saveyourassetsfirst3 |
- Public getting spooked... gold mania may lie ahead
- Make 20% a year in the world's worst real estate market
- Better than gold; this metal will soar in 2009
- The End of America
- A Bottom For Gold And Gold Stocks?
- Why gold money?
- Production & Profits Enhance China's Gold Status
- The Dollar and Manipulation Control the Market
- Shadow Banking 101
- Weaker Metals Blamed on French Results
- Morning Outlook from the Trade Desk 05/07/12
- All the gold and silver roads now leading to China
- Cyclical Bear Continues in Junior Gold Shares
- Links 5/7/12
- Stock sell-off accelerates following European elections
- Is Gold Hinting At Imminent Coordinated Global Intervention?
- Gold is limited government
- Gold & Silver Market Morning, May 07 2012
- Currency Debasement and Social Collapse
- DTS: Money as Debt
- BrotherJohnF: Silver To Test $26?
- James Grant with Bloomberg on Fed Bailout
- Why is Gold Getting Hammered?
- How Flat Are These Gold Prices?
- Keeping the Decline in Gold Stocks in Perspective
- The Dollar & Gold Have Eyes on Europe
- The Bear Hunters and the Trigger Event for the Aussie Dollar
- Reforming Our Thoughts on U.S. Education
- Shale Gas Hype: Subprime 2.0?
- Gold in Modern Times (1800 onwards)
| Public getting spooked... gold mania may lie ahead Posted: 07 May 2012 05:20 AM PDT We don't know whether to be bullish or bearish on this one… Eric Sprott, one of Canada's top money managers, says, "The window to raise money for gold stocks has blown open." Barrick Gold CEO Peter Munk says he's getting tons of calls from investors asking how to protect their money. Investor interest in gold is soaring. This level of interest usually coincides with a vicious correction in an asset. It's only when the papers are full of bearish news does a true bull market rally move into high gear. But given the state of the government boondoggle right now, we wouldn't be surprised to see these sorts of comments coincide with a move over $1,000 an ounce… Read on... |
| Make 20% a year in the world's worst real estate market Posted: 07 May 2012 05:20 AM PDT From DailyWealth: Andrew started flipping houses. He'd gather the gloomiest articles about Detroit real estate. He'd mail these articles to loan officers at the local banks. Then, he'd offer to buy their foreclosed properties for pennies on the dollar. Andrew's strategy worked. He'd pay a Polish cleaning crew to overhaul the houses and then resell them for a profit. Now, Andrew has found a new business in Detroit. He says this business is "the most fundamentally sound cash-flowing businesses in the nation right now." Investing in apartment buildings is Andrew's new business. He buys buildings with between 30 and 200 units. He says these buildings are too big for the average owner but too small for institutions and hedge funds. Andrew says there's "very little competition" for these buildings since the credit crunch struck Detroit. Read full article... |
| Better than gold; this metal will soar in 2009 Posted: 07 May 2012 05:20 AM PDT From The Growth Stock Wire: This year will be the year of precious metals. I'm certain of it. The U.S. government is printing trillions of new dollars to bail out everyone from Wall Street bankers to Detroit automakers to Miami housing speculators to Las Vegas gamblers. That will lead to inflation. ...But if you can only buy one precious metal in 2009, then buy platinum. Relative to gold, platinum is cheaper now than it has been at any time during the past 10 years. Here, take a look... Read full article... |
| Posted: 07 May 2012 05:20 AM PDT From DailyWealth: The huge inflation underway right now will be what I call "The End of America." I don't mean an end to our political union – I mean an end to the special role America has played in the global economy since World War II. The coming great inflation will destroy America's economic leadership. It will lead – eventually – to the return of settling international obligations in gold instead of paper dollars. And this will happen much faster than anyone expects. By the time Obama leaves office, you will not be able to exchange dollars for any sound currency in the world without permission from the U.S. government. The price of gold will be well over $2,500 per ounce. Most importantly, commodities will no longer be priced in dollars either, but instead in the currencies of the leading producer. Americans haven't experienced anything like this since the Great Depression. Read full article... |
| A Bottom For Gold And Gold Stocks? Posted: 07 May 2012 04:07 AM PDT By Cam Hui: Mark Hulbert wrote last week that his measures of gold timer sentiment was very washed out, which indicated the possibility of a bottom for gold and gold stocks soon:
Hulbert wrote that he hadn't seen these kinds of sentiment readings since March 2009:
Complete Story » |
| Posted: 07 May 2012 01:30 AM PDT Recently Rob McEwen of McEwen Mining Co. and Michael Crofton of Philadelphia Trust discussed the pros and cons of the gold standard. In this debate, Mr McEwen made an excellent case for gold as ... |
| Production & Profits Enhance China's Gold Status Posted: 07 May 2012 01:29 AM PDT
