The Economy and Bond Market Diary (August 30, 2010)

Saturday, August 28th, 2010

The Economy and Bond Market Diary (August 30, 2010)

Treasury bonds sold off sharply on Friday, sending yields higher as the market was disappointed by Federal Reserve Chairman Bernanke’s comments regarding the prospect for additional unconventional monetary policy. The market wanted a more definitive commitment and apparently was priced accordingly.

The chart below shows the 10-year Treasury bond, which experienced the sharpest one-day sell off since May. For the week, however, yields were only modestly higher.

Strengths

• Mortgage rates hit a fresh new low of 4.36 percent, the lowest level since records began 39 years ago.
• Credit-card debt fell to the lowest levels in eight years as consumers continue to pare down debt and repair personal balance sheets. While this is negative for near-term spending, it is ultimately what must be done and the process is moving forward relatively rapidly.
• The Fed reiterated its commitment to do what it takes to prevent deflation through additional monetary policy.

Weaknesses

• Second-quarter GDP was revised lower to 1.6 percent from the originally reported 2.4 percent. This was in line with expectations, but does highlight the tentative nature of the economic recovery.
• Housing remains very weak, new home sales fell 12.4 percent and reached a new record low while existing home sales fell by more than 27 percent.
• Ireland’s long-term debt was downgraded this week and credit default swap spreads for the sovereign-debt-burdened “PIIGS” countries (Portugal, Ireland, Italy, Greece and Spain) have reached levels at or near all-time highs. After a lull, investors appear to have refocused on the long-term negative prospects for many of these countries.

Opportunities

• Inflation is unlikely to be a problem for some time and this gives central bankers and other policymakers around the world room for expansive policies.

Threats

• Next week’s economic calendar is full of potential market-moving reports. The most important of these will be next Friday’s job report and Wednesday’s ISM Manufacturing Index.

Tags: 10 Year Treasury, 10 Year Treasury Bond, All Time Highs, Credit Card Debt, Credit Default Swap, Economic Calendar, Existing Home Sales, Federal Reserve Chairman, Federal Reserve Chairman Bernanke, Ireland Italy, Italy Greece, Market Diary, Mortgage Rates, Personal Balance, Policy Weaknesses, Potential Market, Quarter Gdp, Sovereign Debt, Tentative Nature, Treasury Bonds
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Gold Market Diary (August 9, 2010)

Monday, August 9th, 2010

Gold Market Diary (August 9, 2010)

For the week, spot gold closed at $1,205.40 per ounce, up $24.40, or 2.07 percent for the week. Gold equities, as measured by the Philadelphia Gold & Silver Index, rose 3.40 percent. The U.S. Trade-Weighted Dollar Index decreased 1.51 percent.

Strengths

• China has moved to further develop its gold market, increasing the number of banks allowed to trade bullion internationally and announcing measures that will encourage development of gold linked products.
• Central banks gold sales under the Central Bank Gold Agreement continue to be miniscule with roughly just 6 of the 400 tonnes allowed coming to the market so far.
• Another big gold company acquisition was announced earlier in the week. While some have criticized the deal as being on rather lofty terms this is positive for the valuations of the junior and mid-tiered mining companies. In one year, the deal may be viewed as a real bargain considering that the fundamentals surrounding further price gains in gold are likely to get more intense.

Weaknesses

• Over the prior three weeks, gold back ETFs have seen net liquidations but appeared to have stabilized this week. Hallgartens’ mining analyst Christopher Ecclestone suggests gold ETFs have become a lobster trap for the mining industry and mining investors, particularly in reducing the availability of funds for project financing.
• Both gold and the dollar enjoyed a price rise when Europe’s sovereign credit issue came to a head in May but have subsequently traded down. Keep in mind, the faster money was long gold and the dollar as the euro tanked and credit spreads went to all time highs. When the market saw Europe was going to pull out the guaranteed-to-pass stress test, there simply was no easy money to be made after that point. After all, European bonds and an oversold euro offered the next best trade to capture alpha for investors. Fortunately, these distorted bond and currency prices have now run their course with the easy money pocketed again. The next trade to go long on again favors gold.
• South Africa’s Department of Mineral Resources faces a credibility issue over their granting of certain non-platinum mineral rights to a director of one their larger platinum miners who subsequently resigned and diverted the assets to his own black economic empowerment company.

