31 March 2006

Economist's View: Shiller: Long-Term Perspectives on the Current Boom in Home Prices

Economist's View: Shiller: Long-Term Perspectives on the Current Boom in Home Prices: "Robert Shiller and Dean Baker have articles in the latest Economists' Voice about the housing boom and its sustainability in the near and longer terms. Here's Shiller with a long-term perspective gained from looking at over 100 years of housing data in a variety of countries. I cut quite a bit, but it's still fairly long as it has lots of interesting things to say: "

Prelude to Stocks Disaster and Gold Opportunities

Kitco - Commentaries - Gold Pressures Re-pricing Of Assets: "Gold’s March 2006 Directional Signal
At this point, we remain close to the June gold futures top of $574. If this resistance is broken on the upside, then we will be persuaded the trending move was sideways not down and that gold is at the inception of the larger rally for 2006 which should continue to the winter holidays. If those June gold futures slide under a $540 closing and hold, we should expect additional selling to $526 and then perhaps the $503-$509 range.
To describe my methods I would say we are about 80% technical and 20% fundamental. In our view, both must work together for mutual advantage in determining optimum market answers. For now, gold charts are showing mild signs of strain and selling (weekly charts) as gold futures prices continue to hold a higher range mostly trading sideways. The HUI, XAU and GDM stock index charts are more pronounced in their saying to sell. With this as a back drop it my job to determine probabilities and provide answers for each one of them.
At certain points on charts we can safely say price will only do two things. For now, gold can easily do all three including buy, sell or go sideways. We are constantly watching not only most all the precious metals futures and stock prices, but their relationships with currencies, bonds, and other major markets which provide correlation if you know what to look for and can compare them.
I follow a small group of five market analysts, which in my view are among the best in their field not only from experience but from proven success. I carefully listen to all of them and monitor their efforts but in the end, I personally decide where things are headed and what I’m going to do to protect and advance our readers and clients. All of us have our own evaluative ways, many of them being "

The Spoof - Bush Promises Free Lunches For All

The Spoof - Bush Promises Free Lunches For All: "Washington, D.C. -- Reversing a longstanding metaphor from economics, George W. Bush, on Friday, said that there actually is such a thing as a free lunch. Under his economic plan, nobody has to pay taxes, our nation doesn’t have to export anything, and our government and its citizens can all spend unlimited amounts of money. Why didn’t anybody think of that sooner?

The new economic philosophy, which has taken hold in Washington, is based on the idea that, simply issuing unlimited amounts of credit, in the form of low-interest, or interest-free loans, and the sale of government bonds, will pump enough money into the hands of consumers, that the economy will continue to escalate, ushering in a new era of unlimited prosperity"

Fox wants to guard chicken coop

Dude, where's the Dharma: "At some point, if it hasn't already happened, the rest of world's leaders will begin to note that the west set up the international financial architecture they now claim is flawed and didn't follow the rules of the system. The current gang running the show, from both sides of the aisle, has yet to come forward with a realistic plan for solving the problem other than suggesting that the world should continue to trust their ability, despite evidence that they are incapable of doing just that.

The idea that, having strong armed many emerging market economies into buying US Treasuries as a form of protection, the same economies should now hand over a large chunk of these reserves to be managed by the very guys who have put the US in the financial straits it currently finds itself, seems absurd to me. It's kind of like a fox wanting to guard a chicken coop."

A Mean-Variance Society?

A Mean-Variance Society?: "Over the past decade, my forays into finance have brought me into contact with a lot of fascinating folks, most of whom are generally pretty pleasant, quantitatively gifted, and often possessed of unique insights into human nature and the world around them. All of which has made for stimulating emails and enjoyable restaurant dining.
One other thing. They are, almost to a man and to a woman, politically conservative: card-carrying Democrats are as rare on the floor of the New York Stock Exchange or the meeting rooms of a CFA Institute convention as infidels in Mecca.
It is interesting, then, that one of the most basic tools of finance offers unique insights into what makes the different species of homo politicus tick. I’m talking, of course, about mean-variance analysis—the 'shot heard round the world,' fired by Harry Markowitz in the Journal of Finance 1952."

30 March 2006

Gold Bullion or Gold Mining Stocks?

FOXNews.com - Business News - Gold Bullion or Gold Mining Stocks?: "Denver-based Newmont Mining Corp. (NEM), the world's biggest gold producer, reported a drop in profit, citing not only high energy costs but also a shortage of miners and environmental protests in Peru that delayed exploration.
And Placer Dome Inc. (PDG), Canada's No. 2 gold producer, said it was hurt by higher energy costs and a loss on hedging against metal price fluctuations.
But Toronto-based Barrick Gold Corp. (ABX) saw third-quarter profit more than triple, and Freeport-McMoRan Copper & Gold Inc. reported higher profit and forecast fourth-quarter gold sales would more than double.
Newmont stock is trading at roughly 55 times estimated 2006 earnings — above the sector average of 53. Barrick is at 51.5 and Placer Dome at 81, according to Reuters data. On Wednesday, Placer Dome rejected an unsolicited $9.2 billion takeover bid from Barrick."

Why the commodities boom is different this time - Money Week

Why the commodities boom is different this time - Money Week: "In advanced economies like the US, growth creates little extra demand for such resources. Donald Coxe, chairman of Harris Investment Management, commented recently that Americans spend their marginal dollars “on household furnishings and decorating, video games, gambling, travel, healthcare, philanthropy, pornography… and tort lawyers... Those pastimes don’t create rising metal demand.”
But high-growth emerging economies are increasingly driving global growth. They have “high metal intensity” as they build infrastructure, factories, communications networks and homes. And high energy intensity, too. “When Chinese and Indians progress from abject poverty to lower middle class status, they move into dwellings with indoor plumbing, electricity and basic appliances.
“Within a few years, as their wealth increases, they become car owners. So, at the margin, they become significant consumers of metals and energy.” (In less than a decade, China has moved from being the world’s 20th largest oil consumer to being the second biggest).
“As they become collectively wealthier, they acquire gold, silver and platinum jewellery, which are both consumption goods and investments.”
Global demand is also being boosted by increasing investment and speculative activity. One indication of this is that investment in commodity index funds has risen from less than $30 billion to an estimated $80 billion currently, and is forecast to reach $140-150 billion by the end of next year.
However, it’s not future demand growth that’s at the core of the bulls’ case for commodities – it’s that supplies are not going to increase"

A new Dawn for Silver

Kitco - Contributed Commentaries: "It is clear that the permission to list on AMEX is confirmation that the Silver E.T.F. will list, despite final clearance not having been given yet. “The S-1, which is the registration statement submitted by BGI, has not become effective yet with the SEC, so we are still in the quiet period of the registration and a launch date cannot be determined,' says Christine Hudacko, spokeswoman for Barclays Global Investors, which is behind the creation of the silver ETF"

Silver lining for white metal producers

Silver lining for white metal producers: "Mar 20, 2006 (The Australian - ABIX via COMTEX) -- Like gold, the price of silver has been rising steadily. In March 2006 it is trading at more than $US10 an ounce. Australia is the third-largest silver producer in the world, but there are few opportunities for local traders to invest in the market. BHP Billiton is Australia's major silver producer. Substantial producers, Perilya and CBH Resources, are locked into contracts. The only specialist silver miner is Macmin Silver, but production is not due to begin until later in 2006. Meanwhile, Barclays Capital Investors is planning to open a silver-backed exchange traded fund and the Dubai Gold & Commodity Exchange will shortly give the go-ahead for a silver contract.
Publication Date: 21 March 2006

Foreign Policy: Fool Me Twice

Foreign Policy: Fool Me Twice: "I used to think that the Bush administration wasn’t seriously considering a military strike on Iran, because it would only accelerate Iran’s nuclear program. But what we're seeing and hearing on Iran today seems awfully familiar. That may be because some U.S. officials have already decided they want to hit Iran hard."

