The swine flu the war in Iraq and Afghanistan Obama administration global recession ...etc...
Part 1 of 5 :
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Thursday, April 30, 2009
Stress Tests are Not Stressful Enough
Last week, when the U.S. Treasury unveiled the basics of their lender “stress tests”, the Fed concluded that “most U.S. banking organizations currently have capital levels well in excess of the amounts required to be well capitalized. ”Simultaneously, they also claimed that the banks needed more capital. Apparently the Fed has little understanding of irony.
Why would our central bankers conclude that “well capitalized” banks need “more capital?” Quite possibly, they believe, as I do, that the rosy economic assumptions that form the basis of the “stress tests” may be far too optimistic. I believe that neither the Fed nor the Treasury have any will to paint a clear picture of our financial turmoil. But that won’t stop them from operating under those assumptions.
A brief examination of the stress test assumptions shows why the Fed should be hedging their bets. (more)
Why would our central bankers conclude that “well capitalized” banks need “more capital?” Quite possibly, they believe, as I do, that the rosy economic assumptions that form the basis of the “stress tests” may be far too optimistic. I believe that neither the Fed nor the Treasury have any will to paint a clear picture of our financial turmoil. But that won’t stop them from operating under those assumptions.
A brief examination of the stress test assumptions shows why the Fed should be hedging their bets. (more)
How Does $9000 Gold Sound?
by: Marc Chandler April 26, 2009
In recent days the Canadian and Swedish central banks have joined the majority of other G10 central banks by indicating that they too may engage in quantitative easing now that the interest rates have been reduced to 25 and 50 basis points respectively. The ECB is wrestling with ways to extend its own form of quantitative easing and an announcement is likely at its next meeting on May 7th.
While some observers have focused on the potential debasement of the US dollar by the aggressive monetary and fiscal policies of both the Bush and Obama Administrations, many investors are worried about the viability of the whole universe of paper money.
As Gillian Tett, award-winning journalist at the Financial Times, put it earlier this month, there has been a four-decade long experiment with fiat currencies not backed by gold or silver. This crisis is so profound that increasingly it appears to have shaken confidence in the experiment. At the same time, the crisis looks to have widened the range of possibilities. (more)
In recent days the Canadian and Swedish central banks have joined the majority of other G10 central banks by indicating that they too may engage in quantitative easing now that the interest rates have been reduced to 25 and 50 basis points respectively. The ECB is wrestling with ways to extend its own form of quantitative easing and an announcement is likely at its next meeting on May 7th.
While some observers have focused on the potential debasement of the US dollar by the aggressive monetary and fiscal policies of both the Bush and Obama Administrations, many investors are worried about the viability of the whole universe of paper money.
As Gillian Tett, award-winning journalist at the Financial Times, put it earlier this month, there has been a four-decade long experiment with fiat currencies not backed by gold or silver. This crisis is so profound that increasingly it appears to have shaken confidence in the experiment. At the same time, the crisis looks to have widened the range of possibilities. (more)
MarketTrends: April 30, 2009
Issued by Colin Cieszynski, CFA, CMT, Market Analyst, CMC Markets Canada
North American Indices and Commodities: US Equities Break Out of Consolidation Zones
After declining through February and rebounding in March, US equity indices consolidated their gains through April. Through this period, equities encountered significant resistance but kept forming support at higher lows, forming bullish ascending triangle patterns. This morning, the Dow Industrials (US30 CFD) and S&P 500 (SPX500 CFD) overcame resistance and broke out of these triangles, suggesting that a new upleg may be underway.
These breakouts, coupled with breakdowns by gold and silver below $900/oz and $12.50/oz respectively suggest that investor confidence continues to grow. In addition to a number of better than expected earnings reports, comments from the US Federal Reserve Board yesterday suggest that the US economy may be starting to stabilize. With the street ignoring yesterday’s worse than expected US GDP numbers it appears that many investors may be thinking the low point of the global recession may be close at hand or already behind us. The next major resistance levels appear near 8,350 then 8,900 for the Dow, 900 and 950 for the S&P.
That being said, the road to recovery may yet be long and bumpy and retests of previous breakout points are common so it may be a bit early to get overly excited about the market. There are a number of factors that may affect sentiment over the next few days. First, there have been a number of reports overnight that Chrysler may declare bankruptcy as soon as today, although this may have already been discounted in market pricing. Second, a number of overseas markets are closed tomorrow for holidays so there may be fewer participants about on Friday. Third, when US equities move significantly in one direction on the last trading day of the month, they tend to reverse course a bit the following day on normal profit-taking. Fourth, don’t forget that stress test results are due on Monday, May 4th, which may yet have a significant impact on the global banking sector.
Although Canadian markets have rallied today, the S&P/TMX 60 (Toronto60 CFD) has remained in its current 550-575 trading range. It appears that the retreat in the precious metal sector may be offsetting gains in other areas of the market.
Commodity trading today also suggests investor confidence may be growing. Precious metals, which had previously acted as a safe haven for capital, have been under pressure with gold breaking down through $900/oz and silver dropping back under $12.50/oz. Meanwhile, economically sensitive commodities continue to rebound, led by copper which has rallied back through the $2.00/lb level, wheat’s move through $5.25/bushel and corn’s advance toward a test of $4.00/bushel resistance. US Crude also continues to attract support, holding near the $51.00/bbl level with resistance near $51.50/bbl and $53.00/bbl and support near $50.00 or $49.00/bbl. Concerns over swine flu now appear to be contained to the pork area with lean hogs falling 3.2% and breaking down below $0.60/lb and pork bellies sliding 0.8%.
Canadian and US Share Update: Earnings Reports Drive US Month-End Trading, Canadian Metals Move in Different Directions
Today’s advance in the US markets appears to be particularly broad based, with leading climbers coming from a number of different sectors. The common theme of the day appears to be a positive reaction to earnings reports and guidance. Leading advancers off of earnings news include: Owens-Illinois (OI) up 27.0%, First Solar (FSLR) up 24.2%, Newell-Rubbermaid (NWL) up 23.1%, Dow Chemical (DOW) up 18.3%, International Paper (IP) up 16.5%, Akamai Technologies (AKAM) up 11.8%, Citrix Systems (CTXS) up 10.0%, and Starbucks (SBUX) up 10.9%.
In Canada today, the main theme has been a significant split in sentiment toward metal producers, with base metals climbing in tandem with the copper price and precious metals falling along with gold and silver. Leading advancers include: First Quantum (FM) up 8.5%, Teck Cominco (TCKb) up 6.0%, Thomson Creek (TCM) up 5.4%, and FNX (FNX) up 4.5%. Falling precious metals include: Agnico-Eagle (AEM) down 6.4%, Silvercorp (SVM) down 5.1%, Silver Wheaton (SLW) down 4.3% and IamGold (IMG) down 4.0%.
Sentiment toward the forest products sector may be improving in response to International Paper’s earnings report. Canfor (CFP) has advanced 5.4%, while Sino-Forest (TRE) has climbed 3.5%.
North American Indices and Commodities: US Equities Break Out of Consolidation Zones
After declining through February and rebounding in March, US equity indices consolidated their gains through April. Through this period, equities encountered significant resistance but kept forming support at higher lows, forming bullish ascending triangle patterns. This morning, the Dow Industrials (US30 CFD) and S&P 500 (SPX500 CFD) overcame resistance and broke out of these triangles, suggesting that a new upleg may be underway.
These breakouts, coupled with breakdowns by gold and silver below $900/oz and $12.50/oz respectively suggest that investor confidence continues to grow. In addition to a number of better than expected earnings reports, comments from the US Federal Reserve Board yesterday suggest that the US economy may be starting to stabilize. With the street ignoring yesterday’s worse than expected US GDP numbers it appears that many investors may be thinking the low point of the global recession may be close at hand or already behind us. The next major resistance levels appear near 8,350 then 8,900 for the Dow, 900 and 950 for the S&P.
That being said, the road to recovery may yet be long and bumpy and retests of previous breakout points are common so it may be a bit early to get overly excited about the market. There are a number of factors that may affect sentiment over the next few days. First, there have been a number of reports overnight that Chrysler may declare bankruptcy as soon as today, although this may have already been discounted in market pricing. Second, a number of overseas markets are closed tomorrow for holidays so there may be fewer participants about on Friday. Third, when US equities move significantly in one direction on the last trading day of the month, they tend to reverse course a bit the following day on normal profit-taking. Fourth, don’t forget that stress test results are due on Monday, May 4th, which may yet have a significant impact on the global banking sector.
Although Canadian markets have rallied today, the S&P/TMX 60 (Toronto60 CFD) has remained in its current 550-575 trading range. It appears that the retreat in the precious metal sector may be offsetting gains in other areas of the market.
Commodity trading today also suggests investor confidence may be growing. Precious metals, which had previously acted as a safe haven for capital, have been under pressure with gold breaking down through $900/oz and silver dropping back under $12.50/oz. Meanwhile, economically sensitive commodities continue to rebound, led by copper which has rallied back through the $2.00/lb level, wheat’s move through $5.25/bushel and corn’s advance toward a test of $4.00/bushel resistance. US Crude also continues to attract support, holding near the $51.00/bbl level with resistance near $51.50/bbl and $53.00/bbl and support near $50.00 or $49.00/bbl. Concerns over swine flu now appear to be contained to the pork area with lean hogs falling 3.2% and breaking down below $0.60/lb and pork bellies sliding 0.8%.
Canadian and US Share Update: Earnings Reports Drive US Month-End Trading, Canadian Metals Move in Different Directions
Today’s advance in the US markets appears to be particularly broad based, with leading climbers coming from a number of different sectors. The common theme of the day appears to be a positive reaction to earnings reports and guidance. Leading advancers off of earnings news include: Owens-Illinois (OI) up 27.0%, First Solar (FSLR) up 24.2%, Newell-Rubbermaid (NWL) up 23.1%, Dow Chemical (DOW) up 18.3%, International Paper (IP) up 16.5%, Akamai Technologies (AKAM) up 11.8%, Citrix Systems (CTXS) up 10.0%, and Starbucks (SBUX) up 10.9%.
In Canada today, the main theme has been a significant split in sentiment toward metal producers, with base metals climbing in tandem with the copper price and precious metals falling along with gold and silver. Leading advancers include: First Quantum (FM) up 8.5%, Teck Cominco (TCKb) up 6.0%, Thomson Creek (TCM) up 5.4%, and FNX (FNX) up 4.5%. Falling precious metals include: Agnico-Eagle (AEM) down 6.4%, Silvercorp (SVM) down 5.1%, Silver Wheaton (SLW) down 4.3% and IamGold (IMG) down 4.0%.
Sentiment toward the forest products sector may be improving in response to International Paper’s earnings report. Canfor (CFP) has advanced 5.4%, while Sino-Forest (TRE) has climbed 3.5%.
Wednesday, April 29, 2009
'Goldman Conspiracy:' RICO? Or Medal of Freedom?
Vote: Racketeers to be indicted or revolutionary American heroes?
ARROYO GRANDE, Calif. (MarketWatch) -- Last week's reader comments made it quite clear that the "Goldman Conspiracy" and Wall Street's growing power and control of our American democracy are deeply disturbing hot-button issues.
Many demand bold, aggressive actions, even criminal prosecution, like those coming from the new administration and the New York attorney general. Read previous Paul B. Farrell.
So what about a federal prosecution under RICO, the Racketeer Influenced and Corrupt Organizations Act? (more)
Shadow Government Statistics newsletter
Howard Ruff
The Ruff Times
Posted Apr 27, 2009
John Williams publishes the Shadow Government Statistics newsletter (www.shadowstats.com). He is an amazing professional economist with a great grasp of the real economy. He and I have arrived at the same conclusions about almost everything in the economy, despite the fact that we approach it from totally different directions: me from the fundamentals, and he from a real technical and numbers point of view.
I am now in John’s home in Oakland, California, looking past the government numbers to get his views on the world as it really is. Shadow Government Statistics reconstructs published government statistics the accurate way we used to do it that reflects reality, rather than the way these numbers are now manipulated, and comes up with different conclusions about the economy, such as the Consumer Price Index (CPI), and other revealing areas published by government.
I trust John’s numbers because the government has been manipulating and restating these numbers for purely political purposes. (more)
Bullish Commodities Stocks
The result is the biggest advance since the stock panic ignited. Even more importantly, these recent gains have generally been measured and orderly. This is a signature of new bull markets in contrast to the violent and short-lived bear-market rallies. The persistent stock-market strength is restoring hope and leading ostrich investors back to the markets. They are wondering which sectors have the best potential to thrive.
For a variety of reasons I'll outline in this essay, I believe the commodities stocks will be the best-performing sector in the coming years. Their incredibly bullish fundamentals, combined with dirt-cheap prices driven by stock-panic psychology, have created one of the greatest investment opportunities I've ever seen. This bullish sector deserves a sizable fraction of every investor's portfolio. (more)
Howard Ruff: Keep Believing
Do you remember a few issues back when silver was around $9.40 an ounce? I told my subscribers this was a glorious time to buy as it would bounce back. A few issues later, I said that I hoped you would take advantage of these cheap opportunities because they would not last forever!
