EE_
2nd March 2012, 11:52 PM
March 1, 2012
The day the Dow dropped 650 points — which it didn’t... but gold did... therein lies the Leap Day lesson...
Chris Mayer on a beaten-down sector...and spectacular growth... headlines be damned!
What’s behind a shifting rare-earth landscape? Mr. King eyes profits...
Monitoring inflation “Fed-style”... 24/7 medical diagnostics in your pocket... a $5 million lawsuit over a half-tank of gas (and how you’re gonna pay)... and more!
Imagine if the Dow had dropped 650 points yesterday. It would have been the lead story on every newscast and website.
It would have trumped the uprising in Syria, the presidential race, even Justin Bieber’s 18th birthday.
In percentage terms, gold fell an equivalent amount yesterday... and outside of the sliver of the population that pays attention to such things, no one noticed.
The fact hardly anyone’s paying attention makes a huge difference. We’ll come back to that momentarily...
From a high approaching $1,790, the yellow metal tumbled below $1,700 by day’s end. It has since recovered to $1,720 as of this writing.
Silver, meanwhile, touched $37.50 and approached $34 before recovering to just above $35.
“I have followed you for years,” writes an indignant reader who was among the few who took notice, “but was stunned with the explanation that the gold price collapse was caused by the speech by Butt Bernanke.”
“What about the 30 tons of gold dropped on the Comex the same morning? You now hold ranks with the likes of CNN, Commie News Network.”
Easy, partner: We said only that the two events coincided, not that one caused the other.
“You pretty much have to be brain-dead not to see that this engineered price decline was precious metals specific...and deliberate,” says Ed Steer over at Casey Research.
“The ‘tell,’” adds the trading veteran who blogs as “Jesse” at Jesse’s Cafe Americain, “is the lack of a serious sell-off in equities. The yawning divergence in the risk trade is hard to miss.”
“I have seen reports,” he adds, “that 225 million ounces of paper silver were dumped on the Comex in less than 30 minutes. The last time I checked, there were less than 35 million ounces of silver registered with the dealers for delivery in at the Comex.”
“Unless you are a full-time experienced trader playing with ‘cool money,’ stop trading,” he counsels. “This market is far too thin and given over to gimmicks for the average person to participate.”
But if you’re a long-term holder? They’ve just handed you another buying opportunity.
“A look at investment flows proves that [gold] isn’t anywhere close to being overbought,” reads a year-old analysis from Canadian resource investing legend Eric Sprott and Andrew Morris that’s still fresh as a newly minted Gold Eagle.
They cite figures from CPM Group: Back in 1968, when gold first started to break from its moorings of $35 an ounce, gold held by individuals for investment purposes made up 5% of global financial assets.
“By 1980,” they write, “that amount had fallen to roughly 3%. By 1990, it had dropped significantly, to 0.6%, and by the year 2000 represented a mere 0.2% of global assets.”
During gold’s run-up in the previous decade, that number has recovered to a mere 0.7%. “So despite gold reaching record nominal highs,” write Sprott and Morris, “the world holds about the same portion of its wealth in gold as it did over two decades ago...”
“Consider that to return to a meaningful level of gold investment, say to the 5% level of 1968, it would require over $9 trillion of gold investment today, or about 6.5 billion ounces of gold at the current gold price. This would represent well over 1.3 times the amount of gold ever produced throughout history and four times the amount of known gold reserves.”
Available in limited quantities (unlike Federal Reserve Notes)
“So not only is the public relatively underinvested in gold, but at current prices, it isn’t even possible to increase our gold holdings back to a meaningful level.”
What does that mean for the dollar price of gold longer term? For reasons you’ll see here, $5,000 isn’t out of line.
Another day, another flirtation between the Dow and 13,000.
Frankly, we’re growing tired and wish they’d consummate the relationship once and for all.
The S&P appears to be enjoying afterglow and a cigarette, having overcome resistance at 1,365.
It’s the first of the month and time to take the pulse of the world’s manufacturing capacity. With each of the following figures, 50 is the dividing line between expansion and contraction:
China: Up for a third month to 51.0
Eurozone: Up slightly to 49, but this is the seventh consecutive month of contraction
U.S: Still expanding, but down significantly in the last month from 54.1 to 52.4. Whoops, economists polled by Bloomberg were counting on the number growing a bit.
