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June 2010



Lowest close since November and a Death Cross soon?

June 29, 2010 – Comments (22)

Looks likely to me.

As I was saying last week (You say goodbye and I say hello, Another look at an old friend: Risk -, we have Death Crosses on the NYSE Composite, CAC 40, IBEX, NIKKEI, HSI, and SSEC. It looks like the S&P 500 will be added to that list soon.  [more]



John Hussman: Recession Warning (Unthinkability is Not Evidence)

June 29, 2010 – Comments (8)

John Hussman of puts out a Weekly Market Comment (which I highly encourage you to read every week). Per usual, this is another good article.  [more]



Robin Griffiths Interview

June 27, 2010 – Comments (8)

This is one of the best interviews I think I have ever heard. There was so much of what Mr. Griffiths had to say that I agreed with, including the fact that he as a Keynesian trained ecnomist says that Keynesian ecnomics is a failure and the Austrian economic interpretation of the macro and monetary situation correctly predicted much of the crisis. He works with cycles analysis (something that I am very interested in and find very useful). He is quite bearish on the markets. And while he has been bearish on gold for much of his 44 years in the markets, he is bullish on it now. He takes a very pragmatic view of gold and the current macro situation. This is a very good interview and is definitely worth 20 minutes of your time.  [more]



A Solar Bulb May Light the Way

June 26, 2010 – Comments (1)

This is a *great* product for countries with unstable electricity supply. There was another story I was reading months ago about a 'solar suitcase' where there is literally a suitcase (fits in overhead bins) with PV panels on the sides and an inverter/regulator built in so that is a completely portable small power station. I really love ideas like these!!  [more]



You say goodbye and I say hello, Another look at an old friend: Risk

June 24, 2010 – Comments (16)

Over a month ago I wrote this post: A look at an old friend: Risk - and had this to say:  [more]



Erste Group: Special Gold Report - In Gold We Trust

June 24, 2010 – Comments (6)

Just saw this and have not read the whole thing so I cannot comment on the contents. But just skimming though it, it has several nice charts including some interesting gold valuation metrics. Looks like it will be a good read.  [more]



New Home Sales, Look Out Below?

June 23, 2010 – Comments (20)

Another good post by Jake at Econompic. New home sales, which had a spike due to the tax credit have fallen off, which was expected. But they fell off so much that they set an new low for the decade ... that was not so expected.  [more]



What G20 will not discuss this weekend (but probably should)

June 22, 2010 – Comments (2)

Here is another very intersting article by Jim Rickards on King World News. A common theme through Rickards' work is the inevitability for returning to a gold standard. This is not necessarily my opinion. Not because I don't think it is a good idea, I am just skeptical of it happening within any kind a predictable timeframe. So (unlike most gold bashers who think this is the main reason why 'gold bugs' hold gold) I do *not* hold gold because I think it will return as an official currency or because the US or any major economy is returning to a gold standard (although this is certainly a "possibility", I am just not commenting on its "probability"). But I do hold gold because it continues to be, and never has stopped ceasing to be money. Gold, in my opinion, is and will continue to be the premier safe haven investment for the next several years and is the one asset I am most bullish on. Here is my thesis for why I hold gold (Why I hold Gold: Why I am a Long Term Optimist and consider holding gold and Optimistic Endeavor, and Why I think the Stagflationary Scenario is more likely Macroeconomically in the Intermediate term (next several years) - and no where do I list as a reason is for a return to the gold standard.  [more]



U.S. Profit-Margin Outlook `Extremely Bad': Chart of the Day

June 22, 2010 – Comments (8)

Interesing article  [more]



Apple, very funny

June 21, 2010 – Comments (13) | RELATED TICKERS: AAPL

In case none of you have seen this, this is very funny.   [more]



Saudi gold reserves over twice previous estimate

June 21, 2010 – Comments (1)

Like I have been pointing out on many occassions, eastern Central Banks have been net buyers of gold, and a few Middle East countries are headed that way too (Saudi Arabia being one of the largest). And on top of that western Central Banks have stopped becoming net sellers and are either neutral or net buyers. On top of that the IMF has reneged on its public plan to sell its gold. I have said before and I will say it again, I believe gold is and will continue to be the premier safe haven investment for the next several years.  [more]



