Red-Hot Resources

"Luck is not chance, it’s toil; fortune’s expensive smile is earned.”

Sunday, September 30, 2007

Sunday Reading

Here's what I'm reading on a rainy Sunday ...

Merrill Lynch has turned bearish on the US economy, judging by its 10 major macro themes of the past week.

The Top 100 Ways Global Warming Will Change Your Life. Say goodbye to French wines, baseball and the Great Barrier Reef. Say hello to massive amounts of mosquitoes, the northwest passage and hurricanes ...

... and someone alert Stephen Colbert:
More Bear Attacks. Earlier this year, Moscow warned its citizens to beware of brown bear attacks. In Russia, it's been too hot in the winter for bears to sleep. When bears can't hibernate, they get very grouchy and become "unusually aggressive."[Der Spiegel]

Over at Big Orange HQ,
EmperorHadrian discusses problems with the US Constitution and the Roman constitution in Hadrian's Forum: Flaws in the Design of the Roman, US Senate; US Constitution, Part 1 . How are the two related? Well, when America's founding fathers were tinkering with a constitutional framework, one of the models they used was the Roman Republic. The whole series by EmperorHadrian is very good.

By the way, I'm watching HBO's Rome series on DVD. my wife is watching it too, albeit often with her hands over her eyes during the especially gruesome parts. This series will rid you of any fantasy that Rome was an idealized utopia. We just finished disk 3 (out of 6) of the first season. An acquaintance at work told me: "At the end of the last disk of the first season, there is a scene of violence that will make your wife wince, you will laugh, and you'll remember me when you see it." Well, now I MUST watch the whole first season!

Here's what we might be driving in the not-too-distant future: The Hypercar.

Other news ... China Investment, $200 Billion Sovereign Wealth Fund, Begins Operations China Investment Corp., the nation's $200 billion sovereign wealth fund, starts operations today as the government seeks to boost returns on the world's biggest foreign-exchange reserves.

U.S. Stocks Post Biggest September Gain Since 1998 After Interest Rate Cut U.S. stocks rose this week to complete the steepest September advance since 1998 as the Federal Reserve's interest-rate cut helped energy and raw-material companies lead the market's recovery from a summer rout.

Dollar Falls to Record Low Versus Euro on Speculation Fed Will Cut Further The dollar fell to the lowest against the euro since the 13-nation currency's debut in 1999 as slowing growth and inflation increased speculation that the Federal Reserve will cut interest rates a second time this year.

Gold Rises to Highest Since 1980, Extends Rally, on Dollar Drop, Oil Gain Gold rose, extending a rally to the highest price since January 1980, as the declining value of the dollar and surging energy costs boosted the appeal of the precious metal as an alternative investment. Silver also gained.

Wheat Rises, Extends Rally to Record, on Smaller-Than-Expected U.S. Supply Wheat rose, touching a record high for the 23rd time in the past three months, after the government said U.S. production and supplies were smaller than analysts expected, reducing already-low global inventories.

Corn, Soybean Futures Fall as USDA Report Shows Unexpected Drop in Demand Corn fell the most in two months and soybeans dropped from a three-year high after a government report showed unexpected declines in demand for the two biggest U.S. crops.

Rainy Weekend Gaming

It's been raining and we hosted a game night at our house last night. Here's what was on the table last night and this morning ...

#1 Incan Gold (Diamant). This game is easy enough that the 5-year-old can grasp it, and it finishes in 15 minutes. Players venture into a lost Incan temple by turning up cards from a deck, sharing the gems they find on the way down. Before the next card is turned up, you have the chance to leave the temple and stash your finds, including any gems you get on the way out. You can also grab artifacts for even more money.

Why would you leave? Because the deck also contains hazards -- snakes, flames, mummies, spiders and rockfalls. When a duplicate hazard turns up (such as a second rockfall), anyone left in the shaft is killed and loses the gems they got this turn. The trick is, the more players that leave, the bigger your share in the next card will be.

The game, invented by elite game designer Alan Moon, was called Diamant in the original German, but redesigned for the American market as Incan Gold.

#2 Monsters Menace America. You can find this at Toys R Us for about $25.

Each player is one of six Giant Monsters, stomping across a map of the USA in search of cities to destroy. The monsters run the gamut from the classic (enormous lizards and gargantuan apes) to the slightly more unconventional (giant walking eyeball), and each has its own set of attributes and powers.

Ingeniously, everyone also controls an arm of the military, which can be used to attack and weaken the other monsters on the board. The battle escalates until all the monsters duke it out in a free-for-all, mano-a-monstrocity Monster Challenge.

