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Gold and Silver

Oh man, I just took a look at the April daily gold chart and it looks like it has formed a small head and shoulders bottom with the neckline at about $555 and gold closed today above that neckline at $561.20.

Then I looked at the March daily silver chart and the same head and shoulders bottom. The chart shows silver breaking out, also. IMHO, it appears both gold and silver are set to challenge recent highs.

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Gold economics silver Mover Mike

Beans in the Teens?

Lot’s of talk the last few days about drought. Yesterday AccuWeather asked the question, Is America Facing Another Dust Bowl?

Last week the National Weather Service Climate Prediction Center issued their drought forecast for 2006 through May:

Why could a new Dust Bowl drought occur?
The low-level jet stream-a fast-moving current of winds close to the Earth’s surface-travels from east to west across the Atlantic, then typically curves northward as it crosses the Gulf of Mexico, bringing moisture to the Great Plains. Abnormal sea-surface temperatures have caused this low-level jet stream to continue westward and to weaken, which is preventing much-needed moisture from reaching the agriculturally critical region. The shift in the jet stream is also allowing a southerly flow from Mexico to bring much drier air northward into the Plains.

Ok, that’s the background. What does it mean?

The severe winter in Eastern Europe’s major grain regions have killed on average about 30% of the crop. Due to drought in the Ukraine and elsewhere, winter wheat planting was down by about 18%. Normally those losses would be made up in the US and Canada, but if forecasts are right from the NWS, our grain crops could suffer. According to London Irvine Report

The probability is for higher prices across the year ahead. Though wheat is an obvious candidate, grains have a tendency to move as a group and that includes Soybeans, corn and oats.Beans in the Teens?

(TFC Weekly Soybean chart)

Is it too early to wonder about the ramifications of rapidly rising food prices and that effect on society?

Drought commodities climate

Update:


Dubai and Profiling

Peggy Noonan writes about what you and I have talked about for months.

I am almost always picked for extra screening. I must be on a list of middle aged Irish-American women terrorists. I know a message is being sent: We don’t do ethnic profiling in America. But that is not, I suspect, the message anyone receives. The message people receive is: This is all nonsense.

Why does the TSA put the average looking American through their paces in the name of Airport Security? Why do they search grandmas and pregnant women? Why don’t they just search young men who fit the profile of an “Islamofacist”?

That would be wrong, we are told. That would be “racial profiling” and we don’t do that in this country. So why are we upset with selling our ports’ management to Dubai? Aren’t I guilty of profiling when I said that it was a stupid idea to allow the sale to go through. I even said that if we do that, why don’t we outsource border security to Venezuela? And who has been most adamant against profiling? The Libs! So it is amusing to see “The Libs” posture on this issue:

In USA Today Chuck Shumer and Pete King write Where’s common sense?

In a post-9/11 world, common sense would dictate that the proposed Dubai Ports World deal would trigger intense scrutiny on the part of our government. Yet common sense clearly did not prevail.

Minority Leader Nancy Pelosi, a California Democrat, has called for hearings and,

“in the meantime, Congress must put an immediate halt to this deal that the administration hastily approved in secret without input from the Congress or state officials.”

Democratic Sens. Hillary Rodham Clinton (N.Y.) and Robert Menendez (N.J.)

plan to introduce legislation barring the sale of port operations to foreign governments, the Washington Times reported on Tuesday.

Uh, Hillary, the seller is British, the British P&O shipping company!

At least Thomas de Zengotita at The Huffington Post acknowledges the problem:

But here’s what I’m a little squeamish about. Am I also supposed to imply, ever so subtly, that Arab and Muslim nations and organizations are suspect by definition, thus playing on widespread US prejudices on that score? I myself, as a progressive, obviously do not share that view — but I know it makes for effective spin. Am I supposed to do that?Hey, wait a minute, I just realized how to handle this one. I won’t fulminate so much against Dubai running our major East Coast ports. I’ll fulminate instead against any “foreign power” running our ports. That way I maximize the upside and minimize the downside.

