Doc 224899

Wall Street Breakfast: Must-Know News

Along those lines, Old Trader, we could add Abu Dhabi telling Dubai that Abu Dhabi is somewhat disinclined to cover the Dhubai World debt obligations, Sri Lanka buying more gold, Vietnam buying gold, India looking at buying the balance of the WMF annual gold allocation after already claiming a couple of hundred billion dollars worth, open discussions of replacing US dollars with an open basket of currencies including gold for international reserve transactions by the G8 and the G20, and China giving Obama a rather cold shoulder during Obama's bowing and scraping visit to China.


On Nov 27 11:38 AM Old Trader wrote:

> I can't help but wonder if Dubai is just the first shoe. This news
> has overshadowed Japan's Finance Minister thinking of asking for
> CB intervention on behalf of the yen, and the fact Vietnam has devalued
> the dong.

Is Dubai's Default a Black Swan Event?

Recipe for UAE "black swan event":

1) Start with last night's Dubai World mini-default.

2) Add the Abu Dhabi announced reluctance to cover Dubai's loan debt.

3) Then, replicate the event in early 2008 when the main fiber optic internet cable was severed in two places simultaneously in the Mediterranean Sea and the Persian Gulf, which shut down banking for a day or two in the UAE, parts of Europe and India, and other parts of the Middle East, and globally slowed up all internet operations everywhere else including the USA.

That, my friends, would cause sufficient panic among traders pressing to cash out their long positions that people holding gold contract options in COMEX would choose to take delivery of physical gold rather than trade the contract options for dollars, and we all know COMEX can't actually cover all the contracts with physical gold. COMEX defaults, people cash out their stock positions in the major exchanges, and the dollar drops like a stone.

That could be the scenario of a full-blown Black Swan Cascade.

COMEX Shorts Confronted by Huge Investment; Central Bank Demand for Bullion

The gold bullion price dropped less in Dubai than it did on the open spot market when Dubai World announced its request for a 6 month grace period for covering its debt obligations.

The investors who conduct gold trades on the Dubai exchange presumably include traders from the other emirates and neighboring large Muslim oil countries as well as insiders at Dubai World. Since they probably have better information about the state of corporate finances in that part of the world than the rest of us, and since they are more bullish on gold than the rest of the world today, I think I'll take my cues from them.

Another Crisis Looms Right Around the Corner

The Age of Aqarius is past, and now we gaze in fear at the looming shadows cast by the rising Obamaclypse.

ETF Update: Health Care Legislation and Health Care Stocks

With the House and the Senate sneaking around on the weekends trying to pass an Obamacare program when no constituents can actually contact their elected representatives to beg and plead with them to not damage the practice of medicine beyond repair (there is no meaningful healthcare without the practice of medicine), and blatant government deception about the true nature of the bill (replace Medicare and Medicaid with an even bigger, more expensive, and more unresponsive government bureaucracy), while the only useful reform strategy of tort reform is utterly ignored, who is going to be stupid enough to invest in healthcare stocks?

Global Macro Trends in Eight Charts: The Next Crisis Will Be in Currency

Our business models, and our management tools, are based on nothing but soothing language that can't make anything happen in the real world anymore. We use the same models and tools in corporate management that we use in the military.

And that's a major factor that supports the rising price of gold.

Corporate leaders can't make profits while putting Americans to work at jobs for the same reason the Army and the FBI couldn't do anything about Nidal Malik Hasan. Management strategies don't actually get anything useful done or result in dynamic leadership, they merely protect managers from being sued for any decisions that might resemble counter-affirmative action.

Most civilians aren't aware that our military is a "High Performing Organization". So is Chrysler, and so was Wachovia. Nothing but a bunch of P.C. hogwash !

Will Gold Hit $1,200 by the End of the Year?

WILL GOLD HIT $1200 BY THE END OF THE DAY?

Bargains Still Abound in a Few Gold Miners

Long term upside? TXX Tirex, Canadian exploration stage miner, is sitting on mountains of ore in the Mirdita region of Albania, which could rival Oyu Tolgoi in Mongolia in ounces extracted in the next 5 years, and their share price has plummeted to the point where an upside move is inevitable. The only question is time frame, since TXX may have to simmer a few years before it gets exciting.

Gold and Silver Continue Their Ascent

Gold bullion prices just formed a very bullish chart pattern: an inverted head and shoulders. A great deal of bullion is being purchased internationally, e.g., by India and China, and an increasing number of precious metals ETFs and mutual funds are buying it.

Gold is still less than 50% BELOW the inflation adjusted price it attained in 1980.

On the supply side, we are in a global state of peak gold: visible physical gold that just lays there shining in the sun, like it used to be found in Mexico, is pretty much gone and what's left is expensive to recover and refine.

