Thoughts on Markets

Tuesday, March 16, 2010

Gold Moves to $2000? China vs US

The fear of the Lord is the beginning of wisdom. This fear includes honor, respect, awe, and actual fear as we study the word of God and learn of His hatred of all sin. Each of us realize that we have broken His law and must repent and seek forgiveness from King Jesus who is the only way to reconciliation with the Father for an everlasting wonderful life with our Sovereign God. Would that we would all be there with Him at the end.

In all aspects, BYD Company seems to be moving very strongly upward. The graph is positive in all respects. Note that it is well above its 50 Day Moving Average.

Both gold and silver are on the move presently. The dollar rallied yesterday morning, but dropped off during the afternoon. It must be down again. However, the precious metals seem to becoming less dependent upon the dollar as they are moving in relation to most currencies and made a recent all time high against the Euro.

From The "But in the middle of all of this economic data was a piece of information which sent a shiver through the bond markets. Global demand for US financial assets weakened in January as both China and Japan, the two biggest holders of Treasuries, reduced their positions. The Net Long-term TIC Flows were expected to come in at $47.5 billion for the month, but instead just $19.1 billion of US financial assets were purchased. Including short-term securities, total investment flows show foreigners sold a net $33.4 billion in January after a net buying of $53.6 billion the previous month.

As readers of the Pfennig know, this is not good news for the US. We remain dependent on foreign investors, as there is just not enough 'internal' demand for our debt. If China and Japan continue to push away from the US debt table, interest rates in the US will rise, as we have to make the debt more attractive to pursue other buyers. China has been a net seller of US Treasuries for three straight months now, and Japan doesn't seem to have the ability to pick up the slack. We have been warning of this for some time now, and it looks like we may be finally seeing a reduction in demand for US investments.

You would think the TIC data would have been much bigger news yesterday, but the media was busy pursuing another story regarding China. The big stories were all about how China is being pressured by the US to let the Chinese Renminbi appreciate. Chinese Premier Wen Jiabao has rebuffed these calls, saying the Renminbi is not undervalued. "We oppose countries pointing fingers at each other and even forcing a country to appreciate its currency," Jiabao said at a press conference yesterday. Wen's remarks prompted traders to reduce their bets on a revaluation of the Chinese currency in the coming year. We continue to believe the Chinese will maintain a slow and steady approach to the Renminbi, allowing it to appreciate just 5% - 8% per year as it has done since it originally released the peg.

Chuck took a short break from baseball yesterday to send me the following from down in Jupiter FL yesterday: "More than 100 members of the US Congress on Monday called on the Obama administration to label China a currency manipulator, in a move that highlighted the pressure on Washington to take a more confrontational stance towards Beijing."

This is really bad news for us and will likely hit the long bond market worst if it comes to fruition. We are dependent upon foreign investment to support our spending binge. The White House and Congress would be wise not to antagonize the Chinese too much. Else, they will walk away from our Treasury auctions upon which we are dependent.


$2000 gold by year end: Rob McEwen

View the video HERE.

Ron makes come good points. Will it reach that? I do not know, but it certainly is possible. Much depends upon how active the bullion banks will be in capping the precious metals between now and the end of the year.


Gold's cross-currency strength signals its evolution

Gold's rally to record highs in euro and sterling terms and the resilience of spot prices in the face of a rising dollar is sign-posting the metal's broadening insurance appeal, as sovereign debt fears shift to the fore. Read it HERE.


New round of foreclosures threatens housing market

The housing market is facing swelling ranks of homeowners who are seriously delinquent but have yet to lose their homes, and this is threatening a new wave of foreclosures that could hit just as the real estate market has begun to stabilize. This is bad news for the "recovery." Read it HERE.


75 years of funny money

A good start to understanding the real nature of central banking is the libertarian bumper sticker saying "Don't steal! The government hates competition." The whole purpose of the bureaucratic machine called central bank is indeed to steal from us. This tutorial on our unbacked paper currency is a good read HERE.


Is China's Politburo spoiling for a showdown with America?

China has succumbed to hubris. It has mistaken the soft diplomacy of Barack Obama for weakness, mistaken the US credit crisis for decline, and mistaken its own mercantilist bubble for ascendancy. There are echoes of Anglo-German spats before the First World War, when Wilhelmine Berlin so badly misjudged the strategic balance of power and over-played its hand. Within a month the US Treasury must rule whether China is a "currency manipulator", triggering sanctions under US law. This has been finessed before, but we are in a new world now with America's U6 unemployment at 16.8pc. We need to be careful about sparing with China. They hold too many dollar instruments and we are dependent upon them to finance our "needs." Read the important article HERE.


Talking Points vs. Realty
by Thomas Sowell

In a swindle that would make Bernie Madoff look like an amateur, Barack Obama has gotten a substantial segment of the population to believe that he can add millions of people to the government-insured rolls without increasing the already record-breaking federal deficit. Read it HERE.

Here are the miners from
Here are the currencies from
Some Current Prices: BYDDF 9.72; FVITF 2.46; TBT 47.47; KENS 0.02; DOW up 33 to 10675; Silver 17.41 up 0.30; Gold 1123.70 up 15.10.

Best to each, Doug


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