When Will This Gas Price Chart Finally Reverse Itself?

As we predicted early last week, everyone is talking about gas prices today.

It's the how new meme: Will gas prices be the thing that suffocates this economy?

We'll pass on making a guess.

But we thought it'd be a good time to update one of our favorite charts: The S&P 500 divided by the cost of an average gallon of gasoline.

FRED

It's kind of beautiful.

From the early '90s until the late '90s, the stock market steadily outstripped gas prices.

Since then it's been basically been the reverse, so that one "share" of the S&P 500 today gets you the same number of gallons of gas as you got in the early 90s.

It's a depressing trend.

You'd like to see stocks (which represent human value creation) grow at a faster clip than a commodity, which just sits there.

For the average person, it means their investments aren't growing faster than a basic cost they see every day.

And for a little more perspective, here's the same chart alongside the price of a gallon of gas -- blue dotted line -- just so you can see the trend of gasoline prices over the last couple of decades.

Total Economic Collapse, Death of the Dollar, Impovershment, WWIII, Marc Faber Interview

Eric Sprott: Silver Will Become a Currency Again

With the Greek crisis nearing a climax, The Doc spoke with Eric Sprott of Sprott Asset Management this week to discuss the Euro debt crisis, silver fundamentals, and the recent PSLV follow-on offering.



When asked about his recent efforts to convince silver mining companies to save in silver rather than cash or treasuries Eric responded:
I think we have a bit of a voice in the silver market, and the reason for the letter was just the simple analysis that the paper traders were determining the price…and why should you physical silver producers let that happen?
And that was the primary thing- would you guys please think about what’s happening in your silver market! Plus the fact that it got bombed last year, and are you just going to sit back and lose $25 an ounce that you might otherwise be making, or are you ready to take a stand here? The other very easy argument for me, is when you have your money in a bank, you get no return. You essentially have no return. In fact I think it was expressed very well by the gentleman that runs UC Resources that you actually get a negative return at the end of the year because inflation’s higher than the return you’re getting on your money! I happen to be of the view that having money in the bank is a dangerous thing!
And you know they keep bailing out the banks all the time such as the recent G6 announcement that we’ll give unlimited loans to banks: well, they had to give unlimited loans to banks, because there were some banks that were on the brink! That tells you that it’s risky having money in a bank! So not only do you have to accept the risk, you get a negative return!
Why don’t you believe in your own product that also has been a currency and also will become a currency?
That’s really why I went there. I thought that if we could just tip a few of these silver producers around to thinking about what’s going on in the market, and who’s determining the price, maybe we’ll let the physical markets determine the price instead of the paper markets determining the price.


When asked about the response he's received from mining company executives Eric responded:

We’ve seen some good responses. I was sort of shocked that out of nowhere UC Resources said they bought a million dollars of the silver trust because I had not specifically spoken to them about it. But I can tell you that First Majestic did buy $10 million of our issue. Keith Neumeyer who runs First Majestic is a very pro silver guy- as you know he makes silver available on his website: First Majestic coins, and he was very helpful in that regard. And I would also point out that Endeavor Silver at the end of last quarter when they produced 1.2 million ounces only sold 400,000. And why did they not sell the other 800,000 ounces? Because they thought, and explained that this price is not appropriately priced at the end of the quarter down around $27, and kudos to them, here the price is now $33, they’ve made 30% more than they might have otherwise made, and I’m glad to see people taking a stand that the paper price shouldn’t determine where you’re selling things!


When asked about the fundamentals of silver vs. gold Eric responded:

One of the interesting things about the IPO of the silver trust I think we raised $550 million. When we did our IPO of the gold trust we raised $440 million. Recently when we did our latest silver traunch we raised $350 million. When we did the latest gold traunch- so far, and it’s still in distribution by the way, so I can’t really speak much about it, but its raised I think $303 million before the exercise of a green shoe which I think has not been exercised yet. But the point I always like to make is that the people buying this are making up their own minds and they’re willing to put as much money into silver as into gold. Which means, they’re buying 50 times more physical volume of silver than they are gold. And when you go to the US Mint site, they sell the same number of dollars of silver as gold. Which means people are buying 50 times the volume of silver than gold. But when you look at what’s available to buy- you know we produce 80 million ounces of gold a year, and maybe 70 million of that is available for investment, and we produce 900 million ounces of silver, and theoretically let’s say 200 million ounces are available for investment, well that means you can only buy 3 times more silver than gold for investment purposes. But we see so many instances where the ratio is 50 to 1! And GoldMoney’s the same thing. Almost every time I talk to a metals dealer my favorite question- How much silver do you sell vs. gold? And every time, I get the same answer: We sell as many dollars of silver as gold. Well, that’s impossible. It’s just impossible that people can keep buying at that rate, and we not end up with some type of shortage. It’s those data points that make me so optimistic about silver.


