Housing Report Worse than Expected

"The bad news today: New home sales fall more than expected, head of IMF gives shock fiscal warning, European banks could face greater disclosure of their derivative contracts, 10 European hedge funds halt redemptions...The manager of one of Britain's biggest hedge funds said: "It's been an extraordinary week. Even in the crash of 1987 I don't remember so much carnage." And lastly, the ECB has secretly rescued the Spanish banking system." (From Casey's Resource Plus)

More bad news yesterday sent both gold and silver higher. Platinum was the big winner pushing to about 1735 before slowing and dropping a bit. Silver has remained strong and is now at 16.61 while gold is at 923.30. All three precious metals have dropped some, but are still on higher plateaus.

The www.kitco.com graph, above, shows that gold continues on its upward movement. We will have to wait and see if it goes parabolic. The run upward has been swift and may take a breather for consolidation before moving forward and upward again.

The mining stocks are recovering, but not to the same extent as the metals, themselves. This is typical, but it is also typical for the mining stocks to sprint forward in the latter stages of the precious metals bull market. By the way, the news on the precious metals is becoming a bit more evident today.

The incapacity of the South African electrical supply has virtually shut down all the mines in the country. The concern is that the power is insufficient for the safety of the miners who work some 2 miles into the earth. The government is doing what it can to restore the power, but the forecast for a complete fix is a decade away. Meanwhile, Harmony and other South African mining stock prices are suffering. Harmony, as well as others are at very tempting levels now, but I have not jumped on board, because of the power loss.


The Powershares DB Agriculture Fund (DBA), an ETF, looks good to me and I have purchased call options DBAGE (July Call @31). The prices of virtually all agricultural products are rising as we all know from shopping at the super markets these days. It is very likely that this situation will continue as ever more liquidity is pumped into the financial arena. This is a sector likely to grow as the "profits" for the Asian tigers increases giving rise to demand for products which we enjoy for food. A swing toward our food by the Asians has been reported and this will increase demand.

Closed-in mutual funds differ from the normal (Open ended) mutual funds in that they are issued in a limited number of shares and trade on the stock exchanges as other types of investments. The trading is among the investors on the exchanges. Open ended mutual funds have a varying number of shares which grow as investors purchase and decrease as investors sell. At times, one may find among the closed-in mutual funds opportunities to buy below asset value and at good dividend rates. There are two which were set up and managed by PIMCO which may appeal to some of you. PIMCO Corporate Opportunity Fund (PTY) trading at about 15.35 with an annual dividend of 1.38 or 9% and PIMCO Corporate Income Fund (PCN) trading at about 15.35 with an annual dividend of 1.28 or 8.34%. Both invest in high grade debt instruments of corporations worldwide. Check them out for yourself. I have not invested in them, but believe they could be good for IRAs where most dividends are not taxed.

I am becoming more interested in silver mining companies; such as, Coeur D'Alene Mines (CDE) 4.64; Pan American Silver Corp. (PAAS) 36.16; Silver Standard Resources Inc (SSRI) 15.16, Note that PAAS has passed SSRI is price again; and Silver Wheaton Corporation (SLW) 16.37. I have been trading call options on PAAS and SLW.

Remember options have expiration dates about which investors should be aware. After that date, they have NO VALUE.

Keep looking toward the written word in the Bible which is all about the living Word: King Jesus. He is the only way to eternal life and the abundant life on earth.

Best to each, Doug

Asian Tigers vs American Economies

The stock markets of the world moved in near lock step with the DJI early this week and have continued the same for the most part. The chart above compares the value of Real Estate Investment Trusts of North America and Asia. The Asian and Pacific REIT remain at a higher level that those of North America. However, note that the trends are almost identical. Thus, we find the movement of each is in concert with the other similar to that of the stock markets.

