It's a "Duh" Kind of Day in Gold Stocks

11 & 12 April 2011

(The first part of this post was published on April 11, 2011:)

The trend continues....

We not only had a record closing high in gold last Friday (blue graph), but we opened Sunday night with further advances to new all-time highs (red graph).

Well, you know the pattern. Record highs in gold, 3% declines in gold mining shares.

I am not kidding.

There is only one scenario under which this makes any sense at all: Holders of gold mining stocks think that the gold rally is exhausting itself and heading back down - and soon!

Well, I've got news for you. That is NOT what is happening.

What is happening is that those who do not wish to make gains by holding undervalued gold mining shares are selling their shares at discount prices to those who do.

On a positive note for our side, the repeated - and now predictable - dumping of gold mining shares cleanses the market of sellers.

And... you know how supply and demand work.

When the sellers keep exhausting themselves, then on the next surge in demand, buyers have to pay premium prices, causing the massive one-day advances we've been seeing.

Gotta tell you. I'm buying in this market!

Duh!

Hold on to your gold stocks. Gold is rising. What do you think the mining shares are going to do???

12 April 2011:

Another day, another sell-off. Today's was a 50% Fibonacci retracement (we're back at the midpoint of the previous advance).

This is standard stuff, but the talk out there is emotion-laden, to say the least.

Our friends at Goldman, who advised their clients to sign-on for $1480 gold just a couple of weeks ago, are now advising their clients to sell commodity positions. (Does this strike you as visionary, consistent, or maybe just pragmatic, short-sighted, perhaps?)

"According to Anthony Neglia of Tower Trading, the metals were getting bullied by Goldman Sachs. The investment firm issued a note Monday urging clients to take profits in commodities as the broad rally might not last as high oil prices eat into demand. All commodities were taking a hit Tuesday, oil prices were down almost $4, especially after mixed earnings from Alcoa."

The fear in silver is most striking. I quote: "Scott Redler, chief strategic officer for T3Live.com, who shorted the SLV (Silver ETF) Monday, is looking to add to his silver short Tuesday, and recommends that long term investors wait for the recent volatility to shake out before getting more heavily invested."

And, get this: "Silver had been holding up in early trading despite the fact that Bloomberg reported Monday a $1 million bet by an options trader that the iShares Silver Trust would fall 37% by July. Currently 22.6 million shares are sold short."

I guess my thinking is simplistic. Gold is not even close to being overbought. The fundamentals are intact. Traders skitter away EVERY TIME a new record high is set, despite the somewhat obvious trend in the gold price! New record highs in gold are good for gold investors and gold mining company investors, not bad. Silver is overbought, but it's not going to retreat if gold is climbing. Investing in things that are going up is usually safer than investing in things that are going the other way, or in no clear direction.

So my thoughts are as follows: continue to relax, have fun with your family, read a good book, watch a good movie, etc.

Let's leave the Byzantine strategizing to the game players on Wall Street. They have their own reward....
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Test Your Telomere Length... Now!

11 April 2011

I've been following the scientific study of telomere length since reading Matt Ridley's classic popular science work: "Genome."

To cite a recent online article in Scientific American:

"Telomeres are caps on the ends of chromosomes, protecting them much as plastic tips on the ends of shoelaces keep the laces from fraying. Whenever chromosomes—the store­houses of our genes—are replicated in preparation for cell division, their telomeres shorten. That shrinking has led many scientists to view telomere length as a marker of biological aging, a “molecular” clock ticking off the cell’s life span, as well as an indicator of overall health.

"Studies comparing the telomere length of white blood cells among groups of volunteers show distinct correlations between telomere length and lifestyle. Those who exercise regularly have longer telomeres than those who do not. Folks who perceive themselves as the most stressed have shorter telomeres than those who see themselves as the least. Certain diseases, too, correlate with shorter telomeres, including cardiovascular (illness), obesity and Alzheimer’s."

Well, the long and the short of it - in this case, in fact the critical factor - is that it is now possible to get your telomere length tested.

Scientific American is not a "commercial" publication, so they did not provide the link to the company that plans to offer this service, but here they are: "Life Length."

