Friday, November 12, 2010

Gold and Silver : The Final Countdown ?

When To Sell Gold

By now you have plenty of reason to congratulate yourself for having boarded the gold bandwagon. The early tickets are the cheap ones, and you’ve already had quite a ride. The best of the ride, I believe, is yet to come, and it should be very good indeed. It should be so much fun that your wallet may start to feel a bit giddy – which can be dangerous. So it would be wise to consider, now, how things will be and how they will feel when the current bull market in gold reaches its “end of days.” Because it will end.

Buying at the right time is the key to building profits. Selling at the right time is the key to collecting them.

The 1980 Peak

In 1980, gold briefly touched the then record price of $850 per ounce. In terms of purchasing power, that would be $2,400 in today’s dollars. And for the value of the world’s entire gold stockpile to attain the same share of the world’s total wealth that it represented at the 1980 peak, the price would need to reach $5,800 per ounce.

But so what? Before you can look to those numbers for guidance about what the peak in gold’s bull market will look like, you need to consider how the process that drove the earlier bull market compares with what is happening today. (more)

NIA Releases Food Price Estimates For A QE2 World: Bread To $23.05, Corn To $11.43, $62.21 For Sugar

On one hand we have the WSJ writing day after day that prices of food and energy products are not "really" rising. On the other hand we have empirical evidence that virtually every staple is already higher in price, or is being served in proportionally smaller portions. One possible arbitration on the issues comes from the NIA, which even if biased, does provide an estimate of where prices of various key perishables will end up in a post-QE2 world. These are as follows: "$11.43 for one ear of corn, $23.05 for a 24 oz loaf of wheat bread, $62.21 for a 32 oz package of Domino Granulated Sugar, $24.31 for a 32 fl oz container of soy milk, $77.71 for a 11.30 oz container of Folgers Classic Roast Coffee, $45.71 for a 64 fl oz container of Minute Maid Orange Juice, and $15.50 for a Hershey's Milk Chocolate 1.55 oz candy bar." Granted these are likely somewhat whimsical, but even if they are partially correct, it would mean the bulk of US society, as we pointed out previously, is in for a long, cold, hungry winter. (more)

foodpriceprojections -

BNN: Top Picks

Benj Gallander, President, Contra The Heard Investment Letter, shares his top picks.

click here for video

Copper price hits record high

Copper futures HG-FT hit record highs in London Thursday and 27-month tops in New York, after strong economic data out of China and persistent supply fears stoked by falling stockpiles of the metal.

Three-month copper on the London Metal Exchange hit a record $8,966 (U.S.) a tonne, compared with $8,760 at the close on Wednesday. The previous record peak was $8,940, touched in July, 2008, before prices slumped to below $3,000 in late 2008 as the global economic slump hit commodity prices.

The metal used in power and construction gave up some gains, and was untraded at the close but last bid at $8,830.

On the New York Mercantile Exchange, the most-active copper contract, December, settled up 5.35 cents, or 1.4 per cent, at $4.0250 per pound – its highest since July, 2008.

Other metals were also firm with battery material lead at its highest since January at $2,650 a tonne. Aluminum AL-FT hit a two year high at $2,500 a tonne.

Economic data from China – the biggest global consumer of copper – including industrial production figures gave the market extra impetus to rise. (more)


Investors have officially become convinced that stocks do not decline. Sentiment readings are literally off the charts this week with the AAII small investor bullish sentiment survey surging 9% to 57.6%. That’s the highest reading since January 2007. Charles Rotblut of AAII is reporting that 60% would be a two standard deviation event. (more)

Is North American Palladium the Perfect Stock?

Everyone would love to find the perfect stock. But will you ever really find a stock that gives you everything you could possibly want?

One thing's for sure: If you don't look, you'll never find truly great investments. So let's first take a look at what you'd want to see from a perfect stock, and then decide if North American Palladium (AMEX: PAL) fits the bill.

The quest for perfection
When you're looking for great stocks, you have to do your due diligence. It's not enough to rely on a single measure, because a stock that looks great based on one factor may turn out to be horrible in other ways. The best stocks, however, excel in many different areas, which all come together to make up a very attractive picture.

Some of the most basic yet important things to look for in a stock are:

  • Growth. Expanding businesses show healthy revenue growth. While past growth is no guarantee that revenue will keep rising, it's certainly a better sign than a stagnant top line.
  • Margins. Higher sales don't mean anything if a company can't turn them into profits. Strong margins ensure a company is able to turn revenue into profit.
  • Balance sheet. Debt-laden companies have banks and bondholders competing with shareholders for management's attention. Companies with strong balance sheets don't have to worry about the distraction of debt. (more)

CEOs Most Optimistic on U.S. Profits in Bull Signal for S&P 500

More U.S. executives than ever are increasing earnings forecasts compared with those lowering them, helped by almost $2 trillion of Federal Reserve spending and a recovery in the global economy.

