more of Bill Bonner ... quoting

But how much would people pay for a gallon of gasoline? Well, let’s see...let’s assume that gold has done a fair job as real money, of holding its purchasing power steady. Back in the early ’70s you could have bought 160 gallons of gas with a single ounce of gold. And today? At $1,800 an ounce, and gasoline at $4, you can buy 450 gallons. It’s as if the price of gasoline had fallen to about 10 cents a gallon!

Hmmm....go figure.

Either gasoline is too cheap. Or gold is too expensive. If we were a trader we’d short the latter and go long on the former.

And since we’re always just guessing, we’ll take a guess as to what this means...

Gasoline is weak because the economy is fundamentally weak. Gold is high because Richard Nixon destroyed the integrity of the dollar, the US economy, and the world’s monetary system. Each of these trends will have to play itself out. In the meantime, gasoline...and/or gold...may need a little adjustment.

DailyReckoning.com
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quoting Bill Bonner

Conversation with a Dublin cab driver:

“You Americans are lucky, sure you are. You can just walk away from a house. If I could do that, I’d be out tomorrow. But here, if you owe money on a mortgage the bank can come after you. You can never get away.

“I got married about 4 years ago. My wife and I both worked. We had good jobs. We were earning good money. And we believed all that BS about how property would just go up and up forever.

“So we bought an apartment for 360,000 euros. It was only supposed to be temporary, because we wanted to have a family and we figured we’d get a house after we started having children.

“Well, we’ve got 2 kids already and another on the way. And we’re still in the apartment. And we can’t move. Because the place is now only worth about 160,000 euros — would you believe it? It’s come down that much. And I can’t make the mortgage payments.

“My wife lost her job when the trouble began. And now, with all those children she can’t go back to work anyway. And driving a cab isn’t what it used to be. Every time someone loses his job in Dublin, he starts driving a cab. There are empty cabs all over the place. So, I don’t make nearly as much money as I used to. And with my wife not working, I can’t pay the mortgage.

“So I went to the bank. You know they are all broke. All the banks in Ireland. You’d think they’d like to see an honest homeowner trying to do the right thing.

“I told them I couldn’t keep up with the payments. I asked them if we could work something out, since the apartment is only worth less than half the mortgage amount. But they wouldn’t even talk to me. I guess they have someone breathing down their neck too.

“So I just send them half the money I’m supposed to. It’s all I can do. And I figure they won’t kick me out. Not in Ireland. Ireland has a long history with evictions. It used to be that English property owners would evict their poor Irish tenants. So, now eviction is a bad word in Ireland, almost as bad as slavery in America, I guess. The banks — which have all been bailed out by the taxpayers — don’t want to be seen on TV evicting their tenants now. So I guess I’ll just keep sending them half the mortgage payment. I’ll probably be there for a long time.

“But sooner or later they’ll have to do something. There are 70,000 people in Dublin who aren’t paying their mortgages. And there’s no way they can pay them. The banks are going to have recognize, sooner or later, that they made a mistake lending all that money to us.”

Regards,

Bill Bonner
for The Daily Reckoning

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Guild Investment

Snips from Guild Investment - QE Watch 2011

... get ready for a big stock market and industrial commodities rally later in the year after QE maneuvers in Europe and the U.S.

We expect regional turmoil to last for quite a while, and this opinion is one reason why we still believe that oil can move to $150 per barrel. Whatever the level when the disturbances begin, you can bet that oil will move higher.

Gold has good long term prospects, but short term it is definitely vulnerable to continuing volatility. We have been dismayed by the degree of overconfidence among some gold investors. For example, we heard from several gold buyers between August 15 and 22nd; when we suggested to them that gold could have a violent correction at any time they scoffed. They were deluding themselves.

As any experienced investor knows, gold (and every other investment) is vulnerable to corrections, and as gold rises to new highs, corrections will become more frequent and more violent.