Peering into the U.S. figures, higher fuel costs appear to be taking a toll. Imagine that.
Oil is back above $108 this morning, to $108.21.
“The long-term fundamentals for coal look good,” says Chris Mayer, always with an eye on overlooked and unloved sectors.
“China, India and the rest of Asia are still young industrial powers, and they are hungry for all the same things America consumed in its younger days. The big one is coal. Consider these notes from the latest issue of The Economist:
Coal accounted for half the increase in energy use from 2000-2010
China leads the world in coal production and consumption. It mines three times more than America (which is No. 2) and recently overtook Japan as the largest importer of coal
India is not far behind. Its projected energy demand is second only to China
Indian coal output has not increased in two years; it may soon be the largest coal importer.”
Chris recently listened in on the conference call of a dry bulk shipper that carries coal and iron ore to these markets. Wrap your mind around this: India now imports more coal per year than Britain, Italy, France and Germany put together.
“And to think,” says Chris, “coal is the primary fuel source for not only these giants, but also for the emerging economies of most of Asia from Bangladesh to the Philippines. Edward Cunningham of Boston University says coal’s resurgence is ‘historically incredible’ and that it could overtake oil as a fuel by 2025.”
“Yet coal stocks are all beat to hell. Why? Because the market is focusing on the near-term weakness of coal prices, the soft global economy and cheaper natural gas.”
“But there is an old saying among men of coal and steel. You buy when the sky is clear over Pittsburgh and sell when the sky is black from the burning of coal. Put another way, you buy when things are slow and sell out when times are good.”
Chris is scouting out coal possibilities as we speak, in addition to his current favorite energy plays.
Americans’ incomes grew slightly in January, and so did their spending. Personal income as calculated by the Commerce Department grew 0.3%, while spending grew 0.2%.
So the consumer is deleveraging, right? Not so fast. On a year-over-year basis, spending is now outpacing income.
This report also contains “core personal consumption expenditures.” This is the Fed’s favorite gauge of inflation because... well, because it’s so far out of line with the real-world cost of living that it’s laughable.
Thus, core PCE grew 1.9% over the last year... right under the Fed’s now-official 2% inflation target. Mission accomplished.
“The more I study the rare-earth business, the more intrigued I am,” says Byron King — and not just because he holds a geology degree from Harvard.
“Indeed, I’ve been buying physics and chemistry textbooks in the past year to study up on the latest insights into the RE world,” he says, the better to unearth investment opportunities in the rare-earth space.
“The technical side of mining RE is much different than mining gold or copper,” he says. “First, there are a variety of RE ores — numerous different hard rock versions or mineral sands or ‘clay’ or byproducts from other mining and much more.”
“Each type of RE ore is utterly unique in its geology, geochemistry, mineralogy and mining properties. Then within the ore, you’re dealing with up to 12 or more different RE elements. You have to figure out how to extract most of them, lest you throw perfectly good material into the tailings pond and drive up your cost per ton.”
And then there’s China: “Basically, China controls the world’s supply, price and availability of RE. So whatever the people in the West are doing with RE, it has to fit into China’s activities. China calls the tune. It makes for immense investment uncertainty.”
But a well-chosen rare-earth stock can still prove immensely lucrative... as Byron demonstrated a year ago when his readers collected quick gains of 109% and 178%.
True, the landscape has shifted since then: “We’re in a new era,” says Byron, “in which companies have to make deals and deliver serious results.” He describes his top candidate here.
“Imagine what health care changes would occur,” says Ray Blanco, “if an inexpensive device you carry in your pocket could be used to perform diagnostics on your body.”
At little expense, it would monitor all your vital signs for changes... even relaying them to your doctor via wireless.
Scientists in London and Singapore have developed a new T-ray technology. That’s short for ‘terahertz rays.’ They’re “high-frequency, microwave band, electromagnetic waves,” Ray explains. They’re already in use in things like airport scanners and scientific imaging applications. But they operate at low power and require cold temperatures — not exactly useful for keeping on your person at all times.