My Reason to Live Long and Prosper

Kitco - Commentaries: "- I was surprised to see that Total Fed Credit was not exploding last week. I was even more surprised to see that Foreign Holdings of U.S. Debt held at the Fed was actually down by $8 billion last week, too. Even the banks were not making fools of themselves, as is their wont, by gobbling up huge fistfuls of government debt. It was, in a word, quiet. In the movies, when somebody remarks how quiet it is, the hero says 'Too quiet!' and the next thing you know there are arrows and/or bullets flying all over the damned place.
So I nervously remark that it is, indeed, the proverbial 'too quiet', because I know that there are enemies out there. For one thing, crude oil prices are up to around $66 a barrel, although to think that oil exporters would NOT factor in an increasing devaluation of the dollar into the price of oil, in the face of enormous American trade deficits, monstrous American budget deficits and stupefying rises in American business and household debt levels, is to insult their intelligence. And in that regard I will note, with a snide Mogambo sneer (SMS), that they were smart enough to grab the global real estate that had most of the oil, while we took the part that is next to Mexico and South America, places so corrupt and stupid that economic refugees are flooding into the USA to get away from there!
And for another thing, bonds are rising in yield, meaning that bonds are falling in price, meaning that all those billions of people around the world who own US bonds lost some money and are getting ready to lose some more as interest rates keep rising. Beyond that, two other noteworthy things happened last week: The Federal Reserve has now officially stopped reporting M-3, the broadest measure of the money supply, and we have the new Treasury Statutory Debt Limit of $8.965 trillion, up "

29 March 2006

Credit investors ponder GM-sized hole in universe

Reuters Business Channel | Reuters.com: "LONDON (Reuters) - Like the elephant in the living room, the decline of General Motors is a problem that investors don't want to think about but can't ignore.
The world's largest automaker, whose debt is close to the gross domestic product (GDP) of Belgium, lost more than $10 billion last year and is facing a bankruptcy that would reap devastation in the financial markets.
GM's share price has halved in the past year, while its $100 billion of bonds have been cut to junk, confronting investors with the prospect of never getting their money back. Others in the highly-leveraged derivatives market face incalculable losses should a bankruptcy occur.
'A GM default would be absolutely huge,' said Jonathan Loredo, of credit manager Cairn Capital. 'It would be the biggest thing to hit the market in terms of losses and operational stress.'
There is no understating the scale of GM's problems. It is losing market share in the United States, has $300 billion of long-term debt, provides health benefits to 1.1 million people (at the rate of about $1,500 per car produced), is threatened with a strike by its largest supplier, which is bankrupt, and is being investigated by the Securities and Exchange Commission.
Few who invest do not have some level of exposure -- GM stock and debt is held by the biggest investment banks and smallest retail buyers.
GM, or its financing arm GMAC, is present in around 65 percent of synthetic collateralized debt obligations (CDOs), according to Standard & Poor's, and underlies an estimated $1 trillion of default swaps.
The company's impact is evidenced by the CDX credit default swap indices. The U.S.-based CDX4 equity tranche"

Asia must prepare for dollar collapse

Aljazeera.Net - 'Asia must prepare for dollar collapse': "East Asian economies need to prepare for a possible collapse of the US dollar, the Asian Development Bank says.
The warning comes as the US trade deficit reaches a record high and global interest rates continue to rise.

Masahiro Kawai, the ADB's head of regional economic integration, said on Tuesday: 'Any shock hitting the US economy or the global market may change investors' perceptions given the existing global current account imbalance.

'Our suggestion to Asian countries is: Don't take this continuous financing of the US current account deficit as given. If something happens then East Asian economies have to be prepared"

Equity Research Report on Global Uranium Companies

PRESS RELEASE Equity Research Report on Global Uranium Companies: "SYDNEY, AUSTRALIA -- (MARKET WIRE) -- 03/28/2006 -- Resource Capital Research, an equity research company which focuses on small resource companies, today launched a major quarterly research report covering 22 global uranium exploration and development companies with a focus on Australia, Canada and the USA. Over 130 junior and mid cap explorers and development companies are identified with a total market capital exceeding US$7 billion.
The report reviews companies active in established uranium districts globally, including Australia, Canada, USA, Mongolia and Namibia. The report covers North American traded companies Fronteer Development Group (AMEX: FRG) and (TSX: FRG), CanAlaska Ventures (TSX-V: CVV) and (OTC BB: CVVLF), International Ranger Corp (OTC: IRNG) and Western Prospector Group (TSX-V: WNP). A feature article reviews surficial calcrete style projects which are driving valuations for a number of companies, namely, Paladin (PDN, development project, Namibia), Nova Energy (NEL, scoping study, WA), Redport (RPT, advanced exploration, WA), Uranex (UNX, advanced exploration, WA), and Extract Resources (EXT Namibia, early exploration).

(Click here for details)
Uranium Company Comparative ChartsTo access the free summary report, go to www.rcresearch.com.au/feature. "

Uranium deal with China close, Govt says

Lateline - 29/03/2006: Uranium deal with China close, Govt says: "TONY JONES: Australia's uranium industry could be in for a massive boost, with Chinese officials confident they'll sign a uranium deal with Australia next week. The deal would allow Australian uranium to be exported to China for power generation and enable China to explore for uranium in Australia and produce it here. It could also pave the way for India to access Australia's vast uranium reserves. The renewed focus on nuclear power comes as Tony Blair highlighted the issue of climate change during his last day in Australia. Dana Robertson reports.

DANA ROBERTSON: They might be the leaders of Australia and Great Britain, but today their eyes were firmly on Asia.

TONY BLAIR, BRITISH PRIME MINISTER: Just as we have our relationship with Europe that is important, you have yours with Asia and, in fact, this can help us both.

DANA ROBERTSON: Like so much else during this visit, Tony Blair and John Howard are in steadfast agreement that there needs to be a new international pact to tackle climate change. While Britain has signed the Kyoto Protocol, Tony Blair called for a dose of realism in the debate and heaped praise on Australia's agreement with other Asia Pacific nations to combat greenhouse emissions.

TONY BLAIR: I think the very fact you've now got a forum in which you've got the US and China and India talking together alongside countries like Australia is a very important, positive sign.

DANA ROBERTSON: And both men agree that China's involvement is crucial.

JOHN HOWARD, PRIME MINISTER: If Australia stopped all emissions, it would take China 10 months to sort of make up for it.

TONY BLAIR: That is why it is just, as I say, a completely unrealistic debate to say that you can have a cl"

Word games and the study of philosophy

Dude, where's the Dharma: "The top down approach of radical idealism which holds that ideas of think trump the experience of the thing would lead you to believe that Presidents don't want war, inflation expectations remain contained and the economy is strong. The bottom up approach of empiricism would lead you to believe; given the United States' history of wars, that the commander in chief, on some level, wanted war, the expectations of inflation among the many might not be as contained as the number crunchers spread sheets suggest, and that the economy as experienced by the many might not be as strong as the aggretive figures suggest.

