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Monday, May 23, 2005

Comex Gold Totals (COT Report) and US Dollar Fibonacci Level

The US dollar is at the Fibonacci level of 86.67, the .618 Fib percent retracement level.

On top of that bullish for gold point is that the Commercials at the Comex futures market in New York have the biggest short total since the bull market in gold started. On top of that, the spec funds at the Comex, who take the other side of the trade from the commercials, have the largest long totals since the bull market in gold started.
A chart of the commitment of traders net positions

It sure looks like something is about to give in the US dollar therefor in gold and silver.

Wednesday, May 18, 2005

The US Dollar versus the rest of the world

For some time now China has been invited to send an observer to the G7 and IMF/World Bank annual get togethers. This year they didn't bother. The US is heading for skid row and (despite its nuclear weopons) is just simply becoming less important to the rest of the world. The rest of the world understands the US's future and it is not pretty. But, what do you expect for an attitude towards someone/some entity who has gotten out of control in taking on debt? Huge debt is debilitating. A huge debtor can become next to useless to others. Rather than being constantly drained by a huge debtor, the world is moving on, making other preparations.

The director of the G24 secretariat: "If developing nations are not given more say in global financial institutions, they will leave the fold of the International Monetary Fund and World Bank.". "The current system of governance is completely out of line with economic realities. What is happening is that many countries are now moving away from these institutions.".

Well guess what? The USD is an important part of these obsolete institutions. The USD's future as the world's reserve currency does not look too good.

China's Hu Jintao and Indonesia's Susilo Bambang Yudhoyono have announced a pledge of stronger new security, economic and social/cultural ties. India has had a 4 day summit with Pakistan to advance trade and wrap up the problem with Kashmir. John Howard has been in China working on a trade agreement. The EU wants US nuclear weapons out of the EU. If the US refuses to do this, is the EU then occupied by the US? Russia has made alliances with China. China is making economic/business deals with parts of South America. China is making economic/business/military deals with most of Africa, 54 coutries, a strategically important raw materials continent. Germany is making deals with Russia, particularly about gas/oil. China is developing trade with the EU preparing for declining trade with the US. China, South Korea, and Japan (yes Japan, one of the few US best buddies left in the world) are starting an Asian monetary fund. The head of Taiwan's opposition party made an historic reconciliation trip to China and met with Hu Jintao. Taiwan knows it can not depend on the military protection of the US anymore nor the US's continuing purchases of Taiwan's products. China, South Korea and, yes, Japan (again) recently met in Istanbul for "Bolstering Asia's defences against attacks on its currencies". Now this is the Japanese Financial Minister talking: "Whatever happens, we need to promote financial cooperation even if there are issues". New FX in China: "The China Foreign Exchange Trade System (CFETS) said the new system hosted trading in the U.S. dollar against the euro, yen, Hong Kong dollar, British pound, Swiss franc, Australian dollar and Canadian dollar, plus the euro versus the yen.".

"The times, they are a changing." - Bob Dylan.

Oh, a while back there, Russia, the EU, China and India started working on putting up their own GPS system so they can have accurate weapons like the US has.

Asia has been making moves to protect itself from:
1.) declining purchases of its products by the US and
2.) from declining values of its USD denominated central bank reserves.

Most Americans do not understand the big picture let alone their own domestic economic/financial picture. It is going to be a rude awakening for them.

Sure, the US is the big bully on the block, but it is aging and has some serious weaknesses. Basically all of its troops are currently being used, so it would have a big problem trying to invade another country. Sure, it can lob plenty of military bombs into countries but there are countries that can lob back financial bombs that would cause political, economic, financial havoc in the US which would weaken its military. Basically, the US is between a rock and a hard place, like its central bank. Wait till Americans themselves find this out.

Monday, May 16, 2005

TIC Report - for March 2005

The US Treasury's monthly TIC numbers are now different from previous reports.
http://www.ustreas.gov/tic/mfh.txt
See the February TIC report here
Or, see the January TIC report here

I guess the US Treasury has reverted to the old Communist style of changing the numbers to fit what ever picture they want to be seen. So much for the usefulness of the TIC report. I guess now a days there is virtually nothing that you can trust the US government for: PPI, CPI, unemployment numbers, new jobs created, etc. People that have been watching these numbers for 2 years say this is the first time they have been changed.


