RESEARCH PAGE: articles and current market news

What is happening in global economy?  Where do we go from here?  Why pursue precious metals and other tangible assets at this time?  Legendary stock guru Jimmy Rogers stated in Fortune Magazine in Dec 2008: "Virtually the only asset class I know where the fundamentals are not impaired - in fact where they are actually improving - is commodities...."  By the way, precious metals...those are commodities!

Jan. 20, 2009 Gold up $15 as Obama moves into office.  All the research suggests the push today is based on a flight to quality.  That is to say, continued concern over the weakness of the equities is prompting investors to run back to metals.  With the big board going below the 8,000 level we could see a strong flight to gold in the days ahead.  That, of course, will bring more wealth protectionists into the rare gold arena as well.  

SPECIAL REPORT Issue #1: America's Money CrisisEarnings, economy - here comes 'terrible'The week ahead: Investors gear up for a deluge of weak earnings and the biggest plunge in GDP in 26 years. Investors this week will face the largest batch of company report cards yet, in what is quickly shaping up to be the worst quarter for corporate profits in a decade.The earnings avalanche will test the market's mettle. Last week, the Dow fought back after falling below the 8,000 point psychological benchmark for four days in a row. Analysts say if the Dow can hang on to this level in the weeks ahead, that's a good indication that a bottom has been set.The biggest week for earnings brings reports from 137 S&P 500 companies and 12 Dow components. Standouts include Caterpillar, American Express, McDonald's, Yahoo, Wells Fargo and Exxon Mobil.Only 10% of the 85 S&P 500 companies that have reported so far have topped forecasts. Another 60% have met estimates and another 30% have missed, according to Thomson Reuters."We're in the process of absorbing just how bad the fourth quarter was," said Bernard McGinn, CEO of McGinn Investment Management. "We had a feeling things were terrible, now we're getting proof of it. The question is 'where do we go now?"This week also brings the latest Fed policy meeting - although it's likely to be less influential than usual since the central bankers are expected to keep interest rates unchanged near zero, said Kenny Landgraf, principal and founder at Kenjol Capital ManagementInvestors will also digest reports on housing, consumer confidence and leading economic indicators early in the week. The end of the week brings the fourth-quarter gross domestic product (GDP) report. It's expected to have fallen by an annual rate of 5.2%, it biggest plunge in 26 years."Everyone is bracing for the GDP number to be pretty terrible, but the bigger surprise could come with the housing numbers, which are also expected to be awful," he said.Landgraf said that investors are also looking for more concrete news to come from the Obama administration this week regarding the use of the remaining $350 billion of the TARP money and negotiations on the $825 billion stimulus package.Earnings hit hard: With 15% of the S&P 500 having already reported results, fourth-quarter profits are expected to have fallen 28.1% from a year ago, according to the latest figures from tracker Thomson Reuters.Typically, the final number is lower than where it stands at this point in the quarter. But even if the final number is no worse than where it stands now, the fourth quarter will still rank as the biggest decline for S&P 500 profits in the 10 years Thomson has been tracking results.Worse-than-expected reports from big financial companies such as Citigroup and Bank of America have weighed heavily on the results so far."It's not how many companies are missing," said John Butters, Thomson Reuters' senior research analyst. "It's the size of the companies missing and the magnitude of the losses."Financials are currently expected to lose $12.5 billion this year as opposed to their profits of $5 billion a year ago. But financials aren't alone, with 7 of 10 S&P economic sectors due to post declines.However, not all of the news has been bad. Last week Google, Apple and IBM reported earnings that were better than expected.

