Casey Files:
This week in 'The Room'
Doug Casey
International
Speculator
written Apr 18, 2008
posted Apr 22, 2008
Welcome to "The Room"
The subscribers-only home page of Casey
Research.
Dear Readers,
I am running quite late this
sunny New England morning. But I have a good excuse: my wife
has left me.
Well, it's not all that dramatic...
it is just that she has hived off for Europe for a ten-day gallivant
with friends, leaving me in sole charge of the children, pets
and sundry household duties. Survival under such circumstances
has required me to rethink standard operating procedures. First
and foremost, rather than rolling out of the sack at a leisurely
7:00 am in order to make it to school by 8:00 am, the kids are
now rousted awake at 6:30 am. Under my new regime, all forms
of maternal cosseting have been vanquished. Instead, following
the required morning absolutions, they find themselves, sleeves
rolled up, feeding and walking the menagerie, setting and clearing
plates, helping to prepare meals and dashing brooms this way
and that.
Then it's off to the playground
for a solid course of healthful chasing after a basketball before
the school bell rings.
All in all, I'm quite proud
of how well I am managing to whip this place into shape. A self-satisfaction
that slipped into the morning call with my wife yesterday. After
listening silently as I related how I have whipped the place
into good order, she commented, a bit coolly, it seemed to me,
"Very nice, dear. Now when I get home, perhaps you could
remember this new routine of yours and stick with it versus,
say, sitting about over a nice cup of coffee while reading the
morning news on your computer."
I have long believed that pride
cometh before the fall and suspect that, provided I am not ousted
in a coup by the grumbling natives before my wife returns home
next week, I shall find myself hoist by my own petard following
her return.
But to the extent that my service
as Mr. Mom has undeniably disrupted my schedule this week, I
am going to have to get right to it. While I am never sure where
my wanderings will take me, I suspect this will be a fairly eclectic
issue.
The Energy Picture
Yesterday I had a long and
interesting conversation with Jeffrey Brown, the petroleum geologist
who spoke so authoritatively on the topic of peak oil at our
Scottsdale Summit. As it was only recently that I touched on
Brown's studies of the Export Land Model in this column, I won't
go into a lot more detail today. But I did want to share the
gist of a couple of comments that he made which stuck in my mind.
On the topic of those who dismiss
the peak oil believers as kooks, he said something to the effect
of, "It is, in my view, ironic that some people believe
peak oil theorists are delusional. That's because it is the height
of delusion to think that we can treat a finite substance, oil,
as if it is available in infinite quantities. It is not."
He also commented that, as
is reflected in the $115 price, things are going in the wrong
direction, and fast. As he put it, even the most determined pessimist
couldn't have foreseen even a few years ago that things would
get this bad, this fast.
Where does he see the price
going from here?
"I think we are going
to see a geometric progression in oil prices: $50, $100, $200,
$400. It's just a question of how short the periods are between
doublings."
He went on to discuss that
it now looks as if global crude production peaked in 2005. Since
that time, the production of total liquids has been basically
flat. And, per comments reported here a few weeks ago, his model
shows that Mexico, on any given day the 3rd largest source for
imported oil into the U.S., will stop exporting oil in 2014...
at the latest.
There was much more to our conversation, which I recorded and
will work up into a longer article soon. Meanwhile, you can read
a research paper on the topic of the Export Land Model by following
this link.
Peak oil is not about running
out of fuel. It is about running out of cheap fuel. Unless and
until there is a serious technological advancement (see the Kurzweil
article at the end of this column for one promising area), this
is a trend you can make your friend... versus letting it kick
you around each time you visit the petrol pump or pay the electricity
bills.
While we are on the topic of
energy, here's a brief look at what's going on in coal, the world's
third most important mass energy source (after oil and gas) from
Chris Gilpin of our Energy Research team...
Coal's Comeback
It wasn't too long ago - just
2006 actually - that coal had been written off as an old, dirty
fuel that had no place in the 21st century's energy equation.
What a difference a year makes...
* Values for 2008 are preliminary reported numbers subject to
revision
The prejudices against coal
were largely based on allegiances to the idea that actions taken
to prevent global warming - such as carbon controls - would crush
the coal industry. It turns out that the practicality of a simple-to-extract,
easy-to-ship fuel like coal outweighed these wishy-washy ideals,
and the international coal market went into overdrive.