William James defined truth as that, the belief in which, improves one's life in some way. Truth is discovered in living life. Faith in untrue statements confuses. Faith in true statements clarifies. We will see if the top down or bottom up approach leads to a more accurate view.The top down approach of radical idealism which holds that ideas of think trump the experience of the thing would lead you to believe that Presidents don't want war, inflation expectations remain contained and the economy is strong. The bottom up approach of empiricism would lead you to believe; given the United States' history of wars, that the commander in chief, on some level, wanted war, the expectations of inflation among the many might not be as contained as the number crunchers spread sheets suggest, and that the economy as experienced by the many might not be as strong as the aggretive figures suggest.

William James defined truth as that, the belief in which, improves one's life in some way. Truth is discovered in living life. Faith in untrue statements confuses. Faith in true statements clarifies. We will see if the top down or bottom up approach leads to a more accurate view."

Saudi Arabia: the sands run out | EnergyBulletin.net | Peak Oil News Clearinghouse

Saudi Arabia: the sands run out | EnergyBulletin.net | Peak Oil News Clearinghouse: "Even more important than its role as a swing producer in times of crisis is Saudi Arabia’s expected contribution to future oil output. “With one-fourth of the world’s proven oil reserves,” the US department of energy (DoE) observed in 2004, “Saudi Arabia is likely to remain the world’s largest net oil exporter for the foreseeable future” (3). Every assessment released by the DoE indicates that Saudi oil production will continue to grow and that it will play a critical role in satisfying the ever-increasing global demand for petroleum. The DoE predicts that Saudi Arabia will provide over one-quarter of all new oil added to global supplies between 2001 and 2025.

To appreciate fully Saudi Arabia’s pivotal role, it is useful to consult the projections of future supply and demand released each year by the DoE. In 2004 it predicted that world oil demand would rise by 57% between 2001 and 2025, from 77m to 121m barrels per day (mbd). In response to this, Saudi oil output was expected to rise by 120% during this period, from 10.2mbd to 22.5mbd, a net increase of 12.3mbd. No other country or group of countries came close in anticipated growth rates. Russia and the former Soviet republics of the Caspian Sea region have a combined anticipated increase of 8.5mbd; Iran, Iraq, and Kuwait were jointly projected to achieve an increase of 7.6mbd; and Nigeria, the leading producer in Africa, was expected to gain only 1.6mbd. Most other regions were projected to experience declining or stagnant production, so Saudi Arabia’s addition was deemed essential to satisfying anticipated demand (4). But is Saudi Arabia truly capable of increasing its oil output by 12.3mbd - or by any amount at all? This question has stirred"

28 March 2006

GoldSeek.com Internet Radio: Bob Chapman, International Forecaster

GoldSeek.com Internet Radio: Bob Chapman, International Forecaster: "Mr. Chapman became a stockbroker in 1960 and retired in 1988. For 18 of those years he owned his own brokerage firm. He was probably the largest gold and silver stockbroker in the world during that period. When he retired he had over 6,000 clients."

A potentially explosive situation in Silver

Kitco Casey - Gold, Silver and Natural Resource Stock Quotes, Share Research and Analysis: "The Hightower Report commented on Friday’s bullish action by saying that “The gold market exploded in what seemed to be a catch-up bounce Friday morning. Certainly seeing the Dollar fall back from early highs, cleared the way for the U.S. bounce, but traders in the Tokyo gold market suggested that the soaring oil price structure prompted them to liquidate short gold position. Other players suggested that the persistent strength in the silver market simply inspired buyers to move into relatively cheaper gold positions.”

With regard to silver, and its recent explosion to the upside, Julian Phillips of goldforecaster.com had this to say: “As we have said consistently, the demand for Silver is going to overtake supply and it may well be in the process of doing so now. With demand for silver for photography having dropped, but being more than replaced by new applications in industry and prints of digital photographs, global demand has moved to a point where it is greater than new global production. This deficit has been accommodated by sales of ‘Official’ silver from the government of China. Sales of Indian ‘Official’ silver should be completed by the end of the year. At that point Indian demand should spill over into the global silver market. We suspect that the sales of Chinese ‘Official’ silver are near to completion as we see imports of silver into China rising quickly. However, we cannot be sure that this has happened. When it is completed, Chinese demand will come to the global market for the needs that are in excess of its present internal supplies. So irrespective of any other factors, the Silver market and its price will have to deal with a potentially very large demand on top of present glob"

Strike lifts copper, analyst says $6000 possible

Creamer Media's Mining Weekly Online, South African Mining News :: News Today: "prices rallied to fresh record highs on Monday as a strike at world No.3 producer Grupo Mexico renewed pressure on limited global copper inventories.

'Supply concerns at the forefront of market attention and any threats to production are feeding straight through to price,' Barclays Capital analyst Ingrid Sternby said.

She added that based on continuing strong demand, the metal used in everything from wiring to plumbing could run up to $6 000 a tonne.

'The trend is still upwards...I see a test of as a distinct possibility,' she said.

Sternby has been a consistent bull and was among the first analysts last year to predict the market would hit $4 000 and later $5 000.

Three-month London Metal Exchange (LME) copper futures hit a fresh record peak of $5 280 a ton overnight in Asia. Ay 1012 GMT they were quoted at $5 230/$5 240, versus $5 250 at the close on Friday.

Other metals were also firm. Zinc rose to a fresh peak of $2 630 a ton, silver hit a 22-year high of $10,90 and ounce. Gold was $10 away from a quarter-century high while other LME metals were mostly steady.

Dealers said a strike on Friday by more than 1 000 workers at Grupo Mexico's 300 000 ton-per-year La Caridad copper mine, was the latest threat to copper supplies."

Metals making for sweet spot 'supercycle,' Citi says - MarketWatch

Metals making for sweet spot 'supercycle,' Citi says - MarketWatch: "NEW YORK (MarketWatch) -- Citigroup, forecasting tighter global supplies of copper and nickel, reversed its bearish stance on various metals Monday, saying those commodities, and more modestly aluminum and gold, are likely to make the most of a 'supercycle' sweet spot.
Metals have shrugged off interest-rate jitters, intermittent weakness in oil and gas prices, several rounds of profit-taking and seasonal demand slowdowns, among other events, according to Citigroup.
Analyst John Hill wrote that a 'drumbeat of operating outages/shortfalls' could introduce an extended period prices at more than $2.50 a pound for copper, more than $7 a pound for nickel and more than $1.25 a pound for aluminum. 'As a consequence, we expect a wave of upward earnings estimates revisions, both short- and long-term, and a very favorable environment for the equities.
'This represents a significant change of opinion on copper and nickel, where the Citigroup global team is abandoning a longstanding bearish stance due to the prospects for synchronous economic growth, structurally tight inventories, sluggish new capacity additions, and recurring operating outages/shortfalls,' Hill wrote. "

27 March 2006


Gold Central - Special Reports: "Please examine the two charts in this entry carefully. If you look closely, you'll see they spell 'doom' in rather large, dayglo letters. Why? Because they reveal two ominous trends: that real estate investment has become an unprecedentedly large percentage of total GDP (Gross Domestic Product), and that homeowners are no longer able to extract cash from their property via refinancing."

