James Seaberg

Why Commodities Are Likely to Struggle in 2008

Why are only long positions deleveraged with margin calls, not short positions? The execution of the shorts makes the commodities rise faster than physical demand would have pressured their prices up. The shorts like J.P.Morgan Bank with its outsized gold short position has to buy the contracts back. This rises the prices of the commodity. It is not the winners which are deleveraged by margin calls, it’s the loosers. The commodity bugs are the winners. My advice: Stay with the winners then you will not encounter margin calls.

The Fed is Deflating: 10 Reasons Why

Jim, I commend you for your great analysis of our present situation with your recent three articles. It is amazing how many comments the article from the 10th of March 2008 has elicited by “flow5”. “flow5” mentioned Keyenes and Friedmann which both are wrong in mayor parts of their theories. I would like to submit that the study of Ludwig von Mises and his great work Human Action and related articles would solve many of our present-day controversies. This book can even be downloaded free of any charge courtesy of mises.org. If there are readers who are hurt by this recession and which are not economists, they probably would enjoy the very readable book The Creature from Jekyll Island: A Second Look at the Federal Reserve by G. Edward Griffin.

Housing Weakness Spilling Over To Manufacturing

The final solution is to abolish the Fed. It is a failed institution and has cost hundreds of millions of people their lifes by financing wars and destruction.

Burst Bubble? Commodities' Long-Term Story Remains Intact

Answer to User 42142 as of Mar 21, 11:50 AM with is question “If one uses these replies as a contrarian guide, what would one do?”

A contrarian is not always a contrarian. He follows the crowd for long periods and lets the profits run. Only before major turning points does he become a contrarian. For example when gold reaches the manic phase at around $15,000 to $20,000 and having the DOW also around $20,000 as an assumption, then he will start selling whilst most everybody else expects that gold goes to $ 30,000 or even $ 100,000.
This is not a time to stop following the early adopters of gold and the crowd that will soon come in. Yes, there is deleveraging. A lower money supply means recession a much lower money supply means depression. The Fed will stem this tide. If it doesn’t succeed, the US empire is over, done, toast. The Fed will buy, if necessary, your mortgages, your houses and your dogs and cats. He has that power. There are several executive orders in the #12,000 to #13,000 range where this power was given to the Fed shortly before Y2K (year 2000 date computer problem).

Whoever thinks that the Fed will be powerless after having reduced interest rates to 0.25% which I expect that it will do, is mistaken. In “open market operations” it can theoretically buy up each and every asset in the US and flood the country with dollars. Bernancke will not only use helicopters but also railroads to get the money to a rail station near you.

So, the smart action would be to use this pullback in gold to buy it, now. Next, I would buy down oil USO (UNITED STATES OIL FUND, LP (AMEX)) with buy-limits set at $75, 70, 65, 60. Later, when the dust has settled, I plan to buy the foods, DBA or RJA.

(Disclaimer: this is not financial advice, only my opinion. Talk to your personal advisor).

Burst Bubble? Commodities' Long-Term Story Remains Intact

This is a good assessment of Davy. We need also to understand that the US central bank needed to do something about price inflation. To lower interest rates and pump money into the economy (= monetary inflation) is very price-inflationary and hurts the dollar. Strangely enough starting 2:30 on Tuesday, the 18th of March, the opposite occurred. The dollar rose and commodities fell.

The fall in commodities was also a concerted action by the Fed and its banking and brokerage minions. Foreign central banks had to buy dollars and the US banks and brokers were told to raise the margins on commodity accounts and go short. Most of the mmargins have now risen to 90% from formerly 25%! In such a way nobody could blame the Fed to have increased price inflation, even though they increased tremendously money inflation. Price inflation usually follows monetary inflation with a certain time lag. But all this money will still creep into the economy and create in the US and worldwide further price inflation. That means the bull market in precious metals and the food complex is by far not over.

In my opinion, we have seen the lows at least in gold. I doubt it will go to 880$ as forecast by some analysts. These prices are buying opportunities. So why not buy today some and next week more.

Goldman's $200 Oil Call and the Hurricane Premium Theory

The rapidly rising general price level in the US will put a floor under oil prices and the price will stay high and eventually even go higher. The 640 dollar question is; will the oil price rise faster than inflation? Will your hedge against inflation outpace inflation?