The price paid for a particular
type of coal varies considerably, according to moisture, ash,
sulfur, calorific value, and the availability of user-specified
grades at their time of need. Australia is the main supplier
of coal to some of the world's biggest importers - namely Japan,
Korea, and Taiwan - and the price for thermal coal at its Newcastle
port has become a global benchmark.
The Newcastle benchmark doubled
for all grades of coal in 2007, and spiked to dizzying heights
in the early part of 2008 when heavy rains forced the closure
of several major coal mines in Australia. Thermal coal at Newcastle
went for as much as US$129, and has now pulled back slightly
as the flooded mines have been drained and resumed operations,
but the price remains well over US$100.
Coal is no longer the stealth
play that it was in 2007, but there are still opportunities to
be had. One area to keep an eye on are U.S. coal prices, which
remained dormant through much of 2007, but are waking up in 2008,
influenced no doubt by coal's international resurgence.
[Ed. Note: If energy
is not yet part of your portfolio, you are out of sync with one
of the most important trends in generations. At the risk of seeming
boastful, I think the new and improved Casey Energy Speculator
is, by an order of magnitude, the most comprehensive service
available for investors looking to keep closely in touch with
everything now going on in energy and, more importantly, the
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though, click
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So, How Are Things Going?
Bud Conrad dropped me an email
with the following chart reflecting a recent survey on the level
of satisfaction felt by the citizenry as to how things are going
in the U.S. While I suspect the trend expressed in the chart
has more to do with a general dissatisfaction in the level of
personal largess transferred to the respondents by Uncle Sam,
this sort of Jimmy Carter level of dissatisfaction won't go unnoticed
by the politicians.
In fact, I'll go on record
here and now that we are on the verge of seeing a New Deal announced.
It won't happen this year, but almost immediately after President
Obama takes power. I will bet that, trying to draft off the heuristic
connotations of that phrase, Obama will even use the term "New
Deal." But, in the same way that a Hollywood movie producer
names his movie sequels, it will likely be called the "New
Deal II"" which will then be used to excuse all manner
of re-jiggering of, well, everything. You heard it here first"
Here's a Trading Idea...
I have an idea that is very
risky, but potentially very profitable. Starting with one of
the biggest trends of the day, soaring food prices, we should
ask ourselves how we can profit.
The obvious is to buy food
commodities.
But there may be a better play.
Namely, only a drooling idiot can be supportive of bio-fuels
at this point.
Even the greenest of greens
must have come to the realization at this point what a huge screw-up
this has been.
The play, therefore, is to
figure out what market is going to be most affected by the government
pulling the plug on bio-fuel subsidies... and play that angle.
Everything being equal, the
dolts that conceived this moronic idea in the first place could
be expected to stubbornly remain with it for years to come. But
everything is not equal. Instead, we now have all sorts of reports
by quasi- and supra-state organizations pointing the finger at
bio-fuel as a major factor in the rising food prices. We will
soon have photos of starving children underscoring the damage
caused by this latest example of government miscalculation.
Most importantly, we have a
change in the presidency coming. That allows whomever is next
to cancel the subsidies and blame it all on Bush and his cronies.
The only question in my mind
is, what's the best way to play this?
As far as I know, no one else
is looking at this angle just now... which leaves the opportunity
wide open.
I ran this idea by options
and futures expert Steve Belmont, a partner with the RMB Group
(RMBgroup.com). Here's his response:
The answer to your e-mail is
simple. 1) Buy call spreads on sugar. 2) Buy relatively cheap
out-of-the money puts on soybeans, corn and rice. I believe this
is the next big trade in terms of reward to risk on the board,
despite what all "fundamentals" say -- partially for
the very reasons you mentioned, partially because of what I saw
in Bud's charts. Everything looks the same -- all at the top
of the parabola.
Nobody is taking this approach,
just like nobody I knew thought interest rates could rise. The
thinking has demand from China and India, etc. making it "different
this time." Whenever I hear that, I get suspicious. Full
disclosure: I own puts in corn and soybeans and am looking to
buy puts on rice.