from mineweb.com: Gold production in China and the profits of Chinese gold producers have continued to see a major upswing this year. Given the manifold increase, China could also be well poised to become the world's biggest gold market in 2012 as demand for the precious metal continues to surge. It actually overtook the world's largest consumer, India in Q4 2011, although annual consumption remained below the latter's figure for the full year. China produced around 24.13 tonnes of gold in January 2012, an increase of 3.68% from the same month a year ago. In February this year, China's gold output jumped 11.3% from January. Data shows that output for the first two months of the year rose 8% to 51.005 tonnes. In February, China produced around 26.87 tonnes of gold. Analyst said China's rapid economic development has completely changed the market for gold over the years. Its consumption was 203.1 tonnes in 2001, while in 2011 the figure had more than tripled to 769.8 tonnes according to the World Gold Council. Production on the other hand has also shown a massive jump. China produced a record 360.95 tonnes of gold in 2011, up 5.89% from 2010, making the country the world's biggest gold producer for the fifth consecutive year. SOARING PROFITS China's largest gold producer, the Zijin Mining Group, also reported an 18% increase in its net profit. In a statement filed at the Shanghai Stock Exchange, Zijin said net incomes rose to $906.35 million mainly due the rising price of gold. While revenues surged 39% from a year ago period to 39.76 billion yuan, the company said the figure was slightly below its earlier forecast of 39.82 billion yuan. China has also been advised to increase its holdings in gold: A senior official was quoted by local newspapers as saying that China should further diversify its foreign exchange portfolio and make more gold purchases when the price slips. Keep on reading @ mineweb.com |
| The Dollar and Manipulation Control the Market Posted: 07 May 2012 01:29 AM PDT |
| Posted: 07 May 2012 01:22 AM PDT
from azizonomics.com: Meet James. James bought a house. It cost him $150,000, of which $30,000 had come from his own savings, leaving him with a $120,000 30-year fixed-rate mortgage from the WTF Bank, with a final cost (after 30 years of interest) of $200,000. Now, up until the '80s, a mortgage was just a mortgage. Banks would lend the funds and profit from interest as the mortgage is paid back. Not so today. James's $200,000 mortgage was packaged up with 1,000 other mortgages into a £180 million MBS, (mortgage backed security), and sold for an immediate gain by WTF Bank to Privet Asset Management, a hedge fund. Privet then placed this MBS with Sacks of Gold, an investment bank, in return for a $18 billion short-term collateralised ("hypothecated") loan. Two days later Sacks of Gold faced a margin call, and so re-hypothecated this collateral for another short-term collateralised $18 billion loan with J.P. Morecocaine, another investment bank. Three weeks later, a huge stock market crash resulted in a liquidity panic, resulting in more margin calls, more forced selling, which left Privet Asset Management — who had already lost a lot of money betting stocks would go up — completely insolvent. Confused? You should be. This is of course a fictitious story. But the really freaky thing is that this kind of scenario — the packaging up of fairly ordinary debt into exotic financial products, which are then traded by hundreds or even thousands of different parties, has occurred millions and millions of times. And it is extremely dangerous. When everybody is in debt to everybody else through a complex web of debt one small shock could break the entire system. The $18 billion debt that Privet owed to Sacks of Gold could be the difference between Sacks of Gold having enough money to survive, or not survive. And if they didn't survive, then all the money that they owed to other parties, like J.P. Morecocaine, would go unpaid, thus threatening those parties with insolvency, and so on. This is called systemic risk, and shadow banking has done for systemic risk what did the Beatles did for rock & roll: blow it up, and spread it every Keep on reading @ azizonomics.com |
| Weaker Metals Blamed on French Results Posted: 07 May 2012 01:03 AM PDT Spot gold lost $5 on the open to start the new week with a bid at $1,637 the ounce. Silver fell 20 cents to the $30.14 mark per ounce. Platinum climbed $5 to $1,528 while palladium rose $2 to $651 the ounce. |
| Morning Outlook from the Trade Desk 05/07/12 Posted: 06 May 2012 11:14 PM PDT Socialists win in France and Greece cannot not even manage a coalition party with the top two parties. As expected equity markets in Europe are under pressure as austerity talks may now need to resume. Hard not to see this benefiting the dollar in the short term. First reaction from the metals was down and now they are almost unchanged from Fridays close. The metals again should trend lower as money moves to the dollar. The Euro is again approaching 1.30 to the dollar, where there has been significant short term support. This level will need to be breached to give the dollar momentum. |
