Foreign Investment in the U.S. – Going Down, Down, Down

As the current administration continues to expand the US debt with multi billion dollar bailout after bailout, one asks the question: where does all that cash come from? Well in the past, when the US Goverment has to pay its bills and it’s checking account is a little low, money is raised via the sale of US Treasuries (currently around $3 trillion per year, a four or five increase over 2008 – just to keep the doors open!).

Foreign investors have been some of the biggest buyers of these borrowing instruments for years, but as you will see from this new article published by Casey Research today, the appetite of investors that provide this seemingly endless source of cash could be coming to an abrupt end soon, which would be disastrous for the US Dollar.

This could be one of the singlemost important articles we have run on this blog as it speaks to a sea change in the US economy, which could cause investments in hard assets like gold, silver and energy to skyrocket in value as the US dollar tips into a steep downward spiral.

Here is a quote from the article, with a link to the full article below: 

“The latest report shows Russia and longtime monetary ally Japan edging towards the door. China and the oil exporting nations continue to convert an increasingly moderate amount of their trade surplus into Treasury Bills – but not on a nearly large enough scale to meet the inflated (and inflating) borrowing needs of the utterly bankrupt U.S. Government. And how long will they continue to show up when an increasing number of other foreign buyers start selling their Treasuries? No one likes to be the last one to leave a party, especially when the bananas flambe’ has tipped over and the curtains are on fire.”

Stong commentary indeed, but information that could help investors realign their portfolios accordingly as storm clouds gather on the horizon.

The full article is available here

Worst of Natural Gas Bear Behind Us?

Mike Paulenoff, author of the MPTrader.com published a brief report on the natural gas market yesterday, with the conclusion that the worst of the natural gas bear market might be behind us. Here is an excerpt from the article with a link below for the full article. “The natural gas inventory figures came in more or less as expected, which in this market is a victory!  Otherwise, the tame inventory data really should not be a surprise.  If we are to believe what my near and intermediate work is telling us, the worst of the gas bear market is behind us, and now we are in the arduous “base-building” phase (measured in weeks) prior to a sustainable powerful upmove.” 

If this prediction holds true, it would reinforce the current futures strip pricing on NYMEX, which shows $4 and $5 per mcf prices over the near to mid term contracts, and would be a great value driver for energy E & P groups that are developing North American based natural gas reserves.

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Junior Golds Offer ‘Ridiculous’ Leverage

By Rick Ackerman, July 28, 2009

Very few Americans own gold in any form. Even though gold’s price has risen each year since 2001, about the only time we hear gold mentioned is in the ubiquitous “cash for gold” TV commercials. Don’t you wonder who has any gold or jewelry left to sell?  The way it’s shunned, you might think gold causes swine flu or greenhouse emissions. It is most baffling to me to see our profligate nation diligently avoiding the most rewarding investment of the last decade.

Above all, there are the two overriding reasons to own gold — one fundamental, the other technical. Concerning the former, the monetary landscape and the certainty of more and more fiat money will keep the gold fires burning brightly. As for technical reasons, on the charts, gold has been consolidating for years to launch into a parabolic rally.

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Tarp Recipients Dole out Millions in Bonuses

NEW YORK (Reuters) – Bonuses paid to executives at nine banks that received U.S. government bailout money in 2008 were greater than net income at some of the banks, the office of New York Attorney General Andrew Cuomo said on Thursday.  Cuomo, in a report on months of investigation into compensation paid by the banks, said employee pay “has become unmoored from the banks’ financial performance.”

Representatives of the banks either declined comment on the report or could not comment immediately.  “There is no clear rhyme or reason to the way banks compensate and reward their employees,” said the report by Cuomo, New York’s top legal officer, who began his probe last October amid taxpayer complaints about Wall Street pay.  Even in one of Wall Street’s worst years on record, at least 4,793 bankers and traders received more than $1 million in bonus payments, according to the report.

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Gold and Silver – A Technical Analysis

Based on technical analysis, it can be argued that gold and silver are poised for a significant rally, possibly in late summer.  Although probably not thought of as the ideal time to expect a rally, historical results may show otherwise.  For example, in 2005 there was a substantial late summer rally, in 2006 a small pre-July rally, in 2007 a huge late summer rally, and in 2008 a small pre-July rally.  Does anybody else see the pattern?  It would appear that we are due for a nice late summer rally, I guess only time will tell.