Well they didn’t last forever! Silver is now over $14 an ounce and gold is back over $970. They are both going a lot higher. Someday you will brag about having bought gold or silver at these prices. I don’t often say, “I told you so,” but this is too good, and I can’t resist.
The metals are reacting to the incipient inflation in six months to a year that will result from the monetary bail-out spawned by Obama and backed by Democrats and weak-kneed Republicans.
Someday the public will credit me as they did in the ‘70s when we made so much money in gold and silver.
We may not be just making money but protecting our assets from a total collapse of our monetary system and hyperinflation. Some day your only wealth will be your gold and silver.
The Stock Market
The stock market is not a monolithic entity. It consists of Industry Groups, most of which should be avoided like the plague. I wouldn’t touch Growth Stocks, Bank Stocks, Growth Mutual Funds, or the Dow Jones Industrial Average.
There is one way to benefit from the continuing collapse of the stock market.
The Dow should drop at least another 3,000 points, with the growth stocks leading the pack.
On the first page of the Investment Menu, Rydex Inverse S&P 500 Stratergy Inv (RYURX) is counter cyclical to the S & P 500 and is great for investing in a bear market. It will do badly during market rallies and well in poor stock performance.
Because I expect interest rates to rise sharply to try to keep the dollar from totally imploding, buy Rydex Inverse Government Long Bond Strategy Inv (RYJUX). It will rise when interest rates are rising and fall when interest rates are falling. Even though the fed has dropped interest rates to near zero, they will rise.
Also, I expect that when oil rises again to at least $80, the public will scream for more drilling. We will build and service more drilling rigs, so the Oil-Service companies should do very well. Schlumberger (SLB) and Halliburton (HAL) will lead the pack.
I also like Uranium Mining Stocks, as there are 35 nuclear power plants on the drawing board or under construction, and they have only half the uranium they need. The list is on my Investment Menu, ranging from the most conservative (Producing Companies) to the Development and Exploration companies.
The real stars of the show will continue to be gold and silver bullion and coins, and gold and silver mining stocks. The mining stocks are particularly interesting because they are only at the levels they reached when gold was only $400 to $500 an ounce, and it’s twice that now. There is a tremendous upside, ranging from Producers to Exploration companies. The Producers have moved substantially already, so it is better at the bottom of the pyramid.
Falsifying Bank Balance Sheets
Our title is borrowed from a caption of the Chicago economist and monetary scientist Melchior Palyi (1892-1970) writing on the fiscal and monetary legerdemain of the U.S. government in his Bulletin #401, dated February 27, 1960, as follows.Faking balance sheets legalized
A corporation publishing faked balance sheets would be barred from every stock exchange. It may even face criminal prosecution. The objective is to protect the public against fraud. But exactly the same fraudulent practice has been legalized in so far as commercial and savings banks, and life insurance companies are concerned. They can carry government bonds on their books at par value. A $1,000 bond may be quoted in the market at $800 or less; the balance sheet of your bank will still show it at $1,000. The purpose of this regulation, adopted by all federal and state supervisory agencies and by the Securities Exchange Commission as well, is to give those bonds a sacrosanct status and guarantee against paper losses. Thereby they are promoted to an absolutely safe and �liquid� status. The bank examiners count the bonds of the federal government, whatever their maturity and actual market price may be, as prime liquid assets, just like cash. The more bonds in the portfolio, the more liquid is the bank by the examiners� standards, � never mind the paper losses. (more)
A corporation publishing faked balance sheets would be barred from every stock exchange. It may even face criminal prosecution. The objective is to protect the public against fraud. But exactly the same fraudulent practice has been legalized in so far as commercial and savings banks, and life insurance companies are concerned. They can carry government bonds on their books at par value. A $1,000 bond may be quoted in the market at $800 or less; the balance sheet of your bank will still show it at $1,000. The purpose of this regulation, adopted by all federal and state supervisory agencies and by the Securities Exchange Commission as well, is to give those bonds a sacrosanct status and guarantee against paper losses. Thereby they are promoted to an absolutely safe and �liquid� status. The bank examiners count the bonds of the federal government, whatever their maturity and actual market price may be, as prime liquid assets, just like cash. The more bonds in the portfolio, the more liquid is the bank by the examiners� standards, � never mind the paper losses. (more)
Donlin Creek gold project will cost $4.5bn to build
NovaGold says the feasibility study for the Donlin Creek gold mine will cost $4.5 billion and will produce 1.6 million ounces of gold a year over the first five years.
Posted: Wednesday , 29 Apr 2009TORONTO (Reuters) -
NovaGold Resources (NG.TO: Quote) said on Tuesday that its 50 percent owned Donlin Creek gold project in Alaska holds reserves of 29.3 million ounces and should produce an average of 1.6 million ounces of gold a year over the first five years after it starts production in 2015.
In a feasibility study, the Canadian company said the project -- a joint venture with Barrick Gold (ABX.TO: Quote) -- should cost about $4.5 billion to build and produce gold at a cash cost of $398 an ounce over the first five years.
The production level -- which should average 1.25 million ounces a year over the mine's 21-year life -- would make the gold mine one of the world's most productive.
Novagold said the mine should initially produce average annual after-tax cash flow of $779 million at $900-an-ounce gold. (more)
US economy shrinks 6.1%
By Alan Rappeport in New York
Published: April 29 2009 13:59 | Last updated: April 29 2009 15:04
The US economy continued to contract in the first quarter of this year as business investment collapsed in the face of eroding global demand.
Preliminary commerce department figures showed on Wednesday that US gross domestic product declined by an annualised rate of 6.1 per cent in the first quarter, after declining by 6.3 per cent during the fourth quarter of last year. The decline was worse than the 4.7 per cent that economists expected and marks a slight improvement from the fourth-quarter contraction, which was the sharpest since 1982. (more)
Interesting Charts: C$, FCX, bond yields, CCJ
Pre-opening Comments for Wednesday April 29th
U.S. equity index futures are higher this morning. S&P 500 futures gained 7 points in pre-opening trade.
S&P 500 futures were virtually unchanged following a worse-than-expected preliminary first quarter GDP report released at 8:30 AM EDT. Consensus was a decline of 4.7% versus a decline of 6.3% in the fourth quarter of 2008. Actual was a decline of 6.1%. The report included higher- than- expected consumer spending and lower- than- expected government spending.
Traders are awaiting news on U.S. interest rates from the Federal Open Market Committee meeting. The FOMC will announce its latest direction on monetary policy at 2:15 PM EDT. No change in policy is anticipated.
The House of Representatives votes on the U.S. budget today. Approval is anticipated.
Concern about rising long term interest rates in the U.S has spilled into the currency market this morning. Ten year Treasuries are yielding 3.01% this morning. The U.S. Dollar has fallen sharply. The Canadian Dollar at 82.97 is testing its recent high at 83.27. (more)
U.S. equity index futures are higher this morning. S&P 500 futures gained 7 points in pre-opening trade.
S&P 500 futures were virtually unchanged following a worse-than-expected preliminary first quarter GDP report released at 8:30 AM EDT. Consensus was a decline of 4.7% versus a decline of 6.3% in the fourth quarter of 2008. Actual was a decline of 6.1%. The report included higher- than- expected consumer spending and lower- than- expected government spending.
Traders are awaiting news on U.S. interest rates from the Federal Open Market Committee meeting. The FOMC will announce its latest direction on monetary policy at 2:15 PM EDT. No change in policy is anticipated.
The House of Representatives votes on the U.S. budget today. Approval is anticipated.
Concern about rising long term interest rates in the U.S has spilled into the currency market this morning. Ten year Treasuries are yielding 3.01% this morning. The U.S. Dollar has fallen sharply. The Canadian Dollar at 82.97 is testing its recent high at 83.27. (more)
Tuesday, April 28, 2009
Bound to Burn
Humanity will keep spewing carbon into the atmosphere, but good policy can help sink it back into the earth.
By Peter W. Huber
Like medieval priests, today's carbon brokers will sell you an indulgence that forgives your carbon sins. It will run you about $500 for 5 tons of forgiveness -- about how much the typical American needs every year. Or about $2,000 a year for a typical four-person household. Your broker will spend the money on such things as reducing methane emissions from hog farms in Brazil.
But if you really want to make a difference, you must send a check large enough to forgive the carbon emitted by four poor Brazilian households, too -- because they're not going to do it themselves. To cover all five households, then, send $4,000. And you probably forgot to send in a check last year, and you might forget again in the future, so you'd best make it an even $40,000, to take care of a decade right now. If you decline to write your own check while insisting that to save the world we must ditch the carbon, you are just burdening your already sooty soul with another ton of self-righteous hypocrisy. And you can't possibly afford what it will cost to forgive that.
If making carbon this personal seems rude, then think globally instead. During the presidential race, Barack Obama was heard to remark that he would bankrupt the coal industry. No one can doubt Washington's power to bankrupt almost anything -- in the United States. But China is adding 100 gigawatts of coal-fired electrical capacity a year. That's another whole United States' worth of coal consumption added every three years, with no stopping point in sight. Much of the rest of the developing world is on a similar path.
Cut to the chase. We rich people can't stop the world's 5 billion poor people from burning the couple of trillion tons of cheap carbon that they have within easy reach. We can't even make any durable dent in global emissions -- because emissions from the developing world are growing too fast, because the other 80 percent of humanity desperately needs cheap energy, and because we and they are now part of the same global economy. What we can do, if we're foolish enough, is let carbon worries send our jobs and industries to their shores, making them grow even faster, and their carbon emissions faster still.
We don't control the global supply of carbon.
Ten countries ruled by nasty people control 80 percent of the planet's oil reserves -- about 1 trillion barrels, currently worth about $40 trillion. If $40 trillion worth of gold were located where most of the oil is, one could only scoff at any suggestion that we might somehow persuade the nasty people to leave the wealth buried. They can lift most of their oil at a cost well under $10 a barrel. They will drill. They will pump. And they will find buyers. Oil is all they've got.
Poor countries all around the planet are sitting on a second, even bigger source of carbon -- almost a trillion tons of cheap, easily accessible coal. They also control most of the planet's third great carbon reservoir -- the rain forests and soil. They will keep squeezing the carbon out of cheap coal, and cheap forest, and cheap soil, because that's all they've got. Unless they can find something even cheaper. But they won't -- not any time in the foreseeable future.
We no longer control the demand for carbon, either. The 5 billion poor -- the other 80 percent -- are already the main problem, not us. Collectively, they emit 20 percent more greenhouse gas than we do. We burn a lot more carbon individually, but they have a lot more children. Their fecundity has eclipsed our gluttony, and the gap is now widening fast. China, not the United States, is now the planet's largest emitter. Brazil, India, Indonesia, South Africa, and others are in hot pursuit. And these countries have all made it clear that they aren't interested in spending what money they have on low-carb diets. It is idle to argue, as some have done, that global warming can be solved -- decades hence -- at a cost of 1 to 2 percent of the global economy. Eighty percent of the global population hasn't signed on to pay more than 0 percent.
Accepting this last, self-evident fact, the Kyoto Protocol divides the world into two groups. The roughly 1.2 billion citizens of industrialized countries are expected to reduce their emissions. The other 5 billion -- including both China and India, each of which is about as populous as the entire Organisation for Economic Co-operation and Development -- aren't. These numbers alone guarantee that humanity isn't going to reduce global emissions at any point in the foreseeable future -- unless it does it the old-fashioned way, by getting poorer. But the current recession won't last forever, and the long-term trend is clear. Their populations and per-capita emissions are rising far faster than ours could fall under any remotely plausible carbon-reduction scheme.
Might we simply buy their cooperation? Various plans have circulated for having the rich pay the poor to stop burning down rain forests and to lower greenhouse-gas emissions from primitive agricultural practices. But taking control of what belongs to someone else ultimately means buying it. Over the long term, we would in effect have to buy up a large fraction of all the world's forests, soil, coal, and oil -- and then post guards to make sure that poor people didn't sneak in and grab all the carbon anyway. Buying off people just doesn't fly when they outnumber you four to one.
Might we instead manage to give the world something cheaper than carbon? The moon-shot law of economics says yes, of course we can. If we just put our minds to it, it will happen. Atom bomb, moon landing, ultracheap energy -- all it takes is a triumph of political will.
Really? For the very poorest, this would mean beating the price of the free rain forest that they burn down to clear land to plant a subsistence crop. For the slightly less poor, it would mean beating the price of coal used to generate electricity at under 3 cents per kilowatt-hour.
And with one important exception, which we will return to shortly, no carbon-free fuel or technology comes remotely close to being able to do that. Fossil fuels are extremely cheap because geological forces happen to have created large deposits of these dense forms of energy in accessible places. Find a mountain of coal, and you can just shovel gargantuan amounts of energy into the boxcars.