#3 Rummikub. This one is too advanced for the 5-year-old, but the 8-year-old plays it to win. Similar to the Rummy that you play with cards - you try to get rid of all your tiles by forming numbers into runs of 3 tiles or more, or 3 to 4 of a kind. The colors of the numbers on the tiles are like card suits. This game may start rather uneventfully, but when the players start putting more and more tiles in play, the options for your upcoming turns can become more complex, challenging, and exciting

#4 Jenga. The classic tower building game is a challenge for all ages, and the 5-year-old is especially good at it (he has no fear, and great hand-eye coordination). The tower consists of 54 wooden rectangular bricks, in layers of 3, placed at right angles to each other. Each player in turn, removes one brick from anywhere below the highest complete storey and places it on the top of the tower, at right angles to the blocks immediately below it. A complete 3-block storey must be completed before starting another. Only one hand may be used at a time.

#5 Horse-Opoly. This is my 8-year-old daughter's favorite game, but I won it this morning. It's a property trading game based on our buying different breeds of horses and setting up bales of hay and barns on property groups. My token was the horsefly.

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Friday, September 28, 2007

My Latest HoweStreet.com Interview

In which Phil and I talk about gold, the US dollar, agriculture and uranium:
http://tinyurl.com/25zctv

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3 Charts for Subscribers

The wonderful new system upgrade at Weiss Research HQ somehow makes charts not visible. Thanks, Bill Gates!

So, here are some charts for subscribers who received recommendation issues today.

First, a chart of the Uranium Participation Corp ...Then, for Red-Hot Canadian Small-Caps subscribers, a chart of Denison Mines ...Then, for Red-Hot Resources subscribers, a chart of Uranerz ...

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Historic Surge in Grain Prices

From the Wall Street Journal (subscription required) ...

Historic Surge In Grain Prices Roils Markets

Rising prices and surging demand for the crops that supply half of the world's calories are producing the biggest changes in global food markets in 30 years, altering the economic landscape for everyone from consumers and farmers to corporate giants and the world's poor.

"The days of cheap grain are gone," says Dan Basse, president of AgResource Co., a Chicago commodity forecasting concern.

XX Note -- I'm busy getting out some recommendation issues for Red-Hot Canadian Small-Caps and Red-Hot Resources this morning, so further updates on this blog will have to wait until after I get that done.
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Thursday, September 27, 2007

News You Can Use for Thursday

Why the silver price is set to soar - Precious metals remain the most undervalued of all the asset classes. Precious metals, and particularly silver, remain the most undervalued of all the commodities. Silver is even more undervalued than gold and is undervalued when compared to other strategic commodities such as oil and uranium.

Credit crisis 'made in Canada' Canadian banks are struggling to contain a credit crisis that could spiral out of control here more than it has elsewhere because of a lax regulatory regime, sources have told the National Post.

Vale, Rio, BHP May Win a 30 Percent Increase in Iron Ore Prices Next Year Cia. Vale do Rio Doce, Rio Tinto Group and BHP Billiton Ltd., the world's three largest iron-ore exporters, may increase prices by 30 percent next year as demand driven by steelmakers in China outpaces growth in supply.

Wheat Rises to Record as Ukraine Limits Exports, Stockpiles at 26-Year Low Wheat rose to a record in Chicago as Ukraine planned to cut exports and importers sought more supplies, squeezing inventories that are heading for a 26-year low.

Crude Oil Rises a Second Day on Decline in Cushing Stockpiles, Storm Risk Crude oil rose for a second day in New York as a storm swept toward Mexico, the third-biggest supplier to the U.S., and stockpiles in the Midwest fell to a 21-month low.

XX Keep your eye not only on the storm off Mexico, but the one that just appeared right beside Florida.

Gulf Petrochemical Producers See Slowdown Due to Global Credit Crunch Persian Gulf petrochemical projects worth as much as $90 billion may be delayed as banks hold back from lending until global debt markets stabilize, according to a group representing 100 chemicals companies in the region.

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Wednesday, September 26, 2007

MoneyandMarkets Column -- What to Do When the Dollar Bounces

Here's my latest MoneyandMarkets.com piece.

Crouching Dollar, Golden Opportunity! (by Sean Brodrick) The dollar is in a steady decline, but it will have bounces along the way. Sean Brodrick tells you what to do during those brief rallies ...

I wanted to write about Agriculture, especially considering that the positions recommended in my report are taking off like rockets, but I think readers must be sick of me covering the same ground.

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News and More for Wednesday

BHP Raises Olympic Dam's Copper, Uranium, Gold Estimates by 75 Percent BHP Billiton Ltd., the world's largest mining company, raised its estimate of copper, gold and uranium resources at Australia's Olympic Dam mine by 75 percent, forecasting prices for the minerals will stay high.

Australian and New Zealand Dollars Gain as Odds of U.S. Rate Cuts Rise The Australian and New Zealand dollars rose on speculation the appeal of the nations' higher- yielding bonds will be boosted as the Federal Reserve cuts interest rates again.

Dollar Falls to Record Low on Forecast Drop in U.S. Durable Goods Orders The dollar traded near a record low against the euro on speculation a government report today will show a drop in U.S. durable goods orders, adding to evidence the economy is slowing.

