Re-Direct to My UncommonWisdomDaily Blog

Due to time constraints, I have to stop publishing to this blog and focus my efforts on my UncommonWisdomDaily blog. I'll come back to this one down the road, probably, if there are things I can't fit on UncommonWisdomDaily.com. But for now, I have to redirect traffic to: http://blogs.uncommonwisdomdaily.com/red-hot-energy-and-gold/



That's a rather long and clunky web address, so if you want a tinyurl address, here you go: http://tinyurl.com/dxfyhs

It's the same great blog (perhaps without the worst of my sophomoric attempts at humor) with lots of charts and plenty of analysis of the natural resource markets. So please be sure to bookmark it.

Thanks, Sean

Check out my new gold and energy blog at MoneyAndMarkets.com

Gold Soaring … And So Is Cost of Bailout

Gold soared this morning, so I feel vindicated, if not fine.
You saw the gold chart I posted yesterday. Today’s chart is more of the same, only with surging volume, as gold rises to a 3-month high.

That’s usually a bullish sign. The question before us now is, is this a real breakout or the mother-of-all fakeouts? Remember, this is happening when the U.S. dollar is also very strong, and currency markets are much bigger than the metals markets.
I think it’s a risk worth taking. We’ll have to move fast if gold is lying to us, though, so if you’re one of my subscribers, stand by.
Now, here is news you can use for this Friday …
Goldman Sachs says the cost of shoring up banks could run as high as $4 trillion. That’s up from the $1.5 trillion already spent specifically on banks. Why, why, WHY aren’t we proceeding with a Resolution Trust Corporation solution to this? Like the one we used in the Savings & Loan Crisis in 1989. Instead, we keep pouring good money after bad. Yes, an RTC solution would cost money but not as much money as this cockamamie bailout we’re seeing now, and it would mean an end to the whole mess. Right now, the bailout is open-ended. How are we supposed to pay back another $4 trillion? The US economy is shrinking, tumbling the most since 1982.
And that, my friends, is one reason why gold is taking off.
Meanwhile, California — the world’s eight largest economy – is so broke that the state is going to start sending out IOUs. This despite the fact that the governator is going to furlough ALL of the state’s rank-and-file employees for two months. He’d better not furlough the prison guards, because once you stop sending poor people their food stamps, what else do they have to lose? I have to think the chance of riots in California is rising. Meanwhile, California is dealing with the worst drought in its history.
Another sign of impending apocalypse — scientists have invented carnivorous robots. It’s only a hop, skip and a jump to Skynet and the Rise of the Machines.
On the lighter side, here are some cool electric concept cars. Let’s hope we don’t end up too bankrupt to afford them.

Check out my new gold and energy blog at MoneyAndMarkets.com

A Lot Happened While I Was Away

Chart of the ever-lovin’ day …

This chart is just the beginning of the new report I just sent to my Red-Hot Global Small-Caps subscribers, “3 Red-Hot Picks From Vancouver.” If you’re a subscriber, look in your in-box. If you’re not a subscriber, you can change that pretty quickly and act on these three recommendations immediately: click here.

Anyway, I’m back from Vancouver. Here are some of the things that caught my eye while I was away …

First, the Guardian in the UK gives us

“25 People at the Heart of the Meltdown.” It’s a bit British-heavy, but that’s understandable for a paper published in London. But why’d they leave out Robert Rubin? Maybe I should make my own list.

Meanwhile, John Hempton at Bronte Capital believes the

Fed should literally try throwing money out of helicopters. I have to believe there are aspects to that plan that he is just not thinking through.

Now for the story that caused steam to come out of my ears in my Vancouver hotel room. Remember how the US taxpayers have bailed out Citigroup (

C: 4.06 -0.14 -3.33%) with $45 billion of our hard-earned money? Well, Citi turned around and was going to buy a $50 million corporate jet from France.

Citigroup is one of the biggest recipients of TARP funds. It received $25 billion under the original payout late last year and received another $20 billion after its stock started to sink in November. It also got the government to backstop some $306 billion in troubled assets on its books. <>So, naturally, buying a $50 million corporate jet is the only thing to do <>

Perhaps I missed it because I was running around Vancouver like a crazy man, but I didn’t see this story on CNBC. Maybe that’s because back in 2007 — almost exactly two years ago – CNBC’s

Maria Bartiromo got in some hot water for taking Citi’s corporate jet with then Citi-executive Todd Thomson.

Oh, wait, look here: CNBC prints an AP story that

Citi will not take possession of the new jet. That story ran at 8:04 pm the day the scandal broke. Yeah, hot on the trail of that one!

And it’s not that Citi suddenly developed a sense of shame.

ABC News reports that Obama administration officials called Citi execs about the jet and told them to “fix it.”

Now, don’t you go feeling sorry for the Citi execs. Even after reducing the size of their air fleet, they STILL have two jets.

In other news, the

Congressional Budget Office compared the economic downturn we’re experiencing today to the Great Depression. Does that make it official? Someone find out for me.

