Today, I’d like to address a curious phenomenon developing in the Treasury market.

March 31st supposedly marked the end of the Fed’s quantitative easing (Q.E.) phase. We were told the Fed would no longer print money and buy mortgage backed securities. There was, of course, no discussion about the Fed printing money and buying other assets. However, ‘ending Q.E.’ carries certain implications and it would not be a stretch to say market participants were led to believe Q.E. in all forms was coming to an end.

Enter ‘curious phenomenon’: Treasury market behavior since March 31st would suggest Q.E. is alive and well. During the month of April, long rates rallied from about 4% to roughly 3.7%.  Treasury prices went up as rates went down after the Fed allegedly stopped Q.E.?! Needless to say this is not the response most market participants would expect.

I’m sure we can come up with more than one reason for this Treasury strength. Perhaps the issues emanating from Europe have driven investors into the relative safety of  US debt. Or maybe Goldman Sachs led financial fears are responsible for the Treasury bid.

However, the following excerpt from ‘The Privateer’ (A favorite publication of ours) offers a compelling argument supporting the theory that the Fed is continuing a Q.E. assault on the credit markets. If this theory is accurate, we would expect any equity market selloff to be contained to a normal uptrend retracement. Moreover, precious metals prices should continue to advance as more Q.E. equals further currency debasement which is a tasty recipe for higher Gold and Silver prices….

The US Treasury auctioned $11 Billion worth of “TIPS” on April 26. They started to sell the regular stuff on April 27 with an auction of $44 Billion in two-year paper. With the Greek debt downgrade to “junk”, hardly anyone noticed. Hardly anyone, that is, except the bidders for US Treasury paper. Indirect bidders (read foreign central banks and governments) bid for only 28 percent of the paper, down substantially from the average demand in 2009.

But much more troubling was the massive 24 percent of the paper on offer taken by the so-called “direct bidders”. The rest was presumably taken by the “primary dealers” in Treasury paper. The “direct bidders” had taken as much as 10 percent of the auction on only 12 of 42 auctions since July last year. They had taken that much only six times in all the auctions held by the US Treasury in the FIVE years from the beginning of 2004 until the end of 2008.

Even more disquieting, the identity of those who are included as “direct bidders” is never disclosed. The fact that the amount of Treasury debt taken by “direct bidders” has blown out since the Fed officially ended its quantitative easing at the end of October 2009 has led to speculation that the Fed has not REALLY ended its policy of monetising Treasury debt after all. More and more analysts (including some mainstream analysts) have come to the conclusion that the “direct bidder” is none other than the Fed. They are almost certainly right, but nobody can know for sure because the “direct bidders” are secret….

Tags: Fed, gold, Goldman Sachs, precious metals, Q.E., Quantitative Easing, silver, treasury market, U.S. Debt

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Yesterday, the equity markets sold off over 2% while the US$ and GOLD moved sharply higher. That’s right, you read correctly, Gold and the US$ moved up together. This action comes as no surprise to the partners of RCM. Over the last year or so, I have explained to anyone willing to listen that the real move higher in Gold prices will occur in spite of or along with an initial move higher in the US$.

One reason the US$ initially moves higher with Gold can be accredited to the carry trade unwind which artificially drives funds back into US$ investments. As an example simply look at the strength of US Treasuries yesterday. As risk is unwound money moves into the relative safely of US Treasuries. I write ‘relative safety’ because as currencies around the world continue to devalue owning US Treasuries will not protect buying power. The only true safe haven in a world intent on currency debasement will be the precious metal Gold and Silver.