| All the gold and silver roads now leading to China Posted: 06 May 2012 11:05 PM PDT All the gold and silver roads now leading to China With the opening of silver futures trading in Shanghai, China could rapidly become a major player in silver trading given its position as now almost certainly being the world's largest silver consumer. Author: Lawrence Williams Posted: Monday , 07 May 2012 LONDON (MINEWEB) - This week the Shanghai Futures Exchange will start trading silver futures from Thursday. In a commentary on this the newspaper, The Australian, comments that nowadays all the gold and silver roads are leading to China, and speculation that the next few years could see the Chinese dominating the global silver market much as they appear to be doing with the global gold market. Indeed a big inflow of silver into China - a country which has a long association with the metal having had a silver related currency standard up until the 1930s - is felt by some to be likely to end some of the metal's price volatility and perhaps end what some see as excessive manipulation of the market through COMEX. But silver does need to throw off its reputation for volatility - the 'devil's metal' as some traders refer to it because of this, and initially silver trading in China could add to this until perhaps it finds some kind of stability. But commentators referred to by The Australian also say that there is indeed a particular penchant for silver investment in China because retail investors are attracted by the much lower price than that of gold and because of the relatively recent association of the country's currency with the metal. There is little doubt that China's take-up of gold - both at the retail and institutional levels - and probably by official entities too - has been perhaps the most significant driver of the yellow metal's price over the past two or three years and it is felt that the impact on the silver market could be similar. Given that silver is a much smaller market than gold this could prove to be quite a substantial impact and could see those holding big silver short positions on COMEX, liquidating these just in case there is a big price kicker ahead as a result. China is already the world's third biggest silver producer after Peru and Mexico, as well as the world's largest gold miner. It is also one of the world's largest consumers of industrial silver - probably the largest - and investment in silver bullion and jewellery has also been running at a very high level. Certainly China is a net importer of silver these days - both for investment and fabrication. Investment demand has been growing id double digits percentage-wise, while in industrial usage many of today's key uses of the metal are in areas where China is beginning to dominate world supply notably in electronic products, solar panel manufacture etc. What might detract from an immediate demand surge from China, though, is the belief that the country's industrialists may have as much as 15 months supply in stockpiles. But China has a remarkable facility to surprise the global markets in its strength of demand for commodities and silver may prove to be no exception. http://www.mineweb.com/mineweb/view/...tail&id=92730 |
| Cyclical Bear Continues in Junior Gold Shares Posted: 06 May 2012 10:07 PM PDT In a market like this the strong get stronger and the weak either are eaten up by the stronger companies or they simply become weaker themselves and significantly reduce upside potential. |
| Posted: 06 May 2012 09:55 PM PDT My internet connection has been up and down all weekend, and is now more down than up. This started last Friday, which is enough to cause considerable suspicions as to the cause, particularly since this problem is with my DSL signal and appears to be specific to my line. I've scheduled this post to go live later this AM, and am adding material as I can. If this winds up being thin, go yell at Verizon. And you would have had another post too were it not for this. Aargh. Bigger and brighter 'supermoon' graces the night sky BBC Amish children are nearly immune to asthma and allergies Daily Mail (May S) Roanoke Colony Revealed? Prof Finds The Mysterious Colony's Capital Firedoglake (Carol B). For history buffs. Advertisers uneasy with Facebook Financial Times The only solution to the eurozone crisis Wolfgang Munchau, Financial Times Vulgar, rude and egotistical, President Bling-Bling has met his Waterloo Daily Mail (May S) Francois Hollande has ten weeks to avert a French bond crisis Telegraph Tokyo Shares End With Biggest Fall Of 2012 On Yen's Rise WSJ Marketbeat. Whoa, the pressure on the BoJ to Do Something is going to escalate. Is Australia turning Japanese? MacroBusiness Collapse in votes for main Greek parties Financial Times Those Revolting Europeans Paul Krugman, New York Times Look Out Below, French Election Edition Barry Ritholtz. Man, is this backwards, since austerity was going to drive Europe off a cliff. But the market has been trading on simple-minded, QE driven risk on, risk off trades, and now investors might have to think! No wonder they are panicked. Put Palestine First Project Syndicate Biden strongly backs gay marriage Guardian In Scott Walker Recall Race, Organized Labor's Pick Falls Short Daily Beast (MT) Krugman compares Republican economic plan to blood-letting Raw Story Protesters in Miami clean garbage from foreclosed homes and dump it at bank MSNBC