Thursday, March 17, 2011

Currency Meltdown Coming

By Greg Hunter’s (revised)

The situation in Japan is getting worse, not better. There are shortages in food, fuel and warm dry shelter. To make matters exponentially worse, nuclear power plants there continue to burn out of control and emit high levels of radiation. Japan is a stark reminder of how fast a modern technologically advanced society can be brought to its knees by an unforeseen calamity.

On the other side of the Pacific, the devastating pictures from that island nation are taking the attention away from our own, much more predictable, calamity coming from a tsunami of debt. As the U.S. and other world governments continue to print money to keep the banks and system solvent, a ball of debt is growing. It is on course to swamp the system. In his latest report, Martin Armstrong, former Chairman of Princeton Economics and an expert in the study of economic cycles, said events happening in places like Japan or the Middle East are not the main issue the world is facing. Armstrong was just released from prison after an 11 year stay. He pled guilty to a conspiracy in 2000, but spent most of his time in jail for contempt of court. Armstrong’s tail is a highly unusual criminal and civil case involving a very brilliant econimic scholar. (Click here to read more on this story from Bloomberg.) Armstrong has written many articles from prison. His latest comments were the last from his incarceration. Armstrong said, “This is coming at a time when governments are broke. We have state and local governments in a debt crisis and that meltdown is very real!!!!!!! Government is collapsing. That is the issue.” Armstrong says because of all the money created to bail out failing banks, gold is gaining in price. “This is not just inflation. We are on the verge of a currency meltdown this time,” said Armstrong. (Click here to read the latest report from Martin Armstrong.)

The latest analysis from economist John Williams of agrees with Armstrong. In a special report released yesterday, Williams warns a “great collapse nears.” Williams said the collapse will take the form of “a hyperinflationary great depression. Such will encompass a complete collapse in the purchasing power of the U.S. dollar; a collapse in the normal stream of U.S. commercial and economic activity; a collapse in the U.S. financial system as we know it. . .” The hyperinflation will come from bank bailouts and ongoing Quantitative Easing (QE or money printing) used to keep the financial system from collapse. Calamities in places like Japan will likely accelerate QE. The Fed will have to make up for the loss of Japan as a buyer of our debt. Williams said,“. . . the economic and systemic-solvency crises appear to be worsening, not improving, suggesting more, not less, quantitative easing.” This, in turn, will quicken the loss of buying power for the buck. So, we have a vicious cycle of QE coupled with declining tax revenue that is accelerating the “great collapse” scenario.

The big question is when? Williams says, “Outside timing on the hyperinflation remains 2014, but there is strong risk of the currency catastrophe beginning to unfold in the months ahead. It may be starting to unfold as we go to press. . .” Meaning, the process of hyperinflation may have already started. Recent inflation numbers and spiking gas prices talked about on this site and many others seem to confirm Williams’ analysis.

If the financial system and government are headed for a shutdown, what should the average person do? Here is what John Williams said, “With no viable or politically-practical way of balancing U.S. fiscal conditions and avoiding this financial economic Armageddon, the best that individuals can do at this point is to protect themselves, both as to meeting short-range survival needs as well as to preserving current wealth and assets over the longer term. Efforts there, respectively, would encompass building a store of key consumables, such as food and water, and moving assets into physical precious metals and outside of the U.S. dollar.”

There is no way of telling how this financial crisis will unfold, or what extremes will be reached. It can be anything from an ongoing deep recession to a complete “Mad Max” style breakdown. If Williams and Armstrong are only half right, then we will experience something in between. At the very least, tough times are coming and they are going to be with us for a while.

Alert: Nuclear (and Economic) Meltdown In Progress

Japan Will Shift From Being an Exporter of Funding to a Consumer of it

Japan Will Shift From Being an Exporter of Funding to a Consumer of it
The substance of this alert centers on the unknown aftershocks that may result from the world's third largest economy, Japan, rapidly shifting from an exporter of funding to a consumer of it.

Important Note

It is with a heavy heart that I am now issuing the highest level alert to my readers than I have to date. The threshold for an alert is one or more world events that personally cause me to take action.

I'm making this alert publicly available less than 36 hours after releasing it to my enrolled subscribers given its importance and the speed at which events are accelerating.

The substance of this alert centers on the unknown aftershocks that may result from the world's third largest economy, Japan, rapidly shifting from an exporter of funding to a consumer of it. In situations like these, we are by definition operating with incomplete and often confusing information, and events are developing more rapidly than they can be fully analyzed and internalized. We regret in advance any mistakes that we might make due to making calls and decisions in this highly fluid environment.

This alert warns you that major world-changing events are now underway and that your personal preparations for an uncertain future should either be completed or take on a new sense of urgency. On the basis of the information contained here and in the past two days of posts, I am personally ratcheting up my preparations, making purchases, and topping off what needs to be topped off.

Important caveat: At this point in time, I cannot fully support 100% of my concerns with hard data and evidence. Some of what has tipped me into this state of urgency is data, evidence, and stories that I can point to. Some is due to the absence of data or information, the remainder results from watching market gyrations and correlations shift into new patterns, which tell me something is afoot.

I have not been this concerned since October of 2008.

Some Background

Within hours of learning of the event at Reactor 1 in Japan, I had looked at the evidence available, drawn a few conclusions, and then checked to see what the experts were saying. Never quite sure of what sort of personal and/or professional limitations are in play, I rarely start with anyone's assessment but my own. It's part of trusting myself and it has worked remarkably well for me and my subscribers over the years.

