Morning Call [7:05am ET]
Earlier this year, the lumber contracts soared from 200 to 325 and all the talk was about economic renewal via government stimulus. Then at the end of April that stimulus plan ended for US home purchases, and in 60 days the price has plunged to about $194, and people are no longer talking inflation, but deflation.
The following ‘Deflation’ headline caught my eye this morning: Elliot Wave Predicts Triple-Digit Dow in 2016. The article goes on to quote Robert Prechter: "This bear market is of Supercycle degree, the biggest since 1720-1784. It should therefore include a decline deeper that the 89% decline of 1929-1932. A decline of 91.5% or more would carry it below 1,000."
http://finance.yahoo.com/banking-budgeting/article/109841/elliot-wave-pr...
Right or wrong, I believe that any theorist who has as many followers as Prechter does, and who uses a system that is often very accurate, must be listened to. What he is saying today is that the world has embarked on a journey toward massive deflation, where money, hard or soft, is precious. I can accept that; my reasoning being that globalization ensures there will always be a cheaper source of labor and land, somewhere. In fact, wars and man-made disasters seem to be necessary counter-balancing factors.
As a cycles analyst, Prechter sees both sides, and Prechter is a product of the Seventies, which was a period of massive inflation; so I understand why he is now a deflation-bug. The problem is that Prechter was a deflation bug over 20 years ago and his forecast was absolutely wrong.
In the month following Black Monday 1987, twenty-three years ago, I recall my wife and I sitting near the front of a packed auditorium in New Orleans listening to the same Robert Prechter tell the same Supercycle story, only at that time the Dow 30 index, which had plunged 1000 points from about 2650 in early October before bouncing 1/3 of the way back to about 2000. Prechter told us the Dow 30 would then crash again repeatedly until a low of about 300 was reached.
Instead of that super-bear scenario playing out, however, the DJIA a year later was up about +6% and two years later at least +30%. In fact, over the dozen years that followed, the US equity market lifted about as much in percentage terms as Prechter warned us it would plummet.
So now he’s back at it again. http://www.elliottwave.com/deflation/
Well, actually he was preaching deflation and depression in his June 2002 book Conquer the Crash, so this is the 3rd or 4th or 5th coming of his deflationary Supercycle forecast. Maybe the epithet “I finally got it right” will be engraved one day on Prechter’s tombstone.
http://www.elliottwave.com/more_info/conquer-the-crash-second-edition.aspx
The practical significance of this discussion is that belief systems can lead to catastrophic loss of capital.
Bottom line: prices fluctuate. Some years they fluctuate more than others.
At 3:00am ET this morning, the Euro was priced at 1.2380. Less than an hour later it was up to 1.2425. Three hours after that, it is now under 1.2375.
During the same time frame, the Canadian Dollar soared from 0.9700 to 0.9740 and then down to 0.9693.
Crude Oil and Silver made the same move.
Gold has a mind of its own, a little like Shanghai (-1.84%) and Hong Kong (+0.74%).
European shares turned negative after the Euro started falling against the US Dollar.
So, watch the Euro today.
Have a good Friday. Enjoy your weekend.
CTA Trading Desk Post-Close Report
Where did all the volume go on this quad-witching day? Normally characterized by swollen volume, option expiry Friday was beyond dull and boring – bordering on comatose as S&P future volume was -40% below average and intraday volatility was virtually nonexistent (S&P+0.13%).
Markets registering the extreme two day rate of change readings seen last Tuesday and refusing to back down usually are telegraphing further gains down the road. Unfortunately, price action on the final few days of expiry weeks rarely give reliable clues regarding the future direction of equity prices; traders must therefore give less weight to the fact the S&P has held its 200-day moving average and has been consolidating over recent resistance levels.
One of the few interesting developments Friday was the strength in precious metals as both silver (SLV+2.40%) and gold (GLD+0.81%) were well bid the entire session. Gold actually posted another all time high during the day as investors kept increasing their long exposure in the one asset class they believe will be unaffected by currency upheaval gripping world markets. As long as GLD holds its uptrend line off the spring lows (currently around 120) further gains would be anticipated, although a quick reversal down through the previous high (122.49) would raise a cautionary flag for ultra-short-term traders.
The tape should be a bit clearer early next week as the artificial expiry influences wane. The widespread calls for the S&P to hit the 50% retracement or 50-day moving average are making us a little uncomfortable; remember that crystal clear head and shoulders pattern forming last summer? Once prices failed to stop at levels targeted for the right shoulder stock prices embarked on a manic upside jaunt for the next six months. Obvious formations sometimes are Mr. Market’s way of deceiving the masses, locking them into big losing positions when the train leaves the station.
All in all, constructive action for the Bull case but without heavier volume this move will probably run out of gas.
Have a great evening.
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Comments
Cara 100 Ratings Changes
Good morning.
AAPL - Apple initiated with an Outperform at Cowen. Cowen believes Apple shares can rise 20% vs. the market driven by iPad and iPhone 4 products.
Deflation and Prechter
Graduating H.S. in '67 as did Bill, I have have heard Robert Prechter's rambling for all these decades as well. A broken clock does tell the right time twice a day so...
Anyway, there's no denying the price and slide of lumber futures of many months.
The attached is a brief article with one chart that might provide some interesting info as to the CPI monthly contributions by major category.
http://econompicdata.blogspot.com/2010/06/what-sti...
A good day...
I'd just like to start off the day with a bit of perspective on what's truly important.
Some good friends emailed a minute ago — their son is back from his third tour of the Middle East (US Army Reserve).
"David called us yesterday from Ft Benning. Ga -Yea!!!!
He left Iraq almost 2 weeks ago-----it was 130 the day that he left.
He never says much but did say how great it was to see "green grass & blue skies" & have cooler weather.
I try never to forget how lucky we are to be in the USA."
Walgreen and CVS Coremark finally make up
Bloomberg has reported: CVS Caremark Corp. and Walgreen Co. said the companies have reached an agreement on terms under which Walgreen will continue participating in the CVS Caremark pharmacy benefit management national retail network for existing, new or renewal plans. The companies are not disclosing the financial terms of the new contract.
White House Flip Flops On Reining In CEO Pay
http://tinyurl.com/2a2w58p
"The White House is intervening at the last minute to come to the defense of multinational corporations in the unfolding conference committee negotiations over Wall Street reform.
A measure that had been generally agreed to by both the House and Senate, which would have affirmed the SEC's authority to allow investors to have proxy access to the corporate decision-making process, was stripped by the Senate in conference committee votes on Wednesday and Thursday. Five sources with knowledge of the situation said the White House pushed for the measure to be stripped at the behest of the Business Roundtable. The sources -- congressional aides as well as outside advocates -- requested anonymity for fear of White House reprisal.
The White House move pits the administration against House Speaker Nancy Pelosi (D-Calif.), who told Barney Frank (D-Mass.) to stand strong against the effort."
Comment:
While everyone was watching the BP show the White House used it as cover to promote the interests of the people who would loot. Its becoming clearer that the Obama administration's efforts at changing things give the appearance of being half hearted and ineffective not because the President is weak but because he is not sincere.
Volatile markets this morning
While the USD seems fairly stable, the gold/silver and oil prices went vertical on the charts. Interesting. I guess HB&B must be happy with the so-called reform legislation. Truly; I am guessing. I don't know what has been driving these particular commodities when others like copper and lumber have been falling.
Ultimate trader motto
"Belief systems can lead to catastrophic loss of capital."
Great way to put it, Bill
Re: Volatile markets this morning
Debunk this if it's wrong, but there's some speculation that China will sell some of its foreign exchange holdings (euros?) and diversify into gold, though why they would announce it, I don't know.
EWT
Bill;
excellent review of EWT, I remember '87 and the end of world, turned out to be C wave of ABC and not a 3rd wave.
Cara 100 Update
AMZN - price target reduced at Citi to $175 from $180 to reflect euro weakness. Reiterate Buy rating.