I will allow Briefing.com to supply the summary of yesterday’s trading. As you will see they have done an exemplary job…

WRAPX End of Day Summary: Stocks Drop Sharply in High Volume Trade

A high-volume selling effort in response to downgrades on the sovereign debt of Greece and Portugal sent stocks to their worst percentage loss in more than two months, but drove the dollar to its best gain in four months… Early trade was rather lackluster as widespread weakness among overseas markets weighed on mood of morning participants… Data didn’t do anything to improve the mood either. The S&P/CaseShiller 20-City Composite made its first increase since 2006 with a 0.6% year-over-year increase, but that was still weaker than the 1.3% annual increase that had been expected… Consumer confidence climbed in April as the Conference Board’s Consumer Confidence Index came in at 57.9, which was not only higher than the 53.5 that had been expected, but was the best reading since August 2008…

Weakness quickly worsened when it was learned that credit analysts at Standard & Poor’s downgraded Greece’s debt to junk and cut Portugal’s debt two notches to A-. Subsequent selling pressure sent the Dow down roughly 150 points in just 30 minutes. It even pushed through its 20-day moving average for the first time since February. It was never able to recover and, as a result, finished near its session low…

The wave of selling sent volatility sharply higher. In fact, the Volatility Index made its way up more than 30% to its highest level since February…

Many market participants fled to the dollar for safety. That gave the greenback a 1.3% gain against a basket of foreign currencies. The euro was especially weak as it fell to 1.3179 against the buck. That puts it on par with its one-year low against the dollar…

Tags: Bookmark and Share Tags: case-shiller, equity markets, gold, Greece, Portugal, precious metals, silver, sovereign debt, US Treasury, US$

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My Feb. 25th remarks  stressed the need for a solid defense based on the current market environment. Today, let’s have some fun and talk offense.

We at RCM have carried the precious metals torch for quite some time. We have explained on countless occasions via this blog, via radio interviews and through one on one conversations, that prodigious fiat currency creation around the world will lead to one unassailably predictable outcome: Higher Gold and Silver prices.   

We have not wavered from our stance despite, at times, an overwhelming din that spews forth from the chorus of naysayers and neophytes. However, we are not so arrogant as to avoid the necessary and important process of challenging our own beliefs. We continue to question our own conviction by analyzing the behavior of Gold and Silver vs. the US$, Euro, GBP and other currencies.

The results of this analysis from the past two weeks are in and the prognosis remains bullish with an increased likelihood of  ’wildly’. We have often stated that the true inflection point for Gold will come when it rises in price vs. all currencies at the same time. Well, in true Shakespearean fashion,  I say to the Caesars of today, beware the Ides of March….

Gold Surges With DXY Positive For The Day

No, you are not reading that chart wrong. Gold just surged to near two month highs, hitting $1130/oz, or $12 higher, even as the dollar is green for the day. The fiat currency inferno is picking up, as traders refuse to keep their money in anything but gold or dollars – proof of tungsten gold counterfeiting is not helping the gold shorts. From the 2010 lows, the currency devaluation “safety trade” has been Gold and the USD, in a ratio of 5-1!

Read More…

Meet The New Regime: Gold And Dollar Coincident  

For all those who expect to see a strong dollar result in lower gold prices: our condolences. Gold is now as much a flight-to-safety target, as the the ra(p/b)idly devaluable dollar (and all other fiat currencies), as has been repeatedly observed on Zero Hedge. The chart below demonstrates that over the past three weeks, not only has dollar strength resulted in gold strength, it has resulted in gold strength at a 6X multiple.

Read More…

Another Record For Euro-Denominated Gold  

As the euro is plunging (and dollar by implication surging) with gold yet again flat and looking like it may turn positive for the day, gold denominated in euros just hit another all time record of €827.

Read More…

In ancient Rome the government clipped coins to devalue the currency.  Nero, in 64 CE, was the first to come up with the idea to actually debase coins by reducing their content. Today, currency debasement has become an art form as evidenced by the story below. For our society, will the outcome of such debasement mirror that of Rome?….

US Dollar Money Supply Is Underreported

March 1, 2010 – As the financial crisis has unfolded over the last two years, the Federal Reserve has been responding in a variety of unprecedented ways.  Therefore, it is logical to assume that these never-before-used actions have altered long-established ways of viewing things.  One area that has been impacted is the US dollar money supply.