Opportunities

• Research company Ipsos completed a survey across 24 countries representing 75 percent of global GDP and found Asian investors are more likely to buy gold to a much greater extent than Americans or Europeans. Of the 19,000 investors interviewed a quarter said they were “somewhat or very likely” to invest in gold in the next six months. Three quarters of the respondents in India and Indonesia and more than half of those in China said they would invest in gold. Only 10 percent of the respondents in America and Europe said gold would be a likely investment.
• John Embry, Sprott Asset Management’s chief investment strategist, said “I would expect the last few months of the year to be quite robust which in a seasonal sense is often the case, but this time I think its going to be more robust than usual…If it’s not between $1,500 and $2,000 in the neat 18 months, I’m dead wrong.”
• Media speculation surfaced that President Obama will direct Fannie Mae and Freddie Mac to reset mortgage rates for all distressed homebuyers or else forgive the underwater portion of their overextended mortgage debt as a way to boost popularity and buy votes in the fall elections. As the estate tax is set to go from 0 to 60 percent next year, Warren Buffet and Bill Gates announced a pledge campaign to sign up billionaires to give away half their wealth.

Threats

• For all the naysayers that espouse there is no chance of a double dip in the economy, David Rosenberg, of Gluskin Sheff Associates, has a few more sobering comments. Consumer prices in the U.S. have fallen three months in a row (as measured by the PCE price deflator) and the last time this occurred in beginning of 2009 there was a strong plummet in the economy.
• The new orders component is down 12.2 points in the last two months. The last time this happened was October 2008 and in fact is a 1-in-25 event. There is only a 4 percent chance this would occur at a time that is not in or near a recession.
• Household employment has contracted three months in a row and the chance of that happening without the U.S. either being in or heading into a recession is unlikely.

Tags: All Time Highs, Bank Gold, Central Banks, Christopher Ecclestone, Company Acquisition, Credit Spreads, Currency Prices, David Rosenberg, Dollar Index, Gold Company, Gold Equities, Gold Etfs, Gold Market, Gold Sales, India, Linked Products, Lobster Trap, Market Diary, Mining Analyst, Philadelphia Gold, Silver Index, Spot Gold
Posted in Bonds, China, Gold, India, Markets | No Comments »

Embry: Gold’s on the cusp of a parabolic move up

Monday, August 2nd, 2010

John Embry is chief investment strategist at Sprott Asset Management and always worth listening to when it comes to gold bullion. The following are excerpts from his recent article published in Investor’s Digest of Canada (courtesy of GATA).

“Gold moved to several new all time highs in the month of June despite the absence of any overt enthusiasm for the yellow metal amongst the general public. Sentiment is remarkably negative when one considers the fact that were it any other asset class making new highs in a powerful multi-year bull market, the mainstream press would be trumpeting the news and the public would be falling all over themselves to buy.

“Why is gold different in this instance? Very simply, the public is being bombarded with misinformation and propaganda as the monetary authorities try to sustain a doomed currency system. In addition, the anti-gold cartel is creating excessive volatility in the new paper-gold market that unnerves the average investor.

“Fed Chairman Ben Bernanke got into the act recently when he was confronted with a question about gold while testifying at a session of the House Budget Committee and his lame response was: “Gold is out there doing something different from the rest of the commodity group. I don’t fully understand the movements in the gold price, but I do think that there’s a great deal of uncertainty and anxiety in financial markets right now. Some people believe that holding gold will be a hedge against the fact that they view many other assets as being risky and hard to predict at this time.”

