Wednesday, February 9, 2011

Israeli Army Chief Ashkenazi: Prepare for all-out war

In his final days on the job, Chief of Staff Ashkenazi warns about growing radicalization in region; given recent changes across Middle East, Israel must prepare for a battle in several theaters, he says
Boaz Fyler

Given recent changes in the Middle East, Israel must prepare for a battle in several theaters, outgoing IDF Chief of Staff Gabi Ashkenazi said Monday at the Herzliya Conference.

"The connection between the different players requires us to contend with more than one theater," he said.

The radical camp in the Middle East is gaining strength, Ashkenazi warned, adding that "the moderate camp among the traditional Arab leadership is weakening." He also made note of what he characterized as the "fascinating phenomenon" whereby power is shifting to the people of the region thanks to online social networks.

The army chief said that in the wake of the growing threat of radical Islam among Israel's neighbors, the defense budget would have to be boosted in the coming years. The main change faced by the army is the widening spectrum of threats, he said.

"Because of this spectrum, we must prepare for a conventional war…it would be a mistake to prepare for non-conventional war or limited conflicts and then expect that overnight the forces will operate in an all-out-war," he said. (more)

3 Coal Stocks: Buy, Sell or Hold?: PCX, ACI, JRCC

One of my top-performing picks from last year was Patriot Coal(PCX_). This mid-size U.S.-based coal operation gained 25% in 2010. Impressive as that may be, the stock did not really gain any steam until the last three months or so of trading. In fact, shares had been in negative territory when that explosive rally began in September.

The gains for Patriot in recent months mirror the gains for the sector. From September to the end of 2010, Patriot shares approximately doubled in value and kept on going right through the first month of 2011. After peaking at $29 per share, Patriot took a step back on Feb. 3 after it was announced that its largest stakeholder, Arclight Capital, had liquidated its 12% position in the company.

In addition to the action in Patriot Coal, the sector received another piece of news with the announcement that Alpha Natural Resources(ANR_) was buying troubled mining operator Massey Energy(MEE_). The $7 billion deal allowed Alpha Natural to surpass bidding from other players, possibly including Arch Coal (ACI_) and Arcelor Mittal(MT_), and represented a 21% premium over current market prices. (more)

NYSE Margin Debt Hits Fresh Post-Lehman High

China, Largest Wheat Grower, Facing Threat of Drought

China, the world’s largest wheat producer, is contending with severe drought in the main region growing winter varieties of the grain, adding to concern about food supply at a time of record global prices.

Rainfall has been “substantially” below normal in the North China Plain since October, with a thinner cover of snow that protects plants against frost, the United NationsFood and Agriculture Organization said in a report today. That may harm the crop scheduled to be harvested in June, the FAO said.

Wheat traded in Chicago, a global benchmark, surged 76 percent in the last year as drought in Russia, flooding in Canada and parched fields across Europe ruined crops. Protests partly linked to food prices have erupted across North Africa and the Middle East in the last month, spurring governments to accelerate grain purchases to contain domestic prices.

“The drought has been bad enough for long enough in China that the crop is not likely to be what it was in 2010,” said Alex Bos, a London-based analyst at Macquarie Bank. “The thing with winter kill is there’s no way you can quantify any of the damage until the crop comes out of dormancy.” (more)

Buying Silver While It’s Still Relatively Cheap


02/07/11 Tampa, Florida – James Cook of reminds us, in his “Market Update” newsletter, that the silver inventory held above ground totals 1.4 billion ounces, and that annual industrial use of silver is 900 million ounces, so that a year and half’s worth of silver exists, “although a third of it is destined for industrial consumption,” which has been increasing its use of silver by 18% in 2010.

And it surely will be used in industrial consumption, because as Mr. Cook says, “it’s hard to fathom all the bullish aspects credited to silver. You have a rare metal used in so many important industrial applications as to be termed miraculous,” so much so that “the billions of ounces mined over 2,000 years are gone forever.”

In fact, I am considering raising money to launch a Discovery Channel special, which will be a revealing new documentary that blows the lid off the explosive situation in silver, beginning with how things would have been worse a long time ago if the Neanderthals had invented electrical generation and a distribution network, both silver-consuming, 100,000 years ago.

And ditto those Renaissance hotshots who everybody thinks are so hot, but couldn’t even come up with a good cell-phone, or how Thomas Edison can invent a light bulb and the phonograph, but not take the logical next step of inventing the CD and CD player, which would have produced much better sound quality than those stupid, scratchy, tinny wax cylinders of his. (more)

An ETF to Profit From the Bond Crash

ProShares Short 20+ Year Treasury ETF (NYSE: TBF) — This fund moves inverse to the daily performance of the Barclays Capital 20+ Year U.S. Treasury Bond Index.

The trend for Treasury prices is sharply down, supported by Fed pressure to increase interest rates through the continued inflationary policies of QE2. Since history has shown that it is usually better to go with the Fed’s policies rather than against them, this appears to be an investment that offsets the impact of increasing the money supply, which in turn, leads to lower bond prices.

TBF consolidated with a saucer for 11 months before a breakout at $45.50. Note the increase in buying volume and the cross of the 50-day moving average through the 200-day moving average (golden cross), which signifies a bullish long-term change in trend.

The target is $50, but buyers should be prepared to hold TBF as a hedge against lower bond prices and higher interest rates.