“The researchers,” says Ray, “designed a way to generate T-rays that is cheaper, easier to use and more compact.” Result? “T-rays promise to revolutionize medical scanning to make it faster and more convenient, potentially relieving patients from the inconvenience of complicated diagnostic procedures and the stress of waiting for accurate results.”
“Thanks to modern nanotechnology and nanofabrication, we have made a real breakthrough in the generation of T-rays that takes us a step closer to these new scanning devices.” To learn about other breakthroughs even closer to the horizon, give this a look.
From the nothing-can-be-overlitigated file, we see Victoria Jean Church-Dellinger of White Lake, Mich., is suing Ally Financial for $5 million because... when Ally repossessed her 2008 Pontiac G6, it failed to return the half-tank of gas therein.
“It’s the same as if you left your jacket in there and they didn’t return it to you,” explains attorney Brian Parker.
How did Parker arrive at $5 million? Well, this is a class action we’re talking about... and according to the suit, $5 million is three times the fair market value of all the gasoline taken from Michigan residents whose cars have been repoed by Ally.
And yes, Ally is the shiny new name on the sorry old carcass of GMAC. And yes, it’s still majority owned by the government. Even if the suit’s laughed out of court, you, dear taxpayer, will be keeping some Ally lawyers living large.
“Thanks for the funnies,” a reader writes after yesterday’s issue. “Can’t wait to see what you’ll publish on April 1. Be calm and carry on.”
The 5: We’d be shocked to publish anything on April 1, seeing as it falls on a Sunday this year...
Regards,
Dave Gonigam
The 5 Min. Forecast
P.S. “This has been a textbook trade for us this year,” wrote Jonas Elmerraji to his readers this morning... as he advised them to collect 14% gains on apparel retailer Charming Shoppes after 23 days.
Double-digit gains in a holding time of a month or less: That’s how it works with Jonas’ strict five-part system. To learn what’s behind it and how to make it work in your portfolio, look here.
Thank you for reading The 5 Min. Forecast! We greatly value your questions and comments. Please send all feedback to 5minforecast@agorafinancial.com
The day the Dow dropped 650 points — which it didn’t... but gold did... therein lies the Leap Day lesson...
Chris Mayer on a beaten-down sector...and spectacular growth... headlines be damned!
What’s behind a shifting rare-earth landscape? Mr. King eyes profits...
Monitoring inflation “Fed-style”... 24/7 medical diagnostics in your pocket... a $5 million lawsuit over a half-tank of gas (and how you’re gonna pay)... and more!
Imagine if the Dow had dropped 650 points yesterday. It would have been the lead story on every newscast and website.
It would have trumped the uprising in Syria, the presidential race, even Justin Bieber’s 18th birthday.
In percentage terms, gold fell an equivalent amount yesterday... and outside of the sliver of the population that pays attention to such things, no one noticed.
The fact hardly anyone’s paying attention makes a huge difference. We’ll come back to that momentarily...
From a high approaching $1,790, the yellow metal tumbled below $1,700 by day’s end. It has since recovered to $1,720 as of this writing.
Silver, meanwhile, touched $37.50 and approached $34 before recovering to just above $35.
“I have followed you for years,” writes an indignant reader who was among the few who took notice, “but was stunned with the explanation that the gold price collapse was caused by the speech by Butt Bernanke.”
“What about the 30 tons of gold dropped on the Comex the same morning? You now hold ranks with the likes of CNN, Commie News Network.”
Easy, partner: We said only that the two events coincided, not that one caused the other.
“You pretty much have to be brain-dead not to see that this engineered price decline was precious metals specific...and deliberate,” says Ed Steer over at Casey Research.
“The ‘tell,’” adds the trading veteran who blogs as “Jesse” at Jesse’s Cafe Americain, “is the lack of a serious sell-off in equities. The yawning divergence in the risk trade is hard to miss.”
“I have seen reports,” he adds, “that 225 million ounces of paper silver were dumped on the Comex in less than 30 minutes. The last time I checked, there were less than 35 million ounces of silver registered with the dealers for delivery in at the Comex.”
