World Of Wallstreet

Best Of The Podcasts: Dominic Frisby, John Kay - Obliquity

How many financial interviews do you pay attention to once and never think about again?

Here's one I've been pondering for a while. I think the word "Obliquity", referring to something that can only be attained indirectly, is quite a useful tool. Happiness, for example, is Obliquitous.

Here's an example (underlined) that caught my attention in church this morning:

Mk 8:34-37: "And He summoned the crowd with His disciples, and said to them, 'If anyone wishes to come after Me, he must deny hiimself, and take up his cross and follow Me. For whoever wishes to save his soul will lose it, but whoever loses his soul for My sake and the gospel's will save it. For what does it profit a man to gain the whole world, and forfeit his sould? For what will a man give in exchange for his soul?'"

Have you found anything Obliquitous in your life? Leave me a comment.

P.S., I find Dominc Frisby interviews to have a ratio of "useful, I've never heard that before"  to "same old gold bug stuff" ratio to be pretty admirable.

MontyHigh, www.worldofwallstreet.us

Off-Topic Best Of The Podcasts: Here's What I've Liked Lately

I don't know if these are tradeable, but I found them entertaining:

Nice bit of conspiracy theory regarding the media and big pharmaceuticals: KMO and the C-Realm Podcast, 297: The Temple of Biological Mysticism. I don't think I buy the whole anti-modern medicine thinking.

Turd Ferguson interviews Gozolo Lira. The beginning is about the Europe Debt situation but things get interesting when talk of war with Iran gets going.

MontyHigh, www.worldofwallstreet.us

Download ZMcCaffrey001

Best Of The Podcasts: Pento On Inflation And Deflation

This King World News with Michael Pento (click here) is one I can recommend.

The really interesting part starts are around 7 minutes in. The really interesting idea is his proposal for a simple way to trade the current markets. He proposes:

• Having two portfolios, an inflation portfolio and a deflation portfolio.
• Switching between them depending on the action in the US dollar.
• When the dollar is falling you switch to the inflation portfolio.
• When the dollar is rising you switch to the deflation portfolio.

Anybody who has been paying attention is aware that either the risk trade is ON or the risk trade is OFF, so Pento's proposal is not exactly new. The cool part about the proposal, from my perspective, is having two default portfolios set up and ready to go ahead of time. With the portfolios prepared ahead of time you can take plenty of time to get them right and then focus on getting the timing right on when to use them.

So, here's my challenge. Help me work out the following:

• If you are managing with an IRA account and can't go short or trade leveraged futures or do anything but covered call options:

                What goes in the inflation portfolio?

                What goes in the deflation portfolio?

                Are there any core positions?

• Same questions if you have a trading account where everything is possible.

Leave me a comment with your thoughts. If I get the time I'll put my own thoughts on this up in a separate post.

MontyHigh, www.worldofwallstreet.us

 

Best Of The Podcasts: Puplava Interviews Trader Peter L Brandt

I thought this one had a lot more long-lasting value than most podcasts (click here or the picture above). One interesting factoid is that Brandt figures only 1/3 of his trades are profitable (but shoots for a 6 to 1 profit to stopped out loss ratio). Puplava and he agreed that this was typical for most successful traders. So, if you want to be a successful trader like Brandt you might as well get used to losing most of the time.

I think my winning percentage is quite a bit higher and perhaps that's because I'm trading manipulated markets (gold and silver) which makes it easier to win if you know what's going on. 

He also said he thinks a 20% annual profit on his value at risk makes for a good year for him. Again, I think being able to trade the manipulated gold and silver markets increases the expected profit outlook significantly. Of course, 20% of his account probably dwarfs mine and its definitely harder to make big percentage wins when you are running bigger money. 

MontyHigh, www.worldofwallstreet.us

 

Best Of The Podcasts: King Interview Jim Rickards On The Recent Gold Takedown

Click here to get the full interview (quite interesting).The following sub-3 minute excerpt is the best summary I've heard lately on why gold-related investments is an intermediate to long-term buy.

Jim Rickards, King World News Excerpt

FWIW, in my trading account, I opened leveraged trading positions (long Comex Gold options and RBY options) on Thursday (click here for the reason why) before the low was put in. I had been basically all cash in the trading account before then. I expect I will reevaluate the situation this Wednesday and probably take some profits (if there are any) off the table at that time.