Now for three non-business stories that interested me and may interest you …

1) Here is some comic relief if you have a weird (gallows) sense of humor:

An Interview With The Central Banker of Zimbabwe. And if you think a trillion is a large number when applied to currency, brace yourself for “sextillion.” I assume the central banker of Zimbabwe didn’t scream that number while spitting blood and tearing his hair out in clumps, so you’ve got to admire his coolness in crisis.

2) It will surprise many leaders in the business community (but should surprise no one) that

Free Monty Python Videos on Youtube Lead to 23,000% DVD Sale Increase. Why does that work? Because no one wants to watch bad-quality YouTube videos for very long.

3) The headline says it all: Pakistani Taliban Turns Honeymoon Spot into Slaughterhouse. Such lovely people. And yes, that was sarcasm.

Check out my new gold and energy blog at MoneyAndMarkets.com

Friday Morning Roundup

I’m busy getting ready for my trip to Vancouver and the 2009 Vancouver Resource Investment Conference this weekend. So I’ll keep this brief.

First, a chart of Agnico-Eagle Mines (AEM: 54.18 +2.92 +5.70%). This will be of interest to my Red-Hot Global Small-Caps subscribers as well as anyone who bought by “Golden Parachute for 2009″ report …

Gold Hits 3-Week High on Safe-Haven Demand Gold has breached well above its 200-day moving average against both the euro and the dollar, but the metal remains 11% lower than its 200-day moving average in yen terms. “Since there remains ample upside in yen terms, Japanese investors may deem this as an opportunity to drive up the metal to next key targets, thus prompting global investor demand further higher,” Laidi said.

In other news, I was just on the radio talking to The Big Money Show out of Denver Colorado and promised to put up a chart of vehicle miles driven year over year … which right now are falling off a cliff.

Here you go …

Source: http://www.calculatedriskblog.com/

Briefly, the decline in miles driven is worse than during the early ’70s and 1979-1980 oil crisis. Miles driven in November 2008 were 5.4% less than November 2007, so the YoY change in the rolling average may get worse.

Now for a few Weekend ReadingLinks …

Macroblog takes a look at charts showing Presidents and where they started with GDP, unemployment, CPI and industrial production. Needless to say, President Obama has his work cut out for him. The charts are eye-popping. Here is one …

Now take a look at the rest.

Here are three (probably) good books about how Wall Street Bankers got us into the mess we’re in. The details in the book review alone will set your teeth on edge.

It turns out the NSA spied on everyone — EVERYONE — during the Bush administration. Who could have predicted that if you lifted the restraints on America’s internal spying apparatus, they would suddenly turn into the KGB? Well, just about everyone to the left of Pat Buchanan could have predicted it, but we were written off as fools and liars by the mainstream media. Now, I predict a boom for security software.

Finally, in a lighter note, apparently, some dung beetles are sick of eating crap and have decided to turn carnivore. It’s evolution in action. Fascinating. Go, beetles! Make sure you get a cool new name. I’d suggest Velociraptor Beetle. That’ll get you more respect at the bug club.

That’s it for this Friday. The broad indices are down, oil is sliding and gold and the dollar are up. We’ll see where we go from here.

Check out my new gold and energy blog at MoneyAndMarkets.com

Gold Near Make-or-Break Point

The gold stock I recently recommended in Red-Hot Global Small Caps is doing well, but be careful. I’m watching gold like a hawk as it pushes up against overhead resistance …

Looking at a weekly chart, we can see that gold is still in a downtrend. It needs to break out of that downtrend for gold stocks to really take off.

As I explained in the RGS issue that went out today …

“Investors around the world are scared out of their pants by the financial crisis. So, they’re rushing into the U.S. dollar, even though the U.S. Treasury is printing money so fast I’m surprised the presses don’t catch on fire. And people are rushing into gold because you can’t print more of it. It is a flight from risk to safety. This is good for gold and big gold miners with plenty of cash that are leveraged to the price of gold.”

In other news …

Chinese Growth Plunges China’s economy expanded at the slowest pace in seven years as the global recession dragged down exports, increasing pressure for more government spending and lower interest rates to buoy growth. Gross domestic product grew 6.8 percent in the fourth quarter from a year earlier, after a 9 percent gain in the previous three months, the statistics bureau said in Beijing today.

The Chinese Devil Wears Prada: Why 0% Growth is the New Size 6.8% Indeed if one were to convert the 6.8% y-o-y figure in the more standard quarter over quarter annualized figure Chinese growth in Q4 would be close to zero if not negative.

Gold, Precious Metals Climb in New York as Investors Seek Out Safe Harbors Gold rose, along with silver, platinum and palladium as investors sought a store of value amid tumbling New York and European equity markets.

Potash Corp. Fourth-Quarter Profit More Than Doubles as Prices Increase Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer by market value, said fourth-quarter profit more than doubled because of higher potash prices.

Summary of Weekly Petroleum Data for the Week Ending January 16, 2009 U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased 6.1 million barrels from the previous week. At 332.7 million barrels, U.S. crude oil inventories are above the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 6.5 million barrels last week, and are at the upper limit of the average range. Both finished gasoline inventories and gasoline blending components inventories increased last week. Distillate fuel inventories increased by 0.8 million barrels, and are above the upper limit of the average range for this time of year.