Investors bewildered by GCC stock market crash | News Feature

Investors bewildered by GCC stock market crash | News Feature: "The Dubai Financial Market is most badly hit, and is now 45% off its all time high of last summer; and Abu Dhabi has followed with a 33% slump in share prices. Doha has taken a similar downward path with shares down a more modest 20%.

But until the past couple of weeks the two biggest GCC stock markets in Saudi Arabia and Kuwait were unaffected. Thus the impact of a 27% fall in the Kingdom and 14% in Kuwait has been all the more unexpected, leading to calls for government intervention to prevent a further downturn, and to correct shares to 'more normal' levels.

Beyond 'fair value'
However, this misses the point. Share prices have been driven upwards way beyond their 'fair value'. The Saudi Arabian bourse has been trading on a market price-to-earnings ratio of 40 compared with a 'fair value' of say 15 for an emerging market with a good economic outlook. "

Copper, zinc rise on bullish fundamentals: LME - Metals News - Metals Place

Copper, zinc rise on bullish fundamentals: LME - Metals News - Metals Place: "Ongoing concerns about possible future protests at Freeport McMoRan's Grasberg mine in Indonesia, the world's second largest copper mine, are underpinning prices, analyst Ingrid Sternby at Barclays Capital said.
However, falling inventories for copper, zinc and nickel all indicate a healthy demand outlook that will keep prices high for the longer term, she added.
LME zinc fell during pre-market trade after 2,375 tons were delivered into warehouses in New Orleans, Roy Carson at Triland said.
Zinc rose during the afternoon in line with sector strength, reaching a record high of $2,588/ton.
LME aluminium continues to trade at a discount to zinc, the first time since 1992. Sector strength and positive technical charts were aluminium's main drivers Friday. Resistance is pegged at $2,550/ton, Carson said.
Nickel bucked the trend, ending down after trade selling pared early gains.
3 months metal (prices in dollars a ton)
Bid – Ask, Change from Thursday PM kerb
Copper 5249.00-5250.00, Up 15.00
Lead 1246.00-1248.00, Up 17.00
Zinc 2579.50-2580.50, Up 8.50
Aluminium 2539.00-2540.00, Up 6.00
Nickel 15190.00-15200.00, Dn 135.00
Tin 8200.00-8250.00, Dn 25.00"

Safe Haven | Reg Howe's BIS Gold Shocker - and what it means to You

Safe Haven | Reg Howe's BIS Gold Shocker - and what it means to You: "Reg Howe's most recent commentary about the BIS' admission that it was involved in the rigging of gold prices (and regards such as 'good policy') has a number of implications which Reg briefly touched, but did not expand on (it's not that he doesn't know. It just wasn't part of his purpose for writing the commentary).
A. Gold Miners Vulnerability to Shareholder Actions:
Reg stated that now, going forward, gold miners can no longer hide behind the general assumption that the gold market is free from rigging efforts and that only kooks would suspect such efforts. This is only half of the truth, though. Although miners certainly have future exposure, the very fact that they were willing to cooperate in the central banks' schemes by voluntarily engaging in forward sales activity and blocking any efforts by GATA and others to bring the truth to light shows that they may even be vulnerable to shareholder derivative lawsuits for their past behavior as well.
This can have serious implications on their future profitability, and thereby their share prices, which affects, well, you. You need to know which mining companies are least vulnerable to this threat, and shift your investment focus over to those."

defining the dollar

:: Weekly Dosage ::: "Now you know something that 99.999% of Americans do not know, and probably a higher percentage of lawyers. The “dollar” is a silver coin containing three hundred and seventy-one and one-quarter grains of silver—and it cannot be changed by constitutional amendment, by definition, any more than the term “year” can. And yet, as I mentioned before, if you ask the average person what a dollar is, he’ll probably hold this thing up. [holding up a Federal Reserve Note] Is there something wrong here? Do we see some kind of cognitive dissonance when we have a problem with this? I should hope so.
The second area in which the misuse of monetary powers and the disregard for monetary disabilities has corrupted the Constitution, as I said before, is the overextension of powers. I won’t go into these in great detail. If you look at the “Necessary and Proper” clause, which has been wildly expanded to give fantastic powers to Congress, what is the foundational case for that expansion? It’s usually cited to be McCulloch v. Maryland in 1819. What was that case about? It was about the Bank of the United States . It was a money case.
If we go to the doctrine of “Emergency Powers,” which is having a great uplift today, for obvious reasons, what was the foundational case that put that doctrine on the constitutional map? It was Knoxvs. Lee, the legal tender cases brought after the Civil War. If we go to the doctrine of “Aggregate Powers,” the doctrine that says, “You can take a little here and a little there and kind of sum them all up, so that the whole is greater than the sum of the parts,” again we go back to the Knox case, a monetary case.
What’s very interesting is to read a dissenting opinion by Justice Steph"


commentary30: "Why Mr. White chose this particular occasion to boast about the central banks' price fixing activities in the supposedly free market for gold and, incidentally, to equate gold with foreign exchange is not clear. But three points are:
First, the BIS regards itself as effectively above and outside the reach of U.S. law regarding the trading of commodities. What is more, the Bank takes this position notwithstanding its trading activities on the COMEX, which at its annual gold dinner in 2000 honored the Bank's manager responsible for gold and foreign exchange with a 'Man of the Year Award' apparently for his work in turning back the rally in gold prices precipitated by announcement of the Washington Agreement on Gold in September 1999. See Complaint, ¶¶ 4, 55.
Second, neither the BIS nor its member central banks adhere to the principle of a free gold market enshrined in the Second Amendment to the Articles of Agreement of the International Monetary Fund, which rewrote Article V, Section 12(a) to commit the Fund to 'the objective of avoiding the management of the price, or the establishment of a fixed price, in the gold market.' [Emphasis supplied.]
Third, as worldwide purveyors of unlimited paper money, the BIS and its member central banks both recognize and continue to struggle against their most dangerous enemy: gold. Put directly, gold is money, and they know it whatever others may think, including most mainstream economists."

26 March 2006

James Wolcott: "Worse than a Fool"

James Wolcott: "Worse than a Fool": "The only explanation, apart from Bush's cognitive disability in facing reality, is that he sociopathically doesn't care about the coming calamity endangering the planet because he and his cronies will be financially prepared even as most Americans lose their standard of living.
There are so many reasons that Bush's name should be dragged through the dust of his post-presidency for the harm and disgrace his administration has inflicted, and so impeachable offenses for which he would prosecuted today if we had a Congress worthy of the Founders. His malign indifference to Peak Oil and global warming may be the greatest of his crimes, because it will lead to the misery and deaths of untold millions of people, animals, and natural resources.
Richard Heinberg, author of The Party's Over and Powerdown, methodically lays out the prosecution argument for the impeachment of George W. Bush.
'While it would be difficult to create an airtight legal case for impeaching George W. Bush based on his ignoring the very real threat posed by Peak Oil, nevertheless I believe that his actions—and inaction—in this regard constitute dereliction of duty on an unprecedented scale.