Here's what I wrote in the blog on the morning of Saturday, March 12, 2011 on Japan's nuclear incident:

There have been reports from Japan's nuclear agency that radioactive cesium and iodine were detected outside of the facility, which can only happen if the core has been exposed somehow. Perhaps that's all under control now, but the evidence for very high temperatures, the explosion of the containment building, a 12-mile evacuation zone, and the presence of cesium and iodine all indicate that perhaps the complete situation is not being shared with the public.
If you live in Japan, you should be heading well upwind of this facility and have potassium iodide pills on hand. I would personally be reading the wind forecasts and assuring that I was upwind.

My expertise involves making sense of the world in relatively short order. It also helps me smell B.S. remarkably quickly, especially from official sources. The nuclear situation in Japan struck me from the outset as being rather more serious than described, and this has proven true. I take no pride in this particular 'victory', and instead feel the burden of having to be the bearer of bad news.

The nature of this alert is to let you know that I consider the chance of a renewed round of economic and fiscal crises to result from the chaos that is currently engulfing Japan and the MENA region to be extremely high.

A Global Meltdown

For decades, the world has been running its own nuclear-style reaction, only in the currency and debt markets, where exponentially-accelerating piles of debt and money have spun about faster and faster in a gigantic, complex, coordinated reaction, the core of which is, and always has been, the United States.

At the very center of this ungainly money reactor is the main fuel pile itself, the US Treasury market. With any interruption to smooth flow of money through this pile, it will immediately become unstable.

The threat I see goes like this:

Stage 1: The world watches, riveted, as Japan suffers a tragic and horrible earthquake and tsunami, but as horrifying as these are, they are localized phenomenon affecting a relatively small percentage of the country. The real trouble lurks within damaged nuclear plants, which are now ruined and will never again produce electricity for Japan, creating instant shortages that will take years to remedy. Worse, a dangerous plume of radioactivity is carried south by winds. Tokyo partially empties and shuts down for all practical purposes.

Stage 2: The abrupt slow down of the world's third largest economy alters the smooth flow of cash around the globe, and even causes reversals of some other long-standing flows. Chaotic eddies emerge in a decades-old pattern of ever-increasing flows of money into and out of the money centers, and various carry-trade and other interest-rate-sensitive strategies blow up. Manufacturing in Japan screeches to a halt, disrupting just-in-time manufacturing strategies both internally and across the globe.

Stage 3: In order to fund the rebuilding effort, Japan has to buy a lot of items from foreign suppliers at the same time that its exports plunge precipitously. At first Japan simply does not participate in US Treasury auctions, leading to a shortage of buyers. But eventually Japan has to sell some of its vast hoard of US bonds in order to pay for external items needed for its reconstruction. Further, insurance companies, huge holders of US bonds, face stiff liability claims in the wake of the worst natural disaster to hit a heavily industrialized center and are forced to redeem enormous amounts of Treasury paper. US Treasury yields begin to climb.

Stage 4: Continuing unrest in the MENA region serves to keep oil elevated and local funding needs high, while Europe's weaker players (the PIIGS) continue to slip under the waves. Money continues to ebb away from the US Treasury market. Forced by circumstance, the Federal Reserve reverses its linguistic course and opens the monetary floodgates once again. There's nothing like a crisis to justify more money printing, especially to a one-trick pony (the Fed) that only knows how to stamp its hoof on the 'print' button.

Stage 5: An increasingly chaotic monetary and fiscal situation spills over into the derivatives arena, creating a number of financial accidents. Stressed governments find themselves in more of an arguing mood than a pull-together-and-sing-Kumbaya mood, and agreements are hard to come by. Banks begin to fail again, global trade falls off, unrest continues to build, and then it happens - a currency crisis.

Stage 6: Everything changes. Faster than you think.

I wish I could completely quantify and justify the reason for this assessment, but I cannot at this time. Yes, we've got some very serious market turbulence to point to:

market chart prices

From ZeroHedge:

Japan's nuclear crisis has deepened and we deeply regret to say that there is now the real possibility of a nuclear catastrophe. Investor panic has set in with the Nikkei down over 16.5% in two days and the Topic index down by 17% - its worst two-day loss since the 1987 Wall Street stock market crash.
The cost to insure Japanese debt has surged to a record with credit-default swaps protecting Japanese government debt for five years soaring 27 basis points to a record of 125 basis points.
One UBS trader said that the deteriorating nuclear crisis had led to "near panic across local credit-default swap markets." While most equity indices and commodities have fallen, some sharply, gold has remained resilient and is down 1% in US dollar terms and is higher in Australian dollars which like other so called 'commodity' currencies has come under pressure in recent days.
(Source [1])

The nuclear meltdown has led to a market meltdown. Market breaks can quickly lead to supply shortages and other unpleasant realities.

Shifting Baselines

The problem with these fast-moving situations is that everything shifts from beneath your feet and events fundamentally change so quickly that you do not have time to adjust properly before the next insult arrives.

For example, I pride myself on ingesting massive amounts of information and processing it logically and relatively completely. But right now I am overwhelmed by too many situations. I should know who the opposition leaders are in Bahrain, how many troops have crossed from Saudi Arabia, what sorts of equipment they brought (as an indication of whether they plan to stay for a little while or a long while), and so forth. But I only know that troops have crossed the border; I consider this to be a bad sign for global oil price stability, but know very little else.

And I am not entirely clear on the inner machinations of the European debt crisis any more. I am completely consumed by following the developing nuclear crisis in Japan and trying to determine how that could, will, should impact our readers in Japan, and the world economic landscape.

