@Deadeye—I like seeing a post from you

-> Posted by breeze @ 23:56 pm on June 18, 2008

and I sure hope you’re right.  A lot of us could use a better day.

the point being

-> Posted by ment17 @ 23:51 pm on June 18, 2008

on nuclear reactors .. the need… to be off and running .. getting in gear .. to get these things built.

as they can produce the power and electricity the world needs to keep its industry alive ..

would of could of should of will not work.. on with the effort ..

Consequences: The Bear Case For Gold and Why It Is Totally Incorrect

-> Posted by eeos @ 23:48 pm on June 18, 2008

 Author: Jim Sinclair

Dear CIGAs,

The Bear case for gold is made up of the following points:

  1. The Federal Reserve slows down on rate cutting.
  2. The Euro Central Bank raises rates modestly.
  3. The US dollar then rallies.
  4. Commodities fall, especially crude and edibles, because the dollar rises.
  5. Shortages in foodstuffs globally stop.
  6. The US Equity Markets rise.
  7. Gold falls.
  8. All problems solved.

These points make up the flavor of this week.

All short-term market movements in anything produce the assumed reasons ?why? after the fact.

The reasons ?why? then at that moment (see above) seem acceptable because the market that produced them is moving in their direction, as was the case today.

The primary reason why this scenario is weak is due to the ?CONSEQUENCES? of the actions taken to produce the appearance of normalcy.

Monetary inflation ALWAYS produces price inflation regardless of the level of business activity.

There is no question that international liquidity is growing at a rate that would double it if kept up until 2012. That even in one year is beyond rationality or belief.

Those that deny international liquidity is moving higher at this rate have actually accepted the announcement of the Treasury Auction that put cash into the banking, investment banking and other fanatical entities at or near bankruptcy as normal a Treasury action. They then write tomes saying the Fed actions are monetarily neutral, exposing themselves as damn fools dressed in academic clothing.

Regardless of how normal the perspective is spun, the cellar is full of unprecedented financial rot. The need to keep that rot from starting a domino effect requires that any and all funds required will be produced to prevent any primary US Treasury dealer or significant OTC derivative grantor from going broke.

The reason to keep primary treasury dealers alive is self-evident.

The reason that Bear Stearns could not go broke is that it would have caused their more than 20,000 OTC derivative counter-party financial entities to fess up to the fact that the specific performance contract with Bear Stearns cannot function and is therefore valueless.

The only time nominal value becomes real value with an OTC derivative is when the specific performance contract goes bankrupt and one side, the losing side, cannot perform. This is FACT.

The upcoming plague of hyperinflation is raising its head due to a combination of the hot-dry long weather cycle and global demand for crude products, but more so from the unprecedented amount of international liquidity created in order to offset true valuation of the OTC derivatives.

The CONSEQUENCES of the expansion of monetary liquidity will NOT be vacated. It cannot be by any measure, action or spin.

As an effect of the about-to-balloon Federal Budget deficit and the CONSEQUENCES of not letting major financial institutions collapse, the euro will reach $2USD and the US dollar will hit .5200 USDX.

What the Bears fail to realize is:

