Monday, September 13, 2010

Technically Precious With Merv

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Peak Everything: An Interactive Look At How Much Of Everything Is Left

Scientific American has done a great summary of peak commodity levels as well as depletion projections for some of the most critical resources in the world including oil, gold, silver copper, not to mention renewable water, as well as estimating general food prices over the next half century. Generally speaking, regardless of whether one believes in peak oil or not, the facts are that stores of natural resources are disappearing at an increasingly alarming pace. And instead of the world's (formerly) richest country sponsoring R&D and basic science to find alternatives, the US government continues to focus on funding a lost Keynesian cause, debasing the dollar and perpetuating a system that will do nothing to resolve any of these ever more pressing concerns. Furthermore, as by 2020, the US will have around $23 trillion in debt (per CBO estimates), the government will be far too focused on using anywhere between 50-100% of tax revenues to cover just interest expense, than funding science and research. Then again it is probably only fitting that future generations will be saddled with not just $100 trillion in total sovereign debt, but will be running out of water, will see sea levels rising ever faster, will have no flat screen TVs, and will be using Flintstonemobiles to go from point A to point B. All so a few bankers and ultra-wealthy individuals don't have to recognize total losses on their balance sheets filled with trillions in toxic debt.

Some key highlights from Scientific American, as well as the year in which a given resource either peaks or runs out: (more)

Last 4 Triple-A Stocks Standing

Kiplinger's Personal Finance,

We’ve been singing the virtues of high-quality dividend-paying stocks for months, and our tune still hasn’t changed. They’re a bargain: These stocks lagged during the market’s roaring rally off the lows of March 2009, and they’ve been beaten up along with everything else over the past few months. Not only are such blue chips cheap, they’re the kind of companies that you can feel good about owning in the face of economic uncertainty.

But within that elite club of high-quality companies is an even more selective group. Only four publicly traded companies still hold triple-A credit ratings (this figure has been in steady decline since the early 1980s, when 32 non-financial firms held the highest rating). Moody's, Fitch and Standard & Poor's assign ratings that assess a company's ability to pay its debts. To be sure, the credit-rating agencies haven’t covered themselves in glory over the past few years. (Remember AIG? It held a triple-A credit rating until less than a day after Lehman Brothers filed for bankruptcy in September 2008, sending AIG into a tailspin.) But this stamp of approval still means that a company is financially healthy, doesn’t have too much debt and is generating plenty of cash to meet its obligations. (All prices and related numbers are as of the September 8 close.) (more)

Chart of the Day

The Case for Silver Investment

I. Introduction
As of September 2010, it appears that physical silver is today potentially the most explosive precious metal play in history. A combination of factors – chronic scarcity, inelastic demand, and expanding consumption has created potentially one of the most profitable opportunities ever seen. The following analysis presents the base rationale for purchasing silver. Furthermore, significant evidence exists to point towards downward manipulation of the silver market by large bullion banks, further compressing the market. It is this author’s opinion that a parabolic top in silver could easily surpass the 20x rhodium price increase from $500 to $10,000 over a five year period as the market realizes the supply shortage. Silver’s supply and demand are analyzed below to provide a background for the reader.

II. A Scarcity of Silver
Total world silver production from the prehistory to the end of 2001 was estimated by the USGS to be 1.26 million metric tons, or 40.5 billion troy oz. The Silver Institute reports that 5.1 billion oz have been mined from 2001-2009. In total, 45.6 billion oz have been mined in history, with roughly 1/9 of that total in the last decade. The Silver Institute and GFMS conclude that approximately 800 million oz existed in total above ground official stocks (governments, COMEX, other dealers, and ETFs combined) as of the end of 2008. Assuming that jewelry and other private stocks are unaccounted for, let us assume that an additional arbitrary 200 million scrap oz can be recovered. Furthermore, there is no justification for ETFs to be included in silver stocks – in theory, the ETFs are supposed to hold investor’s silver and to include investor silver in inventories would be to double-count them. Recall that the Hunt Brothers’ silver squeeze in the 80’s pushed many to liquidate scrap silver, implying that individuals today probably either 1) did not sell at $50/ounce in 1980, and probably would not sell now, or 2) sold their silver in the 1980’s and have only silver acquired since then. In summary, a base could rationally assume potentially 1 billion ounces exist in the market today. (more)

Trade of the Week

Sometimes you don't have to scour the market for a good trade. Occasionally, it can be found in some of the most visible stocks on the market.