Foreclosed Houses Become Homes For Indoor Marijuana Farms New York Times Dozens of Police Evict Georgia Family at Gunpoint at 3am Alternet (MBH) There are few sparks in a sputtering US recovery Edward Luce, Financial Times * * * D – 124 and counting* "I seen my opportunities and I took 'em." –George Washington Plunkitt, on "honest graft" "The [whose?] economy" on the talk shows: You could do worse than The Bobblespeak Translations: "GREGORY: Joe is this a jobless recovery? … BIDEN: We were losing millions of jobs when we were sworn in — since then we've slowly added hundreds of thousands" (cf. Dean Baker). HoHo: "much better shape." Schumer: "steady hand on the tiller". Toles not an antidote. A Socialist wins the French election, so MoDo writes about the Fascist (more MoDo goodness). Robama kicks off official campaign in OH with greatest speech ever. Overflow crowd or not? Not, actually. Axelrove: "14,000 is 11,000 more than the largest crowd that Mitt Romney has ever drawn". Ouch! Robama: "I still believe in you. And I'm asking you to keep believing in me." Obomney campaign site: "Believe in America". One side is lying and the other is not telling the truth (hat tip: Chris Floyd). Which even our famously free press is starting to notice. Anyhow, here's the transcript, which does, in fact, read well: CHILD: "We love you, Barack Obama!" Squee! But when you've lost Ezili Dantò… Robama campaign "tailors message for key states and voters". (Sun slated to appear in East.) Like college towns. In swing state VA, 2008's coalition — youth, suburban Washingtonians, women, and blacks — is largely intact (though not clear how large "largely" is). Robama's composite cartoon woman, "Julia," appeals to all members of that coalition (except for blacks; he doesn't need to bother). Thinking back to 2008′s key demographic, Julia is also a "creative class" professional: Her (suburban Washingtonian, i.e. Beltway) business might bid on building websites for ObamaCare, for example. Or the DHS. Eight time loser Robert Shrum (D): "What's powerful about the Obama slide show ["Julia"] is that it deals in specifics that people very much care about." Web site development?! Jobs, maybe. Robama's hiring. But don't take your work home with you! Key players on Team Robama meet Sunday nights: David Axelrod, Stephanie Cutter, Larry Grisolano, Valerie Jarrett, Jacob J. Lew, Alyssa Mastromonaco, Jim Messina, Dan Pfeiffer, David Plouffe, Pete Rouse. Joe Biden (not on the list) is the "highest ranking official" who is "comfortable with gay marriage". Alrighty then. Paul surgelet: NV: "An organized contingent who easily took control of the state convention". ME: "Paul's backers took control of key parliamentary positions and the convention agenda". "Other than [Governor] LePage, most of the names are relative unknowns". IA: If Paul trend continues, the IA caucus will have had three winners: "Romney on caucus night, Santorum after the certified vote, and Paul in the delegate count". The emerging narrative seems to meld Obama strategists' focus on caucuses with Clinton supporters' quest to be heard at the convention. And the only thing I can find on the Green's Jill Stein is an upcoming speech in Humboldt County, CA. Some long-form think pieces on politics from The Arch Druid (2012), Ian Welsh (2010), and Stirling Newberry (2009) (the last because Avedon keeps linking to it). – Horse race-related tips, links, hate mail to lambert * 124 days 'til the Democratic National Convention ends with an all-you-can eat shrimp buffet in Bank of America Stadium, Charlotte, NC. The longest kidney transplant chain ever had 124 links. Antidote du jour:
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| Stock sell-off accelerates following European elections Posted: 06 May 2012 09:30 PM PDT Gold and silver prices help up fairly well at the end of last week, considering the washout in equities and the broader commodity complex on Friday, following disappointing US nonfarm payroll numbers. ... |
| Is Gold Hinting At Imminent Coordinated Global Intervention? Posted: 06 May 2012 09:05 PM PDT
from zerohedge.com: While it is still early in the overnight session, initial indications are for a full spectrum Risk Off market. In fact, S&P 500 futures (ES) have not fallen this fast over a two- or three-day period since the third week of November last year. As many may remember – a few days of drops like this took ES from 1260 to 1136 in a week but more importantly was followed very quickly by a massive and coordinated Central Bank intervention that ripped ES over 6% higher in an overnight session – sparking the entire rally of the last six months as it appeared the central bank put strike had been dragged higher. Admittedly the two-day fall so far (while the largest in almost six months) is still small in context, it would appear the world is waking up to the true event risks of a debt-saturated fiat system going through its death throes. Back of the envelope would suggest we need to drop to 1285 or so on the S&P before the same kind of hit-the-big-red-central-bank-panic-button kind of move comes into play. Sure enough, Gold is only very modestly lower (-$3 at $1640) so far in the face of a rip higher in USD and broad liquidation everywhere else – perhaps the patience of sound money will be paid off once again. ES fell with a similar velocity in mid November (red rectangle) – soon after (green oval) the central banks of the world went crazy… Keep on reading @ zerohedge.com |
