Thoughts on Markets

Wednesday, April 21, 2010

Buying Citigroup - Gold & Silver a Bit Higher

Gold is a bit higher today, but remains in a tight trading range.
Silver is lagging behind gold, but has moved a little higher
I am buying, as I mentioned in the email this morning Citigroup (C) at below 5.00. It was recommended by Richard Russell as a fairly safe buy, because he believes that it will not disappear or go very much lower, but has an upward potential as the save the banks trend continues. It could be a short term play. We will have to wait and see.

From MineWeb.com:

S&P says worst is over for U.S. Metals & Mining Sector


Standard & Poor's said Tuesday that the worst is likely over for the U.S. Metals and Mining Sector.

S&P noted, "Gold continues to be a bright spot in the sector. Its price remains high, partly reflecting its role as a store of value in tough economic times, a trend we expect to continue."

"Our optimism, however, is subdued," said S&P credit analysts because demand and prices have not consistently improved across the sector, "or even within subsectors, and we expect recovery to be choppy."

S&P warned that weak industrial demand and somewhat high inventories at ulity companies "could force further production cuts and put pressure on coal contract prices, particularly if weather conditions are not conducive to increased electricity demand." Read it HERE.

From fgmr.com:

Hyperinflation Watch – April 20, 2010

April 20, 2010 – There is an interesting article in Canada’s Globe & Mail about the lack of growth in the US money supply. Ignoring for the moment that the quantity of dollars in circulation is significantly under reported, it observes:

“The money supply in the United States is doing something that almost never happens: it’s shrinking, after taking into account inflation. Similar episodes in the past have usually been scary times for investors. Declines in the amount of money in circulation have coincided with recessions, and some analysts looking at the current trend say it is a harbinger of trouble. Despite signs that the U.S. is in recovery, they worry that the money supply numbers indicate the economy remains vulnerable to the feared double-dip downturn, or is close to experiencing deflation.”

I agree with the first half of this proposition about a renewed economic downturn, but not the second. In fact, rather than deflation, the dollar is moving ever closer to hyperinflation.

How is deflation possible when crude oil prices have more than doubled since their post-Lehman crash low? Or more broadly, how can there be deflation when the price index of 19 commodities compiled by the Commodity Research Bureau rose 47% during this same period? It cannot of course, which means there is no deflation.

This is a must read article which is very important and needs to be studied. Read it HERE.

From IMF.org:

Government Borrowing Is Rising Risk to World Financial System

The global financial system and the world economy are slowly regaining their health, thanks in large part to unprecedented interventions by governments, but the sharp rise in government debt during the economic crisis from already elevated levels helped create what the IMF says is the newest threat to the financial system: growing sovereign risk. Read it HERE.

From The Daily Pfennig: "Meanwhile back at the ranch... The loonie has gone past parity this morning!

Yes, Australia, Norway, and India have raised rates, but they aren't G-7... So... This would be HUGE for the loonie folks... HUGE!

Oh! And The Reserve Bank of India (RBI) raised their benchmark interest rate by 25 BPS yesterday! The Indian rupee continues to be one of the best performers in Asia..."

The rate increase rush is in early stages, but more will join in as time marches forward. Thus, bond market prices will begin to suffer for the rest of this year if the trend continues.

From Walter Williams in TownHall.com:

Taxes and Voting
by Walter E. Williams

According to the Tax Policy Center, a Washington, D.C., research organization, nearly half of U.S. households will pay no federal income taxes for 2009. That's up from the Tax Foundation's 2006 estimate that 41 percent of the American population, or 121 million Americans, were completely outside the federal income tax system. These Americans pay no federal income tax either because their incomes are too low or they have higher income but credits, deductions and exemptions that relieve them of tax liability. This lack of income tax liability stands in stark contrast to the top 10 percent of earners, those households earning an average of $366,400 in 2006, who paid about 73 percent of federal income taxes. The top 25 percent paid 86 percent. The bottom 50 percent of taxpayers paid less than 4 percent of federal income taxes collected. Read the article HERE.

From MineWeb.com:

John Embry: Chief Investment Strategist - Sprott Asset Management

"If gold isn't up at least $500 in the next six months, I will be surprised"

GEOFF CANDY: Hello and welcome to this week's edition of Mineweb.com's Gold Weekly podcast, my name is Geoff Candy and joining me on the line is John Embry, the Chief Investment strategist at Sprott Asset Management. John the last week or so has been a rather interesting one for the gold market. First there was the strong run upwards followed by a rather sharp retraction following the news of the SEC charges against Goldman Sachs. If we start there, why did gold react in the way it did to that news? See the video and read the article HERE.

Update on Harmony (HMY) from MineWeb.com:

Harmony closes shafts: Graham Briggs – CEO, Harmony Gold

'Really there's no option other than this.’

ALEC HOGG: Well, Harmony Gold pulled the plug on three of its oldest mining shafts today, bringing to an end 60 years of gold production there, and the loss of 3 700 jobs. I asked chief executive Graham Briggs about the timing of the decision.

GRAHAM BRIGGS: I guess it's quite a difficult decision to make, Alec, because when one goes through this process you have to understand everything that's been done could be done to try and save them, understand ore bodies, the remaining ore bodies, the cost, the structure, try and do a few different things. And, you know, we've got to that position where we've gone through all the hoops, and really there's no option other than this. Read it and listen to it HERE.

The Miners from Scottrade.com:


The currencies from Kitco.com:
Some prices today: BYDDF 9.45; FVITF 2.5554; C 5.02; CAHC 0.11; DOW up 32 to 11150; Gold up 2.90 to 1142.70; Silver up 0.09 to 17.91.

The Lord has given us another day in which to praise Him for His grace and mercy. We should also praise Him for the challenges of the day and rest in Him for the results of the work we do. Praise King Jesus daily for His many blessings.

Best to each, Doug

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