Dubai-based yellow metal analysts are predicting a high of $1129, a low of $795, a year end price of $1046 and an average price for the year of $935. Some suggest that gold may hit a high of $1,180 an ounce and dipping as low as $870 an ounce, but averaging at $970.

The WGC chief said the 15 central banks, which agreed in 2005 to limit gold sales and gold lending to 500 tonnes a year for the next five years, account for 21,000 tonnes of reserves. Buying or selling of the metal by the banks can influence prices. "If they are not going to supply the market as committed, the shortfall would impact prices. With countries like Russia possibly looking to increase gold reserves, an overall reduction of gold coming into the market from this sector could be a positive factor," a Dubai-based analyst said.

http://tinyurl.com/47scrz

Bill,

Counter-party risk. Nice way to go.

I revised a caption on a cartoon I saw. Thought the community might enjoy.

http://preview.tinyurl.com/63e4s9

The US imports in 2007 were 17% of US GDP, according to the National Income and Product Account tables provided by the Bureau of Economic Affairs. In contrast, the BEA industry tables show that in 2006 (2007 data not yet available) US manufacturing comprised only 11.7% of US GDP.

If US imports actually exceed total US manufacturing output by 5% of GDP, it does not seem possible that the US can close its massive trade deficit. Even if every item manufactured in the US was exported, the US would still have a large trade deficit.

If the US cannot close its trade deficit, it is unlikely that the US dollar can remain the world reserve currency. If the dollar were to lose the reserve currency role, the US government would not be able to finance its annual red ink budget by borrowing from foreigners, as the US saving rate is about zero, and the US would not be able to pay its import bill in its own currency.

http://www.counterpunch.org/roberts04092008.html

Vast oil potential in Arctic

Las Vegas-based Arctic Oil & Gas has raised eyebrows around the world with its roll-of-the-dice bid to lock up exclusive rights to extract oil and gas from rapidly melting areas of the central Arctic Ocean, currently beyond the territorial control of Canada, Russia and other polar nations. Geological data suggests a "potentially vast" petroleum resource of 400 billion barrels.

http://tinyurl.com/2van9k

DUG/SMN-> time to press the trade?

adding to ESLR at 10.51...

GE now downgraded to Neutral @ Credit Suisse.

I'm sure that all Caraistas join me in thanking them for the advance warning. :^)

ESLR-> off the morning allocation @ 10.97...

2nd, you da man. ;)

Pierre Brodeur - Excellent work on IBM and HPQ. Thanks for takng the time to post your TA on Bill's other morning thread.

taking QID off-> rotating into SMN/FXP...

There is surprising strength in the financials this morning. These have been beaten for the last few days so perhaps they need a rest.

Anyone have an opinion on Horizons BETA Pro NYMEX® Crude Oil Bear Plus ETF? This one is leveraged 2X

Sure looks to me that since April 1 there's been increasing volume on declining price on the banks, Moab. Wait different from the pattern in March. Am I missing something?

That was Way, not Wait. Darn dyslexia.

I was just talking about today. With the market down 1% the XLF was off only slightly, and now it is up a penny.

Good article from Bob Hoye:

http://www.321gold.com/editorials/hoye/hoye041108.html

He thinks the seasonal strength for base metals will ebb here.

DUG is movin' a little, I think a lot of the weak hands in this trade have been strangled over the last week.

USO sitting on its low of the day - I'm watching for possibility of a sharp break.

Who or what is the GE CEO putting the blame on?

"GE, based in Fairfield, Connecticut, traced its end-of- quarter difficulties to the Federal Reserve's mid-March decision to provide financing to prevent the collapse of Bear Stearns Cos., the second-biggest underwriter of U.S. mortgage bonds. On a conference call today, analysts demanded that Immelt explain why he told retail investors on a March 13 Webcast that GE would likely meet its annual forecast of at least $2.42 a share."

``Two days after the Webcast, the Bear Stearns situation took place,'' Immelt said. ``The last two weeks in March were a different world in financial services.''

[Bill Cara note: I have stated this repeatedly: Jeff Immelt (GE's CEO) is on the Board of Directors of the Federal Reserve Bank of New York. This bank made the decision to use $29 billion of the People's credit to support the acquisition of Bear Stearns by JP Morgan. JP Morgan effectively made the acquisition at zero cost because the $1 billion they put up will net out on the business combination (ie, merger). Another director of the Fed is Jamie Dimon, CEO of JP Morgan. The public is starting to question Jeff Immelt of these events now that they see the inter-relationships. To my knowledge, no Senator asked Jamie Dimon if he is a Fed director and to produce minutes of the Fed meeting in which $29 billion was lent to his company. This is not acceptable to the People. Their representatives in Congress must do a better job of protecting the public interest.]

http://www.ny.frb.org/aboutthefed/org_nydirectors.html

Bill,
Great response from LB regarding the Ultra ETF's. So it appears to me that even though counter-party risk is considered minimal, by their own admission, Proshares and Rydex conclude that if a counter-party goes bankrupt (ie Bear Stearns) that your etf investment (leveraged or not, bull and bear) could disappear into a morass of bankrupcy litigation, etc. This is enough reason for me to trade them daily but not to carry them over the weekends. As you say, we trade prices not stocks. My conclusion is that the ETF trade is tailor-made for day and extremely short-term trading, however, I for one shall endeavour to be out by the weekend, JUST IN CASE.

Thanks to you and Larry

Best regards

Chris

closing out the DZZ/HGD.TO trade (flat) here...(partly on the basis of last night's Stratfor post)...

good read at www.dailywealth.com today...reminds me why I started trying to take control of my family's financial future.