Australia says 2008 uranium prices could fall on increased production Uranium prices may fall 15% next year as demand growth moderates and new mines start production, the Australian Bureau of Agricultural and Resource Economics said.

Insatiable China boosts export sales Sales of commodities might reach $144.7 billion in 2007-08, the Australian Bureau of Agricultural and Resource Economics said yesterday. That compares with last year's revised figure of $139.2 billion and is 3 per cent lower than its $149.5 billion June estimate, reflecting lower metal price forecasts and gains in the Australian dollar.

China Revokes Licenses of Hundreds of Food Processors China's food safety watchdog said Tuesday it had revoked the licenses of 564 factories involved in producing problematic monosodium glutamate (MSG), rice and frozen noodles, stepping up its crackdown on unsafe food production to meet a deadline late this year set by the central government in its campaign to restore confidence in the integrity of Chinese consumer goods.
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Tuesday, September 25, 2007

Cotton-Pickin' Potential

It’s time to take a second look at cotton. Why? Because new supplies of cotton (cotton production plus unaccounted cotton) in 2007/08 are expected to decline 1.5 million bales, to 120.1 million. supply of cotton is primarily due to lower production in the United States, where a 4.1-million-bale drop is expected. This year, the USDA reduced its estimate of the size of the U.S. cotton crop to 17.5 million bales. Meanwhile US cotton exports will rise to 16.7 million bales in the year that ends July 31, from 13 million in the previous year, the USDA said.

US farmers planted 11.06 million acres with cotton in 2007, 28% less than a year earlier, according to the USDA. Looking ahead, planting in 2008 may drop to around 9 million acres from 11.1 million this year. A crop of 9 million acres would be the smallest since 1983.

Seeing this, won’t many farmers switch back to cotton? Well, there are costs to factor in. The cost of fertilizers, herbicides, seeds and farm equipment runs to about $400 per acre for cotton, compared with $225 for corn, $170 for soybeans and $150 for wheat.

Indeed, if anything, farmers are planting more wheat. The price of wheat is up 78% this year, so growers from Kansas to India are preparing the world's largest wheat crop in 10 years, overwhelming demand and refilling barren grain bins. Lowly cotton is being left like a wallflower at the dance.

That will make for higher prices down the road, and probably sooner than anyone realizes.

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Mister Dollar and the Fickle Market

Here are some comments I gave a small group of readers last night on the US dollar ...

The once-mighty US dollar traded to a new record low against the euro on Monday, and also drifted lower against the yen. See the following chart ...

Moves in the greenback are having a big effect on other commodities, and sentiment has turned against the US dollar very quickly. Because the market is a fickle beast, this is actually prime breeding grounds for a US dollar rally, so don’t be surprised if you see the greenback go higher. But any rally could be viewed an opportunity to get short the dollar and long precious metals.

Why? Well, the US dollar seems to be facing rejection on a global scale – and that is a sure sign of more trouble ahead. The flow of funds into the euro and other currencies is signaling a lack of faith in the US economy which is burdened with A) a humongous (and growing) Federal deficit compounded by B) the high cost of Iraq C) swooning real estate prices D) a soft economic forecast. The US dollar could be facing problems that will make the sub-prime crisis look like a cakewalk.

What’s more, now that the Fed cut interest rates, investors are starting to wonder why they should hold the dollar. The Fed is likely to cut again, so you’re certainly not holding it for rising yields.

Still, nothing travels in a straight line, and we could see a sizeable rally in the dollar if sentiment gets too bearish too quickly. Will these rallies be tradeable? We’ll see. Use a good two-or-three day rally to get long gold or silver, and you probably won’t be sorry. Also, a falling dollar makes US agricultural goods more affordable for overseas buyers – the bull market in grains should not only continue, it could accelerate.

Update: As I write this, the US dollar is up and gold is down $9 per ounce. Give it another couple days, and it might be time to buy gold again. My subscribers should stay tuned for updates.

Update II: I wrote that post early this morning and let it sit before publishing it. Now, I checked and the US dollar is down again! And gold is up! I'm leaving this post up here to remind myself not to post before the rest of the market wakes up.

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Monday, September 24, 2007

Two Energy Stories

Analysts watch, wince as Mexico's oil supply dwindles

MIAMI - When left-wing guerrillas in Mexico bombed several pipelines in simultaneous attacks this month, it sent a shudder through that country's large oil and gas industry.

The threat of economic sabotage by a shady group known as the Revolutionary Popular Army EPR poses a major new headache for the Mexican government. But Mexico's energy industry problems run far deeper than terrorist attacks on its infrastructure, analysts say, and have major implications for U.S. oil supply.

Read the rest by clicking HERE.

China soaks up global uranium supplies

Having wrapped up a uranium supply deal with Australia a week ago, China is now setting its sights on pretty much all the big uranium suppliers. China's official target for nuclear power capacity is 40 GWe by 2020 and another 18 GWe in the following five-year plan at a cost of $50 billion.