MontyHigh, www.worldofwallstreet.us

Best Of The Podcasts: Eric King Interviews Eric Sprott

Eric King's interview of Eric Sprott this week provides a really valuable new (to me) insight on the fundamentals of the silver market that seems very compellingly bullish to me. It makes me want to get even longer silver.

Click 20101031sprott for the 82 second segment that gives the gist of the insight or click here for the whole interview.

MontyHigh, www.worldofwallstreet.us

Permabull Throws In The Towel...

 

Listened to most of Puplava's three hours today. Every once in a while he let's little nuggets slip out that show how much his outlook has changed.

 

He used to be a perma bull plugging gold, gold stocks, oil and oil stocks every single week (plus beating on the inflation drum every week). He was long and strong all of the above all the way thru the 2008 crash.

 

Now he reveals today:

• He's short the overall market (pretty big change).
• He's SHORT GOLD STOCKS (YIKES, HUGE CHANGE).  

Because the economic leading indicators are so bearish that he's banking on another deflationary downturn (initially) prior to another round of monetization/QE. 

 

Guess he's like a lot of people where they don't want what happened to them in 2008 to every happen to them again.

 

I was pretty surprised and am pondering what it means. It probably means I should lighten up a little more on my gold stocks (holdings are still very substantial) and get shorter the S&P, but its hard to tell.

 

MontyHigh, www.worldofwallstreet.us

 

P.S., He also let slip that he's been quietly accumulating certain preferred Uranium explorers (ones with great drill holes. Sounds like Hathor, but what do I know?). This little tid-bit shows us how big an advantage we have in the smallish resource stock space. We can move 100K$ in and out of these things without disturbing them much, but even guys who I consider to be out of the mainstream (e.g. Puplava) can't move in and out of these things. They have to buy in and hold come hell or high-water.

 

 

Best Of The Podcasts: What's Really Going On And Why They Don't Talk About It

Great interview by Jim Puplava, click here: Dr. Lawrence Parks Executive Director Foundation of the Advancement of Monetary Education (FAME) Topic:  Collapse of the Dollar

Only part of this is new to me, but its extremely well stated and there was some news stuff in there too.

MontyHigh, www.worldofwallstreet.us

P.S., Is this guy right when he says that campaign contributions are a euphemism for bribery? I suspect he is and that there's not much to protect against laundering those contributions into flat out cash for a politicians pals and then cash back to the politician himself.

Best Of The Podcasts: Puplava Takes On The Latest Out Of The Mainstream Stuff From The Gold Conspiratorialists

In the first hour of this week's Podcasts (click here).

 

Here's the highlights (with my own editorializing):

(a) Jeffrey Christian clarifies the misinterpretation of his misquoted as "London physical market isn't physical and London physical market operates on a 1/100th fractional reserve basis" CFTC testimony. I was there at the CFTC meeting and his comments have clearly been twisted.

He said that the trading volume of the course of the year in the London physical market was 100 times the amount of gold actually stored in the vaults. He further claims in today's podcast that this kind of volume relative to the underlying value of what is traded is typical of the financial markets (e.g. the amount of S&P 500 futures and options bought and sold over the course of a year is roughly 100 times the actual market value of the S&P 500).

Christian clearly made his point about this 100 to 1 fractional reserve non-sense. He came off pretty weak (in my view) on whether there was significant downward manipulation of the price of gold. He granted that it occurred on the 10 to 20$/oz basis without naming names (an insinuating this was done by individual traders, not big banks) and without admitting there was a larger strategy. So, GATA would have been better off if they stuck with what they had good evidence for (concentration of trading positions plus obviously manipulative market action plus their whistleblower evidence) and laid off the 100 to 1 nonsense. 

 

This is a case where GATA (and the outer fringes of the gold community) has clearly hurt their credibility by intentionally misinterpreting a mainstream statement.

Another clear case (same source: Adrian Douglas) was claiming that the US geological survey (USGS) had stated there there was only a very few years (e.g. 10, I don't remember the exact number) of silver left in the earth's crust. (see http://www.safehaven.com/article/13451/silver-long-term) "the US Geological says silver will be the first on the periodical table to go extinct by 2020."

