Busy day today, from the Econoday Calendar:

http://www.nasdaq.com/econoday/calendar/US/EN/New_York/year/2007/month/01/day/18/daily/index.html

Market Focus »

Bernanke Speaks »

Weekly Bill Settlement

Consumer Price Index
8:30 ET

Housing Starts
8:30 ET

Jobless Claims
8:30 ET

EIA Petroleum Status Report
10:30 ET

EIA Natural Gas Report
10:30 ET

3-Month Bill Announcement
11:00 ET

6-Month Bill Announcement
11:00 ET

20-Year TIPS Announcement
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Philadelphia Fed Survey
12:00 ET

Money Supply
4:30 ET

Bill, I really don't know how to thank you for sharing such a great piece of knowledge and information with us. Your today's analysis is even better than precious metals for me :)
By the way, I was losing a little faith in gold and in the credit bubble, but today... I'm the managing director of a small Italian company, and I'm used to the daily battles to have money from banks (in Italy most companies have low capitals, and rely on debts, not to mention small companies that rely just on debt). Just yesterday the main Italian bank called me to offer a low interest loan for any purpose without any guarantee, and today a financial agent came to me to offer a meeting with a foreign merchant bank that wants to offer some kind of "big" financing because at least our company is sound enough and there are some good ideas about new products, but specially because their bank... is so overloaded with money and they do not know anymore where to place it (he said so!).
Credit? Inflation? Many rich people? What do we have here?!? Have a nice day, and take care Bill!
By the way, the European ETF about agriculture and live stock that I mentioned some days ago in your blog is growing well...
http://www.wallstreet-online.de/etf/436682.html

Bill,
Goldman Sachs Japan is betting against your analysis as they are net short 29,489 gold contracts for 2007.

http://www.tocom.or.jp/souba/gold/torikumi.html

Hopefully, Russia, China and India will step up and absorb all that H. Paulson and co. plan to sell from the US treasury this year.

More will be revealed.....

Your insights today are invaluable - THANK YOU. May your recovery go well!

Question for the community while Bill is recovering.

Why would a pin in the credit balloon derail holdings that rely on rising commodity prices?

my head is not straight today.

cb, well that little tidbit just ruined my appetite for breakfast. With Paulson, GS can do no wrong. He'll see to it.

NYUGrad, a deflating credit balloon means the great salt lake of liquidity begins drying out, which will put a damper on inflation in commodity prices. That's my take, anyway.

NYUgrad: My nascent (and perhaps wrong understanding) would be that availability of cheap credit fuels growth, and accordingly, increases in commodity prices. Declining credit has the obverse effect leading to a decline in commodity prices decline.

Leisa and number2son, thank you. My interpretation was similar to yours Leisa. but that holds true with any holding other than owning rental properties without a mortgage. Bill seemed to imply a much more direct correlation between credit availability and commodities specifically. maybe i am reading too hard. Hopefully Bill will shine the light into the cave.

The rising credit tide lifts all boats. When the plug is pulled, all asset classes (except perhaps gold) will head toward the drain.

Speaking of gold, it is due now for a rest.

cb

Interestingly (reference your source), , GS Japan has a small net long position in silver. Overall it's small.

http://www.tocom.or.jp/souba/silver/torikumi.html

To find a true exposure, other sources may reveal more.

Bernake speaking--anytime these guys (Paulson, Bernake, Fed Reserve Govs) speak, USD usually strengthens and PMs backtrack.

Bill,

I have been tracking the CLO market for some time given my interest in fixed income markets as I have indicated to you in the past. The growth in the CLO market in 2006 was staggering. Including index derivative funds the market grew to $2.8 trillion - a meaningful increase over 2005. Of that $2.8 trillion leveraged CLO's or those involving corporate paper of various credit quality jumped to $600 billion.

These are staggering numbers which show no sign of abating. Further they demonstrate the relative ease with which credit is created - credit that is outside the box of normal regulators I might add.

One impact of these instruments is to reduce compress risk premiums and drive yields down due to competition for collateral assets in each CLO.

That may be one reason why we see an inverted yield curve.

These types of things raise - among others - the question of the relevancy of role central banks play in credit creation going forward. Moreover these types of instruments raise the spector of unanticipated events causing considerable turmoil to global financial markets.

Any thoughts?

With best regards...

NYUgrad,

Bursting of the credit bubble means we must live more within our means, i.e. less borrowing and reduction of existing debt. The resulting decline in domestic demand for goods and services means declining demand for commodities used to satisfy this demand. Lower demand = lower commodities prices = lower valuation of the underlying. The more government attempts to stimulate demand with inflationary policies, the harder will be the fall. Gold may be the only commodity that will withstand the event that will surely happen should this recession-leaning scenario continue to play out. Am I being too simplistic in this outlook?