Read the rest by clicking HERE.

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The Debt Bubble and the Downfall of the Republic

HERE is a fascinating essay on how debt bubbles can contribute to the downfall of a republic. The republic discussed in the essay is Rome, but you can draw similarities between the late Roman republic and the United States all day long.

Some similarities that pertain to this discussion …

  1. Both had housing bubbles
  2. Both had a middle class under stress
  3. In both, cheap foreign labor (slaves in Rome, offshoring in the US) drove down working wages and caused massive economic realignments
  4. In both Rome and the US, there were safeguards to prevent tyranny

In Rome, those safeguards failed. In the US, the story is still being written.

Read the essay by CLICKING HERE.

In related news, I can recommend this book ...
Finally, I'll close this with how Jugurtha famously described Rome back in the day: "A city for sale and doomed to quick destruction, if it should ever find a buyer."

Does that remind you of any famous American cities?

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Monday Chart Action

Here are some charts I find interesting ...

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News You Can Use for Monday

Dollar Falls to Record Low Against Euro Before Housing, Confidence Reports The dollar fell to a record low against the euro and declined versus the yen on speculation economic reports will show U.S. growth is losing momentum, adding to pressure on the Federal Reserve to cut interest rates again.

Treasury Notes Drop on Concern Fed Interest Rate Cut Will Spur Inflation U.S. 10-year Treasuries fell on concern the Federal Reserve's interest-rate cut last week will cause inflation to quicken in the world's biggest economy.

Copper Rises in Asia on Concern Peruvian Miners' Strike May Cut Supplies Copper rose in Asia amid concern supplies may be disrupted after Peruvian workers at Southern Copper Corp., the world's fifth-largest producer of the metal, voted to strike Oct. 2 for higher wages.

Wheat May Become Worst Commodity as Record Prices Hurt Sales, Spur Farmers Farmers are sowing the seeds for an end to the biggest rally in wheat since the Soviet Union cornered the U.S. market in the 1970s.

Paraguay May Gather 12 Percent More Soybeans Next Year as Rains Boost Crop Paraguay, South America's third- largest soybean exporter, may next year gather as much as 12 percent more of the oilseed as rains moistened dry soils, an industry group said.

Gold Advances in London Trading, Extending Rally to Highest in 27 Years Gold gained to the highest in more than 27 years in London as investors sought a hedge against inflation on speculation the Federal Reserve will cut interest rates to protect the economy from turmoil in credit markets.

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Friday, September 21, 2007

Get Your Weekend On

Happy birthday to John Burke, another son of Maine (and younger than me, dang it).

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My latest interview on HoweStreet.com

Phil and I shoot the breeze about gold, the dollar, uranium and more: http://tinyurl.com/yo596h

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The Big Bull Market in Commodities

Gold and oil are ready to pull back ...

Gold Falls From 27-Year High on Speculation Five-Week Rally Was Overdone Gold fell, erasing earlier gains, on speculation a five-week rally to a 27-year high was overdone. Silver was little changed.

Crude Oil Declines on Signs Demand Will Slip as OPEC Production Increases Crude oil fell after reaching a record yesterday on speculation that prices are overvalued because of slowing demand growth and increased OPEC output.

... While copper, soybeans and wheat rally ...

Copper Rises in New York on Dollar's Slump, Supply Concern in Peru, Mexico Copper rose, heading for the biggest weekly gain in five months, as the dollar's slump made the metal cheaper for buyers using other currencies and labor disputes spurred supply concerns.

Soybeans Fall as Rally Cuts Investor Demand, Boosts Sales From U.S. Farms Soybeans fell, erasing an earlier gain, on speculation a rally to a three-year high might have been overdone as the U.S. harvest accelerates.

Wheat Heads for Ninth Straight Weekly Gain on U.S. Exports, Australian Cut Wheat rose, heading for a ninth straight weekly gain, as demand for U.S. supplies increased and Australia's production slumped.

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So Much for a United Europe

I wonder if this will have any effect on the value of the euro ...

Calls for a Breakup Grow Ever Louder in Belgium

This flat, Maryland-size country of 10.4 million is a bad marriage writ large — two nationalities living together that cannot stand each other.

A poll by the private Field Research Institute released on Tuesday indicated that 66 percent of the inhabitants of Flanders believe that the country will split up “sooner or later,” and 46 percent favor such a division.
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My Latest Interview on Market Matters Radio

Tom Jeffries and I cover a whole range of topics. Listen here: http://tinyurl.com/2dnso4

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Thursday, September 20, 2007

More Inflationary News

Via TPM ...

The Congressional Budget Office estimates the cost of a long-term U.S. occupation of Iraq in the trillions of dollars in a new report released this morning. The study appears to make some pretty conservative assumptions in calculating cost estimates.