“Mr Bernanke was correct in acknowledging that other assets might be risky (they most assuredly are) but, in my mind, he was totally disingenuous in stating that he didn’t fully understand the movements in the price. He knows full well that it is his monetary policy, featuring zero-based interest rates for the world’s reserve currency, and the profligacy of his own government which are fuelling the desire to own gold. To keep his job, he also knows that he could never publicly acknowledge these facts.

“We are on the cusp of a parabolic move in the price of gold underwritten by physical shortages. Central banks can no longer supply the amount needed to balance supply and demand while mine production continues to stagnate at best.

“It is imperative that investors ignore the volatility created by the anti-gold cartel and use every opportunity that is created by them to purchase more physical gold.”

Click here for the full article.

Source: John Embry, Investor’s Digest of Canada, July 23, 2010.

Tags: All Time Highs, asset class, Ben Bernanke, Budget Committee, Chief Investment Strategist, Commodity Group, Currency System, Cusp, Fed Chairman, Gold, Gold Bullion, Gold Market, Gold Price, John Embry, Mainstream Press, Monetary Authorities, Month Of June, New Highs, Paper Gold, Profligacy, Public Sentiment, Reserve Currency
Posted in Canada, Gold, Markets | No Comments »

Finding Gold in the Mainstream

Monday, June 21st, 2010

The New York Times dedicated a chunk of last Sunday’s paper to gold as a mainstream investment. In other words, gold is now legit — no longer can it be dismissed as the asset of choice for fringe types with a cellar full of canned goods and a stash of bullion buried in the backyard.

And to illustrate just how far gold has moved into the American mainstream, the paper goes bipartisan by holding up investor George Soros on the left and commentator Glenn Beck on the right as examples of the newly converted.

Now there’s an old saying that the time to sell an investment is when it’s finally “discovered” by the popular media, but that may not be good advice for gold in today’s environment. This week spot gold and gold futures hit all-time highs as the latest government reports cast doubts on the economic recovery.

In its story, the Times points out many of the same gold drivers that we have been citing for a while now – the tandem risks of near-term deflation and longer-term inflation, massive U.S. budget deficits and crushing sovereign debt burdens in Western Europe that threaten the euro’s viability.

Gold’s safe-haven qualities now make it attractive to worried investors. It’s true that this fear won’t last forever, but it’s not at all clear that investors will have a good reason to be less fearful any time soon.

From a recent research note by UBS: “The sense that some investors only trust a gold holding if they can see it and touch it is a clear indication that some investors are buying gold as a hedge against a full-scale financial crisis and currency debasement.”

There are other factors supportive of gold. One is the renewed interest of central banks in adding to their gold holdings to diversify their foreign reserves.

The chart above shows how little gold has been sold by the 18 European countries covered under the Central Bank Gold Agreement. The annual limit is 400 metric tons, but through the first eight months of its latest fiscal year (ends September 2010), only a tenth of that amount changed hands, nearly all of it being sold by the International Monetary Fund.

Russia’s central bank added more than 26 metric tons to its reserves in the first quarter of 2010, according to the World Gold Council. The Philippines has boosted its gold reserves by about 10 metric tons, and China is widely believed to be quietly adding large quantities of gold to its vaults. China is the world’s largest producer and is consuming all of its production, so this supply is not seen in the market.

Gold mine supply also comes into play. After a nice bump up in 2009, gold mine output is on track to decline this year and in 2011 (chart) at the same time that investment demand is strong. The World Gold Council forecasts that overall gold consumption in China could double in the coming decade as income levels rise – it is very unlikely that China’s production will be able to keep the same pace.

Other appeal:  gold’s historic non-correlation with other financial assets, household debt reduction and the uncertainties created by the efforts in Washington to raise tax rates and impose new regulatory schemes. And as we approach the important 2010 midterm elections, it would be no surprise to see government deficit spending climb even higher into the stratosphere to curry favor with the voting public.