  1. Of course the Fed has to slow down rate cuts as they are closing in on zero quite quickly. Dropping the rate significantly now would empty the ammunition locker for spin if an emergency drop becomes again required.
  2. The Central Bank of Euroland may increase rates, but common to those who have experienced their currency dissolve due to inflation, the decrease would be quite gradual.
  3. Comparative US/euro interest rates price itself into an equation of the dollar/euro rate, finding an equilibrium point. That point is equally impacted by what the Fed is doing in all areas.
  4. As the Fed (at what they call Treasury Auctions) buys OTC derivative paper in exchange for cash or treasuries, their balance sheet weakens and that factors into the dollar/euro relationship.
  5. As Federal spending stays even or increases in the face of decreasing Federal tax revenues, the growing Federal Budget Deficit is factored into the dollar/euro relationship.
  6. As a change of guard closes in on the US Administration, the economic policies of the candidates factor into the dollar/euro relationship. There are only 270 days, 8 hours, 13 minutes and 38 seconds at this writing until a new guard arrives, more than likely a clone of the present.
  7. The shortage of food cannot be solved by closing US markets, no matter how Mr. Gartman feels, as food trades everywhere and traders that matter trade everywhere. That will be factored into the dollar/euro relationship. In Asia a shift has been made from eating a purely carbohydrate diet to eating a protein diet and that WILL NOT reverse, no matter how much Mr. Gartman feels the impact of stopping US futures trading on foods means.
  8. Hyperinflation is unavoidable as a product of the expansion of international liquidity that persists, regardless of Western business conditions that would be an on balance factor for the dollar/euro relationship.
  9. A dollar rally from a change in the US momentum of lowering interest rates would be a modest affair as world central banks awash in dollars that have declined drastically are eager to offload. Sovereign Funds, investments via loans to private companies and other methods of getting out of US dollar would accelerate. This is certainly true in precious, base and strategic metals, as well as food production. Most of this will take place in the financial acquisition of Africa.
  10. Should a dollar rally occur from these levels it wouldn?t have legs because of the financial rot in the US system and the debilitation of the Federal Reserve balance sheet that occurs as junk is bought for cash and treasuries with no equal or even near equal value.
  11. Closing of markets, as Mr. Gartman proposes, will not happen, as it is the same as saying currency controls can act to correct the value of currencies when the underlying fundamentals are violently contrary to that assumption. His proposal is akin to price controls of foodstuffs resulting in more food to feed the many. That is simply wrong.
  12. I have given warning that shorting equities has to be for a fast cover because liquidity is the grease of the wheels of equity value, not business activity.
  13. In the Weimar experience the stock market went up violently before it all exploded during a period when business activity was awful.
  14. Gold can have significant reactions at any time yet whatever gold is to do on the downside should complete by the first week of May. As far as gold shares are concerned they should reverse by May 8th at the latest even if gold is still chopping for a bottom.
  15. This reinforces my plea to the average person not to use margin in anything gold as you lose your freedom of action, you are not disciplined enough and you have a financial death wish.
  16. For the gold investor in anything gold without margin, the reaction from the first penetration of $1000 is meaningless. The market has NOT topped.
  17. What differentiates today from the early 1980s is the mountain of garbage paper called OTC derivatives and the growing demand for proper valuation, much of which is zero. There is no Paul Volcker at the controls.

You are all welcome to call me if you need me. I can be reached at 860-364-1830. If I am on the phone leave a message and I will return your call.

Your friend,
Jim

 p.s. you all can call me too….just don’t make it too late dangit. I don’t promise I will answer but hey, you can call. When JS says you can call, it makes me wonder if we are going to have some more days of getting drug through the mud?? Who knows.

LEAP/E2020 Summer 2008 Alert – July-December 2008: The world plunges into the heart of the global systemic crisis

-> Posted by PM_Energy @ 23:24 pm on June 18, 2008

Follow link for the full article.

LEAP/E2020 Summer 2008 Alert – July-December 2008: The world plunges into the heart of the global systemic crisis

On the occasion of this 26th – Summer 2008 Special – edition of the Global Europe Anticipation Bulletin, the LEAP/E2020 team has decided to launch an alert on the July-December 2008 period. Indeed, our team is now convinced that this period will consist for the whole world in a major plunge into the heart of the phase of impact of the global systemic crisis. The upcoming six months are in fact the core of the unfolding crisis. The troubles met in the past six months were mere harbingers.

(Ipso_Facto) Hi there.

-> Posted by Deadeye @ 23:22 pm on June 18, 2008

Been to the mountain and got the word. You will be glad to hear - we are going up tomorrow and Fri for a change.

Global systemic crisis / September 2008 - Phase of collapse of US real economy

-> Posted by PM_Energy @ 23:17 pm on June 18, 2008

click for full article link

According to LEAP/E2020, the end of the third quarter of 2008 will be marked by a new tipping point in the unfolding of the global systemic crisis. At that time indeed, the cumulated impact of the various sequences of the crisis (see table below) will reach its maximum strength and affect decisively the very heart of the systems concerned, on the frontline of which the United States, epicentre of the current crisis. In the United States, this new tipping point will translate into a collapse of the real economy, final socio-economic stage of the serial bursting of the housing and financial bubbles (1) and of the pursuance of the US dollar fall. The collapse of US real economy means the virtual freeze of the American economic machinery: private and public bankruptcies in large numbers, companies and public services closing down massively (2),…

@silver_rider re gardening

-> Posted by Aguila @ 23:10 pm on June 18, 2008

I’m looking for your contact information here so I can buy some neem oil for the garden project.