There is little doubt that we are experiencing a interlocked world economy. The Asian economies are growing at a more rapid rate than ours here in America, but I suspect that all will move together. All are based upon the vast liquidity produced by the central banks of the world. In such a situation growth in terms of the Gross National Product of each nation comes from the inflated money supply and is measured by the total of the currency spend in each economy. There is little concern with the fact that the resulting price inflation has artificially created the reported "growth."

In a free market economy, which does not exist in the world today, produces economic use of scarce resources to ever more efficiently utilize the resources to improve standards of living at lower prices. In other words, true economic growth is evident in an actual increase in the wealth of a nation. In such an economy, there is no need to inflate the money supply to "produce" growth, it is a natural result of the free market.

Politicians and citizens educated in Keynesian Economics fear the free market. They see that the free market punishes producers who fail to supply the consumers' needs at the best quality and price. The unprofitable producers either change their ways, produce better less expensive products or services, find another product or service, or go bankrupt. The bankrupt business leaves the market place, because it did not make the most efficient use of scarce resources. Observers see the "loss" of a business, the tax income therefrom, and the loss of jobs. However, the workers will find secure employment in the more efficient businesses. Perhaps, some will become the efficient entrepreneurs with their own businesses. This is all part of the "invisible hand" of the free market as Adam Smith wrote long ago in The Wealth of Nations.

Back to the Markets: Gold is above $900 hitting almost $925 earlier this morning and is now at $912.70. Silver pushed $16.60 and is now at $16.37. Both have recovered quite rapidly as the dollar is under more pressure with the Fed's panic cut in interest rate.

The DJI are almost even on the day at 12371+, down about 9. The general market has been highly volatile as have the precious and base metals. The S&P 500 is down about 1.50 to 1350.52.

Though we are experiencing dangerous times in all markets, they remain interesting and exciting. I believe it is time to get out of debt, accumulate some cash for emergencies and emphasize precious metals, mining stocks, and resource stocks for preservation of capital. It is interesting that the energy stocks are currently down. Possibly, this is a warning that recessions are here or on the way. After all, in recessions, there is likely to be less need for energy, and for that matter, base metals, as well. I believe we are in recession already.

Praise that Lord that He cares for His people. It is also wonderful that He even blesses those who are not His through the blessings He has for His own. We are to share the light of His word and become the salt that seasons the world.

Best to each, Doug

The DOW and the Euro are up, but are they?

Wow, what an up move in the DJI yesterday. The big question is "Will there big a big follow through today and tomorrow?" I do not know the answer to that question, nor does anyone else. The market will speak to us in language so strong and loud that the answer will be obvious. However, if you will examine the first graph of the DJI in terms of gold, you will find that gold is doing much better. Gold continues to buy more and more of the DOW which means that gold is retaining purchasing power while the DOW is languishing, even as it seems to rise in price.

In the second graph, you will see that the same is happening to the Euro in terms of the Swiss Franc. The Euro is losing value against the Swiss currency. Thus, we are seeing that the Franc is holding value while the "preferred" substitute for the the dollar: the Euro, is losing. Things must not be as great within the ECM as it may appear from the outside.

Meanwhile in Asia, China, Japan, and the Asian partners are trading among themselves to an extent that exceeds all of the past. This is helping sustain their economies and replace the potential loss of the U. S. consumer. We, consumers of the products of the world seem to be slowing in our demand for products. Perhaps, we are attempting to service our rising debt, avoid foreclosures, and stay out of bankruptcy. Maybe it is a case of all of the above. The latest retail statistics here reveal a slowing of consumer buying.

This morning, we find gold moving above $900 again and silver above $16. We should expect to see silver begin to catch up with the percentage move of gold before long. As always, be warned, the way upward is likely to be rocky with sandy, soft spots along the way. There will be corrections as the prices move to higher plateaus throughout the move.

Gold is presently $906 and Silver $16.18.

There are always interesting, and often, exciting times in markets. Remember that God tells us that it is the LOVE of money, not money that is the root of all sorts of evil. He is wisdom, Himself and knows the heart of man much better than we know ourselves. Thus, we must fear Him and prayerfully seek His guidance through diligent study of His word. There is no other way to live!

