Thoughts on Markets

Friday, June 11, 2010

Worship the Lord in beauty of His Holiness - Markets and Metals

From The Daily Pfennig: "So... Yesterday morning, I told you about the Chinese exports data and how a huge sigh of relief came over the global growth campers... The Chinese had also thrown the euro a bone by making a statement about how they viewed Europe weathering the storm there. Australia had great employment data, and New Zealand raised rates... These things all ganged up on the Risk Aversion crowd, and a rally was on!

But it didn't just stop there! And this one caught me by surprise, so my bad... The Brazilian Central Bank raised rates for the second consecutive meeting, and once again they didn't dawdle around with 25 BPS hikes... They went for the full Monty... 75 BPS or 3/4%... The Central Bank issued a one sentence statement that acknowledged the 75 BPS hike was to keep inflation moving toward their target... To me, that just leaves the door open for more rate hikes, although, at some point, the 75 BPS variety will have to be lowered...

But... The real loved the move! Well, better put I think would be to say, buyers of the real loved the move! The real booked a very nice gain yesterday, another wild swing, but this time it was positive! So, it's all good!

So... Here we go! (to borrow the phrase from Bud Light) We've got Australia, Brazil, Canada, New Zealand, and Norway, that are on the roster of countries that have raised interest rates from historical lows... These countries have done the "right thing" in keeping their eyes focused on their own fundamentals, and not those of the world... Good Show!

The currencies had a nice rally VS the dollar yesterday, but Gold saw the other side of that trade... This has really been strange lately, as Gold trades alongside the dollar... That certainly won't last long... Gold is the alternative dollar... So trading alongside is strange... Very strange..."

Is the rate raising move going to spread? It seems that more nations are climbing aboard this train. Of course, there are some, e.g. the U.S., who can ill afford such a move. A rate raise here, though likely a good thing would practically guarantee a double dip recession/depression


SEC joins crowd investigating $300mn gold-mining taxation Ponzi scheme

The SEC became the latest regulatory agency in two nations trying to unwind a complex web of gold mining taxation and investment fraud, which bilked 3,000 investors of US$300 million.
An elaborate $300 million Ponzi scheme involving a gold mining taxation scam which bilked 3,000 investors including the elderly as well as seven current or former NFL football players has now incurred the wrath of the SEC.
In a complaint filed with the U.S. District Court for the Western District of Washington, the SEC sought an injunction against four Canadians, two Florida men and four companies, charging them with securities fraud.

Interestingly, the whole scheme was exposed with the help of a former con man turned church pastor who went undercover for the FBI as it investigated two gold companies without any real gold assets that were linked to the fraud.

Milowe Allen Brost, 56, and Gary Allen Sorenson, 66, both of Calgary, Alberta, were reportedly the primary architects and beneficiaries of the scheme that convinced more than 3,000 investors across the U.S. and Canada to invest their savings, retirement funds and even home equity, the SEC said in a filing Thursday with the U.S. District Court for the Western District of Washington. The agency said the investors were actually investing in shell companies owned or controlled by Brost or Sorenson. Read it HERE.

Another Moose Pasture gold scheme. How many are there out there? Such tends to give gold mines a bad name. Certainly, we must separate the Moose Pasture deals from the actual miners.


U.S. asset managers worried Obama could confiscate gold

Anecdotal evidence suggests some major U.S. asset managers prefer to hold gold outside the U.S. for fear of confiscation in an echo of Roosevelt's 1933 decree.
Speaking at the FT Silver conference in London yesterday, lead-off speaker John Levin, HSBC Bank's Managing Director, Global Metals and Trading (HSBC is one of the world's top precious metals traders and its vaults in the U.S. and Europe hold huge holdings of gold and silver bullion) recounted conversations with some of the U.S.'s top asset managers controlling massive amounts of capital asking if HSBC had the capacity in its vaults to store major gold purchases.  On being told that the bank's U.S. vaults had sufficient space available he was told that they did not want their gold stored in the U.S.A. but preferably in Europe because they feared that at some stage the U.S. Administration might follow the path set by Franklin D. Roosevelt in 1933 and confiscate all U.S. gold holdings as part of the country's strategy in dealing with the nation's economic problems. Read it HERE.

While I believe that this has the chance of the proverbial snow ball, the rumors still fly. Roosevelt had little problem in his immoral act, but Obama faces a more hostile public which would be unwilling to surrender its gold.


Silver - "the Devil's metal - like gold on crack"

Top HSBC metals trader John Levin on his love-hate relationship with silver in his day to day business and some fascinating insights into the current views of major asset managers.

In opening his presentation to the FT's first Silver Conference, held at the London Stock Exchange yesterday, HSBC's

When he started trading silver, Levin said it was referred to as the $5 commodity in the markets - when it fell to $4 it was too cheap and when it reached $6 was too expensive - and it sat at around the $5 level for many years, before starting to take off alongside the rising gold price around 10 years ago.  Since then he says he has had a love-hate relationship with the metal because of the difficulty in trading it - but recently HSBC has seen big investment positions being taken in precious metals. Read it HERE.

For my portfolios, I am heavily in silver miners. My thoughts, for me, are that silver will go into the wild blue once we are in the third phase for gold.