In Budget Crisis, States Take Aim at Pension Costs

June 20, 2010 – Comments (7)

This is an article that very much goes with my post from yesterday - The Promises Must Be Broken - State governments are starting to accept the reality of the unsustainablity of the situation, but as I highlight below, there is still some major denial going on. This is a bad situation and it just keeps getting worse.  [more]



The Promises Must Be Broken

June 18, 2010 – Comments (7)

Another good article by Steve Saville. This is a bad situation: Many people depend on these entitlements but there is absoulutely no way all of the entitlements can be honored. Not even close. This is another fundamental reason why we will have a sovereign debt crisis: 1) We have a failed financials system that is only functioning today because of serious ad-hoc changes made to basic accounting rules, 2) Massive defecit spending is the only reason for the growth observed (i.e. it is unsustainable), 3) Demographics - a huge portion of the population is entering into retrirement (much more than is entering into the workforce) which reduces tax revenues and puts downward pressure on assets that retires need to live on and 4) The culmination of points 1-3, the government has put all three points on its balance sheet.... except the government does have any wealth. We have unfunded entitlements plus a national defecti that are 5 times GDP, we have a GDP that is unsustainable (consumer based and all recent growth is driven by stimulus dollars that we borrowed into existence), and a declining tax base.  [more]



Update on Short Term Gold Count

June 18, 2010 – Comments (5)

Here is my short term Gold count (using GLD as an intraday proxy for Gold). To understand where this count comes from and all of my longer term charts and counts for Gold, see this post: binve's Gold Foil Hat Zone: More Thoughts on Gold's Massive Bull Market -  [more]



Is It Time to be Bullish on Cattle?, (part II)

June 16, 2010 – Comments (7) | RELATED TICKERS: COW

In my last post: Is It Time to be Bullish on Cattle?, I said this:

binve says "Moo" [translation: If it makes a higher low at support ~64-65, then there is an inverted H&S setup that targets ~80, which is also the 38% retrace from the top]..... cows have a very concise language, leaves more time for grazing.  [more]



UBS: Gold - The Ultimate Currency

June 16, 2010 – Comments (9)

This is a very nice investment research paper by UBS, covering these topics: 1) Gold is more than meets the eye, 2) The market for gold, 3) Is gold really expensive? The question of valuation. 4) Investment outlook. I especially liked their section on the valuation of gold, similar to other articles I have previously posted. As Bill Fleckenstein points out, gold is very difficult to value to begin with: Bill Fleckenstein Interview - But I lay out a few ways in which gold can be (IMO) reasonably valued: Update on the Dow/Gold Ratio and a few more Gold Ratios and  ContraryInvestor: The Many Faces Of Gold -  [more]



Just what we need: Split CFTC approves box-office futures

June 15, 2010 – Comments (8)

Fantastic. I was hoping this thing wouldn't pass, but it did. What a crazy bunch of crap.  [more]



Japan prime minister Naoto Kan warns of Greek-style public debt problems

June 15, 2010 – Comments (2)

We continue to hear so much complaining: "Greek is a small economy, Hungary debt issue was already known, Portugal while bigger than Greece is still small globally,... ". In essence, there is a lot of rationalization and downplay of the emerging sovereign debt crisis. Well, when Japan speaks we should all listen. While it is old news that Japan has a high public debt, talk of defaulting on that debt in any form is fairly new. I think it would be very difficult to sweep this under the rug. This is a big global deal, debt issues are not isolated to small marginal economies.  [more]



George Soros: We Are Just Entering "Act 2" Of The Crisis

June 14, 2010 – Comments (11)

This is a very good talk given by Soros, and the transcript is provided in the link below. I have excerpted a few passages with some comments. Please read the whole thing, it really is worth your time. (Thanks for finding Tasty!)  [more]



Sprott / John Embry: 17 Reasons to Own Gold

June 13, 2010 – Comments (11)

Here is another good article (pretty quick read) of who gold is a good investment, if not the premier investment, for the current macro environment. Most of these I agree with, and some of them I don't. But it is a good article that I encourage you to read.