| Posted: 06 May 2012 09:00 PM PDT
from gata.org: "Civilized people don't buy gold," Berkshire Hathaway's Charles Munger told CNBC the other day. Echoing his partner, Warren Buffett, Munger said civilized people instead "invest in productive businesses," adding, "Gold is a great thing to sew into your garments if you're a Jewish family in Vienna in 1939." (See http://www.gata.org/node/11324.) As indignant as such a comment may make certain gold investors, most are probably accustomed to such disparagement by the financial establishment, and greater indignation should be directed toward the mainstream financial news media for not seeking out any rebuttal, even if the rebuttal is obvious enough. Perhaps first is that gold as money is the primary mechanism of enforcing limited government, and limited government is the first characteristic of civilized government. The distance between gold as money and unlimited fiat money is the distance between limited government and unlimited government, between democracy and totalitarianism. The trend toward unlimited government lately has become overwhelming, from the stupid imperial wars being waged by the United States every few years to the comprehensive surveillance undertaken under the "Patriot Act" to the "financial repression" that even a recent member of the Federal Reserve's Board of Governors complained about a few months ago (http://www.gata.org/node/10839). This prompts our friend Bill A. to chide Munger that the United States in 2012 is in danger of becoming like Vienna in 1939, insofar as anyone now is subject to the abuse heaped on Jews by the Nazis. Keep on reading @ gata.org |
| Gold & Silver Market Morning, May 07 2012 Posted: 06 May 2012 09:00 PM PDT |
| Currency Debasement and Social Collapse Posted: 06 May 2012 08:59 PM PDT
from mises.org: [In a recent debate between Ron Paul and Paul Krugman, Dr. Paul said, "Professor Krugman indicates we just want to go back 100 years or so. That's not exactly true. We want to improve on what life was like back then. But he wants to go back 1,000 years or 2,000 years, just as the Romans and the Greeks … debased their currency." In Human Action, Ludwig von Mises explained how currency debasement contributed to the fall of the classical civilization of antiquity.] Knowledge of the effects of government interference with market prices makes us comprehend the economic causes of a momentous historical event, the decline of ancient civilization. It may be left undecided whether or not it is correct to call the economic organization of the Roman Empire capitalism. At any rate it is certain that the Roman Empire in the 2nd century, the age of the Antonines, the "good" emperors, had reached a high stage of the social division of labor and of interregional commerce. Several metropolitan centers, a considerable number of middle-sized towns, and many small towns were the seats of a refined civilization. The inhabitants of these urban agglomerations were supplied with food and raw materials not only from the neighboring rural districts, but also from distant provinces. A part of these provisions flowed into the cities as revenue of their wealthy residents who owned landed property. But a considerable part was bought in exchange for the rural population's purchases of the products of the city dwellers' processing activities. There was an extensive trade between the various regions of the vast empire. Not only in the processing industries, but also in agriculture there was a tendency toward further specialization. The various parts of the empire were no longer economically self-sufficient. They were interdependent. What brought about the decline of the empire and the decay of its civilization was the disintegration of this economic interconnectedness, not the barbarian invasions. The alien aggressors merely took advantage of an opportunity which the internal weakness of the empire offered to them. From a military point of view the tribes which invaded the empire in the 4th and 5th centuries were not more formidable than the armies which the legions had easily defeated in earlier times. But the empire had changed. Its economic and social structure was already medieval. Keep on reading @ mises.org |
| Posted: 06 May 2012 08:58 PM PDT |
| BrotherJohnF: Silver To Test $26? Posted: 06 May 2012 08:55 PM PDT Brother John F discusses from altinvestorshangout: ~TVR |
| James Grant with Bloomberg on Fed Bailout Posted: 06 May 2012 08:40 PM PDT James Grant, editor of Grant's Interest Rate Observer, talks with Bloomberg's Pimm Fox in New York about the Federal Reserve's intervention in the credit market crisis and its impact on the value of the U.S. dollar. from wanax: ~TVR |
| Posted: 06 May 2012 07:59 PM PDT Actually, such action in gold is – to me – proof that gold is still in the early stages of this bull market. Yes, gold is now in the 11th year of this run, but it's still the early stages. |