FSLR - price target increased at Citi to $140 from $125 on new capacity and better pricing in back half of 2010. Maintain Hold rating.
Goldman and ZeroHedge views on the Euro
http://www.zerohedge.com/article/european-capital-...?
My earlier view -- while bearish on the Euro -- was that the Euro would bounce from maybe 1.20 to 1.24-1.25, and then it dropped to 1.19 before bouncing to 1.2426 (now at 1.2374). I think the Goldman/ZeroHedge outlook is a good one and that the ECB can only hold the Euro at these levels for so long before it falters again.
Gold/silver is stronger than I anticipated, which is the 'new' safe-haven play, but a rising USD ought to temper that. If GLD can close above say 122.45 today, the precious metals can hang in. It's very tough to call, but the gap higher openings yesterday and today caught me off guard.
Re: Deflation and Prechter
Prechter is probably correct. I can see the DOW trading at 100 again.
Once the 'old' DOW crosses 100,000 and bread is $25 a loaf, we simply print 'new' dollars by moving the decimal point three places to the left. What that will mean to debt repayments I will leave to your imagination.
I have watched my government defile its constitution without amendment, torturously interfere with money and banking and abrogate a thousand years of English common law upon which this nation was built. Absolutely nothing will suprise me further.
"Neccessity is the plea for every infringement of human freedom. It is the arguement of tyrants; it is the creed of slaves."
Baltic Dry Index
It's officially crashing for the past month, posting a lower low:
http://www.bloomberg.com/apps/cbuilder?ticker1=BDI...
FD:
90% short and 10% cash
Dow Futures
Futures breaking out from their high of yesterday early morning which was the high for the month. Might run up from here.
Even Copper has caught on with the aforementioned metals.
Re: Dow Futures
Actually, it looks like Copper is down a little and the longer term charts look pretty bearish:
http://www.kitcometals.com/charts/copper_historica...
Re: Dow Futures
Hi T,
Was looking at the 10:00 move up on a 5 minute chart. I suit up, show up and also can easily mess up.
G
Re: Dow Futures
haha. no worries. i'd rather focus on the 3 or 6 month charts, which paint a pretty ugly picture.
Re: Dow Futures
Completely agree on the 3 and 6 mos. chart. Owning a manufacturing company and hoping for a continued recovery in America, I try to find signs of same. Still think it can happen regardless of present political pollution. Will now "ferme la bouche". Unless we get that big rally. Ho ho.
Re: Baltic Dry Index
Is that bad or good, TOF?
Jan 1 2009 - Mar 9 2009: BDI +160% VT -20%
Mar 10 2009 - Apr 10 2009: BDI -35% VT +28%
Jun 1 2009 - Sep 25 2009: BDI -34% VT +18%
Nov 15 2009 - Feb 14 2010: BDI -38% VT -4%
Apr 27 2010 - May 26 2010: BDI +40% VT -15%
BDI = Baltic Dry Index
VT= Vangaurd Total World Stock Index
Re: Baltic Dry Index
Mack - There isn't much correlation on a short term basis but on a longer term basis there is. More important to me is that it has now begun a series of lower lows on a longer term chart.
I've been piecing together these charts (copper, BDI index) along with recent economic reports and it is flashing big red lights regarding the stock market. That is why I'm short the market. I don't think buyers here will be rewarded given a pretty significant slowdown going on.
Gold at new ATH yet few seem to care or believe it
Cup and handle or double top break out, a break is a break, right?
NEM is showing its muscle this week, while others are not. Some smaller well-selected players are continuing their run, eg SMF.to, regardless of what the sleepy HUI does as long as Aurum holds up or makes a new ATH just like today.
Hold Your Nose And Buy
¹²Hold Your Nose And Buy
By Jeff Clark | 17 June 2010
http://www.growthstockwire.com/archive/2010/jun/20...
Bears Beware. The Stock Market Will Rally Over The Next Month. Here's Why
http://www.growthstockwire.com/images/charts/2010/... This is a chart of the New York Stock Exchange Summation Index. It's a momentum indicator with an excellent track record of identifying short-term turning points in the stock market. The indicator generates "buy" signals when the short-term moving average convergence divergence (MACD)— the black line on the bottom graph— crosses up and over the longer-term MACD line— the red line. Buy signals are marked by the green circles on the chart.
"Sell" signals occur when the short-term MACD line curls down and crosses below the long-term line. Sell signals are marked by the red circles. How it works, why it works, and what it all means aren't important. All that matters for short-term traders is to buy when you get a green circle and sell when you get a red circle.
Here's How The S&P 500 Performed After Each Signal Over The Past Year
http://www.growthstockwire.com/images/charts/2010/... Five of the six trading signals were profitable. The only exception was the sell signal in August 2009. That trade lost 8% before the indicator reversed and generated a buy signal. The sell signal in late March was a bit early. But it still paid off pretty well.
Overall, the NYSI signals have been accurate. They usually last between four and eight weeks. The buy signal we got last Thursday should keep the bulls happy and the bears frustrated at least until the middle of July.
It's difficult to be a buyer of stocks right now. But according to the NYSI indicator, it's the right thing to do. So hold your nose and buy. We'll sell sometime next month.
Best regards and good trading,
Jeff Clark
Re: Baltic Dry Index
I see the Feb 15-present(4 months) series 2566-3574-2911-4209 about to carve out a new low below 2911, but I see a "longer term" series Dec 2009-present: 663-2298-1463-4291-2163-4661-? still intact until 2163 is taken out (-22% from here). If anything, it looks like it either 1) topped at 4661 back in Nov 2009 and we're in a downtrend: 4661-2566-4209-? or, more likely, 2) it's been range/channel bound since May 2009. Whichever it is, it's a wildly volatile and complex index where 2566 and 2163 are the next two important levels to watch after the 2911 break of the last couple of days that you have noted. :)
see attachment
SLR UPDATE
ALOHA!!
SLR
Silver Lake Res(SLR:ASX) closed up at $1.97AUD, with intraday at $2.01. Nearly a 1200% gain over 18 months. It seems every week is a new high now. I have only sold enough shares to cover my original buy-in, so disclosure wise I am still "all in" and nowhere near the sidelines on this one.
Here is how I see SLR now. I would like to see a correction as there has been quite a run-up of late, perhaps back to $1.50, but this stock has not had any significant corrections since the beginning of 2010. From a fundamental aspect its full steam ahead so I see the only correction coming once the news is out. Buy the "rumor" ... perhaps in July when the financials are published.
Currently if you look at the gold production levels and exploration of pipeline projects which will increase ounces in the ground significantly I see further upside. SLR is in a very similar "set-up" as Dominion(DOM:ASX) was in August of 2007 when its share price was in the $2 range. Once DOM reported 100K+ gold production and significant increase in reserves combined with record revenues it was a short time(within 3 months) before the share price increased by another 220%. Prior to that the share price steadily moved up from $0.45AUD in 2005 to the 2007(18 months) price above $2AUD, similar to SLR. While there are headwinds in 2010 that were not there in 2007, like the RUDD resource tax and global sovereign debt issues, there is one big saving grace and that is the POG worldwide has moved up dramatically over the last six months. This will make SLRs bottom line even better as their production costs drop and production output increases. SLR has yet to report annual production of 100k Au ounces which will come this year(according to the SLR conceptual targets that list 10/11), so I think that those production levels combined with a significant increase in JORC and rising profit margins will make for a similar 220% increase in the current share price by years end. Maybe not exactly 220% but the "set-up" is there from a company and POG fundamentals. Naturally the SLR share price can be influenced by the overall global equities so a severe DOW crash that ignites a global equity market crash will cost SLR some market cap. How much and when this may occur is anybody's guess. Then again so far SLR's share price has been immune to most of the stock and futures gyrations. From a monetary aspect though SLR has some excellent gold grades in the ground and they are proving up even more and some at ridiculously shallow depths(7-44 meters) which is literally "appreciating monetary assets" in the ground. The "appreciating" part makes all the difference in the World since when have you ever seen the words "monetary" and "assets" side by side?