The quantity of dollars in circulation is being underreported by relying upon the traditional and now outdated definitions used to calculate M1 and M2.  These ‘Ms’ are calculated and reported by the Federal Reserve based on the following guidelines that identify the several different forms of dollar currency used in commerce:

Read More…

Tags: currencies, DXY, euro, Federal Reserve, GBP, gold, precious metals, silver, US$

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Investment strategy: Many factors will affect our investment strategy in 2010 not the least of which will be the continued development of the Chinese dragon. The transformation of China into an economic powerhouse will lead to many dynamic investment opportunities for those who can separate the proverbial wheat from the shaft.

I can think of no better international combine driver than our own research guru, Gary Rosenthal. When he simply touches a shaft of wheat a loaf of bread materializes. Am I bias because he is my father as well as a partner at RCM? Maybe, but proof of his personal success can be found under the ‘Charts & Graphs’ page of our website www.rosenthalcapital.com. Review ‘Gary’s Rosenthal’s rollover IRA’ section and judge for yourself whether my sentiments are justified or exaggerated.

Welcome to Our Research Room:

Bret: Gary, China has offered fertile soil from which to reap investment returns for some years now. Why do you feel 2010 may offer continued opportunity?

Gary: On Friday Jan. 1st 2010 a China and Asean free trade deal began. This is a major event on par with China being allowed into the World Trade Organization in Dec. 2001. I believe this Asean free trade deal among nearly 1.9bn people will further accelerate the growth in Asia. Furthermore, China has established initial agreements to settle trade in local Asian currencies, not the US$. The stage is set for Asia to roar away from the U.S. and to establish the Yuan (Rinmembi) as a hard currency.

Bret: Forgive this question for being the softball it is and riddle me this: What do you believe is in store for the US$ this year and how would you structure a portfolio to benefit.

Gary: Softball? More like a pumpkin or watermelon! Take my previous comments, add Quantitative Easing (unlimited Dollar printing) to declining Dollar demand in Asia and you have the blueprint for a dramatically lower Dollar over time. An appropriate long term investment strategy: Precious metals, industrial metals, energy, agriculture and well researched high growth Chinese equity ideas.

Stories reported since Jan. 1 2010 supporting the Chinese theme:

Asian consumers most upbeat, American sentiment dips – Reuters.com

Reuters.com reports consumer confidence is strongest in emerging Asia, Brazil and Australia, but weakened slightly in the United States in the fourth quarter as Americans worried about job security, a survey showed. Consumer sentiment was highest in Indonesia, followed by India and Brazil, and was weakest in Japan and South Korea, according to the survey conducted by Nielsen Company a month ago. Globally, the Nielsen Global Consumer Confidence Index averaged a reading of 87 points in the fourth quarter, little changed from the third quarter but 5 points higher than the second quarter. The U.S. reading dipped to 82 in the fourth quarter from 84 three months earlier, reflecting concern about rising unemployment and ranking U.S. confidence at 18th among the 29 markets surveyed worldwide. 

China raises key interbank rate – WSJ

The Wall Street Journal reports China’s central bank unexpectedly raised a key interbank market interest rate Thursday for the first time in nearly five months, signaling a change in its policy focus toward pre-empting inflation risks in the new year. The tightening move, in the form of a higher yield in its weekly bill sale, came less than a day after the People’s Bank of China hinted its priorities had shifted toward managing inflation expectations and away from single-mindedly supporting economic growth. It also shows the PBOC still prefers using liquidity management tools, rather than policy interest rates, to guide market funding costs gradually higher before inflation becomes a real threat, analysts said. In its weekly open-market operation, the central bank sold 60 bln yuan ($8.8 bln) worth of three-month bills at 1.3684% Thursday, after keeping the yield unchanged at 1.3280% since Aug. 13. The PBOC drained a net 137 bln yuan from the money market this week, its biggest weekly fund withdrawal in nearly three months. The central bank has been draining liquidity for 13 consecutive weeks.

 Jan. 6 (Bloomberg) — China overtook Germany as the world’s top exporter last year, data compiled by Global Trade Information Services Inc. show. 

