If we can get past Monday, we’ll be OK until 2027.
On Monday, an asteroid one-third of a mile wide will pass within 745,000 miles of Earth — barely three times the distance between Earth and moon.
Gosh, and to think we spent all week getting worked up over tax increases and the shenanigans of the European Central Bank.
But never fear, says NASA: The giant rock poses “no threat to the Earth for the foreseeable future.” That is, this particular asteroid won’t make another pass by Earth for 200 more years.
But long before then, another big rock will hurtle our way in 2027.
According to an account at CNN, the asteroid stopping by on Monday should be visible with just a good pair of binoculars.
Unless you live in Chongqing, China. Not with smog like this…
“On a clear day…”
But the city’s central planners have a solution — a ban on smoking bacon.
“Eating preserved pork and sausages is a long-held tradition in Chongqing and the neighboring Sichuan province,” explains a dispatch from China Radio International, “with many households making smoked bacon before the Chinese lunar new year, which falls on Feb. 19 this year.” Violators face a fine of $805.
On this score, the Chinese government is allowing dissent: Everyday Chinese are taking to the Internet suggesting the government “should probably ban cooking because it also generates air pollution.” Said another: “Maybe we should stop breathing because it pollutes the air.”
A less trivial story from China: Plans are underway for a 4,300-mile high-speed rail line from Beijing to Moscow. What’s a five-day trip now would be cut to two.
The story is getting much play on the Russian government’s English-language RT network: “China is actively promoting its high-speed railway technology and sees Russia as an especially attractive market because of its strained relations with Western countries over Ukraine.”
The news comes on the heels of two big natural gas deals China and Russia signed last year… and growing signs the two nations are leading a growing “anti-dollar alliance,” as described by our own Jim Rickards.
Key to that campaign is continued Russian accumulation of gold. Yesterday, the Russian central bank issued its latest gold reserve figures.
So much for the ridiculous rumors last month about Russia unloading its gold reserves to stay afloat. Assuming the Russian central bank is telling the truth — it’s giving a bigger nod to transparency than the New York Fed, that’s for sure — it added 600,000 ounces of gold last month.
As our Byron King explained at the end of 2014, Russia is now converting its oil revenue into gold as quickly as it can: “At the end of the day, Putin’s goal is to create a working alternative to the dollar. He has said as much, and many people who work for Putin have said as much. When the time is right, Putin will present the world with a new Russian ruble, backed — in whole or in part — by gold.”
Gold is set to end the week nearly flat compared with the end of last week. At last check, the bid was $1,288.
Crude has barely budged on the news that King Abdullah of Saudi Arabia has died. As we write, a barrel of West Texas Intermediate fetches $46.42.
A new king — Salman is his name — is already on the throne. He’s yet another aging son of Ibn Saud, the kingdom’s founding monarch who ruled from 1932-53. If there’s any palace intrigue, any maneuvering among Ibn Saud’s descendants, it’s being kept quiet.
“Then there is the ongoing threat from jihadists, both at home and across its borders,” says the BBC’s security correspondent Frank Gardner. “Saudi Arabia is now sandwiched between the aggressive Islamic State (IS) group to the north and al-Qaida in Yemen to the south. Saudi warplanes have joined the U.S.-led coalition in airstrikes against IS, but this is deeply unpopular with many Saudis.”
The BBC is too polite to point out that many factions among Saudi Arabia’s 7,000 princes helped fund the rise of both al-Qaida and ISIS. Heh…
And how about this wild card — the pending execution of an outspoken dissident in Saudi Arabia, stirring up the Sunni-Shia conflict dating back some 1,360 years?
He’s a revered Shia cleric, Sheikh Nimr Baqir al-Nimr. Recall the House of Saud is Sunni Muslim… but Saudi Arabia is home to a restive Shia Muslim minority concentrated near the country’s most productive oil fields.
“This was not an ordinary criminal trial, even considering Saudi Arabia’s liberal use of capital punishment,” writes analyst Giorgio Cafiero at Foreign Policy in Focus. “Among other charges, the prosecutor sought to convict al-Nimr of ‘waging war on God’ and ‘aiding terrorists,’ even calling for the cleric to be publicly executed by ‘crucifixion.’ In Saudi Arabia, this rare method of execution entails beheading the individual before publicly displaying his decapitated body.”
Al-Nimr’s supporters say all he did was lead a nonviolent movement supporting Shia rights and more rights for women.
Saudi Arabian rulers know carrying out the death sentence would be provocative: “As officials in Riyadh decide what steps to take toward al-Nimr, they must be cautious about the possibility of Shiite militias carrying out future attacks against the ruling monarchy.”
Now that would bring oil prices out of their doldrums in a hurry…
Major U.S. stock indexes are catching their breath after a big run-up yesterday. As we write, the Nasdaq is barely in the green, but everything else is in the red, the S&P 500 at 2,058.
The run-up was a delayed reaction to the European Central Bank’s launch of quantitative easing. Ditto for the fall of the euro — after a modest drop early yesterday, the bottom fell out. Now the euro sits below $1.12 for the first time since September 2003. And the dollar index is only a short distance from 95.
“And the bad news just keeps coming for the euro,” writes our friend Chuck Butler, managing director at EverBank Global Markets.
