March 2010


Essentially it’s been torpedoed by the Greeks and Euro.

While the dollar has rallied in the past four months, it is largely a euro phenomenon. That phenomenon is based on a sovereign debt crisis concerning Greece’s ability to refinance its debt. For now, that crisis is beginning to wane as credit default swaps have dropped since February 4th, but Greece has a long road up ahead to refinance 53 billion euros in debt. It would be a good idea to continue watching Greece’s debt issuance throughout the year and the resulting affects on the U.S. dollar index if you’re invested in dollar denominated commodities, such as gold, that tend to fall when the U.S. dollar is rising.

That said, the US dollar is doomed. Obama has put paid to that. By adding his ridiculous Health Care Bill to the already unmanageable liabilities of Social Security, Medicare & Medicaid, the US deficits are exploding. Add to that volatile mixture the inability to incur longer term debt due to rising yields and the interest burden, Gold and Yamana will have their day in the sun.

On the move again. Soon it will break $100 and drive possibly, significantly higher. I’m still waiting on this for a short.

NEW YORK (AP) — Nissan’s new electric car will cost just over $25,000 when it goes on sale in the U.S. in December, aiming to bring gasoline-free technology within reach of mainstream drivers.

The Leaf, a four-door hatchback, will have a base price of $32,780, but it’s eligible for a $7,500 federal tax credit for electric vehicles. That will make it cheaper to buy than electric vehicles coming from rivals and may force competitors to cut prices. But the Leaf’s limited range of just 100 miles per charge for its lithium-ion battery could be a dealbreaker for some motorists.

“We want to make sure the car is affordable, ready for the mass market and has mass appeal,” Mark Perry, director of product planning and advanced technology at Nissan North America Inc., said in an interview.

Customers can start reserving a Leaf in the U.S. on April 20 and Nissan is aiming for 25,000 orders by December. It hopes to build and sell 50,000 of the cars around the world during the first model year. Production is starting at an existing factory in Oppama, Japan, south of Tokyo, and will expand to Nissan’s factory in Smyrna, Tenn., in 2012.

Christopher Richter, an auto analyst at CLSA Asia Pacific Markets in Tokyo, predicted the car will prove popular among “people who want to be green, people who love technology and people who are status-conscious.”

Sales during the first year will be limited to about 20 large cities in the U.S., including New York, Seattle and Atlanta, Perry said. He said Nissan hopes to expand Leaf sales nationwide by the end of 2011.

The Leaf’s relatively low starting price — as well as an option to lease the vehicle for $349 a month — could touch off a price war among rivals. A spokesman for General Motors Co., which will begin selling its Chevrolet Volt electric car later this year, said it will look at Nissan’s pricing before announcing its own closer to its December sales date.

Suprised? I was.

As Argentina’s oil battle with the United Kingdom rages on, the only other obstacle the South American country can throw at oil companies planning to drill near the Falkland Islands is to interdict U.K. ships or equipment – but regional expert Riordan Roett doubts the Argentines are “stupid enough to do that.” This would be a “very dangerous move” on the part of the Argentine government, said Roett, director of Latin American studies at Johns Hopkins University in Washington. Argentina, which went to war with the U.K. in 1982 over Falklands’ sovereignty, is “very careful” about challenging the British in reaching the islands, Roett noted. The dispute between the old foes erupted in February when U.K.’s Desire Petroleum towed an oil rig from Scotland to the South Atlantic to drill near the Falklands. Experts tout the area beneath the islands contains as much as 60 billion barrels of crude oil but there are many doubts about this claim.

Never actually thought about it much while we were fighting, but, now it all makes much more sense.

Demand, in one of the worst economic periods of history, has not dropped the price of oil that much. Sure it’s down from the $140/barrel nosebleed level of the 2007 market, but, it’s likely heading back there as a stopping point higher.

The reason being that once-upon-a-time, America entering an economic downturn would have dropped the price into almost single digits. America accounted for that much useage. Not anymore. Now, America while certainly still the primary consumer, has significant competition.

Thus, the price of oil is going far higher, until, pretty much extinction. What energy source can replace oil? Warren Buffett has bet on coal via the railroads. Check out the rail infrastructure around the West Coast, the major import ports from Asia.

What else is there that can replace oil? The obvious candidate is Natural Gas. Cleaner than Coal, the infra-structure already largely exists, and I believe it produces as much, or more energy than coal. The US has ample reserves, as it does of coal. Thus industrial [electricity] supply should be ok [just as well, nuclear, is not really a solution now due to timeframes]

Transport for the general population however remains a major problem. The electric car really needs to progress to the point where it can be mass produced, the battery issue resolved, and the price to fall significantly to generally affordable levels.

What’s government actually doing? Oh, pretty much the absolute opposite. It is seriously time to get rid of these clowns.

Rising Bond yields, historically, have been a negative for the stockmarket. Thus the rising 10yr Note rising yield should indicate a warning sign for the current stockmarket – correct?

Wrong.

The rising 10yr note yield essentially will increase interest payments as a % of GDP to the government. A government already running record deficits, debt and adding to them all-the-time. This then essentially increases the risk of default and/or continued inflation, that might progress to a full-blown hyperinflation.

Stocks in this environment actually become hedges against the loss in value of the government debt and default. If you go back to the myriad hyperinflations through fairly recent history – the salient fact is that the stockmarkets maintained purchasing power far better than the debt markets.

Unless governments get their fiscal and monetary houses in order, the run to Treasuries is likely to be fraught with pain. Treasuries, until further notice are a short-sale.

From Zero Hedge:

Today, Adrian Douglas, director of GATA, adds to the mountain of evidence that the commodities market, and the CFTC, stand behind what is potentially the biggest market manipulation scheme in the history of capital markets…Douglas confirms that the “LBMA trades over 100 times the amount of gold it actually has to back the trades.”

“…So the giant ponzi trading of gold ledger entries can be sustained only if there is never a liquidity crisis in the REAL physical market. If someone asks for gold and there isn’t any the default would trigger the biggest “bank run” and default in history. This is, of course, why the Central Banks lease their gold or sell it outright to the bullion banks when they are squeezed by high demand for REAL physical gold that can not be met from their own stocks.

Almost every day we hear of a new financial fraud that has been exposed. The gold and silver market fraud is likely to be bigger than all of them. Investors in their droves, who have purchased gold in good faith in “unallocated accounts”, are going to demand delivery of their metal. They will then discover that there is only one ounce for every one hundred ounces claimed. They will find out they are “unsecured creditors”.

The implications of which make it important to consider [if you are holding paper assets denominated in gold] which assets that you hold. Some of the newer ETF’s are Funds that will only hold the physical, some are shares in producers, these [should] work out fine, if, the allegations turn out to be true.

Getting very close, but still no final blow-off type of chart pattern. The financials are really bad, and I’ll have a post up on them next week at some point. This will be my short position, once I feel that the catalyst, or market warrant taking the position.

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