Shoveling wind and sun is much, much harder. Windmills are now 50-story skyscrapers. Yet one windmill generates a piddling 2 to 3 megawatts. A jumbo jet needs 100 megawatts to get off the ground; Google is building 100-megawatt server farms. Meeting New York City's total energy demand would require 13,000 of those skyscrapers spinning at top speed, which would require scattering about 50,000 of them across the state, to make sure that you always hit enough windy spots. To answer the howls of green protest that inevitably greet realistic engineering estimates like these, note that real-world systems must be able to meet peak, not average, demand; that reserve margins are essential; and that converting electric power into liquid or gaseous fuels to power the existing transportation and heating systems would entail substantial losses. What was Mayor Bloomberg thinking when he suggested that he might just tuck windmills into Manhattan? Such thoughts betray a deep ignorance about how difficult it is to get a lot of energy out of sources as thin and dilute as wind and sun.
It's often suggested that technology improvements and mass production will sharply lower the cost of wind and solar. But engineers have pursued these technologies for decades, and while costs of some components have fallen, there is no serious prospect of costs plummeting and performance soaring as they have in our laptops and cell phones. When you replace conventional with renewable energy, everything gets bigger, not smaller -- and bigger costs more, not less. Even if solar cells themselves were free, solar power would remain very expensive because of the huge structures and support systems required to extract large amounts of electricity from a source so weak that it takes hours to deliver a tan.
This is why the (few) greens ready to accept engineering and economic reality have suddenly emerged as avid proponents of nuclear power. In the aftermath of the Three Mile Island accident -- which didn't harm anyone, and wouldn't even have damaged the reactor core if the operators had simply kept their hands off the switches and let the automatic safety systems do their job -- ostensibly green antinuclear activists unwittingly boosted U.S. coal consumption by about 400 million tons per year. The United States would be in compliance with the Kyoto Protocol today if we could simply undo their handiwork and conjure back into existence the nuclear plants that were in the pipeline in nuclear power's heyday. Nuclear power is fantastically compact, and -- as America's nuclear navy, several commercial U.S. operators, France, Japan, and a handful of other countries have convincingly established -- it's both safe and cheap wherever engineers are allowed to get on with it.
But getting on with it briskly is essential, because costs hinge on the huge, up-front capital investment in the power plant. Years of delay between the capital investment and when it starts earning a return are ruinous. Most of the developed world has made nuclear power unaffordable by surrounding it with a regulatory process so sluggish and unpredictable that no one will pour a couple of billion dollars into a new plant, for the good reason that no one knows when (or even if) the investment will be allowed to start making money.
And countries that don't trust nuclear power on their own soil must hesitate to share the technology with countries where you never know who will be in charge next year, or what he might decide to do with his nuclear toys. So much for the possibility that cheap nuclear power might replace carbon-spewing sources of energy in the developing world. Moreover, even India and China, which have mastered nuclear technologies, are deploying far more new coal capacity.
Remember, finally, that most of the cost of carbon-based energy resides not in the fuels but in the gigantic infrastructure of furnaces, turbines, and engines. Those costs are sunk, which means that carbon-free alternatives -- with their own huge, attendant, front-end capital costs -- must be cheap enough to beat carbon fuels that already have their infrastructure in place. That won't happen in our lifetimes.
Another argument commonly advanced is that getting over carbon will, nevertheless, be comparatively cheap, because it will get us over oil, too -- which will impoverish our enemies and save us a bundle at the Pentagon and the Department of Homeland Security. But uranium aside, the most economical substitute for oil is, in fact, electricity generated with coal. Cheap coal-fired electricity has been, is, and will continue to be a substitute for oil, or a substitute for natural gas, which can in turn substitute for oil. By sharply boosting the cost of coal electricity, the war on carbon will make us more dependent on oil, not less.
The first place where coal displaces oil is in the electric power plant itself. When oil prices spiked in the early 1980s, U.S. utilities quickly switched to other fuels, with coal leading the pack; the coal-fired plants now being built in China, India, and other developing countries are displacing diesel generators. More power plants burning coal to produce cheap electricity can also mean less natural gas used to generate electricity. And less used for industrial, commercial, and residential heating, welding, and chemical processing, as these users switch to electrically powered alternatives. The gas that's freed up this way can then substitute for diesel fuel in heavy trucks, delivery vehicles, and buses. And coal-fired electricity will eventually begin displacing gasoline, too, as soon as plug-in hybrid cars start recharging their batteries directly from the grid.
To top it all, using electricity generated in large part by coal to power our passenger cars would lower carbon emissions -- even in Indiana, which generates 75 percent of its electricity with coal. Big power plants are so much more efficient than the gasoline engines in our cars that a plug-in hybrid car running on electricity supplied by Indiana's current grid still ends up more carbon-frugal than comparable cars burning gasoline in a conventional engine under the hood. Old-guard energy types have been saying this for decades. In a major report released last March, the World Wildlife Fund finally concluded that they were right all along.
But true carbon zealots won't settle for modest reductions in carbon emissions when fat targets beckon. They see coal-fired electricity as the dragon to slay first. Huge, stationary sources can't run or hide, and the cost of doing without them doesn't get rung up in plain view at the gas pump. California, Pennsylvania, and other greener-than-thou states have made flatlining electricity consumption the linchpin of their war on carbon. That is the one certain way to halt the displacement of foreign oil by cheap, domestic electricity.
The oil-coal economics come down to this. Per unit of energy delivered, coal costs about one-fifth as much as oil -- but contains one-third more carbon. High carbon taxes (or tradable permits, or any other economic equivalent) sharply narrow the price gap between oil and the one fuel that can displace it worldwide, here and now. The oil nasties will celebrate the green war on carbon as enthusiastically as the coal industry celebrated the green war on uranium 30 years ago.
The other 5 billion are too poor to deny these economic realities. For them, the price to beat is 3-cent coal-fired electricity. China and India won't trade 3-cent coal for 15-cent wind or 30-cent solar. As for us, if we embrace those economically frivolous alternatives on our own, we will certainly end up doing more harm than good.
By pouring money into anything-but-carbon fuels, we will lower demand for carbon, making it even cheaper for the rest of the world to buy and burn. The rest will use cheaper energy to accelerate their own economic growth. Jobs will go where energy is cheap, just as they go where labor is cheap. Manufacturing and heavy industry require a great deal of energy, and in a global economy, no competitor can survive while paying substantially more for an essential input. The carbon police acknowledge the problem and talk vaguely of using tariffs and such to address it. But carbon is far too deeply embedded in the global economy, and materials, goods, and services move and intermingle far too freely, for the customs agents to track.
Consider your next Google search. As noted in a recent article in Harper's, "Google . . . and its rivals now head abroad for cheaper, often dirtier power." Google itself (the "don't be evil" company) is looking to set up one of its electrically voracious server farms at a site in Lithuania, "disingenuously described as being near a hydroelectric dam." But Lithuania's grid is 0.5 percent hydroelectric and 78 percent nuclear. Perhaps the company's next huge farm will be "near" the Three Gorges Dam in China, built to generate over three times as much power as our own Grand Coulee Dam in Washington State. China will be happy to play along, while it quietly plugs another coal plant into its grid a few pylons down the line. All the while, of course, Google will maintain its low-energy headquarters in California, a state that often boasts of the wise regulatory policies -- centered, one is told, on efficiency and conservation -- that have made it such a frugal energy user. But in fact, sky-high prices have played the key role, curbing internal demand and propelling the flight from California of power plants, heavy industries, chip fabs, server farms, and much else (see "California's Potemkin Environmentalism," Spring 2008).
So the suggestion that we can lift ourselves out of the economic doldrums by spending lavishly on exceptionally expensive new sources of energy is absurd. "Green jobs" means Americans paying other Americans to chase carbon while the rest of the world builds new power plants and factories. And the environmental consequences of outsourcing jobs, industries, and carbon to developing countries are beyond dispute. They use energy far less efficiently than we do, and they remain almost completely oblivious to environmental impacts, just as we were in our own first century of industrialization. A massive transfer of carbon, industry, and jobs from us to them will raise carbon emissions, not lower them.
The grand theory for how the developed world can unilaterally save the planet seems to run like this. We buy time for the planet by rapidly slashing our own emissions. We do so by developing carbon-free alternatives even cheaper than carbon. The rest of the world will then quickly adopt these alternatives, leaving most of its trillion barrels of oil and trillion tons of coal safely buried, most of the rain forests standing, and most of the planet's carbon-rich soil undisturbed. From end to end, however, this vision strains credulity.
Perhaps it's the recognition of that inconvenient truth that has made the anti-carbon rhetoric increasingly apocalyptic. Coal trains have been analogized to boxcars headed for Auschwitz. There is talk of the extinction of all humanity. But then, we have heard such things before. It is indeed quite routine, in environmental discourse, to frame choices as involving potentially infinite costs on the green side of the ledger. If they really are infinite, no reasonable person can quibble about spending mere billions, or even trillions, on the dollar side, to dodge the apocalyptic bullet.
Thirty years ago, the case against nuclear power was framed as the "Zero-Infinity Dilemma." The risks of a meltdown might be vanishingly small, but if it happened, the costs would be infinitely large, so we should forget about uranium. Computer models demonstrated that meltdowns were highly unlikely and that the costs of a meltdown, should one occur, would be manageable -- but greens scoffed: huge computer models couldn't be trusted. So we ended up burning much more coal. The software shoe is on the other foot now; the machines that said nukes wouldn't melt now say that the ice caps will. Warming skeptics scoff in turn, and can quite plausibly argue that a planet is harder to model than a nuclear reactor. But that's a detail. From a rhetorical perspective, any claim that the infinite, the apocalypse, or the Almighty supports your side of the argument shuts down all further discussion.
To judge by actions rather than words, however, few people and almost no national governments actually believe in the infinite rewards of exorcising carbon from economic life. Kyoto has hurt the anti-carbon mission far more than carbon zealots seem to grasp. It has proved only that with carbon, governments will say and sign anything -- and then do less than nothing. The United States should steer well clear of such treaties because they are unenforceable, routinely ignored, and therefore worthless.
If we're truly worried about carbon, we must instead approach it as if the emissions originated in an annual eruption of Mount Krakatoa. Don't try to persuade the volcano to sign a treaty promising to stop. Focus instead on what might be done to protect and promote the planet's carbon sinks -- the systems that suck carbon back out of the air and bury it. Green plants currently pump 15 to 20 times as much carbon out of the atmosphere as humanity releases into it -- that's the pump that put all that carbon underground in the first place, millions of years ago. At present, almost all of that plant-captured carbon is released back into the atmosphere within a year or so by animal consumers. North America, however, is currently sinking almost two-thirds of its carbon emissions back into prairies and forests that were originally leveled in the 1800s but are now recovering. For the next 50 years or so, we should focus on promoting better land use and reforestation worldwide. Beyond that, weather and the oceans naturally sink about one-fifth of total fossil-fuel emissions. We should also investigate large-scale options for accelerating the process of ocean sequestration.
Carbon zealots despise carbon-sinking schemes because, they insist, nobody can be sure that the sunk carbon will stay sunk. Yet everything they propose hinges on the assumption that carbon already sunk by nature in what are now hugely valuable deposits of oil and coal can be kept sunk by treaty and imaginary cheaper-than-carbon alternatives. This, yet again, gets things backward. We certainly know how to improve agriculture to protect soil, and how to grow new trees, and how to maintain existing forests, and we can almost certainly learn how to mummify carbon and bury it back in the earth or the depths of the oceans, in ways that neither man nor nature will disturb. It's keeping nature's black gold sequestered from humanity that's impossible.
If we do need to do something serious about carbon, the sequestration of carbon after it's burned is the one approach that accepts the growth of carbon emissions as an inescapable fact of the twenty-first century. And it's the one approach that the rest of the world can embrace, too, here and now, because it begins with improving land use, which can lead directly and quickly to greater prosperity. If, on the other hand, we persist in building green bridges to nowhere, we will make things worse, not better. Good intentions aren't enough. Turned into ineffectual action, they can cost the earth and accelerate its ruin at the same time.
By Peter W. Huber
Like medieval priests, today's carbon brokers will sell you an indulgence that forgives your carbon sins. It will run you about $500 for 5 tons of forgiveness -- about how much the typical American needs every year. Or about $2,000 a year for a typical four-person household. Your broker will spend the money on such things as reducing methane emissions from hog farms in Brazil.
But if you really want to make a difference, you must send a check large enough to forgive the carbon emitted by four poor Brazilian households, too -- because they're not going to do it themselves. To cover all five households, then, send $4,000. And you probably forgot to send in a check last year, and you might forget again in the future, so you'd best make it an even $40,000, to take care of a decade right now. If you decline to write your own check while insisting that to save the world we must ditch the carbon, you are just burdening your already sooty soul with another ton of self-righteous hypocrisy. And you can't possibly afford what it will cost to forgive that.