EBay Inc., United Parcel Service Inc. and 196 other companies raised profit estimates above analysts’ projections last month as 130 firms cut them, the biggest gap since Bloomberg began tracking the data in 1999. Shipping companies and computer makers boosted forecasts the most, pushing the Morgan Stanley Cyclical Index of businesses most tied to the economy up 27 percent since July 2. That beat the 20 percent rally in the Standard & Poor’s 500 Index.

Companies are raising the outlook for U.S. profits at the same time the Fed is trying to prevent deflation and reduce unemployment by purchasing an additional $600 billion in Treasuries. The last time executives were this optimistic, stocks climbed 39 percent over the next 3 1/2 years, data compiled by Bloomberg show. (more)

Marc Faber: Frontier Investing

[Ed. Note: The following is an excerpt from the November edition of Dr. Faber’s indispensable monthly newsletter, The Gloom, Doom & Boom Report.]

I think there may be a window of opportunity left in frontier markets. Let me explain. In last month’s report, I noted that we should think of the US as a “huge money-printing machine that produces an unlimited quantity of dollars”.

Most of these dollars flow to the corporate sector, wealthy individuals, and financial institutions. A large proportion of these dollars is then transferred to emerging economies through the US trade deficit and investment flows, where it boosts those economies’ economic activity and increases wealth relative to the US. I also warned that potentially spectacular bubbles could develop in emerging stock markets, as well as in selected hard assets (i.e. in precious metals, art prices, and prestigious properties). I am now beginning to think that even more spectacular bubbles could develop in frontier markets. How so?

I mentioned that the US transfers dollars to emerging economies through its trade deficit and investment flows. Emerging economies are then faced with the decision of what to do about the dollar inflows. If they let the currency appreciate, a temporary loss of competitiveness may result. (This is not my view, however.) If they do nothing, spectacular asset bubbles can occur that are accompanied by high consumer price increases. In either case, the price level (especially of assets) in traditional emerging economies initially increases compared to the level in frontier markets. What happens next? (more)

You Need to Know This About Natural Gas

Shale gas changed everything, according to professional geologist and "Pierce Points" newsletter writer Dave Forest. Using hydraulic fracturing technology, North American gas producers have unlocked trillions of cubic feet of new, unconventional gas reserves from shale over the past decade. "U.S. natural gas output has taken off since 2006," he says, "as shale plays like the Haynesville, Marcellus and Eagle Ford have come online." So, with all this new supply, why has U.S. gas demand remained relatively flat? Obviously, the new world of gas supply and demand has not been kind to prices. What will drive them higher? In this Energy Report exclusive, Dave reveals that Eagle Ford producers could give their gas away and still make a tidy profit on the shale wells selling nat gas liquids.

Shale gas changed everything.

Using hydraulic fracturing (or hydro fracturing) technology, North American gas producers over the past decade have unlocked trillions of cubic feet of new, unconventional gas reserves from shale.

Check out the chart below from a recent study by MIT (Massachusetts Institute of Technology). Both the United States and Canada have seen big jumps in gas reserves due to unconventional resources. The majority of which is shale. In the U.S., this has added nearly a trillion cubic feet (tcf) of resource. In Canada, it's added about 500 billion cubic feet (bcf). These are huge adds. (more)

Bubble, Crash, Bubble, Crash, Bubble...

"Stock prices rose and long-term interest rates fell when investors began to anticipate the most recent action. Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion."

Federal Reserve Chairman Ben Bernanke, Washington Post 11/4/2010

Last week, the Federal Reserve confirmed its intention to engage in a second round of "quantitative easing" - purchasing about $600 billion of U.S. Treasury debt over the coming months, in addition to about $250 billion that it already planned to purchase to replace various Fannie Mae and Freddie Mac securities as they mature.

While the announcement of QE2 itself was met with a rather mixed market reaction on Wednesday, the markets launched into a speculative rampage in response to an Op-Ed piece by Bernanke that was published Thursday morning in the Washington Post. In it, Bernanke suggested that QE2 would help the economy essentially by propping up the stock market, corporate bonds, and other types of risky securities, resulting in a "virtuous circle" of economic activity. Conspicuously absent was any suggestion that the banking system was even an object of the Fed's policy at all. Indeed, Bernanke observed "Our earlier use of this policy approach had little effect on the amount of currency in circulation or on other broad measures of the money supply, such as bank deposits." (more)

The 20 Cities With The Most Underwater Homes

The scariest number for anyone invested in the real estate market is this: 23.2%.

That's the record-high share of mortgages that are now underwater, as estimated by Zillow.

Negative equity is the prime factor driving a record number of mortgage holders into delinquency. Delinquencies will lead to foreclosures, which will drive down home prices, creating more negative equity -- a very dangerous cycle.

In some parts of America, a gob smacking percentage of homes are underwater. In Las Vegas, for instance, four out of five mortgages are now underwater. (more)