Who’s gonna eat these vegetables?  This Gold-BUG or those pesky little wild-BUGS that stay up all night in the garden?  When do they sleep anyway?  Why don’t they go eat a little crabgrass or something?

silver_rider and grin@10:49 June 18 and Equis also

-> Posted by Aguila @ 23:06 pm on June 18, 2008

By golly if our sentiment does not mark the bottom then watch out below

I just bought a wheat mill so I can turn wheat to flour to bake and sell bread so to buy beer… does anybody have yeast?

Price controls…

-> Posted by PM_Energy @ 22:58 pm on June 18, 2008

MEXICO FREEZES PRICES ON FOOD ITEMS TO STEM INFLATION

June 19th, 2008 Via: Houston Chronicle:

Moving to stem rising inflation and civil discontent, President Felipe Calderon and Mexican industrialists announced an agreement Wednesday to freeze prices on more than 150 food items.

The pact, which will be in effect through the end of the year, comes amid escalating costs of corn and other staples of the Mexican diet. Companies agreed to hold prices steady for cooking oil, tortillas, flour, tomato sauce, canned soups and tuna, beans, chili sauces and other staples of the Mexican table.

“In recent months the significant increase in the price of food has been felt worldwide,” Calderon said in announcing the deal. “Maintaining the maximum prices of these products fixed will truly permit an enormous support for the household economy.”

Calderon last month ordered the easing of restrictions on imported corn, wheat and rice to stabilize local prices of those grains. He has also announced measures — criticized as insufficient by farm groups — to boost agricultural production and lower farmers’ costs.

This year’s sustained price spikes for oil, grains and other commodities have sparked riots across the developing world and parts of Europe. Food riots brought the forced resignation of Haiti’s prime minister earlier this year.

Though Mexico’s mostly urban population has remained calm, Calderon’s government has been maneuvering to keep food and gasoline prices low.

The price freeze on some items will hold until December only if “there aren’t indiscriminate increases in these prices, specifically of raw materials,” said Ismael Plascencia, president of the Concamin, a national organization composed of various manufacturers associations.

But increasing raw material costs are as likely for Mexican manufacturers as they are worldwide, said economist Rogelio Ramirez de la O, whose firm advises some of the largest companies operating here.

“Everything is going up in price,” Ramirez de la O said. “There is no escape.”

Larger Mexican companies, some of which have a stranglehold on their industries and enjoy profit margins of as much as 30 percent, likely will be able to absorb the increased costs, Ramirez de la O said. But many smaller manufacturers could be severely squeezed.

“No one really expects these prices to be fixed for such a long time,” said Ramirez de la O, who also served as economic advisor to the leftist candidate who lost the presidential election two years ago to Calderon.

The price of corn tortillas rose 22 percent early last month, according to the federal consumer protection agency, while rice has spiked by 40 percent since the beginning of the year.

Calderon’s government disclosed recently that nearly all the windfall profits from Mexico’s oil exports — 1.3 million barrels a day to the U.S. Gulf Coast refineries — are being spent to subsidize gasoline sold inside the country.

Mexico imports about 40 percent of its gasoline, most of it from the United States. Regular gasoline sells for about $2.80 a gallon, far lower than the price in the United States.

“This is a populist measure,” Ramirez de la O said of Wednesday’s accord. “The government is running very short of real alternatives.”

The vote? we have a vote??

-> Posted by PM_Energy @ 22:49 pm on June 18, 2008

why do people vote for them? Well, who actually does? Maybe a few count, as we know, the brainwashed hoards seem vast. But they’re also usually too lazy to show.

Personally I have now come to the conclusion that the entire vote is purely illusion, and it may be that it has always been this way. I have seen friends and family members disenfranchised on multiple occasions. But the absolute worst is voting in a small precinct and not seeing my vote in the tally. This is from personal experience with my vote not being shown in my precinct in multiple elections now. Ohio’s voting issues are some of the better documented ones. It is one huge sham. And the sheeple just go along with it. With the strong arm of the police state in place, it does no good to throw oneself into the gears. It will just eat you up and keep on going.

What a great little tool the computerized voting is. The party bosses get their picks. The local precint passes its tax levy. Everybody happy. Oh and did I mention the ‘media’ is in on it? Yes, everybody happy.

No need to even show up to vote anymore.

I am heading to the hills as soon as I can manage to pull it off.

