Addison Wiggin – January 9, 2012
- Soros buying gold again? Paulson selling? The 5 tracks a couple of big movers in the market… while gold goes nowhere…
- Best buying opportunity in the gold space since early 2009? A revealing chart… and your chance to ask questions of six experts
- Chris Mayer prepares to take you bargain hunting on “the biggest yard sale we’ve ever seen”
- The one college major with even worse job prospects than the arts and humanities… a reader’s futile plea to the Supreme Court… Orwellian observations from an overseas reader… and more!
Gold is starting the new week around where it ended the previous one. The bid as of this writing is $1,612. But the buzz this morning is about what the hedge fund giants are doing.
George Soros — who dumped most of his gold holdings in early 2011 — appears to have gotten back in, acquiring shares of GLD toward year-end.
John Paulson appears to have sold off GLD at the same time. It’s conceivable he did so to meet redemptions from investors who got fed up with taking a bath on his other signature plays that didn’t work out so well — like Citi and Sino-Forest.
Paulson’s Advantage Plus fund — one of his largest — fell 51% in 2011. “Clearly, this has been an aberrational year for us,” he wrote his remaining investors last Thursday.
We won’t know how much GLD was bought and sold until Soros and Paulson file their 13-Fs, which they will do by Feb. 14. With the little that we know to date, the moves appear to cancel out… leaving our 2012 gold forecast untouched.
“We don’t think gold is going to go up this year,” Bill Bonner ventured on Friday. “It’s been up every year for the past 11 years — the most-durable bull market in recent history.”
“It’s ready for a rest.”
“Even so, we should probably expect it to go up again. Because the danger of thinking it will go up is far lower than the benefit of thinking it will go down.”
And if it falls to $1,400… or even $1,200… that’s just an opportunity to load up on more.
One of the factors that might well prop up gold this year is central bank buying — a factor cited this morning by both Goldman Sachs and Deutsche Bank.
“We… also expect central bank gold buying will continue,” said the Deutsche Bank report, “and that tail event risk as it relates to the European sovereign debt crisis and the European Central Bank’s balance sheet will encourage gold prices to recover.” The German giant is looking for an average of $1,825 this year.”
While not citing a price target, Goldman’s Jeffrey Currie also cited central bank buying during a conference in London today.
It’s a compelling argument: As of six months ago, China held only 1.8% of its total reserves in gold… Russia 8.7%… and India 9.5%.
In the United States, the figure is 76.5%… assuming all the gold last audited in Fort Knox in the ’50s is still there, heh.
“What precisely are governments and central banks seeking to protect with their gold holdings and acquisitions?” asks Laissez-Faire Books editor Jeffrey Tucker.
“It is not you and me. It is about their system and their interests. As much as they love foisting the paper stuff on the population, risking even the destruction of the means by which we earn, save and provide for ourselves, when it comes to government and central bank finance, gold serves them well.”
“They deny it publicly, but their actions speak more loudly than their press conferences. Governments destroyed the gold standard long ago, but they know better than anyone that there is no surer means of financial security, proven over nearly all times and all places.”
Gold stocks are going nowhere this morning. The HUI index sits a hair below 520… still on the low end of the trading range where it’s been mired since October 2010.
But an examination of the HUI-to-gold ratio — literally the HUI divided by the gold price — reveals a historic buying opportunity…
By this measure, gold stocks are nearly as good a value as they were during the panic lows in early 2009. From there, the HUI doubled in less than two years.
The above chart jives perfectly with research we’ve been doing on our own: We’ve uncovered an anomaly within the gold market that’s occurred only four times in the last 33 years. The smallest gain this anomaly has delivered is 74%. But it’s also generated as much as 219%.
We’ll show you the chart tomorrow… and we’ll tell you why the window of opportunity might be closing very soon. For now let me assure you our own research checks out against reputable experts, including resource investing guru Rick Rule… fund genius Frank Holmes… and our own Harvard-trained geologist, Byron King.
They’re among six experts we’ve assembled for an online seminar on this very opportunity. Byron was recording his segment only this morning in the library attached to my office…
In Mr. King’s left hand is an iPhone. In his right hand is a quartzite rock with gold ore. Guess which one is worth more?