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gold & silver

Ross Clark sees gold correcting to 50DMA (1670) silver to 37.60
MoneyTalks

Bob Hoye expects 20% pull back from highs in gold indices.
Accumulate at HUI 486; GDX 51; XGD.TO 21.50
321Gold
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Bill Bonner

Quoting Bill Bonner:

Now, let’s look at the gold market. Gold went down $30 yesterday.

Is it too late to join the party?

Investors don’t know what to do. They were buying gold this week because the Fed is putting on its annual shindig at Jackson Hole, Wyoming. Everybody knows the Fed sees itself as a booster for Wall Street. They know, too, that QE2 came out of the Fed last summer. That program didn’t do anything for the economy...

..but what a gift to gold holders!

Gold is up 33% so far this year. And by the look of the chart...it could easily finish the year above $2,000. Maybe above $3,000.

But — remember we’re just guessing — gold looks like it has gotten ahead of itself. It looks over-bought. Besides, investors may be expecting too much of the Fed.

Of course, if the Fed comes out with some more high-octane market hooch...this party could really go wild. But, it isn’t likely. Everybody’s watching. Bernanke needs to give the markets enough juice so they don’t fall apart on Friday...but not enough so the gold market goes blind.

Most likely, he will encourage investors. But he won’t cause a panic. Not yet.

And most likely, gold will fall.

Look, we’re gold bugs here at The Daily Reckoning. We have more faith in gold than we do in the fellows running the world financial system. Not that they’re not nice men. And they’re plenty smart. It’s not that we think they’re stupid. It’s just that we think they’re human. They put on their pants one leg at a time, just like everybody else. And just like everybody else, if you put them under pressure...they’ll crack.

But not yet. Our views on the stock market were severely tested during the big rallies of the ’00s. Now, it is the gold bulls who face a test. Gold has gone up every year since 2000. It’s been too easy. So, it’s time for Mr. Market to pull a fast one on gold buyers.

The process of de-leveraging the private sector, following in Japan’s footsteps, will be long, slow and hard. The feds will fight de-leveraging. They’ll zombify the economy. They’ll make a bigger mess of things...

..but they won’t create conditions for the real Third Phase of the bull market in gold. Not yet.

Yes, dear reader, you pried it out of us. We were trying to be coy. We wanted to hold off. We thought that maybe if we gave it to you all at once, well...maybe you wouldn’t respect us.

But there...we’ve gone and done it anyway. You have our Big Prediction on gold right in front of you. And it didn’t cost you a penny.

We’re gold bugs. But we’re not always gold bulls. And our guess now is that Mr. Market is going to throw us a curve. (Bugs...bulls...curves...why the hell not?) Yep. He’s drawing in millions of Johnny-come-lately gold buyers into the market. And now he’s going to massacre them...and test us.

Because gold is going lower...not higher.

Yep, you read it here first. Stocks are going down. But so is gold.

“Bill, you’ve been saying that gold is going higher for 11 years. Are you now really saying that it’s probably going down?”

“Yep.”

“But didn’t you just urge readers to sell stocks and buy gold?”

“Yep.”

“So you now think it’s going down, right? “

“Yep.”

“So, are you selling your gold?”

“Nope... You think I’m crazy? This is just a temporary setback...maybe a few years, that’s all. This bull market in gold won’t end until gold and the Dow meet.”

Our guess is that gold goes down...shakes out the speculators and weak investors...and then — perhaps a couple years from now...perhaps longer — begins its third and final phase.

Regards,

Bill Bonner,
for The Daily Reckoning

HUI seasonality

timing the market.ca
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Natural Gas

Quoting from timingthemarket.ca

Headline reads, “Storms could disrupt gas sector: Seasonal strength August-October at weather’s whim”.

Following is full text:

Natural gas prices have a history of moving higher from August to December. What are prospects this year?

Thackray’s 2011 Investor’s Guide notes that U.S. natural gas prices have recorded exceptional seasonal strength from August 1st to December 21st during the past 15 periods. The trade was profitable in 12 of the past 15 periods. Average return per period was 42.3 percent. A word of caution! Natural gas prices are volatile. Returns during the past 12 profitable periods were substantial, but losses during the three periods that recorded a loss also were substantial. “Sweet spot” for the seasonal trade is from the end of August to the end of October.