While Steve's strategy is certainly
contrarian just now, primarily because you risk being too early,
the general idea that bio-fuel subsidies will end is, I believe,
a good one. What are your thoughts? Drop me a line at david@caseyresearch.com.
[Note: Note Steve's
mention of interest rates, a call that we featured recently in
the International Speculator and that I mentioned last week.
A couple of weeks ago, I bought EuroDollar puts - a strategy
recommended by Steve and his team - and am happy to report my
position has almost doubled already. Both Doug Casey and Bud
Conrad are on record as saying that playing rising interest rates
may be the single best move you can make today. This, and other
crisis strategies, will continue to be closely followed in our
flagship International
Speculator.]
On the Topic of Interest Rates
Not sure if you caught this
story, but the Wall Street Journal ran a piece this week questioning
whether or not the widely used LIBOR was actually valid, or if
it was being manipulated by the banks to downplay what they are
really paying for short-term money. You can read the full article
by clicking
here.
But here's the nub of the problem,
according to the WSJ:
The concern: Some banks don't
want to report the high rates they're paying for short-term loans
because they don't want to tip off the market that they're desperate
for cash. The Libor system depends on banks to tell the truth
about their borrowing rates. Fibbing by banks could mean that
millions of borrowers around the world are paying artificially
low rates on their loans. That's good for borrowers, but could
be very bad for the banks and other financial institutions that
lend to them.
In this market, at this time,
you have to be on guard against, well, just about everything.
People are desperately hoping that the banks will stop performing
like broken Whack-A-Moles, taking it on the head over and over.
But we are nowhere near out of the woods at this point.
President Obama?
Above, and in other editions
of this weekly missive in the past, I have expressed the view
that it will likely be President Obama who next sets his heels
on the Resolute desk in the Oval Office (the desk, a gift from
Queen Vic herself back in 1880, was built from the remains of
the British frigate HMS Resolute).
This week one of you wrote
to say, "Not so fast, I think you are jumping the gun on
Obama."
For entertainment purposes
only, I will risk offending the politically sensitive by sharing
why it is that I think Obama will be the next prez.
Here's my calculation at this
point. Despite the contention by many in the Democratic party
that Hillary's stubborn refusal to get out of the race is hurting
Obama's chances in the general contest this fall, I think the
opposite is true. In fact, every day she stays in the race improves
Obama's chances.
That's because Hillary's attack
dogs are turning up every possible stone trying to get the dirt
needed to bury Obama. Provided he can prevail (and at this point
it is almost a statistical certainty he will), then the Clintonistas'
constant attacks will serve to inoculate him in the public mind
against these very same charges, should the Republicans later
try to dredge them up ahead of the November vote.
Put another way, everyone will
have heard all the bad stuff available about Obama and so will
mentally relegate it to yesterday's news. Further, he will have
had the opportunity to practice the messaging that will best
allow him to dodge whatever charges the Clintonistas raise.
Meanwhile, back at Sunny Acres,
McCain is enjoying a nice long holiday. But once the contest
between Hil and Bama is settled, that holiday will come to an
abrupt end and the massive dossier compiled by the Democrats
on his many faults will be unleashed... just in time to do the
most damage ahead of the final contest.
While some of what McCain will
face when the general election kicks off in earnest did briefly
surface during the Republican contest, that was pre-school for
what is coming. He has, if you credit the fairly credible reports,
alienated a lot of people with his temper, people that won't
mind a little payback. Then there was the fact that he was caught
with his hand in the proverbial cookie jar with that whole Keating
S&L scandal, his rendition of Bomb, Bomb, Bomb Iran (seemed
funny at the time, but I have to believe it won't play well in
a 60-second attack ad aired over and over). And then there was
the whole cozying-up-to-the-lobbyists thing and his apparent
confusion over the key players in Iraq and Afghanistan, etc.,
etc.
Who knows, maybe Obama's folks
will borrow Hillary's 3:00 am ad and repurpose it against McCain.
"It's 3:00 am in the morning, who do you want answering
the phone?" Cut to John McCain thrashing, confused, for
the telephone. "Who the hell's calling at this time of the
damn morning! And who am I anyway?" (Sorry, McCain fans,
I just couldn't help myself.)
And so his holiday will come
to a screeching halt, just in time for the popular vote.