Also, those charts by Mr. Brodeur are pretty...any chance for some chart tutorials in the future (whys, not hows)?

RE: ETF risk (apologies if already posted)

http://tinyurl.com/4mfsz9

Summary: DCR inverse oil ETF dropped 26% even though oil increased only 3%. A weird early termination clause exists where if the front month contract price of oil closes above $111 for three consecutive days, fund reverts to its NAV, which is defined by a weird formula listed in the article. NAV was $2.82, while the share price of DCR the 26% drop was $7.76. Interestingly, according to the comment section, the paired ETF for oil, UCR, has a similar NAV reversion clause which goes into effect if DCR's clause gets "activated."

I don't fully understand it, but bottom line, buyer beware.

Look at them bid up the financials. This is starting to get too easy. My bet is that they try and stabilize or even push up the financials until expiration, since so many April puts sold on all of them. So, when they peak out around Tuesday of next week, just before CPI is released, I'll pounce.

My thought is they'll get hammered the week of the 21st again. And if enough puts get sold they'll run them up into expiration again.

What do you think about that scenario?

Rob.

ALOHA !!

Bill ... To distill Larry's message down to its basic ETF elements ... "ETFS ARE EXPOSED TO COUNTERPARTY RISK TO AN UNKNOWN LESSER DEGREE BUT BUY THEM ANYWAY"!

Could you ask Larry how we can monitor the "Illiquid Securities" clause in all the ProShares ETFs that allows all these ETFs to carry up to 15% of the ETFs value in "illiquid securities"? Where is that transparency?

Could it be that if the ETF is stuck with unmarketable derivatives or securities that the ETF would be allowed to stockpile those "unmarketables" in their own "Illiquid Securities" account in order to not report or make public certain failed counterparties the ETF has accumulated? By time the 15% limit is breached either i) they raise the limit to 20% or ii)they announce 15% of the ETF is now "illiquid" and in less than an hour the ETF is sold off. How would that play out? I would think then that all ETFs would be automatically sold off for fear they are all tainted with "illiquid" counterparties. At that point it would not matter if you traded the ETF on a daily basis or not.

IT WORKS UNTIL IT DOESN'T !!

...as we suspected, no upside breakout this week, but downside might be limited here for a while, the 20sma appears to be holding the DJ-30, and just below that we have the 50sma, for the SP-500 we have support at the beautiful convergence of the 20 & 50sma's ... all in all it appears a tradable bounce might be in play here, at least for another retest of resistance, with potential for an upside breakout next week, the sector breadth results this weekend should give some good clues...

good trading,
ralph
http://successfulonlinetrading.com/blogs

Today's close should be telling. If we close under the 20 and 50 day MAs then the bear case will be strengthened. If not then the market will be shaking off a major earnings disappointment and a severe hit to consumer confidence.

Which way is the wind blowing?

"GE, based in Fairfield, Connecticut, traced its end-of- quarter difficulties to the Federal Reserve's mid-March decision to provide financing to prevent the collapse of Bear Stearns Cos"

So, does this mean they were using their capital to play the market and bet against financials?

And when Ben saved everything it screwed their positions.

Or is it that the credit markets have actually tightened since Ben saved everything??

I think it may be a little of both but more of the latter. Look at LIBOR since then, steadily rising.

Rob.

moab- wind just picked up...

re: ETF risk

Since ETF's don't have any actual underlying assets like companies with products/land/IP/etc, aren't ETF's really just like gambling?

Imagine you had a gaming table where the players bet on the next card of a deck being high or low, but the bets have to net to 0, i.e. same # betting on up as down. Card counting would dictate that if you take the riskier side of bet, you get a discount and vice versa.

In this game each round would result in a bunch of winners and losers with no money left on the table. Now change the game to be betting on the 5 card average and you can leave your bets on the table from round to round, adding to or reducing your position.

Isn't that similar to how ETFs work? iShares or Proshares just provide the table. It almost seems like the derivatives are a waste of time, why not just let people bet on the direction of the market? As we've seen with that imploding ETF, having the derivatives don't really add any 'underlying asset' or value. In fact, seems to me the trading of underlying derivatives just lines the pockets of some HB&B.

I seem to remember hearing about a site where you can bet on anything, i.e. election outcomes, weather, etc. What would be the difference with betting on market outcomes without underlying derivatives?

What do you guys think about Goldman telling everyone to short WM?

I remember last fall when they told us to sell Gold and the opposite happened.

Have they ever told us to short something where the stock actually crashes.

My instincts tell me to take the other side of their recommendation. Maybe some Jan 09 calls let's say. Or just picking up a couple hundred shares of WM.

What do you all think?

Rob.

I'm not sure I trust Immelt. I think he was trying to prop that market up by letting people think that only the financials are affected; no contagion.

If I trusted him I would think that he is referring to consumer behavior after mid-March changing dramatically as they realized that if there are banking failures, perhaps business as usual is - spending money you don't have - is dangerous.

Yuan continues its rise against the US dollar.

add to that strong crude and a Euro zone rate freeze, it cant be good for a "strong dollar"
policy. (and i use "policy" is the most loose sense of the word)

http://jglobal.blogspot.com

ALOHA !!

