Friday, December 11, 2009


What Gold-Bashers Say

by Jason Hommel, December 10th, 2009

Last week, I asked my readers to tell me what it's like when they try to convince their friends and family to buy silver and gold.

What do Your Naysayers Say?
(Why won't your friends and family listen?)

The letters poured in, 112 of them, which you can see, here:

What Naysayers are Saying; 75-112 of 112 December 9th, 2009
What Naysayers are Saying; 38-74 of 112 December 8th, 2009
What Naysayers are Saying; 1-37 of 112 December 8th, 2009

No, you didn't miss an email. I didn't send any of those reports out, they are too long.

Here the arguments, summarized, put into similar categories, and counted, to see the most popular arguments, both against, and for, owning the precious metals:

This is probably my most important report of the last 5 years, if ever. This is ground breaking research. Few others could even conduct this market research, as I have a large email list of 80,000 readers. This could be a psychology study or PhD thesis. It is an amazing picture of society today. With 112 responses, with each person trying to talk to about 10 people on average, then this is a summary of what over 1000 people are saying against precious metals. Now, knowing human psychology, these reasons to not buy gold might not be all the real reasons, or deeper reasons, which sometimes cannot be properly articulated, but it's close. Especially when so many say the same kind of things. (more)

Why Didn’t Canada’s Housing Market Go Bust?

James MacGee

Housing markets in the United States and Canada are similar in many respects, but each has fared quite differently since the onset of the financial crisis. A comparison of the two markets suggests that relaxed lending standards likely played a critical role in the U.S. housing bust.

Despite their many points of similarity, housing markets in the United States and Canada have fared quite differently since the onset of the financial crisis. Unlike the U.S., Canada has not experienced a dramatic increase in mortgage defaults, nor has any Canadian bank required a government bailout. As a result, observers such as The Economist have pointed to Canada as “a country that got things right.” (more)

New Quasi-Competition For Gold Trust ETF (GLD, PHYS)

It looks like the SPDR Gold Shares (NYSE: GLD) is about to get some new competition, albeit far a far smaller trading vehicle. A F-1 filing at the SEC was made today by Sprott Physical Gold Trust, which is going to be selling units via an initial public offering. Be advised that this is a Canadian trust established as an Ontario trust, and it was created to invest and hold substantially all of its assets in physical gold bullion. In short, it wants to compete against the “GLD.” While no terms beyond a $10.00 offering price are formally listed, it noted in the filing that it will sell up to $575 million in this IPO. (more)

The Coming Wave Of Debt Defaults

The trouble in the commercial real estate markets is getting ugly, as the precarious situation of Dubai World has made all too clear.

Expect many more unpleasant situations like that one. Speculative-grade debt issuers are bracing for the default rate to hit 12% to 14% by the end of 2009, according to our projections at Bain & Company. The last time the U.S. economy experienced default rates of that magnitude was 28 years ago. The current long-term average default rate is 4.5%; as recently as 2007, it was just under 1%. These failures are not limited to small or marginal firms; they are happening at large companies with at least $100 million in assets, and have, after all, already hit legendary businesses like General Motors, Lehman Brothers and General Growth Properties.

What's significant is not just that big, high-profile companies have defaulted--by missing a payment, making a distressed exchange with lenders to buy time or filing for bankruptcy--but that virtually every sector of the U.S. economy has been touched, including automotive, home building, industrial products, entertainment, media and financial services. Now watch for commercial real estate. (more)

Clean Water: The New Hot Commodity

When you think about hot commodities right now, you probably don’t think of water. Yet the price of water in some parts of the world is rising… sometimes very quickly. Take California, for example.

Mark Swatek is CEO of Southwest Water Co., a water utility that serves California and the Southwestern U.S. You may accuse him of talking his book when he says: “One of the fastest growing commodity prices is the price of metropolitan water [in Southern California].”

It may be an exaggeration, but not by much. Since 2007, the Metropolitan Water District of Southern California has increased its water rates from $574 an acre-foot to $781 an acre-foot — a 36% increase. (An acre-foot is the amount of water needed to flood a plain of one acre to a depth of one foot — or about 326,000 gallons.) (more)

U.S. Foreclosures to Reach Record 3.9 Million in 2009

Foreclosure filings in the U.S. will reach a record for the second consecutive year with 3.9 million notices sent to homeowners in default, RealtyTrac Inc. said.

This year’s filings will surpass 2008’s total of 3.2 million as record unemployment and price erosion batter the housing market, the Irvine, California-based company said.

“We are a long way from a recovery,” John Quigley, economics professor at the University of California, Berkeley, said in an interview. “You can’t start to see improvement in the housing market until after unemployment peaks.” (MORE)

S&P 500 Overvalued by 100 Percent: VIX now Back to August 2007 Lev

It is hard to justify the 1,100 mark for the S&P 500. The 676 low of March, as disastrous as it may have felt, actually reflected a more accurate measure of earnings potential of the 500 S&P companies. The S&P 500 is a good index because it measures 500 companies with a current collective market cap of $9.6 trillion. The S&P 500 over a century of data has seen price to earnings ratios of between 5 and 10 after severe contractions. It is safe to say that what we are experiencing is a strong contraction.

It is troubling to see a sudden complacency entering into the market. The VIX which measures option volatility is back to the point reached in August of 2007, right when the crisis ignited: (more)

Rogoff: Unemployment to Only Get Worse

Harvard economist Ken Rogoff, former Economic Counselor and Director of Research Department for the International Monetary Fund, sees more headwind ahead.

"It's hard to see the kind of robust recovery that's really going to generate the 10, 11 million jobs that we need to get back to where we were before it started," Rogoff told Tech Ticker.

A glance at the U.S. economy feels very déjà vu now, Rogoff says.

“Can I tell you what month the stock market is going to go up and what month it’s going to go down? No. But the broad contours are really eerily similar to the average of past post-war crises.” (more)