SLR PRESENTATION LINK: http://tinyurl.com/2akwop3
ITS THE LIABILITY STUPID!
The World is engulfed in a LIABILITY BUBBLE, the likes we have never seen. There is unending liabilities in every global central bank and treasury. Economies of all sizes are mired in liability after liability brought on by the false wealth and malinvestments tied to debt accumulation. This is unprecedented. Could it be the monetary system itself that is the root of all these liabilities?
According to CHART OF THE DAY the POG still has room to fly.
"Even after a strong 20 month rally gold trades significantly below resistance"
LINK: http://www.chartoftheday.com/20100618.htm?T
I posted over at the Cunning Realist website with regards to "intervention" and its ill effects on the global market economies. Please read the main article posted there entitled PROXY FIGHT which I think sums up the the failed agendas of the US FED and the US TREASURY to intervene. This guy is a Wall Street insider with Congressional clout who has been calling for Bernanke's head since Obama took office.
CR LINK: http://cunningrealist.blogspot.com/
One must consider where else can global capital slosh to except into hard assets? The real estate markets both here in the USA and globally are doomed until "real" employment returns. Can you qualify for a home loan when you're on unemployment? It turns out that FNM and FRE are bank depositories for toxic derivatives liabilities, in other words TARP 2. The same kind of "offshore shell companies" Enron used to mask losses except FNM and FRE are onshore! Unlike Prechter I do not under estimate the power of those in control of money to intervene with what ever tools they deem necessary to preserve that power. Even if they have to shut down the internet and hand each person $50,000! We have seen some heavy duty tools used so far, all of which plug into the US Taxpayer counterparty MEGA AMP OUTLET! What Prechter and many other fail to see is the "liability" aspect, since who cares why or how people came to line up at homeless shelters. The fact is that way too many people are in a liability trade and not an asset trade. Look at the latest regional bank failure rates put out by SNL Financial regarding the TARP repayments(also see Seeking Alpha article on that subject today). The herd is ready to be fleeced again as Rosenberg's quote from yesterday on bonds implies.
The C WORD is in play globally ...
Canada's Secret Gold Reserve
Anyone have insights into this story about a secret Canadian gold stash?
========================================================
Canada's Secret Gold Reserve
Link: http://beforeitsnews.com/news/79/220/Canadas_secre...
There are whispers in the Great White North that the Canadian Government has been quietly but vigorously amassing very large reserves of Gold.
Semi secret documents from Natural Resources Canada and the Department of Public Safety and Emergency Preparedness point towards a collaborative program that has Canada sitting on 300 Billion USD worth of freshly mined Gold.
This secret stash would represent about 4% of the worlds known Gold Reserves. What gives credence to the tale is that over $5 Billion has been shuffled and hidden in several large Federal Government Land acquisitions and Sensitive Lands reclamation projects that coincidentally included over 30 inactive Gold & Silver mines.
Other strange events such as the recall(since 2004) of some 3000+ Hard Rock Miners that were formerly Federal Government employees in the Uranium Mining industry. These Miners are now subject to the National Defense act and there is no official public accounting of their operations or financial dealings.
10 Years ago Canada would permit any experienced miners from around the world to work in Canada. Today the Canadian Mining Industry demands long term Canadian experience, in other words immigrants need not apply.
Other Strange happenings such as the total relocation of a Heavy Lift Helicopter company from Vancouver BC, to Newfoundland is totally perplexing. The company just up and moved over the summer of 2005 and abandoned its bread&butter Heli Logging business. This company is listed as a Preferred contractor for CANMET Mining and Mineral Sciences Laboratories(Natural Resources Canada).
Other strange events:
* Province of Ontario buys a Precious Metals Refining facility.
* Province of BC removes 2600 Hectares of Productive Forest Land from the Tree Farm License. This land is in the Cassiar region and is purported to hold some of the densest Gold veins in the World.(see the movie "The Mother lode' with Charleston Heston.
* An open pit mine on the Alberta/BC border(Federal Park Land) has 80 heavy coal haulers but has not produced any coal in five years(not allowed in Park) even though they work year round.
* Dozens of CN train cars overturned and spilled some kind of ore near Crowsnest Pass. The Grain cars were clearly labelled Agriculture Canada. Ore is never transported in Grain cars.
So the question must be asked: Does the Canadian Government have a Gold fetish or are they preparing for the total collapse of the fiat currency system?"
==========================================================
FWIW: US gold holdings according to Bernanke's written response to Congressman Alan Grayson's written questions(
Link: http://www.scribd.com/doc/32796202/Bernanke-Respon...):
"...the U.S. government currently owns gold with a market value of almost $300 billion. Combined with the roughly $100 billion held in other international reserve assets, U.S. total foreign reserves are sizable but they are still below the level of reserves held by a number of countries,
especially relative to the size of the economy."
Donald Cox
I apologize if this is off topic but does anyone havs a link to Donald Cox assuming he still has weekly broadcasts.
Regards
Stock market forecasting vs. economy forecasting
[ Normxxx Here: Remember that some of the info in the news relates to the economy going forward and some to the stock market. These are not very well synchronized events, but FWIW, the market usually leads the economy and the economy is usually a lot slower to change. An economic 'double dip' is much more likely to be next year, but the stock market can be expected to head south ~6 months before. ]
Re: Baltic Dry Index
Here is a longer time frame of the chart for reference.
http://www.screencast.com/users/Telestar3d/folders...
Re: Donald Cox
You can access the calls at this website: http://www.investmentpostcards.com/
There is a link on the right side part way down.
Mark
NOAA fact sheet on Oil Spill and hurricanes
http://www.nhc.noaa.gov/pdf/hurricanes_oil_factshe...
I have the utmost respect for NOAA, but I doubt the govt would permit any negative speculation or opinion.
BP: Debt financing
There are "rumors and speculation" that BP (BP 31.61, -0.10, -0.32%) is considering various options to debt finance the $20 billion spill fund, including a bank credit facility or possibly a $10 billion bond sale, Informa analyst Ken Jaques said.
"A debt sale, as soon as next week, is the more likely route according to market analysts," he wrote in a note.
Re: BP: Debt financing
10:39:21 AM
British Petroleum plc Reportedly to seek approx $7B in loans from 10 different banks - unconfirmed report
- Reminder: Yesterday CNBC reported that BP was looking to raise between $5-10B through a corporate debt offering as soon as next week.
- Follow up 10:55ET: BP declines to comment on the report
Nice chart set up
in BID for next week.
Bears
keep dropping the ball here. You would figure with all of the negative econ reports and earnings misses that the market would be down, but this market has ignored everything negative this week. The bears have pretty much sat idly by...kinda like the Celtics last night with a 12 point lead.
Narrow vein mining
This is basically a repeat of a previous question to which Bill responded but nobody answered, so apologies for harping, but perhaps over the weekend a mining engineer will be able to answer:
What is a practical mining width for modern practices. It arose because Rainy River has some excellent grades, but mostly only 1.5 meters wide, so unless they've contracted with Snow White for her seven dwarfs there's bound to be some dilution, and I'd like to get some idea of what it is. (Note they've also had one intersection that's quite wide).
Another question someone may be able to answer concerns the Fire River property called Nixon Fork where they're finding delicious grades from the previous operator's drill cores. Anyone know who was the previous operator? (Need to be able to avoid them, as they seem to have let a pearl get away).
TIA,
Chris
Re: BP: Debt financing
So tapping lines of credit before going to the bond market?
Quick setup example
We have two particularly nice charts today for review. One is especially interesting, "setup within setup", there are detailed explanations in the log.
http://tradinglog.realitytrader.com/2010/06/fri-ju...