If making carbon this personal seems rude, then think globally instead. During the presidential race, Barack Obama was heard to remark that he would bankrupt the coal industry. No one can doubt Washington's power to bankrupt almost anything -- in the United States. But China is adding 100 gigawatts of coal-fired electrical capacity a year. That's another whole United States' worth of coal consumption added every three years, with no stopping point in sight. Much of the rest of the developing world is on a similar path.
Cut to the chase. We rich people can't stop the world's 5 billion poor people from burning the couple of trillion tons of cheap carbon that they have within easy reach. We can't even make any durable dent in global emissions -- because emissions from the developing world are growing too fast, because the other 80 percent of humanity desperately needs cheap energy, and because we and they are now part of the same global economy. What we can do, if we're foolish enough, is let carbon worries send our jobs and industries to their shores, making them grow even faster, and their carbon emissions faster still.
We don't control the global supply of carbon.
Ten countries ruled by nasty people control 80 percent of the planet's oil reserves -- about 1 trillion barrels, currently worth about $40 trillion. If $40 trillion worth of gold were located where most of the oil is, one could only scoff at any suggestion that we might somehow persuade the nasty people to leave the wealth buried. They can lift most of their oil at a cost well under $10 a barrel. They will drill. They will pump. And they will find buyers. Oil is all they've got.
Poor countries all around the planet are sitting on a second, even bigger source of carbon -- almost a trillion tons of cheap, easily accessible coal. They also control most of the planet's third great carbon reservoir -- the rain forests and soil. They will keep squeezing the carbon out of cheap coal, and cheap forest, and cheap soil, because that's all they've got. Unless they can find something even cheaper. But they won't -- not any time in the foreseeable future.
We no longer control the demand for carbon, either. The 5 billion poor -- the other 80 percent -- are already the main problem, not us. Collectively, they emit 20 percent more greenhouse gas than we do. We burn a lot more carbon individually, but they have a lot more children. Their fecundity has eclipsed our gluttony, and the gap is now widening fast. China, not the United States, is now the planet's largest emitter. Brazil, India, Indonesia, South Africa, and others are in hot pursuit. And these countries have all made it clear that they aren't interested in spending what money they have on low-carb diets. It is idle to argue, as some have done, that global warming can be solved -- decades hence -- at a cost of 1 to 2 percent of the global economy. Eighty percent of the global population hasn't signed on to pay more than 0 percent.
Accepting this last, self-evident fact, the Kyoto Protocol divides the world into two groups. The roughly 1.2 billion citizens of industrialized countries are expected to reduce their emissions. The other 5 billion -- including both China and India, each of which is about as populous as the entire Organisation for Economic Co-operation and Development -- aren't. These numbers alone guarantee that humanity isn't going to reduce global emissions at any point in the foreseeable future -- unless it does it the old-fashioned way, by getting poorer. But the current recession won't last forever, and the long-term trend is clear. Their populations and per-capita emissions are rising far faster than ours could fall under any remotely plausible carbon-reduction scheme.
Might we simply buy their cooperation? Various plans have circulated for having the rich pay the poor to stop burning down rain forests and to lower greenhouse-gas emissions from primitive agricultural practices. But taking control of what belongs to someone else ultimately means buying it. Over the long term, we would in effect have to buy up a large fraction of all the world's forests, soil, coal, and oil -- and then post guards to make sure that poor people didn't sneak in and grab all the carbon anyway. Buying off people just doesn't fly when they outnumber you four to one.
Might we instead manage to give the world something cheaper than carbon? The moon-shot law of economics says yes, of course we can. If we just put our minds to it, it will happen. Atom bomb, moon landing, ultracheap energy -- all it takes is a triumph of political will.
Really? For the very poorest, this would mean beating the price of the free rain forest that they burn down to clear land to plant a subsistence crop. For the slightly less poor, it would mean beating the price of coal used to generate electricity at under 3 cents per kilowatt-hour.
And with one important exception, which we will return to shortly, no carbon-free fuel or technology comes remotely close to being able to do that. Fossil fuels are extremely cheap because geological forces happen to have created large deposits of these dense forms of energy in accessible places. Find a mountain of coal, and you can just shovel gargantuan amounts of energy into the boxcars.
Shoveling wind and sun is much, much harder. Windmills are now 50-story skyscrapers. Yet one windmill generates a piddling 2 to 3 megawatts. A jumbo jet needs 100 megawatts to get off the ground; Google is building 100-megawatt server farms. Meeting New York City's total energy demand would require 13,000 of those skyscrapers spinning at top speed, which would require scattering about 50,000 of them across the state, to make sure that you always hit enough windy spots. To answer the howls of green protest that inevitably greet realistic engineering estimates like these, note that real-world systems must be able to meet peak, not average, demand; that reserve margins are essential; and that converting electric power into liquid or gaseous fuels to power the existing transportation and heating systems would entail substantial losses. What was Mayor Bloomberg thinking when he suggested that he might just tuck windmills into Manhattan? Such thoughts betray a deep ignorance about how difficult it is to get a lot of energy out of sources as thin and dilute as wind and sun.
It's often suggested that technology improvements and mass production will sharply lower the cost of wind and solar. But engineers have pursued these technologies for decades, and while costs of some components have fallen, there is no serious prospect of costs plummeting and performance soaring as they have in our laptops and cell phones. When you replace conventional with renewable energy, everything gets bigger, not smaller -- and bigger costs more, not less. Even if solar cells themselves were free, solar power would remain very expensive because of the huge structures and support systems required to extract large amounts of electricity from a source so weak that it takes hours to deliver a tan.
This is why the (few) greens ready to accept engineering and economic reality have suddenly emerged as avid proponents of nuclear power. In the aftermath of the Three Mile Island accident -- which didn't harm anyone, and wouldn't even have damaged the reactor core if the operators had simply kept their hands off the switches and let the automatic safety systems do their job -- ostensibly green antinuclear activists unwittingly boosted U.S. coal consumption by about 400 million tons per year. The United States would be in compliance with the Kyoto Protocol today if we could simply undo their handiwork and conjure back into existence the nuclear plants that were in the pipeline in nuclear power's heyday. Nuclear power is fantastically compact, and -- as America's nuclear navy, several commercial U.S. operators, France, Japan, and a handful of other countries have convincingly established -- it's both safe and cheap wherever engineers are allowed to get on with it.
But getting on with it briskly is essential, because costs hinge on the huge, up-front capital investment in the power plant. Years of delay between the capital investment and when it starts earning a return are ruinous. Most of the developed world has made nuclear power unaffordable by surrounding it with a regulatory process so sluggish and unpredictable that no one will pour a couple of billion dollars into a new plant, for the good reason that no one knows when (or even if) the investment will be allowed to start making money.
And countries that don't trust nuclear power on their own soil must hesitate to share the technology with countries where you never know who will be in charge next year, or what he might decide to do with his nuclear toys. So much for the possibility that cheap nuclear power might replace carbon-spewing sources of energy in the developing world. Moreover, even India and China, which have mastered nuclear technologies, are deploying far more new coal capacity.
Remember, finally, that most of the cost of carbon-based energy resides not in the fuels but in the gigantic infrastructure of furnaces, turbines, and engines. Those costs are sunk, which means that carbon-free alternatives -- with their own huge, attendant, front-end capital costs -- must be cheap enough to beat carbon fuels that already have their infrastructure in place. That won't happen in our lifetimes.
Another argument commonly advanced is that getting over carbon will, nevertheless, be comparatively cheap, because it will get us over oil, too -- which will impoverish our enemies and save us a bundle at the Pentagon and the Department of Homeland Security. But uranium aside, the most economical substitute for oil is, in fact, electricity generated with coal. Cheap coal-fired electricity has been, is, and will continue to be a substitute for oil, or a substitute for natural gas, which can in turn substitute for oil. By sharply boosting the cost of coal electricity, the war on carbon will make us more dependent on oil, not less.
The first place where coal displaces oil is in the electric power plant itself. When oil prices spiked in the early 1980s, U.S. utilities quickly switched to other fuels, with coal leading the pack; the coal-fired plants now being built in China, India, and other developing countries are displacing diesel generators. More power plants burning coal to produce cheap electricity can also mean less natural gas used to generate electricity. And less used for industrial, commercial, and residential heating, welding, and chemical processing, as these users switch to electrically powered alternatives. The gas that's freed up this way can then substitute for diesel fuel in heavy trucks, delivery vehicles, and buses. And coal-fired electricity will eventually begin displacing gasoline, too, as soon as plug-in hybrid cars start recharging their batteries directly from the grid.
To top it all, using electricity generated in large part by coal to power our passenger cars would lower carbon emissions -- even in Indiana, which generates 75 percent of its electricity with coal. Big power plants are so much more efficient than the gasoline engines in our cars that a plug-in hybrid car running on electricity supplied by Indiana's current grid still ends up more carbon-frugal than comparable cars burning gasoline in a conventional engine under the hood. Old-guard energy types have been saying this for decades. In a major report released last March, the World Wildlife Fund finally concluded that they were right all along.
But true carbon zealots won't settle for modest reductions in carbon emissions when fat targets beckon. They see coal-fired electricity as the dragon to slay first. Huge, stationary sources can't run or hide, and the cost of doing without them doesn't get rung up in plain view at the gas pump. California, Pennsylvania, and other greener-than-thou states have made flatlining electricity consumption the linchpin of their war on carbon. That is the one certain way to halt the displacement of foreign oil by cheap, domestic electricity.
The oil-coal economics come down to this. Per unit of energy delivered, coal costs about one-fifth as much as oil -- but contains one-third more carbon. High carbon taxes (or tradable permits, or any other economic equivalent) sharply narrow the price gap between oil and the one fuel that can displace it worldwide, here and now. The oil nasties will celebrate the green war on carbon as enthusiastically as the coal industry celebrated the green war on uranium 30 years ago.
The other 5 billion are too poor to deny these economic realities. For them, the price to beat is 3-cent coal-fired electricity. China and India won't trade 3-cent coal for 15-cent wind or 30-cent solar. As for us, if we embrace those economically frivolous alternatives on our own, we will certainly end up doing more harm than good.
By pouring money into anything-but-carbon fuels, we will lower demand for carbon, making it even cheaper for the rest of the world to buy and burn. The rest will use cheaper energy to accelerate their own economic growth. Jobs will go where energy is cheap, just as they go where labor is cheap. Manufacturing and heavy industry require a great deal of energy, and in a global economy, no competitor can survive while paying substantially more for an essential input. The carbon police acknowledge the problem and talk vaguely of using tariffs and such to address it. But carbon is far too deeply embedded in the global economy, and materials, goods, and services move and intermingle far too freely, for the customs agents to track.
Consider your next Google search. As noted in a recent article in Harper's, "Google . . . and its rivals now head abroad for cheaper, often dirtier power." Google itself (the "don't be evil" company) is looking to set up one of its electrically voracious server farms at a site in Lithuania, "disingenuously described as being near a hydroelectric dam." But Lithuania's grid is 0.5 percent hydroelectric and 78 percent nuclear. Perhaps the company's next huge farm will be "near" the Three Gorges Dam in China, built to generate over three times as much power as our own Grand Coulee Dam in Washington State. China will be happy to play along, while it quietly plugs another coal plant into its grid a few pylons down the line. All the while, of course, Google will maintain its low-energy headquarters in California, a state that often boasts of the wise regulatory policies -- centered, one is told, on efficiency and conservation -- that have made it such a frugal energy user. But in fact, sky-high prices have played the key role, curbing internal demand and propelling the flight from California of power plants, heavy industries, chip fabs, server farms, and much else (see "California's Potemkin Environmentalism," Spring 2008).
So the suggestion that we can lift ourselves out of the economic doldrums by spending lavishly on exceptionally expensive new sources of energy is absurd. "Green jobs" means Americans paying other Americans to chase carbon while the rest of the world builds new power plants and factories. And the environmental consequences of outsourcing jobs, industries, and carbon to developing countries are beyond dispute. They use energy far less efficiently than we do, and they remain almost completely oblivious to environmental impacts, just as we were in our own first century of industrialization. A massive transfer of carbon, industry, and jobs from us to them will raise carbon emissions, not lower them.
The grand theory for how the developed world can unilaterally save the planet seems to run like this. We buy time for the planet by rapidly slashing our own emissions. We do so by developing carbon-free alternatives even cheaper than carbon. The rest of the world will then quickly adopt these alternatives, leaving most of its trillion barrels of oil and trillion tons of coal safely buried, most of the rain forests standing, and most of the planet's carbon-rich soil undisturbed. From end to end, however, this vision strains credulity.
Perhaps it's the recognition of that inconvenient truth that has made the anti-carbon rhetoric increasingly apocalyptic. Coal trains have been analogized to boxcars headed for Auschwitz. There is talk of the extinction of all humanity. But then, we have heard such things before. It is indeed quite routine, in environmental discourse, to frame choices as involving potentially infinite costs on the green side of the ledger. If they really are infinite, no reasonable person can quibble about spending mere billions, or even trillions, on the dollar side, to dodge the apocalyptic bullet.