I have always wondered about GE and their exposure to mortgages through GE Capital. Since there seems to be no reporting of trouble with GE Capital all their loans must be performing in an outstanding fashion. I do know that GE financed many a "pool/landscaping loan" for the over priced real estate markets in Southern California. How many of their "pool/lanscaping loans" are good? What about all their commercial loans they write for their various industrial products? GE writes a lot of loans across the board! They must all be good ...

in my view, the market has risen too much and too fast before the 1Q earning. the economic reality and possibility of earning deterorations have not set in. with 1Q earning coming out, the stock market may go down further. it takes time for the market to recover. I don't belive the bottom has been put in. it seems to me historical data suggests market bottom is not formed in a capitulation, rather in a long period of low volume and extreme pessimism.

traders with long horizon got to be careful not caught in this false sense of optimism. even if the bottom has formed, market may go sideways for several months. for day traders, the window of opportunity should also be closing as the quick downdraft and big swings are becoming things of past.

be careful out there.

ALOHA !!

proudPapa ... THEY DO HAVE COMPANIES ... At least some do who trade the QQQ or DOW do and some are all in cash ... It just depends on which way and what sector you are betting on. Look at their portfolios section and it'll spell it out for you.

One big draw to ETFs are the yields they pay, some near 5%. You have to have interest and/or dividend paying underlying assets in order to offer a yield. In other words "gamblers" in Vegas usually don't get paid 5% while they gamble. You get a few drinks and some eye candy but that's all and you don't even get 5% of that! HA!!

Obviously the ETFs also utilize derivative swaps, since that is also listed in their portfolios, but I am more interested in what isn't listed in their portfolios that JP MORGAN controls. I never see a section "illiquid securities" listed in their portfolios. JP MORGAN has an inordinate amount of control of ETFs. We all know how well that benefitted BSC shareholders in terms of transparency!

Its hard to imagine that bidders will be plentiful going in to the last few hours of trading. The GE news today serves as a big reminder to the markets than anything is possible going in to the weekend.

If the financial outlook of one of the world's largest companies changes drastically in a matter of weeks - ANYTHING is possible. GE uses BSC bailout as scapegoat , perhaps it will be another company next week saying everything was going great until GE ruined the market for this or that.

-----------

FXP working nicely today - I wonder whats in the black box balance sheets of all those Chinese bank constituents in the FXI?

ALOHA !!

PMI GOLD-PMV.V/PMVGF.PK

Well PMI GOLD officially has a mine now according to Golder Assoc Report. Onto feasability and funding now ...

PMV shares currently up 6%+ on triple average volume ...

READ ON:
April 10, 2008, Vancouver BC - PMI Gold Corporation (TSX.V:PMV) reports the recently completed Preliminary Assessment-Scoping study commissioned by the Company on its 100% owned Kubi Gold Project in Ghana, West Africa, indicates that the Project can be developed as a profitable underground mining operation with a base case Internal Rate of Return (IRR) of 28%, and a Net Present Value (NPV) at a 10% discount rate, of $38.6 million. Based on the findings of the Golder Associates Ltd. ('Golder') study, PMI Gold is now advancing Kubi toward a full feasibility study for production of up to 50,000 ounces of gold per year at an expected average cash cost of production for the first five years of $336 per ounce. All figures are in USD.

Golder has recommended moving forward with detailed proposals for a full feasibility study, including environmental, geo-technical, shaft and mine design, condemnation drilling, equipment selection, infrastructure development, further metallurgical testing to permit optimizing the recovery process, water and tailings management, and final mine rehabilitation.(more)

Link: http://tinyurl.com/62ke6g

I own PMI GOLD shares ...

FXP- off at 80.50...

Great new site (at least to me) at www.finviz.com - via one of Kirk's links. Check out the screener, portfolio and maps. There are lots of "market carpet" things out there, but this one has lots of technical and fundamental variables to play with. the ETF map is especially good (intraday performance, volume vs. avg volume). Hope it is useful for fellow Caraistas.

I can't wait to see the new "facility" the FED tries this time to save the markets from going their natural course.

No amount of pumping will raise the market with nearly every company's earnings declining. Once earnings bottom or even a couple months before they bottom will be the time for me to go long.

Until then I twiddle my thumbs while the market hits lower highs and then ride it down to the lower lows and then rinse and repeat.

Rob.

It's hard to believe that GE hasn't fallen 12% in one day since the crash of '87?

In normal times it must be a stock you could sell calls and puts on every month and be confident to just keep pocketing the money as it must hardly ever move.

Rob.

crack, SPY prints <133.51 ... looks like SPY has a gap to fill now, could get ugly now

broad-based bet-> took SMN/DUG into the selling wave, and betting i can buy it back into a rally...

shoudl read "took SMN/DUG positions OFF into the selling wave..."

Yamana Gold
Cramer interview with AUY CEO
(apologies if already posted)
http://tinyurl.com/6rpsll

I was watching Bloomberg TV yesterday morning as they announced same-store sales. They led with Walmart and CostCo and then rattled off some other big retailers like Target and JC Penny's, each time using percentages. Then the announcer ends with the Gap saying "sales were down".

This really caught my ear as being suspicious, since unlike all the others they didn't quantify the sales decline. Well, Gap sales were down 18%.

More evidence of the spin campaign to downplay the bad news.

And JC Penny's sales were down 12%. They are probably the pulse of the middle class / middle American consumer. I don't remember how bad it was in the 1990 recession, but 12% sales decline sounds particularly brutal.

Rob d - great site, thanks

2nd - followed you on FXP, off @ 80.60, thanks

was that today's panic...in which case the risk shifts to an upside move to close?

Doesn't feel like panic yet... nice orderly slide rather, no hysteric sell-off

Vad- thanks for weighing in...

anyone buying GE at 32?

Here's an interesting look at what bloomberg is reporting as the breaking news of right now. This seems like it could send a chill into the bones of many investors...