“Suddenly, the markets woke up and realized that Sunday is the day the Greeks go to the polls and elect a new government, which on the outside doesn’t seem to be that big of a deal, given this is Greece, and not a world power. However, this election has some spice to it, for one of the major parties is the ‘leave the euro’ party (they have a real name, but this is what I call them).
“And need I tell you that IF the ‘leave the euro’ party wins a majority on Sunday, the euro’s march to parity with the dollar will pick up the pace.”
“The tide is already turning in favor of the homebuilder trade,” says Greg Guenthner of our trading desk.
Greg started pounding the table for homebuilders in our virtual pages back on Oct. 21. Since then, the SPDR S&P Homebuilders Index ETF (XHB) is up nearly 11%, while the S&P 500 is up barely 6%.
“We don’t need another insanity-driven speculative bubble to make money on this homebuilder trade,” he says. “All we’re looking for is a return to ‘normal.'”
Which is exactly what we’re getting, he says: “Construction hiring is actually on the mend after years of decline. Contractors added 48,000 jobs in December, according to the latest numbers. Full-year numbers were also better than expected, clocking in at nine-year highs. Why is no one talking about that?
“By the time expectations catch up to reality,” Greg concludes, “you’ll have made your money.”
“Regarding Jonas’ comments in the Wednesday issue,” a reader writes: “I believe there was a previous period when a small number of the biggest stocks propped up market averages for a time while the small caps all floundered.
“The highfliers, called the ‘Nifty Fifty,’ were the darlings of Wall Street for a time — and everyone piled in. When the pattern broke, as I recall, it wasn’t due to the small caps catching up. I’d be interested to see one of your analysts do a comparison, then versus now.”
The 5: Jonas looks to a different era in market history for signposts: “I think we’re in a period incredibly similar to the ‘mega bulls’ that kicked off in the early 1950s and 1980s — and in those periods, small caps do incredibly well,” he says.
“In fact, they do better toward the end of the mega-bull run as everyone gets exposure to the market and people move from being cautious investors to aggressive (foolhardy) speculators.
“2014 was a year of poor market breadth — those aren’t uncommon. But markets tend to mean revert, and if I’m right about where we are in the cycle, then the mean reversion will be a boon to small caps.”
“Having been involved in a project in South Dakota back in 1990-91, I know that there IS a lot of gold and a lot of other metals in sewage sludge,” a reader writes after yesterday’s episode — “especially in the ash when the sludge has been incinerated.
“However, the data from Japan are a bit higher than I recall, maybe by a factor of 10. Still, seven ounces (troy, I assume) from a ton of ash is better than a LOT of gold ore (including what was being taken out of the Homestake before it closed).
“HOWEVER, the COST of recovering those metals is very high because of the practical recovery rate, the amount of processing, the cost of the equipment (and its maintenance and frequent replacement: Ash is very tough on most kinds of equipment) and the environmental permitting and regulatory compliance costs. Add to that the cost (for the same reasons) of incinerating the sludge (versus land application) and transportation costs and even at $1,290-plus an ounce, the ROI is pretty poor.
“Probably better off going back and mining old tailings from historical gold mining operations, due to even worse recovery rates way back when, or going out and finding new ore bodies (well, more like going out and exploiting those we already know about). Cleaning up the old tailings gives you brownie points (and maybe cash grants and long-term low interest loans) for environmental cleanup.”
“The picture of the Ford Granada made me flash back to the ’80s and a road trip involving a Granada,” a reader writes.
“Four of us guys had tickets to a rock show called ARMS (Action Into Research for Multiple Sclerosis) featuring rock legends of the time Eric Clapton, Jeff Beck and Jimmy Page, all to support Ronnie Lane’s medical issues with MS. The Granada took us from Seattle to San Francisco’s Cow Palace and back in December 1983.
“We left the show at midnight. On the way home at 1 in the morning, it started snowing hard in Redding, California. We drove 10 hours through the Siskiyou mountain pass in whiteout blizzard conditions. It was terrifying! The Granada got us home safely, and we nicknamed her the ‘Timex.’ She took a licking and kept on ticking!
“Never thought of that car looking like a Benz, though!”
“Brings back some funny memories,” writes another. “Growing up, my car was the 1954 Ford Skyliner. It had the first look-through roof. Everyone who saw this before-its-time car would ask me — a teenager dating — if I was afraid of getting moon burn. Wish I still had it — quite rare.
“By the way, Ford never took government handouts (our tax dollars ), and their Ford Foundation educated many Americans. Because of that, I will always buy Ford’s great products knowing that my dollars go to their corporate offices in our great USA!!
“I’m fully open to rebuttal — as a three-tour Vietnam veteran naval communications/intelligence officer.”
The 5: True, Ford didn’t get the kind of bailout GM and Chrysler did. But Ford did get $5.9 billion in low-cost government loans in 2009 to upgrade its factories for more fuel-efficient technology. And Ford borrowed $7 billion from a Federal Reserve entity called the Commercial Paper Funding Facility.
Still, there’s no arguing Ford’s the cleanest dirty shirt…
Have a good weekend,
Dave Gonigam
The 5 Min. Forecast
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