Re: Goldman and ZeroHedge views on the Euro
GS noting a big influx of fx reserves into switzerland. Perhaps that partially explains the silence of the apartment complex construction site next door. One of the workers remarked, and if I understood correctly (imagine a portugese speaking french to an australian to comprehend my dilemma) they lacked reinforcing steel rods for the concrete. 3 weeks stop work. I hope save haven isn't becoming another bubble.
On another anecdotal level, spoke to Logitech engineer now attached to LPFL, Switzerland's top tech college. Everything's rosy in his eyes.
Re: Narrow vein mining
There are many factors to consider. How deep are the resources? What is the grade? What is the orientation of the vein (vertical or horizontal or a combination of both)? Each have different mining methods? Will they be trucked up, conveyored up or skipped up? Are they using a contract miner or do they own their fleet?
What type of equipment do they have (track/trackless), size of there existing LHDs (UG Loader) bucket width limits the size of the vein, smaller buckets mean more bucketfull to extract the resources (more fuel, maintenance, $operators$). Small bucket = low dilution but lower tonnages, large bucket = high dilution but higher tonnages.
Determining the economics of an ore body is very complex.
If you are keen on learning go to http://www.edumine.com/xutility/html/menu.asp?cate...
Typical LHDs http://www.miningandconstruction.sandvik.com/sandv...
-smallest carries 1 ton per bucket (42" bucket width) $200K to +$1M depending on size.
an operator will cost you $60/hr x 24hrs, $~30/hr to $60/hr in maintenance
-Same applies to drilling equipment (conventional (Jacklegs&Stopers or fully mechanized)$15,000 - $1,000,000 per unit
-Same for hauling equipment
-Support equipment
All these determine your ventillation requirements which limits how much you can have to mine the ore. More gear more power required which equal more cost $$
It's a very interesting and complex question which is the reason most feasibility studies fail to succeed as they usually assume blue sky conditions and are completed by engineers or consultant groups with little or no actual operational experience.
If you ever get a chance visit a mine and you will appreciate the details required behind a successful project
Re: Narrow vein mining
This link might also be useful
http://www.infomine.com/SearchMiningRule.asp
List of common rules of thumb for mine design and operation
i.e.Area: Ore Width
• Blasthole (longhole) stoping may be employed for ore widths as narrow as 3m (10 feet). However, this narrow a width is only practical when there is an exceptionally good contact separation and a very uniform dip. Source: Clarke and Nabb
Longhole is a method of mining higher tonnages per blast. Other methods are usually more costly and require more effort for the same amount of recovered ore.
The chosen method really only depends on the grade, volume of ore, spacing of veins, is it in a straight line or jumping and weaving. All these will add up to what equipment you need, at what cost and will the ore recovered pay for costs and return a profit.
BP Bonds
Here’s something a little different. Our CFO tells us what interest rate to use for valuing deals which in my case is typically natty storage deals. Last week for the first time ever I wanted to see what bonds my company had in the marketplace and what the effective yields were. I wanted to compare the interest rate he gave me to what the market was saying about our company. I sent him a screen print similar to the attached slides and he’s agreed to go over it with me. Honestly, this is probably a good exercise that all of us with a regular job should do.
Since BP will probably be a hot topic for the next few weeks (months?), I thought I would start watching their bonds. The attached slides are table views of the BP bonds as of 6/17/2010 and 6/18/2010. The first time I ever looked at this screen was last week. I plan on listening to the broker’s bond tutorial this weekend so I can get more familiar with it. Both slides should contain the same bond issues but again I’m not that familiar with this screen. I did confirm that the coupon and maturity dates are the same on each slide. Also, I’m not sure what the difference is between Bp Cap Mkts PL C and Bp Cap Mkts Amer Inc but I’m guessing they roll up to the same parent company.
Tonight I’m just looking at the bonds that mature on 8/11/2011. Near the right side of the slide there is a column that shows the maturity date. On 6/17/2010 the bid/ask on the yield was 6.905% / 6.064% and on 6/18/2010 it tightened to 6.437% / 5.883% so the market is feeling a little better about BP today than it did yesterday.
How many times have Mr. Cara and Kamiu said “follow the money”? Posted on June 16 “(Reuters) - Bill Gross, the co-chief investment officer of PIMCO, said on Wednesday that he recently bought $100 million of short-maturing BP Plc (BP.L) (BP.N) notes and some Anadarko Petroleum (APC.N) paper.” “Gross helps oversee more than $1 trillion in assets at PIMCO”
I’m at a loss for words here. For some reason this just bugs me. Will PIMCO let us know when they sell? Do they announce every purchase and sell they make? Do you think this announcement moved the market?
This started off as an example of bond yields, something we don’t blog about too often but something I think we should be aware of given the situation. What I find interesting is that I remember seeing the headline that Pimco had bought some BP bonds but now that I’m writing about it, thinking about it, I find I have more questions and that I’m much more annoyed about the whole situation.
Questions for the community
Do any of you find this interesting and/or useful?
Can someone tell me what comments on the slide “conditional calls” and “make whole call only” mean?
Thanks.
Krugman vs. Greenspan
Krugman's been weighing in on the "why cut stimulus now, do we want a repeat of the 1930's?" question. Greenspan, though no better, at least understands what needs to be done this time. Happy to hear a blogger debunk convincingly Krugman's public spending thesis in a little Q&A game:
http://globaleconomicanalysis.blogspot.com/2010/06...
MORE SLR
ALOHA!!
It is gratifying to see a large international fund move into a position you own a year after you do! Especially when the fund is run by ex-Merrill Lynch managers!
BAKER STEEL CAPITAL MANAGERS
This global fund based in London with most of its accounts in the Caymans has recently accumulated another 2% of SLR shares moving up to a 7% share of SLR. These shares were accumulated in May and June according to the documents(Form 604) filed at the ASX.
LINK: http://www.asx.com.au/asxpdf/20100615/pdf/31qts2g4...
Who is Baker Steel Capital Managers?
Baker Steel Capital Managers was established in 2001 by a team of investment professionals with a wealth of award-winning investment management expertise.
We manage substantial assets on behalf of a broad range of financial institutions, wealth managers and professional investors.
It seems the two co-founders are ex Senior Portfolio Managers from Merrill Lynch Investment Management(MLIM), formerly Mercury Asset Management. Then the other associates are all former employees of Australian mining companies like Xstrata, Homestake, but low and behold one of the insiders used to be in management at WMC, which is where most of SLR management is also from. Most of the impressive degrees are out of UK schools. The PEOPLE TREE never ceases to amaze me. Networks matter and your best bet is to follow the network of the better mining management teams, which is what originally drew me to SLR in the first place.
BAKER STEEL PEOPLE LINK: http://www.bakersteelcap.com/bakersteel_profiles.html
BAKER STEEL FUND LINK: http://www.bakersteelcap.com/funds.html
Baker Steel Capital Managers also has a unique fund(Baker Steel Resource Trust) they opened in March of this year that utilizes Private Placements(PP) for pre-IPO resource company investments. As I have mentioned before I like to use PP to buy large share blocks, whereby you avoid moving the share price in the open market. Naturally these types of strategies are for those with a long term outlook and are comfortable with longer term monetary trends.
Now I know where the latest SLR share price run-up came from ... At least it isn't a bunch of weak hands from MAD MONEY!
Re: Krugman vs. Greenspan
ALOHA!!
Les-KRUGMAN vs GREENSPAN or LOSER vs LOSER! I'm always amazed these two still get any credible attention at all. Those who called the monetary trends and made money the past ten years are virtually unknowns in comparison. I suppose failures are still fashionable.
I take what Congress(law makers) say and do regarding "austerity" prior to a major election in November with a grain of salt. These guys are experts at saying and doing anything to stay in power ... period! That, after all, is their only expertise ... "getting elected"! Does it mean a political power structure built on the promises of spending will CHANGE? Humans are humans after all and we will always chose the path of the least pain.
Case in point. While law makers talk "austerity" the US Treasury added another $130BIL in short term debt issues on Thursday, June 17th! There's your austerity!