Check out my new gold and energy blog at MoneyAndMarkets.com

Oil Drop -- Quicker Than I Thought

I thought we were getting to $33 oil, I just didn't think it would happen so fast. Oil is trading at $33 and change, down $3.67 as I write this. Traders are blaming a lower demand outlook from OPEC, but I think it's a combination of deflation, demand destruction and too much oil in storage, as I mentioned in yesterday's post.


From the Bloomberg story:

OPEC said that demand for its crude will decline 4.2 percent this year as the recession in the U.S., Europe and Japan curbs fuel use.
Consumption of OPEC supplies will shrink 1.4 million barrels to 29.5 million barrels a day, according to a monthly report released today. U.S. fuel demand fell 6 percent
last year, the biggest drop since 1980, as prices touched records and the economy contracted, the industry-funded American Petroleum Institute said today.

In Other News ...

Oil Collapse Forces Gulf Nations to Run Deficits, Cut Foreign Investment Tumbling oil prices are forcing many of the richest Persian Gulf states to record budget deficits and limit a critical source of foreign investment for poorer Arab countries.

Gold mine production down but costs up 24% world-wide Producers' total cash costs rose by 22% year-on-year to an average of $472/ounce for the nine months of 2008, while total production costs were also up by 22% at $591/ounce. The figures for the third quarter of 2008 alone record an increase of 25% year-on-year in cash costs and a 24% in production costs.


S.Africa gold output falls 8.7 pct yr/yr in Nov. South African gold output has fallen since state-owned power utility Eskom 1/8ESCJ.UL 3/8 suffered a near collapse in the electricity grid last January.


Four Bad Bear Markets Update
When looking at this chart, be aware that the Great Depression crash is based on the DOW; the three others are for the S&P 500.

Sean's note: The S&P as of yesterdy was down 45.2% in the current bear market (and up 12% from its November low). I think we're going back to visit the November low.

Food Prices Overcooked Given Corn's Decline, Fuel Group Says: Chart of Day Food prices should be lower, given the decline in commodities such as corn and crude oil the past six months, according to Robert Dinneen, president of the Renewable Fuels Association.


China Passes Germany to Become Third-Biggest Economy Gross domestic product expanded 13 percent from a year earlier, more than a previous estimate of 11.9 percent, to 25.731 trillion yuan ($3.38 trillion), the statistics bureau said on its Web site today. That topped Germany’s 2.424 trillion euros ($3.32 trillion), using average exchange rates for 2007.

Check out my new gold and energy blog at MoneyAndMarkets.com

Following Up on Some of Yesterday’s Trades

Yesterday I added some positions to play a potential rally in the U.S. dollar and short-term decline in gold. Let’s look at some of those trades …

UUP aims to track twice the daily movement in the U.S. dollar versus a basket of currencies. Yesterday was a good day to add it. It gapped higher today and should keep running.
Now, let’s look at the DRR, which tracks twice the INVERSE of the movement in the euro …

This one also gapped higher, naturally, because the euro has been acting like the “anti-dollar” lately. Notice how it went even higher this morning, then banged its head on its 50-day moving average and pulled back. It could take a few days to work through that 50-day MA, and I’ll keep an eye on it.
Now, let’s look at gold, as tracked by the GLD …

The GLD gapped lower yesterday. It tried to rally today, but that rally seems to be running out of steam. In the short-term, I expect it to go lower, and the 50-day moving average makes a good initial target.
Actually, gold is holding up pretty well considering the rally in the U.S. dollar. It just goes to show that nothing correlates perfectly in this market.
In one service, I also recommended getting short banks by buying the SKF. That is in slightly negative territory so far today, but I still think it’s a good bet.

Check out my new gold and energy blog at MoneyAndMarkets.com

Is Gold Poised for a Pullback?

It sure looks like gold is poised for a pullback. Here are two charts that illustrate my point ...The rally in the U.S. dollar is weighing on gold just as it bumps its head on overhead resistance. It should head lower from here. The longer-term picture for gold is still good, and corrections are a normal part of any market.

In Wednesday's Money and Markets, I'll have some ideas on how to play a potential gold pullback.

Check out my new gold and energy blog at MoneyAndMarkets.com

Armageddon in Oil and Gold? 2008 Going Out With a Bang Edition

This morning, we are seeing gold build on its sizeable gains from last week, and oil is up as well. The reason for the move in oil is simple: The explosive conflict in the Middle East is acting as a catalyst on an oil market that was already deeply oversold.

Here is some of the news driving oil this morning ...

Oil jumps above $40 on Gaza conflict: Tensions generated by a widening conflict between Israel and Palestinian militants sent crude prices up sharply to above $40 a barrel Monday, with gasoline and heating oil also making sizable gains.

Defense Minister Ehud Barak said Israel is fighting a “war to the death” with Hamas, the group that controls Gaza. Prices also advanced as China, the world’s second-biggest energy consumer, said it will supplement its emergency oil stockpiles while prices are low, and the United Arab Emirates announced compliance with OPEC production cuts agreed on this month. Prices also were supported by indications that other key OPEC members were acting on commitments to cut back production, in line with a decision earlier this month to take a daily 2.2 million barrels off the market.

And yet, just remember, there is bearish news as well ...