Excess Savings or Printing

PrudentBear.com - The One-Stop Shop for the Bear Case: "March 24 – Bloomberg (Matthew Brockett): “European Central Bank Chief Economist Otmar Issing comments…on money supply growth and asset prices: ‘You can’t ignore developments in money and credit.’ The issue of asset price increases ‘for me is one of the biggest challenges of central banks of our time: how to deal with that. We are far from final answers… One of the advantages of our strategy, which is now more and more recognized, is that there’s hardly any development in asset prices which can’t be’ connected ‘to developments in money and credit. So giving money and credit a strong role in your analysis is forcing you to take account of that…’ The ECB says it bases interest rate decisions on the two ‘pillars’ of analyzing the economy and money supply, and Issing has advocated a policy of ‘leaning against the wind’ to avoid asset price bubbles.”

Mr. Bernanke refers sanguinely to a “global savings glut,” while the astute Mr. Issing frets over a “large liquidity buildup.” Bernanke discusses conveniently ambiguous concepts such as “excess saving over investment rates.” But what, may I inquire, is the role played these days by “saving” in an integrated financial world of unconstrained Credit expansion and massive Financial Flows. And how might we define, account for and analyze contemporary “investment,” anyway? "

China watch

PrudentBear.com - The One-Stop Shop for the Bear Case: "March 22 – Financial Times (Richard McGregor and Geoff Dyer): “China will take measures to meet US complaints about their bilateral trade imbalance as part of next month’s trip to Washington by Hu Jintao, Chinese president, but has warned the US also to take responsibility for its economic problems. Wen Jiabao, China’s premier… promised new initiatives on issues such as abuse of intellectual property rights, a long-running complaint of investors. “But it is unfair for the US to scapegoat China for the US’s own structural economic problems,” Mr Wen added…

March 22 – Bloomberg (Allen T. Cheng and Todd Prince): “China aims to more than double trade with Russia to as much as $80 billion in five years as the nations increase cooperation in energy, commodities and technology, Chinese President Hu Jintao said.”

March 23 – Bloomberg (Nerys Avery): “Sales by China’s top 100 chain store operators rose 42 percent last year from a year earlier to 708 billion yuan ($87 billion) as they opened more outlets, the China Daily reported”

March 24 – Bloomberg (Nipa Piboontanasawat): “Hong Kong’s export growth picked up in February as trade with China increased after the Lunar New Year holiday. Overseas sales rose 20.5 percent last month from a year earlier to HK$153.6 billion ($20 billion)…”

March 22 – Bloomberg (Patricia Kuo): “Hong Kong prime office rents may jump 30 percent this year to record highs after new supplies fell to a 35-year low, the South China Morning Post reported.”

25 March 2006

Dude, where's the Dharma

On the political manifestations of Hegelianism: "Not that such doubts cloud the minds of the neo-Hegelians. Fukuyama argues in his End of History that consciousness will ultimately remake the material world in its image which recalls the words of one Bush insider to Ron Suskind, 'We're an empire now, and when we act, we create our own reality,' 'but the real world seems as reluctant to oblige more than a decade later as it was when Hegel argued similarly in 1806.

Mar 24, 2006 What about gold here? Richard Russell 321gold . . . Inc . . . 7

Mar 24, 2006 What about gold here? Richard Russell 321gold . . . Inc . . . 7: "There are certain times when I stand back from the stock market and say, 'Let 'er rip without me.' This is one of those times. Stock valuations are very rich, and as the major stock averages rise, volume has been contracting. So frankly, at this point I would just rather own T-bills than stocks. I guess the real reason that I won't sit with this market is that I haven't the nerve to ride through the inevitable declines. And the reason for that is that I'm afraid that each decline could be the beginning of a major down-wave, and the last thing I want to sweat through is exactly that -- a major wave to the downside.
What about gold here? To answer this question, I'm going to refer to my weekly charts along with their (blue) 20-week moving averages and their (red) 40-week moving averages. These are charts that I don't believe you'll see anywhere else. The first chart below shows weekly gold on logarithmic or ratio scale. Over the last seven months gold has gone almost parabolic. This is powerful almost vertical action, and ordinarily it calls for a major correction. Whether that's what gold is fated to undergo no one knows, I certainly don't."

Water Issues

FSU Editorial: "Agua Caliente" by Richard Karn 03/24/2006: "Many industrialized countries’ infrastructure appears to be living on borrowed time. The majority of infrastructure problems revolve around neglected or decaying systems unable to cope with increasing wastage, which in turn is being exacerbated by increasing demand. Many European cities lose as much as 30% of the water in their antiquated systems to leakage. In the US, which has the fastest growing population of any industrialized country, infrastructure is simply not keeping pace with growth. There are more than 700,000 miles of water pipes nationwide, and water mains break roughly 237,000 times each year.[7] A surprising amount of that pipe is more than one hundred years old, and some systems are amalgamations of various pipes of various ages from various systems cobbled together ‘to make do’ years ago. Exurban sprawl is over-taxing once rural systems not designed to handle the increased demands and loads. Terrified to even mention raising taxes to pay for the needed repairs and upgrades, which the American Water Works Association (AWWA) in 2002 estimated to be as high as $6900 per household in some rural areas,[8] weak-willed politicians with a long term planning horizon that extends only as far as the next election have been deferring the issue to their successors now for decades.
This political climate reflects the slow motion collapse of water infrastructure itself. Just as in the case of petroleum and energy consumption, Americans are the most profligate in the world in terms of water usage. Politicians of all stripes avoid this issue like the plague because Jimmy Carter demonstrated that advocating conservation and responsible lifestyle changes is the second fastest way out of office. These same politicians who have refused to address the probl"

Oil and Water Do Not Mix" by Doug Wakefield and Ben Hill 03/24/2006

FSU Editorial:"'Oil and Water Do Not Mix" by Doug Wakefield and Ben Hill 03/24/2006: "“Russia’s Lukoil and two Russian government companies had a 23-year contract to develop Iraq’s West Qurna oilfield. China also was against the war. Its China National Petroleum Company held a potentially huge oil contract in western Iraq. France too held rights to exploit Iraq oil under the Saddam regime. All three powers knew that a unilateral U.S. war could end their Iraq dreams for good.” 9
Further evidence of Russia, China, France, and other countries’ desires to obtain Iraqi oil can be found by reviewing the Cheney Energy Task Force document titled “Foreign Suitors for Iraqi Oilfield Contracts.” 10 This document, available at judicialwatch.org, makes it apparent that U.S. knew about these projects when we invaded Iraq. It may also be worth noting that the U.S. Department of Energy’s Energy Information Administration comments that as of December 2005, Iraq is estimated to hold the third largest proven oil reserves in the world, at 115 billion barrels. However, estimates vary widely as much of the country has not been explored. 11
After Saddam was toppled, these contracts with Russian, Chinese, and French firms appear to have been nullified. 12 Needless to say, geopolitical tension with these three U.N. Security Council members has mounted.
This leads us to our point. Even though the oil itself is still priced in dollars, in 2003, Iran began demanding their oil payments in Euros instead of dollars. 13 Oil, reserve currency pressures, unsustainable U.S. military growth, and extreme Islam do not mix. With the demand for oil continuing to grow, Fed Chairman Bernanke stoking the printing presses, U.S. military costs mounting and extreme Islam raging, we must remain wa"

Which is it- Inflation or Deflation?

Kitco - Commentaries - Gold Pressures Re-pricing Of Assets: "Are we experiencing an abnormal increase in available currency and credit beyond the proportion of available goods, resulting in a sharp and continuing rise in price levels? Or, in the alternative, do we experience a reduction in general price levels brought on by a decrease in the amount of money in circulation or by a decrease in the total volume of spending? In Trader Tracks we explore this issue."