Contacts for the company are as follows:

Stephen Matlin
smatlin@lifelength.com

Nuño Arroyo
narroyo@lifelength.com

Marisol Quintero
mquintero@lifelength.com

I have already e-mailed Mr. Matlin, and he indicates that the test is presently available at a cost of €500.

His contact information is as follows:

Stephen J.Matlin

Chief Executive Officer

Agustín de Betancourt, 21 – 8^th floor

Madrid, Spain 28003

T +(34) 91 395 6368

M +(34) 629 343 694

www.lifelength.com

I'll let you know exactly what's up as I find out more.

Again, telomere length is one of the critical factors in aging.

Though we're a long way from being able to modify telomere length in individual humans, another company (Geron Corp.) is working on doing exactly this. Their present focus is on the use of telomerase blocking to control the proliferation of cancer cells.

From Geron's website:

"We and others have shown that when the enzyme telomerase is introduced into normal cells, it can restore telomere length - reset the "clock" - thereby increasing the functional lifespan of the cells. Importantly, it does this without altering the cells' biology or causing them to become cancerous.

"Human telomerase, a complex enzyme, is composed of a ribonucleic acid (RNA) component, known as hTR, a protein component, known as hTERT, and other accessory proteins. In 1994, we cloned the gene for hTR, and in 1997, with collaborators, cloned the gene for hTERT.

"The 2009 Nobel Prize for Physiology and Medicine was awarded for the discovery of how chromosomes are protected by telomeres and the enzyme telomerase.

"The Nobel laureates were early Geron collaborators, Elizabeth H. Blackburn and Carol W. Greider, along with Jack W. Szostak."

Without further ado, let's start by checking out our telomere length with the help of the folks at Life Length.

Then we'll take it from there.

For other advances in genetic testing, please visit my earlier post on the (now private) genomics pioneer, deCODE Genetics (also featured in Ridley's book).
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Fuel: By Josh Tickell

11 April 2011

I just watched the film "Fuel," on DVD, by my fellow New College of Florida alum, Josh Tickell.

This is basically the story of Josh's life's work. He has had an interesting life, and tells his story well. He happens to be a gifted environmental activist, plus a talented film maker.....

Josh majored in sustainable living at New College of Florida (yes, you can do that - that is, you are allowed to invent your own major, and this is what Josh did).

Basically, this film is about biodiesel. Biodiesel is not good. Biodiesel is revolutionary.

Biodiesel is NOT corn-based ethanol. It is not food-to-fuel. It returns the energy input 3:1 or better. It is safe and even edible. It pollutes less than so-called fossil-based diesel fuel. There are many ways to produce it, and more and better ways of doing it are being found all the time.

As an aside, the US can produce all the biodiesel it needs, and never has to import oil from anyplace again, if it chooses this path.

As Josh says, "War is not required."

Willie Nelson, Neil Young and Richard Branson are among biodiesel's better-known advocates.

Oh, and this film isn't only about biodiesel. It is also about how to live, how to conserve energy, the history of our present fossil fuel-based energy system, other ways to produce energy besides fossil fuels, the life story of Rudolph Diesel, a lot of Josh's own life story, interviews with scientists and business people, finance, educational graphics, statistical analysis, etc., etc. I hope you're getting the idea. My impression is that there are investible ideas here too, and why not?

Anyway, (1) you have to watch this to learn more, (2) you need to figure out how to get biodiesel and related sustainable technologies into your home, your life and your communities, and (3) you need to tell other people about this.

Again, this has nothing to do with corn-based ethanol, which is not a particularly good idea at all, at least, not much better than fossil fuels. This is entirely different. You can make this stuff from trees that grow to maturity in 3 years, from algae (thank Jimmy Carter for getting this started), from sewage sludge, etc., etc.

Again, the US does not need to import oil. Neither does any other country that wants to do this. This is good, very good.

Watch.
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It's a "Duh" Market

7 April 2011

These comments are from a letter to a friend.

Hopefully they will stand on their own, in light of my frequent statements about the sure tendency of gold and silver miners to sell off (or "go nowhere") when gold and silver reach new record highs:

I'm just standing back and looking at all the post-breakout selling that is going on.

