The Value Of The US Dollar Will Be Its Intrinsic Value

posted by Admin at Marc Faber Blog - 2 hours ago

"The value of the U.S. dollar will be precisely its intrinsic value — namely zero, precisely zero" - *in CNBC.com* *Marc Faber is an international investor known for his uncanny predictions of the stock m...

$1 Billion of Gold Bars Taken Delivery Of By Pension Fund Due to Risk of COMEX Default and Shortages

Submitted by Tyler Durden on 04/18/2011 06:59

Concerns that the sovereign debt crisis may be entering a new phase and the risk of contagion has seen peripheral eurozone bonds fall sharply and the euro fall against major currencies and gold today. Sovereign debt risk, global inflation concerns, geopolitical risk, disappointing European earnings and concerns about Japan's coming reporting season have seen equities weaken and new record nominal highs for gold and silver (all time and 31 year). Greek bond yields have continued their relentless march higher and have risen above 14.07% (10 year) and Portuguese debt (10 year) has risen to a euro era record over 9.27%.Spanish and Irish debt are also under pressure this morning. Gold is increasingly being seen as the superior currency in a world of trillion dollar and euro deficits and bailouts. Indeed, the printing and electronic creation of billion and trillions of the major paper currencies is increasingly making gold and silver the currencies of last resort. One of the largest pension funds in the world, the University of Texas Investment Management Co (which manages the endowment for the Texas teachers pension fund), has realized this and has put 5% of the pension fund into gold bullion (see news). The fund has previously expressed concerns about the counter party risk in ETFs. However, the reason given for opting for taking delivery of 100 oz gold bars in a warehouse was that if the holders of just 5 percent of COMEX futures contracts opted to take delivery of the metal, there wouldn’t be enough to cover the demand leading to a COMEX default. The risk of a COMEX default increases by the day and appears to be moving from the realms of the “conspiracy theory” to that of “of course we knew it would happen, it stands to reason and was inevitable.” A COMEX default would have serious ramifications for the dollar and all fiat currencies as it would further erode trust in central banks, fiat currencies and today’s monetary system.

Fear of Comex paper gold scam drove U of Texas to take delivery

In The News Today

Posted: Apr 18 2011     By: Jim Sinclair      Post Edited: April 18, 2011 at 10:31 am
Filed under: In The News

GDX (Majors) Versus GDXJ (Juniors) Ratio Chart

Posted: Apr 17 2011     By: Dan Norcini      Post Edited: April 17, 2011 at 11:18 pm
Filed under: Trader Dan Norcini

For further market analysis and commentary, please see Trader Dan’s website at www.traderdan.net

Dear CIGAs,

At the suggestion of my good friend Jim Sinclair, I have prepared a chart detailing the ratio of the price of GDX compared to the price of GDXJ.
The GDX does contain some smaller cap miners but it also mainly includes the large cap mining outfits.
The GDXJ on the other hand, is comprised entirely of medium cap and small cap miners.
Over 60% of the stocks that make up the GDXJ are Canadian firms. Nearly 14% are US headquartered with 13.31% being Australian. The remaining are from various countries around the globe.
While not a perfect representation, it is a useful tool for charting the underperformance ( in general) of the small and medium cap miners compared to the larger cap miners.