As far as Mish goes ... he lives in a bi-dimensional World where black and white and right and wrong are all that exists. I believe you can distill all these economic debates down into one final outcome, which is all that matters in the long run. Not a banking crisis or a deficit crisis or a credit crisis or debt ... those are symptoms of a monetary crisis.
I also disagree with the usual ace-in-the-hole card these guys always pullout ... the JAPAN CARD! You cannot compare Japan to Greece or the USA, which is why Greece is in trouble sooner than Japan is. As if all economies and all people are the same all over the world. They are not, which is the thesis that backs the Austrian Economics in terms of human action. I see Japanese tourists here all the time in Hawaii and I guarantee you there is a world of difference between the average Japanese lifestyle and values versus the average American and it is reflected in the Japanese corporate culture and their exports as well.
Debt is what our monetary system is based on, so when Mish talks "debt" he is talking "money". When he talks "structural" he is talking "politics". Naturally insolvency cannot be resolved with more debt. The only reason the US government has grown this big has been all political in terms of retaining a political two party monopoly. I am of the opinion that if we got rid of the US FED we would get rid of the two party monopoly. Mish talks incessantly about breaking government unions, but he never looks at the monetary and political power structure in America as a monopoly. We need to focus on breaking "that" unholy union instead of workers unions. Besides unions will eventually be broken with state and municipal bankruptcies anyway.
Then the well worn WW2 Great Depression cure. The way it feels now it seems that all the Americans who fought and died in WW1, WW2, Korea and Vietnam did so just so Goldman Sachs and JP Morgan could survive to scoop up whats left of the Middle Class wealth. The US FED member banks seem to benefit most from every crisis. Well, its not WE THE PEOPLE is it? Hummmmmm??? So who controls the money?
Just an aside since it is Friday still here in Hawaii. Last night I saw the movie ITS COMPLICATED about your average American who lives in Santa Barbara on a huge ranch in a 20 bedroom house all by herself(Meryl Streep) meeting with her architect(Steve Martin) to do a 5000 sq ft kitchen expansion. What do you think the average Japanese thinks of Americans who live so lavishly in the midst of the Great Depression #2. I know it is Hollywood, but where are the movies that depict real American "McMansion austerity"? Just what does the average American think "austerity" is suppose to look like? Is it only two 50 inch flat screens instead of four? Is it a Kenmore instead of a SubZero? Is it a 1/5 acre lot instead of a 1/4 acre lot? There are some 6.4 billion people in the World not just 308 million.
The other half of the Waxman Markey "Cap and Trade" bill
I found this fact sheet from the Institute for Energy Research very disturbing, and indeed cataloging a fundamental change. I hope it is worth reading for other US residents. Its probably too late to do a lot about it other than contact your Senator if you think it is bad policy. It may be my age and ignorance, but for me, information on the contents of these fundamental change legislation efforts is scarce, so this was valuable even with its obvious "point of view".
http://www.instituteforenergyresearch.org/pdf/Othe...
ETF Traders Take Note
Effective July 8, 2010, the following ETF's will undergo a 1 for 5 reverse split:
DRV
ERY
TYP
TZA
http://finance.yahoo.com/news/Direxion-Sets-Revers...
Re: Krugman vs. Greenspan
Les,
Thanks for the link.
Quite a pair to set up any debate — Tweedle Dee and Tweedle Dum(b).
Here's what I sent to Mish after reading his article:
-------
To hear something, anything sensible and coherent from Alan Greenspan is indeed rare. He must want to clean up his legacy after contributing so much for so long to the fiscal mess we're in.
You stated, "If you want jobs, name a jobs program that makes fiscal sense." I have a suggestion.
I have heard it said the stimulus for "shovel-ready jobs" went into state pockets and is being held to cover existing debt such as pensions. (And we thought it was just the banks who were sitting on it.)
Beginning with the "Peace Dividend" when the Soviet Union fell, I have sent a "jobs program" to each presidential candidate — none has responded.
Patterned after the Interstate Highway System under Eisenhower, this scale project can only be done with national planning and coordination. It would require money with no other optional use possible. Think what $800 billion or so could have done if applied to something like this. This would leave a lasting legacy like the CCC parks construction which paid people to actually work and build.
When sent to my congressman all I got was a form letter saying they already had infrastructure projects allocated — Thank You.
My view of Tony Hayward's Congressional performance
Its obvious that BP knows he did poorly, so poorly that that immediately demoted him.
Mr. Hayward's primary objective was his own self preservation. He did not care whether he inflicted more damage on BP.
Congressional questioning indicated that from June 2007 to February 2010, while Hayward was CEO, "BP’s refineries racked up 760 citations for egregiously, willful safety violations accounting for 97% of the worst and most serious violations that OSHA monitors in the workplace." Even though he was given the questions in advance he made no effort to respond candidly.
This was a particularly important line of questioning. If EPA determines that BP as a corporation has a bad actor culture it has the power to debar BP. Debarment would cancel its contracts to sell fuel to the military and prohibit BP from leasing or renewing drilling leases on federal land. By not answering Hayward projected an attitude of indifference and non-compliance with respect to safe operations in a hazardous industry.
Re: BP Bonds
Funny you mentioned BP bonds.
I posted the following observation over on the skype site yesterday morning.
[6/18/2010 10:32:46 AM] seamus.himself:
"FWIW, checking BP notes of 8/11/2011 . . Wed yield was @ 12%, yesterday@ 6.5% and this a.m. on the bond board, 5.968% . . ."
If Pimco bought these short term notes Wed, they’ve already made a lot of money!
Occassionally, some of us will post comments on bonds. Usually it is a reference to the 10 year Treasury rate or the bid to cover ratio on Treasury auctions as these can influence equity prices. Bill also comments on bonds in his weekly WIR.
For clarification, I am not a bond trader. I trade equities. I do keep some cash in short term municipal bonds in lieu of a MM paying 0.1% or whatever. I usually retain these bonds until maturity.
Reference your “call” questions:
Simply put, callable bonds give the issuer the right to repay the bond before the maturity date on the call dates. This can be undertaken for a number of reasons, but many times the issuer can sell replacement bonds at a lower interest rate saving the issuer money he would have paid on the original bonds.
If you have financial terms you are uncertain about, try investopedia or wikipedia sites.
Below is a link on bonds you may find helpful in answering your questions.
http://en.wikipedia.org/wiki/Bond_(finance)
Have a good weekend!
Re: Narrow vein mining
Rocmec Mines has developed a thermal fragmentation method. Diesel burners shatter around a predrilled series of holes, then remainder of vein is broken out. Micro mill is housed in mine, tailings never leave the mine and become backfill. Suitable to very narrow widths. They are doing test programs with Goldcorp and Fresnillo. Their motto, mining ounces not tons. I find it interesting, have a very small position, one third the size of the one percent of my portfolio that I like to limit exploration stage micro cap mining companies. Chart is either very weak or it is at a bottom. HA!
For the weekend enjoyment of those of us who believed that the inevitable trillions in bailouts would weaken the dollar and strengthen hard assets, and who have held some losing positions for years now, and who are seeing,maybe, the benefit of playing out their hand; here is some entertainment as only the Muppets can do to commemorate the strength in gold:
http://tinyurl.com/6ztbl8
I tried to find Rowlf the Dog singing Money, Money, Money, I Love Money, Money, Money on the honkytonk piano, but I couldn't find it.
Weekly Oil Rig Count Down
A four rig pullback this week.
http://www.ods-petrodata.com/odsp/weekly_rig_count...
Yesterday I was intrigued by the RIG and NE ticker comparisons. Big jump for RIG but NE moved little even though it has been on the Cara Buy Alert a few days ago. I had dabbled in NE earlier in the week but got stopped out and declined to pursue. I personally think RIG is getting pumped and next will be the dump. We'll probably get a spate of "news" articles talking about lawsuits and contract cancellations for all of the oil drillers. And then in a couple of months we'll be looking at an oil shortage and zooming oil prices. Wash rinse repeat.