Deutsche Bank: Demand for oil will fall by largest margin in 25 years Global demand for oil in 2009 will fall by the largest amount for 25 years, according to the chief energy economist of Deutsche Bank. Adam Sieminski said oil prices could hit a low of $30 a barrel next year, a fall of a quarter from today's price, because of the sickly global economy. He forecast an average price of $47.5 for the whole year for oil traded in New York. Deutsche Bank predicts global demand will contract by 1 per cent, or 1 million barrels a day, three times the fall seen this year and the biggest since 1983.

In a related matter, Chicago Tribune reports that falling oil prices endanger alternative energy. Well, duh. Don't worry, though. Despite the dire warning from Deutsche Bank, I don't think oil prices will stay too low for too long.

Now, on to gold ...

Gold Rises in London to 2-Month High on Middle East Fighting, Inflation Gold rose to a two-month high in London as fighting in the Middle East and higher oil prices spurred demand for the metal as a haven and a hedge against inflation. The morning “fixing” used by miners to sell metal gained the most since at least 1984.

Here are three gold charts I think you should see -- daily, weekly and monthly charts of gold.

IN OTHER NEWS ...

Do you think the Crash of '29 was bad? Then you don't know about the Panic of 1873. I'm writing about that for this week's MoneyandMarkets.com column. I'm also writing about Baron Nathan Rothschild, of "Buy when there is blood in the streets" fame. He made that comment in 1871, which was part of the Panic of 1873. The Panic started in 1869 (1873 was just the worst year) and the economic depression associated with it lasted until 1879. Ouch!

Wall St. faces record losses in last week of 2008
Investors are preparing to close out the last three trading days of 2008 with Wall Street's worst performance since Herbert Hoover was president. The ongoing recession and global economic shock pummeled stocks this year, with the Dow Jones industrial average slumping 36.2 percent. That's the biggest drop since 1931 when the Great Depression sent stocks reeling 40.6 percent.


More bad news: U.S. Corporate Profits Probably Fell for Sixth Quarter as Spending Plunged U.S. corporate earnings probably fell for a sixth-straight quarter, the longest streak in at least 20 years, as consumer spending on automobiles, homes and retailers collapsed.

Want to see something really scary? Click through to the Grandfather Economic Report series.

I like The Retroist because I'm old.

Marketwatch gives its "10 Investment Ideas for 2009." See if you agree. Meanwhile, Motley Fool likes small caps now. Remember, small-cap stocks historically outperform the market in the month of January (for the simple reason that January is when money managers are most disposed to take on risk).

There are some great new cars coming in 2009, as long as auto manufacturers can survive long enough to get them to us.

The global recession is playing out in China.

Check out my new gold and energy blog at MoneyAndMarkets.com

Monthly Gold Chart & Happy Festivus!

Merry Christmas-Eve-Eve! Or Happy Festivus, if you're so inclined. Let the Airing of Grievances begin!

Here's my chart for today -- a monthly chart of gold. Note how the recent uptrend has been tested but hasn't broken (yet anyway). In fact, RSI, a measure of momentum, is now giving a "buy" signal.

I think gold could enter the New Year in a very positive position. Still, watch the euro-us dollar relationship that I posted about yesterday. That is probably the real key to what happens with gold.

Here is the other news and analysis I'm reading ...

U.S. debt approaches insolvency; Chinese currency reserves at risk

According to new figures published by Bloomberg in recent days, the American government has employed a total of 8.549 trillion dollars to stop the financial crisis. This means a total of about 24-25.4 trillion dollars of direct or indirect public debt weighing on American taxpayers. The complete tally must also include the debt - about 5-6 trillion dollars - of Fannie Mae and Freddie Mac, which are now quasi-public companies, because 79.9% of their capital is controlled by a public entity, the Federal Housing Finance Agency, which manages them as a public conservatorship.

Canaccord Adams: The worst for junior mining ‘is likely behind us'

"The year 2008 has shattered investor confidence, and market valuations reflect risk-averse investor sentiment," the analysts advised. "We believe that, to achieve a sustainable rally in the junior mining sector in 2009, investors must regain confidence in broader equity markets. "
"Given the ongoing issues in the global equity and credit markets, we believe that investors are likely to remain somewhat risk adverse. That said, opportunities to exist in the junior sector even under more subdued investor interest."

Why Short Sector ETFs Aren't So Smart Part 1 and Part 2

XXSean's note -- this is an interesting analysis on RealMoney.com about short ETFs. I think the author makes some good points. On the other hand, everyone has their own agenda. And the fact is, as long as you use short ETFs for short-term investing (not long-term), I think they have real advantages.

Existing Home Sales Plunge in November

I still expect sales to fall further over the next few months, although inventory has peaked for the year.

Holiday Sector Performance Relative to the S&P 500 -- From The Big Picture blog ...

Check out my new gold and energy blog at MoneyAndMarkets.com

Follow the Bouncing Buck

I recommended subscribers who are following my "Golden Parachute for 2009" bank HALF their gains on their open positions yesterday. They were double-digit gains. It was time to grab some gains because the US dollar bounced from Fibonacci support. See the dollar chart below.