China shipped products worth $957.7 billion in the first 10 months of 2009, while Germany sold goods worth $917.7 billion to customers abroad, according to an Internet database operated by Columbia, South Carolina-based GTI. Exports from China exceeded German shipments every month since April last year, data show.

China has already slipped past Germany to become the world’s third-largest economy and is forecast to overtake Japan this year, assuming the No. 2 spot behind the U.S. Exports have driven a 15-fold increase in China’s economy to more than $3.8 trillion since the nation opened its doors to foreign trade and investment in 1978. READ MORE…

China approves stock futures, margin trading – AP  

AP reports Chinese regulators have approved the launch of stock futures and a trial run of margin trading, a state news agency said, in a move that could help boost stock prices and increase the role of China’s securities markets in financing economic development. It will take about three months to complete preparations for stock futures, the China News Service said Friday. It said the trial of margin trading – buying stocks with cash borrowed from a broker – might be followed by full-scale use but gave no indication when that might happen. The decision was long-awaited by investors. Rumors that the innovations might be introduced this week helped to push up stock prices. They fell back when the changes failed to materialize.

Tags: China, investment strategy, precious metals, Quantitative Easing, US$, yuan

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The volatility of precious metals prices will continue to astound. For those requiring a courage boost, I offer the following information as succor…

The Precious Metals market is minuscule - Matterhorn Asset Management
The graph below shows how small the gold and silver industries and markets are in relation to major US corporations and to total world financial assets. The market capitalisation of the silver industry is only $ 9 billion and of the gold industry $ 200 B whilst Microsoft is valued at $250 B and Exxon 350 B.

Both the silver and gold industries as well as the physical markets are so small that any increase in demand is likely to drive prices very substantially higher.

Zerohedge further exposes the BLS Friday jobs report as a worthless…

Even as the BLS and the administration are trying to cover up the real state of unemployment affairs using assorted semantic gimmicks of just what it means to be unemployed, and as companies provide adjusted EPS numbers, while actual earnings continue to collapse, the true barometer of spending, provided by the Financial Management Service, tax withholdings (net of refunds), continues to paint the truest picture of just what is really happening with both America’s consumer and the corporate world….

…On a rolling 12 month basis, individual tax withheld has dropped by nearly 8% YoY, from $1.42 trillion to $1.31 trillion, while company witholdings are down a whalloping 64%, from $274 billion to just under $100 billion! Read More…

Of course, the Obama administration is aware of the true nature of the unemployment problem…

WASHINGTON – President Barack Obama called for a major new burst of federal spending Tuesday, perhaps $150 billion or more, aiming to jolt the wobbly economy into a stronger recovery and reduce painfully persistent double-digit unemployment. Read More…

Geithner said to be seeking TARP extension until next October -

Bloomberg.com reports Treasury Secretary Timothy Geithner plans to tell Congress that the Obama administration will extend the $700 billion financial-rescue program until next October, according to people familiar with the matter. While the Troubled Asset Relief Program expires on Dec. 31, Geithner can extend it by notifying Congress. A letter notifying Congress of the extension could come as soon as today, said the people, who declined to be identified. Andrew Williams, a Treasury Department spokesman, declined to comment. The TARP, passed in October 2008 to prevent a collapse of the financial system, has drawn criticism from Congressional opponents of taxpayer-funded bailouts of banks including Citigroup Inc. The Obama administration, preparing the ground for an extension, has emphasized that the program may also be used to aid homeowners and small companies.

Both actions above are US$ bearish, precious metals bullish. Add to the mix the recent zero-rate U.S. Treasury auction and you can see why our Gold and Silver investment thesis remains intact…

U.S. Treasury zero-rate auction matches record low
WASHINGTON, Dec 8 (Reuters) – The 0.000 percent high yield on the U.S. Treasury’s four-week bill auction on Tuesday matches the lowest on record for the security, the Treasury’s Bureau of the Public Debt said.

The Treasury’s auction of $29 billion in four-week bills at a strong 5.33 bid-to-cover ratio marks only the fourth time that the security was sold at a zero rate. The other three zero-rate auctions occurred in December 2008, near the height of the financial crisis.