Re: NOAA fact sheet on Oil Spill and hurricanes
Right now, it appears the highly toxic dispersant being used on the spill by BP is the primary source of inland contaminant by rainfall. This, supposedly, is what is spotting and killing plant life. And, like everything to do with this catastrophe, this subject leads into its own warren of rabbit holes.
by Michael J. Evans on May 20, 2010
in Gulf Oil Spill Response
Late Wednesday the EPA gave BP 24 hours to choose a less toxic chemical dispersant to break up the Gulf oil spill, the Washington Post reported. The decision came hours after Congress heard testimony from BP executives and scientists on the high toxicity of Corexit, and the relative ineffectiveness of the chemical against the type of crude leaking into the Gulf. Once the EPA approves the new dispersant, BP will have 72 hours to begin using the new dispersant.
Corexit is carcinogenic, mutagenic, and highly toxic, and scientists are concerned about its effect on marine life. Corexit is banned in Great Britain.
More than 600,000 gallons of Corexit have been sprayed by BP on the surface of the Gulf, and another 55,000 gallons have been used under the surface. The chemical dispersant has never been used in such large quantities before.
Members of Congress have suggested that BP chose Corexit because of ties between BP and the manufacturer of Corexit, Nalco Holding. A former BP executive sits on Nalco’s board. The Guardian reported that Congessman Jerrold Nadler (D. N.Y.) asked, “Why would you use something that is much more toxic and much less effective, other than you have a corporate relationship with the manufacturer?”
THE PLEDGE
ALOHA!!
I stumbled onto the PLEDGE OF ALLEGIANCE on Wikipedia and found some interesting political history there. By the way, is the THE PLEDGE even said any more in schools? When I was in school we said the Pledge every day and one kid stood in front of the classroom holding the flag as we all stood and faced the flag and put our hands across our hearts.
Here is how THE PLEDGE has changed over the decades ...
1892
“I pledge allegiance to my flag and the republic for which it stands: one nation indivisible with liberty and justice for all.”
1923 to 1924
"I pledge allegiance to the flag of the United States and to the republic for which it stands: one nation indivisible with liberty and justice for all."
1924 to 1954
"I pledge allegiance to the flag of the United States of America, and to the republic for which it stands; one nation indivisible with liberty and justice for all."
1954 to Present
"I pledge allegiance to the flag of the United States of America, and to the republic for which it stands, one nation under God, indivisible, with liberty and justice for all."
I do not see the word "democracy" in the Pledge any where. Nor do I see Goldman Sachs ...
"I pledge allegiance to the hubris of Goldman Sachs of America, and to the CEO for which it stands, one CDS, doing Gods Work, in derivatives, with dark pools and fraud for all"
So as the Pledge Of Allegiance has been complicated and politicized so has our lives. What was wrong with the first version in 1892? Way too simple ...
CENTRAL BANK SALES
ALOHA!!
Not only do we have the complete mismanagement of the US FED buying toxic assets for 100 cents on the dollar but we now get to see just how foolish all the global central banks and the IMF look for selling their gold reserves at the lows.
The most infamous of the fools resides in London and goes by the name of Gordon Brown, then ExChequer of BofE who sold 58% of the UK gold at the $300USD range. He must have been advised by Prechter.
Here is what the World Gold Council has to say about central bank actions during the the first Washington Agreement days.
The following remarks are from George Milling-Stanley, Manager, Gold Market Analysis--World Gold Council, from an October 6, 1999 address to The 12th Nikkei Gold Conference :
"Central bank independence is enshrined in law in many countries, and central bankers tend to be independent thinkers. It is worth asking why such a large group of them decided to associate themselves with this highly unusual agreement...At the same time, through our close contacts with central banks, the Council has been aware that some of the biggest holders have for some time been concerned about the impact on the gold price—and thus on the value of their gold reserves—of unfounded rumours, and about the use of official gold for speculative purposes."
For "speculative purposes" ... indeed ...
Washington Agreement-First version (1999)
Signed on 26 September 1999
Signatories
* Oesterreichische Nationalbank
* Banca d'Italia
* Banque de France
* Banco do Portugal
* Schweizerische Nationalbank
* Banque Nationale de Belgique
* Banque Centrale du Luxembourg
* Deutsche Bundesbank
* Banco de España
* Bank of England
* Suomen Pankki
* De Nederlandsche Bank
* Central Bank of Ireland
* Sveriges Riksbank
* European Central Bank
Look like a Whos Who list of many of the failed sovereigns of today. The IMF did not sign the 2009 Washington Agreement. The IMF did sign the other two but sold no gold and they did finally sell gold on the one agreement they did not sign! Notice the US FED is missing from these agreements.
"The agreement came in response to concerns in the gold market after the United Kingdom treasury announced that it was proposing to sell 58% of UK gold reserves through Bank of England auctions, coupled with the prospect of significant sales by the Swiss National Bank and the possibility of on-going sales by Austria and the Netherlands, plus proposals of sales by the IMF. The UK announcement, in particular, had greatly unsettled the market because, unlike most other European sales by central banks in recent years, it was announced in advance. Sales by such countries as Belgium and the Netherlands had always been discreet and announced after the event. So the Washington/European Agreement was at least perceived as putting a cap on European sales."
So after a decade of selling their gold all along the gold bull trend, mostly at the bottom, now the central banks have decided not to sell. In Year 5 of the 2004 Washington Agreement central banks only sold 120tonnes versus 400 and 500 tonnes in prior years. Now in 2010 the only sales have been the IMF with 39 tonnes. This begs the question as central banks, including the Swiss SNB, have been selling for the past ten years who has been buying? Its not Warren Buffet or George Soros, so who bought all that tonnage since 1999? Where is it?
Now you get the "barbarous relic" crowd like Soros and Paulson and the likes of Tigris Financial deciding to buy at the so called top of the so called "Gold Bubble".
Here is what Tigris Financial is doing ...
A Billionaire Goes All-In on Gold
Tigris Financial’s Thomas Kaplan, in his New York office this past week, on his investment focus: ‘I feel the only asset I have confidence in is gold.’
Gold is setting records again, boosting the holdings of central banks, Armageddon worrywarts, and ordinary people who own gold bars, coins and jewelry.
But few individuals stand to benefit as much as low-profile billionaire Thomas Kaplan. A New York-born commodities magnate who earned a doctorate in British colonial history at Oxford, Mr. Kaplan oversees an empire devoted largely to gold.
Through his firm, Tigris Financial Group, and affiliates, Mr. Kaplan has loaded up on bullion and bought up properties in 17 countries on five continents, where geologists are exploring for more. Tigris subsidiaries have taken stakes in mining companies, including tiny firms that have yet to produce an ounce.
Though he won’t disclose how much physical gold he owns, Mr. Kaplan, who is 47 years old, controls up to 30% of the shares in some so-called junior miners. Together, his holdings amount to a nearly $2 billion bet on gold, more than the Brazilian central bank’s bullion is currently worth.END
Okay ...
Here is what Kaplan says ... "‘I feel the only asset I have confidence in is gold.’
Maybe that is because those "other assets" are actually "liabilities" backed by debt ridden insolvent counterpaties like treasuries and taxpayers. Look at that ... he mentions the C WORD ... "confidence". Yet Mish will tell you its all about "deflation" and Schiff will tell you its all about "inflation". Its not ... Its all about "no confidence" in "liabilities". Floating fiat currencies define "liabilities". In Websters they need to put a photo of the Euro, the Pound and the USD under the word "LIABILITY".
EYES WIDE SHUT!
Re: CENTRAL BANK SALES
Thanks, Kaimu, for the Central Bank review. Only 39 tonnes sold by the IMF in 2010 suggests it's the central bankers that are the first to blink in the Confidence game. Central banks are also net buyers of the 'metal of the sun' this year for the first time in a long long time.