METALS STOCKS Gold soars above $900 on safe-haven demandBy Polya Lesova, MarketWatchLast update: 12:46 p.m. EST Jan. 23, 2009Comments: 525NEW YORK (MarketWatch) -- Gold futures rallied above $900 an ounce Friday to their highest level since early October, as falling equities and worries about the global economy prompted investors to seek a safe haven.Gold for February delivery was last up $40.70, or 4.7%, to $899.50 an ounce in electronic trading on Globex.Earlier, gold soared to an intraday high of $901.20 an ounce on Globex, which is the metal's highest level since Oct. 8, 2008."The market is up on safe-haven buying after equity market weakness this morning and poor earnings, which make gold attractive to investors right now," said James Steel, gold analyst at HSBC.On Wall Street, U.S. stocks posted losses, with the Dow Jones Industrial Average (DJIA):dropping 106 points, or 1.3%. See Market Snapshot.In more worrying economic news, Britain's economy contracted at its fastest quarterly pace in nearly 29 years during the final three months of 2008, government data revealed Friday, marking a result even worse than most economists' pessimistic expectations. See full story on U.K. GDP.Gross domestic product shrank by 1.5% in the final three months of the year, following a 0.6% quarterly contraction in the July-to-September period, the office for national statistics said in its initial estimate.The British pound plunged to a 23-year low Friday against the dollar, undermined as data confirmed the U.K. economy fell into a deep and potentially long-lasting recession in the final three months of 2008. See Currencies."The true secular measure of currencies is gauged against gold," as the metal extends to fresh record highs against the British pound, three-month highs against the euro, nearly four-month highs against the U.S. dollar and only three-day highs against the rallying yen, said Ashraf Laidi, chief market strategist at CMC Markets.Gold has breached well above its 200-day moving average against both the euro and the dollar, but the metal remains 11% lower than its 200-day moving average in yen terms, Laidi said in a research note."Since there remains ample upside in yen terms, Japanese investors may deem this as an opportunity to drive up the metal to next key targets, thus prompting global investor demand further higher," Laidi said.Also on Globex, other metals posted strong gains. March silver futures soared 66 cents, or 6%, to $12.02 an ounce and April platinum futures rose $27.60, or 3%, to $962.50.March palladium futures gained $10.20, or 6%, to $195 an ounce and March copper futures rose 7 cents, or 5%, to $1.47 a pound.Among mining shares, Barrick Gold Corporation (ABX:39.68, +4.11, +11.6%)rallied 11%.The Amex Gold Bugs Index (HUI 304.04, +25.28, +9.1%) , which tracks the share prices of major gold companies, gained 9%. The SPDR Gold Trust (GLD 88.36, +3.78, +4.5%) , the largest exchange-traded gold fund, rose 5% and the Market Vectors-Gold Miners ETF (GDX: 34.34, +2.88, +9.2%) gained 9%.Oil futures fell Friday, pressured by rising inventories and worries about the severity of the global economic downturn. See Futures Movers. Polya Lesova is a New York-based reporter for MarketWatch.