This was another intentional misinterpretation: The USGS actually states that there is only a small number of years of proven and probable reserves. Its a known fact that as mine production takes place that miners move more ore into the proven and probable category and thus increase or restore the number of years of proven and probably reserves. This is especially the case with Mexican silver where narrow veins are prolific and are mined without going through the exercise of developing large proven and probable reserves. Thus the number of years of proven or probable reserves doesn't really saying anything about when an extractive resource will "run out" other than providing a significantly underestimated lower bound on that resource's "running out".

 

As far as I'm concerned, Adrian Douglas' credibility is shot with me. He does do some good digging around and comes up with evidence that would not otherwise be found, but he also frequently completely goes off the deep end overestimating the meaning of what he's come up with (in my opinion).

 

Puplava then brought out Nick Barisheff to rebut Eric King's interview of Harvey Organ who claimed that Scotia Mocatta didn't have nearly as much bullion in its vault as it should. Barisheff said basically: "Hey we have hundreds of millions of dollars of bullion with Scotia Mocatta and we go in annually and audit each and every bar by serial number. We have actual ownership of 99% of our bullion and its not fractional reserved anything". Seems to be another case where the outer fringe has damaged its credibility of the whole precious metal manipulation idea.

And they wonder why they never get any mainstream media coverage.

As you know, I'm enough of a believer in the conspiracy stuff to swing-trade the interventionals, but it does irritate me when complete nonsense is bandied about because it really brings into question the credibility of those espousing precious metals interventions.

 

By the way, what's the latest on the tungsten filled gold bars mania? Has any decent hard evidence showed up.

 

Finally, are there any thoughts about when this kind of stuff comes out? It seems to me that it tends to come out during the "crazy good" up moves in precious metals and may even be an indicator that those times are coming to an end. When did the tungten story come out last fall? Spending a couple of minutes I see it came out in mid-October 09, just before the crazy good phase kicked in. This bodes well for the current up move in precious metals as the current crazy claims also seem to be coming out at the beginning of a "crazy good" run.

 

What does your BS detector accept about:

(a) "LBMA physical market operates on a 100 to 1 leveraged fractional reserve basis and is a ponzi scheme" claim?

(b) "I saw a nearly empty vault so Scotia Mocatta is part of the entire gold conspiracy nake short fraud system" claim?

(c) "A large fraction of US gold, LBMA gold, etc. its actually bogus tungesten filled counter fit and the real gold is missing" claim?

(d) "the US Geological says silver will be the first on the periodical table to go extinct by 2020." claim?

 

Like Puplava, you don't have buy every wild claim to be a major gold/silver enthusiast. 

 

MontyHigh, www.worldofwallstreet.us

Best Of The PodCasts: GoldSeek Radio's Chris Waltzek Interviews Louis Navellier

Click here. Navellier makes the bull case for stocks:

• USA Q4 GDP will print a 6% number !!! This is way higher than any of the bears I normally listen to are expecting.
• USA Q4 stocks will have absolutely great year-over-year earnings.
• There is still a bunch of money on the sidelines and money that should shift from bonds to stocks on this good economic /earnings news. 

Its not what I have been expecting, but I wasn't expecting a +3.3% GDP growth announcement for Q3, either. That was the last turning point. I'd say this kind of unexpected upside is something to study further and perhaps get ready for. That +6% GDP may have a lot to do with why the copper price keeps ramping up.

MontyHigh, www.worldofwallstreet.us

P.S., Despite this short-term bullish outlook, Navellier is pretty bearish on the US unemployment and the US dollar longer term (all that debt).

Best Of The Podcasts: Puplava Interview's Mangen On Oil

I've got to give a lot of credit to Jim Puplava, one of the peak-oil, energy permabulls.

The energy segment in this week's news hour (click here or here, beginning 34 minutes in for about 10 minutes) features an interview with a genuine oil expert who discusses the current inventory situation (which is pretty dismal for crude oil and its products [gasoline, diesel, distallates]). He said that in terms of days of use, that crude oil is in the 99th percentile. This means that historically 99 percent of the time there has been less crude oil inventory that there is currently. It means that demand in the USA has fallen hard (there was one data point that indicated it was down 20% year over year for at least one week recently). Pretty darn bearish for oil. 

I give Puplava a lot of credit for having a guy on whose short term call is so much the opposite of Puplava's long time outlook. Gives Puplava a lot of credibility, in my view.

Puplava's entire program this week had zero bullish material on energy (as best I can tell) while he was touting gold all the way thru. 