XX Sounds inflationary to me ... and another good reason to buy precious metals.

Here's another inflationary outlook (from
Bonddad, who is making a name for himself in the bond analysis world): Why the Fed's Rate Cut Was a Mistake. Bonddad provides some great charts, too.

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The Falling Dollar, Our Rich Cousins in Canada, and Other News

Canada's Dollar Reaches Parity With U.S. Currency First Time Since 1976 Canada's dollar traded equal to the U.S. currency for the first time in three decades, capping a five-year run on the back of booming demand for the nation's commodities.

XX This is big news. For many Americans, this is the first time the Canadian dollar has been at parity with the US dollar in their lifetimes. What will be the consequences of this? More importantly, where is the US dollar going?

The rise of the Canadian loonie versus the US dollar is having an effect on the Red-Hot Canadian Small-Caps portfolio. Let me show you what I mean. First, let's look at one of our positions, a gold miner called Aurizon (symbol ARZ on the TSX) ...
Our Canadian position is up 6.2% since I recommended it in June. Now, let's look at Aurizon's shares listed on the AMEX in the US (symbol AZK) ...

Aurizon's US shares -- listed on the AMEX -- are up 13.9% since I recommended it in June. In other words, the US shares are more than doubling the Canadian shares of the same stock. But that's just to make up for the decline in the US dollar versus the Canadian loonie ...

The lesson to take from this is to invest in foreign stocks ... to invest outside the US. It's the best portfolio protection you can get if you think the US dollar is going to continue to shrink.

Can this trend continue? Well, the US government is injecting liquidity -- basically "printing money," though it's more complex than that -- which debases our currency. This is eating away at the confidence of not only investors but foreign governments. Overnight, we got news that Saudi Arabia might drop its peg to the US dollar.

Great Britain's Daily Telegraph newspaper reported: "Saudi Arabia has refused to cut interest rates in lockstep with the U.S. Federal Reserve for the first time, signaling that the oil-rich Gulf kingdom is preparing to break the dollar currency peg in a move that risks setting off a stampede out of the dollar across the Middle East."

I think it's a move the Saudis have wanted to make for some time, but have held off because our troops in Iraq serve their interests. Our troops are leaving -- probably next year -- and the Saudis are sick of pegging their money to a shrinking currency. How soon before China decides to hop aboard that train? If you think the US dollar is tumbling now, just wait until the Chinese start to sell.

This will continue as long as the US government (and by extension, Americans) continues to live beyond its means. Buy gold, buy silver, and invest at least part of your money in foreign-based stocks. Investing in US ADRs or tracking stocks of those foriegn companies will protect you as well.

If you don't subscribe to Red-Hot Canadian Small-Caps, and have been thinking about it, now might be a good time to SIGN UP. What you'll make in currency differential alone will probably pay for a 3-year subscription.

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Silver Daily and Weekly Charts

This is looking very good. I'm glad I recommended silver stocks in Red-Hot Canadian Small-Caps and Red-Hot Resources this week.
Here is the daily silver chart ...
Here is the weekly silver chart ...

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Gold's Breakout

Gold is on fire -- again -- today. Check out this chart of the breakout ...

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Wednesday, September 19, 2007

Why Connacher Is Pulling Back Today

It's just profit taking. The company started steam injection at Great Divide Pod One. See press release at: http://www.connacheroil.com/documents/news2007/CLL-2007-09-17.pdf

This is a milestone for the company -- it's a fully functioning oil sands producer now -- so, some people are grabbing gains. Oh, how I think they'll rue getting out now.

UPDATE: It's NOT just profit taking. What I missed, because I was putting out an order issue for Red-Hot Resources, is that the province of Alberta is raising taxes ...


Bill O'Connor
Watch Out for Your Canadian Energy Holdings
9/19/2007 10:24 AM EDT
The province of Alberta, where most of Canada's energy comes from, has announced plans to increase the royalties(i.e., taxes) on oil and natural gas produced in the province. Similar to our politicians in the U.S., Alberta is seeking ways to extract more money out of energy sector. The politicians there are also in a rush to chop the head off the goose that lays the golden eggs.

This will be painful for all those big oil sands producers. Big guys like Suncor (SU) are down 4% today, and I suspect that, if this tax is enacted, we could see all the big oil sands producers drop even more. The large energy trust Canadian Oil Sands (COSWF) is down 4% on news.

Read the rest by CLICKING HERE.

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My Latest Money & Markets Column -- Wake Up and Smell the Coffee

Wake Up and Smell the Coffee! (by Sean Brodrick)
9/19/2007 7:30:00 AM

The Federal Reserve cut both its federal funds rate and the discount window rate a generous half percentage point yesterday, in an effort to prop up a cratering U.S. real estate market, and to prevent the economy from slipping into recession.

At the same time, the Fed noted that, "Some inflation risks remain, and it will continue to monitor inflation developments carefully."