The problem is captured perfectly in this post by Debu [2]:

Another slightly surreal day in Tokyo which I largely spent buying food in case we have to stay indoors for an extended period due to fallout and/or if food supplies are disrupted by distribution problems. (I have been remiss in my prepping, I admit. I will spare you my lame excuses as to why.) Near pandemonium in some supermarkets which surprised me given the generally anodyne tone of the reactor situation coverage on the TV. Possibly it is simply worries about empty shelves feeding on itself.

Still, despite the devastation a few hundred kilometres away in the areas affected by the earthquake/tsunami (words fail), in Tokyo we are only inconvenienced in trivial ways. And so, the sense of unreality. There were emails today from my Japanese mates saying they were resigned to there being no hockey for awhile because the rinks will be closed because of the power cuts (and serious damage to the roof of our home rink). Or, whether it is milk is hard to come by (but still lots of wine and whiskey available), or some shops are closed to save power, or limited train service, etc. it is all inconsequential trifles. Given what is happening up north it is enough cause a bit of survivors' guilt.

Many thanks to all on this forum for the info and the insights. It has, and will continue to be I suspect, my best source of information and advice.

One name for this process of only very slowly coming to grips with an enormous change when it happens at a slow enough pace is "shifting baselines." It means that if you had put these same people to sleep a week ago and woke them up today, the shock of the reality of today's situation would immediately jar them into action. But somehow, as things change seemingly gradually from hour to hour and day to day, the change itself can prove oddly paralyzing, and this is because our baselines shift. What would have been abnormal yesterday is normal today.

Last week the residents of Tokyo were sympathizing with the plight of their neighbors to the north, and then they were hearing about some controllable problems with some nuclear plants, and then they were hearing about maybe some more serious difficulties, and today they find themselves scrambling to empty store shelves and get out of Dodge, so to speak.

(Reuters) - Radiation wafted from an earthquake-stricken nuclear power plant toward Tokyo on Tuesday, sparking panic in one of the world's biggest and most densely populated cities.
Women and children packed into the departure lounge at an airport, supermarkets ran low on rice and other supplies and frightened residents, tourists and expatriates either stayed indoors or simply left the city.
"I'm not too worried about another earthquake. It's radiation that scares me," said Masashi Yoshida, cradling his 5-month-old daughter Hana.
The nail-biting eased in the afternoon after Chief Cabinet Secretary Yukio Edano appeared on national television saying radiation levels at the troubled Fukushima Daiichi nuclear-power complex had fallen dramatically since morning.
But confidence in the government is shaken and many decided not to take chances, especially after radiation levels in Saitama, near Tokyo, were 40 times normal -- not enough to cause human damage but enough to stoke fears in the ultra-modern and hyper-efficient metropolis of 12 million people.
Many hoarded food and other supplies and stayed indoors. Don Quixote, a multistory, 24-hour general store in Tokyo's Roppongi district, was sold out of radios, flashlights, candles, fuel cans and sleeping bags on Tuesday.
At another market near Tokyo's Yotsuya station, an entire aisle was nearly empty on both sides, its instant noodles, bread and pastry gone since Friday's earthquake and tsunami killed at least 10,000 people nationwide and plunged Japan into a twin nuclear and humanitarian crisis.
(Source [3])

Time to Prepare

Okay, folks, this is not a drill.

Events have now sped up to the point that we cannot predict what will happen next. At this point a systemic banking crisis, complete political upheaval in one or more countries, a currency crisis, or a debt crisis are all within the realm of the possible.

This is the most difficult Alert I've ever had to write, because I know I have not yet processed all the necessary information to truly assess the risks. I am operating on gut instinct here, and several of you have already reminded me to trust myself. Thank you. That's what I am doing now.

The risks I am most concerned about striking outside of Japan are:

  • A derivative-fueled banking crisis. Another banking crisis could shut down international monetary flows for a period of time, which would severely impact your ability to access your money, conduct trades, or otherwise take care of business.
  • Critical shortages. Already we know that much of Japan's manufacturing output will be crippled for a while due to quake damaged plants being destroyed, workers failing to show up as they attend to their families in a moment of deep crisis, and electricity shortages due to destroyed power plants being taken permanently off-line. How much and which products will be affected will take weeks of effort to discover, as our highly integrated global supply network has an unknowable number of nodes that originate in or pass through Japan.
  • A global GDP insult. Building on the idea of critical supply chain disruptions and shortages, it is a safe bet that the world economy will take a hit now that various products cannot be manufactured and sold. Rather than a gentle slow-down that can be easily managed, the risk I see here is akin to a large wrench being tossed into a delicate transmission. The risk springs less from how much you slow down, but rather how fast you do it. This global GDP hit will further expose the weakness at the periphery, probably taking down the weaker players once and for all.

The main story line here is that Japan is a critical and embedded player in both the financial and productive economies, and it has suddenly, almost instantly, been taken off-line. We don't know what might happen next, but we should be prepared for anything.

My Advice

Recently I had advised readers to be ready for a big downturn linked to the idea of a QE cessation. I am going to retract that somewhat (almost entirely), because this Japan crisis will provide all the political cover necessary for more printing.

Nonetheless, a market rout is on, but for entirely different reasons than I first projected.

At any rate, the time to move to cash from stocks is slipping quickly past, if not already gone, but if you haven't made that move yet, you should consider waiting for the next "Bernanke bounce" in which a few hundred billion are tossed into the kitty to stabilize the markets.

