Thoughts on Markets

Friday, April 08, 2011

ECB Ups Rates - Closer look at FVITF & SLW - Inflation vs Stagflation - Silver Over $40

Oil up to $111 a barrel. That means higher prices at the pumps. This is likely not from speculation, as many are charging, but the demand for oil has significantly increased over the last three years, and mid-east turmoil adds to the price. Shop for the lowest price among the pumps in your area. The signs of a stealth like inflation are all around the U.S. and the world today. This will continue as long as the liquidity which has been and still is being pumped into the world. 

The unbacked Keynesian currencies and economic system of the world is crumbling. It is founded upon principles which are false. God looks down from Heaven on this folly of man in derision. This type of economics leads to centralized powerful, totalitarian governments which fail to provide for the protection of the life, liberty, and property of citizens. 

Our forefathers gave us a republican, not democratic government. Ben Franklin was correct when he said that they had given us a republic if you can keep it. We, citizens have failed to keep the constitutional government which they believed they had created. As a nation, as we turned from our God, have lost all but a few remnants of the original constitution. Thus, we are no longer a free people, but have become more and more slaves to the USG upon which we are dependent for cradle to the grave coverage. The USG is made up of men and it is a false messiah. 

We are facing a collapse of the false financial system based on paper currencies. Most certainly, the dollar is not going to be the reserve currency for the world over this century. If will be replaced, likely, initially by a basket of currencies including the dollar, and then totally. We should pray that gold and silver become widely recognized as true money. More tomorrow on the implications of this "sea change" in the world.

Daily Pfennig (Pfennig@EverBank.com): "Well. The ECB did indeed hike their internal interest rate yesterday, as they laid out in their previous press conference after last month's meeting. This was the first major country to hike rates, and it was the first rate hike from the ECB in two years! The dust covers on Eurozone interest rates had to be pulled back! It's about time! If you can't spur an economy with low interest rates in 2 years, then for-get-a-bout-it! The real key I think, and the reason the euro never really sold off yesterday, was the fact that in the press conference following the rate announcement, ECB President, Trichet gave a very balanced statement. He said that no decision had yet been taken on whether this was the first of a series of rate hikes, which on first blush, would make you believe it was a "one and done" . But then he would emphasize that there were "upside risks to price stability" , and that: 1. The ECB's mandate was to provide price stability, and 2. That the ECB would not tolerate any second round effects . That leads me to believe that he left the door open for follow up rate hikes.
While I don't think the ECB will go back-to-back with rate hikes, I do believe that by the end of 2011, we'll see Eurozone internal rates at 1.75% (currently 1.25%). Remember, price stability is job number 1 at the ECB. So, as we go along this summer, let's watch for signs of continued inflation pressures in the Eurozone. When we spot them, we'll know that the ECB has seen them too, for they aren't as blind as a bat, like another Central Bank that I won't name names.." This is the big news from Europe and it sounded round the world. The currencies and precious metals surged upward with some going to new or very near old highs.

KitCo News:
A.M. Kitco Metals Roundup: Comex Gold Hits Another Record High, Silver Pushes Above $40.00, as U.S. Dollar Slumps
08 April 2011, 07:55 a.m.
By Jim Wyckoff
Comex gold futures are trading higher Friday morning and hit yet another all-time record high of $1,474.50 as of this writing. Meantime, Comex silver futures have notched a fresh 31-year high and have moved above what was psychological resistance at $40.00 an ounce. An erosive U.S. dollar index and rallying crude oil market are bullish factors helping to propel the precious metals. Comex June gold last traded up $12.60 an ounce at $1,471.90. Spot gold last traded up $12.70 at $1,471.50. The U.S. dollar index fell to a fresh five-month low overnight, while the Euro currency hit a fresh 15-month high. The greenback is under pressure following an interest rate hike from the European Central Bank and on the news Portugal will accept an EU bailout package. China earlier this week also raised its interest rates. The U.S. Federal Reserve maintains it still needs an easy monetary policy to stimulate economic growth, but it now appears the Fed may be getting behind the curve on rising inflationary pressures. It's becoming likelier the U.S. central bank will have to raise U.S. interest rates sooner rather than later. Inflation is out there, but is masked by the way the USG reports price inflation, the high level of unemployment, and the housing problem. Of course, the USG wants a weaker and lower priced dollar to enable our debt to be serviced. HERE.


The Street:
Gold Prices at New Record, Silver Hits $40
Gold prices were hitting a new record Friday and silver prices touched $40 an ounce as the precious metal bulls came out in full force.
Gold for June delivery was adding $12.40 to $1,471.70 an ounce at the Comex division of the New York Mercantile Exchange. The gold price hit another high of $1,474.50 an ounce. The spot gold price was jumping more than $12, according to Kitco's gold index. This is news that is being widely reported. Thus, folks who have failed to buy in at lower prices are beginning to wake up. This will force prices even higher as the late comers increase the demand. Better late than never, but why did they not see what was ahead as it was in the 1970s. HERE.

Mine Web:
Silver continues upwards despite bear protests
Despite a jump of over 28% this year so far, there are many investors who believe silver has room to grow but, bears worry that investors are just getting caught up in the euphoria surrounding the metal. There could be a sandy spot for the precious metals as the run up has become parabolic. Of course, when the "Gold Rush" of the third phase gets going, the price increases will shock the world. This could be the early start of the third phase, but I am not certain. The news coverage is certainly broader than it has been in years. HERE.

Silver Wheaton is one of my core holdings which I have not mentioned is some time. You must decide if it right for you. Please, make your own decisions, but I am holding and not buying at present.


Fortuna is one of my major holdings in my portfolios. It has had a sandy spot or two on the way, but it has continued to climb after every set back. It may be a bit over bought at present, but seems to have a steady growth along with the higher prices of silver. Once again, you must decide if it is correct for you. I am holding and would be a buyer on any good correction.
Miners from Scottrade: Notice that the miners are once again uncoupling from the general market by a wider margin of late.


Currencies from KitCo:
Some Prices: FVITF 6.95; OLVRF 1.6738; BYDDF 3.90; FRXP 0.23 (Wild Speculation); DOW down 6 to 12404.84; SPX up 0.68 to 1334.28; Gold up 11.70 to 1470.10; Silver up 0.63 to 40.27.

Best to each, Doug

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