Thirty years ago, the case against nuclear power was framed as the "Zero-Infinity Dilemma." The risks of a meltdown might be vanishingly small, but if it happened, the costs would be infinitely large, so we should forget about uranium. Computer models demonstrated that meltdowns were highly unlikely and that the costs of a meltdown, should one occur, would be manageable -- but greens scoffed: huge computer models couldn't be trusted. So we ended up burning much more coal. The software shoe is on the other foot now; the machines that said nukes wouldn't melt now say that the ice caps will. Warming skeptics scoff in turn, and can quite plausibly argue that a planet is harder to model than a nuclear reactor. But that's a detail. From a rhetorical perspective, any claim that the infinite, the apocalypse, or the Almighty supports your side of the argument shuts down all further discussion.
To judge by actions rather than words, however, few people and almost no national governments actually believe in the infinite rewards of exorcising carbon from economic life. Kyoto has hurt the anti-carbon mission far more than carbon zealots seem to grasp. It has proved only that with carbon, governments will say and sign anything -- and then do less than nothing. The United States should steer well clear of such treaties because they are unenforceable, routinely ignored, and therefore worthless.
If we're truly worried about carbon, we must instead approach it as if the emissions originated in an annual eruption of Mount Krakatoa. Don't try to persuade the volcano to sign a treaty promising to stop. Focus instead on what might be done to protect and promote the planet's carbon sinks -- the systems that suck carbon back out of the air and bury it. Green plants currently pump 15 to 20 times as much carbon out of the atmosphere as humanity releases into it -- that's the pump that put all that carbon underground in the first place, millions of years ago. At present, almost all of that plant-captured carbon is released back into the atmosphere within a year or so by animal consumers. North America, however, is currently sinking almost two-thirds of its carbon emissions back into prairies and forests that were originally leveled in the 1800s but are now recovering. For the next 50 years or so, we should focus on promoting better land use and reforestation worldwide. Beyond that, weather and the oceans naturally sink about one-fifth of total fossil-fuel emissions. We should also investigate large-scale options for accelerating the process of ocean sequestration.
Carbon zealots despise carbon-sinking schemes because, they insist, nobody can be sure that the sunk carbon will stay sunk. Yet everything they propose hinges on the assumption that carbon already sunk by nature in what are now hugely valuable deposits of oil and coal can be kept sunk by treaty and imaginary cheaper-than-carbon alternatives. This, yet again, gets things backward. We certainly know how to improve agriculture to protect soil, and how to grow new trees, and how to maintain existing forests, and we can almost certainly learn how to mummify carbon and bury it back in the earth or the depths of the oceans, in ways that neither man nor nature will disturb. It's keeping nature's black gold sequestered from humanity that's impossible.
If we do need to do something serious about carbon, the sequestration of carbon after it's burned is the one approach that accepts the growth of carbon emissions as an inescapable fact of the twenty-first century. And it's the one approach that the rest of the world can embrace, too, here and now, because it begins with improving land use, which can lead directly and quickly to greater prosperity. If, on the other hand, we persist in building green bridges to nowhere, we will make things worse, not better. Good intentions aren't enough. Turned into ineffectual action, they can cost the earth and accelerate its ruin at the same time.
A Floor in the Price of Gold?
www.rufftimes.com
We believe gold is wonderfully poised for future price increases. Even so, should it somehow fall, does gold have a floor, a price that would stubbornly resist further retreat? The answer is likely yes…and that support might come in the form of gold’s production dynamics.
Let’s set the stage. The thing to keep in mind here is that gold, unlike every currency ever known to man, cannot be inflated. You can’t turn a $20 Double Eagle into a hot air balloon. You can’t pump water into a gold bar. There’s only so much of the shining stuff in and above the ground.
And it’s this rarity that’s made the precious metal so valuable for over 2633 years of history.
It’s also this rarity that tends to fix the production cost of gold at roughly $750 an ounce. Here’s how Michael Rozeff from LewRockwell.com explains it.
“The costs of gold production vary among producers. I examined the production in ounces and the accounting costs of production for six large producers for the years 2005-2007. I obtained the total costs as reported on income statements and divided them by the production in ounces. I found that those costs were $570-$600 an ounce. Another source confirms my estimate with a number of $591 an ounce. That is not the total cost. The cost of the capital should be figured in. That raises costs to $700 to $750 an ounce, using a 10 percent cost of equity capital. The CFO of the largest gold producer (Barrick) estimates the cost of production at $700-$800 an ounce ‘easily.’ ‘To us that's the long-term break-even cost to the industry...below $700/oz to $800/oz long term, the industry doesn't make money.’ I conclude that an estimate of $750 an ounce for t! he total production cost of gold is not unreasonable.”
So if gold did descend below the magic $750 production cost, producers would, yes, tend to stop producing.
Production has been anemic as it is, even with gold topping $1,000 an ounce. In 2008, gold production followed a multi-year swoon, falling by 88 tonnes (a tonne equals 2,204 lbs) even while mining production costs rose 24 percent. If gold fell below $750, producers would likely just sit on their mines and let the world fight over the above-ground supply.
Now, granted, the actual industrial use of gold isn’t so great that it alone would ever drive the precious metal’s price to the moon. Still, if production halted at $750 gold, the law of supply and demand would kick in fairly quickly and, unless the economy were completely and convincingly fixed, there’d always be nations, investors and collectors eager to add more gold to their holdings.
***********************
WHAT TO DO ABOUT IT
Well…if you own gold, sit back, put your feet up, and pat yourself on the back (if you can reach back that far). You can feel good about your decision to add gold to your portfolio, come what may.
And if you don’t own gold, now’s certainly not too late. With so much going on, with today’s printing presses producing tomorrow’s inevitable inflation, the demand for gold is not likely to be heading south any time soon. If it did, as the above indicates, there may still be strong resistance at the $750 to $800 level, which could be a very comforting thing.
We believe gold is wonderfully poised for future price increases. Even so, should it somehow fall, does gold have a floor, a price that would stubbornly resist further retreat? The answer is likely yes…and that support might come in the form of gold’s production dynamics.
Let’s set the stage. The thing to keep in mind here is that gold, unlike every currency ever known to man, cannot be inflated. You can’t turn a $20 Double Eagle into a hot air balloon. You can’t pump water into a gold bar. There’s only so much of the shining stuff in and above the ground.
And it’s this rarity that’s made the precious metal so valuable for over 2633 years of history.
It’s also this rarity that tends to fix the production cost of gold at roughly $750 an ounce. Here’s how Michael Rozeff from LewRockwell.com explains it.
“The costs of gold production vary among producers. I examined the production in ounces and the accounting costs of production for six large producers for the years 2005-2007. I obtained the total costs as reported on income statements and divided them by the production in ounces. I found that those costs were $570-$600 an ounce. Another source confirms my estimate with a number of $591 an ounce. That is not the total cost. The cost of the capital should be figured in. That raises costs to $700 to $750 an ounce, using a 10 percent cost of equity capital. The CFO of the largest gold producer (Barrick) estimates the cost of production at $700-$800 an ounce ‘easily.’ ‘To us that's the long-term break-even cost to the industry...below $700/oz to $800/oz long term, the industry doesn't make money.’ I conclude that an estimate of $750 an ounce for t! he total production cost of gold is not unreasonable.”
So if gold did descend below the magic $750 production cost, producers would, yes, tend to stop producing.
Production has been anemic as it is, even with gold topping $1,000 an ounce. In 2008, gold production followed a multi-year swoon, falling by 88 tonnes (a tonne equals 2,204 lbs) even while mining production costs rose 24 percent. If gold fell below $750, producers would likely just sit on their mines and let the world fight over the above-ground supply.
Now, granted, the actual industrial use of gold isn’t so great that it alone would ever drive the precious metal’s price to the moon. Still, if production halted at $750 gold, the law of supply and demand would kick in fairly quickly and, unless the economy were completely and convincingly fixed, there’d always be nations, investors and collectors eager to add more gold to their holdings.
***********************
WHAT TO DO ABOUT IT
Well…if you own gold, sit back, put your feet up, and pat yourself on the back (if you can reach back that far). You can feel good about your decision to add gold to your portfolio, come what may.
And if you don’t own gold, now’s certainly not too late. With so much going on, with today’s printing presses producing tomorrow’s inevitable inflation, the demand for gold is not likely to be heading south any time soon. If it did, as the above indicates, there may still be strong resistance at the $750 to $800 level, which could be a very comforting thing.
Japan facing worst economic outlook on record
Japan's economy is expected to shrink 3.3 per cent over the coming year, marking its biggest decline in more than five decades, according to government predictions.
By Danielle Demetriou in Tokyo
Last Updated: 6:30AM BST 27 Apr 2009
The projected downturn for the forthcoming financial year would be the biggest slump since records began in 1955 as the world's second biggest economy continues to struggle with the global recession.
The exports-reliant economy has been hit hard by a continued drop in overseas demands for goods, making it increasingly vulnerable to turmoil in global financial markets.
The predicted decline for the coming financial year eclipses the 1.5 per cent contraction that hit the economy during the peak of Japan's "lost decade" of recession in 1998 and exceeds the government's earlier forecasts of zero growth. (more)
By Danielle Demetriou in Tokyo
Last Updated: 6:30AM BST 27 Apr 2009
The projected downturn for the forthcoming financial year would be the biggest slump since records began in 1955 as the world's second biggest economy continues to struggle with the global recession.
The exports-reliant economy has been hit hard by a continued drop in overseas demands for goods, making it increasingly vulnerable to turmoil in global financial markets.
The predicted decline for the coming financial year eclipses the 1.5 per cent contraction that hit the economy during the peak of Japan's "lost decade" of recession in 1998 and exceeds the government's earlier forecasts of zero growth. (more)
IMF: As bad as ever
* Editorial
* The Guardian, Monday 27 April 2009
* Article history
Well, that didn't take long. Just three weeks after leaders of the G20 countries agreed a historic deal to give $1.1 trillion in aid to crisis-hit economies, it seems to be unravelling. The back-slapping of the London summit gave way this weekend to the tension of the finance ministers' meeting in Washington. And many of their disputes came down to the International Monetary Fund. The IMF was the big winner of the London summit. It was made the main rescue vehicle to pull countries out of financial crisis and given up to $750bn in extra spending power. But as became clear this weekend, the money is still not agreed - and neither are plans to reform the Fund. (more)
* The Guardian, Monday 27 April 2009
* Article history
Well, that didn't take long. Just three weeks after leaders of the G20 countries agreed a historic deal to give $1.1 trillion in aid to crisis-hit economies, it seems to be unravelling. The back-slapping of the London summit gave way this weekend to the tension of the finance ministers' meeting in Washington. And many of their disputes came down to the International Monetary Fund. The IMF was the big winner of the London summit. It was made the main rescue vehicle to pull countries out of financial crisis and given up to $750bn in extra spending power. But as became clear this weekend, the money is still not agreed - and neither are plans to reform the Fund. (more)
About 20% of Asia Hedge Funds Shut Since January 2008
By Bei Hu and Tomoko Yamazaki
April 27 (Bloomberg) -- Almost 20 percent of Asia-Pacific hedge funds closed in the 15 months to March, with the rate set to accelerate as rising operating costs hit smaller managers, according to London-based AsiaHedge magazine.
In 2008, 129 funds were shuttered in the region, the most in at least eight years and more than double the number in 2007, according to a statement from the magazine, which tracks more than 1,000 hedge funds. Another 17 closed in the first quarter.
“Many of the smaller shops we see closing today started life on a shoestring budget and lacked staying power in the area of operating capital,” said Ed Rogers, chief executive officer of Rogers Investment Advisors Y.K., a Tokyo-based hedge-fund advisory firm. “It is unfortunate, but not surprising, to see these funds being forced to close not because of poor performance, but because of poor business planning.” (more)
April 27 (Bloomberg) -- Almost 20 percent of Asia-Pacific hedge funds closed in the 15 months to March, with the rate set to accelerate as rising operating costs hit smaller managers, according to London-based AsiaHedge magazine.
In 2008, 129 funds were shuttered in the region, the most in at least eight years and more than double the number in 2007, according to a statement from the magazine, which tracks more than 1,000 hedge funds. Another 17 closed in the first quarter.
“Many of the smaller shops we see closing today started life on a shoestring budget and lacked staying power in the area of operating capital,” said Ed Rogers, chief executive officer of Rogers Investment Advisors Y.K., a Tokyo-based hedge-fund advisory firm. “It is unfortunate, but not surprising, to see these funds being forced to close not because of poor performance, but because of poor business planning.” (more)
China admits to building up stockpile of gold
SHANGHAI/BEIJING - China revealed on Friday that it had secretly raised its gold reserves by three-quarters since 2003, increasing its holdings to 1,054 tonnes - or a pot worth about US$30.9-billion - and confirming years of speculation it had been buying.