Trade of the Day - TBF Chart

Eric Sprott On A "Gold Tsunami"

Gold Tsunami

By: Eric Sprott & David Franklin of Sprott Asset Management

Ignoring real estate, most people invest their hard earned money in paper things. Stocks, bonds, annuities, insurance - it’s all paper, and it sits nicely in our bank accounts and shows up on our computer screens. Halfway across the world, investors in China and India have never trusted paper investments as a store of value - and they’re converting their hard earned paper money into gold and silver bullion. Not that this is anything new. It isn’t. But the scale and speed with which they are accumulating precious metals IS new, and it’s driving the fundamentals that we believe will lead to higher prices in 2011.

Demand for the metals is literally exploding in Asia, and it’s creating shortages of physical bullion around the world. The statistics are extraordinary. China, the world’s largest gold producer, now requires so much of the precious metal (in addition to what it already mines) that it imported over 209 metric tons (6.7 million oz) of gold during the first ten months of 2010. This represents a fivefold increase from the estimated 45 metric tons it imported in all of 2009.1

According to the World Gold Council, Chinese retail demand for gold increased by 70% from October 2009 to September 2010, representing a total of 153.2 tonnes of gold imports. Yet, over the same period, the demand for gold jewelry rose by only 8%.2 There is a clear trend developing for Chinese investment in gold as a monetary asset, and China is buying so much gold for investment purposes that it now threatens to supercede India as the world’s largest gold consumer. Chinese demand in 2010 is expected to reach approximately 600 tonnes, just behind India’s 800 tonnes.3 To put that in perspective, 2010 world mine production is forecasted to be 2,652 tonnes, which means China and India could collectively lock-up over half of global annual production.

Even more surprising is the increase in Chinese demand for silver. Recent statistics show that silver imports have increased fourfold from 2009 to 2010. In 2005, the Chinese exported just over 100 million oz. of silver.4 In 2010, they imported just over 120 million oz. This represents a swing of 200 million+ oz. in a market that supplied a total of 889 million oz. in 2009 - a truly tectonic shift in demand!5 (more)

BNN: Top Picks

David Baskin, President, Baskin Financial Services, shares his top picks.

click here for audio

Jay Taylor: Turning Hard Times Into Good times

Peter Grandich and Mike Shedlock will tell us whether we are at the start of a new glorious bull market in stocks or whether the post Lehman Brothers credit collapse was just a prelude to some more deflationary times ahead. Both Grandich and Shedlock have had stellar track records with their macro calls and market forecasts. So, you can’t afford to miss what they have to say. Also joining us will be the CEO of Crocodile Gold, an Australian Gold producer with extraordinary exploration and growth potential. We will also talk to the CEO of American Manganese, which company has the largest deposit of manganese in North America at a time when manganese prices could be heading through the roof. Partners Roger Wiegand and Chen Lin will also join host Jay Taylor for added commentary.

click for audio hour 1 hour 2 hour3

Mutual Fund Cash Levels vs S&P 500

Doug Groh: What's Old Is New Again in Gold

The Gold Report: Gold dipped from about $140 per ounce in the bull market of January 1976 to below $105/oz. in September of that year. Ultimately, it proved only a pullback on the way to gold's peak of $850/oz. in 1980. Are we seeing a similar pattern now, or is this correction simply much ado about nothing?

Doug Groh: It's hard to say if this is a similar pattern. The market conditions are different than they were 35 years ago. However, cycles can be somewhat repetitive. I think the more important questions are: What does this correction mean and how long will it take?

Looking back at 2010, the gold market did very well with a nearly 30% rise in price. It's normal to have some type of correction after such an upward surge. Whether the market will experience a 25% correction like back in the late 1970s is hard to tell. But it is not out of the realm of possibility that gold could consolidate at levels seen during 2010 to what was the year's annual average of about $1,225/oz. before it marches to a higher level.

A correction is a healthy thing because it can shake out the weak players, traders and undedicated investors. It solidifies a base.

TGR: Has the correction led to any changes in the way Tocqueville is managing its gold fund?

DG: It hasn't motivated any immediate changes. However, we would like to see how this pullback plays out. It appears that we may be through most of it. At the end of last year, we were a little bit more cautious about investing new funds into gold equities. We felt that some of the gold equities were getting overpriced. We were accumulating cash and taking the opportunity to reposition ourselves for when a correction would come along. The market is going through profit taking from last year and a value-seeking phase. Now we're more interested in some of the companies that we had been looking at last year, but were waiting for better valuations. That is still playing out. (more)

Markets brush aside Chinese rate hike

The Dow notched a seventh straight day of gains on Tuesday, but light volume suggested that investors don't believe the more than five-month rally has the legs to keep going.

Surprisingly strong sales by McDonald's boosted optimism on consumer spending and drove the Dow's gains on what turned out to be the quietest day of trading so far in 2011, with total volume about 17 percent below last year's daily average.

Weakness in energy shares limited gains in the S&P 500 and Nasdaq after China, the world's second-biggest energy consumer, raised interest rates for the second time in six weeks. The
move pressured commodities on fears of lower demand but had little market impact outside that sector.

"The rate hike is important, but it isn't at a critical level where it becomes troublesome," said Michael Mullaney, a portfolio manager who helps manage $9.5 billion at Fiduciary Trust Co in Boston. (more)