Here is the article:

I am going to comment on my views of the points below for anybody who is interested:  [more]



Bernanke Puzzled by Gold Rally

June 10, 2010 – Comments (7) | RELATED TICKERS: LO.DL , L

LOL!!! This is hilarious. Everybody, including the Chairman of the Federal Reserve, seems to be clueless / under the incorrect assumption that gold is mainly or only an inflation hedge. As I and many others have belabored repeatedly that is not gold's main function. Like I point out here: Why I hold Gold: Why I am a Long Term Optimist and consider holding gold and Optimistic Endeavor, and Why I think the Stagflationary Scenario is more likely Macroeconomically in the Intermediate term (next several years) -  [more]



Synopsis of Bernanke's Speech

June 09, 2010 – Comments (4)

Here is a quick synopsis of Bernanke's speech (to continue with moneymcbags title: 6/8/10 Midevening Report: Bernanke speech fails to significantly rally the market, says he'll overpromise more next time -  [more]



City Finance Crisis Study Recommends Considering Bankruptcy, Leasing Out Parks and Charging for Library Books

June 09, 2010 – Comments (15)

Wow. Many of us have been talking about a debt crisis in Cities and Muncipalities and then States in the US, but steps proposed this way are always a little shocking. So we are now at a crossroads. Trends like this will continue (more municipalities / cities / states will considere defaulting on debt) which will force the Federal Government to either bail them out or to let the wildfire spread. If they get bailed out, it will almost certainly be a large bailout by the Treasury, and then monetized by the Fed (will China and Japan subsidize continued free library books in San Diego?). Which will call into question the "safety" (used very loosely) and sustainability of US Sovereign Debt.

When everything gets transferred on to the balance sheet of the Fed, and the Fed thinks it can monetize that debt with impunity because the Dollar is still the reserve currency, then the market will start teaching some macroecnomic lessons to Geithener and Bernanke.  [more]



binve's Gold Foil Hat Zone: More Thoughts on Gold's Massive Bull Market

June 07, 2010 – Comments (36)

WARNING!! binv's Tin Gold Foil Hat Zone !!

.... Just call me a Gold Bug. (In case you didn't notice, I am being sarcastic. Because anybody who is bearish on gold labels anybody who is bullish on gold a Gold Bug. But that's fine, I will take it).

I am very bullish on gold. This is no surprise. I have written on the subject of gold many times.  [more]



Bill Laggner Interview

June 06, 2010 – Comments (3)

Here is a very good interview with Bill Laggner (of Bearing Asset Management) on King World News. I very much agree with what he had to say with regard to the financial and monetary system of most advanced economies. He discusses: Sentiment, Mortgage delinquencies, misinformation, lack of liquidity in the market, HFT trading, market "class warefare", the costs of a systemic bailout, gold as a monetary asset, soverign debt issues, leverage levels in the German banks and US banks, the Hungary debt crisis, the lack of ECB planning in handling this crisis, monetization of Eurozone debt, carry trade unwinds, Japanese monetization vs. US monetization, Bearing Asset Management's track record, bursting of the sovereign debt bubble, short selling as a means to price discovery (which I *completely* agree with)   [more]



Why I hold Gold: Why I am a Long Term Optimist and consider holding gold and Optimistic Endeavor, and Why I think the Stagflationary Scenario is more likely Macroeconomically in the Intermediate term (next several years)

June 05, 2010 – Comments (27)

Wow, long title :) Here it is again -- Why I hold Gold: Why I am a Long Term Optimist and consider holding gold and Optimistic Endeavor, and Why I think the Stagflationary Scenario is more likely Macroeconomically in the Intermediate term (next several years). I have made these points before scattered in several different posts and I will consolidate them here.

The argument against holding Gold only as a hedge against "inflation":

We must first disabuse anybody of the incorrect assumption that gold is an "Inflation" hedge... period. I have said this many times in the past, that gold is not only a hedge against inflation, but (and more importantly) it is a hedge against financial shenanigans and economic instability (loss of confidence).