| How Flat Are These Gold Prices? Posted: 06 May 2012 07:07 PM PDT Last Wednesday afternoon's London gold fix, dollar gold prices were $1,648 an ounce. This marked the fortieth trading day in a row that gold fixed between $1,600 and $1,700. |
| Keeping the Decline in Gold Stocks in Perspective Posted: 06 May 2012 06:52 PM PDT As the gold stocks continue to fall to new lows and struggle to find a bottom, it is important to keep things in perspective. Before we get to the visual comparison with the 1960s and 1970s, we want to touch on the reasons why the gold stocks have underperformed in recent months and years. First, the sector had a terrific run that would have to be corrected. From late 2008 until the end of 2010, GDX advanced more than 4-fold from $15 to $64. Silver stocks, juniors and mid-tiers had a larger run that lasted nearly 30 months. It takes not months but quarters to correct that type of move. Moreover, GDX has yet to reach the 50% retracement at $41. A 38% or 50% retracement is routine. Furthermore, we've shown in recent writings that the current correction in percentage terms is in-line with corrections in past years. A second reason for poor performance from gold stocks is the strong stock market, which provides competition. If conventional investments perform well then there is less mainstream demand for Gold and gold stocks. After the announcement of QE 2 in August 2010, the large gold stocks advanced for only four months before reaching a peak. Since the announcement, the S&P 500 is up more than 30%. The S&P 500 has had a great run in the past seven months while gold stocks have really struggled. The best general market environment for gold stocks is not one of extreme strength or weakness but one of slight strength or neutrality. Third, mining is a difficult business in which operational difficulties are not random. Sure, energy costs and overall costs are higher but margins for the able producers are at record highs. The great companies are performing well in this environment, as they should be. The struggles of so many companies within a highly profitable environment is a testament to the overall difficulty of the mining business. Lastly, we believe the lack of performance can also be attributed to the wall of worry phase of a bull market. Current valuations are a reflection of the wall of worry phase. There are three phases in a bull market. Valuations increase at the start (stealth phase) and at the end (participation phase) but not during the middle, wall of worry phase. Presently, the gold stocks remain in the wall of worry phase. In the previous bull market, the wall of worry phase lasted five years. Below we plot the Barron's Gold Mining Index (blue) and the current HUI Gold Bugs Index (HUI). We've touched on this in previous writings, but there are noticeable similarities. The HUI had a sharper initial correction but rebounded to marginal new highs. The HUI now appears on its way to forming its first major bottom since 2008. When the BGMI bottomed in late 1971 it had effectively made no progress in six years. The BGMI is currently only marginally above its peak in 2006. This chart is not to imply that the HUI will follow the exact same path. More so, it is to illustrate the similarities between both markets as they endured the wall of worry period. In previous writings we showed how other bull markets (Nasdaq, Japan) endured their own wall of worry periods before exploding to new highs and then higher highs. From its low in 1971, the BGMI would rise roughly 12 fold in the last nine years of its bull market. With the current low valuations and extreme negative sentiment combined with the strengthening real price of Gold (implies future margin increases), we have little worry that this sector will explode in the coming years. The last six months have been a difficult period but it is closer to the end than the start of said period. With all of this in mind, it is wise to develop a game plan and a stock list. Scaling into positions (near support levels) over the next several months would be a wise move. For subscribers, we have updated our watch lists and prepared support levels to watch for a potential major bottom. If you'd be interested in professional guidance then we invite you to learn more about our service. Good Luck! Jordan Roy-Byrne, CMT
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| The Dollar & Gold Have Eyes on Europe Posted: 06 May 2012 05:39 PM PDT The price action over the weekend on Monday will likely be telling and we could see the beginning of a major move in a variety of underlying assets depending on the election results. Clearly times have changed when US market participants are concerned about what is going on in Europe... |