“Unless you are a full-time experienced trader playing with ‘cool money,’ stop trading,” he counsels. “This market is far too thin and given over to gimmicks for the average person to participate.”
But if you’re a long-term holder? They’ve just handed you another buying opportunity.
“A look at investment flows proves that [gold] isn’t anywhere close to being overbought,” reads a year-old analysis from Canadian resource investing legend Eric Sprott and Andrew Morris that’s still fresh as a newly minted Gold Eagle.
They cite figures from CPM Group: Back in 1968, when gold first started to break from its moorings of $35 an ounce, gold held by individuals for investment purposes made up 5% of global financial assets.
“By 1980,” they write, “that amount had fallen to roughly 3%. By 1990, it had dropped significantly, to 0.6%, and by the year 2000 represented a mere 0.2% of global assets.”
During gold’s run-up in the previous decade, that number has recovered to a mere 0.7%. “So despite gold reaching record nominal highs,” write Sprott and Morris, “the world holds about the same portion of its wealth in gold as it did over two decades ago...”
“Consider that to return to a meaningful level of gold investment, say to the 5% level of 1968, it would require over $9 trillion of gold investment today, or about 6.5 billion ounces of gold at the current gold price. This would represent well over 1.3 times the amount of gold ever produced throughout history and four times the amount of known gold reserves.”
Available in limited quantities (unlike Federal Reserve Notes)
“So not only is the public relatively underinvested in gold, but at current prices, it isn’t even possible to increase our gold holdings back to a meaningful level.”
What does that mean for the dollar price of gold longer term? For reasons you’ll see here, $5,000 isn’t out of line.
Another day, another flirtation between the Dow and 13,000.
Frankly, we’re growing tired and wish they’d consummate the relationship once and for all.
The S&P appears to be enjoying afterglow and a cigarette, having overcome resistance at 1,365.
It’s the first of the month and time to take the pulse of the world’s manufacturing capacity. With each of the following figures, 50 is the dividing line between expansion and contraction:
China: Up for a third month to 51.0
Eurozone: Up slightly to 49, but this is the seventh consecutive month of contraction
U.S: Still expanding, but down significantly in the last month from 54.1 to 52.4. Whoops, economists polled by Bloomberg were counting on the number growing a bit.
Peering into the U.S. figures, higher fuel costs appear to be taking a toll. Imagine that.
Oil is back above $108 this morning, to $108.21.
“The long-term fundamentals for coal look good,” says Chris Mayer, always with an eye on overlooked and unloved sectors.
“China, India and the rest of Asia are still young industrial powers, and they are hungry for all the same things America consumed in its younger days. The big one is coal. Consider these notes from the latest issue of The Economist:
Coal accounted for half the increase in energy use from 2000-2010
China leads the world in coal production and consumption. It mines three times more than America (which is No. 2) and recently overtook Japan as the largest importer of coal
India is not far behind. Its projected energy demand is second only to China
Indian coal output has not increased in two years; it may soon be the largest coal importer.”
Chris recently listened in on the conference call of a dry bulk shipper that carries coal and iron ore to these markets. Wrap your mind around this: India now imports more coal per year than Britain, Italy, France and Germany put together.
“And to think,” says Chris, “coal is the primary fuel source for not only these giants, but also for the emerging economies of most of Asia from Bangladesh to the Philippines. Edward Cunningham of Boston University says coal’s resurgence is ‘historically incredible’ and that it could overtake oil as a fuel by 2025.”
“Yet coal stocks are all beat to hell. Why? Because the market is focusing on the near-term weakness of coal prices, the soft global economy and cheaper natural gas.”
“But there is an old saying among men of coal and steel. You buy when the sky is clear over Pittsburgh and sell when the sky is black from the burning of coal. Put another way, you buy when things are slow and sell out when times are good.”
Chris is scouting out coal possibilities as we speak, in addition to his current favorite energy plays.
Americans’ incomes grew slightly in January, and so did their spending. Personal income as calculated by the Commerce Department grew 0.3%, while spending grew 0.2%.
So the consumer is deleveraging, right? Not so fast. On a year-over-year basis, spending is now outpacing income.