That's how I read it and, if
I can find the right counterparty, how I'll bet on it. At least,
if I win, I'll have some small head start on the higher tax bill
Obama's perfect world will require.
Another Casey First
A couple of weeks back, I took
the unusual step of posting an ad from a friend and subscriber
looking for the ideal mate. (The early response, she has informed
me, has been quite good... with a fuller report due any day.)
Another subscriber with whom
I stay in fairly regular correspondence mentioned in passing
that he was temporarily in the ranks of the unemployed. As I
have always enjoyed our correspondence - Clifton is a very knowledgeable
amateur historian - I suggested that if we could help a friend
find a mate, we could help a mate find a job. After all, what
are phyles for if not to help when help is needed. In any event,
I suggested he write up an ad for himself. Which he did, and
which follows...
David and I have something
in common other than precious metals. Both his stepfather and
my father served in the CBI Theater during WWII. His was in the
air as an Ace, mine drove the Burma Road.
I thank David and the Casey
gang for allowing me to use this forum. I'm relatively new to
the Casey family, but not so to precious metals, thanks to my
dad.
I'm looking for an opportunity.
My resume includes a lot of positions, since I did a career change
from sales and sales management into accounting (MBA, CPA), and
I've walked away from more than one unethical situation. Most
recently I've been in the homebuilding/land development arena,
but am open to a different industry.
An avocational writer, I have
written numerous short stories and novels. My interests include
the card game Skat, coins, books, guns, dogs, comic books and
red zinfandel. I am a Vietnam Era Veteran having served as an
MP in the US Army.
I would prefer to telecommute
from Northern Alabama with occasional travel as necessary, but
am open to relocating for the right opportunity.
If you can assist me with either
a traditional accounting/finance role or an amalgamation across
my interests, or if you are an agent or editor looking for new
blood, please contact me.
Q&A
As usual, I received a number
of letters from readers this week. Here's a couple I thought
you might find interesting.
Hi David,
Thank you for your thought-provoking,
funny letters. As a new subscriber, I'm trying to wrap my head
around a few issues raised in the April 11 issue of "In
the Room." My first question is technical, the second historical/philosophical.
Doug Casey writes, "If
the money supply is stable and one commodity goes up a lot, the
price of others must drop -- the general price level, in terms
of dollars, stays the same." What is the relationship between
the effect of currency inflation on commodity prices, and the
effect of the cycle of supply and demand (and the resulting state
of the infrastructure) of each individual commodity?
More philosophically, in reference
to your discussion about the housing bailout, you champion the
virtues of free-market capitalism. I have to be the devil's advocate
here, for no one else is. Isn't it free-market capitalism, unrestrained
by governmental oversight, that makes sweatshops possible? Notice
that when regulation tightened in this country, working conditions
improved, wages went up, and the "free market" hightailed
it to the Third World, where anything went, and despite occasional
boycotts, still goes -- at least as compared to labor standards
here.
Wasn't it a lack of preventive,
regulatory oversight that allowed the housing crisis to brew
and erupt? The "free market" wasn't so free after all,
even to those who preyed on ignorant and marginally solvent borrowers
-- and who then, attempting to "spread" (hide and pass
on) the risk, sliced and diced these shaky loans into pieces
too small to recognize, thus giving new meaning to "death
by a thousand cuts."
No matter how wonderful, everything
has its dark side, an unrestrained market as well as governmental
regulation.
Yours truly,
Linda
Given my time restraints, I
asked our own Terry Coxon, a senior editor who works on the International
Speculator and BIG
GOLD, to respond. For those of you who are unfamiliar with
Terry, he was Harry Browne's partner and editor for years and,
among other accomplishments, founded the Permanent Portfolio
Fund. Here's his response..
Linda:
1. Commodities and inflation.
The initial effect of an increase in the rate of monetary inflation
(an increase in the growth rate of the money supply) is to lower
interest rates. This tilts the demand for goods in general toward
capital goods (long-lived assets, such as buildings and machinery)
and away from short-lived, consumable goods (such as socks and
toothpaste). That's why the recent run-up in housing prices outstripped
the rise in consumer prices.