24 March 2006

Do you trust the latest US Housing numbers

russwinter's Xanga Site: "The rectifiers at the Ministry of Truth have spewn forth some existing homes numbers that only Ernest P 'Do I look like I have stupid written all over my face' Worell would appreciate. Incredibly the cognoscenti take this data as credible? According to this 'source', existing-home sales rose in February following five months of decline, indicating a stabilization is taking place in the market, according to the Nat'l Asso. of Realtors (NAR). Use truthful information at your own peril for trading though, as the Ken Lay school of the new underworld order of liars is running a full court press"

Semiconductors – Lagging Sector Lies at the Crossroads

Financial Sense Online  Market WrapUp with Martin Goldberg 03/23/2006: "The largest company within the index in terms of market capitalization, Intel, will provide insight into the entire sector and more importantly, the overall US stock market. While I would like to think that these technical observations clearly suggest that I am a genius, the reality of the situation is that Intel is at the bottom of a (too) obvious trading range. There are numerous hedge funds trading this (obvious) range. In the market environment we have been in for the last couple of years, trading this range from the long side should be pretty easy. But is it actually free money with low risk? Maybe this time it will be. Yet it is my contention that there is risk in this apparent “free money” that may eventually burn a lot of technicians with a crash. Yet, until it does, I’m just rationalizing. My conclusion is that if Intel stays true to its range, it will be bullish for the market. Yet the large width of the trading range suggest that if Intel breaks below the trading range, it will likely result in a price objective of about 12.5 or less, and this will be quite bearish for the US stock market."

Oxiana and other Resource stocks rise

Bloomberg.com: Australia & New Zealand: "Oxiana, Zinifex
Oxiana, Australia's second-biggest gold miner by market value, added 7 cents, or 2.6 percent, to A$2.40. Zinifex, the world's second-largest zinc producer, rose 31 cents, or 3.6 percent, to A$8.92.
The Australian dollar fell to 71.18 U.S. cents, its lowest in 17 months, in Sydney. "


THE ECONOMIC COSTS OF THE IRAQ WAR:: "Although it is difficult to estimate these costs precisely, we can use current and expected troop deployment to make a reasonable projection of the likely costs. Looking purely at direct budgetary costs to the taxpayer, we estimate that the total cost of the Iraq war is in the range of $750 billion to $1.1 trillion, assuming that the US begins to withdraw troops in 2006 and maintains a diminishing presence in Iraq for the next five years. We have looked at the budgetary cost both including and excluding the cost of interest on the debt. We have also adjusted this cost for economic factors, as outlined in section two. Under any reasonable set of assumptions, the cost of the war even without considering the macroeconomic costs – is more than double the current number provided by the Administration. "

Google Finance

Jeremy Zawodny's blog: "I've had several folks ask me what I think of Google Finance. There's already a fair amount of good commentary out there on the topic (Bambi, TBAiT, Charlene, Matt, Publishing 2.0, Blodget, and others), so I'm going to answer this in a different way.
Warning: This is long and not terribly flattering stuff that's been under mild pressure for a few years now.
You see, I started at Yahoo! back in 1999 as an engineer working on Yahoo! Finance. It was one of the sites I used most often back then, so it was a privilege to get my hands on it and really contribute in a meaningful way. I spent roughly the next three years working with the good folks in our group, including Katie Stanton, who announced Google Finance a few days ago."

Blowback Part 2

Bears' Chat - Welcome: "Chalmers Johnson: What I don't understand is that the current defense budget and the recent Quadrennial Defense Review (which has no strategy in it at all) are just continuations of everything we did before. Make sure that the couple of hundred military golf courses around the world are well groomed, that the Lear jets are ready to fly the admirals and generals to the Armed Forces ski resort in Garmisch in the Bavarian Alps or the military's two luxury hotels in downtown Seoul and Tokyo.

What I can't explain is what has happened to Congress. Is it just that they're corrupt? That's certainly part of it. I'm sitting here in California's 50th District. This past December, our congressman Randy Cunningham confessed to the largest single bribery case in the history of the US Congress: $2.4 million in trinkets - a Rolls-Royce, some French antiques - went to him, thanks to his ability as a member of the military subcommittee of the House Appropriations Committee to add things secretly to the budget. He was doing this for pals of his running small companies. He was adding things even the Department of Defense said it didn't want. "

23 March 2006

Safe Haven | Who Needs Al Capone?

Safe Haven | Who Needs Al Capone?: "Recently, when the Cheuvreux Report came out, I went straight to the chief principal at [my] firm to give him a copy. This guy is the chief stock picker in the firm and his decisions strongly influence the stocks that are bought and sold by the firm. After several days, he contacted me and stated that the report had really stimulated his interest, and are there any gold stock recommendations that I could provide? I thought about it and gave him the tickers HL (Hecla), NEM (Newmont) and AEM (Agnico-Eagle).
I was astonished with what [our] research department communicated to me several days later. You see, not only could our firm not buy any of my PM recommendations, the firm could not buy even a single solitary share of any gold/silver stocks and here is why:
1). Our firm uses Morningstar ratings on stocks and stocks cannot have the lowest rating [one star] to be considered by our firm.
2). Not only did my three recommendations all have the lowest rating (One star)..... every single gold stock with analysis was the lowest rating (One Star) !!!!
3). This was embarrassing to me and so I decided to read into what kind of content was in Morningstar analysis. When reading the analysis in Morningstar about my first pick - HL(Hecla) the text is so negative, if I did not personally know anything about this stock, I would have agreed with rejecting this stock completely. It read like a hopeless and horrible company and I was embarrassed that I even suggested this dog.
4). However, I became suspicious when seeing a target price for Hecla at $2.00, when the current price was $5.25 per share !!!! The author would not recommend buying this stock unless it was in the low one dollar range !!! Outrageous !!!
5). Hecla is admittedly a little speculative, so "

Gold Stocks: Year To Date Price Breakouts

The Gold Stock Blog » Gold Stocks: Year To Date Price Breakouts: "Gold Stocks: Year To Date Price Breakouts"

LRB | John Mearsheimer and Stephen Walt : The Israel Lobby

LRB | John Mearsheimer and Stephen Walt : The Israel Lobby: "A key pillar of the Lobby’s effectiveness is its influence in Congress, where Israel is virtually immune from criticism. This in itself is remarkable, because Congress rarely shies away from contentious issues. Where Israel is concerned, however, potential critics fall silent. One reason is that some key members are Christian Zionists like Dick Armey, who said in September 2002: ‘My No. 1 priority in foreign policy is to protect Israel.’ One might think that the No. 1 priority for any congressman would be to protect America. There are also Jewish senators and congressmen who work to ensure that US foreign policy supports Israel’s interests.
Another source of the Lobby’s power is its use of pro-Israel congressional staffers. As Morris Amitay, a former head of AIPAC, once admitted, ‘there are a lot of guys at the working level up here’ – on Capitol Hill – ‘who happen to be Jewish, who are willing . . . to look at certain issues in terms of their Jewishness . . . These are all guys who are in a position to make the decision in these areas for those senators . . . You can get an awful lot done just at the staff level.’
AIPAC itself, however, forms the core of the Lobby’s influence in Congress. Its success is due to its ability to reward legislators and congressional candidates who support its agenda, and to punish those who challenge it. Money is critical to US elections (as the scandal over the lobbyist Jack Abramoff’s shady dealings reminds us), and AIPAC makes sure that its friends get strong financial support from the many pro-Israel political action committees. Anyone who is seen as hostile to Israel can be sure that AIPAC will direct campaign contributions to his or her political opponents. AIPAC also "