Swiss central banker Philipp Heldebarnd announced this week he ain't buyin' euros no more and will allow the Swiss franc to rise. Took on some Swiss francs last week. That puts a lot of pressure on the euro, does it not? Also, perhaps this supports a higher USD, lower Dow and S&P500 as the euro approaches par with the USD. Took a short position on the S&P500 too but consider it a risky trade in these low volume summer months. So hard to just go away in May.
From the WSJ:
http://www.cmemarkets.com/v3/2010/06/18/wsj618-swi...
Someone remarked that regardless of the fiat currency wars, India and China are rapidly growing their middle class and have populations that historically accumulate gold as a source of wealth. I like that sentiment. It's like a CDS on fiat for goldbugs.
Cheers.
Gold/Silver Ratio
Brief commentary on the historic ratio worth a look:
"Glittering gold became known as the 'metal of the Sun', while shining silver was considered the 'metal of the Moon'. For each cycle of the Sun (1 year), there are 13 cycles of the Moon. Thus was born the ORIGINAL gold/silver price ratio of 13:1 ...
So we have two metals with a natural ratio of 17:1, a historical price ratio of 15:1, an original ratio of 13:1, a supply-ratio (of actual bullion) of 6:1 (or less) - and a current price ratio of 70:1. Is it not obvious why silver bulls such as myself to expect the Metal of the Moon to greatly outperform gold in the future?"
http://tinyurl.com/24o9yxc
Long SLW.
Reality TV
Watching the second day of the House-Senate Conference Committee hammering out the differences in the financial regulation bill passed by the two chambers...
Good stuff!
For the first hour they debated a last minute amendment from the Decromats that retroactively extended the FDIC depositor protection increase from $100,000 to $250,000, made during the September '08 crisis back to include the originators of the debacle - the Indi Mac depositors who got pooched earlier that year. With a shrug and a wink, Frank and the democrats argued that it was estimated only to cost an additional $180,000,000 from the FDIC to make good these 1200 Indi Mac investors who, after all, were just regular folks (never mind that the average depositor in the US had only $14,000).
Then things got really interesting as the Republicans introduced an amendment to strike 2 lines from the regulator language which mandated that every participant (banks, lenders, Fed, treasury, etc) be assessed by the regulators on the degree to which they were including and "strengthening" women and minority participation in financial services.
The Republicans basically argued that it was this kind of Policy mandate - i.e. "affordable" subsidised subprime housing - that got us into this mess in the first place (Frank interjected that he thought that they should have been encouraged to rent instead of own). A very spirited debate:
Rep. Guitierez(toungue-in-cheek): "...you know all those latinos and black people went and got all those loans and caused this crisis in this country and now we're gonna give them jobs! Imagine the peril they're gonna bring to this country..."
http://tinyurl.com/37luymw
Re: Gold/Silver Ratio
Dr. Strange,
You been drinkin too much moon 'shine' in the sunshine. Tain't no natural ratio of gold to silver. For proof I offer your own observation that gold is now priced at 70X silver. Why? Well, maybe the world goes stupid from time to time and fails to embrace your wisdom.
If say 17 to 1 is the 'proper' ratio, then either silver should be priced at $73/oz or gold should be $325/oz. Take your pick. It might be a great arbitrage for you!
My dentist friend is still waiting to break even on his Bunker Hunt $40/oz silver. Gee, that was almost 30 years ago. But back then with gold at $800 and silver at $40, they were priced close to your 'natural' ratio.
Your arguement for silver is tarnished. Not to say silver can't rise in price. But give us a supply/demand and/or cost of production or new uses reasons.
Under our former bi-metallic standard (pre 1900) the gold silver ratio was fixed at 16 to 1, de jure. After 1900 it fluctuated between 20 to 1 and 35 to 1. The ratio may have come close to 17 to 1 in the late 60's when gold was arbitrarily fixed at $35/oz and silver freely traded at $2/oz. If you blinked, you missed it.
Nothing against silver. I just don't like it. It's ugly and needs polishing. It has become difficult to use to bribe women. "Oh, a silver necklace! Why don't you love me anymore!!!" I admit to having a 100oz brick that I spray painted black and use as a doorstop.
Given that there are sun spot cycles, sun cycles, moon cycles, women's cycles, weather cycles, tri-cycles, bi-cycles and motor-cycles. There must be some syllogisms there to explain the low price of rapeseed in Saskatchawan this year.
The good fathers at the University of Salamanca circa 1250 determined that a fair price was the last price of an uncoerced transaction. Ergo, the fair price of silver is $19/oz. But I will ship you my doorstop today for the arbitrary low price of $3500. That gives you at least $3500 upside at a 17 to 1 ratio. What could be more fair? I suspect that you are going to say that the price that I ask is too high. But how can that be IF gold/silver is money. Ah, but you relate the prices to dollars. Pity. Then to your mind, gold/silver has a PRICE in dollars. So do all commodities, services and labour.
I freely admit that gold is NOT a barbaric relic.The Failed Western Economists who have denigrated labour to the advantage of capital have been bought and payed for by the interests of Capital. Gold is no more a relic than a black beef critter. Both are wares that reflect prices in free markets.
Let me give you a protein ratio that's a hell of a lot tighter than your supposed gold/silver ratio by fair value over time. One beef critter is equal to two fat hogs and plus or minus chickens to boot. Note that there is no dollar price implied.
You want to 'buy' one of my 1,000 lb steers? An ounce of your gold will do. About $1200 give or take. That is also the market price in dollars.
You trying to shine me Doc?
China currency news!
The People's Bank of China said in its statement that holding the yuan in a de facto peg to the dollar since July 2008 had helped mitigate the impact of the global financial crisis and spur the world's recovery.
With the economy on a more solid footing, it was time to enhance the exchange rate's flexibility, though the basis did not exist for "large-scale appreciation," it said.
http://bit.ly/90AsVq
Re: Gold/Silver Ratio
Thank-you for your very interesting analogy about the 'sun' and the 'moon', as you applied them to gold and silver. These are illustrations that even a child can understand...and to me even at age 55, they are important teaching aids. Jesus told his disciples...when they tried to stop the children from approaching him..."let the children come to me, and do no try to stop them"...Mark 10:14.
Later.
Re: China currency news!
Yuan appreciation, even Chinese style, must have implications for prices, interest rates, commodities, stocks, etc. Perhaps Bill can mention a few of the ripple effects he would expect from an appreciating yuan?
options update
took a flyer on NOK thurs, bgt stock in $8.8s and sold Jun 9 call for .08, will sell Jul 9 call mon for .31, will be exercise my ARNA put over week-end and will sell the tight call mon, rolled both sides of the short $6 HL sideways and will probably sell the Aug 5 puts on mon once they are established I note from Matthew's nightly charts that several of the metals have at least one RSI above 70.... warning to get a litle cautious.....really appreciate the work all of you (in this case Matthew) put into Bill's site.......also selling the WATG 7.5 puts in here each mo......(a tmo play)
Sunday Morning Coffee: When 98.6 IS Overheated
http://ronsen.blogspot.com/2010/06/when-986-is-ove...
More charts and tables.
Something a little different, though.
Re: Gold/Silver Ratio
Ross -
"Let me give you a protein ratio that's a hell of a lot tighter than your supposed gold/silver ratio by fair value over time. One beef critter is equal to two fat hogs and plus or minus chickens to boot. Note that there is no dollar price implied." - Ross
Read again: Those are not dollar ratios other other than the one that's out of whack at 70:1. All the other ratios are based on the cycles of the heavens, physical supply, and historic non-fiat exchange.
So if you could get say 10 hogs plus a chicken for one steer, would you become a hog farmer? JPMorgan Chase has the mother of all short positions in silver and the paper trade in silver is far in excess of the physical stuff. Hence, the ratio is badly skewed. Simple. Have fun with that constipated animal, cowboy.
Who's Buying the Central Banks' Gold
http://1.bp.blogspot.com/_H2DePAZe2gA/TBuS_A3zCMI/...
From Jesse's Cafe.