Eric's full interview with The Doc also covered how he first became interested in gold and silver, the Euro debt crisis, silver supply and demand, hyperinflation, the sourcing of silver for Sprott Asset Management's recent PSLV follow-on offering, and much more.

Eric Sprott's full radio interview with The Doc is now available. Click here for all 3-parts!

Martin Armstrong: Dow Jones Soars Gold Flounders

Dow Jones Soars Gold Flounders



click here to read in pdf

Gallup Reports Unemployment in February Increases to 9%

The latest Gallup survey finds U.S. Unemployment Increases in Mid-February

The U.S. unemployment rate, as measured by Gallup without seasonal adjustment, is 9.0% in mid-February, up from 8.6% for January. The mid-month reading normally reflects what the U.S. government reports for the entire month, and is up from 8.3% in mid-January.

US Unemployment Rate, Monthly Averages



Gallup also finds 10.0% of U.S. employees in mid-February are working part time but want full-time work, essentially the same as in January. The mid-February reading means the percentage of Americans who can only find part-time work remains close to its high since Gallup began measuring employment status in January 2010.

Percentage of Workers, Working Part Time but Want Full Time Employment



Seasonal forces typically cause unadjusted unemployment rates to increase at this time of year. In this regard, some of the sharp increase Gallup finds in unemployment and underemployment may result from seasonal factors. Although the government seasonally adjusts the U.S. unemployment rate, and the workforce participation rate could decline, it still seems likely that the BLS will report an increase in the seasonally adjusted U.S. unemployment rate for February.

Regardless of what the government reports, Gallup's unemployment and underemployment measures show a sharp deterioration in job market conditions since mid-January.

BLS Numbers Not Realistic

Gallup only polls those 18 and above while the BLS includes 16 and above. Given teenage unemployment, this would (or at least should) artificially lower unemployment numbers for Gallup. Yet, Gallup is higher, way higher when one considers underemployment.

Fundamental and Mathematical Case for Structurally High Unemployment for a Decade

As I have said many times, the BLS numbers are simply not realistic for many reasons. For further discussion please see ...

• Fewer Nonfarm Employees Now Than December 2000; Unemployment Rate: Some Things Still Don't Add Up; Obamanomics?
• Fundamental and Mathematical Case for Structurally High Unemployment for a Decade; Shrinking Job Opportunities and the Jobs Gap; The Real Employment Situation

Source: Global Economic Analysis

The West Is Losing The Chess Game With Iran

The western embargo against Iran’s oil seems to be running into a buzz saw. The success of any embargo will be conditioned on two variables: 1) whether Saudi Arabia can quickly ramp up production to meet European demand, and 2) whether China and Japan will cooperate. Now, after a two-week delay, Iran is making its own chess move by cutting off supplies to French and British oil companies. With a full European embargo now in effect, the final blow will be delivered by Iran itself. AP reports that Asia has given Europe and the U.S. a “polite” bush off, with China going so far as to increase Iranian imports.

It should be pointed out that when Libya shut down production, the Saudis took it as an opportunity to game the market and little else. Forcing higher production also comes with costs, namely it harms the oil fields. Added production would also involve heavy crude, which the market doesn’t really want. Furthermore, Saudi production is already near full capacity. Finally, shipping 0.6 Mb/d more per day to Europe will involve passage through the Strait of Hormuz, and that would be a direct affront to Iran and something Saudi Arabia might wish to avoid. One of the many under-reported stories in the West is that the Saudis have already made special arrangements to send 100% of their contracted oil to Japan and China. So it appears that the argument that Saudi Arabia will simply ramp up output to meet European demand is nothing more than cheap talk by spin doctors.

With oil spiking once again and these developments, the timing of the latest story of an LTRO bazooka couldn’t be more stunning. Besides shooting itself in the foot, Europe may now be setting up to blow its head off by delivering a new large round of LTRO so that speculators can run amok in the energy markets. Expanding the availability of cheap credit right now in exchange for toxic assets strikes me as the height of folly.

