Saturday, October 10, 2009

Emini Futures Trading - Gold Hits Historic Highs / Friday October 9th, 2009


For 7 years on the Net and the last 4 years on the radio we have pounded the table in regards to Gold. Just as we warned of the collapse in real estate, we forewarned the importance of owning both Gold and Silver. To those who heard and heeded, congratulations. To those who didn't, the good news is -
You can still get in!
90% of my personal portfolio is in 1 stock.
Just 1.
(learn more)

The Tiny Gold Market

(So little gold at $1000/oz. for China, Germany, or Oil nations!)

Silver Stock Report

by Jason Hommel, October 9th, 2009

There is very little understanding of the relative size of the gold market, let alone the silver market.

In the gold market, the IMF has continued to "threaten" to sell 400 tonnes of gold, about once or twice a year, for the past ten years, to help "relieve the poverty" (yeah, right) of indebted nations who generally produce gold, and would actually be benefited by a higher gold price, not a lower gold price. This always results in a flurry of news stories, and usually panic among gold investors who are on leverage, who know next to nothing.

You never hear about how China actually was buying 500 tonnes over the last 8 years.

You never hear in the popular news how China wants to buy $80 billion more gold.

That would use only a tiny fraction of China's $2131 billion of foreign exchange reserves.

$80 billion in gold, at $1000/oz., is 80 million oz., which, divided by 32,151 oz/tonne, is 2488 tonnes, which is almost exactly the same amount as the annual production of all the world's gold mines.

You never hear that China has so many dollars that they want to buy all the world's annual gold mining production, as a small and tiny diversification, for years to come. But I just provided all the proof for that statement.

You never hear in the mainstream press how Germany swapped about 3000 tonnes of gold with the US, and wants their gold back, which again, is just over the entire world annual gold mining production.

You never hear that if the oil producing nations decided to sell oil for gold, what that would mean for the gold price.

Well, actually, we did hear something similar to that this week, a "vicious rumor" that led to the current $50 rally in the gold price. (more)

Gold Touches a New Record


10/08/09 London, England

“Gold continues to climb…stoked by inflation worries,” says a headline in the International Herald Tribune.

Yesterday, it touched a new record – $1,050 – even as the dollar rose, oil slumped under $70 and stocks dipped very slightly.

Well, what do you expect? The United States added $1 trillion to its monetary base in the last year or so. The federal government is running a deficit of $1.7 trillion this year. And along comes Barack Obama with an idea to stimulate employment – spend more money! This time, Obama’s plan is a kind of ‘Cash for Workers’ program…in which businesses get a tax credit for hiring new employees.

Gold investors must think the new program will be the straw they’ve been waiting for. Government has piled on bales of costly new initiatives on this poor camel’s back. Still, he stands up straight.

So, is gold at $1,000 a bargain…or a trap? Or both.

We begin by asking: where’s the inflation? We don’t see any inflation. What we do see is deflation.

Barclays Capital says gold could go to $1,500. We don’t know where they got that number. It could go to $15,000 for all we know. Or it could go down, too.

Our guess is that it will go down enough scare the bejesus out of speculators. Then, it will soar.

But, hey, we’re just guessing – along with everyone else.

Sooner or later gold is probably headed to the lunatic moon. We’re sticking with the yellow metal. We don’t want to miss that ride.

But when?

Ah…we’re going to stick our necks out and say “eventually.” We’re sure we’re right about this. Just don’t ask us for more precision; we have none. And what bothers us is that between eventually and now there could be a lot of time and a lot of trouble. And one trouble that could come up pretty fast is another crash in the stock market.

If the stock markets of the world take another dive…like they did last year…gold will probably go down with them. Not as much, but down nonetheless. So, if we were speculating…we’d probably be short gold and short stocks too. We’d bet against bonds too – even though we think they will probably go up in the short run. The smart, long term money – in both stocks and bonds – is probably on the short side.

Here at The Daily Reckoning, however, we never speculate – except in print. As to ideas about how the world works we have plenty. We speculate daily. As to gold, stocks and commodities, we prefer to hold onto our long-term positions.

What seems fairly sure to us is that this recovery is a fraud. It’s a mountebank and a flimflam.

And now approaches a moment of truth – earnings announcements. Stock market investors bid up shares on the theory that sales and profits would rise. Will they? We don’t think so.

We think sales are going to be disappointing…and earnings will be even worse. If so, we’ll see analysts begin to change their expectations…and announce that the results are “not as bad as expected.”

If we get a few really bad announcements – with results much worse than expected – it could sink the rally. Then again, if we’re surprised with exceptionally good reports…it could send the market in the other direction.

Good results will also cause us here at The Daily Reckoning to question our position. Maybe the economy is not sinking into a chronic depression, after all. Could we be wrong?

Ha ha…are you kidding, dear reader? Of course, we can be wrong. When we were younger we were uncertain about things. But now that we’re older, we’re not so sure.

Here is what we’re pretty sure about:

1) The credit cycle has topped out.

Americans are saving – think of the poor boomers, 10 years older but not a penny richer than they were in 1999. Stocks have gone nowhere but down in real terms. Houses hit a high in 2006…now, they’re off 30%…and still going down. Jobs? Forget it…there are already 15 million people who are unemployed and about 200,000 more every month. The job market is unlikely to recover for another 6-13 years – that is, after many of the boomers are retired! And if you are lucky enough to have a job, you’re not likely to get a raise…not with so much spare capacity in the labor market.