Seals unable to find stable ice

Seals unable to find stable ice: "Seals, unable to find stable ice, are hauling up on islands to give birth. Robins and barn owls and hornets, previously unknown so far north, are arriving in Arctic villages.' The new wildlife has left Inuit elders at 'a loss for words.' 'These are things that all of our old oral history has never mentioned,' said one elder. 'We cannot pass on our traditional knowledge, because it is no longer "

Bloomberg.com: Australia & New Zealand

Currency Boost to Miners: "Mining shares recieved a further boost after Glyn Lawcock, an analyst at UBS AG, said in a note to clients that a lower Australian dollar versus the U.S. currency and higher commodities prices will boost earnings of mining companies, including Zinifex Ltd. and Oxiana Ltd. A lower Australian dollar boosts miners' U.S. dollar-denominated exports in local currency terms"

22 March 2006

The Iraq War: Three Years On - The march of folly, that has led to a bloodbath

The Iraq War: Three Years On - The march of folly, that has led to a bloodbath: "I read a fearful prophecy by the evangelical preacher Pat Buchanan written five months before we illegally invaded Iraq. 'This invasion will not be the cakewalk neo-conservatives predict,' he said. 'Terrorist attacks in liberated Iraq seem as certain as in liberated Afghanistan. For a militant Islam ... will never accept George Bush dictating the destiny of the Islamic world ... Pax Americana will reach apogee but then the tide recedes; for the one endeavour at which Islamic peoples excel is expelling imperial powers by terror and guerrilla warfare.' There were the dreary precedents. Muslims drove the Brits out of Palestine and Aden; the French out of Algeria; the Russians out of Afghanistan; the Americans out of Somalia; and Beirut, the Israelis out of Lebanon. As Buchanan wrote, 'we have started up the road to empire, and over the next hill we will meet those who went before.' However, we shall not count the bodies."

Chalmers Johnson on the US Military Empire

TomDispatch - Tomdispatch Interview: Chalmers Johnson on Our Military Empire: "Our leaders simply could not contemplate dismantling the apparatus of the Cold War.
That was, I thought, shocking. I was no less shocked that the American public seemed indifferent. And what things they did do were disastrous. George Bush, the father, was President. He instantaneously declared that he was no longer interested in Afghanistan. It's over. What a huge cost we've paid for that, for creating the largest clandestine operation we ever had and then just walking away, so that any Afghan we recruited in the 1980s in the fight against the Soviet Union instantaneously came to see us as the enemy -- and started paying us back. The biggest blowback of the lot was, of course, 9/11, but there were plenty of them before then.
I was flabbergasted and felt the need to understand what had happened. The chief question that came to mind almost at once, as soon as it was clear that our part of the Cold War was going to be perpetuated -- the same structure, the same military Keynesianism, an economy based largely on the building of weapons -- was: Did this suggest that the Cold War was, in fact, a cover for something else; that something else being an American empire intentionally created during World War II as the successor to the British Empire?.
Now that led me to say: Yes, the Cold War was not the clean-cut conflict between totalitarian and democratic values that we had claimed it to be. You can make something of a claim for that in Western Europe at certain points in the 1950s, but once you bring it into the global context, once you include China and our two East Asian wars, Korea and Vietnam, the whole thing breaks down badly and this caused me to realize that I had some rethinking to do. The wise-ass sophomore has said to me -- this has happened a number of"

Silver EFT nears approval

The Securities and Exchange Commission announced that it has approved a rule change for a silver exchange-traded fund (ETF) in registration from Barclays Global Investors that would allow the product to list on the American Stock Exchange, although the fund has not yet been cleared to launch by regulators. With the ETF one step closer to being launched, May silver futures jumped two percent to finish the session at $10.565 an ounce – its highest level since late 1983. Meanwhile, April gold futures settled at a one-week low of $553.20 an ounce, down $2.90. May copper tagged a high of $2.374 per pound before closing day with a loss of one penny at $2.324 per pound.

FSU Editorial: "Ominous Warnings & Dire Predictions of World's Financial Experts, Part 2" by Baker & Wilson 03/21/2006

FSU Editorial: "Ominous Warnings & Dire Predictions of World's Financial Experts, Part 2" by Baker & Wilson 03/21/2006: "Rodrigo de Rato, Managing Director of the International Monetary Fund at a recent speech at the University of California at Berkeley, stated that “while global current account imbalances have been widening, the fact that they have been financed easily thus far seems to be inducing a sense of complacency among policy makers. I think they should be more concerned. This is not to say that the risk of a disorderly adjustment is imminent, but the problem is growing, and if a disorderly adjustment does take place, it will be very costly and disruptive to the world economy.
The most visible aspect of the global imbalances problem is a very large deficit in the current account of the balance of payments of the United States – amounting to about 6.25% of GDP. The main problem is that in the United States savings are too low. These global imbalances could unwind quickly, and in a very disruptive way, with either an abrupt fall in the rate of consumption growth (i.e. increased savings) in the United States which is holding up the world economy or by investors abroad becoming unwilling to hold increasing amounts of U.S. financial asset, and demand higher interest rates and a depreciation of the U.S. dollar, which in turn forces U.S. domestic demand to contract.”
Economic Pain
Timothy Adams, Undersecretary of Treasury for International Affairs, stated recently that “the world economy is dangerously imbalanced and the U.S. current account deficit is now at levels that many experts fear could trigger a run on the dollar, soaring interest rates, and global economic pain.”
Severe Consequences
Robert E. Rubin, director of Citigroup Inc. and former Secretary of the T"

Kitco - Contributed Commentaries - A Walk Down Currency Lane

Kitco - Contributed Commentaries - A Walk Down Currency Lane: "The United States, under its hostile, arrogant, irresponsible, nearsighted economic leadership, guided by misdirected, unwise, heretical, charlatan financial counsel, fully encouraged in indulgent, thoughtless, undisciplined, indebted lifestyle among the public, has actually thought it could export inflation, import deflation, enjoy the spending largesse afforded by a housing bubble, and expect to get away with the crime against Mother Economic Nature month after month, year after year. The price to be paid will come. It always does. Its form is uncertain. What is so exasperating is that instead of working toward a remedy, we desperately increase pressure on the gas pedal on the financial buggy. A flood of USDollars has entered into the world markets, with no prospect of abatement. The USGovt and USFed have inflated like crazy for ten years running, and now must defend the USDollar. THIS IS CLEAR WEIMAR-LIKE ACTIVITY, LOCKED INTO POLICY MAKING."

Very Coy Rally Kisses Targets, by Rick Ackerman

Very Coy Rally Kisses Targets, by Rick Ackerman: "I should also note that, if the downturn begun from yesterday’s highs gains momentum over the next few days, it could queer the bullish case in a New York minute. That’s because the rally which has unfolded over the last 30 months has been accompanied by declining stochastic peaks and is in fact occurring right now on declining volume. Bottom line: Until such time as the DJIA exceeds 11350, stocks are an extremely risky buy."