Some extreme gold bulls are urging investors to move half or even more of their portfolio into gold – we are not in that camp. We consistently suggest that investors consider a maximum 10 percent allocation to gold-related assets – half in bullion or bullion ETFs and the other half in gold stocks or a good gold fund – and that they rebalance each year to capture the swings.

On the gold equities, our research via a basic regression analysis shows that gold equities appear undervalued by 8 percent to 9 percent relative to bullion. This may present a buying opportunity for long-time gold investors and those New York Times readers who are among the many new believers.

Gold, precious metals, and precious minerals funds may be susceptible to adverse economic, political or regulatory developments due to concentrating in a single theme. The prices of gold, precious metals, and precious minerals are subject to substantial price fluctuations over short periods of time and may be affected by unpredicted international monetary and political policies. We suggest investing no more than 5% to 10% of your portfolio in these sectors.

Tags: All Time Highs, American Mainstream, Bank Gold, Budget Deficits, Canned Goods, Central Banks, Debasement, Debt Burdens, Deflation, Finding Gold, George Soros, Glenn Beck, Gold Futures, Gold Holdings, Good Advice, Government Reports, Rsquo, Russia, Sovereign Debt, Spot Gold, Term Inflation
Posted in China, Gold, Our Commentaries | Comments Off

Finding Gold in the Mainstream

Saturday, June 19th, 2010

By Frank Holmes, CEO and Chief Investment Officer, U.S. Global Investors

The New York Times dedicated a chunk of last Sunday’s paper to gold as a mainstream investment. In other words, gold is now legit — no longer can it be dismissed as the asset of choice for fringe types with a cellar full of canned goods and a stash of bullion buried in the backyard.

And to illustrate just how far gold has moved into the American mainstream, the paper goes bipartisan by holding up investor George Soros on the left and commentator Glenn Beck on the right as examples of the newly converted.

Now there’s an old saying that the time to sell an investment is when it’s finally “discovered” by the popular media, but that may not be good advice for gold in today’s environment. This week spot gold and gold futures hit all-time highs as the latest government reports cast doubts on the economic recovery.

In its story, the Times points out many of the same gold drivers that we have been citing for a while now – the tandem risks of near-term deflation and longer-term inflation, massive U.S. budget deficits and crushing sovereign debt burdens in Western Europe that threaten the euro’s viability.

Gold’s safe-haven qualities now make it attractive to worried investors. It’s true that this fear won’t last forever, but it’s not at all clear that investors will have a good reason to be less fearful any time soon.

From a recent research note by UBS: “The sense that some investors only trust a gold holding if they can see it and touch it is a clear indication that some investors are buying gold as a hedge against a full-scale financial crisis and currency debasement.”

There are other factors supportive of gold. One is the renewed interest of central banks in adding to their gold holdings to diversify their foreign reserves.

Tags: All Time Highs, American Mainstream, Bank Gold, Budget Deficits, Canned Goods, Central Banks, Chief Investment Officer, China, Debasement, Debt Burdens, ETF, Finding Gold, Frank Holmes, George Soros, Glenn Beck, Gold, Gold Futures, Gold Holdings, Government Reports, Russia, Sovereign Debt, Spot Gold, Term Inflation, U S Global Investors
Posted in China, Gold, Markets | No Comments »

Hungary Meltdown – Euro Contagion Spreading

Friday, June 4th, 2010

Euro-contagion has spread to Hungary. Parity for the euro may come sooner than anyone expected. Here are notes and analysis from a variety of sources on the unfolding euro/Hungarian meltdown, Round 2:

To all those who listened to Hugh Hendry’s recommendation to panic a week ago, congratulations- you are well ahead of the market today. Hungary CDS is now offerless as investors are shocked, shocked, that the country (and continent) is actually really bankrupt, as opposed to just make believe. IMF’s comments yesterday that it does not have the funds to rescue all of Europe are not helping. Hungary CDS is now essentially bidless last seen 120 bps wider, around 430/460 with the bid/ask spread at 30bps, and only dealers daring to take on any risk exposure as the risk off brigade has kicked the optimists out of the building. The one thing up today so far? Gold. NFP better be north of 100 million or else the stick save today will be a tad problematic.