Seasonal tendencies in the sector are influenced by two annual recurring weather related events during late summer and early fall: Warm weather that increases demand for natural gas used to produce power for air conditioning and hurricanes entering the Gulf of Mexico that frequently curtail supply. The Gulf of Mexico is the largest gas producing area in the U.S.. More important of the two events are hurricanes entering the Gulf.

What about this year? Heat in the southern U.S. and Gulf of Mexico has reached record levels this year. Temperatures have remained high for longer than average, a scenario that favours larger and more frequent tropical storms. Weather forecasters are predicting an increase in the number of Atlantic based hurricanes this year partially because of warmer than average temperatures in hurricane inception areas in the Atlantic

during the past few months. A sixth “name” storm for the current season was announced over the weekend. The National Oceanic and Atmosphere Administration (NOAA), a U.S. government entity, noted that the Atlantic storm season annually averages 9-12 named storms of which five to seven storms reach hurricane strength and one to three become major hurricanes. This year NOAA is predicting 12-18 named storms of which six to ten storms will reach hurricane strength and three to six storms will become major hurricanes. Natural gas inventories currently are slightly below the middle of their historic demand/supply range for this time of year. The demand/supply balance easily could be disrupted if NOAA’s forecast proves to be true.

Investors can play the seasonal trade in natural gas in two ways: by owning natural gas directly either through futures contracts and futures based Exchange Traded Funds (ETFs) or indirectly by owning “gassy” equities and equity based ETFs. Direct ownership is not for the “faint of heart” due to high price volatility. In addition, futures contracts and futures backed ETFs assume additional risk when futures contracts are in contango. The easiest way to invest is by owning ETFs that hold a diversified portfolio of “gassy” stocks. In the U.S. the top choice among liquid ETFs is First Trust ISE Revere Fund (FCG US$19.33). The fund holds 30 equally weighted North American oil and gas stocks that focus on natural gas production. In Canada, BMO Capital offers the BMO Junior Gas Index ETF (ZJN $21.63). Units track performance of the Dow Jones Select Junior Gas Index, a portfolio holding 38 “gassy” stocks.

North American natural gas equities and related ETFs are attractive for another reason this year. Junior companies in the natural gas industry are actively exploring and developing additional reserves from recent gas shale discoveries. Successful drilling has attracted the interest of large international oil and gas companies who have been acquiring junior producers at premium prices.

The technical profile for natural gas currently is negative, but is starting to show promise. Intermediate trend is down. Natural gas trades below its 50 and 200 day moving averages. However, support was established last week at US$3.85 and short term momentum indicators are recovering from deeply oversold levels. Strength relative to the S&P 500 Index and TSX Composite has been positive since the beginning of July.

Preferred strategy is to accumulate “gassy” equities and equity ETFs for a seasonal trade that is expected to last until at least the end of October.

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Guild Investment

Stocks
Keep a close eye on world markets. Much uncertainty and volatility exist. We expect a huge quantitative easing and bond-buying program to be instituted in the next few months by Europe, Japan, and the U.S. jointly. China may also join in. This development will signal to us a big move up in gold, stocks, oil, commodities and other investment areas that benefit from inflation.

Investor Risk Perceptions Shifting
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The Beauty of English around the world

In a Bangkok temple:
IT IS FORBIDDEN TO ENTER A WOMAN, EVEN A FOREIGNER, IF DRESSED AS A MAN.

Cocktail lounge, Norway:
LADIES ARE REQUESTED NOT TO HAVE CHILDREN IN THE BAR.

Doctors office, Rome:
SPECIALIST IN WOMEN AND OTHER DISEASES.

Dry cleaners, Bangkok:
DROP YOUR TROUSERS HERE FOR THE BEST RESULTS.