MAJOR FOREIGN HOLDERS OF TREASURY SECURITIES
(in billions of dollars)

HOLDINGS 1/ AT END OF PERIOD

2005 2005 2005 2004 2004 2004 2004 2004 2004
Mar Feb Jan Dec Nov Oct Sept Aug July 2/
COUNTRY Series V Series IV

Japan 679.5 680.3 679.3 689.4 692.5 691.8 696.8 698.9 674.9
Mainland China 223.5 224.9 223.5 222.9 220.2 214.8 209.4 201.6 196.4
Caribbean Banking Centers 3/ 137.2 104.7 94.2 71.4 75.7 96.9 98.8 94.9 93.8
United Kingdom 4/ 122.9 110.7 100.3 101.0 89.8 72.0 67.6 67.2 63.0
Taiwan 71.1 68.5 68.3 67.9 67.1 66.6 66.5 65.5 66.8
OPEC 62.2 67.6 67.0 62.1 63.0 62.1 57.4 51.6 56.9
Korea 57.1 53.1 53.6 55.0 55.3 49.6 50.5 47.3 45.4
Germany 56.0 53.0 53.8 50.2 52.6 49.2 47.9 45.1 45.9
Hong Kong 45.2 45.3 45.3 45.1 42.4 43.3 42.9 42.8 43.8
Switzerland 44.1 44.5 41.0 42.1 41.9 42.3 40.1 40.4 39.6
Luxembourg 42.1 43.0 41.8 41.6 40.6 40.4 39.7 39.7 39.6
Canada 38.4 38.0 35.4 33.3 32.2 26.6 26.1 25.7 25.9
Mexico 32.5 33.0 33.5 32.8 33.5 33.2 34.0 36.0 34.6
Singapore 30.7 29.2 29.9 30.3 30.4 28.4 26.1 28.2 28.4
France 25.1 27.2 21.2 20.0 19.5 19.8 22.0 22.1 23.8
India 18.4 18.1 15.9 15.0 15.5 16.0 14.9 16.3 17.2
Netherlands 18.0 16.5 16.8 17.8 16.3 16.7 18.0 15.2 22.5
Ireland 17.2 17.8 15.6 16.3 16.9 15.0 14.5 15.5 14.7
Norway 16.9 33.8 35.1 30.4 32.6 33.0 24.2 21.2 18.6
Sweden 16.9 16.3 15.8 16.9 16.0 15.6 14.6 14.4 13.7
Belgium 15.3 16.7 16.8 17.0 16.8 16.0 15.9 15.8 16.0
Brazil 14.7 13.6 13.8 15.1 15.3 15.6 16.3 16.8 16.7
Israel 14.6 14.3 14.9 13.7 13.2 10.6 12.5 11.6 12.8
Italy 14.5 13.7 13.0 12.8 12.8 12.3 12.4 12.4 13.3
Thailand 12.1 13.0 13.3 12.5 12.8 12.1 11.1 12.2 11.2
Poland 11.4 10.6 10.2 10.8 10.8 10.6 10.3 9.4 9.4
Turkey 11.4 10.4 12.9 12.0 14.5 16.1 16.9 16.5 15.1
All Other 84.1 95.0 97.1 119.6 114.3 88.5 83.4 90.6 96.8
Grand Total 1977.1 1945.7 1908.1 1883.9 1877.6 1843.7 1824.1 1800.6 1783.2

Of which
Foreign Official 1228.2 1242.2 1238.0 1232.7 1237.1 1219.5 1204.3 1187.6 1169.7
Treasury Bills 236.2 235.2 242.3 244.6 256.0 259.5 259.9 254.1 251.8
Treasury Bonds
& Notes 992.0 1007.0 995.7 988.1 981.1 960.0 944.4 933.5 918.0

Department of the Treasury/Federal Reserve Board
May 16, 2005
1/ Estimated foreign holdings of U.S. Treasury marketable and nonmarketable bills, bonds and notes
reported under the Treasury International Capital (TIC) reporting system are based on annual
Surveys of Foreign Holdings of U.S. Securities and on monthly data.
2/ Denotes series break: Series IV positions data for this month and prior periods to June 2003 are based on the
end-June 2003 annual Survey; Series V positions data for this month and subsequent periods are based on preliminary
results from the end-June 2004 annual Survey.
3/ Includes Bahamas, Bermuda, Cayman Islands, Netherlands Antilles, and Panama.
4/ Includes Channel Islands and Isle of Man.

Sunday, May 15, 2005

The HUI - AMEX Gold Bugs Index

Here is a 5 year chart of the HUI
Since we have really weird US financial markets, no telling where the HUI is going. The HUI may be making a long 2 year double bottom correction. 2 years, that is by the time it makes it back up to its old high. It is still above its most basic oldest uptrend line established by the low of late 2000 and the low of late 2001.

Can the HUI go below its 2004 low where it is almost at right now? I don't know. That is pretty good support. Plenty of gold and silver stocks were generating end of trend signals as of last Friday. If it is making a double bottom, the right bottom may go a little lower for a last really good final shake out of the weak longs. It can do this and still stay above its most basic uptrend line. The psychology amongst stock investors is absolutely awful right now, so maybe the stocks can be pushed a little bit lower.