Among commodities, the earliest
to be affected by an increase in the rate of monetary inflation
will be commodities associated with the production of capital
goods -- such as lumber and metals. Consumable commodities, such
as foodstuffs, will lag behind and then later catch up. This
closely matches what we've seen over the last few years -- the
monetary inflation that pushed short-term interest rates down
to 1% and produced a boom in housing construction also set off
a rise in the prices of metals, but only more recently has fueled
a rise in the prices of wheat, rice and other foods.
2. Sweatshops. Milton Friedman
remarked that if his parents hadn't worked in sweatshops in Chicago,
he would never have gotten an education. What could he have been
thinking?
If by sweatshops you mean people
working in rough conditions for low wages, it is possible for
determined, energetic government action to change matters. The
government can, for example, require that every workplace maintain
a temperature of 80 degrees or less. And it can prohibit paying
any employee less than a certain wage rate. Sounds nice. But
the effect on employees ranges from bad to catastrophic -- because
the cost an employer is willing to incur for a person's labor
is limited unbendingly by the value that labor adds to output.
Air conditioning and other
workplace amenities (even fans) come with a cost, which is a
cost of maintaining an employee. It is inescapable that if the
government requires such amenities, then it imposes such costs
-- which reduce the wages the employer is willing to pay. The
employees might like the air conditioning, but the fact that
it is installed only by government mandate is proof that the
employees would prefer sweat and higher wages.
The effect of minimum wage
laws is even worse. Name any minimum wage rate and there are
people whose labor doesn't add that much value per hour. So no
one will hire them. In the U.S., these victims of government
are generally teenagers, who tend to be short on the education,
reliability and work experience that make labor productive and
valuable. Some of them never get their first job, and with time
they become chronically unemployed and eventually unemployable.
Not even slavery is as effective at keeping the poor poor as
vigorously enforced minimum wage laws.
Outside the U.S., measures
to shut down sweatshops would have even worse effects. The children
sewing clothes in Bangladesh only get 50 cents per hour because
that is about what they add to the value of the factory's output.
Requiring a minimum wage of 75 cents per hour would destroy their
jobs and leave them earning nothing. Some would die. An effective
boycott would be just as cruel. Boycott the clothes they make
because you don't like the terms of their employment and you
boycott their opportunity to live.
Terry
In Defense of Marx
I also received the following
email message, in response to my less than flattering description
of Karl Marx last week.
David
Based on your following statement:
"Thus wrote Karl Marx,
by reliable accounts a penniless, unpopular, slovenly loser throughout
the entirety of his miserable existence. Yet, avoiding any deep
contemplation, the masses gravitated to his slogan, resulting
in hundreds of millions of deaths and untold misery that carries
forward even to this day."
It's clear that you are an
absolute cretin. Marx's slogan is a fabulous one, and any civilized
culture would do well to aspire to it.
But being a bourgeois imbecile,
it's no wonder you deride it. As for Marx being responsible for
millions of deaths, uh, no, I think you'll find that those responsible
were people with names like Stalin, and Mao, who distorted Marx
for their own ghastly purposes. Now grow up or shut up!
Ross
At 53 years old, I suspect
the whole "grow up" thing is simply not going to happen.
And I don't really feel compelled to shut up, either. So I will
comment, albeit briefly, that while Marx didn't actually pull
the trigger on the uncountable millions who have died based on
his fine-sounding ideas, he might as well have.
That's because the slogan that popped to his mind one day, and
which you are so deeply fond of, "From each according to
his abilities, to each according to his needs" contains
within it a clear and implicit promise of coercion and even violence.
Any platitude, even Marx's,
might be used by an individual as a reminder to act in a certain
way toward their fellow man. But when it is adopted as government
policy, which was clearly Marx's desire and goal, it becomes
an entirely different thing altogether.
Simply (as a "bourgeois
imbecile," I am capable of no complex thoughts), what happens
if I, as the individual in Marx's equation who is able to produce
more, am unwilling to give of my bounty to others unable to produce
more?
There may be any number of
reasons why I might not want to hand over goods I have earned,
or shoulder extra work so that others less able may live more
comfortably. For instance, I might want to save money to start
a new business. Or, I may be concerned about the future and want
a little extra padding to assure my immediate family doesn't
have to go without. Or, I may simply enjoy the feeling of fine
Corinthian leather on my car seats.