Europe Tremors Resume: Spain Bund Spreads At All Time Wides, China Exporters Ditch Euro As CHF Surges, from ZeroHedge.com.

Another horrendous day shaping up for Europe. Spanish Bund spreads have surged to all time highs just south of 200 bps, Hungary confirms that it was not exaggerating comments about chances of (not) avoiding Greek situation, pushing its CDS even wider, the EURCHF has dropped to under 1.40 and the SNB has not intervened yet, while the EURUSD is down to 4 year lows below 1.21. The nail in the euro coffin is a report by Reuters that a growing number of Chinese exporters turn down euro payment, flatly refuting anything SAFE may be saying officially.

Chinese exporters who made a big push only a year ago to bill in euros are increasingly turning their backs on the wounded European currency and demanding dollars instead.

By contrst, Beijing last week said a report it was reviewing the euro portion in its mountain of foreign exchange reserves was groundless and it calmed markets by saying that Europe remained a key investment market.

But Chinese exporters and the local governments that oversee them are less confident. They are trying to keep a wider berth from the euro, at least for now.

Oh, and now the French PM is quoted as saying that he only sees good news in parity between the dollar and the euro. Too bad none of his bank share the sentimentm realizing all too well none of them will exist in that situation.

Add Hungary to the PIIGs List, from Big Picture.

The market needs a new acronym to replace PIIGS to include Hungary as a spokesman for the PM of Hungary said their economy is “in a grave economic situation” and the possibility of default is “not an exaggeration.” Markets rolled over after the comments and the euro fell to a new 4 year low vs the US$. Hungary 5 yr CDS is higher by 15 bps to 323 bps, the highest since July ‘09. Hungarian stocks are lower by almost 4% and European banks are all lower. With respect to the US jobs data, it’s not the headline number that will matter but what’s under the hood as census workers may add 500k+ to the figure. The private sector is expected to add 180k jobs and that is the only thing that matters as the census workers will be off the gov’t rolls by Sept. The birth/death model will also contribute as 186k jobs were added in May ‘09. The unemployment rate is expected to tick lower by .1% to 9.8%.

Now it’s Hungary’s Turn, from TraderMark.

Well this one came out of the blue. Looks like they pulled a Greece in their statistics department. Hmm, governments worldwide fudging the numbers to create an alternate sense of reality? Whodda thunk!

• Hungary’s is in a “grave situation” because the previous government “manipulated” figures and “lied” about the state of the economy, said Peter Szijjarto, spokesman for Prime Minister Viktor Orban. The forint fell for a second day, dropping as much as 2.1 percent against the euro.
• A fact-finding panel will probably present preliminary figures on the state of the economy this weekend, Szijjarto said today at a news conference in Budapest. The government will publish an action plan within 72 hours after the committee reports its findings, he said.
• “It’s clear that the economy is in a very grave situation,” Szijjarto said. “We need a clean slate to formulate our economic action plan, and the fact-finding committee will provide just that.”
• “It’s no exaggeration” to talk about a default, Szijjarto said today.
• Hungary needed a 20 billion-euro ($24 billion) international bailout to avert a default in 2008. Orban, who took over May 29 after winning elections by pledging to cut taxes and stimulate the economy, yesterday failed to get European Union approval for looser fiscal policy.
• “Investors are losing their patience,” Gyorgy Barta, a Budapest-based economist at Intesa Sanpaolo SpA, said in a phone interview. “This is part of a communications strategy that wants to tell voters one thing and the markets another. It’s getting too complicated, and the government now needs to come clean and present a convincing plan of fiscal consolidation.”

Oh well, nothing a hundred or two billion euro won’t fix. Get to work US taxpayer… err IMF.

Biggest Hungarian Commercial Bank Trading Halted On Budapest Stock Exchange, from ZeroHedge.com.

