Free Republic

Every so often I'm asked to describe the role of juniors in the commodities industry. And I simply reply, "They're like rabbits". Rabbits are seemingly insignificant and useless animals. But in actuality they serve a critical role in the food chain as a valuable source of nourishment for larger animals. Like rabbits, juniors are seemingly insignificant. But their function in commodities lifecycles is indispensable. And also like rabbits, juniors are a valuable source of nourishment to their predators. One of their major roles is to feed the larger resource companies, ultimately serving to provide sustenance and longevity. The primary purpose...

The time was Post-Depression and the States had a huge need for the expansion of the money supply. Secondly, the dark clouds of war had started to gather, as Hitler took power. So the money supply had to be expanded, yet be capable of holding its value, when the global scene would have lead to simple un-backed paper money not being accepted. Gold however, was even accepted between enemies, as it would be today. What pushed government to take gold away from its citizens? It was seen as a time of national need. It was the need to reinforce the...

BY END-JULY 2009, sales of new US Treasury bonds had already outstripped full-year sales in calendar 2008. Creating money from nowhere, the Fed's asset-purchase scheme bought bonds equal to more than 18% of that 7-month record, effectively financing $224bn of the total $1.2 trillion in new government bonds. No, the Fed didn't simply hand that cash straight to the government. But it funded the national debt via the primary dealers who did buy the bonds...only to sell them onto the Fed...and thus stumped up 32% of the net cash flowing to Treasury from its bond sales (gross issuance minus maturities)....

At a time when the trade is questioning USDA’s 2009/10 prospective demand for US corn, especially in the feed use column, it is refreshing to note the continued upward demand for corn for ethanol. According to the Energy Independence and Security Act of 2007, the United States is expected to manufacture 12 billion gallons of ethanol for calendar year 2010, or 14.3% more than a year earlier requirement of 10.5 billion gallons in calendar year 2009. As you are able to view the trend increase for corn use for ethanol continues to be impressive vs feed use and equally important...

A few weeks ago, Government Motors dropped a public relations bomb when new chief Fritz Henderson announced that the forthcoming Chevy Volt would get an astonishing 230 miles per gallon (that's 98 kilometers per liter, for our metric-system friends). We'll stop short of calling it a fabrication and instead chalk it up to a classic apples-to-oranges comparison. After all, the Volt will be powered more by coal than by oil. United States EPA mileage guidelines are based on a bunch of hypothetical “typical” driving patterns. And the makers of conventional and plug-in hybrid cars are lobbying hard to change those...

CHINA IS A FARAWAY COUNTRY of which we know little. The Isle of Wight, on the other hand, is a small island two miles off England's south coast where my mother-in-law lives. And there...between the crumbling fiber-glass dinosaurs of Black Gang Chine and the rain-soaked falconry shows at Robin Hill...chit-chat says England's baby boomers gave up saving long ago. "Spend! Spend! Spend!" remained their grim cry this Bank Holiday weekend, despite the death of cheap credit, liars loans and self-cert improvement mortgages. Margaret Thatcher screwed their parents' state pensions; now they're getting screwed by her answer. Company schemes are falling...

Each year, generally in May, the Energy Information Administration publishes a less-than-eagerly-anticipated tome called the International Energy Outlook, 250+ pages of mind-numbing text, charts, graphs, and tables. No one reads it. The mainstream media ignore it. It's the product of the best prognosticators in the Department of Energy. Okay, that may be what puts most people off. But if you're patient enough to dig into it, it will cough up some fascinating nuggets of information. The present edition is no exception. The report refrains from spelling out the conclusion that seems most obvious from its data. However, confirming a trend...

We need to get rid of the FDIC along with the moral hazard it creates and we need to do it fast. Yes I said it, the FDIC needs to be abolished, it creates a moral hazard in our system, and in its current form intends to penalize solvent profitable banks. Of course it's scary to think that your money in a bank isn't insured, but wouldn't that encourage banks to compete on solvency, make good loans, and remain well capitalized in order to attract more deposits? Wouldn't we all be much more careful about who we decided to bank...

Now that we are just about 2 years into the world financial/credit crisis, it’s time to ask what is next in one or two years. One is to ask will stagflation emerge in 2010 and after? We may be moving from a two year crisis stage to a post stage of stagflation that lasts years. There are several aspects to clarify first. First, assuming there is NOT another credit meltdown this Fall/Winter, and the USD does NOT have a big devaluation event, but rather tails down gradually, then I expect stagflation to emerge. The US and Western economy could do...

Mid-Week Gold, Silver, Nat Gas & Oil Update So far this week we have seen commodities move sideways with traders and investors waiting for the US Dollar to rally or continue dropping, which will trigger the commodities to move. I have provided some below charts showing where prices currently stand. GLD Gold Trading Fund - Weekly Chart As you can see on this weekly chart gold has been consolidating for the past 5 months. This bullish pennant pattern is hinting that prices will breakout to the up side in the coming weeks. If for some reason we see the USD...

