Basic Points September 2008 Edition

Don Coxe's September 2008 Edition of Basic Points can be found at the
Commodity News and Mining Stocks Blog

This monthly report along with Mr. Coxe's weekly webcast is a must for gold and commodity investors.

J

weekly charts USD vs Gold

Quick weekly charts of Gold and the US Dollar Index showing RSI, MACD and W%R.

Notice gold's strong technical picture on the weekly chart closing just above the 50 MA.


US Dollar index looking like it is rolling over on all indicators. A full blown roll-over may be confirmed with the RSI-7 falling below 50. The MACD is resembling a tsunami about to break.
Monday's action will be critical in light of the bailout news.



good luck on monday.

J

Technical Analysis for the GLD

Its been a while but I wanted to post a quick TA on the Streetracks Gold ETF (GLD)

I did some experimentation with Exponential Moving Averages and Fibonacci sequences and noticed some interesting events unfolding. With the US government bailout looming though, it seems impossible to predict which way gold will turn.



enjoy,

J

Tools of the Gold Bug's Trade

how newsletter writer's stand forever at the precipie of an explosion in the gold price:

recognize these lines????


GOLD:


gold will zoom if the ECB's mexican standoff against the dollar and Eurozone inflation results in an ECB rate increase.


gold got crushed by the ECB's attempt to cool markets with a rate increase, once the hollow nature of this inflation fighting stance is revealed for what it is, i expect gold to take off.


gold took it on the chin as lower oil prices dragged down the commodity sector


the focus on oil and its downward price spiral seems to be affecting gold which seasonally should be a strong period


jewlery demand will increase as indians and chineese realize that they will be unable to purchase gold below $900 for the remainder of the year if not for the rest of this commodity bull cycle.


asians are pouring money into gold...


asian central banks are secretly buying up gold as they attempt to lighten up on US treasuries...


mid-east soverign wealth funds are buying gold in exchange for oil...


iran is on the verge of creating a Euro-denominated oil bourse...


George Sorros says this is "insert cataclysmic reference here" the world has ever faced.


gold could go to $2000 on any collapse in the banking system by 2014...


gold prices to rise through 2009...



GOLD STOCKS:


how can you profit from these troublesome times? subscribe to the "insert generic gold-centric name" newsletter for our analysis of select gold stocks that stand to gain exponentially during the coming commodity bull market...


gold stocks should outperform gold over the long run as investors awaken to the reality that their currency is being destroyed and the only true value lies with reserves in the ground


gold stocks are at historic lows relative to the price of gold, (while we continually mock analysts who mistakenly call a bottom in financials) we are calling for a bottom in gold stocks here... again...



JR. GOLD STOCKS:


jr gold stocks are suffering from maniuplation and short seller's fraudulant schemes to scare investors out of their shares. (its too bad manipulation in every other market resulted in skyrocketing share prices intended to goad greater fools to invest, somehow constant underperformace seemed like a better way to bilk new investors out of their money...)

jr. gold stocks are suffering because of current credit conditions...


jr. gold stocks are suffering because of the high cost of crude oil..


jr. gold stocks are suffering because crude oil is falling taking the commodity space with it


jr. gold stocks are suffering because of gold-backed ETF's


jr. gold stock "A" is suffering because such and such newsletter writter issued a "sell" rating


paul vaneeden is an a$#hole for recommending Miranda gold so much on BNN...


Sprott really likes this stock, they know a thing or two about resources (Sprott precious metals fund down over %15 year to date, at 4 year lows, John Embry has stopped making specific stock recommendations in his monthy Investor's newsletter)


PDAC will highlight some up and coming gold producers on the brink of huge discoveries, write their information down using this Val Gold Sponsored pen, Baja Mining sponsored note pad and try some pound cake baked by one of the chesty E-Trade girls at our booth....

Pakistan's Stock woes continue

Pakistani Investors Stone Exchange as Stocks Plunge

By Farhan Sharif


July 17 (Bloomberg) -- Pakistan investors stormed out of the Karachi Stock Exchange, smashed windows and cursed regulators after the benchmark index fell for a 15th day, the worst losing streak in at least 18 years.