| The Bear Hunters and the Trigger Event for the Aussie Dollar Posted: 06 May 2012 05:20 PM PDT 'Sometimes you eat the bear and sometimes, well...he eats you.' That's what Sam Elliott's character says to the Dude in The Big Lebowski. He didn't say anything about those times when the bear climbs up a tree, is tranquilised, and then falls gracefully to the ground. They don't ring a bell at the top. Do they shoot a bear at the bottom?  Reports of the bear's demise may be greatly exaggerated, to paraphrase Samuel Langhorne Clemens. The Australian stock market has opened up in the red. It follows Friday's loss on the Dow Jones Industrials. The Dow had been trading near a four-year high. It's going to be a tough week for Aussie assets. The financial crisis in Europe has become political. The results of weekend elections in France and Greece make it hard to figure out what the end-game for Europe's debt crisis is. This kind of uncertainty makes 'risk' assets like the Aussie dollar less attractive. Speaking of the Australian dollar, does it look like a 'safe haven' currency to you? We made the argument over the weekend that the Aussie dollar is anything but a 'safe haven'. It's a proxy for commodities, it's a proxy for China, and it's a proxy for risk. All of those things make it a dangerous currency at the moment.  The argument we made over the weekend is that the next 'crisis' could trigger a major correction in the Australian dollar. We'll get to the trigger event in a moment. But what could a major correction entail? Well, Slipstream Trader Editor Murray Dawes showed us a long-term chart of the Aussie dollar this morning. The crucial item on the chart was that the short-term moving average has moved below the long-term moving average. Murray says this is long-term bearish. He reckons if the Aussie dollar breaches a certain level, look out below. Of course the point of such a warning/forecast isn't to abandon hope and panic. For Murray, it's to prepare and trade. He has several shorts trades on at the moment. Individual stocks can often track the performance of a currency or index. Such is the case with the Australian dollar. If Murray is right and the Aussie dollar falls, then so too should some of the stocks he's short. It all depends on the 'trigger' event. There are several candidates in Europe. Take the French and Greek elections, for example. The French have elected their first socialist President since Francois Mitterrand. Francois Hollande is in, Nickolas Sarkozy is out. If the election results are a rejection of the current austerity measures imposed by the European Union and the European Central Bank, it's not going to make things better in Europe. Mind you, the austerity isn't making things better either. You can't blame the French for rejecting a system which makes taxpayers foot the bill for the ongoing bailout of the European banking system. But if the socialist answer is bigger government and more spending, well then that's hardly a solution to the debt problem either, is it? While the French turn left, the Greeks turn right. Actually they seem to have turned away from the centre, more than anything. The anti-bailout Left Coalition is on track to win 16.1% of the vote in Parliamentary elections. The centre-right New Democracy party came in first at 20%. The socialist Pasok party came in third. Both elections see a rejection of the status quo in Europe. For example, both Pasok and New Democracy - supposedly on opposite sides of the political spectrum - supported the austerity measures imposed on Greece by the 'troika' from the EU, the ECB, and the IMF. If you ask us, it looks like voters are rejecting political elites who do the bidding of banking elites. If they had their way, they'd probably throw the whole Euro baby out with all the European Union bathwater. But then again, it's hard to know what the Greeks and the French want. Do they want something for nothing? Or are they rejecting elites? Do they want less pain and more free money? Or do they want a decentralised Europe free from the micro-managing bureaucratic tyranny of the EU? Are they headed down the path of more debt, more spending, and bigger government...or the total breakup of the European Union and the Euro currency? Or maybe none of the extremes are likely. Maybe the 'elite' strategy is to paper over the financial crisis with debt refinancing and money printing. If so, that strategy has just run headlong into the buzz saw of righteous democracy. Maybe, in time, when confronted with the realities of the situation, the new elites will be compromised just like the old elites. In the meantime, it's not a good environment for 'risk assets'. You don't have tell that to Albert Edwards. Dylan Grice's colleague at Societe Generale told clients last week that in Australia, 'We see a credit bubble built on a commodity bull market based on a much bigger Chinese credit bubble...Of all the bubbles I have seen over the last 30 years in this industry, this one is even more obvious.' We feel partly to blame for Edwards' conclusion. Dylan wrote a piece on Australia a few weeks ago. That piece was derived from his trip down here for our After America conference in March. He concluded that there were some pretty obvious signs of a bubble, including a household debt-to-GDP ratio of 150%. Incidentally, the After America DVD ships later this week. It includes six discs from the three days of presentations in Sydney. We reviewed a lot of it last week and found the analysis to still be timely. Many of the presentations look at the long-term case for and against different Australian assets. There isn't a better time to be thinking about this, either. The government debt bubble in Europe grows more unstable by the day. The situation is not much better in America, nor in Japan's economy. If these bubbles pop or even just deflate as they did in 2008, it could be devastating for growth stocks and growth assets. That puts Aussie assets right in the crosshairs, just where the bear wants them. More on how to avoid being tranquilised tomorrow. Regards, Dan Denning From the Archives... Markets and the Aurelius Vision How the RBA's Interest Rate Cuts Cause a Housing Bubble How a Cashless Society Promotes Tyranny Gleichschaltung Risky Investments in a Market Full of Conmen