There is absolutely nothing in economics that has only one cause and one effect. There are primary causes and secondary causes (and always multiple ones), and the primary cause at one time might become a secondary cause at a later time!!

"Gold is only a hedge against inflation". First this is an incomplete statement because it does not distinguish between monetary inflation and price inflation (most people are not even aware of the difference). And gold is a hedge against inflation (first and foremost it is a hedge against monetary inflation and is one of the few asset classes to respond to it early and directly. Moreover, all monetary measures are *NOT* created equal and you must use the proper, and in fact clearer/simpler form of money measurement, to understand monetary inflation, which is the True Money Supply / TMS - see: Steve Saville: Thoughts on Monetary Inflation. M2 and M3 have *non-monetary* components and are invalid for understanding the true scope of monetary inflation/deflation) and it is also, perhaps more importantly, a hedge against financial instability / loss of confidence.

It the 1980s, we had massive inflation. However gold dropped. So there is a contradiction right there. Why? Because Volcker's policies returned confidence back to the financial markets. And the future outlook, even though it was inflationary at the time, was deemed to be bright enough that people poured back into equities and left the safety of gold. (An example of a primary cause and a secondary cause switching importance).

The case for the stagflationary scenario in the intermediate term:

I have been hammering on the topic because it is the critical issue to understand how all of the advanced economies government's action will not only fail to produce the desired effects, but will more importantly make matters worse. The main issue is  Debt Saturation - It is critical to understand that an increasing debt load has decreasing marginal utility and there comes a point due to servicing requirements that all new debt has a negative economic impact. This is why we were NEVER going to be able to borrow and spend our way out of a crisis that was caused by too much debt to begin with.

This sets up an extreme deflationary environment (this debt load is unsustainable) within which the Federal Reserve will monetize unprecedented amounts of debt at unprecedented rates. Which will result in a simultaneous deflationary and inflationary outcome: stagflation. There is NEVER anything in economics and especially macroeconomics that has only one cause and one effect. There are always multiple effects with varying degrees of influence (both in absolute value and transience). There will be deflationary impulses and there will be extreme monetary inflation, the Fed will see to that. Which means that I think the most likely outcome will be a combination of the two: stagflation. Economically correlated assets go down in value (like your home and equities as a general asset class) and things you need to buy/consume (such as real assets / commodities) cost more. Really the worst of all possible outcomes.

I do think that most inflationists discount the amount of debt that is collapsing (even though most deflationists use measures like M2 and M3, which have a lot of non-monetary components to prove their point) while at the same time most deflationists discount the amount of monetary inflation the Fed can generate (they argue that the Fed creating base money is like pushing on a string because the banks don't have to lend, even though I am many others have pointed out that the Fed has gone around the banking system and has started monetizing private sector debt directly, which is a trend that is likely to increase not decrease). Most people on either side of the debate is not considering strong evidence that both forces are significant.

The case for holding gold as an optimistic endeavor:

I am bullish on the very long term prospects for the economy of the US and the world.

.... Now that might seem odd, because aren't all the people who invest in gold assuming the world will end? The answer is no, at least for this gold investor. I invest in gold not because the world might end, but I invest because I firmly believe it WILL NOT!!. If I was uber-bearish for the very long term, I would build a bunker underground, stocked with years of food and buy guns. Gold? For the end of the world? It makes no sense. Why would a useless shiny metal rock be something to collect if civilization ends?

It is the same thing with fiat currency (such as the US dollar). If you really thought the world would end, why collect little pieces of green paper with faces on it? How is that possibly useful? If there is no government to give you goods in exchange for it, then there are better items for a bunker mentality.

So I invest in gold because I am an optimist.

I am not bullish on the US government. I think they will inflate the dollar into worthlessness (or devalue it highly at least). But ultimately economies WILL recover, and I want to trade my gold in for something useful. Shares in a profitable alternative energy company, or a company the produces / distributes water from seawater to sustain drought countries, or any number of productive future endeavors.