``I have lost my life savings in the last 15 days and no one in the government or regulators came to help us,'' said Imran Inayat, 45, a protester and a former banker who retired early and said he lost 300,000 rupees ($4,175) on the market.

Police surrounded the exchange after hundreds of investors stoned the building and shouted anti-government slogans. Securities and Exchange Commission of Pakistan, which imposed and then removed a 1 percent daily limit on price declines this week, had attempted to halt a slide that wiped out $30 billion of market value in three months, threatening to undo a 14-fold rally since 2001.

``There has been some level of mismanagement by the authorities,'' said Habib-ur-Rehman, who manages the equivalent of 6.5 billion rupees in Pakistani stocks and bonds at Atlas Asset Management Ltd. in Karachi. ``This may be due to their misperception that they can prevent the market from falling. Investors have to learn to bear losses as they do gains.''

The benchmark Karachi Stock Exchange 100 Index dropped 278.96, or 2.7 percent, to 10,212.92. The index plunged 35 percent from the record of 15,676.34 on April 18. Losses have been even steeper in China and Vietnam, where stock indexes fell more than 48 percent in 2008, yet no violence ensued there. Pakistan stocks reached an all-time high two months after parties opposed to President Pervez Musharraf prevailed in a parliamentary vote and said they would try to form a coalition government. The election heightened the risks for investors, Templeton Asset Management Ltd.'s Mark Mobius said in February.

Regulators this week eased the curbs on trading after volumes fell to the lowest in a decade. The restrictions, including a ban on short selling, were lifted with effect from July 14 by the securities commission after the exchange announced a 50 billion rupee fund to buy stocks. ``We will try to activate the fund as soon as possible to give investors an exit opportunity,'' stockbroker Aqeel Karim Dhedhi told reporters after an emergency meeting at the exchange. ``We will meet again at 8:30 a.m. tomorrow.''

The Karachi Index plunged this year on concern the ruling government coalition would collapse because of disputes between Asif Ali Zardari, co-chairman of the Pakistan Peoples Party, the biggest group in the ruling coalition, and former Prime Minister Nawaz Sharif. The leaders have failed to resolve differences over how to reinstate judges dismissed by Musharraf and whether the former army chief should be removed and stand trial.

Foreign investors slashed spending on Pakistani stocks to $62.2 million in the 11 months ended May 31, from $1.76 billion a year earlier, according to data compiled by the central bank. Investors broke windows today in Karachi, threw plant holders in the parking lot of the building, burned shareholder statements and at least one protester was injured, prompting intervention by police and the paramilitary. Investors also protested outside the Lahore and Islamabad stock exchanges, Geo Television reported.

``We demand that all stock prices be frozen at current levels,'' said Kauser Javed, who heads the Small Investors Association. ``People have sold their assets in the last 15 days to meet payments and if things continue this way, you will start hearing of suicides. The regulators always favor big brokers and investors.''


To contact the reporter on this story: Farhan Sharif in Karachi, Pakistan, at
fsharif2@bloomberg.net.

Last Updated: July 17, 2008 12:33 EDT

Dow Theory Update

This newsletter update from Richard Russell of Dow Theory Letters is a staunch reminder of the difficulties facing the US economy and the reserve banking system. Thanks to www.beearly.com for the update.

J


Best of Richard Russell, July 1st, 2008

If the American people ever realized or understood how the Fed operates and how money is created in the US, there would probably be a ten million man and woman march on Washington and more specifically a march on the Federal Reserve Building. The Fed is a private banking monopoly that has "grabbed hold" of the money-creation of the United States. Who controls a nation's money, controls that nation.

The US needs money to pay for building roads, for buying war planes, for fighting wars, for paying Congressmen, for paying IRS and Post Office employees, for a thousand different items. For this the government turns to the tax payers or it turns to the Federal Reserve. The Fed is nothing more than a group of private banks that charge interest on money that never existed before.

