Monday, November 1, 2010

Iran Announces It Has Converted 15% Of Its $100 Billion+ In FX Reserves Into Gold

As of today, one of the world's top oil exporters announced that has exchanged about $15 billion of its FX reserves into gold. Earlier, Iran announced that the country has converted about 15% of its foreign exchange reserves into gold, and "will not need to import the metal for the next ten years." There is your mystery buyer to all that gold the IMF was selling in Q3... And since Ahmadinejad said that Iran's total FX reserves exceed $100 billion, the amount of gold in stock held by Iran is more than $15 billion. Which is equivalent more than 345 tonnes at a closing price of about $1350. Which also means that the WGC's official gold holdings are in dire need of an update, as Iran does not appear anywhere on the IMF's listing of official gold holders, and with over 345 tonnes, it would make Iran a top 15 holder of the yellow metal. (more)

US Debt: A Recipe for Economic Disaster?

The foundation of the US dollar is already under threat. If it collapses, it will take other economies and currencies down with it.

The United States has dug the biggest economic hole in human history. It's become so severe that if you listen carefully, you’ll hear the Chinese -- the biggest holders of American debt -- wondering if they’ll ever get their money back. The foundation of the US dollar is already under threat. If it does collapse, it will take other economies and currencies down with it.

At the summer 2010 meeting of G20 countries, European countries including the United Kingdom and Germany urged President Obama to implement austerity measures with them. The American president refused. Instead, he steered the economy in the opposite direction -- by pumping billions more into the economy.

The United States is moving to the left. Meanwhile, European countries, recognizing some major flaws in their system, are moving right. Some socialist aspects of their societies are being reduced. For example, the tax burden on citizens and companies are being relaxed even as they decrease government spending. Europe is moving toward free enterprise.

In essence, the Obama administration plans to tax and spend the country back into prosperity. While it might make sense in theory, the policy has never been attempted in this magnitude before and it can fail (at my firm, we're believers in a small government). It's also important to note that more than four out of every 10 dollars today is already borrowed -- in stimulus spending. Another concern is that “redistributing” the wealth is inefficient. (more)

Luxury, Discount Stocks Red-Hot for Holidays

Investors betting on U.S. retail stocks this holiday season are advised to buy high and low, and sell the in-betweens.

Luxury chains and discounters are likely to emerge as winners, unlike last year when the recession depressed retailers across the board, industry watchers said.

Seasoned stock pickers are urging clients to hoard high-end players such as Tiffany & Co and Nordstrom Inc, as well as discounters including Target Corp.

Tiffany turns analysts on despite its high valuation, with many seeing promise in the jeweler's recent line of clutches sporting its signature robin's-egg blue color. Nordstrom, too, has won praise for its better merchandise.

"The housing market is still in the ditch. Unemployment is still very high," said Craig Johnson, president of Customer Growth Partners. "But if you are (among) the 83 percent of people (who) ... still has a full-time job and you have made it through this far, you are probably going to do OK." (more)

Inflation Adjusted Gold Price

The Rising Cost of Survival

As a general rule, the most successful man in life is the man who has the best information

Socio-economic turmoil - lawlessness, poverty, lack of adequate medical facilities and attention, low to no employment, low wages, disease, no clean drinking water or water for irrigation and shortages of food or unaffordable food can all cause socio-economic pressure to build in many countries that were once stable environments for investment.

In 2007 and 2008 roughly 40 food riots occurred – two of the more publicized examples were when people took to the streets after rising corn prices made tortillas very expensive in Mexico and skyrocketing food prices in Haiti led to the overthrow of that country’s Prime Minister.

The U.N. Food and Agriculture Organization (FAO) reported a five per cent increase in the international price of food over July and August 2010.

"I think everyone is wondering if we are going to have a repeat of 2008 when there were food riots around the world." Johanna Nesseth Tuttle, director, Global Food Security Project

The world’s developing economies mostly rely on food imports to sustain themselves. On average their citizens spend a much larger percentage of their wages on food than do their counterparts in developed nations. Some published estimates are as high as 50 to 60 percent of income going towards food. (more)

Rick Rule: Courage of Conviction

The Energy Report: I attended your speech at the recent Casey Conference, wherein you professed a love of bear markets because everything is cheap. Can you explain further?

Rick Rule: People draw psychological comfort from increasing share prices; but, if trying to increase wealth, they also have to augment their assets. Assets are cheap during bear markets and expensive during bull markets. The virtues of bear markets are fairly obvious—assets are cheap and customers (the consumers of assets and providers of capital, if you will) are afraid. Companies are more willing to offer inducements for you to buy financings, such as long warrants. Another bear-market advantage is that asset markets become more and more constrained, which go to stronger players with established management teams.