But regardless of my reasons,
I may decide that, no thanks, I'd rather keep the fruits of my
labor all to my selfish self.
Leaving the government in Marx's
utopian world with only one option... coercion. They can forcibly
take the goods from me, or they can send me to a work camp. And
they can take away the controls of production, which was Marx's
proposed solution. But when they do, they will be taking away
the incentives to innovate and to produce, leading inevitably
(just check the history books for proof) to an economic meltdown.
Just as inevitably, the government - looking to protect itself
- then resorts to anything and everything to stay in power. Stalin
and Mao are not the exceptions in this form of government, but
the most likely consequences.
There is more to this discussion
than I have the time or the inclination to go into here. But
if you, Ross, have reached this stage of life still believing
in Marx and communism, then I'm betting you are still pondering
how Santa Claus manages to slide down your chimney each Christmas.
It's Official: I'm Out of Touch
I read this morning, as I watched
the stock market rise, that the reason for the rally has to do
with the fact that Citigroup's first-quarter revenue plunged
"only" 48 percent.
According to Bloomberg:
The New York-based firm's first-quarter
net loss of $5.11 billion, or $1.02 a share, compared with earnings
of $5.01 billion, or $1.01, a year earlier. Analysts estimated
the company would report a loss of $4.75 billion, according to
a survey compiled by Bloomberg.
So, a year-over-year swing,
in the wrong direction, of about $10 billion is good news? I
must be out of touch with the new reality, because I just don't
get it.
Apparently, however, the rationale for such ebullience - which
has the Dow up 197 points as I write - is because people are,
once again, seeing Citigroup's results as not quite as bad as
they could have been. This, apparently, signifies the beginning
of the end. And because things are going to improve, the Fed
can now be less aggressive in cutting rates... which has strengthened
the dollar, taking a (temporary) bite out of gold.
Now, one could comment endlessly
on these sorts of market movements. But I think it is a waste
of time. No question that traders will continue trying to spot
the patches of blue through the thick gray overcast. But this
storm, according to everything we see and reliably report on
in our various publications, is just getting rolling and before
you know it, lightning and hail the size of grapefruit will be
sending the equities market running for cover.
Inflation Watch
It is getting harder by the
day to keep up with all the negative inflation reports. The latest,
out of the UK, has it that the government there is waaaaaay understating
the real inflation rate. Specifically, that instead of it bouncing
along under the 3% rate, it is actually running closer to 15%,
based on a basket of items that the Daily Mail categorizes as
"must pay." You know, those annoying things like food
and fuel which governments like to leave out of their inflation
indicators. Here's the
story.
Meanwhile, Faith, one of your
fellow subscribers, sent along the following link to a YouTube
confrontation between Ron Paul and Fed Chairman Ben Bernanke.
While I would rank the caliber of most questions asked of Bernanke
by most Congressmen on a level with those that might be asked
by a grammar school social study class, Ron Paul gets into Bernanke
with both elbows. It is a very interesting exchange, stunning
almost. Check it out here.
Political Pandering
How low will a presidential
candidate stoop to pick up a vote? If you trust the evidence,
the answer is, pretty low. Among that evidence are the promises
of the Democrats that, if elected, they will change the current
regs so that union organizers will be able to unionize a company
based on a signed petition, versus the secret ballot that companies
can now insist on.
Now picture this. With the
secret ballot system, you step into a private booth and vote
to unionize, or not.
Under the proposed rule change,
George from down in the shop stands in front of you, toothpick
between his teeth, proffering you a sign-up sheet. "Here,
sign this," he says. So, what are you going to say? "No
thanks? I have noticed how so many of the unionized industries
have been destroyed and moved off-shore to be competitive."
I don't think so.
It reminds me of the close
friend of a former partner of mine who set up a vegetable stand
by the side of the LI Expressway. After a week or two, a guy
in a big caddy drives up and gets out. Toothpick between his
teeth, he says, "Looks like a nice business youse got here.