Tags: Geithner, gold, jobs, obama, precious metals, silver, U.S. treasury, US$

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Stock Market Investing: Market action continues to revolve around the fallout from Friday’s employment data. Equity markets consolidate and precious metals take a breather. Yes, I wrote ‘take a breather’. Allow me to state unequivocally, we believe a dubious government supplied employment number lacks the power to end a Gold and Silver generational bull market. If you feel otherwise, please do us all a favor and sell your precious metals holdings. In fact, if you would like to borrow and sell short that would be even better.

All healthy bull markets experience shakeouts. Often, these shakeouts can be violent, but they tend to be short lived. These shakeouts result in the expelling of weak holders and suckering in of short sellers. These same players will again be buyers at higher prices.

Investment Strategy: Maintain previous positions and look to add on weakness where appropriate.

TrimTab’s explains Friday’s employment numbers:

TrimTabs employment analysis, which uses real-time daily income tax deposits from all U.S. taxpayers to compute employment growth, estimated that the U.S. economy shed 255,000 jobs in November. This past month’s results were an improvement of only 10.2% from the 284,000 jobs lost in October.

Meanwhile, the Bureau of Labor Statistics (BLS) reported that the U.S. economy lost an astonishingly better than expected 11,000 jobs in November. In addition, the BLS revised their September and October results down a whopping 203,000 jobs, resulting in a 45% improvement over their preliminary results.

Something is not right in Kansas! Either the BLS results are wrong, our results are in error, or the truth lies somewhere in the middle.

We believe the BLS is grossly underestimating current job losses due to their flawed survey methodology. Those flaws include rigid seasonal adjustments, a mysterious birth/death adjustment, and the fact that only 40% to 60% of the BLS survey is complete by the time of the first release and subject to revision.

Seasonal adjustments are particularly problematic around the holiday season due to the large number of temporary holiday-related jobs added to payrolls in October and November which then disappear in January. In the past two months, the BLS seasonal adjustments subtracted 2.4 million jobs from the results. In January, when the seasonal adjustments are the largest of the year, the BLS will add anywhere from 2.0 to 2.3 million jobs. In our opinion, trying to glean monthly job losses numbering in the tens of thousands or even in the hundreds of thousands are lost in the enormous size of the seasonal adjustments.

In November, the BLS revised their September and October job losses down a surprising 44.5%, or 203,000 jobs. In the twelve months ending in October, the BLS revised their job loss estimates up or down by a staggering 679,000 jobs, or 13.0%. Until this past month, these revisions brought the BLS’ revised estimates to within a couple percent of TrimTabs’ original estimates. The large divergence between the two results begs the question of what is causing the difference. While we don’t have an answer today, we will be poring over the data in an attempt to answer that question.

Tags: employment report, gold, investment strategy, precious metals, silver, stock market investing

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NEW YORK (CNNMoney.com) — The news that the sovereign wealth fund of Dubai requested a postponement of billions of dollars of debt this week could pose a big problem for U.S. banks…

…Bove said the underlying problem is that there is a lot of uncertainty floating around. For example, there’s little information available about counterparty derivatives, guarantees that transfer default risk from lenders to other financial institutions. And it’s unknown how much of Dubai World’s debt guarantee is held by U.S. banks. Read More…

Stock Market Investing: The above story along with many others have filled the airwaves and blogosphere over the last 4 days. I will refrain from adding my voice to the din. Moreover, endeavoring to postulate on the repercussions seems to me a fool’s errand. The sheer plethora of moving parts and back room deals makes a supposition worthless.

I will, however, offer some insight to a more pressing question: How will this event effect the US$, the equity markets and the price of Gold?

An avid reader of this blog will find the answer both simple and familiar. Bad news on the global economic front equates to good news for the U.S. equity markets and the price of precious metals, Gold and Silver.