I think the buck could bounce to 84 from here, where it will run into A) price resistance, B) overhead fib resistance and C) declining moving averages.

I’m sure some people will look at the buck rising from oversold (see the RSI indicator on the bottom of the chart) and say, "the buck has found the bottom." We shall see.

If I'm right and this is just a temporary bounce in the buck, we'll get a great opportunity to go long gold again when/if the US dollar tops out.

Right now, gold is down over $20 an ounce, so yesterday's decision to grab gains looks like a good call.

Check out my new gold and energy blog at MoneyAndMarkets.com

My Target on Gold ...

For a couple weeks, I've been annoying people within earshot by saying that, "if gold closes above $820, it can go much higher."

Well, gold did close above 820. And then it went higher still. So today, Bruce Bragagnolo, the CEO of the gold company I visited in Mexico (which you'll be able to read about in MoneyandMarkets tomorrow), asked me, "so how high is gold going now?"

There are those who believe that the Deflationary Spiral of Doom (catchy, eh? I'm going to copywrite it) is going to suck gold down with it. So I hesitate to name a number.

But the only people who read this blog are subscribers to my services and a few friends. So I'll tell you. My target on gold is $980, and I think we can get there rather quickly. There is no magic to this -- I get my target from a simple point-and-figure chart, which you can find at any one of numerous charting sites.

Point and figure charts famously do not include "time" in their projections. But fundamental forces are lining up to push gold higher.

Longer term, my target on gold remains $1,100, though we'll probably see some backing and filling at $980 first.

And none of this MUST happen. These are just projections, and subject to change. As John Maynard Keynes famously said: "When the facts change, I change my mind. What do you do, sir?"

My even-longer term target for gold is just under $2,000. Keynes' other famous quote is: "In the long run, we are all dead."

Check out my new gold and energy blog at MoneyAndMarkets.com

Waiting on the Fed, US Sinks Deeper Into the Red

We're all waiting for the Fed announcement shortly after 2 pm today, where it is widely expected that the Fed will cut its benchmark interest rate in half to 50 basis points. According to Bloomberg, with Fed rates at zero, Fed Chairman Ben Bernanke will then move on to using the Fed's balance sheet as the key tool for monetary policy. Options include purchasing Treasuries to inject more cash into the economy.

But where is all this money going to come from? As a result of all the bailouts for banks, automakers and other new federal outlays, our nation’s budget deficit is expected to reach $1 TRILLION in 2009. And that DOESN’T include the new, $1 trillion stimulus plan that Barack Obama’s economic team is reportedly working on.

We are seeing paper money debased. And that looks like a good time to own gold to me.

Here is other news I'm reading ...

Big Oil Projects Put in Jeopardy by Fall in Prices
From the plains of North Dakota to the deep waters of Brazil, dozens of major oil and gas projects have been suspended or canceled in recent weeks as companies scramble to adjust to the collapse in energy markets.

Russian Industrial Production Shrinks Most Since Economic Collapse of 1998 Russian industrial production shrank the most since the economic collapse of 1998 in November as the global slowdown reduced demand for steel, pipes and fertilizers, pushing the nation to the brink of recession.

Venezuela Wants OPEC to Cut Oil Production by Up to 2 Million Barrels/Day Venezuelan Oil Minister Rafael Ramirez said he wants a cut in OPEC production of between 1 million and 2 million barrels a day at this week’s meeting.

Gold Declines After Rally Entices Selling; Dollar Arrests Slide vs Euro Gold fell in London, ending a six-day rally, as an 11 percent gain in the period spurred some investors to sell and as the dollar halted its slide, reducing bullion’s appeal as an alternative investment.

Check out my new gold and energy blog at MoneyAndMarkets.com

3 Charts on Gold

Gold is powering higher today.

To quote MacBeth: "Is this a breakout from a cup-and-handle formation that I see before me?" Well, maybe I'm taking some liberties with the bard.

But gold's move higher is translating into even bigger moves for the major gold producers ...

And we're even seeing moves higher in the little-known foreign gold miners that have been pounded into the dirt over the past six months ...

What's it all mean? I don't know. Ask me when/if gold hits 850. It sure is good news for the recommendations in my recent "Golden Parachute" gold report.

Check out my new gold and energy blog at MoneyAndMarkets.com

What I'm Reading Today

Here's what I am reading today ...

ASIA

Japanese Business Confidence Plunges Most in 34 Years as Recession Deepens Sentiment among Japan’s largest manufacturers fell the most in 34 years, signaling companies are likely to cancel spending plans and cut more jobs, pushing the economy further into recession.

China Plans to Increase Money Supply in 2009 to Boost Domestic Consumption China aims to increase its money supply 17 percent in 2009 and encourage lending to boost domestic consumption and buoy growth in the world’s fourth-largest economy.

ENERGY
Crude Oil Rises as OPEC's El-Badri Says Sizeable Cut Is Needed at Meeting Crude oil rose, touching $50 a barrel in New York, after OPEC’s Secretary-General Abdalla El-Badri said the group needs to make a “sizable” output cut at this week’s meeting in Algeria.