This alert is going to be a living document in the sense that I will be constantly updating it as time goes on and events unfold. The first stage of my advice centers on the basics. You need to have all of your basic preparations completed at this time. Food, water, medical kits, shelter, cash out of the bank, and all the rest should absolutely be in place at this time.

Get the basics done. Now.

  • If you live on the west coast of the US, you must prepare for a fallout event even though this is extremely unlikely due to the distances involved. The concern here is that nearly 40 years of spent fuel is stored onsite and apparently boiling away its water and possibly burning. This means buying KI tablets for at least a week for every member of your family and being prepared to spend up to a week 'taped up' inside your house if it comes to that. Plastic, duct tape, and board games are what you need. I hate having to even suggest this sort of preparation. But while remote, there's always the chance that a quirk in the air flow patterns could lead to less dilution than expected across the ocean and that a relatively small area of the west coast could receive a surprisingly strong concentration of contamination. Again, this is very remote, but so was the idea of four plants all melting down at the same time.
  • Get what cash you can out of the bank. You can always put it back later on. Keep it somewhere safe.
  • Move any money you can from less liquid to more liquid vehicles. You want to be able to access your money in a hurry should that become necessary. Re-read Taking Control of Your Personal Finances [4] if necessary. I outline all the reasons and a few methods for 'becoming more liquid.'
  • Top off your fuel tanks.
  • Buy extra food at the grocery store.
  • Have long-term storage food put aside.
  • Take medicines? Be sure to get extras.

I am still holding onto all of my gold and silver holdings as I cannot imagine any possible policy responses that will bolster anyone's faith in fiat currencies. That said, I am expecting short-term declines, possibly significant, in the US paper price for these metals on the basis of a liquidity crisis skimming the speculative component of their price off the top. I really don't know how much this will be, but it's certainly not insignificant.

When you stock up on things at the store(s), think also about friends family, neighbors, and all the other assorted people you care about who have almost certainly done little or nothing to prepare. What would they like? Don't overlook comfort and luxury items that command a mental premium in a time of crisis. Chocolate comes to mind.


As always, I have no idea if anything is going to transpire or not, or when. How's that for indecisive? But I can tell you that the pressures are larger than they’ve ever been throughout this long emergency and that conditions are ripe for an avalanche. My sincerest hope is that this will all blow over. But hope alone is a terrible strategy, and so we prepare.

My best guess is that the situation in Japan will unfold over the next two weeks, with a full blown funding and fiscal crisis (of confidence) blossoming there over that time. Already we are seeing credit spreads on Japan's sovereign debt begin to skyrocket, meaning that an increasing chance of a sovereign default is being priced into the debt markets. This is the same dynamic we saw with Greece, then Ireland, Iceland, too, and so on. Only this time it is happening to the world's third largest economy.

Two weeks after that, I expect that the first real product shortages and associated work stoppages will begin to hit the US and European economies. I expect the difficulties to surface first in Europe followed by the US. Somewhere in this zone we will get the next solid commitment to print, print, print, probably as a joint exercise of both continents.

Taken together, I think we've got at least a month until things have shifted enough that preparations will become either difficult or irresponsible.

Use this next month very wisely.

Remember, it's better to be a year early than a day late. So get out there and prepare responsibly.

Above all, it is our duty to remain calm, focused, and helpful to those around us. We are all experiencing anxiety and fear to greater and lesser degrees. It is my hope that we can use the privacy of the comment thread below to work through whatever issues arise for each other, whatever those may be, and to help each other make the best decisions we can in an increasingly chaotic and uncertain environment.

Welcome to the nexus of multiple exponential curves. We always knew things would speed up along the way, and so they have. Let's do the best we can.

Events are unfolding in a manner entirely consistent with the framework I laid out in my recent Guide to Navigating the Coming Crisis [5]. As the report predicts: things are speeding up, events are progressing from the outside in, and soon enough everything will be substantially different than you remember and it won't be completely obvious how that happened due to the phenomenon of shifting baselines. Reading it should be a particular priority for those with family or substantial investments to protect. Click here [5] to read the free executive summary.

Your faithful information scout,
Chris Martenson

Apple (AAPL) Breaks Uptrend

Apple (AAPL) successfully tested and held its long-term uptrend channel three times this year, but yesterday the uptrend finally failed to hold. As shown below, the stock broke the uptrend yesterday but managed to trade higher from the open to the close. Today the stock opened down by a few points, and it has continued lower to its current level of $333.50, which is down nearly $12 on the day.

5 Junior Mining Stocks to Sell Before Precious Metals Correct

With the jaw-dropping run in silver and gold since last summer, mining companies have had their day in the sun. In particular, junior mining companies have seen shares soar as a gigantic surge of investor interest has caused surges in share prices across the sector. The Junior Gold Miners ETF (GDXJ) rocketed from 25 last summer to a peak of almost 45, and still sits at 38 today.

However, discretion is advised. The bull market in metals has sent nearly all junior mining and exploration stage precious metals plays soaring. Several companies within the space have merely tagged along for the ride, however, without any fundmental justification for the large increases their share prices have enjoyed. Here's several mining companies you should get out of now before an upcoming correction in the sector sends these companies' shares downward.

NovaGold (NG) -- Novagold rejected a buyout from Barrick Gold (ABX) for $16 a share several years ago and it has been all downhill for Novagold since then. The company's two flagship properties are still many years away from operations, and progress on them is proceeding at a snail's pace, while the company's once-promising Rock Creek mine has been written off the balance sheet entirely after environmental problems and a fatal accident ruined that mine's utility.