Yesterday's Top Story: Gold close to boiling point - McEwen

Rob McEwen hopes we manage to avoid the "darkest hour" describing fearsome parallels between the Weimar Republic to the United States of today. Interview with The Gold Report.
Author: The Gold Report
Posted:  Thursday , 10 Jun 2010 

The Gold Report: We see a lot of troubling scenes on the global economic landscape-from the bailouts in Europe to ever-increasing deficit spending in the U.S. to talk about a housing bubble about to burst in China. What's your view of all of this turmoil?

Rob McEwen: I think the economic news will continue to get worse. We've had a lot of monetary stimulation by the governments of the West. In Europe, we're seeing that not only were corporations levered, but governments used off balance sheet techniques to alter the appearance of their financials. Greece and Portugal and Italy and Ireland are all part of that, but I suspect it's even larger. It all goes back to people taking advantage of very easy, low-cost credit, believing the economy would continue to grow endlessly.

Then people began to realize they got overextended. In the Middle East and Far East, nations started moving money out of dollars into alternative currencies, the most significant of which was the euro about a year to 18 months ago. Iran said they were going to price oil in euros because they thought the dollar would get weaker and weaker and wouldn't be defended by the U.S. government. China started to diversify its huge foreign reserves out of dollars. They viewed the euro as the alternative to the dollar. Of course today there's a tremendous rush out of euros.

Europe's as much a mess as America, but ironically, the dollar now offers refuge because you can take money out of the euro (or any other currency) and put it into a dollar very quickly. From that standpoint, America looks better than Europe right now, but I believe that's a short-term view. It won't be long before people look around and say, "Let's not forget about the debts and the weakness in the U.S. economy. Where do we go next?"

Could be. We must pray that it does not go that far.

From CNBC from

CNBC Asia's 'Squawk Box' finds affirmation for GATA

Dear Friend of GATA and Gold:
Having moved to CNBC Asia, former Bloomberg TV Asia journalist Bernie Lo yesterday injected GATA into a discussion of gold on CNBC's "Squawk Box" program. "Squawk Box" was interviewing UBS Wealth Management's chief investment strategist Kelvin Tay and Nomura International managing director Paul Schulte when Lo asked them about GATA and gold price manipulation by central banks. Schulte enthusiastically agreed that central banks manipulate the gold price. The "Squawk Box" segment referring to GATA is 6 minutes long and the reference to GATA begins at 3:45. You can find it here:


Getting Gold: Seasonal Price Trends are Favorable for Summer Purchases
(Graphics and text by
A momentous shift in the financial realm occurred at the turn of the millennium, but did so without fireworks -- not a single squib was heard on its behalf. After all, the gold market had long and dutifully languished, languished so utterly weary with its own 20-year bearish attitude that the proverbial "rock-bottom" was struck at $250 (and not just once but rather twice, as if to re-emphasize contempt at the price tag), a price so absurdly low it triggered a cathartic purging of all further legitimate bearish opinion on the matter. (Illegitimate bearish opinion continues to this day and suffers accordingly.)See the Graphs and read the article HERE.


Gold: The Only Asset Worth Owning

Eric Sprott founded Sprott Asset Management in 2001 and has over $5 billion in assets under management. He has been an outspoken gold bull since 2000 and warned that the bursting of the Nasdaq bubble was the start of a long-term deflationary trend that is playing out. I met him last week in Toronto for an interview.

EJ: You've loved gold for a long time but, when the crisis hit in 2008, gold and junior miners got killed like everyone else. How do you explain that?

ES: I treat what happened to gold stocks in 2008 as anomalous. Now, two years later, gold's at a record price and gold stocks have come back from an absolute pasting.

I'm not convinced the market is always right. The market can be very wrong for a certain time period. I remember in 2006 when homebuilder stocks rallied 60% because people thought housing was turning.

We love gold and silver stocks. I'm still bullish on my prior stock picks of junior miners. [At the May Value Investing Congress, Sprott recommended OceanaGold Corp., which is listed in Toronto under OGC, Avion Gold (AVGC.PK), and East Asia Minerals (EAIAF.PK).] Why? Because there could be times in the life of investing when people only buy one thing. That's what happened in the mid-1930s. They only bought gold stocks. So much so, there were 80,000 gold mines in the States then because they could get financing.  Read it HERE.

From Ed Steer's Gold and Silver Daily: "Both Ted and I are waiting for the silver price to blow up.  Ted heard rumors yesterday that it will take the Central Fund of Canada the better part of five or six months to get all the silver they purchased on their latest offering last month.  If that's the case, then the world is effectively out of silver right now.  I'm sure that's the reason why the SLV is still running miles behind the GLD ETF... as gold continues to pour into it... regardless of the price action.  You would be perfectly within you right, dear reader, to ask... what is going on out here? 

The answer from me is... I don't know.  But that's why I'm 'all in'.

Whether or not we experience a 'summer doldrums' in the precious metals this year, is still open to debate.  If we do have one... it will be courtesy of the bullion banks... and nothing to do with supply and demand fundamentals in the real world."

The miners from


The Currencies from

Some prices at almost noon: BYDDF 7.92; FVITF 1.9629; TLT 97.25; TBT 39.06; GDXJ 27.92; Gold up 9.10 to 1223.90; Silver up 0.07 to 18.31; DOW down 23 to 10149.33.

Make it a great day for yourself by depending upon and trusting in the Lord and showing your love toward His Son by obedience to His word. Praise the Lord! Do not neglect the gathering together of the saints in corporate worship on the Lord's Day this week end.

Best to each, Doug


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