" * GE Profit Drops, Misses Estimates; Shares Fall the Most Since Crash of '87

* Industrial Stocks Drop the Most in Six Years on Immelt's GE Earnings Miss

* Consumer Confidence in U.S. Drops to Lowest Since 1982 as Fuel Prices Gain

* Goldman Cuts GE to Hold, Says Earnings Miss Raises `Credibility Concerns'

* Lehman CFO Callan Says Financial Market Recovery May Take Until Next Year

* Brian Hunter Helps Deliver 49% Return With Commodities Bets After Amaranth

* Bernanke at Fed in 2002 Urged Board Readiness to Cut Rates `Aggressively'

* Pelosi-Led Rebuff of Colombia Trade Deal May Aid Chavez Fight Against U.S.

* American Air Cancels 595 More Flights on Fourth Day of Plane Inspections
"

EEMt- done...GE at 32.08...

Glad to see reality setting in, really. Low volume upward moves were unconvincing, yet tough to bet against. Loss of two support levels, 1840 and 1820 for NQ on slightly improving volume gives hope for the resolution coming.

I am not complaining, this is pure daytrader's market and we did well in it. But life is running out of it, I'd prefer resolution to come sooner rather than later so movements become more "healthy", no matter which direction.

Outstanding article on the position the credit cycle and the Fed's strategy from a well-reknowned expert, Dr. Michael Hudson:

http://www.itulip.com/forums/showthread.php?p=33036#post33036

Interestingly he says no politician, even Ron Paul, understands money and credit, except Kucinich (who he is advising).

Hi,

Just a line to wish a great weekend to all.

Enjoy what really matters.

Cheers!

Out of LEH, COF April puts for over 50% gain

Holding FXP, DUG over weekend slightly underwater

Oh,

I forgot to post the weekly music video:

http://www.youtube.com/watch?v=Dzp0JETG0Pw

:-)

Enjoy!

ProudPapa said "Isn't that similar to how ETFs work? iShares or Proshares just provide the table. It almost seems like the derivatives are a waste of time, why not just let people bet on the direction of the market?"

But then the market would shift from NYC to Las Vegas. HB&B wouldn't want that, would they? They run the game, front-run the order flow, and use your own positions to trade against you. At least in Las Vegas you know how the "house" stacks against you and you can choose to gamble accordingly.

moab said:

"Interestingly he says no politician, even Ron Paul, understands money and credit, except Kucinich (who he is advising)."

Just for the record, Kucinich ran the city of Cleveland straight into the ground while he was mayor. We don't need to see what catastrophe he could bring forth on a larger scale.

Pass ...

Went back to the well with GGP. The short side was good to me last month.

April 40s, in at 1.15, out ITM at 2.50. 3 days, 100%, I'll take it.

If it rallies again, I'll do it on the downside again. CRE is going nowhere for a while.

CMG is giving up it's downside gifts again, too. Didn't play that. You can't be in everything. If it rallies back up to 115 or more next week, it's puts and burritos for everyone. As I said a month or two ago, this one will be going down and giving it up for a while.

If investors in the U.S. were to write their own CFDs in the U.S. and trade them online, this would take control of the futures market out of Wall Street and hand it to Main Street.

As it stands CFDs are traded everywhere else except the U.S.

Into GE @ $31.90

I found the Kucinich comment strange and self-serving.

Have a great weekend everyone.

I can't wait for next week. Tons of earnings and PPI and CPI.

I can almost hear the spin now.

"Everything went up drastically but Core CPI, that measures things noone has ever bought, is up a mere .2% which is in the FED's comfort zone"

Question for the talking heads:
Where's your bottom now??

Rob.

From http://www.itulip.com/forums/showthread.php?p=33036#post33036

"There are an awful lot of guys on the Internet who are very taken with the ideas of Friedrich August von Hayek, Ludwig von Mises and others of the Mises school... They don’t want to hear that we actually figured out how credit works a long time ago."

Is this true? Didn't our financial system almost suffer a systemic failure due to issues with credit? It seems to me that due to our imperfect human nature, our credit system could use a few more strong "checks and balances" against profligate credit expansion. Paul Kasriel has opined that our monetary system might be better regulated if expansion of the money supply was tied to US population growth. Ron Paul has suggested allowing gold and silver to circulate freely as competing currencies. Wouldn't these types of systems help keep credit creation in check? Why should the imperfect people in the Fed be allowed to (try to) control our money supply?

RH

rharaz -

I agree. His point seems to be that a gold standard would be too constricting on credit, which is a valid point. From the 1860s to 1920s farmers were virtual serfs as they had to borrow money to harvest their crops, yet deflation caused the price they could get for their crops to decline for years on end. They could never get out of debt.

I am beginning to think that only truly free markets can regulate credit creation properly. That means allowing bank failures to occur with no intervention in free markets, except anti-monopoly regulation. Gold has a place in this system, where those who don't want to risk their capital in banks will hold a portion of it in gold.

Thanks moab,

Point well taken regarding the gold standard and credit. Prof. Fekete has some interesting ideas about using a concept called "real bills" to allow for credit in an economic system that uses commodity based money (see http://www.financialsense.com/editorials/fekete/2006/0807.html)
I think the Islamic religion prohibits usury -- how do businessmen of the Islamic faith finance their business endeavors?

RH

Re: Cramer interviewing Marrone

Cramer seemed rather disappointed by Marrone's replies about results falling under projected returns and having no explanation. Marrone seems also caught in his own bafflegab about improving the bottom line without acquisitions and contradicting that about how acquisitions would add to the company.