We are in a bind. Our USDs pile up overseas. (Last year alone the pile was $728 Billion high.) Foreigners will want to invest those dollars and as they accumulate more and more, we will not like what they buy and I guaran-double-tee you, we will not like the blackmail they can exercise.

Dubai Eastern Ports USDs economics profiling

Chris Muir on Dubai Contoversy

Ed Morrissey has the best cartoon of the day at Captain’s Quarters:

Bush Dubai Eastern Ports

American Idol’s Katharine McPhee

In case you missed Katharine McPhee sing Since I Fell For You, rickey.org has a MP3 of her singing. Right now she’s my choice for going all the way.

American Idol Katharine McPhee Entertainment

Inflation is “Showing”

I have argued for months that the CPI is understated and to concentrate on the “core rate” of inflation is misleading. Economists and “bubbleheads” like Larry Kudlow disagree with me. They said that gold prices and oil prices adjusted for inflation were not announcing inflation. Maybe, it’s finally getting through to some that there is inflation and it’s starting to show up in prices.

The LA Daily News has this article: Climbing food, fuel prices strain budgets

People are feeling the pinch from rising inflation.”It’s tough out there for most households,” economist Joel Naroff said after the government reported Wednesday that consumer prices galloped ahead in January at the fastest pace in four months.
[…]
With overall inflation gaining momentum in January, families’ budget were strained. A separate report, also released by the Labor Department, showed that workers’ average weekly earnings, adjusted for inflation, dropped by 0.4 percent in January compared with a year ago. For most workers last year, paychecks didn’t keep pace with inflation.

Energy prices in January rose 5 percent
Gasoline prices last month went up 6.4 percent
Electricity prices soared 5.5 percent
Natural gas prices rose 1.7 percent
Food prices, meanwhile, increased 0.5 percent

Airfares in January climbed by 1.2 percent
New car prices rose 0.6 percent
Clothing prices went up 0.3 percent

Education prices, including tuition and books, rose a hefty 0.7 percent
Medical care went up by just 0.1 percent in January.

The government has flim-flammmed, flummoxed and bamboozled economists and bubbleheads with their “core rate” talk while our currency declines in value. They have capped the price of gold by leasing and selling gold to keep the alarm bells from sounding. It is not nice to fight mother nature or markets.

core rate of inflation finance gold

“Swaps” Really “Over the Counter Derivatives”

Jim Sinclair of JS MineSet recommends substituting “over the counter derivatives” for “swaps” in the following article from Bloomberg.

Banks Plan to Settle Default Swaps (over the counter derivatives) in Cash, Avoiding `Squeeze’

Feb. 17 (Bloomberg) — Debt-insurance contracts may be settled in cash, averting a rush for bonds when companies default, under a plan being proposed today by the International Swaps (over the counter derivatives) and Derivatives Association.

The market for credit derivatives, dominated by credit- default swaps (over the counter derivatives), expanded fivefold in two years to about $12.4 trillion, according to ISDA in New York. Banks sold so many of the contracts that when auto-parts maker Delphi Corp. defaulted in October, there weren’t enough bonds to settle with, causing prices for the notes to rally.

[…]

No one knows just how much debt is insured through credit- default swaps (over the counter derivatives) because the contracts are privately arranged and aren’t listed on any exchange.

Credit derivatives are the fastest growing part of the $270 trillion market for derivatives, financial obligations based on interest rates, the outcome of certain events, or the price of underlying assets such as bonds.

Investors use credit-default swaps (over the counter derivatives) to protect against non- payment on debt, or trade them as a way of betting on a company’s credit quality. The buyer of the contract pays an annual fee and receives the full amount insured if the borrower defaults. Usually the buyer is obliged to deliver the defaulted loans or bonds as part of the settlement process.

Why is cash settlement important? In the case of the Saudis who bought silver through the British and then demanded the physical, they were told it wasn’t available. Apparently, the British leased it out. If you were the Saudis would you want cash or your silver?

