment building, for example, you collect rents. That's why you own the building. You want the income. That makes you an investor. If you buy the building because you think it is going up in price you are not an investor; you're a speculator. You're speculating that you'll get an increase in your capital. "Most people who call themselves 'investors' are not really investors," we explained, to know one in particular. "If you are a real investor, you have to study your investments carefully and make sure they produce a stream of income that justifies the investment. But very few stocks provide enough in dividends to give you any real return on your money. The dividend yield is only about 2%, on average...or about the same as the official inflation rate. The real inflation rate is much higher...meaning, you lose money unless your stocks go up in price." How likely is it that stocks will go up in price? Everyone seems to think they'll go up. Ben Bernanke - the most powerful economist in the world - says he'll make sure they go up. And they've been going up for almost 2 years. So... Why not buy stocks? And guess what...they're cheaper today than they were yesterday. The Dow went down 10 points yesterday. If the Dow goes down another 5,000 points, we'll be a buyer too. *** "Why don't you bring your new friend down for the weekend," we suggested to one of the children. "Elizabeth will ask him questions about St. Augustine. I'll see how he handles a chain saw. We'll all see how he holds up." We used to be reluctant to involve ourselves in our children's personal lives. That was their business, we said to ourselves. Now, we're not so sure... "Americans have very funny ideas," said a French friend. "They don't believe in giving money to their children. They're afraid it will ruin them. I guess the idea comes from Americans' history as frontiersmen and settlers. Each pioneer had to make it with his own wits. "But in most of the world, people want to help their children as much as possible. It seems only natural to me. The world is a competitive place. You give your children every kind of help you can. If you have a skill, you pass it on. If you have a nice house, you give them that. If you have money, you want to make sure they get it, rather than it going to someone else's children. Money gives them something to work with. And it makes their lives nicer and easier. "And if you don't have any money, at least you should help your children find suitable marriage partners. When they do it on their own, the result is hit or miss. Often, they just make the wrong choices. And then they have to get a divorce - which undermines their financial plans. Or they live with their mistake, unhappily, all their lives. "It seems crazy to me. Parents are older and wiser. They should help guide their children into happy marriages. If they don't, they are failing in their parental duty." Regards, Bill Bonner for The Daily Reckoning Australia Similar Posts: |
| Posted: 13 Feb 2011 10:57 AM PST In a recent Daily Reckoning column, "Buy a House...Then Buy Another," I told you about John Paulson, the billionaire hedge fund manager who switched from betting against housing to now telling people they should buy a house...or even two houses. Bill Ackman, the successful hedge fund manager behind Pershing Square Capital Management, is another case in point. He, too, saw the housing bubble before it popped. He made a now famous argument as to why the stock of MBIA, which guaranteed the slop coming out of the mortgage factories during the bubble, was going to crumble. And it did, netting Ackman more than $1 billion. MBIA was, at the time, one of the five biggest financial institutions in the US. But now, like Paulson, Ackman is bullish on US housing. He recently made a compelling case focused on five key areas. Let's take another look at the case for housing and add more meat to the bones. First, housing is cheaper now than it's been in a generation. The median income is now 78% above what it takes to qualify for a fixed- rate loan on 80% of the median purchase price. Mix that with housing prices that are 30% off their peak nationally and low mortgage rates and you get a cocktail of affordable housing.