Elsewhere in this geopolitical chess game, the U.S. National Security Advisor showed up in Israel this weekend to make a plea “to let sanctions work” [Washington Post]. With its nuclear program proceeding rapidly and with effective reverse embargoes underway against Europe, Iran surely must be pleased with how the game is playing out. Elsewhere Saturday, two Iranian warships got away with delivering arms for Bashar Assad’s crackdown without U.S. or Israeli interference. They docked at Tartus port Saturday alongside a Russian naval flotilla, symbolizing their joint effort to preserve Assad.

On Jan. 20, Israeli Prime Minister Binyamin Netanyahu advised the visiting chairman of the U.S. Joint Chiefs of Staff, Gen. Martin Dempsey [Debka], that the time for action against Iran was now. This week, the Israeli press (but not in the West) reported Netanyahu as saying that embargoes against Iran weren’t working. Debka, which is widely seen as a mouthpiece for Israeli views, has circulated the rhetoric, saying that Netanyahu feels cheated and betrayed by the U.S. [US-Israel Relations in Crisis]‘

LISTEN: BrotherJohnF talks Triple Digit Silver

Forget Apple, Buy This Instead

Traders should avoid Apple right now. It has probably reached the bubble stage of its price rise (I'll explain below). But the stock market can still move higher, even if Apple (AAPL) lags.

In fact, I think it's a great time to add to stock market investments. The sector I like the most offers a potential gain of 36%.

Relative strength usually confirms what everyone knows, but this time it's providing a divergence from popular opinion. That's what traders should be paying attention to. My analysis says to sell AAPL even as traders push the stock to new all-time highs. With AAPL soaring past $500 a share, 55 of 56 analysts who cover the stock for Wall Street firms agree it's a buy. My system disagrees.

I use the 26-week rate of change (ROC) to spot buys and sells. Clear, unbiased rules make sure that my love of the iPhone doesn't keep me in a stock too long. ROC also helps spot when stocks are really in a bubble, and the indicator says AAPL has finally reached bubble status.

By adding Bollinger Bands to the ROC, we can create a bubble indicator. Bollinger Bands should contain about 95% of the market action, so it is a rare signal when an indicator moves above the upper Band. This should only happen about 2.5% of the time, or about once a year on average.

The chart below shows that ROC for AAPL just broke above the upper Band for the first time in several years. In the chart, the upper Band has been adjusted to 2.5 standard deviations. Breakouts above that Band should only occur about less than 0.62% of the time. This shows that AAPL really is acting like a bubble stock.

The monthly ROC confirms that AAPL could need some time to consolidate its recent gains. This indicator is below its 20-month moving average. When this happened before, the price of AAPL went nowhere for a few months.

Stocks can still move higher even if AAPL doesn't lead the way. Market leadership rotates, a sign of a healthy market. I designed the 26-week ROC strategy to spot those leadership shifts, and this week it's saying we should increase our exposure to small-cap stocks and buy Vanguard Small-Cap ETF (VB).

Small caps have outperformed large caps over the past 6 months. AAPL is the largest of the large caps and if the leadership is moving away from AAPL, that could mean small caps should continue to be the best performers in the market.

VB is set up to break through resistance. If it does I think it can reach $105 a share. The previous high was at $81 and VB fell to about $57 as it formed a rounding bottom pattern. After breaking out, technicians expect a stock to rise as far as it fell in this pattern. The 24 point decline added to the $81 breakout level gives a price target of $105.

Each buy in this strategy requires a sell, and I'm selling iShares Barclays 20+ Year Treasury Bonds (TLT) to make room for VB.

The strategy says we should be holding Vanguard REIT (VNQ), SPDR S&P 500 ETF (SPY) and Vanguard Small-Cap ETF (VB) after the trades are completed on Tuesday.

Michael J. Carr

Commercials Increase Net Silver Shorts by 83% in Last 4 Weeks!

Last Friday's COT report revealed that the commercials had increased their net short position to 34,650.
Not surprisingly, the commercials increased their net short position an additional 2,660 contracts (13.3 million ounces) in the week ending 2/14, bringing their net shorts to 37,310 contracts, or 186,550,000 ounces!
In the last 4 weeks, the commercials have increased their net shorts by 83% from 101.91 million ounces to 186.55 million ounces!
This means that the large commercials traders (allegedly mainly JP Morgan) have NEARLY DOUBLED THEIR NAKED SHORT SILVER POSITION IN THE LAST 4 WEEKS!