More to the point, Byron names his favorite gold stock of the moment during his talk… and you can access it free. You can also get the sessions with Rick, Frank, Chris Mayer, Michael Pento and Nick Bruyer.
Every one of them is free. They’re available starting Thursday… and access is yours as soon as you sign up. You can even submit your own questions. Here’s where to do so.
Major U.S. stock indexes are flat to slightly down. If traders are eyeing anything this morning, it’s Europe… but even that can’t ramp up any excitement.
The first “Merkozy” summit of 2012 delivered the unsurprising promise that European leaders will move heaven and earth to keep Greece in the eurozone. We have no doubt this is true and will remain so… until the moment it’s not.
The soothing words from Europe have firmed the euro slightly, to $1.274. The dollar index is off slightly, to 81.2.
Don’t look for the European Central Bank to cut interest rates again this week, suggests EverBank’s currency maven Chuck Butler.
Still, that’s likely to be only a pause in a rate-cutting cycle that began the moment Mario Draghi took over as chairman last fall. “He’s no Trichet or Duisenberg,” Chuck says, comparing Draghi to his hawkish predecessors. He’s more of a Bernanke & Greenspan.
“So you can expect to see eurozone rate dropping below 1% for the first time this year… It’s sad, I know… But I can tell you that Draghi and his fellow-euroheads, don’t care about the ECB’s credibility… And they don’t believe it will be damaged, as the markets will see the rate cuts as needed to help the eurozone economy that appears to be heading to recession.”
“The EU is about to host the biggest yard sale we’ve ever seen,” says Chris Mayer, looking for opportunities among the wreckage.
“Yes, the governments are in trouble. Part of the solution is to sell stuff they own. Greece, for instance, is going to sell about 50 billion euros of stuff. The list is long: stakes in ports, 39 airports, a casino, two water companies, a nickel miner, two banks, gas and power monopolies and land. Not that you’d want to put a dime in Greece, per se, but the other EU countries will host similar sales.”
“Italy, Spain, Portugal — even the U.K. — will sell airports, airlines, radio frequencies, television channels, water and gas utilities, telecom companies and much more. Not only the governments, but the EU banks will have to unload nearly $2 trillion in assets.”
“This is going to create some massive opportunities to pick and choose among the rubble and get stuff on the cheap.”
Chris has already spotted one opportunity. Usually, it’s reserved for the very rich… but in this case, you can take part. All you have to be is a subscriber to Capital & Crisis.
Mamas, don’t let your babies grow up to be… architects?
In our ongoing survey of the higher-education bubble, we’ve come across new research from George Washington University. Researchers there recently crunched some Census numbers to discover which college majors have the highest and lowest unemployment rates.
Newly minted architects fare the worst, with a 13.9% unemployment rate. That’s even worse than arts majors (11.1%) and humanities majors (9.1%).
Across all recent college grads, the unemployment rate is 8.9%.
The majors that fared best are interesting. Graduates who majored in agriculture and natural resources have a 7% unemployment rate — which speaks volumes about the ongoing demand for commodities.
But education majors and health care majors have it best of all: In both categories, the unemployment rate is 5.4%.
In the Labor Department’s unemployment report on Friday, government employment fell through most of 2011 — except in education.
The collapse of the housing bubble and relentless hollowing out of U.S. manufacturing is not delivering a nation of high-value brainiac jobs… far from it. But we do appear to be building a nation of people emptying each other’s bedpans and teaching others how to do the same.
“Here is another way,” writes a Reserve member, “to look at our unemployment rate and our ‘progress’ in reducing it.”
“I heard on the radio today that if the USA labor force was the same size today as it was in January 2009 when Obama took office, our unemployment rate would be 10.9%.”
“The 8.5% unemployment rate reported this week is a farce. Drive people out of the workforce and drive down the unemployment rate! One day soon when no one is working, we’ll have full employment!!”
The 5: That number checks out. And if you go back two more years to January 2007, the number of people characterized as “not in the labor force” has grown by 7.5 million.
“Again,” a reader laments after reading Friday’s account of how the holders of mortgage bonds might get stuck with the bill for bankers’ misdeeds, “the government is using coercion/intimidation/blackmail to fornicate bondholders?”