In a Nairobi restaurant:
CUSTOMERS WHO FIND OUR WAITRESSES RUDE OUGHT TO SEE THE MANAGER.

On the main road to Mombassa, leaving Nairobi:
TAKE NOTICE: WHEN THIS SIGN IS UNDER WATER, THIS ROAD IS IMPASSABLE.

On a poster at Kencom:
ARE YOU AN ADULT THAT CANNOT READ? IF SO WE CAN HELP.

In a City restaurant:
OPEN SEVEN DAYS A WEEK AND WEEKENDS.

In a cemetery:
PERSONS ARE PROHIBITED FROM PICKING FLOWERS FROM ANY BUT THEIR OWN GRAVES.

Tokyo hotel's rules and regulations:
GUESTS ARE REQUESTED NOT TO SMOKE OR DO OTHER DISGUSTING BEHAVIOURS IN BED.

On the menu of a Swiss restaurant:
OUR WINES LEAVE YOU NOTHING TO HOPE FOR.

In a Tokyo bar:
SPECIAL COCKTAILS FOR THE LADIES WITH NUTS.

Hotel, Yugoslavia:
THE FLATTENING OF UNDERWEAR WITH PLEASURE IS THE JOB OF THE CHAMBERMAID.

Hotel, Japan:
YOU ARE INVITED TO TAKE ADVANTAGE OF THE
CHAMBERMAID.

In the lobby of a Moscow hotel across from a Russian Orthodox monastery:
YOU ARE WELCOME TO VISIT THE CEMETERY WHERE FAMOUS RUSSIAN AND SOVIET COMPOSERS, ARTISTS AND WRITERS ARE BURIED DAILY EXCEPT THURSDAY.

A sign posted in Germany's Black Forest:
IT IS STRICTLY FORBIDDEN ON OUR BLACK FOREST CAMPING SITE THAT PEOPLE OF DIFFERENT SEX, FOR INSTANCE, MEN AND WOMEN, LIVE TOGETHER IN ONE
TENT UNLESS THEY ARE MARRIED WITH EACH OTHER FOR THIS PURPOSE.

Hotel, Zurich:
BECAUSE OF THE IMPROPRIETY OF ENTERTAINING GUESTS OF THE OPPOSITE SEX IN THE BEDROOM, IT IS SUGGESTED THAT THE LOBBY BE USED FOR THIS PURPOSE.

Advertisement for donkey rides, Thailand:
WOULD YOU LIKE TO RIDE ON YOUR OWN ASS?

Airline ticket office, Copenhagen:
WE TAKE YOUR BAGS AND SEND THEM IN ALL DIRECTIONS.

A laundry in Rome:
LADIES, LEAVE YOUR CLOTHES HERE AND SPEND THE AFTERNOON HAVING A GOOD TIME.

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Gold : buying the mid August correction

After touching $1,818 intraday on Aug 10, gold is at $1,725 as I type.

Targets for increased buying are 1700 1675 1650 etc, for about a two week window.

1,575 is the low of Hubbartt's "volatility box".

GDX is outperforming S&P500 by wide margin.

GDXJ now at 34.90 could retest 31.60 area.

DJIA now 11,265 could rally to 11,860 before dropping to 9,500 area in October.

More detail and easy to understand charts in Morris Hubbartt's Aug 12 editorial
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gold, oil, and a new currency?

Here's a short snip from GuildInvestment.com "Got Volatility?"

2. Investors who want to maintain their buying power, or who want to become wealthy, will seek alternatives to the dollar such as the ones we have long espoused. Gold, strong non-U.S. currencies. If the dollar is devalued in one large increment; food, oil, and other commodities would rise dramatically. At that time, we would not be surprised to see oil and gold double from their current levels.

3. A much lower dollar will help solve many of the U.S. growth problems: corporate profits will rise, exports will increase, employment will increase, and the economic stagnation will improve, but inflation will rise at a rapid rate.

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Natural Gas

Investing in Natural Gas with Exchange Traded Funds

Natural gas prices have a history of moving higher from August to December. What are prospects this year?

