Thoughts on Markets

Tuesday, December 02, 2008

Finally Admitted, We are in a recession which started a year ago!

From Casey's Daily Resource Plus:

"The gloomy news came in bunches yesterday. The Institute for Supply Management reported that its manufacturing index fell to 36.2% in November from 38.9% in October, its lowest reading since May 1982 and worse than economists’ expectations for a drop to 37%. Readings under 50% indicate most firms reported worsening conditions."

Doug Comment: There is much more of this type of "encouraging" news to come. I believe the recession is going to be around for months, possibly for a year or so. There is nothing on the horizon that lets us view any light from the end of the tunnel. The bail outs and interest cuts have be little more than ineffective band aids on a damaged artery. By the way, interest rate cuts will be the messages of central banks around the world. The Royal Bank of Australia lopped off 1% yesterday. More will follow as they through out all caution in their failed attempt to head off the world wide recession.

From Gold Anti-Trust Action Committee:

J.P. Morgan report likes gold for many of GATA's reasons

1:40p ET Saturday, November 29, 2008

Dear Friend of GATA and Gold:

A report on gold and gold stocks issued this week by J.P. Morgan Securities Ltd. is positive for many of the reasons GATA has brought to your attention, though of course while it describes central bank involvement in the market the report does not quite frankly acknowledge the intent to suppress the price. An excerpt from the report:

"Gold has been competing with the dollar as a relatively safe haven for investors as stock markets have fallen. Initially, gold and the dollar performed well, but it's wrong to compare dollar strength with the performance of the dollar-denominated gold price since, as the dollar rises, it slows the upward movement of dollar gold. In the less volatile Swiss franc, gold achieved a new all-time high about one month ago. Until the fear-driven flows into the dollar slow, the dollar could continue to rise, but gold's improved visibility may be preparing gold for strength into the year end. We would like to see gold perform in absolute terms, but we are very happy with gold's out performance of the S&P 500. ..."

Read the original article HERE.

Another article from Sprott Management's monthly commentary:

Eric Sprott and Sasha Solunac: The solution

11:20a ET Sunday, November 30, 2008

Dear Friend of GATA and Gold:

The financialization of Western economies (particuarly the U.S. economy) has been noted before but maybe not as well as it is in the essay appended here by Eric Sprott and Sasha Solunac of Sprott Asset Management in Toronto. Propping up the financial system with extraordinary measures lately has done nothing for the real economy, Sprott and Solunac note; it has only thrown good money after bad. The real economy, they argue, would be supported better by raising commodity prices, which government could arrange with infrastructure programs and direct purchases of commodity inventories.

Read the article HERE.

From Bloomberg.com:

Bernanke Says Fed May Buy Treasuries to Aid Economy (Update3)

By Scott Lanman and Vivien Lou Chen

Dec. 1 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said he has “obviously limited” room to lower interest rates further and may use less conventional policies, such as buying Treasury securities, to revive the economy.


Read the article HERE.

Copper prices are a measuring rod for manufacturing, physical building and infrastructure businesses. This on copper from MineWeb.com:

Copper: what does the price fall portend?

A decidedly bearish view on what happens next with respect to the copper price from a specialist analyst who predicted a major decline in the copper price here almost exactly one year ago.

Author: Simon Hunt
Posted: Tuesday , 02 Dec 2008

WEYBRIDGE, UK -

To serious students of the copper market, the 60% fall in the copper price since early July was no surprise. What was surprising was how long the price had defied gravity and the real situation. The reasoning was mainly twofold. The first was a proper reading of the macroeconomic situation with its impact on global consumption; and the second was the knowledge that copper prices were being manipulated by groups who were both holding material off the market and others who were encouraging financial institutions to engage in holding leveraged positions and other instruments in the market.

See the article HERE.

Some interesting news on DRD Gold from Resource Investors:

DRDGold Says It Has A Solution To Rising ERPM Water Levels

By Charlotte Mathews
01 Dec 2008 at 10:56 AM GMT-05:00

DRDGold had devised a pumping solution to check rising water levels at its ERPM mine on the East Rand that would address environmental threats, CEO-designate Niël Pretorius said on Friday.

See the article HERE.

Well, today we see that gold has moved up some to 782.20 and silver to 9.66. Both are currently on up ticks. The mining stocks are following the precious metals with DROOY @ 4.20 amd VGZ @1.13. Virtually all are up today. They also seem to be hooked up with the general market again. The DJI is up about 183 at 8330. I would like it much better if the miners were not so dependent upon the general market. They will uncouple at some time in the not too distant future.

In the mean time, I will be looking to establish 5% Trailing Stops on my trading stocks (DROOY, HMY, and VGZ). Current prices are DROOY 4.20; HMY 7.75; VGZ 1.10. It is important that you make your own decisions, as what I do may not fit your investment plans and risk taking attitude. Educate yourself and prayfully make your plans to suit your situation. Always, consider a good nights rest without worry as a benefit of knowing your risk tolerance.

Always commit your plans to the Lord and depend upon Him for the results. God always teaches us through our failures. Study them and make plans with fewer errors. We must be steeped in the word of God to guide our lives on earth and for a wonderful hereafter in the presence of King Jesus forever.

Best to each, Doug

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