“The only option to those who wish to get ahead is to eliminate debt and, at times like this, to position assets in financially strong investments that profit from strong cash flow and rising commodity prices. And then when governments and banks stick the pin in the credit balloon, you must immediately eliminate those holdings that rely on rising commodity prices. Otherwise, you will lose as much in the coming Bear market as you did in the last one.�

Beginning to wonder if my bell also rings clear on this:

Does it mean that if I own GG or GLD I need to sell when the pin is stuck since both these assets depend on commodity prices rising? Won't one quit digging and the other lose it‘s value… ??? What else would you eliminate other than the paper commodity itself ?

Does it mean to hold physical GOLD?

Please don't be tooo harsh with me, I'm just asking for clarity ;)

Excellent analysis Bill, as always. I think the Central Banks are acting more and more like politicians, they tell and do what pleases their political masters, rather than what is expedient. Unfortunately also when the Japanese see what the US is doing, then they follow suit. I guess no one wants to panic a public that seems to be doing just fine buying retail clothing and other goods from China at astonishing levels. The iPhone is coming, let the party continue. Spend, spend, spend.

Hi Bill,
Avelox is what the doctor put me on after that sinus infection I got while on that Thanksgiving Mexican cruise. It really works. I also like that one a day pill. $11/pill, not cheap.

Please don't take this as a recommendation to buy, it is not, but I am very bullish on gold here.

Bernanke speaks, gold sells off again, and again, and again... nuff said.

Will the group forgive an obligatory KRY post? It's getting trounced today after rebounding...you can guess the news....the eyeing nationalization of gold mines, though I wonder how this is really different than the other news.

g034-

Bellcow not enthused about latest gold push. Didn't rally well. Sold off strongly today.

moooo setting at 50% retracement that held prior. Still bullish on gold, but then again, I think the Bears will pull it out this weekend, so I guess I am a contrarian (they did average more points than the new "America's Team" did this year - not yards, but points).

"When the plug is pulled, all asset classes (except perhaps gold) will head toward the drain."

Anyone here have any comments about how Uranium may fair in such an environment?? Especially considering the possibility of peak oil and world demand.

Also, In regard to KRY....Cramer dumped it...but the "optomistic" news is that:

"visiting this Friday the Sifontes municipality, to participate in a process of fortification of the popular power, besides to take care of and to update the requests of the mining areas, that are slow."

Aye carumba! kry dropped off a cliff but seemed to rebound a bit. I feel like I'm playing roulette here... but the ball has a couple of bounces left I think.

Don't bet on red just yet.

( DJ ) 01/18 01:53PM DJ Venezuela Also Eyeing Nationalization Of Mining
- Minister
RIO DE JANEIRO (Dow Jones)--Venezuela, in addition to planning the
nationalization of other key sectors of the economy, eyes the
nationalization
of the mining industry, the country's foreign minister said Thursday.
"The basic industries of minerals should be in the hands of the
national
state," Foreign Minister Nicholas Maduro said. He spoke at the
sidelines of a
summit of leaders of the Common Market of the South, or Mercosur trade
block,
taking place here Thursday and Friday.
Maduro, however, didn't elaborate on the issue of nationalizing the
mining
industry.
A number of Canadian, U.S. and Brazilian mining companies are
operating in

http://finance.google.com/group/google.finance.661957/browse_thread/thread/c9b840be59916ed1

Leisa,

I went to lunch. that's what happened to KRY/GRZ. everytime i go out to eat, something just floors or pumps KRY either way. there is absolutely no substantial news so I must conclude my lunch habits were the cause. I am sorry i missed the $2.22 cuz i started to buy furiously. it sure bounced back pretty good.

in all seriousness this might be the doing of Goldcorp trying to bang crystallex hard before the permit is announced. Here is a positively buzzing article regarding how the VZ officials feel about Crystallex and GRZ. funny how no one promotes these types of releases.

Google translated
http://tinyurl.com/2bav2o

With apologies to MarkM, what the sam hill is today's KRY news about?!

The mines have already been nationalized!

He is probably getting back at US investors for his bad day at the airport.

"In September 2006, Washington seemingly retaliated by subjecting Venezuelan Foreign Minister Nicolas Maduro to secondary screening after he arrived late for a flight from New York's J.F.K. airport to Caracas. Maduro claimed that Port Authority officials verbally abused and strip searched him even after he showed them his diplomatic passport. A subsequent U.S. apology was discarded by Chavez who described the incident as a provocation. The mudslinging that preceded the incident, most notably Chavez calling Bush "the devil" at the September 2006 U.N. General Assembly in New York, continued in early October with Chavez describing U.S. Secretary of Defense Donald Rumsfeld as a "dog of war."

http://kwagga.com/blog/index.php?itemid=272

NYUGrad, please, for the benefit of all eat a large breakfast and skip lunch.

Breakfast is my fav meal so no more lunch for me.