Heck, Fed Chairman Ben Bernanke doesn't need to look farther than his morning cup of coffee to see inflation at work. Prices are on the launch pad, up more than 6% just this past Monday!

In fact, just about everything in your morning breakfast is only going to get more expensive, as agricultural commodities, led by wheat and soybeans, get swept up in a rip-roaring bull market.

The good news is there are ways you can play the coming move that will perk up your portfolio with potential profits. I'll get to those in a bit. First …

Read the rest by CLICKING HERE.


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The Fed's Rate cut has (so far) proved bearish for the US dollar and bullish for commodities. Here is some news you can use ...

Australian and New Zealand Dollars Strengthen on U.S. Interest Rate Cut The New Zealand dollar surged by the most in almost nine years and Australia's currency advanced the most in a month after the U.S. cut its key interest rate by a half point, boosting the appeal of higher-yielding assets.

Japan's Bonds Fall Most in 8 Months; BOJ Reiterates Need for Higher Rates Japan's 10-year bonds fell the most in eight months after the central bank governor reiterated the need to raise interest rates and one of his fellow policy makers opposed today's decision to keep borrowing costs unchanged.

Oil Trades Above $82 After U.S. Rate Cut Stokes Outlook for Fuel Demand Crude oil traded above $82 a barrel in New York for a second day on speculation a cut in U.S. interest rates will revive the economy and strengthen demand for energy.

Hong Kong's Hang Seng Index Surges; Closes Above 25,000 for First Time Hong Kong's Hang Seng Index surged to its first close above 25,000, with the value of shares traded reaching an all-time-high.

India's Benchmark Sensex Tops 16,000 for First Time After Fed Cuts Rates India's Sensitive Index exceeded 16,000 for the first time after the U.S. Federal Reserve cut its benchmark interest rate more than expected, easing concern a housing slump will drive the world's largest economy into recession. Reliance Industries Ltd. led advancers.

Gold May Decline in London as Jeweler Purchases Stall; Silver Advances Gold may decline in London on speculation jewelers, the biggest buyers, will hold off purchases until prices retreat from recent highs. Silver rose.

Nickel, Copper Gain in London on Expectations Rate Cut Will Bolster Demand Nickel, copper and zinc rose in London after the U.S. Federal Reserve lowered interest rates to prevent an economic slowdown. Aluminum, lead and tin also gained.

Uranium Will Trade at $85 to $100 a Pound in Short Term, RBC Dominion Says Uranium prices will range between $85 and $100 a pound ``in the coming weeks,'' with ``increasing activity'' at the end of this month and into October, RBC Dominion Securities Inc. said in a report yesterday.

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Tuesday, September 18, 2007

Is It Silver's Time to Shine?

Here's a chart and some analysis ...
PRODUCTION: Silver mine production rose by 0.6% in 2006 to 646.1 million ounces[1]. In 2005, silver mine production rose 3.4% (to 642 million ounces). Demand dropped fractionally in 2006 to 840.5 million ounces after growing by 3.8% in 2005.

History shows us that about a third of new mine projects suffer serious delays.

Top 20 Silver Producing Countries in 2006
(millions of ounces)

1.

Peru

111.6

2.

Mexico

96.4

3.

China

75.4

4.

Australia

55.6

5.

Chile

51.5

6.

Poland

40.4

7.

Russia

39.6

8.

United States

36.7

9.

Canada

31.2

10.

Kazakhstan

26.1

11.

Bolivia

15.2

12.

Sweden

8.6

13.

Indonesia

7.7

14.

Morocco

7.6

15.

Argentina

6.1

16.

Turkey

6.0

17.

Iran

3.2

18.

South Africa

2.8

19.

India

2.7

20.

Uzbekistan

2.3

Above-Ground Stockpiles

Are Getting Critically Low

In 1990[2], there were around 2.2 billion ounces of silver held in above-ground stocks. As recently as 1995, there were 1.4 billion ounces of bullion in stockpiles. Today, there are probably only about 300 million ounces. That's a 50-year low.

Industrial Demand

Is Surging

Unlike gold, silver is also an industrial metal. Industrial demand for silver is hot and getting hotter. Silver is the best metallic conductor of electricity, and uses for it are growing. In 2006, industrial applications of silver grew at a 65 rate to 430 million ounces, recording the fifth consecutive year of growth in this category.

For example, you know how Sony computer batteries caught fire (literally) last year. Well, newly developed silver-zinc batteries don’t catch fire – AND they can run notebook computers for hours longer than lithium-ion batteries.

Total jewelry demand fell in 2006 by nearly 5%, largely due to a slump in demand from India due to higher prices. Demand in China grew by 16%.

Photographic demand continued to fall, decreasing by 10 percent in 2006 to 145.8 million ounces.

