Wednesday, April 29, 2009
The Ruff Times
Posted Apr 27, 2009
John Williams publishes the Shadow Government Statistics newsletter (www.shadowstats.com). He is an amazing professional economist with a great grasp of the real economy. He and I have arrived at the same conclusions about almost everything in the economy, despite the fact that we approach it from totally different directions: me from the fundamentals, and he from a real technical and numbers point of view.
I am now in John’s home in Oakland, California, looking past the government numbers to get his views on the world as it really is. Shadow Government Statistics reconstructs published government statistics the accurate way we used to do it that reflects reality, rather than the way these numbers are now manipulated, and comes up with different conclusions about the economy, such as the Consumer Price Index (CPI), and other revealing areas published by government.
I trust John’s numbers because the government has been manipulating and restating these numbers for purely political purposes. (more)
The result is the biggest advance since the stock panic ignited. Even more importantly, these recent gains have generally been measured and orderly. This is a signature of new bull markets in contrast to the violent and short-lived bear-market rallies. The persistent stock-market strength is restoring hope and leading ostrich investors back to the markets. They are wondering which sectors have the best potential to thrive.
For a variety of reasons I'll outline in this essay, I believe the commodities stocks will be the best-performing sector in the coming years. Their incredibly bullish fundamentals, combined with dirt-cheap prices driven by stock-panic psychology, have created one of the greatest investment opportunities I've ever seen. This bullish sector deserves a sizable fraction of every investor's portfolio. (more)
Do you remember a few issues back when silver was around $9.40 an ounce? I told my subscribers this was a glorious time to buy as it would bounce back. A few issues later, I said that I hoped you would take advantage of these cheap opportunities because they would not last forever!
Well they didn’t last forever! Silver is now over $14 an ounce and gold is back over $970. They are both going a lot higher. Someday you will brag about having bought gold or silver at these prices. I don’t often say, “I told you so,” but this is too good, and I can’t resist.
The metals are reacting to the incipient inflation in six months to a year that will result from the monetary bail-out spawned by Obama and backed by Democrats and weak-kneed Republicans.
Someday the public will credit me as they did in the ‘70s when we made so much money in gold and silver.
We may not be just making money but protecting our assets from a total collapse of our monetary system and hyperinflation. Some day your only wealth will be your gold and silver.
The Stock Market
The stock market is not a monolithic entity. It consists of Industry Groups, most of which should be avoided like the plague. I wouldn’t touch Growth Stocks, Bank Stocks, Growth Mutual Funds, or the Dow Jones Industrial Average.
There is one way to benefit from the continuing collapse of the stock market.
The Dow should drop at least another 3,000 points, with the growth stocks leading the pack.
On the first page of the Investment Menu, Rydex Inverse S&P 500 Stratergy Inv (RYURX) is counter cyclical to the S & P 500 and is great for investing in a bear market. It will do badly during market rallies and well in poor stock performance.
Because I expect interest rates to rise sharply to try to keep the dollar from totally imploding, buy Rydex Inverse Government Long Bond Strategy Inv (RYJUX). It will rise when interest rates are rising and fall when interest rates are falling. Even though the fed has dropped interest rates to near zero, they will rise.
Also, I expect that when oil rises again to at least $80, the public will scream for more drilling. We will build and service more drilling rigs, so the Oil-Service companies should do very well. Schlumberger (SLB) and Halliburton (HAL) will lead the pack.
I also like Uranium Mining Stocks, as there are 35 nuclear power plants on the drawing board or under construction, and they have only half the uranium they need. The list is on my Investment Menu, ranging from the most conservative (Producing Companies) to the Development and Exploration companies.
The real stars of the show will continue to be gold and silver bullion and coins, and gold and silver mining stocks. The mining stocks are particularly interesting because they are only at the levels they reached when gold was only $400 to $500 an ounce, and it’s twice that now. There is a tremendous upside, ranging from Producers to Exploration companies. The Producers have moved substantially already, so it is better at the bottom of the pyramid.
A corporation publishing faked balance sheets would be barred from every stock exchange. It may even face criminal prosecution. The objective is to protect the public against fraud. But exactly the same fraudulent practice has been legalized in so far as commercial and savings banks, and life insurance companies are concerned. They can carry government bonds on their books at par value. A $1,000 bond may be quoted in the market at $800 or less; the balance sheet of your bank will still show it at $1,000. The purpose of this regulation, adopted by all federal and state supervisory agencies and by the Securities Exchange Commission as well, is to give those bonds a sacrosanct status and guarantee against paper losses. Thereby they are promoted to an absolutely safe and �liquid� status. The bank examiners count the bonds of the federal government, whatever their maturity and actual market price may be, as prime liquid assets, just like cash. The more bonds in the portfolio, the more liquid is the bank by the examiners� standards, � never mind the paper losses. (more)
NovaGold says the feasibility study for the Donlin Creek gold mine will cost $4.5 billion and will produce 1.6 million ounces of gold a year over the first five years.Posted: Wednesday , 29 Apr 2009
TORONTO (Reuters) -
NovaGold Resources (NG.TO: Quote) said on Tuesday that its 50 percent owned Donlin Creek gold project in Alaska holds reserves of 29.3 million ounces and should produce an average of 1.6 million ounces of gold a year over the first five years after it starts production in 2015.
In a feasibility study, the Canadian company said the project -- a joint venture with Barrick Gold (ABX.TO: Quote) -- should cost about $4.5 billion to build and produce gold at a cash cost of $398 an ounce over the first five years.
The production level -- which should average 1.25 million ounces a year over the mine's 21-year life -- would make the gold mine one of the world's most productive.
Novagold said the mine should initially produce average annual after-tax cash flow of $779 million at $900-an-ounce gold. (more)
By Alan Rappeport in New York
Published: April 29 2009 13:59 | Last updated: April 29 2009 15:04
The US economy continued to contract in the first quarter of this year as business investment collapsed in the face of eroding global demand.
Preliminary commerce department figures showed on Wednesday that US gross domestic product declined by an annualised rate of 6.1 per cent in the first quarter, after declining by 6.3 per cent during the fourth quarter of last year. The decline was worse than the 4.7 per cent that economists expected and marks a slight improvement from the fourth-quarter contraction, which was the sharpest since 1982. (more)
U.S. equity index futures are higher this morning. S&P 500 futures gained 7 points in pre-opening trade.
S&P 500 futures were virtually unchanged following a worse-than-expected preliminary first quarter GDP report released at 8:30 AM EDT. Consensus was a decline of 4.7% versus a decline of 6.3% in the fourth quarter of 2008. Actual was a decline of 6.1%. The report included higher- than- expected consumer spending and lower- than- expected government spending.
Traders are awaiting news on U.S. interest rates from the Federal Open Market Committee meeting. The FOMC will announce its latest direction on monetary policy at 2:15 PM EDT. No change in policy is anticipated.
The House of Representatives votes on the U.S. budget today. Approval is anticipated.
Concern about rising long term interest rates in the U.S has spilled into the currency market this morning. Ten year Treasuries are yielding 3.01% this morning. The U.S. Dollar has fallen sharply. The Canadian Dollar at 82.97 is testing its recent high at 83.27. (more)