Silver COT Report - Futures
Large Speculators			Commercial		Total
Long	Short	Spreading	Long	Short	Long	Short
32,860	7,192	19,371	31,427	68,737	83,658	95,300
621	-1,460	-648	-368	2,292	-395	184
Traders
70	30	41	32	45	125	96
	Small Speculators
	Long	Short	Open Interest
	21,214	9,572	104,872
	-741	-1,320	-1,136
	non reportable positions		Change from the previous reporting period

Silver COT Report - Futures & Options Combined
Large Speculators			Commercial		Total
Long	Short	Spreading	Long	Short	Long	Short
33,468	5,188	45,534	46,325	87,243	125,327	137,965
347	-1,283	-1,928	-753	1,313	-2,334	-1,898
Traders
79	35	64	36	47	143	121
	Small Speculators
	Long	Short	Open Interest
	24,394	11,757	149,722
	-1,171	-1,607	-3,505
	non reportable positions		Change from the previous reporting period

10 Smart Money Tips for 2012

We've already become savvier consumers and cut back on spending. So, if there's a dominant consumer theme in 2012, it will be to look for small savings, particularly in charges and fees that are often hidden. Transparency should be your friend. Here's a checklist of 10 things you should do to make better use of your money.

Know what you spend. Do you really know where your money goes? Spending patterns often can get hardwired into our behavior. Vendors like it that way because it's easier for them when you just fork over the money every month without thinking about it. But you should be thinking about how your money is spent and, in particular, where you can spend less of it.

Make a budget. When you actually know how much you spend, it is much easier to make a budget. Budgets are an essential discipline if you are serious about being a master of your money.

Stick to your budget. Every month, review the prior month's spending and compare it to your budget. After a few months, this will cease being torture and can become an effective planning and support tool.

Have some money fun. If budgeting is all drudgery, you will wind up in a money prison and that's a bad place to be. So, set aside money to have some good times. Building in such rewards can provide the incentive to stick with your budget.

Check vendor, credit card, and banking fees. Look carefully for new fees and interest charges. Financial companies are always looking for ways to pick up more consumer revenue. Make sure it's not at your expense. Consider using online tools to automate monthly bill payments, particularly for utilities and other "must pay" accounts. If you have a credit card that offers rebates on purchases, see if you can use it to pay other vendors' bills. Before doing so, make sure the vendor doesn't slap you with its own fee for paying with a credit card.

Review insurance terms and rates. In many households, insurance is a large percentage of spending. As we, and our possessions, get older, our insurance needs might change. Is the deductible on your auto's collision coverage still the right call as your vehicle's value declines? Is your home insurance providing you more protection than you need given declining property values? Do you still need as much life insurance or is it time to use those premium dollars for another purpose? Even if your insurance coverage is perfectly aligned with your needs, you should shop for better rates at least once a year. The carrier that provided you the best deal 10 years ago may no longer be the best choice.

Review retirement accounts. Make sure you regularly rebalance your retirement investments. Over time, winners and losers will throw your portfolio out of balance. Consider selling some winners and buying in sectors that haven't done so well. This should be at least an annual exercise. As you get older, think about preparing your holdings for the time when you will be withdrawing funds. That means moving from growth into income funds and thinking about taxes on withdrawals.

Look at investment fees. New government rules will soon require consumer-friendly fee disclosures from investment firms. Saving even a few tenths of a percentage point on management fees can add thousands of dollars to your retirement funds in the long run.

Consider a Roth IRA conversion. Regular IRAs let you contribute pretax dollars and defer taxes on any investment gains until you withdraw the funds. You can begin doing so at the age of 59, but you must withdraw what is called an annual required minimum distribution (RMD) of funds from these accounts beginning when you turn 70 1/2. Roths, by contrast, are funded with post-tax dollars, but there are no taxes on any investment gains and no age requirement for withdrawing funds. Roths offer a particularly attractive way to pass on wealth to your heirs. That's because you can transfer a Roth when you die and your heirs avoid all taxes (although they will be subject to the same RMD rules that apply to regular IRAs). The big downside of conversions is that you must pay income taxes on funds moved from tax-deferred accounts. Most major investment websites have conversion guides.

Review your Social Security benefits. If you haven't yet begun taking Social Security, do you have a plan for when you will start? Benefits can be taken as soon as you turn 62. But for each year thereafter until the age of 70, your benefit rises 8 percent plus the level of inflation. With lifespans getting longer and longer, boosting your level of lifetime guaranteed Social Security benefits may be a terrific "investment" decision. Check it out.