Whaddaya do wit your garbage?" "Oh, nothing much. It's
just a couple of garbage bags' worth that I toss in the trunk
of my car and take home." "Dat right. Well, you know
what? I think you could use a dumpster." "Really, it's
no trouble at all," my partner's friend replied. To which
his new acquaintance said, cracking his knuckles as he spoke,
"No, you don't understand. You NEED a dumpster. It will
be here in the morning. You just pay us rent for $500 a month
and everyone's good, right?"
But back to the present, while
I have nothing against unions, I understand enough about human
nature to understand what a fundamentally flawed idea it is to
force businesses to unionize based on a petition. The last thing
the U.S. needs at this point is yet more reasons to ship industry
overseas. One can only hope this is one of those situations where
the politicians are doing the only other thing they do better
than pandering... lying, in this case to the heads of the unions.
The Price of Gold
In my closing comments last
week, I wrote the following...
A final check of the numbers
as I prepare to put the tools to rest has it that gold is hovering
around the $926 level, while the DJIA is taking a hard shellacking,
down 223 points.
For entertainment purposes
only, I'm going to bet that gold is going to go over $950 in
the coming week. In fact, I'll go one step further, and say it
will peak at $953 for the high next week (as of noon next Friday,
April 18). If you want to get in on the game, send in a specific
guess of gold's high for the week (also by noon Friday). If you
are right, we'll comp you for a year of BIG GOLD... with a tie,
going to whoever sends in their prediction first. Drop me an
email with your prediction, and any other comments you have about
this week's edition, to David@caseyresearch.com.
The high for the week, using
intraday spot prices, rang in at $953.90... so I'd have to give
my crystal ball high marks. But I was outmaneuvered by Anne V.,
who actually nailed it right on the head, winning herself the
free one-year subscription to BIG GOLD. Here's her entry:
"David I think gold will
touch 953.9 next week. And I hope some of our gold juniors follow
suit!"
As for the juniors, the next
and most important trigger will be the next round of quarterly
reports issuing forth from the large producers. Those reports
will start coming out within a week or so, and will continue
into mid-May. If they are as positive as I think they will be,
the attention on the mining sector will ratchet up considerably.
Stay tuned, things are about to get interesting.
Miscellany
- A friend in need. Say what you will about Colombia,
they have had more than their share of turmoil and trauma. And
think what you will about the War on Drugs -- the Colombians,
at least to this casual observer, seemed to have jumped on the
team, supporting the U.S. effort to interdict supplies at the
source by, among other things, allowing U.S. soldiers to tromp
all over the place and engage in blanket dusting of crops using
various insecticides. I also have no doubts they paid close attention
to the admonitions of the U.S. government to build a diversified
economy. But when it came time to approve a new free trade agreement
with them, politics trumped and the Colombians were turned back
at the door. Not sure what message the rest of the world will
take away from this, but I think the bigger point to pay attention
to is that the trade barriers are only beginning to go up. And
not just in the U.S., but around the world. Not a good trend
if you ask me.
x
- Ascent of humankind - continued. Underscoring his optimistic view on
the world we live in - or soon will - our globetrotting chairman
sent along a link to an excellent article by Ray Kurzweil. Kurzweil,
who is well known and respected in the science community, points
to the exponential advances in computing power, and how that
same level of technological leap-frogging is now being applied
to other crucial fields as well. I have often commented to my
kids that their generation may live to 200 years of age. And
if you credit Kurzweil, the odds in favor of that happening are
improving daily. Here's a
link to the article.
x
- Crisis, what crisis? According to Bloomberg, "The
amount of distressed corporate bonds jumped to $206 billion April
11 from $4.4 billion in March 2007, according to a Merrill Lynch
& Co. index of bonds yielding at least 10 percentage points
more than Treasuries." Read those numbers again. $4 billion
to $206 billion in a year? Look for cover if you haven't already
found it.
And that is that for this week's
particularly rushed edition of The Room. I apologize for any
poorly worded or ungrammatical expressions, as at this point
I have the choice of doing another pass through what I have just
written, or picking the kids up from school.
As always, I greatly appreciate you taking the time to read this
weekly missive. As I sign off, the DJIA is up 234 points and
gold is trading at $916. Time to worry? Hardly. But it is time
to pick up the kids and so I will sign off for this week.
Until next week...
Sincerely,
David Galland
Managing Director
Casey Research, LLC.
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Doug Casey
Casey Archives
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