How does the system of money creation work? A simplified but true explanation. The government needs ten billion dollars (aside from what it takes in income taxes or from what it borrows). So the government then prints ten billion dollars worth of interest-bearing US government bonds. Next, it takes the bonds to the Fed. The Fed accepts the bonds, and then places ten billion dollars in a checking account. The US government then writes checks to the tune of ten billion dollars against their checking account. But where was that ten billion dollars before the Fed issued the money? The money didn't exist. Can you believe it, the money was created by the Fed "out of thin air."

In other words, the Fed lends the US government the money -- and the crowning irony is that the Fed then charges the government interest forever on the bonds that the US government sold to the Fed in the first place. And the debts build and build and the national debt grows ever- larger.

How about the interest that is owed on the national debt, which has now grown to a choking $500 billion a year? That's part of where our income taxes go. The government taxes our sorry asses partly to pay for expenses incurred by our very own government. And a further crowning irony -- the government taxes us to pay for the interest on the ever-expanding national debt.

www.dowtheoryletters.com

How Are We Doing?

By W. Michael Cox and Richard Alm From the July/August 2008 Issue

Filed under: Big Ideas

The American economy is in a rough patch. But the long-term trends are good—and there is a price to economic pessimism. When a presidential election year collides with iffy economic times, the public’s view of the U.S. economy turns gloomy. Perspective shrinks in favor of short-term assessments that focus on such unpleasant realities as falling job counts, sluggish GDP growth, uncertain incomes, rising oil and food prices, subprime mortgage woes, and wobbly financial markets. Taken together, it’s enough to shake our faith in American progress. The best path to reviving that faith lies in gaining some perspective— getting out of the short-term rut, casting off the blinders that focus us on what will turn out to be mere footnotes in a longer-term march of progress. Once we do that, we see the U.S. economy, a $14 trillion behemoth, is doing quite well, thank you very much. For starters, it has been remarkably stable and productive. Since 1982, the United States has been in recession for a mere 16 months, the present slowdown notwithstanding. Over that period, the country more than doubled its inflation-adjusted output of goods and services and created jobs for an additional 50 million workers. Income and wages are often used as gauges of progress, but consumption is the best measure of rising living standards. Products that began as luxuries only the rich could afford in time came within the means of just about all U.S. households (Fig. 1). In previous generations, telephones, cars, electricity, household appliances, and televisions made life better for the average American. In our times it has been computers, cell phones, Internet access, VCR/ DVD players, digital cameras, and more. All segments of society have shared in the material progress. Over the past two decades, ownership of cars, color televisions, and household appliances has risen among poor households (Fig. 2). A quarter of poor households have computers. Two in five own their homes. For many goods, ownership rates are higher for today’s poor households than for the general population of the early 1970s. As Americans know, today’s rising food and energy prices are crimping household budgets. But there are other ways to understand the relative size of the rise of food and energy costs. For example, in terms of time worked at the average pay rate, the real cost of a 12-item basket of basic foods has hardly budged. And while the work-time price of gasoline doubled in recent years, a gallon of gasoline still goes for less than 11 minutes of work (Fig. 3). At 20 miles per gallon, an hour of work will get you 110 miles down the road; at 30 mpg, you can go 165 miles. When it comes to how hard we have to work for food and fuel, we still face far lower burdens than our grandparents did. Living standards rise on the ability to use productive resources to churn out more goods and services—that is, to advance productivity. As the economy has become more productive decade by decade, Americans have reaped the gains, first and foremost by consuming more. There’s more to the good life than goods and services, however, and we’ve taken some of our added productivity in other ways. We’ve gained more leisure time, improved our working conditions, enhanced safety and security, and added variety to our choice set. All of these benefits become increasingly important as we climb up the income ladder. The lament-filled anecdotes about long hours and low pay just don’t stand up to the test of hard data. Real total compensation—wages plus fringe benefits, both adjusted for inflation—has been rising steadily for several generations (Fig. 4). Over