Investment Strategy: The legend for deciphering this market environment:

Neg.Eco.News = Con’t.Q.E.; (Q.E. = Quantitative Easing; catchall for liquidity creation)

Con’t.Q.E. = Con’t.US$.Dval.; (US$. Dval = US$ devaluation)

Con’t. US$.Dval = Exponential Gold and Silver price increases + higher US equity prices

This legend, in all likelihood, will remain in force until major policy changes occur within the White House, U.S. Treasury and Fed. Never in history has the systematic devaluation of a currency led to sustained economic recovery and long-term growth. However, without fail, said devaluation leads to inflation, often hyperinflation, and a flight out of the currency into hard assets. The move unfolding in the price of Gold and Silver will be for most unimaginable, but for the few, the proud, the aware, it will be a move of a lifetime.

Tags: Dubai, Fed, gold, hyperinflation, Inflation, investment strategy, precious metals, Quantitative Easing, silver, stock market investing, U.S. treasury, US$, white house

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Juggling the recent debt crisis in Dubai, reports of a growing asset bubble, the latest unemployment data, and last Thursday’s turkey leftovers can present a formidable task for even the most seasoned of investors.  During times like these, why not sit back, loosen up the belt, and digest an admittedly ‘lite’ version of market commentary?  Jeffrey Saut, Chief Investment Strategist and Managing Director of Equity Research at Raymond James & Associates, as well as Bill Gross, Managing Director at the Pacific Investment Management Company (PIMCO), recently weighed in, releasing their own market thoughts.

Saut’s November 30th commentary is titled, “Don’t Worry About the Dollar!” Citing a previous occurrence during the 1970′s, he believes that stock market investors’ worries about inflation are largely overblown.  Most notably, he predicts that any continued weakness in the US Dollar will be more-than-offset by rising stock prices.  As he explains,

Nevertheless, the dollar’s weakness has clearly been very positive for our “stuff stocks” (precious/base-metals, agriculture, energy, cement, timber, etc.), as well as stocks in general, and we have been bullish. Most recently, we have suggested, “that with credit spreads below their pre-Lehman bankruptcy levels there should be no reason why the equity markets can’t ‘fill up’ the downside vacuum created in the charts by said bankruptcy… That gives the S&P 500 an upside target of 1200 – 1250”…

Saut goes on to support his bullish theory with a myriad of facts.  In particular, he points to recent decreasing jobless claims, dramatic increases in labor productivity, rising corporate profits, and lowering inventories as potential catalysts for an economic rebound.  More specifically, after initially cutting back on labor, he expects that businesses will soon look to reinvest profits, hire new workers, and replenish those declining inventories.  Such a move could reinvigorate consumer demand and jump-start our ailing economy.

Furthermore, he views last week’s Dubai debt crisis as a symptom of the previous real estate bubble, and not a sign of another pending systemic crisis.  Finally, as he has suggested over the previous few months, he is near-term bullish large cap stocks.

Meanwhile, in Bill Gross’s November commentary, titled, “Anything but .01%,” he points out the depressingly anemic returns generated by most of today’s money market accounts.  Indeed, although maintaining low interest rates may be in the economy’s best interests, they are also forcing investors to flee supposedly “riskless” investments in order to chase more attractive returns.  This has sparked a considerable rise in asset prices.

Nonetheless, Gross does not foresee the Fed raising rates any time soon.  As we have seen, the private sector has shown little traction this year, with government spending largely assuming the role of oiling the gears of this economy.  Until GDP picks up considerably, unemployment shows signs of reversing, and private sector demand replaces the need for government stimulus, rates are likely to remain low.  As Gross notes,

The Fed is trying to reflate the U.S. economy.  The process of reflation involves lowering short-term rates to such a painful level that investors are forced or enticed to term out their short-term cash into higher-risk bonds or stocks.  Once your cash has recapitalized and revitalized corporate America and homeowners, well, then the Fed will start to be concerned about inflation-not until.

Looking forward, Gross has a few ideas for skittish investors to consider.  First, long term investors must ready themselves for a “New Normal” economy to take effect.  In essence, they should expect that as companies continue to deleverage, corporate growth slows, and the government’s role in the economy expands, corporate profits will take a hit.  As a result, dividend and interest payments are also likely to suffer; end result, investors may need to lower their expectations when it comes to returns.