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| Reforming Our Thoughts on U.S. Education Posted: 06 May 2012 05:19 PM PDT In The Wall Street Journal (!) this week, was another editorial explaining why education is necessary to GDP growth. "Education is the key to a healthy economy," say George Schultz and Eric Hanushek. They show that societies with the highest test scores in math — notably Taiwan and Singapore — also have had the highest GDP growth rates. Well, surprise, surprise. Math is the common language of engineering and science. And engineering and science are what it takes to make the stuff of GDP growth. Little wonder, that the people who work the hardest at math are also those who make the most stuff. The authors didn't mention that when people from Taiwan and Singapore come to the US, they continue to work harder at math than native born Americans. Whatever the defects of the school system, it doesn't keep them from getting advanced degrees in science and engineering and going on to earn a lot of money. And they don't mention that the US already spends much more per student on education than either one of them. So, the reasonable question is not what's wrong with US education...but what's wrong with Americans. Are they lazy? Or just stupid? But instead of really analyzing why the US spends so much on education and gets, relatively, so little... ...or even wondering why anyone should give a damn... ...the authors call for "reforming" our K-12 system. What do they mean by that? How would it make anyone any better off? And if it were such a good idea, why haven't people already "reformed" the schools? The typical reader doesn't think about it. He merely feels it is the right thing. Regards, Bill Bonner for The Daily Reckoning Australia From the Archives... Markets and the Aurelius Vision How the RBA's Interest Rate Cuts Cause a Housing Bubble How a Cashless Society Promotes Tyranny Gleichschaltung Risky Investments in a Market Full of Conmen
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| Posted: 06 May 2012 04:44 PM PDT If my RSS reader is any guide, most of the press about shale gas has focused on two issues. First, shale gas is in considerable supply, cheap to produce, and burns far cleaner than other fossil fuels. Second, shale gas does not look so hot environmentally, all in. Fracking can pollute ground water (and potable water is our most scarce resource) and releases enough methane to make shale gas as detrimental as coal. Still, it has been treated as the Great Hope for America's energy woes, a way to turn the US into an exporter, and maybe it will cure cancer too. Obama touted 100 years of shale gas reserves, and manufacturers envision an American revival based on cheap fuel. The problem is that the good part of this story is largely wrong. Shale gas supplies are overestimated, and it is not as cheap as it has been touted to be. The big reason is that shale gas wells, unlike oil wells, peter out really quickly. The result is that the viability of shale gas as a solution to America's high energy consumption level is only on an interim basis. Shale gas is more likely to be a stopgap, a 25 year solution rather than a 100 one. As with the housing bubble, analysts and journalists who understand the economics are giving clear warnings, but they don't seem to be getting much of an audience. For instance, Jeff Goodell in Rolling Stone wrote in March:
In February, no doubt annoyed by Obama's State of the Union claim of 100 years of shale gas, aeberman of The Oil Drum wrote a detailed post explaining in some detail what the supply side looks like. One key fact: the US is already at the point where it is drilling less productive wells:
And the broader implications:
In March, Wolf Richter also explained why the super low shale gas prices ($2.28/MMBtu) were not a sign of a great new energy source, but lack of producer discipline:
But why the comparison to subprime? The biggest producers are more land/lease speculators than energy companies, in terms of how they seek to make money. And they've been speculating in a highly leveraged manner. Per John Dizard of the Financial Times:
The sad bit isn't just that we seem to be playing the same tired scripts over and over, but that finance now seems to be based on deeply flawed incentives and risk sharing that encourage the manufacture of bad loans. I focused on current readings to contrast them with the hype, but consider: Dizard (not an energy expert, he's only as good as his sources) was issuing warnings in 2010. As he points out, journalists, again in a parallel to the housing bubble, have been as remiss as the promoters.
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| Gold in Modern Times (1800 onwards) Posted: 06 May 2012 04:30 PM PDT goldipedia |
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