Very quick on Cramer's part.

Wizards:

GE was all the news today.

In that vein, Bill in his book talks about GE on pages 191-193 “How stupid can one get?”

Personally, being weak in fundamental analysis, I really appreciate what Bill is conveying here. It has already changed how I look at a stock by comparing historical factors to current i.e. reversion to mean concept.

Here are two charts that I think will help you visualize those pages and be able to better grasp the lesson Bill shares.

The first chart is two links as I needed this to capture all data.

http://tinyurl.com/66f4p8

http://tinyurl.com/5mtype

The second is a chart of GE, monthly close as of Thursday’s close.

http://tinyurl.com/6yqvlb

I hope readers of the book of the above pages find it useful to their understanding.

Thank you to Quasi for sharing how to capture images and link them to the web. Quasi, Thank you.

Mega mergers ahead for mining industry

http://tinyurl.com/6onqc5

>>His point seems to be that a gold standard would be too constricting on credit, which is a valid point.

This is a discussion that is laid out in detail at Ellen Browns "Web of Debt" blog @ http://webofdebt.wordpress.com/feedback/ . I've have posed this on other forums with little valid response.

Gold and other PM's are easily fungible assets. Ron Paul's proposal to monetize Gold should not restrict the economy in any way other than to limit the amount of credit extended by the central bank, which usually finds its way to mal-investment.
Correct me if I'm wrong but to be thought of as a competing currency it would not need to act as means of exchange in the market place merely a tax free point of storage. Monetization of precious metals would allow people to store wealth without being subject to the exit tax of its nominal appreciation against fiat which is really not a increase in the value of gold but a reflection of currency debasement. By allowing citizens to decide to store their wealth in either or, would restrict the ability of the central bank to issue debt instruments against which to print currency. This is not your Grandpa’s lock (Bretton Woods) but a use of a free market float in the market place between fiat and PM's easily convertible on any given day at the current market rate thereby in no way hampering economic growth. As an increase in the mount of physical gold is no longer necessary to expand the economy, the existing units become worth more and further sub divided. In this example no one would be carrying satchels of metal around just converting, current electronic holdings from one form to another.

I also posted thoughts about this at Denninger’s site ( http://market-ticker.denninger.net/ ), he seems to think this linchpin concept a of Paul’s competing currency idea to be ludicrous as he feels the value of gold is more deeply tied to geopolitical unrest than to currency debasement . On this point humbly disagree. I am sincerely interested in opinions on the validity of this concept.

stormrunner,

Re: "Correct me if I'm wrong but to be thought of as a competing currency it would not need to act as means of exchange in the market place merely a tax free point of storage."

Having precious metals (or other tangible assets) serve as a tax-free storage medium would suit my purposes (and I imagine those of many others) who would prefer to pursue interests rather than studying markets in an often futile effort to counter inflationary effects of currency debasement. How liberating that would be! One can even imagine that such economic surety might provide new stimulus for productive innovation and development.

The "tax-free" and "competing currency" aspects are the key components for me.

-----

In response to rharaz's earlier posting the question asking how do Islamic financiers operate given Islam's injunction against usury?--there also are injunctions against usury in Judaism and Christianity. It seems all are simply ignored.

Re: Yamana diminishing returns

The reason why Yamana had diminishing returns is twofold. They hedged their copper production prior to a temporary collapse of the metal price. What could not be forseen was continued strength in demand and a high copper price unlike other base metals.

So with a higher copper price, the accounting rules made for less profit than anticipated.

Coupled with this are settlements in $US. If the hedge is paid in a fixed $US price and the currency declines against costs, this will be a contributing factor.

What gold companies will be looking for, imo, is the possibility of hedging against currency going forward by purchasing production out of countries which to not pose the same currency risk.

By setting up in a low-cost country and experiencing cost push inflation, for things which would have cost the same anyway, they are now at a disadvantage unless they can add to production.

There are relatively few places to do this. Australia comes to mind, but you also have Canada. Another place to consider is the U.S. If the dollar is to continue its decline, then costs will decline if gold is sold un-hedged into Euros, for example.

The same advantage goes for refineries buying gold scrap out of the U.S. with Euros and turning into bullion to be sold on the open market in London. The same customs loopholes regarding gold scrap applies to doré gold, as they are both considered commodities, not money.

The reverse could be said for $C producers, should the $US reverse its decline and the $C fall by comparison.

G7 has decided to increase transparancy to kep economic crisis in US from spreading. I haven't found many details.

DJIA futures down 261 on Bloomberg.

http://biz.yahoo.com/ap/080411/credit_crisis.html

Sorry for the lack of a tiny url but it isn't very long.

I look forward to reading the Caraistas take on this.

Whoops, that -261 is from this morning. Sorry about that.

But what did G7 decide?

Hello all. Long time student of the board, infrequent poster. Any opinions on buying quality gold in 10oz bars ( Credit Suisse, Pamp Suisse, Engelhard, CMX )versus modern coinage Eagles, Maples etc.. I've been adding regularly to my physical holdings over the years, and trading GLD to take advantage of short term trends. At this point I'm wondering if the liquidity premium for coinage outweighs buying bars at close to spot prices.

I thought this article by John Mauldin was excellent.

Is it a Bull, Bear or Cowardly Lion Market?
by John Mauldin
April 11, 2008

http://www.mediafire.com/?edmxgdnzf4x

This speech by the former fed chairman is very relevant today...