I was thinking about reentering with oil back down into the 60s, but I think I'll just stand aside as long as the inventory is building.

MontyHigh, www.worldofwallstreet.us

Best Of The PodCasts: Eric King Interview John Williams (Shadowstats.Com)

Here's the scariest bit of doom and gloom I've heard in a long time (click here or here). The scary part is that it appears to be backed up by very strong evidence and reasoning.

The outline of the story is familiar, its the simple application of baldly stated facts that make it compelling:

(a) The US economy is really recovering. It can only genuinely grow if the nations income is growing and the average US person's income (even adjusted for the government's rigged statistics) hasn't grown since the 70s.

(b) The US government's financial situation is much worse than generally understood. This shows up when you use ordinary GAAP-type accounting (the kind required of business that includes pensions, in this case Social Security and Medicare). The US government is losing over 5 Trillion $ / year with GAAP accounting. Even if the US government was to tax 100% of individual income it would not cover this 5 Trillion $ / year gap.

(c) Adjusting Social Security and Medicare downward is politically impossible.

(d) The US government and Federal Reserve will deal with this situation by printing money.

(e) As soon as foreigners stop buying US bonds the Federal Reserve will take over. This will be a currency event that results in hyperinflation.

(f) The currency event and hyperinflation will happen sometime in the next five years as soon as 2010 [not a lot of evidence to back up the timing of the event]. 

I'm hoping there's some error in item (b) above and that the facts, as stated by Williams, are not correct. Can you help me by pointing out what those errors are?

These guys in general for decades and Williams for years have been talking hyperinflation but we haven't seen it yet. Is it really different this time?

If not, have you gotten to the point of taking action to protect yourself and those you are responsible for from what seems to be coming reasonably soon? If so, please provide some thoughts and links on what you are doing.

So far the only thing I've done is to invest heavily in the Canadian stock market (thru a US broker) rather than the US stock market. Is Canada facing the same financial situation as the US? I think not, thanks to their single-payer health system, but I really don't know.

MontyHigh, www.worldofwallstreet.us

Best Of The Podcasts: Puplava Gets Bullish With Peru Saxena

I'm probably like you. I've been listening to (and reading) a lot of really bearish stuff for a long time.

I'd say that Puplava's interview with Peru Saxena from this weekend (click here or here) provides a nice contrast which lines up pretty nicely with my previous "Chartworks" post. The interview starts 18 minutes 15 seconds into the mp3. The first two minutes are definitely worth listening to. The part about the yield curve (near the end) which covers when will the "jig be up" for the rally is really, really valuable I think. This is really a good interview, IMHO. Only 11 minutes long. 

MontyHigh, www.worldofwallstreet.us

Best [And Worst] Of The Podcasts: Jim Puplava On Energy Investing

I thought this, specifically the energy discussion beginning around 35 minutes and 58 seconds, was the best bit of podcasting on energy investing I'd heard lately.

If you want to hear me get Mr Puplava a little hot under the collar, listen in to this beginning at 38 minutes and 47 seconds. My comment was in response to last week's podcast with Joe Dancy (click here beginning around 41 minutes at 4 seconds) in which had Mr. Puplava and Mr Dancy go on and on about how natural gas production has to plummet given the falling rig count without mentioning how much more effective newer rigs are than old rigs.

I'll stick with my point of view that the increased effectiveness of the newer drills is a huge part of the reasons why the drill count for natural gas is falling. I think that failing to discuss this increased effectiveness while emphasizing the importance of a falling rig count either means you are spinning or not very well informed. I wouldn't want to think that Mr. Puplava is uninformed when it comes to energy investing.

Much thanks to the Investor Village BRY board for getting me up to speed on this.

I don't pretend to be an energy-investing expert, but I certainly don't want to be a sucker either.

MontyHigh, www.worldofwallstreet.us

Best Of The Podcasts: Marc Faber Interviewed By Jim Puplava

FinancialSense had a really excellent interview today(click here for the web page or here for the MP3 download).

Jim Puplava interviews Marc Faber. In contrast to most of the interviews you see where Faber (e.g. CNBC, Bloomberg), Jim Puplava "gets it" and really helps Faber get his own ideas out rather than the usual "don't you think" rebuttals that keep things from really getting going. I've been critical of Puplava in the past, but he was really great here.