Another Great Depression  (by James Turk)  I don’t like to start any new year on a gloomy note.  I am by nature an optimist, but I am also a realist who readily faces facts. Right now those facts are not very pretty and suggest to me that the world has entered into another Great Depression. Here are some shockers about the US economy that are worth pondering.The National Bureau of Economic Research reckons that the present recession began in December 2007. In only one month since then has the US economy not lost jobs, but worryingly, the job losses are occurring with increasing momentum suggesting that the economy is spiraling downward.Last week the US government announced that the unemployment rate rose this past December to 7.2% from 6.8% the month before.  The US economy lost 2.6 million jobs in 2008, of which 1.9 million were lost in the past four months.  Of these, 524,000 were lost in December alone.Importantly, there are clear indications that employment will drop further. Companies have been cutting back on hours worked, which reached a record low in December of 33.3 hours per week. This measure is a leading indicator because companies first cut back on hours worked before they cut jobs. Also, layoffs are growing. The Wall Street Journal reports: “The new year has brought no letup on layoffs, as employers have already announced more than 30,000 cuts.”The monthly unemployment report is prepared by the Bureau of Labor Statistics <http://www.bls.gov/news.release/empsit.nr0.htm>. It reveals that the number of unemployed has climbed over the past year by 3.6 million to 11.1 million, but the real numbers are much worse when looking through the government sugar-coating in these reports. As The Wall Street Journal explains it: “While the official unemployment rate is 7.2%, a different figure that includes discouraged workers who have dropped out of the labor force and those working part-time because they can't find full-time work hit 13.5% in December. That was nearly a full percentage point higher than in the previous month and up from 8.7% at the end of 2007.” While a 13.5% unemployment rate is shocking, the truth is even worse because the WSJ is still relying upon government reports. To get the unadorned picture, we need to turn to private economists, and I reply upon the work of John Williams ofShadow Government Statistics <http://www.shadowstats.com/>, who presents in his latest report the true picture of the dire unemployment situation: “During the Clinton Administration, ‘discouraged workers’ those had given up looking for a job because there were no jobs to be had were redefined so as to be counted only if they had been ‘discouraged’ for less than a year. This time qualification defined away the bulk of the discouraged workers. Adding them back into the total unemployed, actual unemployment, as estimated by the SGS-Alternate Unemployment Measure, rose to 17.5% in December from 16.6% in November.”Unemployment is the key measure that signals whether or not a depression has begun, and by the SGS measures we are rapidly approaching the 25% unemployment rate usually mentioned as the most important signpost marking the depths of the Great Depression. That high rate of unemployment cut a wide-swath of misery through the American population.Given the current 17.5% rate of unemployment, it would appear that I am not far off the mark to suggest that we have entered another Great Depression, and I am not alone in my thinking. Others who are more attuned to the economic situation see it the same way as I do.For example, the following quote is from an OpEd piece by Nobel Laureate Paul Krugman that was published in The New York Times on January 5th: “The fact is that recent economic numbers have been terrifying, not just in the United States but around the world. Manufacturing, in particular, is plunging everywhere. Banks aren’t lending; businesses and consumers aren’t spending. Let’s not mince words: This looks an awful lot like the beginning of a second Great Depression.”I agree, which is unusual because I don’t often agree with Mr. Krugman.  But not only do I think his observation about another Great Depression is accurate, but I also agree with another key point of the analysis in his article.Namely, Mr. Krugman observes: “In 2003, Robert Lucas of the University of Chicago, in his presidential address to the American Economic Association, declared that the central problem of depression-prevention has been solved, for all practical purposes, and has in fact been solved for many decades.  Milton Friedman, in particular, persuaded many economists that the Federal Reserve could have stopped the Depression in its tracks simply by providing banks with more liquidity, which would have prevented a sharp fall in the money supply...It turns out, however, that preventing depressions isn’t that easy after all.”Not only is it not “easy”, it is impossible, and the reason is simple.  Ludwig von Mises explained this phenomenon in 1912 in his seminal work, “The Theory of Money and Credit”.Basically, banks make too many loans creating a ‘boom’ that is built upon an unsustainable and shaky foundation of credit. Eventually, the bankers and their borrowers realize that these extensions of credit and the mountain of borrowing that resulted from it was imprudent, and they then seek to improve the dire state of their overleveraged balance sheets. The ‘bust’ occurs because the loans made during good times inevitably lead to bad investment decisions that appear sound only within the illusory prosperity of the boom. In short, prosperity comes from hard work and savings, not borrowed money and consumption. Unfortunately, hard work and savings have been in short supply, and economies around the world are now feeling the consequences.For decades the global economy in general and the US economy in particular have enjoyed the boom. They are now in the throws of the bust, and this where Mr. Krugman and I part company. He believes that this current bust can be avoided by more of the same – government spending.He says: “Friedman’s claim that monetary policy could have prevented the Great Depression was an attempt to refute the analysis of John Maynard Keynes, who argued that monetary policy is ineffective under depression conditions and that fiscal policy – large-scale deficit spending by the government – is needed to fight mass unemployment. The failure of monetary policy in the current crisis shows that Keynes had it right the first time. And Keynesian thinking lies behind Mr. Obama’s plans to rescue the economy.”This wrong-headed thinking is what put the US economy – and indeed, the global economy – in this mess in the first place. Therefore, the cure cannot possibly come from government spending, all of which is going to come from debt – some $2 trillion of it that is estimated the government will borrow this current fiscal year.If Mr. Obama follows this advice – and he has clearly indicated that he will – the US government will have gone ‘to the well’ once too often. It is foolhardy to think that the federal government’s resources and borrowing capacity are unlimited. They are not, and more to the point, they have already been exceeded. It’s just that too few people today recognize this reality, which is what always happens in bubbles. People accept certain conventional wisdoms without question or even any cursory analysis. For example, consider the following.

It is questionable whether Keynesian dogma ever worked, but regardless, one thing is clear. Increased borrowing and spending by an overleveraged government in an overleveraged country that is already the world’s largest debtor will not make the economy strong or lead to an economic revival. It will lead to a collapse of the currency, just like it has done in dozens of countries throughout the world. By pursuing defunct Keynesian dogma the new administration is ringing the bell that signals the death knell of the dollar.In short, the biggest bubble of them all – that the US dollar is ‘money’ – is about to pop. The US dollar is on the path to the fiat currency graveyard, and will soon get there.Not only does the US have problems, but like the 1930s, they are global. While it had been hoped that China would be the shock-absorber of the world, both its exports and imports are falling from year-ago levels as its manufacturing activity stalls. Germany is also faltering, as is much of Europe. There is another similarity to the 1930s.Most people mark the beginning of the Great Depression with the stock market crash in October 1929. I think it actually began over a year later with the collapse of the Bank of the United States in December 1930, a commercial bank based in New York City. Its failure turned an economic downturn into a full-fledged panic that rocked the American banking system to its core, which in turn sent ripple effects throughout the world, just like the collapse of Lehman has done.Is there some good news for 2009? There are two things that should bring some cheer.First, the plummeting price of crude oil to $40 a barrel has put some $200 billion back into the pockets of Americans. That may help economic activity somewhat or at the very least, help repair household balance sheets.Second, gold is likely to have another good year as the world increasingly wakes up to today’s realities. As they do, they will also come to understand that gold is money, which is a good thing to hold any time, but particularly during economic and monetary turmoil.by James Turk

Gulf central banks look to gold as uncertainty rises

By Cleofe Maceda, Staff Reporter