Friday, April 1, 2011

Mike Maloney - The US$ has cancer

Jim Rogers - On Japan and the Markets

The USA is a Failed State

Gold Heads for Longest Run of Quarterly Gains in 3 Decades

From Bloomberg:

Gold rose in New York, heading for the longest streak of quarterly gains in more than three decades, as fighting in Libya and concerns about European debt spurred demand for an alternative investment.

Troops loyal to Muammar Qaddafi forced Libyan rebels to retreat as the U.S. and U.K. said they would consider arming opposition forces. Gold futures reached a record $1,448.60 an ounce on March 24 as fighting in Libya, the Japanese nuclear crisis and concerns about European debt boosted demand for a protection of wealth.

“Given the unrest in the Middle East and North Africa region, increasing debt issues in the euro zone and the environment of historically low interest rates, gold and silver should continue to remain underpinned and test towards recent highs,” James Moore, an analyst at in London, said in a report.

Gold futures for June delivery rose $13.20, or 0.9 percent, to $1,438.10 an ounce at 11:52 a.m. on the Comex in New York. Prices are up 1.2 percent this quarter. A 10th quarterly increase would be the best run of gains since at least 1975. The metal for immediate delivery in London was 1 percent higher at $1,436.93.

Libyan Foreign Minister Moussa Koussa quit Qaddafi’s government as rebels were forced to abandon much of the territory they captured after the U.S.-led air campaign against Qaddafi’s army began almost two weeks ago. The fighting in Libya is the most violent seen in more than two months of popular uprisings across the Middle East and North Africa.

Portuguese Debt

Standard & Poor’s this week cut credit ratings for Greece and Portugal, and the cost of insuring Portuguese government debt reached a record according to CMA prices, as speculation mounted the nation will be forced to restructure its borrowings. Irish regulators instructed four banks to raise 24 billion euros ($34.1 billion) in additional capital following a stress test on the nation’s lenders.

Tokyo Electric Power Co. has been spraying water on the reactors at the Fukushima Dai-Ichi plant damaged after this month’s earthquake and tsunami in Japan. Work to repair the plant’s monitoring and cooling systems has been hampered by discoveries of hazardous radioactive water. The government hasn’t ruled out pouring concrete over the whole facility as one way to shut it down, Chief Cabinet Secretary Yukio Edano said.

Gold and silver are being supported by “inflation, geopolitical and euro zone debt concerns,” analysts at GoldCore Ltd. in Dublin said in a report.

Inflation Accelerates

European inflation unexpectedly accelerated to 2.6 percent in March, the fastest in more than two years, the European Union’s statistics office said today.

Gains were limited this quarter on signs the U.S. economy is improving, boosting investor appetite for higher-yielding assets like stocks. St. Louis Federal Reserve Bank President James Bullard yesterday said the central bank may need to begin pulling back from record levels of monetary accommodation even amid uncertainties in Japan and the Middle East.

Silver for May delivery in New York rose 0.4 percent to $37.675 an ounce. It reached $38.18 on March 24, the highest level since February 1980, the year futures reached a record $50.35. Prices are up 22 percent this year, heading for a ninth straight quarterly advance, the best run of gains since at least 1975.

An ounce of gold bought as little as 37.72 ounces of silver in London today, the lowest level since October 1983, data compiled by Bloomberg show. Silver is used more in industry than gold.

“Increasing global investment and industrial demand in the very small and finite silver bullion market is a recipe for higher prices,” GoldCore analysts said. With gold near a record, “silver is the cheap alternative to gold and an attractive store of value.”

Keiser Report: Food Stamp Army

by on Mar 31, 2011

This week Max Keiser and co-host, Stacy Herbert, report on American household wealth declining by 23% while billionaires see their wealth rise by 25%. In the second half of the show, Max talks to Dmitry Orlov for an update on the state of economic collapse in America.

Libyan update with Webster Tarpley

Japan nuclear update

Debunking Gold Bears

Jordan Roy-Byrne, CMT
29 March 2011
In this missive we reply to the supposed reasons against investing in Gold.

Point: If you bought Gold in 1980, you were in the red for many years.

In only two and a half months, Gold went from $400/oz to over $850/oz. Gold really began to takeoff in the second quarter of 1979 at a price of $250/oz. Some buying came in after Gold's initial crash as it rebounded from $500/oz to $750/oz. The point is Gold spent only nine months above $500/oz. The spike was extremely short-lived. Very few people bought in above $500/oz. Gold bears would have you believe "the public" came in at $800/oz. There wasn't enough time for that. The bubble itself was very quick and over within months.

Point: Since 1980 stocks have outperformed Gold. Stocks for the long run!

Ah yes. Pick an arbitrary date to make your point. How about 2000? 1965? The point is there is a time and season for every asset class. There is always a bull market somewhere. The objective is to find the major trends early and ride them. Investing in stocks in 2000 was a disastrous decision. By 2020, investing in Gold might be disastrous but certainly not now.

Point: Gold is a bad inflation hedge. Look what happened in the 1980s and 1990s.

Yes, we had inflation in the 1980s and 1990s. However, it was disinflation. Long-term inflation rates were coming down. Gold does well ahead of rising inflation or in periods of hyperinflation and deflation. If inflation is low and relatively stable then Gold will not perform well.

Point: What if we have deflation?

Deflation acts as a catalyst for Gold and gold shares. Gold held its value during 1929-1932 while the gold stocks bottomed in 1931 and outperformed for four years. Remember the deflation fears in 2002? Gold had a great run from there on. Sure the 2008 crash hurt but Gold and gold stocks were the first sectors to recover and make new highs. Growing worries of deflation would act as a catalyst for the sector. Remember, in a deflationary period cash is king. However, if all governments are highly indebted (as in now) then Gold also functions as cash.

Point: We won't have rising inflation because banks won't lend and consumers won't spend. The economy is too weak.

There is a difference between inflation and hyperinflation. Inflation is caused by monetary stimulus, bank lending and deficit spending whereas hyperinflation is quite different. In fact, it is a weak economy and deflation that causes hyperinflation in many countries. When a government can't borrow and tax revenues are falling, severe inflation is inevitable. Mind you, we aren't predicting this in the western world. However, when one looks at the US, Europe and Japan, it is impossible that these economies can grow their way out of the debt burden. Hence, they are periodically monetizing debt.

Point: Interest rates will rise and that will support fiat currencies and crush Gold.

Hello? The 1970s? I think that was a pretty good time for precious metals and terrible for Bonds. Western nations are so indebted (particularly the US and Japan) that they can't afford higher interest rates. We've written about this in the past. Higher interest rates will only exacerbate the problem and serve as a major catalyst for the bull market in hard assets.

Point: Gold is a crowded trade and a bubble.

First of all, ignore anyone who calls Gold a trade. It's a bull market not a trade. A trade makes it sound like it is a fad and aberration. Yes, there will be wild swings both ways but the global allocation to Gold and gold shares is 1%. Its estimated that the allocation to Gold and gold shares in pension funds is 0.3%. Does that sound like a bubble? Not even close. Good God, can you imagine if that figure went to 5%?

Point: Gold is just a rock with no utility.

Gold is money and has been throughout history. When governments and their finances are stable, Gold becomes valued as a commodity rather than a currency and its then when its utility is diminished. When government finances are unstable, Gold becomes the money of choice. Saying Gold is just a rock is really ignorant.

Point: You can't eat Gold.

I didn't know the US Dollar had any nutritional value. I didn't know a currency had to function as food.

Jordan Roy-Byrne, CMT
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