That accounts for 36.5% of it since 2000 with the remaining 2,837 tonnes sold to this guy: http://www.youtube.com/watch?v=U1TmeBd9338
Re: NOK
To find NOK stock lower than today,you have to go back to 1998. Friday, it touched a low not seen since March '09. It did so on MUCH higher volume. SO, turn-around doesn't seem imminent.
BUT, isn't NOK destined to rebound at some point? After all, they ARE still the world's largest cellphone maker, I believe.
OR will the numbers of new users in China and India - better served by local producers - simply overwhelm NOK's historical prowess? OR would a chinese or Korean manufacturer BUY NOK for its global distribution?
I can't believe there won't be some kind of bounce, although no signs of it starting just yet!
Re: Gold/Silver Ratio
Ross, I think Dr. S's argument stems from the relative concentrations of Gold : Silver in the earth's crust, which is around 17.5:1 (silver:gold). Right now according to pricing, it's 66:1, which seems out of whack from that standpoint.
However, that logic doesn't hold, simply because then all metals would be priced according to rarity, instead of being priced according to utility, and that's not how things work.
Likewise, from a "wealth storage utility" point of view, silver has its disadvantages. Primarily, it's damnably heavy. Try sneaking across a border with your wealth in silver. Good luck swimming the Rio Grande to Mexico with 100k in silver in your pocket - that's 438 pounds of silver, and its only six pounds of gold!
Now that's a circular argument, to be sure. Long silver short gold would be ridiculously profitable if money officially goes bi-metallic at the rarity rate, but if recent history is any guide, people think of gold as money, and they think of silver mostly as an industrial metal. So which will it be? I'm not smart enough to know the answer to that one.
I like the old silver coins, Morgan and Peace dollars and standing liberty quarters, they make such a nice clear tinkly sound, and they have impressive heft. But big doorstops made of silver ingots? I'm not a fan.
Re: NOK
Hi Jock - Nice to see you out and about. Thanks for the heads up on Rainy River a while ago. Been in and out a time or two with nice results. Are you still up to speed on developments? Bill - thanks for the week in review, as a mortgage person the whole thing with Fannie reeks along with the regime's actions in general. Happy Trading
Futures, WIR
Bill said that futures were sickening again (up) on no news. Couldn't the Chinese Yuan announcement (yada, yada, yada) have something to do with it? Asia's markets are just rock and rolling tonight.
WIR
Thanks Bill for another excellent WIR. I hope there will still be Cara Conferences. Someday I'm going to make it.
Re: BP Bonds
Seamus, thanks for the response on the BP Bonds. That's an incredible move and maybe its just my nature but I'm betting Pimco's announcement had something to do with it.
Re: Gold/Silver Ratio
Good Dr. S.
Your arguement reminds me of the the story of the good widow Jones whose son Jonny joined the army and went marching off to war. A thousand soldiers paraded down the street in marched cadence but Jonny was off by a pace and a half. Mrs. Jones exclaimed "Look! Everyone is out of step but my Jonny!"
Forget my steer to hogs and chicken analogy. Look at the crush spreads on soybeans. Those are tight ratios because the economics make sense. If I could transmute silver into gold at 17 to 1, I would buy silver. Alas, I left my philosopher's stone in my dinner jacket that my Chinese launderer swears was lost. No doubt some Chinaman is conjuring tin into silver...
All joking aside, I just can't find a rational reason that there is some constant ratio between two disparate metals with little interchangability. There is some substantial subtitution between aluminum and copper but I'm far from convinced that gold and silver have anything in common.
Just another observation that could be wrong.
Best wishes
WIR
Not happy to see the professionals of the american financial system suffering, but nonetheless content to see the pressure being ratcheted. A prelude to greater things if we are lucky.
Washington insiders noting similar disillusion within Obama's inner circle (now if only voters would stand up to voice their collective disappointment):
http://www.telegraph.co.uk/news/worldnews/northame...
On the business side, RIO remains bullish on metallurgical coal prices:
http://www.theaustralian.com.au/business/mining-en...
Interventionism not so apparent in EURCHF
went and bought enough Euros for holidays next month anticipating a bounce, yet Euro just rolled over and died against Swiss Franc.
http://www.google.com/finance?q=EURCHF
I see the Aussie dollar is back against both the Euro and the $USD. The flight to quality continues.
I'm only a novice day trader, but I know well enough now that big gap up days suck in this time frame as well.
Greek Prime Minister talks about Greece's Debt on Camera......
http://www.cbc.ca/video/#/News/TV_Shows/The_Nation...
Arizona back in the news
As Bill and others have pointed out, just as US markets are being given over to Wall St. gangs whole swaths of US territory is being placed off limits to US citizens as crime escalates to the point that local law enforcement can no longer challenge the criminals:
http://jessescrossroadscafe.blogspot.com/2010/06/u...
It's a slippery slope from here if policy makers don't get their act together. How long before the market (since the media doesn't appear to be willing) puts the spotlight on the dismal state of US economic and social policy? How low can the Dow go when the chickens come how to roost?
Re: Arizona back in the news
I totally agree with Jesse.
For years I've been of the opinion the US is engaged in terminal silliness —
We make wearing a seat belt a law, remove slides and teeter totters form playgrounds, preach the dangers of cholesterol... yet:
Claim "service jobs" will be better than manufacturing.
Invite illegal aliens into the country to work cheaper than "minimum" wage.
Encourage reckless borrowing and lending over thrift.
Sell our nation's long term job future for a short term boost in stock prices.
Allow tainted food & drug imports.
Make home ownership a right but ignore violence on our borders.
As Lincoln said, "suicide".
A new, updated, Dr. Seuss book.
(Supplement to WIR)
I do not like this Uncle Sam,
I do not like his health care scam.
I do not like these dirty crooks,
or how they lie and cook the books.
I do not like when Congress steals,
I do not like their secret deals.
I do not like this speaker, Nan ,
I do not like this 'YES WE CAN.'
I do not like this spending spree,
I'm smart, I know that nothing's free.
I do not like your smug replies,
when I complain about your lies.
I do not like this kind of hope.
I do not like it, nope, nope, nope!
Dead On Arrival: Financial Reform Fails
by Simon Johnson
http://baselinescenario.com/2010/06/21/dead-on-arr...
from zero hedge.....where are the adults??????????
Oil Spill: Belgians Shouldn't Feel Too Bad, The U.S. Wouldn't Go Dutch Either
Posted by: asiablues
Post date: 06/20/2010 - 18:49
Some additional info came forward since I last quoted a Belgian newspaper that the Jones Act may have caused a delay in the oil spill rescue by forbidding foreign vessels and personnel to work in the U.S. Gulf. As it has turned out, the Belgian companies shouldn't feel too bad, the U.S. also turned down an official offer by the Dutch government as well.
FYI,,,Will also be selling july AUY & SVM puts today.......just looking for my 3-5% possible return a mo.........cash secured and will do w/$ from expired RIG naked puts. TERIFFIC WIR, sent the intro to my sister and she sent it to everyone she knows.
Re: Narrow vein mining
Thanks to Northern Otoko and Menock for their responses. I guess I knew at the back of my mind that mining narrow veins was a complicated business, having tried to envision how I would try and do it, and now I have links to research reality.
Re: Gold/Silver Ratio
Cattleman Ross -
"I just can't find a rational reason that there is some constant ratio between two disparate metals with little interchangability. There is some substantial subtitution between aluminum and copper but I'm far from convinced that gold and silver have anything in common." - Ross
You need look no further than the U.S. gold and silver notes, redeemable in the metals, of the 19th and 20th centuries. Or how about Williams Jennings Bryan 1896 Cross of Gold speech in regards to bimetalism:
http://en.wikipedia.org/wiki/Cross_of_gold_speech
History gives us gold and silver coinage through millennia and the consequences of debasement. How's that for interchangability.
Ambrose Evans-Pritchard last night on the issue:
http://www.telegraph.co.uk/finance/comment/ambrose...