I am calling this a "duh" market. There is almost nothing you can invest in, in this sector, that will not be moving higher, yet sellers predominate over buyers.

Obviously the prevailing belief in the broad market is that each time gold and silver reach record high prices, it is an "apex," following which prices will drift back down again in future. However, gold (followed only a little later by silver) has been forging new highs since 2001. For me, ten years is long enough to be convinced that there is a secular (long-term) trend at work, and that the future will continue to hold higher prices for gold and silver, not lower ones.

"Duh."

Yeah. It's a good time to watch movies, read books, go for walks, spend time with family members.

Time is ONLY on our side. There is no downside from here. We're in gold/silver stock investors' heaven (even though it doesn't necessarily feel like it).

There is huge action beneath the surface, and it will keep erupting, moving prices higher from here. It is obvious to any objective thinker.

You can only lose if you think too much about it!

Oh yeah. Sometimes the seismic activity is not "volcanic."

It bubbles up like mudpots.

But it is very hot beneath the surface.
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Enantiodromia: The Word of the Day....

5 April 2011

The following is a comment I made on the Dollar Vigilante Blog. If a little more context will help you after reading this, then click here for Jeff Berwick's thought-provoking article ("Mortgaging Our Grandchildren's Future? That's Being Optimistic!"). In any case, my recent thoughts on enantiodromia:

Jung (the Swiss psychiatrist) used the term "enantiodromia" to describe the psychological principle of "running into opposites."

Historically, no people have ever been more opposed to centrally-planned, non-free-market economies than the citizens of the US. That, of course, has changed, and it is perhaps instructive to analyze why.

The healthcare system is one example.

Layers of bureaucracy and regulation have accreted over the years to PREVENT the emergence of government-provided healthcare in the US. The notion that government regulation can advance a free-market system has made the quasi-free-market health-insurance-encumbered US health system perhaps the most expensive in the world.

Like it or lump it, but government-run healthcare in Canada costs half as much, and for most people, it is also better.

Somewhere, the idea that the government and the Fed have the "responsibility" to rescue an economy in trouble became acceptable (our forefathers would not have accepted this idea for a moment), and the executives on Wall Street have been feeding at the publicly mis-regulated "private" trough for decades, making Animal Farm no longer an allegory (the pigs are running the farmyard).

A guy I respect (Bill Fleckenstein) says that the Fed (the US Federal Reserve Bank, headed by Ben Bernanke) has more implicit responsibility for this situation than any other body, including the big spenders in Washington and the over-leveraged risk-takers and game-players on Wall Street.

That is, easy money creates a climate in which elected representatives, business leaders, et al, simply believe they will be rescued.

And of course the public buys into this idea.

Who in Wisconsin is demonstrating in the streets, saying, "Hey, thanks for saving us taxpayers the money we can't afford to pay!"

Anyway, the greatest opponents of the centrally-planned economy have now morphed into its greatest advocates. Read more about it at the Dollar Vigilante....

Enantiodromia: the word of the day.....
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The Heroes of 2011: Japanese Nuclear Workers

2 April 2011

I've been following the New York Times Asia-Pacific page since the Japanese earthquake and tsunami.

I wish to make one point. We knew from the start that the reactors would leak as a consequence of the damage from both an earthquake and a tsunami. Come on, nothing is built to withstand such dual forces of destruction.

And yes, there is serious local leakage of very poisonous and persistent radioactive substances - plutonium, iodine, cesium and more, and they will spread. It's horrible.

But we must remember that (1) nothing nuclear blew up or (fully) melted down and (2) nothing nuclear burned.

Yes, it's disastrous, unimaginable, really. But it could have been far, far worse.

I give full credit to the courageous frontline workers, who knew from the start they would be over-exposed to life-threatening radiation.

They did this for us, and I thank them for their sacrifice on our behalf. When Time Magazine chooses the "person" of the year this year, I hope they remember these workers!
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My Question to Mr. Ignatieff

31 March 2011

On Sunday, April 3, at 11:00 am EST, The Liberal Party of Canada will host a special live town hall meeting that will be streamed online at Liberal.ca. During the event, Michael Ignatieff will unveil the Liberal Platform and answer questions from Canadians.