As best as I can tell, shares have rebounded from less than 50 cents to more than $12 largely due to a slick press relations campaign combined with the investment of several noted investors such as George Soros, who bought in at prices of less than half what Novagold trades for today. The company still is woefully underfinanced and cannot build either its Donlin Creek or Galore Creek mines without selling itself out entirely or diluting itself beyond recognition. Read my articles Novagold: The Precious Metals Sector's Most Overvalued Stock (Part 1) (Part 2) for the complete story.

Seabridge (SA) -- Like NovaGold, Seabridge has a long history of putting out press releases and funding itself with additional share offerings while it has no operational experience in running mines. The company has long been promoted (via paid advertisement on such exciting venues as CNBC) as a way to buy a call option on gold, since Seabridge merely acquires gold in ground and then sits on it without trying to develop the assets.

While this strategy may have made sense when gold was trading at $500/oz, it makes no sense now. When the price is high, generally a mining company is wise to produce its gold, rather than leaving it sitting in the ground. Of course, Seabridge may be smart not to extract its gold, since the company's largest project is sitting in large part under a glacier and the CAPEX to actually extract that gold would be enormous.

Better to keep selling people the promise of large gold deposits than the reality that Seabridge's deposits are difficult to reach and costly to extract. Seabridge, interestingly enough, has almost no coverage from the analyst community; while the company has a more than billion dollar market cap, it has not been able to convince mining analysts of its potential. This Barrons expose should have sent Seabridge shares diving, but instead, people have kept on believing Seabridge's unlikely story. Could KSM-- Seabridge's main asset which was acquired for less than a million dollars from Placer Dome, and which has been unsuccessfully explored by gold mining majors since the 1960s-- really be worth billions today? Sure, but it's also possible the company is merely selling you the proverbial Brooklyn Bridge.

Great Panther Silver (GPL) -- Unlike NovaGold or Seabridge, there are no great problems with Great Panther other than valuation. However, the market is valuing this rather ordinary silver miner as if it were a star performer. The company's management has had a long history of breathless press releases followed by lackluster results, and the stock had consistently hovered around a dollar.

Then, last fall, everything changed, as Great Panther shares began to surge and soon after the company announced an uplisting off of the pink sheets. Mayhem ensued as soon as the move was completed, with shares doubling since February to more than $5 last week. For a company lacking exemplary management or any long track record of success or profits, a 400% pop in a few months is way too much. The Price/Sales ratio is now 12, the Price/Book ratio is more than 15, and the trailing PE is near 100. Take your profits here and re-deploy them elsewhere. Great Panther is a high-cost silver producer, meaning that it is highly leveraged to the price of silver. If silver retreats even modestly, Great Panther shares will get clobbered.

Gold Reserve (GRZ) -- Stocks like Gold Reserve really make me doubt the efficient markets theory. Gold Reserve is presently trading near its 52-week high at close to $2 a share. The company, however, has a book value of merely 8 cents a share, and its one and only significant asset-- the Las Brisas property-- has been nationalized by Venezuelan despot Hugo Chavez. The company is burning close to $20 million of cash a year, though at current loss rates, the company can sustain itself a few more years before running out of cash. It seems that the company is trading upward entirely on its sector's strength, as there has been no good news to drive the share price surge since last summer.

For $1.80 a share, Gold Reserve investors get 8 cents a share in net assets (this number should turn negatve within the next two quarters), plus they get to participate in Gold Reserve's lawsuit against Hugo Chavez for expropriating the company's Venezuelan property. While anything can happen, let's just say that the odds of a foreign company beating Hugo Chavez in court and then actually taking possession of a property in Venezuela is infinitesimally low. I highly doubt that Chavez is going to care even if some foreign court declares that Gold Reserve has a right to the Las Brisas property-- he is a socialist dictator after all. Shareholders expecting Gold Reserve to reclaim possession of the Las Brisas property are deluded. Gold Reserve shares are worth close to zero and profits should definitely be taken, with the stock trading up more than 125% since June of 2010.

Crystallex (KRY) -- Speaking of companies facing a Hugo Chavez problem, embattled Crystallex also remains a strong sell. Crystallex's prolonged effort to develop the Las Cristinas mine is finally coming to its pathetic end. The Chavez-controlled Venezuelan state mining company officially took over Las Cristinas last month leaving Crystallex out of cash, in debt, and with no mines or properties to develop. Unlike Gold Reserve, Crystallex doesn't have the cash to launch a protracted legal struggle against Hugo Chavez and the company should finally give up the ghost around the end of this year when its cash supply is extinguished. Remarkably, Crystallex still has a $57 million market cap despite it having no remaining shareholder value nor any realistic hope of creating value in the future.

Stocks Look Attractive Again, Shopping List Time (MSFT, GS, NFLX, VLO)

Fellow Masters it's time to shove a bunch of stocks into the shopping cart and go for broke. Thanks to the big decline in all major indexes, we believe its time to start think about buying on the dip. This is when you pick up a few shares of the best companies around as they all have fallen in market cap along with everyone else.

Leading the pack for us would be Microsoft (NASDAQ:MSFT) which is now trading 8% away from its 52-week low. Coming next would be the almighty Goldman Sachs (NYSE:GS), its dropped 8% in the last month. Then look to Raging Bull Index favorite NetFlix (NASDAQ:NFLX), that stock has increased 200% since it first joined the index last year. Tack on a little Valero Energy (NYSE:VLO) and its time to push that cart down the hill Jackass style

FYI: This huge sell-off started before the Japanese disaster.