Ivanhoe Energy (IVAN)

-> Posted by amals @ 22:49 pm on June 18, 2008

A stock very heavily touted by Doug Casey a few years ago, has been doing quite well lately, and in fact has finally gone green for me after a long, oh, three years or so, of languishing.  Does anyone know what’s up with this company, why its stock has been moving recently, and any expectations for future performance?

Equiz - crossed the border!?? Heck, it’s a stampede!! These idiots are going to

-> Posted by silverboom @ 22:36 pm on June 18, 2008

ruin us all. Who the hell keeps voting for these clowns???????????????? Oh, what I would give to head-butt every last one of them, and watch the blood spurt from their broken noses. It is seldom in life that I have had an irresistable compulsion to do physical harm to another human being, but I fear that tonite I would happily break bones throughout the halls of our capitol. These people should be tried for treason, and then shot on the steps of Capitol hill, in plain site, where the public can see it. It works in Singapore, it works in China, I promise you it would work just fine right here in the good old USA.

Just_Buy_It, silverboom. Does the 20:05 posting about

-> Posted by Equisetum @ 22:12 pm on June 18, 2008

the posssibility of government take-over of refineries suggest that socialism has crept across the 49th parallel southwards into the United States?

I’m just joking.  Have a good evening.  Equiz.

@ 2_point re your 15:50 pm on June 18, 2008

-> Posted by TQ @ 22:10 pm on June 18, 2008

Nice chart.  Looks like all of 2008 has been a falling wedge.  Could resolve soon.

Cheers, TQ

p.s.  Been out all day.  Have not seen all the posts since yesterday.  Hope to catch up tomorrow.

illusion (04:19, 18 Jun 08). Thank you for your very perceptive notes.

-> Posted by Equisetum @ 22:03 pm on June 18, 2008

Your point is exactly what has been going through my mind.  I have really been wondering why we should hold a position in a company like US Gold, given its poor performance since we bought in during 2007.  Yet I am stubborn enough to hang in with this one, plus several more PM equities (some of them producers) because I have the fear of being left behind if the PM equity market does decide to move sharply upwards before or about January 2011.

But when I look at our portfolio I cant help but note how miserable the performance has been since spring 2006 for our PM equities, especially when I compare it to our biggest holding in one of our accounts, Russell Metals (RUS.TO, see chart linked below) .  We have held RUS since early 2005.  Its current dividend yield is 5.8 % per annum, with dividends automatically invested in purchase of new shares (compounding comes into play here).  At its current price, RUS.TO has a price/earnings ratio of 17.4 %.  We have a substantial capital gain on this holding since buying in during 2005 (see 3-year chart below).  Hence my comment that in hindsight we would have been better to just buy into a good dividend-yielding stock with an acceptably low price:earnings ratio, like RUS.TO, instead of playing the guessing game with PM junior stocks.

The comparison outlined above is the basis for my current attitude, which you characterized at 04:19 as my “roll over and surrender” approach.  My own view of our approach is that we are not surrendering, because we are maintaining a substantial PM equity position, over and above our holdings of physical silver and gold.  And I think we will keep those current positions for the forseeable future.

What I could not relate to last evening, and which was the stimulus for your 04:19 remarks to me, was the plea by Mr. Sinclair for us PM equity investors to contact the companies in which we hold positions to help counteract the circumstance that JS describes as “the naked short seller is an entity engaged in a criminal act”.  I have better things to do with my time than to engage in such a futile exercise for a bit player like me.  I leave that effort to the big boys like JS and probably some who post on Goldtent.

On the rare occasions that I do contact a PM company that we are invested in, it involves the same kind of due diligence questions I used during my career when doing evaluations of forest resources.  I learned early on to ask first what the corporate forest entiry was saying about their standing wood biomass inventory, then to  subcontract the help I needed from consulting forest economists and/or forest marketing specialists, to which I added my own specialization which is site index estimation based on soils and climatic criteria and stage of successional development since the last major disturbance.  I have tried to use a comparable approach when trying to get corporate information out of PM companies in which we are invested.  But I admit to only limited success with this approach, because there seems to be so much spin involved.  And I guess that is what Mr. Sinclair was getting at.  But I still think it is futile for me to ask PM companies to join in a co-operative to fend off naked short sellers.

Those are my thoughts for this evening.  Wishing you a pleasant day in your part of New Zealand.  Cheers.  Equiz.

http://stockcharts.com/h-sc/ui?s=RUS.TO&p=D&yr=3&mn=0&dy=0&id=p29006476335