time, the fringes have become a larger share of the rewards for work, dampening the statistics on wage increases. At the same time, we’re spending less time at work. An average workweek has fallen from 39.8 hours in 1950 to 36.9 hours in 1973 to 33.8 hours today. Not all those hours are spent on actual work. Human resources experts estimate that 1.6 hours a day go to non-work activities; employees themselves say it’s more than two hours. What are workers doing? Most of them are using the Internet for personal business or socializing with coworkers (Fig. 5). It’s no coincidence that the busiest times for online auctions come during the hours when most Americans are supposed to be hard at work (Fig. 6). We’re not only working less on the job. We’re also taking less time for household chores. Since 1950, the annual hours devoted to work at home has fallen from 1,544 to 1,278. Working less means we have more time for ourselves. The hustle and bustle of everyday life conceals the fact that a typical American has more free time than ever. We start work later in life and live longer and healthier lives, enjoying added years of retirement. All told, only about a quarter of our waking hours are consumed with work, down from 45 percent in 1950 and 35 percent in 1973 (Fig. 7). Workplaces are getting safer, too. Accident and death rates have been on long declines, partly because the economy has evolved toward services jobs, which are inherently less risky than mining, construction, and manufacturing (Fig. 8). However, factory safety has improved, too. In fact, we’re safer at work than at home. In the early 1990s, the on-the-job death rate fell below home mortality for the first time. Since then, the home has become riskier, while safety gains have continued at work. Our lives have become safer and more secure in other ways. We’re moving from place to place more than ever—in itself a sign of rising living standards—but deaths per billion miles driven and flown are both at all-time lows (Fig. 9). Medical advances have brought down death rates for many diseases (Fig. 10). Gains have been made against heart disease and cancer in recent decades. Death rates from disease aren’t the only sign that Americans have benefited from rising healthcare spending. Since 1960, life expectancy has risen by seven years for men and six years for women. At a time when so many Americans are vexed by the high cost of healthcare, these gains suggest the country may be getting something for its money (Fig. 11). Increasing globalization and trade has many citizens wondering: Can America still compete? Record merchandise trade deficits create some anxiety, but they’re a product of our imports of cheap manufacturing goods and energy. The world economy is moving toward producing and consuming more services—and that’s where the United States shines. Our foreign sales of services totaled $488.5 billion in 2007, topping the combined total of Britain and Germany, the second and third most successful services exporters. U.S. exports exceed imports in 15 of the Commerce Department’s 20 broad categories of services trade, often by large margins (Fig. 12). This trade supports well-paying jobs in industrial engineering, medicine, construction, information technology, and law. Film and television distribution demonstrate how the world market can boost services. Half of the top 15 biggest budget movies weren’t profitable until they went into the international market (Fig. 13). So many data points add up to steady, continuing progress for average Americans—and there’s no reason not to expect the future will bring further progress. Bad news will pop up from time to time, just as it has in every decade of American history. Some people will take the negatives—the hiccups on the long road to progress—for harbingers of worse times to come. But there’s a price for pessimism. In the early 1980s, the U.S. economy had big problems, including slow growth and high inflation. A rational response for pessimists might have been to put their money into the safe havens of gold or Treasury bills. A $10,000 initial investment in gold would now be worth $22,525; the same amount in T-Bills would be worth $37,778 (Fig. 14). Early 1980s optimists might have bet on U.S. economic progress by investing in the Dow stocks. Their initial $10,000 would now be worth $288,163—even after the financial market troubles of recent months. W. Michael Cox is the senior vice president and chief economist at the Federal Reserve Bank of Dallas, and Richard Alm is the bank’s senior economics writer. Illustrations by Brucie Rosch. Figure Sources: Fig.1: authors’ calculations; Fig.2: Census Bureau, Energy Information Administration; Figs. 3 and 4: Bureau of Labor Statistics; Fig.5: America Online and Salary.com; Fig.6: Yahoo; Fig.7: authors; Fig.8: National Safety Council, BLS; Fig.9: Federal Highway Administration, National Transportation Safety Board, Air Transport Association; Fig.10: Centers for Disease Control and Prevention; Fig.12: Bureau of Economic Analysis; Fig.13: Nash Information Services; Fig. 14: authors.