Best to each, Doug

Markets Going South

Markets all over the world were down over the week end and yesterday. Currently, the DOW is at 11961.51 down 137+. It has been down over 200 a bit earlier, so is showing some signs of recovering.

Gold is at 889.50 and silver at 16.05. Both are moving upward. Both should be going through the roof, but there is manipulation. There is a negative impact on the precious metals as many in the general stock market are being hit with margin calls and need cash to cover the calls.

Many who do not want to invest in individual mining companies and to hold the precious metal bullion coins should look to the Exchange Traded Funds (ETF) and other investment trusts. These allow investors to invest in various sectors of the market without making individual stock selections.

For investments in the metals, there are the following: www.everbank.com World Markets Metals Select, Canadian gold and silver fund (CEF), the iShares gold fund GLD, and the silver equivalent SLV. The last three are traded like stocks on the exchanges.

For investments in the mining stocks, there is the ETF GDX which is the miners index. This, too, is traded as a stock.

For energy, the ETF XLE offers diversification.

Options are available on GDX and XLE for those with greater risk tolerance. In fact, I am currently investing in calls on both of these.

The dollar has been showing some strength against other currencies, but the trend for the buck is still down. The more stimulus, the lower will the dollar go. The liquidity of paper currency in the world is at the highest level ever and most central banks and governments are advocating ever more to avoid recession at all cost. Perhaps, as many are saying we are already in a recession which seems destined to get worse. With the personal savings at an all time low, we will have little resources to survive without a lot of bankruptcies and other pain.

It is wise to avoid credit card debt, which has the greatest interest requirement. Also, it is wise to lower debt of all types and to avoid further debt. Let's make our plans to get out of debt as soon as possible and live debt free to the extent that the Lord makes possible. What a great blessing from the Lord is debt free living!

So hide the word of God in your hearts that there is not room for sin. Daily study and meditate upon God's law-word. Without the light which this sheds upon our lives, we are totally lost. He wonderfully cares for His people 24/7.

Best to each, Doug

Gold Has Backed Down to a Lower Trading Range

Above is a www.Stockcharts.com graph of Harmony Gold of which I have been a buyer below $11. From the graph, it can be seen that the recent high for HMY was above $13. It should return to that level as the dollar continues to fall and as gold breaks out of consolidation at the current level of around $880.

Silver has broken above $16 and seems to be sprinting to catch up with gold. The three silver stocks, I prefer are CDE, PAAS, and SSRI. Options are traded on both CDE and PAAS. At present I prefer the options rather than the stocks, because of the leverage offered by options. Of course, one should have a higher risk tolerance for trading in options.

The price of the option is based upon the difference between the option exercise price (the price at which the holder can use the option to either buy or sell the underlying stock) and the length of time to the time when the option expires. The time portion decreases with the passage of time. As the expiration date approaches, the value of each option becomes increasingly based solely upon the difference between the exercise price and the market price of the underlying stocks.

There are two types of options: Puts provide the holder of the option the right to sell (or put) the underlying stocks at the exercise price until the expiration date of the option. Calls provide the holder of the option the right to buy (or call) the underlying stocks at the exercise price until the expiration date of the option. Both are sold in individual contracts of 100 shares. Thus, the price paid for one contract is 100 times the market price.

We make our plans, commit them to the Lord, execute the plans, and give Him the praise for the results. It is very important to recognize that it is He, alone, Who is in control of everything. He also is working all things out in accordance to His plan for the good of His elect people.

Best to each Doug

Is the Price of Gold Going Parabolic?

The latest rise in the price of gold may be taking on the parabolic rise of the third phase. I would have thought that it was a bit early for that! Gold seems to be fighting to stay above $880, but is bounced down at times by normal profit taking or manipulation. It is currently at $881.70 and silver is at $15.68 still lagging behind gold.