Historians may well look back and see it differently, but this sell-off began before the Japanese quakes. Emerging markets have been trending down since December last year. Despite new highs in gold and silver, the major gold stocks also made their highs late last year. The DAX, the FTSE, the Dow, the S&P 500 and the Nasdaq all peaked later, around February 21st.

Sure we can keep going down and probably will, but at some point the best and brightest stocks are going to bounce.

Stocks like Microsoft (NASDAQ:MSFT) , NetFlix (NASDAQ:NFLX), Goldman Sachs (NYSE:GS), and Valero Energy (NYSE:VLO) need no introduction. These are market leaders, huge corporations, and just four compaines that will regain market share once the market begins to tick higher.

Barton Biggs: Ordering Japanese

Barton Biggs, Traxis Partners managing partner, didn’t own Japan before, but says he jumped in yesterday. Biggs believes the radiation levels will not present a serious problem, and that the economic impact will be negligible.

This chart has an uncanny ability to call tops and bottoms in the market

Investors can use the 15-year falling yield channel to make quality "big picture" buy and sell decisions for stock holdings.

Is the recent decline about the situation in Japan or the repeating dance between yields and stock prices?

Stock to Watch: Cameco (CCJ)

Investors have been dumping Uranium Stocks left and right - and with good reason.

Earlier on Wednesday, the Chinese government said it was tightening it approvals and safety procedures for new reactors as Japanese authorities scrambled to bring a quake-damaged nuclear power plant back from the brink of disaster.

"We will temporarily suspend approval of nuclear power projects, including those in the preliminary stages of development, before nuclear safety regulations are approved," China's State Council said in a statement.

The announcement came as Japan struggled to cool down a nuclear power plant north of Tokyo that was severely damaged by the 9.0 magnitude quake and tsunami.

Enter Cameco (CCJ)

Cameco Corporation operates as a nuclear energy company. The company operates through three segments: Uranium, Fuel Services, and Electricity. The Uranium segment involves in the exploration for, mining, milling, purchase, and sale of uranium concentrate

So why on earth would you want a Uranium stock in your portfolio?

The Uranium selloff, and China's reaction, seems to be knee-jerk reaction to the Japan crisis. However, China has announced plans to boost nuclear power output to at least 80 gigawatts from a current 11 gigawatts.

Mastery Bottom Line:

People aren't going to just flip the switch and shut off Nuclear Power overnight.

CEO Jerry Grandey said the market’s reaction which Cameco’s share price 12% lower on Monday was “largely driven by emotion”, and that the “fundamentals of the industry remain positive".

“We do not anticipate significant effects on Cameco’s business in the short or long term,” he said.

Shares of CCJ are down 30% in the last month. We do not recommend running out and buying CCJ today, but add to your watch list - anything under $25 a share would be a great buy opportunity.

Commodities Advance, Snapping Four Days of Losses, as Oil Gains on Mideast

Commodities rose for the first time in five days as crude oil rebounded on renewed concern about supply disruptions amid increasing Middle East tension.

The Standard & Poor’s GSCI Spot Index of 24 commodity futures climbed 1.6 percent to 684.32 as of 12:04 p.m. in London after plunging 3.8 percent yesterday, the most since July 2009. Crude oil advanced as Bahrain suspended stock-market trading after the government declared a state of emergency. Gulf-nation troops poured into the island country, which is off of Saudi Arabia, the largest oil exporter.

“What people have in the back of their mind is the Middle East,” said Michael Haigh, global head of commodities research at Standard Chartered Plc, in Singapore. “Disruptions in the Middle East and places like Libya tend to be long-lasting.”

The GSCI index has advanced 8.3 percent this year, with gains in the past month coming mostly from political unrest that started in Tunisia and spread to Egypt, Libya and Bahrain, sparking speculation oil supply may be disrupted.

Libya’s oil exports may be halted for “many months” because of damage to facilities and sanctions following a rebellion against leader Muammar Qaddafi, the International Energy Agency said in its monthly Oil Market Report.

The Middle East unrest outweighed concerns about radiation from a Japanese nuclear plant damaged by the country’s strongest earthquake on record and subsequent tsunami. The country is the world’s third-biggest user of crude oil, the top importer of corn and the second-largest buyer of copper ore.
Fuel Rods

Military helicopters were deployed to drop water on the crippled Fukushima Dai-Ichi power plant as officials battling to prevent a meltdown said fuel rods at two reactors may have been damaged and temperatures at spent fuel pools were rising.

Clouds of white smoke or steam rose from the reactor buildings following a fire at Dai-Ichi’s No. 4 reactor this morning. Chief Cabinet Secretary Yukio Edano said radiation levels at the plant then rose, forcing a brief evacuation, but have since fallen. About 70 percent of the fuel rods at the plant’s No. 1 reactor and a third of the No. 2 reactor’s fuel may have been impaired, Tokyo Electric Power Co. said. The Dai- Ichi nuclear complex has six reactors.

“Investors’ greatest worry is a meltdown of that nuclear plant,” Ker Chung Yang, an analyst at Phillip Futures Pte, said today by phone from Singapore. “It is less than a week after the Japanese quake. The outlook is still uncertain.”
Oil, Copper

Oil for April delivery gained 2 percent to $99.11 a barrel on the New York Mercantile Exchange after falling as much as 1 percent to the lowest level in more than two weeks. About 1.3 million barrels a day, or 29 percent, of Japan’s refining capacity was closed after the temblor and tsunami.