Note the steep decline in the line that began in the summer of last year which lasted throughout the remainder of 2010. Only towards the end of last year did the juniors recover a bit of ground but the best they could do was to retrace a small portion of their losses against the large cap miners by moving higher but since January they have gone nowhere against the large caps.
It seems to me that the hedge funds are selectively targeting some of the small and mid tier mining firms to go after with their short side of the spread trade that they have been employing. Perhaps they feel that due to their sheer size and financial firepower, they can overwhelm any buying coming into the smaller firms and thus create an effective put option against their long metals positions. I am not sure but either way, the chart reveals the reason for the frustration among many who own quality junior and mid cap mining firms whose share prices seem stuck in the mud even as the gold and silver markets continue soaring higher.
Let me take this opportunity to also clarify something in my earlier post about the HUI and XAU ratio charts. I did not mean to imply that the mining shares are trading at the same level as they were back in 2001 when silver was $4.00. That is of course preposterous as most have had strong gains over the last decade. The ratio charts’ purpose is to show whether the shares are underperforming or outperforming physical gold and/or silver. What the charts do show however is that the mining shares in general have so seriously underperformed the gains in both gold and silver, that the ratio of the indices to the underlying metals is ridiculously skewed. In the case of silver, you have to go all the way back to 2001, a period in which very few people were calling for a major bull run in the metal. There was little if any excitement whatsoever in the mining sector back then.
In regards to silver in particular, the ratio of the HUI and the XAU to it may not be as good of a gauge of how the silver stocks in particular are performing when compared to the price of the bullion, mainly because both indices are dominated by gold producers, particularly the HUI, but both indices do hold silver miners in their basket as well as some gold miners who produce both gold and silver. Since silver has been outperforming gold on a percentage basis, and both of these indices favor a larger number of gold producers than silver, it is reasonable to assume that both of the indices would be lagging silver when a ratio is constructed, but not to this extent. To see these indices trading at such extremely low levels when a ratio is created is indicative of the kind of short selling pressure that is active in the mining sector in many instances.
It is just mindboggling to see how undervalued many of the shares are when compared to the metals. While many have moved strongly higher, a large number of them continue to lag and are not reflecting the kind of price movements that we would expect to normally see with the bullion making either all time highs in price or 30+ year highs.
If you want to get a "fair" or reasonable level at which the indices should be trading, run some statistical analysis and see what the mean or average value should be then see what the standard deviation away from that mean is. I will leave that to my statistics friends but either way, the result is indicative of how cheap the stocks are compared to the metals in many cases.
Here are a few of the silver stocks comparing them to the price of silver and creating a ratio chart. A rising line indicates the stock price is outperforming the price of silver. A falling line indicates the stock is underperforming.





A pleasant exception: SLW

Coming to a neighborhood near you...sooner then you think...

In The News Today

Posted: Apr 17 2011     By: Jim Sinclair      Post Edited: April 17, 2011 at 11:08 pm
Filed under: In The News

Jim Sinclair’s Commentary
This will be carefully noted by Western Central Banks.

Anarchy erupts in Greece as austerity bites
As Thessalonika riots, a town near Athens spins out of control with angry residents setting up massive roadblocks and hurling Molotov cocktails By Elena Becatoros in Keratea, Greece
Sunday, 17 April 2011

As explosions boom, the town’s loudspeakers blare: "Attention! Attention! We are under attack!" Air-raid sirens wail through the streets, mingling with the frantic clanging of church bells. Clouds of tear gas waft between houses as helmeted riot police move in to push back the rebels. This isn’t a war zone, but a small town just outside Athens. And while its fight is about a rubbish dump, it captures Greece’s angry mood over its devastated economy.
As unemployment rises and austerity bites ever harder, tempers seem to fray faster in Greece, with citizens of all stripes thumbing their noses at authority. Some refuse to pay increased highway tolls and public transport tickets. There has been a rise in politicians being heckled and even assaulted. Yesterday, in Thessalonika, scores of activists were arrested after violent clashes with police.
The anger is most palpable in Keratea, a town of 15,000 people 30 miles south of Athens which appears to have spun out of control. The state’s attempt to start work on a planned landfill site on a nearby hillside in December caused locals to set fire to construction vehicles and erect massive roadblocks on a road that bypasses the town and runs to the capital. It’s a fight that has galvanised the town, from the mayor and the local priest to shopkeepers, farmers, schoolteachers and teenagers.
Over the past four months, locals have developed increasingly inventive roadblocks to stop contractors from getting to the site. They have parked trucks across the street and built piles of rubble and dirt. Apparently in it for the long haul, they have erected a wooden hut by the side of the road to serve as protest headquarters, complete with campaign posters, news clippings and children’s drawings of the riots. Their latest move was a nocturnal expedition to dig a shoulder-deep trench across both lanes of the road. That was one step too far for the authorities, who, on Thursday, sent in workers – protected by police – to repair the damage.
Within hours, the confrontation degenerated. Masked youths hurled firebombs and rocks at riot police, who responded with rubber batons and repeated volleys of tear gas. A police helicopter circled overhead. "The town is out of control. Business activity has stopped," said Yannis Adamis, a resident and mechanical engineer. "The stores are closed. The sirens are blaring, the [church] bells are ringing, people are on the streets. This cannot continue."
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