Should Oil Be Trading at $60 or $150?

The blogger, Christopher Deal got it right. In order to understand the system, one should read the excellent book of Edward Griffin: The Creature from Jekyll Island. Also the various good articles from mises.org are very illuminating. Under a central-bank-system prices rise always. It is the pupose of a central bank to make sure that nobody escapes total confiscation. That is what we see. Enjoy it.

Ladies and Gentlemen, Here's Gold at $1000

There are more bombs to come. That phantasy money system is in complete disarray. Duck the explosions behind gold.

Metal Miners Benefit as Power Shortages Force Platinum Prices Higher

The statement “He revised his price forecast from $1,450 to $2,125 per ounce in 2008, and also increased his 2009, 2010 and long term estimates to $2,000, $1,900 and $1,000, respectively.” appears so hopelessly outdated. We are already at roughly $ 2,200. What is Jaworski talking about increaing his estimates to $1,900 and $1,000?

Parallel to gold, platinum will go much higher. The Russians take also very good care of the platinum price and hold back supply when the price plunges. Platinum is a clear buy!

The New Pillars of Inflation

Very good article, congratulations.

In reference to the “disinflation brought about by the fall in house prices will temper these inflationary pillars in the short-term.” I may add that house prices are not part of the Consumer Price Index of the USA (CPI); rentals are. Also, the CPI is falsified. To get a correct picture of the true inflation in the US, please refer to shadowstats.com. The inflation rate is much higher. That’s why the article’s author is so successful.

If we experience a bust in the US and a knock-on bust in China, I’m not so sure, whether the industrial commodities like copper, etc. will hold up in price. I think they will tank. Foods, oil and gold will hold up much better.

The Big Whoosh: Is This The Beginning?

The US economy is not a free market. It is a managed market by political interventions and the dictatorial Central Bank which price-fixes certain important interest rates. Under this regime, also called fractional reserve system, debt has to be increased incessantly in order to create GDP growth. Presently, this abominable system needs five out-of-thin-air- created dollars to create one dollar of GDP growth. Such a system is systemically unsustainable and will, within the next few years, run into a steel-armored concrete wall and self-destruct. All this chatter of my cobloggers is for naught, if we don’t talk first about the fundamental causes for the problems of the US economy.

I have seen Herb a few times on CNBC. I can hardly believe that he doesn’t know. Many at CNBC know but I can see it in their faces that they are not allowed to talk about the secret. Our problem is etatism, socialism, interventionism, the central bank and the fraudulent fractional banking system. Our solution would be genuine unhampered markets. We will have it in 100 to 200 years after 90% of mankind has been wiped out. It’s a slow learning process and mankind needs many catastrophes not to fall anymore for the glib fast-talkers of officialdom. I wish everybody lots of good luck .You will need it in order to survive.

Import Prices and Retail Sales: Two More Clues About the Future

If we discount the retail/food service sales of the above chart by the "true" inflation calculated in the shadowstats.com, we will find that the retailers and food sellers shipped 10% less goods out of the door than last year (13% p.a. inflation minus 3 % higher nominal sales). That means the consumer bought 10% fewer goods than last year. Now, if that is not a recession!

Gold/Dollar Ratio Goes Parabolic

On the gold/dollar ratio: The dollar will continue to fall against the Euro as long as the US inflation rate is higher than that of Europe. Gold will keep rising as long as we have negative real interest rates in the USA. If you put these two ingredients together, you will be able to forecast a continuation of the exponential rise of the gold/dollar ratio. So, don't worry. Keep buying gold. The Fed is an unvoluntary friend of gold.

Global 'Oil Shock' Rattles World Stock Markets

A scarce resource like crude oil can go up even in a fixed exchange rate system. We need only the concerted efforts of the major central banks to inflate the money supply. This unbelievable money supply growth which we are experiencing presently together with the prospect of peak oil will assure much higher oil prices even if the US falls into a recession. Solution: Buy USO (an ETF).

Interest Rates Fated to Rise?

Gold will do well as long as we have negative real interest rates. Just deduct the inflation rate of shadowstats.com from the yield of the fixed rate debt.