Another quote from Casey's Daily Resource Plus (Emphasis added): "The open interest numbers for Monday's huge PM rally are in. In gold, o.i. rose 12,376 contracts and silver was up another 3,139. The price managers are still 100% in control of this market and are showing no signs whatsoever of backing off. Remember, they are not there to prevent the price from rising, but they are there to prevent it from seeking its true value in a very short period of time. The last thing that the Cartel wants is an out-of-control gold price. All they're succeeding in doing is dying a death of a thousand cuts rather than death by a single thrust. Sooner or later it's going to get away from them anyway; but until then, it will be business as usual for 'da boyz'.

I see in a couple of reports (one on CNBS) that Dennis Gartman sold 40% of his gold position today. He says gold is overbought and wants to buy it back when the price is back in the low $800 range. It will be interesting to see how he makes out, as it's not a trade I would be making at this time of year...unless he knows something we don't. I also note that the GLD ETF now has 639 tonnes in it.

Besides gold and silver, the President's Working Group (and their proxies) were everywhere on Wednesday to prevent a total market breakdown. They've succeeded for the moment. And the Dow....mercy sakes!...they turned it from a 70 point loss to a 146 point gain. I would suspect that there was a lot of short covering once this 'rally' developed some legs. The dollar got another out-of-the blue 'hail Mary' rally as well. Chalk one up for Paulson and his merry band of criminals."

On currencies, here is the latest from Kitco.com:

Exchange Rates
(Exchange rates displayed are the middle point between bid and ask)	[details]

Currency	Chg% X=1$USD	NY Time	X= 1$USD	X$USD =1	Gold Price/oz	Gold Chg	Gold Chg%
US Dollar	--	01/10-10:25	--	--	881.60	+2.30		+0.26%
Australian Dollar	+0.90%	01/10-10:20	1.1252	0.8888	992.04	-6.27		-0.63%
Brazilian Real	+0.31%	01/10-10:25	1.7587	0.5686	1550.65	-0.62		-0.04%
British Pound	+0.08%	01/10-10:25	0.5104	1.9594	449.98	+0.87		+0.19%
Canadian Dollar	-0.12%	01/10-10:20	1.0105	0.9897	890.91	+3.48		+0.39%
Chinese Yuan	-0.12%	01/10-07:48	7.2685	0.1376	6408.64	+25.18		+0.39%
Euro	+0.53%	01/10-10:20	0.6782	1.4746	597.92	-1.54		-0.26%
Indian Rupee	+0.01%	01/10-08:26	39.1700	0.0255	34536.19	+89.61		+0.26%
Japanese Yen	-0.31%	01/10-10:25	109.6750	0.0091	96700.45	+562.18		+0.58%
Mexican Pesos	+0.22%	01/10-10:25	10.9467	0.0914	9651.71	+4.82		+0.05%
Russian Ruble	+0.33%	01/10-10:20	24.4010	0.0410	21514.36	-11.52		-0.05%
S.African Rand	+0.54%	01/10-10:25	6.8633	0.1457	6051.33	-16.28		-0.27%
Swiss Franc	+0.68%	01/10-10:25	1.1076	0.9029	976.53	-4.02		-0.41%

The dollar is held fairly firm yesterday and the Yaun was a bit lower. The Euro is still holding well at $1.4746. The Bank of England meets today to consider interest rates. It is nestled rather uncomfortably on the horns of a dilemma. To handle the melt down in housing, the rates need to be lower, but to combat inflation higher rates are needed. The European Bank meets soon and should leave rates unchanged, even though the 3.1% inflation exceeds the maximum allowed under the treaty. Perhaps, it will bite the bullet and raise rates a bit. That would be very positive for the Euro. We shall have to wait and see.

We must keep reminding ourselves that all of these are but paper or computer blips and have value in relation to each other and the acquiescence or desire of people to use them. There is a growing drift away from the dollar. As the price of gold increases, there should be growing interest in owning gold as a safe store of wealth.

Rest assured that the Sovereign God of all, Who loves and cares for His people is in control of all and is working for the eventual good of His people. Praise Him daily!

Best, Doug