The Liberal Party is inviting Canadians to pose questions to Mr. Ignatieff.

I have responded by submitting my question. Honestly, I don't think my question is very easy, but here it is:

"Mr. Ignatieff,

"I regard our present time as the era of investor exploitation. Mr. Harper's dismantling of the income trust program selectively harmed small Canadian investors and sold off Canadian assets to international bidders. Low interest rates punish savers and motivate investors to take excessive risks or to misdirect investments. The broad markets have been flat for a decade. In the western world, only the Australians have a different (high interest rate) policy. Capital investment (saving) is at the heart of economic growth. Do you favour restoring the income trusts, raising interest rates, and undertaking other policies to benefit savers and to restrain high-risk (speculative) activity?"

Well, I'm hoping for an answer.....

I'll keep you posted.
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Why Canada Is Doing Well

26 March 2011

Things are getting better in Canada, compared to almost every place else.

According to Niall Ferguson, here's why:

That's Canada at the bottom, trending downward. Our debt is falling relative to GDP - unlike virtually everybody else! (Australia is also doing relatively well, but it's not on this chart.)

Why?

1. We are a small country that leads the world in commodity production - mining, timber, agriculture. We have it all - including 60% of all the mining companies in the world.

2. Paul Martin (our former Liberal Prime Minister and Finance Minister) rationalized government expenditures and brought the country into surplus. He ran Canada like a business. (He was followed by an imprudent - and impudent - fellow named Stephen Harper who has gotten Canada into trouble by disenfranchising senior citizens and other savers/small investors. Fortunately, Mr. Harper has just lost his job!)

3. What Canada produces - raw materials - is in demand from the rapidly growing Asian economies. Commodities have been in a decade-long secular bull market, and that market appears set to continue into the present (upcoming) decade.

4. Both the Canadian government and Canadian banks are relatively conservative. We tend to avoid bubbles and manias. We keep speculators on a short leash.

5. We have affordable, publicly-funded health care and social insurance.

Canada is not perfect, but, compared to almost every place else, it might as well be. It doesn't get much better than this in the real world.
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The End of Extend and Pretend

23 & 25 March 2011

As a subscriber to Bill Fleckenstein's bargain-priced financial advisory service, I have the privilege of popping off questions to Mr. Fleckenstein from time to time.

Tonight, I thought I had finally grasped the fundamental paradox facing the most indebted nation in world history.

Here is my latest question to Mr. Fleckenstein (who is taking a well-deserved day off tomorrow):
_______________________________________________________

Fleck,

Sorry to trouble you on a day off, but I have a simple question.

Let's say that there is no crisis and no "flash crash" between now and June 30, and that the Fed decides to halt QE (Federal Reserve money-printing) ad infinitum.

Given that the central bank will not be buying $75 billion per month in US treasury bonds, does that not mean that there will be MORE upward pressure on interest rates?

That is, QE = more money supply (inflation), but "No QE" means higher interest rates, and eventually higher federal debt payments?

(Note: a 7% rate on the existing $14 trillion plus US federal debt = $1 trillion in interest payments per year.)

And the fix is for our elected leaders to come back to us and say, "Sorry, we can't give you what we promised you after all. We're shutting off the tap. It's all over."

I think I'm truly beginning to grasp the Catch 22. Every option is "impossible," yet as in all paradoxes, and as always through history, the paradox will have to be navigated in real time.

If I've got it right, is there a timeframe (or interest rate level) beyond which extend and pretend is no longer sustainable?
_______________________________________________________

There it is. My latest question to Fleck. I'll share any answer that comes my way.....

25 March 2011: Mr Fleckenstein replied today to my question as follows: "In my opinion, austerity is a short sale, no one will stand for it, when we can just print money. I don't think there is any set level of anything that would end extend and pretend, it will end when it does, but I'd guess it will be 'unwinding' in the next 6-9 months or so."

Again, my advice for my readers is that you subscribe to Mr. Fleckenstein's economically-priced advisory service!
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