Gold is right around its 2 year or so uptrend line. Tense times.

US Financial Media Spin

Refering to "parliamentary-democratic parties" outside of Germany, Geobbels said that "The hunt for popularity usually means nothing other than concealing the truth and speaking nonsense."
Goebbels at Nuremberg — 1934

To Goebbels this is the exact opposite of what in his mind a successful government should do. Not that his idea of a successful government is my cup of tea. But this is exactly what is happening in the US. On Thursday a talking head analyst on Bloomberg TV actually said that in the US economy “automobiles do not count.” That is like standing outside on a bright sunny day at high noon and declaring it midnight.

This week Federal Reserve Governor Poole said that there has been a “dramatic” improvement in US economic activity. Then why did notes and bonds make new recent highs (expecting less demand for money, less economic activity)? And that is despite them breaking their 6 month long recent uptrend lines. They broke their uptrend lines and still ended up making new recent highs. Strange. To me notes and bonds should be fearing a devaluing USD but that's not what is happening.

Greenspan made the "USD has bottomed" statement, again. Greenspan, a guy who during his private practice years developed an atrocious record for predicting what the economy and inflation would do. Hey, sounds like a candidate to head the Fed. Yup, they made him head of the Fed. They needed a guy that has no shame.

Things must be pretty bad out there when these guys are reduced to making simple minded stupid dumb lies.

What's up with GS? Its shares are taking a dive. A 12 month Goldman Sachs chart
What? Some otc derivative bombs been set to ticking?

Friday, May 13, 2005

The US Dollar

I was wrong about gold not going below its base price level of about 425. The USD moved up more towards 86, so gold went down below that level. On the other hand the USD is now at 86 which is serious resistance so I doubt gold is going lower than today. I have to hand it to the cartel. They are doing a good job of influencing the markets and controling the mass media. Joseph Goebbels would be proud.
Goebbels at Nuremberg — 1934

Man oh man. When gold and silver blow, it should be really something since the government has gone sooooooooo far out of its way to manipulate/rig/influence (what ever you want to call it) the US markets. It takes the purchasing power of about USD 2,000 of today's dollars to equal the January 1981 purchasing power of about USD 870,
which was the price of an ounce of gold at that time.

The most amazing thing is that it appears that Americans are continuing to go even deeper in debt.

Most American "money" managers don't know what a bear market is, couldn't recognize one if they were in one, which they are if they are equities managers. The ignorance of Americans is astounding, and their government is cheering them on.

Monday, May 09, 2005

Derivatives - BIS ( Bank for International Settlements )

The BIS says there are a total of about $300 trillion notional value worth of otc derivatives in the world. Despite saying in the past that otc derivatives should not be regulated, Greenspan is now acting concerned about them. I don't know why he bothers. I can not see him or any of the regulators doing anything about them. I'm not saying they should be regulated. In a truely free market most of the derivatives out there today would probably not exist, nor would the huge bond markets because interest rates would be so steady. There would not be any profits to be made trading bonds. In other words we would not have all these derivative nuetron bombs waiting to go off.

From Jim Sinclair's site, about derivatives

1. Have no regulators.
2. And therefore have no regulations.
3. They are not listed on any exchange.
4. There are no standard contracts.
5. There are no clearinghouse guarantees.
6. There is no transparency.
7. They are issued in most cases by subsidiaries of good name international investment firms - not the investment firms themselves.
8. There is no automatic guarantee mechanism between the parent and the subsidiary when it comes to trade debts.
9. A bankruptcy of the derivative-granting subsidiary would not be guaranteed by the holding company parent.
10. It is not possible to know the financials of a subsidiary of an SEC filing company as all that is required is for the parent to file if or not the subsidiary meets capital requirements - if there are any in the area they operate.
11. The subsidiaries are generally located in financial areas without capital requirements for financial commitments.
12. The financial capability of the performance of a derivative depends on the balance sheet of the loser on the contract.
13. Valuations are products not of a market but of a computer simulation based on assumptions inputted by the company doing the valuation for its own purposes.

Gold Shares

Last week most the better gold and silver shares closed up for the week. A good sign. Even on Friday with gold significantly down, many shares were up or just not phased a bit by gold's drop. A similar thing happened with many silver shares. Markets are not efficient since all information is not available to all market players. While there may be tons of information out there that is free, some is private property, the most valuable usually. This most valuable private information that the masses do not have could be why the shares did well last week. It may be that some of the most valuable information is being used to buy gold and silver shares by a very small group of people.