This report also contains “core personal consumption expenditures.” This is the Fed’s favorite gauge of inflation because... well, because it’s so far out of line with the real-world cost of living that it’s laughable.
Thus, core PCE grew 1.9% over the last year... right under the Fed’s now-official 2% inflation target. Mission accomplished.
“The more I study the rare-earth business, the more intrigued I am,” says Byron King — and not just because he holds a geology degree from Harvard.
“Indeed, I’ve been buying physics and chemistry textbooks in the past year to study up on the latest insights into the RE world,” he says, the better to unearth investment opportunities in the rare-earth space.
“The technical side of mining RE is much different than mining gold or copper,” he says. “First, there are a variety of RE ores — numerous different hard rock versions or mineral sands or ‘clay’ or byproducts from other mining and much more.”
“Each type of RE ore is utterly unique in its geology, geochemistry, mineralogy and mining properties. Then within the ore, you’re dealing with up to 12 or more different RE elements. You have to figure out how to extract most of them, lest you throw perfectly good material into the tailings pond and drive up your cost per ton.”
And then there’s China: “Basically, China controls the world’s supply, price and availability of RE. So whatever the people in the West are doing with RE, it has to fit into China’s activities. China calls the tune. It makes for immense investment uncertainty.”
But a well-chosen rare-earth stock can still prove immensely lucrative... as Byron demonstrated a year ago when his readers collected quick gains of 109% and 178%.
True, the landscape has shifted since then: “We’re in a new era,” says Byron, “in which companies have to make deals and deliver serious results.” He describes his top candidate here.
“Imagine what health care changes would occur,” says Ray Blanco, “if an inexpensive device you carry in your pocket could be used to perform diagnostics on your body.”
At little expense, it would monitor all your vital signs for changes... even relaying them to your doctor via wireless.
Scientists in London and Singapore have developed a new T-ray technology. That’s short for ‘terahertz rays.’ They’re “high-frequency, microwave band, electromagnetic waves,” Ray explains. They’re already in use in things like airport scanners and scientific imaging applications. But they operate at low power and require cold temperatures — not exactly useful for keeping on your person at all times.
“The researchers,” says Ray, “designed a way to generate T-rays that is cheaper, easier to use and more compact.” Result? “T-rays promise to revolutionize medical scanning to make it faster and more convenient, potentially relieving patients from the inconvenience of complicated diagnostic procedures and the stress of waiting for accurate results.”
“Thanks to modern nanotechnology and nanofabrication, we have made a real breakthrough in the generation of T-rays that takes us a step closer to these new scanning devices.” To learn about other breakthroughs even closer to the horizon, give this a look.
From the nothing-can-be-overlitigated file, we see Victoria Jean Church-Dellinger of White Lake, Mich., is suing Ally Financial for $5 million because... when Ally repossessed her 2008 Pontiac G6, it failed to return the half-tank of gas therein.
“It’s the same as if you left your jacket in there and they didn’t return it to you,” explains attorney Brian Parker.
How did Parker arrive at $5 million? Well, this is a class action we’re talking about... and according to the suit, $5 million is three times the fair market value of all the gasoline taken from Michigan residents whose cars have been repoed by Ally.
And yes, Ally is the shiny new name on the sorry old carcass of GMAC. And yes, it’s still majority owned by the government. Even if the suit’s laughed out of court, you, dear taxpayer, will be keeping some Ally lawyers living large.
“Thanks for the funnies,” a reader writes after yesterday’s issue. “Can’t wait to see what you’ll publish on April 1. Be calm and carry on.”
The 5: We’d be shocked to publish anything on April 1, seeing as it falls on a Sunday this year...
Regards,
Dave Gonigam
The 5 Min. Forecast
P.S. “This has been a textbook trade for us this year,” wrote Jonas Elmerraji to his readers this morning... as he advised them to collect 14% gains on apparel retailer Charming Shoppes after 23 days.
Double-digit gains in a holding time of a month or less: That’s how it works with Jonas’ strict five-part system. To learn what’s behind it and how to make it work in your portfolio, look here.
Thank you for reading The 5 Min. Forecast! We greatly value your questions and comments. Please send all feedback to 5minforecast@agorafinancial.com