Friday, April 11, 2008
Volcker's Speech

Note: 1 of 5 parts
http://www.youtube.com/watch?v=2opw-iUaezs

The links to all parts 1-5 are avaiable here...

http://calculatedrisk.blogspot.com/2008/04/volckers-speech.html

Cara System applied to a couple of charts.

http://ronsen.blogspot.com/2008/04/cara-system-graphicallymore-than.html

Re: The Lengthy Unsolved Forex Puzzle

I've been working on what seems to be a lengthy foreign exchange puzzle, especially as it may affect the gold price. I suppose an appropriate departure point would be to agree that foreign exchange rates may not necessarily reflect in gold prices, since bullion has experienced inflation in every currency.

This is primarily due to the decline in the $US. If short term rates in US treasuries continue their decline, and short term bond rates in other currencies stabilize, then it seems a given that we haven't yet seen a bottom in the $US. This is primarily the reason why the € continues to firm and the $US underperform.

In fact, the currency to watch is really the ¥, because they have no room to slash rates in an ad hoc fashion. I suppose if you could get a peek at their short term bond rates in ¥, that they would be coming up as the $ goes down. The relationship between the ¥ and the $ is very important to the whole process, as other currencies appreciate against the $US and decline against the ¥.

The daily chart in ¥/$ trade gives us an appreciation of how that might work and in general over the long term, this has held firm:

stockcharts.com

http://tinyurl.com/3ub8rh

The curious thing about the Bank Of Japan is that they do not seem to have a single stick of information on short term treasuries or bonds. They do, however have a very cheery looking pdf file on interest rate credit derivatives.

*blech*

I can't look at the numbers on any of their pages, because quite frankly, they are so huge they are beyond comprehension, thus a scary monster. (I know, its childish- I should be more mature for my age. Somebody responsible enough will have to look at it for me.)

Just look at the pdf file containing: "Trading Of Interest-Bearing Government Bonds By Purchaser"

http://www.boj.or.jp/en/theme/kokko_etc/stat/index.htm#kokusai

This is how the carry trade in ¥ is conducted, by interest rate swaps, which allows them to get around international banking regulations, which vary in whatever precinct you may choose around the world, though not upsetting international settlements exactly.

They are issuing massive quantities of interest rate credit derivatives euphemistically referred to as "bonds." This is at the heart of the $US decline, as well as worldwide commodity inflation.

In short, the ¥ has a long way to appreciate, and the $US may still have a long way to decline.

No wonder the Japanese are so advanced compared to us, because we still insist on issuing short term treasuries and drive around in SUVs, while they drive around in Maglev trains, and issue credit derivatives in lieu of their bond market.

But this does not mean if there's an unwind in the carry trade, that this will immediately cause a collapse of the subatomic structure of the universe. The next step is a decline of the € against the ¥, which seems a given. Either euro bond rates change, or US bond rates are decimated. Which seems more likely?

stockcharts.com

http://tinyurl.com/3x7ywk

I'm hopeful that as the € loses ground against the ¥, that the loonie will see some appreciation against the €. The short term treasuries at the Bank Of Canada would have to stabilize here, at around 2%. You can't get short term treasuries from your bank/brokerage with the Bank Of Canada rate. That 2% is going somewhere, and doesn't disappear. Or perhaps its just propaganda, after all:

http://www.bankofcanada.ca/en/rates/tbill.html

The loonie has appreciated against the dollar, so my guess is banks are absconding with the treasury rates and selling 0% turnover bonds to the retail sector.

If € rates do decline, this will cause a sudden appreciation of the loonie, but also of the ¥, which is bad for Uncle Buck. But good for gold!

But it may also be good for Canadian listed gold mining stocks, as they are cross listed in European exchanges. This may be the reason why so many gold juniors have declined, as the loonie declines against the euro and Canadian short term treasuries decline while euro rates remain unchanged, this has been exceptionally bad for precious metals stocks not indexed to the gold price as many of the majors are.

Just look at any listing of some of the gold majors and you will see that they are listed on so m any exchanges in the U.S., Canada, and Europe its no wonder they are so well indexed against the gold price. But not so the juniors. This is at the heart of problems in venture exchange stocks, falling value of the $CDN vs. the €.

Boggles the mind, it does:

http://finance.yahoo.com/lookup?s=kinross

The € vs. $CDN chart:

http://tinyurl.com/4jactm

My mistake:

The "Derivatives Amounts Outstanding" page is the page referred to in my above post, sorry to post the wrong link:

http://www.boj.or.jp/en/type/stat/boj_stat/deri/index.htm

The number I was referring to was:

"6. Credit derivatives

The notional amounts outstanding of credit derivatives was US$812.8 billion, increasing by +937.2 percent from the previous survey."

Vista Gold - "born-again" junior

From 2002-2007, Vista acquired 18M oz of gold resources, and then - in the company’s own words -“hoarded” its gold. Perhaps in a different market, acquirers would have materialized, or Vista's share price would have simply risen along with the gold price.

Vista holds 11M oz Measured & Indicated reserves and is valued by the market at $146M. That’s $13/oz. – just 1.4% of today’s spot gold price. This is well below standard “rules of thumb” for projects with 43-101-compliant reserves. Thus, it’s plain to see why Vista has undertaken a change of strategic direction: from a “gold hoarder” into a mid-tier producer - targeting 350-400k oz/yr by 2011. I learned this recently in a small-group breakfast with CFO Greg Marlier. Here is a writeup from my notes:

As part of this “re-birth” (and due to partnership issues) Vista placed their Nevada properties into Allied Nevada Corp., and spun off the shares last year to Vista shareholders. Mr. Marlier maintained that Allied has the 3rd largest land position in Nevada! This spinoff left Vista with 11M oz. measured and indicated across various properties. Now, they are moving these properties towards production.