All trading in shares of OTP Bank, Hungary’s largest commercial bank, has been halted on the Budapest stock exchange after a plunge greater than 10%. Nothing to see here, go back to reading Goldman’s spin on things, and why everything all of this really should be priced in already.

Austria Next On The Implosion Radar; German, France CDS Blow Out, from ZeroHedge.com.

Austria, the country most exposed to weakness in Central and Eastern Europe, is back on the radar. After having avoided skeptical investor scrutiny even as the bulk of Europe was collapsing all around it, the country is today’s top CDS widener, yet still stunningly trades inside of France and Belgium. Look for this spread to blow out over the next week. Then again, the biggest CDS wideners are precisely the countries formerly seen safe: Austria, France, Germany and Belgium are all the top movers in CDS. So much for the whole North vs South division in Europe.

Goldman Sachs’ Desperate Attempt at Hungary Damage Control, courtesy of ZeroHedge.com.

Goldman Sachs to save the day…

Hungary – Greek-like crisis has already happened; Fidesz tries to free itself from campaign promises

Yesterday’s comments by Fidesz vice-president Kósa alleged that Hungary stands on a brink of a sovereign default due to its very precarious budget situation and continuously appearing ’skeletons’ in the fiscal accounts while Michaly Varga, a deputy PM, claimed again that the ‘true’ 2010 budget deficit is closer to 7%-7.5% of GDP rather than the 3.8% assumed in the IMF-led program or 4.3%-4.5% forecasted by the NBH. Given the seriousness of the situation, Kósa declared that within a week the new government will announce a two-year crisis management plan that would include deep constitutional and structural reforms. Nevertheless, Kósa did not withdraw the plans to lower taxes which was one of the key election promises. He also declared that countries that were successful at crisis management ‘rejected the requirements of the World Bank and the IMF’ and expected the European Union to foot the bill for a potential external rescue of Hungary.

On the same day, European Commission President Barroso urged the new Hungarian government to speed up fiscal consolidation and implement structural reforms that would help maintain long-term fiscal sustainability and support economic recovery.

The Hungarian PM, Victor Orban, followed with declarations that the new government is committed to restoring fiscal stability and that the new economic plan, to be published within 72 hours after revealing the budget report, will include structural measures to boost growth and competitiveness as well as significant tax cuts.

IMF mission chief is due to arrive in Budapest for informal talks with the government. His visit is not a part of a formal review mission, which was postponed because of the parliamentary elections.

COMMENT: We believe that yesterday’s dramatic comments were intended for domestic consumption and were used to build a dramatic backdrop that would let Fidesz backtrack on a large share of its campaign promises and broadly continue with the fiscal policies of the previous government, as well as preparing the ground for another round of IMF talks. Exaggerating the state of public finances left by the previous government, pretty common as it is (the incoming UK government used very similar tactics), supports the arguments against fiscal expansion and, in the future, will back up the claims that the crisis management plan was successful in reducing public deficit. The party faces local elections in October and not following up on the election promises risks alienating the voters, while blaming the ‘imminent crisis’ and ‘fiscal skeletons’ helps it save its face. At the same time, inflating the deficit forecast gives it space for negotiations with the international lenders and increases the chances that the potential new program will allow for some fiscal loosening in 2010 and 2011.

The claim that the country is on a brink of sovereign default and risks following the Greek path does not hold up against the facts. Hungary has already faced a crisis and asked for IMF and EU assistance in late-2008. In this context, Hungary is some 18 months ahead of Greece. Next, Hungary is not an EMU member and by having its own currency and domestic and external debt benefits from having a captive investor base. Finally, Hungary still has access to the undisbursed tranches of the IMF/EU loans. Our analysis (New Markets Analyst 10/04) shows that under the current policies debt stock is stable and that the country will be able to rollover its maturing debt without a problem.