Hu Xiaolian, head of the State Administration of Foreign Exchange, told Xinhua news agency in an interview that the country's reserves had risen by 454 tonnes from 600 tonnes since 2003, when China last adjusted its state gold reserves figure.
The confirmation of its surreptitious stockpiling is likely to fuel market talk about Beijing's ability to buy secretly and its ambitions for spending its nearly US$2-trillion pile of savings. And not just in gold: copper and other metals markets are booming thanks to China's barely-visible hand.
Speculation has gathered speed over the last year, since the tumbling dollar has threatened to weaken China's buying power - and give it yet more reason to diversify into gold, oil and metals. (more)
Hu Xiaolian, head of the State Administration of Foreign Exchange, told Xinhua news agency in an interview that the country's reserves had risen by 454 tonnes from 600 tonnes since 2003, when China last adjusted its state gold reserves figure.
The confirmation of its surreptitious stockpiling is likely to fuel market talk about Beijing's ability to buy secretly and its ambitions for spending its nearly US$2-trillion pile of savings. And not just in gold: copper and other metals markets are booming thanks to China's barely-visible hand.
Speculation has gathered speed over the last year, since the tumbling dollar has threatened to weaken China's buying power - and give it yet more reason to diversify into gold, oil and metals. (more)
Lessons from the Great Depression Part XXVI: Time to put the Bankers and Wall Street on Trial
Pecora Commission Where Art Thou? Lessons from the Great Depression Part XXVI: Time to put the Bankers and Wall Street on Trial. “Legal chicanery and pitch darkness were the banker’s stoutest allies.”
The Pecora hearings have been making the rounds recently. The United States Senate Committee on Banking and Currency was setup during the Great Depression to examine the causes of the Wall Street Crash of 1929. The initial inquiry started in March 4, 1932 and was heavily politicized. After all, we were talking about the Great Depression here and the public was outraged. The actual investigation itself was launched by a majority-Republican Senate but was criticized by the Democratic Party as an underhanded way of gathering up populist anger. The bottom line was the American public was suffering. The suffering of the vast majority of Americans stood in stark contrast to the high rolling lifestyle of bankers and those on Wall Street. The banking syndicate had brought the U.S. economy to the edge and took it over. At first the initial investigation had very little traction. That is until Ferdinand Pecora, assistant district attorney of New York County was hired to put together and bring forth the final report. (more)
The Pecora hearings have been making the rounds recently. The United States Senate Committee on Banking and Currency was setup during the Great Depression to examine the causes of the Wall Street Crash of 1929. The initial inquiry started in March 4, 1932 and was heavily politicized. After all, we were talking about the Great Depression here and the public was outraged. The actual investigation itself was launched by a majority-Republican Senate but was criticized by the Democratic Party as an underhanded way of gathering up populist anger. The bottom line was the American public was suffering. The suffering of the vast majority of Americans stood in stark contrast to the high rolling lifestyle of bankers and those on Wall Street. The banking syndicate had brought the U.S. economy to the edge and took it over. At first the initial investigation had very little traction. That is until Ferdinand Pecora, assistant district attorney of New York County was hired to put together and bring forth the final report. (more)
Cramer's Outrage: Ultra-Short ETFs
Posted By:Tom Brennan
Topics:SEC | Stock Picks | Stock Market
Sectors:Financial Services
As if one ultra-short exchange-traded fund wasn't bad enough. Now ProShares is asking the Securities and Exchange Commission for permission to create 94 new ETFs. And instead of settling for a mere $2 of short leverage, ProShares wants $3. Needless to say, Cramer is outraged, especially considering the damage already caused by the UltraShort Financial ETF [SKF 59.77 0.19 (+0.32%) ]. He wants them all shut down. Watch the video for the latest on this important Cramer crusade. (more)
Topics:SEC | Stock Picks | Stock Market
Sectors:Financial Services
As if one ultra-short exchange-traded fund wasn't bad enough. Now ProShares is asking the Securities and Exchange Commission for permission to create 94 new ETFs. And instead of settling for a mere $2 of short leverage, ProShares wants $3. Needless to say, Cramer is outraged, especially considering the damage already caused by the UltraShort Financial ETF [SKF 59.77 0.19 (+0.32%) ]. He wants them all shut down. Watch the video for the latest on this important Cramer crusade. (more)
Monday, April 27, 2009
Equity and Commodity charts
Trends
The ratio of S&P 500 stocks in an uptrend to a downtrend (i.e. the Up/Down ratio) rose last week from 1.26 to (258/165=) 1.56 last week. The ratio has come a long way from its low on March 6th at 0.18. Another 47 S&P 500 stocks broke resistance last week (including 16 stocks on Friday). Twelve stocks broke support. Most stocks breaking support were in the financial service sector. S&P 500 stocks remain in the Mark Up phase. Next phase after the Mark Up phase is the Peaking phase. Evidence of the Peaking phase based on this indicator has yet to surface.
Bullish Percent Index for S&P 500 stocks eased last week from 66.00% to 62.40%. On Friday, the Index closed below its 15 day moving average. A break below its 15 day moving average from an intermediate overbought level is the requirement for a Bullish Percent Index sell signal. (more)
Martin Armstrong says Major Turn at Hand - batten down the hatches, or...
Written by Martin Armstrong - former chairman of Princeton Economics International Ltd. | Friday, 24 April 2009 07:44
A turn date in Martin Armstrong's Economic Confidence Model passed on April 19th or 20th, depending on how many days you use to calculate a year. The graphic shows that the model is predicting a top at this turn date before heading down into a long-term low in June 2011. As Martin explains in the essay below, the model does not necessarily mean that a top in the Dow Industrials is at hand.
For instance, the 1989 turn date forecasted a top in the Japanese Nikkei. The Economic Confidence Model was created with inputs from around the world and therefore is not limited in scope to just pinpointing stock market tops and bottoms. Personally, I am looking at the US Dollar, the Treasury market or the Shanghai market for signs of a top. All these markets have experienced strong rallies off of recent bottoms and might be ready to turn lower. (more)Recession, Far From Over, Already Setting Records
THE current recession has become the second-worst in the last half-century and is close to surpassing the severe 1973-75 downturn, according to the Index of Coincident Indicators, based on government data and compiled each month by the Conference Board, a private organization.
Unlike the more widely followed Index of Leading Indicators, which is supposed to help forecast changes in the economy, the coincident index is aimed at simply recording how the economy is doing now.
The accompanying chart shows how far that index has declined from prerecession peaks during each downturn since 1960. The figure for March, released this week, showed a decline of 5.6 percent from the high set in November 2007, the month before the recession began, according to the National Bureau of Economic Research.
The decline in the 1970s recession was 6 percent, a figure that is likely to be eclipsed within a few months. (more)Uranium stocks finally bottomed?
Merv’s Weekly Uranium Review
for week ending 24 April 2009
Well it sure looks like we are getting on a roll. Four good days with improving daily volume activity. The Daily Index has moved into new recovery highs and looks set to continue further, however, these moves never just go straight up but do take some kind of rest or consolidation of gains before continuing. When that will happen is anyone’s guess at this time.
On Friday the Merv’s Daily Uranium Index closed 7.44 points higher or 4.75%, finishing off a very good week. There were 40 daily winners and 10 daily losers. There were no stocks not knowing which way they were going. As for the five largest stocks, one was lower, the rest were higher. Cameco gained 4.8%, First Uranium lost 2.1%, Paladin gained 3.6%, Uranium One gained 6.5% and USEC gained 6.2%. The best winner on the day was Alberta Star with a gain of 35.7% while the loser on the day was Globex Mining with a loss of 6.7%.
For the week as a whole the Merv’s Weekly Uranium Index was up 564.59 points or 13.89% (the Daily Index closed up 9.39% for the week). There were 36 weekly winners, 11 weekly losers and 3 stocks that went nowhere. As for the 5 largest stocks, Cameco gained 15.7%, First Uranium gained 0.8%, Paladin gained 7.7%, Uranium One gained 10.0% and USEC gained 4.0%. The best weekly gainer was Purepoint Uranium (a new component) with a gain of 57.1% while the loser on the week was Kodiak with a loss of 15.9%.
This week’s analysis is pretty simple. On the long term the Weekly Index is above its positive sloping moving average line as is the Daily Index above its long term positive line. The long term momentum indicator (both the weekly and daily versions) is just below its neutral line in the negative zone but moving upwards above its positive trigger line. The Volume indicator is once more in all time new highs above its positive sloping trigger line. The long term rating remains BULLISH.
On the intermediate term everything is positive. The Daily Index is above its positive moving average line, the momentum indicator is in its positive zone above its positive trigger line and the volume indicator is in new high territory above its positive trigger line. The intermediate term rating can only be BULLISH. (more)
Thursday, April 23, 2009
Planned Economy Or Planned Destruction?
Look way down at the bottom left hand corner of this image from the Chicago Tribune in 1934. Does it sound familiar? Pay very close attention to what is happening in Washington.
Martial Law and the Coming Revolution
This aired yesterday on the Steve Quayle program.
Special guest was Dr. Steve Pieczenik for 2 hours.
hour #1
hour #2
Special guest was Dr. Steve Pieczenik for 2 hours.
hour #1
hour #2
'There will be blood'
Harvard economic historian Niall Ferguson predicts prolonged financial hardship, even civil war, before the ‘Great Recession' ends
HEATHER SCOFFIELD
Globe and Mail Update
February 23, 2009 at 6:45 PM EDT
Harvard author and financial crisis guru Niall Ferguson has landed with a thud in Ottawa, spreading messages that could make even the most confident policy makers squirm.
The global crisis is far from over, has only just begun, and Canada is no exception, Mr. Ferguson said in an interview before delivering a presentation to public-policy think tank, Canada 2020.
Policy makers and forecasters who see a recovery next year are probably lying to boost public confidence, he said. And the crisis will eventually provoke political conflict, albeit not on the scale of a world war, but violent all the same.
The Buy America penchant pushed by the U.S. Congress in passing the recent stimulus bill was only the tip of the iceberg.
Abu Dhabi buying Nova Chemicals at bargain-basement prices on Monday is a sign of things to come, with financial power quickly being transferred over to the world's creditors – namely sovereign wealth funds – and away from the world's debtors.
And much of today's mess is the fault of central bankers who targeted consumer-price inflation but purposefully turned a blind eye to asset inflation. (more)
HEATHER SCOFFIELD
Globe and Mail Update
February 23, 2009 at 6:45 PM EDT
Harvard author and financial crisis guru Niall Ferguson has landed with a thud in Ottawa, spreading messages that could make even the most confident policy makers squirm.
The global crisis is far from over, has only just begun, and Canada is no exception, Mr. Ferguson said in an interview before delivering a presentation to public-policy think tank, Canada 2020.
Policy makers and forecasters who see a recovery next year are probably lying to boost public confidence, he said. And the crisis will eventually provoke political conflict, albeit not on the scale of a world war, but violent all the same.
The Buy America penchant pushed by the U.S. Congress in passing the recent stimulus bill was only the tip of the iceberg.
Abu Dhabi buying Nova Chemicals at bargain-basement prices on Monday is a sign of things to come, with financial power quickly being transferred over to the world's creditors – namely sovereign wealth funds – and away from the world's debtors.
And much of today's mess is the fault of central bankers who targeted consumer-price inflation but purposefully turned a blind eye to asset inflation. (more)
10 Charts Showing a Prolonged Global Recession: Credit Markets, Housing, and Equity Markets point to Lengthy Economic Contraction.
The IMF came out with a global report on the economy in October of 2008. Since that time, the global economy has deteriorated even further and the IMF has issued another report. I went ahead and looked at both documents and from what is presented, there is very little reason to believe we will see any stabilization in 2009. All the talk of a second half recovery would mean that things would need to start picking up on July 1st which doesn’t seem likely with news showing more hits to employment. Currently, we have 24 million Americans that are unemployed or underemployed and with news that GM won’t be able to make its June 1st payment and plant closures, we have to wonder what is going to happen to their 230,000+ worker force? (more)
How low could stock markets go?
By Dominic Frisby Apr 22, 2009
Dominic Frisby
Markets will be a sea of red for a while to come yet
After Monday's capitulation in the stock markets, which, if you read last week's missive, came right on cue, followed by yesterday's formidable rally, it's time to ask, 'Where next for the stock market?' I'll warn you right now – judging by past experience, the outlook is not pretty.
Meanwhile, precious metal investors should be aware that 'The Gordon Brown Gold Rally Indicator' has just flashed a buy signal – more on this below...
More similarities between the bust of 1929 and now
As you might know, I am fond of drawing parallels between 1929 and now. The cause of today's boom and bust – too much credit – was the same as the cause of the bust of 1929, so it is not unreasonable to expect the post-bubble contraction, the environment we are in now, to unfold in a similar manner. (more)
Dominic Frisby
Markets will be a sea of red for a while to come yet
After Monday's capitulation in the stock markets, which, if you read last week's missive, came right on cue, followed by yesterday's formidable rally, it's time to ask, 'Where next for the stock market?' I'll warn you right now – judging by past experience, the outlook is not pretty.