Paredones Amarillos (in Baja California, formerly developed by Echo Bay) with 1.9M oz. is fully permitted, and processing equipment has just been purchased (used) in Canada, and refurbished. A 12 yr. minelife at 117K oz/yr is expected, with possibility of upping production to 150K oz/yr. All-in production costs were estimated by Mr. Marlier at $480/oz. Production is expected to begin early 2009. I was impressed that Vista located, hired and brought back to the area the mine manager and personnel manager (both locals) from the Echo Bay days. History in the region has to help, given communities’ sensitivity to mining these days.

In early 2011, Mt. Todd in northern Australia (formerly operated by Pegasus) is scheduled to enter production. (2.9M oz M&I). Mr. Marlier explained convincingly how and why Pegasus had failed at Mt. Todd, and how Vista could succeed. Vista projects 266K oz/yr gold and 4.3M lb/yr copper. Operating costs are projected at $391/oz. of gold. Vista has exploration licenses covering 1000 sq. kms, and has only explored about 1/10th of their land. The trend where they will mine extends across their entire land package.

Earlier stage properties include Yellow Pine in California with 2.2M oz. M&I, Awak Mas in Indonesia with 1.7M oz M&I, Long Valley in California with 1.2M oz. M&I.

Of course, the skills needed to acquire properties, to develop them, to finance and put them into production are all quite different. Mr. Marlier pointed out that he, Vista’s VP Business Development, its President, and its CEO had worked with each other on and off for 20+ years, in different companies and in all 4 capacities. I suspect that few juniors valued at $146M have managements that can claim such broad and deep experience as a team.

Financing and bringing the first two properties into production offer “catalysts” to create interest and move the stock price. If Vista can engineer a successful “re-birth”, they’ll move beyond the crowd of juniors, and into the more rarified ranks of the mid-tier producers to whom the market has been ascribing more value.

NOTE and DISCLOSURE: After this meeting, I bought Vista's stock. The above reflects my impressions only. The above is not a stock recommendation, just information sharing. Everyone should perform their own due diligence, in light of their particular financial circumstances.

Jock:

VGZ.to - Vista Gold

Back on February 9, 2008, I mentioned that this was a stock I was watching. Thank you for the update.

Much appreciated. I haven't bought this stock as I still feel that sellers are in control. In fact I

feel that most of the juniors are not responding to any buying sentiment. This has kept me parked in

cash. Still waiting for some news to trigger a buy. Also, I did feel a bit of regret mentioning this

stock as one to watch, because the low volume on this stock is not to my liking.

===

I am a bit disappointed that there were about two dozen Caraistas at PDAC in Toronto, yet there were few

reports back on the show. It is a puzzle to my why after I threw up a couple of comments and then Bill

asked for some posts, there was very little or no responses. I canned my very negative report on PDAC as

a result.

I know Jock is busy doing a report, so I am fine with waiting for this report on the juniors. [034].

Whoever, in any nation, not just ours, controls the money supply controls credit and the economy and can cause booms or bubbles and busts or recession.

Bill has one of the best understandings of that power and in addition to what he shares with us here on his blog (thank you Bill!) this video helps further in understanding what we are up against.

The entire history of our nation from the perspective of money and money supply and central banking is in this video. Complete with quotes from our Presidents, Congressmen, Economists, and even bankers, you find the reason we have had so many volatile times in the course of the history of this nation. I enjoyed the history of the civil war from the perspective of money.

Again, very long but very worth the education it provides about the power that can even control markets, economies and governments. You can then see why some of the most powerful in government are still pulled by the voters one way and by the elite connected to the central bank, the other way.

http://tinyurl.com/3g72s8

This week we had only 10 sectors with stronger than 0% breadth. Lots of Energy and Utility related sectors are populating the relatively stronger side of the market. We have 16 sectors with -100% breadth (traders voting unanimously to be OUT of those sectors). The broadest selling was in Homebuilders, Internet, Real Estate, Retail, Software, Nasdaq 100, Transportation and Telecom sectors among many others. All in all it appears next week we might see a bit more downside on Monday and then some upward progress to retest the now fortified resistance zone in the indexes. The consolidation this week may have allowed the market to refuel enough to push through that zone. We shall see.

Good Trading All…
Ralph
http://successfulonlinetrading.com/blogs

ALOHA !!

I was roaming around the JEDH, Joint External Debt Hub, a conglomeration of debt info put out by the BIS, IMF and OECD over there at the World Bank and I was able to look up how much short term debt(less than one year)various countries owe. It turns our not even GOD(the Vatican)is debt free! GOD owes $61millUSD in short term debt. I have to admit though, GOD has lots of assets to sell to cover that debt ...

When I was seventeen I was at the Vatican on a tour. My brother and I ditched the tour guide and went walking around and we saw a door that had a sign on it "DO NOT ENTER". We tested the door knob and it was unlocked so we opened it and there was this room about 50sq.mt. in size and there were these glassed in display cases surounding the walls on all sides containing solid gold Vatican artifacts stacked on top of each other in a disarray! WOW ... we were amazed that they left their "gold door" unlocked! It was like we walked into the tomb of King Tut!

Overall GOD's debt/liabilities sheet look pretty good with deposits exceeding liabilities. Unlike the USA the Vatican is a model for debt management!

I know GOD has a lot of gold to cover that $61milUSD short term debt! GOD has GOLD!!

Link: http://www.jedh.org/jedh_creditor.html

God may have gold, but the Japanese make the origami.