Click the chart below for further analysis.

Avanti Mining to Benefit from Expected Doubling of Moly Prices

Avanti Mining Inc. (TSX-V: AVT) is a resource company which seeks to become the pre-eminent “institutional grade” mining company focused on Molybdenum.  Avanti has a 100% interest in the Kitsault Molybdenum Mine, a past producing mine located in Northern British Columbia.  According to a Canadian Institute of Mining, Metallurgy and Petroleum compliant resource estimate for the mine (i) an indicated resource of 158 million tonnes of ore with an average Molybdenum grade of 0.10% was found resulting in approximately 348 million pounds of Molybdenum and (ii) an inferred resource of 133 million tonnes of ore was also found, resulting in approximately 235 million pounds of Molybdenum.

With the above-described indicated and inferred resource, Avanti is sure to benefit from an expected increase in moly prices between now and the end of the year and into 2010.  Moly prices have averaged slightly more than $9/lb so far this year but according to J.P. Morgan analyst Michael Gambardella, he expects moly prices to close in on $15/lb over the next several months and to average $18/lb in 2010.  Gambardella’s expectations are  based on the belief that “most Western molybdenum producers have little to no inventory, leaving traders scrambling–given the recent increase in demand outside China.”  Gambardella further believes that the restocking by carbon and stainless steel producers in the developed world and still-healthy demand from China should lead to the next step-up in moly prices to $20/lb in the fourth quarter of next year.

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Buying Gold: Futures and Physical Metal In, ETFs Out

LONDON (Reuters) – Gold prices are ignoring dwindling inflows into bullion-backed exchange-traded funds, with prices supported as investors switch their interest to the U.S. futures market and outright purchases of physical metal.  Investors are increasingly embracing riskier assets like stocks, leaving less of an impulse to hoard gold as a hedge against the unknown, lending support to its appeal as a buffer to dollar weakness and future inflation.  Consequently, while interest in gold-backed ETFs has tailed off after unprecedented buying in the first quarter, other forms of investment, such as positioning on the New York Comex futures exchange, have increased and underpinned a firm price.

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Research Indicates Multiple Anomalies In Silver ETFs

Project Mayhem Research Inc. has released its first working paper on statistical and factual anomalies in silver ETFs, the conclusion from which is disturbing.   

“During our research into the inventory lists of the iShares SLV and London-based ETFS physical silver funds, we discovered multiple anomalies which cannot be easily dismissed. These included the presence of internal duplicates, rough internal duplicates, weight duplicates, statistical clustering, and cross-reference duplicates. Taken together, these anomalies are cause for concern, and we suggest that more capable teams conduct further research into these issues, as they effect price discovery within the precious metals market, as these ETF shares are being used for settlement and possibly pricesuppression on the COMEX.

If these problems are caused by accounting errors, they are disturbing and perhaps profoundly incompetent, and we suggest both these funds should have their senior management replaced.

In our opinions, the only way for all of these anomalies to occur together as noted in this paper, is via systemic fraud or gross accounting error bordering on jaw-dropping incompetence.”

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SEC Rule on “Naked” Short-Selling Now Permanent

WASHINGTON – Federal regulators on Monday made permanent an emergency rule put in at the height of last fall’s market turmoil that aims to reduce abusive short-selling.  The Securities and Exchange Commission announced that it took the action on the rule targeting so-called “naked” short-selling, which was due to expire Friday.

Short-sellers bet against a stock. They generally borrow a company’s shares, sell them, and then buy them when the stock falls and return them to the lender — pocketing the difference in price.  “Naked” short-selling occurs when sellers don’t even borrow the shares before selling them, and then look to cover positions sometime after the sale.

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Ted Butler: Gold / Silver Price Relationship Set to Break-Up

According to silver analyst Ted Butler, “the price of silver, relative to gold, is out of line,” the cause of which has been long running manipulation of the silver markets.  However, it is Butler’s perceived end of silver manipulation that will “set silver free to begin its own new price life.”  Accordingly, it is his belief that those that can switch gold holdings to silver should do so without delay. 

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