“Where is the outrage and where are the lawsuits from the downstream holders that are getting it socked to them? I don’t recall the government having the power to abrogate private contracts in my read of the Constitution.”
“This (and the prior lawless action) needs to go to the Supreme Court.”
The 5: Recall in 2009 the state of Indiana pension fund — among other Chrysler bondholders — sued Chrysler and the Treasury Department for that sleazy deal. The highest court in the land declined to hear their challenge.
“I read your daily email,” writes a reader who says he hails from a South Pacific nation, “and have been following the discussion on the National Defense Authorization Act with interest.”
“The American people, who once lived in one of the most free countries in the world, a country where individual rights and freedom were respected, are slowly but surely loosing their freedom. Corrupt leaders and governments know that to control a population, the population needs to be kept scared. They also know that as people loose their freedom, they become angry, so this anger needs to be directed somewhere. What better way to achieve both these things than to have a foreign enemy.”
“Once, the Cold War was finished, a new foreign enemy was needed, so along came al-Qaida and the Islamic terrorist threat. Then there was Iraq with its so-called weapons of mass destruction, which, by the way, were never found, but over 100,000 Iraqi civilians had to lose their lives due to this American escapade.”
“Now the war drums are beating against Iran, another country that has never attacked America. How many more countries that have never attacked America will America attack? Iran is no threat to the USA. Iran knows that for all their long-held nuclear ambitions, they will never be able to match America’s military supremacy. Even if they were to develop the know-how to fit a nuclear warhead to a ballistic missile, the odds are that the weapon would be shot down the moment it left its launchpad by one of the hundreds of anti-missile batteries the U.S. has deployed around the Gulf region in anticipation of just such an eventuality.”
“Now that the Middle East is running out of countries that still need U.S.-style regime change, it is time for a new enemy to be organized. Who is the latest target of U.S. defense policy? China. So now China can be a new enemy to scare the U.S. population.”
“When I was visiting the USA a while after the Sept. 11 attacks, I saw something that could have come straight out of the book 1984. Each morning, we would go into the hotel restaurant for breakfast and on the wall would be the TV blaring CNN news, and running across the bottom of the screen would be that day’s color-coded terror alert, red for extreme down to green for low.”
“The terror threat from the enemy, terrorism, to keep the population scared. It was uncanny just how prescient George Orwell was.”
“That pathetic so-called TV show on Fox, The Five, is, without doubt, the worst example of a talk show I have ever seen. I cannot sit through even 10 minutes of it without having heart palpitations.”
“Your 5, on the other hand, I never miss. Keep it up.”
“P.S. Love the political stuff also.”
The 5: Great, just when we thought we’d extracted ourselves from the “political stuff,” you have to go and pull us back in…thanks.
While we’re here, let’s take a look at Michael O’Leary, founder of Ryanair, giving bureaucrats in Brussels hell for their stupid protectionist policies. He begins with the irony of having been invited to address a conference on innovation hosted by said bureaucrats… in Brussels:
“This guy is straight out of Atlas Shrugged,” reads the first comment beneath the video “Notice, that this means he’s doing well, the customers have more of their own cash in their own pockets. True capitalism and free market action at work: win-win-lose. Who loses? The bureaucrats who want to control every aspect of your lives.”
If you’re a connoisseur of irony, pay close attention at the 6:10 mark.
Here’s a photo from Ryanair’s annual charity calendar, shot exclusively with talent assembled from Ryanair’s cabin crews:
Cheers,
Addison Wiggin
The 5 Min. Forecast
P.S. If you’re bored by the euro crisis, why not make some money from it? That’ll spruce things up for you a bit…
As mentioned above, Chris is working on an idea that’ll be worth holding for at least a year or two. But if you’re looking for something that’ll move faster, Abe Cofnas is more your speed.
“On Friday,” says Abe, “the speculative shorts against the EURUSD hit new levels. To me, that indicates it’s time for a pause in this pessimism and bearish outlook.” He’s looking for the euro to move up from the current $1.274 to $1.282 before week’s end… which could deliver his readers a 150% gain.
Abe did nicely by his readers tracking the euro crisis last year, with seven plays in eight weeks delivering gains of up to 161%… all of it in four days or less. Learn more about how you can get in on the fun right here.