Bernard F - re Junior gold companies

At PDAC lots of juniors told good stories. But, you had to wonder just what it TAKES for the marketplace to reward a junior these days.

I'm thinking that a junior needs special features or a well-crafted strategy to attract traders: the promise of a couple of million ounces maybe, someday isn't cutting it.

Perhaps Vista will separate itself from the crowd by becoming a successful producer (although Vista's production costs aren't exactly cheap, and financing isn't easy to come by).

As Kaimu pointed out yesterday, PMI Gold's financial prospects look appealing, with its "micro-mining" & "boot-strap" production strategy centered upon several previously producing mines in Ghana.

Perhaps Aurelian will appeal to several seniors as simply too large to ignore(13.7M+ oz, with prospects for more)although all depends upon a reasonable regulatory regime from Ecuador, a country new to mining, but burned by the oil majors.

GIX has a deposit which looks more and more like Penasquito, and is just down the road. Might GIX prove irresistible to Goldcorp? The last 3 months price action suggests: not yet!

Why no exhuberant writeups after PDAC? Although potential is greatest among the juniors, they have lagged the metal and the seniors. I believe at some point, traders will return to the juniors as a class. Until then, it comes down to having a unique feature or strategy that sets a junior apart from the languishing crowd.

The juniors will continue to lag, unless the $CDN advances against the €, for the reasons cited above.

Kaimu,

I posed a question on the board last night (albeit late ) and would value your opinion on buying physical gold in bars as compared to coins. Most of my holdings at this point are in Eagles and Maples, but I'm considering high quality bars as the prices are much closer to spot. Does anyone else have an opinion ?

WD

Vista Gold - 2nd opinion

My local colleague and tecnically-oriented buyer of gold juniors since 2000 (who also met Vista's CFO) offers the following:

"I don't have a strong feeling for this stock based strictly on the technicals. On balance I'd say they're slightly positive. If you look at the weekly chart, we're testing the lower end of the Bollinger Bands, meaning that the stock is relatively cheap. The bands are narrowing, which hints at a big move upcoming. (But sometimes the big move is down--see Vista's action in April 2007.)

The MACD and RSI have both been rising during the last nine months of sideways action--that can be bullish, but they both look like they're about to turn down.

There is strong support at the $4 mark. (I'm looking at the AMEX chart for VGZ.) If we test that level on notably low volume, that would be bullish and that would then be a decent buy point with a close stop."

[NOTE: the referenced price action, actually May, '07 tracked the spinoff of Allied Nevada shares.]

Re: VGZ.TO

I posted a chart comparing Vista Gold to the inverse of the Gold/Silver ratio. Vista appears to have had a speculative peak sometime in July of 2006, and has not been indexed to either the gold price in $C or the silver/gold ratio:

stockcharts.com

http://tinyurl.com/64h5ww

there has been talk of money coming back to the JR gold sector for over 1.5 years now.

i think the situation in the JR's wasnt forseen by most analysts and gold bugs. all through 2007 and now into 2008 ive been reading the same byline with all sorts of rationale to support why JR's have lagged and why they will regain their shine.

the most plausable argument advanced by someone you cant ignore when it comes to gold is by Jim Sinclair who has said Hedge Funds are long the major's and short the JR's. soon this is supposed to end with gold meteoric rise.

i dont fully understand it, and havent heard much moe detail on how or why this was done. but i cannot ignore it.

the charts showing the shares ratio to gold continue to trail lower or base (as in the case with canadian gold miners at the moment, thankfully)

i dont see how JR golds will rise unless gold makes its next advance past $1000 or the market makes another bull-run and all boats get a boost.

That's a good theory too, dr. cosa!

:0

I have good friend who is a Chinese citizen. This past week he returned to the US from a trip to China. He's just a normal person, not an investment type. He reports that food prices are up about 40-50% since his last trip about 6 months ago. He also says real estate is up about 30% from 1.5 years ago. Finally, he says all sorts of people were cashing out their CDs/savings and putting their money in the stock market last year, which is down over 40% from the October peak. He says it is mainly the working people feeling the squeeze and they are losing purchasing power. He thinks it's only a matter of time before the food inflation works its way into all prices.

It seems to me political instability will rock the world if food prices continue surging. Not sure which direction it'll be in the next few months. Seems to be a bull market in the long term.

When people go hungry dangerous things occur.

"Why costs are climbing. As food prices surge, starvation looms for millions. Experts call for emergency action but admit there's no quick fix".

Globe and Mail: http://tinyurl.com/6lk8ds

Coxe listeners knew this a year ago.

ALOHA !!

Whadayadoin ... I suggest using gold/silver coins, specifically British Gold Sovereigns or Canadian Maple Leafs(foreign coins), for personal stash and large bars, such as gold kilo or 400oz gold bars and 1000 oz silver bars, for storage accounts.

You will be able to "spend" coins as they are official "coin of the realm" and readily accepted, especially British Gold Sovereigns, which have been in circulation since 1533. They weigh less and you can carry them in your pockets easier. Good for emergencies as even the US Air Force give British Gold Sovereigns to their pilots as part of their "rescue kit" in the event they are shot down behind enemy lines. Notice the USAF does not have any crisp $100 FRNs in the "rescue kit"! What does that say about "real money"?

If you are storing bullion in a "bullion vault" best to keep them in the form that most mints and refiners and metals markets readily accept since they will be your likely customers when it comes time to sell. These size bars are always numbered(serial numbers)and are therefore readily verifiable as authentic.

In IBN 38.68 Cara 100 company