OPEC Collides With Goldman Over $75 Oil in First Demand Decline Since 1983 The Organization of Petroleum Exporting Countries will probably lower output targets by at least 2 million barrels a day, or 7.3 percent, when its members meet Dec. 17, according to 18 of 33 analysts surveyed by Bloomberg. While Saudi Arabia’s King Abdullah said last month that his country needs oil priced at $75 a barrel to spur development, Goldman Sachs Group Inc. predicts crude may slide to $30 from $46.28 today.

OPEC Is in a Desperate Race Against Falling Oil Prices Oppenheimer & Co. senior oil analyst Fadel Gheit estimates the world oil supply is likely to drop by three million to five million barrels a day in 2009, due to OPEC cuts and smaller companies slashing production, compared with a decline of just one million to two million barrels a day in global oil demand.

COMMODITIES

Australia Cuts Commodity Export Sales Forecast 10% on Global Credit Crisis Australia, the world’s largest shipper of coal, iron ore and wool, cut its commodity exports forecast by 10 percent because of the global financial crisis that may continue to hinder any recovery until the second half next year.

Gold Futures Climb in New York as Dollar Extends Slump; Silver Advances Gold prices rose as the slumping dollar boosted the appeal of the precious metal as an alternative investment. Silver also gained.

China's Soybean Imports May Double This Month as Domestic Prices Advance China, the world’s largest buyer of soybeans, may double its imports this month from a year earlier, after higher prices of domestic beans prompted buyers to increase purchases overseas in the past few weeks.

World Gold Output to Rise for the First Time in Four Years, Australia Says Global gold production may rise for the first time in four years in 2009 as China and Indonesia increase output, Australia’s commodity forecaster said.

XX Sean's note -- that will be an interesting trick (to raise global producition) the way that the credit crunch is cutting into mine expansion plans, but I guess anything is possible.

US DOLLAR

Dollar Falls to Eight-Week Low Versus Euro on Auto Industry Bailout Costs The dollar fell to an eight-week low versus the euro on speculation a U.S. government rescue for the country’s automakers will leave less money to protect the financial system.

Dollar Staggers as U.S. Unleashes Flood, Deficits Increase, Fed Cuts Rates U.S. policy makers are flooding the world with an extra $8.5 trillion through 23 different plans designed to bail out the financial system and pump up the economy. The decline shows that the increased supply of money may be overwhelming investors just as the government steps up debt sales, the trade and budget deficits grow and de-leveraging by investors slows.

Treasury Benefits From ‘Massive Paranoia’ as Bailout Cost Falls Instead of shunning the U.S., where losses on subprime mortgages in 2007 triggered a global seizure in credit markets that led to the downfall of securities firms Bear Stearns Cos. and Lehman Brothers Holdings Inc., investors can’t get enough Treasuries. Even as estimates of Obama’s stimulus package and the budget deficit rise to a record $1 trillion, demand continues to increase as investors flee risky assets around the world and put their cash into U.S. bonds paying, in some cases, nothing in yield just to ensure the return of their principal.

US ECONOMY

US cost of living probably fell most in six decades
The cost of living in the U.S. probably fell in November by the most in six decades, while slumps in manufacturing and homebuilding worsened, sending the economy deeper into a recession, economists said before reports this week. Consumer prices probably dropped 1.2 percent last month, the most since records began in 1947, according to the median estimate in a Bloomberg News survey. Builders broke ground on the fewest houses in almost a half century and factory output continued to slide. Costs of oil and other raw materials plummeted last month as the credit crisis caused consumers to slash spending, prompting automakers to plead for a bailout. Tumbling sales have retailers cutting prices, setting the stage for the Federal Reserve this week to lower its key rate target to its lowest level ever.

GLOBAL WARMING

The glaciologist's worst nightmare Lakes of melted ice form on the surface of the polar ice caps in the summer months, driving cracks down through the ice, creating conduits. In Greenland recently, one such lake, three kilometres wide, emptied like a draining bathtub in just 90 minutes.So much water surging down to the bedrock of the ice sheet could contribute to massive icebergs breaking off and sliding into the sea – causing a sharp rise in sea level. It's the glaciologist's worst nightmare.

Check out my new gold and energy blog at MoneyAndMarkets.com

Better Than a Hot Death Sandwich

After I recommended a bearish position in RCE on Friday, the markets surged like a rhino on cocaine. Typical! Still, it's better than a hot-death sandwich, if only because A) we kept the position small and B) my other services, which are longer-term, retain their bullish stance on gold, energy and agriculture.

And the markets are looking to open well up this morning, but Friday showed us how quickly these things can turn around. Keep an eye on the dollar ...It seems to be heading lower. If the US dollar breaks below 84.5, it could go to 82.65 or stronger support at 81. A weaker dollar should be supportive of gold (it has been so far this morning -- gold is up by about $24 as I write this) but it doesn't have to be. Here is the news I'm reading ...

GLOBAL MARKETS

World markets surge on global stimulus hopes
The gains came despite Friday's news that American employers cut 533,000 jobs in November -- the most in 34 years -- as investors appeared to signal their support for growth-promoting measures around the world. "The hour is darkest before the dawn and while the economic backdrop is absolutely dire, policy makers have now moved to an aggressively accommodative stance," said Jeremy Batstone-Carr, head of research at Charles Stanley in London. Chinese officials were reportedly meeting this week to discuss possible new steps to expand the $586 billion of stimulus already planned, while in Washington, a bailout of ailing U.S. automakers appeared to be falling into place.