TER: Do you think we're in a bear market? Investors have had some pretty nice returns this year.

RR: No. I think we're in a raging bull market in the resource sector. It's arguable that some sectors of the general securities market are in a bear market; but even that market has been very generous relative to what I think the economy would sustain. (more)

The Coming Silver Shortage

What determines Price? According to Adam Smith, it is the "invisible hand" of the marketplace. Price is where Supply meets Demand. So what happens when you manipulate Supply or Demand? You control the Price. It really is that simple. The fact of the matte is, that we will shortly witness the "Great Disappearing Silver" caper of 2010.

This will shortly occur when 100% of the silver that only exists on paper disappears from the marketplace. Yes, the Banksters have once more proven that fractional reserve lending has more than one useful application. It is always in their best interest to suppress metals prices as long as we continue to use their worthless paper as currency.

"Nelson Bunker Hunt and Herbert Hunt, the sons of Texas oil billionaire Haroldson Lafayette Hunt, Jr., had for some time been attempting to corner the market in silver. In 1979, the price of silver jumped from $6/oz to an all-time record high of $48.70/oz. The brothers were estimated to hold one third of the entire world supply of silver (other than that held by governments). The situation for other prospective purchasers of silver was so dire that the jeweller Tiffanys took out a full page ad in the New York Times, condemning the Hunt Brothers and stating We think it is unconscionable for anyone to hoard several billion, yes billion, dollars worth of silver and thus drive the price up so high that others must pay artificially high prices for articles made of silver. (more)

“Confessions Of An Economic Hitman” John Perkins

Gold Will Outlive Dollar Once Slaughter Comes: John Hathaway

The world’s monetary system is in the process of melting down. We have entered the endgame for the dollar as the dominant reserve currency, but most investors and policy makers are unaware of the implications.

The only questions are how long the denouement of the dollar reserve system will last, and how much more damage will be inflicted by new rounds of quantitative easing or more radical monetary measures to prop up the system.

Whether prolonged or sudden, the transition to a stable monetary system will become possible only when the shortcomings of the status quo become unbearable. Such a transition is, by definition, nonlinear. So central-bank soothsaying based on the extrapolation of historical data and the repetition of conventional wisdom offers no guidance on what lies ahead.

It’s amazing that there is no intelligent discourse among policy leaders on the subject of monetary rot and its implications for the future economic and political landscape. Until there is fundamental monetary reform on an international scale, most economic forecasts aren’t worth the paper on which they are written. (more)

US Economic Calendar for the Week

DateTime (ET)StatisticForActualBriefing ForecastMarket ExpectsPriorRevised From
Nov 18:30 AMPersonal IncomeSep--0.3%0.2%0.5%-
Nov 18:30 AMPersonal SpendingSep-0.5%0.4%0.4%-
Nov 18:30 AMPCE Prices - CoreSep-0.1%0.0%0.1%-
Nov 110:00 AMISM IndexOct-54.654.054.4-
Nov 110:00 AMConstruction SpendingSep--0.8%-0.7%0.4%-
Nov 37:00 AMMBA Mortgage Applications10/29-NANA3.2%-
Nov 37:30 AMChallenger Job Cuts (y/y)Oct-NANA-44.1%-
Nov 38:15 AMADP Employment ChangeOct-20K23K-39K-
Nov 310:00 AMISM ServicesOct-53.553.453.2-
Nov 310:00 AMFactory OrdersSep-2.0%1.7%-0.5%-
Nov 310:30 AMCrude Inventories10/30-NANA5.01M-
Nov 32:00 PMAuto SalesOct-NANA3.75M-
Nov 32:00 PMTruck SalesOct-NANA5.07M-
Nov 32:15 PMFOMC Rate DecisionNov 3-0.25%0.25%0.25%-
Nov 48:30 AMInitial Claims10/30-450K445K434K-
Nov 48:30 AMContinuing Claims10/23-4400K4383K4356K-
Nov 48:30 AMProductivity-PrelQ3-1.0%1.0%-1.8%-
Nov 48:30 AMUnit Labor CostsQ3-0.7%1.0%1.1%-
Nov 58:30 AMNonfarm PayrollsOct-25K55K-95K-
Nov 58:30 AMNonfarm Payrolls - PrivateOct-50K60K64K-
Nov 58:30 AMUnemployment RateOct-9.7%9.6%9.6%-
Nov 58:30 AMHourly EarningsOct-0.1%0.1%0.0%-
Nov 58:30 AMAverage WorkweekOct-
Nov 510:00 AMPending Home SalesSep-2.0%2.5%4.3%-
Nov 53:00 PMConsumer CreditSep--$3.0B-$4.0B-$3.3B-