According to Gross, part of the reason why Warren Buffett recently invested in the railroads was to simply put his money to work, rather than let it languish in a low-yielding account (I covered this subject in more depth  in my previous blog).  Like Buffett, Gross believes investors would be wise to follow suit.  In this “New Normal” economy, he suggests targeting low-growth, high-yielding companies like utilities.  Although utilities may not excite investors from a return standpoint, they do offer reliable cash flow (dividends), and normally grow in line with the broader economy.

Tags: Bill Gross, debt crisis, Dubai, economy, equity markets, GDP, Inflation, inventories, Jeffrey Saut, jobless, labor productivity, New Normal, PIMCO, precious metals, Raymond James, real estate bubble, U.S. Dollar, utilities, Warren Buffett

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Mid-week and the economic numbers continue to disappoint. However, equity investors should take heart and view the chart above. This is a monthly chart illustrating the direction of the US$ and the inverse relationship with the S&P500. The chart dates back to 2000, but you can see the correlation has become more intense in the last 12 months.

So, as long as this correlation holds, remember bad economic data equals good equity market performance due to continued Fed accommodation that leads to a weaker US$…

Fed’s Bullard says possible Fed won’t hike rates until 2012

Housing Starts Crater
The talk that housing starts were stabilizing hit a snag in October as new housing starts plummeted 10.6% to 529,000 units from 592,000. The consensus forecasted an increase in starts to 600,000…Single family starts fell 6.8% to 476,000 and is at its lowest level since May. Multi-family starts fell a whopping 34.5% as only 53,000 new units were started. Multi-family starts have never been this low since the index was created in 1959

Gold bars allocated to the Trust in connection with the creation of a Basket may not meet the London Good Delivery Standards and, if a Basket is issued against such gold, the Trust may suffer a loss. Neither the Trustee nor the Custodian independently confirms the fineness of the gold bars allocated to the Trust in connection with the creation of a Basket. The gold bars allocated to the Trust by the Custodian may be different from the reported fineness or weight required by the LBMA’s standards for gold bars delivered in settlement of a gold trade, or the London Good Delivery Standards, the standards required by the Trust. If the Trustee nevertheless issues a Basket against such gold, and if the Custodian fails to satisfy its obligation to credit the Trust the amount of any deficiency, the Trust may suffer a loss. Read More…

I mentioned Monday, “Make sure your precious investment is backed by the actual metal.” Below you will find an excerpt from the Gold ETF (GLD) prospectus. This same language can be found in the Silver ETF (SLV) prospectus. Take heed of these warnings. I fear in a world that has become numb to a long list of possible side effects to the drugs taken, you may view this prospectus in the same light. Don’t make that mistake! These are very real warning that could effect your financial health. Why even take the risk, when there are so many quality alternatives? Please, feel free to log onto our website http://www.rosenthalcapital.com/ for a complete discussion of said alternatives…
…Meanwhile, the best in the business are coming our way. To Touradji and Paulson I will say, from all of us at RCM, welcome to our world!

Paulson & Co. to launch new gold fund January 1; Paulson to personally invest about $250 mln in new gold fund - Reuters

Touradji Capital Management LP, the New York hedge-fund firm that oversees about $2.7 billion, bought 2.23 million shares of Barrick Gold Corp., the world’s biggest gold producer, while selling shares in SPDR Gold Trust, the largest exchange-traded fund backed by bullion. Read More…

Tags: economy, Fed, gold, housing market, precious metals, silver, US$

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Stock Market Investing: No change from last week. The technicals didn’t get much better but an overwhelming tsunami of weak economic data helped to drive the US$ lower and drove both hard asset prices and equity prices higher.Read More…

…Meanwhile, even as Brazil implements policy changes to stop its currency from appreciating, the Real advances adding credence to the Economist theory of a Forex crisis approaching …Read More…

Investment Strategy: Ride the wave! This market behavior reminds me of the waters off Jupiter Beach, FL, where I live. Right now I’m looking at a beautiful expanse of ocean as far as the eye can see (don’t hate the player, hate the game) and I see perfect 5ft. rollers washing up on shore. The break is speckled with surfers all the way down to Juno Beach pier where the best are attacking the biggest swells.