Yes, gold is at the bottom of its 6 week price range and the US Treasury and Fed bank seem to be particularly desparate. Maybe they can get gold below where it is now. If so, it is going to be awfully hard for them to do it.

By the way, I take the below as an indication of a bubble in the US real estate market. Treasure bonds and notes broke their uptrend lines last week. Therefor rising interest rates could scare the equity and real estate markets this week.

May 5 – AP: “It’s only on the drawing boards, but a developer is proposing to build the world's tallest condominium tower in downtown Miami. Leon Cohen bought the property Monday for $31.7 million and is preparing to submit plans for a 110-story tower that would be 1,200 feet tall. A companion tower of the same height would be a combination hotel-apartment building.”

Wednesday, May 04, 2005

Gold / Silver Market Bottom

Yesterday the USD was up 7 days in a row and is at the bottom of a resistance level between 84.5 and 85.5. US Treasury notes and bonds are in a similar situation in terms of resistance levels. The notes have drifted to the right over the last 2 weeks to their uptrend line. If the notes break the line, yields and interest rates look to go up. Not good for the US economy (looks to be slowing), US stock market and US real estate.

Gold and silver are down to their support levels established 5-6 weeks ago when I said gold and silver had likely bottomed. I still think in those terms.

2 days ago gold went down but the HUI index (mostly gold/silver non-hedged mining companies) held its level. Yesterday gold went down again and the HUI index moved up. I like that.

Yesterday the Fed's board and Greenspan pulled a Monty Python act when they announced about an hour and a half later that they forgot to put back in a sentence from last months message for this months message about the FOMC interest rate meeting. And that the other sentence that got left out should stay out. This is the moronic bunch that is trying to run the US economy Communist (central planning) style. They have already screwed up the US economy. The affects just haven't been fully felt yet. Most in the world, particularly Americans, did not learn a single thing from the internal implosion of the former USSR.

The US is more like a shell of itself:

Gold Price Per Ounce

"Unconstitutional or not, the individual income tax (or any other tax, for that matter) will not by itself drive this country's economy to collapse tomorrow, next month, or next year. But the monetary and banking systems will--if not tomorrow, surely someday soon. And the resulting chaos will offer the occasion and excuse for the General Government to impose a police-state tyranny beside which the worst excesses of today's tax Gestapo will resemble Jeffersonian libertarianism."
- April 9, 2005, Dr. Edwin Vieira, Jr., Ph.D., J.D., author of Pieces of Eight and coauthor of Cra$hmaker with Trader Vic

Sunday, May 01, 2005

Inflation / Deflation

What is inflation? What is deflation? Is the US or the world going to end up in inflation or deflation? Can both happen at the same time, but in different parts of markets?

A help to answering these questions is an article called "Gold and Deflation: A Dissenting Dissection" by Bob Landis at The Golden Sextent. It starts here.

Bob brings up a neat point a lot further down in the article. That some establishment heads (Roach and Volker are 2 examples) are talking like gold bugs talk and it's not shaking up anybody or the establishment if you measure shaking by major price changes in the financial markets. It really is something when you stop to think about it. Boy! Just wait till the real fear sets in and the prices of gold and silver get radical.

Here is a quote from the article:

"Peter G. Peterson, Chairman, The Blackstone Group; former Chairman, Council on Foreign Relations; former Chairman, Federal Reserve Bank of New York [20]:

The world is increasingly alarmed by America’s profligacy. It’s not just the
staff of the International Monetary Fund who lecture us as if we were a banana
republic. Global leaders at the Davos World Economic Forum and other venues
speculate openly about how long the dollar will remain the world’s reserve
currency, and about whether the U.S. financial system will take down the
global economy when it implodes.

Stephen Roach, Chief Economist and Director of Global Economic Analysis, Morgan Stanley [21]:

The day is close at hand when US monetary policy must get real. At a
minimum, that will require a normalization of real interest rates. Given
the excesses that now exist, it may even require a federal funds rate that
needs to move into the restrictive zone -- possibly as high as 5.5%. Yes,
this would cause an outcry -- perhaps similar to that which occurred in the
spring of 1997 on the occasion of the Original Sin. But in the end, there
may be no other choice. Fedspeak has taken us into the greatest moral hazard
dilemma of all -- how to wean an asset-dependent system from unsustainably
low real interest rates without bringing the entire House of Cards down.
The longer the Fed waits, the more perilous the exit strategy.

Under normal circumstances, that is to say, at a point in time when the nation was not in the grip of magical thinking, comments like these could reasonably be expected to prompt editorial outrage, a hue and cry for investigation and reform, and a great deal of handwringing and fingerpointing on the part of politicians. It is a measure of just how far gone we are that when even icons of the establishment start talking like goldbugs, nobody will listen. Welcome to our world."