Clorox (NYSE: CLX), also known as "the bleach company," looks to be one of those trades.

As a top manufacturer of cleaning products, Clorox sells a number of other recognized consumer brands, including Hidden Valley salad dressing, Brita water-filtration systems, Glad garbage bags, Kingsford charcoal and Burt's Bees personal care products.

Already selling its products in more than 100 countries worldwide, Clorox continues to expand internationally by introducing new niche items, like Green Works environmental cleaning supplies, to growing markets in Asia and Latin America.

With competitive pricing, successful marketing and effective internal cost controls, Clorox is showing the potential for solid future revenue and earnings growth. (more)

Eric Coffin Discusses the Yukon Gold Rush

click here for audio

The Mad Hedge Fund Trader Interviews Bill Fleckenstein

1) Bill Fleckenstein, Legendary Hedge Fund Manager, on Hedge Fund Radio. My guest on Hedge Fund Radio this week is the legendary hedge fund manager Bill Fleckenstein, president of Fleckenstein Capital, based in Seattle, Washington.

Bill graduated from the University of Washington with a major in Mathematics, and joined the prestigious Wall Street firm Kidder Peabody in 1979. In 1982 he launched his own firm, following in the footsteps of the great hedge fund pioneers like George Soros, Julian Robertson, and Michael Steinhart.

He became a highly controversial figure during the nineties by warning of the dangers of the dotcom bubble. Bill stuck to his convictions and cashed in big time in the collapse that followed, riding some of his short positions down to zero.

Fleck, as he is known to his friends, was a vociferous critic of the Fed’s easy money policies during the 2000’s. He published a bestselling book, Greenspan’s Bubble: The Age of Ignorance at the Federal Reserve in January of 2008.

Fleck ran a short only hedge fund which he closed within days of the March 2009 bottom in the stock market, and returned the capital to his ecstatic investors. Since then he has been predominantly long investments that are beneficiaries of the relentless running of the printing presses in Washington, such as gold and the Canadian dollar. He still keeps in his office a six foot high stuffed black bear, wearing a blue “Dow 10,000” baseball hat, given him by a client. Note to readers: Bill doesn’t play in the ETF space, but I have included the relevant stock symbols for the convenience of individual investors.

Bill is sitting a major position in gold (GLD) these days, both in the physical and through the major miners, Newmont Mining (NEM), Agnico Eagle (AEM), and Goldcorp (GG). Despite a fourfold return over the last decade, the barbarous relic is still hated by many professional money managers, which means it still has much further to rise. Falling confidence in “colored paper” (dollars) will just add fuel to the flames. Fleck is matching investments in the yellow metal with serious positions in silver and its miners. His target is nothing more specific than “UP”. (more)

Overdose: The Next Financial Crisis

US Economic Calendar

DateTime (ET)StatisticForActualBriefing ForecastMarket ExpectsPriorRevised From
Sep 132:00 PMTreasury BudgetAug--$104.0B-$95.0B-$103.6B-
Sep 148:30 AMRetail SalesAug-0.2%0.3%0.4%-
Sep 148:30 AMRetail Sales ex-autoAug-0.2%0.3%0.2%-
Sep 1410:00 AMBusiness InventoriesJul-0.8%0.8%0.3%-
Sep 158:30 AMNY Fed - Empire Manufacturing SurveySep-
Sep 158:30 AMExport Prices ex-ag.Aug-NANA-0.2%-
Sep 158:30 AMImport Prices ex-oilAug-NANA-0.3%-
Sep 159:15 AMIndustrial ProductionAug-0.3%0.3%1.0%-
Sep 159:15 AMCapacity UtilizationAug-
Sep 1510:30 AMCrude Inventories09/11-NANA-1.85M-
Sep 168:30 AMInitial Claims09/11-440K460K451K-
Sep 168:30 AMContinuing Claims09/4-4450K4450K4478K-
Sep 168:30 AMPPIAug-0.3%0.3%0.2%-
Sep 168:30 AMCore PPIAug-0.1%0.1%0.3%-
Sep 168:30 AMCurrent AccountQ2--$125.0-$125.0-$109.0B-
Sep 169:00 AMNet Long-Term TIC FlowsJun-NANA$44.4B-
Sep 1610:00 AMPhiladelphia FedSep-0.00.0-7.7-
Sep 178:30 AMCPIAug-0.3%0.2%0.3%-
Sep 178:30 AMCore CPIAug-0.1%0.1%0.1%-
Sep 179:55 AMMich SentimentSep-