Under those conditions, a consumer boom is very unlikely.

2) We know that a period of credit contraction is deflationary.

Prices go down as demand falls. Buyers disappear from the malls that once knew them, while the factories that produce stuff grow dusty and quiet.

But we know the feds hate falling prices. And we know they are taking extraordinary actions to get prices to go up. So far, their efforts have been a giant flop. Prices are falling in the United States at the fastest pace since the ’50s.

Most of the feds’ efforts have been directed towards keeping the bankers fat and happy…and getting themselves a bigger share of America’s output. They took funds designed to relaunch the US economy, for example, and used them to buy themselves a big position in the auto industry, the financial industry and the insurance industry.

3) We know too, by the way they conducted themselves in those affairs, that the feds have become much more aggressive…throwing their weight around in the private sector as never before.

What we don’t know is how this affects markets in the short term. So far, consumer prices are falling, but the stock market is enjoying a bounce. It is a real, new bull market? Or just a bear market bounce? It is probably a bear market bounce…but it has been going for long enough that we have to at least consider the idea that it is a genuine bull market. That’s why the numbers from this quarter are important…they’ll tell us if the companies themselves are expanding earnings fast enough to justify investors’ optimism.

4) We know too that there is a whole lot of ’flation going on.

We are just unable to tell you what kind of ’flation it is. The monetary base is way up – it increased by $1 trillion in the last 12 months. But the money-in-circulation has barely budged. The feds give the banks overnight loans at practically zero interest. Then, the banks lend it back to the feds at nearly 4% more.

What happens to it then? Well, what do you think…it is wasted on typical federal government scams and humbugs.

So, relatively little of the money actually ends up in the consumer economy. And so, we can’t tell you whether the ’flation will have a ‘in’ prefix or a ‘de’ prefix. They’re just two letters. But they will make a whole alphabet of difference to the economy and to your investments.

5) Most important, we are dead sure that the people running America’s financial policies are jackasses.

We say that with all due respect, which is probably not much. They have only one idea – and it is a bad one. They think economies are improved by more consumer spending. They don’t seem to care why consumers occasionally cut back on their spending. All that matters to them is finding ways to get the consumer shopping again. So they try tax cuts and government spending…bailouts and boondoggles…zero interest lending and federal takeovers…cash for clunkers, cash for houses, cash for employees….

…trillions worth of claptrap and folderol. But what a nuisance! The fool consumer still won’t shop!

But they’re determined to keep trying. That’s why we can be pretty sure that, eventually, they’ll get inflation rates up. One way or another. And then, gold at $1000 will seem like an outrageous bargain.

Until tomorrow,

Bill Bonner
The Daily Reckoning

A Bull in a Silver Shop
by The Mogambo Guru
Tampa Bay, Florida

"More than one-seventh of all the silver bullion 'thought to exist' in the whole world was suddenly bought up in less than a year, and yet the price of silver has been pounded down to less than 10 bucks an ounce?"

It's the Balance of Power, Stupid!
by Leon T. Hadar
Washington, DC

"...there is an eerie resemblance between the resistance of officials, lawmakers and pundits in London 1949 and that of their contemporary counterparts in Washington 2009 to adjust their nation's foreign policies to the changing global balance of power."

Greetings from Qatar!
by Chris Mayer
Doha, Qatar

" One headline story noted how 32,000 homes are about to come on the market next year, which is a big number to choke down in any city. Dubai had a huge property boom and now must suffer the flip side."

Inshallah, Build It And They Will Come
by Addison Wiggin
Dubai, United Arab Emirates

"Here in Dubai, there is little money from oil or gas, it's mostly trade, Western conglomerates setting up shop in a low tax jurisdiction and real estate. And, since the bust...debt."

Chronic Depression
by Bill Bonner
London, England

"The authorities still do not understand what is going on. They are used to fooling most of the people most of the time. They think they can dupe them again - with bailouts and boondoggles."

Is Santa Fe Now A Likely Future Takeover Candidate?

This is not a solicitation to buy Santa Fe Gold. It is a statement of the facts as we see them for your consideration. Whether you decide to invest in Santa Fe Gold may or may not make a difference to the stock, but it could make a big difference in your life, as it has already done for many others, if our belief becomes a reality: That Santa Fe will most likely ultimately be taken over at much higher prices than those of today and we have tried to outline the many compelling reasons as to why this may occur below, but you don't have to hear it from us.. The company already has an analyst buy rating of $3 per share: And that was before the two recent acquisitions, that have probably added at least another $2 per share to that target price, that is now gaining increasing coverage with rising gold prices.

And that's the point. Santa Fe is not only getting increasing coverage and recognition, it is delivering on all of its promises and all of its objectives thus far have not only been met, they have actually been exceeded and any time that happens with any company, it usually means that it represents a major buying opportunity that will likely have continuing surprises on the upside in the future. And the best part of it all might be in this instance you may not ever need to sell your stock as it just might be bought out from you in a takeover bid.

Killing the Goose Visit John's MySpace Page

In this issue:
Killing the Goose
What Were We Thinking?
Let's Play Turn It Around
Detroit, the Red Sox and the Yankees, and Traveling Too Much

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