Safe Haven | Stock Market: CNBC Report

Safe Haven | Stock Market: CNBC Report: "Last week we were looking for the index to move up out of the low we forecast for the previous weekend and start the final exhaustion move up to complete this bull campaign. This must also comply with fast trend criteria or there is a problem with the trend. This cannot correct back more than 4 days at any time or the trend is over. If this is going to be a true exhaustion of classic proportions it will need to show a small sideways consolidation now rather than a counter trend down. A counter trend will still hold the up trend intact but a sideways or 'flat' consolidation that takes only three or four days to complete would indicate a much stronger trend. There is a wild card here and I don't know the effect. But the 19th through the 21st of March has been very, very significant every year for the past 7 years. It is not usual for this index to find a vibration point and repeat it for years as was done with the October dates after 1987. I am assuming that one-year vibration is no longer dominant, next resistance is 1326."

Safe Haven | Weekly Wrap-up: Earnings, Interest Rates, and the 2nd Derivative

Safe Haven | Weekly Wrap-up: Earnings, Interest Rates, and the 2nd Derivative: "QUESTION: What mistakes do most people make in the markets?
AO: The worst mistake people make is to either not have a trading plan or to have a plan and not stick to it.
QUESTION: How important is money management in your overall approach to trading?
AO: Money management is probably the first, second, and third most important thing in trading.
QUESTION: How would you characterize your approach to the markets?"

Safe Haven | Previews of Coming Destructions

Safe Haven | Previews of Coming Destructions: "The recent announcement by the Bank of Japan that it will soon end its zero interest rate policy serves to illustrate the main reason why I am a longer term bear on the U.S. economy and dollar. The two principle factors that need to exist in order to cause hyperinflation have been set in motion and it is scheduled to arrive in the middle of the next decade. One is our massive debt and the other is the fiat currency system which will be employed to print the imbalances away. The reason why I believe hyperinflation is the more likely outcome, as opposed to a depression, is that hyperinflation is more palatable from the Government's standpoint. It only insidiously destroys the public's wealth, where as a severe economic downturn would be immediately pernicious for the consumer and not as easily disguised."

21 March 2006

Hussman Funds - Weekly Market Comment: March 20, 2006 - Everything Looks Good at the Top of the Channel

Hussman Funds - Weekly Market Comment: March 20, 2006 - Everything Looks Good at the Top of the Channel: "As of last week, the Market Climate for stocks was characterized by unusually unfavorable valuations and relatively neutral market action. As noted above, market action appears firm in the major indices, but internal conditions are less compelling. Hence the neutral overall condition. The Strategic Growth Fund remains fully-hedged against the impact of market fluctuations here, but it's possible that we would accept a modest amount of market exposure (say, as much as 20-25%) if we were to observe a general market pullback without much deterioration in market internals. For now, with the markets clearly overbought, the case for increasing our market exposure isn't very convincing.
In bonds, the Market Climate remains characterized by unfavorable valuations and unfavorable market action. The Strategic Total Return Fund continues to carry a duration of about 2 years (meaning that a 100 basis point change in interest rates would be expected to affect Fund value by about 2% on the basis of bond price fluctuations), and a recently increased exposure to precious metals shares near 15% of assets. "

Kontent Review: Bit of a worry...

Kontent Review: Bit of a worry...: "Bit of a worry...
The discovery of huge hidden losses at General Motors' finance arm
has raised fresh fears of bankruptcy at the world's biggest
carmaker, sending tremors through the credit derivatives markets.

The struggling group asked for a filing delay after admitting to an
extra $2 billion (£1.1 billion) in accounting errors at its finance
arm GMAC, raising total losses last year to $10.6 billion. The news
triggered a sharp spike in the cost of default insurance on GMAC's
bonds, rising 75 basis points overnight.

Car-parts supplier Dana Corp. defaulted last week on $2.5 billion of
debt, following Delphi and Tower Automotive last year"

Asia Times Online :: Asian news and current affairs

Intellectual property rights: Bad TRIPS: "The four key elements in the issue of fair value in global trade are IP, technology, information and pricing. In classical exchange theory, price is determined by cost and demand, which under free trade conditions will reach equilibrium to provide the optimum price and the largest sales. But free trade is a myth, and the US is the leading opponent of it in practice while being the leading proponent of it in rhetoric.

The rationale for IP protection is that it is needed to subsidize the coming stream of new technology. But as the Microsoft antitrust case demonstrates, IP inhibits new technology more than is generally recognized. The same is evident in medical drugs. The only arena where this inhibition does not exist is in military technology, where the technological imperative still governs at the expense of price sensitivity."

Asia Times Online :: Asian news and current affairs

Forget Iran, the problems at home: "Of all the things that could wreck the US dollar - and there are many - the projected Tehran oil bourse, which is tentatively scheduled to open on March 20 to trade Iran's crude and other petroleum products in euros rather than US dollars, is probably not among them. "

Asia Times Online :: Asian news and current affairs

The Wizard of Bubbleland: "Until the late 1950s, a currency's money market was based in the issuing nation's financial center: US dollars in New York, sterling in London, yen in Tokyo, Swiss francs in Zurich, etc. The Bretton Woods monetary regime of fixed exchange rates built around a gold-backed dollar did not consider unrestricted cross-border flow of funds desirable or necessary for facilitating international trade"

Financial Sense "Gold Wars: Gibson's Paradox & the Gold Standard" by Douglas Gnazzo 03/17/2006

Financial Sense "Gold Wars: Gibson's Paradox & the Gold Standard" by Douglas Gnazzo 03/17/2006: "Lord Keynes, in one of his more lucid moments, coined the term “Gibson's Paradox”, in an attempt to explain the correlation between interest rates and the general price level observed during the years of the classical gold standard.
The reason it was a paradox is that Irving Fisher suggested that interest rates should move with the rate of change in prices, i.e., the inflation rate or expected inflation rate, rather than the price level itself.
Mr. Summer’s has the following to say on the matter:
“The price level under the gold standard behaved in a fashion very similar to the way the reciprocal of the relative price of gold evolves today. Data from recent years indicate that changes in long-term real interest rates are indeed associated with movements in the relative price of gold in the opposite direction and that this effect is a dominant feature of gold price fluctuations.” [3]
The above translates into English as meaning that gold prices move opposite (inverse) to real interest rates – in a free market that is. Although free markets are doubtful, the rest of the thesis remains plausible, at least for a while."

FSU Editorial: "Massive World Speculation Dominos" by Chris Laird 03/20/2006

FSU Editorial: "Massive World Speculation Dominos" by Chris Laird 03/20/2006: "Last year, many Asian and other foreign stock markets went up as much as 50%. There is a synchronized world housing bubble that is a very analogous follow on bubble from the Japan collapses in the early 90’s, and the Fed loosening following 911.
We had the tech bubble crash in 2000/1, and a have now a general US stock bubble that is yet to really pop. Right now, we are about at the same DOW level before the market collapses in 2001/2.
There is a massive US and Japanese bond bubble because interest rates are so low, and have been for over ten years, at least from Japan’s perspective. Japan has acted as a virtual central banker for the world, with their zero interest rates. That has caused both a multi trillion dollar value Yen carry trade (borrowing cheap yen then lending the money in the US for example for a net gain of about 3%). The massive Yen carry trade has also financed much of the world stock bubbles as of this point. Also, that money has found its way into the world real estate market bubbles through various forms of mortgage backed securities. This list is endless for the Yen carry trade."