Here's my notes, but I recommend actually listening to the pocast:

• Second Half Of 2009 Recovery - the same guys who were predicting a goldilocks economy and then a soft landing and then a 2nd half of 2008 recovery are the guys predicting a 2nd half 09 recovery. They have been wrong all along; why should they be right now? The economic downturn is going to be long, much longer than folks think.
• US Government Debt - the government is falling into the same mistake as all those "exotic" mortgage buyers who got into debt with short-term teaser rates. The government is financing its deficits with short term debt when it should be making use of the lowest rates ever by locking in long-term rates. Interest rates hit there lows in Dec 08 and are moving up.
• What's Up With The Economy - Falling assets are making consumers shift from spending to saving. This is normal and desirable (given that they don't have enough savings anymore), but the government is fighting it. They are printing more and more money and cutting interest rates to dissaude folks from saving. Eventually this will be highly inflationary. Not now. The longer we stay in the recession the more money will get printed up and the bigger the inflation will eventually be. This week's stimulus package is not the last. There will be about five stimulas packages and none of them will work. Faber expects staglation eventually. Weak economies have high inflation because deficits are big and central banks print money.
• US Dollar - won't all these deficits and dollar printing trigger a dollar downturn? In the long-term yes, but not now. US trade is shrinking. When US trade shrinks, global liquidity shrinks and that is good for the dollar. This is what has been happening since last summer. When US trade increases global liquidity increases and the the dollar falls. That is what happened from 2002 to the summer of 2008. Right now, (while trade is shrinking) the dollar is ok against all other currencies except gold. The US is different from Argentina. Its foreign debt is in its own currency. Don't worry about the supply of treasuries or inflation. One day, when the global economy recovers the dollar will fall and inflation will be a big problem. This could occur suddenly, but its not for now.
• Gold - negative inflation adjusted interest rates are good for gold and that is what we will have for a while. Gold is a preferred asset. Gold seizure may happen when US lenders demand it (and gold) to service US government debt. One should store one's gold in Dubai or Singapore. 
• US Stock Market - still overvalued despite the worst-ever 10 year performance and despite previous situations of bad 10-year performance preceding good performance. The stock market cap as a fraction of GDP is still higher than previous major stock market tops (73, 63, 29). You can't trust P/E ratios because US corporations lie and cheat to make earnings look better than they really are. 
• China - emerging markets are more cyclical than the US economy, especially the Asia producers. The Chinese have learned from the Americans how to lie and cheat on economic statistics. The Chinese economy is not growing by 7%. It is actually contracting. 40% of the Chinese economy is export related and another big chunk is capital spending to support exports. Exports are way down (look at Taiwan and Korea for example) and will continue to go down. Their stimulus package won't help their overcapacity problem and isn't big enough to make up for the export-related hit the economy will take.
• Resource Stocks - Mining companies bottomed in November 08. Thinks mining exploration and oil exploration stocks might be good at this point just because they have been so brutally taken down.
• War - War goes in long-term cycles just like the economy. The War cycles are ramping up, but it won't be traditional war like WW 2. It will be guerilla war and terrorist attacks. This US military is clearly unprepared for this kind of war.

Seems really on the mark and matches my own outlook at this time.

MontyHigh, www.worldofwallstreet.us

Best Of The Podcasts: Donald Coxe's Weekly

As you may know, Donald Coxe has left BMO capital and has set up his own shop (click here). He was among the first to catch the commodity wave and those who have been following his advice for a while have made a tonne of money in a pretty mainstream, low risk fashion. Like all of the long-term "stronger for longer" crowd his picks have taken quite a hit since July 2008, but Coxe was among the first to admit what happened and how he missed that change. That keeps him on my favorites list.

For a long time he has had a weekly call for his subscribers that was posted on the web where there was no security on the call and was widely listened to by lots of non-subscribers. For now, at least his calls are open to everyone. I for one hope he keeps it that way. Here's the link (click here) to these weekly calls. The calls are consistently above average compared to other investing podcasts (particularly on the content to self-aggrandizement ratio), but this week's call gets my "Best Of The Podcasts" award. 

I recommend listening to the whole half an hour call, but for the cliff-notes version, here's my notes:

Donald Coxe Call 2/13/2009

Charts show the INDU (down) vs Gold (up) since the US election.

There are two interpretations of gold's rise:
(a) Obama's program won't work - flight to safety (fear).
(b) Obama's program will work - inflation is coming.