Meanwhile, precious metal investors should be aware that 'The Gordon Brown Gold Rally Indicator' has just flashed a buy signal – more on this below...
More similarities between the bust of 1929 and now
As you might know, I am fond of drawing parallels between 1929 and now. The cause of today's boom and bust – too much credit – was the same as the cause of the bust of 1929, so it is not unreasonable to expect the post-bubble contraction, the environment we are in now, to unfold in a similar manner. (more)
Wednesday, April 22, 2009
Housing bubble smackdown: Huge “shadow inventory” portends a bigger crash ahead
Mike Whitney
Online Journal
Wednesday, April 22, 2009
Due to the lifting of the foreclosure moratorium at the end of March, the downward slide in housing is gaining speed.
The moratorium was initiated in January to give Obama’s anti-foreclosure program — which is a combination of mortgage modifications and refinancing — a chance to succeed. The goal of the plan was to keep up to 9 million struggling homeowners in their homes, but it’s clear now that the program will fall well short of its objective.
In March, housing prices accelerated on the downside, indicating bigger adjustments dead ahead. Trend lines are steeper now than ever before — nearly perpendicular. Housing prices are not falling, they’re crashing and crashing hard.
Now that the foreclosure moratorium has ended, notices of default (NOD) have spiked to an all-time high. These notices will turn into foreclosures in four to five months’ time, creating another cascade of foreclosures. Market analysts predict there will be 5 million more foreclosures between now and 2011. It’s a disaster bigger than Katrina. (more)
5 Reasons House Prices May Never Recover
House prices will eventually stop falling, probably in about two years. But will they ever recover to the levels we saw during the heights of boom? In some areas, prices might climb that high again. But for most markets, such a recovery will probably never happen, and would take decades it were to occur.
In an essay published today, Charles Hugh Smith explains that the bubble vaulations are probably never coming back.
-
Once the bubble in an asset class pops, it never reflates. "It is simply a truism that bubbles never reflate, ever. Tulip bulb valuations did not rise to stratospheric heights after the Tulip Craze popped, and the Nasdaq dot-com bubble did not reinflate, either, for the very good reason that bubbles are never based on rational valuations--they are based on the psychological state of mania which cannot be reinstated once lost," Smith writes. (more)
Sunday, April 19, 2009
Buy the Dip: Silver's on Sale!
Silver Stock Report
The world gold mines produces 2500 tonnes per year, which is about 80 million ounces. With gold at $867, that's $69 billion worth of gold mined each year. That's a tiny market in the scale of world finance, where the USA has $14,000 billion in the US banking system at risk, and has added $11,000 billion of commitments in bail outs, and continues to issue $800 billion bail outs with increasing regularity, with a total budget exceeding $3000 billion, and a budget deficit approaching $1500 billion.
http://en.wikipedia.org/wiki/United_States_federal_budget
The silver market is a lot smaller. Way smaller than the $69 billion in gold produced. World silver mines produce about 600 million ounces, at $11.88/oz. is $7.1 billion. Unlike with gold, where 95% of demand is for investment purposes, most silver has industrial applications, and there is little relative investment demand. Investment demand in silver is about 10-25% of the market, perhaps headed towards about 150 million ounces per year now, rapidly increasing in 2008, and in 2009 now. 150 million oz of silver, at $11.88 = $1.7 billion market.
Gold Eagle production is 710,000 oz., while Silver Eagle production was about 20 million ounces for 2008. The silver Eagle market is thus only a $237 million market, extremely tiny in the scale of world finance. (more)
by Jason Hommel, April 14th, 2009
Let's review the fundamentals of gold and silver.The world gold mines produces 2500 tonnes per year, which is about 80 million ounces. With gold at $867, that's $69 billion worth of gold mined each year. That's a tiny market in the scale of world finance, where the USA has $14,000 billion in the US banking system at risk, and has added $11,000 billion of commitments in bail outs, and continues to issue $800 billion bail outs with increasing regularity, with a total budget exceeding $3000 billion, and a budget deficit approaching $1500 billion.
http://en.wikipedia.org/wiki/United_States_federal_budget
The silver market is a lot smaller. Way smaller than the $69 billion in gold produced. World silver mines produce about 600 million ounces, at $11.88/oz. is $7.1 billion. Unlike with gold, where 95% of demand is for investment purposes, most silver has industrial applications, and there is little relative investment demand. Investment demand in silver is about 10-25% of the market, perhaps headed towards about 150 million ounces per year now, rapidly increasing in 2008, and in 2009 now. 150 million oz of silver, at $11.88 = $1.7 billion market.
Gold Eagle production is 710,000 oz., while Silver Eagle production was about 20 million ounces for 2008. The silver Eagle market is thus only a $237 million market, extremely tiny in the scale of world finance. (more)
Saturday, April 18, 2009
Faber Says S&P 500 May Rise to 1,000 on Bank Earnings
by on 04/17/2009
The Standard & Poor’s 500 Index may rise 17 percent to 1,000 in the next three months as government spending boosts bank profits, investor Marc Faber said.
“You have essentially a government that gives financials free money at the expense of the taxpayer,” Faber said. “With this free money, they may actually have decent earnings in the near future.”
Banks in the S&P 500 are forecast to post an 86 percent drop in first-quarter earnings, according to analyst estimates compiled by Bloomberg. Profits are projected to fall 57 percent in the second quarter and 52 percent in the third before rebounding 277 percent in the year’s last three months. (more)
Traders, Not Investors, Fueling This Stock Rally: NYSE Chief
Friday April 17, 2009, 10:55 am EDT
Wall Street's stunning six-week rally has been fed more by traders looking to take advantage of quick swings in the market than investors with a long-term view, NYSE Euronext (NYSE:NYX - News) CEO Duncan Niederauer told CNBC.
Because of that, the rally likely is to run out of steam as low volume eventually comes back to the bite the market, he said.
"It feels to me we're in a trader's market and not an investor's market," Niederauer said in a live interview from the exchange floor.
Markets are likely to near their March lows after an upswing that has sent the major indexes more than 20 percent higher, he said. (more)
IMF predicts prolonged, deep global recession
The International Monetary Fund on Thursday forecast a prolonged, deep global recession, a "sluggish" recovery, and weak capital flows to emerging economies that would hammer eastern Europe.
"The current recession is likely to be unusually long and severe and the recovery sluggish," the IMF said in releasing two chapters from its twice-yearly World Economic Outlook (WEO).
The fund offered no timeline for a recovery from the first global recession in six decades.
The IMF also warned that "the decline in capital flows to emerging economies ... may be protracted, given the solvency problems facing advanced economy banks who provide significant financing to emerging economies." (more)
"The current recession is likely to be unusually long and severe and the recovery sluggish," the IMF said in releasing two chapters from its twice-yearly World Economic Outlook (WEO).
The fund offered no timeline for a recovery from the first global recession in six decades.
The IMF also warned that "the decline in capital flows to emerging economies ... may be protracted, given the solvency problems facing advanced economy banks who provide significant financing to emerging economies." (more)
Friday, April 17, 2009
Guns: A better buy than stocks
Posted Apr 16 2009, 12:20 PM by Todd Harrison Forget stocks and bonds, the real money's in guns.
The Wall Street Journal reports artillery enthusiasts are stocking up on guns and ammo, not necessarily ahead of widespread civil unrest resulting from our ongoing economic swoon, but as an investment. These trigger-happy speculators are betting President Obama will institute a ban on assault rifles, which would crimp supply and send prices, well, shooting up.
For it's part, the Obama administration says it has no plans to enact such legislation and supports the Second Amendment right to bear arms.
During the federal ban on semiautomatic weapons from 1994-2004, prices soared. Recent buying has reached almost a frenzied pitch, creating backlogs for popular models and enabling resellers to list certain guns well above suggested retail prices. AK-47s doubled in price between September 2008 and the end of last year.
Ammo, as well, has become a hot commodity. As one supplier said, "(Ammunition) beats the hell out of money markets and CDs. You can double your investment in ammunition in a year."
(more)
The Wall Street Journal reports artillery enthusiasts are stocking up on guns and ammo, not necessarily ahead of widespread civil unrest resulting from our ongoing economic swoon, but as an investment. These trigger-happy speculators are betting President Obama will institute a ban on assault rifles, which would crimp supply and send prices, well, shooting up.
For it's part, the Obama administration says it has no plans to enact such legislation and supports the Second Amendment right to bear arms.
During the federal ban on semiautomatic weapons from 1994-2004, prices soared. Recent buying has reached almost a frenzied pitch, creating backlogs for popular models and enabling resellers to list certain guns well above suggested retail prices. AK-47s doubled in price between September 2008 and the end of last year.
Ammo, as well, has become a hot commodity. As one supplier said, "(Ammunition) beats the hell out of money markets and CDs. You can double your investment in ammunition in a year."
(more)
Platinum and palladium markets find their own stimulus
Potential launch of first U.S. ETF backed by the metals holds promise
By Myra P. Saefong, MarketWatch
Last update: 2:27 p.m. EDT April 17, 2009
TOKYO (MarketWatch) -- The platinum and palladium markets have found their own stimulus plan -- in the form of the potential launch of the first U.S. exchange-traded funds physically backed by the precious metals.
In the down economy, couples getting married may find palladium more attractive, with the cost about 70% less than that of platinum. Investors seem to be keen on the metal, too. Stacey Delo reports. (April 17)
And if the SPDR Gold Trust (GLD
SPDR Gold Trust ETF & SLV) are good examples of what ETFs can do for a specific commodities market, then the latest ones backed by platinum and palladium may be no different, analysts said.
These ETFs would be a "huge boon for retail investment into the PGMs (platinum group metals)," said Scott Wright, an analyst at financial-services company Zeal LLC.
Indeed, the timing may be just right. Prices for platinum and palladium have been climbing from lows hit late last year.
Platinum prices have gained more than 60% from their low in October of last year to trade as high as $1,247 an ounce this week on the Comex division of the New York Mercantile Exchange. Palladium's up close to 50% from its December low to a high above $242 an ounce this week.
(more)
By Myra P. Saefong, MarketWatch
Last update: 2:27 p.m. EDT April 17, 2009
TOKYO (MarketWatch) -- The platinum and palladium markets have found their own stimulus plan -- in the form of the potential launch of the first U.S. exchange-traded funds physically backed by the precious metals.
In the down economy, couples getting married may find palladium more attractive, with the cost about 70% less than that of platinum. Investors seem to be keen on the metal, too. Stacey Delo reports. (April 17)
And if the SPDR Gold Trust (GLD
SPDR Gold Trust ETF & SLV) are good examples of what ETFs can do for a specific commodities market, then the latest ones backed by platinum and palladium may be no different, analysts said.
These ETFs would be a "huge boon for retail investment into the PGMs (platinum group metals)," said Scott Wright, an analyst at financial-services company Zeal LLC.
Indeed, the timing may be just right. Prices for platinum and palladium have been climbing from lows hit late last year.
Platinum prices have gained more than 60% from their low in October of last year to trade as high as $1,247 an ounce this week on the Comex division of the New York Mercantile Exchange. Palladium's up close to 50% from its December low to a high above $242 an ounce this week.
(more)
Tuesday, April 14, 2009
Faber Says S&P 500 May Rise to 1,000 on Bank Earnings (Update3)
April 13 (Bloomberg) -- The Standard & Poor’s 500 Index may rise 17 percent to 1,000 in the next three months as government spending boosts bank profits, investor Marc Faber said.
U.S. stocks probably reached their bear market low when the S&P 500 fell to 666.79 during trading on March 6, Faber, who publishes the Gloom, Boom and Doom report, told Bloomberg Radio in an interview from Thailand.
Financial shares may increase further after the S&P 500 Banks Index jumped 25 percent on April 9, the biggest rally since at least 1989. Citigroup Inc., Goldman Sachs Group Inc. and JPMorgan Chase & Co. are among more than 30 S&P 500 companies scheduled to announce results this week.
“You have essentially a government that gives financials free money at the expense of the taxpayer,” Faber said. “With this free money, they may actually have decent earnings in the near future.” (more)
The IEA warns of shortages - "The next oil crisis is coming"
by Michael Kläsgen
A shortage of oil could trigger another global recession around 2013 – says the IEA. By 2010 the price will reach new highs.
The IEA in Paris is warning of a new, much more severe global economic crisis around 2013. The reason is that investments in oil from new projects are being cancelled by large oil companies. If demand starts increasing in 2010, the oil price could explode, fire up inflation and put global growth at risk.
"We are concerned, that oil companies are reducing their investment levels. When demand returns a supply shortage could appear. We are even predicting that this shortage could occur in 2013." Said Nobuo Tanaka, head of the IEA in an interview with Sueddeutsche Zeitung.