It seems that Fidesz has taken a major decision on the path of macroeconomic policy and is now preparing the stage for its announcement – first, by revealing the ‘true’ size of the deficit and, second, by following up with the two-year plan. We believe that the ‘good scenario’ is more likely, namely a new agreement with the IMF and the EU and broad continuity of the fiscal consolidation plans, although with some loosening due to the cost of the yet to be announced structural reforms and to accommodate some of the election promises. We continue to believe that a stabilization program is the most likely outcome, which should significantly reduce the perception of the Hungarian sovereign risk (for more information, please see New Markets Analyst 10/05).

The risk here is that the new government attempts to follow the Ukrainian and Romanian examples, leading to protracted and rocky discussions. The other risk is that the new government is too confident in its ability to influence the Forint (in earlier comments, Fidesz said that weaker currency will support Hungary’s competitiveness) and may be careless in its communications (as shown by yesterday’s comments from Kósa). The punishment from the market may come quickly and weakening of the currency beyond the pain level of banks and households (about EURHUF of 300) – which hold significant amounts of FX debt – would serve as a warning to the new government. Our research shows that among CE3 countries, Hungary is most exposed to risk sentiment and the widening of risk premia would hurt Hungary’s growth.

The ‘negative scenario’ in which the new government abandons the IMF program and lets the fiscal situation get out of control would actually help fulfil the claims that the country is indeed unable to access financing; we find that unlikely, though.

The news that the IMF mission chief will hold informal talks with the new government is neutral. Such a visit had to happen regardless of the course of Fidesz’s macroeconomic plans. IMF needs to learn more about these plans and both sides need to decide how they want to proceed. This should clarify the situation and help us know whether the next program is going to happen. We expect some follow-up news within the next couple of days.

Tags: All Time Highs, Bps, China, China Exporters, Chinese Exporters, Coffin, Contagion, Ditch, ETF, Eurchf, Eurusd, Gold, Hugh Hendry, Imf, Lows, Meltdown, Optimists, Parity, Reuters, Risk Exposure, Snb, Surges, Tremors
Posted in Gold, Markets | 1 Comment »

Gold and Silver for the Time Being

Wednesday, February 24th, 2010

Adam Hewison, CEO, MarketClub, is back with two new educational videos about Gold and Silver. Hewison, a seasoned trader and source of sound market guidance shares his near term views on the two very different metals.

Title: Five Reasons Why Gold Will Not…

Gold has made some exciting moves recently, but what can we expect in the future? In today’s video, I point out five reasons that I do not expect gold to make a new high just yet.

If the current cycle persists, there will be some interesting trades to be had in this market and a possible new high before summer.

Title: Looking At Silver for All the Wrong Reasons

Late in 2009 a lot of folks began asking us about buying silver instead of gold. At the time, we stated exactly how we felt, in that, why would you try to buy something that is not in the same league as gold? The two markets are completely different and are driven by a different set of emotions and fundamentals.

This is the first video that I’ve done on silver in quite some time, but I think it’s an important one for you to see.

One of the standout features that I noticed was the fact that when gold was making new all-time highs in early December, silver failed to take out the March 2008 high. I consider this to be a negative.

In this short video you will very quickly see how we feel about silver and how you can benefit from looking at this market from a different perspective.

Tags: All Time Highs, Buying Gold, Ceo, Current, Different Perspective, Driven, Educational Videos, Emotions, Gold, Gold And Silver, Gold Silver, Market Guidance, Marketclub, Metals, New Videos, Quite Some Time, Silver, Standout Features, Trades
Posted in Markets | No Comments »

Jim Rogers: Gold, Market Bubbles, Equities, and Dr. Doom

Tuesday, November 10th, 2009

This article is a guest contribution from Damien Hoffman, of Wall Street Cheat Sheet.

Jim Rogers is one of the most respected investors in the world. I had a chance to chat with him the other morning to get more details about some of his recent comments in the media …

Damien Hoffman: Jim, you were in the media a few times last week and I want to follow up on a few points you made. You said on Bloomberg that Nouriel Roubini did not do his homework regarding the asset bubbles about which he is now warning. Can you explain what homework he did not do?