Thackray’s 2011 Investor’s Guide notes that U.S. natural gas prices have recorded exceptional seasonal strength from August 1st to December 21st during the past 15 periods. The trade was profitable in 12 of the past 15 periods. Average return per period was 42.3 percent. The sweet spot is from the end of August to the end of October. A word of caution! Natural gas prices are volatile. Returns during the past 12 profitable periods were substantial, but losses during the three losing periods also were substantial.

Seasonality by the sector is influenced by one minor and one major annual weather event that occur each fall. The minor event is warm weather that increases demand for natural gas used to produce power for air conditioning. The major event is hurricanes entering the Gulf of Mexico that frequently curtail supply. The Gulf of Mexico is the largest gas producing area in the U.S.

What about this year? Weather forecasters are predicting hotter than average temperatures in eastern Canada and the eastern U.S. states in the month of August. Weather forecasters also are predicting an increase in the number of Atlantic based hurricanes this year partially because of warmer than average temperatures in hurricane inception areas during the past few months. The National Oceanic and Atmosphere Administration (NOAA), a U.S. government entity noted that the Atlantic storm season annually averages 9-12 name storms of which five to seven storms reach hurricane strength and one to three become major hurricanes. This year NOAA is predicting 12-18 named storms of which six to ten storms will reach hurricane strength and three to six storms will become major hurricanes. Natural gas inventories currently are in the middle of their historic demand/supply range for this time of year. The demand/supply balance easily could be disrupted if current weather forecasts prove to be true.

The direct way to invest is through ownership of futures backed Exchange Traded Funds that track the price of natural gas. Direct ownership is not for the “faint of heart” due to high price volatility. In addition, futures contracts and futures backed ETFs assume additional risk when futures contracts are in contango.

The most actively traded natural gas Exchange Traded Fund is the U.S. Natural Gas Fund (UNG US$10.00). It attempts to track the spot price of natural gas in the U.S. Management expense ratio is 0.60 percent.

The second most actively traded natural gas ETF in the U.S. is the U.S. 12 month Natural Gas Fund (UNL US$30.01). The fund is based on a basket of futures contracts that expire over the next 12 months. Management expense ratio is 0.75 percent.

Claymore Investments offers the Claymore Natural Gas Commodity ETF (GAS $23.70). Units hold physical natural gas forward contracts designed to track the NGX Canadian Natural Gas Index. Management expense ratio is 0.80 percent.

Horizons offers a variety of U.S. futures based natural gas ETFs that are hedged against U.S. currency risk. The Winter-Term NYMEX Natural Gas ETF (HUN $4.35) is designed to track the NYMEX futures contract for the next January delivery. Management expense ratio is 0.75 percent. The BetaPro NYMEX Natural Gas Bull+ ETF (HNU $4.31) seeks investment results equal to 200 percent of the daily upside performance of the NYMEX natural gas contract for the next delivery month. The BetaPro NYMEX Natural Gas Bear+ ETF (HND $$9.55) seeks investment results equal to 200% of the daily downside performance of the NYMEX natural gas contract for the next delivery month. Management expense ratio for the Bull+ and Bear+ ETFs is 1.15 percent.

On the charts, natural gas currently has a negative technical profile. Intermediate trend is down. Gas trades below its 50 and 200 day moving averages. Short term momentum indicators are oversold, but have yet to show signs of bottoming. Strength relative to the S&P 500 Index turned positive at the beginning of July. Preferred strategy is to wait until late August for technical signs of bottoming before entering into the seasonal trade.

TimingTheMarket.ca
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No Top In Gold Price

12 clear points from Jim Sinclair

The Goldmans of the world will invent OTC derivatives and maybe even a listed second derivative to speculate on word liquidity via the gold price. There will be no 1980 type collapse in the gold price. Over valuation which occurs in all bull markets might be by 20%. This will result in producing gold mining shares becoming the utilities of 2016 onward.

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