Wall Street Looks for Upbeat Open
Wall Street was set for an upbeat start on Monday, with investors enthusiastic that President-elect Barack Obama's plan to launch the largest infrastructure-spending package since the 1950s will help boost the crippled economy. Obama announced over the weekend plans for the largest U.S. public works spending program since the creation of the interstate highway system a half-century ago. That could bolster the economy by putting thousands of people to work building schools and other construction projects.

Cheapest Stocks Since 1995 Show Companies' Cash Exceeds Total Market Value Stocks have fallen so far that 2,267 companies around the globe are offering profits to investors for free. That’s eight times as many as at the end of the last bear market, when the shares rose 115 percent over the next year.

US ECONOMY

Fears of a Million Layoffs a Month in Corporate America
As many as a million American jobs could be lost every month by next spring as businesses struggle to raise capital in financial markets consumed by fear, according to a new analysis. Graham Turner, of consultancy GFC Economics, says the rising cost of corporate debt is now flashing a red warning signal that far worse is to come over the next few months and job losses are heading for levels last seen in the 1930s Great Depression.

Financial Medicine of Lower Interest Rates Will Only Make Us All Sicker
The problem isn't the cost of credit but the availability. Credit won't become more available until the banks trust each other and the inter-bank market reboots. That won't happen until the banks are forced to reveal their potential sub-prime losses. Lower rates just delay that "day of reckoning" – by giving the banks more hope they can get away without "full disclosure".

ENERGY

Contango Pays Most in Decade as Shell Stores Crude Stockpiling crude may provide higher returns than commodities, stocks and Treasuries as the U.S., Japan and Europe endure simultaneous recessions for the first time since World War II. As many as 16 [supertankers are] booked for potential storage instead of transporting crude ... The tankers, if full, hold about 26 million barrels worth about $1 billion, more than the 22.9 million barrels sitting in Cushing, Oklahoma, where oil is stored for delivery against Nymex contracts.

Oil Price Could Fall to $25 a Barrel, Analysts Say
Merrill Lynch commodity strategist Francisco Clanch said there is possibility it could go even lower if the economic outlook worsens. "Potentially, under a number of circumstances including a recession in China and a failure from OPEC to cut enough output, we could see prices dipping all the way to $US25 a barrel," he said. "We're not forecasting that. We're saying its might happen."

SOLAR

Will Solar Power Ever Be as Cheap as Coal
“Solar power is the energy of the future – and always will be." That tired joke, which has dogged solar-generated electricity for decades due to its high cost, could be retired far sooner than many think. While solar contributes less than 1 percent of the energy generated in the United States today, its costs are turning sharply downward.

How Will Temporary Decline in Oil Prices Impact Energy Sector?
Many observers have suggested that a precipitous decline in the oil markets will have a disastrous impact on alternative energy investments. I disagree because I believe reversion to the established trend line in the oil markets can only take us back to the $70 to $80 level and many alternative energy technologies remain cost effective at that price point. Moreover, electricity prices are not likely to experience the same violent swings as oil. So the fundamental market drivers that favor the use of wind and solar power are different. Sales may decline for a time, but they will almost certainly recover with the overall economy.

METALS

Gold Gains in London as Weaker Dollar, Higher Oil Boost Demand for Metal Gold rose for the first time in four days in London as a weaker dollar and higher oil prices increased its appeal as an alternative investment to the U.S. currency and hedge against inflation. Silver and platinum also gained.

Copper Gains in London, Ending Worst Losing Streak in a Decade; Zinc Rises Copper rallied from its worst losing streak in a decade in London, buoyed by a weaker dollar and U.S. President-elect Barack Obama’s pledge to begin the biggest public works program in about 50 years. Aluminum and zinc also advanced.

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Gold Chart and More

Time to look at gold again ...

Gold is drifting sideways, trying to decide if it wants to rally or head lower. I'm keeping an eye on it. And now let's look at a chart of the gold's doppleganger (in the short-term, anyway), the US dollar ...

More sideways drift. In this case, the dollar looks to be testing overhead resistance, while gold is testing downside support.

Here's another great chart from Jesse ...

Click on the chart for a bigger image.

Here is more news I'm reading (it's pretty depressing)

Metal prices fall further than during Great Depression

The price of key industrial metals has fallen further over the last four months than occurred during the worst years of Great Depression between 1929 and 1933, according to research by Barclays Capital.

Oil Will Fall Further Without OPEC Action, Says BP

Oil prices will continue to fall during the next 12 to 18 months if OPEC fails to implement “sufficient cuts” and supply stays at current levels

Weak data add to fears of long slump

According to the Beige Book, which offers a picture of the economy based on anecdotal evidence provided to the US central bank, “overall economic activity weakened” across all 12 of the Fed districts since the last report in mid-October, which had also offered a grim outlook.