Oil reserves declining markedly (more)
Moody's Downgrades The Whole Country
Joe Weisenthal|Apr. 8, 2009, 8:33 AM
The Federal government is still AAA, but every municipal debt issuer is now suspect and shaky according to Moody's.
For the first time ever, the ratings agency placed all munis on negative outlook, a precursor to potential downgrades. Historically, the agency looked at munis individually and considered them to be too diverse to make blanket statements about.
But it seems overspending and the hollowing out of the revenue base is a nationwide phenomenon affecting cities and states everywhere.
And of course the US government is affected by those same phenomenon -- we think the government's revenue expectations remain wildly optimistic, given the slowdown and the collapsing of the income gap -- but alas the Fed still has the printing press and should be able to hold onto its AAA rating for awhile longer.
Meanwhile, New York actually managed to float a bond at a 5.55% interest rate and a 2036 maturity. Who'd have guessed?
The Federal government is still AAA, but every municipal debt issuer is now suspect and shaky according to Moody's.
For the first time ever, the ratings agency placed all munis on negative outlook, a precursor to potential downgrades. Historically, the agency looked at munis individually and considered them to be too diverse to make blanket statements about.
But it seems overspending and the hollowing out of the revenue base is a nationwide phenomenon affecting cities and states everywhere.
And of course the US government is affected by those same phenomenon -- we think the government's revenue expectations remain wildly optimistic, given the slowdown and the collapsing of the income gap -- but alas the Fed still has the printing press and should be able to hold onto its AAA rating for awhile longer.
Meanwhile, New York actually managed to float a bond at a 5.55% interest rate and a 2036 maturity. Who'd have guessed?
Friday, April 10, 2009
The IEA warns of shortages - "The next oil crisis is coming"
by Michael Kläsgen
A shortage of oil could trigger another global recession around 2013 – says the IEA. By 2010 the price will reach new highs.
The IEA in Paris is warning of a new, much more severe global economic crisis around 2013. The reason is that investments in oil from new projects are being cancelled by large oil companies. If demand starts increasing in 2010, the oil price could explode, fire up inflation and put global growth at risk.
"We are concerned, that oil companies are reducing their investment levels. When demand returns a supply shortage could appear. We are even predicting that this shortage could occur in 2013." Said Nobuo Tanaka, head of the IEA in an interview with Sueddeutsche Zeitung.
Oil reserves declining markedly
He is alarmed, because he has data that shows that the global oil supply capacity is declining and that oil reserves will likely be markedly reduced by 2013. The stronger oil demand will be in a recovery starting in 2010, especially in the US, China and India, the sooner the shortage will appear and strangle global growth. (more)
Why I Prefer the Silver Lining
Howard Ruff
The Ruff Times
Posted Apr 6, 2009
In my recent interview on CNBC’s Squawk Box, I was asked why I preferred silver. Here’s why:
1) I am bullish on gold. I can enthusiastically endorse all the bullish arguments. In fact, my investment in the Central Fund of Canada Ltd. (CEF) contains one ounce of gold for every 50 ounces of silver. I am not negative on gold; far from it. It’s a question of better or best.
2) At these prices, gold is not a greatly in-demand industrial metal. It has industrial uses, but many of these uses are too expensive for gold. Gold is a monetary and jewelry metal. It also is enthroned in human consciousness as a store of value. I expect gold to continue to rise if Barack Obama continues to create so much currency.
3) Silver is also a jewelry and monetary metal, but it is also a very important industrial metal. It has over 2,000 industrial uses. Back in the ‘70s when I liked silver over gold, there was ten times as much silver above ground as there was gold. Despite that, we made two to three times as much money on silver as we did on gold. (more)
Swiss slide into deflation signals the next chapter of this global crisis
Watch Switzerland closely. It is tipping into deflation, the first Western country to succumb to Japan's disease.
By Ambrose Evans-Pritchard
Last Updated: 7:17PM BST 05 Apr 2009
Comments 36 | Comment on this article
Swiss consumer prices fell 0.4pc in March (year-on-year). Swiss CPI will be minus 1pc at least by July, nearing the level where spending psychology changes. By the time you have a self-feeding spiral, it is too late.
"This is something that we must prevent at all costs. The current situation is extraordinarily serious," said Philipp Hildebrand, a governor of the Swiss National Bank.
The SNB is not easily spooked. It is the world's benchmark bank, the keeper of the monetary flame. Yet even the SNB's hard men have thrown away the rule book, taking emergency action to force down the exchange rate of the Swiss franc.
Here lies the danger. If other countries try to export deflation by this means, we will face a second phase of the global crisis. Taiwan is already devaluing. Korea, Singapore, and Sweden all seem tempted to follow. Japan is chomping at the bit.
"We don't fully realise in the West what a catastrophic collapse Japan has suffered," says Albert Edwards, global strategist at Société Générale. "The West has dumped a large part of its economic downturn onto Japan by devaluing against the yen."
This is about to go into reverse as Tokyo hits the ping-pong ball back across the net. "As the unfolding collapse in the yen gathers pace, the West will see its green shoots incinerated to dust," he said.
Japan's industrial output fell 38pc in February (year-on-year), mostly concentrated into the last four months. No major economy imploded at this speed in the 1930s. The country has been hit by a double shock. As an export power it has taken the brunt of Anglo-Saxon belt-tightening: as the world's top creditor it is cursed by a "safe-haven" currency that soars in moments of danger – largely because the Japanese bring home their wealth till the storm passes. Normally, Japan can cope. This time, the yen's rise has pushed the economy over a cliff.
The yen must come back down to earth, and soon, or Japanese society will start to disintegrate. If necessary, the Bank of Japan will force it down by intervention, as occurred in 2003-2004.
Will China stand idly by as Japanese unleashes a shock to the global system through competitive devaluation? That depends whether you think China's spring recovery is the real thing, or an inventory build-up before the next downward slide. The Communist Party says 20m jobs have been lost since the bubble burst. This cannot be tolerated for long.
It is remarkable that China's fall into deflation has attracted so little notice. China's CPI was minus 1.6pc in February. The country has built too many factories producing goods that the world cannot absorb. The temptation is to shunt this excess capacity abroad. A faction of the politburo is already itching to devalue the yuan.
Of course, Britain has already played the currency card. That is different. The pound's fall, though welcome, is a side-effect of the Bank of England efforts to stem the credit crunch. There has been no currency intervention.
Crucially, Britain has a current account deficit. Many countries toying with devaluation are exporters with surpluses – 15.4pc of GDP for Singapore, 8.4pc for Switzerland, and 6.1pc for China. If these countries refuse to let their imbalances correct, world demand must implode.
Mr Hildebrand denies that the SNB is pursuing a "beggar-thy-neighbour' strategy. Like the yen, the franc suffers from the safe-haven curse: everybody buys it in a storm. This tightens monetary conditions. The SNB cannot easily offset this. It has already cut interest rates to near zero. There are not enough Swiss government bonds in the market to rely on the sort of "QE" asset purchases being carried out by the Bank.
Ultimately, I suspect this crisis may mark the moment when the Swiss franc loses its safe-haven role. Credit default swaps (CDS) measuring risk on five-year government debt have reached 127 for Switzerland, higher than Britain at 118. Norway has the world's lowest CDS at 48, reflecting its status as a petro-democracy.
Switzerland's banks are over-leveraged. Loans to emerging markets equal 50pc of GDP (half to Eastern Europe). Banking secrecy is dying. Fortunately for the Swiss, they have built up $700bn in net foreign assets for a rainy day. Improvident Britons are less lucky. But that is another story. What we risk now is a game of deflation "pass-the-parcel" worldwide. The economic establishment was caught off guard from 2003 to 2007 because it overlooked the way that Asia's unbalanced relationship with the West was feeding a credit bubble.
It may be caught again as the same warped structure leads to a chain of (panicked) devaluations.
Enjoy the "bear-trap" rally on global bourses this spring. But remember, we have only just begun to see the mass lay-offs and hardship caused by this slump. The politicians will act to save their skins. Markets may not like the result.
Tuesday, April 7, 2009
Billionaire Buffett benefits from bailout he promoted
Published: Sunday, Apr. 5, 2009 - 12:00 am | Page 1A
Last Modified: Sunday, Apr. 5, 2009 - 12:25 pm
Last Modified: Sunday, Apr. 5, 2009 - 12:25 pm
Financier Warren Buffett has been lauded for his plain-spoken denunciation of the greed and foolishness behind the economic crisis. He has pushed the massive federal bailout of imploding banks as the essential response to an "economic Pearl Harbor."
When Buffett speaks, people in high places listen. The famous investor is so highly regarded that in a debate last fall, both presidential candidates said they were considering him for treasury secretary.
A Bee examination of regulatory records shows that Buffett, the world's second-wealthiest person, also quietly has become a top beneficiary of the banking bailout he so vigorously advocated.(more)
The Soft Panic of 2009 Has Just Begun, (collapse of commercial real estate)
By Andrew Mickey, Q1 Publishing
Boston’s Clarendon Street sits on one of city’s most iconic buildings. It’s also the symbol of what could kick off what I call the “Soft Panic of 2009.”
Locals know it simply as “The Hancock.” The 60-story frame wrapped in reflective blue glass makes it look like the tallest mirror in the world. I’m sure it was an impressive sight when it was built in the 70’s. It still is.
The I.M. Pei designed building stood as a symbol of financial strength and ingenuity. Now, it’s looking a whole lot different.
And for those of us looking into this situation now we will be protected. And for more aggressive folks, we’ll actually be able to profit from it all. Here’s how.
BIS Admits $190 Billion Silver Fraud
Silver Stock Report
by Jason Hommel, April 6th, 2009
In the past, I've pointed out various frauds in the silver market such as, the excessive futures contracts on the COMEX, the excessive trading in "London" silver, and the excess silver in the new ishares Silver ETF, SLV.
In 10 years of reading and writing and searching, I've never known the numbers of paper silver in the OTC "Over the Counter" market until a reader informed me, just today.
This is directly from the BIS, the Bank of International Settlements. This is good data.
http://www.bis.org/statistics/derstats.htm
At the link above, see
21 Amounts outstanding of OTC single-currency interest rate derivatives
"21C By instrument, maturity and counterparty"
That's this link:
http://www.bis.org/statistics/otcder/dt21c22a.pdf
See the center middle column towards the bottom, under "Other Precious Metals", which excludes Gold. This would be Silver, Platinum, and Palladium. We can exclude Platinum and Palladium as nearly irrelevant, because those markets are much smaller than silver, and very few people hold paper instruments of that type. Furthermore palladium is much like silver in that the market is dominated by industrial demand, and investor demand is less than 5% of the market.
The number of "Single currency interest rate derivatives in other precious metals (SILVER)" from June 2006 to June 2008, in two short years, more than doubled:
From $84 billion to $190 billion!
That's about 40 times larger of a fraud than I had thought.
This is serious news. This is original reporting. Will any other news agency cover it? Probably not.
How much new paper silver is that?
Well, the physical silver investor market annual demand is about $1.3 -$2 billion per year! And yet, they sold $100 billion in new paper silver in the span of 2 years, which is over 50 times as much paper silver as exists in the world annual physical silver investment market!
Previously, I had written and exposed that one or two banks sold, over the span of about a month, 130 million ounces of silver at COMEX to depress silver prices, which is only 1.3 times as much as annual investor demand.
I'm shocked at the figures. Most people who are thinking that they are "buying silver" are still just trusting banks and brokerage firms that have no silver.
Real silver investment demand has therefore not yet really begun, because those banks have not bought any silver. Just wait. It's going to get absolutely crazy.
I just watched a History Channel show last night on the Madoff Scandal. This is nearly 4 times as big! It's the same kind of Ponzi scheme, as they have not bought the real silver that they owe their clients.
People kept saying that the Madoff Scandal was the biggest Ponzi scheme in history. It wasn't. The biggest is not even this silver scandal. It's paper money; that's also a Ponzi Scheme!
I know many people who have most of their wealth with the brokerage houses, and just "some" of their assets "in silver" with the same firms. It's time to pull 100% of your assets out of those firms. Put most of it, if not all of it, into silver first, palladium second, and gold third. Let the diverse metals be your diversification.
Spread it around in several locations if you have a lot. Buy the vaults you need to protect it.
Buy it now, when the silver market is relatively calm, when silver is available.
We offer about $78,000 worth of physical silver at auctions nightly at seekbullion.com. And it's available for immediate delivery, unlike many of our competitors who offer silver for delayed delivery.
It won't be enough.
Also, we won't be ordering or making any more of the following items, so when we sell out, those will be the last ones available:
New Obama, Old Obama, Fish, Bull, CFTC, Snake.
We will continue to re-order all of the replicas such as the Buffalo and the '29 Indian, and our other designs such as the Beer, NWO, "Love God" and the Pirates (except Obama).
At our Coin Shop in Rocklin, and online at seekbullion.com, we will be offering rounds and bars at $1.75 over spot again. Our suppliers have been good to us, and have lowered costs once again for us due to our large volume.
Sincerely,
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