Silver ETF Is Growing By Leaps and Bounds

You probably know that the gold exchange-traded funds, including the GLD, are major sources of new demand for gold and they are driving prices higher. Well, the silver ETF, the SLV, is a also roaring success. It has 139,067,911.100 ounces of silver – [3] that’s way, way up from the 21 million ounces it started with back in April of 2006.

China Mines for Precious Metals Profits

Trading in spot and gold and silver futures started on the Shanghai Gold Exchange in June. Now, the Shanghai Futures Exchange is about to launch gold futures. [4] It would not be surprising to see silver futures start to trade on the Shanghai Futures Exchange, giving China's 1.3 billion capitalists another way to invest in the metal.

The Chinese have already gone gung-ho for stocks – Shanghai’s stock market recently hit a five-year high[5] – and Chinese demand for silver could be an explosive force in the market.

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Monday, September 17, 2007

News You Can Use for Monday

A Secret Time Bomb Made of Gold: A little-known fountain of free money called the "gold carry trade" is in danger of drying up. And if it does, then markets from gold to bonds and even stocks can be in for a wild ride. Before even explaining what the gold carry trade entails, let me first say that its demise has been forecast for nearly a decade. In researching this topic, I found articles as far back as 1998 looking for an explosion in gold prices and commensurate damage to other markets, if not the economy. In other words, this is a story that is as old as Methuselah. But with a sinking dollar, soaring commodities, and several diverse technical conditions on the charts, the dynamics are coming together to make the end of the gold carry trade a lot closer to reality than ever before. (Barron's)

Gulf of Mexico storm possible this week
Ingrid is a disorganized system, but may reform later in week. The real news …

The four reliable computer models for forecasting genesis of tropical cyclones have been very busy the past few runs cooking up some nasty storms in the Western Caribbean and Gulf of Mexico for the coming week. Neither the timing nor the location of these hypothetical storms has been consistent. However, the models are insistent enough that something might happen, that there is about a 40% chance we'll see a tropical storm in the Gulf of Mexico by week's end.

British Pound's Overnight Rate Rises the Most Since June on Northern Rock The cost of borrowing in pounds climbed the most since June as Northern Rock Plc depositors queued to withdraw their savings for a third day, heightening concern about the credit drought.

Gold Rises to Near 16-Month High as Run on Northern Rock Enters Third Day Gold rose to near a 16-month high in London as customers lined up across the U.K. for a third day to withdraw funds from branches of Northern Rock Plc after the lender was bailed out by the Bank of England.

Canadian Dollar Dominance Shows Break With Weakening U.S. Economy, Markets Currency traders are concluding that there's nothing the U.S. economy can do that Canada's can't do better. Much better.

Petroleos de Venezuela to Convert Accounts Away From Dollars Into Euros Venezuelan President Hugo Chavez instructed Petroleos de Venezuela SA, the state oil company, to convert its investment accounts from dollars to euros and Asian currencies to reduce risk.

Soybeans Rise to 3-Year High as U.S. Crop Faces Frost Damage in Minnesota Soybean futures jumped to a three- year high, rallying for a seventh day, on concern freezing weather will damage crops. Wheat futures also rose.

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Monday Chart Action

Tuesday is the big day when we hear from the Fed. Here are some things I’m watching in the meantime …

Bottom line: I wouldn’t bet against Treasuries right now.

I think I’ll be adding a gold position or two this week.

I wish silver was performing better. Can gold go up while silver goes down? Sure, if enough people are scared. And people are lining up in Britain to take their money out of banks. They’re buying gold.

I’d wait for a pullback, then buy crude, or place an order below the market and see if the storm warnings in the Gulf of Mexico blow profit my way.

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Sunday, September 16, 2007

Zip it, Greenspan

Former Federal Reserve Chairman Alan Greenspan is flogging his new book that takes a sharp look at the Bush Administration. In it, he criticizes President Bush for not responsibly handling national spending and racking up big budget deficits.

Mr. Greenspan would have us forget the role he played in enabling the disastrous Bush economic agenda. In the first days after the 2001 inauguration, Mr. Greenspan warned of a danger that the budget surplus could actually become too big and drag down the economy. And thus, Mr. Greenspan gave the green light to Bush's tax cuts.

More importantly, Mr. Greenspan, or “Mr. Bubble” as we call him in the markets, is partly responsible for the mess that many homeowners find themselves in. He gave explicit endorsement to Adjustable Rate Mortgages (ARMs) and the other crackpot financing that drove the housing bubble to new heights and enabled many Americans to buy more home than they could afford.

From a USA Today story published February 2, 2004:

WASHINGTON — Federal Reserve Chairman Alan Greenspan said Monday that Americans' preference for long-term, fixed-rate mortgages means many are paying more than necessary for their homes and suggested consumers would benefit if lenders offered more alternatives.

[snip]

While borrowers can refinance fixed-rate mortgages, Greenspan said homeowners were paying as much as 0.5 to 1.2 percentage points for that right and the protection against a potential rate rise, which could increase annual after-tax payments by several thousand dollars.