"They rush about in disorder, anxious slaves of the three M's - the moment, the mode, and the mob. They see too well their want of dignity and fitness, and need a false elegance to hide their galloping consumption..." - Friedrich Nietzsche, Thoughts Out of Season II: The Use & Abuse of History (1874) NOW THE banking crisis is over - "Bernanke stays put, home prices up," as Fox News reports - the career academics who failed to spot and prevent it can get back to fretting about the most macro of tasks: How to rebalance the global economy? The...

While we aren't contrarian for the sake of being contrary, more often than not that is the position in which we find ourselves. Today, with the media falling all over itself to paint a rosy outlook for the economy while simultaneously voicing encouragement to the new administration in its remake of the nation in previously unimaginable ways, it's hard not to question our conviction that the worst is yet to come. Could the economy really recover this quickly from the traumatic trifecta of a record real estate bubble, leviathan levels of debt, and a global credit collapse? We don't see...

Years have passed since investors seemed to pay attention to anything other than the latest short-term, but irrelevant, number of the day. Perhaps the ESPN approach being applied to business news is part of the reason for that. What might happen next week or next year seems of little concern. However, next week and next year have a habit of becoming today over time. Sometimes though, short-term events, being largely ignored, unveil longer term developments. One of those might be the drought currently ravaging India’s farmers. Summer monsoons provide more than half of the rainfall in much of India. Indian...

Here we are again approaching another 10-year cycle peak. The last such peak was in 1999 while the most recent 10-year cycle bottom was in 2004. We wrote extensively on both episodes at the time and the 10-year cycle is one of our favorites. It's what I like to call the "slam dunk" cycle since among all the yearly Kress cycles, the 10-year cycle at its peak and bottom phase can almost always be used for profitable trading/investing almost by itself. It will be sad to wave goodbye to our friend, the 10-year cycle, in a few weeks. After the...

In the week when a new Agreement by European central banks regarding gold sales, only a tiny sale of 0.15 tonnes of gold was made the week before last and last week saw no sales. In the fist few months of the last year of the Agreement beginning on the 26th September 2008, as you can see from the Table below, around 140 tonnes of gold were sold by the signatories to the Central Bank Gold Agreement. Of these only just under 95.6 tonnes came from sellers who announced their intentions before they sold at the beginning of the Agreement....

Correlations come and go, but the path of Euros and gold rarely diverge vs. the Dollar... "The DOLLAR is not a good store of value," says Nobel prize-winner Joseph Stiglitz, finally catching onto the last nine decades' 95% loss of purchasing power. "Right now," he told an audience in Bangkok on Friday, "the Dollar is yielding almost no return and yet anybody looking at the Dollar has to say there's a high degree of risk." Gold also yields nothing, but your risk in the metal is somewhat lower. At least it will still be a lump of rare, precious, yellow...

News out of China reports China National Cereals, Oils & Foodstuffs Corporation (COFCO) has laid plans to erect its second largest soybean processing plant in the country's southwest region. The company's second largest plant is expected to begin construction in the month of September and once complete will have annual capacity of 1.2 million tonnes (44 million bushels). Interesting enough is the location, away from the country's major soybean production region and nearer port facilities but equally interesting is how competitors of COFCO, both Sino Grain and Jilin Grain Group are also laying plans to open "new" facilities. Allendale research...

Everyone is talking about gold shooting to the moon because of the massive reverse head & shoulders pattern forming, not to mention the economy isn't as good as some of us would like it to beJ. I put together this quick report to show the bearish side of things for once. Bearish Points for Gold & Silver: * Silver looks to be forming a H&S pattern * Gold made a new high in March and quickly sold off * Gold's neckline is angled up which makes for a weaker breakout if it occurs * The US Dollar looks ready for...

IT'S NOT OFTEN that Sweden gets to lead the world. Saab mimicked BMW. Nokia improved on Motorola. Abba took The Carpenters and added a hi-hat. In monetary matters, however, Sweden remains an occasional trail-blazer. The world's first central bank, beating even the Bank of England by 26 years, the Riksbank then copied the Old Lady by when it abandoned the Gold Standard in September 1931. But the Swedes chose to mimic Great Britain before anyone else, quitting the metal within two weeks of London's monetary bomb-blast. Just like today (as we'll see in a moment), such monetary madness was hardly...

The Commodities Futures Trading Commission (CFTC) wrapped up its hearings on whether to install position limits on futures trading this week, and like other hot topics being tossed around Capitol Hill, misinformation seems to be running rampant. One myth is that speculators only bet on prices going higher. The chart below shows both long and short futures positions for all commodities. While it's definitely not a one-to-one ratio, the chart shows that investing in futures is a two-way street, with investors lining up on both sides. Another myth is the overall size of the speculative market. According to a recent...