Seems bullish to me.

Therefore, even if there are corrections, the trend is up.

Beyond GLD: Four Alternative Gold ETFs

ETS that were omitted from the list, worthy of consideration:

CEF: Central Fund of Canada. CEF holds gold and silver, and certificates in a vault. CEF just announced a $1B purchase of gold bullion.

GTU: Central Gold Trust. Like CEF, but holds just gold.

Beyond GLD: Four Alternative Gold ETFs

There are two ways to play GDXJ: trade shares of the ETF (which is what the vast majority of brokers and personal financial advisers will tell their clients, so a heck of a lot of shares will be traded), or trade shares of the stocks in the ETF's list of holdings. For the time being, I'm doing the latter. IPOs of ETFs are tricky, and ETFs (e.g., SMN) don't always perform like the label implies they will (Jeff's point, again).

If people buy a large volume of GDXJ shares, and they almost certainly will, it will pull up the demand/supply curve for many of these small miners, and share prices of the small miners’s stock will also be pulled upwards. GDXJ share prices should leverage GLD and GDX, all things being equal, and volume of GDXJ shares traded will increase the extent to which the individual small miner stocks leverage the price of gold and leverage the value of the gold miner sector.

In the same way GLD's bullion holdings raise the price of gold when lots of new shares of GLD are bought, an increase in the volume of GDXJ outstanding shares will raise the prices of small miner stocks. I’m betting that will happen in the next week or two, as this new ETF catches on, and it will pull up share prices of the junior miners.

Some of the stocks, like GRS and JAG and NXG, have terrific fundamentals right now, and they should do very well.

6 Global Risks that Could Spark a New Crisis

8. Several jihadi attacks simultaneously that even Obama can't ignore.
Short: lawyers, democrats, urban residential property, urban commercial property. Long: gold, silver, gold miners, commodities, rural residential properties, rural agricultural property with fresh water supply, guns, ammo, toilet paper, hand tools.

Hedge: learn animal husbandry and veterinarian skills, learn midwife skills, drop the bitchy attitude, discipline those children, make friends with a blacksmith.

3 Reasons Not to Believe In Gold's Recent Rally

Gold bullion spot prices just made an inverted "head and shoulders" chart configuration since the March market lows, MACD is positieve, and unemployment just broke 10%, so gold has short-term upside. Resistance on the HUI chart is around 480, but yesterday's resistance is tomorrows support. If one picks the right miner stocks, those stocks leverage the bullion prices. Gold has anticipated silver, and the other PMs, though investors who bought into PAL and SWC at the right point are chuckling right now.

6 Global Risks that Could Spark a New Crisis

7. L-shaped recovery. Short: lawyers, democrats, urban residential property, urban commercial property. Long: gold, silver, gold miners, commodities, rural residential properties, rural agricultural property with fresh water supply, guns, ammo, toilet paper, hand tools.

Hedge: learn animal husbandry and veterinarian skills, learn midwife skills, drop the bitchy attitude, discipline those children, make friends with a blacksmith.

Van Eck's Highly Anticipated Market Vectors Junior Miners ETF Is Set for Its Debut

All of Jeff Nielson's concerns are valid, and GDXJ could buy nothing but high risk derivatives of junior miner stock and sink like a stone, although the most obvious possible explanation of a thing (the ETF will buy shares of small gold miner stocks) is usually the way that thing happens in reality.

There are two ways to play this: trade shares of the ETF (which is what the vast majority of brokers and personal financial advisers will tell their clients, so a heck of a lot of shares will be traded), or trade shares of the stocks in the ETF's list of holdings. For the time being, I'm doing the latter. IPOs of ETFs are tricky, and ETFs (e.g., SMN) don't always perform like the label implies they will (Jeff's point, again).

If people buy a large volume of GDXJ shares, and they almost certainly will, it will pull up the demand/supply curve for many of these small miners, and share prices of the small miners’s stock will also be pulled upwards. GDXJ share prices should leverage GLD and GDX, all things being equal, and volume of GDXJ shares traded will increase the extent to which the individual small miner stocks leverage the price of gold and leverage the value of the gold miner sector.

In the same way GLD's bullion holdings raise the price of gold when lots of new shares of GLD are bought, an increase in the volume of GDXJ outstanding shares will raise the prices of small miner stocks. I’m betting that will happen in the next week or two, as this new ETF catches on, and it will pull up share prices of the junior miners.

Some of the stocks, like GRS and JAG and NXG, have terrific fundamentals right now, and they should do very well as GDXJ pulls their share prices up while their fundamentals combined with the rising price of gold have the same effect.