Gold is simply a way to maintain purchasing power as the worlds economy goes through this large and needed contraction. So as an optimist, you should invest in gold :) Just my $0.02 (silver coins of course, not actual pennies ... :) )

Why I am long term optimistic and certainly no permabear:

The problem is that there are no straight lines. Not in nature and not in the systems that humans create. We as humans want to see linear realtionships, but they are a myth by and large. The world is inherently nonlinear. But more importantly, the world is cyclical. The are all kinds of very long cycles in nature: the fast 11 year solar cycle, 13 year cicadas, 26000 year precession cycle of the North Pole, etc.

There are also economic cycles that last a very long time, such as the 33 year Long Valuation wave cycle, or the 40 year Kondratiev Wave cycle.

But humans are *very* bad at picking out cycles that last more than 1 year. And we always want to extroplate linearly.

So I agree, the next several years will be marked by economic contraction. We were on a broad upswing for many decades and now we will contract for a long time as well. It does not make sense that we will just grow indefinitely with only brief pauses (1975, 1982, 2000, 2008).

But this is PRECISELY the reason why I am *NOT* a PERMABEAR

Because the world is cyclical. Nothing goes up forever, and nothing goes down forever.

Uptrends need to be corrected down. And once those corrections are complete, in both size and duration, the human race goes back to making progress.

The human race will always make net progress in all of it endeavors.

This is why the stock market will *never* go to "zero".

Every advancement, whether it is with the market or economy or any other endeavor, there is a hiatus and an appropriate retracemnet, but then the next wave will advance.

It is the reason why I am very optimistic for the future. Because after the current correction plays out (and I have layed out my case for why it is not over many times. Others don't agree with me and that is fine) the next bull run will be truly awesome.

Because it has to do with this idea of net advancement.

We do have a finite world with finite resources. But we have *unlimited* potential in how efficiently we use them. The advacements we have made in the last 100 years in all areas of science, but most importantly materials science, is nothing short of astounding.

As long as humans have the creative will to continue to learn and grow, we will never become extinct. We will face our challenges and come up with solutions. Our fate is very literally in our own hands. And I have no doubt whatsoever of the outcome.

Which makes very very long term bullish on the prospects of humanity. It also makes me very long term bullish on the prospects of human endeavors. And yes, that includes the stock market. I am not bullish for the intermediate term. Like I said above, we are in a long cycle, and that cycle is not over. But it will not go down forever.  [more]



Hungary says economy in grave state

June 04, 2010 – Comments (26)

Here is a good short article that discusses the Hungary debt crisis.

There are two other articles worth reading. This one: Sovereign Credit-Default Swaps Surge on Hungarian Debt Crisis - and this one: Hungary Vows to Avert Greece-Like Crisis -  [more]



Bill Fleckenstein Interview

June 03, 2010 – Comments (2)

This was a very good and refreshing interview. I did not agree with Bill Fleckenstein on everything, but I did agree with many of the points he made, especially with regard to debt levels, how the debt crisis unfolded, the total lack of prudence and will to get anything done in the wake of the first financial meltdown, and thoughts on a virtually inevitable sovereign debt crisis.

I particularly liked the last half of the interview where he talked about gold and why he holds it. It was a very pragmatic viewpoint that I completely agree and identify with. Gold is protection against bad financial and governmental decsions, especially with regards to monetary policy. And the fact that it has served this purpose for so long tells how effective it is in this regard when currency crises happen (and every fiat currency eventually has one).  [more]



ATPG, part IV

June 02, 2010 – Comments (4) | RELATED TICKERS: ATPAQ.DL

Here is my 4th look at ATPG in the last several months. I have written about ATPG several times:

- Analysis Update: ATPG and AMX
- Analysis Update: ATPG and AMX (Feb 5)
- Natty: It's a Gas!, a Review of ATPG, and a look at SWN  [more]



Greece urged to give up euro

June 02, 2010 – Comments (0)

An interesting but not unexpected development. Obviously this is still *very* preliminary, but the possibility of a Greek exit from the EU and debt default is not inconceivable.  [more]



Best... Comment... Ever....(Tastylunch)

June 01, 2010 – Comments (18)

Tastylunch's comment on this blog is probably the best comment I have ever read on this site.

Yet another impressive display why Tasty is da man :) Thanks Tasty!!

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