The second key part to the argument is to look at the number of forced sellers. As a buyer, it is more favorable to you if you buy from people who have to sell. Makes sense right? In housing, about 30% of sellers are in foreclosure or approaching it. These are national figures, so in some markets, there are more forced sellers than others. "Buyers benefit when conventional sellers compete with distressed sales," Ackman says. "Las Vegas is an extreme example, where distressed and nondistressed sale prices have nearly converged." Ultimately, this process is good for the home market. As Ackman points out, "Overpriced and overleveraged homes will be transitioned to new, stable owners at more reasonable prices and on more favorable financing terms." From such stable bases, new bull markets are born. Third, we look again at financing terms and costs. Blue chip companies don't get the deal you get when you buy a home. You can borrow at about 5% fixed for up to 30 years, putting down only 20% (3% for FHA loans). You have no prepayment penalties - so you can, if rates fall, refinance. But if rates rise, you can sit tight. And you can deduct the interest from your taxes. It is a sweetheart deal. Rates, by the way, haven't been this low since the Freddie Mac survey began. This also makes for a great inflation hedge. Housing, as an asset class, performed extremely well during the inflationary 1970s. Today's borrowers have similar upside. Ackman demonstrates how even small price increases multiply the equity in your house, assuming conventional 80% financing and a 10-year holding period:
People who are skeptical of housing think prices won't rise anytime soon. But as this exercise shows, you don't need much of an increase. Even a 1% annual increase over a 10-year period gives you 2.7 times your money. Anything better and your upside soars! So far, the case for housing is familiar and easy to grasp. Now we get to the fourth and fifth pieces of the argument, which clinch the case, in my view: the long-term supply and demand for housing. Let's start with supply. What can we say about the supply of houses in the US? There is a lot of it right now, which is what weighs down pricing. This is what creates the opportunity for buyers. But there is more. "Builders have sharply reduced their construction capacity, increasing lead times when the market does recover," Ackman says. "It can take three-seven years to get land permitted in many of the more desirable markets." This means that we can't turn on a switch and get a lot more houses. As with mining, it is important to consider how long it will take to bring new supply to the market. As investors, we want new supply to come slowly. The number of housing starts is lower than at any time in at least the past 50 years. New construction is about half the long-term average. Again, good news for investors in housing, since this means that new supply is growing very slowly. Now let's turn to demand. Demand for new housing is depressed. Home ownership rates are back down to pre-bubble levels. But housing demand - based simply on demographic trends - should rise inexorably for years to come. You take the growth in households - driven by population growth - and apply a home ownership rate. Demographically, the US is still a growing country. By 2030, there will be 370 million Americans. Even using the long-term average home ownership rate means we'll need 1.1-1.2 million new single-family homes per year. Here is another chart that puts supply and demand together and captures how depressed things are. The chart shows housing starts. The dotted line shows you projected annual demand of about 1.2 million homes per year. So you can see the big gap as the market digs into existing supply. At some point, housing starts will rebound. This could happen as early as this year...
The prime beneficiary of any rebound would be the homebuilders. There are several interesting possibilities in homebuilder stocks, such as Lennar (NYSE:LEN) or MDC Holdings (NYSE:MDC). I don't think we need to rush to buy any of these just yet, but they are on the radar. There will be other beneficiaries of a housing rebound, too. There are all those depressed building supply stocks. There are the many little local banks that finance housing. Each has been an area we've sought to avoid, but they have become promising fishing holes. The risks seem low. We've already seen the bubble collapse. A second collapse is unlikely. The market is adjusting to a more normal level. All is to say that as contrarian as it seems, housing is now a good bet for the long term. Paulson and Ackman - two great investors - made fortunes betting against housing, but now they've changed their views as the market changed. Maybe we should too. Regards, Chris Mayer |
| Gold Testing $1,353 Support after Sell Off Posted: 13 Feb 2011 10:00 AM PST Despite a late-week sell off, gold managed to eke out a gain last week, but price action remains lackluster as ETF holdings continue to decline amid a distinct lack of catalysts for the metal. |
| Posted: 13 Feb 2011 10:00 AM PST Following a retreat to the $1,355 area, gold prices picked up fresh hedge fund-sourced steam this morning and climbed to the upper $1,360's with relative ease, despite near three-week highs recorded in the values of the US dollar. |
| Silver Bullion Comex Stocks at 4-Year Low Posted: 13 Feb 2011 10:00 AM PST Gold and silver are higher after last week's 1% and 3.5% gains in dollars. Silver is particularly strong again this morning and the euro has come under pressure as bonds in Ireland, Spain, Portugal and Greece continue to rise. |
| Posted: 13 Feb 2011 09:15 AM PST I have been a bull all my life and I will continue to remain a silver bull all my life. But silver has the tendency to fall much faster than any other metal in the event of a bear run. It is this tendency which scares low risk investors away. However silver's performance in 2010 has a lit a fire in the mind of retail investors that he needs to invest in silver. I am now being asked by a huge amount of people whether they can invest at current prices. A few years ago I used to tell the same people to invest in silver but they ignored my advice. |
| Got Gold Report – Gold, Silver Correction Ahead? Posted: 13 Feb 2011 08:32 AM PST Two weeks ago we had our targets for reentry into the gold and silver markets all picked out and we had our trading trigger finger at the ready. Then we think the trouble in Egypt got in the way and interfered with a perfectly good garden variety pullback we intended to game. Gold and especially silver checked up above our comfort level for reentry. |
| Ron Paul Speech-Bullish for Silver and Gold Posted: 13 Feb 2011 05:19 AM PST |
| Feb 12, 1965 : De Gaulle v. the Dollar Posted: 11 Feb 2011 04:30 PM PST |
| Feb 12, 1851 : Edward Hargraves discovers Gold at Bathurst Posted: 11 Feb 2011 10:00 AM PST |
Egypt is free! …and the market rejoices.
| 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