Coxe votes for (b).

Current situation is, in Coxe's view, a lot like the 70s.

From the 70s we know that commodity stocks are what recover strongly after a recession with large monetary growth. This has already started.

By the way, things were way worse in 1974.

So, the market doesn't know if Obama's 2 T$ will work, but if it does commodities will come back hard.

The crucial difference from the 70s is housing and the baby boomers. The baby boomers needed housing in the 70s. They need to sell housing now (this is a demographic-based deflationary factor which is global for the developed world).

A 50% premium (contango) for WTI crude oil from spot to Dec 09 is something Coxe has never seen before. What we are seeing is, despite the global slow down, dec 2010 oil is $60. This explains why the oil stocks are starting to pick up. US consumpion has not fallen by 5-6%. The actually demand for oil has not fallen off a cliff. Industrial commodities have fallen off a cliff, but oil stocks.

Things are turning. IBD shows chemical fertilizers has gone from 150th industry to 50th.

Coxe thinks there's a strong possibility that two centuries of global warming has ended and global cooling has started. Spot corn is $3.66, dec 09 corn is $4.07, dec 10 is $4.57. Farmers can make a lot of money with these prices.

So, we already have two commodity groups which are moving up strongly. You can make money in oil and agriculture/fertilizers. Market won't make big bets either way on Obama's program succeeding at this time.

Coxe says again. A downturn that begins with the financials (bank stocks) doesn't end until the bank stocks recover. Coxes can't say this downturn has bottomed until the bank stocks recover.

Coxe admires Obama, but the bail out bill was created by Pelosi is long on far-out liberal programs could never get through congress under ordinary situations and short on genuine economic stimulus. E.g. 4 B$ for ACORN.

Keynes said its better to have someone dig holes and fill them in than to have no activity. So, this bail out stuff may have a short term benefit. The long term addition to the built-in deficit is bad but that is long term.

So, will it work? The money supply is growing. That's good. Once the money supply starts growing things (economy? stocks?) can turn up really rapidly. In addition we have these bail outs for the banks. As long as they help the ones that can do something useful, Coxe doesn't mind if they help the ones that don't deserve it (big wallstreet firms).

They should give money to the banks that give money to people face-to-face, e.g. letters of credit. Coxe says there are signs trade is coming back.E.g. Baltic dry index has doubled (from a very low level). China money supply and velocity is picking up. Claims China did a better job of doing Keynesian stimulation than the west. If you care about commodities, China is what counts.

Coxes expects the global recovery will come later this year led by China and India. India is still growing and has done a lot of stimulation itself (monetary growth, help financials).

If you don't look at the money-center banks, what you see is that regional banks (NE, midwest, southeast) are out-performing.

Summary: Even if Obama's stimulus is doing bad things giving money to bad people, then its better than nothing. Take the political debate out of it. Don't sulk. Its likely that we'll get a turn. So follow the signals. The industries that are out performing now will probably continue to out perform 6 months from now.

MontyHigh, www.worldofwallstreet.us

Best Of The Podcasts: Gerald Celente's Greatest Depression

http://www.howestreet.com/index.php?pl=/goldradio/index.php/mediaplayer/1065

Pretty good on enumerating the downsides for the US and World Economy this year. Had the catchiest phrase of the week: "Use it up, wear it out, make it do, do without.", an example of 1930s frugality that Celente forecasts making a comeback.

I confess I'm pretty tired of hearing from these pessimists about all the USA negatives without mentioning the tonnes of places where the USA is still the best in the world. The technical team at my day-job is by far the best in the world and all the remotely close competitors are also USA-based. There are tonnes of areas where the USA is technically the best in the world and being the best in the world is where you want to be in the Winner-Take-All world of intellectual property which is becoming a larger and larger slice of the economic pie. Celente doesn't mention this or any other positive for the US economy. When I hear this kind of one-sided pitch, I know I'm being spun rather than being given the whole truth. 

Also, his description of the social response to the "next great depression" being a return to dance-halls shows that the guy is completely clueless on social trends. The big social trends I see (from observing my college aged children and 20-something nieces and nephews) is all about technology enhanced socializing (facebook, text messaging, cell-phones, multi-player gaming, Wii, etc.) This kind of blog is the same kind of thing (as well as Internet message boards). Its technically enhanced, you get the kind of intimacy and sharing about niche-interests that would be impossible without the technology, with out other techniques you are kept more up-to-date with more details, but are also left without as much face-to-face genuine human touch.