Copper rose for the first time in six days on speculation reconstruction in Japan will boost demand. The contract for three-month delivery on the London Metal Exchange added as much as 2.9 percent to $9,382 a metric ton and last traded at $9,341.75.

“Following the steep losses in the last few days, the price now looks attractive to some buyers,” Li Peiying, an analyst at Essence Futures Co., said by telephone from Beijing. “People have started to shift their attention to the rebuilding that will boost demand in the next few months.”

Corn for May delivery dropped as much as 2 percent to $6.235 a bushel, the lowest level for the most-active contract in two months, before erasing the decline and adding 1.1 percent to $6.4275.

Declines in commodity prices because of the Japanese earthquake are likely to be temporary, according to Standard Chartered’s Haig. “We expect a V-shaped recovery” that will boost demand for steel and industrial metals, he said.

The Bull Market Is Over It's a bear market now

It's a bear market now
The disaster in Japan has hit stocks across the world. But the bull market was already rolling over even before the quake hit. Dominic Frisby asks: what happens next?

It's taken the devastating combination of an escalating sovereign debt crisis in Europe, revolution across the Arab world and one of the most horrific natural disasters in modern history to finally take this two-year bull market down, but take it down it has.

Until mid-afternoon yesterday, when we saw some welcome respite, this week has seen nothing but inexorable, across-the-board selling.

It's felt like 2008 all over again. It doesn't matter what you own, quality or not, everything has been sold. The baby has been thrown out with the bathwater. Panic has set in.

This is one of those times, if ever there was one, to 'keep your head when all about you are losing theirs'.

So let's take a step back and think…

This sell-off started before the Japanese disaster

Historians may well look back and see it differently, but this sell-off began before the Japanese quakes. Emerging markets have been trending down since December last year. Despite new highs in gold and silver, the major gold stocks also made their highs late last year. The DAX, the FTSE, the Dow, the S&P 500 and the Nasdaq all peaked later, around February 21st.

Even uranium stocks, which are down by about 40% in barely two days (!) this week, were trending down a good three weeks before the earthquake hit. In fact only the CRB, the commodities index (which is heavily weighted to oil), was making new highs last week.

It has hugely exacerbated it, yes – it has turned it into something more serious. But the Japanese crisis wasn't the initial cause of this sell-off.

In fact just last week [1], the day before the quake, I wrote: "It could be that this turn down (in the gold-silver ratio) is the beginning of the next phase of the financial crisis. It wouldn't surprise me. It's long-overdue and there are bearish signals all over the place. Senior gold stocks have been in a downtrend since late last year, even although gold has been rising. Emerging stock markets have been falling, although their Western counterparts have been rising. And a spike down in the gold:silver ratio often marks a major market turn".

But this is all academic. We need to recognize the environment we're now in. And the short of it is this: the bull market is over. We're in a bear market now.

It's time to sell the rallies

The first thing we can expect in the coming days is huge volatility. We've seen that to the downside already. At some stage – hopefully sooner rather than later, and it may even have started yesterday – we’ll get the bounce. And we’ll be able to learn a lot about what lies in store by the magnitude of that bounce.

Trade this volatility at your peril. Some will earn fortunes doing so, but many will not. Once the dust starts to settle, we can get a clearer idea of where things are trending.

Those that went defensive and started to take cash off the table as this bull market became more and more extended will be mightily relieved they did so. Those that didn't should use rallies to build up cash for the opportunities that bear markets inevitably create.

For my part, this is what I see ahead.

The Nikkei has already been the hit hardest of any market. I hate to say it - and not everyone in the MoneyWeek office agrees - but I think that’s likely to continue. It's rallying as I write this, and should bounce from these oversold levels. There will also be some buing opportunities in individual stocks. But I'm afraid it looks doomed to eventually retest its 2009 lows around the 7,000 mark. Too many Japanese companies have been too badly beaten up by all of this.

But who knows? Maybe that will mark the final low at the end of Japan's interminable bear market, just as in 2001 commodities retested their 1999 lows and finally ended their 20 years in the doldrums. Here we see a log chart of the Nikkei since 1988.

Nikkei since 1988

The Dow hasn't been much better than the Nikkei

Many may look at the Dow over the last two years and think what a wonderful market it's been, while they look at the Nikkei over the same period and think, 'What a dog'. But this has largely been a result of the relative currency weakness. This week aside, the Nikkei's recent performance isn't as bad as it may seem.

If you take the Nikkei and measure it in US dollars, and take the Dow and measure it in Japanese yen, the performance has been virtually identical. This is shown in the chart below.

Nikkei-USD vs Dow-Yen

The strength of the Dow has been an illusion created by currency weakness.

The yen has been rallying as stocks are liquidated and cash pours into the area. This might well continue for as long as the stock market declines. Then these two may well turn together, perhaps as soon as early summer, as the spending and inevitable money-printing continues. (I bet the Japanese government will wish they hadn't spent as much these last 20 years and got into so much debt, when they didn't really need to).

For now, the Japanese must enter a period of mourning. And our thoughts and prayers should be with them as they do so. But once they start that rebuilding process, they will do so with great persistence and energy. And they're going to have to import a lot of iron, a lot of copper, a lot of cement, a lot of energy. The Daily Telegraph says this "tragedy is expected to become the costliest natural disaster in history, with the repair bill likely to top £100 billion".

So as we emerge from this panic, and the dust settles, commodities will likely resume their secular bull market, while stock markets and currencies continue to meander.

