Friday, May 02, 2008

Canadian Silver Bug- Friday files

Bloomberg reports that other Gulf States may soon follow Kuwait’s lead and drop their dollar peg (another one of my predictions for the year)

In the words of Kuwaiti Finance Minister Mustafa al-Shimali

``Yes, there are some'' Gulf Cooperation Council states considering dropping their pegs to the dollar, which has fallen 13 percent against the euro in the last 12 months. Some countries will do what we are doing”

The problem for the Gulf States is that their peg to the U.S. dollar has them importing double digit inflation resulting from the prolonged devaluation of the U.S. dollar. The Kuwaiti's acted on this danger almost a year ago when they moved their peg to a mixed basket of currency. As a result the Dinar has appreciated nearly 8% in the last year and though I could not find the numbers must certainly have decreased their non food inflation rate since.

This is definitely bad news for the U.S. dollar and it’s probably a good bet that rampant inflation will encourage the Gulf States to move more actively towards a proposed regional currency which I doubt would be pegged to the dollar. Even before the 2010 deadline for the new currency I believe some if not all Gulf States will move to a variation of Kuwait’s currency basket peg.


Despite the claims bottom and a quick end to banking problems the E.U and the Fed have increased their injections into the market with announcements the Fed will increase the Term Auction Facility to $150 billion this month from the previous $100B and the EU will increase their equivalent program from the $15 Billion range to $25 billion. Yep every looks fine here.

Bottom? What bottom!

For anybody keeping track apparently Las Vegas is winning the, who can lose the most in home value contest with a whopping 22.8% loss in one year, close runner ups are Miami and Phoenix.

2.9% of non rental homes in the U.S. are now vacant and up for sale, that’s some 2.28 million houses.

We have finally reached the half way point for ARM resets and while resets will start dropping off in the future, there are still a substantial number of ARMs yet to reset. Also don't forget it takes 3 months or so for arrears to turn into defaults, and even longer for defaults to turn into foreclosures. The peak in resets equals neither the peak in defaults nor foreclosures; that may have to wait until the end of the year or the beginning of 2009.

We've not even seen any major job loss related foreclosures yet, I have no doubt that numbers will reach at LEAST 4 million vacant homes before this is over.

Food prices.

I’m all for farmers making a decent living and I know they’ve been had it hard over the last decades but the rampant speculation that is going to cost millions of lives concerns me greatly. The west systematically destroyed domestic agriculture in the third world through the use of mechanized agriculture, subsidizing cheap grain production and globalisation; in the end foreign farmers could not compete with government supported imports and went out of business, but at least they could eat cheap.

This decade after they’ve lost the skills, the access to locally adapted seed, and often even the land to farm, bio-fuels and speculations rips their means of sustenance from their mouths. While there is certainly money to be made here I’m not comfortable doing it.


We’ve taken a beating this week and my only solace is its Friday (the usual suppression day for metals) and we are holding with a little strength.

What is really annoying me is some of my stocks are at prices not seen since gold was $600 and silver $10. I honestly think the big players are shorting the juniors to cripple them in a bid to snatch up cheap resources. The juniors have operating costs, drilling to do, but they can’t borrow right now and if you depress their price enough that share offer would cause too much dilution you just might squeeze them into a corner where a cheap take over is possible. It stinks, half the shorting is probably naked and we small investors are being brutalized.

Have a good weekend,
Do yourself and the world a favour, dig up part of your lawn and plant some veggies.

Wednesday, April 30, 2008

I got one right!

This is what I hope will the first of many "I told you so" posts for the year.

Today’s note is in response to the Feds action today lowering interest rates again by a more modest .25% bringing the prime rate down to my predicted 2% for the year. This makes me something like 2 for 20 on my predictions so far this year. 2% prime rate and a major bank failure (Bear Stearns), that's 10% probably better than Bernanke:)

One thing I can’t understand however is the recent strength in the U.S. dollar, $160 billion or so for stimulus package, 2% interest rates a full quarter before I expected them, banks taking loses weekly, another 3 billion loss for GM the list goes on and on. A full ½ of American’s trade deficit is now based on energy imports and with no chance of a 200 billion barrel oil field being found under the White House, this is not going to change anytime soon.

The fundamentals say the dollar should be weaker but since the Canadian and British Central banks have decided to hold hands with Bernanke as he skips down the path of currency debasement the weakness is camouflaged.

It still looks however that a crunch is coming as treasury auctions continue to be under subscribed, if they can’t borrow it they will have to print it. The U.S. has a large leaking wound which is draining its blood, the blood bank has been emptied and now they just keep topping it up with more and more saline solution watering down what little blood is left. Eventually the body will die!

James Turk of Gold Money is calling for a “Major Dollar Crisis” within 3 to 6 months and a return to $1000+ gold and silver over $20. When smarter people than me still see problems I think my $1200/$25 prediction for the year has hope.

The only other tidbit of U.S. dollar news is Iran claims that all transactions for oil are now non dollar denominated, Euros in Europe and Yen in Asia. While they announced this last year I appears to have taken some time to get everyone onboard with the idea.

What are you doing with your rebate?

I know from the hit tracking program that a fair number of my readers come for the U.S. and I was just wondering what our American friends were doing with their freshly counterfeited rebate money. Those who have direct deposit apparently have started receiving their cash and the cheques are probably in the mail now.

My best guess is that a good portion of this stimulus package will end up covering already purchased merchandise on credit cards and credit lines and the remainder will end up going towards more expensive food and fuel. That small portion of the population who can actually spend this money on new stuff will just end up supporting the Mao Kai Shek exploitation corporation somewhere in the orient, so who's economy is going to get stimulated?

Wal-mart is so eager to get people in and spending that they are offering to cash the cheques for free and offer deals. (you pay to cash cheques?)
Other retailers are offering special deals but only if you cash and spend part of your rebate with them, Sears for example will give you 10% if you convert your cheque into Sears gift cards as will several grocery chains. That’s how desperate retailers are to get a piece of the government largess, god forbid people save it or pay off debts.

I really enjoyed the Comments by Wal-Mart CEO Eduaro Castro-Wright
People don't have as much access to credit as they used to, Clearly that is having an impact on how consumers behave.

He was complaining at the time that lenders are not allowing people to extend their credit after maxing out and could not continue to splurge on nonessential or big ticket items. Duh, that’s how everyone got in this mess to start with, asshole!

So what’s up people, how much did you get?

How will you spend it?

Tell us some horror stories about what your non metal investing friends and families are doing.