By the way, I think the best place to have genuine, caring, human-touch is at Church. "A new command I give to you, that you love one another, even as I have loved you" and "Forsake not the gathering of yourselves together, but encourage one another, day-after day.. so that none of you will be hardened by the deceitfulness of sin."

MontyHigh

Best Of The Podcasts: John Doody On Puplava's Financial Sense

The best of the podcasts I've heard latest is John Doody (of http://www.gold-stock-analyst.com) on the first hour of FinancialSenseOnline (click here for the web page and here for the MP3). The part that got the Best Of The Podcasts award begins in bold-print underlined text below.

John Doody starts about 56 minutes into the MP3 and goes for about 10 minutes. Here's the quick summary and review:

1. 56:00 - Introduction - Puplava's sidekick says that high demand for physical gold shows that its not a bubble. Of course, if demand wanes the price of gold could completely collapse just as the price of nickel, zinc, lead, crude oil and copper did. This is not a strong argument to show that gold is not a bubble as demand for gold is pretty psychological and could shift substantially on the macroeconomic picture changing.
2. 56:40 - Inflation Is Coming - Jim and John discuss the amazing expansion of the Federal Reserve balance sheet and how low interest rates are. These guys have been calling for massive inflation for years and have been wrong all along, whether they'll end up being right remains to be seen (click here for a discussion of inflation vs deflation). I think they will be right next year (but am not sure). I think you can skip this as its the same old thing without much new information. It is clear that low interest rates are good for gold as gold has a zero interest rate and loses out to dollar based investments when real interest rates are high.

3. 59:00 - Gold Stocks ($XAU to $Gold Ratio) - discusses how the XAU gold stock ratio to gold price ratio is historically low. A reversion to the mean has begun which is very bullish for gold stocks as long as the price of gold holds up (which is not guaranteed but they and I think they outlook for gold itself is bullish). The mean reversion idea is a good one, but not guaranteed as the ratio was bullish months ago and yet gold stocks kept falling and falling moving the ratio even further from the mean.

4. 59:26 - Gold Mining Costs - Doody claims that the price of crude oil constitutes 25% of mining costs. This rule of thumb is worth the price of reading this article. Given that oil prices are down something like 75% that means gold miner's costs should be down 15 to 20% in Q4 just on the falling price of crude oil. Doody claims that currencies have been moving in a postive direction (down relative to the dollar). For example, the Brazilean Real is down 50%. Doody claims that one Brazilean gold miner, Yamana (AUY) should have its cash cost fall from $350/oz to under $200/ oz. Together this means that gold miner costs should be down, profits up for Q4 without any further climb in the price of gold. This sounds tradeable to me. By the way, another Brazilean gold miner that might benefit from this is Jaguar Mining (JAG), a stock recommended by Northbeach 2000.

5. 1:01:08 - More $XAU to $GOLD ratio - see (3) above.

So, let's take a closer look at the Gold Mining Costs and the benefits of the currency claims as far as Q4 profits go.

The above chart shows the inverse movement of the Mexican Peso, Canadian Dollar, Brazilean Real, Australian Dollar and price of Gold (DGZ) versus the dollar where +50% means the dollar went up 50% relative to the currency or price of gold.

The chart shows that, bearish for miner profit, the price of gold was lower for Q4 (more area under the brown line) than Q3.

Offsetting that, gold miner costs were lower in Q4 (more area under each of the other lines) that Q3 with Brazilean miners benefitting the most, followed by Mexian miners, Australian miners and then Canadian miners.

Whether falling costs outweigh the falling price of gold probably depends on whether the individual miner is a high-cost or low-cost producer. Ironically, high-cost producers should benefit more from falling costs than low-cost producers.

This may explain why Golden Star Resources (GSS, a high-cost miner in Ghana) has rebounded so significantly of late. As a high-cost, unprofitable producer it stands to move from threatened insolvency to profitability on both the collapse in oil prices, currency moves and the recent rise in the price of gold.

So, it appears that if you want to trade a pop in profitability for Q4, what you want is a high-cost gold miner in Brazil or Mexico that meets or exceeds its guided production for Q4. I would say that Jaguar Mining fits the bill and I'll be putting the company under the due diligence radar. Are there any other companies you might recommend?

MontyHigh