Those who have followed GATA, believe that the central banks and the bullion banks are short 12,000 to 16,000 tins of gold. When it becomes crunch time, do you want some fiat currency or do you want your gold? The Comex and the government will try, maybe even mandate, you settle in cash. To settle in gold would drive the price to the moon.

The new piece of information in this article is the size of the derivatives market: $270 Trillion. The BIS in 2002 estimated the size to be $109 Trillion. That is almost triple in three years!

Swaps Over the Counter Derivatives Finance

American Idols – Boys

Tonight on American Idol it was the boys turn and two have to go. I’m choosing Bobby Bennett and Patrick Hall to go:

We’ll see tomorrow night when the 24 are reduced to 20.

American Idol culture entertainment

Update:

I was correct. Both Bobby and Patrick have been eliminated. Now there are 20!

Yellowstone!

From the USGS

MAP 1.0 2006/02/22 07:06:55 44.521 -110.998 13.0 18 km ( 11 mi) SSE of West Yellowstone, MT
MAP 1.2 2006/02/22 07:00:42 44.520 -110.971 12.2 19 km ( 12 mi) SE of West Yellowstone, MT
MAP 1.2 2006/02/22 06:58:41 44.513 -110.996 10.6 19 km ( 12 mi) SSE of West Yellowstone, MT
MAP 1.3 2006/02/22 06:50:25 44.528 -110.987 8.0 18 km ( 11 mi) SSE of West Yellowstone, MT
MAP 1.3 2006/02/22 06:43:59 44.532 -110.979 3.0 18 km ( 11 mi) SE of West Yellowstone, MT
MAP 1.0 2006/02/22 06:37:44 44.530 -110.960 5.9 19 km ( 12 mi) SE of West Yellowstone, MT
MAP 1.6 2006/02/22 06:28:58 44.593 -110.983 13.5 12 km ( 8 mi) SE of West Yellowstone, MT
MAP 1.2 2006/02/22 06:28:42 44.512 -111.014 14.0 18 km ( 11 mi) SSE of West Yellowstone, MT
MAP 1.4 2006/02/22 06:25:25 44.529 -110.981 7.3 18 km ( 11 mi) SE of West Yellowstone, MT
MAP 1.5 2006/02/22 06:23:55 44.531 -110.949 10.1 19 km ( 12 mi) SE of West Yellowstone, MT
MAP 1.3 2006/02/22 06:21:43 44.532 -110.959 7.0 19 km ( 12 mi) SE of West Yellowstone, MT

Some unusual jiggles in the park and I’m going there this summer. My first time ever!

Yellowstone Earthquakes caldera

Ferguson resigns as Fed vice chairman

From MarketWatch,

Roger Ferguson, the No. 2 official at the Federal Reserve during the last eight years of Alan Greenspan’s tenure, announced Wednesday that he has decided to resign from the board of the central bank, effective at the end of April.[…]

With Ferguson’s departure, all seven Fed governors will have been chosen by President Bush.

The Fed is supposed to be independent from political control, and even though the Fed is a cartel run by the banks, for the banks, it does smack of “banana republic” to have all governors appointed by one man, President Bush. I wish Bush hadn’t said, “The Constitution…it is just a God damned piece of paper!”

Federal Reserve Roger Ferguson finance

Update:

From AMEInfo comes this analysis of Ferguson’s departure:

One of the biggest news today was the surprise resignation of Federal Reserve Vice Chairman Roger Ferguson.One of the most respected Federal Reserve Governors; Ferguson was once thought to have what it takes to succeed Greenspan. As the only central banker in Washington during 9/11 while Greenspan was in Europe, Ferguson has often been credited for steering the Fed through the crisis. However, Ferguson has often bumped heads with Bernanke as he opposes inflation targeting, arguing that it limits the Fed’s flexibility.

With his departure, Ben Bernanke’s board of governors now consists of all Bush nominees. This shock to the market will once again bring back concerns about how well Ben Bernanke’s team will respond to any crisis that may fall upon the economy.


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