The picture seems perfect but the key word from the description above is ATTACKING. I sat through brunch on Sunday next to a local surfer girl. She was around 16 and had everything going for her with the tiny exception of crutches and a rather large bandage on her foot.

While the surf was perfect for humans, it was also an absolute delight for the sharks. Do you see where I’m going with this? When investing in today’s markets you can enjoy the ride but you better remember the sharks are circling.

Time to review the details from last week. Follow the bouncing ball and you will get to the inevitable conclusion that hyperinflation is raging toward us like a Hammerhead that smells blood….

Fed’s Fisher says Q3 US GDP growth probably not quite as robust as originally reported, closer to 2.5% – Reuters

November University of Michigan-prelim 66.0 vs 71.0 consensus, October 70.6

Initial Claims Continue to Fall
Initial claims again beat consensus estimates as claims fell from 514,000 new claims to 502,000 for the week ending Nov. 7. While the drop in claims doesn’t represent a clear turning point, for the second consecutive week claims have fallen below the 520,000 to 550,000 range that it seems to have been stuck at during the previous month. The market is going to take the drop as a sign that the labor sector is beginning to turn around, but we’ve seen a similar decline in claims before when initial claims fell below the 550,000 threshold at the end of September…

The drop in continuing claims was not due to workers finding new jobs, but due to people running out of unemployment benefits. Approximately, 7,000 unemployed workers lost their benefits every day. Congress recently passed an extension of the unemployment benefits that gave all unemployed workers an additional 14 weeks of unemployment insurance payment and an additional six weeks to workers that live in states where the unemployment rate is above 8.5%. Obama signed the extension into law on Nov. 6. The extension will stop the downward trend in continuing claims…

More workers are still losing their jobs than finding new ones and we expect the data to show a slight uptick in unemployed workers over the next three months. Due to timing of the releases, the data will not show the results of the unemployment extension until the Nov. 25 release. This means that the continuing claims numbers will show a decline in next week’s reported numbers.

…The details above represent “blood in the water” that requires the Fed to remain easy. However, these policies that balloon money supply have fueled the decline in the value of the US$. I have written volumes about this vicious cycle. For the sake of new readers I will repeat the RCM mantra: Hyperinflation is a currency event not an economic event.

I am forever baffled by the ignorance of many financial commentators when asked about inflation. They point to economic troubles and scoff at the very idea of inflation but applaud Fed policy and cheer rapidly inflating asset prices. Do they not see the oxymoron? Or are they simply morons? (OK, true that was trite and a little unfair but it couldn’t be helped.)

Hyperinflation is rapidly spreading worldwide because currencies around the globe are being devalued in an effort to keep up with the Bernanke “helicopter” drops of US$. The world is heading toward a Forex crisis as the Economist article below suggests. Our response to this roller coaster: Please hold on to the (GOLD) bar…

The Economist on Gold and Forex:

Developed-country governments have attempted to control bond yields through quantitative easing and to support stockmarkets through ultra-low interest rates. But they cannot support their currencies as well without risking problems in the bond and equity markets. Gold’s surge may indicate that investors fear the next stage of the crisis will occur in the foreign-exchange markets.

Brazil’s real is up 1.1 percent against the dollar this month, even after imposing a tax in October on foreign stock and bond investments and increasing foreign reserves by $9.5 billion in October in an effort to curb the currency’s appreciation. The real has risen 33 percent this year.

…As you can see, the march toward hyperinflation and perhaps a currency crisis seems inevitable. The best defense: Precious metals, Gold & Silver. A note of caution: Make sure your precious investment is backed by the actual metal. More on that topic next time…

Tags: ben bernanke, Brazil, Dollar, Fed, forex, GDP, gold, hyperinflation, investment strategy, obama, precious metals, silver, stock market investing, US$

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