Martin Wolf Says Big Stimulus Programs by Big Debtor Countries Will End in Tears

What is being advocated as a Keynesian remedy is in fact the opposite of what Keynes called for in his day. Keynes' prescription then would lead to a global rebalancing, with the US depending more on internally generated demand and less on its foreign partners (who were defaulting on their government debt). But if it were successfully deployed in the US now, it wold lead to a continuation, of our excessive consumption and China's underdevelopment of its internal demand.

November Layoffs Hit Highest Level in 7 Years

Job cuts announced in November totaled 181,671, up 61 percent from October and 148 percent higher than November 2007, when job cuts totaled 73,140, outplacement firm Challenger Gray & Christmas said in a report released on Wednesday.

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Gold Kicks Butt Longer Term

Gold is down sharply this morning (over $30 an ounce as I write this -- ouch!). Maybe the "technical" buy signal gold triggered last week was incorrect, or maybe this is a pullback for all the late stragglers to get in before gold goes higher. We'll have to see how things develop.

Meanwhile, look at this chart I made on Stockcharts.com. It shows gold's weekly percentage performance over the past five years compared to the S&P 500, the Dow, the CRB Index and the US dollar. And gold has been kicking butt. I don't know if this outperformance will continue, but it certainly is a head-turner.

(hat-tip Jesse for the original comparison)

Check out my new gold and energy blog at MoneyAndMarkets.com

Money and Markets -- Financial Mayhem & Gold's Next Surge

Here is my latest Money and Markets piece ...

Financial Mayhem to Fuel Gold’s Next Surge?

by Sean Brodrick

Wednesday, November 26, 2008 | 7:30 AM

Last week, I wrote about how our oil-rich friends in the Middle East are buying gold hand over fist. It turns out they’re not the only ones. The latest figures from the World Gold Council show a frenzy of activity … [More...]

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Getting Ready for Turkey Day

I am seeing a flurry of stories that base metals miners are rushing to shut down. Just look at some of the headlines from the past couple days:

Zambian copper workers face layoffs ... Indefinite shutdown for world top tantalum miner ... Mwana Africa shuts Zimbabwe nickel mines ... Denison Mines delays uranium project ... Norilsk Idles Two Mines ... I could go on, but you get the picture. This is happening because the global economy is tumbling into recession (See the China story linked below). But down the road, this is also setting up a supply squeeze and subsequent rebound.

And it's not just base metals: Australia's 2008 gold output may fall to lowest level since '89 .

In Other News ...

Gold equities expected to pay off for the patient

Scotia Capital analyst Trevor Turnbull remains bullish on gold, noting that dollar demand for the metal reached an all-time quarterly record of US$32-billion in the third quarter as investors flocked to safety. He also highlighted the identifiable investment demand gold offers, which includes ETFs, bars and coins.

XX Sean's note -- this guy's picks will look familiar to buyers of my gold report. By the way, did you get yesterday's update to "Your Golden Parachute for 2009"? It's an important one!

Gold is the answer. Now what was the question? While gold has hardly been seen to be performing well in recent months, and has failed to meet gold optimists' more extreme, or even more mild, expectations, it has still performed less badly than most other sectors of the market. As has been noted here on several occasions actual physical demand has remained extremely strong, both in eastern and western markets. Major gold suppliers have run out of inventory and seem to be having difficulty replacing it, while ETF demand remains very positive.

Synchronized Recession, Synchronized Stimulus?

If all the countries (or all the relevant countries) were to stimulate simultaneously, then the aggregate world economy would look a lot more like a closed economy, and the multiplier would be larger yet again.

Figure 1: From visualization of OECD Economic Outlook 84 [link]. Blue is negative growth, darkest blue is -9.335%; orange is positive growth, most orange is +9.335%. White is zero; gray is "no forecast".

A Global Downturn Puts the Brakes on China's Industry It is happening faster than most anyone predicted: China’s economy, long the world’s fastest-growing major economy, is slowing down. Economists are forecasting that after growing nearly 12 percent last year, China’s economy could slow to 5.5 percent in the fourth quarter of this year — a stunning retreat for a country accustomed to boom times.

The Western Financial System We Knew Has Collapsed

Getting banks to lend again is even more essential than getting primary and secondary markets for illiquid structured financial products going again. It may be even more important than getting the regular commercial paper market going again, important though that is. Small and medium enterprises rely overwhelmingly on banks for external finance. Without access to bank loans, credit lines and overdraft facilities, countless SMEs that would be perfectly viable with a functional financial and banking system are threatened with bankruptcy. Without working capital, businesses go out of business. Banks are essential. But they are not lending. Why? A number of possible explanations suggest themselves.

And now for some good news ...

U.S. Mortgage Rates Fall on $600 Billion Fed Plan U.S. mortgage rates fell more than three-quarters of a percentage point today ... The average U.S. rate for a 30-year fixed mortgage ended the day at about 5.5 percent after falling to as low as 5.25 percent, according to Bankrate Inc. It was 6.38 percent this morning.

XX Sean's note -- I'll be traveling for Thanksgiving, so my computer access over the long weekend will be very restricted. Have a great holiday, stuff yourself silly, and I'll talk to you on Monday.

Check out my new gold and energy blog at MoneyAndMarkets.com