He said a Fed study suggested many homeowners could have saved tens of thousands of dollars in the last decade if they had ARMs. Those savings would not have been realized, however, had interest rates shot up.

"American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage," Greenspan said.

You can go read the whole thing yourself here: http://www.usatoday.com/money/economy/fed/2004-02-23-greenspan-debt_x.h
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Friday, September 14, 2007

Chart of the Day -- Uranium One

Yesterday, I showed you a chart of Fronteer Development Group, one of the original stocks from my "Golden Age of Uranium" report. Today, let's look at another stock from that report, Uranium One ...It looks pretty bullish to me. UUU is coming up against another downtrend (not shown) that could hold it in check for awhile. But Uranium One's acquisition of Energy Metals this year puts it on track to surpass the production of uranium kingpin Cameco by 2013.

Uranium One will increase its saleable uranium production from around 2.5 million pounds to approximately 28 million pounds by 2013. It already had an aggressive production growth plan of 20 million pounds of production by 2013, enhanced by about 8 million pounds with the acquisition.

The small- and micro-cap uranium stocks I profiled in "Small Uranium Wonders" are rebounding as well, albeit not as quickly as the bigger-cap stocks. Their day will come, and sooner than most people will believe, I reckon.

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Seeds of Wealth

Here's some news that will be of interest to those who received my Agriculture Boom report yesterday ...

Dow and Monsanto team on hybrid corn

MIDLAND, Mich. --Dow Chemical Co. and agribusiness giant Monsanto Co. said Friday they have teamed up to market a corn hybrid using genetic technology from both companies, in a move to expand their seed brands and traits business.

The cross-licensing agreement between the Dow AgroSciences LLC division and Monsanto is intended to create corn, called SmartStax, which includes eight different genes that tolerate weed killers and protect against insects both above and below ground.

The technology should be available by the end of the decade, Dow said, and will be the first-ever eight-gene stacked corn combination.

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News, TGIF Edition

A Transatlantic Shock Wave U.K. lender's woes weigh; data on retail sales and confidence on tap LONDON (MarketWatch) - U.S. stock futures traded lower on Friday, with news of a foreign lender's difficulties reigniting concerns about U.S. banks ahead of investment bank reporting season next week.

Iron-Ore Prices May Advance 25 Percent Next Year, J.P. Morgan Forecasts Iron-ore contract prices may gain 25 percent next year as miners fail to match the increase in demand, JPMorgan Chase & Co. said after increasing its earlier 10 percent estimate.

China's Factory Spending Accelerates, Increasing Rate-Increase Prospects China's spending on factories, equipment and property climbed 26.7 percent in the first eight months of 2007, making the central bank more likely to raise interest rates to cool the world's fastest-growing major economy.

China Raises Interest Rates for Fifth Time in 2007 to Cool Economic Growth China raised interest rates for the fifth time since March to curb the fastest inflation since 1996 and cool a surging stock market.

China's August Crude Output Rises 2.3 Percent to Meet Rising Energy Demand China increased crude output 2.3 percent last month to help meet rising energy demand in the world's fastest-growing major economy.

Queensland's New Premier Anna Bligh Confirms State's Ban on Uranium Mining Queensland's new Premier Anna Bligh ruled out changing the Australian state's opposition to uranium mining even after her Labor Party decided to allow new production sites for the radioactive metal.

Chicago Wheat Futures Extend Losses as Advance to Record Seen as Overdone Wheat futures in Chicago declined for a third day, as investors bet the recent rally to a record was overdone and on speculation higher prices will encourage the world's farmers to plant more, easing supply concerns.

Oil May Fall From Record Next Week as Refiners Shut Units, Survey Shows Crude oil may decline from a record in New York on speculation refiners will shut units in the coming month for maintenance, reducing demand.

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More News on Tropical Depression 8

UPDATE: Tropical Depression 8 is now Tropical Storm Ingrid.

Earlier, I had posted how recent Satellite loops of TD 8 showed that wind shear has picked up, preventing TD 8 from building strength. Apparently, it strengthened into a Tropical Storm anyway.
By late Saturday, the storm should encounter wind shear from westerly winds. Will it be enough to tear the storm apart? I don't know. I hope so.

From an investment point of view, if Ingrid falls apart, that could send oil prices/stocks sliding lower. But I'd rather have that than my house hammered by a hurricane (again).

Update: Humberto The 'Instant Hurricane' Was Fastest-Growing Storm On Record

HIGH ISLAND, Texas — Call it the instant hurricane. Humberto, which grew faster than any storm on record from tropical depression to full-scale hurricane landfall, surprised the Texas-Louisiana coast early Thursday with 85-mph winds and heavy rain that knocked out power to more than 100,000 and left at least one person dead. Meteorologists were at a loss to explain the rapid, 16-hour genesis of the first hurricane to hit the U.S. since 2005.

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