This am, a poster on a bullboard emailed James Shipman at Dow jones. James was the one who released the last bit of propoganda causing the drop. that email to and from Mr. Shipman can be read here....

http://tinyurl.com/2ojh7b

http://tinyurl.com/2luwj8

I guess Shipman called in a favor

Oil continues lower. It likely goes lower still from current levels. Gold is likely to follow lower as well. I'm longer term somewhat bullish on the precious metal, but short term bearish.

We shall see ...

Re KRY---it is comforting to see that the last two hits have been bought hard. NYUgrad...do not skip meals--you must be careful about ascription of random events (your eating for example) to the price of this poor, whipped about stock.

I suspect the stop losses were triggered which caused the exaggerated move. I do not have a stoploss on my KRY for that reason.

leisa,

I have adopted a beautiful strategy for these crystallex swings... i hold my core shares outright without stop losses. I buy to open put options several months out. when the stock tanked twice i sold those at a nice gain and bought the hit shares low. when the pps rises i buy those puts again, add lunch and repeat :)

I don't suppose there's any way to tell if the dip-buying is shorts buying back to cover, is there?

God Cramer somehow must have upset the masses. His most favourite new horse in the stable Yamana is taking a bit of a whipping.

Leisa,

If you look at a one year chart of KRY and accept the chart as a picture of collective investor psychology, then I don't think the recent mood swings are out of line with what might be expected. I also don't have a problem with Chavez nationalizing his country's resources. He's doing the right thing. I think he's a man of principle, and he's also a man who understands the rules of engagement for those in power. It would really surprise me if VZ attemtpted to wrest away Crystallex's entire interest in the mine.

All my way of saying it's a buying opportunity.

Again, IMHO.

Many people on this board are invested in KRY and it seems many would benefit from Bill's wisdom.

So Bill how about? What say you? Is this company univestable? Have things in the region take far too radical a turn for the average investor?

Bill are you there?

Lots of oil and nat gas around....Saudis are possibly
pumping like crazzy to hurt Iran. I took profits in PMs
Still have core position in PMs.

Cramer is pounding the table to sell techs....I bought
some QID....looks like correction coming in market.

I think the Dems are going to push bills that market
will not like.

noodle-

Get a clue. Bill is in bed with pnuemonia for chrissakes. Run your own investments.

My feeling is GS and Saudis are conspiring to knock down oil in preparation for pre-emptive attack on Iran, in which oil will spike but may not reach all time highs due to the current smack down. They are taking out all the leveraged speculators. $40 oil would be a huge opportunity IMHO, barring a deep recession. Why the market doesn't expect an attack on Iran is beyond me. The risk is much higher now than last year when everyone was talking about the risk premium in the oil price. Sooner or later you learn to not follow the crowd or you lose enough to give up on the market.

KRY smackdown is to be expected. It happened several times last year. If you are invested in KRY you have to expect large drops and use them as the great buying opportunities they present.

MarkM,

I am fully aware of Bill's situation. I am quite capable of running money. Didn't mean to offend you in any way.

Offend me? No. Piss me off? Yes. I guess I cannot comprehend the absolute self absorption some have as to think their every need must be fulfilled, even if it means someone who is hacking up blood needs to rise from bed to give THEM comforting words about their cratering spec play in KRY.

Of course, I'm a bit old-fashioned that way.

Hey Marky,

You may be old fashioned but you don't have any class. Get your prozac sonny and settle in for a long nap. Save this board for substantive posting not bashing. Otherwise go back to yhaoo when you wake up.

Peace.

Can someone lock this post please. the real enemies are elsewhere.

I don't think any one is waking up Bill up by posting a question on this board.And I don't know why some people has to apologize to a bully for discussing KRY.
And This is Cara's Day trader bull board!

Maybe Bill needs to open a separate KRY board so those of us KRY'ers don't bother the rest of you. I suspect that whether Bill is coughing up blood or 100% healthy, his posting on KRY would be about as frequent. He has stated his position on numerous occasions and probably doesn't have anything new to add. In situations like this it would be nice to have someone hold our hand, but that's not going to happen.

So KRY had a momentary 23% drop. That's one stock. Just this morning Bill wrote . . . "you must immediately eliminate those holdings that rely on rising commodity prices. Otherwise, you will lose as much in the coming Bear market as you did in the last one." I read that to mean to get prepared for more than one stock in your portfolio having a 23% drop. But KRY came back up to only have a 2.3% loss on the day. When the shit hits the fan I don't think Bill is forecasting the same result in the general market.

The other thing I am noticing on different blogs is the "testiness" of many posters. What does that say?

I don't think I would be alone in saying that this blog provides us all with way more insights into what really is happening in this world than all tout TV combined. When Bill backs away from his blogging for whatever reason, posters step up to pick up the slack. We need quality people with different viewpoints that are willing to share their expertise. It helps us all.