Jim: All of it. How can you talk about a bubble when assets such as silver are 70% below their all-time high? Same for coffee, sugar, cotton, natural gas, and many more. I have a problem talking about a bubble when assets are this depressed from their all-time highs.

A bubble is when assets are screaming to new highs everyday, everyone is talking about them, and everyone owns them. Right now, virtually no one owns commodities. So for Mr. Roubini to talk about a bubble in commodities defies comprehension. It proves he does not understand markets.

I am flabbergasted at Mr. Roubini’s comment about bubbles because there is not a single market in the world making all-time highs except Gold, US Government Bonds, Cocoa, and the Sri Lankan stock market. That’s hardly reason to call for a bubble. So, I am most perplexed about this alleged bubble which is out there.

If an asset rises 100% in one year, that’s a great year, but not necessarily a bubble. Look at oil. It’s up huge off the bottom but nowhere near it’s old highs. Look at Citigroup. The stock is up 3 or so times off the bottom …

Damien: … and I doubt long term shareholders feel like they are in a bubble.

Jim: Exactly. And since Mr. Roubini thought oil would stay below $40 a barrel for all of 2009, I would love for him to tell me and the rest of the world exactly where are all the oil supplies because the International Energy Agency (IEA) — which has the best global data set on energy supplies — has no idea where is the oil. Mr. Roubini should tell us where this price suppressing oil supply is hidden. All the oil possessing countries in the world have declining reserves. All the oil companies have declining reserves. So Mr. Roubini must know something the rest of us don’t.

Damien: On another note, Gold has been reaching new all-time highs, although not inflation adjusted. You said Gold may reach $2,000 an ounce over the next decade. Can you explain what variables will push Gold to $2,000?

Jim: First, I hope you will keep Mr. Roubini’s statement where he said Gold going to $2,000 an ounce by 2019 is “utter nonsense.” I think you’re going to get a chance to call him before 2019 to ask him what he thinks of Gold at $2,000 and why he thought it was “utter nonsense.”

Regarding variables, it’s very clear there is huge suspicion about paper money around the world. This suspicion is gathering steam. Governments are printing huge amounts of money. This has always led to higher prices. Maybe I am wrong and it’s different this time. But I doubt it.

Additionally, no new large gold mines have been opened in decades. Some of those mines are over 100-years old. They are all depleting. On the other hand, central banks have huge Gold reserves above ground — and they are less interested in selling than in the past.

If you adjust Gold for inflation and go back to it’s former all-time high in 1980, Gold should be over $2,000 an ounce right now if you want to say it’s reaching new inflation adjusted all-time highs. That does not mean Gold has to get back to a true all-time high. Nothing has to. However, I suspect that given all the money printing in the world, we will see much higher prices for hard assets.

Despite Gold’s potential, I think I will make more money in other commodities such as silver, cotton, or coffee — all of which are terribly depressed.

Damien: Speaking of other assets, as an outsider living abroad, what is your opinion on US Equities?

Jim: This is one of the few times in my life I have not had shorts anywhere in the world. I have also not had a lot of longs in the stock market because I’ve chosen longs in commodities and currencies. I have kept away from shorts because there is a gigantic amount of money being printed and it has to go somewhere. I thought some of it would end up in the stock market, and it has.

How much higher can the equity markets go? I don’t know. There are a lot of problems in the economy, but I don’t know when those problems will cause a downdraft in the stock market. All we’ve done is paper over the problem, so I expect we’ll have to deal with those issues in the future. Printing and spending money we don’t have simply prolongs the problems and makes them worse in the long run.

If the world economy improves, commodities will lead the way due to demand and shortages. If the world economy does not get better, commodities are still a great place to be because governments are printing so much money. And, if the world economy doesn’t get better, they will print even more money!

Damien: Jim, thank you for taking the time to share your outlook and opinions. I greatly appreciate it.

Jim: You are very welcome. Your site is very impressive. I look forward to staying in touch.

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