U.S. Stocks Fall as S&P 500 Drops to Lowest Level Since December

U.S. stocks retreated, sending the Standard & Poor’s 500 Index to the lowest level since December, amid concern that Japan’s nuclear crisis will worsen.

The iShares MSCI Japan Index Fund (EWJ) tracking 323 securities slumped 3.7 percent. KB Home and D.R. Horton Inc. slid more than 2.2 percent, pacing declines in homebuilders, as housing starts plunged to the lowest level in almost a year. International Business Machines Corp. (IBM) fell 3.8 percent as Sanford C. Bernstein & Co. cut its rating on the shares. Apple Inc. (AAPL) sank 4.5 percent after JMP Securities LLC downgraded the maker of iPads.

The S&P 500 fell 2 percent to 1,256.88 at 4 p.m. in New York. The Dow Jones Industrial Average slid 242.12 points, or 2 percent, to 11,613.30, the biggest drop since August. The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, rose 21 percent to 29.40, the highest level since July.

“The risks have risen and you have to be mindful of them,” said David Joy, chief market strategist at Columbia Management in Boston, which oversees $350 billion. “It’s difficult to nail down what’s accurate information coming out of Japan and what isn’t. There’s concern that the problems at the nuclear plants are far more serious than the problems associated with the earthquake. In addition to that, there’s ongoing housing weakness in the U.S. and a fear premium built into the oil market. That’s why you have to hedge your bets.”

Emergency Meeting

The United Nations’ nuclear agency will call an emergency meeting to discuss the crisis in Japan as a breach at the stricken Fukushima Dai-Ichi plant increased the risk of a radioactive leak. IAEA Chief Yukiya Amano is flying to Tokyo to talk with authorities today and will return for the meeting as soon as possible, he told reporters in Vienna. It will be the first extraordinary meeting of the agency’s 35-member board since his election to succeed Mohamed ElBaradei two years ago.

The S&P 500 pared its retreat after the Associated Press reported Tokyo Electric Power Co. says a power line that may solve the nuclear crisis at its facility is almost ready. Tokyo Electric Power has not determined the timing for when a new power line can restore electricity to a tsunami-crippled nuclear power plant, Sakio Iwamoto, a spokesman, told Bloomberg News. Iwamoto said he couldn’t confirm how much progress has been made in installing the new power line.

The S&P 500 has slumped 3.6 percent over the last three days after a 9-magnitude earthquake, the biggest in Japan’s history, struck the northeast part of the country on March 11.

‘Armageddon Scenario’

“Investors have priced in an Armageddon scenario,” said Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which manages $53 billion. “If we find that there’s stabilization coming into those nuclear facilities in Japan, investors will turn around and look at the alternatives. People are wary, but at the same time there’s a notion that the economic basis continues to show strength.”

Japan’s earthquake should have a “limited” impact on U.S. growth, said Alec Phillips, a Goldman Sachs Group Inc. economist based in Washington. Disruptions to Japanese output could shift demand to U.S. products, according to Phillips.

The iShares MSCI Japan Index Fund declined 3.7 percent to $9.66 in U.S. trading, dropping to the lowest level since September. Qualcomm Inc. (QCOM), the biggest maker of mobile-phone chips, and Coach Inc. (COH), the largest U.S. maker of luxury leather handbags, slumped at least 2.6 percent amid concern Japanese sales will suffer.

Housing Starts

Earlier today, equity futures fell after the Commerce Department said housing starts dropped 22.5 percent to a 479,000 annual rate. The decline from January was the biggest since March 1984. The median forecast in a Bloomberg News survey called for a 566,000 rate. Building permits, a proxy for future construction, fell 8.2 percent to a 517,000 annual pace.

The producer-price index climbed 1.6 percent from the prior month, the most since June 2009, Labor Department figures showed today in Washington. The median projection in a Bloomberg News survey was for a 0.7 percent gain. The so-called core measure, which excludes volatile food and energy costs increased 0.2 percent, matching forecasts.

A gauge of homebuilders in S&P indexes declined 2.3 percent, as 11 of the 12 stocks retreated. KB Home (KBH) slumped 3.8 percent to $12.71. D.R. Horton sank 2.3 percent to $11.70.

IBM declined 3.8 percent to $153. The computer services company was cut to “market perform” from “outperform” at Sanford C. Bernstein. IBM, which makes up 10 percent of the gauge, contributed 45.60 points to the index’s slump.

Apple fell 4.5 percent, the most since June, to $330.01. The world’s most valuable technology company was cut to "market perform’’ from “market outperform” at JMP Securities. Alex Gauna, an analyst at the brokerage, citing risks related to manufacturing partner Foxconn Technology Corp.

Pessimism Rises

Pessimism on U.S. stocks rose for the third straight week, according to Investor Intelligence’s analysis of investment newsletters between March 9 and yesterday. About 22 percent of writers were bearish on U.S. stocks, up from 21 percent last week, according to the New Rochelle, New York-based firm, which has examined forecasts in newsletters since 1963. About 52 percent of investors were bullish, while 26 percent anticipate a correction, or 10 percent decline, in the market.

Barclays Plc’s Barry Knapp forecast that the U.S. stock market will dip in the third to fourth quarter this year, once the Federal Reserve starts to unwind its stimulus program.

The Fed is “likely to keep the balance sheet static after they stop expanding in June,” said Knapp, head of U.S. equity strategy at Barclays Capital, in an interview today on “Bloomberg Surveillance” with Tom Keene. “In the September to November time frame, they’ll allow it start contracting, and that will be the necessary condition to trigger an equity market correction.”